Advocates & Solicitors
● Commissioner for Oaths ● Intellectual Property Lawyers ● Corporate & Commercial Lawyers
______
7th September 2010
In the course of a business
The phrase “in the course of a business” A1 is used to:
a) place liability in respect of implied conditions in the supply and/sale of goods under the Sale of Goods and Supply of Goods Act1;
b) define a person dealing as consumer that in turn depends on the consumer not acting in the course of a business vis-à-vis the supplier who does so act in the course of a business 2 .
The width attributed to this phrase can therefore work simultaneously to benefit and prejudice the buyer. A wider meaning given to “in the course of a business” for implied conditions under sections 14(2) and 14(3) of the Sale of Goods Act improves helps consumers as there is a greater scope for these conditions of quality to be imposed on the supplier. By this token, the same interpretation would potentially affect whether the buyer acted in the course of a business, one of the elements of the issue of the buyer dealing as consumer under section 12(1) of the Unfair Contract Terms Act.
Different interpretations to “in the course of a business”
In effect, the English courts have given different interpretations to “in the course of a business” under sections 14(2) and 14(3) of the Sale of Goods Act and section 12(1) of the Unfair Contract Terms Act.
Under section 12(1) of the Unfair Contract Terms Act, to determine whether a buyer entered into the contract of sale (or contracts for transfer or hire of goods)3 in the course of a business, the test is whether the transaction entered into was an integral part of the business carried on by the buyer.4 If the buyer enters into the transaction not in the course of a business, he does not deal as consumer pursuant to the Unfair Contract Terms Act.4A An one-off adventure in the nature of trade carried through with a view to profit may be an integral part of the business and thus be carried in the course of the business5. Other transactions that may otherwise be only incidental in the carrying on of the business may become integral to the business due to degree of regularity in the transactions6.
Narrow meaning
The English courts have taken a narrow view of when a buyer is deemed to have entered the transaction in the course of a business7. For a freight-forwarding company that bought for a car for both the personal use of its executive as well as for company use and signed the agreement in its name, the company was held not to be dealing as consumer under the Unfair Contract Terms Act as the purchase was merely incidental to its business, and the necessary degree of regularity had not been established, and also the company had not held itself out as making the contract in the course of business.8
Even if a company had signed a form stating that they would be using the car for the purposes of their business, this did not make it a transaction entered into by the company in the course of its business.8A This meant that the implied contractual term purporting to exclude liability for fitness for purpose was not of effect.9 Under this test, it is the transaction and not the goods that must be integral to the business.10
Even where a car is used almost exclusively by the owner for the purpose of his business as a self-employed courier, the sale of the car with a false trade description to the car was held not to be a sale in the course of business as the owner business had no practice of buying and selling cars which also did not constitute stock-in-trade 11. Where vehicles were purchased with a view to selling them at a profit, they were held to have been entered into in the course of a business under the UK hire-purchase legislation, though at the time of purchase, the purchaser had not yet taken any formal steps to set himself up as a motor dealer 12.
