Durham E-Theses The consequences of goods perishing subsequent to a contract having been entered into for their sale Todd, I. A. How to cite: The consequences of goods perishing subsequent to a contract having been entered into for their sale, Durham theses, Durham University. Available at Durham E-Theses Online: Todd, I. A. (1981) http://etheses.dur.ac.uk/7600/ Use policy The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that: • a full bibliographic reference is made to the original source • a link is made to the metadata record in Durham E-Theses • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders. Please consult the full Durham E-Theses policy for further details. Academic Support Oce, Durham University, University Oce, Old Elvet, Durham DH1 3HP e-mail: e-theses.admin@dur.ac.uk Tel: +44 0191 334 6107 http://etheses.dur.ac.uk 2 THE CONSEQUENCES OF GOODS PERISHING SUBSEQUENT TO A CONTRACT HAVING BEEN ENTERED INTO FOR THEIR SALE I.A. TODD Thesis submitted f o r the award of the degree B.C.L. Thesis submitted i n 1981 The copyright of this thesis rests with the author. No quotation from it should be published without his prior written consent and information derived from it should be acknowledged. \ 7 WC( WPA 9 TABLE OF CONTENTS Page. 9 | ) I I ^ Abstract t o t h e s i s Table of Cases Table of Statutes Bibliography i i i vi viii Preface 1 Part One: The Meaning o f "Perished" Introduction Section A: When W i l l Physical D e t e r i o r a t i o n / Destruction Cause Goods To Perish? A U t i l i t y Test Perishing/Merchantability Rendered Unmerchantable/Change of I d e n t i t y A Suggested Test Recovery/Restoration Possible Section B: Can Goods Perish I f They Have Never Existed? A u t h o r i t y f o r an A f f i r m a t i v e Answer A u t h o r i t y f o r a Negative Answer Section C: Can Goods Be Taken To Have Perished Even Though They Continue To E x i s t And Have Not Been Subject t o Physical Deterioration/Destruction? Stolen Goods/Goods Taken By Mistake Requisitioned Goods 5 6 Part Two: The Concept of Risk Section A: Where Risk Passes Prior To Property And Possession Is the Buyer w i t h r i s k under an O b l i g a t i o n t o pay the Contract Price i f the Goods Perish? L i a b i l i t y t o pay the Contract P r i c e : An H i s t o r i c a l Perspective The S i g n i f i c a n c e of the Passing o f Property Recovery o f " l o s s " rather than Recovery of " p r i c e " Circumstances i n which the Price may be recovered F a i l u r e o f Consideration Section B: Where Risk Passes w i t h Property How many r i s k s are t o be borne by the party w i t h Risk Risk and Perishing Risk and Price F a i l u r e of Consideration Section C: Apportionment Of Risk Between Seller And Buyer And Re-vesting Of Risk I n The Seller Default i n making or t a k i n g Delivery Risk and O b l i g a t i o n as Bailee Request t h a t Delivery be taken 9 10 11 13 IB 19 22 22 24 27 27 29 34 35 36 43 43 47 49 50 53 53 56 58 62 63 63 67 71 Contributory Negligence Risk and T r a n s i t ( 1 ) Risk and T r a n s i t (2) Risk and T r a n s i t (3) Part Three: F r u s t r a t i o n o f the Contract Section A: F r u s t r a t i o n By Section 7 Sale of Goods Act 1979 Must the Goods be Specific? Property and Risk must not have passed Fault Exclusion o f s e c t i o n 7 Section B: Consequences Of A Contract Being F r u s t r a t e d By Section 7 Discharge of both p a r t i e s i n r e l a t i o n t o Obligations which have not Accrued Performance o f Obligations which have Accrued Compensation f o r Expenses Incurred Payment f o r Goods Delivered Section C: F r u s t r a t i o n At Common Law Section D: Consequences Of A Contract Being Discharged By Common Law Discharge o f both p a r t i e s F i n a n c i a l Adjustments Prorating Section E: Can There Be A Common Law F r u s t r a t i o n Of A Contract For The Sale Of S p e c i f i c Goods Which Have Perished? The i n t e n t i o n of Parliament? E f f e c t o f a Common Law F r u s t r a t i o n Action f o r the Price or an Indemnity i n r e l a t i o n t o Actual Loss? A Casus Omissus Addendum t o t h e s i s None of the m a t e r i a l contained i n t h i s t h e s i s has previously been submitted f o r a degree awarded by any U n i v e r s i or by any other degree awarding body, save only f o r the poss i b i l i t y t h a t m a t e r i a l published i n academic a r t i c l e s or i n books, and acknowledged as such i n the t h e s i s , may have been so submitted. - i - ABSTRACT t o t h e s i s e n t i t l e d "The consequences o f goods p e r i s h i n g subsequent t o a c o n t r a c t having been entered i n t o f o r t h e i r s a l e " The t h e s i s comprises three P a r t s , together w i t h a preface and an addendum. Each o f the Parts focuses upon one of the three i n t e r - r e l a t e d concepts a p p l i c a b l e where there i s a post-contract p e r i s h i n g of goods. The concepts o f " p e r i s h i n g " , " r i s k " and " f r u s t r a t i o n " are separately analysed so as t o i d e n t i f y t h e i r i n d i v i d u a l c h a r a c t e r i s t i c s and i n order t h a t facets of t h e i r i n t e r - r e l a t i o n s h i p may emerge. Part One, which deals w i t h the meaning of " p e r i s h i n g " , i s more d e s c r i p t i v e i n nature than the other two Parts, f o r , when considered i n i s o l a t i o n , the issues r a i s e d i n t h a t Part are r e l a t i v e l y s t r a i g h t f o r w a r d . I t i s only when those same issues are re-considered, i n the context of the concepts o f r i s k and f r u s t r a t i o n , t h a t t h e i r s i g n i f i c a n c e becomes apparent. I n Part Two, an analysis i s made of the meaning o f " r i s k " and instances of the d i v i s i b i l i t y o f r i s k are examined. D i f f e r e n t views of the mishaps provided f o r by the s t a t u t o r y term " r i s k " are assessed and, as p a r t of t h a t e x e r c i s e , the meaning o f "perished" i s re-appraised. An analysis i s made, i n Part Three, of the r u l e s which provide f o r f r u s t r a t i o n of a c o n t r a c t o f sale and f o r the consequences r e s u l t i n g from such frustration. An attempt i s made t o i d e n t i f y instances i n which a c o n t r a c t of sale may be f r u s t r a t e d even though p r o p e r t y , or r i s k , o r , indeed, both property and r i s k , have passed t o the buyer p r i o r t o the goods p e r i s h i n g . I n the addendum t o the t h e s i s an o p p o r t u n i t y i s taken t o re-examine the concepts of " p e r i s h i n g " , " r i s k " and " f r u s t r a t i o n " i n a context i n which, the separate concepts having already been analysed and d e t a i l e d s t a t u t o r y and common law p r o v i s i o n s s c r u t i n i s e d , there i s freedom t o bring together strands which have emerged from the various Parts o f the thesis. This o p p o r t u n i t y i s taken i n an attempt t o f i x the r e l a t i o n s h i p between the concepts. - 11 - TABLE OF CASES Page. Asfar v. B l u n d e l l /"1896 7 1 Q.B. 123 Ashington Piggeries v. Christopher H i l l /"1971 7 1 A l l , E.R. 847 ~ re Badische Co., Bayer Co. /"1921 7 2 Ch. 331 Barr v . Gibson (1838) 3 Mand W 390 7, 1 1 , 12, 13, 15, 16, 17, 127 18 108 9, 15, 19 Barrow Lane and B a l l a r d L t d . v. P h i l l i p P h i l l i p s and Company L t d . /~1929_7 1 K.B. 574 27, 29, 32, 102 Beer v . Walker (1877) 46 L.J. Q.B. 677 78 Bevington and Morris v. Dale and Co. L t d . (1902) 7 Com. Cas. 112 Blackburn Bobbin Company v. T.W. A l l e n and Sons 4 1 , 42 /"191B_7 1 K.B. 540 108 B o u l t e r v. A r n o t t (1833) 1 Cr and M 333 44 Bovey v . Castleman 1 L t d . Rayen 67 43 Bou/den Bros, and Co. L t d . v. L i t t l e (1907) 4 C.L.R. 1364 77 B r i t i s h Movietonews L t d . v . London and D i s t r i c t Cinemas Ltd. /"1952_7 A.C. 166 B.P. E x p l o r a t i o n v. Hunt (No. 2) /"1979_7 1 W.L.R. 783 B u l l v. Robinson (1854) 10 Ex. 342 20 106, 122 80 Cammell L a i r d and Co. v. The Manganese Bronze and Brass Co. /"1934_7 A.C. 402 12 Canada A t l a n t i c Grain Export Co. v. E i l e r s (1929) 35 Com. Cas. 90 12 Castle v. P l a y f o r d (1872) L.R. 7 Ex. 98 38, 42 Chandler v. Webster /"19Q4 7 1 K.B. 493 104, 133 C i v i l Service Co-operative Society v. General Steam Navigation Co. /"19Q3 7 2 K.B. 764 133 Clarke v. Army and Navy Co-operative Society / 1903 7 1 K.B. 155 " 75 - iii - Page Clarke v. Hutchins (1811) 14 East 475 86 Colley v. Overseas Exporters /"1921 7 3 K.B. 302 44 Cologan v. London Assurance (1816) 5 M and S 447 10 Comptoir D'Achat e t De Vente du Boeren Bond Beige S/A v. Luis de Ridder Limitada (The J u l i a n a ) /"1949 7 A.C. 293 " " 35> 5 1 , 52, 54, 62 Constantine (Joseph) S.S. Line v. I m p e r i a l Smelting Corporation L t d . /"1942_7 A.C. 154 60 Cunningham L t d . v. R.A. Munro and Co. L t d . (1922) 28 Com. Cas. 42 64 Cutter v. Powell (1795) 6 T.R. 320 105 Denby Hamilton and Co. v. Barden /"1949 7 1 A l l . E.R. 435 39, 4 1 , 42, 64, 67 Dight v. Craster H a l l (Owners) (1913) 6 B.W.C.C. 674 71 Doe'd Dacre v. Dacre (Lady) (1798) 1 B and B 250 64 Federspiel (Carlos) and Co. S.A. v. Chas. Twigg and Co. L t d . /"1957 7 1 Lloyds Rep 240 59 Fibrosa Spoka Akcyjna v. F a i r b a i r n Lawson Combe Barbour L t d . /"1943 7 A.C. 32 50, 101, 104, 105, 116, 139 Francis v. Boulton (1895) 12 T.L.R. 75 15, 16 Hadley v. Baxendale (1854) 9 Exch. 341 66 Hansen v. Dunn (1906) 22 T.L.R. 458 15 Hong Guan and Co. L t d . v. R. Jumabhoy and Sons L t d . /"1960_7 A.C. 684 125 Horn v. M i n i s t e r of Food /"1948 7 2 A l l . E.R. 1036 9, 134 Howell v. Coupland: 22, 93, 110, 113 23, 25, 110 (1874) L.R. 9 Q.B. 462 (1876) 1 Q.B.D. 258 I n g l i s v. Stock (1885) 10 A.C. 263 42 - iv - Page Jones v. Just (1868) 18 L.T. 208 14 Karberg (Arnhold) and Co. v. B l y t h , Green, Jourdain and Co. /_~1915J 2 K.B. 379 134 Koon v. B r i n k e r h o f f (1866) 39 Hun. 130 69 K u r s e l l \J . l imber Operators /~1927 7 1 K.B. 298 54 L a i r d v. Pirn (1841) 151 E.R. 857 45 Logan v. Le Mesurier (1847) 13 E.R. 628 96 Mambre Saccharine Co. v. Corn Products Co. (1918) 24 Com. Cas. 89 134 Maratime N a t i o n a l Fish L t d . v. Ocean Trawlers L t d . /"1935_7 A.C. 524 125 Martineau v. K i t c h i n g (1872) L.R. 7 Q.B. 436 37, 40, 4 1 , 42, 47, 48 Mash and M u r e l l v. Joseph Emmanuel L t d . /~1961 7 1 A l l . E.R. 485 " " 77 McRae v. Commonwealth Disposals Commission (1951) 84 C.L.R. 377 24 Mody v. Gregson (1868) 19 L.T. 458 14 O l l e t t v. Jorden /"1918 7 2 K.B. 41 78 P a c i f i c Motor Auction Pty. L t d . v. Motor C r e d i t s ( H i r e Finance) L t d . /"1965_7 A.C. 867 Palace Shipping Company v. S p i l l e r s and Bakers 69 The Times May 18 1908 15, 16 Pattinson v. Luckley (1875) L.R. 10 Ex. 330 Quinn v. Burch Bros. ( B u i l d e r s ) L t d . /"1966 7 2 370 " 106 Q.B. 89 - V - Rendall v. Turnbull (1908) 27 N.Z.L.R. 1067 16 Rowland v. Div/all /"1923 7 2 K.B. 500 131 Rugg v. Minett 11 East 210 128 Sainsbury v. Street /"1972 7 3 A i l . E.R. 1127 25 Sargant and Sons v. Paterson and Co. (1923) 129 L.T. 471 92 re Shipton Anderson and Co. and Harrison Bros, and Co. /"1915_7 3 K.B. 676 30, 3 1 , 32 Simmons \i. S w i f t 108 E.R. 319 54 Sky Petroleum v. V.I.P. Petroleum L t d . /'1974 7 1 A l l . E.R. 954 " 94 Slades Case (1602) 4 Co. Rep. 43 S t a f f s Motor Guarantee L t d . v. B r i t i s h Wagon /"1934 7 2 K.B. 305 " ~ Sterns v. Vickers L t d . /"1923_7 1 K.B. 78 36, 4 1 , 52 Sumpter v. Hedges /"1898 7 1 Q.B. 676 106 T a r l i n g v. Bates (1827) 108 E.R. 484 136 Taylor v. Caldwell (1863) 3 B and S 826 22, 23, 60, 102, 127 Tenants (Lancashire) L t d . v. C.S. Wilson and Co. L t d . /"1917 7 A.C. 495 > 69 r e Waite /""1927J 1 Ch. 6Q6 124 25, 111 Waite v. Baker (1848) 2 Ex. 1 83 White and Carter (Councils) L t d . v. McGregor /"1962 7 A.C. 413 > * " 66 Wiehe v. Dennis Bros, (1913) 29 T.L.R. 250 69 Wimble Sons and Co. v. Rosenberg and Sons /~1913 7 3 K.B. 757 " 88 Young (Thomas) and Sons L t d . v. Hobson and Partners (1949) 65 T.L.R. 365 86 - vi- TABLE OF STATUTES Page Sale of Goods Act 1893 (56 and 57 V i c t . , c.71) Section 6 Section 49(2) 24, 27 45 Marine Insurance Act 1906 (6 Edw. 7. c.41) Section 57(1) Section 60 19 19 Law Reform ( F r u s t r a t e d Contracts) Act 1943 (6 and 7 Geo. 6, c.40) > Section Section Section Section Section Section Section KD 1(2) K3) 1(4) 2(3) 2(4) 2(5)(c) t Section 3 112 115, 116, 120, 121, 123 119 115, 116 123 6, 20, 101, 112 129, 139 6 Law Reform (Contributory Neqliqence) Act 1945 (8 and 9 Geo. 6, c.28) i Section KD 74-76 Sale of Goods Act 1979 (c.54) > Section Section Section Section Section 2(1) 2(4) 5(2) 6 7 Section 13 Section 14(2) > > Section 18 Section 20(1) Section 20(2) Section Section Section Section Section Section Section Section 20(3) 27 30(1) 32(1) 32(2) 32(3) 33 35 131 77 25, 111 6, 28-29 6, 29, 60, 88, 93, e t seq. 141 e t seq. 18 12-17, 57, 78, 99 84 36, 53-58 36, 39, 49, 64-67, 74, 85 67-71, 75 131 107, 123 82 82-87 87-90 74-82 107 - Vll - Page Sale o f Goods Act 1979 (cont.) Section 37 Section 49 Section 49(2) Section 52 Section 54 Section 55(1) Section 61 Section 62(2) 71-74 138 47 94, 110 51-2 99 6, 64, 25, 111 - viii - BIBLIOGRAPHY ) > I American Law I n s t i t u t e : Restatement o f the Law o f Contracts (andsupplements, 1954 and 1965). American Law I n s t i t u t e : Restatement o f the Law of R e s t i t u t i o n (and supplement 1954). Anson, S i r W.R.: Anson's Law of Contract (23rd c d . ) . A t i y a h , P.S.: The Sale o f Goods (4th e d . ) . Battersby, G. and Preston, A.D.: The Concepts o f 'Property', ' T i t l e ' and 'Owner' used i n the Sale o f Goods Act 1893. 35 M.L.R. 268. Benjamin, J.P.: Sale of Goods. Carver, T.G.: Carver's Carraige By Sea (12th ed.) Vols. 1 and- 2. Chalmers, M.D.: Sale of Goods Act 1893 (16th ed.) Chalmers, M.D.: Marine Insurance Act 1906 ( 8 t h e d . ) . Charlesworth, J.: Charlesworth on Negligence Cheshire, G.C. and F i f o o t , C.H.S.: The Law of Contract ( 8 t h e d . ) . 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Zalueta, F. de.: The Roman Law of Sale. 1 - PREFACE As i n d i c a t e d i n i t s t i t l e , t h i s t h e s i s sets out t o explore the consequences o f goods p e r i s h i n g subsequent t o a c o n t r a c t having been entered i n t o f o r their sale. a) From the o u t s e t , i t has been determined t h a t : s t a t u t o r y and common law provisions r e l a t i n g t o a pre-contract p e r i s h i n g of goods w i l l be r e f e r r e d t o only where they a s s i s t i n the understanding b) of the consequences of a p o s t - c o n t r a c t p e r i s h i n g ; events other than the p e r i s h i n g o f goods which may render per- formance o f a c o n t r a c t o f sale impossible w i l l , s i m i l a r l y , be considered only t o the extent t h a t they reveal the existence o f s p e c i a l r u l e s applicable t o the s i t u a t i o n i n which goods p e r i s h or where they b r i n g such r u l e s i n t o a sharper focus than would be t h e case i f there were to be no reference t o those other instances o f i m p o s s i b i l i t y . A t t e n t i o n i s focused upon the narrow area o f a post-contract p e r i s h i n g of goods because of the s p e c i a l o p p o r t u n i t i e s i t provides f o r an analysis of the i n t e r - r e l a t i o n s h i p of fundamental concepts w i t h i n t h e rules applicable t o contracts of sale. I n p a r t i c u l a r , the n o t i o n of " p e r i s h i n g " provides a l i n k between the r e l a t e d concepts o f r i s k and f r u s t r a t i o n and the s i t u a t i o n i n which goods p e r i s h thus creates a forum i n which the operation o f these concepts can be examined and t h e i r nature revealed. When goods which form the subject matter o f a c o n t r a c t of s a l e p e r i s h , subsequent t o the making o f the c o n t r a c t , two r e l a t e d , but separate, questions need t o be answered. The p a r t i e s w i l l wish t o know which o f them must bear the loss o f the items destroyed or damaged. They w i l l also be concerned as t o the s t a t u s of the agreement they have made and w i l l wish t o be advised whether or not the c o n t r a c t has survived t h e p e r i s h i n g of the goods. I f i t has n o t , they w i l l f u r t h e r wish t o be advised of the consequences o f the untimely t e r m i n a t i o n of t h e i r bargain. The answers t o these questions are determined by the a p p l i c a t i o n of the r u l e s r e l a t i n g t o r i s k and f r u s t r a t i o n . Not only w i l l a post-contract - 3 - p e r i s h i n g o f goods r a i s e these problems and i n t r o d u c e these concepts, i t w i l l do so u n i q u e l y . Where a c o n t r a c t f o r the sale o f goods i s f r u s t r a t e d by supervening i l l e g a l i t y , f o r example, the p a r t i e s w i l l need t o determine only the f a c t t h a t performance of the c o n t r a c t i s discharged sequences of such discharge. and the con- No question of r i s k a r i s e s , f o r t h e goods, and the wealth they represent, w i l l continue t o e x i s t . I t i s , then, i n the event o f a p o s t - c o n t r a c t p e r i s h i n g of goods t h a t the nature o f the p r i n c i p l e s r e l a t i n g t o r i s k and f r u s t r a t i o n ought t o r e v e a l themselves most s h a r p l y . I t w i l l become apparent t h a t the concept of r i s k , and t h e c l a s s i f i c a t i o n o f events which w i l l c o n s t i t u t e a " p e r i s h i n g " are i n t e r r e l a t e d . Into this f a b r i c o f ' r e l a t i o n s h i p s must also be woven the d o c t r i n e of f r u s t r a t i o n , for the L e g i s l a t u r e and the Courts have thought i t a p p r o p r i a t e t o r e f e r t o the concept o f r i s k when framing r u l e s and p r i n c i p l e s