Question 10:
Critically compare the requirements of quality and fitness of goods found in:
(1) Sections 2(5) and 16(2) of the Hong Kong Sale of Goods Ordinance (Cap.26);
(2) Sections 14(2), 14(2A), 14(2B) and 14(2C) of the English Sale of Goods Act 1979;
(3) Article 35(2)(a) of the United Nations Convention on Contracts for the International Sale of Goods 1980 (CISG); and,
(4) Any relevant legislation in your home jurisdiction.
In your view, should the Hong Kong test for quality and fitness be revised and (if so) in what way and why?
Introduction:
The implementation and interpretation of the provisions regulating the requirements of the quality and fitness of the goods have generated numerous problems. Also, these issues were among the most litigated matters in the CISG. Despite the fact that these issues concern international sales, case law is influenced by the domestic laws of sales and reflects the legal importance of notification of the seller in some countries. Similarly, there are relatively few decisions in countries where the domestic law of sales requires the notice to be given in a reasonable period of time.Logically, the majority of decisions stem from countries where the domestic laws provide strict rules regarding the examination of the goods and non-conformity notice. In the practical application of Hong Kong, it should be noted that the duty to examine the goods and the duty to notify the seller of non-conformity of the goods are established in the seller's favor, while being an additional burden on the buyer. In the international law of sales it is, therefore, of essential importance not to impose overly harsh requirements on the buyer because the risk of non-conformity of the goods would thereby be shifted to the buyer. Further, it is important to stress that the criteria established under the domestic laws of sales are not applicable in the international sale of goods.
The main principle underlying the examination of quality and fitness of goods is the principle of reasonableness. On the basis of this critically review, the interpretation of the other countries’ quality protection law, there would seem to be several important advices on the Hong Kong Sale of Goods Ordinance (the Ordinance). The buyer must examine the goods in order to establish every possible lack of conformity. The inspection of the goods serves for the preparation of the notice of nonconformity. The examination of the goods is, by its nature, a duty. The requirements imposed on the buyer in relation to the inspection of the goods should not be too strict because the risk of non-conformity of the goods would thereby be shifted to the buyer.
This paper analyzes different requirements of quality and fitness of goods by four conventions. The importance of setting a well requirement to examine the goods, its quality and fitness, relationship to the duty to notify the seller of the lack of conformity of the goods and its legal nature will be discussed. Subjects effecting the examination and method and scope of the examination are analyzed in the following part of this paper.
Sections 2(5) and 16(2) of the Hong Kong Sale of Goods Ordinance (cap.26)
Goods are of ‘merchantable quality’ under s16 (2) if they are 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 and all the other relevant circumstances. In other words, the buyer will expect that the goods are merchantable quality and fit for consumer to use.
In the reality case, if the buyer cannot find any defects in the goods after the purchase, therefor, they are not entitled to rely on s16 (2). Nevertheless, under s16 (3) , where the seller sells goods in the course of business and the buyer, expressly or by implication, makes known to the seller any particular purpose for which the goods are being bought, there is an implied condition that the goods supplied under the contract are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the buyer does not rely, or that it is unreasonable for them to rely, on the seller’s skill or judgment. So the buyer could take a chance to exclude its liability towards consumer.
Also, the “merchantable quality” was appropriate to natural products but not to machines. . Of section 2(5), it is said to be unclear as to how the definition applies to multi-purpose goods, second-hand goods and goods with minor or cosmetic defects; the phrase "reasonable to expect" is said potentially to work against consumers in certain situations; the time at which the quality of goods is to be judged is not spelt out, which creates problems concerning how durable goods must be in order to satisfy the definition.
The purpose for which the buyer wants the goods is made known to the seller but there is some peculiarity pertaining to the buyer's condition of which the seller is unaware, the seller is not liable under section 16(3) if the goods turned out to be unfit because of the buyer's condition. For example, in Griffiths v Peter Conway Ltd [1939] 1 All ER 685, the plaintiff bought a coat from the defendant and contracted dermatitis because she had abnormally sensitive skin. As the coat would not have harmed an ordinary person and the plaintiff's condition was not disclosed to the defendant, the latter was not liable. Obviously, if the plaintiff had disclosed her condition and sought the defendant's advice before the purchase, there could well be liability.
Section 2(5) does not provide how long the goods sold must remain in its original merchantable state. However, goods will not be of merchantable quality unless they are reasonably durable. For example a new television set which breaks down after a few days, even though apparently in good condition when delivered, was surely not of merchantable quality. What is reasonably durable will depend on the nature of the goods and the other circumstances of the case. For example, a pair of fashion shoes is notexpected to be as durable as a pair of walking shoes.
