Commercial Law - Lecture notes ALL LECTURES PDF

Preview

Summary

Commercial Law – 18th January – Sale of GoodsSale is by far the most common in the area of contract law and it has an effect on the other areas – e. transport. Insurance law and the law of sale have a strong link with each other. Law Society requires students to know about this area of law. This is ...

Description

Commercial Law – 18th January – Sale of Goods Sale is by far the most common in the area of contract law and it has an effect on the other areas – e.g. transport. Insurance law and the law of sale have a strong link with each other. Law Society requires students to know about this area of law. This is a discrete subject, but carries into other areas of the law. Need to understand the Sale of Goods Act 1979 and other regulations, including European. Most significant change recently is the Consumer Rights Act 2015. This is a fair bit. CRA: deals with rules and principles about protecting consumers. This is the part of the Act that we focus on but the Act does go beyond this. The provisions apply to consumer contracts entered into after 1st October 2015. Anything before this would be thought to be the SOGA 1979, but certain provisions continue to apply from the SGA after 1st October 2015. For Commercial Sale of Goods Davidson et al, Commercial Law in Scotland, 4th ed, 2016, chapter 1 The Sale of Goods Act 1979, as amended (included in Avizandum statutes on Scots Commercial and Consumer Law, 2016-17) For Consumer Sale of Goods Davidson et al, Commercial Law in Scotland, 4th ed, 2016, chapter 1 Parts 1 and 2 of the Consumer Rights Act 2015 (included in Avizandum statutes on Scots Commercial and Consumer Law, 2016-17) SOGA continues to be relevant for certain aspects of consumer sales. For E-Commerce Davidson et al, Commercial Law in Scotland, 4th ed, 2016, chapter 4 The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (included in Avizandum statutes on Scots Commercial and Consumer Law, 2016-17) The Electronic Commerce (EC Directive) Regulations 2002. Where there are significant differences in the rules between both, we will deal with them separately, but some can be taught together. The SOGA tells us if provisions do not apply anymore and directs us to the correct place. The CRA deals with more than sale of goods. Part one, for example, relates to hire of goods/services. SOGA only applies to the sale of goods. THE CONTRACT OF SALE What is a contract of sale of goods? Section 2(1) SOGA: “A contract of sale of goods is a contract by which the seller transfers or agrees to transfer the property in the goods to the buyer for a money consideration called the price.” This is how you identify a contract of sale. Next you ask if it’s a consumer sale or not.

Distinguish between a sale and an agreement to sell: s.2(4) and (5) SOGA: “where under a contract of sale the transfer of the property in the goods is to take place at a future time or subject to some condition later to be fulfilled the contract is called an agreement to sell.” Agreement to sale becomes a sale upon the fulfilling of the transfer of ownership, or the completion of criterion. Hughes v Pendragon Sabre (t/a Porsche Centre Bolton) [2016] 1 Lloyd’s Rep 311: pre-CRA. Car dealer selling to an individual. At the time the contract between A and B was entered into the seller did no longer have the car. His acquisition depended whether he would be given this limited edition Porsche or not, this was never clear. The Court of Appeal said this does not prevent the contract forming. Didn’t have to be a sale, just an agreement to sale, which is still a contract of sale under Section 2(1). An agreement for sale comes within the definition of Section 2. Section 5(1) CRA “A contract is a sales contract if under it (a) the trader transfers of agrees to transfer ownership of goods to the consumer and (b) the consumer pays or agrees to pay the price.” This is similar to Section 2 of SOGA. Note the clarification provided in s5(2) where goods are manufactured or produced for the trader to supply them to the consumer. Not just where they have the goods, but where they make or create the goods. Five key elements to a contract of sale 1. Two parties: buyer and seller 2. A contract – connect the two 3. Transfer of property – ownership 4. Goods 5. The price If you have these 5 elements, it is definitely a sale. A buyer and a seller Vitally important to distinguish between a consumer and a non-consumer buyer. This is because the law is different. Where a consumer buyer – look to CRA and SOGA, where a non-consumer (a commercial) buyer look to SOGA. Don’t refer to CRA when it is not consumer. Commercial means non-consumer which refers to SOGA and never CRA. Buyer and seller defined in s61(1) SOGA. Buyer is someone who agrees to buy; the seller is the person who agrees to sell. CRA only applies with the contract is between a trader and consumer: s1(1). Defined in s2: a trader means a person acting for purposes relating to that person’s trade, business, craft, or profession, whether acting personally or through another person…. If you have someone who is selling goods, theirs or their own, then they are a trader. Consumer is entitled to protection from CRA. Even if the person is a private individual. Includes a trader acting as an intermediary on behalf of a private individual who has not duly informed the consumer of fact that owner of goods is a private individual: Wathelet v Garage Bietheres (C-149/15).