r e l a t i n g t o frustration. Thus, not only do the r u l e s o f r i s k and f r u s t r a t i o n apply i n the same s i t u a t i o n , t h a t i n which goods p e r i s h , b u t , i n a d d i t i o n , one set of r u l e s has been incorporated i n t o the o t h e r . This has n o t , however, r e s u l t e d i n a s i t u a t i o n i n which bath sets o f r u l e s have been subsumed i n t o one and much of the u n c e r t a i n t y t o be found i n t h i s area r e s u l t s from t h i s f a c t . The complexity o f these i n t e r - r e l a t i o n s h i p s i s heightened by the lack of s t a t u t o r y and, o f t e n , J u d i c i a l d e f i n i t i o n s . A l l too o f t e n , the a p p l i c a t i o n of r u l e s i s assumed r a t h e r than questioned and determined and p r i n c i p l e s are hidden, or even l o s t , i n judgments which r e f e r t o an outcome w i t h o u t adequate reference t o the reasons or reasoning leading t o t h i s outcome. In t h i s t h e s i s , then, an attempt w i l l be made t o i d e n t i f y the nature of the r u l e s which apply where goods p e r i s h subsequent t o a c o n t r a c t of sale and t o analyse aspects of t h e i r i n t e r - r e l a t i o n s h i p . the t h e s i s has been d i v i d e d i n t o three P a r t s . To t h i s end, - 4 - In Part One an attempt i s made t o determine the circumstances i n which goods w i l l be taken t o have perished, Part Two seeks t o i d e n t i f y the nature of the concept of r i s k and i n Part Three r u l e s r e l a t i n g t o f r u s t r a t i o n are examined i n a s e t t i n g provided by one instance of i m p o s s i b i l i t y , t h a t a r i s i n g out of a post-contract p e r i s h i n g of goods. Whilst the m a t e r i a l contained i n t h i s t h e s i s has, t o f a c i l i t a t e a n a l y s i s , been separated i n t o these three Parts, i t w i l l become apparent t h a t the Parts are not intended t o be d i s c r e t e . I t may a s s i s t the reader i n h i s progress through t h i s t h e s i s i f he i s aware t h a t i t has been w r i t t e n i n the expectation t h a t i t w i l l r e v e a l possible answers t o what may i n i t i a l l y appear t o be f a i r l y s t r a i g h t f o r w a r d questions: a) what does i t mean t o say t h a t a p a r t y t o a sale o f goods c o n t r a c t "has r i s k " ? b) when w i l l a sale of goods c o n t r a c t be f r u s t r a t e d by reason of the goods p e r i s h i n g and what are the consequences of the c o n t r a c t being f r u s t r a t e d as a r e s u l t o f such an event? F i n a l l y , and somewhat t e n t a t i v e l y , an o p p o r t u n i t y w i l l be taken, i n an addendum t o the t h e s i s , t o r e f l e c t upon the m a t e r i a l contained w i t h i n the t h e s i s and, i n the l i g h t o f t h a t m a t e r i a l , t o suggest possible r e l a t i o n ships between the terms " p e r i s h " and " r i s k " . - 5- PART ONE THE MEANING OF "PERISHED" - 6 - INTRODUCTION I n the p o s t - c o n t r a c t s i t u a t i o n much may t u r n on whether or not goods which form the s u b j e c t matter o f a c o n t r a c t of sale have perished. ( Section 7 Sale o f Goods Act 1979 provides t h a t where "... there i s an agreement f o r the sale o f s p e c i f i c goods and subsequently t h e goods, w i t h o u t any f a u l t on the p a r t o f the s e l l e r or buyer, p e r i s h before t h e r i s k passes t o t h e buyer, t h e agreement i s avoided" and, q u i t e c l e a r l y , a p p l i e s only where goods " p e r i s h " . Conversely, s e c t i o n 2 ( 5 ) ( c ) Law Reform ( F r u s t r a t e d Contracts) Act 1943 provides t h a t the Act "... s h a l l not apply 1 Act .... ( c ) t o any c o n t r a c t t o which s e c t i o n seven o f t h e Sale o f Goods 1979 (which avoids c o n t r a c t s f o r t h e sale o f s p e c i f i c goods which p e r i s h before t h e r i s k has passed t o t h e buyer) a p p l i e s , or t o any other c o n t r a c t f o r t h e s a l e , or f o r t h e sale and d e l i v e r y o f s p e c i f i c goods, » where the c o n t r a c t i s f r u s t r a t e d by reason of the f a c t t h a t the goods have perished". 1943 ( As a r e s u l t o f t h i s s e c t i o n none o f t h e p r o v i s i o n s o f t h e Act can apply t o a c o n t r a c t f o r the sale o f s p e c i f i c goods which have "perished". The s i g n i f i c a n c e o f the goods being considered t o have "perished" i s , i n the case o f t h e above p r o v i s i o n s , manifest. There are other s i t u a t i o n s i n which a f i n d i n g t h a t the goods have "perished" may be e q u a l l y s i g n i f i c a n t , though the need f o r such a f i n d i n g may, i n i t i a l l y , be less obvious. Thus, f o r example, i t may be t h a t the concept o f r i s k , as Equally i n the event o f a p r e - c o n t r a c t mishap s e c t i o n 6 Sale o f Goods Act 1979 provides t h a t where "there i s a c o n t r a c t f o r the sale o f s p e c i f i c goods and the goods w i t h o u t the knowledge o f the s e l l e r have perished a t the time when the c o n t r a c t i s made, the c o n t r a c t i s v o i d " and, again, a p p l i e s only where the goods have "perished". - 7 - r e f e r r e d t o i n the 1979 A c t , goods " p e r i s h " . r e l a t e s only t o the s i t u a t i o n This p o s s i b i l i t y w i l l be explored i n Part i n which Two. When do goods "perish"? Neither the Sale of Goods Act 1979 nor the Law Reform ( F r u s t r a t e d Contracts) Act 1943 provides a s t a t u t o r y answer t o t h i s q u e s t i o n , f o r n e i t h e r provides a d e f i n i t i o n o f the term, despite 2 the f a c t t h a t both s t a t u t e s c o n t a i n a d e f i n i t i o n s e c t i o n . Given t h e absence o f a s t a t u t o r y d e f i n i t i o n one must t u r n t o case-law f o r guidance, but one must proceed w i t h c a u t i o n . Most of the cases i n which con- s i d e r a t i o n has been given t o t h i s problem were not such as t o concern the Court w i t h the r e s p e c t i v e r i g h t s and l i a b i l i t i e s of t h e p a r t i e s t o t h e c o n t r a c t o f s a l e , they are e i t h e r insurance cases or cases i n which the Court was c a l l e d upon t o determine whether f r e i g h t was payable on a cargo which had been damaged or which had d e t e r i o r a t e d d u r i n g a voyage. The case which i s most o f t e n r e l i e d upon as an authority'' i n t h i s area, 4 Asfar v. B l u n d e l l , was, f o r example, an a c t i o n a g a i n s t i n s u r e r s i n which the Court was asked t o determine whether f r e i g h t was payable and whether or not there had been a t o t a l loss of the cargo so as t o a c t i v a t e an insurance p o l i c y . The cases have thus been concerned w i t h one, or more, of three r e l a t e d , but independent, q u e s t i o n s : 1) have the goods "perished" or "ceased t o e x i s t " f o r the purposes of a c o n t r a c t f o r t h e i r sale? 2) have the goods a r r i v e d a t t h e i r d e s t i n a t i o n so as t o render the shipper or c h a r t e r e r l i a b l e t o pay f r e i g h t ? 3) have the goods been t o t a l l y l o s t f o r t h e purposes o f insurance? Section 61 Sale of Goods Act 1979; Section 3 Law Reform Contracts) Act 1943. (Frustrated ^See, f o r example: Atiyah "The Sale of Goods"(4th e d ) , page 4 1 ; Greig, "Sale of Goods", page 213; "Benjamin's Sale of Goods", page 75; " C h i t t y on Contracts, S p e c i f i c Contracts", page 370. /"1896 7 1 Q.B. 123. ^ 1 - a Can the answers t o questions 2 and 3 be of assistance when seeking an answer t o question 1? Most academic w r i t e r s , w i t h varying degrees o f enthusiasm^ have concluded t h a t they are. An analysis o f case-law w i l l now be made t o permit answers t o be suggested t o three questions: 1) When w i l l p h y s i c a l d e t e r i o r a t i o n / d e s t r u c t i o n cause goods t o perish? 2) Can goods p e r i s h i f they have never existed? 3) Can goods be taken t o have perished even though they continue t o e x i s t and have not been subject t o p h y s i c a l d e t e r i o r a t i o n / destruction? Contrast, f o r example, Greig, "Sale of Goods", page 213 and Atiyah "The Sale o f Goods ( 4 t h ed), page 4 1 . - 9 - SECTION A; WHEN WILL PHYSICAL DETERIORATION/DESTRUCTION CAUSE GOODS TO PERISH? I t i s c l e a r t h a t goods which have been so completely destroyed as to no longer e x i s t i n specie must be taken t o have perished. I n some cases i t has been suggested t h a t t h i s t e s t , o f t o t a l d e s t r u c t i o n , i s the only one which can be used t o determine whether goods have perished. The sole question, i t i s argued, i s whether or not the goods s t i l l correspond w i t h the c o n t r a c t d e s c r i p t i o n . I n Barr v. Gibson^ the Court was faced w i t h a s i t u a t i o n i n which a deed had been executed f o r t h e sale o f a ship i n ignorance o f the f a c t t h a t , a t t h a t time, t h e ship was aground and could n o t , i n p r a c t i c a l terms, be r e - f l o a t e d . sale? Parke B. held t h a t "We are o f the opinion Was there a the ship did con- t i n u e t o be capable of being t r a n s f e r r e d .... though she might be l o s t w i t h i n the meaning o f a c o n t r a c t o f insurance". 7 The Court refused t o consider the u t i l i t y o f the goods as a r e l e v a n t f a c t o r ; "She was s t i l l a ship though a t the time incapable o f being 7 b e n e f i c i a l l y employed 8 as such". S i m i l a r l y i n Horn v. M i n i s t e r o f Food Morris J., when cons i d e r i n g whether potatoes which had r o t t e d i n a clamp had perished f o r g the purposes of Section 7 Sale o f Goods Act 1893, s a i d , o b i t e r , " i t would be wrong ... t o say t h a t they d i d not answer t o the d e s c r i p t i o n o f 'potatoes', however grave was the d e t e r i o r a t i o n of t h e i r c o n d i t i o n " . Can i t be then, t h a t "perished" means "destroyed"? 6 ( 1 8 3 8 ) 3 M + W 390; 150 E.R. 1196. 7 150 E.R. 1200. 8 /~1948_7 2 A l l E.R. 1036. 9 a t 1039. Support f o r t h i s - 10 - p r o p o s i t i o n can be found, i n a d i f f e r e n t c o n t e x t , i n the r u l e s which allow the High Court t o make an order f o r r e - s a l e . R.S.C. provides: Rule 4(1) Order 29 "The Court may .... make an order f o r the sale .... of any property (other than land) .... which i s o f a perishable nature or l i k e l y t o d e t e r i o r a t e i f kept ...". The 'or' i s s i g n i f i c a n t , goods may be sold by the Court i f perishable or l i k e l y t o d e t e r i o r a t e , i t would seem t h a t perishable means, i n t h i s c o n t e x t , something other than having a propensity t o become u n f i t or unmerchantable and, presumably, means being of such a nature t h a t the goods may do more than " d e t e r i o r a t e " , they may cease t o e x i s t i n specie. A Utility Test Despite t h e above a u t h o r i t i e s , there has been a growing tendency f o r the courts t o take i n t o account the u t i l i t y o f the goods i n order t o determine whether they have ceased t o e x i s t . Assurance I n Cologan v. London Lord Ellenborough asserted t h a t "there i s a t o t a l loss o f the t h i n g i f , by any o f the p e r i l s insured a g a i n s t , i t i s rendered of no use whatsoever although i t might not be e n t i r e l y annihilated"."''''' u t i l i t y t e s t i n i t s crudest form. This i s a I f the goods have some u t i l i t y , however marginal, the goods e x i s t ; i f , on t h e other hand, t h e goods have no u t i l i t y then they have ceased t o e x i s t f o r the purposes o f insurance even though they continue t o e x i s t i n specie. The t e s t i s an unhappy one, c e r t a i n l y i n the sale o f goods c o n t e x t , and, i n t h a t context, would seem t o have no c l e a r conceptual base. the The t e s t r e f e r s t o the u t i l i t y o f goods but ignores the c o n t r a c t u a l l y contemplated purpose and, accordingly, places undue emphasis on an i r r e l e v a n t , r e s i d u a l , u t i l i t y . (1816) 5 H + S 447; 105 E.R. 1114. 105 E.R. a t 1117, 1118. - 11 - Perishing/Merchantability I n Asfar v. B l u n d e l l t h e Court o f Appeal was r e q u i r e d t o determine whether t h e r e was a t o t a l loss o f dates which had been submerged i n water and impregnated w i t h sewage. The dates were not t o t a l l y destroyed, nor were they l a c k i n g i n u t i l i t y , f o r they were of considerable value f o r the purpose of d i s t i l l a t i o n i n t o s p i r i t . The Court of Appeal held t h a t no f r e i g h t was payable and t h a t there was a t o t a l loss of the s u b j e c t matter of the insurance,, Lord Esher M.R. asserted: "There i s a p e r f e c t l y well-known t e s t which has f o r many years been a p p l i e d t o such cases as the present, t h a t t e s t i s whether, as a matter o f business, the nature of 12 the t h i n g has a l t e r e d . " A l l four judges concerned w i t h t h e case r e l i e d upon the f a c t t h a t the goods were no longer merchantable. gave judgment at f i r s t instance 1 3 asserted t h a t : Mathew J., who "Total destruction i s 14 not necessary, d e s t r u c t i o n o f the merchantable character i s s u f f i c i e n t , " Lord Esher M.R., who d e l i v e r e d the leading Judgment Appeal, maintained t h a t : i n the Court o f ".„.<,. the question f o r d e t e r m i n a t i o n i s whether the t h i n g i n s u r e d , the o r i g i n a l a r t i c l e of commerce, has become a t o t a l loss. I f i t i s so changed i n i t s nature by t h e p e r i l s o f the sea as t o become an unmerchantable t h i n g , which no buyer would buy and no honest s e l l e r would s e l l , there i s a t o t a l l o s s . " the same o p i n i o n : character as dates. But ... they had c l e a r l y l o s t any merchantable I n my judgement i t i s i d l e t o suggest t h a t t h e r e was not a t o t a l loss of the d a t e s . " /~1896_7 1 Q.B. 123. 12 " " a t 127. 1 3 1 4 1 3 1 6 /~1895_7 2 Q.B. 196. a t 201. /"1896_7 1 Q.B. a t 130. Lopes L.J. was of "The f i r s t p o i n t taken was t h a t there was no t o t a l loss of the dates. 4 1 3 123, 128. 1 6 Kay L.J. expressly approved the - 12 - statement made, a t f i r s t instance, by Mathew J. 17 What, then, i s the t e s t t o emerge from t h i s case? mean "rendered unmerchantable"? Does "perished" Perhaps the answer t o t h i s question l i e s i n the answer t o another; i s the term "unmerchantable", as used i n the t e s t e s t a b l i s h e d i n As far v. B l u n d e l l , the same term as t h a t used i n s e c t i o n 14(2) Sale of Goods Act 1 9 7 9 ? Co. v. E i l e r s 19 Wright J. s a i d : 18 I n Canada A t l a n t i c Grain Export 20 " I t seems t o follow t h a t i f goods are sold under a d e s c r i p t i o n which they f u l f i l , and i f goods under t h a t d e s c r i p t i o n are reasonably capable i n ordinary use o f several purposes they are of merchantable q u a l i t y w i t h i n s e c t i o n 14 sub-section 2 of the Act i f they are*reasonably capable o f being used f o r one or more such purposes, even i f u n f i t f o r t h a t one of those purposes which the p a r t i c u l a r buyer intended. No doubt i t i s too wide t o say t h a t they must be of use f o r some purpose, because t h a t purpose might be f o r e i g n t o t h e i r ordinary user. Thus i n Asfar v. B l u n d e l l .... dates were held t o be unmerchantable as dates because they had been submerged i n the Thames and became impregnated w i t h sewage, though they were of considerable value f o r d i s t i l l a t i o n i n t o vinegar." 21 S i m i l a r l y i n Cammell L a i r d and Co. v. The Manqaneze Bronze and Brass Co. 22 Lord Wright asserted: "What sub-section 2 now means by 'merchantable q u a l i t y ' i s t h a t goods i n the form i n which they were tendered were o f no use f o r any purpose f o r which such goods would normally be used and hence not saleable under t h a t d e s c r i p t i o n ... i t i s immaterial t o consider i f i t could be s o l d as scrap; thus i n Asfar v. B l u n d e l l dates were held t o be unmerchantable as dates because they had been submerged i n the Thames and had become impregnated w i t h sewage and were useless as dates, though they were of considerable value f o r d i s t i l l a t i o n i n t o vinegar." Clearly i n both cases, the term "unmerchantable" advocated 1 7 at as used i n the t e s t i n Asfar v. B l u n d e l l i s equated w i t h the use of t h a t term i n 132. 18 Section 14(2) provides t h a t : "Where the s e l l e r s e l l s goods i n the course of a business there i s an implied c o n d i t i o n t h a t the goods supplied under the c o n t r a c t are of merchantable q u a l i t y 19 ( 1 9 2 9 ) 35 Com Cas 20 ^ a t 102, U 2 1 103. /"1934_7 A.C. 22 "at 430. 90. 