Legal Environment in Business

Law 200
Sale of Goods Act 1930
3/13/2019

Ishtiak Abdullah Polem

Barrister-at-Law( Lincoln’s Inn)
Sale of Goods Act 1930
Traditionally, contractual terms were classified as
either conditions or warranties. It is important for parties to correctly identify which
terms are to be conditions and which are to be warranties. Where there has been a
breach of contract, it is necessary to determine which type of term has been breached in
order to establish the remedy available.

Terms

Express Terms Implied Terms

Condition Warranty Innominate

A condition is a major term of the contract which goes to the root of the contract. If a
condition is breached the innocent party is entitled to repudiate and so reject the goods
and demand the repayment of the price. The buyer can even waive the breach can claim
only damages as well ( Poussard v Spiers )

Warranties are minor terms of a contract which are not central to the existence of the
contract. If a warranty is breached the innocent party may claim damages but can not
repudiate the contract ( Bettini v Gye)

The category of innominate terms was created in Hong Kong Fir Shipping. Rather than
classifying the terms themselves as conditions or warranties, the innominate term
approach looks to the effect of the breach and questions whether the innocent party to
the breach was deprived of substantially the whole benefit of the contract.
Main focusing sections of this Lecture
Section 14 Implied condition as to title

Section 15 Implied term as to description

Section 16(2) Implied term as to satisfactory quality:

Section 16(3) Implied term as to fitness for particular purpose

Section 17 Implied terms in sales by sample

Section 14

Section 14 provides that there is an implied condition on the part of the seller that
he must have either title on the goods or a right to sell the goods. This is a condition
of the contract and there is no requirement that the seller acts in the ordinary
course of business. Atkin LJ in Rowland v Divall said, ‘there can be no sale at all of
goods which the seller has no right to sell. The buyer has not received any part of
that which he contracted to receive… and, that being so, there has been a total
failure of consideration”.

The provision in s.14 goes beyond the question of whether the seller passes good
title. Where the seller does not have title to the goods, the buyer may, nevertheless,
acquire good title under one of the exceptions to the nemo dat quod non habet rule
,but the seller is in breach of s.14 because they have no right to sell (Barber
v NWS Bank plc).
Section 15

Section 15 provides that where there is a contract for the sale of goods by
description, there is an implied term that the goods must correspond with the
description. There is no need to show that the sale was ‘in the course of business.

What constitutes a description can be determined whether the parties intended a

particular statement to form part of the description of the goods. The key issue is
what the parties contemplate as forming part of the description Reardon Smith
Lines Ltd v Hansen-Tangen.

IN Ashington Piggeries Lord Diplock observed, the test is whether the buyer could
fairly and reasonably refuse to accept the physical goods proffered to him on the
ground that their failure to correspond with that part of what was said about them
in the contract makes them goods of a different kind from those he had agreed to
buy. The key to s.15 is identification.

Strict approach was taken in Arcos v Ronaasen or in Re Moore & Co Ltd and
Landauer. In the latter there was a breach when the seller, who was required to
deliver 3,000 tins in boxes of 30 tins, delivered around half in boxes of 24 tins, even
though the buyers would have suffered no disadvantage. Scrutton LJ, argued that
there may be a considerable difficulty in case of resell.

The courts have sought to shift away from such a literal interpretation of contracts
and thereby soften the strict liability rule as in Steel & Busks Ltd v Bleecker
or in Peter Darlington & Partners Ltd v Gosho. in Peter Darlington it was held that
canary seed conformed with a description in the contract that the seed would be
‘pure’ even though only 98 per cent pure because the trade accepted that no canary
seed was 100 per cent pure and 98 per cent represented the highest standard of
purity.

Only minor, commercially insignificant deviation is allowed or microscopic

deviations which business men can ignore. (Re Moore)

S.15 is simply concerned with description and not quality as was made clear in Arcos
v Ranaason
Section 16(2)

Sections 14 contains implied terms as to quality and is prefaced with the caveat emptor
(let the buyer beware) principle. Quality and description may be difficult to separate
sometimes since the description of goods often refers to quality and the issue of quality
is often linked to the description of the goods.

According to section 16, there is an implied term in the contract of sale of goods that the
goods are of satisfactory quality provided that the seller is selling the goods under the
course of business.

