#20307 - L4. Implied Terms In Non Consumer Contracts - Commercial Sales Law Lecture Notes

I. Implied Terms under the Sale of Goods Act (SGA)

The SGA implies several conditions into business-to-business (B2B) contracts to protect buyers from defective goods.

1. Satisfactory Quality (Section 14(2))

When a seller sells goodsin the course of a business, there is an implied condition that the goods are of satisfactory quality.

• Strict Liability: The seller is liable even if they are not at fault.

• Course of Business: This includes sales that are merely incidental to the business (e.g., a fishing boat owner selling a boat). If the seller is a private individual, "caveat emptor" (buyer beware) applies instead.

• Scope: This applies to all "goods supplied" under the contract, including packaging and containers (e.g., a defective bottle containing a drink).

The Objective Test (Section 14(2A)):

Quality is judged by what areasonable personwould consider satisfactory, taking into account:

• The description of the goods.

• The price paid (higher prices imply a higher expectation of quality).

• All other relevant circumstances.

Aspects of Quality (Section 14(2B)):

1. Fitness for all common purposes: The goods must do what they are usually supposed to do.

2. Appearance and finish: Cosmetic state matters.

3. Freedom from minor defects: Even small flaws can make a new item unsatisfactory.

4. Safety: The goods must not be dangerous.

5. Durability: The goods must last for a reasonable amount of time.

Exceptions (Section 14(2C)):

The condition of satisfactory quality doesnotapply to defects:

• Specifically drawn to the buyer's attention before the contract.

• That a reasonable examination should have revealed (if the buyer chose to examine the goods).

• Apparent on reasonable examination of a sample.

2. Fitness for Purpose (Section 14(3))

If the seller sells in the course of business and the buyer makes known (expressly or by implication) anyparticular purposefor the goods, there is an implied condition that the goods are reasonably fit for that purpose.

• Usual Purpose: If the goods are used for their standard purpose (e.g., a hot-water bottle), the purpose is implied, and the buyer doesn't need to state it.

• Particular Purpose: If the buyer has an unusual requirement, they must disclose it (e.g., food for a specific type of animal).

• Reliance: The term is not implied if the buyer does not rely on the seller's skill or judgment, or if it is unreasonable to do so.

II. Implied Terms under the SGSA

TheSupply of Goods and Services Act 1982applies to contracts of barter, hire, and the provision of services.

• Barter/Work & Materials (Sections 2–5): Same implied terms as SGA (Title, Description, Quality, Fitness, Sample).

• Hire (Sections 6–11): Implied terms regarding the right to transfer possession, description, quality, fitness, and sample.

• Services (Sections 12–16):

  • Reasonable Care and Skill (Section 13): The supplier must meet the standard of a competent professional (the Bolam test). Unlike goods, liability for services isfault-based, not strict.

  • Reasonable Time (Section 14): If no time is fixed, the service must be done in a reasonable time.

  • Reasonable Charge (Section 15): If no price is fixed, the buyer must pay a reasonable amount.

III. Exemption Clauses and UCTA 1977

Sellers often try to limit or exclude liability using exemption clauses. In B2B contracts, these are governed by theUnfair Contract Terms Act 1977.

• Prohibited Exclusions:

  • ...