Chapter 10Contracts for the supply of goods and servicesespecially on the duties of a supplier of goods and
services. We now turn our attention to the person who
produces the goods. What exactly are the responsibilities
of a manufacturer who puts defective products into
circulation? A striking feature of modern life is the con-
stant bombardment we receive from expensive advertis-
ing or promotions conducted by manufacturers who are
trying to persuade us to buy their products. It is hardly
surprising, therefore, that if anything goes wrong with
the product, the majority of people think that the man-
ufacturer is responsible in law to put matters right.
Certainly, most retailers do little to dispel this belief. It is
true that if the manufacturer supplies goods directly
to the customer, the customer is entitled to sue him in
contract for breach of the terms which are implied now
in all contracts for the supply of goods. Very often, how-
ever, goods are not sold straight to the customer, but
are distributed through a wholesaler, who sells them to
a retailer, who in turn supplies them to the ultimate
consumer. If the goods are faulty, the consumer’s rights
lie against the retailer, not against the person who cre-
ated the problem in the first place.
The primary responsibility for compensating the
consumer in respect of defective products is placed by
the law of contract on the person who sold or supplied
the goods; he or she is liable irrespective of whether he
or she was at fault. Thus, the law imposes what is known
as ‘strict liability’ on retailers in respect of faulty goods.
A good example of this principle is the case of Godleyv
Perry(1960), which was discussed earlier in this chapter
. The action involved a young boy who lost an eye
when his toy catapult broke. The boy had purchased the
catapult three days earlier from a newsagent’s shop. The
newsagent had taken reasonable care to ensure that
the catapults he sold were safe. Nevertheless, under the
Sale of Goods Act, he was held strictly liable for injuries
caused to the boy.
The law of contract provides the main avenue for
redress in respect of faulty goods. However, a contrac-
tual solution to the problem of defective goods has its
limitations.
1 The traditional doctrine of privity of contract meant
that the rights and duties created by a contract were
confined to the parties. Only the purchaser could take
action in contract in respect of a defective product. For
example, if in Godleyv Perrythe boy had received the
catapult as a Christmas present from his parents, he
would not have been able to sue the newsagent for com-
pensation for his injuries under the Sale of Goods Act
because of the absence of a contract between himself and
the newsagent.
However, under s 1 of the Contracts (Rights of Third
Parties) Act 1999, a third party may have the right to
enforce a term in the contract, such as the implied term
contained in s 14 of the Sale of Goods Act 1979, where
either the contract contains an express term to this effect
or a term of the contract purports to confer a benefit on
the third party. So, if a doting aunt buys a wedding pre-
sent for her nephew and delivery is to be made to the
nephew’s house, it can be argued that the contract pur-
ports to confer a benefit on the nephew, and he will be
able to sue if the present is defective.
2 The common law doctrine of privity also means that
the consumer’s rights in contract are restricted to an
action against the person who sold or supplied him with
the goods. Such ‘rights’ may prove illusory. The retailer
may not have the means to pay compensation or he may
have ceased trading because of insolvency.
3 The retailer is required to bear the brunt of claims for
compensation from aggrieved customers, even though
he may be completely blameless. Of course, the retailer
can sue his immediate supplier in contract for breach of
the implied terms in the Sale of Goods Act 1979. The
supplier can sue the next person in the chain of con-
tracts which ultimately ends with the manufacturer.
This chain of responsibility is illustrated in Fig 10.3.
Thus, the manufacturer is required, albeit in a round-
about way, to accept responsibility for his defective325
Figure 10.3The chain of responsibility in contract
for a defective product