Sale and Supply of Goods Act - Essay Example

Topic: Contract Law: Introduction: This paper involves a case analysis of the given facts and the application of the applicable law on the matter. It therefore starts with the presentation of the case facts, followed by the identification of the issues and then the analysis and resolution of the issues by connecting the facts with the provisions of law under which the case facts and related issues find application. The paper ends with an advice to Melinda who is one of the contracting parties in this case. I. Facts: Melinda owns a small restaurant and lives above the restaurant with her family. She buys an ‘industrial standard dishwasher’ from Electromart, a large electrical good shop. She intends to use the machine both for her restaurant and for family meals. One of the clauses in the sales contract, which is drafted in technical legal language, read as follows: “Electromart cannot be held responsible for any loss or injury whatsoever caused by any defects in the manufacture or design of any goods sold.” Melinda also enters into an on-site service contract for an extra £45. In the service contract Electromart agrees to repair the dishwasher if it breaks down within one year of purchase. One of the clauses in the service contract provides: “The customer bears all the risk of all repairs and nether Electromart nor any of its employees whatsoever accept any liability for any injury, damage or consequential loss, howsoever caused, arising out of any work done or omitted to be done in respect of any insured product.” Two days after the machine is delivered the dishwasher floods, causing £2,000 damage, and £200 lost business in the restaurant. An employee of Electromart, Noreen, attempts to repair the dishwasher. Immediately after Noreen leaves, Melinda tries to use the machine, which bursts open in mid-cycle, scalding Melinda badly. Advice Melinda. II. Issues From the above facts we can have the following issues: 1. May a seller (not the manufacturer) of a manufactured product avoid liability from defects of the product by including in its contract the following clause: “Electromart cannot be held responsible for any loss or injury whatsoever caused by any defects in the manufacture or design of any goods sold.” 1.a If indeed it can avoid liability, who should be reponsible if something happens as a consequence of using the sold product? 2. May Electromart avoid liability as repairer of the product it sold to Melinda by providing in the contract the following clause: “The customer bears all the risk of all repairs and neither Electromart nor any of its employees whatsoever accept any liability for any injury, damage or consequential loss, howsoever caused, arising out of any work done or omitted to be done in respect of any insured product.” 3. Is there a breach of contract? If yes, what are the remedies of Melinda under the circumstances? III. Analysis and Resolution: 1. I resolve to answer to the first issue that the seller could avoid the liability because it is not the manufacturer of the product. However, it does not mean that it has removed the liability of the manufacturer when something wrong happened with the sold product. Under the given facts, two days after the machine is delivered the dishwasher floods, causing £2,000 damage, and £200 lost business in the restaurant. With only two days having passed when the machine was a delivered, it would be very correct to conclude that he machines was defective especially that facts mentioning nothing about the possible negligence of the Melinda. 1.a. The next question that should be answered under the given facts is: May the manufacturer still be liable? Our answer to the question is yes. But what is the basis of the liability? Is there a breach of contract between the manufacturer and Melinda? Is the right of Melinda based on consumer contract or based on Sale and Supply of Goods Act of 1994 (c.35)? To answer this question, there is need to cite the provision of Consumer Arbitration Agreements Act 1988 (c. 21) (2000), which reads: Contracting "as a consumer".         3.—(1) For the purposes of section 1 above a person enters into a contract "as a consumer" if—  (a) he neither makes the contract in the course of a business nor holds himself out as doing so; and  (b) the other party makes the contract in the course of a business; and  (c) in the case of a contract governed by the law of sale of goods or hire-purchase, or by section 7 of the Act of 1977, the goods passing under or in pursuance of the contract are of a type ordinarily supplied for private use or consumption; but on a sale by auction or by competitive tender the buyer is not in any circumstances to be regarded as entering into the contract as a consumer. (2) In subsection (1) above— "business" includes a profession and the activities of any government department, Northern Ireland department or local or public authority; and "goods" has the same meaning as in the Sale of Goods Act 1979.     (3) It is for those claiming that a person entered into a contract otherwise than as a Reference: http://www.opsi.gov.uk/acts/acts1988/Ukpga_19880021_en_2.htm Based on the foregoing, Melinda is deemed to be not a consumer covered under a consumer contract, since she is buying the dishwasher machine to be used in the restaurant, and not for private consumption. Applying section 3(1) (a) above, makes the contract in the course of a business or holds himself out as doing so and there he is a consumer. Therefore she is said to be covered under the Sale and Supply Act of 1994 (c.35) (2000), for which a breach of warranty may be applicable between her and the manufacturer. But did she not contract with Electromart? Under the particular set of facts, the sale of the dishwasher to Melinda may be deemed to still be covered under the warranty period in the absence of evidence to the contrary or unless Melinda has known the expiration of the warranty when she bought the dishwasher from Electromart especially with a provision on the contract limiting the liability from the design of the product. Assuming dishwasher is still covered by warranty, the basis of the manufacturer’s liability in law is the Sale and Supply of Goods Act of 1994 (c.35) (2000) which reads: Implied term about quality.         1.—(1) In section 14 of the [1979 c. 54.] Sale of Goods Act 1979 (implied terms about quality or fitness) for subsection (2) there is substituted—   "(2) 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.   (2A) For the purposes of this Act, 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 (if relevant) and all the other relevant circumstances.   (2B) For the purposes of this Act, the quality of goods includes their state and condition and the following (among others) are in appropriate cases aspects of the quality of goods—  (a) fitness for all the purposes for which goods of the kind in question are commonly supplied,  (b) appearance and finish,  (c) freedom from minor defects,  (d) safety, and  (e) durability.   (2C) The term implied by subsection (2) above does not extend to any matter making the quality of goods unsatisfactory—  (a) which is specifically drawn to the buyers attention before the contract is made,  (b) where the buyer examines the goods before the contract is made, which that examination ought to reveal, or  (c) in the case of a contract for sale by sample, which would have been apparent on a reasonable examination of the sample.     (2) In section 15 of that Act (sale by sample) in subsection (2) (c) for "rendering them “unmerchantable" there is substituted "making their quality unsatisfactory". However, by circumstantial evidence, we could presume that dish washer may have expired because of Melinda’s willingness to enter into a contract with Electromart about a possible repair within a period of one year from purchase for a price. 2. The next issue is whether Melinda could enforce her right to damages against Electromart for the presumably defective repair of the dishwasher. Case facts say that immediately after the Electro mart’s employee left the dishwasher, Melinda tried to use the machine, which burst open in mid-cycle, scalding Melinda badly. With this factual setting, there is strong basis for the negligence of Electromart as done by its employee. To have authorized Melinda to use the machine, leaving her damaged just immediately is an indication of gross negligence if not bad faith in the performance of service it is suppose to render effectively and safely. This is another clause of which the repairer tried avoid liability and which it cannot. This sounds illegal, one cannot avoid liability out of the things he has done. If this argument is sustained, and then the repairer is not selling anything. It is just like agreeing to commit fraud. Waiver of future fraud invalidates the clause. This is different from the first case of avoiding. Under the first case, the distributor cannot warrant what it did not manufacture but it cannot avoid liability by not being responsible for the repair it has done. This would be absurd. How if it places a time bomb in the dishwasher while repairing the machine? Under the agreement, it would seem the repairer would be free from responsibility in all cases. Could this be fair? Of course it is not. Degree of diligence may be subjected to a contract like agreeing to reduce diligence from extraordinary to ordinary diligence, but agreeing to be completely free from responsibility would be amounting to bad faith which amount to fraud or gross negligence (West Publishing Company (n.d.) for which the Law affords protection to the victim by declaring that the clause or condition will be void. It means that Melinda could still recover despite the signing such kind of agreement on future absence of liability arising from repair for the product. 3. As to whether there is breach of contract (Rianda, P (n.d.), the answer is yes because of the material damage suffered by Melinda with product virtually did give the benefit she is due. Her remedies are available under Section 11F of the Sale and Supply of Goods Act of 1994 (2000), which reads as follows: Remedies for breach of contract.         11F.    —  (1) Where in a contract for the transfer of goods a transferor is in breach of any term of the contract (express or implied), the other party to the contract (in this section referred to as "the transferee" ) shall be entitled—  (a) to claim damages; and  (b) if the breach is material, to reject any goods delivered under the contract and treat it as repudiated.     (2) Where a contract for the transfer of goods is a consumer contract and the transferee is the consumer, then, for the purposes of subsection (1)(b) above, breach by the transferor of any term (express or implied)—  (a) as to the quality of the goods or their fitness for a purpose;  (b) if the goods are, or are to be, transferred by description, that the goods will correspond with the description;  (c) if the goods are, or are to be, transferred by reference to a sample, that the bulk will correspond with the sample in quality, shall be deemed to be a material breach.     (3) In subsection (2) above, "consumer contract" has the same meaning as in section 25(1) of the 1977 Act; and for the purposes of that subsection the onus of proving that a contract is not to be regarded as a consumer contract shall lie on the transferor. Comment: Whether or not Melinda is a covered under a consumer contract, (Since we have earlier determined that Melinda in not covered under the consumer contract) , it is submitted that that she is entitled to claim damages and the right to have the contract repudiated because of the material damage she suffered and without almost benefiting from the product. IV. Conclusion and Recommendation: Conclusion: Contracting parties have the right to enter into contract under the principle of freedom to enter into a contract. Exclusion clauses or clauses limiting the liability of one of the parties may be a valid part of contract pursuant to that principle of freedom to enter into contract. However, there are limits to what could be agreed upon and these includes violating the law, public policy, public morals and public order (Check this UK law) Recommendation: I am recommending Melinda to heed advice that she must demand compensation for damages for the defective product from the manufacturer and another set of damages for Electromart. Since the breach is material, I also advised that she would rather have the contract repudiated in addition to claim for actual damages in term of property destroyed as well damages as a result of scalding. She could also some kind of damages she suffered because of the grossly negligent act of repair of the dishwasher by Electromart. She should not worry about the exclusionary clause limiting the liability of the repairer because; Electromart could not validly do so. Bibliography: 1. Consumer Arbitration Agreements Act 1988 (c. 21) (2000), Contracting "as a consumer 1988 c. 21, {www document} URL , http://www.opsi.gov.uk/acts/acts1988/Ukpga_19880021_en_2.htm, accessed March 20,2006 2. Rianda, P (n.d.) What Constitutes A Material Breach of Contract?, (n.d.), {www document} URL ,,http://www.transactionworld.com/articles/2005/February/theLegalJungle1.asp, accessed March 20,2006 3. Sale and Supply of Goods Act 1994 (c. 35) (2000) , Implied terms about quality , {www document} URL , http://www.opsi.gov.uk/acts/acts1994/Ukpga_19940035_en_2.htm accessed March 20,2006 4. Sale and Supply of Goods Act 1994 (c. 35) (2000), Remedies for breach of contract , {www document} URL , http://www.opsi.gov.uk/acts/acts1994/Ukpga_19940035_en_2.htm, accessed March 20,2006 5. West Publishing Company (n.d.) A STATUTORY DEFINITION OF GROSS NEGLIGENCE: RECOMMENDATION TO THE LEGISLATURE, {www document} URL , http://council.legislature.mi.gov/mlrc/1996/gross.htm accessed March 20,2006 Read More