Sale of Goods Terms

Express terms
Contractual terms can either be express of implied. An express term is one that
has been expressly agreed by the parties, either in writing or orally.
1) Signature
2) Notice
Parker v SE Ry, what constitutes a reasonable notice?
a) Did the person receiving the ticket know that there was writing on it?
b) Did he know that the ticket contained or referred to conditions?
c) Did the party seeking to rely on the clause do what was reasonable to bring
the existence of the clause to the notice of the other party?
3) Course of Dealings

Implied terms
Implied terms can be operated at common law and by operation of statute
(SOG 1979 B2B, CRA 2015 B2C)
At common law, the rule of caveat emptor was the key principle underpinning
contracts of sale but has been eroded largely by the SOG 1893 which introduced
the implied terms of quality and fitness of purpose. CE is still of relevance in
relation to purely private sales, and this is because the terms implied by the SGA
in s.14(2) and (3) in relation to the quality and fitness for purpose of the goods
only apply to sales made in the course of a business. SGA and CRA also eroded
the principle by implying into contracts for the sale of goods a number of terms
that favour the purchaser of the goods and can be argued that the governing
principle is now caveat venditor (let the seller beware).
Contractual terms can be a condition, warranty or an innominate term. The
statutory terms implied by the SGA have been classified as either conditions or
warranties. (*in respect of contracts of Sog these terms may only be implied if
s.2(1) has been satisfied).
s.12 SGA, implied terms as to title.
1. Condition that the seller has the right to sell the goods (s.12(2))
2. Warranty that the goods are free from any charge or encumbrance,
s.12(2)(a)
3. A warranty that the buyer will enjoy quiet possession of the goods,
s.12(2)(b)
The distinction of terms affects the buyers remedy.
1. Condition repudiate, reject, claim damages
2. Warranty claim damages
 s.12(1) Right to sell the goods
s.12(1) there is an implied condition on the part of the seller that in the case
of a sale he has a right to sell the goods, and in the case of an agreement to sell,
he will have such a right at the time when the property is to pass. Test:
1) Has the seller ever had the right to sell the goods?
2) If so, did the seller have the right to sell the goods at the relevant time?
Did the seller have the right to sell? This section does not require that the
seller should also be the owner, nor does the section require him to acquire title
before transferring the goods to the buyer. Meaning, a person may sell gods even
if he doesnt himself own them.
Niblett v Confectioners Materials, the seller sold a quantity of tins of
condensed milk. Some tins were labelled in such manner that a third party
trademark was violated. Buyers sued the seller for the breach of s.12(1). Court
held that the presence of the trademark infringement meant despite being the
owner of the goods and holding valid title, because they had no right to sell time.
A term implied by this section is a strict liability, because it is irrelevant
whether the seller knew or ought to have known that he had no right to sell the
goods.
Did the seller have the right to sell at the relevant time? It depends upon
whether the contract purported to effect a
1) Sale or (a present transfer of property in the goods)
2) Agreement to sell (where the transfer of property in the goods will not
take place until a future date, or upon the fulfilment of some condition)
It is also important to distinguish between a contracts for the sale of
1) Specific goods right to sell at the time the contract is made (provided
it is an unconditional sale and no condition as to transfer of title exists)
2) Unascertained goods right to sell at the time that the property would
be transferred to the buyer under s.18 Rule 5 SGA
3) Agreement to sell right to sell at the time when the property is to
pass to the buyer
A breach of s.12(1) (condition) will entitle the innocent party to treat the
contract as at an end (repudiate and reject) subject to the rule of acceptance
where a buyer cannot generally terminate the contract for breach of condition
once he has accepted the goods and can only bring an action for damages for
breach of warranty.
Rowland v Divall, the contract was for the purchase of a car which the seller
had no right to sell as, unbeknown to him, had earlier been stolen. As the entire
purpose of a contract of sale is to transfer ownership in the goods to the buyer,
there was a total failure of consideration because the buyer could never
have obtained title, because the seller had no right to sell. There was no proper
acceptance even though he had use of the car for several months and was
allowed to recover the full purchase price for the car.
Criticism: the buyer enjoyed the use of the car for several months, recovering
the full pp means that the use of the car by the buyer was free, and the car was
worth less when returned than when bought. c/f Butterworth v Kingsway K,
H and Kingsway all acquired valid title and could not recover the full pp (no
total failure of consideration + they accepted). Butterworth written to Kingsway
prior to Rudolph obtaining title, and the letter held to be a repudiation of the
contract so entitled to recover the full pp.
s.12(2)(a), goods free from charges or encumbrances
1) Refers only to a proprietary or possessory right, not to a mere contractual
right
2) The goods at the time the agreement was entered into must be free from
charges/ encumbrances and must remain free until the time when
property in the goods passes to the buyer
3) The term implied will not be implied where the existence of the
charge/encumbrance is disclosed or made known to the buyer prior to the
contract being entered into
4) A breach o term is not dependant on the charge/ encumbrance being
enforced or asserted: a mere existence of charge/encumbrance suffice to
establish breach
This is a warranty, so the buyer is only entitled to recover damages.

