Discussion on Amendments to Sale of Goods Act in the UK: Sections 12, 13, and 15, Study notes of Law

Download Discussion on Amendments to Sale of Goods Act in the UK: Sections 12, 13, and 15 and more Study notes Law in PDF only on Docsity! 1 .4, N.B. This i s a j o i n t docmen t of the Law Commission and the S c o t t i s h Law Commission circulated f o r comment and cri t icism only. It does not r ep resen t the concluded views of t h e two Commissions. LAi7 COl.fMI S S I ON (Published Working Paper Bot. 18) and SCOTTISH LAV CONMISSION (Memorandum No. 7) PROVISIONAL PROPOSALS RELATING t o &.IEI'?DI~~JTS TO SECTIONS l Z J L 5 O F THE SALE OF GOODS ACT 1893 and COl!lTRACTlXG OUT OF TH% CONDITIONS ADD 'V'bRRANTIES IMPLIED BY THOSE SECTIONS 22nd YJay 1968 I n view of the urgency of t h i s p r o j e c t it is reques ted that r e p l i e s should b e fornarded not later than 30th September 1968. All correspondence and i n q u i r i e s should be addressed to: R.G. Greene, Law Commission, Lacon House, Theobalds Road, London, T.C.1. (Tel.: 01-405 8700, ext . 239) - i PART I: IIVTRODUCTION 1 PART 11: SECTIONS 12-15 OF T-FEE SALE OF GOODS ACT 1893 A. Sect ion 1 2 B. Sec t ion 13 C. Sec t ion 14cj D. Sect ion 14 (2 ) E. F. Sec t ion 15 G. Sec t ion 14( 3) I ’ a& (4) Third p a r t y b c n d f i c i a r i e s of condi t ions and warranties PART III : CO-OFDIITATION WITH HIRE PUIiCHASE LEGISLATION PART IV: hERCHAI’iDISX P&iR.KS ACT 1887 PART V: COlPEUCTIITG OUT OF COTTDITIONS &JD Yidm?mIES ACT 1893 INPLED BY SECTIONS 12-15 OF m SAL;: OF GOODS P U T V I r CONTRACTING OUT OF LIABIJJITY FOR RZGLIGENCE PART VII: SUldiillRY OF COBCLUSIONS fND OF QUESTIOITS UPON WHICH COi’dMENT IS l2TVIm APPENDICES A. B, C. D. Nmes of oenbcrs of t he J o i n t Working P a r t y Sec t ions 12-15 of t he S a l e of Goods Act 1893 S.2-302 of t h e U.S. Uniforn Comerc ia l Code Israeli Standard Contracts Law 1964 2 3 4 4 6 10 10 1 11 15 16 17 28 30 33 34 37 40 eliniaate t h i s d i s t i n c t i o n fiould involve a radical r ev i s ion of the whole lam of sale and indeed t h e general law of con t r ac t , nh ich nould go beyond the scope of the p resen t exe rc i se . This long-term t a s k is b e i n g under- taken undcr the Programmes of the Lau Comissions. 8. Sales of Goods has nou been enacted i n t h e United Kingdon by the Uniform Lavs on I n t e r n a t i o n a l Sales Act 1967; opera t ion u n t i l the Convention re la t ing t o the Uniforn Law has come i n t o fo rce . apply only i f adopted by the p a r t i e s , support within t h e Working P a r t y f o r t he Uniforin La17 as a code which, i n comprchensivcncss and c l a r i t y , rcprcscntcd an inprovcmcnt on the S a l e of Goods Act. Sone mcnbcrs comidc rcd t h a t t h c roplaccnent of t h e nholc S a l e of Goods Act by t h c Uniforn Lau r;ould bc p r e f e r a b l e t o p i c c c m a l amend- ncnt o f t hc A c t . The Working Pa r ty noted t h a t t h e Uniforn L m on t h e I n t e r n a t i o n a l but t h e A c t w i l l not come i n t o Even then , s o far a s ’ t h c United Kingdom i s conccrncd, i t ail1 Nevertheless t h e r e uas cons iderable 9. t h e advantages of having t h e s u e code app l i cab le t o b o t h domestic and i n t e r n a t i o n a l con t r ac t s of sa le , thcy rcgmd a s o l u t i o n oil t hcsz l i n c s as a long-term p r o j e c t ou t s idc t h c = b i t of thc p r x c n t l i n i t c d rcv icv . I n any event , thcy consider t h a t any rcassessnent of t hc Uniforn Law should be dc fc r r cd u n t i l i t has oporatcd f o r a per iod i n p r a c t i c e . Law Connissions agree n i t h t h e conclusion of the Working Pa r ty that it would be i n p r a c t i c a b l e n e r d y t o s u b s t i t u t e A r t i c l c s 33, 52 and 53 of t h c Uniforn Law f o r ss.12-15 of the Salc of Goods Act, and thcy cndorsc t h e Though t h e Lan Comiss ions synpatk isc n i t h t h i s v i m , and apprec ia t e The Working P a r t y ’ s dec i s ion that the proper course i n the present contcx t is t o concent ra te on poss ib l e m e n b e n t s t o t h c Salc of Goods Act i t s e l f . A. SECTION 1 2 5 10. sirasranties o r n a t c r i d term) r c l s t i n g to titlo, quict possession and f i ccdon from encmbrancc. The S c o t t i s h criticbn of t h i s s c c t i o n has already been nent ioned i n paragraph 7 above. t h a t t h e s e c t i o n should r cna in f o r t h e nonent and t h a t t h e qucs t ion of i t s r e p e a l should await a conprchonsivc r ev icn o f the 1m of sale. This s c c t i o n conta ins thc condi t ions and war ran t i c s ( i n Scotland: The Lam Comiss ions th ink 11. t o the s e c t i o n neccsswy. a i t h t h i s , subject t o the follovting poin t . The Law Reforn Connit tee , i n their Twelfth Report on Transfer of T i t l e t o Chattels (Cnnd, 2958) poin ted out (paragraph 36) that on a breach of t h e condi t ion of t i t l e the The Ilolony Coaxi t tee (paragraph 451) d i d not cons ider any mendnent The Working P a r t y mas i n gene ra l agreenent - 3 - /grcsent present l a w d l o n s the buyer to' recover the whole pr ice paid by hin, without any ctllotiance f o r the &e and enjoynent of the goods. Refom Connittee recornended ?hat the buyer should be able t o recover no more than h i s actual loss, giiing c red i t f o r any benef i t he nay have had from the goods while they ner4 i n h i s possession, agreed with t h i s recomendatibn. 12. give e f f e c t t o the recornendation contained i n pctragcctph 36 of the Twelfth Report of the Law Regom Cormittee. The Law ! The Working Party I So do the Law Conaissions. The Law Connissions propose tha t s.12 shoidd be mended s o as t o '1 B G SECTION 13 13. by description, there is an mpl ied condition ( i n Scotland: =L n a t c r i a l tern) tha t the goods correspond mith the description. wording of t h i s sect ion has been c r i t i c i s e d , it seem t o have caused no d i f f i cu l ty , and s o l o n g as the d is t inc t ion between conditions and varrant ies is naintained i n England, i t seem desirable to provide tha t This states t h a t nhere there is a contract f o r the sa le of goods Although the i n that ju r i sd ic t ion c o n f o d t y with a description i s a condition and not a nere warranty. The Vyorking Pasty considered that no m e n b e n t t o t h i s sect ion i s required, The Law Comissions agree. \ c. SECTION 14(1) 14. inp l ied t e r n as t o ) f i t n e s s f o r purpose. of the Eblony Cornittee (pnragraphs 447-449)9 the za jo r i ty of the Working Party recornended the following anenhents: This subsection relates t o the inpl ied condition of ( i n Scotland: I n ,agrecnent ~ i t h the vieas (1) The requirenent that the goods s h a l l be "of a description mhich it is i n the course of the seller's business t o oupply" should bo replaced by the requirenent t h a t the goods 3se sold I1iy way of trsdc". The proviso e x c l m n g sa les under a patent o r other t rade nme should be deleted. The c a j o r i t y of tho Working Party considered that t h i s proviso fulfils 116 purpose s ince it has been held by the courts t ha t the pkoviso does n o t operate where tho buyer r e l i e s on the seilcrts skill and judgment. (2) 15. Comissions agree that tp present fornula of the subsection should be abolished, but they are not happy with the phrase "by way of trade", With regard t o the Wdrking Pa r ty ' s first rccomiendation, the Law I . which i s rocomended t o replace it. It is intended t h t t h e subsection - 4 - /should should apply t o bus iness sales inc lud ing those by a manufacturer, and t h e Law Commissions do not t h i n k t h a t t he words "by way of t r a d e " express t h i s i n l e n t i o n wi th s u f f i c i e n t c l a r i t y . They suggest t h a t t h e requirement should be t h a t t h e s e l l e r i s "acting i n t h e course of t r a d e o r bus iness I t . The Law Commissions are i n complete qreement with the 'iiorking P a r t y ' s second recommendation. no t apply where t h e buyer can be r e g a d e d as having r e l i ed on the s e l l e r ' s skill and judgment. This i s d e s t r u c t i v e of t h e meaning of t h e proviso, s i n c e the wording of s.l4(l) i t s e l f makes i t c l e a r t h a t un le s s t h e buyer can be s o regasded t h e subsec t ion has CO app l i ca t ion anyway. of t hese cases , no u s e f u l p u q o s e i s served by the r e t e n t i o n of t he proviso. Quite a p a r t from t h e s e dec i s ions , t he Law Commissions see no reason why, when the purchaser is c l o a r l y r e l y i n g on the s e l l e r ' s s k i l l and judgment, t he sale of an a r t i c l e under a pa ten t o r t r a d e name should exclude t h e purchaser from the remedies which would otherwise be a v a i l a b l e t o h i m , C e r t a i n Eng l i sh cases show t h a t the proviso does I n the l ight 16. s h a l l be "of a dosc r ip