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Disclaimer: Educational purposes only. Not legal advice. Consult a qualified NZ legal practitioner for your specific circumstances.

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consumer

Can you get compensation for damage caused by a faulty product?

Key Takeaway

In New Zealand, consumers may be compensated for damage caused by a faulty product under the Consumer Guarantees Act 1993, specifically for reasonably foreseeable loss or damage. The Fair Trading Act 1986 also offers remedies if the fault resulted from misleading representations. Rights generally apply to goods purchased for personal use, not always for business.

Understanding Your Rights for Faulty Products in New Zealand

When a product purchased in New Zealand causes damage due to a fault, consumers have specific rights and avenues for compensation under New Zealand law, primarily through the Consumer Guarantees Act 1993 and the Fair Trading Act 1986.

Understanding Your Rights Under the Consumer Guarantees Act 1993

The Consumer Guarantees Act 1993 (CGA) is a New Zealand law that provides consumers with guarantees for goods and services ordinarily acquired for personal, domestic, or household use. If a product fails to meet these guarantees, consumers are entitled to a remedy from the supplier [Source: Consumer Guarantees Act 1993, s 1A].

Key Guarantees for Goods

The CGA sets out several key guarantees that goods must meet:

  • Acceptable Quality: Goods must be of acceptable quality, meaning they are fit for all the purposes for which goods of that type are commonly supplied, acceptable in appearance and finish, free from minor defects, safe, and durable [Source: Consumer Guarantees Act 1993, s 6].
  • Fit for a Particular Purpose: If a consumer makes known to the supplier or manufacturer a particular purpose for which the goods are being acquired, the goods must be reasonably fit for that purpose [Source: Consumer Guarantees Act 1993, s 8].
  • Match Description: Goods must correspond with any description given by the supplier or on the packaging [Source: Consumer Guarantees Act 1993, s 9].
  • Match Sample or Demonstration Model: If goods are sold by reference to a sample or demonstration model, they must correspond with that sample or model [Source: Consumer Guarantees Act 1993, s 10].
  • Reasonable Price: If no price is agreed, the consumer is not liable to pay more than a reasonable price [Source: Consumer Guarantees Act 1993, s 11].
  • Spare Parts and Repair Facilities: Manufacturers must take reasonable action to ensure that facilities for repair of the goods and supply of parts are reasonably available for a reasonable period after the goods are supplied [Source: Consumer Guarantees Act 1993, s 12].

Remedies for Faulty Goods

The remedies available depend on whether the failure is minor or substantial:

  • Minor Failure: A minor failure is one that can be remedied easily. In such cases, the supplier must remedy the failure within a reasonable time. This may involve repairing the goods, replacing them with identical goods, or providing a full refund. If the supplier fails to do so, the consumer can either have the failure remedied by someone else and recover the reasonable costs from the supplier, or reject the goods [Source: Consumer Guarantees Act 1993, s 18(2)].
  • Substantial Failure: A substantial failure is one where the goods depart significantly from any description or sample, are substantially unfit for a common or particular purpose, are unsafe, or would not have been acquired by a reasonable consumer aware of the failure. In the case of a substantial failure, the consumer has the right to reject the goods and choose either a refund or a replacement of the same type and value. Alternatively, the consumer can keep the goods and claim compensation for the reduction in value [Source: Consumer Guarantees Act 1993, s 21].

Compensation for Damage Caused by Faulty Products (Consequential Loss)

Crucially, beyond the cost of the faulty product itself, the CGA allows for consumers to claim damages (a sum of money paid as compensation for loss or injury) for consequential loss. This refers to any loss or damage, beyond the immediate cost of the goods or services, that directly results from the failure of the product [Source: Consumer Guarantees Act 1993, s 27(1)].

Consumers may obtain damages from the supplier for any loss or damage resulting from the failure that was reasonably foreseeable as liable to result from the failure [Source: Consumer Guarantees Act 1993, s 27(2)]. This can include:

  • Damage to other property, such as a faulty appliance causing a fire that damages other household items.
  • Personal injury, if the faulty product directly caused physical harm.

It is important to note that the CGA generally does not apply to goods or services supplied for business purposes, if the parties have agreed in writing to contract out of the Act [Source: Consumer Guarantees Act 1993, s 43(2)].

The Role of the Fair Trading Act 1986

The Fair Trading Act 1986 (FTA) is a New Zealand law that prohibits misleading and deceptive conduct, false representations, and unfair practices by businesses. It aims to promote fair competition and ensure consumers are not misled about goods or services.

If a faulty product causes damage, the FTA may be relevant if the fault arose because the supplier or manufacturer engaged in misleading or deceptive conduct about the product. For instance, if false claims were made about a product's safety or durability that led to its failure and subsequent damage [Source: Fair Trading Act 1986, s 9, s 13].

Under the FTA, a court can make various orders, including an order requiring a person to pay damages to any person who has suffered, or is likely to suffer, loss or damage by the conduct [Source: Fair Trading Act 1986, s 43(2)(d)]. This means if a consumer suffers loss or damage due to a faulty product that was supplied as a result of misleading or deceptive conduct, they may be able to claim compensation under the FTA, in addition to or instead of the CGA.

Who is Responsible?

Generally, under the CGA, the supplier (the retailer or business from whom the product was purchased) is primarily responsible for ensuring goods meet the guarantees and for providing a remedy. However, manufacturers also have obligations under the CGA, particularly regarding repair facilities and express guarantees [Source: Consumer Guarantees Act 1993, s 2(1)]. Under the FTA, both the supplier and potentially the manufacturer could be held responsible for misleading conduct leading to a faulty product and subsequent damage.

Steps to Take if a Product is Faulty and Causes Damage

If a product is faulty and has caused damage, the following steps are generally followed:

  1. Stop Using the Product: Cease using the product immediately to prevent further damage or injury.
  2. Document the Damage: Gather evidence, such as photographs or videos of the faulty product and the resulting damage. Keep any receipts, warranties, and communication with the supplier.
  3. Contact the Supplier: Inform the supplier about the fault and the damage caused. Clearly state the desired remedy (e.g., repair, replacement, refund, and compensation for consequential loss).
  4. Seek Independent Legal Advice: If the supplier does not resolve the issue, consider seeking advice on further action.
  5. Dispute Resolution: If a resolution cannot be reached directly, consumers may pursue resolution through organisations such as the Disputes Tribunal for claims up to $30,000 (or $50,000 if all parties agree) or through other relevant dispute resolution schemes.

When to Seek Independent Legal Advice

It is recommended that individuals seek independent legal advice from a qualified lawyer for specific guidance on their individual circumstances, particularly in complex cases involving significant damage, personal injury, or if a business is refusing to acknowledge their obligations. Community Law Centres nationwide also offer free legal assistance and information.

Key Resources