In the 1987 Report, the Law Commission was of the view that the old definition of merchantable quality had not changed the view taken in Kendal v Lillico (4) that goods need only be fit for one of their common purposes. (5) Nevertheless, the Law Commission recommended a change in the law so that goods supplied should be fit for all common purposes, whether or not individually disclosed to the seller under section 14(3).
The Commission took the view that a seller concerned to supply goods only for one common purpose should carefully narrow the description of the goods so as to exclude other common purposed. The question therefore is, would a seller's narrow description might be seen as an attempt to exclude liability under section 14(2).
The term 'common' purpose is an ambiguous one. When does a purpose split and become two or more purposes? How common is common? The new definition does not positively require that the goods shall be fit for all common purposes. Rather their fitness in this respect is to be taken into account only in 'appropriate cases.'
The new definition does not make any mention of the provision of spare parts and servicing facilities. Yet, there may be cases where the seller would be liable under s14(2) for an absence of spare parts.
It has been suggested by some commentators that the new standard is more appropriate for consumer rather than commercial transactions. There may be a case for separate consumer and commercial codes.
Rejection for minor breach
In the law of contract, any breach of condition by the seller (unless so small it would not be a breach by virtue of the principle de minimis non curat lex) gives the buyer the right to reject the goods and to treat the contract as repudiated by the seller. This remains the position for a buyer who 'deals as a consumer.' However, for non-consumer buyers, new s15A in the Sale of Goods Act provides that if a breach of a term in ss13,14 or 15 is 'so slight that it would be unreasonable for him to reject them ... the breach is not to be treated as a breach of condition but may be treated as a breach of warranty.' This is the position unless a contrary intention appears in, or is to be implied from, the contract. A 'contrary intention' inserted by the buyer would not be subject to the Unfair Contract Terms Act 1977. Therefore, Jackson v Rotax Motor and Cycle Co Ltd (6) is no longer good authority. The new provision applies only to breaches of certain conditions, namely that the seller should deliver the correct contract quantity and fulfils the conditions in ss13,14 and 15 of the Sale of Goods Act.
The new s15A in certain cases takes away from the non-consumer buyer the right to terminate a contract for breach of condition. The continuance of strict rejection rights in consumer cases will encourage a seller to cure a defective tender when faced with a buyer willing to keep the goods or accept a replacement. However, it may equally be said that the undermining of strict rejection rights in s15A will encourage buyers to be reasonable in accepting an offer of cure.
Section 15A is confined to the implied terms in sections 13-15 of the Sale of Goods Act and should not overrule those authorities that state that the time of delivery in commercial contracts is normally the essence of the contract.(7)
Section 15A overrides the need to distort the implied conditions of fitness and quality in the Act. It should not prevent rejection where the breach cannot be described as slight but the buyer is unreasonable in, for example, turning down an offer of cure.
Prior to the 1994 Act, a buyer under a non-severable contract had the right under s30(4) to reject goods that did not correspond with their description whilst accepting those that did. In a new s35A this right of partial rejection has been extended.
It was once the case that acceptance by the buyer of all or any part of the goods, precluded the buyer from being able to reject any of the goods. However, there were exceptions to the rule: (i) in the case of a severable contract, where acceptance of goods under one severable part of the contract did not preclude the possibility of rejecting the goods under another part; (ii) where more goods than the contract quantity were delivered, the buyer having the option to accept the correct quantity and reject the rest; (iii) where the contract goods were delivered together with some goods which did not meet the contract description, the buyer having the option of accepting those goods which did not comply with the contract description.
The first two exceptions remain but the third has been replaced by a new s35A of the Sale of Goods Act. In order to exercise a right of partial rejection under this provision, the buyer must first have a right to reject the goods (since s35A does not manufacture a right of rejection where none existed before), e.g. because of a breach of condition, and must secondly, accept all the goods which comply with the contract. Providing he accepts all of the goods which comply with the contract, he is not precluded from rejecting all, or some, of those which do not. Although s35A(4) states that this section applies only if a contrary intention does not appear. However, a clause in a contract which purported to deprive a consumer buyer of his right of partial rejection may be rendered ineffective by virtue of the UCTA 1977, or the Unfair Contract Terms Regulations. A business buyer is not covered by the UCTA 1977.
Acceptance
Under s11(4) of the Sale of Goods Act a buyer loses the right to reject the goods and treat the contract as repudiated if he has accepted those goods. The definition of 'acceptance' has been amended by s35 of the Sale of Goods Act. Unless the buyer has previously examined the goods, he will not be taken to have accepted them either by (i) intimating to the seller that he has accepted them, or (ii) performing some act, after delivery, which is inconsistent with the ownership of the seller, until he has a reasonable opportunity of examining them.
Under the old law, the buyer was deemed to have accepted the goods by retaining them for more than a reasonable length of time without intimating to the seller that he had rejected them. Under the new law, the 'reasonable length of time' includes a reasonable opportunity to examine the goods for the purpose of seeing whether they conform to the contract. This is a change in the law as stated in Bernstein v Pamsons Motors.(8)
There are two further provisions relating to 'acceptance.' Firstly, the buyer will not be deemed to have accepted the goods merely because he asks for, or agrees to, their repair, or by under an agreement with the seller. Secondly, he will not be deemed to have accepted the goods merely because they are delivered to another under a sub-sale or other disposition.
Section 35(6) provides that the buyer does not accept the goods 'merely' by requesting or submitting to the repair of the goods by the seller or by delivering the goods to a sub-buyer.
Seeking repair would not of itself be looked upon an as an act inconsistent with the seller's ownership; nor would the period of repair be taken into account when looking at issues of lapse of time.
