Summary
- The Sale of Goods Act 1979 now primarily applies to business-to-business sales (as consumer protections have been replaced by the Consumer Rights Act 2015 for purchases made after 30 September 2015), requiring goods to be of satisfactory quality, as described, and fit for purpose, with the Act applying to both written and verbal contracts but not hire purchase agreements.
- Acceptance of goods under the Act occurs either when the buyer expressly notifies the seller of acceptance or when the buyer performs an act inconsistent with the seller’s ownership (such as listing the goods for sale), but a buyer cannot be deemed to have accepted goods without a reasonable opportunity to examine them.
- The Act contains implied terms including the seller’s legal right to sell the goods at the point of sale, the buyer’s right to quiet enjoyment of the goods, and the seller’s obligation to disclose all costs associated with the goods, which apply regardless of whether they are expressly stated in the contract.
- This article is a guide to the Sale of Goods Act 1979 for online and e-commerce businesses in the UK, explaining when the Act applies, what acceptance means, and the implied terms that govern business-to-business sales.
- LegalVision is a commercial law firm that specialises in advising clients on e-commerce law and commercial contracts.
Tips for Businesses
Ensure all goods sold to other businesses meet the statutory requirements of satisfactory quality, accurate description, and fitness for purpose under the Sale of Goods Act 1979, as these obligations apply regardless of your contract terms. Give buyers a reasonable opportunity to examine goods before treating acceptance as having occurred, as acceptance without examination may be challenged. Review your business-to-business sale of goods contracts to ensure they do not conflict with the Act’s implied terms, as these apply automatically and cannot be excluded by agreement.
Running an online business in the UK means complying with specific laws governing the sale of goods, and the Sale of Goods Act 1979 remains a critical piece of legislation for business-to-business sales. Understanding how it applies to your eCommerce business can help you avoid breach of contract claims and protect your trading relationships. This article will explain three crucial points to note about the Sale of Goods Act 1979.
What is the Sale of Goods Act?
The Sale of Goods Act 1979 is a piece of UK legislation to protect customers when they buy products. It ensures they have particular rights in terms of the goods they buy. It does not, however, apply to services.
The Sale of Goods Act means you must ensure the goods you sell online are:
- of satisfactory quality;
- are as they are described; and
- fit for purpose, so do what you, as the seller, say they can do.
As the Act is statutory UK law, you cannot choose whether it applies to your online business. It is, therefore, irrelevant if it is not in your business terms and conditions.
1. When Does It Apply?
An important point to note about the Sale of Goods Act, which you may not know, is that most of what it covers now applies through the Consumers Rights Act 2015. This is particularly the case in terms of areas which apply to consumers. The Consumers Rights Act 2015 effectively replaces the Sale of Goods Act for consumers. The Act, therefore, only applies to consumers now for any products they purchased before 30th September 2015. However, naturally, as the provisions for consumers are now in other UK legislation, you still have to abide by the details of the law in the Act.
Instead, the Sale of Goods Act applies for business-to-business sales. So, if you are an online business which, for example, supplies goods to a dropship business, it applies. The Act is also relevant to both written sale of goods contracts and verbal ones. However, you should note that the Act does not apply to goods that business buys on hire purchase.
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2. What Does Acceptance Mean?
The Sale of Goods Act is particular in terms of what acceptance means. It is essential as an eCommerce brand that you understand this so you know when another business has accepted your goods. There are two main ways your buyer accepts the products you sell to them. This is when:
- the business that buys your products tells you they have accepted them; or
- you deliver the buyer the products, they carry out an action which shows that they consider you to no longer own them.
Point two could occur, for example, where the business you sell your goods to places them for sale on their website.
You should note that a buyer does not accept your goods if you have not given them a reasonable chance to examine them where they have not already done so. A reasonable time is a time which allows an examination of the purpose the goods are for. Your buyer needs to check that they match the contractual description and are the same as any sample you have previously given if it is a sale-by-sample.
3. What Are the Implied Terms?
The Sale of Goods Act contains implied terms in it. This means there are rules of the Act that you must abide by, but these are not expressly stated in the Act. These include:
- your legal right to sell the goods to the buyer at the point of sale;
- the buyer’s right to enjoy goods in peace once you sell them; and
- your obligation as the seller to tell the buyer about all costs associated with the goods.
What Are the Remedies for Breach of the Sale of Goods Act?
If you breach the implied terms of the Sale of Goods Act 1979 in a business-to-business sale, the buyer has several remedies available to them. Where the goods do not conform to the contract, the buyer may be entitled to:
- reject the goods and treat the contract as ended;
- claim a price reduction; or
- sue for damages to recover any financial loss caused by the breach.
However, once a buyer has accepted the goods, their right to reject them is lost. At that point, they can only claim damages. The amount of damages a buyer can recover will depend on the loss they can prove was caused directly by the breach. This could include the cost of sourcing replacement goods or losses from being unable to fulfil their own customer orders.
As a seller, you can limit your liability for breach through a well-drafted contract. However, under the Unfair Contract Terms Act 1977, any clause that attempts to exclude liability for breach of the implied terms must be reasonable to be enforceable in a business-to-business context.
This checklist will help you identify areas in your business that may need further protection or assistance to ensure you are legally compliant.
Key Takeaways
The Sale of Goods Act is a crucial piece of UK law that applies to your eCommerce business. Whilst it no longer covers consumer sales, the areas it covers are now in the Consumer Rights Act, so the detail of the law still applies. The Sale of Goods Act applies to your business-to-business sales and protects the quality and purpose of the goods. This article has explained three essential points about the Act. It describes when it applies and how. The article also presents how to understand acceptance of the Act. The third important point the article covers about the Sale of Goods Act is that it contains implied terms.
If you need help determining if your eCommerce business is in compliance with the Sale of Goods Act, LegalVision provides ongoing legal support for all businesses through our fixed-fee legal membership. Our experienced eCommerce lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Does the Sale of Goods Act 1979 cover services?
No, the Act only protects customers buying products. It does not apply to services.
Can businesses exclude the Sale of Goods Act from their terms and conditions?
No, it is statutory UK law. It applies to your online business regardless of what your terms state.
When does a buyer formally accept goods under the Sale of Goods Act?
Acceptance occurs when the buyer notifies you directly. It also occurs when they act as owner, such as listing your goods for sale.
What implied terms must sellers comply with under the Sale of Goods Act?
Sellers must hold legal rights to sell goods. Buyers must enjoy purchased goods peacefully. Sellers must also disclose all costs associated with the goods.
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