An agreement to sell arises where the ownership of the goods is to be transferred at a future time or subject to some conditions. The rights of the parties: a) The seller has the right to sue the buyer for damages if he defaults. b) The buyer, where the seller defaults, can only sue for damages. c) The risk or any loss to the goods is with the seller as ownership has not passed. Note: See sl(4) to determine when an agreement to sell becomes a sale contract. Classification of goods: Goods which form the subject matter of a contract of sale may be: (s5 & 60) a) Existing goods eg a particular car. b) Future goods eg work in progress. c) Specific goods. Before a sale can take place the goods must be identified and agreed upon. d) Unascertained goods. If the goods are unidentified, ie not earmarked, then there is an agreement to sell only and as such does not form a sale until the goods are delivered or as agreed. Money consideration, the price (s8). The prices can be fixed at the time of sale or by a method agreed upon but in the absence of an agreement there is an implied condition to pay a reasonable price. Note: For the Act to apply there must be some money consideration, therefore barter is not appropriate. 1. In an unconditional contract for specified, goods in a deliverable state, property passes at sale (s18 Rule1) 2. If the seller is still required to do something to the goods, property passes when that thing is done (Refer to Seath v Moore, page 210, s18 Rule 2 & 3) 3. If the sale is “on appro” or “on sale or return”, property passes to the buyer (s18 Rule 4). 4. Sale of unascertained goods, property passes once the goods are ascertained and the goods are appropriated to the contract with the approval of the buyer (s16, 18 Rule 5(1)). 5.
Delivery of goods to a carrier is appropriation of goods to a contract (s18 Rule 5(2)) 6. Seller can by arrangement reserve the right of disposal (s19) 7. If specific goods are destroyed before making the contract, it is void through mistake (s 6&7). 8. If unascertained goods are destroyed before making the contract the contract is not void. The seller would be required to find other goods to tender in performance of the contract. 9. Risk, unless otherwise agreed, remains with the seller until the property is transferred to the buyer s20.
Title of Transfer: Refer to sections 21-26. The general rule is that no person can receive a better title to goods than that of the transferor. Exception to that rule are: a) –Estoppel: Where the owner of goods is by his conduct precluded from denying the seller’s authority to sell, the buyer obtains a valid title. (s21) b) Sale by a Mercantile Agent or by a person under Special Power: When goods are sold by a mercantile agent to a person who takes them bona fide, such a person obtains a valid title to the goods. c) Sale under a Voidable Title: (see s23).
When the option has not been exercised the buyer acquires a good title if purchased in good faith and without notice of any defects or title. d) Sale by Seller or Buyer in possession after sale: (See s25) Where the seller continues in possession of the goods a further sale of the goods to a person receiving them in good faith and without notice of the previous sale has the same effect as if the transaction was authorised by the original purchaser. e) Sale in Market Overt: (See s22): Where goods are purchased in a open public market, the buyer obtains a good title provided he/she has acquired them in good faith. f) When stolen goods are sold the true owner can recover them if the thief has been prosecuted to conviction (s24). However if the goods are obtained by fraud the goods are not revested by reason only of conviction. Conditions and Warranties: Refer to Part 1 sections 10-15 of the Sale of Goods Act Condition: A term going to the root of the contract, of vital importance. Warranty: A term of lesser importance, an auxiliary term, not the contract itself, not an opinion, not sales talk. Transfer of property. If the contract when carried out would result in the sale of a chattel eg a chair the contract is one for the sale of goods.
The problem arises when the contracts main substance is the supply of skills and or experience with materials being ancillary, eg an artist commissioned to paint a portrait. Enforceable Contract: (s4) Sale of goods $20 and over is unenforceable unless: a) The buyer has received and accepted all or part of the goods, or b) The buyer has given something in earnest to bind the contract, or c) The buyer has given something in part payment, or d) Evidence in writing exists to prove the contract existed. Note: Also applies to a single contract which embraces a number of articles if the total value is or exceeds $20.
Acceptance: the word has two distinct meanings under Sale of Goods Act: 1. Relating to the condition of enforceability of the contract (refer to s4(3)). Note: 1. The act of acceptance need not be acceptance of the goods; it is sufficient if the act is consistent with recognition of an existing contract, eg where a buyer makes an effort to re-sell goods before their actual receipt. 2. In relation to actually receiving the goods the buyer has receipt when the seller has released the goods. 2. Relating to transfer of ownership of the goods or performance of the contract.
