Sale of Goods Act

Looking at the facts provided some of the problems has been identified such as late delivery, wrong delivery, and non delivery, when exclusive supplying Cuvee champagnes to its sub buyers. On the basis of these facts Exclusive Winery UK Ltd (“Exclusive”) wished to claim for damages as there has been breach of contract by Cuvée Ltd (“Cuvee”). In terms of advising Exclusive, there are a number of issues that needs to be taken into consideration; they are the sale of contract between Exclusive and Cuvee, duties of the parties, buyer remedies and measure of damages.These main issues contain other elements, which if established successfully by analysing Sale of Goods Act (SGA) 1979 and relevant cases, Exclusive may be awarded for the damages.

1. Contract for sale in Commercial law:

First issue that raises the question is that whether there was a valid commercial contract between Exclusive and Cuvee or not. Based on the facts highlighted, Exclusive is a supplier and entered into a contract with Cuvee Ltd, a champagne manufacturer, supplying from France. The contract was initially for one year with an opportunity to carry on for further eighteen months. Exclusive had agreed to pay one million pounds, in which half million pounds has been paid at the time of the contract known as ‘price’ and in return Cuvee ‘agreed to supply’ champagne to the buyer which satisfies SGA 1979 s. 2(1).[1] This contract clearly indicated that Cuvee would supply champagne including sellers rare vintage of 1995 which satisfies s. 2(3)[2] of SGA 1979 Finally, there was a clear ‘agreement of sale’ under s.2 (5)[3] of SGA 1979 because seller agreed to deliver these goods in every two months in a year. Thus indicated that there was an offer and acceptance and parties had sufficient consideration and intention to create legal binding.

1.1 There are some vital elements of the contract also should be looked at. First of all whether contract for sale Cuvee champagne is ‘goods’ or not under the sale of contract, because contract for sales must be a sale of ‘goods’ under SGA 1979 s.61(1) which provides, ‘goods’ includes all personal chattels other than things in action.[4] This definition explains that Cuvee champagne including rare vintage were clearly defined as ‘goods’ for sale of the contract.

1.2 Second element of the sale of contract is that ‘goods’ must be ascertained under s.16 of SGA 1979 which stated: [Subject to section 20A] where there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained. This rule raises public awareness of specific or ascertains goods. Those that come across dealing with unascertained goods will not be supported by the law, if anyone does, then they will be taking it under their own risk, as demonstrated by case of Re Wait.[5]

In this case Exclusive agreed to buy two types of champagne one is general Cuvee champagne and other one Cuvee rare vintage of 1995 champagne. Now, what we need to understand is that whether the products are unascertained or ascertained or specified goods as defined under SGA 1979 s.61 which stated ‘specific goods’ means goods that are identified and agreed on at the time of the contract and s.20A(1) which provides “undivided shares in goods forming part of a bulk(1)This section applies to a contract for the sale of a specified quantity of unascertained goods if the following conditions are met (a)the goods or some of them form part of a bulk which is identified either in the contract or by subsequent agreement between the parties; and(b)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”.[6] Considering s. 61 and s. 20A(1) of SGA 1979 with the facts highlighted in Exclusives case. It can be argued that half million pounds has been paid at the time of contract and presumably both of these products has been identified at the time of contract. Therefore both products were ascertained under s.20(A) of SGA 1979.

2. Duties of the parties:

It has been successfully established this was commercial contract and satisfied Sale of Goods Act provisions. Now, second issue needs to be raised is that what consists of duties of the parties.

2.1 The duties of Exclusive, in this case the buyer is to make payment or willingness to pay. Both parties Cuvee and exclusive agreed to pay in installment. According to their agreement, exclusive paid half a million at the point of contract and it was agreed that the rest of the payment would be made at the receipt of delivery. Secondly, as the buyer had already accepted few deliveries from the seller (Cuvee), the buyer therefore had no intention to refuse any delivery from the seller, which clearly indicates that Exclusive complied with SGA 1979 s.27[7] and s.28.[8]

