The Consumer Guarantees

The Consumer Guarantees Act is a cornerstone piece of legislation. Its role is to protect consumers. Under the Act, your consumer rights are expressed as a series of "guarantees" that a seller automatically makes to you when you buy any goods or services ordinarily purchased for personal use.In this guide, we explain what those rights are, and what to do if you think your rights have been breached. The Consumer Guarantees Act 1993

A Summary

Introduction: The Act came into force on 1 April 1994 and does not apply to any contract for the supply of goods or services made before this date (Section 56). It is a significant piece of legislation and is aimed at imposing guarantees in contracts for the supply of goods and the performance of services for the consumers benefit. It provides a right of redress against suppliers and manufacturers in respect of any failure of the goods or services to comply with the guarantees.

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Definitions: Certain terms are defined in the Act itself (Section 2). These definitions are important in determining in what circumstances the Act will or will not apply. The Act defines “Goods”, “Service”, “Supplier”, “Manufacturer”, “trade”, and other terms. The key definition in the Act is “Consumer”. This is defined to mean a person who:- (a) Acquires from a supplier goods or services of a kind ordinarily acquired for personal, domestic, or household use or consumption; and (b) Does not acquire the goods or services, or hold himself or herself out as acquiring the goods or services, for the purpose of:

(i) Re-supplying them in trade; or (ii) Consuming them in the course of a process of production or manufacture; or (iii) In the case of goods, repairing or treating in trade other goods or fixtures on land.”

The definition of “Consumer” is unusual and difficult. The focus is the ordinary use for which goods or services are acquired rather than the use intended by the acquiring purchaser. By way of example a contract for the supply of crockery to a company that owns a restaurant will be a contract of supply of goods subject to the Act because although intended for commercial use, crockery is ordinarily acquired for personal, domestic or household use and consumption.

As far as the services supplied by travel agents are concerned it would be best to proceed on the basis that virtually all of the services will be viewed as a kind ordinarily acquired for personal or domestic use or consumption with the consequence that the Act will apply to those services.

Guarantees: The Act establishes one set of guarantees which apply in relation to the supply of goods and a different set of guarantees which apply in relation to the supply of services. This summary deals only with the guarantees which the Act imposes in relation to the supply of services. TAANZ also has a summary of the guarantees which are imposed by the Act in relation to the supply of goods and if a member has a problem involving the guarantees applicable to supply of goods the member can obtain a copy of that summary by contacting the TAANZ office.

Guarantees in Respect of the Supply of Services Where services are supplied to a consumer there are four guarantees provided by Part IV of the Act. These are:-

(i) Guarantee as to Reasonable Care and Skill (Section 28). A guarantee that services will be carried out with reasonable skill and care. This guarantee restates in statutory form the existing common law obligations on Travel Agents to exercise the skill and care of a reasonable competent professional travel agent in performing their services. The guarantee does not extend the existing legal obligations of a travel agent to act with reasonable skill and care in the performance of their function on behalf of their customers. Travel Agents had these obligations before the Act was passed.

(ii) Guarantee as to Fitness for Particular Purpose (Section 29) A guarantee that the service, and any product resulting from the service, will be reasonably fit for any particular purpose, and of such a nature and quality that it can reasonably be expected to achieve any particular result that the consumer made known to the supplier.

This, the second guarantee, is significant and establishes a new liability on travel agents in relation to the performance of services for customers. The Section (Section 29) requires the consumer to have made known his or her purpose to the travel agent at or before the time of making the contract for supply of services for the customer.

The difficulty with this particular guarantee is that it is possible that travel agents may be liable for the actions or defaults of other suppliers of product where the other suppliers fail to perform at the levels expected of them.

By way of example, if a customer makes known particular needs in terms of a holiday, for example, a resort which contains a golf course and tennis courts, and the travel agent recommends a particular resort as being able to provide those services and facilities, if the resort (for whatever reason) fails to provide those facilities then the travel agent may be liable. Accordingly, this particular guarantee has the capacity to extend the liability of the travel agent to include failures on the part of the suppliers of the actual facilities of travel accommodation.

This particular guarantee is modified in part by Section 33 of the Act which states that there shall be no right of redress against a supplier under the Act in respect of a service or any product resulting from a service which fails to comply with that guarantee only as to fitness for particular purpose if it fails to comply with that guarantee only because of any act, or default, or omission of, or any representation made by any person other than the supplier or an agent or servant of the supplier.

