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Section 2 - What the Duties are Between the Parties Engaged in the Contract of Sale

Section 2 - What the Duties are Between the Parties Engaged in the Contract of Sale. Outcome . Students must be able to categorise the duties imposed on the seller and the buyer by the Sale of Goods Act 1979. Introduction. These duties are found in ss 27 and 28 SOGA 1979.

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Section 2 - What the Duties are Between the Parties Engaged in the Contract of Sale

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  1. Section 2 - What the Duties are Between the Parties Engaged in the Contract of Sale

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

  3. Introduction • These duties are found in ss 27 and 28 SOGA 1979. • DUTY OF THE SELLER: TO DELIVER THE GOODS • DUTY OF THE BUYER: TO ACCEPT AND PAY FOR THE GOODS AS PER (IN ACCORDANCE TO) THE TERMS OF CONTRACT • These are concurrent conditions

  4. Duties of the Seller • 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. (In this case S sold agreed to sell a car to B and at B’s request, delivered the car directly to X, to whom B has sold the car. Held: delivery to X constituted a state of affairs whereby S was acting as B agent and that B was in constructive possession of the car even though he never had physical possession of it).

  5. Duties of the Seller (continued) • 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 (default rule). The exception to this would be if the goods are specific goods, then the place of delivery will be where the goods are situated.

  6. Duties of the Seller (continued) • 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.

  7. Duties of the Seller (continued) • In British & Common Holdings v Quandrex Holdings (1989) , it was held that initially in a contract where delivery should be made within reasonable time, time cannot be initially of the essence but buyer can subsequently make it of the essence by serving a reasonable notice fixing a delivery date and making time of the essence. • In Bunge Corporation v Tradax SA (1981), the buyer was required to give the seller notice of readiness:

  8. Duties of the Seller (continued) • ‘It is clearly essential that both buyer and seller (who may change roles in the next series of contracts, or even in the same series of contracts) should know precisely what their obligations are, most especially because the ability of the seller to fulfil his obligations may well be totally dependent on punctual performance by the buyer’. (per Lord Wilberforce)

  9. Duties of the Seller (continued) • In other words time is of the essence for large-scale commercial contracts (contracts for commodities). Lord Wilberforce referred to ‘mercantile contracts’. Probability in commercial contracts. Possibility in consumer contracts. • If on seller’s terms delivery ‘on or about’ a certain date: this will somehow stop the buyer to simply withdraw from his contractual obligations

  10. Duties of the Seller (continued) • 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. • 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.

  11. Condition of the Goods • The seller is under a duty to supply goodsin 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.

  12. 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.

  13. I. Goods must correspond with their description • Was the sale by description? • What was the description by which the goods were sold? • Did the description influence the buyer? • Did the description identify the commercial characteristics of the goods sold? • Did the description identify the goods to be supplied rather than an item or location of the goods? • Did the goods correspond to all aspects of the detail by which they were described?

  14. Was the sale by description? • See Varley v Whipp (1900) 1 QB 513, Grant v Australian Knitting Mills (1936) AC 85 for seen or unseen goods. • In Varley v Whipp it was held that where S sold specific goods which B had not seen, the sale was one by description. • In Grant v Australian Knitting Mills it was held that ‘There is sale by description even though the buyer is buying something displayed before him on the counter…’

  15. What was the description by which the goods were sold? • Can include the slightest characteristic. • See Beale v Taylor (1967) 3 All ER 253: ‘1200’ badge on a secondhand car was held to be part of the description of the car

  16. Did the description influence the buyer? • See Harlington & Leinster v Christopher Hull (1991) 1 QB 564: Bought a supposedly Gabriele Munter (German expressionist painter). S declared he was not an expert on German expressionist painting to B, who actually was an expert. £6,000. Fake: £50-100. Court of Appeal said this was not sale by description basing its decision on the fact that the attribution of artistic arts is not an exact science, and that anyone dealing in fine art is taking a calculated risk. Good decision but sellers cannot get away simply by stating that they are not experts.

  17. Did the description identify the commercial characteristics of the goods sold? • See Ashington Piggeries v Christopher Hill (1973) AC 441: Goods are only ‘sold by description’ where the description in question identifies the commercial characteristics of the goods to be sold.

  18. 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 [1976] 1 WLR 989: ‘Description has to be a substantial ingredient in the identity of the thing sold.’

  19. Did the goods correspond to all aspects of the detail by which they were described? • See Arcos v Ronaasen (1933) AC 470 HL: B ordered 0,5 inch thick timber staves for making barrels; most of the staves delivered varied from 0,5 inch to 9/16s of an inch. The buyer was entitled to reject, despite the fact that he took advantage of a falling market for timber. ‘Due for fresh examination’ said the Lord Wilberforce in Reardon Smith.

  20. II. Goods must be of satisfactory quality • Fitness for all purposes for which the goods are commonly supplied. • Appearance and finish, freedom from minor defects. • Durability and safety.

  21. II. Goods must be of satisfactory quality (continued) • 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 (not merchantable quality as before 1995). • See Stevenson v Rogers (1999) QB 1028: The court rejected the meaning given to that phrase in the context of the Trade Descriptions Act 1968 and the Unfair Contract Terms Act 1977 and took a broader approach. Fisherman selling his trawler was taken to be ‘in the course of business’.

  22. II. Goods must be of satisfactory quality (continued) • 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: Secondhand Renault 80,000 miles - £2,995 (reasonable price) – realised the car was of unsatisfactory quality as she had problems with the gear box; her claim failed, because the car’s lack of durability did not make it of unsatisfactory quality.

