Case Study 1 Question 1 Under the Sale of Goods Act 1979, A contract of Sale is a contract where a seller transfers or agrees to transfer goods or a service to a buyer for money, in the course of a business. The transfer must be for money, barter or exchange are not covered. The Act covers sales and agreements to sell. Question 2 In contracts for the sale of goods and supply of services certain basic provisions are implied by statute in order to provide protection to purchasers.
The main provisions derive from the Sale of Goods Act 1979 and the Supply of Goods and Services Act 1982. Section 12 of The Sale of Goods Act protects purchasers where the seller does not have the right to sell the goods. Section 13 relates when the goods are sold by description there is an implied term that the goods will correspond to that description. Section 14 of the Act ensures that businesses must sell goods that are of satisfactory quality and fit for their purpose.
Where the goods are sold by sample there is an implied term in Section 15 that the goods will correspond to the sample in quality Section 12 applies to all contracts for sale of goods so it will cover private sales in addition to where goods have been purchased from a shop or other business. Is the implied term that relates to title, The seller must have the right to sell the goods, that they are free from any undisclosed charge or encumbrance. Sub section (1) implies a term that the seller has the right to sell the goods.
This covers situations where the seller is selling stolen goods (whether the actual thief or a subsequent sale in the chain). This term is a condition in all sales. In addition to applying to stolen goods Section 12(1) also applies where the seller does not have the right to sell the goods where to do so would be breach of trademark, patent or copyright: for example, Niblett v Confectioners’ Material (1921), where Niblett purchased 1000 tins of condensed milk from Confections’ Materials. The tins were labelled ‘Nissly’.
Nestle claimed that if they attempted to sell these on, they would apply for an injunction to prevent the sale as the label was very similar to their own labels for their condensed milk. Niblett agreed not to sell them and brought an action against the sellers. Sub section (2)(b) implies a term that the purchaser will enjoy quiet possession of the goods. This acts as an on-going assurance that no one will interfere with the buyer’s right to possess or use the goods. As in the case of Microbeads v Vinehurst Road Markings (1975) Microbeads purchased some road marking machines.
After the purchase a third party was granted a patent right in the machines. This meant that Microbeads could not use the machines unless they were granted a licence to do so. There was no breach of section 12(1) as at the time of the sale the seller had the right to sell the goods. However, there was a breach of Section 12(2) in that the buyer could not enjoy quiet possession of the goods. Section 13 of the Act states that where there is a contract for the sale of goods by description, there is an implied term that the goods will correspond with the description.
If the buyer sees the actual goods before the sale then Section 13 cannot be relied upon as in the case of Harlington & Leinster v Christopher Hull Fine Art (1991). The painting was described in an auction catalogue as being by German impressionist artist Gabrielle Munter. Both the buyers and the sellers were London art dealers. The sellers were not experts on German paintings whilst the buyers specialised in German paintings. The purchasers sent their experts to inspect the painting before agreeing to purchase. After the sale the buyers discovered that the painting was a fake and worth less than ? 00. They brought an action based on Section 13 Sale of Goods Act in that the painting was not as described, however by sending their experts to inspect the painting this meant the sale was no longer by description, and Section 13 only applies to goods sold by description and therefore the buyers had no protection. Section 13 is simply concerned with description and not quality as was made clear in Re Moore & Landauer (1921) A contract for a sale of 3100 tins of peaches described the tins as being packed in cases of 30.
When they arrived the tins were packed in cases of 24 although the agreed overall number of tins was supplied. The purchaser was entitled to reject the goods as they were not as described. Section 14 Is 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. Sub section (2A) For the purposes of this Act, goods are of satisfactory 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.
Sub section (2B) relates to the quality of goods and includes their state and condition and (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, are in appropriate cases aspects of the quality of goods. As in the case Stevenson v Rogers (1999) Rogers was a fisherman and sold his fishing boat to Stevenson, who brought an action against Rogers based on breach of Section 14 of the Sale of Goods Act as the boat was not of satisfactory quality.
Section 14 only applies to the sale of goods sold in the course of a business. Roger argued that the sale of the boat was not in the course of his business. His business was catching fish and selling them, he was not in the business of buying and selling fishing boats. The court agreed with Stevenson that the sale was in the course of the business and Roger had to ensure the boat was of satisfactory quality. Section 15 applies to all sales by sample irrespective of whether it is a private sale, consumer sale or business to business sale.
Also Section 15 (2) has an implied term that the bulk will correspond with the sample in quality and that the goods will be free from any defect, making their quality unsatisfactory, which would not be apparent on reasonable examination of the sample, this only relates to quality and not to other matters such as colour. In the case of Ruben V Faire Bros (1949), the buyers had been shown a sample of Linatex fabric. When the fabric arrived, it was crinkly it was not the same as the sample, which was soft.
The sellers advised them to warm the fabric to make it go soft, however the sellers were in breach of Section 15, as the bulk should be as the sample. Question 3 Troy’s legal rights to pursue the store are that the condition of the radio operated helicopter breaches section 14(2) of the Sale of Goods Act 1979, for not being of satisfactory quality. In the case of Godley v Peryy (1960) a young boy lost an eye when he fired a stone from a plastic catapult he bought from the shop.
