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Lecture

Transfer of Property and Risk

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Department
Law
Course
JSB171
Professor
All Professors
Semester
Spring

Description
TRANSFER OF PROPERTY AND RISK Plaintiff v Defendant DRAW DIAGRAM: [Owner] [Seller] [Buyer] E.G.: E.G.: E.G. • Retention of Title clause • Mortgagee over goods • Innocent 3 party over [goods] • Agent exceeding authority • Mortgage over goods (mercantile agent) • Principal of seller 1. ISSUES: IF buyer is bankrupt: Here, [buyer] has become insolvent. It is necessary to determine whether property has passed to determine whether or not the goods are able to be [sold by trustees/claimed back by seller]. IF goods are now damaged: Here [goods] have been damaged in transit etc. To determine whether [seller] or [buyer] bears the loss it is necessary to ascertain whether risk and property have passed. IF buyer hasn’t accepted goods: Here [buyer] has not accepted the goods. To determine whether [seller] can sue for the price instead of damages (s 50 SGA) it is necessary to ascertain whether property has passed 2. DISTINCTION BETWEEN TITLE AND PROPERTY: In SGA: • Title deals essentially with the Nemo Dat rule (can’t pass better title than you have). • Property deals essentially with ownership in the goods. Example: • Hendrickson v Mid-City Motors: A clause provided title remained with the vendor until price fully paid. HELD: interpreted the clause narrowly drawing a distinction between reservation of title and property; therefore the property passed but the seller continued to have a lien and right to defer the legal title. Importance of determining when property passes: • Risk prima facie passes with property (s 23 SGA) • Buyer may lose right to reject goods once property has passed (s 14(3) SGA) • Party with property in the goods can generally sue for damage caused to the goods • Buyer with property can pass good title to a third party • Seller can only sue for the price if property has passed to the buyer (s 50 SGA) • Also: if seller becomes insolvent and the buyer has already paid for the goods, then you will want to know whether property has passed because the buyer would want to claim those goods as their own, rather than having to line up with all the other unsecured creditors in bankruptcy. IF QUESTION DEALS WITH RISK: (e.g. property is damaged) (else skip to below) Prima facie risk passes to the buyer when property passes, unless there is a contrary intention in the contract: s23(1) SGA. IF contract states risk passes immediately: Here, contract provides that risk passes ________; therefore [buyer/seller] will be liable for the loss. IF contract is silent: Here, the contract is silent as to the passing of risk; therefore it is necessary to determine whether property has passed to determine if risk has also passed. GOTO IF QUESTION DEALS WITH PROPERTY PASSING below IF delay in delivery AND goods damaged because of delay: Here there was a delay in delivery and the [goods] were subsequently destroyed/damaged. Section 23(2) acts as a proviso to the statutory presumption in s 23(1) SGA and provides that where there is a delay, the goods are at the risk of the party whose fault the delay is unless there is contrary intention. Here, _____. IF seller at fault: Here, similarly to in Allied Mill v Gywdir, the seller, [seller] caused the breach of contract (late delivery) and therefore similarly to this case [seller] will be liable. IF buyer at fault: Here, Allied Mills v Gywdir, can be distinguished because the buyer, [buyer] has caused the breach (late delivery) and therefore applying s23(2) the seller, [seller] will not be liable. Example: o Allied Mills v Gwydir: Seller was in breach and failed to deliver part of the goods; a fire subsequently destroyed the goods. The buyer had already resold the goods and was forced to re-buy in a rising market; he claimed damages against the seller. Seller counter-argued that there was frustration under s 10 SGA and therefore he was not liable. HELD: rejected counter-argument; stated that the proviso preserved the law of bailment and as bailee the seller must take reasonable care of the goods. HELD: s10 did not apply nor did a term in the contract exonerating the seller for a breach outside his control as it was within in his control to prevent the fire through precaution. Therefore the seller was liable. IF QUESTION DEALS WITH PROPERTY PASSING: (or contract silent on risk) 1. ARE GOODS SPECIFIC OR UNASCERTAINED? Goods can fall into a range of categories, whether they are ascertained will affect [buyer]’s rights: Re Wait. IF unclear on facts: Here, it is unclear whether (goods) are specific or unascertained, therefore it is necessary to consider the rules applicable to each. IF Specific: Here, [goods] are ‘identified and agreed upon at the time the contract of sale was made’, therefore they are specific: s3 SGA. IF Unascertained (or future) Here, [goods] are ‘not identified or agreed upon at the time the contract of sale was made’, therefore they are unascertained: Re Wait. Because the goods are unascertained [buyer] will only have a remedy for damages which may or may not be equal to contract price, not specific performance: s51(1) SGA; Re Wait. Example: Re Wait: Bought half a share of cargo of wheat onboard a