- Performance of contract — Remedies for breach of contract — Termination/unwinding of contract — Electronic commerce and choice of law
Background to Modern Sale of Goods Legislation
1.01 Sale of goods is a specialized branch of the general law of contract. Its case law has been of fundamental importance in assisting the development of the general law. In two principal respects, however, the special law of sale of goods stands apart from general contract law. First, unlike most nominate contracts, sale involves a conveyance of the seller’s property interest in the goods in favour of the buyer, which, together with the abundance of reported sales decisions, lends a degree of autonomy to this branch of the law. Secondly, and quite strikingly in view of the paucity of statutes in general contract law, sale has its own statutory code, the Sale of Goods Act 1979, which is for the most part a reworking of its 1893 predecessor. Far from separating sales law from the general law of contract, a reference to it is directed by the Act where none other of its provisions apply.1 Yet the process of reabsorption of sale by the general law, prompted by the gaps that appear in a code over time and by the mass of decisions that encrust particular provisions of the Act, is disguised by the way that syllabuses and textbook writers have delineated sale as a category apart.
Evolution of sale of goods law.
1.02 Most of the law of sale, a branch of commercial law, is the product of nineteenth-century developments.2 Prior to this, Lord Mansfield had fostered the integration of the law merchant into the common law by making the latter responsive to the customs and usages of the former,3 just as Lord Holt, a half century earlier, had laid (p. 2) the foundation of the common law treatment of negotiable instruments.4 Nevertheless, the major features of the modern law of sale, such as the passing of property and risk, the implied terms of description, fitness for purpose, and merchantable (now satisfactory) quality, and the remedies for breach of contract were laid down in a series of nineteenth-century judgments ranging from the time of Lord Ellenborough to Lord Blackburn. The enactment in 1893 of the Sale of Goods Act5 was the coping-stone of this development and was part of a broad operation to codify important areas of commercial law.6
1.03 A consequence of this course of progression is that the present Sale of Goods Act 1979, a consolidation of the 1893 Act and amending legislation, together with a few minor statutory changes, faithfully reflects the type of sale agreement that preoccupied the courts in that century. This case law was mainly concerned with small commodities agreements and the sale of goods for industrial use and consumption. It can be traced into the provisions of the 1893 Act. Large-scale commodities agreements on forward delivery terms involving the transfer of documents find no mention in the 1893 Act or even in its 1979 successor. Further, the difficulties experienced in reforming the statutory provisions on the implied terms, discharge for breach, and acceptance, dealt with by the Sale and Supply of Goods Act 1994, are rooted in the fact that the law was not codified on the basis of decisions arising out of the dealings in consumer durables and complex manufactured goods that are prominent in modern case law.7
Sale of Goods Act 1979.
1.04 The Sale of Goods Act 1979 cannot be described as an attempt to revise the law of sale to meet late twentieth-century conditions. The law therein was not overhauled and subjected to the rigorous scrutiny needed for such a task. Rather, a number of important, though, in the greater scheme of things, incidental, reforms of the 1960s and 1970s were consolidated alongside a few minor changes of drafting style.8 Those reforms affected the definition of the implied terms of title, description, merchantable quality, and fitness for purpose; the ability of the seller to exclude these obligations; the relationship between the buyer’s right to examine the goods and to reject them if they are defective; and the exceptions to the rule of nemo dat quod non habet. Further changes of similar importance, advocated by the Law Commission,9 were implemented by the Sale and Supply of Goods Act 1994 without changing the original structure inherited from the 1893 Act. In addition, a Sale of Goods (Amendment) Act 1994 was passed to abolish the rule of market overt in the transfer of title to goods, followed in 1995 by another Sale of Goods (Amendment) Act, which permitted prepaying buyers to acquire an undivided interest in identified bulk goods. In 2002, an EC Directive10 was transposed in the form of regulations.11 These gave consumer buyers additional rights in respect of non-conforming goods and made some alterations to the rules on the transfer of risk and satisfactory quality. The regulations introduced new (p. 3) provisions in the Sale of Goods Act12 by way of an implant, a new Part 5A (‘Additional Rights of Buyer in Consumer Cases’). This legislative technique, which may have been unavoidable in the absence of a thorough recasting of the Sale of Goods Act, has caused significant damage to the structure of the Act. Part 5A sits in the Act in a thoroughly unintegrated way, laying out for consumer buyers an almost completely separate remedial path from the one already in the Act which, if they so choose, consumer buyers remain free to take.
1.05 Any discussion of the merits of a radical revision of sales law should start from the position that the Sale of Goods Act is largely presumptive and rarely mandatory. Those with a mind to exclude or vary its provisions are, for the most part, unimpeded in their efforts, though the combined force of statutory inertia and contractual brevity should not be underestimated. It cannot be said that an archaic statute, essentially Victorian, is stifling commerce. Even if there were any truth in this, commerce is resilient enough to absorb such an irritant in the way that an oyster envelopes a grain of sand. In any case, an ageing statute increasingly defers to case law responsive to changes in commercial practice.13 Set against these considerations, the argument that the Sale of Goods Act has lost its shape and is out of date does not seem strong enough to merit the time needed by law reform agencies and Parliament to produce a new Act for the twenty-first century. Nevertheless, the introduction of Part 5A thoroughly compromised the structure of the Sale of Goods Act, revealing in the process of its insertion some of the more archaic features of the Act14 and pointing to the continuing difficulty of holding within the bounds of one statute provisions dealing with commercial and with consumer sales, that a case can now be made for a thorough statutory revision.15 As far as consumer transactions go, the case has been accepted. A draft Consumer Rights Bill has been published,16 the effect of which is to consolidate in a single statute a large number of statutory provisions dealing with consumer transactions, and not just sale of goods.17 The Bill also contains new provisions transposing part of an EU Directive.18 The effect on the Sale of Goods Act is to transfer those contractual provisions, so far as applicable to consumer transactions from the Act to the Bill.19 Apart from the provisions deriving from the EU Directive, this process involves no substantive change to the position of seller and consumer buyer under the current Sale of Goods Act. In this work, the relevant provisions of the Act marked for removal to the new Consumer Rights Act will be identified at the appropriate point. It is unlikely now that consideration will be given to modernizing (p. 4) the Sale of Goods Act for non-consumer sales. If such a development were, however, contemplated, there would be a danger that the modern style of statutory drafting would obliterate the simpler style of the late nineteenth century, which is still evident in the Sale of Goods Act today. The Act is not a regulatory Act; a statutory style that trusts the courts to work in harmony with the Act is appropriate to this area of law. Any new legislation should be closer in style to the Arbitration Act 1996 than to the Consumer Credit Act 1974, at least in so far as that legislation is dedicated to commercial sale of goods contracts.
1.06 Account should be taken of the work that has taken place on the unification of the law of international sale,20 which began in the 1930s under the auspices of the Institute for the Unification of Private Law. These efforts resumed after the Second World War in the 1950s and produced two conventions that were adopted at a diplomatic conference sponsored by the Dutch Government. The conventions dealt with the formation of international sale of goods contracts and with the law governing the sales themselves. Neither convention was successful: the United States and socialist and developing states were not active in the process. A fresh reform initiative was taken by the United Nations Commission on International Trade Law (UNCITRAL), which culminated in a 1978 draft Convention on International Sale of Goods that was unanimously approved at a diplomatic conference held in Vienna in 1980. The Convention has now been adopted by nearly eighty countries, accounting for the greater part of world trade, and the isolation of the United Kingdom, which has so far failed to adopt the Convention, is becoming increasingly obvious. Drawing from a wide array of civil and common law experience, and responsive to the commercial needs of different types of economies, the Convention rests upon the inherited wisdom and authority of no particular legal system. Its influence, radiated through the medium of the EC Directive on consumer sales and associated guarantees,21 is already apparent in English law in the provisions of Part 5A of the Sale of Goods Act. UNCITRAL provides a documentary service about the national case law interpreting the Convention22 but there is no authoritative supranational source to provide amicus curiae opinions.23 The most active national courts and tribunals have set the tone for the Convention’s future interpretation. English courts have therefore had no part to play in the interpretation of the Convention, and will continue not to do so if the United Kingdom remains outside the Convention, apart perhaps from the occasional case where they might be called upon to apply, as the applicable law of a contract, a law that incorporates the Convention.
Code and Common Law
Drafting style and complexity.
1.07 A legitimate criticism of the common law is that its finely calibrated character, responsive to infinite shades of practical reality, is purchased at the cost of a complexity that places its comprehension beyond the reach of all but a select number of academics, judges, and practitioners.24 The complexity of modern case law complements the complexity of modern statutes. It is salutary to compare in the 1979 Act the pristine sections of the 1893 Act with additions made in the last quarter-century: the former are (p. 5) open-textured and simple, while the latter are contorted by the draftsman’s attempts to provide for every eventuality. The 1893 Act was consequent upon the simplification of procedure and the abolition of the forms of action,25 together with the substitution of a mass of judge-made legal rules for the unrecorded factual judgments of juries.26 It is a compendium of clear rules that has come under stress in modern conditions as the pendulum between law and fact has swung increasingly in favour of the latter, a tendency due in no small part to the infusion of the common law with a benevolent judicial discretion at the expense of legal inflexibility.27 The Sale of Goods Act 1893 recorded a process that over the nineteenth century had substituted a network of legal rules for a laconic and unsystematic mass of jury decisions.28 The line between fact and law has been redrawn in modern times in favour of the former, although this has come too late for the civil jury, now almost completely disappeared.
1.08 Confidence in statutory codes as universal solvents is inversely proportional to the number of years that have passed since their enactment; the same holds true for civilian codes. The Sale of Goods Act may not be a code in the sense understood by a civilian jurist, since it is confined to a special contract (sale) and permits penetration by the general uncodified law to fill its lacunae, but it can rightly be called a codification for the conscious attempt to summarize rather than reform the antecedent case law.29 Unlike a statute such as the Consumer Credit Act 1974, which manufactures its own concepts and largely consigns the antecedent case law to oblivion, the Sale of Goods Act is very much a creature of the common law that it summarized. A thorough understanding of the Act cannot be attained without a journey to the case law that prompted the statutory provisions, however much this might be deplored by those who argue that statutes supply a fresh start and wholly supersede earlier case law.
Earlier case law.
