Passing of property

Section 17 applies for specific goods when the parties agree, if no intention is expressed then Section 18 operates.  Rules 1 – 4 control specific goods.  (Rule 1) states that where there is an unconditional contract for the sale of specific goods in a deliverable state the property in  the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or delivery, or both be postponed.  The following cases are a reflection of (rule 1): Tarling v Baxter, 6 B. & C. 360 K.B. [1827] – “a haystack was bought; the seller was looking after it for the buyer with the price to be paid after the contract date and before delivery. Before paying for the haystack it burnt down.  The court used (rule 1) to ascertain who owned the haystack.  The buyer still had to pay.”  In Dennant v Skinner and Collom [1948] 2 K.B. 164; [1948] L.J.R. 1576; [1948] 2 All E.R. 29 – Intention was examined it was found that; “If intention changes it is irrelevant and property will still pass subsequent to their intention at the time of making the contract.”  “A van was bought at an auction by cheque. When paying, the buyer stated that ownership would not pass until the cheque was cleared. He lost as this came after the contract had been made.  The law states that when the hammer falls at an auction the contract is sealed.  This is the common law approach.  (Rule 2) of Section 18 of the Sale of Goods Act states that where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until the thing is done and the buyer has notice that it has been done.  (Rule 3) expresses where there is a contract for the sale of specific goods in a deliverable state but the seller is bound to weigh, measure, test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until the act or thing is done and the buyer has notice that it has been done.  (Rule 4) relates to approval etc – when goods are delivered to the buyer on approval or on sale or return or other similar terms the property in the goods passes to the buyer:- a) when he signifies his approval or acceptance to the seller or does any other act adopting the transaction, or b) if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of the time. Section 18 Rule 5 is a new rule; “this applies to the sale of unascertained goods or future goods by description.  Appropriation by exhaustion – property will pass when goods of that description and in a deliverable state are unconditionally appropriated to the contract. In order for unconditional appropriation to take place, case law requires that the contract goods must be identified, separated from other goods where applicable, and irrevocably attached to the contract.”  The goods in the paper are future goods; however it is not clear if the goods are clearly appropriated to Annacol.  This rule can cause conflicting decisions, see Carlos Federspiel & Co SA v Charles Twigg & Co Ltd [1957] 1 Lloyd’s Rep 240.  

On analysis of the above sections it is clear that Benfico intended ownership to pass to Annacol by reference to section 18 (rule 1), it does not matter that delivery and payment have not been made, the ownership passes when the contract is agreed.  The paper does not mention when payment will be made for the goods.  See Underwood v Burgh Castle Brick and Cement Syndicate [1922] 1 KB 343.  “The seller can sue for the price of the goods only after the property has passed – section 49.”  The property has passed, Benfico has had to manufacture the goods they are entitled to be reimbursed for their costs.

Section 20 of the Sale of Goods Act relates to risk, this risk passes with property.  Rule (1) states that risk passes when ownership passes unless otherwise agreed.  See Phillip Head & Sons Ltd v Showfronts Ltd [1970] 1 Lloyd’s Rep 140.  The paper does not state anything in relation to risk, so the risk should be borne by Annacol.  Rule (2) states but where delivery has been delayed through the fault of either buyer or seller the goods are at the risk of the party at fault as regards any loss which might not have occurred but for such fault.  Rule (3) states; nothing in this section affects the duties or liabilities of either seller or buyer as a bailee or custodier of the goods of the other party.  See Nanka-Bruce v Commonwealth Trust Limited [1926] AC 77.

The paper does not state if Benfico have communicated to Annacol Computers that they are delivering the goods.  The paper states that Benfico has heard that Annacol has gone into liquidation.  “Liquidation is a process whereby a company has its assets realised and distributed to satisfy, insofar as it is able, its liabilities and to repay its shareholders. Liquidation is a terminal process and is followed by the dissolution of the company.”  The question I would ask is from what source have they heard this?  There are various government resources that will advise information on a company such as the date of incorporation, registered office, date of the last filed documents, status and the company number, these are available free of charge on the following website: .  Alternatively Benfico can telephone the Contact centre on 0870 333 3636.  More detailed information, such as accounts, is chargeable but could save Benfico a lot of unwanted hassle.  If I am been truly honest, I would delay the delivery until it has definitely been clarified that they are in liquidation, Section 41 of the Sale of Goods Act.  Everything depends on whether they have gone into liquidation.  If they are not in liquidation then Benfico have not behaved properly their action is not lawful, Annacol do own the goods and Benfico should deliver.  However if it is correct that they are in liquidation then the delivery should not be made.

