This is a guide to the Consumer Guarantees Act (CGA) for retail traders supplying consumer goods. It sets out the guarantees under the Act that apply to goods and the rights and remedies available to consumers if those guarantees are breached.

Guarantees for goods

Goods will be of acceptable quality.
Goods will be fit for any particular purpose.
Goods must be the same as any description given to the customer.
Goods must be the same as any sample or demonstration model shown to the customer.
Goods can be legally sold ( the seller has the right to sell the goods and there are no undisclosed securities).
Goods will cost the consumer a reasonable price if no agreement has been made about the price.
Manufacturers and importers of goods must guarantee that repairs and spare parts are available for a reasonable time.

From 8 July 2003, the Consumer Guarantees Act applies to

Electricity
Gas
Water
Computer software

This means that from 8 July 2003 you must meet the guarantees contained in the Consumer Guarantees Act when you supply those goods to consumers.

Acceptable quality

The Act says goods are of acceptable quality when the goods:

do what they are made to do
are fit for all the purposes that the goods are normally used for
do not have any small faults
are acceptable in appearance and finish
are safe to use
are durable.

The test for each of these points is:

Would a reasonable consumer, who is fully aware of the state of the goods including any hidden defects, find the goods acceptable?

When are goods not of acceptable quality?

A reasonable consumer would NOT consider these goods to be of acceptable quality
A new toaster has a faulty element and toasts only one side of the bread. It does not do what it is made to do.
An on/off light on a new CD player doesn't work. This is a minor fault but not acceptable quality for a new appliance.
A shirt has a mark on the back. It is unacceptable in appearance.
The locking mechanism on a baby stroller slips when the child wriggles about in the parked stroller. The stroller is not safe.
The motor in a new washing machine burns out after two years normal use. A reasonable consumer would consider this was not acceptable durability for a new appliance.
Computer software with a "bug" in it that continually causes the consumer’s computer to crash.
Electricity supply that is cut off to a street, so that work can be done on the lines, and no advance warning is given to consumers.
Water that is murky and tastes bad, because the water supplier failed to use skill and care when maintaining the pipes.

What else must a consumer consider?

In deciding if goods are of acceptable quality the reasonable consumer must consider:

the nature of the goods
the price (where relevant)
any statements on labels or packaging
anything said about the goods by the seller or the manufacturer
any other relevant circumstances.

Examples

Nature of the goods

A reasonable consumer will have different expectations of goods depending on their nature.

e.g. a customer will expect a T shirt made of a heavier weight cotton material to last longer than a T shirt made from a very lightweight material.

Price

Price will be relevant when a customer has paid a very high or very low price for the goods. A reasonable consumer will expect goods that are expensive to be of better quality than goods that are very cheap. Within the normal range of prices for a particular type of good eg $7 - $35 for a T shirt there will be a standard level of quality that a reasonable consumer will expect.

e.g. the seams are well sewn, there are no holes in the fabric.

Statements or representations made by the seller and manufacturer

These may be statements made in advertising or displays or things that are said to the customer.

e.g. a sofa covered in loose weave Indian cotton is sold with a warning that the cotton is likely to rip after two years normal use. The customer will not have a valid claim if this happens after two years.

e.g. a customer will have a claim if they are told the wallpaper they are buying is washable but the surface rubs off when it is wiped.

Other relevant circumstances

e.g. the customer installs a log-burner incorrectly and this causes the problem.

What if the customer has caused the problem with the goods?

Sometimes the customer will have caused the problem.

You do not have to refund, repair or replace if a customer has:

used the goods in a way that is different to the way a reasonable consumer would use the goods and this use has caused the problem.
e.g. Mereana uses her baby stroller to move some concrete blocks because she doesn't have a wheelbarrow. The seat fabric rips.

used the goods far more often than a reasonable consumer would expect to use the goods and this use has caused the problem.
e.g. Brian buys a washing machine and uses it to provide a laundry service for a home for the elderly. The motor fails after eight months.

The use the consumer made of the goods must have caused the problem if you are to refuse a repair, replacement or refund.

e.g. if Brian's washing machine was delivered with a scratched panel he could ask you to put it right. His excessive use of the machine has not caused the scratch.

What if I pointed out the defect?

