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The truth about warranties, refunds and replacements

Whether you're selling goods or providing services, you need to understand the regulations around warranties and refunds. 

If you sell goods

You must fulfill certain conditions and warranties set out by the Competition and Consumer Act 2010 (CCA). Your goods must:

  • be of merchantable quality—goods need to reach a basic level of quality given the price of the goods and any description that is provided with the goods
  • be fit for the purpose or job that they are meant to provide and fulfill purposes made known to the consumer
  • match any description or sample given to the consumer whether in promotional material, over the phone, in person, on a website or on labelling or packaging
  • be free from defects and faults
  • be clear of finance or encumbrances not disclosed to the consumer so that the consumer can have free title to the goods.

When you sell goods, you enter into a contract with the consumer. If you don't meet your obligations, you may have to provide a refund or replacement.

If you provide a service

If you provide a service you're obliged to carry it out with due skill and care. Make sure that any materials you provide as part of this service are fit for the purpose.

If you don't meet any of these obligations, you could have to repeat the service or pay for someone else to carry it out. The consumer may also be able to claim compensation for expenses incurred as a result, such as loss or damage. You may have to bear this cost.

When do I have to give a refund or replacement?

If there is a problem with your products or services you must provide a refund, replacement, repair or other remedy if you fail to meet your obligations under the CCA (outlined above).

You don't have to provide a refund if the customer doesn't have proof of purchase (eg. a receipt), has just changed their mind, if they have damaged the goods, or they knew about a fault beforehand (eg. factory seconds).

Under Australian Consumer Law, you are required to provide a remedy if your products or services:

  • are faulty (even if the customer only found out it was faulty after using the product)
  • don't match the sample or demo model
  • don't match the description
  • don't do what the salesperson said it would
  • don't do what the customer asked for.

If a customer simply changes their mind, you aren't legally required to give them a refund.

What type of remedy do I have to provide?

The problem with your product or service is major if it can't be fixed, would take too long to be fixed, or is too difficult to fix.

In this instance, the customer can choose to:

  • return the item and have it refunded or replaced
  • keep the item and be compensated for its drop in value.

The problem with your product or service is minor if it can be fixed within a reasonable time frame. In this case, your customer must give you the chance to fix the issue. You can choose whether to refund, repair or replace the item. However, if you are going to repair the item, you are responsible for dealing with the manufacturer.

Warranties and refunds in your state or territory

This content was first published on business.gov.au

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