I. SALE OF GOODS LEGISLATION IN AUSTRALIA
1.1 The story of sale of goods legislation in Australia really begins with the Sale of Goods Act 1893 (UK) on which the Australian legislation was based.
1.2 On 9th August, 1888 the Sale of Goods Bill 1888 (No 267) was introduced in the House of Lords with an explanatory memorandum by its draftsman, Sir Mackenzie Chalmers, which said that the Bill was “almost entirely a reproduction of the common law”.1 The Bill lapsed, but was followed by a number of other Bills leading, eventually, to the Sale of Goods Bill 1893 (No 441)2 which passed through Parliament and received the Royal Assent on 20th February 1894.3 The Act was soon adopted in all Australian States except New South Wales.4
1.3 In New South Wales it was not until 1st January, 1924 that the Sale of Goods Act 1923 came into force. Notwithstanding this delay, and the opportunity to observe the working of the legislation, there were only minor departures from the United Kingdom Act. It is doubtful, however, whether this implied legislative approval to the decisions which had been reached by the English (and Australian) Courts since 1893. 5
1.4 Similarly there was no attempt to improve on the United Kingdom legislation when the Sale of Goods Ordinance 1954 (ACT) and Sale of Goods Ordinance 1972 (NT)6 were passed. But the adoption in the Territories at least meant that throughout Australia there was uniform legislation dealing with the sale of goods.
II. AMENDMENT TO THE LEGISLATION
1.5 Again it is useful to begin with the Sale of Goods Act 1893 (UK), because the amendments in Australia, until recently, have followed amendments to that Act. There were three significant pieces of legislation.
1.6 Section 4 of the Sale of Goods Act 1893 (UK), which had re-enacted s 1 7 of the Statute of Frauds 1677 (Imp), was repealed by s2 of the Law Reform (Enforcement of Contracts) Act 1954 (UK).7 Secondly, by virtue of s4(1) and s4(2) of the Misrepresentation Act 1967 (UK) amendments were made to s11(1)(c), dealing with the effect of the passing of property in specific goods,8 and s35 relating to "acceptance” of goods.9 Thirdly, significant amendments were made to the implied term provisions when new ss12 and 14 were substituted by the Supply of Goods (Implied Terms) Act 1973 (UK). In addition, s4 of that Act substituted a new s55, relating to the exclusion of implied rights, duties and liabilities, and imposed restrictions (particularly in relation to “consumer” sales) on the exclusion of ss13-15.10 A definition of “merchantable quality” was also inserted in s62(IA) of the Act.
1.7 The Sale of Goods Act 1893 (UK) was repealed and replaced by the Sale of Goods Act 1979 (UK) which was passed to “consolidate the law relating to the sale of goods”.
1.8 Some of the changes referred to above have been adopted in Australia. However, this has not been done on a uniform basis and there are now significant differences between Australian jurisdictions. In particular, amendments to the Goods Act 1958 (Vic) made by the Goods (Sales and Leases) Act 1981 (Vic) have resulted in the Victorian Act being significantly different, particularly in relation to “consumer” sales, from the sale of goods legislation in all other Australian jurisdictions. The Victorian Act is not limited to “sale”: it now has provisions dealing with goods leased to consumers and this also sets it apart from legislation in the other States (and Territories). 11
1.9 In New South Wales, leaving aside statute revision and changes made necessary by the adoption of decimal currency, the Sale of Goods Act 1923 (NSW) has been amended by five pieces of legislation.
1.10. First, the Sale of Goods (Amendment) Act 1937 (NSW) added what is now s61(1), relating to draft allowances to be made on wool. Secondly, the Sale of Goods (Amendment) Act 1953 (NSW) added s61(2), relating to draft allowances on sheep skins. Neither of these amendments has any general significance. Thirdly, the Minors (Property and Contracts) Act 1970 (NSW) amended s7, dealing with capacity to buy and sell, but only in relation to the application of the proviso to minors’ contracts. Fourthly, and most significantly, Part VIII (ss62-64) was inserted by the Commercial Transactions (Miscellaneous Provisions) Act 1974 (NSW). This deals with “consumer sales” (as defined by s62), and has the following consequences:
1. Provisions in contracts for consumer sales which purport to exclude or restrict the operation of ss18, 19 and 20 (except s19(4)) or any liability of the seller for breach of a condition or warranty implied by any of those sections are rendered “void”: s64(1).
2. A definition of “merchantable quality” is stated for consumer sales: s64(3).
3. There is no implied condition that goods shall be of merchantable quality as regards defects brought to the buyer’s notice before the contract was entered into: s64(4).
4. The court is empowered, by s64(5), to add the manufacturer of goods to proceedings arising out of a contract for a consumer sale and to make limited orders against the manufacturer in cases where the goods are not of merchantable quality.
5. In legal proceedings for breach of the condition of merchantable quality implied in a consumer sale relating to second-hand goods, the liability of the seller is, subject to contrary agreement, limited to the amount of the cash price of the goods: s64(9).
