Study Guide - LAW 3019 - Summary Commercial Law PDF

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Study Guide: Commercial Law 3019Contract terms Express and implied  Express and representations: Dick Bentley v Smith [1965] 2 All ER 65; Oscar Chess Ltd [1957] 1 WLR 370  Conditions and warranties  Definition: s 61 SoGA  Consequences? S 11(3) BUT see s 15A & 11(2) SoGA  Fundamental te...

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Study Guide: Commercial Law 3019 Contract terms  Express and implied  Express and representations: Dick Bentley v Smith [1965] 2 All ER 65; Oscar Chess Ltd [1957] 1 WLR 370  Conditions and warranties  Definition: s 61 SoGA  Consequences? S 11(3) BUT see s 15A & 11(2) SoGA  Fundamental terms?  Innominate terms: Hong Kong Fir v Kawasaki [1962] 2 QB 26; Cehave NV v Bremer Handelgesellschaft m.b.H (the Hansa Nord) [1976] QB 74; BUT see for commercial contracts: Bunge Corp v Tradax [1981] 1 WLR 711 (HL) Controlling contract terms  Exclusion of liability?  Incorporation  Construction  Legislation  UCTA 1977, ss 3 and 6: terms valid if reasonable  Reasonableness test: s 11 and schedule 2 Parties duties: overview  Contract of sale: bilateral contract  S wants payment for the goods  B wants the goods on time, in right quantity, and right quality  S 27: ‘it is the duty of the S to deliver the goods and of the B to accept and pay for them in accordance with the terms of the contract of sale’ Deivery meaning  Meaning? S 61(1): voluntary transfer of possession from one person to another (BUT see appropriation of the goods for ss 20A&B)  Actual delivery  Constructive delivery (control of the goods)  NB: Not enough to deliver, B must accept Constructive delivery  International sales: document of title (bill of lading as authorised (bill endorsed) and FOB contracts  Attornment: s 29(4): Stern v Vickers Ltd [1923] 1 KB 78  Symbolic delivery (Sealy and Hooley)  Delivery to a carrier: s 32(1)

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 Galbraith & Grant Ltd v Block [1922] 2 KB 155; Computer 2000 Distribution Ltd v ICM Computer Solutions [2004] EWCA Civ 1634 Delivery to an agent or bailee Galbriath Facts - B had ordered champagne from G – saying – B requested drink be delivered to particular address – delivered with carrier - Man received the goods but it wasn’t the right person so Block wrote to Galbraith, who wanted to be paid for the goods and B wanted the good because he hadnt received it Issue - Could the goods be regarded as being delivered as they had been trusted with the currier Held – YES - carrier only has to take reasonable steps to ensure that the goods are indeed delivered to the intended rec – nothing suspicious in this case –hat would suggest he wasn’t B B had to pay for the champagne that he never received Unanimous decision and had been applied by the CofA in Computer chips Delivery to a carrier will be enough to constitute deliver – when amazon sends you package to any carrier it will constitute as being delivered – same with agents

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B released from performance Damages: s 51 Measure: s 51(2) Quantum? Generally: diffce between ctct price and market price at time of delivery: s 51(3) Specific performance? S 52:  Discretionary, for specific and ascertained goods If the seller has not delivered the goods, because you are in a biltateral contract the buyer is released from performance and the contract can be terminated and he doesn’t incur any obigations Damages –price is the difference between sale price and market price at the time of deivery SP – you are entitled to ask but it is discretionary as to whether it is awarded to you – red shoes size 5 – specific to you

Time for delivery  Fixed by contract  Silence: reasonable time: s 29(3) and reasonable hour: s 29(5). Nature of goods important  Exclusion possible if reasonable: UCTA  Remedies for late delivery  If time of essence: termination (and damages): Bunge Corporation v Tradax (81) •

Time for delivery is important so will be a condition of a contract so if they fail to delvier on time the buyer has a right to terminate the contract because there is a breach of condition

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if it is not stipulated into the contract, the fact that the time of delivery is not going to be enough, unless it is a commercial contract, not enough t allow the buyer to terminate the contract – s29 (3) – court will apply a reasonable time if there is sience – nature of the goods is important – perishable goods – you wil want them to be delivered at a certain time so it will normaly be entered into the contract Can exclude time for deivery from the contract but it has to be assessed and only valid if it is reasonabe in accorance of the UCTA Remedies – usually the courts accept that time is of the essence in commerical contracts, especially in international sales

