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ENGLISH COMMERCIAL LAW

By Dr. A.E. Platsas

School of English Law

Dr. Antonios E. Platsas

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WELCOME NOTE

Dear all,

Welcome to the module of English Commercial Law. This is a module which touches upon the core of English private law. The module seeks to give you advanced knowledge on the main areas of English commercial law. We will engage ourselves with the jewel of English commercial law, the Sale of Goods Act 1979 (as amended); competition law, consumer law (now an autonomous offshoot of commercial law due to the influences of European law) and e-commerce law.

English commercial law is generally perceived as one of those intellectual flagships of English law as a whole. Do recall that the Englishman has been a trader in his heart. Him having excelled in commerce meant that he would excel in private law. The sophistication of his commercial laws has caused his laws to be the setting paradigm for the laws of other jurisdictions, jurisdictions which did not have to be connected with the old British Empire. The Scandinavians for instance would draft much of their commercial law based on the English legal example.

Thus, the main advantage of this module is that the module will allow you to expand on your knowledge in the leading field of commercial law. In addition, the field of commercial law provides an excellent background for your research. I invite you to take advantage of this fact and make the most out of this module.

In the hope that I will immerse you in the particulars and the intricacies of what is one of the most dynamic areas of English Law, Commercial Law, I would like to wish you all the best in this module and your studies as a whole.

Antonios Platsas, LLB, LLM., PhD, PG Cert, Reader in Law, FHEA, Advocate.

INDEX


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PART I – SALE OF GOODS LAW Section 1 - The Commercial Contract of Sale

Section 2 - The Duties and Responsibilities of the Parties

Section 3 - The Requirements Necessary to Enforce the Contract of Sale

Section 4 - The Competing Claims to the Ownership of Goods

Section 5 - The Remedies Available to the Seller and the Buyer

PART II – CONSUMER LAW Section 6 - Consumer Protection

Section 7 - Consumer Credit Law and Regulation

PART III – E-COMMERCE LAW Section 8 - Online Commerce

PART IV – COMPETITION LAW Section 9 - Theoretical Foundations of Competition Law

Section 10 - Practical Aspects of EC/UK Competition Law


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Indicative Reading List

Sale of Goods

• JN Adams, Atiyah’s Sale of Goods (12th edn Pearson, Harlow 2010)• R Bradgate, Commercial Law (3rd edn Butterworths, Chippenham 2000)• E McKendrick (ed), Goode on Commercial Law (4th edn Penguin, London

2010)• LS Sealy and RJA Hooley, Commercial Law Text, Cases and Materials (4th

edn OUP, Oxford 2009)

Consumer Law

• M Furmston and J Chuah, Commercial and Consumer Law (Pearson, Harlow 2010)

• G Woodroffe, Consumer Law and Practice (8th edn Sweet & Maxwell, London 2010)

• JK MacLeod, The Law Relating to Consumer Sales and Financing of Goods (2nd edn Routledge Cavendish, London 2006)

E-Commerce Law

• P Todd, E-commerce Law (Cavendish, London 2005)• D Bainbridge, Introduction to Information Technology Law (Longman, London

2007)• FF Wang, Law of Electronic Commercial Transactions (Routledge Cavendish,

London 2010)

Competition Law

• R Whish, Competition Law (6th edn OUP, Oxford 2008)• M Furse, Competition Law of the EC and UK (6th edn OUP, Oxford 2008)• B Rodger and A MacCulloch, Competition Law and Policy in the EC and UK

(4th edn Routledge Cavendish, Abingdon 2008)


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PART I – SALE OF GOODS LAW

Section 1 - The Commercial Contract of Sale

Outline of this Section1.0. – Outcome1.1. – The Characteristics of the Contract of Sale

1.2. – The Most Important non-sale of Goods Transactions1.3. – Activities

1.0 - OutcomeThe students must show that they understand the differences between a contract of sale regulated by the Sale of Goods Act 1979 and the non-sale of goods contract.

1.1 - The Characteristics of the Contract of Sale The types of contracts that we will be dealing with in this course are those that regulate the sale of goods. No formalities are required to create contracts for the sale of goods and they may be written or oral. The governing statute will be the Sale of Goods Act 1979 (SoGA 1979), as amended. We begin by defining the contract of sale. The defining characteristics of the contract of sale are contained in s 2 of the SoGA 1979. The contract of sale may be conditional, s 2(3), a future sale, s 2(5), or an agreement to sell, s 2(6). s 2(1), delineates the following requirements:

A seller and a buyer Both the seller and the buyer must have capacity and be committed to selling and buying. This is evidenced by an intention to pass property under the contract. Weiner v Harris (1910) LKB285 demonstrates the procedures the court will follow in determining whether the parties are sellers and buyers. The transfer or agreement to transfer property Property is defined under s 61 as the general property in the goods and means the transference of the absolute legal title or ownership. Contracts of sale must be distinguished from those contracts where a lesser interest is transferred. Examples of lesser interests are possessory interests such as bailment. See the cases of South Australia Insurance v Randell (1869) LR3PC101 and Mercer v Craven (1994) CLC328HL where the courts had to decide whether absolute legal title or a mere possessory interest was transferred.


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Money consideration Money refers to the unit of account issued for the purpose of legal tender within a legal jurisdiction. Problems arise where goods are sold for other than money or, where money is used in conjunction with goods such as the part exchange of a car. See the cases of Esso Petroleum v Customs & Excise Coms (1976) 1ALLER117. Aldridge v Johnston (1857) 7E&B885. Flynn v Mackin (1974) IR101. A price The price is a crucial term of the contract and failure to agree on the price may be evidence that a contract has not been concluded. S 8(1) allows the contract to fix the price, or left to be fixed in a manner agreed, or determined by a course of dealings between the parties. Where none of these apply, s 8(2) requires the buyer to set a reasonable price. S 9 determines those situations where the price is to be set by a third party. See the cases of May v Butcher (1934) 2KBHL and Foley v Classique Coaches (1934) 2KB1CA where the courts had to decide if the parties had actually fixed a contract price or not.

Goods S 5, distinguishes goods in the following way:

• Existing goods, these are goods that are in the possession of the seller at the time of the contract.

• Future goods, those goods that have to be manufactured or acquired by the seller pursuant to the contract.

• Specific goods, those goods that are identifiable in a complete form at the time of the contract.

• Unascertained goods, those goods that are not specific and are sold by a generic description.

S 61 defines the types of goods that fall within the above classifications. Recently problems have emerged regarding the classification of computer software. See the case of St. Albans CC v International Computers Ltd. (1996) 4ALLER481

1.2 - The Most Important non-sale of Goods Transactions

Those contracts that do not satisfy the requirement of s 2(1) will not be classified as sale of goods contracts. It is therefore crucial to determine the nature of the contract because in the event of it is not a sale of goods contract then the contract will be regulated by a different statute that may not be as advantageous as the Sale of Goods Act 1979. The main statutes regulating non-sale of goods are the Supply of Goods and Services Act 1982 along with the Supply of Goods (Implied Terms) Act 1973.

The most important non-sale of goods transactions are the following:

Hire Purchase The object of a hire purchase is to supply goods on credit terms coupled with a security for the supplier. The legal form of a hire purchase agreement is of a hiring or


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bailment of the goods by their owner (bailor) to the hirer (bailee) with the hirer being granted an option to purchase the goods at the end of the hire period. See the case of Helby v Matthews where the court was faced with the task of determining whether a hire purchase agreement existed or not. Work and Materials As has been mentioned, the object of the contract of sale is the transfer of property from the seller to the buyer. The object of a contract of work and materials is the performance of a service for the customer. The distinction between the two becomes blurred in instances of those contracts where both goods and services are transferred. See how the courts have resolved distinctions such as this in the following cases: Clay v Yates, Lee v. Griffin, Robinson v Graves, Hyundai Heavy Industries v Papadopoulos, Beta Computer systems v Adobe. Exchange and Barter Where the consideration for a contract is not money the contract will be referred to as either an exchange or barter. In the context of consumer contracts goods are often supplied in conjunction with marketing promotions such as coupons or vouchers. The courts in these instances will look to the intention of the parties; see the cases of Esso Petroleum v Customs and Excise, Chappell & Co. v Nestle Ltd. Hire and Bailment A bailment and hire contract is characterised by a possessory interest in the goods as opposed to a legal interest. In this capacity no ownership in the goods is transferred. See the following cases where the courts have had to determine whether the interest transferred was a possessory interest or whether the property in the goods had been transferred: Clough v Martin, Leigh & Sullivan v Aliakmon Shipping, Lilley v Doubleday.

1.3 - Activities

Reading

• Bradgate, Commercial Law (3rd Edition Butterworths), Chapters 7, 8, 19 or• PJ Omar, ‘Contracts for the sale of goods - French and British approaches’

ICCLR 1998, 9(5), 141-145 (WestLaw) Abstract: Although this module does not concern itself with French law, this article explains in a simple way important areas in the Sales of Goods Act 1979. By comparing the Act with French law, an understanding through example can be found.

Activity Number 1 “A contract is a contract, and in application there is no difference between a contract to build a house and a contract to sell a television”. Discuss this statement in light of the form in which contracts are classified in English law.

Activity Number 2 Identify the legal nature of the following contracts:

NOTE: These questions raise issues of quality and the passing of risk. You are not required to discuss these issues.

1. Mike takes his watch in for a service. The jeweller performs the service and invoices Mike for the removal of rust from inside the watch, replacing a new


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battery, replacing a new watch face, and for the replacing of worn links in the watchstrap. The links prove to be defective and the watch falls of Mike's wrist smashing to the ground.

