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4. Sale of Goods (UK): Delivery, Payment & Acceptance II

Updated on July 13, 2017

CONTENTS

1. Time of Delivery

  • Charles Rickards Ltd v Oppenheim [1950] 1 KB 616

2. Shortfall vs Excess of Goods

  • Shipton, Anderson & Co v Weil Bros & Co [1912] 1 KB 574

3. Instalment Deliveries

  • Jackson v Rotax Motor and Cycle Company [1910] 2KB 937
  • Maple Flock Co Ltd v Universal Furniture Products (Wembley) Ltd [1934] 1KB 148 (CA)

4. Payment
5. Acceptance/Taking Delivery

1. Time of Delivery

  • Whether a stipulation as to time is of the essence of the contract depends on the terms of the contract - s 10(2) SGA 1979

BUT Hartley v Hymans [1920] 3 KB 475:

  • Common law does not look to the contractual terms, unless they are express, but to the nature of the contract and goods.
  • For example, in commercial contracts, stipulations as to time terms are interpreted as being of the essence.
  • An example of this can be found in Bunge Corporation v Tradax Export SA [1981] 1 WLR 711 (HL))
  • The buyer can waive the strict nature of stipulations as to time (e.g. by extending a delivery period), but can then revive his right to terminate (if goods are not delivered by the end of the extended period) so that once again time becomes of the essence. (Charles Rickards case)

A chassis.
A chassis.

Charles Rickards Ltd v Oppenheim [1950] 1 KB 616:

Facts:

  • Order for body of a car to be built on a chassis.
  • The contract stated that delivery was to be within 6 or 7 months and that time was of the essence.
  • The buyer later waived the stipulation so that time was not of the essence anymore.
  • 10 months on and the goods were not delivered yet.
  • The buyer then gave a notice to the seller requiring delivery within 4 weeks.
  • Once again the seller failed to deliver the goods in time.

Held by the Court of Appeal:

  • The buyer's waiver of the initial stipulation that time was of the essence did not prevent the buyer from having the right to give a reasonable notice to the seller to make time of delivery of the essence again.
  • The buyer was thus entitled to terminate the contract.

1.1 Reasonable Time

s 29(3):

‘Where under the contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time’.

  • This provision is a particular instance of a general rule that, if a contract is silent as to time of delivery, goods must be delivered within a reasonable time
  • We see this general principle applied in cases like SHV Gas Supply & Trading SAS v Naftomar Shipping and Trading Co Ltd Inc [2005] EWHC 2528 (Comm)

2. Shortfall vs Excess of Goods

Shortfall - s30(1):

‘Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered he must pay for them at the contract rate.’

Excess - s30(2):

‘Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer may accept the goods included in the contract and reject the rest, or he may reject the whole.’

Acceptance of Excess - S 30(3):

‘Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell and the buyer accepts the whole of the goods so delivered he must pay for them at the contract rate’.

De Minimis

  • Rejection of the whole is not possible if the shortfall/excess ‘is so slight that it would be unreasonable’ for B to do so (s 30(2A)) or unless shortfall/excess is ‘material’ (s 30(2D)).

Did they ship-tonnes? Yes, and-then-some. Shipton Anderson.
Did they ship-tonnes? Yes, and-then-some. Shipton Anderson.

Shipton, Anderson & Co v Weil Bros & Co [1912] 1 KB 574:

Facts:

  • Contract for 4,500 tonnes of wheat, 10% more or less. (Effectively: 4050-4950 tonnes).
  • The seller delivered 55 lbs more than the upper limit of 4,950 tonnes.
  • The seller did not claim payment for the extra 55 lbs.
  • The buyer rejected the whole cargo on the basis that it exceeded the contractual quantity.
  • The seller then made a distressed sale of the cargo at a loss and claimed the difference between that amount and what he would have sold it for had the buyer not wrongfully rejected.

Held:

  • The seller can recover the difference.
  • De minimis applied. The excess quantity was deemed to be ‘trifling’ – it had no effect on the 'substance of the contract’.
  • Relevant to the decision was that the seller did not claim payment for the excess, so it posed no burden on the buyer.


2. Instalment Deliveries

  • Unless otherwise agreed, the buyer is not bound to accept delivery of goods by instalments (s 31(1))
  • Even if the contract is for delivery by instalments, it may be an 'entire' or 'indivisible' contract if this is what - objectively read - the contract shows the parties' intentions were.

If the contract is entire/indivisible:

  • Prima facie, full and complete delivery of the total quantity of goods is a condition precedent to the buyer's liability to pay any part of the price at all.
  • Even where some instalments have been delivered, the buyer can reject further instalments if the total quantity has not been delivered – the whole contract can be terminated.

If the contract is severable/divisible:

  • Instalment contracts are also often construed as severable/divisible contracts which are different from separate contracts.
  • If the buyer accepted one or more of the instalments, he is not prevented from rejecting later instalments for breach of condition.

