Sale of Goods Act 1979 / 1994

In English law the common law was frequently seen as being too rigid and slow for the purposes of the developing and changing economy.

Over the years a large amount of commercial law grew up, much of it developed by traders themselves. A significant amount of this man made law is now embedded in statute law through Acts of Parliament such as the Sale of Goods Act that applies to all contracts where the seller transfers or agrees to transfer property in goods to the buyer for a money consideration called price.

The Sale of Goods Act permits the consumer options that are not open to him in the ordinary case law relating to contract. The Act (as amended in 1994) makes for the fast rectifying of problems in a commonsense manner. It is intended to make clear the rights and obligations of both parties and to avoid the need for formal legal action such as going to court.

One of the good things about the Sales of Goods Act is its clarity and the shortness of the Act itself. It is easy to read and understand.

In contract law the usual remedy for breach of condition or warranty is damages. This may not be appropriate for someone who has bought a computer that does not work. The consumer will want to go back the shop and either have his money refunded or a replacement item. All of this is the entitlement of the consumer and does not depend on shopkeeper goodwill.

It is important to understand the meaning of some of the words we will come across in studying sale of goods. :

Property means the ownership of goods

Goods include anything that can be touched, or moved, is visible and of which physical possession can be taken

Specific goods are those identified and agreed upon at the time of a contract for sale

Unascertained goods are those which are not specific. It is only when goods are identified in accordance with the contract that the property can pass from one to another.

Ascertained and unacertained goods - pile of newspapers for sale = unascertained. I select one and give it to the shopkeeper. It is now identifiable as the item I want to buy. It then becomes ascertained.

It must be appreciated that goods cannot be transferred until they are ascertained (specific)

Implied Conditions and Warranties

This is a key area of Sale of Goods legislation. This area is the one that deals with most of consumer problems.

Implied terms are of two kinds :

1) condition that is a breach of contract that permits us to terminate the contract. If our computer had a defective mainboard that would be a breach of condition. It would allow us to return the goods and be entitled to a refund. The shopkeeper does not have the right to insist on a replacement or that we accept a credit note.

2) warranty a less serious breach that allows us to receive damages but not to have the contract terminated. In this instance if our computer merely needed a new plug, or a switch to be moved this would be a breach of warranty. It would mean that we would be entitled to damages covering out of pocket expenses whilst our machine were right. A breach of warranty can be regarded as a minor blemish that can be put right immediately.

see : Bettini v Gye 1876, Poussard v Spiers 1876

The Sale of Goods Act contains a number of implied terms. These are some of the basic rules that govern our transactions with traders.

An implied term is one that is accepted to be so obvious that we need not specify that it is in the contract. For instance when we buy something from the local DIY store it is obvious that the store owns the goods they are selling and can pass the title (ownership) to us.

Main implied terms are :

Seller to have title [S12] This mean that the seller owns the goods he is selling or has evidence to prove the seller owns the goods. Rowland v Divall where plaintiff bought a car from the defendant who was not the owner. Held Rightful owner could recover car.

Goods to correspond to contract description [S13] Moore v Landaeur 1921, concerning tins of fruit and Beale v Taylor 1967 involving a car that turned out to be a collection of soldered together vehicles.

Goods to be of satisfactory quality [S14] Note the term in the 1994 legislation is satisfactory quality. Previously it was merchantable quality) Grant v Australian Knitting Mills 1936, (itchy underpants) Wilson v Rickett Cockerall & Co. 1954 (exploding coal)

Section 14 [2] deals with instances where goods are usable but have some form of defect. Examples include Rogers and Another v Parish (Scarborough) Ltd and Another 1987 where the Court of Appeal held that a series of defects in a Range Rover made it unmerchantable (not of satisfactory quality) even though it was fit to drive.

Section 14 [2 a] states :

For the purposes of this Act, goods are of a satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking into account of any description of the goods, the price (if relevant) and all the circumstances.

This section of the sale of Goods act means that quality is a subjective rather than objetcive matter.

Other motor cases include

Bernstein v Pamson Motors (Golders Green) Ltd 1987

Bartlett v Sydney Marcus 1965 where it was held that a second hand car with a clutch problem made known to the buyer did not come under the protection of the Act (caveat emptor applied)

Crowther v Shannon 1975 involved an 8 year old Jaguar car with 85000 miles. Three weeks after sale the engine seizes. Held not of merchantable quality.

Goods are to be suitable for the purpose disclosed [S14(3)]

Grant v Australian Knitting Mills 1936, Wilson v Rickett Cockerall & Co. 1954, Priest v Last 1903

In a sale by sample the bulk to correspond with the sample [S15].

Remember that this is an implied term. It is so obvious that it need not be written into specific contracts.

