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ENGLISH
COMMERCIAL LAW
By Dr. A.E. Platsas

School of English Law

Dr. Antonios E. Platsas


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WELCOME NOTE

Dear all,

Welcome to the module of English Commercial Law. This is a module which touches
upon the core of English private law. The module seeks to give you advanced
knowledge on the main areas of English commercial law. We will engage ourselves
with the jewel of English commercial law, the Sale of Goods Act 1979 (as amended);
competition law, consumer law (now an autonomous offshoot of commercial law due
to the influences of European law) and e-commerce law.

English commercial law is generally perceived as one of those intellectual flagships


of English law as a whole. Do recall that the Englishman has been a trader in his
heart. Him having excelled in commerce meant that he would excel in private law.
The sophistication of his commercial laws has caused his laws to be the setting
paradigm for the laws of other jurisdictions, jurisdictions which did not have to be
connected with the old British Empire. The Scandinavians for instance would draft
much of their commercial law based on the English legal example.

Thus, the main advantage of this module is that the module will allow you to expand
on your knowledge in the leading field of commercial law. In addition, the field of
commercial law provides an excellent background for your research. I invite you to
take advantage of this fact and make the most out of this module.

In the hope that I will immerse you in the particulars and the intricacies of what is one
of the most dynamic areas of English Law, Commercial Law, I would like to wish you
all the best in this module and your studies as a whole.

Antonios Platsas,
LLB, LLM., PhD, PG Cert, Reader in Law, FHEA, Advocate.

INDEX

Dr. Antonios E. Platsas


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PART I SALE OF GOODS LAW

Section 1 - The Commercial Contract of Sale

Section 2 - The Duties and Responsibilities of the Parties

Section 3 - The Requirements Necessary to Enforce the Contract of Sale

Section 4 - The Competing Claims to the Ownership of Goods

Section 5 - The Remedies Available to the Seller and the Buyer

PART II CONSUMER LAW

Section 6 - Consumer Protection

Section 7 - Consumer Credit Law and Regulation

PART III E-COMMERCE LAW

Section 8 - Online Commerce

PART IV COMPETITION LAW

Section 9 - Theoretical Foundations of Competition Law

Section 10 - Practical Aspects of EC/UK Competition Law

Dr. Antonios E. Platsas


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Indicative Reading List

Sale of Goods

JN Adams, Atiyahs Sale of Goods (12th edn Pearson, Harlow 2010)


R Bradgate, Commercial Law (3rd edn Butterworths, Chippenham 2000)
E McKendrick (ed), Goode on Commercial Law (4th edn Penguin, London
2010)
LS Sealy and RJA Hooley, Commercial Law Text, Cases and Materials (4th
edn OUP, Oxford 2009)

Consumer Law

M Furmston and J Chuah, Commercial and Consumer Law (Pearson, Harlow


2010)
G Woodroffe, Consumer Law and Practice (8th edn Sweet & Maxwell, London
2010)
JK MacLeod, The Law Relating to Consumer Sales and Financing of Goods
(2nd edn Routledge Cavendish, London 2006)

E-Commerce Law

P Todd, E-commerce Law (Cavendish, London 2005)


D Bainbridge, Introduction to Information Technology Law (Longman, London
2007)
FF Wang, Law of Electronic Commercial Transactions (Routledge Cavendish,
London 2010)

Competition Law

R Whish, Competition Law (6th edn OUP, Oxford 2008)


M Furse, Competition Law of the EC and UK (6th edn OUP, Oxford 2008)
B Rodger and A MacCulloch, Competition Law and Policy in the EC and UK
(4th edn Routledge Cavendish, Abingdon 2008)

Dr. Antonios E. Platsas


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PART I SALE OF GOODS LAW

Section 1 - The Commercial Contract of Sale

Outline of this Section


1.0. Outcome
1.1. The Characteristics of the Contract of Sale
1.2. The Most Important non-sale of Goods Transactions
1.3. Activities

1.0 - Outcome
The students must show that they understand the differences between a contract of
sale regulated by the Sale of Goods Act 1979 and the non-sale of goods contract.

1.1 - The Characteristics of the Contract of Sale


The types of contracts that we will be dealing with in this course are those that
regulate the sale of goods. No formalities are required to create contracts for the
sale of goods and they may be written or oral. The governing statute will be the Sale
of Goods Act 1979 (SoGA 1979), as amended. We begin by defining the contract of
sale.
The defining characteristics of the contract of sale are contained in s 2 of the SoGA
1979. The contract of sale may be conditional, s 2(3), a future sale, s 2(5), or an
agreement to sell, s 2(6). s 2(1), delineates the following requirements:
A seller and a buyer
Both the seller and the buyer must have capacity and be committed to selling and
buying. This is evidenced by an intention to pass property under the contract.
Weiner v Harris (1910) LKB285 demonstrates the procedures the court will follow in
determining whether the parties are sellers and buyers.
The transfer or agreement to transfer property
Property is defined under s 61 as the general property in the goods and means the
transference of the absolute legal title or ownership. Contracts of sale must be
distinguished from those contracts where a lesser interest is transferred. Examples
of lesser interests are possessory interests such as bailment. See the cases of
South Australia Insurance v Randell (1869) LR3PC101 and Mercer v Craven (1994)
CLC328HL where the courts had to decide whether absolute legal title or a mere
possessory interest was transferred.
Money consideration

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Money refers to the unit of account issued for the purpose of legal tender within a
legal jurisdiction. Problems arise where goods are sold for other than money or,
where money is used in conjunction with goods such as the part exchange of a car.
See the cases of Esso Petroleum v Customs & Excise Coms (1976) 1ALLER117.
Aldridge v Johnston (1857) 7E&B885. Flynn v Mackin (1974) IR101.
A price
The price is a crucial term of the contract and failure to agree on the price may be
evidence that a contract has not been concluded. S 8(1) allows the contract to fix the
price, or left to be fixed in a manner agreed, or determined by a course of dealings
between the parties. Where none of these apply, s 8(2) requires the buyer to set a
reasonable price. S 9 determines those situations where the price is to be set by a
third party. See the cases of May v Butcher (1934) 2KBHL and Foley v Classique
Coaches (1934) 2KB1CA where the courts had to decide if the parties had actually
fixed a contract price or not.
Goods
S 5, distinguishes goods in the following way:
1 Existing goods, these are goods that are in the possession of the seller at the
time of the contract.
2 Future goods, those goods that have to be manufactured or acquired by the
seller pursuant to the contract.
3 Specific goods, those goods that are identifiable in a complete form at the time
of the contract.
4 Unascertained goods, those goods that are not specific and are sold by a
generic description.

S 61 defines the types of goods that fall within the above classifications. Recently
problems have emerged regarding the classification of computer software. See the
case of St. Albans CC v International Computers Ltd. (1996) 4ALLER481

1.2 - The Most Important non-sale of Goods


Transactions

Those contracts that do not satisfy the requirement of s 2(1) will not be classified as
sale of goods contracts. It is therefore crucial to determine the nature of the contract
because in the event of it is not a sale of goods contract then the contract will be
regulated by a different statute that may not be as advantageous as the Sale of
Goods Act 1979. The main statutes regulating non-sale of goods are the Supply of
Goods and Services Act 1982 along with the Supply of Goods (Implied Terms) Act
1973.

The most important non-sale of goods transactions are the following:

Hire Purchase
The object of a hire purchase is to supply goods on credit terms coupled with a
security for the supplier. The legal form of a hire purchase agreement is of a hiring or
bailment of the goods by their owner (bailor) to the hirer (bailee) with the hirer being
granted an option to purchase the goods at the end of the hire period. See the case

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of Helby v Matthews where the court was faced with the task of determining whether
a hire purchase agreement existed or not.
Work and Materials
As has been mentioned, the object of the contract of sale is the transfer of property
from the seller to the buyer. The object of a contract of work and materials is the
performance of a service for the customer. The distinction between the two becomes
blurred in instances of those contracts where both goods and services are
transferred. See how the courts have resolved distinctions such as this in the
following cases: Clay v Yates, Lee v. Griffin, Robinson v Graves, Hyundai Heavy
Industries v Papadopoulos, Beta Computer systems v Adobe.
Exchange and Barter
Where the consideration for a contract is not money the contract will be referred to as
either an exchange or barter. In the context of consumer contracts goods are often
supplied in conjunction with marketing promotions such as coupons or vouchers.
The courts in these instances will look to the intention of the parties; see the cases of
Esso Petroleum v Customs and Excise, Chappell & Co. v Nestle Ltd.
Hire and Bailment
A bailment and hire contract is characterised by a possessory interest in the goods
as opposed to a legal interest. In this capacity no ownership in the goods is
transferred. See the following cases where the courts have had to determine whether
the interest transferred was a possessory interest or whether the property in the
goods had been transferred: Clough v Martin, Leigh & Sullivan v Aliakmon Shipping,
Lilley v Doubleday.

1.3 - Activities
Reading
1 Bradgate, Commercial Law (3rd Edition Butterworths), Chapters 7, 8, 19 or
2 PJ Omar, Contracts for the sale of goods - French and British approaches
ICCLR 1998, 9(5), 141-145 (WestLaw)
Abstract: Although this module does not concern itself with French law, this
article explains in a simple way important areas in the Sales of Goods Act
1979. By comparing the Act with French law, an understanding through
example can be found.

