Passing Property and Risk Updated

Question 1

Order in a PQ?

Answer 1

1. Is the contract for specific goods? 61(1), s.17, s.18 R1-4
2. Are good unascertained?
3. Have goods become ascertained so they can fall under s.16?
   - Re Waite, Kursell v Timer, Re London Wine, Staylpton Fletcher, Re GCE
4. If not ascertained property remains with seller
5. If ascertained, apply s.17 and s.18 R5 to determine when prop passed
   - 61(1) deliverable state, Carlos Federspiel v Charles Twigg, Healy v Howit, Phillip Head
6. If still unascertained, can s.20A be met? (ex bulk)
   - s.61(1) bulk
7. Has seller reserved title? s.9
8. Has risk been assigned in a specific way?
   s. 20(1)- The Aliakmon, s.20(2)- Stern v Vickers
9. Have specific goods perished so contract frustrated? s.7, Barlow Lane
10. For non- specific can CL frustration be applied? Howell v Coupland

Question 2

Is the contract for a specific good cases and provisions?

Answer 2

s.61(1), s.17, s.18 R1-4

Question 3

s.61(1)

Answer 3

“specific goods” means goods identified and agreed on at the time a contract of sale is made and includes an undivided share, specified as a fraction or percentage, of goods identified and agreed on as aforesaid.

e.g. A agrees to buy B’s Silver Audi A4 with registration AX79 SGA, as opposed to a silver Audi A4.

Question 4

s.17

Answer 4

Where contract for a specific or ascertained goods property passes when intended to be transferred by parties. Look to conduct and circumstances.

Question 5

s.18 R1-4

Answer 5

Rules for determining when intention was for prop to pass. Use if apply to any of these situations.

1- unconditional for sale of goods in deliverable state= when contract made.

2-Seller bound to do something to put into deliverable it is when done and buyer has been notified.

3- Where must weigh, measure etc to determine price, prop passes when done.

4- Goods delivered on sale, return etc. Just read.

Question 6

Are goods unascertained cases and provs?

Answer 6

s.16; s.17; Re Waite; Kursell v Timer; Re London Wine; Staylpton Fletcher; Re GCE

Question 7

What is an unascertained good?

Answer 7

Not defined in Act. By inference must mean goods which are not specific, so which are not identified and agreed on at the time the contract was made.

Usually sold by description.. The goods provided must match this description.

No property right in the goods. Only personal rights (s.16)

Made up of:

1. Wholly unascertained
2. Quasi-specific
3. Future goods

Question 8

Wholly unascertained?

Answer 8

McKendrick- If I agree to buy 100 kilos of potatoes then the seller is free to supply them from any existing or future source. The buyer has no right to insist on any particular source.

Question 9

Quasi-specific (ex bulk)

Answer 9

A source is identified but the goods themselves are not yet specifically appropriated to the contract. Very common commercially.

McKendrick- the buyer agrees to purchase 100 kilos of potatoes forming part of a consignment of 500 kilos then onboard a named vessel or in a designated warehouse.

Question 10

s.61(1)- future goods

Answer 10

“future goods” means goods to be manufactured or acquired by the seller after the making of the contract of sale.

Not in existence at the time the contract is made so cannot be ascertained.

Question 11

Ascertained good?

Answer 11

When goods which were unascertained at the time the contract was made are later identified they become ascertained and the seller is bound to deliver those ascertained goods only.

Buyer gets property rights once ascertained.

Question 12

s.16

Answer 12

Subject to section 20A below, where there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained.

Question 13

Re Wait (1927) CoA

Answer 13

Not ascertained.
Case: W owned 1,000 tonnes of wheat and contracted to sell 500 to H, who paid in advance. W went bankrupt before anything had been done to identify the 500 tonnes, therefore it formed part of W’s estate and H could only prove in bankruptcy for the money he had lost.

