THE LAW SCHOOL

LLB (Honours)

BIL0007

Commercial Law

Lecture and Tutorial Outlines

Spring 2009
TINA HART
 LLB (Honours) Law & LLB (Honours) Business Law

Commercial Law (BIL0007)

Materials for Spring 2009.

Tina Hart

t.s.hart@hud.ac.uk

01484 472967

Please bring your statute books to each lecture and tutorial.

I will mainly use the following textbooks:

Dobson and Stokes, Commercial Law, 7e, Sweet & Maxwell.

Sealy and Hooley, Commercial Law: Text, Cases and Materials, 4e, OUP

Bradgate, Commercial Law, OUP

Atiyah, Adams & MacQueen, The Sale of Goods, Longman

The last two books are quite dated now and it is not recommended that you purchase
them. They would be useful if you can find them in the library.

Whichever textbook you use, you are also advised to look up the updates on Robert
Bradgate’s site at Oxford University Press
www.OUP.co.uk
 CONTENTS

Page

Module Specification

Introduction

Previous Year's Summer Exam Paper

Lecture Syllabus

Lecture Outlines

Tutorials
AN INTRODUCTION TO THE SALE AND SUPPLY OF GOODS.

ABOUT THIS MODULE

The overall aim of this module is to give a broad overview of the sale of goods and its interaction with
the market economy. The module is delivered by a combination of lecture and tutorials.

The module is broken down into a series of units which are set out in the teaching programme. Each
unit has a series of lectures followed by a linked tutorial.

LECTURES

The primary aim of lectures in this module is to give you guidance on the basic principles of the law in
relation to the sale of goods. The reading specified for the unit tutorial is also the relevant reading for
the lecture. Whilst the reading is vital in preparation for the tutorial you will also find it helpful in
understanding the lectures.

You are provided with a lecture outline in respect of each unit of study. Lectures are not intended to
give you a comprehensive and complete set of notes. Lectures point you in the right direction for your
own independent study. Listen carefully to what is said in lectures, use your lecture handout and
make brief notes that contain key words. Do not attempt to write down all that the lecturer says. If
you try to do this you will not keep up. Remember lecturers are not giving dictation. After the lecture,
you should go away and expand on these notes from your reading. Detail is very important here
since it is these notes that will form the basis of your revision notes. Time spent on these now will
make life a lot easier for you when the exams loom. Furthermore good comprehensive notes will
enable you to obtain the highest grades.

TUTORIALS

Tutorials have various aims. These include:

To develop your analytical skills: in particular, to enable you to dissect factual situations in order to
pick out the facts which have legal significance and to apply the relevant rules of law to them;

To develop your awareness of the economic and political environment in which these areas of law
operate;

To enable you to deepen your knowledge and understanding of the subject through directed reading;

To give you time to discuss any issues or aspects that you find difficult;

Finally, and not least, tutorials are provided to enable you to develop good techniques that ensure
success in the examination which, as stated earlier, is very important in this subject.

None of this can happen unless you make proper preparation for each tutorial. The course contact
time allows you approximately 10 hours per week for a 30 credit module/ 6hours per week for a 20
credit to prepare for your tutorial, so there is no reason why you should not prepare thoroughly.

Remember to make a note of any questions you have arising from your reading – any difficult points
or ambiguities that you want cleared up – and make sure that you raise these at the tutorial.

Work through the questions on the tutorial sheet and make notes on the answers. These need not be
written out in essay style, but the notes should be full enough to be comprehensible. Try to work all
the way through to a conclusion.
In doing this bear in mind that every legal statement must be backed up with authority; that means
that you need to be able to refer to a case or statutory provision which establishes the point you are
making.

Bear in mind also what you have been asked to do: Is it to “Advise X” or “Discuss” or something
else? If the question is not a problem-style question, make notes of the points you would make for
and against the proposition that is under discussion.
After the tutorial, review the whole topic and ensure that your notes are complete and that there is
nothing that you have not understood

ATTENDANCE AT TUTORIALS

Your attendance at tutorials is compulsory and records will be kept.

You are not allowed to change tutorials groups without permission. This is only granted in
EXCEPTIONAL circumstances

BOOKS .

Dobson and Stokes, Commercial Law, 7e, Sweet & Maxwell.

Sealy and Hooley, Commercial Law: Text, Cases and Materials, 4e, OUP
Bradgate, Commercial Law, OUP

The Student Law Review (Cavendish Publishing) which is distributed to students three times a year, free of
charge is an excellent source of information on the latest developments in tort and other subjects. Make sure that
you get a copy and keep it for future reference. You will also benefit from regular perusal of the Times Law
Reports. There will be several important tort cases reported during the course. There is a guide to accessing
these reports electronically on the Blackboard site for this module.

The Blackboard site also contains supplementary information such as new cases.

ASSESSMENT

Coursework 30%
Examination 70%

The coursework must be word processed. There is a maximum word limit of 2500 words (excluding
the bibliography). Failure to comply with either or both of these instructions will mean a maximum
mark of 40% being awarded. The examination at the end of the module covers material from both
terms.

COURSEWORK

This should have been submitted in Term one.

REVISION

Start your revision sooner rather than later, do not leave it to the last minute. Experience suggests
that until you understand the principles for each tort you cannot begin to learn it. Therefore before
you try to learn, read, read and read again your notes and textbook.

EXAMINATION

Note that the examination is 2 hours long at intermediate level and 3 hours long at Honours level.
You must complete Sections A, B and C of the examination. Section A will be based on an Agency
case study which will be released to students prior to the examination. Section B contains questions
on the Sale of Goods. You must complete one question from this section if you are taking the
examination at intermediate level and two questions if you are taking the examination at honours
level. Section C is made up of multiple choice questions on the sale of goods and all questions must
be answered.

Students will be permitted to refer to Commercial Law books in the examination. Suitable texts
include those published by; Palgrave, Sweet and Maxwell or Oxford University Press.
Note carefully the following points concerning this text.

1.

The statute book must be completely unmarked and un-

annotated. This means that there must be no notes of any sort written in or
otherwise contained within the book. The text must not be highlighted in any way, nor
any form of tabbing used to identify sections of the text.

2. Books will be examined during the examination. Should any book be found to
contain any of the above items then it will be confiscated immediately and a report
made to the Academic Registrar with a view to disciplinary proceedings for
obtaining or attempting to obtain an unfair advantage (i.e. cheating) being
undertaken.

3. If you are considering purchasing a second-hand statute book you should take
particular care that the copy complies with the above requirements. It is entirely your
responsibility if it does not do so and this is discovered during the examination.

4. Please be aware that the penalties for non-compliance are very severe and may result
in your being excluded from the pathway. Further whatever penalty is imposed, the
university is required to report your conduct to the Solicitors Regulation Authority
and the Bar Standards Board which may, in turn lead to you being excluded from
qualifying as either a solicitor or barrister.

You need only purchase a statute book in time for the Examination.

Tina Hart, will be delivering the lectures at Queensgate. Her contact details are as follows:

Room Number FS4/10

Direct Line 01484 472967

E-Mail t.s.hart@hud.ac.uk
LECTURE OUTLINE

UNIT

1. Sources of Law / Contract Revision: Contractual Terms

2. Delivery
3. The Implied Terms: Sale by Description and Transfer of Title
4. The Implied Terms: Satisfactory Quality & Buyer’s Remedies
5. The rights of the seller and retention of title.
6. Passing of Ownership and Risk
7. The “Nemo dat” rule and its exceptions.
8. European Community Intervention (self-directed study)
9. Revision

TUTORIALS

1. Sources of Law / Contract Revision including exclusion and limitation clauses.

2. Time & Delivery
3. Sale by Description and Transfer of Title
4. Satisfactory Quality & Buyer’s Remedies
5. Seller’s Rights & Retention of Title
6. Passing of Ownership and Risk
The main sources of law for the sale and supply of goods.

By the end of this session, you should appreciate the contribution of the following to
this area of law.

