Reddy, Johnson Q & A, commercial law 2009–2010 2009-1
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Q&A COMMERCIAL LAW 2009–2010
was made. It should be noted, however, that although the cif seller’s obligations as to quality relate to the time of shipment, the seller impliedly undertakes that the goods are in such a state as to be able to withstand a normal sea transit (Mash and Murrell v Joseph Emanuel (1961)), so that the seller remains liable for deterioration if the goods suffer from some defect before risk in them has passed to the buyer as from shipment.
It can be seen, therefore, that there are cases where goods are lost in transit in circumstances where the buyer has no claim against the carrier or insurer and that this sometimes involves hardship for the buyer, because the buyer has to pay the purchase price to the seller on tender of the shipping documents or, if he has already paid, he cannot recover the price on the ground that there was a total failure of consideration.
(b)
Cif contracts are often concerned with sale of unascertained goods and problems arise where such goods are lost before the seller has appropriated the goods to the contract. The general rule in domestic sales is that a seller who has not actually appropriated any goods to the contract is not entitled to rely on the fact that he had intended to do so before the goods are lost. However, Aitkin J in Groom v Barber (1915) said that:
‘The seller must be in a position to pass property by the bill of lading if the goods are in existence, but he need not have appropriated the particular goods in the particular bill of lading until the moment of tender.’
Although the question of appropriation was not discussed, Manbre Saccharine v Corn Products (1919) suggests that a cif seller is entitled to tender documents relating to a cargo which he knows to be lost. ‘Appropriation’ in the sense that the seller is bound contractually to deliver the goods in question in order to pass property will hardly ever take place under a cif contract before tender of documents.
The decided cases and academic opinion do not provide a clear answer to the question. Certainly, Re Olympia Oil and Cake Co and Produce Brokers (1915) suggests that a cif seller can appropriate lost cargo to the contract (and the buyer’s remedy is, therefore, against the carrier or the insurer). Rowlatt J in that case pointed out, however, that to allow appropriation after loss might lead to unjust results: if the market price of the goods rose (or the insurance policy did not cover the loss), the seller would tender the documents relating to the lost cargo; whereas, if the market price fell, the seller could buy an alternative cargo to fulfil the contract and claim on the insurance policy in respect of the lost goods. Of course, if the seller is not entitled to appropriate lost goods, he may suffer hardship, for example, where he is liable to his supplier for goods appropriated before loss without being able to pass on that appropriation to the buyer after loss.
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In the absence of clear authority to the contrary, academic opinion suggests that a cif seller of unascertained goods cannot appropriate a lost cargo, that is, he is not entitled to tender documents relating to the goods which have been lost unless at the time of loss he had appropriated the particular goods to the contract by binding himself contractually to deliver those goods which have been lost.
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INDEX
acceptance of goods 23–4, 32–3, 38, 44, 46, 47–8, 54–7, 186–90, 193, 194
acceptance of offers 13–14 account, duty to 138 advertising, credit agreements 98
agency 133–4; authority see authority of agents; commercial agents 133, 134, 135, 139–43, 144, 146–8, 152, 153; deemed agency 121, 128; duties of agent 134–8; fiduciary relationships 133, 134, 137, 151, 156, 159, 161, 178; mercantile agent exception to nemo dat quod non habet 77; personal liability of agents 143–6, 160; remuneration 139–43, 144, 146–8, 177; secret profits 137–8, 154, 156, 159, 161; termination 133, 138, 152; undisclosed 142–3, 159–65
agricultural products 49–50
alternative dispute resolution (ADR) 4–5; Financial Ombudsman Service 115, 120
Anton Piller orders see search and seize orders apparent authority of agents 155, 158–60,
166–73, 174, 176, 178–80
appropriation of lost cargo 215–16, 232–5, 240 arbitration 4
arrears, credit agreements 103–11, 116–18 authority of agents 149–80; apparent authority