402. - 13 - s e c t i o n 14(2) Sale o f Goods Act. Does t h i s mean t h a t i f goods are unmerchantable f o r t h e purposes o f s e c t i o n 1 4 ( 2 ) , they have "perished" w i t h i n t h e meaning o f , say, s e c t i o n 7? I t i s submitted t h a t such a con- c l u s i o n would embrace t o o l i b e r a l an i n t e r p r e t a t i o n o f these cases. To a s s e r t t h a t goods which are unmerchantable w i t h i n the Asfar v. B l u n d e l l t e s t w i l l be unmerchantable f o r t h e purpose o f s e c t i o n 14(2) i s not t o assert the converse, t h a t goods which are unmerchantable f o r the purposes of s e c t i o n 14(2) w i l l have "perished" as a r e s u l t o f the t e s t advocated i n Asfar v. B l u n d e l l . I f , indeed, a c o u r t was prepared t o accept t h a t goods which had been rendered unmerchantable f o r t h e purposes o f s e c t i o n 14(2) had "perished" for t h e purposes o f s e c t i o n 7 o f t h e A c t , strange consequences would ensue. Any s e l l e r who agreed t o s e l l s p e c i f i c goods would n o t be l i a b l e t o t h e buyer f o r breach o f s e c t i o n 14(2) i f t h e goods were, w i t h o u t f a u l t , rendered unmerchantable p r i o r t o r i s k passing, f o r s e c t i o n 7 o f t h e Act would avoid the c o n t r a c t . A f a u l t n o t i o n would thus be imported i n t o l i a b i l i t y f o r breach o f a c o n t r a c t f o r the s a l e o f s p e c i f i c goods. I f , however, the goods were unascertained t h e s e l l e r would be l i a b l e , f o r s e c t i o n 7 r e l a t e s only t o agreements f o r the sale o f s p e c i f i c goods. S i m i l a r l y , the s e l l e r would remain l i a b l e i f t h e goods he i s s e l l i n g had always been unmerchantable, f o r i n such uses there could hardly be a "perishing". I n such circumstances f a u l t would be i r r e l e v a n t i n establishing l i a b i l i t y f o r breach. Rendered Unmerchantable/Change o f I d e n t i t y None o f the judges involved i n Asfar v. B l u n d e l l a c t u a l l y r e f e r t o "merchantable q u a l i t y " , the term used i n s e c t i o n 14(2) Sale o f Goods Act 1893. Mathew J., Lopes L.J. and Kay L.J. r e f e r t o the goods being no 23 longer o f "merchantable 2 3 character" and Lord Esher M.R. r e f e r s t o "an /"1895_7 2 Q.B. 196, 201; /"1896_7 1 Q.B. 123, 130 and 132. - 14 - unmerchantable thing" 24 . The term "merchantable q u a l i t y " \i/as i n use at 25 t h a t t i m e , i n Mody v. Greqson, f o r example, W i l l i s J. asserted t h a t "the defendants promised the p l a i n t i f f s ... t h a t the same ... should be of 26 merchantable quality". Can any conclusions be drawn from the apparent r e l u c t a n c e of the judges i n Asfar v. B l u n d e l l t o adopt the term "merchantable quality"? I t i s submitted t h a t very l i t t l e should be drawn from the f a c t t h a t t h e r e i s no d i r e c t reference t o t h i s term, f o r i t appears t h a t a t t h a t time (and, indeed, a t the present time) terms such as "merchantable" and "of merchantable q u a l i t y " were regarded as i n t e r 27 changeable. I n Jones v. Just f o r example, t h e Court, when a p p l y i n g the i m p l i e d term, r e f e r r e d not t o "merchantable q u a l i t y " but t o the r e q u i r e 28 ment t h a t t h e r e be a "merchantable a r t i c l e " . More weight should, perhaps, be given t o Lord Esher's c o n c l u s i o n 12 t h a t "as a matter of business, the nature of the t h i n g has been altered',' f o r i t would seem t h a t Lord Esher i s r e f e r r i n g not t o q u a l i t y but r a t h e r to identity. Lord J u s t i c e Kay, w h i l s t a d m i t t i n g t h a t "the substance o f the dates s t i l l remained and t h a t they had not been changed i n t o anything but dates i n a p e c u l i a r c o n d i t i o n , questioned whether "the law r e q u i r e s the nature of the t h i n g insured t o be so f a r changed as was suggested i n 29 argument". 2 4 2 5 /"1896_7 1 Q.B. ( 1 8 6 8 ) 19 L.T. 2 6 2 7 Quite c l e a r l y Kay L.J., accepting t h a t t h e r e had been at 123, 128. 458. 459. ( 1 8 6 8 ) 18 L.T. 208. at 209. 12 at 2 9 127. /"1896 7 1 Q.8. 123, 132. - 15 - some change i n the nature o f the goods, also recognised t h a t there i s a requirement t h a t the goods should change i n nature. I t i s submitted t h a t i t i s t h i s requirement t h a t i s a t the c e n t r e of the t e s t e s t a b l i s h e d i n Asfar v. B l u n d e l l . I t would seem t h a t the goods w i l l have perished, under t h i s t e s t , when they have been rendered so unmerchantable as t o have undergone, i n a commercial sense, a change of nature/identity» I t would f o l l o w t h a t the f a c t t h a t the goods have been rendered unmerchantable w i l l n o t , i n i t s e l f , mean t h a t they have p e r i s h e d . The t e s t t o be used when e s t a b l i s h i n g whether or not goods have 7 perished would, t h e r e f o r e , seem t o remain t h a t advocated i n Barr v. Gibson. The goods have perished i f they do not e x i s t " i n specie" and i f they do e x i s t " i n specie" they have not p e r i s h e d , even though they may be s u b j e c t to serious defects i n q u a l i t y . The judgment i n Asfar v. B l u n d e l l may thus be seen as important i n so f a r as i t provides f o r a more l i b e r a l approach, than t h a t adopted i n Barr v. Gibson, when determining whether the goods do e x i s t i n s p e c i e . Since Asfar v. B l u n d e l l commercial as w e l l as a p h y s i c a l one. the t e s t remains one of i d e n t i t y may 31 t h e t e s t i s now Support f o r t h e p r o p o s i t i o n be found i n t h e judgment J . i n Hansen v. Dunn, ^ f o r i n the course of h i s judgment a that o f Kennedy Kennedy J. s t a t e d , i n r e l a t i o n t o the consignment i n q u e s t i o n : " I t s c o n d i t i o n was, no doubt, bad, but I do not f e e l myself j u s t i f i e d i n h o l d i n g t h a t i t d i d not a r r i v e ' i n specie' as maize, according t o the t e s t s t a t e d by Lord Esher i n Asfar v. B l u n d e l l . " 3 1 Further support l i e s i n the d e c i s i o n s a r r i v e d a t i n Francis v. Boulton 7 32 150 E.R. 3 0 3 1 and Palace Shipping Company v. S p l l l e r s and Bakers. 1200. ( 1 9 0 6 ) 22 TLR at 458. 459. 3 2 ( 1 8 9 5 ) 12 TLR 75. 33 T h e Times May 18 1908. 33 I n Francis v. - 16 - Boulton a Thames l i g h t e r c a r r y i n g r i c e sank and was covered f o r two t i d e s . When t h e l i g h t e r was r a i s e d and the cargo r e t r i e v e d the r i c e was k i l n d r i e d a t the cost of £68 and s o l d f o r £111. The Court, i n h o l d i n g t h a t t h e r e had been no t o t a l l o s s , d i s t i n g u i s h e d Asfar v. B l u n d e l l on t h e basis t h a t the r i c e was "capable o f being c o n d i t i o n e d and t h a t when k i l n d r i e d i t was s o l d as r i c e and f e t c h e d about a t h i r d o f i t s sound value" I n Palace Shipping Co. v. S p i l l e r s and Bakers a consignment o f wheat was so damaged by sea-water t h a t i t became swollen and d i s c o l o u r e d , l o s t i t s g l u t e n and gave o f f an o f f e n s i v e s m e l l . f o r l e s s than one-quarter I t was s o l d by the purchasers o f the expected p r i c e , though when k i l n - d r i e d i t was l a t e r s o l d f o r h a l f t h e market p r i c e . Mr. J u s t i c e Walker, accepting t h a t the wheat could no longer be used f o r making bread, a p p l i e d t h e t e s t "Was t h e wheat damaged wheat or had t h e whole nature o f the a r t i c l e altered?" 3 3 He decided t h a t the k i l n - d r i e d wheat, which c o u l d be used f o r c a t t l e feed was damaged wheat b u t t h a t i t had not ceased t o be wheat. I n both cases the goods were c l e a r l y unmerchantable under the c o n t r a c t d e s c r i p t i o n , b u t they had not perished f o r , i n each case, t h e d e f e c t i n q u a l i t y was not such as t o change the nature o f t h e goods. The wheat was "damaged wheat" and t h e r i c e "was s o l d as r i c e " whereas t h e dates i n Asfar v. B l u n d e l l had, f o r commercial purposes, ceased t o be dates and had only a "scrap value" ( a l b e i t a considerable one). I t i s submitted t h a t only where t h e i d e n t i t y o f t h e goods has changed w i l l the goods be taken t o have perished. The judgment o f Cooper J. i n 3 Rendell v. T u r n b u l l ^ appears a t f i r s t t o c o n t r a d i c t t h i s conclusion b u t , on c l o s e r a n a l y s i s , the case can be r e a d i l y r e c o n c i l e d w i t h t h e " i d e n t i t y " at page 75. 33 T h e Times May 18 1908, 3 5 ( 1 9 0 8 ) 27 NZLR 1067. - 17 - proposition. The f a c t s of the case are s t r a i g h t f o r w a r d , there was an agreement t o s e l l a s p e c i f i c batch of " t a b l e potatoes" which, a t the time of d e l i v e r y were found t o be u n f i t f o r human food. the purposes of the New Act? Had they perished f o r Zealand equivalent of s e c t i o n 7 Sale of Goods Cooper J. asserted t h a t "the f a c t t h a t the potatoes e x i s t e d 3 ' i n specie' does not prevent the s e c t i o n applying" ** and thus seemed t o suggest t h a t the t e s t was one of q u a l i t y r a t h e r than i d e n t i t y , and t h a t the goods could be taken t o have perished even though t h e i r nature had not 3 changed. He went on, however, t o say: ^ "They were s o l d as 'table potatoes' and both p a r t i e s believed them t o be t a b l e potatoes, and I am s a t i s f i e d t h a t , although t o outward appearances they were 'table potatoes' they had .... ceased t o be ' t a b l e potatoes'. Through t h i s c o n d i t i o n /"a second growth 7 ... they had as 'table potatoes' perished." He found, i n e f f e c t , t h a t the words " t a b l e potatoes" implied " f i t t o be eaten" t h a t the c o n t r a c t d e s c r i p t i o n thereby incorporated a statement t o the q u a l i t y of the goods. and relating The goods perished not because they were unmerchantable but because the d e f e c t i n q u a l i t y which caused them t o be unmerchantable also took them outside the c o n t r a c t d e s c r i p t i o n . The f a c t t h a t the t e s t remains one of i d e n t i t y r a t h e r than q u a l i t y has o f t e n escaped n o t i c e . Thus, f o r example, Asfar v. B l u n d e l l i s t o be found i n the English and Empire Digest under an entry which reads: unmerchantable under o r i g i n a l d e s c r i p t i o n - No f r e i g h t p a y a b l e " . 37 i t i s submitted, i s c l e a r l y not the r u l e and the e n t r y should read: "Goods This, "Goods so unmerchantable as t o no longer comply w i t h the o r i g i n a l d e s c r i p t i o n No f r e i g h t at payable". 1072. Replacement Volume 41 (published 1965), page 572. - 18 - A Suggested Test I t has been submitted t h a t goods perish when they are p h y s i c a l l y destroyed or have d e t e r i o r a t e d t o such an extent as t o have changed t h e i r nature. Goods which have d e t e r i o r a t e d but have not changed i n nature have not perished. I n the l i g h t of the decision of the House o f Lords i n 38 Ash.tnqton Piggeries v, Christopher H i l l which drew a d i s t i n c t i o n between the a p p l i c a t i o n o f s e c t i o n 13 Sale o f Goods Act 1893 ( r e l a t i n g t o t h e i d e n t i t y o f the goods) and s e c t i o n 14 o f the Act ( r e l a t i n g t o t h e q u a l i t y of the goods), the t e s t t o be used when e s t a b l i s h i n g whether goods have p h y s i c a l l y perished may be expressed i n a d i f f e r e n t way. of the goods has d e t e r i o r a t e d t o such an extent I f the q u a l i t y t h a t the s e l l e r would 9 be l i a b l e ,to the buyer under s e c t i o n 13 Sale o f Goods Act 1979* (but f o r the f a c t t h a t he may be r e l i e v e d o f h i s l i a b i l i t y as a r e s u l t o f the c o n t r a c t being rendered void by s e c t i o n 6 Sale o f Goods Act 1979 or avoided by s e c t i o n 7 o f the A c t , or as a r e s u l t o f the buyer being taken t o have acquired the r i s k of the p a r t i c u l a r d e s t r u c t i o n / d e t e r i o r a t i o n ) , the goods w i l l not e x i s t " i n specie" and w i l l have perished. On the other hand, i f the d e t e r i o r a t i o n i n q u a l i t y i s not such as t o cause a breach o f s e c t i o n 13 o f the A c t , the goods must c l e a r l y s t i l l e x i s t " i n specie" and have not perished. When determining whether there would be a breach o f s e c t i o n 13 o f the Act i t would be permissable t o take i n t o account "Commercial expectations" "The t e s t of d e s c r i p t i o n , at l e a s t where commodities are concerned, i s intended t o be a broader, more commonsense, t e s t o f a mercantile character. The question whether t h a t i s what t h e buyer bargained for has t o be answered according t o such t e s t s as men i n the market would apply, l e a v i n g more d e l i c a t e questions o f c o n d i t i o n , or q u a l i t y , t o be determined under other clauses o f the c o n t r a c t or sections of the Act." (per Lord W i l b e r f o r c e , Ashinqton Piggeries v. Christopher H i l l ^ O ) 3 8 /J 1911 71 A l l E.R. 847. 39 which provides t h a t where "there i s a c o n t r a c t f o r the sale o f goods by d e s c r i p t i o n , there i s an i m p l i e d c o n d i t i o n t h a t the goods w i l l correspond w i t h the d e s c r i p t i o n " . 40 /• 1971_/ 1 A l l E.R. 847, 872. - 19 - Recovery/Restoration Possible A problem i s r a i s e d i n the s i t u a t i o n i n which recovery or r e s t o r a t i o n o f goods, which are " l o s t " or have d e t e r i o r a t e d , i s comm e r c i a l l y out o f the question but i s not p h y s i c a l l y impossible. goods perished i n these circumstances? Have the As most o f t h e reported cases i n v o l v e marine insurance or f r e i g h t a c o n s i d e r a t i o n o f t h i s area may be instructive. I n a c o n t r a c t o f marine insurance there may be an a c t u a l t o t a l loss or a c o n s t r u c t i v e t o t a l loss and the d i f f e r e n c e between t h e two r e f l e c t s the d i s t i n c t i o n between p h y s i c a l and commercial i m p o s s i b i l i t y . Section 57(1) Marine Insurance Act 1906 provides t h a t there i s an a c t u a l t o t a l loss where "the s u b j e c t matter insured i s destroyed, or so damaged as t o cease t o be a t h i n g o f the kind i n s u r e d , or where the assured i s i r r e t r i e v a b l y deprived thereof". With the p o s s i b l e exception o f an a c t u a l t o t a l loss which has r e s u l t e d from t h e assured being " i r r e t r i e v a b l y deprived" o f the s u b j e c t matter o f the insurance, i t seems c l e a r t h a t where there i s an a c t u a l t o t a l loss there i s both a commercial and a p h y s i c a l p e r i s h i n g o f the goods. Section 60 Marine Insurance Act 1906, however, defines a c o n s t r u c t i v e t o t a l loss as a loss occasioned where "the s u b j e c t matter insured i s reasonably abandoned on account o f i t s a c t u a l t o t a l loss appearing t o be unavoidable, or because i t could not be preserved from a c t u a l t o t a l loss w i t h o u t an expenditure which would exceed i t s value when the expenditure had been i n c u r r e d " . Quite c l e a r l y there can be a c o n s t r u c t i v e t o t a l loss where goods are p h y s i c a l l y capable o f being recovered. I t i s conceivable t h a t t h i s approach would be adopted by a c o u r t c a l l e d upon t o determine whether goods have perished which may be recovered/restored f o r the purposes o f s a l e . This s i t u a t i o n was a n t i c i p a t e d i n an i n t e r e s t i n g problem posed by counsel 41 i n Barr v. Gibson, "Suppose", he asked the Court, " t h i s had been a ship (1838) 150 E.R. 1196, 1198. - 20 - a t the bottom of the ocean, and the water being very c l e a r i t could be d i s t i n c t l y seen". I f one adds t o t h i s s u p p o s i t i o n the f u r t h e r s u p p o s i t i o n t h a t the vessel could be recovered, but only a t enormous expense, one creates a t a x i n g problem. c o n t r a c t of sale? Has the vessel perished f o r the purposes of a To ask t h i s question i s not simply t o ask whether a c o u r t would be prepared t o release the s e l l e r from h i s o b l i g a t i o n s , f o r i t i s not doubted t h a t , i n a p p r o p r i a t e circumstances, the c o n t r a c t could be declared v o i d or f r u s t r a t e d (depending time of upon the r e l a t i o n s h i p between the s i n k i n g and the time of making the c o n t r a c t ) on the basis t h a t the p a r t i e s "never agreed t o be bound i n a fundamentally d i f f e r e n t s i t u a t i o n 42 which has now unexpectedly emerged". The q u e s t i o n r e l a t e s r a t h e r t o t h e consequences of any f r u s t r a t i o n f o r , the goods being s p e c i f i c , i t would be necessary t o determine whether or not the goods have perished i n order t o a s c e r t a i n the r u l e s t o be used t o e s t a b l i s h t h e consequences o f the frustration. I t would seem t h a t there are two p o s s i b l e approaches. The Court could conclude t h a t the goods have not perished and t h a t t h e basis o f the f r u s t r a t i o n i s , q u i t e s i m p l y , the f a c t t h a t t h e manner of performance i s so changed as t o be r a d i c a l l y d i f f e r e n t t o t h a t by the p a r t i e s . contemplated The other p o s s i b i l i t y i s t h a t t h e Court would adopt the approach used i n insurance cases and conclude t h a t where there i s a cons t r u c t i v e t o t a l loss there i s also a p e r i s h i n g of the goods. The first approach a t t r a c t s the p r o v i s i o n s of the law Reform ( F r u s t r a t e d Contracts) 43 Act 1943, the second does n o t . An adoption of the c o n s t r u c t i v e t o t a l loss approach, i n cases i n v o l v i n g issues r e l a t i n g t o the c o n t r a c t of s a l e , would r a i s e t h e i n e v i t a b l e question o f the p o i n t of time a t which the goods would be taken ^ p e r Viscount Simon, B r i t i s h Movietonews L t d . v. London and D i s t r i c t Cinemas L t d . /~1952_7A.C. 166, 185. 