1. F O U N D A T I O N L A W 2 0 1 3 / 1 4
LECTURE 15
CONDITIONS, WARRANTIES AND
IMPLIED TERMS

2. RECAP- LECTURE 14:
MISREPRESENTATIONS
• In last week’s lecture we looked at…………
• What a misrepresentation is
• The three different types of misrepresentations:
• Fraudulent/false misrepresentation
• Negligent misrepresentation
• Innocent misrepresentation
• Principles from Hedley Bryne v Heller (1963): “special
relationship”

3. LEARNING OUTCOMES:
• Understand the difference between a “negligent misrepresentation” and “negligent
misstatement”;
• Show knowledge & understanding of the different contractual terms;
• Explain what is meant by an implied term;
• Explain the difference between a condition and a warranty and the effect of breach
of these terms;
• Show knowledge & understanding of the provisions under the Sale of Goods Act 1979
& the Supply of Goods and Services Act 1982;
• Understand the effect of exclusion clauses;
• Apply legal principles to given facts and demonstrate criticality & analysis when
answering fact based questions; and
• Analyse case law and be able to apply case law in a persuasive manner to
hypothetical case studies

4. NEGLIGENT MISSTATEMENTS
• In last week’s lecture we looked at NEGLIGENT
MISREPRESENTATIONS
• A negligent misrepresentation is a false statement of
fact, whereby the maker of the statement has been
careless/negligent as regards to the truth of the
statement
• A negligent misrepresentation is usually made by a
person (the representor) who has specialist knowledge;
as was the case in both Esso Petroleum v Marden & the
case of Hedley Bryne v Heller

5. SO, WHAT IS NEGLIGENT MISSTATEMENT
AND HOW IS IT DIFFERENT TO A NEGLIGENT
MISREPRESENTATION?
• Like negligent misrepresentation (“NMR”) a negligent
misstatement (“NMS”) is also a false statement of fact
which has been made by the representor
carelessly/negligently AND furthermore, the maker of the
statement has special knowledge/expertise
• However, one of the key differences between a NMR
and NMS is that, to bring a claim for NMS, the maker of
statement must owe the claimant a duty of care.
Whereas for NMR, the defendant does not owe the
claimant a duty of care

6. • The duty of care for NMS is established using the
“special relationship” test, as established in the case of
Hedley Bryne v Heller (1964)
• Remember, that in order to establish that there existed
a “special relationship” between the parties, the
following 5 conditions must be satisfied:
1. The advice is needed for a specific or general purpose
2. This purpose is made known, either expressly or implicitly, to
the adviser at the time when the advice is given
3. The adviser knows that the advice will be used for that
purpose by the advisee
4. The adviser knows that the advice is likely to be acted upon
without further independent inquiry; and
5. The advisee does in fact act on the advice and subsequently
suffers financial damage.

7. • Only when the claimant suffers financial loss (“PEL”) as a
result of the defendant’s breach of duty (which is
established by the “special relationship” test), can the
claimant bring an action for PEL under the tort of
negligence on the grounds of negligent misstatement
• Hence, in Hedley Bryne v Heller, it was NEGLIGENT
MISSTATEMENT, as special relationship could be
established. Whereas in Esso Petroleum v Marden, whilst
Esso did have special knowledge, special relationship
could not be established (Esso did not owe a duty of
care). Hence it was NEGLIGENT MISREPRESENTATION

8. OTHER DIFFERENCES BETWEEN NEGLIGENT
MISREPRESENTATION AND NEGLIGENT
MISSTATEMENT
NEGLIGENT MISREPRESENTATION NEGLIGENT MISSTATEMENT
Action is brought under the statutory
law…Section 2 (1) of the
Misrepresentation Act 1967
Falls under the common law; tort of
negligence. The special relationship
test was established in Hedley Bryne v
Heller (1964) and subsequently
recognised in the case of Caparo v
Dickman (1990)
Falls under the law of contract, since
the relationship between the parties is
contractual
Falls under the law of torts, as there
exists a duty of care/special
relationship between the parties

9. IMPLIED TERMS
• To understand what is meant by an implied term, its best to
understand what is an express term first
• Express terms are those contractual terms
(obligations/responsibilities/description of goods etc.) which have
been agreed between the parties and usually have been expressly
stated into the contract as the contract’s main terms and
conditions
• Examples of express terms include terms relating to the description
of the goods, the price, delivery & payment terms etc.
• Implied terms in contrast, are terms which although have not been
expressly incorporated into the contract, they still apply to the
contract
• For example, in a sale of goods contract, there is an implied term
that the goods will be of satisfactory quality

10. IMPLIED TERMS UNDER THE SALE OF
GOODS ACT 1979 (“SGA 1979”)
• The Sale of Goods Act 1979 (as amended by the Sale of
Goods Act 1995), governs contracts for the sale of
goods
• Under section 2 of the SGA 1979, a contract for the sale
of goods is, “a contract for the sale of goods is 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”
• Within the meaning of the Act, goods must be
“tangible” and furthermore, the Act only deals with
contracts for the sale of goods

11. SECTION 12 SGA 1979: IMPLIED TERM AS
TO TITLE
• There is an implied condition that the seller has the right
to sell the goods and therefore, to transfer ownership.
Therefore, a person who steals goods generally would
not have the right to pass on a good title to a buyer
• Rowland v Divall (1923)

12. SECTION 14 SGA 1979: IMPLIED TERMS
WITH RESPECT TO SATISFACTORY
QUALITY AND FITNESS FOR PURPOSE
• Under section 14 (2), where the seller sells goods in the
course of a business, there is an implied term that the
goods are of satisfactory quality (unless defects are
drawn to the buyer’s attention beforehand on the
formation of the contract)
• Satisfactory quality includes:
• That the goods are free from defects;
• The goods work;
• Safety and durability; and
• Appearance and finish.

