Authored By: Hania zainab
Middlesex university Dubai
ABSTRACT:
In an era of rapidly evolving commercial practices, legal systems must adapt to ensure fair and predictable outcomes. The UK’s Sale of Goods Act 1979, while foundational, shows limitations in addressing modern transaction complexities. This article examines challenges related to open price terms, digital goods classification, and blurred lines between goods and services in mixed contracts. By analysing judicial interpretations and gaps, concerning Section 8 and the definition of “goods”, the study assesses the Act’s ability to offer commercial certainty. It also compares the Act with the Consumer Rights Act 2015 to highlight protection inconsistencies between consumer and business-to-business contexts. The article further examines the inconsistent application of Section 14(2). Conducted through doctrinal research and a comparative lens, this article ultimately proposes reform-oriented reflections aimed at enhancing the clarity, coherence, and commercial relevance of the SGA in today’s market context.
INTRODUCTION:
Modern commercial transactions are no longer limited to clear-cut physical goods or fixed prices. As business models evolve, legal frameworks must keep pace to ensure fairness and predictability. This article takes a critical look at the Sale of Goods Act 1979 and considers whether it still meets the demands of today’s trade. Issues like digital goods, flexible pricing, and hybrid contracts are discussed alongside comparisons with the Consumer Rights Act 2015 to explore where the law may need clarification or reform.
Open Price Terms under Section 8: Legal Challenges and Interpretations
The Section 8 of the SGA 1979 provides a commercially practical and consistent framework by allowing courts to imply a ‘reasonable price’ where no price has been fixed, thus enabling contracts to be enforced even when the price term is left open. This was applied in Foley v Classique Coaches Ltd [1934], where the court upheld a contract despite the absence of a fixed price, relying on Section 8(2) to imply a reasonable price because the parties had intended to contract and had begun performance.[1] Similarly, in Hillas & Co Ltd v Arcos Ltd [1932], the court departed from rigid formalism, interpreting vague terms in light of prior commercial dealings.[2] Both cases reflect the observation by Atiyah that modern courts increasingly favour commercial intent and practicality over strict formal rules.[3] The ability to imply a reasonable price based on market conditions ensures contracts are not void of uncertainty, allowing businesses to proceed with transactions even when not all terms are finalized. In this way, Section 8 promotes legal certainty and supports long-term commercial stability in a market environment that often demands flexibility.
Despite the attempt to provide flexibility, significant concerns persist regarding its inconsistent application and lack of clarity, which can create uncertainty in commercial transactions. While the provision allows courts to imply a ‘reasonable price,’ as seen in modern cases, older decisions like May & Butcher Ltd v The King [1934] highlight the tension.[4] Here, the agreement failed because the price was to be ‘agreed from time to time,’ a term the court deemed too vague to form a valid contract.[5] Atiyah critiques this rigid approach, questioning whether a genuine agreement can exist when the price, a core term, is left unsettled, emphasizing the blurred line between genuine consensus and ongoing negotiation.[6] Tarrant similarly points out that disputes often arise when one party seeks to enforce an open-price deal that was never fully finalized.[7] Even Howard, while defending judicial involvement, acknowledges that courts walk a fine line: they are not creating new contracts but rather enabling parties to fulfil their original intent.[8] A role that becomes problematic when the intention is unclear. This inconsistency becomes more apparent when courts determine a ‘reasonable price’ using unpredictable methods.[9] In Kountz v Kirkpatrick and Lovejoy v Michels, both U.S. cases, judges deviated from market rates and considered factors like production costs and surrounding circumstances, reflecting a broader trend of judicial discretion.[10] Benjamin reinforces this by noting that while section 8(2) often fills pricing gaps, its success is fact-dependent, which can lead to varied outcomes.[11] Ultimately, while Section 8 enables courts to preserve commercial bargains where possible, its inconsistent application and reliance on judicial interpretation risk undermining the predictability and fairness that commercial law seeks to protect. A more nuanced approach is therefore needed, one that upholds intention without allowing flexibility to devolve into legal uncertainty.