The old practice of seeking to deprive a consumer of his right of rejection by securing his acceptance of a delivery note which acknowledged receipt of the goods in the correct condition will now be deprived of its intended effect. In fact, it was never entirely certain that signing a delivery note, or contractual agreement to the effect that the goods have been examined and found to be in good condition, was of itself and act of acceptance; see Lowe v Lombank Ltd.(9)
The Law Commission declined to recommend the addition of a new head of acceptance, the buyer's inability to restore the goods in substantially the state in which they were accepted.(10), when this was already a well-established bar to rescission for innocent misrepresentation; see Clarke v Dickson (11). The Law Commission rejected the introduction of a fixed acceptance period (12) and was content to permit the courts to continue to define that period in practice.
There is also the concept of the 'commercial unit.' A commercial unit is a unit, division of which would materially impair the value of the goods or the character of the unit. An example is a two volume dictionary, the first volume dealing with A to K and volume two dealing with L to Z. (13) A buyer accepting any goods in the commercial unit is deemed to have accepted all of the goods in that unit. This rule appears to be in conflict with the new right of partial rejection. However, the commercial unit rule prevails, therefore, acceptance of some goods in the commercial unit is deemed to be acceptance of all of the goods in that unit.
A contract may provide for the goods to be delivered in instalments and yet not be a severable contract. If the instalments are to be separately paid for, that would be a compelling factor suggesting that the parties intended the contract to be severable. However, the true test is whether the parties intended that a breach as to one consignment would justify rejection of all consignments. If they did, then the contract is not severable. In such a case, if there is a breach of condition in relation to one instalment, that breach would justify the buyer in rejecting the whole contract. However by virtue of s11(4) of Sale of Goods Act 1979 in the case where the buyer does not exercise that right but accepts the defective instalment - that acceptance will preclude the buyer from being entitled to reject later instalments.
The new s35A permits the buyer to reject the non-conforming goods in the defective instalment whilst accepting the conforming ones. If he does so, however, that acceptance will preclude him from being entitled to reject later instalments. This is so as the permission given by s35A to accept the conforming goods whilst rejecting all or some of the non-conforming goods, is confined to the instalment in respect of which the buyer has a right of rejection.
Section 30(4) of the 1979 Act covers incidents goods are delivered 'mixed with' goods of a different description. It provided that a buyer may accept the contract goods and reject the rest, or reject the entire consignment. The 1994 Act repeals it in its entirety without a replacement. It is now unclear what the position is where the correct quantity of goods is delivered but mixed with some additional material.
Consumers have strong remedies, rejection plus the right to recover damages, including consequential damage. However, in practice the most commonly invoked consumer remedies are repair and replacement, yet these are not provided for at all in the statutory scheme. The Law Commission thought giving the seller the right to cure was inappropriate in many commercial transactions and consumer rights would be threatened.
There is nothing in the 1994 Act to circumvent privity rules which prevent manufacturers from contractual decisions. Other legal systems allow buyers to sue higher links in the contractual chain, recognising that the manufacturer should be responsible for the quality and also the safety of his products. The most notable is the French system with the 'action directe.'
Market overt
Another legislative change to the Sale of Goods Act 1979 was made in 1994. Also from 3 January 1995, pursuant to the quite separate legislation of the Sale of Goods (Amendment) Act 1994, the provisions of the Sale of Goods Act 1979 relating to market overt are repealed. The exception to the nemo dat rule has now gone. The market ouvert rule applied to markets which existed since 'time immemorial' or those established by charter. The rule bypassed the normal presumption that good title cannot pass to a purchaser of stolen goods. The rule had been described as a thieves' charter.
Conclusion
I suggest that the changes made in 1994 are to the disadvantage of traders, however, they are to the advantage of consumers. The 1994 Act replaced the old 'merchantable quality' requirement with the new phrase 'satisfactory quality.' The new requirement is a tougher standard for traders to meet. Goods now have to be fit for all common purposes. Consumer buyers retain the right to reject for any breach of condition, whereas the non-consumer buyer now cannot reject for minor breaches. The acceptance standard has changed. The buyer now has a 'reasonable length of time' to inspect the goods before he is deemed to have accepted them, even repair or sub-sales no longer bar rejection of the goods. The market ouvert rule has now gone, buyers and sellers alike now cannot take good title to stolen goods, even if purchased in 'good faith.' There is a strong case for separate consumer and commercial legislation.
Bibliography
Books
Atiyah, 'Sale of Goods', 8th edition, 1990, Pitman.
Borrie, 'Commercial Law', 6th edition, 1988.
Pitt, 'Butterworths Commercial Law Handbook', 1989, Butterworths.
Articles
G Bridge, 'Commercial Sales', 1995 BBL 400.
P Dobson, 'The Sale and Supply of Goods Act 1994', 1995 SLR v14, p8.
G Howells, 'The Modernization of Sales Law?', 1995 LMCLQ 190.
R Lawson, 'Amendments to the Sale of Goods Act 1979', 1995 SJ 139(2), p38.
R Lawson, 'On the Receiving End', LSG 95 - 92(a), p20
P Milne, 'Goodbye to Merchantable Quality', 1995 NLJ 145(6695), p683.
Footnotes
1. Law Commission, No. 160
2. [1965] 1 WLR 1013
3. [1969] 2 AC 31
4. supra.
5. Law Commission, No. 160, para. 3.32
6. [1910] 2 KB 937
7. Law Commission, No. 160, para 4.24
8. [1987] 2 All ER 220
9. [1960] 1 All ER 611
10. Law Commission, No. 160, paras 5.39-40
11. (1858) EB & E 148 at p155.
12. Law Commission, No. 160, para 5.14 et seq.
13 P Dobson, 'The Sale and Supply of Goods Act 1994', 1995 SLR v14, at p9.