Contracts & Consumer Legislation

The International Travel College of New Zealand 1
Legislation and Ethics in the Travel and Tourism Sector
Unit #8 – Learning Outcome 3
CONTRACTS + CONSUMER
LEGISLATION
• Contracts
• Layby Sales Act
• Unsolicited Goods and Services Act 1975
• Commerce Act 1986

Law of Contract is a branch of Civil Law
• A contract is a legally binding agreement between two
or more parties by which they acquire rights and owe
duties and have obligations in respect of the subject-
matter of that agreement
• Contracts range from small every day consumer
transactions (the buying and selling of goods such as
cars, clothes, computers etc) to complex transactions
involving millions of dollars.
• Contracts don’t have to be in writing
• All contracts have 3 common features:
– You make some an offer
– They accept it
– You promise to give something in return

Contracts cont…
• When you enter a contract, you're bound by
everything you've specifically agreed with the
other person or company.
• You might also be covered by terms and
conditions not specifically mentioned but are,
nevertheless, assumed under the law to be part
of the contract.
• The Consumer Guarantees Act requires that
goods and services should be fit for the purpose
they're sold for, and that promise is assumed to
be part of the contract you make when make a
purchase.

Layby Sales Act 1971
• The Layby Sales Act 1971 covers layby sales for goods
priced at $7,500 or less, but not sales of vehicles by
licensed motor vehicle dealers.
• Selling by ‘layby’ is a form of sale that is uniquely
Australasian.
• It is purchasing goods from a retailer and paying for
them by instalments with possession of the goods
remaining with the retailer until full retail payment is
made.
• No interest is charged on the instalment payments.
• You'll usually pay a deposit.
• The only additional charge a retailer can add is a storage
fee. This might apply if the goods are too large to be
stored at the shop.

Cancelling a layby deal:
• Unless you agree, a retailer can only cancel a layby if you break the agreement, for
example, by not keeping up the payments.
• You can cancel a layby at any time before you make the final payment, and you don't
have to give a reason. However the shop can deduct "selling costs" and "loss of
value" from the refund.
• A retailer cannot increase the price of layby goods.
• If you have an item on layby and that same item is reduced, you still have to pay the
original price.
• This is because the layby agreement is a contract that can't be altered unless both
parties agree.
• If a shop sells your layby goods to someone else, you must be given an acceptable
substitute. If this is not possible, you must be refunded in full.
• You can also claim any increase in price you have to pay for the same goods
elsewhere.
• Goods on layby are still covered by the Consumer Guarantees Act.
• If the goods are damaged or faulty, the shop must repair them, replace them, or give
you a full refund. If you wished, you could negotiate a discount.
• With layby sales, you do not own the goods until you've made the final payment. It is
the retailer's responsibility to have the goods insured.

Unsolicited Goods and Services Act 1975
• The Unsolicited Goods and Services Act provides protection for
people (consumers and businesses) who receive unsolicited goods
or invoices for unordered goods or services.
• The Act establishes that unsolicited goods sent to a person remain
the property of the sender until the consumer accepts them, does
something contrary to the sender’s ownership (i.e. disposes of
them), or the sender recovers them.
• If the sender does not recover the goods within times specified in
the Act, the goods become an unconditional gift to the consumer.
• These provisions limit the person receiving the goods’ liability for
goods sent to them without prior request (i.e. goods which are
“unsolicited”).

Unsolicited Goods cont…
• There is a prohibition on sending invoices to people for
goods or services they have not ordered unless the
sender has a reasonable belief that they are entitled to
payment. This limits a sender’s ability to seek payment
for unordered goods or services.
• The Act also prohibits senders from demanding or using
threats to elicit payment for unsolicited goods unless
they have reasonable cause to believe they have a right
to payment.
• The maximum fine for invoicing or demanding payment
without an established right is $1,000 and $1,500 for
threats to elicit payment. Penalties, up to $300, can be
imposed on persons ordering goods for others without
their authority.

Commerce Act 1986
• The aim of the Commerce Act is to
promote competition in markets within
New Zealand.
• It prohibits conduct that restricts
competition (restrictive trade practices)
and the purchase of a business's shares
or assets if that purchase leads to a
substantial lessening of competition in the
market.