2. Judy purchases a satellite TV dish from Jake a local dealer. The dish is priced at £99 but the dealer advertises that for an extra £30 they will install the dish. Judy agrees to pay £129 and have the dish installed by Jake. Judy pays the full price in the store and the dish is delivered later that day. The next day Jake declares insolvency and is now unable to install the dish.

3. Bill decides to build his own "Super" computer that would exceed the capabilities of any commercially obtainable computer. This would involve buying a kit from the manufacturer that contains the body, motherboard, CPU, hard drive, and memory. Additions such as a modem, DVD and CD-Writer would have to be bought separately. Bill asks his friend Steve to build this computer for him and to find the appropriate additions. Steve agrees to build the computer and purchases a second hand computer from Janet for £450. The second hand computer contains the required DVD, Modem and CD-Writer. Steve completes the "Super" computer and charges Bill £2,500. The computer proves defective due to defects in the DVD and modem.

Would your analysis be different if:

• Steve paid for the kit and charged Bill £5,000 for the finished computer? • Steve found the second hand computer, but Bill had gone with him and he paid

Janet for the computer?

Activity Number 3 Explain the manner in which the SoGA has classified the manufacture and use of computer software.


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Section 2 - What the Duties are Between the Parties Engaged in the Contract of Sale

Outline of this Section2.0. – Outcome2.1. – Introduction

2.2. – Duties of the Seller2.3. – Duties of the Buyer

2.4. – Activities

2.0 - OutcomeStudents must be able to categorise the duties imposed on the seller and the buyer by the Sale of Goods Act 1979.

2.1 - IntroductionWe will now establish what the duties are between the parties engaged in the contract of sale are.

The duties of the parties are regulated by SoGa 1979 ss 27 & 28. It is the duty of the seller to deliver the goods and of the buyer to accept and pay for the goods in accordance with the terms of the contract. The duties of delivery and acceptance are concurrent conditions, that is to say that the seller must be willing to give up possession in exchange for the price and the buyer must be willing to pay the price in exchange for the goods.

2.2 - Duties of the SellerThe duties of the seller fall under the headings of delivery and condition of the goods.

Delivery

Under s 27 delivery requires the voluntary transfer of possession from one person to another in accordance with the terms of the contract. In Four Points Garage v Carter (1985) 3 All ER 12 the court held that the transfer of possession may be satisfied symbolically through the delivery of documents of title or to an agent.

Place

The SoGa 1979 s 29(2) requires the place of delivery to be determined by the contract or if not, it will be the seller's place of business. The exception to this would


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be if the goods are specific goods, then the place of delivery will be where the goods are situated.

Time

The SoGa 1979 s 29(5) & 29(3) requires the goods to be delivered at the time stipulated by the contract of sale, or, if not, within a reasonable time. What is a reasonable time will be determined as a question of fact. These sections must be read in accordance with SoGa 1979 s 10(2) which requires a determination as to whether time is of the essence or not. See the cases of British & Common Holdings v Quandrex Holdings (1989) 3 All ER 492, and, Bunge Corporation v Tradax SA (1981) 2 All ER 513 for a discussion of instances where the time of delivery may or may not be of the essence.

Amount

The contract of sale will fix the amount of goods to be delivered and failure to comply with that term will result in an unenforceable contract. SOGA s 30, lays down a detailed set of rules defining the buyers rights where the seller delivers more or less than the agreed quantity of goods. In essence, if the incorrect amount is delivered the buyer may reject the whole contract amount subject to the applicable limitations under SoGa s 30(2A), & s 30(2B). These sections prohibit a buyer dealing as a non consumer from rejecting goods where the shortfall is so slight that it would be unreasonable to do so.

Condition of the Goods

The seller is under a duty to supply goods in accordance with the implied terms as to the condition of the goods under the SoGa 1979. The implied terms are contained in SoGa ss 12-15. The implied terms are the most important source of redress for the buyer if the goods are defective in any way.

Goods must correspond with their description

SoGa s 13, implies a condition that where the goods are sold by description they will correspond with that description once they are in the possession of the buyer. The following requirements must be satisfied:

a.

Was the sale by description? See Varley v Whipp (1900) 1 QB 513, Grant v Australian Knitting Mills (1936) AC 85

b.

What was the description by which the goods were sold? See Beale v Taylor (1967) 3 All ER 253

c. Did the description influence the buyer? See Harlington & Leinster v Christopher Hull (1991) 1 QB 564

d.

Did the description identify the commercial characteristics of the goods sold? See Ashington Piggeries v Christopher Hill (1973) AC 441

e.

Did the description identify the goods to be supplied rather than an item or location of the goods? See Reardon Smith v Hansen-Tagen (1976) 3 All ER 570

f. Did the goods correspond to all aspects of the detail by which they were described? See Arcos v Ronaasen (1933) AC 470 HL


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Satisfactory quality

SoGa s 14(2) implies a condition that where goods are sold in the course of a business, the goods supplied will be of satisfactory quality. The meaning of "in the course of a business" has been given a broad interpretation, See Stevenson v Rogers (1999) QB 1028.

SoGa s 14(2A) creates an objective standard of satisfactory quality taking into account the description of the goods, the price and any other relevant factors. See Thain v Annieland Trade Centre (1997) SLT 102, Allbright & Wilson UK Ltd v Biachem Ltd (2000) All ER 530, Rogers v Parish (1987) QB 1933, Bartlett v Sidney Marcus Ltd (1965) 2 All ER 753.

SoGa s 14(2B) creates a checklist relevant to the quality of the goods:

Fitness for all purposes for which the goods are commonly supplied. See Kendall v Lillico (1969) 2 AC 31, Aswan Engineering v Lupdine Ltd (1987) 1 All ER 135.

Appearance and finish, freedom from minor defects. This section attempts to strike a balance between defects that render the goods unusable and defects that are only minor and do not affect the usability of the goods. See Rogers v Parish Ltd (1987) 2 All ER 232, Shine v General Guarantee Corp (1988) 2 All ER 911, Bernstein v Pamson Motors (1987) 2 All ER 220, Millars of Falkirk v Turpie (1976) SLT 66.

Durability and safety. Durability requires that at the time risk is transferred the goods should not deteriorate more rapidly than can reasonably be expected. Safety requires goods of satisfactory quality to be safe for use. See Thain v Anniesland Trade Centre (1990) SLT 102.

Liability under SoGa s 14(2) is strict but under s 14(C), there are two exceptions:

a.

Where the defects are specifically drawn to the attention of the buyer.

b.

Where the buyer examines goods before the contract is made and this reveals certain defects.

The crucial point here is that there is no obligation on the buyer to inspect, even if the seller creates the opportunity for inspection.

Fitness for purpose

SoGa s 14(3), where the buyer makes known to the seller any purpose for which the goods are to be used, then the goods supplied under the contract must be reasonably fit for that purpose. Again, the meaning of "in the course of a business" has been given a broad interpretation, see Stevenson v Rogers (1999) QB 1028.

Two requirements must be satisfied:

a) The particular purpose must be made known to the seller and, if it is a special purpose, that purpose must be specifically stated. See Kendall & Sons v Lillico & Sons Ltd (1969) 2 AC 31, Ashington Piggeries Ltd v Christopher Hill (1972) AC 441, Slater v Finning (1997) AC 473.


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b) The buyer must rely on the seller in circumstances where it would be reasonable for the buyer to rely on the judgement of the seller. See Wren v Holt (1903) 1 KB 610 CA, R& B Customs Brokers v United D.T. (1988) 1 ALL ER 847, Aswan Engineering v Lupine (1987) 1 All ER 135.

Pass good title

SoGa 1979 s 12(1), imposes a duty on the seller in a contract for the sale of goods to transfer to the buyer an absolute legal interest in the goods. Failure to transfer an absolute legal interest will allow the buyer to reject the goods and terminate the contract. See Niblett v Confectioners Materials Co Ltd (1921) 3 KB 387, Rowland v Divall (1932) 2 KB 500, Barber v NSW Bank Ltd (1996) 1 All ER 906.

In addition under SoGa s 12(2), there are two implied warranties:

a.

The goods must be free of any charges and encumbrances.

b.

The buyer must be allowed quite possession of the goods. See, Microbeads v Vinhurst Road Markings (1975) 1 All ER 529.

Sale by sample

SoGa s 15, requires goods sold by sample to be free of any defects and also for the sample to correspond with the bulk of the goods. See Drummond (James) & Sons v EH Van Ingen & CO LTD (1887) 12 APP CAS 284, Godley v Perry (1960) 1 WLR 9.

2.3 - Duties of the BuyerAcceptance of the goods

SoGa 1979 s 27 requires the buyer to accept the goods and not wrongfully reject the goods. This must be read in conjunction with SoGa 1979 s 37 that apportions liability on the buyer for refusing or, being negligent in not taking delivery of the goods after the seller has requested him to do so.

The meaning and application of acceptance under the act will be discussed later under the buyer's remedies.

Payment for the goods

The duty to pay the price is fundamental to the contract of sale and under SoGa s 8(2) the price may be fixed by the contract, or, by a manner to be agreed in accordance with the contract or, by a prior course of dealings. Failing this a reasonable price will be implied dependant on the circumstances of the case. In connection with the buyer's duty to pay for the goods under SoGa s 27 reference must be made to the Late Payment of Commercial Debts (Interest) Act 1998.