Definition of Goods under S61: Limitations in Modern Commerce and Evolution
Under SGA 1979 ‘goods’ are defined as tangible items, leading to ambiguity regarding the inclusion of digital products.[12] Intangible items, such as software, are functionally similar to physical goods but often fall outside the scope, thus denying consumers the implied protections under s12–15.[13] In St Albans v International Computers [1996], software provided through a physical disk was classified as goods, but this approach was criticized for prioritizing the medium over substance.[14] Lord Penrose in Beta Computers v Adobe Systems [1996] cautioned that extending consumer protection to software on this basis risks logical inconsistency, specifically when identical software delivered by download does not qualify.[15] This distinction discloses a lack of technological neutrality in transactions where outcomes differ based solely on the mode of delivery.[16] Thereby reinforcing the unresolved position that it has never been authoritatively decided whether software constitutes goods.[17]
However, this ambiguity was partly addressed by the Consumer Rights Act 2015 (CRA), which introduced a distinct category for ‘digital content’ under s2(9), recognising its growing role in commerce. While this provides consistent protection for consumers, it does not apply to business-to-business transactions, again exposing the definitional inconsistency between the CRA and SGA regimes. Green v Petfre (Gibraltar) Ltd [2021] rejected exclusion clauses in a digital gambling platform’s term, holding that they failed the fairness test under s62 CRA.[18] The court emphasised the lack of transparency and the significant imbalance such clauses imposed on the consumer, making them unenforceable. This reinforces the commitment to substantive fairness in digital transactions, filling gaps left by the SGA where consumer software purchases may otherwise lack protection. Similarly, in Evans v Kosmar Villa Holidays Ltd [2007], although predating the CRA, it underscored the importance of clarity in consumer contracts principles which now underpin the CRA framework.[19] These collectively illustrate a more technologically and commercially sensitive approach under the CRA compared to the SGA definition, though the divergence between regimes leaves business transactions and mixed contracts without clear alignment.
The challenges in applying the Act to digital products gained attention. A UK Department report highlighted that while the government seeks to employ the ‘core principles of consumer protection,’ including the s12–15 implied terms,[20] such products often fall outside the definition of goods under s61(1).[21] A significant development emerged in Computer Associates (UK) Ltd v The Software Incubator Ltd [2021], where electronically delivered software could be classified as goods under the Commercial Agents Regulations 1993.[22] Although still not directly under the SGA, the ruling indicated that when sold with perpetual licenses, it closely resembles tangible transfers. This may prompt a future re-evaluation of the definition of goods under s61(1), thus making contracts for digital products viable while challenges the prevailing academic perspective that the issue remains unresolved for modern software.[23] Consequently, judicial attitudes appear to be evolving with commercial realities, narrowing previous gaps in sales contracts. These developments indicate growing judicial consistency in response to commercial realities, even if full statutory alignment remains incomplete.
Services often fall outside the scope of the Act, creating uncertainty in mixed contracts. In Lee v Griffen [1861],[24] the making of dentures was held to be a sale due to the tangible end product, while in Robinson v Graves [1935], a portrait commission was treated as a service due to the emphasis on skill included in work and materials.[25] This inconsistency is reinforced in Stocznia Gdanska v Latvian Shipping Co [1998], which excluded shipbuilding from sale under SGA, underscoring its limited applicability when services predominate.[26] In an era of ‘servitization’, where goods and services intersect in contracts, this fragmented legal approach creates uncertainty.[27] Unlike digital products, where courts have begun to adapt, judicial engagement with mixed service-good contracts remains limited. This judicial passivity risks perpetuating statutory inconsistency, as courts continue to defer to outdated legal distinctions rather than addressing the complexity. Therefore, a revised case or section is necessary to better reflect contemporary sales contracts.
