Overview

Overview

The Sale of Goods legislation codified and supplemented the general rules of contract law in relation to the sale of goods and the supply of services.  The original 1893 legislation focused primarily on the mechanics of sale, such as payment of the price, delivery, the passing of property, delivery and rights to recover price.  Modern amendments have provided rights for the protection of consumers.

The sale of goods and supply of services legislation distinguishes between commercial sales (business to business) and sales to consumers by businesses. The legislation provides stronger protection for consumer sales.  Certain implied conditions and terms cannot be varied in the case of consumer sales.  In contrast, in the case of sales to businesses they may be upheld unconditionally or in some cases, to the extent, they are fair and reasonable.


Statutorily Implied Terms

The Sale of Goods Act implies many key terms and conditions.  There are conditions in relation to ownership/title, the quality of the goods, fitness for purpose and correspondence with description.  There are also implied terms as to the procedure for and the respective obligations of the parties in relation to delivery, acceptance, and rejection of the goods and the payment of the purchase price.

The statutorily implied terms make the purchaser’s task in defining and asserting the terms of the contract significantly easier.  The onus is on the seller to show that the implied terms have been excluded.  In a business to business contract, the key protective terms may be excluded, only if and in so far as the exclusions are fair and reasonable.  In a consumer contract, the key protective implied terms may not be excluded at all.


Conditions and Warranties

Under the Sale of Goods Act, the terms of the contract are either conditions or warranties.  A condition is a term of the contract breach of which entitles the innocent party to terminate the contract.  That party may not necessarily terminate the contract.  He may affirm it and claim compensation only.  Alternatively, he may simply waive the breach.

A warranty is a term breach of which entitles the party affected to compensation only.  He is not entitled to terminate the contract.  Generally, breach of warranty relates to a subsidiary collateral or less important matter than a condition.

The terminology may be confusing in that commonly, all the terms of the contract are labelled as conditions.  However, it does not follow that each is a condition and sufficiently central so that its breach entitles the innocent party to terminate the contract.


Designation of Conditions

The parties may generally designate terms of the contract to be either conditions or warranties in the above sense.  This usually follows a common sense assessment of the terms that are critical.  Generally, conditions are more important than warranties.

Parties are free to designate any terms as conditions or warranties as they see fit. in accordance with freedom of contract.  Therefore, where the parties by the contract have specifically designated certain terms as either conditions or warranties, the law will generally uphold the designation.

In principle, terms should be designated as conditions or warranties from the outset.  It is a central principle of contract law that the terms of the contract are fixed when made.  However, the court may treat some terms as intermediary terms or so-called innominate terms.  In this case, whether the term is a condition or warranty (in the above sense) will depend on the seriousness of the breach.  This is a more flexible approach and it will enable the court to allow a termination (only) where the breach is in fact serious.


Delivery of the Goods

The seller of goods is obliged to deliver the goods and the buyer is obliged to accept them.  The contract may state or imply the method of delivery.  The contract may state or imply to where the goods are to be delivered.

If there is nothing expressed or implied in the circumstances, the Sale of Goods Act provides that the place of delivery is to be the seller’s place of business, or if he has no such place, his residence.  There is no obligation on the seller to transport the goods unless he so agrees.  The goods are to be made available in a fit state and condition.

The “delivery” of goods is the means by which title passes. In this context “delivery” is a legal concept, which need not, but often does, coincide with physical delivery. Legal delivery, which transfers the title or ownership of movable goods, is presumed to occur when there is physical delivery which is accompanied by an intention to transfer ownership.


Documents of Title

In some limited cases, there may be title documents to goods. The transfer of the title documents may operate to transfer ownership.  Certain documents are by custom in particular industries, proof of possession and control (and presumptively) ownership of goods.  This includes warehouse keeper certificates.

Where particular documents are by custom proof of possession and control of the goods, the transfer of the title documents may transfer title.  Title documents may be transferred by physical delivery or by endorsement with an intention to transfer.

In the context of marine carriage, a bill of lading takes effect as a title document to the goods. The title is transferred by endorsement and delivery.  Generally, the shipper/carrier may and must only deliver the goods to the person who produces the bill of lading.


