Commercial Law - Assignment Example

Commercial Law Module Module Number: Academic Year: Seminar Essay Question: Commercial Law Assignment Number: Question # 1 Clause 2 of the Sale of Goods Act (Amendment) 1979 (SGA) aims to regulate the retention of title in agreements for the sale of merchandise. The idea is driven by the need for the seller of the goods in question to enjoy important safeguards against failure of payment by the buyer of goods until payment is obtained. The concept stems from the previous challenges whereby buyers could receive the goods and fail to make payments for them because of lack of finances, perceived substandard goods, and breakages along transit, hence precipitating losses upon the supplier. The provision implicitly provides that goods may also change ownership when the buyer and the seller have spelt out under the contract1. The clause is effective in its primary aim of ensuring retention of title, which is to support the supply of goods on credit so that in the event that the customer subsequently experiences financial difficulty, the supplier can claim the goods. In light of this, clause 2 is depicted as an ordinary extension of the parameters within which the credit economy is applicable. Conversely, in several jurisdictions, insolvency arrangements or credit regimes hinder the enforcement of title retention provisions from enforcing, especially where such actions would pose conflict with the implementation of the regime or where the contract states otherwise. Question # 2 Clause 9, under sub-sections (a), (b), (c) and (e) of the standard form contract stipulates the obligations of the seller; while subsections (d) and (f) states the obligations of the buyer and the rights of a consumer respectively. Specifically, clause 9(a) obligates sellers to elect to either replace faulty goods supplied to buyers or make unconditional refund of any payments, which had been made by the buyer in respect of the goods. Subsection (b) exempts such sellers from any other duties relating to the disputed goods including warranties, other explicit or implicit terms or legal requirements. This way, sellers are exempted from double jeopardy. Subsection (c) aims to preserve the sanctity of human life by making sellers liable for personal injury of the buyers and or consumers arising from the seller’s negligence (including by their agents)2. Subsection (d) obligates buyers to commit to the performance of the contract, provided the seller is not in breach of subsections (a), (b) and (c) by limiting any form of compensation to remedying the specific breach. However, damages should follow the seller’s inability or failure to correct the breach. In addition, sub-section (e) aims to uphold the seller’s rights and duties in respect of title to goods and performance of implied terms in the sale of quality goods; and consumer rights as also captured under (f). Question # 3 A contract for the sale of goods has been formed between Evans Furniture Ltd and Westway Office Equipment considering that the agreement containing the intention to engage in more legal commitments was made in writing, and the following conditions were met: a) the supplier floated the “offer” for the sale of 120 desks to prospective buyers on 1st December; b) Westway in its letter dated 4th December showed “acceptance” to buy 60 of the items at the seller’s price of £570 per desk and made no counter offers; c) due to past successful dealings between the two parties, “consideration” of the offer and the contractual document really does not count in this case, considering that the two parties have established formidable legal relations in the past. The enforcement of this contract was reasonably expected to be done in a similar way3. Having established the validity of the agreement for the sale of goods, the 60 items which Westway had expressed interest in would change ownership upon their delivery to the buyer. This implies that Evans Furniture Ltd retains the title to the desks as long as they are still in its custody – be it the warehouse, store, and on transit. In light of this, Westway can only claim ownership of the items upon making payment for the same. Question # 4 The sending of the 60 desks to the loading bay by Evans in readiness for transportation to the buyer is significant to the performance of the contract in the sense that the items had been ascertained, hence the events showed the seller’s determination to perform the contract with Westway. Unfortunately, the overnight fire at the loading bay, which destroyed the items complicates the performance of the contract with Westway, considering that the damaged goods are similar to the 60 desks remaining in the store, making replacements is easy, but complex. The supplier may be relieved from performing the contract on the grounds that it was not the cause of the fire. In other words, Evans would not be obligated to replace the damaged desks with new ones from the store, despite the fact that they are similar. But in the event that Evans had not ascertained the items for delivery to Westway (by taking them to the loading bay), the supplier would be under the obligation to replace the goods with new ones from the warehouse in line with performing the contract4. Question # 5 The primary rule which is applicable to determine who should bear the risk of damages to goods is provided for under Section 20(1) of the SGA 