Approach:
¨
identify
the legal relations between the parties;
¨
identify
the transactions engaged in by the parties;
¨
what
are the obligations (rights and duties) of the parties?
¨
what
are the issues?
¨
what
causes of action are available?
¨
what
remedies are the parties seeking?
An agent is one that can create legal relationships
between the principal and third parties: International Harvester v
Carrigan’s Hazeldene Pastoral Co.
Capacity
ð
principal
must have capacity to do the act which the agent performs on the principal’s
behalf.
ð
agent
is not required to have legal capacity.
The nature and extent of an
Agent’s authority
¨
express
grant by B
¨
relationship
between B and A is such that A impliedly has B’s authority
¨
representations
made by B to a third party that A has B’s authority
¨
operation
of law
¨
operation
of statute
¨
ratification
General agency issues:
ð
what
forms of authority are at issue?
ð
check
which of actual express, actual implied, ostensible agency or agency by
ratification are applicable for each relevant legal actor. Ensure that you
understand the differences between them.
ð
how
has the agency relationship involving A been created?
ð
is
there more than one form of agency at issue here?
Look for form of Authority
¨
actual
authority
¨
ostensible
authority
¨
ratification
ð
They
will be hold to have consented if they have agreed to what amounts in law to
such a relationship - even if they don’t recognize it themselves and even if
they profess to disclaim it.
ð
The
consent must have been gien by each of them - the principal and agent.
ð
It
can be expressly given or by implication from their words or conduct.
ð
Primarily
one looks to what the parties said and did at the time of the alleged creation
of the agency (or act or transaction): Garnac Grain v HMF Faure and
Fairclough.
Actual Implied Authority
Subcategories:
¨
incidental
authority
¨
usual
authority
¨
customary
authority
¨
authority
implied from the course of dealing in the circumstances of the case
This type of authority stems from the circumstances of the case and the
conduct of the parties: Equiticorp.
ð
An
agency agreement can be implied when each has conducted himself in relation to
the other that it is reasonable for the other to infer consent to the agency
relationship.
ð
There
are no particular agency laws applicable here - that is semply recognition of
the fact that contracts are not always express and can be inferred by the court
from the circumstances -> the promises are expressed partly or wholly by
conduct rather than by words.
¨
other
two forms consentual
¨
can
exist without consent/authority or where principal has forbidden agent to do
something or agent has exceeded authority
Elements of ostensible
authority or Agency by representation
¨
representation
by words or conduct by the principal (not the agent) to the third party that
the agent acts for him
¨
reliance
by the third party on the representation
¨
alteration
of the third party’s position resulting from such reliance: Rama Corporation v
Proved Tin & General Investments
Ostensible authority:
Reliance can not be claimed where:
¨
it
is an unusual transaction: Rama Corporation.
¨
the
third party knows or had the power to know the truth: Hely Hutchinson
¨
the
articles of association do not allow for delegation of the relevant power on
the particular agent: Northside Developments
¨
a
person with ostensible authority cannot confer ostensible authority on another:
Crabtree Vickers
Freeman Lockyer v Buckhurst Park Properties
usual transaction
can rely on power in articles without knowing of it
Examples:
where principle appoints an agent to a particular position or entrusts
agent with some responsibility
a course of delaings between a third party and a principal through an
agent
where principal stands by mute where someone deals with a third party
apparently on behalf of the principal
Rama Corporation v Proved Tin & General Investments
unusual transaction
cannot rely on power in articles unless aware of it
First Sport Ltd v Barclays Bank
- applied above principles
The elements are:
¨
the
agent whose act is to be ratified must have purported to have acted for the
principal.
¨
at
the time that the act was done, the agent must have had a competent principal.
¨
at
the time of ratification, the principal must be legally capable of doing the
act: Firth v Staines; Trident General Insurance Co Ltd v McNiece Bros Pty
Ltd.
¨
the
principal must be disclosed or identifiable (Trident General Insurance Co
Ltd v McNiece Bros as well as competent to do the act personally: Black
v Smallwood (1966).
¨
the
principal must have full knowledge of all material facts relating to the act to
be ratified: Taylor v Smith.
¨
ratification
must take place within a reasonable time of the agent’s act unless the contract
stipulates another, more specific timeframe: see Life Savers Australasia Ltd
v Frigmobile Pty Ltd.
Time for Ratification:
ð
has
ratification occurred within a reasonable time?
The time for ratification by the principal of the
agent’s act depends on the circumstances of the case. If the particular
contract specifies a timeframe within which ratification must take place the
that timeframe must be observed. If there is not timeframe specified, then
ratification must take place within a reasonable period of time: Life Savers
Australasia v Frigmobile.
NOTE: A limit on ratification appears in the rule that
ratification cannot be made which divests persons not parties to the ratified
contract of their rights or to affect prejudicially those rights where those
rights have vested before the act of purported ratification: A-G v Wilde
ð
will
ratification cause an injustice to the third party?
ð
has
the principal dealt with the third party in a manner suggesting that the
contract has gone off?
Ratification Issues
ð
Who may ratify?
Only person able to ratifiy is the person:
¨
in
whose name the act was purported to be done
¨
which
person must be in existence at the time the act was done
¨
competent
at that time to be the principal of the person doing the act
¨
not
necessarily known, personally or by name, to the third party
¨
Howard
Smith
¨
ratification
between principal and agent only
¨
agent
must disclose at time of contracting that he is acting on behalf of a
principal.
¨
principal
need not be named but must be capable of identification: Kelly Maxstead v
Durrant.
ð
When can a principal ratify?
see above.
ð
What constitutes ratification?
Ratification may take a variety of forms to be effective
at general law:
(1) Express - this requires clear and unequivocal acts:
Petersen v Maloney.
(2) Implied - by conduct (such as a putative principal
commencing legal proceedings on the contract concluded by the agent: Cox v
Isles, Love & Co.
The act of adoption must be accompanied by full nowledge
of all the essential facts: Taylor v Smith.
The assignment by the principal of the benefit of a
contract entered into by an agent without authority is a ratification of the
contract: Thompson v Hickman.
It is also necessary for the entirety of the third party
transaction to be ratified - it is not possible to adopt in part and disclaim
in part: Howard Smith.
When courts will not invoke
the doctrine of ratification:
¨
ratification
occurs after performance of the contract
¨
where
there is a time stipulation in which the contract is to be accepted
¨
where
there has been a breach or loss under the contract before ratification
¨
where
ratification occurs after withdrawal of the offer
¨
will
not be effective when it will unfairly prejudice a third party
What happens if:
A makes offer to B
|
Unauthorized acceptance by B
|
A withdraws offer
|
B’s principal ratifies
Bolton Partners v Lambert Facts - Doctrine in pure form contract would be fine from an
unauthorized acceptance. Held - Ratification was effective not withstanding
that the third party had given notice to the principle of his withdrawal from
it. Ratification dated back to the time of the acceptance rendering the
withdrawal of the offer inoperative. A was ordered to specifically perform the
contract.
Concerned an action for specific performance of a
contract to take a lease. The defendant lessee wrote the plaintiff lessor
offering to take a lease on 8.12.1886. On 13.12.1886 a director of the
plaintiff lessor communicated by letter an acceptance of the earlier offer to
lease. On 13.1.1887 the defendant lessee withdrew the offer which had been made
earlier. At the time the offer to lease had been accepted by the lessor, the
director of the lessor who communicated the acceptance did not if fact have
authority to bind the company be accepting the earlier offer. On 28.1.1887 the
Board of Directors ratified the contract of leases. The court ruled: “The rule
is to ratification by a principal of acts done by an assumed agent is that the
ratification is thrown back to the date of the act done, and that the agent is
put in the same position as if he had had authority to do the act at the time the
act was done by him. [This is sometimes known as the doctrine of relation
back.]”
HOWEVER according to Isaacs J (in dissent) in Davison’s
case Bolton Partners v Lambeth was wrongly decided and should not be followed
in Australia.
ð
an
agent commonly owes duties of a fiduciary nature to his principal: Hospital
Products v US Surgical Corp
ð
principal
and agent duties will arise when you have got either actual express authority
or actual implied authority - won’t necessary arise in the case of ostensible
authority.
ð
can
be expressly stated in written agency document i.e. Power of Attorney.
ð
can
be wide and varied.
ð
common
effect is that the relationship is fiduciary in nature.
Principal/Agent relationship
not necessarily fiduciary
ð
consider
whether the fiduciary undertakes . . . to act for . . . another person in the
exercise of a power or discretion which will affect the interests of that other
person in a legal or practical sense. The relationship . . . is therefore one
which give the fiduciary a special opportunity to exercise the power or
discretion to the detriment of that other person who is accordingly vulnerable
to abuse by the fiduciary of his position: Hospital Products.
Implied duties to:
obey principal’s instructions - primary legal duty of agent
exercise due care and skill
act personally
account
act in good faith
pertains to fiduciary part of relationship
to avoid conflicts of interest
not to profit from position of agent
not to devulge confidential information.
Duty
to obey principal’s instructions
ð
primary
legal duty of the agent - to carry out on the principal’s behalf the business
or tasks which the agent has agreed to perform: Heytesbury v Kelly; WH Coomb
v Brown
Turbin v Bilton - 1843 - An agent was instructed to insure a ship but
failed to do so. Agent was held liable to the principal when the ship was lost
while uninsured. The basis of the agent’s liability to the principal was for
failing to carry out the principal’s instructions.
A derivation of that duty to follow instructions is the
duty not to exceed these instructions: Waugh v Clifford & Sons.
Duty
to exercise due care and skill
ð
is
a requirement that pereates all business
ð
the
standard that applies in respect to agency is that which a reasonable person
would expect an agent of the type in question to exercise in the circumstances.
ð
that
enables the court to take into account factors relating to the agent’s trade or
profession and also perhaps whether the agent is acting for reward or not.
An agent must act personally when contracted by the
principle for performance of services on the principles behalf.
Reason for rule: lies in the need to uphold the personal
qualities of the agent which influenced the agent’s appointment in the first
place.
The qualifications to this rule (rule known as the Rule
against Delegation) are:
1. a power may be delegated when there is express or
implied authority to delegate i.e. professional or trade usage.
there are some statutory powers of delegation i.e. s54
Trusts Act 1973 -> a case of express authority to delegate
2. Authority to delegate can be implied for purely
ministerial or administrative acts such as the signing of a letter or the
giving of a notice if no personal confidence is placed in the agent by the
principal or if no personal skill of the agent is required: De Bussche v
Alt.
There is a difference between delegating a task and
delegating responsibility.
1. Proper accounts must be maintained by the agent.
2. If the agent receives goods or money from a third
party on behalf of the principal (or if the agent receives money from the
principal for transactions with a third party he (the agent) must keep the
money separate or the relevant property separate from their own: Foley v
Hill.
The next three duties arise from the fiduciary nature of
the relationship between principle and agent.
Duty
to avoid conflicts of interest and the Duty not to profit from the duty as
agent - the Self Dealing Rule.
An agent must not put himself to a position where his
personal interests conflict with those of the principal’s.
i.e. an agent can’t buy property that he was instructed
to sell.
Heywood v Roadknight - An agent ends up buying land that is for sale. He
buys it for 29 Pounds/acre and sells it in a year for 90 Pounds/acre. The agent
was held to be in breach of a fiduciary duty placed upon him by his role in the
sale. He was liable to account for the profit that he had made. In this case
the agent because of the fiduciary relationship had knowledge of the
principal’s difficulties in selling the property and the knowledge of the true
value of the property because he had been party to all the confidences that the
plaintiff had given.
Although this duty is applied very strictly - they are
instances when it can be relaxed:
if the agent makes prior disclosure of the exact nature
and extent of the agent’s interest in the transaction and the principal
consents to the transaction: Pennisula & Oriental Steam Navigation Co v
Johnston.
Duty
of the Agent not to accept bribes or secret commissions/profit
ð
any
benefit received by an agent over what the agent is entitled to receive from
the principal by way of remuneration will be regarded as a secret profit if it
is received without the informed consent of the principal: Denstate Pty Ltd
v Kennedy (SC of NSW 1989 - unreported).
Duty
of an agent not to devulge confidential information
ð
the
duty is not to misuse confidential information
ð
confidential
information is information concerning the principal entrusted to the agent for
the use of the principal.
Heytesbury v Kelly The breachs of duty that had been argued to have
occured were as listed. The breached duties of failure to act honestly and
failure to make full disclosure and the conflict of interest duty were all
relevant to the fact that K had been promised a sizeable commission as a basis
for entering into the transaction which he failed to disclose to either H or
Janet. He was also held to breach the duty to act with due care and skill and
to comply with instructions on the basis that he had been told not to settle
the sale other than receipt of cleared funds or a bank cheque. He was also told
not to permit the physical transfer of the necklace until the purchase price
had been paid.
Principals’ Duties and
Agents’ Rights
An agent has 4 main rights against a principal:
ð
is
different from the right to indemnify.
ð
The
right to remuneration compensates an agent for the value of services expended
in performing the agency.
ð
The
right to idemnity compensates the agent for costs and liabilities incurred to
third parties.
ð
An
agent is entitled to be remunerated as an express or implied term of the agency
agreement.
ð
The
courts will look to the circumstances of the case in order to determine whether
the implied right exists: Way v Latilla.
ð
If
you are a friend of the principal and you are doing someone a favour the right
to remuneration will be more difficult to imply than if you were a professional
performing a particular task.
ð
The
principal is only obliged to pay the agent if the agent complies with the terms
of the agency agreement and when the agent has actually earned the payment.
ð
This
can be a point of contention as to when an agent’s right to remuneration arose
- it comes up frequently with real estate agents suing for their commission.
Luxor (Eastborne) v Cooper - An agent appointed in respect to the sale of a cinema
- the agent introduced a purchaser who offered the asking price but no contract
was ever made because the principal decided against proceeding with the sale. On
agreement commission was payable on completion of the sale which had not
occurred. The agent was in effect asking the court for a declaration that a
term be implied into the contract to the effect that the principle could not
refuse to go ahead with the sale. It was held that no such term could be
implied and as a result no commission was payable nor was the principal liable
in damages for breach of contract.
ð
In
respect to the agent’s right to idemnity, an agent is entitled to be idemnified
against liabilities that they may have occurred on behalf of the principal or
to recover any amounts paid.
ð
The
agent must have lawfully occurred the loss or liability in question.
ð
If
the agent has acted outside the scope of his authority or if the agent suffered
loss through his own negligence or fault then he will not be entitled to
indemnify: NZ Farmers Cooperative Distributing Co v National Mortgage &
Agency Co of NZ.
ð
refers
to the agent’s right where there is an outstanding claim to either indemnify or
remuneration.
ð
the
agent’s right to exercise a lien by retaining the principal’s goods which are
in the agent’s lawful possession.
ð
different
types of lien:
1. general lien - where an agent can retain goods of the
principal even though the principal does not owe the agent anything in respect
to those specific goods i.e. documents, keys etc kept in relation to money owed
on other matters.
Courts don’t usually favour this type of lien.
2. a particular lien - operates by permitting the agent
to retain a particular item until the principal pays the agent what is owing on
it: Re Clune.
4. Right of stoppage in transitu
ð
Similarly
to an unpaid seller if an agent has paid a third party for goods but has not
been paid by the principal then the agent can exercise the right to stop the
goods in transit until the principal pays for them.
Agency and Third Parties
ð agent acting for a disclosed and named principal
ð liability of agency for misrepresentation
ð agent acting for disclosed but unnamed principal
ð agent lacks authority although claiming a principal
exists.
ð agent acting for an undisclosed principal.
Agency acting for a
disclosed and named principal
ð
A disclosed
principal is one whose existence has been revealed to the third party
although the identity of the principal may not be known.
ð
An
undisclosed principal is the opposite - that is where the third party
believes the agent is contracting personally.
ð
The
general position in relation to a disclosed principal is that where the agent
has made a contract with a third party the principal can sue or be sued on the
contract. In contrast with the case of the undisclosed principal who will only
be bound if the contract was in the agent’s actual authority.
ð
An
agent must make clear that he/she is acting as an agent preferably by adding
the word agent after their signature.
Liability of agents for
misrepresentation
ð
An
agent may be liable to a third party for a wrong in tort not withstanding that
the agent in not liable to a third party in contract.
ð
Although
the agent will normally drop out of the picture once the contract is settled
they will however be liable for negligent misrepresentation made prior to entry
into the contract by the principal and the third party and for breach of s38
FTA 1998 (Q) - misleading and deceptive conduct; Roots v Oentory.
Agent acting for disclosed
but unnamed principal
ð
different
from first senario because although existence of the principal is disclosed the
name of the principal is not given.
ð
usually
makes no difference whether principal is named or not when you are trying to
determine the rights or liabilities of a principal under a contract. What is
important is whether the existence of the principal is disclosed.
ð
there
are some cases where it has been suggested that where the principal is not
named the courts will more ready assume that the agent was contracting
personally: Teheran-Europe v ST Belton (Tractors).
ð
normally
the mere fact that the agent has not identified the principal will not make the
agent personally liable: Marsh & McLennan v Stanyers Transport.
Agent lacks authority
although claiming a principal exists.
ð
this
is a cause of action that can be taken by a third party against an agent where
none of the forms of authority are said to exist. So the third party can still
sue the agent for breach of warranty
of authority.
ð
basis
for the cause of action against the agent by the third party is that the agent
has misrepresented authority: Collen v Wright. If the agent has not
contracted personally but purports to contract as agent but it is found that
there is no authority between the principal and the agent then the agent may be
liable to the third party of the basis that they misrepresented that they had
authority.
ð
the
agent’s liability for breach of warranty is strict and it doesn’t depend on the
state of mind of the agent. So it doesn’t matter that the agent honestly
thought that he or she was authorized.
ð
if
you have a case of ostensible authority then there won’t be generally any need
to sue an agent for breach of warranty of authority - even though the third
party will have suffered no loss in that situation as the principal is still
bound on the basis of ostensible authority.
ð
where
the agent is fraudulent - they knew they weren’t authorized but claimed to be
then the agent may also be liable in deceit: Polehill v Walter; Gould v
Vaggelas.
ð
if
the agent is negligent there may also be a case of negligence to be made out: Hedley
Bryne v Heller.
Elements necessary for
breach of warranty
ð agent was purporting to act as an agent
ð the agent must lack authority
ð the agent must not have expressed doubts about his or
her authority or warned the third party of them
ð the third party must rely on the representation
ð the third party must have suffered damage.
Where the agent acts for the
undisclosed principal - the Doctrine of the undisclosed principal
ð
in
the situation where not even the existence of the principal is disclosed at the
time of entering such a contract the third party will have believed that the
agent is acting personally and that the agent is therefore personally liable
and is entitled to sue on the contract.
ð
this
is subject to the principal’s right to intervene on that contract but nothing
must prejudice the right of the third party to sue the agent should the third
party wish to do so.
ð
once
the third party discovers the existence of the principal then the third party
may sue if the case involves issues between the third party and the principal,
the third party may sue either the principal or agent or both in the
alternative.
ð
if
both the principal and the agent are found liable the third party must elect to
take judgment against either the principal and the agent: Kendall v Hamilton.
ð
what
is a binding election is a question of fact - it seems you don’t make a binding
election until you actually make a recovery from one or another.
ð
this doctrine will only apply if the agent was acting
with actual authority.
