Scenario on the Sale of Goods and Unfair Contract Terms

This problem scenario is clearly referred to sale of goods act 1979 and unfair contract terms act 1977. The given three questions have been analyzed accordingly in separate three paragraphs. In the sale of goods act section 2 (1) it defines that what contract of sale of goods is as a contract whereby the seller transfers or somehow agree to transfer property in the goods to buyer for money consideration, which called as the price.

Mainly considering that point the question has been discussed. According to the question there are some aspects which can consider as the grounds on which bill may make a claim against Agro Ltd. This means consideration of Agro Ltd’s liability under sale of goods act 1979 to bill. According to the given problem scenario the buyer, bill green is a keen gardener and a lecturer in biology. Sale of goods act however provides protections for Bill in four main sections.

Section 12 points out that the seller be required to have the right to trade the goods. Section 13 points out that the goods sold by description should keep up a correspondence to the description.

In section 14 it is noted that goods must be of satisfactory quality. Section 15, goods that are sold by sample must correspond to its sample in quality. From above sections, the section 14 is further limited in its scope. Somehow it applies only where goods sold in the course of businesses.

According to section 14, when the seller Agro Ltd sells goods in the course of a business then present an implied term which points out that the goods supplied are of satisfactory quality. If Agro Ltd was not selling in the course of business and was only a private seller then they fall under section 13 and not within section 14. Agro Ltd sells Apple Grofertiliser to bill. Bill before deciding to buy ‘Apple Gro’ fertilizer he looked at fertilizer on display, differing prices and read the promotional leaflets. First let’s consider sale by description.

According to section 13(1), it describes that wherever there is an agreement for sale of goods by its description there is an implied term which the goods correspond with the description. Sale by description means that a sale where the buyer that means according to the question bill green has not seen the goods and is relying on the description. But actually did bill not see the goods? He did look at several types of fertilizer. He studied the chemical composition of each fertilizer, given in the leaflets.

But it’s not clearly mentioned that the product of Apple Gro was there in the leaflets or not. He was given instructions and details of dosage rates after signing the sales invoice. A contract of sale does not become a ‘sale by description’ merely because a description was attached to the goods. The description must relate substantially to the identity of the goods. To consider how far must goods correspond to their description there is a narrow approach and a broad approach.

In the case Arcos Ltd v E A Ronasse and sons[1] buyers to buy a quantity of staves, which they required, as the seller knew, for making cement barrels. Contract said the staves were to be A½ inch thick.

The staves were larger than A½ inch thick. It was held that the buyer was entitled to reject goods for breach of section 13. In determining whether goods correspond to the description there is also a broader common sense test can be applied. In the case Ashington Piggeries Ltd v Christopher Hill[2], the buyer had contracted to buy ‘herring meal’ for the purpose of feeding mink.

They were provided with herring meal which was contaminated with a substance that made it unsuitable for feeding mink. It was held that no breach of section 13 because the goods were described in the contract as ‘herring meal’ and what the seller provided was ‘herring meal’ although contaminated and not fit for the purpose. However what bill wanted was something cheaper. So the sales assistance recommended that bill should buy Agro Ltd’s ‘Apple Gro’, which was considerably cheaper. As section 14 of sale of goods act introduced satisfactory quality and section 14 (2A) defines satisfactory as meeting the standard to an ordinary reasonable person would consider as satisfactory taking in to account, description, price, and all other relevant circumstances.

When it comes to whether goods fit for their common purpose it comes under section 14(2B). In the case of Aswan Engineering Establishment Co v Lupdine[3] it was held that goods satisfied the requirement that they be of ‘merchantable quality’. This explains that if a seller knows that the goods are not fit for one of its common purposes, seller must make this known to the buyer. According to section 14(3) seller, Agro Ltd in course of business sells to buyer, Bill who tells Agro Ltd the purpose for which the goods are bought.

And also bill partially rely on sellers skill and judgment. Frost v Aylesbury Dairies[4] illustrated even of seller could not have discovered the defect no matter how much he tries, he is still liable. Bill did not realize that rain could wash away the fertilizer and no specific statement to this effect was contained in the instructions. The fertilizers Bill had previously used were applied to the tree roots and were not affected by rain. This Apple Grofertilizer was sprayed on leaves and fruits.

Section 14 (2B) states that the qualities of the goods include their situation and condition as well as the fitness for each and every purposes for which goods of the class are commonly used whether or not the buyer is a business or consumer. However above the grounds that bill may claim against Agro Ltd.

If Agro Ltd is in breach of contract then it should be considered of the validity of the terms of sale in the invoice. Invoice contains exclusion clauses. These clauses usually and especially in standard form contracts contains to exclude or restrict liability of seller. Some exclusion seeks to negate terms that favored the buyer.

When considering standard form contracts most companies use these forms when entering in to contracts because it is more efficient and convenient than having to discuss and negotiate terms with each individual customer. In this scenario there is a standard form contract. A clause is of no effect unless if it is incorporated as a term in the contract. It must be incorporated when the contract is made[5]. The buyer will find it difficult to argue that the clause was not agreed upon if it is contained in a document signed by him. It will not help him to plead that he had not read the clauses or was unaware of its existence.

As with an unsigned contractual document, the method, displayed notices of incorporation will work only if at the time of making the contract the buyer, Bill actually knew of the existence of the term or otherwise reasonable steps had been taken to bring them to his attention. When Bill told he likes to buy the Agro Ltd gave the invoice. Bill paid for the fertilizer and signed the invoice without reading it. And also If, in the past parties have often went through contracts with each other upon the same terms (including exemption terms), then that course of dealing can incorporate those terms in to a later contract between them.

