Routledge Revision

Commercial Law

Q&A Commercial Law

Jo Reddy & Howard Johnson

Commercial Lawcards 2012 - 2013

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Questions & Answers

The Good, the Fair and the Ugly

Good essays are the gateway to top marks. The Good, The Fair, and The Ugly shows you the style of essay which works well in exams, as well as the simple errors that can cost you essential marks. Written by our Q&A authors, each of these interactive essay-based tutorials highlights key themes and common errors and illustrates essays of specific standards:

Whilst marking criteria will vary, as a general guide, the Good answer will be based on a general mark of a first or upper second class; the Fair answer will be based on a lower second or third class and the Ugly answer would result in a fail.

The Good

Historically, the concept of ‘deemed acceptance’ in s 11(4) and s 35 of the Sale of Goods Act 1979 operated quite harshly as far as consumer buyers were concerned, but the amendment of s 35 by the Sale and Supply of Goods Act 1994 and the introduction of new consumer remedies in s 48A of the Sale of Goods Act 1979 has satisfactorily remedied the situation.

The writer is aware of the key precedents in relation to the interpretation of the provisions.
The writer is aware of the co-existence of the ‘old’ outright rejection remedy in s 35 and the newer tiered remedies of repair and replacement in s 48A–F.
The scope and operation of s 48A–F is usefully discussed and the clear point that the demand for repair or replacement must be reasonable in the context.
The need to explain the nature of the problem and what has been done to repair as discussed in the House of Lords decision in J H Ritchie Ltd v Lloyd (2007) is discussed.
The question is well structured with an introduction, development and conclusion.
A useful awareness of potential future developments which might affect the situation and the potential withdrawal of the unilateral right of withdrawal by the proposed EU Consumer Rights Directive shows candidate well on top of issue.

Podcast: the Good

In a contract of sale it is the duty of the seller to deliver goods that are in conformity with the contract (s 27 of the Sale of Goods Act 1979 (SGA). If the goods are not in conformity, the buyer may be able to reject them, and this is particularly so if there has been a breach of the implied terms in ss 12–15 SGA 1979, which are implied conditions of the contract. This will be the case if the seller does not have title in the goods (s 12 SGA), or the goods do not correspond with description (s 13 SGA), or if the goods are not of satisfactory quality (s 14(2)), or if they are not reasonably fit for their purpose (s 14(3)) or, if sold by sample, the bulk does not correspond with the sample. These implied terms are conditions, which permits the innocent party the consumer buyer, at their election, either to affirm the contract or to reject the goods and recover their price, if paid and damages for breach of contract. In business to consumer contracts (B2C contracts) this right can be exercised even if the breach of the implied terms is of a relatively minor character, such as a minor defect of problems with the appearance of the product. However, there is an important qualification to this right, which is set out in s 11(4) SGA, stating that where the contract is not severable and the buyer has accepted the goods or part of them, the breach of a condition to be fulfilled by the seller can only be treated as a breach of warranty, and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is an express or implied term of the contract to that effect – this is called ‘deemed acceptance’.(1) The answer sets out clearly the context of whether the consumer’s right to reject for breach of condition – mainly of importance in relation to the implied terms – can be lost and how.

Historically, this rule worked very harshly as far as consumers were concerned. It assumed a decisive and clear break with the contract with a decision being taken in a relatively short time by the consumer to reject the goods; it was all or nothing – the consumer either had to accept all the goods or reject them all. The provisions were a legal snare for consumers, most of whom did not know the law. In reality many consumers were looking for repair or replacement of the product, or a reduction in price. The law historically gave them a stark choice between rapid rejection of the goods and monetary remedies, or, often, being deemed to have accepted the goods and being confined to a claim for damages for breach of warranty. A further problem was the uncertain relationship between the acceptance provisions and the requirement that the buyer be given a reasonable opportunity to examine the goods to see if they complied with the contract (s 34 SGA 1979).

There were three ways in which goods could be accepted by the buyer set out in s 35(1) and (4):

when the buyer intimates to the seller that he has accepted them;
when the goods are delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller;
when, after a lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them.(2) The question sets out clearly the relevant statutory provisions ss 11(4) and s 35 and what constitutes acceptance.

Each of these grounds had pitfalls for the consumer.(3) The pitfalls in the traditional regime are clearly set out. If the goods consisted of a number of items in unitary non-severable contract, all the goods had to be accepted or all the goods rejected. Often when some large item like a suite of furniture was delivered to the consumer, they would be asked to sign what they thought might merely be a delivery note, but this might contain a clause stating that the buyer accepted the goods as in compliance with the contract – so called ‘deemed acceptance’ notes – and these might be treated as an express acceptance within the first ground before they had had any chance to actually examine the goods. If the consumer altered the goods in any way, the second ground might prevent rejection because they could not return the goods to the seller in the same condition as they got them. However, the most difficult ground was lapse of a reasonable time. The time ran from the date of the contract, not the discovery of the defect. (See Leaf v International Galleries (1950), where both seller and buyer innocently thought a painting of Salisbury Cathedral was by John Constable. Five years later when examined prior to being put up for auction the attribution was held to be wrong but it was held to be far too late to reject the painting.) The courts assumed a very rapid decision to reject often holding after a matter of days or even a couple of weeks that a reasonable time had elapsed, a typical case being Bernstein v Pamson Motors (1987), where the consumer had only had the car for some three weeks and for much of that time it was not in use as he was ill and he had not even used up the complimentary tank of petrol given on sale. The court was probably influenced by the fact that the defect was relatively minor and had been repaired, but the buyer had lost confidence in the car. In some older cases a reasonable time has been interpreted even more strictly, coming down to a matter of three days in a case involving a defective dynamo in a purchased second hand lorry – the lorry was only on its second journey, but the court held that a reasonable time had elapsed (Long v Lloyd (1958)).

Uncertainty surrounded the issue of a request for repair – did this amount to acceptance or did it stop the clock running in relation to a reasonable time.(4) The key areas of ‘deemed acceptance notes’ and lapse of a reasonable time are explored. Even when the consumer was legally advised delays in negotiating a settlement of the dispute might mean that the consumer was held to have accepted the goods (Lee v York Coach and Marine (1977)).(5) The writer is aware of the key precedents in relation to the interpretation of the provisions.