Wide meaning
For whether seller supplied in the course of a business pursuant to section 14(2) of the Sale of Goods Act, the English courts have adopted a wide meaning of “in the course of business”13. So the sale of a vessel by a seller who carried on the business of a fisherman was held to have sold the vessel (used in the business) in the course of a business.14 (The seller had sold the vessel with a view to getting a replacement for his business.) This was so even though a strict application of the narrow view of “in the course of a business” would have yielded a different result15. This was justified by the need to extend wider protection to a consumer following the amendment of the Sale of Goods Act.16 The court noted that to have held that the sale of the very asset without which the seller could not have carried on his business (with the intention of purchasing a replacement for the purpose of continuing his business) was not a sale made in the course of a business, would have yielded a curious result and so declined to do so.17
The Singapore High Court, in interpreting s 14(2) appears to favour a narrow approach, citing a seller, “whose normal vocation being not the selling of the product or thing”, selling the product as not something done in the course of a business.18
______
A1. Other references to things done or to be done by a person in the course of a business include the Unfair Contract Terms Act s1(3), Sale of Goods Act s14(2) (satisfactory quality), s14(3) (fitness for purpose), s14(5) (person acting as agent) and the Supply of Goods Act ss4(2), 9(2) (satisfactory quality), 4(4), 9(4) (fitness for purpose), 4(8), 9(8) (person acting as agent). See further [60.142], [60.130], [60.132]. It may be observed that the Unfair Contract Terms Act s1(3) defines business liability as that arising for breach of obligations or duties arising from things done or to be done by a person in the course of a business (whether his own business or another’s). ‘Business’ is defined in s14 as including a profession and the activities of any Government department or local or public authority. Accordingly, ss2–7 (except for s6) do not apply to any dealings between two persons who both do not transact in the course of any business, for instance, aperson selling his personal furniture items in a private sale to another who buys for use in his residence. Generally, it may be said that the Unfair Contract Terms Act covers either transactions between a consumer and a non-consumer or between two non-consumers (i.e.a businessmen acting in the course of business). See however, s6(4) which extends the scope of s6 to include liability arising under any contract of sale of goods or hire- purchase agreement. Where an agent sells goods on behalf of a principal, it is the principal who is the seller under normal principles of agency. It would be whether the principal (and not the agent) is acting in the course of a business which determines whether s12 is satisfied, unless the principal sells the goods to the agent who then re- sells the same.
1. Sale of Goods Act (Cap 393, 1999 Ed) s 14(2), (3), (5) (contracts for the sale of goods) and Supply of Goods Act (Cap 394, 1999 Ed) s 4(2), (4), (8) (contracts for the transfer of goods); s 9 (2), (4), (8) (contracts for the hire of goods).
2. Sale of Goods Act (Cap 393, 1999 Ed) s 61(4A) (incorporates by reference to the section 12 of the Unfair Contract Terms Act (Cap 396, 1994 Ed) the definition of “dealing as consumer”)and Supply of Goods Act (Cap 394, 1999 Ed) s 18 (4) (incorporates by reference to the section 12 of the Unfair Contract Terms Act (Cap 396, 1994 Ed) the definition of “dealing as consumer”).
3. For contracts of transfer or hire of goods, similar provisions under the Supply of Goods Act (Cap 394 1999 Ed) would apply.
4. R &Ｂ Customs Brokers Co Ltd v United Dominions Trust Ltd [1988] 1 WLR 321 at pp 330E-331C. But note in Peter Symmons & Co v Cook (1981) 131 NLJ 758, it was held with respect to the Unfair Contract Terms Act 1977 (UK) s12 (the English equivalent to the Singapore Unfair Contract Terms Act s12), that ‘buying … must form at the very least an integral part of the buyer’s business or a necessary incidental thereto’ (per MrRH Rougier). See also Rasbora Ltd v JCL Marine Ltd [1977] 1 Lloyds’ Rep 645 (sale of power boat from boat builders to private buyer held to be a consumer sale under the Sale of Goods Act 1893 (UK) s55(7) which is equivalent to the Unfair Contract Terms Act s12). R & B Customs Brokers has been affirmed by the recent case of Feldarol Foundry Plc v Hermes Leasing (London) Ltd [2004] EWCA Civ 74 7. See also Rasbora Ltd v JCL Marine Ltd [1977] 1 Lloyd’s Rep 645 (Sale of Goods Act 1893 (UK) s55(7) which is equivalent to the Unfair Contract Terms Act s12).
4A. See section 12(1) of the Unfair Contract Terms Act (Cap 396 1994 Ed)
5. R &Ｂ Customs Brokers Co Ltd v United Dominions Trust Ltd, see note 4 above.
6. R &Ｂ Customs Brokers Co Ltd v United Dominions Trust Ltd, see note 4 above.
7. R Ｂ Customs Brokers Co Ltd v United Dominions Trust Ltd [1988] 1 WLR 321 approving and adopting the test in Davies v Sumner [1984] 1 WLR 1301, the latter case dealing with the UK Trade Descriptions Act 1968 s 1(1)(a) that provides that: “Any person who, in the course of a trade or business, - (a) applies a false trade description to any goods; or (b) supplies or offers to supply any goods to which a false trade description is applied; shall, subject to the provisions of this Act, be guilty of an offence”. Section 1 of the UK Trade Descriptions Act 1968 has a Singapore equivalent in the Consumer Protection (Trade Descriptions and Safety Requirements) Act (Cap53, 1985Ed) s4) dealing with an analogous point, iethe phrase ‘in the course of a trade or business’ (see also Havering London Borough Council v Stevenson [1970] 3 All ER 609, [1970] 1 WLR 1375, DC; Wycombe Marsh Garage Ltd v Fowler [1972] 3 All ER 248, [1972] 1 WLR 1156, DC).