Mention must be made to the possibility of excluding liability for breach of any of the duties imposed on the seller and buyer. The ability to limit or restrict liability in a sale of goods contract is regulated primarily by the Unfair Contracts Terms Act 1977, ss 6 & 7. This act states that the duty to pass good title under Sec. 12 cannot be limited or excluded under any circumstances. In relation to ss 13, 14 & 15, these terms


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cannot be excluded or limited where the buyer deals as a consumer. In instances where the buyer is not dealing as a consumer these terms can only be excluded if they satisfy the test of reasonableness. See George Mitchell v Finney Lock Seeds, AEG (UK) Ltd v Logic Resource Ltd (1996) CLC 265 and Unfair Terms in Consumer Regulations Act 1999.

2.4 - ActivitiesReading

MacKendrick’s Goode on Commercial Law (4th edn, Penguin 2010), Chapters 10, 11, 13 and 15.

In addition you may wish to read the following:

Ian Brown, ‘The scope of section 12 of the Sale of Goods Act’ LQR 1992, 108(Apr), 221-223 (Westlaw)

Abstract: s 12 Implied terms about title, etc.

Paul Robson & John N Adams, ‘Consumer sales’ JBL 1990, Sep, 433-437 (WestLaw)

Abstract: s 13 Sale by description.

Activity Number 1

Dimsight went to Optic, an optician, to purchase a new pair of spectacles. There was a special promotion allowing anyone who bought any pair of spectacles for more than £100 to get a second pair for free.

Dimsight bought one pair of spectacles for £110 and so was able to take advantage of the special offer. When choosing the second free pair of spectacles he asked for shatter proof plastic lenses. Dimsight was a regular squash player and he intended to use the second pair for spectacles for playing squash but did not tell Optic his reason for ordering them. Optic did not himself make spectacles of this kind, but supplied the lens prescription to Toughlens, a specialist manufacturer who manufactured the spectacles to the prescription and then sent them to Optic who fitted them to Dimsight in accordance with his usual practice. Before Dimsight ordered, Optic had shown him the Toughlens brochure, which described their lenses as "ideal for all kinds of sport". That statement is true to the extent that in the present state of lens technology there is no better lenses and, provided the lenses are well fitted to a rigid frame, they will withstand considerable pressure, but they will shatter on a very hard impact. In fact the pair supplied to Optic had lenses badly fitted to a rigid frame, this was not uncommon due to the present state of the spectacle making industry. The bad fit was not readily discernable, even to an expert, but it stressed the lenses so as to weaken them considerably.

One day Dimsight was struck in the eye by a ball while playing squash. The lens of his spectacles shattered and his eye was badly injured. An expert has examined the


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remains of the spectacles and established that they were weaker than they should have been because of the bad fitting, but he is not prepared to say that they would have shattered anyway given the speed of the ball and the force of the impact.

Advise Dimsight.

Activity Number 2

Victor operates a small independent dairy but has decided to cease business frustrated at the increasing amount of EU regulations. He owns a Bedford van, which he has used to make deliveries of milk and dairy produce, and asks Simon, who sells light commercial vehicles, to sell it for him.

Paul has recently started a business manufacturing his own brand "Mister Cream" ice cream and wants to purchase a van for use as an ice cream van. He asks Arthur, a mechanic, to look out for a suitable van for him.

Arthur sees the Bedford van at Simon's premises but does not realise that it belongs to Victor. He explains to Simon that he is interested in the van for use as an ice cream van. Simon replies that he is "no expert" on ice cream but advises that the Bedford has previously been used to carry dairy produce and that he thinks it should be suitable. Arthur makes a cursory examination of the van, which includes examining the engine, starting it up and driving it around the block (a distance of about half a mile) and then agrees to buy it. Simon asks him to sign a contract for the van, and produces a printed form headed "Simon's Vehicle Sales: Vehicle Sale Contract "Arthur signs the form as "buyer" without reading it. He pays for the van with cash, withdrawn from the bank by Paul for that purpose.

For the first month Paul uses the van for general purposes while he is setting up his business. He does not use it to deliver ice cream during that time. The first time he uses it on his ice cream round the engine over heats and seizes. Moreover he discovers that the refrigeration plant, although suitable for keeping milk, cheese and yoghurt chilled, is inadequate for keeping ice cream frozen and all of his stock of ice cream melts. He is advised that the van will need expensive repairs to enable it to be used on the road as a delivery van but cannot be used as an ice cream van without replacement of the refrigeration unit and extensive modification. However, when he complains to Simon, Simon denies all liability, claiming that Victor was the seller of the van, that in any case he sold it to Arthur, and drawing Paul's attention to a clause in the contract, signed by Arthur which states that:

“No warranty of quality or fitness for any purpose is given. Simon's Vehicle Sales accept no liability for any defect in any vehicle supplied.”

Advise Paul.


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Section 3 - The Requirements Necessary to Enforce the Contract of Sale

Outline of this Section3.0. – Outcome3.1. – Introduction

3.2. – Passing of Property3.3. – Passing of Risk

3.4. – Mistake and Frustration3.5. – Activities

3.0 - OutcomeStudents must understand the conditions attached to the passing of property and the circumstances, which determine how risk is allocated between parties.

3.1 - IntroductionWe will now discuss the requirements necessary to enforce the contract of sale. This relates to the passing of property, the passing of risk and matters incidental to risk and frustration.

3.2 - Passing of PropertyThe passing of property is an act independent of delivery and possession. This means that the owner can become the owner of the goods before they are actually delivered to him and the seller can retain property after delivery.

Property passes in accordance with the following rules:

Intention

SoGa 1979 s 17(1) states that property will pass when the parties intend it to pass, s 17(2) allows intention to be ascertained by reference to the terms of the contract, the conduct of the parties and the circumstances of the case. Intention may be either express, implied, or presumed. SoGa s 19, allows for the parties intention to include instances where the seller wishes to retain his rights of disposal until the fulfilment of certain conditions. See Dennant v Skinner and Collom (1948) 2 KB 164, Dobson v General Accident and Life Assurance Corp. Ltd (1990) 1 QB 274.


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Contracts for the sale of specific goods

Specific goods are those goods that are identified and agreed on at the time of the contract. There are three rules that regulate the passing of property in specific goods.

SoGa s 18 rule 1, ...with specific goods in a deliverable state property passes when the contract is made. See, Varley v Whipp (1900) 1 QB 513, Underwood Ltd v Burgh Castle Brick and Cement Syndicate (1922) 1 KB 343.

SoGa s 18 rule 2…where specific goods are not in a deliverable state property will pass when the goods are put in a deliverable state.

SoGa s 18 rule 3, ...where specific goods have to be weighed or measured or some other act done in order to ascertain the price, property does not pass until that act is done.

Approval or sale or return

SoGa s 18 rule 4 if the goods are on sale or approval, property will pass when the goods have been approved or accepted or the goods have been retained without any notice of rejection. See Atari Corp. V Electronics Boutique Stores (1988) 1 All ER 1010.

Unascertained goods

Property in unascertained goods will pass once the goods have been ascertained and appropriated to the contract.

SoGa s 16 states that no property in unascertained goods will pass until the goods have been ascertained. The ascertainment of the goods means that the goods have been identified to the contract. See Re Goldcorp Exchange Ltd (1995) 1 AC 74.

SoGa s 18 rule 5 requires that once the goods have been ascertained they must then be unconditionally appropriated to the contract. Appropriation therefore requires an irrevocable act intending those goods to be used in the performance of the contract. See Carlos Federspiel SA & Co v Charles Twigg & Co Ltd (1957) 1 Lloyd's Rep 240, Hendy Lennox v Grahame Puttick Ltd (1984) 2 All ER 152, Healy v Howlett & Sons (1917) 1 KB 337, Wardars Co v Norwood & Sons Ltd (1968) 2 QB 663, The Elafi (1982) 1 All ER 208.

Sale from a designated bulk

SoGa s 20(A) & 20(B), applies unless the parties agree otherwise, to the transfer of property in an undivided share in the bulk transferred to the buyer. The buyer becomes an owner in common of the bulk. By SoGa s 20(B), where joint ownership is created under s 20, the parties consent to the stated provisions of s 20(B). See Re Waite 1927) 1 CH 606, Re London Wine Shippers Ltd (1986) PCC 121, Re Stapylton Fletcher Ltd [1995] 1 All ER 192.


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3.3 - Passing of RiskRisk refers to the deterioration or damage to the goods as well as to the damage caused to the goods by third parties. The crucial question is who will be liable for the goods in the event they have deteriorated or been damaged. The answer will depend on which party bears the risk.

SoGa s 20(1) states that unless the parties agree otherwise the risk will follow ownership. This applies irrespective of who has possession. See Stern v Vickers (1923) 1 KB 78, Healy v Howlett (1917) 1 KB 337.

SoGa s 20(2) states that the general rule on risk will be displaced where the goods are damaged as a result of the delay of one of the parties. The risk will fall on the party at fault. See Demby Hamilton & Co v Baren (1949) 1 All ER 435.

SoGa ss 29(3) & 37 state that the transfer of risk does not affect the rights and obligations of the seller or buyer as a bailee of the goods. The significance of this is that if risk has passed to the buyer but the goods are still in the possession of the seller, the seller acts as a bailee of the goods.

SoGa s 32 deals with the passing of risk while goods are in transit to the buyer. S 32(1) states that where goods are required to be delivered to a carrier, property and risk will pass when delivery to the carrier is complete. SoGa s 32(2) places the burden on the seller to create a reasonable contract for delivery to the carrier under s 32(1). See Thomas Young & Sons v Hobsons (1949) 65 TLR 365.

3.4 - Mistake and FrustrationIf the goods are damaged whilst at the sellers risk he will not be able to deliver them in performance of the contract. In the event that the goods cannot be repaired or replaced, the seller will be liable for breach of contract, unless he is able to be excused.