Delivery Issues

The Sale of Goods Act provides that where goods have perished before the contract is made without the seller’s knowledge, the contract is void.  If the seller promises that the goods exist, he is liable for breach of contract if they do not exist. In effect, he assumes the risk that the goods exist.

There is a presumption in the Sale of Goods Act that the delivery of the goods to a carrier for the purpose of carriage,  is delivery to the buyer.  This does not apply where the carrier is the seller’s agent.

A delivery of goods may be implied where the means of control of the goods are delivered. Where goods are in possession of a third party,  they may be regarded as delivered when the third party acknowledges to the buyer or his agent that he holds them on the buyer’s behalf.

It is possible for the date of delivery to be a strict or fundamental term (condition) of the contract.  This means that the failure to comply entitles the other party to terminate the contract and claim damages.

The presumption is that if the seller does not provide the goods in a deliverable state at the relevant date, the buyer does not have to accept them.  The buyer can cancel the contract, even if he does not suffer any loss.


Date; Buyer’s Options

The time of delivery is not generally a condition.  Delivery must be taken within a reasonable time. If this is not done, the seller is entitled to terminate the contract.  In certain circumstances, time may be critical and therefore be “of the essence”, such as where the goods are perishable.

If no date or time for delivery is expressed, the Sale of Goods Act requires that delivery take place within a reasonable time.  What is reasonable,  depends on the circumstances.  If delivery has not been made within a reasonable time, the buyer may cancel the contract.

A buyer may accept delivery late, even though he could have cancelled the contract.  Once goods are accepted, the contract cannot be cancelled.  The buyer may have a right to compensation for late delivery or other breach

The buyer’s waiver of his right to cancel the contract will occur when the goods are clearly accepted.  It may be a question of interpretation in the circumstances, as to when there has been acceptance.


Quantity; Buyer’s Options

The Sale of Goods Act provides that where the quantity of goods is specified, it is a condition that the correct quantity of goods be delivered.  If less are delivered, the legislation presumes that the buyer is entitled to reject them.  The buyer is not obliged to accept delivery in instalments unless agreed.

The buyer may accept a smaller quantity when not enough is delivered. He may accept the correct quantity when too much is delivered.  The contract rate must be paid.

A minimal deviation does not suffice to allow rejection. Where the non-compliance is minimal the buyer is not entitled to reject the goods. The margin of error must be relatively small. In this case, he may claim compensation only.

Where the delivery is by instalments, a shortfall in one instalment will entitle the buyer to terminate the entire contract, only where it is very serious.  Similar principles are likely to apply in relation to the failure to make individual payments.


Buyer’s Obligations

The buyer is obliged to accept delivery, where the goods are delivered in accordance with the contract.  See above in relation to the presumption as to the due place of delivery.

The buyer is obliged to pay for goods in accordance with the terms of the contract.  This covers the specified price, the time of payment, the manner of payment.  If the goods are not delivered and if the above conditions such as quantity and time are breached, the buyer may be entitled to terminate the contract.

The buyer must be ready and willing to pay the price.  If the seller does not deliver the goods and the buyer can show that he is ready, willing, and able to purchase them, then the buyer may terminate the contract.


Payment

The manner of payment will depend on the express or implied terms of the contract, the circumstances, trade or custom.  In the case of payment by cheque, the payment is conditional on the cheque being honoured, There is no payment if the cheque is not honoured.

The seller can, therefore, sue for the price if the cheque is dishonoured.  Similarly, in international trade payment by letter of credit, payment is conditional until it is honoured on presentation of the documents to the relevant bank.

The presumption (in the absence of an agreement otherwise) is that payment and delivery must happen simultaneously.  It is presumed that payment is to take place on delivery.

The presumption is that time is not a strict condition in relation to payment.  The seller can claim compensation for non-payment. He is not entitled to terminate immediately unless the contract so provides. Compensation includes compensation for late payment.  There is a statutory right to interest for late payment of commercial debts.  The seller may also be entitled to compensation for other losses, costs and interest.

