Our May edition of the E-commerce Business Magazine takes a look at warranties and cyber risks.
Author: Farrah Motley, Solicitor of the Supreme Court of Queensland
Welcome to the first edition of our new publication, Ecommerce Business Magazine. We’re excited to have you join us.
You can download the .pdf version of Edition 1 of the Ecommerce Business Magazine here:
Put simply, we wanted to give Australian e-commerce businesses (of whatever size and whatever industry) a resource to learn and develop their knowledge of the law and commercial tactics to help their businesses thrive. 2021 is going to be as competitive as ever for eCommerce and it’s vital for eCommerce businesses to understand their rights
and obligations and deliver value for their customers.
Our Ecommerce Business Magazine offers an unparalleled insight into the legal and commercial imperatives of any eCommerce
business.
This publication is written by Farrah Motley, a business lawyer with nearly a decade of working at the legal coal face of businesses.
Warranties can be an area of confusion for eCommerce businesses a warranty against defects; and consumer guarantees under the Australian Consumer Law (“ACL”).
There is an important difference between:
Warranties against defects are also known as “manufacturer’s warranties” or “express warranties”. Warranties against defects are generally expressed in relation to time or use (for instance, a car warranty may be for up to 20,000km or 2 years).
The warranty conditions will explain to customers what must be done in order to claim under the warranty. This may involve returning the product before the expiry of the warranty and emailing the seller’s warranty department.
Businesses do not have to give customers a warranty against defects; they are optional and give the business an opportunity to build trust in their brand and products.
If an eCommerce business does decide to pass on a manufacturer’s warranty to their customers, it is important to carefully mediate the relationship between the manufacturer and the customer.
Unlike a warranty against defects, consumer guarantees are not optional. No matter what a business puts in its terms and conditions, it cannot agree to exclude consumer guarantees.
Consumer guarantees include guarantees as to the product being fit for purpose, the product is of acceptable quality and matches the description provided by the seller. Find out more.
Consumer guarantees apply between both the end-user and the manufacturer, as well as between an end-user and a seller; the customer can decide whether to seek a remedy against either or both of the manufacturer or seller. Both are responsible.
It’s important that eCommerce businesses do not mislead their customers about their rights or reject genuine and lawful defects claims. It’s also important not to accept every claim without investigation as this may have negative commercial impacts because of the high return rate.
If an eCommerce business does experience a high failure rate on a particular product; they should seek redress against the manufacturer or supplier.
Ecommerce businesses (and their customers) are susceptible to cyber risks.
Picture this – a customer makes a large purchase on your website and claims to have made a payment. Your eCommerce business does not receive the payment and the customer does not receive the products. It then transpires that your eCommerce website has been hacked.
Now you must either decide to supply the product(s) to your innocent customer (at a loss to your eCommerce business) or refuse to supply the product and risk a bad review and damage to your eCommerce business’ reputation.
Given the prevalence of cyber security issues in the eCommerce space and the inability to completely prevent cyberattacks, eCommerce businesses should consider taking out cyber insurance. That way, if you and/or your customer become the victim of a cyber-attack, you have the means to address the problem without the impact on your bottom line.
While not an insurance policy, engaging a third party to monitor and alert you to cyber incidents occurring on your eCommerce platform and putting preventative measures in place, may enable you to quickly respond to issues and limit the number of impacted customers.
In the cyber risk space, prevention is the best path.
Educating your eCommerce customers is another important way to prevent cyber security incidents. You may wish to consider providing some non-alarmist, friendly warnings on your website to ensure your customers are alert to unusual activity or requests.
Cyber incidents may involve the theft of personal information. If your eCommerce business does not take reasonable steps to protect the personal information of its customers, your business may be investigated by regulators and your business’ reputation may be significantly impacted.
If you have any questions relating to your eCommerce business’ legal rights and obligations, contact Farrah Motley, an Australian business lawyer.
Author: Farrah Motley | Director
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