Consumer rights Reforming statutory implied conditions and warranties

New Zealand

Relevant legislation

The Consumer Guarantees Act 1993 (CGA) introduced a new regime of consumer rights and remedies greater than those available under the SGA 1908 (NZ).

It sets out a number of statutory guarantees or obligations that suppliers must meet, and provides rights of redress against suppliers and manufacturers where they are not met.

The legislation does not allow for enforcement under the CGA to be carried out by the Commerce Commission or any other government or third party agency. The consumer may initiate civil legal action if the remedies are not followed through. The Disputes Tribunal, District Court or High Court may hear claims for costs, damages, or a refund payable under the CGA.

The scope of the CGA

The CGA sets out statutory guarantees that goods and services must meet when supplied to a consumer and prohibits contracting out.

In Contact Energy Ltd v Jones, Miller J observed:

Liability is strict, in the sense that it is no defence for the retailer to show that a manufacturer or other supplier was at fault, or that the retailer could not have detected or prevented the defect.²⁸⁷

A consumer is defined as a person who:

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  acquires from a supplier goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption; and
  
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  does not acquire the goods or services for the purpose of resupplying them in trade, or consuming them in the course of a process of production or manufacture, or, in the case of goods, repairing or treating in trade other goods or fixtures on land.²⁸⁸
  

In Nesbit v Porter²⁸⁹ the Court of Appeal had to consider whether the purchase of a four wheel drive Nissan Navara utility motor vehicle was a ‘consumer’ contract. The Court considered that ‘ordinarily’ was used in the sense of ‘as a matter of regular practice or occurrence’ or ‘in the ordinary or usual course of events or state of things’.²⁹⁰

There was evidence that about 20 per cent of buyers of Navaras acquired them exclusively for private use and that therefore there was a regular practice or occurrence of such vehicles being used for private use.

In 2003, the CGA was amended to apply to the provision of electricity.²⁹¹ This amendment was made as a result of the finding by Neazor J in Electricity Supply Association of New Zealand v Commerce Commission that electricity did not constitute ‘goods’.²⁹² The CGA does not cover goods bought by auction or by tender²⁹³ or goods bought from a private seller.²⁹⁴

Statutory guarantees — goods

The CGA sets out the following main implied guarantees into consumer contracts for supply of goods:

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  that the supplier has a right to sell the goods, the goods are free from any undisclosed security, and the consumer has the right to undisturbed possession of the goods;
  
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  that goods supplied to a consumer are of ‘acceptable quality’. Goods are of acceptable quality if they are as:
  
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    fit for all purposes for which those type of goods are commonly supplied; and
    
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    acceptable in appearance and finish; and
    
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    free from minor defects; and
    
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    safe; and
    
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    durable
    

as a reasonable consumer fully acquainted with the state and condition of the goods, including any hidden defects, would regard as acceptable, having regard to:

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  the nature of the goods;
  
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  price (where relevant);
  
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  any statements made about the goods on any packaging or label on the goods;
  
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  any representation made about the goods by the supplier or the manufacturer; and
  
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  all other relevant circumstances of the supply of the goods.²⁹⁵
  
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  There is an exception in relation to notified defects.²⁹⁶ If defects are specifically drawn to the consumer’s attention before the supplier agreed to supply, the goods may still meet the guarantee of acceptable quality despite those defects.
  
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  There is also an exception in relation to unreasonable or excessive use.²⁹⁷ This excludes from the guarantee goods that have been used in a manner, or to an extent which is inconsistent with the manner or extent of use that a reasonable consumer would expect to obtain from the goods.
  
