ASSIGNMENT

“The concept of corporate governance has now become a

serious concern among regulators of corporate law and
regulations since the decision makers in the corporate sector
are entrusted with the stewardship of the nation’s wealth and
wealth creation not only directly for shareholders but also for
all those affected by the corporation’s existence – the
stakeholders.”

Discuss WHAT AND WHY there is a need for Corporate

Governance. Please also make specific reference to the
provisions of Malaysian Code of Corporate Governance and
relevant provisions of the Companies Act on the duties and
liabilities of directors and officers of the company to ensure
Corporate Governance.

(20 Marks)

The Malaysian Code on Corporate Governance (Code) was

developed by the Working Group on Best Practices in Corporate
Governance (JPK1) and subsequently approved by the High
Level Finance Committee on Corporate Governance. JPK1 was
chaired by the Chairman of the Federation of Public Listed
Companies. The members of JPK1 comprised a mix of private
and public sector participation.

The Code was principally an initiative of the private sector. The

need for a Code was inspired in part by a desire for the private
sector to initiate and lead a review and to establish reforms of
standards of corporate governance at a micro level. This was
based on the belief that in some aspects, self-regulation was
preferable and the standards developed by those involved
would be more acceptable and thus more enduring.

The Code essentially aims to set out principles and best

practices on structures and processes that companies may use
in their operations towards achieving the optimal governance
framework. These structures and processes exist at a
microlevel which include issues such as the composition of the
board, procedures for recruiting new directors, remuneration of
directors, the use of board committees, their mandates and
their activities.

The significance of the Code is that it allows for a more

constructive and flexible response to raise standards in
corporate governance as opposed to the more black and white
response engendered by statute or regulation. It is in
recognition of the fact that there are aspects of corporate
governance where statutory regulation is necessary and others
where self-regulation, complemented by market regulation is
more appropriate.

The need for a code also results from economic forces and the
need to reinvent the corporate enterprise, so as to efficiently
meet emerging global competition. The world’s economies are
tending towards market orientation. In market oriented
economies, companies are less protected by traditional and
prescriptive legal rules and regulations. Malaysia is no
exception and the shift to a full disclosure regime, already
underway in Malaysia, is such an example. Hence, there is a
need for companies to be more efficient and well managed
than ever before to meet existing and anticipated world-wide
competition. The role of directors then increases in importance.
The role of the board in hiring the right management,
compensating, monitoring, replacing and planning the
succession of senior management is crucial, as management
undertakes the key responsibility for the enterprise’s efficiency
and competitiveness. The role of the Code is to guide boards by
clarifying their responsibilities and providing prescriptions,
thereby strengthening the control exercised by boards over
their companies.

The Malaysian Code on Corporate Governance (Code), first

issued in March 2000, marked a significant milestone in
corporate governance reform in Malaysia. It codified the
principles and best practices of good governance and described
optimal corporate governance structures and internal
processes.

Since the release of the Code, the Malaysian corporate scene

has made significant strides in corporate governance
standards. The mandatory reporting of compliance with the
Code has enabled shareholders and the public to assess and
determine the standards of corporate governance by listed
companies.

The Code is aimed at strengthening the board of directors and

audit committees, and ensuring that the board of directors and
audit committees discharge their roles and responsibilities
effectively.

Duties and liabilities of directors and officers of the

company to ensure Corporate Governance are:

Malaysia’s economy depends on the drive and efficiency of the

companies. Therefore, the effectiveness of the board of
directors in discharging their duties and responsibilities
determines Malaysia’s competitive position. In other words,
Company directors must be free to drive their companies
forward, but they have to exercise that freedom within a
framework of effective accountability.

A proper and efficient system of corporate governance is

necessary in the companies in order to regulate the directors’
duties and preventing them from abusing their powers.
Corporate Governance is the system by which business
corporations are directed and controlled. It is necessary to
ensure that company directors act in the best interests of their
companies as well as ensuring the observance and compliance
with all laws, regulations and codes of conduct and best
practices.

