#8603 - Sale Of Goods - Commercial and IP

Commercial Law

Sale of Goods

Part A: Fundamental Principles of Sale of Goods in English law (sgs 7)

Exam structure flow chart: how to apply SGA and UCTA

Identify claim
Identify specific terms breached (express or implied) Is the term breached a condition?
Identify remedies available
Has right to reject been lost? breach so slight it would be unr’able to reject B has expressly/by implication waived breach B has accepted goods
Is there an exclusion or limitation of liability, howsoever expressed? If so, apply UCTA and ‘r’able ness test’ S.11 and sch.2 factors UCTA alarm bells: Exclusion/limitation of liability Plus one party trying to exclude liability for negligence; and/or Exclusion/limitation of SGA ss.13-15; and/or One party contracting on other’s standard written terms
What remedies remain?

Terms of a contract

Express	Terms expressly agreed by parties - can be written or oral
Implied	In addition, or in absence of express terms, certain terms are implied Can be implied into contract in a number of ways eg. Custom or practice in a particular profession/trade Conduct of parties or imputed intention of parties Previous course of dealing between parties Statute
Condition or Warranty?	cond = term which is fundamental to performance of contract and is considered to go to root of contract W = contractual promise that goods provided will meet a certain specification. Less imp than a term Court looks @ effect of breach to determine which
Key provisions of SGA contract	Details of goods How/when delivery will be effected When title and risk in goods pass to B The contractual price When/how price is to be paid What condition/quality is apprope to goods
Types of goods	Defined in s.61 and are essentially tangible items If unascertainable (ie. Not specific goods) they are identified by description and s.13 implies that goods will correspond w/that description
Delivery	Under s.27, S is under a duty to deliver goods and B is under a duty to accept conforming goods and take delivery @ agreed time or be liable to S for damages for non-acceptance In absence of ag, s.29 sets out default position which provides delivery will take place @ S’s premise w/in a r’able time
Is time for delivery of essence?	Under s.10(2) time is not necessarily of the essence but court will generally consider it so in most commercial contracts
Title	Title, or legal ownership, in goods may be transferred to B @ time agreed between parties S will usually want to retain title for as long as poss, @ v least until payment for goods has been received. B will want title asap so they are free to deal w/goods as they will
Retention of title	S.19 anticipates possible risks to S in retaining ownership of goods pending payments so Ss use Retention of Title cl’s Under a ROT, a S should: Reserve LT to goods, reserve a right of entry onto B’s premises in order to inspect and/or recover goods, reserve LT to any other goods S has supplied to B until such a time as the price has been paid by B for all goods, require the B to store and mark goods separately from other goods, require B to insure goods, restrict B’s ability to attach goods to any other goods
Risk	Risk = who bears responsibility if goods are damaged or lost In absence of ag, s.20 provides risk or loss of damage to goods passes prima facie to B when title passes, irrespective of delivery. As S loses possession and control of goods on delivery, S will usually wish the contract to expressly stipulate that risk passes on delivery
Price	Price may be subject to: a mechanism to adjust amount in reference to a specified doc, formula etc Price escalation or indexation Currently or exchange rate stipulations Additional charges eg. Delivery VAT being payable in addition to price Prompt payment discount
Payment	usually a fundamental term and expressly agreed upon If not, time for payment is not considered to be of the essence s.10
Quality	Goods may be new or used but subject to 2 x conditions satisfactory quality Fitness for purpose
(1) satisfactory quality - s.14(2)	Goods must be of ‘satisfactory quality’ s.14(2) implied into every contract Objective test S.14(2C) exceptions if any aspect affecting quality of goods is: drawn to B’s attention before contract is made; or Revealed by an examination of the goods by B before the contract it made (nb B has no implied duty to examine goods)
(2) fitness for purpose - s.14(3)	S.14(3) implies a term into every contract for SOG that goods are to be r’ably fit for B’s purpose if that purpose was made known (expressly or by implication) to S before contract was entered into Reliance on S’s skill or judgment may be implied and therefore defective goods often give rise to a claim by B for breach of both s.14(2) and (3)
Conditions	Terms implied by s.14 are conditions s.14(6) Breach will entitle B to remedies for breach of cond

