SECTIONS 6/7 - Frustration & Perished Goods Flashcards
What sort of goods do s6/7 apply to ?
Specified goods
When does s6 apply?
Where at the time of contract the goods had perished
What is the definition of perished?
Is not defined in the SGA itself, but has been given a broad interpretation by the courts to include goods that have been stolen or partially destroyed
Cases for definition of perished?
Barrow, Lane & Ballard v Phillips
Asfar v Blundell
CASE IMPLICATION
Asfar v Blundell
Goods have perished if they become significantly altered so that, for commercial purposes, they can no longer be said to be the same goods that were contracted to.
They do not actually have to be destroyed
CASE FACTS
Asfar v Blundell
Dates were impregnated with river water and sewage when the barge on which they were carried sank. The dates were covered by insurance only if they had perished. Insurers argued that despite the contamination they were still dates and could still be used to distil alcohol.
Held they no longer fit for purpose = perished
CASE IMPLICATION
Barrow, Lane & Ballard v Phillips
Where there is a sale of specific goods and part of the goods perished before the date of the sale, the whole contract is avoided by s.6 if the sale was not severable.
The subject matter may have perished if part only has been lost.
CASE FACTS
Barrow, Lane & Ballard v Phillips
S contracted to sell a specific ‘lot’ of 700 bags of nuts lying in his wharf. Unknown to either of party 109 of the bags were stolen before contract concluded. Contract held void under s.6.
The contract was for the entire and indivisible lot. Had the contract been severable (ie, for the sale of separate lots with each lot being invoiced and paid for separately) then contract would have been void only as to those lots which were stolen
What happens if the goods are deemed to have perished?
Under s6, the contract is void
Case for perishing resulting in void contract?
Coutireire v Hastie
What does s7 deal with?
The situation where there is a contract for the sale of specific goods and they exist at the time of the contract but perish after that (without any fault of either the seller or buyer)
Where is the risk in s7
With the seller -> agreement id ‘avoided’ not void
Case for s7
Sainsbury Ltd v Street
CASE IMPLICATIONS
Sainsbury Ltd v Street
Where only part of the goods have perished then the seller might be required to make the remaining (unperished) goods available to B (under no obligation to accept)
Where B contracts to purchase a specific portion of a crop, and performance becomes impossible owing to a failure of the crop w/o any default on the part of S, then S is not liable to the buyer in damages although he is obliged to deliver the actual amount that has been harvested.
CASE FACTS
Sainsbury Ltd v Street
S contracted with B before harvest to sell his entire crop of barley (about 270 tons) but due to bad weather the crop was only (140 tons)
S then sold a majority of his crop to another buyer, and sold the rest to B at a higher price than agreed.
BUT, implied condition of the contract that if a lower tonnage of crop was produced through no fault of S, S won’t pay damages, as farming is risky. B sued for breach of contract.
Issue: Does the crop shortfall release Street from obligations?
Held: It was an implied condition of the contract that if a lower tonnage of crop occurred with no fault of S, he should not pay damages.
Unreasonable implication that if S could not deliver the whole obligation he should not deliver any of it (ending the contract). The agreed weight was an upper limit; it cannot be implied as a lower limit to release S from obligation.
Reasonable to assume that the parties have agreed that on the facts that arose in that case B should have the option of accepting the reduced quantity of barley that was harvested.
When do s6/7 not apply?
Unascertained goods
-> common law instead
What happens if one party under the contract for the sale of goods agree to take the risk should the goods perish?
S6 doesn’t apply, see McRae v Commonwealth Disposals Commission
CASE FACTS
McRae v Commonwealth Disposals Commission
S sold an oil tanker described as lying on Jourmand Reef off Papua. B spent a lot on salvaging the wreckage. There was no oil tanker, nor any place known as Jourmand Reef. B brought an action for breach of contract.
Held: S had contracted to sell a ship and, as a term of the contract, ‘warranted that they had a ship to sell’. They were held liable to pay damages
S 6 did not apply because the tanker had not perished, it never existed.
What is a Force Majeure
Clause in contracts that frees both parties from liability if an extraordinary event happens - a war, strike, riot, crime, act of God, prevents one or both parties from fulfilling their obligations.
Normally only lasts for duration of event