FAIR TRADING
• Fair Trading Act 1986
• Credit Contracts and Consumer Finance Act 2003
• Consumer Guarantees Act 1993

Fair Trading Act 1986
• The introduction of the FTA was the beginning of new
government initiatives in the field of consumer protection.
• Previous consumer protection was limited, legislation
fragmented and inadequate to meet growing demands
for a cohesive legal system.
• The Fair Trading Act was developed with the Commerce
Act to encourage competition and to protect consumers
from misleading and deceptive conduct and unfair
trading practices.
• The Act applies to all aspects of the promotion and sale
of goods and services - from advertising and pricing to
sales techniques and finance agreements.
• The Act also applies to pyramid schemes.

Fair Trading Act: purpose
The key purpose of the FTA is to stop unfair competition but it also
produced two major benefits:
1. Increased consumer protection by requiring information about products and
services to be true, in the sense of not being misleading, deceptive or
misrepresentational.
2. Protecting reputable and honest traders by giving them rights against traders who
do not trade fairly and honestly, and thus obtain an ‘unfair’ competitive advantage.
A unique feature of the Act gives traders the right to initiate action against business
competitors who do not observe the fair trading provisions of the Act.
There are provisions for both criminal sanctions and civil remedies.
An important aspect of the FTA is its ability to be applied overseas. ‘The Act applies to
conduct within and outside New Zealand where the conduct is carried out by a person who
is resident in or carrying on business in NZ, if the conduct relates to the supply of goods,
services or land within New Zealand.’
The FTA protection is restricted to ‘Traders’ and excludes people acting/selling goods or
services in a private capacity.

Before you buy:
• You have the right to expect a fair deal when making purchasing
decisions.
• The Fair Trading Act makes it illegal for businesses to mislead
consumers, give false information, or use unfair trading practices.
• It applies to anyone in trade: businesses of any size.
• The Act covers all aspects of the promotion and sale of goods and
services. It includes anything said about a product or service, either
verbally or in writing.
• It also includes an impression given by pictures, advertisements,
promotional material or a sales pitch, or by something which is not
said - that is, by important information being left out.

After you buy:
• After you've purchased a good or service from a retailer, you are
protected by a series of guarantees set out in the Consumer
Guarantees Act.
• Under this Act, goods must be fit for their normal purpose, safe,
durable, they must last for a reasonable time, have no minor defects
and be acceptable in look and finish.
• Services must be performed with reasonable care and skill and fit
for the particular purpose they were supplied for.
• They must also be completed within a reasonable time and provided
at a reasonable price, if no time for completion or price or pricing
formula has been previously agreed.

Pricing:
• Sales, pricing comparisons and markdowns are
examples of how a business might use price to promote
its goods or services.
• Any claims made about price must be clear, accurate
and unambiguous.
• Prices must include or be clear about the 15% GST, and
any surcharges must be declared before you buy.
• When you see a price sticker on a product or a shelf
price, it is reasonable to expect that this is the price you
will be charged at checkout.

Eating out:
• Prices displayed on a menu or on any signage should
include GST, and any surcharges, such as for using a
credit card, must be made clear.
• Some restaurants allow you to bring your own wine
(BYO) but you will probably be charged a corkage fee.
This fee should be clearly displayed in the restaurant or
on the menu.
• Tipping is optional. There should be no tips shown on
the bill, however feel free to tip anyway.

Accommodation
• Accommodation should be as it was represented to you when it was booked..
• If there is a significant difference it should be raised with hotel maagement as soon as
possible.
• You should also alert management at the start of your stay if there is anything missing
from or damaged in your room.
• If you haven't broken or taken anything, you should not be charged anything above
the price quoted at the time of booking and the cost of any other purchases made
during your stay, such as Wi-Fi access or mini-bar snacks.
• If you're booking accommodation online, you should be able to rely on the pricing and
availability details being accurate and up to date.
• An accommodation provider could be breaking the law if, having had a booking
initially confirmed at a set price online, the guest is then told the price quoted is not
current.

Getting around:
• When booking a flight, hiring a rental car or
catching a taxi, make sure you know all costs
upfront before booking or paying.
• Businesses must clearly identify any additional
costs or charges, such as fees for checked
baggage, insurance cover, or GST, before you
buy.