Activity Number 1
A contract is a contract, and in application there is no difference between a contract
to build a house and a contract to sell a television. Discuss this statement in light of
the form in which contracts are classified in English law.
Activity Number 2
Identify the legal nature of the following contracts:
NOTE: These questions raise issues of quality and the passing of risk. You are not
required to discuss these issues.
11. Mike takes his watch in for a service. The jeweller performs the service and
invoices Mike for the removal of rust from inside the watch, replacing a new
battery, replacing a new watch face, and for the replacing of worn links in the

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watchstrap. The links prove to be defective and the watch falls of Mike's wrist
smashing to the ground.
22. Judy purchases a satellite TV dish from Jake a local dealer. The dish is
priced at 99 but the dealer advertises that for an extra 30 they will install
the dish. Judy agrees to pay 129 and have the dish installed by Jake. Judy
pays the full price in the store and the dish is delivered later that day. The
next day Jake declares insolvency and is now unable to install the dish.
33. Bill decides to build his own "Super" computer that would exceed the
capabilities of any commercially obtainable computer. This would involve
buying a kit from the manufacturer that contains the body, motherboard, CPU,
hard drive, and memory. Additions such as a modem, DVD and CD-Writer
would have to be bought separately. Bill asks his friend Steve to build this
computer for him and to find the appropriate additions. Steve agrees to build
the computer and purchases a second hand computer from Janet for 450.
The second hand computer contains the required DVD, Modem and CD-
Writer. Steve completes the "Super" computer and charges Bill 2,500. The
computer proves defective due to defects in the DVD and modem.

Would your analysis be different if:

1 Steve paid for the kit and charged Bill 5,000 for the finished computer?
2 Steve found the second hand computer, but Bill had gone with him and he paid
Janet for the computer?

Activity Number 3
Explain the manner in which the SoGA has classified the manufacture and use of
computer software.

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Section 2 - What the Duties are Between the


Parties Engaged in the Contract of Sale
Outline of this Section
2.0. Outcome
2.1. Introduction
2.2. Duties of the Seller
2.3. Duties of the Buyer
2.4. Activities

2.0 - Outcome
Students must be able to categorise the duties imposed on the seller and the buyer
by the Sale of Goods Act 1979.

2.1 - Introduction
We will now establish what the duties are between the parties engaged in the
contract of sale are.

The duties of the parties are regulated by SoGa 1979 ss 27 & 28. It is the duty of the
seller to deliver the goods and of the buyer to accept and pay for the goods in
accordance with the terms of the contract. The duties of delivery and acceptance are
concurrent conditions, that is to say that the seller must be willing to give up
possession in exchange for the price and the buyer must be willing to pay the price in
exchange for the goods.

2.2 - Duties of the Seller


The duties of the seller fall under the headings of delivery and condition of the goods.

Delivery
Under s 27 delivery requires the voluntary transfer of possession from one person to
another in accordance with the terms of the contract. In Four Points Garage v Carter
(1985) 3 All ER 12 the court held that the transfer of possession may be satisfied
symbolically through the delivery of documents of title or to an agent.

Place
The SoGa 1979 s 29(2) requires the place of delivery to be determined by the
contract or if not, it will be the seller's place of business. The exception to this would

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be if the goods are specific goods, then the place of delivery will be where the goods
are situated.

Time
The SoGa 1979 s 29(5) & 29(3) requires the goods to be delivered at the time
stipulated by the contract of sale, or, if not, within a reasonable time. What is a
reasonable time will be determined as a question of fact. These sections must be
read in accordance with SoGa 1979 s 10(2) which requires a determination as to
whether time is of the essence or not. See the cases of British & Common Holdings
v Quandrex Holdings (1989) 3 All ER 492, and, Bunge Corporation v Tradax SA
(1981) 2 All ER 513 for a discussion of instances where the time of delivery may or
may not be of the essence.

Amount
The contract of sale will fix the amount of goods to be delivered and failure to comply
with that term will result in an unenforceable contract. SOGA s 30, lays down a
detailed set of rules defining the buyers rights where the seller delivers more or less
than the agreed quantity of goods. In essence, if the incorrect amount is delivered
the buyer may reject the whole contract amount subject to the applicable limitations
under SoGa s 30(2A), & s 30(2B). These sections prohibit a buyer dealing as a non
consumer from rejecting goods where the shortfall is so slight that it would be
unreasonable to do so.

Condition of the Goods


The seller is under a duty to supply goods in accordance with the implied terms as to
the condition of the goods under the SoGa 1979. The implied terms are contained in
SoGa ss 12-15. The implied terms are the most important source of redress for the
buyer if the goods are defective in any way.

Goods must correspond with their description


SoGa s 13, implies a condition that where the goods are sold by description they will
correspond with that description once they are in the possession of the buyer. The
following requirements must be satisfied:

a. Was the sale by description? See Varley v Whipp (1900) 1 QB 513, Grant v
Australian Knitting Mills (1936) AC 85
b. What was the description by which the goods were sold? See Beale v Taylor
(1967) 3 All ER 253
c. Did the description influence the buyer? See Harlington & Leinster v Christopher
Hull (1991) 1 QB 564
d. Did the description identify the commercial characteristics of the goods sold? See
Ashington Piggeries v Christopher Hill (1973) AC 441
e. Did the description identify the goods to be supplied rather than an item or location
of the goods? See Reardon Smith v Hansen-Tagen (1976) 3 All ER 570
f. Did the goods correspond to all aspects of the detail by which they were
described? See Arcos v Ronaasen (1933) AC 470 HL

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Satisfactory quality
SoGa s 14(2) implies a condition that where goods are sold in the course of a
business, the goods supplied will be of satisfactory quality. The meaning of "in the
course of a business" has been given a broad interpretation, See Stevenson v
Rogers (1999) QB 1028.

SoGa s 14(2A) creates an objective standard of satisfactory quality taking into


account the description of the goods, the price and any other relevant factors. See
Thain v Annieland Trade Centre (1997) SLT 102, Allbright & Wilson UK Ltd v
Biachem Ltd (2000) All ER 530, Rogers v Parish (1987) QB 1933, Bartlett v Sidney
Marcus Ltd (1965) 2 All ER 753.

SoGa s 14(2B) creates a checklist relevant to the quality of the goods:

Fitness for all purposes for which the goods are commonly supplied. See
Kendall v Lillico (1969) 2 AC 31, Aswan Engineering v Lupdine Ltd (1987) 1
All ER 135.

Appearance and finish, freedom from minor defects. This section attempts to
strike a balance between defects that render the goods unusable and defects
that are only minor and do not affect the usability of the goods. See Rogers v
Parish Ltd (1987) 2 All ER 232, Shine v General Guarantee Corp (1988) 2 All
ER 911, Bernstein v Pamson Motors (1987) 2 All ER 220, Millars of Falkirk v
Turpie (1976) SLT 66.
Durability and safety. Durability requires that at the time risk is transferred the
goods should not deteriorate more rapidly than can reasonably be expected.
Safety requires goods of satisfactory quality to be safe for use. See Thain v
Anniesland Trade Centre (1990) SLT 102.

Liability under SoGa s 14(2) is strict but under s 14(C), there are two exceptions:

a. Where the defects are specifically drawn to the attention of the buyer.
b. Where the buyer examines goods before the contract is made and this reveals
certain defects.

The crucial point here is that there is no obligation on the buyer to inspect, even if the
seller creates the opportunity for inspection.

Fitness for purpose


SoGa s 14(3), where the buyer makes known to the seller any purpose for which the
goods are to be used, then the goods supplied under the contract must be
reasonably fit for that purpose. Again, the meaning of "in the course of a business"
has been given a broad interpretation, see Stevenson v Rogers (1999) QB 1028.

Two requirements must be satisfied:

a) The particular purpose must be made known to the seller and, if it is a special
purpose, that purpose must be specifically stated. See Kendall & Sons v Lillico &
Sons Ltd (1969) 2 AC 31, Ashington Piggeries Ltd v Christopher Hill (1972) AC 441,
Slater v Finning (1997) AC 473.

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b) The buyer must rely on the seller in circumstances where it would be reasonable
for the buyer to rely on the judgement of the seller. See Wren v Holt (1903) 1 KB 610
CA, R& B Customs Brokers v United D.T. (1988) 1 ALL ER 847, Aswan Engineering
v Lupine (1987) 1 All ER 135.

Pass good title

SoGa 1979 s 12(1), imposes a duty on the seller in a contract for the sale of goods to
transfer to the buyer an absolute legal interest in the goods. Failure to transfer an
absolute legal interest will allow the buyer to reject the goods and terminate the
contract. See Niblett v Confectioners Materials Co Ltd (1921) 3 KB 387, Rowland v
Divall (1932) 2 KB 500, Barber v NSW Bank Ltd (1996) 1 All ER 906.

In addition under SoGa s 12(2), there are two implied warranties:

a. The goods must be free of any charges and encumbrances.


b. The buyer must be allowed quite possession of the goods. See, Microbeads v
Vinhurst Road Markings (1975) 1 All ER 529.

Sale by sample
SoGa s 15, requires goods sold by sample to be free of any defects and also for the
sample to correspond with the bulk of the goods. See Drummond (James) & Sons v
EH Van Ingen & CO LTD (1887) 12 APP CAS 284, Godley v Perry (1960) 1 WLR 9.

2.3 - Duties of the Buyer


Acceptance of the goods
SoGa 1979 s 27 requires the buyer to accept the goods and not wrongfully reject the
goods. This must be read in conjunction with SoGa 1979 s 37 that apportions liability
on the buyer for refusing or, being negligent in not taking delivery of the goods after
the seller has requested him to do so.

The meaning and application of acceptance under the act will be discussed later
under the buyer's remedies.

Payment for the goods


The duty to pay the price is fundamental to the contract of sale and under SoGa s
8(2) the price may be fixed by the contract, or, by a manner to be agreed in
accordance with the contract or, by a prior course of dealings. Failing this a
reasonable price will be implied dependant on the circumstances of the case. In
connection with the buyer's duty to pay for the goods under SoGa s 27 reference
must be made to the Late Payment of Commercial Debts (Interest) Act 1998.

