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Sale and Supply of Goods

Detailed Module Outline


© Paul Eden – September 2013

COMMERCIAL LAW - SALE AND SUPPLY OF GOODS

DETAILED MODULE OUTLINE 2013-2014


Principal works cited and abbreviations used:
Atiyah: Atiyah’s Sale of Goods 12 ed. (Pearson-Longman, 2010)
Benjamin: Benjamin’s Sale of Goods 8 ed. (Sweet and Maxwell, 2010);
Bridge: Michael Bridge The Sale of Goods 2 ed (OUP, 2009);
Baskind: E Baskind et al Commercial Law (Oxford University Press, 2013)
Goode: R M Goode and E McKendrick Commercial Law 4 ed (Penguin, 2010);
Macleod: J K Macleod Consumer Sales Law 2 ed (Routledge-Cavendish, 2007)
McKendrick: Ewan McKendrick (ed) Sale of Goods (LLP, 2000);
Sealy/Hooley: L S Sealy and R J A Hooley Commercial Law: Text, Cases and Materials
4 ed (Oxford University Press, 2008).

1. NATURE AND FORMATION OF THE CONTRACT OF SALE


Readings: Atiyah chapters 1-7, Sealy/Hooley chapter 7, Baskind chapter 10, Bridge
chapters 1 and 2, Goode chapter 7, Macleod chapters 1 and 2.

1.1 PRELIMINARY

1.1.1 Historical development and conceptual framework


- Goode Commercial Law 4 ed Chapter 1
- Sealy/Hooley Commercial Law: Text, Cases and Materials 4 ed Chapter 1

1.1.2 Basic concepts of personal property


- Goode Commercial Law 4 ed Chapter 2
- Sealy/Hooley Commercial Law: Text, Cases and Materials 4 ed Chapter 2
- Baskind et al Commercial Law chapter 2

1.2. INTRODUCTION

1.2.1 Background to the Sale of Goods Act 1979


- Goode Commercial Law 4 ed Chapter 6

1.2.2 Sources of the law relating to sale of goods


• the Sale of Goods Act 1979 (SGA) and amending statutes including;
• the Supply of Goods (Implied Terms) Act 1973;
• the Supply of Goods and Services Act 1982 (SGSA);
• the Sale and Supply of Goods Act 1994 (SSGA);
• numerous other statutory provisions (e.g. EU Regulations and Directives – but
in particular Directive 1999/44/EC implemented by SI 2002/3045)
• case law interpreting the 1893 and 1979 Acts;
• case law relating to sale of goods before the 1893 Act.

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1.2.3 Interpreting a codifying statute


‘I think that the proper course is in the first instance to examine the language of the
statute and ask what is its natural meaning, uninfluenced by any considerations derived
from the previous state of the law, and not to start with inquiring how the law previously
stood, and then, assuming that it was probably intended to leave it unaltered, to see if the
words of the enactment will bear an interpretation in conformity with this view.’
Per Lord Herschell in Bank of England v Vagliano Brothers [1891] AC 107,
[1891-4] All ER Rep 93 (HL) at 144-5, All ER Rep 113E-113F.
Exceptions to Lord Herschell’s “proper course”
 ambiguity
 where a term has acquired a technical meaning which earlier cases may
illustrate.
See also Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 at 501

To what extent is it possible to determine the “natural meaning” of the language of a


statute without reference to the previous state of the law?

See, for example, The Hansa Nord [1976] QB 44, [1975] 3 All ER 739 (CA)

1.2.4 Relationship between the common law and the law under the SGA
`The rules of the common law, including the law merchant, except in so far as they are
inconsistent with the provisions of this Act, and in particular the rules relating to the law
of principal and agent and the effect of fraud, misrepresentation, duress or coercion,
mistake, or other invalidating cause, apply to contracts for the sale of goods’
s62(2) SGA

Do “the rules of common law” include the rules of equity?


What do the words “except in so far as they are inconsistent with the provisions of this
Act” mean?

See Re Wait [1927] 1 Ch 606 (CA) especially the judgment of Atkin LJ

1.3 DEFINITIONS

1.3.1 The contract for the sale of goods, sale, agreement to sell
`A contract for the 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.’
s2(1) SGA
See also s2(4)-(5) and s61(1)

1.3.2 Goods
‘“goods” includes all personal chattels other than things in action and money, and in
Scotland all corporeal moveables except money; and in particular “goods” includes
emblements, industrial growing crops, and things attached to or forming part of the land
which are agreed to be severed before sale or under the contract of sale and includes an
undivided share in goods;’
s61(1) SGA (as amended by sec. 2 (c) the Sale of Goods (Amendment) Act 1995)

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(i) Is a sixpence money? See R v Thompson [1980] QB 229, [1980] 2 All ER 103 (CA).
(ii) Where/how does the SGA draw a dividing line between goods and land?
(iii) Are some transactions both a contract for the sale of goods under the SGA and a
contract for the sale or transfer of an interest in land under the Law of Property Act 1925?
(iv) If the answer to (iii) is yes, in the event of a clash do the provisions of the SGA or the
rules of land law prevail?

Morgan v Russell & Sons [1909] 1 KB 357


Underwood Ltd v Burgh Castle Brick & Cement Syndicate [1922] 1 KB 343
Moss v Hancock [1899] 2 QB 111

1.3.3 Special problems concerning crops


fructus industriales and fructus naturales
Marshall v Green (1875) 1 CPD 35
Kursell v Timber Operators & Contractors Ltd [1927] 1 KB 298 (CA)

Has the distinction between fructus industriales and fructus naturales survived the
enactment of the SGA 1979? What is the role of severance under the 1979 Act?

1.3.4 Classification of goods under the SGA


 existing and future goods
‘(1) The goods which form the subject matter of a contract of sale may be either existing
goods, owned or possessed by the seller, or goods to be manufactured or acquired by him
after the making of the contract of sale, in this Act called future goods.
(2) There may be a contract for the sale of goods the acquisition of which by the seller
depends on a contingency which may or may not happen.
(3) Where by a contract of sale the seller purports to effect a present sale of future goods,
the contract operates as an agreement to sell the goods.’
s5 SGA (see also s2(3))
‘“future goods” means goods to be manufactured or acquired by the seller after the making
of the contract of sale’
s61(1) SGA

Sealy and Hooley state (at page 272) that: “It may be helpful to classify ‘future
goods’ into various sub-categories. These will include:
1. goods to be manufactured by the seller;
2. goods to be acquired by the seller (by purchase, gift, succession or otherwise -
e.g. fish which he expects or hopes to catch); goods not yet in existence (e.g.
lambs to be born next spring, fruit or potatoes to be harvested next autumn);
and
3. (possibly) things which do exist, but are not yet “goods” (e.g. minerals not yet
extracted but still forming part of the land).”

 specific, ascertained and unascertained goods


‘”specific goods” means goods identified and agreed on at the time a contract of sale is
made and includes an undivided share, specified as a fraction or percentage, of goods
identified and agreed on as aforesaid;’
s61(1) SGA (as amended by sec. 2 (d) the Sale of Goods (Amend.) Act 1995)

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Sealy states that unascertained goods fall into three main categories:
1. generic goods sold by description (commodities such as grain, coal, oil);
2. goods not yet in existence, to be grown or manufactured;
3. a part as yet unidentified out of a specific or identified bulk, e.g. 10 tonnes out
of the 100 tons of potatoes now in my store.

Must future goods always be unascertained?


‘[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.’
s16 SGA
Re Wait [1927] 1 Ch 606 (CA)
Kursell v Timber Operators & Contractors Ltd [1927] 1 KB 298 (CA)

1.3.5 Property
‘“property” means the general property in the goods not just a special property’
s61(1) SGA
 G Battersby and A D Preston ‘The Concepts of “Property”, “Title” and “Owner”
used in the Sale of Goods Act 1893 (1972) 35 Modern Law Review 268-288
 McClure, Stebbings and Goldberg ‘The History of a Hunt for Simplicity and
Coherence in the Field of “Ownership”, “Possession”, “Property” and “Title”
in the Sale of Goods Act” [1992] Denning Law Journal 103-136
 C L Ho, ‘Some Reflections on “Property” and “Title” in the Sale of Goods
Act’ [1997] Cambridge Law Journal 571-598
 G Battersby ‘A reconsideration of “property” and “title” in the Sale of Goods Act’
[2001] Journal of Business Law 1-13

1.3.6 Price
‘(1) The price in a contract of sale may be fixed by the contract, or may be left to be
fixed in a manner agreed by contract, or may be determined in the course of dealing between
the parties.
(2) Where the price is not determined as mentioned in subsection (1) above the buyer
must pay a reasonable price.
(3) What is a reasonable price is a question of fact dependent on the circumstances of
each particular case.’
s8 SGA

May & Butcher Ltd v R [1934] 2 KB 17n (HL)


Hillias & Co Ltd v Arcos Ltd (1932) 147 LT 503 (HL)

What is the true contractual position in a situation where a customer agrees to purchase
goods from a retailer by credit or debit card with the knowledge that a 2.5 per cent fee of
the total purchase price would go to another company, unassociated with the retailer, for
card-handling services? See Revenue and Customs Commissioners v Debenhams Retail
plc [2005] EWCA 892 overruling [2004] EWHC 1540 (Ch), [2004] STC 1132

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1.4. SALE OF GOODS AND OTHER TRANSACTIONS DISTINGUISHED

1.4.1 Introduction
Section 17 Statute of Frauds Act 1677 (re-enacted with changes s4 SGA 1893)
Sec.1 Law Reform (Enforcement of Contracts) Act 1954 repealed the above.

1.4.2 Sale distinguished from gift


Esso Petroleum Ltd v Customs and Excise Commissioners [1976] 1 WLR 1,
[1976] 1 All ER 117 (HL)

1.4.3 Sale distinguished from barter or exchange


Aldridge v Johnson (1857) E & B 885, 26 LJQB 296, 119 ER 1476
Dawson v Dutfield [1936] 2 All ER 232 (KBD)
Flynn v Mackin [1974] IR 101

1.4.4 Sale of goods distinguished from a transfer of an interest in land


s.53(1)(c) Law of Property Act 1925
s.1 Law of Property (Miscellaneous Provisions) Act 1989
See also Saunders v Pilcher [1949] 2 All ER 1097

1.4.5 Sale distinguished from a bailment


South Australian Insurance Co v Randell (1869) LR 3 PC 101, 16 ER 755
Chapman Bros v Verco Bros & Co Ltd (1933) 49 CLR 306 (HCA)
Mercer v Craven Grain Storage Ltd [1994] CLC 328 (HL)

1.4.6 Sale distinguished from hire-purchase


Lee v Butler [1893] 2 QB 318 (CA)
Helby v Matthews [1895] AC 471 (HL)
Forthright Finance Ltd v Carlyle Finance Ltd [1997] 4 All ER 90 (CA)
The Supply of Goods (Implied Terms) Act 1973
The Consumer Credit Act 1974
The Unfair Contract Terms Act 1977
Since the coming into force of the Consumer Credit Act 1974 what is the practical
effect of the distinction between hire purchase and conditional sale agreements?

