Contract between Dale Godwin and Eric Sully - Case Study Example

Memorandum Name: Course: Tutor: Date: Material Facts The case between Dale Godwin and Eric Sully involves a commercial contract of sales. Dale is the Director and Owner of ACT Aviaries Pty Ltd and he signed a contract with Eric, the director of Director of Parklife Pty Ltd to supply different items necessary for installation of a butterfly enclosure. One of the terms included in the contract was a consideration of $6,909 on the necessary items to build the enclosure, which Eric agreed to pay within 90 days after the delivery and installation of the aviary. However, it was barely 90 days before Eric Sully contacted Dale informing him that Parklife Pty Ltd had become insolvent, without having settled the bill for the aviary. Dale had left surplus aluminium railings worth about $800 which were meant to be used for the purpose of maintenance of the Butterfly Park site in future. Later, after he received the bankruptcy report, Dale sought to collect the railings but Eric Sully informed him that they had been combined with other materials by the employees of Parklife Pty Ltd and used to make model butterflies, which had been given to Weston Primary School. The School’s Parents and Community Association donated $1000 to the Butterfly Park as an indication of their appreciation. Later, Dale offered bird cages to Eric for sale at $50 each on the condition that Dale retains ownership of the items until Eric clears the bill. Further, they agreed that Eric would keep the proceeds on behalf of Dale in a special piggy bank, though the two conditions were arrived at orally. Legal issues A legal issue arises in this case on whether Dale can claim the $1000 from Weston Primary School. Another legal issue that emerges is whether Dale can dismantle and retrieve the aviary. Finally, there is need to assess whether Dale can claim the remaining cages, the proceeds from the sale of sold bird cages, or any damages arising from breach of contract to be taken out of the funds in the piggy bank. This begs the question; which law can Dale rely on in this case? The first issue pertains to whether Dale to can claim $1000 that was given to Parklife Pty Ltd as a donation from the Weston Primary School. Generally, under the sales of goods legislations in Australasia, if a seller passes goods to a buyer, who becomes insolvent without having paid the bill for them in part or in full, the items forms part of the bankrupt estate and forms part of the properties to be distributed on prorata basis among all the unsecured creditors, including the sellers.1 However, the introduction of Romalpa clauses in a contract helps to preserve the rights of the seller in such a scenario.2 Romalpa clauses help to take advantage of appropriate sale of goods legislation to reserve the title of the goods sold by the seller until the buyer pays the full purchase price of the goods. Further, this law gives an opportunity to the seller to recover the goods, in circumstances where the buyer becomes insolvent, notwithstanding the fact that the agreed final date for payment is not due. Nevertheless, application of this law requires that the goods concerned must be identifiable as goods that have not been paid.3 Precisely, the seller must be able to positively identify the goods in question as unpaid in the list of the unpaid invoices. In this case, the $800 worth of aluminium railings that were left by Dale at Butterfly Park site were surplus, and thus, not included in the invoices containing the unpaid bill by Parklife Pty Ltd. This explains the fact that Dale may not succeed in his claim for the $1000 which was given Parklife Pty Ltd as a donation from the Weston Primary School. The second issue concerns whether Dale can dismantle and retrieve the aviary. The contract between ACT Aviaries Pty Ltd and Parklife Pty Ltd contained a Romalpa clause indicating that ACT Aviaries Pty Ltd reserves the rights in relation to the goods until Parklife Pty Ltd settles the bill for the aviary in full. Further, in accordance with the retention of title clause in the agreement, Dale reserves the right to enter the premises of Parklife Pty Ltd where the aviary is located, without any liability for trespass or any damage that may result and retake possession of the aviary. Thus, Dale has the right to enter the Parklife Pty Ltd premises and dismantle and retrieve the aviary.4 The third issue pertains to whether Dale can claim the remaining cages, the proceeds from the sale of sold bird cages, or any damages arising from breach of contract to be taken out of the funds in the piggy bank from Eric Sully. Both parties agreed to the condition that until Eric pays the bill for the cages, Dale would keep ownership and Eric would keep proceeds on behalf of Dale in a special piggy bank. Irrespective of the fact that this was conducted orally, this statement comprises a Romalpa clause and it implies that Eric retains the bird cages as a fiduciary agent and bailee of Dale. Thus, he is entitled to resell the cages and to keep the proceeds equal to the agreed purchase price for each cage in the special account on behalf of Dale.5 Thus, this clause entitles Dale to recover the remaining bird cages, the proceeds from the already sold bird cages and also damages that would arise from a breach of contract to be taken out of the funds in the piggy bank from Eric Sully. However, the ability to trace the proceeds on the basis of this clause will not apply if Eric fails to keep the proceeds in the special piggy bank or keeps it in an overdraft account.6 In such a case, however, Dale can still rely on the Discrimination Act 1991 which prohibits the act by an individual of discriminating