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Susan Hedge LWB 332 Sale of Goods

Sale of Goods
Sale of Goods.........................................................................................................................................1 1. Application of Legislation..................................................................................................................2 1.1 Application of the Sale of Goods Act 1896 (Qld).....................................................................2 1.2 Application of the Trade Practices Act 1974 (Cth)...................................................................7 2. Implied terms....................................................................................................................................11 2.1 Implied undertaking as to title and quiet possesion.................................................................11 2.2 Correspondence with description............................................................................................14 2.3 Fitness for purpose..................................................................................................................17 2.4 Merchantable quality..............................................................................................................21 2.5 Sale by sample........................................................................................................................23 3. Remedies for the Buyer....................................................................................................................24 3.1 Remedies for a breach of condition implied by the SGA .......................................................24 3.2 Remedies for a breach of warranty implied by the SGA ........................................................26 3.3 Remedies for a breach of a term implied by the TPA.............................................................27 4. Actions Against Manufacturers/Importers of Goods........................................................................28 4.1 Application of Part V - definitions..........................................................................................29 4.2 Substantive sections of Part V................................................................................................29 4.3 Excluding the causes of action................................................................................................35 5. Persons Injured by Defective Goods.................................................................................................35 5.1 Application of Part VA definitions......................................................................................35 5.2 Substantive sections................................................................................................................36 5.3 Defences.................................................................................................................................36 5.4 Remedies................................................................................................................................37 6. Transfer of Property and Risk...........................................................................................................38 6.1 General rules...........................................................................................................................38 6.2 Where intention is expressed in the contract/circumstances...................................................39 6.3 Where no intention appears....................................................................................................40 6.4 Risk.........................................................................................................................................45 7. Transfer of Title by Non-Owner.......................................................................................................47 7.1 Exceptions to nemo dat rule....................................................................................................47 8. Performance of the Contract.............................................................................................................54 8.1 General Rules of Delivery .....................................................................................................54 8.2 Delivery of wrong quantity or mixed quantity .......................................................................55 8.3 Installment Deliveries ............................................................................................................55 8.4 Special Rules of Delivery Relating to Carriers ......................................................................56 9. Remedies for the Seller ....................................................................................................................57 9.1 Unpaid seller against the buyer ..............................................................................................57 9.2 Unpaid seller against the goods..............................................................................................58 10. Remedies of the buyer....................................................................................................................62 10.1 Damages for non-delivery s52..............................................................................................62 10.3 Repudiation of contract see discussion above s33 (does not only apply to installment contract may apply to lump sum contracts)..................................................................................62 10.4 Damages for breach of warranty see above........................................................................62 10.5 Right to specific performance s53......................................................................................62

Susan Hedge LWB 332 Sale of Goods

1. Application of Legislation

Domestic Sales (ie all intra-state sales, where Qld is the proper law) = Sale of Goods Act 1896 (Qld) or SGA International Sales = Sale of Goods (Vienna Convention) Act 1896 (Qld) or VSC Note sale of goods transactions may trigger consumer protection provisions under the Trade Practices Act 1974 (Cth) or TPA. Note if both the SGA and the TPA apply the TPA will prevail because of s 109 of the Cth Constitution: When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid.

1.1 Application of the Sale of Goods Act 1896 (Qld)


SoGA essentially a codification of the common law Isnt a perfect codification because: o The preamble to the Act provides it is an Act to codify and amend the law relating to the sale of goods. The use of the word amend suggests the Act isnt a pure codification. o Section 61(2) provides that the rules of the common law apply to contracts for the sale of goods except where there is an inconsistency between those rules and the Sale of Goods Act. The fact that the Act anticipates inconsistency may suggest that the Act is not a complete codification. Rules of interpretation are those of a Code only resort to the common law if the words are ambiguous or the statute is silent: Bank of England v Vagliano Bros [1891] AC 107; Ganers Motor Centre v Natwest (1987) 163 CLR 236, 243

For the SoGA to apply, there must be (s4(1) SoGA): (a) a contract of sale (b) of goods (c) by which property passes (d) for money consideration (e) where the SoGA is not excluded by agreement (a) a contract of sale can be wrriten or oral includes an agreement to sell: s3 o if goods are unascertained, its an agreement to sell, not a sale per se: s4(3) SoGA and Jansz v GMB Imports Pty Ltd [1979] VR 581 o becomes a sale when the property is to be transferred: s4(4) SoGA and Jansz v GMB Imports Pty Ltd [1979] VR 581

s 4 Sale and agreement to sell (1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price. (1A) There may be a contract of sale between one part owner and another. (2) A contract of sale may be absolute or conditional. (3) When under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale; but when the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time has elapsed or the conditions have been fulfilled subject to which the property in the goods is to be transferred.

Must be a contract of sale as opposed to other transactions, ie not:

Susan Hedge LWB 332 Sale of Goods

o o o o

A barter, exchange or trade in where no reference to to money consideation, however if the parties value the respective goods in money terms and then transfer equally valued items, may be a sale: Aldridge v Johnson A hire purchase hirer does not have to purchase, merely has the option to purchase (but if simply a sale conditional on payment, is a sale) Floor plans - an agreement whereby a trader is authorised to buy goods on behalf of & as agent for a financier, who allows him to retain the goods on his premises for the purposes of display & sale: Motor Credits (Hire Finance) v Pacific Motor Auctions Bailment where the ownership is not expected to be transferred

Susan Hedge LWB 332 Sale of Goods

(b) of goods Goods

goods = all chattels personal other than things in action and money and also includes emblements and things attached to or forming part of the land which are agreed can be severed before sale or under the contract of sale: s 3(1). o chattels = physical objects (cattle, furniture, jewels, garments, anything that could be moved from place to place) and intangible choses such as debts, rights of action, patents and copyrights. o Term emblements means crops of the soil which are annually produced by agricultural labour. Does not include things growing naturally on the land: Scully v South at 1189-90. (would include crops of grain or potatoes but not fruit growing on trees which although cultivated yield an annual crop largely because of nature not mankind). o attached to or forming part of the land which are agreed can be severed means contract for the sale of timber growing on land would be a sale of goods, provided the timber was agreed to be felled under the contract of sale: Egmont Box Co Ltd v Registrar-General of Lands. Such as a contract to sever a known and defined mound of rock, mineral etc is a sale of goods BUT a contract to locate and extract sand, gravel or minerals for an agreed price per ton from the soil is not (called profit a prendre): Mills v Stokman; Amco Enterprises Pty Ltd v Wade [1968] Qd R 445 Question is whether the mound has become so indistinguishable from the land that it is part of the land, or whether it is still a chattel Does not include shares, negotiable instruments and debts?

NOT a supply of services Not a sale of goods if the contract is for work and labour and the supply of materials Question is whether the contract when carried out would result in sale of a chattel & if so, the contract is one for the sale of goods: Deta Nominees Pty v Viscount Plastic Products o Artist commissioned to paint portrait of lady: Robinson v Graves o an agreement for supply & installation of a lift into a building & for the supply & fitting of seats specially designed to fit a particular lecture hall: Aristoc Industries v R A Wenham not a sale of goods if the contract is for supply and installation or work done and material supplied: Brooks Robinson Pty Ltd v Rothfield: 1951 (contract to build and install built in cocktail cabinet) Exception: where property passes at the time the contract is made and the goods are later installed (Aristoc Industries Pty Ltd v RA Wenham (Builders) Pty Ltd o The test is intention of the parties: Symes v Laurie: contract for sale and removal of a house held to be contract for S of G. House existed at the time of contract and parties had contractually agreed that it would be severed from the land and put on stumps on buyers land. Held contract for the sale of goods Test for distinguishing goods from services Test 1 the substance test To be applied first by the court If the substance of the contract is the production of something to be sold and the exercise of skill, though high, is primarily for the purpose of producing the goods, then the contract is one for the sale of goods. Robinson v Graves Robinson v Graves painting of portrait was not the sale of goods Perlmutter v Beth David Hospital 123 NE 2d 792 (1954) NY Crt of Appeal o Blood transfusion Blood contained virus causing jaundice of P o Hospital not liable in negligence, as no test existed to identify the virus

Susan Hedge LWB 332 Sale of Goods

Hospital itemized blood on bill as an expense P sued for breach of implied term that blood be of merchantable quality o HELD that the supply of blood was the supply of services because it was incidental to the supply of hospital services o Followed in Australia in E v Australian Red Cross Supply of meal in a restaurant was a sale of goods because the element of service was incidental to the supply of the meal: Lockett v A & M Charles Ltd 1938
o

Test 2 the alternative test if a contract results in the sale of a chattel it should be constructed as a sale of goods. Where the end result is the sale of a chattel, then no matter how great the skill involved, it is a sale of goods but it was otherwise if work and labour resulted in nothing that became the subject of a sale (e.g. attorney employed to prepare a deed): Lee v Griffin 1861 Lee v Griffin 1861 - sale of dentures by a dentist held to be a sale of goods Test adopted by Fullager J in Delta Nominees Pty Ltd v Plastic Products Pty Ltd where K for design and manufacture a set of dies for plastic furniture drawers (sale of goods). Toby Products v Computer Bar Sales [1983] sale of hardware + software was sale of goods because software was mass produced off-the-shelf type of computer programs, price was reflection of hardware supplied and therefore a chattel. o May have been different if designing software for particular use and then selling to customer

Categories of goods Specific goods Goods identified and agreed upon at the time a contract of sale is made: s 3. Example sale of a particular car. Goods appropriated to contract after agreement entered into are ascertained not specific. Unless parties agree otherwise, property is to pass when the contract for sale in respect of those goods is made: s 21 rule 1 SGA. If the goods arent delivered the buyer may obtain an order for specific performance of the contract, provided damages are an inadequate remedy in the circumstances: s 52 SGA. Unascertained goods No definition in the Act. Are goods that arent identified or agreed upon at the time of making the contract. Example generic goods which are sold on terms so seller can obtain them from any source/stock opposed to particular stock: Re Goldcorp Exchange Ltd (in rec) [1994] 2 All ER 806, 814. Example sold ex-bulk, (quasi-specific) ie. sold a portion of a fixed and predetermined source but from which seller may make their own choice (unless contract requires it to be made in some other way) such as I sell you 60 of the sheep now on my farm. Cannot transfer property in unascertained goods: s19 SoGA. Buyer cannot acquire title until it is known to which goods the title relates: Re Goldcorp Exchange Ltd (in rec) at 814. Ascertained goods No definition in the Act. Probably means identified in accordance with the agreement after the contract is made: Atkin LJ in Re Wait at 630. Such as 100 tonnes of 200 tonnes of wheat in sellers silo loaded to buyers vehicle after time contract was made, so that they are ascertained after formation of contract. If there is to be no delivery, merely segregation at sellers hands, segregation from the companys trading assets (physically or by giving instructions to a bonded warehouse keeped) causes the goods to be ascertained:

Susan Hedge LWB 332 Sale of Goods

o o

Stapylton Fletcher Ltd (in admin rec)- ascertainment by the sellers of wine separating wine purchased by customers in a separate part of the warehouse and the careful maintenance of records within the company. If the goods arent delivered the buyer may obtain an order for specific performance of the contract, provided damages are an inadequate remedy in the circumstances: s 52 SGA.

Future goods Goods to be manufactured or acquired by seller after making the contract of sale: s 3; s 4(3); s 8(1); s 8(2) Where by contract of sale, the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods: s 8(3). Because under s 4(3) if the seller does not have property in goods the seller in unable to pass property to the buyer and hence conclude a sale. Property is transferred in accordance with the intention of the parties after the goods have become ascertained: Akron Tyre Co v Kittson at 484-5. Re Wait [1927] Ch 606 Bought 1000 tonnes of wheat to be loaded from Oregon and shipped to Arrowmouth. During transit sold 500 tonnes of the wheat to a sub-purchaser. Sub-purchaser paid Wait even though wheat had not yet been appropriated (delivered). The corn dealer then went bankrupt (Wait). The sub-purchaser then sought an order for specific performance against the trustee in bankruptcy to force them to deliver the 500 tonnes of wheat. There were other orders sought (our purposes thats the main one). Under equivalent of SGA s 53. Whether they could maintain an action for specific performance depended on whether goods were specific or ascertained. HELD that they were unascertained goods because there had been no ascertainment or identification of the 500 tonnes out of the cargo in bulk on board the ship. Had to be identifiable out of the greater cargo to be specific or ascertained, o must be a contract to deliver a particular chattel to be entitled to specific performance of the contract o may have had a right to damages but didnt have the right to the property. (c) by which property passes property means both legal and equitable title, not some specific or limited interest such as that of a bailee or a security interest: s3(1) SoGA see ss 19, 20, 21, 22 SoGA for the rules regarding when property passes important that property is intended to pass at some time, ie not a bailment or other relationship where property is not expected to pass at the time of the transaction (d) for money consideration Goods must be transferred for a money consideration (price). Price can be determined in accordance with methods in s 11
11 Ascertainment of price (1) The price in a contract of sale may be fixed by the contract, or may be left to be fixed in manner thereby agreed, or may be determined by the course of dealing between the parties. (2) When the price is not determined in accordance with subsection (1) the buyer must pay a reasonable price. (3) What is a reasonable price is a question of fact dependent on the circumstances of each particular case.

Susan Hedge LWB 332 Sale of Goods

In sale of goodwill and stock/assets of a business, description of price as at valuation was held to be sufficient fixed by the contract under s11(1): Wenning v Robinson (1964) NSW Circumstances in s11(3) - by reference to the current market price of the goods at the time and place of delivery, even though another amount based on, eg. cost of production may also be in a sense reasonable. The application of a reasonable price where the parties have not otherwise agreed in accordance with s 11(1) is an exception to the principle which requires there to be certainty of terms between the contracting parties: Foley v Classique Coaches Ltd o Davey v Paine Bros (Motors) Ltd (1954) NSWLR 1122 - 2 cars valued & found to be equal in price. Agreed to exchange cars. Held to be a sale of goods whether a barter or pure exchange of goods can be made out depends if the parties agreed on a money price, valued respective goods, and if necessary made a cash adjustment one way: Aldridge v Johnson If a sale of the principal goods (the new car) together with a subsidiary agreement that the buyer delivers to the seller the vehicle to be traded in, an adjustment will be made to the price, SGA doesnt apply to transaction involving traded car because the consideration paid by seller isnt money but a partial release of debt: Warmings Used Cars Ltd v Tucker

(e) where the SoGA is not excluded SoGA able to be excluded by express agreement of the parties
56 Exclusion of implied terms and conditions When any right, duty, or liability would arise under a contract of sale by implication of law, it may be negatived or varied by express agreement or by the course of dealing between the parties, or by usage, if the usage is such as to bind both parties to the contract.

1.2 Application of the Trade Practices Act 1974 (Cth)

TPA applies generally to corporations engaged in the supply of goods or services to a consumer

(a) Supply The supply of goods is a wider term than sale of goods, as used in the SGA. Supply is defined to include not only contracts of sale but also the lease or hire of goods: s 4(1) TPA.
s 4(1): supply, when used as a verb, includes: (a) in relation to goodssupply (including re-supply) by way of sale, exchange, lease, hire or hire-purchase; and (b) in relation to servicesprovide, grant or confer; and, when used as a noun, has a corresponding meaning, and supplied and supplier have corresponding meanings.

(b) Goods or Services Goods

Defined to include ships, aircraft & other vehicles; animals including fish; minerals, trees & crops, whether on, under or attached to the land or not; and gas and electricity: s 4 TPA.
s 4(1): goods includes: (a) ships, aircraft and other vehicles; (b) animals, including fish; (c) minerals, trees and crops, whether on, under or attached to land or not; and (d) gas and electricity.

Susan Hedge LWB 332 Sale of Goods

Confusion over whether computer software is goods: ASX Operations Pty Ltd v Pont Data Ltd (1990) 27 FCR 460 Also includes services s 4(1): services includes any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce, and without limiting the generality of the foregoing, includes the rights, benefits, privileges or facilities that are, or are to be, provided, granted or conferred under: (a) a contract for or in relation to: (i) the performance of work (including work of a professional nature), whether with or without the supply of goods; (ii) the provision of, or the use or enjoyment of facilities for, amusement, entertainment, recreation or instruction; or (iii)the conferring of rights, benefits or privileges for which remuneration is payable in the form of a royalty, tribute, levy or similar exaction; (b) a contract of insurance; (c) a contract between a banker and a customer of the banker entered into in the course of the carrying on by the banker of the business of banking; or (d) any contract for or in relation to the lending of moneys; but does not include rights or benefits being the supply of goods or the performance of work under a contract of service.

