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A Scottish Perspective on the Sale of Goods Act and Applicability of UN Sale of Goods Law

Internationales Kaufvertragsrecht: Schottischer „Sale of Goods Act“ und UN-Rechtsrahmen

Studienarbeit 2010 19 Seiten

BWL - Recht

Leseprobe

Table of Contents

PART A – Sale of Goods
1. Introduction
2. Legal Requirements for a valid contract
2.1 General overview
2.2 Legal foundation
2.3 Intention
2.3 Consent
2.4 Consideration
3. Remedies for breach of contract
3.1 Seller’s remedies
3.2 Buyer’s remedies
4. Conclusion

PART B - CISG
1. Introduction
2. Choice of law clauses under the CISG
4. Conclusion

References

Bibliography

PART A – Sale of Goods

1. Introduction

Closing contracts is a part of every day’s private and business life. A very common – and for the business of XY Co. the most essential form of contract - is the one for the sale of goods.[1] However, it has not been too long since such contracts are governed under one “legal umbrella”: Whereas a first step was taken with the Sale of Goods Act in 1893, it was, despite several amendments, not until 1979 where the act of 1893 and its subsequent amendments were consolidated and updated to fit modern (business) life. Yet, by now also the Sale of Goods Act of 1979 has undergone several revisions since its introduction (e.g. 1994, 1995).[2]

In order to avoid legal issues from arising for XY Co., this document aims at providing a comprehensive overview of which legal requirements result from the Sale of Goods Act for the company (specifically when entering into contract with Scottish firms). A major problem of contracts is when they are not fulfilled properly – a breach of contract with the potential consequence of remedies arising. Therefore, this aspect will be discussed in the second chapter of the report. The overview will be framed by summarising remarks on the Act.

2. Legal Requirements for a valid contract

This report will work out the fundamentals of the Sale of Goods Act 1979 (henceforth: SGA) for XY company for the given situation of entering a contract with a Scottish firm.

2.1 General overview

A first notable fact on the SGA with reference to entering it with a Scottish counterpart is that, opposed to many other regulations in the UK, the act is valid for the entire UK.[3] Usually, the “Scots law” for example is differing widely from English (and Welsh) law and thus has an exceptional position.[4] Therefore, apart from some exceptions that are only valid for Scotland (one of which will be discussed in chapter 3), the SGA applies also to contracts that XY Co. closes with the mentioned Scottish firm.

From this starting point, it seems necessary to identify the core requirements forming a valid contract under the SGA. The analysis of relevant literature showed that four aspects are repeatedly referred to as the fundamental requirements:[5]

- Legality and legal ability
- Intention
- Consent
- Consideration

In the following, these aspects will be explained in more detail and referred to the respective sections of the SGA.

2.2 Legal foundation

The first requirement for a valid contract under the SGA is that it actually covers a “sale” (as e.g. opposed to rent, lease or a gift) and “goods” (as opposed to e.g. services).[6] Whereas this sounds simple, for XY Co. in the first, it can be important e.g. if IT equipment is bought. Whereas hardware clearly is “goods”, the sale of software might be services (if conducted via web download), but could be “goods” as well, e.g. when bought as physical media (e.g. DVD, CD-Rom). A clear depiction of what is understood as goods is referred to in S.61 (1) of SGA.

Another fundamental legal prerequisite is that the contract must follow a legal purpose. The contract subject must be legal (as opposed to e.g. sale of illegal drugs). However, given the business trading scope of XY Co. and the Scottish firm, this seems not to be an issue in that respect. This similarly applies to the requirement of the legal ability to enter into contracts. It shall be assumed that the issue of minors (persons under the age of 18) closing contracts for either parties is negligible. Another reason for contracts being void or voidable are mental health problems,[7] however it is assumed that this also will not be a major issue in XY Co.’s business conduct with the Scottish firm.

What seems to be notable for the purpose of XY is the form of the contract. Usually, a sales contract is not bound to any specific form (e.g. written, oral).[8] For Scottish contracts however, an exemption for the sale of land exists.[9] Therefore, whenever XY Co. is entering a contract on the sale of land with a Scottish firm, careful consideration needs to be given to the form. Moreover, although not enforced by the SGA, it is recommended for business conduct that sale of goods contracts are kept in written to ensure they can be used as proof.[10]

2.3 Intention

Apart from the fundamental legal requirements, a contract of sale requires two parties, both of them willingly and intentionally entering into an agreement. The contract must be clear about whom these parties are, usually a seller and a buyer.[11] Moreover, their intention of entering into a contract for the sale of goods must be obvious or expressed – and mutually agreed upon.[12] When this intention is missing, no contract is formed (and no obligations arise or can be taken action for).[13] What might be considered as an offer to contract might only be an invitation to treat, e.g. when goods are displayed in a shop window.[14]

However, for the usual business conduct of XY Co. it is assumed that such intention is given. The most important note for XY Co. therefore is that fraudulent information (a misinformation on substantial contracts terms) will void the intent and thus the contract.[15]