8. R &Ｂ Customs Brokers Co Ltd v United Dominions Trust Ltd [1988] 1 WLR 321 at pp 326G- 327A, 328H-329A, 330E-331C, 333H, 336H. The stating in the finance application form of the company business details of the company and the company business , and the number of years of trading, and the number of employees, and the directors’ names and addresses was not enough to constitute a dealing in the course of a business (at p 328H-329A ).
8A. Feldarol Foundry Plc v Hermes Leasing (London) Ltd [2004] EWCA Civ 747. In this case, where a company in the aluminium foundry industry hire-purchased a car for its chairman/ managing director, this was held to be a transaction undertaken by the company not in the course of a business, and to that extent, the company dealt as a consumer, and the exclusion clause was invalid under the Unfair Contract Terms Act s 6(2). The Court of Appeal rejected the attempted distinction that the company in R & B Customs Brokers was a one-man private company and that the company in this case was a public company whose books must have recorded the car as part of its assets. See fn. 4 above.
9. See section 6(2) of Unfair Contract Terms Act (Cap 396, 1994 Ed).
10. Stevenson v Rogers [1999] QB 1028 at p 1042C
11. Davies v Sumner [1984] 1 WLR 130, a case approved by R &Ｂ Customs Brokers Co Ltd v United Dominions Trust Ltd [1988] 1 WLR 321. Curiously, though, in R &Ｂ Customs Brokers Co Ltd v United Dominions Trust Ltd, the courts gave instances of transactions that would constitute dealings in the course of its business: a) where a company that runs a grocer’s shop buys a new delivery van; b) whether a merchant bank buys a car as a company car as a perquisite for a senior executive employee; and c) where a farming company buys a landrover for the person and company use of a farm manager (at p 329B-C). Under the Davies v Sumner standard, these would not be dealings in the course of a business.
12. G E Capital Bank Ltd v Rushton [2006] 1 WLR 899 (dealing with the Hire-Purchase Act 1964 (UK) and approving Davies v Sumner, and R &Ｂ Customs Brokers Co Ltd v United Dominions Trust Ltd.
13. Stevenson v Rogers [1999] QB 1028 at pp 1041-1042
14. Stevenson v Rogers [1999] QB 1028
15. In Stevenson v Rogers [1999] QB 1028, Potter LJ remarked that “had the [trial] judge .been correct to apply the reasoning in Davies v Sumner [1984] 1 WLR 1301 to the sale of the Jelle, then I consider that he was entitled to come to the conclusion which he did” (at p 1042 A-B).
16. Section 14 of the Sale of Goods Act (UK) was amended by Supply of Goods (Implied Terms) Act 1973 (UK): see Stevenson v Rogers [1999] QB 1028 at pp 1041F-G per Potter LJ.
17. Stevenson v Rogers [1999] QB 1028 at 1042B per Potter LJ. The divergence in the varying interpretation of “in the course of a business” as applied to the buyer and seller becomes more obvious in the following scenario. A seller sells his boat (used in his business as a fisherman) to a aluminium foundry company that buys it for the use of its chairman. Here, on the seller’ side, he is selling the course of his business (for SOGA section14(2)), although this is a one-off sale. On the buyer’s side, he is not buying in the course of a business as this is a one-off purchase (for whether there is a consumer transaction under UCTA s 12(1)(a)). Note Potter LJ in Stevenson v Rogers [1999] QB 1028 when he stated at p 1041 F: “[a]s to the proper construction of section 14(2), given the clear view which I have formed, I do not consider it right to displace the construction simply to achieve harmony with a decision upon the meaning of section 12 of the Unfair Contract Terms Act.”