8555v5a Learners Guide

US 8555 v5a
Learner’s Guide
LEGAL STUDIES
Unit Standard 8555

Version 5 | Level 2 | Credit 3
Describe the
objectives and
application of
consumer law
Licensed to:
Western Heights High School
2018 - 5a © ATC New Zealand
www.instant.org.nz
i
US8555v5a Learner's Guide Licensed to Western Heights High School

Describe the objectives and application of consumer 25092018-US8555-136987 INSTANT Education Solutions
law 5a © ATC New Zealand www.instant.org.nz
ii
About this
Learner’s Guide
Learning Purpose & Outcomes
In this guide you will learn about the objectives and application of consumer law.
During your day-to-day life you and your family will be required to make many various purchases.
You may need to buy food, resources for your studies, a new car, or you may want to buy a new
stereo or iPod. No matter what you are buying, it is important that you are aware of the laws that
relate to your purchases. If you do not know about your rights under consumer law, you may lose
money or get a product that you are not completely happy with.
Be prepared to think about your past experiences with consumer law. Have you seen
advertisements that have incorrectly represented products? Have you bought a product that
has not been in the condition that you expected it to be? Has a service you paid for not been
completed by the person you paid to do it? Thinking about your experiences with consumer law
will help you to remember and apply the laws that you learn about.
Difficult or technical terms have been provided in a glossary at the end of this guide. Terms are
highlighted the first time they appear in the main text.
Licensed to Western Heights High School US8555v5a Learner's Guide

25092018-US8555-136987 INSTANT Education Solutions Describe the objectives and application of consumer
5a © ATC New Zealand www.instant.org.nz law
iii
Additional
Resources
Legislation
All legislation can be accessed from http://www.legislation.govt.nz/
Credit Contracts and Consumer Finance Act 2003
Consumer Guarantees Act 1993
Fair Trading Act 1986
Websites
Commerce Commission website: http://www.comcom.govt.nz
Consumers’ Institute website: http://www.consumer.org.nz
Ministry of Consumer Affairs website: http://www.consumeraffairs.govt.nz
Youth Law Tino Rangatiratanga Taitamariki website: http://www.youthlaw.co.nz

1
Contents
What is consumer law? 2

Consumer law 3
Objectives of consumer law 6
Consumer law - rights, responsibilities, and remedies 10

Rights, responsibilities, and remedies 11
The Consumer Guarantees Act 1993 13
The Fair Trading Act 1986 16
Uninvited direct sales 18
Layby Sales 21
Unsolicited Goods 24

Evaluating limitations of consumer law 27
Limitations of consumer law 28
Review 37
Glossary 40

2
LESSON 1:
What is
consumer law?
Learning Objectives
On completion of this lesson, learners are able to: A space has been left
on the right of every
understand the meaning of consumer law
page for you to make
understand key terms used when describing consumer law notes about what
understand the objectives of the Consumer Guarantees Act 1993 you are learning.
understand the objectives of the Fair Trading Act 1986.
In this lesson you will learn about the meaning of consumer law and
how it protects consumers. You will also learn key terms used when
describing consumer law.
In particular, you will look at the key objectives of the Consumer
Guarantees Act 1993 and the Fair Trading Act 1986. These
objectives include the protection of consumer rights, the protection
of consumer safety, and legal remedies for consumers when there
has been a breach of their rights.
When consumer rights are not upheld, this is a breach of those
rights. Legal remedies are ways, under consumer law, of fixing the
problems that come up for consumers when their rights have been
breached.

3
LESSON 1: What is consumer law?
Consumer law
Consumer law focuses on the relationship between trader and

consumer, especially in relation to products and services that are
sold. Unfortunately, consumer problems are very common. Most
people have had the frustrating experience of buying faulty goods,
or receiving service that is below an acceptable standard. It is
important to understand the objectives of consumer law so that
you know your rights and obligations when purchasing goods and
services.
Every time you buy something consumer law works to

What do protect you and the person or company you are buying
You Think? from. It makes sure that the transaction is fair and safe
for both parties.
In groups, talk about some purchases that you have
made recently.
Write notes down here:

4
Write down the meaning of the words below. Refer to the

Try it for glossary if you need to.
Yourself
Write the meaning of:
1. Contract
2. Hire purchase
3. Unsolicited goods
4. Layby

5
Services
The term “service” is very important to consumer law. The term
“service” means any rights, benefits, or privileges that are provided
by a trader. When receiving a service, the consumer often doesn’t
receive physical goods. Instead, the consumer receives the labour,
or work, of the trader.
Service people are used every day to complete a variety

What do of tasks for the consumer. In groups, write a list of some
You Think? of the types of roles that offer a service to the public.
Write your list down here:
Goods
Goods mean personal property of any kind, except land. Goods
can be tangible such as a computer, table, or car. They can also
be intangible such as an electronic file or an idea. Other words for
goods include product or item.
Choose one item you have bought that you weren’t

What do happy with. With a partner, discuss what was wrong with
You Think? the item. Answer the following questions:
1. What is the name of the item you bought?
2. What was wrong with the item?

