Warranties against defects in service: mandatory text applies from 9 June 2019.

From 9 June 2019, businesses that supply services (or goods and services together) and provide “a document that evidences a warranty against defects” for those services must include new mandatory wording in its warranty documentation (e.g. terms of service, terms of use, product warranties).

The new requirements are intended to bring service providers into line with goods suppliers (which have been subject to mandatory wording in warranties against defects since 1 January 2012).

Whilst the giving of a written warranty against defects is not compelled by law, if your business chooses to issue them, it must comply with the new regulations by including certain prescribed text (see below).

Relevant laws

By way of the Competition and Consumer Amendment (Australian Consumer Law Review) Regulations 2018, new wording has been inserted into the Competition and Consumer Regulations 2010 (the Regulations) and it is these updated Regulations which now prescribe requirements for the form and content of warranties against defects under section 102 of the Competition and Consumer Act 2010 (the CCA).

The new mandatory text

Under Regulation 90(1), a warranty against defects must be in a document that is transparent (i.e. expressed in reasonably plain language, legible, and presented clearly) which concisely states what must occur to claim and honour the warranty, and must include a number of details including the warranty period, the procedure for warranty claims, cost recovery and the details of the giver of the warranty.

For the Regulation 90(1) requirements the supplier of the services (or goods and services) may draft its own terms which are to comply however further into the new Regulations, mandatory wording in respect of services is now prescribed.

At Regulation 90(3) the mandatory text for the supply of services (only) which must be included in a warranty document is:

Our services come with guarantees that cannot be excluded under the Australian Consumer Law. For major failures with the service, you are entitled:

• to cancel your service contract with us; an

• to a refund for the unused portion, or to compensation for its reduced value.

You are also entitled to be compensated for any other reasonably foreseeable loss or damage. If the failure does not amount to a major failure you are entitled to have problems with the service rectified in a reasonable time and, if this is not done, to cancel your contract and obtain a refund for the unused portion of the contract

The mandatory text that must be included in a warranty document for the supply of goods and services (together) is set out in Regulation 90(4):

Our goods and services come with guarantees that cannot be excluded under the Australian Consumer Law. For major failures with the service, you are entitled:

• to cancel your service contract with us; and

• to a refund for the unused portion, or to compensation for its reduced value.

You are also entitled to choose a refund or replacement for major failures with goods. If a failure with the goods or a service does not amount to a major failure, you are entitled to have the failure rectified in a reasonable time. If this is not done you are entitled to a refund for the goods and to cancel the contract for the service and obtain a refund of any unused portion. You are also entitled to be compensated for any other reasonably foreseeable loss or damage from a failure in the goods or service.

Who is affected?

Anyone who supplies services (whether standalone or combined with goods), and provides warranty terms is affected by the new mandatory text. This includes online services, professional services, management services, and maintenance and support services.