Delivery and quantity  Particularly important for intnal ctcts  Too little delivered: s 30(1)  Can S deliver the rest later? No: s 31(1)  B can sue for what is not delivered BUT  De minimis rule: ss 30(2D(a): Shipton, Anderson & Co v Weil Bros & Co [1912] 1 KB 574  S 30(2)(A)(a)  International ctcts: shortage accepted  Too much delivered: s 30(2). B can reject the whole BUT s 30(2D(b); s 30(2)(A)(b)  Important for international contracts – abiding by the quality is a condition of the contract – provides certainty  Obligation to deliver the right quantity  To little:  Introduced in the SOGA 1994 – de minimis rule – 5% allowance – if you are within that margin you are okay – buyer not entitled to terminate the contract – v important in international sales and the descrition of the goods  100 tonnes of oil – always going to be shrinkage – not going to get every last drop  Too much:  Can reject but there is the de minimis rule – s 30(2)  Not worth jeopardising the entire relationship over a little too much/little Taking delivery  Duty of B to accept goods (in conformity): s 27  Liability for not taking delivery: s 37  Loss of S and charge of custody of goods: s 37(1)  Main duty of seller is to deliver the goods BUT the buyer must accept  Important because if the delivery is not rihg t- wrong quantity/quality – right for th buyer to not accept the goods – if not in conformity s27  BUT  If the goods are in the right quantity, quality, time frame – if the B refuses delivery, they will be in breach and therefore they will be liable – in breach of condition – S will have the right to terminate the contract and claim damages

 If its 100 tonnes of oil and you don’t take delivery for no valid reason – S would have to pay for storage and that can be recouped in the damages – expenses that the seller has incurred S’s liability for goods delivered (1)  S 13: Sale by description – have to comply with description – Online shopping, allergy desc,  S 14(2): satisfactory quality – first or second hand  S 14(3): fit for purpose of B – how you want to use them – most of the time we all use the product for the normal purpose  S 15: correspond with sample  S 12: right to sell – want to ensure that the goods you are buying from the shop, actually belong to the shop. Additional obligation on the seller that the seller has the right to sell – why? – buying stolen goods – you don’t have the title  S 12(2)&(3): quiet enjoyment and free from encumbrance: warranty NB: SGA: not a complete code for fitness and quality: other terms can be implied: s 14(4): trade usage  Once a contract is entered into, every single contract for the sale of goods will impose some conditions on the seller that the have to comply with in relation to the goods he or she is selling  S 12,14, 15 are conditions  Quiet enjoyment is a warranty – if its broken you can claim damages but you cant terminate the contract  SOGA applies by default - If they create their own contract, the SOGA wont apply unless it’s a condition  You can decide at what point you want the property to pass – retention of title clause –  Financing v important – I will give you the yarn but you pay me in 90 days – make money and then pay me – how do you protect the seller if they decide not to pay? = retention of title clause – that is why they are allowed – defined at the point that property will pass  SOGA is not a complete code – still relevant for parties to imply a term by trade usage Sale by description  S 13(1) where there is a contract for the sale of goods by description, there is an implied term that the goods correspond with the description  S 13(1)A: a condition for NI, England and Wales  Strict liability  Applies to all sales (B2C and B2B) BUT B2B is now under CRA 2015  This is a condition - not a condition for Scotland  Strict liability - I order red shoes – you either deliver me red shoes or you don’t – it doesn’t matter if someone was incompetent on the sellers end – breach = terminate the contract  Applies to all sales – obligation on the seller  Berger & Co Inc v Gill & Duffus SA [1984] AC 382, at 394, per Diplock ‘The Act contains no definition of what it means when it speaks … of a contract for the sale of goods being