6
Objectives of consumer law
Consumer law has three main objectives in relation to protecting

consumers. These objectives are:
• To protect consumer rights.
• To protect consumer safety.
• To provide a legal remedy for consumers.
The two main laws that cover these objectives are the Consumer
Guarantees Act and the Fair Trading Act. In general, the Consumer
Guarantees Act covers the quality of products after they have been
bought. The Fair Trading Act covers claims made about products
and services before they are sold and the way that products are
sold. You will learn about the rights and remedies covered by these
Acts in the next lesson.
Protection of consumer rights

One of the most important reasons for consumer law is the need to
protect consumer rights in relation to goods and services provided.
The Consumer Guarantees Act plays an essential role in protecting
consumer rights. The Act sets out a number of broad guarantees
that a person selling goods or providing services must follow.
Consumer law gives a variety of rights to consumers.

What do From your own experience, brainstorm some rights that
You Think? you think consumers have under consumer law.
Possible rights under

consumer law.

7
Protection of consumer safety

Another important objective of consumer law is to protect
consumers from unsafe products. Consumers have the right to
expect that the products they buy will be safe for normal use.
The Consumer Guarantees Act and the Fair Trading Act both have a
key objective of ensuring that goods sold to consumers are safe.
Under the Consumer Guarantees Act, all products must meet the
guarantee of acceptable quality. Safety of the product is part of this
guarantee.
The Fair Trading Act also has a key purpose to protect consumers.
It protects consumer safety through Product Safety Standards for
certain products. The purpose of the regulations is to prevent or
reduce the risk of injury to any person.
As an example, a toaster must be fit for its normal purpose which is
toasting bread. The toaster must also be safe to use. The cord of the
toaster must not cause an electric shock when it is plugged in. Also,
the toaster must not catch on fire when being used normally. If these
things happen then the toaster is obviously
not of an acceptable quality. It would be an
offence under the Consumer Guarantees
Act for anyone to continue to sell such a
toaster.
Note: Under recent changes to the Fair
Trading Act 1986, consumers are given
protection for misusing products if the
misuse is ‘reasonably foreseeable.’
Some goods are a greater risk to consumers than other

What do goods. Write a list of goods that you think could harm
You Think? consumers if they were not made properly or carefully.

8
Providing legal remedies for consumers

Another objective of consumer law is to provide legal remedies for
consumers. Most consumers have experienced problems with new
or near-new goods. Imagine the following problems:
• the television screen shows only a blue screen when a DVD is
played
• a new washing machine leaks water
• the cord on a vacuum cleaner does not retract properly
• a television has a “green tint” in the picture after only three months
• a dishwasher does not complete the rinse cycle
• a new mobile phone doesn’t work when on speakerphone.
From your own experience, brainstorm some of the

What do remedies available to consumers when their rights have
You Think? been breached. You can use the information above to
help you.
Possible remedies for

breaches of
consumer law.
Under the Consumer Guarantees Act, if a guarantee is not met,

consumers have certain remedies such as a refund, repair, or
replacement.
Under the Fair Trading Act, if a trader is advertising a product or service
through deceptive advertising or unfair trading practices, the Commerce
Commission can carry out (implement) certain remedies. These include
prosecuting the trader, ordering compensation, or applying for a court
order to make the trader stop using the advertisement.

9
Try it for Answer the following questions about the Consumer

Yourself Guarantees Act and the Fair Trading Act.
1. Which law has the objective of providing rights for consumers before they have
bought an item?
2. Which law has the objective of providing rights for consumers after the have
bought an item?
3. Which law has Product Safety Standards for certain products?
4. What are some legal remedies under the Consumer Guarantees Act?
5. What are some legal remedies under the Fair Trading Act?

10
LESSON 2:
Consumer law - rights,

responsibilities, and remedies
Learning Objectives
On completion of this lesson, learners are able to:
identify the purpose of important consumer law legislation
describe the rights of consumers available under key consumer
law legislation
describe the responsibilities of traders under key consumer law
legislation
In this lesson you will look at important consumer law legislation,

including:
• Consumer Guarantees Act 1993
• Fair Trading Act 1986
You will learn how consumer law protects the rights of consumers
and offers remedies to consumers when there has been a breach of
their rights. You will also learn about the responsibilities that traders
have in relation to the legislation above.

11
LESSON 2: Consumer law - rights, responsibilities, and remedies
Rights, responsibilities,
and remedies
Consumer law can basically be split into three areas:

• rights
• responsibilities
• remedies.
Each piece of legislation focuses on a different area of consumer
law, but still has the aim to protect the rights of the consumer and
give responsibilities to the trader. The law also covers situations
where the consumer has not been given their rights, and a solution
is needed for the problem.
Rights of the
consumer
Consumer law
Responsibilities
Legal remedies
of the trader
Rights The term “rights” means certain conditions

that the consumer is entitled to be given.
An example of a right is the right to expect
that a new product will be in working
condition when it is bought. This right
comes from the Consumer Guarantees Act.

