English Commercial Law Outline & Section 1

OutlinePART I – SALE OF GOODS LAW• Section 1 - Definition of the Contract of Sale • Section 2 - What the Duties are Between the Parties Engaged in the Contract of Sale • Section 3 - The Requirements Necessary to Enforce the Contract of Sale • Section 4 - The Competing Claims to the Ownership of Goods • Section 5 - The Remedies Available to the Seller and the Buyer PART II - CONSUMER LAW• Section 6 - Consumer Protection • Section 7 - Consumer Credit and ProtectionPART III – E-COMMERCE LAW• Section 8 - Online CommercePART IV – COMPETITION LAW• Section 9 - Theoretical Foundations of Competition Law• Section 10 - Practical Aspects of EC/UK Competition Law

Suggested ReadingIndicative Reading List• Sale of Goods

– JN Adams, Atiyah’s Sale of Goods (12th edn Pearson, Harlow 2010)– R Bradgate, Commercial Law (3rd edn Butterworths, Chippenham 2000)– E McKendrick (ed), Goode on Commercial Law (4th edn Penguin, London 2010)– LS Sealy and RJA Hooley, Commercial Law Text, Cases and Materials (4th edn OUP, Oxford 2009)

• Consumer Law– M Furmston and J Chuah, Commercial and Consumer Law (Pearson,Harlow 2010)– G Woodroffe, Consumer Law and Practice (8th edn Sweet & Maxwell, London 2010)– JK MacLeod, The Law Relating to Consumer Sales and Financing of Goods (2nd edn Routledge Cavendish, London

2006)

• E-Commerce Law– P Todd, E-commerce Law (Cavendish, London 2005)– D Bainbridge, Introduction to Information Technology Law (6th edn Longman, London 2007)– FF Wang, Law of Electronic Commercial Transactions (Routledge Cavendish, London 2010)

• Competition Law– R Whish, Competition Law (6th edn OUP, Oxford 2008)– M Furse, Competition Law of the EC and UK (6th edn OUP, Oxford 2008)– B Rodger and A MacCulloch, Competition Law and Policy in the EC and UK (4th edn Routledge Cavendish, Abingdon

2008)

Ethos of English Commercial Law

• The Englishman has been a trader in his heart.• Him having excelled in commerce meant that

he would excel in private law. • The sophistication of his commercial laws has

caused his laws to be the setting paradigm for the laws of other jurisdictions, jurisdictions which did not have to be connected with the old British Empire only.

The Sale of Goods Act as the Core of English Commercial Law

• The old Sale of Goods Act 1893 is responsible for much of the development of world trade, as we know it

• This Act has been simplified but essentially preserved in 1979 in the form of the Sale of Goods Act 1979 (as amended in 1994)

• The USA, before the birth of the Uniform Commercial Code in 1952, had a law which was not very different to our Sale of Goods Act (SGA)

Economic Liberalism: When you read the Sale of Goods Act, you read Adam

Smith• Economic Liberalism lies at the heart of the

Sale of Goods Act 1979• The theories of Adam Smith had only

prevailed by 1893 when the original Sale of Goods Act came to life

• That spirit – to this day – prevails and defines the application, the functions and the operations of English Commercial Law

Section 1 (Definition of the Contract of Sale) – Learning Outcome

• To understand the differences between a contract of sale regulated by the Sale of Goods Act 1979 and the non-sale of goods contract.

Characteristics of the Contract of Sale

• No formalities are required to create contracts for the sale of goods and they may be written or oral.

• The governing statute will be the Sale of Goods Act 1979 (SoGA 1979), as amended.

• The defining characteristics of the contract of sale are contained in s 2 of the SoGA 1979. The contract of sale may be conditional, s 2(3), a future sale, s 2(5), or an agreement to sell, s 2(6).

Characteristics of the Contract of Sale (continued)

• s 2(1), delineates the following requirements:-Seller and buyer-The transfer or agreement to transfer property-Money consideration-Price-Goods

A Seller and a Buyer

• Both the seller and the buyer must have capacity and be committed to selling and buying.

• If these basic requirements do not occur, the contract is simply void.

• In Weiner v Harris (1910) the court held down the basic principles as to how to determine whether the parties are sellers and buyers. In this case a manufacturer delivered jewellery to a dealer ‘on sale for cash only or return’. The transfer of property was to be effected only if the payment had been made.

Transfer or agreement to transfer property

• Section 61 (1) SoGA 1979 reads as follows: ‘property means the general property in the goods, not merely a special property’

• Transfer of ‘ownership’ or ‘absolute legal right’ (see Battersby and Preston (1972) 35 MLR 269; cf Ho [1997] CLJ 571)

• (O)WNER ------------------ (B)AILEE (O remains the owner despite the transfer of the goods and in fact B is under a legal obligation to return the goods to O)

Transfer or agreement to transfer property (continued)

• South Australia Insurance v Randell (1869) LR3PC101: farmers deposited grain with B asking them to return the equivalent of it at any time or to pay its cash value. Held that the intention of the parties here was that grain deposited with B should become B’s property, in the same way that money deposited with a bank becomes the property of the bank.