(c) consumer

There needs to be a supply of goods to a consumer. Consumer is defined in s 4B. Essentially a consumer is a person/corporation where either the price of goods does not exceed $40,000 OR the goods are of a kind ordinarily acquired for personal, domestic or household use or consumption, regardless of price. Not a consumer if the goods purchased for resale, or to be used in the process of production and manufacture.
4B Consumers (1) For the purposes of this Act, unless the contrary intention appears: (a) a person shall be taken to have acquired particular goods as a consumer if, and only if: (i) the price of the goods did not exceed the prescribed amount; or (ii) where that price exceeded the prescribed amountthe goods were of a kind ordinarily acquired for personal, domestic or household use or consumption or the goods consisted of a commercial road vehicle; and the person did not acquire the goods, or hold himself or herself out as acquiring the goods, for the purpose of re-supply or for the purpose of using them up or transforming them, in trade or commerce, in the course of a process of production or manufacture or of repairing or treating other goods or fixtures on land; and (b) a person shall be taken to have acquired particular services as a consumer if, and only if: (i) the price of the services did not exceed the prescribed amount; or (ii) where that price exceeded the prescribed amountthe services were of a kind ordinarily acquired for personal, domestic or household use or consumption. (2) For the purposes of subsection (1): (a) the prescribed amount is $40,000 or, if a greater amount is prescribed for the purposes of this paragraph, that greater amount; (b) subject to paragraph (c), the price of goods or services purchased by a person shall be taken to have been the amount paid or payable by the person for the goods or services;

Susan Hedge LWB 332 Sale of Goods

(c) where a person purchased goods or services together with other property or services, or with both other property and services, and a specified price was not allocated to the goods or services in the contract under which they were purchased, the price of the goods or services shall be taken to have been: (i) the price at which, at the time of the acquisition, the person could have purchased from the supplier the goods or services without the other property or services; (ii) if, at the time of the acquisition, the goods or services were not available for purchase from the supplier except together with the other property or services but, at that time, goods or services of the kind acquired were available for purchase from another supplier without other property or servicesthe lowest price at which the person could, at that time, reasonably have purchased goods or services of that kind from another supplier; or (iii) if, at the time of the acquisition, goods or services of the kind acquired were not available for purchase from any supplier except together with other property or servicesthe value of the goods or services at that time; (d) where a person acquired goods or services otherwise than by way of purchase, the price of the goods or services shall be taken to have been: (i) the price at which, at the time of the acquisition, the person could have purchased the goods or services from the supplier; (ii) if, at the time of the acquisition, the goods or services were not available for purchase from the supplier or were so available only together with other property or services but, at that time, goods or services of the kind acquired were available for purchase from another supplierthe lowest price at which the person could, at that time, reasonably have purchased goods or services of that kind from another supplier; or (iii) if goods or services of the kind acquired were not available, at the time of the acquisition, for purchase from any supplier or were not so available except together with other property or servicesthe value of the goods or services at that time; and (e) without limiting by implication the meaning of the expression services in subsection 4(1), the obtaining of credit by a person in connection with the acquisition of goods or services by him or her shall be deemed to be the acquisition by him or her of a service and any amount by which the amount paid or payable by him or her for the goods or services is increased by reason of his or her so obtaining credit shall be deemed to be paid or payable by him or her for that service. (3) Where it is alleged in any proceeding under this Act or in any other proceeding in respect of a matter arising under this Act that a person was a consumer in relation to particular goods or services, it shall be presumed, unless the contrary is established, that the person was a consumer in relation to those goods or services. (4) In this section, commercial road vehicle means a vehicle or trailer acquired for use principally in the transport of goods on public roads.

A person for the purposes of s 4B(1) can also be a corporation: Acts Interpretation Act 1901 (Cth) para 22(1)(a); Seely International Pty Ltd v Cintro Pty Ltd. A buyer may be a consumer even where the goods purchased were second hand: Atkinson v Hastings Deering (Qld) Ptd Ltd (1985) ATPR 40-625 Similar definition of consumer applies in Part v, Div 2A which permit a consumer a direct right of action against a manufacturer of goods : s 74A(2)(a). BUT there must be evidence admissible to prove either that a particular kind of goods is, or is not, ordinarily acquired for personal, domestic or household use or consumption and, if the matter depends upon onus of proof, the onus is on the party who claims an entitlement to compensation: Crago v Multiquip Pty Ltd.

ordinarily acquired for personal, domestic or household use or consumption


Personal, domestic or household use is a Q of fact: Carpet Call Pty Ltd v Chan Focus is on the ordinary use, not the actual intended use

Susan Hedge LWB 332 Sale of Goods

In Crago v Multiquip Pty Ltd Lehane J listed the following things as NOT ordinarily acquired for personal, domestic or household use: Airseeder: Jillawarra Grazing Co v John Shearer Ltd. Large tractor: Atkinson v Hasting Deering (Qld) Pty Ltd. Reduction photocopier: Four Square Stores (Qld) Ltd v ABE Copiers Pty Ltd. Prime mover: Minchillo v Ford Motor Company of Australia. Goods may be of a kind ordinarily acquired for personal, domestic or household use or consumtption even if in many or majority of cases theyre acquired for a business use: Crago v Multiquip Pty Ltd per Lehane J at 40,798. The fact that goods are ordinarily acquired for use on a farm does not necessarily mean that they cannot ordinarily be acquired for domestic purposes.

Crago v Multiquip Pty Ltd (1998) ATPR 41-620 Purchase of ostrich egg incubator Held that not ordinarily acquired for personal, domestic or household use or consumption Not ordinary goods such as a TV, washing machine etc Only used by ostrich farmers etc in the course of their business Hence, not consumer Carpet Call v Chan (1987) ATPR 46-025 Purchased carpet for a night club Carpet was rated heavy duty domestic and worth more than $40,000 Simply because purchased for use in night club did not make the goods lose their character as something ordinarily acquired for personal, domestic or household use Two issues re carpet colour to fit with dcor and staining Extended operation under ss5, 6, 75B Extensions under s5: o To actions of body corporates incorporated in Australia outside Australia: s5(1) o Extension of ss47, 48 to the conduct of bodies corporate outside Australia in relation to the supply of goods or services to persons within Australia Part V, Div 2 can broadly apply to: o Corporations engaged in trade or commerce in the supply of goods or services; o Any entity, including an individual engaged in interstate trade and commerce: s6 o Any entity, including an individual, engaged in conduct, to the extent that conduct involves the use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast: s6 o Conduct engaged in outside Australia by persons ordinarily resident in Australia, by Australian citizens or by companies incorporated in Australia or carrying on business in Australia:s6 s75B extends operation of the act to person who aid, induce or conspire in a contravention of Part V o Meant to catch employees, salespersons, ISPs etc The conditions implied by ss 69-72 of Part V, Div 2 are expressed to apply to contracts for the supply of goods or services by a corporation to a consumer. Excluding the TPA

Effect cannot be excluded for goods of a kind ordinarily acquired for personal, domestic or household use or consumption: s 68. If goods are outside above category then there is some scope for the liability of sellers to be limited for a breach of the implied conditions: s 68A.

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Susan Hedge LWB 332 Sale of Goods

2. Implied terms
Title and quiet possession Correspondence with description Fitness for purpose Merchantable quality. Correspondence with sample SGA s 15 s 16 s 17(a) and (b) s 17(c) and (d) s 18 TPA, Part V Div 2 s 69(1) s 70 s 71(2) s 71(1) (s 66(2)) s 72 Cannot exclude: s 68 TPA, Part V Div 2A s 74C s 74B s 74D (s 74D(3)) s 74E Cannot exclude: s 74K

2.1 Implied undertaking as to title and quiet possesion


s 15 Implied undertaking as to title etc. In a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is (a) an implied condition on the part of the seller that in the case of a sale the seller has a right to sell the goods, and that in the case of an agreement to sell the seller will have a right to sell the goods at the time when the property is to pass; (b) an implied warranty that the buyer shall have and enjoy quiet possession of the goods; (c) an implied warranty that the 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 is made.

Implied condition that seller has right to sell: s15(a) SoGA


Most common illustration is where the seller has no title to the goods, eg: Rowland v Divall. The liability imposed by the condition is strict and does not depend on the knowledge of the seller. In some cases the seller may sell goods before they have obtained title if this happens they may perfect their title and avoid liability to the buyer under this provision if the sellers title is perfected before the buyer rescinds the contract: Patten v Thomas Motors Pty Ltd Rowland v Divall [1923] 2 KB 500 o plf purchased care from defendant, took possession and sold to a third party o def did not have titile to pass o third party surrended the car to the true owner o plf refunded purchase price to third party and brought action against def to recover price o held that s15 applied, there was a total failure of consideration b/c the seller did not have title Niblett v Confectioners Materials Co Ltd, o seller had title to the goods but wasnt in a position to sell them. o The goods carried the trademark of a 3rd party and were seized by authorities. o Plainiffs were able to secure their release by removing and destroying the labels. o HELD: seller in breach of term and plaintiffs entitled to damages. Egekvist Bakeries v Tizel & Blinick, o contract of sale was for berries, which were impounded at the time of sale. o HELD: breach of the implied term under s15 b/c seller did not have good title to sell the goods 11

Susan Hedge LWB 332 Sale of Goods

Butterworth v Kingsway Motors, o a hirer under a hire-purchase agreement sold her car before she had paid all the installments and exercised the right to purchase. o There were several other buyer sellers etc before one (Butterworth) became aware that the hire-purchase company owned the car. o He wrote to his immediate seller rescinding the contract of sale. o A week or so later the hirer paid all moneys owning and so title acquired feed down the line. o Each sued its immediate seller for damages.

Remedy

A breach of s 15(a) is a breach of a condition which gives rise to a right in the buyer to treat the contract as repudiated and to claim damages for the breach of the condition. On the basis that there was a total failure of consideration, the transfer of property in the goods being fundamental to the contract: Rowland v Divall. It is no bar to rescission of that contract that the goods cannot be returned to the seller or that the buyer has had a temporary use or enjoyment of them: Rowland v Divall. Ie. the implied condition is not converted to a warranty by the buyers actions. s 14(3) which converts a condition into a warranty where the buyer has accepted the goods, was held to have no application to a breach of this particular condition: Rowland v Divall at 507; Butterworth v Kingsway Motors at 1294.

Implied warranty that buyer shall have quiet possession: s 15(b) Quiet possession includes, but extends beyond, freedom from physical interference with the goods by the seller. Infringement of the implied term where: o Goods are sold and delivered on credit, but still within the credit terms, are seized by the seller: Healing (Sales) Pty Ltd v Inglis Electrix Pty Ltd (1968) 121 CLR 584 o Where patentee of the patent affecting the goods claimed infringement by the buyer against the patent: Microbeads A-G v Vinhurst Road Markings Ltd [1975] 1 WLR 218 o Where the buyer needed to remove labels on goods which infringed the copyright of a 3rd party: Niblett v Confectioners Materials Co Ltd.

Have and enjoy includes the period after possession is passed to the seller, and before the passing of property: Keetley v Quinton Pty Ltd. Microbeads A-G v Vinhurst Road Markings Ltd [1975] 1 WLR 218 o Buyer purchased road marking machines from Swiss sellers o An English company has applied for the patent of the machine, and received the letters patent after the sale o English coy brought an action against the buyer for breach of patent and buyer sued seller for breach of implied warranty of quiet possession o HELD there was a breach of warranty of quiet possession even though the defect (patent rights) occurred after the sale

Remedy The buyer is not entitled to treat the contract as repudiated where there is a breach of the warranty, being limited to a claim for damages Implied warranty that the goods are free from encumbrance: s 15 (c) Implied warranty that the goods will be free from any charge or encumbrance in favour of any 3rd party not declared or known to the buyer before or at the time when the contract is made.

Steinke v Edwards (1935) 8 ALJ 368 12

Susan Hedge LWB 332 Sale of Goods

o o o o o

Plaintiff bought car from def and resold Previous owner of car had tax owing Car seized under state legislation to pay out tax debts charge or encumbrance was defined to include tax HELD breach of implied warranty that goods are free from encumberance

Remedy is damages suggested that it should be limited to the amount of expenditure required to discharge the encumbrance or charge + relevant legal costs Trade Practices Act 1974 (Cth) implied condition as to title: s69(1)(a) implied warranty as to quiet possession: s69(1)(b) implied warranty that the goods are free from encumbrances: s69(1)(c) s 69 Implied undertakings as to title, encumbrances and quiet possession (1) In every contract for the supply of goods by a corporation to a consumer, other than a contract to which subsection (3) applies, there is: (a) an implied condition that, in the case of a supply by way of sale, the supplier has a right to sell the goods, and, in the case of an agreement to sell or a hire-purchase agreement, the supplier will have a right to sell the goods at the time when the property is to pass; (b) an implied warranty that the consumer will enjoy quiet possession of the goods except so far as it may lawfully be disturbed by the supplier or by another person who is entitled to the benefit of any charge or encumbrance disclosed or known to the consumer before the contract is made; and (c) in the case of a contract for the supply of goods under which the property is to pass or may pass to the consumeran implied warranty that the goods are free, and will remain free until the time when the property passes, from any charge or encumbrance not disclosed or known to the consumer before the contract is made. (2) A corporation is not, in relation to a contract for the supply of goods, in breach of the implied warranty referred to in paragraph (1)(c) by reason only of the existence of a floating charge over assets of the corporation unless and until the charge becomes fixed and enforceable by the person to whom the charge is given. (3) In a contract for the supply of goods by a corporation to a consumer in the case of which there appears from the contract or is to be inferred from the circumstances of the contract an intention that the supplier should transfer only such title as he or she or a third person may have, there is: (a) an implied warranty that all charges or encumbrances known to the supplier and not known to the consumer have been disclosed to the consumer before the contract is made; and (b) an implied warranty that: (i) the supplier; (ii) in a case where the parties to the contract intend that the supplier should transfer only such title as a third person may havethat person; and (iii) anyone claiming through or under the supplier or that third person otherwise than under a charge or encumbrance disclosed or known to the consumer before the contract is made; will not disturb the consumers quiet possession of the goods.

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Unlike the SGA s 69 of the TPA cannot be excluded by agreement, not liability limited: ss 68, 68A(1). s 69(3) provides the only potential relief for a supplier. s 69 applies to the supply by way of sale, agreement to sell or hire-purchase of goods by a corporation to a consumer. Auction sales are included. There is no requirement, as exists in other terms implied under Div 2, that the goods must be supplied in the course of a business.

2.2 Correspondence with description


16 Sale by description When there is a contract for the sale of goods by description there is an implied condition that the goods shall correspond with the description; and if the sale is by sample, as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description.

Note no need to use this implied warranty if there is an express term of the contract that the goods comply with a certain description To determine whether a representation inducing contract or a binding term of the contract the question is of the intention of the parties. Did the parties intend for those words to constitute part of the contract? Oscar Chess Ltd v Williams Test is whether a reasonably intelligent bystander would think that a promise was intended. 1. A sale by description Specific Goods bought by the buyer in reliance on the description. Although reliance isnt mentioned in s 16 it is a necessary consequence of the requirement that the sale be by description. It is possible to sell specific goods with no description article may be sold by its presence and the buyer take the risk that the article is what they think it is. BUT usually sold with some description such as a stone sold as a jewel not costume jewellery and a thoroughbred sold as a thoroughbred not a work horse. Sale in a self-service store will constitute a sale by description provided goods are described in some way on the outside of the packaging or by sign, notice or label No distinction between self selection and a sale assistant handing over an article in response to a request: Great Atlantic and Pacific Tea Co v Walker (1937) 104 SW (2d) 627 Goods characteristics which would be apparent on reasonable examination are unlikely to be intended by the parties to form part of the description by which the goods were sold, even if those characteristics are mentioned in references in the contract to the goods that are its subject matter: Gill & Duffus SA v Berger & Co Inc (No 2) Lord Diplock at 394

Smith Goldsborough Mort Ltd v McBride, o bull was seen and selected but was sold as a breeding bull. o Wasnt fertile sale was said to be a sale by description and the relevant description in the catalogue was breeding bull. Grant v Australian Knitting Mills, o Buyer contracted dermatitis from woollen underwear o Sued retailer on basis that it had breached the implied conditions as to merchantability which also requires that there had been a sale by description. o Grant had self-selected the underwear from the shelf

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o o

Court held that there had been a sale by description, at least to the extent that the description on the box delineates the good and describes the kind of clothing to be bought. In the High Court per Dixon J when the ground on which the goods are selected or identified is then correspondence to a description and when therefore the buyer primarily relies on their classification or possession of attributes. Notwithstanding that theyre specific goods theyre still bought by description

Harlington & Leinster Enterprises Ltd v Christopher Hull Fine Art Ltd, o Painting sold from one dealer to another o Question for the court was whether the name on the painting Munter formed part of the description of the painting in which the buyer bought in reliance o Seller made it clear to the buyer he was not an expert in Munters paintings and both parties were very experienced o Painting turned out to be a fake o HELD that the buyer could not have reasonably relied on the name on the painting Must look at the whole of the contract to determine which characteristics of the thing are intended to be its description Parties did not have a common intention that the authenticity of the name Munter was a term of the contract Test is objective

Unascertained goods usually by description, otherwise nothing to determine the subject matter of the contract or the obligations of the vendor Future goods usually by description, but may not be fore example where they are seen and requested by the buyer in the hands of a 3rd party and then later obtained by the seller from the 3 rd party for sale to the buyer 2. What is the content of the description?

Description means a statement of kind, class or species which the article belongs. Must be a statement as to the essential or specific nature of the thing sold NOT merely a statement as to the quality, state or other attribute: Taylor v Combined Buyers Ltd at 639-40. o If contract to buy a cask of port wine but get beer - difference of kind so a breach. BUT if contract to buy a cask of port wine in sound condition and get poor condition - not entitled to reject goods, conform to description only a difference of quality, state or condition remedy under not merchantable. o If contract to buy specific chairs described as set of antique mahogany chairs and receive modern imitations. Can reject difference of kind not quality. o If contract to buy a stud bull but on delivery cannot perform copulation breach of description because part of the essential nature of a stud bull so differs in kind not just quality: Cotter v Luckie. BUT if contract for a pedigree Jersey bull on delivery sterile, not a breach of description within the strict meaning of pedigree: Dell v Quilty. o If contract to buy a 14 horse power engine, but engine is less that than it may not constitute a breach: Parson v Sexton. o If contract to buy specific stock of coal of Cumberland and small Welsh coal mixed but get a mixture of inferior coal may only be a difference of quality not kind: Kirkpatrick v Gowan. o In Ashington Piggeries Ltd v Christopher Hill Ltd qualitative description of the goods may form part of the description. Description was for a reaping machine as new

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the previous year and only used for 50 acres was a sale by description on the basis that it should have identified a nearly new machine. o Can reject a car if contract for a new one but receive a second hand one because technology means it will be of a different kind not just quality. o Can reject a car when contract for a particular model but receive two half models welded together: Beale v Taylor Even though the model seems prima facie to regard quality, it had become so important to the parties to the transaction that it was considered to be the identity of the goods Words that describe the purpose for which goods are suitable will usually not form part of the description of the goods for the purpose of s 16, otherwise the implied condition as to fitness for purpose would be redundant o Note, may be exceptions where general purpose of goods is an element of description of the goods eg. oysters not fit for eating might not conform with their description as oysters

Contamination Metal Roofing and Cladding Pty Ltd v Amcor Trading Pty Ltd, o relevant goods described as PVC resin. Buyers said level of contamination was higher than normally expected in market. o Held that no uniform understanding or expectation of tolerable level of contaminants let alone at what level it couldnt be described as PVC. Marimpex Mineralol v Louis Dreyfus et Cie Mineralol, o goods sold as normal Russian gas oil o Held that the goods didnt conform to the description because the level of contamination was higher than that accepted in the trade as satisfying that description. 3. Do the goods correspond with their description?