ð
ostensible
authority cannot act when principal is undisclosed because it runs counter to
the nature of the authority - there will not have been any representation by
the principal and no reliance on the misrepresentation.
ð
can’t
operate in relation to ratification either because the agent has to disclose
the existence of the principal when they enter into the contract that is eventually
ratified by the principal.
ð
an
undisclosed principal may not be able to sue or be sued if intervention is
inconsistent with the terms of the contract - express or implied.
ð
this
is a relicit of the parole evidence rule and the courts will be slow to regard
the terms of a contract excluding the intervention of an undisclosed principal
unless it was clearly intended to make the agent the sole contracting party.
ð
the
principal may not be able to intervene when the identity of the person with
whom the third party is contracting is material to the third party - then you
can’t hid behind the agent.
Breach of warranty of
authority:
¨
This
is a fallback position for TP (ie, if TP does not succeed against P, its
preferred target).
¨
Collen
v Wright is analysed in Yonge v Toynbee [1910] 1 KB 215.
¨
the
state of mind of the supposed agent is irrelevant, as is the distinction
whether the agency never or that it existed but terminated.
¨
the
liability of the agent stems from the implied promise that the authority which
the agent claims to have exists;
¨
the
remedy for the third party is damages;
¨
the
agent can never claim an indemnity from the principal (because the principal is
not really the principal of the agent and under a correlative duty to indemnify
the agent).
Termination of the Agency
Relationship
ð
can be terminated two main ways:
1. though the conscious act of the parties; and
2. by operation of law.
ð
a
consentual arrangement where the parties simply agree to the voluntory
discharge of their relationship.
ð
where
the principal revocates the authority of the agent
ð
where
the agent renounces their position.
ð
operation
of law: death of either; insanity; bankrupcy of either; expiration of agreed
period of agency
SAMPLE ANSWERS
Issues:
The issues are:
ð
is
P an undisclosed principal?
ð
did
A contract personally or is he an agent of P?
ð
can
the third party sue both P and A?
ð
What
is the effect of P’s change of heart?
Issue No 1:
Rule: the elements of the doctrine of the undisclosed
principal; see Fisher [16.49].
Cases: The Teheran-Europe Case; Maynegrain v Compafina
Bank; Siu Yin Kwan v Eastern Insurance Co
Application:
ð
the
scope of A’s authority;
ð
does
the contract exclude P’s intervention?;
ð
do
any exceptions to the doctrine apply? (see Fisher [16.50]-[16.53]);
Exceptions to the doctrine:
(1) the terms of the contract; and
ð
an
undisclosed principal may not be able to sue or be sued if intervention is
inconsistent with the terms of the contract - express or implied.
ð
this
is a relicit of the parole evidence rule and the courts will be slow to regard
the terms of a contract excluding the intervention of an undisclosed principal
unless it was clearly intended to make the agent the sole contracting party.
(2) where the personality of the agent and the third
party are vital to the contract of transaction.
ð
the
principal may not be able to intervene when the identity of the person with
whom the third party is contracting is material to the third party - then you
can’t hid behind the agent: Dyster v Randall & Sons.
ð
contracts
for personal service: Carberry v Gardiner
ð
where
the identity of the agent is vital to the transaction with the third party such
that the third party is relying on the personal skill or creditworthiness or
solvency of the agent: Greer v Downs Supplies Co.
ð
what
of the fact that A did not reveal P’s existence.
Conclusion: probably P is not an undisclosed principal
because A did not contract in such a way as to exclude P’s intervention.
Issue No 2:
Rule: decide whether A is an agent in light of the
outcome that P is an undisclosed principal; if so, then P is the true principal
and A need not be sued by the third party (who is at liberty to do so).
Application: on the hypothesis that P is the principal,
A is not primarily liable to the third party, but if sued, can claim an
indemnity from the principal (P). On the hypothesis that P is not the
principal, the third party cannot sue P qua principal.
Conclusion: on the first hypothesis, P is the principal
and liable to the third party for the price of the goods. On the second hypothesis,
P is not a principal and P is not liable to the third party for the price of
the goods.
Issue No 3:
Rule: the third party can sue both the principal and the
agent: Siu Yin Kwan v Eastern Insurance Co Ltd [1994] 1 All ER 213 at 220.
Application: the third party can sue both P and A.
Conclusion: both P and A are liable to the third party
for the price of the goods. However, the third party can only get judgment
against P or A as it must elect between them.
Issue No 4:
What is the effect of A’s change of heart?
A acted without authority initially.
P later adopted the acts of A.
Ratification and the undisclosed principal doctrine are
mutually exclusive (Keighley Maxstead v Durant).
P may be estopped from denying as between P and A that
she adopted A’s unauthorised act. This is not an estoppel that the third party
can invoke because it was not made to it. It applies as between P and A to
prevent P from resiling from indemnifying A for the purchase of the computers.
It may amount to a ratification under alternative
scenarios (i) and (ii) because the principal is identifiable (see (i)) or
identified (see (ii)).
I.
INTENTION: animus - [mental element]
II.
CONTROL;
corpus – [physical element]
·
ð
The
physical and mental elements must coincide if there is to be possession in law:
Button v Cooper.
ð
Sometimes
statute law intervenes and allocates possession to a person by operation of
law.
ð
The
necessary combination of the two elements depends on the facts of each case.
ð
The
mental element may be inferred from knowledge of control or custody of goods.
ð
The
mental element relates to an attitude of mind on the part of the possessor in
denying access to others.
ð
The
mental element is ambulatory (or shifting).
ð
Generally
intention to control ripens into intention to own (the animus domini).
ð
The
physical element (control) requires the possessor to exercise some degree of
power over the goods.
ð
Control
is used to determine the content of the physical element.
ð
Control
is directed to the use or enjoyment of the goods unless excluded by force.
ð
Control
can be direct or indirect. Control is direct when it involves physical contact,
and it is indirect when it involves access.
ð
Possession
is exclusive and indivisible.
ð
Possession
can be shared in community
ð
Possession
implies the power to exclude
ð
Possession
can be transferred entire.
ð
Possession
is a root of title.
Possession is nearly the same of title. Often a person
will be able to demonstrate a claim to ownership of goods by proving possession
of them. Example: say a person has bought a valuable watch but lost the
receipt. The watch is stolen from that person’s apartment and that person wants
to make a claim on their insurance using their contents policy - if that person
hasn’t a receipt to prove ownership they have to prove prior possession. So
where you can’t prove ownership you can prove possession.
ð
Possessory
title is good against the whole world except the absolute owner.
Ranks the interest of owner, possessor, and the rest of
the world. Possessory title gives the possessor a special interest.
1. Owner
2. Possessor
3. The rest of the world
1. In the event of a wrongful taking of goods, the
possessor’ s possessory title
prevails over the rights of the wrongdoer
2. As between the owner and the possessor, the owner has
a superior right
to possess, and the possessory title of the possessor
must yield (absent a
supervening legal relationship such as bailment).
The owner, who does not have possession, has a right to
possession.
The possessory title of the possessor in subordinate to
the possessory right of the owner. NOTE THIS IS PRESUMING THE ABSENCE OF A
SUPERVENING LEGAL RELATIONSHIP SUCH AS BAILMENT.
If the bailment is for a term (a fixed period of time)
then the owner cannot get the goods but before the bailment expires.
If the bailment is a bailment at will (temporary), the
bailee must, if the bailor askes for the goods back, deliver them up. If the
bailee doesn’t deliver the goods up, the bailee is liable to be sued for an action
in detinue or conversion (depending on what the bailee has done).
3. As between the true owner and the wrongdoer, the
superior right of the owner
prevails over the wrongdoer.
Possession is proved by acts that are consistent with possession
and by
discounting those acts that are inconsistent with any
more remote
association: Button v Cooper.
In Button v Cooper, someone was charged with being in
possession of goods thought to be stolen. The revelant goods in question were
found in the accused bedroom cupboard. The defence he mounted to the charge of
being in possession of stolen property was although they were found in his room
they weren’t in fact on his person as he wasn’t wearing the stolen articles of
clothing. He was convicted. It was appealed but the court said the conviction
was proper.
What the courts do is balance up all the circumstances -
they talked about the accused being in possession because although the stolen
items weren’t being carried by the accused when he was arrested they were in
his house, in his bedroom, and stored in a place where only he had access to.
So if we go back to those fundamental concepts of
intention and control that are critical to possession - although his control
was weak in the sense that he didn’t have immediate control or custody of the
articles, the fact that they were stored in an area of his house that he had
generally only had access to was sufficient to justify and sustain a
conviction. So that is why the courts say that we will look at those
circumstances that are consistent with possession, we will explain away or
discount those acts that are not consistent with the idea and then we basically
reach a conclusion as to whether or not a given person is or is not in
possession of goods.
The courts evaluate all the circumstances of the case -
they look at the legal relationships between either the owner or possessor -
and then they come to the conclusion as to whether or not a given individual is
or isn’t in possession of the articles but they only do that when they take
into account the incidence of intention and control.
THE SUBJECT MATTER OF
POSSESSION
Choses in possession can be possessed.
You can’t possess a chose in action. The test for
differentiating choose in possession from chose in action hinges on whether the
thing in question can be reduced to physical possession.
Goods within goods can also be possessed.
i.e. a tool box - eve though when the lid in shut on the
tool box the possessor of the tool box would not say “I possess a spanner, a
hammer . . . “ - the fact is that by possessing the tool box as an entire
entity you are taken in law asbeing in possession of each individual tool
within it.
Articles within receptiacles are possessed if the person
who possesses the larger receptiacle has both intention and control.
Personal use assets are usually possessed by personal
contact.
i.e. watches, clothes.
Possession of goods can take place even if they are in a
separate building.
Possession of goods can occur constructively.
Custody is separated from legal possession i.e. QUT -
books in the library -the librarian through cotnrolling the library controls
the books on behalf of QUT. In terms of constructive possession, QUT possesses
constructively through its employees and agents.
QUT as a legal entity possesses its property
constructively through its entire body of employees.
Materialised choses in action can also be possessed.
There are some chose in action such as bills of
exchange, promissory notes, and share certicates that are valuable because of
the value of the piece of paper - the intrisic thing that records the amount of
the bill of exchange or the cheque or a share certificate - what is valuable
about these things are the things they represent - if you are a BHP shareholder
and you have a million BHP shares and you have in your hand a share certificate
for a million BHP shares that is an example of a materialized chose in action -
the relationship between a shareholder and a company is expressed to be that
the shareholder has an interest in the capital of the company in the form of
shares or share capital. What of course in valuable, is the relationship
between the shareholder and the company. The chose in action has materialized
because it appears in the form of a share certificate which is a material
embodiment of shareholder’s rights. You buy and sell shares by buying and
selling the share certificate. So in that sense when we say a materialized
chose in action can be possessed we are talking about the intangible claims
which appear in basically paper form. Electronic shares are not materialized
chose in action.
THE DEGREES OF POSSESSION
There are 2 schemes to analyse the degrees of
possession.
The broader, less detailed scheme divides possession
into actual and constructive
possession.
The more detailed scheme is the one that Pollock and
Wright developed.
The Pollock and Wright scheme
1. Custody.
Lowest degree of possession. Defined as a physical
holding, a detention, an occupational control of goods which falls short of
possession in law.
Meaing of custody depends on its context. Sometimes
statutes use the phrase custody - if defined that definition is used - but if
not go to common law where the meaning is a physical detention: FCT v ANZ
Bank - the primary meaning of custody is physical control.
2. Actual (or de facto) possession.
3. Legal possession.
4. Lawful possession.
5. Constructive possession.
6. The right to possession.
CUSTODY
Custody: a physical holding, detention, occupation or control of
goods which falls
short of possession in law.
The meaning of “custody” depends on its context.
“Possession, custody and control”.
The employee has custody in the sense of physical
control.
Look for a supervening legal relationship to decide if
the putative occupier has
possession in law.
ACTUAL POSSESSION
Actual possession takes place when the possessor of
goods has the use and
occupation of goods of which the subject matter of the
possessory relationship is
capable: Gray v OTB (Official Trustee of Bankrupcy)
(1991) 29 FCR 166 at 171.
This means that with actual possession someone is more
than a mere custodian. They are in fact allowed to use the articles in question
for lawful proper purposes.
Actual possession is not the same as possession in law.
Actual possession allows the possessor to exclude others
and also connotes the
state of being in effective control.
Actual possession is not always the same as custody,
although the two coincide
often in practice.
Physical custody and actual possession can be separated
in practice also.
Actual possession is not concerned with the lawfulness
or rightfulness of ossession.
LEGAL POSSESSION
Is the state of being in possession in the contemplation
of the law: Gray.
Note 2 presumptions:
1. possession in fact (actual possession) is prima facie
evidence of possession in law - presumption but can be rebutted - check for
supervening legal relationship;
2. possession in fact imports possession in law, so long
as there if the manifest
intent of sole and exclusive dominion.
Can be separated from custody and actual possession.
Does not depend upon (but can co-exist with) detention
or lawful or rightful
possession.
LAWFUL POSSESSION
Denotes rightful legal possession.
Is one “degree” above legal possession -it refers to the
rightful quality of
possession by the possessor.
May coincide with legal possession (and doesn’ t if the
rightful possessor is out of
possession).
Look for some dealing in goods in order to determine
whether possession is rightful.
Is the basis on which to vindicate claims for an
invasion of possession.
CONSTRUCTIVE POSSESSION
Is the foil to actual possession,
Occurs when the right to possess or to have legal
possession is separated from
actual possession.
So look for the separation between legal possession and
actual possession - the person with constructive possession has the right to
get the possession back.
See if there is a transaction effecting the ownership of
the revelant article.
Covers the relationship between a person and goods,
which not in the person’ s
actual possession, are held by another from whom
possession may be demanded.
Look for an underlying dealing affecting the right to
possession (especially a
dealing affecting property).
Requires the exercise of control over goods: Compafina
Examples of constructive possession:
1. sale of goods coupled with a bailment;
2. sale of goods in the hands of a third party custodian
by seller to buyer;
custodian attorns to
the incoming owner/buyer.
The person having actual possession usually has an
inferior interest in the
goods to that of the constructive possessor.
Requires the identification of the goods (especially
where they are in bulk).
Is the highest possessory interest a person can have in
goods.
Claimant is usually out of possession.
Endures against the whole world.
Is an incorporeal
interest in goods.
It follows ownership.
Is summarised as follows:
1. it includes the right to physical possession.
2. it can exist apart from both legal and lawful
possession.
3. it is a normal incident of ownership and is sometimes
called “property”.
4. is transmissible or assignable by a dealing
(excepting delivery).
5. is not always exclusive (sub-bailment).
6. can co-exist with legal possession when the right to
possess is vested in the
person having custody.
See Gray (1991) 29 FCR 166 at 171-2.
THE ACQUISITION AND LOSS OF
POSSESSION
THE CORRELATIVE OF ACQUIRING AND DIVISTING POSSESSION
Divesting possession
Making Delivery
Abandonment - an intentional transaction - is voluntary
- not lost
Loss
Acquiring possession
Taking Delivery
Original Acquisition - is the flip side of abandonment
Finding
Delivery is the voluntary transfer of possession,
whether actual or
constructive, of goods from one person to another.
There are 2 forms of delivery:
· actual (or manual);
· constructive.
Delivery requires 2 legal subjects as well as a legal
object.
CONSTRUCTIVE DELIVERY
Takes place by an alteration in control over goods
without any any change in
physical possession: Gamer.
Þ
look
for a transaction that effects ownership
5 forms of constructive delivery exist:
1. Delivery by attornment;
2. Symbolic delivery;
3. Delivery of documents of title;
4. Delivery to a carrier;
5. Bailee becomes owner.
Constructive delivery involves some consensual dealing
in the right to possession which is transferred by agreement: Mills v
Charlesworth . This means that
the person who is not in actual possession of the article can axquire the
ownership by agreement because a Sale of Goods Contract is the paradigm example
of a voluntary transaction effecting personal property. When something is
transferred by agreement the parties usually intent to transfer both possession
and ownership but if the bailee is already in possession of the goods then
there is no shift of actual possession that remains insitu - what actually
changes is the right to control.
Possession of goods can be acquired and lost.
The acquisition of possession may be original or derivative.
It is original in
the case of ownerless things (res nullius
and res derelictae).
It is derivative when
the transfer of possession takes place by the process of
delivery.
Possession (as well as ownership) can also be abandoned:
Re Jigrose.This depends on intention.
The finding cases involve a contest between the
possessory interests calimed
by an occupier of land and the finder of goods on that
land.
The underlying legal principles are:
1. the finder has a possessory
title to the goods;
2. the occupier of land has, by law, possession of
everything which is attached to or under the land and in the absence of a
better title elsewhere, the right to possess the goods also.
The first principle covers the gap left by the second,
namely the situation of goods
which are on but
not attached to or under the land.
The policy of the law in the finding cases is to
facilitate the reunion of the the lost
goods with their owner.
This policy is likely to be met if the law gives primacy
to the interests of the owner over those of the finder.
To use the Finding and Occupier Rules derived from Parker:
1. identify the party and the kind of interest which
that party claims;
2. identify any supervening legal relationship which
affects a party;
i.e. employer/employee
3. apply the appropriate Finding or Occupier Rule to the
situation of the party concerned;
4. see whether (if at all) the true owner intervenes;
5. look for the timing as to when (if at all) the
occupier manifests an intention to control entry onto the land;
Is the article found on top of the land or underneath
it?
If the goods are found on top of the land then according
to Parker’s case for the land occupier to have a better claim than the finder
the occupier has to have a manifest intention to control the land before the
finder fines.
If the article is buried under the land the law automatically
imputies possession to the occupier.
This is a question of fact.
6. look for these factors when advising the finder:
· is the finder on the land by consent or dishonestly or
as a trespasser?
· has the finder acted honestly since the find?
· has the finder occupied the goods?
· is there a contractual stipulation affecting the right
of the finder to remain in possession of the goods?
7. identify exactly where
and how the goods are situated
when found.
8. note that Occupier Rule 1 dovetails very closely with
Finding Rules 1, 2 and 3.
9. Most finding disputes resolve themselves on the facts not the law;
intention and control are
not critical to Occupier Rule 1, but they are for Occupier
Rule 2.
Ownership is the most significant interest that can
exist in relation to personalty.
What is owned is what belongs to a person: Myerson v Collard.
Ownership is the intangible tie which unites a legal
subject (person) with a legal object so that the subject has an absolute
interest in the object.
Only legal persons can own property: Glebe Admin
Board.
Ownership is incorporeal
even if the thing owned is a material object (such as goods or land).
Ownership has 2 dimensions:
1. internal: the
ability to use ; enjoy, etc.
2. external: the
capacity to ward off encroachments: Marfani.
Ownership tends to be defined in terms of what rights of
ownership entail - user,
alienation, vindication, etc: Knapp.
Ownership of personalty is absolute not divisible into
estates: Knapp.
The significance of ownership is that all other legal
persons are under a duty to
respect an owner’ s rights in relation to what is owned:
Marfani.
JJJJJJJJJJJ
Proof of ownership normally consists of proof of
possession: Gatward v Alley.
Proof of ownership can also be made by tracing it back
to some dealing under
which the putative owner acquired both ownership and
possession of the goods:
Gatward v Alley.