43 See s e c t i o n 2 ( 5 ) ( c ) Law Reform F r u s t r a t e d Contracts Act. - 21 - t o have perished. Would goods p e r i s h when they have so d e t e r i o r a t e d as t o have changed i n n a t u r e , even though a t t h a t time the p o s s i b i l i t y o f r e s t o r a t i o n has not been considered, or would they p e r i s h when they have been changed i n nature and t h e p o s s i b i l i t y o f r e s t o r a t i o n has been considered and, l e g i t i m a t e l y , r e j e c t e d ? The question i s not merely academic f o r , i f r i s k has passed t o t h e buyer d u r i n g t h e i n t e r v a l between change i n nature and r e j e c t i o n o f the p o s s i b i l i t y of r e s t o r a t i o n , s e c t i o n 7 Sale o f Goods Act 1979 w i l l only apply i f t h e Court concludes t h a t the goods had perished p r i o r t o r i s k passing. only be determined Perhaps the question o f p e r i s h i n g can a f t e r a lapse o f time but the p r o v i s i o n s o f t h e s e c t i o n , c o n t a i n i n g t h e requirement t h a t t h e goods p e r i s h , a r e deemed t o have taken, immediate e f f e c t . I f so, one c o u l d n o t e s t a b l i s h whether the goods had perished u n t i l t h e p o s s i b i l i t y o f r e s t o r a t i o n had been considered and r e j e c t e d as not p o s s i b l e . The p r o v i s i o n s o f s e c t i o n 7 would, however be r e t r o s p e c t i v e l y a c t i v a t e d so t h a t the c o n t r a c t was avoided a t r the time o f t h e i n c i d e n t which caused t h e goods t o be ' l o s t ' or t o change i n nature. - 22 - SECTION B: CAN GOODS PERISH IF THEY HAVE NEVER EXISTED? The word "perished" would seem t o i n d i c a t e an existence which has terminated. existed? Can goods be said t o have perished i f they have never Were i t not f o r the p r o v i s i o n o f the Sale o f Goods Act 1979 and the Law Reform ( F r u s t r a t e d Contracts) Act 1943, t h i s question would appear t o have more p h i l o s o p h i c a l than l e g a l importance. These p r o v i s i o n s do, however, e x i s t and courts have been asked t o provide an answer t o t h i s very question. A u t h o r i t y f o r an A f f i r m a t i v e Answer 44 I n Howell v. Coupland there was an agreement t o s e l l 200 tons o f potatoes t o be grown on land belonging t o t h e defendant. Sufficient acreage was sown t o produce the crop but an appearance o f b l i g h t r e s u l t e d i n crop f a i l u r e . The Court granted a d e c l a r a t i o n t h a t the s e l l e r was r e l i e v e d o f h i s o b l i g a t i o n s t o d e l i v e r though i t i s not c l e a r whether the Court d i d so on the basis t h a t the goods had perished. Blackburn J . assumed t h a t the goods had perished and t h a t t h e c o n t r a c t was s u b j e c t t o 45 the r u l i n g i n Taylor v. Caldwell. The other members o f the Court, Archibald J. and Quain J., agreed t h a t the case was w i t h i n the r u l e i n Taylor v. Caldwell but d i d not expressly r e f e r t o a " p e r i s h i n g " o f the goods. Archibald J. l a i d emphasis on the f a c t t h a t the goods should be 46 47 " i n existence", w h i l s t Quain J. r e l i e d upon the notion o f v i s major. 44 45 46 47 Law Rep. 9 Q.B. 462. at 465, 466. at 467, at 466, - 23 - As Archibald J. and Quain J. both r e f e r r e d t o Taylor v. Caldwell, the f a c t t h a t they d i d not r e f e r t o the goods having "perished" may not be 48 s i g n i f i c a n t , f o r G l a n v i l l e Williams asserts t h a t the word " p e r i s h " i n s e c t i o n 7 Sale of Goods Act i s a reference t o the r u l e i n Taylor v. Caldu/ell. Reliance upon the r u l e , t h e r e f o r e , i s possibly a r e c o g n i t i o n t h a t there has been a " p e r i s h i n g " . 49 Howell v. Coupland was considered, on appeal, by a f u l l c o u r t of the Court of Appeal which a f f i r m e d the d e c i s i o n of the D i v i s i o n a l Court on the basis t h a t there was an i m p l i e d term t h a t before the time f i x e d for performance the goods should be i n existence. Only one member of the Court, M e l l i s h L.J., spoke of the goods " p e r i s h i n g " , a s s e r t i n g t h a t " i f the t h i n g perishes before the time f o r performance, the vendor i s excused from performance"."^ Recognising t h a t there was "a d i s t i n c t i o n " which could be drawn between goods which have perished and goods which have never e x i s t e d he doubted t h a t there was p r i n c i p l e " " ^ i n such cases. "any r e a l d i f f e r e n c e i n At t h a t time he was probably c o r r e c t . Whilst none of the other members of the Court r e f e r r e d t o a " p e r i s h i n g " they a l l c l e a r l y r e l i e d upon the r u l e i n Taylor v. Caldwell. Did Howell v. Coupland e s t a b l i s h t h a t goods can p e r i s h even though they have never existed? Eight judges considered the case and a l l a r r i v e d at the same d e c i s i o n . All, d i r e c t l y or i n d i r e c t l y , r e l i e d upon the d e c i s i o n i n Taylor v. Caldwell but only two r e f e r r e d d i r e c t l y t o a "perishing". G l a n v i l l e Williams concludes t h a t " i t was held i n Howell v. Coupland t h a t goods t h a t f a i l t o m a t e r i a l i s e 'perish' f o r the purposes of 48 "The Law Reform ( F r u s t r a t e d Contracts) Act 1943", page 89. A 9 ( 1 8 7 6 ) 1 Q.B.D. 258. 5 0 at 262. - 24 - the r u l e " , 48 ( i . e . t h e r u l e i n Taylor v. C a l d w e l l ) . I t i s submitted t h a t i t i s c o r r e c t t o say t h a t the goods were h e l d t o have perished f o r the purposes o f the r u l e i n Taylor v. Caldwell and, i f one accepts t h a t s e c t i o n 7 Sale o f Goods Act 1979 gives s t a t u t o r y e f f e c t t o t h i s r u l e i t i s possible t h a t Howell v. Coupland i s also a u t h o r i t y f o r the p r o p o s i t i o n t h a t such goods " p e r i s h " f o r the purposes o f t h a t s e c t i o n . A u t h o r i t y f o r a Negative Answer I n McRae v. Commonwealth Disposals Commission^^ t h e r e was a sale o f a s h i p which not only d i d not e x i s t , b u t never had e x i s t e d . The Court considered the p r o v i s i o n s o f s e c t i o n I I V i c t o r i a n Goods Act 1928, which corresponds w i t h s e c t i o n 6 Sale o f Goods Act 1979 and provides "Where there i s a c o n t r a c t f o r the sale o f s p e c i f i c goods and t h e goods w i t h o u t the knowledge o f t h e s e l l e r have perished a t the time when the c o n t r a c t i s made the c o n t r a c t i s void",. asserted Dixon J . and F u l l g a r J., i n a j o i n t judgment, t h a t " i t seems c l e a r t h a t the s e c t i o n has no a p p l i c a t i o n t o t h e f a c t s o f t h e present case. Here the goods never e x i s t e d and the s e l l e r 52 ought t o have known t h a t they d i d not e x i s t " . McTiernan J., d i d not consider the p o i n t . not c l e a r . The t h i r d judge, The basis o f the d e c i s i o n i s Did the Court decide t h a t s e c t i o n I I ( s e c t i o n 6) has no a p p l i c a t i o n where t h e goods have never e x i s t e d or d i d they decide t h a t the s e c t i o n could not apply where the goods have never e x i s t e d and the s e l l e r should have been aware o f t h i s ? The determining f a c t o r may have been the f a c t t h a t the goods had never e x i s t e d b u t , e q u a l l y , i t may have 48 " T h e Law Reform ( F r u s t r a t e d Contracts) Act 1943", page 89. 5 1 ( 1 9 5 1 ) 84 C.L.R. 377. 52 at 410. - 25 - been the f a c t t h a t the vendor should have been aware o f the nonexistence. I t i s d i f f i c u l t t o determine whether t h e Court denied t h e p o s s i b i l i t y o f a c o n s t r u c t i v e p e r i s h i n g or admitted the p o s s i b i l i t y o f constructive notice. In r e W a i t e ^ A t k i n L.J., r e f e r r i n g t o the d e c i s i o n i n Howell v. Coupland, suggested t h a t " i n as much as we a r e now bound by the p l a i n language o f the code I do not t h i n k t h a t d e c i s i o n s i n cases before 1893 54 are o f much value". Lord A t k i n suggested t h a t Howell v. Coupland was covered, not by s e c t i o n 7 Sale o f Goods Act 1893, but by s e c t i o n 5(2) o f the Act o r , perhaps, by common law p r i n c i p l e s r e t a i n e d by s e c t i o n 61(2) of the A c t . ^ I n Sainsbury v. S t r e e t ^ MacKenna J . adopted t h i s view and asserted t h a t s e c t i o n s 6 and 7 o f the Act "are, i n my o p i n i o n , dealing w i t h goods e x i s t i p g " . ^ Lord A t k i n ' s r e j e c t i o n o f pre-Sale o f Goods A c t a u t h o r i t y i s i n l i n e w i t h the approach t o the i n t e r p r e t a t i o n o f c o d i f y i n g s t a t u t e s 58 suggested by Lord H e r s c h e i l i n Bank o f England v. vaqliano Bros.: " I t h i n k the proper course i s i n the f i r s t instance t o examine the language o f the s t a t u t e and t o ask what i s i t s n a t u r a l meaning, uninfluenced by any c o n s i d e r a t i o n s derived from the previous s t a t e o f the law, and not t o s t a r t w i t h i n q u i r i n g how t h e law p r e v i o u s l y stood, and. then, assuming t h a t i t was probably intended t o leave i t u n a l t e r e d , t o see i f the words of the enactment w i l l bear an i n t e r p r e t a t i o n i n conformity 5 3 w i t h t h i s view". /"1927_7 1 Ch. 606. 54 ^ a t 631. 5 5 5 6 5 7 5 8 a t 631; see now sections 5(2) and 62(2) /"1972 7 3 A l l E.R. 1127. a t 1133. /"1891 7 A.C. 107, 144 and 145. Sale of Goods Act 1979. - 26 - I t may, however, be u n r e a l i s t i c t o expect t h a t a Court w i l l not be prepared t o seek guidance from pre-1893 case-law when i n t e r p r e t i n g the prov i s i o n s o f the Sale o f Goods Act 1979. Academic w r i t e r s , c e r t a i n l y , have been r e l u c t a n t t o ignore the 'old' law. Professor A.L. Diamond p o i n t s out59 that the 15th e d i t i o n o f Chalmers "Sale o f Goods Act" r e f e r s t o 863 cases decided be Fore the 1B93 Act was passed. Ihe f i g u r e s f o r Atiyah's "The Sale o f Goods" (3rd ed) and Fridman's "Sale o f Goods" are 438 and 490, respectively. Perhaps the best argument i n support o f a r e j e c t i o n o f the approach favoured i n Howell v. Coupland i s the f a c t t h a t the case pre-dates not only the Sale o f Goods Act 1893 but also the Law Reform ( F r u s t r a t e d Contracts) Act 1943. • The provisions of the 1943 Act have so i n t e n s i f i e d the importance of determining whether s p e c i f i c goods have perished as t o surely discourage any modern c o u r t from seeking guidance from judges who expressed t h e i r views i n a p a r t i c u l a r l e g a l context and could not have appreciated t h e r a m i f i c a t i o n s o f those views being i n t e r p r e t e d 31 M.L.R. 384. i n a d i f f e r e n t context. - 27 - SECTION C: CAN GOODS BE TAKEN TO HAVE PERISHED EVEN THOUGH THEY CONTINUE TO EXIST AND HAVE NOT BEEN SUBJECT TO PHYSICAL DETERIORATION/DESTRUCTION? Stolen Goods/Goods Taken by Mistake In Barrow Lane and B a l l a r d L t d . v. P h i l l i p P h i l l i p s and Company L t d . ^ a c o n t r a c t was made f o r the sale o f a s p e c i f i c parcel o f goods l y i n g a t a wharf. Unknown t o the s e l l e r 109 bags out o f a t o t a l consignment o f 700 had been s t o l e n a t the time o f the c o n t r a c t , other bags were s t o l e n a f t e r the making o f the c o n t r a c t and, u l t i m a t e l y , only 150 were d e l i v e r e d . The Court considered the a p p l i c a t i o n o f s e c t i o n 6 Sale o f Goods Act 1893 and, i n so doing, faced two problems. One problem r e s u l t e d from t h e f a c t t h a t the goods had not ceased t o e x i s t , they had been misappropriated but, no doubt, continued t o e x i s t a t the time o f the c o n t r a c t and, indeed, were p o t e n t i a l l y recoverable a t t h a t time. The other problem arose from the f a c t t h a t only some o f the goods contracted f o r had been s t o l e n a t the time o f the making o f the c o n t r a c t . The f i r s t problem was disposed of very e a s i l y by Wright J. who asserted t h a t "the goods have ceased t o e x i s t f o r a l l purposes r e l e v a n t t o the c o n t r a c t " . ^ The second problem caused more heartsearching but Wright J., concluding t h a t a l l the goods had perished as a r e s u l t o f the disappearance o f some, u l t i m a t e l y determined t h a t the c o n t r a c t was void as a r e s u l t o f s e c t i o n 6 Sale of Goods Act 1893. The disposal of the f i r s t of the two problems faced by the Court r a i s e s i n t e r e s t i n g questions. What, f o r example, would be the e f f e c t of a recovery of s t o l e n goods i n such a s i t u a t i o n ? 6 0 6 1 /"1929_7 1 K.B. 574. a t 583. - 28 - I f goods have perished a t the time o f making the c o n t r a c t s e c t i o n 6 Sale o f Goods Act 1979 w i l l render the c o n t r a c t v o i d , i n which case a subsequent recovery o f the goods would be of no account f o r , the c o n t r a c t being a n u l l i t y , i t cannot r e v i v e . The problem i s t o be found, however, i n determining the time a t which the goods p e r i s h . Wright J. was u n c e r t a i n i n h i s treatment o f the problem, a s s e r t i n g t h a t t h e goods had perished because "they had been s t o l e n and taken away and cannot be f o l l o w e d or discovered anywhere".^ Section 6 Sale o f Goods Act 1979 imposes a t e s t which i s " f r o z e n " i n t i m e ; the question t o be determined i s whether the goods had perished a t t h e time o f the making o f t h e c o n t r a c t . Can i t be t h a t t h e t e s t i s f r o z e n i n time but the p r i n c i p a l component o f t h e q u e s t i o n , the requirement t h a t the goods have p e r i s h e d , can only be determined w i t h hindsight? Such a s i t u a t i o n i s not unknown t o the law. The common law actus reus o f murder, f o r example, r e q u i r e s death w i t h i n a year and a day of the i n j u r y being i n f l i c t e d . The other requirements o f t h e actus reus may be immediately determined b u t the requirement o f death may only be determined a f t e r t h e passage o f t i m e . A death w i t h i n a year and a day w i l l r e s u l t i n a murder having been committed, a death a f t e r t h a t time w i l l not. S i m i l a r l y , i t may be t h a t the question o f p e r i s h i n g o f goods can only be determined a f t e r the passage o f t i m e . I f the goods are not recovered they have perished and had perished when s t o l e n . Conversely, goods which are recovered have not perished and had not perished when s t o l e n . I f t h i s approach i s t o be adopted the obvious problem a r i s e s of determining the p o i n t o f time a t which i t can be accepted t h a t the goods cannot be " f o l l o w e d or discovered". I t may be t h a t , on g r o u n d s o f c e r t a i n t y , a court would conclude t h a t s t o l e n goods " p e r i s h " as soon as they are s t o l e n . at 583. - 29 - I f so,.further problems a r i s e . Consider the f o l l o w i n g s i t u a t i o n : X, a r e t a i l e r , has two antique vases i n h i s shop. by mistake, takes d e l i v e r y of the o t h e r . t o buy the vase mistakenly taken by Y. and Q? Y buys one b u t , Q then telephones X and agrees I s there a c o n t r a c t between X The vase has not been s t o l e n but i t has, n e v e r t h e l e s s , ceased t o e x i s t f o r the purposes o f the c o n t r a c t u n t i l r e t u r n e d . Y has no c r i m i n a l i n t e n t and w i l l probably r e t u r n the vase t o X, b u t he may n o t . I f Y does r e t u r n t h e vase t o X, perhaps a matter o f minutes a f t e r t h e 'sale' t o Q, would Q be able t o avoid l i a b i l i t y on the c o n t r a c t on t h e basis t h a t t h e agreement i s s u b j e c t t o s e c t i o n 6 Sale o f Goods A c t 1979? i n d i c a t e s t h a t such a p r o p o s i t i o n cannot be supported. Common sense What, however, i f the c o n t r a c t i s not s e t aside and Y does not r e t u r n t h e vase? I f , faced by problems such as t h i s , c o u r t s were prepared t o accept t h a t goods p e r i s h only when i t has been determined t h a t they cannot be recovered r i s k may, i n the case o f a p o s t - c o n t r a c t t h e f t , pass t o t h e buyer, under the terms o f the c o n t r a c t , between t h e f t and d e t e r m i n a t i o n o f nonrecoverability. The c o n t r a c t would not then be f r u s t r a t e d by s e c t i o n 7. Would a c o u r t be prepared t o impose such a burden upon t h e purchaser? Requisitioned Goods The statement made by Wright J . i n Barrow Lane and B a l l a r d L t d . v. P h i l l i p P h i l l i p s and Company L t d . t h a t goods have perished i f they "have ceased t o e x i s t f o r a l l purposes r e l e v a n t t o t h e c o n t r a c t " i s very wide. Such an approach would suggest t h a t goods have perished where, f o r example, they have been r e q u i s i t i o n e d . disagree. Most academic w r i t e r s would, however, Cheshire and F i f o o t a s s e r t , i n r e l a t i o n t o s e c t i o n 7 Sale o f Goods A c t , t h a t "unless the goods have perished apply. s e c t i o n 7 does not I f the c o n t r a c t i s f r u s t r a t e d by some other event, as where the goods are r e q u i s i t i o n e d by t h e Government a f t e r the agreement has been made - 30 - the s e c t i o n i s excluded". Re Shipton Anderson and Co. and Harrison Bros, and Co.