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Rights, Duties and Remedies under a Sale of Goods Contract.pptx

  1. Rights and Remedies Lyla Latif, PhD Warwick Law School (2023)
  2. Rights: If not agreed, SOGA 1979 to apply Seller • B accepts the goods – sec 27 • Within reasonable time • If not, liable to S for any loss and reasonable charge for care and custody • If rejects, must intimate refusal to accept • B pays the purchase price – sec 27 • Retain possession until pay – sec 41 • Right of stoppage in transit – sec 44 Buyer • S delivers the goods • on time, at the place and as agreed with the buyer – sec 27 • of the correct quantity – sec 30 • Reject the goods • Examine the goods – sec 34 • Partial rejection – sec 35A
  3. Delivery + Acceptance
  4. Reflections 1. S delivers goods to B’s agent – can this be considered as delivery? 2. S delivers goods to B’s neighbour – can this be considered as delivery? 3. S delivers goods to his warehouse and notifies B to come collect – can this be considered as delivery?
  5. Delivery – sec 61(1) • Delivery: sec 61(1) – voluntary transfer of possession from S to B Constructive delivery S transfers control of goods to B because S does not have physical possession Actual delivery S transfer physical possession to B S’s duty on AD of the goods to B’s premises is limited to handing them over to someone who appears to have the authority to receive them. S should take reasonable care to ensure that no unauthorised person receives them. See: 1. Galbraith & Grant v Block (1922) 2. Computer 2000 Distribution ltd v ICM Computer Solutions plc (2004)
  6. Galbraith… • G contracted a carrier to deliver champagne to B’s premises. Delivery driver said that he delivered the champagne to a man at the side entrance of B’s premises and that someone on the premises signed the delivery note in B’s name. B argued that: 1. his premises were closed at the time of delivery 2. he never received the champagne 3. the signature was not his 4. nor did he authorise anyone to sign B refused to pay.
  7. Held: ‘A seller who is told to deliver goods at the buyer’s premises discharges his obligations if he delivers them there w/t negligence to a person apparently having authority to receive them. He cannot know what authority the actual recipient has. His duty is to deliver the goods at the proper place and to take all proper care to see that no unauthorised person receives them. He is under no obligation to do more. If the buyer has been unfortunate enough to have had access to his premises obtained by some apparently respectable person who takes his goods and signs for them in his absence, the loss must fall on him, and not on the innocent carrier or seller’.
  8. Computer 2000… • Rogue pretended to act on behalf of B – a reputable company and ordered electronic goods from S. S placed an order with its suppliers. Rogue gave S instructions to deliver to Mr Richard Cole at a given business address. S similarly instructed the suppliers. Security guard at the premises signed for the goods. Goods collected by Mr. Richard Cole (presumably the rogue) and he absconded with the goods. S refused to pay the suppliers. • Held: • Instructions were to deliver to Mr. RC at a given business address. Suppliers followed the instructions and goods had been collected by an individual of that name. Supplier, therefore, delivered the goods in accordance with the terms. • It was found that the security guard had authority to receive goods on behalf of persons carrying on business at the business address and there was no reason for supplier to suspect that the named individual and company were not carrying on business at the address
  9. Delivery – sec 28 • Delivery and the payment of the price must be concurrent – sec 28 • Concurrent: both S and B have to be ‘ready and willing’ to give possession (S) and paying price (B)
  10. Rules relating to delivery 1. General rules 2. Quantity 3. Instalments 4. Involvement of a carrier (by rail or sea)
  11. 1. Rules regulating delivery – sec 29 (general) • General Rule: • the contract between B and S determines whether it is B who is to take possession or S is to send them to B. • S is only responsible to convey the goods. Duty is on B to collect the goods • No Contract: • s29.2: Where is the place of delivery? S’s place of business or residence. If sale of specific goods and its in the parties knowledge that the goods are at a different place – then that different place is the place of delivery • s29.3: Time of delivery? At the time specified. If no time – reasonable time • Reasonable time means reasonable hour and THAT IS A QUESTION OF FACT (s29.5) – see Charles Rickards Ltd v Oppenheim (1950) • s29.4: Delivery through 3P? No delivery by S to B until 3P acknowledges to B that he holds the goods on B’s behalf – referred to as attornment • s29.6: Expenses for delivery? S bears all expenses to putting goods in a deliverable state
