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The passing of property:

Pg 230-236 Goode textbook on what specific/ascertained/unascertained and quasispecific


goods are.
So if there has been an appropriation after the making of the contract, then it is the sale of
ascertained goods.
But if the goods where identified at the time the contract is made, then it is a sale of specific
goods.
https://www.quora.com/What-is-the-difference-between-ascertained-goods-and-specific-
goods
Rules on the Passing of Property from the S to B in: When we get to the five rules in section
18, those rules say whether they apply to specific or unascertained goods so you need to be
able to distinguish what kind of rules you have in other to know which one of those rules
they apply to.

- Specific Goods
- Goods delivered on Approval or on Sale or Return
- Unascertained goods

Previously we have discussed the consequences of passing of property:

- Passage of risk
- The S is not entitled to sue for the price unless the property has passed
- The S or the B may have a title good against the liquidator/administrator
- Frustration of the K

Basic rules:
When looking at the passage of property, you start with section 16, S17 and then go to
section 18. Cases in the court said that it is much better to go through section 16 and 17
first, before going through the rules of section 18.
S. 16: “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.”

(Subject to the exception in s. 20A) where the contract is for unascertained goods, no
property in the goods can be transferred unless and until the goods have been ascertained.
S. 17: Intention of the parties to pass the property is crucial.

Property passes when intended to pass.

(1)Where there is a contract for the sale of specific or ascertained goods the property in them 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.
S. 18: Where this intention is not clear, s.18 rules 1-5 will establish and clarify the intention.
*These sections of the SGA also apply to sales regulated by the CRA 2015 (s.4 CRA)
Specific goods: The nature of goods - specific or unascertained – will determine the exact
moment of the passing of property. This means that the moment of property passing will
depend largely by what type of goods you have and the rules are different for each type.
For specific goods and ascertained goods we look at s17(property passes when intended to
pass).
SGA 1979, s.17 (intention) – property passes when intended to pass. The presumptive rules
for ascertaining intention are contained in s.18 SGA 1979 and there are five different
scenarios covered in s.18. When dealing with this issue in a problem question for example
you should always start with s.17 and see whether you can work out when property passes
from that section. More often than not you won’t be able to and you will then need to look
at the presumptive rules in s.18 and work out which of those (if any) applies to the facts of
the case before you.
Even though s17(1) only applies to specific/ascertained goods, For some reason s17(2)
applies to unascertained goods as well. Therefore, for specific/ascertained goods we look at
17(1) and 17(2), but if we have just got unascertained goods, it is only s17. For both of
those different types of goods, there are some rules in s.18. All of those rules apply to very
specific type of commercial contract and you need to be very aware of which contract which
rule applies to.
S.18 (PRESUMPTIVE RULES)
Rule 1- Unconditional: Rule 1 deals with contracts with no conditions.
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,
and it is immaterial whether the time of payment or the time of delivery, or both, be
postponed.”

This is an Unconditional contract for the sale of specific goods. Only applies for specific
goods and does not apply for unascertained goods. This means that the first thing to work
out to see if this rule applies is to see if the problem question says it has specific goods.
It is an unconditional rule because it says property passes when the contract is made. There
is nothing else that will affect the passage of property. It does not matter if the delivery or
payment is delayed. You can sue for late delivery or non-payment but it does not affect the
passage of property if rule 1 is involved. Therefore, for rule 1 the contract does not
containing any essential conditions breach of which may give the right to the Buyer to treat
the contract as repudiated. In other words, there is nothing in this contract other than a
very straight forward sales of goods. It is a really straightforward contract
Dennant v Skinner and Collom: In this case, there is a sale of car by auction by Dennant to
King for 345 pounds. King bought five other vehicles at the same time and said that he was
the son of a reputable motor car dealer. In reliance of this, Dennant allows him to take the
car away, leaving an uncleared cheque. King takes the car by signing a document title to the
vehicle would not pass until the cheque is cleared. The problem here is that the court said
that the passage of property in an unconditional contract happens when a hammer in an
auction falls. The intention of the parties to prevent the property from passing by signing a
document came too late. Property had already passed by the time the document was
signed. All the signing of the form was irrelevant because property had already passed by
then. The contrary intention in the signed document would have only worked if that was in
play before property had actually passed. Therefore, as soon as the contract has concluded,
property passes.
Varley v Whipp: This case can be confusing. When reading it, take it with a pinch of salt.
Contract was held to be conditional in the present context because the conditions implied
by the Act as to conformity with description (s.13) and merchantable quality ( former s.
14(2)) remained unfulfilled. This case has been widely criticized makes the passage of
property very vague. This case means that do these conditions deal with the passage of
property or not. If they do, then you are not in rule 1 property, but if they don’t or if they
are dealing with quality or fitness(implied terms), then rule 1 still applies.
Modern meaning of unconditional: Not subject to any condition upon the fulfilment of
which the passing of the property depends. This means having no conditions relevant to the
passing of the property. If you do then rule 1 does not apply.
Rule 1 deals with K’s with no conditions. Every K has essential condition e.g. S to deliver the
goods to the B; B to accept and pay the price. But unconditional here means that having no
conditions relevant to the passing of the property.
The most important condition relates to payment.
- Express terms may make the passing of property conditional on payment even after
delivery: Normally, if payment is delayed, that does not affect the passing of
property. However, if payment is expressly delayed to avoid passing of property it is
different. If you want to make the passing of property condition on payment, you
need to have an express term in your contract setting that out. If you want to make
sure that you retain property and goods, even though that good has been delivered
or used, you need to have a contrary intention expressed in the contract because if
you don’t, rule 1 will apply and that will cause you all sort of problems. Make sure
that when you are drafting any kind of retention of title clauses, you make sure that
the property passing is conditional on payment and as soon as you draft that clause
correctly, it stops rule 1 from applying. If you do not, then you end up in a position
where actually your intention allows the passage of property like the case above.
Aluminium Industrie v Romalpa:
https://en.wikipedia.org/wiki/Aluminium_Industrie_Vaassen_BV_v_Romalpa_Alumi
nium_Ltd
- A cheque is considered as conditional discharge of the payment obligation. But the
fact that a payment has been made by cheque does not prevent the passage of
property under Rule 1.
Anderson v Havana Horse and others:
*Rule 2-4: if you come up in a problem question and see that there is some sort of condition
relating to property passing, then skip rule one and go to rule 2-4. This deals with K with
conditions (conditional sale of specific goods).
Rule 1- specific goods:
S.61: 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

Future goods cannot be specific.

