English Commercial Law Module Handbook-Updated 20120612 181831
English Commercial Law Module Handbook-Updated 20120612 181831
ENGLISH
COMMERCIAL LAW
By Dr. A.E. Platsas
WELCOME NOTE
Dear all,
Welcome to the module of English Commercial Law. This is a module which touches
upon the core of English private law. The module seeks to give you advanced
knowledge on the main areas of English commercial law. We will engage ourselves
with the jewel of English commercial law, the Sale of Goods Act 1979 (as amended);
competition law, consumer law (now an autonomous offshoot of commercial law due
to the influences of European law) and e-commerce law.
Thus, the main advantage of this module is that the module will allow you to expand
on your knowledge in the leading field of commercial law. In addition, the field of
commercial law provides an excellent background for your research. I invite you to
take advantage of this fact and make the most out of this module.
In the hope that I will immerse you in the particulars and the intricacies of what is one
of the most dynamic areas of English Law, Commercial Law, I would like to wish you
all the best in this module and your studies as a whole.
Antonios Platsas,
LLB, LLM., PhD, PG Cert, Reader in Law, FHEA, Advocate.
INDEX
Sale of Goods
Consumer Law
E-Commerce Law
Competition Law
1.0 - Outcome
The students must show that they understand the differences between a contract of
sale regulated by the Sale of Goods Act 1979 and the non-sale of goods contract.
Money consideration
Money refers to the unit of account issued for the purpose of legal tender within a
legal jurisdiction. Problems arise where goods are sold for other than money or,
where money is used in conjunction with goods such as the part exchange of a car.
See the cases of Esso Petroleum v Customs & Excise Coms (1976) 1ALLER117.
Aldridge v Johnston (1857) 7E&B885. Flynn v Mackin (1974) IR101.
A price
The price is a crucial term of the contract and failure to agree on the price may be
evidence that a contract has not been concluded. S 8(1) allows the contract to fix the
price, or left to be fixed in a manner agreed, or determined by a course of dealings
between the parties. Where none of these apply, s 8(2) requires the buyer to set a
reasonable price. S 9 determines those situations where the price is to be set by a
third party. See the cases of May v Butcher (1934) 2KBHL and Foley v Classique
Coaches (1934) 2KB1CA where the courts had to decide if the parties had actually
fixed a contract price or not.
Goods
S 5, distinguishes goods in the following way:
1• Existing goods, these are goods that are in the possession of the seller at the
time of the contract.
2• Future goods, those goods that have to be manufactured or acquired by the
seller pursuant to the contract.
3• Specific goods, those goods that are identifiable in a complete form at the time
of the contract.
4• Unascertained goods, those goods that are not specific and are sold by a
generic description.
S 61 defines the types of goods that fall within the above classifications. Recently
problems have emerged regarding the classification of computer software. See the
case of St. Albans CC v International Computers Ltd. (1996) 4ALLER481
Those contracts that do not satisfy the requirement of s 2(1) will not be classified as
sale of goods contracts. It is therefore crucial to determine the nature of the contract
because in the event of it is not a sale of goods contract then the contract will be
regulated by a different statute that may not be as advantageous as the Sale of
Goods Act 1979. The main statutes regulating non-sale of goods are the Supply of
Goods and Services Act 1982 along with the Supply of Goods (Implied Terms) Act
1973.
Hire Purchase
The object of a hire purchase is to supply goods on credit terms coupled with a
security for the supplier. The legal form of a hire purchase agreement is of a hiring or
bailment of the goods by their owner (bailor) to the hirer (bailee) with the hirer being
granted an option to purchase the goods at the end of the hire period. See the case
of Helby v Matthews where the court was faced with the task of determining whether
a hire purchase agreement existed or not.
Work and Materials
As has been mentioned, the object of the contract of sale is the transfer of property
from the seller to the buyer. The object of a contract of work and materials is the
performance of a service for the customer. The distinction between the two becomes
blurred in instances of those contracts where both goods and services are
transferred. See how the courts have resolved distinctions such as this in the
following cases: Clay v Yates, Lee v. Griffin, Robinson v Graves, Hyundai Heavy
Industries v Papadopoulos, Beta Computer systems v Adobe.
Exchange and Barter
Where the consideration for a contract is not money the contract will be referred to as
either an exchange or barter. In the context of consumer contracts goods are often
supplied in conjunction with marketing promotions such as coupons or vouchers.
The courts in these instances will look to the intention of the parties; see the cases of
Esso Petroleum v Customs and Excise, Chappell & Co. v Nestle Ltd.
Hire and Bailment
A bailment and hire contract is characterised by a possessory interest in the goods
as opposed to a legal interest. In this capacity no ownership in the goods is
transferred. See the following cases where the courts have had to determine whether
the interest transferred was a possessory interest or whether the property in the
goods had been transferred: Clough v Martin, Leigh & Sullivan v Aliakmon Shipping,
Lilley v Doubleday.
1.3 - Activities
Reading
1• Bradgate, Commercial Law (3rd Edition Butterworths), Chapters 7, 8, 19 or
2• PJ Omar, ‘Contracts for the sale of goods - French and British approaches’
ICCLR 1998, 9(5), 141-145 (WestLaw)
Abstract: Although this module does not concern itself with French law, this
article explains in a simple way important areas in the Sales of Goods Act
1979. By comparing the Act with French law, an understanding through
example can be found.
Activity Number 1
“A contract is a contract, and in application there is no difference between a contract
to build a house and a contract to sell a television”. Discuss this statement in light of
the form in which contracts are classified in English law.
Activity Number 2
Identify the legal nature of the following contracts:
NOTE: These questions raise issues of quality and the passing of risk. You are not
required to discuss these issues.
