Online shopping and the Consumer Guarantees Act

Today’s consumers have the power – usually in the palms of their hands – to buy virtually all types of goods and services online. While this provides many businesses with the opportunity to sell to a wider audience, online shopping does not change a business’ obligations to its customers under New Zealand consumer law.

The Consumer Guarantees Act 1993 (CGA) places obligations on businesses around the quality of goods and services supplied to consumers, and it applies to both in-store and e-commerce purchases. A ‘consumer’ is anyone who acquires from a supplier goods or services of a kind ordinarily acquired for personal, domestic or household use. As well as applying to purchases by consumers, businesses that buy consumer products or services from other businesses (for example, a domestic fridge) are also protected under the CGA.

The CGA sets out a number of ‘guarantees’ that businesses must provide to their customers – these can only be avoided in business to business transactions where both parties agree in writing and it is fair to exclude the guarantees:

  • Product guarantees in the CGA include that products are of acceptable quality and comply with their description.
  • For services, the CGA guarantees that they are carried out with reasonable care and skill, and are fit for any particular purpose that the customer told the service provider about.

If goods or services do not comply with the guarantees set out in the CGA, businesses must remedy the failure by providing the consumer with a repair, replacement or refund (depending on the nature of the failure). The guarantees in the CGA will also apply to any replacement goods or services provided.

While the CGA places certain obligations on businesses, it doesn’t apply where a consumer simply changes their mind or in situations where the supplier is not in trade (for example, a private sale on TradeMe). Businesses also need to be careful not to misrepresent consumers’ rights under the CGA as this is an offence under the Fair Trading Act 1986 and is an area of interest for Commerce Commission investigations.

Failure to comply with the CGA can prove costly, with businesses also being liable for any reasonably foreseeable losses that result from the initial failure of goods or services to comply with the CGA guarantees.

Just as the internet can facilitate the spread of business opportunity, it can also spread reputational damage where a business fails to comply with the CGA – which can be more costly than repairing, replacing or refunding faulty good or services.

About the author

Kelly Litt is a Senior Solicitor specialising in commercial, intellectual property, IT, corporate and consumer law.

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