Not Fit for Purpose in New Zealand: CGA Obligations

If you sell goods or services to customers in New Zealand, you’ve probably had a customer say something like: “This isn’t what I bought it for” or “It’s not fit for purpose.”

That complaint can quickly turn into a legal issue under the Consumer Guarantees Act 1993 (CGA). And while the CGA is designed to protect consumers, it also sets a clear framework for you as a business owner, so you know what you must do (and what you don’t have to do).

In this guide, we’ll break down what “not fit for purpose” means under the CGA, what your obligations are, how it interacts with the Fair Trading Act, and the practical steps you can take to reduce disputes and handle complaints confidently.

What Does “Not Fit For Purpose” Mean Under The Consumer Guarantees Act?

“Not fit for purpose” is one of the most common ways customers describe a problem with a product or service. Under the CGA, it links to specific consumer guarantees that apply automatically when you supply goods or services to a consumer.

In plain terms, a product (or service) may be “not fit for purpose” where it:

doesn’t do what products of that type are normally expected to do; and/or
doesn’t do what the customer told you they needed it to do (and they relied on your skill or judgement); and/or
doesn’t achieve the result you promised or marketed it would achieve.

This is why “not fit for purpose” comes up so often in CGA disputes - customers are usually pointing to one of these automatic guarantees, even if they’re not using legal language.

Goods Vs Services: “Fit For Purpose” Comes Up In Both

It’s not just physical products. The CGA also applies to services, and a “fit for purpose” issue can arise where:

a service wasn’t carried out with reasonable care and skill (for example, poor workmanship);
the service wasn’t fit for the particular purpose you were told about; or
the service wasn’t completed within a reasonable time (if no timeframe was agreed).

When A Customer’s “Purpose” Matters Most

A key part of “fit for purpose” is the customer’s stated purpose. If they tell you what they need the goods or services for, and they rely on you to supply something suitable, you can be responsible if it can’t do that job.

For example:

A customer says they need a laptop for video editing and you recommend one that cannot handle basic editing software.
A customer tells you they need a waterproof jacket for hiking and you sell them one that soaks through in light rain.
A customer tells a contractor they need a deck suitable for a spa pool, and the deck is not built to handle that load.

None of these scenarios require the product to be “broken” in the traditional sense. The core issue is that it doesn’t do what it was bought to do.

When Does The CGA Apply To Your Business (And When Can It Be Contracted Out)?

The CGA generally applies when you supply goods or services to a consumer in New Zealand. Importantly, “consumer” isn’t limited to people buying purely in a personal capacity. A person (including a business) can still be a consumer depending on what’s being supplied and why.

Broadly, the CGA can apply where the goods or services are of a kind ordinarily acquired for personal, domestic, or household use or consumption. But it generally won’t apply where the goods or services are acquired for:

resupplying them in trade;
consuming them in the course of a process of production or manufacture in trade; or
repairing or treating other goods or fixtures in trade.

So if you’re a small business selling to the public - whether online, in-store, or through bookings - you should usually assume the CGA applies unless you are clearly dealing B2B and have properly contracted out.

Can You Contract Out Of The CGA?

Sometimes, yes - but only in a business-to-business context, and only if the contracting out is done correctly.

In practice, contracting out usually means:

you and the other business agree in writing that the CGA won’t apply; and
it’s fair and reasonable in the circumstances that you contracted out (this often depends on things like bargaining power and how the deal was negotiated).

If you’re selling to everyday customers, “no refunds” signage or website wording won’t override the CGA.

And if you’re selling to businesses but haven’t set up the paperwork properly, you may still find the CGA applies.

This is where having properly drafted Business Terms can make a big difference, especially if you sell both to consumers and to other businesses.

What Are Your Obligations If Goods Or Services Are Not Fit For Purpose?

If a customer raises a “not fit for purpose” issue, your obligations depend on:

which CGA guarantee applies (goods or services);
whether the problem can be remedied and (if it can’t) whether it’s “substantial”; and
how quickly you can provide a remedy.

The CGA doesn’t automatically mean “instant refund” in every scenario. But it does mean you must provide an appropriate remedy.

