Delivery & Price
Cases
Tradax (Ir.) Ltd. v. Irish Grain Board [1984] IR 1
O’Higgins C.J. S.C.
It is submitted on behalf of the defendants that they were entitled to cancel the contract because the plaintiffs were in breach of a fundamental term thereof in that they failed to establish or open the agreed letter of credit prior to the commencement on the 1st April, 1978, of the contractual shipment or drawing period. The defendants submit that this fundamental term must necessarily be implied into the contract made on the 23rd March, 1978; they so contend because, they say, it represents the presumed intention of the parties.
It is clear that this submission has been so framed having regard to what was decided in three English cases upon which considerable reliance was placed by counsel for the defendants; the three cases are Pavia & Co. S. P.A. v.Thurmann-Nielsen 6 ; Sinason-Teicher Inter-American Grain Corporation v.Oilcakes and Oilseeds Trading Co. Ltd. 9 and Ian Stach Ltd. v. Baker Bosley Ltd. 10 Those cases related to the shipment of goods over a particular period,
with payment in respect of each shipment to be by letter of credit with no date provided in the contract for the opening of the credit; and terms were implied as to the latest date on which credit should have been opened. In each of the first two cases, which were concerned with c.i.f. contracts, it was held to be an implied term that the credit be opened a reasonable time before the first date for shipment. In the third case, which was concerned with a classical f.o.b. contract, it was held to be an implied term that the credit be opened, at the latest, on the first day of the shipping period. The defendants’ submission is that a similar term should be implied into the contract in this case and that the plaintiffs should be held to have been bound by a condition which required them to open the necessary letter of credit at the latest by the first day of the drawing or shipment period, which was the 1st April, 1978.
In my view, a submission of this kind should be received with extreme caution. It involves an invitation to decide one case in accordance with the decision in another or others. Before one could even consider such an approach, one would have to be certain that the facts and circumstances in both cases are the same. As to this, it seems to me that certain differences exist between the authorities relied on in support of this submission and the present case. All three of the authorities relied on relate to transactions involving international trade. The first two are concerned with c.i.f. contracts and the third with an f.o.b. contract. In the Sinason-Teicher Case 9 , payment was to be cash against documents on the buyer’s bankers’ guarantee. In the Pavia Case 6 the contract provided for payment “. . . by the opening of a confirmed, irrevocable, divisible, transmissible and transferable credit opened in the sellers’ favour and utilizable by them against delivery of certain documents . .” the documents were then specified. In the Ian Stach Case 10 payment was to be “by confirmed, irrevocable, transferable and divisible letter of credit in favour of our nominees.” In none of those cases was there a fixed date for payment. Payment was to be made against presentation of documents which, in turn, came into existence according to shipments. In each case the contract provided for a shipment period. As indicated in the first two cases, it was held in effect that the necessary guarantee or credit should be made available before the commencement of the shipment period and, in the Ian Stach Case 10 , by the first day of that period at the latest.
An examination of the basis for each of those decisions indicates that it was the availability of the machinery for payment (and not the date of the actual shipments effected by the seller) which was regarded as crucial. In the Pavia Case 6 Somervell L.J. said at p. 88 of the report:
“. . . when a seller is given a right to ship over a period and there is machinery for payment, that machinery must be available over the whole of that period. If the buyer is anxious, as he might be if the period of shipment is a long one, not to have to put the credit machinery in motion until shortly before the seller is likely to want to ship, then he must put in some provision by which the credit shall be provided 14 days after a cable received from the seller, or the like.”
In the same case Denning L.J. (as he then was) said at p. 88 of the report:
“In the absence of express stipulation, I think the credit must be made available to the seller at the beginning of the shipment period. The reason is because the seller is entitled, before he ships the goods, to be assured that, on shipment, he will get paid.”
In the Sinason-Teicher Case 9 that reasoning was accepted. The decision in the Ian Stach Case 10 , which was concerned with an f.o.b. contract, must be considered in the light of the special facts which applied. In holding that the credit should have been opened and confirmed by the first day of the shipping period, Diplock J. said at pp. 142-3 of the report:
“There is no authority which guides me in this matter. It seems to me, however, that the contention for which Mr. Kerr argues is the sensible one, and, since it is the sensible one, and since there is no authority to the contrary, the one which I am inclined to hold, and do hold, is good law. I am fortified in this view by the fact that it is quite apparent from the correspondence and from the conduct of the parties in this case (and, so far as one can see, from that of the parties to the other contracts) that it is their view that that was the requirement of the contract. It seems to me that, particularly in a trade of this kind, where, as is known to all parties participating, there may well be a string of contracts all of which are financed by, and can only be financed by, the credit opened by the ultimate user which goes down the string getting less and less until it comes to the ultimate supplier, the business sense of the arrangement requires that by the time the shipping period starts each of the sellers should receive the assurance from the banker that if he performs his part of the contract he will receive payment. That seems to me at least to have the advantage of providing a definite date by which the parties know they have to fulfil the obligation of opening a credit.”
The defendants’ authorities not in point
I cannot see that any of those three cases is of much assistance in deciding the issue which arises on this appeal. We are concerned with two companies, both operating in Dublin and being customers of the same bank, that contract in relation to Irish feeding barley which is already available in the hands of the seller. The contract, an oral one, provides for a delivery and shipment period stretching over three months (April, May and June) of the year 1978. It provides for the payment of the entire of the contract price on the 1st May by letter of credit maturing on that date. The nature of the letter of credit is not described, nor is any provision made that it is to be confirmed; it is merely tomature for payment on the named day. Under this contract the seller has the advantage of two months payment in advance of delivery; payment is then to be effected not by the buyer, who may have limited resources, but by the buyer’s bank. Here the machinery for payment operates on a single day with a single payment and it is specifically recognised that it cannot operate for the first month of the delivery, or shipping, period. I cannot see how decisions which were made on different facts, and in relation to a payment machinery which was intended to operate over the whole of a shipping period, can be of any relevance to a case of this kind. Here neither of the contracting parties had any experience of the working of a letter of credit. This necessarily involved consultation and co-operation between them about what was to be done.
As appears from his evidence, Mr. Kyne’s object in asking for payment by such means and on the named date was twofold. In the first place, while disclaiming any doubt about the ability of the plaintiffs to finance a £2.4 million transaction, in his evidence (B. 7, p. 54, q. 569) he said: “It was a prudent business practice to say that a business at that stage that had £50,000 paid-up share capital and we selling to them on May 1st and having a potential of something like £700,000 outstanding, it would be imprudent of me to have done anything else, imprudent.” When asked why he had considered it prudent to obtain a letter of credit, he replied: “I don’t know that a guaranteed cheque as such exists but my letter of credit was like a bank draft guaranteed for payment.” It appears, therefore, that in the first place Mr. Kyne was concerned that his company would be paid on the 1st May not by the plaintiffs but by their bank, so that no risk of inability to pay would arise. He went on to say that, in considering the prudence of asking for a bank guaranteed payment on the 1st May, he had in mind that this would ensure that the risk which he was exposed to for the previous month of April would be covered. In other parts of his evidence, Mr. Kyne explained that the arrangement he had made for two months payment in advance of the entire purchase price of £2.4 million would have an important bearing on the defendants’ liquidity position.
The term sought by the defendants
The case for the defendants is to the effect that it is to be implied into this arrangement made on the 23rd March, 1978, as a fundamental term thereof, that by the 1st April (the commencement of the drawing period) a letter of credit of the kind actually opened on the 24th April should have been established or opened by the plaintiffs. Such an arrangement would have tied up the plaintiffs’ finances for a month before payment. It is clear that no suggestion to that effect was made at the time of the contract. Had it been made by Mr. Kyne, is it conceivable that it would have been agreed to? The plaintiffs are a subsidiary, with limited assets, of an international trading corporation. In order to arrange for the opening of a letter of credit covering £2.4 million, it is obvious that a transfer of this large sum to the plaintiffs’ account would be necessary. Indeed, from his evidence, Mr. Kyne appears to have had this very much in mind. The contract was made on Holy Thursday and, therefore, it immediately preceded a period during which banking facilities were not available to customers. Although Mr. Fitzpatrick immediately asked the parent company to put the plaintiffs in funds to cover the necessary credit, that was not achieved until the 11th April. In the course of his evidence, Mr. Kyne was asked whether he had considered at all when the letter of credit should have been opened. At first he said that he had not considered that question. He then said that he thought it should have been opened before any barley was drawn, but that he did not think it was his job to tell Mr. Fitzpatrick how a letter of credit should work.
In those circumstances it is not surprising that the learned trial judge should have said at pp. 28-9 of his judgment: “I do not believe that at the time of making the contract or at any time before the 20th April Mr. Kyne ever considered that a letter of credit should be opened or in place, or confirmed by or notified by the bank, at any time prior to the 1st May, 1978, or that no delivery of grain should have been made prior to that. In spite of his confessed efforts to deceive others trading in barley in Ireland at that time, I believe that if he had thought the procuring effectively of a letter of credit by the plaintiffs was an essential prerequisite to the delivery of grain by the defendants he would have said so to Mr. Fitzpatrick on or prior to the 20th April, 1978, and would have so required as an express term of the contract. The nature of the contract was such that any such provision was of such materiality that it would have to have been expressly agreed and could not be merely an implied term.”
In the circumstances, is it possible to imply into this contract, and as a fundamental term thereof, something which certainly did not occur to Mr. Fitzpatrick and which, if it occurred to Mr. Kyne, was never mentioned by him? In particular, can such a term be implied when the conduct of the parties subsequent to the contract appears to be inconsistent with the existence of such a term? On the 29th March, 1978, the plaintiffs were instructed to draw barley from Edenderry which they commenced to do without opening the letter of credit; the defendants said at the trial that this was due to an office error. This explanation, however, is not consistent with the contents of Mr. Kyne’s letter of the 1st May, 1978, to Messrs. Arthur Cox & Co. in which, in relation to the drawing of barley from Edenderry, he stated: “At the time when we were in negotiation for the sale to your clients of the barley, arrangements were made which enabled your clients to take delivery of a quantity of barley in the month of April on the expectation that the contracts then in the course of negotiation would shortly be completed. In fact a number of important conditions were never agreed between your clients and my Board and no final contract was ever reached.” While enquiries were made late in April on behalf of the defendants as to when the letter of credit would be opened, it was never suggested that it hould have been in place by the 1st April or before any barley was drawn. As late as the 20th April, according to the evidence of Mr. Ritchie, he informed either Mr. O’Rourke or a Mr. Burke, who was enquiring on behalf of the defendants as to the letter of credit, that it was in process of being drawn up and was told: “That is okay” or “That is fine.” Further, it appears that Mr. Kyne’s decision to cancel the contract on the 21st April was very much an afterthought, and was significantly influenced by a disagreement or row which he had with Mr. Fitzpatrick in relation to other matters.
When a term may be implied
It goes without question that, in any class of contract, the Courts may imply a term in order to repair an intrinsic failure of expression. This is done to give business efficacy, as it is said, to a contract which would otherwise lack it. The existence of this power was asserted in the well-known case of The Moorcock 15 where, at p. 68 of the report, Bowen L.J. said:
“The implication which the law draws from what must obviously have been the intention of the parties, the law draws with the object of giving efficacy to the transaction and preventing such a failure of consideration as cannot have been within the contemplation of either side; and I believe if one were to take all the cases, and they are many, of implied warranties or covenants in law, it will be found that in all of them the law is raising an implication from the presumed intention of the parties with the object of giving to the transaction such efficacy as both parties must have intended that at all events it should have. In business transactions such as this, what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are business men; not to impose on one side all the perils of the transaction, or to emancipate one side from all the chances of failure, but to make each party promise in law as much, at all events, as it must have been in the contemplation of both parties that he should be responsible for in respect of those perils or chances.”
However, this power must be exercised with care. The Courts have no role in acting as contract makers, or as counsellors, to advise or direct what agreement ought to have been made by two people, whether businessmen or not, who chose to enter into contractual relations with each other. The much-quoted passage, supra, from the judgment of Bowen L.J. in The Moorcock 15 was referred to by MacKinnon L.J. in Shirlaw v. Southern Foundries Ltd. 16 (at p. 227) in the following terms:
“They are sentences from an ex tempore judgment as sound and sensible as all the utterances of that great judge; but I fancy that he would have been rather surprised if he could have foreseen that these general remarks of his would come to be a favourite citation of a supposed principle of law, and I even think that he might sympathize with the occasional impatience of his successors when The Moorcock 15 is so often flushed for them in that guise.”
On the same page MacKinnon L.J. said:
“Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if, while the parties were making their bargain an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common ‘Oh, of course!’.”
Can that test be applied in this case? Is it so obvious that the parties intended, as they contracted on the 23rd March (Holy Thursday) that a week from then a letter of credit, providing for the payment on the 1st May of £2.4 million, would have been established in favour of the defendants at the plaintiffs’ bank? I cannot see anything in the circumstances attendant on this contract, or in the manner in which the contract came about, to suggest that it was obviously the intention of the parties that such should be done. Nor can I see anything in what was said or done, or in the circumstances, which would suggest that such a letter should have been opened prior to the drawing of any barley. The impracticability of doing so and the subsequent actions and conduct of the parties all suggest to my mind the absence of any such intention. Further, I cannot see that the absence of any term or agreement as to when the letter of credit was to be opened in any way affected the business efficacy of the transaction: what was required was payment by a bank of the entire purchase money on the due date. This payment date was fixed and the date of the opening of the credit could not affect, alter or prejudice this payment in any way.
On reading the evidence, I am strongly of the view (a view which was shared by the learned trial judge) that the plaintiffs sought genuinely to fulfil their contract; that they never intended to repudiate it; and that they would have abided by any reasonable request made by the defendants about the date for the opening of the letter of credit. It seems to me that all that can be implied into the contract made on behalf of the two contracting parties by Mr. Fitzpatrick and Mr. Kyne is that Mr. Fitzpatrick, on behalf of the plaintiffs, should take reasonable and proper steps to finance the opening of a letter of credit which would mature for payment of £2.4 million on the 1st May, 1978. If he had been dilatory in securing the transfer of funds to the plaintiffs or otherwise had acted as if the contractual obligation would not be honoured, there might have been grounds for complaint by the defendants. In my view, in the circumstances, the purported cancellation of the contract on the 21st April, 1978, by the defendants was unjustified. Accordingly, I would hold that the plaintiffs are entitled to succeed in their action. For these reasons I would dismiss the defendants’ appeal.
Henchy J.
It is clear from the evidence, and was so found by the trial judge, that on the 23rd March, 1978, the parties, by their agents, entered into an oral agreement. Under that agreement the defendants were to sell to the plaintiffs two lots of grain. The first lot consisted of 20,000 metric tonnes at £99.50 per tonne delivered f.o.b. for shipment from New Ross, subject to a minimum loading rate of 800 tonnes per weather working day. The second lot consisted of 5,000 metric tonnes to be delivered ex-store, either from Mullingar or Edenderry, at £96.50 per tonne. There was some discussion about the quality and level of moisture, as to the effect of which the parties are not agreed; but it was the clear understanding that payment for each lot would be made by letter of credit maturing for payment on the 1st May, 1978.
These oral arrangements were entered into by two telephone conversations. After a lengthy hearing in the High Court, Mr. Justice Gannon held that after those two telephone conversations a contractual nexus had been created whereby, subject to the formal signing of contract documents, the parties had bound themselves in regard to the goods sold, the quantity, the price, the times and places of delivery and the time and method of payment. I see no reason to differ from those conclusions.
It is true that the contract documents furnished by the plaintiffs, as purchasers, introduced some descriptive terms which, in other circumstances, might have indicated a lack of detailed consensus between the parties, but the subsequent conduct of the parties, particularly the willingness of the plaintiffs to begin taking delivery of the 5,000 tonnes lot, shows that the parties were waiving whatever ostensible or real difficulties existed as to the details of the contract.
As well as that, Mr. Justice Gannon held that a letter of the 21st April, 1978, coupled with a telex communication, constituted a sufficient note or memorandum for the purpose of s. 4 of the Sale of Goods Act, 1893. I agree with the trial judge that, in the circumstances, there was no material difference between the parties as to description, loading rate or any other term of business importance, and that the only area of arguable controversy is in regard to the letters of credit. As to the note or memorandum for the purpose of s. 4 of the Act of 1893, even if it were absent, the acceptance and actual receipt by the plaintiffs of part of the goods would have made that absence immaterial to the question of enforceability.
Although the persons negotiating the terms of the contract were not familiar with all the technicalities of documentary credit, they were of one mind that payment for the barley purchased was to be by a letter of credit for each lot, maturing on the 1st May, 1978. This date was specified notwithstanding that the shipping period for the shipments from New Ross was to run from the 1st April, 1978, until the 30th June, 1978. Therefore, this case is to be distinguished from the run of cases of sales based on payment by documentary credit, where the buyer’s furnishing of the documentary credit is a precondition of the shipment or delivery of the goods by the seller.
It was known to both parties that any barley delivered f.o.b. to a ship at New Ross, or taken by lorry from one of the defendants’ stores before the 1st May, 1978, would be received on credit by the plaintiffs on foot of the contract. The plaintiffs arranged their affairs on that basis. They considered that they were entitled to take delivery on credit before the 1st May, 1978, by ship or by lorry, of such barley as the defendants would let them have. In fact, by the 21st April, 1978, they had taken delivery by lorry of over £180,000 worth of barley from the defendants’ store in Edenderry, and they had notified the defendants that a ship was due at New Ross sometime between the 25th and the 28th April, 1978, to take delivery of some of the 20,000 metric tonnes contracted to be purchased.
The reaction of the defendants to this course of events showed that there was a fundamental disagreement between the parties about the interpretation of the contract. The defendants, holding that the letters of credit should have been opened before any delivery was taken by the plaintiffs, purported to cancel the contract on the 21st April, 1978, on the ground of fundamental breach. The plaintiffs refused to concede that they were in default. They proceeded to open letters of credit in favour of the defendants on the 24th April, 1978. While denying the existence of a contract, the plaintiffs say that they have done all they were required to do under the contract relied on by the defendants and that the latter were not entitled to cancel the contract.
The matter reduces itself to a question of whether a contractual obligation was imposed on the plaintiffs to open letters of credit before delivery of any of the barley. If there was, then their failure to open letters of credit was a fundamental breach which would justify the defendants in repudiating the contract. I am satisfied that the plaintiffs’ interpretation of the contractual provision relating to the letters of credit is correct. The judicial decisions and the text-books show that a court will intervene to fix a date or period for the opening of a letter of credit only when the contract between the seller and buyer contains no express stipulation as to such date or period. In the absence of an express stipulation, a court will import into a contract such implied term in regard to date or period as will give reasonable business efficacy to the transaction. In the present case there is no basis for the introduction of such an implied term into the contract. Indeed, the introduction of the implied term suggested by the defendants that the plaintiffs would open letters of credit before taking delivery of barley by ship or by lorry would run counter to the express term that the mode of payment for each of the two lots of barley would be by letter of credit maturing on the 1st May, 1978.
The documents that passed between the parties refer variously to a letter of credit “maturing” on the 1st May, to “payment by 1st May 1978 against letter of credit drawn in favour of Irish Grain Board Limited”, and the like. In my view, expressions such as “maturing” do not change the nature of the express contractual obligation which was cast on the plaintiffs. That obligation was to arrange, regardless of whether there had or had not been partial delivery, documentary credit whereby the defendants, on presentation of the specified documents to the nominated bank on or after the 1st May, 1978, would be entitled to be paid in full for each of the two lots of barley contracted to be sold. A letter of credit does not mature in the sense of ripening to fruition from a state of immaturity. It has matured, or has been opened, or is effective when, and only when, the seller may obtain payment from the nominated bank.
The plaintiffs opened the necessary letters of credit on the 24th April, 1978, and on that date they gave due notification to the defendants. Therefore, as the contract expressly required, the defendants were enabled to obtain full payment by letters of credit on the 1st May, 1978.
If the Court were to hold that the letters of credit should have been opened before any deliveries were made, it would be rewriting the contract. My understanding of the principles of documentary credit and my reading of the judicial authorities satisfy me that the fleshing out of the contract by the insertion of a date or period for the opening of the letters of credit is permissible only when the contract is not specific as to such date or period. That is not the case here. On any reasonable interpretation of what was said and written on behalf of the parties, it is clear that it was expressly provided that the letters of credit were to be opened by the plaintiffs by the 1st May, 1978. Therefore, there is no ground for a submission that the letters of credit should have been opened at any earlier point, such as before any delivery of barley was taken.
