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The law protects consumers by imposing product standards on businesses through consumer guarantees. These are promises you make about your product’s quality and other aspects of the sale. They also apply to services. This article will explain whether consumer law applies to your business and what consumer guarantees you owe your customers.

Does Consumer Law Apply to My Business?

There are two key Acts that your business should be aware of for protecting consumer rights. These are:

In most cases, both of these laws only apply to businesses or individuals ‘in trade’. This is a description of your commercial status, and you will likely be in trade if you:

  • regularly sell goods or services;
  • purchase or manufacture goods to sell them on;
  • have staff;
  • register for GST; or
  • operate from a corporate structure.

When you are in trade, then you need to ensure your goods meet their relevant consumer guarantees.

When Do Consumer Guarantees Not Apply to My Products?

However, consumer guarantees will not cover all of your sales. The Consumer Guarantees Act only covers consumer goods, which you sell to consumers for personal or domestic use. Examples include clothing products or personal electronics like laptops. It does not apply to commercial products which you sell to another business for business use.

For instance, if your business sells rolls of fabric to another business for manufacture, this is not for personal or domestic use. Therefore, you do not need to meet consumer guarantees.

Private sellers, such as consumer to consumer sales on TradeMe, also do not need to uphold consumer guarantees. If you sell your goods to another business, you can contract out of the CGA, and consumer guarantees do not apply to your transaction. However, you cannot contract out of the CGA in sales with everyday consumers. Trying to do so and misleading consumers about their rights is against the law.

What Consumer Guarantees Apply When Selling Products?

The consumer guarantees that apply to your products set a minimum standard that customers can expect. The table below sets out what standards you need to meet if you sell products to consumers.

 

Consumer Guarantee

Explanation

Fit for Purpose

Your products need to be suitable for the reason a customer bought them. If a customer asks for a cleaning product that can eliminate mould in their bathroom, you must give them a product that can best do the job.

Acceptable Quality

This guarantee is open-ended and depends on the context, such as the price your customers pay. Generally, this means that your products meet their purpose, are free from minor faults, are safe and durable, and are acceptable in appearance and finish.

Matching Description

Your products need to match the way you describe them. So, if you sell online, then your products need to match your descriptions and pictures.

Matching Demonstrations or Samples

If you give in-store demonstrations or hand out samples to customers, the products you sell need to match these.

Sell at Reasonable Price

You may not have a set price for some products before the customer agrees to enter a contract, such as commissioning an art piece. In these situations, the price you do set after the fact needs to be reasonable.

Satisfactory Delivery

If you manage product delivery, you need to ensure that goods arrive on time and are in good condition.

Sell Legally

When you sell goods, you need to have the legal right to do so. There should not be any hidden complications.

There are also extra guarantees if you manufacture goods, or you are the first to sell the products in the country. You need to ensure that:

  • there are spare parts and repair facilities available;
  • you honour any written warranties with your products;
  • products match their description; and
  • products meet an acceptable standard of quality.

Remedying a Broken Consumer Guarantee

If you break one of your consumer guarantees, you need to give the affected customer a remedy, either a:

  • repair;
  • replacement; or
  • refund.

If the fault or problem is minor, such as a toy car’s easily replaceable wheel falling off, then you get to choose the remedy. However, if there is a major problem, then the customer gets to choose the remedy. A problem is major if the customer would not have bought the product if they knew about the issue, or if the product: 

  • is unsafe;
  • does not match its description at all; or
  • is not fit for purpose, and you cannot easily fix this.

You only have to give a remedy if you have broken a consumer guarantee. You do not have to provide a remedy if a customer changed their mind or damaged the product themselves. For example, you have to provide a remedy for a laptop that does not turn on when the customer first uses it because it is clearly faulty and breaks a consumer guarantee. However, if the customer drops the laptop and cracks the screen, you do not have to provide a remedy.

Key Takeaways

When you sell products to consumers, you have to ensure that you meet your consumer guarantees. These guarantee product quality and fair sales. If you would like more information or help with meeting your products’ consumer guarantees, contact LegalVision’s regulatory and compliance lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What are consumer guarantees?

Consumer guarantees are promises that you make about the quality and nature of your goods and services. The law requires that you meet them, and you must provide a remedy if you fail to do so.

What goods and services do consumer guarantees apply to?

Consumer guarantees apply to any goods or services a consumer would buy for their personal or domestic use. Examples include couches, televisions or clothing.

What does ‘in trade’ mean?

In trade refers to the trading status of a seller. A seller is in trade if they regularly sell goods or services or purchase/manufacture goods to sell on.

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