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Warranties are promises you make to your customers. They outline steps your business will take if something goes wrong with a product or service bought from you. This could be a promise to repair any faulty products or a guarantee to replace broken goods. If you offer a warranty on top of a customer’s consumer rights, you must meet specific legal requirements. Otherwise, you could face fines or other penalties. This article will provide some guidance around when you can offer extended warranties with your New Zealand products and what the law has to say on the matter.

What Is an Extended Warranty?

An extended warranty is something you (the warrantor) offer to a customer at the time of purchase. It is a contract in which you offer a particular service or make certain guarantees beyond the manufacturer’s warranty. A standard guarantee is promising a repair or replacement of a customer’s purchased product in specific situations, free of charge at that time. It is an extra cost on top of the original purchase price of the product and lasts for a set period.
For example, say you offer an extended lifetime warranty agreement to repair any defects in the specialised hiking boots you sell. This means there is no time limit for a customer making a claim under that warranty.

Consumer Guarantees

If you sell goods and services to customers, you need to know your consumer law obligations. Under consumer law, customers receive automatic consumer guarantees from you about your products’ quality and what you will do if something goes wrong.  This means you need to offer a remedy (such as a repair or replacement) if you fail to meet one of these guarantees. You may breach consumer guarantees if a product you sell is not:
  • fit for purpose;
  • the same as its description or sample model;
  • of acceptable quality or finish;
  • reasonably priced where there is no predetermined price;
  • sold legally; and
  • delivered on time and in good condition.
Under the Consumer Guarantees Act (CGA), you legally offer these guarantees for a ‘reasonable length of time’. How long that is will depend on:
  • product quality, which you can determine through price;
  • what kind of product it is;
  • how the customer uses the product; and
  • how the customer maintains the product.
For example, you would expect a fridge or oven to last a longer period of time than a smartphone.

Extended Warranties and the Consumer Guarantees Act

If you offer an extended warranty to your customers, you cannot claim that you are providing anything that the CGA already offers. These consumer rights will apply regardless of what your warranty says, and you cannot contract out of the CGA when dealing with consumers. Your extended warranty can only ever offer guarantees in addition to what consumer law already provides.
For example, say a customer comes to you with a faulty laptop a year and a half after they have purchased it. You say you cannot fix the problem because their extended warranty does not cover general wear and tear. The laptop is still reasonably new, and they have not misused it, so their consumer rights still apply. You still have to offer them a remedy, regardless of what your extended warranty says.

Extended Warranty Requirements

If you do offer an extended warranty, you need to make sure your customer knows about their consumer rights. On the front page of your warranty, with no cover pages or similar preceding it, you must have:
  • a summary of a customer’s rights and remedies under the CGA;
  • a comparison of a customer’s consumer rights and what you offer;
  • an explanation of the customer’s right to cancel the agreement; and
  • your contact details.
You need to include all terms and conditions in this document, detailing the warranty’s duration and whether it expires when a customer makes a claim. Customers have a right to cancel this contract within five days of receiving it, getting a full refund. You must inform them of this fact. If you do not meet these requirements, you are misleading your customers and could face penalties under the Fair Trading Act.

What Should I Offer in My Extended Warranty?

Offering an extended warranty can be useful if you want to provide extra guarantees for your customers, on top of what the law offers. If you want to have a strong focus on customer service at your business, this may align with the kind of service you want to offer. Some examples include offering:
  • a guaranteed replacement for a minor fault, rather than a repair (as the CGA implies);
  • an extended warranty for a long time, such as a lifetime warranty;
  • a warranty that covers some cases of customer-caused faults; or
  • an extended warranty to your business customers that have contracted out of the CGA.

Key Takeaways

You may offer extended warranties with your products if you want to go above and beyond what the law requires when dealing with broken or faulty products. However, if you do so, you cannot mislead your customers about what rights they already have under consumer law and what guarantees your extended warranty covers. If you would like more information or help with extended warranties, contact LegalVision’s NZ regulatory and compliance lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What is an extended warranty?

An extended warranty is a contract with your customer detailing certain promises or guarantees (such as a guaranteed repair or replacement) you make that apply to your products after the manufacturer’s warranty ends. Customers purchase an extended warranty for an extra cost, and it lasts for a set period.

What is a manufacturer’s warranty?

A manufacturer’s warranty (also known as an express guarantee) is a promise made by the manufacturer that they will replace or repair faulty products for a set period after purchase. This can be written or implied.

What are consumer guarantees?

Consumer guarantees are certain promises traders make to consumers when they sell goods and services. They apply regardless of any manufacturer’s or extended warranty, and the law requires that businesses honour them.

Can I sell an extended warranty with my products?

You can sell an extended warranty with your products. However, you cannot mislead your customers about what protections it confers compared to what consumers already have a right to under consumer law. An extended warranty is only useful if it provides guarantees in addition to what the law provides.

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