Topic 2 – An introduction to the law relating to the sale of goods

Question 1

What is the primary purpose of commercial law?

Answer 1

Facilitating trade and business transactions.

Question 2

What is an agreement to sell?

Answer 2

A contract of sale where property is to be transferred either in the future or on the fulfillment of a condition, s.2(5).

Question 3

What are the key drivers of commercial law?

Answer 3

Business needs, economic policies, technological advancements, and international trade agreements.

Question 4

Name three sources of commercial law.

Answer 4

Statute law, case law, and commercial customs/practices.

Question 5

Why does commercial law favor a laissez-faire approach?

Answer 5

To allow flexibility and freedom of contract in business dealings.

Question 6

What is the main reason for regulating consumer transactions?

Answer 6

To protect consumers from unfair business practices.

Question 7

What are the main objectives of the Consumer Rights Act 2015?

Answer 7

Streamline consumer rights, clarify consumer law, modernize regulations, deregulate businesses, and enhance consumer protection.

Question 8

What is the fundamental difference between B2B and B2C transactions?

Answer 8

B2B transactions assume equal bargaining power, while B2C transactions provide additional protections for consumers.

Question 9

Can businesses contract out of the CRA 2015?

Answer 9

No, businesses cannot exclude consumer rights under the CRA 2015.

Question 10

Can businesses contract out of the SGA 1979?

Answer 10

Yes, businesses can exclude or limit certain provisions in B2B contracts.

Question 11

What type of contract is covered by both the SGA 1979 and CRA 2015?

Answer 11

Contracts for the sale of goods.

Question 12

What is the key distinction between commercial and consumer transactions?

Answer 12

Commercial transactions emphasize contract freedom, while consumer transactions prioritize consumer protection.

Question 13

What is the definition of a contract of sale under the SGA 1979?

Answer 13

“A contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price”, s.2(1), SGA.

Question 14

How does the CRA 2015 expand the definition of a sale of goods contract?

Answer 14

The CRA 2015 does not expand the definition of a sale of goods contract. But includes such contracts, along with contracts for the hire of goods; hire-purchase agreements; and contracts for the transfer of goods, under contracts for the supply of goods to a consumer by a trader , s.3(2), CRA 2015.

Question 15

What is the role of implied terms in sales contracts?

Answer 15

They ensure goods meet minimum standards of quality, description, and fitness for purpose.

Question 16

Under which law are digital goods explicitly protected?

Answer 16

The Consumer Rights Act 2015.

Question 17

Which act governs remedies for defective consumer goods?

Answer 17

The Consumer Rights Act 2015.

Question 18

What is the most significant remedy introduced by the CRA 2015?

Answer 18

The 30-day right to reject faulty goods.

Question 19

How does the SGA 1979 treat remedies for defective goods?

Answer 19

It allows businesses to negotiate remedies based on contract terms.

Question 20

What is the primary principle governing contract interpretation in the UK?

Answer 20

The intention of the parties as determined by contract language and context.

Question 21

What case established the modern contextual approach to contract interpretation?

Answer 21

Investors Compensation Scheme Ltd v West Bromwich Building Society (1997).

Question 22

What is the traditional approach to contract interpretation?

Answer 22

Literal interpretation, focusing on the plain meaning of words.

Question 23

Why is the contextual approach preferred in modern contract law?

Answer 23

It considers commercial realities and the background knowledge of the parties.

Question 24

Does English law impose a general duty of good faith in contracts?

Answer 24

No, there is no overriding duty of good faith in English contract law.

Question 25

Name a case that highlighted the lack of a general good faith obligation in contract law?

Answer 25

Interfoto Picture Library v Stiletto Visual Programmes (1989). Walford v Miles (1992)

Question 26

Can good faith be implied in some commercial contracts?

Answer 26

Yes, courts may imply good faith in certain relational contracts (Yam Seng v ITC Ltd (2013)). Why in Yam Seng?

Question 27

What is the difference between good faith in common law and civil law systems?

Answer 27

Civil law systems recognize a general duty of good faith, whereas English law does not.

Question 28

How can good faith obligations affect contractual certainty?

Answer 28

Unclear definitions of good faith may introduce uncertainty in business contracts.

Question 29

What does s.6 of the SGA 1979 state about the sale of non-existent goods?

Answer 29

If specific goods perish before the contract is made, the contract is void.

Question 30

What is the effect of frustration on a sales contract?

Answer 30

It discharges the parties from their contractual obligations due to unforeseen impossibility.

Question 31

What case established the modern doctrine of frustration?

