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UniCramNotes.com ©Page 14 iv.WERE THE GOODS SUPPLIED IN THE COURSE OF A
BUSINESS? The goods must be of the kind that the seller supplies in the course of
business. Ashington Piggeries -It is in the course of the seller’s business if the seller
agrees to supply the goods when ordered. This applies orders for new goods. -By
holding out the seller as a manufacturer or dealer in goods of that kind, the seller
leads the buyer reasonably to understand that he is capable of exercising sufficient
skill or judgment to make or to select goods which will be fit for the particular
purpose oIt does not matter that the seller does not actually possess the necessary
skill or judgment. v.ARE THE GOODS REASONABLY FIT FOR THE PARTICULAR
PURPOSE? To determine whether the goods are reasonable for the particular
purpose, this is a factual question. However, the following cases provide guidelines
as to the level of fitness for purpose for which the seller is responsible. Henry
Kendall -The reliance on the seller extends to latent defects that even with the
utmost skill and judgment, the seller would not have detected them. oThis is a high
burden. -If a purpose is stated so widely as to cover different qualities of goods,
whether it will be reasonably for purpose will be a question of fact and degree. oThe
rarity of the unsuitability of the goods would be weighed against the gravity of the
consequences. -Any term excluding responsibility of latent defects is only partially
effective. oIt is only effective to extent that the latent defect does not prevent the
goods from being reasonably fit for their purpose. Ashington Piggeries -The absence
of complaint from other buyers who received the same goods does not establish the
suitability of the goods. -The buyer need not show that the goods were not
reasonably fit for purpose for other customers as well. vi.DOES THE PROVISO APPLY
– DID THE BUYER RELY ON THE PATENT OR TRADE NAME? The proviso applies
where the buyer requests to purchase a specific good using its patent or other trade
name (e.g. Kleenex, Panadol and so on) Baldry v Marshall -The fact that the goods
are merely described with reference to a trade name does not activate the proviso. -
It is only when the buyer specifically asked for the goods using the trade name so as
to indicate that he is satisfied, rightly or wrongly, that it will answer his purpose, and
that he is not relying on the skill or judgment of the seller. Preview of Study
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UniCramNotes.com ©Page 15 G.HAS THE BUYER SIGNALLED ACCEPTANCE OF
GOODS? i.HAS THE BUYER EXAMINED THE GOODS? Under s 37, the buyer will not
be deemed to have accepted goods unless and until the buyer has had a
reasonable opportunity of examining them for the purpose of ascertaining whether
they are in conformity with the contract. Likewise, the seller must give the buyer
such a reasonable opportunity to examine the goods (s 37(2)). ii.HAS THE BUYER
INTIMATED ACCEPTANCE, DONE ANY ACT INCONSISTENT WITH SELLER’S
OWNERSHIP, OR RETAINED THEM WITHOUT INTIMATING REJECTION? The buyer will
be deemed to have accepted the goods where the buyer (s 38): -intimates to the
seller that the buyer has accepted the goods, or -does any act inconsistent with the
seller’s ownership of the goods, or-retains the goods without intimating acceptance
within a reasonable time Note that intimation can only happen if there is actual
communication. This cannot be inferred from conduct. H.REMEDIESWhere there
has been a failure of an implied condition, the buyer can rescind the contract of sale
by returning the goods and claiming for the purchase price paid. Where there is a
failure of a warranty, the buyer can claim damages for the loss suffered (expectation
loss/loss of bargain). However, note that under s 16(3), breach of a condition may
be treated as breach of a warranty once the buyer has accepted the goods or part
thereof. Note that this does not mean that a condition becomes a warranty upon
acceptance of goods by the buyer. The consequence is that the legal remedies for
breach become limited to remedies which exist for warranties only, that is, suing for
damages. 3.THE PASSING OF RISK,POSSESSION AND TITLE TO
GOODSA.BACKGROUND -TYPES OF GOODSi.FUTURE GOODSUnder s 5(1), future
goods are defined as goods to be manufactured or acquired by seller after the
making of the contract. This would encompass goods which are not currently in
existence. ii.SPECIFIC GOODSSpecific goods are those that are identified and agreed
upon at time of contract. Kursell -A sale of trees by reference to their height at the
time of felling was not considered to be specific goods because it couldn’t be
determined which trees were part of the contract until the time for felling. Preview
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UniCramNotes.com ©Page 16 iii.ASCERTAINED GOODSAscertained goods are
those that are identified in accordance with the agreement after the contract has
been made. For example, in the Kursell case above, the sale of trees with reference
to their height at the time of felling would be ascertained goods. iv.UNASCERTAINED
GOODSUnascertained goods are those that cannot be identified with sufficient
certainty, or those which are not agreed upon at the time of contract. v.EXISTING
GOODSExisting goods are those that are currently owned or possessed by the seller
(s 10(1)). B.HAS TITLE PASSED?PRESUMPTIONS AS TO WHEN TITLE PASSESTitle
to the property can pass whether or not delivery, possession or payment has taken
place. Therefore, it is important to determine when title has passed to the buyer. The
implication of the passing of title is that: -Risk of the goods passes when title passes
(s 25)-If title to the goods have passed to the buyer, the buyer will have good title
even if the seller becomes insolvent before delivery of the goods to the buyer. -
Where specific goods, without fault of the seller or buyer, perish before risk passes
to the buyer, the agreement is avoided (s 12). That is, the loss lies where it falls.
