Commercial Law for Sale of Goods - Essay Example

? Terms and Conditions of Sale Terms and Conditions of Sale Part A This is provided for in the contract of sale of goods as defined under section 2(4) of the Sale of Goods Act since AOL had agreed to transfer the property in the shoes to Tippy Toes Limited for a money consideration, the price1. The seller, AOL, under Clause 8.1 of the Terms and conditions, warrants that the goods shall correspond with their specification and that they will be free from any defects. The seller does not however warrant that the goods will be fit for any particular purpose and therefore the buyer cannot claim in that regard. However, the seller provides that the goods will be of good quality and for the specific purpose and as he is liable to that extent if the goods delivered are not of good quality2. It is an implied term under the Sale of Goods Act section 13 and 14 that goods purchased will always be of quality that is satisfactory to the purchaser and the ultimate consumer3. If this is not met, the purchaser has a right to seek remedies from the seller. However the usual wear and tear of a commodity or good does not in any way affect the quality of goods and as such, the purchaser cannot recover from the seller for this reason4. Tippy Toes allege that the veckle was coming off pre-maturely but at the same time, this could be another event of wear and tear. It is upon Tippy Toes Limited to prove that this was premature and did not in any way fall under the category of normal wear and tear of those shoes for it to succeed against AOL. Property had already passed to Tippy Toes Limited and therefore, if there were any risks as per clause 7 of the contract, these were to be borne by it .Tippy Toes Limited paid all monies due to the Seller and the goods had already been delivered to it. They therefore are the bearers of any risks that may come along with regard to the goods5. Section 17 (1) of the Sale of Goods Act provides that the property passes when the parties to the contract intend for it to pass. This can be inferred from the terms of the contract. Clearly, the terms of the contract between Tippy Toes Limited and AOL provided for this. These were ascertained goods and once the property has passed, Tippy Toes Limited could not rescind the contract but only seek for loss and damages6. Under the AOL’s contract, where the buyer discovers any defect on the goods or where the goods do not correspond to their specification, the buyer has to notify the seller within 21 days of delivery of the goods. Alternatively, this can be done within a reasonable time after discovery of the defect if the defect was not apparent on reasonable inspection. The complaint by Tippy Toes Ltd was made on the 25 April 2012; approximately 2 months after the goods had been delivered by AOL. This was past the 21 days period that was required of them to lodge the complaint. However, Tippy Toes Ltd can argue that the defect was not apparent on reasonable inspection since it involved the Velcro fastening coming away from the buckle prematurely and this could only be noted after use for a while. If it is found that the defect was found to have been used for, it has to be determined whether the complaint was made within a reasonable time. Reasonableness depends on the circumstances of each case and in most cases; the Courts in determining whether an action was done within a reasonable time, looks at the earliest time necessary and convenient to do that thing that ought to be done. In addition, the Court may look at the previous conduct between the parties, the customs and usage of a certain business and any other specific agreements or objectives that the parties ought to have achieved. The burden of proof is entirely on AOL to prove that Tippy Toes Limited did not present a complaint within a reasonable time and for this, they were not in a position to repay them as they had entered into other business liabilities. Similarly, under clause 8.4 of the Terms and conditions, the seller can only either replace the goods at no cost to the buyer or refund to the buyer the purchase price7. The clause specifically states that the seller has no further liability to the buyer. Therefore, in the event of finding that AOL is liable to Tippy Toes Ltd, AOL can only refund the purchase price of the shoes and will not be liable to compensate Tippy Toes Ltd for any other losses. This is provided for under the Entire Agreement Clause which clearly stipulates that there shall be no other variations relating to the contract unless the same are in writing and agreed upon by both the purchaser and the buyer89. The effect of an entire agreement clause is that the parties agree that they will be strictly bound by the terms of the contract. One cannot rely on any other statements that are not specifically provided for in the contract. Also, one can only seek the remedies that have been stipulated under the contract.10 The Parole evidence rule applies in the strict sense in that, no other evidence can be relied on to change what is provided for in the contract11 . The entire agreement clause excludes all evidence, oral or otherwise that was not part of the initial contract. The intention of such clauses as stated in Thomas Witter Limited –vs- TBP Industries Limited is that, where a person is sold a certain thing, he has no remedy unless that remedy is warranted in the contract12. Therefore, Tippy Toes Ltd is ousted by the entire agreement clause from seeking compensation for loss of sales and customers because that is not provided for in the contract. The contract only provides for the refund of the money or re-supply of the products at no cost to the buyer and the seller can only be bound by that. Most entire agreement clauses state that the parties should not have relied on any misrepresentations whilst entering into the contract. However, this provision does not exclude any claim for misrepresentation by either party despite it not having been part of the contract. So if Tippy Toes Ltd is able to show that AOL misrepresented