Mention must be made to the possibility of excluding liability for breach of any of the
duties imposed on the seller and buyer. The ability to limit or restrict liability in a sale
of goods contract is regulated primarily by the Unfair Contracts Terms Act 1977, ss 6
& 7. This act states that the duty to pass good title under Sec. 12 cannot be limited
or excluded under any circumstances. In relation to ss 13, 14 & 15, these terms
cannot be excluded or limited where the buyer deals as a consumer. In instances

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where the buyer is not dealing as a consumer these terms can only be excluded if
they satisfy the test of reasonableness. See George Mitchell v Finney Lock Seeds,
AEG (UK) Ltd v Logic Resource Ltd (1996) CLC 265 and Unfair Terms in Consumer
Regulations Act 1999.

2.4 - Activities
Reading
MacKendricks Goode on Commercial Law (4th edn, Penguin 2010), Chapters
10, 11, 13 and 15.

In addition you may wish to read the following:

Ian Brown, The scope of section 12 of the Sale of Goods Act LQR 1992,
108(Apr), 221-223 (Westlaw)

Abstract: s 12 Implied terms about title, etc.

Paul Robson & John N Adams, Consumer sales JBL 1990, Sep, 433-437
(WestLaw)

Abstract: s 13 Sale by description.

Activity Number 1

Dimsight went to Optic, an optician, to purchase a new pair of spectacles. There was
a special promotion allowing anyone who bought any pair of spectacles for more than
100 to get a second pair for free.

Dimsight bought one pair of spectacles for 110 and so was able to take advantage
of the special offer. When choosing the second free pair of spectacles he asked for
shatter proof plastic lenses. Dimsight was a regular squash player and he intended
to use the second pair for spectacles for playing squash but did not tell Optic his
reason for ordering them. Optic did not himself make spectacles of this kind, but
supplied the lens prescription to Toughlens, a specialist manufacturer who
manufactured the spectacles to the prescription and then sent them to Optic who
fitted them to Dimsight in accordance with his usual practice. Before Dimsight
ordered, Optic had shown him the Toughlens brochure, which described their lenses
as "ideal for all kinds of sport". That statement is true to the extent that in the present
state of lens technology there is no better lenses and, provided the lenses are well
fitted to a rigid frame, they will withstand considerable pressure, but they will shatter
on a very hard impact. In fact the pair supplied to Optic had lenses badly fitted to a
rigid frame, this was not uncommon due to the present state of the spectacle making
industry. The bad fit was not readily discernable, even to an expert, but it stressed
the lenses so as to weaken them considerably.

One day Dimsight was struck in the eye by a ball while playing squash. The lens of
his spectacles shattered and his eye was badly injured. An expert has examined the

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remains of the spectacles and established that they were weaker than they should
have been because of the bad fitting, but he is not prepared to say that they would
have shattered anyway given the speed of the ball and the force of the impact.

Advise Dimsight.

Activity Number 2

Victor operates a small independent dairy but has decided to cease business
frustrated at the increasing amount of EU regulations. He owns a Bedford van, which
he has used to make deliveries of milk and dairy produce, and asks Simon, who sells
light commercial vehicles, to sell it for him.

Paul has recently started a business manufacturing his own brand "Mister Cream" ice
cream and wants to purchase a van for use as an ice cream van. He asks Arthur, a
mechanic, to look out for a suitable van for him.

Arthur sees the Bedford van at Simon's premises but does not realise that it belongs
to Victor. He explains to Simon that he is interested in the van for use as an ice
cream van. Simon replies that he is "no expert" on ice cream but advises that the
Bedford has previously been used to carry dairy produce and that he thinks it should
be suitable. Arthur makes a cursory examination of the van, which includes
examining the engine, starting it up and driving it around the block (a distance of
about half a mile) and then agrees to buy it. Simon asks him to sign a contract for
the van, and produces a printed form headed "Simon's Vehicle Sales: Vehicle Sale
Contract "Arthur signs the form as "buyer" without reading it. He pays for the van
with cash, withdrawn from the bank by Paul for that purpose.

For the first month Paul uses the van for general purposes while he is setting up his
business. He does not use it to deliver ice cream during that time. The first time he
uses it on his ice cream round the engine over heats and seizes. Moreover he
discovers that the refrigeration plant, although suitable for keeping milk, cheese and
yoghurt chilled, is inadequate for keeping ice cream frozen and all of his stock of ice
cream melts. He is advised that the van will need expensive repairs to enable it to be
used on the road as a delivery van but cannot be used as an ice cream van without
replacement of the refrigeration unit and extensive modification. However, when he
complains to Simon, Simon denies all liability, claiming that Victor was the seller of
the van, that in any case he sold it to Arthur, and drawing Paul's attention to a clause
in the contract, signed by Arthur which states that:

No warranty of quality or fitness for any purpose is given. Simon's Vehicle Sales
accept no liability for any defect in any vehicle supplied.

Advise Paul.

Dr. Antonios E. Platsas


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Section 3 - The Requirements Necessary to


Enforce the Contract of Sale
Outline of this Section
3.0. Outcome
3.1. Introduction
3.2. Passing of Property
3.3. Passing of Risk
3.4. Mistake and Frustration
3.5. Activities

3.0 - Outcome
Students must understand the conditions attached to the passing of property and the
circumstances, which determine how risk is allocated between parties.

3.1 - Introduction
We will now discuss the requirements necessary to enforce the contract of sale. This
relates to the passing of property, the passing of risk and matters incidental to risk
and frustration.

3.2 - Passing of Property


The passing of property is an act independent of delivery and possession. This
means that the owner can become the owner of the goods before they are actually
delivered to him and the seller can retain property after delivery.

Property passes in accordance with the following rules:

Intention
SoGa 1979 s 17(1) states that property will pass when the parties intend it to pass, s
17(2) allows intention to be ascertained by reference to the terms of the contract, the
conduct of the parties and the circumstances of the case. Intention may be either
express, implied, or presumed. SoGa s 19, allows for the parties intention to include
instances where the seller wishes to retain his rights of disposal until the fulfilment of
certain conditions. See Dennant v Skinner and Collom (1948) 2 KB 164, Dobson v
General Accident and Life Assurance Corp. Ltd (1990) 1 QB 274.

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Contracts for the sale of specific goods


Specific goods are those goods that are identified and agreed on at the time of the
contract. There are three rules that regulate the passing of property in specific
goods.

SoGa s 18 rule 1, ...with specific goods in a deliverable state property passes when
the contract is made. See, Varley v Whipp (1900) 1 QB 513, Underwood Ltd v Burgh
Castle Brick and Cement Syndicate (1922) 1 KB 343.

SoGa s 18 rule 2where specific goods are not in a deliverable state property will
pass when the goods are put in a deliverable state.

SoGa s 18 rule 3, ...where specific goods have to be weighed or measured or some


other act done in order to ascertain the price, property does not pass until that act is
done.

Approval or sale or return


SoGa s 18 rule 4 if the goods are on sale or approval, property will pass when the
goods have been approved or accepted or the goods have been retained without any
notice of rejection. See Atari Corp. V Electronics Boutique Stores (1988) 1 All ER
1010.

Unascertained goods
Property in unascertained goods will pass once the goods have been ascertained
and appropriated to the contract.

SoGa s 16 states that no property in unascertained goods will pass until the goods
have been ascertained. The ascertainment of the goods means that the goods have
been identified to the contract. See Re Goldcorp Exchange Ltd (1995) 1 AC 74.

SoGa s 18 rule 5 requires that once the goods have been ascertained they must then
be unconditionally appropriated to the contract. Appropriation therefore requires an
irrevocable act intending those goods to be used in the performance of the contract.
See Carlos Federspiel SA & Co v Charles Twigg & Co Ltd (1957) 1 Lloyd's Rep 240,
Hendy Lennox v Grahame Puttick Ltd (1984) 2 All ER 152, Healy v Howlett & Sons
(1917) 1 KB 337, Wardars Co v Norwood & Sons Ltd (1968) 2 QB 663, The Elafi
(1982) 1 All ER 208.

Sale from a designated bulk


SoGa s 20(A) & 20(B), applies unless the parties agree otherwise, to the transfer of
property in an undivided share in the bulk transferred to the buyer. The buyer
becomes an owner in common of the bulk. By SoGa s 20(B), where joint ownership
is created under s 20, the parties consent to the stated provisions of s 20(B). See
Re Waite 1927) 1 CH 606, Re London Wine Shippers Ltd (1986) PCC 121, Re
Stapylton Fletcher Ltd [1995] 1 All ER 192.

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3.3 - Passing of Risk


Risk refers to the deterioration or damage to the goods as well as to the damage
caused to the goods by third parties. The crucial question is who will be liable for the
goods in the event they have deteriorated or been damaged. The answer will
depend on which party bears the risk.

SoGa s 20(1) states that unless the parties agree otherwise the risk will follow
ownership. This applies irrespective of who has possession. See Stern v Vickers
(1923) 1 KB 78, Healy v Howlett (1917) 1 KB 337.

SoGa s 20(2) states that the general rule on risk will be displaced where the goods
are damaged as a result of the delay of one of the parties. The risk will fall on the
party at fault. See Demby Hamilton & Co v Baren (1949) 1 All ER 435.

SoGa ss 29(3) & 37 state that the transfer of risk does not affect the rights and
obligations of the seller or buyer as a bailee of the goods. The significance of this is
that if risk has passed to the buyer but the goods are still in the possession of the
seller, the seller acts as a bailee of the goods.

SoGa s 32 deals with the passing of risk while goods are in transit to the buyer. S
32(1) states that where goods are required to be delivered to a carrier, property and
risk will pass when delivery to the carrier is complete. SoGa s 32(2) places the
burden on the seller to create a reasonable contract for delivery to the carrier under s
32(1). See Thomas Young & Sons v Hobsons (1949) 65 TLR 365.

3.4 - Mistake and Frustration


If the goods are damaged whilst at the sellers risk he will not be able to deliver them
in performance of the contract. In the event that the goods cannot be repaired or
replaced, the seller will be liable for breach of contract, unless he is able to be
excused.

