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Commercial Law (charts) SOGA + International Sales

+ Agency - Printed
Commercial law (University of London)

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Commercial Law
Part I
Sale of Goods Act 1979
(SOGA 1979)

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Sales of Goods Act 1979 International Sales The Law of Agency

This statute among others of its Being based on English law; there are The syllabus coverage here is
kind were basically developed to some difficulties that exist in rather wide although the ambit
provide some consumer; and also to International Sales type transactions. of questions is quite focused.
persons involved in transactions
involving sales of goods. The agency / principal
The syllabus covers regular
International sales type relationship is one that we
Other statutes includes : commercial obligations. cannot do without in today’s
commercial world.
SOGASA 1982 Eg: C.I.F & F.O.B contracts
Therefore, it is important for us
UCTA 1977
The syllabus also covers the passing to be aware of the necessary
CPA 1987
of property; risk; and title issues, not implications & inabilities that
to mention the obligation of insuring may arise from transactions
The ambit of this statute also covers the goods itself. involving the agent, the principal
the issues of passing of property; and third party.
risk; and title.
The methods of financing an
( the seller’s need to reserve the passing
international transaction is also an Contractual obligations as well
of property is also considered )
important part of the syllabus for as contractual and tortious
International Sales transactions. liabilities of the parties will
The passing of title by a non-owner is also be considered.
also considered in detail, in the study
International codes of banking and other
of the exceptions to the NEMO DAT
practices that have been introduced by
COMMERCE will also be included as
The obligations of the seller and the part of the syllabus.
buyer are also taken into account.

- SS.12 to 15 (IMPLID TERMS)

- Duty to deliver the goods in the right

quantity and quality.

- Duty to take delivery and accept the


Finally, the remedies of the seller and

the buyer are also provided for in the
statute, and since this is not
exhaustive, the statute has made
provisions for the inclusion of common
law remedies, s.62(2)SOGA1979.

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Contract for the sales of goods and

other contracts that do not fall within the
Sale of Goods Act 1979 (SOGA 1979)

S.2(1) SOGA 1979: A contract of sale of goods is a contract by

which the seller transfers or agrees to transfers the property in
goods to the buyer for a money consideration, call the price.

Contract that do not fall within the scope of SOGA 1979

Bailment Hire Purchase Mortgage

- where a bailor parts with - a hire purchase agreement - a mortgage of goods occurs when
possession of goods but he is a bailment of goods by the the owner of goods transfers title to
retains ownership of them. owner to the hirer, the a creditor as security for a debt.
bailment being coupled with
- Contrast this with a contract an option to purchase. - the transaction may take the form
of sale, whereby the seller of a contract for the sale of goods
undertakes to transfer both - the hirer is not a buyer but the mortgagee does not obtain
possession and ownership. within SOGA 1979, unless an absolute title.
and until he exercise his
option to purchase. - the mortgagee’s title being
subjected to the mortgagor’s right to
Pledge Helby v. Matthews (1895) redeem the goods.

- A bailment of goods or - such transactions do not fall

document of title to goods under SOGA 1979.
as security for a loan is
known as a pledge.

Consideration other than money Hire Contracts for work and material

- in a sale of goods contract under SOGA - a special of bailment that is - where the substance of the contract is an
1979 the consideration must always be without an option to purchase, undertaking to use skills in producing a
in monetary form. as there is no intention on the particular article, the contract may be one for
part of the owner that property works and materials and not a contract for
- where the goods is transferred for a is ever to pass. the sale of goods under SOGA 1979.
consideration other than money, the
transaction is not a contract for the Robinson v. Graves (1935)
sale of goods under SOGA 1979. - it was held that the contract to paint a
portrait was a contract for the exercise
- if the consideration is the exchange of of skills and experience; and not a
other goods, the transaction is known contract for the sale of goods.
as barter.
- contrast with :
What happens if the consideration is
in cash and part exchange of goods? Cammel Laird & Co Ltd v.
Manganese Bronze Co Ltd (1934)
Aldridge v. Johnson (1857)
- A contract for the exchange of 52 bullocks with 100 quarters
of barley, the difference in value to be made up in money, was Sale and a gift
treated without argument as a contract for the sale of goods.
- the likely argument being that the money formed the substantial - A gift is not considered under SOGA 1979 because
part of the consideration. there is no consideration.
- however, this argument is inconsistent with the usual motor trade-in
concept to which the court would consider it to be in the lines of a sale Esso Petroleum Ltd v. Comm. Of Customs & Exise (1976)
despite the substantial part of the consideration being in goods. (it is
- HOL decided that in circumstances where a garage had
important that the car has a fixed monetary value)
provided a coin with the purchase of 4 gallons of petrol, it
was not construed as a gift because the garage was bound
- See SUPPLY OF GOODS AND SERVICES ACT 1982 to provide the coin.
-Yet it was also not considered as a sale but rather as a
- Contrast with:
collateral contract that existed alongside the main contract.
-It is presumed that it fell within the SUPPLY OF GOODS
Dawson Ltd. v. Dutfield (1936) AND SERVICES ACT 1982.

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General situations not

falling under s.12(3)

s.12(1) : Condition as to Situations falling within

the seller’s right to sell. the scope of s.12(3)

(a) (b) Seller only intends to transfer such

Sale Agreement to sell title as he or a third party may have.
Free from Quiet
-Right to sell -Right to sell
encumbrances possession
at the time at the time when
of contract. property is to pass
s.12(4) s.12(5)
Case : Niblett v. Confections Materials (1921) There is an implied warranty There is an implied warranty
that all charges and encumbrances that none of the following will
known to the seller and not disturb the buyer's quiet
Right To Sell c/f Power To Sell known to the buyer have possession of the goods.
been disclosed to the buyer - The Seller
before the contract is made. - Third Party
Although the Seller may not have a right
- Anyone else
to sell yet he may pass on good title in
the goods by virtue of the Remedies Available
NEMO DAT QUAD NON HABET In breach of s.12, then the seller
exceptions. may be in breach of condition

*Distinguishing between :-
Sue for and/or Repudiate the
• Right to sell + Power to sell
damages contract
• Right to sell but no Power to sell
• no Right to sell and no Power to sell Note :
• no Right to sell but having a Power to sell the common law has extended
the realm of damages to that of
NOTE : Having no Right to sell
yet having a Power to sell
Cases :
- Rowland v. Divall (1923)
View of LJ ATKIN in
- Karflex v. Poole (1933)
Niblett v. Confections Materials (1920) –
- Butterworth v. Kingsway Motors (1954)
“…there is in fact no breach of s.12…
it may be that the implied term is not
broken if the Seller is able to pass to the Also note the issue of *Feeding Off* of title in
purchaser a right to sell not withstanding - West Ltd v. McBlain (1950) and
his own inability...” - Patten v. Thomas Motors Pty Ltd (1965)

View of Atiyah and Goode : Note : Although the word “condition” in the old s.12(1);
There is a technical breach of s.12 since and “warranty” in the old s.12(2); s.12(4): S.12(5) have
as against the true owner the disposition been replaced with the word “term” by the Sale and
is unlawful.
Supply of Goods Act 1994, the new s.15A provides that
as regards England and Wales and Northern Ireland,
Note : remedies available here is that since the terms implied by s.12(1) is a condition and the
the buyer has obtained what he bargained terms implied by s.12(2); s.12(4); s.12(5) are warranties.
for then his damages will be nominal (not
substantial) but as to whether the buyer
can reject the goods, the law is unclear
although the general view is that buyer
has NO right to reject.

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Contract for the Goods which have perished Determining the price
sale of goods s.6 : where there is a contract for s.2(1) : states that the price must
s.2(1) : Contract by which the sale of specific goods & the goods be in terms of money consideration.
the seller transfer or agrees without the knowledge of the seller has
to transfer property in goods perished at the time the contract •Sale
to the buyer for a money is made, the contract is void. s.8(1) : price determined by
consideration, call the price. - Contract
Goods perishing before the sale - Method in the contract
after the agreement to sell
- Course of dealing
s.7 : where there is an agreement to sell
s.2(4) s.2(5)
specific goods & subsequently the goods Alternatively to be determined
Sale Agreement to sell
without any default on the part on the by the courts under s.8(2) by
part of seller and buyer perishes before stating what is a reasonable price.
the risk passes to the buyer, the
agreement is avoided. Agreement to sell
Definitions s.9 : price to be determined by
a third party.
Property in the goods
S.61(1) : “means the general - If no valuation… reasonable price
property in goods, and not - If no valuation was possible due
merely a special property” to the fault of the seller or buyer,
the defaultee may be sued.
General property means :-
ownership in the goods and
nothing short of it.
Special property means :-
specific right in goods. Classification of goods
eg : bailment, hire purchase

Existing goods Future goods

s.61(1) : s.5(1) : goods in existence owned s.5(1) : to be manufactured or
“…all personal chattel other or owned by the seller at the time acquired by the seller after the
than things in action or money…” of the contract. contract.

Case: Moss v. Hancock

Specific good Unascertained goods Ascertained goods
s.61(1) : Goods that are identified Goods that were
Goods that are by way of description but unascertained at
identified and not identified and agreed the time of contract
agree upon at upon at the time of contract. but have subsequently
the time of the been ascertained.

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According to Benjamin s.13 may be breached in one of two ways:
1. minute deviation as in Re Moore & Landauer (1921)
and in Arcos Ltd v. E.A.Ronaason (1933)
2. where there has been a total failure of
consideration eg. Varley v. Whipp (1900)

The sale by description has been interpreted to apply to almost all

types of sales. However, whether the descriptive words will be terms
of the contract and falls under the ambit of s.13 have been
interpreted very restrictively in cases such as:

Ashington Piggeries v. Christopher Hill Ltd (1972)

Reardon Smith Line Ltd v. Yngvar Hansen-Tangen (1976)

What constitutes a sale by description and what Are all descriptive words automatically a description
does not constitute a sale by description? under s.13 and does s.13 blur the traditional distinction
between mere representations and terms of the contract?
What is a sale by description?
- Description in itself is not defined The answer to both questions is NO. This is according to
under the SOGA 1979 Salmon J in Taylor v Combined Buyers Ltd (1924)
- However, where implied or express terms
are used to describe the article which is a term of Not all description words fall under s.13 and s.13 does not
the contract… For the purpose of identifying override the traditional distinction between terms and
the goods… and is relied upon by the buyer… mere representations and it does not automatically convert
would be a working definition. any or all descriptive words into conditions or terms of the
1. The description must be a term of the contract
and not a mere representation. Although some cases seem to indicate that all
2. All sales of unascertained goods and future descriptive words fall within s.13
goods are naturally sales by description and this Eg. Arcos v Ronaason (1933) : where Lord Atkin refused to
may include sales of specific goods. comply with the traditional doctrine of substantial
performance in contract and required strict compliance.
R.M. Goode :–
- states that goods that are seen and examined Lord Wilberforce in Reardon Smith v. Hansen Tangen
- by the buyer may also be a sale by description. doubted the authority of the above discussions because
of the “excessive technicality” in their interpretation of s.13.
Beale v. Taylor (1967)
To determine which of the descriptive words fall within
3. The sale of manufactured goods in a self service the ambit of s.13, the following test is to be used:
store may also be consider a sale under s.13.
4. Not a sale by description. Ashington Piggeries v. Christopher Hill (1972) “…the
Sale of unique goods to which buyer is purchasing descriptive words used must form an essential ingredient
because of it’s uniqueness. in the identification of the goods…”(Lord Diplock)

Note : Contracting out and the exclusion of liability. “…the key to s.13 is IDENTIFICATION…”(Lord Diplock)

Eg. “Bought As Seen” The above test has been refined in

- This is a customary trade term which is Reardom Smith v. Hansen Tangen (1976) ; where
especially used by 2nd hand car dealers. Lord Wilberforce stated that in order for descriptive
Q : Is this an exclusion clause? word to be part of the description within s.13:
1. The description must be essential in the identification of
the goods and not merely as to where it is to be found.
2. It must be essential in the performance of the contract. In
this respect, regards must be had to two factors:
(i) commercial purpose and background of the contract.
(ii) other relevant circumstances.