If the buyer loses possession of the goods, he can claim damages based
on the value of the goods at the time of dispossession
If the buyer is not dispossessed of the goods, the prima facie measure of
damages will be the difference in value between the goods when they
were delivered and the value that the goods would have had it the
contract had been complied with
Regardless of whether the buyer loses possession, he can claim from the
seller reasonable costs incurred in avoiding the charge/encumbrance
(legal costs and any damages awarded against the buyer)
s.12(2)(b), right to enjoy quiet possession
The buyer will enjoy possession of the goods meaning this term can be
breached even after the title has been transferred to the buyer.
Rubicon v United Paints, although Rubicon had transferred valid title to UP,
the duty was a continuous one that had been breached by activating the time
lock which prevented UP from accessing the computer system so UP can recover
the pp and damages. (sellers interference)
Microbeads v Vinhurst, the seller sold some road marking machinery. Shortly
after, a company obtained a patent relating to road marking machine which
entitled them to bring an action against the buyer to enforce their patent
preventing V to use the machines. Court held, as M had the right to sell the
goods at the time the contract was entered into, the term implied by s.12(1)
had not been breached. But by obtaining the patent and seeking an injunction,
the third party had interrupted Vs enjoyment of the machines. So the term had
been breached and V could obtain damages from M. (interference by a third
party)
1) When will the implied term come into effect? Once the goods are
delivered to the buyer, irrespective of whether he also acquires title at this
point.
2) What conduct constitutes breach of term?
Niblett, interference is caused by the sellers breach of contract or
tortious conduct
Microbeads, interference is caused by the lawful conduct of a third
party, unless the interference is not due to the fault of the seller
Malzy v Eichholz, interference caused by the unlawful conduct of a
third party, then the term will not be breached, unless the seller
involved in unlawful conduct and the unlawful conduct was sufficiently
connect to the contract of sale

s.12(2)(b) is a warranty, will only be entitled to claim damages.

If buyer dispossessed: value of the goods at the time buyer was
dispossessed (loss directly and naturally resulting in the ordinary course of
events from the breach of warranty).
If buyer not dispossessed: rebuttable presumption difference in value
between the goods at the time of delivery and the value that the goods
would have if the term implied by s. 12(2)(b) had not been breached.
Buyer can usually further claim legal costs and consequential losses to the
extent that they are not too remote.
s.12(3), transfer of a limited title
Chapman v Speller, sheriff seized gods from a judgment debtor which he
intended to sell at an auction to satisfy the debtors debt. The goods were
purchased by Speller at the auction who subsequently sold them to Chapman.
The goods were discovered not to be the property of the debtor. Chapman
returned goods to owner and sought the recovery of the price paid to Speller on
the ground that Speller did not have the right to sell the goods. Claim failed as
sheriff could not know that the debtors title was defective, it was inferred that
Speller intended to transfer solely the title that he actually had. The true
consideration was the assignment of the right, whatever it was, that Speller had
acquired by his purchase at the sheriffs sale and that this consideration had not
failed. The money paid by Chapman was therefore not for the goods but merely
for this right Speller had acquired.
When s.12(3) is implied, s.12(1), (2)(a) and (b) will not be implied, but a more
limited term will be implied by s.12(4) and s.12(5).

S.13(1) Correspondence with description

The description must amount to a term in the contract
It must be a substantial ingredient of the identity of the thing sold
The description must be relied upon the buyer
 Did the goods fail to correspond with the description?

