Regulatory Compliance Briefing Note - Implied Terms
in Business Contracts for the Sale of Goods

The Sale of Goods Act 1979 implies terms in agreements for the sale of goods in the UK. By default the implied terms are incorporated into B2B and B2C contracts. The terms may be excluded from operation in B2B contracts by agreement at the time of contract.

The Sale of Goods Act is supplemented by the Sale and Supply of Goods Act 1994 and the Sale and Supply of Goods to Consumers Regulations 2002.

This legislation grants the following rights in the sale and supply of goods:

1. Fit any description given on labels, packaging or advertising
2. Be of satisfactory quality, in that they will last for a reasonable amount of time (with a consideration for cost), are in good condition and safe to use
3. Be fit for the purpose for which they were designed, taking into account their advertised use
4. Match any sample in the exposure of the goods for sale, and
5. Come with sensible assembly instructions

Online Contracts

Unlike other consumer protection legislation these warranties apply to the retailer rather than the manufacturer of the goods, which in the digital environment and e-business extends to web site sales, direct marketing, and catalogue sales.

In a significant extension of the law, the Sale and Supply of Goods to Consumers Regulations incorporates the product advertising by the manufacturer or importer into the United Kingdom into the contract of sale with the consumer. The advertising paid for by the manufacturer or importer is assimilated to be the advertising of the retailer themselves.

Exceptions do apply to specified goods and contracts, due to the scope for abuse by consumers, such as in the case of DVD and CD sales.

Potential Consequences

A failure to offer a refund when it is reasonable to offer one, replacement goods, repair or offer reasonably adequate compensation may lead to an avoidable escalation to the Office of Fair Trading. Consumers are entitled to a reasonable opportunity to inspect the goods to determine whether they are suitable. If the goods are unsuitable, the consumer is entitled to a refund.

In the event that the goods do not satisfy the requirements of the Sale of Goods Act, the consumer has up to six months after the sale to claim an entitlement to have the goods repaired or replaced at the retailer’s option.

The ability of the consumer to claim consequential loss arising from faulty goods presents a significant risk to retailers and the claims that may lie against them.

Sales from other EU Countries

The Sale and Supply of Goods to Consumers Regulations 2002 were implemented as a consequence of the passage of the European Union Directive 1999/44/EC. The warranties last for two years, not the six years period allowed in the UK Regulations. Again, the relief is against the original retailer rather than the manufacturer or importation agent.