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Passing of Risk Non-consumer sales Risk is not dependent upon possession. S20(1) SGA “Unless otherwise agreed, the goods remain at the seller’s risk until the property in them is transferred to the buyer, but when the property in them is transferred to the buyer the goods are at the buyer’s risk whether the delivery has been made or not.” 3 Exceptions: Consumer sales Delayed deliveries Custodier situations- the party in possession will remain liable or loss deriving from his negligence. Demby Hamilton & Co Ltd v Barden 1949 There was a contract for the sale of apple juice. Part of it was delivered at the correct time but not all. The buyer delayed the providing of instructions for the delivery of apple juice in casks. The apple juice went bad and the buyer said he was not responsible for the goods. The court disagreed, whilst the property remained with the seller the buyer was responsible for the risk. If the goods are at the buyers risk when destroyed, the he remains liable for the price. If the goods are at the sellers risk when destroyed then he remains liable to fulfil the contract. In consumer sales passing of risk is not connected to passing property. S29: goods remain at the seller’s risk until they come into the physical possession of the consumer or the person identified of by the consumer to take possession. There is an exception to this under section 29(3) and (4) where the goods are delivered to a carrier who is commissioned by the consumer to deliver the goods and the carrier is not a carrier the seller named as an option for the consumer. In this case the goods are at the buyers risk on and after delivery to the carrier.

But under s31(1)(k) you cannot contract out of passing risk in consumer sales. The passing of risks may be subject to the buyers right to reject where the goods turn out to be defective or otherwise disconform to the contract. Risk remains with seller and buyer has the duty to take reasonable care of the goods. – Head v Tatersall 1870 Section 6 & 7 of the 1979 act applies to both consumer and non-consumer sales. Section 6: perishing of specific goods without knowledge = void. If goods have perished at the time the contract is made then the contract is void. Section 7: perishing of specific goods without fault = void If section 18(1) applies then this will not. Asfar v Blundell 1896 A vessel carrying dates was sunk during the course of a voyage. The defendant argued that there had been no change in the nature of the dates, they “were still dates, composed of stone, skin and flesh” even though they had been impregnated with sewage and had begun to ferment. Lord Esher MR: Goods have perished if they are so changed in their nature “as to become unmerchantable… which no buyer would buy and no honest seller would sell”. McRae v Commonwealth Disposals Commission 1951 The goods have to have existed at some point in time. If they did not exist you cannot say someone had possession and risk, you also cannot say that they have perished. The seller may be liable in damages for representing to the buyer that the goods existed. Sale: Non- owner S21(1) SGA

“Where goods are sold by a person who is not their owner, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell." Nemo dat quod non habet “no one gives what he doesn’t have” Nemo dat rule- nobody can pass a better title than that which he had It resembles personal bar, or estoppel in English law. However, in English law doubts have been expressed as to whether it is in fact based on estoppel, in particular because it is not limited to the usual type of estoppel which prevents the true owner from denying the sellers authority to sell, but in addition, has the effect of permitting ownership of goods to pass. Lord Devlin in Eastern Distributors Ltd v Goldring 1957: “ we doubt whether this principle… ought really to be regarded as part of the law of estoppel. At any rate it differs from what is sometimes called ‘equitable estoppel’ in this vital respect, that the effect of its application is to transfer real title and not merely a metaphorical title by estoppel” Lord Denning explained the logic behind the exceptions in Bishopgate Motor Finance Corporation Ltd v Transport Brakes Ltd 1949: “In the development of our law, two principles have striven for mastery. The first is for the protection of property: no one can give a better title than he himself possesses. The second is for the protection of commercial transactions: the person who takes in good faith and for value without notice should get good title. The first principle has held sway for a long time, but it has been modified by the common law itself and by statute so as to meet the needs of our own times.” The law an uphold the rights of the legal owner or the right of the innocent third party buyer. Nemo Dat Exceptions “In the development of our law, two principles have striven for mastery. The first is for the protection of property: no one can give a better title than he himself possesses. The second is for the protection of commercial transactions: the person who takes in good faith, and for value without notice should get a

good title. The first principle has held sway for a long time, but it has been modified by the common law itself and by statute so as to meet the needs of our own times.” (per Lord Denning, 1949). Statutory exceptions: Mercantile Agents Sellers in Possession Buyers in Possession Sales of motor vehicles – HP/CS agreements Sale Mercantile Agent: The Factors Act 1889 s2(1): "Where a mercantile agent is, with the consent of the owner, in possession of goods or of the documents of title to goods, any sale, pledge or other disposition . . made by him while acting in the ordinary course of business of a mercantile agent, shall . . . be valid as if here were expressly authorised by the owner . . to make the same; provided that the person taking under the disposition acts in good faith, and has not at the time of the disposition notice that the person making the disposition has not authority to make the same." s1(1) of Factors Act & s26 SGA 1979 a mercantile agent is someone who has in the customary course of his business authority to sell goods, or to consign them for sale, or to buy goods, or to raise money on their security. Pearson v Rose & Young [1951]: The Court of Appeal held that the fact that the agent had obtained the registration book for the car subsequently sold by him was not important.The only question was whether the goods were in his possession with the consent of the owner. "The owner must consent to the agent having them for a purpose which is in some way or other connected with his business as a mercantile agent. It may not actually be for sale. It may be for display or to get offers, or merely to put it