SoGa s 6, applies where the contract is for the sale of specific goods and without the
knowledge of the seller the goods have perished before the contract is made. The
contract will consequently be declared void. SoGa s 7 applies where there is a
contract for the sale of specific goods and between the making of the contract and
the passing of risk from the seller to buyer, the goods perish without fault of either
party. See Howell v Copeland (1876) 1 QBD 258, Sainsbury v Street (1972) 3 All ER
1127.

The application of the above sections requires that the goods have perished.
'Perished' occurs where the goods have been irretrievably destroyed to the extent
that it is unlikely that the goods will be bought or sold. In instances where only part of
the goods have perished, the whole contract may be avoided subject to a contrary
intention. See Horn v Minister of Food (1948) 2 All ER 1036, Asfar v Blundell (1896)
1 QB 123, Barrow Lane Ballard v Phillip Phillips & Co (1929) 1 KB 574, Bell v Lever
Bros Ltd (1932) AC 162.

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3.5 - Activities
Reading
MacKendricks Goode on Commercial Law (4th edn, Penguin 2010), Chapters
8 and 9.

In addition, please you may wish to read the following:

N.R. Campbell, Passing of property in contracts for the sale of unascertained


goods JBL 1996, Mar, 199-205 (WestLaw)

Abstract: s 16 Goods must be ascertained.

Peter Roberts, Effective title transfers in international LNG trades IELTR


2007, 7, 99-103 (WestLaw)

Abstract: s 17 Property passes when intended to pass. The usefulness of this


article illustrates the application of the Sales of Goods Act to complicated
commercial agreements because it is particularly suited to applying and
interpreting the nuances of a complex contractual structure. Although there is
an element of international trade the article is worth reading in light of the
Masters program modules.

Activity Number 1

Recess Ltd are wholesale commodity dealers specialising in Rice. Consider the
legal consequences of the following transactions in which they are involved.

1. On 1st November they entered into a contract with Em Minim for the sale to
Em of 100 sacks of rice, to be collected by Em on 5th November. On 2nd
November Recess took 100 sacks from their warehouse and affixed them to
labels saying "Em Minim". The sacks were moved and stored in the despatch
area of the warehouse. On 5th November Em sent a representative to collect
the rice but it was discovered that the sacks marked with Em's name had
been ruined as a result of being soaked with water penetrating the warehouse
despatch area through a hole in the roof caused by vandals.

2. Also on 1st November they contracted with Croft Ltd to sell them 200 sacks of
beans, to be delivered in Derby where Croft have their headquarters. On 3rd
November 200 sacks were duly despatched by British Rail to "await
collection", and Croft were informed of the despatch. On the same day Croft
entered into a contract to sell "200 sacks of rice" today, despatched to us by
Recess Ltd to Shaggy. The contract required Croft to repack the beans in
2kg packages and load the packages onto pallets prior to delivery. On 4th
November Recess were informed that the beans had arrived in Derby and
could be collected. They authorised delivery to Croft who sent a

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representative to Derby station to collect the beans. It was then discovered


that the beans had been delivered on the evening 3rd November and that,
overnight, thieves had broken into the railway station and had stolen 50
sacks. The market price of rice had risen sharply on 3rd November and
Shaggy demands delivery at the contract price.
3. On 1st November Recess had in stock 500 sacks of Vietnamese rice. On
that day they were examined by a representative of Defjam Ltd who agreed
that they would buy all 500 sacks, property to pass on payment of the price of
5000. On l5th November Defjam collected the beans and paid the contract
price; however, on opening the sack they discovered that they had become so
badly infested with rice-mites as to be totally unusable. It is established that
the infestation occurred after 1st November. In the meantime the market price
of similar rice has risen to 15 per sac.

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Section 4 - The Competing Claims to the


Ownership of Goods
4.0. Outcome
4.1. Instances of Competing Claims to the Ownership of Goods
4.2. Activities

4.0 - Outcome
Students must be able to determine those instances where the property in the goods
may pass as an exception to the general requirements for the passing of property
under the Sale of Goods Act 1979.

4.1 - Instances of Competing Claims to the


Ownership of Goods
We now turn to those instances where there may be competing claims to the
ownership of goods. These competing claims may come about as a result of goods
being sold in circumstances where the seller does not have title to the goods. The
buyer may have a claim to ownership in these circumstances if she falls into one of
the exceptions and bought the goods in good faith and without notice that the seller
did not have title. See Bishopgate Finance Corp v Transport Brakes Ltd (1949) 1 KB
322.

Good faith and notice


SoGa s 61(3) defines good faith as acting honestly whether acting negligently or not.
This implies a subjective test. Good faith, in commercial transactions, tends to mean
actual notice but this will ultimately depend on what facts were known to the buyers
at the time of the transaction. See Dodds v Yorkshire Bank (1992) CCLR 92, Feur
Leather v Frank Johnston & Sons (1981) Com LR 251.

Exceptions
SoGa s 21(1) makes it clear that unless an exception applies under the statute no
buyer can acquire a better title than the seller has. S 21(1) allows for three
exceptions:

1. Agency

Agents have the authority given to them by the principal to transfer ownership on
behalf of the principal. In this context the agents do not have actual title to the goods
but can still transfer the title belonging to the principal. See Hely-Hutchinson v
Brayhead Ltd (1968) 1 QB 549, Freeman and Lockyer v Buckhurst Properties (1964)
2 QB 480.

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2. Estoppel

The general rule is displaced where the owner is estopped from denying that the
seller has the right to sell. An estoppel is created by a representation that is
subsequently relied on. The representation may be made by words or by conduct
provided it is clear and unequivocal. See Eastern Distributers v Goldring (1957) 2
QB 600, Debs v Sibec Developments Ltd (1990) RTR 91.

3. Mercantile agents

These are created under the Factors Act 1889 s 2. Mercantile agents, or factors, are
professional agents who trade in their own names and may not disclose the identity
of their principals. Third parties dealing with mercantile agents may therefore satisfy
the good faith without notice doctrine. See Belvoir Finance v Harold G Cole (1969)
2All ER 904, Oppenheimer v Attenborough (1908) 1 KB 221, Heap v Motorists
Advisory Agency Ltd 1 KB 577.

Seller in possession
SoGa s 24 displaces the general rule where a seller no longer owns the goods in
possession but sells them to the buyer in good faith without notice. See Pacific
Motor Auctions v Motor Credits Ltd (1965) AC 867, Worcester Works Finance Ltd v
Cooden Engineering Ltd (1972) 1 QB 210, Nicholson v Harper (1895) 2 Ch 415.

Voidable title
SoGa s 23 states that the general rule is displaced if goods are sold under a voidable
title to a buyer in good faith and without notice and the title has not been avoided at
the time of sale. See Cundy v Lindsay (1873) 3 App Cas 459, Citibank v Brown
Shipley &Co Ltd (1991) 2 All ER 690, Ingram v Little (1961) 1 QB 31 (1960) 3 All ER
332, Lewis v Averay (1972) 1 QB 198, Car and Universal Finance Ltd v Caldwell
(1965) 1 QB 525.

Buyer in possession
SoGa s 25 states that the general rule is displaced where a buyer obtains possession
of goods without title and resells them to a buyer in good faith without notice. See
Four Points Garage v Carter (1985) 3 All ER 12, The Saetta (1994) 1 All ER 851,
Newtons Wembly v William (1965) 1 QB 560, National Employers GIA v Jones
(1990) 1 AC 24.

Sale of vehicles on hire purchase


Under the Hire Purchase Act 1964, the general rule may be displaced where vehicles
are held on hire purchase and sold before title has passed to the hirer. See
Stevenson v Beveley Bentick Ltd (1976) 2 All ER 606.

Special power of sale


SoGa s 21(2)(b) displaces the general rule where goods are sold under special
powers such as pledges or goods seized under warrants of execution.

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4.2 - Activities
Reading
MacKendricks Goode on Commercial Law (4th edn, Penguin 2010), Chapter
16.

Activity Number 1
The courts and parliament have endeavoured to strike a balance between the
competing interests created by the contractual transfer of title to property. Explain
what these interests are and how this has been achieved paying particular attention
to the doctrines of "good faith" and "notice."

Dr. Antonios E. Platsas


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Section 5 - The Remedies Available to the


Seller and the Buyer
5.0. Outcome
5.1. Sellers Remedies
5.2. Buyers Remedies
5.3. Activities

5.0 - Outcome
Students must be able to allocate a remedy in favour of the innocent party in the
event that the contract of sale is breached.

5.1 - Sellers Remedies


The sellers' remedies arise where the buyer fails to perform his obligations under the
contract. The sellers' remedies are divided into real and personal remedies.

Personal
SoGA s 49 states that provided the seller can satisfy the statutory claim there is no
requirement to prove loss. A claim for price will only arise where the property in the
goods has passed to the buyer and the price is payable on a certain day irrespective
of delivery.

SoGA s 50 provides that where the seller is unable to satisfy a statutory claim for the
price she may proceed for damages where the buyer wrongfully refuses to accept
and pay for the goods. The seller is expected to mitigate her loss by seeking an
alternate buyer for the goods in the market. See Bem Ticaret v International Agri
Trade (1999) 1 All ER (Comm) 619, W L Thompson v Robinson (1955) Ch 177,
Shearson Lehman v MaClaine Watson (1990) 1 Lloyd's Rep 441.

SoGa s 37 allows the seller a claim in circumstances where the buyer has accepted
the goods but due to the failure of the buyer to take delivery the seller has incurred
losses.

Real
SoGa s 39 allows the unpaid seller three rights:

A lien on the goods, or the right to retain them for the price while in his
possession.
The right to stop the goods in transit
The right to resell the goods.

SoGa s 43 allows the seller to withhold delivery until he has been paid even if
property has passed to the buyer. This remedy is only available where the goods
have not been supplied on credit, if supplied on credit the credit must not have

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expired, the buyer is not insolvent. Because a lien is a possessory remedy it will be
lost if the buyer obtains possession of the goods through consent of the seller.