1. Case Law

2. Sale of Goods Act 1893

3. Supply of Goods (Implied Terms) Act 1973

4. Unfair Contract Terms Act 1977.

5. Sale of Goods Act 1979

6. Supply of Goods and Services Act 1982

7. Sale and Supply of Goods Act 1994

8. Sale of Goods (Amendment) Act 1994

9. Unfair Terms in Consumer Contracts Regulations 1994

10. Unfair Terms in Consumer Contracts Regulations 1999

11. Consumer Protection (Distance Selling) Regulations 2000

12. The Sale and Supply of Goods to Consumers Regulations 2002.

Law of Contract Revision.

What are the essentials of a valid contract?

Contractual Terms.

1. What is a contractual term?

How does a term differ from a representation?

Oscar Chess Ltd v. Williams [1957] 1 WLR 370

Dick Bently Productions Ltd v. Harold Smith Motors Ltd [1965] 1 WLR 623

2. Express terms

What is condition?

See Wallis, Son & Wells v. Pratt & Haynes [1910] 2 KB 1003, Fletcher Moulton
LJ at p1012.

What is a warranty?

The difference?

Poussard v. Spiers & Pond (1876) 1 QBD 410

Bettini v. Gye (1876) 1 QBD 183

Innominate Terms

Hong Kong Fir Shipping Company Ltd v. Kawasaki Kisen Kaisha Ltd [1962] 2
QB 26
Cehave NV v. Bremer Handelsgesellscaft mbH, The Hansa Nord [1976] QB 44

3. Implied Terms

a/ Custom
Kendall (Henry) & Sons v. Lillico & Sons Ltd [1969] 2 AC 31

b/ Judicial
The Moorcock [1889] 14 PD 64
Liverpool City Council v. Irwin [1977] AC 239

c/ Statute
The Sale of Goods Act 1979 (as amended).
CONTRACTS FOR THE SALE OF GOODS

Learning Outcome:
Define a contract for the sale of goods;
Identify when the Sale of Goods Act 1979 applies;
Distinguish contracts for the sale of goods from other contracts.

Reading: Dobson & Stokes, 1.006 – 1.015.

Sale of Goods 1979 s2 (1)

'[A] contract where the seller transfers, or agrees to transfer the property in the
goods for a money consideration called the price..'

What are goods?

There are five categories:

1. Existing Goods
2. Future Goods
3. Specific Goods
4. Unascertained Good
5. Ascertained Goods

Now look up SGA s61 for the definition of future and specific goods!

Section 61
Goods are all personal chattels, emblements, industrial growing crops and things
which can be severed from the land. It excludes things in action and money.

Morgan v. Russell & Sons [1909] 1 KB 357.

Thus contracts for the sale of goods should be distinguished from:

* Gifts
ESSO Petroleum Ltd v.
Commissioners For Customs & Excise [1976] 1 All ER 504

* Barter arrangements:
But see Dawson
v. Dutfield [1936] 2 All ER 232

* Bailment / Hire

* Agency

* Loans with goods as security

Helby v.
Matthews [1895] AC 471

*Supply of services:
Robinson v. Graves [1935] 1 KB 579

*Licences of intellectual property / Computer Software

St. Albans CC v. ICL [1996] 4 All ER 481
Beta Computers (Europe) Ltd v. Adobe Systems (Europe) Ltd 1996 SLT 604

The price

What is the status of free gifts?

See

ESSO Petroleum Ltd v. Commissioners For Customs & Excise [1976] 1 All ER
504

What if the parties fail to agree terms?

See British Steel Corp. v. Cleveland Bridge [1984] 1 All ER 504

Property must be transferred

See s61(1)
s2(4)
s2(5)-(6)
Rowland v. Divall [1923] 2 KB 500

There must be a ‘money consideration

ESSO Petroleum Ltd v. Commissioners For Customs & Excise [1976] 1 All ER
504

Section 8 Fixing the price.

Price can be arranged by the parties or in any other acceptable manner. If there is no
express agreement as to price, then a reasonable price must be paid.

See Foley v. Classique Coaches LTD [1934] 2 KB 1

THE DUTIES OF THE SELLER:

Delivery and Payment

Learning Outcomes:
To determine the main duties of the seller;
To comprehend, the meaning of ‘delivery’.

Reading: Dobson & Stokes Chapter 11.

The duties of the seller and the buyer will normally be determined by the terms of
the contract and terms implied by the Sale of Goods Act 1979.

Delivery ss27 & 28

Four Point Garage v. Carter [1985] 3 All ER 12

Place ss29 & 32

Gailbraith & Grant Ltd v. Block [1922] 2 KB 155
Computer 2000 Distribution Ltd v. ICM Computer Solutions Plc, The Times, 17
November 2004.

Time ss10(2), 29 and 59

What s30
Shipton, Anderson v. Weil Brothers [1912] 1 KB 574
Regent v. Francesco [1981] Com. LR 78

Instalments

1. Parties did not agree that delivery could be by instalments.

Behrend v. Produce Brokers Ltd [1920] 3 KB 530

2. Parties agreed, but contract not severable.

3. Parties agreed and contract severable.

Jackson v. Rotax Motor and Cycle Co. [1910] 2 KB 937
Maple Flock Co v. Universal Furniture Products (Wembley) [1934] 1 KB
148
Smyth (Ross) v. Bailey [1940] 3 All ER 60

Deciding whether the contract is severable or non-severable.

Rosenthal v. Esmail [1965] 1 WLR 1117

But see SGA s35A inserted by Sale and Supply of Goods to Consumers
Regulations (SI 2002/3045), reg. 4(3).

Delivery to a carrier.
Thomas Young v. Hobson (1949) 65 TLR 365
THE MAIN IMPLED TERMS.
Learning Outcomes:
To comprehend the difference between the conditions and warranties in s12.
To comprehend the transfer of title and it application.
To analyse when goods are sold by description.

Reading: Dobson & Stokes Chapter 7.

s10 Time of Performance

The importance of time will be determined by terms of the contract.

Brit. & Common Holdings v. Quandrex Holdings [1989] 3 All ER 492

Hartley v. Hyams [1920] 3 KB 475
Bunge Corp. v. Tradax SA [1981] 2 All ER 513
Charles Rickards Ltd v. Oppenheim [1950] 1 KB 616

s12 Seller has the right to sell (the transfer of good title).

Rowland v. Divall [1923] 2 KB 500

Rowland bought car from Divall. Then discovered that (unknown to Divall) car had
been stolen and had to be returned.
C.A HELD -R was entitled to recover the full price even though the car had been used
for over two months before returned, because at no time did Rowland have what he
had intended to buy, which was the legal title to the vehicle.

Butterworths v. Kingsway Motors [1954] 1 WLR 1286

See also Barber v. NSW Bank [1996] 1 All ER 906

s12 (2) Warranties

s12 (2)(a) Goods will be free from encumbrances (e.g. mortgages)
s12 (2)(b) Buyer will enjoy quiet possession

Niblett Ltd v. Confectioners Materials Co. [1921] 3 KB 387

Microbeads A.G v. Vinhurst Road Markings LTD [1975] 1 All ER 529: [1975] 1
WLR 218
After sale, a third party obtained a patent, which interfered with the buyer's right to use
the machine.
HELD no breach of condition as seller had the right to sell. But buyer entitled to
damages under s12 (2)(b).

Read s13

s13 Goods will fit their description

A sale by description will occur where the goods are unascertained or future goods

Beale v. Taylor [1967] 3 All ER 253

Car advertised as '1961 Triumph Herald 1200'. It was later discovered that only the
rear was 1961. The front was taken from an earlier model.
C.A HELD –The seller was in breach of s13 even though he was unaware.

But see

Harlingdon & Leinster Enterprises Ltd v. Christopher Hull Fine Art [1991] 1 QB
564

Drake v. Agnew [2002] EWHC 294

Varley v. Whipp [1900] 1 QB 513

Goods sold by sample should comply with the description as well as the sample.

Nichol v. Godts (1854) 10 Exch 191.

Sections 13 and 14.

Pinnock Brothers v. Lewis & Peat [1923] 1 KB 690

Ashington Piggeries v. Hill [1971] 2 WLR 1051
SATISFACTORY QUALITY

Learning Outcomes:
Identify and explain the law surrounding satisfactory quality;
Analyse and apply s14
Comprehend the implication of whether the term in breach is classified as a warranty
or condition.