^ i s c i t e d as a u t h o r i t y . T r e i t e l asserts t h a t "The Act of 1943 i s only excluded where the cause o f f r u s t r a t i o n i s the p e r i s h i n g of the goods. Thus the Act applies where the c o n t r a c t i s 64 f r u s t r a t e d by i l l e g a l i t y or r e q u i s i t i o n " . Sutton and Shannon, r e f e r r i n g t o the p r o v i s i o n s of the Law Reform (Frustrated Contracts) Act 1943, claim t h a t " i t i s only cases where the c o n t r a c t i s f r u s t r a t e d by reason of the f a c t t h a t the goods have perished t h a t are excluded from the operation o f the Act. A c o n t r a c t f o r the sale even o f s p e c i f i c goods may be f r u s t r a t e d by other events, such as ... the goods being r e q u i s i t i o n e d by the Government. presumably a p p l y " . ^ To a l l such cases the Act w i l l Atiyah s t a t e s t h a t "Perishing o f s p e c i f i c goods i s the only instance of f r u s t r a t i o n provided f o r by the Act / " i . e . the Sale o f Goods Act 1979 7 but there i s no doubt t h a t a t Common Law a c o n t r a c t f o r the sale of s p e c i f i c goods may be f r u s t r a t e d by any event which destroys the whole basis of the c o n t r a c t " . ^ Again, Atiyah c i t e s as a u t h o r i t y re Shipton Anderson and Co. and Harrison Bros, and Co. What was decided i n r e Shipton Anderson and Co. and Harrison Bros, and Co.? The Court, c a l l e d upon t o consider a sale o f s p e c i f i c goods which had been subsequently r e q u i s i t i o n e d by H.M. Government, held t h a t the s e l l e r was excused from performance. Lord Reading C.J., d e l i v e r i n g the leading judgement, reviewed the r u l e i n Taylor v. Caldwell and went on t o say: " I t i s t o be observed t h a t i n t h a t r u l e s t r e s s i s l a i d upon the Cheshire and F i f o o t ' s "Law of Contract" ( 8 t h ed) 562. /"1915 7 3 K.B. 676. T r e i t a l "Law of Contract" (3rd ed) 778. "Sutton and Shannon on Contracts" ( 7 t h ed) 385. '"TheSale of Goods" ( 4 t h ed) 167. - 31 - perishing contract. before breach o f t h e t h i n g which was t h e foundation o f the The p r i n c i p l e o f t h e case seems t o me e q u a l l y a p p l i c a b l e t o t h a t now under c o n s i d e r a t i o n , Executive, where by reason o f t h e l a w f u l a c t o f the the t h i n g , i n a sense, has perished. C e r t a i n l y i t i s no longer i n the power o f the s e l l e r s t o perform t h e i r c o n t r a c t " . ^ J. and Lush J . agreed w i t h t h e judgment Darling o f Lord Reading C.J., b u t made no express reference t o the goods having p e r i s h e d . I t i s clear Lord Reading C.J. was aware o f a d i s t i n c t i o n between a p h y s i c a l that perishing and a r e q u i s i t i o n which no longer permits a d e l i v e r y o f t h e goods t o the buyer. His handling o f t h i s d i s t i n c t i o n i s , however, u n c e r t a i n . speaks o f p e r i s h i n g f i n a l sentence: He " i n a sense" and would appear t o "hedge" w i t h h i s "Certainly i t i s no longer i n the power o f the s e l l e r s t o perform t h e i r c o n t r a c t " . The m a j o r i t y o f academic w r i t e r s c l e a r l y adopt t h e view t h a t there has, i n t h i s case, been no p e r i s h i n g would disagree. o f goods, b u t t h e r e a r e some who G l a n v i l l e Williams asserts when r e f e r r i n g t o re Shipton Anderson, t h a t "a s p e c i f i c p a r c e l o f wheat which had been s o l d f o r d e l i v e r y was held t o 'perish' when i t was r e q u i s i t i o n e d by the Government before delivery".- 68 — Macleod suggests t h a t "the term /'perished 7 would ... seem t o include .... those s i t u a t i o n s where t h e goods are u n a v a i l a b l e t o t h e p a r t i e s f o r the completion o f the c o n t r a c t f o r some reason which i s 69 beyond the c o n t r o l o f the p a r t i e s " . Indeed, Macleod goes f u r t h e r than t h i s and maintains t h a t i t may not be going too f a r " t o suggest t h a t t h e goods have perished where, s u b j e c t t o the de minimus r u l e , any p a r t o f 6 7 68 /"1915_7 3 K.B. 676, 682. " T h e Law Reform ( F r u s t r a t e d 69„ Contracts) Act 1943" 89. Sale and Hire Purchase" 253. - 32 - them are c o n t i n u a l l y unavailable t o the p a r t i e s f o r the performance o f the c o n t r a c t " . ^ I t must be noted t h a t i n re Shipton Anderson the Court was not faced w i t h the provisions of t h e Law Reform ( F r u s t r a t e d Contracts) Act 1943 and the question of the s p e c i f i c goods having perished would not have appeared s i g n i f i c a n t . Nevertheless i t i s clear t h a t the r e q u i s i t i o n e d goods had, i n the words o f Wright J. i n Barrow Lane and B a l l a r d v. P h i l l i p P h i l l i p s and Company L t d . , 'beased t o e x i s t f o r a l l purposes relevant t o the c o n t r a c t " and i t would seem u n r e a l i s t i c t o impose upon c o n t r a c t i n g parties r u l e s which d i f f e r according t o whether t h e goods which form the subject matter o f the contract have been s t o l e n or r e q u i s i t i o n e d . I t i s submitted t h a t re Shipton Anderson i s not a u t h o r i t y f o r the p r o p o s i t i o n that r e q u i s i t i o n e d goods have perished, the equivocal judgement o f Lord Reading C.J. i s t o o weak a base f o r such a conclusion. I t i s also submitted, however, that the case i s not c l e a r a u t h o r i t y f o r the p r o p o s i t i o n that r e q u i s i t i o n e d goods have not perished. By analogy w i t h Barrow Lane and B a l l a r d v. P h i l l i p P h i l l i p s and Co. L t d . i t would seem possible t o suggest t h a t goods perish whenever they have "ceased t o e x i s t " f o r a l l purposes relevant t o the c o n t r a c t " . I f t h i s p r o p o s i t i o n can be accepted i t would seem t h a t there i s a p e r i s h i n g of goods whenever they have been rendered unavailable t o the s e l l e r . There would, o f course, remain s i t u a t i o n s i n which the contract could be f r u s t r a t e d by reason other than t h a t o f the goods having perished. I f , for example, the contract were t o be rendered i l l e g a l , the goods could not be taken t o have ceased t o e x i s t f o r the purposes o f the c o n t r a c t , even though the contract would be f r u s t r a t e d . The f r u s t r a t i n g event would r e l a t e t o the contract i t s e l f rather than t o the subject matter o f 7 0 a t 254. - 33 - the c o n t r a c t and would be, so as t o apeak, a f r u s t r a t i n g event which operated i n personam r a t h e r than i n rem. - 34 - PART TWO THE CONCEPT OF RISK - 35 - SECTION A: WHERE RISK PASSES PRIOR TO PROPERTY AND POSSESSION Given t h a t the goods, which form t h e subject matter of the c o n t r a c t of s a l e , have perished, the question of who bears the loss i s one which needs t c be determined. Central t o t h a t question are the associated problems of e s t a b l i s h i n g what i s meant by loss and of determining whether t h a t term has a constant meaning i n a l l circumstances. The key t o these issues i s the concept of r i s k , a concept which, together w i t h those of ownership and possession, forms the t r i l o g y of concepts attaching t o a c o n t r a c t of s a l e . the Sometimes one p a r t y , e i t h e r s e l l e r or buyer, w i l l own goods, possess them and have the r i s k of t h e i r d e s t r u c t i o n or d e t e r i o r a t i o n , the c o n t r a c t being e i t h e r completely executory or comp l e t e l y executed. Often one p a r t y , the buyer, w i l l own the goods and have the r i s k of d e s t r u c t i o n w h i l s t the other has possession of the goods. I t can happen t h a t the buyer can own the goods w h i l s t the s e l l e r them and has r i s k . possesses I n each of these s i t u a t i o n s one t h i n g i s constant, he who has r i s k has e i t h e r ownership or possession. I n one s i t u a t i o n , however, the concept of r i s k can be i s o l a t e d from i t s companions and subjected t o s c r u t i n y , the s i t u a t i o n being t h a t i n which the s e l l e r has ownership and possession w h i l s t the buyer has r i s k . I t is i n this s i t u a t i o n , where r i s k i s a l l t h a t the buyer has "acquired" under the cont r a c t , t h a t the concept of r i s k and the attendant notion of loss should r e v e a l t h e i r true nature. I t i s not usual f o r r i s k t o pass p r i o r t o ownership and. possession but "the the the s i t u a t i o n i s not uncommon. I n c . i . f . c o n t r a c t s , f o r example, property may pass e i t h e r on shipment or on tender / of documents 7, 1 r i s k generally passes on shipment" and, apparently, "the present "*"per Lord Porter, Comptoir D'Achat e t De Vente du Boeren Bond Beige S/A v. Luis de Ridder Limitada (The Juliana) /~1949 /A.C. 293, 309. - 36 - s i t u a t i o n under a c . i . f . c o n t r a c t i s t h a t r i s k very commonly passes 2 before p r o p e r t y " . the Section 20(1) Sale o f Goods Act 1979 provides t h a t goods remain at the s e l l e r ' s r i s k u n t i l property i s t r a n s f e r r e d , whereupon they are at the buyer's r i s k , "unless otherwise agreed". Quite c l e a r l y , t h e r e f o r e , r i s k can pass t o the buyer, i n advance o f p r o p e r t y , as a r e s u l t of agreement between the p a r t i e s , which agreement may be implied by the C o u r t ? The second sub-section of s e c t i o n 20 incorporates another s i t u a t i o n i n which the draftsman envisaged the p o s s i b i l i t y of r i s k passing ahead of ownership and possession. " I t provides t h a t : where d e l i v e r y has been delayed through the f a u l t of e i t h e r buyer or s e l l e r the goods are a t the r i s k of the party i n f a u l t as regards any loss which might not have occurred but f o r such f a u l t " . I t w i l l be noted t h a t t h i s sub-section r e s u l t s i n only one aspect of r i s k passing, r i s k of loss which would not otherwise have occurred. The r i s k of other loss would be determined, subject t o contrary agreement, by the normal r u l e , res p e r i t domino. I n a l l of these s i t u a t i o n s , as a r e s u l t of agreement, com- mercial p r a c t i c e or f a u l t , r i s k may pass t o the buyer ahead of property and possession. What f o l l o w s from the f a c t t h a t the buyer has acquired r i s k i n goods which he n e i t h e r possesses nor owns? I s the Buyer w i t h Risk under an O b l i g a t i o n t o pay the Contract Price i f the Goods Perish? Is the buyer, where r i s k has passed p r i o r t o property and possession, l i a b l e t o the s e l l e r f o r the p r i c e of the goods i f the goods perish? Academic opinion i s d i f f i c u l t t o gauge f o r , o f t e n , w r i t e r s tend t o assert Benjamin, "Sale of Goods" 1557. 3 E.g. Sterns v. Wickers L t d . /"1923 7 1 K.B. 78. The question of the d i v i s i b i l i t y of r i s k i s one which w i l l be. discussed l a t e r i n t h i s P a r t , see Section C. - 37 - merely t h a t the buyer must bear "the l o s s " . Those who consider the nature of t h i s l i a b i l i t y u n i v e r s a l l y accept o r , perhaps, assume t h a t i f the r i s k has passed t o the buyer he must, i f the goods p e r i s h , pay t o the s e l l e r the agreed c o n t r a c t price'' and t h a t t h a t sum c o n s t i t u t e s the s e l l e r ' s l o s s . No attempt i s made t o d i s t i n g u i s h between those s i t u a t i o n s i n which property has passed t o the buyer and those i n which i t has not and the clear inference i s t h a t the buyer must pay the contract p r i c e , because he has r i s k , whether or not he has property i n the goods. There i s some, l i m i t e d , j u d i c i a l support f o r t h i s assumption. In Martineau v. K i t c h i n q ^ Blackburn J. considered the s i t u a t i o n i n which property and possession remains w i t h the s e l l e r w h i l s t r i s k i s w i t h the buyer. assume t h a t i t /"property 7 had not passed. agreement between the p a r t i e s was I f the 'though they /"the goods 7 s h a l l not be yours, I s t i p u l a t e and agree t h a t i f I keep them beyond, the month 1 the r i s k s h a l l be upon y o u ; and then the goods p e r i s h ; t o say t h a t the buyer could set up t h i s defence and say, 'Although I s t i p u l a t e d t h a t the r i s k should be mine, yet inasmuch as an accident has happened which destroyed them, I w i l l have no part of t h i s r i s k , but w i l l throw i t e n t i r e l y upon you because the property d i d not pass t o me' i s a p r o p o s i t i o n which, s t a t e d i n t h i s way, appears t o be absolutely a r e d u c t i o ad absurdum; and t h a t i s r e a l l y what the argument amounts t o . I f the p a r t i e s have s t i p u l a t e d t h a t , i f a f t e r the two months the goods remain i n the s e l l e r ' s warehouse, they s h a l l , nevertheless, remain there at the buyer's r i s k , i t would be a manifest absurdity t o say t h a t he i s not t o pay f o r them." I t i s submitted t h a t i t may w e l l be absurd t o deny, i n such circumstances, t h a t the buyer, bearing the r i s k , must s u f f e r the l o s s . I t may, however, E.g. Atiyah "The Sale of Goods" 4 t h ed. page 161; Anson "Law of Contract" 23rd ed. page 480; Sealey "Risk i n the Law of Sale" 1972 31 C.L.J. 225. 6 ( 1 8 7 2 ) L.R. 7 Q.B. 436. - 38 - not f o l l o w t h a t because he has t h e r i s k , and must s u f f e r t h e l o s s , the buyer must pay the c o n t r a c t In Castle v. P l a y f o r d price. 7 the Court o f Exchequer Chamber appeared t o determine t h a t the o b l i g a t i o n t o pay the p r i c e does a r i s e when the s e l l e r ' s goods p e r i s h w h i l s t a t the buyer's r i s k . loss o f a consignment The case involved the o f i c e , the p r i c e o f which was t o be determined, by weighing, upon a r r i v a l a t i t s d e s t i n a t i o n . The pleadings requested the • Court t o award the s e l l e r the "value" o f t h e cargo, request t h a t the Court should award the c o n t r a c t which may be a price. Certainly M a r t i n B., a t f i r s t i n s t a n c e , would appear t o equate "value" w i t h price when r e f e r r i n g t o the p o s s i b i l i t y t h a t the terms o f the c o n t r a c t "accelerate t h e defendants' l i a b i l i t y the event o f a p e r i s h i n g t o pay the value o f the goods" i n 9 of the subject matter. I n the Court o f Exchequer Chamber, however, the Court was less c e r t a i n i n i t s use o f the term "value". Cockburn C.J. construed t h e c o n t r a c t as meaning t h a t " t h e defendant undertook t h a t i f the cargo should be shippe-d and the b i l l s o f lading t r a n s f e r r e d t o him, he would pay f o r i t according t o a c e r t a i n r a t e ; and i f i t perished he would pay f o r i t according t o what might be a f a i r estimation o f i t s value a t t h e time i t went down"."^ Blackburn J. asserted t h a t "when the ship went down t h e r e would be so much i c e on board, and, i n a l l p r o b a b i l i t y , upon an ordinary voyage so much would have melted; and what the defendant has taken upon h i m s e l f t o pay i s the amount which, i n a l l p r o b a b i l i t y , would have been payable f o r the i c e " . The two seem t o 7 ( 1 8 7 2 ) L.R. 7 Ex. 98. 8 See L.R. 5 Ex. 165. 9 L.R. 5 Ex. 165, 168. 10 ( 1 8 7 2 ) L.R. 7 Ex. 98, 99. - 39 - be t a l k i n g o f d i f f e r e n t r e l i e f f o r the p l a i n t i f f . Blackburn J. i s c l e a r l y a s s e r t i n g t h a t the defendant was l i a b l e t o pay a sum equal t o an e s t i m a t i o n o f the c o n t r a c t p r i c e . Cockburn C.J., on the other hand, r e f e r s t o the buyer's o b l i g a t i o n t o pay, t o the s e l l e r , a sum equal t o the value of t h e i c e "when the s h i p went down", n o t , i t w i l l be noted, a sum equal t o the estimated p r i c e , which p r i c e was t o have been determined only upon arrival. the I t would appear t h a t w h i l s t Blackburn J. was o f the o p i n i o n t h a t buyer should pay the p r i c e , Cockburn C.J. concluded t h a t the buyer should compensate the s e l l e r f o r h i s a c t u a l l o s s , t h e l o s s t o be assessed on t h e basis o f , say, the replacement value o f t h e consignment. As, however, both Cockburn C.J. and Blackburn J. gave judgement f o r the p l a i n t i f f and as the r e l i e f requested was ambiguous, i t i s d i f f i c u l t t o determine the a c t u a l nature o f the award. Another case i n which i t i s d i f f i c u l t t o a s c e r t a i n t h e nature o f t h e sum awarded i s Denby Hamilton and Co. v. B a r d e n . ^ As a r e s u l t o f the p r o v i s o t o s e c t i o n 20 Sale o f Goods Act 1893 (now s e c t i o n 20(2)) t h e purchaser had acquired r i s k i n r e l a t i o n t o goods o f the s e l l e r which had perished. The s e l l e r claimed the c o n t r a c t p r i c e o r , as an a l t e r n a t i v e , damages f o r f a i l u r e t o take d e l i v e r y and i t i s n o t c l e a r from the j u d g 12 ment whether the sum awarded represented the p r i c e or damages f o r breach. Even i f the sum awarded by S e l l e r s J., i n Denby Hamilton and Co. v. Barden, was the c o n t r a c t p r i c e the case would s t i l l be dubious a u t h o r i t y f o r a x ± /~1949_7 1 A l l E.R. 435. 