1.4.7 Sale of goods distinguished from a contract for work and materials
Clay v Yates (1856) 1 H & N 73, Lee v Griffin (1861) 1 B & S 272
Cammell Laird & Manganese Bronze & Brass Co Ltd [1934] AC 402 (HL)
Robinson v Graves [1935] 1 KB 579 (CA)
Lockett v Charles Ltd [1938] 4 All ER 170
Dodd v Wilson [1946] 2 All ER 691
J Marcel (Furriers) Ltd v Tapper [1953] 1 WLR 49
Philip Head & Sons Ltd v Showfronts Ltd [1970] 1 Lloyd’s Rep 140
H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd [1978] QB 791 (CA)
Jones v Gallagher [2004] EWCA Civ 10, [2005] 1 Lloyd's Rep. 377

Given the repeal of s4 of the Sale of Goods Act 1893 in 1954 how important is the
distinction between sales of goods and contracts for the supply of work and materials?

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See, in particular, the Supply of Goods and Services Act 1982

Hyundai Heavy Industries Co Ltd v Papadopoulos [1980] 1 WLR 1129 (HL)


Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 WLR 575 (HL)
St Albans City and District Council v ICL [1996] 4 All ER 481 (CA)
London Borough of Southwark v IBM [2011] EWHC 549 (TCC)

Are contracts for the sale of computer software governed by the SGA? If your answer
to this question is no, what legal regime governs the sale of computer software?

 Robert Bradgate ‘Beyond the Millennium - The Legal Issues: Sale of Goods
Issues and the Millennium Bug’ (1999) 2 The Journal of Information, Law and
Technology (http://www2.warwick.ac.uk/fac/soc/law/elj/jilt/1999_2/bradgate)
 Paul Eden ‘Electronic Commerce – Law and Policy’ in The Internet, Law and
Society edited by Clive Walker et al (Longman, 2000) chapter 15 (pp.349-369)
 Sarah Green and Djakhongir Saidov “Software as goods” [2007] JBL 161-181

1.5. FORMATION OF THE CONTRACT OF SALE

1.5.1 Formation in general


‘(1) The price in a contract of sale may be fixed by the contract, or may be left to be fixed in
a manner agreed by the contract, or may be determined by a course of dealing between
the parties.
(2) Where the price is not determined as mentioned in subsection (1) above the buyer must
pay a reasonable price.
(3) What is a reasonable price is a question of fact dependent on the circumstances of each
particular case.’
s8 SGA
May & Butcher Ltd v R [1934] 2 KB 17 (HL)
Hillias & Co Ltd v Arcos Ltd (1932) 147 LT 503; [1932] All ER Rep 494 (HL)
Can the cases of May & Butcher v R and Hillias v Arcos be reconciled?

1.5.2 Auction sales


‘(1) Where goods are put up for sale by auction in lots, each lot is prima facie deemed to be
the subject of a separate contract of sale.
(2) A sale by auction is complete when the auctioneer announces its completion by the fall
of the hammer, or in other customary manner; and until the announcement is made any
bidder may retract his bid.
(3) A sale by auction may be notified to be subject to a reserve or upset price, and a right to
bid may be reserved expressly on on behalf of the seller.
(4) Where a sale is not notified to be subject to a right to bid by or on behalf of the seller, it
is not lawful for the seller to bid himself or to employ any person to bid at the sale, or for
the auctioneer to knowingly take any bid from the seller or any such person.
(5) A sale contravening subsection (4) above may be treated as fraudulent by the buyer.
(6) Where, in respect of a sale by auction, a right to bid is expressly reserved (but not
otherwise) the seller or any one person on his behalf may bid at auction.’
s57 SGA

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Warlow v Harrison (1859) 1 E & E 309; 120 ER 925 (EC)


Harris v Nickerson (1873) LR 8 QB 286; 42 LJKB 171
Dennant v Skinner and Collum [1948] 2 KB 164; [1948] 2 All ER 29
Barry v Davis [2000] 1 WLR 1962, [2001] 1 All ER 944 (CA)
In sales governed by s57 who makes the offer and who makes the acceptance?

See Frank Meisel “A Nod and a Wink – the Problem of Disappointed Buyers at
Auction” in F. Meisel and P. J. Cook (eds) Property and Protection – Essays in
Honour of Brian W Harvey (Hart, 2000) 289-304. See also Frank Meisel “What
price auctions without reserve?” (2001) 64 MLR 468-72 and Karen Scott “The
auction house: with or without reserve?” [2001] LMCLQ 334-7.

1.5.3 Mistake
62(2) SGA

1.5.4 Formalities
‘(1) Subject to this and any other Act, a contract of sale may be made in writing (either with
or without seal), or by word of mouth, or partly in writing and partly by word of mouth,
or may be implied from the conduct of the parties.
(2) Nothing in this section affects the law relating to corporations.’
Section 4 SGA

2. PASSING THE PROPERTY IN THE GOODS, RISK AND


FRUSTRATION
Readings: Atiyah chapters 8 and 19-20, Sealy/Hooley chapter 8, Baskind chapters 11 and
13, Bridge chapters 3 and 4, Goode chapters 8 and 9, Macleod chapters 19, 20 & 22

2.1 INTRODUCTION

2.1.1 “The property”


ss 2(1), 61(1) SGA
ss12(1)-(3) SGA
Is “the general property in goods” the same thing as ownership of the goods?

Rowland v Divall [1923] 2 KB 500 (CA)


Butterworth v Kingsway Motors [1954] 1 WLR 1286, [1954] 2 All ER 694
Law Reform Committee – Twelfth Report Transfer of Title to Chattels (Cmnd
2958, 1967) paragraph 36 – compensation for use by buyer mooted
See also section 6 Torts (Interference with Goods) Act 1977 - improvements

2.1.2 Significance of passing the property


The distinction between sale and agreements to sell
ss2(4)-(5) SGA
The Aliakmon [1986] AC 785 (HL)

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2.2 RELATIONSHIP OF PROPERTY TO RISK

2.2.1 Passing of Risk (prior to 2003 - res perit domino)


‘(1) Unless otherwise agreed, the goods remain the seller’s risk until the property in them is
transferred to the buyer, but when the property in them is transferred to the buyer the goods
are the buyer’s risk whether delivery has been made or not.
(2) But where delivery has been delayed through the fault of either buyer or seller the 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 a bailee
or custodier of the goods of the other party.
(4) In a case where the buyer deals as consumer or, in Scotland, where there is a consumer
contract in which the buyer is a consumer, subsections (1) to (3) above must be ignored and
the goods remain at the seller's risk until they are delivered to the consumer.
s20 SGA (sub-section (4) was added by s4 of SI 3045/2002 w.e.f. 31st March 2003)
Head v Tattersall (1871) LR 7 Exch 7 (CE)
Demby Hamilton & Co Ltd v Barden [1949] 1 All ER 435 (KB)
Wiehe v Dennis Bros (1913) 29 TLR 250 (KB)
Sterns Ltd v Vickers Ltd [1923] 1 KB 78 (CA)
L S Sealy ‘“Risk” in the Law of Sale’ [1972B] Cambridge LJ 225
Is Head v Tattersall really an illustration of the doctrine of risk?

2.2.2 Statutory provisions relating to the perishing of specific goods


‘Where there is a contract for the sale of specific goods, and the goods without the
knowledge of the seller have perished at the time when a contract is made, the contract is
void’
s6 SGA
Couturier v Hastie (1856) 5 HL Cas 673
McRae v Commonwealth Disposals Commission (1950) 84 CLR 377 (HCA)

What is the relationship between s6 SGA and the doctrine of common mistake?
Can the decision in McRae be reconciled with the statutory rule laid down by s6?

‘Where there is an agreement to sell specific goods and subsequently the goods, without any
fault on the part of the seller or buyer, perish before the risk passes to the buyer, the
agreement is avoided’
s7 SGA
Howell v Coupland (1876) 1 QBD 258 (CA)

2.3 FRUSTRATION

2.3.1 Relationship between s7 SGA and the doctrine of frustration


• agreement to sell specific goods
• the concept of “perishing”

2.3.2 Frustration of a contract of sale at common law


Blackburn Bobbin Co Ltd v T W Allen & Sons Ltd [1918] 2 KB 467 (CA)

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Fibrosia Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC


32, [1942] 2 All ER 122 (HL)
Tsakiroglou & Co Ltd v Noblee Thorl GmbH [1962] AC 93 (HL)
“The Super Servant Two” [1990] 1 Lloyd’s LR 1 (CA)

2.3.3 Other instances of frustration


s.9 SGA (Agreement to sell goods – price to be fixed by third party valuation)

2.3.4 Force majeure clauses


See Treitel Frustration and Force Majeure 2nd ed (Sweet and Maxwell, 2004)

2.3.5 Effect of frustration


Law Reform (Frustrated Contracts) Act 1943
Intertradex SA v Lesieur-Tourtreaux SARL [1977] 2 Lloyd’s Rep 146 (QB)
(affirmed [1978] 2 Lloyd’s Rep 509 (CA))
Howell v Coupland (1876) 1 QBD 258 (CA)
H R & S Sainsbury Ltd v Street [1972] 1 WLR 834 (QBD)
B P Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783 (QBD)
The Super Servant II [1990] 1 Lloyd’s Rep 1 (CA)

 Is it ever possible for a contract for the sale of generic goods sold purely by
description to be frustrated?
 Is Howell v Coupland an example of what is now covered by s7 of the SGA,
common-law frustration or a contract for the sale of goods the acquisition of
which depends on a contingency (s5(2) of the SGA)?
 Compare the provisions of Article 79 of the United Nations Convention on
Contracts for the International Sale of Goods (CISG) (also known as the
Vienna Sales Convention) and the doctrine of frustration in English law.
Which of the two is, in your view, better suited to the needs of the commercial
community?

2.4 THE BASIC RULES FOR DETERMINING WHEN PROPERTY


PASSES

2.4.1 No property can pass in unascertained goods


‘[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.’
s16 SGA
Re Wait [1927] Ch 606 (CA)
Re London Wine Co (Shippers) Ltd [1986] PCC 121 (ChD)
Hunter v Moss [1994] 1 WLR 452, [1993] 3 All ER 215 (CA)
Re Goldcorp Exchange Ltd [1995] 1 AC 74, [1994] 2 All ER 806 (PC)
Re Stapylton Fletcher Ltd [1994] 1 WLR 1181, [1995] 1 All ER 192 (ChD)
Customs and Excise Commissioners v Everwine Ltd [2003] EWCA Civ 953, (2003)
147 SJLB 870
Sale of Goods forming Part of a Bulk L Com No 215, 1993

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Section 20A SGA was introduced by the Sale of Goods (Amendment) Act 1995 and
it applies to contracts entered into on or after 19 September 1995.

