Sale of Goods Notes

Sale of Goods

Introduction

Sale of Goods is a type of contract governed by legislation, specifically The Sale of Goods Act (SOGA) in Jamaica. Common law principles apply to areas not covered by SOGA. Sale of Goods involves selling and buying tangible items, legally termed "choses in possession," which are tangible and movable. Examples include computers, books, cars, and furniture. Service contracts, land contracts, and sales of computer software are not considered sales of goods.

Definition and Essentials

A contract for the sale of goods is defined as a contract where the seller transfers or agrees to transfer property in goods to the buyer for a money consideration, known as the price (Section 2(1) SOGA). This covers both a contract of sale (immediate transfer) and an agreement to sell (future transfer or subject to conditions). Key elements include two parties (buyer and seller), intention to transfer ownership, and the involvement of money as consideration.

Formalities

Sale of goods contracts can be made in writing (with or without seal), orally, partly in writing and partly orally, or implied from conduct. Essential elements of a valid contract still apply.

Types of Goods

Goods can be existing (owned/possessed by the seller), future (to be manufactured/acquired), specific/ascertained (identified by the buyer at the time of contract), or unascertained (cannot be identified or yet to be taken from bulk). The type of goods is determined from both the seller's and buyer's perspectives. The applicable rule on transfer of ownership depends on the type of goods.

Sale of Perished Goods

SOGA states that if specific goods have perished without the seller's knowledge at the time of the contract, the contract is void (Section 7). If there's an agreement to sell specific goods and they perish without fault of either party before the risk passes to the buyer, the agreement is avoided (Section 8). In such cases, the seller cannot be sued for breach, and the buyer cannot be compelled to take delivery or pay. If payment was made, it must be refunded.

• Case Example: Barrow Lane and Ballard v Phillips

Determination of Price

The price of goods may be fixed by contract, left to be fixed as agreed, determined by the course of dealing between parties, or be a reasonable price if not fixed (Section 9(2)). If a third party is meant to value the goods but cannot or does not, the agreement is avoided. However, if the buyer has received and used the goods, they must pay a reasonable price (Section 10(1)).

Transfer of Property/Ownership

Understanding transfer of ownership is crucial because risk usually follows ownership (Section 21). The owner bears the risk. Unless agreed otherwise, the seller is at risk until ownership transfers. Ownership generally transfers when the parties intend it to, often deduced from the contract terms. Possession does not always equate to ownership.

Ownership of unascertained goods does not transfer until the goods are ascertained (identified) (Section 17).

For specific or ascertained goods, ownership transfers when the parties intend it to, based on contract terms, conduct, and circumstances (Section 18).

Rules on Passing of Ownership (Section 19 rules 1-5)

• Rule 1: For an unconditional contract for specific goods in a deliverable state, property passes to the buyer when the contract is made, regardless of when payment or delivery occurs.
  • Case Examples: Dennant v Skinner and Collom, Tarling v Baxter
• Rule 2: If the seller must put specific goods into a deliverable state, property does not pass until this is done and the buyer is notified.
  • Case Example: Underwood Ltd v Burgh Castle Brick
• Rule 3: If the seller must weigh, measure, test, or perform an act to ascertain the price of specific goods in a deliverable state, property does not pass until this is done and the buyer is notified.
• Rule 4: When goods are delivered on approval or “on sale or return,” property passes when the buyer signifies approval/acceptance or acts in a way that adopts the transaction. If no approval is given but the goods are retained beyond a fixed or reasonable time, property passes.
  • Case Example: Poole v Smith’s Car Sales (Balham) Ltd.
• Rule 5: For unascertained or future goods sold by description, property passes when goods matching the description and in a deliverable state are unconditionally appropriated to the contract, with the assent of both parties.
  • Case Examples: Pignatario v Gilroy, Edwards v Ddin

Delivering goods to a carrier for transmission to the buyer, without reserving the right of disposal, is deemed unconditional appropriation.

The seller can reserve the right of disposal until certain conditions are met, even after delivering the goods to a carrier (Section 20). In this case, property does not pass until the seller's conditions are fulfilled.

Conditions and Warranties

Conditions are fundamental terms in a contract; breach allows termination and damages. Warranties are lesser terms; breach allows damages but not termination. The aggrieved party can choose to waive a condition or treat its breach as a warranty (Section 12 (1)).

Parties can specify terms as conditions or warranties. However, the court interprets the contract in case of dispute (Section 12(1)(b)). Simply labeling a term as a 'condition' or 'warranty' is not definitive.

The Sale of Goods Act implies certain conditions and warranties (Sections 11-16), which apply even if not explicitly included in the contract, and sellers cannot generally negate these.

Time of payment is generally not a condition unless otherwise stated (Section 11).

If a contract is not severable and the buyer has accepted the goods, or if the contract is for specific goods and property has passed, a breach of condition by the seller is treated as a breach of warranty unless otherwise expressed (Section 12(3)).

