Passing of Property and Risk

In Mr Gregson’s interest it is important to know if the property in the goods in question had passed to the buyers in their respective situations and with which party was the risk present.

1. The Tiles

On November 6th 2009, Mr Gregson sold 100 ‘Acadia’ white tiles to Bertrams Builders. He had the exact quantity of these tiles in stock and agreed to deliver them to the buyer on 10th November. The tiles were damaged while being loaded. These tiles fall within the category of specific goods under s.61 (1) of the Sale of Goods Act 1979 (SGA 1979) which defines specific goods as ‘goods identified and agreed on at the time a contract of sale is made’. This means that the goods are known in a specified way to both the buyer and seller prior to the agreement. In Mr Gregson’s situation, the specified quantity of the tiles and the fact that the tiles in question were known and agreed upon by both himself and the buyer places them in that category.

In contracts for the sale of specific goods, s.17 (1) SGA 1979 says that ‘where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.’ Further, s.17 (2) provides that ‘for the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.’ Lord Diplock, who commented on this matter in the case of Ward v Bignall said that, “Very little would be needed in modern times to give rise to the inference that the property in specific goods is to pass only on delivery or payment”. It was decided in Denant v Skinner that ‘the parties should have the requisite intention when the contract is being concluded.’ By applying s.17 to this situation, the property in the tiles is deemed to have passed at the time when the parties intend it to do so. It is open to the parties to agree to make their own provisions as to when property is to pass and the courts will give effect to this expressed intention. On the facts, it appears difficult to infer any concrete intention by either party. If no time is specified for the passing of the property then relevant rules from s.18 should be applied for the ascertaining of the parties intentions. With s.18, ‘there is an unconditional contract for the sale of specific goods in a deliverable state the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, be postponed.’ This illustrates that the property passes to the buyer when the contract is made. Further, in s.61 (5), ‘goods are in a deliverable state when they are in such a state that the buyer would under the contract be bound to take delivery of them.’ In Underwood v Burgh Castle, a machine that was attached to a factory floor and therefore was not in a deliverable state was deemed not to be intended to pass. This clearly demonstrates the aforementioned principle. The tiles in question were in a deliverable state because Mr Gregson had the exact quantity of these tiles in stock and agreed to deliver them to Bertrams Builders on November 10th. Therefore, the property in the goods has passed and the risk lies with Bertrams Builders.

Alternatively, depending on the actual facts, if it happened to be a situation where Mr Gregson with 100 tiles agrees to sell all 100 tiles, it might not be a sale of specific goods even if he intends to supply the 100 tiles. It is important to ascertain the terms of the contract to find out if he could obtain more tiles at a later time or date and supply those instead of the ones he had in stock. If so, then it is not a sale of specific goods. Re London Wine Co, illustrates the principle that where an appropriation is concerned, there has to be an apparent intention to irrevocably attach the goods to the contract.

In such a situation, the100 tiles will then be treated as unascertained goods. Looking at s.16 subject to s.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.’ Section 20A is not applicable in this particular scenario as the tiles do not form part of a bulk. Next we have to consider the intention of the parties provided for in s.17 which states that with regard to ascertained goods, the property in them is transferred to the buyer when intended to by the parties either contained within the terms of the contract, the conduct of the parties or the circumstances of the case. If intention can’t be inferred, then Rule 5(1) under s.18 will apply, ‘ where there is a contract for the sale of unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods then passes to the buyer; and the assent may be express or implied, and may be given either before or after the appropriation is made.’ ‘A deliverable state’ is defined in s.61(5) describing that ‘goods are in a deliverable state within the meaning of this Act when they are in such a state that the buyer would under the contract be bound to take delivery of them.’ In Philip Head v Showfronts, it was held that carpets were not in a deliverable state when they were stolen because they had yet to be installed when the theft happened.

Under Rule 5 there are two main criteria to be assessed. The first is wherever there is unconditional appropriation. In other words, the goods in question have to be irrevocable earmarked and attached to the relevant contract. This means that there exists irrevocable identification of the goods which is beyond the power for the seller to substitute goods as seen in Carlos Federspiel & Co SA v Charles Twigg & Co Ltd. In Carlos Federspiel, the seller agreed to sell some bicycles to the buyer. The seller packed the bicycles and agreed to a ‘free on board’. The seller then went into liquidation. The buyers argued that the bicycles were theirs but the courts held that merely segregating the goods was not a sufficient unconditional appropriation. The second criterion is whether the appropriation was afforded with the proper assent from a party to the contract. In this case there is an unconditional appropriation because when the buyer accepts delivery it is considered assent and there actually was delivery in this case.

