Chapter Four: The Sale of Goods 1

The Sale of Goods Act 1979 in Britain: Britain The Sale of Goods Act 1979  regulates contracts in which goods are sold and bought. The Sale of Goods Act 1979  regulates contracts in which goods are sold and bought. The Act performs several functions: The Act performs several functions: 1. The Act lays down a small number of compulsory legal rules  (restrictions) are minimal. 1. The Act lays down a small number of compulsory legal rules  (restrictions) are minimal. 2. The bulk of the Act is concerned with presumptions and implied terms  reflect the commercial expectations in the most commonly agreed sales contracts. 2. The bulk of the Act is concerned with presumptions and implied terms  reflect the commercial expectations in the most commonly agreed sales contracts.  In the absence of contrary agreement these terms will govern a contract within the Act's remit.  In the absence of contrary agreement these terms will govern a contract within the Act's remit. The benefits in efficiency and legal certainty have led many jurisdictions to adopt the Act or versions of it in almost all Commonwealth countries. The benefits in efficiency and legal certainty have led many jurisdictions to adopt the Act or versions of it in almost all Commonwealth countries. The Act applies to all contracts where property in 'goods' is transferred or agreed to be transferred for a monetary consideration. The Act applies to all contracts where property in 'goods' is transferred or agreed to be transferred for a monetary consideration. 2

Terms Implied into the Contract of Sale: Terms are implied into contracts by the Sale of Goods Act Terms are implied into contracts by the Sale of Goods Act Breaches of these terms by the seller may give rise to an action for damages Breaches of these terms by the seller may give rise to an action for damages Condition: If the terms are conditions, any breach of them means termination of the contract. Condition: If the terms are conditions, any breach of them means termination of the contract. Warranty: where the breach renders it unreasonable for a buyer to reject the goods (for breach of the implied terms as to description, quality or fitness or sample ) then the buyer can only claim damages for a breach of warranty. Warranty: where the breach renders it unreasonable for a buyer to reject the goods (for breach of the implied terms as to description, quality or fitness or sample ) then the buyer can only claim damages for a breach of warranty.damages This amendment moderates the traditionally strict approach of English Law to contractual breach in a commercial context. This amendment moderates the traditionally strict approach of English Law to contractual breach in a commercial context. 3

Implied Term as to Title: Section 12 incorporates into the contract a term that the seller either has legal title to the property Section 12 incorporates into the contract a term that the seller either has legal title to the property At the time to be sold or At the time to be sold or at the time when property is passed. at the time when property is passed. Two warranties are implied: Two warranties are implied: The buyer enjoys quiet possession of the goods The buyer enjoys quiet possession of the goods The goods will be free from any encumbrances (i.e., a third party having lien over the goods). The goods will be free from any encumbrances (i.e., a third party having lien over the goods).lien These terms can be harsh: These terms can be harsh: e.g., rejection of goods found to be in breach of Section12  will allow the buyer to recover the full price paid, with no allowance for the buyer's use of the goods. e.g., rejection of goods found to be in breach of Section12  will allow the buyer to recover the full price paid, with no allowance for the buyer's use of the goods. 4

Implied Term as to Description: Where the buyer buys goods by description  the goods must correspond with this description. Where the buyer buys goods by description  the goods must correspond with this description.goods Harlingdon v Christopher Hull (legal precedent)  provides  this implied term may only be breached if the buyer relied upon the description. Harlingdon v Christopher Hull (legal precedent)  provides  this implied term may only be breached if the buyer relied upon the description. breached Therefore if the buyer is an expert, reliance may not be established. Therefore if the buyer is an expert, reliance may not be established. 5

Implied Term as to Quality or Fitness: These terms are implied by Section 14 and are only relevant where the seller is acting in the course of a business. These terms are implied by Section 14 and are only relevant where the seller is acting in the course of a business. There is no requirement as to the status of the buyer. There is no requirement as to the status of the buyer. First: Fitness for purpose: First: Fitness for purpose: If the buyer expressly or impliedly makes his purpose for the goods known to the seller  The seller is obliged to make sure the goods provided are fit for that purpose, if it is reasonable for the buyer to rely on the seller's expertise. If the buyer expressly or impliedly makes his purpose for the goods known to the seller  The seller is obliged to make sure the goods provided are fit for that purpose, if it is reasonable for the buyer to rely on the seller's expertise.goods 6

Second: Satisfactory Quality: The quality of the goods sold must be satisfactory The quality of the goods sold must be satisfactory The Act provides an objective test to determine satisfactory quality  “the quality that would be expected by the reasonable man”  with regards price, description and any other relevant factors. The Act provides an objective test to determine satisfactory quality  “the quality that would be expected by the reasonable man”  with regards price, description and any other relevant factors.Act The courts have identified certain factors: The courts have identified certain factors: Second hand goods will attract a lower expectation. Second hand goods will attract a lower expectation. Second hand Second hand Goods of a reputable brand may attract a higher expectation. Goods of a reputable brand may attract a higher expectation. 7