Fifthly, the Sale of Goods (Registrable Interests) Amendment Act 1986 (NSW) amended s26, dealing with sale by a person not the owner, by adding the Registration of Interests in Goods Act 1986 (NSW) to subsection 2(a) of s26, thus making it clear that the provisions of the Sale of Goods Act 1923 (NSW) do not affect the Registration of Interests in Goods Act 1986 (NSW).
1.11 Apart from amendments to the original sale of goods legislation there is the significance of the entry into the field by the Commonwealth Parliament by virtue of the Trade Practices Act 1974 (Cth). In particular, in any consideration of the terms to be implied into the contract, and the rights of the buyer for breach by the seller, regard must be had to the position of the buyer under that Act. Generally, where the Commonwealth Act applies, the buyer is in a more favourable position than under the sale of goods legislation of this State. Of course, for the Trade Practices Act to apply the buyer must usually be a "consumer”12 as defined by the Act.
III. APPROACH TO THE LEGISLATION
1 12. The preamble to the Sale of Goods Act 1923 (NSW) states that it is an “Act to codify and amend the law relating to the Sale of Goods”. The general approach to a codifying enactment was stated as follows by Lord Herschell in Bank of England v Vagliano Bros:13
I think the proper course is in the first instance to examine the language of the statute and to ask what is its natural meaning, uninfluenced by any considerations derived from the previous state of the law, and not to start with inquiring how the law previously stood, and then, assuming that it was probably intended to leave it unaltered, to see if the words of the enactment will bear an interpretation in conformity with this view.
If a statute, intended to embody in a code a particular branch of the law, is to be treated in this fashion, it appears to me that its utility will be almost entirely destroyed, and the very object with which it was enacted will be frustrated. The purpose of such a statute surely was that on any point specifically dealt with by it, the law should be ascertained by interpreting the language used instead of, as before, by roaming over a vast number of authorities in order to discover what the law was, extracting it by a minute critical examination of the prior decisions, dependent upon a knowledge of the exact effect even of an obsolete proceeding such as a demurrer to evidence. I am of course far from asserting that resort may never be had to the previous state of the law for the purpose of aiding in the construction of the provisions of the code. If, for example, a provision be of doubtful import, such resort would be perfectly legitimate. Or, again, if in a code..... words be found which have previously acquired a technical meaning, or been used in a sense other than their ordinary one,..... the same interpretation might well be put upon them in the code. I give these as examples merely; they, of course, do not exhaust the category. What, however, I am venturing to insist upon is, that the first step taken should be to interpret the language of the statute, and that an appeal to earlier decisions can only be justified on some special ground. 14
1.13. Therefore, one should not look beyond the terms of the Act when resolving a sale of goods issue unless there is an element of uncertainty or ambiguity in the words used. However, in order to apply these principles the rules of law set out in the Act should have sufficient detail to allow an interpretation which does not require an analysis of case law outside the Act. In fact this has never really been possible since the Act assumes a fairly sophisticated knowledge of contract law.
1.14 Take, for example, s34(2) of the Act dealing with the rights of the parties in respect of the breach of a contract for the sale of goods “to be delivered by stated instalments which are to be separately paid for”.15 If either party breaches the contract, s34(2) states that:
it is a question in each case depending on the terms of the contract and the circumstances of the case whether the breach of contract is a repudiation of the whole contract or whether it is a severable breach giving rise to a claim for compensation but not to a right to treat the whole contract as repudiated.
The cynic might say that all s34(2) states is that there is a right to treat the contract as repudiated when it has been repudiated by the other party. After all, the only guidance which s34(2) gives on the issue of repudiation is to say that it depends on the most general factors imaginable, namely the terms of the contract, and the circumstances of the case. Thus, the courts have filled out the detail of the provision16 frequently by reference to prior cases.17
1.15 Although the potential for tension is always there, codification has only on rare occasions given rise to any difficulty.18 In fact the generality of the language of the Act has been one of its virtues and helps to explain why there have been so few amendments. During the first 60 years of its operation in the United Kingdom the Act was regarded as the best general statement of the law of contract available, so that the rules stated in the context of the sale of goods contract were given a general application. For example, the condition/warranty distinction, which is the cornerstone of the Act, was adopted as part of the general law.19
1.16 More recently a reverse process has operated, and the courts have been concerned to ensure that developments in the general law are reflected in the law of sale of goods.20 It is, in fact, sometimes difficult to know whether decisions on sale of goods contracts are being reached on the basis of the rules stated in the Act, or on the basis of the common law preserved by the Act, particularly in the context of cif and fob contracts which are now more sophisticated than in 1893. Indeed, today it is fairly common for decisions on sale of goods contracts to be reached without detailed reference to the sections of the Act.21 However, we take the view that it is undesirable for a codifying Act to be allowed to fall behind developments in the general law (see eg Chapter 3). This implies a policy of keeping the Act under review so as to ensure that it continues to reflect commercial (and consumer) expectations.