It was seen that the catapult was neither of merchantable quality nor reasonably fit for the purpose under section 14 of the Sale of goods act. No reasonable person would believe that a remote controlled helicopter that explodes and loses control to be of satisfactory quality. The relevant aspect is safety and fitness for the purpose. So the helicopter breaches section 14(2) and (3). Under the terms of section 15b (1) Troy is entitled to damages and under section 53A (1) damages are payable for losses directly and naturally arising.
Question 4 Vanessa does have recourse to legal action following her injuries. As Vanessa was not the purchaser, no contract exists, so the Sale of Goods Act cannot be used. Previously before the Consumer Protection Act was passed the user had to rely on the law of delict, and prove that someone in the supply chain was negligent as in the case of Donoghue and Stevenson. However, the introduction of the Consumer Protection Act, clarified the situation on product liability, so that the person making the claim, does not have to be the purchaser.
The injured party does not need to prove negligence, just that there has been an injury, there is a dangerous defect in the product and that the defect was the cause of the injury. So Vanessa would be able to sue for damages. Question 5 Under the Unfair Contract Terms Act 1977, an exclusion term must be incorporated into the contract as an express term. However if a person in the course of their business tries to restrict or eliminate liability, this would restrict them from doing so.
Under Section 16 of the Act, where there is an attempt to exclude liability for personal injury or death, then that would make it void. Therefore the notice that was displayed in the store is not worth the paper it is written on and does not exempt the store from any liability. Question 6 The liability on the helicopter is strict. The Sale of Goods Act, Section 14 states that the seller cannot blame the manufacturer. Remedy is to sue the seller for breach of contract. Section 14 includes the requirement for fitness for the purpose and quality. Troy is also entitled to claim for amages for his car and a refund of the original purchase price under section 15. Case Study 2 A consumer credit agreement is a personal credit agreement where the creditor supplies the debtor with credit. It applies to hire purchase agreements, bank loans and overdrafts, as well as the issue of credit cards and budget accounts with shops. Debtors are given protection by the Consumer Credit Act 1974. Under the Act, Section 21 only licensed traders, lenders or credit brokers may give consumer credit or hire and The Director General for Fair Trading, is responsible for the licensing of them.
These agreements are all regulated and give a range of benefits to the consumer, such as a full set of rules that all dealers must operate within, making a framework of fairness. It controls advertising so that it is true and easy to understand. Also agreements are standardised so that they show specific information on the agreement to be signed. All agreement s must be signed by the creditor and the debtor and an improperly executed agreement can only be executed by the sheriff court and if it is not on the prescribed form then it cannot be enforced at all.
The debtor also has a cooling off period, there are 14 days to change your mind and cancel the agreement. However, this is for the credit, if the debtor has formed a contract, they would still have to find another way to finance the purchase, and the contract to buy would still stand. A contract has a 5 day cooling off period once the contract has been formed and can only be cancelled in writing. The legal relationship between Soundwave and the Finance House, means that the consumer would purchase the product from Soundwave, and Soundwave would receive payment from Finance House.
It means that Soundwave have a level of certainty to receiving their money and the consumer has a quicker way of accessing the goods. Under Section 75 of the Consumer Credit Act, customers that have a claim against a supplier for breach of contract or misrepresentation will generally have an equal claim against the credit provider. With a hire purchase agreement, the cost of the goods is spread over a period of time, and ownership of the product does not transfer to the purchaser until the final payment has been made.
The consumer is responsible for repairs and damage during the hire purchase period, and the retailer can repossess the goods if the consumer fails to make payments. With a credit sale, owner ship of the goods is transferred immediately to the purchaser. Debtors can cancel a consumer credit agreement, under the Consumer Credit Act 1974, certain credit agreements can be cancelled provided there were face-to-face negotiations before the agreement and you didn’t sign the agreement on the trade premises of the creditor or supplier.
However, there are certain conditions, you must cancel in writing, and you must cancel within five days after you receive the second copy of the agreement, which the creditor is obliged to send you. After these five days, your right to cancel is forfeited. Case Study 3 Question 1 Crofters Kitchen is committing a criminal offence, as they are in breach of the Trade Discription Act 1968. This Act provides protection to consumers regarding misleading statements concerning goods and services.
The Act states that anyone, in the course of a business, applying a false trade description to any good under Section 1 of the Act, or supplies or offers to supply any goods to which a false trade description is applied, under Section 14, are guilty of a criminal offence. An example of this, is the case of Wings Ltd v Ellis (1985), a tour operator that incorrectly stated that a hotel in Sri Lanka had air conditioning. The mistake was notices, however, when a customer, Mr Wade, read the brochure, the mistake was not drawn to his attention, and an offence was committed by Wings Ltd, every time the uncorrected brochure was read and relied upon. Scottish Business Law, 3rd Edition). Question 2 There are defences available under Section 24 of the Trade Descriptions Act 1968, for the person charged. These are, that the offence was committed because of a mistake, or because the accused relied on information supplied to they by another, as it was due to what someone else did, or an accident took place, or it was beyond the control of the accused. The accused must identify and name the person responsible, in writing within a seven day period. An example of this are Ford v Guild (1990), where a motor trader as charged under the Trade Descriptions Act, Section 1, relating to a false mileage reading on a car sold to a customer. The previous owner confirmed he believed the mileage to be correct, however the trader did not check this and the court found he could not rely on Section 24, as he did not take all reasonable steps and exercise all due diligence to avoid committing an offence. I feel that in this case, none of the defences are really appropriate, as there is nothing in the company’s statements to advertise this product that are true.