2.2 In case of seller (Cuvee), duties include delivering goods according to description such as Cuvee’s champagne including rare vintage 1995.The seller’s willingness and the intention to deliver the goods as stated under s.28 of SGA 1979.In this case seller agreed to deliver goods to the buyer by six installments, which shows that, it was a contract for installment delivery, which can be possible in severable (separate) and non severable (entire) contract. Deciding whether contract severable or non severable can be very complex depending on contractual term. Severable contract defined in SGA 1979 s.31 (2)[9] where stated in severable contract installment, delivery and payment are paid separately. In severable contract usually delivery and payment take place together, failure to do one or more delivery can lead to the whole contract being not voidable. Installment delivery may be possible in non severable (entire) contract. It can be assumed that, this contract was not severable and payment was not paid separately for each delivery. Buyer already paid half million pounds at the time of the contract, and agreed to pay rest of payment upon final delivery which clearly indicates that it was a entire contract. The Seller’s first installment delivered correctly, second installment was wrong, although was repaired by the seller. Fourth and fifth installment was not only late but also wrong products had been delivered. Finally, the seller refused to deliver sixth installment, which was unexpected by the buyer, which meant it was a breach of contract by the seller. In that case Exclusive cannot repudiate the contract. Buyer can only claim damage for breach of warranty by Cuvee under s.11(4)[10] of SGA 1979. According to s.29(3)[11] of SGA 1979 the seller was obliged to deliver goods within fixed period of time as stated in contract delivery by installment in every two months. These duties are crucial, failing to comply with these rules can lead to breach of contract and Exclusive can sue for damage.

3. Buyer remedies:

As it has been established that Cuvee has already breached the contract, the third issue will look at what remedies available to Exclusive in relation to late delivery, wrong products and refusing to deliver final installment.

3.1 First element of the remedy is that whether the contract for sale of goods falls under specific performance or not. The terms of Specific performance are matter of court discretion. Court will only order specific performance under s.52(1)[12] of SGA 1979 when goods are only unique, ascertained or specific and only designed or manufactured for particular buyers and where similar goods are unobtainable elsewhere, damage is not only enough for the buyer as pose to the delivery, as seen in case of Behnke v. Bede Shipping Co.[13]

Considering s.52(1)of SGA 1979 and Behnke v. Bede Shipping Co with given facts, firstly there was a contract between Exclusive and Cuvee to supply two types of champagne. One was Cuvee champagne which was an ordinary champagne which can be available in the market and other one rare vintage 1995 Cuvee champagne are specific by description, but it does not indicate that this champagne was only manufactured only for Exclusive, it can be assumed that this rare vintage may be supplied to others by Cuvee. Therefore these goods are not unique and this may also be available elsewhere. Secondly, when Cuvee failed to deliver last installment, Exclusive claimed for damage as a remedy, this gives the impression that damage was sufficient for remedy as part of the loss. In that case if this goes further the court may not order for specific performance.

3.2 Second element of remedy is that Exclusive received late delivery for fourth and fifth installments, whether buyer can receive any damage from Cuvee or not. In this case it can be assumed that buyer already accepted late delivery, therefore has lost his right for rejection under s.35[14] of SGA 1979 The buyer can only receive damage in terms of late delivery under s.11(4) of SGA 1979 as mentioned above.

3.3 Third element of remedy will consider whether Exclusive can get damage for breach of warranty, when Cuvee failed to deliver right products in its last two installments as mentioned above. It can be assumed the delivery has been accepted by Exclusive therefore buyer had lost rights to reject the deliveries under s.35 of SGA 1979 as mentioned above. The buyer can only claim for damage Under s.53(1) of SGA 1979.[15]

3.4 Fourth element of remedy will demonstrate whether Exclusive has any remedy in terms of non delivery of final installment Cuvee, as mentioned above.SGA 1979 s. 51(1) stated damages for non-delivery ,”where 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”.[16] In view of this rule Cuvee has breached contract on the basis of delivery refusal, as a result Exclusive is entitled to claim damage against Cuvee.

