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Communtity Law Manual | Consumer protection | Buying goods – Automatic guarantees

Automatic guarantees when buying from a business

Buying goods – Automatic guarantees

Which goods are covered by the Consumer Guarantees Act?

What sorts of goods are covered?

Consumer Guarantees Act 1993, ss 2, 41

The Consumer Guarantees Act covers goods usually bought for personal, domestic or household use – for example, household appliances, computer software, clothes, furniture and cars.

The Act also specifically covers water and non-reticulated gas (that is, gas provided in cylinders or tanks rather than being piped into your home). Reticulated gas (piped gas) and electricity are generally not covered by the Act, but there is a specific guarantee of acceptable quality for them.

You must be buying the goods from someone who is in trade. This means from a business or a person who is in the business of selling. Second-hand goods are covered as long as you buy them from a second-hand dealer (see below, “What if goods are bought second-hand?”).

Consumer Guarantees Act, s 43

Note: If you are buying the goods for business purposes, the seller can contract out of the Consumer Guarantees Act, even if the goods are the type of goods that would usually be bought for personal, domestic or household use. For example, a car may be bought to make business deliveries.

What sorts of goods are not covered?

Consumer Guarantees Act 1993, s 41w

The Consumer Guarantees Act does not cover:

  • goods normally bought for commercial or business purposes (for example, a photocopier)
  • goods bought through a private sale – for example, garage sales, the “For sale” columns of newspapers, and buying from an ordinary person selling on Trade Me
  • goods bought for resale in trade or for use in a manufacturing process.

What if goods are bought second-hand?

Second-hand goods are covered by the same guarantees as other goods, if you buy the goods from a second-hand dealer and they’re goods that are usually bought for personal, domestic or household use. However, your rights will depend on:

  • the age and condition of the goods
  • the price you paid for the goods
  • what the second-hand dealer said about the condition of the goods.

For example, “acceptable quality” for a five-year-old computer will be different from acceptable quality for a brand-new computer.

Note: The one guarantee that is quite different when you buy second-hand is the guaranteed availability of repair facilities and spare parts. This doesn’t apply to second-hand goods, unless you’re buying something that is imported and you’re the first person to buy it in New Zealand.

What if goods are bought on Trade Me?

Consumer Guarantees Act 1993; Fair Trading Act 1986, ss 28B, 36ZC

The automatic guarantees in the Consumer Guarantees Act apply to consumer goods bought on online auction and trading sites like Trade Me only if the seller is in the business of selling. The Act covers you whether you buy from a trader through winning an auction or through buying at a fixed price (using “Buy now”).

The Act doesn’t apply if the seller using the online site is someone who is not in the business of selling things.

All online sellers who are traders must make it clear to potential buyers that they are traders. This includes when they sell through an intermediary website like Trade Me. The website itself must also take reasonable steps to ensure that sellers who are traders make this clear. Traders and websites that do not do this may get an infringement notice, from the Commerce Commission, requiring them to pay an infringement fee (a fine), as an alternative to a criminal prosecution.

What protections are available if the Consumer Guarantees Act does not apply?

First, check that the Consumer Guarantees Act really does not apply. If you are in fact covered by the Act, the trader can’t put up a notice taking away your rights under the Act or get you to sign something to give up your rights.

Even if your situation isn’t covered by the Consumer Guarantees Act, there may be remedies for you:

Automatic guarantees for goods under the Consumer Guarantees Act

The goods must be of an acceptable quality

Consumer Guarantees Act 1993, ss 6, 7, 7A

Goods are of an acceptable quality when they are:

  • fit for all purposes that goods of their type are commonly used for
  • acceptable in appearance and finish
  • free from minor defects
  • safe
  • durable.

Acceptable standards mean the standards that would be acceptable to a reasonable consumer who is fully aware of the state and condition of the goods, including any hidden defects, taking into account the price and nature of the goods, any statements made by the supplier or the manufacturer, the nature of the supplier and the context in which the goods are supplied.

If the seller has told you about a particular problem before you buy, the quality guarantee does not apply to that problem, but the goods still have to be of acceptable quality in every other way.

Reticulated gas (piped gas) and electricity are generally not covered by the Consumer Guarantees Act, but are covered by a specific guarantee of acceptable quality under the Act. This requires the supply to be reasonably safe and reasonably reliable, and it requires that the gas or electricity must be able to be consistently used as a reasonable consumer would expect.

The goods must be fit for their purpose

Consumer Guarantees Act 1993, ss 7, 8

Goods must be:

  • fit for their usual purpose
  • fit for any purpose that you tell the seller you intend to use the goods for, or that you imply to the seller you want to use the goods for
  • fit for any purpose the seller says the goods are fit for.