Reading: Dobson & Stokes paragraphs 7.016-7.027

s14 Goods will be of satisfactory quality

s14(2) “where the seller sells goods in the course of business there is an
implied condition that the goods will be of satisfactory quality..”

What is a sale ‘in the course of business?’

R & B Customs Brokers Ltd v. United Dominions Trust [1988] 1 All ER 847

Stevenson v. Rogers [1999] QB 1028

Felderall v. Hermes Leasing (London) Ltd [2004] EWCA Civ 747

Selling through an agent.

Boyter v. Thomson [1995] 2 AC 628.

Section 14 will apply to the entire goods supplied, see

Wilson v. Rickett Cockerell & Co [1954] 1 All ER 168

Albright & Wilson UK Ltd v. Biachem Ltd [2001] EWCA Civ 301.

What is satisfactory quality ?

Goods will be of satisfactory quality if they meet the standard that a reasonable person
would regard as satisfactory, taking into account the description of the goods, the price
and any other relevant circumstances.

See s14(2A)
S14(2B)

Sale and Supply of Goods Act 1994

Thain v. Anniesland Trade Centre [1997] SLT 102

Fitness for all common purposes

If goods of that kind have more than one common purpose, then they should be
satisfactory for all those common purposes.
Kendall v. Lillico [1969] 2 AC 31

Summer Permin v. Webb [1922] 1 KB 55

Aswan Engineering v. Lupdine [1987] 1 All ER 135

The following can be taken into account

* fitness for all the purposes goods of that kind are commonly bought
* appearance and finish
* freedom from minor defects
* safety, and
* durability

Barlett v. Sidney Marcus [1965] 2 All ER 753

Customer informed that something was wrong with the clutch on a second hand car.
Purchased vehicle with a 25% price reduction. New clutch actually cost £45.
C.A -car satisfactory under the circumstances.

Rogers v. Parish (Scarborough) LTD [1987] 2 All ER 232: [1987] QB 933.

C.A Held that a range rover, which developed a number of defects, none of which
made the vehicle unroadworthy or unsafe, but which were irritating for such a new and
expensive car (£16,000), made it unsatisfactory.

See also

Shine v. General Guarantee Corp. [1983] 1 All ER 911

Egan v. Motor Services (Bath) Ltd [2007] EWCA Civ 1002.

Where the goods can be used for their intended purpose

Cehave v. Bremer, The Hansa Nord [1976] QB 44

Citrus pulp pellets could still be used and was used for its intended purpose, that of
making cattle feed, and thus passed the test of satisfactory quality.

The Obligations will not apply if:

1. The defect is drawn to the buyer's attention before the contract is made.

2. The buyer examines the goods and that examination should have revealed
those defects.

Thornett Fehr v. Beers & Son [1919] 1KB 486

NB There is no obligation on the buyer to examine the goods, but if he has been given
the opportunity to do so and gives the seller the impression that he has, he may be
estopped from denying that he has made a full examination (Bradgate at p 298)

Note also that the goods will be deemed 'satisfactory', if it is contemplated that they will
be processed in some way before use, and that process would have removed the
defect.

See Heil v. Hedges [1951] 1 TLR 512

The defect would have been removed if P had cooked the pork chop properly

But contrast with

Grant v. Australian Knitting Mill [1936] AC 85 below.

s14(3) Fitness for Purpose.

Applies when the buyer has made it known to the seller that the goods are
required for a particular purpose.

Ashington Piggeries v. Christopher Hill [1972] AC 441

Defendants were manufacturers of animal foodstuffs. They were asked to make up
feed for minks. They used herring meal, which contained a toxic substance harmful to
most animals, but particularly harmful to minks. As a result many of P's mink died.
Lords Held –since the poison affected all animals, feed unfit for disclosed purpose,
since P had relied on D's skill and judgement, to the extent that D was a manufacturer
of animal food.

There are instances where the courts will hold that a particular use is so obvious, that
the buyer need not specifically state the purpose of buying the goods.

Grant v. Australian Knitting Mill [1936] AC 85

The customer bought a pair of underpants, which had not been washed properly and
still contained a chemical substance from manufacture. The buyer wore the pants and
suffered dermatitis.
Privy Council: The buyer had by implication made it known that he intended to wear
underpants, which were not reasonably fit for their purpose.

See also Priest v. Last [1903] 2 KB 148

Where goods are fit for various purposes, and no particular purpose is specified, the
goods will be deemed fit for their purpose even if not fit for the buyer s particular
purpose.

If goods are required for a particular purpose, the seller's advice should be sought.

Griffiths v. Peter Conway LTD [1939] 1 All ER 685

The buyer had abnormally sensitive skin and suffered dermatitis from her new tweed
coat. This would not have affected person with normal skin, thus action against seller
failed.

See also

Slater v. Finning [1997] AC 473

Teheran-Europe v. ST Belton [1968] 2 QB 545.

s14(3) does not apply where

-circumstances show that buyer does not rely on seller's skill and judgement
or
-where it would be unreasonable to rely on seller's skill and judgement.

Jewson Ltd v. Kelly [2003] EWCA Civ 1030

s15 Goods Sold by Sample.

“The office of a sample is to 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. But it cannot be treated as saying more than such a sample
would tell to a merchant of the class to which the buyer belongs, using due care and
diligence, and appealing to the it in the ordinary way and with the knowledge
possessed by merchants of that class at the time. No doubt the sample may be made
to say a great deal more. Pulled to pieces and examined by unusual tests which
curiosity or suspicion might suggest, it would doubtless reveal every secret of its
construction. But that is not the way in which business is done in this country. Per
Lord MacNaughten in Drummond v. Van Ingen (1887) 12 App Cas 284 at p297

IMPLIED CONDITIONS
-bulk of goods will correspond with sample
-goods will be free from any defect rendering them
unsatisfactory.

This should now be read with

Section 35(2)(b)

Godley v. Perry [1960] 1 All ER 36

A young boy bought catapult from a retail shop. It got broken almost immediately, and
he lost an eye. The retailer had bought catapult by sample from a wholesaler and had
tested sample. No defect was apparent. The boy able to claim damages from retailer
who in turn was claimed from the wholesaler.

E&S Ruben v. Faire Brothers [1949] 1 KB 254.

EXCLUSION AND LIMITATION CLAUSES.

The seller’s right to restrict or exclude her obligations is severely restricted by

The Unfair Contract Terms Act 1977

Unfair Terms in Consumer Contract Regulations 1999
EC Consumer Guarantees Directive 1999/44/EC Directive

Remember to revise these areas from your Contract work last year.
THE BUYER’S REMEDIES.

Learning Outcomes
To assess the buyer’s obligations and remedies.
To analyse when the buyer has ‘accepted’ the goods.

Reading: Dobson & Stokes Chapter 13.

Section 27 Acceptance

Section 8 Payment
Re Charge Card Services Ltd [1988] 3 All ER 702

Buyer’s Remedies Under The Sale of Goods Act 1979 (as amended).

1. Damages: see rule in HADLEY v. BAXENDALE 1854

ss50-53 SGA

2. Specific Performance s52.

3. Right to Reject the Goods and Repudiate.

This will only be the case where the term broken can be classified as a condition.
SGA. Sections 13-15 have been modified by s15A as amended by The Sale and
Supply of Goods Act 1994.

See s15A where the breach of condition is trivial.

The courts have held that late delivery will be a breach of condition, depending on the
express terms of the contract, or its nature. (s11(3))

s11(4) where the contract is non severable, the right to reject the goods is lost
as soon as the buyer accepts them.

The right to reject the goods is lost of the buyer accepts them.

How does the buyer accept the goods?

s35 a) He indicates to the seller that the goods have been accepted;
b) The goods are; delivered and treated in a way that is inconsistent with
the seller's ownership. E.g. buyer sells them on.
c) The goods are retained for more than a reasonable time, without an
indication to the seller that they have been rejected.

Berstein v. Pamson Motors LTD [1987] 2 All ER 220

A new car broke down after 3 weeks and after doing 140 miles. The buyer was
entitled to damages but lost right to reject.

