Amendments of Sale of Goods Act

INTRODUCTION

The Sale of Goods Act 1893 [“1893 SGA”] was re-enacted as the Sale of Goods Act 1979 [“1979 SGA”] following a 1973 amendment and changes made by the Unfair Contract Terms Act 1977. Since then, the 1979 SGA has been further amended in a piecemeal fashion and on several occasions. This essay will focus on three amendments in particular. Firstly, the replacement of the implied term “merchantable quality” with “satisfactory quality”. Secondly, the limitation of the implied term of “merchantable quality” to cases where the seller sells “in the course of business”. Thirdly, the creation of an additional remedy of repair and replacement, and fourthly, allowing a purchaser of an undivided share in an identified bulk to become an owner in common of the bulk if he has pre-paid the price.

The effectiveness of these amendments will be assessed in light of several commerce trends of the 21st century, namely, the increase in consumption levels, in particular of consumer durables such as electrical appliances, the phenomena of e-commerce, the resulting need for greater and more nuanced consumer protection; and moving away from the consumer, the expansion of bulk sales and trade in general.

THE AMENDMENTS

“Satisfactory quality” in lieu of “merchantable quality”

Section 14(2) of the 1893 SGA provided that “where goods are bought by description from a seller who deals in goods of that description (whether he be the manufacturer or not), there is an implied condition that the goods shall be of merchantable quality.” Following calls for clarification as to what “merchantable quality” meant, the Supply of Goods (Implied Terms) Amendment Act [1] introduced a statutory definition of “merchantable quality” [2] . Accordingly, goods are of a merchantable quality “if they are fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances.” In the Sale and Supply of Goods Act 1994 [3] , the implied term of “merchantable quality” was substituted by an implied term of “satisfactory quality” [4] , a change which is better suited to meet the commerce requirements of the twentieth century.

This is achieved firstly by the the deletion of the word “merchantable”. As the UK Law Commission Report on the Sale and Supply of Goods [5] observed [6] , “merchantable” relates to “merchants” and trade. This is “inappropriate” in the context of a consumer transaction, a problem amplified by the advent of consumerism in the 21st century. According to the Office of National Statistics in the UK [7] , spending on consumer durables in the UK has increased steadily since 1970s. For example, in 1983, 18% of households had a video recorder whereas this proportion rose to 88% in 2000.. In addition, the variety of goods bought and sold has become greatly varied over the years. Whereas Farwell LJ in Bristol Tramways v. Fiat Motors Ltd [8] observed that, “merchantable quality seems more appropriate to a retail purchaser buying from a wholesale firm than to private buyers, and to natural products, such as grain, wool, or flour, than to a complicated machine” [9] .

In addition to replacing “merchantable quality” with “satisfactory quality”, the Sale and Supply of Goods Act 1994 also widened the notion of “quality” to include several aspects such as “fitness for all the purposes for which goods of the kind in question are commonly supplied” “appearance and finish”, “freedom from minor defects”, and “safety” and “durability” [10] . These changes do well to make consumer protection more robust, an increasingly important requirement in the 21st century where increasingly complex and globalised supply chains mean less control over the quality of goods. In addition, the consumer is “almost always buying goods for domestic use…and not for the purpose of making a profit [and so] will not usually be content with defective goods when he intended to buy perfect goods” [11] .

“Fitness”

Prior to the amendment, goods had to be fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description, price (if relevant) and all other relevant circumstances” [12] . This did not mean that goods had to be fit for “all their normal purposes”, but rather that they had to be fit for one or more of the common purposes [13] . In contrast, section 14(2B) of the SGA should be interpreted to mean that goods have to be fit for “all the purposes for which goods of the kind in question are commonly supplied”, not just one or two of the common purposes. This certainly goes some way to ensure that goods attain a higher standard of functionality than before.

“Appearance and finish” and “Freedom from minor defects”

The insertion of “freedom from minor defects” provides an important clarification that fitness for purpose(s) is not the overarching test of quality. Indeed, consumers should not have to accept minor defects just because they do not interfere with the functionality of the product.

