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Approach:
identify the legal relations between the parties;
identify the transactions engaged in by the parties;
what are the obligations (rights and duties) of the parties?
what are the issues?
what causes of action are available?
what remedies are the parties seeking?
An agent is one that can create legal relationships between the principal and third
parties: International Harvester v Carrigans Hazeldene Pastoral Co.
Capacity
principal must have capacity to do the act which the agent performs on the
principals behalf.
agent is not required to have legal capacity.
The nature and extent of an Agents authority
express grant by B
relationship between B and A is such that A impliedly has Bs authority
representations made by B to a third party that A has Bs authority
operation of law
operation of statute
ratification
actual authority
ostensible authority
ratification
Actual Authority
They will be hold to have consented if they have agreed to what amounts in law
to such a relationship - even if they dont recognize it themselves and even if
they profess to disclaim it.
The consent must have been gien by each of them - the principal and agent.
It can be expressly given or by implication from their words or conduct.
Primarily one looks to what the parties said and did at the time of the alleged
creation of the agency (or act or transaction): Garnac Grain v HMF Faure and
Fairclough.
Actual Implied Authority
Subcategories:
incidental authority
usual authority
customary authority
authority implied from the course of dealing in the circumstances of the case
This type of authority stems from the circumstances of the case and the conduct
of the parties: Equiticorp.
An agency agreement can be implied when each has conducted himself in
relation to the other that it is reasonable for the other to infer consent to the
agency relationship.
There are no particular agency laws applicable here - that is semply recognition
of the fact that contracts are not always express and can be inferred by the
court from the circumstances -> the promises are expressed partly or wholly by
conduct rather than by words.
Ostensible Authority
other two forms consentual
transaction - look at employment contract between that person and the sale of
whatever (in questions there will usually be some limiting written agreement that
will limit the agents authority).
the agent whose act is to be ratified must have purported to have acted for the
principal.
at the time that the act was done, the agent must have had a competent
principal.
at the time of ratification, the principal must be legally capable of doing the
act: Firth v Staines; Trident General Insurance Co Ltd v McNiece Bros Pty Ltd.
the principal must be disclosed or identifiable (Trident General Insurance Co
Ltd v McNiece Bros as well as competent to do the act personally: Black v
Smallwood (1966).
the principal must have full knowledge of all material facts relating to the act
to be ratified: Taylor v Smith.
ratification must take place within a reasonable time of the agents act unless
the contract stipulates another, more specific timeframe: see Life Savers
Australasia Ltd v Frigmobile Pty Ltd.
Time for Ratification:
has ratification occurred within a reasonable time?
The time for ratification by the principal of the agents act depends on the
circumstances of the case. If the particular contract specifies a timeframe
within which ratification must take place the that timeframe must be
observed. If there is not timeframe specified, then ratification must take
place within a reasonable period of time: Life Savers Australasia v Frigmobile.
NOTE: A limit on ratification appears in the rule that ratification cannot be
made which divests persons not parties to the ratified contract of their rights
or to affect prejudicially those rights where those rights have vested before
the act of purported ratification: A-G v Wilde
will ratification cause an injustice to the third party?
has the principal dealt with the third party in a manner suggesting that the
contract has gone off?
Ratification Issues
Who may ratify?
Only person able to ratifiy is the person:
in whose name the act was purported to be done
which person must be in existence at the time the act was done
competent at that time to be the principal of the person doing the act
not necessarily known, personally or by name, to the third party
Howard Smith
withdrawal from it. Ratification dated back to the time of the acceptance
rendering the withdrawal of the offer inoperative. A was ordered to specifically
perform the contract.
Concerned an action for specific performance of a contract to take a lease.
The defendant lessee wrote the plaintiff lessor offering to take a lease on
8.12.1886. On 13.12.1886 a director of the plaintiff lessor communicated by
letter an acceptance of the earlier offer to lease. On 13.1.1887 the
defendant lessee withdrew the offer which had been made earlier. At the
time the offer to lease had been accepted by the lessor, the director of the
lessor who communicated the acceptance did not if fact have authority to
bind the company be accepting the earlier offer. On 28.1.1887 the Board of
Directors ratified the contract of leases. The court ruled: The rule is to
ratification by a principal of acts done by an assumed agent is that the
ratification is thrown back to the date of the act done, and that the agent is
put in the same position as if he had had authority to do the act at the time
the act was done by him. [This is sometimes known as the doctrine of
relation back.]
HOWEVER according to Isaacs J (in dissent) in Davisons case Bolton
Partners v Lambeth was wrongly decided and should not be followed in
Australia.
DUTIES OF AGENTS
an agent commonly owes duties of a fiduciary nature to his principal: Hospital
Products v US Surgical Corp
principal and agent duties will arise when you have got either actual express
authority or actual implied authority - wont necessary arise in the case of
ostensible authority.
can be expressly stated in written agency document i.e. Power of Attorney.
can be wide and varied.
common effect is that the relationship is fiduciary in nature.
Principal/Agent relationship not necessarily fiduciary
consider whether the fiduciary undertakes . . . to act for . . . another person in
the exercise of a power or discretion which will affect the interests of that
other person in a legal or practical sense. The relationship . . . is therefore one
which give the fiduciary a special opportunity to exercise the power or
discretion to the detriment of that other person who is accordingly vulnerable
to abuse by the fiduciary of his position: Hospital Products.
Implied duties to:
obey principals instructions - primary legal duty of agent
exercise due care and skill
act personally
account
act in good faith
pertains to fiduciary part of relationship
to avoid conflicts of interest
not to profit from position of agent
not to devulge confidential information.
Duty to obey principals instructions
primary legal duty of the agent - to carry out on the principals behalf the
business or tasks which the agent has agreed to perform: Heytesbury v Kelly;
WH Coomb v Brown
Turbin v Bilton - 1843 - An agent was instructed to insure a ship but
failed to do so. Agent was held liable to the principal when the ship was
lost while uninsured. The basis of the agents liability to the principal was
for failing to carry out the principals instructions.
Duty to avoid conflicts of interest and the Duty not to profit from the duty
as agent - the Self Dealing Rule.
An agent must not put himself to a position where his personal interests conflict
with those of the principals.
i.e. an agent cant buy property that he was instructed to sell.
Heywood v Roadknight - An agent ends up buying land that is for sale. He
buys it for 29 Pounds/acre and sells it in a year for 90 Pounds/acre. The
agent was held to be in breach of a fiduciary duty placed upon him by his
role in the sale. He was liable to account for the profit that he had made.
In this case the agent because of the fiduciary relationship had
knowledge of the principals difficulties in selling the property and the
knowledge of the true value of the property because he had been party
to all the confidences that the plaintiff had given.
Although this duty is applied very strictly - they are instances when it can be
relaxed:
if the agent makes prior disclosure of the exact nature and extent of the
agents interest in the transaction and the principal consents to the
transaction: Pennisula & Oriental Steam Navigation Co v Johnston.
Duty of the Agent not to accept bribes or secret commissions/profit
any benefit received by an agent over what the agent is entitled to receive
from the principal by way of remuneration will be regarded as a secret profit if
it is received without the informed consent of the principal: Denstate Pty Ltd v
Kennedy (SC of NSW 1989 - unreported).
Duty of an agent not to devulge confidential information
the duty is not to misuse confidential information
confidential information is information concerning the principal entrusted to
the agent for the use of the principal.
Heytesbury v Kelly The breachs of duty that had been argued to have occured
were as listed. The breached duties of failure to act honestly and failure to make
full disclosure and the conflict of interest duty were all relevant to the fact that K
had been promised a sizeable commission as a basis for entering into the
transaction which he failed to disclose to either H or Janet. He was also held to
breach the duty to act with due care and skill and to comply with instructions on
the basis that he had been told not to settle the sale other than receipt of cleared
funds or a bank cheque. He was also told not to permit the physical transfer of the
necklace until the purchase price had been paid.
make the agent personally liable: Marsh & McLennan v Stanyers Transport.
Agent lacks authority although claiming a principal exists.
this is a cause of action that can be taken by a third party against an agent
where none of the forms of authority are said to exist. So the third party can
still sue the agent for breach of warranty of authority.
basis for the cause of action against the agent by the third party is that the
agent has misrepresented authority: Collen v Wright. If the agent has not
contracted personally but purports to contract as agent but it is found that
there is no authority between the principal and the agent then the agent may be
liable to the third party of the basis that they misrepresented that they had
authority.
the agents liability for breach of warranty is strict and it doesnt depend on
the state of mind of the agent. So it doesnt matter that the agent honestly
thought that he or she was authorized.
if you have a case of ostensible authority then there wont be generally any
need to sue an agent for breach of warranty of authority - even though the
third party will have suffered no loss in that situation as the principal is still
bound on the basis of ostensible authority.
where the agent is fraudulent - they knew they werent authorized but claimed
to be then the agent may also be liable in deceit: Polehill v Walter; Gould v
Vaggelas.
if the agent is negligent there may also be a case of negligence to be made out:
Hedley Bryne v Heller.
Elements necessary for breach of warranty
agent was purporting to act as an agent
the agent must lack authority
the agent must not have expressed doubts about his or her authority or warned
the third party of them
the third party must rely on the representation
the third party must have suffered damage.