12 The f a c t t h a t S e l l e r s J. considered the s e l l e r s duty t o m i t i g a t e ( a t page 438) i s o f no assistance f o r , w h i l s t there i s normally no o b l i g a t i o n t o m i t i g a t e when suing f o r the p r i c e , the proviso t o s e c t i o n 20, imposing l i a b i l i t y on the p a r t y a t f a u l t f o r "any loss which might not have occurred but f o r such f a u l t " , c l e a r l y i n c o r p o r a t e s a s i m i l a r n o t i o n i n t o any c l a i m brought i n r e l i a n c e upon the p r o v i s o , whether t h e c l a i m be f o r the p r i c e or f o r some other sum. - 40 - general p r o p o s i t i o n t h a t the p r i c e can be recovered where the buyer has r i s k , but not property, i n goods which have perished. The award o f the p r i c e might merely r e f l e c t the unwillingness of a court t o permit a buyer, who has, i n breach o f c o n t r a c t , d e f a u l t e d i n t a k i n g d e l i v e r y o f the goods, t o r e s i s t a claim f o r the p r i c e by r e l y i n g upon the f a c t t h a t property has n o t , as a d i r e c t r e s u l t o f h i s own d e f a u l t , passed t o him. Such s n o t i o n was introduced by Blackburn J. i n Martineau v. K i t c h i n q : ^ "As a general r u l e res p e r i t domino, the o l d C i v i l law maximj i s a maxim o f our law, and when you can show t h a t t h e property passed, the r i s k o f the loss prima f a c i e i s on the person i n whom the property i s But the two are not inseparable By the C i v i l law i t always was considered t h a t i f there was any weighing, or anything o f the s o r t which prevented the c o n t r a c t from being p e r f e c t a emptio, whenever t h a t was occasioned by one o f the p a r t i e s i n mora, and i t was h i s d e f a u l t he s h a l l have t h e r i s k j u s t as i f there was emptio perfecta when the weighing i s delayed i n consequence of the i n t e r f e r e n c e o f the buyer so t h a t property d i d not pass because the non-completion o f the bargain and s a l e , which would a b s o l u t e l y t r a n s f e r the p r o p e r t y , was owing t o the delay o f the purchaser, the purchaser should bear the r i s k j u s t as i f property had passed."13 I n Martineau v. K i t c h i n q t h e p l a i n t i f f s e l l e r had, on 21st March 1870, d e l i v e r e d t o the buyer a notice s t a t i n g "please remove the f o l l o w i n g sugars now l y i n g here a t your r i s k ". The f i r e , which destroyed the sugar, d i d not break out u n t i l 24th A p r i l 1870 and Blackburn J. drew a t t e n t i o n t o "another reason which i n t h i s case would c l e a r l y apply the delay i n weighing i s q u i t e as much the f a u l t o f the purchaser as o f the s e l l e r s .... i t i s the buyer, i n e f f e c t who requests t h a t .... the weighing should be postponed f o r a time. Therefore i t i s i n consequence 14 of h i s delay t h a t the weighing does not take place". 6 ( 1 8 7 2 ) L.R. 7Q.B. 436. 1 3 14 A t pages 454, 456. Page 456. Perhaps both - 41 - Martineau v. K i t c h i n q and Denby Hamilton and Co. v. Barden should be regarded as cases i n which, w h i l s t property had not passed t o the buyer, the courts were prepared t o apply something analogous t o an estoppel t o prevent the buyer r e l y i n g upon t h i s . Such an "estoppel" would, presumably, apply only where, as i n these cases, the delay i n t r a n s f e r r i n g property was d i r e c t l y a t t r i b u t a b l e t o the f a u l t of the buyer, whether such f a u l t amounted t o a breach o f c o n t r a c t ^ or not."^ The e f f e c t o f the "estoppel" would be t h a t the s e l l e r could, i n such circumstances, recover the p r i c e even though property had not passed. The nature o f the award made i n both Castle v. Playford and Denby Hamilton and Co. v. Barden may be d i f f i c u l t t o determine, i n 7 Bevinqton and Morris v. Dale and Co. Ltd.,"*" another p o t e n t i a l a u t h o r i t y i n t h i s area, circumstances conspired so as t o render the nature o f the sum awarded by the Court not so much d i f f i c u l t t o determine as a matter o f no account. The purchaser had r e c e i v e d , on sale or r e t u r n terms, goods which were s t o l e n from him p r i o r t o the passing o f p r o p e r t y . Accepting the existence of a trade custom t h a t r i s k passed t o the buyer as soon as he received the goods, the Court found f o r the p l a i n t i f f s e l l e r and determined t h a t the purchaser must bear the l o s s . When considering the nature of t h a t l o s s , however, the Court found, u n f o r t u n a t e l y , t h a t the cost o f replacement was i d e n t i c a l t o the invoiced p r i c e and, as a r e s u l t , gave no consideration t o the basis f o r determining the amount o f the award. There are few other cases d i r e c t l y on the p o i n t . the I n Sterns v. Wickers Court o f Appeal was faced w i t h a s i t u a t i o n i n which goods had d e t e r i o r a t e d p r i o r t o property passing but subsequent t o the buyer's ^ A s i n Denby Hamilton and Co. v. Barden. ^ A s i n Martineau v. K i t c h i n q . 17 3 ( 1 9 0 2 ) 7 Com. Cas. 112. /~1923 7 1 K.B. 78. 3 - 42 - a c q u i s i t i o n of r i s k . The Court was, however, only c a l l e d upon t o determine whether or not the buyer could sue f o r the d e t e r i o r a t i o n i n q u a l i t y i n the goods which were d e l i v e r e d t o him. The f a c t t h a t the r i s k had passed simply r e s u l t e d i n the buyer l o s i n g h i s r i g h t t o sue and, the goods not havi perished, the s e l l e r ' s remedy i n such a s i t u a t i o n was not considered. 18 S i m i l a r l y i n I n g l i s v. Stock, where there was a loss of goods forming an undivided p o r t i o n of a l a r g e r consignment, the nature of the s e l l e r ' s remedy was not at issue. The Court, which accepted t h a t r i s k had passed t o the buyer p r i o r t o property, was p r i m a r i l y concerned t o e s t a b l i s h whether or not the buyer had an insurable i n t e r e s t i n the goods which had perished. The defendant insurance company, which contended t h a t n e i t h e r property nor r i s k had passed t o the buyer, argued t h a t the buyer could not have an insurable i n t e r e s t a t the time of the l o s s . This was the only defence r e l i e d upon and the extent of the buyer's i n t e r e s t , i f an insurable i n t e r e s t was found t o e x i s t , was not r a i s e d . The cases i n which the courts have a c t u a l l y considered the consequences of the s e l l e r ' s goods p e r i s h i n g w h i l s t i n h i s possession, a t the r i s k of the buyer, thus provide meagre a u t h o r i t y f o r the p r o p o s i t i o n t h a t the buyer i s l i a b l e to pay the p r i c e . The t r u e nature of the sums awarded i n both Castle v. Playford and Denby Hamilton and Co. v. Barden i s a matter f o r conjecture and the problem of determining the sum t o be awarded i n Bevington and Morris v. Dale and Co. L t d . was s h o r t - c i r c u i t e d by a convenient f i n d i n g of f a c t . Martineau v. K i t c h i n q , together, p o s s i b l y , w i t h Denby Hamilton and Co. v. Barden, may be a u t h o r i t y f o r the p r o p o s i t i o n t h a t the p r i c e can be recovered, where the s e l l e r has retained property i n , and possession o f , the goods, only i f the r e t e n t i o n of property was inadvertent and due t o the d e f a u l t of the buyer. (1885) 10 App. Cas. 263. Short of t h i s p o s s i b i l i t y - 43 - there i s l i t t l e support f o r the n o t i o n t h a t the s e l l e r may c o n t r a c t p r i c e from a buyer who recover the has acquired nothing under the c o n t r a c t other than the r i s k of d e s t r u c t i o n . L i a b i l i t y t o pay the Contract P r i c e : I t may, An H i s t o r i c a l Perspective perhaps, be i n s t r u c t i v e , a t t h i s s t a g e } t o determine the o r i g i n s and trace the development of the a c t i o n a v a i l a b l e t o a s e l l e r of goods f o r recovery of the p r i c e . I n i t i a l l y the a c t i o n l a y i n Debt which, at f i r s t , lay only when the goods had been d e l i v e r e d t o the buyer. " I n the a c t i o n of debt 'the defendant was conceived of as having i n h i s possession something belonging t o the p l a i n t i f f which he might not 19 reasonably keep but ought t o surrender'. had s o l d , or l e n t , or deposited wished t o be paid t h a t sum, Now i t i s clear t h a t i f A goods t o or w i t h B f o r a f i x e d sum, the a c t i o n of debt would l i e . and A I t i s equally c l e a r t h a t t i l l the possession of the goods had been handed over no such 20 a c t i o n could be brought". By Henry VI's r e i g n , however, i t had become possible f o r the s e l l e r t o sue i n debt upon an agreement t o s e l l a 21 specific chattel. Holdsworth sees i n t h i s the o r i g i n of the n o t i o n t h a t i n a c o n t r a c t of sale of s p e c i f i c goods property passes at the time of 22 23 making the c o n t r a c t . As a r e s u l t of Slade's case the a c t i o n of Debt 24 was v i r t u a l l y superceded by I n d e b i t a t u s Assumpsit. I n 1696 i t was held t h a t t h i s a c t i o n would only l i e where Debt would l i e , being a v a i l a b l e , 19 H.L.R. v i 260. ?n S i r W i l l i a m Holdsworth: 21 See Y.B. 22 "A History of English Law" 23 ( 1 6 0 2 ) 4 Co. "A H i s t o r y of English Law" 20 Hy v . i . T r i n . p i . 4. Vol. I l l page 355. Rep. 24 Bovey v. Castleman 1 L t d . Rayen 67. v o l . I l l page 420. - 44 - t h e r e f o r e , only where the goods had been d e l i v e r e d o r , i f they had n o t , where property i n them had passed. The p o s i t i o n was s u b s t a n t i a l l y the same a t the time o f t h e passing 2S of the Sale o f Goods Act 1893. I n Colley v. Overseas Exporters McCardie J., r e v i e w i n g the pre-1893 law, i d e n t i f i e d only two s i t u a t i o n s i n which t h e s e l l e r could recover t h e p r i c e . The f i r s t was provided f o r by t h e i n d e b i t a t u s count f o r goods s o l d and d e l i v e r e d which, according 26 t o B u l l e n and Leake: "Precedents o f Pleading" was pleaded t h u s : "Money payable by t h e defendant t o the p l a i n t i f f f o r goods sold and d e l i v e r e d by t h e p l a i n t i f f t o t h e defendant". 27 I n B o u l t e r v. A r n o t t the I t had been e s t a b l i s h e d , , t h a t t h i s count would not l i e b e f o r e d e l i v e r y o f goods t o the buyer. Quite c l e a r l y a s e l l e r c o u l d not have brought such an a c t i o n where t h e goods t o be t r a n s f e r r e d had perished p r i o r t o delivery. The only other s i t u a t i o n i n which t h e p r i c e c o u l d be recovered was provided f o r by the i n d e b i t a t u s count f o r goods bargained and s o l d , pleaded as f o l l o w s : "Money payable by t h e defendant t o t h e p l a i n t i f f 28 f o r goods bargained and s o l d by t h e p l a i n t i f f t o t h e defendant." "This count was a p p l i c a b l e where upon a s a l e o f goods t h e property had passed t o t h e purchaser and t h e c o n t r a c t had been completed i n a l l respects except d e l i v e r y , and the d e l i v e r y was not a p a r t o f the c o n s i d e r a t i o n f o r the p r i c e or a c o n d i t i o n precedent t o i t s payment. 29 passed the count would not l i e . " I f t h e property had n o t Having reviewed t h e pre-1893 s i t u a t i o n McCardie J. concluded t h a t " I n my view the law as t o the circumstances /"1921_7 3 K.B. 302. under which an a c t i o n w i l l l i e f o r the p r i c e o f goods has not been ( 3 r d ed) page 380. 2 5 2 6 2 7 ( 1 8 3 3 ) 1 Cr. and M. 333. 28 "Precedents o f Pleading" page 39. 2 9 p e r McCardie J., a t page 310, c i t i n g Atkinson v. B e l l (1828) 8 B and C 277. - 45 - changed by the Sale o f Goods Act 1893". In arriving at this conclusion McCardie J. d i d not overlook s e c t i o n 49 (2) Sale o f Goods Act 1893, which provided f o r one s i t u a t i o n i n which the s e l l e r could b r i n g an a c t i o n f o r 3 the p r i c e where no property had passed, "*" f o r he l a t e r incorporated the provisions o f t h a t sub-section i n t o h i s conclusion: " I n my opinion no a c t i o n w i l l l i e f n r the p r i c e o f the goods u n t i l the property has passed, save only i n the s p e c i a l cases provided f o r by s e c t i o n 49 ss 2. This seems p l a i n on both the code and on common law p r i n c i p l e . I have searched i n vain f o r a u t h o r i t y t o the c o n t r a r y . " ^ ^ I t seems q u i t e c l e a r t h a t , a t common law, the passing o f property was the determining f a c t o r i n r e l a t i o n t o the a v a i l a b i l i t y o f an a c t i o n f o r the p r i c e . Apart from the p r o v i s i o n s o f s e c t i o n 49(2) Sale of Goods Act 1979, the importance o f property having passed has not been diminished, by the passing o f the 1893 Act nor by i t s re-enactment i n 1979. I t would appear, as a r e s u l t , t h a t i t should not be possible t o sue a buye f o r the p r i c e , where r i s k has passed but property has n o t . The S i g n i f i c a n c e o f the Passing o f Property What, however, i s the "mischief" behind these rules? s e l l e r only sue where he has parted w i t h property? Why can the The answer may, perhap 3 be t h a t suggested by Parke B. i n L a i r d v. Pirn? a case i n v o l v i n g an a c t i o n f o r breach o f a c o n t r a c t t o s e l l land. Where there i s such a breach, Baron Parke asserted, the s e l l e r can only sue the buyer f o r the c o n t r a c t p r i c e i f the conveyance has been executed and the l e g a l estate t r a n s f e r r e d per McCardie J., a t page 310. 3 "^"Where, under a c o n t r a c t o f s a l e , the p r i c e i s payable on a day c e r t a i n i r r e s p e c t i v e of d e l i v e r y , and the buyer w r o n g f u l l y neglects or refuses t o pay such p r i c e , the s e l l e r may maintain an a c t i o n f o r the p r i c e , a l though the property i n the goods has not passed, and the goods have not been appropriated t o the c o n t r a c t . " 3 2 A t page 310. (1841) 151 E.R. 857. - 46 - 34 s h o r t of t h a t the s e l l e r can only sue f o r damages. The reason f o r t h i s was, he claimed, t h a t " i t i s c l e a r t h a t he /~the s e l l e r 7 cannot have the land and i t s value too".''"' Baron Parke went on t o c l a i m t h a t "A party cannot recover the f u l l value of a c h a t t e l , unless under circumstances which import t h a t the property has passed t o the defendant, as i n the case of goods s o l d and d e l i v e r e d , where they have been a b s o l u t e l y parted w i t h and cannot be s o l d again". I f the i n a b i l i t y t o r e - s e l l i s the underlying requirement of the r u l e t h a t p r o p e r t y must have passed before the s e l l e r can maintain an a c t i o n f o r the p r i c e , i s i t p o s s i b l e t h a t the s e l l e r can sue f o r the p r i c e where p r o p e r t y has not passed b u t , the goods having perished, i t i s c l e a r t h a t a r e - s a l e i s not possible? A persuasive voice i s t h a t of Sealey"^ who, p o i n t i n g out t h a t r i s k i s nowhere d e f i n e d i n the Sale of Goods Act, a t t r i b u t e s many of the doubts which e x i s t i n t h i s area t o t h a t l a c k of d e f i n i t i o n and r u l e s r e l a t i n g t o r i s k as an o b l i g a t i o n / r i g h t . r i s k i s not defined or delineated t o the lack of Sealey concludes t h a t by the Sale of Goods Act because i t i s a negative concept which r e p l a c e s , or n e g a t i v e s , i n c e r t a i n circumstances, conditions which, n o r m a l l y , are p r e - r e q u i s i t e t o the enforcement o f o t h e r "primary" o b l i g a t i o n s . Normally, f o r example, the s e l l e r must e s t a b l i s h . t h a t he has passed p r o p e r t y t o the buyer i f he i s t o be able t o sue f o r the p r i c e . Where, however, the buyer has the r i s k , Sealey asserts t h a t the incidence of r i s k negatives the requirement t h a t property must pass and allows the s e l l e r t o sue and may f o r the p r i c e . The argument i s a t t r a c t i v e w e l l r e f l e c t a r a t i o n a l i s a t i o n of the apparently i n t u i t i v e f e e l i n g 34 Though the e q u i t a b l e order of s p e c i f i c performance would now be a v a i l able t o compel performance and render the purchaser l i a b l e t o pay the price 3 5 A t page 854 36 3 7 At page 854. " R i s k i n the Law of Sale" 31 C.L.J. 225. 