1.09 Be that as it may, the classic approach to a codifying statute, uttered in the full and optimistic flush of the statute’s youth, is given by Lord Herschell in respect of the Bills of Exchange Act 1882,30 like the Sale of Goods Act 1893 a product of Sir Mackenzie Chalmers’s draftsmanship. He said that the starting point should be the natural meaning of the statutory text itself, ‘uninfluenced by any considerations derived from the previous state of the law’, and that recourse should be had to the antecedent case law only in exceptional cases, for example, if the text was unclear or if it adopted a term of art that could be clarified by a discussion of the cases. Besides the economy of effort that comes with not ‘roaming over a vast sea of authorities’, the court also avoids the risk of misreading provisions of a reforming or clarifying nature, not literally based upon earlier cases.31
1.10 But in our legal tradition, the accretion of case law impedes direct access to the text and the text itself becomes absorbed eventually by the common law. The words of Lord Herschell might have seemed to lack currency in the case of sale were it not for the introduction of a statutory definition of merchantable quality in 1973, renamed with some modification as satisfactory quality in 1994. This has prompted two divergent judicial approaches to its interpretation: the one seeking an answer to its meaning in the text itself, and the other looking to the case law on which it was modelled.32 Since the current definition of satisfactory quality is hardly a definition at all but an open-ended list of criteria that a court might consult in determining whether goods are of satisfactory quality, the arguments against consulting former case law are unconvincing, though such case law if consulted ought to be looked at with care. Further, an argument in favour of turning from time to time to the pre-1893 case law is that the provisions of the Act are sometimes based upon common law reasoning that is now outmoded. Chalmers faithfully recorded the law as he saw it, though it should be understood that certain changes were made to the 1893 Act in its progression through Parliament. Condensing sales law as it did, the Sale of Goods Act encouraged later observers to see as flaws in the Act rules that were a perfect reflection of the contemporary law that had been codified.33 A similar judgment is that Chalmers, the author of the highly successful Bills of Exchange Act 1882, nodded when he laid out the inferior Sale of Goods Act 1893.34 With continuing imaginative and informed interpretation, the Act can be brought back into line with contemporary contract law, but the price paid for this is that the Act can no longer in places be read for an understanding of the modern position.35 Sale of goods law and contract law alike are dynamic and must respond to changing patterns of commercial activity. On occasion, the resolution of a modern problem may need the antecedents of the statutory text to be scrutinized with no small care. To understand the pedigree of sales law is not to practise legal antiquarianism.
Sale of Goods Act and Common Law
Background common law.
1.11 The Sale of Goods Act is less than a code, for section 62(2) directs a reference to the general law when the Act itself is silent:36(p. 7)
The rules of the common law, including the law merchant, except in so far as they are inconsistent with the provisions of this Act, and in particular the rules relating to the law of principal and agent and the effect of fraud, misrepresentation, duress or coercion, mistake or other invalidating cause, apply to contracts for the sale of goods.
1.12 This section shows that the Act was never designed to be comprehensive and inward-looking; rather, it expresses a framework of mainly presumptive rules complementing the general law.37 A number of sections state that the intention of the parties is paramount,38 thereby emphasizing the parties are free to strike their own bargain.39 Sales law and general contract law are both affected by forces abridging contractual freedom, and by the need to strike a reasonable balance between contractual autonomy and contractual regulation.
1.13 Section 62(2) has proved its value in the past when enabling courts to avoid inflexibility in the Sale of Goods Act. Thus section 7 was not applied in one case where the goods had never existed and therefore could not be said to have perished for the purpose of initial impossibility;40 and the Act’s classification of implied contractual terms as conditions and warranties was held in another case not to impede the application of intermediate stipulation analysis to express terms of the contract.41 Applied in this corrective fashion, section 62(2) works to prevent the divergence of sales law from an evolving general law.
Meaning of ‘common law’.
1.14 In another respect, however, section 62(2) has fostered just such a divergence. It makes no reference to the rules of equity. Does ‘the rules of common law’ mean common law and equity as opposed to statute, or common law in the narrower sense that excludes equity? The question has proved to be particularly troubling in the areas of equitable proprietary interests and, in certain Commonwealth jurisdictions, the equitable rule of innocent misrepresentation.42
1.15 The issue concerning innocent misrepresentation is whether the lenient equitable test for an actionable misrepresentation, that a statement merely induce the making of a contract,43 or the common law rule, that it induce in the mind of the listener a fundamental mistake,44 applies to sale of goods agreements. In England, the matter has long been settled in favour of the equitable view.45 But the New Zealand Court of Appeal in Riddiford v Warren46 took the opposite view for these reasons. First, innocent (p. 8) misrepresentation had never formed part of sales law before sale was codified, as opposed to reformed, by statute. The reference in section 62(2) to ‘misrepresentation’ was therefore to the common law rule. Moreover, a lenient misrepresentation rule could subvert the statutory scheme of contractual terms and remedies for breach.47 We shall see later in this text that English courts have moved by other means to prevent such subversion from occurring and that some modest degree of judicial control has been granted by statute so as to prevent a contract from being rescinded in some cases.48 Secondly, the issue was not to be resolved in accordance with the rule that, in cases of conflict between law and equity, the rules of equity shall prevail. There was no conflict to resolve since innocent misrepresentation had never been extended to ‘mercantile contracts for the sale of goods’ in the years before the fusion of law and equity.
1.16 However faithful Riddiford v Warren may have been to the pre-code law of sale, it is motivated by the regrettable view that the Sale of Goods Act froze the living law. Chalmers may well have believed that sales law had reached the acme of its development before the Act, but a sensible view of the draftsman’s intention would see section 62(2) as incorporating the general law as it exists from time to time so as to retain the affinity between sale of goods law and the general law of contract.
1.17 An approach similar to the one in Riddiford v Warren has exercised a more general and lasting appeal in respect of the transfer of equitable proprietary rights between seller and buyer. In contrast with its laconic treatment of common law misrepresentation, the Act deals at length with the passing of the legal, or general, property in goods.49 A buyer who has obtained this general property may, if the seller becomes insolvent before delivery, assert this property right against the seller’s creditors, secured and unsecured. A buyer unable to show that such a conveyance has taken place, but to whom equitable proprietary rights have been transferred, would receive upon the seller’s insolvency equivalent protection.50 Despite nineteenth-century authority favouring the buyer, the dominant view in the twentieth century has been that there is no room in sale of goods law for the passing of implied equitable proprietary rights.51 The question why some equitable rules have been incorporated in sales law while others, in the interest of commercial stability and convenience, have not, has not received a thorough judicial explanation.
Other equitable principles.
1.18 In numerous other respects, equity plays an uncontroversial part in contemporary sales law. Any argument that promissory estoppel,52 injunctive (p. 9) relief,53 and rectification,54 to name just three examples, are excluded by the Act would receive short shrift. Other equitable institutions, such as relief against forfeiture,55 remain of doubtful scope in sale of goods cases, not because of anything in the Act but because their own doctrinal limitations may restrict their operation. The problem of equity’s relationship with the common law centres today, not so much upon the scope of the Act, but rather upon the extent to which equitable rules and institutions are free to develop by expansion or even by retraction after the administrative fusion of the two systems.56 This in turn presents the questions whether such a refurbished equity is greatly different from a common law renewed by an infusion of discretion and sensitivity to particular fact, and whether the two systems are converging to produce a unification of substantive law.
Meaning of law merchant.
1.19 Section 62(2) explicitly incorporates the rules of the law merchant. The law merchant was the source of the unpaid seller’s right of stoppage in transit57 and it continues still to invigorate the common law.58 The law merchant is not, however, some body of immutable, supranational law proceeding from the will of a higher sovereign, or even an all-encompassing opinio juris, but rather the sum of trade usages and customs practised from time to time and upon which commercial parties are presumed to conduct their dealings.59 These are binding either as implied terms of the contract or because they colour its interpretation; they may therefore be ousted by a contrary agreement.60 In modern times, the proliferation of standard-form agreements has diminished the scope for implied terms based upon trade usage,61 so that in a very real sense now the law merchant is the totality of standard forms.
Inconsistency with Act.
1.20 Section 62(2) would exclude the law merchant where it is inconsistent with the Act. To understand how far this reservation hampers the law merchant, it is necessary to quantify the mandatory content of the Sale of Goods Act. It cannot be that the law merchant is excluded every time the Act lays down presumptive rules of agreement, for this would concede it a very small role to the law merchant62 and would create an inconsistency between trade usages and other sources of express and implied terms. Since the binding force of trade usage itself depends upon presumptive agreement, the inroads it makes into the Act are surely as great as those made by inconsistent express and implied terms. The (p. 10) rules regarding the passing of property and risk in c.i.f. contracts,63 inconsistent with the presumptive rules of the Act, may be regarded as binding on the parties by virtue of either implied agreement or of trade usage.
1.21 But there are provisions in the Act that may not be excluded by the parties. Parties may not provide for the general property in unascertained goods to pass to the buyer before the goods become ascertained;64 any inconsistent trade usage should be excluded under section 62(2). The Act also deals with the proprietary relationship between original owner and subsequent transferee in a group of sections dealing with the rule of nemo dat quod non habet and its exceptions.65 These may not be excluded by the agreement of seller and buyer. The law merchant has been relied upon in the past to extend the scope of the negotiability principle to novel types of securities.66 Were it to manufacture new exceptions to the nemo dat rule, this would be in contravention of the comprehensive scheme of title resolution laid down in the Act and so could not be recognized.
Conclusion of the Contract
1.22 This section of the chapter is devoted to certain aspects of the contractual formation process that merit attention in a specialist sale of goods text. No attempt will be made to dispose of matters that had best be left to the general contract texts. Mention will be made here of formalities and electronic commerce; of special statutory provision for abuses and potential abuses in the process of concluding a sale of goods contract, particularly in the case of distance selling; and of offer and acceptance, contractual capacity and certainty, to the extent that they are dealt with specifically in the Sale of Goods Act.
1.23 Between 1677 and 1954, sale of goods agreements for goods exceeding £10 in value could be enforced only if they were evidenced by a note or memorandum of the agreement signed by the party against whom enforcement was sought. Two statutory exceptions to this writing requirement existed: where the buyer had actually received and accepted the goods; and where the buyer had made some advance payment.67 These exceptions created for sale of goods contracts an extended equivalent of the equitable doctrine of part-performance applicable to contracts involving the sale of land, the existence of which was recognized by statute68 before the writing requirement was tightened for land in such a way as to leave no room for the continuing existence of part-performance.69 The writing requirement for sale of goods gave rise to a body of very complex law,70 which was severely (p. 11) criticized by Stephen and Pollock in one of the most polemical law review articles ever written.71 In 1954, the need for writing was abolished by the Law Reform (Enforcement of Contracts) Act.72 The current position, as expressed in section 4 of the Sale of Goods Act 1979, is that no formal requirements of any kind are exacted for sale of goods agreements under the Act, which may be concluded in any way that evidences the appropriate contractual intention. Section 4, however, is without prejudice to other statutes imposing formal requirements that extend to certain sale of goods agreements.
Bills of sale.