Consumer groups such as the National Consumer Council (now part of Consumer Focus), in their report ‘Buying Problems’, demanded reforms, including fixed periods of, say, three months for smaller goods and six months for larger goods, in which the consumer might reject goods.

The notion of fixed periods was rejected by the Law Commission in their report, which led ultimately to the Sale and Supply of Goods Act 1994.(6) The question is chronologically organized looking at the stages of reform – the historical position under the 1979 Sale of Goods Act and, indeed, earlier, and the two stages of reforms introduced by the Sale and Supply of Goods Act 1994 and the reforms required by the EU Directive.

A number of significant reforms were introduced:

Deemed acceptance notes were outlawed in consumer sales – by virtue of s 35(2) and (3), the consumer could not, by agreement or waiver, sign away the right to a reasonable opportunity to examine the goods contained in s 34 SGA.

A new partial right to reject was introduced by s 35A, except where the goods formed part of one commercial unit (e.g. a suite of furniture you could not reject one armchair and accept the other and the settee) but this right is subject to an express or implied contrary intention (s 35A(4)).

Section 35(6)(a) makes clear that requesting repair does not constitute acceptance of the goods.

Lapse of a reasonable time remains, fixed periods of rejection having been rejected, but in subsequent case law the courts have shown a greater flexibility and a willingness to allow longer periods to elapse without the consumer being deemed to have accepted the goods and the Court of Appeal in Clegg v Anderssen (2003) held that Bernstein v Pamson Motors was no longer good law. The case itself illustrates a greater sympathy for the consumer. The case involved the purchase of an expensive yacht; the problem was an overweight keel, which meant the yacht could not attain the racing speeds expected. The yacht was delivered in July 2000 and there were protracted discussions and correspondence about it, but it was not until February 2001 that an authoritative explanation was provided with proposals for remedy. Within three weeks of this, the consumer purchaser rejected the yacht and the Court of Appeal held, given the time taken to try and illicit information about what was to be done, this was not unreasonable and a reasonable time was held not to have elapsed. It must, however, be emphasized that even now the time is not open ended and a delay of nearly 18 months in relation to a fitted kitchen was held to be too long in Jones v Callagher (2005).
A further strengthening of the consumer’s position is the House of Lords decision in J H Ritchie v Lloyd Ltd (2007), which held that where goods had been sent back to the manufacturer and apparently successfully repaired the buyer was entitled to know what the problem was and what had been done and when this was not revealed, it was held he was entitled not to accept the goods back. (While this was a business to business (B2B) contract, this might be a valuable right in relation to sophisticated consumer products, such as cars, where it can be very unclear what exactly the problem was and what has actually been done to address it.)(7) The need to explain the nature of the problem and what has been done to repair, as discussed in the House of Lords decision in J H Ritchie Ltd v Lloyd (2007), is discussed.

Nevertheless, the reforms of 1994 did not address the more fundamental issue that in many cases all the consumer wanted was either a replacement of the defective product or repair of the defects.

The consumer’s position in this respect was further strengthened when s 48A–F was introduced by the Sale and Supply of Consumer Goods Regulations, which implemented the EU Directive on Consumer Sales and Associated Guarantees, Directive 99/44.(8) The writer is aware of the co-existence of the ‘old’, outright rejection remedy in s 35 and the newer, tiered remedies of repair and replacement in s 48A–F. The scope and operation of s 48A–F is usefully discussed and the clear point that the demand for repair or replacement must be reasonable in the context.

Instead of the single option of rejection and monetary compensation, s 48A provides for a series of graded remedies for consumer buyers only – the so-called ‘new remedies’ do not apply to B2B sales. Further, the hand of the consumer buyer is strengthened by s 48E, which allows court ordered specific performance of the obligations. The buyer can require the seller, within a reasonable time, to repair or replace the goods, but without being significantly inconvenient to the buyer. However, repair or replacement cannot be demanded if it is impossible (end of range product, no more available) or disproportionate in comparison to the other remedies (e.g. to repair a £30 kettle would cost at least £100 – this would not be reasonable) or disproportionate in relation to either a price reduction or rescission of the contract. However, if the contract is rescinded, the buyer must give the seller an allowance for any use that has been made of the product (s 48E(5) SGA). If the consumer had to go to court then the court can impose such conditions on any court order as they think just.

The net result of these legislative changes, and the more sympathetic approach of the courts to the consumer’s predicament in an often uncertain situation, is that the consumer is in much stronger position than they were historically. One could envisage on the horizon that the traditional right of outright rejection may be lost by virtue of the new Consumer Rights Directive, or limited to a relatively short period such as 30 days, in a consolidation of EU consumer law directives. In the Law Commission Report ‘Consumer Remedies for Faulty Goods’ (November 2009, Law Com 317), it is recommended that the right to reject should be retained in the UK as a short-term remedy of first instance. It was argued that this is a simple, easy to use remedy, which inspires consumer confidence. The Law Commission recommended that in normal circumstances, a consumer should have 30 days to return faulty goods and receive a refund, with limited flexibility for special circumstances, such as perishable goods, or goods which both parties know will not be used for some time.(9) The question is well structured with an introduction, development and conclusion. A useful awareness of potential future developments, which might affect the situation and the potential withdrawal of the unilateral right of withdrawal by the proposed EU Consumer Rights Directive shows candidate well on top of issue

PODCAST

DRAFT COMMENTS

The good essay has placed the issue in context, particularly emphasizing why acceptance is a key issue in contracts of sale and the fact that if you have accepted the goods they cannot be rejected for breach of condition. Importantly the candidate has got a good sense of chronology, tracking the position from the original version of the Sale of Goods Act 1979 through the changes introduced in 1994 and 2002. Key cases are quoted and changes in judicial attitude noted. Again there is some reference to context (e.g. the National Consumer Council Report on Buying Problems). Usefully the question has ended with reference to the possible further changes which might in fact have a negative impact on the consumer’s right of withdrawal if the EU Draft Consumer Rights Directive goes through in its current form. Extra marks can always be obtained by showing that the candidate is on top of current issues. Overall this is a solid answer and should obtain a good mark.

