SALE OF GOODS LAW

CUFS16 (January 2012)

SALE OF GOODS LAW Businesses as well as consumers are usually free to enter into contracts on whatever terms they see fit to agree. However, contracts involving sales of goods can be subject to a range of statutory provisions. Consumers have greater protection than buyers who are dealing in the course of a business. Let the buyer beware or caveat emptor does not apply to all transactions and anyone selling goods in the course of a business to consumers should be aware that the law will imply certain terms into all such transactions.

Consumers are defined as people who are buying for purposes not related to their trade, business or profession.

1. Legislation

The Sale and Supply of Goods Act 1994 introduced significant changes to areas formerly covered by the Sale of Goods Act 1979, the Supply of Goods (Implied Terms) Act 1973, and the Supply of Goods and Services Act 1982. However, the 1979 Act, as amended, remains the bedrock of our sale of goods law. General sale of goods law is discussed in this fact sheet. Our fact sheet on Sale of Goods Law (Consumer Protection) deals with legislation that is specifically designed to protect buyers who are consumers. This includes the Unfair Terms in Consumer Contracts Regulations 1999, the Consumer Protection (Distance Selling) Regulations 2000, the Sale and Supply of Goods to Consumers Regulations 2002 and the Consumer Protection (Cancellation of Contracts Concluded away from Business Premises) Regulations 1987.2. Implied TermsThe terms implied into most sales of goods contracts are found in sections 1215 of the 1979 Act. Broadly speaking, they are:

Section 12: Title The general rule is that a seller must have good title, that is to say, ownership and the right to sell the goods they are selling. If the goods are stolen, the seller will not have the right to sell them and the buyer will not obtain good title. In such a situation the buyer might well find they have to return the stolen goods to the rightful owner and seek compensation from the seller, assuming they can be found.

Similarly, a person who has possession of goods that are subject to a hire purchase (HP) contract will not usually be entitled to sell them while finance is still outstanding because it is the finance company that actually owns the goods.

Section 12 applies to people selling goods privately as well as to those selling goods in the course of their business and is one of strict liability. So, the fact that the seller did not know the goods were stolen is no defence to a claim for a full refund from the buyer.

Section 13: Description If you are selling something by description it must correspond with the description given to it. So, a car advertised as being a 1994 model must be a 1994 model, rather than the front end of a 1994 model welded to the rear end of a 1990 model. Goods bought over the counter may be a sale by description so, if the buyer relies, at least in part, on any description given by the seller, those goods must correspond with that description. As with section 12, this section applies to both private sellers and those selling goods in the course of a business and is again one of strict liability. That means if a seller advertises a car for sale saying it is a 1994 model when in fact it is something else, the car will not correspond with the description. It is no defence to rely on information provided in the registration documents.

Section 14(2): Quality The Sale and Supply of Goods Act 1994 introduced the requirement that goods be of a satisfactory quality. This section of the Act applies only to sellers who are acting in the course of a business. The Act sets out a list of criteria to be met for goods to be of a satisfactory quality. In order to satisfy that test, regard must be had to the following:

Fitness for all the purposes for which goods of the kind in question are commonly supplied.

Appearance and finish.

Freedom from minor defects.

Safety.

Durability.Buyers cannot expect a legal remedy in respect of

Fair wear and tear;

Misuse or accidental damage; or

If they decide that they no longer want the item

Further, where defects or special uses have been specifically brought to a buyers attention, or where an inspection is carried out and a reasonable inspection of the goods would have revealed those defects, a buyer will not be able to rely on any of the above implied terms when arguing breach of this section. In some cases, therefore, a buyer who has not had the opportunity to carry out a reasonable inspection will be in a better position than one who has.

The section goes on to state that goods will be of a satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory taking into account such things as any description given, the price paid and all other relevant considerations.

Sale of goods law generally and the requirement that goods be of a satisfactory quality applies equally to used or second-hand goods as well as new goods.

The requirement that goods be fit for all the purposes for which goods of that kind are commonly supplied significantly strengthens the consumers position. It may be possible to suggest, for example, that a television and video combination set would not meet the test of satisfactory quality where it was not possible to video one television channel whilst watching another. Arguably, one of the common purposes of buying a television and video together is the ability to watch one channel whilst taping another. So, unless the salesperson had specifically brought those characteristics to the attention of the consumer prior to purchase, it may be possible to argue that the goods were not of a satisfactory quality.

The reference to appearance and finish and freedom from minor defects is again subject to the test of reasonableness. A reasonable person would not expect used or second hand goods to be of the same appearance and finish as new goods. Similarly, goods may still satisfy the test of satisfactory quality notwithstanding a minor defect where a reasonable person would regard the defect so minor as to be insignificant.

