Breaching the Consumer Guarantee Laws proves costly

Service suppliers are subject to the Consumer Guarantees Act “CGA” when supplying services to customers for personal or household use.

Breaching the CGA can prove costly.   In a recent case an experienced tradesperson breached the guarantee as to fitness for a particular purpose.  As a result he not only lost out on payment for the services provided, but was also liable to pay $5,000.00 for damage and loss that occurred as a result.

As a supplier of services you are subject to four guarantees.  These guarantees are:

• Work being carried out with reasonable skill and care
• Work being fit for a particular purpose that you have been made aware of by the customer
• Work being completed in a reasonable timeframe (subject to an agreed completion date) 
• Work being charged at a reasonable price (subject to an agreed price)

The guarantees as to skill and care, timeframe and price, are all measured by a standard of reasonableness, which relates to your profession and standards within that profession.  What would be regarded as unreasonable by your contemporaries?

The guarantee that work must be fit for a particular purpose relates to a particular purpose the customer has informed you of. 

If you are unsure whether you will be able to achieve the intended purpose or result as requested by the customer, you must advise them of this in advance.  It would be wise to do this in writing to avoid later disputes.

Often customers will take the cheaper option, which can compromise quality.  In these situations you should get the customer’s agreement in writing that they have chosen the cheaper option and set out the risks associated with their choice.  Your work will remain subject to the guarantee, but, the standard will be to the level you advised the client could be achieved.

What happens when there is a problem with your work and all or one of the guarantees has not been met?  The customer will have certain rights and remedies against you.  The outcome will depend on whether the problems can be fixed or not and what damage and loss has been caused by the problem.

If the problem with your work can be fixed, the customer must give you an opportunity to fix the problem within a reasonable timeframe.  You must not charge the customer for rectifying the problem. 

If you fail to do so, the customer may employ someone else to rectify the problem and claim the cost incurred from you, or alternatively, cancel the contract and refuse to pay for the work or pay less than the agreed price.

Where there is a problem with your work that is serious or cannot be fixed, the customer can cancel the contract and refuse to pay or pay less than the price that was agreed in advance.  Alternatively the customer can claim compensation due to the work not being worth the amount paid or agreed to be paid.

Where a problem with your work has caused the customer to suffer a loss or has damaged their property, you will be liable to pay for that damage and any loss incurred that is foreseeable.

Where you supply services to a business that is of a personal or household nature, you can avoid liability under the CGA by contracting out, by a written agreement, outlining how your work will not be subject to the CGA.

If you find yourself in a dispute with a customer who is unhappy with the services you have provided, you should seek early legal advice regarding your rights and obligations.

Alan Knowsley
Partner
Wellington