Sale of Goods and Consumer Protection

Sale of Goods and Consumer Protection

Legislation overview

Sale of Goods Act 1923 (NSW)

Governs contracts for sale of goods

Mainly relevant to commercial contracts

Consumer provisions included (ss 62, 63,64)

Trade Practices Act 1974 (Cth)

Our focus is on consumer protection

Fair Trading Act 1987 (NSW)

•Parallels consumer protection provisions of TPA

Definitions

Goods (s5)

•All chattels personal other than things in action and money.

•Includes emblements and things attached/forming part of the land which - agreed to be severed before sale or under the contract of sale.

Examples:

•Does NOT include software: St AlbansCity and District Council v International Computers Ltd [1996]

•Does NOTinclude pay TV signals Telstra Corporation Ltd v Hurstville City Council (2000)

•DOES include combined sale of computer system + software Toby Constructions Products Pty Ltd v Computa Bar Sales Pty Ltd [1983]

Contract of Sale (s6)

Contract whereby the seller transfers or agrees to transfer the property (ownership) in goods to the buyer for a money consideration (price).

• Does NOT include sale transactions intended to operate by way of mortgage, pledge etc.
• Hire purchase agreements (hire of goods where hirer had option to purchase)  sale of goods by instalments

Hire Purchase agreements

Lee v Butler [1893] 2 QB 318 (furniture—‘as soon as the said hirer shall have well and truly made all payments of rents the said furniture…shall thenceforth be and become the sole and absolute property of the said hirer.’)

Helby v Matthews [1895] AC 471(piano—‘that the hirer may terminate the hiring by delivering up to the owner the said instrument.’)

See Consumer Credit Code

10. (1) For the purposes of this Code, a contract for the hire of goods under which the hirer has a right or obligation to purchase the goods, is to be regarded as a sale of the goods by instalments if the charge that is or may be made for hiring the goods, together with any other amount payable under the contract (including an amount to purchase the goods or to exercise an option to do so) exceeds the cash price of the goods.

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(3) Accordingly, if because of section 6 (1) the contract is a credit contract, this Code (including Part 6) applies as if the contract had always been a sale of goods by instalments, and for that purpose

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(d) the property of the supplier in the goods passes under the contract to the person to whom the goods are hired on delivery of the goods or the making of the contract, whichever occurs last

[Text: Once there is a deemed contract for the sale of goods, the SGA applies.]

Importance of distinction between hire purchase and sale of goods

28Seller or buyer in possession after sale

•Where a person having sold goods continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for that person of the goods or documents of title under any sale pledge or other disposition thereof to any person receiving the same in good faith and without notice of the previous sale shall have the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same.

•Where a person having bought or agreed to buy goods obtains with the consent of the seller possession of the goods or the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for that person of the goods or documents of title under any sale pledge or other disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods shall have the same effect as if the person making the delivery or transfer were a mercantile agent intrusted by the owner with the goods or documents of title.of

Ascertainment of price (s13, 14)

•May be fixed by the contract

•OR left to be fixed in agreed manner

•OR determined by dealing btw parties.

•If fail above  buyer must pay reasonable price (question of fact).

•If agreed for 3rd party to make valuation  3rd party cannot/doesn’t  agreement is avoided.

Wenning v Robinson (1964) 64 SR (NSW) 157 (‘plus stock at valuation’)

…in my opinion, the intention which is to be ascertained from the agreement is that the stock would pass from the seller to the buyer at its “value”, that is to say, at its reasonable value, or (which is the same thing), at its reasonable price. Of course, it was possible that disputes might arise as to the proper basis of the valuation but, nevertheless, the parties are to be taken to have agreed that what would be paid was what was reasonable in the circumstances…Per Walsh J

Correspondence withDescription (s18)

•Implied condition that goods shall correspond with description.

•If also sold by sample must correspond with BOTH description and sample.

•If fail  buyer can reject goods or sue for damages.

Type of goods

•Future/unascertained goods  always sold by description.