Sometimes, a title registration system exists for some
kinds of goods, ie ships
under the Shipping
Registration Act 1981 (Cth).
The Acquisition of Ownership
The acquisition of ownership is either original or derivative. It is original when
title does not derive from the title of another person.
Forms of alienation of ownership include:
· dealings - such as sale, exchange, barter, gift, deed;
· operation of law - bona
vacantia;
· reduction into occupation of ownerless things- res nullius;
· abandonment of goods;
· capture by enemy forces;
· consumption: see Vincent v SBNSW.
Some of these are original and some are derivative.
Forms of Original Ownership
Forms of original ownership include:
· occupancy following abandonment or finding;
· occupatio
required the taking into
possession coupled with the intention to appropriate (NB conjunction of control
and intention): Re Jigrose;
· creation of new things - copyright and patents;
Derivative ownership divides into:
ð
consensual transactions: dealings such as sale, gift, barter, assignment;
ð
involuntary transactions: accession, commingling, specification, destruction,
and dealings or transfers by operation of law.
Derivative consensual ownership transactions:
ð
1.
depend on the intention of the owner coupled with consent: Lewis v Andrews
& Rowley Pty Ltd (this rule cannot apply to res nullius), as well as the consent and
intention of the transferee: Quality Tyres
ð
2.
depend on the rules of recognition developed by the legal system for the
validity of such dealings: Quality Tyres.
Involuntary Ownership
Dealings
The main forms include:
· accession;
· commingling;
· specification;
· other transfers by operation of law (insolvency and
bankruptcy);
Accession derives from the Roman law doctrine of accessio. It refers to the
increase to real or personal property as a result of any
natural or artificial process. It covers ownership in particular.
Accession involves 2 material objects -the principal and
the accessory
1. is grounded in the right of occupancy of the accessory by the owner of
the principal: Lewis.
2. involves the principal and the accessory being owned by 2 different
persons;
3. involves a transfer of property from the principal to the accessory.
¨
is
a doctrine of both real and personal property law which deals with the loss of
ownership by one person of personal property and, the acquisition of the
divested property by another.
¨
no
Australian court has ever given a succinct statement of what the doctrine is
¨
Jones
v De Marchant - the right to all
which one’s own property produces, whether that property be moveable or
immoveable and the right to that which is united to it by accessory, either
naturally or artifically.
¨
accession
is a form of transfer of personalty from one existing owner to another: McKeown
v Cavalier Yachts.
The Test for Accession
The test for accession comes from Rendell:
ð
The
accessory continues to belong to its owner unless as a matter of practical
necessity, the accessory cannot be identified; if identifiable, the accessory
must be incorporated into the principal to such an extent that it cannot be
detached.
ð
The
intention of the owner of the accessory cannot retard the transfer of property
in the case of impracticability.
ð
Accession
is an objective test and it overrides the subjective intention of the owner of
the accessory not to transfer property to the principal.
The Effects of Accession
The effects of accession are three-fold:
1. the accessory becomes part of the principal: Lewis;
McKeown.
2. the title of the owner of the accessory is
extinguished on accession: Lewis;
Rendell;
3. it by-passes the nemo
dat rule: McKeown.
As to (3): if the accessory is merged into the principal
or consumed in the course of manufacturing the principal, then the property in
the accessory passes by operation of law to the owner of the principal - this
displaces the general law doctrine of nemo dat (that no man can be deprived of
his property, except by his own voluntary act or by operation of law). Justification
for displacement: the combination of the absence of motive on the part of the
innocent holder of the accessory coupled with the irrevocable consumption of or
change of state of th accessory would make it unjust to require that innocent
occupant to return the principal or the manufactured article to the
dispossessed true owner.
Application of Accession
Accession applies where:
1. the accessory cannot be detached without damage or as
a matter of
practical necessity: Rendell; McKeown.
2. the owner consents to the accession: Akron;
3. the owner of the accessory is estopped from
contending that the owner is
entitled to the accessory: Rendell.
Restitution or compensation
resulting from the accession
As a matter of general principle, the court is expected
to make a fair and just allowance to the owner of the accessories to compensate
that owner for the improvements done to the true owner’s article: McKeown v
Cavalier Yachts.
ð
refers
to the mixing together of goods belonging to two or more people in such a way
as to result in common ownership of the resultant mass or bulk.
ð
The
2 forms of commingling are commixtio (solids)
and confusio (liquids or solids
resolving into liquids before solidifying).
ð
There
is no commingling if the mixture can be separated into its constituents and
returned to A and B: Lewis.
ð
The
relationship between commingling and accession is that they are mutually exclusive.
ð
the
tests for both accession and commingling may be moving in the same direction as
the criterion of practical necessity activates the operation of both doctrines:
Lewis.
ð
Where
commingling of goods reults in an inextricable mixture or mass where it is
either impossible to separate the constituent parts or where the mixture is not
practicably capable of being separated then the separate property of each
contributor is merged and the allocation of property in the new mass is
determined by applying rules as detailed below:
1. If the separate goods belonging to A and B are
commingled then:
(a) if the commingling is consensual, A and B own the
goods as owners-in-common in equal shares if it is not possible or practical to
determine their respective contributions: Buckley v Gross.
(b) if the commingling is consensual and it is possible
to determine the respective contributions of A and B to the mass, then A and B
own the mass as owners-in-common according to the relative ratio of their
contributions to the mass: Coleman v Harvey.
2. If separate goods belonging to A and B are commingled
by accident or without consent, then:
(a) if the determination of the respective proportions
for A and B can be made, then A and B hold the resultant mass as
owners-in-common according to the relative ratio of their contributions to the
mass: Indian Oil Corp.
(b) if it is not possible to determine how much of or
the maximum amount of the innocent party’s goods into the common mass, then
that entire mass belongs to the innocent party: Indian Oil Corp.
3. If the separate goods belonging to A and B are
commingled by consent, and they can be separated as a matter of practical
necessity, then there is no commingling: Lewis.
4. If separate goods belonging to A and B are commingled
by consent than A and B can agree on the amount of their respective shares in
the common mass: The Drege ‘Willemstead’.
5. If separate goods belonging to A and B are commingled
by consent, then it is open for A and B to agree that one of them will obtain
entire property in the common mass to the exclusion of the other, so long as
the evidence is consistent with an intention to part with ownership altogether:
Coleman v Harvey.
Specification
ð
Specification
is the process under which raw material or other input is altered by the
application of some work or some mechanical or chemical process to produce an
output of a different identity or species from the input or inputs.
ð
Carey
MIller has defined specification as the “unauthorized utilization of the
property of another, producing a thing, irreducible to its constitutents but
sufficiently distinct in character to justify acquisition by the maker,
regardless of his state of mind.”
ð
Under
Scots law, the test for specification is whether the manufactured article can
be reduced to its constituents. If so, then the parts belong to their owners
and the parts may be restored to their owners. If not, then the entire product
belongs to the operator and the dispossessed owner is entitled to the value of
the inputs: IBC case.
ð
The
operator must act in good faith: McDonald. If not the operator does not acquire good title to the
manufactured article.
ð
the
true owner of the constituent elements of the article is entitled to trace the
article into whoever’s hands it may come into: McDonald v Provan.
ð
the
owner of the constituent elements and the operator may reach an agreement about
their respective interests in the manufactured article, and the courts will
respect and enforce the agreement: Wylie and Lochhead.
ð
the
relationship between specification and accession is that each doctrine deals
with the grounds on which the union of goods belonging to two or more people
will resul in a transfer of property to one or the other (or both). The
coverage of each doctrine is mutually exclusive.
ð
specification
usually involves a change of physical or chemical state of the input so that it
is impracticable to reverse the process. This means that the impracticability
test underpinning accession has no role to play in determining ownership
allocation in a case of specification.
ð
commingling
does not produce a different kind of species to the inputs (but if it does it is
really a case of specification).
An owner’ s property in goods may be lost if the goods
are destroyed or consumed:
Vincent v SBNSW.
Property may be lost or transferred by operation of law:
· death (testate or intestate succession);
· bankruptcy and insolvency;
· compulsory acquisition.
An owner of personal property may pursue a remedy for
the conversion or wrongful detention fo his goods by another person - HOWEVER
this entitlement may be statute barred by virtue of s12(1) of the Limitations
of Actions Act 1974 (Qld) - an action must be brought within 6 years from the
accrual of the cause of action.
The definition in Simpson v Gowers was approved in Keene v Carter :
Abandonment occurs when
there is a giving up, a total desertion, an absolute relinquishment of private
goods by a former owner. It may arise when the owner with the specific intent
of desertion and relinquishment casts away or leaves behind hid property . . .: Simpson v Gowers.
The underlying idea of abandonment is that the owner
does not want the goods anymore.
Two elements must be satisfied:
1. intention
2. control.
The abandonment of goods will not lightly be inferred.
Abandonment occurs where an owner is indifferent to any future asportation of
them by others, where the owner leaves them ‘for anybody to take them away’. It
is possible that the circumstances of the finding, and the nature and condition
of the goods, is such that a person may reasonably believe that they have been
abandoned, yet at the same time, know, or have the means of ascertaining, the
identity of the former owner who has abandoned them: Keene.
Abandonment is one of the consensual methods of loss of
ownership of personal
property: Vincent.
The doctrinal dispute polarising abandonment is whether
it is possible as a matter of law to abandon goods. Some say “yes” and some say
“no”.
Is Abandonment Possible? There are three views as to this question:
Abandonment does not divest the owner of property in
goods: Kaine.
Some cases echo uncertainty whether abandonment strips
an owner of property
in goods: Moorhouse; Vincent.
Abandonment is possible as a matter of law: Re
Jigrose; Lang; Cook v Saroukas.
Requirements of Abandonment
Abandonment requires the conjunction of 2 elements:
1. the physical
act of abandonment;
2. the owner’ s intention
to abandon the property in the goods: Moorhouse; Re Jigrose.
Compare this with the elements of possession: intention and control.
How do you prove
abandonment?
The best evidence is that which points unequivocally to
a renunciation of the
interests an owner has in the goods: Moorhouse. (“Interest’ here refers to the interests of
ownership and possession - abandonment must effect both.)
Intention also distinguishes abandonment from loss: Re
Jigrose.
The Intention to Abandon
Is it decided subjectively
or objectively? Re Jigrose,
Keene v Carter and Gerber. (A)
decide that you look at:
1. the relationship between the parties;
2. the terms of any contract or transaction between the
parties;
3. the value of the goods;
4. the circumstances under which it came to be
putatively lost;
5. the length of time that it has been lost;
6. the attempts made by the owner to find or recover the
goods;
7. the conduct of the owner and of the occupier;
8. the size and mobility of the goods.
Arguably. the test is an objective multi-factor test
rather than solely subjective.
Note the terminology:
· ownership-in-common;
· joint ownership.
There is no tenancy of personalty as it absolutely
owned.
Dennis v Dennis:
“Ownership-in-common ...
connotes that the owners have a unity of possession, but a distinct and several
title to shares which need not be equal...”
Common Ownership and
Personalty
The regime for intangibles is not co-extensive with the
regime for tangibles -there
is no
ownership-in-common of a chose in action at law: In re McKerrell
cf equity - see Buchan v Nash.
Joint ownership is possible for both choses in
possession and in action; Knapp; McKerrell.
Joint owners enjoy the 4 unities of possession, interest, title and time of
commencement.
Severing Joint Ownership of
Personalty
There are 4 methods to sever joint ownership of
personalty:
1. effective disposition of a share to a person: Corin
v Patton;
2. by mutual agreement/course of dealing: Gebhardt v
Dempster;
3. course of dealing sufficient to intimate that the
interest of all were mutually
treated as owned-in-common: Abela;
4. any act, dealing or transaction contrary to public
policy to continue joint ownership: Kemp.
Ownership, Title and
Possession
Gatward v Alley:
ð
possession
is a platform for ownership and title, especially against third parties:
ð
good
title to property means having the rights to that property that the law allows
to property of that class;
ð
possession
is prima facie evidence of ownership;
ð
possession
overcomes the difficulties associated with establishing a chain of title to
goods.
The main forms of dealings in personalty are:
· sale;
· assignment;
· gifts;
· involuntary dealings;
· security dealings.
Some of the underlying phenomena are:
· the presence or absence of consent;
· intention;
· form vs substance;
· which legal system or body of law recognises the
dealing;
· does the property relate to present or future property?
“Sale” relates to any form of transfer of any property
in exchange for a price:
Capel.
Sale is generally confined to the contract of sale of goods. See the Sale of Goods
Act 1896 (Qld).
Sale involves the voluntary transfer of goods from the
seller to the buyer in
exchange for their price: s4(1).
There are 2 aspects to the sale of goods:
1. contract:
the mechanism for the parties to assume mutual obligations relating to
the transfer of property of goods (obligations);
2. conveyance:
the transfer of the ownership of the goods from the seller to the buyer (property).
Contract is relational and relatively concrete. It is
facilitative and facultative.
Conveyance is proprietorial and relatively abstract.
Both phenomena combine in the contract of sale. Each
produces or has effects in
the overall transaction.
ASSIGNMENTS GENERALLY
Means the immediate transfer of an existing proprietary
right, vested or
contingent, from the assignor to the assignee: Norman
v FCT.
Assignment requires 2 legal persons and a legal object.
Anything can be assigned
unless this is contrary to public policy: Norman.
There are 2 forms of assignment:
1. legal;
2. equitable.
Each form has different rules of recognition.
Historically, the common law did not recognise or
support assignments of choses in action at first.
Examples of Assignments
Today
Factoring: the assignment of debts by a trader to a
financier to raise money. This
applies only if the trader supplies credit to its own
customers: Squires v SA
Sheet and Steel Pty Ltd.
Securitisation: the packaging of illiquid loan assets
into securities and their later
distribution into the capital markets to investors.
Assignments and Other
Dealings
Assignments can be absolute
or by way of security. The
determinants are the
purpose of the assignment and the way it is structured.
Novation: the making of a new contract between the
creditor and the debtor
(whether the old or the new debtor) in consideration of
the extinguishment of the
old contract: Olsson v Dyson.
Release: the “annihilation” of a property right or
interest by the obligee in favour of the obligor.
Defintion of a Gift
The term “gift” is used in 2 senses:
1. a gift is the descriptive designation for the
transfer of property from one person to another;
2. a gift is the voluntary transfer of property from one
person to another where no
valuable consideration passes from the transferee to the
transferor: Leary v FCT.
The underying idea of a gift is the concept of benefaction: Cuming Campbell.
This is also called the animus donandi -
the intention to give: Leary v FCT.
Parties: donor (giver)
and donee (receiver).
Attributes of a Gift
There are 4 attributes of a gift:
1. a gift is by way of benefaction;
2. a gift does not normally arise out of a contract;
3. a gift normally is made without any material
advantage accruing to the
donor;
4. a gift proceeds out of detached generosity or out of
affection or respect or similar values: Leary v FCT; FCT v McPhail.
A gift must transfer the beneficial interest in property
from the donor to the donee: Peers.
Modes of Making a Gift
There are 3 modes of making a gift:
1. by deed or an instrument in writing: French v
Gething;
2. by delivery in the case of movable corporeal
property: Williams v Williams;
3. by declaration of trust: Cain v McEacharn.
Elements of Making a Gift
There a 3 elements associated with the making of a gift:
1. the donor must have the intention to make a gift: Knapp
v Knapp;
2. the donee must have the intention to receive the gift
of property: Knapp v Knapp
3. there must be acts sufficient to give complete effect
to the intention: Knapp v
Knapp (these
acts include a deed or delivery or a declaration of trust).
Involuntary Transfers of
Personalty
There are 3 main forms of involuntary transfer of
personal property by operation
of law from one person to another:
1. death: the personal estate of the deceased vests in
the executor under a will (45 of the
Succession Act 1981 (Qld)).
2. bankruptcy: the personal property of the bankrupt
vests in the trustee in bankruptcy under s58(1)(a) of the Bankruptcy Act 1966 (Cth).
3. insolvency: property of the company does not vest
automatically in the liquidator in the case of the winding up of the company.
This only occurs if the court makes an order to that effect (s474(2) of the Corporations Law).
Security Transfers Generally
A security is defined as follows:
The essence of a right in security is that it is a
defeasible right a creditor has over some or all of the property of the debtor
to satisfy a debt or an obligation owed by the debtor to the creditor: Armour.
Summary of the Elements of a
Security: The 5 elements which
summarise a security at general law come from Armour:
1. right over property;
2. given by debtor not reserved;
3. activated by default;
4. priority over unsecured creditors;
5. the right is defeasible.
Elements of a Security
If the Armour
definition is examined, it yields 5 elements:
1. a right over
property;
2. given or ceded by
the debtor over the debtor’ s property in favour of the
creditor;
3. it is activated
by a breach of a contract, duty
or other obligation owed by the
debtor to the creditor;
4. the creditor acquires priority over the secured property of the debtor as
against the general (or unsecured) creditors of the
debtor;
5. the security right is defeasible - the creditor’ s rights over the debtor’ s
property can be annulled if the debtor performs the duty
owed to the creditor.
SAMPLE ANSWERS
Question 1(a):
“Property” is defined as follows by the Canadian lawyer
Welling:
B Welling, Property in Things in the Common Law System
(Scribblers Publishing, Gold Coast, 1996), pp6-7)
[6] Property is a
relationship. There are always three
people in the relationship. The first
person is the state.
The second person is someone whom the state has
concluded is the holder of a specified form of property. The third is any other
person whom the state has not concluded is the holder of that specified form of
property.
The state will suppress the civil liberties of the third
person to the extent they fall within the scope of the form of property held.
Question 1(b):
Distinguishing real from personal property:
Applicable laws (Land Title Act 1994).
Civil procedure and private international law.
Succession law.
Remedies.
Question 2:
The sources of commercial and personal property law are:
Contracts.
Model “contractual” codes.
Custom or usage.
Common law or equity.
National or State legislation.
International treaties.
Question 3:
(a) Right to sue in contract:
The right is a chose in action. It is an intangible
claim against the party in breach It is an obligation too because it is a
composite right-and-duty thing. The contract is a voluntary obligation.
(b) Right to sue in tort:
The right is a chose in action. It is an intangible
claim against the party in breach It is an obligation too because it is a
composite right-and-duty thing. The tort is an involuntary obligation.
(c) Copyright:
Section 31 of the Copyright Act 1968 (Cth) sets out the
nature of copyright (ie, the right to copy certain types of literary, dramatic,
musical and artistic “works”).
Section 196(1) enacts that copyright is personal
property. It is a chose in action. The material form in which copyright
subsists is usually a chose in possession.
(d) Sale of goods on 60 days’ credit:
There are “goods” (this is a chose in possession).
There is the 60 days’ credit period for the payment of
the price (this is a chose in action).
(e)
computer software:
In the Toby Constructions case, Rogers J left
open the question whether software by itself was a “good” within the Sale of
Goods Act.
In the St Albans case, the court ruled that
software by itself was not a “good” within the Sale of Goods Act. (This ruling
depends on the evidence of this case, so do not extropolate too far from its
material facts).
(f) Computer hardware:
Computer hardware is clearly a “good” within the SGA.
(g) Computer hardware and software:
Computer hardware and software is clearly a “good”
within the SGA: see Toby Constructions case.