The application of the de minimis rule to s.13 cases would appear to provide
the only exception, so that microscopic deviations from the description will not
result in the term implied by s.13(1) being breached.

s.14(2) Satisfactory Quality

This condition implied by s.14(2) applies where the seller sells the goods in the
course of a business, there is an implied term that the goods supplied under
the contract are of satisfactory quality.
Satisfactory quality was known as merchantable quality. The Sale and Supply
of Goods Act 1994 amended s.14(2) replacing it with satisfactory quality.
Liability under this section is strict and arises if the seller sells goods in the
course of a business that are not a satisfactory quality. The seller need not be at
fault. Scope:
1) In the course of a business
Stevenson v Rogers, the court held that for the purpose of the SGA, a sale
by a business is a sale in the course of a business irrespective of whether or
not it is incidental to the business. (Need not relate to the actual business
that is engaged in). If the sale is a private sale then the buyer cannot rely on
these implied conditions and unless any other statute applies, there will be no
implied terms about the quality or fitness supplied under a contract of sale.
c/f s.12(1) UCTA, the purchase must be an integral part of the business or if
bought as one-off purchase, it must be bought with the intention of selling
them on for a profit, or if the goods purchased are of a kind which the
business has bought with some degree of regularity.
2) Goods supplied under the contract

Wilson v Rickett, H and W purchased a tonne of Coalite from Rickett. W

used the Coalite to make a fire, and an explosion occurred due to a piece of
explosive material that had been inadvertently delivered with the Coalite.
Appeal allowed as s.14(2) applies to all goods so delivered, whether they
conform to the contract or not, meaning the whole consignment, including the
offending piece, and not merely to the Coalite alone.
 Situation expressly outside the scope of 14(2)
Specifically drawn to the buyers attention before the contract was
made
Contract is one for sale by sample
Where the sale is effected through an agent who is acting for a principal
who is not selling in the course of a business
Where the buyer examines the goods before the contract is made, which
the examination ought to reveal. For this exception to arise, the buyer
must actually examine the goods in question although he is under no
obligation to do so. Also depends on the nature of the examination.

14(2A): ...goods are of satisfactory quality if they meet the standard that a
reasonable person would regard as satisfactory, taking account of any
description of the goods, the price (if relevant) and all the other relevant
circumstances

Bramhill v Edwards, B purchased a motor-home for Edwards. They had

inspected but had not measured the vehicle before purchased, only after
they had used the vehicle for six months that they measured it and found
it to be 2 inches too wide. Held, the vehicle was of satisfactory quality.
Although the test is objective, the reasonable person must be one who is
in the position of the buyer with knowledge of all relevant background
facts. They were knowledgeable about motor homes and were aware that
the authorities turned a blind eye to the illegality and this was a common
occurrence. Obiter, they would have disentitled them from relying on any
breach that might have been found because they had examined the
vehicle before purchase and their examination would have revealed its
unlawfully excessive width had they gone on to measure it.
So, a buyer would be well advised either not to examine the goods at all or to
ensure that his examination is as thorough as reasonably possible.
3) When will goods be of satisfactory quality?

14(2B), the quality of goods includes their state and condition and the
following (among others) are in appropriate cases aspects of the quality of
goods. This is objective, irrelevant if the seller or buyer believed the goods
to be satisfactory. But the reasonable person must be one who is in the
position of the buyer, with his knowledge.
Two specific factors following s.14(2A) description of the goods
and the price. (consider)

BS Brown v Craiks, the cloth complied with the contractual description but was
not suitable for dressmaking. Held, cloth was merchantable quality. As B had not
informed C that the cloth would be used to make dresses, there were no grounds
to hold that the goods were not of merchantable quality.
Thain v Anniesland, T purchased a second hand Renault car from Anni for
2995. The car was around 5 years old and had 80k miles on the odometer. Later,
it developed a gearbox fault. Sough to recovery. Held, not beached in choosing
buy, she has accepted the risk of expensive repair inevitably attaching to a
second had car that was 5 years old and had 80k miles plus she did not pay
warranty for the first three months, and so she assumed the risk of expensive
repair.

