Goods & Services What’s the difference? The Definitive Answer?

by Paul Brown of AgentBase
I asked a very simple question of a variety of specialist
agency law solicitors. But no-one can answer it
comprehensively. Here is a compilation of their answers:

Ben Griffin – Solicitor

www.cobbetts.com
I set out below some examples of the grey area between
goods and services. There are not many recent reported
cases that touch on this particular point, but a brief review
of some of the cases of note are below.
In a Scottish case concerning contracts for the building of
conservatories, the court held that the Regulations did not
apply as the contracts were not separable into contracts for
goods (i.e. the complete conservatory) and contracts for
services (labour). In this case, the Court held: “It seems to
me that the UK regulations are clear in their term in that
they provide rights to agents who regularly enter into
contracts of sale or purchase on behalf of their principles.
That is what the directive sought to achieve. I think the
solicitor for the defenders was right when he said there
were two categories of agents for the purposes of the
regulations, namely those who enter into contracts for the
sale and purchase of goods and every other agent who
enters into any other kind of contract. It is as much the
purpose of the regulations to limit the rights extended to
commercial agents to those involved in the sale and
purchase of goods and to exclude all others, as it is to afford
the protection itself.” As this is a Scottish case, the English
Courts would not be obliged to follow it and we have some
doubts as to whether an English Court would agree with this
analysis.
In the case of Pace Airline Services v Aerotrans
Luftfahrtagentur GmBH (which is unreported) it was
suggested that cargo space on an aircraft could be goods.
In Crane v Sky In-home Services and others [2007] EWHC
66 (ChD), Sky television digital packages were agreed by the
parties to be services and not goods. In this case the agent
sold set-top boxes and subscriptions.
The Court held that as the subscriptions were the element
of the package that led to repeat business for the principal,
rather than the set top box, the activities in selling the set
top boxes were secondary to the activities of selling the
service (namely the subscription), and therefore, the
Regulations did not apply.
Gas has been held by the Court to be “goods” within the
meaning of the Regulations (Tamarind International Ltd v
Eastern Natural Gas (Retail) Ltd [2000]).
The grey area is made murkier by the fact that an agent who
sells services as well as goods may fall outside of the
Regulations not because he is deemed not to sell goods, but
because his activities are “secondary”.
There are a number of cases on secondary activities and it
can be a tricky area. However, analysis of the detailed facts
about the operation of the agency and the potential
secondary activities argument is always required if an agent
sells both goods and services.

Paul Samuel – Solicitor

www.ashbycohen.co.uk
The essential distinction between goods and services is
that goods are tangible – things which you can touch and
services are intangible – you cannot physically touch them.
A supply of services is the provision of human effort for the
benefit of the buyer – in other words the provision of labour
as when a hairdresser cuts a customer’s hair. The sale of
goods involves a contract to pass ownership of a thing from
the seller to the buyer for a sum of money. In the middle, is
a contract for the sale of goods and for the seller to carry
out work for the buyer in relation to those goods.
An example which is often given is the sale of windows
(goods) which then have to be fitted (services). I did send
you a suggested article touching on this area at the
beginning of the year, but am not sure it was published.
An agent selling storage space would be selling services not
goods and would not be protected under the 1993
Regulations. Similarly an agent selling advertising space for
a magazine would be selling services – no ownership of
anything passes.

David Bentley – Solicitor

www.bentleyandco-solicitors.com

The question which you ask is not a straightforward one to
answer. The Regulations only apply to “goods” (as defined
by Section 61 of the Sale of Goods Act 1979), but there are
often circumstances which throw up situations where
either:-
What an agent sells isn’t obviously not “goods” (e.g.:- in the
Tamarind case (in 2000), gas was deemed to be “goods”,
and possibly also electricity and in the Crane and Sky case,
the sale of digital packages was deemed a service (and in
which case therefore the Regulations did not apply));
and/or:-
An agent effectively sells both goods and services on behalf
of the same principal (in which case (a) there may need to
be a decision taken by a Court as to which the agent was
more predominantly selling, and/or (b) an assessment
made as to whether, if the agent was selling services more
predominantly over goods, that fact then renders the sale
of goods aspect as a “secondary activity”, and so as to
potentially then take the agent outside the scope and
application of the Regulations, altogether); and/or:-
An agent may have sold goods in the first instance on
behalf of a principal, but then, having sold those items for
that principal, applies a service element to what he has sold,
in which case a Court may then decide that only the initial
work carried out by the agent (i.e.:- in selling the goods) will
be counted in assessing his potential status as a commercial
agent.

Following on from the above, I think that it is the case that
each situation needs to be judged on its own facts, and that
it remains uncertain just how any individual Court might
approach the issue.
Please further note that, in the second scenario described
above, it may be that a Court would finish up assessing what
was the % split of commission as between the sale of goods
and the sale of services, and then assess any amount
payable pursuant to an indemnity or compensation
entitlement, based just on what the agent received in
respect to the sale of the goods.

Thom Vaughan – Solicitor

www.eadsolicitors.co.uk

This continues to be a vexed question (!) and reference to
“the grey area” is very appropriate.
In their guidance notes on the Regulations BIS/the DTI say:
‘?”Goods” clearly has to be interpreted in accordance with
the EC Treaty and, of that reason, the Regulations do not
define the word. However, it is considered that the
definition of “goods” in s 61(1) of the Sale of Goods Act
1979 as including, inter alia, all personal chattels other than
things in action (eg shares) and money, may offer a
reasonable guide, without necessarily being absolutely coextensive
with the Directive meaning.’ The definition in s
61(1) is: ‘?”Goods” includes all personal chattels other than
things in action and money, and in Scotland all corporeal
moveables except money; and in particular “goods”
includes emblements, industrial growing crops, and things
attached to or forming part of the land which are agreed to
be severed before sale or under the contract of sale.’
Where a contract includes both goods and services, i.e sale
and fitting of double glazing then the court may take a
pragmatic approach and look at whether there is a
reasonably substantial element of ‘goods’ in a particular
transaction and decide accordingly. In Pace Airline Services
Ltd v Aerotrans Luftfahrtagentur GmbH (Case C-64/99
[1999] OJ C121/123 concerning the sale of cargo space the
court surprisingly indicated this might be ‘goods’ which
seems extremely unlikely. The case was to be referred to
the European Court of Justice but was settled before it
reached that stage. How can cargo space be “goods”??
Financial services are NOT covered by the Regs: In Abbey
Life v Yeap [2001] EWCA Civ 706, CA the European Court of
Justice the court was asked to look at whether policies for
life assurance, annuities, health and pension business, unit
trusts, offshore funds business, personal equity plans and
other contracts offered by Abbey Life were goods for these
purposes. The court held that financial services were
outside the agency directive and although goods and
services had been in early drafts of the directive services
had been removed.

So, there it is. Simple!

Maybe one day this issue will be settled in a court
once and for all. But I doubt that as there will
always be motive to argue the toss as long as the
EC regulations differentiate between goods and
services. As long as this is the case, both sides to a
dispute with a possible grey area will have a large
incentive to argue their case.
So maybe the question we should be asking
instead is:
Why are agents who are selling
services not protected under the
Commercial Agents Regulations?
Any answers to that one are gratefully received.

Disclaimer: This column does not contain legal advice and is for general guidance only.
Agentbase, Cobbetts LLP, Ashby Cohen Solicitors, Bentley & Co. and EAD Solicitors accept
no liability in connection with the general guidance given in this column.

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