BUSINESS LAW (MS27B/MGMT2021)

SEMESTER 1 ACADEMIC YEAR 2013

WORKSHEET X
CONTRACTS FOR THE SALE OF GOODS

Learning Objective: The student should be able to explain and apply the rules governing the
passing of property/risk in sale of goods contracts. S/he should also be able to explain the rules
relating to conditions and warranties that are implied by the statute.
NB. Statutory references on PAGES 1-4 of this worksheet are to the Sale of
Goods Act 1895 (Jamaica). On page 5, statutory references are to the
Electronic Transactions Act, 2006 (Jamaica).

What is a contract for the sale of goods? See s.2: - A contract in which the seller
transfers or agrees to transfer the property in goods to the buyer for a money
consideration called the price. (“Property” here means legal ownership or title.)

What are goods? They include all personal chattels (tangible things eg furniture, car,
boat) ie all things in possession of somebody other than land, house and money (s.60).
The Act distinguishes between various types of goods:
 Specific or (ascertained) goods – goods identified and agreed upon at the time
the contract of sale is made (see s.60)
 Future goods – goods to be manufactured or acquired by the seller after the
making of the contract of sale (see s.60)
 Unascertained goods – goods defined only by description which applies to all
goods in the same class
It is important to understand these distinctions because the type of goods has a
bearing on when property passes from seller to buyer under ss.17 and 18 and
under the rules contained in s.19 of the Act.

Transfer of Property as between Buyer and Seller

1. Unascertained goods: s.17: in contracts for the sale of unascertained goods, no

property in the goods is transferred to the buyer unless and until the goods are
ascertained: Healy v Howlette (1917) – the mackerel had not been ascertained before it
became spoilt and therefore the seller had to bear the loss on account of the spoilage
since he was still the owner. (See too Rule 5 under s.19 below).

2. Specific or ascertained goods: s.18: in contracts for the sale of specific or

ascertained goods, the property in them is transferred to the buyer at the time that the
contracting parties intend it to pass. The law will therefore give effect to the intention of
the parties.
How is their intention to be determined? Section 18(2) states that in determining the
intention of the parties, it is necessary to look at:
a) the terms of the contract b) conduct of the parties 3) circumstances of the case.
In Aluminium Industrie BV v Romalpa (1976) there was an express provision in the
contract that property in the goods sold would not be transferred to the buyer until the
seller was paid all that was owed under the contract. The buyer became insolvent
without having paid the seller for the goods which had already been delivered. It was
held that the goods should revert to the buyer since there was a clear intention from the
terms of the contract that property or title in the goods were to be reserved in the seller
until full payment was made. Reservation of title clauses are given statutory recognition
in s.20.

If there is no clear indication of the intention of the parties as to when property

should pass then the rules contained in section 19 of the Act must be applied to
find out when the parties intended that property in the goods should pass from
seller to buyer. This section also provides for the passing of property in future goods.

The Rules in Section 19

Type of goods; nature of contract When Property Passes

1. unconditional contract1 for sale of At time contract made.

specific goods in a deliverable state2 NB it is immaterial whether
the time for payment or
delivery is postponed.

Cases: Tarling v Baxter (1827); Distinguish Dennant v Skinner (1948) in which the
contract was made at the time of the fall of the hammer at the auction so that property
passed at that time under this rule. A subsequent agreement between the parties as to
when property would pass was therefore held to be ineffective.
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2. contract for sale of specific goods At the time the thing is done
BUT seller is bound to do something in AND the buyer is notified
order to put them in a deliverable state that the thing has been done

Case: Underwood Ltd v Burgh Castle Brick & Cement Syndicate (1921) – the seller had
to remove the engine from the concrete floor, dismantle it and put it on rail in order to put
it in a deliverable state. Before it was put on rail, it was damaged. The buyer refused to
take the engine. Rule 2 was applied to ascertain when property passed. Which party
then was liable to bear the cost of the damage to the engine?
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3. contract for the sale of specific goods After seller has weighed,
in a deliverable state BUT seller is bound measured, tested, etc AND
to weigh, measure, test or do something the buyer has notice that
to ascertain the price this has been done

Case: Hanson v Meyer (1805) – property in starch which had remained unweighed in a
warehouse did not pass to the buyer and consequently assignees of the bankrupt buyer
were unsuccessful in their claim for the starch.

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ie a contract not subject to any conditions precedent to the passing of property
2
See s.60(4); goods are in a deliverable state when they are in a condition in which the buyer would, under
the terms of the contract, be bound to take them.

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Type of goods; nature of contract When Property Passes

4. Goods delivered to the buyer on At time when buyer indicates

approval or “sale or return” his approval/acceptance or
when he adopts the transaction.
BUT if he does not approve,
accept or adopt and retains
the goods without giving
notice of his rejection, then
property passes upon the
expiration of the time fixed
for the return of the goods
or if no such time was fixed,
after a reasonable time.

Cases: Kirkham v Attenborough (1897) shows the application of the adoption principle;
Poole v Smith’s Car Sales (1962) – shows application of “reasonable time” principle.
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5. contract for sale of unascertained or Upon such appropriation and

future goods by description and those assent. (Assent may be
goods in deliverable state are uncondi- express or implied and may
tionally appropriated3 to the contract by be given before or after
any party with the assent of the other appropriation.)

