Passing of property

*Passing of property deal with the issue where the seller goes bankrupt after the payment.

Firstly, see whether this is a commercial contract or a consumer contract

-if commercial section 20 will be applied
-if consumer section 29(2) CRA will be applied

Specific goods or uncertain goods

-specific goods mean goods identified and agreed on at the time a contract of sale is made.
-Uncertain goods mean no goods not yet in existence, goods must come into future

-Section 16 SOGA: In order to for the property in the goods passed to the buyer, the goods
must be ascertained or specific in nature
-If the goods are unascertained, we must undergo subsequent methods of ascertainment
either through appropriation or ascertainment by exhaustion.
-Appropriation takes place when the buyer comes to collect the goods in person or the seller
has carved out certain units of goods out of his general stock and then when the goods are
delivered to the buyer as per Hayman v McLintock
-Exhaustion takes place when you are buying goods out of a larger bulk, from this larger bulk
the carrier goes on and delivers goods to all buyers, the bulk then is reduced. The bulk must
reduce in size to the exact amount that you are contract for or less and cannot be more and
you are the only remaining buyer to whom deliveries are due as per The Elafi – under rule
5(3)
-raise the approbation and exhaustion in the exam, if still can’t be come ascertain, then go to
exception
-if become ascertain, go to rule 1 – 4 to see whether the party intended to good to be
passed.
IF SPECIFIC GOODS OR ASCERTAINED GOODS, SECTION 17 APPLIED
-Section 17 states that where is a contract for the sale of specific or ascertained goods, the
property is transferred to the buyer at such time as the parties to the contract intend it to be
transferred. (the goods are transferred to the buyer when they intend it to be transferred)
-However, when the intention is unclear or vague, we need to go to section 18 to see
whether there is intention

In situation where is the specific goods, but

-The fact did not state whether the parties
the intention is unclear. intended it to be passed. When the
intention is unclear or vague, we need to go
to section 18 to see whether there is an
intention the property to be passed.
-Pls consider whether it is in deliverable
state.
In situation where the goods is still -As per the general rule, if the goods are
 uncertain and not specific in nature
How to determine the intention of the parties (section 18 SOGA) : These all are the
presumption unless there is contrary intention exhibited by the parties
*note also payment is not a criteria whether the property pass or not but only at 20A
Rule 1 (property passed at the time of the
contract)
Rule 2 (Property passed when thing is done
and seller notifies buyer)
Rule 3 (This is the same with rule 2)
Rule 4
Rule 5 (for unascertained or future goods)
unascertained, the property of the goods
cannot be passed. However, there are
some exceptions to this general rule. Firstly,
XX needs to see section 18 SOGA under
rule 5(1). Rule 5(1) is the exception
because the property can be passed
although the goods are unascertained.
Under this rule, the property in the goods is
passed to the buyer if the seller obtained
assent by the buyer or the buyer obtained
assent by the seller.
- Next, we need to see whether there is the
concept of separation or segregation. The
requirement that must be satisfied is the
goods are not longer under the seller power
of control and the goods must be left in the
hands of an independent third party ware
house.
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. It is
immaterial whether the time of payment or
the time of delivery is postponed.
This is where the seller is bound to do
something to the goods for the purpose of
putting them into a deliverable state. The
“something” must be done then the seller
will notify the buyer.
Where the goods are ready for delivery, but
the seller is bound to weigh, measure, test,
or do some other act for ascertaining the
price. The things must be done and then
the seller will notify the buyer.
When goods are delivered to the buyer
based on the buyer’s approval or on sale or
return or other similar term. The property in
the goods is passed
a)When he does not indicate approval or
acceptance to the seller or any other act
b)if he does not indicate his approval or
acceptance but he retains the goods
without giving notice of rejection, the
property is passed if not returned the goods
in the time period that fixed. If no time has
been fixed, the expiration of the a
reasonable time.
Rule 5(1)
 (Rule 5(1) is the exception because the
property can be passed although the goods
are unascertained)
-in the situation where the claimant ordered
10 goods, but the bulk is reduced to 5
goods, only that 5 goods will pass to him is
he is the only remaining buyer. Hence, we
need to move to section 20A to argue to get
another 5.
* Rules 1 and rules 2 the only distinguishing factor is on the discussion of what amounts to
deliverable state
What amount to deliverable state (the way define deliverable state is unclear)
Underwood v Burgh Castle Brick
Philip Head & Sons Ltd v Showfronts
Unconditional appropriation under rule 5(1)
By the seller (with assent by the buyer)
The property in the goods is passed to the
buyer if the seller obtained assent by the
buyer or the buyer obtained assent by the
seller.
Rule 5(3) (ascertainment by exhaustion)
Where there are unascertained goods in a
deliverable state forming part of the bulk
which is identified either in the contract or
agreement between the parties and the
bulk is reduced to that quantity or less than
that quantity, if the buyer is the only buyer
to whom goods are then due out of the bulk
a) The remaining goods are to be
taken as appropriated to that
contract at the time when the bulk is
so reduced
b) The property in those goods then
passes to that buyer
The court held that the mere fact that a
chattel such as a sideboard needed to be
dismantled before delivery did not prevent
the passing of the property. This implies
that he thought such goods were in a
deliverable state and thus conformed to the
contract. (what is this)
-the court held that the engine was not in a
deliverable state since it was not yet
detached from the floor and hence the
property has not passed.
The court held that the carpet was not in a
deliverable state apparently because it was
a heavy bundle and difficult to move.
Carlos Federspiel v Charles Twigg (HC)
-The seller agreed to sell a number of
bicycles to the buyer. The seller packed the
bicycles marked them with the buyer’s
name and told the buyer the shipping
marks. After packing and labelling the
bicycles, the seller became insolvent.
-The question here arises is whether the
bicycle was passed to the buyer.
-The court held that the labelling is not
enough but the seller has to label the goods
and put them onto a carrier moving to the
buyer’s direction.