Section 4 of the Companies Act 1965 (CA) defines director as:

“any person occupying the position of director of a corporation

by whatever name called and includes a person in accordance
with whose directions or instructions the directors of a
corporation are accustomed to act and an alternate or
substitute director”

Where a director is required to act bona fide in the interest of a

company, he must act according to what he considers, not
what a court may consider, is in the interest of the company :
Re Smith and Fawcett Ltd (1942) Ch 304. The directors are the
ones to determine what is best for the company. In Intraco Ltd
v Multi-Pak Singapore Pte Ltd [1995] 1 SLR 313, the Court held
that the proper test in determining whether the directors have
acted bona fide was whether an honest and intelligent man in
the position of a director in the whole of the existing
circumstances, have reasonably believed that the transactions
were for the benefit of the company.

Obligation of directors to act bona fide in the interest of the

company

The law imposes on directors a certain trustees-like duties.

This duties include:

• To act for a proper purpose

• To avoid conflict of interest

• Not to have other interest fetter his discretion

• To ensure that the interest of the members of the

company is protected

• To use reasonable diligence in the discharge of his duties.

Directors are required to exercise powers given to them for the

proper purpose of the company. The purposes may be set out
in the articles of association of the company. Therefore,
directors are prohibited from exercising its powers for any
collateral purposes or any act done for an impermissible
purpose.

Whitehouse & Anor v Carlton Hotel Proprietary Ltd (1987) 162

CLR 285 Mr Whitehouse as a director allotted two class ‘B’
shares to each of the sons which had the effect of passing
control of the company to them.

The company later passed a resolution that the class ‘B’ shares
had never been issued by arguing that the power was
exercised to achieve an impermissible purpose, namely to
defeat the voting power of the existing shareholders by
creating a new majority. The Court held that the articles of
association does not authorise the exercise by Mr Whitehouse
of that fiduciary duty for an impermissible and vitiating
purpose.

A director who has entered into a contract with his company in

breach of his fiduciary duties still remains accountable to his
company for any profit which he or she derives from the
breach.

This profit rule can apply in instances where even if there is no

realistic possibility of conflict between the interest and duty but
where the directors have made a profit : Queenland Mines Ltd v
Hudson (1978) 3 ACLR 176.

Statutory Duties of Directors : Section 131 Companies Act

(CA) 1965

This provision are designed to achieve a modification of the

‘no conflict rule’ by allowing a company to enter into
transactions with directors provided their interest is disclosed
to the board.

S131 CA provides that: “every director of a company who is in

any way, whether directly or indirectly, interested in a contract
or proposed contract with the company shall, as soon as
practicable after the relevant facts have come to his
knowledge, declare the nature of his interest at a meeting of
the directors of the company.”

In a Singapore case of Yeo Geok Seng v PP [2000] 1 SLR 195,

Yong CJ held that S156 Singapore CA(S131 Malaysian CA) was
not confined to situations where the directors had a personal
interest that conflicts with his duty but was wide enough to
impose a duty of disclosure on a director who holds directorship
in another company.

Statutory Duties of directors – Section 132 CA 1965

Section 132(1) CA 1965 sets out the director’s duties to act

honestly.

Under S132(1), a director shall at all times act honestly and use
reasonable diligence in the discharge of the duties of his office.

Also, under S132(5), this duties are in addition to and not in

derogation of any written law or rule of law relating to the duty
or liability of directors or officers of a company.

Therefore, the common law and equitable rules relating to

directors are still relevant.

In Multi-Pak Singapore Pte Ltd v Intraco Ltd [1994] 2 SLR 282,

the court held that the word 'honestly' does not mean that a
director would only be in breach of duty if he had acted
fraudulently. It means to act bona fide in the interests of the
company. In exercising their discretion, the directors should
only act to promote or advance the interest of the company.

Duties of Skill and care

Section 132(1) CA also sets out the duty of the director to use
reasonable diligence in the exercise of the duties of his office.

The duty of skill, care and diligence to be exercised by the

directors were established in the leading case of Re City
Equitable Fire Insurance Co Ltd [1925] Ch 407.