Where the agent acts for the undisclosed principal - the Doctrine of the
undisclosed principal
in the situation where not even the existence of the principal is disclosed at the
time of entering such a contract the third party will have believed that the
agent is acting personally and that the agent is therefore personally liable and
is entitled to sue on the contract.
this is subject to the principals right to intervene on that contract but nothing
must prejudice the right of the third party to sue the agent should the third
party wish to do so.
once the third party discovers the existence of the principal then the third
party may sue if the case involves issues between the third party and the
principal, the third party may sue either the principal or agent or both in the
alternative.
if both the principal and the agent are found liable the third party must elect
to take judgment against either the principal and the agent: Kendall v Hamilton.
what is a binding election is a question of fact - it seems you dont make a
binding election until you actually make a recovery from one or another.
this doctrine will only apply if the agent was acting with actual authority .
ostensible authority cannot act when principal is undisclosed because it runs
counter to the nature of the authority - there will not have been any
representation by the principal and no reliance on the misrepresentation.
cant operate in relation to ratification either because the agent has to disclose
the existence of the principal when they enter into the contract that is
eventually ratified by the principal.
an undisclosed principal may not be able to sue or be sued if intervention is
inconsistent with the terms of the contract - express or implied.
this is a relicit of the parole evidence rule and the courts will be slow to regard
the terms of a contract excluding the intervention of an undisclosed principal
unless it was clearly intended to make the agent the sole contracting party.
the principal may not be able to intervene when the identity of the person with
whom the third party is contracting is material to the third party - then you
cant hid behind the agent.
Breach of warranty of authority:
This is a fallback position for TP (ie, if TP does not succeed against P, its
preferred target).
Collen v Wright is analysed in Yonge v Toynbee [1910] 1 KB 215.
the state of mind of the supposed agent is irrelevant, as is the distinction
whether the agency never or that it existed but terminated.
the liability of the agent stems from the implied promise that the authority
which the agent claims to have exists;
the remedy for the third party is damages;
the agent can never claim an indemnity from the principal (because the principal
is not really the principal of the agent and under a correlative duty to indemnify
the agent).
SAMPLE ANSWERS
Issues:
The issues are:
is P an undisclosed principal?
did A contract personally or is he an agent of P?
can the third party sue both P and A?
What is the effect of Ps change of heart?
Issue No 1:
Rule: the elements of the doctrine of the undisclosed principal; see Fisher [16.49].
Cases: The Teheran-Europe Case; Maynegrain v Compafina Bank; Siu Yin Kwan v
Eastern Insurance Co
Application:
the scope of As authority;
does the contract exclude Ps intervention?;
do any exceptions to the doctrine apply? (see Fisher [16.50]-[16.53]);
Exceptions to the doctrine:
(1) the terms of the contract; and
an undisclosed principal may not be able to sue or be sued if
intervention is inconsistent with the terms of the contract - express
or implied.
this is a relicit of the parole evidence rule and the courts will be slow
to regard the terms of a contract excluding the intervention of an
undisclosed principal unless it was clearly intended to make the agent
the sole contracting party.
(2) where the personality of the agent and the third party are vital to the
contract of transaction.
the principal may not be able to intervene when the identity of the
person with whom the third party is contracting is material to the
third party - then you cant hid behind the agent: Dyster v Randall &
Sons.
contracts for personal service: Carberry v Gardiner
where the identity of the agent is vital to the transaction with the
third party such that the third party is relying on the personal skill or
creditworthiness or solvency of the agent: Greer v Downs Supplies Co.
what of the fact that A did not reveal Ps existence.
POSSESSION
I.
II.
claim on their insurance using their contents policy - if that person hasnt a
receipt to prove ownership they have to prove prior possession. So where you
cant prove ownership you can prove possession.
Possessory title is good against the whole world except the absolute owner.
Ranks the interest of owner, possessor, and the rest of the world. Possessory
title gives the possessor a special interest.
HIERARCHY OF POSSESSION
1. Owner
2. Possessor
3. The rest of the world
1. In the event of a wrongful taking of goods, the possessor s possessory title
prevails over the rights of the wrongdoer
2. As between the owner and the possessor, the owner has a superior right
to possess, and the possessory title of the possessor must yield (absent a
supervening legal relationship such as bailment).
The owner, who does not have possession, has a right to possession.
The possessory title of the possessor in subordinate to the possessory right of
the owner. NOTE THIS IS PRESUMING THE ABSENCE OF A SUPERVENING
LEGAL RELATIONSHIP SUCH AS BAILMENT.
If the bailment is for a term (a fixed period of time) then the owner cannot
get the goods but before the bailment expires.
If the bailment is a bailment at will (temporary), the bailee must, if the bailor
askes for the goods back, deliver them up. If the bailee doesnt deliver the
goods up, the bailee is liable to be sued for an action in detinue or conversion
(depending on what the bailee has done).
3. As between the true owner and the wrongdoer, the superior right of the owner
prevails over the wrongdoer.
PROVING POSSESSION
Possession is proved by acts that are consistent with possession and by
discounting those acts that are inconsistent with any more remote
association: Button v Cooper.
In Button v Cooper, someone was charged with being in possession of goods
thought to be stolen. The revelant goods in question were found in the accused
bedroom cupboard. The defence he mounted to the charge of being in
possession of stolen property was although they were found in his room they
werent in fact on his person as he wasnt wearing the stolen articles of
clothing. He was convicted. It was appealed but the court said the conviction
was proper.
What the courts do is balance up all the circumstances - they talked about the
accused being in possession because although the stolen items werent being
carried by the accused when he was arrested they were in his house, in his
bedroom, and stored in a place where only he had access to.
So if we go back to those fundamental concepts of intention and control that
are critical to possession - although his control was weak in the sense that he
didnt have immediate control or custody of the articles, the fact that they
were stored in an area of his house that he had generally only had access to
was sufficient to justify and sustain a conviction. So that is why the courts say
that we will look at those circumstances that are consistent with possession,
we will explain away or discount those acts that are not consistent with the
idea and then we basically reach a conclusion as to whether or not a given
person is or is not in possession of goods.
The courts evaluate all the circumstances of the case - they look at the legal
relationships between either the owner or possessor - and then they come to
the conclusion as to whether or not a given individual is or isnt in possession of
the articles but they only do that when they take into account the incidence of
intention and control.
THE SUBJECT MATTER OF POSSESSION
Choses in possession can be possessed.
You cant possess a chose in action. The test for differentiating choose in
possession from chose in action hinges on whether the thing in question can be
reduced to physical possession.
Goods within goods can also be possessed.
i.e. a tool box - eve though when the lid in shut on the tool box the possessor
of the tool box would not say I possess a spanner, a hammer . . . - the fact is
that by possessing the tool box as an entire entity you are taken in law asbeing
in possession of each individual tool within it.
Articles within receptiacles are possessed if the person who possesses the
larger receptiacle has both intention and control.
Personal use assets are usually possessed by personal contact.
i.e. watches, clothes.
Possession of goods can take place even if they are in a separate building.
Possession of goods can occur constructively.
Custody is separated from legal possession i.e. QUT - books in the library -the
librarian through cotnrolling the library controls the books on behalf of QUT.
In terms of constructive possession, QUT possesses constructively through its
employees and agents.
QUT as a legal entity possesses its property constructively through its entire
body of employees.
Materialised choses in action can also be possessed.
There are some chose in action such as bills of exchange, promissory notes, and
share certicates that are valuable because of the value of the piece of paper the intrisic thing that records the amount of the bill of exchange or the
cheque or a share certificate - what is valuable about these things are the
things they represent - if you are a BHP shareholder and you have a million BHP
shares and you have in your hand a share certificate for a million BHP shares
that is an example of a materialized chose in action - the relationship between
a shareholder and a company is expressed to be that the shareholder has an
interest in the capital of the company in the form of shares or share capital.
What of course in valuable, is the relationship between the shareholder and
the company. The chose in action has materialized because it appears in the
form of a share certificate which is a material embodiment of shareholders
rights. You buy and sell shares by buying and selling the share certificate. So in
that sense when we say a materialized chose in action can be possessed we are
talking about the intangible claims which appear in basically paper form.
Electronic shares are not materialized chose in action.
THE DEGREES OF POSSESSION
There are 2 schemes to analyse the degrees of possession.
The broader, less detailed scheme divides possession into actual and constructive
possession.
The more detailed scheme is the one that Pollock and Wright developed.
The Pollock and Wright scheme
1. Custody.
Lowest degree of possession. Defined as a physical holding, a detention, an
occupational control of goods which falls short of possession in law.
Meaing of custody depends on its context. Sometimes statutes use the phrase
custody - if defined that definition is used - but if not go to common law where
the meaning is a physical detention: FCT v ANZ Bank - the primary meaning of
custody is physical control.
2. Actual (or de facto) possession.
3. Legal possession.
4. Lawful possession.
5. Constructive possession.
6. The right to possession.
CUSTODY
Custody: a physical holding, detention, occupation or control of goods which falls
short of possession in law.
The meaning of custody depends on its context.
Possession, custody and control.
The employee has custody in the sense of physical control.
Look for a supervening legal relationship to decide if the putative occupier has
possession in law.
ACTUAL POSSESSION
Actual possession takes place when the possessor of goods has the use and
occupation of goods of which the subject matter of the possessory relationship is
capable: Gray v OTB (Official Trustee of Bankrupcy) (1991) 29 FCR 166 at 171.
This means that with actual possession someone is more than a mere custodian.
They are in fact allowed to use the articles in question for lawful proper
purposes.
Actual possession is not the same as possession in law.
Actual possession allows the possessor to exclude others and also connotes the
state of being in effective control.
Actual possession is not always the same as custody, although the two coincide
often in practice.
Physical custody and actual possession can be separated in practice also.
Actual possession is not concerned with the lawfulness or rightfulness of
ossession.
LEGAL POSSESSION
Is the state of being in possession in the contemplation of the law: Gray.
