Sale of goods

Reading 1: Introduction to sale of goods legislation

The following text gives an overview of the area of law which relates to the sale of goods. This can relate to a wide variety of transactions, from buying something tangible in a shop or on the Internet to paying for a service, such as repairs.

1. Read through the text quickly and complete the sentences below using the words in the box.

1. A sale can be defined as the ………. of ……….. in a good.

2 Implied ………… do not need to be expressed as they are implied by law.

3 Two means of limiting warranty liability are ………. and …………..

4 The CISG sets forth rules that govern ……. for the international sale of goods.

The sale of goods entails a broad area of the law which is largely governed by legislation. Where an aspect of the law is not regulated by legislation, it is governed by the common law or often by general principles of law in non-common law jurisdictions.

The applicable legislation sets forth the nature of what is involved in the sale of goods. Naturally, this includes definitions of what constitutes a sale and goods. A sale entails the transfer of title in a good from the seller to the buyer. Goods can be defined broadly as some type of tangible chattel. Application of the legislation depends upon: the type of sale; whether the seller is a merchant or not; and, if the seller is a merchant, whether he is trading in the course of his usual business.

The aspects of sale of goods governed by legislation include such things as contract formation, price, passage of title, warranties of title, implied warranties, express warranties, disclaimers of warranties, remedies for breach of warranty, delivery and acceptance of goods, and the passing of risk. The principal relevant legislation in the UK is the Sale of Goods Act 1979 (including its amendments).

Contract formation in this context includes the requirements applied to contracts in general with some added details such as agreements implied by conduct of the parties. The price to be paid for the goods is usually set forth in the agreement, but in some instances relevant legislation will determine the price if this term is left out. At the very least, the buyer is generally required to pay a reasonable price. Contractual provisions concerning the transfer of title dictate when good title is transferred, for example between a person who has possession but not title to a third-party buyer. Generally, good title cannot be transferred to a third party from a person not authorised to do so by the holder of title. Naturally, aspects of good faith and apparent authority come into play in this context.

Different warranties play a major role in the sale of goods. Implied warranties are such warranties which do not need to be expressed but which the law implies. Some of these types of warranties would include warranties of title, fitness for a particular purpose, and quality or merchantability. Many times the application of the latter two types of warranty depends upon the type of sale (for example sales by sample) and whether the seller is a merchant acting in the course of business. Express warranties are warranties which are specifically stated either in writing or orally, as the case may be. Under many statutory provisions, an express warranty cannot negate an implied warranty of the relevant legislation. A common feature of legislation governing the sale of goods is to restrict the ability to limit warranty liability through exclusions or disclaimers in the contract.

Another general aspect of this type of legislation is to regulate performance between the parties. Aspects covered in this area would include delivery and acceptance, inspection by the buyer, the buyer's right to refuse acceptance and return of goods.

An international convention which should be particularly mentioned in this context is the United Nations Convention on Contracts for the International Sale of Goods Act (CISG). The Convention sets forth rules that govern contracts for the international sale of goods and takes into consideration different social, economic and legal systems to remove legal barriers and foster the development of international trade.

Key terms: Sale of Goods

2 Warranties Match these types of warranties and concepts related to warranties (1-7) with their definitions (a-g).

3 Buying and selling Complete the table below using the words in the box.

4 Most of the words in the right-hand column of the table in Exercise 3 are not exact synonyms but are used in slightly different ways. Read this excerpt from a student's vocabulary notebook on the definitions and uses of two of the words for goods.

1 What do you think of the way vocabulary is recorded in the excerpt above?

2 How do you record vocabulary?

5 Choose one section of the table in Exercise 3, such as 'words for goods', and look up each word in a dictionary. How do the meanings differ? Find out if a word is used in some contexts but not in others.

Language use: terms and conditions of sale

Lawyers often assist suppliers of goods in drawing up standard terms and conditions of sale. These terms and conditions may be incorporated into contracts for the sale of goods or may be relied on as the legal framework of consumer sales. Legal counsel ensures that the terms and conditions are relevant to the specific circumstances of the seller in his particular trade, and that they provide adequate protection of the seller's rights.

6 These clauses are typically included in a company's general terms and conditions of sale. Match the clause types (1-10) with their descriptions (a-j).

7 Decide which kind of clause each of the sentences (1-5) below would most likely be found in. Then explain them in your own words.

EXAMPLE: Prices and charges are subject to change without notice.

Prices and payment clause

It means that the prices and other fees can be changed at any time, and they don’t need to give you advance notice.

1 Title in the goods shall pass to the buyer on delivery of the goods.

2 Vendor's interpretation of a verbal order shall be final and binding where shipment is made prior to receipt of written confirmation.