  12. 2. Rules regulating delivery – sec 30 (quantity) • If S delivers the wrong quantity of goods to B: • Less (sec 30.1): B may reject. If B accepts, must pay for them • B entitled to sue for non-delivery in respect of the shortfall. Can only sue if 3 conditions met: • Sec 30(2D)(a): de minimis non curat lex rule – B can not reject goods due to shortfall, unless shortfall is material • If unreasonable for B to reject the goods • Goods are prone to shortages (fuel which evaporates) – B entitled to pay a lesser price instead to cover goods delivered • More (sec 30.2): B may accept the goods included in the contract and reject the surplus, or may reject the whole. B can accept the surplus – must pay for the surplus as it forms a new contract. • See: Shipton, Anderson & Co v Weil Bros 7 Co (1912)- B cannot reject surplus, unless ‘material’
  13. 3. Rules regulating delivery – (instalments) • B not bound to accept delivery by instalments unless agreed to in writing • If B accepts short delivery (can sue to recover price paid for goods not delivered and damages for non delivery), S cannot later compel B to accept the remainder at a later date – See: Behrend & Co Ltd v Produce Brokers Co Ltd (1920)
  14. 3. Rules regulating delivery – (instalments cont’d) • Where goods are delivered by instalments and the buyer accepts the first instalment – this act does not prevent the buyer from rejecting later instalments if the later instalments contain goods that breach the implied terms under sections 12, 13, 14 or 15. – See Jackson v Rotax Motor and Cycle Company (1910) • Note: two possible routes: • Treat breach of contract as a condition - repudiation of the whole contract • Treat contract as severable – only claim compensation Depends on the terms of the contract and the circumstances of each case
  15. Maple Flock Co Ltd v Universal Furniture Products (1934) • Severable contract to purchase 100 tonnes of rag flock to be DBI • 15 instalment deliveries were satisfactory, 16th delivery was not – defective. 17th -20th deliveries were satisfactory • UFP sought to rescind the ENTIRE contract, refused to accept further deliveries. MP sued for BOC • UFP not entitled to repudiate the entire contract. This was a sale under a severable contract and only some of the instalments were defective. 2 tests: • Quantitative ratio which the breach bears to the contract as a whole • Degree of probability that such a breach would be repeated
  16. 4. Delivery to a carrier – sec 32(1), unlike sec 29.4 - bailee • Where S is authorised or required to send the goods to B, the delivery of the goods to a carrier for the purpose of transmission to B is prima facie deemed to be a delivery of the goods to B • The carrier must not be an agent of S: Galbraith & Grant v Block (1922) • S must make the contract with the carrier on behalf of B as may be reasonable (w/r to the nature of goods and other circumstances of the case) – otherwise • S will be liable if goods are lost or damaged in the course of transit (implications: B can decline to treat delivery of goods to himself and sue S for damages) – Thomas Young & Sons v Hobson & Partner (1949)
  17. 4. Delivery to a carrier: rail v sea • Rail: S must make the contract with the carrier on behalf of B as may be reasonable (w/r to the nature of goods and other circumstances of the case) – otherwise • S will be liable if goods are lost or damaged in the course of transit (implications: B can decline to treat delivery of goods to himself and sue S for damages) – Thomas Young & Sons v Hobson & Partner (1949) • Sea: risk lies with B where goods carried by sea (FOB – free on board), since B has to insure the goods. S only liable if: • Did not give B sufficient notice to enable B to insure the goods during sea transit
  18. Mercuria Energy Trading Pte Ltd v Citibank NA [2015] • S delivered goods to W – warehouse operator; has there been delivery to B? • No. Why? Because W is a third party and must therefore attorn to B that he holds the goods on B’s behalf for delivery to be effected • W, therefore, becomes B’s bailee at the point of attornment and B acquires constructive possession of the goods Question: If S transfers to B receipts issued by W in respect of the goods – does this in itself effect delivery?