Question of fact in the circumstances of the case: Ashington Piggeries Ltd v Christopher Hill Ltd.

Ashington Piggeries Ltd v Christopher Hill Ltd CH sold animal foods, entered into contract to sell mink food to AP who ran a mink farm AP supplied a formula for CH to make up the food called King Size CH had no particular expertise with respect to mink CH entered into K with Nordsildmel for them to supply Norwegian herring meal of 'fair average quality of the season' for the compound The herring meal contained dimethylnitrosamine (DMNA) unbeknown to any of the parties The DMNA was highly toxic to mink and the mink died The chemical reaction which produced the toxic substance in the course of manufacture was unthought of to N and CH Christopher Hill, the seller, sued Ashington Piggeries for the price of the goods. Ashington Piggeries counter-claimed for damages for breach of contract alleging that the 'King Size' did not correspond with its description, was not reasonably fit for the purpose, nor or merchantable quality HELD that there was no breach of the implied condition that the goods correspond with their description o There was a sale by description ie that the food would be made up according to the formula o The herring meal was in the formula o The presence of DMNA only went to the quality or fitness for purpose of the herring meal and not to its description.

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Beale v Taylor T advertised his car for sale as a Herald convertible, white, 1961 and the car was bought by B after examination. Both parties believed the car was a 1961 model but B discovered soon after the sale that it was made up of two parts which had been welded together, one of which had been a 1961 model. HELD o Although B had examined the car, he had relied on the description in the advertisement as showing the kind of car he was buying. o The model of the car had become part of the way the car was identified. o The sale was a sale by description and since the car didnt correspond to the description, B was entitled to damages for breach of an implied condition Trade Practices Act 1974 (Cth) s70 70 Supply by description (1) Where there is a contract for the supply (otherwise than by way of sale by auction) by a corporation in the course of a business of goods to a consumer by description, there is an implied condition that the goods will correspond with the description, and, if the supply is by reference to a sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description. (2) A supply of goods is not prevented from being a supply by description for the purposes of subsection (1) by reason only that, being exposed for sale or hire, they are selected by the consumer.

TPA section is broader in application. Supply is broader than sale includes barters, leases, hire or hire-purchase. s 70(2) refers specifically to self-serve customer BUT since Grant v Australian Knitting Mills Limited, perhaps unnecessary as self serve customers can be covered by s 16 SoGA Condition cannot be excluded by the parties: s 68. REMEDY: sue for damages for breach of contract (ie implied condition) not damages under s 82 TPA: Arturi v Zupps Motors Pty Ltd. Breach under s70 must be brought before state courts not federal unless other aspects of the claim permit a claim under s 70 to be brought at the same time in a federal court.

2.3 Fitness for purpose


17 Implied conditions as to quality or fitness Subject to the provisions of this Act and of any statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows (a) when the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the sellers skill or judgment, and the goods are of a description which it is in the course of the sellers business to supply (whether the seller is the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose; (b) however, in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose;

4 elements 1. The buyer must have made known, expressly or by implication, the particular purpose for which he wanted the goods.

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2. 3. 4.

Particular purpose must have been disclosed in such a way that it was clear that the buyer was relying on the sellers skill and judgment. The seller was in the business of supplying goods of that description. Goods, if specific, not bought under their patent or other trade name.

1. The buyer must have made known, expressly or by implication, the particular purpose for which he wanted the goods. Seller is entitled to know the purpose so they can ensure the goods are fit for that purpose. Appropriate to look at all the circumstances preceding the transaction. May request goods for a specific purpose jacket to keep me warm & dry while skiing. Can be inferred if a propeller is ordered for a ship under construction, the purpose is will have been made known: Cammell Laird & Co Ltd v Manganese Bronze & Brass Co Ltd. o When goods are by their description suitable for only one purpose, it will be inferred that they buyer has made known the purpose for the goods: Priest v Last. o If no specific purpose is made known, inferred that the buyer has made known that the goods are being bought for their normal purpose: Priest v Last. o If capable of use for more than one purpose, buyer must make known the purpose they require them for, if they do, must be suitable for that purpose: Priest v Last. o Eg underwear to wear: Grant v Australian Knitting Mills; walking shoes to walk in: David Jones Ltd v Willis Particular purpose means given a purpose, particular just narrows it. The purpose must be made know with sufficient particularity to enable the seller to identify the characteristics which the goods need to posssess to fir them for that purpose: The Hardwick Game Farm v Suffolk Agricultural Poultry Producers Asssociation.

Regal Pearl Pty Ltd v Stewart [2002] prawns contaminated with hepatitis held not fit for the purpose of human consumption. When the court below tested them against purpose of consumption after cooking would have been fit for that purpose Frost v Aylesbury Dairy Co Ltd [1905] - milk supplied infected with typhoid. Buyers wife drank milk and died. Argued the buyer had not disclosed the purpose for which the milk was required. HELD: could be reasonably assumed milk was purchased for human consumption. Southern Cross Homes (Broken Hill) Inc v Chapman [1999], argued by buyer that required purpose of the purchase of a commode chair was that they would not permit any leakage or spillage. Chairs in fact permitted leakage into a designated fiberglass base. HELD: this particular purpose was not made known to the seller, only relevant purpose was the sale of a commode chair which would accept commode pots and bed pans Griffiths v Peter Conway Ltd o The implied condition of fitness is not operative when the particular purpose for which goods are required is the purpose of being worn by a person suffering an abnormality, and it is not known by the seller at the time of the sale o A tweed coat which would not have affected a normal persons skin was purchased and caused dermatitis because of an abnormality in the buyers skin of which the seller was not aware. No breach of implied condition of fitness for purpose. Grant v Australian Knitting Mills Ltd, P bought underwear and then contracted dermatitis. HELD: that purpose didnt need to be disclosed, when goods are by their description suitable for one purpose, it will be inferred that they buyer has made known the purpose for the goods

2. Particular purpose must have been disclosed in such a way that it was clear that the buyer was relying on the sellers skill and judgment. There must be actual reliance by the buyer on the sellers skill and judgment and this must be evident to a reasonable seller at or before the time the contract is formed: Frank v Grosvenor Motor Auctions Pty Ltd No presumption of reliance: Claude B Fox Pty Ltd v Rayner.

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Evidence of reliance usually occurs by implication question of fact: Ashington Piggeries Ltd v Christopher Hill Ltd. o Grant v Australian Knitting Mills Ltd, HELD: reliance will, in general, be inferred from the fact that a buyer goes to the relevant shop in the confidence that the tradesment has selected his stock with skill and judgment, that is, that the seller has bought the right goods of a good make. The better the shop the easier it is to draw this inference.

Inference from Grant v Australian Knitting Mills Ltd doesnt apply between two traders who are equally knowledgeable: Hardwick Game Farm at 84, 106-7, 124-5. Reliance must be affirmatively shown but reliance on the sellers skill and judgment need not be total or exclusive: Ashington Piggeries v Christopher Hill at 423 per Lord Wright. Reliance must, constitute a substantial and effective inducement which leads the buyer to purchase the article: Dependable Motors Pty Ltd v Ashford Shire Council at 283 and 289. The buyer may still have relied on his own experts, knowledge or common sense o o o Ashington Piggeries v Christopher Hill, seller was a compounder of foodstuffs and told the buyer he knew nothing about the nutritional requirements of mink, merely agreed to comply with the formula as provided by the buyer, a mink farmer. The seller was held liable under equivalent of s 17(a) although the buyer had relied on his own skill and judgment as to the suitability of the compound, he had still relied on the seller to select and acquire good quality ingredients of the kind in the formula and to combine them satisfactorily.

Ashford Shire Council v Dependable Motors Pty Ltd o A shire council requiring a tractor for use in roadwork requested an engineer to inspect a tractor in Sydney to see whether it was suitable for the work o The engineer inspected the tractor, & informed the D that the tractor was required for roadwork & asked whether it could perform such work. o Engineer reported back to the P that the tractor had plenty of power & was big enough to do the work, however he did not report what was passed between the D and himself. o Engineer received instructions from P to purchase the tractor. In purchasing the tractor, P relied upon the report made by the engineer. HELD the engineer on behalf of P having disclosed the proposed purpose, had acted on the skill and judgment of the Deft. Since the tractor was unsuitable for roadwork the P was entitled damages. o The purpose of the section is to impute to the seller a contractual promise moving from the seller to the buyer that the goods are fit for the purpose about which he has been informed & on which his/her skill/judgment has been sought o A reasonable person in the shoes of the seller would have realized that he/she was being relied upon by the buyer

McWilliams Wines Pty Ltd v Liaweena


Pff wine maker bought 50,000 corks from Deft cork merchant. It was later found that a significant proportion of the bottles of wine sealed with the cork became contaminated and were unsaleable. HELD D was liable for breach of implied condition of fitness. o Due to many other transactions between the parties over the years, it had been established that the P had made known to the D that it was relying on the skill & judgment to deliver corks which were not contaminated in some unobservable way & which would cause a deleterious effect on the wine. o

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In some cases inspection by buyer may indicate that they are not relying on the sellers skill and judgment: H Beecham & Co Pty Ltd v F Howard & Co Pty Ltd at 433. REMEDY: if reliance is established, sellers liability is strict and it does not matter whether the defect was latent or patent: Hardwick Game Farm.

3. The seller was in the business of supplying goods of that description.


Limits it to the course of sellers business opposed to private persons: Ashington Piggeries Ltd v Christopher Hill Ltd. It is sufficient that the seller supply goods of that kind in the course of business: Ashington Piggeries Ltd v Christopher Hill Ltd. It is in the course of a sellers business to supply goods if he agrees to supply the goods when ordered. This is the case whether or not he has previously accepted orders for goods of that description: Ashington Piggeries Ltd v Christopher Hill Ltd. Irrelevant whether the sale of those goods forms an integral part of the business carried on, or with what sort of regularity. Stevenson v Rogers, seller had an established business as a fisher. Bought a new vessel in 1983 and sold it in 1988. Held that the provision was wide enough to encompass it such sparse dealings

4. Goods, if specific, not bought under their patent or other trade name: s17(b) Logic is where a buyer buys by reference to a trade name, he does not rely on the seller. Baldry v Marshall [1925] 1 KB 260 o Buyer asked for a car suitable for touring & ordered a car that was recommended in a magazine. The car proved unsuitable for touring o HELD that despite the order of the car by name, the buyer had relied on the sellers skill and judgment & it was not the sale under a trade name within the meaning of s17(b). Once the trade name is secondary, and the purpose of the goods is communicated, s17(b) will not apply Mere fact that buyer mentions the trade name will not be sufficient to exclude the implication Has the condition been breached? Question of fact: Christopher Hill v Ashington Piggeries The goods must be reasonably fit for their specified purpose, assessed at the time of sale The goods must be reasonably fit for their purpose for a reasonable time after sale: Lambert v Lewis what is a reasonable time depends on the nature of the goods. Where the engine of a car stopped one week after purchase, this was held to show that the car was not fit for its purpose at the time of sale: Crowther v Shannon. Trade Practices Act 1974 (Cth) s71(2)
s 71 Implied undertakings as to quality or fitness (2) Where a corporation supplies (otherwise than by way of sale by auction) goods to a consumer in the course of a business and the consumer, expressly or by implication, makes known to the corporation or to the person by whom any antecedent negotiations are conducted any particular purpose for which the goods are being acquired, there is an implied condition that the goods supplied under the contract for the supply of the goods are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the consumer does not rely, or that it is unreasonable for him or her to rely, on the skill or judgment of the corporation or of that person.

Unlike SGA, the TPA implies the condition as to fitness for purpose where (in addition to the other requirements) the purpose is expressly or impliedly made known to seller: it is not

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necessary for the buyer also to prove reliance but if the seller can prove there was no reliance or unreasonable reliance, the term will not be implied o Effectively shifts the onus of proof onto the supplier No equivalent trade name exception under the TPA. A statutory agency incorporated by the provision in permitting the relevant purpose to be made known to the person by whom any antecedent negotiations are conducted.

2.4 Merchantable quality


17 Implied conditions as to quality or fitness (c) when goods are bought by description from a seller who deals in goods of that description (whether the seller is the manufacturer or not) there is an implied condition that the goods shall be of merchantable quality; (d) however, if the buyer has examined the goods, there is no implied condition as regards defects which such examination ought to have revealed;

3 elements 1. The goods were bought by description. 2. The seller deals in goods of that description. 3. The buyer did not examine the goods before or at the time of sale, or, if he did, the defects were such as would not reasonably have been discoverable on such examination. 1. The goods were bought by description. Has been construed to have the same meaning as for fitness for purpose: Taylor v Combined Buyers Ltd see 2.3 above Reasonable to expect uniformity of the sections: Ashington Piggeries Ltd v Christopher Hill Ltd. 2. The seller deals in goods of that description. Has been construed to have the same meaning as for fitness for purpose: Taylor v Combined Buyers Ltd. Sufficient if the seller dealt in the course of his business with goods of that kind: Ashington Piggeries Ltd v Christopher Hill Ltd per Lord Hodson at 469. 3. The buyer did not examine the goods before or at the time of sale, or, if he did, the defects were such as would not reasonably have been discoverable on such examination. Must have been made prior to the contract being entered into. Such examination refers to examination by buyer. Ought to have been revealed refers to the actual examination carried out and what ought to have been revealed by it not to what might have been revealed in an ordinary inspection: Frank v Grosvenor Motor Auctions Pty Ltd. Clear that the proviso doesnt apply if the buyer does not undertake any examination at all, irrespective of whether he has been offered an opportunity to examine the goods. Thornett & Fehr v Beers o Buyer viewed outside of barrels of glue. o HELD: to have undertaken an examination within the meaning of the proviso, so no implied condition of merchantability. o Section doesnt require a full examination. A proper examination would have revealed the defect and the buyer had been offered a full inspection and declined the opportunity so was held to have assumed the risk o Some doubt about the correctness of this decision Has the condition been breached are the goods merchantable? No definition of merchantable quality in SGA.

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Is a composite quality comprising elements of description, purpose, condition and price: Cehave NV v Bremer Handelsgesellschaft mbH at 80. If description and purpose is wide to be merchantable they need only suit one of those purposes: Henry Kendall & Sons v William Lillico & Sons Ltd at 77, Lord Reid. If description is narrow and one purpose goods will not be merchantable if they do not meet that purpose: Henry Kendall & Sons v William Lillico & Sons Ltd at 77, Lord Reid.

Henry Kendall & Sons v William Lillico & Sons Ltd, o sale of contaminated Brazilian groundnut extract to manufactures of cattle and poultry foods. o Sale in question was to manufacturer of poultry food. o The goods found to be poisonous for poultry but would have been suitable for cattle. o Held that although sellers breached fitness for purpose it was of merchantable quality because it was fit for one of its purposes (although not the one for which the buyers had bought it for) Brand v Bardon, o moisturising cream for abnormal/sensitive skin caused skin blisters on the buyer. o Held to be a breach, outcome probably different if hadnt been label for sensitive skin.

The price is relevant the higher the price the higher the buyers expectations as to quality of the goods supplied: Australian Knitting Mills Limited v Grant at 418, Dixon J. Must be commercially saleable to a consumer under the description by which they were sold at a price not too far removed from K price: Brown & Son v Craiks [1970] 1 WLR 752 An unsubstantial price reduction may not be sufficient

H Beecham & Co Pty Ltd v Francis Howard & Co Pty Ltd, wood was sold for making pianos but had dry rot. Wood would have been suitable for making boxes, one of its purposes. HELD that it wasnt merchantable because no businessman would have accepted the timber, its condition being known, without a significant price reduction on market price, at 435. BS Brown & Son Ltd v Crakis, rayon cloth bought, unknown to seller, to make dresses. The cloth was of insufficient quality for that purpose but could be used as industrial fabric. Although the price was high for industrial fabric the difference was not substantial enough to make the cloth unmerchantable.

Trade Practices Act 1974 (Cth) s71(1) 71 Implied undertakings as to quality or fitness (1) Where a corporation supplies (otherwise than by way of sale by auction) goods to a consumer in the course of a business, there is an implied condition that the goods supplied under the contract for the supply of the goods are of merchantable quality, except that there is no such condition by virtue only of this section: (a) as regards defects specifically drawn to the consumers attention before the contract is made; or (b) if the consumer examines the goods before the contract is made, as regards defects which that examination ought to reveal.

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66 Interpretation (2) Goods of any kind are of merchantable quality within the meaning of this Division if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances.

Condition as to merchantability is excluded under s 71(1)(b) if the consumer examines the goods before the contract is made as regard defects which examination ought reveal o The examination is clearly the actual examination undertaken by the buyer, not the examination a reasonable buyer wouldve made: Truck Wreckers (1979) Pty Ltd v Waters. Unnecessary and undesirable to look at the common law definition for the purpose of construing statutory definition in s 66(2) TPA: Courtney V Medtel Pty Ltd at [189]. Merchantable quality standard required under TPA is more onerous than CL definition. Goods to be merchantable under s 66(2) must be fit for all the purposes for which goods of that kind are commonly bought. Also seller doesnt have to deal in goods of that description so long as the contract for sale is made in the course of a business.