By the buyer (with assent by the seller)
-although the goods had been packed, the
seller had the obligation to ship them. Since
the seller had not taken this last step, it was
held that property had not passed. (it was
relevant to ask whether the seller had done
the last act that he was obliged to do.)
-Labelling is important under rule 5
Healey v Howlett & Sons
-the contract was for 20 boxes of fish. The
seller put 190 boxes onto a train with
instructions that 20 were to be delivered to
the seller. It was held that in this case that
delivery to the carrier did not amount to an
unconditional appropriation. Such
appropriation could only occur when the
defendant’s 20 boxes were separated from
the rest of the 190.
-The buyer issues the carrier. When the
carrier arrived, cartons were standing on
the pavement outside the store awaiting
delivery. Carrier issues a delivery note,
which is an authority from the buyers to the
agent to release the goods to the carrier.
Whilst loading, some of the cartons were
already dripping.
-The question that arises here was there an
appropriation of goods to the contract &
who is to bear for the loss of damage to the
goods.
-The court held that merely leaving them
ready for collection and leaving the goods
at your warehouse is not enough because it
is still under your control and can always
switch the label. The goods must left the
seller’s possession and go into the hands of
a third person, the carrier. And the third
person must acknowledge those goods as
the buyers.

Section 20 A (this exception does not give full property right and only held as backup
exception)
Bulk means the goods must be contained in a defined space and area as per section
61 (if the exam states only one place, arguably that it is defined area)

Section 20 A (1) The goods are the part of the bulk which is
identified either in the contract or
subsequent agreement between the
parties.
The buyer has paid the price for some or all
of the goods which form part of the bulk
*Both must be satisfied
Section 20 A(2) Where the requirement for section 20 A(1)
has been met, the parties may agree
 a) Property in an undivided share in
the bulk is transferred to the buyer
b) The buyer becomes an owner in
common of the bulk
Section 20 A(3) The undivided share of a buyer in a bulk at
any time shall be such share as the quantity
of goods paid for and the quantity of goods
where buyer out of the bulk at that time.
(if the person merely made payment for half
of goods, then the undivided share should
be based of the partial payment)
Section 20 A(4) If the undivided shares of buyers is
exceeding the whole bulk, the undivided
share in the bulk of each buyer shall be
reduced proportionately so the undivided
shares is equal to the whole bulk.
Section 20A(5) What you pay, what you receive
Section 20A (6) Just because you have paid only part of the
price does not mean you lose out on
arguing for the other party that you have not
yet paid for. Hence, you have the right to
assert for the remaining goods that you
haven’t paid for under this section by
making full payment of it.
*20 A is not a satisfactory response to the shortcomings of the current frame work of law as
per Tom Burns article
Have to satisfy 20A first and then can come to this section
As long as the criteria of section 20A is satisfied, it will attract the application of 20B

