Commercial Law Case Study: Property and Risk in Sale of Goods Act

This assignment analyzes a commercial law case study involving Jack and Fort Galleries Ltd (FGL), focusing on the principles of the Sale of Goods Act (SOGA) 1979. The case explores scenarios where Jack attempts to purchase art pieces, examining when property and risk transfer from the seller to the buyer. The analysis delves into the implications of specific goods, ascertained goods, and the intention of parties in determining the transfer of ownership and risk. It also examines the seller's duties of performance, delivery obligations, and the buyer's remedies in case of breach of contract. The assignment uses legal principles, including sections 16, 17, 18, and 20 of SOGA, and relevant case law to determine the outcomes of the transactions, considering events such as warehouse floods and theft. The document also assesses the impact of time of delivery and the buyer's rights in cases of late delivery, applying the principles of contract frustration and breach of contract.

Corp /Buss Law
Author Name(s)
Institution
Author Note

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Introduction
In the principles of Sale of Goods (SOG), the crucial moment is the determination of
when the risk and property pass from seller and goes to the buyer. In particular, it is the
determination of when the transaction for the sales matures and the ownership of the property
ceases to rescind with the seller and the buyer acquires the ownership. In law, property passes
from sellers to buyers whenever buyer the buyer transfers the required price to the seller and the
seller transfers the ownership. The Sale of Goods Act (SOGA) 1979 provides the guidance of the
circumstances surrounding these transfers. In understanding these rules, this paper uses a
scenario of Jack. In an intention to extent his art, Jack went to Fort Galleries Ltd, to purchase
some items.
(1) Jack agreed with Samantha, Fort Galleries Ltd assistant that he would collect the
painting the following days. However, the flood destroys the warehouse and the painting.
Whenever there is an agreement for the sale of goods, it is crucial to ascertain when the
ownership of the goods (property) passes from being in the possession of the seller and moves to
the buyer. In most cases, property does not pass to the buyer immediately after the payments.1
The SOGA provides the governing principles for the transfer of both the property and risk.
Usually, the law assumes that ownership of property and risk pass from the from the seller to the
buyer simultaneously at the time of the exchange.2
On the other hand, the law allows the parties to decide between themselves regarding
matters of the party that bears the risk. For instance, the United Nations Conventions on the
1 Indira Carr and Peter Stone, International Trade Law (4th ed, Routledge-Cavendish 2010) 25.
2 Ewoud Hondius, Viola Heutger and Christoph Jeloschek, Sales. (Hamburger Edition HIS 2016) 337
<http://public.eblib.com/choice/publicfullrecord.aspx?p=4746611> accessed 19 June 2019.

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Contract for international sale of goods (CISG) provides the contracting parties with legal rights
to decide freely on the terms they would want to include in the signed agreement.3
Normally, properties pass to buyer at the time when both parties, the buyer and the seller
are executing the contract, or after the execution.4 However, the actual possession may pass
sometimes later. The parties’ intention remains the focal point in determining the status of the
transfer. Along the principles of passing the property, the risk also passes prima facie with the
property.5 Nevertheless, this general principle is subject to exception where article 6 allows the
parties to agree how they risk would be transferred depending on the different times between the
negotiations and the actual transfer of the property.6
The information that we have regarding the case of Jack and Fort Galleries Ltd (FGL)
tells us that Jack selected the canvass print, and Samantha informed him that the print could be
ordered from the warehouse. Samantha then went ahead to make arrangements with the
warehouse, who in turn separated the paintings, and marked them for Jack. This information does
provide state clearly whether there were actual contractual terms decided between Jack and FGL.
In cases where the there are no clear contractual terms, Lord Hoffmann stated that judges need to
take a purposive approach in finding the objective intention apart from taking a 'literal' approach
which looks at the meaning of the words used.7 Therefore, in dealing with the case of Jack and
FGL, we need to look at the circumstances of their transaction, and use align the circumstances
3 United Nations Convention On Contracts For The International Sale Of Goods[CISG] 1980 Article 6.
4 Anwar Aboukdir, ‘The Timing of the Passing of Property and Risk under the English Sale of Goods
Act 1979, the CISG and the Libyan Law–the Interplay between the Principle of Party Autonomy and
the Default Rule’.
5 ibid.
6 Bradford Stone, ‘Contracts for the International Sale of Goods: The Convention and the Code’ (2014)
23 Mich. St. Int’l L. Rev. 753.
7 Investors Compensation Scheme v West Bromwich Building Society [1997] UKHL 28; [1998] 1 All ER
98; [1998] 1 WLR 896 (19 June, 1997).

