On the Commercial Law elective on the #LPC, we are first introduced to the Sales of Goods Act 1979 (SGA), breach of contract issues, remedies for breach and the duties of the various parties. Below are my notes covering these issues.
Typical kinds of commercial contract:
Sale of goods - domestic and international
Carriage arrangements
Payment and security for international transactions
Agency
The use of conventions, such as Incoterms and Uniform Customs and Practice for documentary credits
Supply chain
how to get goods to the ultimate consumer in the most efficient and cost-effective manner?
Examples include:
Manufacturer 1 > Retailers > End user
Manufacturer 2 > Distributor > Retailers > End user
Manufacturer 3 > Agent > negotiates/concludes sales > Retailers > End user
Standard terms and conditions
Will these apply or negotiate contracts individually?
It is common to have a set of terms to be put into a standard contract which a business will use for all transactions
The use of standard terms means the final contract suits the needs of whichever party has been able to insist on their use
Buyer wants goods to be delivered on time, preferably to its own premises and will want S to be liable for defects
Seller wants flexibility for late delivery, wants B to preferably collect the goods and whilst it accepts some liability for defects, will not want to be liable for every trivial problem
UK Contract principles
Offeror must made an offer on certain terms, showing intention to be bound and the offeree must accept those terms unconditionally
Before entering into the contract, there will be a period of negotiation, either oral or written
An offer must be distinguished from an invitation to treat, where there is no intention to be legal bound. Advertisements, brochures, price lists, estimates will not be offers.
The words subject to contract show that the parties do not intend to be bound by the terms of any informal agreement or pre-contractual negotiations
Remedies for breach of contract
Breach of a condition = gives innocent party the right to repudiate or terminate the contract. Termination means that the innocent party is discharged from all future obligations under the contract and may recover any property transferred under the contract and claim damages. The innocent party may choose to affirm the contract - hold the other party to its obligations under the contract
Breach of warranty = gives innocent party the right to claim damages, does not have option to terminate the contract
Contractual damages = compensatory. They are assessed on an expectation basis: to put the C into the position that he would have been if the contract had been performed as intended.
Damages cannot be claimed for losses that are too remote - Hadley v Baxendale (1854):
losses that flow naturally from the breach = direct loss/damage - the ordinary loss of profit
losses in the contemplation of the parties at the time they made the contract = loss of profit or indirect and consequential loss e.g. Victoria Laundry v Newman Industries [1949] - exceptional profit arising as a result of lucrative dyeing contract which has not been drawn to the attention of the D was too remote - it is the knowledge of the parties at the time of the contract is made, not at the time of the breach which is relevant when applying this test
The Sale of Goods Act 1979 (SGA)
SGA imposes duties on B and S with corresponding rights and remedies for each party, relating to transfer of ownership
E.g. under s17 - B’s duty to pay for the goods is concurrent with Ss duty to deliver them and failure to perform these duties gives rise to statutory remedies over and above ordinary contractual remedies
Effect of a sale of goods is that ownership of, and risk in, the goods passes to the B
The main performance obligations can be divided into 3 categories:
Default provisions - many implied terms are safety-net terms, implied only if parties have not made their own provision
Implied terms which can be excluded by agreement between the parties - s55: some of the implied terms into a contract for the sale of goods by 1979 Act can be excluded by agreement of the parties, subject to UCTA 1977
Implied terms which can never be excluded - under UCTA 1977, obligation of S to pass good title to the B can never be excluded
Effects of a sale of goods contract
The effects of a sale of goods contract are that:
ownership of goods is transferred to B,
risk in the goods passes to B, and
S is paid.
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