11. Mike takes his watch in for a service. The jeweller performs the service and
invoices Mike for the removal of rust from inside the watch, replacing a new
battery, replacing a new watch face, and for the replacing of worn links in the
watchstrap. The links prove to be defective and the watch falls of Mike's wrist
smashing to the ground.
22. Judy purchases a satellite TV dish from Jake a local dealer. The dish is
priced at £99 but the dealer advertises that for an extra £30 they will install
the dish. Judy agrees to pay £129 and have the dish installed by Jake. Judy
pays the full price in the store and the dish is delivered later that day. The
next day Jake declares insolvency and is now unable to install the dish.
33. Bill decides to build his own "Super" computer that would exceed the
capabilities of any commercially obtainable computer. This would involve
buying a kit from the manufacturer that contains the body, motherboard, CPU,
hard drive, and memory. Additions such as a modem, DVD and CD-Writer
would have to be bought separately. Bill asks his friend Steve to build this
computer for him and to find the appropriate additions. Steve agrees to build
the computer and purchases a second hand computer from Janet for £450.
The second hand computer contains the required DVD, Modem and CD-
Writer. Steve completes the "Super" computer and charges Bill £2,500. The
computer proves defective due to defects in the DVD and modem.
1• Steve paid for the kit and charged Bill £5,000 for the finished computer?
2• Steve found the second hand computer, but Bill had gone with him and he paid
Janet for the computer?
Activity Number 3
Explain the manner in which the SoGA has classified the manufacture and use of
computer software.
2.0 - Outcome
Students must be able to categorise the duties imposed on the seller and the buyer
by the Sale of Goods Act 1979.
2.1 - Introduction
We will now establish what the duties are between the parties engaged in the
contract of sale are.
The duties of the parties are regulated by SoGa 1979 ss 27 & 28. It is the duty of the
seller to deliver the goods and of the buyer to accept and pay for the goods in
accordance with the terms of the contract. The duties of delivery and acceptance are
concurrent conditions, that is to say that the seller must be willing to give up
possession in exchange for the price and the buyer must be willing to pay the price in
exchange for the goods.
Delivery
Under s 27 delivery requires the voluntary transfer of possession from one person to
another in accordance with the terms of the contract. In Four Points Garage v Carter
(1985) 3 All ER 12 the court held that the transfer of possession may be satisfied
symbolically through the delivery of documents of title or to an agent.
Place
The SoGa 1979 s 29(2) requires the place of delivery to be determined by the
contract or if not, it will be the seller's place of business. The exception to this would
be if the goods are specific goods, then the place of delivery will be where the goods
are situated.
Time
The SoGa 1979 s 29(5) & 29(3) requires the goods to be delivered at the time
stipulated by the contract of sale, or, if not, within a reasonable time. What is a
reasonable time will be determined as a question of fact. These sections must be
read in accordance with SoGa 1979 s 10(2) which requires a determination as to
whether time is of the essence or not. See the cases of British & Common Holdings
v Quandrex Holdings (1989) 3 All ER 492, and, Bunge Corporation v Tradax SA
(1981) 2 All ER 513 for a discussion of instances where the time of delivery may or
may not be of the essence.
Amount
The contract of sale will fix the amount of goods to be delivered and failure to comply
with that term will result in an unenforceable contract. SOGA s 30, lays down a
detailed set of rules defining the buyers rights where the seller delivers more or less
than the agreed quantity of goods. In essence, if the incorrect amount is delivered
the buyer may reject the whole contract amount subject to the applicable limitations
under SoGa s 30(2A), & s 30(2B). These sections prohibit a buyer dealing as a non
consumer from rejecting goods where the shortfall is so slight that it would be
unreasonable to do so.
SoGa s 13, implies a condition that where the goods are sold by description they will
correspond with that description once they are in the possession of the buyer. The
following requirements must be satisfied:
a. Was the sale by description? See Varley v Whipp (1900) 1 QB 513, Grant v
Australian Knitting Mills (1936) AC 85
b. What was the description by which the goods were sold? See Beale v Taylor
(1967) 3 All ER 253
c. Did the description influence the buyer? See Harlington & Leinster v Christopher
Hull (1991) 1 QB 564
d. Did the description identify the commercial characteristics of the goods sold? See
Ashington Piggeries v Christopher Hill (1973) AC 441
e. Did the description identify the goods to be supplied rather than an item or location
of the goods? See Reardon Smith v Hansen-Tagen (1976) 3 All ER 570
f. Did the goods correspond to all aspects of the detail by which they were
described? See Arcos v Ronaasen (1933) AC 470 HL
Satisfactory quality
SoGa s 14(2) implies a condition that where goods are sold in the course of a
business, the goods supplied will be of satisfactory quality. The meaning of "in the
course of a business" has been given a broad interpretation, See Stevenson v
Rogers (1999) QB 1028.
Fitness for all purposes for which the goods are commonly supplied. See
Kendall v Lillico (1969) 2 AC 31, Aswan Engineering v Lupdine Ltd (1987) 1
All ER 135.
Appearance and finish, freedom from minor defects. This section attempts to
strike a balance between defects that render the goods unusable and defects
that are only minor and do not affect the usability of the goods. See Rogers v
Parish Ltd (1987) 2 All ER 232, Shine v General Guarantee Corp (1988) 2 All
ER 911, Bernstein v Pamson Motors (1987) 2 All ER 220, Millars of Falkirk v
Turpie (1976) SLT 66.
Durability and safety. Durability requires that at the time risk is transferred the
goods should not deteriorate more rapidly than can reasonably be expected.
Safety requires goods of satisfactory quality to be safe for use. See Thain v
Anniesland Trade Centre (1990) SLT 102.
Liability under SoGa s 14(2) is strict but under s 14(C), there are two exceptions:
a. Where the defects are specifically drawn to the attention of the buyer.
b. Where the buyer examines goods before the contract is made and this reveals
certain defects.
