BUSINESS LAW II ASSIGNMENT.

In performance of contract of sale of goods the seller has the following duties and obligations.

a)      Duty to deliver the goods

"It is the duty of the seller to deliver the goods, and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale." (Section 28)

b)     Duty to pass a good title

"Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that is to say, the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer must be ready and willing to pay the price in exchange for the possession of the goods." (Section 29)

c)      Duty to put the goods into a deliverable state.

Where goods have been delivered to the buyer, and he has had a reasonable opportunity of inspecting them, he is deemed to have accepted them. In Molling v Dean certain goods were sold in Germany to buyers who lived in England. The goods were sent direct to America. When they reached America, they were examined and it was discovered that they were not in conformity with the contract. The Court held that the goods could properly be rejected since America was the assumed place for inspection. The buyer’s right to reject the goods was not lost by reason of the fact that the goods had not been examined at the port of shipment.

          d).     Duty to Deliver Right quantity.

Delivery must be of the exact quantity—if it is too much or too little the buyer may reject the whole. In Hart v Mills buyers ordered two-dozen bottles of wine. In response, the sellers sent four dozen. It was held that all the four-dozen could be returned. Although the buyer’s behaviour appeared to be unreasonable, it was consistent with the provision of the Act. However, where the delivery is greater, or less, than the amount contracted for, and the buyer accepts part of whole of the delivery, he is liable for the price at the contract rate. He cannot then claim damages afterwards. This is illustrated by:

In Gabriel, Wade and English Limited v Arcos Limited: in which there was a contract for the sale of a thousand standards, about 85% red wood and about 15% white wood. A delivery was made and accepted by the buyers in which white wood largely exceeded 15%. It was held that the buyers could not sue for damages. They could have rejected the consignment, had they so wished, but having accepted it, they could not sue for damages.

If quantities are stated as "more or less" the seller is allowed a reasonable margin. If, however, that margin is exceeded, the buyer may reject the goods. Each case has to be judged on its own merits. For example:

In Payne and Routh v Lillico and Sons a contract was made for the sale of 4,000 tons of meal within "2% or less". The sellers considerably exceeded the allowance and the buyers refused to take delivery. It was held that the buyers were entitled to refuse and the court would not make further variation in the quantity; and that where a margin is expressly limited for variation, it should be adhered to unless the difference delivered is trifling, in which case it may be disregarded.

In McConnel v Murphy: The contract was for "all the spares manufactured by X, say about 600, averaging 16 inches". 496 of the specified kind and measurement were tendered. The tender was held good.

In Morris v Levison: The contract was for "a full and complete cargo, say 1,100 tons". The vessel would take 1,210 tons, and only 1,080 were ordered. It was decided that, under these circumstances, this would not suffice.

In Miller v Borner: An undertaking was to load a "cargo of ore, say about 2,080 tons, although the capacity of the ship was greater. The charterer satisfied the contract by loading 2,840 tons, although the capacity of the ship was greater. The absence of the words "full and complete" led to a result opposite to that of Morris v Levison.

In Re Harrison and Micks Lambert: On the sale of the "remainder of a cargo (more or less) 5,400 quarters wheat", the buyers were held bound to accept 5,574 quarters, on the ground that there was a sale of the whole remainder, whatever the quantity might be; the seller's collateral estimate not affecting the meaning of the word "remainder".

DUTIES OF THE BUYER

a)      Take delivery.

Under section 2 of the Act, it is the duty of the buyer to take delivery of the goods failing which the seller may maintain an action against him for damages for non-acceptance pursuant to section 50(1) of the Act.

b)     Pay the price. 

Under section 28 of the Act it is the duty of the buyer to pay the price of the goods failing which the seller may maintain an action against him for the price pursuant to section 49 of the Act.

BREACH OF CONTRACT

Remedies to seller.

A buyer commits a breach of the contract of sale if he wrongfully fails to pay for the goods in accordance with the terms of the contract. In such a case, the seller is legally known as "the unpaid seller". Section 39 defines an unpaid seller as follows:

          (a)     The seller of goods is deemed to be an unpaid seller within the meaning of this Act:

1. When the whole of the price has not been paid or tendered.

2. 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.

          (b)     In this part of the Act, the term "seller" includes any person who is in the position of a seller, as for instance, an agent of the seller to whom the bill of landing has been endorsed, or a consignor or agent who has him paid, or is directly responsible for, the price".

REMEDIES OF THE UNPAID SELLER.

Remedies of the unpaid seller are either real or personal.  Real remedies are remedies against the goods and are enforceable without judicial intervention.  Personal remedies are remedies against the buyer and enforceable through the courts.

Personal Remedies:

          (a)     Action for Price.

Section 49 provides that the unpaid seller has a right of action for the price of the goods:

                   (i)      Where the property in the goods has passed to the buyer and he refuses to pay for them according to the contract.

                   (ii)     If the buyer has agreed to pay for the goods on a certain day, and he wrongfully refuses to pay for them.

          (b)     Action for damages.

Section 50 provides that where the buyer wrongfully neglects or refuses to accept and pay for the goods (i.e. the property in the goods has not been passed to the buyer) the seller may maintain an action against him for damages for non-acceptance. The amount of damages will be the estimated loss caused by the buyer's breach of contract.

