1. Lecturer: Emmanuel FOMUSO (LLB Hons), LLM, PGCE)
BUSINESS LAW
Unit code: R/601/1145
QCF level: 5
Credit value: 15 credits
Lecturer: Emmanuel FOMUSO (LLB Hons), LLM, PGCE)

2. Aim of Unit, Business Law
The aim of this unit is to provide knowledge and application of the law relating to sale of goods, consumer credit, monopolies and intellectual property as it relates to business and its everyday dealings.
Learners will recognise that businesses operate within UK as well as EU legal framework
Learners also need to understand that legal rules laid down are to be observed and that sanctions exist for failure to comply with these areas of law that follow from the basic rules of contract and tort.

3. Learning outcomes for Business Law
On successful completion of this unit, a learner will:
1 Be able to apply the main principles affecting the legal relationship between business organisations and their consumers,
2 Be able to apply the legal rules on consumer credit agreements and agency,
3 Understand the legal rules relating to monopolies, mergers and anti-competitive practices,
4 Know key provisions relating to intellectual property rights.

4. Assessment:
The module will be assessed meeting all the Learning Outcomes (LO) as specified by the awarding body,
Please read the instructions carefully while addressing the tasks specified
Contribution: 100% of the module
Outline Details: Individual report approximately 4000 to 4500 words in all.

5. Recommended text and links:
Keenan M, Riches S and Allen V, Business Law, Ninth Edition, 2009
Mansell, Meteyard and Thomson, A Critical Introduction to Law, second edition, Cavendish; London, 1999
Whaley, Douglas J, Problems and Materials on Commercial Law, 8th edition, Aspen publishers, 2005
Adams A, Law for Business Students, third edition, 2003
Supplementary reading
Schubert, Frank A., Introduction to Law, 8th Edition, Houghton Mifflin, 2004
Goode, Roy, Commercial Law, (3rd Edition). Penguin books Ltd, 2004
Smith and Keenan, Advanced Business Law, Prentice Hall, 2006

6. Be able to apply the main principles affecting the legal relationship between business organisations and their consumers
Sale of Goods Contracts: statutory implied terms, transfer of property and possession, seller’s remedies against the buyer, consumer’s remedies against the seller,
Sale and Supply of Services Contract: statutory implied terms, seller’s and consumer’s remedies,
Product Liability: defective goods, consumer remedies against the producer of defective goods.

7. Outline of the Law of Contract
A contract is said to be an agreement which is legally binding on the parties involved. Hence are recognised and enforceable by law
For a contract to be formed, there must be an offer from the offeror and acceptance from the offeree, intention to create legal relationship and consideration. Also essential are capacity to contract and Form
For a contract to be valid, no vitiating or obstructing factor should exist which could make the contract void or voidable such as misrepresentation, mistake Duress or Illegality
In relation to the Contents, Terms could be Express (Parties) or Implied (Statutes, e.g. Supply of Goods and Services Act 1982)
Exclusion Clauses are subject to controls by legislations such as the Unfair Contract Terms Act 1977 or the UTCC Regulation 1999
In case of termination by breach of contract, parties could claim damages in the form of compensation or specific performance

8. Terms of a Contract
Terms are said to be those specific binding details in a contract or those statements which bind the parties,
Terms could be classified as very important in which case they are called Conditions or less important known as Warranties or borderline known as Innominate terms
They either come from the parties hence said to be Express terms or from external legal sources called Implied terms
The external legal sources making up the implied terms include Customs, Courts and Statutes

9. Express Terms
These are written or verbal terms stated into the contract by parties
The most important feature of these terms is that there should be certainty between the parties about these terms
In other words the parties are to be aware of these terms else they are said to be void

10. Exclusion Clauses (Exemption)
Terms stated by a party in order to limit their liability in the contract
Since such terms are subject to being abused especially by stronger parties, hence they are subject to controls with the use of common law and statutory tests;
Common law Tests include Proper Incorporation of the term into the contract and Clear and precise nature of the terms
Statutory Tests, Unfair Contract Terms Act (UCTA) 1977 and Unfair Terms in Consumer Contract Regulations (UTCCR) 1999

