Chapter 5A - Contracts for the sale of goods SOGA79 Flashcards
Contracts for the sale of goods only - Sale of Goods Act 1979
Sale of Goods Act 1979 then amended to the Sale of Goods (Amendment) Act 1994 and the Sales and Supply of Goods Act 1994.
After October 2015 the Consumer Rights Act replaces them and applies without interruption to B2B and many C2C contracts irrespective of the date they were made.
Contracts for the sale of goods
Section 2 (subsection 1):
‘A contract by which the seller transfers, or agrees to transfer, the property of goods to a buyer for a money consideration called the price.’
Contracts falling outside SOGA79 as a consequence of Section 2 (1)
- Service contracts, as they are regulated by the Supply of Goods and Services Act 1982;
- Hire Purchase Contracts, as they are regulated by the Consumer Credit Act 1974
- Hire contracts are regulated by the Supply of Goods and Services Act 1982
- Trading stamp and loyalty voucher collections are regulated by the Supply of Goods and Services Act 1982
- Contracts of barter (swapping one good for another) are regulated by the Supply of Goods and Services Act 1982
- A free gift linked to a sale of goods contract is either a collateral contract or part of the seller’s consideration and are regulated by the Supply of Goods and Services Act 1982
Timing of Sale
Section 2 (1) states the property passes immediately at sale point, or at a date agreed by the parties.
The Price
Case: Foley v Classique Coaches Ltd (1934)
Section 2 (1) refers to "money consideration". Barter, changing one product for another, is not considered price.
Price is usually fixed by the contract. It may also be determined by a course of dealings between the parties.
If no price is mentioned or implied, purchaser will be obliged to pay a reasonable price.
Case: Foley v Classique Coaches Ltd (1934)
A bus company agreed to purchase petrol from at price agreed ‘from time to time’. They bought for a period of 3 years. Company then wanted to repudiate on the grounds that it was incomplete.
Held: company couldn’t do this. The course of dealings over the 3 years, they therefore had to pay reasonable price.
Statutory duties of the seller
Duties are enshrined in the SOGA79 and are as follows:
Section 27: basic obligation to deliver the goods, make them available; and on the buyer to accept and pay them.
Breach of condition entitles purchaser to repudiate the contract and claim damages.
Breach of a warranty entitles purchaser to claim damages.
Implied Terms (Sections 12 -15)
These sections are implied by statute into every sale of goods contract
Implied Terms
Section 12 (1) - Right to transfer goods and transfer title
Case: Rowland v Divali (1923)
The seller has the right to transfer goods and transfer title.
Condition will be breached if the goods have previously been stolen or if they are subject to hire or hire purchase agreement. In this case, purchaser can reclaim the price and the goods returned to true owner
Case: Rowland v Divali (1923)
R bought car from D and used it for a period of months. It was then discovered it was stolen and had to be returned to the owner.
Held: R recovered the purchase price in full. Despite the car having been used and suffered depreciation.
Implied Terms
Section 12 (2) Contains 2 implied warranties: Charge of Incumbrance and Quiet Possession
Case: Microbeads AG v Vinhurst Road Markings (1975)
Charge of Incumbrance - goods must be free from encumbrance when they are to be sold (mortgage is an example of incumbrance.
Quiet Possession - purchaser is to enjoy quiet possession of the goods
Case: Microbeads AG v Vinhurst Road Markings (1975)
Buyer bought road-marking equipment. A third party than obtained a patent for the equipment, which prevented purchaser from using it.
Held: interference to buyer’s quiet possession, so he was entitled to damages
Case: Rubicon Computer Systems v United Paints (2000)
R contracted to provide U with computers. After they were installed, there was a dispute between them. U didn’t know that R had installed an immobilising device in the computers, which made the computers unusable.
Held: Breach of warranty for quiet possession and U was entitled the contract price.
Implied Terms
Section 12 (3) and (5) seller passes on title he possesses.
