Wholesale Liquidators

The Law behind Wholesale Liquidators and the Sale of Goods Act

4.1 The Sale of Goods Act
4.1.1 The Act
The original Sale of Goods Act 1893 was an attempt to codify much of the common law on sale contracts. The Act, therefore, was shaped by the fact that the case law on sales was mainly concerned with sale for the purpose of trading (for example, a manufacturer of goods selling to a retailer of goods) rather than for consumption (for example, a sale by a retailer to a consumer). By the late twentieth century there was recognition that the principles derived from such contracts might not serve the needs of consumers.

In providing greater protection for the consumer, the Sale of Goods Act 1979 was part of a shift from the general principle of caveat emptor, according to which it was for the buyer to ensure goods did not suffer from any defects (see s.14(1), discussed in 5.5 below), to a position where the seller is obliged to ensure that goods do not suffer from certain types of defects, or that the buyer is made aware of such defects before the sale. This shift affects all buyers, including business people.

The change of emphasis from sale for trade to sale for consumption is also illustrated by the change in the main implied term as to quality. In the 1893 Act goods were required to be of ‘merchantable quality’, which assessed quality according to their value in trade. This has been replaced by a requirement that goods be of satisfactory quality (s.14(2)), which emphasises issues of consumption.
This shift in the Act has been reinforced by the Unfair Contract Terms Act 1977 and by the Sale and Supply of Goods to Consumers Regulations 2002, which restrict the ability of sellers to contract out of their obligations and which give greater protection to consumers (as opposed to commercial buyers, who are, however, not ignored by the 1977 Act).

Yet it would be wrong to characterise the recent history of sales law as simply concerned with the problems of buyers. For instance, there has been some relaxation of the rules in the context of sales between business people: for example, s.15A (introduced into the SGA in 1994) has made it more difficult for the non-consumer buyer to reject defective goods (see Chapter 6). In spite of the development of distinctions between the law applying to commercial (business-to-business sales) and the law applying to consumer sales (business-to-privatebuyer sales), the rules remain mixed together in the same legislation: the SGA and related statutes, such as the Unfair Contract Terms Act 1977. This has led to confusion and to calls for separate codes for the different types of sale.

4.1.2 Interpreting the Sale of Goods Act 1979
Essential reading
Sealy and Hooley, Part III: ‘Domestic sales law’, Chapter 7: ‘Introduction and definitions’, pp.245–47.

The Sale of Goods Act 1893 was meant to codify the common law on contracts for the sale of goods, although in truth it is only a partial code because key areas of contract law are not fully covered or are entirely omitted (for example, formation and misrepresentation). The general principles of contract law are, therefore, still relevant (see s.62(2)).

The approach to interpreting codifying statutes was laid down by Lord Herschell in a case on the Bills of Exchange Act 1882:

I think the proper course is in the first instance to examine the language of the statute and to ask what is its rational meaning, uninfluenced by any considerations derived from the previous state of the law, and not to start with inquiring how the law previously stood, and then, assuming that it was probably intended to leave it unaltered, to see if the words of the enactment will bear an interpretation in conformity with this view. (Bank of England v Vagliano Brothers [1891] AC 107). Atkin LJ confirmed that this was the correct approach to the SGA: ‘Inasmuch as we are now bound by the plain language of the Code I do not think that decisions in cases before 1893 are of much value’ (Re Wait [1927] 1 Ch 606; Sealy and Hooley, p.246). Yet, what this means ¢ page 58 University of London External Programme
is not always clear. Indeed, Atkin LJ followed the statement quoted above by referring to two pre-1893 cases. In Young & Marten Ltd v McManus Childs Ltd [1969] 1 AC 454, Lord Upjohn explained, ‘Your Lordships were properly referred to authorities in the nineteenth century, for section 14(2) only put the common law as it had been established into a statutory code.’ (Also Carlos Federspiel & Co SA v Charles Twigg & Co Ltd [1957] 1 Lloyd’s Rep 240; Sealy and Hooley, pp.320–22.)

The most recent version of the Act was passed in 1979 and that Act has been amended in 1994, 1995 and 2002. Interpreting the legislation rests on the pretence that the Act, including provisions drawn from the 1893 Act, was written at one time. Potter LJ explained (Stevenson v Rogers [1999] QB 1028):

The [Sale of Goods] Act of 1979 forms a single code; however, that is upon the basis simply that it consolidates and enacts within one statute and without material amendment a number of disparate statutes previously governing the field of sale of goods. While, in the first instance, a consolidating Act is to be construed in the same way as any other, if real doubt as to its legal meaning arises, its words are to be construed as if they remained in the earlier Act. Thus, in terms of the proper construction of its provisions, the Act of 1979 is not to be regarded as more than the sum of its parts.
Lord Diplock (Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441) proposed a different method of interpretation. He drew attention to the danger of not allowing the law to develop and so restrict the freedom of the parties to engage in more sophisticated agreements than were envisaged by the courts in the nineteenth century. He urged that, the Act ought not to be construed so narrowly as to force upon parties to contracts for the sale of goods promises and consequences different from what they must reasonably have intended. Instead, [its provisions] should be treated as illustrations of the application to simple types of contract of general principles for ascertaining the common intention of the parties as to their mutual promises and their consequences, which ought to be applied
by analogy in cases arising out of contracts which do not appear to have been within the immediate contemplation of the draftsman of the Act in 1893…I believe that the basic principle of the English common law of contract, including that part of it which is codified in the Sale of Goods Act 1893, is to give effect to the common intention of the parties as to their mutual promises in the sense that I have just described, I prefer to deal with each appeal by considering first the transaction between the buyer and the seller in the light of common sense and good faith in business, before examining the particular provisions of the code upon which the parties rely.

Article Courtesy: http://www.londoninternational.ac.uk/current_students/programme_resources/laws/subject_guides/commercial/commercial_ch4.pdf
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