in his showroom; but there must be consent to something of that kind before the owner can be deprived of his goods.” (per Lord Denning at 288). If the owner gave his car in to be repaired for example, the dealer could not give good title to a bona fide purchaser. Belvior Finance Ltd v Harold G Cole Ltd 1959: A car hire company was not a mercantile agent where it occasionally sold cars from its fleet. Seller in Possession s24 SGA (and s8 of the Factors Act): “Where a person having sold goods continues or is in possession of the goods, or of the documents of title to the goods, the delivery, or transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title under any sale, pledge, or other disposition thereof, to any person receiving the same in good faith, and without notice of the previous sale, has the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same.” Pacific Motor Auctions Proprietary Ltd v Motor Credits (Hire Finance) Ltd [1965] Continuity of physical possession, has been interpreted as continuity of physical possession only. It does not matter if the legal nature of the seller’s possession has changed for example the seller becomes a custodier for the buyer. Worcester Works Finance Ltd v Cooden Engineering Co Ltd [1972] The sellers possession of the goods may even be wrongful. There is no requirement of good faith, so someone who sells goods to a bona fide purchaser gives them good title. Wide interpretation of the word disposition, interpreted as including the repossession by the original owner from the seller in possession with that sellers consent. Seizure of the goods against the sellers will, does not however amount to a disposition within the meaning of the section. Michael Gerson (Leasing) Ltd v Wilkinson [2001]

Wide interpretation of the delivery or transfer, which the seller in possession makes to the buyer in terms of s.24. A company, E sold goods under a sale and leaseback arrangement to a finance company, MG, but without delivering them to MG. E then purported to enter a similar sale ad leaseback arrangement in relation to some of the same goods to another finance company, State. In neither were the goods actually delivered. State then sold the goods to another company, Sagebush. The court of appeal found that E was a seller in possession in terms of s.24, and that there had been a constructive delivery of the goods from E to state followed by an immediate redelivery to E as a hirer. State therefore obtained good title under s.24 and could sell them to Sagebush. Fadallah v Pollak 2013 Someone who sold goods, yielded to the buyer, and thereafter recovered possession e.g. by hiring the goods from the buyer, would no longer be a seller in possession, and would not beable to pass good title. Buyer in Possession s.25(1) SGA (and s.9 of the Factors Act): “Where a person having bought or agreed to buy goods obtains, with the consent of the seller, possession of the goods or the documents of title to the goods the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title, under any sale, pledge or other disposition thereof, to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods, has the same effect as if the person making the delivery or transfer were a mercantile agent in possession of the goods or documents of title with the consent of the owner.” Constructive possession required Four Point Garage Ltd v Carter [1985] Wide interpretation of s.25 The defendant agreed to buy a car from a dealer, F, and paid the full purchase price without taking possession of the car. F did not have the car, but intended to purchase it from the plaintiff, also a car dealer. F asked the plaintiff to deliver the car direct to the defendant, at no time did F take possession of the car. The plaintiff delivered the car but thought that he was leasing it to the defendant.

The defendant thought that the car had been delivered by F. F then went into liquidation without paying the plaintiff. The plaintiff brought an action against the defendant claiming that the car had remained in his ownership. It was held that through the operation of s.25, the defendant had obtained good tittle to the car. F had acted as a buyer in possession, even though he had not actually been in possession of the car. There was constructive possession of the car by F. The result here seems to ignore the requirement in section 25 that there be delivery or transfer of the goods by the buyer in possession. It is clear that Simon Brown J considers there to have been constructive delivery of the car by F. Newtons of Wembley Ltd v Williams [1965] The buyer in possession must have the sellers consent to his possession, but it does not matter if the consent is subsequently withdrawn and the original contract is rescinded. National Employers Mutual General Insurance Association Ltd v Jones [1990] Section 25 cannot operate to pass good title where the original seller had no title to the goods. Thus where goods are stolen from a by B and B sells to C, who then sells to D, D does not obtain good title, and D cannot claim that C is a buyer in possession with the consent of the seller. Lord Goff opined that the Factors Act sought to give: “protection to those who had dealt in good faith with factors or agents, to whom goods, or documents of title to goods, had been entrusted, to the extent that the rights of such persons should.. override those of the owner who had so entrusted the goods or documents to the factor or agent. The acts did not seek to: “enable a factor or agent, entrusted with goods by a thief or a purchaser from a thief, to give a good title to a bona fide purchaser from him, overriding the title of the true owner”, s25 SGA takes precedence over RoT Clauses Subject to HP or CS

s25(2) SGA explicitly does not apply to conditional sale agreements OR hire purchase agreements. If property in the goods has not already passed to the buyer under a sale or return contract he cannot confer a good title on a bona fide purchaser. Exception? ss27-29 Hire Purchase Act (for cars) – these sections apply to a party who has hired a motor vehicle under a hire purchase agreement, or holds it under a conditional sale agreement and has not yet become the owner of the vehicle. Where that party makes a disposition of the motor vehicle to a private purchaser acting in good faith and without notice of the relevant hire or conditional sale agreement, the disposition is valid. The provisions aim to protect private but not trade purchasers. The first purchaser must acquire the motor vehicle in good faith, if he does not then no subsequent purchaser can acquire good title to it. Good faith requirement still exists 1st private purchaser must do so in good faith If void agreement, provisions n/a – Shogun Finance Ltd v Hudson [2004] It makes no difference that the motor vehicle may have passed through the hands of several trade purchasers before reaching the private purchaser. Mitchell v Heys & Sons 1894 Someone who buys a vehicle from an individual who is hiring it under a contract of lease cannot be given good title. Sale Under a Voidable Title. S.23 of the 1979 Act reflects the common law rule that where a seller has a voidable title to goods, but it has not been avoided at the time of sale, the buyer obtains good title provided that he acts in good faith and without notice of the defect in title. In some cases however the buyer in possession may be able to pass title under s.25 of the act....