The common law of risk and benefit

Question 1

What is risk?

Answer 1

The loss resulting from damage to, or destruction of, the thing sold, or any other disadvantage accruing to, or affecting it, arising through any agency other than the breach of contract or wrongful act or default of the seller (Mackeurtan).

Question 2

Which case deals with the modern example of a loss/risk?

Answer 2

Van der Merwe v Viljoen.

Question 3

What kind of losses fall within the rule of risk?

Answer 3

Losses due to vis maior, casus fortuitus, general deterioration over time and theft.

Question 4

Which losses do not fall within the rule of risk?

Answer 4

Losses caused by the failure of the seller to observe the appropriate standard of care.

Question 5

What is the Roman law rule wrt to risk?

Answer 5

In the absence of negligence on the part of the seller, the general rule is that the risk passs to the buyer when the sale is perfecta.

Question 6

Which cases deal with ‘where the risk lies’?

Answer 6

1. Rood’s Trustees v Scott and De Villiers
2. BC Plant Hire v Grenco
3. Southern Era Resources v Farndell

Question 7

What is the natural consequence of the roman law rule of risk?

Answer 7

The full price will have to be paid by the buyer even though the thing sold is damaged or destroyed by an act falling under the definition of a risk before it is handed over.

Question 8

When will the roman law rule wrt to risk not apply?

Answer 8

1. Where the parties have agreed to the contrary
2. Where specific goods still have to be weighed, measured or counted
3. Unascertained goods
4. Where there is a statutory provision to the contrary
5. Where there is default by either party.

Question 9

What is ‘where specific goods still have to be weighed, measured or counted’?

Answer 9

Where there is a sale of specific goods, but the price depends on the counting, weighing or measuring, the risk does not pass until the price has been ascertained by counting, weighing or measuring.

Question 10

What are unascertained goods?

Answer 10

The subject matter has not yet been set aside, risk in the res vendita does not pass until goods answering the description in the contract have been appropriated to the contract.

Question 11

When does appropriation occur?

Answer 11

There must be some overt act by the seller, such as a setting aside or marking of the relevant goods.

Question 12

What are the cases for unascertained goods?

Answer 12

1. Maraiis v Deare and Dietz
2. Poppe, Schunhoff and Guttery v Mosenthal and Co
3. Taylor v Mackie, Dunn and Co.

Question 13

What is ‘where there is default by either party’

Answer 13

The ordinary rules of risk are altered where a party is in default of his obligations under the contract.

Question 14

When are the ordinary rules of risk where there is default by either party varied?

Answer 14

1. Fraud
2. Failure of the seller to observe the required standard of care
3. Default of either party in performance
4. Acts by either party which hinders the other in their performance.

Question 15

Which case deals with ‘where there is default by either party’?

Answer 15

Fitwell Clothing v Quorn Hotel.

Question 16

What is section 59 of the Customs and Excise Act?

Answer 16

If the risk is an increased tax then that particular amount can be passed immediately to the buyer.

Question 17

What is a benefit?

Answer 17

Any natural or civil fruits and other similar advantages, gains or profits.

Question 18

What is the general rule regarding benefits?

Answer 18

The benefit in the res vendita follows the risk i.e. any benefits will pass to the buyer once the sale is perfecta.

Question 19

What is the exception to the general rule regarding benefits?

Answer 19

Fortuitous gains unassociated with the thing, that could never have been contemplated by the parties. Falls under emptio spei.

Question 20

What are the requirements of a benefit?

Answer 20

1. Direct connection with the res vendita
2. Actually produced by the res vendita.
3. Must have been in the contemplation of the parties at the time of concluding the sale.

Question 21

Which case deals with benefits?

Answer 21

Van Deventer v Erasmus.

Question 22

Which section of the CPA deals with the common-law of risk?

Answer 22

Section 19(2)(c).

Question 23

What does section 19(2)(c) of the CPA hold?

Answer 23

Unless otherwise expressly provided or anticipated in an agreement, it is an implied condition of every transaction for the supply of goods or services that goods to be delivered remain at the supplier’s risk until the consumer has accepted delivery of them, in accordance with this section.

Question 24

What are the cases for where the risk lies?

Answer 24

1. Rood’s Trustees v Scott and De Villiers
2. BC Plant Hire v Grenco
3. Southern Era Resources v Farndell

Question 25

What are the facts of Rood’s Trustees v Scott and De Villiers?

Answer 25

Scott and De Villiers sold land to Rood. S and DV guaranteed unencumbered and free property but it was not so as the property had servitudes. Rood’s trustee’s sued for a rescission of the sale and a refund of the purchase price.

Question 26

What is the legal rule applied in Rood’s Trustees v Scott and De Villiers?

Answer 26

Periculum rei venditae

Question 27

What is the periculum rei venditae?

Answer 27

The buyer runs the risk of the loss of a thing sold though not delivered.

Question 28

What did the court hold in BC Plant Hire v Grenco?

Answer 28

Because it was a contract of purchase and sale, the risk passed to the purchaser as soon s the contract was perfecta, namely when the thing and the price had been determined and the agreement was unconditional, then the risk falls on the purchaser.

Question 29

What did the court hold in Southern Era Resources v Farndell?

