Can I Contract Out of the Sale of Goods Act?

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Table of Contents

• What Are the Implied Terms under the Sale of Goods Act?
• When Can You Contract Out of the Implied Terms?
• Can You Contract Out of Your Consumer Sale Obligations?
• Key Takeaways
• Frequently Asked Questions   

Primarily, the Sale of Goods Act protects the businesses that sell goods to other businesses and specific business-to-consumer sales. The law implies certain contract terms to protect the parties from buying or selling faulty goods. Those terms apply even if you did not agree to them when signing the contract.

This article explains the implied terms of the Sale of Goods Act and when can you contract out of this law.

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What Are the Implied Terms under the Sale of Goods Act?

The Sale of Goods Act implies specific terms in contracts that allow for the sale of goods between parties. These terms apply to both consumers and other businesses. For example, some terms imply:

• the seller can sell the products at the time of sale;
• the buyer enjoys quiet possession of the goods (known as buying and enjoying the goods without outside interference);
• there is no third party who made the buyer aware that they had a claim over the goods at the time of sale; 
• when a buyer purchasers goods per their description, the goods will reflect that description;
• when the buyer tells the seller that they need the goods for a particular purpose, the goods should be reasonably fit for such a purpose;
• any goods sold by description will be suitable for the purpose (known as ‘merchantable’ quality);
• if the seller sells goods by sample, the rest of the goods will correspond with the quality of the sample;
• if the buyer purchases goods by a sample, the buyer will have a reasonable opportunity to compare the bulk of the goods with the sample; and
• any goods sold by sample do not contain defects that would make them unsuitable for their purpose, and you cannot see the defects after examining the sample. 

When Can You Contract Out of the Implied Terms?

As a business, you can choose to contract out of the Sale of Goods Act in various ways. For instance, you can do so:

• through an express agreement, where both parties agree to exclude the Act from applying to the contract;
• during business dealings throughout the time of the contract; or
• through regular use if the use binds both parties. 

For example, consider a restaurant owner buying lettuce from a supplier based on the supplier’s description over the phone that the lettuce is fresh and green. The contract does not say the goods have to match the description. However, the lettuce arrives looking brown. Therefore, the lettuce fails to match the description. In this case, the supplier breaches the implied term that any goods they sell by description would reflect that description.

However, the situation is different if the contract between the restaurant and its supplier includes a term stating that the conditions implied by the Sale of Goods Act would not apply in this agreement. The restaurant owner would not have a claim against the supplier, as they gave up their legal right for the Act to apply to the contract. 

Can You Contract Out of Your Consumer Sale Obligations?

You cannot contract out of the Sale of Goods Act‘s implied terms if your business sells to consumers. The only exception is when the consumer knew about defects before purchasing the product. If you include a clause in your contract that excludes the Act’s application, that term can be void. This means sellers cannot enforce it against any consumers. 

What is a Customer Sale?

The Sale of Goods Act defines customer sales as the sale of goods bought for private use to someone not buying the goods for business reasons. 

So, for example, if your business sells a TV to a young father of three kids to watch Netflix, that would be a customer sale under the Sale of Goods Act. On the other hand, if your business sells a TV to a corporate executive who wants the TV for business presentations, that is unlikely a customer sale under the Sale of Goods Act.

Therefore, if you make customer sales, you cannot contract out of your legal obligations under the Act. Any contractual term that claims otherwise will be void. 

Key Takeaways

Your business can exclude the operation of the Sale of Goods Act in your contracts by inserting a clause in the contract stating that the law does not apply. However, you cannot exclude the law’s operation if you sell goods to customers for private consumption. Any contractual term that claims otherwise will not be enforceable against your consumers. 

If you have any questions or need your contract reviewed, you can contact our experienced contract lawyers to assist as part of our LegalVision membership. You will have unlimited access to lawyers who can answer your questions and draft and review your documents for a low monthly fee. Call us today at 1300 544 755 or visit our membership page. 

Frequently Asked Questions