Sections 14 of the English Sales goods act 1979
Although the English Sales of Goods Act 1979 still states that "buyer's caution" is the basic rule for the sale of goods, the common law "buyer caution" has largely evolved into a series of developments in "seller’s responsibility to be cautious." In fact, it is hard to say that the basic rule for buying and selling goods in UK is still "the buyer ‘s responsibility to be cautious "rather than" seller’s responsibility to be cautious ".
First, the quality standard developed from “merchantable quality” to “satisfactory quality”. In 1979, English Parliament passed a new law on the Sale of Goods, the main part is the combination of the 1893 Law on the Sale of Goods and the subsequent amendments to the law, the Sale and Purchase of Goods Act 1979 passed some amendments to it, the most important one of which was amended from "Goods in 1994 Sale and Supply Act” made. The law passed in November 1994 and started on January 3, 1995. On the basis of the recommendations made by the Law Commission in its 1987 report on the sale and supply of goods. It has a major change on the quality and fitness of goods with respect to the 1979 Act: it amended the merchantable implied terms as changing it to the implied terms of "satisfactory quality".
Second, The Law Commissions thought that the consumer should never be prevented from rejecting defective goods and terminate the contract if that is what he wants. The Law Commissions considered the position of the consumer buyer who usually buys goods for domestic or personal use and not for profit. He will generally not be satisfied with defective goods when he intended to buy perfect goods. A price reduction may be insufficient compensation. Commercial buyers are in the business of dealing in goods and are usually able to dispose of goods of different qualities through access to the appropriate channels. A breach by the seller can usually be measured in monetary terms.
The Law Commissions originally recommended that the seller be given the right to repair or replace defective goods. The classification of the implied terms in sections 13-15 of the Sale of Goods Act as "conditions" should be retained for consumer sales so that the consumer would continue to enjoy an absolute right to reject defective goods. the probability of defects is also important. Sometimes, there is no need for a particularly intensive inspection if the buyer can rely on the seller's statements and if he believes that the goods have specific characteristics.
The Law Commissions were not in favor of applying the cure principle to commercial sales, which usually involve more substantial sums of money than consumer sales because firstly, it would be difficult to provide a detailed enough code, which would cover all eventualities in commercial transactions. Secondly, sellers may seek to do all they can to impose cure upon the buyer in some cases, and in others, buyers may seek cure for minor but irremediable defects simply to have the opportunity to reject goods because the market has changed. Further, a cure principle may not be practical where goods were imported with the seller many miles away.
CISG
The CISG and the English Sale of Goods Act 1979 have a lot in common. They both provide an outstanding place to fitness for purpose to emphasize the quality of the goods that the seller must deliver in the absence of any other express quality standard in the contract. It is a matter of fact that CISG’s language follows very closely the language of the Sale of Goods Act 1979. Furthermore, both instruments lack any express guarantee against hidden defects, a characteristic feature of civil law. However, the CISG and the Sale of Goods Act 1979 differ in two places in this area. First, the CISG records the vendor’s express obligations regarding the quality and description of the goods, the latter not having the technical implication that it has under the Sale of Goods Act 1979. Sales of Goods Act 1979ignores express warranty obligations. Secondly, and more significantly, the CISG does not provide an implied term of satisfactory (or merchantable) quality. Satisfactory quality is a very complicated concept to elucidate; it depends on a market place in which goods are sold to a variable standard.
According to CISG, except where the parties have agreed otherwise, the goods do not conform with the contract unless they: (a) are fit for the purposes for which goods of the same description would ordinarily be used; The buyer must examine the goods, or cause them to be examined; within as short a period as is practicable in the circumstances.
Although inapplicable to the United Kingdom and Hong Kong, we have taken note of the United Nations Convention on Contracts for the International Sale of Goods (1980) where an attempt was made to advance upon sale of goods legislation for international commercial transactions. The Convention gives the buyer the option to ask for replacement where there has been fundamental breach of contractual terms. The buyer may ask for repairs where the breach is remediable. The Convention does not give the seller a right to repair or replace defective goods.
Pursuant to the 1980 UN Convention on Contracts for the International Sale of Goods (CISG), the buyer has the duty to examine the delivered goods and to notify the seller on possible non-conformities properly and in a timely manner. In such a case, the buyer's omission has serious legal consequences. The seller's obligation to deliver the goods is deemed to be performed and the buyer has to pay the purchase price. Consequently, the buyer loses the right to rely on a lack of conformity of the goods and to claim damages.
