The law
which governs sales and other transfers of goods is, for the most part, of
venerable age. The Sale of Goods Act 1893, for many years the governing
statute, was itself largely a codification of common law principles which had
already been in existence for a considerable time. Then, when the 1893 Act was
repealed and replaced by the Sale of Goods Act 1979, the new statute was in
effect a repeat of its predecessor (albeit taking on board a number of
amendments which Parliament had introduced in the intervening 86 years). And,
far from being regarded as out of touch with modern requirements, these
statutory rules were then applied almost verbatim to other contracts involving
the transfer of goods by the Supply of Goods and Services Act 1982.
Notwithstanding
this general sense of approval, however, there are aspects of the law on supply
of goods which have long been a cause for concern. Some of these relate only to
consumer contracts, others are of more general application. Governmental
recognition of these concerns led in 1979 to questions being referred to the
Law Commission, which in 1987 (such is the pace of law reform!) made a number
of recommendations for change. And, following further less than frenzied
activity on the legislative front, out (eventually) popped the Sale and Supply
of Goods Act 1994. This Act, which came into operation on January 3 1995, makes
a number of significant changes to both the supplier’s obligations and the
buyer’s (or other transferee’s) remedies.
The phrase
‘merchantable quality’ is one which trips readily off the tongue of anyone who
has ever studied the law of contract. However, the word ‘merchantable’ is not
otherwise to be found in everyday conversation, and there is no doubt that a
fair proportion of the population has not the slightest idea what it means.
Largely for
this reason, the Law Commission recommended (and Parliament decided) that a
different expression should be substituted in the relevant Acts and, at the
same time, that the opportunity should be taken to remove some of the doubts as
to what the ‘quality’ of goods involves.
The Law
Commission favoured the expression ‘acceptable quality’, but there was a
feeling that this might cause confusion, since the Sale of Goods Act already
contains a set of rules on what constitutes ‘acceptance’ of goods by the buyer.
As a result,
section 14(2) of the Sale of Goods Act 1979 has been amended to read: ‘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.’
And, lest there be any doubt as to what ‘satisfactory’ means, section 14(2A)
provides that goods are of this 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’. (For the sake of completeness it may be added that equivalent
amendments have been made to the Supply of Goods and Services Act 1982.)
So far, ‘so
what?’ might be the response, but some rather more detailed guidance is to be
found in section 14(2B). This provides that the ‘quality’ of goods includes
their ‘state and condition’ and, moreover, that some other factors are also in
appropriate cases to be taken into account. These include (though the Act is
careful to make this a non-exhaustive list): ‘(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.
As to
precisely how these factors will be interpreted by the courts, only time will
tell. However, it is worth noting that goods may now retrospectively be found
not to have been ‘of satisfactory quality’ at the time of sale when they fail
to last as long as might reasonably have been expected. What is more, consumers
will no doubt rejoice at the specific statutory recognition that a buyer is
entitled to complain of cosmetic defects, as well as of those which affect the
functionality of what has been purchased.
of goods
A source of
considerable controversy in the past has been the principle that a buyer who
has ‘accepted’ goods no longer has a right to reject them on the ground that
they do not conform with the contract (either because they are physically
defective, or because they are of the wrong description or quantity). In an
attempt to solve some of the problems which have arisen, the 1994 Act provides
a new version of section 35 of the Sale of Goods Act 1979, which clearly
identifies a number of things which do not constitute acceptance.
For
instance, while it remains the law that a buyer accepts goods if ‘he does any
act in relation to them in a way which is inconsistent with the ownership of
the seller’, it is expressly provided that this does not apply unless the buyer
has had a reasonable opportunity to examine the goods. Moreover, it is now
spelled out that neither having defective goods repaired nor disposing of them
by way of subsale is in itself sufficient to constitute acceptance by the
buyer.
rejection
An aspect of
the previous law which was often criticised was the principle that a buyer who
‘accepted’ any part of the contract goods was deemed to accept all of them.
Hence, except where the seller delivered goods answering the contract
description ‘mixed with’ others (a scenario specifically provided for by
section 30(4)), the buyer had no right to reject only part of a consignment
(even the incorrect part).
The
inflexibility and commercial inconvenience of this rule has now been addressed
by the insertion of a new section 35A into the Sale of Goods Act 1979.
Henceforth, the only situation in which acceptance of part will automatically
be treated as acceptance of the whole is where the goods make up a ‘commercial
unit’ (such as a pair of shoes), so that division of that unit would materially
affect the value of the goods contained in it. In all other cases (except where
the contract shows a contrary intention), a buyer may accept all conforming
goods and even some non-conforming ones without losing the right to
reject the remainder.
defects
The two
reforms last mentioned are designed to improve a buyer’s right to reject
defective or otherwise non-conforming goods. The next recognises that this very
right of rejection is capable of being abused. The reason that this is possible
is that most of the seller’s obligations are defined as ‘conditions’ rather
than ‘warranties’; hence, if breached, they give rise to a right for the buyer
to terminate the contract as well as or instead of claiming damages.
In a number
of well-known cases a buyer, faced by a falling market, has been able to escape
from a burdensome contract by identifying some error in the contract
description of the goods (albeit one which in no way diminishes their value or
usefulness) and using this to justify rejection.
A new
section 15A of the Sale of Goods Act 1979 now provides that in non-consumer
cases (and unless the contract shows a contrary intention) a buyer cannot
reject goods (and is thus restricted to claiming damages) where the seller’s
breach is so slight that rejection would be unreasonable.
This reform,
which will most certainly be welcomed by all commercial suppliers, applies to
all the breaches of contract which buyers have used in this way
(misdescription, defects or delivery of the wrong quantity of goods).