Goods: Repair, Replacement, Or Refund

If goods are not fit for purpose, the consumer can generally require you to remedy the issue. Where the failure can be remedied and isn’t substantial, you can usually choose how to fix it (for example, by repairing, replacing, or refunding).

If the failure is substantial (for example, it can’t be fixed easily, it’s unsafe, or it’s significantly different from what was promised), the consumer may be able to:

reject the goods and choose a refund or replacement; or
keep the goods and seek compensation for the drop in value.

Also, if the problem isn’t remedied within a reasonable time (or you refuse to remedy it), the consumer may be able to reject the goods or have the issue fixed elsewhere and recover reasonable costs (depending on the circumstances).

Services: Fix The Work Or Refund Part Of The Cost

If the issue relates to a service (for example, poor quality work), remedies can include requiring the supplier to:

remedy the failure within a reasonable time; or
if it can’t be remedied or isn’t done within a reasonable time, the consumer can get it done elsewhere and claim the reasonable cost from you; and/or
cancel the contract for a substantial failure.

If you provide services, getting the scope crystal clear upfront is one of the best ways to prevent “fit for purpose” disputes. A tailored Service Agreement helps set expectations around deliverables, limitations, timelines, and what’s included (and what isn’t).

Who Is Responsible: Retailer, Manufacturer, Or Importer?

Customers will usually come to you first - the retailer or service provider they paid.

Even if the fault is caused by a manufacturer, you may still have obligations to the consumer, and then you may need to pursue the manufacturer or wholesaler separately.

This is why your supplier contracts and quality control processes matter. It’s also why you should keep clear records of batch numbers, invoices, and communications when a product complaint comes in.

How “Not Fit For Purpose” Complaints Interact With The Fair Trading Act

In most real-life complaints, the CGA isn’t the only law in play.

The Fair Trading Act 1986 (FTA) focuses on how you advertise, describe, and sell your goods or services. Even if your product technically works, you can still run into problems if the customer says they were misled about what it would do.

Common FTA risk areas include:

overstating performance claims (for example, “guaranteed results” or “works for everyone”);
unclear limitations (for example, important exclusions hidden in fine print);
before-and-after marketing that implies typical results when they’re not; and
bundling or subscription pricing that isn’t explained transparently.

From a practical standpoint, “not fit for purpose” disputes often escalate because the customer believes your marketing promised something that wasn’t delivered.

If you sell online or run a platform, this is also a good time to check your customer-facing terms. For many businesses, having tailored E-Commerce Terms And Conditions helps reduce ambiguity about delivery, returns processes, and how complaints are handled (without trying to contract out of CGA obligations to consumers).

What Should Your Business Do When A Customer Says “Not Fit For Purpose”?

When you receive a complaint, it’s easy to go straight into defensive mode - especially if you think the customer is being unreasonable.

But with CGA complaints, your goal is to:

work out whether the CGA applies;
identify the actual issue and evidence; and
offer the correct remedy promptly (to stop the dispute escalating).

Step 1: Confirm Whether The CGA Applies

Start with a few simple questions:

Was the buyer purchasing as a consumer under the CGA (including considering what the goods/services are and whether they were acquired for resupply/production/repair in trade)?
Was the item or service supplied in trade (i.e. through your business)?
Is there any valid contracting out clause (B2B only, properly agreed)?

If it looks like a consumer supply, assume CGA obligations apply.

Step 2: Ask For Specifics (And Keep The Conversation Calm)

“Not fit for purpose” is often a conclusion, not a description. Ask the customer:

What purpose did they buy it for?
What did they rely on (your advice, product description, advertising, staff recommendation)?
What exactly is happening in practice?
When did the issue start?
Do they have photos, videos, or screenshots?

Keep all communications in writing where possible (email is usually best), and keep notes of phone calls.

Step 3: Work Out Whether The Issue Is “Minor” Or “Substantial”

You don’t need to argue legal definitions with the customer. Instead, focus on practical indicators:

Can it be fixed quickly and effectively? If yes, it’s more likely to be a non-substantial failure.
Is it unsafe? Safety issues are often substantial.
Is it significantly different from what was described? That leans substantial.
Would the customer have bought it if they knew about the issue? If not, that suggests substantial failure.