For a discussion of the effect of the Sale of Goods (Amendment) Act 1995 see:
 Burns ‘Better Late than Never: Reform of the Law on the Sale of Goods
forming Part of a Bulk’ (1996) 59 MLR 260-271;
 Ulph ‘The Sale of Goods (Amendment) Act: co-ownership and the rogue
seller’ [1996] LMCLQ 93; and
 Gullifer ‘Constructive Possession after the Sale of Goods (Amendment) Act
1995’ [1999] LMCLQ 93

For a discussion of the (potential) role of equitable property interests in the sphere of
bulk (and non-bulk) sales see, inter alia:
 Worthington ‘Sorting Out Ownership Interests in a Bulk: Gifts, Sales and
Trusts’ [1999] Journal of Business Law 1-21 (which may be contrasted with)
 Eden ‘The Equitable Ownership of Shares’ in E Cooke (ed) Modern Studies
in Property Law: Volume II – Property 2002 (Hart, 2003) 183-201 and
 Eden ‘Re Goldcorp Exchange Ltd Revisited’ in E Cooke (ed) Modern Studies
in Property Law: Volume III – Property 2004 (Hart, 2005) 177-199.

2.4.2 Ascertainment
 ascertainment by exhaustion
Wait & James v Midland Bank (1926) Com Cas 172 (KBD)
The Elafi [1982] 1 All ER 208 (QBD)
See also section 18 rule 5 sub-sections (3) and (4) (inserted by the Sale of Goods
(Amendment) Act 1995 applies to contracts entered into on or after 19 Sept. 1995)

2.4.3 Section 17: intention of the parties paramount


‘(1) Where there is a contract for the sale of specific or ascertained goods the property in the
goods 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.’
Re Blyth Shipbuilding & Dry Docks Co Ltd [1926] Ch 494 (CA)
Re Anchor Line (Henderson Bros.) Ltd [1937] Ch 1
R V Ward Ltd v Bignall [1967] 1 QB 534 [1967] 2 All ER 449 (CA) at 454 (All ER
453I) “in modern times very little is needed to give rise to the inference that property
in specific goods is to pass only on delivery or payment” (per Diplock LJ).

2.5 STATUTORY PRESUMPTIONS - SECTION 18


‘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.’
s18 SGA

2.5.1 Rule 1: unconditional contract.... specific goods in a deliverable state


‘Rule 1. - Where 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,

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and it is immaterial whether the time for payment or the time for delivery, or both, be
postponed.’
 unconditional contract
 specific goods
 deliverable state
Tarling v Baxter (1827) 6 B & C 360 (KB)
Dennant v Skinner [1948] 2 KB 164
Kursell v Timber Operators & Contractors Ltd [1927] 1 KB 298 (CA)
Underwood Ltd v Burgh Castle Brick & Cement Syndicate Ltd [1922] 1 KB 123
Philip Head & Sons Ltd v Showfronts Ltd [1970] 1 Lloyd’s Rep 140 (QBD)

2.5.2 Rule 2: specific goods to be put into a deliverable state by the seller
‘Rule 2. - Where there is a contract for the sale of specific goods and the seller is bound to
do something to the goods for the purpose of putting them in a deliverable state, the property
does not pass until the thing is done and the buyer has notice that it has been done.’

2.5.3 Rule 3: specific goods to be weighed, measured etc. to ascertain the price
‘Rule 3. - Where there is a contract for the sale of specific goods in a deliverable state but
the seller is bound to weigh, measure, test or do some other act or thing with reference to the
goods for the purposes of ascertaining the price, the property does not pass until the act or
thing is done and the buyer has notice that it has been done.’
Turley v Bates (1863) 2 H & C 200; 159 ER 83 (CE)
Nanka-Bruce v Commonwealth Trust [1926] AC 77 (PC)
Castle v Playford (1872) LR 7 Exch 98 (CE)

2.5.4 Rule 4: goods delivered on approval or on sale or return


‘Rule 4 - When the goods are delivered to the buyer on approval or on sale or return or
other similar terms the property in the goods 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 his approval or acceptance to the seller but retains the goods
without giving notice of rejection, then, if a time has been fixed for the return of the goods,
on the expiration of that time, and, if no time has been fixed, on the expiration of a
reasonable time.’
Kirkham v Attenborough [1897] 1 QB 201; 66 LJQB 149 (CA)
Weiner v Gill [1906] 2 KB 574 (CA)
Poole v Smith’s Car Sales (Balham) Ltd [1962] 1 WLR 744 (CA)
Atari Corp (UK) Ltd v Electronic Boutique Stores Ltd [1998] 1 All ER 1010 (CA)
What is the date of a sale of goods delivered on approval or sale or return for
VAT purposes? See sec. 6 (2)(c) of the VAT Act 1994 and Compton &
Woodhouse Ltd v Revenue and Customs Commissioners [2008] S.T.I. 1162
(VAT due on mail order goods sent “on 60 days approval” at time of supply).

2.5.5 Rule 5: unascertained goods


‘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

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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.
(2) Where, in pursuance of the contract, the seller delivers the goods to the buyer or
to a carrier or other bailee or custodier (whether named by the buyer or not) for the purpose
of transmission to the buyer, and does not reserve the right of disposal, he is taken to have
unconditionally appropriated the goods to the contract.
(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.
(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.
Wait v Baker (1848) 2 Exch 1; 154 ER 380 (CE)
Aldridge v Johnson (1857) 7 E & B 885; 119 ER 1476 (QB)
Pignataro v Gilroy [1919] 1 KB 459; 88 LJKB 726 (KB)
Carlos Federspeil & Co SA v Charles Twigg & Co Ltd [1957] 1 Lloyd’s Rep 240
Wardar’s Import & Export) Co Ltd v W Norwood & Sons Ltd [1968] 2 QB 663 (CA)
Kulkarni v Manor Credit (Davenham) Ltd [2010] EWCA Civ 69

3. TRANSFER OF TITLE BY A NON-OWNER


Readings: Atiyah chapter 21, Sealy/Hooley chapter 9, Baskind chapter 12, Bridge chapter
9, Goode chapter 16, Macleod chapter 21

3.1 THE NEMO DAT QUOD NON HABET RULE


Cundy v Lindsay (1878) 3 App Cas 459 (HL)
Jerome v Bentley & Co [1952] 2 All ER 114
‘In the development of our law, two principles have striven for mastery. The first is for
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 times.’
Per Denning LJ in Bishopsgate Motor Finance Corpn Ltd v Transport Brakes Ltd
[1949] 1 KB 322 (CA) at 336-7

3.2 THE EXCEPTIONS TO THE NEMO DAT RULE

3.2.1 First exception: Estoppel


‘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.’ (emphasis added)
s21(1) SGA

Is the word “precluded” in section 21(1) more or less equivalent to “estopped”?


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‘Ostensible or apparent authority.... is merely a form of estoppel, indeed, it has been termed
agency by estoppel, and you cannot call in aid an estoppel unless you have three ingredients:
(i) a representation, (ii) reliance on the representation, and (iii) an alteration of your position
resulting from such reliance.’
Rama Corpn Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147 (QBD)
‘We may lay it down as a general principle that, wherever one of two innocent persons must
suffer by the acts of a third, he who has enabled such third person to occasion the loss must
sustain it’
This dictum of Ashhurst J in Lickbarrow v Mason (1787) 2 Term Rep 63 at 70 is
much quoted but rarely applied and may be termed a dictum of last resort.
Commonwealth Trust v Akotey [1926] AC 72 (PC)
Eastern Distributors Ltd v Goldring [1957] 2 QB 600 (CA)
Henderson & Co v Williams [1895] 1 QB 521 (CA)
Farquharson Bros & Co v C King & Co [1902] AC 325 (HL)
Central Newbury Car Auctions Ltd v Unity Finance Ltd [1957] 1 QB 371 (CA)
Mercantile Credit Co Ltd v Hamblin [1965] 2 QB 242 (CA)
Moorgate Mercantile Co Ltd v Twitchings [1977] AC 890 (HL)
Powell v Wiltshire [2004] EWCA Civ 534, [2005] QB 117
Industrial and Corporate Finance Ltd v Wyder Group Ltd t/a Ducati (2008)
152(37) SJLB 31

Should there be a broad principle that whenever one person entrusts their goods to
another, an innocent purchaser from the latter should get good title?

Options for reform


Article 2279 of the French Civil Code: “En fait de meubles la possession vaut titre” -
the buyer in good faith who takes possession gets good title.
Law Reform Committee Transfer of Title to Chattels 1966 (Cmnd. 2958)
Diamond A Review of the Security Interests in Property (DTI, 1989)
Transfer of Title: Sections 21 to 26 of the Sale of Goods Act 1979 (DTI, 1994)

3.2.2 Second exception: mercantile agents


‘Nothing in this Act affects.... the provisions of the Factors Acts or any enactment enabling
the apparent owner of the goods to dispose of them as if he were their true owner;’
s21(2)(a) SGA
‘Where a mercantile agent is, with the consent of the owner, in possession of goods or of the
document of title to goods, any sale, pledge, or other disposition of the goods, made by him
acting in the ordinary course of business of a mercantile agent, shall, subject to the
provisions of this Act, be as valid as if he were expressly authorised by the owner of the
goods to make the same; provided that the person taking under the disposition acts in good
faith, and has not at the time of the disposition notice that the person making the disposition
has not authority to make the same.’
s2(1) Factors Act 1889
 mercantile agent
 in possession of the goods with the consent of the owner
 acting in the ordinary course of business as a mercantile agent
 buyer in good faith without notice of irregularity

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‘For the purposes of this Act, the expression “mercantile agent” shall mean a mercantile
agent having in the customary course of his business as such agent authority either to sell
goods or consign goods for the purpose of sale, or to buy goods, or to raise money on the
security of goods:’
s1(1) Factors Act 1889 (see also section 26 of the Sale of Goods Act 1979)
Weiner v Harris [1910] 1 KB 285 (CA)
Lowther v Harris [1927] 1 KB 393 (KBD)
Budberg v Jerwood (1934) 51 TLR 99 (KBD)
Pearson v Rose & Young Ltd [1951] 1 KB 275 (CA)
Staffs Motor Guarantee Ltd v British Wagon Co Ltd [1934] 2 KB 305 (KBD)
Astley Industrial Trust Ltd v Millar [1968] 2 All ER 36 (QBD)
Folkes v King [1923] 1 KB 282 (CA)
Heap v Motorists’ Advisory Agency Ltd [1923] 1 KB 577

3.2.3 Third exception: sale under power of sale or court order


‘Nothing in this Act affects.... the validity of any contract of sale under any special common
law or statutory power of sale or under the order or a court of competent jurisdiction’
s21(2)(b) SGA

3.2.4 Fourth exception: sale under a voidable title


‘When the seller of goods has a voidable title to them but this title has not been avoided at
the time of the sale, the buyer acquires good title to the goods provided that he buys them in
good faith and without notice of the seller’s defect of title.’
s23 SGA
Cundy v Lindsay (1878) 3 App Cas 459 (HL)
Lewis v Averay [1972] 1 QB 198, [1971] 3 All ER 907 (CA)
Car & Finance Co Ltd v Caldwell [1965] 1 QB 525 (CA)
Shogun Finance Ltd v Hudson [2003] UKHL 62, [2004] 1 AC 919

