PASSING OF PROPERTY

NOTE: S4 CRA 2015 invokes ss.16–20B SOGA 1979 to determine when property passes
in consumer sales. So for both consumer & non-consumer sales, the same provisions of
SOGA 1979 apply

Sections 16- property in goods can pass only if it is ascertained to the contract-subject to
S20A
Circumstance where property in goods passes from the seller to the buyer!
Sections 2(4)sale and (5)agreement to sell.
Mechanism for the ascertainment of goods to the contract[goods to be
grown/manufactured, purely generic goods, unidentified part of a specified whole-PS
Atiyah]
Means
•“appropriation”- Hayman v McLintock, Healy v Howlett Sons(1917)
•“Ascertainment by exhaustion”-The Elafi(1982) Wait & James v Midland Bank(1926)

prepared by rdr 1
Appropriation of goods
• Hayman v McLintock
S had 420 sacks of wheat of which the B bought 100 sacks. B obtained
storage order but no separation of goods took place. S became insolvent
and the trustees of bankruptcy claimed the goods…no property had
passed to B.
Appropriation and risk
• Healy v Howlett and Sons(1917) Avery J
S transported 190 crates of mackerel on train to buyers…trained delayed and
mackerel deteriorated . B refused to accept consignment of 20 crates that
were part of the 190 on the basis that property had not passed because
the goods had not been appropriated to the contract. Held- neither
property nor risk had passed. (despite payment)

prepared by rdr 2
• Ascertainment by exhaustion
Wait and James v Midland Bank(1926)
B bought consignments of wheat at 250,250,750 qts. But collected 400 qts
with the balance left at Wait and James warehouse. S were not payed so
but goods were consigned to the bank by the buyers (Midland Bank). Held
: that property had passed to the buyer at the time of the contract-
ascertainment by exhaustion.
The Elafi(1985)
Buyer purchased 6,000/20,000 tonnes of copra on board a ship. They later
purchased another parcel of copra. The sellers delivered the entire
balance to the other buyers leaving only the first buyers stock. The
balance goods were damaged whilst being unloaded. Held property had
passed to the buyer and risk also having passed (international trade
agreement)

prepared by rdr 3
 PROPERTY PASSES WHEN INTENDED TO PASS
Sections 17(1)contract for the sale of specific of ascertained goods property is
transferred..intended to be transferred.
S17(2) regards shall be had to the terms of the contract, conduct of the
parties and circumstances of the case.
Diplock LJ in Ward v Bignall(1967)called S17 “…the governing rule in the
passing of property”.
• Terms of the contract: S19[Romalpa Clause]
• Conduct of the parties/circumstances of the case:Re
Anchorline(1937)-sale of a dock-crane where the buyer had to pay
depreciation value and a ROT existed in contract.
See S19(1)SOGA 1979-where a ROT protects the seller in times of insolvency
of the buyer- conditional contracts.

prepared by rdr 4
 S18 Rules on ascertaining intention
Passing of property in specific goods
S18 rule 1
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 is postponed.
See S19(1)reservation of title and S61(5)deliverable state
• Underwood v Burgh Castle Cement and Brick Syndicate(1921)-sale of a
30tonne machine latched to the ground in warehouse. Seller hired
contractor to put the machine into a deliverable state but damaged in
delivery process. Property and risk with the seller
• Dennant v Skinner and Collom(1948)

prepared by rdr 5
 S18 rule 2
Where there is a contract for the sale of specific goods and the
seller is bound to do something to the goods for the purposes of
putting them into a deliverable state, the property does not pass
until the thing is done and the buyer has notice that it has been
done.

•Underwood v Burgh Castle Cement and Brick Syndicate- were

the goods in a deliverable state?

prepared by rdr 6
 S18 rule 3
Where there is a contract for the sale of specific goods in a deliverable state
but the seller is bound to weigh, measure,test or do some other act or thing
with reference to the goods for the purposes of ascertaining the price, the
property does not pass until the act or thing is done and buyer has notice it has
been done.
•Zagury v Furnell- S agrees to sell 289 bails of sheep skin @ £ X perskin. It
was unclear how many skins existed in each bail. Before the seller could count
the skins it was destroyed by fire. Prperty and risk with the seller.
•Turley v Bates(1863)S agreed to sell to B a heap of fire clay on land @2s
pertonne.B weighed and carted away 270t but left 1,000t.Fierclay destroyed
and S argued property passed but B relied on S18r3.-why did S18r3 not apply?