1.24 Statutes imposing formal requirements on contracts of sale of goods include the Bills of Sale Acts 1878–91.73 Briefly, these statutes promote two quite different policies: they protect needy debtors against certain types of grasping behaviour by creditors, and they supposedly protect outside creditors from the deceptive appearances created when a debtor appears to be in unencumbered possession of chattels, but in reality has signed away his rights to a particular creditor. The Bills of Sale Act 1878 applies to absolute (that is, non-security) bills of sale and deals with the second of these two policies.74 It imposes a most demanding formal and written procedure once the parties to a bill of sale have decided to reduce their agreement to writing.75 A wide variety of document is caught by the statutory definition of a bill of sale;76 it is by no means confined to agreements that borrow the form of a sale of goods contract. The bill must set forth the consideration for which it is given and must be duly attested and registered.77 Attestation is carried out by a solicitor who—and this has to be expressed in the attestation statement—explains the effect of the bill of sale to the grantor of the bill.78 The bill, together with every schedule or inventory annexed to or referred to in (p. 12) the bill, has to be filed with the registrar79 within seven clear working days after the grant of the bill.80 In addition to the bill, there must be filed with the registrar: a true copy of the bill, as well as of any schedule or inventory; every attestation of the execution of the bill, together with an affidavit of the time the bill was given and of its due execution and attestation; and a description of the residence and occupation of the person giving the bill and of every attesting witness to the bill of sale. According to section 8, an unregistered bill of sale is deemed to be fraudulent and void as regards the property in or right to possession of chattels comprised in the bill of sale as against trustees in bankruptcy, sheriffs, and execution creditors. Nevertheless, the limited effect of such voidness must be appreciated. In so far as a transaction takes effect between two parties as ‘a prior and independent bargain’, the bill of sale itself not being a part of the bargain, the transaction will not be avoided because of the subsequent grant of a void bill of sale.81 In modern times, there are unsurprisingly few registered absolute bills of sale and the statutory repeal of the legislation would probably leave little mark on the law.82 In so far as registration under the 1878 Act counters the reputed ownership of the grantor of the bill of sale, the continuing existence of the Act cannot be justified after the repeal of the doctrine of reputed ownership in bankruptcy matters in the insolvency legislation of the 1980s. The Bills of Sale Act 1878 serves no worthwhile purpose and should be repealed for absolute bills of sale. Its survival may owe something to its integration with the Bills of Sale (1878) Amendment Act 1882 in governing security bills of sale. Until something can be done with security bills of sale, the 1878 Act remains of some relevance to absolute bills of sale.
1.25 Formalities are also prescribed for those sale of goods contracts that are also regulated consumer credit agreements under the Consumer Credit Act 1974.83 The powers of the Secretary of State to make regulations dealing with the form and content of agreements are laid down in section 60 of the Act. The regulations made are required to deal, inter alia, with the rights and duties under the agreement, the amount and rate of the total charge for credit and the protection and remedies available to the consumer under the Act.84 Particular mention is made in section 60(2) of the power to regulate the manner in which specific information is included or excluded in documents and to ensure that specified information is brought to the attention of the consumer.85 Section 61 of the Act also requires regulated agreements to be signed by the consumer and by or on behalf of the credit provider. The document signed must contain all the terms of the agreement, other than implied terms.86 The consumer must also receive a copy of the agreement when he signs it, if (p. 13) at that time it becomes an executed agreement; if it is not executed at that time, then a copy of the executed agreement must be delivered within seven days following the making of the agreement.87 The consumer is also entitled to be notified of his rights of cancellation and of the manner in which they may be exercised if the agreement is a cancellable one.88 A failure to comply with the above requirements means that the agreement is not properly executed, which in turn means that it may be enforced only with a court order.89
Deemed gift of unsolicited goods.
1.26 The Unsolicited Goods and Services Act 197190 was passed to deal with one particular abusive practice in the formation of contracts,91 namely, the practice of inertia selling, by which goods were sent without prior request to recipients with the accompanying information that they were to be considered sold at the stated price unless the recipients declared in time their intention not to buy the goods. There is little doubt that many recipients, whether through inertia or a less-than-perfect understanding of the principles of contract formation, paid the demanded price and kept the goods. The civil consequences of sending unsolicited goods are no longer dealt with by the 1971 Act but now come under the Consumer Protection (Distance Selling) Regulations 2000.92 The key provision is regulation 24, which provides that, as between the sender and the unwilling recipient, the latter may ‘use, deal with or dispose of the goods as if they were an unconditional gift to him’93 and the sender’s rights in the goods shall be extinguished.94 It is not clear what the position would be if the recipient’s first response is to have nothing to do with the goods and even to demand that the sender take back the goods. If the recipient has agreed to return the goods, then the civil consequences of sending unsolicited goods no longer apply.95 In the absence of an agreement to return, the better view, given the need to protect recipients and to free them from the burden of taking legal advice, is that the recipient is free to revert to his statutory right to treat the sending of the goods as a gift. The Regulations do say that the sender’s rights in the goods are extinguished, without providing that this extinguishment is conditional on the recipient choosing to treat the goods as a gift. A further difficulty is that the Regulations do not say the goods are a gift, but rather confer upon the recipient a type of statutory immunity (p. 14) when using, dealing, or disposing of the goods. It does not follow that this provision would protect a donee to whom the recipient makes a gift of the goods, though a sale of the goods by the recipient might confer an effective title on the buyer outside the Regulations.96 If the recipient were simply to abandon the goods, it is also unclear whether the sender could claim the goods as an owner with the right to immediate possession, though the apparently unconditional provision that the sender’s rights in the goods are extinguished seems to indicate that this is not the case. The sender would therefore have to compete with the rest of the world to acquire ownership of the goods by capture. This solution might also resolve the problem of the donee mentioned earlier, who could be considered as having acquired ownership by capture.
1.27 Before the civil consequences laid down in regulation 24 can apply, a number of conditions have to be satisfied.97 First, the goods have to be sent with a view to the recipient acquiring them. This would protect the sender if the goods were mistakenly sent to the wrong person or to the wrong address. The recipient would need to think long and hard about treating the goods as a gift if there were a possibility, which might be based on evidence not available to the recipient, that a mistake of this kind had occurred. Secondly, the sender is protected if the recipient had no reasonable cause to believe that the goods were sent for the purpose of acquisition by a trade or business. Circumstances could arise where it is no easy matter for the recipient to read the mind of the sender.98 Thirdly, the recipient must not have requested the goods or have agreed to return them. Finally, the Regulations make it an offence, without reasonable cause to believe there is a right to payment, to demand or claim payment, or to threaten legal or collection proceedings or place a recipient on a blacklist.99
1.28 With one exception, contracts concluded by electronic means follow orthodox rules of contract formation, which will not be repeated here. The entry of data on a website accompanied by the selection of the appropriate box or boxes would, in an entirely orthodox way, be treated as an offer when there is a commitment being made to purchase; the operator of the website would then accept and would communicate electronically the acceptance to the person inputting the data. The provisions of the Electronic Commerce (EC Directive) Regulations 2002,100 nevertheless, contain provisions of particular interest concerning the process of contract formation. They are designed to promote the proper functioning of the internal market to the minimum extent that intervention in this way accords with the principle of proportionality.101 A ‘service provider’ providing a commercial communication as part of an ‘information society service’102 must, inter alia, ensure (p. 15) that that communication is ‘clearly identifiable as a commercial communication’, ‘clearly identify the person on whose behalf the commercial communication is made’, and ‘clearly identify as such any promotional offer (including any discount, premium or gift) and ensure that any conditions which must be met to qualify for it are easily accessible, and presented clearly and unambiguously’.103 Furthermore, ‘any unsolicited commercial communication sent by him by electronic mail’ must be ‘clearly and unambiguously identifiable as such as soon as it is received’.104 In addition, a service provider is required, where a contract is to be concluded by ‘electronic means’, to state in ‘a clear, comprehensible and unambiguous manner’ the ‘different technical steps to follow to conclude the contract’, ‘whether or not the concluded contract will be filed by the service provider and whether it will be accessible’, ‘the technical means for identifying and correcting input errors prior to the placing of the order’,105 and ‘the languages offered for the conclusion of the contract’.106 The Regulations also require that a service provider shall make available to the other party terms and conditions that are applicable to the contract in a way that permits that other party to store and reproduce those terms and conditions.107 The Regulations require also a certain response to offers made to service providers, who must acknowledge receipt of the order without undue delay and by electronic means108 and also make available ‘appropriate, effective and accessible technical means’ allowing the other party to identify and correct input errors prior to placing the order.109 The order is deemed to be received when the addressee is able to access it, which is an orthodox statement of the position in general contract law, and the same goes for the ‘acknowledgment of receipt’, which is a communication with no special significance in general contract law.110 That acknowledgement of receipt can also be provided in the form of performance of the contract by the services provider.111
1.29 An action for damages for breach of a statutory duty exists in a number of cases in the Regulations.112 The exception to orthodox rules of contract formation referred to previously concerns a rule that, with the aid of a statutory remedy of rescission,113 inhibits the formation of a contract concluded imperfectly by electronic means. As stated earlier, regulation 11(1)(b) states that a service provider must make available to the other party ‘appropriate, effective and accessible technical means allowing him to identify and correct input errors prior to the placing of the order’. If the service provider fails to comply with regulation 11(1)(b), persons entering into a contract with the service provider are entitled (p. 16) to rescind the contract, subject to the discretion of the court that rescission should not be allowed.114 The Regulations do not define ‘rescission’ but the mischief behind the provisions in question points strongly to a treatment of the contract as though it had never been made.
1.30 Although Part II of the Sale of Goods Act is entitled ‘Formation of the Contract’, the only provision dealing with the formation of contracts,115 section 57 on auction sales, is located elsewhere in the Act. Section 57(2), in providing that the contract is concluded when the auctioneer announces this by the fall of the hammer or in some other customary way, codifies one of the earliest common law rules on contract formation.116 The bidder consequently makes the offer which, in accordance with ordinary contract principle, the auctioneer is free to accept or refuse.117 The contract concluded in this way relates to the particular lot announced to be the subject of the bidding, unless this presumptive rule is displaced in the circumstances.118 There is an exception to the binding nature of a contract concluded by the auctioneer’s announcement. It arises where bidders have been notified that the auction is subject to a reserve or upset price.119 If a sale is announced by the auctioneer below this price, it has been held120 that an auctioneer refusing to complete the contract in these circumstances may not be sued by the successful bidder for breach of his warranty of authority.121 The auctioneer also clearly lacks the actual authority to bind the principal. Furthermore, having notified the reserve price, the auctioneer cannot bind the principal on the ground of apparent authority.
Seller’s right to bid.