Hence three necessities must be fulfilled before a course of dealing can incorporate an exemption clause in to a future contract. That are firstly the transaction between the parties must have been sufficiently numerous to constitute a ‘course of dealing’. Secondly the established course of dealing must have been constant. Thirdly the recognized course of dealing must not have been deviated from on the occasion in question. According to the question it says that Agro Ltd has number of retail outlets.

Bill visited one of these outlets to buy fertiliser. In the past, he had always used a top brand, but was hoping to find something cheaper.

But in this scenario it’s not clear whether Bill only visited this Agro Ltd to buy something cheaper or whether Bill always went to this Agro Ltd manufacturers and this time he wanted something cheaper. Later Unfair contract terms act (UCTA) 1977 introduced to control exclusion and limiting clauses in general. The unfair contract terms act 1977 is a major landmark in the development of the law of contract. It deals with exemption clauses and it replaced and extended certain provisions previously in the supply of goods act 1973[6].

In that Act, Section 6 applies to any of the clause that claim to exempt the seller, that means Agro Ltd from any of the terms that are implied by section 12-15 of sale of goods act. The effect of section 6 depends upon whether the buyer was ‘dealing as a consumer’. This act is misleading in that it also applies to non-contractual relationships. However UCTA refers to business transactions and consumer transactions. Exclusions are either void or subject to the test of reasonableness.

Section 3 describes when liability arising under contract It covers consumer transactions or contracts where one party deals on the others standard business terms. When it, covers breach where the party at fault claims to be able to give a substantially different performance or no performance. Such will be subject to the test of reasonableness. According to section 5 where loss or damage arises from defective goods for consumer use owing to the negligence of the manufacturer or distributor, the liability for loss or damage cannot be excluded or restricted.

According to section 6 terms as to title cannot be excluded /limited in any type of sale. Other terms in sale of goods act 79(section 13, 14, 15) cannot be excluded/limited against a consumer.if bill is considered as a consumer then this cannot be excluded. But this can be excluded/ limited against a business buyer if reasonable. Therefore according to the problem scenario, if Bill was dealing as a consumer, then the first exemption clause may become void according to UCTA 1977. And the second clause has becomes unreasonable because there is no specific section for that in UCTA 1977.

And the third exemption clause will also be void if Bill deals as a consumer according to section 3 of UCTA 1977. Æ’ If we assumed that Agro ltd is liable for breach of contract of sale, and is not protected from liability by the terms of sale in the invoice, there may be remedies available to bill.

Recovery of the purchase price, damages and specific performance of the contract are some remedies that will be available to the buyer, Bill. Bill however wishes to sue Agro Ltd for all compensation possible, including the purchase price of the fertiliser, loss of profit on sale of the apple crop, loss of prize money from shows, stress, and loss of the increase in salary he would have got on promotion. Can he really do this? According to the terms that Agro Ltd provided he cannot claim this much compensation. But the goods he bought were not fit for common purpose.

In instructions also it was not clearly mentioned that rain could wash away the fertiliser. And also according to instructions bill sprayed his apple trees in July. So why cannot he recover damages? Under section 53 breaches of warranty and 54 Bill can recover damages in to some extent. However Bill cannot reject goods. It’s because he already accepted the goods.

And he already used the goods. Under section 54 considerations has totally failed and Bill can recover payments already made. However if court decided not to void the first term of the contract it will not be possible. Where the buyer, Bill accepts part of the goods and rejects the rest, he can recover any part of the price paid in respect of the rejected but must pay for the non-rejected goods.

But according to the given problem scenario we cannot see any partial acceptance. Section 53 (3) prima facie the difference between value of goods as they are and the value they should have been in if the warranty had not been breached. In section 53(2) the measure of damages is as for rule 1 in Hadley v Baxendale[7]. When considering this as with the case of Bence Graphics v Fassons[8], F manufactures and sold to B some vinyl film. Once B received the film he would stamp it and turn it in to labels.

A condition was that the vinyl and labelling remained in good condition for five years. Vinyl was defective so the labels degraded earlier than expected, so as to become illegible.

B sought to recover from F the whole of the purchase price or alternatively an insurance to cover claims from end users. Damages assessed by trial judge under section 53(3) as measure being difference in value between goods on delivery and value goodswould have been if vinyl not defective. F applied. Appeal allowed and it was held that prima facie measure for breach of warrenty of quality under section 53(3) can be displaced where it had been in contemplation of the parties at time warrenty given that goods would be resold.

The measure should be assessed on basis of actual liability to ultimate buyer and as few of the sub buyers claimed, the loss was less than that worked out under the prima facie market rule. This is limb 1 of Hadley v Baxendale rule. As the conclusion we can add that even though there are exemption clauses from the side of the seller he may be liable if the terms not satisfy certain criteria as explained above. And also the buyer even though had remedies he cannot claim everything to his wish. From the acts that were established is more fairly helps to deal with matters from buyers side as well as sellers side.

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[1] Arcos Ltd v E A Ronasse and sons [1933] AC 470 [2] Ashington Piggeries Ltd v Christopher Hill [1972] AC 441 [3] Aswan Engineering Establishment Co v Lupdine [1987] 1 WLR1 [4] Frost v Aylesbury Dairies [1905] 1 KB 608 [5] Paul Dobson and Rob Stokes, commercial law: (8th ed.Sweet and Maxwell 2012)at p.184 [6] Paul Dobson and Rob Stokes, (note 5 above)at p. 192 [7] Hadley v Baxendale[1854] EWHC J70 [8] Bence Graphics v Fassons (UK)[1997] 3 WLR 205

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