What “faulty” means for services, plus what you must do for customers if the work you do is substandard.

Requirements for your services

The Consumer Guarantees Act (CGA) says services must meet these requirements — also known as guarantees:

  • Done with reasonable care and skill.
  • Fit for a particular purpose.
  • Cost a reasonable price if the price wasn’t set beforehand.
  • Completed in a reasonable time if the timeframe wasn’t set beforehand.

If your services fail to meet any of these four guarantees, your customers can seek a remedy from you.

The remedy depends on how bad the problem is. You may also be responsible for paying for any damage or loss caused by the problem.

You and your customer might have different opinions on how serious it is and whether it can be fixed. Do what you can to reach an agreement — if you can’t resolve it, it might go the Disputes Tribunal or District Court.


Read more about Obligations under the Consumer Guarantees Act


Remedies for minor problems

If the problem or fault with the service is minor and can be fixed, you must:

  • fix the problem or do extra work at no extra cost
  • act within a reasonable time.

How fast you must act depends on the nature of the problem and what’s involved in fixing it. Sometimes a reasonable time will mean within a few hours, eg a window won’t open after a house is painted. In other cases, it might be a few days, eg a new roof is leaking.

The customer must give you the chance to fix minor problems first. If they complain after getting a minor fault fixed elsewhere, you do not have to pay the repair bill. Nor do you have to give a refund or replacement. By not coming to you first, the customer has lost their right to a remedy.

If you refuse or delay

Your customer has two choices:

  1. Employ someone else to put it right and claim the cost from you.
  2. Cancel the contract and refuse to pay, or pay less than the agreed price. If they have already paid, they can claim all or some of their money back.

If your customer gets someone else to fix it because you refused or delayed:

  • You must pay for the repairs.
  • Repair costs must be reasonable — within the normal range of quotes for this work.&
  • The customer doesn’t have to show you quotes before getting it fixed.

If you think the repair bill is too high, you must show why you think it’s unreasonable.

A customer can only ask you to pay for repairs done by someone else if you have refused or delayed doing it yourself. If you are too busy to put it right, arrange for someone else to do it.

Remedies for serious problems

A problem or fault with a service is considered serious if:

  • The customer who knew what would go wrong would not have had the job done.
    • For example, getting a jacket drycleaned, but the dye runs and the jacket is streaked.
  • The work done is unfit for its normal purpose and can't easily be put right, or it can't be put right within a reasonable time.
    • For example, bald patches left on a carpet after it’s been professionally cleaned.
  • A customer tells you of a specific purpose or result they want. The work does not achieve this, and can't easily or within a reasonable time be made to do so.
    • For example, a large family hire a station wagon for a weekend trip to visit relatives. It breaks down and repairs will take two days. But the hire company doesn't have a replacement vehicle that’s large enough.
  • The work done produces an unsafe result.
    • For example, an electrician wires a wall socket incorrectly and the customer gets an electric shock.

Customer chooses remedy

If it’s a serious problem, or it can't be put right, your customer has two choices:

  1. Claim compensation because the work done is not worth the price paid for it.

For example, a builder lines a room with plasterboard but makes a bad job of the joins. The plasterer tells the customer they will have to charge more as the job will take longer because of the bad joins. The customer claims compensation from the builder to cover the extra plastering cost.

  1. Cancel the contract and refuse to pay for the work, or pay less than the agreed price. If they have already paid, they can claim all or some of their money back.

Cancelling a contract

This means the agreement to do the work no longer applies. The contract doesn’t need be in writing.

A customer has the right to cancel a contract in three situations:

  1. There is a serious problem with the service provided.
  2. The problem can’t be repaired.
  3. They asked you to fix a problem, but you have not done so within reasonable time.

They do not have to give you the chance to put it right. And they can either:

  • ask for some or all of their money back
  • refuse to pay all or part of the bill.

The customer must tell you they are cancelling the contract, either in writing or by telling you. If you can’t be easily contacted, they can use any reasonable means to notify you. For contracts that require written notice of cancellation, this can be a letter or email.

Sometimes a customer will cancel a contract if some of the work is substandard. You will need to agree together how much they will pay for the work done properly.

Example:

Phil gets a garage to do a wheel balance and alignment and fit a new exhaust to his car. The exhaust works well but Phil is unhappy with the wheel balance and alignment. The car is veering to the left. Phil demands a full refund.