When seller is uncertain about their title, they pass on only rights they possess. Buyer must be made aware of the risk.
Implied warranty here is that quiet possession shouldn’t be disturbed and that full defects have been fully disclosed.
Implied Terms
Section 13 - Reliance upon description of goods
Section 13 (1) Case: Harlingdon v Christopher Hull Fine Art (1991)
Case: Beale v Taylor (1967)
Section 13 (1) Where goods are sold by description, it is an implied condition that they correspond to the description.
Case: Harlingdon v Christopher Hull Fine Art (1991)
Seller sold to oil paintings for £6,000 stating they were Gabrielle Munter. Both parties were London dealers, but only buyers were specialists in German Impressionism.
Buyers sent an employee to check the paintings and then stated the sellers knew nothing about the paintings or Munter. Then it came to light they were fake and worth less than £100. Buyers rejected the paintings under Section 13 (1).
Held: buyers couldn’t reject paintings. Sellers had made a detailed description, but purchaser didn’t rely on them. And here description was not a condition in the contract.
Case: Beale v Taylor (1967)
Car was advertised as a Triumph Herald. Buyer saw the car before purchase. Later discovered the car was actually 2 parts that had been welded together. Rear part was correctly described, but the front part was another car.
Held: Claimant was entitled to damages. Even though he had inspected the car, he had relied on the description.
Implied Terms
Section 13 - Reliance upon description of goods
Section 13 (1) Description includes quantity, weight, size and packing, but not price.
Case: Moore and Co. v Landauer and Co (1921)
Case: Arcos v EA Ronaasen & Son (1933)
Case: Moore and Co. v Landauer and Co (1921)
Seller agreed to sell 3000 tins of peaches in cases containing 30 each. The right quantity was delivered, but in cases of 24. Buyer wished to reject the whole.
Held: He was entitled as it didn’t match description.
Case: Arcos v EA Ronaasen & Son (1933)
Purchaser ordered staves 1/2 inch thick. Some measured 9/16 of an inch.
Held: Buyer could reject the whole.
Implied Terms
Section 13 - Reliance upon description of goods
Non-consumer sales
Case: Peter Darlington Partners v Gosho Co (1964)
Case: Reardon Smith v Hansen (1976)
Only in non-consumer sales, if breach of Section 13 is so slight, the breach of a term may be seen as a breach of a warranty. Therefore damages will be awarded, but buyer can’t reject the goods.
Case: Peter Darlington Partners v Gosho Co (1964)
Sale to supply pure birdseed. It was only 98% pure.
Held: it was the highest quality in the market, buyer was obliged to accept and pay the full value.
Case: Reardon Smith v Hansen (1976)
Ship to be built in ‘yard 354’. It met all other requirements but was built elsewhere. Buyer refused to accept deliver.
Held: buyer was obliged to accept the ship. Place it was built was considered immaterial.
Implied Terms
Section 14 - Quality and fitness of the goods
Caveat Emptor
Case: Stevenson v Rogers (1999)
Caveat Emptor (let the buyer beware). This means the buyer has the risk, so they must ensure they are satisfied with the quality of the goods for their purpose.
In B2B however 2 conditions must be satisfied: the goods are of satisfactory quality (Section 14 (2)) and that they are fit for purpose, either specific or usual (Section 14 (3)).
Case: Stevenson v Rogers (1999)
Defendant had been a fisherman for 20 years and sold a fishing boat to the claimant. Boat was not being used as part of the defendants stock. Therefore claimant stated the boat was not of satisfactory quality.
Held: Court of Appeal held boat was sold in the coarse of defendant’s business. There was no need to prove regularity of sales, sporadic sales are acceptable.
Implied Terms
Section 14(2)
As amended by the Sale and Supply of Goods Act 1994.
States that if seller sells goods in the coarse of business there is an implied condition that the goods are of satisfactory quality.