The crucial point here is that there is no obligation on the buyer to inspect, even if the
seller creates the opportunity for inspection.
a) The particular purpose must be made known to the seller and, if it is a special
purpose, that purpose must be specifically stated. See Kendall & Sons v Lillico &
Sons Ltd (1969) 2 AC 31, Ashington Piggeries Ltd v Christopher Hill (1972) AC 441,
Slater v Finning (1997) AC 473.
b) The buyer must rely on the seller in circumstances where it would be reasonable
for the buyer to rely on the judgement of the seller. See Wren v Holt (1903) 1 KB 610
CA, R& B Customs Brokers v United D.T. (1988) 1 ALL ER 847, Aswan Engineering
v Lupine (1987) 1 All ER 135.
SoGa 1979 s 12(1), imposes a duty on the seller in a contract for the sale of goods to
transfer to the buyer an absolute legal interest in the goods. Failure to transfer an
absolute legal interest will allow the buyer to reject the goods and terminate the
contract. See Niblett v Confectioners Materials Co Ltd (1921) 3 KB 387, Rowland v
Divall (1932) 2 KB 500, Barber v NSW Bank Ltd (1996) 1 All ER 906.
Sale by sample
SoGa s 15, requires goods sold by sample to be free of any defects and also for the
sample to correspond with the bulk of the goods. See Drummond (James) & Sons v
EH Van Ingen & CO LTD (1887) 12 APP CAS 284, Godley v Perry (1960) 1 WLR 9.
The meaning and application of acceptance under the act will be discussed later
under the buyer's remedies.
Mention must be made to the possibility of excluding liability for breach of any of the
duties imposed on the seller and buyer. The ability to limit or restrict liability in a sale
of goods contract is regulated primarily by the Unfair Contracts Terms Act 1977, ss 6
& 7. This act states that the duty to pass good title under Sec. 12 cannot be limited
or excluded under any circumstances. In relation to ss 13, 14 & 15, these terms
cannot be excluded or limited where the buyer deals as a consumer. In instances
where the buyer is not dealing as a consumer these terms can only be excluded if
they satisfy the test of reasonableness. See George Mitchell v Finney Lock Seeds,
AEG (UK) Ltd v Logic Resource Ltd (1996) CLC 265 and Unfair Terms in Consumer
Regulations Act 1999.
2.4 - Activities
Reading
MacKendrick’s Goode on Commercial Law (4th edn, Penguin 2010), Chapters
10, 11, 13 and 15.
Ian Brown, ‘The scope of section 12 of the Sale of Goods Act’ LQR 1992,
108(Apr), 221-223 (Westlaw)
Paul Robson & John N Adams, ‘Consumer sales’ JBL 1990, Sep, 433-437
(WestLaw)
Activity Number 1
Dimsight went to Optic, an optician, to purchase a new pair of spectacles. There was
a special promotion allowing anyone who bought any pair of spectacles for more than
£100 to get a second pair for free.
Dimsight bought one pair of spectacles for £110 and so was able to take advantage
of the special offer. When choosing the second free pair of spectacles he asked for
shatter proof plastic lenses. Dimsight was a regular squash player and he intended
to use the second pair for spectacles for playing squash but did not tell Optic his
reason for ordering them. Optic did not himself make spectacles of this kind, but
supplied the lens prescription to Toughlens, a specialist manufacturer who
manufactured the spectacles to the prescription and then sent them to Optic who
fitted them to Dimsight in accordance with his usual practice. Before Dimsight
ordered, Optic had shown him the Toughlens brochure, which described their lenses
as "ideal for all kinds of sport". That statement is true to the extent that in the present
state of lens technology there is no better lenses and, provided the lenses are well
fitted to a rigid frame, they will withstand considerable pressure, but they will shatter
on a very hard impact. In fact the pair supplied to Optic had lenses badly fitted to a
rigid frame, this was not uncommon due to the present state of the spectacle making
industry. The bad fit was not readily discernable, even to an expert, but it stressed
the lenses so as to weaken them considerably.
One day Dimsight was struck in the eye by a ball while playing squash. The lens of
his spectacles shattered and his eye was badly injured. An expert has examined the
remains of the spectacles and established that they were weaker than they should
have been because of the bad fitting, but he is not prepared to say that they would
have shattered anyway given the speed of the ball and the force of the impact.
Advise Dimsight.
Activity Number 2
Victor operates a small independent dairy but has decided to cease business
frustrated at the increasing amount of EU regulations. He owns a Bedford van, which
he has used to make deliveries of milk and dairy produce, and asks Simon, who sells
light commercial vehicles, to sell it for him.
Paul has recently started a business manufacturing his own brand "Mister Cream" ice
cream and wants to purchase a van for use as an ice cream van. He asks Arthur, a
mechanic, to look out for a suitable van for him.
Arthur sees the Bedford van at Simon's premises but does not realise that it belongs
to Victor. He explains to Simon that he is interested in the van for use as an ice
cream van. Simon replies that he is "no expert" on ice cream but advises that the
Bedford has previously been used to carry dairy produce and that he thinks it should
be suitable. Arthur makes a cursory examination of the van, which includes
examining the engine, starting it up and driving it around the block (a distance of
about half a mile) and then agrees to buy it. Simon asks him to sign a contract for
the van, and produces a printed form headed "Simon's Vehicle Sales: Vehicle Sale
Contract "Arthur signs the form as "buyer" without reading it. He pays for the van
with cash, withdrawn from the bank by Paul for that purpose.