Cavalier Marketing v Rasell [1991] 2 Qd R 323 Consumer purchased carpet which had a pile reversal defect (didnt change colour with direction of pile) Carpet bought for 2 purposes as a floor covering and also to fit with dcor of home Carpet fit for purpose of floor covering but not aesthetically pleasing to buyer HELD that as s66(2) states that goods must be fit for all purposes they are bought for, and here the carpet had been bought for decoration, it was not of merchantable quality Different conclusion would be reached under SoGA

2.5 Sale by sample


18 Sale by sample (1) A contract of sale is a contract for sale by sample when there is a term in the contract, express or implied, to that effect. (2) In the case of a contract for sale by sample (a) there is an implied condition that the bulk shall correspond with the sample in quality; (b) there is an implied condition that the buyer shall have a reasonable opportunity of comparing the bulk with the sample; (c) there is an implied condition that the goods shall be free from any defect, rendering them unmerchantable, which would not be apparent on reasonable examination of the sample.

A sale is not a sale by sample merely because a buyer is shown a sample during the course of negotiations: JS Robertson (Aust) Pty Ltd v Martin. The seller must expressly or impliedly promise that the goods being sold will conform to the sample: LG Thorne Ltd v Thomas Borthwick & Sons (Asia) Ltd. May involve issues as to the admissibility of parol evidence where a sample is not referred to in the contract but was relied upon by the buyer: Codelfa Construction Pty Ltd v State Rail Authority of NSW. There is nothing to prevent the buyer providing the relevant sample, though it usually comes from the seller: Simms Jones Ltd v Petrochem NZ Ltd LG Thorne Ltd v Thomas Borthwick & Sons (Asia) Ltd o Plt bought certain drums of neatsfoot oil. o Had been provided a sample and after analysis, and satisfied with the analysis he entered into the contract.

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The oil supplied was different didnt have a cloud oil under 30F. HELD that it wasnt a sale by sample, was a contract in writing and the sample was verbal. o Even though the court was confident Plt would not have bought if the oil wasnt satisfactory wasnt sufficient to overcome general rule with regard to parol variations of written contracts. Cameron & Co v Slutzkin Pty Ltd o HC admitted evidence by way of a sample, not to vary the written terms of the contract of sale, but in order to interpret the expression matchless 2475 voile. o To determine the nature of the goods intended to be described. Goods didnt conform to the sample so the buyer was held to be justified in rejecting them. o o

Trade Practices Act 1974 (Cth) s72 72 Supply by sample Where in a contract for the supply (otherwise than by way of sale by auction) by a corporation in the course of a business of goods to a consumer there is a term in the contract, expressed or implied, to the effect that the goods are supplied by reference to a sample: (a) there is an implied condition that the bulk will correspond with the sample in quality; (b) there is an implied condition that the consumer will have a reasonable opportunity of comparing the bulk with the sample; and (c) there is an implied condition that the goods will be free from any defect, rendering them unmerchantable, that would not be apparent on reasonable examination of the sample.

3. Remedies for the Buyer


3.1 Remedies for a breach of condition implied by the SGA

Breach of condition entitles innocent party to rescind the contract = right to reject goods. Right to reject the goods as been described as merely a particular form of the right to rescind, because it involves the rejection of a tender of goods: Chao v British Traders and Shippers Ltd.

When a condition will be treated as a warranty s14(3) SoGA


14 When condition to be treated as warranty (3) When a contract of sale is not severable, and the buyer has accepted the goods, or part thereof, or when the contract is for specific goods the property in which has passed to the buyer, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect.

Section enlivened if: o Buyer has accepted the goods o If K for specific goods, property has passed to the buyer s14(3) can be excluded by a term of the K, express or implied

Approach to Ks for the sale of specific goods

words of s14(3) state that the buyer cannot reject goods once property has passed to the buyer 24

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This has been criticised as too harsh because s 21 r 1 ie. property in specific goods passes at the time the contract is made. SO courts avoid strict application of the provision and determine the issue on the basis of whether the goods have been accepted: Taylor v Combined Buyers Ltd at 650.

Has the buyer accepted the goods s37 sets out three instances in which a buyer will have deemed to have accepted the goods: 1. when the buyer intimates to the seller that the buyer has accepted them; or 2. when the goods have been delivered to the buyer, and the buyer does any act in relation to them which is inconsistent with the ownership of the seller act inconsistent with the ownership of the seller means an act inconsistent with the right of the seller, in the event of a rejection, to have the goods returned to the place of examination of the goods as contemplated by the K: Kwei Tek Chao v British Traders and Shippers Ltd [1954] 2 QB 459; Hammer & Barrow v Coca-Cola [1962] NZLR 723 3. when after the lapse of a reasonable time, the buyer retains the goods without intimating to the seller that the buyer has rejected them. 37 Acceptance The buyer is deemed to have accepted the goods when the buyer intimates to the seller that the buyer has accepted them, or when the goods have been delivered to the buyer, and the buyer does any act in relation to them which is inconsistent with the ownership of the seller, or when after the lapse of a reasonable time, the buyer retains the goods without intimating to the seller that the buyer has rejected them. BUT s36 states that: where goods are delivered that the buyer has not previously examined the buyer will not be deemed to accept them until they have had a reasonably opportunity to inspect to determine whether the goods are in accordance with the K 36 Buyers right of examining the goods (1) When goods are delivered to the buyer, which the buyer has not previously examined, the buyer is not deemed to have accepted them unless and until the buyer has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract. (2) Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, the seller is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract. Accepted in other jurisdictions that ss37 is NOT to be read subject to s36: Hardy v Hillerns and Fowler [1923] 2 KB 490 Hence, where a buyer does an act inconsistent with the ownership of the seller, they will be taken to have accepted the goods regardless of whether they had a reasonable opportunity to inspect the goods Hardy v Hillerns and Fowler [1923] 2 KB 490 o Buyer bought wheat to be shipped from South America. o Shortly after delivery and while the time during which buyers had the right to examine the goods was still running they on-sold the goods. o Buyer then tried to reject the wheat as soon as it was possible to make an adequate inspection and recalled the wheat in transit to the sub-buyer.

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Held that the act by the buyer in on-selling part of the goods has placed the goods in a position which prevented the seller from resuming possession of them upon receipt of the notice of rejection by the buyer. The act therefore was acceptance and they couldnt reject the goods

In the case of an on-sale of goods to a sub-buyer, this result can be avoided o Seller and buyer agree that seller will send goods straight to sub-buyer o Place for examination of goods under s36 is sub-buyers premises o Buyers agent may possess goods and dispatch them to sub-buyer o This dispatch will not be an acceptance under s37 because the sellers right, in the event of a rejection by the buyer, to have the goods physically returned to the place of examination has not been interfered with (b/c the goods are at the place of examination the sub-buyers premises) Hammer & Barrow v Coca-Cola [1962] NZLR 723 o Yoyos purchased by Coca-cola from H&B and delivered to sub-buyers in Auckland o Yoyos passed through forwarding agent of Coca-Cola in Christchuch o 80% of yoyos defective and Coca-cola attempted to reject the goods already delivered (+ rescind contract which is not herein relevant) o HELD that the yoyos could be returned as the buyer had not yet done an act inconsistent with the ownership of the seller Although the goods were delivered in Christchuch, the place for examination of the yoyos were at the premises of the sub-buyers in Auckland (contemplation of the parties in the K) The right of the seller in the case of a rejection was to have the goods returned to the place of examination (Auckland) Hence all yoyos still in Auckland could be rejected and sent back Only yoyos which could not be returned were those that had been sent on to retailers from sub-buyers or attempted to be fixed by Coca-cola

Buyers act of rejection must be unequivocal, if not, or doesnt reject the goods, buyer will have affirmed the contract: Graanhandel T Vink BV v European Grain & Shipping Ltd. Unless the parties otherwise agree the buyer is not bound to return the rejected goods to the seller it is sufficient if buyer intimates to seller that buyer rejects the goods: s 38.

3.2 Remedies for a breach of warranty implied by the SGA

If the seller has breached a warranty or has breached a condition but the buyer has accepted the goods, the buyer is entitled to damages.

54 Remedy for breach of warranty (1) When there is a breach of warranty by the seller, or when the buyer elects, or is compelled, to treat a breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods; but the buyer may (a) set up against the seller the breach of warranty in diminution or extinction of the price; or (b) maintain an action against the seller for damages for the breach of warranty. (2) The measure of damages for breach of warranty is the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach of warranty.

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(3) In the case of breach of warranty of quality such loss is prima facie the difference between the value of the goods at the time of delivery to the buyer and the value which they would have had if they had answered to the warranty. (4) The fact that the buyer has set up the breach of warranty in diminution or extinction of the price does not prevent the buyer from maintaining an action for the same breach of warranty if the buyer has suffered further damage. 55 Interest and special damages This Act does not affect the right of a buyer or a seller to recover interest or special damages in any case in which by law interest or special damages are recoverable, or to recover money paid when the consideration for the payment of it has failed.

Section 54(2) incorporates the basic principles for remoteness of damages as enunciated in the leading case of Hadley v Baxendale. o What the parties reasonably contemplated at the time of contract as to the damages that would result from a breach of their contract is a question of fact. In relation to damages for goods of an inferior quality, the principal in s 54(3) is regarded as a prima facie rule from which the court may depart in appropriate circumstances. (Burden of proof on person seeking to adopt another measure of damages). Often a commercial buyer will have either on-sold the goods or at least have contemplated onselling them, if the seller knows that the buyer intended to resell them and a breach would be likely to cause the buyer a loss of profit on the resale or potential resale the buyer is entitled to recover damages in respect of those lost profits: Bence Graphics International Ltd v Fasson UK Ltd. In the case of a string of on-sales courts take into account the string of litigation and the damages and costs paid by the buyer will be included in the calculation of damages for the sellers breach of the original contract: Bence Graphics; Kasler and Cohen v Slavouski.

3.3 Remedies for a breach of a term implied by the TPA


Damages for breach of contract and/or rescission under s 75A. A consumer who sues in reliance on a section in Div 2 doesnt rely on s 82(1), which confers a right to damages for a contravention of a provision of Part V, but upon a breach of a contractual term imposed by a provision of Pt V: E v Australian Red Cross Society Acceptance of the goods is no bar to rescission under s 75A. Where there has been a breach of an implied condition the consumer can rescind by either: serving a notice on the supplier giving particulars of the breach (s75A(1)(c)); or returning the goods to the supplier and giving the latter either orally or in writing particulars of the breach (s75A(1)(d)) Either of the above ways to rescind must occur within a reasonable time after the consumer has had a reasonable opportunity of inspecting the goods: s75A(2)(a) A written notice of rescission for breach of implied condition will be ineffective if before the notice was served: o The goods were disposed of by the consumer, were lost, or were destroyed otherwise than by the defect in the goods s75A(2)(b)(i) o The consumer caused the goods to become unmerchantable or failed to take reasonable steps to prevent them becoming unmerchantable s75A(2)(b)(ii) o The goods were damaged by abnormal use s75A(2)(b)(iii) Rescission by return of the goods to the supplier will be ineffective if: o The consumer caused the goods to become unmerchantable or failed to take reasonable steps to prevent them becoming unmerchantable s75A(2)(c)(ii) o The goods were damaged by abnormal use s75A(2)(c)(iii)

75A Rescission of contracts (1) Where: 27

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(a) a corporation supplies goods to a consumer in the course of a business; and (b) there is a breach of a condition that is, by virtue of a provision of Division 2, implied in the contract for the supply of the goods; the consumer is, subject to this section, entitled to rescind the contract by: (c) causing to be served on the corporation a notice in writing signed by him or her giving particulars of the breach; or (d) causing the goods to be returned to the corporation and giving to the corporation, either orally or in writing, particulars of the breach. (2) Where a consumer purports to rescind under this section a contract for the supply of goods by a corporation, the purported rescission does not have any effect if: (a) the notice is not served or the goods are not returned within a reasonable time after the consumer has had a reasonable opportunity of inspecting the goods; (b) in the case of a rescission effected by service of a notice, after the delivery of the goods to the consumer but before the notice is served: (i) the goods were disposed of by the consumer, were lost, or were destroyed otherwise than by reason of a defect in the goods; (ii) the consumer caused the goods to become unmerchantable or failed to take reasonable steps to prevent the goods from becoming unmerchantable; or (iii) the goods were damaged by abnormal use; or (c) in the case of a rescission effected by return of the goods, while the goods were in the possession of the consumer: (i) the consumer caused the goods to become unmerchantable or failed to take reasonable steps to prevent the goods from becoming unmerchantable; or (ii) the goods were damaged by abnormal use. (3) Where a contract for the supply of goods by a corporation to a consumer has been rescinded in accordance with this section: (a) if the property in the goods had passed to the consumer before the notice of rescission was served on, or the goods were returned to, the corporationthe property in the goods re-vests in the corporation upon the service of the notice or the return of the goods; and (b) the consumer may recover from the corporation, as a debt, the amount or value of any consideration paid or provided by him or her for the goods. (4) The right of rescission conferred by this section is in addition to, and not in derogation of, any other right or remedy under this Act or any other Act, any State Act, any law of a Territory or any rule of law.

4. Actions Against Manufacturers/Importers of Goods


Part V, Div 2A TPA Manufacturers should be liable for defects in goods because of modern methods of packaging, labeling, distribution and promotion of goods: Zaravinos (G) v Dairy Farmers Co-operative Ltd at 606. Doesnt apply for contract between manufacturer and consumer. (normal contract of sale) Applies where manufacturer supplies goods to another person, usually a distributor or retailer who is acquiring the goods for re-sale. Also applies where a manufacturer supplies goods to a wholesaler who supplies to a retailer who supplies to a consumer. Main sections are s 74B (fitness for purpose) and s 74D (merchantability). Sections dont create a fictional contract, they create statutory causes of action that are available where a corporation places goods in the chain of distribution and the goods are not of merchantable quality or are not reasonably fit for the particular purpose that was made known to the corporation: Courtney v Medtel Pty Ltd at [182]

Remedies Proceedings are for compensation.

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Damages recoverable arent recoverable pursuant to s 82: Arturi v Zupps Motors Pty Ltd. A person who supplies goods direct to a consumer has a right of indemnity from the manufacturer in certain circumstances: s 74H. Any term of a contract that purports to exclude, restrict or modify the liability of the manufacturer or other person under Div 2A is void: s 74K.

4.1 Application of Part V - definitions


Consumer s4B above A person is taken to have acquired goods as a consumer if the price of the goods didnt exceed the amount prescribed an the person didnt acquire the goods for the purpose of using them up or transforming them in trade or commerce: s 4B(1). Goods

s 74A(2)(a) says that unless the contrary intention appears, be read as reference to goods of a kind ordinarily acquired for personal, domestic or household use or consumption Minchillo v Ford Motor Company of Australia, a large Ford prime mover, even though used personally was held that personal use was broader than domestic or household and so was outside the scope of the section.

Manufacturer not defined, but manufactured: includes grown, extracted, produced, processed and assembled: s 75A(1). A corporation will be deemed to be the manufacturer for the purposes of Div 2A if: o The corporation holds itself out to the public as the manufacturer of goods (s 74A(3) (a). o A corporation causes or permits the name of the corporation to be applied to the goods supplied by the corporation (s 74A(3)(b)). o Corporation causes or permits another person in connection with the supply or possible supply of goods by other person, or in connection with promotion by that other person by any means of the supply or use of the goods to hold out the corporation to the public as the manufacturer of the goods (s 74A(3)(c)). o Goods are imported by corporation, and at the time of importation the manufacturer does not have a place of business in Australia (s 74A(4)). Cavalier Marketing (Australia) Pty Ltd v Rasell o Rasells bought carpet from a importer which was deemed to be the manufacturer under Div 2A. o Importer was the appellant. o Appellant supplied the carpet to the 1st defendant for re-supply to Rasells who had bought the carpet to colour match the dcor of the house. o Carpet supplied had pile-reversing which meant colour changed. o Held that the purpose was made clear and that the term was breached. Entitled to damages less the price of the carpet as scrap. Regal Pearl Pty Ltd v Stewart o prawns bought by restaurant from a wholesaler. o Prawns were steamed but contaiminated with Hep A. o Had they been cooked it wouldve gotten rid of the contamination. o Held that it wasnt commonly known that prawns had to be cooked a certain way to be fit for their purpose (human consumption) unlike chicken so a breach of term.

4.2 Substantive sections of Part V


Fitness for purpose: s 74B

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s 74B gives a consumer a direct right of action against the manufacturer if the goods are not fit for the purpose for which they were acquired by the buyer. To apply the manufacturer must not have contracted directly with the consumer. 74B Actions in respect of unsuitable goods (1) Where: (a) a corporation, in trade or commerce, supplies goods manufactured by the corporation to another person who acquires the goods for re-supply; (b) a person (whether or not the person who acquired the goods from the corporation) supplies the goods (otherwise than by way of sale by auction) to a consumer; (c) the goods are acquired by the consumer for a particular purpose that was, expressly or by implication, made known to the corporation, either directly, or through the person from whom the consumer acquired the goods or a person by whom any antecedent negotiations in connexion with the acquisition of the goods were conducted; (d) the goods are not reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied; and (e) the consumer or a person who acquires the goods from, or derives title to the goods through or under, the consumer suffers loss or damage by reason that the goods are not reasonably fit for that purpose; the corporation is liable to compensate the consumer or that other person for the loss or damage and the consumer or that other person may recover the amount of the compensation by action against the corporation in a court of competent jurisdiction. (2) Subsection (1) does not apply: (a) if the goods are not reasonably fit for the purpose referred to in that subsection by reason of: (i) an act or default of any person (not being the corporation or a servant or agent of the corporation); or (ii) a cause independent of human control; occurring after the goods have left the control of the corporation; or (b) where the circumstances show that the consumer did not rely, or that it was unreasonable for the consumer to rely, on the skill or judgment of the corporation.

