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consumer

Minor vs. Serious faults: How it changes your refund rights

Key Takeaway

In New Zealand, consumer rights for faulty goods or services depend on whether the fault is minor or serious under the Consumer Guarantees Act 1993. For minor faults, the supplier chooses the remedy (repair, replacement, or refund). For serious faults, the consumer can choose to reject the goods and receive a refund or replacement, or claim compensation.

Understanding Faults and Refund Rights in New Zealand Consumer Law

New Zealand consumer law provides important protections for individuals purchasing goods and services. Two primary pieces of legislation govern these rights: the Consumer Guarantees Act 1993 (CGA) and the Fair Trading Act 1986 (FTA). These Acts define the standards that goods and services must meet and outline the remedies available to consumers when these standards are not met.

Consumer Guarantees Act 1993 (CGA)

The Consumer Guarantees Act 1993 establishes a set of guarantees that automatically apply to goods and services supplied to a "consumer" [Source: Consumer Guarantees Act 1993, s 2]. A "consumer" is generally defined as a person who acquires goods or services of a kind ordinarily acquired for personal, domestic, or household use or consumption, and not for the purpose of resupplying them in trade, consuming them in the course of a manufacturing or production process, or repairing or treating other goods or fixtures on land [Source: Consumer Guarantees Act 1993, s 2]. A "supplier" is a person who supplies goods or services to a consumer in trade [Source: Consumer Guarantees Act 1993, s 2].

Guarantees for Goods

When a consumer buys "goods" (which includes many items such as appliances, vehicles, and clothing) [Source: Consumer Guarantees Act 1993, s 2], the supplier guarantees that the goods are:

  • Of 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, taking into account their nature, price, and any statements made about them [Source: Consumer Guarantees Act 1993, s 6].
  • Fit for a particular purpose: If the consumer makes known a particular purpose for which they are acquiring the goods, and the supplier represents they are fit for that purpose, the goods must be reasonably fit for that purpose [Source: Consumer Guarantees Act 1993, s 7].
  • Match description: Goods must correspond with any description by which they are supplied [Source: Consumer Guarantees Act 1993, s 8].

Minor Faults (Failure of a Non-Substantial Character)

If goods fail to comply with a guarantee, and that failure can be remedied and is not of a "substantial character" (i.e., a minor fault), the consumer cannot immediately demand a refund [Source: Consumer Guarantees Act 1993, s 18(1)]. In such cases, the "supplier" (the person who provided the goods) must remedy the failure within a reasonable time [Source: Consumer Guarantees Act 1993, s 18(2)(a)]. A "remedy" is an action taken to fix a problem, which may include repairing the goods, replacing the goods with identical or similar goods, or providing a refund [Source: Consumer Guarantees Act 1993, s 2].

If the supplier fails to remedy the fault within a reasonable time, or refuses to do so, the consumer then has additional options. They can either:

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

Serious Faults (Failure of a Substantial Character)

A "serious fault" or a failure of a "substantial character" is defined as one where:

  • The goods would not have been acquired by a reasonable consumer fully aware of the extent of the failure.
  • The goods depart significantly from their description, sample, or demonstration model.
  • The goods are substantially unfit for a common purpose and cannot easily be remedied to be fit within a reasonable time.
  • The goods are substantially unfit for a particular purpose made known to the supplier and cannot easily be remedied to be fit within a reasonable time.
  • The goods are unsafe [Source: Consumer Guarantees Act 1993, s 21].

When a failure is of a substantial character, the consumer has greater rights. The consumer can choose their preferred remedy from the following options:

  • Reject the goods and receive a refund of any money paid or other consideration, or a replacement of the goods with goods of an identical type [Source: Consumer Guarantees Act 1993, s 23(2)(a)].
  • Claim compensation for any reduction in value of the goods below the price paid or payable [Source: Consumer Guarantees Act 1993, s 23(2)(b)].

Guarantees for Services

The CGA also applies to "services" (work done by a tradesperson, professional services, etc.) [Source: Consumer Guarantees Act 1993, s 2]. Suppliers of services guarantee that they will be:

  • Carried out with reasonable care and skill [Source: Consumer Guarantees Act 1993, s 28].
  • Fit for any particular purpose that the consumer makes known to the supplier [Source: Consumer Guarantees Act 1993, s 29].
  • Completed within a reasonable time, where no time is agreed [Source: Consumer Guarantees Act 1993, s 30].
  • Supplied for a reasonable price, where no price is agreed [Source: Consumer Guarantees Act 1993, s 32].

The remedies for faulty services are similar to those for goods, with the supplier first having the opportunity to remedy minor faults [Source: Consumer Guarantees Act 1993, s 32]. If the fault is serious, or a minor fault is not remedied, the consumer can cancel the service agreement and/or claim compensation for any reduction in value or for any reasonably foreseeable loss or damage [Source: Consumer Guarantees Act 1993, s 32].

Fair Trading Act 1986 (FTA)

The Fair Trading Act 1986 aims to protect consumers from misleading and deceptive conduct and unfair trading practices by businesses. It applies to conduct "in trade" [Source: Fair Trading Act 1986, s 2(1)].

Misleading or Deceptive Conduct

Section 9 of the FTA prohibits any person from engaging in conduct that is "misleading or deceptive or is likely to mislead or deceive" in trade [Source: Fair Trading Act 1986, s 9]. This can include advertising, promotions, or statements made by a supplier about goods or services.

False Representations

Section 13 of the FTA specifically prohibits false or misleading representations about goods or services. This includes misrepresentations about the standard, quality, value, grade, composition, style, model, history, or previous use of goods, or the nature, characteristics, suitability, or quantity of services [Source: Fair Trading Act 1986, s 13].

Remedies under the FTA

If a consumer has suffered loss or damage due to a breach of the FTA (e.g., they were misled into buying a faulty product), a court may grant various remedies. These can include ordering the repayment of money, payment of damages for losses suffered, or declaring a contract void [Source: Fair Trading Act 1986, s 43]. Unlike the CGA, which focuses on the quality of goods and services, the FTA focuses on the honesty and accuracy of information provided by suppliers. A breach of the FTA can occur even if the goods or services themselves are not faulty but were misrepresented.

Interaction of the CGA and FTA

Both the CGA and FTA provide consumer protection and can sometimes apply to the same transaction. The CGA deals with the quality and fitness of goods and services, while the FTA addresses misleading conduct and false representations made by businesses. It is possible for a supplier's conduct to breach both Acts, for example, if they sell faulty goods and falsely claim they are of high quality. The remedies available under each Act differ, with the CGA focusing on repairing, replacing, or refunding goods/services, and the FTA allowing for a broader range of court-ordered remedies, including compensation for losses caused by misleading conduct.

It is generally not possible for suppliers to contract out of the protections provided by the CGA or FTA when goods or services are supplied to a consumer for personal, domestic, or household use [Source: Consumer Guarantees Act 1993, s 43; Fair Trading Act 1986, s 5C].

When to Seek Independent Legal Advice

Navigating consumer law can be complex, especially when determining whether a fault is minor or serious, or when dealing with uncooperative suppliers. Independent legal advice may be beneficial for consumers who have experienced a dispute with a supplier, have suffered significant loss, or are unsure of their rights and options under the Consumer Guarantees Act 1993 or the Fair Trading Act 1986. Consumers can seek assistance from Community Law Centres throughout New Zealand for free legal advice [https://communitylaw.org.nz/].

Key Resources