Sale of Goods to a Consumer - Case Study Example

Introduction Contract of sale is agreement of two parties or entities on the delivery of promise or good in exchange for valuable consideration or payment (Hill & Hill, 2005). There are fundamental elements for consideration in a contract: presence of an offer, acceptance of offer after meeting of minds, delivery of goods or service or a promise to perform, payment or valuable consideration, terms and conditions, actual performance or delivery of goods or services (Hill & Hill, 2005). This document will tackle the issues of a contract of sale of a second hand van between Mr. Graham and Mr.Daly and will attempt to provide an informal legal opinion or advice as remedy to legal issues raised by Mr. Graham, buyer of said second hand van. Part of this document will discuss the facts of the case at a time when verbal negotiations were made by contracting parties; the discovery of defects of good; an examination of exclusion clause; and the possible remedies that the purchaser could avail to resolve his issue. The Verbal Negotiations Winston Graham, a partner of antic dealers, went to Daly Car Sales Ltd., a commercial vehicle dealer, to purchase a van after one of their three delivery vans was “written-off” in an an accident. Graham conveyed that he was in search for a replacement vehicle that can load up to 1 ton and a cubic capacity of 200 feet. He also explained that the vehicle will be maximized for regular delivery of furniture, their business, and that the average journey would involve normally four or fine large items of furniture. Immediately, Alan Daly retorted that there was an available van that will befit Graham needs. He was referring to a White Transit XL which he warrants as a van with capacity to run at a distance of 48,000 miles on the clock and the storage capacity suitable enough for delivery of furniture. The Oil Leak and the Defective Clutch Graham immediately inspected the van and conveyed his observation of the small oil in the forecourt. Seller retorted that the oil leak was just incidental when they topped the oil and water levels when the van was used for service. The parties underwent a moment of negotiation of van’s price bordering on discussions about the difficulties of the business of selling second hand van. The asking price was L4,800 (plus VAT) but Winston counter-offered a price of L 4,500 (plus VAT). Mr. Daly finally accepted Winston’s offer and they proceeded in signing the contract of sale, the latter was a standard form contract, the nature of which implied “take it or leave it” concept. Daly wrote “White, Transit XL, 48,072 miles” as details of the object of the contract. A week after the delivery of van, the firm’s driver reported a serious oil leak and a technical problem with its clutch. These problems were conveyed to Mr. Daly via telephone who assured Graham that his company would look into the problem if it will be returned to them before the end of the week. Graham failed to follow Daly’s advice following series of delivery schedules. Said van collected five antique desks and other heavy items which reached approximately the weight of 1 ton, just when its brake failed to stop the vehicle at a junction. Luckily, they were able to escape possible accident. But such experience made the driver decide not ever to use the new van for deliveries and collection to evade possible circumstance that an accident could happen anytime van’s defective engine and brake. The firm however used the van for “light duties” until it finally came to a halt. After thorough mechanical inspection, it was reported that the van necessitate complete replacement of engine and of clutch. Report also bared that the damage is attributable to constant loss of oil. The van’s total repair will cost more than L 1,000. While at this state, Graham discovered that the vehicle has only a cubic capacity of 150 feet and a load of half a ton. The Exclusion Clause The contract of the sale of van had an exclusion clause under Clause 14 (b) which state, “Any warranty or condition, description, quality or fitness for particular purpose is hereby excluded from this contract for sale.” Both Graham and Daly signed the contract. Exclusion clause theoretically restricts parties to a contract and limits the amount of damages to be claimed regardless of loss. However, exclusion clauses have limited effects under Unfair Contract Terms Act of 1977 (Sale of Goods Act, 1979) and Unfair Terms in Consumer Contracts Regulations of 1999. While exclusion clause seeks to eliminate liability arising from a contract but such must demand reasonable care from the other party too. When van was totally damaged, Graham reported to Daly. The latter assailed that the company has no liability on it arguing that the firm have been using the vehicle for one month and two weeks and that his offer to look the condition of the van earlier was neglected. He further argued that the damage could have been caused by overloading and that the Daly Cars Sale Ltd. is exonerated from liability on it.. Considering all these, Graham and partners consider legal action. Issues and the Remedies Considering all facts, can Graham and partners sue Dale Car Sale Ltd.? And, for what cause? For repair? For replacement? Damages due to losses affecting business? For refund? This contract of sale raises two issues in both fronts: (a) obligation of the seller and (b) obligation of the buyer. There are also legal implications to consider with the nature the contract signed, i.e. standard of contract and the exclusion clause stipulated in it. It is appropriate to discuss each of this within the context