You will not be liable for a fault if you display a sign with the goods that states what the defect is - eg, "this appliance has a scratch on the left side".

The Act says you must use a sign displayed with the goods to avoid liability. You cannot use a sign to avoid responsibility for unknown faults that may occur - eg, "these garments may not be colour-fast".

You can only exclude liability for specific faults that you know exist.

Fitness for particular purpose

This can be a purpose that either:

the customer tells you about or implies - e.g. "I want a heater to heat my hall and the two bedrooms". The heater must be of sufficient strength to heat a number of rooms,

or

you have stated the goods will be fit for. Such statements are often made in advertising, in speaking to the customer, on signs, on labels or on packaging - e.g. a display sign says "Work socks". The socks should be hard wearing and suitable for use by a labourer wearing boots.

Fitness for particular purpose is an additional guarantee to fit for "normal" purpose (which falls under the guarantee of acceptable quality).

e.g. Trevor wants a car that will tow his jetboat. Trevor knows that a car's normal purpose is to be used as transportation but the car he buys must not only be fit for that use but also able to tow the boat.

A car that has only a 1600cc engine won't do for Trevor!

The guarantee that the goods will be fit for a particular purpose applies even when the purpose is an unusual one.

e.g. Terry wants to paint his car himself. He goes to the local hardware store and asks for paint suitable for his car.

If they sell him the paint then it must be fit for the purpose he has stated. If they have no paint suitable for cars they should say so.

Am I always expected to know if the goods will do the job the customer wants?

Everyone working in the shop should know about the normal uses for the goods they are selling.

e.g. if you sell paint you should know what each type and brand is suitable for.

You need to be sure any claims you make for the goods are true.

e.g. a shop assistant tells a customer that the anti-mould product they are looking at will definitely stop mould growing on a bathroom ceiling. The customer will have a claim if it doesn't.

In some situations you cannot be expected to know if the goods will meet the customer's purpose. In these cases the customer can't claim under the fitness for particular purpose guarantee.

e.g. Alan asks for a pair of shoes that won't hurt his bunion. The salesperson can suggest which shoes are most likely to be suitable but only Alan can judge how comfortable the shoes are for him.

Goods must match any description of them

Many goods are sold with a description of some sort - e.g.100% cotton, free-range eggs, recycled paper, toughened steel blade.

As a retailer you are liable for any description given with the goods including the descriptions on packaging and labels.

Goods must comply with a sample

If you show a customer a sample or a demonstration model then the goods the customer buys must be the same as the sample.

e.g. Julie looks at a food processor on display in a shop and takes a box off the stack to the counter. When she gets home she finds it is a different model to the one on display.

Goods can be legally sold

You must guarantee that you have the right to sell the goods and that there are no undisclosed security interests. You also guarantee that the goods will not be repossessed by you or anyone else.

If you supply software to consumers, you must have the legal right to sell that software, and you must sell it in a way that gives the consumer the right to use the software.

There are two exceptions:

The goods are sold under a Hire Purchase agreement.
A security or a term of the sales agreement allows for repossession and the customer has been told that the goods can be repossessed and has acknowledged this in writing:

the fact that the goods can be repossessed was explained in a way that would make it clear to a reasonable person

the customer has been given a copy of the repossession clause.

An example of a security held over the goods is a Romalpa clause. If you include Romalpa clauses in your sale agreements you must tell the customer about the clause, get a written acknowledgment from them and give them a written copy of the agreement, or part relating to the romalpa clause.

Goods will be charged at a reasonable price

This guarantee only applies when you have not agreed a price with the customer. This situation will not occur very often in normal retail business.

eg, Kiri orders a load of firewood over the telephone without asking the price. The bill is twice as much as other local merchants are charging. Kiri does not have to pay more than a reasonable price for the goods.

A reasonable price will be a price within the range of prices offered by other local suppliers.

Manufacturer's guarantees

Spare parts and repair facilities

They can supply the parts and service themselves or ensure that they are available through other people.

If a manufacturer or importer does not want to be bound by this guarantee they must make sure that the customer knows that availability of spare parts and repairs is not guaranteed or is limited.

Manufacturers may choose to inform the customer in writing so that they will have proof that they have given notice to the customer.