Business defined as including activities of any governmental department or local or public authority: s2(7) CRA. A consumer means an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession. Except (for the most part) an individual buying second hand goods at a public auction in person (s2(5) CRA). Buying stock for your shop makes you a non-consumer. A computer bought partially for work but mostly for social use gives some discrepancy. The Contract General principles of contract law will apply: there must be consensus in idem, parties must have capacity etc. Capacity – general law applies, s.3 SOGA. Form – may be written, oral or constituted by the conduct of the parties, s.4 SOGA; s.1(2) CRA. You have a buyer and a seller. Following the coming into force of The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (“the 2013 Regulations”) on 13 June 2013 a trader is under a number of obligations to a consumer in on-premises, off-premises or distance contracts. There are some contracts that the 2013 Regulations do not apply to, including contracts for the supply of foodstuffs, beverages or other goods intended for current consumption in the household and which are supplied by a trader on frequent or regular rounds to the consumer’s home, residence or workplace – reg 6 or the sale of a medicinal product under prescription – reg 7(2). Trader and consumer defined in reg 4 – same as definition in CRA (see above). On premises contract – defined in reg 5 – as a contract between a trader and consumer which is neither a distance contract or an off-premises contract. See e-commerce (below) re distance contracts. Off-premises contracts are generally not entered into in the business premises of the trader. On premises contract will include many regular sales of goods – where the contract is entered into between the parties when they are in the trader’s business premises. Regulation 9(1) of the 2013 Regulations provides that before a consumer is bound by an onpremises contract the trader must give or make available to the consumer certain information set out in Schedule 1 in a clear and comprehensible manner, if that information is not already apparent from the context. Reg 9 does not apply to a contract which involves a day to day transaction and is performed immediately the contract is entered into – reg 9(2). The information set out in Schedule 1 includes the main characteristics of the goods, the identity of the trader, the total price of the goods including taxes, arrangements for payment, delivery, performance, time of delivery and the trader’s complaint handling policy.

The information provided (except the main characteristics of the goods) is to be treated as a term of the contract and any change made before or after the contract is entered into is ineffective unless the change was expressly agreed between the consumer and trader: CRA s12. There are certain contracts that are excluded. Regulation 9 does not apply to day-to-day contracts. Buying a washing machine for example would come under Regulation 9 because this is not a day-to-day contract. The information provided is to be treated as a term of the contract and anything out with this is excluded unless made clear and agreed by the parties. If the information is given to the consumer before the contract is entered into it has to be agreed by the consumer. Transfer of property Contract has to transfer the property. This is essential in the definition of the SOGA. SOGA only applies where property in goods is being transferred. PST Energy 7 Shipping LLC v OW Bunker Malta Ltd [2016] AC 1034: seller is selling fuel to buyer. They seek payment under the contract. There is a clause that retains title until the goods are paid for. This clause existed here. There was a 60-day period whereby the fuel was handed over and not paid for, the buyer was allowed to use the fuel in this period. After 60 days, most, if not all, of the fuel had been used. When fuel is consumed it ceases to exist and it was longer being able to have ownership transferred. By the time it was to be transferred, the goods may not exist and so it cannot be a sale of goods contract. The seller is still to be paid, but this is not a sale of goods by virtue if SOGA which has consequences. Transfer of ownership has to be a part of the contract for it to be under SOGA. Hire and rent do not come under SOGA, they have different statutory governing. The transfer of ownership makes it sale of goods governed by SOGA. Only a sales contract under CRA 15 if ownership in the goods is being transferred. Note however CRA also applies to all supplies of goods such as hire and hire purchase but these contracts not focus of lectures. - s2(2) SOGA and s3(5)(a) CRA: There may be a contract of sale between one-part owner and another. An item may be owned by two people (A and B) – A can transfer his ownership to B and this is a sale of goods. - s2(4) SOGA: “Where…the property in the goods is transferred from the seller to the buyer the contract is called sale.” - s2(5) SOGA: “Where… the transfer of the property in the goods is to take place at a future time… the contract is called an agreement to sell.” - S5(1) CRA – there is a sales contract if the trader transfers or agrees to transfer ownership of the goods to the consumer. Goods s61 SOGA: “‘goods’ includes… 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” This applies to consumer and commercial transactions.

