Sale of Goods: Retention of Title Primary Sources Flashcards
Sale of Goods Act 1979, s.17
*begin PQ with this, then 19(3)/2(3)…
Property in specific/ascertained goods passes when it is intended to pass; regard should be had to all of the circumstances of the case
Sale of Goods Act 1979, s.18
Assumptions for ascertaining intention (unless other intention appears):
Rule 1: Where unconditional contract for the sale of specific goods in deliverable state the property passes when the contract is made (payment immaterial)
Rule 2: Where specific goods and seller bound to do something to put them in deliverable state, property does not pass until thing is done and the buyer has notice.
Rule 3: Where specific goods in a deliverable state but seller is bound to weigh, measure, test etc. property does not pass until that thing is done and the buyer has notice.
Rule 4: Where goods are delivered to the buyer on approval or on sale/return property 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 then after a reasonable time
Rule 5:
(1) Where unascertained/future goods, property passes when goods of the description and in a deliverable state are unconditionally appropriated to the contract by s/b with b/s assent (express/implied future/past)
(2) Where seller delivers goods but does not reserve right of disposal, considered to have unconditionally appropriated goods to the contract.
(3) Where there is a contract for the sale of 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 only satisfy the buyer under that contract then:
(a) the remaining gods are taken to be appropriated to that contract
(b) property passes to the buyer
Sale of Goods Act 1979, s.19(1)
For contract of specific goods or where goods are subsequently appropriated to the contract, the seller may reserve the right of disposal of the goods until certain conditions are fulfilled
Aluminium Industrie Vaessen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676
Case: Dutch seller (A) supplies English buyer (R) with aluminium foil; R sells some of the foil to third parties; R goes into liquidation owing £122k to A; £35k (proceeds of sale to 3rd parties) is he’d by receiver in a separate account; money came into receiver’s possession after R’s liquidation; A claims (1) foil still in R’s possession, and (2) proceeds of sub-sales of foil to third parties.
Decision:
(1) Clause 13 declares that ownership in material will only be transferred when purchased has paid AIV in full, therefore A could recover the foil in R’s possession
(2) Clause 13 declares that AIV will be given ownership of new objects mixed/made from material and that the the purchaser is still entitled to see these objects in capacity as ‘fiduciary’; in this case this was considered a normal fiduciary relationship where proceeds of sale may be recovered; the purchaser is entitled to sell objects to a third party within the framework of normal carrying on of business, and deliver them on the condition that the purchaser shall hand over to AIV the claims he has against the buyer emanating from this transaction (benefit of transaction assigned to AIV)
(3) Therefore AIV was entitled to the money representing the proceeds of subsales on the basis of the doctrine of tracing established in Re Hallett’s Estate, they held as bailees (fiduciary/agent)
N.B. it is easy to get foil back into original place
Also considered that it is almost inevitable, in the nature of things, that where the contract seeks to confer upon the seller a right to look for satisfaction of the price to property which is worth more than that amount (or to a sum of money which exceeds the price which he is owed), the courts will construe the transaction as one involving a charge (obiter)
Re Bond Worth Ltd [1980] Ch 228
Case: BW bought fibre which was spun, dyed and woven into carpets; M (seller) retains beneficial and equitable ownership; BW insolvent owing nearly £600k to M; very little raw fibre left, mostly spun into yarn with some in form of finished carpets
Decision: Absolute contracts of sale with property and risk in goods passing on their delivery to BW; no intention to give seller all the rights normally enjoyed by sole beneficial owner against trustee (despite language used), e.g. BW right to sell goods and transfer property to sub-purchaser before payment received; BW free to sell goods to third party but intention that seller would be ‘equitable and beneficial’ owner; intention that RoT clause would also apply to products manufactured from goods; the effect of the RoT clause was to create a floating equitable charge over the charged assets, void for non-registration; distinct from Romalpa as effect was to make them bailees
Rule: If the seller purports to reserve to himself an equitable interest in the goods until the price is paid, and meantime to transfer only a bare legal title to the buyer, this may also constitute a charge [there is a fine line between retention of title and creating a charge]
