136 |
The passage of title, delivery and payment |
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context. There is no obligation on the buyer to accept instalment delivery,80 |
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although the parties are free to decide otherwise, it then being a matter for the |
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construction of the contract as to whether it is severable or non-severable. If |
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the contract is non-severable, a breach in one instalment does not allow the |
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buyer to repudiate the whole contract unless the problem was with the first |
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instalment. Once the buyer has accepted the first instalment he cannot reject |
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the contract because of a breach in a subsequent instalment. He would need |
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to claim damages instead.81 However, if the contract is severable, a breach of |
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any instalment may allow the rejection of that instalment without affecting the |
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remainder of the contract,82 with acceptance of the first instalment not affecting |
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that position. It will depend on how serious the breach is and its impact on the |
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contract as a whole. Ultimately, that is a matter for the court to decide. Equally, |
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the court will decide whether the contract is severable at all with factors such as |
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separate payment for each instalment being persuasive but not conclusive. |
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Q10 Review the statutory provisions governing the delivery of goods and pay- |
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ment for them. |
7â Remedies
In the majority of contracts for the sale of goods, property passes without any difficulty and delivery and payment happen both successfully and on time. Nonetheless, it is in the nature of commerce that there will be some contracts which do not run smoothly and for which the seller or buyer, or both, will seek access to a contractual remedy. It is unsurprising therefore that a breach of the provisions as to delivery and payment give rise to a variety of remedies for both buyer and seller.
(a)â Seller’s remedies
The remedies available to the seller fall into two categories, real remedies exercisable against the goods and personal remedies involving a monetary claim for the price of the goods and damages.
(i)â Real remedies
The real remedies available to the seller involve, in effect, using the goods as a form of security to protect his position. However, the availability of the remedies is restricted to sellers who are classed as an ‘unpaid seller’ within the meaning of the 1979 Act.83 Section 38(1) defines an ‘unpaid seller’ thus:
80 Ibid. s.31(1).â 81â Ibid. s.11(4).
82See ibid. s.35A(2) as regards the right of partial rejection in instalment deliveries.
83Defined in ibid. s.38 as occurring when the whole of the price for the goods has not been paid or tendered or when a bill of exchange or other negotiable instrument has been dishonoured.
137 |
7â Remedies |
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An unpaid seller 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.
In addition to the seller himself, section 38(2) makes it clear that anyone who is in the position of the seller can bring himself within the definition of ‘unpaid seller’, most particularly, any agent of the seller to whom a bill of lading has been indorsed or any consignor or agent who has paid, or is responsible for, the price.
Thus, an agent who has already paid the price to the seller with the intention of recouping it from the buyer would be classed as an ‘unpaid seller’ for these purposes.
Section 39 provides the unpaid seller with three rights exercisable against the goods when the property in the goods has already passed,84 with a further right to withhold delivery of the goods when the property in them has not yet passed.85 The three remedies exercisable against the goods, even if the property in them has passed, are a lien over them, a right of stoppage in transit when the buyer has become insolvent,86 and a right of resale within the terms of the 1979 Act. As mentioned previously, where the property has not passed, the seller has a right to withhold delivery of the goods, this right being co-extensive with the other three rights. These remedies all relate to possession of the goods rather than ownership of them and are circumscribed by the statutory controls that govern them.87
The seller has a lien over the goods such as to allow him to retain possession of them in three situations, namely:
(a)where the goods have been sold without any stipulation as to credit;
(b)where the goods have been sold on credit but the term of the credit has expired;
(c)where the buyer becomes insolvent.
When any of these situations has occurred, the seller can exercise his lien or a right of retention even if he is in possession as the agent of the buyer.88 He can retain all or part of the goods unless a previous part delivery of the goods shows an intention on the part of the seller to waive any lien or right of retention.
Naturally, being a right in possession, the lien will terminate automatically if the seller loses possession of the goods. The statute identifies three situations in which the seller will lose his lien or right of retention, namely, if he delivers the goods to a carrier, bailee or custodian of the goods for onward transmission
84 Ibid. s.39(1).â 85â Ibid. s.39(2).
86A remedy that may become increasingly important in the current economic climate.
87Unpaid seller’s lien (Sale of Goods Act 1979, ss.41–43), stoppage in transit (ibid. ss.44–46) and right of resale (ibid. ss.47–48).
88Ibid. s.41(2).