3.2.6 Fifth exception: disposition by seller continuing in possession after sale


‘Where a person having sold goods continues or is in possession of the goods, or of the
documents of title to the goods, the delivery or transfer by that person or by a mercantile
agent acting for him, of the goods or documents of title under any sale, pledge or other
disposition thereof, [or under any agreement for sale, pledge, or other disposition thereof] to
any person receiving the same in good faith and without notice of the previous sale, has the
same effect as if the person making the delivery or transfer were expressly authorised by the
owner of the goods to make the same.’
s24 SGA [see also s8 Factors Act 1889]
Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd [1965] AC 867
Worcester Works Finance Ltd v Cooden Engineering Co Ltd [1972] 1 QB 210 (CA)
(both these cases overrule Staffs Motor Guarantee Ltd v British Wagon Co Ltd
[1934] 2 KB 305 so far as the construction of s24 SGA is concerned)
Michael Gerson (Leasing) Ltd v Wilkinson [2001] QB 514 (CA)

‘The expression “document of title” shall include any bill of lading, dock warrant,
warehouse-keeper’s certificate, and warrant or order for the delivery of goods, and any other
document used in the ordinary course of business as proof of the possession or control of
the goods, or authorising or purporting to authorise, either by endorsement or delivery, the
possessor of the document to transfer or receive goods thereby represented,’

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s1(4) Factors Act 1889 [see also s61(1) SGA]

3.2.7 Sixth exception: disposition by buyer in possession


‘Where a person having bought or agreed to buy goods obtains, with the consent of the
seller, possession of the goods, or the documents of title to the goods, the delivery or
transfer by that person or by a mercantile agent acting for him, of the goods or documents of
title under any sale, pledge or other disposition thereof, [or under any agreement for sale,
pledge, or other disposition thereof] to any person receiving the same in good faith and
without notice of any lien or other right of the original seller in respect of the goods, has the
same effect as if the person making the delivery or transfer were a mercantile agent in
possession of the goods or documents of title with the consent of the owner.’
s25(1) SGA [see also s9 Factors Act 1889]
Lee v Butler [1893] 2 QB 318 (CA)
Newtons of Wembley Ltd v Williams [1965] 1 QB 560 (CA)
National Employers’ Mutual General Insurance Association Ltd v Jones [1990] 1
AC 24 (HL) - also known as NEMGIA Ltd v Jones
D F Mount Ltd v Jay & Jay (Provisions) Co Ltd [1960] 1 QB 159
Re Highway Foods International Ltd [1995] BCC 271
P4 Ltd v Unite Integrated Solutions Ltd [2006] EWHC 2640 (TCC)

3.2.8 Seventh exception: sale by unpaid seller under s48 SGA 1979
‘Where an unpaid seller who has exercised his right of lien or retention or stoppage in
transit re-sells the goods, the buyer acquires a good title to them as against the original
buyer.’
s48(2) SGA

Sections 48(3)-(4) SGA set out the circumstances in which the unpaid seller has a
right of resale. They are:
1. where the unpaid seller gives notice to the buyer of his intention to re-sell and the
buyer does not, within a reasonable time pay or tender the price;
2. where the goods are of a perishable nature (NB – notice not required); and
3. where the seller expressly reserves the right of re-sale in the event of the buyer’s
default and the buyer defaults (NB - the seller does not have to be unpaid!).

R V Ward v Bignall [1967] 1 QB 534, [1967] 2 All ER 449 (CA)

3.2.9 Eighth exception: sale of a motor vehicle held on hire purchase to a


private purchaser
Part III of the Hire-Purchase Act 1964 is concerned to protect:
 private purchasers;
 acting in good faith;
 who buy motor vehicles which have been let out on hire-purchase (or under
conditional sale agreements - see s27(1) HP Act 1964);
 without notice of the existence of the hire purchase agreement.
Shogun Finance Ltd v Hudson [2003] UKHL 62, [2004] 1 AC 919 (noted in [2004]
JBL 381-387, (2004) 120 LQR 369-373 and (2004) 63 Cambridge LJ 24-27)
GE Capital Bank Ltd v Rushton [2005] EWCA Civ 1556, [2006] 3 All ER 865
VFS Financial Services Ltd v JF Plant Tyres Ltd [2013] EWHC 346 (QB)

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4. RETENTION/RESERVATION OF TITLE CLAUSES


Readings: Atiyah 467-478, Sealy/Hooley 452-470, Baskind 255-264, Bradgate “Twenty-
Five Years of Romalpa” in Iwan Davies (ed) Security Interests in Mobile Equipment
(Ashgate, 2002) 29-94, Macleod pages 862-868.

4.1 INTRODUCTION

4.1.1 Romalpa clauses


Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676
ss 2(5), 17, 19, 25(1) SGA
ss 395-6 Companies Act 1985 (repealed (expected 1 October 2009) by Schedule 16
para 1 Companies Act 2006 and replaced by section 889 Companies Act 2006)
s8 Bills of Sale Act 1878
ss.8-11, 15 Insolvency Act 1986

4.1.2 Types of clauses


(i) simple clause - the seller retains ownership until the full purchase price for those
particular goods has been paid;
(ii) all liabilities or current account clause - this links the passing of the property
to the satisfaction of all debts;
(iii) continuing or extended clause - the seller retains ownership on the basis of (i)
and/or (ii) against the buyer and any sub-buyer;
(iv) tracing or prolonged clause - includes elements of (i)-(iii) but on subsale the
original seller seeks to retain title to the proceeds of sale or the right to sue the
sub-buyer for the proceeds;
(v) aggregation or enlarged clause - includes elements of (i)-(iv) but the clause
attempts to assert a claim to the ownership of property manufactured from the
goods supplied, or of a proportionate part of the resultant product equal to the
contribution made to the manufacturing process by the original goods.

4.1.3 Abandon hope all ye who enter here?


‘Since “Romalpa” clauses may take many forms, and since the case-law on their validity and
interpretation has become progressively complex and refined, this area of the law is, in the
words of Staughton J. (Hendy Lennox (Industrial Engines) Ltd v Grahame Puttick Ltd
[1984] 1 WLR 485 at 493), “presently a maze if not a minefield”.’
Benjamin’s Sale of Goods 6 ed. (Sweet and Maxwell, 2002) para 5-142

When does a reservation of title clause become a charge and, thus, void unless
registered under Part 25 of the Companies Act 2006?

4.2 THE LIMITS OF “ROMALPA” CLAUSES

4.2.1 Unaltered goods


ss 17(1) and 19(1) SGA
Re Bond Worth [1980] Ch 228 where Slade J said (at 248):
‘...any contract which, by way of security for the payment of a debt, confers an interest in
property defeasible or destructible on payment of such debt, or appropriates such property

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for the payment of the debt, must necessarily be regarded as creating a mortgage or charge,
as the case may be.’

Has Slade J’s much quoted dictum survived the rejection of the scintilla temporis
fiction in Abbey National Building Society v Cann [1991] 2 AC 56 (HL)?
See R Gregory ‘Romalpa clauses as unregistered charges - a fundamental shift?’
(1990) 106 LQR 550. But see also Stroud Agricultural Systems Ltd v John Laing
Construction Ltd [1994] BCC 18
Clough Mill Ltd v Martin [1985] 1 WLR 111, [1984] 3 All ER 982 (CA)
Armour v Thyssen Edelstahlwerke AG [1991] 2 AC 339 (HL)
Consider the situation where the buyer of unaltered goods subject to a simple
reservation of title clause goes into liquidation with only a small portion of the
purchase price unpaid. Will the seller be able to retake the goods and resell them? If
the resale raises more than the portion of the purchase price outstanding who is
entitled to the surplus? Would it matter whether the goods were divisible or
indivisible? Would it make a difference if the reservation of title clause was an “all
moneys” clause rather than a “simple” clause? Is Rowland v Divall [1923] 2 KB 500
(CA) relevant here? [See the judgment of Goff LJ in Clough Mill Ltd v Martin]

4.2.2 Mixed or synthesised goods


Borden (UK) Ltd Scottish Timber Products Ltd [1981] Ch 25 (CA)
Re Peachdart Ltd [1984] Ch 131 (ChD)
Hendy Lennox (Industrial Engines) Ltd v Grahame Puttick Ltd [1984] 1 WLR 485
(QBD)
Clough Mill Ltd v Martin [1985] 1 WLR 111 (CA)

In determining whether the seller retains title to synthesised or mixed goods the courts
tend to ask whether the goods are reducible to their original materials or not but Goff LJ
(in Clough Mill Ltd v Martin) suggested that it should be possible to resolve such
questions by careful drafting i.e. there is no reason why express terms of a contract cannot
displace the normal rule that ownership of synthesised goods resides with the synthesiser.
Would an approach based on the relative importance of the constituents be preferable?

4.2.3 Proceeds of subsales


Re Peachdart Ltd [1984] Ch 131 (ChD)
Hendy Lennox (Industrial Engines) Ltd v Grahame Puttick Ltd [1984] 1 WLR 485
Re Andrabell Ltd [1984] Ch 131
E Pheiffer Weinkellerei-Weinkauf GmbH & Co v Arbuthnot Factors Ltd [1988] 1
WLR 150
Tatung (UK) Ltd v Galex Telesure Ltd (1988) 5 BCC 325
Compaq Computer Ltd v Abercorn Group Ltd [1991] BCC 484

4.3 REFORM
Diamond A Review of Security Interests in Property (1989) Chapter 17 and para 23.6
Registration of Security Interests: Company Charges and Property other than Land
(Law Com Consultation Paper 164) paras 5.9-5.12, 16-6.21 and 7.24-7.26
Company Security Interests: A Consultative Report (Law Com C-Paper 176) paras
2.81-2.137 and Company Security Interests (Law Com Report 296) paras 1.60-1.66

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5. STATUTORY IMPLIED TERMS


Readings: Atiyah chapters 9 and 13, Sealy/Hooley chapter 10, Baskind chapter 15, Bridge
chapter 7, Goode chapter 11, Macleod chapters 11-15.

The Sale of Goods Act 1979 was amended by the Sale and Supply of Goods Act 1994
that came into effect on 3 January 1995. The 1994 Act is the legislative expression of the
Law Commission’s recommendations contained in Sale and Supply of Goods L Com 160,
1987. See Michael Bridge “The Sale and Supply of Goods Act 1994” [1995] JBL 398-
408 and Geraint Howells “The modernization of sales law?” [1994] LMCLQ 191-7.

More recently the Sale of Goods Act 1979 has been amended the Sale and Supply of
Goods to Consumers Regulations 2002 (SI 3045/2002). These Regulations implement
the 1999 EC Directive 1999/44/EC on Certain Aspects of Sale of Consumer Goods and
Associated Guarantees. See Chris Willett, Martin Morgan-Taylor and Andre Naidoo
“The Sale and Supply of Goods to Consumers Regulations” [2004] JBL 94-120. See also
Michael Bridge “What is to be done about sale of goods” (2003) 119 LQR 173-177.

