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When a customer buys a faulty good or service from your business, you have certain obligations to remedy the issue. But, what happens when you purchase a faulty good or service from another business? In some cases, you may be able to rely on the same consumer law that protects your customers. However, in others, you may not be able to because of your business’ commercial nature. If you purchase a faulty good or service from another business, your first option is to let them know and ask for a solution. If they refuse, there are some laws you may rely on for an alternative remedy. 

Consumer Goods and Services

If your business provides goods and services to consumers, it must adhere to specific consumer guarantees about the nature of those goods or services. This applies across all businesses that sell goods of this nature, including those that sell to your business. The Consumer Guarantees Act (CGA) outlines this.

However, you can only rely on this law if the faulty goods or services you bought were consumer goods or services. ‘Consumer’ means that an ordinary member of the public would buy these products or services for personal or domestic use. Consumer goods or services your business uses may include:

  • stationery;
  • computers;
  • lunch delivery for your staff; or
  • furniture.

This law does not apply to commercial products. These are products that you buy to trade or sell on, for:

  • resupply;
  • manufacturing new products; or
  • repairing other goods.

So if the products or services your business purchased were consumer products, then you can rely on the CGA. But, if they were commercial products, then you cannot.

Relying On Consumer Guarantees

Any business that sells you consumer products or services owes you the same guarantees you owe your customers. These are outlined in the table below.

Goods must be:

Services must be:

  • matching with their description;
  • of acceptable quality;
  • fit for purpose;
  • priced reasonably if no predetermined price;
  • delivered on time;
  • sold legally; and
  • sold with spare parts or repairs available.
  • fit for purpose;
  • done with a reasonable level of skill and care;
  • provided within a reasonable time; and
  • priced reasonably if no predetermined price.

If the other business provides you with a faulty good or service that breaks their consumer guarantees, they must give you a remedy, such as a:

Commercial Warranties

If the faulty goods are commercial products, then you may be able to rely on commercial warranties implied by the Contract and Commercial Law Act (CCLA). You can make a claim under this law if the product was not:

  • fit for purpose;
  • of reasonable quality; or
  • legally sold to you; or
  • a match of the seller’s description.

These cases only apply when the seller regularly sells or makes a product that does not meet its usual standard. But if any of these instances apply to your transaction, then you may be able to claim a refund or other form of compensation.

The law also implies certain standards for services carried out by businesses that operate similarly to the CGA’s guarantees. If a business provides you with a service, it should do it:

  • with reasonable care and skill; and
  • within a reasonable time frame.

False Statements

If another business provided you with a faulty good or service and made false statements about their quality, then fair trading laws may apply to you. The Fair Trading Act (FTA) binds all traders. This applies if the other party misled you about the quality of the goods you bought or made unsubstantiated claims about the nature of those goods.

For example, say that a business sold your cafe ‘organic’ kiwifruit. Later, you find out that they used chemical pesticides on the kiwifruit. This is an untrue claim, and you may be able to rely on the FTA for a remedy.

Contracting Out

However, it is crucial that you thoroughly check through your contract or sales agreement with the business that sold you these goods or services. Parties in trade can contract out of the three laws mentioned above. This means you both agree to not seek remedies under these laws, and they do not apply to your contractual relationship. However, any agreement to contract out must be fair and reasonable.

Look for phrases mentioning these acts specifically, or ones like “No other warranties either express or implied by law are made concerning these products.”

Contractual Rights

While reading through your contract, look for clauses that outline what happens if a party does supply faulty goods or services. You may already have contractual remedies available, such as requesting a refund or cancelling the contract. It is a good idea to seek legal advice to help you with this process.

For example, a clause in your contract may allow you to cancel if the other party cannot remedy a fault in their product.

Key Takeaways

If your business buys faulty goods or services, then you may have some legal remedies available. However, this depends on the nature of the transaction and whether you contracted out the relevant laws. If you would like more information or help with faulty goods or services that your business bought, contact LegalVision’s regulatory and compliance lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What should I do if I buy faulty goods or services?

If you buy faulty goods or services, speak to the party who sold them to you and see if they will remedy it. If not, some laws protect you depending on the nature of the goods you purchased.

What does contracting out mean?

Contracting out means that you and another party in trade sign a contract agreeing that certain laws (such as the Consumer Guarantees Act and the Fair Trading Act) do not apply to the sale.

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