Sale of Goods
Introduction
Contracts for sale of goods are by far the most common form of commercial transaction and impact
upon many other areas of commercial law that are covered in this course, including carriage,
negotiable instruments, credit, debt, guarantees and insurance. People do things by selling and
buying goods- most common form of commercial transaction. These four lectures are therefore
designed to cover the key elements of sale of goods. However, it is expected that students will
already be familiar with the basic principles to be discussed.
All statutory references below are to the Sale of Goods Act 1979 (SOGA), unless otherwise stated.
I. THE CONTRACT OF SALE
1. What is a contract of sale of goods?
Section 2(1): “A contract of sale of goods is a contract by which the seller transfers or agrees to
transfer the property in the goods to the buyer for a money consideration called the price.”
Distinguish between a sale and an agreement to sell: s2(4) property transferred from the seller to
the buyer it is called a sale; and (5) transfer to take place at a future time then that is an agreement
to sale. They are both contracts of sale.
2. Five key elements
i. A contract
ii. Two parties: a buyer and a seller
iii. Transfer of property
iv. Goods
v. The price
They must all be present for a contract of sale to be in effect and to be governed by the Sale of
Goods Act 1979.
i The Contract
General principles of contract law will apply: there must be consensus in idem; parties must have
capacity, etc.
(For further reference, see MacQueen and Thomson, Contract Law in Scotland, 2012; or Black,
Woolman on Contract, 2014)
Section 3: Capacity – general law applies.
Section 4: Form – may be written, oral or constituted by the conduct of the parties i.e. implied.
1
,Following the coming into force of The Consumer Contracts (Information, Cancellation and Additional
Charges) Regulations the “2013 Regulations” on 13 June 2013 a trader is under a number of
obligations to a consumer (contracts of sale only between a trader and a consumer!) in on-premises,
off-premises or distance contracts in relation to the sale of goods, services and digital content. There
are some contracts- only apply to consumer contracts- that the 2013 Regulations do not apply to,
including contracts for the supply of foodstuffs, beverages or other goods intended for current
consumption in the household and which are supplied by a trader on frequent or regular rounds to
the consumer’s home, residence or workplace – see reg 6 or the sale of a medicinal product under
prescription – see reg 7(2).
Trader – defined in reg 4 - as a person acting for purposes relating to that person’s trade, business,
craft or profession.
Consumer – defined in reg 4 – as an individual acting for purposes which are wholly or mainly
outside that individual’s trade, business, craft or profession.
On premises contract – defined in reg 5 – as a contract between a trader and consumer which is
neither a distance contract nor an off-premises contract. See below re distance contracts. Off-
premises contracts (reg 5) generally not entered into in the business premises of the trader. On
premises contract will include many regular sales of goods – where the contract is entered into
between the parties who are in the trader’s business premises.
Reg 9(1) of the 2013 Regulations provides that before a consumer is bound by an on-premises
contract the trader must give or make available to the consumer certain information set out in
Schedule 1 in a clear and comprehensible manner, if that information is not already apparent from
the context. Reg 9 does not apply to a contract which involves a day to day transaction and is
performed immediately the contract is entered into- certain sales are not affected by the regulation
like day to day transactions like buying a newspaper – reg 9(2). The information set out in Schedule 1
includes the main characteristics of the goods, the identity of the trader, the total price of the goods
including taxes, arrangements for payment, delivery, performance and the time of delivery and the
trader’s complaint handling policy.
ii A Buyer and a Seller
Defined in s61(1) SOGA.
Distinguish between a consumer buyer and a non-consumer buyer.
“It is now noticeable that one of the principal trends of modern legislative change is to
discriminate between consumer and non-consumer transactions.” (Atiyah, p6)
Two definitions of “consumer”:
Section 61(1) defines a consumer contract in terms of the Unfair Contract Terms Act 1977, section
25.
2
,UCTA 1977, s25(1): a ‘consumer contract’ is one where
“(a) one party to the contract deals, and the other party to the contract (‘the consumer’)
does not deal or hold himself out as dealing, in the course of a business, and
(b) in the case of a contract such as is mentioned in section 15(2)(a) of this Act [a contract
which relates to the transfer of the ownership or possession of goods from one person to
another];, the goods are of a type ordinarily supplied for private use or consumption.”
