Commercial Law - Case Study Example

Commercial Law Mohammed a retailer had agreed to purchase seventy – five orange coloured buckets from the Shiny Ltd. At the time of the agreement, exactly seventy – five such buckets had been available with the seller. However, Mohammed specified that the plastic handles on these buckets were to be replaced by metallic ones, prior to delivery; after that he paid for them. However, prior to the delivery, a fire broke out in the warehouse of the Shiny Ltd, which damaged twenty – five of these orange coloured buckets. In order to advice the Shiny Ltd, with regard to liability in these agreements, the following statutes and case laws had been examined. According to section 16 of the SGA, in contracts relating to the sale of unascertained goods, property in such goods is not transferred to the buyer, till such time as the goods are not ascertained. Consequently, a buyer has no ownership claim over unascertained goods (Section 16). The buckets to be supplied to Mohammed are not in a deliverable state, because the plastic handles have to be supplanted with metallic ones. Section 61 of the SGA states that goods are deemed to be in a deliverable state if they are in such a state that the buyer would perforce have to take delivery of them, in accordance with the contract (Connoly, 1998. P. 104). Therefore, Shiny Ltd is solely responsible for the damage caused to the consignment relating to Mohammed. Therefore, Shiny Ltd has to arrange for the remaining buckets and in addition, it has to replace the plastic handles with metallic ones. Section 18 Rule 5 of the SGA states that property passes only for ascertained goods. Section 18 Rule 5(3) states that if the specified quantities of unascertained goods, which are in a deliverable form, form a portion of a bulk; then any reduction in the bulk to either a lesser amount or to that amount will have the effect set out below. If there is only a single buyer, then whatever goods remain, are to be appropriated to the contract and the property in such goods passes on to the buyer (Sale of Goods Act 1979). This is known as ascertainment by exhaustion (Howells, 2007. P. 60 – 61). Rule 1 in section 18 of the SGA concerns unconditional contracts, in which there is a sale of specific goods in a deliverable state. In such contracts, irrespective of a postponement in the time of payment time or time of delivery, property in the goods passes to the buyer at the time of forming the contract (Section 18). Rule 2 of section 18 of the SGA states that in contracts involving the sale of specific goods, wherein it is mandatory for the seller to perform further actions to make the goods deliverable; there is no passage of property to the buyer till such time as those acts have not been completed by the seller. In addition, there has to be a notice to the buyer, regarding such completion (Section 18). In Underwood v. Burgh Castle Brick and Cement Syndicate, the contract pertained to the sale of an engine. While dislodging it from its base in the workshop, and loading it on to a truck for transfer to the buyer; this engine sustained damage. It was held that the goods had not been in a deliverable state, at the time of contract. Hence, in accordance with Section 18 Rule 2 of the SGA, till such time as the engine had been safely placed in the truck, the property in the engine would not pass to the buyer. Hence, the risk is to be borne, solely by the seller (Underwood v. Burgh Castle Brick and Cement Syndicate, 1922). In respect of Navraj, who was a retailer, the Shiny Ltd had segregated and labelled one hundred and twenty black coloured buckets, as the property of the former; out of the total stock of one hundred and eighty black coloured buckets in its warehouse. The fire destroyed all the buckets set aside as Navraj’s property. Section 17(1) of the SGA states that in respect of specific or ascertained goods, the property passes when the parties intend it to pass. Moreover, subsection (2) requires the contractual terms, the facts of the case and the conduct of the party to be considered, in order to determine the motive of the parties to the contract (Section 17). In Hendy Lennox (Industrial Engines) Ltd v. Grahame Puttick Limited, goods had been segregated by customer name and a serial number was allotted to them. Later on these serial numbers were intimated to the respective customers, in the invoices sent to them. It was held that appropriation could be deemed to have transpired, after the invoices containing the serial numbers had been