SoGa s 6, applies where the contract is for the sale of specific goods and without the knowledge of the seller the goods have perished before the contract is made. The contract will consequently be declared void. SoGa s 7 applies where there is a contract for the sale of specific goods and between the making of the contract and the passing of risk from the seller to buyer, the goods perish without fault of either party. See Howell v Copeland (1876) 1 QBD 258, Sainsbury v Street (1972) 3 All ER 1127.

The application of the above sections requires that the goods have perished. 'Perished' occurs where the goods have been irretrievably destroyed to the extent that it is unlikely that the goods will be bought or sold. In instances where only part of the goods have perished, the whole contract may be avoided subject to a contrary intention. See Horn v Minister of Food (1948) 2 All ER 1036, Asfar v Blundell (1896) 1 QB 123, Barrow Lane Ballard v Phillip Phillips & Co (1929) 1 KB 574, Bell v Lever Bros Ltd (1932) AC 162.


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MacKendrick’s Goode on Commercial Law (4th edn, Penguin 2010), Chapters 8 and 9.

In addition, please you may wish to read the following:

N.R. Campbell, ‘Passing of property in contracts for the sale of unascertained goods’ JBL 1996, Mar, 199-205 (WestLaw)

Abstract: s 16 Goods must be ascertained.

Peter Roberts, ‘Effective title transfers in international LNG trades’ IELTR 2007, 7, 99-103 (WestLaw)

Abstract: s 17 Property passes when intended to pass. The usefulness of this article illustrates the application of the Sales of Goods Act to complicated commercial agreements because it is particularly suited to applying and interpreting the nuances of a complex contractual structure. Although there is an element of international trade the article is worth reading in light of the Masters program modules.

Activity Number 1

Recess Ltd are wholesale commodity dealers specialising in Rice. Consider the legal consequences of the following transactions in which they are involved.

1. On 1st November they entered into a contract with Em Minim for the sale to Em of 100 sacks of rice, to be collected by Em on 5th November. On 2nd November Recess took 100 sacks from their warehouse and affixed them to labels saying "Em Minim". The sacks were moved and stored in the despatch area of the warehouse. On 5th November Em sent a representative to collect the rice but it was discovered that the sacks marked with Em's name had been ruined as a result of being soaked with water penetrating the warehouse despatch area through a hole in the roof caused by vandals.

2. Also on 1st November they contracted with Croft Ltd to sell them 200 sacks of beans, to be delivered in Derby where Croft have their headquarters. On 3rd November 200 sacks were duly despatched by British Rail to "await collection", and Croft were informed of the despatch. On the same day Croft entered into a contract to sell "200 sacks of rice" today, despatched to us by Recess Ltd to Shaggy. The contract required Croft to repack the beans in 2kg packages and load the packages onto pallets prior to delivery. On 4th November Recess were informed that the beans had arrived in Derby and could be collected. They authorised delivery to Croft who sent a


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representative to Derby station to collect the beans. It was then discovered that the beans had been delivered on the evening 3rd November and that, overnight, thieves had broken into the railway station and had stolen 50 sacks. The market price of rice had risen sharply on 3rd November and Shaggy demands delivery at the contract price.

3. On 1st November Recess had in stock 500 sacks of Vietnamese rice. On that day they were examined by a representative of Defjam Ltd who agreed that they would buy all 500 sacks, property to pass on payment of the price of £5000. On l5th November Defjam collected the beans and paid the contract price; however, on opening the sack they discovered that they had become so badly infested with rice-mites as to be totally unusable. It is established that the infestation occurred after 1st November. In the meantime the market price of similar rice has risen to £15 per sac.


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Section 4 - The Competing Claims to the Ownership of Goods

4.0. – Outcome4.1. – Instances of Competing Claims to the Ownership of Goods

4.2. – Activities

4.0 - OutcomeStudents must be able to determine those instances where the property in the goods may pass as an exception to the general requirements for the passing of property under the Sale of Goods Act 1979.

4.1 - Instances of Competing Claims to the Ownership of GoodsWe now turn to those instances where there may be competing claims to the ownership of goods. These competing claims may come about as a result of goods being sold in circumstances where the seller does not have title to the goods. The buyer may have a claim to ownership in these circumstances if she falls into one of the exceptions and bought the goods in good faith and without notice that the seller did not have title. See Bishopgate Finance Corp v Transport Brakes Ltd (1949) 1 KB 322.

Good faith and notice

SoGa s 61(3) defines good faith as acting honestly whether acting negligently or not. This implies a subjective test. Good faith, in commercial transactions, tends to mean actual notice but this will ultimately depend on what facts were known to the buyers at the time of the transaction. See Dodds v Yorkshire Bank (1992) CCLR 92, Feur Leather v Frank Johnston & Sons (1981) Com LR 251.

Exceptions

SoGa s 21(1) makes it clear that unless an exception applies under the statute no buyer can acquire a better title than the seller has. S 21(1) allows for three exceptions:

1. Agency

Agents have the authority given to them by the principal to transfer ownership on behalf of the principal. In this context the agents do not have actual title to the goods but can still transfer the title belonging to the principal. See Hely-Hutchinson v


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Brayhead Ltd (1968) 1 QB 549, Freeman and Lockyer v Buckhurst Properties (1964) 2 QB 480.

2. Estoppel

The general rule is displaced where the owner is estopped from denying that the seller has the right to sell. An estoppel is created by a representation that is subsequently relied on. The representation may be made by words or by conduct provided it is clear and unequivocal. See Eastern Distributers v Goldring (1957) 2 QB 600, Debs v Sibec Developments Ltd (1990) RTR 91.

3. Mercantile agents

These are created under the Factors Act 1889 s 2. Mercantile agents, or factors, are professional agents who trade in their own names and may not disclose the identity of their principals. Third parties dealing with mercantile agents may therefore satisfy the good faith without notice doctrine. See Belvoir Finance v Harold G Cole (1969) 2All ER 904, Oppenheimer v Attenborough (1908) 1 KB 221, Heap v Motorists Advisory Agency Ltd 1 KB 577.

Seller in possession

SoGa s 24 displaces the general rule where a seller no longer owns the goods in possession but sells them to the buyer in good faith without notice. See Pacific Motor Auctions v Motor Credits Ltd (1965) AC 867, Worcester Works Finance Ltd v Cooden Engineering Ltd (1972) 1 QB 210, Nicholson v Harper (1895) 2 Ch 415.

Voidable title

SoGa s 23 states that the general rule is displaced if goods are sold under a voidable title to a buyer in good faith and without notice and the title has not been avoided at the time of sale. See Cundy v Lindsay (1873) 3 App Cas 459, Citibank v Brown Shipley &Co Ltd (1991) 2 All ER 690, Ingram v Little (1961) 1 QB 31 (1960) 3 All ER 332, Lewis v Averay (1972) 1 QB 198, Car and Universal Finance Ltd v Caldwell (1965) 1 QB 525.

Buyer in possession

SoGa s 25 states that the general rule is displaced where a buyer obtains possession of goods without title and resells them to a buyer in good faith without notice. See Four Points Garage v Carter (1985) 3 All ER 12, The Saetta (1994) 1 All ER 851, Newtons Wembly v William (1965) 1 QB 560, National Employers GIA v Jones (1990) 1 AC 24.

Sale of vehicles on hire purchase

Under the Hire Purchase Act 1964, the general rule may be displaced where vehicles are held on hire purchase and sold before title has passed to the hirer. See Stevenson v Beveley Bentick Ltd (1976) 2 All ER 606.


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Special power of sale

SoGa s 21(2)(b) displaces the general rule where goods are sold under special powers such as pledges or goods seized under warrants of execution.


MacKendrick’s Goode on Commercial Law (4th edn, Penguin 2010), Chapter 16.

Activity Number 1

The courts and parliament have endeavoured to strike a balance between the competing interests created by the contractual transfer of title to property. Explain what these interests are and how this has been achieved paying particular attention to the doctrines of "good faith" and "notice."


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Section 5 - The Remedies Available to the Seller and the Buyer

5.0. – Outcome

5.1. – Sellers’ Remedies5.2. – Buyers’ Remedies

5.3. – Activities

5.0 - OutcomeStudents must be able to allocate a remedy in favour of the innocent party in the event that the contract of sale is breached.

5.1 - Sellers’ RemediesThe sellers' remedies arise where the buyer fails to perform his obligations under the contract. The sellers' remedies are divided into real and personal remedies.

Personal

SoGA s 49 states that provided the seller can satisfy the statutory claim there is no requirement to prove loss. A claim for price will only arise where the property in the goods has passed to the buyer and the price is payable on a certain day irrespective of delivery.

SoGA s 50 provides that where the seller is unable to satisfy a statutory claim for the price she may proceed for damages where the buyer wrongfully refuses to accept and pay for the goods. The seller is expected to mitigate her loss by seeking an alternate buyer for the goods in the market. See Bem Ticaret v International Agri Trade (1999) 1 All ER (Comm) 619, W L Thompson v Robinson (1955) Ch 177, Shearson Lehman v MaClaine Watson (1990) 1 Lloyd's Rep 441.

SoGa s 37 allows the seller a claim in circumstances where the buyer has accepted the goods but due to the failure of the buyer to take delivery the seller has incurred losses.

Real

SoGa s 39 allows the unpaid seller three rights:

A lien on the goods, or the right to retain them for the price while in his possession.

The right to stop the goods in transit The right to resell the goods.


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SoGa s 43 allows the seller to withhold delivery until he has been paid even if property has passed to the buyer. This remedy is only available where the goods have not been supplied on credit, if supplied on credit the credit must not have expired, the buyer is not insolvent. Because a lien is a possessory remedy it will be lost if the buyer obtains possession of the goods through consent of the seller.