Note : Although the word “condition” in the old s.13(1) have been replaced with the word “term” by
the Sale and Supply of Goods Act 1994, the new s.13(1A) provides that as regards England and Wales
and Northern Ireland, the term implied by s.13(1) is a condition.

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s.14(2) : where the seller s.14(2B) : quality of goods

sells goods in the course of includes their state and
a business, there is an condition and the following
implied condition that the are aspects of the quality
goods supplied under the of the goods
contract are satisfactory
s.14(2B)(a) s.14(2B)(b) s.14(2B)(c) s.14(2B)(d) s.14(2B)(e)
Fitness for Appearance Freedom safety durability
all purposes and finish from minor
s.14(2A) : goods are of defects
satisfactory quality if
they meet the standard
if that a reasonable man
would regards as s.14(2C) : the implied condition under
s.14(2) does not extend to any matter
making the goods unsatisfactory where:

(a) the defects have (b) The buyer examines the (c) In a contract for
been drawn specifically good before the contract is sale by sample, the
to the buyer’s attention made as regards those defects defect would have
before the contract is which that examinations ought been apparent on a
made. to have reveal. reasonable examination
of the sample

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Factors under the common law that have been held to be relevant in
determining whether or not goods are of satisfactory quality

The price Only part of the goods What is included as part Must the goods
are of satisfactory quality of the satisfactory quality be fit for all it’s
Cases :- of the goods purposes
- Beecham & Co Ltd Cases :-
v. Francis Howard - Jackson v. Rotax Motors Cases :- Cases :-
(1921) (1910) - Niblett v. Confections - Sumner Permain
c/f c/f Materials (1921) Co. v. Webb (1922)
- B.S.Brown & Sons - Cehave v. Bremer - Geddling v. Marsh (1920) - Henry Kendall v.
v. Craix Ltd (1970) Handlegaselchaft (1976) - Wormell v. RHM William Lillico
Agriculture (1987) (1960)
- Wilson v. Rickett
Cockrell Co Ltd (1954)
For how long must
Cases :- the goods remain to be
- Bartlett v. Sydney Marcus (1965) It was within the contemplation
of the parties that it would be of satisfactory quality.
- Crowther v. Shannon Motors (1975) reasonable to put the goods
through an additional process Cases :-
and to make the goods to be of - Mash & Murell v.
- Bernstein v. Pamson Motors (1987) satisfactory quality. Joseph Emmanuel (1961)
- Roger v. Parish Cases :-
(Scarborough) Ltd (1987) - Heil v. Hedge (1951)
- Grant v. Australian Knitting
Mills (1936)

Note : Although the word “condition” in the

old s.14(2) have been replaced with the word
“term” by the Sale and Supply of Goods Act
1994, the new s.14(6) provides that as regards
England and Wales and Northern Ireland the
term implied by 14(2) is a condition.

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s.14(3) : where the seller sells good in the course of a business & the buyer expressly or any impliedly makes
known to the seller / Credit-broker any particular purpose for which goods are being bought, there is an
implied condition that goods supplied under the contract are reasonably fit for that purpose, whether or not
that is that purpose for which such good are commonly supplied except where :-

Buyer does not rely on the skill or It was unreasonable for buyer to rely on the
judgment of the seller or Credit-broker. skill & judgment of the seller Credit-broker.

Factors that are to be taken into consideration

In the course Reliance on skill

Expressly or impliedly
of a business & judgment
made known to the seller
Teheran-Europe v.
Priest v. Last (1930)
St.Belton (1968)

What happens if the goods and

Goods supplied
under the contract have a variety of purposes? Partial Reliance
Manchester Liner v. Rea (1922) Ashington Piggeries v.
Christopher Hill (1972)
Griffith v. Peter Conway Ltd (1939)
Cammel Laird v.
Magannese Bronze &
Brass (1934)

Reasonably fit for that purpose

Bristol Tramsway Carriage v. Fiat Motors Ltd (1910)

Barlett v. Sydney Marcus (1965)

Note : Although the word “condition” in the

old s.14(3) have been replaced with the word
“term” by the Sale and Supply of Goods Act
1994, the new s.14(6) provides that as regards
England and Wales and Northern Ireland the
term implied by 14(3) is a condition.

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(1) A contract of sale is a contract for sale (2) In the case of a contact for sale for
by sample where there is an express or implied sample there is an implied condition:
term of that effect in the contract

(a) that the bulk will (b) deleted by the

correspond with the Sale and Supply
sample in quality. of Goods Act 1994

- A sample must correspond with

the bulk as regard qualities (c) that the goods will be free
apparent from examination which from any defect rendering
is normal in that trade. them unsatisfactory which
would not be apparent on
James Drummond v. Eh Van Ingen (1887) reasonable examination of
the sample.
“…sample speaks for itself…but it
s.5(2)(c) :
cannot treated as saying more than
such a sample would tell a merchant excludes the implied condition
of the class to which the buyer belongs that goods shall be satisfactory
where the defects rendering them
using due care & diligence...”
unmerchantable could have been
discovered by reasonable
examination of sample.
Sale by sample
*It does not matter whether or
Parker v. Palmer (1821)
not there was an examination
“…a sale by sample is a sale
whereby the seller expressly
- Contrast this with the
or impliedly promises that the
requirement to actually examine
goods sold should answer the
the goods under s.14(2)
description of a small parcel
exhibited at the time of the sale…”
because here the seller can
assume that the buyer will
Nb: s.15 states that the mere fact
examine the goods.
a sample is exhibited during
negotiations for sale does not
make it a sale by sample.
Reasonable Examination
Business purchasing is more
likely to be treated as a sale by
sample than a purchase made
Practical Examination
by consumer.
Case : Godley v Perry (1960)

Note : Although the word “condition” in the

old s.15(2) have been replaced with the word
“term” by the Sale and Supply of Goods Act
1994, the new s.15(3) provides that as regards
England and Wales and Northern Ireland the
term implied by 15(2) is a condition.

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Section 15A Sale of Goods Act 1979 (SOGA 1979)

Where the buyer has the right to reject goods by reason
of a breach on the part of the seller of a term implied by :

s.13(1) : s.14(2) : s.14(3) : s.15(2) :

Sale by description. Satisfactory quality. Particular purpose made Sale by sample.
shown to the seller.


s.15A(1) : the breach is so slight s.15A(1) : the buyer does s.15A(2) : there is no contrary
that it would be unreasonable not deal as consumer. intention in, or is to be implied
for the buyer to reject the goods from, the contract

The breach is not to be treated as a breach

of condition, but may be treated as a breach
of warranty, s.15A (1).

The onus is on the seller to show that

a breach falls within s.15A(1)

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Passing of Property and Risk

1 2
Importance to determining Rules pertaining to passing
when property passes. of property

Importance to determining
when property passes.

(i) Right of action in tort. (iii) Risk and Frustration.

Leigh & Sillivan v. Aliakmon s.20(1) SOGA 1979: risk passes with
(1986) HOL property subject to contrary intention
whether the goods were delivered or not.
Only persons who has proprietary
and possessory interest in the goods Tarling v Baxter (1827)
would have the right of action in
the tort of negligence in respect of s.20(2) SOGA 1979: where delivery is being
pure economic loss. delayed due to the fault of any party, risk
will remain with the party at fault.
Note: the position today after the
Carriage of Goods by Sea Act 1992. Demby Hamilton v. Barden (1913)

s.20(3) SOGA 1979: nothing affects the duties

(ii) Claim of Equitable Interest. of either seller or buyer as bailor or bailee of
the other.
Re Wait (1925) CA, Atkin LJ
Wiehe v. Dennis Bros (1913)
Any claims for equitable interest will
depend on goods being identified or s.33 SOGA 1979: where seller agrees to deliver at
ascertained so that property in goods seller’s risk to a place other than the place of
would any how passes in law. sale, the buyer takes any risk of deterioration
to incidental to the course of transit.
Note: s.54 SOGA 1979
where interest or special damages Mash & Murrell
are recoverable by law, or money v. Joseph I Emmanuel (1961)
paid is recoverable due to a total
failure of consideration. Contrary Intention in s.20(1)

Implied by customs:

- Bovington & Morris v. Dale (1902)

Express agreement:

- Sterns v. Vivkers (1923) CA

- Head v. Tattersall (1871)

The Julia: CIF contract.

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Rules pertaining to passing
of property

Note : Classification of goods.

s.5 SOGA 1979

s.61(1) SOGA 1979

Unascertained goods Specific or Ascertained goods

s.16 SOGA 1979 : property in goods cannot s.17(1) SOGA 1979 : property in specific or
pass in the sale of unascertained goods until ascertained goods passes when the parties
and unless the goods are ascertained. intended it to pass.

Healy v. Howlett & Son (1917) Ward v. Bignall(1967) Diplock LJ:

Re Goldcorp Exchange (1994) His lordship called s.17 the governing rule in
2 ALL ER 806 the passing of property.

c/f s.17(2) SOGA 1979 :

For ascertaining the intention of the parties’
Wardar’s (import & export) intention, regards should be had to the express
v. W Norwood & Sons (1968) terms of the contract, conduct of the parties
and the circumstances of the case.
Note: ascertainment by exhaustion.
Re Anchor Line (1937) CA
Wait & James
v. Midland Bank (1926) Only if the intention of the parties cannot be
determined under s.17, then the court shall
s.18 r.5(3)&(4) (inserted by the Sale and have regards to the guidelines in s.18 SOGA 1979.
Supply of Goods Act 1994)

Note : Tenancy In Common

s.20A SOGA 1979

Inserted by the Sale of Goods (Amendment) Act
s.20B SOGA 1979

s.20(A)(1) : sale of a specified quality of unascertained goods

s.20A(2) : (a) property in undivided share in the bulk is transferred to the buyer.

(b) the buyer becomes an owner in common of the bulk.

s.20A(4) : the total sum of goods of all the buyers exceed the whole of the bulk, then
the undivided share of each buyer shall be reduced proportionately.