47 - which has l e d academic o p i n i o n t o the b e l i e f t h a t an a c t i o n f o r the p r i c e can l i e , even where property has not passed, i f t h e goods have perished when a t the buyer's r i s k . Further support f o r t h i s view may be developed by analogy w i t h t h e p r o v i s i o n s o f s e c t i o n 49(2) Sale o f Goods 3 Act. "'" The L e g i s l a t u r e presumably enacted s. 49(2) on the basis t h a t t h e buyer, having agreed t o pay the c o n t r a c t p r i c e , even though t h e goods have not been d e l i v e r e d t o him and property has not vested i n him, must be taken t o have waived h i s r i g h t t o r e q u i r e these p r e - r e q u i s i t e s t e n d e r i n g the p r i c e . before I f so, i t would seem t o f o l l o w t h a t i n those circumstances i n which r i s k has passed ahead o f property as a r e s u l t o f express agreement between t h e p a r t i e s , t h e buyer would be s i m i l a r l y taken t o have waived performance o f these o b l i g a t i o n s o f the s e l l e r which, normally, are p r e - r e q u i s i t e s t o an a c t i o n f o r the p r i c e . I tis, f r o m ' t h i s p o i n t , a s h o r t step t o take t o the f u r t h e r conclusion t h a t where r i s k passes as a matter o f law, r a t h e r than agreement, t h e buyer w i l l , again, be taken t o have l o s t h i s r i g h t t o i n s i s t upon performance o f these p r e - r e q u i s i t e o b l i g a t i o n s . Recovery of " l o s s " r a t h e r than Recovery o f " p r i c e " Another approach t o t h e problem o f determining the s e l l e r ' s remedy where h i s goods have perished w h i l s t a t t h e buyer's r i s k emphasises t h e r e l a t i o n s h i p between " r i s k " and " l o s s " r a t h e r than t h a t between " r i s k " 38 and "price". I n Martineau v. K i t c h i n q , Cockburn C.J. asserted " l o o k i n g a t a l l the circumstances o f the case, i t i s impossible that t o doubt "Where, under a c o n t r a c t o f s a l e , t h e p r i c e i s payable on a day c e r t a i n i r r e s p e c t i v e o f d e l i v e r y , and the buyer w r o n g f u l l y neglects or refuses t o pay such p r i c e , t h e s e l l e r may maintain an a c t i o n f o r the p r i c e , a l though the property i n the goods has not passed, and the goods have not been appropriated t o the c o n t r a c t . " 3 8 A t page 451. - 48 - t h a t the t r u e i n t e n t i o n of the p a r t i e s ...... was t h a t the property was w i t h the buyer and no longer i n the s e l l e r s a t the time o f the f i r e , and t h e r e f o r e the t h i n g having perished, perishes t o the dominus, namely the buyer, and not t o the s e l l e r s , who had ceased t o have anything to do w i t h i t " . The approach adopted by the Lord Chief J u s t i c e implies t h a t the i n i t i a l question t o be determined by the Court i s t o determine whether the goods were owned by the s e l l e r or the buyer, so as t o determine who has s u f f e r e d the l o s s . the Having established who has suffered loss the Court should then determine who must bear the r i s k of that loss. I n Martineau v. K i t c h i n q the s e l l e r , having t r a n s f e r r e d ownership, had no i n t e r e s t i n the goods, the buyer having both property and r i s k . The s e l l e r was, t h e r e f o r e , able t o sue, on the c o n t r a c t , f o r the p r i c e , " l e a v i n g the buyer t o s u f f e r the loss of h i s goods. but What, however, of the s i t u a t i o n i n which the s e l l e r has property the buyer has r i s k ? I f the goods have perished i t would seem clear t h a t the goods being those of the s e l l e r i t i s he, the s e l l e r , who suffered a loss. the has The buyer has the r i s k and, t h a t being so, he must bear l o s s , b u t , i n t h i s s i t u a t i o n , the loss t o be borne i s t h a t which would, but f o r the passing o f r i s k , have f a l l e n upon the s e l l e r . Consider as an example, the s i t u a t i o n i n which the s e l l e r has agreed t o s e l l the buyer s p e c i f i c goods or unascertained goods from a s p e c i f i c b u l k . Assume t h a t r i s k i n these goods has passed t o the buyer but property has n o t . The p e r i s h i n g of the s p e c i f i c goods, or of the s p e c i f i c source, w i l l be the seller's loss. I f i t i s possible t o f r u s t r a t e a c o n t r a c t i n which 39 r i s k has passed t o the buyer, the c o n t r a c t u a l o b l i g a t i o n t o d e l i v e r w i l l be discharged and, as a r e s u l t , the goods, which may w e l l have been unique only i n so f a r as they were i d e n t i f i e d f o r the purposes of the 39 See later. - 49 - c o n t r a c t of s a l e , may cease t o have any unique q u a l i t y . I f so, the s e l l e r ' s loss i s obviously the cost o f replacing h i s stock. the buyer be l i a b l e f o r the price? Why should This i s not the s e l l e r ' s loss and, the goods being those o f the s e l l e r i t i s the s e l l e r ' s loss t h a t the buyer i s obliged t o bear. Circumstances i n which the Price may be Recovered When, then, can the s e l l e r b r i n g an a c t i o n f o r the p r i c e as a r e s u l t of h i s goods having perished a t the buyer's r i s k ? 1) I t i s possible t h a t where the goods are a t the buyer's r i s k as a r e s u l t o f the operation o f s e c t i o n 20(2) Sale o f Goods Act .1979, the buyer may be sued f o r the price " j u s t as i f property had passed". 2) Where the goods are a t the buyer's r i s k because o f express agreement between the p a r t i e s there would seem t o be l i t t l e support f o r the p r o p o s i t i o n t h a t the s e l l e r can sue f o r the price. The case-law i s less than decisive and an h i s t o r i c a l perspective would i n d i c a t e t h a t such an a c t i o n can only be brought when property has passed. To maintain t h a t the s e l l e r cannot sue f o r the price i s not t o deny t h a t the s e l l e r may s t i l l have an a c t i o n , f o r the buyer does have the r i s k . I t would seem l i k e l y t h a t , i f an a c t i o n f o r the price i s not a v a i l a b l e t o t h e s e l l e r , the most l i k e l y a l t e r n a t i v e would be t o sue f o r the replacement value o f the goods which have perished. I t may be, however, t h a t the s e l l e r may be able t o b r i n g an a c t i o n f o r the price on the basis t h a t the buyer, having agreed t o accept r i s k , has waived h i s r i g h t t o i n s i s t upon d e l i v e r y or the t r a n s f e r o f property. 3) I t may be the case t h a t , i n a l l s i t u a t i o n s i n which r i s k has - 50 - passed t o the buyer p r i o r t o the s e l l e r having t r a n s f e r r e d property, the d o c t r i n e o f r i s k would, as Sealey asserts, be taken t o obviate the requirement t h a t the s e l l e r perform prer e q u i s i t e o b l i g a t i o n s before b r i n g i n g h i s a c t i o n f o r the p r i c e . I f so, the p r i c e would always be recoverable. F a i l u r e o f Consideration A l l o f the above a l t e r n a t i v e s assume t h a t , whatever the a c t i o n a v a i l a b l e t o the s e l l e r , i f the goods p e r i s h , w h i l s t a t the buyer's r i s k , he must be l i a b l e t o compensate the s e l l e r f o r h i s l o s s . considering When, however, the s i t u a t i o n i n which r i s k attaches t o t h e buyer who has neither property i n , nor possession o f , the goods he has agreed t o buy, i t i s d i f f i c u l t t o avoid a r r i v i n g a t the conclusion t h a t t h e buyer has, i f the goods perish p r i o r t o the passing o f property or possession, received no b e n e f i t under the c o n t r a c t . The r e c e i p t o f the r i s k itself i s a l l t h a t the buyer has acquired and t h i s i s hardly a b e n e f i t , f o r the only r i g h t t h i s would seem t o confer upon the buyer i s the r i g h t , now t h a t he has an insurable i n t e r e s t i n the goods, t o enter i n t o a p o l i c y o f insurance, which " r i g h t " i s , i n r e a l i t y , a mere power t o n e u t r a l i s e an obligation. The buyer has, a d m i t t e d l y , received a promise t h a t he w i l l receive d e l i v e r y o f , and property i n , the goods he has agreed t o buy, but "when one i s considering the quasi-contractual the law o f f a i l u r e o f consideration and of r i g h t t o recover money on t h a t ground, i t i s , generally speaking, not the promise which i s r e f e r r e d t o as the con40 s i d e r a t i o n , but the performance o f the c o n t r a c t " . has conferred none o f the b e n e f i t s contracted Given t h a t the s e l l e r f o r one i s l e d t o consider per Viscount Simon - Fibrosa Spoka Akcyjna v. F a i r b a i r n Lawson Combe Barbour L t d . /~1943_7A.C. 32, 48. - 51 - - t h e p r o v i s i o n s of s e c t i o n 54 Sale o f Goods Act 1979 which provides: "Nothing i n t h i s Act s h a l l a f f e c t the r i g h t of the buyer t o recover money paid where the c o n s i d e r a t i o n f o r the payment o f i t has The s e c t i o n could not be couched i n stronger terms. failed." I t would i n d i c a t e t h a t , where property and possession have not been t r a n s f e r r e d by the s e l l e r , the buyer could recover any money p a i d , n o t w i t h s t a n d i n g the f a c t t h a t he has t h e r i s k , and i t i m p l i e s t h a t ;the buyer could refuse t o pay any money i f he has not already done so. Lord Simonds emphasised the s i g n i f i c a n c e of s e c t i o n 54 of the Act when, i n The Julianahe asserted t h a t , i n r e l a t i o n t o a c . i . f . c o n t r a c t , the passing o f r i s k was o f no account i f there was a complete f a i l u r e o f c o n s i d e r a t i o n : "The s e l l e r s ....... urged t h a t the r i s k i n the goods had passed t o the buyers, even i f p r o p e r t y had n o t , and t h a t the insurance cont r a c t made by the s e l l e r s was a v a i l a b l e f o r the buyers I am unable t o see how /Ehis 7 a s s i s t s the s e l l e r s . I f the contract is a c o n t r a c t f o r the sale o f rye t o be performed by i t s p h y s i c a l or symbolic d e l i v e r y , what relevance has i t t h a t the s e l l e r s say a t a c e r t a i n stage t h a t the r i s k has passed and the insurance i s a v a i l a b l e ? I t may w e l l be t h a t , i f t h e r e i s any v a l i d i t y i n these p r o p o s i t i o n s , the buyers r e c o v e r i n g upon the insurance p o l i c i e s would h o l d the proceeds f o r the b e n e f i t o f the s e l l e r s , but t h i s does not seem t o me t o touch the question whether there has been a t o t a l f a i l u r e o f c o n s i d e r a t i o n . " Can i t be t h a t where goods p e r i s h w h i l s t i n the possession o f a s e l l e r who has r e t a i n e d property i n them, the buyer has no o b l i g a t i o n t o compensate the s e l l e r , even though the buyer has r i s k ? Perhaps so, but i t may be t h a t t h e problem of a f a i l u r e of c o n s i d e r a t i o n w i l l , i n r e a l i t y , r a r e l y a r i s e i n those s i t u a t i o n s i n which the s e l l e r has property i n the goods w h i l s t the buyer has r i s k . I f the reason f o r property remaining i n the s e l l e r i s the buyer's d e f a u l t i n t a k i n g d e l i v e r y , the Courts may w e l l be disposed t o t r e a t the buyer " j u s t as i f t h e r e was an emptio p e r f e c t a " . I f , on the other hand, r i s k i s on the Comptoir D'Achat e t De Vente du Boeren Bond Beige S/A Ridder Limitada / 1949 7 A.C. 293, 315. v. Luis de - 52 - buyer as a r e s u l t o f express agreement between t h e p a r t i e s and t h e s e l l e r 42 has changed h i s p o s i t i o n i n r e l i a n c e upon t h e buyer's undertaking, the buyer may w e l l be estopped from p o i n t i n g t o t h e f a i l u r e o f c o n s i d e r a t i o n . I f there i s no basis f o r an estoppel t h e buyer may s t i l l be unable t o invoke the p r o v i s i o n s o f s e c t i o n 54, f o r , i n many s i t u a t i o n s i n which r i s k has passed before property, there w i l l be, as i n Sterns v. Wickers, something a k i n t o a c o n s t r u c t i v e d e l i v e r y o f the goods which would l e a d the Court t o conclude t h a t t h e buyer has received some b e n e f i t . I t was s a i d , f o r example, i n the J u l i a n a t h a t " i n those cases i n which i t has been held t h a t r i s k w i t h o u t t h e property has passed t o t h e buyer i t has been because the buyer r a t h e r than t h e s e l l e r was seen t o have an immediate and p r a c t i c a l i n t e r e s t i n the goods, as f o r instance where he has an immediate r i g h t under t h e storekeeper's d e l i v e r y warrant t o t h e d e l i v e r y o f a p o r t i o n o f an undivided bulk i n s t o r e or an immediate r i g h t under s e v e r a l c o n t r a c t s w i t h d i f f e r e n t persons t o t h e whole o f a b u l k not y e t a p p r o p r i a t e d t o the s e v e r a l contracts'.'.^ C l e a r l y a c o u r t would be disposed t o f i n d t h a t the buyer had acquired some i n t e r e s t i n t h e goods, amounting t o a b e n e f i t received under the c o n t r a c t , f o r i f no b e n e f i t can be shown t h e n o t i o n o f f a i l u r e of c o n s i d e r a t i o n may negative t h e passing o f r i s k . Such a r e s u l t would n o t , i t i s submitted, accord w i t h commercial e x p e c t a t i o n s . I t i s sub- m i t t e d t h a t where goods p e r i s h a t t h e buyer's r i s k , i n circumstances i n which n e i t h e r p r o p e r t y nor possession have been t r a n s f e r r e d , the buyer i s l i a b l e t o t h e s e l l e r . The e x t e n t o f t h i s l i a b i l i t y i s , however, a matter o f some doubt. 42 E.g. 43 when n e g o t i a t i n g h i s insurance per Lord Normand, page 319. cover - 53 - SECTION B; WHERE RISK PASSES WITH PROPERTY Normally r i s k w i l l pass t o the purchaser a t the same time t h a t he acquires property i n the goods and i n t h e absence of any contrary agree- ment and o f any d e f a u l t i n r e l a t i o n t o d e l i v e r y , t h i s w i l l always be the 44 case. What i s meant i n these circumstances by the assertion t h a t t h e buyer has r i s k ? Hon/ many r i s k s are t o be borne by the party w i t h Risk? 45 Sealey reminds us t h a t a c o n t r a c t i n g party i s s u b j e c t t o a v a r i e t y of r i s k s , .including: 1) the r i s k t h a t the other may be dishonest; 2) the r i s k t h a t the other may become i n s o l v e n t ; 3) the r i s k t h a t changing market conditions may make h i s bargain an unfortunate one; 4) the r i s k t h a t the goods may p e r i s h ; and 5) the r i s k t h a t the contract may be f r u s t r a t e d . The wording o f s e c t i o n 20 Sale o f Goods Act 1979 points t o the meaning of " r i s k " f o r the purposes o f the Act. The section provides t h a t "the goods" are a t the s e l l e r ' s r i s k u n t i l property i s t r a n s f e r r e d , b u t t h a t t h e r e a f t e r "the goods" are a t the buyer's r i s k . Clearly r i s k r e l a t e s t o the goods themselves rather than t o the nature o f the bargain e f f e c t e d . I t has no r e l a t i o n t o the dishonesty or insolvency o f one o f the c o n t r a c t i n g p a r t i e s , nor t o f l u c t u a t i o n s i n market Section 20 Sale o f Goods Act 1979. 31 Cambridge Law Journal page 228. conditions. - 54 - I t would a l s o appear t h a t a p a r t y w i t h r i s k does not bear t h e r i s k of a f r u s t r a t i n g event: "The agreement of p a r t i e s t h a t the buyers should bear the r i s k of a loss a g a i n s t which the insurance was provided f o r by t h e c o n t r a c t i s not evidence of an i n t e n t i o n t h a t t h e buyers were a l s o t o take the r i s k of a f r u s t r a t i o n which was not w i t h i n the contemplation of the contract."46 47 G l a n v i l l e Williams r e f e r s t o d i c t a by S c r u t t o n L.J. i n K u r s e l l v. Timber 48 Operators t o the e f f e c t t h a t a c o n t r a c t f o r the sale o f goods would be f r u s t r a t e d by supervening i l l e g a l i t y even though p r o p e r t y , and t h e r e f o r e r i s k , had passed t o the buyer. He maintains t h a t i f t h i s dictum i s c o r r e c t the concept of r i s k i s c o n f i n e d t o one p a r t i c u l a r r i s k ; t h e r i s k t h a t t h e goods p e r i s h . G l a n v i l l e Williams does n o t , h i m s e l f , accept t h a t t h e concept o f r i s k i s so l i m i t e d and a s s e r t s , i n r e l a t i o n t o the term " r i s k " as used i n s e c t i o n 20 o f t h e Sale o f Goods Act t h a t " i t means a l l r i s k " , i n c l u d i n g r i s k o f a f r u s t r a t i n g event. There are pre-Act cases i n which the con- cept of r i s k i s r e f e r r e d t o i n e q u a l l y wide terms. Thus, f o r example, 49 50 i n Simmons v. S w i f t Bayley J. asserts t h a t ; "Two questions are involved i n t h i s case: f i r s t , whether the property i n t h e bark was vested i n the defendant so as t o throw a l l r i s k s upon him I tis submitted, however, t h a t such statements cannot d e t r a c t from the c l e a r wording of the Act. Section 20 r e f e r s t o "the goods" being a t the r i s k of s e l l e r or buyer and i t would r e q u i r e an unacceptably extravagent extension of t h i s c o n t i n g e n t l i a b i l i t y t o b r i n g w i t h i n the s e l l e r or buyer's 46 per Lord Normand, Comptoir D'Achat e t de Vente du Boeren Bond Beige v. Luis De Ridder Limitada (The J u l i a n a ) /~1949 7 A.C. 293, 319. 47 S/A "The Law Reform ( F r u s t r a t e d Contracts) Act 1943" page 84, footnote 34. 4 8 4 9 5 Q /'1321J 1 K.B. 298, 312. 1 0 8 E.R. 319. a t page 321. - 55 - r i s k the p o s s i b i l i t y o f , say, supervening i l l e g a l i t y . An event which renders subsequent discharge of the c o n t r a c t u a l o b l i g a t i o n s i l l e g a l attacks performance o f the contract rather than the subject matter o f the c o n t r a c t ; i t operates " i n personam" rather than " i n rem". Only an event which i n t e r f e r e s w i t h the goods themselves w i l l , i t i s submitted, f a l l w i t h i n the ambit o f that aspect o f r i s k which i s provided f o r by s e c t i o n 20 o f the A c t . This conclusion i s a r r i v e d a t by Smith 51 who defines r i s k 52 as "... t h e p a t r i m o n i a l ( i . e . economic) loss s u f f e r e d by the s e l l e r or t h e buyer as the case may be by reason o f the p h y s i c a l d e s t r u c t i o n o f the goods or such damage t h e r e t o t h a t they cease t o be o f the kind described by the contract o f sale - but i n such circumstances t h a t t h e party s u f f e r i n g the loss i s not thereby released from performing h i s o b l i g a t i o n s under t h e contract". I n t h i s d e f i n i t i o n of r i s k two features o f t h e concept are clearly stated: 1) The concept of r i s k does not discharge t h e c o n t r a c t u a l o b l i g a t i o n s o f e i t h e r p a r t y ; such discharge f a l l s w i t h i n the rules r e l a t i n g t o f r u s t r a t i o n of contract. 