United Kingdom Reforms - Essay Example

Task United Kingdom Reforms Introduction The Sale of Goods (Amendment) Act 1995, SOG (A) A came as a relief to many buyers of goods. It sought to address the imbalance that the buyer had to undergo in circumstances when goods have been traded, and the supplier goes for liquidation1. The act is relevant to contracts where ownership of goods transferred or agreed to be transferred has been paid. The queen enacted the 1995 Act after consent from the House of Commons, to fill gaping loopholes in the Sales of Goods Act 1979, which failed to protect buyers in a situation where a supplier was bankrupt. The act assists buyers to obtain legal redress when they encounter problems with their purchases. The act requires that the supplier should sell goods that fit their description, serve their intended purpose and are of satisfactory quality. The act benefits suppliers, who comply, as they can use their conformity to their advantage, as they use it to boost their consumer relationships. The act essentially aims to protect individual customers from defected or unsafe goods. The Act covers traded contracts made on or after 1 January 1894. Prior before the passing of the 1995 Act, the sale of goods act 1979, (c 54) was applied. This Act of Parliament regulated English contract law as well as the UK commercial law regarding goods traded. The m1979 act merged the original act of 1893 as well as subsequent legislation that consecutively codified and joined the law. Before the 1995 Act, section 16 barred transferring of ownership in goods to the buyer from the seller until the goods were established. Under s.20A of the 1979 Act, as buyer becomes the owner in common bulk2 of property, in an undivided share, in the bulk transferred to him. S.16 of the 1979 act provides that where there is a contract for selling unascertained goods, the property cannot be passed to the buyer unless or until the goods are identified. The buyer acquires no aptness interest in the goods he paid for since he was regarded as an unsecured creditor for the return in price in the occurrence of insolvency. This rendered for the sellers creditors benefitting with an undeserved windfall 3 as they will claim both goods and money paid for them. When all the requirements have been met, the property ownership of the undivided share is given to the purchaser unless both parties agree. The purchased share is a fraction of the bulk goods as an equal owner. Section 61 (1) of the 1979 Act describes the bulk as a collection of goods of the same type contained in the same area or space and is such that goods in the mass are interchangeable with other goods of the same quantity or number. The goods can be ascertained by separation from the bulk through either exhaustion3 or consolidation4. This act was biased to extents that, even if the seller sold all his goods to different clients, thereby divesting himself all interest in the bulk, no property will be passed to the clients until the quantities have been ascertained. The same applied if the seller became insolvent while the goods were still in bulk or the seller’s creditor arrested the bulk. This entails that the buyers or buyer will have no claim even if they had paid for the goods fully or partly. The buyer will only claim for damages, breach of contract or return of price only as an unsecured creditor 5but will have no equitable interest in the goods. Furthermore, traders who purchased goods either on land or in the course of the sea were concerned of this problem. In addition, suing carriers of goods by sea was covered on agreement in a bill of lading6 was under the Bills of lading Act1855, covering the transfer of property in the goods by the bill. Therefore, the buyer of part of the bulk had no right of suing the transporter in contract if the goods in transit were missing or damaged. In addition, Section 16 stressed the Lading Bills did not convey the intended meaning by the parties as outlined by the known Law commission. The parties’ expectations were not to get valueless documents after the bankruptcy of the seller. Equally, Proctor7 believed that these credentials, which were assumed to confer ownership of goods, might be valueless in a situation where insolvency occurs. For instance, in the case of Re wait8 a buyer lost his payment for goods and could assert no claim to the ascertained goods. The buyer had paid for 500 tons of wheat from a ship cargo of 1,000 tons and was given a bill of lading. Since the buyer’s goods had not been divided from the bulk when the seller went bankrupt, the buyer lost his part of the goods along with the sellers. The same case happened in Re Goldcorp9 where accompany dealing with gold had agreed to sell and deliver the gold to a number of customers in a later time. Meanwhile, the company collapsed and with no stock left for the individual contracts of the customers leaving them with no propriety claim. The company was dealing in future goods. Future goods can be existing ones that are owned or possessed by the seller, or goods those that are to be manufactured or acquired by him later. These goods in this Act are referred to as future goods. Campbell notes10 that, section 20A requires that the goods form part of a bulk, which is identified. He identifies that in non-commercial cases (for instance, the Re London Wine Co Shippers Ltd) the existing reserve might be an identified bulk if the seller promises to deliver the contract goods but which is not binding thus the seller can go ahead and trade with other available customers. Equitable ownership11 is not vital in this aspect of law, and that one cannot avoid the general law restrictions in passing of ownership during the sale of commodities. When all the requirements have been met, the property ownership of the undivided share is given to the purchaser unless both