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against the prevailing commercial laws to determine both the transfer and the allocation of the
risk.
The section 16 of SOGA provides that parties can only transfer goods after ascertaining
them.8 This means that the parties must identify the goods in which they intend to transfer in
their contract. Apart from ascertaining goods in writing, the law recognizes that goods can be
ascertained through conducts.9 This means that some action actions undertaken by the parties
after the contract are qualified in ascertaining goods. Given these principles, we can then make
conclusions by choosing them and the action of the FGL to separate and put the writing of Jack,
that the paintings that Jack selected were ascertained.
The next step is to find the intentions of the parties to transfer the ownership of the
paintings from FGL to Jack. The guiding principles can be found in SOGA sec 17 and 18.10
Whereas ascertainment of goods is a factor to the transfer, Section 17 provides that there must be
the intention of the parties to execute the actual transfer.11 Specifically, the act states that goods
are transferred when the parties intend them to pass.12 Considering the facts provided, the sale
made to Jack by FGL was a sale of specific goods. Therefore, property can be stated to have
passed to Jack the moment the painting was separated from the stock and Jack’s details were
written down on it. Section 18 confirms this by stating that in an unconditional contract, goods
pass to the buyer at the time of making the contract, and it is therefore immaterial to look at
whether payment was postponed or to be paid on delivery.13
8 The Sale of Goods Act 6.
9 Furmston, Sale & Supply of Goods (Routledge 2012) ss 57–59.
10 The Sale of Goods Act (n 8) ss 17 & 18.
11 Alexander von Ziegler, Transfer of Ownership in International Trade (Kluwer Law International BV
2011) 140.
12 The Sale of Goods Act (n 8) s 17.
13 ibid 18 rule 1.

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However, applying this principle together with those of section 20 would lead to a
conclusion that the goods and risk passed to Jack despite the fact that the painting was still in
FGL’s warehouse. Such a conclusion would be confusing unless if the parties had manifested
such intention at the formation of the contract. Therefore, since it is likely that FGL had
insurance for its stock, this one painting was also covered with the rest of the goods in the
warehouse. Secondly, it would be unlikely that the act of separating one painting and marking it
for sale took out the insurance cover acquired for it considering that the payments were pending.
Such cases were also covered by Diplock LJ when he stated that in matters of specific goods,
there is no need to infer that property only pass with the delivery or payment.14 Now that no
property had passed, it follows the same principle that no risk had passed. Section 20 provides
that unless the parties agree during the formation of the agreement, the risk of goods remain with
the seller until when he transfers the property to the buyer. This means that for the case of Jack,
the principles of section 20 would apply. The conclusion would be that neither the property and
nor the risk was passed to Jack. The fact that the floor was something out of no one’s control
satisfies that the contract was frustrated through force majeure, Jack cannot sue FGL for non-
fulfillment of their performance.
2. Jack selected the original painting. Samantha informed him that the painting would be
ready for collection in the next 24 hours. Jack came to collect the painting but he was told
that it was not available due to a staff meeting. The next day, the store is broken into and
the painting stolen.
The law under SOGA imposes duties of performance to the contract to both the buyer and
the seller.15 The act also sets out the remedies to be provided if any other parties fails to honor its
14 Ward v Bignall (1967) 534 1 QB.
15 John Honnold and Harry M Flechtner, Uniform Law for International Sales under the 1980 United
Nations Convention (4th ed, Kluwer Law International ; Sold and distributed in North, Central, and