boat, HELD: unascertained because not separated or segregated in any way; therefore property unable to pass despite buyer having paid. • IF Generic Unascertained (90 tones of wheat from anywhere): Furthermore [goods] are generic unascertained goods, as they are sold on terms which preserve [seller]’s freedom to decide how and from what source they will obtain said goods: Re Goldcorp. • IF Quasi-Specific Unascertained (90 tones of wheat from that 100 tones): Furthermore [goods] are quasi-specific unascertained goods, as they are to be supplied from a fixed/predetermined source, from which [seller] can make their own choice: Re Goldcorp. NOW GO TO EITHER: (notes sections) • IF DECIDE – UNASCERTAINED GOODS • IF DECIDE – SPECIFIC GOODS • IF GOODS SOLD ‘ON APPROVAL’ OR ‘ON SALE OR RETURN’ BASIS IF DECIDE GOODS = UNASCERTAINED GOODS Here, assuming (goods) are unascertained, property cannot pass until the goods are ascertained: s19; Jansz v GMB. IF no contrary intention (s20); Section 21, Rule 5, states that property in unascertained goods sold by description will pass where the goods are in a deliverable state and are unconditionally appropriated to the contract. A) IS THERE A CONTRARY INTENTION? IF express term in contract: Here, there is an express term in the contract stating that property will pass when _____________. This is a contrary intention and therefore the rules in s 21 will not apply. IF no contrary intention: On the facts there does not appear to be a contrary intention wither expressly or by implication. IF FOB (Free On Board) OR CIF (Cost, Insurance & Freight) contract: Although there is no express intention that circumstances of the case may indicate an intention to pass property: The Elafi. IF FOB contract: Here the goods have been purchased under a FOB (Free on Board) K. Pursuant to the standard term of a FOB, contract it is the seller’s responsibility to deliver the goods to the ship, once on the ship property will pass. Although that is the normal position, because s21 rule 5 is subject to s19, property will not pass until the goods are ascertained: The Elafi. IF CIF contract: Here the goods are purchased under a CIF (Cost, Insurance & Freight) contract; this is similar to The Elafi. Although this is prima facie a contrary intention, because s21 rule 5 is subject to s19, property will not pass until the goods are ascertained: The Elafi. IF Romalpa Clause: (Retention of Title by seller until payment) Here, there is a Romalpa clause reseving ownership with [seller] until [payment of the purchase price]. This would be considered a contrary intention for the purposes of s21. GOTO NOTES ON ROMALPA CLAUSES!!! B) IS THERE UNCONDITIONAL APPROPRIATION? No appropriation unless the parties intend to attach the goods to the contract irrevocably so those goods and not others form the subject matter of the sale, i.e. require appropriation: s5; Carlos Federspeil v Charles. IF there is appropriation with assent: (Basic) Here ____________ in [case name] this was held to be an unconditional appropriation with assent. Therefore property in the goods will pass to [buyer].  [seller] has notified [buyer] who has agreed to arrange pick of the goods: Rohde v Thwaites  [seller] has notified [buyer] who has asked that [seller] hold them in the meantime: Pedding v Dalgety  the price has been paid and the goods have been set aside at the request of [buyer]: Pigataro v Gilroy  [seller] has set aside the goods and notified [buyer] who has had not objection: Tas Producers v Cummings  [seller] has placed in a tank where it is mixed with other fuel: Badische v Basle Chem. IF goods set aside, packaged and marked: (analogous to Carlos) Similarly to in Carlos Federspiel, [seller] has set aside [goods], packaged them and marked them for delivery to [buyer]. Example: • Carlos Federspiel: Order of kids bikes was set aside and packaged. The sale of the bikes was under a FOB K. Before delivery to the ship the sellers went into receivership and the buyer claimed the purchase price paid; HELD: mere setting aside of goods is not enough to amount to appropriation but is merely a preparatory act, as the seller can always change his or her mind. Further acts must be done; e.g. advising the buyer of what he or she has done; furthermore because FOB contract held property could not pass until the seller had done everything he was obliged to (ie delivery to the ship). IF buyer not notified: Applying Carlos here, [seller] has not notified [buyer] of the setting aside and therefore [buyer] has a strong argument that the acts done here are not an unconditional appropriation but are merely in preparation. IF buyer notified: Applying Carlos here, [seller] [has advised buyer/put goods on truck for delivery] and therefore it is likely on the reasoning in Carlos that the goods would be considered unconditionally appropriated to the K. IF goods mixed with buyers AND indistinguishable: Here, similar to Edwards v Ddin, [goods] have been mixed with [goods] of [buyer] and are no longer identifiable. Applying Edwards here, property would passes in accordance with s21 rule 5 as [goods] have been unconditionally appropriated with assent of both parties. Example: • Edwards v Ddin: petrol was mixed in a tank and then not paid for; HELD: elements of stealing were not made out as property in the goods had passed as the