Kursell v Timber operators: The claimant sold to the defendant all the trees in a Latvian
forest which conformed to certain measurements on a specific date. They said that the
buyer had 15 years to collect and remove the timber once they worked out if the timber
conformed to the requirements. Unfortunately, shortly after the contract was concluded,
the Latvian assembly passed a law to take control of the forest.
Held: Held (CA): property in the trees had not passed. The goods were not sufficiently
identified because it wasn’t all the trees but only the trees that conformed to particular
measurements. Since they put this complex contractual clause in, they had no idea which
trees complied and which ones didn’t and because of that they goods were not sufficiently
identified to be specific goods for the purposes of rule 1. They could not have gone into the
forest and say that is my tree and that is my tree. Therefore, no passage of property.
In contrast in the case below,
Joseph Reid v Schultz: Contract for all the millable timber on a particular plot of land.
Timber was already cut in this case and was just awaiting collection. The court said that this
was a sale for specific goods and property did pass because there was no identifying to be
done after the contract was made. This is because all the timber was ready to go.
Commissioners of Custom and Excise v Everwine: This case also applies to rule 5 but for
different reasons. In this case, there was wine belonging to Everwine held in a third party
warehouse. Whenever Everwine sold wine to somebody else, release notes were faxed to
the warehouse operators telling them which wine had been sold. There was an issue on
whether property had passed to the buyers or had it remained in Everwines possession.
Held: The COA said that the property passed to the buyer only when the wine specified in
those release note represented the entire stock of the particular wine held on the day of
sale. If the released note represented everything of that particular description of that on
that particular day, the goods were identified. Because you would have gone to the
warehouse and would have said all that wine belongs to this person. But in cases where the
release note did not represent all of the wine and there was a larger stock of wine in the
warehouse, because there had been no physical separation of the wine, the wine had not
been identified. Because the individual bottle had not been identified enough, no property
could pass under rule 1. Therefore, property did not pass.
Rule 1- Deliverable State:
S. 61(5) Goods are in a deliverable state within the meaning of this Act when they are in such a state that the
buyer would under the contract be bound to take delivery of them. – not a comprehensive definition.