Note : Re Stapylton Flecther Ltd (1995) 1 ALL ER 192

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Passing of Property and Risk (continued)

In the absence of the intention required in s.17 SOGA 1979,
the court shall have regards to the guidelines in s.18 SOGA 1979

s.18 r.1 SOGA 1979 s.18 r.2 SOGA 1979 s.18 r.3 SOGA 1979 s.18 r.5 SOGA 1979

- unconditional contract Where the goods are not Where seller has to Property in
in a deliverable state, weight, test, or measure unascertained goods.
- sale of specific or property in goods passes for the purpose of
ascertained goods when they are put into a ascertaining the price; Note: s.16 SOGA 1979
deliverable state and the property in goods passes
- deliverable state buyer has notice about when seller has done the Goods are in a
it. weighting etc and the deliverable state.
Note : buyer has notice about it
s.61(5) SOGA 1979 Tarling v. Baxter (1827) Philip Head & Son
Zagury v. Furnell (1809) v. Showfront (1970)
Cases :
Nanka Bruce v. Property passes when the
Underwood v. Burge Commonwealth Trust goods are unconditionally
Castle Brick & Cement (1926) appropriated to the
Syndicate (1922) contract.
- property in goods passes
when the contract is made Haeley v. Howlett & Son
whether time of payment (1917)
and delivery is postponed Laurie & Morewood
s.18 r.4 SOGA 1979 v. John Dudin (1926)
or not.
Guidelines in :
Dennant v. Goode : s.18 r.4 is an oddity
Carlos Fiderspiel
Skinner & Collom (1948)
v. Charles Twigg (1957)
Goods delivered
Appropriate by:

On approval Sale or return Seller with assent of

Buyer or
“Buyer” is to examine the “Buyer” wish to have facility Buyer with assent of Seller
goods to see if the goods or returning the goods for
are suitable to his purpose. some other reason other than Pignataro v. Gilroy (1919)
disapproval of their suitability. - implied assent

s.18 r.5(3) & (4)

Property in goods passes ascertainment by exhaustion.

s.20A & s.20B

s.18 r.4(a) SOGA 1979 s.18 r.4(b) SOGA 1979 Buyer as tenant in common
of the bulk
When the “buyer” signifies his approval to the seller. When “Buyer” does not signify
or approval but retain the goods
When the “buyer” does any act adopting the transaction. without notice of rejection.

Re Florence (1879) - Resell the goods

If not time period was fixed If there is a time period fixed
Kirham v. Attenborough (1897) - Pledges the goods. for returning the goods for returning the goods.

When the “buyer” deals with the goods as if

they were his own property. Property in the goods passes Property in goods passes
upon expiry of a reasonable upon expiry passes upon
Testing the goods does not amount to dealing with period of time. expiry of that time period.
the property as if his own.
Poole v. Smith Car Sales (1962)
Consider the grey area where the “buyer” during
the sale or return period disposes of the goods on
sale or return to another.

Atiyah : any act by “buyer” inconsistent with his

free power to return the goods is an act of adoption.

Benjamin : excessive use of the goods by the “buyer”

amounts to adoption.

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Power of Sale
Sale by agent :
S.62: “…the rules relating to the law of principal and
agent…apply to the sale of goods”.

agent has actual / ostensible authority to sell.

s.2 FA 1889 OR s.21(2)(a) :

Sale by Merchantile Agent (M/A)

( usually in motor industry )
M/A with the consent of the owner … is in possession of
goods/documents of the title … any sale, pledge or other
disposition by him … acting in the ordinary course of
business of M/A … valid as if authorised by owner of goods
to make sale … provided the Buyer acted in good faith
without notice.

Was the Seller a Was the M/A in Was M/A in possession with Was Buyer in good faith
Merchantile Agent? possession of the goods? the consent of the owner and without notice?

No – end No – end No – end No – end

Yes –- Yes – - Yes –- Yes – -

Did it appear to the Was M/A in Was disposition by M/A Buyer acquires good title
third part that M/A has possession his in the ordinary course of
ostensible authority? capacity as M/A? business of a M/A?

No – end No – end No – end

Yes –----------- Yes – - - - - - - - - - - - Yes – - - - - - - - - - - - - -

s.21(2)(a) : preserves the exception in the Factors Act 1889

Nothing in this Act affects; the provisions of the

Factors Act or any enactments enabling the
apparent owner to dispose of them as if he were
their true owner.

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Merchantile Agent (continued)

s.1(1) FA 1889 :

Having in the customary course of business Person can become a M/A for a single transaction but if private
individual (non-trader) without a customary course of business
as an agent authority either to sell goods/consign of buying/selling then he can not be turned into a M/A for a
goods or to buy goods or raise money on the single transaction.
security of goods.
- Lowther v. Harris (1927)
One of substance and not one of form, therefore The person must be a M/A at the time of obtaining possession
Name/description of party irrelevant.
of the owner’s goods.
- Heap v. Motor Advisory Agency (1923)
Refer : Rolls Razor V Cox (1967)
Weither v. Harris (1910)

It must appear to M/A must be in possession Was M/A in possession Disposition by M/A must
Buyer that M/A in his capacity as M/A with the consent of the be in the ordinary course
has ostensible owner. of M/A business
authority Pearson v. Rose & Young (1951)
Denning J : Fraud / trickery – still consent M/A must act within the
Authority that appears “the owner must consent to the ordinary course of business
to third party and Folkes v King (1923) (COA) of M/A’s generally and not
agent having the goods for a
irrelevant if any actual purpose which is in some way contrast from : that of a particular M/A
restrictions are placed Heap v. Motorist ADV (1923) (normal M/A)
or other connected with his
on M/A unless buyer business as a M/A … it may not
is aware – not in good actually be for sale, it may be for Importance placed on Oppenheimer v. Attenborough
faith the registration book. (1988) Buckley LJ :
display or to get offers or merely
to put into his showroom … but
Pearson v Rose & Young (1951) M/A must
there must be consent to
something of that kind before T/O delivered his car to M/A to
M/A must be in obtain some offers for it. M/A - Act within business
possession of the owner can be deprived of
his goods.” was not authorised to sell car. hours
the goods
While inspection, M/A found
registration book, tricked T/O to - At a proper place of
take his wife to hospital, then business
sold car with registration book
to third party. - In other aspects, act in
an ordinary way in which
Denning / Vaisey LJ : a M/A would act.
Exam :
Said that goods in this case means
car including it’s registration book SHOULD NOT AROSE
and a sale of a car without it’s SUSPICION OF BUYER
registration book is not a sale
M/A but sells car of goods.
T.O car repair to third party
Summerville LJ :
Sale of a car including Buyer must prove that he took
Possible because car repair and car sales are work it’s registration book is the goods in good faith and
connected to work of M/A not a Sale in the ordinary without notice
course of a M/A business.
BUT Heap v. Motorist Advisory Agency
Despite the ambiguity of COA (1923)
Given in purely private capacity, eg. Neighbour / Judgment, it is submitted that Rogue obtain possession of a car
Friend, then s.2(1) FA 1889 will not operate. LJ Summerville’s decision is to and disposed of it.
be preferred. On the facts of the True owner seek to recover car back.
AND case M/A has possession of the
car with the registration book The courts held in T/O’s favour
If a person is having car / other goods on HP, without his consent. If it’s a sale because they were not conviced
he is not in possession in his capacity as M/A. of car without registration book, of B’s bona fideness.
then it would not be a same in the
Staff Motor Guarantee v. British Wagon (1934) ordinary course of M/A business. Burden of Proof is on buyer.
s..2(1) FA 1889 did not apply.
Astley industrial Trust v. Miller (1968)

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Section 21(1)(1st limb) : NEMO DAT QUAD NON HABET

“No one can give a better title than he himself possesses.”
Bishopgate Motor Finance v. Transport Brakes Ltd. (1949)
Lord Denning : 2 principles striving for mastery.

Crowther Commission : - expressed concern over the

excessive technicality and injustice which had arisen in
this particular area of the law.

s.21(1)(2nd limb) : Estoppel Estoppel (continued)

Owner by his own conduct is precluded

from denying the seller’s authority to sell
– Buyer gets good title. Representation By negligence

Examples :
Merchantile Credit v. Hamblin (1965)
Contract – Buyer relied on statement and words conduct
The court treated the duty of care
altered his position
required in this area the same as
Kenderson v. Farquharson That which arises under the tort of
Land Law – Proprietary Estoppel Williams (1895) v. The King In both it’s nature & existence.
eg. On reliance of statement (1982)
buyer expended money but
later seller said that it was his Moorgate Merchantile v. Twitching
property. (1977) House of Lords appeared to have
departed from Merchantile v. Hamblin in
Usually statement of fact but now a promise holding that the negligence in this area is
would suffice. Ie. Promissory Estoppel. different from that in tort of negligence.

Usually statement of fact but now a promise

would suffice. Ie. Promissory Estoppel. Elements (problem question)

Estoppel Some knowledge of a Simply delivery of

proposed sale to the possession to seller
buyer to the world at is not sufficient.
Representation Negligence large must be present Central Newbury v.
in the mind of the owner. Unity Finance (1957)
Atiyah criticises
words conduct
because for creation There must actually
there must be be a sale and not Carelessness or
representation merely an agreement inactivity on the
to sell. owners part is
- words Shaw v. MPC (1987) irrelevant.
- conduct
The buyer must be
- Omission some kind of a holding It is also not relevant that
( only if duty out to the third party seller is untrustworthy and
of care exits.) that the seller has the that the owner has doubt
authority to sell. about him/her.

(a) The buyer must establish

that the owner owed him
a duty of care.
There must be some kind of a holding out to the third party
that the seller has the authority to sell.
(b) Owner is in breach of
duty of care. Lord Wright – Merchantile Bank of India v. Central Bank of India (1938)
“… if estoppel by representation is to be invoked there must be some
(c) The owner’s breach was act which positively misleads the third party beyond merely allowing a
of proximate / real cause
non-owner possession of the goods.”
of the buyer being induced
to purchase goods from
the seller.
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Power of Sale

s.21(2)(b) : common law power of sale s.22(1) : Sale in a market overt

or statutory power of sale
by courts

- Baliff
- Customs
- Agency of necessity

common law Statutory

power of sale power of sale

Non regulatory pledge Bankruptcy :

s.15 Bankcruptcy & Deeds of Arrangement Act 1923
Agency of necessity
- Power of a sheriff to seize and sell goods under
a write of execution.

Tort :
s.12 Torts (Interference with Goods) Act 1977

- bailee’s power of sale

Innkeepers :
s.1 Innkeepers Act 1878

- Stay in hotel and do not pay, then hotel can sell

customers’ goods.

Sale by order of the court

For any just & sufficient reason … be desirable

to have goods sold at once.

Larner v. Fawcett (1950)

- Horse owner refused to collect horse because
of outstanding bill.
- Court ordered sale of the horse to pay for
the outstanding bill.

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Power of Sale
s.23: Sale under a voidable title
Seller has a voidable title in goods … not yet avoided at
the time of sale … buyer acquires good title provided
Buyer buys in good faith and without notice.

Distinction of void and voidable title

Exam : Fraud : Look for intention of Seller.

Intention is to pass property to Buyer.
then it is voidable; if the intention is to
pass property to someone else, and not
buyer – void.

Face to face At a distance

Presumption is that seller is Communication by post

taken to deal with the person
in front of him. Cundy v. Lindsay (1878)

Phillips v. Brookes (1919) contrast :

Lewis v. Avery (1972)
King’s Norton Metal v.
Lake v. Simmonds (1927) Eldridge Merret (1897)
Ingram v. Little (1961)
- mistake as to identity, voidable contract.
- mistake as to identity, voidable contract.
- mistake as to attributes, void contract.
- Mistake as to attributes, void contract.

Voidable contract: s.23 applies.

To retain title, the defrauded party must rescind contract before goods are sold
to third party by communicating the rescission to the fraudulent party, seller.

