The Consumer Guarantees Amendment Act 2013 introduced some major changes to the Consumer Guarantees Act 1994 (CGA), which came into force on 17 June 2014. It is vital that all businesses that provide goods and services to consumers are aware of the changes to the CGA, and how these may affect their business. Several other consumer law reforms also came into force on the same date, including changes to the Fair Trading Act, which businesses should also ensure they are aware of.

By way of reminder, the CGA applies when businesses interact with consumers. The CGA defines a ‘consumer’ as a person who acquires from a supplier goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption, and does not acquire those goods or services for the purpose of resupplying them in trade or consuming them in the process of production or manufacture.

The changes to the CGA that were introduced on 17 June 2014 include:

Guarantee as to delivery

A new guarantee has been inserted into the CGA regarding delivery of goods. Where a supplier is responsible for delivering or arranging for the delivery of goods to a consumer, there is now an implied guarantee that goods will be:

  • Delivered at a time or within a period that has been agreed between the supplier and the consumer; or
  • If no time period has been agreed upon, then within a reasonable time.

If a supplier fails to deliver goods on time, the consumer can reject the goods if the failure is substantial, and obtain a payment of damages. The customer may be awarded damages even if they choose to keep the goods. This means that businesses need to be careful that they are not overpromising when goods can be expected to be delivered, and that businesses need to monitor the efficiency and timeliness of their deliveries to ensure that customer expectations are being adequately managed.

The meaning of ‘acceptable quality’

The definition of acceptable quality has now been amended so that the Court can take into account the nature of the supplier and the context in which the supplier supplies the goods. This may be in part a recognition that in some circumstances, such as when selling second hand goods through online auctions, the level of quality that is acceptable may be different from circumstances where goods are sold through traditional means.

Delivery of gas and electricity

When gas or electricity is supplied by an electricity retailer, there is an implied guarantee that it will be of acceptable quality. This implied guarantee means that the supply will be:

  • As safe as a reasonable consumer would expect it to be.
  • As reliable as a reasonable consumer would expect supply in that place to be.
  • Of such a quality that it can be consistently used for things that a reasonable consumer would expect to use gas and electricity for.

When determining what a reasonable consumer would expect, it is assumed that the consumer has considered that the supply may be affected by emergencies outside of the control of the retailer, may be interrupted for safety, maintenance or other technical purposes, that there may be some fluctuations of supply within the tolerances permitted by regulations, that reliability may depend on the location being supplied, and that the reliability and quality of supply may be related to price.

The supply will not fail to comply with the guarantee if the customer has used the electricity or gas in an unreasonable manner or to an unreasonable extent if the supply would have otherwise complied with the guarantee had it not been used in such a way. It will also not fail to comply if supply to a particular consumer is likely to be worse than the supply that generally applies, the retailer has explained this to the affected person and that person has agreed to supply on that basis.

These are the only implied guarantees that relate to the supply of gas or electricity under the CGA. Retailers of electricity and gas are also given new indemnity protection in circumstances where the failure to provide the gas or electricity is out of their control and caused by an issue with electricity or gas lines.

CGA to apply to auctions

The CGA formerly contained a provision that meant that it would not apply to goods sold by auction or competitive tender. This provision meant that goods sold by auction (via TradeMe for example) would not be subject to the CGA, even if the seller was in trade, but would apply if a purchaser chose to ‘buy now’. This anomaly has been amended to remove the exception for auctions and competitive tenders, and these will now be subject to the CGA in the same way as other consumer transactions where they are purchasing from a professional seller.

Contracting out

Under the CGA as it was prior to 17 June 2014, parties could contract out of the CGA if the goods or services were acquired by the consumer for business purposes, and both parties agreed in writing that the CGA would not apply.

Section 43 of the CGA will now be amended in such as way as to make the effectiveness of contracting out provisions less certain. In addition to the agreement needing to be in writing, and the relevant goods being acquired in trade, it must be fair and reasonable for the parties to be bound by the agreement. In the event that a Court is required to decide whether it is fair and reasonable for the parties to have contracted out, the Court will take into account all of the circumstances of the agreement, including:

  • The subject matter of the agreement.
  • The value of the goods or services supplied.
  • The respective bargaining powers of the parties, including their capacity to negotiate the terms of the agreement.
  • Whether parties were represented by a lawyer.

It is likely that this provision will make contracting out provisions less reliably enforceable, especially where the supplier has more bargaining power than the customer.

Implications of changes to the CGA

Businesses will need to consider whether provisions in their contracts that currently allow them to contract out of the CGA will still be effective under the new legislation, and consider what impact this may have. Businesses will also need to be particularly cautious with managing delivery schedules and customer expectations around delivery of goods.

Consumers will have greater protections, particularly when buying through auction sites. Consumers of electricity and gas (which may include businesses, depending on the circumstances) will now have specific provisions to turn to in the event that they believe the supply is not up to a reasonable standard.