1.31 Besides an auction being notified as subject to a reserve or upset price, it may also be notified as subject to a right to bid by or on behalf of the seller.122 Where a right to bid is thus reserved, the seller, or any single person in his stead, is entitled to bid at the auction.123 If no such notification is made, it is unlawful for the seller to bid or to employ someone else to bid.124 An auctioneer, moreover, who knowingly takes such a bid also acts unlawfully.125 The Act goes on to provide that a sale concluded after an unlawful bid may be treated as fraudulent by the buyer.126
1.32 A number of questions about reserve prices and rights to bid arise under the Sale of Goods Act. First, it is not clear from the Act what the position is where a reserve price (p. 17) has not been notified but the auctioneer withdraws the goods. The Act does not as such say that withdrawal of the goods is wrongful. Nevertheless, it has been held that the auctioneer is liable on a collateral contract to sell to the highest bidder. The consideration for the auctioneer’s promise to sell to the highest bidder may be seen in the detriment incurred by an offeror making a bid that was liable to be accepted, or in the benefit accruing to the auctioneer of increased attendance at the auction.127 The same collateral contract liability should arise where the goods are knocked down to the seller or his agent.128 Section 57(2), in accordance with normal contract principle, states that the contract of sale is concluded on the fall of the hammer or in some other customary manner, but this provision does not affect the collateral contract claim. Secondly, where an auction is not subject to reserve, the Act does not provide for all consequences of an unlawful bid being made by or on behalf of the seller or knowingly accepted by the auctioneer. The Act does deal with the case of the successful bidder, but does not deal with other disappointed bidders. Since they will have been outbid by the successful bidder, they would seem not to have suffered any loss as a result of any breach by the auctioneer of a collateral undertaking to sell to the highest bidder.129 Thirdly, whilst the successful bidder may treat the ‘sale’ as fraudulent when an unlawful bid has been made,130 there is some doubt whether ‘sale’ should be understood in the same way as it is elsewhere in the Act, where it is distinguished from an ‘agreement to sell’.131 Common sense would require ‘sale’ to be read broadly to include also contracts of sale so that the seller could not recover damages from a non-accepting buyer who has made a successful bid.132 Fourthly, although the successful bidder should be able to rescind the contract of sale for fraud, after an unlawful bid, in accordance with the limits imposed for rescission in fraud cases, the question of damages is not so easy where, for example, the buyer has lost the right to rescind. Presumably, damages would lie in the tort of deceit against the seller, but it is not clear whether only the seller would be liable or whether the auctioneer would also be liable, with joint and several liability between the two. Section 57(5) deems the sale to be fraudulent and not the behaviour of those acting unlawfully in making or permitting bids when the auction is conducted. The auctioneer is not a party to the contract of sale.133 Although section 57(5) as such may not impose liability on the auctioneer, the auctioneer’s conduct may be fraudulent at common law. Where damages are awarded, they should be on the normal fraud scale, which is for all direct losses arising out of entry into the contract.134
Withdrawal from consumer credit transactions.
1.33 The Consumer Credit Act grants the right to withdraw from or cancel an agreement (often referred to as the right of cooling off) in two categories of case. First, there is section 66A of the Act,135 which largely supersedes the second case, in sections 67 to 74, which arises only where section 66A is inapplicable.136 Section 66A confers an unconditional ‘right of withdrawal’ for a fourteen-day period. It does not apply to consumer hire agreements,137 nor does it apply to those consumer credit agreements, including credit sale, conditional sale, and hire purchase agreements, that provide credit in excess of £60,260.138 The fourteen-day period runs from the day after the latest of the following events:139 the day the agreement is made; the day the creditor informs the debtor of the credit limit under the agreement, in those cases where the creditor is required to notify the debtor of this; the day when a copy of the agreement is provided in section 61A cases;140 and the day when a copy of the agreement is provided in section 63 cases.141 Section 66A also contains various provisions dealing with the giving and receipt of oral and written notices.142 Taking consumer sale, credit sale, and hire purchase as examples, the effect of a withdrawal should be carefully noted. First of all, the agreement (and the same goes for an ancillary service contract)143 is treated as though it had never been entered into,144 a graphic expression that does not accurately depict the consequences of all cases. Secondly, the debtor is required to repay the creditor the amount of the credit provided together with accrued interest at the rate provided for by the agreement, without any additional charge except for a charge exacted by a public administrative body. The amount to be repaid must be repaid without undue delay and no later than thirty days from the giving of the notice of withdrawal. As and when repayment of the credit so far advanced is made, title to the goods vests in the debtor ‘on the same terms as would have applied if the debtor had not withdrawn from the agreement’.145 This odd formulation cannot quite be taken at face value. Since the debtor retains the goods, section 66A can only mean that the buyer or hire purchase bailee now obtains them on the basis of a cash sale. The only feasible method of determining the cash price in accordance with the Act is to collapse all future instalments and discount them into one presently owed lump sum. This is, nevertheless, hardly a case of the goods being obtained ‘on the same terms’. It is a most curious right of withdrawal that when exercised commits the buyer or bailee to retain the goods; section 66A may turn out to be a trap for the unwary if they find themselves having to pay for goods that they cannot afford. Had the buyer or bailee wished to acquire the goods on a cash basis, then presumably he would not have entered into the credit agreement in the first place. The consequence of withdrawal, therefore, is that the debtor is not put into the same position as if he had never entered into (p. 19) the credit agreement. For many, indeed most, buyers and bailees, the right of cancellation in sections 67 to 74 would be a greatly preferred outcome, but the legislation does not give them the choice. Sections 67 to 74 apply only where section 66A does not.146 There is consequently no scope for an argument that a consumer exercising a right of cancellation under the former provisions is not exercising a right of withdrawal under the latter provision.
Cancellation of consumer credit transactions.
1.34 For regulated consumer credit agreements, including conditional sales, credit sale, and hire purchase, in excess of £60,260 credit, and for non-hire-purchase bailment, sections 67 to 74 of the Consumer Credit Act grant rights of cancellation in certain circumstances,147 a subject dealt with also by the Consumer Protection (Distance Selling) Regulations 2000.148 Given section 66A, it will be an infrequent case in which these provisions apply to regulated conditional sales, yet the contrast they present to section 66A requires the detail of them to be considered. Where an agreement is cancellable, the consumer has a cooling-off period of five days149 from the delivery to him of a copy of the unexecuted agreement or notice to him of the existence of rights of cancellation. For practical purposes, these two starting points are the same, since an improperly executed agreement, which would include one that did not give notice of cancellation rights, is not enforceable against the consumer.150 For transactions involving goods, a cancellable agreement is one where antecedent negotiations include oral representations made in the presence of the consumer by the negotiator (typically, a dealer under a three-party conditional sale arrangement) or an agent of the negotiator, and the unexecuted agreement is signed by the consumer at the premises of the other party or of a negotiator.151 Cancelling the agreement means that the agreement never was concluded.152 The effect of cancellation is that money paid by the consumer and credit advanced to the consumer are recoverable.153 The consumer entitled to the recovery of money paid has a lien on any goods supplied until repaid,154 but in the meantime has a duty to take reasonable care of the goods.155 The consumer’s duty to restore the goods is to do so at his own premises,156 though he may undertake to have them transported elsewhere.157 If the consumer has traded in goods by way of part-exchange allowance, he is entitled to recover the allowance unless the part-exchange goods are returned to him in substantially the same condition within ten days of the date of cancellation.158 Where credit has already been advanced to the consumer, the agreement remains in force for the repayment of (p. 20) that sum with interest,159 except that the consumer is free from having to pay any interest if he repays the advance within one month of serving the notice of cancellation.160
1.35 Subject to any changes brought in when a 2011 Directive is transposed,161 the practice of distance selling in consumer cases will continue to be governed by the Consumer Protection (Distance Selling) Regulations 2000.162 These Regulations transpose an EC Directive on the protection of consumers in respect of distant transactions.163 In respect of goods, the Regulations apply to contracts for the supply of goods164 to a consumer165 made under an organized distance sales scheme by a supplier166 who uses exclusively one or more means of distance communication.167 Apart from exceptional cases,168 consumers have a right to cancel sale of goods contracts.169 The period in the standard case runs for seven working days beginning with the day after the day the consumer receives the goods,170 but it depends on the supplier complying with the requirement that stipulated information, which includes information about cancellation rights,171 be given to the consumer either prior to the contract or in good time and before delivery.172 Otherwise, if the information is provided within the three months beginning on the day after the consumer receives the goods, the seven-day cancellation period starts on the day following the consumer’s receipt of (p. 21) the information.173 Where neither of these two periods apply, the period ends three months and seven working days after the day on which the consumer receives the goods.174 The information referred to relates first of all to the right of cancellation, and concerns the conditions and procedures for exercising the right of cancellation, including notification of the consumer’s duty to return the goods where a term of the contract so requires and information about whether it is the consumer or the supplier who under the Regulations bears the cost of recovering the goods or returning them to the supplier.175 In addition, the running of the cancellation period depends upon the supply of information concerning the geographical address of the supplier’s place of business to which complaints should be made, after-sales services and guarantees and, for contracts of more than one year’s duration or of unspecified duration, the conditions governing the right of cancellation.176 There is also a requirement under the Regulations that other information be provided in the case of distance contracts,177 but the failure to give this information does not govern the exercise of cancellation rights.178
Distance selling: effects of cancellation.
1.36 The effects of cancellation under the Regulations bear some resemblance to the effects of cancellation under sections 67 to 74 of the Consumer Credit Act 1974. First of all, the contract is generally treated as if it had not been made.179 The supplier must return moneys paid no later than thirty days from the beginning of the day on which notice of cancellation was given,180 though the supplier may levy a charge for the return of the goods where the cost of this should have been but was not borne by the consumer.181 Cancellation of the supply contract entails also cancellation of a related credit agreement.182 The consumer on cancellation is bound to restore the goods; during the period that the goods were in his possession, he is deemed to have been bound to retain in his possession and take (p. 22) reasonable care of them.183 The consumer’s duty to deliver the goods is a duty to make them available at his own premises and his duty to take reasonable care ceases after the twenty-one days following the date on which notice of cancellation was given if he receives no request to make the goods available.184 If the consumer was bound to return the goods and not just to make them available, the twenty-one-day period becomes a six-month period.185 A consumer who fails to comply with his obligations concerning the restitution or return of the goods is liable to an action for breach of statutory duty.186 If the consumer has provided goods in part-exchange, these must be returned to him within ten days starting from the date of cancellation, unless the consumer is to recover instead the part-exchange allowance.187 Upon receipt of the allowance, title to the goods vests in the supplier if it has not already done so.188
1.37 Doorstep selling is a practice that can give rise to abuses taking the form of denial of choice and harassment in the formation of contracts. For some years after the Consumer Credit Act 1974 was enacted, with its introduction of cancellation rights for regulated consumer credit agreements, no legislation provided cancellation rights for sales that lacked a credit element. This omission was first rectified by the Consumer Protection (Cancellation of Contracts Concluded away from Business Premises) Regulations 1987,189 which adopted an EEC Directive to protect consumers in respect of contracts negotiated away from business premises.190 These Regulations were later revoked by the current governing instrument, the Cancellation of Contracts made in a Consumer’s Home or Place of Work etc. Regulations 2008,191 which re-implemented the 1985 Directive that the 1987 Regulations had earlier sought to transpose.192 Subject to any changes brought in when a 2011 Directive is transposed,193 these Regulations will continue to apply. The 2008 Regulations apply to contracts for the supply of goods or services between a consumer194 and a trader195 made in any one of three cases: during a ‘visit’196 made by a trader to the home of the consumer or another person or to the consumer’s place of work; during an excursion organized by the trader away from (p. 23) his business premises; and after the consumer has made an offer to purchase goods or services during such a visit or excursion.197 There are three exceptional instances where the Regulations do not apply:198 first, in the case of ‘excepted contracts’;199 secondly, where a right of either withdrawal or of cancellation exists in the case of a regulated consumer credit agreement under the Consumer Credit Act;200 and thirdly, where the trader makes a solicited visit to the home of the consumer or of another individual, or to the consumer’s place of work. In this last case, a solicited visit is defined with no small degree of circumspection so as to exclude invited visits that follow unsolicited telephone calls or unsolicited visits, and to exclude also visits where the ensuing contract concerns goods or services other than those that formed the subject matter of the request (except where the consumer at least should reasonably have known that these other goods or services formed part of the trader’s commercial or professional activities).201 Where the Regulations apply, a contract may not be enforced against a consumer who does not receive a notice of his right of cancellation and the information required by regulation 7.202 The notice must be in writing and supplied at the time the contract is made,203 or at the time a consumer makes an offer where this occurs after a visit or excursion.204 The notice has to be dated, indicate the right of cancellation within the cancellation period, be easily legible, and contain specified information205 and a detachable cancellation slip.206 The notice must also state that any related credit agreement will also be cancelled and that any goods or services supplied with the consumer’s consent prior to cancellation will have to be paid for.207 The consumer’s right to cancel the agreement runs from seven days starting with the date the consumer receives notice of the right of cancellation.208 If the consumer serves a cancellation notice within the cancellation period,209 the contract is cancelled and treated as though it had never been entered into.210 A related credit agreement is automatically cancelled.211 Any notice that (p. 24) indicates the consumer’s intention to cancel will suffice,212 though a form is also provided in the Regulations.213 The notice must be served on the trader or other person specified in the notice of cancellation rights.214 A contract term inconsistent with a provision in the Regulations for the protection of consumers is void.215 The Regulations also contain a number of offences, liabilities, and defences,216 as well as provisions on enforcement.217
Doorstep selling: effects of cancellation.