3.5 The final element of the remedy will discuss sub-sale, in relation to Cuvee’s late delivery including wrong goods on last two installments and refused delivery on final installment. The given facts does not make it clear whether or not Cuvee was aware of the fact that Exclusive supplies champagne in various other companies. In order to claim damage for sub sale, Exclusive need to meet four conditions as stated by House of Lords in case of Re Hall & Pim s Arbitration[17], firstly, that Exclusive’s contract for resell was for specific goods especially rare Cuvee vintage of 1995 which was quite demandable, instead of this product Exclusive was unable to tender other products. Secondly, Cuvee was informed of Exclusive re selling these product and had failed to deliver this product as a result, caused serious loss to Exclusive. Thirdly, Exclusive does this subcontract prior to Cuvee’s breach of contract and finally this sub sale price was not unusual bargain. Should Exclusive fail to satisfy all four requirements, in this case Exclusive will not be able to claim damages for sub sale. However, It can also be assumed that Cuvee was aware of the fact that Exclusive is a champagne supplier as a result may get damage for sub sale. Exclusive can demand Cuvee to pay for any damages when Exclusive faces payment to its sub buyers as Cuvee knew that Exclusive had brought the goods for re-sell as per in case of Godley v Perryr.[18]

4. Measure of Damage:

Final issue will measure damages for Exclusive against Cuvee. It has already been established in remedy that Exclusive is entitled to damages for late delivery, wrong delivery and non delivery on final installment, Exclusive may also get damage for sub sale. These damages can be assessed by analysing various sections of SGA 1979 and case laws.

4.1 First element of damage will assess exclusive’s late and wrong products delivery. Delivering wrong products is a breach of warranty as mentioned above, and this damage will assess by SGA 1979 s.53(2) which stated ”the measure of damages for breach of warranty is the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach of warranty”.[19] In case of Hadley v Baxendale[20] ‘the court held that there are two types of damage, which can be obtained for breach of contract. They are i) any loss naturally arising from the breach ii) any loss which at the time of making the contract, the defendant could have predicted as likely to result from the breach of it. This principle was applied in case of Victoria Laundry v Newman Industries[21] buyer was awarded damage for this loss of ordinary business which arose naturally from the late delivery’.[22] In the light of above rules, Exclusive may get damage due to loss which arose naturally for late and wrong products delivery. If the seller only had late delivery then the buyer would have had the chance to minimise the loss, however it could be assumed that due to wrong delivery in its last two instalments Exclusive could not supply rare vintage of champagne to his buyers which had resulted a great loss.

4.2 Second element of damage will consider the amount of damages Exclusive may be awarded for non delivery of sixth instalment by Cuvee. In this fact Cuvee informed Exclusive three weeks prior to the final installment about non delivery, which Cuvee repudiated the contract prior to the time for performance, but the facts does not indicate whether it was immediately agreed by exclusive or not. In a situation like this two options would be considered:

4.2.1 First option is that, if Exclusive had accepted to repudiate the breach and immediately claim for damage then this will be treated as anticipatory breach, damage will be measured differently between contract and market price as stated in case of Tai Hing Cotton Mill Ltd v Kamsing Knitting Factory.[23] In that case other area will need to brought into attention whether exclusive has taken reasonable step to mitigate its loss. It could be assumed that exclusive made all attempts to purchase rare vintage from elsewhere but it was not available locally or nationally, however Exclusive was not bound to supply wrong products to the buyers because it would involve the company’s own commercial reputation as stated in case of Finlay v Kwik Hoo Tong.[24] Exclusive was not either expected to hunt globally to find similar goods as per in case of Lesters Leather & Skin Co v. Home & Oversees Brokers[25] in that case court has discretion to award hire damage.

4.2.2 Second option is that, if Exclusive had refused to accept Cuvee’s anticipatory breach and waited until actual performance date. This would have been treated as non delivery. Damage will be prima facie and assessed on s.51(2)[26] and 51(3)[27] of SGA 1979 .This prima facie rule explain by the L.J salmon in case of Pagnun v. Corbisa[28] stated that ” … the innocent party is not bound to go on the market and buy or sell at the date of the breach. Nor is he bound to gamble on the market changing in his favour. He may wait if he chooses; and if the market turns against him this cannot increase the liability of the party in default; similarly, if the market turns in his favour, the liability of the party in default is not diminished”.[29]

Taking into account s.51(2),(3) and Pagnun with given facts the basic measure of damage for Exclusive will be estimated in respect of loss directly and naturally caused for non delivery by Cuvee for last installment. Considering these rules, although Exclusive is not bound to hunt for the rare vintage from the market, but if he had found similar products from the market with high prices in that case prima facie rule that cuvee’s liability would not have increased. If however, Exclusive found similar products cheaper then contract price then, Cuvee would be liable for damages. The measure of damages would be estimated and assessed on natural loss because of seller’s non delivery.