SoGa s 44 applies in instances where the seller has lost his right to a lien due to
delivery of the goods to a carrier. In these circumstances if the buyer becomes
insolvent while the goods are in transit, the unpaid seller has the right to stop the
goods in transit and recover possession of the goods until payment.

SoGa s 48 allows a seller who has exercised his right to a lien or stoppage in transit
and still remains unpaid to sell the goods in order to recoup his losses. If the seller
does so the new buyer will get good title to the goods.

Retention of title clauses


Retention of title clauses allow the seller of goods the right to retain title in instances
where goods are sold on credit and the buyer becomes insolvent before he has paid
the seller. The value of this is that the goods (and the seller) are exempt from the
hierarchy of the insolvency creditors. See Aluminium Industrie Vaasen v Romalpa
Ltd (1976) 2 All ER 552.

Complexities surround the actual construction and application of the clauses. This
tends to relate to what the seller is claiming or retaining:

Where the Seller claims the original goods see Clough Mill Ltd v Geoffrey Martin
(1984) 3 All ER 982, Re Peachdart Ltd (1984) Ch 131, Borden Ltd v Scottish Timber
Products Ltd (1981) Ch 25.

Where the seller claims the retention of sums due see Armour v Thyssen
Edelstahlwerke AG (1991) 2 AC 339.

Where the seller lays Claim to manufactured products see Hendy Lennox v Grahame
Puttick (1984) 2 All ER 152, Borden v Scottish Timber Products Ltd (1981) Ch 21.

Where the seller claims the proceeds of the resale of the goods see Tatung Ltd v
Galex Telesure Ltd (1988) 5 BCC 325, Compaq Computers Ltd v Abercorn group Ltd
(1991) BCC 484.

5.2 - Buyers Remedies


Right to reject
The buyer may reject the goods in three situations:

1. The contract may include an express right of rejection.


2. SoGa s 30, allows the buyer to reject the goods if the wrong quantity has
been delivered.
3. SoGa s 11(3) defines a condition and the buyer can reject for breach of
condition. SoGa s 34 allows the buyer a reasonable opportunity to inspect
the goods for the purpose of ascertaining whether they are in conformity with
the contract.

The right to reject for breach of condition is subject to a number of restrictions:

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1. SoGa s 11(4), the right to reject is lost if the buyer is deemed to have accepted the
goods under SoGa s 35. S 11(4) only applies to non-severable contracts. SoGa s
31(2) defines a severable contract as one that is delivered in instalments and
separately paid for. If the contract is severable then a breach by either party in
relation to one severable part of their obligations will not necessarily affect the other
severable obligations under the contract or the contract as a whole. See Warinco
AG v Samor SPA (1977) 2 Lloyd's Rep 582, Maple Flock Co v Universal Furniture
Products (1934) 1 KB 148 CA, Robert A Munro v Meyer (1930) 2 KB 312, Regent
OHG v Francesco of Jermyn Street (1981) 3 All ER 327.

Acceptance, which may cause the buyer to lose his right to reject, may occur in three
situations:

SoGa s 35(1)(a), where the buyer expressly intimates his acceptance.


Intimation means use of clear words of acceptance. See Varley v Whipp
(1900) 1 QB 513. SoGa s 35(A) provides that where the buyer has the right
to reject by reason of a breach which affects all or some of the goods, but
accepts some of them, he does not lose the right to reject the rest provided
that there where some of the goods are unaffected by the breach he accepts
all of them.
SoGa s 35(1)(b), where the buyer does an act inconsistent with the seller's
ownership. Traditional situations are where the buyer has affirmed the
contract by dealing with the goods and/or, where the physical return of the
goods is impossible due to the buyer's act of selling, dealing, repairing or
destroying the goods.
SoGa s 35(4), where after a reasonable period the buyer retains the goods
without indicating he intends to reject them. What is reasonable will be a
question of fact depending on the circumstances of the case. See Knight
Machinery (Holdings) Ltd v Rennie (1995) SLT 166, Bernstein v Pamson
Motors Ltd (1987) 2 All ER 220, Peakman v Express Circuits Ltd [1998]
EWCA Civ 136, Truk (UK) Ltd v Tokmakidis GmbH (2000) 1 Lloyd's Rep 543.

SoGa s 35(2) requires that the buyer to be given an opportunity to inspect the goods
and he will not have accepted the goods pursuant to s 35(1) unless he has had a
reasonable opportunity for examining the goods. SoGa s 35(3) prohibits a consumer
from losing this right in any circumstance. SoGa s 35(5) requires consideration of
whether the buyer has had a reasonable opportunity of examining the goods when
taking into account the lapse of a reasonable amount of time constituting acceptance
under SoGa s 35(4).

2. SoGa s 15(A), the right of a non-consumer buyer may be lost if the breach of the
condition is slight. Rejection here would be unreasonable and the breach is to be
treated as a breach of warranty.

3. Commercial contracts may include terms that restrict or exclude the buyers right
to reject.

Where the buyer has lost her right to reject she may still sue for damages.

Damages for breach

Non delivery

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SoGa s 51 apportions damages for non delivery of goods on those losses arising
directly and naturally in the ordinary course of events from the seller's breach. See
Kaines v O W (1993) 2 Lloyd's Rep 1, The Texaco Melbourne (1994) 1 Lloyd's Rep
473, Shearson Lehman Hutton v Maclaine (No2) (1990) 1 Lloyd's Rep 441.

Late delivery

If time was of the essence and goods are delivered late, damages are apportioned
on the difference in value at the time of the required contractual delivery and the
actual date of delivery. See Victoria Laundry v Newman (1949) 2 KB 528, Elbinger v
Armstrong (1874) LR 9 QB 473, Wertheim v Chicoutimi Pulp Co (1911) AC 301,
Slater v Hoyle Ltd (1920) 2 KB 11 CA.

Delivery of defective goods

SoGa s 53 allows for a claim of damages where the buyer may not repudiate the
contract and damages are assessed either in accordance with general principles of
damages or, the buyer may set up her claim in diminution or extinction of the price.
See George Mitchell v Finney Lock Seeds (1983) 2 AC 803, Bernstein v Pamson
Motors (Golders Green) (1987) 2 All ER 220, Slater v Hoyle & Smith Ltd (1920) 2 KB
11 CA, Bence Graphics International v Fasson (1998) QB 87.

5.3 - Activities
Reading
MacKendricks Goode on Commercial Law (4th edn, Penguin 2010), Chapters
14 and 15.

In addition, you may wish to read the following:

Robert Bradgate, Remedying the unfit fitted kitchen LQR 2004, 120(Oct),
558-563 (WestLaw)

Abstract: s 35 Acceptance.

Activity Number 1
The buyer's expectation rests on the receiving of goods that conform to the contract
and delivered within the specified time. The seller's expectation rests on delivering
the goods and receiving payment for them. It would seem that if these expectations
are not met, the applicable remedies are relatively simple.

Explain how the SoGa deals with remedying these expectations and whether this has
created certainty and predictability.

Activity Number 2
Best Delivery Caterers has recently gone into liquidation. Mike has been appointed
as the liquidator and a number of creditors are claiming goods supplied to Best
Delivery Caterers under contracts incorporating reservation of title clauses. Advise
Mike in the following situations.

Dr. Antonios E. Platsas


27

1. Munchie Ltd has supplied the Caterers with meat and poultry for the last three
years. Their last three invoices relating to the supply of 15kg of beef, 10kg of
lamb and 8Kg of chickens remains unpaid. At the time of Mike's appointment
5kg of beef, 5kg of lamb and 2kg of chickens remained in the fridges of the
caterers. The remainder of the beef was cooked and prepared and frozen for
a function next week. The lamb and chicken was used at a function last week
for which no payment has yet been received. Munchie's clause reads:
"Title to the goods supplied under this contract shall be and
remain with us until we are paid all sums due in respect of
this consignment."
2. Would it make a difference if the clause read: until we are paid all sums due
on any account whatsoever.?
3. Kitch Ltd supplied cooking equipment to the caterers. They supplied 2 ovens
at a price of 2,000 each. The ovens have been bolted to the kitchen floor
and their power cables have been fixed in ducting set into the walls and floor
of the factory. The sale contract simply states:

"Goods supplied shall be our property until the price is paid."

Kitch have been paid nothing.

PART II CONSUMER LAW

Section 6 - Consumer Protection

Dr. Antonios E. Platsas


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Outline of this Section


6.0. Outcome
6.1. Mechanisms of Consumer Protection
6.2. Performance Standards
6.3. Unfair Terms
6.4. Regulation Against Unfair Practices
6.5. Activities

6.0 - Outcome
Students must understand the overall legal framework of consumer protection.

6.1 - Mechanisms of Consumer Protection


The consumer society, a synonym to our rather postmodern society, is something
that characterises the modern English legal system. Together with that one sees the
strengthening of consumer protection especially in the last three-four decades (not
always with ideal results).
Overall such consumer society is a phenomenon which came about in the 20 th and
the 21st century. Traditionally, the consumer society in the Western legal sphere has
been created in the last one-hundred years or so forming a particularly strong
individualistic consumer ethos.
Factors in the Creation of Consumer Society
o The rise of the middle class(es)
o The greater availability of credit
o The greater availability of a much wider variety of goods and services
Issues
o Trade Practices
If such practices will involve deception or excessive pressure
those will be deemed as illegal.
Illegal practices can occur before a transaction takes place
(e.g. through airing or advertising); during a transaction takes
place (e.g. through pressurising the consumer to acquire more
goods) or after a transaction has taken place (e.g. by the non-
honouring of a consumer product guarantee).
Protection of consumers in English law occurs through law
means as well as through public law controls.
Rationale
The rationale behind consumer protection is to avoid market failures (negative type of
rationale) or to make the market work (positive type of rationale).
Private Law

Dr. Antonios E. Platsas


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Most of the private law rules are generally rules which are common law based. The
British legislator would intervene where the private law rules would be unsatisfactory.
Typically, in the common law of torts, if the manufacturer of a certain good has not
exercised reasonable care in doing so, he would have committed a civil wrong.
Public Law
There are four (4) different ways where public plays an important role in the
protection of consumers:
1. Public bodies have the right to issue licences for the operation of
businesses e.g. consumer credit services would be issued licences by
the Office of Fair Trading.
2. Public bodies have rights to inspect buildings and manufactured
goods. Additionally, the same bodies would also have the legal
powers to examine contract terms and trade practices.
3. Court enforcement or injunction orders are to be initiated by the same
bodies.
4. Public bodies have the right but also the obligation to prosecute a
trader who has committed a criminal offence.
Self-regulation
This takes the form of trade association codes. These are not necessarily
enforceable by consumers themselves. E.g. the Advertising Standards Authority is a
body which is founded by advertisers and regulates the industry of advertising.
European Law
o Unfair Terms in Consumer Contracts Directive 93/13 (Unfair Terms in
Consumer Contracts Regulations 1999)
o Unfair Commercial Practices Directive 2005/29 (Consumer Protection
for Unfair Trading Regulations 2008)
Article 7: misleading omission and informed decision.