CRA makes provisions for immoveable property but these are nothing to do with the sale of goods. Atiyah et al note that this definition is “virtually all-embracing” (p77) – but there are exceptions and problem areas. Software: Beta Computer Systems (Europe) Ltd v Adobe Computer Systems (Europe) Ltd 1996 SLT 604: is a contract when the seller sends something with software in it a contract of sale? Tangible moveable item with a right. Held that this is unique. Cannot be categorised. The general rules of contract apply to it, but specific rules of specific contracts do not. Unacceptable to analysis it as two contracts. Has elements of both contracts, but it is one unique contract. St Albans DC v International Computers Ltd [1996] 4 All ER 481: obiter comment that the computer disc is tangible goods and the software is not which suggests that there are two contracts. Supply of services: Robinson v Graves [1935] 1 KB 579: defendant commissioned plaintiff to make a portrait and offered payment. Breached contract and defendant sought reimbursement. Held it was a contract of working labour, not for goods. Paying for services and the canvas and paint were ancillary. We don’t really have a problem because of the wide definition of goods. Passing of the property is of essence to the contract. S2(8) CRA: ‘goods’ means any tangible moveable items…. CRA does not apply to contracts for a trader to supply coins or notes to a consumer for use as currency: s3(3)(a). Note that CRA also applies to the supply of services (chapter 4 CRA) and digital content (chapter 3 CRA) but we are concerned in these lectures on sale of goods. Price s2(1) SOGA – need for a money consideration called the price. No such express requirement in CRA but by implication: s5(1)(b) – consumer must pay or agree to pay the price but see also s8 – there is a contract for the transfer of goods (not a sales contract) where the consumer provides or agrees to provide consideration otherwise by paying a price. Barter and exchange are excluded from this. Has to be a money consideration called the ‘price’. S.5(1)(b): transfer of goods, not sale of goods? In a commercial sales contract the price may be set out in the contract or may be left to be fixed in a manner agreed by the contract or may be determined by the course of dealing between the parties; s8(1) SOGA. If no price is stipulated, then the buyer must pay a ‘reasonable price’: s.8(2) and 8(3) SOGA. Reasonable price is a question of fact. Most cases it will be set out, or there will be a