1. The goods were never ascertained to the contract.
2. Where the SOGA is relevant, a buyer cannot assert a claim that they obtained a proprietary right in unascertained goods by virtue of a trust or other equitable device.
3. ‘It would have been futile to have created an elaborate structure of rules dealing with rights at law if at the same time it was intended to leave, subsisting with the legal rights, equitable rights inconsistent with and more extensive and coming into existence earlier than the rights carefully set out in the Code.
4. A seller or purchaser may create an equity by charge , trust etc expressly, but no CT.

Question 14

Kursell v Timber Operators (1927) CoA

Answer 14

Not ascertained
Case: Contract for sale of all merchantile timber growing after a certain date for the following 15 years in a forest in Latvia. The contract defined ‘mercantile timber’ as ‘all trunks and branches of all trees but not seedlings and young trees of less than 6 inches in diameter and 4 feet in height’. Shortly after Latvian government nationalised the forest.

1. The goods were unascertained so under [s.16] the proprietary interest in the timber had not passed, so the contract was frustrated (allows the buyers a way out).
2. They had not become ascertained This was because the trees answering to the contract measurement could not be identified until time came to cut them, which could be any time in the next 15 years.

Question 15

London Wine Co (1986)

Answer 15

Ascertainment of goods.
Case: Wine sold to customers who received certificates of title describing them as the ‘sole and beneficial owner’ of the wines.
Company keeps possession of the wines for them and charges them for storage and insurance until such time that they wish to collect it.
Company has no procedure for identifying, segregating and allocating wine sold to particular contracts. It all remained part of the whole bulk (common in commercial world). 3 different types of customer:
1. Those who bough up the co’s entire stock of a type of wine;
2. Those who finished off the co’s stock of a particular wine; and
3. Those who purchased wine but did not exhaust the co’s stock of that type of wine.

Co had charged all of its assets to the banks and a receiver was appointed.

Decision: Oliver: No property interest had passed in any of these cases because there was never any ascertainment of any wine to any specific contract. Contractual rights were the only rights which had been created. Therefore unsecured creditors and had to proof in the liquidation.

Question 16

Re Staylpton Fletcher (1994)

Answer 16

Ascertainment of goods. Contrast with London Wine to show to impact division has on ascertainment.

Case: Both companies in this case held stocks of wine as bailees for customers in return for rentals.
3 situations:

1. Wine indexed then later mixed- unascertained
   Wines had all been kept together. Individual bottles were not market but a virtually 100% accurate index had been kept which contained the names of customers and wine the number of cases allotted to each. After acquisition of the co’s shares by B the wines were moved, broken up and many index cards were lost.
   These wines were unascertained and so no proprietary right had passed in them under 16. Had to prove in winding up.
2. Bottles of identical wine kept separately from co’s trading stock. Ascertained for s16. All stacks had been individually allocated. Proprietary interest so could not form part of co’s estate.
3. Wines which had been ordered for specific customers from a specific vineyard in France- unascertained. At the date of appointment of receivers the wines had not been dispatched from vineyards and in some cases had not even been bottled. Remained part of the vineyard’s generic stock, so no proprietary interest. Had to proof in winding up.

Question 17

Re Goldcorp Exchange (1995) Facts

Answer 17

Ascertainment of goods.
Case: GCE sold unascertained bullion to customers for delivery upon them giving 7 days notice. Otherwise it was stored by the company and customers were given a ‘non-allocated’ invoice verifying ownership. Employees of the company had told customers that the co would maintain a separate and sufficient stock of each type of bullion to meet all demands, but it failed to do so. All of the bullion was stored together.

Bank had floating charge over all assets of the co which crystallised. It transpired that the co did not even have enough assets to cover the floating charge, so the customers would not receive anything in the winding up.

3 classes of respondent tried to assert a proprietary right in the bullion so that the purchases would not form part of the co’s estate.

Question 18

Re Goldcorp Exchange (1995) First Respondents

Answer 18

1. Respondent’s with non-allocated bullion for future delivery- No proprietary interest in bullion. Tried a number of arguments:
   (a) Property in the bullion was passed immediately on making the purchases by virtue of the contract- NO. Contracts for the sale of unascertained generic goods. A buyer cannot acquire title until it is known to what goods the title relates. The goods were not even quasi-specific.
   (b) Property in the bullion was passed when the co purchased the bullion and put it into its own stock- NO.

