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consumer

Faulty custom-made goods: Refund rights

Key Takeaway

In New Zealand, consumers have rights regarding faulty custom-made goods under the Consumer Guarantees Act 1993. If goods are not of acceptable quality or fit for purpose, consumers may be entitled to a repair, replacement, or refund, depending on the nature of the fault. The Fair Trading Act 1986 addresses misleading conduct by traders.

Consumer Rights for Faulty Custom-Made Goods in New Zealand

When a consumer purchases custom-made goods in New Zealand, their rights are primarily protected by the Consumer Guarantees Act 1993 (CGA) and, in certain circumstances, the Fair Trading Act 1986 (FTA). These Acts set out the guarantees that apply to goods supplied by a person in trade and the remedies available if those guarantees are not met.

What are 'Goods' and 'In Trade'?

Under New Zealand law, 'goods' are broadly defined and include items manufactured or produced [Source: Consumer Guarantees Act 1993, s 2]. This definition encompasses custom-made items, such as bespoke furniture, tailor-made clothing, or specially designed equipment. A person acts 'in trade' when they are operating in the course of a business, profession, or occupation [Source: Consumer Guarantees Act 1993, s 2]. The CGA applies when goods are supplied in trade to a 'consumer', which is generally an individual who acquires goods of a type ordinarily acquired for personal, domestic, or household use, and not for the purpose of resupplying them in trade, consuming them in the course of a manufacturing process, or for repairing other goods or fixtures [Source: Consumer Guarantees Act 1993, s 2].

Consumer Guarantees Act 1993 (CGA)

The CGA establishes several guarantees that automatically apply to goods supplied in trade, regardless of what a seller's warranty might state. If a custom-made item fails to meet these guarantees, the consumer may be entitled to a remedy.

Key Guarantees for Goods:

  • 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]. The specific standard of acceptable quality considers the nature of the goods, the price, any statements made about the goods, and all other relevant circumstances.
  • Fit for a Particular Purpose: If the consumer makes known to the supplier, either directly or by implication, any particular purpose for which the goods are being acquired, the goods must be reasonably fit for that purpose [Source: Consumer Guarantees Act 1993, s 7]. This is particularly relevant for custom-made items where specific requirements are often communicated.
  • Match Description: The goods must correspond with any description given to them [Source: Consumer Guarantees Act 1993, s 8]. This means the final custom-made product should match the specifications, drawings, or verbal descriptions provided during the order process.
  • Reasonable Price: Where goods are supplied without a price being agreed, the consumer is not liable to pay more than a reasonable price [Source: Consumer Guarantees Act 1993, s 9].

Remedies for Failure of a Guarantee:

When a custom-made item fails to comply with one or more of the consumer guarantees, the type of remedy available depends on whether the failure is 'minor' or 'substantial'.

  • Minor Failure: A failure is minor if it can be remedied and does not prevent the goods from being used for their ordinary purpose [Source: Consumer Guarantees Act 1993, s 18]. For a minor failure, the supplier must remedy the failure within a reasonable time. This could involve repairing the goods, replacing the goods with identical or similar goods, or providing a refund [Source: Consumer Guarantees Act 1993, s 18]. If the supplier fails to remedy the failure within a reasonable time, or refuses to do so, the consumer may either:

    • Have the failure remedied elsewhere and recover the reasonable costs from the supplier [Source: Consumer Guarantees Act 1993, s 18(2)(b)(i)]; or
    • Reject the goods and obtain a refund or replacement [Source: Consumer Guarantees Act 1993, s 18(2)(b)(ii)].

  • Substantial Failure: A failure is substantial if the goods:

    • Are unfit for a purpose for which goods of the type are commonly supplied, and the failure cannot easily and quickly be remedied to make them fit for that purpose;
    • Are significantly different from their description, sample, or demonstration model;
    • Are substantially unfit for a particular purpose made known to the supplier, and cannot easily and quickly be remedied to make them fit for that purpose;
    • Are not of acceptable quality because they are unsafe [Source: Consumer Guarantees Act 1993, s 21].

For a substantial failure, the consumer has the right to choose their remedy directly. They may: * Reject the goods [Source: Consumer Guarantees Act 1993, s 23(2)(a)]; or * Obtain damages from the supplier for any reduction in value of the goods below the price paid or payable [Source: Consumer Guarantees Act 1993, s 23(2)(b)].

Rejecting Goods and Obtaining a Refund:

When a consumer rejects goods, they must notify the supplier and return the goods or make them available for collection [Source: Consumer Guarantees Act 1993, s 20]. Upon rejection, the consumer is entitled to either a refund of any money paid or a replacement of the goods with goods of the same type and similar value [Source: Consumer Guarantees Act 1993, s 23(1)]. The supplier cannot refuse a refund if the consumer chooses this option for a substantial failure or after a minor failure where the supplier failed to remedy it.

There is a time limit for rejecting goods, which is generally a reasonable period after the consumer becomes aware of the failure or should reasonably have become aware of it [Source: Consumer Guarantees Act 1993, s 20(2)]. What constitutes a reasonable time depends on the type of goods and the nature of the failure.

Fair Trading Act 1986 (FTA)

The FTA primarily addresses fair trading practices and prohibits misleading or deceptive conduct by persons in trade. While the CGA focuses on the quality of goods after purchase, the FTA can be relevant to custom-made goods if a consumer was misled before or during the purchase process.

Key Provisions of the FTA:

  • Misleading or 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 could apply if, for example, a supplier made false promises about the capabilities or appearance of a custom-made item before the order was placed.
  • False or Misleading Representations: The FTA prohibits false or misleading representations about goods, services, or prices. This includes representations about the standard, quality, value, grade, composition, style, or model of goods, or that goods are new [Source: Fair Trading Act 1986, s 13].

Remedies under the FTA:

If a consumer has suffered loss or damage due to misleading or deceptive conduct or false representations, the courts have a wide range of powers under the FTA, including ordering the supplier to pay damages, vary a contract, or refund money [Source: Fair Trading Act 1986, s 43].

Interaction between CGA and FTA

The CGA addresses the quality and fitness of goods once they have been supplied, providing clear remedies for faulty items. The FTA, on the other hand, deals with the accuracy of information and claims made by traders, often before a transaction is completed. In some cases, a single issue with a custom-made item could involve breaches of both Acts. For example, if a supplier falsely promised a custom-made item would perform a specific function (FTA breach) and the item subsequently fails to meet that promise (CGA breach of fitness for purpose).

When to Seek Independent Legal Advice

Individuals facing issues with faulty custom-made goods are encouraged to seek independent legal advice. Information provided here is general and specific situations can be complex. Legal advice may be obtained from a qualified legal professional, Citizens Advice Bureau, or through Community Law Centres which offer free legal assistance [https://communitylaw.org.nz/].

Key Resources