Phil clearly has a case for not paying for the balancing and alignment work. But he must pay for the parts and the labour involved in fitting the exhaust.

After a contract is cancelled

If the job isn't finished when a customer cancels the contract, you do not have to complete the work.

If you supplied materials as part of the job, the customer has the right to keep these. They can also refuse to pay, or pay less than the agreed price. Together you will have to agree about payment for materials.

Example:

Kimi gets her roof replaced and the roofer does a bad job. The roof leaks and the work will have to be redone. Kimi cancels the contract and refuses to pay for the labour.

The roofing material itself is not faulty, so Kimi should pay for it. If she refuses, the roofer can go to the Disputes Tribunal or District Court to claim the cost of the materials. If she has already paid, and the roofer refused to refund any money, Kimi can go to the Disputes Tribunal or District Court to claim back the labour costs.

Ownership of materials

In written contracts you can add a Romalpa clause, which lets you keep ownership of parts or materials until the customer pays in full for work done. If they don't pay, you can repossess the parts or materials.

This clause protects you when there is no problem with the work done, but the customer does not pay.

But if the customer cancels the contract due to a problem with the work done, you can’t use this clause to repossess parts or materials until you’ve resolved it with your customer.

The CGA says if you use a Romalpa clause, you must:

  • Tell the customer parts or materials can be repossessed – in a way that’s clear to a reasonable person.
  • Get it in writing that they understand this.
  • Give the customer a copy of the repossession clause.

For more tips on creating good contracts and sales agreements, see the business.govt.nz website.

What to put in sales agreements — business.govt.nz


Remedies for damage or loss

Sometimes the work you do causes damage to a customer’s belongings or property, known as consequential loss.

If this happens, you must:

Pay for any damage or other losses you caused.

  • For example, costs to clean up paint spilled on a driveway or repair scratches on tiles caused by moving an appliance. Pay any extra costs directly related to the problem you caused.
  • For example, costs of panel-beating and temporary transport if a builder drops roofing materials on a customer’s car.

But if damage or loss couldn’t have been predicted, you only have limited responsibility.

  • For example, if a washing machine repairer causes a flood in the laundry, they must pay for damage to that room’s flooring. But if the water runs outside and damages a Persian rug left out to air, this is unforeseeable loss — the repairer does not have to pay for the rug.

If you sell services 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 there’s a problem with the work done.

Common questions answered

Find out how to deal with common situations that can arise when you're providing services to customers.

When you supply materials as part of the job and charge the customer for them, you will be responsible for any faults in those materials.

If the problem is serious or can't be fixed, the customer will have the choice of a refund, replacement or compensation for the faulty products.

For example, when paving a courtyard, a bricklayer buys paving and charges the customer. The paving stones vary in colour and the customer wants them replaced. If the bricklayer refuses to repair or replace the paving, or doesn't do it in a reasonable time, the customer can claim a refund.

The customer can claim a remedy from their supplier — not from those who installed the faulty materials.

For example, a customer buys carpet and a labourer lays it, or a mechanic fits a part the customer bought at a wrecker's yard. If these turn out to be faulty, the customer must still pay the labourer or mechanic for the work done. The customer can then claim these costs from their supplier.

You are not responsible if it’s caused by either:

  • someone who doesn’t work for you
  • the weather, an earthquake or other event beyond human control.

For example, a painter puts the top coat of paint on one side of a house when the neighbour lights a rubbish fire. Ash blows over and sticks to the paint. The painter is not responsible for fixing the problem.

Sometimes the customer causes the problem or expects too much of the work done.

For example, a mechanic tunes Sarah's car. A week later, she complains it’s not accelerating fast enough. The mechanic goes for a drive with Sarah and discovers she drives at 120kph and expects to pass other vehicles at 140kph. The car is already over-revving at 120 kph. In this case, the tune-up is clearly fit for purpose and Sarah can’t claim a remedy.

Customers can complain up to six years after the problem appears.

For example, it may take three years for a problem with timber cladding to become noticeable. The customer will be able to claim from the builder that supplied the cladding, or the supplier if they bought it themselves.

In some cases, eg car repairs, it may be difficult to decide if a problem is the result of poor service provided earlier or if it’s normal wear and tear. If you and the customer cannot agree on the cause, you may need to go to the Disputes Tribunal for a decision.

Both the Act and the Code offer protection to customers who are not happy with the durability of materials used in a new home. When both the Act and the Code apply, the customer can claim under the one that offers the most protection.