Since the plaintiffs duly opened letters of credit in favour of the defendants on the 24th April, 1978, which was before the date stipulated in the contract, I would hold that the defendants were not entitled to repudiate the contract; accordingly, I would dismiss their appeal.
Griffin J.
The facts are fully set out in the judgment of the Chief Justice. The issues which arise in this appeal are, first, whether the defendants had entered into a binding contract on the 23rd March, 1978, to sell two parcels (comprising 20,000 tonnes and 5,000 tonnes respectively) of Irish feed barley to the plaintiffs. Secondly, if so, were the requirements of s. 4 of the Sale of Goods Act, 1893, complied with? Thirdly, whether the failure of the plaintiffs to open a letter of credit for the agreed price prior to the 21st April, 1978, entitled the defendants to repudiate the agreement and to refuse further performance of the contract as from that date.
The learned trial judge found that a concluded agreement had been reached on the 23rd March, 1978, and was confirmed by the plaintiffs by their telex of the 24th March, 1978, and by the defendants by contract documents dated the 4th April, 1978, which were sent to the plaintiffs and signed by Mr.Kyne, the defendants’ general manager. The terms of the verbal agreement depended on the evidence of Mr. Fitzpatrick, the plaintiffs’ managing director, and Mr. Kyne. The trial judge accepted the evidence of Mr. Fitzpatrick who said that the telex of the 24th March represented what they had agreed. At p. 8 of his judgment, he found that “they had agreed on the goods sold, the quantity and price, the times and places of delivery, the time and method of payment.” I agree with the Chief Justice and Mr. Justice Henchy that, on the facts as accepted by the learned trial judge, he was justified in holding that a concluded agreement had been reached between the parties.
Under s. 4 of the Sale of Goods Act, 1893, this contract would not be enforceable by action unless the plaintiffs accepted part of the goods sold and actually received the same, or unless there was a sufficient note or memorandum in writing signed by the defendants or their agent in that behalf. The secretary of the defendants, who is also their solicitor, referred in the first paragraph of his letter of the 21st April, 1978 (which was written to the plaintiffs purporting to repudiate the agreement) to the telex dated the 24th March, 1978 “confirming the agreed terms of the above-mentioned two contracts for 20,000 tonnes and 5,000 tonnes respectively of Irish Feeding Barley and which provided for payment by letter of credit maturing on the 1st of May 1978.” The trial judge held that that letter (which was written on the defendants’ headed notepaper, addressed to the plaintiffs, and signed by the defendants’ secretary) was a sufficient note or memorandum of the contract made on the 23rd March, 1978. In my opinion, he was correct in so holding. The reference to the agreed terms of the contract in the telex had the same effect as if the terms of the telex had been incorporated in the letter, and the letter and telex combined provided a sufficient memorandum to comply with the requirements of s. 4 of the Act of 1893. However, in any event, that section would have been satisfied even if there had been no sufficient note or memorandum because, as Mr. Justice Henchy has pointed out in his judgment, the plaintiffs had accepted and received part of the goods, amounting to 1,871 tonnes, to the value of £180,560.
For the purpose of this appeal, the important terms of the agreement are those providing for shipment of the barley in April, May and June, 1978, and for payment by letter of credit in favour of the defendants maturing on the 1st May, 1978. What the parties had agreed on the 23rd March in relation to payment was that the price for the entire 25,000 tonnes should be paid on the 1st May by a single payment on that date the payment to be effected by letter of credit. An irrevocable letter of credit is an undertaking issued by the buyer’s bank by which the bank promises the seller to pay the price of the goods upon presentation of specified documents. Neither Mr. Fitzpatrick nor Mr. Kyne had any previous experience of the use of letters of credit as a mode of payment, nor had either of them any clear idea of what was involved or of what would be required to give effect to that mode of payment. What they wished to secure was that the defendants would receive payment on a certain date (the 1st May, 1978) whether delivery of some, all, or none of the barley had been taken by that date.
It was submitted on behalf of the defendants that, as payment was to be by letter of credit, it was essential that the letter of credit should have been opened, at the latest, before the commencement of the shipping period, which was the 1st April, 1978. Counsel on their behalf cited a number of cases to this effect (some being c.i.f. and some being f.o.b. contracts) but in those cases the courts were stating the duties of the purchasers under the particular contracts; in none of those cases was the payment of the entire purchase price to be made on a specified date. Counsel relied especially on a statement of Denning L.J. (as he then was) in Pavia & Co. S. P.A. v. Thurmann-Nielsen 6 about the duty of a purchaser in relation to the opening of a letter of credit in a case where no date is fixed for opening the letter of credit. In that case the contract was a c.i.f. contract, in which the seller was entitled to ship at any date during the shipping period, but it is generally accepted that the same principle applies in an f.o.b. contract. At pp. 88-9 of the report Denning L.J. said:
“In the absence of express stipulation, I think the credit must be made available to the seller at the beginning of the shipment period. The reason is because the seller is entitled, before he ships the goods, to be assured that, on shipment, he will get paid. The seller is not bound to tell the buyer the precise date when he is going to ship; and whenever he does ship the goods, he must be able to draw on the credit. He may ship on the very first day of the shipment period. If, therefore, the buyer is to fulfil his obligations he must make the credit available to the seller at the very first date when the goods may be lawfully shipped in compliance with the contract.”
Denning L.J. is there referring to the provisions which apply in the absence of express stipulation. However, it is quite unusual to specify, as the day for payment, a date which is unrelated to the date or dates of delivery of the goods. In the case of letters of credit, one is dealing with documents rather than with goods. The specified documents will almost invariably include the bill or bills of lading in respect of the goods sold. Therefore, it is essential in such cases that, when the goods are shipped, the seller must be able to draw on the credit, and that he is paid in respect of each shipment on presentation of the bill of lading for that shipment. In such cases, the principle stated by Denning L.J. is implied by the court, and ensures that the seller is secured in advance.
In the instant case, payment was not related to the quantity of goods delivered or to the time of the delivery, and there was an express stipulation or term, which departs from the usual terms, requiring that the credit should be available for the payment of the entire price on the 1st May, 1978, irrespective of whether all, none, or some only of the goods were delivered by that date. In my view, this case is distinguishable from the cases cited on behalf of the defendants. As there is in the contract an express term with regard to payment,
the Court cannot imply a term such as that for which the defendants contend. If the defendants had considered it to be of importance that letters of credit should be opened before any of the goods were shipped or delivered, or at any time prior to the 1st May, 1978, they should have required or ensured that the contract made suitable provision to that end. There was no evidence that there was any fear on the part of the defendants that the plaintiffs, who are a subsidiary of one of the largest grain dealers in the world, would not open the letter of credit in due time to ensure payment of the entire purchase money on the 1st May, 1978.
The plaintiffs opened the letters of credit for the full amount of the purchase price on the 24th April, 1978, and, if the defendants had not purported to repudiate the contract on the 21st April, the plaintiffs would have been in a position to meet their contractual obligations on the 1st May, 1978.
In my opinion, the plaintiffs were not in breach of their contractual obligations when the letter of the 21st April,1978, was written and, therefore, the defendants were not entitled to repudiate the contract. In the result, by reason of the breach of contract on the part of the defendants, the plaintiffs suffered damage in the agreed sum of £215,000, and the learned trial judge was correct in awarding them damages in that amount. Accordingly, I would dismiss this appeal.
Hederman J.
I agree with the judgment delivered by the Chief Justice and, accordingly, I would dismiss the appeal.
McCarthy J.
On the 23rd March, 1978, Ronan Fitzpatrick, the managing director of the plaintiff company, had two telephone conversations with Timothy Kyne, the general manager of the defendant company. Whatever else occurred, it is common case that the plaintiffs agreed to buy and the defendants agreed to sell two separate lots of feed barley one of 20,000 metric tonnes was to be delivered by ship ex New Ross, and the other of 5,000 metric tonnes was to be drawn from a midland store, either in Edenderry or Mullingar. The prices were £99.50 per tonne ex New Ross and £96.50 per tonne ex midland store; the quantity was 5% more or less in each case; the method of payment was to be by letters of credit (one in respect of each lot) and each letter of credit was to mature for payment on the 1st May, 1978, although the period of delivery ex New Ross was to commence on the 1st April, 1978, and run until the 30th June, 1978.
The issues arising in this action are, first, did the parties conclude a legally enforceable contract or contracts on the 23rd March, 1978? Secondly, if so, what were the terms of the same concerning (a) the description of goods, (b)the loading rate at New Ross and demurrage and (c)the opening of the letters of credit? Thirdly, if there were a legally enforceable contract or legally enforceable contracts, was there on the part of the plaintiffs a breach or breaches of a term or terms of the contract or contracts so fundamental as to entitle the defendants to repudiate or (as expressed in a letter written by the defendants’ secretary on the 21st April, 1978) to “consider both these contracts cancelled?”
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The letters of credit
Whilst, therefore, the case argued before this Court on behalf of the defendants was that the law imposes a term such as they indicate, I prefer to construe the contract on the basis of the terms that may be implied. In our Courts this has been referred to as the principle laid down in The Moorcock 15 ; it was illustrated with graphic simplicity by Scrutton L.J. in Reigate v. Union Manufacturing Co. (Ramsbottom) 17 at p. 605 of the report:
“A term can only be implied if it is necessary in the business sense to give efficacy to the contract; that is, if it is such a term that it can confidently be said that if at the time the contract was being negotiated some one had said to the parties, ‘What will happen in such a case,’ they would both have replied, ‘Of course, so and so will happen; we did not trouble to say that; it is too clear’.”
Both those cases received the express approval of the former Supreme Court in Ward v. Spivack Ltd. 18 where Maguire C.J. delivered the judgment of the court. In this context it is relevant to point out that, whilst there are codes of practice commonly used in international commerce and regarded as binding in such transactions (including the Uniform Customs and Practice for Documentary Credits), the stated ignorance of Mr. Fitzpatrick and Mr. Kyne in respect of letters of credit would seem to make inappropriate the implication of any term drawn from such codes; although it is quite possible that the Tradax group of companies were well aware of those codes. The defendants have placed much reliance upon Pavia & Co. S.P.A. v. Thurmann-Nielsen 6 and the observations of Denning L.J. therein, which are cited in many textbooks on this subject; they also relied upon Sinason-Teicher Inter-American Grain Corporation v. Oilcakes and Oilseeds Trading Co. Ltd. 9 and Ian Stach v. Baker Bosley Ltd. 10 in which, as has been stated in the judgments already delivered, there was one critically different feature in that there was no fixed date for payment irrespective of delivery etc. In the course of argument on this appeal, on enquiry from the Court, it was suggested by Mr. Johnson that there were fixed-date cases amongst the authorities. None such were cited.
In my view, one must turn to the older principle, which was well established as part of our law before the Constitution of 1922, and was recognised thereafter, where appropriate, without undue extension; that principle is that a court should seek to lend business efficacy to a contract by the implication of a term which is necessary in order to do so. It is not the function of a court to write a contract for parties who have met upon commercially equal terms; if such parties want to enter into unreasonable, unfair, or even disastrous contracts, that is their business, not the business of the Courts. If, however, parties engaged in commerce want to enter into a contract for the sale and purchase of goods and purport to do so, believing they have done so and acting as if they have done so, then a court ought to import a term where it is necessary to do so in order to give business efficacy to the contract.
It was contended on behalf of the plaintiffs that, if an ambiguous term is to be inserted in a contract, the ambiguity must be resolved against the party inserting such term. I know of no such principle as of general application to the law of contract; it does apply to clauses which provide for limitation or exclusion of liability and is known as the contra proferentem maxim which is commonly applied in the construction of insurance policies.
The plaintiffs have argued that “our people thought they should get the proper contract or invoice before opening the letter of credit.” The short answer to that factual contention is that the remedy lay in their hands. They were contending for a particular form of description and there was nothing to prevent them from opening the letter of credit in terms which incorporated their particular description. In fact, when the plaintiffs did open the letters of credit on the 24th April, 1978, that is exactly what they did; they used their own formula. It may well be that the defendants would have complained if, at an earlier date, and certainly not later than the 7th April, the letters of credit had been opened using the same formula, but they could not have complained that no letter of credit had been opened.
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I must demur to the view of the learned trial judge that there were no facts or circumstances in this case analogous to those in the cases where there had been usual and regular use of letters of credit. The analogous fact or circumstance is that, in securing payment by letter of credit, the defendants were getting a guarantee of payment not by the buyer but by the bank as Mr. Murr pointed out, the underlying principle is the same. The fact that there are a variety of circumstances in different cases of commercial transactions of this kind is not to the point; the fundamental nature of a letter-of-credit transaction is the guarantee from the bank. The seller is entitled to say to himself at any stage: “Anything the buyer takes will be paid for in this case, not immediately, but of a certainty on a given date, and will be paid for by the bank who have established a privity with me.” In my view, it is not a question for consideration as to whether or not the failure of the plaintiffs to have confirmation of a banker’s credit notified to the defendants before the 21st April in respect of a single complete payment on the 1st May impeded or created any difficulty for the defendants in the performance of the obligation, if obligation then existed, of delivering f.o.b. New Ross the grain intended and agreed to be delivered in advance of payment. The only consideration is whether or not it was a condition precedent to liability to deliver, or permit the drawing of, the barley that the letter of credit should be opened in advance of same. Here, with respect to the learned trial judge, it is not a question of reasonableness; it is a question of the true construction of the contract; it was not a matter for the defendants to complain that the plaintiffs’ delay was causing difficulty or concern; but Mr. O’Rourke did so complain to Mr. Ritchie and received assurances which some might describe as misleading and others as deliberate untruths. It was not a matter for the defendants to fix a time limit for compliance; the law did that by implication. In answer to Mr. Gogarty (Book 3) Mr. Fitzpatrick said: “(Q. 52)Yes, I am putting it to you that in order to ensure payment for the goods which were for export out of the Twenty Six Counties it was necessary to have some guarantee of payment before the goods left the Twenty Six Counties? A. Well that is not the case. If that were to be the case we would have certainly acceded to that request.”
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Other than arranging for the appropriate financing from their parent group, it is clear that the plaintiffs made no real attempt to obtain a letter of credit in favour of the defendants until receipt of the letter of the 21st April, 1978, from the defendants in which letter they purported to hold the plaintiffs in default on the contracts and to be entitled to “consider both these contracts cancelled.” That message was also conveyed by telex on the same date. By letter of the same date the solicitors for the plaintiffs stated, inter alia: “by reason of your failure to furnish a contract in accordance with what had been agreed and what is set out in our clients’ letters of 7th April the letter of credit was not completed by our clients. You will appreciate that the letter of credit must correctly set out the description of the goods. We have, however, to make it clear that our clients are now and at all times have been ready and willing to arrange for the letter of credit, but only when a correct contract is received from you. We accordingly call upon you forthwith to furnish contracts in accordance with what was agreed, as has been accepted by you, in view of what you have said in the first paragraph of your letter. On that being done, the letter of credit will be completed.”
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The issue on this part of the case does not depend upon the reasonableness of the conduct of the parties after the contract had been made; their conduct may well be criticised one way or another. The test of reasonableness appears to me to be appropriate to the construction of the terms of the contract, including those terms which necessarily should be implied.
If one supposes that the plaintiffs had taken delivery of all the goods before the 1st May, 1978, as was possible (however unlikely) and did not open the letter of credit on the 1st May, the position of the defendants would have been no better than that of a creditor under a simple contract; they would not even have the advantage of a guaranteed cheque in their possession, if such could have been obtained in the circumstances. In my opinion, it is not any answer to turn the other side of the coin and to say that the plaintiffs would have been bound to provide the letter of credit, upon which the full amount could be drawn on the 1st May, without having taken delivery of any of the goods. If by the 1st May the plaintiffs had not made the money available in some form, even by an ordinary cheque which was to be paid from their own account, the defendants could have refused delivery of any part of the goods. In short, it was not the fact of payment on the 1st May that was of critical importance but the assurance that the defendants could look forward to such payment on the 1st May, such payment to be made by a bank on an irrevocable promise by the bank itself. If the letter of credit were merely to be opened on the 1st May and opening requires notification to the prospective drawer in theory, it could not have been drawn upon at the start of banking hours on that day.
In my judgment, by necessary implication it was a term of the contract of the 23rd March, 1978 (assuming, of course, there was such a contract) that a letter of credit or letters of credit for the total of the sum due, with whatever adjustments might be necessary because of the 5% more-or-less clause, would be opened at a bank in Ireland before the first day of drawing barley from the Edenderry store or not less than five days before the date of arrival of a ship at New Ross for the f.o.b. transaction whichever date should be the earlier. Such a term was fundamental to the contract and, although the defendants were prepared for the moment to overlook that breach until they repudiated the contract by the letter of the 21st April, 1978, such a breach entitled the defendants to repudiate lawfully the contract of the 23rd March, 1978. It follows that in my judgment the defendants’ appeal succeeds and the action should be dismissed.
Kulkarni v Manor Credit (Davenham) Ltd
[2010] EWCA Civ 69 [2010] 2 Lloyd’s Rep 431, [2010] EWCA Civ 69, [2010] 2 All ER (Comm) 1017
“Disposition” is defined in section 29(1):
“”disposition” means any sale or contract of sale (including a conditional sale agreement), any bailment or (in Scotland) hiring under a hire-purchase agreement and any transfer of the property in goods in pursuance of a provision in that behalf in a hire-purchase agreement, and includes any transaction purporting to be a disposition (as so defined) and “dispose of” shall be construed accordingly.”
For these purposes, Manor Credit is the creditor, Gwent the debtor, and Dr Kulkarni the private purchaser. There is no dispute that Dr Kulkarni is a private purchaser in good faith without notice. What is required, however, for section 27 to pass a good title to a private purchaser is a “disposition” by the debtor Gwent at a time when it is a debtor, that is to say a hirer under its hire-purchase agreement with Manor Credit which it entered into on 14 March 2008. Disposition is defined as a sale or a contract of sale or a transaction purporting to be a sale or contract of sale.
Dr Kulkarni’s original contract of sale was of course entered into well before Gwent became Manor Credit’s debtor. However, Mr James Ross, who appears for Manor Credit, does not rely on that contract as a relevant disposition, because he concedes that section 27 would give relief to a private purchaser for the latest relevant “disposition”, even if there had been an earlier one at a time before section 27 became applicable. Thus he concedes that where an earlier contract of sale, which does not itself amount to a sale, fructifies later into a sale, when there is a transfer or purported transfer of property, and that later sale falls within the relevant window of section 27, then that will count as a disposition within section 27, even though the earlier contract of sale fell outside that window. He had earlier made the same concession at trial, which is why the judge had said (at para 13):
“it is not so important to look at the earliest date on which there could be a contract of sale or a sale, but to look to the latest date”.
Another possible rationalisation is that for these purposes “contract of sale” means such a contract as amounts to a sale, as will occur (see above) where the parties intend the contract to transfer the property in the car there and then. (It might be said, however, that that makes the words “or contract of sale” redundant; and it may be important in another context to consider whether a purchaser is a “private purchaser” at the earlier time of an agreement to sell: see section 29(2) and GE Capital Bank Ltd v. Rushton [2005] EWCA Civ 1556, [2005] 1 WLR 899.) Another possible rationalisation is that nothing counts as a relevant disposition until a particular motor vehicle has been identified. That is because section 27 is concerned with property and title in a particular identifiable motor vehicle: see “the property in the vehicle” and “a purchaser of the vehicle in good faith”. On that basis, there could in any event be no “disposition” until the car labelled as VK08 EVF had been (irrevocably) identified with the goods to pass under Dr Kulkarni’s contract. A third rationalisation may be that the definition of “disposition” provides true alternatives, so that as long as there is something which counts as a disposition within the statutory window, then section 27 may work its power.
Be that as it may, Mr Ross made it plain that his concession was made. If there was a passing of property or purported passing of property at a time when Gwent was a hirer of the car from Manor Credit, then Dr Kulkarni would obtain a good title under section 27; but if property had purportedly been transferred to Dr Kulkarni before that time, then there would be no assistance to Dr Kulkarni to be derived from that section. Thus there was no concession in relation to anything which occurred after Dr Kulkarni’s agreement had fructified into a sale (or purported sale). Once there had been a final transfer of property under his agreement with Gwent, it was too late to talk of any further “disposition” under the 1964 Act.
All this explains why it became important to identify the latest moment when a mere agreement to sell fructified into a sale (or at least a purported sale) under which transfer of the property in the car was intended to be transferred. If that was before Gwent became Manor Credit’s debtor under their hire purchase agreement, then the disposition in question fell outside the protection of section 27 and Dr Kulkarni received no aid from it to establish a better title than Manor Credit’s.