t ion which i t i s i n t h e course of a seller's bus iness t o supply" should be rep laced by t h e requirement t h a t the s e l l e r was "ac t ing i n t h e course of tradc3. or bus iness t f , and t h a t the proviso excludiiig salcs under a pa ten t o r o t h c r trade name should bc de le ted . The Law Commissions propose t h a t t h e requirement t h a t t h e goods 17. accordingly no o t h e r s were considered by t h e Torlting Pasty. has o f t e n bccn poin ted o c t that , i n t h e l i g h t of t h e cons t ruc t ion pu t upon the subsec t ion i n the decidcd cases , i t s present ao rd ing does not express i t s lcgal c f fcc t w i t h m a x i m u m c l a r i t y . Although t h c d i f f e rences of emphasis i n t h e va r ious judgments a r c r e f l e c t e d i n t h e speeches of t he Lan Lords i n t h e r e c e n t Hardwick Game Farm Case (see paragraph 2 0 ) , it seems t h a t t he p re sen t legal p o s i t i o n can be summarised as f o l l o w : goods are purchased for t h e i r normal and obvious purpose then, i n the absence of anyth ing t o thc cont ra ry , there i s implied a condi t ion t h a t t h e goods a x reasonably f i t f o r t h a t purpose no tn i th s t and ing that the buycr has done noth ing s p e c i f i c a l l y t o i n d i c a t e t h a t he roqu i r c s them f o r that purpose and notwi ths tanding t h a t he has done no th ing more t o shorn that he re l ies on the seller's s k i l l and judgment than t o buy them from a tradesman i n t h a t type of goods. purpose, only then nmst he nakc h i s purpose knom t o the s c l l c r , b u t i t seems t h a t , i f he docs S O , then , i n thc absence of anything t o t h e cont ra ry t h i s n i l 1 be suf f ic ien t t o shon t h a t he relies on t h e seller's s k i l l and The IIolony Committee made no o t h e r c r i t i c i s m s of s.14(1) and Howevcr, i t where If he r e q u i r e s them f o r some unusual or s p e c i a l I /judgment s i 0 22. the Working Party that nerchan-:.ablc qua l i ty should be defined. Pasty decided t h a t the def in i t ion should be based on Farwell L . J . ' s test , but t ha t the elenent of description and the Scot t i sh concept of price- worthiness should be incorporated. done, there would be no need t o exclude the condition i n the case of sales of second-hand and inperfect goods and-goods so ld by a c t i o n , as the Molony Cornittee (pmagraph 445) had thought dould be inevi table . 23. Accordingly, a large m.jority of the Vorking Party approved the following re-fornulation of s.ln(2) ( the t e x t V J E ~ ~ n o t intended as a fornal l e g i s l a t i v e & a f t ) : The Lam Canmissions agree, therefore, n i t h thc ,na jo r i ty conclusion of The Working Thc vien mas taken tha t i f this ncre L Where goods a;.c so ld by ilay of t rade there is condition ( i n Sco;.land: warranty) t ha t the goods s h a l l be of merchant able qi i a l i ty . Ncrchantable qua l i ty neans tha t the goods tendered i n p e r f o m a c e of the contract s h d 1 be of such type and qua l i ty and i n such condition tha t having regard t o all the circun- stances, including tho pr ice and description under which the goods m e sold, a buyer, u i t h f u l l honlcdge of the qual i ty and charac te r i s t ics of the goods, including knonledge of any dcfccts , vrould, act ing reasonably, accept the goods i n perfornance of the contract. I f , p r i o r t o the contract , thc buyer has had cer ta in defects i n the goods spec i f ica l ly dram t o h i s a t ten t ion o r has exanined the goods, the existence of such defects as were dratvn t o h i s a t ten t ion o r as he discovered on inspection or would have dis- covered had he conductcrl the examination with the case reasonably t o be expectcd of h in i n the circuastmces, shall not be a breach of the condition ( i n Scotland: warranty) inp l ied by t h i s section.' ' *implied 24. A small minority of t he illorking Pasty sa?d no need f o r a def in i t ion of nerchantable qua l i ty o r thought t h a t the one suggested viould not work ve l1 i n practice. The Lan Coclnissions do not share these views, and they con- s i d e r t h a t a def in i t ion of merchantable qua l i ty i s desirable , and t h a t one on the l i n e s o f t ha t approved by the majority of the Working Party i s the best. t h a t can be devised i n thc circunstmces. It w i l l be observed tha t i t is , i n e f f ec t , an anpl i f ied version of the def in i t ion of Dixon J. which had the approval of thu m a j o r i t y of the Xouse of Lords i n the Hardwick Gane Fasn Case. Tho Lav Cormissions' conclusion on the n a t t e r i s , however, tentative, and connents of the rec ip ien ts of t h i s Working Paper mould be mlcomc. - 8 - 25. The Law Commissions are aware of , and sympathise with, the c r i t i c i sm tha t has been made o f the expression "merchantable quali ty" which, though appropriate enough i n commercial transactions, seems inappropriate t o s a l e s to a pr ivate consumer. But the expression has become hallowed by l o n g use and u n t i l there i s a complete revision of the Sale of Goods Act, i t would probably do more h a m than good t o adopt an a l te rna t ive expression. 26. defined and s,14(2) re-forEiLiLated on the l ines suggested i n paragraph 23 above. seller ac t ing i n the course of trade o r business" should be subst i tuted f o r "by way of t rade" i n sub-paragaph (a). The Law Commissions propose tha t "merchantable qual i ty" should be But, f o r reasons given i n paragraph 15, they suggest t h a t "by a 27. "by way of trade" (or s i m i l a s expression) would cover the case o f a trading body ac t ing as an agent t o s e l l goods on behalf of a pr ivate person, e.g. a motor dealer s e l l i n g a car on behalf of a pr ivate owner, The majority of the Working Party considered tha t such a s a l e should be t reated on the same foot ing as a sa l e by a t rader as owner t o a consumer. Accordingly, a clause on the fo l lowing l i nes was approved as an amendment Doubt was expressed i n the Working Pazty on whether the expression to s.14: "Whcre goods a re so ld by an agent o r auctioneer ac t ing i n the course of trade o r profession the goods s h a l l be deemed t o be sold by way of trade whether o r not the owner of the goods o r other person on vhose behalf the goods are sold i s himself engaged i n trade." This clause would apply t o both subsections (1) and ( 2 ) of s.14, although s.14(1) would ra re ly i f ever apply t o auction s a l e s s ince a purchaser at an auction r e l i e s on h i s own judgnent and not on t h a t of the auctioneer. * 28. Strong objections were r a i sed by a fey1 members of the Working Party t o t h i s clause on the grounds that i t was anomalous and inequitable that if a pr ivate individual sold d i r e c t t o another porson,he would not be l i z b l e under s.14, whereas if he so ld through a n a g e n t engaged i n t rade o r through an auctioneer, he would be l i ab l e . Such a change i n the law, it was argued, was completely unjust i f ied. The viem of the Lam Commissions is tha t , i n the l i g h t of the suggested amendment t o the terms o f s.14(2) (see paragraph 23 above), the sect ion should cer ta in ly apply t o auction sa l e s but t ha t there is a case f o r saying that, i n t he case of such sales, an express exclusion of l i a b i l i t y under t ha t subsection should be permitted. Reference i s made t o t h i s i n paragraphs 55-58 below. To provide that the . . - 9 - /subs e c t ion subsection should never have any application t o sales through a cormercial a g e n t o r auctioneer would, i n the vien o f the Lam Comnissions, be going far f u r t h e r than could be justified on any count. pointed cut i n paragraph 445, "the used car market i s a f e r t i l e source of consumer trouble". A s the Ilolony Committee And i n some auction sales the buyer w i l l not knon . .whether the auctioneer is s e l l i n g h i s o m goods, those of anothcr*tradc seller, o r those of a pr ivate oviner. . Accordingly, the Lam Connissions propose tha t a clause on the following l ines should be added t o s.14. e f f e c t as the one suggested by the Working Party except t h a t thc phrase "by way of trade" has been replaccd by the phrase recommended i n para- graph 15 above. This clause is t o the s a c Where goods are sold through an agent o r auctioneer ac t ing i n the course of t rade o r business, the goods s h a l l be dcened.to be sold by a se l le r act ing i n the course of t rade o r businessg" E. SECTION 14(3) and (41 e 29. These subsections m e supplcnentary and do not require mendment, F, SECTION 15 30. d id n o t recommend any amendment, but two points arise, the first of which mas nentioned by the Working Party: This sect ion deals with sales by samples. The Ilolony Corni t tee (a) Subsection (2)(c) s t a t