13. • Under section 14 (3), there is an implied condition that
the goods will be reasonably fit for purpose
• Priest v Last (1903)
• Wormwell v RHM Agricultural Ltd (1987)
• NB: section 14 only applies to consumer sales and not
to private sales (between private sellers)

14. SECTION 15 SGA 1979: SALE BY SAMPLE
• Where there has been a sale by sample, there is an
implied condition under section 15 of the Act that the
goods supplied shall:
• Correspond with the quality of the sample;
• The buyer shall be given a reasonable opportunity to compare
the sample with the goods supplied; and
• The goods shall be free from defects rendering them
unmerchantable which would not be apparent on reasonable
inspection

15. CONDITIONS AND WARRANTIES
• Conditions are the terms of a contract which go to the
very roots of the contract. It can be said that these are
the terms upon which the contract is formed (for
example, the price and the description of the goods are
both examples of conditions)
• A condition therefore, is a major term of the contract
and if a condition is breached, the innocent party is
entitled terminate the contract and claim damages
(Poussard v Spiers (1876))

16. CONDITIONS UNDER THE SGA 1979:
SECTION 13- SALE BY DESCRIPTION
• Where there is a sale by description, the goods must correspond
with the description
• For example, if an advertisement describes a pair of jeans as
“black denim jeans” but upon arrival of the order the buyer realises
that jeans are actually “dark navy”. The buyer has the right to
terminate the contract (return the jeans)
• Beale v Taylor (1967)
• Furthermore, section 13 (3) extends a sale by description to include
situations where the buyer selects the goods. For example, a buyer
buys a jar of what has been described as “strawberry jam” on its
packaging but discovers it actually contains Marmite!
• Section 13 applies to both consumer and business sales

17. SUMMARY OF THE IMPLIED
CONDITIONS IN THE SGA 1979
Section Implied Condition Comment
12 The seller has the right
to sell the goods
Cannot be excluded
from any contract
13 The goods match their
description
Cannot be excluded
from consumer sales
Can be excluded from
private sales
14 The goods are of
satisfactory quality
Cannot be excluded
from consumer sales
15 The goods match
sample
Cannot be excluded
from consumer sales
Can be excluded from
private sales

18. • Warranties in contrast, are minor terms of a contract
which are not central to the formation of a contract
• Such terms usually relate to the performance of the
contractual obligations
• For example, under section 12 of the SGA 1979, there is
an implied warranty that the goods shall be free from
any charge or encumbrance not disclosed to , or
known by the buyer and also that the buyer shall enjoy
“quiet possession” of the goods
• Unlike a condition, if a warranty is breached, it only gives
the innocent party the right to claim damages and no
right to termination of the contract (Bettini v Gye (1876))

19. EXCLUSION CLAUSES
• The Unfair Contract Terms Act 1977 (UCTA) states that
none of the implied terms outlined above, may be
excluded by a seller in a consumer sale (remember, a
consumer sale is a sale of goods for private use or
consumption and not in the course of a business.)

20. CONSUMER LAW
• Who is a consumer?
• A person who buys goods/services for personal use
• A consumer sale is defined as a sale where the goods
are of a type ordinarily supplied for private use or
consumption and the seller is selling in the course of a
business and the buyer is not buying in the course of a
business

21. • The normal rules of contract with respect to offer,
acceptance, and consideration etc. Will still apply, but
the law protects the interests of the consumer.
• Therefore, consumers’ rights and interests are protected
by certain legislation, which aim to:
• Protect the consumer from (financial) exploitation from the seller
(e.g., the seller may not be providing value for money); and
• Ensure that the goods and services being brought by the
consumer meet certain conditions in respect of their quality and
fitness for the purpose that they are intended to serve.

22. • Although there are three main statutory provisions
governing consumer law –
• the Sale of Goods Act 1979 (as amended by the Sale
of Goods Act 1995)
• the Supply of Goods and Services Act 1982; and
• the Consumer Protection Act 1987)
• we will only be focusing on the Sale of Goods Act 1979
(SGA 1979) and looking at the provisions of the Supply
of Goods and Services Act 1982 on this course

23. THE SUPPLY OF GOODS AND SERVICES
ACT 1982 (“SGSA 1982”)
• Where the contract is for the supply of goods and
services, for example for the purchase of a Samsung
50” TV (the supply of goods) and installation (the supply
of services). The Supply of Goods and Services Act 1982
will also protect the consumer, in addition to the
implied terms of the SGA 1979
• Under section 13 of the Supply of Goods and Services
Act 1982, a person who supplies a service in the course
of a business impliedly undertakes to “carry out the
service with reasonable care and skill”. Therefore,
where a party fails to perform a contract with
reasonable care and/or the necessary skill, there is a
breach of contract

24. PREP.TASKS FOR SEMINAR 15
• Hand Out:
• Reading List:
• Jacqueline Martin, “GCSE Law”, 5th edition, chapter 32-
Consumer Law
• List of Cases
• Preparatory Questions