But, where the consumer is a natural person then UCTA s25(1A) applies:
“Where the consumer is an individual, paragraph (b) in the definition of “consumer
contract” [above] must be disregarded”- this means you can have a k of sale entered into by
a natural person not in the course of business, then you don’t need to show the goods are
ordinarily used for private use or consumption. Lets say it is a company entering into such a
contract buying goods it does not normally use or trade in, then it is necessary to show that
the goods are of a type used for private use or consumption.
iii Transfer of Property
Section 2 SOGA: SOGA does not apply to provision of services and it does not apply to hire. Goods
must pass from the seller to the buyer in order to be governed by the SOGA.
Section 2(2): “There may be a contract of sale between one part owner and another.”
Section 2(4): “Where…the property in the goods is transferred from the seller to the buyer the
contract is called sale.”
Section 2(5): “Where… the transfer of the property in the goods is to take place at a future time…
the contract is called an agreement to sell.”
iv Goods
Section 61: “ ‘goods’ includes… all corporeal moveables (not land) except money; and in particular
‘goods’ includes emblements (crops), industrial growing crops, and things attached to or forming
part of the land which are agreed to be severed before sale or under the contract of sale”
Atiyah et al note that this definition is “virtually all-embracing” it is exceptionally wide(p77) – but
there are exceptions and problem areas.
Software:
Beta Computer Systems (Europe) Ltd v Adobe Computer Systems (Europe) Ltd 1996 SLT 604- dispute
between seller and purchaser of a software and related to terms of use of the software, provided to
the buyer at the time of delivery of the software. Could he reject the software and return it to the
buyer? It was said it is a sui generis contract- it had some features of nominate contracts. (READ THE
CASE)
3
, St Albans DC v International Computers Ltd [1996] 4 All ER 481- obiter comments- computer desk is
tangible and software is intangible thus would not constitute goods- this was a nominate contract
which included features of both.
Supply of services:
Robinson v Graves [1935] 1 KB 579- D commissioned C to do a portrait for price consideration- D
repudiated the contract before the art was finished. CA held contract for work and labour and not
the sale of goods.
v The Price
The price may be set out in the contract or may be left to be fixed in a manner agreed by the
contract or may be determined by the course of dealing between the parties; s8(1)
Contracts of barter are excluded or not governed by the SOGA.
If no price is stipulated, (can be determined by the practice of previous course of dealings) then the
buyer must pay a “reasonable price”: s8(2) and 8(3) reasonable price is a question of fact.
Glynwed Distribution v S Koronka & Co 1977 SC 1- what is reasonable price? Dispute about price- the
inner house held that reasonable price is something different from the market value. Reasonable
price has to be fair and just to both parties, and may require balancing of pros and cons arising from
the sale- consideration be given to the parties actings before the price is to be set.
II. PASSING OF PROPERTY, RISK AND TITLE
1. The Passing of Property
Distinguish between property i.e. ownership transfer of the property and possession.
Section 17: “… property in [the goods] is transferred to the buyer at such time as the parties to the
contract intend it to be transferred.” In determining the intention of the parties regard to be had to
the terms of the contract, conduct of the parties and circumstances of the case. (property transfers
when the parties intend that to be done)
Where having considered the contract, parties’ conduct and circumstances it remains unclear when
the parties intended property in the goods to pass use section 18: provides 5 rules for ascertaining
the intention of the parties as to passing of property. (Check the rules) Rule 1 unconditional contract
for sale of specific goods property passes to the buyer when the contract is made(most important)
(in practice sellers opt out of this rule expressly) - rule 2; property does not pass until the agreed
thing is done and buyer notices that the thing is done; rule 4- goods delivered when buyer signifies
his approval or accepts the goods- rule 5; contract for unascertained or future goods.
