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Express Warranties Under The Draft ACL Regulations - A Significant Compliance Burden?

Do you give a warranty or guarantee document with your product? Draft regulations for the new Australian Consumer Law have been released by Treasury for public comment - and they should concern any supplier of consumer goods that come with an express warranty.

The regulations set out the required content for express warranties against defects, but do not build in a transitional period. As a result, suppliers of products could face a very significant challenge in trying to comply with the regulations as soon as they come into force, which could be as early as 1 January 2011.

Submissions close on 13 October 2010, so it's important to consider making a submission as soon as possible.

What is the proposed express warranty against defects under the ACL?

The warranty against defects must

be in a document that is transparent (that is, it is expressed in reasonably plain language, legible and presented clearly);

state the warranty period, procedure for claiming, who bears the cost of claiming the warranty, and that the benefits of the warranty are in addition to other rights and remedies of the consumer under a law in relation to the goods and services to which the warranty relates; and

prominently state the name, business address, telephone number and email address (if any) of the person who gives the warranty.

It must also include the following statement:

"Our goods come with guarantees that cannot be excluded under the Australian Consumer Law. You are entitled to a replacement or refund for a major failure and for compensation for any other loss or damage. You are also entitled to have the goods repaired or replaced if the goods fail to be of acceptable quality and the failure does not amount to a major failure." So what's the problem with the draft express warranty against defects?

It's highly unlikely that anyone's current express warranties comply.

As the draft regulations do not currently allow for any transition period, and they could possibly come into effect as early as 1 January 2011, this would mean product suppliers would be hard-pressed to make all their products already in production or shipped comply in time.

What else is in the draft ACL regulations?

The draft regulations also cover:

prescribed requirements for asserting a right to payment

warning statements on documents and invoices

exemptions for publishers and large companies

agreements that are not unsolicited consumer agreements

party plans

business contracts

renewal of contracts of the same kind

voluntary contact with the same supplier

information relating to the identity of a dealer

information about termination periods for unsolicited consumer agreements

information, requirements and approved form for agreements and agreement documents

emergency repair contracts

potential exemptions for charities and energy supplies from unsolicited consumer agreement provisions

requirements for repair notices

reporting requirements for goods or product-related services associated with death, serious injury or illness.

So what should you do now?

Submissions close on 13 October 2010, so it's important to consider making a submission as soon as possible.

In terms of the ACL generally suppliers should be getting ready now for 1 January 2011. In particular, important and practical issues should be considered, such as:

do you understand the new terminology eg the difference between major failure and non-major failure and use and foreseeable misuse?

have you reviewed your systems for dealing with consumers, especially with complaints of product failure or harm caused by the product?

when are notifications of product safety related injuries not required?

do you understand when consumers are entitled to reject goods and ask for compensation?

do you have procedures in place to deal promptly with substantiation and disclosure notices issues by the regulator?

the possible impact of notifications to regulators upon insurance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mr Colin Loveday

Clayton Utz

Levels 22-35

No. 1 O'Connell Street





Tel: 293534000

Fax: 282206700



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Publication:Mondaq Business Briefing
Date:Oct 5, 2010
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