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

Updated on April 18, 2017

Contents

  1. Introduction
  2. s27 SGA 1979 - Delivery, Acceptance & Payment
  3. s28 SGA 1979 - The Principle of Simultaneous Exchange
  4. s61(1) SGA 1979 - Definition of Delivery
  5. Actual or Physical Delivery
    --> Thomas Young & Sons v Hobson & Partner [1949]
  6. Constructive Delivery
    --> Sterns Ltd v Vickers [1923]
    --> Gailbraith v Grant
    --> ICM
  7. Place of Delivery
    --> Gailbraith & Grant Ltd v Block [1922]
    --> Computer 2000 Distribution Ltd v ICM Computer Solutions plc [2004]

1. Introduction

  • There are four major obligations for parties under the SGA 1979.
  • Two are the buyer's and two are the seller's.
  • The seller's key obligation is to deliver, and the buyer's key obligation is to pay.
  • Key questions come up surrounding how delivery can take place (actual vs constructive) and the place of delivery.
  • As always, criminals add an extra element of complexity and the effect of a rogue ordering goods from a seller is examined.

2. s27 SGA 1979 - Delivery, Acceptance & Payment

s27:

'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.'

  • As can be expected, the terms of the contract have the freedom to set the details of delivery and acceptance.
  • However, where the contract is silent on these matters there needs to be default rules.
  • This is where the SGA fills in the gaps.

3. s28 SGA 1979 - The Principle of Simultaneous Exchange

'Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that is to say, the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price and the buyer must be ready and willing to pay the price in exchange for possession of the goods'.

  • The seller and buyer must only be 'ready and willing' to perform their duties.
  • Thus the seller does not actually have to deliver his goods before he becomes entitled to sue the buyer for their price.

Keyword: 'possession' (not the ghost kind).
Keyword: 'possession' (not the ghost kind).

4. s61(1) SGA 1979 - Definition of Delivery

'"Delivery" means voluntary transfer of possession from one person to another; [except that in relations to sections 20A and 20B... it includes such appropriation of goods to the contract as results in property in the goods being transferred to the buyer];'

  • Transfer of possession from one person to another can arise in several different (perhaps surprising) ways.
  • The big distinction to be borne in mind here is that of 'actual/physical' delivery and 'constructive' delivery.

5. Actual or Physical Delivery

  • Here the seller transfers physical possession of the goods to the buyer or his agent.

Situation 1: Physical transfer of the goods themselves to B

  • This is what the lay person would most likely think when he sees 'delivery'.
  • The seller is able to physically hand the goods to the buyer in an everyday way, like buying for goods in a shop.

Situation 2: Contractual Parties may agree that the seller will hold the goods as the buyer’s agent or bailee.

  • In this case, the agreement to hold the goods as agent or bailee suffices to transfer possession of the goods and thus allows the seller to demand payment.

Situation 3: Delivery to a Carrier

S 32(1):

‘Where, in pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier (whether named by the buyer or not) for the purpose of transmission to the buyer is prima facie deemed to be a delivery of the goods to the buyer.’

S. 32(2):

‘Unless otherwise authorised 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; and if the seller omits to do so, and the goods are lost or damaged in course of transit, the buyer may decline to treat the delivery to the carrier as a delivery to himself or may hold the seller responsible in damages.’

Thomas Young & Sons v Hobson & Partner (1949) 65 TLR 365 (CA)

Facts:

  • Sale of electric engines to be delivered by rail.
  • Seller loaded the engines in box wagons, but failed to secure them adequately.
  • The goods arrived in a damaged state.
  • The contract of carriage arranged by the seller provided that the engines were to be carried at the owner’s risk whereas they could have been dispatched at the same cost at the carrier’s risk instead.
  • The buyer refused to accept the goods from the railway.

Held by the Court of Appeal:

  • The seller failed to perform its duty under s 32(2) (SGA 1893): the contract of carriage procured by the seller was not reasonable in the circumstances.
  • The buyer was entitled to refuse the delivery by the railway company as delivery and was entitled to reject the goods.

6. Constructive Delivery

  • Here the seller does not have physical possession of the goods and transfers control (or the right to control) to the buyer through any different method.

1. Delivery of something that provides physical control. For example, the seller delivers the keys to a car or to a warehouse (where the goods are stored) to the buyer, who then has the ability to control the goods.

2. Transfer of Document of Title - the most common method in international trade. Here the seller delivers documents to the buyer which (acting just like a key) allow him to control the goods in certain ways e.g. a bill of lading lets him go to the port and collect the goods upon showing it.

