Sale of Goods

What is sale of goods?

• Exchange of money in return for acquiring ownership of goods

• Enforceable agreement/contract/title to goods supported by consideration [not unilateral]

• Contract will be important to see when property has been passed. [contract intertwined with sale of goods, doesn't have to be written]

Formation of contract

Contract of sale of goods

A contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration (s 120 CCLA)

• Doesn’t have to be in writing, only includes tangible property

A contract of sale may be absolute (unconditional) or conditional (s 122 CCLA)

Sale and agreement to sell: (s 123 CCLA)

• Contract of sale = sale - if property in the goods is transferred from the seller to the buyer. (s 123(1))

  • Buyer gets contractual + property rights, seller = contractual rights to be paid. Good is held as a bailment until the buyer's physical possession.

Agreement to sell

• CoS = agreement to sell if property in the goods is to take place in the future or subject to a condition(s) to be fulfilled in the future (s 123(2))

  • The buyer has contractual rights only. Before property passes, buyers can’t sue in property laws. 

• Agreement to sell = sale when time for transfer of property elapses OR condition(s) to transfer property are fulfilled. (s 123(3))

Are the goods ascertained or unascertained?

Specified or ascertained goods means good identified and agreed on at time a contract of sale is made (s 119 CCLA) Under contract for the sale of unascertained goods no property in the goods is transferred to buyer unless and until the goods are ascertained (s 143 CCLA)

Is there intention for when the property is to pass?

S 144 CCLA; property passes when intended to pass. (NOTE: specific or ascertained goods) Parties can decide when property passes  Doesn’t have to be on payment For unascertained goods refer to s 143 CCLA - once conditions are fulfilled s 144.

Inferring if there is an intention for when it passes.

Terms of the contract, Conduct of the parties, Circumstances of the case (s 144(2)) Actions of the parties infer intention - when the good is treated as their own/ right of ownership (Isaac v Unpaid Farmers)

S 145 CCLA what s 146 does

S 145 CCLA - Ascertaining parties’ intention for when parties s 146 applies unless a different intention appears (s 144).

s 146 sets out 5 rules for ascertaining parties intention

s 146 Rule 1

Section 146 (1)  Rule 1: Under an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made. (2) it is immaterial whether the time of payment or the time of delivery (or both) is postponed

Elements:  Unconditional contract  Specific goods Deliverable state  Contract of sale (not agreement to sell) For purposes of sub-s 2; s 157 unless otherwise agreed;  payment and delivery are to take place at the same time, each party must be willing to give up the goods/money for the possession.

Section 146 Rule 2: 

Section 146 Rule 2:  If there is a contract for sale of specific goods, and the seller is bound to do something to the goods for purpose of putting the goods into a deliverable state, the property in the goods does not pass until;   that thing is done; and  the buyer has notice that thing is done.

Elements: Specific Goods Seller has obligation to do something to put goods in deliverable state (ie finish construction) The buyer has notice that thing is done. Note: Could be overlap with conditional sale

Section 146 Rule 3 

Section 146 Rule 3  If there is a contract for specific goods in a deliverable state, but the seller is bound to weigh, test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property in the goods does not pass until   that act or thing is done; and   the buyer has notice that the act or thing is done.

Elements: Specific goods In a deliverable state Seller obliged to ascertain the price. Act is done to ascertain the price Buyer has notice when that thing is done.

Section 146 Rule 4

Section 146 Rule 4 If goods are delivered to the buyer on approval, or on sale or return or other similar terms, the property in the goods passes to the buyer   when the buyer indicates the buyers approval or acceptance; or  the buyer retains the goods without notice of rejection

Elements: Delivery on approval, sale, or return. Buyer indicates acceptance or doesn’t give notice of rejection (after a reasonable amount of time)

Section 146 Rule 5 (unascertained goods)

Section 146 Rule 5 If there is a contract of sale for unascertained or future goods, the property in the goods passes to the buyer when the goods of that description are in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller.

Elements: Contract for unascertained/future goods Goods of that description are in a deliverable state. Goods of that description have been put aside for that contract. Assent of both parties to those goods. (express or implied before or after the appropriation is made) Unconditionally appropriated: In performing the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer; and  The seller does not reserve the right of disposal.

4) Have the goods perished?

Risk passes with property unless otherwise agreed (s 148);  Goods remain at the sellers risk until property in the goods is transferred to the buyer.  When property is transferred to the buyer the goods are at the buyer’s risk (regardless if delivery has been made yet) If the delivery has been delayed through the fault of either the buyer or the seller, the goods are at the risk of the party at fault with respect to any loss that might not have occurred but for the fault.  (3) does not affect the duties or liabilities of either the seller or buyer as bailee of goods of the other party

perishing’s effect when the risk is on the seller

Contract void if the goods, without the seller’s knowledge, have perished at the time the contract is made (s 127) Contract void if goods perish before sale but after an agreement to sell (s 128) Elements;  Agreement to sell specific goods The goods without fault of the seller or buyer Perish before the risk passes to the buyer

Perishing’s effect when risk is on the buyer

If property has passed to the buyer (Oldfields Ashphalts Ltd v Grovedale)

Meaning of perish.

Not limited to food - any case where the nature of goods has been so altered as to cease having the qualities which led to the contract(Oldfields Ashphalts Ltd v Grovedale) Goods have perished if not possible or practicable to repair (Oldfields Ashphalts Ltd v Grovedale) Rotten potatoes can have not perished as “potatoes” (Horn v Minister of Food) Rotten potatoes have perished as “table potatoes” (Rendell v Turnbull) No longer fit for intended use (Asfar v Blundell)

5) Is the sale by a person who is not the owner. What title does the buyer receive?