Question 1(a):
K transfers possession of her watch to D. D has intention
and control after the transfer (K must relinquish control if D is to have
possession: see Young v Cockman 149 ALR 1006); therefore D has possession.
Question 1(b):
S transfers actual or de facto possession of her
jewellery to the bank. S retains some control via the duplicate key. Note the
arrangement regarding the use by the bank of the duplicate key in its
possession. S has mediate (or remote) control (not immediate physical control)
of the jewellery.
As for the mental aspect, there is no specific evidence
regarding this. This would be inferred from the overall circumstances and the
conduct of the parties. Considering these, it would seem that the intention of
S is to retain possession for herself.
Overall, S retains possession of the jewellery.
Question 1(c):
This is similar to 1(b) above except that no outsider
has access or control of the book in J’s locker.
J has possession of the book even though it is not with
him. J has mediate (or remote) possession. Even though the physical element is
weak, it is enough when combined with the mental element.
Question 1(d):
There are two transactions affecting interests in
personal property here: the sale (ownership) and the constructive delivery
(possession).
Property passes when the contract of sale is made or when
the price is paid.
The book has remained static and has not been physically
delivered.
Because of the sale, ownership has passed. The book has
been constructively delivered by J to S.
S becomes the owner/bailor and J becomes the
bailee/possessor.
Question 1(e):
Jo has remote (or mediate) physical possession of the
marijuana.
For the same reasons as for 1(b)-(d), Jo has possession.
The mental element would also be inferred from the fact
the marijuana was hidden inside a drawer in Jo’s bedroom.
Question 1(f):
Chronology and critical phenomena:
Initially, Jill has possession of the wheat. How do the intention plus control elements
come into play?. Possession of the wheat passes from Jill to Graincorp Ltd when
it is deposited in the Graincorp silo.
What is the significance of the delivery order given to
Jill by Graincorp?
The delivery order is a "document of title".
Graincorp becomes the bailee of the wheat while Jill
remains the owner. As a bailee at will,
Graincorp has possession of the wheat.
At the same time, Jill has constructive possession of the wheat.
Ownership of the wheat passes 14 days later to
Queensland Bread Co Ltd (QBC). What
happened when Jill handed over the delivery order over to QBC?
Sixty days latter when QBC withdrew 40 tonnes for its
milling and baking operations, QBC took delivery of that 40 tonnes from
Graincorp. How has possession of that 40
tonnes changed when it was withdrawn from the bulk of 100 tonnes?
What is the significance of the surrender of the 100
tonnes delivery order by QBC to Graincorp and its replacement by a delivery
order for 60 tonnes ?
SEMINAR No 6: FUNDAMENTAL CONCEPTS
Question 1:
Approach:
identify the legal relations between the parties;
identify the transactions engaged in by the parties;
what are the obligations (rights and duties) of the
parties?
use each person as the focal point of discussion, and in
particular, determine who has rights against whom.
Chronology:
Jill owns Broadacres.
Jill has leased Broadacres to Asgard.
Jack entered Broadacres and found the axe.
Jack had the axe evaluated by the Queensland Museum.
Jill and Asgard demand the return of the axe.
Finding Rules (see Study Guide pp 60-61):
From the key facts distilled under the Chronology, see
which of the Finding Rules from Parker’s case will apply. Not all of the
Finding Rules can apply to each legal actor. Think about the underlying social
policies to the Finding Rules.
1. Jack:
Locate Jack within the scheme of the Finding Rules (ie
the class of legal actor) and then match up the applicable Finding Rules that
fits Jack’s circumstances.
Finding Rule Nos 1, 3. And 5 apply.
What duties and liabilities apply to Jack as a result of
these Finding Rules?
2. Asgard:
Locate Asgard within the scheme of the Occupier Rules
(ie the class of legal actor) and then match up the applicable Occupier Rules
that fits Asgard’s circumstances.
Occupier Rules No’s 1 and 3 apply. Why can’t Occupier
Rule 3 apply?
What duties and liabilities apply to Asgard as a result
of these Occupier Rules?
3. Jill:
what is Jill’s legal status and how does she fit into
the scene?
how can Jill prove her claim to the axe?
how do the Finding and Occupier Rules apply to Jill and
how can she assert her rights?
what is the outcome of the dispute as far as Jill is
concerned?
4. What of the true owner?
How does the true owner fit into the scene?
What is the point of the Finding and Occupier Rules so
far as the true owner is concerned.
Question 2(a):
NB: students should have read the case cited, Young v
Hitchens (1844) 115 ER 228.
Issues:
What cause(s) of action does Bob have against Bill?
What interest in personal property does Bob have when
Bill intervenes?
What interest is necessary (as opposed to sufficient) to
support a claim for an invasion of a personal property interest (Hint: read
Fisher, Commercial and Personal Property Law, Ch 9).
Can Bob succeed against Bill?
Question 2(b):
NB: students should have read the cases cited before the
seminar, viz The Tubantia [1924] P 78 and Columbia-America Deep Search Inc v
Atlantic Mutual Insurance Co 974 F 2d 450 (1992).
What cause(s) of action does SSB have against CDI?
What interest in personal property does SSB have when
CDI intervenes?
What interest is necessary (as opposed to sufficient) to
support a claim for an invasion of a personal property interest (Hint: read
Fisher, Commercial and Personal Property Law, Ch 9).
Can SSB succeed against CDI?
Question 3:
Statutory assignments of things in action
199.(1) Any absolute assignment by writing under the
hand of the
assignor (not purporting to be by way of charge only) of
any debt or other legal thing in action, of which express notice in writing has
been given to the debtor, trustee or other person from whom the assignor would
have been entitled to claim such debt or thing in action, is effectual in law
(subject to equities having priority over the right of the assignee) to pass
and transfer from the date of such notice—
(a) the legal right to such debt or thing in action; and
(b) all legal and other remedies for the same; and
(c) the power to give a good discharge for the same
without the concurrence of the assignor.
(2) If the debtor, trustee or other person liable in
respect of such debt or thing in action has notice—
(a) that the assignment is disputed by the assignor or
any person claiming under the assignor; or
(b) of any other opposing or conflicting claims to such
debt or thing in action;
the debtor may, if the debtor thinks fit, either call
upon the persons making claim to the debt or other thing in action to
interplead concerning the same, or pay the debt or other thing in action into
court under and in conformity with the provisions of the Acts relating to
relief of trustees.
Parties:
The “assignor” within s 199 of the Property Law Act
would be Bill; the “assignee” would be All-States Discounts Ltd (ASD); the
“debtors” are all of the customers of Bill whose debts are assigned to ASD.
Outline of Steps to Factor the Debts to ASD:
The parties are the assignor (transferor) and the
assignee (transferee).
The assignment must be absolute (and not by way of
charge).
The assignment must in writing.
It must be under the “hand” of the assignor.
The “thing” assigned must be a debt or other legal thing
in action.
Notice of the assignment must be given to the
debtor/trustee/obligor.
The Effect of the Assignment:
The effect of the assignment is as follows:
The assignment is subject to “equities” as between the
assignor and the debtors.
The assignment passes:
The legal right to the debt or thing in action.
All legal and other remedies for the debt and the thing
in action.
The power of the assignee to discharge the debt without
the actions of the assignor.
SEMINAR No 7: FUNDAMENTAL CONCEPTS
Question 1:
Chronology:
Bob owns the tractor.
Bob bought some tyres from Jax.
The tyres are installed on Bob’s tractor.
Bob installed the engine parts he bought from JDF on his
tractor.
Bob defaults under the contracts of sale with Jax and
JDF.
Issues:
The issue for each supplier is: can it reclaim the goods
supplied or are they each relegated to a damages claim against Bob?
Area of law:
The doctrine of accession. Why doesn’t specification or
commingling apply?
Identify the principal and the accessory things.
Approaching accession: 4 Questions:
What is the proper test for determining when the
accessory accedes to the principal?
What is the effect of the doctrine of accession?
What are the methods which the law recognises as
competent for the doctrine of accession to apply?
What restitution or compensation (if any) should be made
by the owner of the principal to the owner of the accessory?
Apply these 4 questions to each of the accessories
supplied to Bob by the suppliers.
how and on what basis should Bob account to each
supplier (or compensate them for the value of any item that has acceded to the
principal?
don’t overlook each supplier’s contractual rights
against Bob.
can each supplier get an order for specific delivery of
the accessories against Bob; if so, what are the things that should be
reflected in the order?
Question 2:
Approach:
identify the legal relations between the parties;
identify the transactions engaged in by the parties;
what are the obligations (rights and duties) of the
parties?
use each person as the focal point of discussion, and in
particular, determine who has rights against whom.
Chronology:
Jon found the ingot.
Andy claims the ingot (qua true owner).
Jon melts the ingot down for the statue he is making for
PGI.
PGI installed the statue in its HQ in situ.
Advice:
The basic issue is: can Jon reclaim the statue?
Issues:
Has A lost property in the ingot? If so, what are the
proprietary consequences of this. If not, what can A do to get it back?
What process affecting ownership has taken place to the
ingot?
Can Jon reclaim the statue?
Issue # 1:
What has happened to the ingot in a proprietary sense?
What process has happened to the ingot?
What are the ownership allocation rules that are called
into play?
Reach a conclusion based on the application of the law
to the facts.
Issue # 2:
What has happened to the ingot in a proprietary sense?
What process has happened to the ingot?
What are the ownership allocation rules that are called
into play?
Reach a conclusion based on the application of the law
to the facts.
Issue # 3:
What interest does Jon have in the sculpture?
Has Jon lost his interest (and if so, how)?
What has happened to the sculpture?
What cause(s) of action does Jon have (and why)?
1. If a party bears the accidental loss or damage to
goods then they are at that party’s risk.
ð
So
if the risk of the goods was with the seller then the seller had the risk in
the goods and they perished while they were at the risk of the seller what
ordinarily would be the consequence of this - the seller would be liable to the
buyer for damages for non-delivery - for being unable to comply with the
seller’s obligation to deliver the goods on time .
2. The buyer would not be liable for the price.
ð
So
that would be the consequence of goods being at the risk of the seller - the
seller will be liable for any loss or damage.
The point is that the contract for sale remains on foot.
When does the risk pass in a contract for the sale of
goods?
The prima facie rule per SGA is that risk of loss or
damage to goods passes to the buyer when the property in the goods is
transferred: s23
Frustration
If
the seller bears the risk of goods and they perish then the seller is liable to
the buyer in damages for non-delivery - that is so unless the seller can
establish that the contract was frustrated.
If
the contract is frustrated, the contract is discharged and neither party is
liable to the other.
Frustration occurs where a supervening event takes place
without fault of either party and for which the contract does not provide which
so significantly changes the nature of the rights and obligations of the
parties that it would be unjust to hold them to the literal bargain.
Is this concept of frustration is recognized in the
Sales of Goods legislation?
There are two provisions that sort of resemble the concept of frustration in
contract: s9 and s10 SGA
When there is:
ð
a
contract for sale of specific goods, and
ð
the
goods without the knowledge of the seller have perished at the time when the
contract is made,
ð
the
contract is void.
McRae v Cth Disposal Commissioner - s9 not applicable because goods had never existed at
all. This case concerned the sale by the defendant of the wreck of a ship at a
certain location - no ship existed at that location - so the defendant was sued
for breach of contract - the High Court said the plaintiffs were entitled to
succeed because there was an implied term that the ship was at the location
specified - s9 was not obstacle to the plaintiff because it only applied where
the goods had once existed but had perished - if s9 had applied the contract
would have been discharged and there would have been no obligations owed by
either party so it suits the plaintiff in this case to establish that the
section does not apply.
When there is
ð
an
agreement to sell specific goods [as opposed to a sale - s3 and
s4(3) - the difference between a sale and an agreement to sell depends on when
property passes - with a sale the property passes at the time the contract is
made with an agreement to sell it passes in the future], and
ð
subsequently
the goods,
ð
without
any fault on the part of the seller or buyer,
ð
perish
before the risk passes to the buyer,
ð
the
agreement is avoided.
“perish”
It is used in both s9 and s10. The word has a wider
meaning then no longer there and it has also been applied where as a matter of
business the goods have so deteriorated as to have loss their merchantable
character or they no longer conform to their contractual description.
The cases suggest that “perish” should be construed in a
commercial sense.
Asfar & Co Ltd v Blundell - concerned a contract for the sale of dates that had
been under water for two days and when they were brought up they were mush -
they had been impregnated with sewerage and they were in a state of
fermentation - the insurers in this case were arguing that there had not been total
loss of the goods and therefore the goods had not perished - but the court held
that while the argument might commend itself to chemists it would not to
businessmen and then they reinforced the
test that was whether as a matter of business the nature of the thing has been
altered. So the term is not limited to total physical destruction - it
has a commercial meaning.
Rendell v Turner - was a contract for the sale of table potatoes - the
contract was held to be void because at the time of the contract the potatoes
by reason of second growth had become unfit for human consumption - so although
technically the potatoes still existed in specie - they are still potatoes so
technically they haven’t perished in that sense - they had ceased to be table
potatoes if you adopted the commercial meaning of the term “perish”.
Barrow Lane & Ballard v Phillips & Co Ltd: contract for an indivisible parcel of specific goods,
part perish, then contract avoided. If the parties do not contract in this
manner - i.e. for an indivisible parcel - then the parties will only be able to
avoid the contract if it is a material breach -> s32 SGA.
Terms and Representations
What is it that the buyer and seller have contracted to
buy or sell?
DON’T FORGET THE COMMON LAW AND THE TPA IN THIS AREA.
If you are concentrating on a transaction involving the
sale of a defective product then the answer would not be complete if you solely
focused on the implied conditions in the SGA.
s14(2) SGA: matter of construction of contract as to whether term
in contract is a condition or warranty.
It is an important distinction because of the remedies
that flow. If you are a seller who is held to have breached a condition then
the contract might well be repudiated and if it is, the buyer then has the
right to reject the goods because they can basically restore the parties to the
position they were in at the date of contract.
Breach of warranty on the other hand means that the
buyer is entitled to damages only - so the buyer does not have a right to
reject the goods and treat the contract as repudiated.
This is the prima facie position when you are looking at
terms in contracts for the sale of goods but there are qualifications.
Breach of condition - repudiation
Breach of warranty - damages only (not a right to reject
the goods and treat contract as repudiated).
Qualification in s14(3) SGA
It sets out what the qualification on that general
provision is. It has two limbs:
Limb 1: When a contract of sale is not
severable and the buyer has accepted [ see s36 and s37 for meaning of accepted]
the goods or part thereof OR
Limb 2: When the contract is for specific goods
the property in which has passed to the buyer
. . .
Then the breach of any condition to be fulfilled by the
seller can only be treated as a breach of warranty and not as a ground for
rejecting the goods and treating the contract as repudiated unless there is a
term of the contract, express or implied, to that effect.
You can contract out of
s14(3) as is evidence by that provision and also s56 SGA. This is a qualification because it changes what we
would ordinarily think a buyer would be entitled to upon breach of a condition
by the seller - but only in these two situations.
Common Law
ð
pre-contractual
statement
ð
mere
puff
ð
misrepresentation
ð
innocent
-> rescission only
ð
negligent
-> damages as well as rescission
ð
fraudulent
-> damages as well as rescission
ð
term
of the contract
ð
condition
ð
warranty
ð
innominate
Term or misrepresentation?
Whether a statement is a term or misrepresentation
depends on the intention of the parties which is determined objectively on the
basis of the conduct of the parties and the circumstances of the case: Oscar
Chess v Williams.
If a term - condition or
warranty?
Depends of the intention of the parties as to its
importance.
Would the buyer have entered into the contract unless he
had been assured of strict performance of the promise?: JJ Savage & Sons
v Blakney
Innominate term
Can only be assessed after the breach by assessing the
seriousness of the breach: Hong Kong Fir Shipping v Kawasaki Kisen Kaisha.
SGA implied undertaking as
to title, etc
There are three limbs to s15 - ss(1)(a) implies a
condition and ss(b) and (c) imply warranties only,
s15(1)(a):
implied condition
that seller has the right to sell the goods, or in case of an agreement to sell
that seller will have the right to sell the goods at the time when property is
to pass.
s15(1)(a) - application
Can apply to the case of purported sale by a non-owner
(i.e. no title): Rowland v Divall.
You can sue for a breach of s15(1)(a) even where the
buyer has no title in the goods - so they are not the owner but they are
purporting to sell something to you Rowland v Divall - it was held that
it was possible to sue for a breach of a implied condition that you had the
right to sell - of course someone in the Rowland v Divall situation could also
argue the total failure of consideration - this is an interesting extension
because under the definition of sale of goods, it requires the transfer of
property - so some may argue how can the Act even apply if you don’t get pass
first base - if you don’t have property to transfer in the first place -
notwithstanding that in Rowland v Divall it was held that a buyer could sue
even where the owner had no title for breach of s15(1)(a).
The more common application is like in Niblett
Confectioners’ Materials where the seller is the owner of the goods but in
the circumstances has not the right to sell them.
Niblett Confectioners’ Materials - there was an infringement by the seller of the
English Trademarking Provision - so under this provision the seller was the
owner but did not have the right to sell the goods - this was a typical case
where s15(1)(a) applied.
Contracting out of Title
Provisions - debate as to
whether parties can contract out of s15(a). It appears that it can be
contracted out ot: Warnings Used Cars v Tucker.
Feeding title
The subject of feeding title is relevant to s15(1)(a).
This situation arises because there is a time lag between the time the seller
purports to pass title under a contract for sale and the time the seller
actually acquires title to those goods after the contract is concluded.
A seller who has no title to goods but who afterwards
acquires title can hold the buyer to the bargain before the buyer rejects the
goods and rescinds the contract, and the seller is estopped from denying the
validity of the transaction.
Subsequent title feeds earlier defective title of the
buyer: Lucas v Smith; Patten v Thomas Motors; Alico Steel Corp v Australian
Development Corp
Although the buyer cannot reject the goods so has been
no breach of the condition the buyer can see sue for damages in this situation
if they have suffered damage as a consequence but they cannot repudiate the
contract which they would normally be entitled to do for a breach of s15(1)(a).
s15(1)(b) and (c) - implied warranties
s15(1)(b) - buyer shall have and enjoy quiet possession
of the goods: Healing Sales v Inglis Electrix - seller must not
wrongfully seize goods from buyer - here goods had been delivered on credit and
the buyer had not paid for them yet but the seller wrongfully seized or
repossessed the goods - this action activated s15(1)(b).
It is an ongoing obligation of the sellers: Microbeads
AC v Vinhurst Road Markings.
Applies to future: Microbeads AC v Vinhurst Road
Markings - in this case road marking machines were later found to infringe
a patent - and although at the time of the sale there was no patent in
existence and therefore no infringements of s15(1)(a), that didn’t mean that
there couldn’t be an infringement of s15(1)(b) which applies not only at the
time of sale but for the future.
s15(1)(c) - goods
shall be free from any charge or encumbrance in favour of any third party, not
declared or known to the buyer before or at the time when the contract was
made.
TPA equivalent: Part V
Division 2
s69(1) - mirrors s15(1) SGA
s69(3) - sales of a limited title - provides for a
situation where it appears from the contract or from the circumstances that the
supplier intends to transfer only the title that that person or third party may
have - so it might be a limited title.