However, this safeguard is not robust enough. One of the problems of the old provision was that it allowed a seller of a good with a minor defect to avoid liability under 14(2) by showing that goods of that type can “reasonably expect” to possess minor defects. [14] This is illustrated by Millars of Falkirk Ltd v. Turpie (1976 S.L.T. (Notes) 66) [“Millars”] where the court held that a car that had a slight oil leak in the steering system was of merchantable quality because it was not exceptional that new cars arrive with minor defects. Turning to the present 14(2A) of the SGA, although “as is reasonable to expect” has been replaced by what “a reasonable person would regard as satisfactory” (which is not very different from the former) and clarified by the express requirement of “freedom from minor defects”.

However, the broad qualification of “all the other relevant circumstances” presents a not dissimilar problem from the erstwhile “as is reasonable to expect”. This can be seen in the 2004 case of Bramhill v. Edwards [15] where a motor home that was two inches wider than the legal limit in the UK was still of “satisfactory quality” under section 14(2A) of the SGA. This was because the court accepted evidence that a significant number of over-width motor homes were being used in the UK and that the authorities were turning a blind eye to it. In other words, it was still open to the seller to argue successfully, as in Millars, that a good with a “minor defect” is still of satisfactory quality if a significant number of goods of that type possess minor defects. This however has the effect of encouraging a lowering of standards of quality.

Notwithstanding the above loophole, the new provision would certainly raise overall standards of quality.. [16]

“Safety” and “durability”

The express inclusion of “safety” is especially important with today’s increasing ownership of electrical appliances. This is echoed by the Law Commission Report which states, “safety is an important part of the quality of many modern consumer goods so that it would be odd to omit reference to it in the SGA [17] . The requirement of “durability”, which means that goods should last for a “reasonable time” [18] , is a new feature and indeed one that enhances consumer protection.

Other aspects of quality

The Law Commission Report stated that the list of factors in section 14(2B) is not exhaustive, and that other factors can be taken into account. However the approach of the courts thus far suggests otherwise. In Jewson Ltd v. Boyhan [19] , the court held that boilers that lowered the home energy ratings of flat under a government assessment procedure were of satisfactory quality because they could still perform the “intrinsic” functions of boilers, and this did not include efficient energy consumption. A less minimalistic view of quality should be adopted, especially in the context of the growing need to conserve energy. The electricity consumed by household domestic appliances in the UK doubled between 1970 and 2000 and is anticipated to rise further to unsustainable levels [20] . It is only necessary that “energy efficiency” should be an aspect of quality that suppliers need to take into account.

“In the course of business”

While the amendments culminating in the present 14(2) of the SGA do go a considerable way to afford better protection to consumers by raising the standard of quality of goods, this is severely limited by the fact that the implied term of satisfactory quality in 14(2) only applies when a seller “sells goods in the course of a business”..

The scope of “in the course of business” has been interpreted inthe case of Stevenson v. Rogers [21] [“Stevenson”]. There the court held that the sale by the defendant, a fisherman, of his fishing vessel, was a sale in the course of business under section 14(2) of the SGA. There was no need to show regularity in the defendant’s sale of fishing vessels, in fact, it was admitted that the sale was a sporadic one to sell of old business equipment. It appears that the protection in 14(2) will now affect all sellers except “purely private sellers”. [22]

However, even such a wide ambit does not go far enough to protect the consumer today. One of the dominant commerce trends in the 21st century is the growth of electronic commerce, or “e-commerce”, which refers to the buying and selling of products over the Internet. In the UK, 42.6% of consumers buy something online at least once a week. This growth is set to continue, in fact, the UK online retail market is predicted to grow by 110% in the next decade. [23] One of the consequences of this phenomenon is the entrance of many casual sellers, in other words, purely private sellers, whose sales may not even be incidental to their trade, and who sell items occasionally. It appears that they are beyond the reach of section 14(2) of the SGA and are under no legal obligation to provide goods of “satisfactory quality”.

However, there is no reason why this should be the case. It is not necessarily harsh to expect private sellers to ensure that their goods are of “satisfactory quality” within the meaning of section 14(2A) and 14(2B). The test of the reasonable person would “permit a lower standard where only a lower standard could reasonably demanded” [24] such as where private sellers offer goods at lower prices, or when they sell second-hand goods, these are all relevant circumstances that the court will take into account under section 14(2)t. In contrast, the consumer is placed in a very vulnerable position because of the lack of information to distinguish the private seller from a business seller, and secondly, because of a lack of opportunity to inspect the goods because of the online medium.