Comparing both options it can be assumed that Exclusive accepted Cuvee’s repudiation immediately and claimed for damage.

4.3 Finally the element of damage will illustrate whether Exclusive can get any damage for loss of lucrative contract with its buyer because of rare Cuvee vintage champagne. Few areas will consider for lucrative contract. First of all Cuvee could predict the result of breaching this principle as stated in case of Hadley as mentioned above. In case of Victoria as mentioned above the innocent party did not get damage because the seller did not predict the buyer’s chance of obtaining lucrative contract. According to the facts it can be assumed that Cuvee was aware of Exclusive sub sale, which he was doing for a long period of time. Secondly, Exclusive loss was not too remote, this happened naturally from Cuvee’s breach. This would not have happened if Cuvee’s performed it’s according to contractual term. In case of Jackson v Royal Bank of Scotland[30] in this case the House of Lords referred the case of Hadley and held that “when there is a breach of contract the aggrieved party is only entitled to recover such part of the loss actually resulting as was at the time of making the contract reasonably foreseeable as likely to result from the breach. Lord Nicholls commented that once the test of remoteness has been satisfied according to the rules of Hadley there is no arbitrary limit that can be applied to the amount of the damages if no cut-off point is provided by the contract”.[31] in contrast of this case it can be assumed that it was reasonably foreseeable to Cuvee that breach on contractual terms as a result Exclusive will suffer loss, therefore loss for lucrative contract was not too remote because the contract stipulated that after a year upon exclusive desecration this will be continued further eighteen months which was a cut off point of the contract, if it would not have been refused by Cuvee before final installment, in that case there would have been a greater chance for Exclusive to continue for further, and opportunity to make large amount of profit from sub buyers, therefore loss for lucrative contract took place naturally for breach of contract by Cuvee.

Advising Exclusive:

Considering the above it can be advisable to Exclusive, This contract was valid under Sale of goods Act as mentioned above. In duties of parties Exclusive was not in breach, in terms of payment or non acceptance with seller the buyer was in breach of contract due to late delivery with wrong products, on and non delivery, as entire contract seller already in breach in warranty as mentioned above. The given facts does not make it clear in terms of sub sale, non delivery, late delivery and wrong products, therefore it can be assumed that Exclusive may have the right to claim for damage such as estimated loss of £2.5 million including £1.5 of lucrative contract. However, it does not mean that Exclusive will get same amount of money. If Exclusive wished to get high amount of damage then few factors need to be proven. First of all this contract was non severable contract and both Cuvee champagne were specific or ascertained. Secondly, buyer has to prove that Cuvee was fully aware of Exclusive sub sell and this has been mentioned in the contract and Exclusive has to satisfy other condition of sub sell as stated above. Thirdly, exclusive has to prove that loss occurred naturally because of late delivery including wrong delivery of goods and had informed Cuvee immediately after receiving wrong year vintage champagne at fourth and fifth installments. Fourthly in non delivery Exclusive has to establish that buyer accepted seller repudiation immediately, rare vintage champagne of 1995 was not available anywhere else and the buyer took all reasonable steps to mitigate its loss. Fifth, in terms of lucrative contract Exclusive has to prove that damage for lucrative contract was not to too remote, because Cuvee was aware that Exclusive is a Supplier of Cuvee’s champagne and that it was stated in contract. Finally all losses arose naturally due to Cuvee’s breach.

Damage is always awarded by the court; if there has been a serious loss, then court may use discretion to give innocent party higher amount of damage to avoid injustice. If this matter of Exclusive’s case appeared in court and providing Exclusive had proved all these factors successfully as mentioned above, then Exclusive may obtain higher compensation for the damages .

Bibliography

Text Books:

* Robert Bradgate and Fidelma White, Commercial law, Oxford University Press,2009 .

* L. S. Sealy, R. J. A. Hooley, Commercial law : text, cases and materials, Oxford University Press,2009.

* Paul Dobson, Rob Stokes, Commercial law, Sweet & Maxwell, 2008.