If the purchaser delays inordinately in paying, the seller may be entitled to terminate the contract and resell the goods.  Generally, notice should be given of the intention to do so.  The Sale of Goods Act allows the seller who has given the buyer a reasonable time to pay and who fails to do so, to resell the goods and recover compensation for any loss arising.


Property in the Goods I

The property in the goods refers to rights of ownership. Ownership generally coincides with the right to sell.  A seller who does not have title to goods is not generally entitled to sell them. In some circumstances, a person may have a right to sell without ownership rights. The sale of goods by a non-owner, or by a person without a right to sell, would be in breach of the implied condition as to title, under the Sale of Goods Act.

If a person does not have ownership or title to the goods he cannot sell them.  Title in this context means absolute ownership. Legal ownership of goods is generally absolute. It is not possible to create multiple legal interests in goods. It is possible to have different rights over goods, such as where others have security interests or special rights, (e.g. where goods are pledged or held by a bailee.

The point of time at which ownership or title passes is critical.  At that point in time, the buyer becomes the owner of the goods. If for example, the seller became insolvent he could claim them, provided that he pays the price. If title or ownership of the goods has not passed, then his rights are personal (a right of compensation against the seller) even if he has paid for them.


Property in Goods II

Until title or property passes to the buyer, the seller can sell the goods to another party.  A person may have title to goods, even though he has not paid for them yet.   The time of delivery, passing of title, passing of risk, and payment can happen at different points in time.

There is a presumption that the transfer of possession of goods passes the property (title) in the goods.  However, this is not the case when another party may be able to show he has a better title.

The issue of property is important. If either the buyer or the seller becomes bankrupt or go into liquidation, before or after title passes, then the goods can be reclaimed by the owner as the case may be.  If for example, a buyer has paid for goods but the ownership has not passed, then a liquidator or bankruptcy trustee / official assignee can reclaim the goods.

The buyer has a right of compensation only against the insolvent, which may be of little value if the seller is insolvent.  Similarly, if title or ownership passes to a buyer who becomes bankrupt, the seller may make a claim for the price in the insolvency only.


Security and Risk

An unpaid vendor’s lien may arise in some cases, which gives the seller a right over the goods until payment.

A retention of title clause may be inserted in the sale contracts, in order to ensure that ownership does not pass until payment is made. There may be an express or implied agreement whereby ownership is reserved or does not pass to the buyer on delivery.  Under retention of title clauses, goods are physically delivered, but title or ownership does not pass until payment.

The passing of property is a separate issue to that of  risk.  Risk refers to who bears the loss, in the event of damage or destruction.  In effect, it means the party who must insure.  Generally, risk passes with the property (title), but this need not necessarily be the case.


Exemption and Limitation Clauses

Exemption clauses are terms and conditions of the contract which exclude, restrict or limit one party’s liability and responsibility.  Typically, a supplier will seek to limit, reduce and exclude its liabilities to the extent possible.

The default position at law is that parties to a business to business contract are entitled to include apply any terms and conditions in the contract as they see fit including restrictions on and the virtual elimination of liability for breach.

An exclusion clause may be incorporated by being in terms and conditions which are signed or which are referred to a signed or otherwise accepted document.  Generally, if a party signs a document, he is bound by its terms irrespective of whether he has read them, or had the opportunity to read them.

A term may be incorporated in the contract by previous dealings.  If the parties have previously dealt on the basis of written terms and conditions, they may be incorporated into future contracts unless there is something to point to the contrary.

Notice of the terms may be given in any number of ways.  For example, a sign on a wall disclaiming liability and clearly seen before a contract is entered may be incorporated in the relevant contract.


Limits to Exclusion Clauses I

The common law position regards certainty as more important than fairness.  If a contract is sufficiently certain, then it will be enforced notwithstanding that the weaker party had no real opportunity to negotiate its terms.

However, even apart from consumer protection legislation, the courts will strain to interpret the contract against the interests of the typically stronger party, who asserts the exemption clause.

