Some Key Terms & Issues

Risk

A separate issue to that of ownership is that of who carries the risk of the loss or damage to the goods. This generally lies with the person who has ownership. This position can be displaced and changed by the terms of the sale contract.

Unless otherwise agreed, goods remain at the seller’s risk until ownership is transferred to the buyer. Where the ownership passes to the buyer (whether in advance of delivery or not) the risk normally passes as well.

There are a number of exceptions. Where delivery is late because of the fault of the buyer or the seller the risk lies with the party at fault regardless, provided it occurred after such fault. Where goods are to be delivered by the seller at his own risk, he must take the risk of deterioration in the goods necessarily incident.

Delivery and Payment

The Sale of Goods Act states that unless otherwise agreed, delivery of goods and payment are concurrent conditions. This means payment is presumed to be due on delivery. This is a different issue to the issue of when ownership passes.

In the case of complicated goods such as larger plant and equipment, this provision may be totally unsatisfactory. Provisions for advance payments, stage payments and guarantees, etc would be important.

The Sale of Goods Act presumes it is a strict condition of the contract that the seller is to deliver the correct contract quantity. Local trade variations may apply to change this presumption.

There are default rules in relation to the place of delivery, where nothing is stated to the contrary in the contract. It may be desirable to change them. The presumption is that the place of delivery is a seller’s place of business except where specific goods are to the knowledge of the parties at some other place, in which case that other place is the place of delivery.

Where there is no specific time for delivery, the seller must send goods within a reasonable time. If the contract specifies the date for delivery, there is a presumption that this is a strict condition so that that failure to comply will give the buyer the right to cancel the contract.

Unless agreed, a buyer is not obliged to accept delivery by installments. Unless otherwise agreed, the expenses and costs of putting goods into a deliverable state must be borne by the seller.

There are special rules in relation to transportation. The buyer must bear the risk of ordinary deterioration.  The Sale of Goods Act requires seller to make contract with a carrier on behalf of the buyer as may be reasonable having regard to the nature of the goods and circumstances.

Acceptance and Rejection

In the absence of agreement otherwise, the buyer may reject the goods if they do not satisfy the conditions as to conformity with description, satisfactory quality, conformity with sample as implied by the Sale of Goods Act, provided he has not accepted them.  Likewise, if the seller delivers less than the agreed quantity, the buyer may reject the consignment or accept them and pay the contract rate.

The buyer is not obliged to return goods which he has rejected. The buyer is liable in damages if he wrongly rejects conforming goods. The buyer has a right to inspect goods. The buyer who receives non-conforming goods has a right of rejection. However, the right must be exercised quickly. Generally it is desirable to specify the time in which the buyer must reject the goods.  A buyer is deemed to accept goods if he does anything inconsistent with the seller’s ownership or after a reasonable time has elapsed or after acceptance is intimated.

Buyers Rights and Remedies

Where a person enters a contract by reason of a misrepresentation (i.e. a misstatement whether innocent careless or fraudulent) he has the right to terminate the contract. Alternatively, under certain circumstances, damages and compensation may be awarded if the contract goods are accepted.

The innocent party will generally be entitled to terminate a contract if there is an express term in the contract that has been breached.  If the contract contains nothing specific, the buyer may terminate where the seller’s breach of contract is so fundamental that it deprives him of the benefit of the contract. He may also terminate if the seller or provider of the service refuses to perform the contract and repudiates it.

The buyer may have rights to terminate in the event of breach of contract. Where the breach is a very serious breach, the buyer may terminate the contract completely. The buyer may take action for breach of contract for non-delivery or incomplete or imperfect or nonconforming delivery.  The buyer has a right of action under Sale of Goods Act for non-delivery.  This also applies to goods that are rejected because they do not conform as to quality or quantity.

As set out above, the Sale of Goods Act distinguishes between breach of warranties and breach of conditions. See above.

Sellers Rights and Remedies

The Sale of Goods Act provides a seller with legal rights against the buyer for the unpaid purchase price. The Late Payment of Commercial Debts legislation provides for a right of compensation and interest on late payment of the purchase price. There is provision for a fixed sum of compensation, depending on the value of the goods. There is also a right to interest at a rate laid down by law.

The seller may take legal action for the price if the buyer refuses or neglects to pay. The seller may be entitled to damages for breach of contract.  He may have a legal right of action against the buyer for non-payment and non-acceptance of the goods.

Where the ownership of the goods has passed, the unpaid seller has the right to retain the goods so long as he is in possession of them. This is known as an unpaid vendor’s lien.

The seller has a right to stop goods if they are in transit and he becomes the aware that the buyer has becomes insolvent after the seller has parted with possession. He has a right of resale of the goods to realise the sale price, even though ownership may already have passed. If the ownership has not passed, he unpaid seller’s rights consists of a right to withhold delivery and sell.

The unpaid seller’s lien is not affected by the sale of the goods by the buyer to a third party, unless the seller has consented to the sale  If the goods are sold on to a third party who takes them in good faith for a full price, the seller’s rights can be terminated.