to them that the shoes were of high quality and that they were of certain specification and Tippy Toes Ltd purchased these shoes based on this representation, then AOL will be liable for such misrepresentation. In Entrepreneur Pub Company – versus – East Crown Limited the Court stated such a provision in the clause does not exclude liability where there has been misrepresentation13. The seller was relying on this provision to evade liability towards the buyer. Such was the case in Glory Gold Limited – versus – Star Play Development where the Hong Kong Court of Appeal held that the entire agreement clause did not exclude liability if the same based on misrepresentation by either party14. Part B The contract between AOL and Tippy Toes Limited under Clause 4.1 provides that the purchase price will be the sellers quoted price. The seller also has a right to increase the price of the goods where there is an increase in production costs. However where the price is stated to be quoted to be fixed for a certain period then the seller cannot increase the purchase price15. From the facts of the case, the parties herein entered into a contract for the sale of these shoes in October 2011, it is not stated whether the seller had issued a quotation of the selling price at the date when the contract was entered into or the same was to be to be issued when the goods were delivered. If the seller had not issued a price quotation, he is allowed as per the contract to quote the new prices to reflect the changes in production. On the other hand, if a price had already been issued and the purchasers entered into the contract based on the prices, any increase on the purchase price should be communicated to the purchasers and the new quotation delivered to them before the scheduled date for delivery. This should aim at informing them that prices of any deliveries made after the 26 March 2012 will be increased to a certain percentage16. This will give due notice to the purchasers and they cannot therefore say that they were not aware of the new prices. If the contract indicated that the price was fixed for the specific period, then the seller cannot increase its prices as that would be in breach of the contract and he can be liable in damage. In Maple Farms, Inc. -Versus- City SchoolDistricyu of Elimra Maple Farms had entered into an agreement with City School District of Elimra for the supply of milk at a fixed price at the market price17. After a certain period of time before the contract could be performed, the price of raw milk went so high such that if Marple Farms were to sell the milk at the agreed price they would have suffered a loss. They therefore moved the court to have the contract rescinded for inability to perform. The court declined this stating that Marple Farms should have foreseen the probability of this happening in the future and included in their contract accordingly. An increase in inflation rates should have been anticipated. AOL has anticipated such uproars in selling prices and has included the same in the contract. They can therefore comfortably rely on that clause in the contract to issue a new quotation price that is consistent with the current market trend showing that they have not unreasonably incurred these costs. However, the purchasers have to be given due notice so that they can prepare their budgets in that line. Where parties enter into a contract, they cannot be excluded from fulfilling their contractual obligations based on the fact that the circumstances have changed that affect how the contract is to be performed. They should show that the circumstances could not be foreseen when they were entering into the contract18. An increase in production is legitimate ground for change in contract. This must be specifically provided for in the contract because a contract can only be changed on the grounds stated in the contract. The business should also inform its customer of the changes that will take effect with regard to the price, when those increased will come into effect, and also give reasons supporting why the changes have to be effected.19 The purchasers in this case have a right to be informed immediately of the changes in the price and why those changes are being effected. If the increase it very high, the purchasers will have a right to rescind the contract early enough but this has to be included in the terms of the contract. Since this was not included in the contract, the purchasers will be bound to pay the new quotation by AOL. However, as aforementioned, this has to be communicated early enough to avoid any difficulties in performance of the contracts. Bibliography Annabel, E. Sale of Goods (Vienna Convention) Act 1987: Legal Issues (1987) 14-15. Atiyah P., Adams J. & MacQueen, H. The sale of goods. (London: Longmans, 2005) Barnett R. Contracts (USA: Aspen Publishers, 2003) Bridge M. The sale of goods. (Oxford, Oxford University Press, 1998) Boscche P. The Law and Policy of World Trade Organization (Cambridge: University Press, 2008) Commercial Law for Sale of Goods: Contract, Property and Risk Corney G. Obligations and Remedies under the 1980 Vienna Sales Convention, Queensland Law Society Journal (1993) 37-58 Craig P. EU Law: Text, Cases and Materials (Oxford: University Press, 2007) England Sale of Goods Act, 1979 Fruehwald S. Reciprocal Altruism as the Basis for Contract 47 University of Louisville Law Review, 47 (2003) 489 Goode R. Commercial Law (USA: Penguin Books, 2010) House of Commons library: Lorraine Conway Standard Note SN/HA/2239, Section of Home Affairs section: last updated 2 April 2012. Magnus, U. General Principles of UN-Sales Law, International Trade and Business Law Annual, University of Queensland, (1997) 33-56. Mallin C. Corporate Governance (Oxford: University Press, 2010) McKendrick E. (ed.), Sale of goods. (London: LLP Professional Publishing, 2000) Mo, J. International Commercial Law (2nd Edition) (London: Butterworths 2000) Roger M & Gaylord J. Fundamentals of Business Law, summarized cases (8th Edition) (USA: South Western Publications, 2001) Read More