155, 158–60, 166–73, 174, 176, 178–80; binding contracts made without authority 173–7; implied authority 149; implied warranty of authority 161, 170, 172–3; power of attorney 178–80; ratification 154, 156–7; usual (implied) authority 136, 149, 159–60, 165, 166–7, 171, 174, 175–6, 179
autonomy of parties 3
bankruptcy 24, 25, 70, 88, 90 bargaining power, equality of 3
bills of exchange 145
bills of lading 182, 186, 188, 189, 195, 196–7; cost insurance freight (cif) contracts 202, 210, 214, 218–20, 220–2, 224, 226–7
breach of contract 32; fundamental breach 14–15; seller’s right to cure 15
bribes 138, 150, 151–2, 161–2
care, duty of 25–6, 135–6, 180 caveat emptor principle 10–11 certainty 2
cheques 145
children and young people see minors
cif contracts see cost insurance freight (cif) contracts
collateral contracts 50, 51
commercial agents 133, 134, 135, 139–43, 144, 146–8, 152, 153
Commercial Court 4 commercial law, purpose of 1–5
commercial practices, recognition of 3–4 commission paid to agent 139–43, 144, 146–8,
177
companies, yet to be incorporated 146, 157 conflicts of interest 137, 151
conformity of goods 15, 181, 198, 207 connected lender liability 121–31 consideration 50, 207, 229n, 234; failure of 90 consistency 2, 5
consumer contracts 3, 5, 7; caveat emptor principle and 10–11; exceptions to privity of contract 9, 11; see also credit agreements
contra proferentem rule 41–2 contributory negligence 27–8 conversion 78, 81–2, 86, 119–20
cost insurance freight (cif) contracts 181, 201–35; appropriation of lost cargo 215–16, 232–5,
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240; bills of lading 202, 210, 214, 218–20, 220–2, 224, 226–7; delivery orders 214, 215; documentary credits 209, 210, 216–17, 227–32; export restrictions 209, 212–13; insurance 201–2, 204, 218, 220, 222–3, 225; passing of risk 217–18, 232–4; perishing of goods 204, 222; rejection of goods 202, 214–16, 217–20, 221–3, 225–7; unascertained goods 201, 232, 233, 234–5
counter-offers 13 courts 2–4
credit agreements 87–99; advertising 98; arrears 103–11, 116–18; connected lender liability 121–31; default 101–20; documentation 99, 110; guarantees 108–11 ; licensing 113; minors 108–11; misrepresentation and 88, 90, 91–2; second cardholders 122–3, 129; termination 101–7, 117–20; unfair relationships in 114–15; use of credit card abroad 123–4, 129; withdrawal 89–91 see also hire purchase
Crowther Report 127
customs and practices, personal liability of agents 146; recognition of 3
damages 16, 25–6, 32, 43, 44, 52; action for conversion and 78–9, 81–2; free on board contracts 189
de minimis non curat lex 45, 55 deceit 22, 91, 172
deeds 179; execution of contract by 146 deemed agency 121, 128
default, credit agreements 101–20
defective goods, fundamental breach and 14; product liability 19, 24–5, 26–7, 28, 125; strict liability 9–10, 11, 26
delegation by agents 136–7
delivery 15, 45; cost insurance freight (cif) contracts 214, 215; excessive 14, 48; free on board (fob) contracts 185–6, 190; pallet sizes 47–8; partial 14, 54–7; time of 7
description of goods 19, 21–4, 35, 45–8 discretion 2
dispute resolution 4–5, 115, 120
documentary credits, cost insurance freight (cif) contracts 209, 210, 216–17, 227–32; free on board (fob) contracts 181, 182, 183–4, 186–90
documentation, credit agreements 99, 110
e-commerce 4n, 9
equality of bargaining power 3
estoppel, apparent authority of agents and 155, 160, 165–71, 176, 178; exception to nemo dat quod non habet 79, 80
European Union 5, 7, 9, 125 exclusion clauses 6, 7, 8, 10, 19, 41;
interpretation 41–2; statutes and 43 export restrictions, cost insurance freight (cif)
contracts 209, 212–13; free on board (fob) contracts 193–4
express terms in contracts, liability arising 29, 31, 32, 39
fairness 5
fiduciary relationships 133, 134, 137, 151, 156, 159, 161, 178
Financial Ombudsman Service 115, 120 fitness for purpose 19, 29, 31, 36–7, 40–4, 51,
53, 130, 192, 198 flexibility 4
fob contracts see free on board (fob) contracts formalities, credit agreements 99, 110 formation of contracts 13–14
fraud 38–9, 83–6
fraudulent misrepresentation 37–9; as to identity 82–6
free offers 48–52
free on board (fob) contracts 181–99; delivery 185–6, 190; documentary credits and 181, 182, 183–4, 186–90; export restrictions 193–4; failure to load 193; inspection of goods 209, 211–12; nomination of an effective ship 183, 184–5, 191, 195, 196; packaging requirements 195–7; perishing of goods 192–3, 195, 198; rejection of goods 188–90, 198
freedom of contract 3, 6–8, 10, 11, 12, 69, 70 freezing orders 4
frustration 17, 68, 73, 191, 193, 212–13 fundamental breach 14–15
good faith 5, 175
guarantees, credit agreements 108–11
hire agreements 93–4, 95–6
