Transfer of Title of Goods Flashcards
What is the purpose of the Sale of Goods Act?
Deals with passing of property and transfer of title. Purpose is to DISTINGUISH between sales by true owner and sales by people who are NOT the owner.
What is the definition of property under the Act?
Defined in the Act to mean ‘general property in goods, and general property can only be held by the true owner’
What is the starting proposition? Nemo Dat rule.
Person disposing of a chattel whether for consideration or not, can give no better title than they themselves have.
Can this proposition be defeated?
Yes in some circumstances under common law and under statute.
What is the effect of the PPSA on common law?
PPSA prevails over common law; relevantly it affects common law principles in relation to contracts for the sale of goods subject to retention clauses.
Why is the issue of ‘when’ property passes in a sale of goods contract important?
The issue of when property passes in a sale of goods contract is important for the following reasons:
1. Risk prima facie passes with property.
2. A buyer may by reason of provisions in the Sale of Goods Act lose the right to reject goods once property has passed.
3. The party with property in the goods can generally sue for damage caused to the goods.
4. If the buyer has property in the goods they can pass good title to a third party.
5. Generally, the seller can only sue for the price if property has passed to the buyer: Style Finnish (Qld) Pty Ltd v Abloy Security Pty Ltd [1994] 2 Qd R 203; considered in Garmin Australasia Pty Ltd v B & K Holdings (Qld) Pty Ltd [2018] QCA 353 by Holmes CJ at [25] and [37].
This is significant because an action for the price is a claim for a liquidated (that is, sum certain) amount, whereas the alternative — a claim for damages for breach of the contractual obligation to pay the price — is a claim for unliquidated damages. In the case of a claim for unliquidated damages, the seller is required to prove their damages;4 this may be difficult if, for example, it is proved that the goods were readily sold for the same price to another buyer
s21 - If it is the express intention of the parties, can Property in unascertained goods pass?
No Regardless of the intention of the parties NO property in unascertained goods can pass to the buyer unless and until the goods are ascertained. Jansz v GMB Imports Pty Ltd [1979] VR 581 at 586.
What is the nature of the arrangement prior to ascertainment?
Until that occurs there is merely an intention to sell - until the goods are ascertained there aren’t any goods that can be the subject of the sale.
When is the property in ascertained goods said to pass?
Primary rule is that property is transferred to the buyer WHEN THE PARTIES intended it to be transferred. The Act provides that in ascertaining when the parties intended property to pass, regard is to be had to the terms of the contract, the conduct of the parties and the circumstances
What is the process in applying the principle?
The principle that property is to pass when parties intended it to pass is an important one.
It demands that attention first be paid to the contract itself, and the circumstances in which it was reached. If the intention of the parties can thereby be determined, it is unnecessary to look further to the statutory presumptions in the Act.
For example, in McDougall v Aeromarine of Emsworth Ltd [1958] 3 All ER 431 a contract to build a ship provided that property was to pass on the first instalment of the price being paid, whereas in Newtons of Wembley Ltd v Williams [1965] 1 QB 560 the contract provided that property in a motor vehicle was not to pass until the buyer’s cheque was honoured.
In both examples the agreement of the parties determined when property was to pass.
It is only if the intention of the parties cannot be ascertained that the ‘rules’ or presumptions of law as to when property is to pass apply.
These are set out in s 21.7 The provision commences: ‘Unless a different intention appears …’. There are five rules which each apply in different circumstances. Which rule applies depends principally upon the nature of the goods being sold. It is important to emphasise that the rules are only presumptions and can be displaced if the parties evince a contrary intention: McEntire v Crossley Bros Ltd [1895] AC 457 at 467
Rule 1 - unconditional contract - specific goods in deliverable state.
When there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, is or are postponed.
8.6 This rule reflected the common law when it was enacted: Simmons v Swift (1826) 5 B & C 857 at 862.
At common law, property could pass in goods irrespective of whether they had been delivered to the buyer: Badische Anilin und Soda Fabrik v Hickson [1906] AC 419
. Further, property could pass whether or not the buyer had paid for the goods: Tarling v Baxter (1827) 6 B & C 360.
The preconditions to the application of the rule are:
(a) an unconditional contract;
(b) for the sale of specific goods;
(c) in a deliverable state.
PROPERTY PASSES (A) WHEN CONTRACT IS MADE; (B) IRRESPECTIVE OF THE TIME FOR PAYMENT OR DELIVERY.
Unconditional contract - what were the facts in McPherson, Thom, Kettle & Co v Dench Bros [1921] VLR 437? (The case of the missing heifer) How did the courts determine the intentions of the parties re transfer of property in the cow?
McPherson concerned the sale of a heifer by auction. The heifer disappeared before the buyer took delivery. The seller sued for the price, arguing that property in the animal had passed. The conditions of sale included relevantly the following:
1. ‘All lots shall be at risk of purchaser after the fall of the hammer, and must be settled for by him and to our satisfaction immediately after the sale’; and
2. ‘All lots not settled for in accordance with these conditions shall be resold either by public auction or private contract whichever we may deem fit, and all deficiency, together with expenses attending such resale, shall be made good by the defaulter at this present sale.’
It was argued by the buyer that condition (1) showed an intention that property was not to pass upon the making of the contract on the basis that otherwise the condition was superfluous, as risk would normally pass with property. Similarly, in relation to condition (2) it was argued by the buyer that the clause permitting a resale by the seller showed that property was with the seller at the time the contract was made.
Both arguments were rejected. Condition (1) was held to amount to an ‘express and emphatic declaration of the intention of the parties’ that property should pass at the time of contract so there could be no room for doubt. Further, condition (2) was construed not to amount to a reservation of a right of disposal until certain conditions were fulfilled (in which case property is not to pass until the conditions are fulfilled) but as a right of resale in a certain event notwithstanding that the property has passed. Such a right of resale exists in the sale of goods legislation and can arise by implication of law upon default in payment, notwithstanding property has passed.
The buyer also argued that the existence of condition (2) meant the sale was ‘conditional’, in which case r 1 could not apply. In relation to this it was held that the power of resale assumed an original sale and that the sale was no doubt subject to a condition. However, the condition was not ‘suspensive’ but ‘resolutive’ in the sense that until default by the buyer, the seller could maintain an action for goods bargained and sold. It was only after default and resale that this action was lost
What does ‘unconditional contract’ mean in the context of McPherson & the missing heifer?
In this context, ‘unconditional’ has been held to mean that the sale contract is not subject to any condition ‘suspensive’ of the passing of property: McPherson, Thom, Kettle & Co v Dench Bros [1921] VLR 437. If the contract is conditional, property will not pass when the contract is made but only when the contract is fulfilled