The requirement of durability will not necessarily extend the reasonable period of time (see below) within which consumers are entitled to reject faulty goods and claim a full refund. That would place an unreasonable burden on retailers where a fault did not become apparent until many months after purchase. However, because durability is now a specific requirement, the consumer will have a stronger right to claim damages for faulty goods, even though the fault may not have appeared until some months after purchase.

Each case will vary depending on the circumstances but, obviously, all goods will suffer wear and tear over a period of time. Therefore, where a fault develops some months after purchase the consumer will probably have lost the right to reject the goods because more than a reasonable period of time has elapsed. However, they may be entitled to damages if the fault was not due to normal wear and tear but because the goods were not of a satisfactory quality at the point of sale. Since 31 March 2003, where the buyer is a consumer, they also have additional rights.

Section 14(3): Fitness for purpose If the buyer, prior to purchase and expressly or by implication, makes known to the seller any specific purpose for which the goods are required, they will have to be reasonably fit for that specific purpose. That would be the case regardless of whether it was a purpose for which goods of that type are commonly bought or sold.

It is worth repeating that all of section 14 only applies to people who sell goods in the course of their business. So, anyone selling a car privately by placing an advertisement in the local paper must ensure that they have good title to sell the vehicle (s.12) and that it corresponds with any description given (s.13). However, they will be under no obligation to see that it meets the criteria of satisfactory quality as laid down by section 14 provided they are not acting in the course of their business.

Section 15: Sale by sample If the contract is for a sale by sample there will be an implied term that the bulk of the goods will correspond with the sample in quality and be free from any defect making the goods not of a satisfactory quality which would not be apparent upon a reasonable examination of the sample.

3. Remedies

GenerallyA buyers remedy for breach of any of the implied terms will vary depending on whether he is acting in the course of a business or as a consumer. Where any of the implied terms have been broken, the buyer may be able to reject the goods and claim a full refund (with or without damages) provided they have not accepted the goods (see below) or claim damages based on the cost of a repair or the difference in value. Consumers have additional rights.

Partial rejection may be possible where some mixed goods, sold in units, are of a satisfactory quality and some are not. Buyers may now be able to reject only those goods that are faulty and accept the rest. This improved right is subject to one qualification. Partial rejection will not be allowed where goods are sold as a whole unit and splitting them would impair the value of the goods or the character of the unit. An example of a whole unit would be reference works such as encyclopaedias made up of several volumes. Splitting them, allowing the buyer to reject one volume because it was not of a satisfactory quality, would alter the character and reduce their value. The buyer would have to reject them all or accept them all.

Buyers who are consumers

Goods will meet the test of satisfactory quality if they are of a standard that a reasonable person would regard as satisfactory. Again, each case will be decided on its own facts. If goods are not of a satisfactory quality, or do not conform with the contract, that is to say, they are faulty, the consumer has a number of options available.

Until recently, the 1979 Act gave all buyers of faulty goods just 2 main remedies. To reject the goods outright and claim a full refund (plus damages, if appropriate) or bring a claim of damages for the cost of a repair. As with all claims based on contract in the UK, these rights are available for 6 years. Since 31 March 2003 where the buyer is a consumer, they have additional rights.

Depending upon the circumstances, the consumer who buys faulty goods may now be able to claim either a repair or a replacement. Where that is not possible they could then claim either a partial or full refund of the purchase price. These rights are discussed in more detail in the fact sheet on Sale of Goods Law (Consumer Protection).

Buyers in business sales

Not every breach of contract will be significant enough to allow for rejection when the buyer is also acting in the course of a business. Section 15(A) of the Sale of Goods Act 1979 states that the implied terms as to satisfactory quality will not allow the buyer to reject where the breach or damage is so slight that it would be unreasonable to allow the buyer to do so. In such circumstances, the buyer will be restricted to a claim in damages, say, for the cost of repairing the goods to the standard of a satisfactory quality.

4. Acceptance of the GoodsBuyers may lose the right to reject goods if they have accepted them. Acceptance may be intimated to the seller or by doing an act inconsistent with the rights of the owner or by deemed acceptance if the buyer keeps the goods for more than a reasonable period of time.

A buyer will not be deemed to have (legally) accepted the goods until he has had a reasonable opportunity of examining them to ascertain whether they conform to the contract or, if the sale is by sample, by comparing the bulk with the sample. So, a buyer who signs for delivery of goods will not, necessarily, lose the right to reject them as faulty until he has had a reasonable opportunity of examining them, regardless of anything that might be written on the delivery note. Where the buyer in this situation is a consumer he can never lose that right to reject by agreement or waiver. Where a commercial buyer takes delivery of goods and signs a delivery note stating that the goods have been accepted then it will be a question of fact whether the buyer has had a reasonable opportunity of examining those goods and legally accepted them. Where a buyer allows the seller to attempt a repair of faulty goods, that will not necessarily be regarded as acceptance of the goods and the buyer would still be able to reject the goods if the fault remained. Further, where goods which have been purchased are discovered to be defective, a term could be implied into the contract entitling the buyer to be told what the defect was (even if the seller repairs the defect) because this information may be necessary to enable to buyer to make a properly informed choice between accepting or rejecting the goods. If the buyer is not given this information they may be entitled to reject the goods.It would be a different matter where the buyer takes faulty goods to anyone other than the seller for repair, unless they were able to argue that was necessary due to an emergency.