i.DEFINITIONS-Delivery is the act of the transfer of possession. -“Goods passing”
describes the transfer of title and ownership of the goods -Risk is the liability for the
loss of the goods (s 25)-Deliverable state oDefined in s 5(4) as the state of the
goods that the buyer would, under the contract, be bound to take delivery of.
oDeliverable state does not depend on mere completeness of the subject matter.
Rather, it depends on the actual state of the goods at date of contract and the state
in which they are to be delivered under the terms of contract (Underwood) oThe
expending of time, money and effort to deliver the goods meant that it was not in
deliverable state (Underwood). ii.GENERAL RULEThe general rule for determining
whether title has passed is that property to specific or ascertained goods passes to
buyer at such time as the parties to the contract intended it to pass (s 22). The
intention of the parties will be drawn from the terms of contract, the conduct of
parties, and the circumstances of case. McPherson -The words “Goods to be at
buyer’s risk after fall of hammer” is an express and emphatic declaration of the
intention of the parties that property passes at the time of contract. -A provision for
resale of the goods did not count against a view that property passed when the
contract was made. Note that where there is a contractual agreement as to when
property is to pass, s 22 Preview of Study Notes from
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UniCramNotes.com ©Page 17 provides that this contractual intention is to be given
effect. However, if there no intention is apparent in the contract, the rules in s 23
(described in the following sections) will be relevant in determining the time when
title passes. iii.SALE OF SPECIFIC GOODSThe following rules are provided under the
SOGA for ascertaining the intention of the parties as to the time at which the
property in specific goods are to pass to the buyer. 1)Unconditional contract Where
there is an unconditional contract for the sale of specific goods in a deliverable state,
property in the goods passes to the buyer at the time of contract (s 23 Rule 1).
There are two parts to this rule- -The contract must be unconditional -The goods
must be in a deliverable state (see s 5(4) in the Definitions section above) In
addition, it is immaterial whether the time for payment or delivery is postponed.
Bodilingo -As the goods were specific, and there was a warranty that the goods was
to be in deliverable state, property passed on the making of the contract (s 23 Rule
1) notwithstanding postponement of the payment or delivery. 2)Seller is bound to do
something to put goods into deliverable state Under s 23 Rule 2, where the seller is
bound to do something to the goods for the purpose of putting them in a deliverable
state, property does not pass until the seller does what is required and the buyer has
notice of this. The main difference from s 23 Rule 1 is that the goods in question are
not currently in a deliverable state. Therefore, the operative requirement is that the
goods be placed in a deliverable state by the seller. Upon informing the buyer that
the goods are placed in a deliverable state, the goods would pass to the buyer.