Clough Mill Ltd v Martin [1985]
*Read carefully
Case: S supplies yarn to B, a textile manufacturer; contract includes RoT clause with right of S to recover goods if payment outstanding; M appointed as receiver and allows B to continue using yarn in its business; S sues M for conversion
Decision: This was not a charge; the property in unused yarn did not pass from S to B so entitled to recover the unused yarn
Rule: Retention of title clause upheld where goods in question remain identifiable as the contract goods
Borden (UK) Ltd v Scottish Timber Products Ltd [1981]
Case: Sellier supplies buyer with resin to make chipboard; contract includes RoT clause; property passes when buyer pays in full for goods (all monies clause)
Decision: The buyers where at liberty to use the resin which had not been paid for in the manufacture of chipboard, the result being that it ceased to exist (not consistent with relationship of bailee or bailor), at that point title to the resin disappeared*
Distinguished from Romalpa as grounds: in Romalpa there was a concession by the buyer that they were holding as bailees; Foil was not being mixed up with another product; simply using resin to make chip board is not sub-sale
The contract did not create any security interest in the chipboard, so the seller had no interest whatsoever in the manufactured product
Rule: Title cannot be retained in property that ceases to exist in irreversible manufacturing process so that goods lost their identity (as permitted by seller)
Re Peachdart Ltd [1984] Ch 131
Case: F supplies leather to P to make handbags; RoT clause that fiduciary relationship between B/S and until payment S retains ownership
Decision: Once leather appropriated into B’s manufacturing process, S ceased to have any title in leather; S had only an unregistered charge over proceeds
Hendy Lennox (Industrial Engineers) Ltd v Graham Puttick [1984] 1 WLR 485
Case: HL supplies diesel engines to GP to incorporate in generating sets for sale; simple RoT clause in the sale contract; GP goes into receivership and HL applies for injunction to prevent sale of generating sets
Decision: As the process of incorporation would not in any way alter or destroy the substance of the engine and title had not disappeared by bolting engine into the generating set
Rule: Retention of title clause upheld where they have been used in manufacturing process which is reversible
Armour Thyssen Eddstahlwerke AG [1991] 2 AC 339
Case: T supplies steel to C Ltd as part of course of dealing; when C goes into receivership there is a quantity of steel on its premises; all monies clause
Decision: Reserving title until paid is not a charge but a legitimate retention of title
Rule: All monies clauses are valid as long as properly drafted
Associated Alloys Pty Ltd v CAN 001 452 106 Pty (2000) 202 CLR 558 (High Court of Australia)
Case: S supplied steel to B over period of time; S’s invoices include RoT clause whereby it stated that B will hold the ‘proceeds’ of any manufacturing or construction process on trust for S; B used steel supplied to manufacture products for a third party; B goes into liquidation owing money to S
Decision: RoT was an agreement to constitute a trust of future-acquired property rather than a charge
FG Wilson (Engineering) Ltd v John Holt & Co (Liverpool) Ltd [2013] EWCA Civ 1232, [2014] 1 WLR 2365
Case: S supplies generators and parts to B; payments by B to S are outstanding and S attempts to rely on RoT clause in the agreement; B replies that the goods have been supplied to its subsidiary; S then brings an action fro the price under SGA s.49(1)
Decision: Property in goods had not passed to b so S could not sue for the contract price as when B sold goods to its subsidiary, it did so as S’s fiduciary agent with a requirement to account for proceeds of sale; no effective remedy
N.B. 49(2) - seller may make price payable on a day certain, irrespective of delivery, so as to ensure the do not fall foul of the protection they thought they had secured
Companies Act 2006, s.859A-H
Charges created by the company must be registered or will be void
Re Highway Foods International Ltd [1995] BCC 271
Case: H supplies large quantities of meat to HF, HF sub-sale to K and delivers to K’s premises; RoT in both contracts and payment outstanding under each; HF insolvent
Decision: H can recover in relation to unprocessed meat in K’s hands as treated as being repossessed and sold to K; H cannot recover in relation to meat processed by K; although H’s RoT clause states that buyer will be accountable for proceeds, that would be a security interest void for non-registration
Sale of Goods Act 1979, ss.2(3), 19(3)
It is axiomatic that a clause in a contract of sale may stipulate that the seller shall retain the title to the goods until a stated event has happened, and in particular until he has been paid the price; and this may be done even though possession of the goods is given to the buyer
