What “faulty” can mean, plus when to provide a remedy in the form of a refund, repair, or replacement — and when not to.
If your products fail to meet any of these requirements, the customer can seek a remedy from you. Whether this is a refund, repair, or replacement depends on how bad the problem is, and whether a fault can be repaired.
Read more about Obligations under the Consumer Guarantees Act
When customers can’t claim a remedy
You do not have to give a refund, repair, or replacement if the customer:
- changes their mind
- causes the problem either by accident or on purpose
- doesn’t follow your advice about a product’s use or care, such as washing instructions
- goes against your advice, for example, they insist on cheaper materials for a roofing job
- goes to someone else for repairs before coming to you.
In certain situations, you may decide to fix the problem for your customer anyway under your business’s returns or complaints policies.
Fair returns and complaints(external link) — business.govt.nz
Remedies for minor problems
If the problem with a product is minor and can be fixed, you have three choices:
- Repair it free of charge.
- Replace it with an identical product at no extra cost.
- Give a full refund.
The customer must accept the remedy you choose. Think carefully before offering repairs. If these are likely to be expensive or labour intensive, perhaps it’s better to offer a replacement or full refund instead.
If you refuse, fail, or take too long to address the problem, the customer can:
- ask for their money back
- ask you for a replacement
- take it elsewhere to be fixed and claim repair costs back from you.
For repairs, how quickly these must be done depends on the type of product and how regularly the customer needs to use it. For example, most shoe repairers offer same-day repairs for shoes. If a heater breaks down during winter, it’s unreasonable to expect a customer to wait longer than a day.
Discuss with your customer when they’ll get the repaired product back. If being without it will be difficult for them, think about loaning a replacement in the meantime.
Remedies for serious problems
A problem or fault with a product is considered serious if:
- A reasonable customer who knows the nature and extent of the fault would not buy the product.
- For example, a customer is unlikely to buy a new washing machine if they know the motor will burn out after three months.
- The product is significantly different to its description, sample, or demonstration model, for example, a jersey described as 100% wool that’s 30% acrylic.
- The product is unfit for its normal purpose and can't easily be made fit for purpose within a reasonable time, for example, washable wallpaper that bubbles after being wiped clean.
- It’s unsafe, for example, a bicycle with faulty brakes.
If you sell vehicles or other expensive items, such as high-end computers, faults might be considered serious when:
- Repair costs are high compared with the price paid, such as repairs of $1,000 on a car bought for $5,000.
- There are several small faults, which on their own are minor but together make a big difference to its performance.
Customer chooses remedy
If the fault is serious, can’t be repaired or causes a safety risk, then the customer has three choices:
- Get a full refund.
- Get a replacement of similar type and value, if available, at no extra cost.
- Keep the faulty product but get compensation for the difference in value compared with one in good condition.
Even if you think you can repair a serious fault, the customer can still choose to get their money back instead.
If the customer chooses repairs, make sure they know it’s a serious fault before repair work begins. If you don’t make this clear, and the fault can’t be fixed, the courts have decided the customer can then reject the product. You’ll have to give them a refund or replacement — as well as having tried to repair it.
Refunds must be in cash or credited back to their credit card or store card account. You cannot offer a store credit or exchange note.
If you don’t think it’s a serious fault
Give your customer enough information about the nature of the fault so they can make an informed decision to either:
- continue asking for their choice of remedy
- accept your offer to repair, replace, or refund their money.
Disagreeing with customers
You may decide to reject a complaint if you and your customer cannot agree about whether it’s a serious fault — or if you find it’s not a valid complaint.
Make sure you investigate fully before rejecting any complaints. You or your customer may want to get an independent assessment of the faulty product to support your views.
If you can’t resolve the problem with your customer, they may make a claim against you at the Disputes Tribunal, District Court, the Motor Vehicles Disputes Tribunal, or another formal process to resolve their complaint.
Read more about Dealing with formal complaints
Remedies for damage or other loss
Sometimes a faulty product will cause damage or loss to your customer’s other belongings or property — known as consequential loss. If this happens, you need to compensate the customer for the damage.
For example, if a faulty dishwasher floods the kitchen, the business that sold the dishwasher must pay to fix any water damage to the flooring — and give a remedy for the faulty dishwasher.
You can ask for receipts or other evidence of extra costs before you reimburse your customer.
Examples of extra costs(external link) — business.govt.nz
If you sell products on credit
If you help arrange finance for a customer, you may be responsible for dealing with the finance company or paying off the loan if the product turns out to be faulty.
If you sell vehicles
If you give a refund for a faulty vehicle, it must be for the full purchase price — you can’t use depreciation as a reason to pay less.
If the customer traded in their old vehicle as part of the sale, you could offer the traded-in vehicle back to the customer, but only if it’s in the same condition — and hasn’t yet been sold to someone else. Otherwise, the customer can claim the original value of their trade-in and any cash they paid.