Note 2 presumptions:
1. possession in fact (actual possession) is prima facie evidence of possession in law
- presumption but can be rebutted - check for supervening legal relationship;
2. possession in fact imports possession in law, so long as there if the manifest
intent of sole and exclusive dominion.
Can be separated from custody and actual possession.
Does not depend upon (but can co-exist with) detention or lawful or rightful
possession.
LAWFUL POSSESSION
Denotes rightful legal possession.
Is one degree above legal possession -it refers to the rightful quality of
possession by the possessor.
May coincide with legal possession (and doesn t if the rightful possessor is out of
possession).
Look for some dealing in goods in order to determine whether possession is
rightful.
Is the basis on which to vindicate claims for an invasion of possession.
CONSTRUCTIVE POSSESSION
Is the foil to actual possession,
Occurs when the right to possess or to have legal possession is separated from
actual possession.
So look for the separation between legal possession and actual possession - the
person with constructive possession has the right to get the possession back.
See if there is a transaction effecting the ownership of the revelant article.
Covers the relationship between a person and goods, which not in the person s
actual possession, are held by another from whom possession may be demanded.
Look for an underlying dealing affecting the right to possession (especially a
dealing affecting property).
Requires the exercise of control over goods: Compafina
Examples of constructive possession:
1. sale of goods coupled with a bailment;
2. sale of goods in the hands of a third party custodian by seller to buyer;
custodian attorns to the incoming owner/buyer.
The person having actual possession usually has an inferior interest in the
goods to that of the constructive possessor.
Requires the identification of the goods (especially where they are in bulk).
THE RIGHT TO POSSESSION
Is the highest possessory interest a person can have in goods.
Claimant is usually out of possession.
Endures against the whole world.
Is an incorporeal interest in goods.
It follows ownership.
Is summarised as follows:
1. it includes the right to physical possession.
2. it can exist apart from both legal and lawful possession.
3. it is a normal incident of ownership and is sometimes called property.
4. is transmissible or assignable by a dealing (excepting delivery).
5. is not always exclusive (sub-bailment).
6. can co-exist with legal possession when the right to possess is vested in the
person having custody.
See Gray (1991) 29 FCR 166 at 171-2.
THE ACQUISITION AND LOSS OF POSSESSION
THE CORRELATIVE OF ACQUIRING AND DIVISTING POSSESSION
Divesting possession
Making Delivery
Abandonment - an intentional transaction - is voluntary - not lost
Loss
Acquiring possession
Taking Delivery
Original Acquisition - is the flip side of abandonment
Finding
DELIVERY
Delivery is the voluntary transfer of possession, whether actual or
constructive, of goods from one person to another.
There are 2 forms of delivery:
actual (or manual);
constructive.
Delivery requires 2 legal subjects as well as a legal object.
CONSTRUCTIVE DELIVERY
Takes place by an alteration in control over goods without any any change in
physical possession: Gamer.
look for a transaction that effects ownership
5 forms of constructive delivery exist:
1. Delivery by attornment;
2. Symbolic delivery;
3. Delivery of documents of title;
4. Delivery to a carrier;
5. Bailee becomes owner.
Constructive delivery involves some consensual dealing in the right to possession
which is transferred by agreement: Mills v Charlesworth . This means that the
person who is not in actual possession of the article can axquire the ownership by
agreement because a Sale of Goods Contract is the paradigm example of a
voluntary transaction effecting personal property. When something is transferred
by agreement the parties usually intent to transfer both possession and ownership
but if the bailee is already in possession of the goods then there is no shift of
actual possession that remains insitu - what actually changes is the right to control.
FINDING AND LOST
Possession of goods can be acquired and lost.
The acquisition of possession may be original or derivative.
It is original in the case of ownerless things (res nullius and res derelictae).
It is derivative when the transfer of possession takes place by the process of
delivery.
Possession (as well as ownership) can also be abandoned: Re Jigrose.This depends
on intention.
FINDING
The finding cases involve a contest between the possessory interests calimed
by an occupier of land and the finder of goods on that land.
The underlying legal principles are:
1. the finder has a possessory title to the goods;
2. the occupier of land has, by law, possession of everything which is attached to or
under the land and in the absence of a better title elsewhere, the right to possess
the goods also.
The first principle covers the gap left by the second, namely the situation of goods
which are on but not attached to or under the land.
The policy of the law in the finding cases is to facilitate the reunion of the the lost
goods with their owner.
This policy is likely to be met if the law gives primacy to the interests of the owner
OWNERSHIP
Ownership is the most significant interest that can exist in relation to personalty.
What is owned is what belongs to a person: Myerson v Collard.
Ownership is the intangible tie which unites a legal subject (person) with a legal
object so that the subject has an absolute interest in the object.
Only legal persons can own property: Glebe Admin Board.
Ownership is incorporeal even if the thing owned is a material object (such as
goods or land).
PROOF OF OWNERSHIP
Proof of ownership normally consists of proof of possession: Gatward v Alley.
Proof of ownership can also be made by tracing it back to some dealing under
which the putative owner acquired both ownership and possession of the goods:
Gatward v Alley.
Sometimes, a title registration system exists for some kinds of goods, ie ships
under the Shipping Registration Act 1981 (Cth).
The Acquisition of Ownership
The acquisition of ownership is either original or derivative. It is original when
title does not derive from the title of another person.
Forms of alienation of ownership include:
dealings - such as sale, exchange, barter, gift, deed;
operation of law - bona vacantia;
reduction into occupation of ownerless things- res nullius;
abandonment of goods;
capture by enemy forces;
consumption: see Vincent v SBNSW.
Some of these are original and some are derivative.
Forms of Original Ownership
Forms of original ownership include:
occupancy following abandonment or finding;
occupatio required the taking into possession coupled with the intention to
no Australian court has ever given a succinct statement of what the doctrine is
Jones v De Marchant - the right to all which ones own property produces,
whether that property be moveable or immoveable and the right to that which
is united to it by accessory, either naturally or artifically.
accession is a form of transfer of personalty from one existing owner to
another: McKeown v Cavalier Yachts.
The Test for Accession
The test for accession comes from Rendell:
The accessory continues to belong to its owner unless as a matter of practical
necessity, the accessory cannot be identified; if identifiable, the accessory
must be incorporated into the principal to such an extent that it cannot be
detached.
The intention of the owner of the accessory cannot retard the transfer of
property in the case of impracticability.
Accession is an objective test and it overrides the subjective intention of the
owner of the accessory not to transfer property to the principal.
The Effects of Accession
The effects of accession are three-fold:
1. the accessory becomes part of the principal: Lewis; McKeown.
2. the title of the owner of the accessory is extinguished on accession: Lewis;
Rendell;
3. it by-passes the nemo dat rule: McKeown.
As to (3): if the accessory is merged into the principal or consumed in the course
of manufacturing the principal, then the property in the accessory passes by
operation of law to the owner of the principal - this displaces the general law
doctrine of nemo dat (that no man can be deprived of his property, except by his
own voluntary act or by operation of law). Justification for displacement: the
combination of the absence of motive on the part of the innocent holder of the
accessory coupled with the irrevocable consumption of or change of state of th
accessory would make it unjust to require that innocent occupant to return the
principal or the manufactured article to the dispossessed true owner.
Application of Accession
Accession applies where:
1. the accessory cannot be detached without damage or as a matter of
the relative ratio of their contributions to the mass: Indian Oil Corp.
(b) if it is not possible to determine how much of or the maximum amount of
the innocent partys goods into the common mass, then that entire mass
belongs to the innocent party: Indian Oil Corp.
3. If the separate goods belonging to A and B are commingled by consent, and they
can be separated as a matter of practical necessity, then there is no commingling:
Lewis.
4. If separate goods belonging to A and B are commingled by consent than A and B
can agree on the amount of their respective shares in the common mass: The Drege
Willemstead.
5. If separate goods belonging to A and B are commingled by consent, then it is
open for A and B to agree that one of them will obtain entire property in the
common mass to the exclusion of the other, so long as the evidence is consistent
with an intention to part with ownership altogether: Coleman v Harvey.
Specification
Specification is the process under which raw material or other input is altered
by the application of some work or some mechanical or chemical process to
produce an output of a different identity or species from the input or inputs.
Carey MIller has defined specification as the unauthorized utilization of the
property of another, producing a thing, irreducible to its constitutents but
sufficiently distinct in character to justify acquisition by the maker, regardless
of his state of mind.
Under Scots law, the test for specification is whether the manufactured article
can be reduced to its constituents. If so, then the parts belong to their owners
and the parts may be restored to their owners. If not, then the entire product
belongs to the operator and the dispossessed owner is entitled to the value of
the inputs: IBC case.
The operator must act in good faith: McDonald. If not the operator does not
acquire good title to the manufactured article.
the true owner of the constituent elements of the article is entitled to trace
the article into whoevers hands it may come into: McDonald v Provan.
the owner of the constituent elements and the operator may reach an
agreement about their respective interests in the manufactured article, and
the courts will respect and enforce the agreement: Wylie and Lochhead.
the relationship between specification and accession is that each doctrine deals
with the grounds on which the union of goods belonging to two or more people
will resul in a transfer of property to one or the other (or both). The coverage
owner leaves them for anybody to take them away. It is possible that the
circumstances of the finding, and the nature and condition of the goods, is such
that a person may reasonably believe that they have been abandoned, yet at the
same time, know, or have the means of ascertaining, the identity of the former
owner who has abandoned them: Keene.
Abandonment is one of the consensual methods of loss of ownership of personal
property: Vincent.
The doctrinal dispute polarising abandonment is whether it is possible as a matter
of law to abandon goods. Some say yes and some say no.