Transfer of Property and Possession [S 17]

This section will demonstrate the value of understanding the definitions at the beginning of these notes. Property and possession must be distinguished since the property in the goods (ownership) may be passed to the buyer, even though the possession is still with the seller.

If the contract states when property will pass (ownership transferred) then that is the end of the matter. However most contracts are silent on the subject requiring the sale of goods Act to inform us as to when property transfers.

1) Unless otherwise stated risk passes with property

2) If property has passed the seller can sue the buyer for the price

3) If the seller resells the goods after the property has passed, the second buyer usually acquires no title, unless there is some exception under the Nemo Dat rule.

Rules concerning passing of property

These are important and need to be understood.

Rule 1 Applies to specific goods that can be taken away. In this case ownership transfers immediately e.g. we see a new car that has had a pre delivery check etc.

Rule 2 Applies where specific goods need something doing to them before they can be taken away e.g. our new car needs a pre delivery check. In this case property passes when the pre delivery check has been completed.

Rule 3 This states that where goods have to be measured and weighed, property passes only when the weighing or measuring has been completed.

Rule 4 Applies to goods delivered on approval or by sale or return. In this instance property does not pass until the buyer has indicated to the seller acceptance.

Rule 5 applied to Unascertained goods (non specific goods) and states that property will only pass when goods have been ascertained.

Exceptions to Nemo Dat Rule (S 21)

The basic rule (Nemo dat rule) is that a person cannot pass to another property he does not own.

The main exceptions are :

* sale in market overt

* sale by mercantile agent

(see Cundy v Lindsay, Phillips v Brookes, and Lewis v Avery)

* resale by buyer or seller in possession

* sale of a vehicle acquired under hire purchase

* estoppel

* sale by bailees and by order of the court

* sale under voidable title (see Cundy v Lindsay Phillips v Brookes, and Lewis v Avery)

Performance of the contract

Delivery (S 29)

It is the duty of the seller to deliver the goods and the duty of the buyer to accept and to pay for the goods. Unless otherwise agreed the place of delivery is the sellers place of business.

Note the Sale of Goods Act 1979 allows the buyer a reasonable period after delivery, in order to inspect the goods. (S 34) This applies even when the buyer signs a shipping order acknowledging receipt.

Wrong quantity delivered

If the seller delivers less than the agreed amount the buyer may : (S 30 (1))

a) reject the goods or

b) accept the short delivery and pay a proportion of the price

If the seller delivers more that the agreed amount the buyer may : (S 30 (2)

a) reject the whole assignment

b) accept and pay for the whole assignment

c) accept and pay for the contracted amount and reject the rest.

Buyer Accepts Goods When :

he informs the seller of his acceptance,

if he resells the goods to a third party,

if, after the lapse of a reasonable time he retains the goods without informing the seller he is rejecting them.

Rights of the unpaid seller (S 38)

The unpaid seller has rights against the goods and the seller

Rights against goods

1 Lien : that is the right to retain possession of the goods until the contract price has been paid (S 41(2))

2 Stoppage in Transit : when the goods are in the hands of an independent carrier. Transit means the time from which the goods are handed to the carrier to the time when the buyer takes delivery. (S 44)

3 Resale of Goods : The seller may only resell goods if : (S 48)

they are of a perishable nature, and he gives notice to the buyer of his intention to resell, and

the buyer does not, within a reasonable time, pay or offer to pay the price he has reserved a right of resale under the contract

4 Repossession of Goods e.g., Romalpa Clause Note that a Romalpa clause is only effective against specific goods.

Rights against the buyer

1 Action for contract price (S 49(1))

2 Action for non acceptance e.g. damages (S 50(1))

Remedies of the buyer

The buyer may :

1 Sue for non delivery e.g. damages (S 51)

2 Sue to recover any money paid to the seller

3 Repudiate the contract for breach of condition by the seller

4 Take action for breach of warranty

Sale of Goods and Unfair Contract terms Act 1977

It is important to be aware that traders are not permitted to exclude the implied terms in the Sale of Goods Act in circumstances where one of the parties is a "consumer". The law lays down the meaning of the term consumer.

It is possible to exclude the requirement of reasonable quality if the contract is between dealers, but even when the contract is between trader and trader it is not permissible to exclude the implied term concerning title.

The Unfair Contract Terms Act 1977 S2 sets out that no contract term can exclude or limit liability in any way for negligently causing death or injury.

Exclusion Clauses

Exclusion, Exemption Clauses

Such clauses have the objective of :

a) Limits compensation for breach of contract

b) Limits remedies available

c) specifically excludes liability for breach of an express or an implied term

d) Attempt to restrict the scope of a contractual obligation.

Case law

Graucob v L'Estrange 1934 re cigarette vending machine, Chapleton v Barry UDC 1940 re collapsing deck chair, Olley v Marlborough Court Hotel 1949, Curtis v Chemical Cleaning Company 1951 where it was held the exclusion clause could be varied by the oral representation of a shop assistant.

