Commercial Law - The Sale of Goods - Essay Example

?Commercial Law Sale of aquarium to Kevin Facts of the case: On Monday, Kevin agreed to purchase aquarium from Jackie and paid for it. As part of the deal, Jackie agreed to dismantle the aquarium, package it for transit and arrange for it to be sent to Kevin’s premises by the end of the week. He did as agreed and loaded onto a lorry belonging to Xpress Ltd, to be sent to Kevin. Analysis: There have been valid offer, acceptance and consideration involved in the contract with delivery completed. However, further analysis with reference to delivery is important. According to Sale of Goods Act 1979, under Section 18, if the contract is unconditional the property in the goods passes to the buyer when the contract is made immaterial of the time of payment or delivery. Kevin has given his assent for unconditional appropriation of the aquarium to the contract. As part of the deal, Jackie agreed to dismantle the aquarium, package it for transit and arrange for it to be sent to Kevin’s premises. Under Section 32 (1) of the Act, if the seller is required to send the goods, delivery of goods to a career whether named by the buyer or not for transmission to the buyer is deemed to be delivery in performance of the contract, unless there is evidence to the contrary. However this is subject to Section 32 (2) which stipulates unless otherwise authorized by the buyer, the seller must make such contract with the carrier on behalf of the buyer as may be reasonable, having regard to the nature of the goods and the other circumstances of the case. It is not clearly stated whether the aquarium has been insured. If the consignment has been insured Kevin can claim compensation from the insurance company. If Jackie has failed to insure the aquarium as a prudent buyer would have done, then the buyer may decline to treat the delivery to carrier as a delivery to him, or hold Jackie responsible in damages under the normal circumstances. However, the statement “As part of the deal, Jackie agreed to dismantle the aquarium, package it for transit and arrange for it to be sent to Kevin’s premises by the end of the week” indicates that Jackie has complied with the instructions of Kevin and done as he has been authorised. Advice: Jackie has made delivery according to the contractual terms. He cannot he held responsible in damages or loss. 2. Sale of canary feed to Leah Facts of the case: On Thursday morning Leah placed an order for 75 bags of canary feed for despatch on Monday. The order was accepted and the payment to be made within 10 days of despatch. On Thursday evening, Jackie discovered that some of her stock records were incorrect and that there were in fact just 25 bags of canary feed. Jackie has now contacted Leah to cancel the contract. Analysis: The contract was based on valid offer, acceptance and consideration. The agreement was legally binding as there were intentions on the part of Jackie and Leah to create legal relations. The offer cannot be considered ‘invitation to treat’. Therefore, Jackie has the duty to deliver canary feed. Otherwise, she is liable for action in damages for non delivery under section 51. In this case, the difference between the contract price and the market price prevailing at the time of delivery as per the contract that is Monday. If there is shortfall in delivery, the buyer may reject the goods if the shortfall is material. If accepted payment has to be made for the quantity accepted. In this case, due to short supply of canary feed Leah is likely to accept shortage in delivery. Mistakes in stock statement due to computer malfunction are not acceptable. It was held in British Electrical & Associated Industries v Patley Pressings Ltd [1953] that a clause referring to "the usual force majeure events" may be void for uncertainty. Therefore, force majeure will not apply to computer malfunction or accounting errors. Advice: Jackie cannot cancel the order. In that case, she is liable for action in damages for non delivery under section 51. However, she can avoid damages in respect of 25 bags available in stock by making delivery to Leah. 3. Sale of parrot feed to Mike Facts of the case: This case is similar to ‘sale of canary feed to Leah’ except in respect of the following points. a. The consignment needs to be weighed prior to despatch in order to determine the contract price. b. Vandals had broken into warehouse overnight and set fire to 40 of the bags of parrot feed. The 40 bags were totally destroyed but the remaining 20 bags were unaffected. Analysis: Weighing is required to determine the contract price that is based on actual quantity because the actual weight may be slightly more or less than the quantity ordered. However, the price of the parrot feed was agreed at ?3 per kilo. Therefore, the agreement has all the elements of valid contract namely offer, acceptance, consideration and the intention to create legal relationship. It is not clearly specified whether there is any written contract. If there is Force Majeure clause covering this type of incident in contract, Jackie could be discharged from performance to the extent of 40 bags damaged in fire. Jackie should prove that she is unable to perform since the failure has been due to an incident beyond her control which could neither be expected nor avoided under normal circumstances. However, she cannot refuse delivery of the remaining 20 unaffected bags. In Channel Island Ferries Ltd v Sealink UK Ltd [1988] 1 it was held that first, the party intending to rely on the clause must establish that the event in question was beyond their control; and secondly, that there were no further steps the party could have taken to avoid or mitigate the consequences. For the force majeure to be recognised in English courts it should be properly defined and incorporated in the agreements. The doctrine of frustration applies in English law where performance of a contract is prevented by an event for which the parties