hire purchase 79–82, 88–92; termination of agreements 102–7, 116–20
identity, mistake/misrepresentation as to 82–6 implied terms in contracts 3, 10, 35, 40; liability
arising 29, 40
implied (usual) authority of agents 136, 149,
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INDEX
159–60, 165, 166–7, 171, 174, 175–6, 179
implied warranty of authority 161, 170, 172–3 incorporation of terms 34, 41
innocent misrepresentation 37–8, 172, 173 insurance 3; cost insurance freight (cif) contracts
201–2, 204, 218, 220, 222–3, 225; passing of risk and 70
international supply of goods 3; Vienna Convention on Contracts for the International Sale of Goods (CISG) 11–17; see also cost insurance freight (cif) contracts; free on board (fob) contracts
interpretation of contract terms 41–2, 54–5 irrevocable offers 13
Law Commission 4, 8
licensing, credit agreements 113
lien, agent’s 142, 165; improver’s 118–19 liquidation, retention of title clauses and 60, 62
Mareva injunctions see freezing orders market overt 85, 86
mercantile agent exception to nemo dat quod non habet 77
minors, credit agreements and 108–11 misrepresentation 10, 32, 35, 38–9, 124, 125;
credit agreements and 88, 90, 91–2; as to identity 82–4
misstatement, negligent 172 mistake, as to identity 82–6 monopolies 3
negligence 25–6, 52, 180; contributory 27–8; negligent misrepresentation 37–8;
negligent misstatement 172
nemo dat quod non habet 75–6; exceptions 76–86 new developments, accommodation of 4 non-interventionist approach 3
offers, acceptance 13; counter-offers 13; withdrawal 13
Office of Fair Trading 7, 11, 112, 113, 114
partial delivery 14, 54–7
passing of property 7, 55, 66–7, 70
passing of risk 16, 59, 60, 64, 68–73, 217–18, 232–4
perishing of goods 59, 71; cost insurance freight (cif) contracts 204, 222; free on board (fob) contracts 192–3, 195, 198, 209, 211–12
personal liability of agents 143–6, 160 power of attorney 178–80 predictability 2
price, buyer’s right to reduce 16, 43, 51 privity of contract 8–10, 11, 25, 133, 231 product liability 19, 24–5, 26–7, 28, 125 property, passing of 55, 66–7, 70; see also title
quality of goods 19, 29; description of goods 19, 21–4, 35, 45–8; fitness for purpose 19, 29, 31, 36–7, 40–4, 51, 53, 130, 192, 198; satisfactory quality 21, 29–31, 35, 36, 40, 41, 42, 43, 45–8, 51–3, 95, 130, 152–3, 198, 203–4
reasonableness test 7, 10
recognition of commercial practices 3 refunds 34–5, 62, 82
rejection of goods 32, 43, 54–5, 82; cost insurance freight (cif) contracts 202, 214–16, 217–20, 221–3, 225–7; free on board (fob) contracts 188–90, 198
remedies 15–16; see also individual remedies remuneration of agents 139–43, 144, 146–8,
177
repair of faulty goods 43, 51 replacement of faulty goods 43, 51 res ipsa loquitur 25
rescission of contracts 24, 32, 38, 43, 51–2, 91–2 resolution of disputes 4–5
retention of title clauses 59–63
risk 7; passing of 16, 59, 60, 64, 68–73, 217–18, 232–4
Romalpa clauses see retention of title clauses
sanctity of contract 3
satisfactory quality 21, 29–31, 35, 36, 40, 41, 42, 43, 45–8, 51–3, 95, 130, 152–3, 198, 203–4
search and seize orders 4
secret profits 137–8, 154, 156, 159, 161 services 52
set-off 161
severable contracts 53, 54–7 specific goods 65–8
specific performance 16, 164
standard terms in contracts 3, 7, 42, 60 stolen goods, passing of risk and 71–3 strict liability, defective goods 9–10, 11, 26
termination, agency 133, 138, 152; credit agreements 101–7, 117–20
theft, passing of risk and 71–3
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third parties, agents’ rights and liabilities under contracts concluded with third parties 149–80; exceptions to privity of contract 9, 11, 49–50; CISG and 14
time of delivery 7
title 76–8, 83–6; action for conversion and 78–9, 81–2; retention of title clauses 59–63; termination of credit agreements 119; see also nemo dat quod non habet
trade-ins 52–3, 102
Trading Standards Authorities 7, 113, 114–15
unascertained goods 64–6, 68, 71, 73; cost insurance freight (cif) contracts 201, 232, 233, 234–5
undisclosed agency 142–3, 159–65
unfair relationships in credit agreements 114–15 unfair terms in contracts 7–8, 10, 11, 35, 42–3,
44, 114
Uniform Customs and Practice for Documentary Credits (UCP) 187, 229, 230
unilateral contracts 50
usual (implied) authority of agents 136, 149, 159–60, 165, 166–7, 171, 174, 175–6, 179
Vienna Convention on Contracts for the International Sale of Goods (CISG) 11–17; application 13; concept of fundamental breach 14–15; formation of contracts and 13–14
warranties, implied warranty of authority 161, 170, 172–3
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