Contra Proferentum Rule

This rule that the courts will in cases of ambiguity interpret the clause against the person making it.

Doctrine of Fundamental Breach

This doctrine is well set out in Suisse Atlantique 1967 and affirmed in Photo Production v Securicor Transport Ltd 1980 In these cases an exemption clause could still be applied even though there had been a fundamental breach of the contract containing the exemption clause.

Statute Law and Exclusion clauses

The Unfair Contract Terms Act 1977 is a landmark in the development of exclusion, exemption clauses and its main provisions must be appreciated.

Consider : Can you describe and evaluate the enforceability of any exclusion clause you may see in a car park or a restaurant.

Misrepresentation

An actionable misrepresentation is an untrue statement of past or existing fact made by one party to another party of the contract which induces the representee to enter the contract. Misrepresentation is best learnt by referring to the following statements and explanations.

Must be a Statement of Fact

Two good cases are Smith v Land and House Property Corporation 1884 and Bisset v Wilkinson 1927. Where statements of law are made then it is not a misrepresentation as everyone is deemed to know the law.

Silence not Misrepresentation

No general duty to disclose facts that are not known to the other contracting party. Rule confirmed in Keates v Lord Cadogan 1851.

Exceptions to Silence Rule

With v O'Flanagan 1936

Re Kyslant 1931

Insurance contracts of the utmost good faith

Inducement in Misrepresentation

Representation must induce the representee to enter the contract and it is usual for the representee to prove that he was induced by the representation

Remedies for Misrepresentation

Misrepresentation Act 1967

Derry v Peak 1889

The main remedies are damages and or recission. Recission is an equitable remedy and it must be understood when recission will fail i.e. if we fail to act in time, and when a third party has develops rights are the most important. cases such as Leaf v International Galleries 1950 and Phillips v Brookes 1919 and Lewis v Avery 1972

Consumer Protection Legislation

The Consumer Safety Act 1978 dealt with the issue of defective products.

The Secretary of State has the power under the Act to make regulations forbidding the sale of certain products that have been judged to be dangerous.

Dangerous items have included inflammable clothes for children, harmful toys etc. It is a criminal offence to breach these rules.

The provisions of the Consumer Safety Act 1978 were aimed at the manufacturer and not the supplier. The Consumer Protection Act 1987 was intended to supplement and to extend the 1987 law.

The general requirement of the law is largely unchanged, but liability for a failure to meet the required safety standard may lie with the producer, or the person whose trademark is on the product, or the importer - where the goods come from outside of the EEC, or the supplier.

The supplying of defective goods is a criminal offence. In actions in the civil courts there is strict liability, but note the working of the state of the art defence introduced at the request of the pharmaceutical lobby.

One new aspect of the Consumer Protection Act 1987 is that third parties have the right to claim against if the goods do not meet the requirements of the legislation.

Trades Description Acts

The Trades Description Act applies to services as well as goods. The Act applies to goods and services offered in the course of business. The Act does not apply to a private individual unless the goods or service are offered as part of a commercial business.

A trade description is only false if it is false to a material degree. An example is the case of Wickens Motors (Gloucester) Ltd v Hall 1952, where the winding back of a motor car clock (odometer) by 50,000 miles was held to be material.

In Norman v Bennett 1974 it was held that the presence of a disclaimer (exclusion clause) was a means of avoiding the consequence of the Act as the disclaimer was notification that no statement was being made rather than a defence to a breach of Trades Description Act prosecution. The disclaimer must be prominent and brought to the attention of the purchaser before the sale of goods or service.

The disclaimer will have to be fair and reasonable in accordance to the terms laid down in the Unfair Contract Terms Act 1977

It is now obvious that for an offence to have taken place under the Trades Description Act 1968 there has to be a statement which the defendant knows to be false or was made recklessly. (In this area there are a number of travel cases) such as Wings Ltd v Ellis 1985

Recklessness need not be dishonesty (MFI Warehouses v Natress 1973) and if a statement was true when it was made subsequent events do not render it false.

A trade description offence occurs if a statement is made "in the course of ... services, accommodation or facilities"

Statements made before work is carried out are statements of intention or promise and must be distinguished from those made in relation to work that has been completed. The later come under the Trade Description Act

Test to see if a Trade Description Offence has taken place

1 There must be a trade description

2 The offender must be acting in the course of trade or business

3 Was statement made before work or service was carried out

4 Statement must be knowingly false or reckless

5 Is there a valid disclaimer (See Norman v Hutton 1974)

6 Check the disclaimer (Unfair Contract Terms Act 1977)

Ó Stephen John B Sc(Econ) M Sc M Ed MBA M Phil FIPD

March 24 2000