Merchantability: s 74D Are the goods of merchantable quality? Merchantable quality defined by objective test. Goods are merchantable if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to those factors in s 74D(3). The price paid in s 74D is therefore the price paid to the corporation and not the price paid by the consumer. (though what consumer pays may be relevant under s 74D(3)(c)). The description, if any, is that applied by the corporation: Rasell v Cavalier Marketing (Australia) Pty Ltd at 344. Common Law definition of merchantability isnt relevant: Rasell v Cavalier Marketing (Australia) Pty Ltd at 348. In order to be merchantable goods must be fit for ALL normal purposes for which such goods are commonly bought unless a particular normal purpose excluded: Rasell v Cavalier Marketing (Australia) Pty Ltd at 349. Whether goods are merchantable is to be determined by assessing the goods at the time they were supplied to the consumer: Medtel Pty Ltd v Courtney. Statutory definition requires a two step inquiry: 1. What is the purpose/purposes for which the goods of that kind are commonly bought?

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o o

Objective test : Rasell v Cavalier Marketing (Australia) Pty Ltd at 348. Not answered by looking to individual consumers subjective purpose but that may be relevant for broader inquiry: Courtney v Medtel Pty Ltd

2. Where the goods as fit for the purpose/purposes, so identified, as is reasonable to expect having regard to the criteria in s 74D? o Raise question as to the identity of the person or persons the reasonableness of whose expectations is in question: Graham Barclay Oysters Pty Ltd v Ryan per Lindgren J at 445. Courtney v Medtal Pty Ltd o considered relevant in considering the expectations of recipients of pacemakers to take into account the specialist medical advice which the patients/consumers would have received and upon which they would have been heavily dependent: at [216] What is the consumer entitled to?

If a consumer establishes that the goods arent merchantable theyre not automatically entitled to compensation. Entitlement to compensation only arises if the consumer suffers loss or damage by reason that the goods are not of merchantable quality: s 74D(1)(d). Medtel Pty Ltd v Courtney o batch of pacemakers were held to be unmerchantable due to the fact that they had all been manufactured in such a way as to subject patients to significant risk of failure. o Applicants pacemaker hadnt failed, but others had. o Held, that given the nature of the product the very fact of the increased risk of physical failure of a particular device was capable of causing loss or damage to at least some consumers so could recover.

Non-economic loss may be compensable: o May be cases where stress and anxiety: Courtney v Medtel Pty Ltd at [248]. o Amount representing care and services provided gratuitously to the consumer provided there is a need for such services and theres a causal relationship between the creation of the need and the supply of unmerchantable goods: Courtney v Medtel Pty Ltd at [257]. Interest can be recovered: s 51A Federal Court of Australia Act 1976 (Cth).

74D Actions in respect of goods of unmerchantable quality (1) Where: (a) a corporation, in trade or commerce, supplies goods manufactured by the corporation to another person who acquires the goods for re-supply; (b) a person (whether or not the person who acquired the goods from the corporation) supplies the goods (otherwise than by way of sale by auction) to a consumer; (c) the goods are not of merchantable quality; and (d) the consumer or a person who acquires the goods from, or derives title to the goods through or under, the consumer suffers loss or damage by reason that the goods are not of merchantable quality; the corporation is liable to compensate the consumer or that other person for the loss or damage and the consumer or that other person may recover the amount of the compensation by action against the corporation in a court of competent jurisdiction. (2) Subsection (1) does not apply: (a) if the goods are not of merchantable quality by reason of: (i) an act or default of any person (not being the corporation or a servant or agent of the corporation); or

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(ii) a cause independent of human control; occurring after the goods have left the control of the corporation; (b) as regards defects specifically drawn to the consumers attention before the making of the contract for the supply of the goods to the consumer; or (c) if the consumer examines the goods before that contract is made, as regards defects that the examination ought to reveal. (3) Goods of any kind are of merchantable quality within the meaning of this section if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to: (a) any description applied to the goods by the corporation; (b) the price received by the corporation for the goods (if relevant); and (c) all the other relevant circumstances. Goods sold under false description: s74C 74C Actions in respect of false descriptions (1) Where: (a) a corporation, in trade or commerce, supplies goods manufactured by the corporation to another person who acquires the goods for re-supply; (b) a person (whether or not the person who acquired the goods from the corporation) supplies the goods (otherwise than by way of sale by auction) to a consumer by description; (c) the goods do not correspond with the description; and (d) the consumer or a person who acquires the goods from, or derives title to the goods through or under, the consumer suffers loss or damage by reason that the goods do not correspond with the description; the corporation is liable to compensate the consumer or that other person for the loss or damage and the consumer or that other person may recover the amount of the compensation by action against the corporation in a court of competent jurisdiction. (2) Subsection (1) does not apply if the goods do not correspond with the description referred to in that subsection by reason of: (a) an act or default of any person (not being the corporation or a servant or agent of the corporation); or (b) a cause independent of human control; occurring after the goods have left the control of the corporation. (3) A corporation is not liable to compensate a person for loss or damage suffered by the person by reason that goods do not correspond with a description unless the description was applied to the goods: (a) by or on behalf of the corporation; or (b) with the consent of the corporation, whether express or implied. (4) If the goods referred to in subsection (1) are supplied to the consumer by reference to a sample as well as by description, it is not a defence to an action under this section that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description. (5) A supply of goods is not prevented from being a supply by description for the purposes of subsection (1) by reason only that, being exposed for sale or hire, they are selected by the consumer. Goods which do not correspond with a sample: s74E 74E Actions in respect of non-correspondence with samples etc. (1) Where: (a) a corporation, in trade or commerce, supplies goods manufactured by the corporation to another person who acquires the goods for re-supply; (b) a person (whether or not the person who acquired the goods from the corporation) supplies the goods (otherwise than by way of sale by auction) to a consumer;

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(c) the goods are supplied to the consumer by reference to a sample; (d) the bulk of the goods does not correspond with the sample in quality or the goods have a defect, rendering them unmerchantable, that is not, or would not be, apparent on reasonable examination of the sample; and (e) the consumer or a person who acquires the goods from, or derives title to the goods through or under, the consumer suffers loss or damage by reason that the bulk does not correspond with the sample in quality or by reason that the goods have that defect; the corporation is liable to compensate the consumer or that other person for the loss or damage and the consumer or that other person may recover the amount of the loss or damage by action against the corporation in a court of competent jurisdiction. (2) Subsection (1) does not apply where: (a) the sample is not supplied by the corporation; (b) the supply by sample is made without the express or implied concurrence of the corporation; or (c) the failure of the bulk of the goods to correspond with the sample in quality or the existence of the defect is due to: (i) an act or default of any person (not being the corporation or a servant or agent of the corporation), or a cause independent of human control, occurring after the goods have left the control of the corporation; or (ii) other circumstances that were beyond the control of the corporation and that it could not reasonably be expected to have foreseen Failure to provide facilities for repairs or parts: s74F 74F Actions in respect of failure to provide facilities for repairs or parts (1) Where: (a) a corporation, in trade or commerce, supplies goods (otherwise than by way of sale by auction) manufactured by the corporation to a consumer; or (b) a corporation, in trade or commerce, supplies goods manufactured by the corporation to another person who acquires the goods for re-supply and a person (whether or not the person who acquired the goods from the corporation) supplies the goods (otherwise than by way of sale by auction) to a consumer; and: (c) at a time (in this section referred to as the relevant time) after the acquisition of the goods by the consumer: (i) the goods require to be repaired but facilities for their repair are not reasonably available to the consumer or a person who acquires the goods from, or derives title to the goods through or under, the consumer; or (ii) a part is required for the goods but the part is not reasonably available to the consumer or a person who acquires the goods from, or derives title to the goods through or under, the consumer; (d) the corporation acted unreasonably in failing to ensure that facilities for the repair of the goods were, or that the part was, reasonably available to the consumer or that other person at the relevant time; and (e) the consumer or that other person suffers loss or damage by reason of the failure of the corporation to ensure that facilities for the repair of the goods were, or that the part was, reasonably available to the consumer or that other person at the relevant time; the corporation is liable to compensate the consumer or that other person for the loss or damage and the consumer or that other person may recover the amount of the compensation by action against the corporation in a court of competent jurisdiction. (2) Subsection (1) does not apply where the corporation took reasonable action to ensure that the consumer acquiring the goods would be given notice at or before the time when he or she acquired the goods that: (a) the corporation did not promise that facilities for the repair of the goods, or that parts for the goods, would be available; or

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(b) the corporation did not promise that facilities for the repair of the goods, or that parts for the goods, would be available after a specified period, being a period that expired before the relevant time. (3) Where the corporation took reasonable action to ensure that the consumer acquiring the goods would be given notice at or before the time when he or she acquired the goods that the corporation did not promise that: (a) facilities for the repair of the goods, being facilities of a kind specified in the notice, would be available; (b) parts for the goods, being parts of a kind specified in the notice, would be available; or (c) facilities for the repair of the goods would be available at, or parts for the goods would be available from, a place or places specified in the notice; the corporation is not liable to compensate the consumer or a person who acquires the goods from, or derives title to the goods through or under, the consumer for loss or damage suffered by the consumer or that other person by reason of the failure of the corporation to ensure that facilities of the kind specified in the notice, or parts of the kind specified in the notice, were available, or that facilities for the repair of the goods were available at, or parts for the goods were available from, a place or places specified in the notice, as the case may be. (4) In determining whether a corporation acted unreasonably in failing to ensure that facilities for the repair of goods were, or that a part was, reasonably available to a person at the relevant time, a court shall have regard to all the circumstances of the case, and in particular to the existence, at the relevant time, of circumstances that prevented those facilities or that part being so available, being circumstances beyond the control of the corporation. Non-compliance with express warranty: s74G 74G Actions in respect of non-compliance with express warranty (1) Where: (a) a corporation, in trade or commerce, supplies goods (otherwise than by way of sale by auction) manufactured by the corporation to a consumer; or (b) a corporation, in trade or commerce, supplies goods manufactured by the corporation to another person who acquires the goods for re-supply and a person (whether or not the person who acquired the goods from the corporation) supplies the goods (otherwise than by way of sale by auction) to a consumer; and: (c) the corporation fails to comply with an express warranty given or made by the corporation in relation to the goods; and (d) the consumer or a person who acquires the goods from, or derives title to the goods through or under, the consumer suffers loss or damage by reason of the failure; the corporation is liable to compensate the consumer or that other person for the loss or damage and the consumer or that other person may recover the amount of the compensation by action against the corporation in a court of competent jurisdiction. (2) For the purposes of any action instituted by a person against a corporation under this section, where: (a) an undertaking, assertion or representation was given or made in connection with the supply of goods or in connection with the promotion by any means of the supply or use of goods; and (b) the undertaking, assertion or representation would, if it had been given or made by the corporation or a person acting on its behalf, have constituted an express warranty in relation to the goods; it shall be presumed that the undertaking, assertion or representation was given or made by the corporation or a person acting on its behalf unless the corporation proves that it did not give or make, and did not cause or permit the giving or making of, the undertaking, assertion or representation.

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4.3 Excluding the causes of action

Sections cannot be excluded except in limited circumstances set out in s74L

74K Application of Division not to be excluded or modified (1) Any term of a contract (including a term that is not set out in the contract but is incorporated in the contract by another term of the contract) that purports to exclude, restrict or modify, or has the effect of excluding, restricting or modifying, any liability of a person to compensate or indemnify another person that may arise under this Division, is void. (2) A term of a contract shall not be taken to exclude, restrict or modify the application of a provision of this Division unless the term does so expressly or is inconsistent with that provision. (3) Nothing in this section applies to a term of a contract referred to in subsection 74L(4). 74L Limitation in certain circumstances of liability of manufacturer to seller (1) Notwithstanding section 74H but subject to this section, in the case of goods other than goods of a kind ordinarily acquired for personal, domestic or household use or consumption, the liability under that section of a manufacturer to a seller is limited to a liability to pay to the seller an amount equal to: (a) the cost of replacing the goods; (b) the cost of obtaining equivalent goods; or (c) the cost of having the goods repaired; whichever is the lowest amount. (2) Subsection (1) does not apply in relation to particular goods if the seller establishes that it is not fair or reasonable for the liability of the manufacturer in respect of those goods to be limited as mentioned in subsection (1). (3) In determining for the purposes of subsection (2) whether or not it is fair or reasonable for the liability of a manufacturer to a seller in respect of goods to be limited as mentioned in subsection (1), a court shall have regard to all the circumstances of the case and, in particular, to: (a) the availability of suitable alternative sources of supply of the goods; (b) the availability of equivalent goods; and (c) whether the goods were manufactured, processed or adapted to the special order of the seller. (4) This section is subject to any term of a contract between the manufacturer and the seller imposing on the manufacturer a greater liability than the liability mentioned in subsection (1). (5) In this section, the expressions manufacturer and seller have the same respective meanings as in section 74H.

5. Persons Injured by Defective Goods


Div 2A, Part VA of the TPA Person does not need to have bought the defective goods. But SGA should be considered. Remember that there may be causes of action at CL such as negligence.

5.1 Application of Part VA definitions

Goods, limited definition for Pt 5, Div 2A doesnt apply so includes: s 4(1) goods includes: (a) ships, aircraft and other vehicles; (b) animals, including fish; (c) minerals, trees and crops, whether on, under or attached to land or not; and (d) gas and electricity.

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Manufactured defined in s 75AA, for the purpose of s 75AD, in same terms as s 74A. There are procedures which apply where the manufacturer isnt known: s 75AJ.

5.2 Substantive sections


75AD Liability for defective goods causing injuriesloss by injured individual If: (a) a corporation, in trade or commerce, supplies goods manufactured by it; and (b) they have a defect; and (c) because of the defect, an individual suffers injuries; then: (d) the corporation is liable to compensate the individual for the amount of the individuals loss suffered as a result of the injuries; and (e) the individual may recover that amount by action against the corporation; and (f) if the individual dies because of the injuriesa law of a State or Territory about liability in respect of the death of individuals applies as if: (i) the action were an action under the law of the State or Territory for damages in respect of the injuries; and (ii) the defect were the corporations wrongful act, neglect or default. a defect

s 75AC(1) provides that goods have a defect if their safety is not such as persons generally are entitled to expect. o Test applied objectively, based on reasonable expectations of the public not particular individual. o In determining the safety of the goods s 75AC(2) provides regard is to be had to the following: s 75AC (2) In determining the extent of the safety of goods, regard is to be given to all relevant circumstances including: (a) the manner in which, and the purposes for which, they have been marketed; and (b) their packaging; and (c) the use of any mark in relation to them; and (d) any instructions for, or warnings with respect to, doing, or refraining from doing, anything with or in relation to them; and (e) what might reasonably be expected to be done with or in relation to them; and (f) the time when they were supplied by their manufacturer.

consumer expectation test: Terri Hazel v Getz Brothers?? o Faulty heart valve If safer goods of the same kind are supplied by the manufacturer after the subject goods were supplied cant lead the inference that original goods were defective: s 75AC(3). Cant draw inference where goods comply with a relevant Cth mandatory standard but that standard wasnt the safest possible at the time of supply: s 75AC(4).

5.3 Defences
75AK Defences (1) In a liability action, it is a defence if it is established that: (a) the defect in the action goods that is alleged to have caused the loss did not exist at the supply time; or

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(b) they had that defect only because there was compliance with a mandatory standard for them; or (c) the state of scientific or technical knowledge at the time when they were supplied by their actual manufacturer was not such as to enable that defect to be discovered; or (d) if they were comprised in other goods (finished goods)that defect is attributable only to: (i) the design of the finished goods; or (ii) the markings on or accompanying the finished goods; or (iii) the instructions or warnings given by the manufacturer of the finished goods. (2) In this section: supply time means: (a) in relation to electricitythe time at which it was generated, being a time before it was transmitted or distributed; or (b) in relation to other goodsthe time when they were supplied by their actual manufacturer.

s 75AK(1)(c) argued successfully in Graham Barclay Oysters v Ryan at 149. Barclay oysters discharged their onus of establishing that when it supplied the contaminated oysters, the state of scientific or technical knowledge was not such as to enable the presence of the HAV in them to be discovered.

5.4 Remedies

If the individual dies then the cause of action survives for the benefit of that individuals estate: s 75AD(f); s 75AH. If another person suffers consequential loss they can recover their loss from the manufacturer, provided their loss does isnt because of a business relationship: s 75AE. A business relationship includes profession and a relationship of employer and employee or similar: s 75AE(2). If workers compensation covers the loss then Pt VA doesnt apply: s 75AI. Damage or destruction of other goods because of the defective goods is covered by the compensation regime. Provided goods fall within the more limited definition of goods ie. goods of a kind ordinarily acquired for personal, domestic or household use: s 75AF. Damage/destruction to land, buildings or fixtures ordinarily acquired for private use is also covered: s 75AG.

Other procedural issues The remedies in Pt VA are in addition to any other remedies that may apply: s 75 AR. Application of Pt VA cannot be excluded, restricted or modified: s 75AP. 3 year limitation period which runs from the time the person first became aware or ought reasonably to have become aware of the loss, the defect and the identity of the manufacturer. Outside time limit of 10 years: s 75AO. Unidentified manufacturer 75AJ Unidentified manufacturer (1) If a person who wishes to institute a liability action does not know who manufactured the action goods, the person may serve on a supplier, or each supplier, of the action goods who is known to the person a written request to give the person particulars identifying: (a) the corporation which manufactured the goods (having regard to section 75AB); or (b) the supplier of the goods to the supplier requested. (2) If, 30 days after the person has made the request or requests, the person still does not know who manufactured the action goods, then the corporation, or each corporation, that is a supplier: (a) to whom a request was made; and

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(b) who did not comply with the request; is taken, for the purposes of the action, to have manufactured the action goods.