Buyers additional remedies in consumer sales

Traditionally, buyer’s remedies were confined to the right to reject goods and to terminate the contract or to obtain damages. However these are not sufficiently robust in today’s context where goods have become invariably more complex. In 1998, “mass customization”, the mass production of individually customized goods and services, was declared the organizing theme of the 21st century [25] . If so, then the designs, functions and make up of products across the board are set to become infinitely more multifaceted to meet specific consumer needs and preferences. Consequently, a consumer is more likely to want the option of having a defective good replaced, or repaired by the same supplier whom they might feel, is more acutely aware of their needs.

The new Part 5A of the SGA introduced by the Sale and Supply of Goods to Consumers Regulations 2002 [26] is laudable for strengthening the existing consumer framework by creating this additional remedy. Consumers can now require the seller to repair or replace goods that do not conform to the contract of sale at the time of delivery if it is not “impossible” or “disproportionate” taking into account several factors listed in 48(B)(4)-(5).

Undivided share in goods forming part of a bulk

It has always been a principle of English law that property cannot pass in wholly unidentified goods [27] . However, there are less extreme situations whereby the goods are not wholly unidentified, but identified to the extent that they must come from a prescribed source, in many cases, a “bulk” of homogenous goods. In such cases, section 16 of the SGA operates to prevent the passing of property in the goods to the buyer until the goods are “ascertained”.

The harshness of this rule is illustrated in the case of The Gosforth [28] where purchasers of goods forming part of a bulk cargo who had paid for goods and received delivery orders, found that the goods still belonged to the seller and could be appropriated by an unpaid creditor leaving them with nothing. This unfairness is amplified by the fact that “risk can still pass to the buyer so that a buyer of goods out of bulk who is prevented by section 16 from acquiring property in the goods may still have to bear the loss if the goods are lost or damage” [29] . In addition, the rule can operate to defeat commercial expectations and practices. As the Law Commission points out, “often, both parties to a contract for the sale of bulk goods will want the property to pass when the price is paid in exchange for the documents…of title”. These difficulties result in the law “lagging behind the commercial requirements of the day” [30] , a criticism accepted by the Law Commission.

In response, the Sale of Goods (Amendment) Act [31] provides that where is a sale of a specified quantity of unascertained goods, then as soon as all or some of these goods form part of an identified bulk and the buyer has paid the price for some or all of the goods, he he becomes owner in common of the bulk. The share which the buyer obtains is proportionate to the amount of the price he has paid [32] .

The amendments are also flexible enough to take into account the fluidity of normal trading. Although the pre-paid buyer becomes “owner in common”, the normal rules of co-ownership do not apply to require that all the co-owners must act together to demand delivery of the whole of the co-owned goods. This is achieved by deeming consent of each co-owner “to any dealing with or removal, delivery or disposal of the goods in the bulk by any other person who is an owner in common of the bulk” [33] . The ability of a co-owner to deal freely with his undivided share of the goods including a sub-sale is also facilitated by the definition of “goods” under section 61(1) which has been amended to include “an undivided share in goods”. As such these changes are laudable for keeping up with the commercial practices of the 21st century where trade in bulk goods forms a not insignificant part of commerce. As the Law Commission observed, “in the last 30 years or so the bulk cargo trade had increased to the point where it is standard practice throughout the world” [34] .

Some academics, in particular, Robert Bradgate and Fidelma White [35] , have criticised the requirement that the buyer must have paid the price for some of all the goods as introducing an “unwelcome inconsistency” [36] in the law since the passing of property is generally not determined by the payment of price. However this requirement is justifiable on the basis that it is the buyers who have paid that are in need of protection because they stand to lose not only the goods but also the price on the seller’s insolvency [37] .

CONCLUSION

The hypothesis in the question may be true of the 1893 Act. However, this is no longer the case. Most of the amendments do well to respond to the needs of commerce in the 21st century both for consumers, as well as traders. For consumers, the present SGA ensures a minimum standard of quality that can be applied to a wide variety of goods, It also provides new remedies that may be more adequate for certain types of non-conformity with the contract. Traders are not left out as section 20A operates to mitigate the harshness of the rule in section 16 by giving them an undivided share in the bulk upon-payment of the price. However more can be done to protect the consumer from purely private sellers who are steadily emerging onto the marketplace through the explosion of the internet and e-commerce.