Question 19

Re Goldcorp Exchange (1995) Second Respondent

Answer 19

2. One Respondent who had purchased specific gold maple coins from the co and had agreed to buy 1,000 more on a non-allocated basis which would be stored with the co.

The co had acquired a substantial number of maple coins, but not expressly for the second respondent.

Differs in 3 ways from respondent 1:

1) It is larger- he had agreed to purchase 1,000 gold maple coins at £732,000. While this explains his special indignation at the co’s conduct, it makes no difference to the outcome.
2) Circumstances of the purchase- He initially made a purchase of 52 coins, which he was shown, but purchased on the same terms as the other purchasers. Then purchased a further 1,000 and did not call for delivery, relying on the collateral promises.

Though his being showed 52 coins (which the court found was an ascertainment sufficient to pass property) may have given him the impression that the legal effect would be the same because they were closely linked, the distinction makes no difference. it remains an agreement for the purchase of generic goods.

3) Co bought extra coins- his 1,000 purchase was so large by comparison with the co’s ordinary retail bullion that the co felt it should reduce its shortages by buying in substantial extra coins. The coins were not earmarked for 2 and only later wrongly mixed on this evidence. Not bought specifically for him.

Question 20

Re Goldcorp Exchange (1995) Third Respondents

Answer 20

3. Category of Cs who bought bullion from W, whose business was subsequently taken over by GCE.

Thorp at FI found that while the bullion was held by F it was sufficiently ascertained for the customers to have the proprietary interest in the property, held by GCE.

• the bullion had been stored and recorded separately.
• After the property interest had passed in this way it was stored together with the other ascertained bullion bet kept separate from the vendor’s own stock.
• The amount of bullion in this pooled mass was precisely equal to the relevant categories of bullion in its open contracts.
• The documents they had with W said the title and risk in the bullion was with the customers.

When shares in W were purchased by GCE it mixed the two stocks and therefore wrongfully dealt properly that was not its own.

Relief: There was not enough bullion in the co’s stock to cover all the claims so C’s asked court to impose an equitable lien on all of the co’s property at the date of receivership to recover the value of their bullion unlawfully misappropriated.
Not accepted on authority. Keep original remedy

Question 21

s.17

Answer 21

Intention. Use after 16 for unascertained and after saying it is ascertained so can determine when property passed.

Question 22

What happens if goods are not ascertained?

Answer 22

Property remains with the seller.

Question 23

s.18 R5

Answer 23

Where contract for unascertained or future goods and goods of that description and in a deliverable state are unconditional appropriated the contract, then on assent property passes to buyer.

Question 24

Carlos Federpsiel v Charles Twigg (1957)

Answer 24

Concerned with unconditional appropriation: Rule 5.

Rule: For goods to be unconditionally appropriated to the contract, they must be irrevocably earmarked as THE goods to be used to satisfy the contracts. Once those goods have been irrevocably appropriated to the contract then those goods, and no others, become the property of the buyer.

Case: Buyer agrees to buy bicycles not yet manufactured from the seller and pays. The agreement is that the goods should be loaded and shipped by the seller in Liverpool to the buyer. S went into receivership before the goods were shipped.

Decision: The goods had not been unconditionally appropriated to the contract at the time of receivership, because shipping was the decisive thing that would have appropriated them.

Question 25

Healy v Howwet (1917)

Answer 25

s.18 R5(1)- Deliverable State.
If goods have deteriorated (fish) before they are appropriated to the contract, then they are not in a deliverable state (under 61(1))

Question 26

Phillip Head and Sons [1970]

Answer 26

Case: S agrees to supply carpets for premises refurbished by P. Carpet for a specific room was delivered and assembled by the seller and left on premises with work to be completed when it was stolen.

Decision: Under 61(1) deliverable state when buyer would be obligated to take them. If ‘things remain to be done’ this is not met. Test of common sense.