parties agree. The purchased share is a fraction of the bulk goods as an equal owner. The proportion received by the owner is the amount of commodities bought and payment made the purchaser to claim ownership. Shares of purchasers fluctuate in an event where there is change for bulk. It is extremely complex to describe a fiduciary accurately, or to outline the distinct aspects of a relationship that is fiduciary. The relationship should put into consideration trust and expect to constantly to operate bearing in mind the welfare the other party. Significantly, no conflict should arise between the two parties when undertaking the fiduciary obligations and individual interests. In other words, where there is sound judgment to be exercised, the fiduciary needs to act, with no individual attention in exercising diplomacy in any particular way. By disparity, normal profitable relationships, where the concerned parties work separately in their individual interests, are not termed as fiducial dealings. In this Act, the seller provided for the buyer to reject the goods from the seller if there was a breach of warranty. The buyer could do this if the there was a breach of contract in lessening or destruction of the price or damages for breach of warranty such as loss of quality. The SOG (A) A 1995 has in large parts addressed the problems that arose from the 1979 Act. The 1995 Act inserted sections to 20A as well as 20B that were instrumental in giving the buyer an undivided share in the unascertained goods, and ensured that the share was proportionate to the amount paid by the buyer during the time, as long as the required conditions were fulfilled. This amendment is applicable if the goods are part of the bulk that has been identified the buyer paid for some or all goods which are concern of the contract. One can agree that, this amendment has in part helped buyers to claim what is rightfully theirs without incurring massive losses through the seller, as it used to happen before the amendments. The 1995 Act has sought to address the issue of the buyer being just a mere unsecured creditor for return of the price. Section 20A12 addresses this situation and gives a protection measure to the buyer. A buyer can obtain goods as owners in common, hence rendering him a claim more than any receiver does. This amendment is a welcome relief as it ensures that a case similar to that in Re wait13 is most unlikely to occur again. The amended section 16 though not hundred percent satisfactory has given a breathing space to buyers as it has dealt away with the coldness of the existing act. Buyers can still buy goods while in bulk, as they are able to get their money back even if the seller goes into liquidation. Scholars such as Burns and Ulph14 have noted that buyers can check on the creditworthiness of the seller or take insurance before property in the goods is passed. Commercial communities, on the other hand, have developed preventative measures to alleviate section 16’s unfairness. The Bill of lading was a key challenge to buyers before the amendment leading them to lose a lot without any basis of seeking legal redress. However, the SOG (A)A has given the bill of lading their planned meaning, as buyers now gain property interest in the goods. Even banks can now take them as security for the buyer’s advances. Burns concurs that this is a remarkable accomplishment, because getting a bank loan f using a bill of lading was put in question by section 16-19 since until ascertainment the buyer did not own the goods thus could not offer real security. One main reason as to why change was inevitable is that whereas before it was not certain whether a sale of an undivided share as a fraction (such as ? or 20%) in particular goods was a sale of specific goods, the 1995 Act makes it clear that it is a sale of specific goods. It does this by adding words to that regard in the definitions of goods and specific goods. It includes undivided share in goods and specifies fraction or percentage of goods identified or agreed upon. The law commission realized that a majority of those interviewed had bought commodities when they were a fraction of a bulky commodity. Nevertheless, some did not get goods as the result of the seller becoming bankrupt after payment of the commodities before they had been delivered to the purchaser. It was necessary for the purchaser to identify the value of the concerned party or be insured before ownership of property is awarded to the seller. Though these changes were necessary for the buyers benefit and benefit of all, it is true that changes are piecemeal, but not extensive enough, and for that, the changes have dealt with the reforms of overselling. The changes also came along with new problems that still hinder smooth operations of the business. The amendment, for example, failed to address or provide rules on the insolvency implications for the buyer of undivided goods. It also faltered in addressing the matter of where one of the co-owning buyers becomes bankrupt or is unable to clears hi debts. According to Burn15, if such a situation arises and the co-owned goods are seized by the creditor, the other co-owners will bear the burden. Therefore, whereas, the amendment has successfully addressed insolvency in the sellers part, it has done little from the buyers side. Reforms The emergence of the new law in 1995 was because of a report compiled by both English and Scottish commissions on law. This section demands that in order to sell quantities that form the bulk of uncertain goods, two conditions must be met. However, this only applies until the involved parties decide otherwise.16 However, 20A1 demands that this sale can only occur if either all or part of the goods form this uncertain bulk, and there is a contract and an existing agreement between the parties. It also demands that the buyer should