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The transfer of ownership of the property
Structure: Issues, Legal rules and application
The transfer of ownership of the property occurs when the sale is made and it is vital to determine when the ownership has passed from seller to buyer. As pursuant to section 20 any loss or damage prima facie falls on whoever is owner at the time. Tom has identified the car he wants to buy and agreed on at the time and a contract of sale is made. By virtue of section 17, property in specific goods passes when the parties intend it to pass, however section 18, rule 1 states 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 whether the time of payment or the time of delivery or both, be postponed. It is likely that the courts may conclude a dispute based on the fact that both payment and delivery are postponed and therefore property was not intended to pass yet. In Ward Ltd v Bignall a car was sold but the seller retained the possession pending payment. The judge said that it is arguable that the buyer and the seller treated the car belonged to the seller until full payment for the car was made or was allowed to take delivery. It is unlikely that Kevin as seller of the car intended the property in the car to pass to Tom until the payment was made.
The payment for the car is deferred which may implicitly indicate that property is not to pass until payment and therefore risk would pass to the buyer with the property. The fact that the car was stolen before it could be collected does not necessarily mean that Kevin should not expect to be paid for the car. Kevin could argue that the contract has been completed when Tom paid the deposit and agreed to trade his car in towards the payment of the car and therefore he is liable. On the other hand Tom could argue that the car was in Kevin's control and therefore it was his responsibility to protect it from being stolen, therefore no liability exists. In Aluminum Induststrie BV v Romalpa the terms and conditions of the sale stated that the ownership of the material will be transferred to the purchaser when full payment for those materials has been made. Unfortunately after the delivery of aluminum the buyer went into liquidation and the seller sought to enforce the clause. It was held that the seller was entitled to recover the material delivered to the buyer.
According to section 18 rule 1 this is an unconditional contract for the sale of specific car which is in a deliverable state and therefore property in the car passed when the contract is made and it is immaterial that the payment and delivery are postponed.
In Pignatoro v Gilroy a seller informed the buyer that the bags of rice were ready but the buyer did nothing for three weeks and in the meantime the bags were stolen. It was held that the property had passed to the buyer. Similarly, property in the car had passed to Tom and therefore it was his responsibility to have it insured. When the car was stolen the risk had to be borne by him.
The car is specific goods so that prima facie, property passes to Tom when the contract is made, and the car is therefore prima facie at Tom's risk from that time. When the car is stolen he has to bear the risk of loss and must pay for it. However, section 20A of the SoGA provides that in such a case, where buyer has paid some thing towards the goods, becomes owner of an undivided share in the bulk and therefore the seller bears the risk of partial destruction of the bulk. The seller bears the risk of any loss in goods prior to delivery to the buyer, Tom, as his rights under the contract are not affected.
Pursuant to section 20(2) where delivery has been delayed through the fault of either buyer or seller the goods are at the risk of the party in fault as regards a loss which might not have occurred but for such fault. For example if A sells a car to B on Sunday and agrees to deliver it on Tuesday and if the car is destroyed in a fire on Monday, then A bears the loss and B does not have to pay the price and can sue for damages for non delivery.
Section 32 of SoGA 1979 provides for the risk of damage in transit. When the cars were delivered to the carrier for transmission to Sharp Auto it is treated as delivery to the buyer, Sharp Auto and therefore the buyer is treated as in possession of the goods and therefore a bailee of these goods through the agency of the carrier whilst they are in transit.
As a general rule, goods must exist and must be identified in any specific contract before the title and ownership in them can pass. The parties to the contract decide when the title passes to the buyer. The passing of property has important consequences when the goods are damaged or lost. Normally this risk passes to the buyer when the property in the goods passes which means the buyer bears the risk. Therefore it is important in this situation to establish when the property in the goods has passed to the buyer. The basic rule is that the property passes when the parties intend it to pass.
In this scenario, Kevin has identified the goods and an order is placed from a business to a business. Although no payment has been made at this point a contract between Sharp Auto and Mayfair Auto Group exists due to the fact that goods were indemnified and with the carriers for delivery according to delivery instructions.
When one of the parties to a contract for the sale of goods deals as a consumer none of the implied terms can be excluded however Kevin has ordered his car on behalf of Sharp Auto and therefore it is a contract between dealers. In such circumstances the implied terms can be excluded as long as they are reasonable. However the implied term as to title can never be excluded. In George Mitchell (chesterhall) Ltd v Finney Lock Seeds Ltd it was held that the seller could have insured against potential risk and liability. In this case cabbage seeds were not supplied as required and the buyer lost anticipated profits of 60,000. On the other hand in St Albans City and District Council v International Computers Ltd ,a faulty software caused over 1 million loss to the council. The contract had a clause which limited the supplier's liability to 100000. This was held that the clause was not fair and reasonable as the supplier firm had a worldwide insurance of 50 million and the parties did not have equal bargaining power.
A transporter carrying Kevin's black BMW crashes damaging all cars. As this is a contract between two dealers, that is, between Sharp Auto and Mayfair Auto Group, the implied term can be excluded except as to the title. The Mayfair Auto Group sounds to be a much bigger organization than Sharp Auto and therefore have unequal bargaining power. Therefore Mayfair Auto could have insured against the risk to cover the liability.
Suzy has a six-month/ 3000-mile guarantee on the car she buys from Sharp Auto which has done 35000 miles. However 7 months after she has driven 4000 miles the gear box fails totally. Sharp Auto denies any liability saying it is outside the guarantee period. It is further claimed that all other conditions and warranties, express or implied are specifically excluded.
