Breaching the Sale of Goods Act

The case of Ashington Piggeries Ltd v. Christopher Hill where the buyers relied on the sellers to make up goods for the buyers specifications. The failure of the seller to ensure that the ingredient of the good is of suitable quality will be a breach of Section 14 of the Sale of Goods Act 1893 [2] .

The facts of the case as follows whereby U who seems to be an expert in mink nutrition approached the defendants on the claimants behalf asking them to compound a food which was expressly made known that it was for mink which was to be made up with U’s formula. It was later found, after heavy losses of mink, that the hearing meal used by the defendants contained highly toxic to the mink. This was unknown to the parties. The defendants had customary supplied food for animals but not for mink before. The herring meal had been taken from a third party, who had stipulated that the food were to be taken” with all faults and defects, damaged or inferior, if any, to be arranged mutually or by arbitration”.

The Queen’s Bench Division held inter alia that the mink food in its contaminated form did not comply with the description that the direct, foreseeable and natural consequences of the breach of contract was the death of the mink. Therefore, the claimant will be liable to the defendant for damages. The main question of the contamination changing the description of the product shows that the quantity and quality of the contaminating substance could be relevant considerations. The sellers of the product to the claimant could be held liable as they were aware that the product was substantially used by mink farmers and had not delivered an ingredient of “fair average quality” as contracted, was in breach of their contract.They are liable to the claimants for substantial damage. Milmo LJ added that the wording Section 14(1) of the Sale of Goods Act 1893 means “definite” and not the opposite of “general” and that the use of a substance for inclusion in animal food compounds is a “particular purpose” within Section 14(1) of the Sale of Goods Act 1893. He also went on to say that where animal foodstuff is sold as such without reservation as to the species of animal to which it is to be fed then the vendor impliedly warrants and that it will be fit for any reasonable purpose to which it might be put. [3]

The Court of Appeal held that the herring meal which was contaminated can still be described as a herring meal. There was no implied obligation to supply a feeding stuff which was suitable for mink as distinct from a feeding stuff compounded to a specified formula. The feeding stuff did “correspond with the description” under Section 13 of the Sale of Good Act 1893. The defendants did not rely on the skill and judgement of the claimants as to the suitability for mink of the herring meal. The compounded feeding stuff for the mink was not of a description which was in the course of the claimants business supply. This means that although the feeding stuff was bought by description but it was not bought from a seller who deals with goods of that description. Therefore, there was no condition of merchantable quality could be implied in such a contract under Section 14(2) of the Sale of Good Act 1893. The claimants succeed in their claim from the Court of Appeal. [4]

The appeal went to the House of Lords. Lord Diplock’s dissenting judgement where his lordship states that the word “description” by which unascertained goods are sold confined to those words in the contract which were intended by the parties to identify the kind of goods that were meant to be supplied. The test whether the buyer could fairly and reasonably reject the physical goods that were offered to him on the ground that the failure to correspond with that part of what was said about them in the contract makes them goods of a different kind from those he had agreed to buy. The key to Section 13 of the Sale of Goods Act 1893 is identification.

On the other hand, Lord Diplock went on to say that the contract was the sale of goods by description conflicts with the principle of reliance which underlies Section 14 (1) and Section 14 (2) of the Sale of Goods Act 1893. If the compound had been unsuitable as a feeding stuff for mink because any food compounded with U’s formula would have been unsuitable for mink, it would have been unmerchantable as there was no any other purpose for which it could be used in commerce. Contrary to commonsense and business honesty, if hill had done specifically which U had reasonably relied upon him to do, were liable for defects in the goods but there was no reliance had been placed upon hill.

His Lordship cited the Cammell Laird’s [5] case where they had never supplied a ship’s propeller of the particular dimensions ordered although this did not form part of the description by which the goods which were the subject matter of that contract were sold. It was sufficient that it was in the course of their business to supply ship propeller’s. It was also laid down that if the defect in the goods which makes them unfit for their purpose was due to a characteristics which lies within the sphere of expertise of the seller to detect and avoid, which means that the responsibility for their unfitness lies with the seller. If the opposite happens where the detect was due to a characteristic which lies within the sphere of expertise of the buyer then, the seller was not contractually responsible for it. This is consistent with the common sense and business honesty principle.

