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If you run a business in New Zealand, you should be aware of your legal requirements around offering warranties. There are different types of warranties that can apply to goods or services that consumers purchase. When offering warranties to consumers, there are specific obligations that you must comply with as a business. Not complying with these obligations means you could face serious penalties, including fines. This article will unpack what you need to know about offering warranties to your customers.

Consumer Guarantees

Consumer guarantees provide assurances that a product or service will work or do as described. If something is not right, these guarantees will give you the right to make a complaint. Consumer Guarantees Act (CGA) automatically gives consumer guarantees to consumers. You cannot contract out of these guarantees except in specific circumstances. The most common of these circumstances being in business to business transactions. They also do not apply to the sale or supply of commercial products or services, such as hospital equipment.

If you sell goods, you must guarantee that goods you sell to consumers will:

  • be of acceptable quality;
  • be fit for a particular purpose;
  • match the description, sample or demonstration model;
  • be a reasonable price;
  • be owned by the consumer after purchase; and
  • arrive by the agreed time (or within a reasonable time if no time has been agreed) and in good condition.

If you provide services, you must guarantee your services will be:

  • carried out with reasonable care and skill;
  • fit for the particular purpose you supply them;
  • completed by the agreed time (or within a reasonable time if no timeframe has been agreed);
  • charged at a reasonable price when you have not agreed on a price; and
  • if you are providing electricity and gas services, your services must meet a specific guarantee of acceptable quality. 

These guarantees will apply, regardless of any additional warranty offered. 

Manufacturer’s Express Warranty

Manufacturers may decide to offer a free express warranty at the time you supply goods or services. These express warranties usually guarantee that a manufacturer will repair or replace faulty goods within a specific period of time. They usually come as part of the purchase price. If you breach the express warranty you have offered, you may be liable to a consumer for breach of contract.

It is important to note that a manufacturer’s warranty does not in any way replace the consumer guarantees, and applies in addition to them. You should be careful not to mislead consumers about their rights under the manufacturer’s warranty.

Although consumers may have rights against manufacturers under the CGA or the manufacturer’s express warranty, suppliers must deal with any consumer complaints regarding these, even if the manufacturer might be liable. Consumers may choose whether to contact the supplier or manufacturer to deal with an issue.

However, the supplier cannot tell their consumers that the manufacturer is the first or only party liable to deal with the complaint. 

Extended Warranty

An extended warranty is an additional warranty to what a consumer would otherwise be entitled to, that a supplier offers for an additional fee. They are sold as an ‘add-on’ to goods or services, at or around the time the consumer purchases the goods or services.

Extended warranties are often offered when consumers purchase white goods such as washing machines, or trade services, such as waterproofing.

A warrantor is someone who provides an extended warranty. The warrantor may be:

  • the business supplying goods or services (such as a retailer); or
  • any other business that enters into an extended warranty agreement directly with a consumer, for example, a manufacturer.

If you offer consumers an extended warranty, there is specific information that you must provide to consumers when you sell the extended warranty. These rules are in place so that consumers are in a good position to decide whether or not to purchase the extended warranty, and if it will provide them with any real value. If the extended warranty is provided by a third party, such as a manufacturer, both the supplier or retailer and the third party manufacturer may be responsible for complying with these requirements.

Key Requirements of Extended Warranty

Some key requirements that warrantors must comply with include that:

Requirement

Description

Front Page

The front page containing key information about the extended warranty must not be preceded by a cover page. This front page should include:

  • a summary of the consumer’s rights and remedies under the CGA;
  • a comparison summary of the relevant differences in protections afforded by the CGA guarantees and additional protections provided by the extended warranty;
  • a summary of the consumer’s right to cancel the extended warranty agreement (including a mandatory 5 day cooling off period); and
  • the warrantor’s name and contact details. 

Terms and Conditions

The extended warranty agreement must include the date and all of its terms and conditions in the one document. They cannot be in a separate document.

The terms and conditions should include:

  • how long the warranty is for;
  • when it expires; and
  • the total price payable under the agreement.

Promotional Materials

You should not use promotional materials that may mislead consumers about the extent of the protections included in the extended warranty. Promotional Materials include product names and slogans. 

Fine and Penalties

Fines and penalties can be imposed on businesses that do not comply with their obligations in relation to offering warranties. If you fail, as a warrantor, to comply with the requirements of offering an extended warranty, you could be issued an infringement notice of $1,000.

If you are prosecuted for a claim, courts can fine businesses that breach extended warranty provisions up to $30,000 and individuals up to $10,000. Fines for misleading and deceptive conduct can be up to $600,000 for businesses and up to $200,000 for individuals.

Key Takeaways

In many cases, consumers automatically have rights to protect them from unscrupulous conduct from businesses. If businesses want to offer even further protections on top of this, they may choose to provide a manufacturer’s warranty or an extended warranty. When you offer these additional warranties, you need to ensure that they do not limit the consumer guarantees, and that they are compliant with your obligations as a business. If you have any questions about warranties, or would like assistance preparing your warranty agreements, get in touch with LegalVision’s New Zealand contract lawyers on 0800 005 570 or fill out the form on this page.

FAQs

What are the consumer guarantees?

Consumer guarantees are guarantees automatically afforded to consumers under the Consumer Guarantees Act (CGA). You cannot contract out of these guarantees except in specific circumstances.

What types of warranties must I provide?

Alongside the consumer guarantees, there are manufacturers warranties you must provide. You also have the option to provide extended warranties to your customers.

What are the consequences of not providing warranties?

If you fail, as a warrantor, to comply with the requirements of offering an extended warranty, you could be issued an infringement notice of $1,000. If you are prosecuted, courts can fine businesses that breach extended warranty provisions up to $30,000 and individuals up to $10,000.

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