It doesn’t include defects that were brought to the buyer’s attention, or defects that should have been spotted by the buyer if he had examined the goods.
Implied Terms
Section 14(2)A
Case: Millars of Falkirk v Turpie (1976)
Satisfactory quality means that goods meet the standard a reasonable person would regard as such, taking account any description of the goods
Case: Millars of Falkirk v Turpie (1976)
Defendant bought new Ford Granada and traded in a Zodiac as part exchange.
Granada’s power engine steering system leaked oil on defendant’s garage floor.
Claimant collected the car, repaired it and redelivered. But it happened again. It would have been a easy repair by replacing the steering system, which would have cost £25. Claimants wanted to reject though.
Held: Car was considered to be of ‘merchantable quality so buyer couldn’t reject under Section 14 (2). The car didn’t cause danger and was an easy repair.
However claimant would have been able to reject nowadays under Sections 14 (2) A and B
Implied Terms
Section 14(2)B
Case: Rogers v Parish (1987)
Case: Bartlett v Sidney Marcus (1965)
(Cases before Supply and Sale of Goods Act 1994)
Quality of goods include their state and condition.
Quality means:
- fitness for purpose for which goods of the kind in question are commonly supplied
- appearance and finish
- freedom from minor defects
- safety
- durability
Even though this cases are before the Supply and Sale of Goods Act 1994, they help explain.
Case: Rogers v Parish (1987)
Buyer bought expensive car for £16,000. Within 6 months engine became defective and bodywork began deteriorating. Purchaser wished to reject the vehicle.
Held: he was entitled to do so, as vehicle was not of merchantable quality
Case: Bartlett v Sidney Marcus (1965)
Second hand car sold with defective clutch, but buyer was warned and thus price reduced. But repair was far more expensive than either part thought.
Held: Car was of merchantable condition, as it was a second hand car, and such defects are expected to appear, and there had been an allowance agreed between the parties to account for this.
Implied Terms
Section 14(2)B
Case: Trac Time Control v Moss Plastic Parts (2004)
(Cases after the Supply and Sale of Goods Act 1994)
Case: Trac Time Control v Moss Plastic Parts (2004)
Defendant supplied lighting manufacturer what he described as high quality polycarbonate mouldings’. There were broken floodlights cause by the fact that it wasn’t and they were returned by clients to claimant. Claimant sued defendant for breach.
Held: Defendant was liable because goods didn’t match description according to Section 13 SOGA79; they weren’t of satisfactory quality under Section 14(2); the goods were not fit for purpose under Section 14 (3)
Implied Terms
Section 14(2)B Meaning of satisfactory
Case: Barry Shine v General Guarantee (1988)
Case: Bramhill v Edwards (2004) Caveat emptor
Case: Barry Shine v General Guarantee (1988)
Mr Shine bought an enthusiasts car. He asked for rust warranty and then discovered the car had been written off for being submerged in water for 24 hours. So he wanted to terminate the agreement.
Held: Court of Appeal held the car was unmerchantable.
Case: Bramhill v Edwards (2004)
No breach of Section 14 that the car sold had a width of 102 inches, exceeding the UK regulation of 100 inches,. Other than that there were no defects to the car. Reasonable buyers should be aware there are a number of cars that exceed the maximum width in the regulations for sale and on the roads. There was also evidence that the car would be able to be insured,
Held: Edwards, the defendant, was successful in claiming caveat emptor, as the buyers were aware of the UK regulations before rescinding the contract.
Implied Terms
Section 14(2)B Meaning of satisfactory
Instructions of goods and buyer mistreatment of goods
Case: M/S Aswan Engineering v Lupdine Ltd (1987)
Seller is not liable for any damage incurred by buyer’s mistreatment of goods, or if they don’t follow the instructions that come with it.
Case: M/S Aswan Engineering v Lupdine Ltd (1987)
Sellers supplied waterproofing materials in plastic pails. The collapsed and spilled the contents, as it had been stacked by seller in piles of 6 pails in bright sunshine and high temperatures.
