I. THE PRESENT LAW
4.1 Section 9 of the Sale of Goods Act 1923 (NSW) provides:
9. (1) A contract for the sale of any goods of the value of twenty dollars or upwards shall not be enforceable by action unless the buyer shall accept part of the goods so sold and actually receive the same, or give something in earnest to bind the contract, or in part payment, or unless some note or memorandum in writing of the contract be made and signed by the party to be charged or his agent in that behalf.
(2) The provisions of this section apply to every such contract, notwithstanding that the goods may be intended to be delivered at some future time, or may not at the time of such contract be actually made procured or provided or fit or ready for delivery or some act may be requisite for the making or completing thereof or rendering the same fit for delivery.
(3) There is an acceptance of goods within the meaning of this section when the buyer does any act in relation to the goods which recognises a pre-existing contract of sale, whether there be an acceptance in performance of the contract or not.
4.2 It can be seen that the structure of s9(l) is to state that a contract for the sale of any goods of value $20 or more is unenforceable by action in the absence of some note or memorandum in writing signed by the party to be charged (or the party’s agent), unless the buyer has accepted and received part of the goods or given something in earnest or in part payment for the goods. Section 9(2) gives the provision a wide operation by providing that s9 applies even though the goods were to be delivered at a future time. Section 9(3) states a definition of “acceptance” which is wider than the description of acceptance in performance stated in s38.1
4.3 Section 9 was based on s4 of the Sale of Goods Act 1893 (UK).2 That provision re-enacted s17 of the Statute of Frauds 1677 (Imp), with changes in language reflecting case law on the provision. As a consequence s 17 of the Statute of Frauds was declared to be no longer in force in New South Wales. 3
4.4 For s9 to operate the contract must relate to “goods” and those goods must be of value $20 or more. The former requirement has attracted a lot of discussion and a distinction has been drawn between contracts for the sale of goods on the one hand, and contracts for work and materials on the other.
4.5 “Goods” are defined by s5(1) as including all chattels personal other than things in action and money. It is also expressly stated that “emblements” and things attached to or forming part of the land which are agreed to be severed before the sale or under the contract are “goods”. Thus, growing crops such as wheat are included, as is fruit growing on trees which is agreed to be harvested prior to the property in the fruit passing to the buyer, whereas a right to remove slate (in the form of dross from quarrying operations) from land is not a sale of goods if there is no agreement to sever the slate from the land. 4
4.6 The distinction between a sale of goods contract and one for the doing of work and supply of materials has been drawn for the purpose of avoiding the requirement of writing in s9. The distinction is an artificial one 5 which is said to depend on whether the substance of the contract is the skill of the supplier, rather than the supply of a finished item where the skill of the supplier is ancillary only.6 In the former case the contract is for work and materials, in the latter a sale of goods is involved. Examples of work and materials contracts include the painting of a portrait7 and the construction and installation of a cocktail cabinets.8 Examples of sale of goods contracts include a dentist’s contract to supply false teeth9 and a contract for a computer system.10 The distinction between the two types of contracts is obviously often a fine one,11 and the tests applied have been said to be “unsatisfactory and imprecise”.12
4.7 In cases where there is no note or memorandum a payment by the buyer, either in earnest or as part payment for the goods, will enable the contract to be enforced, as will the acceptance of part of the goods by the buyer. These alternatives do significantly narrow the operation of the requirement of written evidence and it is perhaps fair to say that there are not many sale of goods contracts which are unenforceable for want of written evidence.
4.8 Sometimes there will be some written evidence of the contract and the question will arise whether the note or memorandum is sufficient. As there is no distinction of principle between the note or memorandum under s4 of the Statute of Frauds 1677 (Imp) (and the provisions derived from that section such as s54A of the Conveyancing Act 1919 (NSW)), a substantial body of complex case law exists in relation to the contents of the note or memorandum, and the requirement that it be signed by the party to be charged.13
4.9 If there is no sufficient note or memorandum signed by the party to be charged, and no part payment or acceptance, the effect of s9 is to render the contract unenforceable rather than void. Thus, claims dehors the contract, such as restitutionary claims to recover money had and received, are sometimes available notwithstanding s9.14 But the equitable doctrine of part performance, whilst perhaps theoretically applicable, does not appear to have been applied in the context of s9.15
4 10. As well as applying to a contract for the sale of goods of value $20 or more, s9 applies to any variation of the contract. Accordingly, variation must be evidenced by the writing and signed by the party to be charged, and an oral variation will be unenforceable. On the other hand, an agreement for rescission of the contract need not be so evidenced. The view has been rejected that every variation of a contract involves a rescission of the old contract and the substitution of a new one.16 The distinction between variation and rescission is frequently difficult and has been criticised.17
4.11 The requirement that a variation of the contract be evidenced by writing has given rise to further refinement between, for example, a variation to the contract and a variation in the mode of its performance, written evidence of the latter not being required.18 As with the distinction between sale of goods contracts and work and materials contracts, the refinements have been made for the purpose of ensuring that s9 is not used as a technical evasion of contractual responsibility.