A director are under the duty to exhibit a degree of skill that is

reasonably expected from a person with his knowledge and
experience : Re City Equitable Fire Insurance Co Ltd

Re City Equitable [1925] Ch 407

A case where the liquidators of the failed insurance co sued

the directors for negligence on 3 grounds:

1) they allowed the co to lend substantial funds on an

unsecured basis to its chairman and GM

2) that they made improvident investments

3) that they paid dividends out of capital

Re City Equitable [1925] Ch 407

The Court held:

A director need not exhibit a greater degree of skill than may

reasonably be expected from a person of his or her knowledge
and experience.

A director is not bound to give continuous attention to the

affairs of the co as his or her duties are of an intermittent
nature to be performed at periodic board meetings.
Statutory Duties of directors – Section 132 CA 1965

S132(2) CA 1965 sets out the duty not to misuse information

or position.

Under S132(2), an officer or agent of a company or officer of

the Stock Exchange shall not make improper use of any
information acquired by virtue of his position as an officer or
agent of the company or officer of the Stock Exchange to gain
directly or indirectly an advantage for himself or for any other
person or to cause detriment to the company.

Hence, it is applicable to directors.

This provision can apply to information which is not

confidential as held in McNamara v Flavel (1988) 13 ACLR 619
but only so long as the information is of a kind which equity
would protect by injunction for breach of fiduciary duty.

S132 CA is sometimes regarded as a misuse of information by

insiders.

Insider trading is in effect a misuse of unpublished information

of a company by anyone in possession of such information
which is not generally available.

Insider trading under Section 89 of the Securities Industry Act

(SIA) 1983

Under Section 89E SIA, an insider (clearly includes a director)

shall not, in respect of any information that is not generally
available:

A) acquire or dispose of, or enter into an agreement with a view

to the acquisition or disposition of such securities; or
B) procuring, directly or indirectly, an acquisition or disposal of
such securities.

Other provisions relating to misuse of information

Section 132A CA

An officer, agent or employee of a corporation or officer of the

Stock Exchange who in or in relation to a dealing in securities of
the corporation by himself or any other person makes improper
use to gain, directly or indirectly, an advantage for himself or
any other person of specific confidential information acquired
by virtue of his position as such officer, agent or employee or
officer of the Stock Exchange which if generally known might
reasonably be expected to affect materially the price of the
subject matter of the dealing on a Stock Exchange shall, in
addition to any penalty imposed under subsection (6), be liable
to any person for loss suffered by that person by reason of the
payment by him or to him of a consideration in respect of the
securities greater or lesser, as the case may be, than the
consideration that would have been reasonable if the
information had been generally known at the time of the
dealing.

Section 132C Companies Act 1965

Notwithstanding anything in a company's memorandum or

articles, the directors shall not carry into effect any proposal
or execute any transaction for -

(a) the acquisition of an undertaking or property of a

substantial value; or
(b) the disposal of a substantial portion of the company's
undertaking or property,

which would materially and adversely affect the performance or

financial position of the company, unless the proposal or
transaction has been approved by the company in general
meeting.

New Sections 131A and 131B:

“Subject to section 131, a director of a company who is in any

way, whether directly or indirectly, interested in a contract
entered into or proposed to be entered into by the company,
unless the interest is one that need not be disclosed under
section 131, shall be counted only to make the quorum at the
board meeting but shall not participate in any discussion while
the contract or proposed contract is being considered at the
board meeting and shall not vote on the contract or proposed
contract.”

S131B provides that the directors have the power to manage or

supervise the affairs of the company.

Directors’ duties under Corporate Governance Disclosure ;

Para 15.26 Disclosure pursuant to the Code,

A listed issuer must ensure that its board of directors makes

the following statements in relation to its compliance with the
Malaysian Code on Corporate Governance in its annual report:-

A) a narrative statement of how its listed company has applied

the principles set out in Part 1 of the Malaysian Code on
Corporate Governance to their particular circumstances; and

B) a statement on the extent of compliance with the Best

Practice of Corporate Governance set out in Part 2 of the
Malaysian Code on Corporate Governance which statement
shall specifically identify and give reasons for any area of non-
compliance with Part 2 and the alternatives to the Best
Practices adopted by the listed issuer if any.

