Legal Considerations of the Sale of Diverse Goods

provides for sale of different kinds of goods

Introduction

The Sale of Goods Act 1979 (SGA 1979) provides for sale of different kinds of goods, which may be specific or unascertained goods. The SGA 1979, s. 61(1) describes specific goods as those which are identified at the time of the contract. The Act does not provide a definition of unascertained goods, save that these are those goods that are not specific. It is important to define the nature of the goods involved in a particular contract because the passing of the property from the seller to the buyer will depend on the definition of goods. This has implications for the rights and liabilities of the parties under the sale of goods contract.

In this scenario, the issues are:

The passing of property in the inflatable Christmas tree

The first issue in the scenario is whether the property in the inflatable Christmas tree has passed to Casa Nautica. In other words, can Casa Nautica claim that they have not received the inflatable Christmas tree from Inflatable Objects Limited.

The relevant legislation in this case is the Sale of Goods Act 1979 (SGA 1979). S.17(1) of the SGA 1979 provides that in cases of sale of specific and ascertained goods, property in the goods passes to the buyer only at such time when the parties to the contract have intended such property to pass to the buyer. This is to be construed as per the terms of the contract, circumstances of the case, and the conduct of the parties.

Where the parties have not specified when the property is to pass to the buyer, then SGA 1979, s.18 comes into play.[2] If the sale of goods contract is unconditional and the goods are in a deliverable state, the property shall pass to the buyer immediately.[3] The property in the goods does not pass to the buyer, until all that the seller is bound to do to the goods to put them in deliverable state, is done by the seller. This rule is provided in s.18, Rule 2 of the SGA 1979. The provision specifically states that 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 passes to the buyer only when the thing is done and the buyer receives the notice of the same.[4] This was also the case in Underwood Limited v Burgh Castle Brick and Cement Syndicate.[5] In this case, a horizontal condensing engine was agreed to be sold at a price free on rail in London. The engine was bolted to and embedded in a flooring of concrete and it had to be detached and dismantled from the concrete before delivery to the buyer. The engine was damaged by the sellers as they were in the process of detaching and later loading it on a truck. The court held that the property in the engine had not passed to the defendants.[6] In Rugg v Minett,[7] the court held that property had not passed to the buyers as the sellers were supposed to top up the casks of the turpentine before delivering, and while doing so, the casks caught fire and the goods were destroyed.

In the present situation, Inflatable Objects Ltd. were required to inflate and secure the inflatable Christmas tree on the roof of the Superstore owned by Casa Nautica. While performing this task, the tree was punctured and it exploded. Thus, the tree was destroyed by the employees of Inflatable Objects Ltd. The property in the tree had not as yet passed to Casa Nautica, as per the provisions of the SGA 1979, specifically ss. 17 and 18.[8] By applying the provision contained in s.18, Rule 2,[9] it is seen that the property in the inflatable tree would have passed to Casa Nautica only when Inflatable Objects had done everything required to be done before making the delivery, in this case, inflating and securing the tree. To conclude, the property in the tree had not passed to Casa Nautica at the time of the explosion.

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The passing of the risk in the inflatable tree

The second issue that arises in this case is whether the risk has passed to Casa Nautica for the inflatable tree. This question arises because the inflatable tree has been destroyed, before it was delivered to Casa Nautica as per the terms of the contract. Therefore, property has not as yet passed to Casa Nautica.[10] Conversely, if the risk would have passed to Casa Nautica, then it could not have claimed a refund of any amount paid by them to Inflatable Objects Ltd. Moreover, they will be required to pay any remaining amount that is payable from them to Inflatable Objects Ltd.

The rule that is applicable to this issue is contained in s. 20(1) of the SGA 1979, which provides that the goods remain at the seller's risk until the property in them is transferred to the buyer. In other words, the transfer of the property in the goods to the buyer will also transfer the risk to the buyer.

In Pignataro v Gilroy,[11] the court held that where the property has passed to the buyers, the risk will also pass, irrespective of whether or not actual delivery is taken by the buyer. In Sterns, Limited v Vickers Limited,[12] the court held that where the buyer has committed some action specifying his acceptance of the delivery of the property in the goods, the risk in the same also passes to the buyer. Clearly, the risk passes to the buyer only when the property is transferred to the buyer. The only exception to this is if the parties specifically agree to pass the risk to the buyer before the property is transferred to the buyer.[13] Therefore, the parties can provide retention of title clauses, whereby the seller can retain the title in the property, while passing the risk to the buyer.[14] This however, has not been done by the parties in the present case.