IV. WHAT IS WRONG WITH THE NEW SOUTH WALES ACT?
1.17 At the most general level there are two main issues. First, is the Act outmoded? Is an Act which can be traced back to the 1880s appropriate to govern contracts entered into in the 1980s? For example, how can the Act be applied to computer software? And how can an Act expressed in general terms cope with sophisticated cif and fob transactions.22 Secondly, is it appropriate today for codifying legislation to be stated so generally, or ought the Act to follow a more detailed approach, exemplified by the Uniform Commercial Code (US) 23 Only if the Act were redrafted in specific and detailed terms would it accurately reflect current commercial practice. Moreover, it might now be appropriate, especially in view of legislation such as the Trade Practices Act 1974 (Cth), to enact a second Act dealing exclusively with consumer transactions.
1.18 More specifically, in New South Wales consideration must be given to the specific defects in the legislation which have been remedied in England and in some Australian jurisdictions. The stage has now been reached that, in respect of some provisions of the Act, there is consensus that amendment must take place. It seems important, in such a fundamental piece of legislation, that uniformity should exist. The main purpose of this Report is to suggest ways in which the Act should be amended to achieve greater uniformity within Australia.
V. SCOPE OF THIS REPORT
1.19 In this Report we attempt to deal with the specific (and largely uncontroversial) defects in the legislation which have been exposed, and acted on in some other jurisdictions. It is proposed to deal with the more general problems referred to in paras 1.17-1.18 in an Issues Paper to be circulated at a later stage.
1.20 Five specific issues are dealt with:
1. rescission for innocent misrepresentation (chapter 2);
2. the application of the Act to intermediate contractual terms (chapter 3);
3. the requirement of writing in s9 of the Act (chapter 4);
4. the passing of property in specific goods (chapter 5); and
5. acceptance and the examination of goods (chapter 6).
1.21 Most of the matters dealt with in this Report were canvassed by the Commission in a Working Paper published in 1975.24 However, it is not intended at this stage to propose legislation which would take account of all the matters discussed in that Paper.
FOOTNOTES
1. See House of Lords Parliamentary Papers, vol 8 p253.
2. See House of Commons Parliamentary Papers, vol 7 p 4l7.
3. The Act was retrospective to 1st January, 1894.
4. In chronological order, as follows: Sale of Goods Act 1895 (SA); Sale of Goods Act 1895 (WA): Goods Act 1896 (Vic); Sale of Goods Act 1896 (Qld); Sale of Goods Act 1896 (Tas). The current Victorian Act is the Goods Act 1958.
5. See the comment by McHugh JA in Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1985) 3 NSWLR 475 at 492.
6. See now Sale of Goods Act 1972 (NT).
7. See also para 4.17.
8. See also para 5.25.
9. See also para 6.14.
10. Subsequently s55 was amended by the Unfair Contract Terms Act 1977 (UK).
11. But see also Consumer Transactions Act 1972 (SA).
12. See s4B and the analysis in Taperell, Vermeesch and Harland, Trade Practices and Consumer Protection (3rd ed 1983) para 1320.
13. [1891] AC 107.
14. (1891) AC at 144-145. For a recent, similar statement of principle see Boughey v The Queen (unreported) 3 June 1986, High Court of Australia, transcript at 22, per Brennan J. Although Lord Herschell’s statement was made in the context of the Bills of Exchange Act 1882 (UK) the same principles apply to sale of goods. See generally Sutton, Sales and Consumer Law in Australia and New Zealand (3rd ed 1983) pp4-5; Benjamin’s Sale of Goods (2nd ed 1981) para 3.
15. See generally Carter, Breach of Contract (1984) paras 828-841.
16. The leading case is Maple Flock Co Ltd v Universal Furniture Products (Wembley) Ltd [1934] 1 KB 148.
17. For example, Mersey Steel and Iron Co Ltd v Naylor Benzon and Co (1884) 9 App Cas 434.
18. For example, in the context of the saving provision; see para 3.8.
19. See Bentsen v Taylor Sons and Co (No 2) [1893] 2 QB 274, which was decided in June 1893 and clearly influenced by the terminology of the Sale of Goods Bill. However, Chalmers, the draftsman of the Act, had reservations: see Chalmers’ Sale of Goods (1st ed 1894) pp168-169.
20. See Ch 3.
21. See, eg Handbury v Nolan (1977) 13 ALR 339; Warinco AG v Samor SpA [1979] 1 Lloyd’s Rep 450.
22. For example, in Cehave NV v Bremer Handelsgesellschaft mbH (The Hansa Nord) [1976] QB 44 at 67 Roskill LJ said that it has “long been recognised that there are what one might, for want of a better phrase, describe as intellectual difficulties regarding the application of these statutory provisions to the basic principles governing cif contracts”.
23. The current text was approved in 1978.
24. New South Wales Law Reform Commission, Working Paper on Sale of Goods (WP 13 1975).
