Can I Contract Out of the Sale of Goods Act in England?

As a business owner entering into business contracts, you may wish to exclude certain implied terms within your contract. A business contract is a contract you may enter with another business (as opposed to a consumer contract). Negotiating exclusion clauses can help you mitigate risks and manage your obligations. This article will outline some of the key implied terms in the Sale of Goods Act. It will also touch on some instances in which you will be able to exclude liability. 

What is the Sale of Goods Act?

The Sale of Goods Act 1979 is a piece of legislation, which currently governs the relationship between businesses that have entered into business contracts. If you are dealing with a consumer contract (in other words, a contract where the other party is a customer), then the relevant legislation is the Consumer Rights Act 2015. 

One of the main functions of the Sale of Goods Act is to imply certain terms in contracts. An implied term is a term that is taken to be a part of your contract even without an express agreement that includes it within your terms. Some implied terms are outlined below. 

The Seller Has Good Title of the Goods

This means that it is an implied term of the contract that the seller of the goods can transfer the legal title of the goods. In other words, the seller must legitimately hold the title of the goods in question. 

The Goods Are Free of Charges

This means that the goods are taken to be free of any unknown charges at the time of the agreement. A charge is a right over property and can include a security interest over a bill of sale.

The Goods are of Satisfactory Quality

This means that the goods are taken to be of satisfactory quality. In making this assessment, it is relevant to consider the product’s: 

• fitness for its purpose; 
• appearance and finish; 
• safety; 
• durability; and 
• whether it has any minor defects. 

If this point goes to court, a judge will assess ‘satisfactory quality.’ To do this, the judge would objectively consider what a ‘reasonable person’ would regard as satisfactory. 

The Goods Must Match the Description Given to the Seller

Goods should correspond to any description or assurance given between the contracting parties. 

That is, given the implied terms under the Sale of Goods Act, the seller should benefit from including exemption clauses. As a seller, this can therefore help you avoid the risk of being sued for breach of contractual obligations. However, buyers can sue you for breach under the implied contractual terms of the Sale of Goods Act.

Exemption Clauses

As a seller, you can manage your liability through exemption clauses. An exemption clause can be a contractual term that excludes liability for implied terms under the Sale of Goods Act. In negotiating these terms, the contracting parties may also choose to include provisions regarding remedies available to the buyer.

To create an enforceable exemption clause, you must meet certain requirements, as outlined below. 

1. Incorporation of the Exemption Clause

Firstly, you must properly incorporate the exemption clause into the contract. Incorporation requires that the term is part of the contract at the time of the agreement. You can confirm this if: 

• both parties signed the contract with the term included;
• you, as the seller (who is relying on the exemption clause), made sure you took reasonable steps to bring the term to the buyer’s attention; or
• both parties’ conduct showed that they intended the term to be binding.

2. Construction of the Exemption Clause

Secondly, both parties must interpret the exemption clause as having the effect the seller desires. However, sometimes the wording is unclear or there is ambiguity. In this case, a court will interpret an exemption clause against the person seeking to rely on it (usually the seller).

3. Reasonableness of the Exemption Clause

Finally, the exemption clause must be ‘reasonable’ for its purpose of the Unfair Contract Terms Act 1977 (UCTA). 

Importantly, UCTA prevents sellers from enforcing exemption clauses in certain cases. The main instances are when:

• the clause exempts liability for death or personal injury as a result of the reliant party’s negligence; and
• the clause is an exemption of liability for implied terms about the seller having good title of the goods. 

Keeping these requirements in mind, it can be a good idea to consider negotiating exclusion clauses in your contract. You should also ensure your business takes reasonable care to provide good service. This is important to manage long-term relationships with partner businesses.  

Key Takeaways

As a business entering into contracts with other businesses, you may wish to include exclusion clauses under the Sale of Goods Act 1979. The Sale of Goods Act implies certain terms in contracts and is an important aspect of managing a seller’s liability. 

To have a valid exclusion clause, you will need to make sure that the term is incorporated properly, can be constructed as you want it to be, and that the term is valid under the Unfair Contract Terms Act 1979. 

If you are unsure about the validity of your exemption clause, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today at 0808 196 8584 or visit our membership page.

Frequently Asked Questions