•Specific goods  may be sold by description depending on circumstances.

Example: Elder Smith Goldsbrough Mort Ltd v McBride [1976] 2 NSWLR 631

•FACT: Bull purchased as ‘breeding bull’. Sterile Bull is sterile. Held: purchaser could recover.

•LAW: Specific good  buyer had chance to inspect  usually not sale by description.

•BUT: can still be by description  even where specific goods and buyer has inspected  IF (!!) deviation of goods from description is NOT apparent.

“By description”:

•Buyer has not seen goods – relying on description alone.

•BUT can still be by description (even where scene)  if buyer bought based on description.

Grant v Australian Knitting Mills Ltd [1936] AC 85

•Sale by description where “though it is specific, so long as it is sold not merely as the specific thing but as a thing corresponding to a description”

Beale v Taylor [1967] 3 All ER 253

•Ad for 1961 Triumph Herald Convertible. Seller didn’t know made of two different Herald models welded together. Buyer inspected and drove.

•ISSUE: sale by description OR sale of particular thing seen by buyer and bought purely based on his assessment.

•HELD: although buyer saw  relied on description as showing the car he was buying.

Ashington Piggeries v Christopher Hill [1971] 1 All ER 847

•FACT: Mink food prepared to formula of P (mink farmer) by D (food compounder). Incl herring meal as ingredient – reacted with preservative. Toxic to mink. P sued for damages.

•HELD: description of “herring meal” was NOT misdescription. Only bad QUALITY of preservative.

•LAW: distinction between description and quality.

•Statements only form part of description if they are to IDENTIFY the goods (not about quality).

Fitness for purpose

•19 (1) Where the buyer expressly or by implication makes known to the seller the particular purpose for which the goods are required so as to show that the buyer relies on the seller’s skill or judgment, and the goods are of a description which it is in the course of the seller’s business to supply (whether the seller be the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose

David Jones v Willis (1934) 52 CLR 110

•FACT:W needed walking shoes for bunion. Few wears, heel broke off and she broke leg.

•HELD: condition can be implied where:

a)buyer makes known to seller the particular purpose for which he requires the goods;

b)buyer indicates his reliance on seller’s kill or judgment (not to be presumed).

•Reliance must be substantial/effective inducement leads buyer to agree to purchase

Cammell Laird & Co v Manganese Bronze and Brass Co Ltd [1934] All ER Rep 1

•Issue: whether the particular purpose for which the goods were required was not merely made known…but was made known so as to show that the appellants as buyers relied on the sellers' skill and judgment.

•Must be affirmatively shown reliance must be brought home to the mind of the seller in such a way that the seller can be taken to have contracted on that footing

Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31

Lord Reid qualifies Wright’s dictum in Cammell Laird

I do not think, however, that he meant more than that in the whole circumstance a reasonable man in the shoes of the seller would have realised that he was being relied on…

[quoting Wright from another case] It is clear that the reliance must be brought home to the mind of the seller, expressly or by implication.

Expo Aluminium (NSW) Pty Ltd v WR Pateman Pty Ltd (1990) ASC ¶55-978

House exposed to weather. Requested Appellant manufacturer to supply replacement aluminumwindows from Respondent manufacturer. A Manuf said statement: ‘…nothing between this job and the South Pole’. Windows unsuitable.

• Trial: owner got damages from A Manuf. A Manuf’s action against R Manuf failed.
• COA: A Manuf won.
• HELD: buyer must establish PURPOSE and RELIANCE from statement (express and implied).

“South Pole”  meant “perils of wind and rain”. Though not precise  it is enough if (by express/implication) a “particular purpose is made known to seller.

Partial Reliance

• Sufficient that buyer relies PARTIALLY on skill/judgment of seller  as long as matter complained off is ABOUT what the buyer relied upon.

Ashington Piggeries v Christopher Hill [1971] 1 All ER 847:

FACT: P (food compounder) compound mink food for D (mink farmer), formula provided by D. Included herring meal (contaminated by preservative). Highly toxic to mink. P sued for mink food and D sued for damages.

