Sale of Goods Act and Agency

Sale of Goods Act and Agency Sale of Goods Act 1979

The Sale of Goods Act 1979 applies to all contracts where the seller transfers or agrees to transfer property in goods to the buyer for a money consideration called price.

Definitions

It is important to understand the meaning of some of the words we will come across in studying sale of goods. :

Property means the ownership of goods
Goods include anything that can be touched, or moved, is visible and of which physical possession can be taken
Specific goods are those identified and agreed upon at the time of a contract for sale
Unascertained goods are those which are not specific. It is only when goods are identified in accordance with the contract that the property can pass from one to another.

It must be appreciated that goods cannot be transferred until they are ascertained (specific)

Implied Conditions and Warranties

Implied terms are of two kinds :

1) condition
2) warranty
see : Bettini v Gye 1876, Poussard v Spiers 1876 and Bernstein v Pamson Motors (Golders Green) Ltd 1986

Seller to have title [S12]
goods to correspond to contract description [S13]
goods to be of merchantable quality [S14(2)]
goods to be suitable for the purpose disclosed [S14(3)
in a sale by sample the bulk to correspond with the sample [S15}.

Cases : Grant v Australian Knitting Mills 1936, Moore v Landaeur 1921, Priest v Last 1903, Wilson v Rickett Cockerall & Co. 1954, Foley v Classique Coaches 1934, Griffiths v Peter Conway Ltd 1939 and Bernstein v Pamson Motors (Golders Green) Ltd 1986 This area of law is rich in cases of the type the student can remember due to the circumstances (story) of the particular cases. Students need to develop their own bank of cases and stories with which to illustrate this popular examination subject area.

Note that the Unfair Contract Terms Act 1977 states that sections 13-15 of the Sale of Goods Act 1979 cannot be excluded in a consumer sale.

Note that whilst the Sale of Goods Act 1979 does not apply directly to Guernsey it has been used in the island as a persuasive precedent.

Transfer of Property and Possession

This section will demonstrate the value of understanding the definitions at the beginning of these notes. Property and possession must be distinguished since the property in the goods (ownership) may be passed to the buyer, even though the possession is still with the seller. The sorting of such problems is a frequent examination topic.

Why timing of passing of property is so important

1) Unless otherwise stated risk passes with property
2) If property has passed the seller can sue the buyer for the price
3) If the seller resells the goods after the property has passed, the second buyer usually acquires no title, unless there is some exception under the Nemo dat rule.

Rules concerning passing of property

These are important and need to be learnt and understood.

Rule 1 Applies to specific goods that can be taken away. In this case ownership transfers immediately e.g. we see a new car that has had a pre delivery check.

Rule 2 Applies where specific goods need something doing to them before they can be taken away e.g. our new car needs a pre delivery check. In this case property passes when the pre delivery check has been completed.

Rule 3 This states that where goods have to be measured and weighed, property passes only when the weighing or measuring has been completed.

Rule 4 Applies to goods delivered on approval or by sale or return. In this instance property does not pass until the buyer has indicated to the seller acceptance.

Rule 5 applied to unacertained goods (non specific goods) and states that property will only pass when goods have been ascertained.

Exceptions to Nemo Dat Rule

Another very popular examination topic. The basic rule is that a person cannot pass to another property he does not own. The essence of the Nemo dat rule for examination students lies in the ability to identify exceptions to that rule.

The main exceptions are :

* sale in market overt
* sale by mercantile agent
(see Cundy v Lindsay, Phillips v Brookes, and Lewis v Avery)
* resale by buyer or seller in possession
* sale of a vehicle acquired under hire purchase
* estoppel
* sale by bailees and by order of the court
* sale under voidable title (see Cundy v Lindsay Phillips v Brookes, and Lewis v Avery)

Performance of the contract

Delivery

It is the duty of the seller to deliver the goods and the duty of the buyer to accept and to pay for the goods. Unless otherwise agreed the place of delivery is the sellers place of business.
Note the Sale of Goods Act 1979 allows the buyer a reasonable period after delivery, in order to inspect the goods.

Wrong quantity delivered

If the seller delivers less than the agreed amount the buyer may :

a) reject the goods or
b) accept the short delivery and pay a proportion of the price

If the seller delivers more that the agreed amount the buyer may :

a) reject the whole assignment
b) accept and pay for the whole assignment
c) accept and pay for the contracted amount and reject the rest.

Buyer Accepts Goods When :

he informs the seller of his acceptance,
if he resells the goods to a third party,
if, after the lapse of a reasonable time he retains the goods without informing the seller he is rejecting them.

Rights of the unpaid seller

The unpaid seller has rights against the goods and the seller. This is another favourite examination topic.

Rights against goods

1 Lien : that is the right to retain possession of the goods until the contract price has been paid

2 Stoppage in Transit : when the goods are in the hands of an independent carrier. Transit means the time from which the goods are handed to the carrier to the time when the buyer takes delivery.

3 Resale of Goods : The seller may only resell goods if :

they are of a perishable nature, and
he gives notice to the buyer of his intention to resell, and
the buyer does not, within a reasonable time, pay or offer to pay the price
he has reserved a right of resale under the contract

4 Repossession of Goods e.g., Romalpa Clause Note that a Romalpa clause is only effective against specific goods.

Rights against the buyer

1 Action for contract price

2 Action for non acceptance e.g. damages

Remedies of the buyer

The buyer may :

1 Sue for non delivery e.g. damages

2 Sue to recover any money paid to the seller

3 Repudiate the contract for breach of condition by the seller

4 Take action for breach of warranty

Agency

The definition of an agent is a person used to make a contract between his principal and a third party.

The agent has the power to make a binding contract between the principal and the third party without incurring any personal liability.

Types of Agent

Special
General
Universal

Creation of Agency

1) Express agreement oral or in writing
2) Implication (Implied) where a contract of agency can be implied from the conduct of the parties. See : Spiro v Lintern 1973
3) Estoppel See Spiro v Lintern 1973
4) Necessity This type of agency arises where :

a) emergency requires the agent to act as he did
b) it was impossible for the agent to obtain instructions from the principal and
c) the agent acted in good faith and in the interest of all parties. See Great
Northern Railway v Swaffield 1874

5) Ratification. This arises when the agent exceeds his authority as an agent, and the principal adopts (ratifies), at a later date the contract made by the agent.

Duties of Agent to Principal

performance
skill and care
personal performance
accountability
no conflict of interest
all benefits to be handed to principal

Agent Personally Liable if :

he executes a deed in his own name
he signs a negotiable instrument without indicating he is an agent
agents are personally liable, by custom
when the principal is fictitious or non existent

Agency can be ended by :

completion of task
notice
death of agent or principal
insanity of either party
bankruptcy of either party
frustration Stephen John 1994

Return to Law Contents