5.3 Terms of Contract

5.3 TERMS OF CONTRACT

5.3.1 Conditions and Warranties

 The Sale of Goods Act (SOGA) implies a number of terms into contracts as either conditions or warranties.  The distinction between conditions and warranties under the law of contract is preserved by the sale of goods legislation.  Whether a stipulation is a condition or warranty depends in each case on the construction of the contract.  According to Section 12(4) SOGA 1957, the stipulation may be condition, though called a warranty in the contract.

Conditions

Section 12(2), Sale of Goods Act 1957 (SOGA 1957):

A condition is ‘a stipulation essential to the main purpose of the contract’

 A breach of condition entitles the innocent party to repudiate the contract and to claim for damages.  However, in the following circumstances under Section 12(2) SOGA 1957, the innocent party cannot repudiate the contract: o Where the buyer waives the condition; o Where the buyer elects to treat the breach of condition as a breach of warranty and claim damages only; o Where the contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of any condition must be accepted as a breach of warranty unless otherwise provided in the contract; and o Where the contract is for specific goods and the property in which has passed to the buyer, the breach of any condition must be accepted as a breach of warranty unless otherwise provided in the contract.

Warranties

Section 12(3), Sale of Goods Act 1957 (SOGA 1957):

A warranty is ‘a stipulation collateral to the main purpose of the contract’

 A breach of warranty give rise to the innocent party to claim for damages but not a right to reject the goods and treat the contract as repudiated.

 According to Section 12(4) of the Act – whether a stipulation is a condition or warranty depends on each case on the construction of the contract. A stipulation may be a condition, though called a warranty in the contract.

Stipulation as to Time

 Under Section 11 SOGA 1957, unless a different intention appears from the terms of the contract, stipulations as to time of payment are not deemed to be essence with respect to the contract of sale.  This means that unless the contract specifically specifies that the time of payment shall be essence of the contract, if a buyer fails to pay by an agreed date, it does not entitle the seller to repudiate the contract.  Under the same section, whether any other stipulation as to time, (for example, time of delivery) is of essence of the contract or not depends on the terms of the contract.

5.3.2 Implied Terms

 Implied terms are terms not stated but understood from parties’ conduct, circumstances and prevailing practice.  The Sale of Goods Act 1957 implies a number of stipulations in every contract of sale of goods.  However, these implied terms apply only when the parties to the contract of sale have not excluded or implied them.  These implied terms, laid down in Section 14 to 17 of the Sales of Goods Act are as follows:

Title Sale goods by description Sale goods by sample

Fitness for purposes

Goods must be of merchantable quality

Implied Conditions

Quiet possession of the goods

Goods are unemcumbered

Implied Warranties

Implied Condition as to Title – Section 14(a) SOGA 1957

 According to the Act, a seller must have the right to sell the goods and when to pass the property when it is time to do so.  A breach of this condition entitles the buyer to repudiate the contract, i.e. to treat the contract as an end and recover the price in full even though the buyer has used the goods.

Rowland v Divall [1923]

Facts: Plaintiff bought a car from defendant and used it for several months. He then realized that defendant has no title to the car and the plaintiff is bound to return it back to the rightful owner. Plaintiff then sued defendant to recover the money paid to the defendant.

Held: Although Rowland had use of the car for some time, he was entitled to recover the full price he had paid because Divall had no right to sell the car. Divall had breached the contract and it give Rowland right to repudiate the contract and claim the money from Divall.

Implied Condition as to Sale Goods by Description – Section 15 SOGA 1957

 Sale of goods by description covers all cases where the buyer has not seen the goods but is relying on the description alone.  According to Section 15 SOGA 1957, where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description.  Breach of this implied condition entitled the innocent party to repudiate the contract and treat the contract as an end.

Varley v Whipp [1900]

Facts: The buyer purchased a second hand reaping machine without ever having seen it. The seller had described it as new the previous year and used it to cut only 50 or 60 acres. In fact, the machine was very old.

Held: This was a sale by description and since the machine did not correspond to its description, the seller was in breach.

Implied Condition as to Sale Goods by Sample – Section 17 SOGA 1957

 According to Section 17 SOGA 1957, a contract is a contract of sale by sample where there is an express or implied term to that effect in the contract.  In addition to the earlier implied condition that the sale is by sample as well as description (the bulk of the goods must correspond with both sample and description), there are three implied conditions in contracts of sale by sample: o The bulk shall correspond with the sample in quality; o If the differences are only of a minor nature and the quality of the goods is still the same, this condition will not be breached; and o The buyer shall have a reasonable opportunity of comparing the bulk with the sample.  The buyer has a reasonable time to compare the bulk with the sample. Once this has been done, acceptance is deemed to have taken place. The right to reject the goods is then lost, although the buyer may still sue for damages for breach of warranty if the bulk does not correspond with the sample.  Breach of this implied condition entitled the innocent party to repudiate the contract and treat the contract as an end.

Godley v Perry [1960] 1 WLR 9

Facts: A boy bought a catapult. While using it, the catapult broke and he lost the sight of an eye. The shopkeeper had bought it from a wholesaler by sample and tested it by pulling out back of the elastic. The shopkeeper was sued and the court held that the catapult was not fit for the purpose for which the buyer wanted it and that it was of unmerchantable quality. The shopkeeper then filed an action against the wholesaler.

Held: Although the shopkeeper had made reasonable examination, the defect was not one which was apparent on such examination. Thus, he had an action against the wholesaler.

Implied Condition as to Fitness for the Purposes – Section 16 SOGA 1957

 Where the buyer, expressly or impliedly, makes known to the seller the particular purpose for which the goods are required so as to show that he relies on the seller’s skill or judgement, and the goods are of a description which is in the course of the seller’s business to supply, there is an implied condition that the goods shall be reasonably fit for the purpose.  There are implied conditions as to fitness of the goods: o A disclosure of purpose. o Reliance on seller’s skills and judgement. o The goods supplied are of the description of the seller’s business to supply. o Not bought under patent or tradename.

 Breach of this implied condition entitled the innocent party to repudiate the contract and treat the contract as an end.

Griffiths v Peter Conway Ltd

Facts: A woman with abnormally sensitive skin bought a coat without telling the salesman that she had sensitive skin. She subsequently contracted dermatitis from wearing the coat.

Held: She was unable to recover for breach of fitness for purpose because there was nothing in the cloth that would have affected the skin of a normal person. She had failed to disclose that she suffered from skin problems.

Implied Condition as to Goods Must Be of Merchantable Quality – Section 16(1)(a) SOGA 1957

 Where the goods are brought by description from a seller who deals in goods of that description, there is an implied condition that the goods shall be of merchantable quality provided that of the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to reveal.

David Jones Ltd. v Willis [1934]

Facts: Willis went to the shoe department of David Jones and told the saleswoman that she wanted a comfortable pair of walking shoes because she had a bunion on her foot. After trying on a number of pairs, she bought a pair which was recommended by the saleswoman. The third time that she wore the shoes the hell broke off one of them, causing her to fall and break her leg. The evidence showed that the shoes were not well made and that the heels had not been properly attached to the shoes.

Held: As the shoes had been bought by description, there had been a breach of the implied condition of merchantable quality.

Implied Warranty as to Quiet Possession of the Goods – Section 14(b) SOGA 1957

 There is an implied warranty that the buyer shall have and enjoy quiet (undisturbed) possession of the goods.