The Passing Of Risk - Commercial Law

Front 1

Healy v Howlett & Sons [1917] 1 KB 337 - res peruit domino

Back 1

Plaintiff, a fish exporter based in Ireland, agreed to sell 20 cases of mackerel to the defendant, a fishmonger based in London. Plaintiff had two other customers for mackerel so he dispatched 190 cases of mackerel by train to satisfy all three customers. He gave instructions to the train to split the fish into 3 sections for each customer at Holyhead. The train was delayed and the fish deteriorated before they could be separated. No property had passed to the defendant and hence no risk, so they didn’t have to pay

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S20 1893

Back 2

Unless otherwise agreed, the goods remain at the seller’s risk until the property in them is transferred to the buyer, but when the property in them is transferred to the buyer, but when the property in them is transferred to the buyer the goods are at the buyer’s risk whether delivery has been made or not.

Front 3

Stearns Ltd v Vickers Ltd [1923] 1 KB 78

Back 3

exception to s20

Plaintiffs owned 200,000 gallons of white spirits held in a storage tank by a third party bailee. They agreed to sell 120,000 gallons to defendant buyers and gave them a warranty or order addressed to the buyer allowing them to collect it. The buyers delayed in collecting the spirit and during that time the spirit deteriorated. The risk had been transferred to the buyers from the moment they obtained the means to obtain delivery

Front 4

The Aliakmon [1986] 2 All ER 145

Back 4

(Insurance case) Buyer agreed to buy a cargo of steel coils carried by see on tterms whiich meant that risk passed to the buyer on shipment when the goods passed the ship's rail, while property and right to possession were retained by the seller until payment, under a retention of title clause. THe coils were damaged in transit due to negligent storage. Risk of the loss fell on the buyer. HOL held that in order to sue for negligence the plaintiff must either have some property in the goods or the immediate right to possession so the buyer was unable to sue the carrier for breach of the carriage contract

Front 5

Head v Tattersall

Back 5

Plaintiff bought a horse from D on the basis that it had hunted with someone important, with a week to return if the horse didn’t meet the criteria of the contract. DUring this week the horse was injured, and then it turned out that it hadn’t hunted with that person. Risk held with the seller, in spite of that property was with the buyer subject to a right to reject. Buyer got a full refund and was really acting as a bailee of the goods.

Front 6

Denby Hamilton & Co Ltd v Barden [1949] 1 All ER 435 - delayed delivery

Back 6

Agreement to sell 30 tonnes of apple juiceSellers crushed the apples and put in barrels but the goods are not appropriated contract. supposed to be taken one truck a week by third parties to whom the goods had been sub sold at the direction of the buyer. The buyer failed to give appropriate instructions and as a result some of the apple juice became putrid. it was held that although property had not passed, the buyer should holds responsibility for the deterioration

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section 32:

Back 7

where the seller is required to deliver the goods to the buyer, delivery to a courier is held to be delivery to the buyer and will section 27 duty to delivery. also result in property and risk being passed to the buyer. Hence, prima facie the buyer holds risk in transit but this can be rebutted. The seller must make sure that the contract for carriage is reasonable to the nature of the goods

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Section 6

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Equivalent to doctrine of mistake

Where there is a contract for the sale of specific goods and the goods without the knowledge of of the seller have perished at the time the contract is made the contract is void

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Section 7

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Equivalent to doctrine of frustration.Where there is an agreement to sell specific goods and subsequently the goods without any fault on part of the seller or buyer perish before the risk passes to the buyer agreement is avoided.Will only apply where rule one has been displaced by rule 2 or 3 or a contrary intention section 20 is displaced

Front 10

HR & S Sainsbury Ltd v Street [1972] 3 All ER 1127

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Meaning of specific goodsSeller contracted to sell the crop of barley estimated to be 275 tons to be grown on a particular field. There was a bad harvest in only 140 tonnes were producedPrice of barley rose dramatically, sellers sold to another buyer. The buyer sued for non delivery and the seller's argued the contract was voided under section 7. It was held the contract was not for specific goods, section 7 and 6 did not apply. Difficult to tell what specific goods are by Sainsbury's - seemingly future goods can be specific goods (an antiques dealer sells a specific chair which he has yet to buy to a person, or the first car off the production line at a company) but there's no judicial pronouncements on the issue

Front 11

Asfar v Blundell [1896] 1 QB 123 - test for goods perished

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Dates were contaminated with river water and sewage when the barge they were on sank were held to have perished even though they still existed and could be used to distil alcoholTest: whether as a matter of business the nature of the thing has been altered

Front 12

Horn v Minister of Food [1948] 2 All ER 1036

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Rotten potatoes had not perished because they still existedAsfar seems to be the better view but does this mean that merchantable quality and perished are the same thing?