Applying the above analysis to the present situation, the property in the inflatable tree had not as yet passed to Casa Nautica, because before the passage of the property, Inflatable Objects Ltd. were required to inflate and secure the tree on to the roof of the superstore. The tree exploded due to a puncture before this act could be completed by the employees of Inflatable Objects Ltd. Therefore, it is concluded that the risk in the goods not having yet passed to Casa Nautica, they are entitled to claim a refund of the amount paid for the purchase of the tree or a replacement of the same.

The liability for the damages to be paid for loss of profits due to the damage caused by the explosion of the inflatable tree

The third issue in the situation is regarding liability for the damage caused to the store by the explosion of the inflatable tree. Casa Nautica had to be shut for urgent repairs due to the damage caused to its roof by the explosion of the tree. The period during which the store was closed is one of the busiest weekend of the year. Therefore, the question arises whether Casa Nautica can claim damages from Inflatable Objects Ltd for the loss of profits suffered by it due to the damage to the store.

The rule of consequential damages is used to claim damages for lost profits due to the act or omission of the defendant. In Western Web Offset Printers Ltd v Independent Media Ltd,[15] it was held by the Court of Appeal that not only was a person entitled to net profits lost due to the breach of contract, a person is also liable to bring an action for any other profits lost as well as the overheads.

Applying this principle to the present case, it is submitted that Casa Nautica lost profits due to the breach of contract and negligence of Inflatable Objects Ltd. and therefore, it must be compensated for the loss of profits.

In this scenario, the issues are:

Breach of condition and its impact on the contract

The first issue in this situation is whether there is a breach of contract by Casa Nautica in supplying the wrong Christmas trees to Geneve. A breach of contract would occur when there is a breach of condition by Casa Nautica.

It is also pertinent to draw a distinction between terms of the contract and mere representations. Promises made by the parties are terms and statements that are made by the party without the intention of being bound is a representation. [17] The importance of such statement to the contracting parties can help determine the importance of the statement.[18] If the statement led to the influencing of the party to enter into the contract, it will be a term.

The effect of a breach of condition is that the contract itself is treated as repudiated by the buyer.[20] Thereupon, the buyer can reject the goods and demand compensation from the seller.[21] If the term breached is a warranty, the buyer cannot repudiate the contract and nor can he reject the goods. However, for breach of warranty, damages can be asked for by the buyer.

The SGA 1979 provides certain conditions that are inherent in a contract for sale of goods. The SGA 1979, s.13 provides that the goods shall correspond to the condition of the goods as described. The SGA 1979, s.14(2) provides that the goods will be of a satisfactory quality and s.14(3) provides that goods will be fit for the purpose for which they are purchased. These three conditions are engaged in this particular scenario, as the Christmas trees must correspond to the description: ‘Christmas Trees, New Variety: Forever Green – will retain needles for at least four weeks!’. The satisfactory quality and fitness of the purpose also relate to the ability of the trees to remain green for a certain period of time, as that is specifically mentioned by Geneve at the time she is purchasing the trees.

Geneve has informed the manager of Casa Nautica (Mr Woods) about the purpose for which she is buying the trees. She told him that she wanted to use the trees as scenery for her theatre company’s Christmas show called ‘A Winter Skating Extravaganza.’ For the purpose to serve, the trees are to retain their needles for the period as advertised. Therefore, it can be said that it is a condition of the contract that the Christmas trees ‘Forever Green’ will remain green for the period specified and not loose their pine needles.

As far as the specific provisions that are attracted in this case, it is submitted that the description “Christmas Trees, New Variety: Forever Green – will retain needles for at least four weeks!” relates to the quality of the goods and not the description of the goods, therefore, s.14 (2) and (3) are engaged in this problem. This is as per the decision of the court in Ashnigton Piggeries Ltd v Christopher Hill Ltd.[23] As these conditions are breached in this case, Geneve can exercise her right to repudiate the contract and ask for the refund of the amount for the supply of the inferior trees.

Damages for the special loss suffered by Geneve

The second issue in this scenario is whether Casa Nautica will be liable to pay consequential and special damages to Geneve.

Geneve may ask for consequential damages of the breach. Consequential damages can include loss of profits due to the failure of the other party to abide by the terms of the contract. For consequential damages to be recoverable, an important condition is that such damages must be reasonably foreseeable at the time of the formation of the contract. As per the decision in Hadley v Baxendale,[24] wherein the Court of Appeal held that the plaintiff can be allowed to recover generally foerseeable losses only, the plaintiff will have to show that the losses were foreseeable by the defendant. Here, the plaintiff may show loss of profits as the generally foreseeable losses of the breach of contract as done in the case of Bacon v Cooper Medicals Ltd.