  19. Remedies - Seller
  20. Seller’s Remedies • If B refuses to accept the goods – damages for non-acceptance • Sec 38.1: If the buyer (1) refuses to pay the purchase price, (2) or has not paid the purchase price, or (3) has made conditional payment and the condition has not been fulfilled, the unpaid seller has two remedies: • Real remedies • Personal remedies
  21. Seller’s Real Remedies (sec 39) • Real remedies: • targeted towards the goods and depend on whether or not property in the goods has passed to B: • Where property has passed: Sec 39.1 – (1) lien on the goods or right to retain goods while in possession (2) if B is insolvent – right of stopping the goods in transit after S has parted with possession (3) re-sell • Where property has not passed: Sec 39.2 – in addition to the remedies under 39.1, S has an additional remedy: withholding delivery
  22. Seller’s Personal Remedies (secs 49, 50 and 54) • Personal remedies: remedy against the buyer – • Sec 49.1: Action for the price (when property has passed to B and he wrongfully neglects or refuses to pay) • If S has retained title, cannot sue for price - FG Wilson Engineering Ltd v John Holt & Co Ltd (2014) • Sec 50.1: Damages for non-acceptance of the goods (where B wrongfully neglects or refuses to accept and pay for the goods) • Sec 54: recover interest or claim special damages based on the loss arising from any special circumstances of which the parties were aware at the time of making the contract
  23. Damages • What are damages? compensation • When does a claim for damages arise? when there is a BOC • When does a BOC arise? when either party fails to perform any of their obligations arising under the contract or as implied under SOGA 1979 • Instances where failure to perform will not entitle the other party to damages: • Impediment is beyond the defaulting party’s control and could not be reasonably foreseen • Failure to perform was as a result of the action or omission of the other party
  24. Recovery and calculation of damages (general) • What is recoverable – a sum equal to the loss, as well as profits • How much is recoverable – an amount that does not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of concluding the contract • The duty to mitigate also applies here in assessing the amount to be recovered • This is to be understood on a case-by-case basis • There are no clear-cut general rules, but guidance exists on how to assess the amount – examples in the next slide
  25. Assessing damages General rules around compensation Foreseeability rule (remoteness) • Only foreseeable losses will be recoverable • Reasonable person standard test • Damages are to compensate the injured party for its losses • Every type of loss is compensable as long as requirements are met (BOC, reasonably foreseeable) • There must be causation – BUT FOR test (limited by foreseeability rule)
  26. Illustration – Hadley v Baxendale (1854) • H’s mill came to a standstill due to a broken crankshaft. H engaged B to deliver a broken crankshaft to the place where it would be repaired and then return it to H’s mill the next day after it had been repaired. B was neglectful and delivered the repaired crankshaft 7 days late. H, in the meantime, was unable to use the mill and claimed loss of profit. B argued that he did not know that the mill would have to be closed during the delay and the loss of profit was too remote. • Held: • A nonbreaching party is entitled damages arising naturally from the breach itself or those that are in the reasonable contemplation of the parties at the time of contracting. • Here, while the breach by Defendants was the actual cause of the lost profits of Plaintiffs, it cannot be said that under ordinary circumstances such loss arises naturally from this type of breach. There is a multitude of reasons for a miller to send a crank shaft to a third party. Defendants had no way of knowing that their breach would cause a longer shutdown of the mill, resulting in lost profits. Further, Plaintiffs never communicated the special circumstances to Defendants, nor did Defendants know of the special circumstances.
  27. Calculating damages for non-acceptance (sec 50.2) Sec 50.2: “the measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer’s breach of contract” Calculation: difference between the contract price and the value of the goods to the seller at the date of the buyer’s breach No available market Harlow & Jones Ltd v Panex Ltd (1967) Available market Apply sec 50.3 Thompson Ltd v Robinson Ltd (1955)
  28. Acceptance of goods
  29. B loses his right to reject goods if he has accepted them Accepted Not accepted Read: J & H Ritchie Ltd v Lloyd Ltd (2007) Fiat Auto Financial Services v Connelly (2007) See: table 17.2 (Baskind, Ch 17)
  30. Remedies - Buyer
  31. Remedies • Damages for non-delivery – sec 51 • Specific performance – sec 52 • Damages for breach of warranty • Reject the goods • Remedy unavailable: if B accepted the goods under sec 35; agreed to repair; retaining goods for more than a reasonable length of time; waiver or election; where breach is slight • Repudiation
  32. Calculating damages for non-delivery • Only arises where seller’s refusal to deliver is wrongful • Also arises where seller delivers goods that are not in accordance with the contract (implied terms) • Depends on whether goods bought for buyer’s own use or for purpose of resale • Measure of damages: • If B can buy elsewhere goods S wrongfully did not deliver at the same price – nominal damages • If B has to pay more: damages will be difference between the contract price and the market price (e.g., CP 3000, MP 4500, Damages = 1500) – MP to be determined AT THE DATE OF THE BREACH – READ: Pagnan & Fratelli v Corbisa… (1970)
