#5253 - Passing Of Property And Risk - Commercial Law

1. What does the Sale of Goods act apply to? s.2(1), SOA 2003

   • Transfer of property

   • In goods

     • Does software count? Green & Saidou (2007) Yes because you can delete it off your computer and licensing restrictions doesn’t mean you don’t own it.

   • For a price in money

CLASSIFYING GOODS

1. Specific v Unascertained goods, per s.61(1) SGA 1979

   • Specific goods

     • Goods identified and agreed on at the time of sale

     • Kursell v Timber Operators & Contractors (1927) sold all trees which conformed to certain measures on a particular date. They were identifiable, but not identified, so not specific. (Merrett doubts this)

     • This INCLUDES an undivided share specified as a fraction or percentage of goods identified

       1. 50% of th3 100 bottles of wine specific goods

       2. 50 of 100 bottles of wine unascertained goods

   • Unascertained goods

     • Goods not identified

     • Includes

       1. Generic goods sold by description

       2. Goods not yet in existence

       3. Goods which are in existence but are not identified

PASSING OF PROPERTY

1. Why is this important?

   • Risk passes with property

   • Seller can’t sue for the price until property has passed (if before, the seller’s remedy is a damage for non-acceptance)

2. Specific Goods

   • They are transferred when the parties intend it to be transferred s.17, SGA 1969

   • If there is no expressed intention it is transferred when the parties intend it to be transferred s.18, SGA 1969

     • Although in practice very little is needed to give rise to the inference that property in specific goods is to pass only on delivery or payment Ward v Bignall (1967) per Diplock LJ

   • The unconditional sale of specific goods

     • S.18, Rule 1 – an unconditional contract for the sale of specific goods, in a deliverable state

       1. Effect – property passes when the contract is made

          1. And it is immaterial whether the time of payment or delivery or both be postponed, although that may indicate a contrary intention

       2. Requirements

          1. An unconditional contract (most important condition is as to payment

          2. Specific good

          3. Deliverable state

             1. S.61(5) SGA 1969 if they are in such a state that the buyer would under the contract be bound to take delivery – but does not say goods are NOT deliverable if buyer not bound to take delivery

             2. Underwood v Burgh (1922) 30 ton engine cemented to floor. Not deliverable.

             3. Philip Head v Showfronts (1970) S sold carpet to B which they were required to lay. Carpet was stolen after sale but before sellers laid it. Held not deliverable.

             4. Goode – fruit ready for picking is in a deliverable state

   • Certain conditional sales of specific goods

     • S.18, Rule 2 – the seller is bound to do something to put them in a deliverable state

       1. Effect – property does not pass until the thing is done and the buyer has notice that it is done

       2. Does not apply when the seller has agreed to repair Anderson v Ryan (1967)

     • S.18. Rule 3 – the seller has to weigh/test to ascertain price

       1. Effect – property does not pass until the thing is done and the buyer has notice that it is done

       2. Only applies to acts done by the seller Nanka Bruce v Commonwealth Trusts (1926) buyer had to weigh it

     • S.18. Rule 4 – goods delivered to buyer on approval or sale or return

     • There is no general provision for the conditional sale of goods, if they fall outside these rules you fall back on s.17 and the presumed intention of the parties

3. Unascertained goods

   • Fundamental rule is that property cannot pass in unascertained goods s.16 SGA 1979

   • S.18, Rule 5 – unconditional appropriations

     • Deliverable

     • Unconditionally appropriated

       1. What is conditional? Usually that the seller only means to let the buyer have goods on payment Re Shipton Anderson (1915)

       2. Examples

          1. Delivery of goods to the buyer

          2. Appropriation by exhaustion, s.18(3)

       3. Outside the examples

          1. Earmarked

             1. Healey v Howlett (1917) Dispatched boxes with instructions to earmark 20 of them. They were not earmarked when the goods rotted, so property had not passed.

          2. Irrevocably – can S sell his mind and sell the goods to someone else

             1. If yes, no property will pass Carlos Federspiel (1957) bicycles were packed in containers with them. This was revocable

             2. If not, property will pass.

                1. Hendy Lennox (1984) Delivery notes with serial numbers. Irrevocable

                2. Aldridge v Johnson (1857) S but barley in sacks. Property passed. Difference with Carlos Federspiel (1957) is that the sacks belonged to B.

