1. Sale of Goods: The Contract of Sale

Question 1

What governs a sale?

Answer 1

Sale is governed by the Sale of Goods Act 1979, general common law principles, and general contractual principles.

NB Here the law develops slowly because consumers tend not to litigate — relatively few high level decisions.

Question 2

s 2(1) SOGA 1979

Answer 2

A contract for the sale of goods is:

s 2(1) SOGA 1979: “A contract of sale of goods is a contract by which the seller transfers or agrees to transfer the property in the goods to the buyer for a money consideration called the price.”

Question 3

How is a ‘sale’ distinguished from an ‘agreement to sell’?

Answer 3

Both of these constitute a contract of sale of goods:
⁃ s 2(4) - where the property in the goods is transferred = sale
⁃ s 2(5) - where the property in the goods is to be transferred at a later time or subject to a future condition = an agreement to sell.

Question 4

What does it mean when a condition in a conditional contract may be either suspensive or resolutive?

Answer 4

When the condition is suspensive, performance of the obligation is delayed until the condition is purified

Where the condition is resolutive, the obligation is already in force and purification of the condition brings the obligation to an end.

Question 5

What are the 5 key elements to the contract of sale?

Answer 5

There are five key elements:

1. A contract
2. Two parties: a buyer and a seller
3. Transfer of property
4. Goods
5. The price

Question 6

What are the general rules to constitute a valid contract of sale?

Answer 6

General principles of contract law will apply: there must be consensus in idem; and parties must have capacity.

⁃ s 3 - in relation to legal capacity, the general law applies
⁃ s 4 - there is no particular form for a contract for the sale of goods: it can be written , oral or constituted by the conduct of the parties.

Question 7

What is a ‘trader’?

Answer 7

Defined in reg 4 - as a person acting for purposes relating to that person’s trade, business, craft or profession. Whether acting personally or through another person acting in the trader’s name or on the trader’s behalf (I.e. An agent). The trader is bound to provide the consumers with specific information about the transaction. (No obligation where transaction is off premises and less than £42). The consumer will not be bound until such information is provided.

Question 8

What obligations is a trader under following the coming into force of The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations the “2013 Regulations” on 13 June 2013?

Answer 8

Following the coming into force of The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations the “2013 Regulations” on 13 June 2013 a trader is under a number of obligations to a consumer in on-premises, off-premises or distance contracts in relation to the sale of goods, services and digital content.

Question 9

What contracts do the 2013 regulations NOT apply to?

Answer 9

Contracts for the supply of foodstuffs, beverages or other goods intended for current consumption in the household and which are supplied by a trader on frequent or regular rounds to the consumer’s home, residence or workplace – see reg 6 or the sale of a medicinal product under prescription – see reg 7(2).

Question 10

Who is a ‘consumer’?

Answer 10

Defined in reg 4 – as an individual acting for purposes which are wholly or mainly outside that individual’s trade, business, craft or profession.

Question 11

What is an ‘on-premises contract’?

Answer 11

defined in reg 5 – as a contract between a trader and consumer which is neither a distance contract or an off-premises contract. See below re distance contracts.

Question 12

What is an ‘off-premises contract’?

Answer 12

defined in reg 5 - generally not entered into in the business premises of the trader. On premises contract will include many regular sales of goods – where the contract is entered into between the parties who are in the trader’s business premises.

Question 13

Reg 9(1) of the 2013 Regulations

Answer 13

provides that before a consumer is bound by an on-premises contract the trader must give or make available to the consumer certain information set out in Schedule 1 in a clear and comprehensible manner, if that information is not already apparent from the context.

Question 14

What is set out in Schedule 1?

Answer 14

The information set out in Schedule 1 includes the main characteristics of the goods, the identity of the trader, the total price of the goods including taxes, arrangements for payment, delivery, performance and the time of delivery and the trader’s complaint handling policy.

Question 15

What does Reg 9 NOT apply to?

Answer 15

Reg 9 does not apply to a contract which involves a day to day transaction and is performed immediately the contract is entered into – reg 9(2).

Question 16

Who is a buyer and a seller?

Answer 16

The parties of the contract are defined in 
s 61(1): 

• a buyer is a person who is agreeing to buy goods
• a seller is a person who is agreeing to sell goods.

Question 17

How does s61(1) define a consumer contract?

