Commercial Law Problem Question – Passing of Property & Risk in Sale of Goods

Question

On 1 June, Sophie purchased from Mack 200 kg of oranges for her restaurant use. Mack immediately picked and weighed 200 kg of oranges from his orchard. Mack then brought the oranges to Sophie’s restaurant and left them outside her restaurant door in the early hours of 2 June. When Sophie came to open her restaurant at 10 am, the oranges were not there, presumably stolen. Discuss the following issues under sale of goods law:

– whether the ownership of goods has transferred to Sophie; and

the party who should bear the cost of the missing goods.

Answer

In order for ownership of goods to transfer, the goods must be ascertained as per S16 of the Sale of Goods Act 1979 (SGA). At the time of the contract, the goods are not ascertained as Sophie could be purchasing any 200kg of oranges from Mack; the subject of the contract is not precise as required (Re Wait [1927] 1 Ch 606 (CA)). However, the goods are ascertained once Mack picks and weighs the oranges – they have then been precisely identified and appropriated to the contract at this point.

Ownership of specific goods is transferred when the parties intend (S17(1) SGA), this is a holistic consideration of the contract, the conduct, and the circumstances (S17(2) SGA). In this case, there is no intention identifiable on the facts. Therefore, the rules under S18 SGA must be considered.

The applicable rule here is S18 Rule 5, as there is a contract for unascertained goods, and since then the goods have been unconditionally appropriated to the contract (the picking and weighing of the oranges), and are in a deliverable state. S61(5) defines a deliverable state as one which the buyer would be bound to take delivery of the goods. Here, it is clear the oranges are in a deliverable state. Therefore, ownership of the goods passes once buyer has assented to the seller’s appropriation, either impliedly or expressly. In this case, there is nothing in the facts which suggest Sophie has assented to this appropriation. Therefore, ownership in the oranges remains with Mack.

As Sophie is not dealing as a consumer, but is dealing in a business capacity for her restaurant, S20(1) SGA rules that risk passes to the buyer only when property has passed to the buyer. Consequently, the risk remains with Mack, who must bear the cost of the missing goods.

References

Re Wait [1927] 1 Ch 606