Why is this important?

Providing warranties or guarantees, whether written or oral, tells your customers you have faith in the products you sell.

Whether you are a retailer, manufacturer or repairer you have certain obligations when setting warranty conditions. Briefly, you must:

• ensure your product is suitable for the purpose for which it is sold
• ensure the product is not faulty
• ensure the product performs to an appropriate standard and achieves the expected result
• as a manufacturer, stand by your warranty and make spare parts available for a reasonable time
• ensure every product you sell or service you provide is suitable for the purpose

What to do

Understand the different types of warranties and guarantees that exist so that you apply the most appropriate one to your products.

Warranties

There are four types of warranties:

• Voluntary warranties — these are given by manufacturers, resellers or service providers who choose to stand behind their goods or services.  If a manufacturer, retailer or service provider chooses to give a voluntary warranty or guarantee, then the law requires that person or business honour it.
• Extended warranties — these usually give a purchaser similar benefits to a manufacturer’s warranty, but over a longer period.  These warranties may apply only after the manufacturer's express warranty has run out.
• Specified warranties — these are imposed by State/Territory laws for particular products, such as used cars.
• Implied warranties — these are imposed by the Trade Practices Act and some State fair trading laws.  With some exceptions relating to purchases by businesses, they cannot be excluded or modified by manufacturers, resellers or service providers, and importantly they apply in addition to any voluntary or extended warranty.  The Trade Practices Act provides more information on warranties.

Personal guarantee

Where you operate a business other than as a sole trader or partnership, you may at some stage be asked to enter into a personal guarantee.  This will be especially so where you operate you business under the umbrella of a company.  A company is a separate legal entity and the directors of a company have only a very limited liability for the debts or other obligations of a company.  A personal guarantee is a way of making the directors personally liable for the obligations of the company or other legal business.  It is advisable to get legal advice before entering into a personal guarantee.

Source: SMExcellence

Where to go for help

Warranties and guarantees

http://toolkit.smallbiz.nsw.gov.au/dsrd/part/obligations_of_warranties_and_guarantees/5/35/169.html

http://www.smallbiz.nsw.gov.au/start/legalcompliance/legalconsiderations/pages/warrantiesguarantees.aspx

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