Contract for the Sale of Goods - Essay Example

Introduction A fundamental principle of contract law in the context of a contract for the sale of goods is that the goods sold should always correspond with the contract’s description of the goods. Under an ordinary contract for the sale of goods the right to reject non-conforming goods is essentially a straightforward matter.1 A contract for the sale of goods is defined by Section 2(1) of the Sale of Goods Act 1979 as: “…a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price.”2 In order to determine any liabilities and rights attributed to Alex it is necessary to ascertain when and where the risk of damage passes under the contracts for sale made by him on Monday, Wednesday and Friday. The passing of any risk associated with preservation of the property sold or in the process of being sold is governed by Section 20(1) of the Sale of Goods Act 1979 which provides as follows:- “Unless otherwise agreed, the goods remain at the sellers 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 buyers risk whether delivery has been made or not.”3 Monday The purchase of the six speed drill appears to have vested in Alex prior to dispatch by the seller since he paid for the drill via credit card over the telephone. According to Section 20(1) of the Sale of Goods Act, 1979 the property was transferred to Alex and while in transit remains at his risk. However, the drill did not conform to specifications since it was a three speed drill rather than the specified six speed drill. As a result, Alex as buyer has a right to reject non-conforming goods. The law presumes that the parties intend that the goods will fit the description as provided for in the sale of goods’ contract. If at the time of shipment the goods do not comport with the contract description: “…the buyer is entitled to reject them.”4 Moreover, the buyer’s right to reject the goods continues: “…if there was a quantitative defect in the goods amounting to a breach of a fundamental term or to a breach of condition, or to a breach of an intermediate term which cause him serious prejudice.”5 A buyer is therefore at liberty to reject goods for the most part if they fail to correspond with the description of the goods sold via the contract for sale. This is possible even when the buyer does not incur any damages or loss as a result of the non-conforming goods.6 However the courts have taken pains to limit the application of this rule by effectively narrowing the ‘concept of the description of the goods.’7 It was held in Christopher Hill Ltd. v Ashington Piggeries Ltd [1972] AC 441that a statement contained in a contract may constitute a part of the description of the goods if it identifies the goods by referring to ‘one or more of their essential qualities.’8 However: “…an identifying statement will not be part of the description, so that its falsity will not entitle the buyer to reject, where it is a mere substitute for a name.”9 The rationale is that once the misstatement does not influence “the value of the goods and is of no commercial significance” the buyer will not be at liberty to reject the goods.10 In this case the varying speeds of the drill have some commercial significance since Alex is a dealer in engineering equipment. This right to reject goods will not be available to the buyer if the point taken is one which the seller upon notification can rectify it.11 However, since the drill has been damaged in transit it is too late for rectification. A buyer may reject the goods if the at the time of rejection the time for rectification of the point raised has already passed to the extent that even if raised the point taken could not be remedied: “In such a case, therefore, the refusal is justified, even though the ground which justified it was not stated at the time of the refusal, so long as that ground existed at the time of the refusal.”12 It is important for Alex to act immediately by bringing the discrepancy to the seller’s attention otherwise he might be deemed to have waived the defect or non-conforming goods. if the seller continues to act pursuant to the contract which might be to his detriment he will have waived his right to reject goods.13 Wednesday Section 18 Rule 2 applies when goods are not in a deliverable state. Rule 2 reads as follows: “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, property does not pass until the thing is done and the buyer has notice that it has been done (emphasis supplied).”14 This provision is relatively straightforward. A good example is a computer which both parties agree will have to up-graded before it is delivered to the buyer. Similarly Section 18 Rule 3 applies to goods which are in a deliverable state but have to be evaluated for the purpose of fixing a sales’ price. Moreover, the property will only pass once the buyer has received notice that the evaluation has been carried out. Rule 3 provides that ‘where there is a contract for the sale of specific goods in a deliverable state but the seller is bound to weigh, measure, test, or do some other act or thing with reference to the goods for the purpose of ascertaining the price.’15 It appears from the ruling in Carlos Federspiel SA v Charles Twigg & Co. Ltd [1957] 1 Lloyds Rep 240 that once the seller meets the condition of sale the property passes since the goods have been altered to a specific form and are of no use for the purpose of resale to another.16 As such the goods have been ‘unconditionally appropriated’ by the buyer.17 As such Alex has appropriated the Metal cutting machine since it has been altered according to specifications. Section 61(5) of the Sale of Goods Act 1979 provides that goods are in ‘deliverable state’ when they are in such a state that the buyer would, under the contract, be bound to take delivery of them.’18 Rule 1 of Section 18 provides that: “…where there is an unconditional contract for the sale of specific goods in a deliverable state the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, be postponed.”19 According to Dennant v Skinner & Collom [1948] 2 KB 164 the parties to a contract cannot make the sale of the property conditional upon any event once the contract is complete.20 When Rule 1 is applicable, the property passes whether or not the seller retains possession of them. The fact is all that has to happen is the completion of the contract and the property passers from seller to buyer and this is so even if the buyer has yet to complete payment for them. The same is true even if delivery of the goods has not yet taken place. In the circumstances Alex remains liable to pay for the machine despite the damages sustained at the seller’s premises. It is likely however, that the premises is covered by insurance policies which will replace the damaged machine. Friday As previously noted rule 1 of Section 18 of the Sale of Goods Act 1979 makes provision for the passing of title to the buyer once a contract has been concluded for specific goods. Alex’s purchase of the drums and the subsequent dispatch were for specific substances in a specific number of drums. It appears from the facts of the case that the goods were dispatched according to the terms of the contract and were damaged by the courier. Alex is therefore liable for the damages and will have a remedy against the courier for breach of the transshipment contract. According to Underwood Ltd v Burgh Castle Brick and Cement Syndicate [1922] 1 KB 343, goods are deemed to be in a ‘deliverable state’ provided the seller has completed all that he needs to complete under the contract for the purpose of bringing that contract to a conclusion.21 Section 61(5) of the Sale of Goods Act 1979 provides that goods are in ‘deliverable state’ when they are in such a state that the buyer would, under the contract, be bound to take delivery of them.’22 Conclusion These consequences might not be entirely satisfactory for Alex but unfortunately no provision was made between himself and the sellers as to the passing of risks under the sale of goods contracts. Therefore the Sale of Goods Act 1979 will have to be applied as interpreted by common law principles. When parties do not make specific provision for the title to pass the status of the property becomes very important in the event they are damaged or creditors are seeking redress against one or both of the parties. Whether or not the Sale of Goods Act 1979 is desirable is no longer important when one of these difficulties arise the application of the rules under Section 18 are a necessary evil. To avoid the unpleasant legal consequences of the application of these rules parties to contracts for the sale of goods are best advised to make specific provisions for the passing of property in their contracts. Works Cited Adams, Atiyah, John. (2001) The Sale of Goods. London: Longman. Carlos Federspiel SA v Charles Twigg & Co. Ltd [1957] 1 Lloyds Rep 240 Christopher Hill Ltd. v Ashington Piggeries Ltd [1972] AC 441 Dennant v Skinner & Collom [1948] 2 KB 164 Guest, A.G.(2006) Benjamin’s Sale of Goods. London: Sweet & Maxwell Nova Petroleum International Establishment v Tricon Trading Ltd[1989] 1 Lloyds Rep. 312 Sale of Goods Act 1979 Underwood Ltd v Burgh Castle Brick and Cement Syndicate [1922] 1 KB 343 Read More