of Sale of Goods Act, a law that protects buyers of satisfactory quality of goods and its fitness for purpose. a. Issue on the Seller. As to the seller, the contract was perfected with fraud when seller intentionally concealed the fact that the vehicle has defective engine, thus, causing oil leakage, and that it has a defective clutch, too. He also concealed the fact that the van has only a loading capacity of half a ton and a cubic capacity of 150 feet when he presented to the buyer that when he orally expressed that the van has a loading capacity of 1 ton and a cubic capacity of 200 feet to induce the buyer to purchase it. At a time of the negotiation, the seller warrants (Rose v.Chrysler Motors Corp., 212 Cal. App.2d 755, 762-763 [28 Cal. Rptr. 185, 99 A.L.R.2d 1411];Allen v. Brown, 181 Kan. 301, 308 [310 P.2d 923] that the subject of sale is within satisfactory condition and such corresponds to the desired features of van needed by Mr. Graham, which include among others the loading capacity for delivery of goods. Such motivated the buyer to purchase the vehicle, who was at the time of negotiation, lacked full knowledge of the real condition and prescribed capacity of the delivery van. The discovery of defective engine and clutch evidenced the seller’s violation of Article 14 Section 13 and Section 14 (2), (3) and (4) of Sale of Goods Act because the genuine conditions of object of the contract do not correspond to genuine description impliedly warranted and such were defects were concealed from the buyer. The law mandated seller to ascertain that the object of the contract of sale is merchantable of good quality. Such legally meant that the good is free of defects and that upon examination of buyer; defects should have been revealed or made known of. Under Section 14 (2A), the law considered goods in satisfactory condition if its meets the standard of a reasonable person taking into consideration the description of goods, price and other related circumstances (Sale of Goods Act, 1979). Such “quality of good” meant (a) fitness of purpose, (b) appearance and finish, (c) freedom from minor defects, (d) safety, and (e) durability. This term implied in subsection 2 however, is not applicable if (1) unsatisfactory condition is revealed to the buyer before the contract was made; or (2) at the time of examination of good before the contract is made, defects ought to have been revealed are genuinely conveyed to buyer; and, (3) in case of sale by description, the unsatisfactory condition is apparent on reasonable examination (Sale of Goods Act, 1979). Contract of sale is implied if (a) goods are free and will remain free until the property is able to pass from any charge or encumbrance not disclosed or known to the buyer before the sale is perfected and (b) the buyer will enjoy quiet possession of the good except if disturbed by the owner or other person entitled to the benefit of any charge or encumbrance so disclosed or known (Art, 59, Section 12 (a) and (b), Sale of Goods Act, 1979). The law further stipulated that there is an implied term when the goods supplied under the contract are reasonably fit for the purpose (Sale of Goods Act, 1979), except when circumstances show that the buyer does not rely or is unreasonable to rely on the skill and judgment of the seller or credit-broker. Said implied term can be annexed to a contract of sale by usage. From the foregoing, the law provides that in a contract of sale, the buyer, Graham, in this case, has the right to avail remedies under Art. 53 Section 1 which stipulate that “where there is a breach of warranty by the seller, or where the buyer elects (or compelled) to treat any breach of a condition on the part of the seller as a breach of warranty entitled to reject the goods; but he may (a) set up against the seller the breach of warranty in diminution or extinction of the price, or (b) maintain an action against the seller for damages for the breach of warranty (Sale of Goods Act, 1979). Section 2 of the same article provides that “measure of damages for breach of warranty is the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach of warranty (Sale of Goods Act, 1979). Section 3 further expounded that in case breach of warranty of quality is prima facie the difference between the value of the goods at the time of delivery to the buyer and the value they would have if the warranty is fulfilled (Sale of Goods Act, 1979). Such meant that buyer can also seek for damages for loss of profit at a time when vehicle fully halted Rose v.Chrysler Motors Corp., 212 Cal. App.2d 755, 762-763 [28 Cal. Rptr. 185, 99 A.L.R.2d 1411];Allen v. Brown, 181 Kan. 301, 308 [310 P.2d 923]., that being part of the business effects due to breach of warranty (Grupe v. Glick, 26 Cal.2d 680, 692 [160 P.2d 832]; Mack v. Hugh W. Comstock Associates, Inc., 225 Cal. App.2d 583, 587 [37 Cal. Rptr. 466). This remedy, if availed, entitles the consumer for repair or replacement within reasonable time, incurring all the cost thereof. Or, the buyer may demand for reduction of fees may avail rescission of contract as stipulated in Article 53 Section 1, 2, 3,and 4 (Sale of Goods Act, 1979 & Lemon & Co., 2011). All of these implied terms of the can be excluded of an express term. This express term is specific, often demandable and has categorical limitations (Smithies, 2007). Express terms literally put across its very meaning, such as when there is an exception to a general rule as a matter of fact and as a matter of law. This is the most obvious, obligatory, and mandatory (Smithies, 2007). There are legal modifications of the remedies for breach of condition in non-consumer