Correspondence with
description
IN A PROBLEM DEALING WITH A DEFECTIVE GOOD CONSIDER THE
APPLICATION OS ALL OF THE FOLLOWING:
s16 Sale by description
When there is a contract
ð
for
the sale of goods by description
ð
there
is an implied condition
ð
that
the goods shall correspond with their description and
ð
if
the sale is by sample as well as description
ð
it
is not sufficient that the bulk goods correspond with the sample if the goods do
not also correspond with the description.
Equivalent provision of TPA: s70
Issues to consider regarding
s16:
1. Is there a sale by
description?
2. If so, what words form
part of the description? Not every descriptive statement of a good will be
treated as a condition under s16 -limited to certain types of descriptive
statements?
3. Do the goods correspond
with their description? Has s16 been breached?
When is there a sale by
description?
In case of unascertained or future goods can be
no contract of sale of goods except by reference to a description of some sort
which will identify them.
In the case of specific goods - where buyer
relies at least in part upon a description given or to be inferred from the
circumstances.
The fact that the seller provides a description does not
make it a sale by description. There has to be some reliance by the buyer on
the description for the sale to be by description.
Harlingdon & Leinster Enterprises v Christopher Hull
Fine Art - this case involved
the sale of a painting attributed to a particular artist - it turned out that
the painting was not painted by the artist - so one of the issues was whether
there had been a breach of s16 - that is did the goods correspond with their
description - the first point they had to argue was whether there had in fact
been a sale by description - the court held that for a sale of goods to be
by description, the description had to be influential so as to become an
essential term of the contract - i.e. a condition of the contract - if you
can show that the buyer did not rely on the description in purchasing the goods
this would be cogent evidence that the parties did not contemplate or intent
that the authenticity of the description should constitute a term of the
contract - it was said at page 574 by LJ Slade that reliance by the buyer was
the nature index of a sale by description.
The reliance can be inferred from the circumstances.
Self - selection by
purchaser
Self selection by the purchaser constitutes sale by
description at least to the extent that the words on the box delineate the
goods and indicate the kind of clothing agreed to be bought: Grant v
Australian Knitting Mills - this case concerned the sale of defective long
johns - the purchase of the defective underwear did constitute a sale by
description even though he had simply gone into the store and purchased the
item off the shelf - because he did rely to some extent to the description on
the box - so as long as you as the buyer are not just buying the goods as they
are but as a thing corresponding to a description - such in Grant’s case woolen
underwear then you would come within s16.
Assuming that there is a
sale by description:
What words form part of the
description?
Only statements concerned with the kind, class or species
of goods that are relevant in the context of s16: Taylor v Combined Buyers.
s16 is only concerned with words of identity not
quality. There are other sections dealing with quality: Christopher Hill v
Ashington Piggeries
Once you have ascertained
the words you think form part if the description (confining to words going to
the identity of the goods) consider:
Do the goods correspond with
their description? - has the section been breached?
So assuming that you have satisfied the above two
elements and you can imply the condition that the goods must correspond with
the description then you have to ask whether they do in fact correspond with
the description: Taylor v Combined Buyers
Christopher Hill v Ashington Piggeries - the plaintiff - a compounder of food stuffs entered into
a contract with the defendant mink farmer who asked the plaintiff to compound
for him in accordance with a formula supplied by the buyer a mink food know as
King Sized - the plaintiff was in the business of compounding or manufacturing
compounds for animal feeding to customers’ formulas but had never previously
manufactured mink food - so the plaintiff made it clear to the defendant that
it knew nothing about mink food - one of the ingredients was herring meal and
this was supplied to the plaintiff by a third party Norwegian firm - unbeknown
to any of the parties the herring meal had become contaminated due to a
chemical reaction with a preservative used in the manufacture of minx food -
the substance was highly toxic and there was a heavy loss of life on the mink
farm - the plaintiff actually sued
for the purchase price of the food - the defendant was counterclaiming for the
damages for the loss incurred - the defendant based its claim on the grounds
that (a) the goods didn’t correspond with their description (b) that they were
not reasonably fit for the required purpose and (c) not of merchantable
quality. The plaintiff joined the third party who was the Norwegian herring
meal supplier alleging also breaches of the equivalent of our s16 and s17 which
are the same as (a) to (c) and also claiming an indemnity from the third party
in respect to the defendant’s counterclaims - dealing first with the equivalent
to s16 the House of Lords (with Viscount Dilhorne is in dissent) agreed with the
Court of Appeal that there had not been a breach of s16 in respect of either
contract - they said that the Herring meal though contaminated was still
herring meal and this conclusion followed from their Lordships’ proposition
that s16 was concerned with the identification of goods as opposed to their
quality - the dissenter dissent was that the distinction between a poisonous
and non-poisonous ingredient was more than a difference in quality and amounted
to a difference in kind - p484-5.
The make and model of a car and the year of manufacture
of the car are probably part of the identification of a car and therefore would
form part of its description when it is sold - each fact that is the make, the
model, and the year of manufacture is a substantial ingredient in the
identification of the thing sold: Miller v Industrial Acceptance Corp.
Bele v Taylor - the defendant advertised his car as a Herald
Covertable white 1961 model - so it is obviously a sale by description but what
words form part of the description? The important question here was whether the
year formed part of the description. The car was in fact made of two parts
welded together - only one part was from 1961 - the court had to decide if the
year formed part of its description and they held that it was and that a breach
of s16 had been established and the goods did not correspond with their
description - the damages were assessed at the purchase price as the value of
the car was scrap.
Liability
of the seller under s16 -
the section is strictly construed and unless the discrepancy is trivial the
buyer is entitled to reject the goods even if the goods are merchantable: Bele
v Taylor
Fitness
for Purpose - s17(a) and (b)
When the buyer
ð
expressly
or by implication
ð
makes
known to the seller the particular purpose for which the goods are required,
ð
so
as to show that the buyer relies on the seller’s skill and judgment, and
ð
the
goods are of a description which it is in the course of the seller’s
business to supply . . . ,
ð
there
is an implied condition that the goods shall be reasonably fit for such
purpose.
1. Disclosure of Purpose
The first element is that the buyer must make known expressly or by
implication the particular purpose for which the goods are required.
ð
The
purpose must be disclosed prior to or at the time of the contract.
ð
The
wider the stated purpose the better the chance that the goods will be fit for
the purpose.
ð
If
the goods in question have only one normal purpose then the buyer makes know
the particular purpose by asking for the goods by their ordinary name - so this
is by implication: Grant v Australian Knitting Mills.
ð
If
the goods are capable of being applied to a number of purposes then the buyer
does have to specify the particular purpose they have in mind.
2. Reliance on Seller’s
skill and judgment
The second element deals with reliance - that is the particular purpose
must be disclosed in such a way that it is clear that the buyer is relying on
the seller’s skill and judgment.
ð
There
has to be actual reliance by the buyer on the seller’s skill and judgment.
ð
Evidence
of reliance usually arises by implication from the circumstances. It is usually
quite easy for a consumer to show reliance by inference.
ð
In
Grant v Australian Knitting Mills it was said that reliance in general
will be inferred by the fact that a buyer goes to the shop in the confidence
that the tradesman has selected his stock with skill and judgment.
ð
But
the same presumption won’t apply in the sale between two traders who are
equally knowledgeable: Hardwick Game Farm.
ð
Reliance
by the buyer need not be exclusive of all reliance on everything else. It is
sufficient that the reliance must constitute a substantial and effective
inducement that led the buyer to purchase the article: Ashford Shire Council
v Dependable Motors.
3. The Seller is in the
Business of Supplying Such Goods
The third element is that the seller is in the business of supplying
goods of that description. This means that this section does not apply to
private sales. It is very wide - the seller need only sell goods of the general
kind - the requirement has been held to have been satisfied by a one off sale: Ashington
Piggeries.
4.Assuming the elements have
been satisfied, ask whether the proviso to the application of s17(a) applies:
The Trade Mark Proviso
And then converting what is actually a proviso to the
operation of s17(a) into an element - the
fourth element is that the goods if specific must not have been bought
under their patent or other tradename.
s17(b)
Goods must not have been bought under their patent or
other trade name: Baldry v Marshall - this proviso is of very limited
use - the mere fact that something is sold by its tradename doesn’t make it a
sale under a tradename - the same applies if you ask for a good that will
fulfill a particular purpose and then you are supplied with a good with a well
known tradename - that still doesn’t aggravate the proviso. Buyer can ask for
the item by its tradename and then asks for the advice of the seller and the
proviso still doesn’t operate.
Liability under s17 - If reliance is established, the slller’s libility is
strict, it does not depend on whether or not the defect was obvious or latent: Hardwick.
Once it is established that
the proviso does not apply, then consider whether s17(a) has been breached;
Has the implied condition as
to fitness for purpose in s17(a) been complied with?
This is a question of fact. What needs to be determined
is whether the goods are reasonably fit for the specified purpose.
Griffiths v Peter Conway - there is no breach of the section if a coat is
suitable for a normal person but not for a person with abnormally sensitive
skin.
Clark v Esanda - the goods must remain fit for a reasonable time after
they come into possession.
The onus is reversed - presumption of reliance which the
seller must rebut.
Merchantability - s17(c) -
goes to quality aspects
When goods are
ð
bought
by description
ð
from
a seller who deals in goods of that description . . .
ð
there
is an implied condition that the goods shall be of merchantable quality.
Elements:
1. Goods bought by
description - from s16 - goods have to have been contracted for under that
description - so reliance by the buyer on the description. A contract for the
sale of unascertained goods will always be a sale by description. If the goods
are specific it becomes more difficult to determine whether there has been a
sale by description. Self selection sale
= sale by description: Grant v Australian Knitting Mills.
2. the buyer has to have
bought the goods from a seller who deals in goods of that description. In Christopher
Hill v Ashington Piggeries that this essentially means the same thing as in
s17(a).
3. the goods must not have
been examined by the buyer (s17(b) proviso). If the goods have been examined
and such examination ought to have revealed such a defect then the implied
condition of merchantability will not be available.
However if the buyer has examined the goods, there is no
implied condition regards defects which such examination ought to have revealed.
What does “such examination” mean?
Much debate.
Two possibilities are:
1. such examination means the actual examination
conducted by the buyer.
2. or a reasonable examination.
Condition excluded if ?:
A reasonable buyer making such examination as actual
buyer made would have seen defect: Frank v Grosvenor Motor Auctions
-> actual examination approach -> favours buyer.
The Victorian court held that the words ‘such
examination’ referred to the actual examination conducted by the buyer, so that
if the examination was superficial, the buyer would be held to have detected
defects which an examination which an examination of that nature could be
expected to disclose.
It is submitted that this is the preferred construction
of th provision because it tilts the balance from caveat emptor to caveat
venditor which is the whole purpose of the provision.
A reasonable buyer making an examination that was
reasonable in the circumstances would have seen the defects: Thornett &
Fehr v Beers & Sons -> reasonable examination approach -> needed
to open barrel to examine goods - favours the seller.
The court preferred to apply the proviso objectively,
holding that if the buyer makes a cursory examination of the goods, the buyer
cannot complain later about the defects which a more thorough examination would
have detected. The underlying idea is that the buyer must perform a reasonable
examination of the goods.
It is safer if the buyer does not make any examination.
In a problem:
First see if you can imply the condition by satifying
the elements of s17(c) and (d)
Second work out whether the condition has been breached
The third step would be to look at the consequences of
breach of the implied condition by looking at the remedy provisions in the Act.
Once you can say that the elements have been satisfied
and therefore you can imply a condition in your contract that the goods must be
of merchantable quality then your next question is whether the condition of
merchantability has been breached.
What does merchantability mean? No definition in the Act
so go to the common law definitions.
Whether the goods are
reasonably fit for any one of the purposes to which goods of this description
and price are reasonably put: BS
Brown & Sons v Craiks.
Here the plaintiff ordered rayon cloth of a particular
description from the defendant - the plaintiff wanted the material to make
dresses but didn’t disclose this to the defendant - the defendant supplied
material which conformed to the contract discription and was suitable for
several industrial purposes but not for dressmaking - it was proved that the
contract price was higher than normal for industrial rayon cloth - but not
unreasonably high - the House of Lords held that in view of that fact and other
factors that the goods were of merchantable quality because they were
reasonably fit for one of their purposes
that is for use in industry
Another usual test that can be applied is: the goods in the form in which they were
tendered must be commercially saleable to some buyer under the description
by which they were sold under the original contract of sale at a price not to
far removed from the contract price.
What does commercially saleable mean?
Goods will be commercially saleable if they are suitable for one or more of the purposes within the
range of purposes for which they are normally bought under the description by
which they were sold.
Statements which form part of the goods description are
only statements going to the identity of the goods not their quality. If you
apply a very narrow description to your goods so that goods of that narrow
description can only be used for one purpose they are more likely not to be of
merchantable quality.
Aswan Engineering Establishment Co v Lupdine - p612 discusses tests of merchantability.
Merchantability under TPA:
s66(2)
If you are looking atthe implied conditions in Part V
Div II of the TPA - s71(1) deals with merchantability.
Merchantability in defined in the TPA in s66(2):
Goods are merchantable: If they are as fit for the purpose
or purposes for which goods of that kind are commonly bought as it is
reasonable to expect having regard to any description applied to
them, the price (if relevant) and all the other relevant
circumstances.
The major difference between this test and the common
law is that the goods have to be fit for the all purposes that goods of that
kind are commonly bought. Not just for one of several purposes that the goods
are commonly bought for. This time we are looking at it from the expectations
of the consumer - at the common law we were looking at whether the goods were
commercially saleable.
The same definition as this one appears in the TPA at
s74D(3) which is the definition applying to cases within Part V Div 2A.
TPA: merchantable
Rassell v Cavalier Marketing: statutary test imports a requirement that the goods
are fit for all normal purposes (as opposed to one) for which the goods of the
kind are commonly bought.
Test focuses on the reasonable objective expectations of
the parties (which can be curtailed by description parties give goods).
Rassell v Cavalier Marketing: This case concerned the supply of carpeting to a
consumer - the manufacturer was held liable under s74B for breach of the
statutary condition of fitness for the particular purpose - in relation to the
condition of merchantability the following points were made:
ð
the
carpeting had the defect of what was called pile reversal or shading.
ð
It
was argued by the manufacturers that because the carpet was fit for its purpose
of a floor covering in terms of its physical quality and manufacture which is a
purpose for which carpet is commonly bought that it was of merchantable
quality.
ð
The
judge disagreed with that submission.
ð
He
compared the TPA definition to the common law definition which is applied in
the SGA and said that the SGA act relates to saleability of goods and the test
of merchance is more appropriate to commercial sale.
ð
The
TPA focuses on the reasonable objective expectations of the consumer who didn’t
purchase the goods for resale.
ð
The
approach to the definition is to first identify the purposes to which goods of
that kind are commonly bought and then secondly to ask whether the goods were
fit for the purposes so identified as it is reasonable to expect - here he said
that one of the purposes for which the carpet was bought was for the aesecfic
appreciation of the owner of the residence. The description of the carpet
didn’t limit the purpose of decoration. Nor was the price so low as to make it
an unreasonable expectation. One of the common reasons for which carpet is
bought and that a reasonable consumer would expect, would be a carpet of high
quality and be fit for the dual purpose of floor covering and decoration. So he
concluded that the carpet was not of merchantable quality.
ð
The result may be different if we applied the common law
definition appropriate to the SGA which only requires that the goods be fit for
one of their purposes.
So once you have concluded any discussion on implied
conditions - you should always consider as a group:
s16 dealing with correspondence with description,
s17(a) and (b) dealing with fitness for purpose, and
s17(c) and (d) dealing with merchantability.
Once you have come to a conclusion as to which of the
implied conditions have been breached you should deal with the consequences of
breach.
So then discuss with s14(3), s36, and s37.
s14(3) When a contract for sale
ð
is
not severable, and
ð
the
buyer has accepted the goods, or part thereof, or
ð
where
the contract is for specific goods the property in which has passed to the
buyer,
ð
the
breach of any condition to be fulfilled by the seller can only be treated as a
breach of warranty and not as a ground for rejecting the goods and treating the
contract as repudiated,
ð
unless
there is a term of the contract, express or implied, to that effect.
s36 Buyer’s right of
exmaiinig goods
s36(1) When goods are
ð
delivered
to the buyer,
ð
which
the buyer has not previously examined,
ð
the
buyer is not deemed to have accepted them unless and until
ð
the
buyer has has a reasonable opportunity of examining them for the purpose of
ascertaining whether they are in conformity with the contract.
s36(2) Unless otherwise agreed,
ð
when
the seller tenders delivery of goods to the buyer,
ð
the
seller is bound, on request,
ð
to
afford the buyer a reasonable opportunity of examining the goods
ð
for
the purpose of ascertaining whether they are inconformity with the contract.
s37 Acceptance
s37. The buyer is
ð
deemed
to have accepted the goods
ð
when
the buyer intimates to the seller that the buyer has accepted them. or
ð
when
the goods have been delivered to the buyer,
and
ð
the
buyer does any act in relation to them which is inconsistent with the ownership
of the seller, or
ð
when
after the lapse of a reasonable time. the buyer retains the goods without
intimating to the seller that the buyer has rejected them.
s18 - deals with the implied conditions in a sale by
sample. A sale by sample is where the seller expressly or impliedly promises
that the goods being sold will conform to the samples So if you have a sale by
sample you can imply the conditions in s18(2).
Transfer of Property and
Risk
Part 3 Effects of the Contract
1. Transfer of property as between seller and buyer:
ss19-23.
2. Transfer of title: ss24-28
The concepts of property and title are different.
It provides for innocent third parties to acquire title
to goods against the rest of the world even though under the rules as to the
passage of property the seller or buyer will normally have such property in the
goods. This deals with the exceptions to the nemo dat rule and in effect allows
for the situation where someone who is innocent of the wrong doing can acquire
title to goods in certain circumstances.
Transfer property important
¨
determines
whether seller can sue for price instead of damages for non-acceptance: ss50
and 51.
¨
risk
prima facie passes with property
¨
may
determine when Buyer loses right to reject goods: s14(3)
¨
apart
from exceptions, it determines whether buyer can confer a good title on a third
party purchaser
¨
may
be vital if either party becomes insolvent before transaction completed.
¨
if
property has passed to the buyer you will generally have good title to the
goods if the seller becomes insolvent while the goods remain in the seller’s
possession.
¨
if
the goods are delivered to the buyer but subject to what is called a
reservation of title clause (Romapla clause) by the seller then the seller may
have a good title to the goods should the buyer become insolvent.
¨
the
right to sue a third party for damage to goods may depend on who has property
in the goods.
¨
generally
the seller can only sue for the price if property has passed.
IN A QUESTION FIRST
DETERMINE WHAT TYPE OF GOODS ARE AT ISSUE:
When there is:
ð
a
contract
ð
for
the sale of unascertained goods
ð
no
property in the goods is transferred to the buyer
ð
until
the goods are ascertained.
Applies irrespective of intention of parties.
s19 is an absolute term and overrides the expressed
intention of the parties: Jansz v GMV Imports.