Front 13

Oldfield Asphalts v Grovedale Coolstores (1994) Ltd [1998] 3 NZLR 479

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An item is generally regarded as having perished if it has:So changed after becoming a merchantable saying which no buyer would buy a no honest seller would sell

Front 14

Bishopsgate Motor Finance Corporation Ltd v Transport Brakes Ltd - nemo dat quad non habet

Back 14

Denning LJ:In the development of our law, two principles have striven for mastery. The first is for the protection of property: no one can give a better title than he possesses. The second is for the protection of commercial transactions: the person who takes ingood faith and for value without notice should get a good title. The first principle has held sway for a long time, but it has been modified by the common law itself and by statute so as to meet the need of our own times.

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Ingram v Little

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Tort of conversion. Current system means that there is always one winner and one loser even though in theory both parties are innocent. Devlin L.J. observed that; the loss “should be divided between them in such circumstances” (where both parties are innocent).

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EXCEPTION #1 - OWNER ESTOPPED FROM DENYING SELLER’S TITLE, Section 21(1) of the 1893 Act

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“where goods are sold by a person who is not the owner thereof, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell”

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EXCEPTION #1 Eastern Distributors Ltd v Goldring [1957] 2 QB 600

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Murphy owned a van and needed to raise some money. Coker, a car dealer, suggested he sell it on plaintiff hire purchaser and repaid the money in instalments. In the event they pretended that Coker was selling Murphy the van. Murphy then sold the van to the defendant in good faith. P sues D, but P have no title because they bought it from a non owner (Coker)Held that Murphy was estopped from denying the plaintiff’s title because when he sold the van ‘again’ he had no rights (they were vested in the P company) so P won.

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EXCEPTION #1Central Newbury Car Auctions Ltd v Unity Finance Ltd [1957] 1 QB 371

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Rogue offers to buy a car on hire purchase and convinced the dealer (plaintiffs) to give him the car and the title documents but the hire purchase company had refused the deal because he had provided a false address. He then sold it to another dealer who sold it to a second HP company at which point the fraud was discovered. P claimed the car from the second HP company, who said that they were estopped from doing so because they ‘clothed the rogue with apparent ownership’Held that the facts did not support an estoppel. Possession does not equal ownership and the defendants knew that

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EXCEPTION #1 Mercantile Credit Co v Hamblin [1965] 2 QB 242

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Argument based on estoppel by negligence failed. The court held that due to the circumstances of the factual situation, a duty of care was established, which fulfilled the first part of the requirement of estoppel by negligence, but the plaintiff could not establish a breach of that duty – the chain of causation was held to be broken.

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EXCEPTION #1 Moorgate Mercantile Co Ltd v Twitchings [1977] AC 890

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No duty of care to all potential buyers.Mclorg took a car from Moorgate on hire purchase ie Moorgate were the new owners of the car, but didn’t get the proper documentation to show it was theirs and not still McLorg’s (the sellers)McLorg then went on to sell the car to Twitchings, who checked the register and found no sign of the car registered as a hire purchase. M sue T for conversion, T say they’re estopped from doing that because they owed T a duty of care to properly register it and they breached that.Held that the registration system was voluntary so there was no duty of care

Front 21

EXCEPTION NO.2 : SALE BY A MERCANTILE AGENT IN THE ORDINARY COURSE OF BUSINESS

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Section 21(2)(a) of the Sale of Goods Act 1893 - nothing in the 1893 act overrides the Factors Act 1889 or any enactment enabling the apparent owner of goods to dispose of them as if he were the true owner of the goods

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EXCEPTION NO.2 : Weiner v Harris [1910] 1 KB 285

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Section 2(1) of the 1889 act does not require that the sellers ordinary business be that of a mercantile agent but that the sale in question must be made in the ordinary course of his business.