(1) No clarity as to whether the B would be bound to take delivery of the goods if the
goods were not in a deliverable state.
(2) The B is not bound to accept delivery of defective goods but the section does not say
that all defective goods are not in a deliverable state within the meaning of this
provision.
BUT defects do not prevent property passing. Important!
Intended meaning: where the goods could not be said to be in a physically deliverable state
yet the B had agreed to take delivery of them as they stood.
Deliverable state should not be referred to voluntary transfer of possession because if the
parties intend to transfer property physical condition does not matter.
Underwood v Burgh Castle: Lecture expanation
Summary: an engine that had to be dismantled after being detached from the floor to which
it had been cemented was not in a deliverable state.
A condensing engine was sold. The engine was cemented to the floor. It had to be detached
from the floor and it had to be dismantled. The issue here was if the engine was in a
deliverable state for the purposes of rule 1 when it as cemented to the floor. The COA said
that rule 1 was not applicable in this case and that the property in the engine had not
passed. They said it was it in a deliverable place because underwood was bound to do
something which he had not done(remove the engine of the floor) for the purposes of
putting it in a state where it could be delivered to another party. In other words, there was
another action that needed to be carried out in order to deliver it but was not carried out.
Therefore property did not pass.
Head v Showfronts:
Summary: carpet that was in a heavy bundle and difficult to move was not in a deliverable
state.
This case dealt with the sale of carpets. Showfront contracted with Head to supply and lay
fitted carpets for a number of rooms in an office block. The carpet for the largest room in
this office block was very big. The carpet fitter said that they couldn’t fit the carpet on a
Friday afternoon because it was so huge and stressful and they were going to have to go in
the next week and it was going to take them days to do it. It was left in the premises on
Friday but it was actually stolen. The issue was whether the carpet was in a deliverable
state. The hight court said that the carpet was not in a deliverable state until it had been
satisfactory laid. They said that until the carpet was actually laid, property did not actually
pass. This is because something else had to be done to the carpet before the contract had
been concluded.
Kulkarnive v Manor Credit:
Summary: until number plates were attached to a new car and it could be lawfully driven by
the buyer on a public road it was not in a deliverable state.
This case was whether a car was in a deliverable state. The court said here that when you
have a new car, until number plates are fitted to a brand new car and it could be lawfully
driven on the road, it was not in a deliverable state. Because up until that point, something
else had to be done to the car to allow the contract to be fulfilled.
Essentially what you are thinking about here is if anything else had to be done to get the
contract concluded. If there is anything that had to be done, it was not in a deliverable state.
Rule 1 – Contrary Intention: If you want to contract out of rule 1 you can. This was seen in
the Dennant case, which could have worked if it did not come too late when property had
already passed.
Express agreement: If there is an express clause in the contract which says “Property will
not pass until e.g. payment is made,” then rule 1 will not apply.
Aluminium Industrie v Romalpa:
https://en.wikipedia.org/wiki/Aluminium_Industrie_Vaassen_BV_v_Romalpa_Aluminium_Lt
d
Consumer Sales: all sorts of rules for when property passes
Ward v Bignall: in modern times very little is needed to give rise to the inference that the
property in specific goods is to pass only on delivery or payment” (per Diplock LJ).
Davies v Leighton: As a general rule, property in goods selected by a supermarket customer
does not pass until payment has been made.
Justices acceded to a submission in a shoplifting case that property in the allegedly stolen
goods had passed to the defendant at the time of the goods being wrapped and handed to
the defendant, who had not paid for it.
Held that clearly property was not intended to pass until the time of payment.
Edwards v Ddin: Property passes when petrol is put into a vehicles tank.
By virtue of the Sale of Goods Act 1893 s. 18 the property in petrol passes when it is
pumped into the tank of a customer's car and he commits no offence under the Theft Act
1968 s. 1 (1) by subsequently driving away without paying. D drove his car into a garage and
requested the attendant to fill up the tank with petrol and put in a quart of oil. After the
attendant had done so D drove off without paying. He was charged with theft. The justices
found that when D drove away the property in the goods had passed to him, therefore he
was not appropriating property belonging to another within s. 1 (1) of the 1968 Act and
dismissed the case. The prosecutor appealed.
Held, dismissing the appeal, that the delivery of the petrol and oil was an unconditional
appropriation of the goods to the contract within s.18 of the 1893 Act since the vendor did
not retain a right of disposal; thus the property in the goods passed to D when they were
placed in his car.
*Right to disposal: Reservation of the right of disposal means reserving a right to dispose of
the goods until certain conditions (like payment of the price) are fulfilled. When the seller
reserves such a right the property in the goods does not pass.
Postponing the payment/delivery: This is not a contrary intention that excludes rule 1. The
statute says that if you postpone payment or delivery, that does not affect the passage of
property. Unless you expressly state that to be the case.
Clark v Michael Reilly:
Part-exchange of old car as part of purchase of new car. Old car retained until new car
arrived.
Held: the property and risk had passed to the B (car dealer).
Negative intention to pass property before delivery.
Criticised: wrong to hold B to keep risk while the S has still use of the car.
Agreement on the transfer of risk: If you agree that the transfer of risk will take place at a
different time to when property passes, that does not change the moment in time that
property passes, unless you expressly state it.
Carlos Federspiel v Charles Twigg: This case was about an international sale of bicycles. The
sellers in this case had done almost everything to comply with the contract and deliver the
bikes. They packed the goods into cases, marked them with the buyers' name, registered
them for consignment and ordered shipping space in a named ship. However, they had not
gone to the ship that the bikes where going to be out into. Some of them were in the van on
the way to the port. When the judge looked at the contract he said that the presumption of
the parties was that property will not pass until delivery to the carrier was carried out.
Looking at the contractual wording of the contract, he said that it was only once the big
container of the bike had passed over to the ships rail, that will be the passage/transfer of
property. Even though they were sitting on the dock all ready to be put on to the ship, that
wasn’t sufficient. Therefore, property had no passed.
It was all about what the parties intended, and the contrary intention in this contract was
very clear that it was delivery to the carrier was the moment the property passed.
The Carlos case is a nice example how it can look very clear that it is a rule one contract and
property has passed, but actually when you look at the wording of the contract, there is
something in it that shows that property has in fact not passed.
Re Anchor Line: By a contract contained in letters the purchasing company agreed with the
vendors' agents to buy a crane "for a deferred purchase price of 4000l." The contract
provided for annual payments by the purchasing company for "interest" and "depreciation"
respectively, to be deducted from the 4000l. In the meantime the purchasing company were
to have "entire charge and responsibility" for the crane. Three years later, and before
payment of the whole of the purchase price, the purchasing company went into voluntary
liquidation and the liquidator entered into a contract, which was shortly afterwards
confirmed by the Court, for the sale of the assets to a new company. In the liquidation the
vendors contended that the property in the crane had not passed to the purchasing
company and therefore that it was not included in the assets sold to the new company and
claimed that the liquidator must either accept the obligations arising and continue the
instalments payable under the contract or return the crane to the vendors. The liquidator
rejected these claims. Eve J. held that the property in the crane passed to the purchasing
company on the making of the contract, in accordance with r. 1 of s. 18 of the Sale of Goods
Act, 1893 .
*2
On appeal:-
Held, that s. 18 of the Act applied only "unless a different intention" appeared, and that,
reading the contract as a whole, a different intention did appear - namely, that the property
in the crane should not pass until the purchase was completed by payment of the purchase
price.
Held, therefore, in the circumstances of the case, that the liquidator must be taken to have
determined to carry out the contract and to make use of it for the purposes of the
liquidation. He was accordingly bound to pay the balance of the purchase-money due to the
vendors under the contract.
Therefore, there was a contrary intention and because of the contrary intention, property
had not passed.
*Section 17(2)-Circumstances of the case: Depending on what the facts are, the court can
choose which decision to make.
Insurance: Have a look at who is insuring the goods. Obligation to insure is an indication of
who bears the risk. It is also an indication of who has the property. The inference that can
be drawn must depend on the circumstances of the case.
Factors to bear in mind:
i. Where the S advises the B to insure this is an indication that the risk and property
have passed to the B. But if the S stipulates insurance, it is that the S may still have
the property.
ii. S may retain some interest in the goods where the property has passed e.g. lien or
charge on the goods. S may require the B to insure the goods in order to protect that
interest.
iii. If the K requires the B to insure the goods, but the S would have no interest on the
goods if the property and risk had passed from him, the correct inference will be that
the property and risk have not passed.
Sale of Goods and Land together: Sale of house and furnishings together: the presumption
that the property passes on the making of the K will be rebutted because property will pass
on conveyance.
Supply and Install contracts: Where goods are to be supplied and installed/fitted by the S so
that the goods become fixtures, the property in those does not pass until the installation
has been completed.

Rule 2: (specific goods to be put into a deliverable state by the S)


“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 into a deliverable state, the property
does not pass until the thing is done and the buyer has notice that it has been done.”