This responsibility does not apply to second hand goods unless they are being sold in New Zealand for the first time

eg, a second hand car imported from Japan and sold in New Zealand for the first time will be covered by the Act unless the importer contracts out.

Customers can claim from the manufacturer

The customer can choose to claim either from you or from the manufacturer for goods that are not of acceptable quality or that don't comply with the manufacturer's description. If you suggest to a customer that they have to go the manufacturer instead of to you, you will be breaching the Fair Trading Act. The Fair Trading Act says you cannot mislead a customer about their rights.

Customers are most likely to claim from you because you are more accessible. A customer might choose to claim from the manufacturer if the manufacturer is recalling goods and offering repairs or refunds directly to the buyer. Or they may have to go to the manufacturer because the retailer who sold the goods has gone out of business.

Manufacturer's warranty or guarantee

As the seller of the goods you are responsible for them meeting the guarantees included in the Consumer Guarantees Act. If a manufacturer gives a guarantee in addition to the guarantees in the Act the manufacturer is responsible for that guarantee. You are not.

If goods come with a written guarantee from the manufacturer then the customer will have the choice of claiming from the manufacturer or from you. If the customer chooses to come to you, you must accept responsibility. You cannot insist that the customer use the manufacturer's guarantee and approach the manufacturer instead.

Can I ask the customer to wait while I send it back to the manufacturer?

No. The customer's contract is with you, not the manufacturer. You are responsible for the goods you sell. You must give a repair, replacement or refund according to the Act without waiting for a manufacturer's opinion unless this can be obtained within a reasonable time.

What rights do I have to get my money back from the manufacturer or supplier?

As you are buying goods for sale in your business you are not covered by the Consumer Guarantees Act. Your rights against your suppliers are still covered by the Sale of Goods Act and are similar to the rights given to consumers in the Consumer Guarantees Act. However your contracts with your suppliers may vary these rights.

You may want to check your contracts with suppliers to make sure that you will be able to claim from them when you have refunded, replaced or repaired goods for a customer.

Rights and remedies

The rights of the customer to redress depend on the type of problem they have with the goods.

If the fault is minor or can be repaired

If the problem with the goods can be fixed the customer can ask you to put it right. You can choose to do this either by repairing the goods or by giving a replacement.

You must act within a reasonable time and provide the repair or replacement free of charge.

The customer must accept either the repair or replacement that you choose to offer.

If you refuse to do something about the faulty goods when it is possible for them to be put right or if you take more than a reasonable time to put it right the customer can choose to:

get their money back
get a replacement or
take the goods somewhere else to be fixed and claim the cost of the repair from you.

It is the customer's decision which of these option they choose.

What is a reasonable time for getting a repair done?

A "reasonable time" for a repair is not defined in the Act and will depend on the nature of the goods and other circumstances. Often it will be a short time.

eg, one day would be a reasonable time for a repair of a pair of shoes that the customer needs. Most shoe repairers offer same day repairs so this is not unreasonable. Similarly if a customer has bought something they need to use eg a heater, they could not be expected to wait longer than a day for a repair. If this is not possible you could offer another heater on loan while the customer's heater is repaired. It is the customer's choice whether they accept the loan.

If the goods are only used once a week eg a lawn mower, a reasonable time for a repair would be one week.

What if a repair will be expensive?

If it is possible to repair goods but the cost of the repair will be more than the value of the goods you do not have to offer a repair. You can replace the goods or if this is not possible you can give a refund.

Do I have to pay if a customer gets it fixed elsewhere?

The customer must have given you the opportunity to put the problem right first. If you have refused to do anything or have taken longer than a reasonable time to provide a repair or replacement the customer can get the repair done elsewhere.

You must pay for the repair. The customer does not have to get your agreement before taking the goods elsewhere and does not have to provide quotes. But you can only be asked to pay reasonable costs for the repair.

What is a reasonable cost for a repair?

A reasonable cost will include the cost of the repair and any other costs such as parking fees or transport costs. A reasonable cost for the repair itself will be a cost within the normal range charged by repairers of the goods.

eg, the zip on a pair of trousers breaks after one week. The shop tells the customer the repair will take 10 days. The customer needs the trousers for work. He gets the zip replaced by a tailor for $35. The shop says that their dressmaker would have done it for $15. If $35 is a normal price for a tailor to do the job you must pay it. The fact that you have access to a cheaper repair is not relevant because you did not provide a repair within a reasonable time.