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obligations.16 Section 27 provides that the seller has the duty to provide or deliver the goods.17
The buyer on its part has a duty to pay and accept the goods as per the stated terms agreed on
contract. Section 28 provides that both the payments and the delivery of the purchased goods do
not have to happen simultaneously unless if the agreement requires them to take place at the
same time.18
The seller has an obligation to deliver the purchased goods to the buyer.19 Delivery in this
case is interpreted as the voluntary transfer of ownership from the seller to the buyer. The law
also recognizes that the both the buyer and the seller may agree that the buyer will come to
collect the goods at the seller’s place. Delivery must also be accompanied by time. Therefore,
both the seller and the buyer must agree on the time of delivery.20 Where no time has been fixed,
delivery must be done at a reasonable time.21 The buyer may consider late delivery has a breach
and can choose to end the contract where delivery was agreed to be of the essence.22 It is upon
the parties to decide whether delivery is of essence. In commercial contracts, delivery is of
essence in cases where time has been fixed.23 Where the seller asks for time extension, it is
within the buyer’ discretion to provide the extension.24 Time extension should be communicated
to the seller. Communication can happen by express means or through conducts. On the other
South America by Aspen Publishers 2009) 314.
16 Gerhard Dannemann and others (eds), The Common European Sales Law in Context: Interactions
with English and German Law (First edition, Oxford University Press 2013) 616.
17 The Sale of Goods Act (n 8) s 27.
18 ibid 28.
19 Honnold and Flechtner (n 15) 314.
20 Sean Thomas, ‘The Right to Reject for Short Delivery and Termination’ (2012) 11 Journal of
International Trade Law and Policy 44.
21 ibid.
22 Alix Adams, Law for Business Students (Pearson Longman 2010) 243.
23 Michael Bridge, ‘AVOIDANCE FOR FUNDAMENTAL BREACH OF CONTRACT UNDER THE
UN CONVENTION ON THE INTERNATIONAL SALE OF GOODS’ (2010) 59 International &
Comparative Law Quarterly 911.
24 Hector Lewis MacQueen, ‘Rights and Duties of the Seller and the Buyer’ [2009] SSRN Electronic
Journal <http://www.ssrn.com/abstract=1447877> accessed 19 June 2019.

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hand, the buyer can choose to deny the extension. I such cases, the buyer would have the right to
repudiate the contract and claim for damages.
In respect of the case of Jack and FGL, it was an obligation to FGL to deliver the painting
within 24 hours as promised. This is in accordance with Section 27 which states that the seller
has a duty to deliver and the buyer has the duty to accept.25 Whereas section 28 states that the
duty to deliver and that to pay are concurrent conditions, it does not mean that both should
happen simultaneously.26 Therefore, it was reasonable for FGL to make the painting available for
delivery and Jack to pay them during the collection. The definition of delivery as per the section
61 states that there is no need for the seller to physically take the goods to the buyer’s place.
Rather, it is the terms of the contract which determine the mode of delivery. In this case, delivery
was supposed to happen by Jack coming to collect the painting from FGL.
In respect of the time for the actual delivery, section 29 leaves it upon the parties to set
the time for delivery.27 Where there is no fixed time, the law requires delivery to be made on a
reasonable time.28 Where parties have set a delivery date, any time after that time would be a
breach of seller’s obligation. For instance, in Bowes v Shand, a cargo of rice was agreed to be
shipped for the March or April.29 However, on 3rd March, there were still remaining 50 bags that
were not on board. The Court allowed the buyer to repudiate the contract as time agreed for
shipment was of essence. Considering this case, Jack could have repudiated the contract and
reject the painting for the failure of FGL to deliver
In circumstances where late delivery does lead to the breach of the conditions provided,
the buyer may suspend the rights for treating the contract as ended and provide the seller with a
25 The Sale of Goods Act (n 8) 27.
26 ibid 28.
27 ibid 29.
28 ibid 29 sub 3.
29 (1877) 455 (House of Lords) 2 App Cas.