Is Abandonment Possible? There are three views as to this question:
Abandonment does not divest the owner of property in goods: Kaine.
Some cases echo uncertainty whether abandonment strips an owner of property
in goods: Moorhouse; Vincent.
Abandonment is possible as a matter of law: Re Jigrose; Lang; Cook v Saroukas.
Requirements of Abandonment
Abandonment requires the conjunction of 2 elements:
1. the physical act of abandonment;
2. the owner s intention to abandon the property in the goods: Moorhouse; Re
Jigrose.
Compare this with the elements of possession: intention and control.
How do you prove abandonment?
The best evidence is that which points unequivocally to a renunciation of the
interests an owner has in the goods: Moorhouse. (Interest here refers to the
interests of ownership and possession - abandonment must effect both.)
Intention also distinguishes abandonment from loss: Re Jigrose.
The Intention to Abandon
Is it decided subjectively or objectively? Re Jigrose, Keene v Carter and Gerber.
(A) decide that you look at:
1. the relationship between the parties;
2. the terms of any contract or transaction between the parties;
3. the value of the goods;
4. the circumstances under which it came to be putatively lost;
5. the length of time that it has been lost;
6. the attempts made by the owner to find or recover the goods;
title to goods.
DEALINGS IN PERSONALTY
The main forms of dealings in personalty are:
sale;
assignment;
gifts;
involuntary dealings;
security dealings.
Some of the underlying phenomena are:
the presence or absence of consent;
intention;
form vs substance;
which legal system or body of law recognises the dealing;
does the property relate to present or future property?
GENERAL ASPECTS OF SALE
Sale relates to any form of transfer of any property in exchange for a price:
Capel.
Sale is generally confined to the contract of sale of goods. See the Sale of Goods
Act 1896 (Qld).
Sale involves the voluntary transfer of goods from the seller to the buyer in
exchange for their price: s4(1).
There are 2 aspects to the sale of goods:
1. contract: the mechanism for the parties to assume mutual obligations relating to
the transfer of property of goods (obligations);
2. conveyance: the transfer of the ownership of the goods from the seller to the
buyer (property).
Contract is relational and relatively concrete. It is facilitative and facultative.
Conveyance is proprietorial and relatively abstract.
Both phenomena combine in the contract of sale. Each produces or has effects in
the overall transaction.
ASSIGNMENTS GENERALLY
Means the immediate transfer of an existing proprietary right, vested or
contingent, from the assignor to the assignee: Norman v FCT.
Assignment requires 2 legal persons and a legal object. Anything can be assigned
SAMPLE ANSWERS
Question 1(a):
Property is defined as follows by the Canadian lawyer Welling:
B Welling, Property in Things in the Common Law System
(Scribblers Publishing, Gold Coast, 1996), pp6-7)
[6] Property is a relationship. There are always three people in the relationship.
The first person is the state.
The second person is someone whom the state has concluded is the holder of a
specified form of property. The third is any other person whom the state has not
concluded is the holder of that specified form of property.
The state will suppress the civil liberties of the third person to the extent they
fall within the scope of the form of property held.
Question 1(b):
Distinguishing real from personal property:
Applicable laws (Land Title Act 1994).
Civil procedure and private international law.
Succession law.
Remedies.
Question 2:
The sources of commercial and personal property law are:
Contracts.
Model contractual codes.
Custom or usage.
Common law or equity.
National or State legislation.
International treaties.
Question 3:
(a) Right to sue in contract:
The right is a chose in action. It is an intangible claim against the party in breach
It is an obligation too because it is a composite right-and-duty thing. The contract
is a voluntary obligation.
(b) Right to sue in tort:
The right is a chose in action. It is an intangible claim against the party in breach
It is an obligation too because it is a composite right-and-duty thing. The tort is an
involuntary obligation.
(c) Copyright:
Section 31 of the Copyright Act 1968 (Cth) sets out the nature of copyright (ie,
the right to copy certain types of literary, dramatic, musical and artistic works).
Question 1(d):
There are two transactions affecting interests in personal property here: the sale
(ownership) and the constructive delivery (possession).
Property passes when the contract of sale is made or when the price is paid.
The book has remained static and has not been physically delivered.
Because of the sale, ownership has passed. The book has been constructively
delivered by J to S.
S becomes the owner/bailor and J becomes the bailee/possessor.
Question 1(e):
Jo has remote (or mediate) physical possession of the marijuana.
For the same reasons as for 1(b)-(d), Jo has possession.
The mental element would also be inferred from the fact the marijuana was hidden
inside a drawer in Jos bedroom.
Question 1(f):
Chronology and critical phenomena:
Initially, Jill has possession of the wheat. How do the intention plus control
elements come into play?. Possession of the wheat passes from Jill to Graincorp
Ltd when it is deposited in the Graincorp silo.
What is the significance of the delivery order given to Jill by Graincorp?
The delivery order is a "document of title".
Graincorp becomes the bailee of the wheat while Jill remains the owner. As a
bailee at will, Graincorp has possession of the wheat. At the same time, Jill has
constructive possession of the wheat.
Ownership of the wheat passes 14 days later to Queensland Bread Co Ltd (QBC).
What happened when Jill handed over the delivery order over to QBC?
Sixty days latter when QBC withdrew 40 tonnes for its milling and baking
operations, QBC took delivery of that 40 tonnes from Graincorp. How has
possession of that 40 tonnes changed when it was withdrawn from the bulk of 100
tonnes?
What is the significance of the surrender of the 100 tonnes delivery order by QBC
to Graincorp and its replacement by a delivery order for 60 tonnes ?
SEMINAR No 6: FUNDAMENTAL CONCEPTS
Question 1:
Approach:
identify the legal relations between the parties;
identify the transactions engaged in by the parties;
what are the obligations (rights and duties) of the parties?
use each person as the focal point of discussion, and in particular, determine who
has rights against whom.
Chronology:
Jill owns Broadacres.
Jill has leased Broadacres to Asgard.
Jack entered Broadacres and found the axe.
Jack had the axe evaluated by the Queensland Museum.
Jill and Asgard demand the return of the axe.
Finding Rules (see Study Guide pp 60-61):
From the key facts distilled under the Chronology, see which of the Finding Rules
from Parkers case will apply. Not all of the Finding Rules can apply to each legal
actor. Think about the underlying social policies to the Finding Rules.
1. Jack:
Locate Jack within the scheme of the Finding Rules (ie the class of legal actor) and
then match up the applicable Finding Rules that fits Jacks circumstances.
Finding Rule Nos 1, 3. And 5 apply.
What duties and liabilities apply to Jack as a result of these Finding Rules?
2. Asgard:
Locate Asgard within the scheme of the Occupier Rules (ie the class of legal actor)
and then match up the applicable Occupier Rules that fits Asgards circumstances.
Occupier Rules Nos 1 and 3 apply. Why cant Occupier Rule 3 apply?
What duties and liabilities apply to Asgard as a result of these Occupier Rules?
3. Jill:
what is Jills legal status and how does she fit into the scene?
how can Jill prove her claim to the axe?
how do the Finding and Occupier Rules apply to Jill and how can she assert her
rights?
what is the outcome of the dispute as far as Jill is concerned?
4. What of the true owner?
How does the true owner fit into the scene?
What is the point of the Finding and Occupier Rules so far as the true owner is
concerned.
Question 2(a):
NB: students should have read the case cited, Young v Hitchens (1844) 115 ER 228.
Issues:
What cause(s) of action does Bob have against Bill?
What interest in personal property does Bob have when Bill intervenes?
What interest is necessary (as opposed to sufficient) to support a claim for an
principal?
What is the effect of the doctrine of accession?
What are the methods which the law recognises as competent for the doctrine of
accession to apply?
What restitution or compensation (if any) should be made by the owner of the
principal to the owner of the accessory?
Apply these 4 questions to each of the accessories supplied to Bob by the
suppliers.
how and on what basis should Bob account to each supplier (or compensate them
for the value of any item that has acceded to the principal?
dont overlook each suppliers contractual rights against Bob.
can each supplier get an order for specific delivery of the accessories against Bob;
if so, what are the things that should be reflected in the order?
Question 2:
Approach:
identify the legal relations between the parties;
identify the transactions engaged in by the parties;
what are the obligations (rights and duties) of the parties?
use each person as the focal point of discussion, and in particular, determine who
has rights against whom.
Chronology:
Jon found the ingot.
Andy claims the ingot (qua true owner).
Jon melts the ingot down for the statue he is making for PGI.
PGI installed the statue in its HQ in situ.
Advice:
The basic issue is: can Jon reclaim the statue?
Issues:
Has A lost property in the ingot? If so, what are the proprietary consequences of
this. If not, what can A do to get it back?
What process affecting ownership has taken place to the ingot?
Can Jon reclaim the statue?
Issue # 1:
What has happened to the ingot in a proprietary sense?
What process has happened to the ingot?
What are the ownership allocation rules that are called into play?
Reach a conclusion based on the application of the law to the facts.
Issue # 2:
What has happened to the ingot in a proprietary sense?
What process has happened to the ingot?
What are the ownership allocation rules that are called into play?
Reach a conclusion based on the application of the law to the facts.
Issue # 3:
What interest does Jon have in the sculpture?
Has Jon lost his interest (and if so, how)?
What has happened to the sculpture?
What cause(s) of action does Jon have (and why)?
SALE OF GOODS
Risk
1. If a party bears the accidental loss or damage to goods then they are at that
partys risk.
So if the risk of the goods was with the seller then the seller had the risk in
the goods and they perished while they were at the risk of the seller what
ordinarily would be the consequence of this - the seller would be liable to the
buyer for damages for non-delivery - for being unable to comply with the
sellers obligation to deliver the goods on time .
