Commercial Law - Lecture notes 1-10 PDF

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Commercial Law- Week 1 lectures  Originally grounded in the Law Merchant and English Common Law- codified by 1893 Sale of Goods Act. Then revised by 1979 version of the act. Chalmers used prior cases to 1893 act to establish codified provision.  1979 act based pretty closely to provisions of 1893 ...

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Commercial Law- Week 1 lectures  Originally grounded in the Law Merchant and English Common Law- codified by 1893 Sale of Goods Act. Then revised by 1979 version of the act. Chalmers used prior cases to 1893 act to establish codified provision.  1979 act based pretty closely to provisions of 1893 act. Provisions still very useful to understand current act in force. Problems: 1) Although it has stood the test of time, developing technology has impacted the act. Such as intangible problems such as software, music downloads etc. 2) Post 1979 there was an increase in divergence in how commercial law was used to create a uniform system of sale of goods. Consumer Rights Act 2015 Final step, only applies when you have a consumer. Limited to consumer protection. Cements idea that there is a different system as to whether the buyer is a consumer. Created to unify the system relating to consumers. Created to simplify and harmonise. Adds complexity. Not restricted to Sale of Goods contracts.  Part One: Consumer Contracts for Goods, Digital Content and Services- Concerning supply contracts- S1(1) agreement between a trader and a consumer for the trader to supply goods, digital content or services, if the agreement is a contract.”  Part Two: Unfair Terms  Part Three: Miscellaneous e.g. Competition, Enforcement

 It applies only if the contract is one of these S2(2)  (a) a sales contract; Contract of sale- Legal owner of goods  (b) a contract for the hire of goods; Contract of hire- Transfer of possession  (c) a hire-purchase agreement;  (d) a contract for transfer of goods.”- Not a sale. No money changing hands What is a sales contract? Section 5 CRA 2015: (1) A contract is a sales contract if under it— (a) the trader transfers or agrees to transfer ownership of goods to the consumer, and (b) the consumer pays or agrees to pay the price. (2) A contract is a sales contract (whether or not it would be one under subsection (1) if under the contract—

(a) goods are to be manufactured or produced and the trader agrees to supply them to the consumer, (b) on being supplied, the goods will be owned by the

consumer, and

(c) the consumer pays or agrees to pay the price. What is a sale of goods?  Section 2(1) of the Sale of Goods Act defines a contract of sale of goods as: “a contract whereby the seller transfers or agrees to transfer the property in the goods to the buyer for a money consideration, called the price.”  Property  Goods  Money Consideration Property means ownership under both frameworks. Types of sale Cash sale plus loan- Eg Credit Card. Legal sale of goods. Entering into a contract to purchase goods, paying a price but paid on your behalf by another party. Credit sale- Specific form of sale of goods. Ownership passes on contract but payments are completed through instalments. Only works for low value goods or absolute trust as can abscond from payments. Conditional sale- Objective to transfer ownership of goods. Distinction is when the property is passed. In this instance property is passed when the condition is met. EG Full payment of final instalment. Default will allow for repossession. Lee v Butler (1893)- Courts held that B2 took title at the expense of the seller even though B didn’t have ownership because conditional sale contract agreed to exchange ownership. Hire Purchase agreements  It is the hallmark of a contract of sale that seller and buyer each enter a commitment that there will be a transfer of ownership from the seller to the buyer. Purchaser is given the option to buy the good, but is not legally required to.  Under a hire-purchase agreement the hirer undertakes to hire the goods for a specified period at a specified rent and he is given an option to buy the goods when he has paid all the specified rent.  Statutory definition in s.189(1) CCA 1974; s.7 CRA 2015  Test case of Helby v Matthews (1895)

