Sale of goods and agency - Essay Example

? Sale of Goods and Agency By Due Part A Answer Against Libby’s wines In the given case, Kangaroo Developments entered into a contract of sale with Libby’s wines on 20th January. The delivery of 200 bottles of Queensland Plonk was to be on 1st February by Libby’s wines on the premises of Kangaroo Developments. Libby’s wine had 700 bottles in their stock from which 200 bottles had to be separated to be delivered to Kangaroo Developments. The 200 bottles, while not separated, were general goods. In order to become ascertained goods, they had to be separated. The agreement was made on 20th January but the transfer of property had not yet been made. According to Sale of Goods Act, 1979, S.18 (Rule 2), “Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until the thing is done and the buyer has notice that it has been done.” According to the given facts, Libby’s wines had separated 200 bottles on 20th January and marked them to be delivered to Kangaroo Developments. There is no information in the given facts whether Kangaroo Developments had the knowledge that 200 bottles had been separated; hence ascertained. The manager put the bottles back after two hours of their separation. By the 1st of February, Libby’s wine had been liquidated. Assuming that Kangaroo Developments had no knowledge of the separation of 200 bottles, it would mean that the goods were never ascertained. Therefore, no transfer of property had taken place and the risk in them remained with Libby’s wines. In this case, since Kangaroo Developments had already paid the price of bottles to Libby’s wines, they would be entitled to recover the price. They would not be entitled to recovery of 200 bottles since the title was never shifted. On the other hand, if Kangaroo Developments had the knowledge that the goods were separated to be delivered to them, the goods would have been said to have ascertained and the transfer of property would have deemed to be made. In this case, Kangaroo Developments would have been able to recover the bottles if the courts were convinced that despite the liquidation of Libby’s wines, the delivery of 200 bottles was possible. It is because the title of the bottles and the risk in them had been transferred when they were separated. If the liquidation of Libby’s wines had made the delivery impossible, then Kangaroo Developments would only have been able to recover the price. In Underwood Ltd v Burgh Castle Brick and Cement Syndicate, the plaintiffs made an agreement to sell a horizontal tandem condensing engine to the defendants. The engine had to be dismantled. After it was dismantled but before it could be delivered, the bed plate of the engine was broken accidently. The defendants refused to accept the engine. The plaintiffs sued. It was held that the defendants were entitled to reject the engine because the engine was not ascertained as the defendants did not have the knowledge about that fact. Therefore, the title was not transferred. Therefore, by the application of S.18 of Sale of Goods Act, 1979 and Underwood Ltd v Burgh Castle Brick and Cement Syndicate, Kangaroo Development would only be able to recover the price if they did not have the knowledge of 200 bottles being separated. The property in goods and the risk in them would remain with Libby’s wines. Against William and Sons According to the given facts, Kangaroo Developments contracted to purchase 500 branded coffee mugs from William and Sons. Each mug was required to be printed with Kangaroo Development’s logo. In this case, the subject matter is future goods. According to S.18 of Sale of Goods Act, 1979, the property in goods would transfer to Kangaroo Developments when the printing of logos is done and they have the notice of it. Here, again, the transfer of property hinges on the affirmation of the fact whether Kangaroo Development had the notice of printing. In the given case, the property would have been passed to the buyer when the goods were ascertained. Printing of logos would have made the mugs ascertained goods. If Kangaroo Developments had the knowledge that the goods were ascertained, the risk in mugs would have passed to them. According S.20 (1) of Sale of Goods Act, 1979, “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 the goods are at the buyer's risk whether delivery has been made or not.” Therefore, assuming that Kangaroo Developments had the knowledge of printing, the cost of 500 mugs would have to be borne by them because of the goods being at their risk. If they did not have the knowledge of the printing, the goods would remain at William and Sons’ risk and the title would not be shifted. On the other hand, if the courts are convinced that the fire was a result of William and Sons’ negligence as suspected by the fire service, the cost of the mugs would have to be borne by William and Sons. Answer 2 According to the given facts, Susan, in her capacity of being a partner of Kangaroo Developments, sold a car to Paul. Paul claimed his money back. He presented three reasons for it which would be dealt with in the following manner: a. Paul asked Susan whether the car was suitable for a rally in Sahara. Susan replied that it should be suitable. According to S.14 (3) of Sale of Goods Act, 1979, “…there is an implied condition that the goods supplied under the contract are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the buyer does not rely, or that it is unreasonable for him to rely, on the skill or judgment of the seller or credit broker.” Susan was