Modified in :
Car & Universal Finance v. Caldwell (1964)
- If the defrauded party take all reasonable steps to rescind the contract, where
unable to communicate directly to the fraudulent party, seller, for example by
reporting to the police/automobile association, then the contract is rescinded.

Scope greatly reduced :

Newton of Weably v. William (1964)
- Even if the defrauded party has rescinded the contract, the fraudulent party,
seller, may still be able to pass on good title under s.25 – buyer in possession
with consent of owner.

No requirement under s.23 that buyer must be in possession.


s.38(1)(b) – Seller will have unpaid seller’s lien if it is in his possession and
goods not paid for.

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Power of Sale

s.8 FA 1889 : Sale by seller s.9 FA 1889 : Sale by buyer Motor vehicle subject
s.21 SOGA : in possession s.25 SOGA : in possession to HP / conditional sale

Seller after concluding a contract Having bought or agreed to buy Part III, s.27-29 HPA 1964
with buyer still in possession of … obtain with consent of seller
goods then … sells, pledges or … possession of goods or amended by CCA
disposes of it to third party … documents … transfer, pledge or
( in good faith / without notice). sell to any person in good faith Bona fide purchaser for value
& without notice. buys vehicle from person
possessing it under HP or
conditional sale obtain good
Property S.8 : also includes title.
must have where the seller
Does not matter if - Sale or return,
passed is transacting
property passes or s.18 r.4.
to buyer outside his Private purchase
not. - Credit sale
ordinary course
(even if voidable title) - Conditional sale
of business. s.27 HPA 1964
Newtons of Wembley - HP
However, this “Buyer in good faith
Ltd v. William (1964)
may raise an without notice.”
interference that
the buyer is not Consent of Seller Barker v. Bell (1971) (CA)
bona fide. Buyer also protected by s.27
Car & Universal Finance v. Caldwell (1965) ; If although he knew car
was under HP, he was lead
Newton of Wembly v. William (1965) to believe it was settled.

Third party in possession of goods /

Seller must deliver document of title.
Trade / finance purchaser
goods to buyer
( who is in good Seller - right of lien & stoppage , s.47
If they sell it to private
faith / without BUT goods transferred to buyer.
purchaser who take it in
notice ) good faith or without notice
Seller - LOSES right of lien and – s.27(3)
stoppage, s.47(2)
- title s.9
s.9 and s.47(2) prevails over s.19(3) SELLER
“ reservation of title by seller. ”
s.48(3) : after exercising right
of stoppage or lien.
In possession :
s.48(2) : pass good title.
(old authority show seller be in possession as seller).

Mitchell v. Jones (1985)

Staff Motors Guarantee v. British Wagon Co. (1934)

Pacific Motor Auction v. Motorcredit (1965)

Continuance of possession refers to continuity in
physical possession and regardless of any private

Worchester Works Ltd v. Cooden Engineering (1972)

Buyer can sue for :

breach of wrongful interference

contract with goods

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Buyer Seller

s.27 : Duty of seller to deliver and buyer to s.61(1) : delivery mean voluntary transfer of
take delivery; accept and pay for goods possession from one person to another.
according to contract
At time and place as contracted
s.28 : Unless stated to the contrary … delivery
and payment are concurrent conditions. ( to be continue… )

To deliver
Pass good title
Pay Take delivery Method Place Essence
All implied terms
s.28 : Does not amount applicable, Ie:
actual s.29(2) s.29(6)
Delivery and to acceptance of
s.12 - right to sell
payment are the goods The expenses
constructive Unless stated
s.13 - sale by description to the contrary of putting the
conditions Legal significance
- document it is the seller’s goods into a
is different from
Usually at acceptance of goods s.14 - satisfactory quality place of business deliverable
- physical state is to be
seller‘s place
of business s.15 - sale by sample control of Wiskin v. borne by the
goods. Ie. keys Terdish Bros seller unless
(1928) stated to the
Time - attornment contrary

As stated in - delivery to
contract but Acceptance carrier
s.10(1) says
it is not of s.34
the essence, s.35 Time
unless contrary s.35A
intention. Hartley v. Haymans (1928)
Buyer may lose essence of contract
Sue for price the right to reject
s.29(3) : no time stipulated then reasonable time
the goods.
s.49(1) : s.29(5) : reasonable hour … question of fact
… where property
in the goods passes Bowes v. Shand (1877)
to buyer and he Courts emphasised that the goods must be
wrongly neglects /
delivered within stipulated time and early
refuses to pay … shipment or delivery will entitle buyer to
seller may sue for repudiate.
PRICE of goods..

s.49(2) : Buyer may waive the conditions relating to

time of delivery but may once more make time
…payment on fixed
the essence by giving seller reasonable notice
date and buyer
that he would not accept delivery after a certain
wrongly neglects or
refuses to pay … sue
for price even through Charles Rickard Ltd v. Oppenheim (1950)
property in goods has
not passed.

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(continue… )

Delivery of correct quantity

Duty is strict and any failure entitles plaintiff

to reject the incorrect quantity delivered.

Only subject to the ‘de minimis principle’.

“a deficiency /excess in quantity which is microscopic”
Arcos v. Ronaasen (1933)


“which is incapable of influencing the mind of the buyer”

Shipton Anderson v. Weil Bros (1912)

Insufficient Excessive Mixed

s.20(1) : … buyer can reject s.30(2) : … buyer can accept goods s.30(4) : deleted by the Sale
but if he accepts contracted for and reject and Supply of
he must pay at the rest or reject whole. Goods Act 1994.
contract rate.
s.30(3) : … if buyer accepts all
alternatively the goods … he must pay for
them at the contract rate.
reject and sue for any loss
but if already paid – recover
sum paid because of total
failure of consideration.


retain goods and recover the

balance Non consumer transaction
Insufficient or Excessive

claim additional damage for breach s.30(2A) : inserted by the Sale and Supply
of Goods Act 1994

where buyer is a non consumer and :

(a) The seller delivers (b) The seller delivers

insufficient goods ; OR excessive goods ;
s.30(1) s.30(2)


The shortfall or excess is so slight that it

would be unreasonable for the buyer to
reject the whole.

The buyer may not reject the whole.

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Delivery to an Independent Carrier

Delivery to carrier Goods in transit

Question : Who bears the loss if goods

s.32(1) : … delivery of goods to carrier for are damages in transit?
purpose of transmission to the buyer
… is delivery of goods to buyer
(independent carrier)

Goods should withstand Seller take reasonable

Effect of s.32(1) normal journey care of goods
- Buyer can still reject goods because it
is not an acceptance but delivery and s.14(2) : Seller may be liable for s.14(2) : unless otherwise stated
buyer has still the right to examine the breach of condition of by buyer seller must
goods. satisfactory quality and make such contract
fitness of purpose if goods with the carrier on
- Unpaid seller will lose his right of lien fail to withstand normal behalf of the buyer as
but not his right of lien but not his journey. may be reasonable,
right of stoppage in transit. having regard to the
nature of the goods
- when seller delivers goods to carrier, and circumstance of
seller makes contract on behalf of the the case.
buyer, therefore buyer can sue
carrier on the contract. Otherwise - buyer may decline
to treat delivery
- if contract is for sale of to carrier as
unascertained goods, delivery to him
delivery to carrier may well amount
to an unconditional appropriation AND
under s.18 r.5
- sue for damages

Thomas Young v.
Hobson and Partners

Transit by sea

s.32(3) : … seller gives notice to

buyer to insure goods …
if not at seller risk
(other precaution)

s.33 : … if seller undertakes to

deliver goods to a place
other than usual place of
business, then buyer must
take risk of deterioration in
good necessarily incidental
to the course of transit.

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Right of Partial Rejection

s.35A SOGA 1979 : by accepting some of the goods

the buyer does not lose the right
to reject the rest.

(a) Seller has committed a breach that (b) - the buyer accepts some of the goods.
gives the buyer the right to reject
the goods. - these may be goods unaffected by
the breach.
eg. - breach of s.13



- breach of an express or
implied conditions.

s.35A(3) : goods are affected by a breach if by

the reason of the breach, they are
not in conformity with the contract.

The buyer by accepting part of the goods does not losses

his right to reject the rest.

This is so unless there is an express or implied contrary


s.35A(2) : if buyer has right to reject an installment, then

by accepting part of the installment, he does
not lose his right to reject the rest of the goods
in the installment.

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Single contract or
Installment delivery Severable or non-severable
separate contract
s.31(2) : contract is severable if goods are to
s.31(1) : unless otherwise stated Presumption that a
be credited in installments and the
buyer not bound to accept single contract exists
installments are to be separately
delivery by installment
paid for.
s.31(2) : contract for sale of PARTIES INTENTION Non severable
goods to be delivered by stated or circumstances. Ie:
installments, which are to - Seller cannot demand payment
be separately paid for … - Separate order forms against part delivery.
seller makes defective deliveries /
buyer neglects / refuses to take - Time of contract differs - Acceptance by buyer of an installments
amounts to adoption of contract as a whole
delivery / to pay for one or more
installments … depends on … cannot reject remaining installments.
s.11(4) : (subject to s.35A)
whether breach of contract is contract is non severable … buyer
a repudiation of whole contract / accepts part of them … breach of
whether it is a severable breach condition to be fulfilled by seller
… giving right to compensation can only be treated as a breach of
but not right to treat whole warranty and not as a grounds for
contract as repudiated. rejection of goods and treating the
contract as repudiated … unless
Cobec Brazilian Trading v. expressly, impliedly stated to
Toepfer (1983) the contrary.

s.31(2) - Provided buyer has not accepted any part

of goods … breach by seller is regarded
as breach of whole contract and buyer is
entitled to reject all
Is contract How a buyer can in
severable or a severable contract - IMPROPER REJECTION by buyer
non severable be able to reject one /
more installments Severable
that are defective
- buyer’s acceptance of one installment
does not debar him (buyer) from rejecting
any subsequent installment.

- If buyer improperly rejects or seller

improperly fails to tender installment this
will not constitute a repudiation of
contract as a whole.

In effect therefore the right of buyer to reject the whole of the goods where one / more installments
are defective and the right of the seller to treat the contract as repudiated where the buyer
improperly reject an installment depends on the terms of the contract and circumstances of the case.

Goode’s view Lord Hewart in Maple Flock Co v. Universal Furniture

Products (Wembley) (1934)
Breach would amount to a - The main test for whether a breach of one installment by
repudiation of the whole contract for :
either the buyer or the seller should be regarded as a breach
of the entire contract is by looking at :
a) an objective observer would perceive
an intention to repudiate (a) Seriousness of breach itself
b) an objective observer would perceive (b) Ratio quantitatively which breach bears to the contract
an inability to perform the contract as as a whole
a whole
(c) Access the degree of probability or improbability that
c) the effect is so substantial as to go such a beach would be repeated
the root of the contract.

