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consumer

Services under the CGA: Guarantee of reasonable price

Key Takeaway

In New Zealand, if the price for a service is not agreed upon, consumers are legally obliged to pay no more than a reasonable price, as guaranteed by the Consumer Guarantees Act 1993. The Fair Trading Act 1986 prohibits businesses from making misleading representations about service prices.

Guarantee of Reasonable Price for Services in New Zealand

When consumers acquire services in New Zealand, they are protected by various legal provisions, primarily the Consumer Guarantees Act 1993 (CGA) and the Fair Trading Act 1986 (FTA). These Acts establish rights and obligations concerning the quality, performance, and pricing of services.

The Guarantee of Reasonable Price Under the Consumer Guarantees Act 1993

The Consumer Guarantees Act 1993 (CGA) provides a guarantee regarding the price of services. If the price for a service is not fixed by, or determined in accordance with, the contract between the supplier and the consumer, then the consumer is not liable to pay the supplier more than a reasonable price for the service [Source: Consumer Guarantees Act 1993, s 30].

This guarantee applies specifically when there is no pre-agreed price for the service. For example, if a mechanic begins work on a car without providing an estimate or quoting a fixed price, the consumer is only required to pay a 'reasonable price' for that service once it is completed. Factors that may be considered when determining a 'reasonable price' include:

  • The prevailing market rates for similar services.
  • The complexity and nature of the work performed.
  • The time and skill required to complete the service.
  • The materials used.
  • The geographical location where the service was provided.

Other Relevant Guarantees for Services (CGA)

Beyond the guarantee of reasonable price, the CGA also provides other important guarantees for services, which apply automatically unless explicitly excluded under specific commercial circumstances [Source: Consumer Guarantees Act 1993, s 28]:

  • Acceptable Quality: The service must be of a standard that a reasonable consumer would regard as acceptable [Source: Consumer Guarantees Act 1993, s 29(a)].
  • Fit for Purpose: The service must be reasonably fit for any particular purpose that the consumer makes known to the supplier [Source: Consumer Guarantees Act 1993, s 29(b)].
  • Reasonable Time: The service must be completed within a reasonable time, if no time for completion has been agreed upon [Source: Consumer Guarantees Act 1993, s 29(c)].
  • Reasonable Care and Skill: The service must be carried out with reasonable care and skill [Source: Consumer Guarantees Act 1993, s 29(d)].

Remedies for Breach of Service Guarantees

If a service fails to meet one or more of the guarantees under the CGA, including the guarantee of reasonable price, the consumer may be entitled to a remedy. The type of remedy depends on whether the failure is of a 'substantial character' [Source: Consumer Guarantees Act 1993, s 32]. A failure is substantial if, for instance, the service is unfit for its normal purpose and cannot easily be remedied, or if it departs significantly from the supplier's representation [Source: Consumer Guarantees Act 1993, s 32].

If the failure is not of a substantial character:

The consumer may require the supplier to remedy the failure within a reasonable time. If the supplier fails to do so, the consumer may:

  • Have the failure remedied by another person and recover all reasonable costs incurred from the supplier [Source: Consumer Guarantees Act 1993, s 36(2)(a)].
  • Cancel the agreement for the supply of the service [Source: Consumer Guarantees Act 1993, s 36(2)(b)].

If the failure is of a substantial character:

The consumer may:

  • Cancel the agreement for the supply of the service [Source: Consumer Guarantees Act 1993, s 37(a)].
  • Obtain damages from the supplier for any reduction in value of the service [Source: Consumer Guarantees Act 1993, s 37(b)].

In addition to these remedies, a consumer may also obtain damages for any loss or damage resulting from the failure that was reasonably foreseeable [Source: Consumer Guarantees Act 1993, s 38].

Fair Trading Act 1986 and Pricing

The Fair Trading Act 1986 (FTA) also plays a crucial role in protecting consumers from misleading or deceptive conduct regarding the price of services. The FTA prohibits any person in trade from engaging in conduct that is misleading or deceptive, or likely to mislead or deceive [Source: Fair Trading Act 1986, s 9].

Specifically related to pricing, the FTA prohibits false or misleading representations concerning the price of goods or services [Source: Fair Trading Act 1986, s 13(g)]. This means businesses must not:

  • Advertise a price that is not genuinely available.
  • Make false claims about discounts, sales, or 'special' prices.
  • Hide additional costs or charges that a consumer would reasonably expect to be included in the advertised price.

Breaches of the FTA can result in significant penalties, including fines, and consumers may seek various remedies such as damages or orders to vary or cancel contracts [Source: Fair Trading Act 1986, s 43].

When to Seek Independent Legal Advice

Navigating consumer rights and obligations can be complex. If there are disputes regarding the price of a service, concerns about misleading pricing practices, or questions about potential remedies, it is advisable for individuals to seek independent legal advice. Information and assistance can be obtained from official bodies like the Ministry of Business, Innovation and Employment (MBIE) or directly from Community Law Centres for free legal advice in New Zealand [https://communitylaw.org.nz/].

Key Resources