International Trade Law - Term Paper Example

Summary Megastores and Toys4U entered into an agreement for the sale of ten Polaris missiles toys, the only stock left with Megastores. During the handling of the toys to prepare them for delivery, two were damaged and Megastores contended that Toys4U should be made liable for them because their ownership already passed to the latter at the time the damage occurred. Toys4U, however, cannot be made liable for such damage because, contrary to Megastores’ claim, transfer of ownership was not yet made at the time the toys were taken out of the stockroom and loaded by the forklift. This is because at the time of the sale, the toys were not yet in a deliverable state and Megastores’ duty to prepare it for delivery was not yet discharged. The conclusion is that Megastores should shoulder the responsibility for the damage to the two toys whilst Toys4U should be free from such responsibility. 1 Introduction 1.1 Statement of the Subject The parties involved here are Megastores and Toys4U, the seller and the buyer, respectively. The subject of the contract of sale is a Polaris missile toy, ten units of them. Megastores contended that Toys4U was liable for the damage of two of the toys because ownership had already passed to the latter at the time the damage occurred. The issue here is whether or not ownership had already passed to Toys4U at the time of the damage. 1.2 Purpose The aim of this report is to disprove Megastores’ contention and establish that Toys4U is not liable for the damage because ownership was not yet transferred to it at the time it occurred. 2 Liability of Toys4U Re: Two Toys Damaged in Handling for Delivery Toys4U is not liable for the damage of the two Polaris missiles toys because it occurred before ownership passed from Megastores to Toys4U. This is supported by the provisions of the Sale of Goods Act 1979 (SoGA) and pertinent case law previously decided by the courts. 2.1 Applicable Provisions of Law The applicable statute here is the Sale of Goods Act 1979 (SoGA hereafter), which received Royal Assent on December 6, 1979 and took effect commencing January 1, 1980. The SoGA governs transactions of sale of goods within the jurisdiction of the United Kingdom. Specific provisions of said law applicable here are: s 2(1), which defines a contract of sale; s 17 (1) and (2), which provide for the exact time specific or ascertained goods are deemed transferred from seller to buyer; s 18 Rule 2, which provides for the exact time property passes from seller to buyer when seller is first required to put goods in a deliverable state, and; s 20 (1), which allocates risk liability to parties. 2.2 Property at seller’s risk until transferred to the buyer Section 20 (1) of the SoGA 1979 provides that the property subject of the sale remains at the risk of the seller until transferred to the buyer. This means that Megastores should shoulder damage sustained by the toys unless ownership was explicitly or implicitly passed to Toys4U at the time of the sale. Since there was no explicit agreement to this effect by the parties at the time of sale, hence; a determination as to the implicit intention of the parties should be made. 2.2 When property deemed transferred or passed to the buyer Section 2(1) of the SoGA 1979 defines a contract of sale as one where “the seller transfers or agrees to transfer the property in goods to the buyer for money consideration called the price.” The transfer of property, however, does not necessarily equate to delivery or possession but to passing of the ownership of the goods. Ownership of property, as a matter of fact, can be transferred prior to delivery (Carr & Stone 2005 p. 25). Section 17(1) of the SoGA provides that in the event the parties did not explicitly provide for it, the passing of ownership must be determined by the intention of the parties. In the case of Dennant v Skinner and Collum, [1948] 2 KB 164, the court ruled that the intention should be reckoned at the time of the sale and not after. Here, a person purchased a car in an auction, issued a check and took the car, with the approval of the auctioneer subject to the condition that ownership will not pass until after the check was cleared. The check subsequently bounced but the car had already been sold. The court ruled against the auctioneer on the ground that the sale was consolidated at the fall of the auctioneer’s hammer and that the subsequent condition was invalid because it was made post-sale. Applying this doctrine to the present problem, the determination of the intention of Megastores and Toys4U should be deemed at the time they agreed to the sale and not after. Section 18, Rule 2, provides that the sale of specific goods requiring the seller to perform prior act to put them in a deliverable state passes only until the act is done. The Polaris toys are considered specific goods because they have been “identified and agreed upon at the time a contract of sale is made” (SoGA 1979). In addition, at the time the parties entered into the contract, there were only ten Polaris missile toys left in the stock of Megastores and Toys4U bought all. On the other hand, a deliverable state was defined by the courts in Underwood v Burgh Castle, [1921] CA, as a state when the goods subject of the sale are immediately deliverable to the buyer without the seller having to perform any act to make them so. In that case, the subject of the sale was a condensing engine which needed to be removed from its bed, dismantled and loaded on a rail before it can be delivered. It sustained damage when it was loaded. The court ruled that since the goods were not in a deliverable state at the time the contract was entered into, their ownership, therefore, did not attach to buyer at the time of the sale. This is applicable to Megastores because it needed to take the toys out of the stockroom, which it did with a forklift, before delivering them. Since the damage to the two toys occurred at this stage when ownership had not passed from Megastores to Toys4U, then the former should shoulder the damage. This contention is supported by Philip Head & Sons v Showfronts Ltd., [1970] 1 LloydÆ Rep 140, where the court ruled that damage sustained by the property subject of a sale and not in a deliverable state is shouldered by the seller. In that case, the sale agreement was for a big, heavy rolled carpet, which had to be bought to the buyer’s place, unrolled and laid it on the floor. Before the carpet could be unrolled and laid, it was stolen. The court ruled that the seller must shoulder the loss because the carpet was not, at that time, in a deliverable state. References Carr, I & Stone, P 2005, International Trade Law, Edition3, illustrated, Routledge Cavendish. Dennant v Skinner and Collum [1948] 2 KB 164. Philip Head & Sons v Showfronts Ltd [1970] 1 LloydÆ Rep 140. Sale of Goods Act 1979. Williston, S 1998, The Law Governing Sales of Goods at Common Law and Under the Uniform Sales Act, Wm. S. Hein Publishing. Underwood v Burgh Castle [1921] CA. Read More