Andrew Douglas
It is common for installers of cabling to take great comfort from the written warranties provided by manufactures of cabling product. Most installers assume that if something goes wrong with the product after it is installed, they can call upon the manufacturer’s warranty to cover the costs and expenses associated with rectification. While that comfort has some justification, it is also important to remember that manufacturer’s warranties do not provide complete protection for installers of other people’s products.
What is a warranty?
A warranty is a guarantee that a product will be free from defects.
Warranties come in two forms:
(1) Voluntary warranties (otherwise known as express warranties). A voluntary warranty is a written promise by a manufacturer or retailer to fix specified problems with a product if the problems arise during a set period of time. The term of the warranty (i.e. the number of years that it lasts) is stipulated in the warranty.
Manufacturers and traders are not required by the law to provide a voluntary warranty, but if they offer one then they must honour it; and
(2) Statutory warranties (otherwise known as implied warranties). These are statutory guarantees which are set out in legislation, but which become terms of the contract of sale.
What is the difference between voluntary warranties and statutory warranties?
A party who purchases a product will only be covered by a voluntary warranty if it is written into the contract of sale. The amount of protection provided is determined by the wording of the warranty.
All purchasers of products are covered by ‘statutory warranties’ (otherwise known as ‘implied warranties’).
The statutory warranties allow a purchaser to sue for breach of contract where:
- Goods are not of merchantable quality (which means fit for their ordinary purpose, taking into account the price of the goods and any description that is provided with the goods);
- Goods are not fit for a special purpose which has been made known to the seller;
- Goods do not 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; and
- In a contract to provide services, the services were not carried out with due skill and care. A person who provides services must also make sure that any materials provided as part of this service are fit for the purpose.
The effect of the statutory warranties is that if the goods break down or develop a fault within an unreasonable time, the purchaser can demand a refund or replacement/repair of the goods. In some circumstances, a purchaser may be able to sue for associated damages (e.g lost profits). Similarly, if a supplier has not provided a service with due skill and care or if the materials which have been supplied as part of the service are not fit for the purpose, then the consumer may also be entitled to claim compensation for expenses they have incurred as a result, such as lost profit.
The purchaser must be able to demonstrate that they did not cause the fault, and that they used the product as it was intended.
There is no time limit which specifies when the defect must arise. It all depends on how long a product of that sort should operate without defects (bearing in mind the price and ordinary purposes of the product). In some cases, the statutory warranty will be longer than the voluntary warranty. For example, the contractual warranty may be limited to one year, but a court may determine that a product of that type should operate without defects for two years.
The statutory warranties are set out in Victoria in the Goods Act 1958 and the Fair Trading Act.[1] The warranties in the Fair Trading Act 1999 (known as consumer protection warranties) are mandatory and cannot be excluded by a contract of sale. These warranties only apply when:
- The goods or services are worth less than $40,000 or
- The goods or services are worth more than that, but the goods or services are of a kind ordinarily acquired for personal, domestic or household use.
In addition, the Fair Trading Act warranties only apply where the purchaser is the end user. In other words, they don’t apply where the purchaser is on-supplying the product to someone else in the course of business. This means that where a contractor purchases goods to supply to another business, the warranties in the Fair Trading Act won’t apply. The warranties in the Goods Act apply regardless of the value or ordinary use of the good,[2] and even where the purchaser is planning to supply the goods to another business. However, these warranties can be excluded by the contract of sale.
Purchasers are still entitled to their statutory rights no matter what terms and conditions might be contained in a voluntary warranty. The only exception to this is where the seller is entitled to exclude the statutory terms and has done so through clear language in the contract of sale. If the seller does this, the statutory warranties will not apply, and the purchaser’s remedies will be limited to any voluntary warranty.
It is quite common for manufacturers to exclude any warranties other than voluntary warranties. If the Fair Trading Act warranties do not apply and the Goods Act warranties have been excluded, the voluntary warranty is the only warranty that applies.
Who is the warranty given to?
Voluntary warranties are normally given to purchasers or end users. This means that the end user can enforce the rights in the warranty, even if they have never seen it, or it was handed to the installer.
Is it bullet proof?