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The Fair

The writer is aware of the key precedents in relation to the interpretation of the provisions.
The writer is aware of the co-existence of the ‘old’ outright rejection remedy in s 35 and the newer tiered remedies of repair and replacement in s 48A–F.
The scope and operation of s 48A–F is usefully discussed and the clear point that the demand for repair or replacement must be reasonable in the context.
The need to explain the nature of the problem and what has been done to repair as discussed in the House of Lords decision in J H Ritchie Ltd v Lloyd (2007) is discussed.
The question is well structured with an introduction, development and conclusion.
A useful awareness of potential future developments which might affect the situation and the potential withdrawal of the unilateral right of withdrawal by the proposed EU Consumer Rights Directive shows candidate well on top of issue.

Podcast: the Fair

In a contract of sale it is the duty of the seller to deliver goods that are in conformity with the contract (s 27 of the Sale of Goods Act 1979 (SGA). If the goods are not in conformity, the buyer may be able to reject the goods, and this is particularly so if there has been a breach of the implied terms in ss 12–15 SGA 1979, which are implied conditions of the contract. This will be the case if the seller does not have title in the goods (s 12 SGA), or the goods do not correspond with description (s 13 SGA), or if the goods are not of satisfactory quality (s 14(2)), or if they are not reasonably fit for their purpose (s 14(3)) or, if sold by sample, the bulk does not correspond with the sample. These implied terms are conditions, which permit the innocent party, the consumer buyer, at their election, either to affirm the contract or to reject the goods and recover their price, if paid and damages for breach of contract. In business to consumer contracts (B2C contracts) this right can be exercised even if the breach of the implied terms is of a relatively minor character, such as a minor defect of problems with the appearance of the product. However, there is an important qualification to this right, which is set out in s 11(4) SGA, stating that where the contract is not severable and the buyer has accepted the goods or part of them, the breach of a condition to be fulfilled by the seller can only be treated as a breach of warranty, and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is an express or implied term of the contract to that effect – this is called ‘deemed acceptance’.

Historically, this rule worked very harshly as far as consumers were concerned. It assumed a decisive and clear break with the contract with a decision being taken in a relatively short time by the consumer to reject the goods; it was all or nothing – the consumer either had to accept all the goods or reject them all. The provisions were a legal snare for consumers, most of whom did not know the law. In reality many consumers were looking for repair or replacement of the product, or a reduction in price. The law historically gave them a stark choice between rapid rejection of the goods and monetary remedies or often being deemed to have accepted the goods and being confined to a claim for damages for breach of warranty. A further problem was the uncertain relationship between the acceptance provisions and the requirement that the buyer be given a reasonable opportunity to examine the goods to see if they complied with the contract (s 34 SGA 1979).

There were three ways in which goods could be accepted by the buyer set out in s 35(1) and (4):

when the buyer intimates to the seller that he has accepted them;
when the goods are delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller;
when, after a lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them.

Each of these grounds had pitfalls for the consumer. If the goods consisted of a number of items in unitary non-severable contract, all the goods had to be accepted or all the goods rejected. Often, when some large item, like a suite of furniture, was delivered to the consumer they would be asked to sign what they thought might merely be a delivery note, but this might contain a clause stating that the buyer accepted the goods as in compliance with the contract – so called ‘deemed acceptance’ notes – and these might be treated as an express acceptance within the first ground before they had had any chance to actually examine the goods. If the consumer altered the goods in any way the second ground might prevent rejection because they could not return the goods to the seller in the same condition as they got them. However, the most difficult ground was lapse of a reasonable time. The time ran from the date of the contract not the discovery of the defect. (Leaf v International Galleries (1950), where both seller and buyer innocently thought a painting of Salisbury Cathedral was by John Constable. Five years later, when examined prior to being put up for auction, the attribution was held to be wrong but it was held to be far too late to reject the painting.) The courts assumed a very rapid decision to reject often holding after a matter of days or even a couple of weeks that a reasonable time had elapsed – a typical case being Bernstein v Pamson Motors (1987), where the consumer had only had the car for some three weeks and for much of that time it was not in use as he was ill and he had not even used up the complimentary tank of petrol given on sale. The court was probably influenced by the fact that the defect was relatively minor and had been repaired but the buyer had lost confidence in the car. In some older cases a reasonable time has been interpreted even more strictly, coming down to a matter of three days in a case involving a defective dynamo in a purchased second hand lorry. The lorry was only on its second journey, but the court held that a reasonable time had elapsed (Long v Lloyd (1958). Uncertainty surrounded the issue of a request for repair – did this amount to acceptance or did it stop the clock running in relation to a reasonable time. Even when the consumer was legally advised, delays in negotiating a settlement of the dispute might mean that the consumer was held to have accepted the goods (Lee v York Coach and Marine (1977)).

A number of significant reforms were introduced:

Deemed acceptance notes were outlawed in consumer sales – by virtue of s 35(2) and (3) the consumer could not, by agreement or waiver, sign away the right to a reasonable opportunity to examine the goods contained in s 34 SGA.
A new partial right to reject was introduced by s 35A, except where the goods formed part of one commercial unit (e.g. a suite of furniture – you could not reject one armchair and accept the other and the settee) but this right is subject to an express or implied contrary intention (s 35A(4)).
Section 35(6)(a) makes clear that requesting repair does not constitute acceptance of the goods.

Nevertheless, the reforms of 1994 did not address the more fundamental issue that in many cases all the consumer wanted was either a replacement of the defective product or repair of the defects.(2) The implications of the House of Lords decision in Ritchie v Lloyd (2007) should have been mentioned – consideration of a section by the Supreme Court (or its pass incarnation, the House of Lords will usually merit a mention unless irrelevant to the answer.

Instead of the single option of rejection and monetary compensation, s 48A provides for a series of graded remedies for consumer buyers only – the so-called ‘new remedies’ do not apply to business to business sales (B2B). Further, the hand of the consumer buyer is strengthened by s 48E, which allows court ordered specific performance of the obligations. The buyer can require the seller, within a reasonable time, to repair or replace the goods, but without being significantly inconvenient to the buyer. However, repair or replacement cannot be demanded if it is impossible (end of range product, no more available) or disproportionate in comparison to the other remedies (e.g. to repair a £30 kettle would cost at least £100 – this would not be reasonable) or disproportionate in relation to either a price reduction or rescission of the contract. However, if the contract is rescinded, the buyer must give the seller an allowance for any use that has been made of the product (s 48E(5) SGA). If the consumer had to go to court, then the court can impose such conditions on any court order as they think just.