Maple Flock Co v. Universal

R A Munro v. Meyers (1930)
Furniture Products (Wembley) (1934)
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Remedies of Seller

Personal Remedies
Real remedies (against goods)

s.38 : “unpaid seller”

s.49(1) : action for price s.58 : non acceptance
s.39 : … despite passing of property seller can :
property passes to buyer s.50(2) : measure of
and buyer neglects or damages
refuse to pay … seller “estimated loss
Right of lien maintains action for price directly and
s.49(2) : if payment on a resulting from
s.41(1) : seller in possession,
particular data, Seller buyer’s breach”.
he can retain goods
s.50(3) : method of
for price.
can sue for price even calculation
before property passes “market value”
Resale (contract price
and market price
(a) Seller is an “unpaid seller”.
s.48(2) : once the seller has difference)
(b) Seller is in possession of
goods, Ie. s.47(2). exercised his right
does not include documents. of lien (s.41) and
his stoppage in
Losing right of lien : transit (s.44), then
he can resell the

s.48(3) : “perishable goods”

Stoppage in transit

s.44 : … buyer insolvent … seller

can exercise stoppage in transit
… retain goods until payment.


(a) Seller is an “unpaid seller”.

(b) Buyer insolvent.
(c) “transit” – goods on carrier
(d) Methods – s.46 taking actual
possession or giving notice
of claim to bailer / carrier.

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Remedies of Buyer

Real remedies (against goods)


Time and method Losing right of lien Severable / non

severable and
Cannot reject after accepting Not when delivery is made installment goods
but must indicate to seller of but when buyer accepts goods.
his intention to reject.
s.36 : buyer not bound to return s.34 : goods delivered but not
goods to seller but take steps examined, buyer must
to hold goods available for have reasonable time to
seller to collect.. examine before deemed
to have accepted.

s.35 : buyer indicates acceptance
or does some act inconsistent
with ownership or allows
reasonable time to lapse.

s.35A : buyer may have the right to

partially accept some of the
goods and reject the rest.

Effects Personal Remedies

Can decline to pay money but if paid, can

recover as Total Failure of Consideration.

AND s.51 non delivery s.52 breach of

condition and
Damages for non delivery measure of damage warranty

Not entitled to reject

s.52 specific s.54 special

amounts to repudiation
performance damages

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Commercial Law
Part II
International Sales

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International Sales

Different types Liabilities of Financing an

of international the shippers international
sales contractual transaction
obligation Documentation for
international sales Documentary
transaction credit system

invoice insurance bill of bill of

lading exchange

Emphasis in exams *Importance of

s.6 and s.7

CIF FOB bill of bill of

lading exchange
Now also see
*C.I.F = Cost, Insurance and Freight Carriage of
*F.O.B = Free on Board Goods by Sea
Act 1992

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Sales of goods in relation

to International Trade

Condition / warranties Unpaid Seller s.38 Installment delivery Exemption Clauses

sales of goods
action : Maple Flock v. Expressly stated not to
Condition – repudiate Universal Furniture apply to international
and damages s.39(1)(a) lien Products supply contract
(b) right of
Warranty – damages only stoppage PhotoProduction v.
(c) resale Securicor
Buyer waives a condition If such clause is incorporated
and it becomes a warranty NEMO DAT exceptions – is it reasonable or not and
s.21 / s.25 consideration as to whether
Innominate term : Diplock J ordinary and fair minded
Hong Kong FIR Shipping Carrier redelivers upon commercial man would be
Co Ltd v. Kawasaki Kisen instruction – bear all cost against it and it’s consequence.
Kaisha Ltd(1962)
George Mitchell v.
s.61(1) SOGA – Finney L
determining section

Sales of goods principle provisions

s.12 - title s.13 - description s.14 – satisfactory

s.15 – sample
Right to sell Arcos v. Ronaasen s.15(2)(a) – bulk correspond with sample
free from any s.14(2), s14(2A) & s.15(2)(b) – ( reasonable opportunity to inspect
legal Re Moore & Landaver s.14(2B) and compare)
Niblett’s case all circumstance (deleted by Sale and Supply of Goods Act 1994)
Asshington P v.
s.12(2) – warranty
Christopher Hill unsatisfactory : Drummond v. Van Inggel
- Free from rescind and obtain Sample not subject to microscopic analysis.
encumbrance Reardon Smith v. damages
Hansen Tanegn *s.30 : wrong quantity can reject and sue for
- Quiet possession *Fit to withstand damages for non-delivery under s.51(a)
Courts moved out of Journey note : s.30(2A) in a non-consumer transaction,
automatic classification Mash Murrell v. where the shortfall or excess is so slight that it is
– not sure – innominate Joseph Emmanuel Ltd. unreasonable to reject, then cannot reject.
term : Hansa Nord
Was merchantable *s.34 : seller must give the buyer a
Ashmore v. Cox (now satisfactory) reasonable opportunity to inspect.
– s.14(2) but not fit for
Bowes v. Shand purpose under s.14(3) *s.35 : acceptance if acted inconsistently, or a
lapse of time, or after a reasonable
S.14(3) – fitness for opportunity of examining the goods.
Purpose except where
no reliance or *Delivery - s.29 : seller’s place of business,
unreasonable to rely residence and at reasonable hour.

Teheran Europe v. *s.28 – payment and delivery are

St Bolton concurrent conditions.

*Non-acceptance :
s.50(1) – seller : damages for non acceptance
s.50(3) – measure : market price less contract price

Note : s.15A – In non-consumer transactions *s.49 : action for price

where the breach is so slight that it - Sale : property passes but not pay (s.49(1))
would be unreasonable for buyer to -Sale but agreement pay on a day certain but not
reject, then he may not reject. -pay can maintain action even if property has
not -pass (s49(2)
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Passing of property Reservation of property Romalpa clause

Enichen v. Ampelos (1989) s.19 - reserve property in goods

until condition is fulfilled
s.17 - property passes when the
parties intends it to pass. Mitsui & Co. Fiota Mercante (1989)
- intention of the parties as per the
terms, conduct and circumstances. i. Takes bill of lading from carrier.

CIF - intention of the parties that property ii. Retains bill of lading with him.
passes upon transfer of document.

FOB - property passes on shipment.

Assumption when property passes :

s.18 r.1
s.18 r.2
s.18 r.3
s.18 r.4
s.18 r.5

s.16 - property in unascertained goods

cannot pass but note s.18 r.5(1) ~ (3).

s.18 r.5(1) - unconditional appropriation

by seller with assent of
buyer or vice versa.

s.18 r.5(2) - delivers goods to shipper

for transmission to buyer
and reserves no rights.

s.18 r.5(3) - appropriation by exhaustion.

Carlos Federspiel v. Charles Twigg

s.20A – tenants in common of the bulk if

the bulk is identified and buyer has
paid for some or all of the price.

s.20 – risk passes with property

*this does not apply to CIF because in CIF risk

passes with shipment but property only passes
upon tender of the correct documents.

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‘Free on Board’ F.O.B

Pyrene v. Scandia Navigation – Devlin J

Passing of property and risk

Both pass upon shipment of

goods unless contrary stated
The Aliakmon

Obligation of seller

Conform with Nominate shipping date Obtain insurance

contract description (FOB add services)
Notify of date & to enable
s.13 – description buyer to insure goods

s.14 – satisfactory S.32(3)

s.15 – sample

s.15 – minor breach

Tender a clean Ship goods at

shipped agreed port
Bill of Lading

- Document of title
Obligation of Buyer
- Mate’s receipt

Nominate effective Obtain export

reset & procure licence
shipping space on it

Pay all expenses

related to carriage
after shipment

Nominate port
of loading

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Obligation of parties
Cost, Insurance and Freight - C.I.F
Definition in :
Comptoir d’Achat et de Vente du Boerenbond Belge SA v. Luis de Ridder Limitada (The Julia) [1949]

Passing of property Obligation of seller

C.I.F is not a contract for

SOG but a contract to Insure goods
Correct quantity Tender to buyer
ship goods which comply
with contract of sale & t Conform with s.13 clean shipped
ender documents against contract description s.30 - more bill of lading,
payment of price. Reardon Smith - less invoice and
Arnold Karberg v. Blyth, insurance policy
v. Hansen-
Green, Jordan & Co [1916] Tangen [1976] s.30(2B): slight shortfail
or excess, buyer cannot
Can tender documents of reject.
Ashington Piggeries
equal status Ltd v. Christopher
s.34 – reasonable
Hill Ltd [1972]
Documents do not comply opportunity to examine

Tendered documents correct s.35 – does not reject but

Contractual quality if act consistently with
Johnson v. Taylor [1920] rights of seller then is
s.14(2), (2A), (2B) deemed to accept the
Failure to accept documents goods.
Berger v. Gill & Duffus s.14(2C)(a),(b),(c) s.35A : right of partial
No assistance if no
reliance or
unreasonable to rely
Shipment within agreed
Teheran-Europe v. S shipping period, agreed
T Belton (Tractors) vessel from agreed port
Ltd [1968] and obtain necessary
Withstand ordinary
incidents of voyage Description under s.13

Mash & Murrell

Ltd v. Joseph
Emmanuel Ltd

Reardon Smith Obligation of buyer

v. Hansen-Tangen
[1976] (continue…)

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Obligation of buyer

Accept tendered documents

and pay even if goods lost
or destroyed

Johnson v. Taylor [1920]

Two rights of rejection Unloading of goods at destination

Kwei Tek Chao v.
British Traders [1954]

1. Reject documents
2. Reject goods

Accept document and pay

later discover goods defective
– sue for loss of right to reject

s.34 – reasonable time to


s.35 – acceptance

Incorrect document or goods

Damages – s.51(1);
Non delivery – s.51(3)
No action for contract price – s.49
property not passed

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Bill of Exchange
S.3(1) Bill of Exchange Act 1882
“…unconditional order in writing, addressed by one
person to another, signed by the person giving it,
requiring the person to whom it is addressed, to pay on
demand or fixed or determined time, certain in money
to or the order of the specified person…”

Conditions Acceptance Negotiations

1. Unconditional order in writing. s.17: …drawee is under s.8: any Bill of Exchange that
- drawer must unconditionally an obligation to accept & contains prohibitions of transfer
instruct the drawee to pay sign the document. or intention to prohibit transfer
without giving opportunity to is non negotiable.
refuse payment. Circumstance of presentation
Palmer v. Praft s.39: Bill of Exchange must be ESSENCE OF NEGOTIABILITY”
Presented for acceptance
2. Addressed by one person (upon sight) in which case it Methods of negotiations
to another and sign it. is accepted (date of sight
endorsed) & such time will
draws run till it’s maturity in which
Seller Buyer Bearer Bill Order Bill
Bill of time payment will be made.
Exchange - Negotiable by - indorsement
Drawer Drawee What if? transfer by and delivery to
on drawee
holder to endorsee
negotiates Holder may
Bill of claim value
Holder Drawee
of Bill of
with one Exchange
does not
party from
drawee when accepts
bill is due Capacity of holder

3. Bill may be drawn by drawer. Do not accept Right of recourse - In due course
- specified person & reject for Against drawee &
- order of specified person Non-acceptance indorsers - holder for value
- to bearer (blank) = Bearer
- mere holder
*If it is order bill, for it to transfer
the transferee must endorse (sign) s.48: Holder of Bill of Exchange
it before passing it on but if it was must give notice of liability to
a bearer bill it is sufficient that the drawee and indorsers
Bill of Exchange is passed on for
property to pass.
When Bill is dishonoured
4. Bill may be made payable
on demand or at a fixed or - If a Bill of Exchange is present for acceptance and it is dishonoured by
determined time. non acceptance, procedure must be followed, otherwise all parties/drawee’s
liabilities will be discharged.
5. Bill of exchange must be an
s.48: Notice must be given of dishonour (issue notice to all indoesers & drawee)
order to pay money.
s.55: Drawee & indorsers will be made liable to compensate the holder.

s.56: also a recourse as against anyone who has signed the bill.

s.57: Measure of damages (amount on bill plus interest)

G & H Montagus v. Irvani (1989)

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Bill of Lading

Document of title Bill of Lading Act 1885 Indemnity

Entitles person in possession s.1 – confers certain rights on

to take possession of goods transfer of bill assuming
from carrier property transfers on
transfer of bill if property Contract of carriage
Transfer of Bill of Lading is should pass before transfer
of bill, transferee cannot NGO CHEW HONG
symbolic delivery
v. SCINDIA (1888)
take advantage of section
Mode of transfer depends on
how consigneee is designated s.2 – reassert allow right of
Ie. stoppage in transit and
assign rights
Order Bill - named person
- named company s.3 – statutory implication where
or anyone it is clean bill of lading has been
sold to issued, statement made in
- order – sold on bill not complied

Bearer Bill – to anyone is


Receipts of shipment – to Seller

Shows that goods are shipped

Evidence of contract of carriage

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Documentary Credit System



- notifies bank of terms of credit to reflect

contract of sale, instruction comprises the
CORRESPONDING ISSUING buyer mandate – must be strictly complied
BANK BANK with by the bank.