Implied Terms

The Sale of Goods Act includes the following implied terms:

1. Implied condition that the seller has the right to sell the goods (Section 13(a)).
   • Case Examples: Niblett v Confectioners’ Materials Co., Rowland v Divall
2. Implied warranty that the buyer will have quiet possession and that the goods are free from encumbrances (Section 13(b)(c)).
   • Case Example: Microbreads AG v Vinhurst Road Markings
3. Implied condition that the goods correspond with their description (Section 14).
   • Case Example: Grant v Australian Knitting Mills
   • Sale by description applies to both specific and unascertained goods, even if the buyer has seen the goods, as long as they rely on the description.
4. Implied condition that the goods are fit for the buyer's purpose if the buyer informs the seller of the purpose and relies on the seller's advice (Section 15(a)).
   • Case Example: Godley v Perry
   • This applies if the buyer expressly or implicitly makes the purpose known, relies on the seller's skill/judgment, and the goods are of a description the seller supplies.
   • Sale of a specified article under its patent or trade name generally excludes this implied condition.
5. Implied condition that the goods are of merchantable quality (Section 15(b)).
   • Case Example: Grant v Australian Knitting Mills
   • Applies when goods are bought by description from a seller dealing in those goods.
   • No implied condition for defects the buyer should have noticed upon examination.
   • Factors affecting quality include appearance, freedom from defects, safety, and durability.
   • Merchantable quality differs from the quality expected by the buyer and assumes normal use.
6. Implied condition that the bulk corresponds with the sample in quality (Section 16).
   • The buyer must have a reasonable opportunity to compare the bulk with the sample, and the goods must be free from defects not apparent upon reasonable examination.
   • Case Example: Nichol v Godts

Manufacturers Liability for Defective Goods

Privity of contract is needed for a buyer to sue the seller for breach of implied condition. However, a party suffering loss from a defective product can sue the manufacturer in tort for negligence, regardless of whether they are the buyer. This action is based on breach of duty in tort, not contract, so privity is not required.

• Case Example: Donoghue v Stevenson

Transfer of Title by Non-Owners

Generally, a buyer acquires no better title than the seller had, unless the owner is precluded by their conduct from denying the seller's authority (Section 22(1)).

Exceptions where non-owners can transfer title:

1. Apparent owner disposing of goods as if they were the true owner (Section 22(2)(a) - Doctrine of Estoppel).
2. Sales by persons with common law or statutory power of sale, or under court order (Section 22(2)(b)).
3. Sale by a person with voidable title, provided the title has not been avoided and the buyer buys in good faith without notice of the defect (Section 23).
4. Sale by a seller in possession after sale (Section 25(1)).
5. Sale by a buyer in possession of goods or documents of title (Section 25(2)).

Performance of Sale of Goods Contract

A sale of goods contract is performed when the seller delivers, and the buyer accepts delivery and pays (Sections 27-28).

Rules on Delivery

1. Whether the buyer takes possession or the seller sends the goods depends on the contract.
2. If not specified, the place of delivery is the seller's business place or residence.
3. If goods are with a third party, delivery occurs when the third party acknowledges holding them on the buyer’s behalf.
4. The seller bears the expense of putting the goods in a deliverable state.
5. If the seller delivers less than contracted, the buyer can reject or accept at the contract rate.
6. If the seller delivers more than contracted, the buyer can accept the contracted quantity and reject the rest, reject all, or accept all at the contract rate.
7. If the seller delivers the contracted goods mixed with goods of a different description, the buyer can accept the conforming goods and reject the rest or reject all.
8. The buyer is not bound to accept installment deliveries unless agreed.
9. Delivery to a carrier for transmission to the buyer is generally deemed delivery to the buyer.
10. If the seller fails to make a reasonable contract with the carrier, the buyer can decline to treat delivery to the carrier as delivery to them.
11. The seller must notify the buyer to insure for sea transit, or the goods are at the seller's risk.
12. If the seller agrees to deliver at their own risk, the buyer takes any risk of deterioration incidental to transit.
13. The buyer must have a reasonable opportunity to examine goods not previously examined before acceptance.
14. The buyer is deemed to have accepted goods when:
    • They intimate acceptance to the seller.
    • They act inconsistently with the seller's rights.
    • They retain the goods for a reasonable time without rejection.
15. Unless agreed, the buyer is not bound to return rejected goods but must notify the seller of rejection.
16. If the seller requests delivery and the buyer does not take it within a reasonable time, the buyer is liable for any resulting loss and reasonable charges for care and custody, unless the buyer repudiated the contract.

Breach of Sale of Goods Contract

Remedies of the Seller Against the Goods (Sections 40-47)

1. Lien on the goods or rights to retain them for the price.
2. Right of stopping the goods in transit if the buyer is insolvent.
3. Limited right of resale.
4. Right of withholding delivery.

• Note: 1-3 apply when property has passed to the buyer; 4 applies when it has not.

Remedies of the Seller Against the Buyer

1. Action for price when property has passed or when the buyer agreed to pay on a certain date but wrongfully refuses (Section 48).
2. Action for damages for non-acceptance of goods when the buyer refuses to accept delivery.

Remedies of the Buyer

1. Action against the seller for non-delivery of goods.
2. Action for specific performance (at the court's discretion).
3. Action for damages for breach of warranty.

List of Cases

1. Barrow Lane and Ballard v Phillips
2. Niblett v Confectioners’ materialsa co.
3. Microbeads v Vinhurst Road Markings
4. Rowland v Divall
5. Grant v Australian Knitting Mills
6. Shine v General Guarantee Finance
7. Godley v Perry
8. Nichol v Godts
9. Healy v Howlett & sons
10. Tarling v Baxter
11. Dennant v Skinner & Collom
12. Underwood v Burgh Castle Brick and Cement Syndicate
13. Poole v Smith’s Car Sales (Balham) Ltd.
14. Pignatario v Gilroy
15. Edwards v Ddin
16. Donoghue v Stevenson