  23. S 14(2A) ‘checklist’ - Fitness for all purposes for which the goods are commonly supplied. • See Kendall v Lillico (1969) 2 AC 31: B bought ground nut extract to make food which in turn sold to the owner of a farm, who fed to his stock. The groundnuts used in the extract had been affected by a mould which produced a toxin poisonous to the birds, which died. In addition groundnuts were also used for cattle food and the extract supplied to B could also been used for cattle food. HoL held that the subject matter of groundnuts was merchantable (=if fit for at least one purpose, then merchantable).

  24. S 14(2A) ‘checklist’ - Fitness for all purposes for which the goods are commonly supplied (continued) • Aswan Engineering v Lupdine Ltd (1987) 1 All ER 135: Here a contract to supply plastic pails which were used to contain damp-proofing compound exported to Kuwait. Goods reach Kuwait and then they were stored. 70 degrees high temperature inside the storage. Pails collapsed under their own weight and buyers claimed that they were unmerchantable. The CoA rejected the argument that the units were unmerchantable simply because they collapsed under their own weight.

  25. S 14(2A) ‘checklist’ - Appearance and finish, freedom from minor defects • 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: B bought a new Range Rover for £16,000. Suffered from minor defects e.g. scratches to the paintwork. CoA held: unmerchantable because it was conceived that cars do not simply get drivers and passengers from one place to the other but of doing so one can also claim that they give pride to their driver by the outward and interior appearance.

  26. S 14(2A) ‘checklist’ - Appearance and finish, freedom from minor defects (continued) • Shine v General Guarantee Corp (1988)2 All ER 911: Unmerchantable even if ‘usable’ – Fiat X-19. Totally immersed in the water so that anti-corrosion warranty was avoided. Unmerchantable. • Bernstein v Pamson Motors (1987) 2 All ER 220: But an easily repairable defect in a car does not make it unmerchantable. • Millars of Falkirk v Turpie (1976) SLT 66: New car delivered with a leak in the power steering system; would cost £25 to fix and seller offered to fix it. B (a laywer) sought to immediately reject. Merchantable.

  27. S 14(2A) ‘checklist’ – 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 (Renault case).

  28. III. Goods must be fit 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 (e.g. buying a washing machine, it should wash clothes…). Again, the meaning of "in the course of a business" has been given a broad interpretation, see Stevenson v Rogers (1999) QB 1028.

  29. III. Goods must be fit for purpose Two (2) requirements must be satisfied: • The particular purpose must be made known to the seller and, if it is a special purpose, that purpose must be specifically stated. • 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.

  30. Fit for purpose - The particular purpose must be made known to the seller • See Kendall & Sons v Lillico & Sons Ltd (1969) 2 AC 31: (Groundnut case). • Ashington Piggeries Ltd v Christopher Hill (1972) AC 441: (M)anufacturer a claim against (S)upplier under s 14 (3) SOGA who had supplied contaminated herring meal. The manufacturer had indicated that this would be for animal feed rather than fertiliser but not that feed was for mink. Fatal to mink. Held: M sufficiently indicated that the purpose in the manufacture was animal feed.

  31. Fit for purpose - The particular purpose must be made known to the seller (continued) • Slater v Finning (1997) AC 473: S supplied a camshaft for B’s fishing vessel. Not only had the first camshaft failed but so did two additional replacements causing significant losses to B’s business. But the camshaft was fit for purpose. The boat’s idiosyncrasy caused problems to it and it worked perfectly in another vessel. The HoL rejected B’s claim because he did not make it clear from the outset that the usage of the camshaft was for a special purpose, a purpose which was never provided by B.

  32. Fit for purpose - The buyer must rely on the seller • See Wren v Holt (1903) 1 KB 610 CA: B bought Holden’s beer from a public house. The beer was contaminated by arsenic. B gave evidence that he knew that the public house sold only Holden’s beer and that he drank there because he liked Holden’s beer. A claim on the unfitness of beer under s 14(3) failed on the basis that B had not relied on S.

  33. Pass good title (nemo dat quod non habet) • 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.

  34. Pass good title (nemo dat quod non habet) (continued) • See Niblett v Confectioners Materials Co Ltd (1921) 3 KB 387: Condensed milk ‘Nissly’ instead of Nestle. Trademark breach preventing B to sell cans of milk of ‘Nissly’. • Rowland v Divall (1932) 2 KB 500, Barber v NSW Bank Ltd (1996) 1 All ER 906: B bought goods but was sued for infringement of patent by X. The patent however was granted to X after the property in the goods passed to B; in contrast to Niblett no breach of s 12(1): S had the right to sell at the time he did to B.

  35. Pass good title (nemo dat quod non habet) (continued) • In addition under SoGa s 12(2), there are two implied warranties: • Where the defects are specifically drawn to the attention of the buyer. • The buyer must be allowed quiet possession of the goods.

  36. Sale by sample • SoGa s 15 requires goods sold by sample to befree 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: a sale by sample ‘where the sample is present to the eye the real meaning and intention of the parties with regard to the subject matter of the contract which, owing to the imperfections of language, it may be difficult or impossible to express in words. The sample speaks for itself’

  37. Duties of the Buyer • Acceptance of the goods • Payment for the goods

  38. Duties of the Buyer (continued) • 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.

  39. Duties of the Buyer (continued) • 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.

  40. Duties of the Buyer (continued) • 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 s 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 where the buyer is not dealing as a consumer these terms can only be excluded if they satisfy the test of reasonableness.

  41. Recap • Duties of the buyer and the seller in a given sale of goods contract under the SOGA 1979 and the corresponding case law. • In the case of the Seller we have dealt with the Condition of the Goods and Delivery, whereas in the case of the Buyer with Acceptance of the Goods and Payment for the goods.

  42. Thank you.

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