Exclusions and limitation of liab

In exam:

- examine cl -> is there excl/limitation of liab -> use s.13 gateway to include -> go to 3 x alarm bells -> s.11 r’ableness -> Sch.2 factors

Identify claim	What wrong has been done? Considered whether it is a breach of contract/breach of oral term/breach of duty of care is relevant.
Identify terms breached	Breach of express term? Breach of implied term?
Is term breach a condition?	If term is express, is it a condition? If term is implied, is it a condition? S.13(1) provides that s.13 is a cond and s.14(6) provides that ss.14(2) and (3) are conds
What remedies are available	If S is in breach of cond, B has following choice of rems: reject goods, terminate contract and/or claim damages; or Reject goods, affirm contract and require contractual performance, reserving right to claim damages; or Accept and keep goods but still claim damages by treating breach as breach of W only If S is in breach of W, B can only claim for damages
Of rems available, has right to reject been lost?	The right to reject goods for breach of an implied cov under ss.13 and 14 is not available to a B in a B2B contract if: breach is so slight it would be unr’able to do so; or B has expressly, or by implication, waived the breach; or B has accepted goods - s.35 In these instances, B could only accept and keep goods but still claim damages
Exclusion/limitation of liability clause and UCTA	is there an limitation or exclusion of liability cl? It is common to include these for various types of default or liability. S.55 SGA expressly permits such terms to limit implied terms, subject to UCTA
S.13 UCTA Gateway into UCTA	Which types of cl does UCTA apply to? S.13 exists in identifying cl’s to which ss.2, 3 and/or 6 apply. In essence, it’s a catch all provision preventing parties from ‘drafting their way out of scope’ of UCTA Nb s.13 is gateway into UCTA, not thr/r’ableness test -> just the gateway. After you see s.13 UCTA excl/limitation cl’s -> then try and see which of the 3 UCTA alarm bells below applies ....
S.2 UCTA negligence	Restricting or excluding UCTA for negligence S.2 says liability for death or PI cannot be excluded or restricted s.2(1) and Liab for any other loss or damage resulting from negligence can be excluded but only to the extent that the cl satisifies r’ableness test s.2(2)
S.3 UCTA Other party’s written standard terms of business	A term which: purports to exclude or restrict liability for breach of contract s.3(2)(a); or Has the effect of entitling that other party not to perform an obligation contractually agreed upon or to render a performance substantially different from what was r’ably expected s.3(2)(b) is subject to r’ableness test Nb. S.3 doesn’t apply to commercial (non-consumer) parties which has been openly negotiated
S.6 UCTA Implied conds	A term which restricts implied conds under SGA relating to: title s.12 absolutely; and Description, satisfactory quality, fitness for purpose and sample ss.13, 14 and 15 unless it satisfies requirement of r’ableness s.6(3)
(a) R’ableness test s.11(1)	“term shall have been a fair and r’able one to be included having regard to the circs which were, or ought r’ably to have been, known to or in the contemplation of the parties when the contract was made.” Nb. Test applies @ time contract was made Fair and r’able
(b) R’ableness test s.11(2) and Sch 2	Indicate a non-exhaustive list of factors which the court should take in account when assessing whether a particular cl satisfies the r’ableness test. Factors include: strength of bargaining position of both parties (Watford Electronics - court only gets involved if parties are not of equal bargaining power) Knowledge Alternative sources Availability of insurance Contract inducements
R’ableness test S.11(5)	Requires the resources to meet the liab of the party purporting to limit its liab, and the availability of insurance against relevant risk, to be considered when testing for ‘rable’
Following application above, which rems remain?	Are rems identified above still available? if exclusions/limitation cl applies it may exclude or limit the applicable remedies above; or If the excl/limitation cl is “unr’able” and consequently unenforceable under UCTA, the rems identified above will be applicable for injured party

Identify terms breached

Breach of express term?

Breach of implied term?

