When it comes to trickery, there are a few magic words. Abracadabra springs to mind, but it doesn’t do a lot except distract us from what is really happening. Which is what an Auckland used-car dealer achieved when he tried to avoid giving consumers remedies that are owed under the Consumer Guarantees Act (CGA). He came very unstuck when a Court held that 'as is where is' and 'sale by tender' are not magic words which entitle traders to tell consumers to fix their own problems.
The CGA guarantees apply to supplies of consumer goods and services by traders to end-user consumers. Traders are often surprised to find that consumers’ rights to remedies under the CGA are truly inalienable. Suppliers cannot avoid giving remedies to consumers — CGA rights can be excluded only in writing, in a business-to-business transaction.
So selling something 'as is where is' does not magically exclude CGA liability. Traders do have to remedy defects in the goods. If a product has specific defects that a trader is not prepared to remedy, then before selling the item, the trader must clearly tell consumers about those defects.
There are exceptions — the CGA does not apply to sales of goods (but not services) by auction or competitive tender. Auction sales are closed at the hammer fall of an auctioneer, who must be licensed. A sale by competitive tender usually involves the seller making an invitation to tender, then waiting until tenders are in before choosing which tender to accept. The tender process doesn’t need to be particularly formal (think Trade Me), but it does usually have rules.
Our intrepid car dealer just gave his customers a form headed “Tender” to sign. He was quite open: the form said that the cars were “as is, where is”, and that customers would have no rights under either the CGA or the FTA! Brave man. Foolhardy though. When something did go wrong with the cars the trader relied on these ‘tender’ forms and refused to give CGA remedies. Some consumer customers complained to the Commerce Commission, which took the car dealer to court — more accurately, it prosecuted the director of the dealership.
The judge pointed out (possibly with a sigh) that just calling something an 'auction' or a 'tender' isn’t enough. It has to really be an auction or a tender. And it’s a long-established law that where the CGA applies, 'as is, where is' misleads consumers as to their rights. Whenever you hear that ‘m’ word, you know you have an FTA breach.
The dealer was found guilty on 32 charges under the Fair Trading Act for misleading consumers about their rights under the CGA. The director was personally ordered to pay fines of $48,000 and costs of $4,160 — being a director of the company which carried out the offending didn’t save him from being personally liable.
Saying 'as is where is' to consumers who buy consumer products misleads them because they might think that the entire CGA has been lawfully excluded. If your place of business happens to have a big old sign up saying 'as is where is' (or the services version: 'all care no responsibility') take it down. 'No refunds' has a similar misleading effect (though you can say 'no refunds if you change your mind').
If you want to reduce your liability to consumers, you can only do it by accurately telling them about all the actual defects of the item you are selling them, and by telling them how to use the products properly. As for hidden defects — well, you’re stuck with giving remedies to consumers for those. If you want to sell to consumers, you just have to live with it.
This article is intended for general information, and should not be relied on as specific legal advice. You should consult a lawyer for advice relating to your own specific legal problems. Rae Nield can be contacted at email@example.com.