Stephens Lawyers & Consultants discuss consumer warranties and new Competition and Consumer Act

As of 1 January, 2011, franchise businesses that offer warranties for consumer goods or services will need to ensure they abide by statutory guarantees under the Competition and Consumer Act, report legal consultants from Stephens Lawyers & Consultants .

Previously, warranties and conditions for consumer goods and services were implied into consumer contracts under the Trade Practices Act, the State Fair Trade Acts and Goods Acts.

The Competition and Consumer Act replaces this regime of implied warranties and conditions with a comprehensive new framework of statutory guarantees.

Stephens Lawyers legal consultants note that the new laws have important implications for operators within the franchise industry who are involved in the supply of goods and services to consumers.

Operators supplying goods and services with a value less than $40,000 or goods and services used for personal, domestic or household use (irrespective of value) will need to ensure that they abide by the new legislation when dealing with product defects or consumer complaints with regard to these products or services.

Franchise consultants at Stephens Lawyers advise that the new statutory guarantees include guarantees:

• as to title
• as to undisturbed possession (provided there are no limitations on the title disclosed to the consumer)
• as to undisclosed securities, charges or encumbrances
• that goods are of an acceptable quality
• that goods are reasonably fit for any disclosed purpose
• that goods match their description
• that goods match a sample or demonstration model; and
• that spare parts and repair facilities are reasonably available for a reasonable period after goods are supplied.

Further, if an express warranty is provided by a manufacturer or supplier to consumers when supplying goods, the Competition and Consumer Act imposes on the manufacturer or supplier a statutory guarantee that they will comply with the express warranty provided in respect of their products or services.

In relation to the supply of services, the Competition and Consumer Act imposes statutory guarantees:

• as to due care and skill
• that services are reasonably fit for a particular purpose
• that services will achieve the desired result; and
• as to a reasonable time of supply.

The Competition and Consumer Act further provides that statutory guarantees cannot be excluded, restricted or modified by contract. In this case, a contractual term that excludes, restricts or modifies a guarantee will be void.

Manufacturers and suppliers can, in limited circumstances, limit their liability for failure to comply with statutory guarantees other than assurances as to title, undisturbed possession and undisclosed securities, charges and encumberances.

Stephens Lawyers legal consultants caution that franchise businesses offering warranties for consumer goods and services will need to ensure compliance with these new consumer guarantees, specifically noting that franchise businesses will now need to avoid:

• requiring consumers to pay for rights entitled under statute
• displaying a “no refund” sign/policy
• selling goods which do not match a sample/demonstration model
• failing to achieve the consumer’s desired result; and
• refusing to offer spare parts or repair facilities.

Further information on consumer guarantees and the new Competition and Consumer Act can be obtained online from franchise legal advice specialists Stephens Lawyers & Consultants.