not a professional car dealer and it is not reasonable for Paul to rely on her judgment. The fact that Paul brought his purpose to the knowledge of Susan would be immaterial in this case. b. Paul also claims that the car is Prima 330 and not Prima 450 as advertised by Susan. This is the information that can be easily found out in the log book of the car. This information reveals itself on reasonable examination. According to the facts, Paul visited Susan and had the opportunity of examining the car. S.14 (2b) of Sale of Goods Act, 1979, waives the implied conditions where a buyer has examined the goods and the fault was able to be revealed in such examination. The aforementioned section would be applicable in some capacity as Paul had the opportunity to examine the car’s log book. c. Paul found out later that the front suspension was faulty. Generally, this is also a fault that can be found out in a reasonable examination which includes a test drive. Assuming that it was not found out in the test drive, neither Susan nor Kangaroo Developments had the knowledge of this fact. They just knew about the fuel inefficiency of the car. They were not bound to disclose that information unless it was asked about. The fault in the front suspension can be regarded as a breach of warranty but not as a breach of condition. S.53 (1) of Sale of Goods Act, 1979, states that “Where there is a breach of warranty by the seller, or where the buyer elects (or is compelled) to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods; but he may- (a) set up against the seller the breach of warranty in diminution or extinction of the price, or (b) maintain an action against the seller for damages for the breach of warranty.” In this case, Paul would not be entitled to treat the contract as repudiated. Paul can sue Kangaroo Developments for damages or a diminution in price. Kangaroo Developments might have to pay for the reparation of the front suspension. They would not be required to refund the proceeds of the car to Paul. Answer 3 From Robbie According to the given facts, Lucas sold an Audi TT to Mr. Smith who resembled a well known actor. He paid for it with a cheque which bounced. Mr. Smith turned out to be an alias. He sold the car online to Robbie. In this case, Mr. Smith never acquired a good title to the car. The contract of sale between Lucas and Mr. Smith is voidable because of the fraud on part of Mr. Smith. According to S.23 of Sale of Goods Act, 1979, “When the seller of goods has a voidable title to them, but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of the seller's defect of title.” According to the given facts, Mr. Smith sold the car Robbie immediately. Robbie bought the car in good faith and he did not have the knowledge of Mr. Smith’s defective title. If Lucas was able to rescind the contract before Mr. Smith sold the car to Robbie, then Robbie would not have been able to keep the car. But the above scenario falls in the category of an exception in which the buyer is not entitled to keep the goods because the actual owner of the goods was not able to communicate with the seller. In this case, Mr. Smith put it out of the power of the Lucas that he could communicate with him. Also, Mr. Smith had the knowledge that Lucas most certainly want to communicate with him to rescind the contract. In this case, Lucas would be entitled to recover the car from Robbie. From Craig According to the given facts, Lucas gave a new Mondeo to Mr. and Mrs. Warren for a test drive. They found the log book under the seat and sold the car to Craig. Clearly, this transfer has not resulted from a contract. All the essentials of a valid contract are missing. Therefore, Mr. and Mrs. Warren are not able to pass a good title to any subsequent buyer. Craig did not acquire any better title to the car than Mr. and Mrs. Warren because neither they had the authority nor they had the consent of the owner to sell the car. According to S.21 (1) of Sale of Goods Act, 1979, “…where goods are sold by a person who is not their owner, 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.” There is no indication and no possibility that Lucas gave a representation or acted in such a way at any point that indicates that Mr. and Mrs. Warren had the authority to sell the car. They came into its possession in a way which can be regarded as theft. Craig did not acquire a better title than Mr. and Mrs. Warren. Therefore, Lucas would be entitled to recover the car from Craig. Part B Apparent authority is a situation in which an agent exceeds his limits assigned by the principal but the principal becomes bound to the resulting contact. The conditions necessary for the principal to become bound are: i. The conduct of the principal is such that makes a third party believe that agent has the authority to enter into a contract on the principal’s behalf; ii. The third party must be reasonable must act in good faith while believing that agent has the authority. It is essential that there must be a conduct or statement by a principal that accentuates the third party’s belief about the agent’s authority. If there is no conduct or statement by the principal and the agent acts alone in the making of the contract, then the principal is not bound. If the above conditions are fulfilled, the principal is bound and he is stopped from reneging from the contract on the basis that the agent had no actual authority; the doctrine of estoppels is activated. Exactly what constitutes the existence of apparent authority has gone through many stages