Para 15.27 Additional statements by the board of directors

A listed issuer must ensure that its board of directors makes

the following additional statement in its annual report:-

A) a statement explaining the board of directors’ responsibility

for preparing the annual audited accounts; and

B) a statement about the state of internal controls of the listed

issuer as a group

PRESENTATION:

(10 marks)

Discuss the transfer of property and risks in goods and the

remedies available to the unpaid seller.
Pursuant to section 47 of the Malaysia Sale of Goods Act 1957, notwithstanding
that the property in goods may have passed to the buyer the unpaid seller of
goods may have passed to the buyer the unpaid seller of goods under the law
has lien on the goods or the right to retain he goods for the price while the seller
is in possession of the said goods. For e.g. In the event the buyer becomes
insolvent the seller has the right to stop the goods in transit after they have
parted with the possession of them. The Act also allows for the resale of the said
goods within the limitation of the Act. Section 48 of the said Act deals with the
situation of part delivery i.e. the right of the seller to the remainder of
undelivered goods and section 49 deals with termination of such lien.

It has to be noted that the freedom of contract or Lazier faire also means that a
party may enter into transactions anywhere in the world which inevitably lead to
conflicts of laws in some situations. Hence, at these times the Malaysian courts
would have take into account international conventions etc to determine the
rights, duties and remedies of the parties.

Many words when used as a phrase come to convey a specific meaning in a

particular industry . One such phrase is “passing of title”.

The words “passing” and “title” are two very basic ordinary words. “Passing” is
moving from one point to another or from one person to another. “Title” on the
other hand refers to amongst others to ownership or evidence of ownership.

Yet the phrase “passing of title” has acquired a meaning of its own though not
entirely unrelated to the original meaning of the words. It conveys a concept,
which goes beyond the meaning of the ordinary words, used in isolation. It has
become a topic by itself. It is a phrase which deals specifically with goods where
the ownership is transferred.

The phrase is better understood in the light of an examination of the concept of

ownership on the one hand and possession on the other. Unless a person is the
creator of a product in which case the person would at the very outset be both
the owner and be in possession of the product, an item of property is usually
acquired by one person from another either as a gift or by purchase or through
legal means.

Thus in the case of goods, the provisions in the Sale of Goods Act 1957 govern
the acquisition and transfer of ownership. Under the Act “goods” mean every
kind of moveable property other than actionable claims and money and includes
stock and shares, growing crops, grass, and things attached to or forming part of
the land which are agreed to be severed before sale or under the contract of
sale.

When a person buys an item from another person two concepts are involved.
One is the legal transfer of ownership of the goods, which is called “passing of
title”. The other is the goods being physically passed over to the buyer, which
gives possession.

Thus in a case where a person lends an item to another for temporary use, what
happens is that the title or rather the legal ownership remains with the lender
and the borrower of the item merely has possession.
Legal ownership or the transfer of the title only occurs when the owner transfers
the ownership or title to the other person. Thus in an ordinary sale and purchase
of goods situation the seller transfers ownership and also possession to the
buyer. However as there may be a lapse of time between an agreement being
reached and possession finalised, the question remains as to when title or “legal
ownership” passes?

This depends on the nature of the transaction. Section 20 of the Sale of Goods
Act 1957 provides that “where there is an unconditional contract for the sale of
specific goods in a deliverable state, the property in the goods passes to the
buyer when the contract is made and it is immaterial when the time of payment
of the price, or the time of delivery of the goods, or both, is postponed.”

What is the significance of the passing of the title? Apart from giving the person
who has acquired the goods their legal ownership, it has implications in terms of
risk. Section 26 provides that “unless otherwise agreed, the goods remain at the
seller’s risk until the property therein is transferred to the buyer, but when the
property therein is transferred to the buyer, the goods are at the buyer’s risk
whether delivery has been made or not.”

Of course where delivery is delayed through the failure of the buyer or seller, the
risk factor may then shift to the person who is considered to be at fault. This is
because the consequences of the risk may not have occurred if there was no
delay.

