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Commercial Law 1

COMMERCIAL LAW by [Name]

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Commercial Law 2 Problem Question Issues  Whether Strictly Dance schools Ltd is entitled to a remedy from Stay Put Ltd  If yes, what remedy is Strictly Dance schools Ltd entitled to  Whether Stay Put Ltd violated implied terms in the sale of goods and in particular, s. 12 of the Sale of Goods Act 1979 Rules and Analysis In the problem scenario provided above, the floors installed by Stay Put Ltd ended up being faulty, and therefore the applicable legislation is the Consumer Rights Act 2015. However, it is essential to establish whether Strictly Dance schools Ltd is a consumer, and StayPut Ltd is a trader. According to the definitions of a consumer and trader provided in s.2 of the CRA 2015, it is prima facie that the former is a consumer while the latter is a trader. 1It is important to note that even if Stayput Ltd was acting on behalf of another party, it would still be bound by CRA 2015 as the final sale of the goods was in the course of business. This got confirmed by the court in Boyter v. Thomson, [1995].2 It is also essential establishing the type of contract between Strictly Dance schools Ltd and StayPut Ltd to determine the applicable remedies. Since the contract between Strictly Dance schools Ltd and StayPut Ltd involved remuneration in exchange of goods/services delivered it is an example of a sales contract as defined in s. 3 and 5 of the CRA 2015. Besides, according to s.2 (5) of CRA 2015, the floor that got installed by StayPut Ltd is an example of a good.3 Shirley had explained in detail to StayPut Ltd the type of floor her organisation needed. However, the floor installed did not match the specifications provided by Shirley. Therefore, 1 Consumer Rights Act 2015 2 Boyter v. Thomson, 1995 A.C.2 628, 1995 All E.R.3 135 (1995). 3 Ibid (n.1)

Commercial Law 3 according to s 9(3) (e) of the CRA 2015, the floor is not fit for purpose and is of unsatisfactory quality. 4 Generally, goods will be regarded as being defective, if the faults reveal within six months after purchase. Thus, this means that Shirley will not be required to prove that the floor installed by Stayput Ltd was defective. Besides, as observed in Rogers v. Parish (Scarborough) Ltd, [1987], all the goods sold should be of merchantable quality.5 Since the defect occurred within 30 after delivery, Shirley should return the floor to StayPut Ltd for a complete reimbursement. S.20 and 22 of the CRA 2015 provide consumers with a short-term right to reject goods sold if the defects occur within 30 days after delivery. 6 According to s. 12 of the Sale of Goods Act 1979, in any sales contract, a seller must have a good title if he/she is to sell his/her goods. A good title, in this case, means that the seller not only owns the goods that he/she is selling but also has the rights to sell them. In instances, where the seller does not own the goods or the rights to sell them, this means that the buyer cannot obtain a good title. 7For example, in cases where a seller sells to a buyer, stolen goods, the buyer will not obtain ‘good title’ to the goods. Subsequently, this means that the buyer will be obligated to return the goods to the rightful owner and seek compensation from the seller provided he/she can be found. According to s. 12(1) of the Sales of Goods Act 1979, there is always an implied condition on the part of the seller that he/she has the right to sell goods in case of a sell. Besides, as observed in Rowland v Divall [1923], there is always an implied condition on the part of the seller that for property to pass, he/she should have the right to sell during the sale. 8Essentially, this means that where the seller does not have the right to sell, the property cannot pass 4 Ibid (n.1) 5 Rogers v. Parish (Scarborough) Ltd, 1987 All E.R.2 232, 1987 W.L.R.2 353 (1987). 6 Ibid (n.1) 7 Sale of Goods Act 1979 8 Rowland v Divall [1923] 2 KB 500