• HELD: P liable for breach of “fitness for purpose”. D had relied on own judgment (formula) BUT had also relied on P to use GOOD quality ingredients.

Fitness for purpose: trade name exception

s19(1): contract for specific article under its patent or other trade name  NO implied condition as to fitness for particular purpose.

BUT good described in contract by Trade Name  does not necessarily mean “sale under a trade name”

• ONLY applies if buyer orders good under Trade Name  in way to show that buyer does NOT rely on seller’s skill/judgment.

Baldry v Marshall Ltd [1924] All ER Rep 155

FACT: Buyer asked for car suitable for touring. Seller rec particular make. Ended up being unsuitable.

• HELD: Buyer had ordered by NAME, BUT buyer had relied on seller’s skill/judgment  not sale under trade name.

Buyer must purchase without reliance on seller’s skill or judgment.

Merchantability

19 (2) Where goods are bought by description from a seller who deals in goods of that description (manufacturer or not), there is an implied condition that the goods shall be of merchantable quality provided that if the buyer has examined the goods there shall be no implied condition as regards defects which such examination ought to have revealed.

Explanation:

Goods must be purchased by description

Seller must deal in goods of that description

If goods inspected no condition in relation to defects which inspection ought to have revealed (latent defects are those which cannot be detected on examination)

Examination

Thornett & Fehr v Beers [1919] 1 KB 486

• FACT: A buy glue from B. Went to warehouse and offered for inspection. A only looked at outside.
• HELD: A “examined the goods”  no implied condition of merchantability.

Meaning of “merchantable quality”:

• Commercially saleable under description they were sold  fit for purpose for which goods of that description

Australian Knitting Mills v Grant (1933) 50 CLR 387

TEST: MQ is where buyer fully acquainted with facts (knowing hidden defects exist and not limited by apparent condition)  would buy without decrease in price.

Cammell Laird & Co v Manganese Bronze and Brass Co Ltd [1934] All ER Rep 1

Shipbuilders order two propellers exactly for their ships. One had vibration problems. Replaced twice  4 props made. Shipbuilders sue for merchantable quality. Makers sue for payment of prop.

HELD: NOT “merchantable quality if” form in which they were tendered were of no use for any purpose for which such goods would normally be used and hence were not saleable under that description…the question is whether the defective propeller could be used…on any vessel

• TEST: fit for any purpose for which goods of that description are normally used.

Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31

Breeding pheasants killed by being fed Aflatoxin tainted Brazil nuts. Feed suitable for cattle at a mix of no more than 5%.

LAW: merchantable commercially saleable…

TEST: if description so general  several purposes  merchantable if fit for any one + of purposes, even if unfit for the particular purpose that the buyer wanted.

LAW: if buyer wants more  get seller to sell on basis that goods are fit for some stated purpose.

If a buyer wants more than this he must get his seller to sell on the basis that the goods are reasonably fit for some stated purpose (per Lord Morris, quoting from Lord Wright in an earlier case)

Consumer sales

s62 Definition: a sale of goods (other than auction) by a seller in the course of a business where the goods:

oare of a kind commonly bought for private use or consumption, and

oare sold to a person who does not buy or hold himself or herself out as buying them in the course of a business.

Merchantable Quality

s 64 (3): NOT of MQ if they are not as fit for the purpose or purposes for which goods of that kind are commonly bought as is reasonable to expect having regard to their price, to any description applied to them by the seller and to all other circumstances.

Action against manufacturers

s 64 (5): where goods, at time of delivery to buyer, not (by defect or other reason) of MQ  Court can add manufacturer as party to proceedings.

And if decide defect should be remedied by manufacturer  may make against the manufacturer…

Title of the Seller

Title (the right to sell the goods) (s17)

Implied condition: seller has a right (title) to sell the goods (sale); or will have right to sell the goods at the time when property is to pass (agreement to sell).