e s t h a t there is an inp l icd condition ( i n Scotland: a narranty) that the goods s h a l l be f r e e from any defect rendering then unAerchantablc, uhich may n o t be apparent on reasonable examination of the smple . If the ' def in i t ion of nerchantable qua l i ty se t out i n clause (b) of the re-formulated s , l 4 (2 ) (see paragraph 23 above) i s adopted, i t should be made c l ca r t h a t the def in i t ion applies t o s.15 - also. As a r e s u l t of sone cases decided as far back as 1814-1815 (which have never been overruled) i t nust, i t seeus, be shown t h a t (i) there i s a tern i n the contract making the sale a sale by sanple, (ii) if the contract i s reduced t o w r i t i n g , this tern i s iiicluded i n the wr i t i ng . The Lax7 Comiss ions consider t ha t t h e sect ion should be mended s o as t o dispense with this requirenent. This could be done by avoiding the words "tern of the contract" i n s.15 and using the formula of s.13, i.e. "where there i s a sale by sample * . . ' I . - 10 - 131. I - '0 - t h e manufacturer ( o r in te rmedia te d i s t r i b u t o r ) , s t rengthen the p o s i t i o n of the consumer and seemingly provide a ready s o l u t i o n t o the problem of manufacturers ' "guarantees". Its e f f e c t , however, would be considerably wider than t h i s ; This would considerably i t mould, f o r instance, g ive a r i g h t t o a f a c t o r y employee i n j u r e d by a de fec t ive machine t o sue the s u p p l i e r (provided, of course, that t h e r e was no exemption clause i n t h e c o n t r a c t o f sa le ) . 36. American dec i s ions r ega rd ing "products l i a b i l i t y " seem, however, t o g ive no clear o r c o n s i s t e n t guidance as t o whether such l i a b i l i t y is based on c o n t r a c t o r t o r t ( d e l i c t ) o r i s su i gener i s . of t h e o b l i g a t i o n s imposed by products l i a b i l i t y is h ighly important , e.g. i n a s s e s s i n g damages, Accurate c l a s s i f i c a t i o n Reforming t h e whole of B r i t i s h law relating t o products l i a b i l i t y would involve s t u d i e s i n depth i n t h e f ie lds bo th of con t r ac t and t o r t ( o r d e l i c t ) . had t o conclude that t h e s e ex tens ive studies could not be f i t t e d i n t o the framework of t h e p re sen t inquiry. ' However, they see the p o s s i b i l i t y f o r a l i m i t e d breakthrough here and now, by extending the b e n e f i t of t h e sel ler ' s o b l i g a t i o n s t o c e r t a i n " t h i r d p a r t y bene f i c i a r i e s " ; time b e i n g such rule should only apply t o consumer sales ( f o r d e f i n i t i o n s e e paragraph 51 (21). which at p resen t i n Scot land apply t o c o n t r a c t s f o r t h e b e n e f i t of t h i r d p a r t i e s should n e c e s s a r i l y apply i n the p resen t context. t he o b l i g a t i o n s of t h e seller could be imposed by s t a t u t e . t he class of persons t o be bene f i t ed , s.2-318 of the U.S. Uniform Commercial Code, which only b e n e f i t s members of the buyer 's fami ly or Regre t fu l ly t h e Law Commissions have but f o r the The Law Commissions do not suggest t h a t t h e niles It may be t h a t As f o r . h u s e h o l d o r guests i n his home, i s , i n t h e opinion of the Lam Commissions, they would extend t h e b e n e f i t of t h e seller's o b l i g a t i o n s too l i m i t e d ; t o any person who may be reasonably expected t o use,consume o r be a f fec ted by the goods. This class would no t , honcver, inc lude f a c t o r y employees The d e f i n i t i o n t h e r e proposed is: "A tconsumer saler i s a s a l e of goods which =-e of a type customari ly bought f o r p r i v a t e use o r consumption, by a seller a c t i n g i n the course of his trade, t o a buycr other than a t r a d e buyer, one who carries on o r holds himself ou t as c a r r y i n g on a t r a d e i n t h e course of which he rnanufactures deals i n o r uses goods of t h a t type , and the onus of proof t h a t t h e buyer i s a trade buyer s h a l l rest w i t h t h e sel ler . "I'rade' i nc ludes any t r a d e , p rofess ion o r bus iness , and a government department or pub l i c a u t h o r i t y s h a l l f o r t h i s purpose be deemed t o be c a r r y i n g on a business . t o sell.If A ' trade buyer! is ' S a l e ' inc ludes an agreement - 13 - / in jured injured during the saanufacturing process s ince ne i ther the machinery nor the goods manufactured w i l l at that stage have been the subject of a consumer sale. 37. benef i t of the seller 's obligations under ss.12-15 of the Sale of Goods Act 1893 should be extended t o any person who may reasonably be expected t o use, consume o r be affected by the goods. Such an extension of the purchaser's remedies would prevent the anomalies i l l u s t r a t e d i n the examples set out i n paragraph 33 above. 38. would arise as t o whether r e l i e f should be granted only i n cases of personal in jury (as under s.2-318 of the U.S Uniform Commercial Code) o r whether dama,ge t o property and f inanc ia l loss should a l s o be covered, I n pr inciple thcrc uould cer ta in ly be a case f o r extending relief at least The Law Commissions propose therefore that i n consumer sales the If a proposal on these l i n e s were implemented, the fu r the r question t o damage t o property. e l e c t r i c blanket which he gives t o B. as a present; i s defective, se l ler f o r breach of s.14 of the Sale of Goods Act if he suffered burns, whereas i f h i s bedding wcs damaged, he would have no remedy unless he Suppose, f o r example, that 8. purchmes an the e l e c t r i c blanket It would be anomalous t o give B. the r igh t t o sue the could prove negligence, 39. absence of personal in jury o r damage t o property, should be given the same r igh t as the buyer has t o r e j e c t the goods fo rbEach of the implied conditions o r t o claim damages f o r t h e i r defects. Such a proposition is more d i f f i c u l t t o support, especial ly when the breach is of s.14(1) f o r tha t depends on nhethcr the goods axe f i t f o r the buyer's purpose - not the purposes o f the t h i r d party. It i s arguable tha t nhereas i n the case of personal in jury or damage t o property, only the th i rd par ty could claim since he alone has been damaged, i n the s i t ua t ion undor review, the t h i r d par ty having suffered no damage, i t is f o r the actual buyer, vho has sustained the loss i n paying the pr ice f o r a defective a r t i c l e , t o enforce h i s rights a g a i n s t the seller, On the other hand, i t may be sa id t h a t t h i s is an unnecessarily cumbrous procedure which could r e s u l t i n claims by two p l a i n t i f f s instead of one. would arise only i n thc- case of a donee, not sus ta in any such claim and a sub-purchaser would ra re ly be i n a posit ion t o do s o since the sa l e t o h i s s e l l e r would n o t normally be a consumer sale . d l o n him alone t o claim both f o r any injury t o h i s person o r property It is a more d i f f i c u l t question nhether the t h i r d party, i n t he I n prac t ice the question A mere user could c l ea r ly I n the case of a donee i t may vel1 be more convenient t o - 14 .- / a d Q and f o r the lower value of the fau l ty goods. nould i n pract ice give r i s e t o any d i f f icu l ty . present f o r B., making known tha t i t i s required f o r use on the nountain roads of Wzles, i t seenls sensible tha t if i t is u n f i t f o r t h i s purpose9 - B. should be a l l o w d t o return i t and get it replaced i n cash o r kind, ra ther than A. 40. extension of l i a b i l i t y i n favour o f t h i rd p m t i e s is whether t h i s nould add t o the cost o f insurance su f f i c i en t ly t o lead t o an increase i n the pr ice of goods. the evidence o f the insurance experts (summarised i n parabaph 72 below) tha t i t could make no s ign i f icant difference whether- contractual l iabi l i ty acre extended t o a th i rd party o r l imitod to the immediate buyer. most cases the th i rd party will at present have a claim f o r personal i n ju r i e s o r damge t o property based on negligence and no exemption clause i n the contract can affect h i s claim since he i s n o t a party t o the contract i n which the exemption clause i s embodied. guarantee i s concerned the question nhether the action had t o be brought It i s n o t thought that this If I A, buys a car as a One relevant consideration i n connection with tho wholk question of The La57 Commissions think it is reasonable t o i n f e r from In So f a r as products by the buyer o r could be brought by the donee could n o t a f f ec t the insurance premium. 