A reasonable period of timeA buyer of faulty goods will lose the right to reject those goods by deemed acceptance if they keep them for more than a reasonable period of time. Exactly what amounts to a reasonable period of time is not defined in any legislation and it has been left to the courts to decide this on a case by case basis.

A reasonable period of time may be as little as three to four weeks or as much as one or two years depending on the circumstances. The only thing that can be said for certain is that if the delay is unfairly prejudicial to the seller, the buyer will most likely lose the right to reject and only be able to claim damages if the goods are faulty.

Say, for example, that a consumer purchases a washing machine to be installed into a brand new kitchen which is being fitted. There may be a delay that has nothing to do with the consumer. A prudent consumer might not unpack the machine until it is ready to be installed for fear of it being damaged. If the machine was then found to be faulty there may have been a delay of more than three or four weeks. But it would still be arguable that the consumer had not had a reasonable opportunity to carry out an inspection until the machine was ready to be fitted and would therefore still be entitled to reject the machine if not of a satisfactory quality.

Compare the above with a consumer who buys a pair of skis at a bargain price because it is the end of the season. They do not use the skis until their next skiing trip some 14 months later when they discover they are not of a satisfactory quality. Arguably, they would have a harder time trying to show they had not had a reasonable opportunity to inspect the goods within that period. Also, the seller would be able to argue it would be unfairly prejudicial to allow the consumer to reject the skis after such a lengthy delay, so the consumers rights would be limited to damages either for the cost of repair or the difference in value. Alternatively, under regulations introduced from 31 March 2003 the consumer may also request a repair or replacement.

The position would again be different where, for example, a fault was discovered with goods upon delivery. As long as the buyer notifies the seller immediately of that fault and makes repeated and continuous requests that the fault be remedied or asks the seller to provide information about any remedial work that might be necessary, so that the buyer can make an informed decision whether to keep the goods or not then, arguably, the buyer can not be said to have accepted the goods and would still be allowed to reject them even though, due to the sellers prevarication, that rejection may be many months after the original sale and delivery.

The above position in respect of buyers who are consumers will, obviously, have to be read in the light of the consumer regulations which came into force on 31 March 2003 (see the fact sheet on Sale of Goods Law (Consumer Protection)).

5. Supply of Goods and ServicesThe Supply of Goods and Services Act 1982 deals with contracts which are not strictly sale of goods contracts but are so similar that many of the legal principles are the same. This is usually the case where a service is being provided in addition to the sale of goods. An example would be the purchase of a kitchen or bathroom where the seller supplies not only the units that are bought but the materials and labour necessary for the fitting. The Act contains implied terms similar to the sale of goods. Broadly speaking, where the contract is for the supply of goods as well as the provision of services then the goods and materials must meet the criteria for satisfactory quality as indicated by the implied terms for sale of goods purposes. Additionally, the person doing the work must meet the standard of a reasonably competent professional exercising reasonable care and skill.

Where no time limit has been agreed in the contract, say, for the delivery of goods or completion of work, then the contract must be completed within a reasonable period of time. Similarly, where no price or charge has been agreed in advance, any charge must be reasonable in all the circumstances.

6.Links

All local authorities will have Trading Standards departments to assist consumers and retailers with any consumer problems. Details will be in your local telephone directory or search online at Trading Standards Central www.tradingstandards.gov.uk

Free advice and leaflets for consumers are also available from most Citizens Advice Bureaux. Details are again available from your local telephone directory or contact their main website for online advice and to fine your nearest bureau www.nacab.org.uk

The Office of Fair Trading is the main regulatory body and also has free consumer advice for both consumers and retailers on their website. Contact details are:Office of Fair Trading

Fleetbank House

2-6 Salisbury Square

London

EC4Y 8JX

General Enquiries: 08457 22 44 99

www.oft.gov.ukThis fact sheet was prepared by the Commercial Unit of Abbey Legal Protection. It is intended only as a guide and is not to be regarded as a substitute for consultation with one of our Legal Advisors, since every case will ultimately turn on its own particular facts and circumstances. Should you require legal advice please contact Abbey Legal Protection on 020 8730 6000. If you are driving when using the legal advice service, please make sure it is safe and legal to do so. Abbey Legal Protection offers a professional Employment Consultancy Service on a wide range of employment and HR issues including redundancy programmes, termination of senior employees and directors, inhouse training and drafting employment documentation compliant with the very latest changes in employment law specifically tailored to your business. We are successful and popular with our clients because we take a customer-focussed approach to each Employment Consultancy assignment.

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