Commercial Law and Law of Sale and Consumer Protection

Commercial Law and Law of sale and consumer protection

  

 

Introduction

            A contract of sale of goods refers to “a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called a price"[1]. The three main components in this case are goods, property, and money consideration. According to the SGA, “Goods” can be defined as “emblements, industrial growing crops and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale" - this also includes all tangible moveable things”[2]. Property refers to transfer of ownership through selling[3], while money consideration is the amount of money paid for such transfer of ownership of goods[4].  By applying these elements to the facts of the case under review, it emerges that there is a contract between Eva and CDS Ltd because Eva gave money consideration to CDS Ltd for transfer of ownership of chain saw and electric greenhouse heater to him. 

Grounds on which Eva could bring a claim for breach of contract

            There are various grounds on which Eva could bring a claim for breach of contract by CDS Ltd.  By selling a particular good to a consumer, the retailer consumer enters into a contract or legal agreement with that consumer. Over and above other express terms that the two parties might agreed upon when entering into the contract, the 1979 Sale of Goods Act implies extra statutory terms into such a contract with a view to protecting the consumer. Consequently, a buyer benefits from statutory legal rights in case the good they have bought is faulty, meaning that it fails to conform to the terms of the contract. Such rights are often enforceable against the seller of the goods, as opposed to the manufacturer. This is based on the fact that the retailer is the one who entered into a contract with the buyer, as opposed to the manufacturer who is responsible for production of the goods. Accordingly, the retailer has a responsibility to ensure that the goods that he sells conform to the expected quality parameters. 

However, the retailer can in turn claim against the wholesaler, who will then claim against the manufacturer as the 1979 Sale of Goods Act makes a provision for such a chain of claim. In the event that a product develops a fault, the consumer could claim for repair, replacement or refund, but this will be determined by how long they have been in possession of the product. 

Certain implied terms under the 1979 Sale of Goods Act extends legal protection to the consumer to expect goods of satisfactory quality considering the various relevant conditions, such as appearance and finish, safety and durability, fitness for purposes, and freedom from minor defects. What is deemed as being 'satisfactory' is partly determined by how the item has been described and the price paid.  However, there can be no legal remedy for a product in case of wear and tear; when there has been an accidental damage or misuse of the product; or in the even that the consumer decides that they do not need the item any more[5]. Also, there can be no legal remedy for the consumer in case the goods in question can the consumer was aware of it prior to purchasing the item or such faults would have been obvious upon reasonable inspection.

            In order that the terms of a sale can be deemed as being valid, this is subject to the operation of common law, along with the associated statute. Based on the facts of the case, it seems as if there could be exclusion clauses to the terms of sale. An exclusion clause is defined as a contractual term whose goal is to limit or exclude the liability of a party to a given contract, most likely the seller[6].  A key rule of common law is that unless terms of a contract have been incorporated, they do not have any effect. One ay of incorporating terms of contract is by getting the parties to a contract to sign the contractual document. This would give validity to terms of contract regardless of whether the buyer read them prior to signing, or not[7].

On the other hand, in case the document is brought to the attention of the buyer following the completion of the contract, it means that the terms as contained in the document cannot be integrated into the terms of the contract. Applying these findings to the facts of the case, the contractual terms were displayed by a small notice at the cash desk but Eva did not notice them. Nonetheless, we could successfully argue that such a notice does not amount to a contractual document seeing as neither party signed it.

            The seller should be knowledgeable about the specific purpose for which the goods are intended. In order for the act to apply, the seller is required to be knowledgeable of the purpose for which the goods ordered by the buyer are intended. From the case provided, Eva requested the help of the store assistant, Jason for advice on the most suitable chain saw that would enable her prune apple tress, as ell as a reliable heater that would keep her prized orchids at a suitable temperature. In this case, Jason was a sales assistant at CDS Ltd and hence fulfil the definition of a seller under the under section the Commercial Code-Sales Act (section2-2-315) in which the seller of goods “at the time of contracting has reasons to know any particular purpose for which the goods are required and the buyer is relying on the seller's skills or judgement to select or furnish suitable goods, there is an implied warranty that the goods shall be first for such purpose”[8].

Eva explicitly told Jason her purposes for buying the chain saw and an electric greenhouse heater. The fact that Jason permitted Eva to select the goods without any additional input signifies that Eva was relying on Jason’s judgement regarding her purchases. Eva indicated to Jason the purposes for which she was buying the goods and accepted the goods that Jason recommended implying that she was at the mercy of his judgement and skill.