Buying souvenirs:
• Any claims made - or impressions given - about
the origin of a product must not be misleading or
deceptive.
• This includes using symbols such as kiwis, flags
or other national emblems to convey false or
misleading impressions that a product is made
in New Zealand.

Clean green New Zealand:
• Consumers should be able to rely on any environmental
claims made about a good or service.
• Businesses making environmental claims must ensure
those claims are accurate and can be backed up with
science.
• This includes any statements made about sustainability,
recycling, carbon neutrality, energy efficiency, use of
natural products or impact on animals and the natural
environment.

Duty-free:
• The term 'duty-free' implies that goods are cheaper in
comparison to prices charged by other retailers because
government imposed import duties do not apply.
• Tourists travelling overseas are entitled to assume that
they will get the benefit of this price advantage.
• Businesses should only use the term if the goods
described as duty-free would usually attract import duty,
and the price advantage is passed on to the consumer.

Credit Contracts and Consumer Finance
Act 2003
• Requires disclosure be made in the course of doing business involving credit
contracts, consumer leases and buy-back transactions of land.
• Disclosures include contract terms, contact information of the creditor,
debtors credit limit, the annual interest rate,the method in which the interest is
calculated, plus explanation of payment terms and the debtor's right to cancel
the contract.
• If a creditor fails to make these disclosures, the debtor can cancel the
contract and/or the creditor will be unable to enforce the contract against the
debtor and the creditor may be liable for statutory damages.
• The Act sets standards about the way in which interest is calculated and
charged.
• The Act covers the circumstances in which a consumer credit contract can be
cancelled and provides rules covering early repayment of debt
• There is a regime of statutory damages that apply if the Act has been
breached
• Breaching certain provisions of the Act is a criminal offence punishable by
fines and, in some cases, by imprisonment.
• The Act is enforced by the Commerce Commission.

Commerce Commission
• The Commerce Commission is New Zealand's competition
enforcement and regulatory agency.
• They enforce legislation that promotes competition in New Zealand
markets and prohibits misleading and deceptive conduct by traders.
• The Commission is an independent Crown entity established under
section 8 of the Commerce Act 1986.
• The Commission is not subject to direction from the government in
carrying out its enforcement and regulatory control activities.
• The Commerce Commission's purpose is to achieve the best
possible outcomes in competitive and regulated markets for the
long-term benefit of New Zealanders.

Consumer Guarantees Act 1993
• The Consumer Guarantees Act sets out guarantees or minimum
standards for goods and services which are purchased by
consumers.
• It also gives remedies against suppliers and manufacturers who fail
to meet the guarantee standards.
• This Act is complementary to the Fair Trading Act 1986 which has a
strong focus on information provided prior to a sale (influences a
persons decision to buy) whereas the Consumer Guarantees Act
provides post-sale protection. ie protection which arises after the
sale of goods or services when the consumer has used them.

Consumer Guarantees Act cont..
• The Commerce Commission does not enforce the Consumer Guarantees Act but it
does have a role to play when businesses breach the Fair Trading Act by misleading
consumers about their rights under the Consumer Guarantees Act.
• A business cannot opt out of their obligations under the Consumer Guarantees Act. A
'No Refunds' sign, for example, with no explanation of what situations this may apply
to, amounts to an illegal attempt to deprive customers of their rights.
• A customer might well be entitled to a refund if the goods have a fault which they
could not have known about when purchasing, or if the business has misrepresented
the goods.
• Businesses do not have to give a refund if a customer simply changes their mind or
damages the goods themselves. 'No Refund' signs should include enough
information to avoid misleading consumers, for example 'We do not have to provide a
refund if you have changed your mind about a particular purchase, so please choose
carefully.'

Consumer Guarantees Act cont..
• The terms of any additional guarantee or warranty provided by a business should be
over and above those provided under the Consumer Guarantees Act.
• Guarantees and warranties should not attempt to limit consumers' legal rights and
should make that clear.
• Attempting to sell an extended warranty by claiming that the customer would
otherwise have no comeback, or by exaggerating the cover provided by a warranty is
likely to breach the Fair Trading Act.
• Telling a customer to claim on an extended warranty, when they have the right to
claim against the retailer under the Consumer Guarantees Act would also breach the
Fair Trading Act, particularly where there is an excess payable under the warranty.
• Advising a customer to make a warranty claim with the manufacturer when they have
the right to choose to claim either from the retailer or the manufacturer would also
breach the Fair Trading Act.
• Warranties must generally include any labour costs involved and compensation for
loss or damage. Only the parts of a warranty which provide more than the legally
necessary guarantees could exclude the labour involved.

