To Buy or Not To Buy – Extended Warranties

Have you been offered the option to purchase an extended warranty or extended care program alongside a good or service and wondered how it compares to your existing rights under law? This article will compare extended warranties to consumers rights under the Australian Consumer Law (ACL).

What is an extended warranty?

An extended warranty is an additional protection or lengthening of the coverage of the manufacturer’s warranty on a good or service. The warranty provider is usually the manufacturer, retailer, or importer. Typically, consumers may be asked to pay extra for extended warranties at the time of purchase.

Consumers’ rights under the Australian Consumer Law

Under the ACL, businesses are automatically subject to statutory guarantees that apply to the goods and/or services they supply to consumers (other than by supply by auction), and these are known as ‘consumer guarantees’.

The ACL defines who is a ‘consumer’ for the purposes of the consumer guarantees. The definition of a consumer can, in certain cases, include a business.

Consumer guarantees cannot be taken away or excluded. They apply to goods or services purchased for less than $100,000 inclusive of GST; goods or services of any price which are normally used for personal, domestic, or household purposes; and to vehicles or trailers acquired for use principally in the transport of goods on public roads.

The ACL outlines that, when purchasing a good, a consumer has the right to expect the following in respect of the good:

• that it is of acceptable quality;
• that it is fit for a particular purpose;
• that it matches its description;
• that it matches samples or demonstration models;
• access to repairs and spare parts;
• that the consumer will obtain legal title and undisturbed possession to it;
• that there are no undisclosed securities in relation to it; and
• that any extra promises made in relation to the good are honoured.

The ACL outlines that when purchasing a service, a consumer has the right to expect that the service is:

• performed with due care and skill;
• fit for a particular purpose; and
• supplied within a reasonable time.

If there is an issue with the good or service, and one of the above guarantees has not been meet, consumers may be entitled to the following remedies:

• repair;
• replacement;
• refund;
• compensation for damage and loss;
• cancellation of contract; or
• having the service performed again.

The appropriate remedy depends on the circumstances. However, consumers may not be entitled to a remedy in the following circumstances:

• Change of mind.
• Damage or use the goods in an unreasonable manner.
• Discovering the goods or services can be purchased for cheaper elsewhere.
• Before purchasing the goods, examined them and ought to have seen an obvious fault.
• A defect was pointed out before purchase.
• Dissatisfied with the performance of a service when the consumer insisted on having it carried out in a certain way.
• Did not clearly express the service wanted.

Other circumstances where consumer guarantees apply

Consumer guarantees also apply to:

• Second-hand goods – Second-hand goods are covered by the guarantee of acceptable quality, but age, price and condition must be considered. It may not be reasonable to expect a second-hand good to last as long or perform to the same standard as the new one.
• Goods bought at auction – Goods bought at a traditional auction conducted by an agent are only entitled to the consumer guarantees relating to title, undisturbed possession and undisclosed securities and charges.
• Goods bought online – Goods purchased from an Australian-based online seller are covered by all the consumer guarantees.
• Goods bought overseas – Goods purchased from an overseas online seller can be covered by the guarantees, however, being able to obtain an effective remedy or solution to their failure to observe consumer rights can be very difficult.

How consumers can take action

If you think a good or service you have purchased does not meet one of the above consumer guarantees, the Australian Competition and Consumer Commission (ACCC) suggests you take the following three steps:

• Step 1: Contact the seller and explain the problem and the ideal outcome. The ACCC suggests either visiting, calling, or formally putting the issues in writing. A sample letter can be found here.
• Step 2: Contact the ACCC or, the relevant state and territory consumer protection agencies and industry ombudsmen where you are having difficult resolving your complaint.
• Step 3: Take legal action, if the other two avenues have been unsuccessful.

Before buying an extended warranty, check to see if it offers you more protection than your rights under the consumer guarantees. It may be the case that the rights offered by the extended warranty will be less than those automatically granted to you under the ACL. Additionally, read the terms and conditions, as these will outline the process on how to make a claim under the extended warranty.

Queries

If you have any questions about this article, please get in touch with an author or any member of our Corporate & Commercial team.

Disclaimer

This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action