Lecture Fundamentals of business law (4th): Chapter 12 - Margaret L. Barron, Richard J.A. Fletcher

Chapter 12 - Sale of goods. In this chapter you should understand: the main statutory and common-law rules relevant to the sale of goods; the difference between specific, unascertained and future goods; the difference between contracts for the sale of goods and agreements to sell; the definition of a contract for sale of goods;…

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Sale of goods

Chapter 12

Sale of goods

• Sale of goods is a contract

• Ownership of goods must pass to the buyer.

• Only covers contracts for sale of goods, not

for work done or materials supplied, otherwise

the provisions of the Sale of Goods Act cannot

Types of goods

• Determine point in time at which ownership will pass to the buyer, along with the “risk” associated with those goods

» to be acquired by the seller

» manufactured by seller after contract made

• Sale - Property or title in the goods

passes to the buyer at the time the

contract is made.

• Agreement to sell - Title or property

in goods is to pass at some point in

time after the contract is made.

Sale of goods

Covers

• Goods - the delivery of the goods is

the main substance of the agreement

not

• Work done or materials supplied -

involves skill and effort with goods

resulting from the effort

When property (and risk) in goods

passes, ownership passes

Type of goods - indicates when property or title in

goods passes to buyer.

• Specific/ascertained - At time parties intend it

to pass, considering:

- terms of contract

- conduct of parties

- circumstances.

• Unascertained/future - At time goods become

identifiable and buyer has been notified, or when the parties to the contract of sale intend that it should pass.

Specific rules for determining when

property in goods passes

Rule 1: Unconditional contract

for specific goods

 When contract made

Rule 2: Specific goods that

need to be placed in a

deliverable state

 When goods are in a deliverable state

 Buyer has been notified

Rule 3: Specific goods that need

weighing or measuring to obtain

their price

 When goods have been weighed or measured

 Buyer has been notified

Rule 4: Goods purchased on

approval

 Buyer communicates approval or acceptance

of the goods to the seller

or

 Buyer does not communicate approval oracceptance to the seller but

- keeps goods without notice of rejection

- on expiration of any specified time

- on expiration of reasonable time

Rule 5 (1): Future or  Goods in deliverable state

Romalpa clauses

Retention of title clauses

- Buyer cannot claim title before full

payment has been received.

Nemo dat rule

The seller of goods cannot pass better title than they actually have.

Seller without title

• Estoppel

• Mercantile agent

• Sale by a seller still in possession

• Sale by a buyer in possession (without title)

• Statutory and common law power of sale

• Sale in the market overt

• Sale under voidable title

If the owner creates an impression

by word or conduct that another party has the authority to sell the goods, and

a purchaser buys those goods in good faith without knowledge of the deficit in title, for value, the purchaser will gain

Rules regarding delivery

• Duty of seller to deliver

Shipping contracts

CIF (Cost Insurance Freight)

• Price includes

– cost of the goods

– insurance (seller organises)

– freight (seller organises)

FOB (Free On Board)

• Price includes

– cost of the goods

– delivery on board ship

Rules regarding acceptance

• Seller notified

• Reasonable time

• Conduct of buyer

• Rejection

Rules regarding payment

• Pay correct amount on delivery

- contracted price

or

- reasonable price

Implied conditions

Breach will terminate contract and allow damages to be claimed.

• As to title:

-seller has rights to sell the goods.

Cannot be excluded for consumer

• As to correspondence with description:

- goods correspond with the description where goods have been sold by description.

• As to merchantable quality:

- fit for a purpose for which goods of that description are normally

used, unless an examination by the buyer should have revealed any defect.

• As to fitness for purpose:

- where the buyer buys goods in reliance upon the seller’s skill, after purpose of good known.

• As to sale by example:

- bulk corresponds with the sample supplied

- reasonable opportunity to compare bulk of goods to the sample

- goods will not be defective.

Implied warranties

Breach will enable the innocent party

to claim damages:

• the buyer shall have quiet possession

• the goods shall be free of any

undisclosed encumbrances

Remedies for breach of contract

for sale of goods

Rights of the unpaid seller

• Against the goods:

- Right to withhold delivery

- Right to a lien (possessory)

- Right to stop goods in transit

- Right to resell the goods

• Against the buyer (breach of contract):

- Sue for damages

- Sue for the price

Remedies for breach of contract

for sale of goods

Rights of the buyer

• Damages for non-delivery of goods

• Breach of warranty of quality

• Specific performance

• Rescission of contract