2.3 Consent

For a contract, consent is reached when the parties find an agreement of what is to be the content of the contract. This occurs, when an offer finds a matching expression of acceptance[16]. This could be achieved bilaterally (when a mutual consideration is expected) or unilaterally (if the promise of the offer is only bound to a, not necessarily material, condition to be fulfilled by the offeree).[17] Similar to the aspect of the legal form of a contract, an offer can be expressed both oral or in writing. What is important for XY Co. executives to notice is that an offer does not necessarily need to be addressed to a specific person, but if made accordingly (e.g. in an advertisement) could also address anyone (“world at large”).[18] Therefore, offers made should be given carefully or specific to an offeree. However, in case necessary offers can be revoked – given that acceptance was not provided yet.[19]

Yet also the way acceptance is given is critical for reaching consent. Not everything that XY Co. executives might consider as such an acceptance actually is one. For example, for an acceptance to be valid, it needs to be unconditional – if not, this is not an acceptance but a either a counter-offer (if contract terms have been altered; then, one cannot go back to the initial offer[20] ) or a conditional acceptance.[21] The contract is formed once the communication of acceptance is provided (e.g. via post, as specified in the “Postal Rule”[22] ) – or one acts accordingly, even if no formal communication was performed[23]. XY Co. therefore needs to be sure that acceptance actually was given and a valid contract was closed in order to avoid situations where “contracts” cannot be enforced due to a lack of consent.

2.4 Consideration

The parties’ obligation for contract performance is also called “consideration”.[24] In a sales contract, the usual considerations are the physical delivery of a good as well as transfer of property (also referred to as “title”) and mostly possession rights (seller) and the payment (buyer).[25]

The contents of this exchange - mainly the goods (e.g. description, quality or quantity), the price or delivery and payment terms[26] - are a fundamental part of the contract. Some of these are indicatively regulated in the SGA (as in implied terms, meaning that if not specifically expressed in the contract, the provisions of the SGA will apply; see Articles 10-14). Some conditions are however explicitly excluded from the “essence of a contract of sale”, as applies for Payment Terms.[27]

For XY, the fundament principles derived from this are that the contracts must be clear about what the duties of the seller (delivery, quality including warranty, quantity) and the buyer (price, payment and respective terms) are.[28] By doing so, it is assured that consent of what is to be performed in a sales contract in which XY is involved is reached – and documented as the mutual considerations. A contract which is not sufficiently specific cannot be enforced.[29]

What the rights and obligations are if a contractual party fails to fulfil these considerations (thus the contract, also called “breach of contract”), is discussed in the next chapter.

[...]


[1] Atiyah et al. (2005), p.14

[2] Atiyah et al. (2005), p.14

[3] Keenan et al. (2005), p.612

[4] Schneiderhan (1996), p.4

[5] e.g. Gitman / McDaniel (2008), p.60; (Steinberger (2007), p.1; Miller / Jentz (2009), p.161

[6] S.2 (SGA); reference to hardware/ software example: Bainbridge (2004), p.194

[7] S.3 (2) SGA, further specified for Scotland in Age of Legal Capacity (Scotland) Act, 1991;

[8] S.4 SGA

[9] Atiyah et al. (2005), p.94

[10] Rush (2002), p.13

[11] See Articles 2 (1) and 2 (2) SGA

[12] See case Rose and Frank Co v JR Crompton & Bros Ltd, [ 1923 ] 2 KB 261

[13] Whincup (2006), p.21

[14] See cases Fisher v Bell [ 1961 ] 1 QB 394 for goods display in a shop window and Pharmaceutical Society of Great Britain v Boots Cash Chemists Ltd [ 1953 ] 1 QB 401 for this being an invitation to treat

[15] Gitman / McDaniel (2008), p.61

[16] To derive from S.62 (2) SGA; Atiyah et al. (2005), p.47

[17] Miller / Jentz (2009), p.162

[18] A leading example for such an offer is subject of Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256, where a promise in an advertisement is held as a binding offer to “the world at large”

[19] See case Payne v Cave (1789) 3 TR 148

[20] As decided e.g. in case Hyde v Wrench (1840) 3 Beav 334

[21] For a description see Richards (2007), p.30

[22] See Adams v Lindsell [1818] EWHC KB J59

[23] See case Brogden v Metropolitan Railway Company (1877) 2 AC 666

[24] e.g. Gitman / Mc Daniel (2008), p.61

[25] S.2 (1) SGA

[26] Siehe Quelle Atiyah

[27] S.10 (1) SGA

[28] Miller / Jentz (2009), p.306

[29] See e.g. Scammell v Ouston [1941] AC 251

Details

Seiten
19
Jahr
2010
ISBN (eBook)
9783656145738
ISBN (Buch)
9783656146131
Dateigröße
564 KB
Sprache
Englisch
Katalognummer
v190095
Institution / Hochschule
Robert Gordon University Aberdeen – Aberdeen Business School
Note
1,0
Schlagworte
Vertragsrecht Internationales Recht Sale of goods Act

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Titel: A Scottish Perspective on the Sale of Goods Act and Applicability of UN Sale of Goods Law