informed to the customers. It was opined that the mere setting aside and labelling of goods with specific customer names was insufficient to constitute appropriation (Hendy Lennox (Industrial Engines) Ltd v. Grahame Puttick Limited, 1984). In Re Stapylton Fletcher (1994), it was held that the ownership of specific goods by a buyer takes place, only after the segregation of such goods, which are then earmarked for the contract. Moreover, a delivery note and invoice had been dispatched to the buyer. Hence, the court deemed it to be an appropriation of goods, in accordance with section 16 of the SGA (Re Stapylton Fletcher , 1994). The buckets that had been stacked separately and labelled as Navraj’s property, however, no serial number had been allotted to these buckets. In addition, neither a delivery note nor an invoice had been dispatched to Navraj. Therefore, the goods have not been ascertained and the ownership and risk, in respect of these buckets lies with Shiny Ltd. Thus, the latter has to make arrangements to replace the goods. This is as per the provisions of section 20(1) of the SGA. At the time of the fire, the risk was borne by Shiny Ltd. This is due to the fact that the buckets were unascertained at that point of time. The property as well as the risk lies with only the seller. In the event of the risk being borne by the sellers, in contracts, wherein the unascertained or future goods were either lost or damaged; it is incumbent upon the sellers to procure a replacement, at their own expense, in order to complete the delivery. If this is not done, then such sellers will be liable for either supplying damaged goods or for not having supplied any goods at all (Kelly & Hayward, 2005. P. 215). Due to appropriation by exhaustion, the property passes on to the buyer, Navraj. He will therefore, obtain the remaining sixty buckets. Moreover, Shiny Ltd, has to make arrangements for supply of the remaining sixty buckets, by resorting to its own resources. After the delivery of these one hundred and twenty buckets, Navraj has to make payment for these buckets at the agreed upon contractual rate. Oliver had ordered a hundred buckets from Shiny Ltd. The latter, sent these by a lorry belonging to Pauline, for delivery to Oliver. Some of these buckets had been damaged in transit. In Wait v. Baker, it was held that after the goods had been handed over to the goods carrier, in order to complete the contract; the carrier acts as the buyer’s agent. The property in passed on to the carrier, therefore, the risk becomes solely that of the carrier (Wait v. Baker, 1848). Section 20 of the Sale of Goods Act 1979 or SGA, provides that any risk arising from loss, damage, destruction or deterioration of goods is to be borne by the person who has property in these goods. However, there could be an agreement between the parties, whereby such risk is not to be borne by the person who has property in the goods. As such the applicability of this rule remains unaffected, even if delivery of the goods by the buyer from the seller has not transpired (Section 20). Under section 18 Rule 5(2) of the SGA, in instances of delivery made to a carrier of goods for further transmission to the buyer, the property is passed on to the buyer if there are no conditions stipulated by the seller. Since, no such conditions were specified by the Shiny Ltd to Oliver, the property as well the risk in the goods passes on to Oliver. In addition, Shiny Ltd, had not been negligent in placing the goods in the lorry for transmission to Oliver (Owens, 2001. P. 407). Hence, any claim for damages has to be made against Pauline. List of References Connoly, M. (1998. P. 104). Briefcase on Commercial Law. Cavendish Publishing. ISBN: 1843141949. Hendy Lennox (Industrial Engines) Ltd v. Grahame Puttick Limited, 2 All ER 152 (1984). Howells, G. (2007. P. 60 – 61). The Yearbook of Consumer Law 2007. Ashgate Publishing Ltd. ISBN: 0754647331. Kelly, D., & Hayward, R. (2005. P. 215). Business Law. Routledge Cavendish. ISBN: 1859419623. Owens, K. (2001. P. 407). Law for Non – Law Students . Routledge Cavendish. ISBN: 1859416713. Re Stapylton Fletcher , 1 WLR 118 (1994). Sale of Goods Act 1979. (n.d.). Section 16. (n.d.). Sale of Goods Act 1979 . Section 17. (n.d.). Sale of Goods Act 1979 . Section 18. (n.d.). Sale of Goods Act 1979 . Section 18. (n.d.). Sale of Goods Act 1979 . Section 20. (n.d.). Sale of Goods Act 1979 . Underwood v. Burgh Castle Brick and Cement Syndicate, 1 KB 343 (Kings Bench 1922). Wait v. Baker, 2 Ex. 1; 154 E.R. 380. (1848). Read More