Topic 2 - Sale of Goods Background PDF

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Commercial Law...

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Commercial Law, LW215

Topic 2 - Introduction to the Sale of Goods Act, Scope & Terms

Essential Preparation for Class:  Print off this handout from Blackboard and read in advance.  Download or print off the Restatement of the Sale of Goods Act (On Blackboard).  Read White Commercial Law Chapters 8 and 9 or Forde Commercial Law Chapter 2, pp. 28 – 37.

Historical Introduction to the Sale of Goods Acts 1893 - 1980 During the 18th and 19th centuries, the industrial boom in the U.K. gave rise to important developments in contract law. It became a feature of English courts to adopt a “laissez faire” attitude to commercial transactions – essentially a non-interventionist attitude of the courts. This was one of the central doctrines in contract law. The courts would recognise the freedom of the parties to contract – e.g. the courts refused to question the adequacy of consideration or to intervene in contracts on the basis of fairness on grounds that this approach facilitates the conduct of trade by promoting certainty.

Sales law reflected this attitude. The basic principle of sales law was caveat emptor – let the buyer beware. The seller did not warrant the quality of the goods, he did not have to disclose any defects and the sale did not imply that the seller had good title to the goods. If the buyer was unsure, he should make enquiries or get warranties from the seller. Around the middle of the 19th century, the principle of caveat emptor began to change slowly. It was recognised that greater protection was needed for buyers and on some occasion, interference was justified. The courts began to imply certain undertakings into contracts of sale. These were still very basic. For example, the seller would be deemed to have title to

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the goods being sold, and certain warranties as to the quality of goods were also implied into contracts but only if there was no express term in the contract to the contrary. By the end of the 19th Century, a substantial body of sale of goods law had been developed through case law. The law was complex and inaccessible and it was decided to codify this body of common law rules into an Act governing the sale of goods.

The Sale of Goods Act 1893 (enacted in 1894!) was described as “An Act for codifying the law relating to sale of goods”.

In 1980 a new SOG Act was passed – made a few changes to existing law – consolidated the 1893 Act – much of the present law relating to contracts of sale derives from the 1893 Act – in turn based on the common law – derived from commercial practices of 18 th and 19th centuries.

Important Points to Note about the Sale of Goods Acts 1893 and 1980:



The Acts are very much optional as opposed to peremptory law.

Most of its

provisions lay down rules which obtain unless the buyer and seller agree otherwise.



The common law rules still apply unless they contradict the wording of the Act.

Section 61(2):

“The rules of the common law . . . save in so far as they are inconsistent with the express provisions of this Act, and in particular the rules relating to the law of principal and agent and the effect of fraud, misrepresentation, duress or coercion, mistake or other invalidating cause, shall continue to apply to contracts for the sale of goods.”

In 1980, the Sale of Goods and Supply of Services Act was passed. It made a number of few changes to the 1893 Act, for example by providing additional protection to consumers. Together the legislation is referred to as The Sale of Goods Acts 1893 and 1980.

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A consolidated version of the Sale of Goods Acts 1893 – 1980 has been produced and it is available on Blackboard or at

http://www.attorneygeneral.ie/slru/Restatement_Sale%20_of_Goods_Acts_1893_and_Part %20II_of_1980%20.pdf

In 2008, the Government established the Sales Law Review Group to report on Sales Law and to make recommendations to modernise and reform the law.

In 2011, the Sales Law Review Group Report was published. A number of important reforms were recommended including the enactment of a comprehensive Consumer Rights Act which would separate consumer from commercial sales. A number of other important recommendations were made with regard to inter alia the implied terms, the passing of property

and

remedies.

The

Report

is

available:

https://www.djei.ie/en/Publications/Publication-files/Report-on-the-Legislation-Governingthe-Sale-of-Goods-and-Supply-of-Services.pdf

The Scope of the Sale of Goods Acts 1893 – 1980: The definition of a Contract for the Sale of Goods

The main provisions of the Sale of Goods Act 1893 – 1980 apply to “contracts for the sale of goods” ONLY.

Section 1(1) of the 1893 Act defines a contract for the sale of goods as

“a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price.”

There are several elements to this:

1. A contract

2. A seller and a buyer

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3. “Transfers or agrees to transfer”

Section 1(3) provides that a contract of sale can be one of 2 types.

1. Where the property in the goods is transferred from the seller to the buyer the contract is called a sale.

2. Where the transfer of property in the goods is to take place at a future time or subject to some condition the contract is called an agreement to sell

Section 62 states that a “contract of sale” includes “an agreement to sell as well as a sale.”

4. Property In Section 62 “property” is defined as “the general property in goods, and not merely a special property”.

This means the absolute legal interest in the goods, or ownership.

5. Goods

This is a key word in the definition. According to S.62 of the Act, goods are defined as including: ‘all personal chattels other than things in action (or choses in action) and money.’

