Your guide to the Consumer Guarantees Act
The Consumer Guarantees Act (CGA) is a fundamental part of your business obligations. Whether you sell products or services, you are required to comply with the CGA, which may override any warranty offered by your suppliers.
Use this guide to find out why the Act is important to your business, what your obligations are, how to manage suppliers and what to do when customers make a claim – all with examples to help you understand what is required.
The Consumer Guarantees Act is important to your business
The Consumer Guarantees Act (CGA) ensures that consumers can trust the quality and safety of the products they buy. The CGA sets minimum guarantees that apply to commonly purchased products or services for personal or household use in New Zealand, and is applicable regardless of any other warranties. The CGA is designed to protect consumers by allowing them to seek repairs, replacements or refunds when there is an issue with a product or service and these guarantees are not met.
Your obligations as a business
- comply with the Fair Trading Act and the Consumer Guarantees Act
- provide clear, accurate and truthful information to consumers
- use fair contract terms, if applicable to your business
- comply with product safety standards
- comply with consumer information standards.
CGA requirements for products
You must ensure the products you offer are:
- fit for purpose
- of acceptable quality
- match the description given, or any samples or demonstrations given
- sold at a reasonable price
- legally able to be sold.
You must also ensure:
- deliveries arrive at the agreed time and in acceptable condition. Although consumers should check with the courier service first in case of known delays, the retailer is ultimately responsible for resolution under the CGA.
- repairs are available, such as spare parts. If repairs are not available, the customer must be informed prior to finalising the sale.
Example: A retailer sells rolling luggage that can accommodate up to 30kg to a customer who intends to use it for frequent travel. The wheels break after a handful of uses, even though the luggage weighed less than 30kg each time. This product could be considered not fit for purpose, and the retailer should either offer a repair, replacement or refund to the customer.
Remedies for faulty products
If you have sold a product that is faulty, unsafe or unfit for purpose, you are required to offer a remedy in the form of repair, replacement or refund in a reasonable amount of time. Determining which remedy is appropriate depends on the severity of the fault, and what can be negotiated with the consumer.
Your business has further obligations to compensate a consumer if they have suffered any damages due to the faulty product or service.
CGA requirements for services
If you provide consumers with services (whether you offer them in-house or contract them out) you must ensure the services you offer are:
- done with a reasonable level of skill and care
- fit for the purpose agreed on by you and the customer
- reasonably priced, if a price was not agreed before the service was complete
- completed in a reasonable time.
Contracts for services you outsource
If you choose to use external service providers to complete services you offer your customers, consider forming a contract with that provider. With a contract in place, you can clarify who bears the cost if something goes wrong. Since you are contracting the services externally, the contract will best serve you as the retailer if the service provider is liable.
Example: A customer buys a suit from a department store which offers free tailoring with the purchase. The tailoring is contracted externally but the measurements are taken in-house. When the customer collects the tailored suit, he finds that the trousers have been hemmed too short. Under the CGA, the retailer is liable because it contracted with the customer to alter the trousers as well as selling the suit.
Remedies for faulty services
If you have provided a service that is of poor quality, is unsafe, isn’t completed in a reasonable timeframe or fails to meet one of the other consumer guarantees, you are required to offer a remedy in the form of repair or refund in a reasonable amount of time. Determining which remedy is appropriate depends on the severity of the fault and what can be negotiated with the consumer.
Your business has further obligations to compensate a consumer if they have suffered any damages due to the faulty product or service.
Warranties and life expectancy of products and services
Consumers have the right to expect a reasonable lifespan for the products and services they purchase. Each product has an estimated duration of functionality based on testing and industry standards, if consumers follow proper care and maintenance instructions, and use the products as intended. This can apply to certain types of services as well, such as trades like painting and electrical work.
For example, most computers have a life expectancy of approximately five years, refrigerators are expected to last up to 10 years, and most ovens and stoves should last 13-15 years.
Even if your warranty only guarantees refunds or exchanges for a limited time, be aware that your customers may still be able to make claims under the CGA after the warranty is expired.
We recommend that you carefully review your warranty and company policies to ensure that they comply with the CGA.
You should only charge consumers for extended warranties if the terms and conditions of the extended warranty exceed the customer’s rights under the CGA.
Example 1: A homeowner hired a painting company to paint the exterior of his house. 14 months after the paint job is completed, he notices that the paint is blistering and peeling on one side of the house. The painting company only offers a warranty of 12 months for their services. However, the industry standard for paint jobs in the homeowner’s area (where the weather conditions can be harsh and severe) is 3-5 years. It is likely that Johnny could have a legitimate claim for repairs under the CGA.
