A business over the course of its existence will enter into numerous commercial contracts, most commonly these agreements will be for the supply of goods or services. The supply of goods to a business can be of detrimental value to its success, especially in those circumstances when it is acting as a VAR (value added reseller). In such circumstances, if goods are supplied that are incorrect, faulty, or not what the business had intended to purchase, then it may become necessary to assert a breach of contract against the supplier. Often, business owners will incorrectly believe that the commercial contract which they have entered into with the supplier will contain all the terms which the supplier must adhere to. However, commercial law is adaptive and aims to protect the consumer and so the importance of implied terms in commercial contracts should never be overlooked in such situations.
These implied terms can be found under the Sale of Goods Act 1979. Firstly, s.12(1) implies into all contracts for the supply of goods that the seller has the right to sell the goods. Section 12(2) of the legislation provides an implied warranty (i) that the goods are free from any charge or encumbrance not already known to the buyer; and (ii) that the buyer will enjoy quiet possession of the goods. This sub-section of the legislation can be of paramount importance should you later discover after receipt of the goods that the supplier did not have the right to sell the goods in the first instance.
An implied term which is commonly enforced by commercial lawyers is found under section 13(1) which implies a term that the goods sold should comply with their description. The words used must be words of description rather than words merely identifying the goods. This implied term has somewhat of a higher threshold than the others for the reason that the individual must also show reliance on the description. This implied term cannot be relied upon where either the buyer was unaware of the description, or where they have chosen to rely on their own skill or judgement. Nevertheless, it is worth mentioning that even in circumstances where the buyer has examined the goods, this will not automatically infer that the buyer has relied on their own skill or judgement. A case which demonstrates this is that of Beale v Taylor, where a car was advertised as a 1961 Triumph Herald, when in actual fact it was parts of two different cars which had been welded together, and only one of said parts was in fact from the 1961 model. In this case, the advertisement was held to be a sale by description, even though the buyer had inspected the car himself. If your business believes they have relied on a description, then you may wish to assert that there has been a breach of this implied term. An alternative avenue for such a case may also exist by bringing a claim for misrepresentation.
Section 14(2) of the Sale of Goods Act 1979 implies a term into all contracts that if a sale is made through the course of a business, then there is an implied term that the goods are of a satisfactory quality. This test of satisfactory quality is an objective test and further factors will be taken into account in determining this decision including; (i) fitness for the common purposes of the goods; (ii) appearance and finish; (iii) freedom from minor defect; (iv) safety; and (v) durability. This implied term is determined entirely on a case by case basis, and there exists stark contrasts in the decisions of such cases. In Thain v Anniesland Trade Centre (1997) it was held that a six-year old car which was sold for £2,995 was of satisfactory quality even though the gearbox failed two weeks after the sale of the car.
Outlined above are a few of the implied terms which can be relied upon by businesses and individuals alike who enter into agreements for the supply of goods. However, it is important in every case to seek the advice of an experienced commercial solicitor.
Summerfield Browne Solicitors specialise in all aspects of commercial and corporate law. They have offices in London, Birmingham, Cambridge, Oxford, Northampton, and Market Harborough, Leicestershire
