A business owner approached SLB Legal after experiencing an increase in unreasonable customer complaints relating to alleged product defects and refund demands.

The business had a limited product warranty and refund policy that the owner had adapted from an online template and relied on when customer complaints arose. While intended to protect the business, the terms were not compliant with the Australian Consumer Law. The warranty and policy were also confusing customers and causing some disputes to escalate.

Where did the DIY warranty and refund policy go wrong?

The business owner needed a clear, enforceable, and compliant product warranty and refund policy that balanced customer rights with the business's commercial risk.

However, our review of templated and self-drafted terms identified several issues, including:

• The product warranty, which was an express warranty about quality, did not include the mandatory wording for warranties against defects under the Australian Consumer Law (ACL).
• The refund and return policy inadvertently attempted to limit or exclude consumer guarantees, which is unlawful under the ACL.
• The express product warranty was not clear on:
  • What was covered and excluded;
  • Customer eligibility requirements, such as product care and usage requirements; and
  • Timeframes for making claims.
• There was no clear process to be followed by either the customer or the business owner in relation to the warranty, rectification, replacement or refund claims.

The risk to the business

If left unchanged, the business was exposed to:

• Possible significant financial penalties for breaches of the Australian Consumer Law;
• Unenforceable product warranty and refund terms;
• Increased refunds and rectification costs;
• Escalation of customer disputes; and
• Reputational and business damage.

How did SLB Legal help?

After an initial review, SLB Legal conducted an in-depth consultation with the business owner to understand:

• The recurring areas of customer disputes about quality and refunds;
• The nature of the products supplied; and
• Where the business was most exposed when facing unreasonable rectification or refund requests.

Based on our discussions, SLB Legal drafted a customised, legally compliant product warranty and refund policy, which fit with how the business actually supplies its products and services.

This included:

• Drafting a product warranty against defects that complied with the Australian Consumer Law and included the mandatory ACL wording.
• Ensuring the rectification, returns, and refund policy did not attempt to exclude or limit the ACL consumer guarantees.
• Clearly defining in both the product warranty and refund policy:
  • what is covered and excluded;
  • Customer eligibility requirements; and
  • Timeframes and conditions for claims.

·      Creating a clear, fair, and enforceable warranty and rectification and refund claims process that balanced customer rights while lawfully limiting the business owner's liability where permitted.

The result

Implementing the new, clear, and legally compliant warranty and refund terms helped the business:

• To reduce the impact of customer disputes;
• Manage refund and rectification requests easier and quicker;
• Have more confidence when responding to customer complaints; and
• Save time and money on unnecessary or unreasonable re-work and refunds.

Using online templates for product warranties and refund policies often leaves businesses exposed. DIY legals and documents may not comply with Australian law and rarely reflect how a business actually supplies its products or services.

If you need help drafting or reviewing your product warranties, refund policies, or terms of trade, contact SLB Legal for advice today.