Re Wait - the seller sold 500 tons of wheat out of a quantity of 1000 tons on
board a ship to a buyer - what category of goods are they? unascertained goods
because the goods were not earmarked in the contract - the 500 tons hadn’t been
unconditionally appropriated to the contract - they hadn’t been separated from
the larger bulk - the buyer prepaid for the goods in advance of delivery and
the seller went bankrupt prior to delivery - the issue was who had property in
that wheat? - well, as the 500 tons of wheat were unascertained the result
was that the property in the wheat contracted for by the buyer had not passed
to him under the contract of sale - so that in the seller’s bankrupcy the
buyer was merely an unsecured creditor not as a buyer having property in goods
but remaining out of possession.
Specific or ascertained
goods: s20
ss(1) property is:
ð
transferred
to the buyer
ð
when
the parties to the contract
ð
intend
it to be transferred.
s20 applies to both specific and unascertained goods.
s20(1) - it is a matter of intention of the parties as
to when property passes. The best evidence of intention will be an express term
in the contract stating when property is to pass. Howver if there are other
terms which indicate a contrary intention then it will be a matter of looking
at the agreement as a whole.
Ascertaining intention:
s20(2)
s20(2) states three things to consider when ascertaining
intention:
¨
terms
of the contract
¨
conduct
of the parties
¨
circumstances
of the case
It is only then if you cannot ascertain the intention of
the parties or if the intention of the parties is unclear that you move on to
s21.
Intention not clear: s21
Rules
s21 is a provision which sets out five rules which you
can apply to help you ascertain when property has passed.
They are rules to be used as a last resort when you
cannot ascertain the parties’ intention.
Which rule you apply depends on the classification of
goods that you are dealing with.
NOTE that the rules are only to be applied unless a
different intention is appears - so the rules are only to be applied when the
parties have formed no intention to when property is to pass or when they have
not expressed it.
First categorize goods - specific, unascertained or future
Specific Goods: s21 rule 1
Where there is:
ð
an
unconditional contract
ð
for
the sale of specific goods
ð
in
a deliverable state,
ð
the
property in the goods passes to the B
ð
when the contract is made, and
ð
it
is immaterial whether the time of payment or the time of delivery, or both, be
postponed.
There must be:
(1) an unconditional contract;
(2) specific goods; and
(3) the goods must be in a ‘deliverable state’ (meaning
that they are in such a state that the buyer must take delivery of them: s3(4))
So that the property passes to the buyer on formation of
the sale of contract.
This is the complete antithesis of retention of title
clauses.
Presumption that it applies unless ousted by different
intention.
Once you look at the implied conditions you should then
look at the consequences of breach by examining s14(3) which basically says
that you treat a breach of a condition only as a breach of a warranty in two
situations.
So in effect the buyer loses his right to reject the
goods if s14(3):
(1) one way that right is lost under s14(3) is where
there is a contract for specific goods the property in which has passed to the
buyer. This is a litle harst. Some of the cases have extended the time to the
time that the buyer has accepted the goods which can be later than the time of
the contract.
This rule is subject to a contrary intention - in modern
trading conditions it is fairly easy to establish a contrary intention. i.e.
you will see terms that state that property in specific goods in only to pass
on deliver or on payment: International Alpaca Management Pty Ltd v Ensor.
i.e. A COD contract is one of these situations as the
intention of the parties in this situation is that property will pass only on
payment (a condition precedent to the passing of title): RV Ward v Bignell.
If payment is made by cheque it is a question of
ascertaining the intention of the parties to determine whether the cheque is
accepted as equavalent for cash or the alternative interpretation of payment by
cheque could be that the property is not to pass until the cheque is met: Davey
v Robinson Motors.
If you pay by credit card property passes on the tender
of your card.
Specific goods not in a
deliverable state: s21 rule 2
Where there is:
ð
a
contract for the sale of specific goods and
ð
the
seller is bound to put goods in a deliverable state,
ð
the
property does not pass until such thing be done and
ð
the
buyer has notice thereof.
Elements:
(1) performance of that act; and
(2) notification of it to the buyer.
Symes v Laurie - Kniepp J was prepared to apply Rule 2 analogically to
a sale of goods requiring the severance of a wooden house from land. Held,
obiter, that the variant of Rule 2 embodied in the parties’ contract reflected
the need for the house to be put into a deliverable state (by severing it from
the land) but that the contract dispensed with the requirement of notice.
The meaning of “deliverable state” which also applies to
rule 1 where the goods are in a deliverable state is defined in s3(4) SGA as in
such a state that the buyer would under
the contract be bound to take delivery of them.
In Wallace v Safeway Caravan Mart a carvan was
purchased on the condition that a shower be installed and the price be paid.
But before the work could be finished the caravan was stolen - it was held that
the caravan was not in a deliverable state at the time of the theft - so that
neither property nor risk had passed to the buyer and he was entitled to a
refund.
It has been held that the notification requirement in
this section may be dispensed with if you can ascertain that that was the
intention of the parties - so it may not be fatal that the buyer has not
received notice that the goods are deliverable: Joseph Reid v Schulz.
Specfic goods in a deliverable state but seller bound to weigh,
measure, test to ascertain price: s21 rule 3
Where there is:
ð
a
contract for sale of specific goods in a deliverable state but
ð
seller
bound to weigh, measure, test, or do some other act or thing with reference to
the goods for the purpose of ascertaining the price,
ð
the
property does not pass until such act or thing be done, and
ð
the
buyer has notice thereof.
The weighing, measuring, testing, etc has to be
something to be done by the seller: Nanka-Bruce v Cth Trust.
Goods on approval/sale or
return: s21 rule 4
Where goods:
ð
are
delivered to the buyer on approval/sale or return or on any similar terms
ð
the
property passes to buyer in three ways:
1. Buyer indicates his approval or acceptance to seller.
2. Buyer does act adopting transaction.
3. Buyer retains the goods without giving notice of
rejection beyond the time fixed for return of the goods, or if no fixed time,
beyond a reasonable time. What is a
reasonable time is a question of fact.
If a buyer sells or pledges the goods it will be an act
adopting the transaction so the property will pass to the buyer: Kirkham v
Appleborough.
Notice of rejection
Atari Corp (UK) v Electronics Boutique Stores (UK): said the notice of rejection could refer to the goods
generically. It did not matter that it did not mention the specific goods being
rejected. It did not matter that the goods were not available for collection at
the time the notice was served by the buyer.
Unascertained goods: s21
rule 5
When there is:
ð
a
contract for the sale of unascertained or future goods by description,
and
ð
goods
of that description and in a deliverable state are unconditionally
appropriated to the contract by one party with the assent of the other . .
.
ð
the
property in the goods thereupon passes to the buyer.
The Elafi -
it was held that an unconditional appropriation was not essential to pass
property in unascertained goods. Howeever it is essential that the goods become
ascertained.
s21 rule 5 - requirements
Essential that goods become ascertained and that parties
intend property be transferred: Re Goldcorp Exchange; Re Stapylton
- said that of all five rules there are two main ones - that is that the goods
become ascertained and secondly that the parties intend property will pass.
Unconditional appropriation
Usual way of passing property in unascertained goods.
It is the selection of goods by one party, usually
seller, and the adoption of that act by the other party (distinguish seller
merely setting aside goods which he expects to use in the contract).
It has to be an irrevocable election by seller and
assent to that election by buyer.
see rule 5 ss(2) - an example of unconditional
appropriation.
Contrary intention of
parties: retention of title clause: s22 - Fisher 12.22
ð
Such
clauses are essentially a security device where seller reserves property in
goods sold to buyer until purchase price paid in full.
ð
Contract
with such a clause will be an agreement for sale.
ð
These
clauses will be evidence of a contrary intention as to when property is to
pass.
ð
These
clauses fragment property and possession.
ð
The
possession of goods is given to the buyer but the property in the goods remains
with the seller.
Once property in the goods passes from seller to buyer,
the goods are at the buyer’s risk, whether or not delivery has been made.
s23(1) Unless otherwise agreed:
ð
the
goods remain at the seller’s risk until
ð
the
property therein is transferred to the buyer
ð
but
when the property therein is transferred to the buyer
ð
the
goods are at the buyer’s risk whether delivery has been made or not.
Sterns v Vickers - the reason why the Court of Appeal held that risk to
goods has passed to the buyer when the property in the goods had not, was that
the buyer had taken delivery of a delivery warrant representing the goods from
the seller and the third party bailee had attorned in respect of those goods in
favour of the buyer. It was the buyer, not the seller, who had control over the
disposition of the goods despite the fact that the property has not passed to
the buyer.
You may contract out of s23.
First proviso - Delay
s23(2)
Where a delay in delivery has occurred the goods are at
the risk of the party in fault in relation to any loss which might not have
occurred but for such fault - there must be a causative link.
Demby Hamilton & Co Ltd v Barden - the buyer was late in taking delivery of apple juice
- in the meantime the apple juice deteriorated and the court held that because
delivery had been delayed through the fault of the buyer and in applying the
first proviso to s23 in ss(2) the buyer have to bear the risk even though the buyer
at that stage did not have property in the goods.
Second proviso - Bailment
s23(3) This section does not effect the duties or liabilities
of either seller or buyer as a bailee of the goods of the other party.
Allied Mills Ltd v Gwydir Valley Oilseeds Pty Ltd - relevant to ss(3) - this section does not effect the
duties or liabilities of either the seller or buyer as a bailee of the goods of
the other party - here the seller had failed to deliver the goods and they were
destroyed by fire while being stored in the warehouse - the buyer had resold
the goods and was forced to buy other goods to replace them in a rising market
and claimed damages against the seller to cover subcontracts - the buyer was
relying on the proviso in ss(3) but the seller argued that the proviso only
exonerated the buyer from paying for the goods, it did not entitle the buyer to
damages - the NSW Court of Appeal rejected this argument - holding that the
goods were at the risk of the seller because of his breach of the contract and
that if the contract had been complied with the goods would not have been
destroyed and that the seller was liable as bailee as they were storing the
goods in the warehouse.
FURTHER NOTE:
s34(4) says that goods are at the seller’s risk if the
goods are sent by sea and the seller fails to give notice to the buyer to
insure them.
s35 says that if the seller has agreed to deliver the
goods at the seller’s own risk, at a place other than where they were sold,
then the buyer must nevertheless, unless otherwise agreed, take any risk or
deterioration of the goods necessarily incident to the course of transit.
Transfer of title by the
non-owner
The second part of Part III of the Act deals with the
transfer of title by the non-owner. Normally the fundamental principle is the
nemo dat rule which states that no one can give a better title than he or she
has or is authorized to give.
The problem with this principle is the innocent third
party. The balancing act is performed by the exceptions to the nemo dat rule.
Nemo dat rule - no one can give a better title than he or she has or
is authorized to give: Sigglekow v Gibbs it was held that the nemo dat maxim
means a person who does not have title cannot give one.
A strict application of the rule is not always
appropriate and accordingly there have been several exceptions to the rule
developed. There are six exceptions to the rule.
The main provision in the SGA is s24(1). It repeats the
nemo dat rule and then contains within it one of the exceptions to the nemo dat
rule expressly and then refers to others impliedly.
Subject to the Act,
ð
when
goods are sold by a person who is not the owner and
ð
who
does not sell them under the authority or with the consent of the owner,
ð
the
buyer acquires no better title to the goods than the seller had,
ð
unless
the owner of the goods is by the owner’s conduct precluded from denying the
seller’s authority to sell.
This last part refers to estoppel.
Exceptions to the nemo dat
rule
“subject to the Act” is referring to:
1. Sales under voidable title: s25
2. Sales by a seller or buyer in possession after the
sale: s27
s27(1) deals with the seller in possession exception.
s27(2) deals with the buyer in possession exception.
3. Bona fide purchaser for goods bound by writ of
execution: s28
4. Revesting of stolen goods on conviction of thief: s26
5. found in s24(2)(a) - is a saving clause - it retains
the application of the Factors Act in relation to this area of sales of goods
law.
s24(2)(a) - saving clause which protects ability of
merchantile agent in possession to confer good title on an innocent third party
for value: Factors Act 1892 (Qld) - NEED
s3 AND s2 OF THE FACTORS ACT - “factors act exception”.
6. is embodied in the concluding words of s24(1):
“unless the owner of the goods is by the owner’s conduct precluded from denying
the seller’s authority to sell.”
So has the owner done anything to estoppel him or
herself from asserting title to the goods. The Act does not define what type of
conduct it is that will preclude the owner from denying the seller’s authority
to sell.
What is relevant conduct?
Refer to principles of common law expressly saved by
s61(2), namely estoppel: Associated Midland Corp v Sanderson Motors - this case
is authority for the point that those words in s24 are referring to the common
law principles of estoppel.
So we are really focussing at common law on the
principles of estoppel to guide us in determining what type of conduct will be
relevant to this exception.
When the seller has a voidable title but the seller’s
title has not been avoided at the time of the sale, the buyer acquires a good
title to the goods, if the buyer buys them in good faith and without notice of
the seller’s defect of title.
This section allows for someone to get good title
provided that the seller with voidable title doesn’t have their title avoided
before they on sell to you.
s25 envisages two sales
Seller 1 to Buyer 1 - pays with cheque which is
dishonoured.
Buyer 1 now Seller 2 . . . Buyer 2
The s25 sale is a second sale where the seller is the
buyer under the first contract and is on selling the goods.
To get good title, buyer 2 must satisfy s25. Must
determine whether contract is void or voidable. s25 will only apply if the
title is from a voidable contract.
Voidable title?
ð
Can
be difficult to decide whether a contract is void for mistake and therefore a
nullity or whether it is merely voidable for fraud.
ð
The
usual situation is when a seller sells goods to a buyer under a
misrepresentation of fact, fraudulent or innocent, the title of the buyer is
generally voidable - so if the buyer resells the goods before their title is
avoided then the purchaser who he sells to will get good title under s25
provided that person is someone who is acting in good faith and without notice
of the seller’s defective title.
ð
A
difficulty can arise if the misrepresentation is so fundamental as to give rise
to an operative mistake by the seller - if it is an operative mistake then the
contract is void (generally such contracts will be voidable - but it is
possible that they will be treated as void):Ingram v Little; Lewis v Averay.
Did original seller rescind
contract in time?
If first contract is voidable then issue arises as to
whether seller 1 rescinded contract before property under contract 2 passed to
the buyer (i.e. buyer 2 is an innocent third party).
It is generally accepted that a seller could only
rescind a contract for misrepresentation by the buyer by giving notice to the
buyer.
Car & Universal Finance v Caldwell.
How do you communicate an election to rescind? Normally it must be
communicated to the other party to the contract - but if that person is a
fraudulent rogue who has absconded then obviously communication is going to be
impractical - in Car & Universal Finance v Caldwell it was held that it was
sufficient that the seller on discovering the fraud took all possible steps to
regain the goods - in this case the seller informed the police of the fraud and
that was held to be sufficient so the innocent third party did not get good
title under s25 exception because the seller had rescinded the first contract
in time. THIS IS BAD LAW - DON’T USE IT
2. Seller or buyer in
possession after sale: s27
SGA enables a seller or buyer in possession of goods after
sale to pass a good title to a third party acting in good faith and without
notice of the previous sale.
Kind of estoppel.
s27(1) Seller in possession
Where a person, having sold goods continues or
is in possession of the goods or documents of title thereto, the delivery
or transfer by the seller (or by a mercantile agent acting for the seller) of
the goods or documents of title under any sale, pledge, or other disposition to
a person receiving them in good faith and without notice of the
previous sale, has the same effect as if the transferor (the seller)
were expressly authorized by the owner of the goods to make the same.
s27(2) - deals with what is called the buyer in possession
exception - it sounds very similar to the seller in possession exception but
differs in three main respects.
Firstly it says when a person has bought or agreed to
buy goods (it extends to situations of an agreement to sell) where as s27(1)
applies only where there was a sale.
Secondly - the difference relates to the words “with the
consent of the seller” - so the person who has agreed to buy goods obtains with
the consent of the seller possession of the goods - in s27(1) there was no
requirement that the seller be in possession with the consent of the buyer -
under s27(2) the seller (who might be the owner or someone with the right to
sell) must consent to the buyer obtaining possession - this consent will still
be consent regardless of whether it was fraudulently obtained - so consent for
the purposes of s27(2) is still consent even if fraudulently obtained: Langmead
v Thyer Rubber.
Thirdly another difference between the two subsections
is in relation to the effect of compliance wiht the provisions:
ð
under
ss(2) the transaction would have the same effect as if the transferor were a
mercantile agent entrusted by the owner with the goods or documents of title.
ð
under
ss(1) the wording is different.
ð
It
has been held that not withstanding the different wording that the sections
mean much the same - and that a delivery of goods by a buyer of goods in
possession should be treated as though the buyer or mercantile agent were
expressly authorized by the owner of the goods to make the further sale.
ð
So
there is an assumption to be made that a mercantile agent is disposing of the
goods in the ordinarily course of business: Gamers Motor Centre (NSW) v
Natwest Wholesale Australia.
What is the general effect of the subsections without
concerning ourselves with the detail?
ð
Under
ss(1) the third party is protected where they have received goods under a sale
by a seller (who is not the owner anymore because they have already probably
sold them previously) who had possession of the goods but not property.
ð
In
a situation where you can apply s27(1) the argument is that the owner is a
little bit more to blame than the third party because the owner left the goods
in the possession of the seller and therefore allowed this to happen.
ð
The
effect of ss(2) the buyer in possession exception is generally to protect a
third party from the buyer of the goods who had possession but not possession
in them - in this case why should an owner be prejudiced against in this
situation? - until you get payment of the goods you shouldn’t put the purchaser
in possession of the goods as again you are allowing this situation to
eventuate.
Elements of s27(1):
1. S selling to B1
2. B1 allows S who is not the owner to remain in
possession
3. S resells to B2
4. then there is a dispute to title between B1 and B2
5. B2 wins if s27(1) applies.
Elements of s27(2)
1. S delivers possession of goods to B1
2. B1 has possession of goods but no yet the property in
the goods
3. B1 then sells to B2
4. Again B2 should win if B2 can show that B1 was a
buyer in possession with the consent of the seller.
A few legal points to note:
1. “continues in possession” in s27(1) - what does it
mean to be a seller who continues in possession under s27(1) - it has been held
that that only refers to continuous physical possession, it does not matter if
there has been a change in nature of the possession.
Whenever a seller continues in possession after a sale
then the title of the seller by which he was in possession has to have changed
from being the owner in the first instance to the bailee in the second -
holding on behalf of the owner - so the nature of the possession will usually
change from owner to bailee: Pacific Motor Options v Motor Credits Higher
Finance Ltd.
Sometimes you can be wondering on a given set of facts
whether it is really the buyer in possession exception that applies or the Factors
Act exception - an important point to remember is that someone who is given
goods to sell by the owner is not a buyer in possession but they might by a
mercantile agent for the purposes of the Factors Act exception: Shaw v
Commissioner of Police of the Metropolitis.
The Factors Act exception
ð
The
Factors Act exception is referred to in s24(2) - the actual exception itself is
contained in s3 Factors Act.
ð
s2
of FA defines what it is to be a mercantile agent - a mercantile agent is
someone whose business it is to sell goods or to consign goods for the purpose
of sale or to buy goods or to raise money on the security of goods. Is someone
who has authority to sell goods on behalf of someone else.
ð
In
relation to this definition it can be the first time you have acted as an agent
so long as you are acting in a business capacity and not as a friend of the
owner then you can still qualify as a mercantile agent.
