An agreement for the sale of goods is a contract. In that contract, the rights and obligations of each party may be created by 'express' terms, i.e. terms that are specifically set out. Rights and obligations may also exist because of terms implied into the contract, i.e. terms that aren't specifically set out. These can include those implied by legislation protecting buyers.

Terms implied by legislation

There are various Acts that imply terms into contracts for the sale of goods, the supply of goods and services (work and materials contracts), and hire purchase contracts. If the goods, or their supply, don't comply with these implied terms, the buyer can claim for breach of contract against the seller.

Ownership

There's an implied term that the seller has title to (i.e. owns) the goods and therefore has the right to sell them. There's also an implied term in a hire-purchase agreement that a hirer will have title to the goods when they pass title to the buyer.

Goods must correspond with description

The goods must correspond with the seller's description of them. This only applies if the buyer or hirer relies on the description of the goods. Goods sold to a consumer must also comply with the main characteristics stated in the pre-contract information supplied by the seller. (See Information Requirements in Consumer Contracts)

Goods must correspond with sample

If the goods are sold by sample, they must be the same as the sample.

Goods must match model

Goods sold to a consumer must match any model of the goods seen or examined by the consumer before they entered into the contract. This right applies to consumer contracts made after 1 October 2015.

Goods must be of satisfactory quality

If goods are sold in the course of business, they must be of satisfactory quality. This means that the goods must meet the standard a reasonable person would expect, bearing in mind factors like the description of the goods and price.

When assessing whether goods are of satisfactory quality, their general state and condition are considered, as well as the following aspects:

• Safety
• Durability
• Appearance and finish
• Freedom from minor defects
• Fitness for all purposes for which goods of the kind in question are commonly supplied.

If the goods aren't of satisfactory quality, the seller will have a defence if:

1. The seller has pointed out to the buyer specific defects before the contract is made; or

2. The buyer has examined the goods before the contract is made and should have noticed the defects.

Goods for special purpose

If goods are sold in the course of business, they must also be reasonably fit for any special purpose for which the buyer has told the seller they need the goods. This doesn't apply where the buyer isn't relying on the skill or judgement of the seller, or where it wouldn't be reasonable for them to do so.

For example, if the buyer is an expert in relation to the goods, and the seller isn't, it wouldn't be reasonable for the buyer to rely on the seller's skill or judgement. If goods are supplied under a hire purchase agreement, there's an implied term that they're fit for special purposes that the hirer tells the creditor or credit broker about.

Goods installed for consumer

Under the Consumer Rights Act 2015, goods installed by the seller for the consumer as part of the contract must be installed correctly. If they aren't, the goods themselves won't conform to the contract.

Goods including digital content

The Consumer Rights Act 2015 recognises 'digital content' as a separate concept from goods and services. Digital content is defined as data produced or supplied in digital form. This includes computer programs, applications, games, music, videos and texts. If goods incorporate digital content, the goods themselves won't conform to the contract if the digital content doesn't conform.

Restriction of insolvency-related termination clauses

Contracts for the supply of goods and services will often allow suppliers to take action if the company they're supplying becomes subject to an insolvency procedure, e.g. by allowing them to end the contract. This helps the supplier to manage the risk of continuing to supply the goods/services but not getting paid.

The Corporate Insolvency and Governance Act 2020 prevents certain suppliers from making use of such clauses. This applies even if the right to end the contract arises before an insolvency procedure but wasn't taken up (the right is suspended when the insolvency procedure begins). The aim of this implied term is to prevent suppliers from stopping supplying, or threatening to stop supplying, companies in insolvency procedures.

This restriction doesn't apply where the company or supplier is involved in financial services, including insurance companies and banks.

A supplier can still end the contract if:

• the company stops paying them (provided the contract allows that);
• the company agrees; or
• a court allows it, which it can if it's satisfied that continuing the contract would cause the supplier hardship.