12
Responsibilities “Responsibilities” refers to the duty of

the trader to ensure that a consumer is
given their rights under key consumer
law. An example of this is the
responsibility of the trader to advertise
in a way that does not misrepresent the
product sold. This responsibility comes
from the Fair Trading Act.
Remedies Each law has a section that provides

remedies in situations where the
consumer has not been given their
rights or where the trader has not been
responsible.
It is necessary to be able to distinguish between a right,

Try it for a responsibility, and a remedy. Look at the following
Yourself statements and fill in the missing word with right,
responsibility, or remedy.
1. A consumer has the to a product that is in working condition.
2. A fine is a possible for false advertising.
3. A trader has the to ensure that the product matches its description.
4. A for when a trader supplies a faulty item is that they replace it.
5. It is the of a consumer to have a product that is safe.

13
The Consumer Guarantees

Act 1993
As mentioned in lesson one, the key aims of the Consumer
Guarantees Act are to ensure that goods and services sold in New
Zealand are of an acceptable quality and fit for their purpose. The
Consumer Guarantees Act focuses on what happens to goods after
they have been bought.
Rights
The Act sets out the consumer’s rights when buying goods and
services.
Goods: Services:
Must be reasonably durable Have to be performed with
and have no significant reasonable skill and care.
defects.
Have to match their description. Must be fit for purpose.
Have to be of an acceptable Must be completed within a
quality. reasonable time.
Responsibilities
The trader is responsible for ensuring that the products they sell,
or services they offer, meet the points above. For example, if the
trader is selling televisions they must make sure that the picture
and sound are clear. The trader must also make sure that the
television will not break within a short time of being bought.
Remedies
The Consumer Guarantees Act offers various remedies when
there has been a breach of consumer rights. The two most
common remedies are repairing or replacing the item. The
trader can only opt to repair the item if it will be fixed within a
reasonable amount of time; otherwise, it should be replaced. In
some cases, a refund should be given.
If the tradesperson has not completed a job to a reasonable
standard, the consumer can ask that the tradesperson redo the
work so that it is to the required quality. Alternatively, the consumer
can ask for compensation. Compensation can also be asked for if
the tradesperson has taken too long to complete the job.

14
Emi’s case
“A few weeks ago I bought a jacket from Suzy’s

Fashions. After I took it home, I noticed that it
was not sewn properly on the cuff. Under the
Consumer Guarantees Act, it is my right to have
a jacket that has no defects and it is the retailer’s
responsibility to provide something that is fit for
its purpose. I returned it to the shop and got a
replacement. The cuff is properly sewn and I am
very happy with it!”
John’s case
“A plumber came to my house to unblock the

kitchen drain. About two hours after he fixed it, the
drain became blocked again. Under the Consumer
Guarantees Act, I have the right to have a repair
that will last. It is the plumber’s responsibility to
ensure that the job was done properly. I called the
plumber and he came back immediately to fix it. It
is working well now!”
Use the information from the previous page to apply

Try it for to the scenario below. Write your answers in the space
Yourself provided.
Scenario
Wilfred is an elderly man who lives in a small home unit. He hired a professional painter
to paint the outside of his unit. It had been at least 10 years since the unit was painted.
At first, Wilfred was pleased with the work. However, within about four months the new
paint started to flake off. After getting opinions from two other professional painters,
Wilfred feels that the first painter did not use reasonable care and skill when he painted
the unit. Wilfred is not sure what to do about the problem.
Continued on next page...

15
1. What rights does Wilfred have in relation to the Consumer Guarantees Act?
2. What responsibilities does the painter have under the Consumer Guarantees Act?
3. What remedies are available to Wilfred under the Consumer Guarantees Act?

16
The Fair Trading Act 1986
As mentioned in lesson one, the Fair Trading Act is mainly

concerned with the way goods and services are sold to consumers.
This means that the Act focuses on claims made about goods in
advertisements and other promotional media. It also covers the
method that is used for sales, such as uninvited direct sales, layby
sales, and the sale of unsolicited goods.
Rights
One of the keys rights of the consumer under the Fair Trading Act is to
be given accurate and full information about products and services.
Responsibilities
It is the responsibility of the trader to:
• not use misleading or deceptive conduct
• not make false or misleading representations
• not use unfair trading practices.
For example, a trader has misled consumers if they advertise a
product for $200, but then sell it for $300. The trader may have
done this to lure consumers into their shop. This practice is
thought be unethical (morally wrong), and is against the terms
of the Fair Trading Act.
Note: Under recent amendments to the Fair Trading Act 1986,
traders must have evidence or reasonable grounds for any
claims they make about products or services.
Remedies
The Act sets out various remedies for breaches of the Fair Trading
Act. These include:
• prosecution
• fines
• compensation to those who were affected
• requiring the trader to publish notices highlighting that
their advertisements were misleading
• court orders forcing the trader to stop the advertisements
or making the trader close the shop.
In order for a consumer to get compensation under the Fair
Trading Act they need to apply to the Disputes Tribunal or to the
Commerce Commission.

