Introduction
In English contract law, the principle of freedom of contract allows parties to agree on the terms of their bargain. However, to ensure fairness and to protect the expectations of buyers, Parliament has legislated to imply certain terms into contracts for the sale of goods. These terms are read into the contract by law, regardless of whether the parties have expressly agreed to them. The principal statute governing these implied terms for business-to-business (B2B) transactions is the Sale of Goods Act 1979 (SGA 1979). This Act consolidated previous legislation and provides a framework of protection for buyers. Before the Consumer Rights Act 2015 (CRA 2015), the SGA 1979 also covered consumer sales, but its primary application is now in the commercial sphere.
This essay will explain the most important terms implied into sale of goods contracts by the SGA 1979. It will focus on the provisions relating to title (section 12), sale by description (section 13), and the quality and fitness of goods (section 14). By examining these sections and the case law that interprets them, this essay will show how the law provides a crucial safety net for buyers in commercial dealings.
The Implied Term as to Title (Section 12)
One of the most fundamental obligations of a seller is to be able to pass good title to the buyer. Section 12 of the SGA 1979 implies a condition into the contract that the seller has the right to sell the goods. Specifically, section 12(1) states that 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.
This term is a condition of the contract, meaning that a breach of it entitles the innocent party to repudiate the contract and claim damages. The courts have interpreted this section strictly. The leading case is Rowland v Divall (1923), where the claimant bought a car from the defendant and used it for several months. It was then discovered that the defendant did not have title to the car, as it had been stolen. The claimant had to return the car to its true owner. He then sued the defendant to recover the full purchase price. The Court of Appeal held that there had been a total failure of consideration because the purpose of a sale of goods contract is to transfer ownership of the goods. As the seller had no right to sell the car, the buyer had received none of what he had contracted for. He was therefore entitled to a full refund of the price, without any deduction for the use he had made of the car.
Additionally, section 12(2) implies two further warranties: first, that the goods are free from any charge or encumbrance not disclosed or known to the buyer before the contract is made and will remain so until the property is to pass; and second, that the buyer will enjoy quiet possession of the goods. These warranties provide ongoing protection for the buyer after the sale has been completed. Unlike the condition in section 12(1), a breach of these warranties only entitles the buyer to claim damages.
The Implied Term as to Description (Section 13)
Many commercial contracts involve the sale of goods by description. Section 13(1) of the SGA 1979 provides that where there is a contract for the sale of goods by description, there is an implied term that the goods will correspond with that description. This applies even where the goods are seen by the buyer, as in a self-service shop, provided they are sold by reference to a description (s.13(3)).
The term 'sale by description' covers a wide range of situations, from goods ordered from a catalogue to specific goods described by the seller in negotiations. The case of Beale v Taylor (1967) illustrates this. The buyer saw an advertisement for a "Herald convertible, white, 1961" and went to inspect the car. He bought it, but later discovered that the car was in fact two parts of different cars welded together, only one of which was from a 1961 model. The court held that this was a sale by description, even though the buyer had seen the car. The descriptive words in the advert were a term of the contract, and since the car did not correspond to that description, the seller was in breach.
However, for section 13 to apply, the description must be an influential factor in the sale. In Harlingdon & Leinster Enterprises Ltd v Christopher Hull Fine Art Ltd (1991), the sellers of a painting stated that they believed it was by the German expressionist artist Gabriele Münter. The buyers, who were specialist dealers in German art, sent their own experts to inspect the painting. After the sale, it was discovered to be a forgery. The Court of Appeal held that there was no breach of section 13. The buyers had not relied on the seller’s description but on their own expert judgment. As the court stated, the description must be a 'substantial ingredient' of the contract for a sale to be considered a sale by description.
The Implied Terms as to Quality and Fitness (Section 14)
Section 14 of the SGA 1979 is arguably the most significant source of protection for buyers regarding the condition of the goods. It implies terms concerning satisfactory quality and fitness for a particular purpose. Importantly, these terms are only implied where the seller sells the goods "in the course of a business" (s.14(2)). This excludes purely private sales from the scope of section 14.
