Part I

Nature and formation of

the contract of sale
1
Sources of the law of sale of goods

The Sale of Goods Act 1979

The focus of this book is the domestic law of sale of goods. The domestic law of sale of
goods is to be found in four main sources. The first, and still by far the most important,
is the Sale of Goods Act 1979, which consolidates (with some additional amendments) the
original Sale of Goods Act of 1893 and amendments to it made prior to 1979. That Act
has in turn been amended by the Sale and Supply of Goods Act 1994, the Sale of Goods
(Amendment) Act 1994 and the Sale of Goods (Amendment) Act 1995. Recently, European
Directives, in particular that on sale of consumer goods and associated guarantees,1 and
that on distance contracts,2 have required further amendments to the Sale of Goods Act
and subordinate legislation. Secondly, there are a number of other statutory provisions, of
varying importance, some of which pre-date the Act of 1893 (such as the Factors Act 1889),
but others of more recent origin, such as the Unfair Contract Terms Act 1977 and the
Unfair Contract Terms Regulations 1999. Thirdly, there is a considerable mass of case law
interpreting the Act of 1893, much of which remains relevant to the interpretation of the
Act of 1979 and, of course, there is now case law on the 1979 Act itself. Additionally there
are some decisions of the European Court of Justice interpreting the various Directives and
Conventions in the field. This jurisprudence is likely to grow in the future. Indeed, the
present law of sale of goods is somewhat patchwork, especially that relating to consumers
– there is a case now for consolidating statutes which deal separately with commercial3
and consumer matters. Fourthly, there is still a certain amount of relevant case law which
pre-dates the Act of 1893. The importance of the old case law on points actually dealt with
by the Act has, however, been declining for many years. The Act of 1893 was a codifying
statute, and the proper method of interpreting such a statute was laid down by Lord
Herschell in Bank of England v Vagliano Bros.4
I think the proper course is in the first instance to examine the language of the statute and to ask
what is its natural 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. If a statute, intended to embody in a code a particular
branch of the law, is to be treated in this fashion, it appears to me that its utility will be almost
entirely destroyed, and the very object with which it was enacted will be frustrated. The purpose
1
99/44/EC, OJ L171, 7/7/99 implemented by SI 2002/3045.
2
97/7/EC, OJ L144, 4/6/97 implemented by SI 2000/2334.
3
The Sale of Goods Act is still of international importance in commercial sales and has a close family relation-
ship to laws in force around the Commonwealth, as well as to Article 2 of the Uniform Commercial Code in
force in all US jurisdictions except Louisiana.
4
[1891] AC 107, 144 –5. These observations were made with reference to the Bills of Exchange Act 1882, but they
apply to all codifying statutes alike.
4 NATURE AND FORMATION OF THE CONTRACT OF SALE

of such a statute surely was that on any point specifically dealt with by it, the law should be ascer-
tained by interpreting the language used instead of, as before, by roaming over a vast number of
authorities in order to discover what the law was, extracting it by a minute critical examination
of the prior decisions.