6.2 - Performance Standards


There are four (4) headings which are relevant to the performance standards in the
transactions between traders and consumers:
1. Implied Terms as per Sale of Goods Act 1979 (as amended)
2. Implied Terms as to supply of services
3. Tortious Liability for Defective Products
4. General Product Safety and Food Safety Standards

Terms as per Sale of Goods Act 1979 (as amended)


The leading provisions of ss 12-14 of the Sale of Goods Act 1979 (as amended) are
applicable to transactions between traders and consumers (as they would be
applicable to transactions between traders themselves). Of particular importance are
s 14(2D) of the Act in question in relation to statements made prior to the purchase of
goods and s 48A in relation to remedies to consumers. Other than that, the terms
have been covered in Section 2 of our module.

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30

When to reject the goods?


o Too long if one rejected a car in more than three (3) weeks: Bernstein v
Pamson Motors Ltd 2 All ER 220
o Too long if one rejected kitchen units within seventeen (17) months: Jones v
Callagher [2004] EWCA 10
o Not too long if one rejected a yacht within seven (7) months: Clegg v
Anderson [2003] Lloyds Rep 32
o Not too long if one rejected a taxi within (4) months: Fiat Financial Services v
Connolly 2007 SLT (Sh Ct) 111
Implied Terms as to Supply of Services
The leading instrument here would be the Supply of Goods and Services Act 1982.
In particular, of great significance is s 13 thereof which provides for a duty to carry
out services through the exercise of reasonable skill and care; s 14 thereof which
provides for a duty to perform the contract of service in a timely fashion and s 15
thereof which provides for an overall duty to charge reasonable amounts for the
supply of services.
Tortious Liability for Defective Products
The leading instrument here would be the Consumer Protection Act 1987; s 2(1) of
the Consumer Protection Act 1987 would read as follows: where any damage is
caused wholly or partly by a defect in a product, every person to sub-section (2)
applies shall be liable for the damage.
o Product: any goods or electricity (s 1(2) of the Consumer Protection Act 1987)
o Defect: goods are defective when the safety of the product is not such as
persons are generally entitled to expect (s 3(1) of the Consumer Protection
Act 1987)
o Damage: this would cover inter alia death or personal injury and damage to
property.
General Product Safety and Food Safety Standards
Instruments catering for product safety would be:
o Consumer Protection Act 1961
o Consumer Protection Act 1971
o Consumer Safety Act 1978
o Consumer Safety (Amendment) Act 1986
o Resulted in Part II of the Consumer Protection Act 1987 which has to
be read together with the General Product Safety Regulations 2005.
The Food Safety Act 1990 is the relevant piece of legislation regulating matters of
food safety.

6.3 - Unfair Terms


The problems arising out of unfair contract terms relate to the following:
o Lack of transparency (e.g. small print in contracts or use of legalese)
o Lack of choice (for the consumer)
o Inequality of bargaining power
o Unfairness per se

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In Suisse Atlantique SA v Rotterdamsche Kolen Centrale [1967] 1 AC 361 the


following was said :

In the ordinary way the customer has not time to read [the standard terms], and if he
did read them he would probably not understand them. And if he did understand and
object to any of them, he would generally be told he could take it or leave it. And if
he went to another supplier the result would be the same. Freedom to contract must
surely imply some choice or room for bargaining.1

The leading instrument in relation to unfair contract terms would be the Unfair
Contract Terms Act 1977. The Act does two things:
1. It renders certain exemption clauses wholly ineffective (ss 2(1), 6(2) & (3))
2. It subjects certain exemption clauses operational but only if they satisfy the
reasonableness test (s 2(2), 3, 8, 11)
Another instrument which deals with unfair contract terms in consumer contracts
would be the Unfair Terms in Consumer Contracts Regulations 1999, which
implemented the Directive on Unfair Terms in Consumer Contracts 93/13. Of
importance in relation to this UK Regulations/EC Directive is the fact that the test of
unfairness is one which is assessed vis--vis the concept[t of good faith (which is not
the case in business-to-business transactions for the sale of goods).

6.4 - Regulation Against Unfair Practices


The Enterprise Act 2002 provides powers to seek enforcement orders against unfair
trade practices. Under the approach followed under the Unfair Commercial Practices
Directive 2005 is one which caters for situations of unfairness e.g. aggressive
practices, misleading actions and omissions and so and so forth.

6.5 - Activities
Reading
3 M Furmston and J Chuah, Commercial and Consumer Law (Pearson, Harlow
2010), Chapter 7

Activity Number 1
What should the preference be?: To resolve consumer law matters through private
dispute resolution or through litigation? Discuss.

Activity Number 2
Do ss 12-14 of the Sale of Goods Act 1979 (as amended) apply to transactions
between consumers and traders?

Activity Number 3

1
Per Lord Reid at 406.

Dr. Antonios E. Platsas


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Identify two differences and two similarities between the trade law regimes for
business-to-business transactions for the sale of goods and business-to-consumer
transactions.

Section 7 - Consumer Credit Law and


Regulation

Outline of this Section


7.0. Outcome

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7.1. Introduction & Definitions


7.2. Reform through Consumer Credit Directive 2008/48/EC
7.3. Consumer Credit Licencing
7.4. Form and Content of Agreements
7.5. Customer Rights to End the Agreement
7.6. Creditor Liability for Dealer Actions
7.7. Dispute Resolution
7.8. Activities

7.0 - Outcome
Students must understand the overall legal framework of consumer credit law and
regulation.

7.1 - Introduction & Definitions


One of the major concerns in relation to consumer credit is that consumers will often
take on more loans that the height of loans they could sustain. Those concerns
became the subject matter of greater debate after the economic crisis reached
England in the summer of 2008. The overall framework of consumer credit in
England and the UK as a whole is now governed under EU Consumer Credit
Directive 2008/48/EC; Article 8.1 thereof provides as follows:

Member States shall ensure that, before the conclusion of a credit agreement, the
creditor assesses the consumers creditworthiness on the basis of sufficient
information, where appropriate obtained from the consumer and, where necessary,
on the basis of consultation of the relevant database. Member States whose
legislation requires creditors to assess the creditworthiness of consumers on the
basis of a consultation of the relevant database may retain this requirement.

Development of UK Consumer Credit Law


Prior to 1974:
o Bill of Sale Acts (187-1882)
o Moneylenders Acts (1900-1927)
o Pawnbrokers Acts (1872-1960)
o Hire-Purchase Act 1965
Post 1974:
o Consumer Credit Act 1974
o The Act removed all of the above Acts except the Bills of the Sales
Acts, which would still cover transactions such mortgages of personal
property aka chattel mprtgages.
o The Consumer Credit Act operates together a number of statutory
instruments, whilst the Consumer Credit Act 2006 amended it e.g. in

Dr. Antonios E. Platsas


34

relation to scope, limits on financial operations, licencing and unfair


credit engagements inter alia.
Definitions under the Act
o Individual: this covers single individuals as consumers but also partnerships
of up to three (3) people; additionally, unincorporated bodies are also
covered.
o Credit: a cash and loan and any form of financial accommodation (s 189(1)
of the Consumer Credit Act 1974 as amended by s 1 of the Consumer Credit
Act 2006).
o Total charge for credit: this is interest and any other charges that credit
would cost. E.g.
o Person Z borrows 30000; interest is 3000: 3000 would be the total
charge for credit here.
o Regulated agreements: agreements which are either consumer credit
agreements or consumer hire agreements (on the basis that these do not fall
into the exempt categories of the Act)
o Consumer credit agreements: S 8(2) of the Consumer Credit Act 1974 is an
agreement according to which the creditor provides credit to the debtor with a
certain credit which would not exceed certain financial limits.
o Hire-purchase: this occurs where goods are hired to the hirer in
exchange for periodical payments. The hirer may acquire ownership
to the goods upon full payment of a price.
o Conditional and credit sales: Unlike hire-purchases, the buyer
commits to the purchase of the goods from the outset of the
transaction. In a conditional sale, payment occurs in instalments. In
credit sales the buyer has a certain period of time for the price but the
title passes to him immediately, that is from the outset.
o Consumer hire agreements: these cover hires (bailments) of goods to
consumers, agreements which are not hire-purchases and would be capable
of lasting more than three (3) months.
o Non-commercial agreements: these are agreements which are not made in
the course of business. Informal agreements between friends would be a
typical example here; this type of transactions are excluded from the
Consumer Credit Act (CCA) 1974. For exemptions of agreements from the
CCA 1974 see ss 16, 16A, 16B in addition to the Consumer Credit (Exempt
Agreements) Orders 1989 and 2007.
o Multiple agreements: a mechanism to avoid multiple transaction
consolidating into one so that the CCA 1974 becomes non-operative (s 18 of
the CCA 1974)
o Linked transactions: arrangements which are subordinate or ancillary to the
principal agreement: Citibank International plc v Schleider [2001] GCCR 2281
(s 19 of the CCA 1974)