Rowland v Divall [1923] 2 KB 500

Car dealer purchaser car from D, who didn’t know stolen. Dealer used car and then sold it. Car taken by police and returned.

HELD: no title  total failure of consideration  refund from D all money (despite buyer had temp use/enjoyment of it)

Nemo dat quod non habet (no person gives what they don’t possess)

• Buyer cannot get better title than that of seller  goods sold by person (not owner)  no title to goods.

Exceptions to nemo dat

•s26(1) Sale by person not the owner – owner estopped from denying authority of seller.

•s27 Sale under voidable title – seller has voidable title

•s28: seller or buyer in possession after sale

S 26 Sale by person not the owner

Owner of the goods is by their conduct precluded from denying the seller’s authority to sell

• Eg. permitting goods to be possessed by person in circumstances, which make it seem like person has authority to sell goods.

Eastern Distributors v Goldring [1957] 2 All ER 525

M (owner of van) gives ownership docs to C. C sells to ED. M (still in possession) sells to G. ED demands van from G.

HELD: M gave C documents to represent to ED that C was owner  precluded from denying C’s authority to sell.

S 27 Voidable title

Seller has voidable title (eg. gained thru fraud)  not avoided at time of sale buyer gets GOOD title IF in good faith and without notice of seller’s defect.

Title can be voidable by: misrep, fraud, duress.

• Title can be avoided by: retaking possession of goods/title, notice of intention to rescind

Car and Universal Finance Co Ltd v Caldwell [1964] 1 All ER 290

Rogue gets car with bad cheque. Seller contacted police etc to track down car (avoided). Sells to another dealer. Dealer had enough info to infer car had been fraudulently gotten.

HELD: sufficiently avoided (rescinded) in circumstance where rogue has absconded and made notice of rescission impossible. Thus: property revested in Seller, never transferred to any buyers.

Newtons of Wembley v Williams [1964] 2 All ER 135

Rogue sold car to innocent P BEFORE seller notified authorities.

• HELD: Innocent P has good title.

S 28(1) Seller in possession

Seller, having sold goods, keeps possession (or docs of title)  transfers to 2nd Purchaser, who receives in good faith and without notice of previous sale  be as if transaction authorised by 1st P.

THUS: 2nd P will have good title to goods against 1st P.

Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd [1965] 2 All ER 105

M (car dealer) in floor plan agreement with finance company. Cars sold to FC but stays with M. M can then sell cars, but has to pay FC back. M has financial difficulties. FC withdraws agreement. But on that day, M sells to PMA all stock. FC sues to get back cars.

HELD: PMA had good title (protected by s28) since he bought in good faith and without notice, from M who had kept possession after selling.

S 28(2) Buyer in possession

Buyer, has possession of goods (or docs of title), with consent of seller  transfers to 2nd Purchaser, who receives in good faith and without notice of previous sale  be as if buyer was mercantile agent entrusted by orig. owner.

• THUS: 2nd P will have good title to goods against orig. seller.

Robinson Motors Pty Ltd v Fowler [1982] Qd R 374

P buys car with bad cheque from dealer. P takes poss of car and sells to F. Dealer sues F.

HELD: F (protected by s28).

Notice: must be actual – not constructive. Failure to make inquiries  relevant to “good faith”.

Ford Credit Australia Ltd v Auto Trade Auction Pty Ltd [1982] VR 795

Finance company lease truck to Lessee. L (in breach of lease) used dealer (who knew FC was owner) to sell to R, who sold it to the Def.

• HELD: s82 only protects where original seller (dealer) was lawfully entitled to sell. Original title did not pass on title  Def did not have good title.

Passing of Property in Goods

Determining TIME when ownership passes  important as owner bears risk of loss (theft, fire)

Rules (s21, 22)

(1)Specific/ascertained goods  when parties intend it to pass (terms of contract, conduct, circumstances)

(2)Unascertained/future goods  when goods become ascertained.