A further advantage to the consumer in relation to these new remedies is that if, subject to the nature of the goods, the goods do not conform to the contract of sale at any time within a period of six months, starting with the date on which the goods were delivered to the buyer, they are taken not to have conformed to the contract, in effect, transferring the burden of proof to the seller to show that they did comply.(3) The controversy surrounding the UK's retention of a unilateral right of consumer rejection in light of the draft EU Consumer Rights Directive, which in effect forces the consumer to give the retailer the choice of repair and replacement – merited a mention – and the English and Scottish Law Commission response suggesting retention of the right but limited in most cases to a short-term right of 30 days.

PODCAST

DRAFT COMMENTS

This essay has shown that the candidate has understood the key legal principles. The main points are lucidly set out and there is mention of relevant legal provisions and some of the key cases. The main difference with the good essay are some omissions such as the key House of Lords decision in Ritchie v Lloyd (2007) and the Court of Appeal judgment in Clegg v Anderssen (2003) and the key point there that they disapproved of the decision in Bernstein v Pamson Motors. Also unlike the good answer the ‘cream on the cake’ point about potential developments flowing from the potential implementation of the draft EU Consumer Rights Directive was omitted. That being said, a solid pass, which should produce a mark in the upper 2:2 range (55-58%).

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The Ugly

The writer is aware of the key precedents in relation to the interpretation of the provisions.
The writer is aware of the co-existence of the ‘old’ outright rejection remedy in s 35 and the newer tiered remedies of repair and replacement in s 48A–F.
The scope and operation of s 48A–F is usefully discussed and the clear point that the demand for repair or replacement must be reasonable in the context.
The need to explain the nature of the problem and what has been done to repair as discussed in the House of Lords decision in J H Ritchie Ltd v Lloyd (2007) is discussed.
The question is well structured with an introduction, development and conclusion.
A useful awareness of potential future developments which might affect the situation and the potential withdrawal of the unilateral right of withdrawal by the proposed EU Consumer Rights Directive shows candidate well on top of issue.

Podcast: the Ugly

If a consumer is supplied with unsatisfactory goods he can reject them unless he has accepted them. He can accept them by telling the buyer they are ok or if he alters them in some way or keeps them for a reasonable time.(1) There is no introduction – no context or setting out what the key issue is in clear terms. Candidates often forget an answer is both a legal answer but also a piece of English; a good introduction, development and conclusion are important. This answer is rather staccato, with points made but no in depth analysis.

The courts have for a long time given the consumer very little time to decide whether to reject, sometimes only a few days or at most a couple of weeks or so.(2) Citation of authorities is important; this essay is bereft of any case references or, indeed, statutory reference – even the Sale of Goods Act 1979 does not merit a mention.

The law has been changed (3) When was the law changed and by what Act or precedent? to give the consumer more time and the courts are more generous in allowing more time as was shown in a case involving a yacht where eight months later the consumer was entitled to reject the yacht which had an overweight keel. In one case involving a car the judge held the buyer could not reject where the buyer had had it only three weeks and not even used up the complimentary tank of petrol.

Sometimes the consumer signs a form saying that the goods are ok this can prevent the consumer rejecting the goods but the law has now been changed so a consumer is not bound and has time to examine the goods. (4) Again no reference to when or by what provision?

If the consumer alters the goods then he cannot reject them because they must be in the same condition to return to the buyer. Also if the consumer gives the goods as a present he cannot reject them because they have been given as a gift to a third party.

The EU has introduced new rules which allow the consumer to demand repair or replacement of the goods instead of just rejecting them and getting monetary compensation. (5) Should have been a reference to the EU Consumer Sales and Associated Guarantees Directive 99/44/EC and the implementation by UK in s 48A-F Sale of Goods Act 1979.

In a Scottish case a farmer bought an agricultural implement which did not work well and asked for it to be repaired and it was sent away to the manufacturer who apparently successfully repaired it but when the farmer asked what had been wrong with it and how it had been repaired the seller refused to tell him the farmer was not required to take the implement back and could reject it.

Now the consumer can ask for repair or replacement it makes life easier for them. (6) Answer ends abruptly with no conclusion and no mention of current controversy surrounding the unilateral right of withdrawal in s 35 and potential impact of the draft EU Consumer Rights Directive.

PODCAST

DRAFT COMMENTS

This answer might just scramble a pass but is weak in that it is short and while it contains no fundamental errors it fails to mention relevant legislation It fails to mention any of the key cases and does not attempt to place them in any sort of chronological development and show how the precedents in relation to acceptance have developed. At least, the candidate has stayed on the point and not included irrelevant material, but it is more like a note form answer than a fully structured and thought out essay.

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Lawcards

Revision Checklist

Chapter 1: Definition of contract of sale of goods;

Definition of contract of sale of goods
Define a 'contract of sale of goods'
What legislation governs contracts for the sale of goods?
What legislation governs contracts for the supply of goods?
What if the contract features both a supply of goods and the supply of a service at the same time?
What legislation governs contracts of hire?

Chapter 2: Passing of property and risk;

Passing of property and risk
What is a specific good?
What is an unascertained good?
When will the rules in s 18 of the Sale of Goods Act 1979 apply?
What is necessary for s 20A–B to apply?
When will risk in the goods pass?

Chapter 3: Retention of title clauses;

Retention of title clauses
What problems face an unpaid seller on the insolvency of the buyer?
What is the effect of a valid retention of title clause on the passing of title?
What are the main types of retention of title clause?
What is the consequence of creating a 'charge' over property?
What are the most frequent arguments raised against retention of title clauses?