11. Common Law Test
Proper incorporation which require the terms to be brought to the attention of the other party through signature (written contracts), Notices (unwritten contracts) and customs (previous dealings)
The clause should be clear and precise (which means it should not be vague) else the court will interpret it against the person who seeks to rely on it know as the contra proferentem rule
Once the above two tests are met, the court does not concern itself with reasonableness of the clause

12. Statutory Test
Unfair Contract Terms Act 1977 S 2 Any such clause concerning Negligence leading to death or personal injury is now void but damage to property or economic loss is subject to a reasonableness test S 3 Such clauses dealing with Breach of contract are now subject to a reasonableness test S 6 Under implied terms of sale and supply of goods, in case of limitation of liability by a party in a business contract (SRT) but the clause will be void in case it was a consumer contracts

13. Unfair Terms in Consumer Contract Regulation 1999
Deals only with contracts involving consumers with standard form contracts
It regulates all terms in a contract between a business and their consumer hence it goes beyond exclusion clauses
Terms are expected to be clear, reasonable and fair
Terms should be in plain English and not have a font size less than font eight

14. Implied Terms
These are terms imported into a contract from external legal sources. These sources are;
Customs, for instance ‘time for seed and labour’ for tenant farmers
Courts or Common Law; terms are said to be implied in law where such terms are implicitly required but are omitted or implied in facts where the terms are so obvious
By Statute such as Sale of Goods Act (1979), Supply of Goods and Services Act (1982)

15. The Sale of Goods Act 1979
This legislation implies terms for contracts where parties are exchanging chattels (tangible goods) for money
Section 2(1) defined sale of goods contracts as ‘a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price’
Such contracts could be consumer or business contract of sale of goods and to a certain extent private contracts

16. Implied Term on Title
Section 11 distinguishes some terms as conditions and others warranties.
Section 12 relates to Title. Under s 12(1) there is a condition that the seller must have title in order to sell, else s/he will be in breach as stated in Rowland v Divall (1923)
Under s12(2) there is a warranty that goods must be free from any encumbrances and the buyer is to have quiet possession

17. Implied Term on Description
Section 13 creates an implied condition that goods should correspond to the description
This will be particularly important were the buyer does not see the goods before purchase say in a catalogue or through the internet
Even if the buyer sees the goods and relies on the description of the seller, there will be a breach as confirmed in Beale v Taylor (1967)
However if seller makes it clear that the description should not be relied upon, they may not be liable

18. Implied Term on Quality
In spite of the common law concept of caveat emptor, section 14 (2) stipulates that goods must be of satisfactory quality else they shall be a breach of condition
This means goods must be fit for all purposes for which they are made and should be durable, effective and free from damage
Cases in point could be Roger v Parish (1987) and Shine v General Guarantee Corps (1988) relating to defective and submerged cars

19. Implied terms for quality and sample
Also under section 14 (3) goods must be fit for the specific purpose indicated by the buyer
Cases in point could be Grant v Australian Knitting Ltd (1936) where neglected chemical caused skin disease on cloths bought by the buyer
In the case of Griffiths v Peter Conway Ltd (1939) the buyers case failed because the skin disease was more of an allergy which the seller was not informed about
Section 15 indicates that the Sample has to be of the same standard as the bulk, as confirmed in the case of Godley v Perry (1960) regarding sub-standard catapult when compared to the initial sample which resulted in a young child being injured.

20. Transfer of Ownership s 16 to 20
There are several reasons why it is important to know when ownership passes from seller to buyer and some include;
The fact that ownership passes with risk of damage or theft as stated in s20.
During liquidation the goods in the possession of the company may or may not belong to the company
The remedy for the unpaid seller will depend on whether ownership of goods in their possession has passed or not.

21. Ascertained and Unascertained goods
Section 16 indicates that where goods are unascertained, ownership in the goods will not pass unless the goods are ascertained
In the case of Healy v Howlett and Sons 1917 ownership did not pass because 20 boxes were only appropriated from the 190 only after the were already bad.
Section 17 indicates that even where goods are ascertained or specific, property will still only pass when the parties intend it to.
Section 18 deals with 5 rules about when property would pass if none was expressed by parties

22. Five rules for ascertaining intention of parties (s18)
Rule 1, In case of unconditional contract for the sale of specific goods, property passes at the time of contract
Rule 2, If anything has to be done to put the specific goods in a deliverable state, property does not pass until this is done, (Underwood v Burgh Castle Brick and Cement Syndicate 1922)
Rule 3, where specific goods have to be weighed and measured, that must be done before ownership will pass.
Rule 4, where specific goods are sold on approval or return basis, ownership only passes when approval take place or the buyer does something which shows his approval (Kirkham v Attenborough 1897) where the goods were pledged
Rule 5, where unascertained goods are unconditionally appropriated, ownership passes to buyer ( Federspiel v Twigg 1957) packed up bicycles ready for shipment when liquidation occurred.

