Lecture 3 s14(2) SGA 1979

1. Lecture 3 s14(2) SGA 1979 Steph Shaw February 2010

2. Assessment Submission Date • The date for submission of your assessment is now Thursday May 13 2010

3. Section 14 SGA • Duty to supply goods of the right quality • 2 provisions, both conditions of the contract: • s14(2)-the right that the goods supplied are of satisfactory quality and • s14(3) the goods are reasonably fit for the buyer’s purpose • Effect is to erode concept of caveat emptor, especially in consumer sales where the conditions cannot be excluded

4. Section 14(2) SGA • ‘Where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the contract are of satisfactory quality.’ • Term is a condition of the contract • Introduced by the Sale and Supply of Goods Act 1994 and applies to all contracts made after 03 January 1995 • No implied condition of satisfactory quality in private sales

5. ‘In the Course of a Business’ • s61 SGA, ‘business’ includes a profession and the activities of any government department or local or public authority • A business seller of goods, whether or not habitually dealing in goods of the type sold, will be considered to be acting in the course of a business Stevenson v Rogers [1999] • No requirement of regularity required for a sale to be made in the ‘course of a business’ under the SGA • Any sale other than a purely private transaction

6. When is a sale ‘in the course of a business’ for the purposes of the SGA 1979? • Stevenson v Rogers [1999] CA • Defendant fisherman sold an old fishing boat which was not of satisfactory quality • D argued that no term as to satisfactory quality should be implied as the boat was not sold in the course of a business • CA held that the boat was sold in the course of the D’s business • For the purposes of s14 the words ‘in the course of a business’ should be taken at face value • s14 applies to any sale made by a business

7. R&B Customs Broker Ltd v United Dominions Trust Ltd [1988] • Decision in Stevenson based on the legislative history of the SGA provisions • CA held that a freight forwarding company who had bought 3 cars over a period of 5 years was not acting ‘in the course of a business’ when buying the cars for the purposes of the Unfair Contract Terms Act 1977 • Controversial decision as it meant that a business, including a limited company, may be ‘dealing as a consumer’ for the purposes of UCTA 1977 • R & B Custom Brokers distinguished in Stevenson v Rogers

8. Goods Supplied Under the Contract • S14 applies to the ‘goods supplied under the contract’ • This widens the scope of liability beyond merely the goods and includes packaging

9. Former section 14(2) • Prior to 03 January 1995 • Implied condition that goods should be of ‘merchantable quality’ • Provision had its roots in in the recognition by the common law during the 19th century that a buyer of goods expected them to meet at least a minimum standard of quality and the seller knew that • SGA 1893 followed the common law but offered no guidance as to the meaning of ‘merchantable quality’

10. Tests of Merchantable Quality Developed by the Courts • ‘Acceptability’ test-regarded goods as merchantable if their actual state was such that a reasonable buyer, fully aware of all the facts, including any hidden defects, would buy them without a reduction of the price or special terms • ‘Usability’ test – emphasised the usability of the goods – goods would be merchantable provided they would be used by a reasonable buyer for any purpose for which goods of the contract description would ordinarily be used • Acceptability test perhaps more favourable to the buyer • Tendency to adopt the acceptability test in consumer cases and the usability test in commercial cases

11. Statutory Definition of ‘Merchantable Quality’ • Introduced in 1973 • Goods of any kind are of merchantable quality.....if they are as 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.’ • It was felt that too much emphasis was placed on the goods being usable • Introduction of ‘satisfactory’ quality in 1995

12. What is the meaning of ‘satisfactory quality’? • s14(2A) helps to define satisfactory quality as does s14(2B) – list of factors to take into account • s14(2A)-goods are of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking into account all relevant circumstances, including price and any description attached to the goods • s14(2B)-a non-exhaustive list of factors to take into account including:

13. The following are aspects of quality: • Fitness for ALL the common purposes, for which goods of the kind in question are COMMONLY supplied • Appearance and finish • Freedom from minor defects • Safety and • Durability • These are not absolute requirements merely factors to take into account ‘in appropriate cases’

14. s14 cannot be excluded in consumer sales s6(2) UCTA • In non-consumer sales liability can be restricted or excluded only in so far as the term satisfies the test of reasonableness-s6(3) UCTA 1977

15. Applying the test of Satisfactory Quality • Do the goods comply with an objectively satisfactory standard for goods of the same description and price? • Egan v Motor Services (Bath) Ltd • Depends on all the facts of the case • Fitness for ALL common purposes-a significant change from pre-1995 law-Kendall v Lillico [1969], groundnut extract was merchantable even though it was poisonous to birds

16. Appearance and Finish and Freedom from Minor Defects • Appearance and finish included in s14(2B) as aspects of quality • Rogers v Parish-newRange Rover for £16000-C/A held that the car was unmerchantable • Goods could be unmerchantable despite being usable • Shine-second-hand car immersed in water, unmerchantable • Courts willing to take into account the expectations of consumers • Higher standard expected from higher priced and brand new goods

17. Thain v Anniesland Trade Centre (1997) • First reported case on new provision of satisfactory quality • Second-hand car, 5 years old, 80,000 miles, £2,995 • After 2 weeks noise from gearbox-claim failed as lack of durability of gearbox did not make the car unsatisfactory because on the facts durability was not a quality which a reasonable person would expect from a 5 year old car • Thain does not lay down a general rule • Cases relating to quality tend to turn on their own facts

18. Price and description and other factors • A higher standard of quality expected of higher priced goods • Second-hand goods may be expected to be of a lower standard • Factors listed in s14(2B) not exhaustive • Courts willing to take into account the expectations of consumers

19. Public Statements about Goods • The Sale and Supply of Goods to Consumer Regulations 2002 expressly mention another factor as being relevant in assessing satisfactory quality: • s14(D) SGA states that where the buyer deals as a consumer any public statement on the specific characteristics of the goods made about them by the seller, the producer or his representative, particularly in advertising or on labelling, is relevant in assessing satisfactory quality

20. Exceptions • There are exceptions-s14(2C): no implied condition: • As regards defects specifically drawn to the buyer’s attention before the contract is made • If the buyer examines the goods before the contract is made as regards defects which the examination ought to reveal • In the case of a contract for sale by sample, which would have been apparent on a reasonable examination of the sample

21. Section 15A SGA • Remember s15A • Restricts the right of a non-consumer buyer to reject for breach of s14 where the breach is so slight that it would be unreasonable for the buyer to reject

22. Caveat Emptor? • Let the buyer beware-basic common law principle • May now be ‘caveat venditor’-let the seller beware