Section 16: unascertained goods- property in goods does not generally pass until the goods are
ascertained- till you know what the good is, can it be pointed out? S20A of SOGA tells us where
there is a k for the sale of specific quantity of bulk of goods and the bulk has been identified and the
4
Introduction
Contracts for sale of goods are by far the most common form of commercial transaction and impact
upon many other areas of commercial law that are covered in this course, including carriage,
negotiable instruments, credit, debt, guarantees and insurance. People do things by selling and
buying goods- most common form of commercial transaction. These four lectures are therefore
designed to cover the key elements of sale of goods. However, it is expected that students will
already be familiar with the basic principles to be discussed.
All statutory references below are to the Sale of Goods Act 1979 (SOGA), unless otherwise stated.
I. THE CONTRACT OF SALE
1. What is a contract of sale of goods?
Section 2(1): “A contract of sale of goods is a contract by which the seller transfers or agrees to
transfer the property in the goods to the buyer for a money consideration called the price.”
Distinguish between a sale and an agreement to sell: s2(4) property transferred from the seller to
the buyer it is called a sale; and (5) transfer to take place at a future time then that is an agreement
to sale. They are both contracts of sale.
2. Five key elements
i. A contract
ii. Two parties: a buyer and a seller
iii. Transfer of property
iv. Goods
v. The price
They must all be present for a contract of sale to be in effect and to be governed by the Sale of
Goods Act 1979.
i The Contract
General principles of contract law will apply: there must be consensus in idem; parties must have
capacity, etc.
(For further reference, see MacQueen and Thomson, Contract Law in Scotland, 2012; or Black,
Woolman on Contract, 2014)
Section 3: Capacity – general law applies.
Section 4: Form – may be written, oral or constituted by the conduct of the parties i.e. implied.
1
,Following the coming into force of The Consumer Contracts (Information, Cancellation and Additional
Charges) Regulations the “2013 Regulations” on 13 June 2013 a trader is under a number of
obligations to a consumer (contracts of sale only between a trader and a consumer!) in on-premises,
off-premises or distance contracts in relation to the sale of goods, services and digital content. There
are some contracts- only apply to consumer contracts- that the 2013 Regulations do not apply to,
including contracts for the supply of foodstuffs, beverages or other goods intended for current
consumption in the household and which are supplied by a trader on frequent or regular rounds to
the consumer’s home, residence or workplace – see reg 6 or the sale of a medicinal product under
prescription – see reg 7(2).
Trader – defined in reg 4 - as a person acting for purposes relating to that person’s trade, business,
craft or profession.
Consumer – defined in reg 4 – as an individual acting for purposes which are wholly or mainly
outside that individual’s trade, business, craft or profession.
On premises contract – defined in reg 5 – as a contract between a trader and consumer which is
neither a distance contract nor an off-premises contract. See below re distance contracts. Off-
premises contracts (reg 5) generally not entered into in the business premises of the trader. On
premises contract will include many regular sales of goods – where the contract is entered into
between the parties who are in the trader’s business premises.
Reg 9(1) of the 2013 Regulations provides that before a consumer is bound by an on-premises
contract the trader must give or make available to the consumer certain information set out in
Schedule 1 in a clear and comprehensible manner, if that information is not already apparent from
the context. Reg 9 does not apply to a contract which involves a day to day transaction and is
performed immediately the contract is entered into- certain sales are not affected by the regulation
like day to day transactions like buying a newspaper – reg 9(2). The information set out in Schedule 1
includes the main characteristics of the goods, the identity of the trader, the total price of the goods
including taxes, arrangements for payment, delivery, performance and the time of delivery and the
trader’s complaint handling policy.
ii A Buyer and a Seller
Defined in s61(1) SOGA.
Distinguish between a consumer buyer and a non-consumer buyer.
“It is now noticeable that one of the principal trends of modern legislative change is to
discriminate between consumer and non-consumer transactions.” (Atiyah, p6)
Two definitions of “consumer”:
Section 61(1) defines a consumer contract in terms of the Unfair Contract Terms Act 1977, section
25.
2
,UCTA 1977, s25(1): a ‘consumer contract’ is one where
“(a) one party to the contract deals, and the other party to the contract (‘the consumer’)
does not deal or hold himself out as dealing, in the course of a business, and
(b) in the case of a contract such as is mentioned in section 15(2)(a) of this Act [a contract
which relates to the transfer of the ownership or possession of goods from one person to
another];, the goods are of a type ordinarily supplied for private use or consumption.”
