Selling in the Course of a Business Under the Sale of Goods Act 1979

Date01 September 1999
Published date01 September 1999
Parliament, is enacted and enters into force.67 The position in Scotland is different,
at least for the time being, and as such Lord Morison seems to have concluded that
Thomson could have arranged to be contractually exempted from liability for fire
damage. Since they had failed to do so, there was nothing in the contractual
structure to defeat his Lordship’s ‘strong presumption’ that a duty of care was
On the other hand, contracting parties might be forgiven for lacking confidence
in the doctrine of ius quaesitum tertio, given its wholly rudimentary development
along the above lines. In any event, the tendency prior to the decision of the House
of Lords in BT was to take account of the broad contractual setting and patterns of
insurance coverage, and to resolve questions of duty of care by reference to that
backdrop. It is submitted that the good sense of this stance is particularly apparent
where the loss complained of is purely economic. Where the loss is physical, the
instinct in favour of imposing a duty of care is bound to be stronger. But the more
discriminating approach to duty of care seen in Marc Rich is not incompatible with
that instinct, if in all the circumstances, the recognition of a duty of care is fair, just
and reasonable.
Selling in the Course of a Business Under the Sale of
Goods Act 1979
John de Lacy*
Caveat emptor has been, and to some extent remains, a foundation principle of the
law of contract. However, in recent times this principle has been eroded as the law
has sought to formally recognise that, in certain situations, a law of contract based
upon the principle of equality of bargaining power is inappropriate. This trend was
recently highlighted by the Unfair Terms in Consumer Contracts Regulations
19941which introduced the principle of good faith into certain types of contract
where one of the parties was a consumer and the other a seller or supplier acting for
purposes relating to his business.2Nevertheless, these regulations were no more
than a continuation3of a theme that gained prominence in the 1960s with the
67 Although the provisions of the Bill would be unlikely to assist a subcontractor in the position of
Thomson. Cl 1(1) provides that a third party may in his own right enforce a term of a contract (which
includes taking the benefit of an exemption clause) if (a) the contract expressly so provides, or (b) the
term purports to confer a benefit on him. However, cl 1(1)(b) will not apply if ‘on a proper
construction of the contract it appears that the parties did not intend the term to be enforceable by the
third party’ (cl 1(2)). It is submitted, nevertheless, that this does not necessarily or conclusively affect
the determination of whether a duty of care in tort or delict is owed.
*Faculty of Law, University of Manchester.
2 See Reg 2(1) for the definitions of ‘consumer’, ‘seller’ and ‘supplier’ and Regulation 4 and Schedule
2 for the scope of the requirement of good faith.
3 Albeit European inspired; see EC Council Directive 93/13/EEC.
The Modern Law Review [Vol. 62
776 ßThe Modern Law Review Limited 1999
publication of the Molony Report4and was later reinforced by a Report of the Law
Commission,5namely consumer protection. These Reports sought to highlight the
injustice that could result from an unregulated system of contract law which left
the parties to contracts to their own devices. This was particularly noticeable where
consumers purchased goods from commercial concerns and were left, in many
cases, to bear the risk of receiving defective goods with no effective remedy. In
short the consumer was deemed to be incapable of negotiating an effective bargain
to meet his needs.6
In order to meet some of these concerns the Sale of Goods Act 1893 was
amended in 19737to extend the protection available to buyers of goods.8For our
purposes, we need only confine ourselves to what is now section 14 (2) and (3) of
the Sale of Goods Act 1979 (as amended)9which impose implied terms relating to
satisfactory quality10 and fitness for purpose into sale of goods contracts.11
However, the protection afforded to buyers of goods, by these implied terms,
only applies where those goods are sold by a seller ‘in the course of a business’.12 It
is only sales made by a business seller that are deemed worthy of having terms
relating to satisfactory quality and fitness for purpose implied into them. A sale by
a private seller will not have these terms implied into the contract of sale. A buyer
of goods in the latter situation will be reliant upon his ownnegotiating skills at the
point of sale and will have to stipulate expressly for any protection in the event that
the goods might later prove defective.13 Caveat emptor is very much alive in this
The question most naturally posed by these developments is: in what
circumstances will a seller of goods be deemed to have sold goods ‘in the course
of a business’ for these implied terms to become operative? Until recently there
was no direct authority on this question and it remained problematic as to the
situations in which section 14(2) and (3) would be applicable. These problems
arose out of the fact that the courts had, in other contexts, applied a restrictive
construction15 to the concept of acting ‘in the course of a business’ such that if this
approach were to be deemed directly applicable to similar wording under the Sale
of Goods Act it would frustrate the broad protection intended to be given to buyers
4 (1962) Cmnd 1781 Final Report of the Committee on Consumer Protection, Chairman J.T. Molony
5 (1969) Law Commission Report No 24 Exemption Clauses in Contracts First Report: Amendments to
6 See HC Deb vol 850 col 1153, 1973 per Sir Geoffrey Howe, Minister for Trade & Consumer Affairs,
explaining the purpose behind, what was to become, the Supply of Goods (Implied Terms) Act 1973.
7 See Supply of Goods (Implied Terms) Act 1973 and note, in particular, s 3.
8 The Sale of Goods Act 1893 was subsequently repealed and replaced by the Sale of Goods Act 1979
(as amended) which is still in force.
10 This phrase was introduced into the Act as a result of an amendment made to s 14(2) by the Sale &
Supply of Goods Act 1994, s 1. Formerly the phrase was ‘merchantable quality’.
11 Under the Sale of Goods Act 1893 the fitness for purpose provision (now contained in Sale of Goods
Act 1979, s 14(3)) was contained in s 14(1).
12 See Sale of Goods Act 1979, s 14(2) and (3). The words ‘in the course of a business’ were added to
these sections in 1973 by virtue of the Supply of Goods (Implied Terms) Act, s 3. The Sale of Goods
Act 1979, s 61(1) provides a non-exhaustive definition of ‘business’ as including ‘a profession and the
activities of any government department’.
13 cf Blakemore vBellamy [1983] RTR 303.
14 See Sale of Goods Act 1979, s 14(1). However, the buyer will have the protection afforded by ss 12
(concerning title), 13 (concerning description) and, more rarely, 15 (concerning sales by sample) of
the Act which contain no limitation relating to the status of the seller.
15 See the cases cited at nn 18–20 below.
September 1999] Stevenson vRogers
ßThe Modern Law Review Limited 1999 777

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