1) Among others are, fitness for all the purposes for which goods of the
kind in question are commonly supplied, appearance and finish, freedom
from minor defects, safety and durability. (Non-exhaustive list)
Remedies (condition), entitle the buyer to reject the goods, repudiate the
contract and recover damages.

s.14(2) Fitness for Purpose

There will be a breach if the seller sells goods in the course of a business, and
either the buyer makes known, expressly or by implication, the purpose for which
the goods were to be used, or it was reasonably foreseeable to the seller that the
buyer might use the goods for such purposes, and the goods are not reasonably
fir for one of those purposes.
1) Communication of particular purpose.
Where the buyer requires the goods for a non-common or abnormal purpose,
then the term implied will only be implied if the buyer communicates that
purpose to the seller. Griffiths v Peter, G developed dermatitis caused by the
coat, but she had not made the particular purpose known to Peter that (she had
abnormally sensitive skin), no breach.

2) Reasonably fit for purpose.

The standard required is that goods are reasonably fit for purpose, what is
reasonable depend upon the circumstances taking into account the
characteristics of the goods. Bartlett v Sidney, second hand Jaguar from SM a
motor dealer. SM informed that the clutch was defective but a minor repair could
remedy it. The price was discounted by 25. He drove the car for several miles
before taking it to the garage for repair and discover to repair it, the engine
would need to be dismantled for 84. Appeal allowed, held, car was fit for purpose
as a buyer should realise defects may appear sooner or later in a second hand
car. The most he can require is that it should be reasonably fir for the purpose of
being driven along the road.
Other factors may also be relevant such as durability, the buyers use of the
goods (if the buyer misuse and the loss sustained is caused by the buyers
misuse, then even if those goods are unfit for purpose, it will not be breach), and
the goods packaging and labelling (might become unfit if not packaged
correctly or accompanied by suitable warnings/ instructions, for goods that need
to be handled in a certain way).
2) This section imposes an objective, strict liability standard it is not
defence for the seller to show that he did not know of the defect or that he
could not have known of it.
Frost v Aylesbury Dairy, F purchased milk from A which was then consumed
by him and his wife. Milk was infect with typhoid, and wife died. A said that no
amount of skill or judgment could have enabled it to discover the defect in the
milk. Held, not fit for purpose, the fact that A could not have discovered the
typhoid was irrelevant, as it matters not whether the defect was discoverable,
patent or latent.
3) Final point is for the purchaser of the goods to prove on the balance of
probabilities that the goods sold were not fit for their purposes.

3) Reliance
Originally, as long as the seller know of the purpose of the purchase of the
goods, the courts will then presume that the buyer relied on the sellers skill and
judgment by purchasing the goods that the seller suppled as fir for purpose. But
where the buyer requests the goods by their trade name in circumstances that
exclude any discussion about their suitability, then he will not be relying on the
skill or judgment of the seller. Also, the reliance must be reasonable for the term
to be implied.
Teheran-Europe, the seller did not know they were being relied on for resale in
Persia and they knew nothing of conditions in Persia but the buyers knew. The
buyers saw the machine, read its description and relied upon their own skill and
judgment, and did not make the purpose known to the seller. No breach.
Partial reliance? If the goods are not fit for purpose due to an issue that lies
within the buyers own area of expertise, then no breach. If the issue was within
the sellers area of expertise, then term breach. Cammell Laird, they agreed to
build two ships for a third party. They sub contracted it to defendant and
provided them with broad specs of the propellers but the exact details of the
propellers would be a matter for defendants skill and judgment. Propellers were
defective. Held unfit for purpose, damages sought successfully by Cammell due
to defect in the sellers area.
s.14(2) vs (3). Jewson Ltd v Boyhan, as the boilers functioned perfectly well
as boilers, there was no breach by s.14(2). Boyhan had not communicated to
Jewson the need to have an efficient SAP rating, so there was also no breach of
the term implied by s.14(3). S.14(2) is to establish a general standard of quality,
s.14(3) establish that goods are fit for a particular purpose made known to the
seller. But s.14(2) does not require the buyer to rely on the sellers skill and
judgment or unreasonableness to rely on.
Remedies, condition, reject, repudiate, and recover damages.