41. Since the Laa Comnissions are as yet undecided on the extent t o which r e l i e f should be granted t o t h i r d par ty benefici,ariest they make no spec i f i c proposd on the matter a t t h i s stage, but nould nclcone views on ' the following questions : If the seller's obligat isns are t o be extended t o t h i r d party beneficiar ies , should the r e l i e f t o be granted: (a) be l i n i t e d t o cases of personal injury? o r (b) cover dmage t o property as well? o r (c ) cover a l l f i n a n c i d l oss? PART I11 : CO-OEU)IMATION '.'UTH HIRE-PURCHASE LEGISLATION 42. Act 1965 apply to most types of s a l e of goods other than those i n which the whole pr ice i s paid immediately, it i s obviously desirable tha t s o far as possible these Acts and the Sale of Goods Act should contain sirnilas provisions. Even i f the proposed anendmcnts a r e car r ied out, there will st i l l remain a nmbcr of discrepancies be-h-rcen the lav relating t o the conditions and warant ies under the 1965 Hire Purchase Acts and under the Sale of Goods Act. S.18 of the Hire Purchase Acts Since the Hire Purchase Act 1965 and the H i r e Purchase (Scotland) - 15 - /deals expressly excluc?ed f rom the def in i t ion by a sui table reserfat ion i n the refeu'en::e t o %usiness". The second a l te rna t ive (paragraph 470 o f the Report) suggested tha t a con- s u e r s a l e night be defined more simply as a sa le o r agreement' t o s e l l (as defined i n the Sale o f Goods A c t 1893) made by way of r e t a i l trade o r busiiiess at or from any place whatsoever. t o decide iirhat,is involved i n " r e t a i l trade o r business"; but the Report exprcsscc! the ho?e tha t the courts would evolve a conception i n l i ne with the Yirst a l t e r - native def ini t ion. This def in i t ion would leave it f o r the courts 49. Report i s tha t the s e l l e r would a t the tiine o f the sale require t o 1mon the purpose f o r which the buyer was acquiring the par t icu lar goods i n question; othervise he could not be cer tain whether a r e s t r i c t i o n applicable t o a "co~suI~I ;? .~ sale" applied cr not. Xoreover the f i r s t def in i t ion -,vould cxclude sales of a r t i c l e s such as l i g h t bulbs or typewriters €or use i n a trade o r professicn i n circuastances which would normally be regarded as sales by r e t a i l , ~ The disadvantage o f the def in i t ion suzgested i n paragcaph 469 of the biolcny 50. The disadvantage o f the a l te rna t ive definit ion-suggested i-r, Paragraph 470 o f the Plolony Report i s tha t whilst it might avoid cer ta in anomalies which ~ o u l ? a r i s e under the more spec i f ic f i r s t def in i t ion , i t docs not drau so c l ea r a ciemzrc- a t ion l i n e and t o t ha t extent might be open t o the c r i t i c i sm o f invclving a grea te r degree of uncertainty. 51. n i t ions might be avoided and i n par t icu lar whether the onus placed upon the sollcr The Law Commissions have considered irhcther tnc disadvantages o f these def i - by the definit ioii put fomard i n paragraph 469 of the Molony Report could be mitigated. Tentatively tho folloi-dng &f in i t i on i s suggested: lconsumer sa l e ' i s a sa l e of goods which are o f a type customarily boucht f o r pr ivate use o r consumption, by a s e l l e r ac t ing i n the course of h i s trade t o a buy& other than a trade buyer. A ' t rade buyer' i s one who ca r r i e s on o r holds himsel1 ovit as carrying on a trade i n the course of which h e zmu- factures deals i n o r uses goods o f tha t type, and the onus o f proof tha t the buyer i s a trade buyer s h a l r r e s t -;Tit* c s e l l e r . trade s h a l l f o r t h i s purpose bz deemed t o be carrying on a business. an agreement t o sell. ' I 'Trade' includes any profession o r business, and a government departmnt o r public authority 'Sale' includes This ten ta t ive def in i t ion would not depend on the s e l l e r ' s knonledge o f t i e par t icu lar use t o which the buyer proposes t o put the gcods. It vrould suf f ice f o r him t o knoi; whether o r not the buyer vjas o r purported t o be a trade buyer; i t would be i rmater ia l whether the par t icu lar purchase mas f o r a pr ivate purrose. Xoreover, the sugzzsted def in i t ion makes i t c l ea r t ha t the onus i s on the ssllm t o es tab l i sh tha t the buyer wads a trade buyer; and i t i s intended b y - i t s lan,ruage t o emphasizc Lhe difference vdiicii orten ex i s t s betvreen the bargaining posit ion and expertise of the trade buyer a n c l the pr ivate buyer vis-%-vis the seller. 0 ? 52. t i e s i n c e r t a i n l imi tzd c l a s ses o f case i n def in ing a “consumer s a l e ” it n o u l d be poss ib le t o devise a de f in i t i on nliici: vould reduce the a rea o f uncer ta in ty to a to l e rab le degree. It i s t h e Laia Commissions’ provisional vicw t h a t although t h r c a rc d i f f i c u l - B. Consumer salas An unqualificd ban on cont rac t ing& 53. d i t i o n s and narra;ltics ccns t i t u t2 a rsasonable codo o f fa i r dea l ing and t h a t 9 subjzc t t o the prol7osals i n ?art I1 o€ t h i s Paperg cont rac t ing o u t o f thos? codi t ion : : and i x n r a n t i e s Ehould be void altogGther a s a t i s f i c d t h a t the d e f i n i t i o n o f mcrcnantable qua l i t y suggested i n ?art I1 lirould adequately meet the case o f s 2 c o n d - h Z or imperfect goods, sold as such, and v:ould have wished a s p c c l f i c c::cGption from the ban t o be made i n t h e i r cssc . But, i n the vie;; o f t he majority, the su,-scstcd d e f i n i t i o n iras s u f f i c i 2 n t l y f l e x i b h t o c a t e r for these cases, p a r t i c u l a r l y as i t makes a s;,ecific reference t o tlie p r i ce and descr ip t ion under which the goods a re sold. The Jork ing Party considered t h a t on sades t o consumers the statutory con- Certain membLrs rrore not 54. Torking Par ty considered and- rejzctecl. a nulloer of poss ib le s o l u t i o m . o f a s s i s t ance t o r2aders o f t h i s Vo-ri;il?g Paper i f th ree of thssz are b r i e f l y mentioned.. One so lu t ion an as t h a t tiicrc should bc a ban on contractiiig out on sa les t o consumers subjdct Lo spec i f ied exceptions. unqualified ban aould no doubt rcgard the r i g h t t o l i m i t the seller’s ob l i sa t ion f o r consequential damagc as the most in?ortznt n a t t e r f o r d i i c h a s p x i a l exczpticii should be nadc. But t h i s i s but onc o f a nurbcr o f cxccptions which might be rzasonablc and acco-dingly t h i s so lu t ion vas r e jec ted on the ground t h a t i t irould h3 impraciiczbl e s a t i s f a c t o l i l y t o frame these cxccptions. siio7,ln t o have substance some thought that a more r e a l i s t i c a l t e r n a t i v e t o an uliqualified ha,n -mulL be a general t e s t of rcasonablcnsss on the l i n e s o f s t z t i o n 3 of thc ‘l israprescntation Act 1967. h o t h c r lsossible sol-ution vas the cxclusioii o f cont rac t ing out on sales up io a s;>ccified naximuni p r i c c , thus followin2 tho precedent 01 the H i r s Purchase -4ct 1965, and the corresponding Sco t t i sh h e t . Tiis, too, was re j ec t ed because .my rraxiinum adequate t o cover s a l c s t o p r iva t e purchasers aould cover many i a o m co,mercial sales than i n the case o f h i r e purchase trms- actions. Purchase 1 eg is la t io l i t hc re v J o u l d he anomalous d i s t i n c tions bztwcen sales t o small busiiicsses nliich vere iiicorporated and those vrhich nere not It should perhaps be mentioned t h a t be€ore reaching t h i s conclusiozz the It ~ n y bs Those who argued aga ins t an If tlnis ar,curncnt bias B e n i f sales t o c o q o r a t z bodies were excluded as i n the 1965 Bire I Fro-aossls and questions on coiisuwr salcs 55. i n paragraph 53, subject t o one qucetion: out of t h e s t a t u t o r y conditions aid warranties i n sec t ions 13 and 15 of t he Sa le The Lair 2oimissions mdorse tlic provosa l of the Vorking Party r2feri-c.d i;o Should the jpoposed ban on c o l i t r a t i n g - 19 - /of i of Goods A c t apply t o sales by aEctlon'? if s e c t i o n l4(2) is t o apply t c auc t ion s a l e s - on which see paragrapn 28 ahove.. 