Lord Herschell then went on to observe that in exceptional cases, reference to earlier
decisions may still be permissible. First, where the provisions of the Act are ambiguous,
earlier cases may help to resolve the ambiguity; and, secondly, where a term has acquired
a technical meaning, previous cases may be cited to illustrate this meaning. It is scarcely
necessary to add that where a point is not covered by the Act, older decisions are still
binding and must be followed.
Despite this warning and its subsequent repetition in later cases, it cannot be said that
it has always been taken to heart by courts or writers. Indeed, there are indications in the
speeches in the House of Lords in Ashington Piggeries Ltd v Christopher Hill Ltd 5 that Lord
Herschell’s remarks may now need qualification. In particular, in the interpretation of
provisions of the Act relating to implied terms, Lord Diplock said that the Act ‘ought not to
be construed so narrowly as to force on parties to contracts for the sale of goods promises
and consequences different from what they must reasonably have intended’.6 More gener-
ally, it may be said that the courts have tended to treat the provisions of the Act as though
they were part of the common law, and have not generally treated cases under the Act as
though they were ordinary exercises in statutory interpretation.
The application of Lord Herschell’s approach in some areas is, however, more con-
troversial. For example, in the case of the former implied condition that the goods were to
be of ‘merchantable quality’ the 1979 Act (unlike the original Act) professed to define the
term ‘merchantable quality’,7 but the definition appeared merely to provide a framework
or skeleton in which the normal processes of case law development might continue; thus
it might have been thought that the meaning of the term ‘merchantable quality’ would
continue to be found in the case law and there were indeed many cases which proceeded
on this basis. But (as we shall see) the Court of Appeal in Rogers v Parish (Scarborough) Ltd 8
insisted that this mass of case law should be jettisoned, and the words of the 1979 Act alone
looked to in the decision of cases on the meaning of the term ‘merchantable quality’. The
merchantable quality warranty has now been replaced by a new requirement that goods are
to be of ‘satisfactory quality’,9 but the same issue will no doubt arise in relation to the new
provisions. For reasons given later, an approach which ignores the previous case law
whether on the old merchantable quality provisions or on other parts of the Act is likely to
produce arbitrary and unpredictable decisions, and any attempt to apply Lord Herschell’s
approach literally must at least take account of the variety of reasons which may inspire the
legislature to codify different provisions of the common law.10
5
[1972] AC 441.
6
At p. 501.
7
The relevant provisions first appeared in the Supply of Goods (Implied Terms) Act 1973.
8
[1987] QB 933 – see below, p. 159. See also Harlington & Leinster Enterprises Ltd v Christopher Hull Fine Art
Ltd [1991] 1 QB 564. Compare the remarks of Lloyd LJ in M/S Aswan Engineering Establishment Co v Lupdine
Ltd [1987] 1 WLR 1, 6 – see below, pp. 158 –9.
9
Sale and Supply of Goods Act 1994.
10
These different approaches were thoroughly canvassed in the Law Commission’s Joint Working Paper No. 85,
Sale and Supply of Goods (1983) which explored various proposals for altering the definition of ‘merchantable
quality’. The Final Report of the Law Commissions, Sale and Supply of Goods (Law Com. No. 160, Scot. Law
Com. No. 104, 1987, Cm. 137), appeared to retreat somewhat from the position arrived at in the Working Paper.
 SOURCES OF THE LAW OF SALE OF GOODS 5

Another problem arising from Lord Herschell’s approach is that this method of inter-
pretation is not sufficiently adaptable to be used in the interpretation of legislation which
clearly departs from general common law principles. This means that every statutory
amendment of the law of sale of goods either opens up a wedge between the law of sale and
the law applicable to closely analogous contracts, or it has to be followed by or accom-
panied by parallel legislation applicable to these other contracts. But if, when this new
legislation is proposed, there are second thoughts about the earlier legislation amending
the law of sale, the result is likely to be yet further amendments to the law of sale. The result
is that the law of sale and the law of similar contracts are engaged in a sort of leap-frog
exercise which sometimes makes it troublesome to identify the precise effect of modern
legislation at any given moment. And it also means that arbitrary distinctions sometimes
have to be drawn between cases according to the precise type of contract involved – sale of
goods contracts sometimes being affected by legislation which does not apply to other
closely similar transactions.
In addition to the law of sale of goods in the strict sense, there is, of course, the general
body of the law against which a codifying statute has to be understood and, in particular,
the general law of contract. The Sale of Goods Act makes no attempt to codify the
general principles of contract law. Indeed, it expressly leaves them untouched, for s. 62(2)
enacts that:
The rules of the common law, including the law merchant except in so far as they are inconsistent
with the provisions of this Act and in particular the rules relating to the law of principal and agent
and the effect of fraud, misrepresentation, duress or coercion, mistake, or other invalidating
cause, apply to contracts for the sale of goods.

