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Extended warranties

Overview

Fair Trading Act 1986, ss 36T-36W

You have some special protections when you pay more to buy an extended warranty for goods or services. In particular, you have the right to cancel the extended warranty within five working days and get your money back. But having an extended warranty doesn’t mean you don’t have the usual consumer protections. A manufacturer’s warranty is included in the purchase price of every item.

What is a manufacturer’s warranty?

A manufacturer’s warranty is a guarantee that the maker of a product will fix or replace any faulty product for a certain period. It does not have to be written.

What is an “extended warranty”?

Fair Trading Act 1986, s 36T

An extended warranty is where a seller, or someone else such as a manufacturer, provides you with specific warranties, guarantees or undertakings for goods or services that you’re buying, in return for you paying a price that is separate from or additional to the price of the goods or services.

Requirements for the content and form of an extended warranty agreement

Fair Trading Act 1986, s 36U

The person or company providing the extended warranty (the “warrantor”) must make sure that the agreement is in writing and that it’s clear, able to be read, and in plain language. You must be given a copy of it at the time that you buy the warranty.

The agreement must state the total price you’ll have to pay for the extended warranty and all the terms and conditions of the warranty. This includes each side’s rights and obligations, and the warranty’s duration and expiry date (including whether or not it expires when you make a claim under it). The agreement must also be dated.

The following information must be on the front page of the warranty document:

  • a summarised comparison of the automatic guarantees you’re already entitled to, under the Consumer Guarantees Act, with the protections provided under the extended warranty
  • a summary of your rights and remedies under the Consumer Guarantees Act
  • a summary of your right to cancel the warranty (see below, “Your right to cancel the warranty”)
  • the warrantor’s name, street address, phone number and email address.

Before the agreement is entered into, the warrantor must also tell you in spoken words about your right to cancel the warranty and how you go about cancelling. But this requirement applies only if it’s reasonably practicable to do this – for example, if you buy the warranty when you’re in the store buying the goods or service, or if you buy the warranty over the phone.

If a warrantor breaches these requirements, the Commerce Commission can issue them with infringement notice requiring them to pay an infringement fee (a fine), as an alternative to bringing criminal charges.

    Example: Expired manufacturer’s warranty

    Your washing machine broke just after the express one year manufacturer’s warranty expired. The Consumer Guarantees Act’s requirement of acceptable quality still applies and the retailer should pay for the cost of repairs, since a reasonable washing machine should last for longer than one year.

Your right to cancel the warranty

Fair Trading Act 1986, s 36V

You have the right to cancel an extended warranty by giving notice to the warrantor within five working days after the day on which you were given a copy of the warranty. The warrantor must then repay you everything you’ve paid for the warranty, in full and without any deductions.

If the warrantor didn’t comply with the requirements for the content and form of the agreement (see above), you can cancel at any time, not just within the first five working days. But if their failure to comply was only minor, the five-working-day limit still applies – for example, if they were late in giving you a copy of the warranty agreement but this didn’t disadvantage you.

To cancel, you don’t have to follow a particular process or use a particular form or a particular set of words. You can do it in any way that shows you intend to cancel or withdraw from the agreement. This could be in writing or by talking to the seller.

When you cancel, you must contact the warrantor using the contact details given on the warranty or in any other way agreed between you.

    Example: Cancelling an extended warranty

    You buy a phone and pay for an extended warranty in case you drop it. You then realise that this is covered by your contents insurance. You can cancel the extended warranty as long as you do this within five days and get a full refund.

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