6. Transfer of Property and Risk

Distinguish property and title o Property defined in SGA as general property in goods can only be held by true owner: s3(1) o Title, used to distinguish between true ownership (property) and entitlement. o Title and property are sometimes used interchangeably and true owner will usually hold title: Sogelease Australia Ltd v Boston Australia Ltd at 4-5. When property passes in a SoG contract is important because: o Risk prima facie passes with property. o A buyer may by reason of provisions in the Act lose the right to reject goods once property has passed (s 14(3)). o The party with property in the goods can generally sue for damages caused to the goods. o IF the buyer has property in the goods he can pass good title to a 3 rd party. o Generally the seller can only sue for the price if property has passed to the buyer: Style Finish (Qld) Pty Ltd v Abloy Security Pty Ltd.

6.1 General rules


Property passes when parties intend it to pass only if not intention expressed will the rules in s21 apply Property will not pass unless the goods are identified or have been ascertained: s19 Unascertained goods o Regardless of partys intention property cant pass until the goods are ascertained: s 19. o Section is in absolute terms and overrides the express intention of the parties: Jansz v GMB Imports Pty Ltd Jansz v GMB Imports Pty Ltd GMB Imports had a tobacco importing licence that expired on 31 May 1976 Signed a contract with a client for supply of tobacco for next 12 months on 31 May 1976 Question was whether they had engaged in unlicensed sale of tobacco Hence, question was whether property passed in the tobacco at the time of contract or at the time of delivery to the client (in the following 12 mnths) HELD that property in the tobacco could not pass until it was ascertained, and the goods were not ascertained until April 1977 when order received and tobacco put aside CANNOT contract out of s19

Specific or ascertained goods o Primary rule is that property in the goods is transferred to the buyer when the parties intend it to be transferred: s 20(1) o In ascertaining when the parties intended property to pass, regard is to be had to the terms of the contract, the conduct of the parties, and the circumstances of the case: s 20(2).

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o o

McDougall v Aeromarine of Emsworth Ltd, contract to build a ship provided property was to pass on the first installment of the price being paid. Newtons of Wembley Ltd v Williams, contract provided that property in a motor vehicle was not to pass until the buyers check had been honoured.

6.2 Where intention is expressed in the contract/circumstances


Generally For specific or ascertained goods property passes when intended: s20 For unascertained goods property passed when intended as long as it is not before the goods are ascertained: s19 Romalpa Clauses

Rules/presumptions subject to the contrary intention of the parties. Purpose of retention of title clauses is to protect the seller from the insolvency of the buyer where the price is unpaid and to defeat the claims of creditors with registered charges who would otherwise take priority over the seller. Romalpa clauses: Aluminium Industrie Vaasen BV v Romalpa Aluminium Ltd. In basic form clause prohibits property passing until payment. Over time clauses have become more elaborate. o Often purport to give proprietary rights to the seller over assets into which the goods have been transformed or with which they might be mixed, or, where the good is the subject of an onward sale by the buyer, that the proceeds of such sale or the debt due to the buyer by the 3rd party are held by the buyer on behalf of the seller (proceeds subclause). If the clause anticipates the buyer may on-sell the goods, then you may see a stipulation to the effect that the buyer may become fiduciary agent of the seller o Why would clause state that the seller become fiduciary agent for the seller? The equitable doctrine of tracing owner can follow property held by the fiduciary, even where property has been transformed to cash or property or mixed with other goods: (Re Diplock) o When stating someone is a fiduciary, it does not necessarily make them your fiduciary (Clough Mill v Martin). Sometimes extend the period of credit. This does not effect the intention that seller remains owner of the goods but may affect the right of possession until the period of credit has expired. Danger to seller is that the buyer may resell the goods in the meantime.

Associated Alloys Pty Ltd v ACN001452106 Pty Ltd (2000) 202 CLR 588 Goods used to make other products so they had lost original identity Seller had not been paid full amount claimed it was entitled to trace into and assert an equity to the buyers debt from the sale of the fabricated product to a third party Held that the proceeds was to be construed to refer to money received by the buyer and not debt which would be set out in the buyers books (same applied to Rondo) Seller unsuccessful as they couldnt prove the money received was proceeds Retention of title clause did not constitute a charge but operated as an agreement to create a trust over the proceeds of the sale of goods Couldnt claim proceeds as it failed to prove they were recorded and received by the buyer Important to distinguish as a charge is void unless it has been registered under the then corporations law and would render the clause ineffective

ROTs used as a security device by the seller but they dont create a security right in favour of the seller: Armour v Thyssen Edelstahlwerke AG. To be effective, the clauses must be part of the contract: Chattis Nominees v Norman Ross Homeworks. (can be oral: Chattis Nominees v Norman Ross Homeworks) 39

Susan Hedge LWB 332 Sale of Goods

Right of disposal of the goods


Right retained by the seller to sell to someone other than the buyer if, when the goods arrived after shipment, the buyer did not pay for them. Reservation of a right of disposal is now regarded as equivalent to a right in the seller to reserve the property in the goods: James v The Commonwealth. 22 Reservation of right of disposal (1) When there is a contract for the sale of specific goods or when goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled.

Rondo Building Services Pty Ltd v Casaron Pty Ltd [2003] QCA 78 distinguished Associated Alloys Pty Ltd v ACN001452106 Pty Ltd R was owed $145000 from C for goods sold and delivered. Rs standard conditions of sale provided that despite delivery or installation, property would remain in R until buyer had paid any and all of its indebtedness to them clause 13 (retention of title) Risk passed on delivery clause 14 Buyers possession was to be a daily consideration until payment was made Seller licensed the buyer to install the product, but R wanted to maintain ownership Rondo: clause 17 The buyer shall be at liberty to agree to sell products (independently or affixed to the other materials) subject to the condition that until payment of the price, the buyer shall sell as agents and bailees for Rondo and that the entire proceeds from sale thereof shall be held in a separate account in trust for Rondo. Was R entitled to rely in guarantee of the debt? C had used materials and they had made goods part of realty and at that stage property passed from R despite the retention of title clause. By virtue of clause 17 which permitted C to sell goods, the liability of C and debt was discharged by performance and therefore there was no indebtedness to which the guarantee would apply Did cl 17 mean that the liability of buyer and its debt to Rondo was discharged by performance? No o Unlike the clause in Associated Alloys, clause 17 here operated until payment of the price held by McPherson JA at para 10 to be an indication and possibly a decisive one, that the indebtness or obligation to pay the price was intended to persist concurrently with the duty to hold the proceeds in a separate trust account. o In Associated Alloys receipt of proceeds by the buyer was regarded as constituting the trust and discharging the obligation in debt. o In Rondo, both parties completely ignored the trust and so could not be the intention of the parties that one arise

6.3 Where no intention appears


Rules are found in s 21. Which rule depends principally on the nature of the goods being sold. Important that rules are only presumptions and can be displaced if the parties evince a contrary intention.

Rule 1 sale of specific goods in a deliverable state 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 buyer when the contract is made and it is immaterial whether the time of payment or the time of delivery, or both, is or are postponed.

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This rule reflected the CL when enacted: Simmons v Swift at 862. CL property could pass in goods irrespective of whether they had been delivered to the buyer: Badische Anilin und Soda Fabrik v Hickson. Property could pass whether or not the buyer had paid for the goods: Tarling v Baxter.

(a)

an unconditional contract Sale is not subject to any condition suspensive (condition precedent) of the passing of property: McPherson, Thom, Kettle & Co v Dench Bros. If theres a condition property will not pass until the contract is fulfilled. McPherson, sale of heifer by auction. Heifer disappeared before buyer took delivery. Seller sued for price - property passed. Conditions for sale included: 1. 'All lots shall be at risk of purchaser after the fall of the hammer, and must be settled for by him and to our satisfaction immediately after the sale'; and 2. 'All lots not settled for in accordance with these conditions shall be resold either by public auction or private contract whichever we may deem fit, and all deficiency, together with expenses attending such resale, shall be made good by the defaulter at this present sale.' Held that (1) was an express declaration by parties that property should pass at time of contract, no room for doubt. Buyer argued (2) made sale conditional. Held the power of resale assumed an original sale and until default by buyer the seller could maintain an action for goods bargained and sold. Only after default and resale that that action was lost. for the sale of specific goods specific goods = goods identified and agreed upon at the time a contract of sale is made: s 3. (may be future goods). in a deliverable state when they are in such as state that the buyer would, under the contract, be bound to take delivery of them: s 3(4). If under a contract certain work was to be done to the goods prior to delivery then they would not be in a deliverable state until that work was done: Underwood Ltd v Burgh Castle Brick and Cement Syndicate. Ie if embroidery to be done on sheets, not in deliverable state until completed

(b)

(c)

In such circumstances property passes when the contract is made irrespective of the time for payment or delivery Is there a contrary intention? Rule is often displaced in modern commercial transactions. Specified as cash sale or a sale COD (cash on delivery), intention of parties is property will pass on payment and that payment is a condition precedent to the passing of title: Minister for Supply & Development v Servicements Co-op Joinery Manufacturers Ltd. If payment by cheque depends on parties intention, whether treated as cash or if property only to pass once honoured: Davey v Robinsons Motors Pty Ltd. Credit card, inference property passes on tender of card: Re Charge Card Services Ltd. Rule 2 specific goods and seller bound to do something to put them into deliverable state Rule 2: When there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof. Preconditions for operation of the rule are:

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a contract for the sale of specific goods the seller is bound to do something to the goods for the purpose of putting them in a deliverable state Only applies where seller is bound to do something. o bound = contractually bound. o Deliverable state = when they are in such as state that the buyer would, under the contract, be bound to take delivery of them: s 3(4).

In such circumstances property does not pass until such thing is done and the buyer has notice thereof. o If parties intend property to pass without notification, property passes when the goods achieve a deliverable state: Joseph Reid Pty Ltd v Schultz at 233. o Knowledge is required, constructive notice probably insufficient: Worcester Works Finance Ltd v Cooden Engineering Co Ltd at 218.

Wallace v Safeway Caravan Mart Pty Ltd, caravan purchased on condition seller install a shower and then delivered. Before work completed the caravan was stolen. Held that caravan was not in a deliverable state at time of theft so property and risk hadnt passed.

Rule 3 specific goods and seller bound to weigh, measure to test them to ascertain price Rule 3: When there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test, or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing is done and the buyer has notice thereof.

a contract for the sale of specific goods in a deliverable state but the seller is bound to weigh, measure, test, or do some other act or thing with reference to the goods for the purpose of ascertaining the price o Must be done by the seller, not the buyer or a 3rd party: Nanka-Bruce v Commonwealth Trust Ltd. o Must be to ascertain the price, not merely for buyers satisfaction. o Nanka-Bruce v Commonwealth Trust Ltd, provision in contract that permitted the bags of cocoa to be weighed to see if their weight corresponded with the weight as represented by the seller, the price having been fixed, was not a condition precedent to passing of property within rule 3. o Some other act or thing, may mean counting.

In these circumstances property doesnt pass until such act or thing is done and the buyer has notice thereof. o Buyer is required to have notice of the price as ascertained by the seller having weighed, measured or tested the goods. Rule 4 goods delivered on approval or on sale or return basis Rule 4: (1) When goods are delivered to the buyer on approval or on sale or return or other similar terms, the property therein passes to the buyer (a) When the buyer signifies the buyers approval or acceptance to the seller, or does any other act adopting the transaction; (b) If the buyer does not signify the buyers approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been

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fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time. (2) What is a reasonable time is a question of fact.

Goods must have been delivered to buyer on approval or on sale or return or other similar terms o Common feature is that buyer has complete discretion as to whether to accept or reject the goods delivered. o Buyer need not show reasonable to reject: Berry & Son v Star Brush Co. o Sale on approval exists where parties intend goods to be bought by buyer if he approves them but not if he disapproves: London Jewellers Ltd v Attenborough. o Contract on sale or return terms exists if sold at option of recipient, not rejected, and not returned to the seller within the fixed time or a reasonable time: Kirkham v Attenborough. o Irrelevant if buyer intends to keep or on-sell: Poole v Smiths Car Sales (Balham) Ltd. Doesnt apply where buyer merely acts as agent for seller: Weiner v Harris Nature of transaction construed via whole transaction: Weiner v Harris at 290. Sale on similar terms eg. goods sent on trial: Beverley v Lincoln Gas Light & Coke Co.

Under the rule property can pass in 3 ways: 1. When buyer indicates approval or acceptance of the goods to seller: s 37. Can be done by writing, words or conduct. 2. When buyer does any act adoption the transaction; or Any act which is consistent only with his being the purchaser or by which he puts it out of his power to return the goods: Kirkham v Attenborough. Kirkham v Attenborough, seller was a jewellery manufactuer and forwarded a large quanity of jewellery to buyer on sale or return. Buyer pledged goods to pawnbroker. Lord Esher MR said must be some act which shows he adopts the transaction; but any act which is consistent only with his being the purchaser is sufficient: at 203. This case buyers act held to be inconsistent with his free power to return goods. HELD: property in the goods had passed to the buyer, pawnbroker had good title to the goods. Astley Industrial Trust Ltd v Miller, held that where a motor vehicle was delivered to a buyer on sale or return terms, the receipt of a log book issued by local authority on buyers application was an act adopting the transaction. If a buyer, receiving goods on sale or return terms forwards it to a 3 rd party on the same terms, this of itself isnt an act adopting the transaction: Genn v Winkel. 3. When the buyer retains the goods without notice of rejection beyond the time fixed for the return of the goods, or if no time has been fixed, on expiration of a reasonable time. What is a reasonable time is a question of fact. Sellers conduct may help determine what a reasonable time is: Poole v Smiths Car Sales (Balham) Ltd. If buyer has notified the seller of his rejection, property cannot pass to the buyer on expiration of a reasonable time: s 21 r 4(b). If recipient notifies seller of rejection but doesnt return them, there is no liability, contract doesnt bind recipient to return the goods: Price v Fraser. Parties can make return necessary for rejection: Ornstein v Alexandra Furnishing Co. THEN failure to return may mean the seller is entitled to sue for wrongful interference: Mitchell v Ealing London Borough Council.

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If goods are damaged/destroyed without buyers fault and before time for return, buyer is not liable for the price of the goods or for damages: Elphick v Barnes. o Elphick v Barnes, horse delivered on trial for 8 days, died on 3rd day. Held to be at sellers risk at the time. o Buyer seen as bailee while in their possession so have onus of proving any damage was not their fault: Houghland v RR Low (Luxury Coaches) Ltd. o If goods sent to buyer without consent, only liable for intentional damage: Howard v Harris.

NOTE TPA: 65 Liability of recipient of unsolicited goods (1) A person to whom unsolicited goods are supplied by a corporation, in trade or commerce, is not liable to make any payment for the goods and is not liable for the loss of or damage to the goods other than loss or damage resulting from the doing by him or her of a wilful and unlawful act in relation to the goods during the period specified in subsection (4). Rule 5 unascertained or future goods Rule 5: (1) When there is a contract for the sale of unascertained or future goods by description, and goods of that description and in deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer, or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. (1A) Such assent may be express or implied, and may be given either before or after the appropriation is made. (2) When, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, the seller is deemed to have unconditionally appropriated the goods to the contract.

a contract for the sale of unascertained or future goods by description o Whatever the intention of the parties, good cannot pass before theyre ascertained: Re Goldcorp Exchange Ltd (in rec); s 19. goods of that description are in a deliverable state o in such a state that the buyer would under the contract be bound to take delivery of them: s 3(4). are unconditionally appropriated to the contract o the contract as become irrevocably attached to the goods in question. o It is the selection of goods by one party, and the adoption of that act by the other party. Distinguished from seller merely setting apart goods they expect to use in the contract, because in that case theyre not bound and can change their mind: Carlos Federspiel & Co SA v Charles Twig & Co Ltd. o The property in the goods must be intended to pass merely upon appropriation and not once some further condition is satisfied eg. payment. o Appropriation depends on circumstances but always involves actual or constructive delivery: Carlos Federspiel & Co SA v Charles Twig & Co. o If there is a retention of title clause thus reserving the right of disposal under certain condition are fulfilled said to be what is not an unconditional appropriation to the contract but a conditional appropriation: James v The Commonwealth at 380. either by the seller with the assent of the buyer, or the buyer with the assent of the seller o Buyer/Seller can agree to appropriation by other party before it happens: Aldridge v Johnson; s 21 r 5(1A).

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o o

Assent can be express of implied. Example of implied is where upon being informed of appropriation buyer insures goods: Sparkes v Marshall. Assent inferred by possession for time without objection: Pignataro v Gilroy.

The property passes to the buyer upon such unconditional appropriation If the goods are future goods, for example, a ship to be built, property in the ship will pass to the buyer when the ship is finished and the ship has been appropriated to the contract by the seller with the assent of the buyer.

6.4 Risk

Important where goods are damaged, destroyed or perished. Person who bears the risk, suffers the loss. Where agreement making it clear which party bears the risk it is necessary to determine: o Who bore the risk in the goods at the relevant time; and o Whether the event which caused the loss resulted in the contract being avoided (on basis of frustration).

