Providing compensation to consumers

Find out when a business might have to pay for consequential loss to a consumer.

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Consumer guarantees and loss

Failure to meet the consumer guarantees entitles the consumer to a:

refund
replacement, or
repair.

In situations where the product breaks down as a result of the good or service not meeting a consumer guarantee and the problem causes subsequent damage, then compensation may be appropriate.

What a business may pay for consequential loss

If a consumer is successful in a claim for consequential loss, you may have to pay for losses that:

result from a failure to meet a consumer guarantee, and
were reasonably foreseeable.

Example: a consumer’s washing machine breaks down due to a fault. As a result, there is water damage to carpet in part of the house. The supplier may be responsible for the cost of replacing the carpet damaged by flooding from the faulty washing machine.

You would not have to pay for:

problems unrelated to your conduct or the goods you supplied
losses caused by something independent of your business and after you no longer control the goods.

Example: a consumer recently bought a car, which leaked oil on her driveway. A neighbour’s dog ran through the oil and into her house, dirtying the carpet. The car dealer would not have to pay for carpet cleaning, as the dealer could not predict that a dog would run through the oil and into the house – the cost was not reasonably foreseeable.

Putting a value on consequential loss

It can be hard to put a dollar figure on consequential loss. Compensation should put the consumer in the position they would have been in if the goods or services had met the consumer guarantees.

Example: a consumer used a liquid cleaner according to instructions to remove a stain on his new curtains. The product damaged a curtain in the living room. As the curtain was new, the supplier would probably have to meet the cost of replacement. Compensation would be less for curtains in poorer condition.

You cannot write a term into a sales contract that says you will not be responsible for any loss, unless:

the goods or services were sold to the consumer for use in their business, and
the term was brought to the consumer’s attention at the time of sale.

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