[Note: the TPA has been superseded by the Australian Consumer Law. Please see our new guide on Customer Guarantees and the IT Industry here]
Online Seller’s Guide to Warranties and Returns
Recently, the ACCC commenced legal proceedings against the well known online computer parts reseller MSY for alleged breaches of the Trade Practices Act. In particular, the ACCC is cracking down on false or misleading representations and information about warranties, refunds and returns. MSY isn’t the only reseller targeted in recent months.
The Trade Practices Act imposes several implied warranties and conditions that cannot be excluded by contract. These include the warranties that goods are fit for purpose, and of merchantable quality. Factors including the price, discount, descriptions and ordinary use of the product are all considered, as are advertising slogans, descriptions of the goods, and sales pitch. It is important to update your contract terms, but that is only part of the process
What Do You Need To Do?
If you supply goods or services, particularly if you sell goods online, these are a few pointers to help you comply with your legal obligations:
- Ensure your contracts are up to date, reflect your business processes, and clearly define the purchaser’s rights and obligations;
- Have a clear refunds and returns policy that is easy to find on your website;
- Ensure any descriptions of goods published on your website are clear and match the goods to be provided;
- Ensure that your warranties comply with the Act, and do not give the impression that you exclude the implied warranties;
The Act allows sellers to limit their liability to the refund of the value of the goods, replacement or resupply. However, it is misleading to advertise a limits to your warranties, if the end result gives the impression that the consumer does not have a remedy.
Claims Against The Manufacturer
We commonly see business models where the goods are shipped directly from the manufacturer to the customer, and the reseller does not receive the goods at any stage. However, if the manufacturer supplies defective products, you are still liable, as the customer has a contract with you. While you can later claim against the manufacturer for defects, the customer has the right to return defective goods to you for a full refund.
Freight And Shipping
In our experience, failing to account for freight and shipping is the main area that resellers come undone. Under the Act, it is a breach of the contract of sale if goods are not of merchantable quality or fit for purpose. This will leave you responsible for all freight and shipping costs in relation to warranty claims (except for goods that are not returned within a reasonable time). This cost of investigating a warranty claim must be included in your profit margin calculations, as it cannot be passed on to the consumer.
Further information is also available on the ACCC website: www.accc.gov.au