  33. Market price depends on: • Available market • Sec 51.3: if there is an AM the measure of damages is to be ascertained by the difference between the CP and MP at the time the goods ought to be delivered • No available market • Sec 51.2: damages will be assessed under common law in accordance with the foreseeability rule under Hadley v Baxendale (loss which would arise naturally ‘according to the usual course of things’)
  34. Calculating damages for breach of warranty Sec 50.2: “the measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer’s breach of contract” • There must be a causal link between the breach and the loss sustained • Liability is only for those losses that can be said to be within contemplation of the parties at the time they made the contract as the probable result of its breach • Remoteness rule: Hadley v Baxendale (1854)
  35. Calculating damages for breach of warranty of quality – sec 53.3 • To compensate B for the lower value in goods as a result of the defects • Loss is prima facie the difference between the value of the goods at the time of delivery to B and the value they would have had if they had conformed to the contract
  36. Specific Performance – sec 52 • There are occasions where a monetary award will not provide the buyer with an adequate remedy – the B will require S to perform: specific performance • B can ask the court to make an order for specific performance (where S has retained the goods, to compel the seller to deliver the goods) • Sky Petroleum Ltd v VIP Petroleum Ltd (1974): SPL had a 10-year fixed price agreement with VIP to purchase fuel. Due to shortages VIP terminated the agreement and SPL was left w/t alternative. Granted SP • Note on SP: At the discretion of the court and in respect of BOC to deliver specific/ascertained goods, order for SP can be made even if property in goods has passed • Case law: see table 17.1 (Ch 17 Baskind)
  37. Next: Retention of Title and Transfer of Title by Non-Owners

Hinweis der Redaktion

  1. Correlation between rights and duties. S’s right is a duty on B B’s right is a duty on S
  2. CD – coz goods already in physical possession of B (in HP contracts – when exercising option to buy)/ handing over documents of title
  3. Charles Rickards – In August O placed an order with C to build a body onto the chassis of a car. C would do this within 6-7 months. In March, O insisted for delivery. In June O wrote to C that he would not accept delivery after July. C informed O that the body would not be ready by then, O cancelled the order. C completed the car in October and O refused to accept delivery. C sued for price. Held: Initially time was of the essence – but O waived this by making requests for delivery after March. O should have given reasonable notice making the new delivery time of essence. O’s June request constituted reasonable notice and was valid. The contract was of essence and O was entitled to repudiate the contract. Points: time of delivery is a condition entitling B to repudiate the contract.
  4. DBI – delivered by instalments BOC – breach of contract Severable contract – each delivery by instalment constitutes a separate contract
  5. Thomas Young: S sold B 7 electric engines. Term: engines to be delivered by rail. S sent the engines at B’s risk. S loaded engines on the rail in box wagons but did not adequately secure them. Engines arrived damaged. B refused to accept them from the railway. CA: S failed in its duty under sec 32(2) of SOGA 1893 to make a reasonable contract with the carrier. B was therefore, entitled to reject the goods. FOB – B arranges for shipment and insurance of goods. Soon as goods loaded onto the vessel, S’s responsibility comes to an end. Risk passes to B.
  6. S can sue for both: real and personal
  7. No available market: If there is no available market, the seller will encounter difficulties in being able to calculate the value of the goods at the date of the buyer’s breach. Rules: If goods are unique – specific only for the buyer – there is no available market for it – so general duty to mitigate the loss applies (S to modify goods to make them marketable to another buyer) Damages will be the difference between the contract price and the value of the goods to the seller on the day of the breach (estimated by the loss of profit: difference between the price at which S bought the goods and the price it would have gotten from B) Available market: Measure of damages is prima facie to be ascertained by the difference between the contract price ad the market or current price at the time when the goods ought to have been accepted or at the time of refusal.
  8. Isn’t sec 35.6.b an act inconsistent with seller’s disposition under sec 35.1.b? Hardy & Co v Hillerns & Fowler – sub-sale seen as an act inconsistent with seller’s ownership. Hardy later seen as unfair to buyers who bought sealed containers with the aim of reselling them – no opportunity to examine, so remedy came under sec 36.6.b. See Truk (UK) Ltd v Tokmakidis GmbH – dependent on reasonable time within which to intimate rejection
  9. Waiver/election – where B either waives or elects to treat the BOC as a BOW – then can’t reject goods.
  10. PF – coz value is to be measured as at the contractual date for delivery – but if defet not discovered until after B has resold the goods, damages assessed on the basis of B’s liability to the consumer