Whether you’re a restaurant owner, software developer, manufacturer, freelancer, or digital nomad, to run your business successfully, you’ll need to rely on the supply of services from other organisations regularly.
Consumers are protected by the Consumer Rights Act 2015; however, this legislation doesn’t apply to B2B contracts. Instead, as a business owner, you need to understand and rely on the provisions of the lesser-known Supply of Goods and Services Act (SGSA)1982.
We’ve set out the basic principles below to help you get to grips with this important legislation. If you have any questions about these regulations, please don’t hesitate to call us, and one of our friendly team will be happy to help you.
What is the Supply of Goods and Services Act 1982?
The SGSA 1982 made it a statutory duty for those who provide services to undertake their work with ‘reasonable care and skill’. In addition, if no completion date or price for the work was supplied, the work must be completed within a reasonable time and for a reasonable charge.
The Consumer Rights Act 2015 replaced most of the SGSA 1982. However, parts of the Act still apply to B2B contracts and consumer contracts entered into before the Consumer Rights Act 2015 came into force (1 October 2015).
Supply of Goods and Services Act 1982 summary
Part I of the SGSA 1982 covers the supply of goods, namely, contracts for transferring property in goods and agreements for hiring goods. Part II applies to the supply of goods in Scotland. The supply of services is covered by Part II, and Part III deals mainly with the interpretation of particular terms mentioned in the Act.
What are the terms implied by the Supply of Goods and Services Act 1982 in business-to-business contracts?
Section 2 of the Supply of Goods and Services Act 1982 implies three terms for all B2B contracts for services, and section 12 provides that these apply regardless of whether goods are sold to the customer as part of that service.
The implied terms are:
- The supplier will carry out the services with reasonable care and skill (section 13)
- If no time frame is provided in the service contract, the supplier of the services will carry out their work within a ‘reasonable time’. What constitutes a reasonable time is a question of fact depending on the circumstances surrounding the services provision and industry standards (section 14)
- If the price of the services provided is not set out in the contract, the customer must pay the supplier a ‘reasonable charge’. Again, what is reasonable will depend on the facts of the agreement (section 15)
Can the implied terms be varied or excluded?
In complex B2B contracts for services, the parties will seek to exclude the SGSA 1982 provisions; therefore, they tend to apply mostly to verbal agreements or agreements that are thin in detail. Section 16 covers the exclusion of implied terms and states that to negate an implied term, an express term must be inconsistent with it.
The High Court has ruled that an entire agreement clause with the wording "any terms undertakings promises or agreements not set out in this Agreement are released by both parties and shall have no effect" did not negate or vary and was not inconsistent with, the implied term that the supplier will carry out the provision of services with due care and skill.
Therefore, it’s essential to instruct your Commercial Law Solicitor to expressly exclude the implied terms under the SGSA 1982 to mitigate the risk of any grounds for dispute.
Do the implied terms provided by the SGSA 1982 amount to a warranty or condition?
The implied terms are neither warranties nor conditions; instead, they fall under intermediate (or innominate) terms.
Why is this important? Because if the supplier breaches one of the implied terms, the remedies available, for example, terminating the contract, will depend on the circumstances of the breach and the effect it had at the time it was made.
If breaching an implied term under the SGSA 1982 produces such severe consequences that the value of the entire contract is null, the Court may allow the innocent party to terminate the agreement and seek damages.
However, if the breach is deemed minor, termination of the contract is unlikely to be an option, and damages will be the only available remedy. To establish whether a breach is major or minor, the Court will consider factors such as the time and cost of fixing the situation, the amount of damage caused to the innocent party, and if the party at fault has breached the contract in the past.
Get legal assistance from LawBite
The SGSA 1982 must be clarified, especially concerning whether its implied terms apply to your agreement. If you have any concerns, please don’t hesitate to contact us, and we can clarify matters quickly and effectively.
LawBite has helped thousands of businesses achieve their commercial ambitions. To find out how we can help you on all matters concerning B2B contracts, please book a free 15 minute consultation with one of our expert lawyers or call us on 020 3808 8314.