Buyer beware is always good advice; but what about seller beware?
Many readers will know New Zealand has a protective consumer law framework that captures traders in the business of selling goods and/or services. This framework addresses the obvious power imbalance between an experienced, savvy trader and a private, individual consumer.
Without these laws, the trader could exploit the consumer’s ignorance and make claims that sound extraordinary but which, in fact, are baseless. The applicable “laws,” in this situation, come largely from the Consumer Guarantees Act 1993 and the Fair Trading Act 1986.
Equally, many readers would have heard of the phrase “caveat emptor,” i.e., “buyer beware.” This principle generally applies to private sales where seller and buyer stand toe-to-toe; say, bargains struck over Facebook’s marketplace or Trade Me.
The first situation (trader v consumer) is a “consumer” contract, where the consumer has greater protection at law. A trader is assumed to have expertise within the area in which they trade, and for that reason, it is less difficult to prove that a trader has committed a “misrepresentation” or fraud.
The second category (seller v buyer) is not a consumer contract – it’s private – but it’s a contract nonetheless – so sellers still need to be careful.
Even a private seller who knowingly makes a promise that doesn’t reflect reality, and which actively influences the buyer’s decision to strike the bargain, can be found to commit a fraudulent misrepresentation.
However, to claim compensation after a private sale, the person making the claim (the “claimant”) needs to show a high threshold of dishonesty by the seller. Two recent Disputes Tribunal decisions illustrate how each case might fall on either side of that threshold.
In one case, the claimant bought a campervan on Trade Me from a private seller (not a trader). The claimant knew about “buyer beware.” He had a friend inspect the vehicle and used FaceTime to participate in the inspection. He also had the vehicle mechanically checked.
After the purchase, the claimant found that the gas ignition for the fridge was faulty, (though it worked on mains electricity and battery power) and the diesel heater was not working. The seller’s advertisement had stated that “the fridge… run[s] off gas” and that the heater was “incredible, warm[ing] the whole van quickly.” By supplying evidence from a gas fitter and a motorhome expert, the claimant was able to show neither of these statements were true, and that reliance had been placed on both statements in the decision to purchase the vehicle.
The claimant was, however, unsuccessful in a separate claim that the seller should have ensured the campervan was compliant with gas regulations. This was in part because compliance with gas regulations was not a legal requirement for a private sale, and importantly, also because the seller had made no statements about gas compliance during the sale.
In another case, the claimant had purchased a car over Trade Me from a private seller (again, not a trader), who asked a local mechanic to handle the sale as she was moving overseas. The claimant later discovered the car had a defective cooling system, but the claim was dismissed.
The first issue was whether the local mechanic was acting as the seller’s “agent.” If he was in fact an agent, and was a professional agent acting in his trade, it would be a consumer contract, and the agent could be liable. Remember, it’s less difficult for a claimant to show a trader in the business of selling certain goods or services has misrepresented an important fact, because the trader is assumed to have special expertise.
If the person actually dealing with the buyer is the “agent,” and if the agent is a trader, then theoretically, they have the experience and knowledge to exploit the buyer: so, consumer law may apply.
But in this particular case, the Tribunal decided not to apply consumer law, instead interpreting the mechanic’s trade narrowly. The Tribunal found that the mechanic was in the trade of repairs and services, not vehicle sales. There was also evidence that the mechanic was the seller’s friend and the sale had nothing to do with his vehicle repair business.
In this case, the claimant also arranged the mechanic to check a possible oil leak issue. The mechanic reported back finding there was no sign of leaked oil. The Tribunal noted that the problems the claimant was now disputing did not focus on an oil leak, but instead, the cooling system, which the mechanic’s inspection had nothing to do with. The claim therefore failed. In any event, as the agent was not “in trade,” any claim for misrepresentation would need to be brought against the seller, as the agent was only an intermediary.
As the seller had departed New Zealand, no claim for misrepresentation could have been brought against her, even if the facts showed a misrepresentation (which they didn’t).
This serves as a reminder that if you’re looking to bring a claim against someone for a misrepresentation, you should act in a timely way, and have the respondent’s (i.e., the seller’s) full details. The best time to obtain these details is before or during the sale itself, not a long time afterwards, when the seller might have gone to ground.
As always, each case must be decided on its own facts, so if you think you’ve been the victim of fraud as a consumer or in a private sale, consider contacting us or discussing your issue with a local law practice.