Implied Terms of Satisfactory Quality under Section 14(2): Judicial Inconsistencies and Their Impact on Modern Commerce
Section 14(2) imposes an implied term for goods to be of satisfactory quality, but concerns for uncertainty in agreements surrounding the interpretation of ‘in the course of business’ exists. In R & B Customs Brokers v United Dominions Trust [1988],[28] the court distinguished between rare or incidental purchases as consumer transactions and regular purchases as business transactions, following Davis v Sumner [1984], which clarified that not every purchase by a business is ‘in the course of business’.[29] In contrast, Stevenson v Rogers [1999], expanded the interpretation, allowing even one-off sales to be considered business transactions, creating inconsistency.[30] Lord Potter explained that the interpretation of ‘in the course of business’ may differ depending on the statute, as R & B dealt with Unfair Contract Terms Act 1977 and Stevenson with the SGA 1979.[31] However, Lord Neil suggested that courts should interpret similar statutory language consistently, advocating for a uniform approach.[32] The recent case of Feldarol Founding Plc v. Hermes Leasing reinforced the narrow interpretation from R & B, complicating the determination of what constitutes a ‘business transaction’ by judicial interpretation.[33] Stevenson interpretation is more consumer-friendly but inconsistent with the rulings in R & B Customs and Feldarol.[34] This inconsistency reflects a trend of maintaining distinctions between private and business sales. However, such inconsistencies undermine legal certainty and fairness, particularly for incidental sellers unaware that their one-time sales contracts are subject to strict liability. Hence, this unpredictability can disadvantage sellers exposing them to penalties. Additionally, it complicates legal advice when clients are involved in one-off contracts drafting. To mitigate potential liability, sellers might consider incorporating explicit exclusion clauses in their sales contract aligning with UCTA 1977. Thus, these varying interpretations have introduced uncertainty under s14(2) as courts fail to consistently update their approach, legal frameworks remain increasingly disconnected from modern commercial realities.[35]
Consumers are largely protected under the implied term of satisfactory quality in both B2B and B2C contexts, especially under s14.[36] In Henry Kendall v Lillico [1969], although the goods were generally suitable for animals, they harmed a different species, illustrating that goods can meet a general purpose yet fail the specific one the buyer intended.[37] Further, Rogers v Parish [1986] expanded including appearance, finish, and comfort, reflecting a more holistic, consumer-focused approach.[38] This broad reading of s14 already laid strong foundations for buyer protection.[39] Yet, the Consumer Rights Act 2015 (CRA) now overrides the SGA 1979 in B2C contracts, offering a modernised and more accessible framework.[40] To evidence, Section 9 retains the right to goods of satisfactory quality adding representations of traders, while Sections 20–24 provide immediate remedies such as repair, replacement, or refund.[41] At first, these may seem to impose greater liabilities on sellers. However, they reflect a legislative shift from case law toward statutory clarity, consistency, and swift enforcement for consumers and not a removal of all contractual flexibility. Notably, the SGA continues to govern B2B sales, where terms can be negotiated, including exclusion clauses, provided they pass the reasonableness test under UCTA 1977.[42] In B2C transactions, exclusion clauses attempting to limit liability for breaches of core terms are not permitted under CRA, while still subject to UCTA and SGA principles where applicable.[43] This framework maintains a balance where statutory protection is the default for consumers, while commercial parties retain freedom to allocate risk. This dual framework CRA for consumers and SGA for commercial parties attempts to balance the need for predictable protection with contractual autonomy. However, divergent statutory regimes may introduce uncertainty for small businesses or professionals engaging in ad hoc transactions, as they navigate between different sets of obligations and liabilities. In this way, the sales of goods contracts are not solely designed to protect buyers but rather maintain fairness with commercial autonomy.