II. CRITICISM OF SECTION 9
4 12. A number of criticisms can be levelled at s9. First, the section applies too widely. Secondly, too much importance is attached to form. Thirdly, interpretation of the section has given rise to unsatisfactory distinctions. Fourthly, it detracts from uniformity, because there is no requirement of writing in a number of other Australian jurisdictions. These are discussed in the following paragraphs.
4.13. Section 17 of the Statute of Frauds 1677 (Imp) applied to contracts for the sale of goods at a price of 10 pounds sterling or upwards. Thus, the amount currently stated in s9 is the decimal equivalent to that figure. It goes without saying that s9 applies to a much larger number of contracts than did the Statute of Frauds when enacted. Therefore, it seems obvious that an initial criticism of s9, even allowing for the alternative means of satisfying the section (which were also present in the Statute of Frauds), is that a greater number of contracts is caught by s9 than can be justified. In fact, in the jurisdictions of Australia with provisions equivalent to s9, only in the Northern Territory has the statutory amount been revised, in that case to $50.19
4.14 The Statute of Frauds 1677 (Imp) was passed to prevent perjury and fraudulent practices. Although that justification has contemporaneous relevance, social conditions have changed considerably in the past 300 years, and too much importance can be attached to formal requirements. 20 In particular, standards of literacy have improved considerably. The English Law Revision Committee thought the ability of the parties to a contract to testify rendered the provisions of s4 of the Sale of Goods Act 1893 (UK) an “anachronism”.21 Moreover, commercial contracts are almost invariably evidenced by writing and the opportunity for false accusations of oral contractual obligations is correspondingly diminished. Section 8 of the Sale of Goods Act 1923 (NSW) provides that a contract for the sale of goods may be written (either with or without seal), oral, partly oral and partly written, or may be implied from the conduct of the parties. At present this is subject to the other provisions of the Act, such as s9, and any other statute. Deletion of s9 would reduce the importance of form, and allow s8 to operate more widely, but still leave open the imposition of a requirement of writing in other contexts, such as consumer credit contracts involving a sale of goods.22
4.15 The third criticism focuses on the interpretation of s9 by the courts. It has been explained that in order to narrow the application of s9 the courts have drawn fine distinctions between contracts for the sale of goods and contracts for work and materials, between variations of the contract and alterations to its mode of performance. This makes the law excessively technical and difficult to state. It also makes the operation of s9 less certain than it should be. In particular, the distinction between sale of goods contracts and contracts for work and materials has been the subject of much criticism. 23 These difficulties would disappear if s9 were deleted from the statute. So too would the difficulties inherent in the cases on “note or memorandum” and “signed by the party to be charged”. There are literally hundreds of such cases and the difficulties of reconciling the decisions is notorious.
4.16 Finally, in some Australian jurisdictions writing is no longer required.24 Moreover, the Statute of Frauds 1677 (Imp) has ceased to apply at all in New South Wales25 and it seems odd that a sale of goods should be seen as in need of a requirement of writing when the only other survivor from the classes of contract enumerated in the Statute of Frauds is a contract involving land.26 It might be argued, for example, that there was a stronger case for requiring a contract of guarantee to be evidenced by writing than for retaining the requirement in the context of a sale of goods.27
III. OTHER JURISDICTIONS
4.17 In the United Kingdom the provision corresponding to s9 of the New South Wales Act was repealed in 1954.28
4.18 The first Australian jurisdiction to follow the English lead was Queensland, where s3 of the Statute of Frauds 1972 (gld) repealed the relevant provision.29 The Australian Capital Territory followed three years later30 and the most recent repeal, in South Australia, took place in 1982.31
4.19 The corresponding provision in New Zealand has also been repealed.32
4.20 There is no evidence that the repeal of the equivalents of s9 has caused any problems,33 notwithstanding that, at least in England and New Zealand, a substantial period of time has elapsed.