It is important to remember that warranties only cover defects in the product supplied. However, the installer’s liability is not confined to the supply of defective goods. Legal liability can arise in a number of ways. These include:
(a) Pre-contractual representations
Parties frequently make representations and promises while they are negotiating a contract or tendering for a job. For example, an installer of a cabling system may represent that the system will perform in a certain way. These ‘pre-contractual representations’ can give rise to legal liability in two main ways. First, the promises may become terms of the contract, and the installer can be sued for breach of contract if the promised performance does not eventuate. Secondly, the installer could be sued for making a ‘false and misleading representation’ in the context of trade or commerce.[3] This applies where a person makes a statement of fact (e.g. this product has certain attributes) which is untrue, or a comment about the future (e.g. this product will behave in a certain way) which they did not have a reasonable basis for making. The manufacturer’s warranty will not provide a defence where the client sues due to representations made by an installer which did not have a proper foundation.
(b) Common law negligence
The law of negligence requires a party to pay compensation where they fail to meet the standard of care owed in the circumstances, and the party to whom the duty was owed suffered loss. A contractor who installs products for a client owes that client a duty of care to ensure that the installation is carried out with a minimum standard of competency.
(c) Occupational Health and Safety
Occupational Health and Safety (OHS) legislation in all states imposes duties on persons who perform work to ensure that other persons (such as employees or members of the public) are not endangered by the work they perform. A contractor who performs work on the site of another business can be prosecuted for a breach of OHS duties if the contractor creates risks or hazards on that site.
What does Court look like?
It is not always easy to predict the legal outcome of a dispute over the quality of an installed product. In most cases, a party who has had a defective product installed will bring an action against the party who installed it. This is because the ultimate purchaser has a contract with the installer, and that contract will contain the statutory warranties described above. The installer can be sued for breach of contract in respect of defective goods supplied by them, even though the manufacturer is really to blame. A person who provides or installs a product is responsible for the quality of that product, and can be sued for breach of statutory warranty if it is defective. While the end-user can sue the manufacturer directly, it is more common for them to sue the person they have a contract with.
If an end-user brings an action against an installer in respect of defective cable, the installer can ‘join’ the manufacturer of the cable to the court proceedings. If the cable is shown to be defective, then the manufacturer will be held liable on their voluntary warranty (or any statutory warranties that have not been excluded). However, this is often not straightforward. In many cases, the manufacturer will argue that the product has not been installed correctly, or that it has been used incorrectly by the end user.
In addition, if the installer made claims about the product which go beyond the promises made by the manufacturer, and the promises have been breached, the installer will be held liable for breach of contract, or for misleading and deceptive conduct. Therefore, it is important that installers do not make claims which go beyond the manufacturer’s warranties, and that all communication about the work to be done is recorded in writing to avoid a dispute over what was said.
The Warranty and beyond
The reality is that warranties are often limited in their scope. Common limits or conditions of voluntary warranties are:
- The product must have been installed by an installer trained by the manufacturer;
- The manufacturer will repair or replace the components but will not provide a refund;
- The warranty is not transferable and applies only to the original end user;
- The party claiming under the warranty must follow a specified procedure (e.g. the installer must attempt to diagnose and rectify the fault first);
- The manufacturer will not be liable for associated or consequential losses (eg. lost profits due to down time).
Limits such as these can drastically curtail the protection afforded by a warranty. If statutory warranties have been excluded (which is commonly the case), then the voluntary warranty may be the sole basis for having recourse against the manufacturer. It is important to remember, though, that the end-user may also have a case against the installer, and the installer’s right to call upon the manufacturer to take responsibility will be limited by the manufacturer’s warranty.
Your contract with the end user: the importance of limiting liability
To ensure that installers are protected, it is important that the contracts they enter into with clients are designed so that the installer’s liability for defective products is limited. It is not possible to limit liability for services where the consumer protection warranties apply (see above), but in other cases it is. The contract of installation can include an ‘exemption clause’ which limits the liability of the installer in the manner specified. To be valid, an exemption clause must be written into the contract with the client, or otherwise brought to their attention.
It is also important to control your sales pitch – make sure that your representations and promises are defensible, and don’t promise what you can’t deliver. Ensure that your services are delivered in a way that is competent and not open to charges of negligence. A manufacturer’s warranty won’t help you defend a charge of negligence which is aimed at your own performance.
Conclusion
Manufacturer’s warranties are an important source of rights for both end users and installers who may otherwise be held liable for defective products. However, the potential legal liability of installers is not completely covered by manufacturer’s warranties. Installers need to think about protecting themselves by using other mechanisms, such as carefully worded contractual documentation, and prudent negotiating.
[1] The Trade Practices Act 1974 also contains statutory warranties in the same form. These apply where the manufacturer or supplier is a corporation.
[2] The warranties in the Goods Act 1958 apply to goods, but not the provision of services.
[3] In breach of section 52 of the Trade Practices Act 1974