to the contract are not responsible. In Davis Contractors Ltd v Fareham U.D.C., (1956)  Lord Radcliffe observed “Frustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract.” Advice: Jackie could be discharged from performance under the contract to the extent of 40 bags damaged in fire. The incident was beyond her control which could neither be expected nor avoided. However, she is liable for performance in respect of 20 bags. Sale of hay by Jackie to Nigel and by Nigel to Otis Facts of the case: Nigel purchased 70 bales of hay from Jackie by cheque. His cheque was dishonoured. Nigel sold the 70 hay bales to Otis. The contract was concluded with Otis paying for the bales in cash and taking immediate delivery. Analysis: In the agreement between Jackie and Nigel, the latter has failed to perform his duty in respect of a valid contract by dishonouring the cheque issued by him. Jackie has a case against Nigel in this regard for forcing him to perform his duty. In the contract concluded between Nigel and Otis, the parties have discharged their duties properly. Jackie has no case against Otis who has purchased hay from Nigel on good faith under a valid contract and discharged his duties as a buyer. Advice to Jackie: Jackie has remedy against Nigel in damages for non payment. Advice to Otis: Otis has discharged his duties on his contract with Nigel, and he is not liable to anyone. 4. Sale of bagging machine to Primrose Facts of the case: Quentin told Primrose that Jackie had told him that the machine could be sold for ?2,000. Primrose told Quentin that Jackie had several times told her that the machine was not for sale. Quentin said that he would check if the machine was for sale and went into the back office. A few minutes later, Quentin said that he had received an email from Jackie and that she had agreed to the sale of the machine for ?2,000. Primrose therefore agreed to buy it at this price. Analysis: Quentin was Jackie’s warehouse manager, managing the business while Jackie was away on holiday. Therefore, Primrose is entitled to do business with Quentin who is an authorized Agent of Jackie. Primrose has also exercised due care before entering into the contract to ensure that the sale had been authorized by Jackie. Quentin has acted as an agent on behalf of the principal in this contract. Law of agency is a part of commercial law. In Hely-Hutchinson v Brayhead Ltd [1968] Lord Denning held that the authority of the agent “is implied when it is inferred from the conduct of the parties and the circumstances of the case ... authorise him to do all such things as fall within the usual scope of that office. Actual authority, express or implied, is binding as between the company and the agent, and also as between the company and others, whether they are within the company or outside it.” Advice: Jackie has to abide by the contractual terms. However, she may consider taking action against Quentin for representing wrongfully to the Primrose since she had never received an email from Jackie and Jackie had never said that the bagging machine could be sold. 5. Sale of dog food and air-conditioner to Rick Facts of the case: Rick agreed to buy 300 tins of dog food and air-conditioner from Jackie. Jackie has now been informed by Shahid that he had bought Rick’s business two weeks ago and he would not be bound by either contract which Rick made. Analysis: After buying Rick’s business Shahid had subsequently left Rick in charge as temporary manager of the business. Jackie entered into the contracts with Rick in good faith as the buyer. He acted as an agent to Shahid. This case is similar to ‘sale of bagging machine’ to Primrose and the same arguments are applicable in this case as well. Shahid had told Rick not to buy anything for the business. But, this instruction unknown to Jackie would not affect validity of the contract. Advice: Shahid’s statement is not correct, and he can be sued for specific performance. 6. Purchase of poultry feed from Tabari Facts of the case: Jackie bought two tons of poultry feed, from Tabari, CIF Liverpool. The cargo was lost at sea, but the cause of the incident is not yet established. Jackie received the shipping documents but refused to accept them or to pay Tabari.  Analysis: The CIF contracts envisage buyers to bear the risk of loss. In CIF contracts assignment of seller’s rights to the buyers enable the buyer to take action against the carrier and insurance company. This case is similar to sale of parrot feed to Mike. In this case, both the buyer and seller are not responsible for the incident causing loss of cargo. The notice of appropriation is an important element and the buyer can reject the documents if this is not complied with. However, ascertainment of rights and responsibilities is a grey area and also, depends upon the precise contractual terms. Bridge (p. 122) stated “The courts are reluctant to treat c.i.f. contracts as purely a sale of documents. If such a seller had a range of c.i.f. buyers from whom to select the recipient of the shipping documents, there is the further complication of deciding the principles on which such a selection might be made.” Prima facie, passing of risk is an important point. The risk is passed when the goods are delivered to the carrier for shipment. Therefore, for the losses or damages, the seller cannot be held liable. The claim should be made against the insurer/the carrier since the goods are not under the control of seller. Advice: Jackie has to accept the documents and prefer claim for loss or damages to the carrier/ insurer. .  References Bridge, M., 1997. The Sale of Goods, Oxford University Press, Oxford. British Electrical & Associated Industries v Patley Pressings Ltd [1953] 1 WLR 280 Channel Island Ferries Ltd v Sealink UK Ltd [1988] 1 Lloyd’s Rep 323 Davis Contractors Ltd v Fareham U.D.C.  [1956] A.C. 696 Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549 Sale of Goods Act 1979 (Chapter 54) London: legislation.gov.uk Read More