Keenan and Riches’BUSINESS LAW

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Chapter 10Contracts for the supply of goods and services

Transfer of property in the goods


The essence of a contract for the sale of goods is the
transfer of property (ownership) in goods from the
seller to the buyer. It is important to ascertain exactly
when the property in goods passes from the seller to the
buyer for the following reasons:


1 If the goods are accidentally destroyed, it is necessary
to know who bears the loss. Section 20 provides that
risk normally passes with ownership.
2 If either the seller or the buyer becomes bankrupt or,
in the case of a company, goes into liquidation, it is
necessary to discover who owns the goods.
3 The remedy of an unpaid seller against a buyer will
depend on whether ownership has been transferred.
If property has passed to the buyer, he can be sued for
the price of the goods. If property has not passed to
the buyer, the seller can only sue for non-acceptance.
(Remedies under the Sale of Goods Act 1979 will be
discussed later in this chapter.)
The rules relating to the transfer of ownership depend
on whether the goods are classified as specific goods or


unascertained goods. Specific goods are ‘goods identified
and agreed on at the time a contract of sale is made’. This
includes contracts such as purchasing groceries from a
supermarket or buying a sheepskin coat from a market
trader. Unascertained goods are those goods which are
not identified and agreed on when the contract is made.
An order for 10 cwt of coal to be delivered in three days’
time involves unascertained goods, because it is impos-
sible to identify which specific lumps of coal lying in the
coal merchant’s yard will make up the order. As soon as
the 10 cwt of coal is set aside to fulfil this order, the
goods are said to be ascertained.

Specific goods
Section 17 provides that the property in specific goods
passes when the parties intend it to pass and, to ascertain
the intention of the parties, ‘regard shall be had to the
terms of the contract, the conduct of the parties and the
circumstances of the case’. If the parties do not indicate,
expressly or impliedly, when they want ownership to
pass, s 18 sets out various rules to ascertain their pre-
sumed intention.
Rule 1 – 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.
This means that a buyer can become the owner of
goods even though he has not paid for them yet and they
are still in the seller’s possession.

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Godley vPerry (1960)

The claimant, a six-year-old boy, bought a plastic toy
catapult for 6d from a newsagent’s shop run by Perry,
the first defendant. The catapult broke while in use and
the claimant lost an eye. He sued Perry for breach of the
implied conditions in s 14(2) and (3). Perry had bought
the catapults by sample from a wholesaler. He had
tested the sample catapult by pulling back the elastic,
but no defect had been revealed. Perry now brought the
wholesaler into the action claiming a breach of the con-
ditions in s 15. The wholesaler had bought his supply of
catapults by sample from another wholesaler, who had
obtained the catapults from Hong Kong. The first whole-
saler brought the second wholesaler into the action
alleging a similar breach of s 15.
It was held that: (1) the claimant could recover damages
from the first defendant for breach of s 14: the catapult
was not of merchantable quality or fit for the purpose for
which it had been bought; and (2) the first defendant
could recover damages from the first wholesaler, who in
turn could recover damages from the second whole-
saler, in both cases because there had been a breach of
s 15, which was implied in the relevant contract.

Tarling vBaxter(1827)

A haystack was sold, but before the buyer had taken it
away it was burned down. It was held that the buyer was
still liable to pay the price because he became the owner
of the haystack when the contract was made. It was im-
material that he had not yet taken delivery of the goods.

Rule 2– where there is a contract for the sale of specific
goods and the seller is bound to do something to the
goods for the purpose of putting them into a deliverable
state, the property does not pass until the thing is done
and the buyer has notice that it has been done.
Where the seller agrees to alter the goods in some way
for the buyer, ownership will pass when the alterations
are completed and the buyer has been informed.
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