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A warranty is a promise or guarantee you make to a customer when purchasing a product from your business. Customers can pay extra for this added protection for their purchased goods. Therefore, you may offer a lifetime guarantee of free repairs with your products or promise prompt replacement of faulty products. The point of a warranty is to offer something above and beyond what the law provides in terms of consumer rights. When you advertise and sell a warranty, you need to ensure that you do not mislead your customers about what protections they already have under the law and what added protection your warranty gives. For some guidance, this article will go through three things to tell your customers when advertising warranties in New Zealand.

1. Disclose Consumer Rights

Consumers are customers that buy goods for their own personal or domestic use. When you sell customers products that they intend to use in this way, you need to ensure those products meet their relevant consumer guarantees. Under the Consumer Guarantees Act, your products need to be:

  • fit for purpose;
  • of acceptable quality;
  • delivered on time and in good condition;
  • sold legally; and
  • the same as any demonstrations or descriptions you give.

‘Of acceptable quality’ means that the product is reasonably durable and lasts for a reasonable amount of time. What is reasonable depends on the product and context. For example, you would not reasonably expect a brand new quality fridge to break down after two years. In this case, you have not met the relevant consumer guarantee, and the law requires that you provide a remedy.

If you do not meet these requirements, then you must remedy the situation and give customers either a:

  • replacement; 
  • repair; or
  • refund.

Therefore, you need to ensure you tell customers about their consumer rights that exist on top of any benefits you offer for a price. On the front page of any warranty you sell, legally, you need to include a:

  • summary of customers’ consumer rights and remedies;
  • comparison between what your warranty offers and what the law already gives;
  • rundown of a customers’ right to cancel the warranty during a five-day cooling-off period; and
  • contact phone number or address.

If you do not meet these requirements, you could face both financial penalties and legal proceedings.

2. Be Clear About Your Terms and Conditions

Consumer rights are inherent rights that the law gives to every consumer. Unfortunately, some businesses attempt to mislead their customers by offering these same protections that the law already gives, but for an added cost. This action is misleading and a potential breach of the law.

Furthermore, you also need to be careful about misleading your customers when advertising your warranties to the general public. Warranties are lengthy documents, likely with complex terms and conditions. However, the average New Zealand shopper will not be thinking about those terms and conditions when they initially decide to purchase your warranty. To avoid deceiving your customers, when you advertise, it should not contradict what those terms and conditions say because those identify the true nature of your warranty. In your advertising, you should consider:

  • the overall impression or dominant message of the advertisement;
  • whether you have sufficiently highlighted any disclaimers or special conditions to the average consumer;
  • if your advertisement would draw in customers based on a mistaken or false belief;
  • whether a customer can easily understand your warranty’s terms and conditions; and
  • whether the dominant theme or offer in your warranty is misleading.

So, if you are advertising your warranties as a “comprehensive lifetime warranty”, but your terms and conditions contradict that overall idea, then you are likely misleading your customers. Drawing attention to a hyperlink to your terms and conditions or a similar disclaimer in the advertisement may not be enough to negate that fact.

3. Highlight the Extra Protection Your Warranty Gives

For a successful extended warranty offer, you should go above and beyond what the law provides. Otherwise, you are getting your customers to pay for the protection they already legally have. If you attempt to do so, not only is this a potential breach of the law, but you will also lose customer trust and reputation. Therefore, when advertising a warranty, you need to draw focus to the added benefits it gives to your customers, in addition to their legal rights. 

For example, consumer guarantees do not cover faults that the customer causes themselves. However, you may offer a three-year warranty to replace products that break through genuine customer mistakes, such as accidental damage.

Key Takeaways

When you when you are advertising your warranties, you should not attempt to get customers to pay for the legal rights that consumer law already grants them. However, what you should highlight is the added protection your warranty provides above and beyond the law. If you would like more information or help with how you should advertise your warranties, contact LegalVision’s regulatory and compliance team on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What is an extended warranty?

An extended warranty is extra protection your customers can purchase along with your products. This extra cost can cover repairs or replacements for a set period after the sale.

When should I sell a warranty on my products?

You should only offer an extended warranty with your products if it offers things on top of the protections consumer law provides. For example, perhaps you offer instant replacements for a faulty product rather than repairs or a lifetime repair guarantee.

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