138 The passage of title, delivery and payment
without reserving a right of disposal, or if the buyer or his agent obtain possession of the goods lawfully, or if the seller waives his lien or right of retention.89 However, the seller does not lose his lien or right of retention purely because he has obtained judgment against the buyer for the money owing.90 As long as the money is unpaid, the lien or right of retention subsists.
The right of stoppage in transit arises when the buyer has gone into liquidation while the goods are still in transit from the seller to the buyer, i.e., delivery has not been completed. Where this is so, the seller has a right to stop the goods in transit, retaking possession of them and retaining them until the payment or tender of the price.91 It does not matter whether the property in the goods has passed or not, the seller can still utilise this remedy. However, it has been suggested that the remedy is no longer as useful as when originally developed because of the modern use of payment against documents and payment by banker’s commercial credits. These allow the seller to retain control of the goods pending payment and so provide a degree of protection against the buyer’s liquidation.92 Equally, the use of retention of title clauses allows the seller to recover his goods if the buyer has failed to pay for them on condition that the criteria relating to the use of the clause have been satisfied.
Naturally, central to this remedy is an understanding of the duration of the transit and when it comes to an end, as the remedy is only available while the transit subsists and will come to an end automatically when the transit finishes. Essentially, the goods are in transit when they have passed from the possession of the seller into the hands of an independent carrier but have not yet reached the possession of the buyer or his agent.93 It is important to note that the carrier must be independent and in business on his own account. If the carrier is an employee or agent of the seller, then the seller has not really parted with possession of the goods and can simply recall them if the need arises, exercising his lien over them. The goods are not in transit within the meaning of the 1979 Act and hence the right of stoppage in transit does not arise.
It is relatively easy to establish when the transit has started but more difficult to identify when it ends such as to defeat the use of this remedy. Section 45(2)–(7) of the 1979 Act deal with a variety of situations that may arise and indicate the effect of each on the transit. Thus, section 45(2) makes clear that if the buyer or his agent obtain delivery of the goods before their arrival at their appointed destination, the transit will come to an end. Equally, if after arrival at the appointed destination, the independent carrier retains possession of the goods but acknowledges that he now holds them on behalf of the buyer or his agent, then the transit will come to an end as the seller no longer controls what happens to the goods.94 However, if the buyer rejects the goods and as a consequence the carrier remains in possession of
89 |
Ibid. s.43(1).â 90â Ibid. s.43(2).â |
91â Ibid. s.44. |
92 |
See Atiyah, Adams and MacQueen,above n. 14. |
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93 |
Sale of Goods Act 1979, s.45(1).â |
94â Ibid. s.45(3). |
139 |
7â Remedies |
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them, the transit will not come to an end even if the seller refuses to receive |
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them back. Delivery has not taken place.95 As regards carriage by sea on a |
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ship that has been chartered by the buyer, it will be a question of fact whether |
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the master of the ship has taken possession of the goods as an independent |
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carrier or as an agent for the buyer96 and this will dictate whether delivery |
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has taken place or whether the goods are still in transit while they remain on |
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the ship. |
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The final two situations involve a wrongful refusal to deliver the goods97 |
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and partial delivery of them.98 In respect of the first, note that the refusal to |
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deliver must be wrongful but, if it is, the transit will be deemed to have come |
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to an end. This protects the buyer from the seller exercising a stoppage in tran- |
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sit when the goods should lawfully have been delivered to the buyer and the |
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buyer had a legitimate right to expect delivery to occur. Finally, partial deliv- |
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ery of the goods to the buyer or his agent does not, of itself, prevent the unpaid |
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seller from exercising a right of stoppage in transit against the remainder of the |
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goods. However, the seller will lose the right of stoppage if the circumstances |
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surrounding the partial delivery are such as to show an agreement to give up |
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possession of the whole of the goods. |
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Having identified the period within which stoppage in transit can take place, |
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the mechanism for exercising the right must be understood. Under section 46 |
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of the 1979 Act, the unpaid seller must either take physical possession of the |
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goods or, alternatively, he can give notice to the carrier, bailee or custodian cur- |
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rently in possession of the goods that he is exercising his right of stoppage in |
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transit. If doing the latter, he can give notice either to the person in actual pos- |
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session or to his principal. in which case he must allow enough time for the |
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principal to notify the person in actual possession such as to prevent delivery |
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to the buyer. When the person in actual possession has the relevant notice, he |
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must redeliver the goods to the seller, or to his order, with the seller bearing any |
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expenses associated with the redelivery. |
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The third of the real remedies that the seller can exercise against the goods is |
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the right of resale under section 48, which bestows limited rights upon the seller |
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in this regard. It must be noted that the mere exercise by the seller of his right |
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of lien or stoppage in transit does not cause rescission of the contract of sale. |
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However, where an unpaid seller who has exercised one of those rights resells |
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the goods, the new buyer acquires good title to the goods as against the original |
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purchaser.99 Particular arrangements are made as regards perishable goods. |
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Under section 48(3), where the seller has given notice to the buyer of his inten- |
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tion to resell the goods and the buyer does not pay or tender payment within |
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95â Ibid. s.45(4).â |
96â Ibid. s.45(5). |
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97 |
Ibid. s.45(6).â |
98â Ibid. s.45(7). |
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99 |
Note that unlike the nemo dat exception under ibid. s.24 (seller in possession of the goods) there |
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is no requirement here that the new buyer is acting in good faith and without knowledge of the |
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previous sale. |
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140 The passage of title, delivery and payment
a reasonable time, the unpaid seller can resell the goods and recover damages from the buyer for any loss resulting from his breach of contract. Finally, section 48(4) stipulates that if the seller has expressly reserved a right of resale upon default by the buyer and duly exercises that right, the original contract is rescinded but the unpaid seller still has the right to sue for contractual damages.
