Consumer Guarantees v Warranty Against Defects – Is there a difference?

Jan 25, 2022

It is probably fair to say that a lot of people who have heard of these two phrases think they are the same thing. However, that is not the case.

While both concepts exist under the Australian Consumer Law (ACL), they are distinct and operate independently from each other.

Competition and Consumer Law

The ACL, contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth), is a single, national law covering consumer protection and fair trading at both a federal and state/territory level.

Among other things, it sets out several “Consumer Guarantees” that provide consumers with a comprehensive set of rights in relation to certain goods and services they acquire.

The ACL also contains provisions in relation to “Warranties Against Defects”, which are representations made to a consumer about what the business will do if the goods and/or services sold are defective. These are also commonly referred to as “manufacturer’s warranties” or “voluntary warranties”.

So, what’s the difference?

While these two concepts both provide consumers with some form of recourse in the event the goods or services they acquired are defective, they are separate legal concepts and do have some important differences.

One of the key differences is that one automatically applies and the other is optional.

On the one hand, Consumer Guarantees are mandated by the ACL and automatically apply in relation to certain goods and services sold to consumers. On the other hand, while the ACL does impose obligations on businesses who chose to provide Warranties Against Defects, it does not impose an obligation on businesses to offer them to consumers.

It also important to note that the Consumer Guarantees may still apply even where a Warranty Against Defects is offered. For example, you might buy a top-of-the-line laptop from a manufacturer for $5,000. The laptop comes with a Warranty Against Defects which provides that the manufacturer will replace or repair the laptop if any fault occurs within 12 months from the date of purchase. Unfortunately, the laptop stops working due to a fault with the machine after 18 months. In this instance, whilst the Warranty Against Defects period may have expired, the consumer may still be able to have the machine repaired or replaced under the Consumer Guarantees.

Consumer Guarantees

Consumer Guarantees apply to suppliers and manufacturers in relation to goods they sell, hire or lease, as well as services they provide to consumers (subject to some exceptions).

There are 9 guarantees that apply in relation to goods. The guarantees provide that:

  • in relation to suppliers and manufacturers:
    • the goods are of acceptable quality;
    • the goods match any description provided; and
    • any express warranties will be honoured.
  • in relation to suppliers, the consumer is purchasing goods:
    • that have clear title (unless otherwise stated);
    • that do not have undisclosed securities;
    • that are fit for any disclosed purpose;
    • with a right to undisturbed possession; and
    • that match the sample or demonstration model provided.
  • manufacturers must guarantee the availability of spare parts and repair facilities for a reasonable time after purchase.

When it comes to services, the guarantees provide that the services provided are:

  • rendered with due care and skill;
  • reasonably fit for the particular purpose they are being acquired for by the consumer (to the extent that such purpose is, expressly or impliedly, made known to the supplier); and
  • supplied within a reasonable time.

It is important to note that, generally speaking, the Consumer Guarantees cannot be modified, restricted or excluded by businesses or waived by consumers.

The ACL contains a number of remedies available to consumers where these guarantees have not been met. For example, a business may be required to repair or replace any goods that do not meet the guarantees.  A consumer may also be entitled to compensation for consequential or associated loss or damage resulting from a business’s failure to meet the guarantees.

Warranties against defects

While it is quite common for suppliers and manufacturers to offer a Warranty Against Defects with its goods and/or services, it is not something that is required by the ACL. Instead, it is up to the supplier or manufacturer as to whether to give this to consumers. If, however, a Warranty Against Defects is given, then it must comply with the relevant provisions of the ACL.

So, what exactly is a Warranty Against Defects? What might first come to mind is a written document that is often included in the packaging with goods being purchased. However, the definition provided by the ACL is much broader.

A Warranty Against Defects is defined as a representation communicated to a consumer, at or around the time that goods or services are supplied, that if the goods or services (or part of them) are defective, the business will:

  • repair or replace the goods or part of them; or
  • resupply or fix a problem with the services or part of them; or
  • provide compensation to the consumer.

The ACL regulations contain several prescribed requirements that must be complied with and relate to the form and content of a Warranty Against Defects. Failure to comply with the mandatory requirements for Warranties Against Defects can result in significant penalties. Notably among these requirements is mandatory wording which must be included with the warranty, which makes it clear to the consumer that the Warranty Against Defects being offered does not exclude, limit or replace the Consumer Guarantees.

Key takeaways

  • Consumer Guarantees and Warranties Against Defects are not the same thing and are distinct legal concepts.
  • Consumer Guarantees apply automatically in most circumstances where a consumer has acquired goods and/or services (subject, of course, to some exceptions).
  • A Warranty Against Defect is not legally required to be given and is voluntary. However, if a Warranty Against Defects is given then it must comply with the requirements of ACL.
  • A Warranty Against Defects (if given) does not replace, override or limit the Consumer Guarantees, but rather operates in addition to them.

If you have any queries or concerns in relation your obligations under the ACL, the KKI Commercial Team is here to help.