1.38 A contract that is cancelled is deemed never to have been concluded.218 Two cases arise for consideration: first, performance under a ‘specified’ contract219 commences before the expiry of the cancellation period; secondly, performance commences afterwards. In the former case, special provision is made if earlier performance is sought in writing by the consumer.220 In this case, the consumer must pay for the goods and services supplied before cancellation ‘in accordance with the reasonable requirements of the cancelled contract’.221 This vague phrase leaves much discretion to the judge, who might be justified in departing from a unit price approach. If the consumer’s request is not in writing, the trader need not begin performance before the expiry of the cancellation period and the consumer need not pay for goods or services supplied before cancellation.222 In the latter case, the position is as follows. So far as sale of goods contracts are concerned, the consumer is entitled to recover money that has been paid and has a lien over goods supplied for the recovery of the money.223 With certain exceptions,224 the consumer is under a duty to restore those goods.225 Restoration means making the goods available at the consumer’s premises further to the trader’s written request,226 though the consumer may instead return the goods.227 Until restoration or return occurs, the consumer is under a duty to take reasonable care of the goods228 and is liable for breach of statutory duty for any failure to comply with a duty laid down in the Regulations.229
1.39 Consumers have statutory rights to terminate ahead of time certain types of regulated agreements under the Consumer Credit Act 1974, including conditional sale contracts.230 The consumer may terminate the contract with prospective effect at any time before the final payment falls due,231 except where title to the goods has been transferred to someone other than the debtor under the regulated agreement.232 Upon early termination, the consumer must pay the amount by which one half of the total price exceeds the aggregate of moneys due and paid immediately before termination, unless the contract calls for a lesser sum to be paid or makes no provision for payment at all.233 There is also, in the case of ‘open-end’ consumer credit agreements,234 a right to terminate the agreement235 at any time subject to a contractual period of notice not to exceed one month.236 This provision is likely to have little if any application to sale of goods contracts.
1.40 Part II of the Sale of Goods Act contains limited provision on contractual capacity. It has nothing to say about corporate capacity.237 Section 3 deals only with the purchase of ‘necessaries’, leaving all other matters arising in connection with capacity to buy and sell and matters of property to the general law.238 Section 3 applies only to minors and persons who are not competent to contract as a result of drunkenness.239 A minor is someone who has not yet attained the age of 18.240 According to section 3(2), the incapacitated person must pay a reasonable price for necessaries that are sold and delivered. This raises three major points. First, ‘necessaries’ are defined in general terms by section 3(3) as ‘goods suitable both to the condition in life of the minor’ or other incapacitated person and to his actual requirements at the time of the sale and delivery. The definition has been particularly hard to apply in the case of minors. The question whether goods are necessaries is a mixed question of law and fact, so that there must be some evidence on which a finding to that effect can be made.241 It is the seller who carries the burden of proving that the goods are necessaries242 and, given the nature of the test, it will often be a difficult burden to discharge. The seller will have to show that the goods are necessaries, having regard not only to the condition in life of the minor, but also to the minor’s existing provision of goods of that kind.243
1.41 Secondly, section 3(2) applies only to necessaries ‘sold and delivered’. Where the goods have not yet been delivered, or have been delivered but the property has not yet passed to the buyer, the common law applies and does not give a clear answer to the question whether either or both of the seller and buyer are bound.244 Since the minor lacks capacity to contract,245 there is no reason to give the protection of a binding contract to a seller who can help himself by refusing to deliver, or by taking proceedings for the recovery of goods, in which he has reserved the general property, against a minor unlawfully retaining possession. Nor is there any reason to give the minor a right to compel further performance of the contract by demanding that the seller deliver the goods or convey the property in them. Thirdly, the contractual price is displaced by the reference to a reasonable price. That is consistent with the price recoverable on a restitutionary basis under the old count of goods sold and delivered.246 It is not necessarily predicated upon a binding contract. Section 3(2) does not include the count of goods bargained and sold, applicable where the property had passed but delivery had not yet been made. A seller dealing with a minor in these circumstances is protected by the unpaid seller’s right of retention in section 39 and the right of resale in section 48. Such a seller does not need the protection of a personal action as well. Section 3 can therefore be rationalized as minimal legislative intervention designed to avert an unjustified enrichment of the minor. It would take a modern rationalization of the law to interpret it as a partial codification of the law dealing with the enforcement of contracts against minors.
1.42 Section 8(1) of the Sale of Goods Act, after making the uncontroversial point that the parties are at liberty to settle the price in the contract, goes on to say that it ‘may be left to be fixed in a manner agreed by the contract, or may be determined by the course of dealing between the parties’.247 Section 8(2) then states that the buyer must pay a reasonable price248 where ‘the price is not determined as mentioned in sub-section (1)’. There is an ambiguity at the heart of this provision which captures the difficulty of knowing how far the law is prepared to go in enforcing uncertain contracts for the sale of goods. The question is whether (p. 27) the word ‘determined’ is to be read as ‘actually determined’ or as ‘to be determined’. If it is the former, then section 8(2) is literally capable of application to cases where the parties have prescribed a method of determining the price,249 but for one reason or another the agreed machinery has broken down. If section 8(2) bears the latter meaning, however, it will apply only where the contract fails to create machinery for establishing the price. It will thus certainly apply where the contract says nothing at all about the price; arguably, it will also apply where the price is indirectly described in terms of a current or future standard that is treated as though it were self-executing, such as a ‘fair price’ or a ‘reasonable price’. As the law has developed, it seems likely that the former approach is correct, at least to the extent that the contractual relations of the parties are well enough defined for there to be a binding contract at common law to which section 8(2) can apply.250
Executed and executory contracts.
1.43 Section 8(2) was codified on the basis of a number of nineteenth-century authorities where nothing was said about the price.251 In most of these decisions, the seller’s consideration had actually been executed, by delivery of the goods to the buyer or to an agent of the buyer, such as a carrier. Where this had occurred, it was not necessary to assess the buyer’s liability in terms of any special or express contract between them. Indeed, it could be assumed that there was no special contract to embarrass resolution of the matter, which was handled off the contract in the indebitatus count of goods sold and delivered. The buyer was rendered liable in a price action, and an amount was adjudged owing that was the reasonable, fair, or market value of the goods at the time of their delivery.252 So far, this line of development would not extend to cases where the seller wished to pursue a damages action for non-acceptance under an executory contract. This decisive step was taken in Hoadly v M’Laine,253 where a carriage was manufactured to the buyer’s specifications254 and the buyer held liable, on the basis of the reasonable value of the carriage, in a damages action.255 Doubts have nevertheless been expressed in Australia in modern times about whether section 8(2) should apply to executory contracts.256
1.44 Section 8 deals with only one source of uncertainty in a sale of goods contract, the amount of the price. It does not deal with elements such as the amounts of delivery and payment that have to be made under an instalment contract, or the time and place of delivery,257 which are left to the common law.258 The prevailing approach is for the courts to strive for the enforcement of agreements, on the ground that a transaction intended to be binding should as far as possible be upheld: verba sunt intelligenda ut res magis valeat quam (p. 28) pereat.259 They are particularly likely to adopt this attitude in the case of ‘mutual dealings arising out of a specialist trade’.260 In addition, the old distinction between executory and executed contracts survives to the extent that a greater judicial willingness to enforce an incomplete agreement is likely to be presented in executed consideration cases.261 One reason for this is that the prejudice suffered by the claimant if the defendant is released from his undertaking will probably be greater in such a case.262 Another reason may be that the sale of goods agreement is but part of a larger whole, such as a compromise agreement, and any difficulties presented by the sale agreement ought not to be allowed to upset the larger agreement.263 A court is likely to enforce a contract even if sense cannot be made of one of its terms, if that term is plainly unimportant or meaningless,264 but will not thus intervene if the term is important and sense cannot be made of it,265 or if a particular method of valuation chosen by the parties has broken down and was not necessarily designed to produce the fair or reasonable price that would be reached by the trier of fact.266
Agreements to agree.
There is, in my view, implicit support here for the doctrine that in a commercial contract, which, when dealing with the future and sometimes the long-term future of necessity leaves certain matters such as price to be worked out over time, an arbitration clause assists the Court to find sufficient certainty by means of the implication of what is reasonable. Which is not to say, that the Court will not itself provide the dispute resolution machinery, even in the absence of an arbitration clause.273
Furthermore, the May & Butcher objection that section 8(2) of the Sale of Goods Act is brought into play only when an agreement passes the test of a binding contract at common law274 may be countered in the following way. Section 62(2) introduces common law contract rules into sale of goods contracts only to the extent that these are not inconsistent with the provisions of the Act. Since the prohibition on enforcing agreements to agree appears to contradict the literal wording of section 8(1) and (2), it would seem that such agreements should be enforced in accordance with the terms of the section, whatever might be the position under the general law of contract.275
Agreements to negotiate.
