510 lecture 7 sales of goods and services

law for New Zealand business 1

Sales of Goods and Services

Background


Focus on two aspects

The sale or other supply of goods and services- the legal framework

Undertakings and promises made prior to the sale or other supply of goods or services


first

The legal framework applying to the sale or other supply of goods and services


Statutory framework

Nineteenth century law merchant (UK) provided for a legal framework for contracts for the sale of goods (but not in relation to the supply of services)

These included implied terms in relation to: Title Quality

And provisions relating to passing of property etc


And then

Moves to codify/ rationalise these in the Sale of Goods Act 1893

However, this was only a framework- always allowed the parties to reach a different contract (contract out of the Act)

New Zealand adopted this Act in 1908


And then It became increasingly evident that the Act had

serious limitations Not suitable in an industrialised, technologised

economy with extended distribution chains involving little association between manufacturer and user and little control for the retailer

Specific-purpose statutes modified the provisions in different situations, made the Sale of Goods Act look increasingly silly (egs: Hire Purchase Act 1971, Contractual Remedies Act 1979)


And then

Proposals since 1972 to alter the terms of the Sale of Goods Act to meet current expectations, particularly in relation to: Promises relating to title Promises relating to quality


Results:

Changes since 1972 but rather than a complete revamp of the Sale of Goods Act, the change has come through several statutes- underlying ideas: Some contracting parties need protection,

others are powerful enough to make their own deals

The law needs to be consistent New Zealand should encourage

international trade


So what do we have?

Sale of Goods Act 1908- applies to goods Generally not affected by the CRA Consumer Guarantees Act 1993- largely

replaces the SoG in consumer sales However, SOG Act still relevant for

implied terms re passing of risk and title, also perishing and where it is not excluded (s56)

Also, nb, the SoG (United Nations Convention) Act 1994


So what provisions are of most importance?

Title and perishing


S8- idea of perishing of goods

Not only destruction but also where they are no longer fit for their intended and obvious purpose

(nb- case of McRae v Commonwealth Disposals Commission (1951))


Concept of property- inderlies issues of title and risk

Title Right of alienation or disposal Possession Risk

Not all of these need to be in the hands of the same person

Nb concepts of “general” and “special” property


Nb title Condition that the Seller has the right to sell

the goods when title is to pass (s14(a)) Meaning- not straightforward

Niblett v Confectioners’ Material Co Ltd (1921) Nemo dat quod non habet- Rowland v Divall

(1923) (importance of the effect of the breach)- now seen as voidable rather than void

Warranty of quiet possession- against consequences of faulty title

Warranty the goods are free of charge or encumbrance


Passing of Property- specific goods (s19)

When parties intended property to pass S20, 4 rules that apply-

if unconditional contract of goods in a deliverable state, it is when the contract is made

If something to be done before a deliverable state is reached, property passes when the buyer knows that has been done

If something needs to be done by the seller to ascertain the price, property passes when the buyer knows that has been done

If good provided on appro, property passes when the buyer signifies approval or after a reasonable time


Passing of Property- unascertained goods

S18-when they are ascertained and in a deliverable state Unconditionally appropriated with

concurrence of both parties Once identified and delivered without

reservation to the buyer or agent


Rules in s20

Normally all aspects of property will pass at the same time

All these rules do not apply if the parties have expressed a contrary intention

One obvious issue is reservation of title- issues of right to sell, rights to proceeds of sale and security interests


S21(1)-Reservation of title

The seller may reserve the right of disposal until certain conditions are fulfuilled- most likely of these is payment- if the goods have been wrongly sold, the seller is entitled to the proceeds- Len Vigden Ski v Timaru Marine Supplies (1986)

More complicated form as used in the Romalpa case- Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd (1976)- right to trace- buyer is the bailee, agent or fiduciary


Effect of Romalpa- added complications

Ok if confined to tracing and right to recover

But- difficulties if the goods extend to manufacture/processing Re Bond Worth (1980) – Court held the

clause to be an unregistered charge- void Whenuapai Joinery v Trust Bank Central

(1994)- Court held the joinery had become part of the real estate


Romalpa Clauses- later developments and

resolutions Registration under the PPSA- Have a look here for a tutorial on how to

use the register: http://www.ppsr.govt.nz/search/cad/dbssiten.main

Will talk about this more in a couple of weeks

The PPSA will replace a romalpa clause regime with a registrable charge regime

Creation of a trust- put the money in there


An aside: the Sale of Goods (United Nations Convention)

Act 1994 Deals with issues of international sales

of goods Does not deal with passing of title or

risk Provides for a core of consistent rules

about implied terms in such contracts, ascertaining price and timing/durration of offer, acceptance and valid contracts

Provides for means of ascertaining the “proper” law to settle disputes


And consumer-related legislation- why?

Limited definition of “goods” – degree of uncertainty with mixed contracts

Ability to contract out Ignored the reality of retailers being

mere middlemen/distributors Dubious application and scope of the

implied terms in ss 15 and 16 (purpose, merchantable quality and sale by description)


What sort of supplies are covered?

Supplies of gds and ss to consumers (s2)

Consumer?- a person acquiring goods or services of a kind ordinarily acquired for personal, household or domestic use or consumptionNot where the acquisition is for:•Resale•Consumption in the course of

production or manufacture•repair


How is this status determined?

Objective- what would someone ordinarily use these goods or services for?Subjective- what is this person acquiring them for?Nb-these are treated as culmulativeNb- no specific limit on value although value may be relevant for determining purpose


Supplier? Provider of gds or ss to a consumer in the

course of trade. The supply can be by way of: Sale Exchange Lease Hire/hp Gift Provision or grant (nb does not apply to where a charitable

organisation distributes for the benefit of the recipient)


What happens if the Act applies?

The Act provides for implied terms and for specific remedies

Other legislation also applies if relevant- eg Door to Door Sales Act, Contractual Remedies Act


Coverage Goods- including land fixtures But does not include electrical

power Implied terms re goods can apply

even if that component was minor (ie largely services)

Second hand is included But not where auction or

competitive tender (s41(3))


Next question: what are the specific provisions?

That is for next week along with an examination of the pre-sale protection given by the Fair Trading Act 1986

510 lecture 7 sales of goods and services

Documents

act new zealand

sale of goods act

consistent new zealand

supply of goods

sales of goods

services law

perishing law

agent law