Where parties attempt to wholly exclude their liability at common law, the courts may refuse to apply an exemption clause which purports to excuse a fundamental breach of contract on the basis that the contract would be otherwise illusory.


Limits to Exclusion Clauses II

The Sale of Goods Act limits the ability of parties to exclude liability for the key implied protective terms in contracts for the sale of goods or supply of services. The implied obligations in respect of title cannot be limited or removed at all.

The terms on merchantability, quality, and compliance may not be excluded in a consumer purchase.  In non-consumer cases, they may be excluded only if it is fair and reasonable to do so.  The implied terms may be excluded in most international sales.

It is an offence to purport to restrict or limit the implied statutory rights in cases where it is not permitted in the contract.  A purported exclusion may occur in an advertisement, statement, publication label etc.

The implied terms may be excluded in the case of contracts for the supply of services.  Where the person provided with the service deals as a consumer, the exclusion is valid only if it is fair and reasonable.


Consumer

A person deals as a consumer if he does not make the contract in the course of business and the other party does make the contract in the course of business. The goods or services must be a type ordinarily supplied for private consumption and use.  The person is presumed to deal as a consumer until the contrary is shown.

The Irish courts have taken a broad view to the concept of what constitutes “in the course of business”.  If goods are purchased by a business but not for the purpose of that actual business, the purchase is still in the course of business.  Therefore, business purchasing equipment for the purpose of his business does not deal as a consumer.

In business to business contracts, exclusions and limitations of liability are permissible on where and in so far as they are fair and reasonable.  The factors which courts will consider exclusions to be fair and reasonable are set out in the Sale of Goods Act. They include:

  • the bargaining strength of the parties including alternative means by which their requirements can be met.
  • whether the customer received an inducement or agreed to the term or in accepting it had an opportunity of entering into a similar contract with other persons without having to accept a similar term.
  • whether the customer knew or ought to have known of the existence or the extent of the term.
  • where the terms exclude or restrict liability if some condition is not complied with whether it was reasonable at the time of the contract to expect that compliance with the condition would be practicable.
  • whether the goods are manufactured, processed or deducted to the special order of the consumer.

The European Union Unfair Terms in Consumer Contract Regulations render some types of clauses, including many exemption clauses unfair and invalid.


References and Sources

Irish Texts

Brian Doolan, A Casebook on Irish Business Law (1989)

Henry Ellis, Modern Irish Commercial and Consumer Law (2004)

Michael Forde, Commercial Law, 3rd Edition (2005)

Linehan, Irish Business and Commercial Law (1995)

McCormack, Reservation of Title 1990 (1994)

Patrick O’Reilly (ed.), Commercial and Consumer Law  (Statutes) (2000)

Sean Quinn (ed.), Statutes Revised on Commercial Law, 1695-1913 (1994)

Fidelma White, Commercial Law (2003) (2nd Ed 2012)

Fidelma White, Commercial and Economic Law In Ireland (2011)

Vincent Grogan, Thelma King and Edward J. Donelan, Sale of Goods and Supply of Services: A Guide to the Legislation (Law Society of Ireland, 1983)

Paul Anthony McDermott, Contract Law (Butterworths, Dublin, 2001)

2011 Report of the Sales Law Review Group,

UK texts

Atiyah and Adam’s Sale of Goods 13th Ed (2016)

Bridge, Benjamin’s Sale of Goods 9th Ed (2015);

Bridge, The Sale of Goods 3rd Ed (2014)

Blackstones’ Statutes Commercial and Consumer Law 2017

Goode on Commercial Law 5th Ed 2017

Legislation

Sale of Goods Act 1893

Sale of Goods and Supply of Services Act 1980

Electronic Commerce Act 2000

Criminal Justice (Theft and Fraud Offences) Act 2001 (50/2001)

International Carriage of Goods by Road Act 1990 (13/1990)

European Union (Consumer Information, Cancellation and Other Rights) Regulations 2013 (S.I. No. 484 of 2013)

European Communities (Certain Aspects of the Sale of Consumer Goods and Associated Guarantees) Regulations 2003 (S.I. No. 11 of 2003)