56. t o sales by auc t ion inc lude the following: This ques t ion i s of s p e c i a l imgortactco The arguments mhich nay be advanced i n favour of g i v i c g s p e c i a l 5 rea tmt i t (a) d i spos ing of goods wxch i t would be cd i f f icu l t or less convenient t o se1: i n any o t h e r way. p o s i t i o n t o undertake t h a t t he goo& comply wi th t h e s-batutory cond;'cians and warranties. sales of f u r n i t u r e and miscel laneous household e f f e c t s and sales uider judicial a u t h o r i t y a r e cases i n p o i n t , (b) commercial sales i t ma37 be d i f f i c u l t i n the case of some clzsscs of sale f o r t h e auc t ionee r t o know whether tk-. buyer i s o r is not s t-reder. he were a t r a d e r he might have g r e a t e r exper ' i ise about the c h a r a c t e r i s t i c , I n a number of circumstances auc t ions provide a ccnvenient method of I n s u c h circumstances t h e s e l l e r may not be i n a Sales of s u r p l u s a m y and o t h e r goods by thp g ~ v e - c ~ ~ : i t 7 I n so fa r as any d i s t i n c t i o p is drawn betneen consuxer sales sild- If and q u a l i t y of t h e mods than e i t h e r t h c selle? o r t h e auc f? ;meer , ( c ) auc t ion s a l e t h a t t h e r e i s a s p e c u l a - X ~ e element i n the t r cwzc tFon s,id that i t would be unreasonable f~ expect t ho f u l l bciieZit of t h c s t a t u t o r y condi t ions and warranties. Against t hese mguments may bc Set t'ie fo l lowing cons ide ra t iom: (a) s u f f i c i e n t f l e x i b i l i t y t o rr.ee-l the needs of those sellers t:ho have l i m i t e d knoidcdge of t h e goods o r could only acquize such knowledge by unreasonable expendi ture . It i s vel1 recogniscd and accepted by bid-zers at many c?.c?;ses of 57. The suggested reformulat ion of "mcrchantalj i l i tg" should provide (b) will i n any event have t o take account of -the provis ions of t h e !$isrep-i r e s e n t a t i o n Act 1967, and any c o n t r a c t i n g ou t of those prov i s ions will be void , s u b j e c t t o the d i s c r e t i o n of t h e c o u r t , u ~ d e r oec-Lio:~ 5. o f tha-b Act. (c) o the r a r t i c l e s of excep t iona l ly h igh value, and t h e rs6vmtage t o t h e sellez of s t i m u l a t i n g conpe t i t i on mongs t buyers by t h e device of 3.n auc t ion should be counterbalanced by his b e m i n g f u l l r e s p o n s i b i l i t y under ihe The d i i f f i c u l t i e s of the seller o r auc t ioneer . i n d e s c r i b i 3 g goods I n some cases the goods which are s o l d by auc t ion are works of a r t o r s t a t u t o r y condi t ions and a m r a n t i e s (d) at auc t ion sales might result .in abusi-ve practices: ( e ) l imited t o second-hand o r de fcc t ivc goods. Freedom t o c o n t r a c t ou t of t h e s t a t u t o r y cond i t ions and . : jarrmties I n p r a c t i c e the casc f o r exc luding auc t ion s s ~ e s f x r a con t ro l i n . D i f f i c u l t i e s u1ide1 - this head should be m e t by t h e proposed d c f i n i t i o n of ':merchantable p d - - t ~ ' ' which n i l 1 cmponer the cour t t o tdw i n t o 2ccour.t "all t h o circ-;nst;xrr:cs, i n c l u d i n g the p r i c e and d c s c r i 2 t i o n under which the goo63 a r c s o i d i t , i 0 'To con t ro l 01 con t rac t inx out iii coimercial sales; Gerieral c;ues$ion zs-i;o p - ~ c ?os i t i on o f r e t a i l e r s a_-_--_ -------- 63. This solu'iion c a l l s for no eo-ment beyond the a r g m e n t s s e t o u t i n paragraphs 6C aid 61. the Law Comissions i n v i t e the views o f r e t a i l e r s , both large and small, i7oulii r e t a i l e r s regard. themselves as being put, i n p a c t i c e , -- i n an unfair pos i t i on i Y t he l a u prt an o u t r i g h t ban on exemytion clauses imposed by retailsrs vrhi ls t , as a mat te r o f lax7 al lowing such c lauses t o be i!ii?osed upon retaile:..s by those from -;:horn they Gbtain t h e i r suDplies? But i t does g ive r i s e t o an important quest ion ugon which l i n e be ti-Jeen those purchasers vrho n o d p r o - t x t i o n aga ins t the s t a t u t o r y condi t ions and n a r r a n t i e s and t?:ose nho do no t does n o t delxnd merely u y n the l ike l ihood o f inequality o f bargaining poiver. t e c t i o n o f priva,te conswners i s based upon t h i s lil;clii?ood. bnat another important 'cest snould be the l i k s l ihood o f the buyer being a t a d i s - adv<m-tage i n h i s a b i l i t y t o judge the q u a l i t y o f goods. h i s judgacnt o f ;,roducts i n which he h a b i t u a l l y dea l s . B L I ~ when a famicr buys z t r a c t o r o r a t r a d e r o r p rofess iona l m n buys a coinplex piece or" o f f i c e equipment he may be no b e t t e r able t o judge i t s t echn ica l q u a l i t i e s than the p r i v a t e purcliasar of a r z f r i g c r a t o r . o f a s a l e Lo a consumer should be s o frained 2,s t o include the end-purchasers o f goods f o r the 9urposes o f a t rade o r business v~ho may nced pro tcc t ion as much as the p r i v a t e pxrchaser. The objec t ion t h a t t h i s n igh t extend t o t r a n s s c t i o n s a t a level vhcre t he purchaser v o - ~ l d ix iz i f2s t ly k capable o f s a f e p m x i i n g h i s own i i i t , x o s t s caul$ i t i s suggested, be met by imposing, a price limit beyond which thc rc would- bc -no r e s t r i c t i o n s on Thz fo rce o f tile srbwnants sup:iorting t h i s _uroposal i n princip1.e are ayqrcciatod, hut the Law Commissions have conci&ed p r o v i s i o n a l l y that it ~ o l ~ - i d 'm difficult to for,xulat;: a ;;<crl;able & ? f i n i t i o n of a :icons-mer sa l c" on tlicse l i n e s . d e s i r a b i l i t y and. p r a c t i c a b i l i t y of l e g i s l a t i o n on the l i n e s ind ica ted i E t h i s paragraph. c o n t r x t i n c cu t" c f The suSgest2d pro- Bdt it i s s u ~ g e s t d L 1 A t r a d e r may be expert i.n It has therzfore been suggested t h a t t he c ' e f in i t ion ccn t r ac t ing ou t , 9:liey i a v i t a c o i ~ ~ ~ ~ 1 1 t on tlic 2ontrect&g out t o be banii.eb 65. t r a c t i n g out o f the s t a t u t o r y condi t ions and vrarrantics shoulcl be 0: no e f f e c t on any sale unless a cour t allom r e l i a n c c upon it as being feir m d rcasoiiablc i n the circumstances of the case, T'liis proposal nhich fo l lo ivs the precedent o f s.3 o f t he iTisr.2przseiitation Sc'c 1967 l?as the advzmtage of avoidii.13 a dcfi:iiticrl c ; save @re reasonable A pro;?osal i::hich was mich debated v i tn in the Norking Party is tha-i; con- "consumer sale" and of providing the courts with a flexible instrument of control, It also has the advantage of providing a consistent rule as regards condition and warranties on the one hand and misrepresentations on the other. pointed out, wherever there is a breach of section 13 of the 1893 Act (implying a condition that the goods agxe with the description) there will necessarily be a misrepresentation also and often the same will apply to breaches of sections 14 and 15. the Jlisrepressntation Act 1967) applied to ccntracting out of liability for As already It would be somewhat anomalous if one mle (section 3 of misrepresentation aad a different rule applied to contracting out of the statutory conditions and warranties. the lines of this prorJosal might contain "guide lines" for the assistance of the court by indicating particular natters which the+court shoul2: take into It was contemplated that legislation on account, for example, the abuse of inequality of bargaining power, In relation to commercial sales strong opposition to this proposal has been expressed on a number of grounds. control to comrnercial transactions particular objection was taken in the Borking Par ty to putting the onus of proof upon the party seeking to rely upon the exemption clause. the precedent of the Yisrepresentation Act 1967 were followed reasonableness would not be judged solely on the basis of the facts known at the time when the contract was made but also in the light of subsequent events and circumstances. A general dispensing power of this nature would, it was contended, intaoduce an intolerable deGee of uncertainty into many commercial transactions. ingly most meabers of the Vorking Party favoured a variant of the proposal reversing the burden of proof and making the date of contract the material date for judging the reasonableness o€ any contracting out provisions (as in s.2-302 Apart fron the general objections to the extension of There were also objections on the further ground that if Accord- of the U.S. Uniform Commercial Code (4)) Questions on the proposals set out i n j g a g a p h 65 66. The Law Comnissioiis invi.te comment on the following questions :: - (1) to in parapaph 65 be desira3le in principle? (2) of t f ie exemption clause) or upon the purchaser (to prove its unreasonableness)? (3) Should the test of reasonableness be applied as at the time of the contract o r in the light of all the ci-rcwnstances which have caused the issue of reasonableness Lo be raised? (4) Bould a measure of control of com;ncrcial sales on the lines referred Should the onus of proof be upon the vendor (to prove the reasonableness If the ansxers to the above questions were to favour a test of reasonableness which difrsrs from the provisions of sec-tion 3 of the IJis- representation Act 1967, should that section be amended and if so in what re spec t s? (4.) See Appendix C. - 24 - /67. - 4 + Control :;lith the assistancc of -&e ReStriCtiVC Practices Court by " p r i o r . vdidct i o n " o r othermis e 67. It has been suggested that the uncertainty as to the enforceability of an exemption clause that might arise if such clauses were subjected to an ex post facto test of reasonableness could be avoided by s o m procedure (similar to that I-ihich is available under the Israeli Standard Contracts Lsw 1964 ( a. contracting out provision could be tested, in advance of its adoytion, before the 2estrictive Practices Court or some similar body, and pronounced void if held, in all the circumstances, to be unfair. As a variant of this pro- cedure it has also been suggested that an exemption clause should be void uiless approved by the Restrictive Practices Court upon the application of the ) whereby party who intends to impose it, Thc Law Commissicns agree with the view of the i7orlchg Party that neithzr of these sugges'iions would be practicable. 