Despite this section, no exposition of this subject would be complete without some
account of the general rules of the law of contract insofar as they have some special
bearing on the law of sale of goods.
The Sale of Goods Act was made applicable to Scotland in 1893 as a result of pressure
in some commercial and legal quarters for the creation of a more uniform law of sale in the
United Kingdom.11 This was achieved with the addition of only a very few sections to the
English codification statute as originally drafted. The Act is thus not a codification in any
sense of the pre-existing Scots common law, but was rather a very significant change, given
the Roman law roots of that law. This was particularly the case in respect of the transfer of
property and, albeit to a less fundamental extent, the duties of the seller and the remedies
of the buyer.12 The Act’s English terminology also caused difficulties in Scotland, although
these have mostly been removed by the reforms of the Sale and Supply of Goods Act 1994,
in which the Scottish Law Commission played a large part. A distinguished Scottish
commentator once argued that ‘the task of the Scots courts is . . . to bring the statutory
provisions into harmony with the principles of our common law’;13 but this has not been
the approach of the judges or of other writers in Scotland, who have preferred generally to
start with the text of the statute, imperfect and sometimes difficult to understand though
it may be from the perspective of Scots law.
11
See Rodger (1992) 108 LQR 570. For the law pre-1893, see Gordon, in Reid and Zimmermann (eds), History
of Private Law in Scotland, vol. 2 (2000, Oxford University Press, Oxford).
12
See Smith, Property Problems in Sale (1978, Sweet & Maxwell, London); Sutherland, 1987 JR 24.
13
Gow, The Mercantile and Industrial Law of Scotland (1964, W. Green & Sons, Edinburgh), 76. Gow supported
his approach by reference to what is now s. 62(2) of the Sale of Goods Act 1979 (see above).
6 NATURE AND FORMATION OF THE CONTRACT OF SALE

As will appear during the course of this book, the Sale of Goods Act has not proved one
of the more successful pieces of codification undertaken by Parliament towards the end of
the nineteenth century.14 The principal reason for this may well be that there has been a
change in the type of sale of goods cases coming before the courts, and the types of cases,
more generally, coming to legal attention. The nineteenth-century cases on which the
Act was based were, in the main, sales between businessmen or organisations, i.e. sales by
manufacturers and suppliers. Since the 1893 Act was passed, however, a larger proportion of
the cases coming before the courts appear to have been sales by retailers to the consuming
public. And even though there is still relatively little litigation arising out of many con-
sumer transactions, because their value does not generally warrant litigation,15 consumers
and consumer organisations today are more vociferous in demanding recognition of their
rights. This was one major reason why the term ‘merchantable quality’, which was of prime
importance in defining the duties of the seller, appeared to be inappropriate to many
lawyers, and why the 1994 Sale and Supply of Goods Act amends and redefines the law on
this point.16
More generally, the very different social and economic nature of commercial and con-
sumer transactions, both of which are in law contracts of sale of goods, means that it is not
surprising that an Act devised principally for the one has not always worked satisfactorily
for the other. It is now noticeable that one of the principal trends of modern legislative
change is to discriminate between consumer and non-consumer transactions.
Finally it should be noted that at the beginning of 2009, the Draft Common Frame of
Reference (DCFR) was published. The text was the result of the work of a broad range of
private law scholars from the member states of the European Union, and it presents itself
as an ‘academic’ document, committed to the precepts of scholarship rather than politics.
Notwithstanding its unwieldy name, the text is nothing less than the draft of the central
components of a European Civil Code. So far as sales law is concerned, the code is a
descendant of the Convention on International Sales of Goods (CISG) dealt with in the
new Chapter 25. As such it is potentially problematic to the extent that buyers and sellers
in many jurisdictions around the world use the Sale of Goods Act in preference to CISG.

14
Save in terms of its widespread adoption in the jurisdictions of the Commonwealth, and in the United States
whose Uniform Sales Act (now replaced by Art. 2 of the Uniform Commercial Code) closely followed it.
15
An effect of the Civil Procedure Rules 1998 seems to have been to reduce still further the trickle of reported
cases.
16
See Chapter 13, where this question is more fully dealt with.