If goods at sellers risk The seller, being unable to deliver the goods in accordance with the contract is liable to the buyer for damages for non-delivery buyer will not be liable for the price. If buyer has paid any price prior to this it will be refunded. If goods at buyers risk Buyer is liable to the seller for the price even if the goods have been damaged or destroyed. Or alternatively damages for non-acceptance. When does risk pass? With property in the goods IN THE ABSENCE OF CONTRARY INTENTION 23 Risk prima facie passes with property (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. (2) However, when delivery has been delayed through the fault of either buyer or seller the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault. (3) This section does not affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party. Parties agreeing otherwise

Where goods are FOB (free on board) or CIF (cost, insurance, freight) parties will usually agree that risk is to pass to the buyer on shipment despite property still remaining with seller: NSW Leather Co Pty Ltd v Vanguard Insurance Co Ltd, where goods stolen prior to being loaded for FOB contract. Evidence didnt establish risk was to pass prior to loading. Where property hasnt passed but seller has done everything they can, parties usually agree that buyer bears risk, especially where goods are under buyers control: Sterns Ltd v Vickers Ltd. If delivery is delayed due to fault of either party goods are at the risk of party at fault in regards to the loss which might not have occurred but for that fault: s 23(2). o Fault wrongful act or default: s 3. o Proviso held to apply to delay in delivery whether or not property is to pass upon delivery: Sharp v Batt. 45

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Demby Hamilton & Co Ltd v Barden, buyer failed to take delivery of part of 30 tons of apple juice. During buyers delay remainder of juice went putrid and had to be destroyed. Held although property hadnt passed, buyer bore risk of deterioration. Court had to be properly satisfied loss was properly attributable to the failure of the buyer to take delivery of goods at the proper time: at 437.

Special provisions for risk where goods are sent by sea (s 34), or where seller agrees to deliver them at sellers own risk at a place other than when they were sold (s 35). o Provision is of limited scope, doesnt absolve the seller for any mishap to the goods in the course of transit.

34 Delivery to carrier (1) When, in pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is prima facie deemed to be a delivery of the goods to the buyer. (2) Unless otherwise authorised by the buyer, the seller must make such contract with the carrier on behalf of the buyer as may be reasonable having regard to the nature of the goods and the other circumstances of the case. (2A) If the seller omits so to do, and the goods are lost or damaged in course of transit, the buyer may decline to treat the delivery to the carrier as a delivery to himself or herself, or may hold the seller responsible in damages. (3) Unless otherwise agreed, when goods are sent by the seller to the buyer by a route involving sea transit, under circumstances in which it is usual to insure, the seller must give such notice to the buyer as may enable the buyer to insure them during their sea transit, and if the seller fails to do so, the goods are deemed to be at the sellers risk during such sea transit. 35 Risk where goods are delivered at distant place When the seller of goods agrees to deliver them at the sellers own risk at a place other than that where they are when sold, the buyer must, nevertheless, unless otherwise agreed, take any risk of deterioration in the goods necessarily incident to the course of transit. Obligations as bailee s 23(3) nothing is to affect the duties or liabilities of either seller of buyer as bailee of the goods of the other party. Bailment may happen where property has passed to the buyer seller remains in possession. Although general risk is with the buyer seller in possession of the goods still owes duties as bailee. And vice versa. Even though goods are at buyers risk, seller must take reasonable care of the goods: Houghland v RR Low (Luxury Coaches) Ltd. Seller must comply with any express terms of the bailment. Failure means they are strictly liable for delivery up of the goods in property condition and will not be excused even in respect of accidental loss or damage UNLESS seller/bailee can show it would have occurred even without the breach: Edwards v Newland & Co. Goods perish after agreement to sell but before sale If no fault of either party, agreement is avoided: s 10. (applies only to specific goods) Risk must not have passed to buyer. 10 Goods perishing before sale, but after agreement to sell

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When there is an agreement to sell specific goods, 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.

If buyer has paid the price, they can recover it from the seller on the basis of total failure of consideration: Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd. Similar to frustration at CL: Taylor v Cardwell. perished in business insurance contracts means so altered in nature by damage or deterioration that they have become, for business purposes, something other than what is described in sale contract: Asfar v Blundell. But rotten potatoes have been held not to be perished: Horn v Minister.

Goods have already perished at time of sale Contract is void: s 9. 9 Goods which have perished When there is a contract for the 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.

Section has no application were goods have never existed: McRae v Commonwealth Disposals Commission. Akin to CL mistake.

7. Transfer of Title by Non-Owner


General rule Is that no-one can transfer a better title to goods than he or she possesses: Hollins v Fowler ie the nemo dat quod non habet rule. nemo dat quod non habet rule is incorporated in the SGA by s 24(1):

24 Sale by person not the owner (1) Subject to the provisions of this Act, when goods are sold by a person who is not the owner thereof, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by the owners conduct precluded from denying the sellers authority to sell.

7.1 Exceptions to nemo dat rule


There are a number of exceptions to the nemo dat rule. Where an exception applies, title in the goods will pass to the 3rd party even though the seller doesnt have title. Reflects the need to balance the protection of property (nemo dat) rule against the protection of commercial transactions (the person who takes in good faith and for value without notice should get a good title): Bishopsgate Motor Finance Corporation Ltd v Transport Brakes Ltd at 336-7 per Denning LJ. The exceptions are: 1. estoppel (the exception embodied in s 24(1)) 2. sale under a voidable title (s 25) 3. sale by a mercantile agent (Factors Act exception s 24(2)) 4. seller in possession (s 27(1)) 5. buyer in possession (s 27(2)) 6. miscellaneous exceptions

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all exceptions require that the buyer/3rd party acquires in good faith and onus is on 3rd party to establish exception

1. Estoppel
Closing words of s 24(1) unless the owner of the goods is by the owners conduct precluded from denying the sellers authority to sell held to incorporate an exception based on CL estoppel: Associated Midland Corporation v Sanderson Motors P/L. An estoppel, where it arises, disentitles the true owner from denying the ownership of a 3 rd party who buys the goods from the buyer. Estoppel binds not only owner of the goods, preventing them asserting true ownership, but confers good title against the whole world: Eastern Distributors Ltd v Goldring. Essential to the creation of the estoppel is the belief by the 3 rd party that the seller is the owner of the goods or is authorised to sell them. Can happen 2 ways: 1. representation by true owner that seller is true owner or has authority to sell the goods on owners behalf. 2. negligence by true owner permitting seller to create appearance of ownership. Both require the 3rd party to rely on it 3rd party cant know the seller isnt the real owner or doesnt have authority to sell.

Estoppel by representation Representation by words or conduct that that person is entitled to sell: Moorgate Mercantile Co 3rd party must establish that there was a clear and unequivocal representation inconsistent with the right of the owner to assert ownership in the goods that the third party reasonably relied on it to his or her detriment: Eastern Distributors Ltd v Goldring. Representation must have been made by the owner or someone authorised by the owner: Moorgate Mercantile Co Ltd v Twitchings. Entrusting possession to another isnt a representation by the owner that they own them: Shaw v Commissioner of Police; Central Newbury Car Auctions Ltd v Unity Finance Ltd. (Common sense otherwise every bailment would present problems) Mere possession by buyer of documents of title does not at CL convey necessary representation, document of title to goods has the same meaning as in the Factors Act s 3. ie. a bill of lading, dock warrant, warehouse keepers certificate, warrant or order for the delivery of goods, and any other document used in the ordinary course of business as proof of the possession or control of goods, or authorising or purporting to authorise, either by endorsement of by delivery, the possessor of the document to transfer or receive goods thereby represented: s 2. Position may be different if goods & documents of title given to an agent, need to consider if circumstances constitute a sufficient representation that possessor was the owner: Motor Credits (Hire Finance) Ltd v Pacific Motor Auctions P/L. Dealers usually bought cars and offered to MC to finance them Display plan so that MC financed cars in dealers yard Dealer sold in own name, purchasers did not know of MC Dealer in financial trouble gave cars to PM and when cheques of payment were dishonoured, PM kept the cars HCA held that PM knew dealer was not the owner of the cars but assumed that the dealer had authority to sell Held that transaction was outside the course of business and so PM should have been on notice that something odd was going on Held MC entitled to car 48

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Privy Council (on appeal) held course of business irrelevant Lloyds & Scottish Finance Ltd v Williamson Williamson owned care and left it with dealer to sell at or above a certain price Williamson understood that the dealer would sell the car as the apparent principal Held that estoppel acted and title passed to third party purchaser even though dealer had exceeded his authority and sold on terms unacceptable to Williamson Bigrock v Esanda Finance Financier lent money over motor vehicle E wrote letter saying that no money was owed Financier sold to Bigrock, who relied on Es letter re payment Held estoppel operative, Bigrock acquired good title Eastern Distributors Ltd v Goldring, Owner of van estopped from denying authority of a car dealer to sell van in circumstances where owner, wishing to raise money on van, had armed dealer with a signed hire purchase agreement in blank & a delivery note in respect of the van.

Estoppel by negligence Where true owner, by own negligence, permits seller to create appearance of ownership. Buyer must show the owner owed the buyer a duty of care; that the owner breached that duty and that this caused the buyer to purchase the relevant goods from the seller. Limited application because usually owner doesnt owe a 3 rd party buyer a duty of care: Mercantile Bank of India Ltd v Central Bank of India Ltd. Mere lack of prudence such as allowing the goods to be stolen or lose isnt sufficient: Central Newbury Car Auctions Ltd v Unity Finance Ltd at 381. Possible examples of negligence Signing form in blank to raise loan Failing to register lease or interest under compulsory registration scheme: Associated Midlands Leonard v Ielasi, Owner of car lent car to a friend. He discovered the friend had, without authority, renewed registration in the friends own name. Owner took no steps to regain possession or rectify the situation. Held to be estopped from denying friends authority to sell. Moorgate Mercantile Co v Twitchings, House of Lords held a finance companys failure to register a hire-purchase agreement where registration wasnt compulsory was insufficient to preclude them asserting their rights.

2. Sale under a voidable title


25 Sale under voidable title When the seller of goods has a voidable title thereto, but the sellers title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, if the buyer buys them in good faith and without notice of the sellers defect of title. Technically not an exception to nemo dat rule but application of contract law that the right to rescind a contract is lost when an innocent 3rd party has acquired a bona fide interest. Section envisages 2 sales: 1. the sale from seller 1 to buyer 1; and 2. the sale from buyer 1 to buyer 2. Buyer 2 will get good title provided B 1s title hasnt been avoided before sale to B 2.

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What is voidable title? If a contract of sale is vitiated by fraud, misrepresentation or mistake the sale is not void but voidable at the option of the innocent party. If goods are sold under a mistake as to the buyers identity better view is that contract is voidable NOT void: Lewis v Avery. If mistake goes to the root of the contract, contract is void. If contract is void no property passes and buyer obtains no title (unless another exception to nemo dat rule applies): Ingram v Little. If contract is voidable then property in the goods can pass and there is scope for the innocent buyer to get good title provided they get it before the contract is rescinded. When is a voidable title avoided? A person may elect to avoid or affirm a contract at any time after they know of the ground for avoidance (ie. that contract is voidable). An unreasonable lapse of time may indicate an election to affirm the contract: Chao v British Traders and Shippers Ltd at 475. Generally avoidance by seller must be communicated to original buyer BUT exceptions. Sufficient avoidance if in circumstances to prevent title passing seller takes all reasonable & practical steps to regain goods, unnecessary the intention to rescind be communicated to fraudulent party: Car v Universal Finance Co Ltd v Caldwell. Seller can only rescind under normal contract law ie by making an unequivocal representation to the buyer that they rescind the contract In practice, rogues often abscond the jurisdiction Car & Universal Finance Co Ltd v Caldwell, Contract avoided upon owner giving notice of theft of the motor vehicle to police and automobile association. Plaintiff didnt get good title.

3. Sale by a mercantile agent


Factors act exception (s 3 Factors Act) preserved by s 24(2)

24 Sale by person not the owner (2) This Act does not affect (a) the provisions of the Factors Act, or any enactment enabling the apparent owner of goods to dispose of them as if the apparent owner were the true owner thereof; (b) the validity of any contract of sale under any special common law or statutory power of sale or under the order of a court of competent jurisdiction. s 3: When a mercantile agent is, with the consent of the owner, in possession of goods or of the documents of title to goods, any 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 authorised by the owner of the goods to make the same: Provided that the person taking under the disposition acts in good faith, and has not at the time of the disposition notice that the person making the disposition has not authority to make the same.

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Onus on 3rd party buyer to establish elements: Oppenheimer v Attenborough & Son. 1. Mercantile agent a commercial intermediary who has authority to sell/buy goods a mercantile agent having in the customary course of his business such agent authority either 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: s 2(1) Factors Act. Applied widely so it may be the only time the agent has acted in such a capacity: Weiner v Harris. Relevant time for whether they are a mercantile agent is the time they obtain possession of the goods: Heap v Mortorists Advisory Ltd. 2. In possession of the goods with the consent of the owner Deemed to be in possession where the agent has actual custody or control of the goods or documents of title: s 2(2) Factors Act. Consent must be to the possession in the capacity of a mercantile agent: Astley Industrial Trust Ltd v Miller. Example: requirement is satisfied if the owner leaves car with dealer for purposes of sale, not satisfied if it is for purposes of repair: Pearson v Rose & Young Ltd. Or if car is left for purposes of hire, there will be no possession as a mercantile agent: Astley Industrial Trust Consent presumed in absence of contrary evidence: s 3(4) Factors Act. Possession by mercantile agent must continue until the time of the disposition by the agent: Staffs Motor Guarantee Ltd v British Wagon Co Ltd. 3. Mercantile agent makes a sale, pledge or other disposition of the goods Pledge any contract pledging or giving lien or security on goods, whether in consideration of an original advance or of any further or continuing advance or of any pecuniary liability: s 2(1) Factors Act. 4. In the ordinary course of business as a mercantile agent If the sale has been for substantially less than the value of the goods, has occurred outside normal business hours, or not from proper business premises the requirement may not be met: Oppenheimer v Attenborough & Son. Must act in the ordinary way that a mercantile agent would act Eg sale through wholesaler not a sale in the ordinary course of business: Sanderson 5. Provided that the person taking under the disposition does so in good faith and without notice of the agents lack of authority in good faith means done honestly, whether negligently or not: s 3(2). Honest = lack of suspicion on reasonable grounds Honesty alone insufficient mustnt have notice of lack of authority. A 3rd party may be deemed to have had notice if a reasonable person in the circumstances would not have taken the goods without further enquiry: Robinson Motors Pty Ltd v Fowler. (Such as something obviously suspicious to which 3rd party turned a blind eye: Worcester Works Finance Ltd v Cooden Engineering Co Ltd.

4. Seller in possession
27 Seller or buyer in possession after sale (1) When a person, having sold goods, continues or is in possession of the goods, or of the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for the person, of the goods or documents of title under any sale, pledge, or other disposition thereof to any person receiving the same in good faith and without notice of the 51

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previous sale, has the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same. Seller first sellers to a person who becomes the true owner; however, the seller remains in possession of the goods and wrongfully makes a second sale of the same goods to a third party. If the second buyer buys the goods in good faith and without notice of the 1 st sale, they will get good title to the goods. 1st buyer is penalized for leaving goods with the seller so they could sell again.

1. Seller to continue in possession of goods Seller must have continuous (physical) possession of the goods: Pacific Motor Auctions Ltd v Motor Credits (Hire Finance) Ltd change in capacity in which they hold the property or the nature of their possession is irrelevant Here, changed nature of possession from owner to bailee held to be irrelevant, only physical possession relevant 2. Delivery of goods by seller in possession to 3rd party purchaser It is sufficient for the seller in possession to give constructive delivery of the goods to the 3 rd party purchaser: Michael Gerson (Leasing) Ltd v Wilkinson.

5. Buyer in possession
27 Seller or buyer in possession after sale (2) When a person having brought or agreed to buy goods obtains, with the consent of the seller, possession of the goods or the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for the person, of the goods or documents of title under any sale, pledge, or other disposition thereof, to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods, has the same effect as if the person making the delivery or transfer were a mercantile agent in possession of the goods or documents of title with the consent of the owner. The buyer agrees to buy goods and although they arent yet the true owner, are given possession of the goods. The buyer then on-sells the goods to a 3rd party before the buyer had obtained title to the goods. Third party is protected if they can show that they bought in good faith and without notice of any right of the true owner. True owner is penalized for having given possession to the buyer before they had title.

1. Bought or agreed to buy Covers a sale as well as an agreement for sale. If the contract between the true owner and the seller contains a retention of title clause the contract is an agreement for sale and the buyer in possession exception may apply: Four Point Garage Ltd v Carter. A person who is given goods to sell by the owner is not a buyer in possession: Shaw v Commissioner of Police of the Metropolis. (Mercantile agent exception might apply) 2. Possession by the buyer Issue hasnt been determined in Australia England says its sufficient for buyer to have constructive possession: Four Point Garage Ltd v Carter. 3. Buyer obtains possession with the consent of the seller

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Exception doesnt apply where buyer has not obtained the goods with the consent of the seller, such as being stolen then on-sold: National Employers Mutual General Insutrance Association Ltd at 62. Consent obtained by fraud still constitutes consent: National Employers Mutual General Insutrance Association Ltd at 33.

4. Delivery of the goods by buyer in possession to the 3rd party delivery = voluntary transfer of possession from one person to another: s 3 Factors Act. Sufficient if the buyer in possession has instructed the owner to delivery the goods directly to the sub-purchaser: Four Point Garage Ltd v Carter constructive delivery. Gamers Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia P/L held that delivery of receipts signed by the car dealer (buyer in possession) pursuant to the finance agreement constituted a voluntary transfer of possession to the financiers. 5. The effect of a disposition by a buyer in possession Has been held that this doesnt have to have occurred in the ordinary course of business: Gamers Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd. If elements satisfied, it is deemed that the purchaser bought them from a person authorised to sell by the owner

6. Miscellaneous exceptions
Writ of execution against goods 28 Effect of writs of execution (1) A writ of fieri-facias or other writ of execution against goods binds the property in the goods of the execution debtor as from the time when the writ is delivered to the sheriff to be executed; and, for the better manifestation of such time, it is the duty of the sheriff upon the receipt of any such writ to endorse upon the back thereof the hour, day, month, and year when the sheriff received it. (1A) But the delivery of such a writ to the sheriff does not prejudice the title to such goods acquired by any person in good faith and for valuable consideration, unless such person had at the time when the person acquired the persons title notice that such writ or any other writ by virtue of which the goods of the execution debtor might be seized or attached had been delivered to and remained unexecuted in the hands of the sheriff. A writ of execution against goods doesnt prejudice the title to such goods acquired by any person in good faith for valuable consideration UNLESS they had notice.

