Seeking compensation from a supplier for goods and services used up in manufacturing?
Sale of goods law provides essential protection for businesses dealing with faulty products in commercial transactions. As a business, you might seek compensation for damages caused due to the supply of faulty goods used up in manufacturing. Although the Australian Consumer law protects consumers and businesses who acquire services amounting to less than $100,000.00 or goods less than $100,000.00, the consumer law offers limited protection to businesses acquiring goods to be used in the process of trade and commerce.
The Sale of Goods Act covers commercial transactions and aids compensation for businesses affected by faulty goods in trade or commerce.
Understanding Sale of Goods Contracts
To be covered under the ambit of Sale of Goods Act (“The Act”), the object of the dispute must be for “goods” and a “valid contract”.
Definition of Goods Under Sale of Goods Law
Section 5 of the Act defines goods as “all chattels personal other than things in action and money. The term includes emblements and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale”.
Contract Requirements for Sale of Goods
A contract of sale includes an agreement to sell as well as sale.2 Section 6 of the act defines sale and agreement to sell as:
“A contract for sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price. There may be a contract for sale between one part owner and another”.
Once the price and validity of the contract is determined, the next step is the determination of terms of the contract. Most disputes arise where the goods do not correspond with the description or are not fit for purpose.
Sale of Goods by Description
Section 18 of the Act -Sale by Description:
“Where there is a contract for sale of goods by description , there is an implied condition that the goods shall correspond with the description; and if the sale be by sample as well as by description , it is not sufficient that the bulk of goods corresponds with the sample if the goods do not correspond with the description”.
Determining Description in Sale of Goods Cases
Determination of sale of goods can be tricky, since description could relate to the identity or quality of the goods. The description depends on when the contract was formed and its terms.
If description is an implied term of the contract where the buyer could seek a refund.
Key Case Study: Elder Smith Goldsbrough Mort Ltd v McBride
In this significant sale of goods case, the McBrides bought a breeding bull that was later found to be infertile. The bull was bought at an auction where the exclusion clause stated that bulls made available for inspection would be purchased with all faults.
The bull was described as a “breeding stud bull.” The core issue was whether the contract was breached between buyer and vendor, and whether the exclusion clause prevented vendors from being liable for damages.
Types of Sale of Goods by Description
Sale of goods by description falls into two categories:
Unascertained or Future Goods
The first type involves unascertained or future goods, as being of a certain kind or class, or to which a ‘description’ in the contract is applied.
Specific Goods
The second involves specific goods bought by the buyer in reliance, at least in part, upon the description given or to be tacitly inferred from circumstances, and which identifies the goods.
Analysis of the McBride Case
The condition was relevant to this case and enabled the finding that the “breeding bull” was part of the contract. Buyers could assume the bull’s fertility. Moreover, inspection by buyers could not expose the bull’s infertility.
Therefore, this case was covered by section 18, where the description of the stud bull was an implied condition of the contract.
Modern Application: Harlingdon & Leinster Enterprises v Christopher Hull Fine Art
This case involved whether the description was a painting made by German Artist Munter.
Circumstances of the Case
The circumstances were unclear since:
- The seller (Christopher Hull Fine Art) implied he had no knowledge of Munter’s work
- The buyer (HL) had no specialized knowledge of Munter’s artwork
- Even with inspection, the buyer could not conclude whether Munter created the artwork
Court’s Decision
The trial judge found that the buyer was not relying on the description. The High Court determined that common intention was important to determine whether description was a contract term.
“The presence or absence of description may be very relevant insofar as it throws light on the intentions of the parties at the time of the contract.”
Hence, circumstances at contract formation might be relevant in determining whether goods were sold by description.
Practical Implications for Sale of Goods Disputes
Understanding these legal principles helps businesses:
Protect Commercial Interests
Knowing your rights under sale of goods legislation ensures proper protection when purchasing goods for business use.
Evidence Requirements
Document all communications, descriptions, and circumstances surrounding the purchase to strengthen your legal position.
Contract Terms
Carefully review contract terms and descriptions to understand your rights and obligations.
Legal Remedies Available
When goods don’t match their description, businesses may be entitled to:
- Full refund of purchase price
- Damages for consequential losses
- Replacement goods meeting the description
- Compensation for business disruption
Legal Assistance
Sale of goods disputes require careful analysis of contract terms, circumstances of formation, and applicable legal principles.
Understanding the distinction between consumer protection and commercial sale of goods law is crucial for business owners dealing with faulty products.
If you are having problems with your supplier regarding sale of goods issues, contact Citilawyers for legal guidance tailored to your commercial situation.
