Property Notes

PROPERTY

NOTES

What significance does the passing of property have in English law?

• Four points of significance

• Getting your goods in the event of insolvency

  • 1) Generally arises where the seller is insolvent, and buyer has paid

    • If buyer can establish property in goods, they can take them

    • If not, they become another unsecured creditor

    • This happened in Carlos Federspiel

  • 2) When buyer has taken delivery of the goods, but hasn’t paid

    • Seller would much rather recover the goods themselves by asserting property right in the goods

    • This happened in Cheetham v Thornham Spinning

      • Sellers retained documents

      • For practical reasons it was more desirable for the buyers to store the goods in their warehouse, but Court held nevertheless they were still merely holding as bailees for the sellers

• 3) Bringing a tort claim

  • Depends usually on having some sort of proprietary interest in the goods at the relevant time

  • Either for damage to goods, or conversion

  • Relevant in Ciudad de Pasto and Filiatra Legacy

• 4) Seller’s right to price

  • Can’t bring an action for price if property hasn’t passed

  • Will deal with this more fully in W8

  • Why do you want to claim for price?

    • Don’t need to worry about remoteness, mitigation, don’t need to establish loss

  • Colley v Overseas Exporters considered whether a seller could bring an action for price even though property had not passed

• Presumption that risk passes with property

  • Although this presumption is often rebutted

When does property pass?

General

• Property passes when parties intend for it to pass (S17 SGA)

  • NOTE: most of our course concerns unascertained goods

  • For unascertained goods, property passes when goods matching contract description and in a deliverable state are unconditionally appropriated to the contract (S18 R5(1) SGA) and ascertained (S16 SGA)

    • Unconditional appropriation = (1) appropriation and (2) payment

  • For specific goods, they are already appropriated (since they’ve been identified and appropriated by the contract of sale) (but not unconditionally, usually it’ll be subject to the condition of payment)

  • For both specific and unascertained goods, seller can reserve a right of disposal (S19(1) SGA)

• Why would seller reserve a right of disposal?

  • (1) to secure payment and (2) finance (Smyth v Bailey, concerned CIF contracts, but can draw an analogy to FOB)

  • General presumption that CIF seller will reserve right of disposal, until payment is made (Smyth v Bailey, The Delfini)

  • S19(2): If by the bill of lading the goods are deliverable to the order of the seller or his agent, then there is a rebuttable presumption of a reserved right of disposal (Ciudad de Pasto)

    • Maybe use this for FOB contracts, and use Smyth v Bailey for CIF

• Exceptions to right of disposal:

  • (1) When buyer and seller are associated companies (Albazero)

    • No need to secure payment against each other

  • (2) When the buyers choose to give credit

    • E.g. Filiatra Legacy

    • Short voyage, payment was due 30 days from bill of lading date, so clearly parties had contemplated that the voyage would long be completed, and the oil used by the buyer, before payment obligation arose

    • Essentially the buyers gave credit

    • Thus the property passing prima facie rule was displaced by that

  • (3) When contract/parties’ intention indicates otherwise

    • E.g. in the oil trade, common to say that property will pass on loading

    • In The Delfini, there was a common intention that delivery could be taken against a letter of indemnity from the buyer

      • So, even though there had been no payment against documents, property still passed

• SUMMARY:

  • For specific goods –

    • Property will generally pass when payment is made, even if this is before shipment (Benjamin’s 19-099)

    • Although this is still subject to parties’ intentions – there are good reasons why they may not want property to pass that early

  • For unascertained goods –

    • 1) Goods must be ascertained (S16 SGA)

      • Subject to S20A exception for unascertained goods in an identified bulk

    • 2) There must be unconditional appropriation (S18 R5(1) SGA) with the assent of the buyer

      • This requires appropriation + payment

      • Appropriation takes place at different times between FOB and CIF contracts (see below)

      • Also payment is subject to exceptions noted above (e.g. associated companies)

      • Assent -> interpreted broadly, so long as the appropriation is done in a manner contemplated by the parties -> can be express or implied

• When will there be appropriation?

  • FOB -> Goods are usually appropriated in a FOB contract on shipment (it’s usually the final act of physical performance -> Carlos Federspiel)

  • CIF -> Can be on shipment, but also can be when a notice of appropriation is given, which identifies the vessel and says, for e.g., the wheat in this hold

    • Unlikely that shipment will count as appropriation, because this would mean the seller is BOUND at that point to deliver those particular goods to the buyer

    • Usually there is an intention to preserve the seller’s flexibility (e.g. if the goods turn out to be unsuitable, they can still procure goods on another ship to fulfil the contract)

    • But if there is no contrary intention, then shipment could still be the moment of appropriation

• General rule is that property will not pass before shipment

  • There are commercial reasons for this

  • 1) One problem is that risk prima facie stays with property (S20)

    • If property passes, then risk passes to the buyers

    • Buyers are unlikely to be protected by insurance prior to shipment

      • Don’t really want to take out an insurance contract that covers the risk in the seller’s country

    • They also have less control of the goods before shipment

    • But you could circumvent this by separating risk and property! Leaving risk with seller and passing property to buyer.

  • 2) But even then, the seller would lose standing to sue, e.g. in tort

    • So let’s say they pass the goods to someone to bring it down to port, and the person damages it

    • They will suffer loss (due to...

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