prepared by rdr 7
 S18 rule 4
Where goods are delivered to the buyer on approval or on sale or return or
other similar terms the property in the goods passes to the buyer
(a) When he signifies his approval or acceptance to the seller or does any other
act adopting the transaction.
(b)If he does not signify his approval or acceptance to the seller but retains the
goods without giving notice of rejection,then, if a time has been fixed for
the return of the goods, on the expiration of that time, and, if no time has
been fixed, on the expiration of a reasonable time.
Kirkham v Attenborough(1897)-jewelry maker delivers goods to B on sale or
return and B pledges this with TP- “ act adopting the transaction”
 Weiner v Gill(1906)-sale or return with ROT- ousting reliance on S18 r 4
 Poole v Smith Car Sales(1962)

prepared by rdr 8
 S18 rule 5(1)
Where there is a contract for the sale of unascertained or future
goods by description and goods of that description and in a
deliverable state are unconditionally appropriated to the contract,
either by the seller with the assent of the buyer or by the buyer with
the assent of the seller, the property in the goods then passes to the
buyer; and the assent may be express or implied and may be given
either before or after the appropriation is made.
•Carlos Federspiel v Charles Twigg(1957)
•Healy v Howlett(1917)
•National Coal Board v Gamble(1959)

prepared by rdr 9
Carlos Federspiel v Charles Twigg(1957)
S sold bicycles to the B… goods were packed and designated but before shipment, S
became insolvent. Held: No property could pass.
• Mere mental segregation of the goods are not enough
• Assent of both parties required for property to pass-C&F contract
• Requires actual or constructive delivery
• Seller still required to manage risk-S20(1) unlikely for property to have passed.
• Final act of shipment of goods have not taken place.

Healy v Howlett & Sons(1917)-was there the “earmarking of goods”

prepared by rdr 10
Key factors:
1. Ascertainment of goods to the contract
2. Consent of the parties as to when property is to pass
3. Goods being in a deliverable state-S61(5)
4. “unconditional appropriation of goods” to the contract-why?
5. “appropriation…” – when does this take place?
6. Irrevocable attachment of goods to the contract
7. Earmarking of goods

prepared by rdr 11
“Ascertainment” of goods to the contract- in satisfaction of S16

Separation or segregation of goods

• Re London Wine Co (Shippers) Ltd 1986
• Re Goldcorp Exchange(1994)PC
• Re Stapylton Fletcher Ltd(1994)

Consideration of S20A Undivided shares in goods forming part of a bulk

S20A(1)This section applies to a contract for the sale of a specified quantity of

unascertained goods if the following conditions are met:
(a) The goods or some of them form part of a bulk which is identified either in
the contract or by subsequent agreement between the parties and
(b) The buyer has paid the price for some or all of the goods which are the
subject of the contract and which form part of the bulk

prepared by rdr 12
(2)…as soon as the conditions…are met or at such later time as the parties
may agree
(a) Property in the undivided share in the bulk is transferred to the buyer
and
(b) The buyer becomes an owner in common of the bulk
(3)…the undivided share of a buyer in the bulk at any time shall be such
share as the quantity of goods paid for and due to the buyer out of the
bulk bears to the quantity of goods in the bulk at that time.

S20(B) Deemed consent by co-owners to dealing in bulk goods.

• Defining “bulk”-S61(1)
• ReWait(1920)

prepared by rdr 13
 Passing of risk- S20
(1)Unless otherwise agreed, the goods remain at the sellers risk until property in them
is transferred to the buyer, but when the property in them is transferred to the
buyer the goods are at buyers risk whether delivery has been made or not.
(2) Where delivery has been delayed…
(3) Duties and liabilities of either the seller or buyer as a bailee or custodier of goods …
(4)In a case where the buyer deals as a consumer…sub(1) to (3) must be ignored and
the goods remain at the sellers risk until they are delivered to the consumer.
• Risk passes with property-CASTLE v PLAYFORD (1920)
• Risk passes before property-INGLIS v STOCK(1885)
and STERN v VICKERS(1923)
• Risk and bailment- Wiehe v Dennis Bros(1907); Poole v Smith Car Sales(1962)
• Delays in delivery[S20(2)]- Demby Hamilton v Barden (1949)
• Buyer takes risk incidental to transit[S33]- Mash & Murrell v Joseph
Emmanuel(1961)

prepared by rdr 14
 Section 19 Reservation of title

(1) Where there is a contract for the sale of specific goods or where goods are
subsequently appropriated to the contract, the seller may by the terms of the
contract or appropriation, reserve the right of disposal of the goods until
certain conditions are fulfilled; and in such a case, notwithstanding delivery
of the goods to the buyer or to a carrier or other bailee or custodier for the
purpose of transmission to the buyer, the property in the goods does not pass
to the buyer until the condition imposed by the seller are fulfilled.
(2) Where goods are shipped, and by the bill of lading the goods are delivered to
the order of the seller…the seller is prima facie to be taken to reserve the
right of disposal.