ð
The
Factors Act itself deals with a range of commercial activities undertaken by
people called factors.
ð
We
are concerning on the exception to the nemo dat rule which is contained in s3.
ð
The
exception says that when a mercantile agent is, with the consent of the owner
[the same concepts come up in this section as did in s27] in possession of
goods or the document of title of goods, in sale, pledge, or other disposition
of the goods made by the agent when acting in the ordinary course of
business of a mercantile agent shall subject to the provisions of the Act
be as valid as if the agent were expressly authorized by the owner of the goods
to make the sale [there is a proviso to the section] provided that the person
who takes under the disposition acts in good faith and has not at the time of
the disposition notice that the person making the disposition has no authority.
This exception was contained within s24(1) in the
closing words of that section -> where it said that where the owner is by
his conduct precluded from denying that the seller has title - it is necessary
to resort to the common law because the Act does not state what type of conduct
by the owner will preclude he or her asserting title to their own goods.
Estoppel in this context covers two broad situations:
1. where the owner makes the representation that the
seller is the owner of the goods or has the authority to sell them.
2. where the owner’s act or omission allows the seller
to create the appearance of ownership.
What is the effect of
establishing estoppel in this context?
Well the effect is the the buyer who is the innocent
third party acquires a title to the goods against all the world not merely the
rights to plead an estoppel against those few parties privy to the
representation by the owner. So it is a true estoppel: Moregate Mercantile
Co v Twitchens; Thomas Australia Wholesale Vehicle Trading Co v Marrick
Finances Australia.
What type of conduct might
lead to estoppel?
If you are the owner of goods what type of conduct could
prevent you from asserting title where someone who didn’t have your authority
sold your car to someone else who acted in good faith and paid for it. Merely
entrusting someone else with your goods/car is not enough to ground an estoppel
against you: Moregate Mercantile Co v Twitchens; Lennard v Lassie.
NOTE: what if you give goods to a mercantile agent (not just an ordinary
person) - if you give goods to a mercantile agent who is someone by the very
nature of their calling has implied authority to sell goods entrusted to them -
then a sale by a mercantile agent in the ordinary course of business will pass
good title to an innocent third party: this is embodied in s3 Factors Act.
If you give someone the documents of title to particular
goods then that also won’t of itself be sufficient to ground an estoppel
against the agent: Mercantile Bank of India v Central Bank of India.
There have been cases where the owners have given
possession of the car and documents of title to someone who has ended up being
a rogue and sells to an innocent third party - is that conduct by the owner going to preclude the owner from claiming
title to the car?
If you have done both that will depend on whether the
circumstances were such as to led a third party to suppose that the possessor
was the owner of the goods - so the outcome can change depending on the circumstances
of the case - contrast the case of Motor Credits v Pacific Motor Options
and Central Newbury Car Options v Unity Finance.
What is a document of title
to goods?
It has been held that a certificate of ownership or
registration is not a document of title to goods: Cook v Jenkins.
If in addition a signed notification of sale document is
handed over together with a letter confirming the sale of the vehicle then this
has been held to be a clear representation of ownership intended to be relied on
by the innocent third party purchaser: Shaw v Commissioner of Police .
In relation to the area of estoppel by negligence under
s24 - it does not arise simply because the owner of the car has been careless
or negligence - if you are going to argue estoppel by negligence you are going
to have to prove the elements of negligence - this requires a duty owed by the
owner to the innocent third party purchaser and if not specifically to the
third party purchaser than a duty of the general public of which the innocent
third party purchaser was a member. Neglect of that duty must be an approximate
cause of that person being mislead: Mercantile Bank of India v Central Bank
of India.
One test
which has been applied in the case of Thomas v Merrick Finance involved asking whether having regard to the
circumstanes known to the parties a reasonable person in the position of the
acquirer of the property would expect the owner acting honestly and
responsibly, if the owner claimed to any title in the property to take steps to
make that claim known by the acquirer and whether in the face of an omission to
do so the acquirer could reasonably assume that no such title was claimed.
To illustrate this look at Lennard v Alassie -
here an owner of a car lent it to a friend and then discovered that the friend
without authority had renewed the registration in his own name - the car is
then onsold to an innocent third party purchaser - there is then a dispute
between the innocent third party purchaser and the owner - it was held that
because the owner had taken no steps to regain possession or to rectify the
situation that the owner was estopped from denying the friend’s authority to
sell the car. So the owner had not acted honestly or responsibly - the owner
had become aware of dishonest dealings with his car and had done nothing about
it - so estoppel was held to have existed.
The performance of the
contract
This is dealing with Part IV of the Act. The issue has
been subdivided into three parts:
ð
the
seller’s duty to deliver
ð
instalment
deliveries
ð
acceptance
of the goods and the buyer’s loss of his right of rejection.
v
s29
provides that it is the seller’s duty to deliver the goods and the buyer has
the corresponding duty to accept them and pay for them.
v
Under
s30, unless it is otherwise agreed, delivery and payment of the price are
concurrent conditions.
v
The
rules as to delivery are set out in s31 - there are quite a number of specific
rules relating to delivery.
v
s31(1)(A)
provides that unless the parties have agreed otherwise that the place of
delivery is the seller’s place of business or if there is not one the seller’s
residence.
v
s31(5)
provides that unless otherwise agreed the expenses associated with putting the
goods into a deliverable state must be borne by the seller.
v
Delivery
may be actual, constructive, or symbolic. The word delivery is statutorially
defined in s3. It means the voluntary transfer of possession from one person to
another. Note it says transfer of possession not property - property can be
transferred before, at the time of, or after delivery.
v
s34
deals with delivery to a carrier. It provides that if the seller is required to
send the goods to a buyer then delivery to a carrier for that purpose will be
deemed to be delivery to the buyer.
Instalment deliveries:
s33(2) and Maple Flock Co v Universal Furniture
Products; Hammer and Barrow v Coca-Cola.
s33(2) is a section that you have to consider when you
are determining whether the buyer has a right to reject goods when he has
bought them by instalment.
A contract for sale by instalments is a situation where
goods are delivered by stated instalments and separately paid for.
In order to determine when a buyer with that kind of
contract loses their right to reject the goods then you have resort to s33(2)
which provides that if the seller makes defective deliveries in relation to one
or more instalments or if the buyer neglects or refuses to take delivery of or
pay for one or more instalments then it is a question in each case depending on
the terms of the contract and the circumstances of the case whether the breach
of the contract is a reputiation of the whole contract or whether it is a
severable breach giving rise to compensation but not giving rise to treating
the whole contract as reputiated.
This is a test
we have incorporated from the common law. So you have to ask whether the breach of the contract is a reputiation of the contract
or whether it is just a severable breach giving rise to compensation.
The basic test of what conduct amounts to repudiation is
whether the acts or conduct of the party in breach evinces an intention to no
longer be bound by the contract.
So if the breach is of such a nature to lead to the
inference that similar breaches will be committed in the future then the whole
contract can be regarded as repudiated and may be rescinded: Maple Flock v
Universal Furniture Products.
In particular they said that you had to consider the
ratio quantitatively which the breach brought to the contract as a whole and
the degree of probability or improbability that the breach would be repeated.
Acceptance of the goods
& the buyer’s loss of the right of rejection/recission.
s33(2) dealt with the loss of the right of rejection in
the context of a specific type of contract - an instalment contract.
But a buyer can also lose the right to reject goods in a
situation of an entire contract where there is only one item for sale.
We dealt with this when we looked at breaches of implied
conditions under the SGA - ie. s16, s17(a)(b)(c) and (d) - once you had established
a breach of a condition the next step was to consider the consequences of
breach and that involved looking at s14(3) - s14(3) has two limbs:
ð
one
relating to an entire contract as opposed to a severable contract and in that
situation where you have an entire contract and the buyer has accepted the
goods then the buyer loses the right to rejection the goods
ð
the
second limb of s14(3) relates to a contract for specific goods - it says that
where there is a contract for specific goods and property has passed to the
buyer then the buyer loses the right to reject.
There is an argument that acceptance is actually the key
in either limb as the cases have watered down the strict application of s21
Rule 1 and the second limb of s14(3): Taylor v Combined Buyers; Lippen
International Galleries - that a buyer loses his right to reject in either
case when the buyer has accepted the goods.
When is it that a buyer will
be seen to have accepted goods?
s37 sets out three instances when a buyer will be deemed
to have accepted goods:
1. when the buyer intimates to the seller that the buyer
has accepted them
2. when the goods have been delivered to the buyer and
the buyer does any act in relation to them which is inconsistent with the
ownership of the seller.
There have
been arguments in relation to this second situation - when a buyer enters into
a contract to onsell immediately after they have entered into the original
contract to purchase goods and if the goods have not yet arrived or been
delivered to that buyer can that act of entering into a contract of onsale be
considered to be acceptance within the second limb of s37 -> does “when the
goods are delivered to the buyer” mean actual delivery - can it mean
constructive delivery.
3. Is when after a reasonable time the buyer retains the
goods without initimating to the seller that the buyer has rejected them.
s36(1) provides that where goods are delivered to the
buyer which he has not previously examined he is not deemed to have accepted
them unless and until he has had a reasonable opportunity to examine them for
the purpose of ascertaining whether they are in conformity with the contract.
Here there is a possibility of a conflict between s36
and s37 - in particular between the second instance of s37 and s36.
In other jursidictions they have actually dealt with
that conflict by making s37 subject to s36 but in Qld s36 in not express to
prevail over s37.
Hardy v Hillerns and Fowler - in a jurisdiction where the equilavent of s37 and
s36, the conflict was not dealt with that s37 was not to be read subject to s36
- in this case the buyer resold and despatched a portion of wheat to
subpurchasers before he had a chance to examine the wheat but the court said
that s37 was not to be read subject to s36 and the act of the buyer in
reselling and dispatching the wheat was an act inconsistent with the ownership
of the seller and did amount to acceptance.
“an act inconsistent with the ownership of the seller” -
this phrase has been held to mean an act inconsistent with the right of the
seller in the event of rejection to have the goods returned to him at the place
of examination of the goods as contemplated by the contract: Hammer and
Barrow v Coca-Cola - this makes the test of final acceptance dependent on
whether there has been delivery of the goods to the place contemplated by the
parties for inspection.
The unpaid seller has rights against the goods of the
following nature:
ð
a
right to a lien on the goods for the price while he still has the goods.
ð
a
right to stop the goods in transit after the goods have left the seller’s
possession
ð
a
right of resale as limited by the SGA s41(1)
The statutory remedies are not exhaustive so if the
seller has a reservation of title clause in their contract then the seller will
be able to rely on that provision to recover any goods in the buyer’s
possession if the buyer becomes insolvent.
What are the seller’s rights
against the buyer in person as oppose to the goods?
If the property has passed to the buyer and the buyer is
wrongfully refusing to pay for them then the seller can sue for the price under
s50(1).
Conversely if property has not passed then the seller
cannot sue for the price but can maintain an action for damages for
nonacceptance in certain cases: s51(1) unless the price was payable on a
certain date in which case even though property has not passed the seller can
sue for the price: s50(2).
The buyer’s rights against
the seller
The seller who wrongfully negates or refuses to deliver
goods to the buyer becomes liable to pay damages for nondelivery: s52(1).
s52(2) provides that the measure of damages is the
estimated loss directly and naturally resulting in the ordinary course of
events from the seller’s breach of contract.
The buyer is not entitled to reject goods by reason only
of a breach of warranty by the seller - similar to s14(3) - but may set up
breach that is the breach of warranty in denitition or extinction of the price
or bring an action in damages for the breach: s54(1) - the same applies in the
case that the buyer has elected or under s14(3) has been compelled to treat a
breach of condition as a breach of warranty. s54 says that if it is a breach of
a warranty you have only got your right to damages you cannot reject the goods.
The section says that it is the same if the buyer has elected to treat a breach
of condition or a breach of a warranty or if under s14(3) it is a matter of
compulsion.
SAMPLE QUESTIONS
Read Fisher [10.38]-[10.41].
What is the best/better test for characterising
contracts for the supply of services? See the Deta Nominees “output” test and
compare it to the “substance of the contract” test.
Apply whichever test you think is the preferred test in
Australia, and also consider whether property in the articles passes to Irma
(and if so, on what basis).
Sale of Goods Act 1896, s16:
note the breakdown of s16:
(1) sale by description, and
(2) the existence of an implied condition that the goods
must correspond with their description.
sale by description:
identity vs quality;
ascertained vs unascertained goods;
descriptive words must form part of the contract;
determine as a matter of fact what the descriptive words
were;
the description applied to the goods must be influential
and relied on by the buyer: see Fisher [12.28].
once you have decided whether, as a matter of law, that
the contract is a sale by description, then the next step is to decide whether
that description has been met as a matter of fact: see Taylor v Combined
Buyers Ltd.
determine the appropriate remedy that Jim can get
(damages for delivery of non-conforming goods under s54 of the SGA: see Fisher
[12.51] and see also whether s14(3) is satisfied because Jim has accepted the
goods.
Sale of Goods Act 1896, s17(a):
s17(a) is concerned with the suitability of the goods
that have been sold.
the elements of s17(a) are:
(1) the buyer communicates the “particular purpose” for
which the goods are required;
(2) the buyer must rely on the seller’s skill or
judment;
(3) the goods must be within the description of goods
which the seller supplies Dring the course of business;
(4) the sale must not be of goods sold under their
patent or trade name (see s17(b)).
apply these elements to the sale by Smooth to Jim:
does the contract contain an implied condition that the
goods will be reasonably fit for their purpose?
If so, has that implied condition been breached or not,
and what are Jim’s remedies?
does s14(3) apply if Jim has accepted the goods? See
also s54.
Sale of Goods Act 1896, s17(c):
note the breakdown of s17(c):
(1) sale by description, and
(2) seller is a dealer in goods of that description, and
(3) implied condition that the goods are of merchantable
quality, and
(4) non-applicability of the examination proviso.
sale by description: see Christopher Hill (same
interpretation as for the s16 usage);
identify the actual description by which the goods are
sold (this is a question of fact).
the dealing element:
the seller must be a dealer [trader] in goods of that
description;
one-off vs repeated transactions in a market: see Christopher
Hill;
non-applicability of the examination proviso; see Thornett
Fehr case [objective test] and compare it to the Grosvenor Motors case
[subjective test] (see Fisher [12.36]).
What is the effect of this proviso and how does it apply
to the present case ?
does the contract between Jim and Smooth contain an
implied condition that the goods will be of merchantable quality ?
If so, has that condition been met ?
What is the meaning of merchantable quality (see Fisher
[12.36]).
Think about 4 components: description, purpose,
condition and price.
Issue # 1: can Jim recover the deposit ?
the underlying issue is whether property has passed to
Jim or not.
If it has, then s50 of the SGA applies and Jim must pay
the balance.
If not, then he can recover the deposit on the basis of
a total failure of consideration and not have to pay the balance of the
purchase price.
identify the kind of goods we are dealing with: specific
goods.
Therefore, s20 applies.
What are the intentions of the parties ?
Look at s20(2) as a default setting.
what is the significance of the arrangement concerning
the car ?
it relates to the deliverable state of the goods: see s
21, rule 2 and s3(4).
It could be argued that the car is not in a deliverable
state when it stolen: see the elements of rule 2. See also Wallace v Safeway
Caravan Mart
Ultimately, the loss falls on the seller and Jim can
also recover damages for non-delivery under s52.
Connect also s10 and go through the elements of s10. See
also s23 (dealing with the incidence of risk).
Issue # 2: the payment of the balance of the purchase
price.
this depends on whether property has passed to Jim: see
s20.
What are the intentions of the parties ?
See s20(2) and apply it to the facts of the case (to the
extent this can be done).
Generally:
Is (1) the contract severable or is it an entire
contract, and
(2) has the buyer accepted some or all of the goods ?
As to (1): severability is a question of fact [Esmail
case]; lump-sum payment; express or implied term of the contract regarding
rejection of any defective goods; s14(3) of the SGA.
Form an opinion as to the nature of the contract as
severable or entire and argue on the basis of the conclusion reached. Plead in
the alternative (if necessary).
Issue # 1:
This invokes s37: the performance of an act inconsistent
with the seller’s ownership.
The consequence is that s14(3) is activated. The goods
have been deemed to be accepted. Unless the harshness of s14(3) can be
mitigated, then it is conclusive. See if s33(2) leads to a different result.
Issue # 2:
This invokes s37 and 38 of the SGA. Read Fisher [12.55].
Has G accepted the goods by doing any act with the goods
that is inconsistent with the seller’s ownership after delivery: see s37.
Identify the timing of the delivery point and the inconsistency (the sub-sale).
If the delivery comes after the sub-sale, then Hammer & Barrow says that
s37 is not activated adversely to the buyer’s interests.
If C has acted as the agent of G in delivering the goods
to B, then (1) there is constructive delivery to G and (2) this is an
inconsistent act within s37: E&S Ruben v Faire Bros.
If the contemplated place of delivery was B’s premises
(ie, the sub-buyer’s premises), then the Hammer & Barrow case holds that
there is no delivery until the goods have been delivered there. Thus this
retards the delivery and acceptance points until that time and place, so that
there is no delivery followed by acceptance as mandated by s37 [ie, the order
of these 2 events is inverted].
Issue # 3:
Here the question is whether the likelihood that the
future undelivered goods will be defective so as to justify G terminating the
contract in advance of delivery.
This invokes the Maple Flock test used to apply s33(2):
see Fisher [12.56]. (1) the ratio of the breach to the contract as a whole, and
(2) the probability of repetition. Apply these limbs to the facts, and reach a
conclusion whether it is possible for G to reject future instalments (as well
as those goods already delivered) or whether it is possible only for G to claim
damages and keep the contract on foot.
A bailment is the
relationship that arises when one person (the bailor) delivers goods to another
person (the bailee) under a promise that the goods will be delivered to the
bailor (or as the bailor directs) or dealt with in a stipulated way: Hobbs.
Bailment derives from the
French word bailler (meaning to
deliver).
ð comes from law of tort
ð arises by transfer
by possession CF Finding
ð always
separation of possession and ownership
ð process called delivery
ð delivery makes it a bailment
ð so must look for transaction that creates a separation.
ð goods in bailment only include tangible personal
property - choses in possession usually not included unless it is the
certificate that is under review.
INTEREST
q The bailor is usually the owner of goods.
q The bailee is the possessor
of the goods.
q Bailment
involves the separation of ownership and possession.
[To have separation need DELIVERY]
q Bailment involves goods (tangibles) and not intangibles
that lack material form (choses in action):CF If have document of title ie bill
of lading; Cheque; Hobbs.
Some questions to ask about bailment:
1. How is a
bailment created?
2. When does a
bailment arise?
3. What is the
purpose of bailment?
4. What are the
interests of the bailor and the bailee?
5. What are the
obligations (rights-and-duties) of the bailor and the bailee?