2. The buyer would not be liable for the price.
So that would be the consequence of goods being at the risk of the seller - the
seller will be liable for any loss or damage.
The point is that the contract for sale remains on foot.
When does the risk pass in a contract for the sale of goods?
The prima facie rule per SGA is that risk of loss or damage to goods passes to the
buyer when the property in the goods is transferred: s23
Frustration
If the seller bears the risk of goods and they perish then the seller is liable to the
buyer in damages for non-delivery - that is so unless the seller can establish that
the contract was frustrated.
If the contract is frustrated, the contract is discharged and neither party is liable
to the other.
Frustration occurs where a supervening event takes place without fault of either
party and for which the contract does not provide which so significantly changes
the nature of the rights and obligations of the parties that it would be unjust to
hold them to the literal bargain.
Is this concept of frustration is recognized in the Sales of Goods legislation?
There are two provisions that sort of resemble the concept of frustration in
contract: s9 and s10 SGA
s9 of SGA
When there is:
a contract for sale of specific goods, and
the goods without the knowledge of the seller have perished at the time when
the contract is made,
the contract is void.
McRae v Cth Disposal Commissioner - s9 not applicable because goods had never
existed at all. This case concerned the sale by the defendant of the wreck of a
ship at a certain location - no ship existed at that location - so the defendant was
sued for breach of contract - the High Court said the plaintiffs were entitled to
succeed because there was an implied term that the ship was at the location
specified - s9 was not obstacle to the plaintiff because it only applied where the
goods had once existed but had perished - if s9 had applied the contract would
have been discharged and there would have been no obligations owed by either
party so it suits the plaintiff in this case to establish that the section does not
apply.
s10 of the SGA
When there is
an agreement to sell specific goods [as opposed to a sale - s3 and s4(3) - the
difference between a sale and an agreement to sell depends on when property
passes - with a sale the property passes at the time the contract is made with
an agreement to sell it passes in the future], and
subsequently the goods,
without any fault on the part of the seller or buyer,
perish before the risk passes to the buyer,
the agreement is avoided.
perish
It is used in both s9 and s10. The word has a wider meaning then no longer there
and it has also been applied where as a matter of business the goods have so
deteriorated as to have loss their merchantable character or they no longer
conform to their contractual description.
The cases suggest that perish should be construed in a commercial sense.
Asfar & Co Ltd v Blundell - concerned a contract for the sale of dates that had
been under water for two days and when they were brought up they were mush they had been impregnated with sewerage and they were in a state of
fermentation - the insurers in this case were arguing that there had not been total
loss of the goods and therefore the goods had not perished - but the court held
that while the argument might commend itself to chemists it would not to
businessmen and then they reinforced the test that was whether as a matter of
business the nature of the thing has been altered. So the term is not limited to
total physical destruction - it has a commercial meaning.
Rendell v Turner - was a contract for the sale of table potatoes - the contract was
held to be void because at the time of the contract the potatoes by reason of
second growth had become unfit for human consumption - so although technically
the potatoes still existed in specie - they are still potatoes so technically they
havent perished in that sense - they had ceased to be table potatoes if you
adopted the commercial meaning of the term perish.
Barrow Lane & Ballard v Phillips & Co Ltd: contract for an indivisible parcel of
specific goods, part perish, then contract avoided. If the parties do not contract in
this manner - i.e. for an indivisible parcel - then the parties will only be able to
avoid the contract if it is a material breach -> s32 SGA.
Terms and Representations
What is it that the buyer and seller have contracted to buy or sell?
DONT FORGET THE COMMON LAW AND THE TPA IN THIS AREA.
If you are concentrating on a transaction involving the sale of a defective product
then the answer would not be complete if you solely focused on the implied
conditions in the SGA.
s14(2) SGA: matter of construction of contract as to whether term in contract is
a condition or warranty.
It is an important distinction because of the remedies that flow. If you are a seller
who is held to have breached a condition then the contract might well be
repudiated and if it is, the buyer then has the right to reject the goods because
they can basically restore the parties to the position they were in at the date of
contract.
Breach of warranty on the other hand means that the buyer is entitled to damages
only - so the buyer does not have a right to reject the goods and treat the
contract as repudiated.
This is the prima facie position when you are looking at terms in contracts for the
sale of goods but there are qualifications.
Breach of condition - repudiation
Breach of warranty - damages only (not a right to
out of s15(a). It appears that it can be contracted out ot: Warnings Used Cars v
Tucker.
Feeding title
The subject of feeding title is relevant to s15(1)(a). This situation arises because
there is a time lag between the time the seller purports to pass title under a
contract for sale and the time the seller actually acquires title to those goods
after the contract is concluded.
A seller who has no title to goods but who afterwards acquires title can hold the
buyer to the bargain before the buyer rejects the goods and rescinds the
contract, and the seller is estopped from denying the validity of the transaction.
Subsequent title feeds earlier defective title of the buyer: Lucas v Smith; Patten v
Thomas Motors; Alico Steel Corp v Australian Development Corp
Although the buyer cannot reject the goods so has been no breach of the condition
the buyer can see sue for damages in this situation if they have suffered damage
as a consequence but they cannot repudiate the contract which they would normally
be entitled to do for a breach of s15(1)(a).
s15(1)(b) and (c) - implied warranties
s15(1)(b) - buyer shall have and enjoy quiet possession of the goods: Healing Sales v
Inglis Electrix - seller must not wrongfully seize goods from buyer - here goods
had been delivered on credit and the buyer had not paid for them yet but the
seller wrongfully seized or repossessed the goods - this action activated s15(1)(b).
It is an ongoing obligation of the sellers: Microbeads AC v Vinhurst Road Markings.
Applies to future: Microbeads AC v Vinhurst Road Markings - in this case road
marking machines were later found to infringe a patent - and although at the time
of the sale there was no patent in existence and therefore no infringements of
s15(1)(a), that didnt mean that there couldnt be an infringement of s15(1)(b)
which applies not only at the time of sale but for the future.
s15(1)(c) - goods shall be free from any charge or encumbrance in favour of any
third party, not declared or known to the buyer before or at the time when the
contract was made.
TPA equivalent: Part V Division 2
s69(1) - mirrors s15(1) SGA
s69(3) - sales of a limited title - provides for a situation where it appears from the
contract or from the circumstances that the supplier intends to transfer only the
title that that person or third party may have - so it might be a limited title.
defendant that it knew nothing about mink food - one of the ingredients was herring meal and this
was supplied to the plaintiff by a third party Norwegian firm - unbeknown to any of the parties the
herring meal had become contaminated due to a chemical reaction with a preservative used in the
manufacture of minx food - the substance was highly toxic and there was a heavy loss of life on the
mink farm - the
plaintiff actually sued for the purchase price of the food - the
defendant was counterclaiming for the damages for the loss incurred - the
defendant based its claim on the grounds that (a) the goods didnt correspond with
their description (b) that they were not reasonably fit for the required purpose
and (c) not of merchantable quality. The plaintiff joined the third party who was
the Norwegian herring meal supplier alleging also breaches of the equivalent of our
s16 and s17 which are the same as (a) to (c) and also claiming an indemnity from the
third party in respect to the defendants counterclaims - dealing first with the
equivalent to s16 the House of Lords (with Viscount Dilhorne is in dissent) agreed
with the Court of Appeal that there had not been a breach of s16 in respect of
either contract - they said that the Herring meal though contaminated was still
herring meal and this conclusion followed from their Lordships proposition that s16
was concerned with the identification of goods as opposed to their quality - the
dissenter dissent was that the distinction between a poisonous and non-poisonous
ingredient was more than a difference in quality and amounted to a difference in
kind - p484-5.
The make and model of a car and the year of manufacture of the car are probably
part of the identification of a car and therefore would form part of its description
when it is sold - each fact that is the make, the model, and the year of
manufacture is a substantial ingredient in the identification of the thing sold:
Miller v Industrial Acceptance Corp.
Bele v Taylor - the defendant advertised his car as a Herald Covertable white 1961
model - so it is obviously a sale by description but what words form part of the
description? The important question here was whether the year formed part of
the description. The car was in fact made of two parts welded together - only one
part was from 1961 - the court had to decide if the year formed part of its
description and they held that it was and that a breach of s16 had been
established and the goods did not correspond with their description - the damages
were assessed at the purchase price as the value of the car was scrap.
Liability of the seller under s16 - the section is strictly construed and unless the
discrepancy is trivial the buyer is entitled to reject the goods even if the goods
are merchantable: Bele v Taylor
Dependable Motors.
3. The Seller is in the Business of Supplying Such Goods
The third element is that the seller is in the business of supplying goods of that
description. This means that this section does not apply to private sales. It is very
wide - the seller need only sell goods of the general kind - the requirement has
been held to have been satisfied by a one off sale: Ashington Piggeries.
4.Assuming the elements have been satisfied, ask whether the proviso to the
application of s17(a) applies: The Trade Mark Proviso
And then converting what is actually a proviso to the operation of s17(a) into an
element - the fourth element is that the goods if specific must not have been
bought under their patent or other tradename.
s17(b)
Goods must not have been bought under their patent or other trade name: Baldry v
Marshall - this proviso is of very limited use - the mere fact that something is sold
by its tradename doesnt make it a sale under a tradename - the same applies if you
ask for a good that will fulfill a particular purpose and then you are supplied with a
good with a well known tradename - that still doesnt aggravate the proviso. Buyer
can ask for the item by its tradename and then asks for the advice of the seller
and the proviso still doesnt operate.
Liability under s17 - If reliance is established, the slllers libility is strict, it does
not depend on whether or not the defect was obvious or latent: Hardwick.
