Difference between revisions of "Contracts for Sale of Goods (11:III)"

Revision as of 22:10, 14 June 2016

Generally, consumers have no right to return goods or cancel a contract simply because they decide the goods are no longer wanted or needed. However, it is often only after the goods are purchased that damages or defects are discovered. In such cases, a purchaser may have a remedy if it can be shown that a term of the contract has been breached. It may also be the case that the business has a refund policy of which the consumer can take advantage.

This section outlines the protection that consumers have against the problems that may occur after a purchase has been made. To understand one’s legal rights, it is necessary to know the differences between terms, representations, and mere puffs.

A. Identifying and Classifying the Terms of a Contract

A term of the contract is a promise made by the manufacturer or seller regarding the character or quality of an article. It can be either written or oral. Written terms will generally be straightforward to identify. Whether an oral statement can be properly considered a term may be less obvious. Not everything said by the seller will be a term of the contract. To be a term, the statement must be a specific promise that makes up part of the contract.

If a statement is not a term, it will be either a representation or a puff. A representation is a material statement of fact made to induce the other party to enter the contract. A puff is vague sales talk not meant to have any legal effect. For example, a statement that, “This is a wonderful car,” would be a puff.

If a statement is a term of the contract, it can be a condition, warranty, or innominate term. A well-drafted contract will characterize particular terms as conditions or warranties, though the wording used in the contract will not always be determinative. The difference between the three types of terms is as follows:

1. Condition

A condition is a term that is so essential to the agreement that its breach is considered to be a substantial failure to perform the contract. A breach of a condition is said to go to the root of the contract. In other words, the breach is such that it deprives the innocent party of “substantially the whole benefit” of the contract. Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd, [1962] 1 All ER 474 at 489. Breach of condition entitles the buyer to terminate any further obligations under the contract and sue for damages. The aggrieved party, if aware of the impending breach, could accept the repudiation of the other party and terminate the contract, ending all future obligations except for the damages that stem from non-performance. Or, the aggrieved party could not accept the repudiation, and may wait for the future breach to occur before pursuing damages (e.g., if he or she thinks that there is still a chance that the contract will be performed).

2. Warranty

A warranty is a term of the contract that is not so essential. A warranty must be performed, but its breach is not considered to go to the root of the contract. This meaning of warranty should not be confused with other uses of the word such as in “one-year maintenance warranty”. When a warranty is breached, the innocent party must continue to perform its own obligations under the contract but can sue for damages.

3. Innominate Terms

Innominate terms arise out of the common law, but unlike conditions and warranties, they are not mentioned in the SGA. An innominate term is one that may be treated as either a condition or a warranty, depending on how severe the consequences of a breach turn out to be. Whether an innominate term is a condition or a warranty is for a judge to decide. Note that the SGA specifies whether certain terms are conditions or warranties.

B. Determining if the Sale of Goods Act Governs the Contract

The SGA applies to transactions that can be characterized as contracts for the sale of goods. Any transaction that is not for the sale of goods does not receive the benefit of the SGA. Hence, the subject matter of the transaction must be goods and the essential elements of a contract must also be present.