Cases: Pignataro v Gilroy (1919); Healy v Howlette (1917)

NB Rule 5 also states that where a seller delivers goods to the buyer or to a carrier or a
bailee or custodian (whether or not named by the buyer) in order to send goods to the
buyer, and the seller does not reserve the right of disposal, then those goods have been
unconditionally appropriated to the contract.
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When Risk Passes

It is important to determine when property passes since the party who owns the property
at the time of any damage to the goods will usually have to bear the cost of the damage
or loss: under section 21 risk does not pass until property passes. So risk passes
with the transfer of property. BUT if delivery has been delayed because of the fault of the
buyer or seller, then the goods are at the risk of the party at fault regarding any loss
which occurs on account of such fault: Demby, Hamilton & Co Ltd v Barden (1949).

Conditions and Warranties (ss 13 –16)

Recall legal distinction between conditions and warranties. (See Worksheet VII). Certain
conditions and warranties are implied in a contract for sale of goods ie if the parties do

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Appropriation is an act done by one party in relation to the goods which shows an intention that property
in those goods should be passed in pursuance of the contract.

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not expressly provide for these conditions in the contract, the law will read them into the
contract.

The implied conditions:

 that seller has right to sell or at least a right to sell when property is to pass
(s.13(a)). (Note that this condition will not apply if the circumstances reveal a
different intention): Niblett v Confectioners’ Materials Co (1921) cf Microbeads v
Vinhurst Road Markings (1975)
 that goods will correspond with the description in a contract for the sale of goods
by description; if the sale is by description and sample, the goods must correspond
with both the description and sample (s.14): Grant v Australian Knitting Mills Ltd
(1936) – P.C. held that there may be a sale by description even though the buyer is
buying something displayed before him on a counter.
 that where the buyer makes the seller aware of the purpose for which the goods are
required so as to show that he relies on the seller’s skill or judgment AND the seller
is in the business of supplying those goods, the goods must be reasonably fit for
the purpose (s.15): Ashington Piggeries v Christopher Hill (1972). Note that this
condition would not be applicable to private sales.
 where goods are bought by description from a seller who deals in goods of that
description (whether he is the manufacturer or not), that the goods must be of
merchantable quality (s.15). Goods are not of merchantable quality if they are
defective (even if the defects are minor: Jackson v Rotax Motor Cycle & Co Ltd
(1910)) or if no reasonable person would use them for what they were intended to be
used or if goods are not in a satisfactory state or condition: Niblett v Confectioners’
Materials (1921). Note that this condition is not applicable if the buyer examines the
goods and ought to have seen obvious defects.
 where goods are sold by sample, that the bulk must correspond with the quality
of the sample, that the buyer must have a reasonable opportunity to compare the
bulk with the sample and the sample and the goods must not be defective so as to
make them unmerchantable which would not be obvious on a reasonable
examination of the sample (s.16).

The implied warranties:

 that buyer shall enjoy quiet possession (s.13(b)): Microbeads v Vinhurst Road
Markings (1975)
 that the goods will be free from a charge or incumbrance in favour of a third
party not declared or known to the buyer before or at the time contract is made
(s.13(c)).
NB: These warranties will not be implied as terms of the contract if the circumstances of
the contract reveal a different intention. Note too s.54. HOWEVER, where a contract
for the sale of goods is also governed by the Consumer Protection Act, 2005, the
implied warranties and conditions specified in ss.13 – 15 of the Sale of Goods Act may
not be excluded. (See Worksheet on Contractual Terms and Worksheet on Consumer
Protection.)
Remedies of the seller/buyer: see ss.48-53.

Read generally the Sale of Goods Act paying particular attention to the sections
highlighted on this worksheet. Most cases cited on worksheet are summarised in
Abbott, Pendlebury & Wardman, 8th ed. Ch. 31 OR Abbott, Pendlebury & Wardman, 7th
ed. Ch 33.

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Provisions affecting electronic contracts for the sale of goods: The Electronic
Transactions Act requires that in such contracts certain information (see Second
Schedule of the Act) must be given to the consumer (note that this term is specifically
defined). In addition to this, the supplier of the goods must give the consumer the
opportunity to review the transaction, correct errors or withdraw from the transaction
before placing the final order. The consumer must also be able to reproduce an
accurate summary of the particulars of the order. If the supplier of goods does not meet
these requirements, the consumer has a right to cancel the transaction within 14 days of
receiving the goods and the supplier must refund all payments to the consumer. Note
obligations of the consumer where he cancels the contract (s.27(4)(a)). A supplier is
also required to use an electronic payment system that is secure. If he does not and a
consumer suffers loss as a result, the supplier must compensate the consumer for such
loss.

Under section 28 of the Act, as a general rule, a consumer is also entitled to a refund
of money paid for goods if he cancels the contract during the “cooling-off” period i.e.
within 7 days of receiving the goods. There are some exceptions to this which are
outlined in subs. 28(2) eg. e-contracts for the sale of newspapers etc, where the goods
have been personalised or made to the consumer’s specifications, where the goods
deteriorate quickly or cannot be returned because of the nature of those goods.

Note too that the supplier has an obligation to supply the goods in a timely way i.e. in
accordance with the time specified in the contract, and where such a time is not
indicated, within 30 days of the agreement. If the supplier does not meet this obligation,
the consumer has a right to cancel the contract but the consumer must give the required
notice of his intention to cancel the contract.

Importantly, the Act makes it impossible for contractual parties to exclude any
rights or duties which are provided for in ss.26-32 of the Act.
For thought: Consider the legal restrictions imposed on the use/effectiveness of
exclusion clauses by virtue of statutes such as the Electronic Transactions Act and
Consumer Protection Act.

Required reading: Electronic Transactions Act ss.26-32

AWilliams