- opens credit in bank in favour of Seller ;

Uniform Custom & Practice bank will not open credit unless some kind
of collateral is given.
- Document that states “banking practice”
in relation to Documentary Credit System. 2. ISSUING BANK (Buyer’s Bank)

- No force in English law unless embodied in - once receives Buyer’s instructions, it will
contract or adopted by Parliament. issue notice to Seller that credit has been
opened in his favour and condition to which
he must comply to obtain payment..

- payment to be made against correct documents

as stated in Buyer’s mandate.

- make reimbursements.


- advisor:
merely advises Seller as to instructions to
comply as instructions by issuing bank.

- confirmer:
besides informing Seller of all communication it
make a separate undertaking to make payment if
correct documents are tendered.

- once it has made payment against correct

documents, they have a right to be reimbursed.


- providing that documentation is correct, entitled

to receive payment irrespective of whether any
dispute arises upon contract.


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Documentary Credit System

Necessity of having such an organised system :

Varieties of
Uniform customs & practices The parties credit system
for documentary credit (UCP)
available Taking up
The UCP is a body of standardised documents
articles which regulate the Buyer’s
implementation of documentary mandate
credit in 150 countries and Types of
published By the International credit
Chambers of Commerce.
BANK BANK Opening of
There rules do not automatically credit system
apply within the UK but may be
expressly incorporated (Art 1) Buyer : (application for credit) Correspondence bank :
and may be free to exclude
any provisions. Assume one of two capacities :
Buyer & Seller must have agreed
that payment is by documentary - advisor
Security for credit :
credit & application for credit - confirmer
The buyer who seeks to open credit in could be by an agent to buyer or a
his favour is usually required to put debtor to buyer Correspondence bank :
up the goods as collateral (Art 3) (Ie.
Banks have ownership of goods)
Issuing bank : Merely advises the seller as to the
terms he must comply in order for
Although anything else of
On obtaining instructions from him to obtain payment in strict
substantial value could be used
buyer it will inform seller that a compliance with buyer’s mandate
credit system has been opened
The bank will provide a letter of lien in his favour The correspondence bank will not
or trust so that the buyer could use have any authority to pay the seller
it in order to sell the goods
It will also state the conditions in view of his compliance with the
which seller must fulfill buyer’s buyer’s mandate although after
( Buyer in breach – liable in tort
mandate communicating the compliance
of conversion and trust )
BUNGE CORP v. VEGETABLE with documentation, the
VITAMIN FOOD (1984) correspondence bank may make
Although third party bona fide payments as agent to the issuing
purchaser may obtain good Such information will be bank
title in goods communicated through a
LLOYDS BANK v. “corresponding bank” in Correspondence confirmer :
BANK OF AMERICA the country of the seller.
(see s.1 FA 1889)
If the correspondence bank acts as a
The Seller : “correspondence confirmer” it
will not only communicate to seller
Providing that the seller has that the credit has been opened, but
complied with buyer’s mandate also give him a complete separate and
he is entitled to receive payment additional undertaking to make
irrespective of whether any dispute payment if buyer’s mandate
has arisen on the sale contract is complied with
BARCLAY (1925)

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Mandate Types of credit Taking up seller’s

- All instructions given by 1. Revocable
buyer to bank Documentary Credit - Bank must inspect all
constitutes mandate documents with
- cheapest form reasonable care
- Exact or precise referring to - no security & does not
all documents against which assure seller payment - No further investigation
payment to be made. - can revoke credit required
Sopornal v. Marine
- normally undertaken by
- Also stipulate mode of
seller if he has had many
payment eg. Cash or dealing with buyer
- Bank delays payment
bill of exchange in Centrale Raifferson v.
seller’s favour. Sumitomo Bank (1988)
2. Irrevocable
Documentary Credit
- Credit is independent of
contract itself as bank only
- unrevocable & payment
deals with documents
guaranteed so long as
seller complies with all
Hamzeh Malas v. British Imex
terms of credit
- assured payment Making payment
UCP for documentary credits
3. Irrevocable credit & - Issuing bank correctly makes
confirm Documentary Credit payment then its entitled to
reimbursement by buyer
Article 3 Article 4
- Bank makes payment even
if buyer is insolvent. BUT loses right of
- where credit is irrevocable reimbursement if acts
bank may still refuse in excess of buyer’s
Exceptions : payment and obtain mandate
instruction from buyer
- i. if fraud perpetrated banks can if seller has failed to - Issuing bank has lien over
take cognisance of contract sale goods (documents) until
perform contract
(credit terms). payment by buyer is made
Doctrine of strict compliance –
Bank have right to reject
documents that do not strictly
comply with credit documents

Equitable Trust of NY v.
Dawson Partners

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Variety of credits

Back to back credit Revolving credit Assignment of credit

Credit for a fixed Credit is generally not

Buyer (wants Seller arranges assignable and if it is not
100 bicycles with bank to maximum amount
S that can be drawn assignable to B1B2 cannot
for £1500) open credit in
W’s favour & by separate B1B2 and assign the benefit under
balance in the buyer need not the credit scheme and
account is his go to the bank to therefore the B1B2 cannot
open credit again assign the presentation
of documentation to
Bank (W sells bicycles
(open credit in for £750 each) another to claim money
seller favour Negotiation credits
for £1500)
The opening of such
credit puts an obligation
on the bank to honour
the negotiable instrument
as against any one who is
the bearer or as against
the seller if arranged

Parking credit /
red clause credit
Transferable credit
Usually credit is opened by the
( Australia / New Zealand buyer in favour of the seller
wool industry )
alone but sometimes if buyer
opened a “transferable credit” in
favour of seller then bank
Bank undertakes to pay the seller or
( opens credit in seller anyone to whom he transfers the
favour to facilitate right to obtain payment
manufacturing of
goods by seller )

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Buyer’s mandate
Instructions which are given by the buyer to the In circumstances of ambiguity the bank
bank for the opening of a credit system in seller usually reverts to the buyer for clarification.
favour so that on presentation of documents by the
seller that corresponds with buyer’s mandate, Alternatively the common law allows the
payment could be made bank to place a reasonable construction to it
( Commercial Banking Co of Sydney
It also indicates the type of credit that is to be v. Jalsard Pty Ltd (1973) )
opened in favour of the seller
If however the bank has made payment
eg. B/E despite the ambiguity and strict compliance,
then it will not obtain reimbursement
Note : Sale Continutations v. Austin Taylor (1967)

It is important that the buyer’s mandate is clear

in terms of instructions to the Bank because there
is no way the bank can make any clarification in
relation to the contract of SOGA and once a D/C
is opened, it is independent of the contract of sale
(as the bank only deals with the documents).

It is immaterial whether or not there has been

performance on the underlying sales contract
Hamzah Malas v. British Imex (1958)

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Variety of credits Opening of the credit :

Buyer & Seller may specifically agree on a date

when credit is to be opened and must be complied
Revocable Irrevocable with otherwise it is a breach of contract
Allows very little - Credit take cannot be
Credit must be opened immediately or within
assurance to the revoked without
such time as would a person exercising diligence
seller because credit agreement of all parties Garcia v. Paye (1936) or
could be withdrawn
any time without - Therefore payment as
Within a reasonable time before the shipping period
prior notice even against the documents Pavia v. Thurmann Neilsen (1959)
after shipment must be made even
of goods where there are
The opening of the credit is entirely the banks
rumours of fraud by responsibility even where the bank has delayed
seller which are Establissement Chainbaux v. Harbormaster (1955)
insufficient to justify
grant of an injunction State Trading Corp. of India v.
restraining payment Compaginie Francaise (1983)
Discount Records v.
Barclays Bank (1975)
If the seller is not informed of the opening of the credit
facility within reasonable time before shipping then
seller should not ship the goods but if he carries on and
alternatively : “a stand by credit”
ships the goods, then he has waived the breach
acts like a guarantee or Panoutsos v. Raymond Hadley
performance bond
The D/C must relect the terms of contract and if it
does not the seller should not ship the goods
although if he does he will be waiving the breach
Alan v. EL Nasr Import & Exports
(Kenyan shilling c/f English shilling)

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Taking up the
seller documents
To take up the documents

Obligations of seller (Bank)

The invoice Bill of lading The insurance
to take up to make payment It should be for the
amount for which the
documents or instruct the Deck carriage Tranship
amount credit was
of the seller correspondence
open and if it is larger Not preferred Viewed as less
bank to make
than usual, the bank
payment as risk of damage risky and banks
can accept it although
to goods is will accept such
it will not pay out any
greater documents
extra than that which
is stated under credit
and the seller can
Doctrine of strict obtain the difference
compliance of money from the
buyer directly (extra
All documents must be goods sent)
examined with
reasonable care
Transport documents
Bank is only looking for Documents indicating loading on
apparent conforming and board or dispatch or taking into
the bank must determine on charge
the basis of the documents
alone whether or not there
is compliance with mandate

As the bank is under

no obligation to check
its authenticity
Gian Singh v.
Banque De I’Indoohine (1974) * If the banks delay payment it can be made liable in damage s to the seller
It is up to the buyer to prove - Ozalid v. African Continental Bank (1979)
failure on the banks part to
exercise reasonable skill and
Bass & Selve Bank v.
Bank of Australasia
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Commercial Law
Part III

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Agency - Creation
Creation by ratification

Express creation Creation by estoppel Creation by operation of law

Usually contract gives Principal creates obligation
rise to : for agent to perform