5.1 INTRODUCTION

5.1.1 Express terms, implied terms and representations


ss2(1) and 2(2) Misrepresentation Act 1967
Oscar Chess v Williams [1957] 1 WLR 370, [1957] 1 All ER 325 (CA)
Hedley Burne v Heller [1964] AC 465
Thomson v Christie, Manson & Woods Ltd [2004] EWHC 1101 (QB) (noted in
(2005) 21 Professional Negligence 250-256 (by Frank Meisel)

5.1.2 Conditions, warranties and innominate terms


s11 SGA
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26
Cehave NV v Bremner Handelsgesellschaft mbH, The Hansa Nord [1976] QB 44
‘A criticism of the classification of most of the implied terms in the Sale of Goods Act as
“conditions” is that it leads to inflexibility and to a danger that the obligation of the seller to
supply goods of the appropriate quality will be watered down. If the defect is a minor one
the court may be reluctant to allow rejection and so, under the present law, may be tempted
to hold that there is no breach at all of the implied term to quality.’
The Law Commission Sale and Supply of Goods (L Com 160, 1987) para 2.26

A criticism of the reclassification of most of the implied terms in the Sale of Goods Act
as innominate terms is that the right of the innocent party to treat the contract as at an end
will depend on whether the buyer has been deprived ‘of substantially the whole benefit
which it was intended that he should obtain from the contract’ (per Diplock LJ in Hong
Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 (CA) at 70).
‘This test which is the same as that for frustration, can make it extremely difficult for the
innocent party to reject’ (Sale and Supply of Goods (L Com 160, 1987) para 2.25).

5.1.3 The seven statutory implied terms are:


 title - s12(1) SGA
 freedom from charges and encumbrances - s12(2)(a) SGA
 quiet possession - s12(2)(b) SGA

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 correspondence with description - s13 SGA (see also “new” s13(1A) SGA)
 satisfactory quality - s14(2) SGA - previously “merchantable quality”
 fitness for purpose - s14(3) SGA (see also “new” s14(6) SGA)
 correspondence with sample s15 SGA (see especially “new” s15(3) SGA)

What effect, if any, has the reclassification of the implied conditions and warranties in
ss11-15 of the Sale of Goods Act 1979 as terms had on a buyer’s remedies?
[Hint: the Sale and Supply of Goods Act 1994 attempts to introduce a distinction between
consumer and non-consumer cases. See “new” s15A SGA]

5.2 TITLE, FREEDOM FROM ENCUMBRANCES AND QUIET POSSESSION

5.2.1 Title
‘In a contract of sale, other than one to which subsection (3) below applies, there is an
implied term on the part of the seller that in the case of a sale he has the right to sell the
goods, and in the case of an agreement to sell he will have such a right at the time when the
property is to pass.’
s12(1) SGA
Rowland v Divall [1923] 2 KB 500 (CA)
Niblett Ltd v Confectioners’ Material Co [1921] 3 KB 387 (CA)
Butterworth v Kingsway Motors [1954] 1 WLR 1286
Barber v NSW Bank plc [1996] 1 WLR 641, [1996] 1 All ER 906 (CA)

Law Reform Committee 12th Report – Transfer of Title to Chattels (1967) para 36.

5.2.2 Sale of a limited title


ss12(3), (4) and (5) SGA

5.2.3 The implied terms as to freedom from encumbrances and quiet possession
ss12(2)(a) and (b) SGA
Mason v Burningham [1949] 2 KB 545 (CA)
Microbeads AC v Vinhurst Road Markings Ltd [1975] 1 WLR 218 (CA)
At what time do s12(1) and s12(2)(b) have to be satisfied?

Where there has been a breach of s12(1) (title), there will usually be a breach of s12(2)(b)
(quiet possession). Under what circumstances would an innocent party elect to rely on
s12(2)(b) rather than s12(1)?

5.3 SALES BY DESCRIPTION


‘Where there is a contract for the sale of goods by description there is an implied term that
the goods will correspond with the description.’
s13(1) SGA (to be read together with “new” s13(1A))
Varley v Whipp [1900] 1 QB 513
Grant v Australian Knitting Mills Ltd [1936] AC 85 (PC)
Heilbert, Symons and Co v Buckleton [1913] AC 30 (HL)
Re Moore & Co Ltd and Landauer & Co’s Arbitration [1921] 2 KB 519 (CA)
Arcos Ltd v E A Ronaasen & Son [1933] AC 470 (HL)
Beale v Taylor [1967] 1 WLR 1193, [1967] 3 All ER 253 (CA)

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Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 (HL)
Harlingdon & Leinster Enterprises Ltd v Christopher Hull Fine Art Ltd [1991] 1 QB
564, [1990] 1 All ER 737 (CA)
Notwithstanding the extension of the concept of a sale by description in the cases to
include sales of specific goods that the buyer has seen and inspected, it must be stressed
that not all sales with a description are sales by description. In order for a contract to be a
sale by description, the descriptive statement relied on must be a term of the contract and
not a mere representation inducing the buyer to enter into the contract. Are all the cases
reconcilable with this proposition?

Section 13 has been described as curious by some commentators who point out that the
seller’s duty to deliver goods of the description by which they were sold is better regarded
as an express obligation rather than an implied term. Do you agree?

5.4 IMPLIED TERMS AS TO QUALITY AND FITNESS

5.4.1 The general rule


caveat emptor - let the buyer beware
‘Except as provided by this section and section 15 below and subject to any other
enactment, there is no implied term about the quality or fitness for purpose of goods
supplied under a contract of sale.’
s14(1) SGA
‘An implied term about quality or fitness for a particular purpose may be annexed to a
contract of sale by usage.’
s14(4) SGA

5.4.2 Where “the seller sells goods in the course of a business”


Boyter v Thomson [1995] 2 AC 628, [1995] 3 All ER 125 (HL)
Davies v Sumner [1984] 1 WLR 1301, [1984] 3 All ER 831 (HL)
Stevenson v Rogers [1999] QB 1028, [1999] 1 All ER 613 (CA)

5.4.3 The implied term that the goods are of satisfactory quality

(2) Where the seller sells in the course of a business, there is an implied term that the
goods supplied under the contract are of satisfactory quality.
Wilson v Rickett, Cockerell & Co Ltd [1954] 1 QB 589, [1954] 1 All ER 868 (CA)

(2A) For the purposes of this Act, goods are of a satisfactory quality if they meet the
standard that a reasonable person would regard as satisfactory, taking account of any
description of the goods, the price (if relevant) and all other relevant circumstances.

(2B) For the purposes of this Act, the quality of the goods includes their state and
condition and the following (among others) are in appropriate cases aspects of the quality of
goods-
(a) fitness for all the purposes for which goods of the kind in question are commonly
supplied,
(b) appearance and finish,
(c) freedom from minor defects,
(d) safety, and
(e) durability.

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SW Tubes v. Owen Stuart [2002] EWCA Civ 854 – section 14(2B)(d) “safety”
Bramhill v Edwards [2004] EWCA Civ 403, [2004] 2 Lloyd’s Rep 653 (CA)
Darren Egan v Motor Services (Bath) Ltd [2007] EWCA Civ 1002
Lowe v W Machell Joinery Ltd [2011] EWCA Civ 794
(2C) The term implied by subsection (2) does not extend to any matter making the goods
unsatisfactory-
(a) which is specifically drawn to the buyer’s attention before the contract is made,
(b) where the buyer examines the goods before the contract is made, which that1
examination ought to reveal, or
(c) in the case of a sale by sample, which would have been apparent on a reasonable
examination of the sample.’

Thornett & Fehr v Beers & Son [1919] KB 486


Bartlett v Sidney Marcus Ltd [195] 1 WLR 1013 (CA)
Bramhill v Edwards [2004] EWCA Civ 403, [2004] 2 Lloyd’s Rep 653 (CA)
Stephenson v Cookson [2009] EWCA Civ 1270 – refusal of permission to appeal.
MacDonald v Pollock (The Monaco) [2012] CSIH 12, [2012] 1 Lloyd’s Rep 425

s14 SGA (to be read together with “new” s14(6) SGA)


The 1893 Act did not define merchantable quality and there were two main
approaches to the question of what was meant by merchantable quality (i.e. the
“acceptability test” and the “usability test”). Although the cases in which these two
approaches were to be found were superseded by the statutory definition introduced
by s7(2) of the Supply of Goods (Implied Terms) Act 1973, they illustrate very clearly
some of the difficulties inherent in trying to define what the quality of goods should
be. [Law Commission Sale and Supply of Goods (1987) para 2.6 (paraphrased)].

Mitchell ‘The Development of Quality Obligations in the Sale of Goods’ (2001) 117
LQR 645-663
Hedley “Quality of Goods, Information and the Death of Contract” [2001] JBL 114-125
Ervine “Satisfactory Quality: What does it Mean?” [2004] JBL 684-703.

To what extent will the post-1973 cases defining merchantable quality, such as Aswan
Engineering Establishment Co v Lupdine Ltd [1987] 1 WLR 1 (CA), be of assistance
in defining the new concept of satisfactory quality?

Section 14(2D) makes public statements made about specific characteristics of the
goods made by “the seller, the producer or his representative, particularly in
advertising or on labelling” part of the circumstances mentioned in subsection (2A)
where the buyer deals as a consumer. Section 14(2E) allows the seller to escape
liability for misleading public statements where the seller can show (NB – onus!):
a) At the time the contract was made, the seller was unaware of the statement;
b) Before the contract was made, the statement was withdrawn or corrected; or
c) The decision to buy the goods could not have been influenced by the
statement.

1
From 1893-1973 the word that in section 14(2C)(b) read such. Is this a distinction or just a difference?

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5.4.4 The implied term as to fitness for purpose (s14(3))


‘Where the seller sells goods in the course of a business and the buyer, expressly or by
implication, makes known.... to the seller, or.... where the purchase price or part of it is
payable by instalments and the goods were previously sold by a credit-broker to the seller, to
that credit broker, any particular purpose for which the goods are being bought, there is an
implied term that the goods supplied under the contract are reasonably fit for that purpose,
whether or not that is a purpose for which such goods are commonly supplied, except where
the circumstances show that the buyer does not rely, or that it is unreasonable for him to rely,
on the skill or judgment of the seller or credit-broker.’
s14(3) SGA (to be read together with “new” s14(6) SGA)

Bristol Tramways & Carriage Co Ltd v Fiat Motors Ltd [1910] 2 KB 831 (CA)
Cammell Laird & Manganese Bronze & Brass Co Ltd [1934] AC 402 (HL)
Teheran-Europe Co Ltd v S T Belton (Tractors) Ltd [1968] 2 QB 545 (CA)
Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 (HL) (also
known as Hardwick Game Farm v SAPPA)
Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 (HL)
Slater v Finning [1997] AC 473, [1996] 3 All ER 398 (HL)
Britvic Soft Drinks Ltd v Messer UK Ltd [2002] 1 Lloyd’s Rep 20, on appeal [2002]
EWCA Civ 548, [2002] 2 Lloyd’s Rep 368 (CA)
Hamilton v Papakura District Council [2002] UKPC 9 noted in (2002) 118 LQR 538
Jewson Ltd v Kelly [2003] EWCA Civ 1030, [2004] 1 Lloyd’s Rep 505 (CA)
What is the relationship between section 14(2) and 14(3) of the Sale of Goods Act?