Answer 29

1. A sale is perfecta if it is absolute, in that it is not subject to a suspensive condition.
2. Sale becomes perfect once there is agreement on the merx, price and fulfilment of conditions.

Question 30

Which case illustrates the modern example of risk and benefit?

Answer 30

Van der Merwe v Viljoen.

Question 31

What are the facts of Van der Merwe v Viljoen?

Answer 31

1. The parties entered into a sale of land contract which provided that the purchaser had to pay the purchase price (6000 pounds) within 3 months of taking possession and also pay 5% interest
2. Failure to comply within 3 months after execution of the agreement would result in the seller taking fixed deposit certificates bearing 5% interest at a bank s part of the purchase price,
3. Transfer was passed to the purchaser on payment of 3000 pounds
4. Bank in which the fixed deposits had been made was placed under judicial management

Question 32

What did the court hold in VDM v Viljoen?

Answer 32

Seller had to accept the securities as part of the purchase price, accordingly the risk of depreciaition fell upon him.

Question 33

What are the cases for unascertained goods?

Answer 33

1. Marais v Deare and Dietz
2. Poppe, Schunhoff & Guffery v Mosenthal & Co
3. Taylor v Mackie, Dunn & Co

Question 34

What are the facts of Marais v Deare and Dietz?

Answer 34

1. Deare and Dietz bought 350 hogshead of Cape brandy from Marais to be shipped
2. Before the shipment of the last 100 hogshead, an Excise duty was, by Act of Parliament, imposed on all spirits then in the hands of any dealer, payable by him within 6 months
3. Marais had all the brandy in store when the sale agreement was entered into, but had not been appropriated from the rest of his stock, the hogshead intended for Deare and DIetz.

Question 35

What was the rule applied in Marais v Deare?

Answer 35

There must be appropriation, setting aside of the unascertained goods on behalf of the buyer, for risk to accrue to the buyer.

Question 36

What did the court hold in Marais v Deare?

Answer 36

The property did not pass to Deare and Dietz because there had been no delivery made to them, and the risk did not pass in the absence of any special agreement to that effect, because there was no appropriation of the brandy.

Question 37

What are the facts of Poppe, Schunhoff & Guttery v Mosenthal & Co?

Answer 37

1. Parties entered into a sale of brandy agreement of 200 hogshead of Cape brandy through a broker
2. 110 of the hogshead were shipped and delivered prior to the Excise Bill
3. 90 of the hogshead were shipped and delivered after the commencement of the Excise Bill
4. Poppe paid the duty on the remaining 90 hogshead and Mosenthal and Co settled for the brandy but refused to refund the amount of duty paid by Poppe
5. No marking of the hogshead reserved for Mosenthal * Co at the time of shipment.

Question 38

What rule did the court apply in Poppe v Mosenthal?

Answer 38

There must be appropriation, setting aside of the goods on behalf of the buyer for risk to accrue to the buyer.

Question 39

What are the facts of Taylor v Mackie, Dunn & Co?

Answer 39

1. Mackie, Dunn & Co bought fifty hogshead of brandy from Taylor
2. Excise duty comes into effect
3. Mackie, Dunn & Co accepted the consignment and paid the purchase-price but refused to refund the amount of duty paid by Taylor (failure to appropriate)

Question 40

What is the rule applied in Taylor v Mackie?

Answer 40

Where there is an appropriation of unascertained goods for the purchaser and before there had been delivery. the Excise Act become law, by which a duty was imposed on brandy in stock; the duty is a risk attaching to the brandy payable by the purchaser.

Question 41

What is the case for “exceptions to the risk rule: where there is default by either party”?

Answer 41

Fitwell Clothing v Quorn Hotel.

Question 42

What are the facts of Fitwell Clothing v Quorn Hotel?

Answer 42

1. Fitwell Clothing and Quorn Hotel had entered into a sale contract for a dozen pairs of trousers.
2. Fitwell delivered the goods to Quorn
3. Quorn refused to accept the goods on the ground that thee invoiced price was higher than the agreed price
4. Goods remained with Quorn and were destroyed by fire.
5. Fitwell sued for the invoiced price

Question 43

What is the holding in Fitwell v Quorn Hotel?

Answer 43

A right to return goods stemming from a breach of contract by the seller renders the contract imeprfect.

Question 44

Which case deals with the rule concerning benefits?

Answer 44

Van Deventer v Erasmus.

Question 45

What are the facts of Van Deventer v Erasmus?

Answer 45

1. Purchaser bought property with a house in it
2. The sale was perfecta- payment of purchase price, sale went through properly, purchaser became owner
3. House was still insured by the Seller and was burnt down
4. Compensation by the insurance was paid out to the seller

Question 46

What is the holding in Van Deventer v Erasmus?

Answer 46

1. Benefits are not a thing which accrues to the seller as a result of an independent contract entered into with a 3rd party where the fruits of the contract have nothing to do with the land itself.
2. Benefit rule passes to the purchaser only if there is a common denominator that the benefit /fruit, to which the purchaser is entitled, runs with the land, arises out of the land, flows out of the land or is born out of the land itself.

Question 47

What is the finding in Van Deventer v Erasmus?

Answer 47

The benefit which flowed from the contract between the seller and the insurance company was a personal benefit which the seller had obtained for himself.