* Roy Goode, Transnational commercial law : text, cases, and materials, Oxford University Press, 2006.

* P.S. Atiyah, J.N. Adams, Sale of Goods,11th Revised edition, Longman,2005.

Websites:

* Sale Of Goods Act:

http://www.opsi.gov.uk/RevisedStatutes/Acts/ukpga/1979/cukpga_19790054_en_1

* Jackson v Royal Bank of Scotland

http://www.publications.parliament.uk/pa/ld200405/ldjudgmt/jd050127/jack-1.htm

* THE LAW OF INTERNATIONAL TRADE AND CARRIAGE

http://www.nadr.co.uk/articles/published/shipping/003CHAPTERTHREETRADE1.pdf

* Entire And Divisible Contracts

http://chestofbooks.com/business/law/Law-Of-Contracts-Treatise/Entire-And-Divisible-Contracts.html

* Case commentary:

http://0login.westlaw.co.uk.brum.beds.ac.uk/

* Specific performance; Disputes & Litigation

http://www.gillhams.com/dictionary/532.cfm

A.K.Atiqul Haque 0814000 Law005-2 Page 1 of 11

[1] 2(1)A contract of sale of goods is a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price.

[2] 2(3)A contract of sale may be absolute or conditional.

[3] 2(5)Where under a contract of sale the transfer of the property in the goods is to take place at a future time or subject to some condition later to be fulfilled the contract is called an agreement to sell.

[4] http://www.opsi.gov.uk/RevisedStatutes/Acts/ukpga/1979/cukpga_19790054_en_8#pt8-l1g73

[5] [1927]1 Ch 606

[6] http://www.opsi.gov.uk/RevisedStatutes/Acts/ukpga/1979/cukpga_19790054_en_3#pt3-pb1-l1g23

[7] SGA 1979 s.27 provides”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”.

[8]s.28 stated that “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”.

[9] Instalment delivery defined in SGA s.31(2) (2)Where there is a contract for the sale of goods to be delivered by stated instalments, which are to be separately paid for…..

[10] When condition to be treated as warranty defined in SGA 1979 under s.11(4)Where a contract of sale is not severable and the buyer has accepted the goods or part of them, the breach of a condition to be fulfilled by the seller can only be treated as a breach of warranty……

[11] Rules about delivery define under s.29(3) of SGA “Where under the contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time”.

[12] Damage of non delivery defined in SGA s.51(1)Where 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.

[13] [1927]1 CH 606

[14] Acceptance define in SGA 1979 under 35(1)The buyer is deemed to have accepted the goods, a)when he intimates to the seller that he has accepted them, or(b)when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller.

[15] Remedy for breach of warranty stated in SGA 1979 under s.53(1)Where there is a breach of warranty by the seller, or where the buyer elects (or is compelled) to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods; but he may—a)… (b)maintain an action against the seller for damages for the breach of warranty.

[16] http://www.opsi.gov.uk/RevisedStatutes/Acts/ukpga/1979/cukpga_19790054_en_7#pt7-pb2-l1g64

[17] [1928]139 L.T.50

[18] (1960) 1 W.L.R. 9.

[19]http://www.opsi.gov.uk/RevisedStatutes/Acts/ukpga/1979/cukpga_19790054_en_7#pt7-pb2-l1g64

[20] (1854) 9 Exch. 341

[21] [1949) 2 K.B. 529

[22] Paul Dobson and Rob Stokes: Commercial law: 7th edition (sweet & Maxwell edition:2008)(211)

[23] [1978] 2 W.L.R.62

[24] [1929]1 K.B. 400

[25] Paul Dobson and Rob Stokes: Commercial law: 7th edition( sweet & Maxwell edition:2008)(219)

[26] SGA 1979 s.51(2)stated “The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the seller’s breach of contract”.

[27]SGA 1979 s51(3) stated “Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered or (if no time was fixed) at the time of the refusal to deliver”.

[28][1970]1 W.L.R 1306

[29] Paul Dobson and Rob Stokes: Commercial law: 7th edition (sweet & Maxwell edition:2008)(212)

[30] [2005] UKHL 3

[31] http://www.brewerconsulting.co.uk/cases/CJ0506RR.htm