What Is the Difference Between A Consumer Product And A Commercial Product?

2 December, 2021 | Kristal Rogers

Commercial products are normally those goods that a business purchases for its business purposes and consumer products are normally those goods which a consumer purchases for their own personal use.  The legal obligations of the seller, and rights of the purchaser and the laws that govern those rights and obligations vary based on whether the product being sold is considered a commercial product or a consumer product.

The Consumer Guarantees Act 1993

The Consumer Guarantees Act 1993 works by implying some basic guarantees into any contract involving the supply of consumer services or goods. The Consumer Guarantees Act normally only applies to businesses who are supplying services or goods to consumers, however it is the nature of the product or service and its end use that is important not the nature of the customer.

The Consumer Guarantees Act protects consumers by allowing them to seek repairs, replacements or refunds when goods are faulty and setting minimum guarantees for all products and services. Products may be covered under the Consumer Guarantees Act if they break too easily, don’t do what they are expected to do or do not work at all (in other words, if they are not fit for purpose).

However, the Consumer Guarantees Act may apply to some commercial products if the goods are purchased by consumers for personal or household use. Similarly, the sale of some goods between commercial parties may also be covered by the Consumer Guarantees Act if the purchaser is using the product for what would be considered personal or household use (for example if a business buys a toaster for use in its lunch room).

Contracting out of the Consumer Guarantees Act

However, retailers, manufacturers and service providers are not bound by the Consumer Guarantees Act when the seller and buyer are both commercial parties, and they agree in writing that it does not apply, and when it is fair and reasonable to both the seller and buyer to contract out of the Consumer Guarantees Act.

Your Rights When Purchasing Commercial Products

Typically, the only rights a business has when purchasing commercial products are those that are stated in the warranty, contract or the sales agreement. It is important to carefully research any commercial contract before signing it, including for clarity around Consumer Guarantees Act matters and seeking legal help is recommended prior to entering into any contract to ensure nothing is missed and that you understand your rights and responsibilities.

If your business has a serious issue with goods that have been sold to it subject to contracting out of the Consumer Guarantees Act then it may be possible to challenge that provision. This is because the Consumer Guarantees Act only allows contracting out if it is “fair and reasonable” to do so, which leaves an opening for businesses to seek the Court’s assistance enforcing the Consumer Guarantees Act’s remedies.

If your business is purchasing goods for its business purposes and something goes wrong, you should seek legal advice because you may be entitled to claim for breach of contract, including under the Contract and Commercial Law Act 2017.

For further advice on your rights and responsibilities as a business when buying or selling goods, to set up an appointment with expert commercial lawyer, Kristal Rogers phone 09 837 6896 or email kristal.rogers@smithpartners.co.nz.