For the first month Paul uses the van for general purposes while he is setting up his
business. He does not use it to deliver ice cream during that time. The first time he
uses it on his ice cream round the engine over heats and seizes. Moreover he
discovers that the refrigeration plant, although suitable for keeping milk, cheese and
yoghurt chilled, is inadequate for keeping ice cream frozen and all of his stock of ice
cream melts. He is advised that the van will need expensive repairs to enable it to be
used on the road as a delivery van but cannot be used as an ice cream van without
replacement of the refrigeration unit and extensive modification. However, when he
complains to Simon, Simon denies all liability, claiming that Victor was the seller of
the van, that in any case he sold it to Arthur, and drawing Paul's attention to a clause
in the contract, signed by Arthur which states that:
“No warranty of quality or fitness for any purpose is given. Simon's Vehicle Sales
accept no liability for any defect in any vehicle supplied.”
Advise Paul.
3.0 - Outcome
Students must understand the conditions attached to the passing of property and the
circumstances, which determine how risk is allocated between parties.
3.1 - Introduction
We will now discuss the requirements necessary to enforce the contract of sale. This
relates to the passing of property, the passing of risk and matters incidental to risk
and frustration.
Intention
SoGa 1979 s 17(1) states that property will pass when the parties intend it to pass, s
17(2) allows intention to be ascertained by reference to the terms of the contract, the
conduct of the parties and the circumstances of the case. Intention may be either
express, implied, or presumed. SoGa s 19, allows for the parties intention to include
instances where the seller wishes to retain his rights of disposal until the fulfilment of
certain conditions. See Dennant v Skinner and Collom (1948) 2 KB 164, Dobson v
General Accident and Life Assurance Corp. Ltd (1990) 1 QB 274.
SoGa s 18 rule 1, ...with specific goods in a deliverable state property passes when
the contract is made. See, Varley v Whipp (1900) 1 QB 513, Underwood Ltd v Burgh
Castle Brick and Cement Syndicate (1922) 1 KB 343.
SoGa s 18 rule 2…where specific goods are not in a deliverable state property will
pass when the goods are put in a deliverable state.
Unascertained goods
Property in unascertained goods will pass once the goods have been ascertained
and appropriated to the contract.
SoGa s 16 states that no property in unascertained goods will pass until the goods
have been ascertained. The ascertainment of the goods means that the goods have
been identified to the contract. See Re Goldcorp Exchange Ltd (1995) 1 AC 74.
SoGa s 18 rule 5 requires that once the goods have been ascertained they must then
be unconditionally appropriated to the contract. Appropriation therefore requires an
irrevocable act intending those goods to be used in the performance of the contract.
See Carlos Federspiel SA & Co v Charles Twigg & Co Ltd (1957) 1 Lloyd's Rep 240,
Hendy Lennox v Grahame Puttick Ltd (1984) 2 All ER 152, Healy v Howlett & Sons
(1917) 1 KB 337, Wardars Co v Norwood & Sons Ltd (1968) 2 QB 663, The Elafi
(1982) 1 All ER 208.
SoGa s 20(1) states that unless the parties agree otherwise the risk will follow
ownership. This applies irrespective of who has possession. See Stern v Vickers
(1923) 1 KB 78, Healy v Howlett (1917) 1 KB 337.
SoGa s 20(2) states that the general rule on risk will be displaced where the goods
are damaged as a result of the delay of one of the parties. The risk will fall on the
party at fault. See Demby Hamilton & Co v Baren (1949) 1 All ER 435.
SoGa ss 29(3) & 37 state that the transfer of risk does not affect the rights and
obligations of the seller or buyer as a bailee of the goods. The significance of this is
that if risk has passed to the buyer but the goods are still in the possession of the
seller, the seller acts as a bailee of the goods.
SoGa s 32 deals with the passing of risk while goods are in transit to the buyer. S
32(1) states that where goods are required to be delivered to a carrier, property and
risk will pass when delivery to the carrier is complete. SoGa s 32(2) places the
burden on the seller to create a reasonable contract for delivery to the carrier under s
32(1). See Thomas Young & Sons v Hobsons (1949) 65 TLR 365.
SoGa s 6, applies where the contract is for the sale of specific goods and without the
knowledge of the seller the goods have perished before the contract is made. The
contract will consequently be declared void. SoGa s 7 applies where there is a
contract for the sale of specific goods and between the making of the contract and
the passing of risk from the seller to buyer, the goods perish without fault of either
party. See Howell v Copeland (1876) 1 QBD 258, Sainsbury v Street (1972) 3 All ER
1127.
The application of the above sections requires that the goods have perished.
'Perished' occurs where the goods have been irretrievably destroyed to the extent
that it is unlikely that the goods will be bought or sold. In instances where only part of
the goods have perished, the whole contract may be avoided subject to a contrary
intention. See Horn v Minister of Food (1948) 2 All ER 1036, Asfar v Blundell (1896)
1 QB 123, Barrow Lane Ballard v Phillip Phillips & Co (1929) 1 KB 574, Bell v Lever
Bros Ltd (1932) AC 162.
3.5 - Activities
Reading
MacKendrick’s Goode on Commercial Law (4th edn, Penguin 2010), Chapters
8 and 9.
Activity Number 1
Recess Ltd are wholesale commodity dealers specialising in Rice. Consider the
legal consequences of the following transactions in which they are involved.
1. On 1st November they entered into a contract with Em Minim for the sale to
Em of 100 sacks of rice, to be collected by Em on 5th November. On 2nd
November Recess took 100 sacks from their warehouse and affixed them to
labels saying "Em Minim". The sacks were moved and stored in the despatch
area of the warehouse. On 5th November Em sent a representative to collect
the rice but it was discovered that the sacks marked with Em's name had
been ruined as a result of being soaked with water penetrating the warehouse
despatch area through a hole in the roof caused by vandals.