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  that the goods are reasonably fit for any particular purpose that the consumer makes known, expressly or by implication, to the supplier as the purpose for which the goods are being acquired by the consumer.²⁹⁸ There is an exception where the circumstances show that the consumer does not rely on the supplier’s skill or judgment or it is unreasonable for the consumer to rely on the supplier’s skill or judgment.²⁹⁹
  
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  that where goods are supplied by description to a consumer, there is a guarantee that the goods correspond with the description.³⁰⁰
  
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  that the goods correspond with the sample or demonstration model in quality and the consumer will have a reasonable opportunity to compare the goods with the sample.³⁰¹
  
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  that where goods are supplied to a consumer, the consumer is not liable to pay more than a reasonable price for the goods in any case where the price for the goods is not:
  
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    determined by the contract;
    
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    left to be determined in a manner agreed by the contract; or
    
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    left to be determined by the course of dealing between the parties.³⁰²
    
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  that the manufacturer will take reasonable action to ensure that facilities for repair of the goods, and supply of parts for the goods, are reasonably available for a reasonable period after the goods are supplied.³⁰³
  

Statutory guarantees — services

The CGA provides implied guarantees that services must be:

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  provided with reasonable care and skill³⁰⁴;
  
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  reasonably fit for any particular purpose the consumer conveys to the supplier³⁰⁵;
  
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  completed within a ‘reasonable time’ (where the time has not been fixed by the contract, left to be fixed in a manner agreed by the contract, nor left to be determined in the course of dealing)³⁰⁶; and
  
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  provided for a reasonable price (where the price has not been fixed by the contract, left to be fixed in a manner agreed by the contract, nor left to be determined in the course of dealing).³⁰⁷
  

Remedies

The CGA requires the retailer who supplied the goods to resolve any problems. This means a retailer cannot tell a consumer to take the problem to the manufacturer. In some cases, the consumer can choose whether to seek a remedy for the problem from the trader or the manufacturer.³⁰⁸ This avoids placing an onus on consumers to prove which firm in the supply chain is responsible for the defect. The consumer is free to claim against either the retailer or the manufacturer; the retailer and the manufacturer are then left to resolve liability between them.³⁰⁹

Remedies for breach of implied guarantees with respect to goods (where the failure can be remedied) include:

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  requiring the supplier to remedy the failure.³¹⁰ The supplier must choose between repairing the goods, replacing the goods or providing a refund; and
  
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  If the trader refuses to remedy the failure or takes more than a ‘reasonable time’ to do so, the consumer can reject the goods (asking for either a refund or replacement). Consumers can also take the goods elsewhere to be fixed and ask the supplier to pay for the cost of repair.³¹¹
  

If the problem is serious (the goods are unsafe, substantially do not meet acceptable quality, fitness for particular purpose, description or sample), consumers can choose to:

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  reject the goods (either seek a refund or replacement)³¹²; or
  
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  keep the goods and have the price reduced to make up for their reduction in value.³¹³
  

The supplier will not be liable if a guarantee has been breached as a result of an event outside of their control.

Where a supplier fails to comply with a guarantee relating to services, the consumer may require the supplier to remedy the failure within a reasonable time. If the supplier refuses to remedy the failure or takes more than a reasonable time to do so, the consumer can:

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  arrange for someone else to rectify the failure and claim the cost from the supplier; or
  
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  cancel the contract for the service and refuse to pay for the work done.³¹⁴
  

If the problem is serious, consumers can choose to:

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  cancel the contract; or
  
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  seek damages in compensation for any reduction in value of the product of a service below the charge paid for the service.³¹⁵
  

In addition to these remedies, consumers may also claim for any reasonably foreseeable extra loss resulting from the fault (consequential loss).³¹⁶ Compensation for consequential loss must put consumers in the position they would have been in if the goods or service was not faulty.

Manufacturers and importers

If there is a breach of the statutory guarantees, consumers may be able to complain to the manufacturer if it has an office in New Zealand, or where the goods are imported, to the importer or distributor.

Where there has been a breach of relevant provisions of the CGA, manufacturers and importers are obliged to:

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  pay compensation, and/or pay for any loss in value; and
  
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  honour any express warranty they gave which gives the consumer greater protection than in the Act.