Now is a great time to check whether your standard terms and
conditions of sale are effective due to the implementation of new
mandatory warranty requirements. These requirements are in addition
to the consumer guarantees introduced under the Competition and
Consumer Act 2010 (CCA). These changes, coupled with the
commencement of the Personal Property Securities Register on 30
January 2012, mean that many terms of sale drafted before 2011 are
no longer adequately protecting the seller's business.
A common warranty against defects that many businesses provide
in their standard terms and conditions of sale is:
'We warrant that our goods will be free from faults. If
goods we supply are found to be faulty within the first 12 months
following their purchase, we will promptly repair or replace those
goods at our cost.'
From 1 January 2012 businesses are required to include
information and mandatory text prescribed by the Competition
and Consumer Regulations 2010 (CCR) whenever they provide a
warranty against defects in connection with a consumer transaction.
As a result, the common warranty above is no longer sufficient for
What is a consumer transaction?
Under the CCA 'consumer transaction' is one that
involves the supply of goods or services that are either:
Ordinarily acquired for household, domestic use
Have a value of less than $40,000.
It is the second limb of this test which means many transactions
between businesses are subject to the rules and regulations
regarding consumer transactions.
What are the Mandatory Requirements for Warranties Against
Under the CCR, businesses providing a warranty against defects
to a consumer must including the following information:
The term of the warranty
The contact information of the person giving the warranty
The procedure to be followed for a consumer to make a
Confirmation that the warranty does not exclude the consumer
Compulsory wording relating to the rights of consumers under
the CCA that cannot be excluded or modified.
The basis for the mandatory wording requirements is to ensure
that businesses pro-actively inform customers of their rights not
only under any warranty conditions, but also their rights to access
remedies under the statutory guarantees regime which commenced on 1
Failure to comply with the mandatory requirements is a strict
liability offence with a penalty of up to $50,000 for a company and
$10,000 for an individual.
How to comply
To ensure that your business complies with these new mandatory
requirements, your standard terms and conditions of sale and any
product packaging should be checked to see whether they contain a
warranty against defects and if so, update the warranty to comply
with the new requirements. Further, if you are part of an
arrangement between a retailer and a manufacturer or wholesaler,
you should also check your terms and conditions with the
manufacturer or wholesaler to ensure that any warranty passed on by
you as a reseller is compliant with the new regulations.
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.
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The ACCC report: "Unfair Contract Terms: Industry review outcomes" provides examples of clauses considered to be unfair.
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