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The Consumer Guarantees Act (CGA) is about the quality of the goods
you manufacture or import. You are responsible for guaranteeing the
quality of the goods you manufacture or import. Consumers can claim
compensation from you if goods you manufacture or import are not of
acceptable quality. You must ensure that repair facilities and spare
parts are reasonably available for goods you manufacture or import.
The Act also affects retail sales. If you sell goods to the
public you may wish to visit our pages providing
information for suppliers of goods.
Definition of manufacturer and importer
All manufacturers of goods normally bought for personal or
household use are liable under the Act.
A manufacturer is defined as anyone who:
- assembles, produces or processes goods
- tells the public that they are the manufacturer of the goods
or
- attaches their brand or mark to goods - eg, a New Zealand
company labels imported tomatoes with their own company name.
Importers will be liable under the Act when they import or
distribute goods normally bought for personal or household use that
are manufactured by a foreign manufacturer who does not have a place
of business in New Zealand.
Guarantees
The Consumer Guarantees Act says that you must give the following
guarantees for the goods you manufacture or import:
- Goods are of acceptable quality
- Goods are the same as any description you gave to the consumer
- Repair facilities and spare parts are reasonably available for
a reasonable time.
These guarantees are explained in more detail in the
suppliers of goods and the CGA section.
Goods must comply with any express guarantee you give with the
goods about their performance and the availability of spare parts or
replacement goods.
Spare parts and repair facilities
The Act makes you responsible for ensuring repair facilities and
spare parts are available for the goods that you manufacture or
import. Repair facilities and spare parts must be reasonably
available for a reasonable period after the goods are sold. This
means you must provide spare parts or repair facilities unless you
know they are easily available through other outlets.
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 by a dealer and
sold in New Zealand for the first time will be covered.
What does reasonably available mean?
The Act does not define reasonably available. What is reasonable
will vary for different types of goods and parts.
eg, goods such as appliances and cars are frequently used
and will have parts that are commonly needed for repairs -
fanbelts, brake pads, toaster elements. Most consumers would
expect these parts to be available immediately in all major towns.
Parts that do not commonly need replacing may be reasonably
available if they are stored in selected centres only and there is a
short delay in getting them to a consumer. The interpretation of
what is reasonably available will be determined as cases are heard
in the Disputes Tribunal and in court.
What is a reasonable period of time?
The guarantee says that spare parts and repair facilities will be
available for a reasonable period of time after the goods are sold.
You will need to consider the normal useful life of the product when
deciding what is a reasonable time.
eg, a washing machine, car or television may be expected to
last more than five years. It is reasonable that spare parts and
repair facilities will be available during this time.
Contracting out of spare parts and repairs guarantee
You can contract out of the provisions about spare parts and
repairs by telling consumers
- that you do not guarantee the availability of spare parts and
repair facilities, and/or
- that spare parts and repair facilities will not be available
after a certain date.
You must make sure that every person buying your goods is told
this before they buy. This will mean making sure that the consumer
receives the warning from the retailer or supplier of the goods.
Goods match their description
Many goods are sold with a description of some sort eg 100%
cotton, free-range eggs, recycled paper, toughened steel blade.
Goods must meet any description given with them. This includes
the descriptions that you put on packaging and labels or use in
advertising.
Manufacturer's warranties
You may offer your own warranty or guarantee with the products
you manufacture or import. This is called an express guarantee and
it is additional to the guarantees given in the Consumer Guarantees
Act. It does not replace or override the guarantees given in the
Act.
You must honour any express guarantees you give. A consumer can
claim compensation from you if you fail to honour an express
guarantee. If the goods are sold while still under an express
guarantee the new owner will be able to claim. This applies to goods
sold by a trader or in a private sale.
Consumer's right to redress
Compensation
A consumer can get compensation from you if you breach any of the
guarantees in the Consumer Guarantees Act. The consumer can ask you
to pay the amount that the goods have dropped in value because of
the problem.
eg, Linda buys a new fridge-freezer and discovers that the
auto-defrost doesn't work. Linda paid $1700 for the
fridge-freezer. Other models that don't have auto-defrost cost
$1500. Linda claims $200 from the manufacturer.
Loss in value is worked out using either the average retail price
or the price the customer paid, whichever is the lower.
eg, Linda paid $1700 for her fridge-freezer but the average
retail price was $1600. Linda will only be able to claim the
difference between the reduced value and $1600.
Note
Where there is a manufacturer's express guarantee the consumer
must give you the chance to repair or replace the goods if your
express guarantee promises that the goods will be repaired or
replaced when a problem arises. But the consumer can claim
compensation from you if you refuse to repair or replace or do not
do so within a reasonable time.
Damage or loss (consequential loss)
You are responsible for any extra loss or damage the consumer
suffers because of the problem with the goods (consequential loss).
eg, a tapedeck develops a fault and ruins the tape it is
playing. You must pay for the tape as well as compensating the
consumer for the problem with the tapedeck.
You are also responsible for any other reasonable costs the
consumer may face because of the problem with the goods.
eg, a dryer breaks down and the repair takes a week. The
consumer can claim the cost of drying their washing at the
laundromat for that week.