2. Also on 1st November they contracted with Croft Ltd to sell them 200 sacks of
beans, to be delivered in Derby where Croft have their headquarters. On 3rd
November 200 sacks were duly despatched by British Rail to "await
collection", and Croft were informed of the despatch. On the same day Croft
entered into a contract to sell "200 sacks of rice" today, despatched to us by
Recess Ltd to Shaggy. The contract required Croft to repack the beans in
2kg packages and load the packages onto pallets prior to delivery. On 4th
November Recess were informed that the beans had arrived in Derby and
could be collected. They authorised delivery to Croft who sent a
4.0. – Outcome
4.1. – Instances of Competing Claims to the Ownership of Goods
4.2. – Activities
4.0 - Outcome
Students must be able to determine those instances where the property in the goods
may pass as an exception to the general requirements for the passing of property
under the Sale of Goods Act 1979.
Exceptions
SoGa s 21(1) makes it clear that unless an exception applies under the statute no
buyer can acquire a better title than the seller has. S 21(1) allows for three
exceptions:
1. Agency
Agents have the authority given to them by the principal to transfer ownership on
behalf of the principal. In this context the agents do not have actual title to the goods
but can still transfer the title belonging to the principal. See Hely-Hutchinson v
Brayhead Ltd (1968) 1 QB 549, Freeman and Lockyer v Buckhurst Properties (1964)
2 QB 480.
2. Estoppel
The general rule is displaced where the owner is estopped from denying that the
seller has the right to sell. An estoppel is created by a representation that is
subsequently relied on. The representation may be made by words or by conduct
provided it is clear and unequivocal. See Eastern Distributers v Goldring (1957) 2
QB 600, Debs v Sibec Developments Ltd (1990) RTR 91.
3. Mercantile agents
These are created under the Factors Act 1889 s 2. Mercantile agents, or factors, are
professional agents who trade in their own names and may not disclose the identity
of their principals. Third parties dealing with mercantile agents may therefore satisfy
the good faith without notice doctrine. See Belvoir Finance v Harold G Cole (1969)
2All ER 904, Oppenheimer v Attenborough (1908) 1 KB 221, Heap v Motorists
Advisory Agency Ltd 1 KB 577.
Seller in possession
SoGa s 24 displaces the general rule where a seller no longer owns the goods in
possession but sells them to the buyer in good faith without notice. See Pacific
Motor Auctions v Motor Credits Ltd (1965) AC 867, Worcester Works Finance Ltd v
Cooden Engineering Ltd (1972) 1 QB 210, Nicholson v Harper (1895) 2 Ch 415.
Voidable title
SoGa s 23 states that the general rule is displaced if goods are sold under a voidable
title to a buyer in good faith and without notice and the title has not been avoided at
the time of sale. See Cundy v Lindsay (1873) 3 App Cas 459, Citibank v Brown
Shipley &Co Ltd (1991) 2 All ER 690, Ingram v Little (1961) 1 QB 31 (1960) 3 All ER
332, Lewis v Averay (1972) 1 QB 198, Car and Universal Finance Ltd v Caldwell
(1965) 1 QB 525.
Buyer in possession
SoGa s 25 states that the general rule is displaced where a buyer obtains possession
of goods without title and resells them to a buyer in good faith without notice. See
Four Points Garage v Carter (1985) 3 All ER 12, The Saetta (1994) 1 All ER 851,
Newtons Wembly v William (1965) 1 QB 560, National Employers GIA v Jones
(1990) 1 AC 24.
4.2 - Activities
Reading
MacKendrick’s Goode on Commercial Law (4th edn, Penguin 2010), Chapter
16.
Activity Number 1
The courts and parliament have endeavoured to strike a balance between the
competing interests created by the contractual transfer of title to property. Explain
what these interests are and how this has been achieved paying particular attention
to the doctrines of "good faith" and "notice."
5.0. – Outcome
5.1. – Sellers’ Remedies
5.2. – Buyers’ Remedies
5.3. – Activities
5.0 - Outcome
Students must be able to allocate a remedy in favour of the innocent party in the
event that the contract of sale is breached.
Personal
SoGA s 49 states that provided the seller can satisfy the statutory claim there is no
requirement to prove loss. A claim for price will only arise where the property in the
goods has passed to the buyer and the price is payable on a certain day irrespective
of delivery.
SoGA s 50 provides that where the seller is unable to satisfy a statutory claim for the
price she may proceed for damages where the buyer wrongfully refuses to accept
and pay for the goods. The seller is expected to mitigate her loss by seeking an
alternate buyer for the goods in the market. See Bem Ticaret v International Agri
Trade (1999) 1 All ER (Comm) 619, W L Thompson v Robinson (1955) Ch 177,
Shearson Lehman v MaClaine Watson (1990) 1 Lloyd's Rep 441.
SoGa s 37 allows the seller a claim in circumstances where the buyer has accepted
the goods but due to the failure of the buyer to take delivery the seller has incurred
losses.
Real
SoGa s 39 allows the unpaid seller three rights:
A lien on the goods, or the right to retain them for the price while in his
possession.
The right to stop the goods in transit
The right to resell the goods.
SoGa s 43 allows the seller to withhold delivery until he has been paid even if
property has passed to the buyer. This remedy is only available where the goods
have not been supplied on credit, if supplied on credit the credit must not have
expired, the buyer is not insolvent. Because a lien is a possessory remedy it will be
lost if the buyer obtains possession of the goods through consent of the seller.
SoGa s 44 applies in instances where the seller has lost his right to a lien due to
delivery of the goods to a carrier. In these circumstances if the buyer becomes
insolvent while the goods are in transit, the unpaid seller has the right to stop the
goods in transit and recover possession of the goods until payment.
SoGa s 48 allows a seller who has exercised his right to a lien or stoppage in transit
and still remains unpaid to sell the goods in order to recoup his losses. If the seller
does so the new buyer will get good title to the goods.