3 Vendor does not make any representations or warranties except that those goods shall conform to the specifications supplied by Purchaser and that all processing applied by Vendor is performed in a good workmanlike manner in accordance with applicable industry trade standards and practices subject to any tolerances and variations consistent with the usual trade practices or as specified by Purchaser.

4 Purchaser hereby agrees to indemnify and hold harmless Vendor from and against all loss, damages, expenses, claims, suits and judgments arising, directly or indirectly, out of the design, installation, maintenance or operation of the goods.

5 Vendor may accept Purchaser's request to change the specifications or processing of the goods, but shall reserve the right to charge Purchaser for all costs and services necessary for such changes.

Listening 1: Legal writing seminar on drafting clauses

In order to protect the rights and interests of a client, a lawyer will try to anticipate possible disputes arising from contracts entered into by the client. Careful drafting of contract clauses can provide protection for the contracting parties in -the case of a breach. The following listening text is an excerpt from a legal writing seminar on drafting contracts, attended by both junior and senior members of a law firm. This part of the seminar deals with the drafting of retention of title [ROT] clauses in contracts of sale.

8 Listen to the first part of the presentation. According to the speaker, why is it a problem if the ROT clause is interpreted as a charge?

9 Listen to the second part and take notes as if you were attending the seminar yourself. What are the five tips for drafting effective retention of title clauses? Compare your notes with a partner.

10 Choose the best answer to each of these questions.

1 What is the main purpose of a retention of title clause?

a to prevent the liquidation of the buyer

b to protect the seller in the event of the insolvency of the buyer

c to enable the seller to profit from the manufacture of the goods sold to the buyer

2 Why don't sellers register every ROT clause as a charge?

a It would be too expensive to register everyone.

b It is not permitted to register everyone.

c It would be too time-consuming to register everyone.

3 Why does the speaker advise putting a serial number on all the goods sold?

a so the seller can prove to a liquidator which goods belong to him

b so the seller can keep a record of which buyer has bought his goods

c so the seller knows exactly how many goods he has sold

4 Why should an ROT clause say that the buyer has a right of entry to recover the goods?

a so that the buyer will not claim additional property that does not belong to him

b so that the goods are not used to produce a product, thus becoming impossible to recover

c so that the buyer will have access to the place where the goods are stored

11 Complete the retention of title clause below using the words in the box.

The ownership of the goods 1) ……… to the buyer shall remain with the 2) ……. until payment 3) ……… for all the goods shall have been received by the seller in accordance with the terms of this contract or until such time as the 4) ……… sells the goods to its customers by way of bona-fide sale at full market 5) …….. If such payment is overdue in whole or in part, the seller may 6) ……. or resell the goods or any part of it and may enter upon the buyer's 7) ………. for that purpose. Such payment shall become 8) ……. immediately upon the commencement of any act or proceeding in which the buyer's 9) ……….. is involved.

12 Does the clause above have the five characteristics of a well-drafted ROT clause mentioned by the speaker?

Listening 2: A case brief

Law students are often required to summarise the facts and outcome of a case in the course of their studies. Practising lawyers also encounter situations in which they are asked to provide a case brief, either orally or in writing; a colleague may want to be briefed on the particulars of a certain case, for example, or a superior will request a written report on cases and rulings in an area of the law in which the firm is currently preparing a case for trial.

In a university law seminar, students are often asked to present case briefs which then the basis of group discussion and debate. In the following exercise, you will hear a law student presenting the brief of a case involving an issue related to the sale of goods. The issue is known as 'shrink-wrap contracts',

13 Listen to the case brief. What exactly is the product involved in the dispute? What is the central legal issue in the case?

14 ecide whether these statements are true or false.

1. In the first instance, the court held that the sales contract was binding and in full force and effect.

2. In the view of the Court of Appeals, the purchaser could have returned the software if he did not agree with the terms and conditions.

3. The Court compared buying shrink-wrapped software with buying an airline ticket, as both involve payment before the terms of sale are fully known to the consumer.

4. The UCC states that a vendor may not propose limitations on the kind of conduct that constitutes acceptance of the terms of a contract.

5. According to the Court, the respondent had to acknowledge the terms of sale, since he could not use the software without doing so.

Text analysis: A case brief

15 Read the transcript of the case brief of ProCD, Inc. v. Matthew Zeidenberg and Silken Mountain Web Services. Underline the paragraph where the speaker gives an overview of his brief. The speaker explicitly mentions the sections of the brief. What are they?

16 On two occasions in the presentation, the speaker uses a particular device to introduce a new topic. What is this device? Underline the two examples.