SoGa s 44 applies in instances where the seller has lost his right to a lien due to delivery of the goods to a carrier. In these circumstances if the buyer becomes insolvent while the goods are in transit, the unpaid seller has the right to stop the goods in transit and recover possession of the goods until payment.

SoGa s 48 allows a seller who has exercised his right to a lien or stoppage in transit and still remains unpaid to sell the goods in order to recoup his losses. If the seller does so the new buyer will get good title to the goods.

Retention of title clauses

Retention of title clauses allow the seller of goods the right to retain title in instances where goods are sold on credit and the buyer becomes insolvent before he has paid the seller. The value of this is that the goods (and the seller) are exempt from the hierarchy of the insolvency creditors. See Aluminium Industrie Vaasen v Romalpa Ltd (1976) 2 All ER 552.

Complexities surround the actual construction and application of the clauses. This tends to relate to what the seller is claiming or retaining:

Where the Seller claims the original goods see Clough Mill Ltd v Geoffrey Martin (1984) 3 All ER 982, Re Peachdart Ltd (1984) Ch 131, Borden Ltd v Scottish Timber Products Ltd (1981) Ch 25.

Where the seller claims the retention of sums due see Armour v Thyssen Edelstahlwerke AG (1991) 2 AC 339.

Where the seller lays Claim to manufactured products see Hendy Lennox v Grahame Puttick (1984) 2 All ER 152, Borden v Scottish Timber Products Ltd (1981) Ch 21.

Where the seller claims the proceeds of the resale of the goods see Tatung Ltd v Galex Telesure Ltd (1988) 5 BCC 325, Compaq Computers Ltd v Abercorn group Ltd (1991) BCC 484.

5.2 - Buyers’ RemediesRight to reject

The buyer may reject the goods in three situations:

1. The contract may include an express right of rejection.2. SoGa s 30, allows the buyer to reject the goods if the wrong quantity has

been delivered.3. SoGa s 11(3) defines a condition and the buyer can reject for breach of

condition. SoGa s 34 allows the buyer a reasonable opportunity to inspect


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the goods for the purpose of ascertaining whether they are in conformity with the contract.

The right to reject for breach of condition is subject to a number of restrictions:

1. SoGa s 11(4), the right to reject is lost if the buyer is deemed to have accepted the goods under SoGa s 35. S 11(4) only applies to non-severable contracts. SoGa s 31(2) defines a severable contract as one that is delivered in instalments and separately paid for. If the contract is severable then a breach by either party in relation to one severable part of their obligations will not necessarily affect the other severable obligations under the contract or the contract as a whole. See Warinco AG v Samor SPA (1977) 2 Lloyd's Rep 582, Maple Flock Co v Universal Furniture Products (1934) 1 KB 148 CA, Robert A Munro v Meyer (1930) 2 KB 312, Regent OHG v Francesco of Jermyn Street (1981) 3 All ER 327.

Acceptance, which may cause the buyer to lose his right to reject, may occur in three situations:

SoGa s 35(1)(a), where the buyer expressly intimates his acceptance. Intimation means use of clear words of acceptance. See Varley v Whipp (1900) 1 QB 513. SoGa s 35(A) provides that where the buyer has the right to reject by reason of a breach which affects all or some of the goods, but accepts some of them, he does not lose the right to reject the rest provided that there where some of the goods are unaffected by the breach he accepts all of them.

SoGa s 35(1)(b), where the buyer does an act inconsistent with the seller's ownership. Traditional situations are where the buyer has affirmed the contract by dealing with the goods and/or, where the physical return of the goods is impossible due to the buyer's act of selling, dealing, repairing or destroying the goods.

SoGa s 35(4), where after a reasonable period the buyer retains the goods without indicating he intends to reject them. What is reasonable will be a question of fact depending on the circumstances of the case. See Knight Machinery (Holdings) Ltd v Rennie (1995) SLT 166, Bernstein v Pamson Motors Ltd (1987) 2 All ER 220, Peakman v Express Circuits Ltd [1998] EWCA Civ 136, Truk (UK) Ltd v Tokmakidis GmbH (2000) 1 Lloyd's Rep 543.

SoGa s 35(2) requires that the buyer to be given an opportunity to inspect the goods and he will not have accepted the goods pursuant to s 35(1) unless he has had a reasonable opportunity for examining the goods. SoGa s 35(3) prohibits a consumer from losing this right in any circumstance. SoGa s 35(5) requires consideration of whether the buyer has had a reasonable opportunity of examining the goods when taking into account the lapse of a reasonable amount of time constituting acceptance under SoGa s 35(4).

2. SoGa s 15(A), the right of a non-consumer buyer may be lost if the breach of the condition is slight. Rejection here would be unreasonable and the breach is to be treated as a breach of warranty.

3. Commercial contracts may include terms that restrict or exclude the buyer’s right to reject.

Where the buyer has lost her right to reject she may still sue for damages.


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Damages for breach

Non delivery

SoGa s 51 apportions damages for non delivery of goods on those losses arising directly and naturally in the ordinary course of events from the seller's breach. See Kaines v O W (1993) 2 Lloyd's Rep 1, The Texaco Melbourne (1994) 1 Lloyd's Rep 473, Shearson Lehman Hutton v Maclaine (No2) (1990) 1 Lloyd's Rep 441.

Late delivery

If time was of the essence and goods are delivered late, damages are apportioned on the difference in value at the time of the required contractual delivery and the actual date of delivery. See Victoria Laundry v Newman (1949) 2 KB 528, Elbinger v Armstrong (1874) LR 9 QB 473, Wertheim v Chicoutimi Pulp Co (1911) AC 301, Slater v Hoyle Ltd (1920) 2 KB 11 CA.

Delivery of defective goods

SoGa s 53 allows for a claim of damages where the buyer may not repudiate the contract and damages are assessed either in accordance with general principles of damages or, the buyer may set up her claim in diminution or extinction of the price. See George Mitchell v Finney Lock Seeds (1983) 2 AC 803, Bernstein v Pamson Motors (Golders Green) (1987) 2 All ER 220, Slater v Hoyle & Smith Ltd (1920) 2 KB 11 CA, Bence Graphics International v Fasson (1998) QB 87.


MacKendrick’s Goode on Commercial Law (4th edn, Penguin 2010), Chapters 14 and 15.

In addition, you may wish to read the following:

Robert Bradgate, ‘Remedying the unfit fitted kitchen’ LQR 2004, 120(Oct), 558-563 (WestLaw)

Abstract: s 35 Acceptance.

Activity Number 1

The buyer's expectation rests on the receiving of goods that conform to the contract and delivered within the specified time. The seller's expectation rests on delivering the goods and receiving payment for them. It would seem that if these expectations are not met, the applicable remedies are relatively simple.

Explain how the SoGa deals with remedying these expectations and whether this has created certainty and predictability.


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Activity Number 2

Best Delivery Caterers has recently gone into liquidation. Mike has been appointed as the liquidator and a number of creditors are claiming goods supplied to Best Delivery Caterers under contracts incorporating reservation of title clauses. Advise Mike in the following situations.

1. Munchie Ltd has supplied the Caterers with meat and poultry for the last three years. Their last three invoices relating to the supply of 15kg of beef, 10kg of lamb and 8Kg of chickens remains unpaid. At the time of Mike's appointment 5kg of beef, 5kg of lamb and 2kg of chickens remained in the fridges of the caterers. The remainder of the beef was cooked and prepared and frozen for a function next week. The lamb and chicken was used at a function last week for which no payment has yet been received. Munchie's clause reads:

"Title to the goods supplied under this contract shall be and remain with us until we are paid all sums due in respect of this consignment."

2. Would it make a difference if the clause read: ‘until we are paid all sums due on any account whatsoever.’?

3. Kitch Ltd supplied cooking equipment to the caterers. They supplied 2 ovens at a price of £2,000 each. The ovens have been bolted to the kitchen floor and their power cables have been fixed in ducting set into the walls and floor of the factory. The sale contract simply states:

"Goods supplied shall be our property until the price is paid."

Kitch have been paid nothing.


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PART II – CONSUMER LAW

Section 6 - Consumer Protection

Outline of this Section6.0. – Outcome6.1. – Mechanisms of Consumer Protection

6.2. – Performance Standards6.3. – Unfair Terms

6.4. – Regulation Against Unfair Practices6.5. – Activities

6.0 - OutcomeStudents must understand the overall legal framework of consumer protection.

6.1 - Mechanisms of Consumer ProtectionThe consumer society, a synonym to our rather postmodern society, is something that characterises the modern English legal system. Together with that one sees the strengthening of consumer protection especially in the last three-four decades (not always with ideal results).Overall such consumer society is a phenomenon which came about in the 20th and the 21st century. Traditionally, the consumer society in the Western legal sphere has been created in the last one-hundred years or so forming a particularly strong individualistic consumer ethos.Factors in the Creation of Consumer Society

o The rise of the middle class(es)

o The greater availability of credit

o The greater availability of a much wider variety of goods and services

Issueso Trade Practices

If such practices will involve deception or excessive pressure those will be deemed as illegal.

Illegal practices can occur before a transaction takes place (e.g. through airing or advertising); during a transaction takes place (e.g. through pressurising the consumer to acquire more


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goods) or after a transaction has taken place (e.g. by the non-honouring of a consumer product guarantee).

Protection of consumers in English law occurs through law means as well as through public law controls.

RationaleThe rationale behind consumer protection is to avoid market failures (negative type of rationale) or to make the market work (positive type of rationale).

