Passing of property

Introduction

1. Meaning of property in goods. S.61(1) cf: possession and risk.

2. Effects:

i) risk - S.20
ii) bankruptcy of either party
iii)seller's remedies: price or non-acceptance. SS. 49 and 50
iv) third parties
v) title to sue
Leigh & Sillivan v Aliakmon Shipping [1986] 2 WLR 902
vi) Tax implications
Compton & Woodhouse Limited v The Commissioners for Her
Majesty's Revenue and Customs 2008 WL 370939

Classification of Goods: S.5; s61(1)

Specific and unascertained goods/ Existing and future goods..
Specific goods are those which are identified and agreed upon at the time the
contract was made..s.61(1).
The time for this classification is at the time the contract is made.
Howell v Coupland [1876] 1 QBD 258
Kursell v Timber Operators [1927] 1 KB 298

Rules when Property Passes

i) Property will not pass until the goods are ascertained - S.16
s20A qualifies s16 (see below)
ii) Property passes when it is intended to pass - S.17

Karlshamns Oliefabiker v Eastport Navigation Corp. The Elafi [1982] 1 All

ER 208
Re Anchor Line [1937] Ch 1
Broadcrest v Ruddock 5 May 2000
iii) Rules to ascertain intention:
S.18 Rules 1-5
S18 Unless a different intention appears, the following are rules for ascertaining
the intention of the parties as to the time at which property in the goods is to pass
to the buyer.

Rule 1 Where there is an unconditional contract for the sale of specific goods,
in a deliverable state, the property in the goods passes to the buyer when the
contract is made, and it is immaterial whether the time of payment or the time of
delivery or both be postponed

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Requirements
1. Unconditional contract
2. Specific Goods
3. Deliverable State s61(5)

Dennant v Skinner [1948] 2KB 164 sale at an auction: property passed to buyer
at the fall of the hammer.
Underwood v Burgh Castle Brick [1922]
Philip Head v Showfronts [1970]
Kulkarni v Manor Credit (Davenham) Ltd [2010] EWCA Civ 69

Rule 2 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.

The seller has to do something to put the goods into a deliverable state.

Underwood v Burgh Castle Brick [1922]

How the buyer acquires notice is not enacted. Actual knowledge is normally
thought to be required

Rule 3 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.

Again, it is for the seller to do the weighing etc., unlike:

Nanka-Bruce v Commonwealth Trust Ltd [1926] AC 77 where it was the sub-
buyer who weighed the goods to ensure the correct price to be paid to their
supplier.

S18 Rule 4 Where the 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;
(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 expiration of that time and, if no time has been fixed, on
the expiration of a reasonable time
NB: no reference is made to specific/unascertained goods.
Genn v Winkel (1912 )-17 Com Cas323
Kirkham v Attenborough [1897] 1 QB 201
Weiner v Gill [1906] 2 KJB 574

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 Weiner v Harris [1910] 1 KB 285
Re Ferrier [1944] Ch 295
Atari Corp v Electronics Boutique Stores [1998] 1 All EE 1010 (sale or return
case) the def retailers returned the claimants computer games to a distribution centre, having
previously given written notice of their intention to return the goods. Held: this was an effective notice.
Compton & Woodhouse Limited v The Commissioners for Her Majesty's
Revenue and Customs 2008 WL 370939
The issue in this appeal is whether the contract the Appellant makes with its customers is
a true sale or return contract, or a contract for sale with a condition enabling the
customer to return the goods within 60 days.
The issue in this appeal, more precisely stated, is whether the Appellant's contract with
its customer is (1) a contract for sale or return, that is that there is no contract of sale at
the time of delivery of the goods but the Appellant retains ownership of the goods and
customer is a bailee who has an option either to purchase them (or he may accept an
irrevocable offer by the Appellant to sell them) or return them within 60 days, to which I
shall refer as sale or return, or (2) a contract of sale with the property in the goods
passing immediately subject to a condition subsequent that the customer may return
them within 60 days, in which case the contract for sale is cancelled, to which I shall
refer as sale. If there is a contract of sale or return s 6(2)(c) fixes the tax point at the
time when it becomes certain that the supply has taken place; if there is a contract of
sale the supply takes place under s 6(2)(a) at the time of removal of the goods.
Essentially the difference between (1) and (2) is when property in the goods passes,
which is when the parties intend it to pass. The issue for VAT in s 6(2)(c) is whether the
supply has taken place, and for s 18 of SGA rule 4 whether a contract for sale has been
concluded,..

Rule 5 (1) Where there is a contract for the sale of unascertained or future
goods by description, and goods of that description and in a deliverable state are
unconditionally appropriated to the contract, either by the seller with the assent of
the buyer, or by the buyer with the assent of the seller, the property in the goods
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 to
disposal, he is taken to have unconditionally appropriated the goods to the
contract.
(3) Where there is a contract for the sale of a specified quantity of
unascertained goods in a deliverable state forming part of a bulk which is
identified either in the contract or by subsequent agreement between the parties
and that bulk is reduced to (or is less than) that quantity, then, if the buyer under
that contract is the only buyer to whom the goods are then due out of the bulk-
(a) the remaining goods are to be taken as appropriated to that contract at the
time when the bulk is so reduced and;
(b) the property in those goods passes to that buyer
(4) Paragraph (3) above applies also (with the necessary modifications) where a
bulk is reduced to (or to less than) the aggregate of the quantities due to a single
buyer under separate contracts relating to that bulk and he is the only buyer to
whom goods are then due out of that bulk).

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unconditionally appropriated
Carlos Federspiel v Twigg [1957] 1 Lloyds R 240
Re London Wine Co. [1986] PCC 121
Re Ellis Son & Vidler [1995]
Rule 5 (2)
Healey v Howlett [1917] 1KB 337
Wardar v Norwood [1963]
Assent of the other party
Pignataro v Gilroy [1919]
Aldridge v Johnson (1857]) 7E&B 885
Noblett v Hopkinson [1905]
Carlos Federspiel v Twigg [1957]

s.20A (amends s.16. Sale of Goods (Amendment) Act 1995)

Until 1995 there was no statutory provision dealing with the situation where the
subject matter of the contract was a specified quantity of goods from an identified
source. e.g. 400 tons of the 1,000 tons of wheat in warehouse x.

By applying s16 it is clear that no property could pass to the buyer until the 400
tons became ascertained. This was not satisfactory as if the buyer paid the price
but seller became insolvent before the wheat was identified the wheat became
the property of the trustee in bankruptcy and the buyer was merely an unsecured
creditor.

Under s20A - which applies to any contract for the sale of a specified quantity of
goods which are part of an identified bulk - as soon as the buyer pays the price
(or part of it) the buyer acquires property in an undivided share in the bulk,
becoming an owner in common of the bulk.

The buyers share is such share as the quantity of goods paid for and due to the
buyer out of the bulk bears to the quantity of the goods in the bulk.

So in the above e.g. the buyer will own an undivided share of 40% of 1,000 tons.
If the seller then sells 200 tons elsewhere, the buyer will now own 50% of the
remaining 800 tons.

Re Stapylton Fletcher [1994] 1 WLR 1181

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