Once it is established that the proviso does not apply, then consider whether
s17(a) has been breached;
Has the implied condition as to fitness for purpose in s17(a) been complied
with?
This is a question of fact. What needs to be determined is whether the goods are
reasonably fit for the specified purpose.
Griffiths v Peter Conway - there is no breach of the section if a coat is suitable
for a normal person but not for a person with abnormally sensitive skin.
Clark v Esanda - the goods must remain fit for a reasonable time after they come
into possession.
The onus is reversed - presumption of reliance which the seller must rebut.
Proviso: s17(d)2
However if the buyer has examined the goods, there is no implied condition
regards defects which such examination ought to have revealed.
What does such examination mean?
Much debate.
Two possibilities are:
1. such examination means the actual examination conducted by the buyer.
2. or a reasonable examination.
Condition excluded if ?:
A reasonable buyer making such examination as actual buyer made would have seen
defect: Frank v Grosvenor Motor Auctions -> actual examination approach ->
favours buyer.
s71(1) TPA
Condition is excluded if consumer examines goods before contract made as regards
defects which that examination ought to reveal.
The examination is the ACTUAL examination not the examination a reasonable
buyer would have made: Truck Wreckers (1979) Pty Ltd v Waters.
2
The Victorian court held that the words such examination referred to the
actual examination conducted by the buyer, so that if the examination was
superficial, the buyer would be held to have detected defects which an
examination which an examination of that nature could be expected to disclose.
It is submitted that this is the preferred construction of th provision because
it tilts the balance from caveat emptor to caveat venditor which is the whole
purpose of the provision.
A reasonable buyer making an examination that was reasonable in the
circumstances would have seen the defects: Thornett & Fehr v Beers & Sons ->
reasonable examination approach -> needed to open barrel to examine goods favours the seller.
The court preferred to apply the proviso objectively, holding that if the buyer
makes a cursory examination of the goods, the buyer cannot complain later
about the defects which a more thorough examination would have detected.
The underlying idea is that the buyer must perform a reasonable examination
of the goods.
It is safer if the buyer does not make any examination.
In a problem:
First see if you can imply the condition by satifying the
elements of s17(c) and (d)
Second work out whether the condition has been breached
The third step would be to look at the consequences of breach
of the implied condition by looking at the remedy provisions in
the Act.
Once you can say that the elements have been satisfied and
therefore you can imply a condition in your contract that the goods
must be of merchantable quality then your next question is whether
the condition of merchantability has been breached.
What does merchantability mean? No definition in the Act so go to
the common law definitions.
Test of merchantability
Whether the goods are reasonably fit for any one of the purposes to which
goods of this description and price are reasonably put: BS Brown & Sons v
Craiks.
Here the plaintiff ordered rayon cloth of a particular description from the
defendant - the plaintiff wanted the material to make dresses but didnt
The same definition as this one appears in the TPA at s74D(3) which is the
definition applying to cases within Part V Div 2A.
TPA: merchantable
Rassell v Cavalier Marketing: statutary test imports a requirement that the goods
are fit for all normal purposes (as opposed to one) for which the goods of the kind
are commonly bought.
Test focuses on the reasonable objective expectations of the parties (which can
be curtailed by description parties give goods).
Rassell v Cavalier Marketing: This case concerned the supply of carpeting to a
consumer - the manufacturer was held liable under s74B for breach of the
statutary condition of fitness for the particular purpose - in relation to the
condition of merchantability the following points were made:
the carpeting had the defect of what was called pile reversal or shading.
It was argued by the manufacturers that because the carpet was fit for its
purpose of a floor covering in terms of its physical quality and manufacture
which is a purpose for which carpet is commonly bought that it was of
merchantable quality.
The judge disagreed with that submission.
He compared the TPA definition to the common law definition which is applied in
the SGA and said that the SGA act relates to saleability of goods and the test
of merchance is more appropriate to commercial sale.
The TPA focuses on the reasonable objective expectations of the consumer who
didnt purchase the goods for resale.
The approach to the definition is to first identify the purposes to which goods
of that kind are commonly bought and then secondly to ask whether the goods
were fit for the purposes so identified as it is reasonable to expect - here he
said that one of the purposes for which the carpet was bought was for the
aesecfic appreciation of the owner of the residence. The description of the
carpet didnt limit the purpose of decoration. Nor was the price so low as to
make it an unreasonable expectation. One of the common reasons for which
carpet is bought and that a reasonable consumer would expect, would be a
carpet of high quality and be fit for the dual purpose of floor covering and
decoration. So he concluded that the carpet was not of merchantable quality.
The result may be different if we applied the common law definition
appropriate to the SGA which only requires that the goods be fit for one
of their purposes.
intend it to be transferred.
s20 applies to both specific and unascertained goods.
s20(1) - it is a matter of intention of the parties as to when property passes. The
best evidence of intention will be an express term in the contract stating when
property is to pass. Howver if there are other terms which indicate a contrary
intention then it will be a matter of looking at the agreement as a whole.
Ascertaining intention: s20(2)
s20(2) states three things to consider when ascertaining intention:
terms of the contract
conduct of the parties
circumstances of the case
It is only then if you cannot ascertain the intention of the parties or if the
intention of the parties is unclear that you move on to s21.
Intention not clear: s21 Rules
s21 is a provision which sets out five rules which you can apply to help you ascertain
when property has passed.
They are rules to be used as a last resort when you cannot ascertain the parties
intention.
Which rule you apply depends on the classification of goods that you are dealing
with.
NOTE that the rules are only to be applied unless a different intention is appears so the rules are only to be applied when the parties have formed no intention to
when property is to pass or when they have not expressed it.
First categorize goods - specific, unascertained or future
Specific Goods: s21 rule 1
Where there is:
an unconditional contract
for the sale of specific goods
in a deliverable state,
the property in the goods passes to the B
when the contract is made, and
Specfic goods in a deliverable state but seller bound to weigh, measure, test
to ascertain price: s21 rule 3
Where there is:
a contract for sale of specific goods in a deliverable state but
seller bound to weigh, measure, test, or do some other act or thing with
reference to the goods for the purpose of ascertaining the price,
the property does not pass until such act or thing be done, and
the buyer has notice thereof.
The weighing, measuring, testing, etc has to be something to be done by the seller:
Nanka-Bruce v Cth Trust.
Goods on approval/sale or return: s21 rule 4
Where goods:
are delivered to the buyer on approval/sale or return or on any similar terms
the property passes to buyer in three ways:
1. Buyer indicates his approval or acceptance to seller.
2. Buyer does act adopting transaction.
3. Buyer retains the goods without giving notice of rejection beyond the time
fixed for return of the goods, or if no fixed time, beyond a reasonable time.
What is a reasonable time is a question of fact.
If a buyer sells or pledges the goods it will be an act adopting the transaction so
the property will pass to the buyer: Kirkham v Appleborough.
Notice of rejection
Atari Corp (UK) v Electronics Boutique Stores (UK): said the notice of rejection
could refer to the goods generically. It did not matter that it did not mention the
specific goods being rejected. It did not matter that the goods were not available
for collection at the time the notice was served by the buyer.
Risk: s23
Once property in the goods passes from seller to buyer, the goods are at the
buyers risk, whether or not delivery has been made.
s23(1) Unless otherwise agreed:
the goods remain at the sellers risk until
the property therein is transferred to the buyer
but when the property therein is transferred to the buyer
the goods are at the buyers risk whether delivery has been made or not.
Sterns v Vickers - the reason why the Court of Appeal held that risk to goods has
passed to the buyer when the property in the goods had not, was that the buyer
had taken delivery of a delivery warrant representing the goods from the seller
and the third party bailee had attorned in respect of those goods in favour of the
buyer. It was the buyer, not the seller, who had control over the disposition of the
goods despite the fact that the property has not passed to the buyer.
You may contract out of s23.
Provisos to s23
First proviso - Delay
s23(2)
Where a delay in delivery has occurred the goods are at the risk of the party in
fault in relation to any loss which might not have occurred but for such fault there must be a causative link.
Demby Hamilton & Co Ltd v Barden - the buyer was late in taking delivery of apple
juice - in the meantime the apple juice deteriorated and the court held that
because delivery had been delayed through the fault of the buyer and in applying
the first proviso to s23 in ss(2) the buyer have to bear the risk even though the
buyer at that stage did not have property in the goods.
Second proviso - Bailment
s23(3) This section does not effect the duties or liabilities of either seller or
buyer as a bailee of the goods of the other party.
Allied Mills Ltd v Gwydir Valley Oilseeds Pty Ltd - relevant to ss(3) - this section
does not effect the duties or liabilities of either the seller or buyer as a bailee of
the goods of the other party - here the seller had failed to deliver the goods and
they were destroyed by fire while being stored in the warehouse - the buyer had
resold the goods and was forced to buy other goods to replace them in a rising
market and claimed damages against the seller to cover subcontracts - the buyer
was relying on the proviso in ss(3) but the seller argued that the proviso only
exonerated the buyer from paying for the goods, it did not entitle the buyer to
damages - the NSW Court of Appeal rejected this argument - holding that the
goods were at the risk of the seller because of his breach of the contract and that
if the contract had been complied with the goods would not have been destroyed
and that the seller was liable as bailee as they were storing the goods in the
warehouse.
FURTHER NOTE:
s34(4) says that goods are at the sellers risk if the goods are sent by sea and the
seller fails to give notice to the buyer to insure them.
s35 says that if the seller has agreed to deliver the goods at the sellers own risk,
at a place other than where they were sold, then the buyer must nevertheless,
unless otherwise agreed, take any risk or deterioration of the goods necessarily
incident to the course of transit.