Week 2 Forthright finance (1997) When the Hirer (having meanwhile conformed with all the terms herein) has paid the Balance Payable and all other sums due to the Owner hereunder the Hirer shall be deemed to have exercised the option to purchase hereby given and the property in the Goods shall pass to the Hirer (unless the Hirer has told the Owner before that time that such is not the case) but until such time the Hirer is a bailee of the Goods and he must not sell or offer for sale assign mortgage pledge lend or otherwise deal with them or with any interest therein or in this Agreement which is personal to the Hirer.” Not a sale- Transfer of possession (hiring) Court of Appeal deemed it a conditional sale Option to purchase- How was it deemed conditional sale? Court unpicked core of contract- Nature of option- Positive option (paying for product after contract) Negative option (Positive act needed to be taken to not take up option of sale) Negative option indicative of conditional sale. Court of appeal swayed by this contract in that the hirer had to make all of payments in a fixed term of hire. No option to stop payment and return product. Sale of Goods Act  Section 2(1) of the Sale of Goods Act defines a contract of sale of goods as: “a contract whereby the seller transfers or agrees to transfer the property in the goods to the buyer for a money consideration, called the price.”  s.61(1) defines goods as including: “all personal chattels other than things in action and money, and in Scotland all corporeal moveables except money; and in particular “goods” includes emblements, industrial growing crops, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale [and includes an undivided share in goods;]” Goods in the SGA 1979 Tangibility is crucial. What about the sale of products which are not tangible? The product must be physical. Spotify not tangible, also do not own as only stream. Software as Goods under the SGA  St. Albans City and District Council v International Computers Ltd [1996] 4 All ER 481 Court deemed software can’t be goods under section 61(1). Exception formed stating that if software downloaded under physical disk- sufficient for that supply to be sale of goods.  Beta Computers (Europe) Ltd v Adobe Systems (Europe) Ltd [1996] SLT 604 Lord Penrose: This reasoning appears to me to be unattractive….It appears to emphasise the role of the physical medium, and to relate the transaction in the medium to sale or hire of

goods. It would have the somewhat odd result that the dominant characteristic of the complex product…would be subordinate to the medium by which it was transmitted to the user in analysing the true nature and effect of the contract”. Is it Even a Sale? License to possess/ use of software Watford Electronics Ltd v Sanderson [2001] 1 All E.R. (Comm) 696 Implied terms which protect buyer under such contract, weren’t implied through SGA, all that was transmitted was a license, not intention to transmit ownership. Doesn’t matter because common law can be used to bring in required  Southwark LBC v IBM UK Ltd [2011] EWHC 549 License. Justice made a serious of observations, software supply on a compact disc should be considered a good. A compact disc being ‘impressed with electrons’ shouldn’t mean its not considered a good under s61(1), definition of goods is inclusive not exclusive. Does it matter under SGA 1979- Yes. A range of terms and protections for buyer.  What about the common law?  Analogous legal frameworks?  Software Incubator Ltd [2016] EWHC 1587 reversed [2018] EWCA Civ 518  Position under the CRA 2015? Section 2: (9) “Digital content” means data which are

produced and supplied in digital

form.”  The approach of the SGA 1979 to digital products is flawed since it is dictated to by the medium of supply;  The CRA 2015 introduces a clearer approach expressly including such content within its ambit;  But how it goes about that, is based on the medium of supply.  Does it matter that the core rights would be implied into contracts for digital products even where the SGA does not apply, i.e. through the common law? Statutory terms  developed through the Sale of Goods Act 1979, sections 12-15 and the Consumer Rights Act 2015, sections 9-17.  Substantial similarity between the two, not least in the general aim.

TERM

Right to Sell

s.12(1)

s.17(1)(b)

Freedom from charge or encumbrance

s.12(2)(a)

s.17(2)(a) and s.17(2)(b)

Quiet possession

s.12(2)(b)

s.17(2)(c)

Correspondence to description

s.13(1)

s.11(1)

Satisfactory quality

s.14(2)

s.9(1)

Fitness for Purpose

s.14(3)

s.10(3)

Correspondence with sample

s.15(2)

s.13(2)

Pre-contract information

N/A

s.12(2)

Goods to match a model seen or examined

N/A

s.14(2)

Serious cross overs seen in chart above. Lots of similarity between the two acts. Look for distinctions between the common law. Right to sell- Distinction between s.12(1) SGA and s.17(1)(b) CRA. Can’t say right to sell in CRA, right to supply, because it covers things such as hire-purchase.

