Sale of Goods Contracts 1

Question 1

How are all stipulations in sale of goods contracts defined?

Answer 1

S11(3) SGA 1979 - all stipulations in sale of goods contracts are either conditions or warranties.

Question 2

What is the definition of a warranty?

Answer 2

S61(1) SGA 1979 - a stipulation collateral to the main purpose of the contract.

Question 3

What do S11(2) and 11(4) SGA 1979 stipulate?

Answer 3

S11(2) - a buyer may waive breach of condition and elect to treat it as breach of warranty.

S11(4) - acceptance means that a breach of condition can only be treated as a breach of warranty.

Question 4

Explain S15A SGA.

Answer 4

If the buyer would have the right to reject the goods by reason of a term implied by S13 or S14, but,

The breach is so slight that it would be unreasonable for him to reject them,

The breach is to be treated as a breach of warranty, not condition.

Question 5

What are 2 reasons for S15A?

Answer 5

1. Rejection of goods following a minor breach could enable the buyer to put the seller at a disproportionate loss.
2. The buyer could take action in bad faith and unreasonably expose the seller to market risk.

Question 6

What did Cehave v Bremer achieve?

Answer 6

It brought sale of goods law into line with general contract law with relation to innominate terms.

1. Does the contract provide for a right to terminate on the event of breach of the term?
2. If the answer is no, does the contract when correctly construed so provide? Is condition used in its technical sense (Schuler v Wickman)?
3. Does the breach of the relevant term create a right to repudiate or reject? These may arise from statute or on particular contractual terms
4. The term may give rise to a right to breach if it goes to the root of the contract.

Question 7

In what two circumstances might a party to a sale of goods contract terminate for breach?

Answer 7

1. Condition defined or expressed by the parties (i.e. time of the essence in Union Eagle) or implied by statute and breached.
2. Factual consequences of the breach are severe (goes to the root of the contract) - breach of innominate term - Hong Kong Fir Shipping.

Question 8

How does termination operate?

Answer 8

It operates prospectively, meaning that the injured party is released from further performance and the unperformed primary duties become a secondary duty to pay damages.

Termination frees the parties from market risk i.e. if the price drops.

Question 8

What are the 4 situations in which there can be termination?

Answer 8

1. Express termination clause.
2. Construction of contract - e.g. ‘condition’.
3. Statute and case law i.e. time clause
4. Breach of non-specific clause which goes to the root of the contract - intermediate stipulation.

Question 9

Can a time condition ever be an innominate term?

Answer 9

No - Lord Wilberforce - Bunge Corp v Tradax - there is only one kind of breach, namely being late.

Question 10

Which two implied terms are found in S12 SGA 1979?

Answer 10

S12(1) - implied condition that the seller has title to the goods.

S12(2) - implied warranty that the goods are free from encumbrances.

Question 11

What does S13 SGA 1979 say?

Answer 11

It is an implied condition that where there is a contract for the sale of goods by description, the goods will correspond with the description.

If the sale is by sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description.

A sale of goods is not prevented from being a sale by description because the goods were selected by the buyer.

Question 12

When will goods not conform to description?

Answer 12

When they are essentially different from the goods for which the buyer bargained - Varley v Whipp.

Question 13

Will labelling the goods amount to description?

Answer 13

No, following Reardon Smith, the ship was chartered for Osaka but was subcontracted to another yard, Oshima, these were substitute labels and not essential.

Question 14

Which case outlines the strictness of conformity to description?

Answer 14

Arcos v Ronaasen - the staves supplied were 1/16th inch out, due to transportation in humidity - they couldn’t physically conform

This would now be caught under S15A.

Question 15

What is another case on the strictness of conformity to description?

Answer 15

Re Moore v Landauer - the buyer rejected tinned peaches as they were packaged in cases of 24, as opposed to 30.

This was primarily to avoid a bad bargain.

Question 16

What was found regarding conformity to description in Ashington Piggeries?

Answer 16

The production of the harmful chemical did not affect its essential nature, it was the result of a chemical reaction.

Question 17

Explain Harlingdon & Leinster.

Answer 17

The contract was for the sale of a Munter painting.

The buyer had expertise and so relied on their own assessment of the painting rather than the description of the seller.

Even though the painting turned out not to be a Munter.

Question 18

What is the rule from Brewer v Mann?

Answer 18

Identity statements treated as statements of opinion may not give rise to a S13 obligation.

Question 19

Contrast two cases where S13 was found to be infringed and not.

Answer 19

Elder Smith Goldsborough v McBride - a ‘breeding bull’ turned out to be infertile so the condition was breached/

Brewer v Mann - a car was deemed to be a Bentley Speed Six as it retained its original chassis and number despite subsequent part replacements and repairs

Question 21

Under what circumstances does the buyer lose the right to reject?

Answer 21

Governed by S35 SGA 1979;

1(a) When he intimates to the seller that he is accepting the goods.

1(b) When the goods have been delivered and he performs an act in relation to them which is inconsistent with the ownership of the seller.

4 After the lapse of a reasonable period of time without intimating to the seller that he is rejecting them.

Question 22

Explain the decision in Clegg v Anderson.

Answer 22

The buyer made statements that he liked the boat, that it was his decision whether to carry out repairs and that he intended to move the yacht to Portugal.

Moving possessions onto the boat did not suffice either.

These were not intimations of acceptance, nor were they inconsistent with the seller’s ownership.

Question 23

What might constitute an act inconsistent with the seller’s ownership?

Answer 23

Alienating the goods by sub-sale - Hillerns & Fowler.

Granting a security over the goods.

*Handling or using the goods to a degree that it impairs their quality or compromises their existence.

Question 24

What is the importance of S36(6)(a) and which case demonstrated this?

Answer 24

The buyer is not deemed to have accepted the foods because he asks for or agrees to their repair.

J&H Ritchie v Lloyd - R returned a seed drill to L for repair, but L would not tell R what needed repairing. R heard informally that the issue was a very serious one and he was worried that he would not be able to test the drill until the following Spring.

R was within his right to reject the goods.

Question 25

What sort of time period must have elapsed in order for the goods to be deemed rejected?

Answer 25

Pamson Motors - ‘the buyer of a bicycle would have to reject sooner than the buyer of a nuclear submarine’.

The buyer lost his right to reject after driving 140 miles and having the car for 3 weeks.

Question 26

What is the rule from 35A? Why is it a good idea?

Answer 26

The buyer can reject non-conforming goods while accepting goods unaffected by the breach - partial rejection (as long as the breach would be serious enough for them to be rejected outright).

Makes good commercial sense.

Question 27

What is the significance of S34 SGA 1979?

Answer 27

It says that the seller must afford the buyer a reasonable opportunity to examine the goods and ascertain whether they are in conformity with the contract.

Failure to allow examination can be treated as a discharging breach - Lorymer v Smith.