7.2 - Reform through Consumer Credit Directive


2008/48/EC

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35

The CCA 1974 has been revised not only by the CCA 2006 but also by Directive
2008/48/EC, the Consumer Credit Directive (CCD). The CCD is related to the
following:
o Formation of credit agreements
o Informational standards
o Repayments
o Role of credit intermediaries
o Rights of withdrawal and cancellation
o The CCD does not apply in the following (exemptions):
o Credit agreements relating to mortgages or similar instruments
o Credit agreements in acquisition or retainment of property
o Credit agreements of value under 200 or of value of more than 75000
o Exclusive hire agreement with no obligation to purchase
o Credit agreements for short-term overdraft facilitation whereby repayment has
to occur within one (1) month
o Interest-free agreements or agreements within a repayment window of three
(3) with insignificant charges
o Employee credit schemes where credit is provided to the employee as a
secondary activity and where rate is lower than the market rate
o Credit agreements which are agreed with investment firms
o Credit agreements which are the result of court decisions or are the result of
another statutory authority
o Pledge agreements
o Loans issued by statutory authorities at a rate than the market rate
o Key Changes to the Act
o Duty of the lender to provide adequate information to the consumer (Article
5(6) CCD)
o Duty on the lender to check the creditworthiness of the prospective debtor
o A more coherent and detailed framework on credit reference databases in
conjunction with a more interactive approach between such databases and
data protection law
o Standard cooling off period of fourteen (14) days from withdrawing in a
consumer credit arrangement
o Duty on the lender to inform consumer when debts are moved over elsewhere
o Duty on credit intermediaries to disclose fees and links to creditors

7.3 - Consumer Credit Licencing


The office responsible for issuing licences for consumer credit is the Office of Fair
Trading. Under UK consumer credit law, it is a criminal offence to trade in the area of
consumer credit.
Types of Licences

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36

There are two (2) types of licences: (i) standard licences and (ii) group licences. The
difference on the two is found in the discretionary powers of the Office for Fair
Trading to grant either standard licences or group licences. The Office will issue
group licences where it considers it appropriate to do so under s 25 of the CCA 1974.

7.4 - Form and Content of Agreements


It is questionable whether or not consumers do actually read agreement regulations.
Even if they do, those frequently complex regulations, may not be comprehensible
due to their convoluted nature.
Steps Toward Proper Execution of Agreements
1. A document which is according to the prescribed formalities (this must
conform to the Agreement Regulations and must be signed in the prescribed
manner)
2. Aside from implied terms, the agreement must contain all relevant terms of
the agreement
3. The documentation must be legible to both parties which are to sign
Content of the Agreement
1. Prescribed terms
2. International requirements e.g. names and addresses of the parties
3. Relevant order of contents and themes in the arrangement
4. Proper structuring of the document which must be eligible
5. Signature boxes within any statements in the documentation
6. Required safeguard statements and inclusion of remedies
7. Required warnings which are compliant with the law

7.5 - Customer Rights to End the Agreement


In principle, the consumer (in the form of debtor or hirer) has the right to cancel a
credit arrangement (subject to the particularities of such arrangement). That can
materialise by way of the customers revocation of the offer (whilst such position is
also strengthened by virtue of s 59 of the CCA 1974). A notice has to be served to
the supplier of credit. Statute (as in s 68 of the CCA 1974) provides that a cooling off
period is one of the following:
a) The end of the fifth day after the day on which the relevant cancellation notice
has been received or
b) If the sending of a prescribed cancellation notice has been dispensed with
fourteen (14) days after the day on which the relevant unexecuted
cancellation agreement was singed by the customer.
In English law consumer credit agreements, like any other agreements, can be
rescinded where vitiating factors are the case (e.g. duress, misrepresentation
mistake etc). Termination of hire-purchases and conditional sale agreements is
provided for in ss 99 & 100 of the CCA 1974.

7.6 - Creditor Liability for Dealer Actions

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37

UK consumer credit law places liability on certain creditors or on those who have
actually conducted the negotiations in relation to the conclusion of a credit
agreement. Such negotiations would be known as antecedent negotiations.
Persons who conduct such negotiations leading to the conclusion of a credit
agreement act as agents (s 56(1) of the CCA 1974). As such it will be the creditor
who holds ultimate legal liability in the matter. Connected lender liability would be a
matter dealt with under s 75 of the CCA 1974, whereas under the parallel operation
of ss 66, 83 and 84 of the CCA 1974 the consumer cardholder will not be liable for
transactions which have been initiated by a third party without him/her being aware of
such matter.

7.7 - Dispute Resolution


One of the major issues in the area of consumer credit law has been the reluctance
of customers to bring action against the creditor. With the Financial Services and
Markets Act 2000 the office of the Financial Ombudsman has been created. This
office can now deal directly with consumer credit matters without the need for one to
resort to litigation. Access to this body is in principle free. The test for the
admissibility of a given case is whether a complaint would be fair and reasonable in
all the circumstances of the case. The powers of the Financial Ombudsman Office
are generally perceived as extensive.

7.8 - Activities
Reading
4 M Furmston and J Chuah, Commercial and Consumer Law (Pearson, Harlow
2010), Chapter 8

Activity Number 1
If a creditor has engaged in irresponsible trading, should the debtor(s) be relieved
wholly or partially their debts? Discuss.

Activity Number 2
Why should the customer have a well-established right to disengage from a
consumer credit agreement?

PART III E-COMMERCE LAW

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38

Section 8 Online Commerce

Outline of this Section


8.0. Outcome
8.1. Nature, Substance and Formation of eContracts
8.2. Performance of eContracts
8.3. Activities

8.0 - Outcome
Students must understand the overall legal realities and framework of eCommerce
transactions.

8.1 - Nature, Substance and Formation of


eContracts
Much of commerce these days is conducted through electronic means. This
presents advantages but at the same time one realises that there are intricacies in
such operations. One of the obvious advantages of eCommerce is that such
commerce can take place virtually anywhere in the world. Electronic commerce
should probably be dedicated a wider understanding in that it includes transactions
from automated machines to transactions which occur instantaneously from one side
of the planet to the other.
Intricacies
o The fact that the law requires specific formats for specific e-transactions
o Conflict of laws questions
o Evidential challenges e.g. acceptability of e-signatures
Forms
A contract under English commercial law can be made in a number of different ways.
S 4 of the Sale of Goods Act 1979 (as amended) guarantees such flexibility. On
occasion, English law will require a contract by deed e.g. a lease for real property for
a period of more than three (3) years by virtue of ss 52, 54(2) of the Property Act
1925. Schedule I of the Interpretation Act 1978 seems to provide for computer
storage means of expressing a contract, even though the Act does not actually refer
to the word electronic or the like. English courts tend to take a flexible approach
when it comes to signatures through electronic means. E.g. in Good Challenger
Navegante Sa V Metalexportimport SA [2004] 1 Lloyds Rep 67 where the court
accepted a signature which was found on a telex; the court considered the signature
as a sufficient one for the purposes of s 30 of the Limitations Act 1980. In Mehta v J
Pereira Fernandes SA [2006] 2 Lloyds Rep 244 the court decided that the insertion
of an e-mail address in official correspondence would not suffice as a signature for
the purposes of the law. The effect of formalities not complied with renders the
contract unenforceable.
Under s 7 of the Electronic Communications Act 2000 full recognition of
electronic signatures is achieved. Under s 15(2) the electronic signature has to be
authentic, i.e. to be accurate.
When are e-contracts normally made?

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39

In English contract law an offer is accepted unequivocally, unconditionally and on


identical terms (consensus ad idem). Offers in English have to be simply
communicated. In Brinkibon Ltd v Stahag und Stahlwarenhandelsgesellschaft mbH
[1983] 2 AC 34 the HoL found that a contract for the exportation of Austrian steel in
England, a contract which accepted by fax from London to Vienna was not in the
jurisdiction of English courts. When it comes to e-mails, an offer in the form of an e-
mail is worthy of acceptance only after such acceptance has been received. Online
auction sites have their own rules pointing to when a contract has been made.
Applicable/Governing Law
This, predominantly, is a matter of express clauses. The freedom if contract doctrine
largely governs the area. In the absence of an express clause to the effect of
governing law, Article 4 of the Rome Convention 1980 would necessitate that the
contract is to be associated to the law of the country to which the contract is most
closely connected.
Electronic Commerce Regulations 2002/Directive 2000/31/EC
The Directives aims are:
o Co-ordination of certain national laws
o Generation of a clear operations in eCommerce
o Securitisation of freedom of movement of information
o Securitisation of freedom of access to dispute resolution
The scope of the Directive is:
o Online contracts
o Remuneration matters of persons other than those who receive service
o Transmission of information on a point-to-point basis
Model Laws
These are United Nations initiatives. These tend to be adopted in EU legislation and
by extension in UK legislation.

8.2 - Performance of eContracts


The issues relating to the performance of electronic contracts have to do with the law
applicable in the matter, jurisdiction (forum) in the adjudication of a potential case and
enforcement.
Definitions
o Distance contract: under Regulation 3(1) of the Consumer Protection
(Distance Selling) Regulations 2000 implementing Directive 97/7/EC is a
contract which makes use of one or more methods of distance
communication until the point a contract is concluded.
o Consumer: this is an individual who acts outside of a business context.
o Supplier: this is a person who acts in a business or professional capacity.
Information
Particular information must be given to the consumer before a contract is concluded.
Regulation 7 of the Consumer Protection (Distance Selling) Regulations 2000
provides as such. There are particular requirements according to this provision e.g.
identity of the seller, main characteristics of seller and full price inter alia.
Under Regulation 8 requires that written confirmation must be offered. Such
confirmation must be offered in good time. In good time would mean that such
confirmation should be available no later than the performance or the delivery of the
goods. It is important that the consumer is informed of the suppliers address; this is
important as he/she may wish to launch a complaint to the supplier for instance.