Your responsibility is limited to loss or damage that could have
been reasonably expected to result from the failure. You are not
liable for losses that are not foreseeable.
eg, a car assembled in New Zealand develops a serious oil
leak. The manufacturer will be liable for the cost of replacing
the oil-stained paving stones in the consumers' driveway. If the
consumer's dog ran through the oil patch and onto the carpet the
manufacturer will not be liable. This is unforeseeable damage.
Frequently asked questions
Can I contract out of the
Consumer Guarantees Act?
What if the person making the claim
bought the goods second hand?
Do I have to pay compensation to
the buyer if I have already compensated the previous owner?
What if the consumer thinks they
paid too much for the goods?
What rights do I have to get my
money back from my suppliers?
Does compensation have to include
the retailer's margin?
What if someone else caused the
problems?
What if the consumer no longer has
the goods?
What if the person making a claim
received the goods as a gift?
What responsibilities does the
retailer have?
Can the consumer claim from me or
from the retailer?
Can I contract out of the Consumer Guarantees Act?
There are only two occasions when manufacturers, importers,
retailers and suppliers of goods can contract out of this Act.
When goods are bought for a business
A retailer or supplier can choose to contract out of the Act when
they sell goods to a business. When they contract out the
manufacturer or importer will also not be liable under the Act.
The retailer or supplier must contract out in writing.
Spare parts and repair facilities
You can contract out of the spare parts and repair facilities
guarantee as long as the consumer is told this before they buy the
goods.
What if the person making the claim bought the goods
second-hand?
A person who buys second hand goods that you have manufactured or
imported has the same rights to claim under the Act as any other
consumer.
If they have bought the goods in a private sale they will not be
able to claim from the seller so are likely to make a claim to you.
If they bought the goods from a retailer they will have the choice
of claiming from you or the retailer. If they bought the goods in an
auction they will not be able to claim from you as goods sold at
auction are not covered by the Act.
Do I have to pay compensation to the buyer if I have already
compensated the previous owner?
You will not have to pay compensation to a new owner of the goods
if you have compensated the previous owner.
eg, a carpet has a shading problem. The manufacturer pays
compensation to the homeowner who bought the carpet. A year later
the house is sold and the new owner makes a claim to the carpet
manufacturer. The manufacturer does not have to compensate the new
owner.
What if the consumer thinks they paid too much for the goods?
A consumer cannot claim under the acceptable quality guarantee
simply because they have paid a high price for the goods.
eg, Johanna buys a vacuum cleaner from an exclusive
department store and pays $700 for it. The manufacturer's
recommended retail price and the average retail price are around
$400. Johanna cannot claim that the cleaner is not of acceptable
quality because it doesn't perform like a $700 vacuum cleaner.
What rights do I have to get my money back from my suppliers?
You are not covered by the Consumer Guarantees Act when you buy
materials for use in your manufacturing business or import goods to
sell.
Your rights against your suppliers are still covered by the Sale
of Goods Act and the agreements in the contracts you make with your
suppliers. You may want to check your contracts with suppliers to
make sure that you will be able to get a refund if they have sold
you faulty goods or materials.
Does compensation have to include the retailer's margin?
Yes. Compensation is based on the drop in value below what the
consumer paid for the goods or the average retail price, whichever
is the lower. It is not based on the wholesale price that you sold
the goods for.
What if someone else caused the problems?
The consumer cannot ask for compensation if the goods are not of
acceptable quality or do not meet their description because of
something someone else has done to them.
eg, the retailer installs a washing machine and scratches
the side panel. The retailer will be liable not you. a natural
disaster or other cause independent of human control occurs after
the goods have left your control
eg, a stereo is damaged by flood waters while in a retail
store.
What if the consumer no longer has the goods?
If the consumer no longer has the goods they cannot ask you for
compensation.
What if the person making a claim received the goods as a gift?
A person who receives goods as a gift has the same right to claim
under the Act as the person who bought the goods.
What responsibilities does the retailer have?
The Act says that retailers must ensure that goods meet the
following guarantees:
- acceptable quality
- the same as any description given to the consumer
- fit for any particular purpose named by the consumer
- fit for any particular purpose that the retailer has told the
consumer they are fit for
- same as any sample or demonstration model shown to the
consumer
- can be legally sold (the seller has the right to sell the
goods and there are no undisclosed securities)
- will cost the consumer a reasonable price if no agreement has
been made about the price.
See CGA for suppliers of goods for more
information.
Can the consumer claim from me or from the retailer?
Consumers can claim from either the retailer or the
manufacturer/importer. They are most likely to claim from retailers
because retailers are usually more accessible.
A consumer might choose to claim against you if you are running a
recall and offer repairs or refunds directly to the consumer.
Consumers may also come to you because the retailer who sold them
the goods has gone out of business.
It is the consumer's choice who they claim against.
You will breach the Fair Trading Act if you suggest to a consumer
that they have to go to the retailer instead of to you. The Fair
Trading Act says you cannot mislead a consumer 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.
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