4.21 An alternative to the repeal of s9 would be the substitution of a larger threshold point for its operation. This has been done in the Northern Territory.34 The figure there is $50 and it might be argued that this is still too low a figure. In the United States, section 2-201 (1) of the Uniform Commercial Code (1978 text) operates on contracts for the sale of goods the price of which is US $500 or more. This seems a more realistic figure, aimed at exempting commercially insignificant contracts from any such requirement. However, it should be noted that section 2-601 is a fairly complex provision with exceptions extending further than acceptance and part payment.35
IV. RECOMMENDATION
4.22 In view of the significant criticisms of s9, and the decreased importance of form in contracts generally it would not be satisfactory simply to revise the monetary threshold. We recommend that s9 be repealed.
FOOTNOTES
1. See para 6.2.
2. Section 4 did not extend to Scotland. For the present position in the UK see para 4.17.
3. See the Schedule to the Act which states that ss15 and 16 (commonly cited as ss16 and
17) were repealed.
4. See Mills v Stokman (1966) 116 CLR 61.
5. Hewett v Court (1983) 149 CLR 639 at 655.
6. Robinson v Graves [1935] 1 KB 579 at 587.
7. Robinson v Graves [1935] 1 KB 579.
8. Brooks Robinson Pty Ltd v Rothfield [1951] VLR 405.
9. Samuels v Davis [1943] 1 KB 526 at 529.
10. Toby Constructions Products Pty Ltd v Computa Bar (Sales) Pty Ltd [1983] 2 NSWLR
11. For further illustrations see Sutton, Sales and Consumer Law in Australia and New Zealand (3rd ed 1983) pp56-61.
12. Hewett v Court (1983) 149 CLR 639 at 646 per Gibbs CJ.
13. For a general discussion see Lindgren, Carter and Harland, Contract Law in Australia (1986) paras 513-516.
14. See Lindgren, Carter and Harland, Contract Law in Australia (1986) para 520.
15. See Meagher, Gummow and Lehane, Equity: Doctrines and Remedies (2nd ed 1984) para 2043.
16. United Dominions Corp (Jamaica) Ltd v Shoucair [1969] 1 AC 340 at 348,349.
17. See Tallerman & Co Pty Ltd v Nathan’s Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93 at 113.
18. See Hartley v Hymans [1920] 3 KB 475.
19. Sale of Goods Act 1972 (NT) s9.
20, For a general discussion of the functions of requirements of writing see New South Wales Law Reform Commission, Wills-Execution and Revocation (LRC 47 1986) paras 2.40-2.49.
21. England Law Revision Committee, Statute of Frauds and the Doctrine of Consideration, 6th Interim Report Cmd 5449 (1937) para 9.
22. See, eg Credit Act 1984 (NSW) s31.
23. Young & Marten Ltd v McManus Childs Ltd [1969] 1 AC 454 at 476.
24. See para 4.18.
25. See Imperial Acts Application Act 1969 (NSW) s8(1).
26. See Conveyancing Act 1919 (NSW) s54A.
27. Cf Credit Act 1984 (NSW), sl36. The Queensland Law Reform Commission thought it “illogical” to retain the requirement of written evidence for a sale of goods contract after the repeal of s4 of the Statute of Frauds: see Queensland Law Reform Commission, Report on a Review of the Statute of Frauds, GLRC 6 (1970) p7; but the requirement for contracts of guarantee was retained: Property Law Act 1974 (Qld) s56.
28. By the Law Reform (Enforcement of Contracts) Act 1954 (UK).
29. The repeal of that section by the Property Law Act 1974 (Qld) does not revive the earlier provision.
30. See Sale of Goods Ordinance 1975 (ACT) s3.
31. See Statutes Amendment (Enforcement of Contracts) Act 1982 (SA) s4.
32. Contracts Enforcement Act 1956 (NZ) s4.
33. See Law Reform Committee of South Australia, Report Relating to the Repeal of the Statute of Frauds and Cognate Enactments in South Australia 34th Report 1975 p9.
34. See para 4.13.
35. See ss2-601(2)-(3), 2-602.
