#20308 - L3. Implied Terms In Non Consumer Contracts - Commercial Sales Law Lecture Notes

Lecture 3: Implied Terms in Non-consumer Contracts.

I. Understanding Contract Terms

Contracts are comprised of different types of terms, which dictate the rights of the parties and the remedies available if a breach occurs.

1. Sources of Terms

• Express Terms: Specifically agreed upon by the parties during the offer and acceptance stage.

• Implied Terms: Not explicitly stated but read into the contract by:

  • Statute(e.g., SGA 1979, SGSA 1982).

  • The Courts(to give business efficacy).

  • Custom(standard trade practices).

2. Classification and Consequences of Breach

The classification of a term determines the innocent party's legal options:

• Condition: A vital term at the heart of the contract. Breach allows the innocent party torepudiate(cancel) the contract and claim damages.

• Warranty: A less important, subsidiary term. Breach only allows fordamages; the contract must continue.

• Innominate Term: A "wait and see" term. If the breach is serious (deprives the party of substantially the whole benefit), it is treated as a breach of condition. If minor, it is treated as a breach of warranty.

II. Key Terms Implied by the SGA

The SGA implies several conditions into B2B contracts to protect buyers from defective or incorrect goods:

• Title (s 12): The seller has the legal right to sell the goods.

• Description (s 13): Goods must correspond with the description provided.

• Satisfactory Quality (s 14(2)): Goods must meet the standard a reasonable person would expect.

• Fitness for Purpose (s 14(3)): Goods must be fit for their specific intended use.

• Sample (s 15): If sold by sample, the bulk must match that sample.

III. Section 13: Sale by Description

This section applies to all types of sales (B2B, C2C, C2B). It states that where goods are sold by description, they must match that description.

1. What Qualifies as a "Sale by Description"?

There is no statutory definition, but for a statement to fall under Section 13, it must meet these criteria:

• It must be a Term: Boastful "puffs" have no legal effect. A statement is a term if it guarantees the truth of a fact, often determined by the seller's special knowledge or the statement's importance.

• It must relate to Identity: The description must identify a "substantial ingredient" of the goods (size, age, or components).

• Buyer Reliance: The buyer must have actually relied on that description when entering the contract.

2. Strictness and the De Minimis Rule

Historically, courts required 100% strict compliance (e.g., a "ton" must be exactly a ton). However,Section 15Anow provides a "de minimis" exception:

• If the breach is so slight that rejection would beunreasonable, it is treated as a breach of warranty rather than a condition. The buyer can claim damages but cannot return the goods.

3. Special Scenarios

• Selected by Buyer: A sale is...