17
Amy’s case
“I saw an advertisement in a travel magazine that was offering trips to

Fiji for $899 per person. It said ‘everything’ was included except spending
money. After I had paid for the trip, I discovered that food was not included.
As the advertisement stated everything was included, I have a right to food
being paid for. It is the travel agent’s responsibility to not use misleading or
incorrect advertisements. As a remedy, the travel agent gave me vouchers
for food during my holiday. The advertisement has now been changed.”
Try it for Use the information in this section to apply to the

Yourself scenario. Write your answers in the space provided.
Scenario
Gary purchased an expensive leather jacket from an exclusive leather shop in Auckland.
The sales sign clearly stated that the jackets were designed by a famous Italian clothing
designer and were “Made in Italy”. Gary paid $500.00 for the jacket. He was pleased with
the purchase as the jacket had been on sale for over $800.00. However, three days later
Gary was annoyed to discover a small label attached to the lining of the jacket, which stated
that the jacket was “Made in China”. Gary believes that the retailer is ripping people off.
1. What rights does Gary have under the Fair Trading Act?
2. What responsibilities does the retailer have under the Fair Trading Act?
3. What remedies are available to Gary under the Fair Trading Act?

18
Uninvited direct sales
Uninvited direct sales are also known as door to door sales. This
type of sale is covered by sections 36K to 36S of the Fair Trading
Act 1986.
The key aim of the uninvited direct sales provisions in the Fair
Trading Act is to protect consumers when buying items at their
home or workplace when an uninvited trader is present.
The Act acknowledges that buying in such situations is different to
buying items from a normal shop. This is because consumers are
confronted with a seller in their presence and have little time to think
about whether or not to make the purchase.
It is important to note that uninvited sales only apply to sales that
are:
• made as a result of negotiations
• more than $100 in value
Has a door to door salesperson ever come to your

What do house? If so, answer the following questions. If a door
You Think? to door salesperson has never come to your house, ask
someone else these questions.
1. What item was the door to door salesperson selling?
2. Did you buy the item?
3. Were there any problems with the agreement? If so, explain.

19
Rights
As well as the basic rights that are given to a consumer under
the Consumer Guarantees Act, additional rights also apply
when buying an item from an uninvited salesperson where there
have been negotiations.
These include:
• the right to cancel the purchase within five days of
signing the purchase agreement
• the right to be given a purchase agreement in writing.
This includes information about the trader, information about
the right to cancel, and information regarding repayments, if
necessary.
Responsibilities
The trader is responsible for arranging to collect the item if
the consumer decides not to purchase it. The consumer must
ensure that the item is in its original condition when returning it
to the trader.
The trader is also responsible for ensuring that the written
agreement includes all necessary information and is given to the
consumer at the time of purchasing the item. If the agreement is
made over the telephone, the consumer must receive a written
copy of the agreement within five working days.
Remedies
A key remedy under the Fair Trading Act 1986 is a refund. As
highlighted above, the consumer only has five days to get a
refund for purchases.
If a consumer feels pressured into the purchase by the door to
door salesperson, a claim can be lodged under the Fair Trading
Act (through the Commerce Commission). The help of a lawyer
is usually needed for this.
Cameron’s case
“A door to door salesperson sold me a

subscription to a current events magazine. The only
documentation provided was a receipt for my $100
deposit. I had the right to cancel the subscription.
This is because the salesperson didn’t supply any
information about the agreement. The salesperson
was responsible for coming to collect the magazine
and giving me my deposit back.”

20
Try it for Use the information from the previous page to apply
to the scenario below. Write your answers in the space
Yourself provided.
Scenario
Sarah was approached by a door to door salesperson called Sam. Sam was selling a cleaning
product called “Wonder Orange”. The product was to be diluted with water and would
last twice as long as similar products on the market. Sarah was very impressed with Sam’s
demonstration and stated that she would like to purchase one bottle.
After some persuasion, Sam negotiated with Sarah to purchase a whole box of Wonder
Orange (one year’s supply). The box contained six 3 litre bottles of Wonder Orange at a total
cost of $500.00. Sarah was unable to pay for the whole amount up front, so she arranged to
buy the goods on credit with a $100.00 initial payment. Sarah signed the agreement, which
stated that she would pay for the cleaning product in four $100.00 instalments. The next day,
the box of Wonder Orange arrived. After some consideration Sarah decided to cancel the
contract. She realised that the product was extremely expensive and that she couldn’t really
afford the payments. She doesn’t know how to get out of the contract.
1. What rights does Sarah have under the Fair Trading Act?
2. What responsibilities does Sam have under the Fair Trading Act?
3. What remedies are available to Sarah under the Fair Trading Act?

