PASSING OF PROPERTY IN UNCONDITIONAL SALE OF SPECIFIC GOODS

CONTENTS

1.0    Introduction

2.0    Objectives

• Main Content
• Rule 1 on Passing of Property in Unconditional Sale of Specific Goods
• Unconditional
• Specific
• Deliverable

4.0    Conclusion

5.0    Summary

6.0    Tutor Marked Assignment

7.0    References/Further Readings.

INTRODUCTION

It is important in all contract of sale of goods to know the nature of goods that form the subject matter of sale, i.e are they specific or unascertained? The essence is to determine the time the property in the goods passes to the buyer and this will help determine where the liability lies. Section 62(1) of the Act refers to “specific goods”  as “goods identified and agreed upon at the time a contract of sale is made”.

Ordinarily, property of ascertained goods ought to pass when a contract of sale is made. However, such passing is subject to the overriding provision laid down by Section 17(1) that “the property is transferred to the buyer at such time as the parties to the contract intend it to be transferred”. In a contract for sale of specific or ascertained goods, the property in the goods passes from the seller to the buyer at such time (if any) as the parties, expressly, or impliedly, stipulate in the contract of sale. In order to ascertain the intention of the parties, regard shall be made to the terms of the contract, the conduct of the parties and the circumstances of the case.

In practice, the parties do not usually express their intention as to   the time property passes. Therefore, where the parties fail to stipulate the time at which the property is to pass, resort must be made to certain rule laid down by the Act for ascertaining the time at which  the property passes (section 17(2) and 18(1) of the Act.

OBJECTIVES

At the end of this unit, you should be able to;

• explain the meaning of passing of property in specific (ascertained) goods.
• understand how the property in specific goods passes at the time a contract is made
• explain why the passing of property in specific goods is subject to the overriding provision laid down by Section 17(1) of the Act
• explain the role of the terms of contract, the conduct, of the parties, and circumstances of the case, in ascertaining the intention of the parties.

MAIN CONTENTS

RULE I ON PASSING OF PROPERTY IN UNCONDITIONAL SALE OF SPECIFIC GOODS.

Unless a different intention appears, there are rules for ascertaining the intention of the parties as to the time of which the property in the goods is to pass to the buyer.

The first of the rules came out in R. V. Ward Ltd (1967)1 G.B. 534. In that case, Diplock L. J. suggested as follows;

“In modern times very little is needed to give rise to the inference that the property in specific goods is to pass only in delivery or payment.”

The above dictum of his Lordship shows clearly that the parties can expressly exclude the operation of Section 18, if they so wish.

Section 18, provides that “unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer.”

Rule 1 of the section 18 provides that “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.”

Rule 1 of Section 18 gives rise to a number of questions with regard   to the meaning of the following terms and phrase.

UNCONDITIONAL CONTRACT: This may mean a contract  which  does not contain a condition precedent or condition subsequent that may have the effect of suspending performance of the contract or passing of the property.

It may also mean a contract not containing any conditions in the  sense of essential stipulations the breach of which gives the buyer the rights to treat the contract as repudiated. In other words, an unconditional contract is one which is not subject to a condition precedent or subsequent. Section 1(2) lays down that “ a contract of sale may be “absolute” or “conditional” which clearly means subject to a condition precedent, for otherwise there would be no point in the contract. It should be observed that Rules 2, 3, and 4 of Section 18 deal with contracts subject to a condition precedent. By Rule 1, contracts, deals with contracts not subject to such conditions.

In Ollett V Jordan, the meaning of “unconditionally appropriated” within Rule 51 was examined. It was held that, the property in goods did not pass to the buyer owing to the fact that there was  no  condition precedent.

It is submitted that, for a sale of goods contract to be enforceable, it must be without conditions. In England, these difficulties appear to have been taken care of by the provision of Section 4 of the Misrepresentation Act, 1967, which provides that,  “where  the contract is for specific goods, the property passes to the buyer. In the light of this, it may not be necessary to give an unnatural  construction to the words “unconditional contract” in Section 18 Rule

1, in order to avoid depriving a buyer of his right to reject goods. It is noteworthy that this is a foreign authority and may only be helpful in the interpretation of the term “unconditional contract”.

SELF ASSESSMENT EXERCISE (SAE)

The phrase “unconditional contract” appears nebulous within the purview of Section 18 Rule. The general view is that it is a contract that does not contain a condition precedent or condition subsequent that have effect of suspending performance of the contract or the passing of property. Discuss.

SPECIFIC GOODS

The second major phrase (also a requirement) under Rule 1 is that   the goods must be specific for the property to pass. The question that arises under Rule 1 is as to the meaning of the phrase  “specific goods”. Section 62 defines “specific goods” as goods identified and agreed upon at the time a contract of sale is made”.

As far as passing of goods is concerned, it is settled that future goods can never be specific, although future goods, if truly identified may be specific goods, and its destruction may frustrate the contract.