5.5 TERMS IMPLIED IN SALES OF GOODS BY SAMPLE (s15 SGA)


‘(1) A contract of sale is a contract for sale by sample where there is an express or implied
term to that effect in the contract.
(2) In the case of a contract for sale by sample there is an implied term-
(a) that the bulk will correspond with the sample in quality;
(b) .... [deleted by s7 (read together with Schedule 2) of the Sale and Supply of Goods Act
1994 (but re-enacted as the final clause of the amended section 34 SGA)]
(c) that the goods will be free from any defect, making their quality unsatisfactory, which
would not be apparent on reasonable examination of the sample.
(3) As regards England, Wales and Northern Ireland, the term implied by subsection (2)
above is a condition.’
s15 SGA
Drummond v Van Ingen (1887) 12 App Cas 284 (HL) [ 374]
Steel & Busks Ltd v Bleecker Bik & Co Ltd [1956] 1 Lloyd’s Rep 228 (QBD) [ 374]

5.6 MODIFICATION OF REMEDIES IN NON-CONSUMER CASES


Buyers, who do not deal as consumers, may not reject goods for the breach of a
term implied in ss13-15 where “the breach is so slight that it would be
unreasonable for him to reject them” i.e. breach of condition to be treated as
breach of warranty (s15(1) (a)-(b) SGA)
s15A SGA was inserted by s4 SSGA 1994 with effect from (w.e.f.) 03-01-1995
Who bears the onus of proving that the breach of a term implied by ss13-15 SGA was so
slight that a buyer who did not act as a consumer wouldn’t be entitled to reject the goods?

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6 ASPECTS OF CONSUMER LAW


Readings: Atiyah chapters 14-16, Willett, Morgan-Taylor and Naidoo “The Sale and
Supply of Goods to Consumers Regulations” [2004] JBL 94-120

6.1 Introduction
As students will no doubt have grasped, the general Commercial Law texts are not
particularly strong on their coverage of Consumer Law. Regard might also be had to:
 Bradgate and Twigg-Flesner Blackstone’s Guide to Consumer Sales and Associated
Guarantees (OUP, 2003)
 J K Macleod Consumer Sales Law 2 ed (Routledge-Cavendish, 2007)
 Law Commission Simplifying Consumer Legislation: A Response to the DTI (2004)
– Part 3 Private Rights: The Sale and Supply of Goods and Services pages 10-13

6.2 EXCLUSION OF SELLER’S LIABILITY

6.2.1 Exemption clauses at common law


- incorporation into the contract
- construction of exemption clauses
Thornington v Shoe Lane Parking Co. Ltd [1971] 2 QB 163 (CA)
Interfoto Picture Library Ltd v Stilleto Visual Progr. Ltd [1989] QB 433 (CA)
Curtis v Chemical Cleaning and Dyeing Co [1951] 1 KB 805 (CA)
Photo Production Ltd v Securicor Transport [1980] AC 827 (HL)
AEG (UK) Ltd v Logic Resource Ltd [1996] CLC 265 (CA)
Photolibrary Group Ltd v Burda Senator Verlag GmBH [2008] EWHC 1343

6.2.2 Statutory control of exemption and limitation clauses


Unfair Contract Terms Act 1977 (UCTA)
- dealing as a consumer (s12 UCTA)
- reasonableness (s11 UCTA)
R & B Customs Brokers Co Ltd v United Dominions Trust [1988] 1 WLR 321,
[1988] 1 All ER 847 (CA)
Davies v Sumner [1984] 1 WLR 1301, [1984] 3 All ER 831 (HL)
George Mitchell (Chesterhall) Ltd v Finney Locks Seeds Ltd [1983] 2 AC 803 (HL)
Walford Electronics Ltd v Sanderson CFL Ltd [2001] EWCA Civ 317, [2001] 1 All
ER 696 (CA)
Feldarol(l) Foundary plc v Hermes Leasing London Ltd [2004] EWCA Civ 747

Unfair Terms in Consumer Contracts Regulations 1999 (a re-enactment with minor


modifications of the Unfair Terms in Consumer Contracts Regulations 1994 which
came into in force from 1 July 1995). These regulations only apply to:
 consumer contracts, which are
 standard form contracts.
See also the Law Commission Report Unfair Terms in Contracts Law Com 292 (2005).

6.2.3 International Supply Contracts

(1) The limits imposed by this Act on the extent to which a person may exclude or
restrict liability by reference to a contract term do not apply to liability arising
under such a contract as is described in subsection (3) below.

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(2) The terms of such a contract are not subject to any requirement of reasonableness
under section 3 or 4: and nothing in Part II of this Act shall require the
incorporation of the terms of such a contract to be fair and reasonable for them to
have effect.
(3) Subject to subsection (4), that description of contract is one whose characteristics
are the following—
(a) either it is a contract of sale of goods or it is one under or in pursuance of
which the possession or ownership of goods passes; and
(b) it is made by parties whose places of business (or, if they have none, habitual
residences) are in the territories of different States (the Channel Islands and
the Isle of Man being treated for this purpose as different States from the
United Kingdom).
(4) A contract falls within subsection (3) above only if either—
(a) the goods in question are, at the time of the conclusion of the contract, in the
course of carriage, or will be carried, from the territory of one State to the
territory of another; or
(b) the acts constituting the offer and acceptance have been done in the territories
of different States; or
(c) the contract provides for the goods to be delivered to the territory of a State
other than that within whose territory those acts were done.

Section 26 Unfair Contract Terms Act 1977


Ocean Chemical Transport Inc v Exnor Craggs Ltd [2000] 1 Lloyd's Rep 446 (CA).
Amiri Flight Authority v BAE Systems PLC [2003] EWCA Civ 1447, [2003] 2
Lloyd’s Rep 767

6.3 CONSUMER GUARANTEES

(1) Where goods are sold or otherwise supplied to a consumer which are offered with a
consumer guarantee, the consumer guarantee takes effect at the time the goods are
delivered as a contractual obligation owed by the guarantor under the conditions set
out in the guarantee statement and the associated advertising.
(2) The guarantor shall ensure that the guarantee sets out in plain intelligible language the
contents of the guarantee and the essential particulars necessary for making claims
under the guarantee, notably the duration and territorial scope of the guarantee as well
as the name and address of the guarantor.
(3) On request by the consumer to a person to whom paragraph (4) applies, the guarantee
shall within a reasonable time be made available in writing or in another durable
medium available and accessible to him.
(4) This paragraph applies to the guarantor and any other person who offers to consumers
the goods which are the subject of the guarantee for sale or supply.
(5) Where consumer goods are offered with a consumer guarantee, and where those goods
are offered within the territory of the United Kingdom, then the guarantor shall ensure
that the consumer guarantee is written in English.
(6) If the guarantor fails to comply with the provisions of paragraphs (2) or (5) above, or a
person to whom paragraph (4) applies fails to comply with paragraph (3) then the
enforcement authority may apply for an injunction or (in Scotland) an order of specific
implement against that person requiring him to comply.
(7) The court on application under this Regulation may grant an injunction or (in
Scotland) an order of specific implement on such terms as it thinks fit.

Reg. 15 Sale and Supply of Goods to Consumers Regulations 2002 (SI 2002/3045).

See also sections 5 and 19 of the Unfair Contract Terms Act 1977
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7. PERFORMANCE OF THE CONTRACT


Readings: Atiyah chapters 10-12 and 17-18, Sealy/Hooley chapter 11, Baskind chapter
14, Bridge chapter 6 (pp.202-229), Goode chapters 10, 12 and 13 (pp.274-384 excluding
pp.290-357), Macleod chapter 23.

7.1 INTRODUCTION

7.1.1 Duties of seller and buyer


‘It is the duty of the seller to deliver the goods, and of the buyer to accept and pay for them,
in accordance with the terms of the contract of sale.’
s27 SGA

7.1.2 Payment and delivery are concurrent conditions


‘Unless otherwise agreed, delivery of the goods and payment of the price are concurrent
conditions, that is to say, the seller must be ready and willing to give possession of the
goods to the buyer in exchange for the price and the buyer must be ready and willing to pay
the price in exchange for possession of the goods.’
s28 SGA
Ferometal SARL v Mediterranian Shipping Co SA [1989] AC 788 (HL)
Albright & Wilson UK Ltd v Biachem Ltd [2001] EWCA Civ 301 was reversed in part
by [2002] UKHL 22.

7.2 DUTIES OF THE SELLER

7.2.1 To deliver the goods


 the meaning of delivery (s61(1) SGA)
 the time of delivery (s10 SGA)
 the place of delivery (s29 SGA)
 delivery to a carrier (s32 SGA but see also “new” s32(4))
 the effect of late delivery
Rainieri v Mills [1981] AC 1050 (HL)
Charles Rickards Ltd v Oppenheim [1950] 1 KB 616 (CA)
Reg. 4(3) of the The Sale and Supply of Goods to Consumers Reg. 2002 (SI 3045)
requires subsections(1) – (3) of section 32 SGA to be ignored in consumer sales.

7.2.2 Duty to deliver the correct quantity


(1) Where the seller delivers to the buyer a quantity of goods less than he contracted to
sell, the buyer may reject them, but if the buyer accepts the goods so delivered he
must pay for them at the contract rate.
(2) Where the seller delivers to the buyer a quantity of goods larger than he contracted to
sell, the buyer may accept the goods included in the contract and reject the rest, or he
may reject the whole.
(2A) A buyer who does not deal as consumer may not--
(a) where the seller delivers a quantity of goods less than he contracted to sell, reject
the goods under subsection (1) above, or
(b) where the seller delivers a quantity of goods larger than he contracted to sell,
reject the whole under subsection (2) above,
if the shortfall or, as the case may be, excess is so slight that it would be
unreasonable for him to do so.

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(2B) It is for the seller to show that a shortfall or excess fell within subsection (2A)
above.
(2C) Subsections (2A) and (2B) above do not apply to Scotland.
(2D) Where the seller delivers a quantity of goods--
(a) less than he contracted to sell, the buyer shall not be entitled to reject the goods
under subsection (1) above,
(b) larger than he contracted to sell the buyer shall not be entitled to reject the whole
under subsection (2) above,
unless the shortfall or excess is material.
(2E) Subsection (2D) above applies to Scotland only.
(3) Where the seller delivers to the buyer a quantity of goods larger than he contracted to
sell and the buyer accepts the whole of the goods so delivered he must pay for them
at the contract rate.
[...]
(5) This section is subject to any usage of trade, special agreement, or course of dealing
between the parties
s30 SGA (as amended by the Sale and Supply of Goods Act 1994)
Shipton, Anderson & Co Ltd v Weil Brothers & Co [1912] 1 KB 574 – the de minimis rule

7.3 DUTIES OF THE BUYER

7.3.1 To take delivery


ss 27, 28, 30, 31 and 37 SGA

7.3.2 To accept the goods


- the concept of a reasonable time
s35 SGA (as amended by s2 SSGA 1994)
Bernstein v Pamson Motors Ltd [1987] 2 All ER 220 (but see now Clegg v Olle
Andersson (T/A Nordic Marine) [2003] EWCA 320, [2003] 2 Lloyd’s Rep. 32)
Jones v Gallagher [2004] EWCA Civ 10, [2005] 1 Lloyd’s Rep. 377.