Therefore, the seller became aware of Eva's purpose of purchase and reliance at the time of the sale, as opposed to after.

Reliance could be implied, and hence need not be express, with evidence showing that retail consumers largely depend on the judgement and skills of sellers in selecting his stock[9] while the seller often depends on the manufacturer's information, supplied in the forms of promotional material, in identifying goods fit for the buyer's purpose. Even as this could point towards a lack of reliance on the seller's judgement and skill, and hence no breach of the contract's implied terms, recent evident point towards the fact that retailers' reliance on the judgement and skills of manufacturers in identify goods most suited for a specific purpose is sufficient[10].

Eva can claim for compensation of the electric greenhouse heater seeing as it failed to maintain the correct temperature on account of a defective thermostat unit, a defect that can be traced back to the manufacturer. This caused Eva financial loss after all her orchids that she had stored in it died. They were valued at £2000. Eva was scheduled to display her orchids at the Hanley Flower Show the following week where she anticipated benefiting from considerable sales and valuable publicity.  There was also the damage to the chain saw while Eva was pruning her apple trees that also caused severe cuts her face, in addition to breaking her expensive protective glasses.   

Can CDS Ltd rely on terms in the notice?

At the cash desk where Eva was paying for her items, a small notice indicated that CDS Ltd would refund the price paid for a good that did not meet the commercially acknowledged quality standards. The notice further stated that all claims to the seller must be made within 21 days of buying the goods. CDS Ltd also claimed that it would not assume any liability for defects in goods sold, and neither does it provide a guarantee that goods sold would be fit or suitable for the purposes for which they are meant to fulfil. However, it is important to note that the terms of the notice by CDS Ltd contravene certain provisions of consumer protection laws and in particular, the Sale of Goods Act[11], which has since been replaced by the Consumer Rights Act[12]. As the retailer, CDS Ltd cannot apportion blame to the manufacturer by indicating that they will not assume any liability for defects of goods sold. In this case, the retailer has a contract with the consumer and hence the rights are against CDS Ltd, as opposed to the manufacturer.

CDS Ltd's statement that all claims must be made within 30 days is also contrary to stipulations by the Sale of Goods Act which provides that the consumer ought to be given 'reasonable' time within which they can assess the goods and ascertain that they are satisfactory. Should the consumer ascertain that the goods are of unsatisfactory quality during this time, he/she has a right to 'reject' them and have the seller refund their money.

However, this needs to be done within a 'reasonable' time. In this case, a reasonable tie shall be reliant on the nature of the product but is often not very long. For example the Consumer Rights Act provides that the consumer has 30 days within which they have a right to reject the goods sold to them in case they are unsatisfactory.  After the expiry of the 30 days limit, the consumer is no longer entitled to a full refund for the goods purchases in case it develops a fault. Eva does not get to use the items bought at CDS Ltd until after two months. Therefore, going by the provisions of the Consumer Rights Act, she is not entitled to a full refund. However, Eva is still entitled to a replacement or repair of the items even though the 30-day time limit has elapsed.

            On the issue of suitability of goods, section 14(3) of the 1979 Sale of Goods Act demands that”they are reasonably fir for the intended purpose[13].” It is important to note that this particular provision does not give an absolute guarantee regarding the issue of suitability of goods and as such, aspects similar to those taken into account when determining satisfactory quality will also be factored in. As such, aspects like price, durability and age ought to be considered. However, CDS Ltd shall be held liable in case of latent defects that could render the goods sold to Eva not fit for purpose. This is the case even where the seller might not have been in a position to identify the defects by exercising their skills and care. Accordingly, in Frist v Aylesbury Dairy[14], the court found the seller of milk that was infected with typhoid liable even though this particular defect was unknowable. Kendall v. Lillico[15] has also supported this strict approach.

Section 14(2) of the 1979 Sale of Goods Act addresses the issue of implied terms regarding the fitness or quality of goods supplied. The implied term following the sale of a good by a seller is that such items should be of satisfactory quality. The bottom line is that the consumer buys such an item trusting that it is of satisfactory quality. Before 1994, the requirement stated that goods being sold should be of merchantable quality. In this case, the Act gives room for an objective test to establish I what a reasonable individual is likely to describe as satisfactory.