If the fault is serious or cannot be repaired

The customer has three choices. They can:

get their money back

get a replacement

keep the goods but get some of their money back in compensation.

The customer chooses which of the three options they prefer.

Under the Act a serious problem is any case where:

a reasonable consumer would not have bought the goods if they had known) that the fault existed - eg, no-one would buy a washing machine if they knew the motor was going to burn out after three months
the goods are significantly different to a description given or to a sample or demonstration model - eg, a jersey is described as 100% wool but is 30% acrylic
the goods are substantially unfit for their normal purpose and they can't easily be made fit for the purpose or this can't be done within a reasonable time - eg, a video will not fast forward or rewind tapes and the fault cannot be found
the goods are substantially unfit for the particular purpose the consumer bought them for and they can't easily be made fit for the purpose or this can't be done within a reasonable time - eg, washable wallpaper that is not really washable at all
the goods are unsafe - eg, a bicycle has faulty brakes.

What if the problem is serious but can be fixed?

If the problem falls within one of the definitions given above the customer can choose to get their money back rather than have the goods repaired. The fact that the problem could be repaired does not change this.

eg, the faulty bicycle brakes could probably be repaired. However a new bicycle should not have a serious fault like this and a reasonable consumer would not buy a bicycle if they knew it had faulty brakes. So the customer has the right to reject the goods and ask for their money back.

Does the customer have to return the goods?

The customer must return the goods if they want a refund. The exception is where returning the goods will cost a significant amount because the goods are:

large
attached to something, or
hard to transport because of the defect.

In these cases you must collect the goods at your expense.

What if it is not possible to return the goods without damaging them?

eg, wallpaper that has been put up cannot be returned without ruining it.

In this situation the customer cannot insist on returning the goods and getting a refund. They may ask you to replace the faulty goods or to give compensation for the drop in value of the goods.

If the customer chooses to keep the goods how much money should they get back as compensation?

When the problem is a serious problem or can't be fixed one option the customer has is to keep the goods and claim some of their money back. They are claiming compensation because there is a fault in the goods. The customer is entitled to an amount equal to the drop in the value of the goods.

eg, washable wallpaper that turns out not to be washable will have a significant drop in value.

The drop in value may equal the cost of the wallpaper. The drop in value of a shirt with a mark on the back is likely to be less than the cost of the shirt.

Do refunds have to be in cash?

When the customer is entitled to a refund it must be given in cash. The customer does not have to accept a credit note.

You can wait until a customer's cheque clears before giving a cash refund. You can reverse the charge on a credit card or store card account instead of giving a cash refund if the customer has not been billed. A cheque may be acceptable for larger refunds.

What if there was a trade-in?

The customer can claim the amount allowed for a trade-in as well as the amount paid for the goods. You must refund the amount allowed in cash. You can return the trade-in goods instead only if the customer agrees.

Damage and loss (consequential loss)

If the goods have caused damage or other loss when they became faulty the customer can ask you to pay for the damage and the extra loss. This loss is called "consequential loss".

What types of damage and other loss am I responsible for?

You are responsible for any extra loss or damage the customer suffers because of the problem with the goods.

eg, a tape deck develops a fault and ruins the tape it is playing. You must pay for the tape as well as putting right the problem with the tape deck.

You are also responsible for any other costs the customer may face because of the problem with the goods.

eg, if a dryer breaks down and the repair takes a week the customer can claim the cost of drying their washing at the laundromat for a week. As an alternative to paying these costs you may want to offer another dryer on loan.

You can ask the customer to provide receipts or other evidence of the extra costs.

Your responsibility is limited to loss or damage that could have been expected to result from the failure. You are not liable for losses that are not foreseeable.

Frequently asked questions

Can the customer come back after several months or years to complain about the goods?
Layby sales
What if the customer no longer has the goods?
Can I still use a Romalpa clause in my sales agreements?
Can I display a No Refund sign?
What if the person making a claim received the goods as a gift?
Does the customer have to produce proof of purchase?
What if the customer wants a replacement and I don't have any similar goods?