21
Layby Sales
A layby sale happens when a consumer pays for an item in two or

more instalments and receives the item once all the instalments are
paid. The item is not owned by the consumer until all the instalments
are paid.
Layby sales are covered by sections 36B to 36J of the Fair Trading
Act 1986.
Legislation in the Fair Trading Act relating to layby sales (or other
similar sales), do not apply to items valued over $15,000.
Think about experiences you, or those around you,

What do have had when putting items on layby. Answer the
You Think? following questions in relation to your experiences, or
the experiences of the person you know.
1. What item was bought on layby?
2. What were the terms of the layby agreement?
3. Did you, or the person who bought the product, have any problems with the layby
agreement?

22
Rights
The key rights of the consumer include the right to have a
written statement with the terms of the agreement on it. The
statement must include:
• a clear description of the goods to be supplied under
the agreement and a summary of the consumer’s right
to cancel the agreement
• whether or not a cancellation fee will be charged
• the sellers details
• the total price of the item
The consumer has the right to cancel the agreement at any
time. Fees can be charged for administration as well as loss in
value. Loss in value is the difference in the original price and the
price that the trader expects to sell it for now.
Responsibilities
The trader is responsible for:
• providing a written statement to the consumer that
highlights the status of their purchase (ie how much they
have paid and how much is owing). This information must
be provided within five working days
• keeping the item for the consumer – it cannot be sold to
another consumer.
If the item is not available to the consumer when the final instalment
is to be made, a suitable substitute has to be given. If a substitute is
not available then an appropriate remedy is a full refund.
Remedies
If there is a dispute that cannot be solved between the trader
and consumer, the case may be taken to the Disputes Tribunal.
Jarrod’s case
“I bought some headphones on layby a few months

ago. Two weeks ago, I asked the assistant at the shop
I bought it from to give me a written statement to show
how much money I owed. The shop assistant did not
give one to me, saying that she was too busy. Under
the Fair Trading Act, I have the right to be given a
statement. It is the trader’s responsibility to provide it
within five days. I informed the shop assistant of my
rights and she supplied the statement.”

23
Try it for Use the information you have read to apply to the
following scenario. Write your answers in the space
Yourself provided.
Scenario
Angela put a new dress for her school ball on layby at Queen’s
Dresses. She made regular payments of $50 per month for six
months. When she went to pay her last instalment and collect
the dress, she discovered that it had already been sold. Worse
still, there were none left in her size!
Angela was upset because her school ball was in one week and
the same dress was expensive at all the other dress shops.
1. What rights does Angela have under the Fair Trading Act?
2. What responsibilities does Queen’s Dresses have under the Fair Trading Act?
3. What remedies are available to Angela under the Fair Trading Act?

24
Unsolicited Goods
An unsolicited good is an item that was not ordered or asked for.

Some traders send unsolicited goods to consumers with the hope
that they will pay for the good. Sending unsolicited goods is thought
to be an unethical business practice as it puts an unnecessary
burden on consumers.
Unsolicited goods are covered by sections 21A to 21D of the Fair
Trading Act 1986.
Have you, or anyone you know, ever received an

What do item that you have not ordered? Answer the following
You Think? questions in relation to your experiences, or the
experiences of the person you know. If you don’t know
of anyone who has received an unsolicited item, ask
your tutor to give you some examples.
1. What item was sent to you or the person you know?
2. Was an invoice included?
3. What did you do with the item?

25
Rights
The consumer:
• is under no obligation to buy the item
• is not responsible for loss or damage of the goods
(unless it was deliberate)
• must make the product available to the sender for up to
10 working days
• can receive the goods as an unconditional gift if they are
not collected by the sender within 10 working days.
Responsibilities
The trader must:
• not send standard invoices with unsolicited goods
• must clearly inform the receiver that they are under no
obligation to pay for the goods.
Remedies
Traders can be taken to the Commerce Commission for forcing
receivers of unsolicited goods to pay for items that they do not
intend to purchase.
Melinda’s case
“I was sent a packet of scented candles with an

invoice for $14. According to the law, it is my right not
to pay for the candles unless I want them. I contacted
the trader and asked him to collect them. As he did
not collect them within 10 days, they became an
unconditional gift to me.”

26
Try it for Use the information you have read to apply to the
following scenario. Write your answers in the space
Yourself provided.
Scenario
A few days ago, Jude received a package in the mail addressed to him from DVDs Plus. The
package contained three wildlife DVDs as well as an invoice for $45.00. Jude was surprised
as he had never ordered the DVDs. He does not want to keep them.
1. What rights does Jude have under the Fair Trading Act?
2. What responsibilities does DVDs Plus have under the Fair Trading Act?
3. What remedies are available to Jude under the Fair Trading Act?

27
LESSON 3:
Evaluating limitations of
consumer law
Learning Objectives
On completion of this lesson, learners are able to:
identify limitations of specific consumer law
describe limitations in relation to the rights of consumers and
traders
evaluate the limitations of consumer law in various scenarios.
In this lesson you will learn about the various limitations of consumer
law to protect consumers and traders. You will evaluate how these
limitations are implemented.