Complexities surround the actual construction and application of the clauses. This
tends to relate to what the seller is claiming or retaining:
Where the Seller claims the original goods see Clough Mill Ltd v Geoffrey Martin
(1984) 3 All ER 982, Re Peachdart Ltd (1984) Ch 131, Borden Ltd v Scottish Timber
Products Ltd (1981) Ch 25.
Where the seller claims the retention of sums due see Armour v Thyssen
Edelstahlwerke AG (1991) 2 AC 339.
Where the seller lays Claim to manufactured products see Hendy Lennox v Grahame
Puttick (1984) 2 All ER 152, Borden v Scottish Timber Products Ltd (1981) Ch 21.
Where the seller claims the proceeds of the resale of the goods see Tatung Ltd v
Galex Telesure Ltd (1988) 5 BCC 325, Compaq Computers Ltd v Abercorn group Ltd
(1991) BCC 484.
the goods for the purpose of ascertaining whether they are in conformity with
the contract.
1. SoGa s 11(4), the right to reject is lost if the buyer is deemed to have accepted the
goods under SoGa s 35. S 11(4) only applies to non-severable contracts. SoGa s
31(2) defines a severable contract as one that is delivered in instalments and
separately paid for. If the contract is severable then a breach by either party in
relation to one severable part of their obligations will not necessarily affect the other
severable obligations under the contract or the contract as a whole. See Warinco
AG v Samor SPA (1977) 2 Lloyd's Rep 582, Maple Flock Co v Universal Furniture
Products (1934) 1 KB 148 CA, Robert A Munro v Meyer (1930) 2 KB 312, Regent
OHG v Francesco of Jermyn Street (1981) 3 All ER 327.
Acceptance, which may cause the buyer to lose his right to reject, may occur in three
situations:
SoGa s 35(2) requires that the buyer to be given an opportunity to inspect the goods
and he will not have accepted the goods pursuant to s 35(1) unless he has had a
reasonable opportunity for examining the goods. SoGa s 35(3) prohibits a consumer
from losing this right in any circumstance. SoGa s 35(5) requires consideration of
whether the buyer has had a reasonable opportunity of examining the goods when
taking into account the lapse of a reasonable amount of time constituting acceptance
under SoGa s 35(4).
2. SoGa s 15(A), the right of a non-consumer buyer may be lost if the breach of the
condition is slight. Rejection here would be unreasonable and the breach is to be
treated as a breach of warranty.
3. Commercial contracts may include terms that restrict or exclude the buyer’s right
to reject.
Where the buyer has lost her right to reject she may still sue for damages.
Non delivery
SoGa s 51 apportions damages for non delivery of goods on those losses arising
directly and naturally in the ordinary course of events from the seller's breach. See
Kaines v O W (1993) 2 Lloyd's Rep 1, The Texaco Melbourne (1994) 1 Lloyd's Rep
473, Shearson Lehman Hutton v Maclaine (No2) (1990) 1 Lloyd's Rep 441.
Late delivery
If time was of the essence and goods are delivered late, damages are apportioned
on the difference in value at the time of the required contractual delivery and the
actual date of delivery. See Victoria Laundry v Newman (1949) 2 KB 528, Elbinger v
Armstrong (1874) LR 9 QB 473, Wertheim v Chicoutimi Pulp Co (1911) AC 301,
Slater v Hoyle Ltd (1920) 2 KB 11 CA.
SoGa s 53 allows for a claim of damages where the buyer may not repudiate the
contract and damages are assessed either in accordance with general principles of
damages or, the buyer may set up her claim in diminution or extinction of the price.
See George Mitchell v Finney Lock Seeds (1983) 2 AC 803, Bernstein v Pamson
Motors (Golders Green) (1987) 2 All ER 220, Slater v Hoyle & Smith Ltd (1920) 2 KB
11 CA, Bence Graphics International v Fasson (1998) QB 87.
5.3 - Activities
Reading
MacKendrick’s Goode on Commercial Law (4th edn, Penguin 2010), Chapters
14 and 15.
Robert Bradgate, ‘Remedying the unfit fitted kitchen’ LQR 2004, 120(Oct),
558-563 (WestLaw)
Abstract: s 35 Acceptance.
Activity Number 1
The buyer's expectation rests on the receiving of goods that conform to the contract
and delivered within the specified time. The seller's expectation rests on delivering
the goods and receiving payment for them. It would seem that if these expectations
are not met, the applicable remedies are relatively simple.
Explain how the SoGa deals with remedying these expectations and whether this has
created certainty and predictability.
Activity Number 2
Best Delivery Caterers has recently gone into liquidation. Mike has been appointed
as the liquidator and a number of creditors are claiming goods supplied to Best
Delivery Caterers under contracts incorporating reservation of title clauses. Advise
Mike in the following situations.
1. Munchie Ltd has supplied the Caterers with meat and poultry for the last three
years. Their last three invoices relating to the supply of 15kg of beef, 10kg of
lamb and 8Kg of chickens remains unpaid. At the time of Mike's appointment
5kg of beef, 5kg of lamb and 2kg of chickens remained in the fridges of the
caterers. The remainder of the beef was cooked and prepared and frozen for a
function next week. The lamb and chicken was used at a function last week
for which no payment has yet been received. Munchie's clause reads:
"Title to the goods supplied under this contract shall be and
remain with us until we are paid all sums due in respect of
this consignment."
2. Would it make a difference if the clause read: ‘until we are paid all sums due
on any account whatsoever.’?
3. Kitch Ltd supplied cooking equipment to the caterers. They supplied 2 ovens
at a price of £2,000 each. The ovens have been bolted to the kitchen floor and
their power cables have been fixed in ducting set into the walls and floor of
the factory. The sale contract simply states:
6.0 - Outcome
Students must understand the overall legal framework of consumer protection.