In the circumstances, the question became when Gwent and Dr Kulkarni intended property in the car to be transferred to Dr Kulkarni, a question of sale of goods law.
Transfer of property under the SGA 1979
Manor Credit’s case was that the judge was right to say that such transfer took place by 11 March and that rule 5(1) of section 18 of the SGA 1979 provided the answer. Dr Kulkarni’s case, however, was that there was no intention to transfer the property until delivery itself. As of 11 March there had been no unconditional appropriation: there could be no such appropriation, nor any relevant assent on the part of Dr Kulkarni at a time when Gwent did not have any property in the car. Dr Kulkarni could not be taken to assent to the appropriation of a car in which Gwent had no property to transfer. Alternatively, the car was not in a deliverable state without its registration plates being attached to it. In any event, rule 5(1) was only a prima facie rule. There could be no intention to pass property in a car in which Gwent had no property. In such circumstances, property would not pass until delivery (see rule 5(2)). That was in any event the better view of what parties to such a contract of sale should be taken to intend, namely that property passes with delivery.
I refer to the Appendix to this judgment where relevant provisions of the SGA 1979 are collected. In brief, however, we are concerned in this case with a contract for the sale of unascertained or future goods. In such a case, no property is transferred unless and until the goods are ascertained (section 16). Where, however, there is a contract for the sale of specific or ascertained goods, property in them is transferred at such time as the parties intend it to be transferred, and for these purposes regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case (section 17). (In terms section 17 appears to apply only to contracts for the sale of specific or ascertained goods, but in practice it has come to be applied to contracts for the sale of unascertained goods as well, once they have become ascertained.) The statute also contains working rules for discovering that intention “Unless a different intention appears”. Those rules are set out in section 18. The rules with which we are concerned in this case are rules 5(1) and (2).
Rule 5(1) for present purposes requires (i) “goods of that [ie the contractual] description”; (ii) “in a deliverable state”; (iii) which have been “unconditionally appropriated to the contract” by the seller; (iv) “with the assent of the buyer”, which assent may be given either before or after the appropriation. No one has argued here for a prior assent by Dr Kulkarni. There is no suggestion that VK08 EVF did not comply with the contractual description. The three matters which it is therefore necessary to consider are (ii), (iii) and (iv).
Rule 5(2), which until the addition of rules 5(3) and 5(4) pursuant to the Sale of Goods (Amendment) Act 1995 was the last of the rules to be set out under section 18, represents a form of long stop prima facie rule, which is that, save where the seller reserves a right of disposal, delivery to the buyer (or to a carrier or other bailee or custodier for transmission to the buyer) amounts to an unconditional appropriation of the goods. For these purposes there is no need for there to be any assent by the buyer, the rule presupposes that the goods are in a deliverable state without making that a condition of the intention to transfer property, and the goods are deemed to have been unconditionally appropriated, whether they have been or not. There is of course no theoretical need for transfer of property and delivery to coincide, just as there is no theoretical need for delivery and payment to occur at the same time, or of property and risk to pass at the same time. However, in the absence of a right of disposal where the price has not yet been paid, and in the absence of any earlier transfer of property, delivery is likely to be the time when parties would intend property to pass.
The passing of risk is dealt with in section 20. Unless otherwise agreed, the goods remain at the seller’s risk until property is transferred: upon transfer risk passes to the buyer as well, whether delivery has been made or not. But not in the case of a consumer sale. By an exception first introduced pursuant to the Sale and Supply of Goods to Consumers Regulations 2002, section 20(4) of the SGA 1979 now provides that where the buyer deals as consumer, the goods remain at the seller’s risk until delivery to the consumer. That is presumably to protect a consumer to whom property and risk may have passed, but to whom delivery has not yet been made.
Deliverable state
The definition of “deliverable state” is contained in section 61(5) of the SGA 1979, viz “such a state that the buyer would under the contract be bound to take delivery of them”. It is true that the absence of the registration plates was in one sense a trivial matter which certainly did not fundamentally affect the condition or the quality of the car in question. However, it could not be lawfully driven by Dr Kulkarni without them. If Gwent had proposed delivery of the car to Dr Kulkarni without putting them on, he would have said that the car was of no use to him without its plates. The judge seems to have considered that there was a substantial question as to when in this case the plates were attached to the Mercedes, for in para 16 he said that –
“The only thing that might be said in respect of this Mercedes was that until it actually had a number plate affixed to it, it might not be said to be in a deliverable state, but I reject that argument. It seems to me that it would be in a perfectly deliverable state without actually having a number plate affixed to it, even though actually at the time that that event arises Gwent would not in fact have been able to deliver it.”
The judge therefore contemplated that, without registration plates attached, Gwent would not even have been able to deliver the car. Whether that is so or not, for dealers are, I believe, entitled to transport cars with their own dealer plates attached, the judge found that without its individual registration plates Gwent would not have been able to deliver the car. Either for that reason or because in any event Dr Kulkarni would not have been able to drive the car without its registration plates attached, which is possibly what the judge meant by his observation, and in circumstances where there was no evidence that, at any material time prior to the time of delivery, the car had its registration plates attached, the car was not shown to have been in a deliverable state as of 11 March (even if at that time it might have become ascertained goods by being appropriated to the contract). In my judgment, Dr Kulkarni would not have been bound to have taken delivery of the car without registration plates attached.
I would therefore be prepared to hold that there is no evidence that rule 5(1) was fulfilled in this respect before Gwent became Manor Credit’s debtor under their hire purchase agreement. In such a case, Dr Kulkarni could establish that he had become a purchaser of the car under a disposition which first took place at the time of delivery, and thus when Gwent was in a position to transfer the property in the car under the nemo dat exception contained within section 27. That is enough to entitle Dr Kulkarni to judgment in his favour and thus to succeed on his appeal.
On behalf of Dr Kulkarni, Mr Christopher Purchas QC had prepared a skeleton argument which sought to argue in addition that the car was not in a deliverable state for reasons unconnected with its physical state and which resided in the fact that at what might otherwise have been the time intended for transfer of the property in the car Gwent lacked any title to transfer. However, at the appeal hearing he abandoned that wider argument, in my judgment correctly. See, for instance, Underwood Ltd v. Burgh Castle Brick and Cement Syndicate [1922] 1 KB 343 (CA) at 345 – “It depends on the actual state of the goods…” per Bankes LJ; see also Benjamin on Sale, 6th ed, 2002, para 5-023, “The goods must therefore be in a physical condition in which the buyer can take delivery and in which it has been agreed that he shall take delivery under the contract.”
Unconditional appropriation and assent as indicators of intention
If that conclusion about deliverable state be wrong, the next question which would arise would be whether there was an unconditional appropriation of the car with the assent of Dr Kulkarni, ie factors (iii) and (iv) above. The judge considered that there had been such an appropriation, and that therefore property in the goods had been intended to be transferred to Dr Kulkarni by at latest 11 March. He said (at para 17):
“Once the identity of the vehicle had been obtained by obtaining a number plate, or rather a registration number of the vehicle, because that must refer to a specific vehicle, then those goods are unconditionally appropriated to the contract, and it is done by the seller with the implied consent of the buyer. At the very latest the buyer assents to that by insuring the vehicle on 11th March. I have to say that that seems to me to be an unassailable argument.”
Subject to the ultimate question of intention, for of course rule 5(1) is only a prima facie rule, the judge’s proposition appears to have a rough good sense to it. Authority, however, suggests that the rule is not after all so very easily fulfilled, at any rate as an indicator of the parties’ intentions. This is in part because the statutory presumptions are not difficult to rebut. As Diplock LJ said in Ward v. Bignall [1967] 1 QB 534 at 545 –
“in modern times very little is needed to give rise to the inference that the property in specific goods is to pass only on delivery or payment.”
A number of cases illustrate the flexibility of the law. Thus in Varley v. Whipp [1900] 1 QB 513 the buyer bought, sight unseen, a second hand reaper under a certain description, viz that it was nearly new as having been used to cut only about 50 to 60 acres. The reaper was sent to the buyer by rail, and on its arrival the buyer complained that it did not comply with its description, being old and mended. The seller sued for the price. The divisional court treated this contract for the sale of specific goods under section 17, not under section 18, and held that property could not have been intended to pass in goods which did not comply with their description until they had been inspected and accepted, which the reaper had not been. The seller therefore failed in his action. In the present case, there was no problem about the car’s description, but there was a breach of the implied condition as to title.
In Noblett v. Hopkinson [1905] 2 KB 214 the buyers bought and paid for a half gallon of beer from a publican. The purchase was made on a Saturday and the beer was drawn off and put aside for delivery on the Sunday. The publican was proceeded against for selling liquor on the Sunday. The issue was whether there had been a transfer of property in the beer on the Saturday. The magistrates found that transfer of the property had been effected on the Saturday. The divisional court however held that that was wrong in law, as property had not been transferred until the Sunday. Lord Alverstone CJ said that the correct inference was that what was done by the publican was under his own responsibility and that “if the bottle of beer had been broken during the Saturday night, other beer would have had to be supplied to the men on the Sunday morning” (at 219). There was no sufficient appropriation.
In Ollett v. Jordan [1918] 2 KB 41 the sale was of herrings, despatched by rail by a seller in Hull to a buyer in Eastbourne. The issue under the Public Health Act 1875 was whether the seller had “exposed for sale” the herrings in an unmerchantable condition. They were in good condition on despatch, but bad on arrival. If property had been transferred on despatch, the seller was not guilty. The question was therefore whether there had been such an appropriation as would transfer the property. It was held that as the buyer had a right to inspect and reject the herrings, property had not passed on despatch, and the seller’s acquittal by the magistrates was reversed on appeal.
The famous case of Rowland v. Divall [1923] 2 KB 500 (CA) concerned a car which had been sold by a seller who had no title to it, for it turned out to have been stolen. After the buyer had used the car for some time, it was recovered by the police for its true owner, and the buyer sued the seller to recover the price. He was held by this court to have been entitled to do so, on the ground that there had been a total failure of consideration, since the seller had contracted to transfer the property in the car but had failed to do so. Bankes, Scrutton and Atkin LJJ agreed in the result. Atkin LJ said (at 506):
“He paid the money in order that he might get the property, and he has not got it. It is true that the seller delivered to him the de facto possession, but the seller had not got the right to possession and consequently could not give it to the buyer.”
He also (controversially) said “there can be no sale at all of goods which the seller has no right to sell” (at 506), but I do not rely on that.
Finally, in Carlos Federspiel & Co SA v. Charles Twigg & Co Ltd (1957) Ll Law Rep 240 the buyer paid in advance for goods to be shipped. The seller failed before shipment, and his receiver refused to ship without a second payment. It was held that he was entitled to do so, since there had been no appropriation and thus as yet no transfer of property. Pearson J reviewed the law from the early nineteenth century. Among the cases which he examined was Mucklow and Others (Assignees of Royland) v. Mangles (1808) 1 Taunt 318, where a buyer had paid for the whole cost of a barge to be constructed, and his name had been painted on it, but the seller sold the barge to a third party and it was held that property had not yet been transferred to the original buyer. Another case was Wilkins v. Bromhead and Hutton (1844) 6 M&G 963, where the buyer had assented to an appropriation of a greenhouse which had been constructed for him: the buyer remitted the price to the seller and asked him to keep it for him. That was a clear case, but the judgment of Tindal CJ is interesting for the following observation (at 974):
“If a purchaser’s assent to the appropriation was shown to have been obtained by misrepresentation, it seems to me it would probably be held to be no assent at all.”
So, in the present case, if Dr Kulkarni’s insurance of the car is to be taken, as the judge thought, as an assent to Gwent’s appropriation, it might be said that such an assent was given on the basis of the implied representation and understanding that at that time Gwent had the property in the car which it would need to have if it was to transfer that property which it had promised to transfer at a time when the agreement to sell matured into a sale. On that basis, Dr Kulkarni’s assent would be no assent.
On the basis of his review of such cases Pearson J restated the following principles at 255/6:
“Therefore the element of common intention has always to be borne in mind. A mere setting apart or selection of the seller of the goods which he expects to use in performance of the contract is not enough. If that is all, he can change his mind and use those goods in performance of some other contract and use some other goods in performance of this contract…
Secondly, it is by agreement of the parties that the appropriation, involving a change of ownership, is made…
Thirdly, an appropriation by the seller, with the assent of the buyer, may be said always to involve an actual or constructive delivery. If the seller retains possession, he does so as bailee for the buyer…
Fourthly, one has to remember Sect. 20 of the Sale of Goods Act, whereby the ownership and the risk are normally associated. Therefore as it appears that there is reason for thinking, on the construction of the relevant documents, that the goods were, at all material times, still at the seller’s risk, that is prima facie an indication that the property had not passed to the buyer.
Fifthly, usually but not necessarily, the appropriating act is the last act to be performed by the seller…But if there is a further act, an important and decisive act to be done by the seller, then there is prima facie evidence that probably the property does not pass until the final act is done.”
Applying those principles, Pearson J concluded that (1) the intention was that the ownership should pass on shipment because shipment was emphasised as the decisive act; (2) there was nothing in the parties’ correspondence to indicate any change in that intention; (3) there was no actual or constructive delivery; (4) there was no suggestion of the goods being at the buyer’s risk before delivery; and (5) there was no delivery or sending for delivery. Therefore property had not passed.
That was an international sale of goods in commerce. The present case is the standard case of the domestic sale of a car to a consumer. It has to be acknowledged that such a purchaser who has paid up front for a car yet to be sourced would be protected by obtaining title to a car, once identified and sufficiently appropriated, in the dealer’s showroom or garage, were the dealer to become insolvent. Nevertheless, the present case shows that there are equal dangers in losing the protection of section 27 if property passes too early. I do not think that one can argue backwards from the consequences in any particular case to the prospective intentions of the parties. In the meantime the standard provision in a consumer case that risk remains with the seller until delivery will protect the buyer against all risk except insolvency. As to that risk in the present case, the fact is that Dr Kulkarni was prepared to trust Gwent with his cash at a time when he had no possibility of having property in a car yet to be sourced or ascertained.
Mr Purchas submitted that in the case of the sale of a car to a consumer property is in general not intended to pass until delivery, and I think that there is force in that submission, at any rate where as here the contract is not for the sale of a specific car and the buyer has never seen the car. Generally speaking, it will be on delivery that the buyer will be able to inspect the car, if new, for its specification, and if second-hand, for any work which the dealer has been asked to do to it. It is on delivery that the buyer will be handed the car’s log-book or registration document (not a matter considered by the judge). Although such a document speaks to the car’s keeper, not its owner, it is I think well recognised that a legitimate buyer would not readily assent to complete the sale of a car without getting its log-book. It is at latest on delivery that the dealer will have ensured that he is paid. It is, I would think, for and from the time of delivery that the buyer insures the car. The special rule as to risk, although perhaps designed to protect a consumer even where property may have passed before delivery, is apt for a passing of property on delivery. The consumer will have little knowledge of the rules of section 18 of the SGA 1979, but he or she will have in their mind the adage that possession is nine points of the law, and that points to the time of delivery as well. Moreover, such a result seems on the whole to fit into the apparent circumspection of the law, indicated by the review conducted by Pearson J, about any assumption that the parties are too readily supposed to intend that property passes under rule 5(1).
I would therefore have wanted some good evidence that the parties in this case had intended the property in the Mercedes to pass prior to delivery before solving the issue on the basis of the rule 5(1) presumption. The judge thought that he had that evidence above all in Dr Kulkarni’s insurance of the car, identified as it would have to be by its registration number. However, as I have pointed out above, there is no finding as to the time from which Dr Kulkarni insured cover for the car. If, as I would in the absence of evidence infer, Dr Kulkarni only insured it from the time of its expected delivery, then this matter of insurance, so far from pointing towards a solution in terms of rule 5(1), actually points against it.
Moreover, on the facts of this case, Gwent never had property in the car to transfer to Dr Kulkarni. It knew that it did not, and it knew that it had no intention of fulfilling its contract to transfer property in the car to its buyer. It knew therefore that any assent by Dr Kulkarni to the appropriation of a car in which Gwent had no property had been procured by its own dishonest pretence. Dr Kulkarni of course did not know the truth of the situation, but it could not be supposed on any objective basis that he would assent to an appropriation to him and thus to the transfer of title there and then in respect of a car in which his seller, Gwent, lacked title. Could a seller who knows that he lacks the property in goods which he appropriates to a contract reasonably think that his buyer would assent to such an appropriation as the means and moment of transferring property? In my judgment, no.
It seems to me that in such a situation, rule 5(1) is unlikely to provide a solution to the question of the parties’ intentions. The rule assumes that the goods which a seller proposes to appropriate unconditionally to his contract, so that with the assent of his buyer property should be transferred then and there to that buyer, are goods in which the seller has property with which to perform his section 12(1) obligation. If, therefore, a seller lacks property in the goods, his appropriation to the contract of goods in which he has no property, a fortiori where he knows he has no property, is unlikely to be any more reliable as an indication of his or the parties’ intentions than his appropriation of goods which are not in a deliverable state, or of goods which are not goods of the contract description.
A seller might in some circumstances not know that he lacks property in the goods, and therefore in his ignorance he might intend to transfer a property that he does not have. That however is not this case. Gwent knew that it had no property, and for his part Dr Kulkarni could not be thought of as intending to assent to an appropriation which his seller knew could not transfer to him the property which, if rule 5(1) were to be applied, would be required to be transferred.
In such circumstances, it seems to me that the agreement to sell would only mature into a sale, or purported sale, with actual delivery of the goods itself. That would reflect the presumption in rule 5(2), which focuses on delivery, deems an unconditional appropriation then to occur, and has no requirement for the buyer’s assent. Thus, I should not be thought of as saying (despite the great authority of anything falling from Atkin LJ) that a seller cannot complete a sale if he lacks full rights of ownership in the goods. Where he lacks full title, he may well transfer such property as he has, such as a possessory title. As it happens, in the present case there is no finding even as to whether Gwent had possession of the car on 11 March.
Such a solution would also reflect the principles derived by Pearson J from his examination of the topic in Federspiel. Thus in terms of those principles I would say that: (1) delivery was here looked to as the decisive act which would transfer both possession and property; (2) there was nothing in the parties’ communications which indicated an intention otherwise; (3) there was no actual or constructive delivery, no sense in which Gwent became the bailee of Dr Kulkarni’s car; (4) the car was not at Dr Kulkarni’s risk before delivery; and (5) in the circumstances of Gwent’s fraud the parties should not be taken to intend anything prior to actual delivery of the car to turn their agreement into a sale.
It is not that Gwent may not have appropriated the car to the contract and done so unconditionally. It is rather that in the circumstances of the case such an appropriation should not be regarded, under a merely presumptive rule, as intended to transfer the property in the car to Dr Kulkarni.
Conclusion
It follows that, for all or some of those reasons, the terms of section 27 applied to this case, and Dr Kulkarni is entitled to judgment. His appeal must therefore be allowed.
Lord Justice Wilson :
Sale of Goods Forming Part of a Bulk [1993] SLC 145
[1993] SLC 145 (Report)Part II The Present Law
The Sale of Goods Act 1979
2.1 The law on sale of goods in the United Kingdom is contained mainly in the Sale of Goods Act 1979. This is based on the Sale of Goods Act 1893 which codified the law on this subject and, to a large extent, removed differences between English and Scottish law. The law on the passing of property under a contract for the sale of goods is now the same throughout the United Kingdom.[8]
2.2 The 1979 Act is concerned only with goods. “Goods” are defined as including
“all personal chattels other than things in action and money, and in Scotland all corporeal moveables except money”.[9]
We are not therefore concerned in this report with such things as unextracted minerals.
The Act distinguishes between specific goods and unascertained goods. “Specific goods” are
“goods identified and agreed on at the time a contract of sale is made”.[10]
Bulk goods may be specific goods. For example, a contract for the sale of all the oil in a particular container, or all the grain in a particular silo, is a contract for the sale of specific goods. Unascertained goods are those which are not identified and agreed on either at the time the contract is made or later.[11]
Unascertained goods include generic goods which are wholly unidentified (eg any 500 tonnes of wheat of a certain description)[12] and goods which are partly identified by reference to the bulk of which they form part (eg 500 tonnes of wheat out of the cargo on board The Challenger).[13]
2.3 The general rule on the passing of property under a contract for the sale of goods is that property passes from the seller to the buyer when the parties intend it to pass. Section 17(1) of the Sale of Goods Act provides that:
“Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.”