1979. It states that risks should be borne by whoever retains title to the goods. Alternatively, internal contractual arrangements may be made by the seller and the buyer under the contract terms, requiring whoever is in possession of the goods to bear the risks, whether or not the payment has been made. In this case, Evans should bear the damages caused by the fire because the goods were damaged whilst it still retained the title to them. Nonetheless, the general rule guiding the transfer of risk is subject to other conditions such as: a) it may be voided by a different agreement between the seller and the buyer; b) Section 20(2) states the risk may be transferred partly or entirely to the party who is found to be at fault; c) Section 20 sub-sections (1), (2) and (3) state that for consumer buyers, the risk remains with the seller, regardless of any exemptions, and; d) section 20 does not absolve the seller of risks for ascertained goods. Question # 6 Higgins has the possession of the 60 desks, but it lacks title to them pending the successful transfer of payment to the supplier. Generally, title to property is only transferred upon acceptance of the goods by the buyer and the activation of payment for the goods5. Under limited circumstances, Higgins may only claim title to the goods if there was an agreement under the sale of goods that the title would pass upon the delivery of the items and not upon payment. Question # 7 Higgins Office Stores may seek repudiation of the contract for the delivery of the goods if it proves that they are substandard. Repudiation would be legal under Section 13 of the SGA, which allows Higgins to claim the four loose or missing handles of the desks did not conform to their description. In addition, under section 14(2) of the SGA 1979, the buyer can rely on the implied term that the items delivered were not reasonably of satisfactory quality6. Yet under Section 14(3) of the Act, Higgins may rely on the implied term that the seller did not make the missing or loose handles known to it either expressly or implicitly prior to the delivery of the items; and that as the result, the defects practically rendered the items unfit for any purpose7. Regardless, in order to achieve successful repudiation of the contract, Higgins would have to overcome the hurdle of proving before a court of law that the desks did not meet the fitness for purpose test. According to the ruling on FT Everand & Sons V BP Marine Ltd [2005] All ER, the claimant would need to annex expert technical evidence to support such claims. In addition, Section 15A of the Act limits the Higgins’s right to repudiate the items on the basis that it is not a consumer, and; the faulty (four handles) is so immaterial that it would be capricious for Higgins to repudiate the goods8. Question # 8 Causation is the primary legal principle guiding the calculation of the amount of damages for awarding aggrieved parties to a contract. Courts usually apply the remoteness test to establish whether there are adequate grounds for awarding damages9. Claims which are too remote from a claimed loss or injury would be dismissed as too speculative to enforce. In this case, Westway’s claims for losses stemming from the impending sub-contract sale of each desk at £900 would be examined based on the likelihoods of a successful deal with the third party, considering the economic situations in the market at the time of forming the contract, the availability of alternative suppliers, and whether or not Evans was at fault regarding the failed delivery of the goods10. In light of these factors, courts would speculate and grant Westway damages based on the possibility of clinching the maximum profits amounting to £330 (£900-£570) on each item by settling for a fraction of the whole profit. If, for instance, the court establishes that on the balance of probabilities, Westway had 50% chances of clinching the £330 in profits, then the claimant would be entitled to half of the profits as reliance damages. Bibliography Adams, John N., (2002), “Damages in Sale of Goods: A Critique of the Provisions of the Sale of Goods Act and Article 2 of the Uniform Commercial Code,” Journal of Business Law, p.553 Alpa, Guido, (2004), The Interaction of Contract Law and Tort and Property Law in Europe: A Comparative Study, Lellier European Law publication, p.67, pp.166-167 Bridge, G. Michael, (1998), The Sale of Goods, Oxford University Press, Oxford, p.2 de Lacy, John, (1999), “Selling in the Course of a Business Under the Sale of Goods Act 1979,” Modern Law Review, 62(5), p.776 Furmston, (2001), Principles of Commercial Law 2/e, Cavendish Publishing, London, p.4 Sarcevic, Petar and Volken, Paul, (2001), The International Sale of Goods Revisited, Kluwer Law International, London, p.115 Thomas, Sean, (2014), “The Role of Authorization in Title Conflicts Involving Retention of Title Clauses: Some American Lessons,” Common Law World Review, 43(1), pp.29-61 Ulph, Janet, (2011), “Markets and Responsibilities: Forgeries and the Sale of Goods Act 1979,” Journal of Business Law, 3, pp.261-281 White, Fidelma, (2013), “Sale of Goods Law Reform: an Irish Perspective,” Common Law World Review, 42(2), pp.172-199 Wolff, Lutz-Christian, (2009), “Statutory retention of title structures? A comparative analysis of German property transfer rules in light of English and Australian law, Deakin Law Review, 14(1), pp.1-27 Read More