Focus on implied terms: Under SGA 1979 Right to sell- Description- Satisfactory quality- Fitness for purpose Conditions go to the heart of a contract, warranties are added as a secondary aspect, differing remedies. If this statutory right is not followed, these are your remedies. SGA still says in section 12(1)? What does s15(A)(1) tell us? This limitation on the consequences of breach of condition only applies where it is determined by sections 13,14,15 The right to sell means you own it. Or purporting to pass what title you have. Section 12(1) seller must have right to sell is condition which is impossible to breach. Either own it or you don’t. Section 15(A)(1) post SGA 1979 amendment. Not in original act- Why? Situations where the buyer does not exist as a consumer….. paragraph b of section 15(A)(1) On October 10, 2015, Rodney purchased a pair of Sennheiser HD800 headphones from Richer Sounds plc (Liverpool Branch). The price was paid by debit card. Rodney will use the headphones primarily in his job as a sound engineer but may, on rare occasion, also use the headphones listening to music for pleasure. Which Act Applies? Definition of consumer- not losing status for occasionally using goods in professional or work aspect. Can’t be primary reason for entering into contract. On October 10, 2017, Bob purchased a pair of jeans from Con Lewits (Liverpool Branch). The price, £169, was paid by credit card. Bob purchased the jeans to wear socially following sartorial feedback from his wife, suggesting that he need not always go out “dressed like an academic”. Which Act Applies? Non consumer buyer- Forget CRA. See a contract entered in September 2015 or earlier forget CRA. Must check. Section 12- Title In a contract of sale, other than one to which subsection (3) below applies, there is an implied term on the part of the seller that in the case of a sale he has a right to sell the goods, and in the case of an agreement to sell he will have such a right at the time when the property is to pass. Subsection 3- Disclose you are not selling goods with full title- Ie finding goods on the street as long as you declare ‘finders title.’ Not in breach of s12(1) Contract for agreement to sell, with property not passing until condition is met is conditional sale.  Lies at the core of every sale of goods contract, though it was not always the case – caveat emptor.

 Liability is strict; fault irrelevant: Breach of condition (s.12(5A)). But note s.12: “(7) This section does not apply to a contract to which Chapter 2 of Part 1 of the Consumer Rights Act 2015 applies (but see the provision made about such contracts in section 17 of that Act).” A Right to Sell  Goes beyond merely ownership, i.e. Property in goods can be vested with S who may nonetheless not have a right to sell and any such sale would be in breach of s.12(1)  Niblett Ltd v Confectioners’ Materials Co (1921)- Trademark infringement decision- Tins of condensed milk, labels infringed trademark. Buyers of tins could have precluded from selling or stopped from selling them without taking labelling off. Breach of right to sell, due to right to sell, couldn’t be resold with infringing label. Rowland (1923)  You buy a car.  You drive car for three months.  You then discover that it did not belong to the seller (having been stolen).  What do you do?  Go to jail for handling stolen goods?  Under s.12(1), breach of condition  Under s.17(1), reject the goods- If seller does not have right to sell, then you can reclaim purchase price. Lecture 5 Catch Up ******

