Keenan and Riches’BUSINESS LAW

Chapter 10Contracts for the supply of goods and services

parties from making their own tailor-made agreement.
In many situations, the rules contained in the Act only
apply where the parties have failed to make express
arrangements as to their obligations. We will now look
at some of the more important provisions of the Sale of
Goods Act 1979. Section references are to the 1979 Act,
unless otherwise indicated.

Definition

A contract of sale of goods is defined by s 2(1) as: ‘a con-
tract by which the seller transfers or agrees to transfer
the property in goods to the buyer for a money con-
sideration called the price’.
You should refer back to Chapter 8 for a detailed
explanation of the key elements of this definition. The
provisions of the Act apply only to those transactions
which fall within the definition.

Formation

It is not necessary to observe complex formalities to cre-
ate a contract for the sale of goods; it may be in writing
or by word of mouth, or partly in writing and partly by
word of mouth, or even implied from the conduct of the
parties. Capacity to enter into a binding sale of goods
contract is governed by the general law of contract,
which we have already considered in Chapter 7.

The implied terms

The parties are generally free to agree between them-
selves the details of their contract. However, the Act also
automatically includes a number of conditions and war-
ranties in every contract for the sale of goods. These are
known as the implied terms and they can be found in
ss 12–15.

Title (s 12)

There is an implied condition on the part of the seller
that in the case of a sale he has a right to sell the goods,
and in the case of an agreement to sell he will have the

right to sell when the property is to pass (s 12(1)). If

the seller cannot pass good title (rights of ownership) to

the buyer, he will be liable for breach of a condition.

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Rowlandv Divall(1923)

Rowland bought a car from Divall for £334 and used it

for four months. It later transpired that Divall had bought

the car from someone who had stolen it, and it had to be

returned to the true owner. Rowland sued Divall to

recover the full purchase price that he had paid. The

Court of Appeal held that Divall was in breach of s 12.

Rowland had paid £334 to become the owner of the car.

Since he had not received what he had contracted for,

there was a total failure of consideration entitling him to

a full refund.

Section 12(2) implies two warranties into sale of

goods contracts:

1 that the goods are free from any charges or encum-

brances (third-party rights) not made known to the

buyer before the contract; and

2 that the buyer will enjoy quiet possession of the

goods.

Microbeadsv Vinhurst Road Markings

Ltd(1975)

The buyers purchased road marking machines from the

sellers. Shortly after the sale, another company obtained

a patent in respect of the machines and this company

was seeking to enforce the patent against the buyers.

The sellers brought an action against the buyers for the

purchase price, and the buyers wished to include in their

defence a breach of s 12(2). The Court of Appeal held

that the buyers’ quiet possession of the machines had

been disturbed and, therefore, it would be appropriate to

raise a breach of s 12(2) as a defence to an action for the

price when the case came to full trial.

Section 12(3)–(5) provides for a situation where the

seller is unsure about his title to goods. He can sell them

on the basis that he is transferring only such rights of

ownership as he may have. If he does this, there is no

implied condition that he has the right to sell the goods,

but the sale is subject to implied warranties relating to

freedom from third-party rights and quiet possession.