However, as we have already noted, section 16 prevents property from passing before the goods are ascertained. The parties cannot contract out of section 16.[14] Its terms are mandatory. It says, without qualification, that:
“Where there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained.”
Section 16 does not say when property will pass once the goods are ascertained. This will depend on the intention of the parties. In deciding what the parties intended regard will be had to the terms of the contract, the conduct of the parties and the circumstances of the case.[15] Unless a different intention appears, the following rule governs the type of case with which we are concerned in this report.[16]
Rule 5.-(1) Where there is a contract of the sale of unascertained or future goods by description, and goods of that description and in the deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or the buyer with the assent of the seller, the property in the goods then passes to the buyer; and the assent may be express or implied, and may be given either before or after the appropriation is made.
(2) Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee or custodier (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is to be taken to have unconditionally appropriated the goods to the contract.
The legal effect of section 16
2.4 Section 16 does not prevent the whole of a bulk from being sold by one contract to several buyers who then become owners in common, holding the goods in undivided shares. Such a sale would be a sale of specific goods, like the sale of a table to a husband and wife; or the sale of a racehorse,[17] or a ship,[18] or a parcel of diamonds[19] to a consortium of buyers.
2.5 Section 16 does not prevent a sale of an undivided share in goods, expressed as a fraction such as a half or a third or as a percentage.[20] Section 2(2) of the 1979 Act itself recognises that there can be a contract of sale between one part owner and another[21] although it has been argued that this is only possible where the contract is for the transfer of the totality of the seller’s interest.[22]
It is, however, less clear whether this is a sale of “goods”.[23] On one view an undivided share in goods is an abstraction, a chose in action or incorporeal property, which is not within the definition of “goods” in the Sale of Goods Act 1979. It is, however, arguable that an undivided share in goods was intended to be within the scope of the 1979 Act.[24] This may be the natural implication, in its context, from section 2(2).[25] We suggest later that the 1979 Act should be amended to remove any doubts.[26]
2.6 If it is assumed that an undivided share – such as a half or a third, or a percentage – of goods qualifies as “goods” under the Act, the next question is whether such a share is “unascertained goods”. This too is unclear. The difficulty in saying that, say, a one-third share in a horse is unascertained goods is that there is no way in which property in the share could pass by sale while the horse is alive. This cannot have been intended. It would be absurd for the law to be, on the one hand, that there can be a sale of a part share in goods such as a horse, ship, painting or table which cannot be divided without being destroyed, but, on the other, that property in the part share could never pass without actual division of the goods. [27] Section 16 draws no distinction between goods of this type and goods which could be easily divided. There is, on the other hand, no difficulty in saying that if a specified undivided share (such as a quarter) in goods is “goods” then that share is identified and agreed on, as clearly as it ever can be while remaining an undivided share, if the goods in which it is a share are identified and agreed on. It seems therefore that a fraction or percentage of specific goods should not be regarded as “unascertained” for the purposes of section 16. On this view, property would pass, under section 17, when the parties intend it to pass and the buyer would then become owner in common with the other owner or owners, who may include the seller.[28] Again, we suggest later that this should be made clear in the Act.[29]
2.7 Section 16 does prevent property from passing in wholly unidentified goods. This is understandable and necessary “for how can we speak of someone as having bought goods if we cannot tell what it is that he has bought?”.[30] It also prevents property from passing, before ascertainment, in goods which are purchased by quantity out of a bulk. Again this is understandable and necessary so far as sole property in that quantity of goods is concerned. However, section 16 also prevents the purchaser of a quantity of goods forming part of a bulk from becoming an owner in common of the whole bulk.[31] This seems less understandable or necessary. It means that there is a crucial difference in legal result between the case where fungible goods never leave the bulk and the case where, with the agreement of both parties, they are separated for a few minutes and then restored to the undivided mass. In the second case the buyer would acquire property in the goods when they were appropriated to the contract by the momentary separation (if there was no indication of any contrary intention) and would then become an owner in common of the whole bulk when the goods were once more merged with the rest.[32] If what has been said in paragraphs 2.5-2.6 above is correct, it also means that there is a crucial difference in legal result between the case where the contract for fungible goods identifies them by quantity, weight or other measure and the case where it identifies them in a proportionate way (whether a fraction or a percentage of the bulk). In the second case the buyer would become an owner in common of the whole bulk (if there was no indication of contrary intention).
2.8 It is common for the purchaser of a quantity out of bulk to receive from the seller a delivery order addressed to a third party, such as a storekeeper, who is holding the goods on behalf of the seller. The purchaser may present this delivery order to the storekeeper who may acknowledge that the quantity in question is now held for the purchaser.[33] While this may operate as delivery as between seller and buyer[34] and may give the purchaser a personal right against the storekeeper to delivery of the stated quantity of goods, it is not sufficient to pass property in the goods. The goods are still unascertained and section 16 still prevents any property from passing.[35] On the seller’s insolvency the goods could still be taken by the liquidator or other office-holder in insolvency. The position is the same, so far as the passing of property is concerned, if the buyer had resold the goods or part of them to a sub-purchaser and handed over a delivery order. In this situation the sub-purchaser may prevail if the original seller, not having been paid by the intermediate buyer, attempts to exercise the possessory rights of an unpaid seller in possession.[36] However, the sub-purchaser, because of section 16, will still not have acquired the property in the goods and will still be in a weak position if the original seller becomes insolvent before the goods are ascertained.
2.9 It may happen that one person becomes the purchaser of a whole bulk by virtue of a series of contracts with the same seller each relating to a specified quantity out of the bulk, or by buying a specified quantity from one seller and the rest of the bulk from another (say, an existing purchaser from the first seller). In such a case, the question arises whether section 16 prevents property from passing to the purchaser until the goods pertaining to the separate contracts have been ascertained, which might never happen. If interpreted literally section 16 would seem to prevent property passing until ascertainment of the goods relating to each contract. It refers to “a contract for the sale of unascertained goods” and says that property is not to pass until “the goods are ascertained”. The most obvious meaning of “the goods” in this context is the goods covered by the contract. However, the courts have declined to push section 16 to its logical conclusion in this type of case and have held that section 16 no longer operates once contracts relating to the whole bulk have been united in one purchaser.[37] This means that whether property passes or not depends on the pattern of sales and sub-sales and the identity of the purchasers or sub-purchasers.
2.10 Section 16 does, however, continue to operate where the whole of the bulk has been bought by different purchasers under different contracts. This gives rise to a bizarre situation. The seller may have been paid for the whole of the bulk. The bulk may be held in an independent warehouse on behalf of the various purchasers. It may have been held there for months or years after the last sale, the buyers paying for storage and insurance. Yet if the goods pertaining to the various contracts have not been ascertained property cannot pass.[38] The whole bulk continues to belong to the seller (who would often be surprised to learn this) and may fall to a liquidator or other office-holder on the seller’s insolvency.
2.11 Section 16 may prevent property from passing even after physical delivery of the goods to the buyer. Suppose, for example, that a seller has one major customer, A Ltd, and several minor customers, in a remote area. In return for a discount A Ltd agree to act as the seller’s agent for distributing quantities out of the bulk to other purchasers. The seller delivers the bulk to A Ltd who have bought and paid for a large quantity out of it. Over the next few weeks the minor customers come to collect the smaller quantities they have bought. Even although A Ltd have taken delivery of the whole bulk no property in the goods can pass to them until the goods covered by their contract are ascertained either by being removed from the bulk, or by becoming the only goods left in the bulk after the other purchasers’ goods have been removed.[39]
2.12 Although section 16 prevents property in goods forming part of a bulk from passing before ascertainment it does not prevent risk from passing and does not prevent the purchaser of a quantity forming part of a bulk from acquiring an insurable interest in the goods before ascertainment.[40] It is common enough for the risk of loss of, or damage to, the goods to pass to the buyer before the property passes.[41] A buyer of goods out of bulk who is prevented by section 16 from acquiring property in the goods may still have to bear the loss if the goods are lost or damaged[42] and should therefore, even under the present law, consider insurance.
Practical effects of section 16
2.13 We have already mentioned the case of The Gosforth[43] which provides one example of the potential practical effects of section 16. It may be helpful to give some other practical examples of the operation of section 16 in cases involving purchases of quantities forming part of a bulk.[44]
1. P bought 250 sacks of flour from S. The sacks formed an undifferentiated part of a larger quantity of sacks in an independent store. P paid for the 250 sacks and obtained a delivery order for them. P took delivery of 29 sacks but the remaining 221 sacks were still in the store when S became bankrupt. The trustee in the bankruptcy successfully claims the 221 sacks, founding on section 16.[45]
2. P bought 120,000 gallons of white spirit from S. This was part of a larger quantity in a tank belonging to a storage company. S gave P a delivery warrant whereby the storage company undertook to deliver to P or Ps’ assignees. P were to make their own arrangements with the storage company in relation to “storage insurance etc after the end of this month”. This was in fact done by sub-purchasers from P who did not want immediate delivery and arranged to pay storage rent to the storage company. Some months later it was found that the spirit had deteriorated in quality (partly through natural evaporation of the more volatile elements) since the date of the sale. The sub-purchasers claimed damages from P, and P sought to recover damages from S. The court of first instance held that property had not passed because of section 16 and gave judgment for P. The Court of Appeal held that, even if property in the goods had not passed, the risk of deterioration plainly had passed to P when they obtained the delivery warrant.[46]
3. P bought 200 quarters of maize from S who had bought them from A. The 200 quarters formed part of a bulk of 618 quarters held by warehousemen on behalf of A. A gave a delivery order to S, and S gave a delivery order to P. Both delivery orders were intimated to the warehousmen. Before any delivery was made A, who had not been paid by S, sent a stop order to the warehousemen ordering them not to deliver. In an action by P against the warehousmen it was held, among other points, that P had no claim as owners of the goods – “the goods were not their property, for they had never been ascertained”.[47] On the facts of this particular case P also failed on other grounds. There had been no attornment by the warehousmen and there was held to be no estoppel. So the warehousemen were free to argue, successfully, that they held the goods all along on behalf of A.
4. P bought from S 500 tones of wheat out of 1,000 tons on board the ship Challenger. P paid S. About two weeks later S went bankrupt. Four days later the ship arrived. The trustee in S’s bankruptcy claimed the whole 1,000 tons. His claim was successful. No property had passed to P.[48]
2.14 We have seen that section 16 can lead to the result that a buyer of goods out of bulk, who has paid for the goods in exchange of documents, loses the goods in a competition with the seller’s creditors. Often this will be on the seller’s insolvency but, as The Gosforth[49] showed, even in the absence of insolvency an unpaid creditor of the seller may be able, under some legal systems, to arrest the goods in connection with an action against the seller. The lack of either the legal ownership of, or a possessory title to, the goods may also prevent the buyer from being able to sue in tort or delict for damage to the goods.[50]
2.15 It would be a mistake to concentrate exclusively on situations where something goes wrong. Commodity trading functions as well as it does because most contracts do not end in disaster. In the normal situation where nothing has gone wrong the main practical effect of section 16 is simply that it is an impediment to freedom of contract. It prevents parties from achieving results which they want to achieve. Very often, for example, both parties to a contract for the sale of bulk goods will want the property to pass when the price is paid in exchange for documents. If, because the goods form an unascertained part of an identified bulk, the property in specific goods cannot pass, the parties may nonetheless want some proprietary interest in the bulk to pass. They may want property to pass so far as is possible in the circumstances. Section 16 prevents them from achieving this result. It is not an answer to say that the parties can always separate out and identify, even momentarily the goods relating to the contract.
Clegg v Olle Andersson (t/a Nordic Marine)
[2003] EWCA Civ 320
Vice Chancellor
Did the Cleggs lose their right to reject the Yacht before 6th March 2001?
It is not disputed that the result of my conclusion in respect of s.14(2) is that the Cleggs were, initially, entitled to reject the Yacht. The question is whether by their subsequent conduct they lost that right on or before 6th March 2001. This issue depends on the proper application to the facts of this case of s.35 Sale of Goods Act 1979 as amended by the Sale and Supply of Goods Act 1994. The material provisions are:
(1) The buyer is deemed to have accepted the goods subject to subsection (2) below –
(a) when he intimates to the seller that he has accepted them, or
(b) when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller.
(2) Where goods are delivered to the buyer, and he has not previously examined them, he is not deemed to have accepted them under subsection (1) above until he has had a reasonable opportunity of examining them for the purpose –
(a) of ascertaining whether they are in conformity with the contract, …
(3) Where the buyer deals as consumer…., the buyer cannot lose his right to rely on subsection (2) above by agreement, waiver or otherwise.
(4) The buyer is also deemed to have accepted the goods when after the lapse of a reasonable time he retains them without intimating to the seller that he has rejected them.
(5) The questions that are material in determining for the purposes of subsection (4) above whether a reasonable time has elapsed include whether the buyer has had a reasonable opportunity of examining the goods for the purpose mentioned in subsection (2) above.
(6) The buyer is not by virtue of this section deemed to have accepted the goods merely because –
(a) he asks for, or agrees to, their repair by or under an arrangement with the seller,…”
The terms of s.35 pose three questions, namely (1) did the Cleggs intimate to Mr Andersson that they accepted the Yacht? (2) did the Cleggs do any act in relation to the Yacht which was inconsistent with the ownership of Mr Andersson ? and (3) had a reasonable time elapsed by 5th March 2001 in which the Cleggs retained the Yacht without intimating to Mr Andersson that they had rejected it? The judge answered each of the first two questions in the affirmative. He indicated that had it arisen he would have answered the third question in the affirmative too.
In paragraphs 43 to 47 the judge dealt with a number of authorities on which Counsel for Mr Andersson had relied before him relating to the application of s.35(4). In paragraph 54 the judge explained why he preferred the evidence of Mr Andersson to that of Mr Clegg but pointed out that the differences between them on relevant matters were small and ultimately probably not crucial.
The judge’s conclusion on the first two questions to which I have referred in paragraph 51 above is set out in paragraph 55 of his judgment. He said:
“I find that Mr. Clegg was told on 12 August 2000 that the Yacht was overweight, that there seemed to be some 607 kilogrammes excess weight in the keel, and that Mr. Andersson and Malo would put that right. Even on Mr. Clegg’s evidence he knew on 16 August 2000 that the keel was overweight. With that knowledge he took his family on a cruise to Falmouth and Alderney over eight days or so. In the light of that experience he decided that he liked the Yacht as it was and told Mr.Andersson so. That, in my judgment, was an intimation that he accepted the Yacht, knowing of the condition of the keel and that Mr. Andersson considered that it should be corrected and was prepared to have the necessary work done. Mr. Clegg’s concern in his letter dated 28 August 2000 in relation to the keel was not whether its condition was such that he might want to reject the Yacht, but simply whether the remedial work proposed by Mr. Andersson was absolutely necessary. In my judgment by 28 August 2000, in the light of his experience of sailing the Yacht, it had not occurred to Mr. Clegg not to keep the Yacht. He was simply interested in whether he should have the remedial work done or not. The fact that he indicated to Mr. Andersson that he considered that it was his, Mr. Clegg’s, decision whether the remedial work should be done or not was a further intimation that he had accepted the Yacht. The giving by Mr. Clegg of an instruction in his letter dated 5 September 2000 to Mr. Andersson that remedial work should not be undertaken on the keel was, in my judgment, an act inconsistent with the continuing ownership of the Yacht by Mr. Andersson. In informing Mr. Andersson in his letter dated 13 January 2001 that he intended to move the Yacht to Portugal or Gibraltar in early May 2001 it seems to me Mr. Clegg was intimating that he had accepted the Yacht. I also consider that by leaving his personal possessions on the Yacht between August 2000 and the end of March 2001 Mr. Clegg was intimating that he had accepted the Yacht. His action in insuring the Yacht was inconsistent with ownership of the Yacht remaining with Mr. Andersson and amounted to the assertion by Mr. Clegg that he had an insurable interest in the Yacht. Contrary to his evidence to me, he would not have had such an interest unless he had accepted the Yacht. Mr. Clegg’s attempt to register the Yacht in his and his wife’s names was also inconsistent with ownership of the Yacht remaining with Mr. Andersson. For all these reasons in my judgment Mr. and Mrs. Clegg had lost the right to reject the Yacht, if, contrary to my findings, they would otherwise have had such right, well before the letter dated 6 March 2001 was written by Messrs. Blake-Turner & Co. Indeed, the tenor of the correspondence between Mr. Clegg and Mr. Andersson up to the letter dated 6 March 2001 does not in any way foreshadow the terms of that letter, which came rather out of the blue. I reject Mr. Clegg’s evidence that he was moved to give instructions for the letter to be written by a realisation from the terms of Mr. Andersson’s letter dated 14 February 2001 that significant work would be necessary to remedy the Yacht. I find it difficult to avoid the conclusion that the writing of the letter dated 6 March 2001 was in fact prompted by a desire to seek to manoeuvre Mr. and Mrs. Clegg into a better position to extract substantial compensation from Mr. Andersson. Certainly something about which I can only speculate appears to have happened at the beginning of March 2001 to cause Mr. Clegg to wish to adopt a much more confrontational stance as against Mr. Andersson than that which had been adopted up to that point.”
The intimations on which the judge relied in relation to the first question were (a) Mr Clegg, with knowledge and experience of the overweight keel, telling Mr Andersson in late August 2000 that he liked the Yacht, (b) Mr Clegg’s letter of 28th August 2000 indicating that the decision whether any and, if so, what remedial work should be done was for Mr Clegg, (c) Mr Clegg’s letter of 13th January 2001 informing Mr Andersson that the Cleggs intended to move the Yacht to Portugal or Gibraltar in early May 2001 and (d) the action of the Cleggs in leaving personal possessions on the Yacht from August 2000 until March 2001.
In my view intimations (a) and (b) should be considered together, not least because the terms of the letter of 28th August 2000 (paragraph 11 above) show the sense in which Mr Clegg’s statement should be regarded. He refers to the overweight keel as a fundamental point. He asks for a revised specification and measurements. He questions the effect on EU weight requirements and on a resale and asks for the appointment of an independent surveyor because he does not have the relevant expertise. I do not read this as an intimation of acceptance; rather Mr Clegg was asking for information so that he might then determine whether or not he should accept the Yacht. That this was his position is, in my view, made plain by the correspondence passing between him and Mr Andersson between 28th August and 8th September 2000 (paragraphs 12 to 16 above). The information he sought was not in fact supplied until 15th February 2001.
Mr Clegg’s letter of 13th January 2001 (paragraph 17 above) cannot be read as an intimation that Mr Clegg had, or then, accepted the Yacht. He was concerned to get the information for which he had previously asked. Had it proved to be satisfactory then, no doubt, he would wish to move the Yacht to Portugal or Gibraltar in early May. That would depend on the sailing/testing he wished to carry out in March/April. I do not read that letter as intimating an intention to move the Yacht to Portugal if the information or the result of the testing was not satisfactory. Until at least the information was received Mr Clegg was not in a position to decide whether to accept the Yacht or not. No doubt the Cleggs had left personal effects in the Yacht but, given the outstanding request for further information, that action cannot be regarded as an intimation of acceptance either. For these reasons I am unable to agree with the judge’s conclusion on the basis of any or all the intimations he referred to in paragraph 55 of his judgment.
The inconsistent acts on which the judge relied in relation to the second question were (a) the letter dated 5th September 2000 from Mr Clegg to Mr Andersson directing him that remedial work should not be done, (b) insuring the Yacht and (c) attempting to register the Yacht. I am unable to agree with the judge in respect of any or all of these acts either.
By s.35(6)(a) a buyer is not deemed to have accepted goods if he asks for or agrees to their repair by the seller. The circumstances existing on 5th September 2000 were that Mr Clegg had sought but had not yet been provided with the information required by him to decide whether or not to accept remedial works to the Yacht. If he had agreed to their repair that would not have amounted to acceptance. In my view Mr Clegg’s indication that he did not agree to any remedial works unless and until he had been provided with the information he sought is also incapable of amounting to acceptance of the Yacht.
In Kwei Tek Chao v British Traders and Shippers [1954] 2 QB 459, 487 Devlin J explained that in cases where, as in this case, property in the goods has passed to the buyer the ownership of the seller with which the buyer must not act inconsistently is the reversionary interest of the seller which remains in him arising from the contingency that the buyer may reject the goods. As property in the Yacht had passed to the Cleggs they had an insurable interest in it whether or not they subsequently rejected it. The act of Mr Clegg in insuring the Yacht in August 2000 was not in any way inconsistent with the reversionary interest of Mr Andersson. Moreover, as the judge recorded in paragraph 28 of his judgment, one reason why Mr Clegg insured the Yacht was because the loan agreement under which he borrowed the money to buy the Yacht required him to do so. In my view the judge was wrong to regard the act of insuring the Yacht as in any way inconsistent with the ownership of Mr Andersson.