Goods are satisfactory if a reasonable person would regard them as satisfactory. The
reasonable person is someone ‘who is in the position of the buyer, with his knowledge’
(Bramhill v Edwards). The test does not involve asking whether the reasonable person
would be satisfied with the goods instead, it is necessary to establish that the goods
were objectively of unsatisfactory quality.

In deciding a goods satisfactory quality some cases provide certain aspects of the
quality of goods:

a. fitness for all the purposes for which goods of the kind in question are commonly
supplied
b. appearance and finish
c. freedom from minor defects
d. safety, and
e. durability.

There cannot be any conclusive standard to determine whether a good is of satisfactory

quality or not since it varies from circumstances to circumstances. This is an objective
test and is a matter of judgment for the judge on the individual facts
of each case.

Whether flaws render goods unsatisfactory may depend on the description and the
price, and the fact that the defect does not affect the function of the goods is not
necessarily decisive. A scratch on the bodywork may render a car unsatisfactory where
it is new, although the result may be different where the car is second-hand (Rogers v
Parish (Scarborough)

In Heil v Hedges the court held that uncooked meat was not unmerchantable because
the parties intended that the buyer would cook it. Compare with Grant v Australian
Knitting Mills , where underwear that required washing before it could be worn was
unmerchantable because the buyer would not have expected to have to wash it.

Even new goods – need not be perfect. In Darren Egan v Motor Services, a wheel on a
new car was not fitted according to the manufacturer’s specification and the buyer
argued that a minor defect rendered the goods unsatisfactory .Smith LJ rejected this.

In Hazlewood Grocery Ltd v Lion Foods Ltd L supplied H with chilli powder that
contained a minute amount of an industrial dye. A term in the sale contract set out the
parameters for possible contaminants. Before the contamination was discovered the
powder was used by H in the manufacture of food. The court held that the express term
requiring the powder to be free from extraneous matter was an absolute obligation
(Arcos Ltd v EA Ronaasen & Son).

However, There will be no breach of s.16:

a. ‘where the defect is specifically drawn to the buyer’s attention before the contract is
made’.

b. ‘where the buyer examined the goods before the contract is made, [any defect] which
that examination ought to reveal’.

In Bartlett v Sydney Marcus, the buyer was told before the contract that the car had a
defective clutch. Therefore, although it cost more to repair than expected, the fact of the
defective clutch could not render it unsatisfactory.

The buyer is not required to make any examination, but if they do then (b) only
imputes knowledge of those defects that would have been noticed by a reasonable
person undertaking the same examination as the buyer

Where the seller promises to repair the goods, but fails to do so, the buyer will be
aware of the defect.

The impact of a latent defect (that is, one of which neither seller nor buyer was aware)
will be tested by asking whether the reasonable buyer would have accepted the goods
as of satisfactory quality if they had known of the latent defect - in Henry Kendall & Sons
v William Lillico & Sons animal feedstuff was made with groundnut extract, which, while
fit for cattle, was poisonous to pheasant and partridge chicks. The House of Lords held
that the feed was not unmerchantable, even though no warning had been given to the
buyers.--- The problem with this reasoning is that it was the lack of warning that
rendered the goods unsafe – like medicines, electrical goods and the underwear in
Grant v Australian Knitting Mills Ltd.
Section 16(3) Fitness for Purpose
Section 16 (3) requires the goods supplied under a contract of sale to be reasonably fit
for that purpose, whether or not that is a purpose for which such goods are commonly
supplied.

There will not be a breach where the seller is able to show the buyer did not rely,
or that it was unreasonable for the buyer to rely, on the seller’s skill or judgment. It is
for the seller to show that there was no such reliance or that, if there was reliance, it
was unreasonable.

In Heil v Hedges, the court took the view that it was common knowledge among
consumers that pork needed to be cooked more thoroughly than other types of meat, so
a seller could not reasonably foresee that the buyer would not cook it thoroughly and,
therefore, the goods were fit for purpose without the need for instructions.

In Wormell v RHM Agriculture, instructions on tins containing agricultural weed-killer

warned against spraying on crops at a certain stage of crop growth. The farmer thought
this was to prevent crop damage and, deciding to take a risk, sprayed throughout the
year to little effect. It was held that the weed-killer was fit for its purpose if applied in
the right conditions and according to the instructions.