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time extension.30 If the buyer’s action leads the seller to believe that the buyer still intends to wait
further, the buyer must reintroduce a new date of delivery. For instance, when the FGL failed to
deliver within 24 hours, the agreement to deliver the following day was a reintroduction of a new
date. In the case of Charles Rickards v Oppenheim, the claimants had agreed to provide the
defendant with a car within seven months.31 Even though this time was stated to be of essence,
the defendant fixed a new delivery date when the claimant failed to deliver within the original
time. The claimant did not finish within the extended time and the defendant refused to take the
car. The court ruled that the defendant was entitled to refuse even though he had waived the
previous stipulation. For the case of Jack, since he agreed to pick the painting the following day,
he had waived his rights to repudiate the contract.
Even after fixing another date of delivery, the problem comes that the store was broken
into and the seller can no longer provide the painting. This situation was dealt with in the case of
Avery v Bowden. In the case, the defendant (Bowden) agreed to carry the claimant’s (Avery)
cargo within a period of 45 days. Shortly afterwards, Bowden informed Avery that they were not
going on with the contract. Instead of the claimant treating the contract as repudiated, they chose
to wait to see whether the defendant would change its mind. Unfortunately, the war broke out
and the defendant could no longer ship cargo. The court held that the contract could not be
performed because it was frustrated. The claimant could not claim that the defendant had
breached the contract before the frustration. The same case applies to Jack. Now that he waived
his rights to repudiate the contract, he cannot go back to those rights when the contract has been
frustrated.
30 Sean Thomas, ‘The Development of the Implied Terms on Quantity in the Law of Sale of Goods’
(2014) 35 The Journal of Legal History 281.
31 Charles Rickards v Oppenheim (1950) 420 (Court of Appeal) 1 All ER.

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3. Jack selected 10 sculptures that he intended to sell. Samantha told him that she could
offer them on a sale or return basis. She agreed with Jack that any unwanted sculptures
must be returned by May 30th 2016. Jack sold 5 of them, one accidently broke. Jack
informed FGL of his intention to return the sculptures on May 29th 2016, but only
returned them on June 10th 2016.
Section 25 deals with circumstances where the buyer gets goods from the seller, obtains
the possession, and the consent to resell. However, the seller does not pass the ownership may
not pass to the buyer until such goods are paid.32 These arrangements are normally common
between a seller and a reseller/buyer for the purchase of goods for resale. Both parties, the buyer,
and the seller find it convenient to decide where the reseller/retailer can return the goods if not
bought. In such cases, the law deems the property to have passed to the reseller the time he or
she signifies his acceptance of goods.33 Acceptance can be express through oral, written, or
implied conduct of the reseller which signifies his adopting of the transaction. Acceptance by
conducts may happen where the reseller takes the goods but does not communicate the rejection
or return when the given time for return elapses.34 On the other hand, if the reseller notifies the
supplier of the rejection or physically returns the goods, such action satisfies a complete
rejection. The seller would not be allowed to reject the goods. Just like possession, the risk does
not pass to the buyer and remains with the seller.
Section 18 of the Sales of Goods Act provides the rules that apply in circumstances of
SOR contract.35 Under rule 4, the law provides that goods would be considered to have passed to
the buyer either on approval or on SOR if; (a) when he demonstrates an acceptance or approval
32 The Sale of Goods Act (n 8) s 25.
33 Michael G Bridge, Principles of English Commercial Law (Oxford University Press 2015) 61.
34 ibid.
35 Sale of Goods Act 1979 s 18.

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of the transaction.36 Part (b) stated that the law would consider the goods to have passed to the
buyer if he fails to signify the acceptance where there is a fixed deadline for returning the
goods.37
On application, the court will need to look at the fact surrounding the case of Jack and
FGL. Firstly, the available facts show that the fixed time for returning the sculptures was on May
30th, 2016. Jack communicated to FGL his intention to return on May 29th, 2016, which is
within the deadline but performed the actual returning on June 10th, 2016. Therefore, the court
would have to decide what form should be taken as the best notice, and what is the right time for
returning the goods? Courts have dealt with these matters on different circumstances. For
instance, in the case of Atari Corporation (U.K.) Ltd. v. Electronics Boutique Stores (U.K.) Lid,
the court first considered the effects of the defendant’s communication.38 Atari Corporation had
supplied the Electronics Boutique with electronic games based on their SOR agreement. Both
parties agreed that the return could be made until 31st January 1996. Electronics Boutique
informed Atari Corporation on their intention to return the games on 19th January 1996.
However, the defendant delayed returning the goods. The plaintiff, therefore, contended that the
notice was not effective as it failed to identify the goods that needed to be returned. It also
contended that the defendant did not have the goods available for return at the time of the notice.
While dealing with this matter, the court dismissed a claim stating that a generic notice was
enough and there was no need to list the goods intended for return. Also, in dealing with the
issues of unavailability of the goods at the time for collection, the Court highlighted that the
notice was indisputable as far as the defendant returned the goods at a reasonable time.
36 Ibid Rule 4.
37 Ibid.
38 1998 WLR 2.