The third act on which the judge relied was Mr Clegg’s attempt to register the Yacht in the name of his wife and himself. In cross-examination Mr Clegg said that he had applied through an agent to register the Yacht in Guernsey. From the context I infer that this was done before or at the time of delivery in August 2000. In paragraph 7 of his supplemental witness statement he indicated that he was required to do so by the terms of the loan agreement. I am unable to see how this act can amount to an act inconsistent with the reversionary interest of Mr Andersson to which I have referred.
Accordingly I am unable to accept that the three acts relied on by the judge, either alone or together, are capable of amounting to acts inconsistent with the ownership of Mr Andersson. With regard to the third question in paragraph 57 of his judgment the judge said
“Subject to the need to have regard to the provision made by Sale of Goods Act 1979 s. 35(4), which was introduced after his decision in Bernstein v. Pamson Motors (Golders Green) Ltd., I respectfully agree with the conclusion of Rougier J. that, on proper construction, Sale of Goods Act 1979 s.35(4) is not concerned with what defects existed in goods in any particular case and how easy they in fact were to discover. What it is concerned with is how long would objectively be a reasonable time on the facts of the particular case to retain goods without intimating a rejection. In applying that objective test what is important, it seems to me, is what opportunities there in fact were to examine the goods to see whether they conformed with the contract requirements, not with whether those opportunities were actually taken. On the facts of the present case Mr. and Mrs. Clegg had ample opportunity, had they chosen to take it, to evaluate whether the Yacht was in conformity with the Contract. Had it been necessary, therefore, I should have held that they had lost any right to reject the Yacht by lapse of time.”
In Bernstein v. Pamson Motors (Golders Green) Ltd [1987] 2 AER 220 Rougier J was concerned with a case in which the car had been delivered to the buyer three weeks before the purported rejection. In the interval the purchaser had driven it 140 miles. At p.230 Rougier J said
“In my judgment, the nature of the particular defect, discovered ex post facto, and the speed with which it might have been discovered, are irrelevant to the concept of reasonable time in s 35 as drafted. That section seems to me to be directed solely to what is a reasonable practical interval in commercial terms between a buyer receiving the goods and his ability to send them back, taking into consideration from his point of view the nature of the goods and their function, and from the point of view of the seller the commercial desirability of being able to close his ledger reasonably soon after the transaction is complete. The complexity of the intended function of the goods is clearly of prime consideration here. What is a reasonable time in relation to a bicycle would hardly suffice for a nuclear submarine.”
As the judge acknowledged that decision has been criticised (104 LQR 18). Further it was based on the terms of s.35 before amendment by the Sale and Supply of Goods Act 1994. It is unnecessary to express a view as to whether the decision of Rougier J was correct before the amendment to s.35 effected by Sale and Supply of Goods Act 1994. In my view it does not represent the law now. As originally enacted s.35(1) provided that a buyer was deemed to have accepted goods, inter alia, “when after the lapse of a reasonable time he retains the goods without intimating to the seller that he has rejected them”. S.59 provided then, as it does now, that what is a reasonable time is a question of fact. The material difference arises from the removal of that part of subsection (1) to subsection (4) and the addition of subsections (5) and (6). Thus subsection (5) provides that whether or not the buyer has had a reasonable time to inspect the goods is only one of the questions to be answered in ascertaining whether there has been acceptance in accordance with subsection (4). Subsection (6)(a) shows that time taken merely in requesting or agreeing to repairs, and, I would hold, for carrying them out, is not to be counted.
In these circumstances I consider that time taken to ascertain what would be required to effect modification or repair is to be taken into account in resolving the question of fact which arises under subsection (4). In the light of the undisputed fact that Mr Clegg did not receive the information he had sought in August and September 2000 until 15th February 2001 I consider that the three weeks which elapsed thereafter until the letter of rejection dated 6th March 2001 did not exceed a reasonable time for the purposes of s.35(4) Sale of Goods Act 1979.
In the concluding sentences of paragraph 55 the judge speculated on why Mr Clegg determined to reject the Yacht when he did. He rejected the evidence of Mr Clegg and considered that he sought to manoeuvre his wife and himself into a better bargaining position with regard to Mr Andersson. In my view the reason why the Cleggs rejected the Yacht when they did is irrelevant if, as I consider, they had the right to do so.
Although Mr Andersson had not served a respondent’s notice we gave him permission to rely on the letters dated 16th and 25th March 2001 (paragraph 21 above). Counsel for Mr Andersson submitted to us, as she had done to the judge, that these letters vitiated the rejection effected by the letter of 6th March. The judge rejected that submission and so do I. If the letter of 6th March 2001 was effective to reject the Yacht there is nothing in the subsequent letters to rob it of that effect. In particular they do not constitute a withdrawal of the rejection or a contract or estoppel not to enforce it.
Damages
Having concluded that the overweight keel constituted the breach of a condition under s.14(2) and that the Cleggs had validly rejected the Yacht by their solicitor’s letter dated 6th March 2001 this issue is to be approached on a different basis from that adopted by the judge. It is not disputed that the Cleggs are entitled to the return of the price and other acquisition costs they incurred. This is quantified at £251,718.49. In addition they are entitled to compensation for consequential losses. These have been formally verified and quantified in the sum of £37,750 under a number of heads. I understood both parties to agree that we should refer the matter to a Master for the assessment of those damages. So that there shall be no doubt what the Master is expected to do I should briefly mention certain issues relating to damages to which the judge referred.
In paragraph 60 of his judgment the judge indicated that there was no claim for damages pleaded in the particulars of claim if the Cleggs had no right to reject the Yacht. Given that the Cleggs did have the right to reject the Yacht and had properly exercised it the pleading point goes. In paragraph 61 the judge concluded that the refusal of the Cleggs to permit Malo to carry out remedial work to the keel in September 2000 constituted a failure by them to mitigate their loss so as to deprive them of damages to reflect that cost. That issue also does not arise in the circumstances that the Cleggs were entitled to and did reject the Yacht in March 2001. The overpayment, but not the berthing charge, referred to by the judge in paragraph 62 of his judgment does still arise and is a factor to be taken into account by the Master in assessing the damages to be paid to the Cleggs.
Conclusion
For all these reasons I would allow the appeal, discharge the order of the judge and refer the assessment of the damages to be paid by Mr Andersson to the Cleggs to the Master. It follows that the order for costs made by the judge is discharged also with the consequence that the issue of whether the costs he ordered the Cleggs to pay to Mr Andersson should be assessed on the indemnity basis does not arise and the matters referred to in paragraph 22 above cease to have any relevance.
Lady Justice Hale:
I agree and would only add that at times the argument before us seemed to lose sight of the real issues in the English law of sale of goods. These are not whether either party has behaved reasonably. The defendant may well feel that he and the manufacturers Malo did their best to put right what had gone wrong and that the claimant purchaser should have taken up one of the options which they advised. If it is established that the seller is in breach of a condition of the contract, however, the choice does not lie with him.
There is an implied term, in English Law a condition, that goods sold in the course of a business must be of satisfactory quality: s 14(2) and (6). There are no implied terms as to quality in a sale of goods contract other than those implied by sections 14(2) and (3) and 15 of the Sale of Goods Act 1979 (and any other enactment): see s 14(1). This means that in the great majority of consumer sales the buyer has to rely upon section 14. If he does not have a remedy under section 14 he has no remedy at all. It so happens that the goods in this case did not comply with the express term of the contract that they be in accordance with the manufacturer’s specification. But if there had been no such term, it would have been a surprising result indeed if the buyer had no legal remedy for a state of affairs which the seller himself considered unacceptable. Mr Andersson only thought the boat acceptable because they could put it right. That is not the point. Seller and buyer often agree to try and put defects right but neither is obliged to do so. The fact that the remedy supplied by English law may be thought disproportionate by some is irrelevant to a consideration of whether the implied term has been broken.
The test is whether a reasonable person would think the goods satisfactory, taking into account their description, the price (if relevant) and all other relevant circumstances: see s 14(2A). The question, as the joint Report of the Law Commission and the Scottish Law Commission explained, is “not whether the reasonable person would find the goods acceptable; it is an objective comparison of the state of the goods with the standard which a reasonable person would find acceptable” (1987, Law Com No 160, Sale and Supply of Goods, para 3.25) The amendments made to section 14 by the Sale and Supply of Goods Act 1994 also make it clear that fitness for purpose and satisfactory quality are two quite different concepts. In some cases, such as a high priced quality product, the customer may be entitled to expect that it is free from even minor defects, in other words perfect or nearly so.
A reasonable person is not an expert. If a reasonable person had been told in September 2000 that the seller himself had realised that a very large quantity of lead would have to be removed in some as yet unspecified way from the keel of a brand new boat costing nearly a quarter of a million pounds with as yet unspecified consequences for its safety and performance he or she would have had little difficulty in concluding that the boat could not be of satisfactory quality. Had he been told that the seller would later recommend the removal of different quantities of lead, he would have had no difficulty. The seller knew that it was unsatisfactory, hence his commendable attempts to get it put right as quickly as possible.
In English law, however, the customer has a right to reject goods which are not of satisfactory quality. He does not have to act reasonably in choosing rejection rather than damages or cure. He can reject for whatever reason he chooses. The only question is whether he has lost that right by accepting the goods: s 11(4). Once again, amendments made in the 1994 Act were designed to strengthen the buyer’s right to reject by restricting the circumstances in which he might be held to have lost it. In particular, the Commissions thought that informal attempts at cure should be encouraged: para 5.28.
The buyer loses the right to reject if he informs the seller that he has accepted the goods, or if he acts inconsistently with the seller’s reversionary interest in the goods, or if he leaves it too long before telling the seller that he rejects them: s 35(1), (4). The first two of these are subject to his having a reasonable opportunity of examining the goods to ascertain whether they conform to the contract, including the implied terms in section 14; whether he has had such an opportunity is also relevant to the third: s 35(2), (5). And a buyer does not accept the goods simply because he asks for or agrees to their repair: s 35(6). It follows that if a buyer is seeking information which the seller has agreed to supply which will enable the buyer to make a properly informed choice between acceptance, rejection or cure, and if cure in what way, he cannot have lost his right to reject.
This was a buyer who was told very early on that something was not right with his brand new boat and given one suggestion for curing it. When he sought time and information to reflect upon the best way forward the sellers agreed to supply the information required. When they eventually produced this, they not only made it clear that there was no ‘do nothing’ option, but presented two very different options for putting it right, each different from the one they had originally proposed. In my view, time only began to run then and the three weeks it took the buyer to inform the seller that he was rejecting the boat were not more than a reasonable time.
Lord Justice Dyson
I agree with both judgments.
Angara Maritime Ltd v Oceanconnect UK Ltd & Anor
[2010] EWHC 619 [2011] 1 Lloyd’s Rep 61
Mackie QC
Submissions of the Parties-Section 25.
Against those findings of fact I turn next to the submissions of the parties.
While I am grateful for the detailed lists of issues prepared by Mr Kulkarni and Ms Hilliard the evaluation of the claim under Section 25 is most usefully conducted by the sequence of steps adopted by Clarke J in Forsythe which I first set out; adapted slightly to the facts of this case.
Step 1 – Did the persons who bought or agreed to buy the goods, that is the charterers, obtain possession of the goods with the consent of the seller?
Step 2 – Was there delivery, within the meaning of Section 25, of the bunkers by the charterers to the owners?
Step 3 – Did the owners receive the bunkers in good faith and without notice of any lien or other right of the original seller in respect of the goods?
This is in reality two steps because the owners must establish that both that they received the bunkers in goof faith and also that they did so without the relevant notice.
Step 4 – If the first three steps are satisfied by the owners what is the meaning of the last part of Section 25 (1) “as the same effect as if the person making the delivery … were a mercantile agent in possession of the goods … with the consent of the owner”. In Forsythe (at 1351 H) the judge held that if there was a delivery by the charterers to the owners pursuant to a sale the charterers were acting in the ordinary course of their business as charterers and were doing something (namely delivering goods pursuant to a sale) which would constitute acting in the ordinary course of business if they were mercantile agents.
Ms Hilliard submitted in general terms that Clarke J had got it wrong but did not identify any good reason why I should not follow the decision in Forsythe. I respectfully agree with the reasoning in Forsythe. Accordingly Step 4 will not be an obstacle for the Claimant if it satisfies the first three steps.
Step 1
Angara submits that it is self-evident that Britannia obtained possession of the bunkers and did so with the consent of Oceanconnect. Mr Kulkarni submits for the reasons given in Forsythe at 1343 F – 1345 C, that while the owners obtained possession of the bunkers because they obtained actually custody so did the charterers because the bunkers were held by the owners subject to their control or on their behalf.
Oceanconnect do not seriously dispute this.
Step 2
Angara submits that there was a delivery within Section 25 (1) ie “some voluntary act by the buyers in possession amounting to delivery” (Forsythe at 1349B). Angara submits that there was in this case the voluntary act which was lacking in Forsythe. This is because while in Forsythe there was a termination of the charter party for non-payment of hire by the owner the position was different in this case as the events on 29 October 2008 show. The telephone conversation and the email demonstrate that while Britannia, the buyer in possession, had not wanted the contract to come to an end it was deciding of its own volition to redeliver the vessels early having been as Mr Znak put it “left with no other option”.
Oceanconnect say there was no such voluntary delivery. Angara has alleged that there was a contractual redelivery on 5 November 2008 resulting, under Clause 40, in the owners taking over and paying for all bunkers remaining on board. Oceanconnect submit that the clause does not apply in the event of premature termination for the reasons given by Lord Diplock in the House of Lords in The Span Terza [1984] 1 Lloyd’s Rep 119, at 122:-
“My Lords I agree with Lord Justice Kerr that cl.3 [which set out that Owners were to pay for bunkers on redelivery] and the latter half of cl.4 [which set out the means of redelivery] deal with the same subject-matter and are confined to it. The latter half of cl.4 deals with the redelivery of the vessel (i.e. its being put once more at the disposal of the shipowners by the charterers) on dropping last outward sea pilot at the port within the redelivery range at the end of the contract period; in casu, about two years, 45 days more/less, from the date of delivery. Clause 3 deals with what is to happen to the bunkers aboard the vessel at the time of that redelivery. I share the view of Lord Justice Kerr that as a matter of construction its express provisions are wholly inapt to apply to termination otherwise that pursuant to cl.4”
Ms Hilliard argues that the Claimant cannot succeed at this point without an express clause stating that the consequences set out in Clause 40 would occur whether delivery occurred during the charter period or on an earlier termination, as happened in Forsythe. (She also submits that the Claimant did not pay for the bunkers with the agreement of the charterers and therefore did not buy them).
Angara responds that consideration of Clause 40 is a distraction. The Span Terza was about who owned bunkers at the point of sale in a dispute between the suppliers and the charterers. The question is whether, as a matter of fact, there was a voluntary act. In this case there was an unqualified tender of redelivery accepted by Angara. Had it been necessary to evaluate the matter in contractual terms the fact would remain that Britannia and Angarahad, notwithstanding the provisions of Clause 4, agreed to redelivery with Angara taking over the bunkers.
I prefer Angara’s approach. The issue is whether as a matter of fact there was a voluntary act by the buyers in possession amounting to delivery and, on the evidence, there clearly was. It is a question of fact not contractual analysis. Even if that analysis is required one then has the parties agreeing to redelivery otherwise than under the clause and thus varying the terms of the deal between them. It is unrealistic for Oceanconnect to present the events as being Angara’s voluntary act, a process beginning with breach by Britannia potentially bringing the charter to an end, ending when Angaravoluntarily accepted the repudiation.
Ms Hilliard placed emphasis on the fact that the burden of proof rests on Angara throughout. So it does. That does not mean however that Angaramust itself produce evidence in any particular form. The question is simply whether on the agreed facts and those established at the trial the Claimant has, on balance, established its case on the point in issue.
Such documents as exist are consistent with there being a sale by Britannia to Angara. The redelivery notice presupposes on a preliminary basis that the debt due to the owner is $197,127.25 (albeit not $201,127.67), as does the Statement of Account. Then is no question of Angara/Fesco dreaming up the sale at a later and convenient point.
Step 3
Oceanconnect claim that Angara lacked good faith and/or had notice of their rights. Ms Hilliard emphasises that in some circumstances mere negligence or carelessness may be evidence of bad faith and that suspicion combined with the power to acquire knowledge can amount to notice. Angara claims that it had no knowledge of Oceanconnect’s standard terms or that there was a retention of title clause within them. Angara further submits that it was not aware that Britannia had not paid for the bunkers. I have accepted Mr Chabrov’s evidence about these points and I find no evidence of negligence or suspicion in what he did and did not do.
For the reasons that I have given I find that Angara did act in good faith and without notice of Oceanconnect’s rights because there was nothing to put someone in the position of Mr Chabrov on enquiry. There would have been no reason for Mr Chabrov to give the email the close textual analysis to which the lawyers have now subjected it. Even when that examination is conducted it seems to me that the unredacted copies support the position that Mr Chabrov had no knowledge of Oceanconnect’s adverse rights or that Britannia had not paid for the bunkers on board.
Section 25 (1) – Conclusion
Angara has established that it meets the first three steps and the fourth one is satisfied for the reasons I have given. As Angara purchased bunkers from Britannia upon redelivery in good faith and without notice of any adverse right, what would otherwise be a good claim in conversion fails.
Bailment
Ms Hilliard contends that Angara is liable for a breach of its duties as bailee. Oceanconnect’s case is that upon delivery of the bunkers to the vessel Angara, as owner, became bailee. In breach of Angara’s duties as bailee it consumed the bunkers and became liable to Oceanconnect. Consumption of bunkers is a conversion and Angara therefore has no defence, even under Section 25(1), in the period up to re-delivery.
Mr Kulkarni responds that upon delivery to the vessel the bunkers would have been held by Britannia as bailee. They would also, he accepts, have been held by Angara as sub-bailee but, as it was put by Lord Diplock in The Span Terza (see Clarke J’s reference at 1341F of Forsythe), Angara would have been under a duty to procure that the bunkers were used by the Master in carrying out Britannia’s lawful orders under the charterparty. Britannia, as bailee exercised full control over the bunkers and, during the charterparty, could have directed Angara to deliver them to it. The sub-bailment was on terms, as explained by Lord Goff in The Pioneer Container [1994] 2 AC 324. Angara is thus entitled to rely upon the terms of the contract between it and Britannia under which the sub-bailment of the bunkers took place. Oceanconnect is to be taken as having consented to Britannia sub-bailing the bunkers on the terms of the charterparty. Those terms in clauses 2 and 86 require the charterers to provide and pay for the fuel.
Ms Hilliard counters that this would still not be a defence to the claim in respect of the IFO because it can only apply to the period while the charterparty remained alive. The answer to that is that Oceanconnect can in that regard be in no better position than Britannia, as regards a bailment claim.
Although Angara was a bailee the relationship is a classic illustration of a sub-bailment on terms. In a claim based on bailment Oceanconnect could not be in any better position than that which Britannia would have enjoyed. There is thus no basis for Oceanconnect’s bailment claim either during the period prior to redelivery or afterwards.
Unjust Enrichment
Oceanconnect claim that Angara is liable to it in unjust enrichment. The case was advanced very briefly at the trial and occupies just five lines of Ms Hilliard’s skeleton argument. The case is that the bunkers were consumed by Angara’s vessel and Angara thereby obtained the benefit. Angara has not paid Oceanconnect for the bunkers or, Oceanconnect maintain, Britannia either. There has therefore been a total failure of consideration and Angara is liable in restitution/unjust enrichment for the value of the bunkers.
This claim cannot get off the ground for the reasons given in Mr Kulkarni’s skeleton argument. It appears that the unjust enrichment claim only arose in the first place when the Defendants were submitting that it was governed by the law of an unspecified US state or alternatively of the Marshall Islands.
Conclusion
There will be judgment for the Claimant because Section 25(1) of the Sale of Goods Act 1979 protects it from what would otherwise be a claim for conversion and because the claims based on bailment and unjust enrichment fail. I shall be grateful if counsel will let me have corrections of the usual kind at least 48 hours before this judgment is handed down together with a draft order and a note of any further matters which arise for decision by me.
