Sale of Goods Act 1979

The Sale of Goods Act 1979 is a British Act of Parliament (1979, ch 54) which regulates contracts in which goods are sold and bought. The Act consolidates the Sale of Goods Act 1893 and subsequent legislation, which in turn consolidated the previous common law.

The Sale of Goods Act performs several functions. The Act lays down a small number of compulsory legal rules, but these restrictions are minimal: the bulk of the Act is concerned with an array of presumptions and implied terms, which aim to reflect the commercial expectations in the most commonly agreed sales contracts. In the absence of contrary agreement these terms will govern a contract within the Act's remit. The benefits in efficiency (through lower bargaining costs) and legal certainty have led to many jurisdictions adopting the legislation wholesale, and versions of the Sale of Goods Act have been adopted in almost all the former territories of the British Empire and Commonwealth (with the notable exception of Canada, which has adopted hybrid legislation incorporating elements of the US Uniform Commercial Code).

The Act applies to all contracts where property in 'goods' is transferred or agreed to be transferred for a monetary consideration, [Sale of Goods Act 1979 s2(1).] in other words: where property in chattels is sold.

Terms implied into the contract

These terms are implied into contracts falling within the Act. Breach of these terms by the seller may give rise to an action for damages, and in the case of those terms which are also conditions, termination of the contract.

Where the slightness of the breach renders it unreasonable for a non-consumer buyer to reject the goods, for breach of the implied terms as to "description", "quality or fitness" or "sample", then the buyer can only claim damages for a breach of warranty. [s15A, as added by the Sale of Goods Act 1994 s4(1).] This amendment moderates the traditionally strict approach of English Law to contractual breach in a commercial context.

Implied term as to title

Section 12 incorporates into the contract a term that the seller either has legal title to the property to be sold or that he will have title at the time when property is to pass. Two warranties are additionally implied that the buyer will enjoy quiet possession of the goods and that the goods will be free from any encumberances (such as sellers' lien or a third party having lien over the goods). [s 12(2).]

These terms can be harsh in their application: controversially, the case of "Rowland v Divall" [ [1923] 2 KB 500] held that rejection of goods found to be in breach of s.12 will allow the buyer to recover the full price paid, with no allowance for the buyer's (potentially extensive) use of the goods.

Implied term as to description

Where the buyer is sold goods by description, the goods must correspond with this description. [s13(1).]

"Harlingdon v Christopher Hull" ["Harlingdon & Leinster Enterprises Ltd. v Christopher Hull Fine Art Ltd." [1990] 1 All ER 737] provides that this implied term may only be breached if the buyer relied upon the description. Therefore if the buyer is an expert, reliance may not be established.

Implied term as to quality or fitness

These terms are implied by s 14 and are only relevant where the seller is acting "in the course of a business". There is no requirement as to the status of the buyer.

The phrase "in the course of a business" has received much judicial consideration. Some judges have applied definitions found in other acts, but the recent case of "Stevenson v Rogers" [ [1999] 1 All ER 613, overruling "R + B Customs Brokers & Co. v United Dominions Trust" [1988] 3 All ER 831 and affirmed in "Feldaroll Foundry plc v Hermes Leasing Ltd." [2004] EWCA Civ 747.] gives a wide definition to this requirement. It will encompass activity which is ancillary or loosely related to the business of a company. To use Richards' [Richards, P, "Law of Contract", ed7 (2006, London: Pearsons) at 124.] example, a bank that sells a company car will be acting "in the course of a business".

;Satisfactory quality, s14(2) [As substituted by the Sale of Goods Act 1994 s 1.] : The quality of the goods sold must be "satisfactory" (prior to 1994, this provision required 'merchantable' quality; this requirement has been retained in most Commonwealth versions of the Act). The Act provides an objective test to determine "satisfactory" quality; the standard that a reasonable person would regard as satisfactory, taking into account the price, description and any other relevant factors. [s 14(2A), as added by the Sale of Goods Act 1994 s 1.] The courts have identified certain factors that may raise or lower the expectation of "satisfaction". Second hand goods, per "Bernstien v Pamsons Motors Ltd." [ [1987] 2 All ER 220.] , will attract a lower expectation. On the other hand goods of a reputable brand may attract a higher expectation, the judge in "Bernstien" used the example of a small ping on a Rolls-Royce being "unsatisfactory". 'Other relevant factors' may include advertising in the case of "consumer contracts". [s 14(2D), as added by the Sale and Supply of Goods to Consumers Regulations 2002, reg 3(2).]