A means you as an owner in common, you have deemed to have consented to any delivery
of the goods of the bulk to another owner in common
B means in so far as the goods fall within the Co owner’s share in the bulk, you are deemed
to have consented to any other dealing by any owner in common as long as the owner in
common has built within his share
*the seller also can be as owner in common if he has the share in the bulk
S20B(3)(a) – can the seller be made liable to compensate?
S20B(2) – can a cause of action be brought against the seller for dealing beyond his share?
Can the seller sell beyond his undivided share?
As you see in this section, it means that before the bankruptcy, the seller is free to take out
any of the bulk delivery or deal to other parties. But after the bankrupt, the seller lost the right
to freely choose the amount he wants to deliver or deal to the other party and he cannot deal
beyond the other owner in common share.
Example of the situation

The concept of separation or segregation

The requirements need to be satisfied
1) the goods are not longer under the seller’s power of control
2) the goods must be left in the hands of an independent third party warehouse (if not
you still have power and control of the goods)
Re Stapylton Fletcher – raise and dismiss the concept of separation or segregation
In this case, it was held that when the seller had separated the goods from part of his stock
and still held them within his premises as regards those goods that he is now holding, he
was no longer holding in the capacity of a seller because there was a different intention.
Passing of risk
Only discuss passing of risk when the goods were damaged, destroyed or lost….. (Any bad
of the goods)
General rule: Risk passes when the property in the goods is passed as per Healy v Howlett
& Sons/ As per general rule res perit domino, the old civil law maxim, is a maxim of our law
and when you can show that the property had passed, the risk of loss prima facie is in the
person with whom property is as per Blackburn J said in Martineau v Kitching
Section 20(1) risk remain at the seller until the property is transferred
Section 20(2) where the delivery has been delayed due to either fault of the buyer or seller,
goods are at the risk of the party at fault.
Exception

Risk passes to buyer, property in goods Stern v Vickers

remain vested in seller -The defendants had some 200000 gallons
of white spirit in a tank belonging to a
storage company. They sold to the buyer
120000 gallons of white spirit. The sellers
handed the buyers a delivery warrant and
the buyers accept it. After the acceptance,
the bulk of the spirit in the tank became
deteriorated in quality.

Risk remains with the seller, property in
goods passes to the buyer
-The question that arises here is whether
the risks had passed to the plaintiff butter
when they accepted the delivery warrant.
-The court held that the seller had done all
they could on their part and the buyers
have the right to request the delivery of
goods at any time. It must also be noted
that if the buyers had taken delivery in a
timely manner, they would have got what
the sellers had promised.
Section 20 states that where delivery has
been delayed through the fault of either
buyer or seller, the goods are at the risk of
the party at fault.
Martineau v Kitching
The seller and buyer expressly agreed in
the contract that the risk should remain on
the seller for two months and appropriation
by the buyer when required by the buyer.
But after two months the goods had been
destroyed by fire. The buyer does not want
to pay for destroyed goods.
Blackburn J, in this case, held that it is
absurd if the buyer agrees the risk should
bear upon him but then refused to take part
of that risk if the accident has happened
and then throw all the risk to the seller
because the property did not pass to him.
Head v Tattersall
The plaintiff bought a horse from the
defendant. Before taking the horse, the
defendant was told that the horse had not
been hunted with the Bicester hounds.
Later, the horse accidentally sustained an
injury during the first week. This reduced
the horse’s value. According to the contract,
the plaintiff was entitled to return the horse
if it did not match the description.
The question that arises here is whether the
buyer was entitled to return the horse and
recover the price.
The court held he could return the horse
and fully recover for the price as the
contract itself contained an express
provision allowing the plaintiff under the
circumstances to return the horse.