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Increased Protections for Consumers: What Businesses Need to Know
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By: Charlene Sell
Some of the most important changes to New Zealand's consumer laws in recent times were enacted at the end of last year.
These changes will affect nearly all businesses in New Zealand. If you are an owner or manager of a business you will need to consider whether your documentation and processes need to be updated to comply with the new laws.
While a few of the changes are effective now, the majority of changes do not come into effect until 17 June 2014. There is a longer timeframe before the prohibition on unfair contract terms comes into effect (17 March 2015).
This article provides a brief overview of the key changes. We will be circulating a series of articles over the coming months to provide more information on the most significant reforms.
Main amendments outlined below:
Unfair contract terms
These new provisions in the Fair Trading Act allow the Commerce Commission to seek a court order declaring that a term in a standard form consumer contract is unfair. A business can be fined if it tries to enforce a term in a contract that a court has declared as unfair. These reforms are aimed at encouraging businesses to use contracts which can be easily understood by consumers and do not unfairly limit consumer rights.
The Commerce Commission can now take action against businesses which make claims about their products or services which they cannot back up.
There have been some changes to the regime for compulsory and voluntary product recalls, including a new obligation to notify the Ministry of Business, Innovation and Employment within two working days if you voluntarily recall an unsafe product.
Uninvited direct sales
The Door to Door Sales Act has been abolished and provisions controlling uninvited direct sales have been included in the Fair Trading Act. These provisions now clearly cover telemarketers as well as door to door salespeople. An uninvited direct sale agreement must be in writing and contain certain specified information in plain language, including the customer's right to cancel. A copy of the contract must be given to the customer.
Unsolicited goods and services
The Unsolicited Goods and Services Act has been abolished and provisions governing unsolicited goods and services have been included in the Fair Trading Act. A person who receives unsolicited goods or services does not have to pay for them. Unwanted goods simply need to be made available for collection. If the sender does not collect them within 10 working days the recipient can keep them as a gift. The sender must notify the consumer of these rights.
The Layby Sales Act has been abolished and provisions governing layby sales have been included in the Fair Trading Act. A layby sale contract must be in writing and contain certain specified information in plain language, including the customer's right to cancel. A copy of the contract must be given to the customer.
Businesses which offer extended warranties to their customers must now comply with certain disclosure requirements. The extended warranty agreement must be in writing and contain certain specified information in plain language, including a summarised comparison between the relevant Consumer Guarantees Act guarantees and the protection provided by the extended warranty. Businesses must also inform the customer of their right to cancel.
Disclosure of trader status
Businesses who sell goods or services over the Internet must make it clear to potential purchasers that they are "in trade".
The Consumer Guarantees Act now extends to goods sold via auction or competitive tender. Consumers who purchase goods from traders through internet auction sites such as Trade Me are now clearly protected by the Consumer Guarantees Act if the goods are substandard. Auction procedures are now regulated under the Fair Trading Act and include specific requirements relating to vendor bids.
Delivery of goods
Two new provisions under the Consumer Guarantees Act apply where a vendor "in trade" arranges delivery of their goods to a consumer. The guarantee of acceptable quality now applies when those goods are received, so the vendor will be responsible if the goods are damaged in transit. There is also a new guarantee requiring the vendor to deliver the goods within the agreed timeframe or if no timeframe has been agreed, within a reasonable time.
Contracting out of the Fair Trading Act and Consumer Guarantees Act
Businesses can contract out of certain provisions of the Fair Trading Act provided both parties are in trade, the agreement is in writing and it is "fair and reasonable" for the parties to do so. Traders can also contract out of the Consumer Guarantees Act for business-to-business transactions provided the agreement is in writing and it is "fair and reasonable" for the parties to do so.
There have been substantial increases to the fines which can be imposed on businesses for breaching the Fair Trading Act.
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