Passing of Property, Risk and Title Flashcards
What is the ‘passing of property’?
The passing of property is provided for in s 17: “… property in [the goods] is transferred to the buyer at such time as the parties to the contract intend it to be transferred.”
What happens where parties do not make their intentions clear?
Parties may have made their intentions as to the passing of property clear. Where they have not, in determining the intention of the parties regard to be had to the terms of the contract, conduct of the parties and circumstances of the case.
If having considered the contract, parties’ conduct and circumstances it remains unclear when the parties intended property in the goods to pass use section 18: this provides 5 rules for ascertaining the intention of the parties as to passing of property.
What are the 5 rules for determining intention under s18?
⁃ Rule 1.[ “Where there is an unconditional contract for the sale of specific goods in a deliverable state the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, be postponed.”]
⁃ Unconditional contract [ Means a contract with no conditions relating to the passing of property rather than a contract with no conditions at all. ]for the sale of specific goods in a deliverable state[ means that the good are in such a state that the buyer would, under the contract, be bound to take delivery of them. ], property passes to the buyer when the contract is made.
⁃ Rule 2.[ “Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until the thing is done and the buyer has notice that it has been done.”]
⁃ Passing of property is delayed until whatever needs to be done to put the goods into a deliverable state has been done and the buyer is aware of this.
⁃ Rule 3.[ “Where there is a contract for the sale of specific goods in a deliverable state but the seller is bound to weigh, measure, test, or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until the act or thing is done and the buyer has notice that it has been done.”]
⁃ When the seller has to do something to ascertain the price of the goods then the property does not pass until this has been done to the buyer’s knowledge.
⁃ Rule 4.[ “When goods are delivered to the buyer on approval or on sale or return or other similar terms the property in the goods passes to the buyer:–
(a)when he signifies his approval or acceptance to the seller or does any other act adopting the transaction;
(b)if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of that time, and, if no time has been fixed, on the expiration of a reasonable time.”]
⁃ Sale or return - property passes when the buyer signifies his approval, either expressly or implicitly.
⁃ Rule 5.[ “(1)Where there is a contract for the sale of unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods then passes to the buyer; and the assent may be express or implied, and may be given either before or after the appropriation is made.
(2)Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee or custodier (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is to be taken to have unconditionally appropriated the goods to the contract.”]
⁃ Unascertained goods by description pass when goods of that description are unconditionally appropriated to the contract with consent of both parties. The most common example of unconditional appropriation is delivery.
What is the rule in relation to the passing of unascertained goods?
In relation to unascertained goods, section 16 provides that property cannot pass until goods have been ascertained.
What is the exception to the passing of unascertained goods under s20A?
NB s 20A exception: where there is a contract for a specified quantity of unascertained goods, some of which form part of a bulk[ Defined in s 61 as a mass or collection of goods of the same kind which are contained in a defined space or area.] and the bulk has been identified and the buyer has paid for some or all of the goods which form part of that bulk, then unless the parties agree otherwise the propriety in the undivided share in the bulk is transferred to the buyer who becomes an owner in common of this bulk. Only applies when the buyer has paid for an amount or whole of the goods
What is the rule regarding retention of title under section 19?
Under section 19: the seller may reserve the right of disposal of the goods (ownership) until conditions are fulfilled, even if possession is passed to the buyer. The normal example is that title will not pass until payment has been made (retention of title clauses).
What is an “all sums” clause?
“All sums” clauses are more controversial - this means that title will not pass until all debts of the buyer to the seller are paid. These were held to be valid in the early 1990s in the case of Armour v Thyysen [1991]
Armour v Thyysen [1991]
Look up this case - woeful explanation in the lecture: the general principle is clear, that an all-sums clause is valid and does not amount to the creation of a security (despite in a sense giving the seller some security for the unpaid debts)
What happens when there is a buyer ‘B’ who hasn’t fulfilled the ‘all sums’ clause to the seller ‘A’ and sells to a good faith purchaser ‘C’?
The general rule is that B cannot transfer to C. However if it does occur, A cannot recover the goods from C? However, under English law the proceeds of the sale are to be held in trust by B for A [I’m not sure if this has to be expressly provided for in the contract or not…?]: (Aluminium Industrie v Romalpa [1976]) but under Scots law the proceeds of sale are not held in trust by B for A (Clark Taylor v Quality Site Development 1981).
What is the general rule under section 20 with regards to the passing of risk?
Section 20(1) provides that unless the parties otherwise agree, the goods remain at the seller's risk until the property (ownership) in them passes to the buyer (regardless of whether delivery has been made). ⁃ NB s 20 is subject to any agreement made between the parties - so s 20 only applies in the absence of agreement. - So risk does not depend upon the actual possession of the goods.
What are the exceptions to the general rule under section 20(1)?
s 20(2): where delivery has been delayed through the fault of either buyer or seller then the goods are at the risk of the party at fault in relation to any loss that might not have happened but for the delay.
s 20(4)[ Added by 2002 Regulations], in consumer contracts [Where one party deals in the course of a business and the other party does not so deal UCTA 1977 s 25(1) ], the goods remain at the seller’s risk until they are delivered to the consumer.[ Consumers are natural persons acting for purposes outside their trade, business or profession. The goods supplied must also be those “ordinarily supplied for private use or consumption” s25(1). ] This is a blanket rule consumer protection rule.
Denby Hamilton v Barden [1949]
(Passing of risk case) plaintiffs had prepared 30 tonnes of apple juice that the defendants had ordered. The defendants planned to sell it on to third party purchasers. The defendant took delivery of part of the apple juice and paid for that part. But the defendant’s failed to give the plaintiff’s delivery instructions for the remainder and they left it so long that the apple juice deteriorated and had to be destroyed. The plaintiffs argued that they should be paid. It was held that the property in the apple juice had not passed to the defendant[ So under the general rule the risk would be with the plaintiffs since they still had ownership.]. However the reason why the loss had occurred was because of the failure on the part of the defendants. So nothing in s20 affects the duties of either party as a customer of the goods of the other party. So the party in possession will remain liable for loss deriving from his negligence. This triggered s 20(2) which meant that liability fell on the defendant.
What is the ‘property/commercial contract dilemma’?
There is a problem in the law known as the ‘property/commercial contract dilemma’ created by sales by a non-owner.
⁃ The dilemma is that a person should not be able to pass a better title than they have, but also that good faith purchasers ought to be protected too.
“In the development of our law, two principles have striven for mastery. The first is for the protection of property: no one can give a better title than he himself possesses. The second is for the protection of commercial transactions: the person who takes in good faith and for value without notice should get a good title.”
(Lord Denning, Bishopsgate Motor Finance Corporation Ltd v Transport Brakes Ltd [1949] 1 KB 322, at 336-337.)
How has the ‘property/commercial contract dilemma’ purported to be resolved?
As a result there are a number of sections in SOGA to try to deal with such instances: s 21, 23, 24, 25.
1) Nemo dat quod non habet (s21)
2) Sale under voidable title (s23)
3) Sale by seller in possession after sale (s24)
4) Sale by buyer in possession after sale (s25)
5) Sale by an agent (s 2(1) of the Factors Act 1889)
What is the nemo dat quod non habet rule?
s 21(1): provides for the nemo dat rule in relation to sale of goods. However s 21 also includes a statutory form of personal bar which provides that the buyer can acquire good title if the "owner of the goods is by his conduct precluded from denying the seller's authority to sell."[ So if an owner knows that a person is trying to sell without authority but does nothing to stop this, then he would be bared from saying that a purchaser cannot acquire good title.]