Rougier J Held: 'reasonable time' meant sufficient time to give the car a
general trial, not sufficient time for hidden defects to be discovered, if that was the case
the right to reject might survive for months.
 s35 is "...directed solely to what is a reasonably practical interval in commercial
terms between a buyer receiving the goods and his ability to send them back,
taking into consideration from his point of view the nature of the goods and their
function, and from the point of view of the seller, the commercial desirability of
being able to close his ledger reasonably soon after the transaction is complete.
The complexity of the intended function is clearly of prime consideration here.
What is a reasonable time in relation to a bicycle would hardly suffice for a
nuclear submarine. per Rougier J in Berstein.

Fiat Auto Financial Services v. Connolly [2007] SLT (Sh. Ct.) 111

See also
Truk (UK) LTD v. Tokmakidis GmbH [2000] 1 Lloyds Rep 543

Clegg v. Olle Andersson [2003] EWCA Civ 320

Jones v. Gallagher [2004] EWCA 10

J&H Ritchie Ltd v. Lloyd Ltd [2007] UKHL 9

Partial Rejection s35A.

Additional Remedies for consumers.

The Sale and Supply of Goods to Consumers Regulations 2002 (SI2002/3045).

Which implements

EC Directive 1999/44.

Sections 48A-48F Sale of Goods Act 1979.

The Conditions.

1. Buyer deals as a consumer.

2. The goods do not conform to the contract..

Definition of consumer.

“..any neutral person who …is acting for the purposes which are outside his trade,
business or profession. “ Regulation 2.

The new remedies.

1. Repair / replacement.
2. Reduction in price or rescission.
THE SELLER’S REMEDIES

Learning outcomes.
To assess the main seller’s remedies
Analyse retention of title clauses.

Reading: Dobson & Stokes Chapter 12 and Chapter 3, paragraphs 3.041 – 3.045.

Personal Remedies: Remedies against the buyer.

1. Action for the price s49

2. Damages for non-acceptance s50

Bem Ticaret v. International Agri Trade [1999] 1 All ER (Comm) 619

WL Thompson v. Robinson [1955] Ch 177

Real Remedies: Remedies against the goods.

1. Lien ss41-43 SGA

2. Stoppage in transit ss44-46 SGA

3. Right of resale s48

Protecting the seller’s interests: Retention of Title

Aluminium Industries Vaasen BV v. Romalpa Aluminium LTD [1976] 2 All

ER 552

Borden LTD v. Scottish Timber Products LTD [1981] Ch 25

Hendy Lennox Ltd v. Graham Puttick Ltd [1984] 1 WLR 485

Re Peachdart [1983] Ch 131

Clough Mills LTD v. Geoffrey Martin [1984] 3 All ER 982

Armour v. Thysson [1991] AC 339.

Glencare International AG v. Metro Trading Inc [2001] 1 All ER Comm 103

TRANSFER OF OWNERSHIP AND RISK.

Learning Outcomes
To appreciate the importance of judging the point at which property in the goods
passes;
To comprehend and apply the rules under ss16-20
To determine the implications of whether goods are classified as ‘specific’ or
‘unascertained’;
To explain the concept of ‘risk’ and when it passes;

Reading: Dobson & Stokes Chapter 3.

What do we mean by passing of ownership?

Why do we need to know when property passes?

In determining when property passes the law makes a distinction between 'specific'
and 'unascertained' goods.

What are specific Goods? Section 61

See Kursell v. Timber Operators [1927] 1

KB 298.

Re Wait [1927] 1 Ch. 606

Re London Wine Co.

(Shippers) [1986] PCC 121.

What are unascertained goods?

The Rules under the SGA 1979

Note s16 property in unascertained goods cannot pass until they have been
ascertained.

SPECIFIC GOODS

s17 Property in specific goods passes when the parties intend it to

pass.

Dennant v. Skinner & Collom [1948] 2 KB 164

Dobson v. General Accident & Life Assurance Corp. LTD [1990] 1 QB 274

What if the parties do not make their intentions clear?

Section 18

Rule One

If the contract is unconditional and in a 'deliverable state', property passes when the
contract is made.

Dennant v. Skinner & Collom [1948] 2 KB 164

Varley v. Whipp [1900] 1 QB 513

Underwood LTD v. Burgh Castle Brick and Cement Syndicate [1922] 1 KB 343

Rule Two
Where goods are not in a deliverable state property passes when seller does what
needs to be done and the buyer has notice that it has been done.

What is a deliverable state? see s61 SGA

Underwood LTD v. Burgh Castle Brick and Cement Syndicate [1922] 1 KB 343
Contract was for the sale of an engine to be loaded on to a railway wagon. When the
contract was made, the engine was embedded in cement foundations at a factory, and
not in a deliverable state. Whilst loading it into the railway wagon the sellers broke
part of the machine. The buyers refused to accept it.
Held Rule 2 and not Rule 1 applied. The engine was still in the seller's ownership, at
the time of damage, and therefore at their risk. The buyer's were able to reject it in its
damaged state.

Rule Three

Where goods are in a deliverable state but something has to be done to

determine the price, property passes, when this has been done and the buyer
has been notified.

Nanka-Bruce v. Commonwealth Trust Ltd [1926] AC 77.

Rule Four
when goods are delivered on approval property passes
a/ when buyer indicates approval
b/ when goods are retained beyond a fixed or reasonable date

Poole v. Smith's Car Sales (Balham) LTD [1962] 1 WLR 744

P left his car with car dealers to be sold. Did not specify a time limit, when car was left.
After three months the car was neither sold nor returned, despite several requests by
P. HELD property in the car passed to the dealers, since the car had not been
returned within a reasonable time, nor at P's request. So D was liable to pay for the
car.
Genn v. Winkel (1911) 28 TLR 483

Read Dobson & Stokes pp36 -37 on the CA statements from this decision.

UNASCERTAINED GOODS

Section 18

Rule Five

Property passes when goods are in a deliverable state and set aside for the buyer.
Buyer must know that goods are ready for collection.

Rule 5 is a presumed intention and can be varied or altered by a contract.

Rule 5 applied to goods that are from a bulk which has not been ascertained. S20A
and B apply to unascertained goods from an identified bulk.

Pignataro v. Gilroy [1919] 1 KB 459

Involved contract for the sale of 140 bags of rice. Seller informed buyer that 15 bags
were ready and asked him to collect them. The buyer did nothing for a month.
Meanwhile the bags were stolen.
Held: Property and risk had passed to the buyer whose assent was inferred by his
inactivity.

Philip Head & Sons v. Showfronts LTD [1970] 1 Lloyds Rep 140
Seller agreed to deliver and lay fitted carpets. A carpet was delivered, but left
overnight to be laid the next morning.
Held: Carpet was still at seller's risk, so when it was stolen overnight the seller bore
the loss.

Healey v. Howlet [1917] 86 LJKB 337

Wardars (Imports & Exports) v. W. Norwood [1968] 2 QB 663.

Re London Wine Co. (Shippers) [1986] PCC 121.

Re Ellis Son & Vidler [1994] 1 WLR 1181.

Karlshamms Oliefabiker v. Eastport Navigation Corporation, The Elafi [1982] 1

All ER 208.

For Rule 5 to apply the goods must be unconditionally appropriated to the contract.

Re Goldcorp Exchange LTD [1995] 1 AC 74

NB Buyers are placed at risk when they pay in advance for the goods if the bulk is
not identified. If the goods are in trust then it prevents the company from dealing
with assets and conducting its business as it sees fit. See
Re Kayford [1975] 1 All ER 604.

Consider the effect of the SALE OF GOODS (AMENDMENT) ACT 1995

This gives statutory authority to Karlshamms Oliefabiker v. Eastport Navigation
Corporation, The Elafi above.

SGA ss20A & 20B

Rules 5(3) and 5(4).

Conditions

1. Contract must be for the sale of goods from an unidentified bulk source
2. Contract must be for sale of a specified quantity
3. Buyer must pay some or all of the price

TRANSFER OF RISK IN NON-CONSUMER SALES.