Murphy -v- O’Toole & Sons Ltd & Anor
[2014] IEHC 486 (17 October 2014)
JUDGMENT of Ms. Justice Baker delivered on the 17th day of October 2014
1. The plaintiff is a farmer and agricultural contractor. In 2002, he bought from the first defendant a piece of agricultural machinery for the purposes of his contracting business, namely, an ‘Amazone Four Metre One Pass Sower’. The purchase was financed through a hire purchase-type agreement with the second defendant. This judgment is given in the matter of a preliminary issue raised in the defence of the first defendant, namely, that the plaintiff’s claim is statute barred, and I heard evidence and legal argument from both the plaintiff and the first defendant for that purpose. Judgment was entered by consent in favour of the second defendant against the plaintiff.
Timeline
2. The plaintiff took delivery of the Amazone machine on 30th October, 2002 and in early 2003, the plaintiff had been travelling along the public highway with the machine attached to his tractor, when he was stopped at a Garda checkpoint and informed that the combination of the tractor with the Amazone was not suitable for transportation on the public highway and was not in compliance with road traffic legislation. The plaintiff returned the machine to the first defendant in October 2003, and issued these proceedings on 10th July, 2008.
3. The claim is framed as a claim for breach of contract, and also as a claim in negligence and negligent misstatement, and with regard to this latter claim the statement of claim pleads that the first defendant negligently advised the plaintiff that the machine was suitable for transportation by tractor on a public highway, and/or that the first defendant negligently failed to consider the suitability of the machine to be transported in combination with a tractor on the highway. There is general plea that the first defendant failed to supply a machine suitable for the purpose for which it was required.
4. The first defendant in its Defence pleads by way of preliminary objection that the claim is statute barred by the Statute of Limitations Act 1957. For the purpose of that argument the first defendant argues that time began to run at the date the contract was made, which is argued was in or around the month of April 2002, and that the six-year time limit provided by s. 11 (1)(a) of the Statute of Limitations Act 1957 had run before the proceedings were instituted in July 2008.
5. In the context of that plea, the plaintiff has made a number of arguments. The first argument is that the contract was a conditional contract, conditional upon hire purchase finance, and that the evidence unequivocally points to the fact that the finance was not obtained until October 2002. It is asserted that in those circumstances, time did not begin to run until the condition precedent was satisfied. The plaintiff also argues that time began to run only when the Amazone machine was delivered, namely in October 2002, and that the plaintiff was accordingly in time when he issued proceedings in July 2008. Finally, the plaintiff argues that the claim in negligence accrued when damage or loss was incurred by him, which he says is either the date of delivery or of the finance agreement.
When was the Contract Made?
6. The first question I address is the formation of the contract. The contract was made orally and was not recorded in writing nor was an order form created. Furthermore, the events giving rise to this action occurred some twelve years ago, and the parties were less than clear in their recollection of some of the relevant events.
7. The plaintiff gave evidence that he had been engaged in the business of agricultural contracting since in or around the year 1994, offering to farmers in his area of County Carlow the service of sowing crops on a seasonal basis and assistance with fencing and other farming occupations. He said that in 2002 his business was going well, and he determined to buy a larger capacity seed sower or hopper. His old hopper or sower was transported at the rear of his tractor and he had become aware of an alternative form of sower which was carried in front of the tractor which had much larger capacity, possibly a capacity of double his old machine. His said he picked up a brochure on his first visit to the first defendant’s showrooms and he noted, in particular, an assertion on the brochure that the Amazone hopper or sower was ideally suited for road transport. He made a number of visits to the first defendant’s showrooms and it was not in issue that the plaintiff had been in the past a customer of the first defendant, and had dealt with John O’Toole, a director of the first defendant company and the son of the original founder of that company.
8. The plaintiff provided no documentary evidence of the relevant dates but he says his first visit to the O’Toole showrooms was in June or July 2002, and in support of his assertion, he says that he, in the normal way, would have been too busy in April of any year to have made visits to the showrooms. He said he met both John O’Toole and his father Joe O’Toole on two occasions, and that, while after the second meeting he had come to the view that the Amazone machine was particularly suitable to his needs, he did not at that stage enter into a contract to buy the machine from the first defendant. He said he was aware of the machine before he first visited the O’Toole showrooms and that after the visit he had seen the machine, or a machine of a similar type at the Agricultural Show in Tullow some time between 15th and 18th of August, 2002, and had viewed the actual machine in the first defendant’s showrooms some time in late July or early August 2002, when the machine arrived from the manufacturer. He says he intended to acquire a new Fendt tractor suitable to transport the Amazone hopper and that he would not have bought the Amazone until after he had taken delivery of this on 20th September, 2002. He says he made contact then through his broker with Bank of Scotland (Ireland) and an agreement was reached that that Bank would provide him with funding. He paid a deposit to the first defendant of €10,905.30 in two instalments, both in mid-October 2002, and these dates are established with documentary evidence. The amount of the deposit was the precise amount of VAT chargeable in respect of the machine, and the plaintiff was registered for VAT and ultimately sought and obtained a refund of the VAT from Revenue. The hire purchase agreement with Bank of Scotland commenced on 23rd October, 2002 and the plaintiff took possession of the machine on 30th October, 2002.
9. John O’Toole gave evidence for the defendant and he produced extracts from his business diary for various dates in 2002. The first such entry on the 18th March, 2002 shows an entry of the mobile telephone number of the plaintiff. The second entry on 25th March, 2002 records that he had quoted Paul Murphy for a new Amazone hopper machine, not of the type or size ultimately bought, and this entry also contained a note with regard to another piece of machinery which the plaintiff bought at that time, but which is not relevant to this action.
10. The third entry was for the next day, the 26th March, 2002, and showed Paul Murphy’s name entered on the page and at the end of the page a recording that he had “quoted Paul Murphy for a 4-metre Amazone machine”. In the course of evidence, this was explained as the relevant quotation for the machine which the plaintiff ultimately bought.
11. The entry on 8th April, 2002 records John O’Toole’s note that he “sold” to Paul Murphy a new 4-metre Amazone hopper machine at the price of IR£39,900 plus VAT. There is also an entry that Paul Murphy had asked for a quote on an Amazone 3-metre machine which, in the course of evidence, was explained as a rear-mounted machine which the plaintiff had considered buying to supplement his other machinery.
12. The next entry is on 10th April, 2002, and records a quote to Paul Murphy for a new Amazone rear-mounted machine, and a power harrow, being an attachment for the plaintiff’s existing tractor to accommodate the smaller rear-mounted Amazone machine.
13. The next entry was on 6th May, 2002 which records an order by or on behalf of Paul Murphy for a stop-start kit, at a cost described as an “extra 900 plus VAT”, which in the course of evidence was explained and accepted by the plaintiff as being an optional extra attachment for the 4-metre Amazone which was ultimately bought.
14. There is an entry on 6th July, 2002, which identified Paul Murphy’s name and no more, an entry on the 4th September, 2002, which records the address of Bank of Scotland, the name Ger Murphy, explained and accepted by the plaintiff as being his financial broker, and records the amount of €51,930, the exact Euro equivalent of the purchase price earlier identified in Irish Pounds.
15. An entry on 10th September, 2002 identified Pat Dalton, explained and accepted as another finance broker, and an entry on 27th September, 2002 merely has the name Paul Murphy on the same line as Lombard & Ulster. Pat Dalton’s name appears with a telephone number on an entry on 19th October, 2002 with a reference to BNP (explained as Banque Nationale de Paris), and there is also an entry on that date referring to Bank of Scotland which appears in the same part of the diary as the name and telephone number for the aforementioned Ger Murphy.
16. John O’Toole gave evidence that the diary entries were contemporaneous and the plaintiff is unable to explain why there are entries in regard to enquiries by him as early as in March and April 2002. The plaintiff is adamant that he did not obtain a quotation in April 2002, nor on 6th May, 2002, and also denies that the machine was ordered from the supplier on his behalf on 8th April, 2002. The plaintiff says he could not even have been thinking about the Amazone machine in March or April 2002, and that he would have been too busy. He does accept that he ordered the stop/start machine as an optional extra, although he does not accept that this occurred on or about 6th May, 2002 as reflected in the diary entry. The plaintiff does not deny that the invoices and the diary entries are referable to the items he actually received and what he does not accept is the evidence of the first defendant as to the relevant dates. Again, the plaintiff differs from the first defendant with regard to the date when he was told that the machinery had arrived from the supplier, and he said that this happened in August and not June 2002.
17. I heard evidence, both from the plaintiff and John O’Toole, and I had the benefit of hearing their evidence in chief and in cross-examination. John O’Toole explained that the sale of the Amazone machine to the plaintiff was a large sale in terms of its value for the first defendant, which is a small family business and would not have sold many of those machines or machines of a similar value in any given year. John O’Toole was adamant that the contracts were made in April, and he says the first contact made with the first defendant was a phone call from Paul Murphy on 18th March, 2002 which was taken by a member of his staff. He said he had a number of phone calls between his first contact with Paul Murphy, when he returned his call on that evening, and he also says that on 25th March, 2002, he went to inspect the fitting on the plaintiff’s existing tractor and he also recalled quite clearly the plaintiff seeking to negotiate a reduction in price in an hour long conversation when they agreed on the price.
18. On 8th April, 2002, John O’Toole says he ordered the machine over the phone from the suppliers and he identified an entry in his diary on 10th April, 2002 with regard to the possible acquisition by the plaintiff of a second Amazone machine which would be rear-mounted. He said that on the date of that proposed second sale, in a conversation regarding the second machine, the plaintiff asked him whether he had ordered an Amazone 4-metre machine. He said that the lead-in time between the placing of an order and the delivery of a machine was always a number of months, and he said that as the sowing season would start in early autumn, it was important that the machine be ordered and would be delivered in the summer months.
19. An area of contention in the case is the fact that no order form was created to identify the plaintiff’s ordering of the machine. John O’Toole said that he took orders on a handshake then in 2002, and that the business still operated that way. He also said that he did not have a habit of taking a deposit when an order was placed, and that this is common in the industry and this was how he himself and the company had done, and continue to do, business.
20. In the course of cross-examination, it was put to John O’Toole that another customer, one Roy Elemis, was also interested at the same time in acquiring a 4-metre Amazone machine. John O’Toole accepted that Roy Elemis had expressed an interest in the machine, but his evidence was that no deal was made with Roy Elemis in March or April 2002, and that the machine was ordered for Paul Murphy. He says that a deal was finalised with Roy Elemis in May or June 2002, and denied that he had two customers for the one machine that he ordered on 8th April, 2002.
21. When pressed as to why he did not seek a deposit, and as to why the contract was not evidenced or made in writing, or why an order form was not produced and sought to be executed by a purchaser, John O’Toole said that it did occasionally, although rarely, occur that a person who ordered a machine did not complete the purchase. He said that when this happened, it was relatively easy to sell the machine to another buyer. In his business of dealing with farmers or contractors, such as the plaintiff, “a deal is a deal”, or, as he also put it, “an order is an order”. He accepted, in cross-examination, that he would not have delivered the machine to Paul Murphy without knowing, as he did know in October 2002, when the machine was delivered, that Paul Murphy had finance in place, although it was the case that the machine was delivered some days before the Bank funding came from the third defendant.
22. Evidence was given by John Scrivener, who was the Managing Director of a company, Farmhand Ltd., the importer and supplier of the Amazone machine. He did not specifically recall the placing of the order by John O’Toole, but he did say that these orders were often placed by phone and the deals were done without written documentation. He did recall an order being placed for the optional spare part on 6th May, 2002, after John O’Toole said the Amazone machine was ordered. This order can be linked directly to the plaintiff who accepts that he ordered this optional spare part, albeit he says it was done many months later.
23. In cross-examination, John Scrivener said that if a customer did not have the money to pay for a machine after it had been ordered, another customer would be found. It was standard practice that a retailer would not deliver machinery unless the money was available, but that in the industry machinery was ordered without deposits or formal contract documentation.
Conclusion on Formation of Contract
24. Certain elements of the evidence of John O’Toole deserve comment. His diary entries are contemporaneous. The first entry identifies a price for the Amazone machine in Irish Pounds and a later entry identifies it in Euro, and this is consistent with the fact that the Euro changeover happened in January 2002, and for some time prices were often understood or recorded in the old currency, and the existence of the two entries is suggestive of the accuracy of the diary entries. I found the evidence of Mr. Murphy unconvincing insofar as he purported to be so clear as to the relevant dates of the transaction. In the circumstances, having heard the evidence of both Mr. Murphy and Mr. O’Toole, and noting that John O’Toole’s evidence is supported by contemporaneous evidence, which I find to be an accurate record and useful to identify the relevant dates in issue, I prefer the evidence of John O’Toole. I am also persuaded by the evidence of the independent witness, John Scrivener, that the optional extra fitting was ordered on the 6th May, 2002 and this is supportive of the evidence that the plaintiff did order the Amazone machine on 8th April, 2002. I find as a matter of fact that the plaintiff did attend at the showrooms of the first defendant in March 2002, and thereafter negotiated the purchase by him of the Amazone machine for €51,930. I am satisfied that this occurred in March 2002, and I am also satisfied as a matter of probability that that order was placed on 8th April, 2002. I take particular note of the coincidence of that date with the clear recollection by Mr. Scrivener of the placing of the order for the additional optional extra a short time later.
25. I accept the evidence of John O’Toole that the practice in the trade is for a deal to be done on a handshake. It was the case that this was a particularly large purchase in terms of its value, but equally, a degree of trust existed between the plaintiff and the first defendant as a result of previous dealings. I hold, as a matter of fact, that the entry of 8th April, 2002 accurately reflects the legal position, namely, that on that date, an agreement was entered into with Paul Murphy for the sale to him of the Amazone machine at the identified price.
Conditional Contract?
26. The plaintiff also asserts that the contract was a conditional contract, one allied to and conditional upon the obtaining by the plaintiff of finance from, the second defendant. I turn now to consider this. It is not in issue that the plaintiff was not in a position to purchase the Amazone machine without hire purchase finance. The Bank fully financed the purchase, save for the VAT element.
27. The plaintiff says it is not credible that the first defendant would have regarded itself as contractually bound to deliver this machine unless it was sure the plaintiff could pay for the goods, and that for this reason the agreement was a tripartite agreement which came into operation in October 2002, when the finance was obtained. The plaintiff makes two different points: that the contract was conditional upon a condition precedent that it would not bind him unless and until he had loan finance, or that the contract was a tripartite agreement entered into at the time the finance was drawn down.
28. A contract for the sale of goods or land may be subject to a condition precedent. The case law is replete with examples of contracts for the sale of land which were subject to loan finance. The plaintiff relies on the English High Court decision of Lee-Parker & Anor. v. Izzet & Ors. (No. 2) [1972] 2 ALL ER 800, where the Court accepted that a written agreement for the sale of land, which contained an express provision that the sale was subject to the purchaser obtaining a satisfactory mortgage, was a condition precedent. That case can be distinguished from this case in that the condition precedent relating to finance was expressly made. The other case relied on by the plaintiff is Schweppe v. Harper [2008] ALL ER(D) 311, where the Court of Appeal followed Lee-Parker v. Izzet, but only after holding that the contract did contain a condition precedent that third party financing would be obtained by the plaintiff.
29. If the parties agreed that the agreement to sell the machine to Mr. Murphy would not be binding until finance was obtained, then this contract was a conditional contract. I accept as a matter of fact that the first defendant knew that Mr. Murphy would require third party financing to pay the agreed purchase price, but I do not accept that any discussion was had between the parties that the contract was subject to third party financing. Mere silence, or an assumption, even a correct assumption, that Mr. Murphy would require finance, did not make the attaining of finance an express term of this contract. For a contract to be a conditional contract, it seems to me that such a condition must be express between the parties, and the Court will not imply a financing term, as such a term was not necessary to give business efficacy to this contract which was perfectly capable of being made without such a condition, albeit that performance of the obligation of one party required financing. I hold that Mr. Murphy could and did order the machine without reference to the requirement of third party financing. Indeed were third party loan finance to have been a term of this contract it seems to me as a matter of probability that the first defendant would not have placed the order for the machine until it was sure that the third party financing was in place, and I accept the evidence of John O’Toole that in general his experience in business was that when machines were ordered the buyer did in fact in the majority of cases come up with the funds to complete the purchase.
30. Any arrangement for the funding of the purchase was one made between the plaintiff and the second defendant. The plaintiff urges upon me that the fact an invoice was furnished by the first defendant to the finance company in the middle of October 2002 is evidence that the contract was subject to finance, but it seems to me that the first defendant furnished the invoice to the finance company in lieu of furnishing it directly to the plaintiff for transmission on to the finance company in ease of the plaintiff and to speed up the release of the funds, and not because the finance company was part of the contract for sale.
The Sale of Goods Acts 1893 to 1980
31. The plaintiff further urged upon me the proposition that it is unlikely, or, he suggested, incredible, that the first defendant would have agreed to sell these goods without a deposit, or that the first defendant would have delivered the goods to the plaintiff without being paid. This brings me to consider the transaction in the context of the provisions of the Sale of Goods Acts 1893 to 1980.
32. Section 1 of the Sale of Goods Act 1893 identifies a contract for the sale of goods as a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price. This particular contract was for the sale of goods, delivery of which would not take place until a future date. Such a contract, by s. 1(3), is identified by statute as being an agreement to sell, which, by s. 1(4), becomes a sale when the time elapses. Section 1 provides as follows:
“1.—(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. There may be a contract of sale between one part owner and another.
(2) A contract of sale may be absolute or conditional.
(3) Where 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 where 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 elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.”
33. The Act divides contracts of sale into two classes of contracts, cases where there is an immediate sale or what the law in general would call an executed contract, and an agreement to sell, an executory contract where it is agreed that the goods shall pass at a future time. This second class of contract is not a sale in the true sense as in the absence of agreement to the contrary, no interest in the goods passes to the intended transferee at the time of the contract. It is an agreement to sell, containing by implication a duty on the part of the seller to deliver the goods and the property in the goods in accordance with the terms of the contract for sale.
34. The seller contracts to deliver the goods in accordance with the contract, and this includes an obligation to deliver goods which satisfy any implied or express term as to condition or fitness for use. The duty to deliver continues to subsist until the date for delivery arises. The payer contracts to pay for the goods and the Act implies certain terms to that regard.
35. This contract was an agreement to sell governed by s.27 of the Act of 1893 which sets out in clear terms the nature of the duties of seller and buyer to a contract so governed. Sections 27 and 28 provide as follows:
“27. 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.
28. Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that is to say, the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer must be ready and willing to pay the price in exchange for possession of the goods”.
36. Accordingly, as a matter of law, the form of this transaction was that the parties entered into an agreement for sale as a result of which the first defendant incurred a liability or an obligation at law to deliver the goods in exchange for the concurrent obligation of the plaintiff buyer to pay for those goods. The mutual rights and obligations of the parties are set out by statute and s.39 of the Act gives certain rights to the unpaid seller within the meaning of the Act who obtains in respect of goods which have passed to the buyer a lien on the goods, a right of resale, a right of stopping the goods in transit in the case of insolvency, or a right to withhold delivery similar and co-extensive with his right of lien and stoppage in transitu. The contracting parties do not need to express these terms which are imported into the contract as a matter of law, and indeed which are reflected in the way in which the plaintiff and the first defendant conducted the business between them. The plaintiff ordered the goods, the first defendant placed the order with the supplier, the first defendant delivered the goods to the plaintiff and the plaintiff had an obligation to pay. The parties agreed an express variation of the contractual formula in that the goods were delivered without the exchange of payment in circumstances where the first defendant knew that the loan finance had been approved and that payment would be made directly to it in respect of the non VAT element of the purchase price within a matter of days of the delivery date.
Conclusion on the Nature of the Contract
37. Accordingly, I do not accept the argument of counsel for the plaintiff that the contract entered into between these parties was one conditional upon the loan finance, or indeed that it was one which did not come into existence and was not formed until the purchase money was available and paid over by the plaintiff. The contract was made in April 2002 and fell within the definition of an agreement for sale in the sale of goods legislation. It accordingly came to have implied as a matter of statute a formula for the performance of the contract by each of the parties to the agreement, the delivery of goods on the part of the seller and the payment for those goods on the part of the buyer. There was nothing in my view in this transaction which rendered it a contract which fell outside of this commonly found formula and the agreement for sale imported as a matter of law the mutual obligations between the parties which came into existence in April of 2002.
38. I reject the submission that this contract was one which was conditional for its enforcement on third party loan finance.