(ii)â Personal remedies
In addition to his rights over the goods themselves, the seller can sue to recover either the price or contractual damages for non-acceptance. These remedies are, arguably, less useful than the real remedies already discussed in that those remedies use the goods themselves as a form of security for the debt and can be used when the buyer has gone into liquidation. By contrast, claims for the price or damages for non-acceptance relate to monetary compensation and, consequently, are of no use to the seller if the buyer has gone into liquidation.
The right of the seller to sue for the price is laid out in section 49 and can be used when the property in the goods has passed to the buyer and the latter wrongfully neglects or refuses to pay for them.100 The key word here is ‘wrongfully’ for the seller cannot enforce this remedy if the buyer has a legitimate legal reason for refusing payment as, for example, if the goods are faulty and the buyer is seeking to rescind the contract because of the failure of the seller to provide goods that conform with the contract. In that situation, the buyer may be withholding payment legitimately pending the seller providing goods that conform to the contract. Further, as delivery and payment are concurrent duties, it follows that the buyer will not have wrongfully refused to pay for the goods unless the seller is ready and willing to deliver them. However, assuming that the refusal to pay is wrongful, the seller is able to sue. In addition, the seller can also sue for the price irrespective of the lack of passage of title if payment was due on a day certain which has passed.101 To qualify as a ‘day certain’, the contract must either specify a precise date or provide a formula that allows the date for payment to be identified. The right to payment in this situation is totally dependent on the date identified by the contract and arises irrespective of delivery. Thus, the fact that delivery has taken place before the ‘day certain’ does not give the seller the right to claim payment until the ‘day certain’ arrives.
Allied to the right to sue for payment when property has passed is the right to sue for damages for non-acceptance when the buyer has wrongfully neglected or refused to accept and pay for the goods.102 Again, the buyer’s action must be wrongful for a remedy to follow. Hence, it would not be wrongful to refuse to accept goods that do not comply with the contract. The measure of damages payable to the seller will be the loss directly and naturally resulting from the buyer’s breach and, where there is an available market for such goods, it will be the difference between the contract price and the market price at the time when the goods should have been accepted.
100 ibid. s.49(1).â 101â Ibid. s.49(2).â 102â Ibid. s.50(1).
