Sale of Goods
The following is a brief summary about the broad area of the law referred to as “sale of goods” designed to provide the Legal English teacher with information supplemental to that set forth in the International Legal English coursebook.
Contracts relating to the sale of goods are typically covered by the legislation of the relevant country or, less frequently, by general contractual principles of law. In the UK, the principal relevant legislation is the 1979 Sale of Goods Act. In the United States, the Uniform Commercial Code (“UCC”) normally applies to sale of goods contracts. A person or entity may have rights under a Sale of Goods Act if they have bought goods for commercial or personal use. Many countries have separate Sale of Goods Acts – one for sales between merchants and one for sales involving consumers.
If the goods are in some way faulty, the purchaser of such goods may be entitled to a full refund or partial compensation. Sale of Goods Acts often list terms or concepts which are implied in every sale of goods contract, regardless of whether they are expressly stated in the contract itself.
In many jurisdictions, a duty of good faith and fair dealing is implied in all contracts, i.e. neither party can do anything that would have the effect of destroying or injuring the right of the other party to receive the benefits of the contract. Although many jurisdictions (including the US) recognise good faith, English law generally refuses to recognise it as an implied contractual term.
Terms implied by custom or trade
One is generally bound by the customs of a particular industry. The terms of a sale of goods contract may have been negotiated against the background of the customs of a particular locality or trade. The parties often assume that their contract will be subject to such customs and thus do not deal specifically with the matter in their contract.
Course of Dealing
If two parties have regularly conducted business on certain terms, the terms may be assumed to be same for each contract made. The parties must have dealt with each other on numerous occasions and been aware of the term meant to be implied. Terms (or entire contracts) may be implied based on the previous course of dealing between the parties.
In common law jurisdictions, there are certain implied warranties or assurances presumed to be made in the sale of goods.
The warranty of merchantability is implied, unless expressly disclaimed or a sale is made using the phrase “as is” or “with all faults.” In order to be “merchantable”, the goods must reasonably conform to an ordinary buyer’s expectations, i.e., it functions like other goods of the same type.
The warranty of fitness for a particular purpose is implied by law where a seller knows or has reason to know of a particular purpose or use for which an item is being purchased by the buyer (and the buyer relies on the seller’s expertise in selecting the product).
Other implied warranties include warranty of title, implying that the seller has the right to sell items and is the proper owner and, in conjunction with real estate transactions, the warranty of habitability, often defined as the minimum standard for housing suitable for human habitation.
Battle of the Forms
In many sale of goods transactions, the parties exchange printed purchase orders and acknowledgement forms. Naturally, these forms are oriented to the thinking of the respective drafting parties and the terms contained in them often do not correspond. Sale of Goods Acts provide rules for contract formation in cases in which the parties exchange forms that do not agree on all the terms.
Under the common law’s mirror-image rule, an acceptance that varies the terms of an offer becomes a counter-offer. This operates as a rejection of the original offer. Many modern statutes, such as the UCC and the Sale of Goods Act, change this rule and convert a counter-offer into an acceptance even if it contains additional or different terms. The only requirement is that the responding form must contain a definite and seasonable expression of acceptance. The terms of the responding form that correspond to the offer constitute the contract. Any additional terms become proposals for additions to the contract. When the transaction is between merchants, the additional terms become part of the contract unless the offer is specifically limited to its terms, the offeror objects to the new terms, or the additional terms materially alter the offer.
United Nations Commission on International Trade Law (CISG and related transactions)
UK Sale of Goods Act
Consumer protection information (US)
Unfair Terms in Consumer Contracts Regulations
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