Private LawMost of the private law rules are generally rules which are common law based. The British legislator would intervene where the private law rules would be unsatisfactory. Typically, in the common law of torts, if the manufacturer of a certain good has not exercised ‘reasonable care’ in doing so, he would have committed a civil wrong.Public LawThere are four (4) different ways where public plays an important role in the protection of consumers:

1. Public bodies have the right to issue licences for the operation of businesses e.g. consumer credit services would be issued licences by the Office of Fair Trading.

2. Public bodies have rights to inspect buildings and manufactured goods. Additionally, the same bodies would also have the legal powers to examine contract terms and trade practices.

3. Court enforcement or injunction orders are to be initiated by the same bodies.

4. Public bodies have the right but also the obligation to prosecute a trader who has committed a criminal offence.

Self-regulationThis takes the form of trade association codes. These are not necessarily enforceable by consumers themselves. E.g. the Advertising Standards Authority is a body which is founded by advertisers and regulates the industry of advertising.

European Lawo Unfair Terms in Consumer Contracts Directive 93/13 (Unfair Terms in

Consumer Contracts Regulations 1999)

o Unfair Commercial Practices Directive 2005/29 (Consumer Protection for Unfair Trading Regulations 2008)

Article 7: ‘misleading omission’ and ‘informed decision’.

6.2 - Performance StandardsThere are four (4) headings which are relevant to the performance standards in the transactions between traders and consumers:

1. Implied Terms as per Sale of Goods Act 1979 (as amended)

2. Implied Terms as to supply of services3. Tortious Liability for Defective Products

4. General Product Safety and Food Safety Standards


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Terms as per Sale of Goods Act 1979 (as amended)The leading provisions of ss 12-14 of the Sale of Goods Act 1979 (as amended) are applicable to transactions between traders and consumers (as they would be applicable to transactions between traders themselves). Of particular importance are s 14(2D) of the Act in question in relation to statements made prior to the purchase of goods and s 48A in relation to remedies to consumers. Other than that, the terms have been covered in Section 2 of our module.

When to reject the goods?

o Too long if one rejected a car in more than three (3) weeks: Bernstein v Pamson Motors Ltd 2 All ER 220

o Too long if one rejected kitchen units within seventeen (17) months: Jones v Callagher [2004] EWCA 10

o Not too long if one rejected a yacht within seven (7) months: Clegg v Anderson [2003] Lloyd’s Rep 32

o Not too long if one rejected a taxi within (4) months: Fiat Financial Services v Connolly 2007 SLT (Sh Ct) 111

Implied Terms as to Supply of ServicesThe leading instrument here would be the Supply of Goods and Services Act 1982. In particular, of great significance is s 13 thereof which provides for a duty to carry out services through the exercise of reasonable skill and care; s 14 thereof which provides for a duty to perform the contract of service in a timely fashion and s 15 thereof which provides for an overall duty to charge reasonable amounts for the supply of services.Tortious Liability for Defective ProductsThe leading instrument here would be the Consumer Protection Act 1987; s 2(1) of the Consumer Protection Act 1987 would read as follows: ‘…where any damage is caused wholly or partly by a defect in a product, every person to sub-section (2) applies shall be liable for the damage.’

o Product: any goods or electricity (s 1(2) of the Consumer Protection Act 1987)

o Defect: goods are defective when ‘the safety of the product is not such as persons are generally entitled to expect’ (s 3(1) of the Consumer Protection Act 1987)

o Damage: this would cover inter alia death or personal injury and damage to property.

General Product Safety and Food Safety StandardsInstruments catering for product safety would be:

o Consumer Protection Act 1961

o Consumer Protection Act 1971

o Consumer Safety Act 1978

o Consumer Safety (Amendment) Act 1986

o Resulted in Part II of the Consumer Protection Act 1987 which has to be read together with the General Product Safety Regulations 2005.

The Food Safety Act 1990 is the relevant piece of legislation regulating matters of food safety.


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6.3 - Unfair Terms

The problems arising out of unfair contract terms relate to the following:

o Lack of transparency (e.g. small print in contracts or use of legalese)

o Lack of choice (for the consumer)

o Inequality of bargaining power

o Unfairness per se

In Suisse Atlantique SA v Rotterdamsche Kolen Centrale [1967] 1 AC 361 the following was said :

‘In the ordinary way the customer has not time to read [the standard terms], and if he did read them he would probably not understand them. And if he did understand and object to any of them, he would generally be told he could take it or leave it. And if he went to another supplier the result would be the same. Freedom to contract must surely imply some choice or room for bargaining.’1

The leading instrument in relation to unfair contract terms would be the Unfair Contract Terms Act 1977. The Act does two things:

1. It renders certain exemption clauses wholly ineffective (ss 2(1), 6(2) & (3))

2. It subjects certain exemption clauses operational but only if they satisfy the reasonableness test (s 2(2), 3, 8, 11)

Another instrument which deals with unfair contract terms in consumer contracts would be the Unfair Terms in Consumer Contracts Regulations 1999, which implemented the Directive on Unfair Terms in Consumer Contracts 93/13. Of importance in relation to this UK Regulations/EC Directive is the fact that the test of unfairness is one which is assessed vis-à-vis the concept[t of good faith (which is not the case in business-to-business transactions for the sale of goods).

6.4 - Regulation Against Unfair PracticesThe Enterprise Act 2002 provides powers to seek enforcement orders against unfair trade practices. Under the approach followed under the Unfair Commercial Practices Directive 2005 is one which caters for situations of unfairness e.g. aggressive practices, misleading actions and omissions and so and so forth.

6.5 - Activities

Reading • M Furmston and J Chuah, Commercial and Consumer Law (Pearson, Harlow

2010), Chapter 7

Activity Number 1

What should the preference be?: To resolve consumer law matters through private dispute resolution or through litigation? Discuss.1 Per Lord Reid at 406.


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Activity Number 2 Do ss 12-14 of the Sale of Goods Act 1979 (as amended) apply to transactions between consumers and traders?

Activity Number 3Identify two differences and two similarities between the trade law regimes for business-to-business transactions for the sale of goods and business-to-consumer transactions.


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Section 7 - Consumer Credit Law and Regulation

Outline of this Section7.0. – Outcome7.1. – Introduction & Definitions

7.2. – Reform through Consumer Credit Directive 2008/48/EC7.3. – Consumer Credit Licencing

7.4. – Form and Content of Agreements7.5. – Customer Rights to End the Agreement

7.6. – Creditor Liability for Dealer Actions7.7. – Dispute Resolution

7.8. – Activities

7.0 - OutcomeStudents must understand the overall legal framework of consumer credit law and regulation.

7.1 - Introduction & DefinitionsOne of the major concerns in relation to consumer credit is that consumers will often take on more loans that the height of loans they could sustain. Those concerns became the subject matter of greater debate after the economic crisis reached England in the summer of 2008. The overall framework of consumer credit in England and the UK as a whole is now governed under EU Consumer Credit Directive 2008/48/EC; Article 8.1 thereof provides as follows:

‘Member States shall ensure that, before the conclusion of a credit agreement, the creditor assesses the consumer’s creditworthiness on the basis of sufficient information, where appropriate obtained from the consumer and, where necessary, on the basis of consultation of the relevant database. Member States whose legislation requires creditors to assess the creditworthiness of consumers on the basis of a consultation of the relevant database may retain this requirement’.

Development of UK Consumer Credit LawPrior to 1974:

o Bill of Sale Acts (187-1882)

o Moneylenders Acts (1900-1927)

o Pawnbrokers Acts (1872-1960)

o Hire-Purchase Act 1965


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Post 1974:

o Consumer Credit Act 1974

o The Act removed all of the above Acts except the Bills of the Sales Acts, which would still cover transactions such mortgages of personal property aka chattel mprtgages.

o The Consumer Credit Act operates together a number of statutory instruments, whilst the Consumer Credit Act 2006 amended it e.g. in relation to scope, limits on financial operations, licencing and unfair credit engagements inter alia.

Definitions under the Acto ‘Individual’: this covers single individuals as consumers but also partnerships

of up to three (3) people; additionally, unincorporated bodies are also covered.

o ‘Credit’: ‘a cash and loan and any form of financial accommodation’ (s 189(1) of the Consumer Credit Act 1974 as amended by s 1 of the Consumer Credit Act 2006).

o ‘Total charge for credit’: this is interest and any other charges that credit would cost. E.g.

o Person Z borrows £30000; interest is £3000: £3000 would be the ‘total charge for credit’ here.

o ‘Regulated agreements’: agreements which are either ‘consumer credit agreements’ or ‘consumer hire agreements (on the basis that these do not fall into the ‘exempt’ categories of the Act)

o ‘Consumer credit agreements’: S 8(2) of the Consumer Credit Act 1974 is an agreement according to which the creditor provides credit to the debtor with a certain credit which would not exceed certain financial limits.

o ‘Hire-purchase’: this occurs where goods are hired to the hirer in exchange for periodical payments. The hirer may acquire ownership to the goods upon full payment of a price.

o ‘Conditional and credit sales’: Unlike hire-purchases, the buyer commits to the purchase of the goods from the outset of the transaction. In a conditional sale, payment occurs in instalments. In credit sales the buyer has a certain period of time for the price but the title passes to him immediately, that is from the outset.

o ‘Consumer hire agreements’: these cover hires (bailments) of goods to consumers, agreements which are not hire-purchases and would be capable of lasting more than three (3) months.

o ‘Non-commercial agreements’: these are agreements which are not made in the course of business’. Informal agreements between friends would be a typical example here; this type of transactions are excluded from the Consumer Credit Act (CCA) 1974. For exemptions of agreements from the CCA 1974 see ss 16, 16A, 16B in addition to the Consumer Credit (Exempt Agreements) Orders 1989 and 2007.

o ‘Multiple agreements’: a mechanism to avoid multiple transaction consolidating into one so that the CCA 1974 becomes non-operative (s 18 of the CCA 1974)