For rule 1 there are already in a deliverable state. But for Rule 2 the seller is bound to do
something to the goods to put them in a deliverable state and they have to give the buyer
notice that it has been done. This is a conditional contract because it is requiring the seller
to do something to those goods before property can pass. The rule will not apply where the
seller has agreed to repair the goods. All rule 2 applies is for the goods to be put in a
deliverable state by the seller. Nor more than that. Repairing is outside the scope of rule 2.
It is important to note that not only must something be done by the seller to put the goods
into a deliverable state but he also MUST give notice to the buyer that that thing has been
done. The second requirement is often forgotten!
Specific goods to be put into a deliverable state by the S:
Underwood v Burgh Castle: Lecture explanation above
Westlaw: The owners of a horizontal condensing engine agreed to sell it at a price free on
rail in London. It weighed thirty tons and was bolted to and embedded in a flooring of
concrete. Before it could be delivered on rail it had to be detached and dismantled. The
sellers detached it, but in loading it on a truck they damaged it by accident, so that the
buyers refused to accept it.
In an action by the sellers for goods bargained and sold:-
Held, that the property in the engine had not passed to the defendants.
By Bankes, Scrutton and Atkin L.JJ. on the ground that the plaintiffs were bound to do
something, which they had not done, for the purpose of putting the engine into a
deliverable state.
By Bankes and Atkin L.JJ. on the further ground that the circumstances showed an intention
that the property should not pass until the engine was placed in safety on rail in London.
Head v Showfronts: Case above.
Rule 2 deals with certain types of conditional contract:
S. 19 also deals with conditional contracts but where the goods are unascertained.
If the conditional K does not fall within Rules 2-4 or s. 19, s.17 must be dealt with (i.e. court
has to ascertain the presumed intention of the parties by taking into account the
circumstances of the case.
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 purpose 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.”

The weighing, measuring and testing has to be done with the purpose of ascertaining the
price. It cannot be done just because they fancy doing it.
Also, the seller is the person under rule 3 that is bound to do the weighing, measuring and
testing.
Turley v Bates:
Summary: the buyer was to weigh the fireclay that was being sold. Rule 3 only applies
where the seller is doing the weighing etc.
T sold fireclay to B which B was to weigh. B only took delivery of some of the fireclay. T sued
B for the price of the remaining goods. B argued the property had not passed and therefore
that he was only liable to T for nominal damages.
Held: Property had passed at the time the contract was concluded and B was liable for the
price. This was because If, upon a contract for the sale of goods, anything remains to be
done by the buyer, such as weighing, measuring, or testing the goods, if it appears by the
terms of the contract that it was the intention of the parties that the property should pass
to the buyer, it will pass though he has not done the act. The weighing should have been
done by the seller rather than the buyer. However, since it was the intention of the parties
that the property will pass without having done it then it will pass.
The thing to take from here is that Rule 3 does not apply where it was agreed that the act
should be done by the buyer rather than the seller.
Nanka Bruce v Commonwealth Trust:
Summary: N entered into a sale of cocoa with L. L then resold the cocoa to CT. During the
resale CT would weigh the cocoa to ascertain the total amount due from L to N.
Held: weighing did not make the K conditional (it was merely to see whether the goods
fitted the weights as represented) and the property passed to L before the price was
ascertained.
Westlaw: The appellant arranged to consign cocoa to one L. by rail at 59s. per load of 60 lbs.
L. was to resell the cocoa to merchants and to transfer to them the railway consignment
notes; the merchants were to check the weights, and L. was to pay according to the weights
so checked. The appellant consigned 160 bags of cocoa to L., and he sold it to the
respondents, transferring to them the consignment note. The respondents bought and took
delivery in good faith, and credited L. with the purchase price against a large debt due to
them from him. The appellant brought an action in the Supreme Court of the Gold Coast to
recover from the respondents damages for conversion of the cocoa:-
Held, that the checking of the weights by the merchant was not a condition precedent to
the passing of the property to L., that the respondents having bought in good faith obtained
a good title against the appellant, and, accordingly, that the action failed
If you get one of those problem questions when the seller is not weighing, don’t think it is a
rule 3 case.
REMEMBER THAT THESE FIRST THREE RULES ONLY APPLY TO SPECIFIC GOODS!