68. 2e:istrar of Restrictive Trade Agreemsnts a pouer, exercisable on complaint Another variant of this type of procedure vould be to confer upon the or 03 his own initiative, to bring before the Restrictive Practices Court clauses which he regards as unfair. enablihg manufacturers or other interestad parties to have standard clauses brought before thc Rcstrictive Frsctices Court for approval. This might be combincd nith a procedure 69. IIovever, any procedure of this character would have the disadvantage that ihilst. it might be well adapted f o r the scrutiny of stan2ard forms of contract it would not be suitable for the scrutiny of "individual" contracts, Differences bcbiecn parties about to enter ixito a non-standard contract as to fairness of a particular cbxse in the particular circwnstances might thmst a great volume of work upon the court. If on the other hand the parties and more particularly Fartics to a proposed commercial contl-sct Bere in agreement es to the fairmss of certain contrxting out yovisions, the court's function mould bc formal rathzr than real. TIT 70. it ni@t ircll have t o be combined (as in the Israeli Standard Contracts Law) , Tnith a p a r e r in the ordinary sourts to strike duJm unreasonable clauses. This might in certain circunistances raise problems of comity between the Restrictive Practices Court and the ordinary courts, for example, whcre the latter were called upon to pronounce upon the reasonableness of provisions which were the subject of proceedings still pending in the formr court. In practicc these problems might well be resolved without serious difficulty. tloreover, i€ such a forin of pocedure were to be applied to consumer sales - (5) St3s Appendix D. - 25 - I PART VI: CONTFiJiCTING O U T S LIABILITY FOR K5GLIGZNCE 76. o r against the manufacturer, or, very occasionally, against an intermediate distributor, claim under sections 12-15 of the Sale of Goods Act. The lattar affords a bstter remedy to the buyer, for all he has to prove is that there is something wrong with the goods; he need not prove any kind of negligence on the part of the seller. unless (i) liability under sections 12-15 has been excluded and (ii) exemption clause is not wide enough the exclusion of sections 12-15 were prohibitd, there would be still less scope for claims in negligence. But some would remain. Section 14, either in its present form or in the amended form which we have proposed, does not apply to private sales o r cases where the buya relies on the manufacturcr's advertising and not on the seller's skill and judgment. there will still be cases where the goods masure up to the requirement bf section 14, yet the seller is liable in negligence bscause he has given no warning On a sale of goods there may be a claim in negligence against the seller A claim against the seller will normally be an alternative to a Accordingly a negligence claim is rarely brought against the seller the to exclude liability for negligence. If Even in trade sales I of the dangers involved in using the goods. 77. Of greater importance are manufacturers' "guaranteest' which purport to exclude liability for the ncgligcnce of the manufacturm and, sometimes, of intermediate distributors. The Xolony Committee, which touched on the subject in paragraphs 474-478 of their Report, irras urged from several quarters to Frohibit contracting out of liability for negligence in consumer sales, but they folt that they ought not to malm such a recommandation, as this nould involve cntering upon the law of tort which nas outside their terns of reference. They pointed out that contracting out of liability for negligence was not confined to contracts of sale of goods but extended to many types of contracts for the supply of services; the problzn G f manufacturers' "guarantees" was but one facet of a far wider problem, nanely whether the freedom to contract out of liability for tort should be restricted, The Committee emphasised that (a) if manufacturers wcre prohibited fron excluding liability, a benefit would be conferred on the purchascr of goods which was dcnjed to the user of servicesg and (b) contractor among the many who rely on exemption clauses as a safeguard from negligence liability - an argument which has particular force where the purchaser has a valid claim against the retailer in contract. They considered, thercfore, that thekole subject required comprehensive study. it would not be proper to discriminate against one single class of - 28 - /78 0 78 Conscious of the desirability of avoidins anomalous distinctions Setween contracts of sale of goods and contracts f o r the provision of services9 the Torking Party took the view that recommendations regarding exclusion of liability for n&i- gence in contracts of sale of goods could not be made until a full exanination had been carried out of the exclusion of liability f o r negligence in contracts f o r the supply of services also. hensive study of the whole problem and proposes to deal with the whole subject of liability f o r negligence in its Final Report. The Law Commissions copsider that the reasons which promptcd the ',7orlcing Party to reach this conclusion, are valid ones, and that the postponement o f the report on the subject is justi- fied in the circumstances. They accordingly endorse the Vorking Party's decision. The Borking Party reached the same conclusion as the llolony Comittce. The Working Party is no8 engaged on a comprs- - 29 - 5 % - t PART VII: SUXDWY OF CONCLUSIONS AIXD OF QUESTIOXS UPON in-IICH COMYENT IS INVITED Amendments t o sect ions 12-15 of the Sale o f Goods. Act 1893 79. It is proposed that: (a) t o the recornendation cont&ed i n paragaph 36- of' the f i e l f t h Report of t he Lam Refom' Comaittee, whereby a buyer who i s e n t i t l e d t o re l ief-because he has not acquired a good t i t l e t o the goods, nust give c red i t f o r any benef i t he r;;.ay have had from the goods while they were i n h i s possession. (b) description which it i s i n the course of the s e l l e r ' s business t o supply" should be replaced by the reluirenent t h a t the s e l l e r "acting i n the course of trad-e o r business", and the proviso excluding Section 1 2 of the Act should be amended s o as t o give effect (Paragraphs 10-12), I n sect ion l 4 ( l ) the requirenent t ha t goods shall be of Ita vas sales under a patent o r other t rade nme should be deleted. graphs 14-16). re-worded on the l i n e s s e t out i n paragraph 17. (c) Scotland: wmranty) should cease t o be l imited t o sa les by descrip- t ion and the requirement t ha t the s e l l e r nust have been dealing i n goods of the relevant description should be replaced by the require- ment tha t he nas 'hct ing i n the course of trade o r business". (Para- graphs 18-19). (Para- Viens arc inv i ted on nhether sect ion 14(1) should be I n sect ion l4(2) the condition of merchantable qua l i ty (o r i n (d) sect ion l4 (2 ) and scct ion 15, and sect ion l 4 ( 2 ) should be re-formulated on the l i n e s s e t out i n paragraph 23 with the sub- s t i t u t i o n of !'by a seller ac t ing i n the course of t rade o r business" f o r "by may of trade". (e) goods arc so ld through an agent o r auctioneer ac t ing i n the course o f s e l l e r ac t ing i n the course of t rzdc o r business. ( f ) It should no longer be a rcquircnent that f o r the purposes of sect ion 15 i t nust be shown t o be a t e r n of the cont rac t t h a t the s a l e is a sale by sarnple and t h a t , i f the contract i s reduced t o n r i t i ng , t h i s t e r n nust be included i n the wr i t i ng . "Ilerchantable qual i ty" should be defined f o r the purposes of (Paragraphs 20-26 and 30). A clause should be added t o sect ion 14 t o the e f f e c t t ha t where trade o r business, thc goods shall be deaned t o be so ld by a (Paragraphs 27-28), (Paragraphs 30-31). - 30 - APPENDIX A J O I N T WORKING PARTY ON EXIPIPTION CLAUSES I N CONTRACTS __.