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The fact in Atari Corporation case matches those of Jack and Fort Galleries Ltd. While
considering notification, Jack notification came within the deadline of May, 30th 2016. Regarding
the listing of the sculptures to be returned, a generic notification was adequate for Jack as stated
by the Court while deciding on Atari Corporation case.39 Similarly, the delay of Jack could do
not render the notification effective since he was only late with 10 days with is reasonable
business time.
On the other hand, Jack will have to pay for the broken sculpture. In SOR, there is an
implied duty to take care of the goods and to avoid acting in a manner which is inconsistent with
the seller’s contract. In Kirkham v Attenborough, the seller allowed the buyer to sell jewelry on a
SOR arrangement.40 However, the buyer charged the jewelry to secure a loan. When the seller
claimed the goods, the Court ruled that the act of the buyer was inconsistent with their
agreement, and goods passed to the buyer.41 Therefore, for Jack, the fact that he broke one of the
sculptures was inconsistent with the agreement which passed the ownership of that sculpture to
him.
39 ibid.
40 (1897) 201 QB 1.
41 Ibid

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Bibliography
Aboukdir A, ‘The Timing of the Passing of Property and Risk under the English Sale of Goods
Act 1979, the CISG and the Libyan Law–the Interplay between the Principle of Party Autonomy
and the Default Rule’
Adams A, Law for Business Students (Pearson Longman 2010)
Bridge M, ‘AVOIDANCE FOR FUNDAMENTAL BREACH OF CONTRACT UNDER THE
UN CONVENTION ON THE INTERNATIONAL SALE OF GOODS’ (2010) 59 International
& Comparative Law Quarterly 911
Bridge MG, Principles of English Commercial Law (Oxford University Press 2015)
Carr I and Stone P, International Trade Law (4th ed, Routledge-Cavendish 2010)
Dannemann G and others (eds), The Common European Sales Law in Context: Interactions with
English and German Law (First edition, Oxford University Press 2013)
Furmston, Sale & Supply of Goods (Routledge 2012)
Hondius E, Heutger V and Jeloschek C, Sales. (Hamburger Edition HIS 2016)
<http://public.eblib.com/choice/publicfullrecord.aspx?p=4746611> accessed 19 June 2019
Honnold J and Flechtner HM, Uniform Law for International Sales under the 1980 United
Nations Convention (4th ed, Kluwer Law International ; Sold and distributed in North, Central,
and South America by Aspen Publishers 2009)
MacQueen HL, ‘Rights and Duties of the Seller and the Buyer’ [2009] SSRN Electronic Journal
<http://www.ssrn.com/abstract=1447877> accessed 19 June 2019
Stone B, ‘Contracts for the International Sale of Goods: The Convention and the Code’ (2014) 23
Mich. St. Int’l L. Rev. 753
Thomas S, ‘The Right to Reject for Short Delivery and Termination’ (2012) 11 Journal of
International Trade Law and Policy 44
——, ‘The Development of the Implied Terms on Quantity in the Law of Sale of Goods’ (2014)
35 The Journal of Legal History 281
Ziegler A von, Transfer of Ownership in International Trade (Kluwer Law International BV
2011)
Atari Corporation (UK) Ltd v Electronics Boutique Stores (UK) Ltd (1998) 66 WLR 2
Bowes v Shand (1877) 455 (House of Lords) 2 App Cas
Charles Rickards v Oppenheim (1950) 420 (Court of Appeal) 1 All ER

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Investors Compensation Scheme v West Bromwich Building Society [1997] UKHL 28; [1998] 1
All ER 98; [1998] 1 WLR 896 (19 June, 1997)
Kirkham v Attenborough (1897) 201 QB 1
Ward v Bignall (1967) 534 1 QB
Sale of Goods Act 1979
United Nations Convention On Contracts For The International Sale Of Goods[CISG] 1980