Sale of Goods Act Case Examination - Assignment Example

Introduction The scenario concerns a possible breach of the terms of the contract by Alan Daly, who has sold goods to Winston and has represented certain qualities about them both verbally and in written form. Thus, the there may be a breach of both express terms and implied terms under the Sale of Goods Act 1979 and common law. Winston can resort to the remedy of damages for any breaches of terms caused by Alan Daly and may also be allowed to reject the goods or rescind the contract if Daly was found to have misrepresented. In light of the breaches, Winston’s appropriate course of action and the remedy available will be considered. Winston cannot be defined as a consumer and therefore cannot rely on the rights awarded under the Sale and Supply of Goods to Consumers Regulations. An express term of a contract is that which is expressly agreed by the parties, either orally or in writing. As a general rule, the courts hold the written document as a complete agreement so that the terms inscribed within form the total extent of the contract and no further terms may be added or varied later by external evidence (Jacobs v. Batavia & General Plantations Trust Ltd. [1924] 1 Ch 287). However, since this instance is concerned with misrepresentation and terms which are implied into the contract (Hutton v. Warrren [1836] 1 M & W 466), the courts are seen to cater to parole evidence wherever necessary and the rule is likely to be excluded. In this instance, the express agreement necessarily includes the requirements mentioned in the standard form contract stipulating inter alia the description of the vehicle: “White Transit XL, 48072 miles” as well as the exclusion clause mentioned. Moreover, it would also include the express oral representations that pertain to the description of the vehicle, “… just the vehicle for you… 48,000 miles on the clock, barely run in for a van like this … and all the storage space you’re likely to need …”. Implied terms fall in one of three categories, where they may be implied by statute, as in this case, the Sale of Goods Act 1979 ss. 12 – 15, by custom prevalent in the market or trade of the contract (Hutton v. Warrren [1836] 1 M & W 466) unless it is deemed to be a custom which negates the express agreement between the parties (Palgrave, Brown & Son Ltd. v. SS Turid (Owners) [1992] 1 AC 397), or it may be implied by common law, where the term must not just be reasonable but also equitably just and “necessary to give business efficacy” to the contract (Lord Simon in BP Refinery (Westernport) Pty Ltd v. Shire of Hastings (1978) ALJR 20, 26). The terms implied by Statute of the Sale of Goods Act 1979 are more applicable to Winston’s situation. Application of Sale of Goods Act 1979 Sale by Description Where the goods are described before they are sold, there is an implied condition that they correspond to that description (s. 13). It is arguable what the description of the van actually completely comprises, as Daly never expressly agreed that the maximum load of the van in question is 1 ton, even though it was later discovered by the registration documents to be 0.5 tons. It is accepted that a “White Ford Transit XL” with 48000 miles falls part of the description, but the maximum load and capacity was never stipulated, even though Winston mentioned the specifications of the earlier van with which the new one had to be replaced; the earlier van fitted the requirements at 200 feet capacity and 1 ton load, the new van had 150 feet capacity with 0.5 tons maximum load, which fell short of requirements. Thus, if this falls part of the description, Winston may be allowed to reject the van on the basis of a breach of s.13. This is further supported by the fact that Daly had special knowledge in dealing with vans, and reliance was placed by Winston on his word (Harlingdon and Leinster v Christopher Hull Fine Art Ltd (1990)). For the purposes of a breach of description, it is irrelevant that Winston examined the van before purchasing (s. 13(13)). The description “all the storage space you’re likely to need” could be held to be relied upon by Winston as he stipulated his requirements before purchasing (Harlingdon). However, in Ashington Piggeries v Christopher Hill (1972), there was no breach of description when the Herring Meal to be fed to minks was found to be contaminated. This was because the herring meal sold was deemed good food for minks and was described as such, all the other descriptive characteristics did not form part of the description for the purposes of s. 13. On balance, there is a chance that the breach could be treated by the courts as a slight one, as the van was still capable of holding 150 feet and 0.5 tons of load, causing Winston to claim damages but not to reject the van completely. Since Winston needed the van for his antique business, which he runs with sufficient regularity employing as many as three vans in the process, he was buying in the course of business (R & B Customs Brokers v UDT Finance [1988] 1 All ER 847 (CA) and Stevenson v Rogers [1999]), it is highly likely that the courts will exercise their discretion under s. 15A and consider the breach of s. 13 a warranty instead of a condition, thereby restricting Winston from rejecting the van and only allowing him to claim damages. More beneficial to Winston would be a claim under s. 14. Satisfactory Quality Since Daly is selling in the course of business, he must satisfy the requirements of satisfactory quality and fitness of purpose stipulated in s. 14(2) and s. 14(3) respectively. S. 14(2) of the Sale of Goods Act 1979 makes it a condition for a seller in the course of business to make sure his goods are of satisfactory quality. The test is that of reasonableness. However, Winston inspected the van before he bought it, and that is factored in as s. 14 excludes the defects in terms of quality which the buyer was made aware of before purchase or defects which he should have discovered upon inspection reasonably. The oil leak falls into one of the above two categories, and since Winston inquired about it, it is evident that he noticed. Thus, if the repair of the oil leak was a minor job, there would be