SALE OF GOODS (LAWS203)

Sale

A contract in which property in goods passes from seller to buyer immediately.

Agreement to Sell

A contract where property in goods will pass at a future time or upon fulfilment of a condition.

Why distinguish a sale from an agreement to sell?

Property, risk, and remedies often depend on the distinction.

s 143 CCLA

Property cannot pass in unascertained goods until they are ascertained.

Ascertained goods

Goods identified and appropriated to the contract.

Specific goods

Goods identified and agreed upon when the contract is made.

Unascertained goods

Goods not specifically identified when the contract is made.

Future goods

Goods not yet owned or acquired by the seller at the time of contracting.

s 144 CCLA

Property passes when the parties intend it to pass.

Primary question under s 144

What did the parties objectively intend regarding the transfer of property?

Why does the passing of property matter?

It determines ownership and usually determines who bears the risk.

Risk

The question of whose problem it is when goods are damaged, destroyed, or lost during the sale process.

General rule for risk

Risk passes with property.

s 148(1) CCLA

Goods remain at the seller's risk until property passes to the buyer.

s 148(1)(b) CCLA

Once property passes, the goods are at the buyer's risk whether or not delivery has occurred.

s 148(2) CCLA

Delay in delivery caused by one party may shift responsibility for resulting loss.

s 148(3) CCLA

Rules about risk do not affect duties arising under a bailment.

Why is bailment relevant to risk?

A party may bear contractual risk yet still recover against a negligent bailee.

Example of risk and bailment

A buyer may bear the risk of damage but still sue a bailee who failed to take reasonable care.

s 127 CCLA

A contract for specific goods is void if the goods had already perished when the contract was made without the seller's knowledge.

What type of goods does s 127 apply to?

Specific goods only.

Effect of s 127

The contract is void and unenforceable.

s 128 CCLA

An agreement to sell specific goods becomes void if the goods perish before risk passes.

Requirements for s 128

Agreement to sell, specific goods, no fault by either party, goods perish before risk passes.

Does s 128 apply to completed sales?

No, only agreements to sell.

Difference between s 127 and s 128

s 127 concerns goods already perished when the contract is made; s 128 concerns goods that perish afterwards.

Difference between ss 127/128 and s 148

Under ss 127/128 the contract ends; under s 148 the contract remains on foot and risk is allocated.

Oldfield Asphalts v Grovedale Coolstores

Leading NZ case on whether goods have "perished" under s 128.

Facts of Oldfield

A freezing chamber sold under an agreement to sell was severely damaged by fire before property passed.

Key issue in Oldfield

Whether the fire damage meant the chamber had "perished."

Who bore the risk in Oldfield before the fire?

Grovedale, because property had not passed.

Why was property not passed in Oldfield?

The contract provided that property would pass only after payment.

Horn v Minister of Food

Rotten potatoes may still be potatoes and therefore not necessarily perished.

Rendell v Turnbull

Goods can perish if they cease to be what was contracted for (e.g. table potatoes no longer fit as table potatoes).

Asfar v Blundell

Goods may perish if their merchantable character for the contracted purpose is destroyed.

Can non-perishable goods "perish" under s 128?

Yes.

Test for "perished" in Oldfield

Whether the goods have fundamentally lost the qualities that made them the subject matter of the contract.

Is repairability decisive?

No.

Outcome in Oldfield

The chamber had perished and the contract was void under s 128.

Nemo dat quod non habet

No one can give what they do not have.

Purpose of nemo dat

To protect ownership rights.

s 149 CCLA

Statutory statement of the nemo dat principle.

General rule under s 149

A buyer acquires no better title than the seller possesses.

Problem with strict nemo dat

It can hinder commercial transactions.

Why do nemo dat exceptions exist?

To balance ownership rights against commercial convenience.

Authority exception to nemo dat

A non-owner can pass good title if authorised by the owner.

s 135 CCLA

Implies an obligation that the seller has the right to sell the goods.

Importance of s 135

A buyer who receives defective title may have contractual remedies.

Double sale scenario

A seller sells the same goods to two buyers.

If property has not passed to Buyer 1

Buyer 1 generally only has contractual remedies.

If property has passed to Buyer 1

Buyer 2 normally receives no title because of nemo dat.

Why might Buyer 1 sue in conversion?

Because the seller's second sale is inconsistent with Buyer 1's ownership rights.

s 153 CCLA

Seller in possession exception to nemo dat.

Purpose of s 153

To protect innocent purchasers in certain double-sale situations.

Requirements of s 153

Prior sale, seller remains in possession, subsequent delivery, and good faith acquisition by the second buyer.

Why is property passing on the first sale important for s 153?

Otherwise there is no nemo dat problem requiring an exception.

Mitchell v Jones

Leading case interpreting the seller-in-possession exception.

Issue in Mitchell v Jones

Whether a seller who regained possession after sale was "continuing in possession."

Stout CJ view in Mitchell v Jones

The exception can apply where the seller remains in a position equivalent to continued possession.

Williams J view in Mitchell v Jones

A seller who later regains possession as bailee is not possessing as seller.

Mercantile agent exception

Allows a mercantile agent in possession with the owner's consent to pass good title.

Relevant provisions for mercantile agents

ss 297–300 CCLA.

Mercantile agent

An agent who in the ordinary course of business has authority to sell goods.

s 297 CCLA

A sale by a mercantile agent in possession with the owner's consent is valid.

Requirements of s 297

Mercantile agent, possession, owner's consent, ordinary course of business, and good faith purchaser.

s 300(b) CCLA

Presumes possession by the mercantile agent is with the owner's consent unless proved otherwise.

Why is the presumption in s 300 important?

It makes it difficult for owners to deny consent without evidence.

Ron McDonald Ltd v Jim Boyd Motors Ltd

Leading NZ case on the mercantile agent exception.

Facts of Ron McDonald

A vehicle ended up with AJ Motors, was sold to Jim Boyd Motors, and later resold by Ron McDonald.

Issue in Ron McDonald

Whether AJ Motors was a mercantile agent in possession with the owner's consent.

Was AJ Motors a mercantile agent?

Yes.

Why?

The business occasionally acted as an agent in selling vehicles.

Did Ron McDonald prove theft?

No.

Why did Jim Boyd Motors obtain good title?

The mercantile agent exception applied and consent was presumed.

Effect of Ron McDonald's later sale to Bedrock Motors

It amounted to conversion because Jim Boyd already had good title.

Main lesson from Ron McDonald

The mercantile agent exception can defeat the original owner's claim to title.

Summary of passing property rules

Property must be ascertained and passes when the parties intend it to pass.

Summary of risk rules

Risk generally follows property unless otherwise agreed.

Summary of nemo dat

Buyers usually receive only the title the seller possesses.

Main nemo dat exceptions studied

Seller in possession and mercantile agent exceptions.

Policy tension underlying sale of goods law

Protecting ownership rights while facilitating commercial transactions.