Should My Business Provide a Warranty Against Defects?
You don't have to provide a warranty against any defects, but if you do, it must comply with the Australian Consumer Law requirements. Read about it here.
Generating interest in your products and services requires much more than simply releasing it onto the market. When customers choose your products or services, they want to be reassured that they are making the best decision possible and that they can rely on your company if any problems arise. In order to increase your customer’s interest and repeat sales, businesses can utilise an inexpensive yet effective tool – a warranty against defects.
Warranties Against Defects
A warranty against defects is a promise that you make to fix any defects that occur in your products up to a certain time period. It is a promise made to the buyers that if the goods or services are defective, your business will:
- Repair or replace goods
- Resupply or fix a problem with services
- Provide compensation to the consumer
You sell premium jewellery. You offer a warranty against defects for up to 5 years after the product is purchased. A customer purchases a gold necklace, of which the clasp is defective and returns it after 4 years. You are obliged to fix, refund or replace the necklace.
Why offer it?
It is not mandatory for a business to provide warranty against defects. However, as a business owner you can choose to offer a warranty against defects for your products and services. Providing this promise will not only convey confidence to your buyers about their purchase decision but will also reduce the perceived risk to the customers. Moreover, offering to fix the defects up to a certain period of time will give your business a competitive advantage. For example, when customers have the choice to buy two products of the same price, they will often choose the product with protection. Additionally, these promises will protect your business as you often spell out what your warranty will cover, thus leaving no room for customers to complain about something that is not in print.
As a business owner, you have the liberty to choose whether or not to offer a warranty against defects. However, if you choose to do so, it is also important to remember that a warranty against defects is provided in addition to consumer guarantees and does not limit or replace them.
What are the requirements?
If you choose to provide a warranty against defects, make sure it is in a document that is transparent. Labels on packaging may be considered to be a document that evidences a warranty against defects. There may also be another document inside the packaging that details the terms and conditions of a warranty. However, if you have two documents present, make sure that they are consistent with each other to satisfy the requirements.
The documents must also concisely state:
- What you will do in order for the warranty to be honoured
- What the buyer must do to claim the warranty
- How the warranty against defects benefits the buyer
What should the warranty documentation include?
When offering a warranty against defects, the documents must include:
- Contact details including the name, business address, telephone number and email address (if any) of your business that is providing the warranty
- The period to which the warranty relates
- Whether or not the buyer will have to bear extra costs of claiming the warranty
- The procedure the buyer must follow to claim the warranty
In addition to the requirements above, a document for these warranties must also include a mandatory text to ensure that the buyers are well aware that the warranty against defects works in addition to the other consumers rights provided by the law.
For more information on warranties against defects refer the ACCC website. Also, as a business owner if you choose to offer such a warranty, remember that the failure to meet these criteria may lead to a maximum penalty of $50,000 for a company and $10,000 for an individual. Likewise, criminal penalties for the same amount may also apply.
Keep in mind that there are also rules about misleading or deceptive conduct. Consequently, make sure that the promises or
Complying to the requirement under the Australian Consumer law can be challenging. If you would like a legal review of your warranties against defects you can contact a warranty lawyer to advise you further.
Anupa is a Legal Intern at Lawpath, and is currently in her final year of studying Bachelor of Laws at Macquarie University.