__-I_ c- The Hon. Lord Kilbrandon (Chairman of the S c o t t i s h M r . Andrew PY'lartin, Q , C . (The Law Commission) J o i n t Law Commission) Chairmen' Professor T , B . Smith, Q.C. (The S c o t t i s h Law M r . L.C,B. Gower (The Law Commission) M r . &I. Abraham (The Law Commission) Mrs. E.L,K. S i n c l a i r (Board of Trade: till Mr. S.W.Te Mitchelmore (Board o f Trade: f r o m Miss G.M.E. White (Board o f Trade) Mr. J . A . Beaton ( S c o t t i s h Off ice) M r . J . B . Sweetman (Treasury Procurement Pol icy Commission) February 1967) February 1967) Committee ) Mr. Stephen T e r r e l l , Q . C . (The Bar Council) M r . M.R.E. Kerr, Q.C. (The Bar Council: appointed Mr. Pe te r Maxwell, Q , C . (The Facul ty of Advocates) Mr. W.BI.H. Williams (The Law Society: res igned February 1967) Appoin- February 1968) ted a f t e r Mr. J . H . Walford (The Law Society: appointed February 1968) with M r . G.R.H. Reid (The Law Society o f Scotland) consulta- the orga- n i s a t i o n ( M r . R.G. Scriven (Associat ion of B r i t i s h Chambers shown i n brackets of C ornmerc e ) i i Industry) Mr. W.E. Bennett (The Confederation of Br i t i sh $ M r . Gordon Borr ie (The Consuaer Council) M r s . Beryl Diamond (The Consumer Council: res igned Mrs. L.E. Vickers (The Consumer Council: February 1967) I February 1967) appointed Secretary: Mr. R.G. Greene (The Law Commission) Mr. J u s t i c e Scarman, Chairman of t he Law Commission, attended some meetings. - 33 - APPENDIX B SECTI9NS 12-15 SALE OF GOODS ACT 1893 I- 1 2 . I n a con t r ac t of s a l e , un le s s the circumstances of the con t r ac t a r e such as t o show a d i f f e r e n t i n t e n t i o n , t h e r e is - (1) An implied condi t ion on t h e p a r t o f the s e l l e r t h a t i n the case of a s a l e he has a r i g h t t o s e l l the goods, and t h a t i n the case of an agreement t o s e l l he w i l l have a r i g h t t o s e l l the goods a t the time when t h e property i s t o pass: ( 2 ) An implied warranty t h a t the buyer s h a l l have and enjoy q u i e t possession of the goods: ( 3 ) An implied warranty t h a t the goods s h a l l be f r e e f r o m any charge or encumbrance i n favour o f any t h i r d par ty , not declared o r known t o the buyer before o r a t t he time when the con%ract i s made. 13. Where t h e r e i s a con t r ac t f o r the s a l e o f goods by desc r ip t ion , t h e r e i s an implied condi t ion t h a t the goods s h a l l correspond w i t h the descr ip t ion ; and i f the s a l e be by sample, a s wel l a s by d e s c r i p t i o n , i t i s not s u f f i c i e n t t h a t the bulk of the goods corresponds with the sample if the goods do not a l s o correspond w i t h the desc r ip t ion . 14. Subject t o the provis ions of t h i s Act and o f any s t a t u t e i n t h a t behalf , t he re i s no implied warranty o r con- d i t i o n a s t o t he q u a l i t y o r f i t n e s s f o r any p a r t i c u l a r purpose of goods suppl ied under a con t r ac t o f s a l e , except a s f o l l o w s : - (1) Where the buyer, express ly o r by impl ica t ion , makes known t o t h e s e l l e r the p a r t i c u l a r purpose f o r which the goods a re required, s o a s t o show t h a t t he buyer - 34. - /re 1 i es a - (b f r e l i e s on the s e l l e r ' s s k i l l or-judgment, and the goods a re of a d e s c r i p t i o n which i t i s i n the c o u s e o f the s e l l e r ' s business t o supply (whether he ,be .the manu- f a c t u r e r - o r n o t ) , t he re i s an implied. condi t ion t h a t t he goods s h a l l be reasonably f i t - f o r such purpose9 provided t h a t i n t h e case o f a con t r ac t f o r the s a l e o f a s p e c i f i e d a r t i c l e under i t s pa ten t o r o ther t r a d e name, t h e r e i s no imp1ie.d condi t ion a s t o i t s f i t n e s s - - . - . f o r a n y - p a r t i c u l a r purpose:. ( 2 ) There goods a r e bought by desc r ip t ion f r o m a s e l l e r who d e a l s i n goods of t h a t d e s c r i p t i o n (whether he be t h e manufacturer o r n o t ) , t he re is an i n p l i e d condi- t i o n t h a t the Goods s h a l l be o f merchankable qua l i t y ; provided t h a t i f t h e buyer has examined the goods, t he re s h a l l be no implied condi t ion a s regards de fec t s which such examination ought t o have revealed: ( 3 ) An i m p l i e d warranty- o r condi t ion a s t o q u a l i t y o r f i t n e s s f o r a p a r t i c u l a r purpose may be annexed Sy t h e usage of t rade : ( 4 ) An express warranty o r condi t ion d o e s not negat ive a 1 warranty o r condi t ion implied by t h i s Act unless i ncons i s t e n t therewith. 15.-(1) A con t rac t of s a l e i s a con t r ac t f o r s a l e by sample where t h e r e i s a t e rm i n the con t r ac t , express o r implied, t o t h a t e f f e c t . ( 2 ) I n the case of a con t r ac t f o r s a l e by sample - ( a ) There i s an implied condi t ion t h a t s h a l l correspond w i t h the sample i n ( b ) There i s an implied condi t ion t h a t s h a l l have a reasonable opportuni ty the b u l k with t h e sample: - 35 - the bulk quality:: . t h e buyer o f comparilig a : d " - This p a r t of the comment inc ludes a l i s t of cases , bo th lmcrican and Engl i sh , a h i c h i l lustrate the underlyii1g b a s i s of thc s e c t i o n . They are pre-Code cases and ase 51 t h e main "comer.cial t t r c t h e r than Itconsumcrt1 c o n t r a c t s , i nc lud ing for t h c most p a r t cases where cour t s of e q u i t y have refused s p e c i f i c cnforccncnt or c o u r t s of law have s t r i c t l y construed one-sided clauses, t o dany a p a r t y the f u l l b e n e f i t of a clause obtz ined through t h e abuse of a clear iribalancc of ba rga in ing power. ., 4. sc ionab le clause". I n e a r l y 1m "unconscionable" c o n t r a c t s were those which were har sh and oppressive, a s s o c i a t e d with fraud, mistake o r gross inadequacy o f cons ide ra t ion , cour t s of e q u i t y as a ground f o r refusing s p e c i f i c performance; a l s o a v a i l a b l e t o a l i n i t e d ex ten t as a defence at lam. An Eng l i sh a u t h o r i t y has descr ibed an unconscionable c o n t r a c t as one There i s no d e f i n i t i o n i n the Code of what c o i ~ s t i t u t c s an "uncon- The concept vias f r e q u e n t l y enployed by i t vas %uch as no nan i n h i s senses and no t under 8 delus ion would nake on t h e one h a d , and as no honest and fair man Rould accept on the o t h e r ... of such even the comon l a v i has talcen not ice" . ( C h e s t e r f i e l d E a r l of v. Jmsscn_ (1751) 2. Ves. Sen. 125, 156, per Lord Hardwicke -iT1 5. From t h e cases c i t c d i n t h e cornlent and from o t h e r s e c t i o n s of the Code (e.g. s.2-719(3) d e a l i n g n i t h dmages) i t seems c l c a r t h a t a wider neming than this tias intcndcd. It has been suggested thzt f r o m a read ing o f t h e Code as a ;Jhole "unconscionable" can be equated v i t h t fgross l y u n f a i r If V. Weber Packing Ccrporat ion, 73 P.2d 1272 (1937)p referred- t o i n the comnent on s.2-302, a clause l i m i t i n g the t ine i n which complaints could I n t h e c s c of Kansas Ci ty ifliolesale Grocery Co. b e made vas he ld inapp l i cab le t o l a t en t d e f e c t s i n a shipment of ca tsup which could only be discovered by microscopic a n a l y s i s , The element of u n f a i r s u r p r i s e r e f c r r c d t o i n the comient uould appear t o inc lude cases of t c r r ! i n snal l p r i n t on the reverse s i d e of a s t anda rd f o r n c o n t r a c t n o t B loonf i c ld Motors, 161 6.2d 69 (196O), - a case of a t t e n p t e d d i s c l a i n e r of an impl ied n a r r a n t y of n c r c h a n t a b i l i t y vh ich vas he ld t o be "so read by t h e buyer o r d r a m t o h i s a t t e n t i o n ( .Enningsen v. i n i m i c a l t o the pub l i c good as t o conpcl an ad jud ica t ion of i t s i n v a l i d i t y " ) . f r o n a . d i s p a r i t y of besga in ing povrer i s i l l u s t r a t e d by t h e case of Oppression i n t h e scnse o f too hard a barga in r e s u l t i n g * (1) 45 Ia-.L.Rcv. 843, 849 (1960). ~. . * - 38 - /Cmpbel l . t U . . 4 0 Campbell Soup Co. V. - 9 Wentz 172 F.2d 80, 3d C i r . 1948, where a Federa l Court of Appeals refused t o enforce a con t rac t for the sale of c a r r o t s t ak ing s t r o n g except ion t o a clausc nhercby i n cases nhere Campbell's ncre prevented fron t a k i n g d e l i v e r y i n c e r t a i n C ~ ~ C U L L S ~ ~ ~ C C S , e.g. a s t r i k e , the growers r equ i r ed C,mpbell 's consent t o dispose of t h e i r c a r r o t s e lsenhere. 