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o ‘Linked transactions’: arrangements which are subordinate or ancillary to the principal agreement: Citibank International plc v Schleider [2001] GCCR 2281 (s 19 of the CCA 1974)

7.2 - Reform through Consumer Credit Directive 2008/48/ECThe CCA 1974 has been revised not only by the CCA 2006 but also by Directive 2008/48/EC, the Consumer Credit Directive (CCD). The CCD is related to the following:

o Formation of credit agreements

o Informational standards

o Repayments

o Role of credit intermediaries

o Rights of withdrawal and cancellation

o The CCD does not apply in the following (exemptions):

o Credit agreements relating to mortgages or similar instruments

o Credit agreements in acquisition or retainment of property

o Credit agreements of value under €200 or of value of more than €75000

o Exclusive hire agreement with no obligation to purchase

o Credit agreements for short-term overdraft facilitation whereby repayment has to occur within one (1) month

o Interest-free agreements or agreements within a repayment window of three (3) with insignificant charges

o Employee credit schemes where credit is provided to the employee as a secondary activity and where rate is lower than the market rate

o Credit agreements which are agreed with investment firms

o Credit agreements which are the result of court decisions or are the result of another statutory authority

o Pledge agreements

o Loans issued by statutory authorities at a rate than the market rate

o Key Changes to the Act

o Duty of the lender to provide adequate information to the consumer (Article 5(6) CCD)

o Duty on the lender to check the creditworthiness of the prospective debtor

o A more coherent and detailed framework on credit reference databases in conjunction with a more interactive approach between such databases and data protection law

o Standard ‘cooling off’ period of fourteen (14) days from withdrawing in a consumer credit arrangement

o Duty on the lender to inform consumer when debts are moved over elsewhere

o Duty on credit intermediaries to disclose fees and links to creditors


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7.3 - Consumer Credit LicencingThe office responsible for issuing licences for consumer credit is the Office of Fair Trading. Under UK consumer credit law, it is a criminal offence to trade in the area of consumer credit.Types of LicencesThere are two (2) types of licences: (i) standard licences and (ii) group licences. The difference on the two is found in the discretionary powers of the Office for Fair Trading to grant either standard licences or group licences. The Office will issue group licences where it considers it appropriate to do so under s 25 of the CCA 1974.

7.4 - Form and Content of AgreementsIt is questionable whether or not consumers do actually read agreement regulations. Even if they do, those frequently complex regulations, may not be comprehensible due to their convoluted nature.

Steps Toward Proper Execution of Agreements1. A document which is according to the prescribed formalities (this must

conform to the Agreement Regulations and must be signed in the prescribed manner)

2. Aside from implied terms, the agreement must contain all relevant terms of the agreement

3. The documentation must be legible to both parties which are to signContent of the Agreement

1. Prescribed terms2. International requirements e.g. names and addresses of the parties

3. Relevant order of contents and themes in the arrangement4. Proper structuring of the document which must be eligible

5. Signature boxes within any statements in the documentation6. Required safeguard statements and inclusion of remedies

7. Required warnings which are compliant with the law

7.5 - Customer Rights to End the AgreementIn principle, the consumer (in the form of debtor or hirer) has the right to cancel a credit arrangement (subject to the particularities of such arrangement). That can materialise by way of the customer’s revocation of the offer (whilst such position is also strengthened by virtue of s 59 of the CCA 1974). A notice has to be served to the supplier of credit. Statute (as in s 68 of the CCA 1974) provides that a cooling off period is one of the following:

a) The end of the fifth day after the day on which the relevant cancellation notice has been received or

b) If the sending of a prescribed cancellation notice has been dispensed with fourteen (14) days after the day on which the relevant unexecuted cancellation agreement was singed by the customer.


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In English law consumer credit agreements, like any other agreements, can be rescinded where vitiating factors are the case (e.g. duress, misrepresentation mistake etc). Termination of hire-purchases and conditional sale agreements is provided for in ss 99 & 100 of the CCA 1974.

7.6 - Creditor Liability for Dealer ActionsUK consumer credit law places liability on certain creditors or on those who have actually conducted the negotiations in relation to the conclusion of a credit agreement. Such negotiations would be known as ‘antecedent negotiations’. Persons who conduct such negotiations leading to the conclusion of a credit agreement act as agents (s 56(1) of the CCA 1974). As such it will be the creditor who holds ultimate legal liability in the matter. Connected lender liability would be a matter dealt with under s 75 of the CCA 1974, whereas under the parallel operation of ss 66, 83 and 84 of the CCA 1974 the consumer cardholder will not be liable for transactions which have been initiated by a third party without him/her being aware of such matter.

7.7 - Dispute ResolutionOne of the major issues in the area of consumer credit law has been the reluctance of customers to bring action against the creditor. With the Financial Services and Markets Act 2000 the office of the Financial Ombudsman has been created. This office can now deal directly with consumer credit matters without the need for one to resort to litigation. Access to this body is in principle free. The test for the admissibility of a given case is whether a complaint would be ‘fair and reasonable in all the circumstances of the case’. The powers of the Financial Ombudsman Office are generally perceived as extensive.

7.8 - Activities

Reading • M Furmston and J Chuah, Commercial and Consumer Law (Pearson, Harlow

2010), Chapter 8

Activity Number 1 If a creditor has engaged in irresponsible trading, should the debtor(s) be relieved wholly or partially their debts? Discuss.

Activity Number 2 Why should the customer have a well-established right to disengage from a consumer credit agreement?


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PART III – E-COMMERCE LAW

Section 8 – Online Commerce

Outline of this Section8.0. – Outcome8.1. – Nature, Substance and Formation of eContracts

8.2. – Performance of eContracts8.3. – Activities

8.0 - OutcomeStudents must understand the overall legal realities and framework of eCommerce transactions.

8.1 - Nature, Substance and Formation of eContractsMuch of commerce these days is conducted through electronic means. This presents advantages but at the same time one realises that there are intricacies in such operations. One of the obvious advantages of eCommerce is that such commerce can take place virtually anywhere in the world. Electronic commerce should probably be dedicated a wider understanding in that it includes transactions from automated machines to transactions which occur instantaneously from one side of the planet to the other.Intricacies

o The fact that the law requires specific formats for specific e-transactionso Conflict of laws questionso Evidential challenges e.g. acceptability of e-signatures

FormsA contract under English commercial law can be made in a number of different ways. S 4 of the Sale of Goods Act 1979 (as amended) guarantees such flexibility. On occasion, English law will require a contract by deed e.g. a lease for real property for a period of more than three (3) years by virtue of ss 52, 54(2) of the Property Act 1925. Schedule I of the Interpretation Act 1978 seems to provide for computer storage means of expressing a contract, even though the Act does not actually refer to the word ‘electronic’ or the like. English courts tend to take a flexible approach when it comes to signatures through electronic means. E.g. in Good Challenger Navegante Sa V Metalexportimport SA [2004] 1 Lloyd’s Rep 67 where the court accepted a signature which was found on a telex; the court considered the signature


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as a sufficient one for the purposes of s 30 of the Limitations Act 1980. In Mehta v J Pereira Fernandes SA [2006] 2 Lloyd’s Rep 244 the court decided that the insertion of an e-mail address in official correspondence would not suffice as a signature for the purposes of the law. The effect of formalities not complied with renders the contract unenforceable.

Under s 7 of the Electronic Communications Act 2000 full recognition of electronic signatures is achieved. Under s 15(2) the electronic signature has to be authentic, i.e. to be accurate.When are e-contracts normally made?In English contract law an offer is accepted unequivocally, unconditionally and on identical terms (consensus ad idem). Offers in English have to be simply communicated. In Brinkibon Ltd v Stahag und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34 the HoL found that a contract for the exportation of Austrian steel in England, a contract which accepted by fax from London to Vienna was not in the jurisdiction of English courts. When it comes to e-mails, an offer in the form of an e-mail is worthy of acceptance only after such acceptance has been received. Online ‘auction’ sites have their own rules pointing to when a contract has been made.Applicable/Governing LawThis, predominantly, is a matter of express clauses. The freedom if contract doctrine largely governs the area. In the absence of an express clause to the effect of governing law, Article 4 of the Rome Convention 1980 would necessitate that the contract is to be associated to the law of the country to which the contract is most closely connected.Electronic Commerce Regulations 2002/Directive 2000/31/ECThe Directive’s aims are:

o Co-ordination of certain national lawso Generation of a clear operations in eCommerceo Securitisation of freedom of movement of informationo Securitisation of freedom of access to dispute resolution

The scope of the Directive is:o Online contractso Remuneration matters of persons other than those who receive serviceo Transmission of information on a point-to-point basis

Model LawsThese are United Nations initiatives. These tend to be adopted in EU legislation and –by extension– in UK legislation.

8.2 - Performance of eContractsThe issues relating to the performance of electronic contracts have to do with the law applicable in the matter, jurisdiction (forum) in the adjudication of a potential case and enforcement.

Definitionso ‘Distance contract’: under Regulation 3(1) of the Consumer Protection

(Distance Selling) Regulations 2000 implementing Directive 97/7/EC is a contract which makes use of one or more methods of distance communication until the point a contract is concluded.

o ‘Consumer’: this is an individual who acts outside of a business context.

o ‘Supplier’: this is a person who acts in a business or professional capacity.

Information


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Particular information must be given to the consumer before a contract is concluded. Regulation 7 of the Consumer Protection (Distance Selling) Regulations 2000 provides as such. There are particular requirements according to this provision e.g. identity of the seller, main characteristics of seller and full price inter alia.