petrol was unconditionally appropriated to the contract with the assent of both parties. IF goods ascertained through exhaustion: (e.g. only goods left) Here, similarly to in the Karlshamns Oljefabriker (The Elafi) the contract states that [property will pass on _____], however the goods remain unascertained as they are part of a larger bulk load. Similarly to The Elafi, only the contracted amount of goods remain and as such through the process of exhaustion, property in (goods) has become appropriated and passed. IF goods damaged/lost before ascertained: Here, as the goods were [damaged etc] before exhaustion occurred, property has not passed and [seller] will bear the loss providing risk has not passed. IF goods damaged/lost after ascertained: As the goods were ascertained through the process of exhaustion at the time of [event] property will have passed and [buyer] will be the owner of the goods. Example: • Karlshamns Oljefabriker (The Elafi): FIC contract for 6000 tonnes of Copra, the shipping docs were handed over during the voyage. The total shipment was 22,000 tonnes; HELD: when 16,000 tonnes had been offloaded at an intermediate port that there was ascertainment of the goods through the process of exhaustion and therefore at this point property passed. IF FOB contract: Here, there is no appropriation until the last of the seller’s obligations have been performed (putting goods on ship): Carlos Federspiel. IF goods have passed the rail (of the ship): Assuming the terms of the FOB contract are standard, here property and risk prima facie pass as [goods] crossed the rail of the ship: NSW Leather; Carlos. Example: • Carlos Federspiel: Order of kids bikes was set aside and packaged. The sale of the bikes was under a FOB K. Before delivery to the ship the sellers went into receivership and the buyer claimed the purchase price paid; HELD: mere setting aside of goods is not enough to amount to appropriation but is merely a preparatory act, as the seller can always change his or her mind. Further acts must be done; e.g. advising the buyer of what he or she has done; furthermore because FOB contract held property could not pass until the seller had done everything he was obliged to (delivery to the ship). • NSW leather v Vanguard: Goods in a sealed container were stolen prior to shipment w/o knowledge of the parties HELD: that under a standard FOB contract; property and the risk in respect of goods loaded in a sealed container does not pass until the container has crossed the ship's rail (SIMPLY: property will pass in the way intended had the container not be subject to theft) IF goods are an undivided portion of a larger bulk: However, here, similar to in Stern v Vickers, the property is unascertained because it is an undivided portion of a larger bulk. Using the reasoning in this case, property would not pass until the goods were severed, however risk will pass once seller had done all his/her undertakings. Here, ________. Example:  Sterns v Vickers: buyers had a share of white sprit-part which was undivided in a tank. The buyers share was to be selected by a 3 party. The seller delivered the sprit discharging their obligations under the K. Before severance from bulk the spirit deteriorated. HELD (Scrutton J): specific share in a bulk did not constitute ascertainment and therefore property would not pass until the goods were severed. However, his honour held that because the seller had done all he undertook and was no longer in control of the goods and therefore found that risk had passed when the goods were delivered. IF goods have not passed the rail (of the ship): Assuming the terms of the FOB are standard, here property and risk will not have passed as [goods] have not crossed the rail of the ship: NSW Leather; Carlos. IF goods delivered to the port: Although (goods) didn’t make it to ship, (seller) will argue that property has passed through the operation of s21 Rule 5(2); i.e. that (goods) were delivered to a carrier or other bailee for the purpose of transmission to the buyer and the buyer does not reserve his right the goods will be unconditionally appropriated. To determine whether this has occurred need to determine whether [3 party] is more closely connected with the other activities arranged by [seller] then the [buyer or agent]: Matthew Short v Riviera. IF analogous with Riviera – agent of buyer is the freighter: rd Here, similarly in Riviera, the agent of [buyer] is [freighter] and [3 party’s] actions are merely preparatory acts on behalf of [seller] for delivery to [freighter] as agent for [buyer]. Therefore applying the decision in Riviera, [seller] will be responsible for __________. IF distinguish Riviera on facts: On the facts it may be possible to distinguish Riviera on the basis that [3 party] is more closely connected to the activities of [agent] as agent for [buyer] than those of seller. If this is the case then seller will not be liable. Example: • Matthew Short v Riviera: Riviera manufactured a cruiser and delivered it to the port car park. In the car park a mobile crane operator lifted the cruiser onto a low loader and C, the driver of the loader delivered it to the wharf and the freighter. The cruiser was damaged but the seller argued that risk had passed on delivery to the port. HELD:
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