7.3.3 To pay the price


ss 27, 28 and 38 SGA

7.4 INSTALMENT CONTRACTS


(1) Unless otherwise agreed, the buyer of goods is not bound to accept delivery of them by
instalments.
(2) Where there is a contract for the sale of goods to be delivered by stated instalments,
which are to be separately paid for, and the seller makes defective deliveries in respect of
one or more instalments, or the buyer neglects or refuses to take delivery of or pay for
one or more instalments, it is a question in each case depending on the terms of the
contract and the circumstances of the case whether the breach of contract is a repudiation
of the whole contract or whether it is a severable breach giving rise to a claim for
compensation but not to a right to treat the whole contract as repudiated
s31 SGA
Behrend & Co v Produce Brokers’ Co [1920] 3 KB 530
Maple Flock Co Ltd v Universal Furniture Products (Wembley) Ltd [1934] 1 KB
148 (CA) Withers v Reynolds (1831) 2 B & Ad 882 (KB)
Warinco AG v Samor SpA [1977] 2 Lloyd’s Rep 582, [1979] 1 Lloyd’s Rep 450
(QBD & CA)

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8. REMEDIES OF THE SELLER AND THE BUYER


Readings: Atiyah chapters 25-30, Sealy/Hooley chapter 12 and 13, Baskind chapters 16
ad 17, Bridge chapter 10, Goode chapters 12-15, Macleod chapters 24, 27 and 29.

8.1 PERSONAL REMEDIES OF THE SELLER

8.1.1 Action for the price


The seller’s right to bring an action for the price arises where:
(i) the property has passed to the buyer (s49(1) SGA);
(ii) the price is payable on a certain day irrespective of delivery (s49(2) SGA);
(iii) the risk has passed;
(iv) other situations.
Manbre Saccharine Co Ltd v Corn Products Ltd [1919] 1 KB 198 (KBD)
Stein, Forbes & Co v County Tailoring Co (1916) 86 LJKB 448 (KBD)
Colley v Overseas Exporters Ltd [1921] 3 KB 302 (KBD)
Heavy Industries Co Ltd v Papadopoulos [1980] 1 WLR 1129 (HL)

8.1.2 Action for damages for wrongful non-acceptance


‘(1) Where the buyer wrongfully neglects or refuses to accept and pay for the goods,
the seller may maintain an action against him for damages for non-acceptance.
(2) The measure of the damages is the estimated loss directly and naturally resulting
in the ordinary course of events, from the buyers breach of contract.
(3) Where there is an available market for the goods in question the measure of
damages is prima facie to be ascertained by the difference between the contact price
and the market or current price at the time or times when they ought to have been
accepted or (if no time was fixed for acceptance) at the time of the refusal to accept.’
s50 SGA
Hadley v Baxendale (1854) 9 Exch 341, 156 ER 145, [1843-60] All ER Rep 461
Students who feel that they need to brush up on their understanding of Hadley v
Baxendale (1854) 9 Exch 341 are encouraged to read (at least) paragraphs 25-
38 of Lord Hope’s judgment in Jackson v Royal Bank of Scotland [2005]
UKHL 3, [2005] 1 WLR 377, [2005] 2 All ER 71, [2005] 1 Lloyd’s Rep 366.

8.1.3 The concept of an available market and the market price rule
Charter v Sullivan [1957] 2 QB 117, [1957] 1 All ER 809 (CA)
Thompson Ltd v Robinson (Gunmakers) Ltd [1955] Ch 177, [1955] 1 All ER 154
Lazenby Garages Ltd v Wright [1976] 1 WLR 459, [1976] 2 All ER 770 (CA)
Tredegar Iron & Coal Co Ltd v Hawthorn Bros & Co (1902) 18 TLR 716
Muller, MacLean & Co v Leslie & Anderson (1921) 8 Ll L Rep 328
Shearson Lehman Hutton Inc v Maclaine Watson & Co Ltd (No 2) [1990] 3 All
ER 723 (QBD)
See also J N Adams, “Damages in the Sale of Goods” [2002] JBL 553

8.1.4 The right to interest and special damages


‘Nothing in this Act affects the right of the buyer or seller to recover interest or
special damages in any case where by law interest or special damages may be
recoverable, or to recover money paid where the consideration for the payment of it
has failed.’
s54 SGA
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8.2 REAL REMEDIES OF THE SELLER

8.2.1 Introduction
(1) Subject to this and any other Act, notwithstanding that the property in the goods may
have passed to the buyer, the unpaid seller of goods, as such, has by implication of
law-
(a) a lien on the goods or right to retain them for the price while he is in possession
of them;
(b) in case of the insolvency of the buyer, a right of stopping the goods in transit
after he has parted with the possession of them;
(c) a right of re-sale as limited by this Act.
(2) Where the property in goods has not passed to the buyer, the unpaid seller has (in
addition to his other remedies) a right of withholding delivery similar to and co-
extensive with his rights of lien or retention and stoppage in transit where the
property has passed to the buyer
s39 SGA

8.2.2 Unpaid seller’s lien (s41 SGA)


An unpaid seller who is in possession of the goods is entitled to retain possession of
the goods where:
(i) the goods have been sold without any stipulation as to credit;
(ii) the goods have been sold on credit but the term of credit has expired;
(iii) the buyer becomes insolvent.
The seller may exercise his/her lien even though s/he is in possession as the buyer’s
bailee or agent (s41(2) SGA).
Section 43 SGA states that an unpaid seller loses his/her lien where:
 the goods have been delivered to a carrier or other bailee for the purpose of
transmission to the buyer and the seller has not reserved the right of disposal of
the goods;
 the buyer or his/her agent lawfully obtains possession of the goods;
 the seller waives his/her lien or right of retention.
Valpy v Gibson (1847) 4 CB 837, 16 LJCP 241, 136 ER 737

8.2.3 Right of stoppage in transit (ss44-46 SGA)


In order in invoke the right of stoppage in transit:
 the seller must be unpaid;
 the buyer of the goods must have become insolvent;
 the goods must be “in transit” (s45 SGA).
The Tigress (1863) 32 LJPM & A 97; 167 ER 286
Taylor v Great Eastern Rly Co (1901) 17 TLR 394, 70 LJKB 499 (KBD)
Reddall v Union Castle Mail SS Co Ltd (1914) 84 LJKB 360, 13 Asp MLC 51

8.2.4 Rescission and resale by the seller (s48 SGA)


Subject to the provisions of s48 SGA, a seller who has exercised a right of retention
or stoppage in transit does not have an automatic right of rescission and resale
(s48(1) SGA). Section 48 states that a right of resale exists where:
1. the unpaid seller gives notice to the buyer of his intention to resell and the buyer
does not within a reasonable time pay or tender the price (s48(3) SGA);

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2. the seller is unpaid and the goods are perishable (s48(3) SGA);
3. the seller expressly reserves the right of resale in case the buyer should make
default (s48(4) SGA).
R V Ward Ltd v Bignall [1967] 1 QB 534, [1967] 2 All ER 449 (CA)
What is the relationship between s48(2) and s24 SGA (s8 Factors Act 1889)?

8.2.5 Retention of title clauses – dealt with earlier (self-study section)


Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676
Re Bond Worth [1980] Ch 228, [1979] 3 All ER 919
Borden (UK) Ltd Scottish Timber Products Ltd [1981] Ch 25, [1979] 3 All ER
961 (CA)
Re Peachdart Ltd [1984] Ch 131, [1983] 3 All ER 204 (ChD)
Hendy Lennox (Industrial Engines) Ltd v Grahame Puttick Ltd [1984] 1 WLR 485
Clough Mill Ltd v Martin [1985] 1 WLR 111, [1984] 3 All ER 982 (CA)

8.2.6 The effect of sub-sales by the buyer (s47 SGA)


Mordaunt Bros v British Oil and Cake Mills Ltd [1910] 2 KB 502, 79 LJKB 1202
D F Mount Ltd v Jay & Jay (Provisions) Co Ltd [1960] 1 QB 159

8.3 THE BUYER’S RIGHT TO REJECT THE GOODS

8.3.1 Introduction
The Law Commission Sale and Supply of Goods (L Com 160, 1987) Part 5
Directive 99/44/EC of the European Parliament and of the Council of 25 May 1999
on certain aspects of the sale of consumer goods and associated guarantees

8.3.2 Rejection
ss11, 34, 35 and 35A SGA (as amended by the SSGA 1994 and SI 2002/3045)
Borrowman, Phillips & Co v Free and Hollis (1878) 4 QBD 500 (CA)
Perkins v Bell [1893] 1 QB 193, [1891-94] All ER Rep 884 (CA)
Hardy & Co v Hillerns & Fowler [1923] 2 KB 490 (CA)
The Kanchenjunga [1990] 1 Lloyd’s Rep 391 (HL)
Truk (UK) Ltd v Takmakidis GmbH [2000] 1 Lloyd's Rep. 543
Clegg v Olle Andersson (T/A Nordic Marine) [2003] EWCA Civ 320, [2003] 2
Lloyd’s Rep 32 [NB: holding that Bernstein v Pamson Motors [1987] 2 All ER 220
no longer represents the law in the light of the Sale and Supply of Goods Act 1994]
Jones v Gallagher [2004] EWCA Civ 10, [2005] 1 Lloyd's Rep. 377 (noted in (2004)
120 LQR 558-563)
J&H Ritchie Ltd v Lloyd Ltd [2007] UKHL 9, [2007] 1 WLR 670, [2007] 2 All ER
353 (noted in (2007) 70 MLR1002-1007 and [2007] LMCLQ 449-453).
See also Vanessa Mak “The seller’s right to cure defective performance – a
reappraisal” [2007] LMCLQ 409-424

Section 11(3) SGA seems to recognise that a breach of a condition gives the buyer
two rights: (a) to reject the goods, and (b) to treat the contract as repudiated, in which
case the buyer will be entitled to terminate the contract. It is important to distinguish
between these two rights because, although the buyer cannot terminate the contract

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without first rejecting the goods, the two rights can be exercised separately so that
the buyer can reject without terminating.

Are there circumstances in which the buyer is entitled to reject but not to terminate?
After rejection by the buyer, who bears the risk of accidental loss or damage?

In 1983 the Law Commission favoured introducing a statutory right to cure in


consumer contracts i.e. to allow the seller to cure where refusal of cure would be
unreasonable, but in its final report in 1987 the Law Commission decided against
introducing such a right on the grounds that it might weaken the rights of consumers.

Under the EC Consumer Guarantees Directive (implemented in the United Kingdom


by the Sale and Supply of Goods to Consumers Regulations 2002) the buyer is
effectively given a right of cure by way of repair or replacement (see 8.5 below).