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a sale by description. One must look to the contract as a whole to identify the kind of goods that the seller was agreeing to sell and the buyer to buy ’ What is it? SOGA doesn’t give us a definition of what a description is so doesn’t tell us what it is – problem because it is central to the SOGA Interpretation – to decide whether we have a sale by description or not – will look at the terms of the contract as a whole Applies where goods unseen as B relies on description alone: Varley v Whipp [1900] 1 QB 513, 516, per Channel J, hence unascertained generic or future goods What about specific goods?: Grant v Australian Knitting Mills [1936] AC 85 (PC), Lord Wright ‘a thing is sold by description, though it is specific, so long as it is sold not merely as the specific thing but as a thing corresponding to a description’: Even if selected? Yes now s 13(3) SGA History: - SOGA 1979, but the first version was in 1893 – even though we still have the same implied terms, the act was drafterd in a different way. In 1893 we didn’t have consumer sales or mass prodcuction so you still produced things on a small scale, contracts were not standardised, so liabilty was not like it is today. So a contract by a sale of description was v important, as attached to that obligation was the obligation of satisfactory quality – s13 is the most central but nowadays is almost redundant because it is so central - problem with that is because its so central it seems easy to define – BUT it is not easy to define - In some cases it is clear (B asks for red trousers, but green are delivered), but in other cases its more difficult when there is a relationship with quality Varley v Whipp – applies where the goods are not seen as the B will rely on the descrption. Farming machine that has been described as one year old and has only cut 50-60 acres – B bought it purely relying on descrption – when it was delivered it was obvious it had been used more. Held - only means for the buyer to know what he was buying is by the descrption – so here we have no doubt it is a sale by descrition. Nowadays we mainly rely on the description (online and how things are labelled – organic) Grant v Australian - Facts: G bought woolen undergarment, man with severe dermatitus. Packaged. Tried to terminate the contract and claim damages for the skin condition - Issue: Problem was they are not generic or future goods because he picked them from the shelves so he could see/touch them. Was there a sale by description? - Held: Yes – 1936 – the court extends the application of s 13 – does not only apply to goods you have never seen, it also applies to goods you can pick up yourselves as long as you can rely on the description. Rely on the description to know if eggs are free ranged As example – the judge said a hot water bottle MOST SALES WILL BE BY DESCRIPTION – IF YOU ARE RELYING ON THE DESCRIPTION OF THE GOODS TO BUY IT – EVEN IF YOU CAN SEEN THE GOODS

What amounts to a description  3 conditions:

 Words of description must be a term to be part of the description  The description must identify the goods  The buyer must rely on the description Words of description v warranties Term v representation distinction  Rep v term distinction still relevant: T&J Harrison v Knowles & Foster [1918], Beale v Taylor [1967], Oscar Chess v Williams [1957] Brewer v Mann [2012] , Harlingdon & Leinster v Hull Fine Arts [1991]  Distinction: ‘highly artificial’ (Goode on commercial law, 2010, p 438) and performing an ‘odd and redundant function of declaring that it is an implied term that the S must comply with an express term of the contract’ Atiyah, 2016, p 124. BUT historical context: Benjamin’s sale of goods, ch 11, (11-013)  Not everything that is said during the negotiation of a contract, will be entered into the contract as a term and it is clear that the descriptive words (s13) will only apply if the descriptive words are not merely a representation but become part of the term  BUT academics have said there is an implied term that a description becomes a term – so the distinction is highly artificial – why do we need to have to say if it’s an implied term if it’s a term?  Harrison v Knowles  Facts: sale involving steam sheets? – B2B contract – part of the terms was that the steam sheets were to be used in a business capacity, so they needed to know the dead weight capacity - how much could they carry. The seller told the buyer that the dead weight capacity was 460 tonnes, but in fact it was 360 tonnes.  Held: representation was a mere innocent misrep – court looked at the contract which said nothing about the dead weight capacity – therefore assessing the importance as to whether the representation was fundamental to the contract or not was held to be a representation  Oscar Chess and Beale v Taylor – status of the party who makes the representation is going to be important  Court will look at: what the contract says, status of the party who makes the statement and how quickly has the sale been concluded between when the statement was mentioned and when the contract was concluded.  Only if it is so fundamental to the contract (it becoming a term) Identification Couchman v Hill [1947] KB 554 at 559,per Scott LJ ‘every item in a description which constitutes a substantial ingredient in the identity of the thing sold is a condition’ • Not every representation will be a term, it will only be those that are most important that become a term – that is the first step the decide if a descritpion becomes part of the contract • Not only must there be a description, but what about the description is important? – it is all about identification.

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‘substantial ingredient’ – not enough for the words to be describing it, but it must be describing a substantive ingredient of it for it to be a condition Not every representation will be a term, it will only be those that are most important that become a term – that is the first step the decide if a descritpion becomes part of the contract Not only must there be a description, but what about the description is important? – it is all about identification. ‘substantial ingredient’ – not enough for the words to be describing it, but it must be describing a substantive ingredient of it for it to be a condition