Satisfactory Quality: Section 14(2)
Section 14(2) implies a condition that goods supplied under the contract are of satisfactory quality. This replaced the older, more difficult concept of 'merchantable quality' following amendments made by the Sale and Supply of Goods Act 1994. The test for satisfactory quality is set out in section 14(2A): 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.
To assist the courts, section 14(2B) provides a non-exhaustive list of aspects of quality. These include: (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.
The application of this test depends heavily on the facts of each case. For example, in Rogers v Parish (Scarborough) Ltd (1987), a new Range Rover was found to have minor defects in its engine, gearbox, and bodywork. Although the car was driveable, the Court of Appeal held that it was not of merchantable quality (the test at the time). A buyer of a new, premium vehicle is entitled to expect a higher standard of performance, appearance, and finish than the buyer of a cheap, second-hand car. This reasoning is equally applicable to the modern test of satisfactory quality. The inclusion of 'freedom from minor defects' in the statutory list confirms that even small issues can render goods unsatisfactory.
There are exceptions to this implied term. Section 14(2C) states that the term does not apply to any defect which is specifically drawn to the buyer's attention before the contract is made, or where the buyer examines the goods before the contract and that examination ought to have revealed the defect.
Fitness for a Particular Purpose: Section 14(3)
Section 14(3) provides additional protection where a buyer requires goods for a specific, rather than a general, purpose. It implies a term that the goods supplied are reasonably fit for any particular purpose which the buyer, expressly or by implication, makes known to the seller.
For this term to be implied, the buyer must make the particular purpose known to the seller, and the buyer must have relied on the seller's skill or judgment. Where goods have only one common purpose, simply buying them implies that purpose. However, if the buyer has an unusual or specific requirement, they must communicate this to the seller. In Griffiths v Peter Conway Ltd (1939), a woman with abnormally sensitive skin bought a tweed coat and developed dermatitis from wearing it. She had not informed the seller of her sensitive skin. Her claim for breach of fitness for purpose failed because the coat was fit for a normal person to wear, and she had not made her particular sensitivity known to the seller.
The buyer's reliance on the seller's skill and judgment is a key element. In a commercial context, if a buyer provides a detailed technical specification for a product to be manufactured, there may be little or no reliance on the seller's judgment regarding the fitness of the design for the buyer’s purpose (Atiyah et al, 2010). However, reliance is often inferred where a buyer asks a seller for a product to perform a certain job.
Conclusion
The implied terms in the Sale of Goods Act 1979 provide a vital framework of buyer protection in business-to-business contracts. They establish minimum standards that sellers must meet, ensuring that buyers receive what they bargain for. The term as to title under section 12 guarantees the buyer's fundamental right to ownership. Section 13 ensures that goods match their description, which is crucial in commerce where goods are often bought unseen. Finally, section 14 provides essential protections relating to the quality and fitness of goods, holding business sellers to a standard of reasonableness.
While parties in commercial contracts can sometimes agree to exclude these terms, the Unfair Contract Terms Act 1977 places significant restrictions on their ability to do so, particularly for title. These statutory implied terms therefore form a bedrock of English commercial contract law, promoting certainty and fairness by balancing the principle of freedom of contract with necessary protection for the buyer.
References
Atiyah, P.S., Adams, J.N. and MacQueen, H. (2010) Atiyah's Sale of Goods. 12th edn. Pearson.
Cases
Arcos Ltd v E A Ronaasen & Son [1933] AC 470
Beale v Taylor [1967] 1 WLR 1193
Griffiths v Peter Conway Ltd [1939] 1 All ER 685
Harlingdon & Leinster Enterprises Ltd v Christopher Hull Fine Art Ltd [1991] 1 QB 564
Rogers v Parish (Scarborough) Ltd [1987] QB 933
Rowland v Divall [1923] 2 KB 500
Legislation
Consumer Rights Act 2015
Sale and Supply of Goods Act 1994
Sale of Goods Act 1979
Unfair Contract Terms Act 1977