28
LESSON 3: Evaluating limitations of consumer law
Limitations of consumer law
Consumer law does not completely protect consumers. Although

the basic rights of consumers are protected, each law has
limitations in its protection.
Note
A limitation is an area that is not covered by the law, or an area
where rights are restricted for a party involved.
Key reasons for limitations include:

• creating a balance between the rights of consumers and
traders
• giving consumers freedom to make decisions about
purchasing products.
When describing how a limitation affects the ability to protect
consumers or traders, you need to refer to the law. For example,
consumers have no right to return a product they have damaged
themselves (as specified in the Consumer Guarantees Act).
What do Answer the following questions about the limitations

that consumer law has to protect the consumer. Use the
You Think? information above to help you.
1. What is a limitation in relation to consumer law?
2. What are the key reasons for limitations in consumer law?

29
Limitations of the Consumer Guarantees Act
Limitations in protecting the rights of the consumer

• The consumer is only covered by the Act if the product was
damaged through no fault of their own. For example, if you
drop the item that you have bought, the trader is under no
obligation to repair it or replace it for you.
• If a defect in a product is drawn to the consumer’s attention
before they purchase it, the guarantee of quality does not
apply to this product in the area where the defect was shown.
• In relation to services, a tradesperson may say that their work
cannot be relied upon. This means they will not be liable
under the Act. An example of this is when a builder is asked
to do some specialist work. If he informs you that it is not his
area of speciality, and he cannot guarantee the work, then he
is not bound by the Act for that particular piece of work.
“I bought an armchair and drove home with it on

my trailer. Unfortunately, I didn’t tie it down securely
enough and it fell off. I went to the shop to get a
replacement, and they said that they didn’t have to
replace it as it wasn’t their fault. Luckily, my insurance
company replaced it for me.”
Limitations in protecting the rights of the trader

It is the trader’s responsibility to supply the consumer with
a repair or new product if the product doesn’t comply with
the terms of the Consumer Guarantees Act. If this cannot be
supplied, the trader has no right to make the consumer wait
for an unreasonable amount of time until a repair has been
completed or a replacement has arrived. In such situations, a
refund must be given to the consumer.
“I sell mobile phones. Unfortunately, a phone I sold to

a customer was faulty. As there were no more of that
make and model in stock, and it was going to take over
three months to repair, I had to give the customer a
refund.”

30
Try it for Answer the following questions in relation to the

scenario below. Use the information in this section to
Yourself help you.
1. John dropped his iPod the day after he bought it. Is he covered by the Act? How
is his protection limited?
2. Justin hired a painter to do some intricate painting on the side of his house. The
painter informed Justin that he was not skilled at doing intricate work. However,
Justin insisted that the painter do it. The paint work was not completed to a
satisfactory standard. Is Justin covered by the Act?

31
Limitations of the Fair Trading Act

This section covers the general terms of the Fair Trading Act.
Uninvited direct sales, layby sales, and unsolicited goods and
services will be covered in the following sections.

• The Act does not cover areas where the consumer has
simply made a mistake and assumed that the trader is
providing a specific good or service.
• The protection of a consumer’s rights is limited where the
selling has included fine print detailing the information.
However, the main advertisement still needs to be clear and
not be misleading.
“We saw a lounge suite advertised and thought it

said it was half price. However, that was for another
product. It was clearly our mistake. We didn’t buy it.”

• The Act does not specifically focus on the rights of the
trader and, therefore there are few limitations specified.
• If a trader breaks the regulations specified in the Fair
Trading Act, there can be severe consequences for the
trader’s business. This includes fines, prosecution, or the
removal of the right to operate the business.

32

scenario below. Use the information from the previous
Yourself page to help you.
1. Michael saw an advertisement from DVDs Plus stating that all DVDs had 50%
off for a limited time. When he got to the shop, he noticed that box sets were
excluded. When he referred to the advertisement, he noticed that the fine print
stated that only single DVDs had 50% off, not box sets. Is Michael covered by
the Act? How are his rights limited?
2. Jean-Paul bought a CD off an online auction site. On the site, the trader stated
that the CD was digitally remastered. However, when Jean-Paul received it, he
discovered that it was not. Is Jean-Paul covered by the Act?
Limitations of the Fair Trading Act in relation to

uninvited direct sales

• If the consumer decides they don’t want the product, and
more than five days have passed since they purchased it,
they are not protected under the Act. According to the Act,
the right of return only lasts five days. If the trader has failed
to provide a written purchase agreement, the purchase can
be cancelled at any time.
• Protection under the law does not apply if the purchase was
not negotiated, or if the purchase was under $100.

