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The implied conditions in sale of goods contracts |
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Sample and description may co-exist. Indeed, one might reasonably construe |
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a sample as a visual description. Section 13(2) makes clear that when goods |
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have been sold both by description and by sample, it is not sufficient merely |
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that the bulk of the goods comply with the sample, they must also correspond |
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with the description. |
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Q10 Consider the role of sales by sample in modern sale of goods law. |
8â Exclusion and limitation of liability
Remedies is an area in which the dichotomy between the position of the commercial buyer and that of the consumer buyer is very apparent, as the protection now available to the latter is significantly more extensive and flexible than that available to the former. However, before examining the availability of remedies, one must, of course, consider whether any liability has been limited or excluded and whether acceptance or affirmation has occurred which would impact on whether the buyer may seek any remedy. This accentuates further the distinction between the consumer buyer and the non-consumer buyer.
Limitation and exclusion is governed by the Unfair Contract Terms Act (UCTA) 1977 and also, for consumers, by the Unfair Terms in Consumer Contract Regulations 1999 (SI 1999/2083). It is the former, however, that is significant in relation to any attempt by the seller to exclude or reduce his liability for breaches of sections 12–15 of the Sale of Goods Act 1979. As is well established, liability for breaches of section 12 cannot be excluded126 against any buyer, with equal protection being granted in respect of the similar provision in hire-purchase127 and in other contracts for the transfer of goods.128 This prohibition applies to all such contracts irrespective of the nature of the buyer, whether business or consumer, and is eminently defensible given the fact that a breach of the ‘right to sell’ involves a total lack of consideration, allowing the buyer to terminate the contract and seek a full refund of the contract price.129 By contrast, the ability of the seller to exclude or restrict his liability for breaches of sections 13–15 and the corresponding provisions in other statutes will depend on the nature of the buyer. As against someone dealing as a consumer within the meaning of the UCTA 1977,130 exclusion or restriction of liability is not permitted by reference to any contract term. Any such term would be void. Against
126 Unfair Contract Terms Act 1977, s.6(1)(a).
127 Ibid. s.6(1)(b).
128 Ibid. s.7(3A) which prohibits the exclusion of liability for breaches under Supply of Goods and Services Act 1982, s.2.
129 See the discussion on the Sale of Goods Act 1979, s.12 (right to sell) above; also Rowland v. Divall [1923] 2 KB 500 and Butterworth v. Kingsway Motors [1954] 1 WLR 1286.
130 See Unfair Contract Terms Act 1977, s.12 for the criteria to establish whether the buyer is ‘dealing as a consumer’.
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9â Acceptance |
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a non-consumer buyer, however, liability under sections 13–15 and the other |
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corresponding provisions may be excluded or restricted by reference to a con- |
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tract term but only to the extent that the term satisfies the test of reasonableness |
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laid down in section 11 of the UCTA 1977.131 |
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Q11 Consider whether the distinction between business buyers and con- |
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sumer buyers as regards limitations and exclusions is an appropriate one. |
9â Acceptance
Acceptance of the goods or affirmation of the contract132 are fatal to the remedy of rejection although the buyer may still be able to claim damages for a breach of warranty under section 11 of the 1979 Act. Section 35 of the 1979 Act outlines three main situations in which acceptance will be deemed to have occurred, the first being where the buyer intimates to the seller that he has accepted them, and the second being when the goods have been delivered to the buyer and he does any act with them that is inconsistent with the continued ownership of the seller. Amendments to section 35 have strengthened both of these options from the perspective of the buyer, as the current version of the 1979 Act places limitations on them. Thus, in line with section 34, which takes priority over section 35,133 the new section 35(2) recognises the right of the buyer to have a reasonable opportunity to examine the goods to ascertain whether they are in conformity with the contract and, in a contract of sale by sample, the opportunity to compare the bulk with the sample.134 Assuming that the buyer has not examined them previously, only when this opportunity for examination under section 35(2) has occurred will acceptance take place. Thus, the common situation of a buyer being expected to sign a delivery note confirming acceptance of the goods prior to him having an opportunity to examine them will be of no effect. This right to an examination cannot be excluded where the buyer deals as a consumer135 and is yet another example of the growing divide between the protection offered to consumer buyers and that made available to non-consumer buyers.
The current version of the 1979 Act has also clarified concerns about what behaviour constitutes an act by the buyer that would be inconsistent with the
131 See ibid. s.6(3) as regards liability for contracts of sale and hire-purchase contracts and ibid. s.7(3) for other contracts under which possession or title to goods passes.
132 The provisions regarding acceptance to be found in Sale of Goods Act 1979, ss.35 and 35A only apply to contracts for the sale of goods and do not extend to other contracts under which a buyer may acquire goods. Affirmation, having its basis in common law, applies to all contracts for the sale or other transfer of goods.
133 For a discussion of the relationship between Sale of Goods Act 1979, ss.34 and 35 see Atiyah, Adams and MacQueen, above n. 9, ch. 27.
134 This approach is in line with the recommendations of the Law Commission who felt that acceptance should not take place prior to the opportunity to examine the goods.