Held: seller not liable, as buyer didn’t follow storage instructions that came with the product.
Implied Terms
Section 14(2C) buyer is obliged to examine goods
Buyer is obliged to examine the goods.
A buyer will lose the right to complain if:
- seller pointed out the goods were faulty
- buyer checks the goods but fails to spot the obvious defect.
Implied Terms
Section 14(3) Fir for purpose
Case: Grant v Australian Knitting Mills (1936)
Implies that the purchased goods will be fit for the purpose they are meant for.
Case: Grant v Australian Knitting Mills (1936)
Underpants bought from shop, but they contained a chemical that should have been removed before the sale, so the buyer contracted dermatitis.
Held: underpants were not of merchantable quality.
Implied Terms
Section 14(3) Fir for purpose Buyer's special requirements
Case: Griffiths v Peter Conway (1939)
Case: Slater v Finning (1996)
If the buyer has any special requirements, they must be made known to the seller.
Case: Griffiths v Peter Conway (1939)
Buyer bought tweed coat. Defendant didn’t know buyer had extremely sensitive skin, so he contracted dermatitis.
Held: Defendants were not liable, coat was fit for ordinary wear.
Case: Slater v Finning (1996)
Marine Engineers Firm supplied camshaft for a boat, which they didn’t know had an unusual tendency to ‘torsional resonance’. It caused damage to the camshaft.
Held: damages refused, as camshaft was suitable for use in other boats.
Implied Terms
Section 14(3) Fit for purpose Buyer's special requirements
Case: Ashington Piggeries v Christopher Hill (1971)
Case: Ashington Piggeries v Christopher Hill (1971)
Buyers were manufacturers of animal feedstuffs. Were asked to produce mink following a specific formula. It included herring, which the buyers bought . It was then contaminated with a chemical which made the meal poisonous. At this point contamination could not be suspected.
Held: Section 14(3) had been breached, buyers relied on sellers skill and judgement, even thought they supplied the formula, the company were the experts and should have taken precautions.
Implied Terms
Relationship between Section 14(2) and Section 14(3)
Case: Jewson Ltd v Kelly (2003)
Case: Jewson Ltd v Kelly (2003)
Kelly acquired a former school building, which he was going to convert into flats. He bought 12 electric boilers from Jewson Ltd but didn’t pay them. Jewson sued, and Kelly claimed for damages for breach of Sections 14(2) and (3) arguing that boilers relied upon peak electricity, thereby reducing the Standard Assessment Procedure energy ratings for the flat, and therefore his ability to market the flats. This made him fail payments on the loan.
There was nothing unsatisfactory with the boilers, but Kelly had made it clear the boilers were to be placed in flats for sale, but there was nothing discussed or asked about electricity ratings, but this was partial reliance on skills of seller.
Held: boilers were fit for purpose and were there was no breach of Sections 14 (2) and (3)
Implied Terms
Who can buyer sue under Sections 14(2) and (3)?
Buyer can sue supplier for sale of defective goods; supplier can sue manufacturer, if necessary.
Implied Terms
Strict Liability
Under Section 14 liability as a whole is strict, that means there will be liability even if there is no direct fault of the seller.
Non-consumer sales only, if the breach of Section 14 is so slight that is seen as unreasonable for the buyer to reject goods, Section 15 states breach of the implied term may be regarded as a breach of a warranty. Which means damages will be awarded, but goods can’t be rejected.
Implied Terms
Section 15 - Sales by Sample
Case: Godley v Perry (1960)
Applies to both B2B and B2C.
Implies the following conditions:
- bulk must correspond to the sample in quality
- buyer will have reasonable opportunity of comparing bulk and sample
- goods will be free of defect that are not apparent upon reasonable inspection of sample.