LEGAL TERMS
• Torts
• Negligence
• Liability
• Nuisance
• Good Faith

Torts & Negligence
• Part of private or civil law consists of laws relating to the wrongs or harms that may be
done by one person to another, or to that other persons’ property.
• This law is called the law of torts, or civil wrongs.
• A tort is a civil wrong
• The law of torts consists of different kinds of wrongful acts for which common law
provides compensation.
• A duty not to cause harm is owed to people generally.
• The consequence of breaking the tort duty is the liability to pay compensation, in the
form of unliquidated damages, to the victim of the breach. (unliquidated damages are
those which cannot be predetermined in amount)

Range of Torts:
• Negligence (property or financial loss
• Nuisance (to an occupier of land)
• Trespass (to person, goods or land)
• Defamation (of a person’s character)
• Miscellaneous (eg deceit, passing off,
malicious prosecution)

Remedies to law of tort breach:
• The remedy is usually money!
• Organisations need to take care that they do not
cause damage or injury to another person or
their property (the tort of Negligence); another
person’s land (private Nuisance); their reputation
(Defamation); or their intellectual property rights
(Passing off).
• The law of torts is separate from the criminal
law.

Types of damages available
• Usually the amount of money awarded in damages for a tort is the
amount required to put the plaintiff (the person who has been
wronged) in the same position he or she would have been in had the
wrongful act or omission not happened. These are called
“compensatory damages”.
• Sometimes the Court will award “exemplary” (or “punitive”)
damages. These are over and above the amount required to
compensate the plaintiff, and are intended to punish the defendant.
• If both the plaintiff and the defendant were at fault, the Court will
reduce the damages recoverable from the defendant to reflect the
plaintiff’s share in the responsibility for the damage.

Vicarious Liability
• The victim of a tort is a potential plaintiff (the person who claims to have been
wronged).
• The person who commits a tort and bears responsibility for it is called a tortfeasor.
• If more than one person is held liable for the same tortuous act those persons are
called joint tortfeasors.
• Liability is not normally transferrable (eg a wife is not responsible for her husband’s
torts, and vice versa)
• BUT: There is one form of liability for another’s torts. This is called vicarious liability.
(vicarious means ‘done or suffered by one person on behalf of another).
• A person or corporate body (organisation) may be vicariously liable for a tort
committed by another person. The victim can sue the tortfeasor, or the party
vicariously liable, or both, as joint tortfeasors. In practice, both will often be joined in
legal action.

Defences for allegations of tort
• Inevitable Accident – liability may not be proven if a
defendant can show that the harm resulted from
circumstances outside their control, was unintentional or
was not caused by their negligence.
• Acts of God - harm caused through natural
catastrophes or phenomenon, such as lightning strikes
or hurricanes
• Volenti non fit injuria which means ‘to a willing person
no harm is done.’ This is where a person has full
knowledge of the risks involved in a situation but
voluntarily consents to run those risks.

Negligence
• Negligence is the failure to exercise
reasonable care to avoid reasonably
foreseeable damage to people or property.
• There are four elements:
1. The defendant must owe the plaintiff a duty of care.
2. The defendant must have breached this duty of care.
3. The plaintiff must have suffered damage that was caused
by the defendant’s breach of duty.
4. The damage suffered must have been a reasonably
foreseeable consequence.

Effect of ACC Scheme
• In New Zealand, a person cannot sue another person for negligence if
they suffer a personal injury that is covered by the ACC scheme.
•
• An exception is that the injured person can sue for exemplary (punitive)
damages, rather than compensatory damages (see below).
• ACC legislation removes the right to bring a common law claim for
compensatory damages arising out of personal injury by accident. The
legislation grants compensation for injuries where no fault is involved, and
where injuries result from potentially hazardous situations, such as in body-
contact sports.
• Aperson who suffered the damage must bring the case within six years of
the date on which the cause of action arose, unless the fact that they had a
cause of action against the defendant was concealed by fraud or mistake.