1.46 The rule that an agreement to agree is unenforceable has long given rise to difficulties where parties have entered into an agreement to negotiate, even though an agreement to negotiate does not compel the conclusion of a binding contract. In Walford v Miles,276 Lord Ackner treated an agreement to negotiate as every bit as lacking in certainty as an agreement to agree. He went on, moreover, to say that an agreement to negotiate in good faith was ‘repugnant to the adversarial position of the parties when involved in negotiations’ and thus too uncertain to be enforced.277 The general bar on giving effect to agreements to negotiate means that a clause seeking to lock the seller of a business into negotiations for the sale of that business over a stated period cannot be enforced,278 despite the (p. 30) prejudice that this might cause negotiating parties who have sunk costs into the negotiation process,279 though the same objection does not apply where a sufficiently precise clause (a ‘lock-out clause’) precludes the vendor from opening competing discussions with the third parties over a stipulated period.280 There are, moreover, cases of long-term supply contracts, where a contract containing a future price negotiation clause has been acted upon and the courts have exceptionally given effect to the negotiation clause by treating it as indicating in market conditions a reasonable price.281 This is consistent with the view that declaring a contract unenforceable for lack of certainty is a measure of last resort. The court will do its best to find substitute machinery for the agreement to agree.282 In Queensland Electricity Generating Board v New Hope Collieries Pty Ltd,283 critical elements in the pricing formula for coal were to be the subject of fresh negotiation five years into a fifteen-year supply agreement. The Privy Council held that the parties had impliedly agreed to use reasonable endeavours and, failing agreement, to do all that was reasonably necessary to procure the appointment of an arbitrator to resolve the issue. There was plainly an intention to enter into binding legal relations and it was implicit in the agreement that the new pricing structure was to be fair and reasonable. Furthermore, in Walford v Miles itself, Lord Ackner stated that an agreement to use best endeavours to agree would not be open to the same objection as an agreement to agree.284 Despite this, there is a general refusal to treat best endeavours agreements to negotiate as binding.285 Apart from best endeavours agreements, a further attempt to preserve flexibility in the negotiating process comes from the proposal that, while an implied obligation to negotiate in good faith is unenforceable, it may be that an express agreement to negotiate in good faith is enforceable, especially where it is entered into under an already binding contract.286 The problem with this proposal is that, if an express agreement to use best endeavours is unenforceable, why should the outcome be any different if there is an express agreement to negotiate in good faith?287 The two types of negotiation clause are close to saying the same thing. A more constructive approach to negotiation clauses is likely to be adopted for long-running and partly executed contracts, such as that in the Queensland Electricity case. Even so, the meaning of a negotiation clause does not become any clearer just because the contract has been acted upon for a period of time if we are to abide by the rule that a contract may not be interpreted in the light of subsequent conduct.288 If a negotiation clause is capable of being interpreted in some cases, then it should be open to interpretation in all cases, executory and executed alike. The fundamental commitment in English law to (p. 31) the enforcement of parties’ agreements is in time likely to, and should, lead to the general enforcement of express best endeavours and good faith negotiation clauses.
1.47 Section 9 of the Sale of Goods Act deals with contracts where the price is to be settled by a third-party valuer. Subsection (1) deals with two cases. First, where the valuation machinery breaks down because the designated valuer cannot or will not do the job, the agreement is avoided.289 Secondly, where the machinery thus breaks down but a part or all of the goods are delivered to and appropriated by the buyer,290 the buyer is bound to pay a reasonable price on the basis of an indebitatus count for goods sold and delivered.291 Section 9(2) then goes on to create a special statutory action in damages where either the buyer or the seller is at fault in causing the valuation machinery to break down: it could, for example, deal with a case where one of the parties refuses to carry out an undertaking to name one of two agreed joint valuers.292 There is no justification for the special treatment in section 9 of this one aspect of contractual formation. It would be better to allow such issues to be resolved by the general law of contract, or by a sufficiently general statutory text that embraced other examples of obstructive behaviour in the bargaining process. This would allow the law to develop unimpeded by a nineteenth-century approach to formation in one corner of the law. There seems every reason nowadays to apply a fair or reasonable price where two parties each appoint a valuer but the machinery breaks down because of one of those valuers;293 yet section 9(1) states that the agreement is avoided.(p. 32)
8 See Stevenson v Rogers  QB 1028, 1040 (Potter LJ): ‘The Act of 1979 forms a single code; however, that is upon the basis simply that it consolidates and enacts within one statute and without material amendment a number of disparate statutes previously governing the field of sale of goods.’ The learned judge went on to say that a consolidating Act was not more than ‘the sum of its parts’ and that, if doubt as to any of its provisions arose, they were to be construed as if they had remained in the earlier Act or Acts: ibid.
18 Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011. This amends Council Directive 93/13/EEC (on unfair terms in consumer transactions) and Directive 1999/44/EC of the European Parliament and of the Council (on certain aspects of the sale of consumer goods and associated guarantees). It also repeals Council Directive 85/577/EEC (on contracts negotiated away from business premises) and Directive 97/7/EC of the European Parliament and of the Council (on consumer distance contracts).
19 The parties to a transaction governed by the Consumer Rights Bill 2013 are a trader and a consumer. A trader is a person acting for purposes ‘relating to [his] trade, business, craft or profession’ (cl. 2(2)). A consumer is ‘an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession’ (cl. 2(3)).
22 CLOUT: Case Law on Uncitral Texts. There is also an information service organized by Pace University of New York available on the Internet: see <http://cisgw3.law.pace.edu>.
23 A private body, the CISG Advisory Council, has taken on this role; see <http://www.cisgac.com>.
27 P. S. Atiyah (1980) 65 Iowa LR 1249. A clear manifestation of this trend is apparent in the modern cases dealing with contractual interpretation. See, e.g., Rainy Sky SA v Kookmin Bank  UKSC 50;  1 WLR 2900.
28 The right to terminate for breach was firmly established as a matter of law by cases such as Bentsen v Taylor, Sons & Co. (No. 2)  2 QB 274. Perhaps the best-known example is the laying down of rules governing remoteness of damage in contract; see Hadley v Baxendale (1854) 9 Ex. 341; A.W.B. Simpson (1979) 46 U Chi LR 533.
31 But for references to the Sale of Goods Act 1893 codifying rather than the reforming law, see e.g. Bristol Tramways & Carriage Co. Ltd v Fiat Motors Ltd  2 KB 831, 836; Harris v Tong (1930) 65 OLR 133, 137 (Can.); Healing Sales Pty Ltd v Inglis Electrix Pty Ltd (1968) 121 CLR 584, 612 (Windeyer J).
32 For a statement of the need to examine pre-codification authorities, see M/S Aswan Engineering Establishment Co. v Lupdine Ltd  1 WLR 1. For the opposite view, see Rogers v Parish Motors (Scarborough) Ltd  2 All ER 232 (Mustill LJ) and Marimpex Mineralöl Handels GmbH v Louis Dreyfus et Cie GmbH  1 Lloyd’s Rep. 167, 179. Assuming the latter approach to an unhelpful statutory definition, how should a court dealing with ‘satisfactory quality’ approach cases decided under the ‘old’ s. 14(6) definition of merchantable quality? See further the examination of the pre-1973 authorities in Cehave NV v Bremer Handelsgesellschaft mbH  QB 44.
33 The Ontario Law Reform Commission, Report on Sale of Goods (1979), i, 23–4, refers to a number of rules as ‘original defects’. But, to take one example, the ‘artificial restrictions on the remedies of a buyer in a sale of specific goods’ were in fact a faithful reflection of a lingering caveat emptor ethic.
34 L. C. B. Gower, Foreword to P. S. Atiyah, The Sale of Goods (Pitman, 1963) (‘perhaps, his least happy effort’). A similar judgment is that of K. Llewellyn, who referred to the Act as drafted ‘not by Blackburn nor by Bramwell, nor yet by Hamilton or Kennedy, but by merely an able lawyer who knew his Bills and Notes’: (1937) 37 Col LR 341, 409.
[T]he contract of sale...[i]n part...is governed by principles peculiar to itself, and in part by principles common to all [consensual and bilateral] contracts...The Act, except incidentally, deals only with the first-mentioned principles. The principles of law which govern the contract of sale, in common with all other consensual contracts, are outside its scope. But they are saved by sect. [62(2)].
37 Introduction to the first edition of Chalmers, The Sale of Goods Act, 1893, and reproduced in all subsequent editions of the work: ‘Sale is a consensual contract, and the Act does not seek to prevent the parties from making any bargain they please. Its object is to lay down clear rules for the case where the parties have either formed no intention, or failed to express it.’
[I]f there is one thing which more than another public policy requires it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by Courts of justice.
47 Watt v Westhoven  VLR 458, 463: ‘Much of the language, and the arrangement in which the Act has codified the common law, would have to be revised to accommodate a doctrine whereby every warranty could become a condition, and every inducing statement not warranted would be a condition also.’ The approach taken in this case to misrepresentation in s. 62(2) was rejected in Graham v Freer (1980) 35 SASR 424 (Full Ct.). See also Law Reform Commission of New South Wales, Sale of Goods (Report No 51, 1987), paras 2.1 et seq.
48 Leaf v International Galleries  2 KB 86; M. G. Bridge (1986) 20 UBC LR 53; see Ch. 10, paras 10.112 et seq.
49 See Ch. 3.
52 The rule has been applied in numerous commodities cases as a last ditch attempt to curb the application of the strict law on termination for breach: e.g., Société Italo-Belge pour le Commerce et l’Industrie v Palm and Vegetable Oils (Malaysia) Sdn. Bhd.  2 Lloyd’s Rep. 695; Peter Cremer v Granaria BV  2 Lloyd’s Rep. 583; Bremer Handelsgesellschaft mbh v Finagrain, Cie Commerciale Agricole et Financière SA  2 Lloyd’s Rep. 259; Bremer Handelsgesellschaft mbh v C. Mackprang Jnr.  2 Lloyd’s Rep. 221.
57 Gibson v Carruthers (1841) 8 M & W 321; see Ch 11, paras 11.24 et seq.
58 Lord Devlin, Samples of Lawmaking (OUP, 1962), ‘The Relation between Commercial Law and Commercial Practice’ (Lecture 2); L. Trakman, The Law Merchant: The Evolution of Commercial Law (Fred B. Rothman & Co., 1983).
59 Goodwin v Robarts (1875) LR 10 Ex. 337; Edelstein v Schuler & Co.  2 KB 144. For the requirement that custom must be reasonable, see Produce Brokers Co. v Olympia Oil and Cake Co.  2 KB 296, 298.
64 S. 16; see Ch. 3, paras 3.28 et seq.
66 Goodwin v Robarts (1875) LR 10 Ex. 337 (scrip); Edelstein v Schuler & Co.  2 KB 144 (bearer bonds). See M. Bridge, L. Gullifer, G. McMeel, and S. Worthington, The Law of Personal Property (Sweet & Maxwell, 2013), ch. 21.
