You are on page 1of 27

Sales of Goods and

Services

Background

law for New Zealand business 1


Focus on two aspects
 The sale or other supply of goods
and services- the legal framework
 Undertakings and promises made
prior to the sale or other supply of
goods or services

law for New Zealand business 2


first
 The legal framework applying to
the sale or other supply of goods
and services

law for New Zealand business 3


Statutory framework
 Nineteenth century law merchant (UK)
provided for a legal framework for
contracts for the sale of goods (but not
in relation to the supply of services)
 These included implied terms in relation
to:
 Title
 Quality
 And provisions relating to passing of
property etc
law for New Zealand business 4
And then
 Moves to codify/ rationalise these
in the Sale of Goods Act 1893
 However, this was only a
framework- always allowed the
parties to reach a different
contract (contract out of the Act)
 New Zealand adopted this Act in
1908
law for New Zealand business 5
And then
 It became increasingly evident that the
Act had serious limitations
 Not suitable in an industrialised,
technologised economy with extended
distribution chains involving little
association between manufacturer and
user and little control for the retailer
 Specific-purpose statutes modified the
provisions in different situations, made
the Sale of Goods Act look increasingly
silly (egs: Hire Purchase Act 1971,
Contractual Remedies Act 1979)
law for New Zealand business 6
And then
 Proposals since 1972 to alter the
terms of the Sale of Goods Act to
meet current expectations,
particularly in relation to:
 Promises relating to title
 Promises relating to quality

law for New Zealand business 7


Results:
 Changes since 1972 but rather than a
complete revamp of the Sale of Goods
Act, the change has come through
several statutes- underlying ideas:
 Some contracting parties need protection,
others are powerful enough to make their
own deals
 The law needs to be consistent
 New Zealand should encourage
international trade
law for New Zealand business 8
So what do we have?

 Sale of Goods Act 1908- applies to


goods
 Generally not affected by the CRA
 Consumer Guarantees Act 1993- largely
replaces the SoG in consumer sales
 However, SOG Act still relevant for
implied terms re passing of risk and
title, also perishing and where it is not
excluded (s56)
 Also, nb, the SoG (United Nations
Convention) Act 1994
law for New Zealand business 9
So what provisions are of
most importance?
 Title and perishing

law for New Zealand business 10


S8- idea of perishing of goods

 Not only destruction but also


where they are no longer fit for
their intended and obvious
purpose
 (nb- case of McRae v
Commonwealth Disposals
Commission (1951))

law for New Zealand business 11


Concept of property- inderlies
issues of title and risk
 Title
 Right of alienation or disposal
 Possession
 Risk
 Not all of these need to be in the
hands of the same person
 Nb concepts of “general” and
“special” property

law for New Zealand business 12


Nb title
 Condition that the Seller has the right to
sell the goods when title is to pass
(s14(a))
 Meaning- not straightforward
 Niblett v Confectioners’ Material Co Ltd
(1921)
 Nemo dat quod non habet- Rowland v Divall
(1923) (importance of the effect of the
breach)- now seen as voidable rather than
void
 Warranty of quiet possession- against
consequences of faulty title
 Warranty the goods are free of charge
law for New Zealand business 13
Passing of Property- specific
goods (s19)
 When parties intended property to pass
 S20, 4 rules that apply-
 if unconditional contract of goods in a deliverable
state, it is when the contract is made
 If something to be done before a deliverable state
is reached, property passes when the buyer
knows that has been done
 If something needs to be done by the seller to
ascertain the price, property passes when the
buyer knows that has been done
 If good provided on appro, property passes when
the buyer signifies approval or after a reasonable
time

law for New Zealand business 14


Passing of Property-
unascertained goods
 S18-when they are ascertained
and in a deliverable state
 Unconditionally appropriated with
concurrence of both parties
 Once identified and delivered without
reservation to the buyer or agent

law for New Zealand business 15


Rules in s20

 Normally all aspects of property will


pass at the same time
 All these rules do not apply if the parties
have expressed a contrary intention
 One obvious issue is reservation of title-
issues of right to sell, rights to proceeds
of sale and security interests

law for New Zealand business 16


S21(1)-Reservation of title

 The seller may reserve the right of


disposal until certain conditions are
fulfuilled- most likely of these is
payment- if the goods have been
wrongly sold, the seller is entitled to the
proceeds- Len Vigden Ski v Timaru
Marine Supplies (1986)
 More complicated form as used in the
Romalpa case- Aluminium Industrie
Vaassen BV v Romalpa Aluminium Ltd
(1976)- right to trace- buyer is the
bailee, agent orZealand
law for New fiduciary
business 17
Effect of Romalpa- added
complications
 Ok if confined to tracing and right to
recover
 But- difficulties if the goods extend to
manufacture/processing
 Re Bond Worth (1980) – Court held the
clause to be an unregistered charge- void
 Whenuapai Joinery v Trust Bank Central
(1994)- Court held the joinery had become
part of the real estate

law for New Zealand business 18


Romalpa Clauses- later
developments and
resolutions
 Registration under the PPSA-
 Have a look here for a tutorial on how to
use the register:
http://www.ppsr.govt.nz/search/cad/dbssite
 Will talk about this more in a couple of
weeks
 The PPSA will replace a romalpa clause
regime with a registrable charge regime
 Creation of a trust- put the money in
there law for New Zealand business 19
An aside: the Sale of Goods
(United Nations Convention)
Act 1994
 Deals with issues of international sales
of goods
 Does not deal with passing of title or
risk
 Provides for a core of consistent rules
about implied terms in such contracts,
ascertaining price and timing/durration
of offer, acceptance and valid contracts
 Provides for means of ascertaining the
“proper” law to settle disputes
law for New Zealand business 20
And consumer-related
legislation- why?
 Limited definition of “goods” – degree of
uncertainty with mixed contracts
 Ability to contract out
 Ignored the reality of retailers being
mere middlemen/distributors
 Dubious application and scope of the
implied terms in ss 15 and 16 (purpose,
merchantable quality and sale by
description)
law for New Zealand business 21
What sort of supplies are
covered?
Supplies of gds and ss to consumers
(s2)
Consumer?- a person acquiring goods
or services of a kind ordinarily
acquired for personal, household or
domestic use or consumption
Not where the acquisition is for:
• Resale
• Consumption in the course of
production or manufacture
law for New Zealand business 22
How is this status determined?
Objective- what would someone
ordinarily use these goods or
services for?
Subjective- what is this person
acquiring them for?
Nb-these are treated as
culmulative
Nb- no specific limit on value
although value may be relevant for
determining purpose
law for New Zealand business 23
Supplier?
 Provider of gds or ss to a consumer in
the course of trade. The supply can be
by way of:
 Sale
 Exchange
 Lease
 Hire/hp
 Gift
 Provision or grant
 (nb does not apply to where a charitable
organisation distributes for the benefit of
the recipient)
law for New Zealand business 24
What happens if the Act
applies?
 The Act provides for implied terms
and for specific remedies
 Other legislation also applies if
relevant- eg Door to Door Sales
Act, Contractual Remedies Act

law for New Zealand business 25


Coverage
 Goods- including land fixtures
 But does not include electrical
power
 Implied terms re goods can apply
even if that component was minor
(ie largely services)
 Second hand is included
 But not where auction or
competitive tender (s41(3))
law for New Zealand business 26
Next question: what are
the specific provisions?
 That is for next week along with an
examination of the pre-sale
protection given by the Fair
Trading Act 1986

law for New Zealand business 27

You might also like