4.5.9.6 Sale by sample

Where there is a sale by sample there is an implied condition, by virtue of s 15:

1. that the bulk will correspond with the sample in quality;

2. [repealed];

1. that the goods will be free from any defect, making their quality unsatisfactory, which would not be apparent on reasonable examination of the sample.

This section does not seem to have given rise to any serious difficulties in application.

4.5.10 Implied terms under the Principles of European Contract Law

The Article of the Principles dealing with implied terms is very short. It states that:

... a contract may contain implied terms which stem from:

1. the intention of the parties;

2. the nature and purpose of the contract; and

3. good faith and fair dealing.

This is very broad, and would allow courts to operate all the approaches adopted by the common law, and outlined above. Moreover, the final category would give the court power to imply terms which are «fair and reasonable» in the circumstances, in a way which has never been explicitly allowed under English law.

4.6 Statutory Controls

As we have seen, the contents of the contract may be subject to statutory control, in that terms may be implied, and exclusion of such terms may be prohibited, by statute (for example, the SGA 1979; the UCTA 1977). There is now, however, a broader control of the contents of certain types of consumer contract, which results from the Unfair Terms in Consumer Contracts Regulations 1999. These Regulations prohibit a wider range of contractual clauses than simply the exclusion clauses affected by the UCTA 1977. The Regulations thus represent a further inroad into the traditional common law principle that the intention of the parties is paramount. Since, however, they relate most closely to the type of control contained in the UCTA 1977, and overlap to a considerable extent with that Act. It is important to remember, however, that all clauses in consumer contracts, other than those which are «individually negotiated», or relate either to the definition of the main subject matter of the contract or to the question of price or remuneration, are subject to a test of «fairness». They will be regarded as «unfair» if they «cause a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer». This constitutes a very powerful control over the contents of consumer contracts. It enables the courts to abandon almost entirely any pretence that regulation is based on the intentions of the parties. What is «fair» to the consumer will be the test, which may well be decided by considering the consumer’s reasonable expectations. This statutory framework means that the divide between the construction of contracts between businesses, and those between consumers, which has always existed, has grown considerably. Depending on how the Regulations are applied, and what further controls may be introduced, in future it may be necessary to deal with the contents of consumer and non-consumer contracts entirely separately.

Indeed, if the Law Commission’s proposals to replace the Regulations with a broadly-based Unfair Contract Terms Act are accepted, most terms in contracts entered into by small businesses (that is, those with under 10 employees) with other businesses, as well as those made by consumers, will be subject to a test of «reasonableness». This will further erode the idea that the substance of the agreement is for the parties to determine, and that the courts simply aim to give effect to their intentions.