have paid for all or some of the goods that are forming this bulk. This possession is not limited by section 16. Therefore, the three conditions to enable the sale include a specified quantity, a bulk that has already been identified and off course an existing buyer who has paid for some or all of this property. Therefore, the buyers are eligible to share in this bulk on grounds that the quantity they have paid for are part of the same bulk and that their share depends on the ratio of the quantity that they have bought and paid for in relation to the whole quantity. However, this share is bound to vary if there is a change in the bulk where if the shares of respective buyers exceed the whole quantity, their portions also get to be reduced in a proportionate manner. In addition to this, securing the delivery of these goods happens to the goods that have already been paid for first. Therefore, this Act clears the uncertainties about goods and undivided shares. This means that this law applies to both these divisions, for it is applicable any goods that have undivided shares. 17However, the law commission disputes this by arguing that the law is only functional to specified quantities. The commission also argue that the sales of undivided shares are only tied to the contracts involved in the sale and the formula used to divide the shares. This means that in talking about quantity, it is only acceptable when dealing with specified quantities of a bulk and not in the sale of a share of a bulk. Those in support have divulged that the new law is essential to a great extent because it gives a measure of protection. This is because when a buyer secures part of the bulk, the obtaining of the title of the goods will enable buyers of a bulk some guarantee of the goods they have paid for. Therefore, in case of a misfortune, they are able to claim for its credit. The examples of possible scenarios that can be avoided by this law match the provisions of the act. This is taken care of in the concept of co- owners who are destined to share in the gains and loses of the bulk. This is especially for goods that had already been paid for in the bulk. A compelling example is that one concerning the seller going into bankruptcy and subsequent loss of payment of buyer and the goods already paid for. This law takes care of this under special provisions to allow for share responsibility. In many ways, this law has been criticized as not being all-inclusive. This is because it is too brief that it does not map out the relationship a share in comparison to the whole quantity of bulk. This is sure to result into confusion of de livery of these goods especially when the shares of buyers do exceed the actual quantity. This may lead to parts of the bulk belonging to other buyers being delivered to the first buyer. This will eventually lead to third party involvement that in most cases will also be legally responsible in conversion. Some of the main criticisms include a claim that the changes that were introduced in 1995 are narrow. This is concerning the view of co-ownership and law of liquidation. This has been predicted to cause confusion among buyers because of it is difficult to access, but codification has been put forward to sole this problem. Another criticism lies in the allotment of risks especially in the complete share. This is because there is no provision for creation of risk transfers of a bulk, even though; some think that this is not a present time issue, and it functions to put it in line with the Act of 1979. 18Finally, the third criticism has something to do with the associated principles, but some quotas say that it was a sensible move. This is because, in commercial matters; there is a reduced need for equitable ethics. This is because, equity has to mean flexibility and carefulness that is inappropriate in this context. Thus, while some are of the opinion that it is a significant concern given the confidence that is valued in the profit-making world. This is further accentuated by Louise gullifer who asserts that the problems revolving around possession are unimportant. 19This is because they do not match to the required status to earn a significant provision in the act. She, therefore, argues that this matter can be dealt with without an alternative to this notion of productive ownership. Additionally, the decree does not grant for rules regarding the implications of bankruptcy of the seller especially to those buyers of undivided goods. For instance, if the seller becomes bankrupt, it means that the responsibility is left to the last co-owner. Therefore, the absence of a statutory provision on the co-owners is sure to spread uneven losses to the owners thus leaving the other in the windfall. Therefore, the issue is that, it does not cater for the insolvency of the buyers largely. This is because it does not fully assuage the buyers from this mess, for they are prone to the insolvency of the first buyer. This includes the procedures they will be involved tom go through to claim their goods, for it will be pricey and time overwhelming. Section 2OB has exceptional provisions that are aimed at creation of normal training, and it functions to monitor and regulate the trading that exists among co-owners of bulk. This is because this co-ownership state turns out to be a relationship within which the normal rules of co-ownership become restrictive. In normal circumstances, co-owners are obliged to assent to any delivery of fellow co-owners because they are bound by a contract from the bulk. This is although the fact that it is probable to cause an increase or a deficit. 