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 == A. Identifying and Classifying the Terms of a Contract ==
-A  term  of  the  contract  is  a  promise  made  by  the  manufacturer  or  seller  regarding  the  character  or quality of an article. It can be either written or oral. Written terms will generally be straightforward to identify.  Whether  an  oral  statement  can  be  properly  considered  a  term  may  be  less  obvious.  Not everything  said  by  the  seller  will  be  a  term  of  the  contract.  To  be  a  term,  the  statement  must  be  a specific promise that makes up part of the contract.  If a statement is not a term, it  will be either a representation or a puff. A representation is a material statement of fact made to induce the other party to enter the contract. A puff is vague sales talk not meant to have any legal effect. For example, a statement that, “This is a wonderful car,” would be a puff. If a statement is a term of the contract, it can be a condition, warranty, or innominate term. A well-drafted  contract  will  characterize  particular  terms  as  conditions  or  warranties,  though  the  wording used in the contract will not always be determinative. The difference between the three types of terms is as follows:  1.Condition A condition is a term that is so essential to the agreement that its breach is considered to be a substantial failure to perform the contract. A breach of a condition is said to go to the root of  the  contract.  In  other  words,  the  breach  is  such  that  it  deprives  the innocent  party  of “substantially  the  whole  benefit”  of  the  contract. Hong  Kong  Fir  Shipping  Co  Ltd  v  Kawasaki Kisen  Kaisha  Ltd,  [1962]  1  All  ER  474  at  489.    Breach  of  condition  entitles  the  buyer  to terminate  any  further  obligations  under  the  contract  and  sue  for  damages.  The  aggrieved party, if aware of the impending breach, could accept the repudiation of the other party and terminate the contract, ending all future obligations except for the damages that stem from non-performance. Or, the aggrieved party could not accept the repudiation, and may wait for the future breach to occur before pursuing damages (e.g., if he or she thinks that there is still a chance that the contract will be performed).  2.Warranty A warranty is a term of the contract that is not so essential. A warranty must be performed, but its breach is not considered to go to the root of the contract. This meaning of warranty should  not  be  confused  with  other  uses  of  the  word  such  as  in “one-year  maintenance warranty”. When  a  warranty  is  breached,  the  innocent  party  must  continue  to  perform  its own obligations under the contract but can sue for damages.3.Innominate Terms Innominate  terms  arise  out  of  the common  law,  but unlike conditions  and  warranties,  they are  not  mentioned  in  the  SGA.  An  innominate  term  is  one  that  may  be  treated  as  either  a condition or a warranty, depending on how severe the consequences of a breach turn out to be. Whether an innominate term is a condition or a warranty is for a judge to decide. Note that the SGA specifies whether certain terms are conditions or warranties. B.Determining if the Sale of Goods A ct Governs the Contract The  SGA  applies  to  transactions  that  can  be  characterized as  contracts  for  the  sale  of  goods.  Any transaction  that  is  not  for  the  sale  of  goods  does  not  receive  the  benefit  of  the  SGA. Hence,  the subject matter of the transaction must be goods and the essential elements of a contract must also be present.
+A term of the contract is a promise made by the manufacturer or seller regarding the character or quality of an article. It can be either written or oral. Written terms will generally be straightforward to identify. Whether an oral statement can be properly considered a term may be less obvious. Not everything  said by the seller will be a term of the contract. To be a term, the statement must be a specific promise that makes up part of the contract.
+If a statement is not a term, it will be either a representation or a puff. A representation is a material statement of fact made to induce the other party to enter the contract. A puff is vague sales talk not meant to have any legal effect. For example, a statement that, “This is a wonderful car,” would be a puff.
+If a statement is a term of the contract, it can be a condition, warranty, or innominate term. A well-drafted contract will characterize particular terms as  conditions or warranties, though the wording used in the contract will not always be determinative. The difference between the three types of terms is as follows:
+=== 1. Condition ===
+A condition is a term that is so essential to the agreement that its breach is considered to be a substantial failure to perform the contract. A breach of a condition is said to go to the root of the contract. In other words, the breach is such that it deprives the innocent party of “substantially the whole  benefit” of the contract. ''Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd'', [1962] 1 All ER 474 at 489. Breach of condition entitles the buyer to terminate any further obligations under the contract and sue for damages. The aggrieved party, if aware of the impending breach, could accept the repudiation of the other party and terminate the contract, ending all future obligations except for the damages that stem from non-performance. Or, the aggrieved party could not accept the repudiation, and may wait for the future breach to occur before pursuing damages (e.g., if he or she thinks that there is still a chance that the contract will be performed).
+=== 2. Warranty ===
+A warranty is a term of the contract that is not so essential. A warranty must be performed, but its breach is not considered to go to the root of the contract. This meaning of warranty should not be confused with other uses of the word such as in “one-year maintenance warranty”. When a warranty is breached,  the innocent party must continue to perform its own obligations under the contract but can sue for damages.
+=== 3. Innominate Terms ===
+Innominate terms arise out of the common law, but unlike conditions and warranties, they are not mentioned in the ''SGA''. An innominate term is one that may  be treated as either a condition or a warranty, depending on how severe the consequences of a breach turn out to be. Whether an innominate term is a condition or a warranty is for a judge to decide. Note that the ''SGA'' specifies whether certain terms are conditions or warranties.
+== B. Determining if the Sale of Goods Act Governs the Contract ==
+The ''SGA'' applies to transactions that can be characterized as contracts for the sale of goods. Any transaction that is not for the sale of goods does not  receive the benefit of the ''SGA''. Hence, the subject matter of the transaction must be goods and the essential elements of a contract must also be present.