prepared by rdr 15
 What is the purpose of a reservation of title clause?
•Protect the interest of the seller in circumstances of insolvency of the
buyer
•Buyer-insolvent S61(4)
•Seller becomes an unpaid seller- S38(1) and remedies under S39 SOGA

Reliance on the reservation of title clause

•Inserted as a term of the contract-S17(1) and (2)
•Effect under S19(1) and (2)
•Classic case Aluminium Industrie Vaassen BV v Romalpa
Aluminium(1976)CA-per Mocatta J.
•Effect of a reservation of title clause on the sub-buyer-S25 SOGA

prepared by rdr 16
 Simple “Romalpa” Clause

• Aluminium Industrie Vaassen BV v Romalpa Aluminium(1976)CA-per Mocatta J.-what is

the objective of a ROT?
• Effects of a simple romalpa clause-circumstances?
 unused
 unmixed and not lost its identity
 Still in the buyers possession
• Rationale: Re Bond worth Ltd(1980) per Slade J- referring to AIV v Romalpa
Aluminium(1976) indicated that a ROT clause had the effect of making, the buyers bailees
of the relevant goods until payment is made in full.

prepared by rdr 17
 Cases to be considered:
 Aluminium Industrie Vaassen BV v Romalpa Aluminium(1976)CA-per
MocattaJ.
RePeachdart Ltd(1984) per Vinlott J
Clough Mills Ltd. V Martin (1985)
Conclusion:
The courts will treat such terms as no more than an indication of the parties
intention with regards to the passing of property at the time of sale and they will
give effect to such an intention under S17 and S19.
The clause will not be treated as a charge/ mortgage within S395 CA 1985 @
1989 and will not require registration.

prepared by rdr 18
 Extended Romalpa Clauses
General presumption:
The seller may chose to draft a ROT clause with the effect of allowing him to
trace an interest into:
o mixed goods
o Proceeds of sale
o Book debts

Mixed goods
What are mixed goods?
The general presumption- RePeachdart Ltd(1984) per Vinlott J- where the sellers
interest is relinquished once the goods are supplied to the manufacturer(buyer) and the good
undergo the manufacture process.
Can the seller argue that the goods belong to him?
 mixed goods- increase commercial value- “windfall doctrine”
Fiduciary obligation to account cf bailor- bailee relationship
Interest of the seller must now be in the form of a charge or mortgage( interest)

prepared by rdr 19
 Interest in the form of a charge or mortgage- this will require
registration under the CA 1985
Cases to consider:
• Re Peachdart Ltd (1984)
• Re Bond worth Ltd (1980)
• AIV v Romalpa Aluminum(1976)

The right to trace an interest into the mixed goods has its
limitation
1. Where the goods supplied have been used in an irreversible
process- RESIN in Borden (UK) v Scottish Timbers(1981)
CA per Buckley LJ
2. Re Bondworth Ltd (1980)- FIBRE
Consider this against cases such as
• Re Peachdart Ltd (1984)
• Hendy Lennox v Graham Puttick(1984)

prepared by rdr 20
 PROCEEDS OF SALE
What are proceeds of sale?
Can the seller seek to reclaim goods that are in the hands of
the sub- buyer?
How can a seller claim entitlements onto proceeds of sale?
1. Construction-term suggesting an interest
2. Registration of that charge-CA 1985
Cases to be considered:
 Aluminium Industrie Vaassen BV v Romalpa
Aluminium(1976)CA-per MocattaJ.
 Re Peachdart Ltd (1984)
 Hendy Lennox v Graham Puttick(1984)

prepared by rdr 21
 BOOKDEBTS
What are book debts?
Can the seller claim an interest into existing book debts?

1. Construction-term suggesting an interest

2. Registration of that charge-CA 1985
Cases to be considered:
 Aluminium Industrie Vaassen BV v
Romalpa Aluminium(1976)CA-per
MocattaJ.

prepared by rdr 22
 AIV v Romalpa Aluminium (COA)
(1976)
• “Clause 13” represented the ROT clause in the contract;-
“Ownership of material delivered will only be transferred to purchaser
when he has met all that is owing to AIV…until date of payment
purchaser required to
→Store material in such a way that it is clearly the property of AIV
→If new objects made, mixed with other objects/becomes constituent of
other objects, AIV given ownership of new objects
→Until full payment, purchaser shall keep objects in question for seller in
capacity of fiduciary owner & store them in such a way that they are
recognized as such
→Buyer allowed to sell goods in the normal carrying on of its business but
shall hand over whatever claims he has against sub-buyers emanating
from sale @bookdebts”

prepared by rdr 23
 Re Bondworth (1980)
• ROT clause in the contract;-
“Equitable & beneficial ownership” of goods
remain with seller until price paid & where
sold, “beneficial ownership” to attach to
proceeds of sale & “equitable & beneficial
ownership of any products made out of the
fibre”

prepared by rdr 24