LOUISE MERRETTTRINITY COLLEGE

COMMERCIAL LAW LECTURES 2013 -2014SALE OF GOODS (5)

SELLERS REAL REMEDIES

Introduction

1. Section 39 SGA provides:Subject to this and any other Act, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law -

(a) a lien on the goods or right to retain them for the price while he is in possession of them(b) in the case of the insolvency of the buyer, a right of stopping the goods in transit after he has parted with possession of them;(c) a right of re-sale as limited by this Act

2. Section 39(2) SGA provides:where the property in the goods has not passed to the buyer, the unpaid seller has (in addition to his other remedies) a right of withholding delivery similar to and coextensive with his rights of lien or retention and stoppage in transit where the property has passed to the buyer.

Unpaid sellers lien

Meaning of unpaid seller

3. Section 38 SGA provides:

(1) The seller of goods is an unpaid seller within the meaning of this Act -(a) when the whole of the price has not been paid or tendered;(b) when a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise

(2) In this part of this Act seller includes any person who is in the position of a seller, as, for instance, an agent of the seller to whom the bill of lading has been indorsed, or a consignor or agent who has himself paid (or is directly responsible for) the price

4. The following points should be noted:

(1) refers to the fact of being unpaid - applies whether or not payment is due according to the contract ie even of sold on credit.(2) in relation to instalment contracts - relates to any part of the goods if any of the price is outstanding(3) Person who is in the position of a seller includes a buyer who agrees to re-sell but does not include buyer who has rejected goods and is seeking to recover price paid.

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When the lien arises

5. Section 41(1) SGA provides:(1) Subject to this Act, (1) the unpaid seller of goods who (2) is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases:

(a) (3) where the goods have been sold without any stipulation as to credit;(b) (4) where the goods have been sold on credit but the term of credit has expired;(c) (5) where the buyer becomes insolvent.

(2) the seller may exercise his lien or right or retention notwithstanding that he is in possession of the goods as agent or bailee or custodian for the buyer

1. unpaid seller - see above.

2. who is in possession - the seller must retain possession of the goods.

o Valpy v Gibson (1874) 4 CB 837: S sold cloth to B and sent it to shipping agents in 4 cases requesting them to put them on board as directed by B. Held that property and possession passed to B at that point. Bs agent ordered them to be returned to S to be repacked in 8 cases instead of 4. S was still in possession of goods when B declared bankrupt. Held too late for S to claim unpaid sellers lien.

part delivery

6. Section 42 SGA provides:where an unpaid seller has made part delivery of the goods, he may exercise his lien or right of retention on the remainder, unless such part delivery has been made under such circumstances as to show an agreement to waive the lien or right of retention

3, 4 and 5 when a lien exists

7. Not every unpaid seller has a lien one of the conditions in subsections (a) - (c) must be satisfied. On the meaning of insolvency see s 61(4): deemed to be insolvent if he has either ceased to pay his debts or cannot pay his debts as they become due.

Extent of the lien

8. The lien under the Act is for payment of the price - it does not extend to any other expenses eg storage. o Somes v British (1860) 8 HLC 328

Termination of the lien

9. The lien will be lost in the following situations:

(a) Full price is paid or tendered (b) Under Section 43 SGA which provides:

(1) The unpaid seller of goods loses his lien or right of retention in respect of them -

(a) when he delivers the goods to a carrier or other bailee or custodier for the purpose of transmission to the buyer without reserving the right of disposal of the goods;

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(b) when the buyer or his agent lawfully obtains possession of the goods;(c) by waiver of the lien or right of retention.

(c) Under section 47 SGA which provides:(1) Subject to this Act, the unpaid sellers right of lien or stoppage in transit is not affected by any sale or other disposition of the goods which the buyer may have made, unless the seller has assented to it.

(2) Where a document of titled to goods has been lawfully transferred to any person as buyer or owner of the goods, and that person transfers the document to a person who takes it in goods faith and for valuable consideration, then -

(a) if the last-mentioned transfer was by way of sale the unpaid sellers right of lien or retention or stoppage in transit is defeated; and(b) if the last-mentioned transfer was made by way of pledge or other disposition for value, the unpaid sellers right of lien or retention or stoppage in transit can only be exercised subject to the rights of the transferee.

10. On what amounts to assent see:

o Mourdaount Bros v British Oil and Cake Mills Ltd [1910] 2 KB 502. S contracted to sell various lots of boiled linseed oil to B who resold to M. M had paid most of price to B. Possession remained with S who had not been paid. Delivery orders sent by B to S directing them to deliver M - entered in Ss books. It was held that these acts did not constitute an assent by s for the purposes of s 47(1). Must be such as to show s renounces his rights in goods. Not enough that he acknowledges receipt of info that there has been a sub-sale and acknowledge that sale.

o cf DF Mount Ltd v Jay & Jay (Provisions) Co Ltd [1960] 1 QB 159. S sold B 250 cartons of canned peaches. B made it plain would pay the price from moneys he would receive from his own customers when the goods were re-sold. S made out 2 delivery orders in favour of B. B sent them to the warehouse. B agreed to re-sell to M, received the price, drew up a delivery order and sent it to the warehouse. Held s 47 did apply to unascertained goods and there had been assent. Distinguished Mourdaount on the basis that in that case S had no reason to doubt Bs ability to pay plus only knew about the sub-sale after it was carried out. Here S anxious to get rid of goods on a falling market. Knew goods could only be paid for from money obtained on re-sale and could only obtain money on delivery. In all the circumstances assented to B re-selling.