6 . j u d i c i a l d e f i n i t i o n of u n c m s c i o n a b i l i t y under the s e c t i o n has been evolved. The p i c t u r e has hovtcver becn f i l l e d out by dec i s ions cn o t h e r s ec t ions of t h e Code nhich use the s m c t e s t , 2nd cases where the cour t s nave found a power of unenfo rceab i l i t y on this basis a t comon law, e.g. W i l l i a n s v. illalkcr-Thomas F u r n i t u r e Co., C.B.D.C. 1965, 350 F.2d 4.45. I n that case unconsc ionabi l i ty a t comon lavi was he ld t o inc lude "an absence o f meaningful choice on the paxt of one of the p a s t i e s t oge the r w i th c o n t r a c t terns vhich u n r c a o n a b l y favour t h e o the r party". As y e t t h e r e have becn feu cases on t h e s e c t i o n s o that no clear 7. greater r ead iness of the h e r i c a n cour t s as conpared n i t h cour t s i n t h i s country t o r e f u s e t o e n f o r c e con t r ac t s nhich they regard as har sh and u n f a i r by d i r e c t f i n d i n g s t h a t t he con t r ac t i s cont ra ry t o p u b l i c po l icy . Thus i n Tunkl v. Regents of t h e Univers i ty of Ca l i fo rn ia , 383 P.2d 441,(19a) t h e Supreme Court of Ca l i fo rn ia (a state which has adopted t h e Code but no t s.2-302) he ld t h a t a c lause exenpt ing a p a r t y f r o n l i a b i l i t y f o r personal i n j u r y caused by negl igence nay be i i lva l ida ted on p u b l i c p o l i c y grounds nhere there i s marked i n e q u a l i t y i n ba rga in ing poner. no t t he re fo re b e necessary i n nany cases t o seek t o r e l y on s.2-302 save as a last r e s o r t . The d e a r t h of cases under s.2-302 nay be p a r t l y explained by the It may - 39 - /APPENDIX . o 0 0 0 APPENDIX D ISRflELI ST,UTJMRD COi'?TPdCTS LAW 1964 1. I n t h i s Law - Def in i t i ons %tanda,rd con t r ac t " means a c o n t r a c t f o r t h e supply of a commodity o r a s e r v i c e , all o r ally of whose terms have been fixed i n advance by, o r on behal f o f , t h e personsupplying t h e commodity o r s e r v i c e ( h e r e i n a f t e r r e f e r r e d t o as "the supp l i e r " ) wi th t h e o b j e c t of c o n s t i t u t i n g condi t ions 'o f many con t r ac t s between him and persons undefined as t o t h e i r number o r i d e n t i t y ( h e r e i n a f t e r r e f e r r e d t o ' as " the customers"); "commodity" inc ludes l a n d and r i g h t s over l and , and r i g h t s of h i r e and iease; "terms of a con t r ac t " inc ludes terms r e f e r r e d t o i n t h e con t r ac t , and any condi t ion , waiver o r o the r matter forming p a r t of t h e barg? in without be ing express ly stated i n t h e con t r ac t i t s e l f , b u t does not inc lude a term s p e c i a l l y agreed upon by a s u p p l i e r 2nd a customer f o r t he purpose of a s p e c i f i c con t r ac t ; " r e s t r i c t i v e term'' means any of t he terms s p e c i f i e d i n s e c t i o n 15; a r b i t r a t o r , "court" inc ludes a t r i b u n a l and .an 2. f L supDlier who e n t e r s 9 o r i n t ends t o e n t e r , i n t o Applicat ion - - f o r approval of s tandard agreements w i t h customers by a s t anda rd con t r ac t , may apply t o t h e Board appointed f o r t h e purposes of t h e Restrictive Trade P r a c t i c e s Law after r e f e r r e d t o as "the Board") f o r approvzl of t h e r e s t r i c t i v e terms of t h e con t r ac t . 3. AFplicat ions f o r a p p r o v d under this Law shall be Composition deal t with by t h e Board composed of three m e m b e r s , who shall b e t h e Chairman of t h e Board o r any o t h e r judge appointed f o r that purpose by the X i n i s t e r of Justice and two members of the Boculd, one o f whom at l e p s t s h a l l no t be a S t a t e employee. c o n t r a c t a 5719-1959 (here in- 4' of the Board, 4. The Board s h a l l no t e n t e r t a i n an a p p l i c a t i o n f o r R e s t r i c t i o n on appl ica- tion for approval made a f te r an ob jec t ion a g a i n s t a r e s t r i c t i v e term of t h e c o n t r a c t has been raised i n a s u i t between t h e s u p p l i e r md one of h i s customers, nor shal l i t approval. - 40 - /en t e r t a i n , . . . . , . . I . . provides f o r the resciss ion o f the contract , o r the abrogation or l imi ta t ion of any of the customer's r i gh t s thereunder, unless such cancellation, var ia t ion , suspension, resciss ion, abrogation o r l imi ta t ion i s conditional upon a breach of the contract by the custoner o r upon other f ac to r s not dependent on the suppl icr ; o r (3) customer under the contract conditional upon the consent of t he suppl ier o r of sone other person on h i s behalf; o r (4) suppl ier o r t o sone other person i n any n a t t e r not d i rec t ly connected n i t h the subject of the contract o r nakes any r i g h t of t he custoner under the contract conditional upon such r e so r t or linits the freedom o f thc custoner t o e n t e r i n to an agreement rJith a t h i r d p a t y i n cany such natter; ( 5 ) of any of h i s r i gh t s t ha t mould have ex is ted under the contract but f o r such te rn ; o r (6) on h i s behalf t o act i n the nacle of the custoner or i n h i s s tead f o r the purpose of r e a l i s i n g a right of the suppl ie r against the custoncr; (7) o r on behalf o f the suppl ier binding on the customer, o r otherwise inposcs on the custoner a burden of proof which '170uld no t have been on him but f o r such tern; o r (8) makes the r i g h t o f the customer t o any legal rcnedy dependent dn the f u l f i l n e n t of a condition o r the observcnce of a t i n e - l i n i t , o r linits the custoner with regard t o arguments o r t o the legal. proceedings avai lable t o hin, unless such tern be an a rb i t r a t ion clause; o r ( 9 ) t r a t ion i n such uanncr as t o give the suppl icr more influence than the custoner on the designation of the a r b i t r a t o r o r a rb i t r a to r s o r the place of t he makes the exercise of any r igh t of t he requires thc custoner t o r e so r t t o the o r const i tutes a sa ive r by the custoner i n advance authorises the suppl ier o r some other person o r makes accounts o r other docunents prepared by r e f e r s c?. disputc. between the pa r t i e s t o arbi- - 4 3 - /arb it ra t ion , Q a a r b i t r a t i o n o r e n t i t l e s t h e s u p p l i e r t o choose, of h is own accord, t h e cour t be fo re which t h e d i spu te is t o be brought. 16. The fac t t h a t a t e m of a c o n t r a c t has been i n v a l i d a t e d by t h e Bo,zrd under s e c t i o n 11 o r by t h e Court under s e c t i o n 14 s h a l l not i n i t s e l f zffcct the o t h e r terns of t h e c o n t r a c t e 17. aga ins t a d e t e m i n s t i o n under s e c t i o n 14, the cour t of appeal nay r econs ide r t h e na t t e r s ' nen t ioned i n sec t ion 6 and 1 4 I n an appeal a g a i n s t a dec i s ion of t h e Board o r 18. s u p p l i e r s h a l l have the sane status as any o t h e r supo l i c r . 19. tern which conforns n i t h , o r i s nore favourable t o the cus toner than , a t e r n p re sc r ibed o r approved by o r under an enactLlent i n f o r c e i n m d i a t e l y p r i o r t o the coming i n t o f o r c e of t h i s Lav o r provided i n an i n t e r n a t i o n a l agrccnent t o which Israel is a party o r i n an ,agreement betv?een an Israel i corpora t ion approved by t h e Governnent f o r t h e purposes of t h i s s e c t i o n and a fo re ign suppl ie r . 20. The prov i s ions of t h i s Law sha l l not derogate f r o n any o t h e r l a 5 7 o r affect any p l e a by v i r t u e of a h i c h a con t r ac t o r m y ten1 the reo f , uhe ther res t r ic- t i v e or otherwise, nay be void or voidable . For t h e purposes of t h i s L a v , the S t a t e as a The provis ions of t h i s Law s h a l l no t apply t o a 21. The Min i s t e r of J u s t i c e i s chasged n i t h the inp lenen ta t ion of t h i s La17 and nay nnkc r egu la t ions f o r such inp lonen ta t ion , i nc lud ing rules of procedure of the B o a d ,and provis ions as t o - (1) i n add i t ion t o the Attorney-General o r h i s r ep resen ta t ive ; ( 2 ) evidence which, no tn i th s t and ing t h e provis ions of any l a w ixcty be a d n i t t e d o r r equ i r ed i n any proceedings be fo re the Board; ( 3 ) witnesses s l lonances j persons t o be respondents before the B o x d payment of c o s t s , advoca te ' s fees and - 44 - Effect on o t h e r terns of cont rec t . Power of cour t of appeal. Applicat ion t o t h e S ta t e . Terns con- f o r n i n g t o enac t n e n t o r i n t e r n a t i o n a l agreenent I Szving of laws and p leas . Imp1 e m n - t a t i o n and regu la t ions . -0 5 8. I i I . ! (4) fees t o be p a i d i n proceedings be fo re the Board; (5) procedure i n appeals under s e c t i o n 8; (6) c o n t r a c t s under s e c t i o n 13. the forn of the i n d i c a t i o n t o be nadc on 22. The prov i s ions of s ec t ions -10 , 11 and 1 4 sha l l T r a n s i t i o n a l not apply t o a c o n t r a c t made before the e x p i r a t i o n of provis ion. six nonths fron t h e coning i n t o f o r c e of this Lam o r be fo re a dec i s ion of the Bozxd under s e c t i o n 5 i n r e s p e c t o f such s t anda rd c o n t r a c t , whichever date is eaxlier - 45 -