In addition, the courts have also singled out factors that could either lower or raise the expectation of satisfaction. For instance, in Bernstein v Pamson Motors[16], the defendant had sold the plaintiff a new car. However, after the plaintiff had used the car for three weeks during which time it had clocked 140 miles, the car broke down, and the plaintiff had to tow it, incurring additional costs. After the plaintiff had complained, the seller fixed the car using the manufacturer's warranty. Nonetheless, the plaintiff was determined to have the contract annulled revoked and that he should be paid for damages. In his ruling, the court held that the contract could not be revoked although the plaintiff was entitled to compensation for damages incurred.

In Bartlett V. Sydney Marcus[17], the court ruled that in the even that a second had car developed upon being sold develops a clutch problem and the seller inform the buyer about it, the buyer is no longer protected by the Act. Crowther v Shannon[18] involved a Jaguar car whose engine seized 3 weeks after its sale. This has an 8 year old car that had only accumulated 85,000 miles. However, in its ruling, the court held that the car did not qualify to be described as of merchantable quality.

Remedies to Eva if her claim for breach of contract is successful

            The remedies available to the buyer for breach of contract are an essential component in the choice of legislation that parties involved in the sale of goods engage in. In particular, the law seeks to protect the buyer who has invested their money and time to enquire, research, and negotiate with the seller. Accordingly, the seller seeks an assurance that in the event that the seller knowingly breaches the sales contract on anything goes wrong he stands to gain satisfactory relief from his remedies that fall under the applicable legislation[19]. As a means of discouraging individuals from breaching a contract, and as a means of compensating the injured individuals for potential losses, we have various forms of remedies under the law for breach of contract, including contract recession, damages, price reduction, specific performance, and contract modification. Damage refers to the compensation, usually in monetary terms, that the Court awards a person who has been suffered a loss or been injured as a result of the wrongful actions of another party.

It is quite clear that there has been a breach of contract in the case provided. Accordingly, various remedies are available to Eva:

Rejection of goods

            Eva may reject the goods, thereby repudiating the contract. On grounds that the seller has breached some of the implied terms in the contract, such as failing to ensure that the goods supplied are suitable for a specific purpose or are of merchantable quality. However, considering that Eva has already accepted the goods and used them, and that the 21 days specified by the seller as the time to make any claim has also elapsed, this particular right could be lost to Eva. Accordingly, Eva is best adviced to treat the seller's breach of condition as nothing more than a breach of warranty. This will effectively limit Eva's remedy to damages claim.

Reduction in the price of goods

            Article 50 of the CISG (Contracts for the International Sale of Goods) allows the buyer to ask for a price reduction in case the goods fail to conform to their contractual quality, description and quantity[20]. In this case, the buyer could reduce the price of goods commensurate with the loss in value of the goods supplied[21]. Nonetheless, in the event that the seller offers to remedy the defect, the buyer cannot reduce the price[22].

Seek damage for contractual breach

            Damage is by far the most suitable remedy in case there has been a breach of contract for goods sold. The buyer, in line with Article 45(1) (b) of CISG, has been granted permission to claim damages in the event that the seller renegedes on his obligations as stipulated in the contract, or as described by this Convention[23]. Eva may seek consequential damages. These particular types of damages seek to reimburse an individual who has suffered a loss or been injured for indirect damages besides the contractual loss suffered.  In the case of Eva, she lost £2000 after all her orchids died following the malfunctioning of the electric greenhouse heater. She also lost in a potential increase in sales which she would have gained from the valuable publicity of displaying her orchids at the Hanley Flower Show.  For there to be a recovery, it is important that the injuries incurred “flow from the breach”, meaning that they ought to have come about as a direct consequence of the breach.

In addition, both parties ought to have foreseen these injuries at the time of entering into contract[24]. In Victoria v. Newman[25], the plaintiff had bought a boiler but was delivered 5 months late. This saw the buyer lose a lot of business because he lacked the capacity that the new larger boiler would have afforded him. The court awarded him damages as a result of loss of business occasioned by late delivery of the larger boiler. However the court did not award the buyer losses incurred following the inability to service a lucrative contract that he stood to gain in the event that the boiler had been delivered on time. If we could apply these facts to the case, Eva could expect to receive damages for her inability to sell orchids. However, she may not expect to receive damages for her inability to display her orchids at the Hanley Flower Show, and neither should she expect damages for her work suffering.  

            Another form of damage that Eva could seek is non-pecuniary and pecuniary damages. In this case, non-pecuniary damages refer to damages paid in order to compensate the intangible damages suffered by the plaintiff as a result of psychological and physical suffering and pain, loss of life's expectations, and other loss of amenities that cannot be arithmetically calculated[26]. Eva suffered non-pecuniary damages after the chain saw flew off and caused serious damage to her face. Her expensive protective glasses were also damaged, not to mention that she underwent physical and psychological pain as a result of this accident.

