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Transfer of Property Rights in
Respect of Goods: Sale
The Contract of Sale
The modern rules on sale are found in the consolidating statute, the Sale of Goods Act 1979 (SGA
1979). The underlying rule is that the transfer is based upon the intention of the contracting parties
(the buyer and seller).
Sale of Goods Act (SGA) 1979
S2 Contract of Sale
(1) A contract of 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
S5 Existing or Future Goods
(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.
S12 Implied terms about title, etc.
(1) 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 a 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.
(2) Other implied terms…
(3) This subsection applies to a contract of sale in the case of which there appears from the contract or is to be inferred from its circumstances an intention that the seller should transfer only such title as he or a third person may have.
S16 Goods must be ascertained
Subject to section 20A, 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.
S17 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.
S18 Rules for Ascertaining Intention
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:
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.
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 into a deliverable state, the property does not pass until the thing is done and the buyer has notice that it has been done.
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.
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.
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 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 to be 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) 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.
S20 Passing of Risk
(1) Unless otherwise agreed, the goods remain at 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 at 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 risk of the party at fault as regards any loss which might not have occurred but for such fault.
S20A Undivided Shares in goods forming part of bulk
(1) This section applies to a contract for the sale of a specified quantity of unascertained goods if the following conditions are met:
(a) the goods or some of them form part of a bulk which is identified either in the contract or by subsequent agreement between the parties; and
(b) the buyer has paid the price for some or all of the goods which are the subject of the contract and which form part of the bulk.
(2) Where this section applies, then (unless the parties agree otherwise), as soon as the conditions specified in paragraphs (a) and (b) of subsection (1) are met or at such later time as the parties may agree —
(a) property in an undivided share in the bulk is transferred to the buyer; and (b) the buyer becomes an owner in common of the bulk.
(3) Subject to subsection (4), for the purposes of this section, the undivided share of a buyer in a bulk at any time shall be 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 at that time.
S20B Deemed consent by co-owner to dealings in bulk 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];
A contract of 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)).
'Property': means the 'general property' in goods, and not merely a special property (S61)
'General property' includes lesser titles to property. We know this from the language of S12.
o S12 includes an implied term that the seller is able to transfer the best title. This suggests that it applies to cases where the seller doesn't have the best title.
The Act makes a distinction between a contract for sale and other contracts/agreements:
"A 'contract of sale' includes an agreement to sell as well as a sale" (S61)
o There is a sale if title is actually transferred under the contract
Whereas an agreement is for the transfer to take place in the future
Barter (chattel for a chattel) is not a mode of conveyance. You would need to transfer title by deed or delivery.
o Flynn v Mackin: was not a contract of sale because no fixed price. Therefore,
property did not pass because there was no delivery.
It is therefore clear that the contract for sale itself has the effect of transferring title to the buyer.
- Note the contrast with land law: you cannot transfer the fee simple in land simply be contract. Contracts agree to the sale but the conveyance itself requires compliance with formalities
Flynn v Mackin (1974)- Irish SC
Facts: D2 (Mr Mahon) agreed to supply D1 (Mr Mackin) with a new motor car in return for £250 and the delivery of D1's used car. It was understood that D2 would have to procure the new car from a 3rd party. D2 obtained the new car from X and telephones D1 informing him, and D1 arranged to take delivery of the new car on the same day. While driving it to the place of delivery for this purpose, D2 collided with a car in which C was a passenger. C was severely injured and sued D1 and D2 for damaged for negligence. Issue was whether the property was vested in D1 at the time of the accident.
Held (Walsh J): Property in the new car had not vested in D1 at the time of the accident. The agreement between them was one in barter and was not an agreement for the sale of goods within the Act. Why does the exact time of formation of the contract of sale matter?
We are often concerned with the exact point at which the seller's proprietary interest in the goods is transferred to the buyer. This is because the transfer effects the performance of the parties'
contractual rights and duties.
There is a connection with passing of risk. By S20 risk (risk of loss) passes to buyer when property in the goods is transferred to the buyer, even before delivery
Important in case of insolvency: if the seller goes insolvent we want to know whether the goods have passed or not
It affects the seller's right to bring an action for the price
Condition for the Passing of Title: Goods Must be
It is a condition required before passing of title can take place that the goods are ascertained. Goods must be ascertained for title to pass (S16). B can only acquire Ownership from a contract of sale once A has exercised his power to give a particular property right to B. Ascertainment simply means the identification of goods by a seller minded to use them in the performance of the contract.
Within the SGA, goods are divided into specific and unascertained goods.
A. Specific Goods: Defined in S61 as being goods identified and agreed on at the time a contract of sale is made.
o Specific goods cannot be substituted, even with goods that are in every other respect identical
B. Unascertained Goods: the residual category of goods. These goods are to be identified at a later point. This includes:
o 'Future goods': goods to be manufactured or acquired by the seller after the making of the contract of sale (S61)
o 'Generic Goods'
o 'Goods ex Bulk'
o In determining whether unascertained goods become ascertained the question will be whether A has made an irrevocable choice to transfer his Ownership of a specific thing to B so that A's duty new relates to a specific thing.
Rationale for condition: The very definition of a sale is that it is a transfer of a particular title from the seller to the buyer, thus relating to specific chattels. If the parties are not aware of the specific goods that the rights relate to then there is no clear subject-matter of the sale. Lord Blackburn in
Goldcorp recognised that this requirement goes to the very definition of sale.
*Remember that ascertainment itself is not enough to make the property pass: it simply removes an inhibition that prevents a conveyance from taking place.
A. Ascertaining Goods: Generic Goods
In order to ascertain goods that are generic it is necessary to find goods that meet that description.
There are important cases on how this can take place:
Healey: When 190 unmarked boxes of mackerel were handed over to be transported, this did not amount to ascertainment since the 20 specific boxes could not be distinguished from the 170 others at this point. It was only once the 20 boxes
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