Here purchase was made on basis it would be delivered and laid in the house. It was in bales in the buyer’s garage which he could hardly move when it was stolen. Not deliverable state.

Question 27

deliverable state- s.61(1)

Answer 27

Goods are in a deliverable state within the meaning of this Act when they are in such a state that the buyer would under the contract be bound to take delivery of them.

Question 28

s.20A?

Answer 28

If goods remains unascertained but ex bulk:

(1) If bulk has been identified in contract or by subsequent agreement and buyer has paid some or all, he becomes co owner of the bulk (2)
- Way to stop from being unsecured creditors.

(3) His share is as the quantity of goods paid for

(4) Where the aggregate of the undivided shares of buyers in a bulk would exceed the whole of the bulk, the undivided share in the bulk of each buyer shall be reduced proportionately so it is equal.
i. e. to calculate divide the quantity of the goods paid for by buyer by the quantity in the bulk.

NB: If this had been applied in Waite the sub-purchaser would have became 50% co-owner and trustee in bankruptcy would have other 50%.

Question 29

s.61(1) bulk

Answer 29

bulk ” means a mass or collection of goods of the same kind which—

(a) is contained in a defined space or area; and
(b) is such that any goods in the bulk are interchangeable with any other goods therein of the same number or quantity.

Question 30

s.19

Answer 30

Has seller reserved title?

Question 31

Assigning risk cases and provs?

Answer 31

s. 20(1)- Aliakmon;

s. 20(2)- Stern v Vickers

Question 32

20(1)

Answer 32

unless otherwise agreed risk is borne by the owner of the goods until the property is transferred to B

Question 33

The Aliakmon

Answer 33

Buyers contracted to buy steel coils from sellers. Damaged by carrier’s negligence when being loaded. At the time they were at the buyer’s risk under the contract (s.20(1)) but because they had not been ascertained at the time property had not passed to the buyers.

This meant the buyer’s only claim could be one for economic loss, since they only had contractual rights in relation to the property.

Question 34

20(2)

Answer 34

If delivery is delayed the goods are at the risk of the party at fault for loss occurring as a result.

Question 35

Stern v Vickers

Answer 35

Risk- Case: S owned 200,000 galloons of spirit stored in a warehouse by a co. Sold 120,000 gallons to B and handed B a delivery warrant entitling him to delivery of the spirit.

Before B had utilised the warrant and before the 120,00 gallons had been segregated from the bulk the spirit in the warehouse the spirit deteriorated in quality.

Held: Upon the acceptance of the delivery warrant the risk (in the undivided share) passed to the buyers, and the loss must be borne by them.

N.B. Distinguished from Re Wait

Question 36

Is contract frustrated cases and provs?

Answer 36

s.7, Barrow Lane, Howell v Coupland

Question 37

s.7

Answer 37

Goods perishing before sale but after agreement to sell.

Where there is an agreement to sell specific goods and subsequently the goods, without any fault on the part of the seller or buyer, perish before the risk passes to the buyer, the agreement is avoided.

Where s7 cannot be used (if goods are not specific) try CL frustration.

Question 38

Barrow Lane v Phillip Phillips [1929]

Answer 38

Rule: perished does not appear to be limited to situations where there is total destruction of the goods (not entirely clear but courts are happy to hold goods as perished without total destruction)

Question 39

Why is frustration at common law unlikely to be found for generic unascertained goods?

Answer 39

Parties are assumed to have contracted on the basis that the seller bears the risk of obtaining goods from a suitable source.

Question 40

Howell v Coupland (1876)

Answer 40

Rule: For quasi-specific goods, frustration of the contract is a much stronger possibility if the agreed source perishes

Case: S only able to supply 80 tons of potatoes from a particular field, rather than agreed 200 tons, due to disease

Decision: S not liable for damages for 120 tons not delivered; there was an implied condition that the potatoes should be in existence at the time of performance but they were destroyed by causes over which the defendants had no control.

Question 41

s.6

Answer 41

Mistake.
Where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made, the contract is void.

This, like s.7 is narrow. Needs to be specific goods, perished, at time of contract.