Implied Terms and Sales of Goods - Essay Example

16 Feb. 2008 IMPLIED TERMS AND SALES OF GOODS A contract is a legally enforceable promise or set of promises made by one party to another. The basic principles of English contract law are the right to freedom of contract within the law and the basic need for some kind of certainty. In the case of any doubt on what was intended by the parties, the exact meaning of a contract must be construed against a person seeking to rely on related provisions. If all the parties involved in the contract agree upon all terms without any kind of influence they are held to the bargain unless circumstances intervene which are beyond the control of either party, and which fundamentally distort the nature of the contract. For any contract under the English law, an offer must be made of terms which are accepted by the other party. Usually an offer can be an oral or a written statement. The contract is complete only if it is accepted by all the parties concerned. The duration till which a contract can be withdrawn is until the time of its acceptance, but as soon as the contract is established it becomes a binding obligation. Most contracts are subject to the doctrine of consideration and are enforceable only if something is given in return of a promise to perform. Only the parties related to the contract can enforce the contract. If a contract is made on behalf of another party, that does not have any good consideration, that party cannot enforce it. If all the parties concerned with a contract make the same mistake in relation to it, then they will never have reached the agreement they intended. If an event occurs which destroys the contract this too will render the contract void. An agreement is a contract that contains the three basic elements of intention to create legal relations, offer and acceptance, and consideration. There arises a need for unification of law in Europe. Any businessman trading in Europe knows that some of his contracts with foreign parties will be governed by foreign laws. The unknown laws of the foreign countries add to such risks. But one who trades with a few countries only, or is about to make a big deal, will sometimes try to obtain information on the foreign contract law or law that come into question. Such a person will often realize that the foreign laws are difficult to understand for him and his lawyer. Many businessmen hope that no dispute with their foreign partners will arise and that it will then be settled amicably. Most disputes are in fact settled amicably. But in the negotiations leading to a settlement the applicable foreign law will often be a factor of importance and it could be disastrous to be ignorant of them. Fear of the unknown law and incomprehension keep many potential exporters and importers away from the European market. The existences of varieties of laws hamper the mobility of the European businessman. It is a non-tariff barrier to the trade. It is the aim of the European Union to abolish the legal restrictions of the intra-union trade. It follows from this objective that differences of law which restrict this trade should be abolished. The highly intensive and increasing international trade creates a need for legal unifications, paving way to CISG in the year 1980. CISG has been adopted by most countries with important international trade. In the countries of the European Union where the trade has increased many times since the Common Market was established, unification of the contract law will become more urgent the more the trade grows. In case the contract has been induced by some kind of misrepresentation, the party who was misled may withdraw from the contract and thus treat the contract as invalid. Action must be invoked immediately after the misrepresentation is discovered. Suppose the misrepresentation was made innocently it must be proved that it was unreasonable for the party making it before the contract becomes invalid or void. The breach of contract is unlawful and is punishable. The remedy for the breach of contract in the common law is damages. The victimized party receives a compensation for the loss incurred to it. In case the breach is of a fundamental term of contract, the victimized party is entitled to rescind or annul the contract itself or just treat it as concluded. The victimized party is entitled to rescission as a withdrawal from the contract when rescission is not warranted may lead the victimized party into breach of contract. Thus the English Law of Contract propounds that each party is obliged to perform the terms of the contract even if the other party is in breach of the contract. The contracts under the English Contract Law are basically of two types, a contract under seal and a simple contract. An under seal contract is signed with strict formalities and is presented in a gratuitous contract or in a contract for transfer of immovable property. Simple contract does not require any formalities, nor does it have to be written. Simple contracts demand the contracting parties to do or not do something. A contract would become null in three instances, error, misrepresentation of facts and duress. A contract in English law will be declared illicit if it is prohibited by an existing English law i.e. if the contract is contrary to the freedom of commerce. It will also be unlawful if it goes against English public order. The emergence of implied terms can be described by analysis of some historic events. Some such events are, the emphasis of employment in United Kingdom being a collective bargaining within supportive laws. The ordinary courts that had little role to play here were suspected by trade unions. The judges winning much academic acclaim for redressing the imbalance between the state and individual parties and certain other incidents lead to the need for a well established contract law and the emergence of the implied terms. The sources of implied terms in the English contract law are discussed below. The terms may be implied from a variety of sources that include legislation of general application in commerce such as consumer protection legislation and the Sales of Goods Act. The terms implied by statute: such terms are usually cumulative. An example is the terms implied by Sales of Goods Act of 1979 that applies concurrently with the terms implied by the Fair Trading Act of 1973. In a contract of Sale of Goods, terms are implied that the seller has the right to sell his goods while the purchaser will enjoy the possession of goods, allowing them to use the goods without interference from any third party and the goods will remain free and will remain so when the property is to pass from any charge or encumbrance that had not been mentioned to the buyer earlier. In a contract for supply of services, where the supplier is acting on the course of business terms implied that the supplier will exercise reasonable skill and care in delivering the services, the services will be carried out within a reasonable time, unless a specific time-frame has been agreed. The services must be of a satisfactory quality and fit for