Aside from exclusion clauses, SGA 1979 affords sellers further flexibility within its framework. In Cordova Land Co Ltd v Victor Brothers Ltd [1961], the court emphasized that the burden rests on the buyer to prove that any defect existed at the point of delivery.[44] This aligns with Mash & Murrell Ltd v Emanuel Ltd [1961], where satisfactory quality does not impose a continuing obligation, but rather that goods must be fit at the time of delivery and reasonably durable to fulfill their intended commercial purpose.[45] Moreover, the Law Commission advocates an objective test of a reasonable person.[46] It is assessed if a person in the position of buyer would regard the goods as unsatisfactory. [47]Further, Bramhill v Edwards [2004], established that the standard under s14(2) is not one of perfection, but of reasonable expectation[48], minor discrepancies do not defeat satisfactory quality where the product remains safe, functional, and aligned with market norms.[49] Similarly, Egan v Motor Services [2008], reaffirmed that minor defects do not automatically constitute a breach of s.14(2). [50] Therefore, while s.14 serves for consumer protection, judicial interpretation ensures that sellers retain freedom in performance particularly where goods meet objectively reasonable standards or valid exclusions apply.[51] Nonetheless, this judicial emphasis on objective reasonableness, while offering clarity and practicality, may inadvertently disadvantage consumers in niche or high-value transactions where expectations differ from standard market norms. The reasonable person test, though useful, can obscure specific buyer concerns, especially where custom goods or unique purposes are involved. Thus, while seller protections are necessary to avoid disproportionate liability, courts must continue calibrating fairness without diluting the consumer-centric purpose of the provision.
CONCLUSION:
The Act remains foundational in UK commercial law, but its application to modern transactions can be scrutinized. The flexibility of Section 8, which allows for open price terms, promotes commercial stability but also risks uncertainty due to inconsistent judicial interpretations. The definition of “goods” under Section 61 is another area of ambiguity, particularly about digital products, highlighting the need for a more nuanced, technology-neutral approach. Although the Consumer Rights Act 2015 has addressed some of these gaps by providing clearer protections for digital goods in consumer transactions, inconsistencies between consumer and business-to-business contexts persist. Similarly, Section 14(2), which implies a term of satisfactory quality, continues to face judicial inconsistencies in defining “business transactions” and applying the standard of “reasonable quality.” The differences between the SGA 1979 and CRA 2015 regimes further underline the challenges of navigating varying legal standards for consumer versus business transactions. In conclusion, while the SGA 1979 has played a critical role in shaping commercial law, it must be reformed to address the complexities of modern commerce. These include the inclusion of digital goods within the definition of “goods,” the need for clearer application of open price terms, and a more consistent approach to the implied term of satisfactory quality. Aligning the SGA 1979 with contemporary business practices and judicial expectations will enhance certainty and fairness in commercial transactions.
Reference(S):
[1] Foley v Classique Coaches Ltd | [1934] | KB | 1.
[2] Hillas and Co Ltd v Arcos Ltd | [1932] | 147 | LT | 503.
[3] Atiyah et al, | The Sale of Goods | (9th edn, | Pitman, | London, | 2010) 28.
[4] May & Butcher Ltd v The King | [1934] | 2 | KB | 17.
[5] Ibid.
[6] Atiyah (n 3).
[7] Tarrant, | ‘Preliminary agreements’ | (2006) | 3 | University of New England Law Journal | 151.
[8] Howard, | ‘Contracts – Sale of goods – Problems of “Uncertainty”’ | (1973) | 51 | Canadian Bar Review | 668.
[9] Akrami, Farzaneh, Yusoff, Sakina Shaik Ahmad & Isa, Suzanna Mohamed, | ‘Open Price Term under the United Kingdom Sale of Goods Act 1979’ | (2017) | Jurnal Undang-Undang dan Masyarakat | 1.
[10] Kountz v Kirkpatrick | (1872) | 72 | Pa. St. | 376 and Lovejoy v Michels | (1891) | 88 | Mich. | 15.
[11] Benjamin, J. et al (eds), | Benjamin’s Sale of Goods | (8th edn, Sweet & Maxwell, London, 2010) 143.
[12] Sales of Goods Act s61(1).
[13] Ibid s12, s13, s14, and s15.