23. Sale of Goods (Amendment) Act 1995
This legislation has modified rule 5
It now introduces the concept of ascertainment by exhaustion
It also introduces the concept of co-ownership of goods on transit to buyers

24. Reserving a right of disposal (s19)
The seller is given the right to retain the title of goods supplied and being sold by the buyer,
This is known as the Romalpa clause after the case Aluminium Industrie Vaassan BV v Romalpa Aluminium Ltd (1976) from where the rule originated
However if the property has been mixed up with others during the process of manufacturing, the clause may not apply and the most likely remedy will be for a Charge to be created under Companies Act 2006
The clause will now only be accepted if it is stated in the agreement that the buyer is bailee (trustee) for seller and the goods must be clearly identifiable after manufacturing

25. Sale by a person who is not the owner (s21 to s25)
As a general rule, a buyer cannot acquire ownership from someone who himself has neither ownership nor the owner’s authority to sell
This is confirmed in section 21 and has its origins from the common law concept of the nemo dat rule which indicates that no one can give what he has not got.
A buyer who buys goods under such conditions is to return the goods to the original owner and claim for breach of contract against the seller under s 12 (1)

26. Exceptions to the Nemo dat rule
Estoppel, where third party believes the agent has authority to sell, s21
Agency or mercantile agents (factors) Factors Act 1889, where the seller is the contractual representative of the owner s21(1)
Statutory powers s21 (2)
Voidable title, s23 (Car & Universal Finance v Caldwell 1964), rescission prior to sale by rough would prevent title passing
Sale by the seller in possession, s24
Resale by the buyer in possession, s25 (Newtons of Wembley Ltd v Williams 1964), third buyer acquired good title despite bounce cheque by first buyer.
S 27 Hire Purchase Act 1964 protects private purchasers who purchase items in good faith which have not been paid in full

27. Termination by Performance of a Sale of Goods Contract
For performance of the sale of goods contract to be completed, both the sellers and buyers have certain statutory duties to observe.
Duty of the seller, (s29) the seller is obliged to deliver the goods in accordance with the place (s29(2)) and time of delivery (s29(3))
Goods in the possession of a third party is not delivered until the party acknowledge that they are acting on behalf of the buyer (29(4))
Delivery takes place where goods are actually handed to buyer or their representative (s32)

28. Duties of the Buyer
Under s27, they have an obligation to accept delivery of goods and to do so within a reasonable time else it would be breach of contract
Under s35 acceptance takes place where the buyer informs the seller about acceptance of delivery or by failing to notify the seller within a reasonable time about rejection of the goods or does anything which is inconsistent with the rights of the seller.
Under s 30, variation in the agreed quantity may lead to rejection by buyer
Under s31, the buyer is not bound to accept goods in instalments
The buyer has a duty to pay for the goods

29. Questions 1) Distinguish express from implied terms
2) What are conditions as opposed to warranties
3) What is the implied term stated in section 13 of the SGA1979
4) Distinguish between sections 14(2) and 14(3)
5)What are unascertained goods
6) What are specific goods
7) What is rule 1 of section 18 of the SGA 1979
8) What is the Rolmapa clause all about

30. Questions Cont… 9) What is the meaning of the Ne mo dat rule
10) State and explain 2 exceptions to the rule
11) Distinguish between the Sale of Goods Act and the Supply of Goods and Services Act 1982
12) What is the provision in section 4 of the SGSA 1982

31. Remedies for breach of Sale of Goods Contract
Sellers and Buyers Remedies

32. The Sellers Remedies
Sellers remedies could be real s41-48 or personal s49/50
Real remedies relates to rights of a seller in possession.
This could be lien over property s41-43
The right to stop the goods in transit, s44-46 if buyer become insolvent
The right of resale, s47 and 48 especially if perishable or express right of resale was stated in the contract
For personal remedies action for price s49 may be brought or damages claimed under s50 for repudiation by non-acceptance
Under s50(3) the seller is to mitigate his losses by selling elsewhere and the court may grant damages using the market price rule. In WL Thompson Ltd v Robinson Ltd 1955, there where no available market so seller entitled to loss of profit not nominal damages