33
“I changed my mind about buying a set of

gardening books from a door to door salesperson.
I thought it would be okay if I just cancelled the
cheque. I didn’t write to him to inform him that I was
cancelling it. Unfortunately, I now have to keep the
books as I didn’t cancel the agreement properly.”
Limitations in protecting the rights of the trade

• If the trader has not provided a written purchase agreement
for the consumer, the trader has to accept cancellation by
the purchaser at any time.

Yourself help you.
1. Matthew works as a door to door salesperson. Two weeks ago, he sold a set
of encyclopedias to Marie on credit. Marie does not want the encyclopedias
anymore, and wrote to Matthew to inform him of this. Matthew did not supply her
with a written agreement when she purchased the encyclopedias. Does Matthew
have any right to prevent Marie from cancelling the contract?
2. Rangi bought a set of gardening tools from a door-to-door salesman for $120.00.
He now realises that he doesn’t really need them, and wants to return them.
Does he have the right to return it under the Act?

34
Limitations of the Fair Trading Act in relation to

layby sales

• If a product is worth over $15,000, the consumer has no
protection under the Act.
• The layby agreement can be cancelled if the consumer is
late in making payments. The consumer will have no right
to the product. However, the consumer does have a right to
have all the payments refunded (minus any administration
costs and loss in value).
“I made a private layby agreement with a friend

who was selling her car. The car cost $28,000.
Unfortunately, my friend sold the car to someone
else when I was halfway through my payments. My
lawyer said the Fair Trading Act would be no use to
me in this situation.”

• The trader has no right to force you to complete the layby
sale. The consumer is able to cancel at any time. However,
administration costs and loss in value might be deducted
from any payments made.
• The trader has no right to increase the price of the item
charged to the consumer – even if the cost of the item
increases during the term of the layby. For example, if the
consumer buys the item on sale for $45 through layby, but
the price upon collection is $90, the trader can only sell it to
the consumer for $45.
“A customer cancelled a computer that she had on

layby for the past year. The item had dropped $300
in value since she first bought it. Although I could not
make her buy it, I was able to charge her for the drop
in value.”

35

Yourself help you.
1. Carmen owns an electronics shop. Five months ago, a customer bought an

mobile phone on layby for $600. Knowing that she could get more stock into the
shop, Carmen sold the mobile phone. Now, all mobile phones of that model have
increased to $700. Can Carmen cancel the layby?
2. Chen bought a dining table on layby and missed four payments. She received a
letter from the furniture store informing her that if she did not pay for the table,
they would cancel the layby. Does she have any rights under the Act?
Limitations of the Fair Trading Act in relation to unsolicited

goods and services

• If the consumer damages the product, they have no right
to return it to the trader. In this situation, the consumer has
no protection under the Act. For the purposes of the Act,
damaging the product is the same as purchasing it.
• If a consumer uses the product, they have accepted ownership
of it and have no right to return it under the Act. The trader can
send an invoice and demand payment for the product.
“I received a tube of hand lotion in the mail

addressed to me. I used it because I thought it was
free. When the sender asked for payment I was
shocked! But according to the law, I have to pay.”

36

• It is illegal for the trader to send an invoice for an item that
is unsolicited. If the trader does send an invoice, their rights
under the Act are limited in that they could be prosecuted
and fined.
• A trader’s rights to have ownership of the property are
limited if they do not collect the item within 10 working
days.
“I sent Christmas cards to various homes, hoping

that consumers would buy them. One consumer
emailed and asked me to collect them. I went to
collect them two months after the consumer sent
the email. However, I was informed that they had
become an unconditional gift to the consumer. I
couldn’t collect them or get paid for them.”

scenario below. Use the information from the previous
Yourself page to help you.
1. Cameron received a package in the mail addressed to him. It contained four

novels from an online bookshop. Cameron read the books, and then decided that
he didn’t want to keep them. Under the Act, can Cameron return them?
2. Asha received a CD and invoice addressed to her in the mail. She never ordered
the CD and does not want to buy it. Is she required to purchase the CD?

37
Review
In this course you have looked at the objectives and applications of

consumer law in New Zealand.
There are three basic objectives of consumer law in New Zealand:
• to protect the basic rights of consumers
• to protect the safety of consumers
• to provide legal remedies for consumers.
The two key laws that provide these rights are the Consumer
Guarantees Act 1993 and the Fair Trading Act 1986.
You have also looked at specific legislation and the rights,
responsibilities, and remedies that come from these. Consumer
law legislation has a strong focus on the rights of consumers. It
recognises that consumers are often put into a vulnerable position.
It also ensures that consumers have adequate protection in
commercial transactions, in a variety of cases.
However, the law does not completely protect consumers.
Consumer law has various limitations that restrict the protection of
consumers. These limitations help create a balance between trader
and consumer rights. Through these limitations, consumers have the
freedom to make decisions regarding purchases.
Try it for Use what you have learned in this course to answer the
Yourself following questions.
1. What does consumer law focus on?

