S27, S28 duties of seller and buyer, Actual delivery, constructive delivery PDF

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S27, S28 duties of seller and buyer, Actual delivery, constructive delivery...

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Facts: Garage entered into a contract with a petrol supplier for deliveries of fuel, after two cheques of the garage were dishonoured, the petrol supplier sought to amend its terms, demanding payment by banker’s draft prior to future delivery. Where the parties agree that delivery should be made before payment and the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may maintain an action against the seller for damages for non-delivery and not to tender the price. Such a buyer may alternatively be able to maintain an action against the seller in conversion, since the buyer will prima facie be entitled to immediate possession of the goods. However, this remedy will not be available to a buyer who is insolvent, as in such circumstances the unpaid seller will be entitled to exercise a lien on the goods and will thereby be entitled to retain possession of them until the seller pays or tenders the price. The duties of seller and buyer The duties of the seller and buyer in relation to delivery are set out in s 27 of the SGA 1979. SGA 1979, s 27 It is the duty of the seller to deliver the goods, and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale. Unless the parties otherwise agree, delivery of the goods and payment of the price are concurrent conditions, as the following provision makes clear. SGA 1979, s 28 Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that is to say, the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price and the buyer must be ready and willing to pay the price in exchange for possession of the goods. Section 28 only requires the seller to be ‘ready and willing’ to give possession of the goods to the buyer and the buyer to be ‘ready and willing’ to pay the price in exchange for possession. The section imposes no requirement for the seller actually to tender delivery before he becomes entitled to sue the buyer for the price or for damages, provided he can show that the buyer would have refused to accept the goods if delivery had been tendered. All the seller needs to do in such circumstances is to show that he was ready and willing to give possession of the goods in question. Delivery As s 27 makes clear, the seller is under a duty to deliver the goods. The word ‘delivery’ has a very specific legal meaning, which is wholly different from its colloquial meaning (e.g. when the supermarket delivers the goods ordered by its customer). The definition of ‘delivery’ is the same under the SGA 1979 and CRA 2015. SGA 1979, s 61(1); CRA 2015, s 59(1) ‘Delivery’ means voluntary transfer of possession from one person to another. For such a simple word, the concept of ‘delivery’ is rather confusing, not least because it does not in fact require the seller to hand over the goods to the buyer, and, as s 29 makes clear, unless otherwise agreed, it is not the seller’s responsibility to convey the goods to the buyer, but it is for the buyer to collect them. Actual delivery

Where the seller does transfer physical possession of the goods to the buyer (or his agent) this is known as actual (or physical) delivery. This is the common form of delivery in consumer transactions. Constructive delivery In the absence of actual delivery of the goods, the ‘voluntary transfer of possession’, and hence delivery, may be satisfied by constructive delivery. Constructive delivery occurs where the seller who does not have physical possession of the goods transfers control (or the right to possession) of those goods to the buyer. Constructive delivery may occur in the following ways. Where the buyer continues in possession of the goods although in his own right This type of constructive delivery can be seen in hire-purchase transactions. Here, the buyer will already have possession of the goods at the time he exercises his option to purchase at the end of the term of hire. The reason ‘delivery’ is satisfied in such a case is because of the different capacity in which the buyer then possesses the goods. Initially, during the period of hire purchase, he possessed the goods in the capacity of bailee (hirer), but when he exercises his option to purchase, he possesses them as owner. Where there is delivery of something that provides physical control of the goods An example of this type of constructive delivery is where the seller hands over control of the goods, for example, by handing over the keys to the premises where they are held, or the keys of a car. In this example, although actual delivery does not occur, control of the goods is transferred to the buyer, thereby satisfying the definition of delivery. Although this is regarded as a type of constructive delivery, it is, in practical terms, rather close to actual delivery. Where the seller transfers to the buyer the document of title to the goods Where the seller holds a document of title to the goods, the transfer of such document to the buyer gives the buyer legal control over the goods and thus (constructive) delivery is established, provided this was the intention of the transferor. The transfer will only be deemed effective if the buyer is given possession of the document noting that the buyer’s possession of it is authorized. Such authorization may be demonstrated by the document bearing the name of the bearer or indorsed by the person named on it. Attornment This relates to the situation where the goods are in the possession of a third party. An attornment in respect of goods occurs where the party in possession of the goods acknowledges to the buyer that he holds them on his behalf. SGA 1979, s 29(4) Where the goods at the time of sale are in the possession of a third person, there is no delivery by seller to buyer unless and until the third person acknowledges to the buyer that he holds the goods on his behalf; but nothing in this section affects the operation of the issue or transfer of any document of title to goods. The acknowledgement referred to in s 29(4) is known as ‘attornment’. This is where a third party attorns to the buyer by acknowledging to the buyer that the third party now holds the goods on the buyer’s behalf. In such a case, delivery occurs at the moment of attornment. It might also be possible to establish a right to immediate pos- session of the goods even without an acknowledgement by the third party, for example, where the third party wrongfully refuses to attorn to the claimant.

