Sale of Goods Act 1979

This article will critically discuss the extent to which, if at all, the longevity of the Sale of Goods Act 1979 is linked to the fact that many of its provisions are default provisions that can be displaced by the terms of the contract. It will do this by discussing the following: (i) The reasons for the Longevity of the Sale of Goods Act (“SGA”) 1979, (ii) The amendment to the Sale of Goods Act 1893, (iii) The Introduction of the Consumer Rights Act 2015, (iv) Sale of Goods Act 1979 still applies to non-consumers and arrives with a conclusion.

The first instance of consumer law was the Assize of Bread and Ale 1266. The 19th century was characterised by the “Freedom of Contract” and Caveat Emptor” – buyer beware. Its purpose was to ensure competition within the market place and protecting competitors, rather than the consumer. There was not much legislation, therefore the common law was important, and the onus was on the purchaser. The longevity of SGA 1979 can be explained by flexibility within the Free Market and Invisible hand theory. The Invisible hand theory proposed by Adam Smith[1], stated that the market would lead itself to the direction of equal distribution of resources. Second, Stephen Copp[2] argues the Free Market theory is where there the market its own is capable of generating their own rules without government intervention. It recognises party autonomy[3] and the freedom of contract. By allowing parties to set their own terms or contract out provisions that are less favourable to them bring the benefit of flexibility[4]. For instance, merchants allow their customers to return/refund their goods even though without a legitimate reason. Consumers and businesses in this context, has superseded any binding regulations, instead contracting their “own provision”. We shall remember, commercial law is rooted upon the principle of contact law and fair balance of interests of parties[5]. The SGA 1979 piece of legislation is a commercial leg into which consumers have rights. It can be argued the SAG is not a consumer piece of legislation.

Since SGA 1893 was enacted 126 years ago and the standards of goods is largely different comparing to now. The purpose of the amendment was largely intended to reflect the standards of commercial practise at that time. Section 14(2) of the 1893 SGA provided there is an implied condition that the goods shall be of merchantable quality. The interpretation of “merchantable quality”[6] incurred the problem of inconsistency of the law in entrenching the law and protecting consumer welfare. Buyers have to rely on the promise/knowledge of the seller on the good. The buyer would be easily deceived if the seller is acting in bad faith.

This is because the term did not incorporate the intention of the buyer in purchasing the good. The good could be held merchantable though it did not fulfilled the buyer’s intended purpose of the good. Lord Wright’s explained of “merchantable quality” in Canada Atlantic Grain Export Co. v. Eilers[7] as the good fulfil the description sold under the contract and if it is reasonable, they are of merchantable quality.  For instance, a good equipped with a wide range of purposes will be merchantable, even though it does not fit the intended purpose of the buyer.[8] In the case of Kendall v Lillico[9], the court held the good to be merchantable on the ground that the good incorporates multi purposes, failing to satisfy the buyer's intended purpose, did not render the good to be un-merchantable. The court arrived with a similarly conclusion in the case of Brown v Craiks[10]. It would be unfair, in a consumer’s perspective to consider a good being merchantable and did not fulfil the purpose behind buying the good. The leading Australian case of Australian Knitting Mills Ltd. v. Grant [11] seems to have provided a clearer approach in interpreting the definition, prior to the amendment. Dixon J held that the definition should be read as allowing the buyer to acquaint facts of the good and any hidden defects exists. It essence, whether the good is merchantable depends the acceptability of the buyer. In contrast, Lord Reid in Henry Kendall & Sons v. William Lillico & Sons Ltd[12] explains the buyer must be bought in some later knowledge[13] in order to determine whether the good is satisfied within statutory meaning. It concerns with whether the goods is usable hence satisfy being merchantable. It was mention by Farwell LJ observed in Bristol Tramways, etc., Carriage Co. Ltd. v. Fiat Motors Ltd.[14], the definition of merchantable quality should be regards as the condition and quality of the good after the buyer has fully inspected the good.[15] It was not until the amendment of Supply of Goods (Implied Terms) Act 1973 to the Sales of Goods Act 1893, the act finally included an implied terms on satisfactory quality to protect consumers.

We can see from the above cases, there is an inducting element is trade where the buyer would rely on the seller’s promise in a contract of sale. In cases where the seller does not fully acknowledge the intended purpose of buyer for purchasing a multi-purposing good, the seller seems to have protected by “merchantable quality”, leaving consumers in disadvantages with no remedies.