[14] St Albans City and District Council v International Computers Ltd | [1996] | 4 | All ER | 481.
[15] Beta Computers (Europe) Ltd v Adobe Systems (Europe) Ltd | [1996] | FSR | 367.
[16] Althaf Marsoof, | ‘Digital Content and the Definition Dilemma under the Sale of Goods Act 1979: Will the Consumer Rights Bill 2013 Remedy the Malady’ | (2014) Vol 9(4) | Journal of International Conmercial Law and Technology | 285, 288.
[17] Ewan McKendrick, | Goode on Commercial Law | (4th ed, | Penguin, London | 2010) 213.
[18] Green v Petfre (Gibraltar) Ltd | [2021] | EWHC (QB) | 842.
[19] Evans v Kosmar Villa Holidays Plc | [2007] | EWCA Civ | 1003.
[20] Sales of Goods act 1979 s12-s15.
[21] Ibid s61(1).
[22] Computer Associates (UK) Ltd v The Software Incubator Ltd | [2021] | 9 | WLUK | 205.
[23] John N Adams and Hector MacQueen, | Atiyah’s Sale of Goods | (12th ed, | Pearson, | 2010) 74.
[24] Lee v Griffen | [1861] | 1 | B&S | 272.
[25] Robinson v Graves [1935] 1 KB 579.
[26] Stocznia Gdanska v Latvian Shipping Co | [1998] | 1 | All ER | 883.
[27] Hugh Beale, | ‘The Sale of Goods Act and the Nature of Sales’ | (Shaping the Law of Obligations: Essays in Honour of Professor Ewan McKendrick KC, | Hart Publishing | 2023) 317.
[28] R&B Custom Brokers Co Ltd v United Dominions Trust Ltd | [1988] | 1 WLR | 321.
[29] Davis v Sumner | [1984] | 1 WLR | 1301.
[30] Stevenson v Rogers | [1999] | 2 WLR | 1064.
[31] Ibid [7].
[32] R&B Customs [1988] (n 28), obiter dicta 324.
[33] Feldarol Foundry plc v Hermes (London) Ltd | [2004] | EWCA Civ | 747.
[34] Ibid (n 28), (n 33).
[35] Sales of Goods Act 1979 s14(2).
[36] Ibid s14.
[37] Henry Kendall & Sons Ltd v William Lillico & Sons Ltd | [1969] | 2 AC | 31.
[38] Rogers v Parish | [1986] | EWCA Civ | J1105-6.
[39] Sales of Goods Act 1979 s14.
[40] Lorraine Conway, Consumer Rights Act 2015, Commons Library Research Briefing (17 May 2022) para 3.1.
[41] Consumer Rights Act 2015 s9, s20-24.
[42] Ogochukwu C Nweke, | ‘Consumer Rights and the Exclusion for Sellers Under the UK Consumer Rights Act of 2015’ | (2023) | Vol 7(11) | Journal of Humanities, Arts and Social Science | 2159, 2161.
[43] Ibid 2162.
[44] Cordova Land Co Ltd v Victor Brothers Inc | [1961] | 1 WLR | 793.
[45] Mash & Murrell Ltd v Joseph I Emanuel Ltd | [1961] | EWCA Civ |J1113-1.
[46] Law Commission and Scottish Law Commission, Sale and Supply of Goods (Law Com No 160; Scot Law Com No 104, 1987) para 3.40
[47] Isaac Olaitan Okeya, David Funso Dare, and Abiodun Thomas Ogundele | ‘Critical Analysis of the “Implied Term” of a Contract Set Out in Sale of Goods Act 1979 in 1995’ | (2020) | Vol 7(8) | International Journal of Research and Review | 49,54-55.
[48] Bramhill v Edwards| [2004] | EWCA Civ | 403.
[49] Isaac, David and Abiodun, (n 47), 55.
[50] Egan v Motor Service | [2008] | WLR | 1589.
[51] Sales if Goods Act 1979 s14.