Besides that, to evaluate whether Lord Diplock’s judgement in this case is applicable to the modern business age, there are few points that need to be looked at in his judgement which reflects the modern business age. His Lordship states that unless the Sale of Goods Act 1893 is allowed to change the law and restrict the freedom of choice of the parties to contract for the sale of goods for the agreements which take account the advances of technology and changes the way businesses is carried out today. However, the provisions which are set out in the sections and subsections of the code is not to be construed so narrowly as to force upon parties of the contracts promises and consequences different from what they must have reasonably intended. They should be treated as simply types of contracts of general principles for ascertaining the common intention of the parties as to their mutual promises and their consequences which ought to be applied by analogy in cases arising out of contracts which do not appear to have been within the immediate contemplation of the draftsman of the act in 1893. His Lordship also adds that the Sale of Goods Act 1893 where the classification adopted by the act is for simple types of contracts for the sale of goods which were usually made in the 19th century and had been the subject of judicial decision before 1893. Therefore, it does not facilitate the modern business age as the modern business age deals with contracts that are more technology based and not a mere simple contract. Lord Diplock’s judgement in this case does mention about the modern business age where the advances of technology is looked upon and how the 1893 is used for more simpler contracts.

If in this case, the information communicated between a Buyer and Seller was entirely electronic, the judgement in this will be different. If the goods sold over the internet, it must correspond to their description, be of satisfactory quality and fit for its purpose. The services must be completed within a reasonable time, for a reasonable charge and provided with reasonable skill and care. The terms and conditions have to be very clear to the e-vendor as this area creates the most problems in an electronic commerce contract. The website also plays an important role. It has to be “easily, directly and permanently” accessible the name of its provider, their geographic address and email address, the details of their applicable trade registration, supervisory authorities or regulatory bodies as well as its VAT identification number. Rules governing e-commerce can be found in the Consumer Protection (Distance Selling) Regulations 2000, which require e-vendors to provide details of the main characteristics of the goods or services, the identity of the vendor, and notification of the consumers right of cancellation created under the Regulations

They do not prescribe the steps behind binding e-contract formation, instead leaving this for online retailers to determine, on the proviso that the information pertaining to contract formation has been provided early on in the transaction lifecycle. When a consumer places an online order this can constitute an “offer”, which is open for the vendor to accept or reject. However, to strengthen their contractual position, e-vendors should make it clear in their terms and conditions that neither the placing of an order, nor the receipt of money, creates a binding contract. The vendor specifies otherwise, it is generally thought that the acknowledgement screen or email, when received, constitutes acceptance. As such, vendors should instead confirm that the order has been received and that the order is being “processed”. This distinction allows vendors to refuse an order and return funds received without further obligations.

Therefore in order to protect against the potential risk of being legally required to supply goods which are no longer obtainable or mistakenly advertised at below-cost price, vendors should specify that “acceptance”, and therefore binding contract formation, occurs upon dispatch of the purchased goods.

Virtual intangible goods transaction between the Buyer and Seller is done almost everyday by millions of people. This transaction is done through the internet. One of the major electronically transacted intangible goods is Paypal. Paypal is an e-commerce business allowing payments and money transfers to be through the internet. It is wholly owned subsidiary of Ebay. If a Buyer whom had purchased an intangible goods and the use of the intangible good had led to some form of economic loss for the Buyer, the Buyer would not be able to bring a claim against the Seller of the good as there was no reliance of the skill and judgement of the seller. Everything is electronically communicated unless there was some form of terms that the Seller was trying convey. E-commerce transactions are not binding agreements as if there was fraud or any kind of misleading transactions before the contract can be concluded and the goods has reached the Buyer. The Buyer cannot bring a claim against the Seller if he had suffered economic loss from it. Furthermore, it is not a physical tangible good where the Buyer can show that he/she had suffered loss from it. It also depends on the realibility, security and sturdyness of the provider and also the user.

To conclude, the law has developed going from the Ashington Piggeries case to the advancement of technology in the E-commerce contracts and transactions today. The EU has implemented the E-Commerce Directive for member states to allow contracts to be concluded by electronic means. The United Kingdom has implemented the Electronic Communications Act 2000 to facilitate contracts that are transacted electronically. Internet is part of our everyday life and E-Commerce transactions are one of the easiest means for people today. Therefore, the law in this area have been expanding and is need of more development for the rapidly changing society of the advancement of technology.