Commercial Law 4 notwithstanding whether there was an agreement to sell between the seller and buyer and that the goods got sold. Subsequently, this means that whether a seller is found to have breached s. 12(1) of the Sales of Goods Act 1979, the buyer is allowed to recover the full price he had paid for the goods. Additionally, in such a case, the buyer will not be required to pay for his use of the goods. A simplistic interpretation of s. 12(1) of the Sales of Goods Act 1979 is that for sale to happen, a seller should have power and ability to transfer ownership of the goods to the buyer. However, seller’s ownership of goods is not sufficient for the transfer of the ownership of the goods from the seller to the buyer. Notably, there cannot be a transfer of ownership of goods, if the goods infringe trademarks and copyrights. For example in Niblett v. Confectioners’ Materials Co. [1921], the court held that although the defendant owned the goods, he did not have the right to sell the goods as he had infringed Nestle’s trademark by labelling the goods with the ‘nissly’ label. Subsequently, the court ordered the defendant to remove the ‘nissly’ label on the goods before he could sell them.9 Undoubtedly, this caused the seller to incur substantive losses. Moreover, based on s. 12(2) of the Sale of Goods Act 1979, there is an implied term of warranty that the goods sold should be from any additional burden not disclosed to the buyer, and that the buyer should enjoy quiet and uninterrupted possession of the goods. This got observed in Microbeads v Vinhurst Road Markings [1975], where the court held that the defendant had only violated s 12(2) of the sale of goods Act and not s. 12(1) as the claimant’s ownership had only been affected after the sale.10 In the problem scenario provided, it is prima facie that Stayput Ltd violated both s.12 (1) and 12(2) of the Sale of Goods Act 1979. Notably, Stayput Ltd had no right to sell the goods 9 Niblett v. Confectioners' Materials Co. [1921] 3 K.B. 387 10 Microbeads v Vinhurst Road Markings [1975] 1 WL

Commercial Law 5 because they infringed Craigs Coverings Ltd copyrights. 11Additionally, Strictly Dance schools Ltd possession of the goods was affected after the sale. Conclusion  Shirley Dancefloors Ltd is entitled to a complete reimbursement from StayPut Ltd  StayPut Ltd is in breach of implied terms in the sale of goods. Essay Question Arguably, s 20 A and 20 B of the Sale of Goods Act 1979 do not provide the buyer of goods forming a bulk more protection than he should be entitled to. Contextually, s 20A and 20B of the Sale of Goods Act 1979 were developed to solve the problems inherent in s 16 of the Sale of Goods Act 1979, and more so those related to the transfer of unascertained goods. S 16 of the Sale of Goods Act 1979 barred the transfer of unascertained goods, which resulted in significant challenges in commercial law practice for the bulk buyers. Initially (before the reform of the Sale of Goods Act 1979 to incorporate s 20A and 20B), buyers were not accorded sufficient statutory protection against the risk of the seller becoming insolvent. Ordinarily, it would be expected that a buyer would assume he had become a legal owner of goods provided he had been given a bill of lading, even if the goods that he had paid for were not transferred to him and were unidentified. 12Subsequently, this means that such a buyer would not be worried when the seller becomes insolvent since the goods he/she had paid for could be transferred from the seller’s bulk and taken to him instead of being taken to either the seller’s creditor or liquidator. However, this was not the case as s 16 of the Sale of Goods Act

11 Sale of Goods Act 1979 12 Malcolm Alistair Clarke, Richard JA Hooley, Roderick JC Munday, Leonard Sedgwick Sealy, A. M. Tettenborn, and P. G. Turner. Commercial law: Text, cases, and materials. (Oxford University Press, 2017.)

Commercial Law 6 1979 barred the transfer of unascertained goods. As a result, despite paying for the goods, the buyers never acquired any proprietary interests. Essentially, the buyers acted as unsecured creditors for the price they had paid for the goods.13 Conceivably, this put them in a disadvantaged position relative to the sellers. More worryingly, the buyers could not opt-out of the contract by citing section 16. Additionally, the buyers did not have any mechanisms of ascertaining the creditworthiness of the seller. Notably, in Re London Wine Co Ltd [1986], the court held that the buyers were unsecured creditors for the price they had paid for the goods, as the goods had not passed from the seller to the buyer. As a result, the bank’s interest security triumphed. It is imperative to note that the wine company had sold wine to the buyers while retaining ownership and possession of the wine in this particular case.14 Additionally, the seller required the customers to pay for storage charges in addition to the price they had paid for the wine. Although the seller had provided each of the buyers with a certificate of title, there was no physical separation of the wine sold to the different customers. Subsequently, this meant that the customers had paid for unascertained goods whose transfer according to s 16 of the Sales of Goods Act 1979 could not be authorized.15 Nonetheless, in the subsequent case of Re Stapylton Fletcher Ltd [1994], the court held that the goods had been transferred from the seller to the buyer as they were ascertained.16 This was despite the seller not marking the names of the individual customers on each of the goods. All the seller had done was to separate the goods sold to the customers from his stock. The court based its ratio decidendi on the claim that a tenancy of common had been established. Despite