TAANZ members should nevertheless take special care when they are dealing with a customer who has specified a particular purpose or that the arrangements which are made for him are to have a particular nature or quality or to achieve a particular result. In such cases the travel agent should be aware that if the customer complains that the programme or plan prepared by the travel agent did not satisfy the particular purpose or provide the facilities of the nature and quality specified by the customer then there is considerable potential for the customer to take action against the travel agent pursuant to this particular guarantee.

This guarantee will not apply where the circumstances show that the consumer does not rely on the suppliers’ skill or judgment, or, it is unreasonable for the consumer to rely on the suppliers’ skill or judgment. TAANZ members should also ensure that their professional indemnity policy will cover them for breaches of this guarantee in circumstances when they have not been negligent. A more detailed analysis of this section is contained in the case studies which appear at the end of this summary.

(iii) Guarantee as to Time of Completion (Section 30) A guarantee that the service will be completed within a reasonable time in any case where the time is not fixed by the contract nor a method for calculating the time provided in the contract.

This guarantee is not likely at a practical level to create problems for travel agents. Travel agents do not have problems completing their tasks with a reasonable time frame. Modern technology enables travel agents to carry out reservation and booking work virtually instantaneously and the consumer is frequently advised at the time of enquiry as to whether seats or accommodation are available at the relevant time.

(iii) Guarantee as to Price (Section 31) A guarantee that the consumer is not liable to pay to the supplier more than a reasonable price for the service in any case where the price is not fixed in the contract nor a method for calculating the price provided in the contract.

When there is failure to comply with this guarantee the consumers right of redress is to refuse to pay more than a reasonable price. Here again the nature of the services provided by travel agents and the basis on which they are remunerated mean that from a practical point of view this guarantee is not likely to be one which affects travel agents in any significant way.

Rights of Redress Against Suppliers In Respect of Supply of Services Where the supplier of a service fails to comply with the guarantees a consumer may exercise certain remedies depending on whether the failure can be remedied or not (Section 32).

Where a failure can be remedied the consumer may require the supplier to remedy it within a reasonable time. If the supplier neglects or refuses to do so within a reasonable time a consumer may have the failure remedied elsewhere at the suppliers’ cost, or, cancel the contract for the supply of service in accordance with the requirements of the Act.

Where a failure cannot be remedied or is of a substantial character the consumer may cancel the contract in accordance with the requirements of the Act or obtain damages in compensation of any reduction in value of the product of a service below the charge paid or payable by the consumer. “substantial character” is defined in the Act (Section 36).

In either situation (can be remedied; cannot be remedied) the consumer can claim damages for any loss reasonably foreseeable as liable to result from the failure.

The exception is that no right of redress is available against a supplier in respect of a service or any product resulting from a service which fails to comply with the guarantee as to fitness for a particular purpose (Section 29) or the guarantee as to time for completion (Section 30) if the cause is independent of human control or caused by an act or default or representation made by any person other than the supplier or servant or agent of the supplier (Section 33).

Right to Cancellation: Once the right of cancellation has arisen Section 37 of the Act sets out the rules applying to cancellation.

Cancellation does not take effect until made known to the supplier, or where it is not reasonably practicable to communicate with the supplier, by means which are reasonable in the circumstances. Cancellation may be made known by words or conduct (Section 37). However, where there is a provision in the contract of supply requiring notice of cancellation in writing this provision will apply (Section 37(3)).

Where a consumer cancels a contract for the supply of services the consumer is entitled to a refund of money or other consideration paid less any amount the Court or a Disputes Tribunal orders that the supplier may retain (Section 38).

Contracting Out: Section 43 deals expressly with contracting out of the Act.

The Act is to have effect notwithstanding any provision to the contrary in any agreement (Section 43). To purport to contract out of the Act is deemed to be an offence under the Fair Trading Act 1986 (a false representation) and fines of up to $200,000 for corporations and $60,000 for individuals may be imposed.

The principal exception to the prohibition against contracting out is where the supply of goods or services is to a consumer who acquires the goods or services for business purposes. Where this criteria is satisfied an agreement to contract out of the provisions of the Act must be in writing and record that the supply is for “business purposes’

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