Special damages are payable when the loss suffered by the plaintiff is due to the special or unusual circumstances of the case.[26] For this to happen, the loss suffered by the plaintiff must not be attributable to the natural and probable consequences of the breach of the contract. In other words, the loss suffered by the plaintiff must not be a direct loss but it must be an indirect loss of the breach of contract. For the special damages to be recoverable, the special circumstances must be informed to the defendant at the time of entering into the contract as held in Hadley v Baxendale. [27] Finally, the losses should not be remote losses and the principle of remoteness is to be applied for ascertaining the losses and recoverable damages.

Applying the above analysis to the present case, it is seen that the foreseeable losses that could be considered at the time of the contract could not have been loss of ticket money. However, the special circumstances of the case were informed to the manager of Casa Nautica at the time of entering into the contract. These special circumstances were for the use of the trees for the theatre company’s Christmas show called ‘A Winter Skating Extravaganza’. Due to the poor and inferior quality of the trees, as compared to the one advertised, that is, ‘forever green’ trees, the show has been a failure. 27 people in the audience complained and were paid 405 GBP in refunds; and another 7,095 GBP were paid due to the problems faced by the skaters in the melting snow in the rink. While the former is a foreseeable loss, the latter was not foreseeable loss. As the special circumstances of the Christmas show were informed to Casa Nautica, the liability to pay special damages of 7,095 GBP will arise.

To conclude, Casa Nautica is liable to pay special damages (7,095 GBP) to Geneve for the loss of tickets through refunds due to the failure of Casa Nautica to sell goods that conformed with the description and fitness for the purpose.

In this scenario, the issues are:

Liability for the damage to industrial refrigerator due to light fuse

The first issue which arises in this situation is whether Casa Nautica is liable for the damage caused to the industrial refrigerator due to the fusing of lights bought from Casa Nautica.

The SGA 1979 provides that the goods sold by the seller shall be in corresponding format to the condition of the goods as described.[30] The SGA 1979, s. 14(2) provides that the goods will be of a satisfactory quality. Furthermore, the SGA 1979, s. 14(3) provides that goods will be fit for the purpose for which they are purchased. These are conditions of the sale of goods and non-conformity with the conditions can lead to the breach of contract and the liability for the breach.

In the present case, Paolo was informed by an employee at Casa Nautica that the lights are for indoor use only. The notice was written on the packaging of the lights and pointed out to Paolo by the salesman at the superstore. Nevertheless, Paolo chose to use the lights for outdoor purpose. He has purposefully chosen to disregard instructions given to him for the correct usage of the lights.

The case that is relevant here is that of Lambert v Lewis[31], in which the court held that if the buyer uses the goods in a manner that is contrary to the proper usage practice of the goods, then there is no breach of the SGA 1979, s.14(3) and the buyer cannot say that the goods are unsatisfactory or unfit for purpose for which they were bought.

Applying the above analysis to the facts of the case, it can be said that Casa Nautica bears no responsibility for the loss that is suffered by Jonathan as the latter has misused the product for a purpose that the product is not fit for, that is outdoor use.

Sale of salami and cheese to Casa Nautica by Jonathan

The second issue in this situation concerns the validity of the sale of salami and cheese by Jonathan to Casa Nautica.

S. 21(1) of SGA 1979 applies in situations where the goods are sold by a person who is not the owner of the same and does not have the authority to sell the goods by the owner of the goods. The rule is also contained in the maxim “Nemo Dat Quod Non Habet” , which means that no person can transfer a better title to goods than that possessed by himself.[32] The SGA 1979, s.21(1) provides an exception in the situation where the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.

In Bishopsgate Motor Finance Corp Ltd v Transport Brakes Ltd,[33] it was held that no one can give a better title than he himself possesses, but a person who takes in good faith and for value without notice should get a good title. This can be understood from another case, Rowland v Divall,[34] in which the court has held that the title of the buyer in good faith is protected under the law.

In the present case, an estoppel by representation is also not created by Paolo as he moved the goods into Jonathan’s van out of necessity and as per the principle laid down in Jerome v Bentley & Co[35] if the true owner of the goods gives the possession of the goods to a third party an estoppel by representation is not created.

Jonathan does not have a title to pass to the Casa Nautica. Therefore, the goods must be returned to Paolo by Casa Nautica.

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