Case: Godley v Perry (1960)
Retailer offered a consignment of catapults from a manufacturer. He tested one by pulling back the elastic, and there were no defects. A boy bought a catapult, it broke causing him to lose an eye.
Held: boy could recover damages from retailer under Section 14(2) and (3). Retailer could recover damages from wholesaler under Section 15.
Effect of purported exclusion clauses: Unfair Contract Terms Act 1977 Section 3(2)
Any attempt by a business to exclude the implied conditions within Sections 12-15 of SOGA79 is void if the buyer purchases as a consumer pre October 2015, or must be ‘reasonable’ in a B2B transaction.
Risk and transfer of title/property/ownership of goods (SS16-29)
It’s important to establish who carries the risk at a certain time, therefore knowing at what point ownership is transferred is crucial.
Risk transfers with ownership.
Specific Goods
These are goods defined and agreed upon the time the contract is made.
Unascertained goods
Goods not specifically identified at the time of contract, because they are still part of a larger bulk of goods at that point.
Future Goods
Goods that didn’t exist at the time the contract was made, or were not in the possession of the seller.
Example: a special order
Specific goods - passing of property (ownership/title)
Section 17
Section 17 states that property passes when the parties intend it to pass.
Regard is given to the terms of the contract, conduct of the parties and circumstances of the case.
If no intention is expressed or implied, then Section 18 will come into play.
Specific goods - passing of property (ownership/title)
Rule 1
Case: Tarling v Baxter (1827)
Rule states that property passes to buyer when the contract is made, and it is immaterial if payment has been made or goods delivered.
Which means byer may become the owner without having paid or having possession of the goods.
Case: Tarling v Baxter (1827)
A farmer sold haystack, but it burned down before the buyer took it.
Held: purchaser must still pay the price, as ownership passed when contract was made.
Specific goods - passing of property (ownership/title)
‘deliverable state’
Section 61 states that ‘deliverable state’ means that it must be in such a condition that the buyer would under the contract be bound to take delivery of them.
Case: Dennant v Skinner and Collom (1948)
Claimant sold ca by auction . Buyer was a swindler and gave a false name and address and asked to take the car in return of a cheque. The claimant allowed, but made him sign a document stating the car would only pass to him after cheque was met. Buyer sold the car, which was then resold to defendant.
Held: intention of parties as expressed in this document was too late to prevent property from passing, as contract took place on the fall of auctioneer’s hammer. And according to Rule 1 property passes when contract takes place, despite payment or possession.
Specific goods - passing of property (ownership/title)
Rule 2
Where there is a contract for the sale of specific goods, and seller is bound to do something to the goods to make them in a deliverable state, then property doesn’t pass until that has been done and buyer has been given notice that it has been done.
Specific goods - passing of property (ownership/title)
Rule 3
Where there is a contract for the sale of specific goods, but seller has been bound to weigh, measure, test or do some other act, in order to ascertain the price, property doesn’t pass until that has been done and buyer has been given notice that it has been done.
Specific goods - passing of property (ownership/title)
Rule 4
When goods are delivered to buyer on approval, or on sale-to-return, ownership passes to the buyer when they signify approval or acceptance, or does an act that adopts the transaction (such as reselling the goods).
Ownership also passes if buyer retains the goods without notice of rejection, for more than a reasonable time.
Case: Elphick v Barnes (1880)
A horse was handed over on approval for 8 days. It died on the third day.
Held: risk remained with seller, as ownership would only pass after the stipulated time.
Unascertained or Future goods - passing of property (title/ownership)
Section 16
Section 16 states that in a contract for the sale of ascertained goods, no property can be transferred unless and until the goods are ascertained.
When it is unclear when parties intend ownership to pass, Section 18 Rules come into play.
Unascertained or Future goods - passing of property (title/ownership)
Rule 5
Where there is a contract for the sale of unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller or by the assent of the buyer or by the buyer with assent of the seller. Assent may be expressed or implied and may be given before the appropriation.