Apparent/ostensible Agency of necessity Agency of cohabitation

No need of marriage
Conditions :
Debenham v. Mellon
Express actual Implied actual 1. Goods entrusted by
authority authority Presumption that when
bailee to bailor
Binsted v. Buck man & women live
No formalities Not expressly together, it is common
existing for woman to be
NB : s.40 LPA 1925 2. Danger to goods
- Couturier v. Hastie responsible for running
s.2 MP(MP)A 1989
- China Pacific v. Food household & hence :-
Express creation Authority by estoppel Corp of India – where ask for credit in man’s
Look for actual authority name in order to do so.
by construing agreement perishables
Hely-Hutchinson allow imposition of
by which the authority v. Brayhead agency - Great Northern Rly v. Today this perception
was created. Chairman acting as Swaffield Is changing with the
Freeman & Lockyer v. Managing Director - where there was social and economic
Buckhurst Park Property - The Hamburg – where
with co. approval none before non-perishables there changes of the times.
Liverpool CC v. Irwin must be actual and
May arise by - to extend the definite commercial
implying terms into exciting agency necessity for the sale
Implied terms where contract is agency relationship
contract not workable - Prager & Blatspiel
expressly created Stamp & Heacock
without them
Shirlaw v. Southerm
Foundries where : 3. Bailee unable to
communicate with
bailor to discover
what to do
- Sims v. Midland Rly
Express terms European Asian Bank - China Pacific
unclear v. Punjab & Sind Bank
distinguish Communication must
Ireland v. Livingstone Ireland v. Livingstone
In agent acts in good faith have been impossible
As seller’s bank not agent.
& adopts reasonable & burden on agent
construction of document
– sufficient authority Bailee : Agent of necessity
Where there is ambiguity, in the context of :
agent should check with
the principal 1. Reimbursement of
expenditure incurred
All normal powers to agent unless expressly excluded
– Hely-Hutchinson v. Brayhead 2. Enforcement of contract
between bailee & T/P –
Implied usual actual authority : China Pacific v. Food
Corp of India,
The Winson

Panorama Development British Bank of Middle East Effect of agency of necessity :

v. Fidelis Furnishing v. Sun Life Assurance
Company secretary has Look at usual accepted practice 1.Unnecessary expenses
implied usual actual and the facts of each case under – taken need not
authority individually be reimbursed

Cunliffe Owen v. 2.Expenses undertaken not

Teather & Greenwood bona fide in interest of
(obvious in particular trade) principal it is breach of
fiduciary obligation of
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Agency – Creation by ratification

The giving of approval to acts done originally without the authority of the principal
The requisites to give rise to creation by ratification are as follows :

Contract must be made Principals must have capacity at Manner and time of ratification
by agent as agent the time the agent acts for him
Keighley Maxsted v. Durant Unless principals must have capacity
– agent cannot act in his own name at the time, he cannot ratify it
Kelner v. Baxter
third party
If someone deals as agent so as to agreement
defraud the principal, is there an At the time the act was done, the agent
enforceable agreement between the must have had a competent principal Principal must make it clear
principal and the third party? Boston Deep Sea Fishing v. Farnham that he is adopting the contract
Forman v. The Liddesdale
Re Tiedermann & Ledermann Freres Firth v. Staines
The doctrine of ratification can still The act is ratification must be
apply and the principal can ratify as he Contract made on behalf of an infant unequivocal
acted as an agent. - void
Ditcham v. Worrall Ratification of the part is
Where agent forges the principal’s ratification of the whole
signature? Any act of the agent for a company Cornwall v. Wilson
must comply with the terms of that
Brook v. Hook company ie. must be intra vires Ratification within reasonable
Here the agent acts as the principal and Ashbury Railway Carriage & Iron Co time of agent entering into
hence the transaction cannot be ratified v. Riche contract
Metropolitan Asylums Board
Does agent have to name his principal? v. Kingham
- Ratification cannot be effective
Watson v. Swann after the time the contract was
– there must be a clear identification of to take effect
principal for third party to be able to
discover his identity
Principal must have capacity
Principal must exist at the time of ratification

Kelner v. Baxter – company must be in existence The rule that the principal makes
before the acts of the agent in order to ratify such the contract from the beginning is
acts just a fiction.

Exception : Promoters of unformed company will The reality is that he is taking over
make contract in their own names, but include term a contract that was made at an
that allows the company to adopt the contract once earlier time
it is incorporated – company. Hence, takes over Grover & Grover v. Matthews
liability and promoters bear no personal liability

Effect of ratification

Ratification is Principla cannot enforce Where agent expressly states that

Principal cannot sue third party
retrospective contract against third party contract subject to ratification
in relation to breaches before
until ratification ratification
Bolton Partners
Warehousing & Forwarding Co.
v. Lambert Bolton Partners v. of East Africa v. Jafferali
Hence, cannot Lambert Kidderminster Corp.
- Where third party knows
revoke offer v. Hardwicke
agent acting outside capacity,
that was already subject to ratification
accepted by agent Q : can third party
earlier sue principal?

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Contracts made by agents

Liability : Principal and agent to third party

: Principal to third party

: Agent to third party

Liability is dependent on whether :

Undisclosed principal

Disclosed principal Agent acts outside his authority

Disclosed principal

Person whose existence is known to the third party.

Principal is named and only he may intervene & take

benefit of contract or be sued under it.

In such situations, agent not liable on contract which he makes.


Principal does Agent undertakes

Agent liable for
not exist personal liability policy reasons

Principal must be in Agent may undertake Universal Steam Nav Teheran-Europe v. St.
existence at the time personal liability even v. Mckelvie Belton (Tractors)
of the contract where principal exists Agent personally liable by Foreign principal to be
Kelner v. Baxter looking at intention of treated the same way as
Agent not liable third party and agent British principal & may
unless he signs Agent who acts within be liable to & enforce
in capacity as both his authority however The Swan – agent jointly contract of sale against
agent and principal usually drops out of the liable with principal third party
Kelner v. Baxter picture
Southwell v. Bowditch Most important factor is BUT the fact that the
Newborne v. knowledge of third party
principal = foreign is a
Sensolid (GB) Agent personally liable about agent’s interest factor to be considered
Where agent uses for a deed he executes when construing
company name signs in his own name - Re The Santa Carina Burden contract made by agent
by or on behalf of International of proof on third party to
company, agent not Contract Co. prove agent personally
liable as company -Principal not bound & liable and only satisfied
undertaking liability. may not enforce deed where it would be
Hence agent also unless he is named as reasonable for third party
cannot enforce the party to it to suppose agent taking
contract personal liability
Note :
Agent signs as s.7 Power of Attorney Can third party sue both
principal / additional Act 1971 – execution of agent & principal?
contracting party – deed by agent of a
he may then power is to be treated Benton v. Campbell–Parker
intervene & enforce as though principal Principal and agent
contract or be liable named in deed alternatively liable. Cannot get
under it – agent will judgment a gainst both.
be personally liable Where agent is trustee Debenham’s Ltd v. Perkins
Harper v. Vigers Bros Harmer v. Armstrong
Agent is mere trustee Whee agent personally liable,
Schmaltz v. Avery where he signs as he can also personally
trustee & principal enforce the contract
may enforce even – Cooke v. Wilson
if not named in deed

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Agent acts outside his authority

Agent acting outside authority Where agent acts outside apparent

- Principal not bound & cannot sue authority, principal cannot ratify.
unless he ratifies it Hence, cannot sue / be sue.

Where principal disclosed, whether Agent then personally liable

named/not, any contract made within
apparent authority will bind principal Collen v. Wringht Unauthorised
regardless of the nature of the contract agent can be liable for breach of
the agent entered into – that is a matter warranty of authority
between agent & principal where :

- he acts fraudulently.
Third party here can sue in tort of
deceit for damages ( even where
agent thought that principal
would ratify )
Polhill v. Walter

- he knows he has no authority

- he acts innocently, honestly believing
he has authority

Damages to put third party in position

he would have been in had contract been
ratified – expectation loss

Agent may be liable for breach of

warranty of authority even
where he acted in good faith
Yonge v. Toynbee

Note :

Warranty of authority is the

authority that the authorises agent to
act for principal

where there is warranty of authority no warranty of authority

- agent liable personally

agent act within agent act outside

authority authority
- principal liable - agent liable personally

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Contracts made by Agents

Undisclosed principals

Undisclosed principal is liable on contract made by his agent & can

also enforce that contract in his own right against the third party.

Relevance of discussion :

- where third party has not noticed that agent = agent (relevant only to
contracts made within the ambit of agent’s actual authority)
- look at the position of the agent in the eyes of the third party
- certain criteria must be satisfied before the principal can interview


Agent must contract personally Identity of the agent

and not as an agent.
There are two primary questions in this area.
In the context of the undisclosed
1. Is the identity of the agent relevant to the agreement?
principal, the notion is that the
identity of the principal is not
2. Is the identity of the principal relevant to the agreement?
relevant to the context of discussion.

Hence the role of the undisclosed 2 4

principal remains subject to the acts
Dyster v. Randall Collins v. Associated
of the agent. Perhaps it may be said
that the undisclosed principal is in & Sons Greyhound Racecourses
no position to intervene in the Absence of Contract to underwrite
transaction until he becomes disclosed! misrepresentation between agent and third
by agent allowed party and in such a case,
The question that then arises is whether any undisclosed the principal could not
the third party is aware that the agent is principal to intervene
intervene and
dealing as an agent or is he under the
enforce the
impression that the agent is the principal?
contract. Here Effect of these cases
although agent
did not declare If third party can show
himself as agent, he was not interested in
Third party that Third party thinks that or make any dealing with undisclosed
agent dealing as agent is the principal representations principal – then the latter
an agent about his will not b able to intervene
Humble v. Hunter position. 3
Fred Drughorn v. Greer v. Downs The question to consider
R Transatlantic Formby Bros v. Formby Supply are :
Refused to allow - whether the making of
undisclosed the type of contract can
1 principal to objectively involve
Said v. Butt intervene personal matter.
Undisclosed principal could because
not intervene to take benefit of the personal – whether personality of
of the contract because third relationship agent/principal is of
party would not have entered between third importance to the third
into the agreement with the party and agent party
principal if he had known
who he was

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lOMoARcPSD|346 393 5

Agency – Torts of Agents

continued from An agent is someone who performs or makes contracts

on behalf of his principal and must be contrasted from an
overleaf independent contractor and an employee.