6. How does a
bailment end?
q Bailment relates more to obligations (rights-and-duties)
rather than to property. Bailment is not confined solely to the law of
obligations. Bailment is its own legal category (sui generis). CF contract; Tort
q Contract
is a sufficient but not necessary source of bailment: Hobbs and Parastatidis v Kotaridis
q MEANS - Bailment and contract law are converge i.e.
organizing the movement of goods interstate with a carrier - there is no such thing as a contract of
bailment before you have delivered the goods to the carrier - Bailment of goods is only created when
possession of the goods is transferred from bailor to bailee - there is no
contract before the goods are transferred - it is an inchoate bailment. (if no
delivery – no bailment) – If co-incide look at contract to find the obligations
to each
q
If
there is a contract, then you look to the contract to see if effects the
obligations the bailor and the bailee share under the bailment: Parastatidis
v Kotaridis.
q If there is no contract between the bailor and the
bailee, GO to the general law of bailment (the common law) supplies the terms
of the bailment. (lend someone an article etc)
- if NO fee (non-contractual)
The 3 elements of bailment
are:
1. the actual or constructive delivery of goods by the bailor to the bailee;
2. the voluntary and consensual assumption of
possession by the bailee (the bailee has control over the goods);
3. the bailee is knowingly in possession as a bailee: The Pioneer Container (this is a mental or intentional element). – If thought
making a GIFT – no Bailment even if only lending
Indica of possession
q Note the convergence of intention and control in
the bailee’s case. This is consistent with possession at general law.
q A
bailment cannot exist in the circumstances where a person is in possession of
goods and is unaware of that possession: Consentino
v Dominion Express.
Bailments can be classified
according to whether they are:
1. commercial (or for reward) - commercial
custodial services, hire or pledge
or for paid services/work;
q A
pledge is a type of bailment.
q It is a bailment for security purposes. [pawn for money
– borrow money against security)
q Commercial bailments are usually tied to the law of
contract. So whenever you have a commercial bailment you usually have the
elements of a contract - offer, acceptance, intention to enter into legal
relations, consideration.
2. gratuitous - safekeeping, for unpaid work or for loan.
q No linking to contracts in these bailments - no
consideration.
See also the scheme in Coggs v Bernard:
1. depositum (gratuitous safekeeping);
2. commodatum (gratuitous loan);
3. locatio et conductio (hire);
4. vadium (pledge);
5. locatio operis faciendi (contract for
work and labour);
6. mandatum (gratuitous work and labour).
There are at least 4 other
forms of bailment:
1. substitutional
bailment: China Pacific TRANSFER OF BAILMENT - (outgoing bailee
vacates possession in favour of incoming bailee) - this is not a subbailment - because the outgoing bailee not only
transfers the possession of the goods to the incoming bailee but ceases to be a
bailee in regard to the bailor - no longer has any rights or responsibilities
to the bailor;
2. quasi-bailment:
Hobbs (bailee contracts or agrees with the bailor to take possession but
does not do so, and instead arranges for another bailee to take possession of
the goods) - the first bailee in truth never acquires possession so it is an
inchoate bailment - commercially when this happens the original intended bailee
can’t take possession so arranges another bailee;
3. bailment by
attornment: Doherty (a bailee in possession of goods agrees to hold them for a
new owner of the goods) - eg. sale of wheat which is held by a grain holder -
is there a transaction effecting ownership that doesn’t effect the possession
of the goods?;
4. mutuum: Parastatidis v Kotaridis;
Customs v Woodlands Enterprises (a
loan for consumption of fungibles, that is, goods that are equivalent in
quantity and quality to those loaned). These cases say that mutuum is not really a form of bailment
at all. Australian cases that agree with this are Chapman Bros v Verco Bros
and SA Insurance Co v Randall.
The similarities between
bailment and agency are:
1. both can arise
independently of contract.
2. semble the bailee and the agent enjoy possession
in their own right: cf Transcontainer;
3. both can
generate fiduciary obligations: Romalpa (but bailment is not a nominate fiduciary relationship while
agency is);
The differences between
agency and bailment are
1. bailment
always involves possession of goods while an agency does not .
2. an agent always
owes a duty of loyalty to the principal while the bailee usually does not
(unless the bailment happens also to be a fiduciary relationship).
Contract is a sufficient but
not necessary source of bailment: Bi-Lo case. A contract to make
delivery does not create a bailment; the goods must be delivered actually or
constructively to the bailee: Hobbs; Bi-Lo (cf substitutional
bailment).
Contract shapes & forms
any bailment arising out of contract: Parastatidis. Note also the
operation of exclusion or limitation of liability clauses.
Tactically
it is almost always in the interest of the bailer to sue on the bailment cause
of action as opposed to the contractual cause of action because the bailee has
the onus of disproving negligence.
Money can be bailed as well
as any other chose in possession.
A loan of money may be
classified as a debt: King v Brown or as mutuum: Parastatidis. Money can also be bailed, although
this is quite rare in practice: Bi-Lo. The bailee would be the borrower
or debtor and the bailor would be the lender or creditor.
BAILMENT
AND RESTITUTION.
The cross-over point between
bailment and restitution law is that the bailee may be under a duty to make
restitution to the bailor if the bailee unjustly enriches itself at the expense
of the bailor: Bi-Lo.
There may also be duty on
the part of the bailor to reimburse the bailee if the bailee acts gratuitously
to safeguard the property of the bailor and incurs expenses while doing so: China
Pacific.
Bailment and sale may
co-exist: Romalpa (a sale of goods contract containing a retention of
title clause under which property [or title] does not pass to the buyer
[bailee] from the seller [bailor] until the buyer pays the price of the goods.
The buyer obtains possession of the goods after the contract of sale is made
and before property in them passes to the buyer).
A transfer of property from
the seller to the buyer may be preceded by the bailment of the goods (with the
seller becoming the bailor and the buyer the bailee): Romalpa.
At the conceptual level, the convergence of sale and bailment focuses on
the interests of the seller/bailor and the buyer/bailee (ownership and
possession) and the distribution (or incidence) of those interests.
At the practical level, the convergence of sale and bailment recognises
that the possession of goods may pass from the seller to the buyer:
1. before the transfer of property (buyer
becomes bailee); or
2. after property has passed to the buyer
(seller remains in possession as a bailee: Doherty.
INTERESTS OF THE BAILOR AND THE BAILEE: A SUMMARY
The interest of the:
1. bailor is ownership (the
bailor usually has a right to immediate possession, especially if the bailment
is at will);
2. bailee is possession (usually
legal and lawful possession).
The bailor’s ownership is qualified by the possessory interest the
bailee enjoys: Franklin v Neate. The bailor has a reversionary interest: City Motors.
The contents of the bailor’s reversionary interest are:
1. the bailor
has an immediate right of possession for the term of the bailment: Transcontainer;
2. the bailor is
entitled to the restoration of the goods or to direct the bailee to deliver
them to some other person: Chapman Bros v Verco Bros & Co.
3. the bailor may
deal with its reversionary interest by alienation; the transferee succeeds to
the interest of the bailor: Franklin
v Neate;
4. the immediate
right to possession gives the bailor the right to vindicate any invasion to its
possessory interest by pursuing tort remedies against tortfeasors: The
Aliakmon.
The bailee has a possessory
interest carved out of the bailor’s ownership. This interest:
1. can be
asserted against the whole world: Penfold Wines;
2. consists of
legal and lawful possession: City Motors;
3. consists of
actual possession when the bailee is in possession: Transcontainer;
4. gives rise to
an immediate right of possession when the bailee is out of possession (except
when the bailment is terminated): City Motors;
5. gives the
bailee exclusive possession of the bailed goods: City Motors;
6. can be used to
create subordinate rights where this is not prohibited by the bailor: Pioneer
Container.
In the absence of a contract
(and subject to the Trade Practices Act
1974), the bailor must:
1. have the right
to bail the goods: Webb v Ireland.
2. ensure that the
goods are reasonably fit for the purpose the bailee requires them for: Derbyshire
Building Co Pty Ltd v Becker.
3. pay the bailee
for services provided by the bailee to the goods of the bailor: Acme Mooring
& Pathing Co (1904) Ltd v S Spanglett Ltd.
4. reimburse the
bailee for any costs incurred by the bailee under a gratuitous bailment in
preserving the goods of the bailor: The Winson.
5. compensate the
bailee for any loss of damage to person or property caused by defects in the
goods: Coughlin v Gillison.
6. warn the bailee
of any dangers that might arise from the goods bailed: Pivovaroff v
Charnabaeff.
DUTIES
OF THE BAILEE: A SUMMARY
In the absence of contract,
the bailee has 5 duties:
1. the duty to
take care of the goods;
2. the duty to
retain possession of the goods;
3. the duty not
to use the goods beyond the authority given or misuse the goods at all;
4. the duty to
return the goods;
5. the duty not to
dispute the bailor’s title.
THE SCOPE OF THE BAILEE’S DUTY OF CARE
The bailee’s duty of care
springs out of a legal relationship: Morris.
The bailee owes the bailor a
duty of care: Hobbs; The Antwerpen. Thus the duty of care concept
links the bailor and the bailee.
The duty of care arises out
of the voluntary assumption of possession of the bailor’s goods by the bailee: Hobbs;
The Antwerpen.
THE CONTENT OF THE BAILEE’S DUTY OF CARE
The content of the bailee’s
duty of care is the standard of care that the law expects the bailee to
observe:Low.
Older cases calibrated the
standard of care according to the type and purpose of the bailment: see Coggs
v Bernard; Coldman v Hill.
Recent cases have abandoned
the idea that the standard of care is to be calibrated according to the type
and purpose of the bailment; instead the modern approach is to describe it in
terms of “reasonable care”: Low;
Port Swettenham.
COMMERCIAL & NON-COMMERCIAL BAILEES & THE
STANDARD OF CARE.
Both commercial and
non-commercial bailees owe the same standard of care - the duty to take reasonable care of the goods: Hobbs and Morris (commercial bailees),
and Pitt Son & Badgery (non-commercial
bailees).
EXAMPLES OF BREACHES OF THE DUTY OF CARE.
What is a breach of the duty
of care depends on the circumstances of the case. Examples include:
1. a keeper of
goods failed to provide adequate security to keep out intruders: Pitt Son
& Badgery;
2. a carrier mixed
money bailed to it with its own funds: Bi-Lo;
3. the bailee delivered the goods to the wrong person: Jackson
v Cochrane.
INCREASES IN THE BAILEE’S DUTY OF CARE.
The bailee’s duty of care is
not an absolute standard or liability unless:
1. this arises
under contract (rare in practice);
2. the bailee
becomes an insurer of the goods (that is, liable as if the bailee were an
insurer of the goods) from the moment the bailee breaches the bailment: Mitchell
v Ealing LBC.
PROOF OF BREACH OF BAILMENT.
The bailor must prove 3
things to establish a breach of bailment:
1. the existence of the bailment as a juridical
phenomenon;
2. that the goods were lost or damaged during the course
of the bailment: Chesser;
3. the bailor’s own loss or
damage: Vanguard Press.
Once 2 and 3 above are
proved, then the onus and burden of proof shifts to the bailee for the bailee
to prove that the bailee is not liable for the loss or damage to the goods
because it took reasonable care: Pitt Son & Badgery; Morris; Low.
The justification for this
rule is that the bailee is in possession of the goods and can carry the burden
of trying to exonerate itself from liability: Cowper.
The bailee may satisfy the
evidentiary burden it carries by showing 1 of 2 things:
1. the bailee was
not at fault (the casualty took place despite the exercise of reasonable care);
or
2. the loss would
have taken place even if the bailee had taken reasonable care but did not do
so: Conway.
The first element goes to an
absence of fault; the second goes to
an absence of causation.
The bailee is not liable for
ordinary wear and tear of the goods: Moorhouse.
THE BAILEE’S DUTY TO RETAIN POSSESSION.
Generally, a bailee must
retain possession of the goods and not delegate the bailment to any one. This
applies especially to commercial bailments for custody: Edwards v Newlands
& Co.
Corporate bailees can always
delegate the bailment to another person (such as an officer or employee). That
bailee remains vicariously liable for
the acts and wrongs of the delegate: Morris.
The bailee must observe any
mandate given by the bailor relating to the delivery of the goods to any place
or other person: Bi-Lo case.
THE BAILEE’S DUTY NOT TO USE OR MISUSE THE GOODS.
The bailee’s duty not to use
or misuse the goods can be broken down by saying that the bailee:
1. must not use
the goods under a bailment of safekeeping unless this is authorised by the
bailor or is necessary for the preservation of the goods: Webb v Ireland;
2. must not use
the goods under a bailment of loan beyond any of the normal range of uses which
the goods have, or contrary to any direction of the bailor: Coggs v Bernard;
3. must not
convert the goods under any form of bailment: Penfolds Wines (this duty co-exists with the duty to take reasonable
care of the goods: Morris).
THE DUTY TO RETURN THE GOODS.
The bailee must, at the end
of the bailment either:
1. return the
goods to the bailor; or
2. deal with the
goods as directed by the bailor: Jackson v Cochrane;
The nature of this duty is not an absolute duty, although it is a
fundamental duty: Gamer; Bi-Lo.
When
must the bailee deliver up the goods?
1. in a bailment at will, when the bailor makes
an unequivocal demand for their return: Mitchell;
2. in a bailment for a term, at the end of the
term: AGC v Ross.
Where
must the goods be delivered up?
1. the place (if
any) agreed by the parties: Mitchell;
2. If there is no
agreed venue, then the place where the goods are located: Mitchell.
TO WHOM MUST DELIVERY BE MADE?
Delivery must normally be
made to the bailor, but if the bailor directs that delivery be made to a third
party, then the bailee must comply: Jackson v Cochrane.
An example of the latter is
where the bailee is a carrier and is under a duty to deliver the goods to a
third party: Bi-Lo.
Sub-bailment is a bailment
by the bailee (or sub-bailor) to the sub-bailee: Pioneer Container.
The bailee transfers
possession to the sub-bailee: Bi-Lo.
There can also be any number
of bailments below the level of the sub-bailee so long as possession is
transferred (or delivered) from each bailee to the next sub-bailee (who takes
possession of the goods): Hamburg Star.
Sub-bailments divide into
those which are authorised and those
which are unauthorised: Pioneer
Container.
RATIONALE FOR AND EFFECT OF SUB-BAILMENT.
The Pioneer Container establishes that:
1. there is a collateral bailment between the
head-bailor and the sub-bailee even if there is no contract ;
2. the sub-bailee
owes the duties of a bailee to the
head-bailor;
3. the rationale of sub-bailment is that the
sub-bailee voluntarily assumes possession of goods that the sub-bailee knows
are not the property of the intermediate bailee but are the property of another
person.
A sub-bailment on terms means that the bailment by the
intermediate bailee to the sub-bailee takes place on terms dictated by the sub-bailee, including any limitation and
exclusive jurisdiction clauses. It requires the consent of the head-bailor: Pioneer Container.
Stipulations in the contract
between the intermediate bailee and the sub-bailee can bind the head bailor
(despite the absence of privity of contract) because the owner of the goods
(the head-bailor) consented to the sub-bailment: Pioneer Container.
The sub-bailee must have
notice that the goods are owned by someone other than the intermediate bailee: Morris; Pioneer Container.
The following events
terminate a bailment:
1. Demand and
delivery of the goods: Mitchell;
2. Act of repugnancy
by the bailee: Union Transport case;
3. Transfer of
property by the bailor to the bailee: Motor Mart;
4. Destruction of the goods: Spycatcher (No
2);
5. Termination by
operation of law: Re Aebly’s
Wills; Hawkins v Clayton.
SEMINAR 12: BAILMENT
Question 1:
Assumption: the stolen goods are never recovered.
Chronology
Ben shows Bill the diamonds Ben bought overseas.
By agreement, Ben leaves the diamonds with Bill.
The diamonds are stolen from Bill.
Issues
Is there a bailment between Ben and Bill?
Does Ben have a good cause of action against Bill for
breach of bailment (or any other cause of action?)
Issue No 1: is there a bailment?
The bailor must prove that there is a bailment:
Element 1: Actual or constructive delivery of the goods
by the bailee to the bailor;
Element 2: The voluntary (or consensual) assumption of
possession of the goods by the bailee;
Element 3: The bailee must be knowingly in possession of
the goods: see The Pioneer Container.
Issue No 2: What cause of action does Ben have against
Bill?
To set up the cause of action for breach of bailment,
the bailor must prove three things:
the existence of the bailment as a juridical phenomenon;
that the goods were lost or damaged during the course of
the bailment: Chesser [1961] 1 Lloyd’s Rep 534;
the bailor’s own loss or damage: Vanguard Press
(unreported, FC, SC WA, 7/9/95).
To defend the claim, Bill must show 1 of 2 things:
the bailee was not at fault (the casualty took place
despite the exercise of reasonable care); or
the loss would have taken place even if the bailee had
taken reasonable care but did not do so: Conway [1986] 1 NZLR 382.
The first element goes to an absence of fault; the
second goes to an absence of causation.
Question 2:
Approach:
draw a diagram of the parties and their relations: use
the one at Fisher [5.70] as a template.
identify in particular the bills of lading and the
effect of the limitation of liability clause (eg, which parties are bound by
it).
Personal Property Interests:
identify the sale and the bailments. Make sure that you
understand and can identify the various interests and how they are dealt with.
is there a bailment from the consignor (XPT) to the ship
(Medex) ? What kind of bailment is there between the 2 ships ? What important
clause does this bill contain ?
is there a sub-bailment from Medex (Tin Can) to the
Semper Fidelis ? What important clause does this bill contain ?
is there a collateral bailment between XPT and The
Semper Fidelis ? Is it supported by any contract ? Does this matter ?
Sub-bailment on Terms:
is there a sub-bailment on terms and if so, between whom
?
what is the effect of the sub-bailment on terms ?
The Pioneer Container holds that in a sub-bailment on
terms, the bailor is bound by the terms on which the sub-bailee acquired possession
from the bailee because of the consent of the owner (bailor) to the creation of
a sub-bailment. Hence the terms of the bill of lading issued by the Tin Can to
XPT is decisive, in particular the consent. What duty of a bailee does this
clause seek to cover ?
the bill of lading issued by the Semper Fidelis contains
a limitation of liability clause. On what basis does this bind XPT ? What is
the explanation given for this in The Pioneer Container?
note that there are 2 bills of lading and 2 back-to-back
bailments. Make sure that you understand how they dovetail together and how
they operate together.
In answering a question always go through all the forms
of authority:
1. Did this person actually have express authority to
enter into this act or transaction - look at employment contract between that
person and the sale of whatever (in questions there will usually be some
limiting written agreement that will limit the agent’s authority).
Condition is excluded if consumer examines goods before contract
made as regards defects which that examination ought to reveal.
The examination is the ACTUAL examination not the
examination a reasonable buyer would have made: Truck Wreckers (1979) Pty Ltd v
Waters.
LG Thorne v Thomas Borthwick - Held - that the mere fact that a sample had been
shown by the intending vendor to the prospective purchaser in the course of
negotiations leading up to a sale did not necessarily make the final contract a
sale by sample. If the contract is reduced to writing after the sample has been
shown, and makes no reference to this fact, then the written contract, if
apparently a complete one, cannot have an added term relating to the sample
incorporated in it by extrinsic evidence. -> -> -> sale of certain
oil.
James Dummond & Sons v Van Inger - Held upon such a contract that there was an implied
warranty that the goods should be fit for use in the manner in which goods of
the same quantity and general character ordinarily would be used. Cloth
merchants ordered from clothing manufacturers worsted coatings which were to be
of a quantity and weight equal to the samples. Latent defects in both goods and
sample making goods unfit for the use that they had been bought for -
manufacturers aware of reason that goods purchased for.