Example 2: A customer buys a new cordless stick vacuum cleaner and is offered either a free five-year warranty, based on the average life expectancy for stick vacuums, or a 10-year extended warranty. After six years, the vacuum stops working, and the customer returns it to the store for a replacement or repair. Since the average life expectancy for cordless stick vacuums is about five years, Mary cannot make a claim under the CGA. However, if she had purchased the extended warranty, the store would be obligated to comply with its terms and conditions.
Interpreting the Act
The terms ‘reasonable’ and ‘acceptable’ are open-ended. These two terms are deliberately intended to allow for flexibility when interpreting the Act, but this does create a grey area for retailers. These terms are left open because it depends on what a reasonable consumer would consider acceptable, based on the nature of the product, price, any statements made about the product and the context in which the product was supplied.
The openness of these two terms is what can make it difficult for retailers to know how to properly remedy a situation when a customer is dissatisfied with a product or service.
Example 1: A consumer purchases a garden hose from a hardware store. When the hose is fitted to the tap at the customer’s home, a hole in the hose is discovered. A reasonable customer would conclude that the product is not of acceptable quality and is not fit for purpose.
Example 2: A customer accidently mows over the hose while mowing the lawn, causing substantial damage. The customer returns to the hardware store where the hose was purchased and makes the claim that the product is not fit for purpose. The retailer has the right to examine the product, ask the customer questions about the use and decide based on that information. When the retailer can clearly see that the issue was caused by customer damage, they are not required to replace or repair the product, or refund the customer.
When the CGA does not apply
It is important to note that the CGA applies only to products or services that are commonly purchased by consumers for household or personal use.
The CGA does not apply when:
- products are purchased for business or commercial use
- the customer has changed their mind
- the customer hasn’t followed the product’s use or care instructions
- the customer has gone against the provider’s advice in selecting materials or product features
- the customer has attempted to make their own alterations or repairs before contacting the vendor.
Example: A customer wants to purchase a new washing machine and tells the retailer they are looking for the cheapest option. The customer confirms to the retailer that the washing machine would be for domestic use and only used a couple of times a week. When the customer returns a broken washing machine a few months later, it turns out the machine was being used in a childcare centre to wash several loads of laundry a day. The machine was not fit for the purpose it was being used for. However, it was fit for the purpose the customer shared with the retailer. The retailer may not be obliged to replace or refund the customer under the CGA.
The retailer should take responsibility for investigating customers’ claims to determine whether there is genuine fault or other failure to meet the consumer guarantees for the product or service.
If the business and the customer cannot come to an agreement, they can seek assistance from the Disputes Tribunal. The Disputes Tribunal is a fair and practical option to ensure both parties get closure.
Prioritising customer service
There are certainly scenarios where a retailer can refuse to refund, repair or replace a product or service for a customer. Your discretion is necessary when trying to determine if a product is faulty, or if the consumer did not use it for the intended purpose or care properly for the product. Consumers can be insistent about their rights under the CGA and refusing them might become more trouble than it is worth. Read the situation as best you can and ensure you have all the information before refusing a request under the CGA. Often it is better for business, staff morale and sales to keep the customer happy.
How to engage with suppliers
As a retailer, you are liable to consumers under the CGA. However, it is important to be aware of what your contracts with suppliers say. There may be opportunities where you can negotiate liability for faulty products, goods not fit for purpose or of acceptable quality with your suppliers. Will they take responsibility, or will it cost your business if a product is faulty and can no longer be sold?
If the manufacturer of a product goes out of business or fails to provide resolutions for faulty products, under the CGA the retailer remains responsible to consumers.
Example: In early 2024, a compulsory recall notice was issued on a line of bathroom heaters after an investigation concluded that multiple models of the heaters were unsafe and posed a fire hazard. The manufacturer, Serene Industries Ltd, did not issue a voluntary recall of the affected models, and ceased operations in New Zealand. However, under the CGA, any vendors in New Zealand who had sold or installed the recalled heaters were responsible for providing remedies to their affected customers.
Ensure you are consistently reviewing and negotiating contracts to help alleviate pressures on your business if an issue arises under the CGA. As a retailer, you should be expecting your suppliers and brands to stand behind their products.
As a business which sells products or services, you have rights under the CGA to:
- choose how to price products or services
- refuse a consumer’s offer to buy a product or service (so long as you don’t breach the Human Rights Act or the Commerce Act)
- ask questions about and inspect any product or service a consumer says does not meet the CGA guarantees
- decide to repair, replace or refund a product or fix a problem with a service if possible
- refuse a refund or any other remedy if a consumer changes their mind about a product or service
- refuse a refund or any other remedy if the consumer damages the product after the sale.
Things to consider to stay compliant with CGA
Need more information?
We understand that navigating the Consumer Guarantees Act can feel overwhelming. If you would like clarification on anything in this guide, or if you would like advice on a specific situation, do not hesitate to email us at [email protected] or give our Advice Service a call on 0800 472 472 (or 1800 128 086 from Australia).
