Sale of goods act 1979- passing of time

Question 1

What are goods

Answer 1

“Goods” includes all personal chattels other than things in action and money (s.61)
“Existing Goods” – Those goods owned or possessed by the seller
“Future Goods” – Goods to be manufactured or acquired by the seller after the making of the contract (s.5)

Question 2

What are specific goods

Answer 2

“Specific Goods” – Goods identified and agreed
at the time a contract of sale is made (s.61)
“Unascertained Goods” – Goods not identified
and agreed on at the time a contract of sale is
made
N.b. undefined by act

Question 3

Catergories of unascertained goods

Answer 3

Categories of unascertained goods:
• Generic goods sold by description, e.g. 5 tonnes of grain
• Goods not yet in existence, to be grown or manufactured by the seller, e.g. an item of machinery
• A part as yet unidentified from an identified bulk, e.g. 5 tonnes of grain from 100 tonnes already existing in a warehouse

Question 4

what does s 2 1 SGA say about contracts

Answer 4

s.2(1) A contract of sale of goods is a contract by
• which the seller transfers or agrees to transfer the
• property in goods to the buyer for a money
• consideration, called the price.
• i.e. The passing of ownership between seller
• and buyer.

Question 5

Definition of property s61 SGA

Answer 5

s.61 defines ‘Property’ as ‘the general property
in the goods and not merely a special property”
Understood as title to the absolute legal interest in
the goods and not a limited possessory right.

Question 6

What is the significance of property passing

Answer 6

• The contract is executed
• Identifies who bears the risk of any loss or damage to the goods
• In the event of insolvency, necessary to determine whether a party can recover their goods
• A claim for the price – only where property has passed to the buyer (s.49(1) SOGA)
• Action in (contract or) tort against a third party in relation to the (negligent) loss or damage to the goods.

Question 7

What rules surround passing property in specific goods

Answer 7

s. 17(1) Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.
(2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.

Question 8

What does s18 SGA say about ascertaining intention

Answer 8

Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer.

Question 9

Define unconditional

Answer 9

‘Unconditional’ – ‘not subject to any conditions
upon the fulfilment of which the passing of property
depends’ (Clarke & Hooley, 340)
E.g. if conditional on the payment of the price.
‘Deliverable state’ – “such a state that the buyer would under the contract be bound to take delivery of them” s. 61(5)

Question 10

Explain the case of Underwood ltd 1922

Answer 10

Machine bolted to concrete bed, contract required S to deliver “free on rail”. S had to detach machine from its bed and dismantle for loading. Machine damaged in process.
Held: Property had not passed as machine not in a deliverable state at the time of the contract as it was a fixture of the premises, not prevented by needing to be dismantled. The intention was to buy a loose chattel.

Question 11

What are the 4 rules around goods

Answer 11

Rule 1 – Unconditional contracts for the sale of specific goods in a deliverable state – Property passes when the contract is made.
Rule 2 – Specific goods to be put into a deliverable
state by the seller.
Requires that the specific goods are to be put in a
deliverable state and property does not pass until
the thing is done and the Buyer has notice that it
has been done.

Rule 3 – Specific goods in a deliverable state to be
weighed or measured, or some other thing etc by
the seller for the purpose of ascertaining the price.
Property does not pass until the act or thing has
been done and the buyer has notice of this.

Rule 4-– Goods delivered on approval or sale or
return basis.
Property passes when the buyer;
(a) Signifies their approval or acceptance to the seller, or;
(b) Does not signify their approval or acceptance but retains the goods without notice of rejection and the time for return of the goods has expired or a reasonable time has expired.

Question 12

What are the rules around passing property in unascertained goods

Answer 12

16 [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
‘Ascertained’ – ‘identified in accordance with the agreement after the time a contract of sale is made’, Re Wait [1927] 1 Ch 606

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.

Question 13

Explain goods and unconditional appropriation

Answer 13

Requires that the goods are irrevocably attached
to the contract, so that those goods and no other
are the subject of the sale and become the
property of the buyer
Carlos Federspiel & Co SA v Charles Twigg & Co
Ltd [1957] 1 Lloyd’s Rep 240

‘A mere setting apart or selection by the seller of
the goods which he expects to use in performance
of the contract is not enough. If that is all, he can
change his mind and use those goods in
performance of some other contract and use some
other goods in performance of this contract.’ Ibid.

Question 14

What happens when goods are successfully appropriated to a contract

Answer 14

Successfully appropriated to the contract – (Hendy
Lenox Ltd v Grahame Puttick Ltd [1984] 2 All ER 152)
Generators manufactured and set aside on S’s
premises and marked with the names of intended
customers. Insufficient to appropriate them to the
contracts with named customers.
The sending of invoices and delivery notes by S to
the intended customer which included the serial
numbers did appropriate them to the contract as the
seller could not substitute other generators. All that
remained was for B to take delivery.

Question 15

What are the other rules to contract appropriati0n

Answer 15

Rule 5(2) delivery to a carrier for transmission to the buyer and does not reserve the right of disposal. 
Rule 5(3) Appropriation by exhaustion 
Rule 5(4) Consolidation

Question 16

Explain 5 3 appropriation by exhaustion

Answer 16

(3) Where there is a contract for the sale of a specified quantity of unascertained goods in a deliverable state forming part of a bulk which is identified either in the contract or by subsequent agreement between the parties and the bulk is reduced to (or to less than) that quantity, then, if the buyer under that contract is the only buyer to whom goods are then due out of the bulk—
(a) the remaining goods are to be taken as appropriated to that contract at the time when the bulk is so reduced; and
(b) the property in those goods then passes to that buyer.