Statute of limitations: the accrual of the cause of action
39. Section 11 (1)(a) of the Statute of Limitations Act 1957 provides a limitation period of six years in breach of contract cases which is to run from the date the cause of action accrues. The general rule in a claim for breach of contract is that the cause of action accrues not when the damage is suffered but at the time of breach and this law is well established. Thus it is not always the case that in a claim for breach of contract the cause of action accrued is the date when the contract was made. The plaintiff in this case argues that the cause of action accrued on the date the goods were delivered, and that it was at that date that the plaintiff took possession of goods which did not meet what he says was the contractually agreed or implied condition, namely that they be fit for use upon public roads. The plaintiff asserts that the cause of action accrued on the date of delivery of the goods in October, 2002. The first defendant argues that the relevant date which the cause of action accrued is the date the contract was made, namely the 8th April, 2002, the date on which I have found that the contract, or the agreement for sale, was made. The first defendant argues that the respective obligations of the plaintiff and the first defendant arose on that date, and that if a breach occurred it occurred then.
40. In Minister for Agriculture and Food v. Thomas Julian [2003] IEHC 144 Dunne J. considered the meaning of the phrase in the Statute of Limitations of “cause of action” and quoted from the classic definition of the phrase in Read v. Brown (1888) 22 Q.B.D.128 where Lord Esher M.R. said at p. 131
“Every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the Court.”
She considered whether an argument might be made as to whether it was necessary for damage to have occurred at the time of breach and in particular she noted the old case of Gibbs v. Gould [1881] Q.B.D. 296 and accepted, as she put it, “that the cause of action accrues as soon as a breach of contract occurs whether or not damage has being suffered at that time.” A cause of action was defined by Viscount Dunedin in Board of Trade v. Cayzer, Irvine and Co. [1927] A.C. 610 at 617 as “that which makes action possible”.
41. In the light of the authorities is clear to me that the cause of action in contract must be the date on which a breach occurs and not the date when the contract is made. There may of course be incidents where these dates or times are coterminous as was found in the Supreme Court decision of Gallagher v. ACC Bank [2012] IESC 35, which I return to below. In that case the court held as a matter of fact that the cause of action accrued at the date on which the transaction was entered into, the date on which the financial product was sold.
42. As indicated above the plaintiff’s claim is on foot of what is characterized in the Sale of Goods Act 1893 as an agreement for sale where the goods were agreed to be delivered at a later date. There is no direct authority on point as to the running of limitation in the case of an agreement for sale but counsel for the plaintiff referred me to a statement at p. 87 in the recently published text by Martin Canny, Limitation of Actions, (2010) where he says
“If the goods are defective, time starts to run against the vendor from the time the goods were received and not when the defect becomes apparent.”
43. The author quotes the case of Lynn v. Bamber [1930] 2 K.B. 72 but I note that McCardie J. decided that case on an assumption, which was not disputed between the parties, that the breach of contract had occurred on the date the contract was made, namely the date when the defendant sold to the plaintiff, a fruit grower, plum trees described as of a particular high quality species, but were actually trees of an inferior quality, and the case centred on the question of whether active and fraudulent concealment on the part of a defendant constituted a good reply to a plea that a claim was statute barred. It is not authority for the proposition that time begins to run in a contract for the sale of goods to be delivered at a future time at the date of delivery. Canny’s statement might well be intended to point to the absence of a discoverability rule in breach of contract cases rather than be an authoritative statement on the link between breach and delivery.
44. Chitty in volume 1 of his seminal text on the law of contract, Chitty on Contracts, 31st Ed. (London, 2012), refers the old case of Battley v. Faulkner (1820) 3 B. & Ald. 288 at para. 28.052 as authority for the proposition that in the case of an agreement to sell the buyer’s right of action for breach of an express or implied warranty relating to goods accrues when the goods are delivered, although again he makes this comment in the context of another question, not relevant to this case, as to whether there is an argument that time runs from the date a defect is discovered rather than the date of delivery. Battley v. Faulkner involved a contract for the delivery of one kind of wheat and the Court held that the breach was complete on delivery of another kind of wheat and the question for the court was whether it could be said that time ran from the date of knowledge and not of delivery. The court held that time ran from the date the contract was broken and this was the date of delivery.
45. None of the cases referred to in the text books is directly on point, and one must look to first principles and the express terms the Act of 1893. The legislation distinguished between a sale where delivery takes place at the time of the contract and an agreement for sale where delivery is to occur on a future date. It seems to me that breach of agreement for sale occurs on the date when the goods come into possession of the buyer, and it is when the buyer takes custody of goods and it is then that the seller is in breach of the warranties or conditions as to quality or fitness for purpose as in the contract. This is the date when the breach occurred. The date of the delivery of the goods may or may not be the date title in the goods passes, but in this particular case there is no reason to suppose, nor has it been argued before me, that title to the Amazone machine did or could have passed to the buyer before the goods were delivered and before he paid for them. What is clear, however, is that under s.1 of the Act of 1893 the delivery of the goods, and the concurrent obligation to pay for the goods, is the point at which the contract or agreement for sale becomes a sale, and breach, if there was one, occurred at performance or delivery when the contract was no longer executory but was executed.
46. To look at the matter another way, the agreement for sale is an agreement on the part of the seller to deliver at a date in the future the Amazone machine in exchange for the payment by the buyer of the purchase price. The contract was not fully performed or could not be said to have been fully performed by the seller until the goods were delivered and it is at that stage that the breach of contract occurred. The plaintiff could not have commenced an action for breach of contract based on a plea of breach of condition or warranty of fitness for purpose in the period between April 2002, when the agreement was made, and October 2002, when the agreement was performed, because until performance it could not be said that there had been a breach of the obligations of the seller. This gap in time is not, for example, found in a simple contract for the sale of goods where a buyer buys an item in a retail shop as both the agreement for sale and the delivery occur at the same time and usually in the same place. When time separates the agreement for sale from the performance of the conditions in that agreement, the contract is not breached until it can be said that the contract was not fully performed or performed in compliance with the conditions on the part of the seller. It is at the date when the obligations of the parties crystallize, i.e. when the seller must deliver and the buyer must pay, and this is the date which can be properly characterized as the date when the breach occurred.
47. I hold that as a matter of law that the breach of the contract for sale, if there be a breach, occurred at the date of delivery of the Amazone machine to the buyer.
48. Accordingly the plaintiff’s claim for breach of contract is not statute barred in that the cause of action accrued when the Amazone machine was delivered i.e. on the 30th of October, 2002. The proceedings were instituted in July of 2008 and within the six year time limit.
The action in negligence
49. In case I am wrong on the first point, I turn now to examine a further argument of the plaintiff, namely that his claim is framed not merely in contract but also in negligence or negligent misstatement a claim in tort, and accordingly that time does not run until damage is suffered. He relies on Hegarty v. O’Loughran [1990] 1 IR 148 where Finlay C.J. held that a tort is not completed until such time as damage has been caused by a wrong, a wrong which does not cause damage not being actionable. It must be necessarily the case that a cause of action in tort has not accrued until at least such time as the two necessary components referred to as a tort have occurred, namely the wrong and the damage.
50. It is argued by the plaintiff that he had acted in reliance on a representation made by a servant or agent of the first defendant company that the Amazone machine was suitable for use on Irish roads and that this representation was made in late July or early August 2002. Irrespective of the date when the representation was made, it is argued the damage that the plaintiff suffered did not occur until he assumed liability to pay for the goods, or in this particular case to repay to the second defendant finance company the money borrowed. The defendant argues that if there was a representation, which he denies, the representation will be actionable as a matter of law only if it was made before the contract was entered into. I accept that submission by counsel for the first defendant, the submission being one which states a well established proposition of law. A representation is actionable only if it can be shown that it induced a party to enter into a contract, and ipso facto such a representation has to have been made before the contract was made. Counsel for the defendant relies on Colthurst & Tenips Ltd. v. Colthurst (Unreported, High Court, McCracken J., 9th February, 2000) as authority for the proposition that an untrue representation is actionable if “the plaintiffs were induced to enter into the settlement by reason of the representation.”
51. For the purposes of the hearing of the preliminary issue I must act on the assumption that a representation was made that the Amazone machine which the plaintiff bought was suitable for use on Irish roads. If there was such a representation, and if it is to be actionable, it must have been made by or on behalf of the first defendant before the contract was entered into. I have found that the contract was entered into on the 8th April, 2002 and accordingly any actionable representation must be made before then. I accept the argument of the first defendant in this regard.
52. Both counsel relied on the decision of the Supreme Court in Gallagher v. ACC Bank [2012] IESC 35. The plaintiff relies on the case in support of his argument that the plaintiff incurred loss only when he assumed the liability to the second defendant to repay the amount of the finance loan. I do not accept this proposition and in my view the plaintiff assumed a liability to the first defendant to pay for these goods when he entered into the agreement for sale on the 8th April, 2002. I have explained my reasoning for this above and I have found that the availability of finance was not a condition precedent to the existence of the agreement for sale and the plaintiff assumed a liability to pay the first defendant when he entered into the agreement for sale.
53. Counsel for the first defendant relies on the judgment of Fennelly J. in Gallagher v. ACC Bank in particular para. 35 of that judgment where Fennelly J. said the following after concluding his review of the English cases that they:
“stood broadly for the proposition that once a party relies on advice to his detriment by entering into a transaction whereby he fails to get that to which he was entitled, the cause of action is complete, notwithstanding the fact that quantification of the loss may be difficult.”
54. Fennelly J. accepted that there would be cases where there was immediate loss even if there are no difficulties of quantification, and equally that there are cases where the loss is not immediate. It seems to me that if the plaintiff’s cause of action here were solely based on a misrepresentation of suitability of the product that the claim would have crystallized the date the contract was made, i.e. on the 8th April, 2002, because only such representations that were made which would have induced the plaintiff to have entered into that contract, which he did on the 8th April, 2002, were actionable by him. Accordingly I reject the argument by counsel for the plaintiff that time began to run in the plaintiff’s claim, insofar as it is properly speaking a claim in negligence, when the plaintiff assumed a liability to pay. The claim in negligent misrepresentation accrued on 8th April, 2002 and was statute barred when the proceedings were instituted.
55. Counsel for the plaintiff argues this is a claim in tort. The question of characterisation is guided by the important and compelling reasoning of O’Donnell J. in Gallagher v. ACC Bank where the Court asked the question as to whether the claim was properly or centrally a claim in contract or in tort. O’Donnell J. pointed out that the claim made by the plaintiff in that case was one made in contract and in tort, but that they were “in fact identical”. As the learned judge said at paras. 124 and 125:
“The same facts are repackaged as a claim in contract, negligence, and negligent misstatement. The pleadings do not distinguish between those claims. Instead, the same acts are pleaded as “particulars of wrongdoing” and no distinction is made between the legal nature of the wrong alleged.
It is also fair to say, I think, that the cause of action in contract is in truth the central and primary claim here. Indeed there was a time not so long ago and certainly at the time the relevant provisions of the Statute of Limitations Act 1957 were enacted, when the contractual claim would have been regarded as the only possible cause of action arising on the facts here. Even today, it is the contract which creates the relationship giving rise to the obligation in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1965] A.C. 465 to take care in the provision of advice, and the terms of contract could control, limit or even negative any such duty. Once again, if there is a separate duty of care in negligence alone, then it is the contract which creates the proximity between the parties which gives rise to the duty of care.”
56. I am persuaded by this statement of O’Donnell J. that I should not engage upon the artificial exercise of distinguishing between or decoupling the claims in contract and tort. The central and primary claim in this case is a claim for breach of the agreement for sale of a machine, a claim made in contract and under the relevant provisions of the Sale of Goods Act 1893 and 1980.
57. In the English Court of Appeal decision frequently quoted at length, Letang v. Cooper [1964] 3 WLR 573, Lord Justice Diplock identified the problem that had arisen and would continue to arise following the enactment of the Judicature Act of 1893 where forms of action were abolished. As he said at pp. 242 – 243:
“A cause of action is simply a factual situation the existence of which entitles one person to obtain from the court a remedy against another person. Historically, the means by which the remedy was obtained varied with the nature of the factual situation and causes action were divided into categories according to the “form of action” by which the remedy was obtained in the particular kind of factual situation which constituted the cause of action. But that is legal history, not current law.”
58. As Lord Justice Diplock said a court in looking at a set of factual circumstances ought not seek to categorise the circumstances into different forms of action, and the name of the form of action is no more than, as he put it, “a convenient and succinct description of a particular category of factual situation which entitles one person to obtain from the court a remedy against another person.” The categorisation does not always properly identify the nature of the action and as he said to forget this would be to encourage the old form of actions “to rule us from their graves.”
59. The abolition by the Judicature Act 1893 of separate forms of action informs me in considering the true nature of the plaintiff’s claim, and I must engage in the exercise of ascertaining what that nature is. This is a claim for damages for the breach of the obligation of the seller of goods to the buyer, governed to a large extent by the Sale of Goods Act 1893 as amended. This is consistent with the view expressed by the Supreme Court in Gallagher v. ACC Bank that the court should look to ascertain the central and primary claim made in litigation and that where appropriate the policy of the law should be to minimise rather than expand the disparity between the running of time in contract and court cases, at least where the wrongdoing alleged is identical. As O’Donnell J. said at para. 127 while the court must consider that “the adaptation of tort claims to a contractual setting necessarily risks having a distorting effect on the law, and more importantly spreading liability, and therefore cost, more widely than is desirable.”
60. I adopt this reasoning, and hold that the facts of this case point to the case being one for breach of contract, the cause of action in which accrued at the date the breach of that contract accrued.
Conclusion
61. The plaintiff’s claim in contract is not statute barred.
Alexander Cross Seed Co., Ltd. v Henry Gillespie, trading as “H. Gillespie & Co.,”
King’s Bench Division.
11 November 1944
[1945] 79 I.L.T.R 7
MacDermott J.
MacDermott, J.:
In this action the plaintiffs, who carry on business in Glasgow as wholesale seed merchants, claim from the defendant, a merchant in Newtownbutler, County Fermanagh, the sum of £419 19s. 4d. as the price of goods sold and delivered. These goods consisted of one ton of turnip seed and one ton of mangold seed. They were despatched from Glasgow by the plaintiffs and duly reached the quay at Belfast. There they were seized by the Customs authorities as goods brought to a place for the purpose of unlawful exportation and so deemed to be prohibited goods by reason of the provisions of section 3 of the Import, Export and Customs Powers (Defence) Act, 1939. The seizure was followed by condemnation proceedings, with the result that the goods were ultimately condemned and forfeited and have therefore become lost to one or other of the parties to the contract.
No question arises as to amount and the contract of sale was, admittedly, valid and effectual. The substance of the case is as to where the loss should fall, and the only issue raised by the pleadings is whether or not the plaintiffs made delivery in accordance with the contract. There was no express agreement as to when the risk should pass. It does not, of course, follow from this, as a general proposition, that the risk remains with the seller until delivery. But Counsel for both parties agreed and the hearing proceeded on the basis that in this case the property in the goods would pass on delivery and, consequently, and having regard to the provisions of section 20 of the Sale of Goods, that the risk lay and liability was to be determined according to whether or not the plaintiffs had made delivery in compliance with the contract at the time of the seizure.
Such is the net point for determination. Before proceeding to consider the matters which I regard as material, it may, however, serve to mark the limited scope of my decision and to avoid misunderstanding if I refer to certain other matters which are not, in my view, of any real assistance in reaching a conclusion. Mr. Fox, for the plaintiffs, stressed the fact that the defendant was a party to the condemnation proceedings and made claim therein to the goods in a manner which, it was contended, showed that he regarded himself as the owner. With the same object, reliance was also placed upon a letter dated the 17th April, 1943, from Mr. Patterson, the defendant’s solicitor, to the Surveyor of Customs and Excise at Belfast, in which complaint was made of the seizure of the goods in transit of the seeds, with a demand for their immediate delivery to the defendant. I do not see that this letter contradicts the defendant’s case as made before me, and even if it did I do not think that it would preclude the defendant from contending, as he has, that at the time of seizure the risk was the sellers’. The defendant was certainly not a reluctant purchaser. He wanted the goods and had endeavoured to obtain possession of them shortly after they were detained. In these circumstances, Mr. Patterson’s letter seems compatible with his client’s interest in the consignment and his obvious anxiety to get hold of what he had ordered. The same motive makes it impossible, in my opinion, to draw any material conclusion from the defendant’s part in the condemnation proceedings and his efforts to avoid forfeiture. On the 30th April, 1943, the plaintiffs had written the defendant that the seizure did not affect them, and this attitude left the buyer no option but to contest the condemnation proceedings or else let forfeiture occur by default. His choice of the former course cannot in the circumstances be regarded in itself as an acceptance, and I find it, like Mr. Patterson’s letter, quite equivocal so far as the question for determination in this action is concerned.
Here I may perhaps add, lest any misapprehension should arise by reason of the nature of the seizure and subsequent forfeiture of the goods, that the plaintiffs did not allege that the defendant was guilty of a Customs offence in respect of the seeds and, further, that the evidence adduced before me did not suffice to warrant any finding as to complicity on his part. The facts, as presented, do not, therefore, raise any question as to the effect on the rights of seller and buyer of a Customs seizure before the property has passed which is due to the conduct of the buyer, and I express no opinion on that point.
On the issue which I have to decide, the material facts and circumstances may be stated as follows: The plaintiffs’ agent for Northern Ireland is William G. Acheson, Ltd., of 3 Queen’s Square, Belfast. This Company (which I refer to hereinafter as the agent) also does business on its own account in flour and feeding stuffs, and the defendant was one of its customers. It does not store goods and has no storage accommodation, facts of which, as I find, the defendant was aware at all material times. The plaintiffs had not previously supplied goods to the defendant, but the agent had brought their price list and terms of business to the defendant’s notice prior to December, 1942, by a circular dated October, 1942, which stated, below a priced list of seeds, “In 1 and 2 lb. sealed bags. Paid to Belfast.” In December, 1942, the defendant placed an order for seed, but the plaintiffs were unable to find 1 and 2 lb. bags and wrote to this effect to the defendant on the 14th December, with an offer to supply in bulk. This letter stated the terms of business, one of which was “paid Belfast.” After sending this letter the plaintiffs found themselves able to bag a portion of the order in 1 and 2 lb. parcels and so informed the defendant by letter dated 21st December. This letter also stated the plaintiffs’ terms of business, and these included “Carriage paid Belfast.” This suggestion as to bagging did not, however, suit the defendant and the order fell through, the defendant writing to the agent on the 29th December “that as Messrs. A. Cross Seed Co. Ltd. had not got the seeds in bags as requested, we ordered supplies from another source and have got delivery of them to-day. We have now got all seeds we require for the incoming season, so we request you to please cancel order.” On the 8th January, 1943, the defendant wrote to the plaintiffs as follows:—
“Dear Sirs,
With regard to our order for Root Seeds, which was sent to you some time ago and which was cancelled on 29th ult.
We wish to advise you that we are now in a position to take delivery of these seeds and herewith book our order as follows:—
20 cwts. Best of All purple top swede:
In 1 & 2 lb. sealed bag. *8
20 cwts. Yellow Globe Mangold top swede:
In 1 & 2 lb. sealed bag.
20 cwts. Long Red „ „ „
In 1 & 2 lb. sealed bag.
If possible please discharge these at your earliest moment to Messrs. Wm. G. Acheson, Ltd., of Belfast and we shall forward cheque in settlement as soon as we take delivery.”
The plaintiffs replied on the 13th January. They anticipated difficulty in getting small bags and asked if the defendant would take the seed in bulk or in “bags of say 28 lbs.” The defendant replied to this, saying: “We believe that we will be able to take delivery of this in sealed bags not larger than 28 lbs., but we would prefer them in 1 and 2 lb. bags.” On the 26th January, 1943, the plaintiffs wrote to the defendant stating in detail how they proposed bagging the goods. Each of the three varieties of seed is dealt with separately, the size of the bags to be used is shown with the weight to be covered by each size, and opposite the particulars so given for each variety is a statement of the price and terms of business. In each of the three statements are the words “paid Belfast.” In writing this letter the plaintiffs were obviously anxious to satisfy the defendant as to the bagging of the goods and so avoid the fate of the first order. The careful particularity of the letter invited the defendant to acquiesce or dissent, and I have no doubt it was so intended. There was no further correspondence regarding the terms of sale, and on the 25th March, 1943, the plaintiffs shipped at Glasgow two of the three tons ordered. The consignment was addressed
“To H. Gillespie & Co., Newtownbutler. At Belfast. To be called for.”