     • Assent

       1. May be express or implied Pignatoro v Gilroy (1919) S notified B that bags were available to collection and sent two reminds. They did not collect. Yes, property had passed

     • Effect

       1. Property passes to B ,but the goods become appropriated, but do not become specific goods

       2. Subject to the intention of the parties

   • S.20A – an unidentified part of an identified bulk

     • Specified quantity of goods

       1. Not a fraction or percentage, but a number, because fraction and percentage are specific

     • Goods are part of an identified bulk

     • The buyer had paid the price for some or all of the goods

     • Effect

       1. Property in an undivided share is transferred to B

          1. This is the share for the amount he has PAID FOR

       2. B becomes the owner in common of the bulk

          1. Still don’t get the exact bottles, but you are protected in insolvency

          2. There is s.20B which states that S can deal with all the other goods except what B is due under the contract (NOT what he paid)

       3. If the amount reduces

          1. Then the interest of the seller is reduced first, and then all the other buyers reduce proportionately s.20A(4)

       4. What about overselling?

          1. S has 400 bottles, and sells 200 each to A, B and C

          2. All three get a share

             1. They share equally in the 400 tonnes and the shares of each would abate rateably to one third of the 400 tonnes

             2. Because s.20A protects prepaying buyers so it suspends all the other rules on title conflict

          3. Only the first two get shares

             1. Ownership of the bulk passed from S to the original two buyers. S would therefore have nothing left to sell, and B3 could not acquire any better title than the seller had (nemo dat non quod habet)

       5. Does risk pass?

          1. If risk has passed to the buyer, the buyer and seller share the loss in proportion

          2. If risk has not passed to the buyer, the seller bears the loss

• Yes, risk passes to the buyer

  • Risk passes when property passes, s.20

    • You have ownership in common, so property passes

  • Sterns v Vickers (1923)

    • Scrutton LJ. But this was about whether risk could pass BEFORE property, and predated the act. The ratio is that it can where there is an immediate right to possession

  • S.20A was made to benefit the buyer and the buyer should not benefit without the corresponding burden of risk

• No, risk does not pass to the buyer

  • McKay (2010)

    • argues that the LC did not intend property to pass with co-ownership and viewed it as an interim stage, LC Report 215 (1993) and therefore property has not passed and therefore risk has not passed and remains with S

  • s.20A(4) insulates the buyer from risk

    • This prima facie appears to provide for the allocation of risk if there is a reduction in the bulk, because it is presumed against the seller

  • S.20B(3)c nothing affects the rights of the buyer

    • Has been argued that this is about risk not passing

    • BUT Merrett says this is about making sure that you have all your contract rights. And the passing of risk is not a contractual risk

• Why didn’t the LC address this?

  • McKay (2010) said that they gave out thousands of questionnaires and only got 100 responses

  • They acknowledged in LC Report 112 (1989) that co-owners should bear the loss in proportion to shares, but says this would be difficult when one more owners has already taken out the shares

  • Not a problem any way, only one case Everwine v Customs and Excise (2003) the parties make provision

PASSING OF RISK

• Risk and frustration

  • Frustration cannot operate when risk has passed to the buyer

  • Only frustration can exclude

    • Seller’s liability for non-delivery

    • Buyer’s liability for non-acceptance

• Consequences if goods destroyed

  • Risk with seller

    • S cannot claim price form buyer / B can reclaim any price already paid

    • S may be liable for non-delivery (a question of frustration)

  • Risk with buyer

    • B must pay the price despite the fact that he may not have possession (specific goods)

    • S can sue for the price or for damages for non-acceptance

1. Transfer of risk in consumer cases

   • This is where the buyer deals as consumer

     • Risk passes only on delivery, s.20(4) SGA 1979

2. Transfer of risk in non-consumer cases

   • Risk passes with property, s.20(1) SGA 1979

     • Unascertained goods – risk is usually with the seller until it is appropriated by delivery

     • Specific goods – property is generally assed at the moment the contract is entered into and the risk will pass at that time

   • Unless there is a contrary intention

     • Risk passing before property

       1. Sterns v Vickers (1923) contract for the sale of unascrtaine goods. Property had not passed, but risk had nevertheless passed

       2. Comptoir d’Achat (1949) Said that this was because B had an immediate interest in the goods from accepting the delivery warrant, and it was his decision as to when to collect it. Lord Norman

       3. Different from s.20A because you don’t need to have paid.

     • Risk passing fter property

       1. Head v Tattersall (1879) risk o the horse injury remained with S

3. Statutory frustration, per s.7 SGA 1979

   • Requirements

     • An agreement to sell specific goods

     • Risk has not passed

       1. Usually with specific goods the risk passes with contract, so this in cases of conditional sales, or where parties provide that it doesn’t pass!

     • Goods have perished

       1. Perishing in a commercial sense?

          1. Yes, but...