The goods must match their description

Consumer Guarantees Act 1993, ss 9, 10

If you buy goods that have been described to you (for example, in an advertisement or demonstration), the goods must be as they were described by the seller. If you buy after being shown a sample or demonstration model, the actual goods you receive must be the same as the sample or demonstration model.

The goods must be at a reasonable price if no price is agreed in advance

Consumer Guarantees Act 1993, s 11

If a price has not already been agreed, you do not have to pay the seller more than a reasonable price for the goods you are purchasing.

A reasonable price could be determined by what other sellers charge.

If the price is unreasonable, you can refuse to pay more than a reasonable price. If you have already paid for the goods, it is too late and you do not have a right to a refund.

Repair facilities and spare parts must be available

Consumer Guarantees Act 1993, ss 12, 42

The manufacturer or importer must do what is reasonable to ensure that repair facilities and spare parts are available for a reasonable period of time after you buy the goods.

This does not apply if you are told about limited availability before you buy.

You get good title to the goods

Consumer Guarantees Act 1993, s 5

You are guaranteed full rights to the goods, free of any security interest (unless the seller tells you about it before you buy). This means that you are guaranteed that the supplier has the right to sell the goods and there is no money owing on the goods to someone else, such as money owing under a hire-purchase contract.

Delivery must be at the agreed time, or within a reasonable time

Consumer Guarantees Act 1993, s 5A

If the seller is responsible for delivering the goods to you, or for arranging delivery, you have a guarantee that you’ll receive them at the agreed time or within the agreed period. If no particular time or period has been agreed, the goods must be delivered within a reasonable time.

What you can do if there’s a problem with the goods

Consumer Guarantees Act 1993, ss 16–24

You have rights if the goods fail to meet any of the automatic guarantees under the Consumer Guarantees Act.

If the problem can be fixed

If the problem can be fixed, you can ask the seller to do this. The seller must fix the problem within a reasonable time and at no extra cost to you. The seller can choose to fix the problem by replacing the goods, repairing the goods, or refunding the purchase price.

You can also claim compensation for “reasonably foreseeable consequential loss” (that is, loss or damage that is caused by the problem with the goods. For example, you may need to claim the cost of a hire car while a faulty car is being repaired.

If the problem can be fixed, but the seller doesn’t fix it

If the seller refuses or fails to fix the problem, you can either:

  • reject and return the goods and get a cash refund or replacement (you are entitled to insist on a cash refund, but you may choose to accept a different remedy such as a replacement), or
  • get the failure fixed elsewhere and claim the reasonable costs of doing so from the seller.

You can also claim compensation for reasonably foreseeable loss caused by the seller’s failure to fix the problem with the goods.

If the failure is substantial or cannot be fixed

If the failure is substantial or cannot be fixed, you can either:

  • reject and return the goods and get a cash refund or replacement (you are entitled to a cash refund but you may choose to accept a different remedy such as a replacement), or
  • choose to keep the goods, and claim compensation for any reduction in the value of the goods.

You can also claim compensation for reasonably foreseeable loss caused by the problem with the goods.

Note: A shop credit is not a refund. If you are entitled to a refund, you are entitled to get your money back.

What is a substantial failure?

Consumer Guarantees Act 1993, s 21

In relation to goods, a substantial failure is when:

  • a reasonable consumer would not have bought the goods if they were fully aware of the problem
  • the goods are different in a significant way from the seller’s description, or from a sample or demonstration model
  • the goods are substantially unfit for their usual purpose, and the goods cannot easily be made fit for purpose within a reasonable time
  • the goods are unfit for a purpose that you told the seller you wanted them for, or that the seller said they would be fit for, and the goods cannot easily be made fit for that purpose within a reasonable time
  • the goods are unsafe.

Can I make a claim against the manufacturer?

Consumer Guarantees Act 1993, ss 13–14, 25–27

You have rights against the manufacturer if:

  • the goods are not of acceptable quality
  • the goods do not match the manufacturer’s description
  • repair facilities and spare parts are not made reasonably available
  • the goods don’t comply with the manufacturer’s warranty.

You can claim compensation from the manufacturer for:

  • direct loss (the loss in value of the goods because of the fault – this is calculated by looking at the difference between the price of the goods and the value of the goods as a consequence of the fault), and
  • reasonably foreseeable consequential loss (any loss or damage that is a consequence of the problem with the goods, for example, the cost of renting a replacement car while a faulty car is being repaired).

Where goods come with a manufacturer’s warranty to repair or replace goods, you must give the manufacturer a reasonable amount of time to repair or replace before you make a claim for compensation.

Note: Your rights against the seller are greater than your rights against the manufacturer. However, you might choose to make a claim against the manufacturer if, for example, the seller has gone out of business or is difficult to deal with. Sellers cannot avoid responsibility under the Consumer Guarantees Act by telling you to go to the manufacturer. It is your right to choose who you deal with.

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