Mar 2008

Repair and Spare Parts Obligations for manufacturers

With the current speed of technological advancements, and some items of technology becoming as much accessory as they are necessary, the rate at which people upgrade is increasing. What may have been the latest and greatest mobile phone, MP3 player or other item two or three years ago may not even be manufactured anymore, having been superseded by an even later and greater model. But technology items are not cheap and consumers expect products to be able to be repaired if necessary. Manufacturers are required under the Consumer Guarantees Act 1993 (CGA) to provide spare parts and repair facilities for their products for an appropriate period of time after those products are supplied.

What does the CGA do?

The CGA imposes minimum guarantees for the supply of goods and services ordinarily acquired for personal, domestic or household use or consumption. 

Computer software is specifically included within the definition of "goods" under the CGA.  Accordingly, software manufacturers should be aware of their obligations to ensure that they are able to provide "spare parts" and "repair facilities" for software.  In practice, this is likely to mean that software manufacturers must be able to offer software 'patches' and have the ability to repair software bugs/defects for a reasonable period.

Each guarantee under the CGA gives consumers statutory rights and remedies against suppliers and manufacturers of goods and services.  Suppliers and manufacturers are prohibited from limiting or excluding the rights and remedies set out in the CGA unless there are special circumstances, such as the goods or services are being acquired for business purposes or if the limitation relates to the provision of spare parts and repair facilities for the goods supplied.

Amongst the guarantees that the CGA provides is a guarantee that manufacturers must take reasonable action to ensure that repair facilities and spare parts are available for a reasonable period after the goods are first supplied to the end user in New Zealand (regardless of when the manufacturer first started manufacturing those products).

Who is the Manufacturer?

A "manufacturer" has a wide definition under the CGA – it includes not only those who actually produce the goods but includes:

• where goods are manufactured overseas, and that foreign manufacturer does not have a presence in New Zealand, the persons who distribute or import those goods;
• any person who attaches their mark or brand onto the goods (for example, a reseller); and
• any person who represents it is the manufacturer of the goods.

This means that a distributor with no direct involvement in the production of goods, may have obligation to ensure the availability of spare parts and repair facilities for goods manufactured overseas which they distribute (regardless of the fact they are not the actual producer of the goods).

A Reasonable Period of Availability of Repair Facilities and Spare Parts

What will be considered a "reasonable period" after supply is not clear-cut and will likely depend on a range of factors such as the nature of the goods supplied, cost and ordinary useful life of the goods.

There is no case law in New Zealand to offer specific guidance in determining what is a reasonable period of time for which repair facilities and spare parts must be offered to consumers. In Australia, in the case of Panasonic Australia Pty Limited v Burstyner (1993) ATPR 41–083 the court indicated that that in determining what is "reasonable" under the equivalent consumer protection legislation, will be considered from a manufacturer's point of view rather than a consumer's.

Any express guarantees that a manufacturer gives as to availability of spare parts and repair facilities will be additional to any reasonable guarantee period implied by the CGA.

Exceptions to the Guarantee

There are exceptions to the obligations to ensure the availability of spare parts and repair facilities for a reasonable period of time.  Manufacturers need not comply with the guarantee, if reasonable action is taken to notify a consumer, at or before the time the goods are supplied, that the manufacturer does not undertake that repair facilities and spare parts will be available, or that they will be available for a specified period only.

A manufacturer should carefully consider how it expresses any exclusion of the repair and spare parts guarantee, or any guarantee required under the CGA, as any false or misleading representation concerning the exclusion of any guarantee, right or remedy could breach the Fair Trading Act 1993. 

Consequences of Non-Compliance

A manufacturer's failure to comply with its obligations to provide spare parts or repair facilities may result in a claim by a consumer for damages based on:

• the reduction in the value of the goods below their purchase price due to the lack of such facilities; and/or
• any reasonably foreseeable loss or damage suffered by the consumer as a result of such facilities not being provided.

Where a manufacturer has given an express guarantee to remedy a failure to meet a guarantee by repairing or replacing goods, a claim for damages by a consumer for a reduction in value for goods can not be claimed unless the manufacturer has first been given an opportunity to remedy the failure.  This does not apply in relation to claims for reasonably foreseeable loss. 

Practical Steps for a Manufacturer

In summary, a manufacturer should consider the following points to assist them in managing their potential exposure to liability under the CGA:

• Contracting Out:  Consider whether or not it is appropriate to contract out of the CGA (eg when goods supplied are being used for a business purpose) and whether it is appropriate to require their distributors to do the same.
  
• Repair and Spare Part Limitations: If repair facilities and spare parts will not be available, or only available for a limited period of time, ensure that this is made clear and up front to a consumer prior to, or at the time of supply of a product.  
  
• Express Guarantees:  Consider offering an express guarantee to repair or replace products not complying with the CGA to ensure that consumers do not make claims for damages in relation to a reduction in value of the products, until they have first allowed the manufacturer an opportunity remedy the fault.