Caveat Emptor Principle and Sales of Goods

The Caveat emptor principle, has been followed and adopted by the English law for centuries. The meaning of the principle was laid down by Justin Reagan in Spivey, where he said that: “Caveat emptor, let the buyer beware, has been part of the English language since 1523, when it was used in connection with the sale of a horse, which might have been ridden upon and be tame or might be wylde. If wylde, it was not the merchant who had to beware, but caveat emptor be ware thou byer.” [1]

The caveat emptor had been seen as a powerful tool to the extent that many jurisdictions have tried to overpower or neutralize it by establishing consumer protection or sale of goods legislation but when it comes to issues concerning land, the principle still applies.

Towards the end of the 19th century, Caveat Emptor was still very much breathing as a general rule but the judiciary were going in to some extent a different direction to go to the length of protecting a buyer as caveat emptor offers buyers very little protection. This inevitably led to the drafting of the Sale of Goods Bill.

Sales of Goods Act 1893 & 1979

Sir Mackenzie Chalmers,who was the draftsman of the 1893 Act, explained that the original Sale of Goods Bill: “… endeavoured to reproduce as exactly as possible the existing law, leaving any

amendments that might seem desirable to be introduced in Committee on the authority of the

Legislature’’ [2] . The Law Committee then laid down innovative measures which included implied terms. The implied terms synchronized in the Act and the decision to include the merchantability of the goods signified inevitable death towards the principle of Caveat Emptor. [3]

The Sale of Goods Act 1979 [4] did not provide any alteration to implied terms, yet, the spirit of the act, in its original incarnation, is to accord a equilibrium of bargaining power between the buyer and the seller. Section 12-15 of the Sale of Goods Act which are implied terms being imposed upon every contract for the sale of goods conditions such as will ensure that the buyer will obtain what he had bargained for, without having to lay down expressly written terms in the contract of sale.

Barely a few years after that however, in 1987, the Law Commission published a report in which incorporated new elements in implied terms and in the provisions for their breach. The Sale and Supply of Goods Act 1994 [5] subsequently substituted the concept of merchantable quality with the concept of satisfactory quality and thus swinging the favour towards buyers.

In the case of Ashington Piggeries & Ltd v Cristopher Hill 1972, the main issue was whether the sale of a particular animal food from the plaintiff to the defendant was a sale by description. Lord Wilberforce stated that: “I would have no difficulty in holding that a seller deals in goods of that description if he accepts orders to supply them in the way of business; and this whether or not he has previously or not accepted orders for goods of that description” [6] This virtually signified that the seller could be regarded as an expert for the only reason that he was selling the foodstuff and it turned out to be the reason why this was considered a sale by description. [7]

Lord Diplock, in his now famous dissenting judgment, was of the view that the swing of the pendulum towards protecting the buyers right is going way beyond limits. He commented on the usage of s13 as to “description” by stating that: The “description” by which unascertained goods are sold, is, in my view, confined to those words in the contract which were intended by the parties to identify the kind of goods which were to be supplied … Ultimately the test is whether the buyer could fairly and reasonably refuse to accept the physical goods proffered to him on the ground that their 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. This leads us to the conclusion that Lord Diplock suggested that identification is the key towards s13 of Sale of Goods Act.

However in the case of Harlington & Leinster Enterprises Limited v Christopher Hull Fine Art Limited 1990, [8]

Nourse LJ held that for a particular sale to be a sale by description, it must have caused a sufficient amount of influence in the sale in order for it to develop into an essential term of the contract, and the correlative of influence is reliance. He further stated that, without a doubt, reliance by the buyer is the natural index of a sale by description and for all practical purposes, there must be reasonable contemplation of the parties that the buyer is relying on the description, for the sale to be one of sale by description.

The confusion over the usage of the implied terms in s13 and s14 of Sale of Goods Act may well further be complicated when it comes to transactions by electronic formats as transactions of such forms can be either a transfer of goods or merely a service. The Sale of Goods Act defines “goods” as including “all personal chattels other than things in action and money”. [9] It leads us to think whether if products which are transacted by virtue of electronic formats falls under the definition of ‘goods’. One of the most common product being transferred by electronic formats is software. Yet, software could be transferred via a physical medium. Software is a terminology used to describe the gathering of information and data that makes computers to function. However, despite the reality that software is one of the most omnipresent product of this 21st century, it has no visible legal identity. [10] The uncertainty of its legal identity is inevitably being if a software is considered as a good or a service.

In St Albans City and District Council v International Computers [11] , Sir Ian Glidewell held that when a computer disk is transferred in a physical medium, the transaction would be deemed as a sale of goods. If a transaction is held not a sale of goods on account of an electronic transfer, it signifies that there are no saleable “goods” in the transaction, for the fact that the property is entirely intangible. This leads us to the discussion of tangibility. Tangibility is usually defined as having a physical form or being capable of being perceived by the senses. [12]

it is necessary to determine why tangibility is ever required of a good. It is probably because of the requirement that property must pass under a sale. Most legal systems define a sales contract as an agreement for the transfer of property in goods for money, usually called the price, [13] and such a transfer generally requires a transfer of possession. In the case of pure intangibles, however, it is often argued in both common and civil law systems that either an alienation [14] or a possession of an intangible is impossible or that intangibles are not capable of being owned because they cannot physically be possessed. [15]

since “good” is sometimes defined as “all things movable”, and since “thing” is a word of

“studied imprecision”, the definition must be extended to cover software, as it is capable of being

electronically moved in various ways. [16]

However, Braucher’s argument may seem to be illusionary as a transfer of software might not be deemed as a sale of good eventhough the software is deemed as a ‘good’.

Under English law, the rights and obligations of the parties to a

transaction not classed as a sales transaction, would be governed by common law rather than the

Sales of Goods Act.

S13

As we have seen

provides that where there is a contract for the sale of goods by description, there is an implied term that the goods will correspond with the description.

S14(2) Satisfactory Quality

Lord Diplock commented in his dissenting judgment in Ashington Piggeries that: “The key to both subsections [i.e. fitness and merchantable quality ] is reliance–the reasonable reliance of the buyer on the seller’s ability to make or select goods which are reasonably fit for the buyer’s purpose coupled with the seller’s acceptance of responsibility to do so.”

S14(3) Fitness for purpose