Section 20: Pignataro v. Gilroy above.

Section 20(2): Demby Hamilton v. Baden [1949] 435.

Section 20(3): Healy Howlett [1917] 86 LJKB 337.

TRANSFER OF RISK IN CONSUMER SALES.

Sale and Supply of Goods to Consumer Regulations 2002 (SI 2002/3045)

Section 20(4): Students to read Dobson & Stokes paragraphs 3.033-3.040

What happens when the goods perish?

-before the contract see s6

Couturier v. Hastie [1843-60] All ER Rep 280

contract is void.

-after the contract see s7 SGA

Where the goods are specific goods and perish before property passes to the
buyer without the fault of either party, the contract is frustrated.

When are goods said to perish?

Horn v. Minister of Food [1948] 2 All ER 1036

Asfar v. Blundell [1896] 1 QB 123

Barrow Lane Ballard v. Phillip Phillips & Co [1929] 1 KB 574
THE NEMO DAT RULE

"Nemo dat non quod habet" "No one can give what they do not have"

Learning Outcome(s)
An understanding that the buyer cannot acquire property in the goods if the seller did
not have the right to sell;
To advise of the situations in which the buyer may still acquire property in the goods
despite the fact that the seller had no right to sell the goods.

Reading: Dobson & Stokes Chapter 5.

SGA s21
"..where the goods are sold by a person who is not their owner, and does not sell them
under the authority or with the consent of the owner, the buyer acquires no better title
to the goods than the seller had..."

Greenwood v. Bennett [1972] 3 WLR 691

Exceptions SGA ss21-25

1. Sale by Agent

Folkes v. King [1923] 1 KB 282

An agent had authority to sell his principal's car for not less than £575. In
breach of these instructions, he sold for only £340. Buyer obtained a good title,
because the agent was clearly in possession with authority to sell, and the buyer had
no reason to suspect the limitation, which the principal had imposed.

Mercantile Agents

Factors Act 1889 s2

Lowther v. Harris [1927] 1 KB 393

Rolls Razer Co. v. Cox [1967] QB 552

Beverly Acceptances v. Oakley [1982] RTR 417

Staffs Motor Guarantee Ltd v. British Wagons Ltd [1934] 2 KB 305.

Pearson v. Rose and Young [1951] 1 KB 275

Stadium Finance v. Robbins [1962] 2 QB 664.

Oppenheimer v. Attenborough [1908] 1 KB 221

2. Estoppel s21(1)
Eastern Distributors LTD v. Goldring [1957] 2 QB 600
Car owner gave a dealer documents, which made the dealer appear to be the
owner, as part of a scheme to enable the car owner to borrow money without
adequate security. The scheme fell through, but the dealer went ahead and sold the
car to a finance company.
Held: Finance company obtained a good title because, although the dealer had
no right to sell, the owner's conduct estopped him from asserting this.

Central Newbury Car Auctions v. Unity Finance [1957] 1 QB 371.

Mercantile Credit Co. v. Hamblin [1965] 2 QB 242

See also Debs v. Sibec Developments LTD [1990] RTR 91

Moorgate Mercantile Co. LTD v. Twitchings [1977] AC 890

The buyer cannot rely on estoppel until s/he has purchased the goods.

Shaw v. Commissioner of Police for the Metropolis [1987] 1 WLR 1332.

3. Sale under voidable title: s23

Cundy v. Lindsay [1873] 3 App Cas 459
Phillips v. Brookes [1919] 2 KB 243
Lewis v. Avery [1972] 1 QB 198

4. Resale By Seller In Possession s24

• The seller must be in possession.

• The purchaser must have acted I good faith.

Pacific Motor Auctions Pty LTD v. Motor Credits (Hire Finance) [1965] AC
867
Finance company bought cars from dealers. Agreement was that dealers
would continue to display cars in their showroom. Finance company had paid 90% of
their value. Dealers got into financial difficulties and finance company revoked the
agreement, but the dealers still sold the cars to bona fide customers.
HELD the sales were valid and finance company's only remedy was to sue the
dealers.

Worcester Works Finance v. Cooden Engineering [1972] 1 QB 210

5. Resale By Buyer In Possession s25

Newtons Of Wembley v. Williams [1965] 1 QB 560

Rogue bought the seller's car with a cheque that was dishonoured. Seller had
stipulated that title was not to pass until the cheque cleared, but allowed the rogue to
take possession. Rogue sold car to innocent buyer for cash in a recognised second-
hand car market.
HELD buyer obtained good title, because the rogue was a buyer in possession
with the consent of the owner and, although the rogue was not a mercantile
agent, he had sold the car in a place where car dealers ordinarily did business.

Original seller must have consented to possession initially

National Mutual General Insurance Association LTD v. Jones [1990] 1 AC

 24
Car was stolen and sold to a car dealer, who sold it to another car dealer, who
sold to Jones (an innocent customer) Jones claimed that he should be protected under
s25. HELD s25 only served to defeat the claim of an owner who gave possession to a
buyer; it could not defeat the title of an owner whose car was stolen.

6. Sale Of Motor Vehicles Under Hire Purchase Act 1964 ss27-29

Stevenson v. Beverley Bentick Ltd [1976] 2 All ER 606

Shogun Finance Ltd v. Norman Hudson [2003] UKHL 62

7. Special Powers of Sale

European Community Intervention.

Refer to work for the tutorial.

TUTORIALS.

In the past, this part of the Commercial Law syllabus has been complete
directed study on the part of students, as is appropriate for second year
students, working on a module, that they have chosen.

Whilst lectures and tutorials will now take place, you will be expected to prepare
tutorials in more detail than perhaps in other modules. There will be cases to
look for and look up, which will not necessarily be covered in lectures.

The work on Exclusion Clauses and E.U intervention will be totally directed
study. They are still examinable areas.
TUTORIAL ONE.

Assess the contribution made by the above sources of law to the development of this
subject.

As a group, you may want to allocate different pieces of legislation.

Unfair Contract Terms Act 1977.

Sale of Goods Act 1979
Supply of Goods and Services Act 1982
Sale and Supply of Goods Act 1994
Sale of Goods (Amendment) Act 1994
Unfair Terms in Consumer Contracts Regulations 1994
Unfair Terms in Consumer Contracts Regulations 1999
EC Consumer Guarantees Directive 1999/44/EC Directive
Consumer Protection (Distance Selling) Regulations 2000
The Sale and Supply of Goods to Consumers Regulations 2002.

Further Questions

1. What are express terms in a contract? How do these differ from

representations?
2. What in the light of strict liability, is the basic task of the judge(s) in an action for
breach of contract?
3. Why might a court introduce a judicially implied term into a contract?
4. Why might Parliament interfere with a contract by introducing statutory terms?

5. How can a court influence the impact of statutory implied terms on a particular
contract?
6. Explain the affect of an exclusion clause? What is a limitation clause?
7. How does s3 of UCTA deal with attempts to exclude rights/obligations?
8. Read the following attached cases and discuss whether the clauses in
question were valid and why.
Lawtel document(s) - 03/01/2007 18:02
ST ALBANS CITY & DISTRICT COUNCIL v INTERNATIONAL COMPUTERS LTD (1996)

CA (Civ Div) (Nourse LJ, Hirst LJ, Sir Iain Glidewell) 26/7/96

CONTRACTS - CONSUMER LAW - DAMAGES - INFORMATION TECHNOLOGY - LOCAL

GOVERNMENT

UNFAIR CONTRACT TERMS ACT 1977 : EXCLUSION CLAUSE : COMPUTER CONTRACT

Standard term computer contract excluding liability over £100,000 held void under the Unfair
Contract Terms Act 1977.