Refer to s35 in respect to when performance of a contract is deemed to have taken place. Earnest: A buyer may give some tangible thing as an earnest token of good faith and as guarantee that he/she will fulfil his/her contract. An “earnest” must be distinguished from a part payment. If he/she defaults the earnest will be fortified, however, if there has been a part payment, then the part payment may be recovered. Note or memorandum: Must show: a) The names of the parties b) The quantity and description of the goods sold.
c) The price and terms as to mode and time of payment, if they have been agreed upon. d) The signature of the party to be charged or that of his/her agent. Note: These particulars can appear in one document or in a series of documents. The memorandum may be made at any time before an action on the contract is commenced. It need not be in formal or legal language and in fact any writing embodying the terms and signed is sufficient. Transfer of Property: Refer to Part 2 sections 16-20 of the Sale of Goods Act. It is important to distinguish between Property in goods and Possession of goods.
(a) Property refers to ownership or title to the goods, (b) possession refers to custody or control of goods. It is important to be able to ascertain the exact time when property in goods passes from the seller to the buyer as risk of loss lies with the owner rather than the possessor of the goods. The following are the rules for ascertaining the time at which the property in goods is to pass to buyer: The Sale of Goods Act implies certain conditions (s 10-15) and these conditions are applicable to all contracts of sale, unless the circumstance of the contract are such as to show a different intention.
a) Under the act, there is an implied condition that the seller has the right to sell the goods, that is he/she has title to pass on (s12(i)). b) Implied condition that the goods shall correspond with the description. This applies to goods sold by advertisement or pamphlet and can even apply where there was an opportunity for the buyer to inspect the goods, eg sale by sample and description (s13). c) There is an implied condition the goods sold will be merchantable quality if they are sold by description. Provided that if the buyer has examined the goods and the examination did not reveal any defects (s14(ii)).
d) Fitness for the stated purpose is an implied condition (s14(i)) e) There is an implied condition that the bulk shall correspond with the sample and the buyer shall have a reasonable opportunity of comparing them in a sale by sample (s15(2)). f) Generally stipulation as to time of delivery is a condition but stipulation as to time of payment are warranties (s10). g) There are implied warranties that the goods are free from encumbrance and that the buyer shall have “quiet possession” (an indemnity against the consequences of a defective title) (s12 (ii) & (iii)).
h) If the goods are inherently dangerous, there is a responsibility in tort, for the supplier to inform the buyer of any precautions to be taken, otherwise he/she may be negligent. Note: 1. These terms and conditions implied by the act can be varied by agreement between the parties (s54): 2. Caveat Emptor: Let the buyers beware. This maxim is applicable in common law when the buyer exercises his/her own judgement in the selection of goods and does not rely on the judgement of the seller. The position of the consumer has been strengthened from this point by various acts.
Trade Practices Act v Sale of Goods Act: The Commonwealth Trade Practices Act 1974 s69-72 implies that, in contracts for the supply of goods by corporations and other traders that engage in interstate or overseas trade and commerce, conditions as to title, correspondence with description, merchantable quality and fitness for purpose cannot be excluded or restricted by agreement between the parties, where the goods are of the kind ordinarily acquired for personal, domestic and household use or consumption.
Title: The supplier should transfer only such title as the supplier or a third person may have. Correspondence with Description: It is sufficient that the goods are supplied “in the course of business”. That is not by a person “who deals in goods of that description” only as stipulated in the SGA s14 (i). Merchantable quality: There is no requirement however the T. P.
A does state “Goods of any kind are of a merchantable quality…if they are as fit for the purpose or purposes for which goods of that kind are commonly bought…” Fitness of Purpose: Where the consumer makes known to the corporation supplying the goods any particular purpose for which the goods are being acquired, the implied condition is set, whether or not it is a propose for which goods are commonly supplied. The Commonwealth Trade Practices Act 1974 s75A provides that a consumer is entitled to rescind a contract for the breach of a condition either by: 1.
Serving on the supplier a notice in writing giving the particulars of the breach, or 2. By the consumer returning the goods to the supplier and giving the supplier the particulars of the breach (As compared with s11 of the Sale of Goods Act) Note: The Fair Trading Act 1987 is a carbon copy of the Trade Practices Act 1974. However, the F. T. A applies to all suppliers of goods and services to consumers whether the supplier is incorporated or not. A condition is to be treated as a warranty See section 11: 1.
If a party chooses to treat a breach of a condition as not to set the contract aside. 2. If the sale is not severable and the buyer accepts the goods or part of the goods. 3. If the sale is for specific goods the property in which has passed to the buyer. Performance of the Contract: In the absence of agreement: 1. The seller must deliver the goods, and the buyer must accept and pay the goods. (s27). 2. Payment and delivery are concurrent conditions (s28) that is the seller must give possession of the goods on payment of the price by the buyer. 3.
Goods must be paid for in legal tender. 4. There is no right to possession until the price is paid. 5. Goods sold on credit and deliverable immediately, subject to stoppage in transit (see below). Rules as to delivery: (See sections 29-37). 1. The place of delivery is the seller’s place of business or, if none, his residence. (s29(1)). 2. Delivery to an apparently authorised agent is delivery to the buyer. (See Galibraith & Grant V Block Pg 268). Note: s29(2) possession of a third person 3. Goods must be sent within a reasonable time and at a reasonable hour (s29(2) & (4)).
