Suppliers’ Obligations are Changing (Part One)

Olivia Porter
16 June 2014

posted in Legislation | Consumer Law | Fair Trading Act | Consumer Guarantees Act



There are a whole host of consumer law reforms which come into effect in tranches. Below are the key changes to the Fair Trading Act 1986 (FTA) and the Consumer Guarantees Act 1993 (CGA), most of which come into effect tomorrow, Tuesday, 17 June 2014, which suppliers (and consumers) of goods and services need to know about.

Contracting Out
A supplier of goods or services cannot contract out of its obligations to a consumer under the FTA and CGA. As of tomorrow, contracting out will only be permissible in a business to business contract (where both parties are in trade) where either the provision in the contract imposes a more onerous obligation on the supplier, or where the parties agree, in writing, to contract out of the provisions of the FTA and/or the CGA. Even then, contracting out will only be permitted if it is “fair and reasonable" (as determined by the Court when the party attempts to enforce the contracting out provision), and there are some provisions in the FTA which simply cannot be excluded.

Extended Warranties

Typically extended warranties apply to electrical or electronic goods. Often a consumer who has purchased an extended warranty will be under the impression that they have no rights other than the manufacturers’ warranty. In fact the consumer has rights under the CGA which may continue well past the manufacturers’ warranty. Manufacturers’ warranties for consumer goods, whether contractual or not, are enforceable as an express guarantee under the CGA.

Extended warranties now fall within the ambit of the FTA. It will now be necessary, at the time of purchase, to provide the consumer with a summary of the differences between the relevant CGA guarantees and the protections provided by the extended warranty available for purchase for an additional amount. Consumers will have the right to cancel an extended warranty within five working days and they must be advised of that right when purchasing the extended warranty.

Suppliers’ Liability for Goods Damaged or Lost in Transit
The CGA has been amended to include a guarantee as to delivery of goods delivered to a consumer and the guarantee of acceptable quality in the CGA now applies from the time of receipt by the consumer. So where goods are damaged in transit and the supplier arranged delivery, the supplier will be liable. Non-delivery will entitle a consumer to a full refund of the goods.

Unsubstantiated Representations
The FTA now includes a prohibition on a person in trade making unsubstantiated representations. A representation is unsubstantiated if the person making the representation does not, at the time the representation is made, have reasonable grounds for the representation - irrespective of whether the representation is false or misleading.

This new rule applies to all representations made in trade, including those relating to price (for example “all washing machines at wholesale price”) and those relating to the nature or quality of goods (for example “environmentally friendly” or “clinically proven”).

Online Sales
Under the FTA, traders offering goods or services over the internet (including via online auction sites and daily deal sites) must now disclose their trader status clearly. Website operators must take reasonable steps to ensure traders using their website disclose their trader status.

Also, the CGA now applies to goods sold to consumers via an online bidding process (like Trade Me “auctions”).

Increased Fines and Management Banning Orders
Fines for breaching the FTA substantially increased as of 18 December 2013. Maximum fines for breaches of Part 1 (Unfair Conduct) have been increased to $200,000 for individuals and $600,000 for companies. New fines have been introduced for contraventions of Part 2 (Consumer Information)and Part 4A (Consumer Transactions and Auctions)of up to $10,000 for individuals and up to $30,000 for companies.

The Commerce Commission’s powers have also been extended; the Commerce Commission can ask a Court to ban an individual, for instance a manager or director, from managing a business. The Commerce Commission can also compel individuals to attend interviews and be questioned about potential FTA breaches.

Suppliers of goods and services need to review their terms and conditions now so as not to fall foul of these new provisions and risk substantial fines under the FTA. 

For more amendments coming into effect tomorrow under the FTA and CGA see Suppliers’ Obligations are Changing (Part Two). 

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