Can the customer come back after several months or years to complain about the goods?

A) Claiming cash refunds or replacement goods

The customer must make their claim within a reasonable time if they want to claim a cash refund or a replacement. A reasonable time is the time in which you would normally expect the defect to become noticeable. In deciding what is a reasonable time for a defect to be noticed these points will be considered

the type of goods
the use of the goods (if goods are used frequently a defect is likely to be noticed sooner. It will take longer for a defect to appear if goods are not the sort that will be used every day - eg, a sander attachment for an electric drill may not be used until six months after it is bought.
the length of time the goods can reasonably be used for -eg, goods such as fridges and washing machines are expected to be used for a long time.
the amount of use before a defect is likely to become obvious - eg, the dye will run on clothing the first time it is washed but it may take several weeks of wear before a problem with fraying seams is noticed.

Some defects will only become noticeable after several years' normal use. The customer will be able to claim a refund or replacement if it can be shown that the problem is due to a defect in the goods and not normal wear and tear.

What if the claim is not made within a reasonable time?

The customer loses the right to ask for a refund or a replacement if the claim is not made within a reasonable time. They can still ask you to put the problem right or to give compensation. There is no time limit on this. You can choose to put it right by either repairing, replacing or refunding.

B) Claiming for a problem to be put right

There is no time limit set by the Consumer Guarantees Act for customers making a claim for a problem to be put right. If goods fail to meet one of the guarantees the customer can ask you to put it right even though it may be some time since they purchased the goods. Remember it is your choice whether you put it right by repairing it or offering a replacement.

What if the customer has just changed their mind about the goods?

You do not have to give a refund or a replacement if the customer has decided they do not want the goods. The Act only applies when the goods do not meet one of the guarantees.

It is your choice whether you offer a refund or any other remedy if a customer has simply changed their mind or decided they can't afford the goods.

Layby sales

When a customer changes their mind about goods they are paying off on layby they have the right to a refund under the Layby Sales Act. The Consumer Guarantees Act does not change this. The Consumer Guarantees Act will only apply to layby sales when the goods bought are faulty and the customer makes a claim under the Consumer Guarantees Act.

What if the customer no longer has the goods?

If the customer no longer has the goods they cannot ask you to replace the goods or give a refund.

Can I still use a Romalpa clause in my sales agreements?

If you sell goods with a Romalpa clause ( a right to retain title to the goods) in the sale agreement then you must tell the customer, get their acknowledgment in writing and give them a copy of the clause.

Can I display a "No Refund" sign?

No Refund signs are a breach of the Fair Trading Act. The signs imply that it is not possible to get a refund when the Consumer Guarantees Act gives customers the right to a refund in certain situations. If you display these signs you are misleading a customer about their rights. An individual can be fined up to $60,000, and a corporation up to $200,000, for breaching the Fair Trading Act.

Signs that specifically state No Refunds will be given for goods if you have simply changed your mind are acceptable. The Ministry has signs you can display in store that set out a refund policy that complies with the Fair Trading Act. You can order the sign from the Publications page.

What if the person making a claim received the goods as a gift?

A person who receives goods as a gift has the same rights to claim under the Act as the person who bought the goods.

eg, if a lawnmower breaks down and you take two weeks to repair it, the customer could claim the cost of hiring a mower to do their lawns. They could not claim the $15 that their son gets for mowing the neighbours lawn each week as you could not be expected to know that this loss would happen.

Does the customer have to produce proof of purchase?

You are entitled to ask for proof of purchase. Proof of purchase may be a receipt, a credit card slip, a copy of a cheque or a witness. It may be unreasonable to expect the customer to have a receipt if the fault has occurred after some time has elapsed.

What if the customer wants a replacement and I don't have any similar goods?

The customer can choose to ask for a replacement if you have refused or delayed putting a problem right. They can also choose a replacement if the problem is serious or can't be fixed.

You must give a replacement if suitable replacement goods are reasonably available to you. This may mean ordering them from another branch or from the supplier. If no similar goods are available to you the customer will have to choose another option.

Disclaimer

Privacy and Copyright Statement

This site uses cookies to track and analyse usage.