Assignment 1 - Sale of Goods Act PDF

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Sale of Goods Act ...

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1. Does the Sale of Goods Act 1923 (NSW) apply? The Sale of Good Act1 will apply in both cases, as they are for more than $40,000 and for the purposes of commercial use.2

2. Advise to Rhonda Cause of Action: Non-delivery of goods3 resulting in breach of contract Basis: According to the facts, on 15 January 2019, Richard and Rhonda enter into a written 4 contract for the present sale of future goods5, which operates as an agreement to sell 6 until the point the goods are ascertained.7 The goods being the diamonds which form part of the seller’s land 8 to be delivered to Rhonda in two instalments for the fixed price 9 of $65,000 COD.10 Transfer of Property Risk generally passes with passing of ownership (property). 11 To determine when the property has passed, we look to the intention.12 At the time of contracting the goods were yet to be manufactured, hence this concerns the sale of unascertained, future goods 13 by description which are covered under Rule 5.14 In relation to the first instalment of delivered diamonds, rule 5(2) will apply, and the seller will have unconditionally appropriated the goods to the buyer via delivery pursuant to the contract, hence passing both ownership and risk to Rhonda. Regarding the instalment yet to be delivered; as it has been separated and labelled “…Rhonda”, this would be sufficient to constitute unconditional appropriation of goods to the contract under rule 5(1) by the seller,15 thereby passing ownership to the buyer. However, there may be an argument that the diamonds must still undergo processing before they can be delivered, hence appropriation has not occurred as they are not in a deliverable state. Assuming that it has, ownership, and consequently risk, have been passed for the entirety of the goods to Rhonda. Rhonda receives good title and may pursue an action for non-delivery of the 2 nd instalment. Remedy: Damages.16 1 Sale of Goods Act 1923 (NSW). 2 Competition and Consumer Act 2010 (Cth) sch 2 s 3(1). 3 Sale of Goods Act 1923 (NSW) s 53. 4 Ibid s 8. 5 Ibid s 10. 6 Ibid s 10(3). 7 Ibid s 21. 8 Ibid s 5. 9 Ibid s 13. 10 Ibid s 6. 11 Ibid s 25. 12 Ibid s 22. 13 Ibid s 18. 14 Ibid s 23. 15 Matthew Short & Associates Pty Ltd v Riviera Marine (International) Pty Ltd [2001]. 16 Sale of Goods Act 1923 (NSW) s 53(2), (3).

However, she will likely be unsuccessful, as she herself defaulted on her own duty for payment of consideration, 17 hence allowing Richard to exercise his ‘unpaid seller’ rights. 18 So, Richard can pursue an action for price19. In this case where part delivery has taken place, the seller may exercise his right of lien on the remainder, 20 but not the first instalment.21 Although exercising such a right does not necessarily rescind the contract, but if the seller were to resell the withheld goods, the buyer would receive good title against the original buyer. 22 Hence, as Richard has had continuous possession of the goods, title will successfully pass to Terry, the innocent third party. 23 Richard can claim damages from Rhonda for non-payment but likely not repudiate, as the contract is inseverable and Rhonda has shown her acceptance of part of the goods 24 through acts of receiving and ‘cutting the stones and setting them’, which are inconsistent with the ownership of the seller. 25 Furthermore, the contract stipulates the time of payment as COD.26 As this is only collateral to the main purpose of the contract, it would likely be treated as a warranty. 27 Hence, Richard can claim damages.28

3. Advise to Terry Cause of Action: Breach of the statutory implied terms of fitness and merchantability.

17 Ibid s 30. 18 Ibid s 41(1)(a), 42. 19 Ibid s 51. 20 Ibid s 44. 21 Ibid s 45(1)(a). 22 Ibid s 50(2). 23 Ibid s 30. 24 Ibid s 16(3). 25 Ibid s 38(1). 26 Ibid s 15. 27 Ibid s 5. 28 Ibid s 54(2).

Fitness The order was placed for industrial grade diamonds, ‘to be used for the manufacture of high-power switches for a power station’, a purpose clearly conveyed to Richard. 29 As purchasing and reselling synthetic diamonds is in the course of Richard’s business, it can be inferred that Terry would have relied on Richard’s expertise to provide the correct diamonds for the particular purpose, and Richard would be aware of Terry’s reliance. 30 Hence, there is an implied condition for the goods to fit their purpose,

Merchantability This is a sale by description, in which Terry describes the kind of diamonds he requires from Richard, a seller who deals in goods of such description. On the facts, there is no mention of Terry examining the goods prior to contract, but this is irrelevant as a reasonable examination would not have revealed that the diamonds are not synthetic. It would require ‘extensive spectroscopic testing.’ The diamonds were to be used for only one purpose as stated on the facts, and failed on that purpose, hence they are not of merchantable quality. Possible Remedies A breach of any of the above implied conditions provides Terry grounds to repudiate the contract. But since ‘Terry accepted the supply’, it is likely that the courts will find that the contract is inseverable as there has been part performance of the contract by Richard, assuming that the same diamonds can no longer be returned in their original condition. So, the condition must be treated as a warrant, and only are damages31 available.32

4. Exclusion Clause This exclusion clause would not greatly impact the contract with Rhonda, but it would exclude Terry from suing Richard for breach of the statutory implied terms of ‘fitness’ and ‘merchantable quality’, 33 pursuant to s57, whereby any right, duty, or liability may be negatived by an express provision. 34

29 Ibid s 19(1). 30 Ibid s 19(1). 31 Ibid s 54 (1), (2). 32 Ibid s 16(3). 33 Ibid s 19 (1), (2). 34 Ibid s 57....