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What Happens When The Warranty Runs Out?

When you think of a warranty, you think of something a retailer offers his customers when they buy a new car or washing machine.

  • 6 April 2010
  • Author: Geoff Hardy
  • Number of views: 2213
  • 0 Comments
What Happens When The Warranty Runs Out?

When you think of a warranty, you think of something a retailer offers his customers when they buy a new car or washing machine. That is, a right to take the thing back if it breaks down, no questions asked, and have it repaired or get a new one. This right usually only lasts for a specified period of say 2, 3 or 5 years. The car or washing machine usually breaks down the week after that period expires. But be that as it may. 

High-volume, low-margin retailers usually do offer a “no questions asked” warranty, provided the customer returns the goods promptly. They expect a certain percentage of their products to break down. They know that a proportion of them will be returned - both by honest and by dishonest customers - but they also know that a lot of customers will be too apathetic or too busy to do anything about it. 

On the other hand, low-volume, high-margin retailers such as the luxury car dealers tend to offer warranties that are subject to a lot more conditions, and for good reason. The customer must not have abused the vehicle. They must have maintained it diligently. They must have had it serviced regularly, and only by authorised service outlets. Any replacement parts or additional fittings must be from the same manufacturer. And there are limitations on the types of work and materials the retailer will supply for free. 

Sometimes retailers make more out of warranty work than they lose. And they may also be able to pass on to their supplier the cost of the free work and materials that they do provide. 

It is a common misconception that when a warranty expires, all the customer’s rights evaporate. Or, when there is no warranty, that the customer has no rights. Everyone just assumes that it’s “buyer beware” when that happens. 

But this is wrong. Warranties are just additional or “bonus” rights. The customer’s real rights are given to them by the law. And those rights can be enforced for whatever period is reasonable – often up to the expiry of the relevant limitation period, which is usually six years. 

Every time a customer acquires a product or service from a supplier, they make a contract with the supplier, whether it is written or unwritten. Experienced suppliers will always ensure the contract is written, and this is known as the “terms of trade”. 

These may be displayed at the supplier’s premises, but more commonly they are in the fine print on the back of the supplier’s confirmation of order, or invoice. If the customer is given these before they make their purchase, then they are the terms of the contract. 

No-one ever reads them, but the law just assumes they have. So suppliers have a unique opportunity to protect themselves, simply by getting their lawyer to write the terms that suit them. 

Knowing that consumers rarely read the fine print, and have no chance of renegotiating the terms even if they did, the law steps in to help. It does this by giving the consumer certain basic rights that are compulsory, regardless of what the contract says. 

These compulsory rights are set out in a number of Acts of Parliament, the best-known of which is the Consumer Guarantees Act 1993. A supplier can’t even pretend to the consumer that these rights don’t exist. If he did, that would be a breach of the Fair Trading Act 1986, and there are serious penalties for that. 

Small business people, who are often just as vulnerable as consumers, don’t get the benefit of these protections, which is one of the great injustices of modern day life. They have to rely on the Sale of Goods Act 1908 and the Contractual Remedies Act 1979. 

But there are many other sectors of society who do qualify for special protection. Employees have all the guaranteed rights under the Employment Relations Act 2000. Wives, husbands and other domestic partners are protected by the Property (Relationships) Act 1976. Minority shareholders are covered by the Companies Act 1993. Consumer borrowers can rely on the Credit Contracts and Consumer Finance Act 2003. Landowners who want a house built, or buyers of household units from property developers, can turn to the Building Act 2004. And so the list goes on. 

It’s one thing to have rights, of course, but it’s another thing to enforce them. However, the law caters for that need as well. There are plenty of “quick and dirty justice” options available for those, like most of us, who can’t afford to go to the Courts. 

Disputes Tribunals can hear claims involving anything up to $15,000. There are no lawyers involved, it is very informal, and it is very hard to appeal from their decisions. 

Then there are all the specialist Tribunals that are available to resolve disputes, such as the Copyright Tribunal, Employment Relations Authority, Human Rights Review Tribunal, Motor Vehicle Disputes Tribunal, Retirement Villages Disputes Panel, Tenancy Tribunal, and the Weathertight Homes Tribunal. 

Even the District Court has been made more user-friendly recently, so you can pretty much represent yourself until things get too complicated. 

So remember, it’s not over when the warranty runs out. The customer will have plenty of rights left, if the product hasn’t performed as it should or the service isn’t up to scratch. 

Warranties can, in fact, be a bit of an illusion. Often they look like they are promising a lot, but the devil is in the detail. The supplier may take the opportunity to build in so many qualifications and limitations that his liability is actually far less than what it would have been under the general law. 

It is for this reason that the law steps in and creates certain minimum rights that can’t be contracted out of. Whether you are a retailer or a customer, it pays to know about them.

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Geoff Hardy

Geoff HardyGeoff Hardy

Geoff’s academic qualifications and his background as a former partner in New Zealand national law firm Simpson Grierson, means that we can confidently handle any commercial law matter, no matter how complex.

This newsletter is not intended to be relied upon as legal advice.

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