Underwood-Deliverable state does not depend on mere completeness of the subject
matter. Rather, it depends on the actual state of the goods at date of contract and
the state in which they are to be delivered under the terms of contract. -The
expending of time, money and effort to deliver the goods meant that it was not in
deliverable state. Section 23 Rule 3 is similar in the sense that the seller must
weigh, measure, test or do some other act with reference to the goods for the
purpose of ascertaining the price. iv.GOODS ON SALE OR RETURN BASISUnder s 23
Rule 4, where goods are delivered to the buyer for sale on a “sale or return” basis,
property to the goods passes to the buyer when: -The buyer signifies approval or
acceptance or does any other act adopting the transaction; or -The buyer retains the
goods without giving notice of rejection of the goods, upon expiration of the time
fixed for the return of goods or the expiration of a reasonable time. Preview of
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UniCramNotes.com ©Page 18 Generally, this provision would apply to goods sold
on consignment with the retailer (the buyer). The intended transaction is that the
buyer (the retailer) offers goods for sale to a consumer. Where the consumer
purchases the goods, the buyer in turn buys the goods from the seller (the supplier),
so that the buyer has good title to sell to the consumer. Under the SOGA, the
relevant transaction under s 23 Rule 4 is that between the supplier (seller) and the
retailer (buyer). The transaction between the retailer and the consumer is not
relevant. 1)Is it on a sale or return basis? Goods will be held by the buyer on a sale
or return basis where the seller delivers the goods to the prospective buyer who may
either elect to buy the goods or return them. Until such an election to buy, the buyer
is not obliged to buy the goods and property does not pass from the seller. Weiner -
Indicia of goods not being on a “sale or return” basis Where the buyer is
remunerated for the sale (e.g. commission for sale) As the retailer will need to buy
goods from the supplier when selling the goods in a particular transaction, they will
become an owner of the goods for the purposes of that particular sale. An owner is
not generally remunerated on a commission basis for selling his or her own goods.
Where an agency relationship exists between the supplier and the retailer (i.e. duty
of the agent to sell) Where the purchase price of goods is not determined until they
have been on-sold by the agent. -In this case, there was an explicit displacement of
s 23 Rule 4 because the property remained that of the supplier throughout the whole
transaction. Re Ferrier -Where the buyer has not made a decision to buy or return
the goods, property would not have passed to the buyer, and the goods remained at
the seller’s risk. 2)Time when title passes Kirkham v Attenborough (1897) -In the
case of a contract on sale or return, the buyer is entitled to retain the goods for a
time on credit, but if he/se deals with the goods in a way which is inconsistent with
his/her rights to return them, then title passes to the buyer at that time. -If the buyer
sells or pledges them, he/she loses the right to return them and the property in the
goods passes to him/her. 3)Has there been a return of goods? Atari v Electronics
Boutique Stores -Any notice of rejection of the goods given before the time fixed for
return is sufficient oThe notice need not be in writing and it need not identify the
goods precisely, as long as it allows the goods to be identified Retailer (Buyer)
Supplier (Seller) Consumer Goods Payment Goods Payment Preview of Study
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UniCramNotes.com ©Page 29 The lien is terminated where (s 45): -the seller
delivers the goods to a carrier for the purpose of transmission to the buyer without
reserving the right of disposal of the goods, -when buyers obtain possession with
sellers consent (i.e. buyer in possession under s 28(2)) -it is waived by the seller.
2)Stoppage in transit Under s 46, where the buyer is insolvent and the unpaid seller
has parted with the possession of the goods, the seller may resume possession of
the goods as long as they are still in course of transit, and may retain them until
payment or tender of the price. The goods will be deemed to be in the course of
transit from the time they are delivered to a carrier for the purpose of transmission to
the buyer, until the buyer takes delivery of them (s47). To exercise the seller’s right
of stoppage, the unpaid seller may either take actual possession of the goods or by
giving notice of the seller’s claim to the carrier or other bailee who currently
possesses the goods (s 48). 3)Right of resale Where an unpaid seller exercises
their right of lien or stoppage in transitu and resells the goods, the buyer to whom
they resell the goods acquires a good title as against the original buyer (s 50(2)).
B.BUYER’S RIGHTS &OBLIGATIONSi.RIGHT TO REJECTWhere the buyer has
accepted the goods delivered, their right to reject the goods is lost (s 16(3)). The
buyer has a right to reject in relation to breaches of condition, whether implied by the
SOGA or expressly stated in the contract. The buyer may also reject goods where
the wrong quantity is delivered or the goods delivered are mixed with goods of a
different description to that in the contract (s 33). Where the buyer rejects goods
which are delivered to the buyer, the buyer is not bound to return them to the seller.
