Your rights if you buy commercial products or services and they are faulty, or you were misled about them before or during the sales process.
Businesses and the Consumer Guarantees Act
It is important to know that you are not covered by the Consumer Guarantees Act (CGA) for any product, equipment, vehicle or service that is purchased for business use.
This means the CGA does not apply to retailers, manufacturers and service providers as long as:
- both parties are in trade and agree to this
- the agreement is in writing
- it is fair and reasonable that both parties are bound by this provision.
Given the above, it is very important that you carefully research any commercial contract before signing it.
It is also worthwhile getting legal help before doing so. This is because the only rights you will typically have if something goes wrong is what is written in the warranty or sale contract.
Definition of a commercial product
A commercial product is anything usually used for a business purpose, even though it might sometimes be used for your personal or household use. It includes things like:
- industrial machinery
- irrigation systems
- all products that are acquired for resale, resupply in trade, or use in manufacturing and production.
Note: If you do end up purchasing faulty goods – or have other commercial consumer issues – you may nevertheless still have some rights through common law rules (rules made by judges in deciding cases) and some specific Acts.
Possible exceptions to what is a ‘commercial product’
There are a few items that you may have purchased for your business, but are still covered by the CGA. Some examples of these include: stationery, pens, computers and desks. These might be covered by the CGA because they are also commonly treated as consumer products.
Basically, the CGA depends on the ordinary use of the products in question. If the item you have a problem with is commonly used as “consumer” item, then consumer guarantees for products could possibly still apply.
What you need to know
Your rights with commercial services
For commercial services, you have rights under the terms of:
- the service contract, or
- the common law rules for contracts and negligence.
Check the terms of the contract for services for your legal rights if the work is not done to a reasonable standard.
Common law rules in New Zealand are similar to the CGA’s guarantees. These are that:
- work must be done with due care and skill
- work must be done in a reasonable time (if a time has not been agreed on).
Your rights with commercial products, equipment and motor vehicles
For commercial products, equipment and motor vehicles you may be covered by the Sale of Goods Act(external link) (SGA). If so, you may be able to get:
- a full or partial refund, or
- compensation under the warranties implied in the Sale of Goods Act.
To be covered by the SGA the product must:
- be reasonably fit for any purpose you told the seller was the reason you were buying the product and the seller normally sells as part of its business
- match either the sample shown or the description given by the seller
- of merchantable quality if bought from a seller who deals in those kinds of product. In general terms this includes that the product should do as it’s supposed to do.
The seller also must have good title (the right to sell those products). This also means that no-one else holds a security interest in the products that the seller has not told you about.
Exceptions and what to look out for
On some occasions, the SGA will not apply. This is typically because the seller has stated that the SGA doesn’t apply. This is often done:
- in the contract
- in the website’s terms and conditions.
Tip: Look out for a written statement that says “No other warranties either express or implied by law are made with respect to these products.”
If you see the above in writing, it means you can’t rely on the SGA if you’ve a problem. In fact, your rights may be limited to:
- those available under a manufacturer’s warranty, or
- any trader's warranties set out in the contract itself.
If a business misleads you – or makes false statements about commercial products or services – you have rights under the Fair Trading Act or the Contractual Remedies Act.
Contract rights and remedies
You can also ask the supplier or negotiate certain remedies in the contract for faulty products and services. You may be able to cancel the contract, or claim compensation if the terms of the contract are breached. Please read Changing or cancelling contracts or quotes for more information about when you can cancel a contract and what your rights are in different situations such as:
- when you make a mistake about what’s in the contract
- when the contract can’t be performed due to events outside anyone’s control
- harsh or oppressive contracts.
Your rights to a remedy
What you might get back from a seller largely depends on the facts of the case and how serious the problem is. If you are entitled to a refund, this should be in cash or how you paid for the purchase. You can also choose to accept a replacement or repair instead of a refund or compensation.
Many businesses don’t appreciate that they have few legal protections when buying a commercial vehicle.
- if a business only sells commercial vehicles they do not have to be registered as motor vehicle trader (who are bound by other laws)
- a Consumer Information Notice (CIN) is not required (including notice of any security interests)
- the Consumer Guarantees Act (CGA) does not apply.
However, if you do have a problem with a commercial vehicle, you may have rights under the Sale of Goods Act. You would need to check the sale contract to see whether the seller has contracted out of the Act. See the Sale of Goods Act(external link).
The Fair Trading Act (FTA) applies to the sale of commercial vehicles by a person in trade if the vehicle has been misrepresented for remedies. See Solving issues with your car dealer for more details about your rights in this situation.
What to do if you have a problem
Contact the trader
If you have problems with commercial equipment, products or services, you may have rights to:
- cancel the sale
- get repairs done
- ask for compensation under the Sale of Goods Act (if it has not been contracted out of) .
Your first step is to check the terms of your contract to see what terms have been breached and what you may be able to claim for. If the breach is serious you may be able to cancel the contract and claim your money back.
Hint: Before going back to the seller to cancel a contract, you may want to get legal advice as this is quite complicated.
Apply to the Disputes Tribunal or District Court
If you don’t have any success in getting your money back and cancelling the sale then you may wish to bring a claim in the Disputes Tribunal or the District Court.
You can apply to the Disputes Tribunal (for contracts up to $15,000) to cancel the contract and get compensation or the District Court if greater than $15,000.
You may be able to claim for:
- a breach of the warranties under the SGA (for faulty products and claim damages)
- a breach of contract for faulty commercial services
- your money back.
You can also ask the Disputes Tribunal (or other court) to make an order requiring the other party to complete their obligations under the contract.
Note: This is a complicated area and you need to get legal advice to bring a claim.
For more information, read Going to the Disputes Tribunal.
Report a business to the Commerce Commission
You can report a business to the Commerce Commission if they have misled you when supplying products or services under the Fair Trading Act.
The Commerce Commission is responsible for enforcing this Act and making sure traders comply. They don’t investigate every complaint and will not get financial compensation for you, so you still need to take action yourself.
Visit the Commerce Commission’s Reporting a business or person(external link) page to learn more about making a formal complaint.
Follow these links for options dealing with:
Need more guidance?
Still need more information? Contact the Ministry of Business Innovation and Employment’s (MBIE) Consumer helpline.
Sue owns a city café. She buys ingredients from the markets and wholesalers which she prepares and sells to her customers. Sue is not covered by the Consumer Guarantees Act for the food ingredients as she is using them to prepare food for resale. She may have rights under her contract with the wholesaler or under the Sale of Goods Act if it has not been contracted out of.
Faulty commercial products
An accounting firm buys a photocopier from a supplier that does not work well after 6 months of use. It was serviced by the supplier but is still not working as it should. The Sale of Goods Act has been contracted out of. But the accounting firm is entitled to cancel the contract if the fault can’t be repaired by the supplier, under the terms of the sale contract.
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