But, where the consumer is a natural person then UCTA s25(1A) applies:
“Where the consumer is an individual, paragraph (b) in the definition of “consumer
contract” [above] must be disregarded”- this means you can have a k of sale entered into by
a natural person not in the course of business, then you don’t need to show the goods are
ordinarily used for private use or consumption. Lets say it is a company entering into such a
contract buying goods it does not normally use or trade in, then it is necessary to show that
the goods are of a type used for private use or consumption.
iii Transfer of Property
Section 2 SOGA: SOGA does not apply to provision of services and it does not apply to hire. Goods
must pass from the seller to the buyer in order to be governed by the SOGA.
Section 2(2): “There may be a contract of sale between one part owner and another.”
Section 2(4): “Where…the property in the goods is transferred from the seller to the buyer the
contract is called sale.”
Section 2(5): “Where… the transfer of the property in the goods is to take place at a future time…
the contract is called an agreement to sell.”
iv Goods
Section 61: “ ‘goods’ includes… all corporeal moveables (not land) except money; and in particular
‘goods’ includes emblements (crops), industrial growing crops, and things attached to or forming
part of the land which are agreed to be severed before sale or under the contract of sale”
Atiyah et al note that this definition is “virtually all-embracing” it is exceptionally wide(p77) – but
there are exceptions and problem areas.
Software:
Beta Computer Systems (Europe) Ltd v Adobe Computer Systems (Europe) Ltd 1996 SLT 604- dispute
between seller and purchaser of a software and related to terms of use of the software, provided to
the buyer at the time of delivery of the software. Could he reject the software and return it to the
buyer? It was said it is a sui generis contract- it had some features of nominate contracts. (READ THE
CASE)
3
, St Albans DC v International Computers Ltd [1996] 4 All ER 481- obiter comments- computer desk is
tangible and software is intangible thus would not constitute goods- this was a nominate contract
which included features of both.
Supply of services:
Robinson v Graves [1935] 1 KB 579- D commissioned C to do a portrait for price consideration- D
repudiated the contract before the art was finished. CA held contract for work and labour and not
the sale of goods.
v The Price
The price may be set out in the contract or may be left to be fixed in a manner agreed by the
contract or may be determined by the course of dealing between the parties; s8(1)
Contracts of barter are excluded or not governed by the SOGA.
If no price is stipulated, (can be determined by the practice of previous course of dealings) then the
buyer must pay a “reasonable price”: s8(2) and 8(3) reasonable price is a question of fact.
Glynwed Distribution v S Koronka & Co 1977 SC 1- what is reasonable price? Dispute about price- the
inner house held that reasonable price is something different from the market value. Reasonable
price has to be fair and just to both parties, and may require balancing of pros and cons arising from
the sale- consideration be given to the parties actings before the price is to be set.
II. PASSING OF PROPERTY, RISK AND TITLE
1. The Passing of Property
Distinguish between property i.e. ownership transfer of the property and possession.
Section 17: “… property in [the goods] is transferred to the buyer at such time as the parties to the
contract intend it to be transferred.” In determining the intention of the parties regard to be had to
the terms of the contract, conduct of the parties and circumstances of the case. (property transfers
when the parties intend that to be done)
Where having considered the contract, parties’ conduct and circumstances it remains unclear when
the parties intended property in the goods to pass use section 18: provides 5 rules for ascertaining
the intention of the parties as to passing of property. (Check the rules) Rule 1 unconditional contract
for sale of specific goods property passes to the buyer when the contract is made(most important)
(in practice sellers opt out of this rule expressly) - rule 2; property does not pass until the agreed
thing is done and buyer notices that the thing is done; rule 4- goods delivered when buyer signifies
his approval or accepts the goods- rule 5; contract for unascertained or future goods.
Section 16: unascertained goods- property in goods does not generally pass until the goods are
ascertained- till you know what the good is, can it be pointed out? S20A of SOGA tells us where
there is a k for the sale of specific quantity of bulk of goods and the bulk has been identified and the
4