Is term breach a condition?

If term is express, is it a condition?

If term is implied, is it a condition? S.13(1) provides that s.13 is a cond and s.14(6) provides that ss.14(2) and (3) are conds

What remedies are available

If S is in breach of cond, B has following choice of rems:

reject goods, terminate contract and/or claim damages; or
Reject goods, affirm contract and require contractual performance, reserving right to claim damages; or
Accept and keep goods but still claim damages by treating breach as breach of W only

If S is in breach of W, B can only claim for damages

Of rems available, has right to reject been lost?

The right to reject goods for breach of an implied cov under ss.13 and 14 is not available to a B in a B2B contract if:

breach is so slight it would be unr’able to do so; or
B has expressly, or by implication, waived the breach; or
B has accepted goods - s.35

In these instances, B could only accept and keep goods but still claim damages

Exclusion/limitation of liability clause and UCTA

is there an limitation or exclusion of liability cl?
It is common to include these for various types of default or liability. S.55 SGA expressly permits such terms to limit implied terms, subject to UCTA

S.13 UCTA

Gateway into UCTA

Which types of cl does UCTA apply to?
S.13 exists in identifying cl’s to which ss.2, 3 and/or 6 apply.
In essence, it’s a catch all provision preventing parties from ‘drafting their way out of scope’ of UCTA
Nb s.13 is gateway into UCTA, not thr/r’ableness test -> just the gateway. After you see s.13 UCTA excl/limitation cl’s -> then try and see which of the 3 UCTA alarm bells below applies ....

S.2 UCTA

negligence

Restricting or excluding UCTA for negligence
S.2 says

liability for death or PI cannot be excluded or restricted s.2(1) and
Liab for any other loss or damage resulting from negligence can be excluded but only to the extent that the cl satisifies r’ableness test s.2(2)

S.3 UCTA

Other party’s written standard terms of business

A term which:

purports to exclude or restrict liability for breach of contract s.3(2)(a); or
Has the effect of entitling that other party not to perform an obligation contractually agreed upon or to render a performance substantially different from what was r’ably expected s.3(2)(b)

is subject to r’ableness test

Nb. S.3 doesn’t apply to commercial (non-consumer) parties which has been openly negotiated

S.6 UCTA

Implied conds

A term which restricts implied conds under SGA relating to:

title s.12 absolutely; and
Description, satisfactory quality, fitness for purpose and sample ss.13, 14 and 15

unless it satisfies requirement of r’ableness s.6(3)

(a) R’ableness test

s.11(1)

“term shall have been a fair and r’able one to be included having regard to the circs which were, or ought r’ably to have been, known to or in the contemplation of the parties when the contract was made.”

Nb. Test applies @ time contract was made

Fair and r’able

(b) R’ableness test

s.11(2) and Sch 2

Indicate a non-exhaustive list of factors which the court should take in account when assessing whether a particular cl satisfies the r’ableness test. Factors include:

strength of bargaining position of both parties (Watford Electronics - court only gets involved if parties are not of equal bargaining power)
Knowledge
Alternative sources
Availability of insurance
Contract inducements

R’ableness test

S.11(5)

Requires the resources to meet the liab of the party purporting to limit its liab, and the availability of insurance against relevant risk, to be considered when testing for ‘rable’

Following application above, which rems remain?

Are rems identified above still available?

if exclusions/limitation cl applies it may exclude or limit the applicable remedies above; or
If the excl/limitation cl is “unr’able” and consequently unenforceable under UCTA, the rems identified above will be applicable for injured party

General points:

on the whole, court usually finds a limitation cl more r’able than an exclusion cl
The party seeking to exclude/limit liab usually bears burden of...

#8603 - Sale Of Goods - Commercial and IP

Express

Implied

Condition or Warranty?

Key provisions of SGA contract

Types of goods

Delivery

Is time for delivery of essence?

Title

Retention of title

Risk

Price

Payment

Quality

(1) satisfactory quality - s.14(2)

(2) fitness for purpose - s.14(3)

Conditions

Identify claim