New ACL Requirements for Service Providers

17 April 2019
Posted by Sarah Luttrell

If your business provides goods or services to consumers, you are likely bound by the Australian Consumer Law (which is contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth)) (ACL). The ACL regulates the sale of goods and services to protect consumers and encourage a fair balance in the marketplace.  There are a number of rules which providers of goods and services must comply with, and as of 9 June 2019 there will be even more!

Warranties against defects – 101

You may already provide promises to consumers about what you will do in the event that there is something wrong with the goods or services you provide. These are known as ‘warranties against defects’. It is not compulsory to have these warranties, and doing so does not limit your other obligations under the ACL, but often providers of goods and services will offer this kind of warranty. For example, you may let a consumer know that if something is wrong with the goods or services you have provided, you promise to repair or replace the goods, or provide the service again, or compensate the consumer.

Current wording requirements for goods

Regulation 90 as part of the regulations of the ACL sets out requirements that warranties against defects for goods must be worded in a certain way (see below).

For goods:

‘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 compensation for any other reasonably foreseeable 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.’

New wording requirements for services

On 9 June 2019, changes to Regulation 90 will take effect. The changes require that any warranty against defects in relation to services (or services bundled together with goods) include specific wording (see below).

For services:

‘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; and
– 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.’

For goods and services together:

‘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.’

The prescribed wording must be used in any and all documents that state a warranty against defects for goods, services or goods and services together.

Review your T&Cs before the changes hit!

There are significant penalties for those who do not comply with the ACL including pecuniary penalties of up to $50,000 for companies who do not use prescribed requirements in warranties against defects.

In anticipation of the changes coming into effect on 9 June 2019, it is important to review any and all warranty documentation (including your contracts with clients) to ensure they are compliant with the new requirements in Regulation 90.

We would encourage you to get in touch with us to consider the following key questions:

1. Are you providing goods and services (or services only) to a ‘consumer’ under the ACL?

2. Are you complying with your obligations under the ACL, including consumer guarantees?

3. Are you giving, or should you be giving, ‘warranties against defects’?

4. Do your ‘warranties against defects’ comply with the new requirements in Regulation 90?

If you would like further advice on your obligations under the ACL, or would like assistance in updating any documents which have warranties against defects, get in touch with us on 03 9521 2128, or email us at hello@studiolegal.com.au.

DISCLAIMER

The information in this article is of a general nature. It does not constitute formal legal advice, and should not be relied on as such. Please see the full disclaimer in our website terms. Please contact Studio Legal if you are seeking advice about a specific legal matter.