• Mercer v Craven (1994) CLC328HL, however, the stored grain was to remain with the depositors at all times. In addition the grain of different farmers was mixed. HoL held that the mere fact the goods belonging to more than one owner were mixed does not destroy the owners’ property in those goods. As a matter of intention, which is the main test here, the intention here was one for a bailment.

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.

• In Esso Petroleum v Customs & Excise Coms (1976) 1ALLER117 this arose. The question there was concerned with special coins featuring images of the 1970 England World Club Squad and entitling four gallons of Esso petrol. The majority of the HoL held that if there was a contract entitling the motorist to a coin, the consideration provided by the motorist was entering into the main contract to buy petrol; any contract relating to the free coin was not of sale.

Money consideration (continued)• In Aldridge v Johnston (1857) 7E&B885 the buyer and the

seller set a price as well exchange of goods (barley for bullocks). It was assumed that the transaction was one of sale, the crucial factor having been that both goods that were to be exchanged were valued in money terms.

• In Flynn v Mackin (1974) IR101 a dealer agreed to supply a motorist with a new car in return for the motorist’s old car in addition to giving the motorist £250 in cash. That was a contract of barter and not of sale (but ‘if the transaction has been that the new car was to be a particular price but that in lieu of that price the vendor would take the existing car and cash for the balance, the contract would have been a contact for sale’).

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.

• Sec. 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, Sec. 8 (2) requires the buyer to set a reasonable price.

• Sec (9) determines those situations where the price is to be set by a third party.

• In May v Butcher (1934) 2KBHL there was an agreement for the sale of goods with ‘prices to be agreed upon from time to time’. Thus the court concluded that it did not have to set the price for the contract under s. 8 of the Act.

A Price (continued)

• In Foley v Classique Coaches (1934) 2KB1CA there was an agreement for the supply of petrol between B and S ‘at prices to be agreed’ which was enforced. To reach this conclusion the court took into consideration the fact that this agreement was part of a larger agreement and in any case there was an ‘arbitration clause’ in it, which meant that in case of disagreement it was for arbitration to decide what the proper price to be paid for petrol would be.

Goods• Sec. 5, distinguishes goods in the following way:

- Existing goods, these are goods that are in the possession of the seller at the time of the contract. - Future goods, those goods that have to be manufactured or acquired by the seller pursuant to the contract. -Specific goods, those goods that are identifiable in a complete form at the time of the contract. -Unascertained goods, those goods that are not specific and are sold by a generic description.

• Sec. 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 where it was held that a software program per se is not a good but if the program is supplied via some physical medium e.g. a diskette or a compact disk then this can be taken to be a good.

The Most Important non-sale of Goods Transactions

• Those contracts that do not satisfy the requirement of sec 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 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 Most Important non-sale of Goods Transactions (continued)

• The main statutes regulating non-sale of goods contracts are the Supply of Goods and Services Act 1982 along with the Supply of Goods (Implied Terms) Act 1973.

The Most Important non-sale of Goods Transactions – Hire Purchase (continued)• The most important non-sale of goods transactions are the

following: • 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.

• OWNER (BAILOR) ----------------------- HIRER (BAILEE) (with option to purchase the goods at the end of the hire period)

The Most Important non-sale of Goods Transactions – Hire Purchase (continued)• 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. Here the HoL held that a hirer under a hire purchase agreement is not a person who has agreed to buy the goods; thus a wrongful disposition by the hirer would not affect the owner’s rights. In other words, the supplier was offered here greater security than a normal conditional sale would.

The Most Important non-sale of Goods Transactions- Work and Materials

(continued)• Work and Materials • 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.

• SERVICE PERSON --------------------- CUSTOMER (for performance of service)

• The distinction between the two becomes blurred in instances of those contracts where both goods and services are transferred.

The Most Important non-sale of Goods Transactions – Work and Materials

(continued)• In Clay v Yates a contract for a printer to print

a book, the printer supplying the paper was interpreted as one for work and materials, applying the “substance of the contract test”. This test was upheld in Robinson v Graves (substance of the contract was the production of something to be sold OR that skill and labour have to be used for the production of the article?).

The Most Important non-sale of Goods Transactions – Work and

Materials (continued)• In Hyundai Industries v Papadopoulos the HoL held

that a contract to build and supply a ship was a contract of sale, even though this was not pure sale and had the characteristics of a building contract.

• In Beta Computer Systems v Adobe it was held that a contract for the supply of software is not a contract for the sale of goods but a sui generis contract, having some of the characteristics of a sale and some of a licence.

The Most Important non-sale of Goods Transactions – Exchange and Barter

(continued)• 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.

• (S)UPPLIER ----------------- CUSTOMER (goods in consideration of things other than money)

• The courts in these instances will look to the intention of the parties, see the cases of Esso Petroleum v Customs and Excise (see above), Chappell & Co. v Nestle Ltd.

The Most Important non-sale of Goods Transactions – Hire and Bailment

(continued)• 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.

• OWNER (BAILOR) ----------------------- HIRER (BAILEE) (only possessory interest is created; thus no legal interest)

• e.g. contracts for the hire of goods• contracts for custody for reward• contracts of pledge, where the owner deposits them with a

bailee as security for a loan

Thank you.