20However, it is normally ones hope that this bulk gets to be divided in the rightful proportions as regards the buyer’s undivided shares. To cater for later problems that do not present themselves at the first sale to the first buyer, this law is has provisions for this. It is set to clear the doubts, and same times regulate the relationships among co-owners. There may be sound reasons as to why selling should take place based on whoever comes first gets the goods first. This is despite the fact that there is a lack of knowledge whether it will be in excess or shortage. However,; it is noteworthy that there be considerable consultations regarding this procedure to eliminate the problems associated with it. The existing law also demands that the co-owners consent to any demands brought forward with co-owners in matters of release, deduction or discarding of goods. Therefore, this law is set to address this by allowing a free dealing with goods is in the jurisdiction of their shares. However, there is an exception where it will not be applicable to over sales that result from sellers who refuse to give up full ownership, and resolve to bring in other co-owners despite the insufficiency for already existing co-owners. 21This is so because the consent only applies to the goods falling within the shares of the owners. These are undivided at that time of bulk disposal. Therefore, this is essential to protect buyers from suffering from the insolvency of the sellers. When compared to the uniform commercial code, section 2-105(4) is set top solve these issues without altering or restoring section 18. However, in comparison to section 20B, it is too short and brief to provide for the weighty issues that need to be dealt with in the reform. It does not clarify the relationship between the quantity sold and the definite weight of the bulk. Necessity of reform The previous law exposed the buyers to severe problems at the benefit of the seller. This is because it did not provide for solutions in any sudden eventuality. Given the cases that had become rampant there was an urgent need for reform to cushion buyers from these effects. This is because even banks were not restricted to pass the law to the customers, thus including an ordinary man (). Eaton asserts that the need for reform was due to an industry group that it be modified to meet the demands of international trade.. This is because the existing law restricted help to the international traders by posing difficulties in trying to get customers from UK. In this scenario, it was evident that one would purchase for goods from Japan only to realize that the bulk was in a far country. Although there were no strategies to enable transportation of goods to nearby places, this downed the morale of sellers’ that had a subsequent sequent impact on buyers. Another reason for the reform was fuelled by the effect it had on the buyers most of which bought goods that were part of a large bulk. This is in reference to findings that almost 85% of the people who got to being interviewed accenting g to that finding. Therefore, there had been such common issues that demanded a reform in the commercial law. In addition to this, section 16 restricted parties to effect changes they wished to make for the benefit of the buyers. For example, in situations where it would be unreasonable to separate and identify bulk, it would be common for the parties involved passing the bulk. This was to be effected after the goods had been paid for and documents exchanged. However, this was not allowed under section 16 that existed before the amendment. This necessity was also noteworthy, for there had been a considerable change in size of the ship that had become larger. In addition to cargo, there has been increased numbers of buyers buying bulk goods. The reform has been complicated because it has not resulted in the solving of issues of bankruptcy, but has also focused only in the business field. Law Com No 215 1993 Section 20A pertains to the sale of goods that have been unascertained if the following rules are met.22 If goods form the bulky part that is recognized in the contract, and the person to buy the goods has already paid, the money forms fraction of the bulky goods. This leads to the material goods that are whole being transferred back to the buyer for the buyer to posses the bulk. This is for the purposes in the section 20A subsection (4) that illustrate that a whole share of a purchaser that is in bulk will be similar to the quantity of the paid goods. In case, the buyer has only paid money for the outstanding goods which forms part of the bulk then any release will be attributed to the goods that have already been paid. Before the passing of the 1995 Act, it was blurred whether the transaction of a whole share in goods was a transaction of goods. According to Law Commissions, it is clear that the transaction is of goods. 23The Law also points out that it is not only concerned with shares that are undivided in goods that are bulky, but also with full shares in goods. Therefore, according to the law the transaction of the whole sales is dissimilar to that of amounts. Therefore, in the transaction of an amount, the quantity is necessary but in the transaction of the amount of a share, the quantity is not pointed out. Conclusion The Sales of Goods (Amendment) 1995 have tried to tackle some of the problems that were brought about by the reality that no material goods were authorized to pass in an unascertained way such as the buyer being unable to pay and still have no possession of the goods. Nevertheless, to tackle these problems they are supposed to be commended as the law demonstrates the situation the ground. Even, though, the buyers protected themselves, they were not aware of the extent of the circumstances at hand. The Sales Act has certainly paid much attention to the commercial field and, therefore, nothing outside this area may be solved. Again new problems have been brought up because the Act did not create rules on the issue of bankruptcy implications. 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