38
Review
2. Name three objectives of consumer law.
3. What two main laws provide protection for the consumer?
4. Which law ensures that traders advertise their products accurately?
5. Name one responsibility the trader has if they are selling items door-to-door.
6. What is the main objective of sections 21A to 21D of the Fair Trading Act?
7. Which Act covers broken appliances?
8. According to the Consumer Guarantees Act, what remedies are available to the
consumer when there has been a breach of consumer rights?

39
Review
9. What is one limitation for a trader when selling through layby sales?
10. What is one limitation of consumers when buying from a door-to-door trader ?

40
Glossary
Consumer A person who buys goods or services for personal, domestic, or household
use.
Consumer A legal promise that goods and services will meet a certain standard when
guarantee sold by someone in trade.
Contract A legal agreement between two or more parties.
Credit When the purchaser is lent money and given time to pay it back, or when the
purchaser buys goods or services and is given time to pay them back.
False The information the consumer has received about goods or services is not
representation true. For example, you buy a dress that says it was “Made in Italy”, but
discover it was made somewhere else.
Finance A company that lends the money to pay for goods the consumer (purchaser)
company buys on credit.
Guarantor The person who will have to pay money owed on the hire purchase if the
purchaser does not keep up with the payments.
Hire purchase Buying goods on credit without paying the full amount straight away. The
purchaser is entitled to take possession of the goods immediately.
Layby The purchaser makes an initial deposit then pays for the goods in instalments.
The goods remain at the shop until the last payment has been made.
Remedy An action taken by someone to fix a problem.
Repossession The goods are removed from the purchaser’s house as a result of their failure
to meet payments under the hire purchase agreement.
Security An interest in the goods held by a finance company allowing it to seize goods
interest if the purchaser fails to meet the payment terms.
Trader The term used for someone in trade who sells goods or provides services to
the consumer.
Unsolicited Any goods sent to a consumer that the consumer has not ordered or asked
goods for.

41

42

43

21 Ruakura Rd, Hamilton East,
Hamilton 3216
Phone: 0800 864 863
E-mail: instant@atc.org.nz
www.instant.org.nz
© ATC New Zealand


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US 8555 v5a

Unit Standard 8555

US8555v5a Learner's Guide Licensed to Western Heights High School

Licensed to Western Heights High School US8555v5a Learner's Guide

US8555v5a Learner's Guide Licensed to Western Heights High School

What is consumer law? 2

Consumer law - rights, responsibilities, and remedies 10

Licensed to Western Heights High School US8555v5a Learner's Guide

understand the objectives of the Fair Trading Act 1986.

US8555v5a Learner's Guide Licensed to Western Heights High School

LESSON 1: What is consumer law?

Consumer law focuses on the relationship between trader and

Every time you buy something consumer law works to

Licensed to Western Heights High School US8555v5a Learner's Guide

LESSON 1: What is consumer law?

Write down the meaning of the words below. Refer to the

US8555v5a Learner's Guide Licensed to Western Heights High School

LESSON 1: What is consumer law?

Service people are used every day to complete a variety

Choose one item you have bought that you weren’t

1. What is the name of the item you bought?

2. What was wrong with the item?

Licensed to Western Heights High School US8555v5a Learner's Guide

LESSON 1: What is consumer law?

Objectives of consumer law

Consumer law has three main objectives in relation to protecting

Protection of consumer rights

Consumer law gives a variety of rights to consumers.

Possible rights under

US8555v5a Learner's Guide Licensed to Western Heights High School

LESSON 1: What is consumer law?

Protection of consumer safety

Some goods are a greater risk to consumers than other

Licensed to Western Heights High School US8555v5a Learner's Guide

LESSON 1: What is consumer law?

Providing legal remedies for consumers

From your own experience, brainstorm some of the

Possible remedies for

Under the Consumer Guarantees Act, if a guarantee is not met,

US8555v5a Learner's Guide Licensed to Western Heights High School

LESSON 1: What is consumer law?

Try it for Answer the following questions about the Consumer

3. Which law has Product Safety Standards for certain products?

Licensed to Western Heights High School US8555v5a Learner's Guide

Consumer law - rights,

In this lesson you will look at important consumer law legislation,

US8555v5a Learner's Guide Licensed to Western Heights High School

LESSON 2: Consumer law - rights, responsibilities, and remedies

Consumer law can basically be split into three areas:

Rights The term “rights” means certain conditions

Licensed to Western Heights High School US8555v5a Learner's Guide

LESSON 2: Consumer law - rights, responsibilities, and remedies

Responsibilities “Responsibilities” refers to the duty of

Remedies Each law has a section that provides

It is necessary to be able to distinguish between a right,

1. A consumer has the to a product that is in working condition.

2. A fine is a possible for false advertising.

5. It is the of a consumer to have a product that is safe.

US8555v5a Learner's Guide Licensed to Western Heights High School

LESSON 2: Consumer law - rights, responsibilities, and remedies

The Consumer Guarantees

Licensed to Western Heights High School US8555v5a Learner's Guide

LESSON 2: Consumer law - rights, responsibilities, and remedies