2.  In order to answer this question in context I will need to evaluate the buyer/seller relationship.  Analysing the paper for possible remedies and what the parties’ legal positions are. Benfico and Ken have entered into a contract, when Ken purchases a laptop for £450.00, Ken is a consumer buyer.  Ken needs the laptop to help him do his sideline job as a proof reader he requires the email facility to do this job.  The fact that the laptop cannot do this makes it of no use to Ken.   An integral requirement of a laptop is a working email facility, if a laptop cannot do this it is useless, it does not fit its use, it is like having a washing machine that does not wash!  When buying any goods they must be fit for their purpose.  “For the first six months after purchase/delivery, the burden of proof when reporting faulty goods will be reversed in the consumer's favour,” this is a new regulation which came about because of the Sale and Supply of Goods to Consumers Regulations 2002.  When Ken bought the laptop it would have been displayed in the shop, most probably it would have come with a description of what it includes and what it can do.

Section 13 of the Sale of Goods Act 1979 outlines description, there is an implied condition that the goods bought will match the description.  If it is found that the description has been relied upon when the goods have been bought, then this will be deemed as a breach of condition.  It is most likely that when Ken went into the shop and bought the laptop he would have relied on a description somewhat when making his selection.  See Beale v Taylor [1967] 1 WLR 1193.  “Normally for breach of condition by the seller, the buyer has the right to reject the goods and treat the contract as repudiated.”  However Ken is a consumer so he cannot do this.  The most likely solution is for Ken to ask the shop to repair the computer.  If a breach is to be successful under S.13 there must be a breach of a term that identifies the goods.  

Section 14 relates to quality it contains two conditions: - 1. S.14 (2) implies a condition that where a seller sells goods in the course of business, the goods supplied are of satisfactory quality.  See Rogers v Parrish (Scarborough) Ltd [1987] Q.B. 933; [1987] 2 W.L.R. 353; [1987] 2 All E.R. 232; [1987] R.T.R. 312.  “The phrase in the course of business is there to distinguish between a sale made in the course of the sellers business and a purely private sale which is outside the confines of any business.”  The sale of the laptop to Ken is in the course of business for Benfico.  The meaning of satisfactory is defined in Section 14 (2A) it states that satisfactory is what a reasonable person would regard as satisfactory taking into account description, price and other relevant circumstances.  Quality is further discussed in Section 14 (2B) & (2D) – F.  Quality is concerned with condition, appearance, freedom from minor blemishes, fitness for a common purpose, safety and durability.  Any public statements that are made about a product are seen as relevant circumstances e.g., an advert.  

Section 14 (2B) (a) of the Sale of Goods Act relates to fitness for purpose of goods, since 1994 the act has now a wider meaning and states “fit for the purpose for all goods of that type are commonly bought”, a laptop is commonly bought to send emails.  See Grant -v- Australian Knitting Mills [1935] All ER Rep 209; [1936] AC 85; 105 LJPC 6; 154 LT 185 and Godley v Perry [1960] 1 All ER 36 – “A young boy bought a cheap polystyrene catapult from a stationery shop. When he used it, it broke, blinding him in one eye. It was held that this was a breach of satisfactory quality and fitness for purpose.”

If Ken wants a solution to his problem, the Sale and Supply of Goods to Consumers Regulations 2002 states that he has up to six months to claim on faulty goods, see Clegg v Olle Andersen t/a Nordic Marine [2003] EWCA Civ 320.  Section 48A of the Sale of Goods Act relates to the right to repair, replacement, price reduction or rescission.  This section gives additional rights to consumers.  Where goods do not conform to the contract at the time of delivery to require repair or replacement or reduction in the price or rescission, any defect discovered within six months is deemed to have existed when the goods were delivered or bought.  The law assumes that the defect was always there.

Benfico is in breach of contract; most likely for Section 14 (2B) (a) of the Sale of Goods Act.  Benfico is legal obliged to remedy the situation they should offer to Ken the following; a repair, a suitable replacement bearing in mind that the laptop is an end of line model, a price reduction, or Ken his money back.  If Ken were offered a repair or replacement it must not be at his inconvenience.  If Ken is unsure of any of his rights then he could contact consumer advice.  Concluding this, I am of the opinion that the best remedy for both parties would be rescission.