THE SALE OF GOODS (AMENDMENT) ACT 1996: SATISFACTORY QUALITY, AN UNDIVIDED SHARE IN A BULK AND OTHER AMENDMENTS

Citation(1997) 9 SAcLJ 362
Date01 December 1997
Published date01 December 1997
I. INTRODUCTION

The Sale of Goods Act (“SGA”)1 was recently amended by the Sale of Goods (Amendment) Act 1996 (“the Amendment Act”)2 which came into effect on 1st January 1997.3 The Amendment Act achieves the following main effects: First, it substitutes the implied condition of merchantable quality with an implied condition that the goods are of satisfactory quality.4 Second, the amendments allow a buyer of goods which form part of a bulk to get an undivided share in the bulk once he has paid the price or part thereof, even though the goods are still unascertained.5 This enables the buyer to become an owner in common of the bulk and protects him if the seller should become insolvent before the goods are ascertained. Third, the amendments affect a buyer’s right to reject goods by (i) taking away, in the case of a non-consumer buyer, the buyer’s right to reject the goods for breach of certain implied conditions where the breach is so slight that it would be unreasonable for the buyer to reject the goods;6 (ii) clarifying the situations when the buyer is deemed to have accepted the goods;7 and (iii) allowing the buyer in specific situations to accept part and reject part of the goods.8 This article aims to provide an overview of the amendments and how they have changed the law.

II. BACKGROUND TO THE AMENDMENTS

The SGA is based on the (UK) Sale of Goods Act 1979,9 which was confirmed to apply in Singapore by the Application of English Law Act 1993 (‘AELA’).10 As with the other English statutes identified under the AELA as applying in Singapore, the Sale of Goods Act 1979 was

reprinted (with minor modifications)11 and included in the Singapore statute books. One question which arose as a result of this was how the Singapore legislature should amend the English Acts reprinted pursuant to the AELA. The amendment of the SGA, amongst the first of the reprinted statutes to be amended,12 suggests that Parliament would choose simply to amend the reprinted statutes directly, just as it would any other locally enacted statute.

The Amendment Act gives effect to changes in the law relating to sale of goods in the UK made by two statutes, the Sale and Supply of Goods Act 199413 and the Sale of Goods (Amendment) Act 1995.14 These two statutes implemented most of the recommendations of the (UK) Law Commission contained in two reports, the first published in 1987 entitled Sale and Supply of Goods,15 and the second published in 1993 entitled Sale of Goods Forming Part of a Bulk.16 Such adoption of UK changes by the Singapore legislature is purely voluntary. After the AELA, changes in UK law would not affect Singapore unless specifically enacted.17 The willingness of the legislature to adopt the UK changes is strong indication that despite the legislature’s long-term aim of developing independent laws in Singapore, appropriate changes in English commercial law will be adopted in Singapore.

III. IMPLIED CONDITION OF SATISFACTORY QUALITY
1. Introduction to the new law — satisfactory quality in a nutshell

The implied condition that goods be of merchantable quality,18 arguably the heart of the law of sales, is no more. This implied condition is deleted by the Amendment Act and substituted with a new condition of satisfactory quality.19 Certain features of the old condition of merchantable

quality are retained. As before, the condition applies only when the seller sells goods in the course of a business. Also, the condition does not apply in the case of any matter which is specifically drawn to the buyer’s attention before the contract is made;20 and in cases where the buyer examines the goods before the contract is made, the condition does not extend to matters which that examination ought to have revealed.21 A corresponding change in the provisions dealing with sale by sample imposes a similar implied condition in a sale by sample that the goods would be free from any defect making their quality unsatisfactory.22 However, as before, this condition does not extend to any matter which would have been apparent on a reasonable examination of the sample.23

The new condition of satisfactory quality consists of two elements. First, there is a statement of principle in section 14(2A) that the goods are to meet the standards that a reasonable person would consider satisfactory, taking into account any description of the goods, the price (if relevant) and all the relevant circumstances. Next, section 14(2B) provides a non-exhaustive list of aspects of quality that might apply in appropriate cases. This subsection states that the quality of the goods includes their state and condition24 and may include aspects such as fitness for all purposes for which goods of that kind are commonly supplied; appearance and finish; freedom from minor defects; safety and durability.