‘In the ordinary way the customer has not time to read [the standard terms], and if he
did read them he would probably not understand them. And if he did understand and
object to any of them, he would generally be told he could take it or leave it. And if
he went to another supplier the result would be the same. Freedom to contract must
surely imply some choice or room for bargaining.’1
The leading instrument in relation to unfair contract terms would be the Unfair
Contract Terms Act 1977. The Act does two things:
1. It renders certain exemption clauses wholly ineffective (ss 2(1), 6(2) & (3))
2. It subjects certain exemption clauses operational but only if they satisfy the
reasonableness test (s 2(2), 3, 8, 11)
Another instrument which deals with unfair contract terms in consumer contracts
would be the Unfair Terms in Consumer Contracts Regulations 1999, which
implemented the Directive on Unfair Terms in Consumer Contracts 93/13. Of
importance in relation to this UK Regulations/EC Directive is the fact that the test of
unfairness is one which is assessed vis-à-vis the concept[t of good faith (which is not
the case in business-to-business transactions for the sale of goods).
6.5 - Activities
Reading
3• M Furmston and J Chuah, Commercial and Consumer Law (Pearson, Harlow
2010), Chapter 7
Activity Number 1
1
Per Lord Reid at 406.
What should the preference be?: To resolve consumer law matters through private
dispute resolution or through litigation? Discuss.
Activity Number 2
Do ss 12-14 of the Sale of Goods Act 1979 (as amended) apply to transactions
between consumers and traders?
Activity Number 3
Identify two differences and two similarities between the trade law regimes for
business-to-business transactions for the sale of goods and business-to-consumer
transactions.
7.0 - Outcome
Students must understand the overall legal framework of consumer credit law and
regulation.
‘Member States shall ensure that, before the conclusion of a credit agreement, the
creditor assesses the consumer’s creditworthiness on the basis of sufficient
information, where appropriate obtained from the consumer and, where necessary,
on the basis of consultation of the relevant database. Member States whose
legislation requires creditors to assess the creditworthiness of consumers on the
basis of a consultation of the relevant database may retain this requirement’.
a) The end of the fifth day after the day on which the relevant cancellation notice
has been received or
b) If the sending of a prescribed cancellation notice has been dispensed with
fourteen (14) days after the day on which the relevant unexecuted
cancellation agreement was singed by the customer.
In English law consumer credit agreements, like any other agreements, can be
rescinded where vitiating factors are the case (e.g. duress, misrepresentation
mistake etc). Termination of hire-purchases and conditional sale agreements is
provided for in ss 99 & 100 of the CCA 1974.
7.8 - Activities
Reading
4• M Furmston and J Chuah, Commercial and Consumer Law (Pearson, Harlow
2010), Chapter 8
Activity Number 1
If a creditor has engaged in irresponsible trading, should the debtor(s) be relieved
wholly or partially their debts? Discuss.
Activity Number 2
Why should the customer have a well-established right to disengage from a
consumer credit agreement?
8.0 - Outcome
Students must understand the overall legal realities and framework of eCommerce
transactions.
storage means of expressing a contract, even though the Act does not actually refer
to the word ‘electronic’ or the like. English courts tend to take a flexible approach
when it comes to signatures through electronic means. E.g. in Good Challenger
Navegante Sa V Metalexportimport SA [2004] 1 Lloyd’s Rep 67 where the court
accepted a signature which was found on a telex; the court considered the signature
as a sufficient one for the purposes of s 30 of the Limitations Act 1980. In Mehta v J
Pereira Fernandes SA [2006] 2 Lloyd’s Rep 244 the court decided that the insertion
of an e-mail address in official correspondence would not suffice as a signature for
the purposes of the law. The effect of formalities not complied with renders the
contract unenforceable.
Under s 7 of the Electronic Communications Act 2000 full recognition of
electronic signatures is achieved. Under s 15(2) the electronic signature has to be
authentic, i.e. to be accurate.
When are e-contracts normally made?
In English contract law an offer is accepted unequivocally, unconditionally and on
identical terms (consensus ad idem). Offers in English have to be simply
communicated. In Brinkibon Ltd v Stahag und Stahlwarenhandelsgesellschaft mbH
[1983] 2 AC 34 the HoL found that a contract for the exportation of Austrian steel in
England, a contract which accepted by fax from London to Vienna was not in the
jurisdiction of English courts. When it comes to e-mails, an offer in the form of an e-
mail is worthy of acceptance only after such acceptance has been received. Online
‘auction’ sites have their own rules pointing to when a contract has been made.
Applicable/Governing Law
This, predominantly, is a matter of express clauses. The freedom if contract doctrine
largely governs the area. In the absence of an express clause to the effect of
governing law, Article 4 of the Rome Convention 1980 would necessitate that the
contract is to be associated to the law of the country to which the contract is most
closely connected.
Electronic Commerce Regulations 2002/Directive 2000/31/EC
The Directive’s aims are:
o Co-ordination of certain national laws
o Generation of a clear operations in eCommerce
o Securitisation of freedom of movement of information
o Securitisation of freedom of access to dispute resolution
The scope of the Directive is:
o Online contracts
o Remuneration matters of persons other than those who receive service
o Transmission of information on a point-to-point basis
Model Laws
These are United Nations initiatives. These tend to be adopted in EU legislation and
–by extension– in UK legislation.
8.3 - Activities
Reading
5• D Bainbridge, Introduction to Information Technology Law (Longman, London
2007), Chapters 21 and 22
6
Activity Number 1
Why eContracts are of fundamental essence in modern English commercial law?
Activity Number 2
When is an eContract normally made under English commercial law?