The defendant ('ICL') appealed from the decision of Scott Baker J awarding the plaintiff damages of
£1,314,846 against the defendant for breach of its contract to supply the plaintiff with a computer
system used for the collection of community charge. In the event, the supplied software (the
'COMCIS' system) was defective and overstated the relevant population of the area, causing a loss in
revenue. The contract specified a "tried and tested" system, a "warranty" that the equipment and
programmes supplied would conform with the relevant product descriptions, and would be of
merchantable quality. The contract contained a clause purporting to limit liability to £100,000. Losses
accrued from the £484,000 less than the plaintiff ought to have received in revenue, a £14,000
reduction in the revenue support grant, and the £1,795,000 extra payable by way of precept to the
Hertfordshire County Council. These losses were partially offset by reduced contribution to the "safety
net" fund (£259,000) and an increase in the receipt from the national non-domestic rate pool
(£865,000). COMCIS was implemented in October 1989 by ICL, thereafter upgraded "releases"
(named 2020, 2036 and 2040). At first instance (summarised below), in the face of considerable
evidential conflict, the judge found that on 29 November 1989, Mr Turton, the defendant's project
manager, gave an assurance that the figures from release 2040 were correct and that he did not have
the technical knowledge to give such an assurance. The defendant submitted two arguments not
advanced in the court below, namely: (a) that the plaintiff was at fault for not performing a rerun of the
figures after release 2040 had been installed on 11 December 1989; and (b) that the plaintiff ought to
have known from the printout of 9 February 1990 that the December figure was or might be
inaccurate.

HELD: (1) Agreeing with the judge at first instance, the defendant was under an express contractual
obligation to supply software enabling the accurate completion of the community charge returns.
(Obiter) At common law, in the absence of any express term as to fitness for purpose or quality, or
any term to the contrary, such a contract as the present case was subject to an implied term of
reasonable fitness for its intended purpose (dicta of Lord Pearson in Trollope & Colls Ltd v North
West Metropolitan Regional Hospital Board (1973) 1 WLR 601 applied). (2) Equally, the court agreed
that the defendant had breached that contract. (3) There was no good reason why the plaintiff ought
to have done a re-run of the figures between 11 December and 9 February. (4) The plaintiff did
suspect inaccuracies in the figures, but, relying on an assurance by the defendant given on 15
February that a further release of software would correct the error shown on 9 February, the plaintiff
was justified in relying on the then current figures. (5) Agreeing with the judge at first instance, the
court found that the defendants' general conditions remained effectively untouched in the negotiations
and the plaintiff dealt with the defendant on its standard terms of business. The Unfair Contract
Terms Act 1977 ('UCTA') applied. (Obiter) Even if negotiations over the standard terms had occurred,
UCTA would still have been applicable. (6) The judge had not proceeded on an erroneous principle or
was plainly and obviously wrong in deciding that the limitation term of £100,000 failed the test of
reasonableness in s.11 UCTA. (7) The plaintiff was in a comparable position to that of trustee under a
trust and had the capacity, indeed the requirement, to recoup such damages as would leave its
ultimate beneficiaries (the local authority's inhabitants) out of pocket. (8) Relying on the authorities of
Parry v Cleaver (1970) AC 1 and Palatine Graphic Arts Co Ltd v Liverpool City Council (1986) 2 WLR
285, distinction was made between the plaintiff's losses. The £484,000 which the plaintiffs did not
receive for community charge in 1990-91 was irrecoverable since the charge-payers were under an
obligation, not discharged because of any fault in the computer system, to pay the same amount
added to the 1991-92 bill. (9) By contrast, the £685,000 (the extra amount which the plaintiffs had to
pay out) was recoverable loss since the plaintiffs were under no obligation to pay this money out but
for the faulty software. (10) (Obiter, per Sir Ian Glidewell) A program (sic) was not goods with the
definition under s.61 Sale of Goods Act 1979 or s.18 Supply of Goods and Services Act 1982, nor did
the transfer of a program amount to a transfer of goods.

Appeal allowed on the single issue of recoverability of damages. Quantum reduced by £484,000.

Conrad Dehn QC, Timothy Lamb QC and Adam Touey instructed by Masons for the defendant.
Richard Mawrey QC instructed by Michael Lovelady, solicitor for St Albans City & District Council for
the plaintiff.

LTL 14/8/96 : (1996) 4 All ER 481 : (1997) FSR 251 : Times, August 14, 1996

Judgment: Official

Document No.: AC0001680

Lawtel document(s) - 03/01/2007 18:05

WATFORD ELECTRONICS LTD v SANDERSON CFL LTD (2001)

[2001] EWCA Civ 317

CA (Civ Div) (Buckley J, Chadwick LJ, Peter Gibson LJ) 23/2/2001

CONTRACTS - INFORMATION TECHNOLOGY - SALE OF GOODS

PERSONAL COMPUTERS : HARDWARE : SOFTWARE : SUPPLY : STANDARD TERMS AND

CONDITIONS : WARRANTIES : EXCLUSION CLAUSES : ENTIRE AGREEMENT CLAUSES :
ACKNOWLEDGEMENT OF NON-RELIANCE : LIMITATION OF LIABILITY : INDIRECT LOSS :
SAVINGS IN COSTS : INCREASE IN CASH FLOW : QUANTUM : LIMIT : REQUIREMENT OF
REASONABLENESS : S.11 UNFAIR CONTRACT TERMS ACT 1977

Provisions in a contract for the supply of computer software that both excluded the supplier's
liability for indirect loss and limited the damages recoverable to the amount paid by the
customer under the contract satisfied the requirement of reasonableness under s.11 Unfair
Contract Terms Act 1977.

Appeal by the defendant ('Sanderson') from that part of the order of HH Judge Thornton QC by which
he determined against Sanderson a preliminary issue as to whether certain of its standard terms and
conditions satisfied the requirement of reasonableness under s.11 Unfair Contract Terms Act 1977.
The preliminary issue arose in the course of an action by the claimant ('Watford') for damages for
breach by Sanderson of a contract for the supply of computer hardware and software ('the goods').
The contract, which incorporated Sanderson's standard terms and conditions, included: (i) an "entire
agreement" clause, which contained an acknowledgement of non-reliance on the part of Watford; and
(ii) a clause ('the subject clause') under which Sanderson purported: (a) to exclude any liability for
indirect or consequential losses; and (b) to limit its liability to the price paid by Watford under the
contract. Following the failure of the goods to perform, Watford sought to recover damages for breach
of contract totalling £5.5 million in respect of loss of profits/depression of turnover, increased costs of
working and mitigation costs. The total paid by Watford under the contract amounted to £104,596.
The judge held that the subject clause, which he construed as a whole, was "unreasonable in its
entirety", and hence fell foul of s.11 of the 1977 Act.
HELD: (1) The judge had erred in his approach to the construction of the subject clause, which was
plainly comprised of two distinct contract terms, in relation to each of which it was necessary to
consider whether the requirement of reasonableness was satisfied. The purpose of each part was to
be construed not only by reference to the other, but also by reference to the entire agreement clause
and Watford's acknowledgement of non-reliance. (2) It was clear that the contract had been
negotiated between experienced businessmen of equal bargaining power and skill. Unless satisfied
that one party had effectively taken unfair advantage of the other, or that a term was so unreasonable
as plainly not to have been understood or considered, the court should not interfere. (3) In those
circumstances, it was impossible to hold that either the term excluding indirect loss or the term
limiting direct loss failed the requirement of reasonableness.

Appeal allowed.

Mark Raeside instructed by DLA (Birmingham) for the appellant. Peter Irvin instructed by Needleman
Treon for the respondent.

LTL 23/2/2001 : (2001) 1 All ER (Comm) 696 : (2001) BLR 143 : (2002) FSR 19 : Times, March 9,
2001

Judgment: Official

Document No.: AC0100829

TUTORIAL TWO

Time and Delivery

Reading

Sale of Goods Act s61, 27, 28

Hartley v. Hymans [1920] 3 KB 475

Charles Rickards Ltd v. Oppenheim [1950] 1 KB 616

Questions

1. What is the statutory meaning of delivery in s61(1) of the Sale of Goods Act
1979?
2. ‘Possession’ of goods and ‘ownership’ of goods are separate legal rights. Give
an example of a contractual situation in which one party has ‘ownership’ and
another party has ‘possession’.
3. What do sections 27 and 28 of the Sale of Goods Act 1979 explain about the
obligations to deliver the contracted goods?

Other aspects of the obligation to deliver –‘where’, ‘when’ & ‘what’.