It is sufficient if the buyer intimates to the seller that the buyer refuses to accept
them (s 39). The right to reject must be communicated within a reasonable time
(Hammer v Coca Cola). E&S Ruben -Facts: the buyer told the seller to send goods
directly to sub-buyer. The sub-buyer rejected the goods. The question was whether
the buyer had a right to reject as well. -If there is no relationship of agency between
the sub-buyer and the buyer, the sub-buyer is treated as separate to the buyer. -If
there is no agency relationship with the sub-buyer, the buyer would have taken
constructive delivery of the goods at the seller’s premises, as the seller is acting as
agent for the buyer in dispatching goods directly to the sub-buyer. The buyer would
have lost the right to reject the goods. -If there is an agency relationship with the
sub-buyer, the sub-buyer can exercise the buyer’s rights on behalf of the buyer,
such as the act of examination and rejection. Where goods are delivered to the
buyer’s carrier, the buyer will not have lost their chance to reject until the buyer has
a reasonable opportunity to reject the goods (Hammer v Coca Cola). Preview of
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UniCramNotes.com ©Page 30 1)Instalment deliveries Under s 34, the buyer is not
bound to accept delivery by instalments unless as specified in the contract. Where
the goods are to be delivered in instalments, and the seller makes defective
deliveries in respect of one or more instalments, consider whether the breach gives
rise to a repudiation of the whole contract (s 34(2)). In Maple Flock, the test was
stated as follows: -Consider the proportionality of breach to whole of the
performance that is contracted for -Consider secondly the probability of repetition of
the breach by the seller Determine the quantity of the total contract that is affected,
as well as whether the breach is a grossly disproportion to what the contract is
worth. ii.RIGHT TO EXAMINEThe buyer has a right to examine the goods (s 37) in
relation to goods delivered which have not been previously examined. The buyer will
not be deemed to have accepted the goods until the buyer is afforded a reasonable
opportunity of examining them for the purpose of ascertaining whether they are in
conformity with the contract. iii.REMEDIES1)Action for price The buyer can recover
the price paid to the seller under normal contractual principles where there is a
failure of consideration. 2)Damages for non-delivery The buyer may maintain
against the seller where the seller wrongfully neglects or refuses to deliver the goods
to the buyer (s 53(1)). The damages will be the estimated loss directly and naturally
resulting in the ordinary course of events from the seller’s breach of contract (s
53(2)). To calculate damages, it is important to determine if an available market
exists for the goods in question. If not, the loss naturally resulting is calculated in
accordance with the principles in Hadley v Baxendale (as discussed previously).
Available market Under s 53(3), where an available market exists for the goods, the
measure of damages is the difference between the contract price and the market
price at the time the goods ought to have been delivered. If no time was fixed for
acceptance, the relevant time is the refusal to deliver the goods. Alternatively, where
a wrongful anticipatory repudiation occurs, the measure of damages is assessed
with reference to the market value of the goods at the time for delivery (Tai Hing
Cotton Mill Ltd v Kamsing Knitting Factory [1979]) For an available market to exist,
there must be sufficient traders in the market to absorb demand and supply in a fair
market (Shearson Lehman Hutton Inc v Maclaine Watson & Co Ltd (No 2) [1990]).
3)Damages from sub-sale According to the rule in Hadley v Baxendale as discussed
previously, the buyer can recover for subsales which were in the within
contemplation of parties, as well as damages paid to the Preview of Study
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UniCramNotes.com ©Page 31 subbuyer (Wong v Hutchison). The seller is liable to
the buyer for reimbursement for the buyer’s reasonable costs in mitigating their loss.
For example, if a premium price is paid to purchase goods which the seller failed to
deliver in order to satisfy the buyer’s subsale, the buyer will be able to recover such
reasonable mitigation costs from the seller (Joseph v Harvest). 4)Breach of
warranty Where the seller is in breach of a warranty, the buyer may (s 54) -Set off
damages against the seller for the breach of warranty in diminution of the price paid,
or -maintain an action against the seller for damages for the breach of warranty. The
damages for the breach of warranty is the estimated loss directly and naturally
resulting in the ordinary course of events from the breach of warranty (s 54(2)). As
such, the same rules in Hadley v Baxendale applies (as discussed previously).
Where there is a breach of warranty as to quality, the loss is the difference between
the value of goods at the time for delivery and the value they would have had if they
were of the contracted quality (s 52(3)). 5)Special damages In addition, s 55 allows
the buyer to recover interest or special damages in certain cases. McWilliams -
Section 55 special damages only arise according to facts that are peculiar to the
case. -In this case, the buyers were buying the corks for bottled wine, with the
intention to sell the bottled win. -The court held that it was within the reasonable
contemplation of the seller (cork supplier) that the wine would be contaminated if the
cork contained poisonous materials. It was also in contemplation of the seller that
the cork would be ultimately used to bottle the wine for resale. This justified special
damages being paid by the seller in relation to the buyer’s loss due to the defective
goods (the cork) affecting the wine.5.AGENCY,MERCANTILE AGENTS, AND
AUTHORITYA.CREATION OF AGENCY RELATIONSHIPAn agency relationship
may arise where there is actual consent from the principal and the agent that the
agent will exercise have actual express authority to act for the principal (Garnac).