Identification of the goods  Description: commercial identity: Ashington Piggeries v Christopher Hill Ltd [1972] AC 441 (HL): sale of ‘Norwegian herring meal fair average quality of the season’  Wilberforce: test of description: a “more common-sense test of mercantile character”; “core identity” rather than mere description; Guest “description implies a specification where the goods can be identified”, Lord Diplock: ‘identification is the key to s 13’. Distinction identity v attributes (quality, fitness for purpose)  Reardon Smith Lines v Hansen Tangen [1976] 1 WLR 989 “words must identify essential part of description” Wilberforce. Context: Arcos v Ronaasen [1933] AC 470; Re Moore & Landauer [1921] 2 KB 519  Description = subject matter of the contract What is the substantive part of the good  Ashington Piggeries v Christopher Hill  Facts: C was a farmer who was farming minx, so contracted A who asked for a compound so he can feed his minks. He asked for something specific and that was missing. A got the missing component from someone else, mixed it all together and sold it to C. unfortunately that additional element that they had bought from someone else, was completely fatal to minx. He refused to pay A. Term was as above, under the heading ‘descrition and quality’ – C didn’t want to pay for something that has caused the death of its business. A sued for breach of contract for not paying and C sued for breach of s13.  C argued that ‘avergae quality’ cannot include something that is toxic  Held: Court said that yes they are toxic, but they can still be described as fair Norweigen Herring meal = no breach of description. Quality here had nothing to do with description.  Lord Wilberforce – said the test of description is the core identity. The meal that you used is Norweighen herring meal – even if it is toxic for your minx. Didn’t matter that the courts missed its core substantial identity  What is the commerical identity of the goods that are sold  COURT DISTINGUISED THE IDENTITY FROM ATTRIBUTES – ONLY WHAT IS PART OF THE COMMERCIAL IDENTITY (CORE IDENTITY) – ’FAIR AVERGAE QUALITY’ WAS A MERE ATTRIBUTE (NOT PART OF THE CORE IDENTITY) WHEREAS ‘NOREWEGIAN HERRING MEAL’ WAS THE IDENTIFICATION OF THE GOODS Reliance

 Harlingdon & Leinster v Hull Fine Arts [1991] 1 QB 564; Drake v Thos Agnew [2002] EWHC 2941 (QB)  In line with ctct law cases of common mistake: Bell v Lever Bros [1932] AC 161 Leaf International Galleries [1950] 2 KB 86 Descritpion recapitulation  Term or representation  If contractual,  Express term requiring compliance? Interpreted by courts  No express term but goods are commodities: so condition (as in Arcos) and doctrine of strict compliance applies BUT see s15(A)  Goods not commodities but description is a substantial ingredient in identity of goods  Is s13 Still useful?  Overlap with s 14(2)? Ashington Piggeries cf Pinnock Bros v Lewis & Peat Ltd [1923] 1 KB 690; Meadowbank Vac Alloys v Eurokey Recycling Ltd (2016) westlaw; Proton Energy Group SA v Orlen Liuteva [2013] EWHC 2872 (Comm); [2014] 1 Lloyd’s Rep 100  Description and implication: Grenfell v Meyrowitz Ltd [1936] 2 All ER 1313; Cotter v Luckie [1918] NZLR 811 Satisfactory quality: s 14(2) S 14(2): where the S sells in the course of a business there is an implied term that the goods supplied are of satisfactory quality S 14(2A): Goods are of satisfactory quality if they meet the standard of the goods that a reasonable person would regard as satisfactory taking account of the price (if relevant) and all other circumstances S14(2B): for the purposes of this act, the quality of goods includes their state and condition and the following (amongst other things) are in appropriate cases aspects of the quality of goods: (a) Fitness for all the purposes for which goods of the kind are commonly supplied (b) Appearance and finish (c) Freedom from minor defects (d) Safety and (e) Durability From merchantable to satisfactory quality  Prior to 1994: merchantable quality: usability test: restrictive and not friendly to consumer sales  Law Commission Sale and Supply of Goods (LC 160, 1987): recommends change to satisfactory quality: acceptability test  Cases prior to change nevertheless still relevant  Sale in a course of a business: Stevenson v Roger [1999] QB 1028  Goods sold through an A: s 14(5) unless B knows or was given notice. Boyter v Thompson [1995] 3 All ER 135

 Goods supplied: Geddling v Marsh [1920]1 KB 668; Wilson v Rickett [1954] 1 QB 598; Albright & Wilson UK [2002] UKHL 37  Strict liability: not based on fault of S BUT exclusion possible if reasonable  14(2A): standard a reasonable person would regard as satisfactory, taking into account of the description of the goods, the price and all the other relevant circumstances  Reasonable person? Bramhill v Edwards [2004] EWCACiv 403, Auld, at [39]  14(2B(a-e): fitness for all purposes…goods commonly supplied; appearance and finish; freedom from minor defects; safety and durability  No hierarchy: Lammara v Capital Bank (2006) SLT 1053  ‘Fitness fo...