4. Demand by the buyer must be made at a reasonable hour (s29(4)). 5. The expenses of putting goods into a deliverable state must be borne by the seller (s29(5)). 6. Delivery of the wrong quantity of goods (s30) or the wrong goods (Plywood v Nasic Oak Pg 269), leaves the buyer to reject them all, accept the contracted part or accept them all and pay at the contracted rate. 7. Buyer is not always bound to accept delivery by instalments (s31). 8. Minor delivery variations would not entitle buyer to repudiate (Maple Flock v Universal Furniture). 9.
Delivery to the carrier is delivery to the buyer, provided the seller makes reasonable arrangements for transport. (s32(1) & (2)). 10. Seller must notify the buyer of shipping so that the buyer can insure. (s32(3), Wimble Sons & Co v Rosenberg & Sons Pg270). 11. The buyer takes risk of deterioration where the goods are delivered to a distant place (s33). 12. A buyer who had not previously examined the goods is entitled to examine them before he/she is deemed to have accepted them (s34). 13. The goods are usually deemed to be accepted by the buyer when they have been delivered (s35).
14. Buyer is not bound to return rejected goods (s36). 15. If the buyer does not take delivery within a reasonable time he/she is liable for loss, care and custody of the goods (s37). Constructive or symbolic Delivery: In some cases delivery may not amount to actual transfer of goods but it may be construed from the circumstances, eg. the handing over of a key. Free on Board – F. O. B. : Means seller must put goods on board the ship and pay all expenses of doing so, he/she must also notify the buyer so that the buyer can insure. Cost, Insurance & Freight – C. I. F.: Means the seller must put the goods on board the ship and pay all costs of doing so and must also pay shipping and insurance costs and then release a bill of lading to the buyer. Note: Risk of loss passes in both instances when the goods are placed on board ship and any loss falls to the buyer or the insurer. Rights of an Unpaid Seller: (See s38-49) An unpaid seller is a person to whom the whole price if the goods has not been paid (s38). a) Against the goods: (s39(1)) 1. A Lien – the right to retain possession until goods are paid for. Ownership is with the buyer but possession is with the seller.
Can only have a lien if you rightfully hold the goods (s40-42). 2. Stoppage in Transitu – an unpaid seller can stop goods which are in transit if the buyer becomes insolvent (s43 – 45). 3. Re-sale – where: (s47) a) Goods are of a perishable nature (See s6) b) Seller exercises his/her right of lien or stoppage in transit and gives notice of his/her intention to re-sell, or c) Seller has expressly reserved a right of re-sale in the case of the buyer defaulting. 4. Withhold Delivery – if neither ownership nor possession has passed to the buyer, the seller can retain the goods until paid for (s39(2)).
Note: If the buyer lawfully sells title to the goods to a person who takes them in good faith and for valuable consideration then the above rights are lost (s46). b) Against the Buyer: 1. Seller can sue the buyer for the price of the goods when the property in the goods has passed to the buyer (s48): 2. Seller can claim damages for non-acceptance where the buyer refuses to pay for or accept the goods (s49). Note: damages may be negligible, generally assessed as the difference between the contract price and the market price (s49(3)). Rights of the Buyer: (See s50-53) 1.
Non-Delivery – the contract may contain a stipulation as to time of delivery and the buyer is entitled to have these carried out. IF the seller defaults the buyer may sue for damages. Buyer must mitigate the loss (s50). 2. Specific Performance – if the item (s) of unique nature and damages would be inadequate, the buyer may sue for specific performance under Court decree (s51). 3. Breach of Warranty – the buyer may sue to reduce the price or claim damages (s52) 4. Repudiation – the buyer may repudiate the contract if a breach of a condition (Rowland v Divall Pg281).
Note: Cannot repudiate if the buyer treats the breach as a warranty, if he/she has accepted the goods or, property has passed to him/her. Auctioneers and Auction Sales: Are covered by the Auction Sales Act 1973 (WA), however, see section 57, of S. G. A Auctioneers are required to hold a licence to operate and act as agents for the sellers, as such they are not one of the contracting parties. A bid is an offer and the fall of the hammer is acceptance. So vendor can withdraw form acceptance or completion any time up to the fall of the hammer. Duties of auctioneers: It is the duty of an auctioneer to:
1. Hold a licence and act in person 2. Sell for money only. 3. Accept the highest bona fide bid where auctioneer sells without reserve (e. e. minimum price) 4. Account for the proceeds if goods sold. 5. Not delivery goods until paid for. 6. Keep full records of sales Warranties by auctioneers: An auctioneer gives the following implied warranties: 1. His/her authority to sell 2. That he/she knows of no defect if the principal’s title. 3. To give possession against the price paid. 4. That such possession will not be disturbed by the principal or the auctioneer.