Alternatively, there may be implied consent as to an agency relationship arising from
a course of dealing (Equiticorp). Ostensible agency or agency by estoppel may arise
where there is a holding out of the agency by the principal to the third party, and the
third party is induced by that representation. Freeman and Lockyer v Buckhurst -
There must be a holding out or representation made by the principal, which is
intended to be relied on by the third party, that the agent has the authority to act on
behalf of the principal -The representation may be made by A person with actual
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UniCramNotes.com ©Page 32 Conduct of the principal in permitting the agent to
act in the management or conduct of the principal’s business (Brick and Pipe)
There is no valid holding out where the representation is made by the agent
himself as to his own actual authority. A person with ostensible authority cannot
hold out another to have ostensible authority (Crabtree) -The third party must be
induced by the representation made. -The scope of authority granted may be limited.
Therefore, it is useful to check the scope of authority represented to the third party to
determine whether the sale was within the scope of the authority. -The
representation itself acts as an estoppel in preventing the principal from asserting
that they are not bound by the purported agent’s conduct.Crabtree-Vickers -A
person with ostensible authority can give actual authority to another to exercise their
ostensible authority, i.e. X can give actual authority to Y to exercise X’s ostensible
authority in X’s name.-However, a person with ostensible authority cannot make a
representation or hold out another person as having the same ostensible authority.
The mere position of directorship does not suggest that the person had ostensible
authority, unless board of directors has represented as such (Northside). Where an
act was purportedly done under an agency relationship which did not exist, the
unauthorised act may be subsequently ratified by the principal. In this way, the
validity of the transaction with the third party is not affected (Davison), although the
principal may have rights as against the purported agent (Suncorp). However, note
that the act of ratification cannot lead to the transfer of property from the third party
(Hughes, Secunda). B.MERCANTILE AGENTSUnder s 3 of the Factors (Mercantile
Agents) Act 1923, a mercantile agent is defined as one who, in the customary
course of business, has authority either to sell goods or to buy goods. Where a
buyer deals with a mercantile agent, the buyer can treat the mercantile agent as
expressly authorised by the owner of the goods to sell them (s 5 Factors Act).
However, the mercantile agent must be entrusted with the possession of goods or
documents of title, and the sale must take place in the ordinary course of business.
In addition, the buyer must be one in good faith, without notice that the purported
mercantile agent does not have adequate authority. i.ENTRUSTMENTThe following
list provides the indicia of the elements that constitute entrustment by theowner to
the mercantile agent. -Entrustment requires the authorizing of the mercantile agent
to sell as the owner (Lloyds) This requires more than merely putting the mercantile
agent in possession of the goods. -There must be a representation of apparent
authority by the mercantile agent to the buyer (i.e. a right to sell) (Pacific Motors) In
this case, the owner allowed the mercantile agent to represent to customers that
they were either owners or had the right to sell. -Where an owner of goods entrusts
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(Guerriero v Peile). -The mercantile agent cannot deposit goods with another agent
to sell. Only the true owner has the power to entrust goods with another (Guerriero v
Peile). -There must be entrustment to a mercantile agent at the time of transfer of
possession (Heap) The Factors Act requires that the mercantile agent be
“entrusted as such”It does not matter if the person with possession later turns into
a mercantile agent. -Bailees are not mercantile agents (Astley) They are not
entrusted with possession for sale of the goods in their capacity as mercantile agent
Bailees are only authorised to return goods to the bailor, and no disposition to a
third party is permitted. As such, entrustment as an agent to sell is required. -There
must be consent of the true owner (Cook) ii.ORDINARY COURSE OF BUSINESSThe
buyer must have purchased the goods from the mercantile agent in the ordinary
course of business. A broad approach to “ordinary course of business” is taken by
the courts, as the precise details of the business are not examined. Rather, the court
only inquires as to the point of view of the purchaser to determine if there appears to
be suspicious conduct (Magnussen). iii.BUYER IN GOOD FAITHThe buyer must act
in good faith, without notice of the purported mercantile agent’s want of authority. In
this respect, a real suspicion of want of authority is sufficient (Sanderson). We hope
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