In Varlet V Whipp (1990) 1 Q. B. 513, even though the goods were specific, they were held to be “future good” as the seller was not the owner of them as at the time of the contract.

The courts have been strict in interpreting the word “specific” under Rule 1. For instance, in Kursell v. Timber Operators and Contractors Ltd (1972) 1 K. B. 298, the plaintiff sold to the defendants all the   trees in Latvian forest of certain measurement, on a particular date  for €225,500 and the defendant were given 15 years within which to remove the timber. Soon afterwards, the Latvian Assembly passed a law confiscating the forest. The question that arose was whether the sale was that of specific goods within rule 1 as to pass property in them or not.

SELF ASSESSMENT EXERCISE (SAE)

Discuss the passing of property in specific goods and when it is determined.

The Court of Appeal held that the property in the trees  had  not passed to the defendant as the trees of the specified dimensions were not sufficiently identified, because not all the trees in the forest were  to pass but only those conforming to the stipulated measurements.

DELIVERABLE STATE

By the provision of Section 18 Rule 1 another requirement is that the goods must be in deliverable state. The means that the goods  must  be in a deliverable state in order to enable property to pass.

Section 62(4) provides the meaning of this term. It states that;

“Goods are in a “deliverable state” within the meaning of this Act when they are in such a state that the buyer would under the contract be bound to take delivery of them.

The above provision is not all that clear, for it does not give a comprehensive definition of the term “deliverable state”. It also does not say that, if the buyer would not be bound to take delivery of the goods, then the goods are not in a deliverable state.

The buyer is not bound to take delivery if the goods are defective  goods but it does not follow that all defective goods are not in a deliverable state within the meaning of the above provision.  Where this type of situation arises, property would never pass in defective goods.

Generally, “defective” does not prevent goods from passing because if the buyer rejects the goods, the property reverts to the seller.

Section 62(4) is probably intended to cover the case where the goods could not be said to be in a deliverable state physically yet the buyer had agreed to take delivery. In other words, the expression  “deliverable state” cannot be said by reference to mean delivery as in Section 62(4) as a voluntary physical transfer of possession”.

The possession of goods can always be transferred in law, if  the parties intend to transfer it, no matter what the physical condition of goods may be. Thus, if this is what “deliverable state” meant, goods would probably always be in a deliverable state.

There appears to be a difficulty in getting a clear definition of the term “deliverable state”. It does not appear that there is any known local authority on this matter but there are foreign authorities. In Kursell

Timber Operator (supra), the court of Appeal decided that not only was the timber not specific but could also not be regarded as being in a “deliverable state”. The question now is what constitutes goods in a “deliverable state”. Again, in Underwood Ltd v. Burgh Castle Brick and Cement Sundicate (1921) All ER 575, the plaintiffs’ sellers agreed to sell a condensing machine to the defendants. The machine weighed 30tons and was bolted to and embedded in a cement floor. Under the term of contract, the plaintiffs were to dismantle the machine, a task which cost them €100 and took about 2 weeks. While the engine was being bided on a railway truck, it was damaged. The plaintiffs would only be entitled to sue for the price if the property had already passed before the time of damage.

It was held inter alia that the machine was not in a deliverable state. For this reason property had not passed when the contract was made. Atkin, L. J., stated that in view of the risk and expenses involved in dismantling and moving the engine, the proper inference to be drawn was that property was not to pass until the engine was safely placed on the rail in London.

 CONCLUSION

The effect of Rule 1 may be illustrated as follows; if Fola enters Tola’s shop and buys a washing machine for N5,000 on terms that Tola will deliver it at Fola’s house the following day and receive payment and that night Tola’s shop is burgled and the machine is stolen. Tola can sue Fola for the price of the machine because property in the machine passed to Fola when the contract was made and the risk also passed to him under Section 20 of Sale of Goods Act.

SUMMARY

In this unit, the learner, has been able to understand the following;

• passing of property in specific (ascertained)
• meaning of Rule 1 of Section
• the issues regarding the meaning of;

1. unconditional Contract.
2. specific Goods
3. deliverable State

TUTOR MARKED ASSESSMENT (TMA)

1. Umar sold a car to Yinus which they were required to use for his graduation. The car was delivered to the Yinus’ premises but was stolen before it could be tested. At what point does the property in the car
2. Chukwu agrees to sell all of the planks in his sawmill the planks are to be taken away a month after the agreement and payment is to be made at that time.

At what point does the property in the planks pass.

        REFERENCES/FURTHER READING

1. Sale of Goods Act,
2. Rawlings, Commercial Law, University of London Press,
3. Okany Nigeria    Commercial    Law,     Africana-Fep    Publisher, Limited,
4. A.   M.   Agbonika   and   J.   A.   A.   Agbonika,   Sale   of   Goods (Commercial Law), 2009, Ababa Press Ltd
5. j. Okoro   (2013),    Business    Law    for    Professional    Exams, MaltHouse Press Ltd.