Answer 31

Taylor v Caldwell (1863)

Question 32

When does frustration apply under s.7 of the SGA 1979?

Answer 32

Where there is an agreement to sell specific goods, which subsequently perish before risk has passed to the buyer.

Question 33

How does common law frustration differ from statutory frustration under the SGA 1979?

Answer 33

Common law applies to all contracts, whereas s.7 only applies to sales of specific goods.

Question 34

Can a contract be frustrated due to increased difficulty or cost?

Answer 34

No, increased cost alone does not amount to frustration (Tsakiroglou v Noblee and Thorl (1962)).

Question 35

What is the impact of COVID-19 on frustration claims?

Answer 35

COVID-19 may constitute frustration if it renders contractual performance radically different.

Question 36

What does the Couturier v Hastie (1856) case suggest about non-existent goods?

Answer 36

If the goods never existed at the time of contract, there is no contract.

Question 37

How does s.2(1) of the SGA 1979 define a sale of goods contract?

Answer 37

A contract of sale of goods is a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price.

Question 38

Can software be classified as "goods" under the SGA 1979?

Answer 38

It depends; software on physical media has been considered goods (St Albans City v International Computers (1997)).

Question 39

How does the CRA 2015 treat software and digital content?

Answer 39

It explicitly includes digital content as part of consumer sales protection under Chapter 3 (ss.33 - 47). Software on a tangible medium is goods. The Explanatory Notes to the CRA 2015 confirm that: “A CD or DVD containing software would be 'goods'… whereas software downloaded from the internet would be 'digital content’.”

Question 40

What is a quasi-specific good?

Answer 40

A good identified from a specific source but not yet ascertained.

Question 41

What case dealt with perishing quasi-specific goods?

Answer 41

HR & S Sainsbury v Street (1972).

Question 42

What section of the CRA 2015 governs unfair contract terms?

Answer 42

Part 2 of the CRA 2015

Question 43

What is a key consumer protection in the CRA 2015 related to unfair terms?

Answer 43

The requirement that terms and notices be transparent and fair, s.62, Part 2.

Question 44

How does the CRA 2015 affect hire-purchase agreements?

Answer 44

It includes hire-purchase agreements under consumer protection laws. Hire-purchase agreements are a 'goods contract' under s.3(2)(c), CRA 2015.

Question 45

What is the impact of standard-form contracts on commercial law?

Answer 45

They help ensure uniformity and efficiency in trade.

Question 46

What case highlights the importance of certainty in contract law?

Answer 46

Arnold v Britton (2013) emphasized the need to avoid rewriting contracts through interpretation.

Question 47

What attribute does a sale contract have that an agreement to sell does not have?

Answer 47

A sale contract is a conveyance (a transfer of property).

Question 48

Distinguish between two types of sales contracts: "bargain and sale" and "sale and delivery".

Answer 48

In a bargain and sale, property passes upon completion of the contract (no requirement for delivery). Sale and delivery requires delivery to the buyer.

Question 49

How are goods defined in the SGA 1979?

Answer 49

“Goods” includes all personal chattels other than things in action and money, s.61(1), SGA 1979.

Question 50

What is the relationship between ss. 17 and 18 of the SGA?

Answer 50

S.17 applies where the timing of property is expressly stated. S.18 applies when the timing must be implied.

Question 51

What distinguishes a contract for the sale of goods from a contract for the supply of services?

Answer 51

Where the substance of the contract is the application of skill and labour rather than the supply of goods, Robinson v Graves [1935] 1 KB 579.

Question 52

In terms of a legal title and absolute interest, what constitutes a sale contract?

Answer 52

A sale contract must pass a legal title to the entirety of an absolute interest.

Question 53

What is the argument against the proposition that 'property' refers to an indefeasible title, i.e the best title.

Answer 53

That the seller has the 'right to sell' in a 'contract of sale', s.12(1) would be redundant, since having the best title gives the right to sell.

Question 54

How is property to be defined?

Answer 54

"Property" in the context of sale of goods refers to the proprietary right that is transferred by the sale, rather than the physical goods themselves. The term encompasses both the interest in the goods and the title to that interest.

Question 55

What is the implication of s.12 SGA?

Answer 55

That title is relative. If a sale could only occur where the best title was transferred, s.12 would not be needed. Having the best title would give the right to sell.

Question 56

Which prominent judge regards 'upholding the reasonable expectations of honest men' as one of the main functions of the commercial law?

Answer 56

Lord Steyn. Lecture in Kuala Lumpur in 1996.

Question 57

Who said that the law should be slow to declare any practice of the commercial community conceptually impossible?