Third party elections An agent is controlled by the authority given to him by

the principal and therefore a discussion of the liability
Where undisclosed principal, the third party in tort would be relevant in the context of both the
is led to believe he is dealing with one agent and his principal.
person. Ie, the agent. He may know that he is
dealing with such a person as an agent but The rule seems to be that the principal would be liable
the fact is that he may be said never to have for the torts of his agent which are committed in the
intended to create two agreements course of carrying out his actual authority.
– one with the agent and one with the principal
– but rather to create one contract with the In relation to the apparent authority that is vested in
the agent, there are differing views :
agent on behalf of the principal

The third party hence has the choice of whether

Apparent authority arises from The contrary argument is that
to enforce the contract with the agent or the representation made by the although the third party may have
principal but cannot sue both. principal to the third party been informed about the agent’s
– the principal to the third party apparent authority, this does not
This means that the third party makes an – the principal should be liable categorically signify that the agent
informed choice with the knowledge of the for any wrongs committed by then has the apparent authority to
relevant facts. the agent commit a tort that would give
liability to the principal
Problems in this context :
The judicial basis of distinction lies on whether
the act committed is fraud or other forms of tort

the extent of the when is the election made

third party’s Fraud Other torts
knowledge The general rule is that
the third party who has Effect of fraud by agnet : The question is whether
- Any contract made by agent
Full knowledge of the knowledge of identity the act committed was
may be voidable for fraudulent
identity of the of principal can then misrepresentation done in the course of
principal before he make unequivocal act - Damages may be claimed for employment as agent.
decides who to sue. showing intention to tort of deceit
pursue remedy either Navarro v. Moregrand
Does the fact that against principal/agent Judicial attitude:
principal has settled This will amount to an Lloyd v. Grace, Amith & Co Kooragang Investments
election and he will not - If agent acting within actual/ v. Richardson & Wrench
with the agent the
then be allowed to sue apparent authority in making the
terms of the agreement contract, the manner of it’s making
affect third party’s the other.
would also be relevant
ability to sue?
Question that should be asked is
Armstrong v. Stokes whether the agent had the authority
Settlement between to enter into the transaction which he
principal & agent Mere institution of entered into and NOT whether the
proceedings is not an agent had the authority to commit
prevent third party
election – the fraud –
from suing principal Uxbridge Permanent Benefit B D v.
as it would be double Clarkson Booked v.
jeopardy on the Andjel
principal. Barwick v. English Joint Stock Bank –
where the agent acts for his own benefit,
Irvine v. Watson – then the principal should not be liable
Unfair to third party Note :
that He may be sued by
principal but is limited Kwei Tek Chao v. British Trades & Shippers The Saudi Crown – where agent was acting within
in his capacity to sue the his actual or apparent authority, then the principal
principal because of acts United City Merchant ( Investments) should be bound regardless of whether the
between the principal & v. Royal Bank of Canada representation was negligent or innocent.
agent ( preferred view)
- the principal will be deemed to have the
knowledge that his agent has
Newsholme Bros v.
Road Transport & General Insurance Co.
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lOMoAR cPSD| 3463935

Agency – Obligations of Principal to Agent

Remuneration Indemnity

The right to indemnity

Contractual right to payment Opportunities to earn arises where :
Depends on the agreement Where agent told to introduce
between them third party to the principal, and
the principal then has the choice
Where right to payment is of whether to do business with Agent spends $ in Agent liable in contract
expressly agreed : them – the question that arises is the performance of /tort to third party/may
Way v. Latilla whether if the principal chose not agency contract he commit offence –
If unclear then a reasonable to do any business with these third is entitled to principal liable to
amount party – could the agent claim recover this from indemnify the agent
earning? the principal. for such loss where it
Express agreement for Adanms v Morgan arose by the exercise
remuneration enforceable Luxor v Cooper of his actual authority
only where contract made Principal retains a discretion as to
Kofi Sunkersette Obu v. whom he may deal with and where Agent not allowed to claim an
Strauss – where at principal’s the discussion concerns commission indemnity for damages paid to
discretion, principal can payable on sale, then only on sale third parties where he was in
decide not to pay and agent will the agent have any earnings. breach of his duties to the principal
would not be entitled to any Lage v. Siemens Bros
payment Alpha Trading v. Dunnshan Patten Barron v. Fitxgerald
Re Richmond Gate Property Co – agent entitled to damages for
obstructive behaviour of principal Principal liable where agent acts
Where there is an obligation to where such conduct results in according to his instructions
pay, but the amount of the breach of contract & causes Anglo Overseas Transport v.
payment is at the discretion of agent loss Titan Industrial Corp.
the principal, agent may claim
a reasonable reward for services L French & Co v. Lesston Shipping No indemnity is payable where
rendered. – there it does not result in breach the agent acts negligently
Taylor v. Brewer no liability Thacker v. Hardy

The agent can enforce his right to
Earning a commission commission / to indemnity in several
Commission is payment according
to result. Hence, only upon the Depends on – whether there was
occurrence of the desired result
Right to commission
agency created by contract in
would the commission be payable cannot be enforced by
which case it would be contractually
agent where he has
breached his duties,
unless the breach is
The agent must perform The event on which Where non-contractual – the agent can
the act he is asked to commission is payable waived by the principal sue in restitution for an indemnity but
perform must come about Harrods Ltd v. Lemon will not be able to sue in remuneration.
Toulmin v. Millar because of the acts of
Agent owes fiduciary
Agent may not receive the agent Indemnity – Brook’s Wharf v.
duty including duty
commission for acts Goodman
not to make secret profit
outside his actual Millar v. Ranford Effect of this case is to allow the
Angrew v. Ramsay
authority unless they non-contractual agent to claim
are later ratified. GT Hodges v. This right usually ceases indemnity for expenditure incurred
Hackbridge Park but for which the principal could have
upon agency being
Residential Hotel terminated UNLESS the been sued directly by the third party.
If agent alone could have been sued
agency contract extends
it to events after the by third party – no indemnity
agent’s death/the Agent’s right to lien over the
termination of the agency
principal’s goods : a mere right to
Wilson v. Harper
retain possession of principal’s goods
until money paid
Croker Horlock v. B Lang
Rolls Razor v. Cox

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lOMoAR cPSD| 3463935

Agency – Obligation of Agent to Principal

Agent’s obligations arise because of :

- contractual agreement
- fiduciary relationship

Non-contractual agent owes fiduciary duty

1 2
Contractual obligations The fiduciary duties of an agent

Contractual obligations

Duty of obedience Duty to use care & skill

to instructions
Keppell v. Wheeler – agent owes duty to
An agent must conform with all instructions
perform his instructions with due care & skill
of the principal
Note :
Where he disobeys they instructions it
may be said that he is s.13 Supply of Goods & Services Act 1982
- doing nothing that will affects the principal
OR The standard of care that is required from an
agent is that he take reasonable care and that
- he is acting outside his actual authority
degree of care & skill differs with the specialist
(where this may be construed as apparent
authority, he may then bind the principal) skills the agent possess/professes to possess

In relation to the agent’s liability in negligence :

- Duty of obedience also includes where
there is non-performance by the agent of
The question is whether the principal is
his obligations
Turpin v Bilton vicariously liable for the acts of an agent Arensen
The Hermoine v. Casson Beckamn Rutley – agent personally
liable for not exercising due care & skill
Christoforides v. Terry
Remedies for disobedience by an agent : The older common law rule suggested that it
- claim for damages for breach of contract should be examinaed whether the agent acted
- account to recover any profit the agent reasonably and whether he had been paid for his
may have made improperly services as these would be the factors a reasonable
man would take into account in determining how
- any claim by agent for remuneration/
indemnity can be resisted he would perform his functions
Hedley Byrne v. Heller
Where act requested by the principal
Gokal Chand-Jagan Nath v. Nandram Das-Atma Ram
was illegal the agent can resist a claim
for non-performance The Privy Council held that the degree of care & skill
Cohen v. Kittell exercisable by the agent should be dependant on
all circumstances surrounding the case
Agent should clarify all instructions of
European Asian Bank AG v.
Punjab & Sind Bank

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lOMoAR cPSD| 3463935

Agency – Obligation of Agent to Principal

Agent’s obligations arise because of :

- contractual agreement
- fiduciary relationship

Non-contractual agent owes fiduciary duty

1 2
Contractual obligations The fiduciary duties of an agent

The fiduciary duties of an agent
Conflict of interest Secret profit

Duty of agent to avoid conflict of This arises where a conflict of interest may
interest regardless of whether it is well give rise to a secret profit
contractual or non-contractual agent Armstrong v. Jackson
Boardman v. Phipps Boardman v. Phipps
Industrial Development Consultants v. Cooley
Armstrong v. Jackson
Agent should not allow his personal interests The duty not to make a secret profit does
to conflict with that of the principal not depend on the good faith of the agent

There need not be actual loss caused. It will Make secret profit by :
suffice that there is potential for conflict
Industrial Development Consultants v. - Using confidential information against
Cooley the interest of the principal
Lamb v. Evans
The agent may use his position to his
own advantage where : Faccenda Chicken v. Fowler

- He has obtained consent of the - Receipt of secret commission from third parties
principal before contracting personally disallows agent to claim commission from principal
Andrew v. Ramsay
- Receipt of bribe
- He must made full disclosure and Industries & General Mortgage v. Lewis
the principal waives the breach Defines bribe as follows :
- person making payment makes it to the agent
Burden of proof is on the agent, and mere for other person with whom he is dealing
notice to the principal of the conflict of - he makes it to that person knowing that the person
interest will not suffice is acting as agent for the other with whom he is dealing -
Dunne v. English he fails to disclose to other person with whom he is
dealing that he has made payment to the person
Is it possible for an agent to represent whom he knows to be the other person’s agent
both the third party and the principal?
Boston Deep Sea Fishing v. Ansell – agent may be
Such a situation is possible where there is dismissed without notice in such an instance
full disclosure to both parties of this fact and
the agent would be able to claim Mahesan v. Malaysia Govt. Officers Corp Housing
commission from both the third party and - Principal cannot claim both the bribe and damages
the principal. Where there is no disclosure - he must choose one or the other
this could give rise to conflict of interest.

The agent in such an instance is referred

to as the del crede agent
Fullwood v. Hurley
Harrods Ltd v. Lemon

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lOMoAR cPSD| 3463935

The fiduciary duties of an agent


The general rule is that the agent is not in a position to delegate unless he is expressly
and impliedly authorized to delegate.

- De Bussche v Alt[1878] per Thesiger LJ - the rule applies where the principal applies trust
and confidence in the agent and where the agent is depended upon for his skills to
performed the function. Where the consent by the principal can be implied it must only relate
to ministerial functions which do not involve confidence or discretion to be applied.

If the agent makes an unauthorised delegation, the act of, and payment to, the sub agent
will not bind the principal. But a third party dealing with the agent may be able to rely on
the apparent authority to delegate and thereby hold the principal bound by the subagents
acts. Alternatively the principal maybe bound if he ratifies the agents acts of delegation.

the rule in Watteau v Fenwick(1893) per Wills

Usual Authority The Demise of Watteau v Fenwick:
Sign-O-Lite v Metropolitan Life Insurance Co(1991)

Attempt to justify Watteau v. Fenwick Limitations of Watteau v Fenwick(1893)

a) There should be an agency relationship
and the agent should be of such character
that his “usual” authority can be identified.
b) W v F will not apply where the agent acts
for himself and not the principal.

Termination of Agency

The principal may terminate the agents authority by Irrevocable agency -

revocation, so long as the agent has not already where the agents authority cannot be revoked by
fulfilled his obligations to the principal the principal without the agents consent or
The agents authority may be revoked by the determined by death, insanity or bankruptcy of the
following means: principal in any of the following events:
a. Execution of a the agents commission - a. Where the authority of the agent is given by
Blackburn v Scholes(1810) deed or for valuable consideration.
b. Where the agent is appointed for a b. Where the agents authority has been given under a
fixed period and that period has power of attorney which is expressly to be irrevocable.
expired. (Dickinson v Lilwal 1815) - Power of Attorney Act 1971
c. Agreement between the principal and agent c. Where the agent during the tenure of his agency
d. Destruction of the subject matter of agency contract has incurred personal liability in the
e. Frustration of the agency rendering its performance of his authority for which the
performance illegal, impossible or radically principal must indemnify him.
different from that the parties had contemplated.
f. The death, insanity or bankruptcy of the agent Termination of an agents authority is
prospective and not retrospective.
or the principal and where the agent or
principal or agent is a company, its winding up. Martin Baker Aircraft Co Ltd v. Canadian
Notice of renunciation given by the agent to the Flight Equipment Ltd [1955] where the agent
principal and accepted by the principal. has been terminated without notice. cf where
reasonable notice must be given.

Note situation where the relationship has to

end prematurely due to circumstances?

Rhodes v. Forwood (1876)

Turner v Goldsmith(1891)

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