9.0 - Outcome
Students need to appreciate the theoretical foundations of competition law and
appreciate the overall legal frameworks in the UK and the EU.
Historically, the United States have been at the forefront of competition law
regulation. For most intents and purposes, modern competition law starts with the
American Sherman Act 1890. In England the examination and the cultivation of
competition law has actually been subjected to economic theory as late as the
second half of the 20th century. In England the first case which dealt in a way with
what we generically call ‘competition law’ would be John Dyer’s case which dealt with
restraint of trade. This was a case that was concerned with dyeing in the same town,
the town where John Dyer would exercise the craft of dyeing. In England monopolies
were actually something quite acceptable and the Crown would grant such monopoly
licences by bypassing the Parliament. With such granting of licences the Crown
would raise funds. The dispute between the Crown and the Parliament would be
resolved with the enactment of the Statute of Monopolies 1632, which abolished all
monopolies (subject to monopolies on patents for a period of no more than 21 years).
Modern UK competition law would be governed by the Competition Act 1998
and the Enterprise Act 2002. UK law is affected by the leading provisions of Articles
85 and 86 of the Treaty of Rome (these have now been renumbered as Articles 81
and 82).
Economics and Competition Law
Taking into account economics would be essential in the drafting of competition law
nowadays. The reason for this is that economics is taken into account is because we
assess macro-economic market failures, whilst relying on micro-economic analysis to
support intervention in the markets. Nonetheless, the EC Commission has attacked
a strictly economic theory analysis when legislating in competition law in its Green
Paper on Vertical Restraints by arguing that:
‘economic theory is just one of the sources of policy. In practice, the application of
economic theory must take place in the context of the existing legal texts and
jurisprudence. Secondly, economic theories are necessarily based on simplifying
assumptions often obtained in the context of stylised theoretical models that cannot
take into account all the complexities of real life cases’ (paragragh 86 of the Green
Paper).
The EU legal order comprises 27 Member States. In the area of competition law the
most important instrument would be the European Community Treaty. The most
important treaty provisions on competition law would be:
o Articles 2 and 3 (objectives of the Community)
o Articles 81 and 82 (substantive competition law provisions)
o Articles 83 and 85 (provisions to the effect of Articles 81 and 82)
o Articles 86 to 89 (provisions in relation to public undertakings and state aids)
Functions of Community Competition Law
The EC Treaty would not offer any direct guidance as to what the functions of
Community competition law should be. Effectively, the overall guidance we would
have would be found in the letter of Articles 81 and 82 of the EC Treaty.
Regulatory Organs
o The EC Commission
o The Advisory Committee
o National Competition Authorities
o European Competition Network
o National Courts
Principles Governing the Relationship between EC and UK Competition
Law
o Article 5 EC (subsidiarity): as such the Commission will assume jurisdiction
where cross-border mergers would have an impact at a cross-border level
(Regulation 139/2004)
o Article 10 EC (supremacy): there has to be sincere co-operation in the
furtherance of the Community’s tasks
o NV Algemene Transport-en Expeditie Onderneming Van Gend en Loos v
Nederlandse Belastingadministratie 26/62 [1963] 1 CMLR 105
United Kingdom
o Competition Act 1998
o Enterprise Act 2002
Regulatory Organs
o Office of Fair Trading
o Competition Commission
o Competition Appeals Tribunal
o Secretary o State for Trade and Industry
o National Courts
9.3 - Activities
Reading
7• M Furse, Competition Law of the EC and UK (6th edn OUP, Oxford 2008),
Chapters 1, 2 and 3
8
9
Activity Number 1
What are the aims of a modern competition law regime?
Activity Number 2
Have EU and UK legislation in the area of competition law converged or diverged?
10.0 - Outcome
Students need to appreciate the more practical aspects of EC/UK competition law.
10.1 - Article 81 EC
o Article 81 is relevant to co-ordinated practices restricting competition
o Violation of Article 81 may result in damages, penalties and alteration of
market behaviour
Prohibitions
o Direct or indirect price fixing
o Limitations or controlling of markets, production
o Distortion of share markets or sources of supply
o Application of non-equivalent conditions to comparable market operations
o Making the conclusion of contracts conditional upon the acceptance of other
parties of secondary obligations which have no connection with the subject of
the original contracts.
Effect
Provisions falling foul of Article 81 are rendered ab initio void.
10.3 - Article 82 EC
o Article 82 applies to undertakings having an abusive type of conduct and a
dominant position in the market.
o Whether or not an undertaking has a dominant position this will be assessed
by the nature of the market in which the undertaking operates and by the
power it enjoys in such a market
o Dominant position means to control a ‘substantial part’ of the market
o Abuses take an expansive meaning and can be exclusionary and exploitative
o For a prohibition to operate an effect on trade on different Member States has
to be manifested
o An ‘objectively justifiable’ abuse of dominant position is in fact not abusive.
o Violation of Article 82 may result in damages, penalties and alteration of
market behaviour
Practical Manifestations of Undertakings with a Dominant Position
o Direct or indirect imposition of unfair prices or trade practices
o Limiting markets, production and technical evolution to the detriment of the
consumer
o Application of dissimilar conditions to comparable transactions
o Making the conclusion of contracts conditional upon the acceptance of other
parties of secondary obligations which have no connection with the subject of
the original contracts.
10.5 - Activities
Reading
10• M Furse, Competition Law of the EC and UK (6th edn OUP, Oxford 2008),
Chapters 9, 11, 14 and 15
11
12
Activity Number 1
Are Article 81 EC and Chapter I prohibition of the Competition Act 1998 compatible?
Are Article 82 EC and Chapter II prohibition of the Competition Act 1998 compatible?
Activity Number 2
Give practical examples of an undertaking’s dominant position in a given market
(whether national or regional).