In international sales, the duty to examine the goods is of great theoretical and practical importance. Article 38 of the CISG explicitly provides that the buyer has the duty to examine the goods and regulates the time frame in which the examination should take place. The place of the examination may be deduced from the Convention. However, the CISG does not address the method and intensity of the examination nor who should bear the costs of the examination. Also, there is a possibility for the duty to examine to be shifted to the customer in cases of the sale of goods in transit. When the buyer, for example, resells and redispatches the goods before having had a reasonable opportunity to examine them, the goods must be examined by the new buyer.
The duty to examine the goods is governed by Article 38 of the CISG, in Chapter II – Obligations of the Seller. However, it is important to stress that this provision defines the buyer's duty to inspect the goods.
(4) Jurisdiction in China
Article 46 of the Product Quality Law of the People's Republic of China: " Defects mentioned in the law are referred to the irrational dangers existing in the products that threaten the safety of person or properties or products that do not conform to the standards set by the State or the specific trade if there is any. "The Provisions provide a double standard for product defects that determine product defects:" a defect "refers to an" unreasonable risk ", which is similar with the standard of US law. In determining the general standard of product defects, China also provides a mandatory standard, which is, " does not meet the standards of the protection of human health, personal, property safety standards and industry Standard. " The legislative idea is that since there is a mandatory national and industrial standard on the safety of a product and the producer has a statutory obligation to comply with the standard, any failure to comply with the standard shall be deemed as a defect. These regulations are more operability and law enforcement standards are more uniform. Also, the producer can be based on this standard to determine whether the product has defects, as soon as possible to prevent or eliminate defects, to avoid liability for product infringement. But on the other hand, due to the inherent deficiencies of China's compulsory standards, double standards have been adopted to define product defects and there are serious flaws.
Due to imperfect judgments on product defects in China’s Product Quality law, it has brought obstacles to judicial practice. It is necessary to improve the legislation of product infringement. China’s legislature can learn from the legislation and judicial practice of advanced countries and adopt the general criterion of existence. “Reasonable risk” as the sole basis for judging product defects. The costs of the examination and time needed for its completion also have to be considered. If mandatory standards are reserved, they should only be regarded as minimum standards and the necessary relief measures should be established so that the rights and interests of consumers are well protected.
Hong Kong Test for Quality and Fitness should be revised in following way
Firstly, as the surge of more technical and comprehensive products, the definition of "merchantable quality" should be clarified by listing aspects of quality to which the court should have regard. These would include the appearance and finish of the goods and their safety and durability.
Secondly, there should be legislative provision, which makes it clear that the signing of an acceptance note does not result in the buyer's loss of his right of rejection of the goods unless he has in fact had a reasonable opportunity to examine them. The observation of the duty to examine the goods is in the buyer's own interest. In contrast, failure to inform the seller of the defects leads to the loss of remedies. It is especially important in buyers’ purchases. Furthermore, failure to examine the goods and to give notice of the lack of conformity is not detrimental to the buyer whenever the defect is latent, that is, if the non-conformity could not have been recognized upon an appropriate examination of the goods.
Thirdly, section 16(1) should be deleted and that it be reformulated so that the implied term as to merchantability is stated in the positive. The reason that section 16 is drafted in the negative is, as explained, historical. It is a matter of form only; the substance of the law is unaffected. One fear must be, however, that a casual reader, particularly a non-lawyer, would be misled. He might conclude from section 16(1) that there is no implied terms as to quality. If reformulation would be cosmetic and would not change the law, it might be asked whether the change is really necessary. The aim must be to draft as readily comprehensible legislation as possible so that the meaning of the law could be understood by everyone. Accessibility and comprehension aside, section 16(1) and (2) should be reformulated because those subsections no longer reflect the law accurately in that the exception in section 16(2) has grown to be greater than the rule in section 16(1). The implied term as to quality is formulated positively in American and some Commonwealth jurisdictions.
On the obligations of a supplier of services, the Ordinance may adopt the English Supply of Goods and Services Act 1982 which sets out the main common law obligations concerning the quality of the services, the time for performance and the consideration. Provisions should also be made to prohibit the exclusion or restriction of liability for breach of these obligations in consumer transactions.
Conclusion
From the review of quality protection law in other countries, it is clear that Hong Kong jurisdictions still needs development and improvement. In my view, the wider aspects of quality and fitness should be examined. As there are so many areas of consumer protection law that could be considered, Hong Kong Government should review the wider aspects of quality protection laws so that the position of the buyer in Hong Kong could be improved.