Whenever a seller continues in possession after a sale then the title of the seller
by which he was in possession has to have changed from being the owner in the
first instance to the bailee in the second - holding on behalf of the owner - so the
nature of the possession will usually change from owner to bailee: Pacific Motor
Options v Motor Credits Higher Finance Ltd.
Sometimes you can be wondering on a given set of facts whether it is really the
buyer in possession exception that applies or the Factors Act exception - an
important point to remember is that someone who is given goods to sell by the
owner is not a buyer in possession but they might by a mercantile agent for the
purposes of the Factors Act exception: Shaw v Commissioner of Police of the
Metropolitis.
The Factors Act exception
The Factors Act exception is referred to in s24(2) - the actual exception itself
is contained in s3 Factors Act.
s2 of FA defines what it is to be a mercantile agent - a mercantile agent is
someone whose business it is to sell goods or to consign goods for the purpose
of sale or to buy goods or to raise money on the security of goods. Is someone
who has authority to sell goods on behalf of someone else.
In relation to this definition it can be the first time you have acted as an agent
so long as you are acting in a business capacity and not as a friend of the owner
then you can still qualify as a mercantile agent.
The Factors Act itself deals with a range of commercial activities undertaken
by people called factors.
We are concerning on the exception to the nemo dat rule which is contained in
s3.
The exception says that when a mercantile agent is, with the consent of the
owner [the same concepts come up in this section as did in s27] in possession of
goods or the document of title of goods, in sale, pledge, or other disposition of
the goods made by the agent when acting in the ordinary course of business of
a mercantile agent shall subject to the provisions of the Act be as valid as if
the agent were expressly authorized by the owner of the goods to make the
sale [there is a proviso to the section] provided that the person who takes
under the disposition acts in good faith and has not at the time of the
disposition notice that the person making the disposition has no authority.
The estoppel exception
This exception was contained within s24(1) in the closing words of that section ->
where it said that where the owner is by his conduct precluded from denying that
the seller has title - it is necessary to resort to the common law because the Act
does not state what type of conduct by the owner will preclude he or her asserting
title to their own goods.
Estoppel in this context covers two broad situations:
1. where the owner makes the representation that the seller is the owner of the
goods or has the authority to sell them.
2. where the owners act or omission allows the seller to create the appearance of
ownership.
What is the effect of establishing estoppel in this context?
Well the effect is the the buyer who is the innocent third party acquires a title to
the goods against all the world not merely the rights to plead an estoppel against
those few parties privy to the representation by the owner. So it is a true
estoppel: Moregate Mercantile Co v Twitchens; Thomas Australia Wholesale
Vehicle Trading Co v Marrick Finances Australia.
What type of conduct might lead to estoppel?
If you are the owner of goods what type of conduct could prevent you from
asserting title where someone who didnt have your authority sold your car to
someone else who acted in good faith and paid for it. Merely entrusting someone
else with your goods/car is not enough to ground an estoppel against you: Moregate
Mercantile Co v Twitchens; Lennard v Lassie.
NOTE: what if you give goods to a mercantile agent (not just an ordinary person) if you give goods to a mercantile agent who is someone by the very nature of their
calling has implied authority to sell goods entrusted to them - then a sale by a
mercantile agent in the ordinary course of business will pass good title to an
innocent third party: this is embodied in s3 Factors Act.
If you give someone the documents of title to particular goods then that also wont
of itself be sufficient to ground an estoppel against the agent: Mercantile Bank of
India v Central Bank of India.
There have been cases where the owners have given possession of the car and
documents of title to someone who has ended up being a rogue and sells to an
innocent third party - is that conduct by the owner going to preclude the owner
from claiming title to the car?
If you have done both that will depend on whether the circumstances were such as
to led a third party to suppose that the possessor was the owner of the goods - so
the outcome can change depending on the circumstances of the case - contrast the
case of Motor Credits v Pacific Motor Options and Central Newbury Car Options v
Unity Finance.
What is a document of title to goods?
It has been held that a certificate of ownership or registration is not a document
of title to goods: Cook v Jenkins.
If in addition a signed notification of sale document is handed over together with a
letter confirming the sale of the vehicle then this has been held to be a clear
representation of ownership intended to be relied on by the innocent third party
purchaser: Shaw v Commissioner of Police .
In relation to the area of estoppel by negligence under s24 - it does not arise
simply because the owner of the car has been careless or negligence - if you are
going to argue estoppel by negligence you are going to have to prove the elements
of negligence - this requires a duty owed by the owner to the innocent third party
purchaser and if not specifically to the third party purchaser than a duty of the
general public of which the innocent third party purchaser was a member. Neglect
of that duty must be an approximate cause of that person being mislead:
Mercantile Bank of India v Central Bank of India.
One test which has been applied in the case of Thomas v Merrick Finance involved
asking whether having regard to the circumstanes known to the parties a
reasonable person in the position of the acquirer of the property would expect
the owner acting honestly and responsibly, if the owner claimed to any title in
the property to take steps to make that claim known by the acquirer and
whether in the face of an omission to do so the acquirer could reasonably
assume that no such title was claimed.
To illustrate this look at Lennard v Alassie - here an owner of a car lent it to a
friend and then discovered that the friend without authority had renewed the
registration in his own name - the car is then onsold to an innocent third party
purchaser - there is then a dispute between the innocent third party purchaser
and the owner - it was held that because the owner had taken no steps to regain
possession or to rectify the situation that the owner was estopped from denying
the friends authority to sell the car. So the owner had not acted honestly or
responsibly - the owner had become aware of dishonest dealings with his car and
3. Is when after a reasonable time the buyer retains the goods without initimating
to the seller that the buyer has rejected them.
s36(1) provides that where goods are delivered to the buyer which he has not
previously examined he is not deemed to have accepted them unless and until he
has had a reasonable opportunity to examine them for the purpose of ascertaining
whether they are in conformity with the contract.
Here there is a possibility of a conflict between s36 and s37 - in particular
between the second instance of s37 and s36.
In other jursidictions they have actually dealt with that conflict by making s37
subject to s36 but in Qld s36 in not express to prevail over s37.
Hardy v Hillerns and Fowler - in a jurisdiction where the equilavent of s37 and s36,
the conflict was not dealt with that s37 was not to be read subject to s36 - in this
case the buyer resold and despatched a portion of wheat to subpurchasers before
he had a chance to examine the wheat but the court said that s37 was not to be
read subject to s36 and the act of the buyer in reselling and dispatching the wheat
was an act inconsistent with the ownership of the seller and did amount to
acceptance.
an act inconsistent with the ownership of the seller - this phrase has been held
to mean an act inconsistent with the right of the seller in the event of rejection to
have the goods returned to him at the place of examination of the goods as
contemplated by the contract: Hammer and Barrow v Coca-Cola - this makes the
test of final acceptance dependent on whether there has been delivery of the
goods to the place contemplated by the parties for inspection.
Remedies
The unpaid seller has rights against the goods of the following nature:
a right to a lien on the goods for the price while he still has the goods.
a right to stop the goods in transit after the goods have left the sellers
possession
a right of resale as limited by the SGA s41(1)
The statutory remedies are not exhaustive so if the seller has a reservation of
title clause in their contract then the seller will be able to rely on that provision to
recover any goods in the buyers possession if the buyer becomes insolvent.
What are the sellers rights against the buyer in person as oppose to the
goods?
If the property has passed to the buyer and the buyer is wrongfully refusing to
pay for them then the seller can sue for the price under s50(1).
Conversely if property has not passed then the seller cannot sue for the price but
can maintain an action for damages for nonacceptance in certain cases: s51(1)
unless the price was payable on a certain date in which case even though property
has not passed the seller can sue for the price: s50(2).
The buyers rights against the seller
The seller who wrongfully negates or refuses to deliver goods to the buyer
becomes liable to pay damages for nondelivery: s52(1).
s52(2) provides that the measure of damages is the estimated loss directly and
naturally resulting in the ordinary course of events from the sellers breach of
contract.
The buyer is not entitled to reject goods by reason only of a breach of warranty by
the seller - similar to s14(3) - but may set up breach that is the breach of
warranty in denitition or extinction of the price or bring an action in damages for
the breach: s54(1) - the same applies in the case that the buyer has elected or
under s14(3) has been compelled to treat a breach of condition as a breach of
warranty. s54 says that if it is a breach of a warranty you have only got your right
to damages you cannot reject the goods. The section says that it is the same if the
buyer has elected to treat a breach of condition or a breach of a warranty or if
under s14(3) it is a matter of compulsion.
SAMPLE QUESTIONS
Read Fisher [10.38]-[10.41].
What is the best/better test for characterising contracts for the supply of
services? See the Deta Nominees output test and compare it to the substance
of the contract test.
Apply whichever test you think is the preferred test in Australia, and also consider
whether property in the articles passes to Irma (and if so, on what basis).
Sale of Goods Act 1896, s16:
note the breakdown of s16:
(1) sale by description, and
(2) the existence of an implied condition that the goods must correspond with
their description.
sale by description:
identity vs quality;
ascertained vs unascertained goods;
descriptive words must form part of the contract;
determine as a matter of fact what the descriptive words were;
the description applied to the goods must be influential and relied on by the buyer:
see Fisher [12.28].
once you have decided whether, as a matter of law, that the contract is a sale by
description, then the next step is to decide whether that description has been met
as a matter of fact: see Taylor v Combined Buyers Ltd.
determine the appropriate remedy that Jim can get (damages for delivery of nonconforming goods under s54 of the SGA: see Fisher [12.51] and see also whether
s14(3) is satisfied because Jim has accepted the goods.