the purpose for which they were intended. The Section 12 provides: in a contract of sale there is an implied term on the part of the seller that in the case of a sale he has a right to sell the goods, and in the case of an agreement to sell he will have such a right at the time when the property is to pass. In a contract of sale there is also an implied term that: the goods are free, and will remain free until the time when the property is to pass, from any charge or encumbrance not disclosed or known to the buyer before the contract is made, and the buyer will enjoy quiet possession of the goods except so far as it may be disturbed by the owner of or other person entitled to the benefit of any charge or encumbrance so disclosed or known. The term implied by s12 is a condition and a warranty. The Section 13 provides: where there is a contract for the sale of goods by description, there is an implied term that the goods will correspond with the description. The term implied is a condition. If the sale is by sample as well as by description it is not sufficient that the bulk of the goods correspond with the sample if the goods do not also correspond with the description. Section 14 provides: 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. Goods are of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price and all other relevant circumstances. The quality of goods includes their state and condition and the following are in appropriate cases aspects of the quality of goods - fitness for the purposes for which goods of the kind in question are commonly supplied, appearance and finish, freedom from minor defects, safety, and durability. The term implied by subsection above does not extend to any matter making the quality of goods unsatisfactory which is specifically drawn to the buyer's attention before the contract is made, where the buyer examines the goods before the contract is made, which that examination ought to reveal, or in the case of a contract for sale by sample, which would have been apparent on a reasonable examination of the sample. Where the seller sells goods in the course of a business and the buyer, expressly or by implication, makes known to the seller any particular purpose for which the goods are being bought, there is an implied term that the goods supplied under the contract are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the buyer does not rely, or that it is unreasonable for him to rely, on the skill or judgment of the seller. The terms implied by sections 14is a condition. The section 15 provides: In the case of a contract for sale by sample there is an implied term - which the bulk will correspond with the sample in quality, that the goods will be free from any defect, making their quality unsatisfactory, which would not be apparent on reasonable examination of the sample. The term implied by s15 is a condition. Section 15A provides: where in the case of a contract of sale - the buyer would, apart from this subsection, have the right to reject goods by reason of a breach on the part of the seller of a term implied by sections 13, 14 or 15 above, but the breach is so slight that it would be unreasonable for him to reject them, then, if the buyer does not deal as a consumer, the breach is not to be treated as a breach of condition but may be treated as a breach of warranty. This section applies unless a contrary intention appears in, or is to be implied from, the contract. It is for the seller to show that a breach fell within the subsection above. According the implied terms about care and skill the section 13 provides: in a contract for the supply of a service where the supplier is acting in the course of a business, there is an implied term that the supplier will carry out the service with reasonable care and skill. According to the implied terms about time of performance the section 14 provides: where, under a contract for the supply of a service by a supplier acting in the course of a business, the time for the service to be carried out is not fixed by the contract, left to be fixed in a manner agreed by the contract or determined by the course of dealing between the parties, there is an implied term that the supplier will carry out the service within a reasonable time. What is reasonable time is a question of fact. According to the implied terms about consideration the section 15 provides: where, under a contract for the supply of a service, the consideration for the service is not determined by the contract, left to be determined in a manner agreed by the contract or determined by the course of dealing between the parties, there is an implied term that the party contracting with the supplier will pay a reasonable charge. What is a reasonable charge is a question of fact. This legislation grants the following rights in the sale and supply of goods: 1. Fit any description given on labels, packaging or advertising 2. Be of satisfactory quality, in that they will last for a reasonable amount of time, are in good condition and safe to use 3. Be fit for the purpose for which they were designed, taking into account their advertised use 4. Match any sample in the exposure of the goods for sale, and 5. Come with sensible assembly instructions The breach of contract is unlawful and is punishable. The remedy for the breach of contract in the common law is damages. The contract damages are to put the victim of the breach as far as law allows onto a position he would have been if the contract had not been broken. There are two tests, one to decide the type of loss based on causation and remoteness, while the other to establish the amount recoverable in respect of the actual loss. The various implied terms in the English Contract Law had played and shall continue to play a leading role in the sales of goods in modern times. It has been ensuring justice to the weaker party and punishing the exploiters. The Implied terms of the Contract Law have been widely accepted and similar laws derived from the English Contract Law are in use throughout the world especially in the European Union. The Contract law enables the customer purchasing party to be ensured of justice against unrestricted exploitation while protecting the supplier group from the customer failing to satisfy the contract terms. The breach of contract being illegal leads to the offending party paying compensations to the offended party. Thus trade becomes much reliable with little malpractice. The lack of malpractice in turn leads to growth of free and fair trade leading to a stronger economic growth. The terms implied by Sales of Goods Act applies along with the terms implied by the Fair Trading Act. In a contract of Sale of Goods, terms are implied that the seller has the right to sell his goods while the purchaser will enjoy the possession of goods, allowing them to use the goods without unnecessary interferences. Works Cited Deborah Smithies. Contract - Express & Implied Terms. August 2007. Contract law. 16 Feb. 2008. Professor Ole Lando. Principles of European Contract Law. 22 Nov. 2006. 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