Chapter 4: Void and frustrated sale of goods contracts;

Void and frustrated sale of goods contracts
The distinction between Mistake and Frustration
The meaning of 'perish' under the Act
Mistake concerning specific goods s 6
Frustration concerning specific goods s 7
The residual role of the common law

Chapter 5: Seller is not the owner;

Seller is not the owner
The nemo dat rule and its exceptions
When will an estoppel arise?
When may a Mercantile Agent confer good title?
When may a seller with a voidable title confer good title?
When may a seller in possession confer good title?
When may a buyer in possession confer good title?
What if an HP purchaser sells a motor vehicle?

Chapter 6: Contract terms as to title;

Implied contract terms as to title under the Sale of Goods Act 1979
What does s 12 mean to buyer and seller?
What conditions and warranties does s 12 imply?
Can a defective title later be cured?
Can you exclude s 12 by an express contract term?

Chapter 7: Misrepresentation;

Misrepresentation
What is a misrepresentation?
What types of misrepresentation exist and what remedies are available?
What forms may Rescission take and when is it available?
When are Damages available and on what basis are they calculated?
Why is it rare in commercial law to use the tort of Negligent Misstatement?
Can you exclude liability for Misrepresentation?

Chapter 8:

Express and implied terms;
Express and implied terms
What are the differences between conditions, warranties and innominate terms?
What term is implied by s 13, when will it apply?
What term is implied by s 14(Chapter 2:, when will it apply?
What term is implied by s 14(Chapter 3:, when will it apply?
What term is implied by s 15, when will it apply?
When may goods be rejected by a consumer?
When may goods be rejected by a commercial buyer?
What tortious claims may be brought concerning a defective product?
What terms are implied into consumer and commercial transactions by other statutes?

Chapter 9: Exemption and limitation clauses;

Exemption and limitation clauses
When is an exemption clause incorporated into a contract?
What is meant by 'interpreting' an exemption clause?
May parties other than the buyer and seller be affected by an exemption clause?
To what clauses does UCTA apply?
How does UCTA define a consumer, with what effect?
How does UCTA apply to commercial transactions?
How does the Reasonableness test apply?
What are the UTCCR 1999, how do they apply, and by whom are they enforced?

Chapter 10: Delivery and payment in sale of goods;

Delivery and payment in sale of goods
What is 'delivery'?
What consequences flow from a delivery which is: late, to the wrong place, or of the wrong quantity?
How may the amount of the payment be calculated?
Is the buyer normally entitled to be supplied on credit?

Chapter 11: Seller's remedies;

Seller's remedies
When is a seller 'unpaid'?
What remedies may a seller have against the buyer?
What is the difference between s 49 and s 50?
What remedies may a seller have against the goods?
When may a seller act 'against the goods'?

Chapter 12: Buyer's remedies;

Buyer's remedies
What is specific performance under s 52?
What forms of damages are recoverable?
How are the different forms of damages calculated?
How do the additional rights of the consumer relate to the existing remedies?

Chapter 13: Agency

What is meant by a contract concluded by 'Agency'?
What forms of authority may an agent possess?
When may the unauthorised acts of the agent be ratified?
What duties exist between the Agent and the Principal?
How and with what consequences may agency be terminated?

Chapter 14: International sales

International sales
What are the features of an FOB contract?
What are the features of a CIF contract?
How are such international sales contracts 'paid-for'?
What is an international letter of credit and what forms may it assume?

Chapter 15: Consumer credit - categories of agreement

What types of credit agreements are regulated by the Act?
How is an 'individual' defined?
Is there still a limit on the amount of credit supplied?
Which agreements are exempt?
Distinguish debtor–creditor–supplier agreements from debtor–creditor agreements
When will a transaction be 'linked'?

Chapter 16: Consumer credit - triangular transactions

Consumer credit – triangular transactions
What credit transactions may be classed as 'triangular'?
Against whom should the consumer proceed if the goods are defective?
When may a dealer act as agent of the creditor?
What are the consequences of the dealer acting as the agent of the creditor?

Chapter 17: Consumer credit - trading control

Consumer credit – trading control
Which businesses must be licensed?
What are the sanctions for unlicensed trading?
What is 'canvassing' and how is it controlled?
What other credit activities are prohibited?

Chapter 18: Consumer credit - documentation and cancellation;

umer credit – documentation and cancellation
What agreements are subject to the documentation requirements?
What are the documentation requirements, why are they important?
When is an agreement cancellable?
What is the effect of cancellation?

Chapter 19: Agency and connected lender liability;

Agency and connected lender liability
What is the effect of s 56 of the Consumer Credit Act 1974?
When will the consumer who pays with a card be able to regard the dealer as the agent of the creditor?
What are the effects of s 75 of the Consumer Credit Act 1974?
Can s 75 apply when the transaction involves a purchase abroad?

Chapter 20. Consumer credit - rights of the parties

Consumer credit – rights of the parties
What are the rights of the debtor?
What are the rights of the creditor?
What is a time order and when may it be granted?
When will a credit bargain be 'unfair' within the meaning of s 140A of the Consumer Credit Act 1974?

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Glossary

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Chapter 1

Goods: see s.61 of Sale of Goods Act 1979. The definition of 'Goods' includes personal property but not: land, choses in action (i.e. cheques) nor money. Exceptionally a particular unit of money may be classified as a 'good' within the meaning of the Act rather than as a means of exchange (i.e. a Spanish Doubloon is today most likely to be viewed as a form of property capable of being a 'good' rather than as its original non-good classification as cash not capable of being a good).

Sale: A transfer of the property in goods, provided by the seller, in exchange for money, provided by the buyer. After a valid sale the buyer acquires the property sold by the seller (whatever this may be) and the seller acquires the money provided by the buyer. For more on the definition of 'a sale of goods' see s.2 of the 1979 Act.

Property in Goods: If the transaction falls under the Sale of Goods Act 1979 the property in goods appears to mean all and every aspect of the seller's title to the goods. It seems that it is incorrect to conceptualise such a transfer of property in goods as involving transfers of common law property and equitable property: that which is transferred UNDER THE 1979 ACT is ALL of the seller's property in the goods (thus there is no need to separate the titles into common law and equitable concepts as all is simultaneously transferred). NB it is possible for the seller to sell a limited title as long as he (or the circumstances) make it clear to the buyer in accordance with s.12 (3) Sale of Goods Act 1979 that the sale is only to comprise some lesser part of the property in the goods.