Front 23

Stadium Finance Ltd v Robbins [1962] 2 QB 664 (Sale in the Ordinary Course of Business)

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Robbins left his car with a dealer for it to be sold under a rather shaky agreement. He kept the keys but unbeknownst to him the title documents were in the glove compartment. The dealer sold it to stadium finance. Robbins got the car back but then Stadium sued him for conversionHeld that for s2 of the factors act to apply, the sale had to be in the ordinary course of business. Selling a car with no documents or keys was not in the ordinary course of business so Robbins won

Front 24

Heap v Motorists’ Advisory Agency Ltd [1923] 1 KB 577

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A rogue was in possession of Heap’s car as an MA under the Factors Act. He sold the car to the defendants.Using a friend to sell it on his behalf. For about half what it was worth.With no registration documents.Refusing a crossed cheque saying he had no bank acct nearby and would only accept an open cheque.Held that the buyers had notice of a defect in the car's title and so were not afforded protection under s 2.

Front 25

Andersen v Ryan [1967] IR 34

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(Mr Davis)→Buyer No. 1 → Buyer No. 2 →Buyer No.3 (plaintiff)Fraudulent representation – voidable contract.

Front 26

Whitehorn Bros v Davison [1911] 1 KB 463 (good faith)

Back 26

Onus on seller to prove that the buyer acted in bad faith ( only exception with this requirementBruford fraudulently obtained pearl necklace from whitehorn (voidable title) then sold it to Davison before Whitehorn could avoid the transaction. W argued that D had notice of the fraud so did not act in good faith

Front 27

EXCEPTION NO.6: SELLER IN POSSESSION

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Section 25 of the 1893 Act: protection for good faith buyer from seller in possession of goods who is not the owner.

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REquirements for seller in possession exception

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1. There must be a sale from the seller to buyer No.1. 2. After the sale, the seller must “continue to be in possession”. 3. The seller must deliver or transfer the goods to Buyer No.2 under any sale, pledge or other disposition. 4. Buyer No.2 must receive the goods in good faith and without notice.

Front 29

Worcester Works Finance Ltd v Cooden Engineering Ltd [1975] 1 QB 210

Back 29

Buyer paid by cheque which bounced.Transferred ownership (sold car) to a finance company and pretended car was to be leased to a fictitious customer.Original seller then retook possession of car.Treated as a disposition passing good title back to the original owners.

Front 30

Hanley v ICC Finance [1996] ILRM 463

Back 30

Sale of car subject to lease agreement.Fact of possession not legality of possession important.

Front 31

EXCEPTION NO.7: BUYER IN POSSESSION

Back 31

The effect of this position is that the buyer who, before paying the seller, has been given possession of the goods or of documents of title to the goods under his contract of sale with the true owner can pass a good title to a bona fide buyer for value without notice. This is because the buyer in possession is treated as a mercantile agent in possession with the owner’s consent and therefore has the right to sell.

Front 32

Requirements for innocent buyer in possession

Back 32

must have either bought the goods or agreed to buy the goods. must have obtained consent from the seller to be in possession. The way in which the consent was obtained does not matter, as long as there was real consent.must deliver or transfer the goods under any sale, pledge or other disposition.any subsequent buyer must receive the goods in good faith and without notice

Front 33

National Employers Mutual General Insurance Association v Jones [1990] 1 AC 24

Back 33

Exception does not apply to stolen goods.After a few transactions, the last buyer of a car which originally had been stolen said that he had obtained the car under s 9 of the factors act. Jones said that to be the buyer in possession, consent had to come from the seller not the owner. Held that this would facilitate the trading of stolen goods so rejected the argument

Front 34

Four Point Garage Ltd v Carter [1985] 3 All ER 12

Back 34

Carter ordered and paid for a car from Freeway Ltd, who located and got the car from four point. Four Point deliver the car to Carter understand that he’s leasing it. Freeway then went into liquidation, Four point want their car back. Carter argued that due to a reservation of title clause in the contract between FP and Freeway, title never vested in Freeway to give to Carter.
Held that there was an implied term in the contract allowing resale so Carter was defeated.

Front 35

Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236

Back 35

Gamers was a wholesaler who sold cars to retailers. One of the dealers (evans and Rose) sold their cars to natwest but they were kept on site to be sold in the showroom. Gamers remained unpaid by Evans and Rose so they seized the cars. Natwest sued GAmers for conversion saying that title had passed to them and that they were buyers in possession.Gamers said that for this to be so the goods would have had to be delivered to them and they weren’t they were still in the showroom. Held that delivery need not mean physical delivery