8.4 THE BUYER’S RIGHT TO DAMAGES

8.4.1 The buyer’s right to damages for wrongful non-delivery

‘(1) Where the seller wrongfully neglects or refuses to deliver the goods, the buyer
may maintain an action against him for damages for non-delivery.
(2) The measure of the damages is the estimated loss directly and naturally resulting
in the ordinary course of events, from the seller’s breach of contract.
(3) Where there is an available market for the goods in question the measure of
damages is prima facie to be ascertained by the difference between the contact price
and the market or current price at the time or times when they ought to have been
delivered or (if no time was fixed for acceptance) at the time of the refusal to
deliver.’
s51 SGA
Hadley v Baxendale (1854) 9 Exch 341, 156 ER 145, [1843-60] All ER Rep 461
Melachrino v Nickoll & Knight [1920] 1 KB 693, [1918-19] All ER Rep 856
Tai Hing Cotton Mill Ltd v Kamsing Knitting Factory [1979] AC 91 (PC)
Williams v Reynolds (1865) 6 B & S 495, 34 LJQB 221
Williams Bros v E T Agius Ltd [1914] AC 510, [1914-15] All ER Rep 97 (HL)

The Sale of Goods Act 1979 contains no special provisions relating to the late
delivery of goods that the buyer chooses to accept. The issue is thus subject to
the normal principles applicable to contracts generally. If there is an available
market, prima facie the measure of damages is the difference between the
market price on the contractual date of delivery and the date of acceptance. In
a rising market, the buyer will not have suffered any loss but in a falling market
the buyer’s losses may be substantial. If there is no available market for the
goods in question the ordinary contractual measure of damages will apply.
See Koufos v C Czarnikow Ltd: The Heron II [1969] 1 AC 350 (HL) and
Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528
(CA).

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8.4.2 The buyer’s right to damages for breach of warranty by the seller
‘(1) Where there is a breach of warranty by the seller, or where buyer elects (or is
compelled) to treat any breach of condition on the part of the seller as a breach of
warranty, the buyer is not by reason only of such breach of warranty entitled to reject
the goods; but he may -
(a) set up against the seller the breach of warranty in diminution or extinction
of the price, or
(b) maintain an action against the seller for damages for breach of warranty.
(2) The measure of damages for breach of warranty is the estimated loss directly and
naturally resulting in the ordinary course of events, from the breach of warranty..
(3) In the case of breach of warranty of quality such loss is prima facie the value of
the goods at the time of delivery to the buyer and the value they would have had if
they had fulfilled the warranty.
(4) The fact that the buyer has set up the breach of warranty in diminution or
extinction of the price does not prevent him from maintaining an action for the same
breach of warranty if he has suffered further damage.’
s53 SGA
Slater v Hoyle & Smith Ltd [1920] 2 KB 11, [1918-19] All ER Rep 654 (CA)
Van Den Hurk v Martens & Co Ltd [1920] 1 KB 850, 89 LJQB 545
H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd [1978] QB 791 (CA)
Bence Graphics International Ltd v Fasson UK Ltd [1998] QB 87 (CA) (noted in
(1997) 113 LQR 188)
Louis Dreyfus Trading Ltd v Reliance Trading Ltd [2004] EWHC 525, [2004] 2
Lloyd’s Rep 243 (noted in (2004) 154 NLJ 1188-1189)
McSherry v Coopers Creek Vineyard Ltd (Unreported, December 21, 2004) (HC
(NZ)) (noted in (2005) 121 LQR 389)

8.4.3 The buyer’s remedies at common law


Like the seller, the buyer may have remedies at common law for breaches of
contract by the seller that are not specifically dealt with by the Sale of Goods Act.
In appropriate circumstances the law may give the buyer a right to terminate the
contract or alternatively a right to claim damages for any loss s/he has suffered.
See, for example, Société Italo-Belge v Palm & Vegetable Oils (Malaysia) Sdn
Bhd: The Post Chaser [1981] 2 Lloyd’s Rep 695.

8.5 ADDITIONAL RIGHTS OF BUYERS IN CONSUMER CASES

48A Introductory
(1) This section applies if—
(a) the buyer deals as consumer or, in Scotland, there is a consumer contract in which
the buyer is a consumer, and
(b) the goods do not conform to the contract of sale at the time of delivery.
(2) If this section applies, the buyer has the right-
(a) under and in accordance with section 48B below, to require the seller to repair or
replace the goods, or
(b) under and in accordance with section 48C below-
(i) to require the seller to reduce the purchase price of the goods to the buyer by an
appropriate amount, or
(ii) to rescind the contract with regard to the goods in question.
(3) For the purposes of subsection (1)(b) above goods which do not conform to the
contract of sale at any time within the period of six months starting with the date on

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which the goods were delivered to the buyer must be taken not to have so conformed
at that date.
(4) Subsection (3) above does not apply if-
(a) it is established that the goods did so conform at that date;
(b) its application is incompatible with the nature of the goods or the nature of the lack
of conformity.

48B Repair or replacement of the goods


(1) If section 48A above applies, the buyer may require the seller—
(a) to repair the goods, or
(b) to replace the goods.
(2) If the buyer requires the seller to repair or replace the goods, the seller must-
(a) repair or, as the case may be, replace the goods within a reasonable time but
without causing significant inconvenience to the buyer;
(a) bear any necessary costs incurred in doing so (including in particular the cost of
any labour, materials or postage).
(1) The buyer must not require the seller to repair or, as the case may be, replace the
goods if that remedy is-
(a) impossible, or
(b) disproportionate in comparison to the other of those remedies, or
(c) disproportionate in comparison to an appropriate reduction in the purchase price
under paragraph (a), or rescission under paragraph (b), of section 48C(1) below.
(1) One remedy is disproportionate in comparison to the other if the one imposes costs
on the seller which, in comparison to those imposed on him by the other, are
unreasonable, taking into account-
(a) the value which the goods would have if they conformed to the contract of sale,
(b) the significance of the lack of conformity, and
(c) whether the other remedy could be effected without significant inconvenience to
the buyer.
(1) Any question as to what is a reasonable time or significant inconvenience is to be
determined by reference to—
(a) the nature of the goods, and
(b) the purpose for which the goods were acquired.

48C Reduction of purchase price or rescission of contract


(1) If section 48A above applies, the buyer may-
(a) require the seller to reduce the purchase price of the goods in question to the
buyer by an appropriate amount, or
(b) rescind the contract with regard to those goods,
if the condition in subsection (2) below is satisfied.
(1) The condition is that-
(a) by virtue of section 48B(3) above the buyer may require neither repair nor
replacement of the goods; or
(b) the buyer has required the seller to repair or replace the goods, but the seller is in
breach of the requirement of section 48B(2)(a) above to do so within a
reasonable time and without significant inconvenience to the buyer.
(3) For the purposes of this Part, if the buyer rescinds the contract, any reimbursement to
the buyer may be reduced to take account of the use he has had of the goods since
they were delivered to him.

48D Relation to other remedies etc.

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(1) If the buyer requires the seller to repair or replace the goods the buyer must not act
under subsection (2) until he has given the seller a reasonable time in which to repair
or replace (as the case may be) the goods.
(2) The buyer acts under this subsection if-
(a) in England and Wales or Northern Ireland he rejects the goods and terminates
the contract for breach of condition;
(b) in Scotland he rejects any goods delivered under the contract and treats it as
repudiated;
(c) he requires the goods to be replaced or repaired (as the case may be).

48E Powers of the court


(1) In any proceedings in which a remedy is sought by virtue of this Part the court, in
addition to any other power it has, may act under this section.
(2) On the application of the buyer the court may make an order requiring specific
performance or, in Scotland, specific implement by the seller of any obligation
imposed on him by virtue of section 48B above.
(3) Subsection (4) applies if-
(a) the buyer requires the seller to give effect to a remedy under section 48B or 48C
above or has claims to rescind under section 48C, but
(b) the court decides that another remedy under section 48B or 48C is appropriate.
(1) The court may proceed-
(a) as if the buyer had required the seller to give effect to the other remedy, or if the
other remedy is rescission under section 48C
(b) as if the buyer had claimed to rescind the contract under that section.
(1) If the buyer has claimed to rescind the contract the court may order that any
reimbursement to the buyer is reduced to take account of the use he has had of the
goods since they were delivered to him.
(6) The court may make an order under this section unconditionally or on such terms and
conditions as to damages, payment of the price and otherwise as it thinks just.

48F Conformity with the contract


For the purposes of this Part, goods do not conform to a contract of sale if there is, in
relation to the goods, a breach of an express term of the contract or a term implied by
section 13, 14 or 15 above.

Sections 48A-F were inserted by SI 2002/3045 Sale and Supply of Goods to


Consumers Regulations 2002 with effect from 31 March 2003. Regulation 6 of the
Sale and Supply of Goods to Consumers Regulations 2002 also inserted the following:

In section 61(1) after the definition of “plaintiff” there is inserted -

“producer” means the manufacturer of goods, the importer of goods into the
European Economic Area or any person purporting to be a producer by placing his
name, trade mark or other distinctive sign on the goods;
(2) in section 61(1) after the definition of “property” there is inserted -

“repair” means, in cases where there is a lack of conformity in goods for the purposes
of section 48F of this Act, to bring the goods into conformity with the contract.

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8.6 OTHER REMEDIES

8.6.1 Specific performance


‘(1) If any action for breach of contract to deliver specific or ascertained goods the court
may, if it thinks fit, on the plaintiff’s application, by its judgment or decree direct that the
contract be performed specifically, without giving the defendant the option of retaining
the goods on payment of damages.’
s52 SGA
Re Wait [1927] 1 Ch 606 (CA)
Sky Petroleum Ltd v VIP Petroleum Ltd [1974] 1 All ER 954
Bronx Engineering Co Ltd [1975] 1 Lloyd’s LR 465
What is the relationship between “new” section 48E(2) and section 52 SGA?

9. Facing the Future

9.1 Codification?
Michael Bridge, “What is to be done about sale of goods?” (2003) 119 LQR 173-177
Roy Goode, “Removing the Obstacles to Commercial Law Reform” (2007)123 LQR
602-617
Lucinda Miller, “The Common Frame of Reference and the feasibility of a common
contract law in Europe” [2007] JBL 378-411
Paul Omar, “Lessons from the French experience: the possibility of codification of
commercial law in the United Kingdom” (2007) 18 International Company and
Commercial Law Review 235-243
Kevin M Rogers, “Philosophical contrasts in commercial and consumer law – should
we codify commercial law?” (2005) 26 Business Law Review 262-266

9.2 The Vienna Sales Convention

Lord Lester of Herne Hill asked Her Majesty’s Government: “Why they have not
ratified the United Nations Convention on Contracts for the International Sale of
Goods (United Nations Convention) which came into force on 1 January 1988.”
The Parliamentary Under-Secretary of State, Department of Trade and Industry
(Lord Sainsbury of Turville): Primary legislation will be needed to implement the
United Nations Convention on Contracts for the International Sale of Goods. The
United Kingdom intends to ratify the convention, subject to the availability of
parliamentary time. There have been delays in the past for a number of reasons, but
we propose to issue a consultation document in the course of the next few months to
examine the available options. Hansard HL vol. 669 col. WA87 (7 Feb 2005)

See also the views of Lord Steyn (Hansard HL vol. 563 col. 1458-9 (3 May 1995)) and
the Scottish Law Commission Formation of Contract: Scottish Law and the United
Nations Convention on Contracts for the International Sale of Goods Scots Law Com
No. 144 (1993) (available at http://www.scotlawcom.gov.uk/downloads/rep144.pdf)
© PAUL EDEN – SEPTEMBER 2013

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