If you’re unsure, it’s worth getting legal advice early. The cost of a quick review is often far less than the cost of a dispute that spirals into formal complaints or reputational harm.

Step 4: Offer A Remedy Promptly (And Follow Through)

Where businesses get into trouble is not necessarily the original fault - it’s the delay, mixed messages, or refusal to engage.

Set internal timeframes, for example:

acknowledge complaints within 1 business day;
request any evidence within 2 business days;
provide a proposed remedy within a defined timeframe (depending on the goods/services and availability of repairs/replacements).

Even if you think the customer caused the issue (misuse, incorrect installation, etc.), you should still investigate before declining.

Step 5: Use Your Documentation To Support Your Process

Solid documentation won’t remove CGA obligations, but it can:

help show what was agreed (especially for services and custom jobs);
clarify what was included/excluded;
support your position on “purpose” and reasonable expectations; and
make your complaints process more consistent (which reduces risk).

If you collect customer details as part of handling complaints (names, contact details, photos, potentially sensitive information), make sure your Privacy Policy and internal handling process under the Privacy Act 2020 are up to scratch.

How Can You Reduce “Not Fit For Purpose” Risk From Day One?

You can’t prevent every complaint. But you can absolutely reduce the number of “not fit for purpose” disputes, and make them easier to resolve when they happen.

Be Careful With Product Descriptions And Sales Claims

Check your website listings, packaging, social media captions, and sales scripts. Ask yourself:

Are we implying a result that won’t always happen?
Are we clear about limitations and compatibility?
Do we oversimplify technical requirements?

This is especially important for industries like health/wellness, tech, building supplies, and anything performance-based.

Train Staff On The “Purpose” Question

A simple change that helps a lot: train staff to ask customers what they need the product for (and to document it for higher-value sales).

That way, you reduce mismatched expectations and can better assess whether the item is suitable before the sale is made.

Use Clear Contracts For Services And B2B Deals

If you provide services, clearly defining the scope is one of the best protections you can have. For ongoing service relationships, a properly drafted Master Services Agreement can help you keep projects consistent while tailoring each job through statements of work.

If you sell to other businesses (wholesale, trade supply, commercial services), contracting out of the CGA may be appropriate in some cases - but it needs to be done correctly and fairly. That’s where your terms and contract drafting really matter.

Have A Practical Returns And Complaints Process

From a customer experience perspective, a clear process reduces frustration. From a legal perspective, it helps you apply consistent remedies and reduces the risk of staff promising the wrong thing.

Consider documenting:

how customers can lodge a complaint;
what information you need to assess it;
typical timeframes;
how you decide repair vs replacement vs refund; and
who approves remedies for higher-value claims.

Don’t Rely On “No Refund” Signs

This one’s worth stating clearly: “no refunds” signs can create risk.

They may mislead consumers about their CGA rights, and that can trigger issues under the Fair Trading Act. If you want to manage change-of-mind returns, you can do that - you just need to clearly distinguish between:

your voluntary returns policy (for change of mind), and
the customer’s legal rights under the CGA (for faults and “not fit for purpose” issues).

Key Takeaways

The phrase “not fit for purpose” usually links to automatic rights under the Consumer Guarantees Act 1993, and it can apply to both goods and services.
A product can be “not fit for purpose” even if it isn’t broken, especially where a customer relied on your advice or your marketing created clear expectations.
Your remedy obligations depend on whether the failure can be remedied, whether it’s substantial, and whether it’s fixed within a reasonable time, and may include repair, replacement, refund, re-supplying services, or compensation.
“No refunds” wording won’t override CGA rights for consumer purchases, and it may create Fair Trading Act risk if it misleads customers.
Clear customer communications, well-structured terms, and properly drafted service agreements can reduce disputes and help you manage complaints consistently.
If you sell B2B, contracting out of the CGA may be possible in some circumstances, but it needs to be done correctly and fairly.

If you’d like help reviewing your customer terms, setting up a clear complaints process, or managing a “not fit for purpose” complaint under the Consumer Guarantees Act, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.

Not Fit For Purpose In New Zealand: CGA Obligations For Businesses