The expression ‘bill of sale’ shall include bills of sale, assignments, transfers, declarations of trust without transfer, inventories of goods with receipt thereto attached, or receipts for purchase moneys of goods, and other assurances of personal chattels, and also powers of attorney, authorities, or licenses to take possession of personal chattels as security for any debt, and also any agreement, whether intended or not to be followed by the execution of any other instrument, by which a right in equity to any personal chattels, or to any charge or security thereon, shall be conferred, but shall not include the following documents; that is to say, assignments for the benefit of the creditors of the person making or giving the same, marriage settlements, transfers or assignments of any ship or vessel or any share thereof, transfers of goods in the ordinary course of business of any trade or calling, bills of sale of goods in foreign parts or at sea, bills of lading, India warrants, warehouse-keepers’ certificates, warrants or orders for the delivery of goods, or any other documents used in the ordinary course of business as proof of the possession or control of goods, or authorising or purporting to authorise, either by indorsement or by delivery, the possessor of such document to transfer or receive goods thereby represented...
The essence of a bill of sale is that it grants a property interest in ‘personal chattels’ and a licence to the grantee to take possession: see A. Diamond (1960) 23 MLR 399, 402.
82 The subject is dealt with in specialist texts; see especially Halsbury’s Laws of England (5th edn., Title: ‘Financial Services and Institutions’: Part 7, ‘Bills of Sale’ (eds C. Proctor, M. Waters and E. Evey, Butterworths, 2008 (based on the work of R. M. Goode in the 4th edn, 1992)). It is rare for an issue to arise concerning absolute bills of sale, but see, e.g., Koppel v Koppel  1 WLR 802; Online Catering Ltd v Acton  EWCA Civ 1058;  QB 204.
83 A regulated agreement is an agreement between a creditor and a debtor who is an ‘individual’. The credit supplied, if the individual is acting for business purposes, must not exceed £25,000 (ss. 8 and 16B of the Consumer Credit Act 1974). For consumers, the £25,000 upper limit was removed with effect from 6 April 2008, but s. 16A, which came into effect on 6 April 2008, allows for regulations to be made to exclude high net worth debtors from the provisions of the Act.
88 S. 64. The time provision is the same as under ss. 62–63. A failure to comply with the requirement of giving notice within seven days, where applicable, may be waived by the Office of Fair Trading if regulations give the Office of Fair Trading the power to do so: s. 64(4).
91 Other abusive practices are dealt with by the Consumer Protection from Unfair Trading Regulations 2008, SI 2008 No. 1277, as am. by SI 2013 No. 783 (discussed in Ch. 8, paras 8.49 et seq), which repealed Part II of the Fair Trading Act 1973, under which the Director General of Fair Trading exercised powers to combat such abuses. The list of commercial practices deemed unfair in the 2008 Regulations includes pyramid promotional schemes (Sch. 1 para. 14). Pyramid selling and other trading schemes are also the subject of regulation under the Trading Schemes Regulations 1997, SI 1997 No. 30, made under the Trading Schemes Act 1996, which amended Part XI of the Fair Trading Act 1973.
93 Reg. 24(2). Directive 2011/83/EU of the European Parliament and the Council of 25 October would exempt the consumer from any need to provide consideration for unsolicited supplies of goods, water, gas, electricity, services, district heating, or digital content: Art. 27.
95 Reg. 24(1)(c). This would mean that the rights of the sender in the goods, previously extinguished under reg. 24(3), are revived. The revival should be prospective: an agreement to return the goods should not allow the sender to treat prior conduct of the recipient as a conversion of or trespass to the goods.
96 Under s. 21(2)(b) of the Sale of Goods Act, an awkwardly worded provision that would protect the ‘validity’ of a contract of sale concluded by someone exercising a common law or statutory power of sale: see Ch. 5. The recipient of unsolicited goods may be treated as someone exercising a statutory power of sale so far as he acts within the immunity conferred by reg. 24(3).
100 SI 2002 No. 2013, transposing Directive 2000/31/EC of the European Parliament and of the Council on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on electronic commerce).
102 A service provider is defined as a person providing ‘information society services’: reg. 2(1). There are cross-references in reg. 2(1) to EC Directives to clarify the meaning of information society services, but the key point for present purposes is that the expression includes the sale of goods online: see recital (18) of Directive 2000/31/EC.
107 Reg. 9(3). There is no provision made here for an action for damages for breach of a statutory duty but an order may be sought from the court to require compliance on the part of the service provider: reg. 14.
109 Reg. 11(1)(b). There is no provision here for an action for damages for breach of a statutory duty. The word ‘order’ in this provision, reg. 11(1)(b), means a contractual offer, but it does not have that meaning elsewhere in the Regulations (apart from reg. 9(1)(c)).
111 Reg. 11(2)(b). The provisions of reg. 11 do not apply to contracts concluded by an exchange of emails or equivalent communications: reg. 11(3). Parties who are not consumers may exclude the operation of reg. 11: reg. 11(1).
113 Cf. cases of cancellation in consumer cases, discussed at paras 1.33 et seq.
114 Reg. 15. This is not unlike the discretion to declare a contract subsisting in s. 2(2) of the Misrepresentation Act 1967; see Ch. 8, para. 8.24.
115 There is arguably another provision, s. 2(3), which provides that a contract of sale may be absolute or conditional. The occurrence of a condition may arrest the conclusion of a contract; see Ch. 2, para. 2.41.
117 British Car Auctions v Wright  3 All ER 462. In so-called ‘Dutch’ auctions, the auctioneer announces the price for which he is willing to sell, starting high and continuing in a downwards direction until someone is prepared to buy at the stated price. The auctioneer is thus making an offer and the successful bidder an acceptance.
127 Barry v Davies  1 WLR 1962, following Warlow v Harrison (1859) 1 E & B 309. The award of damages is on the same market basis as an award against a non-delivering seller: Barry v Davies  1 WLR 1962, 1969.
133 For other legislation on abusive auction practices, see the Auctions (Bidding Agreements) Acts of 1927 and 1969 (bidding rings). Under s. 3 of the 1969 Act, a seller may avoid the contract of sale where there has been a bidding agreement, involving at least one dealer (who need not be the person making the successful bid), by which one or more parties to the agreement undertake not to bid. If restitution of the goods is not made to the seller, then all parties to the bidding agreement are jointly and severally liable to the seller for loss caused by the operation of the bidding agreement.
134 See Ch. 8, paras 8.31 et seq.
148 SI 2000 No. 2334 (as am. by SI 2004 No. 2095, SI 2005 No. 689, SI 2009 No. 209, SI 2010 No. 2960, and SI 2013 No. 783). See generally G. G. Howells and S. Weatherill, Consumer Protection Law (2nd edn, Ashgate, 2005); J. K. Macleod, Consumer Sales Law (2nd edn, Routledge-Cavendish, 2007), ch. 8.
151 S. 67. If the consumer is still in possession of goods under the cancelled agreement, he has a lien on those goods pending receipt of the part-exchange goods or of the part-exchange allowance: s. 73(5). If it has not already done so, title to the part-exchange goods vests in the negotiator when the consumer is paid the part-exchange allowance: s. 73(6).
152 Subject to contrary provision in the Act: s. 69(4). Where goods are supplied on an emergency basis or worked by the consumer into land so as to become fixtures, it is only the credit aspect of the transaction that is cancelled: s. 69(2).
161 Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011. This is a maximum harmonization measure: Art. 4. It is due to be transposed by 13 June 2014: Art. 28. The Directive requires information to be provided to the consumer (e.g., trader’s complaint handling policy, trading name etc.). The Consumer Rights Bill 2013 states that the information provided, barring information pertaining to the main characteristics of the goods, amounts to a term of the contract. Any breach of such a term gives rise to a price reduction action: cl. 18(4) and see Ch. 12, para. 12.122.
162 SI 2000 No. 2334 (as am. by SI 2004 No. 2095, SI 2005 No. 689, SI 2009 No. 209, SI 2010 No. 2960, and SI 2013 No. 783). So far as contract terms are inconsistent with the protection given to the consumer by the Regulations, they are void: reg. 25.
163 Directive 97/7/EC of the European Parliament and the Council of 20 May 1997 (OJ No. L144 of 4.6.97, p. 19). The Regulations do not transpose Art. 10 of that Directive. The Directive in earlier drafts may be seen at  OJ C156/14 and  OJ C308/18, and the Commission Recommendation at  OJ L156/21.
164 There are exempt transactions, but the only relevant transactions for the purposes of this book are auction sales, sales conducted through a public payphone, and sales made through an automated vending machine or premises: reg. 5(1).
165 Defined as ‘any natural person who, in contracts to which these Regulations apply, is acting for purposes which are outside his business’: reg. 3. A business is defined as including a trade or profession: reg. 3.
167 Regs 3–4. Distance communication is any means that does not require the simultaneous presence of the supplier and the consumer: reg. 3. An indicative list of means of distance communication is contained in Sch. 1 to the Regulations.
168 Reg. 13 (exceptions to the right to cancel). The sale of goods cases included here are sales of goods that are perishable or personalized for the buyer or made to the buyer’s specifications; sales of newspapers, periodicals, or magazines; sales of audio or video recordings or of computer software if they are unsealed by the consumer; and sales where the price depends on fluctuations in the financial markets not controlled by the supplier. The reference to financial markets points to ‘goods’ having a broader meaning than it does in English law under the Sale of Goods Act 1979 (cf. R (on the application of Khatun) v Newham LBC  EWCA Civ 55;  QB 37). The Regulations also provide that they are only partly applicable to certain contracts (regs 7–20 are disapplied), including contracts for the supply of food, beverages, and other goods intended for everyday consumption, supplied by regular roundsmen to the consumer’s residence or workplace: reg. 6.
174 Reg. 11(4). Since none of the three cancellation periods starts with or depends in any way upon the date of conclusion of the contract, it seems impossible to make sense of reg. 11(1): ‘...[T]he cancellation period in the case of contracts for the supply of goods begins with the day on which the contract is concluded and ends as provided for in paragraphs (2) to (5).’ Where the goods are received by a third party, the third party’s receipt of the goods is deemed to be the consumer’s receipt in paras (2) to (4): reg. 11(5).
177 This information, to be supplied either prior to the contract or in good time and before delivery, comprises information concerning: the identity of the supplier and, if payment is made in advance, the address of the supplier; a description of the main characteristics of the goods; the price of the goods; delivery costs; arrangements for payment, delivery or performance; the cost of using means of distance communication; the period for which the offer or price remains valid; where appropriate, the minimum duration of the contract; and the intention, if it exists, to supply substitute goods if the designated goods are unavailable and to bear the cost of that substitution: reg. 7(1). The information must be ‘clear and comprehensible’, due regard being had to ‘the principle of good faith in commercial transactions and the principles governing the protection of those who are unable to give their consent such as minors’: reg. 7(2). The supplier’s commercial purpose should be made clear: reg. 7(3). A supplier making a telephone communication should also make its identity and commercial purpose clear at the beginning of the call: reg. 11(4) (e.g., ‘I want to sell you double-glazing’, not ‘I want to interest you in energy savings’).