3. Attornment - This is where the goods are in physical possession of a third party, such as a warehouse keeper, and that third party acknowledges that he now holds the goods for the buyer instead of the seller. This is a necessary part of delivery in the cases where a third person holds the goods.

s29(4) SGA:

'Where the goods at the time of sale are in the possession of a third person, there is no delivery by seller to buyer unless and until the third person acknowledges to the buyer that he holds the goods on his behalf; but nothing in this section affects the operation of the issue or transfer of any document of title to goods.'

White spirit.
White spirit.

Sterns Ltd v Vickers [1923] 1 KB 78 (CA)

Facts:

  • 120,000 gallons of white spirit was being sold.
  • This white spirit was just a small part of a much larger quantity of white spirit being held in a tanker belonging to a storage company.
  • The seller handed the buyer a delivery warrant stating that the storage company would deliver the 120,000 gallons of white spirit to the buyer's order.
  • The buyer accepted the warrant and agreed to pay storage charges.
  • The entire amount of white gallon (not just the 120,000 gallons) deteriorated before the 120,000 gallons could be severed from it.

Held by the Court of Appeal:

  • The risk of the goods being damaged or destroyed passed to the buyer, even though property in the 120,000 gallons did not pass to him.
  • This is because the risk passed upon the acceptance of the delivery warrant, since at that point the seller could no longer access the goods, and also because the buyer agreed to pay storage charges.
  • This is one instance where the courts were happy to detach the general rule that risk follows property: even though property had not passed to the buyer, the risk of damage or loss of the goods did.

'‘The vendor of a specified quantity out of a bulk in the possession of a third party discharges his obligation to the purchaser as soon as the third party undertakes to the purchaser to deliver him that quantity out of the bulk’ (Scrutton LJ, 85)

7. Place of Delivery

  • In CIF and FOB contracts (international trade) delivery to the correct port of shipment is a condition - Bowes v Shand (1877) 2 App Cas 455, 467 - so if a mistake is made and the wrong port receives the good, the buyer will always be able to terminate the contract.
  • Otherwise, place of delivery is an innominate term so the consequences of wrong place of delivery will have to be assessed before it is clear whether the buyer can terminate the contract or simply receive damages.

S 29(1):

‘Whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer is a question depending in each case on the contract, express or implied, between the parties.’

S 29(2):

‘Apart from any such contract, express or implied, the place of delivery is the seller’s place of business if he has one, and if not, his residence; except that, if the contract is for the sale of specific goods, which to the knowledge of the parties when the contract is made are in some other place, then that place is the place of delivery.’

S 29(6):

‘The expenses of and incidental to putting the goods into a deliverable state must be borne by the seller’

Galbraith & Grant Ltd v Block [1922] 2 KB 155:

Facts:

  • A rogue ordered some champagne from a seller.
  • The contract between the rogue and the seller of the champagne stated that the goods were to be delivered to an innocent buyer's premises.
  • When the goods arrived, a man at a side entrance of the buyer's premises signed the delivery note in the buyer's name.
  • The seller then requests payment for the goods from the buyer.
  • The buyer refused on the grounds that he never received any goods, and never authorised anyone to sign any note of delivery for them.

Decision:

  • If the seller, who is told to deliver goods to the buyer's premises, delivers them, without negligence, to a person apparently having authority to receive them – the seller fulfils his obligation to deliver.
  • The innocent buyer had to pay the seller for the goods he never received or even ordered!
  • ‘If the purchaser has been unfortunate enough to have had access to his premises obtained by some apparently respectable person who takes his goods and signs for them in his absence, the loss must fall on him, and not on the innocent carrier or vendor’ (157)

Computer 2000 Distribution Ltd v ICM Computer Solutions plc [2004] EWCA Civ 1634:

Facts:

  • A rogue ordered goods from the seller to be delivered to AMEC Plc
  • The address given was not one of AMEC
  • The contracts stated that the goods were to be collected by: Richard Cole, payment was to be made at the end of the month, following delivery.
  • The goods were delivered to the given address and were taken by the security guard.
  • A person, calling himself RC, collected the goods from the security guard.
  • The goods disappeared, and 'Richard Cole' was never heard of again.
  • The seller made a claim for payment against AMEC, who of course refused to pay.

Held by the Court of Appeal:

‘The right question…is: whom did [the seller] hold out to the suppliers as a person authorized to receive goods dispatched to AMEC Plc’?

  • Even if Richard Cole had not collected the goods, the goods would still have been delivered.
  • This is because the security guard ‘could be expected to have the authority to receive the goods….There was no indication to the courier that AMEC Plc was not carrying on business there’ (Chadwick LJ, para. 28)
  • All parties are innocent, but someone has to bear the loss, and once again it is the innocent 'buyer' who must take it.

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