Chapter 2

Ownership: The legal rights which connect a person to a particular piece of property. Ownership usually indicates control over the said property which may, but need not, extend to include a right to: a) give or sell the property to another, b) exclude others from the enjoyment of the property, c) destroy the property.

Possession: The custody of property, whether lawful or unlawful, which may or may not also be owned by the possessor. If the possessor does not own the property it may be that s/he still has a lien (being some form of lawful reason to retain possession of the property) over the property which may prevent the true owner from recovering the property until the possessor's lien is discharged.

Generic Goods: Goods which are not currently identifiable, as a matter of evidence, from the information provided by the sale of goods contract. No property in goods under the 1979 Act can pass in purely generic and hence unidentified goods: s.16. Thus the goods comprised by '100 oranges' are not identifiable as there is currently no way of knowing which oranges are referred to. If more information is provided this may help the process of identification. Thus, '100 oranges from my warehouse' may be clear enough as long as there is only one warehouse and there are only 100 oranges present at that warehouse. If there are two warehouses and / or more (or less) than 100 oranges in each, more clarity is required before we know which oranges are the subject matter of the sale of goods contract and hence whether or not the seller can or has passed the property in those oranges to the buyer.

Chapter 3

Retention of Title Clause: A contractual term which attempts, in accordance with s 19 of the Sale of Goods Act 1979, to postpone the passing of title in the goods from the seller to the buyer until some later specified event, usually the payment of the price.

Insolvency: A company which can not pay its debts as they fall due is said to be insolvent. When this occurs, assuming no further funds are available, either the creditors or those who own the company will seek to recover as much as they may from the insolvent company. The manner and order in which such funds may be recovered after the necessary debts have been paid is strictly controlled by legislation. See the Insolvency Act 1986 (as amended).

Security Interest: A continuing interest in the property of another. It entitles the holder of that interest to a higher ranking in the statutory order of payment in the event of an insolvency. Security interests typically require registration in order to be effective. Importantly and technically a retention of title clause / Romalpa clause is NOT a security interest as the unpaid seller who attempts to use s 19 of the Sale of Goods Act 1979 only wishes to retain TITLE Ð not property Ð in the goods (and only wishes to do this until paid in full). Overly ambitious attempts at drafting retention of title clauses may fail if they actually create a security interest.

Registerable Charge: A security interest in the property which belongs to a company. The existence and ownership of this interest must be registered if it is to be binding upon anyone (e.g. liquidators / receivers / administrators) other than the parties which created it: s 860 Companies Act 2006. This requirement of registration is the ÒpriceÓ which the secured creditor pays to obtain a higher position in the statutory ranking imposed by the Insolvency Act 1986 (as amended) and allows others to form a more accurate picture of the borrowings and liabilities of the company in question by examining the publicly available register. A poorly drafted retention of title clause can malfunction and create such a registerable charge concerning the unpaid goods (see Re Bond Worth [1980]).

Book Debts: The money which a company expects to receive, but has yet to receive, from contracts to buy its products. For example, Marder Ltd makes lawnmowers. It concludes a contract with the large Tescburies supermarket chain under which Tescburies will buy its lawnmowers. The contract obliges Marder Ltd to make and deliver 500 lawnmowers per month for the next six months and Tescburies to pay for each monthly delivery on receipt of the lawnmowers. Marder Ltd, when it does its accounts, will record all the sums due from Tescburies over the next six months as book debts Ð that is money that Tescburies owes to Marder Ltd. As this contract is legally enforceable it will be possible for Marder Ltd to then go to a commercial lender and borrow money on the basis of the money which Marder Ltd is 'owed' by Tescburies. One way of immediately securing such a loan would be to sign over to the lender all of the money which will come in from Tescburies in advance. This is called an assignment of a book debt. The advantage for Marder Ltd is that it gets the money Ð minus borrowing costs Ð immediately. Such arrangements may be particular to one contract, as in the simple example above, or cover all of the monies which the company expects to receive from all of its contracts over a given period of time.

Chapter 4

Void: a contract (or term in a contract) which never could have legal effect. Such attempted contracts (or terms) are void and entirely ineffective from the beginning because they violate

Voidable: a contract (or term in a contract) which, though potentially lacking legal effect yet remains effective until the 'innocent' party decides to act to deprive it of its legal effect, i.e. by rescinding the contract. If the innocent party delays for too long, allows third parties to gain rights in relation to the property, or, having knowledge of the defect makes it clear to the other party to the contract that the defect is unobjectionable, the innocent party's right to rescind for that defect will be lost.

frustrated contract: A contract which is made but then becomes impossible to perform through no fault of the parties by reason of an unforeseen event which happens AFTER the contract was made. Frustrated contracts are discharged at the point at which the frustrating event occurs. NB1 If it is an action of a party to the contract which makes the performance impossible the contract is NOT frustrated. NB 2 If the contract contains a term which provided for the event in question the event is not 'unforeseen' and thus the contract can not be frustrated by its occurrence. NB 3 If the contract is possible to perform but is now more expensive it is NOT frustrated by reason of the increase in cost alone. NB 4 If the event which made the performance impossible happens BEFORE the contract was made, Frustration can not apply but Mistake may be applicable.

Chapter 5

Estoppel

A doctrine of the law of evidence which prevents 'A', who has made a representation to 'B', from denying that the representation was true and valid when 'B', who has acted in reliance upon the said representation, later tries to rely upon it in legal proceedings to defend a claim (or exceptionally to assert a right) against what would, but for 'A's' statement or act, be in accordance with 'A's' rights.

E.g. 'A' told his tenant, 'B', that for the duration of World War II war only one half of the rent due each month need be paid. 'B' acted in reliance on this unsupported statement and paid only half of the rent. After the war 'B' was confronted by a demand for back rent which covered some of the sums which 'A' had assured him he need not pay. 'B' could plead 'A's' statement to defend against the back rent claim and raise a promissory estoppel in his (B's) favour. 'A' was estopped from denying the truth and validity of his otherwise unsupported statement.

Factor(s) - used to refer to a person, i.e. 'a Factor'.: A person who by reason of being a Mercantile Agent may usually be expected to have possession of property and documents of title relating thereunto. As an Agent a Factor may have Authority relating to the sale of such goods sufficient to pass good title to a third party purchaser, despite the desire of Principal (the true owner) to retain that property. See Factors Act 1889.

