Building and renovation services under the CGA

Consumer Protections in Building and Renovation Services

Consumers in New Zealand who engage building and renovation services are protected by key legislation, primarily the Consumer Guarantees Act 1993 (CGA) and the Fair Trading Act 1986 (FTA). These Acts establish rights and obligations for both consumers and businesses (in trade: operating in the course of a business, profession, or calling) providing services.

Consumer Guarantees Act 1993 (CGA)

The Consumer Guarantees Act 1993 (CGA) is a law that provides consumers with guarantees when they buy goods or services from businesses. It applies to services ordinarily acquired for personal, domestic, or household use or consumption. Building and renovation services for a home typically fall under this category.

Guarantees as to Services

When a consumer enters into a contract for building or renovation services, the supplier (in trade) automatically guarantees:

Reasonable Care and Skill: The services will be carried out with reasonable care and skill [Source: Consumer Guarantees Act 1993, s 28]. This means the work should meet an appropriate standard, considering the nature of the service.
Fitness for Particular Purpose: If the consumer makes known to the supplier the particular purpose for which the services are required, or the result that the consumer wishes the services to achieve, and relies on the supplier's skill or judgment, the services must be reasonably fit for that purpose or of a nature and quality to achieve that result [Source: Consumer Guarantees Act 1993, s 29].
Time of Completion: If no specific time for completion is agreed upon, the services will be completed within a reasonable time [Source: Consumer Guarantees Act 1993, s 30]. What constitutes "reasonable" depends on the nature of the service.
Price: If the price for the services is not determined by the contract, or a course of dealing between the parties, the consumer will not be liable to pay to the supplier more than a reasonable price [Source: Consumer Guarantees Act 1993, s 31].

Remedies for Breaches of Service Guarantees

When services fail to meet one of these guarantees, the type of remedy available depends on whether the failure is a minor failure (a problem with a service that can be fixed within a reasonable time and does not depart substantially from the guarantee) or a major failure (a problem with a service that a reasonable consumer would not have acquired if they had known its nature and extent, or which is substantially unfit for purpose, or unsafe).

Minor Failure: If the failure is a minor one, the consumer must allow the supplier to remedy the failure. The supplier must remedy the failure within a reasonable time [Source: Consumer Guarantees Act 1993, s 32(a)]. If the supplier fails to do so, the consumer may either have the failure remedied by someone else and recover the reasonable costs from the supplier, or cancel the contract for the services [Source: Consumer Guarantees Act 1993, s 32(b)].
Major Failure: If the failure is of a substantial character (a major failure), the consumer has the option to either cancel the contract for the services or obtain damages from the supplier for any reduction in value of the services below the price payable [Source: Consumer Guarantees Act 1993, s 32(c)]. A contract for services may be cancelled where a supplier's failure to meet a guarantee is of a substantial character [Source: Consumer Guarantees Act 1993, s 7].
Consequential Loss: In addition to the above, consumers may recover consequential loss (losses suffered by a consumer as a result of a defective good or service, beyond the cost of the good or service itself) that is reasonably foreseeable as a result of the failure [Source: Consumer Guarantees Act 1993, s 6].

Contracting Out of the CGA

Businesses generally cannot contract out of the CGA for services supplied to consumers for personal, domestic, or household use. However, if goods or services are supplied to a business (in trade) for business purposes, the parties can agree to contract out of the CGA, provided the agreement is in writing and is fair and reasonable [Source: Consumer Guarantees Act 1993, s 43].

Fair Trading Act 1986 (FTA)

The Fair Trading Act 1986 (FTA) is a law that protects consumers from misleading and deceptive conduct, and unfair trading practices by businesses. This Act applies broadly to all aspects of building and renovation services, from advertising and quotes to contractual terms and representations made during the project.

Key Provisions of the FTA

Misleading and Deceptive Conduct: No person in trade shall engage in conduct that is misleading or deceptive or is likely to mislead or deceive [Source: Fair Trading Act 1986, s 9]. This can apply to claims made in advertising, quotes, or discussions about the scope or quality of work.
False or Misleading Representations: The FTA prohibits making false or misleading representations about goods or services. This includes claims about the standard, quality, grade, composition, style, model, history, particular use, endorsements, price, or the existence of any condition, warranty, or guarantee [Source: Fair Trading Act 1986, s 13]. For example, a builder falsely claiming to have certain qualifications or that materials are of a higher standard than they are would breach this section.
Unsubstantiated Representations: A person in trade must not make a representation if they do not have reasonable grounds for making it [Source: Fair Trading Act 1986, s 12A]. For example, a builder stating that a renovation will increase property value by a specific amount without reasonable grounds could be in breach.
Unfair Contract Terms: Certain terms in standard form consumer contracts may be declared unfair and therefore unenforceable [Source: Fair Trading Act 1986, s 46H]. This could apply to terms in building or renovation contracts that cause a significant imbalance in the parties' rights and obligations to the consumer's detriment.

Remedies for Breaches of the FTA

The Commerce Commission enforces the FTA, but individuals can also take private action. Remedies can include orders for damages, injunctions, and orders to vary or declare void contracts [Source: Fair Trading Act 1986, Part 5].

When to Seek Independent Legal Advice

It is recommended that individuals seek independent legal advice from a qualified legal professional for specific situations involving building and renovation disputes, contract interpretation, or understanding their full legal rights and obligations. Information on legal assistance can be found through the Citizens Advice Bureau or by contacting Community Law Centres for free legal guidance.