135 Sale of Goods Act 1979, s.35(3).
108 |
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The implied conditions in sale of goods contracts |
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continued ownership of the seller. Again, the relationship between sections |
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34 and 35 caused difficulties in the past, particularly in relation to sub-sales |
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where the buyer might be buying for resale to a sub-buyer without examin- |
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ing the goods himself. If a sub-sale is deemed to be an act inconsistent with |
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the continued ownership of the seller, the situation could arise where a buyer |
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who arranged for the seller to deliver direct to the sub-buyer might be deemed |
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to have accepted them without the opportunity to examine them. Equally, the |
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onward sale of sealed goods raised a similar problem. Clearly, this was an unsat- |
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isfactory situation, particularly given the assumed superiority of section 34. The |
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1994 amendments to the 1979 Act resolved the issue by inserting a new section |
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35(6)(b) that expressly provides that a sub-sale or other disposition of the goods |
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to another person does not constitute acceptance. |
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An act inconsistent with the continued ownership of the seller would include |
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situations whereby the buyer has destroyed the character of the item by, for |
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example, reconstituting it as an integral part of another product from which it |
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cannot be recovered. Equally, it can be argued that if a product has been used |
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extensively and so cannot be returned in the same condition in which it was |
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provided, that could constitute acceptance.136 |
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Section 35(6) also clarifies another long-standing issue, namely, whether |
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allowing a seller the opportunity to repair faulty goods is tantamount to accept- |
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ance, by stipulating that where the buyer asks for, or agrees to, their repair under |
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an arrangement with the seller, this will not be deemed to be acceptance. This |
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may be of greater significance to the whole concept of acceptance given that |
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section 48 has introduced new remedies available to consumer buyers which |
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include a right to ask for a repair when goods are not in conformity with the |
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contract, which is defined as being where there is a breach of sections 13–15 of |
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the 1979 Act. |
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Acceptance is also deemed to occur when the buyer has retained the goods |
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for a reasonable period without intimating to the seller that he is rejecting |
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them.137 The reasonable period must include allowing the buyer a reasonable |
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opportunity to examine the goods to ensure conformity with the contract and |
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confirm that a bulk complies with a sample, once again reinforcing the import- |
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ance of that requirement.138 The Law Commission rejected any suggestion that |
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there should be a long-term right to reject goods or even a long-term right to |
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reject for latent defects.139 Amongst other things, they argued that such a right |
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would raise issues about what consideration the buyer should provide for the |
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use and enjoyment he had had from the goods prior to rejection. They felt |
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that no meaningful formula for assessing this could be devised which did not |
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depend ‘upon criteria so uncertain as almost to invite dispute’.140 Equally, they |
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136 |
Atiyah, Adams and MacQueen, above n. 9, ch. 27. |
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137 |
Sale of Goods Act 1979, s.35(4).â 138â Ibid. s.35(5). |
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139 |
Law Commission Sale and Supply of Goods (Report No. 160, 1987). |
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140 |
Ibid. |
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109 9â Acceptance
rejected any notion of different fixed periods for the rejection of different classes of goods.141 Consequently, they recommended the continued use of the ‘reasonable time’ approach, which, while lacking certainty, facilitates the breadth of situations to which it must be applied. Of course, what constitutes a ‘reasonable time’ is ultimately a matter of fact for the court to decide but some guidance can be gleaned from case law.
A key issue as regards rejection is whether the goods are being purchased for resale, a situation typically occurring in business sales, or whether they are being sold for use, which will include some business sales and virtually all consumer sales. Two leading cases, Truk (UK) Ltd v. Tokmakidis GmbH142 and J & H Ritchie Ltd v. Lloyd Ltd143 are instructive here. In the former case, the buyer purchased some lifting equipment for fitting to a vehicle which the buyer intended to resell. A potential sub-buyer noticed that the gear was defective and the buyer immediately notified the seller of the suspected defect. Three months later, when an investigation confirmed the fault, the buyer sought to reject the goods. The court held that the rejection was valid, opining that, when goods are intended for resale, a ‘reasonable time’ would include the time taken to sell the goods together with an appropriate period for the sub-buyer to examine and try them out. The dealings between buyer and seller need to be considered, including any agreement to allow for a repair so as to permit the seller the opportunity to provide goods that conform to the contract. Further, where payment is to be delayed beyond the date for delivery, it could be argued that the reasonable period should last at least until payment is due.
The House of Lords in J & H Ritchie Ltd v. Lloyd Ltd considered the impact upon acceptance of permitting repairs to faulty goods, holding that when the buyer has agreed to allow the seller the opportunity to inspect and repair the goods, there is an implied term that the seller will inform the buyer both about the defect and the remedial action taken to repair it so as to allow the buyer the opportunity to make an informed decision as to whether to accept the repaired goods. The refusal of the seller to provide the buyer with such information was a breach entitling the buyer to repudiate the agreement and claim a refund of the purchase price.
Both of these cases related to business contracts. For several years, the leading case in consumer sales was that of Bernstein v. Pamson Motors (Golders Green) Ltd,144 which took quite a restrictive approach to acceptance, holding that acceptance had occurred after only three weeks. However, the 1994 amendments to the 1979 Act have invalidated the Bernstein decision, which no longer represents the law, a view confirmed by the Court of Appeal in Clegg v. Olle Anderson.145 The major issue is that consumer goods are invariably bought for use and it is more difficult to establish what constitutes a reasonable period
141 |
Ibid.â 142â [2000] 1 Lloyd’s Rep. 543. |
143 |
[2007] 1 WLR 670.â 144â [1987] 2 All ER 220. |
145 |
[2003] EWCA Civ 320. |