141 |
7â Remedies |
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Naturally, as this is a claim for damages, the seller must prove that he has suf- |
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fered loss and is under a duty to mitigate that loss by seeking to resell the goods. |
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His ability to do this will be effected by supply and demand for the goods at the |
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time of resale. If supply outstrips demand, he may find it impossible to resell the |
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goods and would be quite entitled to claim damages for the profit that he would |
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have made on the contract with the buyer if the latter had not gone into breach. |
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By contrast, if demand exceeds supply, he should have no trouble in reselling |
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the goods, which will be reflected in the amount of damages that he will be |
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likely to recover. |
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In addition to the right of the seller to sue for the price or claim damages for |
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non-acceptance, he also has an allied claim under section 37 of the 1979 Act. |
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This provides that when the seller is ready and willing to effect delivery of the |
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goods and has requested the buyer to take delivery, then if the buyer does not |
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accept delivery of them within a reasonable time thereafter, the buyer will be |
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liable to the seller for any loss that the seller suffers as a result of the buyer’s neg- |
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lect or refusal to take delivery. The seller can also claim a reasonable charge for |
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the storage and custody of the goods pending delivery. It should be noted that, |
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unlike section 50 of the 1979 Act, this section does not require that the buyer |
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has acted wrongfully in refusing to accept delivery. The right bestowed under |
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section 37 does not impact on the rights of the seller if the buyer’s refusal to |
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accept delivery amounts to a repudiation of the contract. |
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(b)â Buyer’s remedies |
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The buyer has three statutory remedies, to be found in sections 51–53 of the |
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1979 Act, which encompass damages for non-delivery, specific performance |
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and damages for a breach of warranty.103 |
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While the seller can sue for non-acceptance, the buyer can sue for non- |
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delivery |
when the seller has wrongfully neglected or refused to deliver the |
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goods to him.104 The refusal by the seller to deliver the goods must have been |
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negligent or wrongful. Thus, for example, if the buyer has indicated that he will |
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not pay for the goods, the seller would be entitled to refuse to deliver the goods |
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as the duty to deliver and the duty to pay are concurrent duties.105 In that situ- |
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ation, the buyer would not be able to bring a claim for non-delivery. |
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The damages will be ‘the estimated loss directly and naturally arising, in |
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the ordinary course of events, from the seller’s breach of contract’106 and includes any special damages that are foreseeable within the rule of Hadley v. Baxendale.107 Naturally, as this is a claim for damages, the buyer is under a duty to mitigate his loss, which is most likely to involve him purchasing replacement goods, if this is possible, as soon as the seller refuses to deliver as
103 Remedies available to the buyer when the goods as delivered are not of a satisfactory quality or fit for their purpose are considered in Part 2 Chapter 2.
104 |
Sale of Goods Act 1979, s.51(1).â 105â Ibid. s.28. |
106 |
Ibid. at s.51(2).â 107â (1854) 9 Exch. 341. |
142 The passage of title, delivery and payment
required under the terms of the contract. Indeed, if the seller commits anticipatory breach by informing the buyer before the due date for delivery that he will not deliver the relevant goods, the buyer can buy alternative goods immediately if he so chooses. Section 51(3) stipulates that, if there is an available market for the goods in question, the measure of damages for non-delivery is prima facie the difference between the contract price and the market or current price at the time that the goods should have been delivered. If there was no set date for delivery, then the time of the refusal to deliver is used instead. In practice, this provision allows the buyer to recover any difference in the market value of the goods. Thus, for example, if the contract price was £1,000 and the market price at the time for delivery is £1,200, the buyer is entitled to recover the additional £200. By contrast, if the price of the goods has fallen to £800, the buyer purchases the replacement goods but is permitted to retain the £200 difference in price. As regards claims for special damages within the ambit of Hadley v. Baxendale, the buyer can recover for losses that were foreseeable to the seller at the time that the contract was made. The most obvious example would be where the goods have been sold by the buyer to a third party in a sub-contract. If the seller knows that the buyer is committed to using those goods to perform the sub-contract and cannot use replacement goods (because, for example, alternative goods cannot be acquired in time or the goods are unique) then the buyer can recover damages to recompense him for his contractual liability to the sub-buyer for non-performance of the sub-contract.
Damages may not be a sufficient remedy for non-delivery in some situations, most particularly where the contract relates to specific goods that are sufficiently unique to mean that replacement goods cannot be obtained easily, or indeed at all. Clearly, money is an inadequate remedy in that situation and the court may resort to the remedy of specific performance, instructing the seller to deliver the goods as per the contract without giving him the option of retaining the goods on payment of damages.108
Finally, the buyer may be able to claim damages for any breach of warranty by the seller or any breach of condition that the buyer has elected to treat, or is compelled to treat, as a breach of warranty.109 Alternatively, he can set up the breach of warranty in diminution of the extinction of the price and the fact that he has done so does not prevent him claiming for the same breach of warranty if he has suffered other damage.110 As with the other monetary remedies relating to delivery and payment, the measure of damages will be that loss directly and naturally resulting from the breach.111 In respect of claims for a breach of warranty of quality, the loss is prima facie the difference in value between the goods as delivered and the value that they would have had if they had fulfilled the warranty.112
108 |
Sale of Goods Act 1979, s.52(1).â 109â Ibid. s.53(1). |
110 |
Ibid. ss.53(2) and (4).â 111â Ibid. s.53(2).â 112â Ibid. s.53(3). |