Rule 4:
“When 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.”
It controls the passage of property and risk in the absence of contractual provision dealing
with these issues.
Two different types of contract: There are only two types of contract regulated by rule 4.
There are sale of approval and sale of return contract. If you don’t have sale of approval or
sale of return contract, then rule 4 cannot apply.
Sale on Approval: A transaction is deemed a sale on approval where the recipient is to
examine the goods to see if they are suitable for his purpose.
Sale or Return: This is a transaction where the recipient wishes to have the facility of
returning goods for some reason other than disapproval of their suitability e.g because the
quantity supplied may prove surplus to requirements or because he takes delivery for the
purpose of resale and may be unable to find sufficient buyers. But the legal effect of the two
transactions appears to be the same.
Although contracts for sale on approval or sale on return are legally and conceptually
different Rule 4 does not differentiate between them at all and treats them exactly the
same.
When you have got the sale of approval or sale of return contract and rule 4 applies,
property in the goods, passes to the buyer in one of two scenarios. Those two scenarios are
set out as part a and part b in section 18 rule 4.
4(a): When he signifies his approval or acceptance to the seller or does any other act
adopting the transaction: This is when you do something that signifies your approval or
acceptance to the seller or does any act that adopts the transaction. Examples are pledging
the goods, reselling goods etc. Anything that shows that you are now the owner. If you do
any of these things, property will pass. There is similarities in statutory wording of section 35
and section 18 rule 4.
Kirkham v Attenborough: In this case, Kirkham(Plaintiff) delivers jewellery to Winter on sale
or return and W pledged it to Attenborough. K claimed goods were his property but was
unsuccessful. This was because Winter had already pledged it and the goods had passed to
him.
In the first case the plaintiff, a manufacturing jeweller, brought an action against a
pawnbroker to recover property pledged by a man of the name of Winter. The plaintiff had
delivered to Winter a large quantity of jewellery on sale or return, some of which was
pledged with the defendant. The plaintiff claimed the return of the goods or their value. The
second case was a similar one, and the two appeals were argued together. The learned
judge had given judgment for the plaintiff in each case.
The defendants appealed.
LOPES L.J: The position of a person who has received goods on sale or return is that he has
the option of becoming the purchaser of them, and may become so in three different ways.
He may pay the price, or he may retain the goods beyond a reasonable time for their return,
or he may do an act inconsistent with his being other than a purchaser. The words of the Act
are difficult to construe; but it seems to me that if the recipient of the goods retains them
for an unreasonable time he does something inconsistent with the exercise of his option to
return them, and thereby adopts the transaction. So if he does any other act inconsistent
with their return, as if he sells them or pledges them, because if he pledges them he no
longer has the free control over them so as to be in a position to return them. In all these
cases he brings himself within the words of the section by adopting the transaction, and the
property in the goods passes to him. If that is the state of the law, applying it to this case, it
is clear that the plaintiff is not entitled to recover from the defendant either the goods or
their price, and the judgment in favour of the plaintiff cannot be supported.
*A contractual stipulation that the property is not to pass until the goods are paid for
protects the seller. This is a contrary intention which overrides Rule 4.
One thing about rule 4 is that it defines what one needs to do in order to pass the property
but no clarity as to what needs to be done to return the goods. Property passes, unless the
buyer gives some sort of notice of rejection. This will allow you to say you don’t want
property to pass, you want to return the goods.
Atari Corp v Electronics Boutique Store: Here, a shop entered into sale or return with Atari
for supplies of computer games and hardware. The sale agreement provided for payment in
full by November 1995, but allowed for sale or return until January 31, 1996. On January 19,
1996 (Before the end of the January deadline), Electronics wrote to Atari notifying them of
the withdrawal of certain stock and specifying that once the stock had been returned to the
warehouse they would help with the handover and accounting and a detailed list could be
prepared. Atari replied that, as the original invoices had not been paid by the due date, the
right to return the goods had been forfeited. In the lower court Atari successfully argued
that, as the goods were not physically available for collection at that time, the January 19
letter was not a notice of rejection, but merely an indication that the goods would be
returned at an unascertained date. Electronics appealed. The plaintiffs replied that the
defendants had lost the right to return the goods because they had not been paid for by the
due date.
Held, allowing the appeal, that the letter was good notice and sufficient to trigger the
buyer's right to return the goods. To require that the goods be immediately available for
collection at the time the notice was issued was wrong in law; they only needed to be made
available within a reasonable time. As long as this is done, it is sufficient to stop property
passing under section 4. This is a good example to show you what you need to do if you are
trying to pass property in a different time to payment.

Westlaw: Held, allowing the appeal, that where goods were delivered on a sale or return
basis the prospective buyer held the goods as a contractual bailee until the expiry of the
period allowed by the agreement for the return of unsold stock; that, in the absence of a
contrary intention, a notice rejecting unsold goods did not have to be in writing or to
identify with certainty the goods to which it related, but sufficed if it identified them
generically so long as the generic description enabled them to be identified with certainty;
that the goods did not need to be physically capable of collection when notice of rejection
was issued, but should be available for collection within a reasonable period, and where
there had been clear notice of rejection of goods, later events were irrelevant to the issue of
its validity; that in the circumstances the defendants' letter was a valid notice of rejection of
the unsold stock; and that, accordingly, the plaintiffs were not successful.
Phillips LG on notice:

Certainty
“Where a seller offers goods for sale on terms that the buyer can accept all or part of the
goods, a rejection of the offer in relation to part only of *551 the goods cannot have legal
effect unless it identifies with certainty the goods to which it relates. So much was accepted
by Mr. Underhill for the defendants. He submitted, however, that this identification did not
have to be effected by listing the goods in question. It sufficed for the notice to identify
them generically, provided that the generic description would enable the goods to be
identified with certainty. Mr. Underhill submitted that the notice in this case satisfied that
requirement. It related expressly to the goods in all the stores and, implicitly, only to those
goods which had been supplied on sale or return terms. Alternatively, if the notice related
to all goods remaining in stock, whether subject to sale or return term or not, it would still
be valid in relation to the goods covered by that term.

Mr. Leggatt argued that to be valid the notice had to inform the plaintiffs precisely what
stock was covered by it, so that they would be in a position to take appropriate action, such
as selling the goods in question to another purchaser.

In my judgment, Mr. Underhill's argument is to be preferred. The defendants had been


steadily accepting the goods on offer by disposing of them, thereby "adopting the
transaction" in relation to them. While they were periodically informing the plaintiffs of the
goods so sold, the plaintiffs did not have up-to-date information as to what was sold and
what remained. Just as the plaintiffs had no entitlement to immediate notification of
precisely which goods were accepted in this way, I can see no basis for contending that they
were entitled to immediate notification of precisely which goods remained in their
ownership when the defendants gave notice of rejection in relation to the goods unsold.
The notice was, in my judgment, a valid notice and one that disentitled the plaintiffs to
payment for the goods to which it related. Accordingly, I would allow the appeal, concurring
in the result proposed by Waller L.J.”

Importance of this case:


In the absence of a specific provision controlling the matter, in a sale or return K any notice
to the S that the B does not wish to exercise his option to purchase suffices.
Commercially this makes sense as if after giving notice the B collects the goods within a
reasonable time the S can resume possession of them and resell them.
This decision also recognises that K’s for sale or return are K’s for bailment up until the time
property passes.
Significance of this decision is that if passing of property and time of payment are separate
the goods will remain in the S’s risk notwithstanding payment by the B.