Commercial Law- Lecture 6 Descriptive Identity not Quality Ashington Piggeries v Hill (1972)- Not relevant that product harmful to human. Not in breach of s13(1). Does it matter? Contrast s.13(1) with s.14(2). Under the CRA? Is have slightly different requirements. If all elements satisfied, viable satisfactory claim for s.14(2). Checklist. S14(2) must be sold in a business, making it a bit more restrictive than s13(1). Not sold in a business= no sale. Historically courts used to allow ‘shoehorn’ approach- merged different sections, creating impossibility to determine types of claims. Satisfactory Quality s.14(2) SGA “(2) Where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory quality. (2A) For the purposes of this Act, goods are of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all the other relevant circumstances.” Must look where potentially relevant factors effect quality of goods. Messy provision, amendment (Capital A), pre 1994 the test in s14(2) wasn’t satisfactory quality, it was merchant ability. Many of leading cases on satisfactory quality have nothing to do with this notion prior to 1994, Rogers v Parish- if you’re purchasing prestige motor vehicle will indicate you expect higher standard of quality. Merchant ability- Not relevant to consumers, SGA needed to be relevant to consumers. Consumer Rights Act 2015 s9 (1) Every contract to supply goods is to be treated as including a term that the quality of the goods is satisfactory. (2) The quality of goods is satisfactory if they meet the standard that a reasonable person would consider satisfactory, taking account of— (a) any description of the goods, (b) the price or other consideration for the goods (if relevant), and (c) all the other relevant circumstances (see subsection (5)). Indicative Factors s.14(2B) SGA Not a checklist. Indicative factors. It does not matter if you can point to one problem and say that s14(2) has been breached, because these are not individually implied conditions. Egan- Audi, standard quiet high but car veered to the left, safety issue- courts decision no breach. “For the purposes of this Act, the quality of goods includes their state and condition and the following (among others) are in appropriate cases 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.” What is the approach? Clegg v Andersson Justice Hale- In order to apply satisfactory quality, you have a two-part test. 1) Find objective satisfactory quality that a normal person would expect. Can look at anything as long as you can argue it. 2) Objective comparison of goods supplied to that standard. Not about reasonable buyer or seller but the comparison of the state of goods which a reasonable person would find acceptable. “The test is whether a reasonable person would think the goods satisfactory, taking into account their description, the price (if relevant) and all other relevant circumstances: see s 14(2A). The question, as the joint Report of the Law Commission and the Scottish Law Commission explained, is “not whether the reasonable person would find the goods acceptable; it is an objective comparison of the state of the goods with the standard which a reasonable person would find acceptable” Is s.14(2) engaged- Is it this type of sale to start with? If Yes, work through s14(2) checklist. If Yes, does the standard of goods fall short of the standard? If yes can the seller avoid liability through s14(2C). Three defences a) Any defects seller has told buyer about prior to sale, successful defence. b) When an inspection is made and it ought to have revealed a problem but didn’t, you cannot then claim for this. Exactly the same process for S9(1) CRA If yes, can the seller avoid liability through s.9(4)? Fitness for Purpose s14(3) SGA BSS Group Plc v Makers (UK) Limited (t/a Allied Services) (2011)  The Court of Appeal stated that the relevant questions were:  (i) whether the buyer made known to the vendor the purpose for which the goods were bought;  (ii) whether they were reasonably fit for that purpose;  (iii) if they were not reasonably fit for that purpose, whether the supplier demonstrated either (a) that the buyer did not rely upon its skill and judgment, or (b) any reliance was unreasonable. No reliance- Cannot claim s14, not mentioned anywhere for satisfactory quality. Reliance in most cases will be inferred (certainly for consumers) Cammel Laird- Specification for propellers, some things were silent. One thing wasn’t provided was thickness for purpose required. Wasn’t provided in spec. Puts it on to seller to understand buyer.

Week 4S12(1) applies to all sale of goods contracts. 13(1) much more narrow application, has to be section 2 sale of goods. Only applies to sale of goods by description. Easy to satisfy, vast majority of sales. But harder than 12(1). 14(2) Even narrower. Need section 2 sale of goods, also need seller to be selling in the course of a business. Satisfactory quality- fitness for purpose common. 14(3) is a condition whereas 14(2) indicative factor. Issue with goods? Or objectively goods are fine, it just doesn’t suit the purpose it was required for. It is 14(3) issue if issue with purpose. 14(3) has contract for sale of goods, only applies in course of a business and communicate the purpose for which you are buying the goods. The Passing of Property in the sale of goods Not affected by CRA 2015. S4(1) CRA- Ownership means property. S4(2) CRA- When under a sales contract, ownership transfers from seller to buyer look up in SGA. Following provisions of SGA. CRA regulated- See SGA. Note s4(1) + (2) in answer. Questions relating to risk- Distinction between SGA and CRA. Under SGA- Risk. s20 risk and property pass together. Must work out who owns them. Distinction between property and title Basically mean the same thing: SGA- Property is about conveyance of ownership in goods from one party to another. S16, 17, 18, 19 and 20(A). Title is a chain of contractual relationships with someone defending themselves from – See lecture recording. S21Chart on PowerPoint- Read vertically. Rule 4- Doesn’t relate to specific or unascertained goods. Very particular form of contract. Doesn’t have place on chart. Specific goods  “goods identified and agreed on at the time a contract of sale is made and includes an undivided share, specified as a fraction or percentage, of goods identified and agreed on as aforesaid”, s.61(1) SGA Do parties know what they are contracting for? Need to be identified and understood as subject matter of supply contract. Question at the time contract is made. Unascertained goods are not specific. Goods must either be identified and understood at time of contract as being subject matter or they are not. If they are not they are unascertained goods.

At some point post contract, contract goods must be identified and agreed upon. When this happens, unascertained goods become ascertained goods. Due to this, specific goods cannot become ascertained or unascertained...