It is because of these factors that a person who buys a car, which turns out to be
stolen, will have to return it to the true owner. This is because the person who
has sold the car did not have legal ownership in the first place. Of course the
person who had obtained the car from another, whether a thief or someone else
who bought it from the thief, may have paid him the money.

S.38 SOGA 1979

"The Seller of goods is an unpaid seller within the meaning of this Act-

(a) when the whole of the price has not been paid or tendered
(b) when a bill of exchange or other negotiable instrument has been received as
conditional payment, and the condition on which it was received has not been
fulfilled by reason of the dishonour of the instrument or otherwise."

9.2 Rights of the Unpaid Seller

S.39 SOGA 1979

"(1) Subject to this and any other Act, notwithstanding that the property in the
goods may have passed to the buyer, the unpaid seller of goods, as such, has by
implication of law -

(a) a lien on the goods or right to retain them for the price while he is in
possession of them,

(b) in case of insolvency of the buyer, a right of stopping the goods in transit
after he has parted with possession of them,

(c) a right of re-sale as limited by this Act.

(2) Where the property in the goods has not passed to the buyer, the unpaid
seller has (in addition to his other remedies) a right of witholding delivery similar
to and coextensive with his rights of lien and stoppage in transit where the
property has passed to the buyer."

Saturday January 29th 2011

9. Remedies of the Seller

For a detailed review / revision of Remedies for Breach of Contract see:

Insite Contract: Remedies

9.1 The Unpaid Seller

S.38 SOGA 1979

"The Seller of goods is an unpaid seller within the meaning of this Act-

(a) when the whole of the price has not been paid or tendered

(b) when a bill of exchange or other negotiable instrument has been received as
conditional payment, and the condition on which it was received has not been
fulfilled by reason of the dishonour of the instrument or otherwise."

9.2 Rights of the Unpaid Seller

S.39 SOGA 1979

"(1) Subject to this and any other Act, notwithstanding that the property in the
goods may have passed to the buyer, the unpaid seller of goods, as such, has by
implication of law -
(a) a lien on the goods or right to retain them for the price while he is in
possession of them,

(b) in case of insolvency of the buyer, a right of stopping the goods in transit
after he has parted with possession of them,

(c) a right of re-sale as limited by this Act.

(2) Where the property in the goods has not passed to the buyer, the unpaid
seller has (in addition to his other remedies) a right of witholding delivery similar
to and coextensive with his rights of lien and stoppage in transit where the
property has passed to the buyer."

9.2.1 The Seller enjoys "Real" and "Personal" Remedies

Real Remedies

Rights against the goods - Lien (ss.41- 43);

Stoppage in Transit (ss.44 - 46);

Retention and Re-sale as limited by the Act (s.48)

Personal Remedies

Rights against the buyer

Action for Price (s.49);

Action in damages for non-acceptance (s.50)

9.3 Real remedies of the unpaid seller

9.3.1 Lien : s.41 - 43

The seller's lien arises (a) where the seller is unpaid (b) the goods sold are not
subject to credit provision (c) if credit was given, the credit period has expired
(d) the buyer is insolvent and (e) the seller is in possession of the goods or part
thereof.

(a) The parties may override the statutory lien by express provision.

(b) The buyer's insolvency while giving a right of lien does not necessarily
repudiate the contract.

(c) The exercise by the seller of the lien does not rescind the contract but may
be a prelude to resale under s.48(3) (Infra).

(d) The lien exists to secure payment of the price in respect of the particular
goods. Any claim for expenses incurred in detaining the goods must be the
subject of a damages claim unless there is express provision made that the
expenses element be treated as part of the price - in which case the lien would
extend to the expenses element.

(e) The rights of stoppage in transit underpin the lien rights.

(f) The lien rights will terminate (a) when he delivers the goods to a carrier for
transmission to the buyer without reserving a right of disposal over the goods (b)
when the buyer of his agent lawfully obtains possession of them (c) by waiver of
the lien or right of retention.
9.3.2 Right of re-sale s.48

"(1) Subject to the provisions of this section, a contract of sale is not rescinded
by the mere exercise by an unpaid seller of his right of lien or retention or
stoppage in transitu.