Answer 57

Lord Hoffmann in Re Bank of Credit and Commerce International SA (No 8) (1998)

Question 58

Is a contract for the construction and sale of a cargo ship potentially covered by the SGA 1979 if occurring in a non-consumer context?

Answer 58

Yes. The construction and sale of a cargo ship appears to involve elements both of a contract for work and materials, to which the SGA does not apply, and a contract for the sale of goods to which it does. Here, focusing on the end product, because of the magnitude of the ‘goods’, the contract might be considered a contract for the sale of goods, Lee v Griffin (1861) (supply of false teeth); Cammell Laird v Manganese Bronze and Brass (1934) (ship propeller).

Question 59

Is a contract for a solicitor to produce a detailed legal document potentially covered by the SGA 1979 if occurring in a non-consumer context?

Answer 59

No. This revolves around the distinction between contracts of sale of goods from contracts for work and materials. On the substance of the contract test (see Robinson v. Graves [1935] 1 KB 579) this appears to be a contract for work and materials.

Question 60

Jake wishes to buy a new car, for business purposes, priced at £7,000 from Mary, a dealer. Mary agrees to take Jake’s old work car and to reduce the price of the new car by £1,000. Could this transaction come within the SGA 1979?

Answer 60

Yes. Contracts in which the seller agrees to take a trade-in as part of the price can come within the SGA 1979. In GJ Dawson (Clapham) Ltd v H & G Dutfield [1936] 2 All ER 232, there was a sale contract where two lorries worth £475 were sold to the buyer for two old lorries plus £250 in cash. The court’s view was that there was a sale of the new lorries for £475 and a subsidiary agreement under which that price was reduced by £225 if the buyer handed over the old lorries. This meant there were two sale contracts: the sale of the new lorries and the sale of the old lorries. If this were not the case, the buyer of the old lorries would not have rights under the SGA 1979.

Question 61

Is the purchase of computer software potentially covered by the SGA 1979 if occurring in a non-consumer context?

Answer 61

The SGA 1979 applies to "contracts of sale of goods" (s.1). Contracts of sale of goods are defined in s.2(1): "A contract of sale of goods is a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price." The position in this situation is unclear for three reasons. First, quite often property does not pass under contracts to supply software (cf. Beta Computers (Europe) Ltd v. Adobe Systems Ltd 1996 SLT 604) and therefore the SGA 1979 would not apply (as s.2 requires the seller to transfer or agree to transfer property in goods (on which see below). Secondly, if the contract is one to supply a bespoke piece of software it may be a contract for a service rather than a contract of sale of goods (cf. Salvage Association v. CAP Financial Services Ltd ((CA) unreported, 9 July 1993)). Thirdly, there is some debate as to whether software is "goods" for the purposes of the SGA 1979 (cf. St Albans City and DC v International Computers Ltd [1997] F.S.R. 251).

Question 62

Is the sale of all of the mushrooms growing in a particular field potentially covered by the SGA 1979 if occurring in a non-consumer context?

Answer 62

Under s.61(1), ‘things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale’ are goods.

Question 63

What are the advantages and disadvantages of a non-interventionist, laissez-faire approach to commercial dealings?

Answer 63

The advantages are in allowing freedom to innovation and creativity. A disadvantage may be that what is good in an individual context is bad for the system. But there has been a degree of regulation through the criminal law (penalties for false measures and adulteration of food and drink) and through contract law (implied terms as to description and quality). Also, starting in the 20th century, there has been legislation that specifically focuses on improving consumer protections in three areas: (i) the contract itself (e.g. the Unfair Contract Terms Act 1977, Unfair Terms in Consumer Contracts Regulations 1999) – both of which are now replaced in respect of consumer transactions by the Consumer Rights Act 2015; (ii) the goods and services supplied (e.g. regulating the production of certain types of goods to improve safety and quality); and (iii) the merchants who supplied particular goods and services (e.g. through licensing).

Question 64

What is meant by property?

Answer 64

The concept of ‘property’ in law consists of two elements: ‘title’ and ‘interest’. The ‘interest’ is the bundle of rights that may be transferred and their duration; ‘title’ is a claim to the interest. This distinction means that an interest may be transferred when the transferor has no good title, i.e. no good claim to the interest, although this does not mean he has no title. And then, ordinarily, the transferee will not be able to acquire good title because of the nemo dat quod non habet rule, although he may acquire some title. A sale of goods contract must involve a transfer or agreement to transfer property. A contract where the transferee is able to consume the goods before acquiring the property in the goods (ownership) is not a contract for the sale of goods under the 1979 Act, PST Energy 7 Shipping v OW Bunker Malta (2016).