The particular purpose need not be mentioned by the buyer where the goods
normally have only one purpose. For example, a hot water bottle should be fit for
filling with hot water and the buyer need not ask if it is (Preist v Last).

If the goods can be used for several purposes, the buyer must make known to the
seller which purpose is intended, otherwise the seller will not be in breach if the goods
fulfil one of the purposes. In Ashington Piggeries CH purchased herring meal
from X. X knew that the herring meal was going to be used for animal feed, but did not
know that it was to be used for feeding mink. It was held that X knew the herring meal
was required for animals and knew, or ought to have known, that herring meal was
commonly used in mink feed.

Where the purpose is unusual, then the buyer needs to specify what it is. A tweed
jacket must be fit for wearing and there is no need to specify that purpose. If it is
bought by someone with unusually sensitive skin who does not make this fact known
to the seller, the seller will not be liable for dermatitis contracted by the buyer
(Griffiths v Peter Conway Ltd).
The test may be, what can the seller reasonably be expected to foresee? The
answer will depend on the information that the seller has or ought to have acquired
both from the buyer and from other sources to which the seller might reasonably be
expected to have access.

In Henry Kendall & Sons v William , Brazilian groundnut extract was sold by K to G, who
resold it to X. X used it in the manufacture of poultry feed, which was sold as feed for
pheasants. The latent presence of a fungus in the groundnut extract made the feed
poisonous and killed many of the pheasants. On the question of K’s liability, K knew that
G intended to resell the extract to a manufacturer of animal feed, but not whether it
would be for cattle or poultry. It was held that K must be taken to have asserted that it
would be suitable for cattle and poultry and that G relied on K to supply material that
was fit for this purpose. K was, therefore, in breach when the extract proved poisonous
to both cattle and poultry, even if in differing degrees. If K could have shown that the
effect of groundnut extract on poultry was well known, it might have been reasonable
for K to assume that a buyer, who bought the extract for animal feed, would not be
using it for poultry.

Where there is a string of contracts in which goods are sold and resold, the seller will
not escape liability merely because the defect in those goods originated with an earlier
party and, therefore, the reliance is on the skill and judgment of that earlier party with
whom the buyer has no contractual relationship (Britvic Soft Drinks Ltd v Messer UK)

There is no obligation on the buyer to examine goods and, indeed, a failure to

conduct an examination might reinforce the idea that the buyer has relied on the
seller’s skill and judgment.

Section 17 (Sample)

In a contract of sale by sample there are implied conditions ‘that the bulk will
correspond with the sample in quality’. It is important to recognise that a contract of
sale by sample does not arise simply because the seller has shown some part of the
goods to the buyer. It must be intended by the parties that the sample constitute the
contractual basis of the sale. And Section 17 deals only with apparent quality.

Extra

Consumer = Private party + Business Party

Non Consumer = Business Party + Business Party

In the course of business
Miscellaneous Important Sections under Sale of Goods Act 1930

Section 18: Where there is a contract for the sale of unascertained goods, no property in the goods
is transferred to the buyer unless and until goods are ascertained.

Section 26: Unless otherwise agreed, the goods remain at the seller's risk until the property
therein is transferred to the buyer, but when the property therein is transferred to the buyer, the
goods are at the buyer's risk whether delivery has been made or not:

Provided that, where delivery has been delayed through the fault of either buyer or seller, the
goods are at the risk of the party in fault as regards any loss which might not have occurred but
for such fault:

Provided also that nothing in this section shall affect the duties or liabilities of either seller or
buyer as a bailee of the goods of the other party.

Section 42 :The buyer is deemed to have accepted the goods when he intimates to the seller, that he
has accepted them, or when the goods have been delivered to him and he does any act in relation to
them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable
time, he retains the goods without intimating to the seller that he has rejected them.

The distinction between hire-purchase and sale contracts

Contrast this with

Contract of hire- the situation
purchase means by where the
which someone contract
can buy goods by stipulates that
making payments property will pass
over a period of at some specified
time. However, it is time in the future,
not a sale because, which will be an
while the intention agreement to sell
is that the buyer or Sale Contract.
will own the goods
when all the
payments have
been made.