Under Regulation 8 requires that written confirmation must be offered. Such confirmation must be offered in good time. In good time would mean that such confirmation should be available no later than the performance or the delivery of the goods. It is important that the consumer is informed of the supplier’s address; this is important as he/she may wish to launch a complaint to the supplier for instance.

Right of CancellationA right to cancellation is clearly provided in Regulation 10. Normally, the relevant ‘cooling off’ period is 7 working days. If the supplier does not abide to Regulation 8 and fails to supply information within three (3) months then the relevant ‘cooling off’ period is three (3) months plus seven (7) working days. These periods relate to contracts for goods and services (which are respectively governed under Regulation 11 and 12).

Performance of a Distance Selling TransactionRegulation 19 provides that orders must be executed within 30 days after the day the consumer made his order with the supplier. In case of impossibility, the consumer would have to be informed and he/she would have to be reimbursed.


• D Bainbridge, Introduction to Information Technology Law (Longman, London 2007), Chapters 21 and 22

Activity Number 1

Why eContracts are of fundamental essence in modern English commercial law?

Activity Number 2 When is an eContract normally made under English commercial law?


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PART IV – COMPETITION LAW

Section 9 – Theoretical Foundations of Competition Law

Outline of this Section9.0. – Outcome9.1. – Theoretical Foundations of Competition Law

9.2. – EU and UK regulatory regimes in the area of competition law9.3. – Activities

9.0 - OutcomeStudents need to appreciate the theoretical foundations of competition law and appreciate the overall legal frameworks in the UK and the EU.

9.1 - Theoretical Foundations of Competition LawThere are –at the very least– two ways to approach competition law in the modern legal environment. One approach suggests that such law is law which protects the well-being and well-functioning of the market (economics approach); the other approach suggests that such law is law which ultimately comes to the benefit of the individual/consumer (social justice approach). Whichever approach one follows, competition law is a central element this day of the overall commercial framework of a State.

The market, at least in theory, is left or should be left to its own devices. Adam Smith’s ‘invisible hand’ will regulate the markets, because markets are perceived capable to self-regulate themselves.

In the UK the regime of competition law has been strengthened under the Competition Act 1998 which has been a piece of legislation which took into account to a great degree EC law provisions in the subject area.History of Competition LawHistorically, the United States have been at the forefront of competition law regulation. For most intents and purposes, modern competition law starts with the American Sherman Act 1890. In England the examination and the cultivation of competition law has actually been subjected to economic theory as late as the


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second half of the 20th century. In England the first case which dealt in a way with what we generically call ‘competition law’ would be John Dyer’s case which dealt with restraint of trade. This was a case that was concerned with dyeing in the same town, the town where John Dyer would exercise the craft of dyeing. In England monopolies were actually something quite acceptable and the Crown would grant such monopoly licences by bypassing the Parliament. With such granting of licences the Crown would raise funds. The dispute between the Crown and the Parliament would be resolved with the enactment of the Statute of Monopolies 1632, which abolished all monopolies (subject to monopolies on patents for a period of no more than 21 years).

Modern UK competition law would be governed by the Competition Act 1998 and the Enterprise Act 2002. UK law is affected by the leading provisions of Articles 85 and 86 of the Treaty of Rome (these have now been renumbered as Articles 81 and 82).Economics and Competition LawTaking into account economics would be essential in the drafting of competition law nowadays. The reason for this is that economics is taken into account is because we assess macro-economic market failures, whilst relying on micro-economic analysis to support intervention in the markets. Nonetheless, the EC Commission has attacked a strictly economic theory analysis when legislating in competition law in its Green Paper on Vertical Restraints by arguing that:

‘economic theory is just one of the sources of policy. In practice, the application of economic theory must take place in the context of the existing legal texts and jurisprudence. Secondly, economic theories are necessarily based on simplifying assumptions often obtained in the context of stylised theoretical models that cannot take into account all the complexities of real life cases’ (paragragh 86 of the Green Paper).

9.2 - EU and UK regulatory regimes in the area of competition lawAfter 1973 the competition regime of the UK has become considerably aligned to EC competition law.Subject MatterThe subject matter of competition in EU and the UK would be undertakings. Undertakings are normally defined by way of factual realities (as opposed to the legal structures of the undertaking itself). In Reuter/BASF 76/743/EEC (1976) OJ L254/40 an inventor was taken to be an undertaking and as such subject to what is now Article 81.

When it comes to undertakings the approach followed in the UK would be identical to the one followed under EC competition law. For instance, in The Institute of Independent Insurance Brokers v The Director General of Fair Trading [2001] CompAR 62 the director of fair trading was to look at the rules of the General Insurance Standards Council. The director concluded that taking into account EC competition rules the Council’s regulatory functions did not constitute economic activity.The EU legal order & Treaty ProvisionsThe EU legal order comprises 27 Member States. In the area of competition law the most important instrument would be the European Community Treaty. The most important treaty provisions on competition law would be:

o Articles 2 and 3 (objectives of the Community)o Articles 81 and 82 (substantive competition law provisions)o Articles 83 and 85 (provisions to the effect of Articles 81 and 82)


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o Articles 86 to 89 (provisions in relation to public undertakings and state aids)Functions of Community Competition LawThe EC Treaty would not offer any direct guidance as to what the functions of Community competition law should be. Effectively, the overall guidance we would have would be found in the letter of Articles 81 and 82 of the EC Treaty.Regulatory Organs

o The EC Commissiono The Advisory Committeeo National Competition Authoritieso European Competition Networko National Courts

Principles Governing the Relationship between EC and UK Competition Law

o Article 5 EC (subsidiarity): as such the Commission will assume jurisdiction where cross-border mergers would have an impact at a cross-border level (Regulation 139/2004)

o Article 10 EC (supremacy): there has to be sincere co-operation in the furtherance of the Community’s tasks

o NV Algemene Transport-en Expeditie Onderneming Van Gend en Loos v Nederlandse Belastingadministratie 26/62 [1963] 1 CMLR 105

United Kingdomo Competition Act 1998o Enterprise Act 2002

Regulatory Organso Office of Fair Tradingo Competition Commissiono Competition Appeals Tribunalo Secretary o State for Trade and Industryo National Courts

9.3 - Activities

Reading • M Furse, Competition Law of the EC and UK (6th edn OUP, Oxford 2008),

Chapters 1, 2 and 3

Activity Number 1

What are the aims of a modern competition law regime?

Activity Number 2 Have EU and UK legislation in the area of competition law converged or diverged?


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Section 10 - Practical Aspects of EC/UK Competition Law

Outline of this Section10.0 – Outcome10.1 – Article 81 EC

10.2 – Chapter I Prohibition10.3 – Article 82 EC

10.4 – Chapter II Prohibition10.5. – Activities

10.0 - OutcomeStudents need to appreciate the more practical aspects of EC/UK competition law.

10.1 - Article 81 ECo Article 81 is relevant to co-ordinated practices restricting competitiono Violation of Article 81 may result in damages, penalties and alteration of

market behaviourProhibitions

o Direct or indirect price fixingo Limitations or controlling of markets, productiono Distortion of share markets or sources of supplyo Application of non-equivalent conditions to comparable market operationso Making the conclusion of contracts conditional upon the acceptance of other

parties of secondary obligations which have no connection with the subject of the original contracts.

EffectProvisions falling foul of Article 81 are rendered ab initio void.

10.2 - Chapter I ProhibitionPursuant to s 2 of the Competition Act 1998 an equivalent regime to the EC competition law regime is created in the UK.

o Normally, Chapter I Prohibition applies as per Article 81 ECo As such, it must be stressed that where Article 81 EC becomes relevant, the

provision must be applied.o In principle, Article 81 and Chapter I Prohibitions can apply together but the

result of such combined application must be consistent.


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o As in the case of Article 81 violations may result in damages, penalties and alteration of market behaviour

10.3 - Article 82 ECo Article 82 applies to undertakings having an abusive type of conduct and a

dominant position in the market.o Whether or not an undertaking has a dominant position this will be assessed

by the nature of the market in which the undertaking operates and by the power it enjoys in such a market

o Dominant position means to control a ‘substantial part’ of the marketo Abuses take an expansive meaning and can be exclusionary and exploitativeo For a prohibition to operate an effect on trade on different Member States has

to be manifestedo An ‘objectively justifiable’ abuse of dominant position is in fact not abusive.o Violation of Article 82 may result in damages, penalties and alteration of

market behaviourPractical Manifestations of Undertakings with a Dominant Position

o Direct or indirect imposition of unfair prices or trade practiceso Limiting markets, production and technical evolution to the detriment of the

consumero Application of dissimilar conditions to comparable transactionso Making the conclusion of contracts conditional upon the acceptance of other

parties of secondary obligations which have no connection with the subject of the original contracts.

10.4 - Chapter II ProhibitionPursuant to s 18 of the Competition Act 1998 an equivalent regime to the EC competition law regime is created in the UK.

o Normally, Chapter II Prohibition applies as per Article 82 ECo As such, it must be stressed that where Article 82 EC becomes relevant, the

provision must be applied.o In principle, Article 82 and Chapter II Prohibitions can apply together but the

result of such combined application must be consistent.o As in the case of Article 82, violations may result in damages, penalties and

alteration of market behaviour

10.5 - Activities

Reading • M Furse, Competition Law of the EC and UK (6th edn OUP, Oxford 2008),

Chapters 9, 11, 14 and 15

Activity Number 1

Are Article 81 EC and Chapter I prohibition of the Competition Act 1998 compatible? Are Article 82 EC and Chapter II prohibition of the Competition Act 1998 compatible?

Activity Number 2


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Give practical examples of an undertaking’s dominant position in a given market (whether national or regional).


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