Sale of Goods Act 1896, s17(a):
s17(a) is concerned with the suitability of the goods that have been sold.
the elements of s17(a) are:
(1) the buyer communicates the particular purpose for which the goods are
required;
(2) the buyer must rely on the sellers skill or judment;
(3) the goods must be within the description of goods which the seller supplies
Dring the course of business;
(4) the sale must not be of goods sold under their patent or trade name (see
s17(b)).
apply these elements to the sale by Smooth to Jim:
does the contract contain an implied condition that the goods will be reasonably fit
for their purpose?
If so, has that implied condition been breached or not, and what are Jims
remedies?
does s14(3) apply if Jim has accepted the goods? See also s54.
Sale of Goods Act 1896, s17(c):
note the breakdown of s17(c):
(1) sale by description, and
(2) seller is a dealer in goods of that description, and
(3) implied condition that the goods are of merchantable quality, and
(4) non-applicability of the examination proviso.
sale by description: see Christopher Hill (same interpretation as for the s16
usage);
identify the actual description by which the goods are sold (this is a question of
fact).
the dealing element:
the seller must be a dealer [trader] in goods of that description;
one-off vs repeated transactions in a market: see Christopher Hill;
non-applicability of the examination proviso; see Thornett Fehr case [objective
test] and compare it to the Grosvenor Motors case [subjective test] (see Fisher
[12.36]).
What is the effect of this proviso and how does it apply to the present case ?
does the contract between Jim and Smooth contain an implied condition that the
goods will be of merchantable quality ?
If so, has that condition been met ?
What is the meaning of merchantable quality (see Fisher [12.36]).
Think about 4 components: description, purpose, condition and price.
Issue # 1: can Jim recover the deposit ?
the underlying issue is whether property has passed to Jim or not.
If it has, then s50 of the SGA applies and Jim must pay the balance.
If not, then he can recover the deposit on the basis of a total failure of
consideration and not have to pay the balance of the purchase price.
identify the kind of goods we are dealing with: specific goods.
Therefore, s20 applies.
What are the intentions of the parties ?
Look at s20(2) as a default setting.
Generally:
Is (1) the contract severable or is it an entire contract, and
(2) has the buyer accepted some or all of the goods ?
As to (1): severability is a question of fact [Esmail case]; lump-sum payment;
express or implied term of the contract regarding rejection of any defective
goods; s14(3) of the SGA.
Form an opinion as to the nature of the contract as severable or entire and argue
on the basis of the conclusion reached. Plead in the alternative (if necessary).
Issue # 1:
This invokes s37: the performance of an act inconsistent with the sellers
ownership.
The consequence is that s14(3) is activated. The goods have been deemed to be
accepted. Unless the harshness of s14(3) can be mitigated, then it is conclusive.
See if s33(2) leads to a different result.
Issue # 2:
This invokes s37 and 38 of the SGA. Read Fisher [12.55].
Has G accepted the goods by doing any act with the goods that is inconsistent with
the sellers ownership after delivery: see s37. Identify the timing of the delivery
point and the inconsistency (the sub-sale). If the delivery comes after the subsale, then Hammer & Barrow says that s37 is not activated adversely to the
buyers interests.
If C has acted as the agent of G in delivering the goods to B, then (1) there is
constructive delivery to G and (2) this is an inconsistent act within s37: E&S Ruben
v Faire Bros.
If the contemplated place of delivery was Bs premises (ie, the sub-buyers
premises), then the Hammer & Barrow case holds that there is no delivery until the
goods have been delivered there. Thus this retards the delivery and acceptance
points until that time and place, so that there is no delivery followed by acceptance
as mandated by s37 [ie, the order of these 2 events is inverted].
Issue # 3:
Here the question is whether the likelihood that the future undelivered goods will
be defective so as to justify G terminating the contract in advance of delivery.
This invokes the Maple Flock test used to apply s33(2): see Fisher [12.56]. (1) the
ratio of the breach to the contract as a whole, and (2) the probability of
repetition. Apply these limbs to the facts, and reach a conclusion whether it is
possible for G to reject future instalments (as well as those goods already
delivered) or whether it is possible only for G to claim damages and keep the
contract on foot.
BAILMENT
A bailment is the relationship that arises when one person (the bailor) delivers
goods to another person (the bailee) under a promise that the goods will be
delivered to the bailor (or as the bailor directs) or dealt with in a stipulated way:
Hobbs.
Bailment derives from the French word bailler (meaning to deliver).
comes from law of tort
arises by transfer by possession CF Finding
always separation of possession and ownership
process called delivery
delivery makes it a bailment
so must look for transaction that creates a separation.
goods in bailment only include tangible personal property - choses in possession
usually not included unless it is the certificate that is under review.
Bailment involves goods (tangibles) and not intangibles that lack material form
(choses in action):CF If have document of title ie bill of lading; Cheque; Hobbs.
APPROACHING BAILMENT
Some questions to ask about bailment:
1. How is a bailment created?
2. When does a bailment arise?
3. What is the purpose of bailment?
4. What are the interests of the bailor and the bailee?
5. What are the obligations (rights-and-duties) of the bailor and the bailee?
6. How does a bailment end?
SOURCES OF BAILMENT LAW
the
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At the practical level, the convergence of sale and bailment recognises that the
possession of goods may pass from the seller to the buyer:
1. before the transfer of property (buyer becomes bailee); or
2. after property has passed to the buyer (seller remains in possession as a bailee:
Doherty.
INTERESTS OF THE BAILOR AND THE BAILEE: A SUMMARY
The interest of the:
1. bailor is ownership (the bailor usually has a right to immediate possession,
especially if the bailment is at will);
2. bailee is possession (usually legal and lawful possession).
The bailors ownership is qualified by the possessory interest the bailee enjoys:
Franklin v Neate. The bailor has a reversionary interest: City Motors.
INTERESTS OF THE BAILOR
The contents of the bailors reversionary interest are:
1. the bailor has an immediate right of possession for the term of the bailment:
Transcontainer;
2. the bailor is entitled to the restoration of the goods or to direct the bailee to
deliver them to some other person: Chapman Bros v Verco Bros & Co.
3. the bailor may deal with its reversionary interest by alienation; the transferee
succeeds to the interest of the bailor: Franklin v Neate;
4. the immediate right to possession gives the bailor the right to vindicate any
invasion to its possessory interest by pursuing tort remedies against
tortfeasors: The Aliakmon.
bailment to any one. This applies especially to commercial bailments for custody:
Edwards v Newlands & Co.
Corporate bailees can always delegate the bailment to another person (such as an
officer or employee). That bailee remains vicariously liable for the acts and wrongs
of the delegate: Morris.
The bailee must observe any mandate given by the bailor relating to the delivery of
the goods to any place or other person: Bi-Lo case.
THE BAILEES DUTY NOT TO USE OR MISUSE THE GOODS.
The bailees duty not to use or misuse the goods can be broken down by saying that
the bailee:
1. must not use the goods under a bailment of safekeeping unless this is
authorised by the bailor or is necessary for the preservation of the goods:
Webb v Ireland;
2. must not use the goods under a bailment of loan beyond any of the normal range
of uses which the goods have, or contrary to any direction of the bailor: Coggs v
Bernard;
3. must not convert the goods under any form of bailment: Penfolds Wines (this
duty co-exists with the duty to take reasonable care of the goods: Morris).
THE DUTY TO RETURN THE GOODS.
The bailee must, at the end of the bailment either:
1. return the goods to the bailor; or
2. deal with the goods as directed by the bailor: Jackson v Cochrane;
The nature of this duty is not an absolute duty, although it is a fundamental duty:
Gamer; Bi-Lo.
MECHANICS OF DELIVERY UP
2. If there is no agreed venue, then the place where the goods are located:
Mitchell.
TO WHOM MUST DELIVERY BE MADE?
Delivery must normally be made to the bailor, but if the bailor directs that
delivery be made to a third party, then the bailee must comply: Jackson v
Cochrane.
An example of the latter is where the bailee is a carrier and is under a duty to
deliver the goods to a third party: Bi-Lo.
SUB-BAILMENT
Sub-bailment is a bailment by the bailee (or sub-bailor) to the sub-bailee: Pioneer
Container.
The bailee transfers possession to the sub-bailee: Bi-Lo.
There can also be any number of bailments below the level of the sub-bailee so long
as possession is transferred (or delivered) from each bailee to the next sub-bailee
(who takes possession of the goods): Hamburg Star.
Sub-bailments divide into those which are authorised and those which are
unauthorised: Pioneer Container.
RATIONALE FOR AND EFFECT OF SUB-BAILMENT.
SUB-BAILMENT ON TERMS
A sub-bailment on terms means that the bailment by the intermediate bailee to the
sub-bailee takes place on terms dictated by the sub-bailee, including any limitation
and exclusive jurisdiction clauses. It requires the consent of the head-bailor:
Pioneer Container.
Stipulations in the contract between the intermediate bailee and the sub-bailee
can bind the head bailor (despite the absence of privity of contract) because the
owner of the goods (the head-bailor) consented to the sub-bailment: Pioneer
Container.
The sub-bailee must have notice that the goods are owned by someone other than
the intermediate bailee: Morris; Pioneer Container.
TERMINATION OF BAILMENT.
The following events terminate a bailment:
1. Demand and delivery of the goods: Mitchell;
2. Act of repugnancy by the bailee: Union Transport case;
3. Transfer of property by the bailor to the bailee: Motor Mart;
4. Destruction of the goods: Spycatcher (No 2);
5. Termination by operation of law: Re Aeblys Wills; Hawkins v Clayton.