(2) Where an unpaid seller who has exercised his right of lien or retention or
stoppage in transitu re-sells the goods, the buyer acquires a good title thereto as
against the original buyer.

(3) Where the goods are of a perishable nature, or where the unpaid seller gives
notice to the buyer of his intention to re-sell, and the buyer does not within a
reasonable time pay or tender the price, the unpaid seller may re-sell the goods
and recover from the original buyer damages for any loss occasioned by his
breach of contract.

(4) Where the seller expressly reserves the right of re-sale in case the buyer
should make default, and on the buyer making default, re-sells the goods, the
original contract of sale, is thereby rescinded, but without prejudice to any claim
the seller may have for damages."

(a) If the seller had no right to re-sell (s.48(3)(4); buyer repudiation;

unascertained good not appropriated to the contract) then the buyer will enjoy a
claim against the seller in damages for non-delivery.

(b) A more subtle way of approaching the problem is for the buyer to waive the
damages claim and treat the seller as if he were the buyer's agent to sell the
goods and claim an account.

Benjamin ¶ 1204 p 722 3rd Edition .

(c) If the buyer repudiates his obligations under the contract (and this can
include insolvency if the buyer shows he is unable or unwilling to pay) the seller
can accept the repudiation, teat the contract as discharged, re-sell the goods
(with title) and claim damages against the buyer for any loss occasioned
thereby.

(c) If the buyer repudiates his obligations under the contract (and this can
include insolvency if the buyer shows he is unable or unwilling to pay) the seller
can accept the repudiation, teat the contract as discharged, re-sell the goods
(with title) and claim damages against the buyer for any loss occasioned
thereby.

(d) If the buyer has both property and possession the seller's claim must be for
the price or damages - personal remedies against the buyer. The real remedies,
rights against the goods, appear to have been lost.

(e) It would appear that when title and possession are vested in a buyer who
later repudiates the contract, the seller cannot recover the goods, property does
not revest in the seller. Property revests where the buyer validly rejects the
goods or the parties rescind on ground of misrepresentation. The way around the
problem would be to make express provision on resale to cover the situation
where property and possession vest in the buyer. (Problems could arise under
the Bills of Sale Act 1878)

(f) If a seller re-sells the goods he may retain deposits as well as the price paid
by the new buyer. (provided no damages claim was made against the buyer for
loss on the re-sale) If, on the other hand, the seller chooses not to re-sell and
claims damages the seller must take into account the deposit in the calculation
of damages.

9.4 Personal Remedies of the Unpaid Selle

9.4.1 Action for the Price

S.49(1)(2) SOGA 1979

(1) Where under a contract of sale, the property in the goods has passed to the
buyer, and he wrongfully neglects or refuses to pay for the goods according to
the terms of the contract, the seller may maintain an action against him for the
price of the goods.
(2) Where, under a contract of sale, the price is payable on a day certain
irrespective of delivery and the buyer wrongfully neglects or refuses to pay the
price, the seller may maintain an action for the price, although the property in
the goods has not passed, and the goods have not been appropriated to the
contract."

(a) The right to sue for the price is independent of lien. In circumstances where
the seller has been given judgment for the price he may still retain the goods by
way of lien until he is actually paid. s.43(2)

(b) The action arises where the buyer has defaulted in paying for the goods.

(c) Under s.49(1) the seller may bring an action for the price only if the property
has passed. (cf. s.49(2).) The contract must continue to remain in force. The
seller must not have accepted a repudiation.

There is some support for the view that the seller may waive his right of
retention of title, allow property to pass and bring an action for the price under
s.49(1)

Napier v Dexters Ltd (1926) 26 Ll L. Rep at 63

(d) If the contract provides that payment is to be made on a day certain the
seller may bring an action for the price on the expiration of the day certain.
s.49(2).

Workman Clark v Lloyd Braziliano [1908] 1 KB 968

(e) The action for the price is an action on a liquidated sum. Advantage can
therefore be taken of Ord. 14 RSC - Summary Judgment proceedings. (See also
C.C.R. O.9)

(f) If it not possible to bring an action for the price under any of the heads
indicated above the seller has to fallback on a remedy in damages for non-
acceptance and non-payment under s.51.
Advantages of the 'price' action :

(a) Financial. The sum gained will invariably be higher than for damages.