Answer 17

s 61(1) defines a consumer contract in terms of the Unfair Contract Terms Act 1977, section 25(1):

a ‘consumer contract’ is one where
⁃ “(a) one party to the contract deals, and the other party to the contract (‘the consumer’) does not deal or hold himself out as dealing, in the course of a business, and
⁃ (b) in the case of a contract such as is mentioned in section 15(2)(a) of this Act [a contract which relates to the transfer of the ownership or possession of goods from one person to another];, the goods are of a type ordinarily supplied for private use or consumption.”[ So this paragraph is only required for a legal person.]
⁃ Note that UCTA has been amended to include s 25(1A):
“Where the consumer is an individual[ A ‘natural person’.], paragraph (b) in the definition of “consumer contract” [above] must be disregarded”

Question 18

What is the requirement that a sales of goods contract must be for the transfer of property?

Answer 18

The contract must be for the transfer of property in goods [So SOGA does not apply to provision of services or hire of goods.].

Section 2(2): “There may be a contract of sale between one part owner and another.[ So if an item is owned by two people, A can transfer his part ownership in the goods so that B becomes the full owner.]”

Section 2(4): “Where…the property in the goods is transferred from the seller to the buyer the contract is called sale.”

Section 2(5): “Where… the transfer of the property in the goods is to take place at a future time… the contract[ This is still a contract for the sale of goods.] is called an agreement to sell.”

Question 19

How are ‘goods’ defined?

Answer 19

s 61(1): "'goods' includes... all corporeal moveables except money; and in particular 'goods' includes emblements, industrial growing crops, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale"
⁃	This definition is "virtually all-embracing" but there are exceptions and problem areas 

Incorporeal property such as copyright cannot be goods, nor can heritable property.

Question 20

How does s 5 divide goods?

Answer 20

s 5 divides goods into “existing” and “future” goods. The former are goods owned or possessed by the seller at the time of the contract of sale.

Question 21

What is the difference between specific and ascertained goods?

Answer 21

Goods may also be specific or unascertained, specific goods are identified and agreed upon at the time the contract is made (s 61(1)) and unascertained are neither but there can be an agreement to sell as this gives the buyer only personal right against the seller.

Question 22

Beta Computer Systems (Europe) Ltd v Adobe Computer Systems (Europe) Ltd 1996

Answer 22

(Software) Seller selling software to a buyer. This included elements of sale of goods and also of licence to use the software. Was this a “sale of goods”? Court held that this was not a sale of goods - it was a sui generis (innominate) contract, which had elements of ‘sale’ and of ‘licence’.

Question 23

St Albans DC v International Computers Ltd [1996]

Answer 23

(Software) Held that computer discs were tangible thus constituted goods, but the computer program, as intangible software, does not constitute goods.[][ So while part of the contract may appear as sale of goods, if another aspect of the contract is not sale of goods then it may be classified as an innominate contract.] NB his comments were obiter. The case law is conflicting and it is not possible at present to provide any definitive answer to the question of whether software constitutes “goods”.

Question 24

Robinson v Graves [1935]

Answer 24

(Supply of services)
Defendant commissioned an artist to paint a portrait for the payment of 250 guineas. The defendant repudiated the contract before the portrait was concluded and the artist raised an action seeking payment of the 250 guineas. Court held that there was a contract for work and labour (services), not for the sale of goods since the substance of the contract was the skill and labour that would be exercised in creating the picture, rather than to transfer property in goods.

Question 25

What is the price requirement under s8?

Answer 25

Money must be given; this means that barter and exchange of goods are not covered by the sale of goods act.

The price may be set out in the contract or may be left to be fixed in a manner agreed by the contract or may be determined by the course of dealing between the parties (s 8(1)).

If no price is stipulated, then the buyer must pay a “reasonable price” (s 8(2)+8(3)). This is a matter of fact rather than law and depends upon the circumstances of the case:

Question 26

Glynwed Distribution v S Koronka & Co 1977 SC 1

Answer 26

(Price)
Sellers offered to sell steel to the buyers. Buyers thought they were buying British steel (~103.50 per tonne). Pursuer’s thought they were selling foreign steel which was more expensive (~149 per tonne). Buyers refused to pay the more expensive price. Court held that the market value was not determinative in working out the ‘reasonable price’ - it had to be fair and just to both parties considering the circumstances etc. And circumstances might require a balancing of advantages and disadvantages between the seller and buyer.

Question 27

What is the requirement of time in a sale of goods contract?

Answer 27

If a contract provides that time is of the essence then late performance by one party will entitle the other party to rescind. In a contract of sale, unless the terms of the contract indicate that the parties intended otherwise, stipulations as to time of payment are not of the essence. Whether any other stipulation as to time is or is not of the essence is a matter of interpretation of the terms of the contract. The appropriate remedy where time is not of the essence is damages rather than recession.