Damages
• The amount of money awarded in negligence cases is
usually the amount required to put the plaintiff in the
same position he or she would have been in had the
defendant not been negligent. Exemplary (or “punitive”)
damages may also be available.
• If both the plaintiff and the defendant are at fault this will
give rise to “contributory negligence”.
• If a finding of contributory negligence is made, the Court
will reduce the damages awarded against the defendant
to reflect the plaintiff’s share in the responsibility for the
damage.

Nuisance
• A private nuisance is one that interferes with a person’s use or enjoyment of land, or
some right connected with land.
• The basis of a defendant’s responsibility is usually that they have possession or
control of the land from which the nuisance arises.
• There are two elements of private nuisance:
1. The plaintiff must have suffered actual damage, or there must be prospective damage.
2. The activity or state of affairs that caused the damage must be something that the law says
can be a basis for suing in private nuisance.
• A public nuisance is one that inflicts damage, injury, discomfort or inconvenience on
all members of the public who come within its sphere of operation.
• There are two elements of public nuisance:
1. The nuisance must interfere significantly with a common right of the public.
2. The interference must be unreasonable, given all the relevant circumstances and conflicting
rights.

Remedies for Nuisance
Damages
• Usually the amount of money awarded is the amount required to put the
plaintiff in the same position he or she would have been in had the Nuisance
not occurred. Exemplary (or “punitive”) damages may also be available.
• If both the plaintiff and the defendant were at fault, the Court will reduce the
damages to reflect the plaintiff’s share in the responsibility for the damage.
Injunction
• A Court order requiring the defendant to do something or not do something.
Abatement
• A self-help remedy that in certain situations allows the person suffering the
harm to enter another person’s land to eliminate the source of an actionable
nuisance.

‘Uberrima fides’ (utmost good faith)
• This Latin phrase is often referred to in the context of contracts.
• In regard to NZ consumer legislation it is relates to insurance
contracts.
• A higher duty is expected from parties to an insurance contract than
from parties to most other contracts in order to ensure the
disclosure of all material facts so that the contract may accurately
reflect the actual risk being undertaken.
• This means that all parties to an insurance contract must deal in
good faith, making a full declaration of all material facts in the
insurance proposal.
• Good faith is a principle that underlined much New Zealand law,
including Employment legislation.

ACCOMMODATION SERVICES
• Hotel grading systems
• Principles of food hygiene regulations

Accommodation Services – Grading
• New Zealand accommodation provision is not defined by law.
• Accommodation providers categorise their product in order to appeal to the
market for which it is intended.
• Accommodation descriptions differ from country to country, along with visitor
expectations!
• No formal ‘government’ style accommodation grading exists in NZ.
• Qualmark (a privately owned and operated business) is most frequently
adopted by accommodation providers in order to offer a consistent
independent rating of the product.
• Qualmark grading is not mandatory on any accommodation provider.

Qualmark
• Qualmark is New Zealand tourism's official quality
assurance organisation, providing recognition of quality
tourism experiences.
• Its role is to ensure international and domestic travellers
can easily select high quality, professional and
sustainable tourism products.
• Through the provision of independent quality assurance,
Qualmark gives consumers and travel trade further
confidence in the products and experiences they
purchase.

Qualmark star grading system
• The Qualmark system operates on a 1-star to 5-
star scale.
• Each star level represents a combined range of
facilities and service quality and standards for
that specific business.
• Within each star grading, those offering a better
range and quality of facilities and services are
recognised with a “plus”.

Categories of Qualmark accommodation
• Accommodation providers can apply for a Qualmark license under which
they will be rated and given an accommodation grading and use of the
Qualmark logo, along with other licensee benefits.
• There are 11 categories of accommodation that can be graded under the
Qualmark scheme.
– Apartments
– Backpackers
– Bed & Breakfast
– Boutique & Lodge
– Holiday Home
– Hotel
– Motel
– New Zealand Luxury Lodge
– Student Accommodation
– Holiday Park
– Venue

Qualmark cont..
• Providers of other tourism services can also apply for a Qualmark
grade, and these include:
– Visitor Activity
– Visitor Service
– Visitor Transport
• All businesses that display Qualmark star grading or endorsed logo
are also assessed on their environmental performance.
• For a Qualmark business to be displaying the additional green
Enviro-logo they will be performing well in environmental practices
and engaging in activities including energy efficiency, waste
management, water conservation, environmental conservation and
community support.