13 Ibid (n.12) 14 Re London Wine Co Ltd [1986] PCC 121 15 Re London Wine Co Ltd [1986] PCC 121 16 Re Stapylton Fletcher Ltd [1994] 1 WLR 118

Commercial Law 7 the court’s ruling in Re Stapylton Fletcher Ltd [1994], buyers were still disadvantaged relative to the sellers, as they could not establish accurately that a given seller kept such records.17 Similarly, in Re Wait [1927], the court maintained that provided s 16 of the Sale of Goods Act 1979 remained unsatisfied, the buyer was an unsecured creditor. Precisely, despite the claimant asserting that he had equitable interests in the goods, the court did not identify the goods in equity since s 16 of the Sale of Goods Act 1979 was not met. Moreover, in Re Goldcorp Exchange Ltd [1994], the Privy Judicial Council held that buyers should always seek to negotiate for protective contractual terms, as they are caveat emptor. The judicial council also reiterated that the buyers should take necessary precautionary measures such as purchasing insurance cover when purchasing goods. 18From the body of existing case laws, it is prima facie that the court has always been reluctant to apply even equity rules in problems involving the transfer of unascertained goods. Subsequently, this has meant that buyers have always been in a disadvantaged position relative to the sellers. More worryingly, the way s.16 of the Sale of Goods Act 1979 was structured meant that although it barred the transfer of unascertained goods from the seller to the buyer, it did not prevent the transfer of risks from the seller to the buyer. This got observed in Sterns Ltd v Vickers Ltd [1923], where the court held that although s.16 of the Sale of Goods Act 1979 barred a buyer from acquiring ownership of unascertained goods, the buyer still had to bear the loss where the goods were either damaged or lost. 19This is partly because for an individual to sue for damages to good/property, he/she should have a proprietary interest in the goods.

17 Re Stapylton Fletcher Ltd [1994] 1 WLR 118 18 Re Goldcorp Exchange Ltd [1994] UKPC 3 19 Sterns Ltd v Vickers Ltd [1923] 1 KB 78.

Commercial Law 8 In light of the above, it is apparent that s. 20 A and 20B do not afford bulk buyers more protection than they should be entitled. The two provisions primarily seek to correct the disadvantaged position of buyers relative to the sellers. S 20A specifically allows for the transfer of unascertained goods provided “the goods or some of them form part of a bulk which is identified either in the contract or by a subsequent agreement between the parties. And the buyer has paid the price for some or all of the goods which are the subject of the contract and which form part of the bulk.” 20Similarly, s 20B of the Sales of Goods Act 1979 allows for trading to continue normally. The two provisions ensure that whenever buyers pay for goods, they acquire corresponding proprietary interests.

20 Sales of Goods Act 1979

Commercial Law 9

References Statutes and Legislation Consumer Rights Act 2015 Sale of Goods Act 1979 Case Law Boyter v. Thomson, 1995 A.C.2 628, 1995 All E.R.3 135 (1995). Microbeads v Vinhurst Road Markings [1975] 1 WL Niblett v. Confectioners' Materials Co. [1921] 3 K.B. 387 Re London Wine Co Ltd [1986] PCC 121 Re Stapylton Fletcher Ltd [1994] 1 WLR 118 Re Wait [1927] 1 Ch 606 Re Goldcorp Exchange Ltd [1994] UKPC 3 Rogers v. Parish (Scarborough) Ltd, 1987 All E.R.2 232, 1987 W.L.R.2 353 (1987). Rowland v Divall [1923] 2 KB 500 Sterns Ltd v Vickers Ltd [1923] 1 KB 78. Articles and Books Clarke, M.A, Richard J.H, Roderick J. M, Leonard S.S, A. M. T, and P. G. T. Commercial law: Text, cases, and materials. (Oxford University Press, 2017.)...