and is still in the process of development. From simple scenarios that made it easy to identify the apparent authority, the constituents now vary to more complex circumstances. In Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd, one of the directors of the company hired architects to make plans about the development of land held by the company. The plaintiffs sued for their fee when the development collapsed. The defendants, being the board of directors, claimed that the director who acted on the behalf of the company did not have the authority to enter into such a contract. It was held that the company was bound by the contract because their conduct was such that made the plaintiffs believe that the director had the authority. If it was not so, then they would have stopped the plaintiffs from working in the first place. They allowed them to work which meant that they were in agreement with the director’s actions. Therefore, they were stopped from reneging from the contract. In the above case, four conditions were stated that were required to be fulfilled to hold the principal liable. These conditions can also serve as a benchmark for other cases of apparent authority concerning companies. They are: i. The existence of a representation that an agent is authorized to make a certain kind of contract on behalf of the company; ii. Such representation must be made by a person who has an actual authority to handle the business of the company or the matters related to a particular kind of contract; iii. The third party relies on such representation and enters into a contract; and iv. It is not provided in the Memorandum of Association of the company that the company is not entitled to enter into such contract or is unable to delegate the authority of entering into such contracts. Another leading case concerning dealings with companies is Royal British Bank v Turquand. In the case, the defendant company gave a bond of ?2000 to secure the company’s drawings on its current account. The bond fulfilled all the formal requirements. Later, when the defendants were sued, they pleaded that the directors who signed the bond were not entitled to borrow more than a limit. It was held that the defendants were liable. The internal matters of the company were their own business. The actions of the directors made the company liable because the plaintiff acted on the belief that the directors were authorized to do so. Internal matters are usually hidden from the outsiders and it has a big impact on apparent authority of an agent. From the above cases, it has been seen that while establishing the fact whether apparent authority exists or not, it is very important that a representation or conduct from the principal is necessary which induces a third party to enter into a contract. The statement given in the question purports to say that with the passage of time, the significance of this condition has seemed to be weakened. The principals have to be very careful now as the scope of what can be deemed to be such a representation, is now very wide. In First Energy (UK) Ltd v Hungarian International Bank Ltd, the plaintiff allegedly entered into a contract in which the defendant had to provide him with business finance. The pivotal aspect in the formation of the contract between them was whether the agent of the defendant had an apparent authority to communicate the offer which laid the foundation of the contract. It was held that he did. From this case, it can be seen that even when the agent does not have the authority to conclude a contract, if he is authorized to communicate an offer to a third party, a valid acceptance by the third party would result in the formation of a contract provided that the third party acts in good faith. The Judge stated that the reasonable expectations of honest men must be protected. However, in the above case, the judge, Steyn LJ, made a very important statement i.e. “the law does not recognize, in the context of apparent authority, the idea of a self-authorizing agent.” This statement shows that, contrary to the statement given the question, the rights of a principal are still very much protected in the law. The aforementioned case did not made the principal bound by the agent’s actions blindly. There was an offer which was communicated by the agent though he was not authorized to do so. This goes at the very core of formation of a contract in which it is essential for an offer to be valid that it must be communicated to the offeree. The principal was bound to the contract partially due to the agent’s apparent authority but largely due to a valid acceptance of his offer. The importance of a representation by principal is still significant. The law entitles a principal to be compensated for the losses caused by the misconduct of the agent. Keeping this fact in mind, it may be possible but it is still very hard for an agent to pull himself up by his bootstraps. Works Cited 1. First Energy (UK) Limited v Hungarian International Bank. Limited [1993] 2 Lloyds Reports 194. 2. Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480. 3. Royal British Bank v Turquand (1856) 6 E&B 327. 4. Sale of Goods Act, 1979. (UK) s 14 (2b). 5. Sale of Goods Act, 1979. (UK) s 14 (3). 6. Sale of Goods Act, 1979. (UK) s 18 (Rule-2). 7. Sale of Goods Act, 1979. (UK) s 20 (1). 8. Sale of Goods Act, 1979. (UK) s 21 (1). 9. Sale of Goods Act, 1979. (UK) s 23. 10. Sale of Goods Act, 1979. (UK) s 53 (1). 11. Underwood Ltd v Burgh Castle Brick & Cement Syndicate [1922] 1 KB 343. Read More