Qualmark Star Grading System
• Acceptable. Meets customers' minimum requirements. Basic, clean, and
comfortable accommodation.
• Good. Exceeds customers' minimum requirements with some additional
facilities and services.
• Very good. Provides a range of facilities and services and achieves good to
very good quality standards.
• Excellent. Consistently achieves high quality levels with a wide range of
facilities and services.
• Exceptional. Among the best available in New Zealand.
Endorsed
• Professional and trustworthy.

Accommodation Services – legislation
• All accommodation providers operate within a standard business setting in
NZ and must comply with national and local legislation concerning:
– Running a business (eg Companies Act 1993 + Incomes Tax Act 2007))
– Compliance with regulations that apply to their premises (eg Building Regulations
1992 & Resource Management Act 1991)
– Employment of staff (compliance with Health & Safety in Employment Act 1992
plus Employment Relations Act 2000)
– Compliance with current consumer protection legislation
– Plus licensing or regulation requirements relevant to their specific sector.
• Accommodation providers who offer food and drink services are also
required to comply with additional legislation:
– The Food Act 1981
– The Food Standards Code
– Food Hygiene Regulations
– Food Safety Regulations.

The Food Act
• The Food Act is the primary piece of legislation
governing the safety of food for sale in New
Zealand. It makes it illegal to prepare for sale or
selling:
– contaminated food
– food that is unsound or unfit to eat
– any food that has in or on it anything that is harmful to
health.
• The Act enables food safety and hygiene
standards to be set.

Food Hygiene Regulations 1974
• Sets out requirements for the registration of food premises - includes mobile
food operations such as ice cream vans and pie carts as well as fixed
premises.
• The occupier of any premises used to manufacture, prepare, pack or store
food needs to ensure that, subject to certain exceptions, the regulations are
satisfied and includes:
– the good construction and repair of premises
– keeping out pests
– the construction and finishes of floors, walls and ceilings
– lighting
– ventilation
– working space
– changing facilities
– toilet accommodation
– water supply
– hot water supply
– plumbing and drainage
– solid waste storage.

Food Hygiene Provisions:
• general provisions for the conduct and maintenance of food premises
• general provisions for the conduct of persons who deal with food for sale
• provisions relating to bake houses and cake kitchens
• relates to delicatessens
• deals with eating houses
• controls the pulping of eggs
• controls the preparation and sale of meat and fish
• relates to the sale of milk and yoghurt
• deals with the storage of milk at depots
• regulates the manufacture of frozen confections
• regulates the sale of ice-cream and frozen confections
• deals with the manufacture of non-alcoholic drinks
• controls food vending machines
• relates to breweries
• relates to the preparation of wine
• relates to the sale of liquor
• contains general provisions dealing with the closure of premises, offences and penalties.

Food (Safety) Regulations 2002
• These regulations prescribe certain food safety standards and
contain specific permissions relating to fluoridated water and the
sale of hemp seed oil as food.
• Part 1 contains general provisions relating to food safety including:
– misuse of food containers
– safety of articles in contact with food
– identifying articles used with food
– infected persons working with food articles used with food
– persons in contact with infected persons
– supervision of the manufacture of low-acid canned food
– compliance with codes for the manufacture of low-acid canned foods
– provisions relating to certain other foods and articles
• Part 2 contains the specific permissions for fluoridated water and
the sale of hemp seed oil as food.
• Schedules to the regulations detail tests for enamel ware and
ceramic ware items for use with food.

Hospitality New Zealand
• Originally set up as the Hotel Association of NZ and renamed as
Hospitality NZ, this is a member driven organization set up to help
hospitality operators with local and national advocacy, advice and
support.
• HNZ is funded by member subscriptions and comprises mostly
small businesses. (2,400+ in 2013)
• Members include restaurants, café bars, hotels, taverns, off-
licenses, casinos and short and long term accommodation
providers.
• Their services include training, provision of resources and
publications, advice, updates on industry developments and
networking.
• HNZ is governed by a Board of nine elected members and owned
by its members.

Contracts & Consumer Legislation

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