Appropriation by exhaustion - Wait & James v Midland Bank [1926] 31 Com Cas 172
Wheat sold and removed from warehouse until exactly 850 quarters (which seller R had pledged to MB) remained. Wheat to satisfy contract ‘ascertained by exhaustion’ and thus property passed from seller to MB

Question 17

Explain appropriation by consolidation

Answer 17

Appropriation by consolidation – Karlshamns v Eastport, The Elafi [1982] ] 1 ALL ER 208
6,000 tonnes of copra purchased in 2 separate contracts which was shipped in undivided bulk and discharged at port until 6,000 remained.

(4) Paragraph (3) above applies also (with the necessary modifications) where a bulk is reduced to (or to less than) the aggregate of the quantities due to a single buyer under separate contracts relating to that bulk and he is the only buyer to whom goods are then due out of that bulk

Question 18

Bulk and unascertained goods SORRY THIS IS LONG

Answer 18

Issue: The rule in s.16 implies that a buyer might believe they have property in the goods having paid for them.
Yet the buyer has no property and thus is vulnerable to the risk of the seller’s insolvency, i.e. they become an unsecured creditor

London Wine co (Shippers) Ltd [1986] PCC 121, Chancery Division

20A (s.16 applies subject to) - Undivided share
in goods forming part of a bulk
(1)This section applies to a contract for the sale of a specified quantity of unascertained goods if the following conditions are met—
(a) the goods or some of them form part of a bulk which is identified either in the contract or by subsequent agreement between the parties;

• 61(1) ‘Bulk’ means a mass of goods of the same kind which
• is contained in a defined space or area; and
• is such that any goods in the bulk are interchangeable with any other goods therein of the same number or quantity….
E.g. a cargo of grain on a named ship, cases of wine (all of the same kind) in an identified cellar.

(b) the buyer has paid the price for some or all of the goods which are the subject of the contract and which form part of the bulk.

Result:
Unless the parties agree otherwise:
(2) (a) property in an undivided share in the bulk is transferred to the buyer, and
(b) the buyer becomes an owner in common of the

)… the undivided share of a buyer in a bulk at any time shall be such share as the quantity of the goods paid for and due to the buyer out of the bulk bears to the quantity of the bulk at that time
Examples:
- A contract for sale for 100 out of 200 bottles of wine contained in the cellar and paid in full = half share (100/200) in the bulk.
- If B has only paid for half of the bottles under the contract = quarter share (50/200)

Where the aggregate of the undivided shares of buyers in bulk… would at any time exceed the whole of the bulk, the undivided share in the bulk… shall be reduced proportionately so that the aggregate is equal to the whole bulk.

Question 19

How do you apply SGA rules to property

Answer 19

Applying the rules in regards to property

1. Identify the nature of the goods
2. (i) Specific or ascertained s.17
   (ii) Unascertained s.16
   
   1. Does s.20A apply?
   2. If not, apply rules s.18(5)

Question 20

What is transfer of title LONG AGAIN SORRY

Answer 20

Who becomes owner of goods/if they have become the owner. Concern: Whether a non-owner seller, can confer a good title on a Buyer, and so defeat the claims of the true owner.
Bishopsgate Motor Finance Corp Ltd v Transport and Brakes [1949]1KB 322, Denning LJ:
“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. The first principle has held sway for a long time, but it has been modified by the common law itself and by statute so as to meet the needs of our own times”

General rule: no one can transfer a better title to goods than he himself possesses’
(nemo dat quod non habet)
This basic rule applies to all transfers of property interests: gifts, bailment, pledges etc.

is codified in s. 21(1):
“Subject to this Act, where goods are sold by a person who is not their owner, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell”

Question 21

What are the 9 exceptions to the nemo dat rule set out in ss 21-26 in SGA 1979

Answer 21

Ø First Exception: estoppel
Ø Second Exception: sale under the Factors Act 1889, s.2
Ø Third Exception: sale under power of sale or court order
Ø Fourth Exception: sale in market overt
Ø Fifth Exception: sale under a voidable title
Ø Sixth exception: sale by seller continuing in possession
Ø Seventh exception: sale by buyer in possession
Ø Eight exception: sale by unpaid seller under SGA 1979, s.48
Ninth exception: private purchase of motor vehicle held on

Question 22

What is risk

Answer 22

a person is bound to bear the accidental loss of, or damages to, goods, they are said to be at “risk”
• The risk of deterioration of or damage to the goods
• Includes accidental damage and damage caused by third parties.
• Insurance

Effect of risk passing

B must bear the accidental loss or damage of the goods
B must pay the price even though they will never receive the goods, e.g. if lost or damaged
B must pay the full price even if goods are partly lost or damaged
B cannot sue S for failing to make delivery or for delivering damaged goods

has not passed…
• S cannot compel B to pay the price or take delivery of the remaining or damaged goods
• S cannot sue B for damages for refusing to take delivery
• S may be liable for non-delivery if B can prove that they had suffered loss as a result

Question 23

What is the general rule around risk

Answer 23

Unless otherwise agreed, the goods remain at the seller’s risk until the property in them is transferred to the buyer
Relationship between property and risk – Healey v Howlett & Sons [1917] 1 KB 337

general rule modified:

(2) Where delivery is delayed through fault of either party “goods are at the risk of the party at fault as regards any loss which might not have occurred but for such fault”
(3) “nothing in this section affects the duties or liabilities of either seller or buyer as bailee or custodier of the goods of the other party”