Before analysing the new amendment in greater detail, it might be helpful to give a simple illustration of how sections 14(2A) and (2B) might be applied. Suppose a person buys a car and the engine will not start. Applying the test in section 14(2A), the question is whether the goods meet the standards that a reasonable person would consider satisfactory. Under section 14(2A), how high a standard to impose would depend on the description, the price, and all the other relevant circumstances. A reasonable person would consider a car that cannot be driven to be of satisfactory quality if it is described as a scrap car and bought from a scrap yard for a few hundred dollars, but not if it is described as a brand new model and bought from a car showroom at the full market price for new cars. What if, alternatively, the car can be driven well enough but has some scratches and dents on its bonnet? Or if the reception from the

car radio is poor? Or if the brakes do not work on a rainy day? Or if the car breaks down completely one month after it is purchased? Applying section 14(2B), these matters (relating respectively to appearance and finish, minor defects, safety and durability) are each aspects of the quality of the car and may, if sufficiently serious, constitute a breach of the implied condition. However, as discussed below, whether the condition of satisfactory quality is actually breached because of the matters complained of would depend on the description, price and all the other relevant circumstances of the case.

2. Critique of the old law

The old condition of merchantable quality had faced criticism on several counts. The first related to terminology, as critics felt that the use of the word ‘merchantable’ was problematic. This word first appeared in statutory form in the (UK) Sale of Goods Act 1873. At that time, it was so well understood by commercial men and merchants that no definition of its meaning was deemed necessary. However, as the type of goods being sold became more complex and the number of consumer transactions grew, the term ‘merchantable’ became less commonly understood and less appropriate. The courts could not agree to a uniform approach to the question of merchantable quality and embraced various different approaches.25 A statutory definition was felt necessary and in 1973, one was added to the sale of goods legislation.26 This definition was eventually incorporated into the now repealed section 14(6) of the SGA, which provided that goods ‘are of merchantable quality … if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances.’

Unfortunately, this definition was not without its own difficulties. Above all, the condition was stated as one of ‘merchantable quality’, making change inevitable in the light of the Law Commission’s conclusion that for all ordinary purposes, the word ‘merchantable’ is largely obsolete today.27 Aside from terminology, the definition of merchantable quality was said to suffer from an uncertain meaning. The main complaint was that the definition in section 14(6) focused too much on fitness of the goods for some purpose or purposes, thereby ignoring defects which did not interfere with the use or uses of the article, for example, an oil stain on the carpet of a new car.28 It can be observed, however, that this shortcoming did not prevent the courts from reaching a just result by giving a wide meaning to the purposes for which an object might be used. So they held that a car was to be used not just for getting from point A to point B but also for the buyer to drive with ‘the appropriate degree of comfort, ease of handling and reliability and … pride in the vehicle’s outward and interior appearance.’29 With this approach, a cosmetic defect in a new car could have rendered it unmerchantable despite not having any effect on its mechanical efficiency. Admittedly, however, the extent to which such non-functional defects would render goods unmerchantable was unclear. The Law Commission was also concerned that the requirement that goods should be as fit for the purpose or purposes ‘as it is reasonable to expect’ may lead to a lowering of the standards of merchantable quality for particular articles. This would have happened if the seller was able to establish that goods of that type could reasonably be expected to possess a number of defects on delivery. If so, then as defects increased both in number and frequency, the chance of there being held to be a breach of contract would diminish.30 Finally, the Law Commission felt that the definition of ‘merchantable quality’ had the shortcoming of omitting to mention expressly the important requirement of durability, which was only found in the cases and that this should be rectified.31

3. Assessing the new law
(i) ‘Satisfactory quality’— the general approach

How far does the new condition of satisfactory quality go towards addressing the criticisms which have been levelled at the old law? For...

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