4. For each of the following aspects of delivery of contracted goods relevant

sections of the 1979 Act are identified below.

For each aspect –where, when & what

(i) Summarise succinctly the obligations / rights implied by the section(s)

(ii) Decide whether the section identifies the remedy available if the contractual
obligation is breached.

Place of delivery ‘where’ Sections 29 and 32

Time of delivery ‘when’ Sections 29, 59 and 10(2)

Quantity to be delivered ‘what’ Section 30

Instalment delivery ‘what’ Sections 11(4), 31

TUTORIAL THREE

Transfer of Title and Sale by Description

Reading

Sale of Goods Act s2, 12 and 13

Cases

Rowland v. Divall [1923] 2 KB 500

Microbeads A.G v. Vinhurst Road Markings LTD [1975] 1 All ER 529
Beale v. Taylor [1967] 3 All ER 253

Questions

1. Explain how the wording of Section 2 of the Sale of Goods Act 1979
emphasises that “ownership” is a key factor in the contract for the sale of
goods.
2. What is the difference between s12(1) and s12(2) of the Sale of Goods Act
1979 in respect of the buyer’s rights? Read s12(5)(A)
3. Ian purchased a 2002 Land Rover for £9, 000 from “Pat’s Car-lot”. Pat had
bought the car from Phil for £4, 000, without realising that Phil had purchased it
for £1, 000 from Mickey knowing that it had been stolen. Ian used the car for
three months before he was spotted by Denise the true owner of the car.
Denise has told Ian that he must return the car to her otherwise she will inform
the police. Advise Ian of his rights against Pat.
4. How would you answer differ if Phil took pity on Ian and paid Denise the market
value for the vehicle?
5. Read the decision in Beale v. Taylor and answer the following questions
(i) Were ‘specific’ or ‘unascertained’ goods involved?
(ii) What sort of descriptive devices were used in the case?
(iii) Why was s13 considered more appropriate than s14?
(iv) How does the decision demonstrate the principle of strict liability in
contract?
TUTORIAL FOUR

Satisfactory Quality & Buyer’s Remedies

Reading

Statute
Sale of Goods Act 1979 section 14

Cases.
Shine v. General Guarantee Corp. [1983] 1 All ER 911
Rogers v. Parish (Scarborough) LTD [1987] 2 All ER 232
Jewson v. Kelly [2003] EWCA Civ 1030 (Attached)
SW Tubes v. Owen Stuart [2002] EWCA Civ 854
Clegg v. Olle Andersson [2003] EWCA Civ 320
Jones v. Gallagher [2004] EWCA Civ 10
J & H Ritchie Ltd v. Lloyd UKHL (attached)

Articles (available via Metalib)

Sly & Clerk Horses for Courses (2007) 157 NLJ 684
Bridge, The Sale of Goods Act in Scotland –Ritchie v Lloyd, J.B.L, Oct 814-819

Questions

1. Will a sale by a private seller be covered by s14?

2. Do sections 14(2), (2)(A) and 2(B) require goods to be perfect?
3. What circumstances in subsection 14(2)(C) can lower the quality requirement in
subsection 14(2)?
4. What extra factor is introduced into the quality standard by subsections 14(2)
(D), 14(2)(E) and 14(2)(F) when a consumer buys goods?
5. What is the difference between s14(2) and s14(3) with respect to standards of
quality?
6. Is there a remedy available if the goods are sound but the packaging is either
faulty or dangerous additional material or instructions were delivered with them?
7. What restrictions on the rights of non-consumers to reject goods is introduced
by s15(A)(1) of the Sale of Goods Act? What is important about s15(A)(2)?
8. What guidance is given in s11(2) and 11(3) about the right to repudiate?
9. Use s35(1) and 35(2) to explain how a buyer is said to accept the goods.
10. Flora purchased the newly patented “DirtZap” washing machine from
“White Goods Ltd” for £950. After two months use, the machine damaged
numerous pairs of silk stockings and woollen jumpers, worth £250. She
contacted “White Goods Ltd”, who took the machine away to repair. When the
company returned it three weeks later, a sales representative would only
explained that the machine had left the t the factory with a small part missing.
Flora was offered £100 to cover the cost of her damaged goods but wants to
return the washing machine. Her electricity bills have increased by 40% as
the “DirtZap” can only operate on peak rate electricity.
Advise Flora
Lawtel document(s) - 03/01/2007 17:51
JEWSON LTD v THOMAS MICHAEL KELLY (2003)

[2003] EWCA Civ 1030

CA (Clarke LJ, Sedley LJ, Cresswell J) 28/7/2003

SALE OF GOODS

IMPLIED TERMS : FITNESS FOR PURPOSE : SUITABILITY : SATISFACTORY QUALITY :

STANDARD ASSESSMENT PROCEDURE RATINGS : SAP RATINGS : REPRESENTATIONS :
PARTICULAR PURPOSE MADE KNOWN TO SELLER : DWELLINGS : CONVERSION WORKS :
SALE FOR PROFIT : EXCLUSION OF LIABILITY : INDIRECT LOSSES : CONSEQUENTIAL :
RELIANCE : BUILDERS MERCHANTS : BUILDING SUPPLIES : MATERIALS : ELECTRIC
BOILERS : S.14 SALE OF GOODS ACT 1979

A seller of electric boilers was not in breach of the terms of satisfactory quality and fitness for
the purposes implied by s.14 Sale of Goods Act 1979 where the buyer did not rely, and it was
not reasonable for him to rely, on the skill and judgment of the seller, in respect of the fact
that the boilers reduced the energy ratings of the flats in which they were installed and made
them difficult to market.

Appeal by the claimant ('Jewsons') from the decision of David Foskett QC that Jewsons was in
breach of terms implied by s.14(2) and (3) Sale of Goods Act 1979 in a contract for the sale of 12
electric boilers to the defendant ('K'). In 1997 K acquired a former school building with planning
permission for conversion into flats. K bought 12 electric boilers from Jewsons along with other
materials. K did not pay for the goods and Jewsons issued proceedings in which K claimed to set off
damages for breach of the contract to supply the boilers. K's case was that the boilers were neither of
satisfactory quality nor reasonably fit for their purpose because they reduced the Standard
Assessment Procedure ('SAP') energy ratings of the flats, because their dependence on peak rate
electricity made them expensive to run, producing ratings which made the flats difficult to market. As
a result K could not keep up repayments on the loan he had taken out to finance the purchase of the
building and the lender repossessed it. The deputy judge trying the preliminary issues held that
although the boilers intrinsically worked satisfactorily, they were not of satisfactory quality and were
not reasonably fit for the purposes for which the boilers were being bought, because of their adverse
impact on the SAP ratings for the flats. Jewsons appealed.

HELD: (1) Under the statutory scheme set out in s.14, it was the function of s.14(3), not s.14(2), to
impose an obligation tailored to the particular circumstances of the case. In the circumstances of this
case it would be startling if Jewsons was liable for breach of the implied terms in s.14(2) and not of
the implied terms in s.14(3). (2) For the purposes of s.14(3) K made it clear to Jewsons that he was
buying the boilers for installation in flats which were being converted for resale. The boilers were not
reasonably fit for that purpose because of their effect on the SAP ratings. But K did not rely on the
skill and judgment of Jewsons, save as to the intrinsic qualities of the boilers. The question whether
they were suitable, having regard to their effect on the flats' SAP ratings, was a matter for K and his
advisers. The case was therefore one of partial reliance (Christopher Hill Ltd v Ashington Piggeries
Ltd (1972) AC 441). (3) In all the circumstances it was not reasonable for K to rely on the skill and
judgment of Jewsons in relation to the effect on the SAP ratings. In the respect in which K could
reasonably have relied on the skill and judgment of Jewsons as sellers of the boilers, they were
reasonably fit for their purpose. Therefore Jewsons was not in breach of the term implied by s.14(3)
of the 1979 Act. (4) There was equally no breach of s.14(2). There was nothing wrong with the quality
of the boilers and a reasonable man would so conclude. They were of satisfactory quality for use in
flats and whether they were fit for a particular purpose made known to the seller was the function of
s.14(3). Once it was held that it was not reasonable of K to rely on the skill and judgment of Jewsons
with regard to the potential impact of the boilers on the flats' SAP ratings, it was clear that a
reasonable man would not conclude that the boilers were not of satisfactory quality.

