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How the CGA makes extended warranties largely unnecessary

Key Takeaway

In New Zealand, the Consumer Guarantees Act 1993 (CGA) provides automatic, comprehensive protections for consumers regarding product quality and durability. These statutory guarantees often cover what extended warranties offer, making such additional warranties largely unnecessary for goods purchased for personal use. The Fair Trading Act 1986 further prohibits misleading claims about warranties.

Understanding Consumer Rights: How the CGA Makes Extended Warranties Largely Unnecessary

When purchasing goods, consumers are often offered an extended warranty, which is an additional contract sold by a retailer or manufacturer that provides coverage beyond the standard manufacturer's warranty. However, in New Zealand, the Consumer Guarantees Act 1993 (CGA) provides robust, automatic protections that frequently make extended warranties largely redundant for goods purchased for personal, domestic, or household use. The Fair Trading Act 1986 (FTA) also plays a role by prohibiting misleading claims about warranties.

Consumer Guarantees Act 1993 (CGA)

The Consumer Guarantees Act 1993 (CGA) is a New Zealand law that provides consumers with a set of automatic guarantees whenever they purchase goods or services for personal, domestic, or household use [Source: Consumer Guarantees Act 1993, s 2]. These guarantees apply regardless of any manufacturer's warranty or extended warranty purchased, and suppliers cannot contract out of them for consumers [Source: Consumer Guarantees Act 1993, s 43(1)].

Key Guarantees for Goods

The CGA stipulates several key guarantees for goods, which include:

  • Guarantee as to acceptable quality: Goods must be fit for all 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]. This guarantee is crucial because it covers the expected lifespan and reliability of a product, often extending beyond a typical manufacturer's warranty.
  • Guarantee as to fitness 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 7].
  • Guarantee that goods comply with description: Goods must match any description given by the supplier or manufacturer [Source: Consumer Guarantees Act 1993, s 8].
  • Guarantee as to price: If the price is not fixed before or at the time of supply, the consumer is not liable to pay more than a reasonable price [Source: Consumer Guarantees Act 1993, s 10].
  • Guarantees as to repairs and spare parts: The manufacturer guarantees that facilities for the repair of the goods and the supply of spare parts are reasonably available for a reasonable period after the goods are supplied [Source: Consumer Guarantees Act 1993, s 12].

Remedies Under the CGA

If goods fail to meet a guarantee, consumers have rights of redress against the supplier or, in some cases, the manufacturer [Source: Consumer Guarantees Act 1993, s 18, s 27].

  • Minor failure: If a failure can be remedied, the supplier must remedy it within a reasonable time and at no cost to the consumer. If the supplier fails to do so, the consumer can choose to have it remedied elsewhere and recover the costs, or reject the goods [Source: Consumer Guarantees Act 1993, s 23].
  • Substantial failure: If a failure cannot be remedied or is of a substantial character (meaning it significantly departs from the guarantee), the consumer can choose to reject the goods and demand a refund or a replacement, or keep the goods and claim compensation for the reduction in value [Source: Consumer Guarantees Act 1993, s 24].

CGA Application to Services

The CGA also provides guarantees for services, stating they must be:

  • Performed with reasonable care and skill [Source: Consumer Guarantees Act 1993, s 28].
  • Fit for any particular purpose that the consumer makes known [Source: Consumer Guarantees Act 1993, s 29].
  • Completed within a reasonable time if no specific time is agreed [Source: Consumer Guarantees Act 1993, s 30].
  • Supplied at a reasonable price if no specific price is agreed [Source: Consumer Guarantees Act 1993, s 31].

Fair Trading Act 1986 (FTA)

The Fair Trading Act 1986 (FTA) is designed to protect consumers from misleading and deceptive conduct and unfair trading practices [Source: Fair Trading Act 1986, s 2]. It prohibits businesses from making false or misleading representations about goods or services, including any claims related to warranties.

Key Protections Under the FTA

  • Misleading or deceptive conduct: No person in trade may engage in conduct that is misleading or deceptive, or is likely to mislead or deceive [Source: Fair Trading Act 1986, s 9]. This applies to representations made when selling goods or services, including extended warranties.
  • False or misleading representations: The FTA specifically prohibits false or misleading representations concerning the existence, exclusion, or effect of any condition, warranty, guarantee, right, or remedy [Source: Fair Trading Act 1986, s 13(g)]. This means sellers cannot misrepresent the protections offered by the CGA or the value an extended warranty provides over and above these automatic rights.
  • Unsubstantiated representations: A person in trade must not make a representation about a good or service if they do not have reasonable grounds for making it [Source: Fair Trading Act 1986, s 12A]. Claims made about the benefits of an extended warranty must be based on reasonable evidence.

Breaches of the FTA can result in significant pecuniary penalties for businesses [Source: Fair Trading Act 1986, s 40].

Why Extended Warranties Are Often Unnecessary

Many extended warranties offer coverage that largely duplicates rights already provided by the CGA. For example, an extended warranty might promise to cover defects for an additional two or three years. However, the CGA's guarantee of acceptable quality, specifically its requirement for durability, means goods must last for a reasonable period, which can often extend beyond a manufacturer's warranty and the term of many extended warranties, depending on the product type, price, and expected use [Source: Consumer Guarantees Act 1993, s 6].

Consumers cannot lose their CGA rights by purchasing an extended warranty, nor can a supplier pressure a consumer into believing an extended warranty is necessary to obtain basic consumer protections [Source: Consumer Guarantees Act 1993, s 43(1); Fair Trading Act 1986, s 13(g)]. If an extended warranty offers specific benefits beyond the CGA (e.g., accidental damage not related to a defect, or coverage for goods used in a commercial setting where the CGA's 'consumer' definition might not fully apply), these benefits must be clearly articulated and not mislead consumers about their existing rights.

When to Seek Independent Legal Advice

If a consumer believes their rights under the Consumer Guarantees Act 1993 or the Fair Trading Act 1986 have been breached, or if they are unsure about the implications of an extended warranty agreement, it is advisable to seek independent legal advice. Information regarding consumer rights and assistance with disputes can be obtained from official consumer protection bodies, legal professionals, or through free services provided by Community Law Centres.

Key Resources