An example can be seen in cases where the goods are held to the order of the seller by a third party, such as a warehouse person. In this example, the seller gives the buyer a delivery order or warrant for the goods that are held in a warehouse. Before possession or property can be transferred to the buyer, the warehouse person must ‘attorn’ by accepting the delivery order or warrant. The goods in question must also be physically segregated or otherwise ascertained, although the fact of attornment itself may be sufficient to raise an estoppel against the warehouse person. Sale and leaseback arrangements, where the goods remain in the seller’s possession throughout, also give rise to an attornment (albeit notionally), and thus constructive delivery, notwithstanding that the buyer is quite unable to give directions to the seller in respect of the goods. In this type of situation, the seller attorns by acknowledging the fact that he holds the goods as the buyer’s bailee. Delivery to a carrier Delivery of the goods to a carrier is prima facie deemed to be a delivery to the buyer pursuant to s 32(1) of the SGA 1979. SGA 1979, s 32(1) Where, in pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier (whether named by the buyer or not) for the purpose of transmission to the buyer is prima facie deemed to be a delivery of the goods to the buyer. The section is concerned specifically about delivery ‘to a carrier’, unlike other sections in the Act, where delivery to a bailee for the purpose of onward transmission to the buyer might suffice. Delivery of the goods to a carrier who is an agent or servant of the seller will not constitute delivery to the buyer because of the connection between seller and carrier. Unless otherwise authorized by the buyer, the seller must make such contract with the carrier on behalf of the buyer as may be reasonable, having regard to the nature of the goods and the other circumstances of the case. If the seller fails to do so, and the goods are lost or damaged in course of transit, the buyer may decline to treat the delivery to the carrier as a delivery to himself or may hold the seller responsible in damages. Whether or not the seller has made the contract with the carrier on reasonable terms for the buyer’s benefit will be a matter of fact, but it was held in the following case that the seller will not have satisfied this requirement where he contracts with the carrier at the owner’s risk where the same carrier would have contracted to deliver the goods at his own risk for the same price. Case: Thomas Young & Sons v Hobson & Partner (1949) 65 TLR 365 (CA) FACTS: The seller sold seven electric engines to the buyer. It was a term of the contract that the engines should be delivered by rail. The seller sent the engines at the buyer’s risk. The seller loaded the engines onto the rail in box wagons, but failed adequately to secure them, which resulted in them arriving in a damaged

condition. The buyer refused to accept them from the railway. It was found that there was no difference in the freight costs as between ‘owner’s risk’ and ‘company’s risk’. HELD: The Court of Appeal held that the seller had failed in its duty under s 32(2) of the SGA 1893 to make such contract with the carrier on behalf of the buyer as was reasonable, having regard to the nature of the goods and the other circumstances of the case, and that the buyer was accordingly entitled to refuse to treat the delivery to the railway company as delivery to himself and was accordingly entitled to reject the goods. Section 32(1) of the SGA 1979 does not apply in cases where the buyer deals as conSumer, with the obvious result that delivery to a carrier in such a case is not deemed to be delivered to the buyer and the risk will not be transferred to the consumer buyer. The justification for s 32(1) being disapplied in consumer cases was explained by Rix LJ in Scottish & Newcastle International Ltd v Othon Ghalanos Ltd as: [reflecting] a feeling that a consumer would not expect the goods to be at his risk until physical delivery had been effected . . . [and] highlights the difference between what one might call a layperson’s view of delivery as being something essentially physical, and a merchant’s or lawyer’s view of it as being more conceptual. Carriage by sea Where the goods are being carried by sea, the risk is likely to be with the buyer, espe cially in the case of a Fob contract. Where the goods are sent by the seller to the buyer by a route involving sea transit, under circumstances in which it is usual to insure the goods, the seller must give such notice to the buyer so as to enable him to insure them during their sea transit. If the seller fails to do so, the goods are at his risk during such sea transit, although the parties may agree otherwise. Place of delivery An obvious question in relation to delivery is: where should delivery be made? Section makes it clear that unless the parties have otherwise agreed, it is not the seller’s responsibility to convey the goods to the buyer, but it is for the buyer to collect them. SGA 1979, s 29 (1) Whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer is a question depending in each case on the contract, express or implied, between the parties. (2) Apart from any such contract, express or implied, the place of delivery is the seller’s place of business if he has one, and if not, his residence; except that, if the contract is for the sale of specific goods, which to the knowledge of the parties when the contract is made are in some other place, then that place is the place of delivery. No general liability for delivering the goods to a rogue The seller will have complied with his duty of delivery if, on arrival at the agreed destination, he hands them to a person whom he reasonably believes is authorized to accept them. In other words, the seller’s duty on physically delivering the goods to the buyer’s premises is limited to handing them over to someone who appears to have the authority to receive them, although he ought to take reasonable care to ensure that no unauthorized person receives them. Once the seller has delivered the goods to such a person, he will not be liable if that person has gained access to the buyer’s premises and later misappropriated the goods, as the following cases demonstrate....