Second, prior to the amendment of SGA 1893, the law did not specify the time limit in terms of inspecting the good. It turns to the question of what would render a reasonable time for inspecting the good and is it necessary to include a reasonable time? The problem of the right to reject relates the reasonable time when the buyer has deemed to have accepted the good. SGA provides the buyer also deemed to have accepted the goods when after the lapse of a reasonable time he retains the goods without intimating to the seller that he has rejected them.[16] In Manifatture Tessile Laniera Wooltex v J B Ashley Ltd[17], Megaw LJ concerns the right to reject includes the reasonable interests of the buyers and of the sellers. It should also take into account of all circumstance. Rougier J in Bernstein v Pamson Motors (Golders Green) Ltd[18] interpreted reasonable time, despite the car has been driven three weeks and some miles, it should be read as reasonable interval in a practical and commercial sense and taking into the account of the buyer’s point of view of the nature of the goods and its function. It was criticised by Sir Andrew Morritt VC in Clegg v Andersson t/a Nordic Marine[19] that Bernstein is no longer reflecting the law since it was decided before the amendment of the Sale and Supply of Goods Act 1994. It left us with the question whether it can still remains good law in the area of “reasonable time”. The court held the buyer in Clegg was entitled to reject the goods after six months of receiving the good. The court in the case did consider the consistency of the buyer’s conduct after he had received the good[20]. Moreover, in Varley v Whipp[21] the court held small amount of use was not acceptance of the good, therefore, the buyer could reject the good. J H Ritchie Ltd v Lloyd Ltd[22] is an interesting case where reasonable time was not the critical factor. Lord Hope held that there was an implied obligation for the seller to provide information of the good in order for the buyer to make an informed decision to accept or reject the good[23] ; Lord Rodger held the three should be an implied term in a separate agreement when the buyer seeks for repairs from the seller[24].

The 1999 Consumer Sales Directive[25] was serving as an EU regime in consumer remedies, along with Sales of Goods Act 1979. The directive proposed[26] consumers shall be entitled to have the goods brought into conformity free of charge by repair, replacement or rescind the contract. Right to reject was not suggested in the directive. Besides, it suggested the right to bring conformity to contract shall not expire within two years of the delivery[27], resolved the confusion of reasonable time[28]. In 2002, the UK implemented the directive with the intention to services as a secondary protection to consumer rights. The distinctiveness of the EU regime in offering consumer remedies is the “right to consumers.” Article 3 of the Directive did not provide the “right to reject” when the good was bought into inconformity. However, it allows consumer to rescind the contract, the right to seek for repair or replacement of the good free of charge. However, in 2006 European Commission Green Paper observed the previous directive were based on minimum harmonisation in consumer welfare. For instance, member state were providing different degree of consumer protection on the basis of minimum harmonisation of EU Law, to some extent, consumers may not understand whether the protection in their home country would still apply in cross-nations transactions, increasing the barrier of trades between the internal market within the EU. The proposal suggested there is a need to achieve maximum harmonisation of consumer rights. The Consumer Rights Act 2015 seeks to provide a clear and easier interpretation of the application of law in protecting consumer rights.[29] It expands the scope of protections of SGA 1979 with regards to satisfactory quality. Section 9 of CRA 2015 provides a list of factors that a reasonable person would considers as satisfactory. More importantly, it includes the right to repair or replacement of the good, reduction in price, partial rejection of goods and the right to reject.

The longevity of Sales of Goods Act 1979 has not been demolished albeit it had some incompletions in consumer protection. The Sale of Good Act is still remains the default position for business to business traders. The nature of SGA reconciles with the Laissez-faire economics[30] theory. It allows businesses can negotiate their own terms freely and regulate themselves freely. While these basic rights cannot be excluded from contracts with consumers, they can be excluded from contracts between businesses. Parties would have to ensure the terms and conditions often contract does not put either of them into disadvantage. Ultimately, it is the party autonomy that drives the longevity of the Sales of Goods Act. In Printing and Numerical Registering Co v Sampson[31], Sir George Jessel stated: “…men of full age and competent understanding shall have the utmost liberty in contracting, and that their contracts, when entered into freely and voluntarily, shall be held sacred and shall be enforced by Courts of Justice.”