Hire Purchase: A form of credit arrangement. There are many modern variations on this theme but at its simplest, property is hired to the hirer for a period of time during which rental payments are made: at the end of the period the hirer has an option to make a payment to own the property outright or to decline to do so and to return the property to the owner. NB If there is an obligation to buy (and so no option to refuse to finally buy) the contract is a conditional sales agreement and not a hire-purchase contract.

Chapter 6

Title: Within the context of Commercial Law 'Title' most usually refers to the ability of the transferor to transfer the property in the goods to the transferee. If the seller has no 'title' to the goods s/he can not transfer the property in those goods to the buyer. A seller who knowingly or unknowingly contracts to transfer property to a buyer to which he, the seller has no title, will commit a breach of contract at common law and also breach s.12 of the Sale of Goods Act 1979. This is so even if the seller gave the buyer possession and use of the goods in question.

Chapter 7

Misrepresentation: A false statement of fact made by one party - usually the seller - which induces the other party - usually the buyer - to enter into a contract with the other party.

Rescission: The termination of a contract and the consequent ending of further legal obligations under that contract. See 'Voidable' above under Chapter Three.

Common Law / Equitable remedies: Before 1873 there were two distinct court systems in England & Wales: The Common Law courts (which were then divided into three common law courts - Kings Bench, Common Pleas and Exchequer) and one Court of Equity. At the risk of oversimplification, each court system had its own system of remedies with their own particular rules. In the legislation which commenced in 1873 the two court systems were combined into the single system which we know today, however, the rules governing each system of remedies were not wholly integrated. Thus although all the rules and remedies are now administered by one judge in one court and at one time, there are still some differences between the legal and equitable remedies which depend upon the way in which the case is brought. The different rules and remedies are particularly visible in the area of Misrepresentation where both contractual and tortious claims uneasily interact with the Misrepresentation Act 1967.

Chapter 8

Express Terms: a term of the contract which has been expressed by at least one of the parties - either in writing or verbally - and accepted by the other.

Implied Terms: A term of the contract which has NOT been expressed by either of the parties but is nonetheless implied by the courts into the contract because either legislation (i.e. ss. 12 - 15 of the Sale of Goods Act 1979), custom, or business efficacy so directs.

Acceptance under s.35 Sale of Goods Act 1979: Normally, when there is a breach of a Condition in a Sale of Goods Act contract the buyer can reject the goods and also claim damages for the losses arising. Acceptance under s.35 of the 1979 Act is the statutory equivalent of Affirmation at common law and occurs when a buyer loses his / her right to reject the goods, despite a breach of 'Condition'. Once goods are 'Accepted' under s.35 of the 1979 Act the buyer may only sue the seller for damages to cover the breach(es) of contract and the goods may NOT be rejected.

Incorporation: (referring to a term or terms in the contract) The first step in establishing if the relevant term is actually part of the given contract. If the term is found not to be incorporated into the contract there is usually no need to consider it (the term) further. Terms will usually be incorporated into the contract (i.e. be part of it) if either: a) the term is contained in a document which was signed by the other party, b) if reasonable notice of the term was given before the contract was concluded, c) if there was a consistent course of dealing on such terms between the parties d) if legislation incorporates the term. NB even if the term is properly incorporated into the contract it may be that legislation (i.e. the Unfair Contract Terms Act 1977) either nullifies or otherwise modifies the effect of the term.

Interpretation: (referring to a term or terms in the contract) The second step in understanding the meaning of the contract (or a term of it) is to establish the meaning of the correctly incorporated and effective terms. Before the 1977 Unfair Contracts Terms Act and 1979 Sale of Goods Act, the English judiciary were often willing to creatively interpret the meaning of a contract so as to protect certain weaker parties (usually a consumer) from what would otherwise have been unreasonable terms imposed by the stronger commercial party. This willingness rarely extended to purely commercial contracts (i.e. those not involving 'consumers') which the courts usually treated as being made between equal parties. NB Since the passage of the legislation mentioned above the courts have usually been able to use the relevant acts to help those whom Parliament would protect and thus creative interpretation has been less necessary than was one the case. Accordingly it is now advisable not to assume that cases from the 1950's and 1960's are representative of the current judicial approach.

Chapter 8

Express Terms: a term of the contract which has been expressed by at least one of the parties - either in writing or verbally - and accepted by the other.

Chapter 9

Incorporation: (referring to a term or terms in the contract) The first step in establishing if the relevant term is actually part of the given contract. If the term is found not to be incorporated into the contract there is usually no need to consider it (the term) further. Terms will usually be incorporated into the contract (i.e. be part of it) if either: a) the term is contained in a document which was signed by the other party, b) if reasonable notice of the term was given before the contract was concluded, c) if there was a consistent course of dealing on such terms between the parties d) if legislation incorporates the term. NB even if the term is properly incorporated into the contract it may be that legislation (i.e. the Unfair Contract Terms Act 1977) either nullifies or otherwise modifies the effect of the term.

Interpretation: (referring to a term or terms in the contract) The second step in understanding the meaning of the contract (or a term of it) is to establish the meaning of the correctly incorporated and effective terms. Before the 1977 Unfair Contracts Terms Act and 1979 Sale of Goods Act, the English judiciary were often willing to creatively interpret the meaning of a contract so as to protect certain weaker parties (usually a consumer) from what would otherwise have been unreasonable terms imposed by the stronger commercial party. This willingness rarely extended to purely commercial contracts (i.e. those not involving 'consumers') which the courts usually treated as being made between equal parties. NB Since the passage of the legislation mentioned above the courts have usually been able to use the relevant acts to help those whom Parliament would protect and thus creative interpretation has been less necessary than was one the case. Accordingly it is now advisable not to assume that cases from the 1950's and 1960's are representative of the current judicial approach.

Chapter 10

Delivery: The handing over of control of the property in question, whether physically giving it to the buyer or giving the buyer the means of control (i.e. the keys) or giving control in purely legal terms (i.e. by telling your agent to stop holding it for you and to now hold it for the buyer).