It reached Belfast on the 26th March and was there unshipped and placed in a shed on the Donegall Quay, the Shipping Company advising the defendant by post of the arrival. On the same day the goods were seized by the Customs authorities and notice of the seizure was given to the defendant by the police. On the 31st March the defendant travelled to Belfast with a lorry to collect the goods. He went to the quay, but the Customs officials refused to release the consignment, which, as already stated, was ultimately condemned and forfeited.
The term as to carriage used in the various documents mentioned is expressed in words which vary slightly but not in any material respect. Whether it is “Paid to Belfast,”“Paid Belfast,” or “Carriage paid Belfast,” I think there can be no doubt that, in the absence of a context requiring a different construction, the meaning is “free on quay, Belfast,” and I understood Counsel for both parties to acquiesce in this view.
For the plaintiffs Mr. Fox contended that this was the only material provision of the contract and that as the plaintiffs had consigned the goods in question to the buyer and had delivered on the quay at Belfast they had delivered in accordance with the contract and so as to fulfil their obligations thereunder in respect of these goods.
For the defendant Mr. McCoy laid emphasis on the last sentence of the plaintiffs’ letter of the 8th January, 1943, which I have already quoted.
Assuming for the moment that this sentence is to be taken as part of the contract, I cannot regard it as sufficient to modify the meaning I have already attributed to the expression “Paid Belfast.” It was suggested in the course of argument that the sentence referred to delivery at the Belfast premises of the agent. I do not think the words used demand such an interpretation, and unless they did I would be slow to adopt it in view of the circumstance that the defendant was aware at the time that the agent’s premises could not receive the shipment. The substance of Mr. McCoy’s case, however, was based on a different interpretation. He urged that this sentence constituted a plain direction to the plaintiffs to consign the goods, not to the defendant, but to the agent; that as a special term of the contract this altered the obligation which would otherwise have been upon the plaintiffs; and that as they had not delivered in accordance with this requirement and as the defendant did not accept the goods, the property therein had not passed and the loss followed the risk and fell on the sellers.
This contention appears to me to be beset with difficulty, and I cannot accept it.
Whatever the true meaning of the sentence, the subject of discussion, may be, I do not think it bears the construction put upon it by Mr. McCoy. Apart from the peculiarity, in the circumstances, of a direction to consign to the sellers’ agent, such an interpretation would involve reading “discharge” as “consign.” I cannot see anything to justify so drastic a treatment of the text, and, even if there were, it is not quite clear to me that the result would necessarily be to establish the remainder of Mr. McCoy’s submission. I need not, however, deal further with this aspect of the case or with the contentions of Mr. Fox that the words “if possible” indicate that what follows was not *9 intended to import an obligation and, alternatively, that the whole sentence is too vague and uncertain to have a meaning ascribed to it and should accordingly be ignored. These considerations are only material if the letter of the 8th January, 1943, is to be taken as forming part of the contract, and I have come to the conclusion that such is not the case.
The plaintiffs were not in a position to make delivery in 1 and 2 lb. bags as directed by this … letter and they were aware from what had happened in respect of the first order that this was a matter of importance to the defendant. They accordingly raised the question of the parcels with the defendant and, having received his somewhat vague statement that “we believe that we will be able to take delivery of these in sealed bags not larger than 28 lbs., but we should prefer them in 1 and 2 lb. bags,” they wrote the letter of the 26th January, setting out in elaborate detail precisely what they were prepared to do and the terms on which they would do it. In my opinion, this letter was intended to state the terms of sale exhaustively, and I think it did so. It constituted the real offer leading to the formation of the contract, and the defendant by his conduct must be taken to have accepted it.
I hold, therefore, that the terms of the contract are to be taken from this letter and the stipulation “paid Belfast” which is contained therein meant that the plaintiffs were to deliver to the defendant free on quay, Belfast.
From this it follows that the plaintiffs delivered the consignment in question in accordance with the contract and that the property and the risk had therefore passed to the defendant at the time of the seizure. Accordingly, I give judgment for the plaintiffs in the sum of £419 19s. 4d., with costs, when taxed and ascertained.
The Royal College of Surgeons v Wallace Bros., Ltd.
King’s Bench Division.
14 June 1901
[1901] 35 I.L.T.R 209
Madden, Barton JJ.
June 14, 1901
Case stated for the opinion of the King’s Bench Division at the instance of the complainants pursuant to the provisions of the 20 & 21 Vic. c. 43.
“At a Petty Sessions holden before the magistrate of the Dublin Southern Divisional Court, on the 18th Jan., 1901, the defendants were charged in and by a certain summons for that they, ‘on the 13th Nov., 1900, at the College of Surgeons, Stephen’s-green, Dublin, within the said District, did deliver to the complainants a quantity of coal less than the quantity expressed in the weight ticket or consignment note of the said coal, contrary to the form of the statute in such case made and provided,’ and the said parties respectively being then present, the charge was duly heard, and upon such hearing it was adjudged that the said summons should be dismissed, with two guineas costs, to be paid by the complainants to the defendants.
“At the hearing of the said complaint it was proved that immediately before the 13th Nov., 1900, five tons of coal were ordered by the complainants from the defendants, who were a company with limited liability carrying on the business of coal merchants in the City of Dublin. Accordingly on the forenoon of the said 13th Nov. three of the defendants’ carts (each in charge of one man) came to the door of the College of Surgeons for the purpose apparently of delivering the said coal, when one of the carters handed to James Duncan, the beadle or hall porter of the complainants, a weight ticket or consignment note not framed in strict accordance with the requirements of s. 21 and the third schedule of the Weights and Measures Act, 1889 (52 & 53 Vic. c. 21), requesting the complainants to receive five tons best Wigan coal, which had been sent out in eighty sacks, each weighing 1¼ cwt. Instead, however, of so receiving the coal, the said James Duncan stated to the carters that he was going to have the coals weighed, and he thereupon accompanied the carters with their carts to the Corporation weighbridge in Kevin-street, where the coals were weighed accordingly, and were found to be in the *209 aggregate 7½ cwt. short of five tons, which 7½ cwt. would exactly represent the proper weight of six bags of the said coal. The carters then brought the coals (so deficient in weight) back to the College and again tendered delivery of them, but the said James Duncan, on behalf of the complainants (in his own words), ‘refused to accept delivery,’ stating he did so by orders. The carters then took away the coals. Shortly afterwards on the same afternoon the Manager of the Company inquired why the bags of coal had been refused, when he was informed by the said James Duncan that they had been found short in weight and had been so refused by order of the President of the said College, with whom he (the Manager) should communicate. The Manager thereupon called at the house of the President, who would give him no further information than that the defendants would hear from the complainants’ solicitors. Later still on the same day the defendants wrote a courteous and respectful letter to the said President, asking for particulars, and stating that they (the defendants) had suspended the three carters pending the investigation of the matter. No reply was, however, sent to this letter, nor did the defendants hear anything more of the matter until the said summons was issued against them two months afterwards.
“The defendants’ weighman (Edward Kelly) was also examined before me, and I was quite satisfied on his evidence that the full and precise complement of five tons of coal was loaded on the said three carts for delivery to the complainants, that six bags thereof in all must have been abstracted from one or more of the said carts between the defendants’ yard and the said College, and that the defendants had throughout acted in good faith and taken every reasonable precaution to insure the complainants getting the full amount of coal so ordered by them.
“On the foregoing state of facts it was contended on behalf of the complainants that there had been a sufficient ‘delivery’ of the coals so deficient in weight to contstiute an offence under s. 21 of the said Act of 1889, and that I ought to convict the defendants, while the contrary was contended on behalf of the defendants.
“So far as the question was one of fact, I found that there had been no delivery of the coals, and as a matter of law I held that under the said section a tender of delivery was not sufficient to constitute the offence charged, and that there had been no delivery as that word is defined in s. 62 of the Sale of Goods Act, 1893 (56 & 57 Vic. c. 71), viz., a voluntary transfer of possession from one person to another, nor any delivery within the meaning of s. 21 of the said Act of 1889, which, as a penal enactment, I was of opinion should be strictly construed. I accordingly dismissed the said summons, and considering that the conduct of the complainants (through their President) in refusing the defendants all information (which might have led to the detection of what was most probably a larceny) was unreasonable and discourteous, I ordered them to pay the defendants the sum of costs already mentioned.
“And hereupon the judgment of the Court is required as to whether I, the said Justice, was correct in point of law in my determination as aforesaid, or as to what should be done in the premises.”
Campbell, K.C., and Horner, for the complainants.—52 & 53 Vic. c. 21, s. 21. There was here a constructive delivery, which is sufficient to bring the case within the meaning of s. 21.
Wylie, K.C., and Jefferson, contra. —Sale of Goods Act, 1893, s. 62. There was no delivery and no offence within s. 21.
The Court held that a constructive delivery or an attempt at delivery was not sufficient to bring the case within the meaning of the section, and the magistrate was right in so holding.
Sugrue v Dwyer
Exchequer Division.
12 May 1890
[1890] 24 I.L.T.R 98
Palles C.B., Andrews, Murphy JJ.
Palles, C. B.
The questions which arise in this case can, in my opinion, be most conveniently discussed on the counterclaim, and our ruling on the counterclaim will include all the questions raised in the argument. The first question arises on the count for goods bargained and sold. It is whether or not the property in the goods passed? It is common case on both sides that there was a contract for sale. There is a question as to the time when the barley was to be delivered. The evidence on that point is conflicting, and we have to draw an inference of fact in favour of the plaintiff and take it, as he alleges, that the delivery was to be postponed. On the 22nd of Oct. the plaintiff sent by rail 100 barrels of barley, and by the night post of that day he sent to the plaintiff the delivery order, carriage paid, and asked the plaintiff for a cheque on account for £100 or £120. The delivery order was made out payable to the order of Dwyer and not to Sugrue, but when sent it was endorsed by Dwyer to Sugrue or order. That letter, with the order, was sent on the same day as the goods were put on the rail. Upon the 24th it was answered by Sugrue [reads reply]. On the question of intention no jury could doubt that Sugrue intended to accept and make his own that particular barley. It appears that on a subsequent day after the 22nd the railway company improperly dealt with the barley, and gave it to some person who had no title to receive it. Under these circumstances there is a question—Does the action for goods bought and sold lie at all? The goods were not specific or ascertained. I am willing to treat the case that the goods would not have answered the description in the contract until they arrived in Cork. The first act should have been done by Dwyer. Once he, in a binding way, sent the goods and gave notice to Sugrue, the contract should have been treated as a contract of specific goods. It is not, I think, necessary in point of law so to regard it. The other point necessary for the purpose of specific contract is that the goods were to be delivered by rail in Cork. This, also, happened before the wrongful act by the railway company, and it is clear that were it not for the form of the delivery order there is no question but that the property in the barley passed the moment it arrived in Cork. What is the effect of the fact that the delivery order was drawn in the name of Dwyer or order in place of being in the name of Sugrue or order? It is assumed that the mere fact of the order being made out in that way in itself was conclusive and prevented the property from passing. It is right to ascertain how it is that the fact of drawing the order or bill of lading in that mode does prevent the property passing. It depends upon the act of the vendor how he will consign the goods. He may make the order in such a shape that not only will the right of possession not pass till payment, but that even the property in the goods is retained until some particular act is done. Therefore, if the order is made out to the consignor instead of the consignee, that is done to preserve the right of control over the property, and prevents the property passing from one to the other. The question of intention is not to be solely gathered from the form of the order, but is also a question of fact for the jury. On this point I would wish to refer to two cases not cited in the argument. In Browne v. Hare (3 H. & N. 484, 4 H. & N. 829) certain merchants at Bristol contracted with merchants at Rotterdam for the sale of some oil at a certain price to be shipped free on board at Rotterdam. The oil was shipped on the 8th, the master signed a bill of lading by which the oil was deliverable “to the shipper’s order,” and the plaintiffs endorsed it specially to the defendants, and wrote a letter to them inclosing a bill of lading, invoice, and a bill of exchange. This reached the defendants on the morning of the 11th. The ship had been lost on the 9th. The defendants knew of the loss before the 11th. They returned the documents to the broker in two hours on the ground that they were not liable to pay for the oil. In an action for not accepting the bill of exchange, and for goods sold and delivered, it was held that the property in the oil vested in the defendants on its delivery on board, and that the plaintiffs were, consequently, entitled to recover on both counts. Pollock, C.B., there says, “Several cases were cited on behalf of the defendants. We think they are all clearly distinguishable. If, at the time the oil was shipped at Rotterdam, the plaintiffs had intended to continue their ownership, and had taken the bill of lading in the terms in which it was made for the purpose of continuing the ownership and exercising dominion over the oil, they could, in our opinion, have broken their contract to ship the oil ‘ free on board,’ and the property would not have passed to the defendants; but if, when they shipped the oil, they intended to perform their contract and deliver it ‘free on board ‘ for the defendants, we think they did perform it, and the property in the oil passed from them to the defendants. If, when the bill of lading was made out, they of purpose and design had the oil made deliverable to ‘shipper’s order’ for an advantage and benefit to themselves, it would be a different case; but if they had no object in the matter—and they clearly had none, for upon the same day they endorsed it specially to the defendants and transmitted it to Bristol—we think it is exactly the same thing as if the bill of lading had originally been made out deliverable to the defen *99 dants” (p. 498). This last sentence is exactly in point. If the jury at the trial, and we sitting here, could infer that, in having his own name in the delivery order, the defendant intended any special control over the barley, then the intended property did not pass. But, having regard to the fact that he sent the indorsed delivery order to the plaintiff, the purchaser, by a later post on the same day, I am of opinion that the present case is even stronger than Brown v. Hare, and that the property in the barley passed—if not when put on the rail at Thurles—at least when it arrived by rail in Cork. Surely, no one doubts that the object with which Dwyer shipped these goods was when they arrived at Cork in pursuance of his contract and sending the delivery order with them, was that he might fulfil it. In Brown v. Hare the documents were repudiated, here they were received and adopted by Sugrue as nothing unusual, and as carrying out the intention of both parties. The same view was acted on in Joyce v. Swan, 17 C. B. N. S. 84. The facts in that case were very complicated. [His Lordship stated the facts and judgment of Williams, J., p. 101.] It was there held, following Browne v. Hare, that it was not a question of law but of intention, and that the property had passed and the insurer was entitled to recover. Admitting the difference from a bill of lading there is no difference that the question to be determined is a question of intention solely, and the same reasoning applies in the present case as in Browne v. Hare and Joyce v. Swan, and warrants the conclusion that Dwyer intended this particular transaction should be in performance of the contract, and should be so as soon as the barley arrived in Cork. In this case it is not necessary to complicate ourselves with the question whether there was such a delivery of goods as would prevent the right of the vendor to stop the goods in transition or would amount to acceptance and receipt under the Statute of Frauds. In my opinion, none of the class of cases cited have the most remote bearing on the question here, viewed in the sense in which I have now stated it. In Farina v. Home the question was whether there was a valid enforcible contract. There could not have been within the meaning of the Statute of Frauds unless there was an acceptance as well as a receipt of goods. [His Lordship cited the judgment of Williams, J.] That cannot touch the question where, as here, the Statute of Frauds has no application. M’Ewan v. Smith and Benthol v. Burns are cases which deal not with property passing but with whether property has passed. The judgment of Cotter, J., in the former case, deals with possession and nothing else. The other cases cited do not touch the present case, because I do not express an opinion as to whether there was evidence of actual change of possession.
That decides the entire case except the question on the Stamp Act. That point was not made at the trial; it was made for the first time in the argument before us. The Common Law Procedure Act, 1853, provides that there shall be no new trial on the ground of an erroneous ruling of the judge in reference to stamps. If no point was taken on it below it cannot be made in a new trial motion. It has been held in England that a judge cannot even reserve a question on his ruling as to a stamp on a document. The chief exception from the rule is if the document itself would have no legal validity whatever if not stamped and could not be stamped afterwards. I have not dealt with this as an order passing property within the Act, but merely indicating an intention whether the property should pass or not by putting it on the rail at Thurles or go to Cork. It could be used for other and collateral purposes. Moreover, on the true construction of the Act, the objection would have been based on the Stamp Act, ss. 15, 16. There is no provision in the statute that prevents a warrant of this kind being stamped after its execution, and therefore, if the objection had been made, the judge could have ruled the question. Pooley v. Great Eastern Ry. Co. decides that instruments of this kind may be stamped after execution. The stamp objection cannot prevail. There was a duty on Dwyer to cancel that stamp in the mode provided by the Act. On the entire case the inference of fact is that the property was intended to pass by being put on the rail at Thurles, and did so pass, and that on its arrival in Cork the contract was concluded and the price became payable. No question of delivery arises.
Andrews and Murphy, JJ., concurred.
Norwell & Co. Ltd. v Black & anor
Circuit Court.
30 October 1930
[1931] 65 I.L.T.R 104
Judge Roche
Judge Roche said:—In my opinion this case presents little difficulty on the facts proved. On a scrutiny of the Act and the cases on the point and having heard the arguments I hold that the plaintiffs are not entitled to succeed. Orders for certain goods were given to a traveller of the plaintiff firm by the defendants and by him in the ordinary course sent on to the plaintiffs. The orders were clear on their faces. If accepted, delivery in the ordinary way would be in one lot. No provision was made for delivery by instalments. Correspondence took place concerning the orders and eventually the plaintiffs wrote to the defendants making a new suggestion to them concerning the orders. That constituted a new offer, contained in a letter of the 19th of September. The defendants did not accept, but in answer to that offer they made what amounted in my opinion to a fresh or counter offer. This did not provide for delivery of the goods, if the offer were accepted, in other than one delivery or lot. There was no actual acceptance in writing by the plaintiffs of that new offer but following upon its receipt the plaintiffs forwarded some goods forming only portion of the orders. On discovering that only part of the goods had been forwarded, the defendants refused to take delivery. Section 31 of the Sale of Goods Act, 1893, was passed to meet cases of that kind. It lay with the defendants to accept or reject the goods so forwarded. In fact they repudiated them. The goods were brought to their place of business and it was found that no invoice had been sent. It was perfectly reasonable to refuse the goods under the circumstances. The burden of proof was on the plaintiffs to show when the invoice was sent out, and I have no reason to refuse to accept Mr. Henry’s evidence for the defendants that there was no invoice sent with the consignment. Later the invoice arrived. In the meantime the defendants were afforded a chance to inspect the goods actually sent, and this chance was availed of. It was found that they did not correspond with the order, in that (1) the whole had not been sent or tendered together in one lot and (2) as regards several items the consignment did not correspond with the order. Mr. Rose, the plaintiffs’ traveller who might have thrown light on the facts so far as disputed, is not here. It is not sufficient merely to try to explain away the discrepancies. On these grounds the defendants were entitled to repudiate the goods immediately ( i.e. on Oct. 2nd) which they did, and that put an end to the transaction. Later, subsequent to the repudiation, Messrs. Norwell decided they would send on certain of the rest of the goods originally ordered—viz. “Pabco.” After some days the “Pabco” parcel arrived and on comparison with the invoice the parcel was found to be correct and the defendants took possession and paid for it. I am asked to hold that that set up the whole of the original order, and though at one stage I was in doubt I am satisfied now that that is not so. The defendants were not bound to communicate directly with the plaintiffs, but the shipping company through whom the goods were forwarded and tendered to the defendants did communicate the repudiation to the plaintiffs, whereupon, on *105 Oct. 9th, the plaintiffs wrote to the defendants saying that they were surprised to hear from the shipping company that the first consignment had been refused as “not ordered.” Mr. Tobias insists that the defendants are bound by those words, but that I think, is no answer. It was fairly correct to say “not ordered”—though the defendants as they say probably meant by that, “not as ordered,” but little turns on that. The order being then at an end, 100 pieces of “Pabco” which were in fact ordered in the original orders of the defendants were forwarded and delivered to the defendants and were in accordance with the invoice. This transaction was distinct. There was no reference to the prior order or dispute. This, in my opinion, constituted a new offer of these goods —viz. “Pabco” by the plaintiffs which the defendants were entitled to accept or refuse as a distinct transaction as they might choose. They accepted it, took delivery and paid for these goods. That did not in my opinion set up the previous transaction The defendants are right in law, though I do not commend their failure to communicate or answer the sympathetic letters sent to them. They chose and were entitled to adopt a policy of masterly silence, and did nothing immoral in ethics or wrong in law. The law is clear. It is regrettable that this dispute should have occurred, but I have merely to decide the law on the point at issue. I therefore dismiss the action with costs.