Resemblance of Reservation of title (retention of title) to sale or return K’s: There are all
sorts of similarities between retention of title clause and sale of return contracts for you to
have a think about when doing your summative.
- RoT generally applies to unascertained goods (S retains property on the goods until S is
paid) and are governed by s. 19 and 17. However, Rule 4 does not apply to
unascertained goods.
- In RoT if the goods are used by the B and their nature is changed this usually passes the
property to B. E.g. Timber used to manufacture furniture; resin used to manufacture
chipboard; aluminium used to manufacture wheels.
- Main difference: in RoT the B is committed to purchase the goods, whereas in sale or
return the B is not committed to purchase. With retention of title, you are
committed to purchase that good. You need to have that obligation to purchase the
good when drafting your retention of title clause. This is because if you do not, then
it will be a sale of return contract.
What if the B under sale or return sells the goods to a 3rd Party despite a clause that
states property is not to pass until payment? A contrary intention will override rule 4. If you
want your property to pass at a different time to that set out to rule 4, you need to make
sure that you have an express term setting that out in your contract. This clause will
override s. 18, Rule 4.

4(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.”

As previously said, there are two ways you can pass property under rule 4. The first one is
that you have to give your approval or acceptance. What if you don’t give your approval or
acceptance? Under 4(b) you will be taken to have accepted the goods under two
circumstances:
- The first one is if a time has been fixed for the return of goods and the time expires and
you have not returned it, you will be taken to have accepted it.
- If there is no time specified but a reasonable time expired then you will have made
your mind up

If you are the buyer under the sale of return contract and you do not do anything, then that
will be taken to return the goods. What if you own a business and you have told your
employee that you do not want this goods and you want them returned, but your employee
does not return them within the time frame. If that happens, rule 4 (b) will kick in and
regardless of your communication with your employee, you will still be the owner and even
if it was your employees fault, since you are the employer then you are responsible for the
actions of your employee. However, if the goods are being held by creditors of the buyer,
then property will not be deemed to have passed under 4(b), even if they have not been
returned within the time frame. This is because the buyer has no control over the creditors
actions.
In summary, if it is a sale of return or sale of approval, rule 4 will apply.

Rule 5: pg 257-259 goode textbook and pg. 350 for clark hooley etal and time in recording =
18:00
Unascertained goods:

 Goods to be manufactured or grown by the S


 Purely generic goods
 Unidentified portion of a specified bulk or whole
- Passing of risk in this last option may take place at a different time.
S. 16 is the starting point: Mandatory rule and has precedence over the intentions of
parties: Subject to s. 20A property cannot pass until goods are ascertained. It cannot be
overridden.
S. 17 deals with intentions of parties and in sale of specific or ascertained goods.
S. 18 R. 5 (1) : Goods must be in a deliverable state (covered earlier).
Unconditional appropriation, R. 5(2):
- Ascertained or identified goods must be irrevocably attached or earmarked for the
particular contract in question.
- The property will then pass to the B.
Rule 5 applies to contracts for the sale of unascertained or future goods by description. The
rule does not distinguish wholly unascertained from quasi specific goods and unascertained
covers both categories. Future goods, even if specific are brought within the rule. This is
because it is extremely unlikely that future goods will also be specific if they are sold by
description and r 5 is confined to sale by description.
Deliverable state: Check rule 1 above
Unconditionally appropriated:
Appropriation has the connotation of selecting or setting aside. Check P.352 Clark et al on
what unconditional appropriation really means.
What is meant here is some act which earmarks goods as the contract goods and irrevocably
commits the parties to those goods, thus depriving the party who performs the act of
appropriation of the right to change his mind and substitute other goods of the contract
description.
How do unascertained goods become unconditionally appropriated to the contract? :
Healy v Howlett: D ordered 20 boxes of mackerel from P. P dispatched 190 boxes and
instructed railway officials to earmark 20 boxes for D. Fish deteriorated during transit.
Held: property did not pass to the D. No property could pass before the boxes were
earmarked and even after earmarking as this was not irrevocable it was not possible to
determine which boxes belonged to D. (P.258-259 Goode)
The plaintiff, a fish exporter carrying on business at Valentia, Ireland, entered into a contract
with the defendants, fish salesmen, of Billingsgate, to sell to them twenty boxes of hard,
bright mackerel. The fish were to be sent to the defendants at Billingsgate. On the same day
the plaintiff consigned by railway from Valentia to his (the plaintiff's) order in Holyhead 190
boxes of mackerel, and telegraphed instructions to the railway company at Holyhead to
deliver twenty of the 190 boxes to the defendants, and of the remaining 170 boxes twenty
and 150 to two other consignees respectively. After the mackerel were placed on rail at
Valentia the plaintiff sent to the defendants by post an invoice on which he placed the
words “At sole risk of purchaser after putting fish on rail here.” The train in which the
mackerel were carried from Valentia to Dublin was delayed and arrived at Dublin so late
that the mackerel lost the boat by which they ought to have been carried from Dublin to
Holyhead. Upon arrival of the 190 boxes at Holyhead an official of the railway company, in
accordance with the plaintiff's telegraphic instructions, picked out and earmarked twenty
boxes for delivery to the defendants and twenty and 150 boxes for delivery to the two other
consignees respectively. In consequence of the delay which had occurred, when the
mackerel reached the defendants in London they were not in a merchantable condition as
hard, bright mackerel, and the defendants refused to *338 accept them. In an action
brought by the plaintiff to recover the price:—
Held, that as the invoice was not sent by the plaintiff until after the contract of sale was
complete and the fish were put on rail, it was not part of the contract, and therefore did not
operate so as to place the fish at the risk of the defendants.
Held, further, that, as there had been no appropriation of the twenty boxes to the
defendants at Valentia, the delivery there to the railway company of the 190 boxes did not
pass the property in any particular twenty boxes to the defendants, and that they were not
bound by the selection and earmarking made at Holyhead after the delay had occurred;
consequently the defendants were entitled to reject the mackerel, and the plaintiff could
not recover the price from them.
Also, the court said when risk passes, depends on the terms of the contract and not on the
unilateral decision of the seller. So it did not matter that the seller had said risk will pass to
the buyer.
Aldridge v Johnson: As soon as the seller filled some sacks sent by the buyer with barley the
property passed.
Summary: A agreed to buy 100 quarters of barley out of a particular 200 quarters. J filled
some sacks sent by A with barley.
Held: Property had passed even though the sacks were in the Seller’s possession.
Plaintiff agreed to purchase from K 100 quarters of barley, being part of a large quantity
which plaintiff saw and approved of, and of which he took away a sample. It was also agreed
that plaintiff should send his own sacks to K; that K should fill the sacks with barley, take
them to the railway, and place them on trucks, to be conveyed to plaintiff. Plaintiff sent 200
sacks, and K filled 155 of them with barley from the larger quantity. The barley was not
delivered, though repeatedly demanded by plaintiff and promised by K. K becoming
embarrassed, took the barley out of the sacks, and mixed it with the bulk, without the
privity of plaintiff. K was soon after adjudicated a bankrupt. The assignees thereupon
removed the barley, and claimed the whole as the bankrupt’s property: Held (1) the
property in the barley in the 155 sacks passed to plaintiff by the appropriation made by K,
with the assent of plaintiff, à priori as well as subsequently; (2) notwithstanding the prior
conversion by K, the removal of the barley by the assignees was a conversion by them.

