Avoiding disputes under the Sale of Goods Act 1979: practical guidance for rural businesses in Scotland

From livestock sales and second-hand machinery to feed, fertiliser and estate supplies, rural businesses across Scotland trade goods every day under pressure and often on trust. Most transactions involving individual consumers purchasing goods or services from a business are governed by the Consumer Rights Act 2015. However, where both parties are acting in the course of a business, transactions involving goods are still governed primarily by the Sales of Goods Act 1979.

The statute provides a framework of rights, obligations and remedies to both buyers and sellers. All rural businesses should be aware of them, as this article explains.

When does the Sale of Goods Act 1979 apply?

The Sales of Goods Act 1979 applies to all business-to-business transactions for the sale and purchase of goods where the parties contract anywhere in the United Kingdom.

If an item is physical, moveable and capable of being owned, then it is likely to be considered a “good” for the purposes of the Act, including new or second-hand goods.

However, it does not govern contracts for services, the sale of heritable property, digital products, or cash.

For rural businesses, the vast majority of their business-to-business transactions are likely to be covered, including in relation to:

The sale or purchase of livestock
The supply of feed, fertiliser, seed or raw materials
The purchase of new or second-hand machinery, vehicles or equipment
The supply of fencing, timber or estate materials
Sales involving forestry or agricultural equipment

The key implied terms offering protection to buyers

Parties entering into a contract for the sale and purchase of goods will normally outline the key terms of the transaction, either in writing or verbally. These are known as the express terms of the contract.

Rural deals are frequently agreed quickly, sometimes on trust and without detailed paperwork. However, under the common law or subject to certain legislation, terms can often be held to apply to a contract, regardless of whether or not the parties agreed to those in their written or verbal contract. These are known as implied terms.

The Act automatically inserts various key terms into business to business contracts, whether those are written or verbal, including implied terms that:

The seller has title to the goods they are selling
The goods will be as described
The goods will be of satisfactory quality
If sold by sample, the bulk’s quality will correspond with the sample’s

The Act also outlines the rules on transfer of risk and delivery, which can be useful where parties have not expressly confirmed arrangements.

The Act’s terms in relation to description, quality and sale by sample can be restricted or excluded, but only if the clause seeking to limit or exclude liability is “fair and reasonable” under both the Act and the Unfair Contract Terms Act 1977.

Whether that test is met will depend on the circumstances, including the parties’ bargaining positions and how the deal was agreed.

This is an area where rural businesses often misunderstand their exposure, particularly where standard terms are copied across transactions without review.

Disputes often arise where machinery does not perform as expected, livestock develops health issues shortly after purchase, or second-hand goods are sold “as seen” without sufficient clarity as to condition or risk.

How is satisfactory quality determined?

When considering aspects of satisfactory quality, this includes that the goods will be (among other things) fit for purpose, free from defects, safe, durable, and of suitable appearance and finish.

The only time goods are not required to be satisfactory quality is if a defect or issue was specifically drawn to your attention before you bought them.

Unless it is patently obvious, a party seeking to establish that goods are not of satisfactory quality will normally instruct a report from an independent expert such as a mechanic, engineer or vet.

Remedies for dissatisfied buyers

Where a buyer considers that a seller is in breach of the Act’s implied terms, the Act provides various potential remedies, including:

To accept the goods, but claim a price reduction or damages (including in cases of late delivery)
If the breach is material, to rejects the goods and cancel the contract
To seek an order forcing the seller to fulfil their contractual obligations (known as specific performance or specific implement)

Recoverable damages are normally those directly and naturally resulting, in the ordinary course of events, from the breach. In the case of goods not of satisfactory quality, then the loss is the difference between the goods as delivered and what should have been delivered.

Context matters. A breakdown during harvest, lambing or silage season may be far more serious than at another time of year. Equally, rural buyers often have limited opportunity to inspect goods fully before purchase, particularly with machinery or livestock. Goods will not be regarded as unsatisfactory if defects were specifically drawn to the buyer’s attention before purchase, or if the buyer examined the goods and the defect should have been obvious.

In many cases, a satisfactory solution can be negotiated directly between the parties, or with the help of the parties’ solicitors, without recourse to the courts.

The key implied terms offering protection to sellers

The Act also provides important protections to sellers when a buyer may be in breach of contract, including the right to:

Sue the buyer for payment for the goods
Reclaim goods before they are delivered in the event the buyer becomes insolvent
Retain possession of goods until payment is made
Claim damages when the buyer refuses delivery or cancels the contract

Understanding these rights can be critical, especially where cashflow or insolvency concerns arise, and it is important that action is taken quickly in such instances to protect your businesses’ position insofar as possible.

How can we help?

Many rural disputes arise between long standing trading partners, neighbours or businesses operating in close knit communities. Early legal advice can often help resolve matters pragmatically, without escalating disputes or damaging valuable commercial relationships.

Acting quickly is essential. Delay, or steps taken without advice, can prejudice or even extinguish potential remedies.

With a view to prevention, a well-drafted contract can significantly reduce the risk of breach of contract disputes, including those under the Act.

We regularly advise farms, estates and rural businesses across Scotland on disputes arising from the sale and purchase of goods. We understand the realities of rural trading, including informal contracting, seasonal pressures and the overlap between commercial and personal relationships.

Our experience includes:

Advising on contract negotiations and documentation, including standard terms
Advising quickly when problems arise, to preserve legal and commercial options
Resolving disputes through negotiation, mediation or, where necessary, the courts

If you are concerned about a transaction, or would like advice on reducing risk before problems arise, early input can save significant time, cost and disruption.

For enquiries in relation to breach of contract claims, or other rural disputes, please contact our Rural Disputes team.

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