33. The Buyers Remedies
The implied terms s12-15 are mostly conditions giving the buyer the right to reject goods which breaches the terms.
Under s35A, the seller may accept those which comply with the terms and reject those which do not.
In the case of Bernstein v Pamson (1987) a new car which kept seizing but which the buyer did retain for more that a reasonable time could not be returned.
Damages could be claimed for non-delivery s51, the market price rule normally applies.
The buyer also has the right to request for specific performance s52 as well as damages under s53 breach of warranty, Lee v York Coach and Marine 1977 where delay in returning defective car meant goods could no longer be returned hence a claim for breach of warranty
Buyer can recover monies for non-delivery s54

34. Supply of Goods and Services Act 1982
The above legislation is distinguished into two parts;
Part 1 on contracts for the supply of goods and is further divided into two sections the first dealing with implied terms for transfer of ownership in goods (s2 title, s3 Description, s4 Quality and fitness for purpose and 5 sample) and the second part with goods on hire (s7 title, s8 Description, s9 Quality and s10 Sample)
Part 2 on contract for services, dealing with s13 reasonable skill and care , s14 time of performance and s15 reasonable pay

35. Remedies under the Sale and Supply of Goods to Consumer Regulations 2002
Damages would be the usual remedy as in sale of goods contracts
Repair or Replacement (s48B), without causing significant inconvenience to the buyer, the seller may be required to repair or replace the goods and to bear the cost of doing so
Reduction of the purchase price or rescission (s48C) of the contract, a partial or full refund should be payable to the buyer in instances where goods cannot be replaced or repaired. The contract may also be rescinded.

36. Product Liability
Rights of the injured party in Common law (Contract and Tort) and statute

37. Liability in Tort of Negligence
A person who suffers injury because of defects in a product caused by the carelessness of the manufacturer or any other person responsible for the goods may sue in the tort of Negligence.
Negligence is breach of legal duty to take care to avoid inflicting injury which is foreseeable.
It is based on the ‘neighbours principle’
The principle was established in the case of Donoghue v Stevenson (1932)

38. Negligence
To succeed in a case of negligence, the claimant has to establish the following elements;
That the defendant owed the claimant a duty of care (reasonable foreseeability)
That the claimant breached that duty (standard of a reasonable person)
That as a result of that breach, the claimant suffered consequential loss or harm (causation and remoteness)

39. Defences and Remedies in Tort of Negligence
Contributory Negligence; This could arise where the claimant or another third party contributes to the negligent conduct
Consent (Volenti Non fit injuria), where the claimant knew about the risk and gave their express or implied consent
Exclusion clauses; however, this is now subject to the Unfair Contract Terms Act 1977 which expect the clause to be reasonable
The remedy would usually be damages in form of compensation to be awarded at the County Court or High Court depending on the amount of Claim being made

40. The Consumer Protection Act 1987 as amended by The General Product Safety Regulation 2005
The above legislation introduces a strict liability on the manufacturer for defective goods.
Part I CPA 1987 deals with civil liability of the persons responsible for the goods while part II deals with criminal liability
Under s1 products include manufactured goods or things which owe their essential characteristics on industrial processes. This now include processed agricultural products
S2 indicates that those who shall be liable include; producers, suppliers, importers and markers (whose name appear on the brand)
Under s3 for it to be defective, it should be unsafe
The claimant must be a consumer and the goods in question should be over £275.

41. Questions
1) When is the buyer deemed to have accepted goods under s35?
2) Give three instances when the buyer has the right to reject goods
3) What rights may be exercised by Adam in the following circumstances?
A) Ben has failed to pay for a consignment of goods in Adams possession
B)Adam has dispatched goods to Cath’s company and has now learnt that the company had gone bankrupt.

42. Questions continue..
4) What must a claimant in an action for negligence prove?
5) What is the essential element to be established under duty of care
6) What does causation mean under consequential harm?
7) What does strict liability mean and who has this liability under the Consumer Protection Act 1987
8) Goods must cost a minimum of how much to qualify under the Consumer Protection Act 1987 Part I