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190 Chapter 7The Sale of Goods Act 1979

(ii) The goods must perish after the contract to sell has been made but before the risk has

passed. Assuming that the parties have not agreed to separate risk and ownership and

that s. 20(4) does not apply, s. 7 cannot therefore operate when s. 18 Rule 1 applies

(because risk and ownership will pass to the buyer at the same time, that is to say when

the contract is made). Section 7 can operate when s. 18 Rules 2 and 3 apply. When s. 7

does apply, the rules set out in the Law Reform (Frustrated Contracts) Act 1943, which

we considered in Chapter 5 on p. 143, do not apply.

(iii) Both ss. 6 and 7 and can apply only if the goods were sold as specific goods. They can

never apply to unascertained goods.

Example

Sid agrees to sell a particular machine to Ben. The contract obliges Sid to overhaul the

machine before delivery is made. The contract will be governed by s. 18 Rule 2 because it

is a sale of specific goods to be put into a deliverable state by the seller. After the contract

has been made, but before Sid has overhauled the machine, the machine is destroyed in a

fire. ( The fire was not caused by the fault of either Sid or Ben.) Section 7 provides that the

contract is frustrated. Therefore, Sid is not in breach of contract for failure to deliver the

machine. Ben need not pay the price and can recover any amount of the price which has

already been paid. Other losses, such as time spent by Sid on trying to free the machine, lie

where they fall. That is to say, no compensation can be claimed in respect of them.

Figure 7.3 shows the rules on the passing of ownership in contracts for the sale of specific

goods.

Passing of ownership in unascertained goods

When considering the passing of property in unascertained goods ss. 16, 17 and 18 Rule 5

must be considered, in that order. Section 16 SGA 1979 provides as follows:

[Subject to section 20A below] Where there is a contract for the sale of unascertained goods no

[ownership] in the goods is transferred to the buyer unless and until the goods are ascertained.

The first thing to notice about s. 16 is that it does not tell us when ownership of unascer-

tained goods does pass. It merely says that the ownership cannot pass until the goods have

become ascertained. Unascertained goods which have been sold become ascertained when

they are identified as the particular goods which are to become the subject matter of the

contract. Once the goods have become ascertained, s. 17 will apply and the property will

pass when the parties intended it to pass. If s. 17 does not show when the ownership is to

pass then s. 18 Rule 5 will apply.

Section 18 Rule 5 says that the ownership of unascertained goods will pass when goods

which match the contract description, and which are in a deliverable state, are uncondition-

ally appropriated to the contract. Goods are unconditionally appropriated to the contract

when they are earmarked as the particular goods to be delivered, in such a way that the

seller can be taken to have decided that those goods, and no others, were to become the

buyer’s property. If the seller could still substitute other goods, then an unconditional

appropriation has not been made.