The Consumer Guarantees Act sets minimum standards for goods and services supplied to consumers in New Zealand. For retailers the single most important feature is that these guarantees cannot be contracted out of in consumer transactions. A sign saying no refunds does not change the legal position, and displaying one can itself be a problem under the Fair Trading Act.
The guarantees for goods
Goods supplied to a consumer carry statutory guarantees that they will be:
- Of acceptable quality — fit for the purposes goods of that type are commonly supplied for, acceptable in appearance and finish, free from minor defects, safe and durable, judged by what a reasonable consumer would regard as acceptable given the price and any description.
- Fit for any particular purpose the consumer made known to the retailer.
- Matching their description, sample or demonstration model.
- Of reasonable price where no price was agreed.
- Supplied with clear title and free from undisclosed security interests.
- Supported by reasonable availability of spare parts and repair facilities, unless the consumer was notified otherwise.
Durability does the most work in disputes. A product that fails after the manufacturer’s warranty expires may still breach the acceptable quality guarantee if a reasonable consumer would have expected it to last longer given the price. Warranty periods do not limit the Act.
Substantial versus minor failures
The remedy depends on the seriousness of the failure, and this distinction governs most retail disputes.
Where the failure is minor, the retailer may choose the remedy: repair, replacement or refund. The consumer must give the retailer a reasonable opportunity to repair.
Where the failure is substantial, the consumer chooses: they may reject the goods and obtain a refund or replacement, or keep them and claim compensation for the reduction in value.
A failure is substantial if the goods would not have been bought by a reasonable consumer aware of the problem, if they differ significantly from their description, if they are substantially unfit for purpose and cannot easily be made fit, or if they are unsafe.
Where retailers get it wrong
- Sending customers to the manufacturer. The consumer’s rights are against the supplier they bought from. You may have your own recourse against the manufacturer, but that is your problem, not the customer’s.
- Treating warranty expiry as the end of obligations. The Act operates independently of any voluntary warranty.
- Store credit instead of a refund for a substantial failure. Where the consumer is entitled to reject and chooses a refund, credit is not a substitute.
- Refusing without proof of purchase. A receipt is the easiest evidence, not the only acceptable evidence.
- Blanket no-return signage. Misrepresenting consumer rights risks Fair Trading Act liability on top of the underlying obligation.
Change of mind is different
The Act does not require refunds for change of mind. If goods are fine and the customer simply no longer wants them, there is no statutory entitlement.
Many retailers offer change-of-mind returns as a commercial policy, which is entirely legitimate. The important thing is to make clear which is which, so that a generous policy is not confused with a statutory obligation and a statutory obligation is not refused as though it were a policy matter.
Services and online selling
Services carry their own guarantees — reasonable care and skill, fitness for purpose, reasonable time and reasonable price where not agreed.
Online sales to New Zealand consumers are covered in the same way as in-store sales. Distance selling also engages Fair Trading Act obligations around information disclosure, and the Act applies to overseas suppliers selling into New Zealand, though enforcement is harder in practice.
Business-to-business sales
The Act applies to goods and services of a kind ordinarily acquired for personal, domestic or household use. Where goods are supplied to a business for business purposes, the parties may contract out, provided it is in writing and both are in trade and it is fair and reasonable to do so.
This is a genuine exception, but it is narrower than many suppliers assume, and the fair and reasonable requirement is a real test rather than a formality.
Getting it right
The Commerce Commission publishes plain-language guidance for businesses on the Consumer Guarantees Act and the Fair Trading Act free at comcom.govt.nz, and Consumer Protection material is available through consumerprotection.govt.nz.
Training front-line staff on the difference between a minor and substantial failure resolves most disputes before they escalate, and costs nothing beyond an hour.
General information only, not legal advice.