Since it is clear on the facts that the property has already passed to the buyer under Rule 5 of s.18, we now look to s.20 which concerns the passing of risk. s.20(1)states that, ‘ 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 delivery has been made or not. However, it must be noted that according to s.20 (3), ‘nothing in this section affects the duties or liabilities of either seller or buyer as a bailee or custodier of the goods of the other party.’ If it is deemed that property has passed then risk has passed also. Therefore the tiles are at the risk of the buyer once delivery has been made. When Mr Gregson dropped the box containing the tiles, the risk was still with him making him responsible for the damage.

2. The Tool Box

On November 7th 2009, Mr Gregson sold a Trojan tool box to Charles Dixon. The tool box had been filled with tools but was damaged before delivery by a water leak from the store room roof. The tool box is categorised under specific goods in s.61(1) because it is understood as to which particular tool box is being referred to. Then s.17(1) and s.17(2) when applied, shows the property in the toolbox passes at the time when the parties intended it to pass. It is open to the parties to agree to make their own provisions as to when property is to pass and the courts will give effect to it. If such an intention is present before the time of delivery then the risk lies with Mr Gregson. Alternatively, if such intent cannot be discerned, Rule 1 of s.18 will be applied as if it was in deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, are postponed. For it to be in a deliverable state, s.61(5) lays out that they are in such a state when the buyer would under the contract be bound to take delivery of them. In s.20 (1), it is stated that ‘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 delivery has been made or not.’ In This case, property would have passed to Mr Dixon whether or not the delivery was made as risk is transfered with ownership, and not possession. However, The Sale & Supply of Goods to Consumers Regulations 2002 amended s.20 SGA 1979. This involved the insertion of subsection (4) into s.20 which generally states that in situations where the buyer deals as a consumer, subsections (1) to (3) of s.20 must be ignored and the goods remain at the seller’s risk until they are delivered to the buyer. This is irrespective of whether the property had passed under ss 17 or 18. In this situation, the damage to the toolbox happened prior to the delivery therefore unfortunately for Mr Gregson, the risk was still on his side of the fence.

3. The Wallpaper

On November 8th 2009, Mr Gregson sold Colin Clark 20 rolls of Dickinson ‘Springtime’ wallpaper which was stolen during delivery. These rolls of wallpaper are unascertained goods. s.16 subject to s.20A. As discussed in the issue about tiles earlier, this exception won’t apply because the wallpaper is not part of a bulk. Then we have to consider s.17 where if the property is to pass, intention must be inferred. On the facts that were provided by Mr Gregson, the intention of the parties cannot be inferred with any proper degree of certainty. If intention can’t be inferred, then Rule 5(1) under s.18 will apply. Under this rule as discussed earlier, there are two main criteria to be assessed. The first is wherever there is unconditional appropriation. In other words, the goods in question have to be irrevocable earmarked and attached to the relevant contract. The second criterion is whether the appropriation was afforded with the proper assent from a party to the contract. In this case there no unconditional appropriation because when the wallpaper was stolen, there was no chance for assent from Mr Clark.

Since it is clear on the facts that the property has not passed to the buyer, the goods remain at the seller’s risk until the property in them is transferred to the buyer in accordance with s.20. The wallpaper was stolen before being delivered to Mr Clark. The risk remain with Mr Gregson.

4. The Paint

On November 8th 2009, Mr Gregson sold 10 tins of paint to Harry Hewitt which then spilled on the road during delivery. The paint was not part of a bulk but rather unascertained goods. s.16 SGA 1979 which is subject to s.20A as discussed above states that goods must be ascertained. Under s.17, property in goods will pass if it can be found that there is an intention for it to happen upon delivery. This situation has nothing to do with bulk in relation to the other tins of paint as nothing was mentioned in the contract about 10 out of 100 tins of paint being delivered that very day. Further, Rule 5(1) under s.18 discussed earlier in the tiles situation will then apply, firstly wherever there is unconditional appropriation that has to be irrevocably earmarked and the second is whether that appropriation was given assent to. In this case it may be argued that unconditional appropriation happened when he loaded the paint on to the pavement. However, the likely scenario is that unconditional appropriation didn’t happen because unloading the tins of paint on to the pavement does not really constitute an unconditional appropriation. If in fact there was delivery to the buyer and assent was given when the buyer accepts delivery then it can be deemed to have been unconditionally appropriated.

When the damages occurred Mr Gregson had the material possession of the good and o top of that, property in the paint had not passed to the buyer yet. If property did not pass, risk was not capable of passing also and as such, Mr Gregson has to bear the risk of the loss and fulfill Mr.Hewitt’s demands for a replacement.