Real remedies    

          (c)     Right of Lien or retention of goods

Sections 41 to 43 give the unpaid seller who is still in possession of the goods the right of lien (i.e. the right to retain them until payment or tender of price ) in the following cases:

                   (i)      Where the goods have been sold on credit but the term of credit has expired.

                   (ii)     Where the goods have been sold without any stipulation as to credit.

                   (iii)    Where the buyer becomes insolvent.

The lien will be lost if the unpaid seller delivers the goods to a carrier or other bailee for transport to the buyer, without reserving the right of disposal of the goods. It will also be lost where the buyer (or his agent) lawfully obtains possession of the goods, or where the unpaid seller waives his rights.

Where part delivery has been made, the unpaid seller has a lien over the rest of the goods, provided that the part delivery already made does not amount to a waiver of the right of lien.

The lien is for the price or for the unpaid balance of price only, and not for any accidental expenses, such as storage charges.

          (d)     Stoppage in transitu

Sections 44 to 46 provide that, where a buyer becomes insolvent, the unpaid seller has a right of stopping the goods "in transitu". This right is exercisable only while the goods are still in transit. If transit is at an end, the right is also at an end.

Goods are in transit from the time they are delivered to a carrier by land or water or other bailee, for the purpose of transport to the buyer, until the buyer or his agent takes delivery of them from the carrier or bailee.

If the buyer obtains the goods before they reach the appointed destination the transit is at an end. The transit is also at an end when the goods reach the appointed destination and the carrier or bailee informs the buyer that he (the carrier or bailee) holds them on his (i.e. the buyer's) behalf.

Where part delivery has been made, the right of stoppage in transitu is effective over the remainder of the articles, unless the part delivery was made in such a way as to show that the seller has agreed to give up possession of the whole of the goods.

                    In Dixon v Baldwen it was explained that transit would be if an end of the goods have so far approached the end of their journey that they await further orders. This is illustrated by Kendall v Marshall, Stevens and Company, where the railway company which transported the goods gave notice that after a certain date they would hold the goods not as carriers but as warehousemen. The goods were not cleared until after the expiration of the time stated, and it was held that the vendor's lien was lost on the expiration of that time.

The unpaid seller exercises his right of stoppage in transitu either by taking possession of the goods or by giving notice to the carrier or bailee that he wishes to exercise the right. The carrier or bailee must then return the goods to the unpaid seller who must pay all the expenses connected with such return.

In Verschure's Creameries v Hull and Netherlands S.S. Company it was held that if the unpaid seller gives notice of his right to the carrier, and the carrier ignores such notice, he can sue either the carrier for damages or the buyer for the price. He can do only one of these things.

Section 47 deals with any sub-sale or pledge by the buyer. It provides that, subject to the provisions of the Act, the unpaid seller's right of lien or retention or stoppage in transitu is not affected by any sale, or other disposition of the goods which the buyer may have made, unless the seller has assented thereto.

However, the unpaid seller's right of stoppage in transitu is lost if a document of title relating to the goods has been sent to the buyer and the buyer has endorsed it to another party, who takes it in good faith and for value, as in  Cahm v Pocketts Bristol Channel Steam Packet Co.

          (c)     Right of Re-Sale

The seller may re-sale the goods under s.48 if the buyer does not pay for the goods, or tender their price, within the agreed or a reasonable time. This right of re-sale is allowed in the following three cases:            (i)      Where the goods are of a perishable nature.

                   (ii)     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.

                   (iii)    Where the seller expressly reserves a right of re-sale.

If, in spite of reselling the goods, the seller still suffers a loss, he can bring an action for damages for non-acceptance, but the first buyer will be discharged from any further liability to pay the price. Where a seller resells under section 48, therefore, the first contract with the original buyer is rescinded. If the seller of the goods obtains more for them than the original contract price, he can retain the whole of the proceeds. The case of R. V. Ward v Bignall (1967) has held that this is the legal position. The resale terminates the sale and reverts title in the seller for transfer to the second buyer.

Section 48 (2) states that "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".

d)     Right to with hold delivery of goods where the property has not passed to the buyer.

Computation of Damages.

Section 50 (2) provides that the amount of damages is the estimated loss (to the seller) which is directly and naturally caused by the buyer's breach of contract.

Section 50 (3) further provides that, where there is an available market for the goods, the measure of damages is the difference between the contract price and the market or current price at the time when the goods ought to have been accepted, or, if no time was fixed for acceptance, then at the time of the refusal to accept.

In W. L. Thompson Limited v R. Robinson (Gunmakers) Limited (1955), X Limited agreed in writing with a company of motor agents to purchase a Standard Vanguard motor car. Later X Limited refused to accept delivery and the sellers claimed as damages for breach of contract the amount of profit which they would have obtained on the sale. At the time of the agreement the demand in the district of Standard Vanguard cars was insufficient to absorb all such models available for sale, but it was not proved that there was no available market in the wider sense of the country as a whole. It was held that in the circumstances Section 50 (3) afforded no defence to X Limited and that the vendors were entitled to the amount of profit which they had lost by the breach of contract. The above statutory provisions in effect codify the common law rule in Hadley v Baxendale.