Stolen goods If the goods are stolen and offender is prosecuted to conviction property in the goods revests in the true owner (or their representative) UNLESS goods were obtained by fraud or other wrongful means not amounting to stealing. 26 Revesting of property in stolen goods on conviction of offender (1) When goods have been stolen and the offender is prosecuted to conviction, the property in the goods so stolen revests in the person who was the owner of the goods, or the persons personal representative, notwithstanding any intermediate dealing with them.

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(2)

Notwithstanding any enactment to the contrary, when goods have been obtained by fraud or other wrongful means not amounting to stealing, the property in such goods does not revest in the person who was the owner of the goods, or the persons personal representative, by reason only of the conviction of the offender.

Doctrine of accession Where goods belonging to A have acceded to goods belonging to B, property in the accessory may pass to B if as a matter of practicality As goods cant be identified or where they have been incorporated to such an extent that they cannot be detached from Bs goods: Rendell v Associated Finance Ltd at 610.

8. Performance of the Contract


It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them in accordance with the terms of the contract of sale: s 29 SGA. Unless otherwise agreed obligations are concurrent seller must be ready and willing to give possession of the goods to the buyer in exchange for the price and vice versa: s 30.

8.1 General Rules of Delivery


s 3 - delivery means voluntary transfer of possession from one person to another; Can include physical transfer; delivery of the means of control (constructive delivery); attornment as bailee of the purchaser where goods are held by a 3rd party; delivery of the documents of title (eg bill of lading) 31 Rules as to delivery (1) Whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer is a question depending in each case on the contract, express or implied, between the parties. (1A) Apart from any such contract, express or implied, the place of delivery is the sellers place of business, if the seller has one, and if not, the sellers residence. Galbraith & Grant v Block, Contract required the seller to delivery wine to the buyers premises. Goods were received by an apparent employee who signed the delivery docket for the wine. Buyers premises were in fact closed and the wine was stolen by the rogue who signed the docket The issue was whether the wine had properly been delivered in pursuance of the contract. It was held that the wine was properly delivered. A vendor who is told to deliver goods at the purchasers premises discharges his obligations if he delivers them there without apparent negligence to a person apparently having authority to receive them. (1B) (2) (3) However, if the contract is for the sale of specific goods which to the knowledge of the parties when the contract is made are in some other place, then that place is the place of delivery. When under the contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time. When the goods at the time of sale are in the possession of a third person, there is no delivery by the seller to the buyer unless and until such third

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(4) (4A) (5) (6)

person acknowledges to the buyer that the third person holds the goods on the sellers behalf. Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is a reasonable hour is a question of fact. Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state must be borne by the seller. s 3(4) Goods are in a deliverable state within the meaning of this Act when they are in such a state that the buyer would under the contract be bound to take delivery of them. This section does not affect the operation of the issue or transfer of any document of title to goods. If the buyer does not take delivery from the seller within a reasonable time after the seller requests the buyer to take delivery, the buyer is liable to the seller for any loss occasioned by the buyers neglect or refusal to take delivery and also for a reasonable charge for the care and custody of the goods. This will not affect the sellers rights in the event that the buyers refusal amounts to a repudiation of the contract.

8.2 Delivery of wrong quantity or mixed quantity


32 Delivery of wrong quantity (1) When the seller delivers to the buyer a quantity of goods less than the seller contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered the buyer must pay for them at the contract rate. (2) When the seller delivers to the buyer a quantity of goods larger than the seller contracted to sell, the buyer may accept the goods included in the contract and reject the rest, or the buyer may reject the whole. (2A) If the buyer accepts the whole of the goods so delivered the buyer must pay for them at the contract rate. (3) When the seller delivers to the buyer the goods which the seller contracted to sell mixed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject the rest, or the buyer may reject the whole. (4) The provisions of this section are subject to any usage of trade special agreement, or course of dealing between the parties. Example: Contract to deliver 100 bales of merino wool. Seller delivers 80 bales: s 32(1) B may reject them but if accepts them must pay for them at the contract rate. Seller delivers 120 bales of wool: s 32(2) B may accept 100 bales and reject rest or reject the whole. If accepts whole then B must pay for them at the contract rate: s 32(2A). Seller delivers 100 bales of merino wool mixed with 20 bales of ordinary wool. B may accept the 100 bales of merino wool and reject the rest or B may reject the whole.

8.3 Installment Deliveries


33 Instalment deliveries (1) Unless otherwise agreed, the buyer of goods is not bound to accept delivery of them by instalments.

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(2)

When there is a contract for the sale of goods to be delivered by stated instalments, which are to be separately paid for, and the seller makes defective deliveries in respect of 1 or more instalments, or the buyer neglects or refuses to take delivery of or pay for 1 or more instalments, it is a question in each case depending on the terms of the contract and the circumstances of the case, whether the breach of contract is a repudiation of the whole contract or whether it is a severable breach giving rise to a claim for compensation but not to a right to treat the whole contract as repudiated. Unless otherwise agreed B isnt bound to accept delivery of goods by instalments: s 33(1). Do not need separate payments under s33(2) courts have interpreted this widely (and contrary to the clear words of the section) Defective deliveries: s 33(2) apply test of whether the buyer can rescind the entire contract: Maple Flock v Universal Furniture Products. Test = consider the ratio quantitatively which the breach bears to the contract as a whole and the degree of probability or improbability that such breach will be repeated. If the seller makes defective delivers in respect of one or more instalments it is a question in each case depending on the terms of the contract and the circumstances of the case whether the breach is a severable breach giving rise to a claim for compensation but not to a right to treat the whole contract as repudiated. Basic test = Objectively to decide whether the acts or conduct of the party in breach evince an intention no longer to be bound by the contract (ie general principle of repudiation): Hammer & Barrow v Coca-cola.

Maple Flock v Universal Furniture Products Instalment contract for lagflock used to stuff furniture Out of 20 deliveries, one delivery was contaminated by excessive amount of chlorine (16 th batch out of 20) Was the purchaser entitled to treat as repudiation? Did it envince an intention of the seller to totally repudiate the contract? Was it likely that there would be further breaches? Contamination portion was 1.5 tonnes out of 100 tonnes overall Chance of breach being repeated was negligible, isolated incident Accepted that sellers business was generally very careful Ratio of 1.5:100 + likelihood of breach being repeated Held not to be a repudiation Hammer & Barrow v Coca-Cola applying Maple Flock test. Plaintiff was a manufacturer of wooden goods. The 1st defendant ordered 200,000 yo-yos with various amounts to be sent to different outlets. 85,000 were sent to Northern Bottlers (2nd Defendant); 65,000 were defective. It was held that the 1st defendant was entitled to refuse to accept further deliveries. They were also entitled to reject the 85,000 already delivered because they hadnt accepted the goods within the meaning of s 37. they hadnt interfered with the right of the seller, in the event of rejection, to have the goods physically returned to the place where the parties contemplated that an examination of the goods was to take place. SEE 3.1 FOR ACCEPTANCE RULES RE LOSING RIGHT TO REJECT GOODS

8.4 Special Rules of Delivery Relating to Carriers

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34 Delivery to carrier (1) When, in pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is prima facie deemed to be a delivery of the goods to the buyer. (2) Unless otherwise authorised by the buyer, the seller must make such contract with the carrier on behalf of the buyer as may be reasonable having regard to the nature of the goods and the other circumstances of the case. (2A) If the seller omits so to do, and the goods are lost or damaged in course of transit, the buyer may decline to treat the delivery to the carrier as a delivery to himself or herself, or may hold the seller responsible in damages. Delivery FOB and CIF Free on Board (3) Unless otherwise agreed, when goods are sent by the seller to the buyer by a route involving sea transit, under circumstances in which it is usual to insure, the seller must give such notice to the buyer as may enable the buyer to insure them during their sea transit, and if the seller fails to do so, the goods are deemed to be at the sellers risk during such sea transit.

9. Remedies for the Seller


9.1 Unpaid seller against the buyer
Action for the price

If property in the goods has passed to the buyer and they havent paid (wrongfully) seller can sue for the price of the goods: s 50(1). Price is payable irrespective of delivery on a certain day and if the buyer fails to pay then the seller may sue for the price even though property in the goods has not passed to the buyer and the goods have not been appropriated to the contract: s 50(2). 50 Action for price (1) When, under a contract of sale, the property in the goods has passed to the buyer, and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against the buyer for the price of the goods. (2) When, under a contract of sale, the price is payable on a day certain irrespective of delivery, and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price, although the property in the goods has not passed, and the goods have not been appropriated to the contract.

Damages for non-acceptance


If buyer wrongfully doesnt accept goods seller can sue for damages: s 51(1). Measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events from the buyers breach: s 51(2). Prima facie its the difference between the contract price or market price at time of delivery or if no time for delivery at time of refusal to accept: s 51(3).

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51 Damages for non-acceptance (1) When the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against the buyer for damages for non-acceptance. (2) The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyers breach of contract. (3) When there is an available market for the goods in question, the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted, or, if no time was fixed for acceptance, then at the time of the refusal to accept.

9.2 Unpaid seller against the goods

Depends on who has possession of goods BUT potential remedies are: Exercise of a lien against the goods; Stoppage of goods in transit Resale of the goods; s 41. If property hasnt yet passed the seller may also withhold delivery: s 41(2). 41 Unpaid sellers right (1) Subject to the provisions of this Act, and of any statute in that behalf, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law (a) a right to retain the goods for the price while the unpaid seller is in possession of them; (b) in case of the insolvency of the buyera right of stopping the goods in transitu after the unpaid seller has parted with the possession of them; (c) a right of resale as limited by this Act. (2) When the property in goods has not passed to the buyer, the unpaid seller has, in addition to the unpaid sellers other remedies, a right of withholding delivery similar to and coextensive with the unpaid sellers rights of retention and stoppage in transitu when the property has passed to the buyer.

Lien or right to retain the goods


Right to retain possession of goods until they have been paid for. Seller must have actual possession to exercise this. Irrelevant in what capacity the seller is in possession (can exercise as agent or bailee for buyer): s 42(2). Unpaid seller can exercise this right in following circumstances: o When the goods have been sold without any stipulation as to credit; o When the goods have been sold on credit, but the term of credit as expired; o When the buyer becomes insolvent: s 42(1). 42 Sellers right of retention (1) Subject to the provisions of this Act, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely (a) when the goods have been sold without any stipulation as to credit;

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(b) when the goods have been sold on credit, but the term of credit has expired; (c) when the buyer becomes insolvent. (2) The seller may exercise the right of retention notwithstanding that the seller is in possession of the goods as agent or bailee for the buyer.

Right to retain the goods is lost if: o When the unpaid seller delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods; o When the buyer or buyers agent lawfully obtains possession of the goods; o By waiver thereof: s 44(1). 44 Termination of right of retention (1) The unpaid seller of goods loses the right of retention (a) when the unpaid seller delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods; (b) when the buyer or the buyers agent lawfully obtains possession of the goods; (c) by waiver thereof. (2) The unpaid seller of goods, having a right of retention thereof, does not lose that right by reason only that the unpaid seller has obtained judgment for the price of the goods.

If the unpaid seller made a part delivery of goods they may exercise the right of retention on remainder unless part delivery constitutes a waiver on the right to exercise lien: s 43. 43 Part delivery When an unpaid seller has made part delivery of the goods, the unpaid seller may exercise the right of retention on the remainder, unless such part delivery has been made under such circumstances as to show an agreement to waive that right.

Withholding delivery

Provided property hasnt passed: s 41(2).

Stoppage in transit

Can stop goods in transit until payment of price: s 45 where: o The buyer is insolvent o The unpaid seller has parted with possession of the goods; and o The goods are in transit. 45 Right of stoppage in transitu Subject to the provisions of this Act, when the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transitu, that is to say, the unpaid seller may resume possession of the goods as long as they are in course of transit, and may retain them until payment or tender of the price

s 46 determines if the goods are in transit.

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Susan Hedge LWB 332 Sale of Goods

46 Duration of transit (1) Goods are deemed to be in course of transit from the time when they are delivered to a carrier by land or water, or other bailee, for the purpose of transmission to the buyer, until the buyer, or the buyers agent in that behalf, takes delivery of them from such carrier or other bailee. (2) If the buyer or the buyers agent in that behalf obtains delivery of the goods before their arrival at the appointed destination, the transit is at an end. (3) If, after the arrival of the goods at the appointed destination, the carrier or other bailee acknowledges to the buyer, or the buyers agent, that the carrier or other bailee holds the goods on the buyers behalf and continues in possession of them as bailee for the buyer or the buyers agent, the transit is at an end, and it is immaterial that a further destination for the goods may have been indicated by the buyer. (4) If the goods are rejected by the buyer and the carrier or other bailee continues in possession of them, the transit is not deemed to be at an end, even if the seller has refused to receive them back. (5) When goods are delivered to a ship chartered by the buyer it is a question depending on the circumstances of the particular case, whether they are in the possession of the master as a carrier or as agent to the buyer. (6) When the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or the buyers agent in that behalf, the transit is deemed to be at an end. (7) When part delivery of the goods has been made to the buyer, or the buyers agent in that behalf, the remainder of the goods may be stopped in transitu, unless such part delivery has been made under such circumstances as to show an agreement to give up possession of the whole of the goods.

Exercises this right by taking actual possession or giving notice of their claim to the carrier or other bailee with possession: s 47. When notice is given that person must, at sellers expense, redeliver in accordance with sellers directions: s 47. 47 How stoppage in transitu is effected (1) The unpaid seller may exercise the right of stoppage in transitu either by taking actual possession of the goods, or by giving notice of the unpaid sellers claim to the carrier or other bailee in whose possession the goods are. (1A) Such notice may be given either to the person in actual possession of the goods or to the persons principal. (1B) In the latter case the notice, to be effectual, must be given at such time and under such circumstances that the principal, by the exercise of reasonable diligence, may communicate it to the principals servant or agent in time to prevent a delivery to the buyer. (2) When notice of stoppage in transitu is given by the seller to the carrier, or other bailee in possession of the goods, the carrier or other bailee must re-deliver the goods to, or according to the directions of, the seller. (3) The expenses of such re-delivery must be borne by the seller.

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Susan Hedge LWB 332 Sale of Goods

If theres been a sub-sale in good faith and for valuable consideration accompanied by a document of title to the goods by the buyer or where buyer has pledged the goods this may affect the sellers rights to stoppage in transit: s 48 48 Effect of sub-sale or pledge by buyer (1) Subject to the provisions of this Act, the unpaid sellers right of retention or stoppage in transitu is not affected by any sale or other disposition of the goods which the buyer may have made, unless the seller has assented thereto. (2) However, where a document of title to goods has been lawfully transferred to any person as buyer or owner of the goods, and that person transfers the document to a person who takes the document in good faith and for valuable consideration, then, if such last mentioned transfer was by way of sale the unpaid sellers right of retention or stoppage in transitu is defeated, and if such last mentioned transfer was by way of pledge or other disposition for value, the unpaid sellers right of retention or stoppage in transitu can only be exercised subject to the rights of the transferee.

Resale

Unpaid seller can resell when: Goods are perishable After giving notice to buyer of sellers intention to resell, buyer doesnt pay within a reasonable time. Where seller expressly reserved resale right in event of buyers default: s 49. 49 Sale not generally rescinded by lien or stoppage in transitu (1) Subject to the provisions of this section, a contract of sale is not rescinded by the mere exercise by an unpaid seller of the right of retention or stoppage in transitu. (2) When an unpaid seller who has exercised the right of retention or stoppage in transitu resells the goods, the buyer acquires a good title to them as against the original buyer. (3) When the goods are of a perishable nature, or when the unpaid seller gives notice to the buyer of the unpaid sellers intention to resell, and the buyer does not within a reasonable time pay or tender the price, the unpaid seller may resell the goods and recover from the original buyer damages for any loss occasioned by the original buyers breach of contract. (4) When the seller expressly reserves a right of resale in case the buyer should make default, and on the buyer making default, resells the goods, the original contract of sale is thereby rescinded, but without prejudice to any claim that the seller may have for damages.

Effect of resale for 1st two circumstances is to rescind original contract and seller is entitled to damages for buyers breach of contract: RV Ward Ltd v Bignall.

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Susan Hedge LWB 332 Sale of Goods

10. Remedies of the buyer


10.1 Damages for non-delivery s52
52 Damages for non-delivery (1) When the seller wrongfully neglects or refuses to deliver the goods to the buyer the buyer may maintain an action against the seller for damages for non-delivery. (2) The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the sellers breach of contract. (3) When there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when the ought to have been delivered, or, if no time was fixed, then at the time of the refusal to deliver.

10.2 Rejection of goods see above 14(3) 10.3 Repudiation of contract see discussion above s33 (does not only apply to installment contract may apply to lump sum contracts) 10.4 Damages for breach of warranty see above 10.5 Right to specific performance s53
53 Specific performance (1) In an action for breach of contract to deliver specific or ascertained goods the court may, if it thinks fit, on the application of the plaintiff, by its judgment direct that the contract shall be performed specifically, without giving the defendant the option of retaining the goods on payment of damages. (2) The judgment may be unconditional, or upon such terms and conditions as to damages, payment of the price, and otherwise, as to the court may seem just, and the application by the plaintiff may be made at any time before judgment.

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