Despite the freedom of contract is common recognised by the court that the SGA 1979 still offers a minimum protection to non-consumers trades. Section 14(2) provides 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. Potential parties to contracts should enter the market using their own thinking to ensure that they decide which bargains will work in their favour and stick to them. This freedom authorises parties to openly choose others as consensual contractual partners. Parties need to be free to express and choose their own individual terms due to each contract needing to be unique, based on the differences of people characters and what they want to expect to see from their contracts and how it can benefit them. Nevertheless the growth of both private and public sector large corporate enterprises made it almost impossible for the fragile party to exercise freedom, this is due to the pressure on for forming agreements with larger companies. Hence a party could be apprehended to the will of these more economically powerful contracting parties rather than practising their rights to an equal tender.

In conclusion under the CRA 20015 the standards consumers can expect in relation to goods are taken from those contained in the SOG Act these include implied terms that the goods will be of satisfactory quality, they be fit for purpose and they match their description. The right to reject follows after any breach of the implied terms.  Under the CRA 2015 there is a short–term right to reject.  The time limit for exercising the short–term right to reject is “the end of the thirty days beginning with the first day after all these has happened: a) ownership or possession in the goods has been transferred to the consumer; b) he goods have been delivered; and c) where the contract requires the seller to install the goods or take other action.  The thirty days is a time limit and the consumer is able to reject before something mentioned in (a)-(c) has happened. R Goode suggested it is impossible to expect the original SGA1893 stood the test of time without any amendments, when it was enacted in the era of horse and buggy[32]. The SGA 1979 still has it power and distinctiveness in governing international trades, mostly because the flexibility it has inherited through the changes in terms and the scope of protection as time and form of trades has evolved. The predictability and emphasises on party autonomy has been the most persuasive values for its longevity.

Footnotes

[1] Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations ( first published 1776, CreateSpace Independent Publishing Platform; Annotated edition 2017) 540

[2] Stephen Copp , The Legal Foundations Of Free Markets (Institute of Economic Affairs 2008) 26-30

[3] Robert Bradgate, Commercial Law (3rd edn., Butterworths, 2000) 6

[4] Stephen Copp , The Legal Foundations Of Free Markets (Institute of Economic Affairs 2008) 158-188

[5] Roy Goode, Goode on Commercial law (5th edn., Penguin 2016)1299

[6] s14(1) Sales of Goods Act 1893

[7] Canada Atlantic Grain Export Co. v. Eilers [1929] 35 Ll.L.Rep. 206, 213

[8] ibid 839

[9] [1969] 2 AC 31

[10] [1970] 1 All ER 823

[11] Australian Knitting Mills Ltd. v. Grant [1933] 50 C.L.R. 387 , 413

[12] Henry Kendall & Sons v. William Lillico & Sons Ltd (1969) 2 AC 31 (Lord Reid)

[13] ibid 75-76

[14] Bristol Tramways, etc., Carriage Co. Ltd. v. Fiat Motors Ltd. [1910] 2 K.B. 831

[15] ibid 841

[16] s34(4), Sales of Goods Act 1893

[17] Manifatture Tessile Laniera Wooltex v J B Ashley Ltd [1979] 2 Lloyd's Rep 28, [32]

[18] Bernstein v Pamson Motors (Golders Green) Ltd [1987] 2 AER 220, 230

[19] Clegg v Andersson t/a Nordic Marine [2003] EWCA Civ 320, [62]

[20] ibid [50]-[66]

[21] Varley v Whipp (1900) 1 QB 513

[22] J H Ritchie Ltd v Lloyd Ltd [2007] 1 WLR 670

[23] ibid [18]

[24] ibid [34]-[38]

[25] Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees

[26] ibid Article 3

[27] ibid Article 5

[28] Hick v Raymond and Reid [1893] AC 22, [29]

[29] s34, Explanatory Notes of Consumer Right Act 2015

[30] Toufic Gaspard, A Political Economy of Lebanon, 1948-2002 (1St edn., Brill) 5

[31] Printing and Numerical Registering Co v Sampson (1875) L.R. 19 Eq. 462, 465

[32] R. Goode, ‘Removing the Obstacles to Commercial Law Reform’ (2007) 123 LQR 602