Extended Warranties and the Consumer Guarantees Act: Are you throwing your money away?

Published: Mon, Dec 23rd, 2013

Extended Warranties and the Consumer Guarantees Act: Are you throwing your money away?

You are buying a shiny new top-of-the-range television with a two year warranty. The salesperson asks if you would like an extended five year warranty for only $249.95 extra. Sounds sensible, right?

Guarantees implied by law

Many consumers do not realise the Consumer Guarantees Act 1993 ('the Act') already provides most of the extra protection that they have been offered under an extended warranty. If you purchase consumer goods or services for personal, domestic or household use the Act imposes several warranties or guarantees on the vendor. In particular, the vendor guarantees that the goods sold match their description, are fit for their purpose, are of acceptable quality, and “acceptable quality” means free from minor defects and durable. Similarly, any services you purchase must be fit for their purpose, be completed in a reasonable time, be provided with reasonable care and skill and must be a reasonable price (if there is no mechanism for the price being established, such as a contract).

Consider your new television. Would the ordinary, reasonable consumer consider that a shiny new top-of-the-range television would be free from defects or suitably durable to last five years? Ten years? If so, it's possible that the additional warranty you have been offered is not as valuable as it appears.

Breach of Guarantee

As an example, let's say you bought a television and chose not to buy an extended warranty. Three years later it stops working, and the vendor wants to charge you to replace the failed LCD controller because the television is out of the warranty period. What now?

You may need to demonstrate that it is reasonable for you to expect your television to last more than three years (and that the failure was not caused by you). It should then follow that the television could not reasonably be considered durable enough – a breach of a guarantee implied by the Act. You should then be entitled to require the vendor to remedy the failure.

If it can be fixed the vendor must repair or replace the product within a reasonable time, or provide a full refund. If a remedy is not timely, if the failure is of a substantial nature or if the product is not fit for its stated purpose (or not fit for the purpose you specifically discussed with the salesperson) then you may be entitled to reject the product and require a full refund, replacement, or obtain damages in compensation from the vendor.

Disputes Tribunal

If a vendor does not agree with you, you may need to present your case at the Disputes Tribunal to enforce your rights under the Act.

While each case is decided on its particular facts, two examples are noted in particular: in 2009 a fridge-freezer was ruled not to be of acceptable quality when its compressor pump failed after seven years - a full refund was given. In contrast, in 2010 a four year old motor scooter with a failed base gasket was ruled to be of acceptable quality because the damage probably occurred because the annual services were not completed in accordance with the manufacturer's specifications - screws on the base gasket should have been checked and tightened.

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