Sale by Sample: Where goods are bought by bulk and the buyer has tested a small number of those goods  the seller is obliged to make sure that every item in the bulk corresponds with the quality of the sample tested. Where goods are bought by bulk and the buyer has tested a small number of those goods  the seller is obliged to make sure that every item in the bulk corresponds with the quality of the sample tested.bulk goodsbulk goods 8

Excluding Implied Terms: These terms will not be incorporated into the contract where they have been expressly excluded, or express terms conflict with them. These terms will not be incorporated into the contract where they have been expressly excluded, or express terms conflict with them.excluded These exclusions may be invalid under the unfair terms in consumer contracts These exclusions may be invalid under the unfair terms in consumer contractsexclusions If the term excluding these implied terms is struck out, the implied term will be effective. If the term excluding these implied terms is struck out, the implied term will be effective. 9

In Consumer Cases: These provisions apply where the buyer is a consumer. These provisions apply where the buyer is a consumer. Within six months, after deliverey, the “buyer” can require the seller to repair the goods, reduce the price, or rescind the contract  where the buyer successfully claims that the goods were not in accordance with the contract at the time of delivery. Within six months, after deliverey, the “buyer” can require the seller to repair the goods, reduce the price, or rescind the contract  where the buyer successfully claims that the goods were not in accordance with the contract at the time of delivery. goods The “seller” can defeat this claim if: The “seller” can defeat this claim if: It is established that the goods did so conform at the time of delivery, or It is established that the goods did so conform at the time of delivery, or The measure is incompatible with the nature of the goods or the nature of the lack of conformity. The measure is incompatible with the nature of the goods or the nature of the lack of conformity. 10

Consumer requires repair or replacement: Consumer requires repair or replacement: The seller must repair or replace the goods within a reasonable amount of time. The seller must repair or replace the goods within a reasonable amount of time.goods This cannot be required if it is impossible or disproportionate in consideration of other available remedies. This cannot be required if it is impossible or disproportionate in consideration of other available remedies. Consumer requires reduction or rescission: Consumer requires reduction or rescission: Only available where repair or replacement is impossible or Only available where repair or replacement is impossible or the seller is taking an unreasonable amount of time to perform these requirements. the seller is taking an unreasonable amount of time to perform these requirements. 11

Legal Title and Property: Passing of property: Property (i.e. ownership) cannot pass unless the goods are ascertained (the actual goods to be sold are identified). Passing of property: Property (i.e. ownership) cannot pass unless the goods are ascertained (the actual goods to be sold are identified).goods Rule 1 : unconditional contract: property passes immediately on contract formation. Rule 1 : unconditional contract: property passes immediately on contract formation. Rule 2 : conditional contract: property passes when the condition is performed. Rule 2 : conditional contract: property passes when the condition is performed. Rule 3 : when it is bound to measure or weigh the goods to ascertain the price, property passes when this is done Rule 3 : when it is bound to measure or weigh the goods to ascertain the price, property passes when this is done Rule 4 : when goods are delivered on sale or on approval, property passes when the buyer adopts the transaction. Rule 4 : when goods are delivered on sale or on approval, property passes when the buyer adopts the transaction. Rule 5 : in a sale of unascertained goods, the property will pass following an unconditional appropriation of goods Rule 5 : in a sale of unascertained goods, the property will pass following an unconditional appropriation of goods These 'rules' can be excluded by contrary implication or express agreement. These 'rules' can be excluded by contrary implication or express agreement. 12

Seller does not have title: Seller does not have title: If the seller does not own the goods, the buyer generally cannot gain title, although he can sue for breach of the implied term as to title. If the seller does not own the goods, the buyer generally cannot gain title, although he can sue for breach of the implied term as to title.breach Seller has voidable title: Seller has voidable title: Where the seller holds voidable title, title can pass to a buyer in good faith. If title is voided before the contract of sale is concluded, title cannot pass. Where the seller holds voidable title, title can pass to a buyer in good faith. If title is voided before the contract of sale is concluded, title cannot pass. 13

Necessities for Minors and Mentally Incapacitated: Section 3(2) provides that if goods are sold and delivered to minors or those mentally incapacitated Section 3(2) provides that if goods are sold and delivered to minors or those mentally incapacitatedgoods The minor will be liable to pay a reasonable price if the goods are necessaries (suitable to the persons' condition of life and actual requirements at the time of contracting). The minor will be liable to pay a reasonable price if the goods are necessaries (suitable to the persons' condition of life and actual requirements at the time of contracting). 14

Miscellaneous: Price : the price is “a money consideration given in exchange for property in goods.” Price : the price is “a money consideration given in exchange for property in goods.” If the price is not agreed, the buyer will be required to pay a reasonable price. If the price is not agreed, the buyer will be required to pay a reasonable price. Specific Goods that perish : the contract is void where they perish before and avoided where they perish after contract formation. Specific Goods that perish : the contract is void where they perish before and avoided where they perish after contract formation. Place of transfer : where location is not stipulated, the buyer must collect the goods at the sellers' place of business. The seller must be prepared to deliver them to the entrance of his place of business. Place of transfer : where location is not stipulated, the buyer must collect the goods at the sellers' place of business. The seller must be prepared to deliver them to the entrance of his place of business.goods 15