against another person by refusing to provide the goods, which he or she is obliged or reasonably expected to provide or make them available to another person.7 Relevant law Various laws are applicable in this case. To start with, the sale of goods legislation in Australia including the Sale of Goods Act 1954 (ACT), s 22; Sale of Goods Act 1896 (Tas),s 22; Sale of Goods Act 1972 (NT), s 22; Sale of Goods Act 1896 (Qld), s 20; Goods Act 1958 (Vic), s 22; Sale of Goods Act 1895 (SA), s 17 and Sale of Goods Act 1923 (NSW), s 22 are all identical on two points. First, they provide that “Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it t o be transferred,”8 This provision settles the fact that in both contracts in these case, the parties involved intended to pass ownership of the items concerned after they are paid for in full. This is relevant to the extent that Dale can still claim ownership of the items, notwithstanding the fact that they have passed to the buyer in both contracts. Further, the aforementioned articles stipulate that “For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.”9 This implies that goods will pass from the seller to the buyer once they have been ascertained and the ascertainment is an unconditional appropriation of the items to the contract. However, the legislation provides an allowance where the parties have reached a separate agreement as to the passing of title (e.g. where the Romalpa clause is part of the contract). Thus, this is relevant to Dale’s case, given that the parties had agreed on Romalpa clauses included in both contracts and thus, they are going to be relied on to in the rule on passage of title to the items concerned. Further, Sale of Goods Act 1954 (ACT), s 24(1); Sale of Goods Act 1896 (Tas), s, 24(1); Sale of Goods Act 1972 (NT), s 24(1); Sale of Goods Act 1896 (Qld), s 22(1); Goods Act 1958 (Vic), s 24(1); Sale of Goods Act 1895 (WA), s 19(1). Sale of Goods Act 1895 (SA), s 19(1) and Sale of Goods Act 1923 (NSW), s 24(1) stipulate that where the contract involves sale of specific goods, the seller may, in accordance with the terms of the contract or appropriation, reserve the right to retrieve and dispose the goods until the conditions imposed on the buyer are fulfilled.10 This rule settles the fact that Dale reserves the right to retrieve the items sold to the buyer in both contracts, whether the buyer is bankrupt or not. Finally, Section 20 of Discrimination Act 1991 prohibits the act by an individual of discriminating against another person by refusing to provide the goods or services, which he or she is obliged or reasonably expected to provide or make them available to another person.11 This article is relevant in this case since it would enable Dale to recover the remaining bird cages and the proceeds of the already sold cages and damages in case Eric Sully fails to keep any money in the piggy bank. Conclusion In conclusion, Romalpa clauses are incorporated in a contract by a seller who does not wish to transfer ownership of the items to the buyer, until the latter has paid the bill for them in full, which is identifiable in the seller’s invoices. The basis for the retention of title clause in Australia is contained in the various articles of sales of goods legislation which allows the seller to retrieve the goods if the buyer fails to pay for them or becomes insolvent, notwithstanding the fact that the final agreed date for payment may not have elapsed. Thus, in my view, on the basis of the facts provided in this case, Dale may not succeed in his claim for the $1000 which was given Parklife Pty Ltd as a donation from the Weston Primary School since the $800 worth surplus railings were not part of the unpaid bill before Parklife Pty Ltd became insolvent. But he has the right to enter the Parklife Pty Ltd premises and dismantle and retrieve the aviary. As well, the clauses included in the contract between Dale and Eric entitle Dale to recover the remaining bird cages, the proceeds from the already sold bird cages and also damages that would arise from breach of contract to be taken out of the funds in the piggy bank from Eric Sully, though after meeting some specific conditions. However, in case the application of Romalpa clauses proves to be unsuccessful, Dale can turn to other laws that may be applicable in this case, such as the Discrimination Act 1991. Bibliography ACT Parliamentary Counsel, Sale of Goods Act 1954 (ACT), 2006, [15, September, 2011], http://www.legislation.act.gov.au/a/1954-15/current/pdf/1954-15.pdf ACT Parliamentary Counsel, Discrimination Act 1991, 2011, [Accessed, 15 September, 2011], http://www.legislation.act.gov.au/a/1991-81/current/pdf/1991-81.pdf Gillies, P, why it is important to know when title has been transferred, Business law, Federation Press, Sydney, 2004. Jones King Lawyers, “Retention of Title (A Fresh Perspective)” 2010, accessed [15, September, 2011], http://www.worrells.net.au/library/insolvency/Retention%20of%20Title.pdf Kelly, D., Hayward, R., Hammer, R. & Hendy, J., sale and supply of goods and services, Business law, Taylor & Francis, New York, 2011. Ong, D. S. K., Trust compared with other concepts, Trusts Law in Australia, Federation Press, Sydney, 2008. Thampapillai, D., J, Retention clauses in Australia, 2010, [Accessed, 15 September, 2011], http://works.bepress.com/cgi/viewcontent.cgi?article=1000&context=dilan_thampapillai&sei-redir=1#search=%22romalpa%20clauses%22 he Parliament of South Australia, Sale of Goods Act 1895 (SA), 2008 [Accessed, 15 September, 2011], http://www.legislation.sa.gov.au/LZ/C/A/SALE%20OF%20GOODS%20ACT%201895/CURRNT/1895.630.UN.PDF Turley, I, Principles of commercial law, Routledge, London, 2001. Read More