In addition, the accident left her unproductive for sometime. On the other hand, pecuniary damages are often computed based on such calculable losses as the potentially lost profits and earnings, or other expenses incurred.  Eva incurred a cost in the form of hospital bills after the accident with the chain saw. This along with the cost of the orchids can be computed and hence would constitute pecuniary damages.  

It is important however to note that in order for a seller to successfully claim damages from the buyer under English law, he should not have tried to annul the contract. Where this is the case the buyer is adviced to treat the seller's breach of condition as a breach of warranty, as opposed to viewing it as a basis for rejecting the goods and with it, repudiating the contract.  The only exception to this directive is there is “an express or implied term of the contract to that effect”[27]. Since there appears to be no implied or express term that towards this end by the contract, Eva is thus best advised to view the seller as having breach a warranty.  However, some of the provisions of CISG are bedevilled with ambiguity in terms of their application. On the other hand, English law grants damages as its key remedy in case of breach of contract. In this case, English law takes into account the uniqueness of damages and the test of inadequacy as a means of avoiding unwelcome outcomes[28].

Conclusion

Based on the facts of the case, Eva can bring a claim against CDS Ltd on grounds that the chain saw and the electric greenhouse heater that the store sold her were neither fit for specific purpose, and nor did they give her satisfactory quality. The implied terms in regards to fitness for specific purpose and satisfactory quality are conditions that afford Eva the right to reject the goods sold to her by CDS Ltd and/or claim damages from the store. Eva may also decide to seek remedy in line with sec. 48 (a) and (f) of the 1979 Sale of Goods Act. On the issue of damages that Eva may be awarded, she could expect to be awarded damages for losses that occurred naturally as a result of loss or breach which she might have foreseen at the point of entering into contract, and should emanate from the breach.

 

 

 

Bibliography

Books

Francis Rose, Blackstone's Statutes on Commercial and Consumer Law 2016-2017 (Oxford University Press 2016) 174

Martin Ebers, André Janssen and Olaf Meyer, European Perspectives on Producers' Liability: Direct Producers' Liability for Non-conformity and the Sellers' Right of Redress (Walter de Gruyter 2009) 259

Nicholas Kouladis, Principles of Law Relating to International Trade (Springer Science & Business Media 2006) 177

Nicholas Ryder, Margaret Griffiths and Lachmi Singh, Commercial Law: Principles and Policy (Cambridge University Press 2012)

Paul Dobson and Robert Stokes, Commercial Law 8th Edn. (Sweet and Maxwell, 2012).

William Putman, Legal Analysis and Writing (Cengage Learning 2012)

William H. Putman and Jennifer Albright, Legal Research, Analysis, and Writing (Cengage Learning 2013)

Journal Articles

Ali Zareshahi, ‘Comparative Study of Damages and Price Reduction Remedy for Breach of Sale Contract under CISG’ (2016) 9 EILJPL 126

Majdzadeh k Khandani ,’ Does the CISG, compared to English law, put too much emphasis on promoting performance of the contract despite a breach by the seller?’ (2012) 1MLR 98

Online journals

Nevi Agapiou,’ Buyer’s remedies under the CISG and English sales law: a comparative analysis 2016. https://lra.le.ac.uk/bitstream/2381/36373/1/2016AGAPIOUNPhD.pdf accessed 04 January 2017

Jessica Tam,’ Types of Damages Available for Breach of Contract’ 2016

<http://www.legalmatch.com/law-library/article/types-of-damages-available-for-breach-of

contract.html> accessed 03 January 2017

Case Laws

Bartlett v Sidney Marcus Ltd [1965] 1 WLR 1013

Bernstein v Pamson Motors (Golders Green) Ltd [1987] 2 All ER 220

Crowther v Shannon Motor Co [1975] 1 WLR 30

Frost v Aylesbury Dairy Co Ltd [1905] 1 KB 608

Henry Kendall Ltd v William Lillico Ltd [1969] 2 AC 31

Jewson Limited v Boyhan [2003] EWCA Civ 1030

L'Estrange v F Graucob Ltd [1934] 2 KB 394

McIntyre v. Docherty. (2009).

Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. [1949] 2 K.B 528

Acts

Consumer Rights Act 2015

Sale of Goods Act 1979. s.2(1)