Dr. Antonios E. Platsas


40

Right of Cancellation
A right to cancellation is clearly provided in Regulation 10. Normally, the relevant
cooling off period is 7 working days. If the supplier does not abide to Regulation 8
and fails to supply information within three (3) months then the relevant cooling off
period is three (3) months plus seven (7) working days. These periods relate to
contracts for goods and services (which are respectively governed under Regulation
11 and 12).
Performance of a Distance Selling Transaction
Regulation 19 provides that orders must be executed within 30 days after the day the
consumer made his order with the supplier. In case of impossibility, the consumer
would have to be informed and he/she would have to be reimbursed.

8.3 - Activities
Reading
5 D Bainbridge, Introduction to Information Technology Law (Longman, London
2007), Chapters 21 and 22
6
Activity Number 1
Why eContracts are of fundamental essence in modern English commercial law?

Activity Number 2
When is an eContract normally made under English commercial law?

PART IV COMPETITION LAW

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41

Section 9 Theoretical Foundations of


Competition Law

Outline of this Section


9.0. Outcome
9.1. Theoretical Foundations of Competition Law
9.2. EU and UK regulatory regimes in the area of competition law
9.3. Activities

9.0 - Outcome
Students need to appreciate the theoretical foundations of competition law and
appreciate the overall legal frameworks in the UK and the EU.

9.1 - Theoretical Foundations of Competition


Law
There are at the very least two ways to approach competition law in the modern
legal environment. One approach suggests that such law is law which protects the
well-being and well-functioning of the market (economics approach); the other
approach suggests that such law is law which ultimately comes to the benefit of the
individual/consumer (social justice approach). Whichever approach one follows,
competition law is a central element this day of the overall commercial framework of
a State.
The market, at least in theory, is left or should be left to its own devices.
Adam Smiths invisible hand will regulate the markets, because markets are
perceived capable to self-regulate themselves.
In the UK the regime of competition law has been strengthened under the
Competition Act 1998 which has been a piece of legislation which took into account
to a great degree EC law provisions in the subject area.
History of Competition Law
Historically, the United States have been at the forefront of competition law
regulation. For most intents and purposes, modern competition law starts with the
American Sherman Act 1890. In England the examination and the cultivation of
competition law has actually been subjected to economic theory as late as the
second half of the 20th century. In England the first case which dealt in a way with
what we generically call competition law would be John Dyers case which dealt with
restraint of trade. This was a case that was concerned with dyeing in the same town,
the town where John Dyer would exercise the craft of dyeing. In England monopolies
were actually something quite acceptable and the Crown would grant such monopoly
licences by bypassing the Parliament. With such granting of licences the Crown
would raise funds. The dispute between the Crown and the Parliament would be
resolved with the enactment of the Statute of Monopolies 1632, which abolished all
monopolies (subject to monopolies on patents for a period of no more than 21 years).

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Modern UK competition law would be governed by the Competition Act 1998


and the Enterprise Act 2002. UK law is affected by the leading provisions of Articles
85 and 86 of the Treaty of Rome (these have now been renumbered as Articles 81
and 82).
Economics and Competition Law
Taking into account economics would be essential in the drafting of competition law
nowadays. The reason for this is that economics is taken into account is because we
assess macro-economic market failures, whilst relying on micro-economic analysis to
support intervention in the markets. Nonetheless, the EC Commission has attacked
a strictly economic theory analysis when legislating in competition law in its Green
Paper on Vertical Restraints by arguing that:

economic theory is just one of the sources of policy. In practice, the application of
economic theory must take place in the context of the existing legal texts and
jurisprudence. Secondly, economic theories are necessarily based on simplifying
assumptions often obtained in the context of stylised theoretical models that cannot
take into account all the complexities of real life cases (paragragh 86 of the Green
Paper).

9.2 - EU and UK regulatory regimes in the area


of competition law
After 1973 the competition regime of the UK has become considerably aligned to EC
competition law.
Subject Matter
The subject matter of competition in EU and the UK would be undertakings.
Undertakings are normally defined by way of factual realities (as opposed to the legal
structures of the undertaking itself). In Reuter/BASF 76/743/EEC (1976) OJ L254/40
an inventor was taken to be an undertaking and as such subject to what is now
Article 81.
When it comes to undertakings the approach followed in the UK would be
identical to the one followed under EC competition law. For instance, in The Institute
of Independent Insurance Brokers v The Director General of Fair Trading [2001]
CompAR 62 the director of fair trading was to look at the rules of the General
Insurance Standards Council. The director concluded that taking into account EC
competition rules the Councils regulatory functions did not constitute economic
activity.
The EU legal order & Treaty Provisions
The EU legal order comprises 27 Member States. In the area of competition law the
most important instrument would be the European Community Treaty. The most
important treaty provisions on competition law would be:
o Articles 2 and 3 (objectives of the Community)
o Articles 81 and 82 (substantive competition law provisions)
o Articles 83 and 85 (provisions to the effect of Articles 81 and 82)
o Articles 86 to 89 (provisions in relation to public undertakings and state aids)
Functions of Community Competition Law
The EC Treaty would not offer any direct guidance as to what the functions of
Community competition law should be. Effectively, the overall guidance we would
have would be found in the letter of Articles 81 and 82 of the EC Treaty.
Regulatory Organs
o The EC Commission
o The Advisory Committee
o National Competition Authorities

Dr. Antonios E. Platsas


43

o European Competition Network


o National Courts
Principles Governing the Relationship between EC and UK Competition
Law
o Article 5 EC (subsidiarity): as such the Commission will assume jurisdiction
where cross-border mergers would have an impact at a cross-border level
(Regulation 139/2004)
o Article 10 EC (supremacy): there has to be sincere co-operation in the
furtherance of the Communitys tasks
o NV Algemene Transport-en Expeditie Onderneming Van Gend en Loos v
Nederlandse Belastingadministratie 26/62 [1963] 1 CMLR 105
United Kingdom
o Competition Act 1998
o Enterprise Act 2002
Regulatory Organs
o Office of Fair Trading
o Competition Commission
o Competition Appeals Tribunal
o Secretary o State for Trade and Industry
o National Courts

9.3 - Activities
Reading
7 M Furse, Competition Law of the EC and UK (6th edn OUP, Oxford 2008),
Chapters 1, 2 and 3
8
9
Activity Number 1
What are the aims of a modern competition law regime?

Activity Number 2
Have EU and UK legislation in the area of competition law converged or diverged?

Section 10 - Practical Aspects of EC/UK


Competition Law
Dr. Antonios E. Platsas
44

Outline of this Section


10.0 Outcome
10.1 Article 81 EC
10.2 Chapter I Prohibition
10.3 Article 82 EC
10.4 Chapter II Prohibition
10.5. Activities

10.0 - Outcome
Students need to appreciate the more practical aspects of EC/UK competition law.

10.1 - Article 81 EC
o Article 81 is relevant to co-ordinated practices restricting competition
o Violation of Article 81 may result in damages, penalties and alteration of
market behaviour
Prohibitions
o Direct or indirect price fixing
o Limitations or controlling of markets, production
o Distortion of share markets or sources of supply
o Application of non-equivalent conditions to comparable market operations
o Making the conclusion of contracts conditional upon the acceptance of other
parties of secondary obligations which have no connection with the subject of
the original contracts.
Effect
Provisions falling foul of Article 81 are rendered ab initio void.

10.2 - Chapter I Prohibition


Pursuant to s 2 of the Competition Act 1998 an equivalent regime to the EC
competition law regime is created in the UK.
o Normally, Chapter I Prohibition applies as per Article 81 EC
o As such, it must be stressed that where Article 81 EC becomes relevant, the
provision must be applied.
o In principle, Article 81 and Chapter I Prohibitions can apply together but the
result of such combined application must be consistent.
o As in the case of Article 81 violations may result in damages, penalties and
alteration of market behaviour

10.3 - Article 82 EC
o Article 82 applies to undertakings having an abusive type of conduct and a
dominant position in the market.
o Whether or not an undertaking has a dominant position this will be assessed
by the nature of the market in which the undertaking operates and by the
power it enjoys in such a market

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45

o Dominant position means to control a substantial part of the market


o Abuses take an expansive meaning and can be exclusionary and exploitative
o For a prohibition to operate an effect on trade on different Member States has
to be manifested
o An objectively justifiable abuse of dominant position is in fact not abusive.
o Violation of Article 82 may result in damages, penalties and alteration of
market behaviour
Practical Manifestations of Undertakings with a Dominant Position
o Direct or indirect imposition of unfair prices or trade practices
o Limiting markets, production and technical evolution to the detriment of the
consumer
o Application of dissimilar conditions to comparable transactions
o Making the conclusion of contracts conditional upon the acceptance of other
parties of secondary obligations which have no connection with the subject of
the original contracts.

10.4 - Chapter II Prohibition


Pursuant to s 18 of the Competition Act 1998 an equivalent regime to the EC
competition law regime is created in the UK.
o Normally, Chapter II Prohibition applies as per Article 82 EC
o As such, it must be stressed that where Article 82 EC becomes relevant, the
provision must be applied.
o In principle, Article 82 and Chapter II Prohibitions can apply together but the
result of such combined application must be consistent.
o As in the case of Article 82, violations may result in damages, penalties and
alteration of market behaviour

10.5 - Activities
Reading
10 M Furse, Competition Law of the EC and UK (6th edn OUP, Oxford 2008),
Chapters 9, 11, 14 and 15
11
12
Activity Number 1
Are Article 81 EC and Chapter I prohibition of the Competition Act 1998 compatible?
Are Article 82 EC and Chapter II prohibition of the Competition Act 1998 compatible?

Activity Number 2
Give practical examples of an undertakings dominant position in a given market
(whether national or regional).

Dr. Antonios E. Platsas

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