178 The Regulations do not create an offence for failing to supply this information, but provision is made for complaints to enforcement authorities and for the seeking of injunctions to prevent breaches of the Regulations: regs 26–27 (as am. by SI 2013 No. 783). Provision is also made for the giving of undertakings in lieu of injunctions: regs 28–29 (as am. by 2013 No. 783).
181 Reg. 14(5), except where the consumer exercises a right to reject the goods under, e.g., s. 14 of the Sale of Goods Act: reg. 14(6), or where the term requiring the consumer to return the goods is an unfair term under the Unfair Terms in Consumer Contracts Regulations 1999, SI 1999 No. 2083.
183 Reg. 17(2), (3). The consumer’s obligations are discharged if he sends or delivers the goods to a person to whom he could have given a cancellation notice (reg. 17(5)), whereupon his obligation of reasonable care ceases (reg. 17(6)).
193 Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011. This is a maximum harmonization measure: Art. 4. It is due to be transposed by 13 June 2014: Art. 28. The Directive requires information to be provided to the consumer (e.g. trader’s complaint handling policy, trading name etc.). The Consumer Rights Bill 2013 states that the information provided, barring information pertaining to the main characteristics of the goods, amounts to a term of the contract. Any breach of such a term gives rise to a price reduction action: cl. 18(4) and see Ch. 12, para. 12.122.
195 Reg. 2: ‘“trader” means a person who, in making a contract to which these Regulations apply, is acting in his personal or professional capacity and anyone acting in the name or on behalf of a trader.’
199 Listed in Sch. 3. The relevant contracts for sale of goods purposes are: contracts for the supply of goods and their incorporation in immovable property; contracts for the supply by a regular roundsman of foodstuffs or beverages intended for current consumption; contracts for the sale of goods in a catalogue that the consumer has a proper opportunity to read in the absence of the trader’s representative, where there is intended to be continuity of contact between the consumer and the trader’s representative concerning the contract or any subsequent transaction, and where the contract and the catalogue contain a prominent notice informing the consumer of his right to return the goods to the supplier or otherwise cancel the contract, with no obligation other than that of taking reasonable care of the goods (in effect, a light touch version of the cancellation right conferred by the 2008 Regulations themselves); and credit contracts, e.g. conditional sales, where the amount of credit does not exceed £35, as well as other contracts where the payments do not exceed £35.
205 See Sch. 4 Part I (including the name of the trader, the trader’s reference number, code, or other details, the name and address of the person to whom notice of cancellation must be given, and a statement that the consumer may use the cancellation form if he wishes).
208 Reg. 2(1). This may give rise to considerable hardship in the case of certain small businesses: see Robertson v Swift  EWCA Civ 1794 at ;  Bus LR 479 (a plea for the revision of the Regulations to increase the range of exempted contracts).
219 The sale of goods contracts in reg. 9(4) comprise the supply of (a) newspapers, periodicals, or magazines; (b) goods whose price depends upon market fluctuations that are not ‘controlled’ by the trader; (c) goods supplied to meet an emergency; (d) goods supplied to a customer’s specification or otherwise customized; (e) perishable goods; (f) goods consumable by use and consumed before cancellation; (g) goods incorporated in land before cancellation; and (h) goods relating to a funeral.
223 Reg. 10(1), (2). Any ‘property’ provided by the consumer as security must also be returned: reg. 10(3). The consumer also has a lien over the goods for the return of part-exchange goods or the payment of the part-exchange allowance: reg. 14. The consumer’s right to a part-exchange allowance arises if the part-exchange goods are not returned to him within ten days of cancellation in substantially as good a condition as when they were delivered to the trader: reg. 14(2).
225 Reg. 13(1). Apart from cases where the consumer has a lien, the consumer’s duty to restore is unenforceable so long as the trader fails in accordance with reg. 10(3) to return any security provided by the consumer.
228 Reg. 13(1). The duty of reasonable care runs for twenty-one days after the cancellation, unless within that time the trader serves a request in writing for the restoration of the goods: reg. 13(6).
233 S. 100(1). The court, moreover, may require a lesser amount to be paid if satisfied that the loss caused to the creditor by early termination is less than the amount payable under s. 100(1): s. 100(3). A greater amount may be payable by a debtor who has failed to take reasonable care of the goods: s. 100(4).
239 Section 3(2) formerly applied also to mental incapacity. The same rule is now to be found in the Mental Capacity Act 2005, s. 7(1). According to s. 2(1), ‘a person lacks capacity in relation to a matter if at the material time he is unable to make a decision for himself in relation to the matter because of an impairment of, or a disturbance in the functioning of, the mind or brain’.
243 Nash v Inman  2 KB 1. For the difficulties of a seller who lacks knowledge, see Johnstone v Marks (1887) 19 QBD 509. For details of nineteenth-century case law showing the consumer needs of sons of the nobility, see G. H. Treitel, The Law of Contract (13th edn by E. Peel, Sweet & Maxwell, 2011), para. 12-006.
244 See Nash v Inman  2 KB 1; Roberts v Gray  1 KB 520 (services). But an incapacitated person able to show that he did not understand what he was doing may at his option avoid the contract: Hart v O’Connor  AC 1000.
245 The position of mentally incapable buyers is different. If the seller is unaware of the mental disorder, he need not rely upon s. 3 but may enforce the contract at common law: Baxter v Portsmouth (1826) 5 B & C 170. Otherwise, the contract may be avoided by the mentally incapable party: Imperial Loan Co. v Stone  1 QB 599. A drunkard is liable on a contract at common law unless his condition is so extreme as to be known to the other party: Gore v Gibson (1843) 13 M & W 623.
246 Discussed in the context of contractual certainty at para. 1.42.
247 If the contract gives the seller a discretion to settle the price, that discretion is not unconfined. In a case dealing with the sale of financial assets by the seller upon default by the buyer, Socimer International Bank Ltd v Standard Bank London Ltd  EWCA Civ 116,  1 Lloyd’s Rep. 558, Rix LJ said at : ‘[A] decision maker’s discretion will be limited, as a matter of necessary implication, by matters of honesty, good faith and genuineness, and the need for the absence of arbitrariness, capriciousness, perversity and irrationality.’ This obligation fell short of an objective valuation of the assets. For other cases on the exercise of a contractual discretion, see Paragon Finance plc v Nash  1 WLR 685; Abu Dhabi National Tanker Co v Product Star Shipping Ltd (The Product Star)  1 Lloyd’s Rep 397; Horkaluk v Cantor Fitzgerald International  EWCA Civ 1287;  ICR 402; JML Direct v Freestar UK Ltd  EWCA Civ 34; Barclays Bank plc v Unicredit Bank AG  EWHC 3655 (Comm); Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd  EWCA Civ 200.
252 See para. 1.42.
256 Hall v Busst (1960) 104 CLR 206, 233–4 (Menzies J). Menzies J was prepared to distinguish Hoadly as a work and materials contract, so that the buyer would be liable in a restitutionary quantum meruit action for a reasonable price on completion of the work. Windeyer J, dissenting on a different point in Hall v Busst, supported Hoadly and the reading it directed of s. 8(2). To this effect, see also Wenning v Robinson (1964) 64 SR(NSW) 157; Montana Mustard Seed Co. v Gates (1963) 42 WWR 303 (Can.).
259 Hillas & Co. Ltd v Arcos Ltd (1932) 147 LT 503; Pagnan SpA v Feed Products Ltd  2 Lloyd’s Rep. 601 (Bingham J); Mamidoil-Jetoil Greek Petroleum Co SA v Okta Crude Oil Refinery (No. 1)  EWCA Civ 406;  2 Lloyd’s Rep 76 (where the authorities are reviewed in detail). See also iSoft Group plc v Misys Holdings Ltd  EWHC 2094 (Ch) at –;  1 All ER (Comm) 1; Northern Foods Ltd v Focal Foods Ltd  EWCA Civ 1262.
266 See, e.g., Re Nudgee Bakery Pty Ltd’s Agreement  Qd. R 24, where a five-year contract for flour requirements prescribed payment at the maximum level permitted by a regulatory contract without providing for the case where the statute was repealed. Also Kidston v Sterling and Pitcairn Ltd (1920) 61 SCR 193 (Can: parties could not agree on what they meant by ‘market price’ in seven-year supply contract, except that it did not mean the market price).
267 May & Butcher Ltd v The King (1929)  2 KB 17 note. See also Courtney and Fairbairn Ltd v Tolaini Bros (Hotels) Ltd  1 WLR 297. May & Butcher was distinguished in a case involving a lease with an option to purchase the reversion at a price to be agreed, not by the parties themselves, but by valuers appointed by each of the parties: Sudbrook Trading Estate Ltd v Eggleton  1 AC 444; see also Queensland Electricity Generating Board v New Hope Collieries Pty Ltd  1 Lloyd’s Rep. 205.
268 F. & G. Sykes (Wessex) Ltd v Fine Fare Ltd  1 Lloyd’s Rep. 53 (buyer’s requirements over five years of 30–80,000 broiler chickens with the precise figure to ‘be agreed’). See also Global Container Lines Ltd v State Black Sea Shipping Co.  EWCA Civ 3007; 1 Lloyd’s Rep.127.
270 Mamidoil-Jetoil Greek Petroleum Co SA v Okta Crude Oil Refinery (No. 1)  EWCA Civ 406;  2 Lloyd’s Rep 76; MRI Trading AG v Erdenet Mining Corp LLC  EWHC 1988 (Comm) at , affd  EWCA Civ 156.
271 Queensland Electricity Generating Board v New Hope Collieries Pty Ltd  1 Lloyd’s Rep 205. See also Alstom Signalling Ltd v Jarvis Facilities Ltd  EWHC 1232 (TCC) (court to settle ‘differences’). S. 8(2) of the Sale of Goods Act does not exhaust the possibilities allowing resort to a reasonable price: MRI Trading AG v Erdenet Mining Corp LLC  EWHC 1988 (Comm) at .
273  EWCA Civ 406;  2 Lloyd’s Rep 76; at . See also BJ Aviation Ltd v Pool Aviation Ltd  EWCA Civ 163;  2 P.& C.R. 25 at  (noting also that a court cannot imply a term inconsistent with that which has been agreed).
279 It is common for a preliminary contract to contain a break clause, by which the professional fees of the prospective purchaser will be reimbursed if the prospective vendor breaks off negotiations, but the fees may not exceed a conventional limit, for otherwise they would amount to unlawful financial assistance under the Companies Act 2006, ss. 677 et seq.
285 Little v Courage Ltd  CLC 164, 169; Philips Petroleum v Enron Europe  CLC 329 at ; London & Regional Investments Limited v TBI plc  EWCA Civ 355; Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd  EWHC 1341 (TCC) at –; Shaker v Vistajet Group Holdings SA  EWHC 1329 (Comm) at .