s.15 Sale by Sample

s.15(2), In the contract for sale by sample, there is an implied term that the
bulk will correspond with the sample in quality; and that the goods will be free
from defect making their quality unsatisfactory, which would not be apparent on
reasonable examination of the sample.
McNaghten in James Drummond, the office of a sample is to present to the
ye the real meaning and intention of the parties with regard to that subject
matter of the contract which, owing to the imperfection of language, it may be
difficult or impossible to express in words. The sample speaks for itself.
Godley v Perry, 6 year old child bought a toy catapult from a shop owned by
Perry. The catapult broke whilst being fired and stuck Godley causing him to
remove his eye. Wife had tested a sample of the catapult before buying from
Burton and Burton had tested a sample before purchasing them from Graham.
Held, the catapult was not of merchantable quality so Perry had breached the
term implied by s.14(2). The sales by Burton to Perry and by Graham to Burton,
were sales by sample, and as the defect was not apparent on a reasonable
examination of the sample, Burton and Graham had breach the term implied.
Remedies, condition, reject, repudiate, and recover damages.

Consumer Rights Act 2015

Goods contract between a trader and consumer (B2C). The terms to be treated
as included in the contract under CRA are not to be treated as conditions.
S.9, satisfactory quality determined by what a reasonable person would
consider satisfactory for the goods in the question (fitness for all the purposes for
which goods of that kind are usually supplied, appearance and finish, freedom
from minor defects, safety and durability). If the consumer is made aware of a
particular defect before making the contract then the defect will not be grounds
for finding the goods to be unsatisfactory. If the consumer examined the goods
which should have been revealed by examination before the contract, then no
grounds for goods to be unsatisfactory. And if the goods were supplied by
sample (even if the consumer did not actually examine the sample) then a
defect which should have been revealed by a reasonable examination of the
sample will not be grounds for finding the goods to be unsatisfactory.
s.10, fitness for a particular purpose. If a consumer acquires goods for a
specific purpose, and has made this purpose known to the trader, the good must
be fit for that purpose unless the consumer does not rely on the skill or judgment
of the trader.
s.11, goods to be described. Where goods are supplied by description, the
goods must be as described.
s.13, goods to match a sample. Entering a contract on the basis of a sample,
the final goods delivered must match the sample.
s.14, goods to match a model seen or examined. If the trader displays or
provides a model of the goods in question, then the goods received by the
consumer on purchase must match that model.
s.15, installation as part of conformity of the goods with the contract.
Installation of the goods forms part of the contract and the goods are installed by
the trader under the traders responsibility. If they are installed incorrectly, then
the goods will not conform to the contract to supply goods. Not available in SGA.

Exclusion of the statutory terms

s.55(1) SGA, in relation to non-consumer sales, Where a right, duty or
liability would arise under a contract of sale of goods by implication of law, it
may (subject to the Unfair Contract Terms Act 1977) be negatived or varied by
express agreement, or by the course of dealing between the parties, or by such
usage as binds both parties to the contract.
s.6 UCTA 1977 provides,
1) S.12 SGA cannot be excluded.
 2) S.13 to 15 SGA can be excluded, but only in so far as the term satisfies
the requirement of reasonableness.
The requirement of reasonableness
s.11(1), a term will be reasonable if it is fair and reasonable one to be included,
having regard to the circumstances that were or ought reasonably to have been
known to or in the contemplation of the parties when the contract was made,
and not at the time when the dispute arose.
s.11(2), the court must have regard to Schedule 2 (non-exhaustive list)
s.11(4) applies solely to clauses seeking to restrict liability to a specified sum of
money (does not apply to clauses that exclude liability altogether)
Exclusion under the CRA 2015
s.31 sets out the extent of the traders liability that cannot be excluded or
restricted.
Doctrine of Fundamental Breach
A fundamental term of the contract and a significant breach would provide the
buyer with a remedy, irrespective of any exclusion clause in the sellers contract.
However, Suisse Atlantique, obiter, there was no rule of substantive law that
a fundamental breach of a contract nullifies an exemption clause and that it is a
matter of construction whether the clause was intended to apply to such a
breach as had occurred. If a breach by one party entitles the other to repudiate,
but he affirms it, the exemption clause continues in force unless it was not
intended to operate in those circumstances.
Confirmed in Photo Production, contract to exclude defendants liability for any
loss suffered through fire or any other cause except insofar as was solely
attributable to the negligence of the companys employees acting in the course
of their employment. One of the employees deliberately started a fire in the
factory, which was destroyed by it. Held that the wording of the exclusion
clause adequate to exclude liability for what occurred.