Appeal allowed.
Anthony de Garr Robinson instructed by Wilkes Partnership for Jewsons. Bryan McGuire instructed
by Bell Lax Litigation for K.

LTL 28/7/2003 : (2004) 1 Lloyd's Rep 505 : (2004) BLR 31 : (2003) CILL 2042

Judgment: Official - 26 pages

Document No.: AC0103647

Lawtel document(s) - 12/03/2007 07:07

J & H RITCHIE LTD v LLOYD LTD (2007)

[2007] UKHL 9

HL (Lord Hope of Craighead, Lord Scott of Foscote, Lord Rodger of Earlsferry, Lord Brown of
Eaton-under-Heywood, Lord Mance) 7/3/2007

SALE OF GOODS

AGRICULTURAL MACHINERY : DEFECTIVE GOODS : IMPLIED TERMS : REJECTION :

REPAIRS : RESCISSION : EFFECT OF S.35(6)(A) SALE OF GOODS ACT 1979 : IMPLIED TERMS
UNDER SEPARATE AGREEMENT TO INSPECT AND REPAIR DEFECTIVE GOODS : s.35(6)(a)
SALE OF GOODS ACT 1979

In the circumstances, where a buyer of agricultural machinery had allowed the seller to take
back defective goods to inspect them with a view to repairing them, business efficacy
required an implied term in the inspection and repair agreement to the effect that, if asked,
the seller would tell the buyer what the inspection had revealed and what repairs had been
carried out. The seller's refusal to provide that information constituted a material breach of
the agreement, which entitled the buyer to rescind it and refuse to accept the goods, even
though the goods had in fact been repaired to "factory gate" standard.

The appellants (R), who carried on a farming business, appealed against a decision of the Extra
Division of the Court of Session (2005 1 SC 155) that they had not been entitled to reject equipment
tendered to them by the respondent company (L). R had purchased agricultural machinery from L
which proved to be defective. The parties agreed that L would take the equipment back with a view to
investigation and possible repair. L repaired the equipment and advised R that it was ready for
collection. L refused to tell R what the problem had been, despite repeated requests, stating only that
it had been repaired to "factory gate" standard. R discovered informally what the problem had been
and were concerned about the fact that they had operated the equipment while it had been defective,
which might have affected other parts in the equipment. R were also concerned about the possible
effects of the events on the manufacturer's guarantee period. Accordingly, they rejected the
equipment. The issue for determination was the effect of the Sale of Goods Act 1979 s.35(6)(a) on
the buyer's right to reject goods which, on delivery, were materially disconform to the contract.

HELD: Prior to the introduction of s.35(6)(a) of the Act, it was open to question whether asking the
seller to repair defective goods might amount to an implied intimation of acceptance by the buyer or
to an inconsistent act that would prevent him from rejecting the goods. The problem was considered
by the Law Commission and the Scottish Law Commission, which resulted in s.35(6)(a) being
inserted into the Act. The commissions expressed the view that informal attempts at curing defects in
goods should be encouraged. However, the very informality of such arrangements gave rise to a
problem in identifying the legal situation with the right of rejection if repairs to which the buyer had
agreed were carried out. In the circumstances, it was appropriate to resort to an implied term to fill the
gap in the statutory code and to govern the relationship of the parties when it was arranged that the
equipment should be taken away and inspected, William Morton & Co v Muir Bros & Co 1907 SC
1211 and Liverpool City Council v Irwin (1977) AC 239 considered. When L took the equipment away,
the parties entered into a separate inspection and repair agreement. It must have been an implied
term of that agreement that, so long as L was duly performing its obligations under it, R were not to
exercise their right to rescind the contract of sale. The right to reject would be lost when a buyer
decided to accept the goods or was deemed to have accepted them. That was a right of election
which he could not be expected to exercise until he had the information that he needed to make an
informed choice. The seller could not refuse to provide the necessary information. L took R's property
away to inspect it: an owner who surrendered his property in that way could surely insist on being told
the outcome of the inspection. Since L was the company that supplied the defective equipment in the
first place, R were entitled to insist on being told what L had discovered. A refusal to supply that
information would inevitably undermine R's trust and confidence in L's due performance of the
contract. L was under an implied obligation to provide R with the information they asked for, Clegg v
Olle Andersson (T/A Nordic Marine) (2003) EWCA Civ 320 , (2003) 1 All ER (Comm) 721 considered.
In the absence of that information, R were entitled to reject the equipment even though it had in fact
been repaired to "factory gate" standard. L's refusal to supply the information amounted to a material
breach of the inspection and repair agreement, entitling R to rescind it and to refuse to collect the
equipment. Once R had rescinded the inspection and repair agreement, there was nothing to prevent
them from exercising the right to rescind the sale contract.

Appeal allowed.

Counsel:
For the appellants: Charles Graham QC, Gillian Wade
For the respondents: Colin Tyre QC, Pino Di Emidio

Solicitors:
For the appellants: McCartney Stewart (Renfrew)
For the respondents: Balfour & Manson (Edinburgh)

LTL 7/3/2007 : Times, March 8, 2007

Judgment: Official - 22 pages

Document No.: AC0112921

TUTORIAL FIVE.

PASSING OF PROPERTY
RETENTION OF TITLE

READING

Alridge v. Johnson (1857) 7 E&B 885

Re Wait [1927] 1 Ch 606
Wardar’s (Import & Export) Co. Ltd v. W. Norwood & Sons Ltd [1968] 2 All ER 602
Re Goldrup Exchange Ltd [1995] 1 AC 74
Re Stapylton Fletcher Ltd [1995] 1 All ER 192
Sale of Goods (Amendment) Act 1995
Aluminium Industries Vaasen BV v. Romalpa Aluminium Ltd [1976] 2 All ER 552
Borden Ltd v. Scottish Timber Products Ltd [1981] Ch 25
Hendy Lennox (Industrial Engines) Ltd v. Graham Puttick Ltd [1984] 2 All ER 152
Clough Mills Ltd v. Geoffrey Martin [1984] 3 All ER 982
Glencore International AG v. Metro Trading Inc [2001] 1 All ER Comm 103

Questions.

1. Mick went along to the local Q&A to purchase 25 bags of cement. He paid for
the cement plus a next day delivery charge. Two days later the cement had not
been delivered, so Mick went back to the store to investigate. He was shocked
to find that the store had gone into liquidation.
Advise Mick as to whether he has ownership of the cement.

2. The family Robinson go to the BFG furniture store. Having tried out a number of
sofas, they find one that they all agree on. Mrs Robinson pays by cheque but
agrees not to take the sofa until her cheque has been cleared by the bank. The
following day, there is a fire which destroys all the stock in BFG.
Discuss which rule applies and when property has passed.

3. Having passed his driving test, Eoin went along to his local used car dealer.
Seeing a car he likes, Eoin agrees to buy it if the engine can be replaced.
What rule should be applied to determine if and when property passes to Eoin.

4. (Summer 2006 Examination).

Shiny Products Ltd has severe financial problems. It hopes to continue but
trading Roar Materials Ltd, a major supplier of its raw materials, is concerned
about outstanding debts owed to it by Shiny Products Ltd.

A term in the supply contract between Roar and Shiny is as follows:

‘The title to and property in goods supplied, and any products manufactured from
the same, shall remain vested, or shall be vested, in the seller unless and until
the buyer pays all monies that are due and owing to the seller arising under this
agreement.’
Three deadlines for payment of Shiny’s outstanding debts to Roar have now
passed.

Advise Roar, by reference to relevant authorities, whether or not it can:

(i) refuse to deliver to Shiny the third instalment of goods purchased

under a contract for supply of materials in four separate
consignments;

AND

(ii) repossess materials which it has previously supplied and which are
still on Shiny’s premises;

AND

(iii) recover products which Shiny has manufactured using the

materials supplied by Roar and which remain on Shiny’s premises
pending delivery to its customers.
(each part of the question carries equal marks)