sale. The law stipulated that buyer have right to reject goods by reason of breach of the seller on a term implied in Section 12, 13, 14 and 15, but if such breach is so slight that it would be unreasonable for him to reject them, such is called breach of warranty. This breach is evident in this case as illustrated by concealment of genuine conditions of the van. b. The Contract and the Exclusion Clause. Graham and Daly signed the Standard Form Contract. This is sometimes considered as adhesion contract that does not allow negotiation and does not appreciate bargaining powers. Graham and Daly, parties to this contract of sale, signed such kind of contract and thus it’s not surprising that it contained Exclusion Clause under Clause 14 (b) which state, “Any warranty or condition, description, quality or fitness for particular purpose is hereby excluded from this contract for sale.” The law under its Supplementary clause explained that on matters relating to exclusion of implied terms, the buyer may avail Unfair Contract Terms Act 1977 to bind parties to the original contractual obligation (Sale of Goods Act, 1979). Buyers as consumers are also protected by Consumer Protection Act of 1987 and of Misrepresentation Act of 1967. The Sale of Goods Act also accords the buyer such right to interpose for remedial action within six months from the date of purchase. The buyer will gather all the necessary evidences to prove that there was misrepresentation and breach of warranty by intentional concealment of the genuine van’s condition and such is evident at the time when the van was purchase and not a consequence of a wear-and-tear (Consumer Rights Home, 2011). c. Buyer’s Obligation. Generally, buyer of properties customarily exercises due diligence and reasonable care of property. It is not sufficient that buyer merely communicate to seller about the defects of good purchased. Graham should have demanded from the seller for free repair of van immediately; or to provide a replacement within a specified timeframe; and to convey reimbursement in case buyer made necessary repair (Consumer Rights Home, 2011). Daly could likely avail mitigated liability because of the firm’s failure to deliver the van for check-up, albeit obvious defective state. If seller refused repair and replacement, buyer may seek for legal option to rescind the contract and demand for refund but such must reject the good immediately from date of purchase (Consumer Rights Home, 2011). Graham and partners must consider litigation as costly. Buyer must reasonably weigh if buyer will succeed in winning the case, to get refund and can afford the cost of court proceedings. Alternative resolution of the issue can be settled amicably through a Civil Procedure Pre-Action Protocol (Consumer Rights Home, 2011). The buyer, of the other hand, should have exercised due diligence and reasonable care of the property under the contract. Conclusion The case illustrated that contract is an agreement that binds parties in a meeting of mind over an object with certain or specific consideration. It has a force of law that put parties to significant obligation (Farnsworth, 1999). It deals about rights and warranties applied to buyer and seller or of payee and payor but such right annexed legal responsibilities and obligation that are also demandable. It is therefore primordial that in contract of sale, the parties must be true to its intents and to its warranties. They must be knowledgeable too of the remedies available for its resolve and must observe governing law on sale diligently with sensitivity to obligations that may arise from contract. They must also seek lawyer or legal luminaries for appropriate solution. REFERENCES Farnsworth, E. Allan. (1999). Contracts. New York: Aspen Law & Business. Perillo, Hill, Gerald & Hill, Kathleen. (2005). Contract. http://legal-dictionary.thefreedictionary.com/contract Accessed: June 29, 2011. Sale of Goods Act 1979. http://www.legislation.gov.uk/ukpga/1979/54/pdfs/ukpga_19790054_en.pdf Accessed: June 29, 2011. Lemon & Co. (2011). Sale of Goods to a Consumer (Sale of Goods Act 1979). Swindon, Wiltshire. http://www.lemon-co.co.uk/article_sale-of-goods.php. Accessed: June 29, 2011 Smithies, Deborah (August 2007) Contract: Express and implied terms. Tutor2U Resources. http://tutor2u.net/law/notes/contract-express-implied-terms.html. Accessed: June 29, 2011 Consumer Rights Home (2011). Understanding the Sale of Goods Act: Your rights. Which? Works for You. Hertford, UK. http://www.which.co.uk/consumer-rights/sale-of-goods/understanding-the-sale-of-goods-act/your-rights/ Accessed: June 29, 2011 Consumer Rights Home (2011). Dealing with Faulty Goods: How to complain about faulty good. http://www.which.co.uk/consumer-rights/making-a-complaint/dealing-with-faulty-goods/how-to-complain-about-faulty-goods/ Accessed: June 29, 2011 Rose v.Chrysler Motors Corp., 212 Cal. App.2d 755, 762-763 [28 Cal. Rptr. 185, 99 A.L.R.2d 1411];Allen v. Brown, 181 Kan. 301, 308 [310 P.2d 923. Accessed: June 29, 2011. also accessible in http://scholar.google.com/scholar_case?case=1671957195749524985&q=breach+of+Sale+of+Goods+Act+1979&hl=en&as_sdt=2,5 Accessed June 29, 2011 Grupe v. Glick, 26 Cal.2d 680, 692 [160 P.2d 832]; Mack v. Hugh W. Comstock Associates, Inc., 225 Cal. App.2d 583, 587 [37 Cal. Rptr. 466 Accessed June 29, 2011 Seely v. White Motor Co. , 63 Cal.2d 9 L. A. No. 27618. In Bank. June 23, 1965.] http://scocal.stanford.edu/opinion/seely-v-white-motor-co-27248 or SCOCAL, Seely v. White Motor Co. , 63 Cal.2d 9 available at: (http://scocal.stanford.edu//opinion/seely-v-white-motor-co-27248) Accessed: June 29, 2011. Read More