mechanism. The price may have to be determined by the court, if not, and this is a question of fact. Glynwed Distribution v S Koronka & Co 1977 SC 1: market price is not necessarily a reasonable price. IH said that the price has to be fair and just to both parties. Look at the circumstances of the sale at the time etc. will be taken into consideration. Likely that the issue will not often arise in consumer sales where the price of the goods for sale is generally clearly marked. Also recall that the trader has an obligation to provide the consumer with the price – reg 9 of the 2013 Regulations (although remember that reg 9 does not apply to a contract which involves a day to day transaction and is performed immediately the contract is entered into). PASSING OF PROPERTY, RISK AND TITLE 1. The passing of property Here the rules are the same for commercial and consumer sales – s.4 CRA refers to the relevant provisions of SOGA. Distinguish between property (ownership) and possession. Person who has the thing is not necessarily the owner of the thing. Example: could be wearing your friend’s shoes. Ownership and possession do not equate to the same thing. Section 17: “… property in [the goods] is transferred to the buyer at such time as the parties to the contract intend it to be transferred.” In determining the intention of the parties regard to be had to the terms of the contract, conduct of the parties and circumstances of the case. It is the intention of the parties. Different contracts between different parties differ, therefore intention makes sense. Where having considered the contract, parties’ conduct and circumstances it remains unclear when the parties intended property in the goods to pass use section 18: provides 5 rules for ascertaining the intention of the parties as to passing of property.

Rule 1 —Where there is an unconditional contract for the sale of specific goods in a deliverable state the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, be postponed. Rule 2 —Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until the thing is done and the buyer has notice that it has been done. Rule 3 —Where there is a contract for the sale of specific goods in a deliverable state but the seller is bound to weigh, measure, test, or do some other act or thing with reference to the

goods for the purpose of ascertaining the price, the property does not pass until the act or thing is done and the buyer has notice that it has been done. Rule 4 —When goods are delivered to the buyer on approval or on sale or return or other similar terms the property in the goods passes to the buyer: — (a)when he signifies his approval or acceptance to the seller or does any other act adopting the transaction; (b)if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of that time, and, if no time has been fixed, on the expiration of a reasonable time. Rule 5 – (1) Where there is a contract for the sale of unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods then passes to the buyer; and the assent may be express or implied, and may be given either before or after the appropriation is made. (2) Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee or custodier (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is to be taken to have unconditionally appropriated the goods to the contract.

Section 16: unascertained goods. “Where there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained.” Exception to Section 16 Section 20A: where there is a quantity of unascertained goods that are part of a bulk, which has been identified this bulk from which the goods will come and the buyer has paid for all or some of the goods, unless the parties agree otherwise then the buyer because owner of the goods. You become an owner in common with what is in the bulk. A bulk is a mass or collection of goods of the same kind retained in the same area. Example: buyer agrees to buy two tons of coal for £300 a ton. Contract identifies a 20-ton bulk of coal your two tons is to come. Once the buyer pays £600 and providing they don’t stipulate to the contrary property in an undivided share of 10% transfers to the buyer. You become an owner in common to the amount you have agreed to and paid for in the bulk.

Retention of title clauses and “all sums” clauses:

Section 19: reservation of right of disposal (in conjunction with s17(1).) Where goods have been appropriated to the contract the seller may buy the terms of the contract which means the parties have to do it. If your contract says nothing about this, then section 17 will be used. Section 19 says that if possession has passed, then title will be retained by the seller until payment has passed. All sums clauses: title doesn’t pass until all sums have been paid. These were created by courts to create protection. Armour v Thyysen Edelstahlwerke AG [1991] 2 AC 339; 1990 SLT 891: HoL held that all sums clauses were valid. By virtue of section 17 and 19 title did not pass until all sums were satisfied. No security in law. Legitimate retention in title is the seller protecting themselves. Sellers are able to include all sums clauses in their contracts. If buyer doesn’t pay because of A selling to C, then A cannot assert ownership of the goods against C. Clark Taylor v Quality Site Development (Edinburgh) Ltd 1981 SC 111: all sums clauses valid in both jurisdictions. In Scots law, proceeds cannot be held in trust for original seller, in England you would be in a better position. 2. Title to Goods “It has long been established that as a matter of contractual obligation the seller’s transfer of an indefeasible title is fundamental to the agreement.” (see Goode, p216 et seq) The property / commercial contract dilemma created by sales by a non-owner: “In the development of our law, two principles have striven for mastery. The first is for the protection of property: no one can give a better title than he himself possesses. The second is for the protection of commercial transactions: the person who takes in good faith and for value without notice should get a good ti...