(3) Sometimes the right of ascertainment rests with the vendee, sometimes solely with the
vendor. Here it is vested in the vendor only . . . When he had done the outward act which
showed which part was to be the vendee’s property, his election was made and the
property passed (Erle J).
Langton v Higgins: property will pass by appropriation of the goods to the contract where
the buyer has previously assented to such appropriation by the seller: “....In all reason,
when a vendee sends his ship, or cart, or cask, or bottle, to the vendor, and he puts the
article sold into it, that is a delivery to the vendee”.
C owed money to L. In order to pay off his debt C, offered to sell L some oil that he was
producing. L sent bottles to be filled with the oil. C filled the bottles but then sold them to H.
Held: Property had passed with the filling of the bottles. By filling the bottles with the oil
the oil had been unconditionally appropriated to the contract. Therefore, L could sue H.
In January, 1858, C. agreed to sell to the plaintiff all the crop of oil of peppermint grown on
his farm in that year at 21s. per pound. In September C. wrote to the plaintiff for bottles to
put the oil in. The plaintiff sent the bottles, and C. having weighed the oil put it in the
plaintiff's bottles, labelled them with the weight, and made out invoices. Before, however,
he had completed the filling of the bottles he sold and delivered several of them to the
defendant. The plaintiff had for many years past bought of C. his crop of oil of peppermint,
and it was usual for C., when the bottles were filled, to deliver them to a carrier to take to a
railway station. In detinue, by the plaintiff against the defendant, for the bottles of oil of
peppermint delivered to him: Held, that the putting the oil in the plaintiff's bottles was an
act of appropriation which vested the property in the plaintiff.
Carlos Federspiel v Charles Twigg: CF ordered bicycles from CT. The bicycles were
manufactured according to the K, packed in crates marked with CF’s details and steps were
taken to ship them to Costa Rica from Liverpool with a specific ship. CF paid the price. CT
went into receivership before the shipment. CF argued that the property had passed.
Held: Property had not passed: (1) Intention was that ownership should pass on shipment
(which did not happen); (2) there was no correspondence evincing an intention to pass
ownership before the shipment; (3) no actual/constructive delivery ; (4) no intention to put
the goods in B’s risk at any time before shipment and; (5) no insistence by the B to the S to
insure the goods.
There has not been an unconditional appropriation. One vital factual key was that the seller
was responsible for arranging the shipment. The court said that when they looked at the
contract the intention was that ownership would pass upon shipment. Shipment never
happened and the court said because shipment was crucial, property had not passed.
The plaintiffs ordered goods from an English company and paid for them in advance. The
goods were to be sent to Costa Rica and the contract was an FOB one with some CIF
features. The English company packed the goods into cases, marked them with the buyers'
name, registered them for consignment and ordered shipping space in a named ship. Before
the goods were sent to the port a receiver was appointed by the debenture holders of the
English company and he refused to deliver the goods. On an action brought by the plaintiffs,
who contended that the property in the goods had passed to them, Pearson J. held that the
intention of the parties was that the property in the goods should pass on shipment and
that there was no such prior appropriation of the goods and assent thereto as would pass
the property by virtue of the Sale of Goods Act 1893 s.18, r.5 .
Where an unidentified part of a bulk was sold there could be no appropriation until there
was a severance of the part sold from the rest and no property passed:
Wardar v Norwood: (goods are in the possession of 3rd party and the 3rd party sets the
goods aside for delivery – unconditional appropriation) The property and risk in
unascertained goods in the possession of a third person pass from seller to buyer when the
third person, having selected the goods from the bulk, acknowledges them as the buyer's.
Summary: W (B) agreed to buy from N (S) 600 cartons of ox kidneys out of 1500 cartons. A
delivery order was handed by the driver to the warehouse owner. During loading and
delivery the goods became unfit for consumption.
Held (CA): the loss fell on the B since property and risk had passed at the time the delivery
order was handed to the warehouse owner and the deterioration occurred after that time.
*B may have claims against the insurance or the carrier company.
Westlaw: S sold B 600 out of 1,500 cartons of frozen kidneys lying in S's agent's cold store.
B's carrier arrived there at 8 a.m. and handed a delivery note to the agent. The cartons were
already standing on the pavement outside the store. Loading lasted until noon, when the
carrier, having noticed shortly before that some of the cartons still on the pavement were
dripping, signed a receipt for them and added "in soft condition." On arrival at their
destination the kidneys were unfit for human consumption.
Held, allowing the appeal that the property and risk in unascertained goods which were in
the possession of a third person passed when the third person, having selected an
appropriate part of the goods from the bulk for the buyer, acknowledged those goods as the
buyer's, for there was then an unconditional appropriation of the goods to the contract
(post, pp. 671E, 673C, F); and applying that test to the present case the risk of deterioration
in the kidneys awaiting delivery on the pavement passed to the plaintiffs when the carrier
handed over the delivery note to the cold store, for at that moment the cold store
acknowledged that they belonged to the plaintiffs, and since the damage occurred
subsequently the risk fell on the plaintiffs; accordingly, the defendants' counterclaim for the
price succeeded.
Assent
Pignataro v Gilroy: The assent which Rule 5 requires may be express or implied.
D (Gilroy) contracted to sell by sample 140 bags of rice to Pignataro (P). The rice was
unascertained. D notified P to collect 125 bags in one collection and 15 in another. An
inference of assent to make these two collections was drawn from the notice. However, P
did not collect the 15 bags. D sued P.
Held: property had passed. P had already given assent to enter into a K for 140 bags and
therefore the risk of loss was on P.
Where on a sale of unascertained goods by description goods of that description and in a
deliverable state are unconditionally appropriated to the contract by the seller, and the
seller sends notice of that appropriation to the buyer, in the event of the buyer neglecting
to reply to that notice promptly it must be inferred that he assents to the appropriation, and
on the expiry of a reasonable time after receipt of the notice the property must be deemed
to have passed.
Conditional appropriation:
If the S stipulates that the B will have the goods only on payment, the appropriation is said
to be conditional. S reserves some rights (implied/express terms) and this will prevent the
property passing.
S.19: Reservation of right of disposal.
Shipton v Harrison Bros: Owner of a specific parcel of wheat sold on the terms ‘payment
cash within 7 days against transfer order’ . The goods were requisitioned by the
Government before delivery.
Held (CA): S reserved the right to retain title as he was not bound by delivery until payment.
contract was frustrated by the Government seizure.
What happens in a transfer without unconditional appropriation:
Karlshamns v Eastport: Millet LJ: Essential requirements (apart from s.18 R.5(1)): (a) goods
should be ascertained (appropriation is the only way to ascertain the goods) and; (b) the
parties should have intention to transfer the goods.