Property is classified as Real or Personal

Personal property : chattels real and chattels personal

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Chattels personal : choses in possession (tangible movables such as goods and money and choses in action (intangible movables such as debts, shares, intellectual property rights).

Under the SOGA goods include all personal chattels except choses in action and money. So, the definition is really concerned with physical tangible moveable articles of property

Issues arise such as whether it is sale of goods or supply of service or something else?

Carroll v An Post National Lottery Co [1996] 1 IR 443

Is it a contract for sale of goods or a contract for ‘work and materials’?

Robinson v Graves [1935] 1 KB 579 Lee v Griffin (1861) 1 B&S 272

Is supply of software a sale of goods? St Albans City and District Council v International Computers ltd [1996] 4 All ER 481

Pre-1980 the Act did not apply at all to services. However, the Sale of Goods Act 1980 now provides certain rights re the provision of services. We will not be discussing these in this course, although you should have come across them when studying contract law. See for example:

Section 39 Implied terms regarding Supply of Services Subject to section 40, in every contract for the supply of a service where the supplier is acting in the course of a business, the following terms are implied—

( a ) that the supplier has the necessary skill to render the service,

( b ) that he will supply the service with due skill, care and diligence,

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( c ) that, where materials are used, they will be sound and reasonably fit for the purpose for which they are required, and

( d ) that, where goods are supplied under the contract, they will be of merchantable quality within the meaning of section 14 (3) of the Act of 1893.

6. Money Consideration

It is also essential that the goods are paid for are intended to be paid for in money. The Acts don’t apply to barter situations which are exchange of goods for goods. It is less clear where the goods are exchanged for goods and money. Is that a sale or exchange? It depends on the intention of the parties. If the parties envisage the transaction as a sale and use the terminology appropriate to a sale contract, it would be held to be a sale even if the substantial consideration is the goods. So, an agreement to supply goods partly for cash and partly in exchange for other goods such as the trade in of a car may fall within the acts depending on the terms agreed upon. .

It seems that the parties must agree on the price with the exchange of goods being in part satisfaction of the price..

Flynn v Mackin [1974] IR 101 Aldridge v Johnson (1857) 7 E & B 885

(a) Do you have to have fixed a price in the contract? Section 8 states that the price “may be fixed by the contract, or may be left to be fixed in a manner thereby agreed, or may be determined by the course of dealing between the parties.”

Section 8(2) states that “where the price is not determined in accordance with the foregoing provisions, the buyer must pay a reasonable price.”

May & Butcher v. The King [1934] 2 KB 17 Foley v. Classique Coaches Ltd. [1934] 2 KB 1

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7. Formalities

At common law, no formalities were required for a contract for the sale of goods.

Section 3 of the 1893 Act provides that contracts may be in writing, or by word of mouth, or partly in writing or partly by word of mouth, or may be implied from the conduct of the parties.

Section 4 of the 1893 Act which provides that a contract for the sale of goods of the value of £10 (€12.70) or more is not enforceable unless:

(i) the buyer accepts, and actually receives, part of the goods sold; or (ii) the buyer gives something in earnest to bind the contract; or (iii) the buyer has made part payment; or (iv) there is a note or memorandum in writing of the contract, signed by the party “to be charged”

Tradax (Ireland) v Irish Grain Board [1984] IR 1

Hopton v McCarthy (1882) 10 Lr (Ir) 266

Kirwan v Price [1958] Ir Jur 56

S.4 was repealed in the UK 1954 on the recommendation of the LRC. Similar reform is long overdue in Ireland. The Sales Law Review Group recommend repeal of S.4.

8. Excluded Contracts Section 61(4) :

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“The provisions of this Act relating to contracts of sale do not apply to any transaction in the form of a contract of sale which is intended to operate by way or mortgage, pledge, charge or other security.”

Also, the following are not considered contracts for the sale of goods [not an exhaustive list]: Hire Purchase, Bailment, Lease / Hire, Gifts, Contracts for the Sale of Land.

Problem Question

Please be prepared to discuss the following problem question in class:

Vera owns a farm with a large number of cows and sheep. She orally agreed with her neighbour Keith that he would sell her several pieces of farm machinery, worth €40,00 in total, in return for 30 cows, valued at a total of €25,000, and a cheque for €15,000 to make up the difference in price. That night Vera sent Keith an email confirming the details of the sale, but Keith did not reply. The next morning she brought 30 cows over to one of Keith’s fields and left the cows there, although Keith was not on his farm at the time. She also left a cheque for €15,000 in Keith’s post box.

That afternoon Keith phoned Vera to say that he wouldn’t be going ahead with the deal, as he’d decided that he wasn’t really that interested in cows and would rather raise chickens and ducks. He told Vera there was nothing Vera could do about it as there was no binding written contract between them. He said he wouldn’t cash the cheque and he asked Vera take back the cows she had delivered.

Advise Vera (a) on whether there is a “contract for the sale of goods” within the meaning of the Sale of Goods Act 1893 – 1980 and (b) on whether she can enforce the contract. (From Commercial Law Exam 2010)

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