Section 13 provides that where the sale of goods by description occurs then there is an implied condition that the goods will correspond with the description. Looking at Section 14 (2B), the courts will still consider durability test as used in the House of Lords case Lambert v Lewis in which it was held that the implied conditions set in section 14(3) were continuing and therefore goods must remain fit for a reasonable time after deliver. However what is a reasonable time depends on the nature of the goods. For a second hand car with 35000 miles already on it, further 4000 would have caused further wear and tear making the gear box fail.
As far as second-hand goods are concerned there is no general rule as to what constitutes satisfactory quality. If a second hand car has been described as 'nearly new' and has been sold for 5000 then the buyer of such a car can expect a much higher performance from that car than if a car is being sold for 1000 which is described as 'working order'.
It is possible that the mileometer on the car may be faulty or tampered with if this is the case then Sharp Auto can not exclude its liability as the mileage of the car has been misrepresented. Sharp Autos do not have a disclaimer saying the mileage is not guaranteed and therefore cannot be relied on and therefore they are asking the consumer to rely on it. It has therefore become a part of the contract and of the description of the vehicle.
If the mileage reading on the car has been altered either by Sharp Autos or it has been altered previously then Sharp Autos can be prosecuted for offering such a vehicle for sale even if they did not alter the mileage or did not know that the mileage has been altered.
The seller, Sharp Auto's powers to exclude the statutory implied terms are restricted by the common law as well as Unfair Contract Terms Act 1977. The term in the Suzy's contract the 6 month guaranteeand that all other conditions and warranties are excluded.. would be construed strictly, contra proferentem. Section 6 of the U C T A 1977 provides that the implied terms with regard to description, quality or fitness for the purpose can never be excluded where buyer deals as a consumer. Therefore, Sharp Autos clause in the contract to exclude all other conditions is ineffective and if Suzy can prove that the vehicle has been described different than what it really is, for example, the mileage on the car is much higher than it shows on the mileometer then she can either get a refund or a replacement car or get the repairs done without any charge.
A sell of a car at an auction is not treated in a same way as a consumer sale. This means anybody who buys a car at such an auction would find their consumer rights drastically reduced. A consumer is usually bound by the written terms and conditions as laid down in the auction. These conditions must be available to a consumer before they go ahead with the purchase. The conditions of an auction may be posted on the wall where the auction is being held or these may contain in a booklet or any other documents. However, where goods are sold in the course of a business a term of satisfactory quality is implied under the contract
However, if the conditions are unfair then these may be challenged. It is usually advisable to study the conditions before buying at auction. Section 14(2) states that where a seller sells goods in the course of a business there is an implied condition that the gods supplied are of satisfactory quality, except to the extent of defects which have been pointed out to the buyer. This means the goods must be fit for the purpose they are normally used including safety and durability. Scott Motor Auctions have clause clearly written in the particulars of the auction that the cars are sold as seen and also invited potential buyer to inspect the vehicle thoroughly with the help of approved motoring organisations. It is not clear whether Kevin had the car inspected before buying or not. The mileage on the car is 60,000 which is quite high which may have been reflected in the price he paid for the car. Any reasonable person must find the goods satisfactory for a price he pays for it. In Millars of Falkirk Ltd v Turpie slight oil leak which would cost around 25 to fix was held as a minor defect and could be easily fixed and therefore merchantable quality. However in Rogers v Parish (Scarborough) Ltd defects in the bodywork of a new range rover were held as car being not of merchantable quality as a reasonable person would be unlikely to accept the quality of new car as satisfactory if the car has minor or cosmetic defects.
The conditions laid down in the Auctions particulars does not make them unfair as the Auctioneers have give clear warning that there is no guarantee or warranty whatsoever. They have also requested potential buyer to have the vehicle inspected by a reputable motor association such as AA and RAC but Kevin being in Auto trade himself bought a vehicle without checking it first. Therefore he will have to bear the loss himself.
- 1. Business Law by Keenan and Riches, sixth edition published by Longman
- 2. The Sale of Goods by P S Atiyah, 9th edition published by Pitman Publishing
- 3. Keenan and Riches on Business law, sixth edition.
- 4. Business law by Abbot Pendlebury Wardman, 7th edition continuum
- 5. Marsh & Solsby, Outlines of English Law 3rd eidition
- 6. Commercial Law by Lowe 2nd edition
- 7. Commercial Law by R Bradgate & F White published by Balckstone press
NOTE: The following cases have been looked up in the books but could not be fitted in the main topic above as the word length has exceeded.
Obu v Strauss ( 1951) AC 243 Commercial Law, 6th edition by Robert Lowe published by Sweet & Maxwell page 24- Case related to the rights of agents.
Kenyon Son and Craven v Baxter Hoare and Co Ltd( 1971) 2 All ER 708 - Chalmers Sale of Goods, 18th edition, Michael Mark, published by Butterworths, page 12.
This case deals with terms of contract - fundamental breach and exemption clauses - A fundamental breach of contract is a breach rendering the purported performance of a contract different from that which the contract contemplated as in Suisse Atalntique v Rotterdam 1966 2 All ER. However, recently no exemption clause could relieve a party to a contract form liability for a fundamental breach. In A UB Karsales Harrow Ltd v Wallis 1956 , House of lords has confirmed that this view was wrong and stated that the clause could limit liability by limiting damages payable or time limit within which remedy would be available or could exclude liability. Even then they must be construed in conjunction with the contract as a whole.