no implied condition under s. 14(2) for Winston. The oil leak, however, turns out to be much more serious than originally thought. It results in a complete breakdown of the van and has resulted in an engine replacement. Thus, the initial oil leak was not what Alan originally mentioned; it was certainly not a small spill caused from the fluid replacements. It was a fault in the engine, and probably unbeknown to both parties. As such, Winston could not have possibly come across it while he inspected the van. However, such defects in quality that arise later come under the ambit of s. 14(2) (as per Neil LJ in R and B Customs Brokers). S. 14A is also satisfied, as a reasonable person would identify an oil leak in a car as a cause for other mechanical disruptions to follow. Clutch and Brakes The standard practice before buying a used car is to drive it first. However, Winston did not do that and placed reliance on Alan’s words. As Thornett and Fehr v Beers (1919) points out, an examination of the goods which should have revealed the defects but did not does not exclude the defect from making the good unsatisfactory. This means that the fact that Winston’s complete examination of the car, including driving it, would have revealed the clutch, gear and possibly break problem is irrelevant. However, s.14A requires that an ordinary person should regard the good as satisfactory in order for it to pass the test, and it is easy to suggest that the clutch and gear problem, along with the brake problem, easily cause a reasonable person to deem the van unsatisfactory. S 14B states that in order for the good to be of satisfactory quality, it must be able to fulfill “all the purposes for which goods of the kind in question are commonly supplied.” For cars, they must be able to be subjected to the kind of use they are designed for (Rogers v Parish (1987)). However, for second-hand cars, a certain degree of problems are expected to occur, and brake fade is one of them (Bartlett v Sydney Marcus (1965)). The clutch eventually requires replacement and hence, it is submitted that the courts would find it as a serious defect, causing Alan to be in breach of s. 14(2) with regards to it. On balance, Winston has a good claim for the defects of the oil leak and clutch which have resulted in clutch and engine replacements. Thus, he can easily proclaim that the van is not of satisfactory quality contrary to s. 14(2). Fitness for purpose S. 14(3) requires that the good is fit for the purpose it was intended for. The oil leak, clutch and brake issues makes the van unfit for the purpose of carrying furniture for which it was bought. Even though Winston inspected the van, he placed considerable reliance on Alan’s representations with regards to the condition of the van and thus, has a valid claim for the oil leak, clutch and brake problems (Cammell Laird v Manganese Bronze and Brass (1934)). It follows that Winston can lay a successful claim under s. 14(3). The verbal negotiations Alan purported that the van was “just the thing” Winston needed, and that it had “all the storage space” he had specified. This may constitute to either an express term of the contract or simply a representation of fact. If it is an express term, it is no doubt breached as a result of the serious faults in the clutch, and the oil levels. If it is merely considered a statement of fact, it can be deemed misrepresentation by Alan if Winston relied on it. The fact that Winston relayed all his requirements to Alan before purchasing suggests that Winston is relying on his word. His own personal examination revealed the oil leak, which Alan purported to be a probable result of an oil refill. Here Alan seems to believe that the oil leak was in fact caused by a refill, and if that is the case, Winston may be restricted from claiming damages under s 2(1) of the Misrepresentation Act 1967). Winston may instead apply for a rescission of the contract and reject the goods. However, the better view is to argue for a breach of s. 14. The Exclusion Clause In order for the exclusion clause to be valid, it must be incorporated into the contract, exclude liability after correct interpretation and not be void under the Unfair Contract Terms Act 1977. The clause was part of the contract Winston signed, which incorporates it (L’Estrange v Graucob (1934)). The clause is also clear enough to exclude all liabilities under s. 14 for “fitness of purpose” and “quality”. However, UCTA 1977 requires the clause to be reasonable under s. 3 which it is submitted, it is not since it excludes all possible liabilities “...condition, description, quality or fitness for particular purpose…” Thus, the courts will find it difficult to apply the clause. Remedies Aside from the misrepresentation remedies already discussed, Winston may claim damages for breach of express terms; if the oral depictions “all the storage space” and “just the vehicle for you” were to be incorporated as express terms, given that they were breached by Alan, Winston could repudiate the contract since their breach resulted in substantial loss to him (Hong Kong Fir v Kawasaki Kisen (1962) contrary to s. 14(2) for satisfactory quality and s. 14(3) for the van being unfit for purpose. Since Winston has chosen to reject the van, he may do so for the oil leak and the defective clutch, both of which render the car compromised in quality under s. 14 (2) and purpose s. 14(3). Conclusion It was not until six weeks later that Winston discovered the engine and clutch replacement issues. Six weeks is a long time and Winston may be regarded to have accepted the items under s. 35 (Bernstein v Pamson Motors (1987)). However, after one week of discovering the oil leak and clutch problem, he informed Alan about it who agreed to examine it. Winston was unable to return the van, and reasonably so because of the business schedule, and hence, it is up to the courts to determine whether the six week time period during which the problem worsened is reasonable enough for him to reject the goods. It is submitted that six weeks may be seen as a reasonable period by the courts and thus, Winston may be allowed to reject the goods on the above mentioned basis and recover the purchase price. Read More