Rules 5(3) & 5(4) – Appropriation by exhaustion (ascertainment can take place if they are
the only goods left)
Goods are unconditionally appropriated to the contract when they represent the remainder
of an identified bulk
Wait & James v Midland Bank (1926) 24 Ll LR 313: all other buyers took delivery of their
wheat leaving only the Claimant’s what behind – appropriation by exhaustion.
Buyers purchased 1,250 quarters of wheat under three separate contracts from a bulk held
in a warehouse. Buyers took delivery of 400 quarters of their order and, over time, following
deliveries to other purchasers, only 850 quarters of the original bulk remained in the
warehouse, all of which was originally owned by the sellers. Held: the wheat remaining in
the warehouse had been ascertained as the quantity of goods agreed to be sold by the
sellers to the buyers and that the property had passed.
Sale of an unidentified part of an identified bulk
S. 16 in its original form caused some concerns. Law Commission prepared a Report on Sale
of Goods Forming Part of a Bulk (1993). Hence addition of ‘Subject to s. 20A…’
Usual position: after the transaction is completed and payment is made, if goods are
ascertained and identified while in the hands of the S the property would pass to B.
- B would be protected from the risk of the S’s insolvency and can claim property rights
against the creditors and administrator.
- Goods would be at the B’s risk
BUT: where the goods are an unidentified part of a bulk so that property could not pass as a
result of s. 16’s original form these consequences would not follow.
Re London Wine: company sold but retained possession of the wine while the customer was
given a “certificate of title” but no earmarking or physical segregation of the wine. No
appropriation by exhaustion as impossible to tell which wine belonged to which customer.
Company (C) sold wine to customers and retained possession of the wine. Customers paid
for the wine and storage charges. C gave certificates of title to the owners. C became
insolvent and the receiver claimed that all the wine belonged to the C and would be seized
by the receiver in order to satisfy the claims of creditors.
One party of creditors claimed they bought the whole stock and that the wine had not been
sold as part of a particular bulk (failed).
Another party of creditors claimed they bought the whole stock of a particular brand wine.
(failed)
The third group failed as the wine had not been ascertained.
Re Stapylton Fletcher: Wines were sold and stored separately. It was held that the property
had passed to the B’s who took the property as tenants in common.
Parties intended to pass the property when they set aside the wine (separation of wines
sold from the company’s trading assets).
A much criticised decision!
Incorrect? Would this be decided differently after the 1995 amendments to SGA i.e. SS.20A
and B?
The Sale of Goods (Amendment) Act 1995:
(1) the doctrine of ascertainment by exhaustion
(2) enables property in an undivided share forming the part of an identified bulk to pass
before ascertainment of the goods relating to the specific sale.
Inserted a new 20A and 20B into SGA 1979: Burns (1996) 59 MLR 260.
s.20A(1)(a): The goods must “form part of a bulk which is identified either in the contract or
by subsequent agreement....”
s.20A(1)(b): The buyer must have paid at least some of the purchase price for the goods.

S. 20 A: So, in order for s.20A to apply 3 conditions must be satisfied


(1) Sale of a specified quantity.
(2) Bulk must be identified.
(3) The B must have paid for some or all of the goods.
The buyer then has “such share as the quantity of goods paid for and due to the buyer out
of the bulk bears to the quantity of goods in the bulk” (s.20A(3)).
(This also applies to contracts regulated by the CRA (s.4 CRA 2015)).
The position in equity prior to the 1995 Act:
Re Wait:
W bought 1000 tons of wheat to be loaded on a specific vessel and contracted to sell 500
tons of this wheat to X. The wheat was shipped in an undivided load and one bill of lading
was issued for the whole load. X paid W. W went bankrupt. W’s trustee claimed 1000 tons.
X claimed that he had an equitable assignment or charge on the 500 tons.
Majority of CA held against X (clearly insufficient appropriation).
Atkin LJ said that since the SGA deals with the transfer of property between buyer and seller
there was no room for equitable relief.