11. On the requirements of s 47(2) see:

o Mount Ltd (op cit) (must be the same document of title which is transferred).

12. On affect on the lien or right of stoppage see:

o In relation to a pledge (ie s 47(2)(b)) the decision of the House of Lords in Kemp v Falk (1882) 7 App Cas 573. B pledges goods S can still exercise the right of stoppage in transit but subject to the right of the pledge ie can claim return of the goods if prepared to pay off the pledge. What is more, if pledgee retains goods and sells them, entitled to claim that the balance of the purchase price is paid to him not S.

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o Cf in the case of a re-sale (ie s 47(2)(a)) Ex parte Goldring Davies & Co Ltd (1880) 13 Ch D 462. A sold to B who sold to C before despatched by A. Bill of lading taken in Cs name but before transfer B became insolvent. A claimed to be entitled to intercept money before paid to B. ie question was not whether he could retain possession, but whether S could intercept the money paid from B2 to B1. Court of Appeal said he could. Doubted by Lord Selborne in Kemp. Inconsistent with s 47(2) which provides if bill of lading transferred lien defeated which must mean for all purpose?

Stoppage in transit

13. Section 44 SGA provides:Subject to this Act, (1) when the buyer of goods becomes insolvent (2) the unpaid seller who has parted with the possession of the goods has the right of stopping them in transit, that is to say he may resume possession of the goods (3) as long as they are in the course of transit, and may retain them until payment or tender of the price

Requirements

1. buyer of goods becomes insolvent - see above

2. unpaid seller - see above 3. duration of transit

14. Section 45 contains 7 sub-sections setting out various rules on duration of transit. They reflect the essential feature being that the goods are in the possession of a middle man between the seller, who has parted with them, and the buyer who has not yet received them.

S ---------- C --------- B

15. For example in Reddall v Union Castle Mail SS Co Ltd (1914) 84 LJKB 360 : where goods are delivered by S to a carrier and pass at each successive stage of transit from hands of one carrier to another to the destination indicated by B to S - transit continues. Does not matter who actually communicates the instructions. Different if, as in this case, B intervenes and sends to a different destination - that ends right of stoppage in transit.

Methods of exercising right of stoppage in transit

16. Section 46 provides:(1) the unpaid seller may exercise his right of stoppage in transit either by taking actual possession of the goods or by giving notice of his claim to the carrier or other bailee or custodier in whose possession the goods are

17. Position as between vendor and carrier can be summarised as follows:

(1) if carrier to whom notice of stoppage has been sent wrongly delivers goods to the buyer, liable for conversion. (2) carrier has a lien over goods for freight due which takes priority over sellers right of stoppage

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Termination of the right of stoppage in transit

18. Similar to lien ie. When primary requirements are no longer met eg. paid in full or under s 47 SGA.

Re-sale by the seller

19. There are 2 distinct aspects to consider:(1) the power of a seller to re-sell ie give good title;(2) the right of a seller to re-sell ie without committing a breach of contract with

the original buyer.

Power of the seller to resell

20. The seller has power (but not necessarily right) to transfer a good title to a second buyer:(a) when at the time of resale he has property in the goods

(b) under section 24 (or s 8 Factors Act) ie. seller in possession

(c) where he has exercised a lien or right of stoppage - see section 48(2) SGA which provides:

when an unpaid seller who has exercised his right of lien or stoppage in transit re-sells the goods, the buyer acquires a good title to them as against the original buyer

The right of the seller to re-sell

21. The seller has the right to re-sell the goods if the buyer is in repudiatory breach.

22. However, the fact that the B is late in paying the price does not necessarily of itself amount to a repudiation. However, section 48(3) provides:

Where the goods are of a perishable nature, or when 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.

23. These provisions make time of payment of the essence in cases of sale of perishable goods, and allow the seller in other cases to make time of payment of the essence by giving notice to the buyer.

24. As to whether the effect of such a sale is to accept the buyers deemed repudiatory breach hence terminate the contract see:

o Gallagher v Shilcok [1949] 2 KB 765: Finnemore J held that sale under s 48(3) did not rescind the original contract of sale. Accordingly if property had passed to B acting as quasi pledgee not owner. B remained liable for the price and could obtain profit if one made.

o Cf Ward v Bignall [1967] 1 QB 534: Ps sold 2 cars to D who repudiated and refused delivery. S gave notice that if he did not pay within 5 days would re-sell. Managed to re-sell one car. Held not entitled to sue for price on the other - resale had rescinded the contract - liable for damages for non acceptance.

o Cf section 48(4) which deals with a different point.

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where the seller expressly reserves the right of re-sale in case the buyer should make a default, and on the buyer making default re-sells the goods, the original contract of sale is rescinded but without prejudice to any claim the seller may have for damages

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LOUISE MERRETTCOMMERCIAL LAW LECTURES 2013 -2014SALE OF GOODS (5)SELLERS REAL REMEDIESIntroductionUnpaid sellers lienMeaning of unpaid sellerWhen the lien arisesExtent of the lienTermination of the lien

Stoppage in transitRequirementsMethods of exercising right of stoppage in transitTermination of the right of stoppage in transit

Re-sale by the sellerPower of the seller to resellThe right of the seller to re-sell