Waiver: A release by the party owed a performance of his right to sue for the breach or failure of that performance. Thus if 'A' is due to deliver goods to 'B' on the 1st (but does not do so) after the 1st 'B' may either sue 'A' for breach of contract or waive the breach and allow 'A' to deliver on the 3rd (or at a later date). If 'B' allows the late delivery he may be said to have waived his right to sue for late delivery.

Chapter 11

Unpaid seller: A seller who has neither received nor been offered full payment for the goods by the time set for payment in the contract. Attempted payment via a cheque which is later dishonoured still leaves the seller technically unpaid.

real remedies of seller

The three self-help rights which an unpaid seller may be allowed by the Sale of Goods Act 1979 (potentially in addition to the possibility of suing the buyer either for the price or for breach of contract). Each real remedy is rendered ineffective if the buyer gains possession of the goods. The three rights are very important on a practical level as they do not require the seller to instruct a lawyer or to go to court: thus they are very commonly employed. The rights are:-

A lien - see 'Possession' above - over the goods if they are still in the seller's possession: ss.39 - 43.
The right to stop the transit of goods, and to recover their possession, from an independent carrier BEFORE they have been given into the custody of the buyer: s.44.
The right to re-sell the goods to another buyer (and to pass good title whilst so doing) WITHOUT extinguishing the right to sue the non-paying first buyer for damages: s.48.

Chapter 12

Specific Performance: An alternative remedy to the usual remedy of Damages, Specific Performance sees the court order that a given contract actually be performed. In the context of Sale of Goods contracts see s.52 of the 1979 Act.

Chapter 13

Agent: A person who enters into contracts, or other legal acts, on behalf of another. An Agent has the ability to bind the person who authorised him / her to so act as long as the actions of the Agent fall within the authority given to the Agent by either the agency agreement or by the law.

Principal: A person who engages another to act on his / her behalf in the making of contracts, or other legal acts, which will bind the Principal in a relationship with a third party. E.g. Percy instructs Alice to enter into a contract on his behalf with Thomas. Percy is the Principal. Alice is the Agent. Thomas is the Third Party. Once the contract is completed it will be between Percy and Thomas - Alice plays no further part in the contract and is paid for her actions by Percy.

Authority: The power which an Agent has to act on behalf of his / her Principal as derived from either the agency agreement between the two or from the general law.

Chapter 14

FOB Contract: A Free On Board contract is one in which the seller agrees to get the goods to the ship nominated by the buyer and to load them onto that ship but nothing more. The buyer pays for the carriage of the goods and their insurance from this point onwards. The property and risk concerning FOB goods does not pass to the buyer until the goods are so loaded by the seller. NB if the buyer does not nominate a ship the property in the goods can not pass from the seller to the buyer (unless the contract provides otherwise) and thus the seller may not usually sue the buyer for the price but only for breach of contract.

CIF Contract: A Cost Insurance and Freight contract is one in which the Seller agrees not only to load the goods onto a ship nominated by the buyer, at the specified time, but also to pay for the carriage of those goods to the destination specified in the contract. The seller must also pay for the insurance of the goods and make the buyer the beneficiary of this insurance policy: risk in the goods therefore normally passes to the buyer once the goods pass the rail of the ship. NB. The importance of the delivery and acceptance of the documents concerning a CIF contract can hardly be overstated - strict compliance is required. A CIF contract obliges the seller to obtain and to transfer to the buyer the documents indicating that the seller has properly performed, i.e. the bill of lading (details concerning the arrangement of the contract of carriage), the insurance policy, and the seller's invoice (which asks the buyer to pay the price of the goods). Often the invoice is actually a Bill of Exchange - imagine an unsigned cheque from the buyer which is made out to the seller - by which the buyer may signify his acceptance and thus allow the seller to thereafter draw. The buyer MUST pay for the goods when the correct documents are presented. If the seller does not obtain and present the correct documents, the buyer need not pay for the goods.

Bill of Lading: The document which sets out the arrangements which the Seller has made concerning the carriage of the goods by sea in accordance with the terms of the contract. Once signed and delivered by the shippers it acts as a conclusive evidence of receipt of the goods and transfers title to its holder.

International Letter of Credit: A financial arrangement by which a buyer situated in one country instructs his bank to make payment to the seller's bank, situated in a different country, as soon as the seller presents the seller's bank with the shipping documents. The point of the international letter of credit is to give the seller some reassurance that payment in their own jurisdiction will be forthcoming: thus there are different types of international letters of credit offering greater or lesser forms of 'reassurance'.E.g. Jack, who is in the UK, is buying a consignment of Canadian nuts CIF from Cedric, who is in Canada for $100,000. Jack tells his UK Bank to pay Cedric's Canadian Bank the money as soon as Cedric presents the Canadian bank with the shipping documents. In rather oversimplified terms Cedric need thus not be concerned that he may have to come to the UK to 'get' his money.

Chapter 15

Credit: A right to defer the payment of an otherwise due debt. E.g. Simon sells a TV to Ruth, transferring the title to the TV by so doing, and allows her to take the property now but to pay for it - whether or not by instalments - at a later date. Most, though not all, credit arrangements involving Consumers are regulated by the Consumer Credit Act 1974 (as amended).

Simple hire: A contract concerning either goods or services. If concerning goods the contract allows the temporary use of property belonging to another but does not transfer the title in that property to the hirer and indeed obligates him/her to eventually return it to its owner. If concerning services the contract allows the hirer to benefit from the skills of the service provider for a specified length of time.

Exempt agreements: As indicated above (see entry concerning 'Credit') not all forms of credit are regulated by the Consumer Credit Act 1974 (as amended) and some are expressly exempted from its ambit.

Chapter 16

Finance House: In the event that the seller of the goods does not provide the credit to the borrower / debtor another party must do so: such a party is generally referred to as a Finance House. However, if a finance house is involved in the supply of goods on credit the transaction changes from a two party to a three party one. Commonly the seller will sell the ownership of the property to the finance house which thereafter will receive the debtor's payments. This change is significant as the debtor who later has a problem with either the goods themselves or complying with the credit agreement would, but for the Consumer Credit Act, have no contractual rights with the seller of the goods as the debtor's contract is with the finance house.

The remaining chapters (17 - 20) contain no terms which require further elucidation.