Jackson v Rotax Motor and Cycle Company [1910] 2KB 937:

Facts:

  • Sale of car horns.
  • The contract stated ‘delivery as required’ and so was not an entire contract.
  • Goods were delivered in 19 cases over two months.
  • The buyer accepted the first instalment but rejected later instalments on the grounds that they were not of the required (merchantable) quality.

Held by the Court of Appeal:

  • ‘Delivery as required’ showed intention for deliveries to be made by instalments.
  • Payments were also intended to be made by instalments.
  • On the true construction of the contract, acceptance of the first instalment did not prevent the buyer from rejecting later instalments.

3.1 Can the Whole Severable/Instalment Contract be Terminated, with All Instalments Being Rejected?

s31(2):

‘Where there is a contract for the sale of goods to be delivered by stated instalments, which are to be separately paid for, and the seller makes defective deliveries in respect of one or more instalments, or the buyer neglects or refuses to take delivery of or pay for one or more instalments, it is a question in each case depending on the terms of the contract and the circumstances of the case whether the breach of contract is a repudiation of the whole contract or whether it is a severable breach giving rise to a claim for compensation but not to a right to treat the whole contract as repudiated.’

Rag flock is a general 'stuffing substance' that used to be used for filling things like mattresses - who would have guessed?
Rag flock is a general 'stuffing substance' that used to be used for filling things like mattresses - who would have guessed?

Maple Flock Co Ltd v Universal Furniture Products (Wembley) Ltd [1934] 1KB 148 (CA):

Facts:

  • The buyer agreed to buy 100 tonnes of rag flock from the seller.
  • The contract was to be severable with goods being delivered by instalments
  • The 16th instalment was defective.
  • The buyer sought to terminate the whole contract

Held by the Court of Appeal:

  • The buyer was not entitled to terminate the whole contract.
  • S 31(2) – the main tests:
    (a) the quantitative ratio which the breach bears to the c-t as a whole;
    (b) the degree of probability that such a breach will be repeated.
  • The delivery complained of was no more than 1.5 tonnes out of the total 100 tonnes.
  • The likelihood of a repeated breach was negligible.

4. Payment

S. 27 SGA:

‘It is the duty of the seller to deliver the goods, and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale’.

s28: payment upon delivery in action!
s28: payment upon delivery in action!
  • s28: no need to pay until the delivery is actually made.
  • The seller is to be paid in cash unless the contracting parties agreed otherwise.
  • Payment by cheque is only a conditional discharge of the payment obligation, total discharge occurs only after the cheque has been honoured.
  • A letter of credit is also only a conditional payment, the buyer's debt is not discharged if his bank went insolvent, even if the buyer already paid the bank for the service.
  • For an example, see: ED & F Man Ltd v Nigerian Sweets & Confectionery Co [1977] 2 Lloyd’s Rep 50 (QB)
  • If the buyer has paid the price but the seller has not delivered, he will be entitled to recover the price with interest since consideration for the buyer's payment will have failed.
  • If the goods are damaged, destroyed or stolen whilst at the buyer’s risk, the buyer must still pay for them.

Time of payment is not a condition. s 10(1) SGA:

‘Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not of the essence of a contract of sale.’

  • Under s28 payment and delivery are concurrent conditions.
  • Time of delivery is normally a condition.
  • But time of payment is not under s10.
  • The impact of s10 is thus restricted by s48(3):

‘Where the goods are of a perishable nature, or where the unpaid seller gives notice to the buyer of his intention to re-sell, and the buyer does not within a reasonable time pay or tender the price, the unpaid seller may re-sell the goods and recover from the original buyer damages for any loss occasioned by his breach of contract.’

5. Acceptance/Taking Delivery

  • Acceptance is normally at the seller's place of business - s29(2)
  • Just like time of payment, the time of acceptance is not of the essence
  • As according to normal contractual principles, if failure to take delivery is accompanied by words or conduct indicating an intention not to perform the contract, the contract is repudiated.

‘It is important that the rules a to the times of payment and taking delivery should be the same because otherwise difficulties would arise if the seller refused to allow the buyer to take delivery on the ground of non-payment.

If the seller could transform a breach of the term as to payment into a breach of condition as to taking delivery by the simple expedient of exercising his lien, this would in effect turn every agreement for time of payment into a condition. If the time of payment is not of the essence, therefore, it would seem illogical…to hold that the time for taking delivery is of the essence’.

JA Adams and H MacQueen, Atiyah’s Sale of Goods, 12th edn (Pearson, 2010) 301-302

S. 20(2) SGA:

But where delivery has been delayed through the fault of either buyer or seller the goods are at the risk of the party at fault as regards any loss which might not have occurred but for such fault’.

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