The buyer acquires no better title than the seller had – Nemo Dat (s 149) Therefore the sale is not legitimized if not the true owner selling. Applies when;  Not the owner of the goods Does not sell the goods under the authority or with the consent of the owner.  Can sue in contract a seller for failure to transfer good title – no point as usually they have no money.

Title when;

True owners actions made it seem like the seller had authority to sell. (s 149(2))

Then the buyer might get good title – based on estoppel.

Title when; Seller remains in possession after sale - Double sale scenario (s 153)

If the third party (second buyer) receives the goods in good faith without notice of previous sale (first buyer) then the third party can acquire good title. (Mitchell v Jones)- s 153 Seller in possession rule (s 153) does not apply where sale is final and delivery has been made, but the property returns to the seller (Mitchell v Jones) Property needs to pass in the first sale Seller is in possession of goods Needs to deliver goods under any sale to C C receives the goods in good faith and without notice of the previous sale to B [where the contention usually is] If property has not passed to first buyer, buyer 1 = no property interest but has contractual remedies against seller (s 153) If property has passed to buyer 1, may have remedies against the seller and buyer 2 in conversion (depending on particular facts) Bailment relationship with buyer 1 affecting conversion if property has passed -> Bailment of Will - R2IP with Buyer 1, if not acting repugnantly (selling + delivering) = repugnant to terms of bailment R2IP goes back to buyer 1 (Stuco)

Title when sold by a mercantle agent  (s 297)

Mercantile agent must be in possession of the goods with consent of the owner. Sale made by mercantile agent in ordinary course of business is valid as long as the buyer: Takes the goods in good faith and Do not have notice of the mercantile agents lack of authority. ^^ exception applies even if consent is withdrawn by the owner if the buyer is not aware that the consent is no longer.  Owner to display that they gave  no consent.  (Ron McDonald v Jim Boyd)

Isaac v Unpaid Farmers in Weddel Receivership [1997] 2 NZLR 455 (CA). (example of how subsection 2 applies) [When does property pass?)

Facts

Ratio

Weddel = slaughterer and meat processor vs Farmers who sent their animals to be slaughtered and then processed Freezing work (Isaac) goes into liquidation.  Carcasses not paid for by freezing works Farmers claimed they still owned the carcasses and they should be removed from the asset pool during liquidation Farmers said he only had possession but property did not pass. Three stages of inspection: pickup, slaughter, MAF kill report Kill report (final stage) terms and conditions included a provision that property in the stock did not pass to the freezing works Farmers argument: Relied on T+C on back of the kill report:  The property in the stock delivered shall not (except as hereinafter provided) pass to the Company and the stock shall remain at all times at the risk of the owner. Overall effect that the parties intended to have farmers retaining ownership until payment is made therefore, property never passes. Issue: Whether property had passed?

CA rejected argument: Farmers didn't exercise any ownership once they passed the stock over.  The terms were on the back of the kill report essentially did not describe the reality of the nature of the transaction between the parties. Terms may once of had a purpose but now are obsolete. No hereinafter provided. [Property has to pass at some point for sale, no hereinafter situations applied.] NB: These terms may cover a home-kill situation -> Person is intending to have the items returned to them so does not make sense for property to pass. Essential terms = Delivery of stock [taken by Weddel at farm], Acceptance by W for slaughter, Slaughter by W and Payment in accordance with agreement. Court notes that after slaughter W would treat animals as it saw fit eg processing them -> Farmers don't show rights of ownership. Therefore 'Intention of the parties was that property… passed to Weddel on acceptance by it for slaughter and certainly by the time the carcass was put over the scales and available for processing'.  Weddel acted as owner. Property passes when it is objectively intended to pass Based on the real substance of the transaction, not legal fiction

Risk: 

Oldfield Asphalts v Grovedale Cool stores

Grovedale bought three freezing chambers and took two away Agreement with Loader Engineering for them to remove 'hanging steel' Grovedale entered into contract of sale with Oldfield for the three chambers - Oldfield wanted to buy them to make mulch Loader Engineering negligently burned the chamber it was working on beyond repair Oldfield demanded chamber be repaired and delivered Issue: Had the sale been completed or was it voided due to perishing?

Sections 127 and 128 can be used to protect seller as well as buyer Perishability is not limited to food cases - any case where the nature of the goods has been so altered as to cease having the qualities which led to the contract Where goods could be repaired but it would be uneconomical to do so, they will still be held to have perished

Title buyer gets:  Mitchell v Jones

Bagge sold horse to Mitchell Mitchell leased horse back to Bagge Bagge sold horse to Jones Mitchell sued Jones for the horse Issue: Could Bagge pass good title as a seller in possession after sale?

Seller in possession rule (s 153) does not apply where sale is final and delivery has been made, but the property returns to the seller

Title buyer gets:

Ron Mcdonald v Jim Boyd Motors

Ron McDonald imports car A&J somehow comes into possession of the car A&J sold car to Jim Boyd Jim Boyd returned car to A&J for repairs Car somehow returned to Ron McDonald Ron McDonald sold car to Bedrock Motors Jim Boyd claimed good title passed from A&J Issue: Whether A&J passed good title to JB despite nemo dat

No strict evidence of consent required for s 297 to apply (sale by seller’s agent) Bailment to a mercantile agent implies consent for sale, in the absence of evidence to the contrary