;Fitness for purpose, s14(3) : If the buyer expressly or impliedly makes his purpose for the goods known to the seller, the seller is obliged to make sure the goods provided are "fit for that purpose", if it is reasonable for the buyer to rely on the seller's expertise. An example of the application of this provision can be found in "Godley v Perry" [ [1960] 1 WLR 9.]

ale by sample

Where goods are bought by bulk and the buyer has tested or examined a small number of those goods, the seller is obliged to make sure that every item in the bulk corresponds with the quality of the sample tested or examined. [s 15]

Excluding implied terms

These terms will not be incorporated into the contract where they have been expressly excluded, or express terms conflict with them. [s 55] These exclusions may be invalid under common law, the Unfair Contract Terms Act 1977, or in "consumer" cases the Unfair Terms in Consumer Contracts Regulations 1999. If the term excluding these implied terms is struck out, the implied term will be effective.

In consumer cases

These provisions apply where the buyer is a "consumer". [Under Scots law this applied where there is a "consumer contract".] Within six months, beginning at the time at which the goods were delivered, the buyer can require the seller to repair the goods, reduce the price, or rescind (revesting property and requiring the return of any payment) the contract where the buyer successfully claims that the goods were not in accordance with the contract at the time of delivery. [s 48B, as added by the Sale and Supply of Goods to Consumers Regulations 2002.] The seller can defeat this claim if (a) "it is established that the goods did so conform" at the time of delivery, or (b) the measure is "incompatible with the nature of the goods or the nature of the lack of conformity. [s 48A(4), as added by the Sale and Supply of Goods to Consumers Regulations 2002.]

;Consumer requires repair or replacement : The seller must repair or replace the goods within a reasonable amount of time, incuring all costs necessary to perform this task. [s 48B(2), as added by the Sale and Supply of Goods to Consumers Regulations 2002.] This cannot be required if it is impossible or disproportionate in consideration of other available remedies. [s 48B(3), as added by the Sale and Supply of Goods to Consumers Regulations 2002.]

;Consumer requires reduction or rescission : This is only available where repair or replacement is impossible or the seller is taking an unreasonable amount of time to perform these requirements. Any reimbursement must take into account any use that the buyer has had out of the goods. [s 48C, as added by the Sale and Supply of Goods to Consumers Regulations 2002.]

Legal title and property

;Passing of property : Property (i.e. ownership) cannot pass unless the goods are ascertained (i.e. the actual goods to be sold are identified). [s16.] s.18 provides presumptions to determine when property will pass, both for specific goods (ascertained at the time of the contract) and goods unascertained at the time of contracting. These 'rules' can be excluded by contrary implication or express agreement.

:Rule 1: in an unconditional contract for sale and delivery of specific goods in a deliverable state, property passes immediately on contract formation.:Rule 2: where the seller is bound to perform some condition before the sale is possible, property passes when this condition is performed.:Rule 3: where the seller is bound to measure or weigh the goods to ascertain the price, property passes when this is done and the buyer is notified.:Rule 4: when goods are delivered on sale or return, or on approval, property passes when the buyer adopts the transaction (or fails to give notice of rejection within a reasonable time).:Rule 5: in a sale of unascertained goods, the property will pass following an unconditional appropriation of goods or, where the sale is from a specified bulk, following ascertainment by exhaustion (i.e. removal of all the goods in the bulk but those destined for the buyer).;Seller does not have title : If the seller does not own the goods, the buyer generally cannot gain title, although he can sue for breach of the implied term as to title. [s21.] This is subject to numerous exceptions in closely defined circumstances, for example: s.2 Factors Act 1889, ss. 21, 24, 25 SGA 1979.

;Seller has voidable title : Where the seller holds voidable title, title can pass to a buyer in good faith. If title is voided before the contract of sale is concluded, title cannot pass. [s23. see "Shogun Finance Ltd v Hudson" [2004] 1 AC 919. For legal justification see Brooks, O & Dodd, A, "Shogun: A Principled Decision" (2003) 153 "NLJ" 1898]

Necessities for minors and mentally incapacitated

Section 3(2) provides that if goods are sold and delivered to minors [Under Scots law this aspect is now regulated by the Age of Legal Capacity (Scotland) Act 1991] or those mentally incapacitated [In England and Wales this aspect is now regulated under the Mental Capacity Act 2005.] the minor will be liable to pay a reasonable price if the goods are "necessaries". Necessaries are goods suitable to the persons' condition of life and actual requirements at the time of contracting.

Miscellaneous

;Price : The "price" is a money consideration given in exchange for property in goods. If the price, or means to ascertain a price, is not agreed, the buyer will be required to pay a reasonable price. [s8(2).

;Specific Goods that perish: The contract is "void" where they perish before and avoided where they perish after contract formation. [s6, 7.] (See Mistake (contract law)).

;Place of transfer : Where location is not stipulated, the buyer must collect the goods at the sellers' place of business. [s29(2).] The seller must be prepared to deliver them to the entrance of his place of business. If the contract was concluded by a means of communication at a distance and the buyer is a "consumer", this provision is disapplied and the Consumer Protection (Distance Selling) Regulations 2000 apply instead.

ee also

*Unfair Contract Terms Act 1977
*Sale of Goods (Amendment) Act 1994
*Unfair Terms in Consumer Contracts Regulations 1999

References

External links

*UK-SLD|183706