(b) Where property has passed the seller is not under a duty to mitigate.

Additional remedies

The seller may be able to claim damages for special loss occasioned by the
breach and be entitled to compensation for delay in acceptance of the goods
under s.37.

s.37

"When the seller is ready and willing to deliver the goods, and he requests the
buyer to take delivery, and the buyer does not within a reasonable time after
such request take delivery of the goods, he is liable to the seller for any loss
occasioned by his neglect or refusal to take delivery, and also for a reasonable
charge for the care and custody of the goods : provided that nothing in this
section shall affect the rights of the seller where the neglect or refusal of the
buyer to take delivery amounts to a repudiation

Failure of the buyer to pay on time

Failure to pay on time is not, of itself, a repudiatory breach. If the seller resells
the goods he may lay himself open tan action by the buyer for non-delivery
under s.51. The new buyer ought to be protected from the consequences of
nemo dat under s.48(2) and s.24 sale of Goods Act.

s.48(3)
"Where the goods are of a perishable nature, or where the unpaid seller gives
notice to the buyer of his intention to re-sell, and the buyer does not within a
reasonable time pay or tender the price, the unpaid seller may re-sell the goods
and recover from the original buyer damages for any loss occasioned by his
breach of contract."

I f the property in the goods has not passed the seller will be able to pass title to
the new buyer.

If the contract provided that the time of payment was a condition of the contract
or 'of the essence' the seller may treat the buyer's refusal to pay as a
repudiatory breach, treat the contract as at an end, sell to a new buyer (passing
full title, since the buyer's title, if he had title, will revest in the seller) and claim
damages for any loss occasioned by the buyer's breach.

9.4.2 The Action for Damages for Non-Acceptance of the Goods

S.50 (1)(2)(3) SOGA 1979

"(1) Where the buyer wrongfully neglects or refuses to accept and pay for the
goods, the seller may maintain an action against him for damages for non-
acceptance.

(2) The measure of damages is the estimated loss directly and naturally
resulting, in the ordinary course of events, from the buyer's breach of contract.

(3) Where there is an available market for the goods in question the measure of
damages is prima facie to be ascertained by the difference between the contract
price and the market or current price at the time or times when the goods ought
to have been accepted or (if no time was fixed for acceptance) at the time of the
refusal to accept."

(a) General principles: The general principles applicable to damages claims can
be summarised as follows:

1. Breaches of contract are actionable per se

2. The object of damages is to compensate

3. There is a requirement to mitigate loss

4. Damages can be recovered only for loss sustained

5. The loss must be caused by the breach.

(b) Mitigation: The distinction between breach and anticipatory breach is

fundamental.

Braithwaite v Foreign Hardwood Co Ltd [1905] 2 KB 543

" If the buyer wrongfully repudiates the contract, the seller can accept the
buyer's repudiation and then maintain an action even though he is unable to
show that he had the capacity to perform the contract when the buyer
repudiated it. On the other hand, this principle must be reconciled with another
equally established rule, namely that a party is not precluded from relying upon
one ground of repudiation merely because at the time he gave another and
unjustifiable reason for repudiating."

Atiyah: 7th Edition.

See also Gebruder Metelman v NBR (1984)

(c) Calculation of damages : is laid down in s.50(3)(2)

s.50(3) Meaning of 'available market'.

A place where goods can be sold

Dunkirk Colliery v Lever (1878) 9 Ch D 20

Thompson v Robinson Gunmakers Ltd [1955] Ch 177

Charter v Sullivan [1957] 1 All ER 809 Jenkins LJ considered that since there was
a distinction between contract price and market price there was only an
available market where the market price was regulated by supply and demand.
This would exclude markets where the goods were sold by reference to a fixed
price in which case the available market rule is inappropriate and the question
becomes one simply of the amount of lost profit made on the lost sale. Where
there is no available market the measure will generally be the difference
between the sale price and the value of the goods to the seller at the time of
breach.