2) Risk r e l a t e s t o loss r e s u l t i n g from the goods having perished. Smith asserts t h a t t h e loss must r e s u l t from e i t h e r physical d e s t r u c t i o n o f the goods or such damage t o the goods t h a t they cease t o be of the kind described by the c o n t r a c t of sale. I t w i l l be r e c a l l e d t h a t i n Part One o f t h i s t h e s i s the d e f i n i t i o n of " p e r i s h i n g " was extended t o cover t h i s k i n d o f damage t o t h e goods, t h a t i s t o say, damage such as t o change the nature of the i d e n t i t y of the goods (see pages 13-18). 51,, P r o p e r t y Problems i n Sale", T.B. Smith, at page 23. - 56 - I f the second o f these two features i s c o r r e c t l y s t a t e d , and i t has been submitted above t h a t such i s the case, the s i g n i f i c a n c e of the goods being deemed t o have "perished" i s manifest. Risk and Perishing I f the goods have perished, then they u / i i l f a l l w i t h i n the r i s k t h a t , v i r t u e of s e c t i o n 20 Sale o f Goods Act 1979, l i e s e i t h e r w i t h s e l l e r or buyer. I f they have not, then the question o f who bears t h e loss of an untoward event w i l l not be determined by reference t o s e c t i o n 20, f o r t h e r i s k o f t h i s loss i s not provided f o r i n t h a t s e c t i o n . The seemingly "academic" discussion o f the meaning o f " p e r i s h i n g " i n Part One o f t h i s t h e s i s should now f a l l properly i n t o perspective. I t may, a t t h i s stage, be appropriate t o r e - v i s i t some o f the issues considered i n Part One. In Part One there was d e t a i l e d c o n s i d e r a t i o n o f the r e l a t i o n s h i p between the meaning o f the term "perished" and the term "unmerchantable". I t was f i n a l l y concluded t h a t goods which had become unmerchantable would only be considered t o have perished where they are "so unmerchantable as t o no longer comply w i t h the o r i g i n a l d e s c r i p t i o n " . (This statement i s almost i d e n t i c a l t o t h a t incorporated i n t o Smith's d e f i n i t i o n o f r i s k . ) There may, i n some cases, be considerable heartsearching as t o whether the d e t e r i o r a t i o n i n , or damage caused t o , goods i s s u f f i c i e n t l y dramatic t o have r e s u l t e d i n such a d e v i a t i o n from t h e c o n t r a c t u a l l y i d e n t i t y of the goods. for contemplated Much may t u r n on the r e s u l t s o f such heartsearching i f r i s k has passed t o the purchaser he must bear the loss r e s u l t i n g from a p e r i s h i n g of the goods, he w i l l not, however, bear the loss of any untoward event which r e s u l t s i n less swingeing damage t o or d e t e r i o r a t i o n i n the goods. Goods which r e t a i n t h e i r c o n t r a c t u a l i d e n t i t y w i l l not have perished, though they may very w e l l be unmerchantable. As - 57 - a r e s u l t , the s t a t e o f the goods w i l l , u l t i m a t e l y , be a cause o f concern for t h e s e l l e r r a t h e r than the buyer, f o r he w i l l , i n a l l p r o b a b i l i t y , be l i a b l e f o r t h e i r unmerchantable s t a t e . ^ The f a c t t h a t r i s k has passed t o t h e purchaser w i l l not r e l i e v e the s e l l e r o f t h i s l i a b i l i t y , f o r the purchaser bears only the r i s k o f t h e goods p e r i s h i n g . S i m i l a r l y , t h e r e was i n Part One a d e t a i l e d c o n s i d e r a t i o n of the l i k e l i h o o d o f goods being considered t o have "perished" where they had been s t o l e n , or r e q u i s i t i o n e d , or even where, as i n Howell v. Coupland they never came i n t o e x i s t e n c e . There was considerable weight o f academic o p i n i o n t h a t goods which had been r e q u i s i t i o n e d had not "perished". A l l o f the academic w r i t e r s r e f e r r e d t o , however, had a r r i v e d at' t h i s conclusion when contemplating the r u l e s r e l a t i n g t o f r u s t r a t i o n and the a p p l i c a b i l i t y or n o n - a p p l i c a b i l i t y o f the Law Reform ( F r u s t r a t e d Contracts) Act 1943. I t i s questionable whether they would have formed a s i m i l a r o p i n i o n had they been c o n s i d e r i n g t h e consequences of a r e q u i s i t i o n i n g i n r e l a t i o n t o t h e concept o f r i s k . I t i s , perhaps, t h i s s i t u a t i o n t h a t best i l l u s t r a t e s t h e i n t e r r e l a t i o n s h i p between " p e r i s h i n g " , " r i s k " and " f r u s t r a t i o n " . I f "risk" r e l a t e s only t o loss r e s u l t i n g from a p e r i s h i n g o f the goods, then any buyer who bears r i s k merely because o f the o p e r a t i o n o f s e c t i o n 20 Sale of Goods Act 1979 ( r a t h e r than by express agreement, i n which case the p a r t i e s may have made s p e c i f i c reference t o the events which are considered t o be a t the " r i s k " o f the p a r t i e s ) w i l l not be responsible where goods are r e q u i s i t i o n e d , f o r he i s not responsible f o r any l o s s other than t h a t which r e s u l t s from a p e r i s h i n g o f t h e goods. I f a c o n t r a c t f o r the sale o f goods cannot be f r u s t r a t e d where property has passed t o the "^as a r e s u l t of the i m p l i e d undertaking as t o m e r c h a n t a b i l i t y contained i n s e c t i o n 14(2) o f the 1979 A c t . - 58 - buyer, then t h e s e l l e r w i l l notr be released from h i s o b l i g a t i o n t o d e l i v e r and, i n the event o f the r u l e s r e l a t i n g t o r i s k being i n a p p l i c a b l e , there would seem t o be no reason why he should not be l i a b l e i n damages for non-delivery (even though the goods r e q u i s i t i o n e d are those o f the buyer). S i m i l a r l y , even though the buyer has " r i s k " i n t h e goods, he would not be l i a b l e t o pay the p r i c e . Property i n t h e goods having passed t o the buyer, the s e l l e r would normally a n t i c i p a t e t h a t , i n the event of an untoward event, he could t r a n s f e r h i s loss and recover t h e p r i c e from a buyer w i t h r i s k . I f , however, the d o c t r i n e of r i s k does not apply i n the non-perishing s i t u a t i o n so as t o negative t h e s e l l e r ' s o b l i g a t i o n t o d e l i v e r , he would not s a t i s f y t h i s p r e - c o n d i t i o n t o an a c t i o n f o r the p r i c e and would, thus, be unable t o sue. Where goods do p e r i s h , or are deemed t o have perished, the r e s u l t i n g economic loss must c l e a r l y be borne by the party w i t h r i s k . Here, however, the question o f quantum r a i s e s i t s e l f . Risk and Price I t has been suggested e a r l i e r i n t h i s Part t h a t the s e l l e r may n o t be able t o recover the p r i c e o f t h e goods from a purchaser w i t h r i s k where those goods perish p r i o r t o property passing. Where property has passed then, c l e a r l y , t h a t ceases t o be a bar t o recovery o f t h e price.and such an a c t i o n would, without doubt, be recognised by any Court c a l l e d upon t o determine the p o s i t i o n o f the p a r t i e s i n the event o f goods p e r i s h i n g w h i l s t the property o f , and a t the r i s k o f , the purchaser. There a r e , perhaps, two l o g i c a l j u s t i f i c a t i o n s f o r t h i s approach. 1) The goods are those of the purchaser his loss. and t h e i r loss i s , t h e r e f o r e , Had the s e l l e r r e t a i n e d r i s k , the purchaser could see the discussion i n Part Three. - 59 - have t r a n s f e r r e d h i s loss t o the s e l l e r . This n o t being the case, however, the purchaser must bear h i s own l o s s . This loss i s dehors the c o n t r a c t , i n the same way t h a t a p e r i s h i n g o f the goods several months a f t e r discharge of a l l c o n t r a c t u a l o b l i g a t i o n s and w h i l s t the goods were i n the possession of the buyer would be unrelated t o the c o n t r a c t . the goods, having t r a n s f e r r e d property The s e l l e r of t o the purchaser would, perhaps, be deemed t o have d e l i v e r e d t o the buyer and would t h u s , by having discharged t h i s one outstanding removed a bar t o an a c t i o n f o r the p r i c e . o b l i g a t i o n , have Support f o r the view t h a t a passing of property w i l l be accompanied by such a •deemed d e l i v e r y i s t o be found i n the judgment i n Carlos Federspiel o f Pearson J. and C° S.A. v. Charles Twiqq and C° L t d . " ^ i n which i t i s asserted t h a t an a p p r o p r i a t i o n by t h e s e l l e r w i t h the assent o f the buyer may be s a i d always t o i n v o l v e an a c t u a l or c o n s t r u c t i v e d e l i v e r y . I f the s e l l e r retains possession he does so as b a i l e e f o r the b u y e r " . ^ 2) An a l t e r n a t i v e approach would be t h a t of S e a l e y ^ who would assert t h a t the buyer must pay the p r i c e purely and simply as a r e s u l t of h i s having r i s k . render immaterial This "negative concept" would t h e f a c t t h a t there had been no d e l i v e r y , which would normally be a p r e - r e q u i s i t e t o an a c t i o n f o r the p r i c e , and leave no bar t o such an a c t i o n . Each of the explanations o u t l i n e d above would appear t o j u s t i f y the view t h a t the s e l l e r can recover the p r i c e from a purchaser w i t h r i s k 5 5 /"1957_7 1 Lloyds Rep. 240. ^ a t page 255. "^31 Cambridge Law Journal, page 225. - 60 - where goods p e r i s h w h i l s t i n the s e l l e r ' s possession but subsequent t o the passing o f property t o the purchaser. I t may, however, be possible t o approach the problem from a d i f - ferent tack. the I f the goods p e r i s h a f t e r property and r i s k has passed t o buyer, s e c t i o n 7 Sale of Goods Act 1979 cannot operate so as t o release the s e l l e r from h i s o b l i g a t i o n t o d e l i v e r the goods. However i n s 58 such a s i t u a t i o n , G l a n v i l l e Williams argues, the s e l l e r ' s o b l i g a t i o n i s discharged a t common law by operation o f the r u l e i n Taylor v. Caldwell. I f so, the s e l l e r cannot be sued f o r non-delivery and the c o n t r a c t i s 59 "off". How then, i t may be asked, can the buyer be l i a b l e f o r t h e contract price? Not having e f f e c t e d d e l i v e r y , the s e l l e r has not s a t i s f i e d a necessary p r e - c o n d i t i o n t o an a c t i o n f o r the p r i c e which, as a r e s u l t , ought not t o be a v a i l a b l e t o him. The s e l l e r w i l l , t h e n , on t h i s argument, lose h i s r i g h t t o sue f o r the p r i c e . I f r i s k had been w i t h him, at the time of d e s t r u c t i o n of the goods, he would also have had t o have borne the loss o f the goods, which loss would be represented by the purchase p r i c e paid by him f o r the goods ( o r the cost of manufacturing them i f he i s the manufacturer). his His l o s s , had the goods perished a t r i s k would thus have been as f o l l o w s : a) r i s k being w i t h him, he would not have had a c l a i m t o r e - imbursement f o r the loss r e s u l t i n g from d e s t r u c t i o n o f the goods and would have had t o have borne t h a t loss h i m s e l f ; "The Law Reform ( F r u s t r a t e d Contracts) Act 1943, page 27. 59 G l a n v i l l e Williams would deny t h a t both p a r t i e s t o the c o n t r a c t a r e . d i s charged from t h e i r o b l i g a t i o n s , f o r he argues ( a t page 27) t h a t t h e r u l e i n Taylor v. Caldwell discharges only the s e l l e r , f o r i t i s only h i s o b l i g a t i o n t h a t i s now "impossible" t o perform. The buyer i s only released i f he can p o i n t t o a f a i l u r e of c o n s i d e r a t i o n and, where property has passed, he w i l l not be i n a p o s i t i o n t o do so. This argument i s , however, r e j e c t e d i n C h i t t y on Contracts (General P r i n c i p l e s 1307) where i t i s pointed out t h a t s e c t i o n 1(1) of the Law Reform ( F r u s t r a t e d Contracts) Act 1943 r e f e r s t o i m p o s s i b i l i t y of performance and asserts t h a t "... the p a r t i e s t h e r e t o have f o r t h a t reason been discharged from f u r t h e r performance of the c o n t r a c t S i m i l a r l y , i t has been asserted t h a t ".... when f r u s t r a t i o n occurs ... i t does not merely provide one party w i t h a defence i n an a c t i o n brought by the other. I t k i l l s the c o n t r a c t i t s e l f and d i s charges both p a r t i e s a u t o m a t i c a l l y " (per Viscount Simon, Joseph Constantine S.S. Line v. I m p e r i a l Smelting Corporation L t d . /"1942 / A.C. 154, 163J. - 61 - b) t h e c o n t r a c t being f r u s t r a t e d , he would have l o s t h i s claim t o the c o n t r a c t u a l l y agreed p r i c e which, i n e f f e c t , means t h a t he would have l o s t h i s opportunity t o make a p r o f i t . I n the s i t u a t i o n presently envisaged, however, the r i s k i s not w i t h t h e s e l l e r , i t i s w i t h the buyer. The s e l l e r has n o t , t h e r e f o r e , l o s t h i s r i g h t t o be indemnified i n respect o f the loss a r i s i n g from the d e s t r u c t i o n o f the goods. Does i t also f o l l o w t h a t he has a r i g h t t o be indemnified against t h e l o s t opportunity t o make a p r o f i t ? Can i t not be argued t h a t the concept o f r i s k throws upon the purchaser only t h e o b l i g a t i o n t o indemnify the s e l l e r i n respect o f the loss a r i s i n g from the d e s t r u c t i o n o f the goods? This loss may be represented by t h e sum t h a t a prudent businessman would have insured the goods f o r w h i l s t they formed p a r t o f h i s stock. Any other v a l u a t i o n of the goods r e l a t e s t o a c o n t r a c t u a l bargain which has been f r u s t r a t e d . We have seen t h a t r i s k does not r e l a t e t o the r i s k o f a f r u s t r a t i n g event. Why then should a purchaser w i t h r i s k indemnify a s e l l e r who has, by v i r t u e o f t h a t f r u s t r a t i n g event, been deprived o f h i s opportunity t o perform a c o n t r a c t and make a p r o f i t ? This approach t o the nature of r i s k depends f o r i t s v a l i d i t y upon t h e n o t i o n t h a t a c o n t r a c t o f sale can be discharged by f r u s t r a t i o n even though property and r i s k have passed. The other, a l t e r n a t i v e , approaches t o the meaning o f r i s k where property and r i s k l i e w i t h the purchaser, assume t h a t such a c o n t r a c t cannot be f r u s t r a t e d and s t r i v e t o f i n d some explanation as t o the reason why the s e l l e r i s not t o be held l i a b l e f o r non-delivery where h i s c o n t r a c t u a l o b l i g a t i o n t o do so has not been d i s charged by t e r m i n a t i o n of the c o n t r a c t . given t o t h i s problem i n Part Three. Further c o n s i d e r a t i o n w i l l be - 62 - F a i l u r e o f Consideration Whatever may be t h e nature o f the buyer's r i s k , and whether the sum t h a t he must pay t o the s e l l e r i s the c o n t r a c t p r i c e or some other sum, i t seems c l e a r t h a t where property has passed t o the purchaser he cannot a v a i l himself o f a claim t h a t there has been a f a i l u r e o f c o n s i d e r a t i o n . I n the J u l i a n a Lord Simonds a s s e r t e d ^ t h a t " i n law there cannot be- a f a i l u r e o f consideration i f the property has passed". A buyer having property and r i s k w i l l , t h e r e f o r e , should the goods perish p r i o r t o d e l i v e r y , be l i a b l e t o the s e l l e r . may be questioned, Only the extent o f t h i s liability there can be no doubting t h a t the l i a b i l i t y exists. /"1949 7 A.C. 293, 315. itself - 63 - SECTION C; APPORTIONMENT OF RISK BETWEEN SELLER AND BUYER AND RE-VESTING- OF RISK IN THE SELLER So f a r , the notion o f r i s k has been t r e a t e d as being necessarily indivisible. I t i s not, however, always possible t o neatly a l l o c a t e the whole o f the r i s k t o e i t h e r s e l l e r or buyer, f o r , i n c e r t a i n circumstances, each may bear an aspect o f r i s k . S i m i l a r l y , i t may appear from t h a t which has so f a r been w r i t t e n t h a t , short o f the buyer r e p u d i a t i n g the c o n t r a c t f o l l o w i n g a breach by t h e s e l l e r , t h e passing o f r i s k i s f i n a l and i r r e v e r s i b l e . This i s n o t , however, always the case. An apportionment o f r i s k between s e l l e r and buyer, or a r e v e s t i n g o f r i s k i n the s e l l e r may take place where: 1) one party has defaulted i n making or t a k i n g d e l i v e r y ; 2) one o f the p a r t i e s i s i n breach o f his o b l i g a t i o n s as bailee o f the goods; 3) the goods are i n t r a n s i t , and, a) they are l i k e l y t o d e t e r i o r a t e as a "necessary i n c i d e n t " t o the t r a n s i t , o r , b) the s e l l e r has e f f e c t e d an unreasonable c o n t r a c t o f carriage, or, c) the t r a n s i t i s by sea and the s e l l e r has not given the buyer notice s u f f i c i e n t t o permit him t o insure t h e goods f o r the d u r a t i o n o f the voyage. Default i n making or t a k i n g Delivery Whilst s e c t i o n 20 Sale o f Goods Act 1979 makes basic p r o v i s i o n for the r i s k t o pass, i n i t s e n t i r e t y , a t the same time as property, an obvious instance o f apportionment i s contained i n t h e second sub-section - 64 - t o the s e c t i o n , which s t i p u l a t e s t h a t : where d e l i v e r y has been delayed through the f a u l t o f e i t h e r buyer or s e l l e r the goods are a t the r i s k o f the p a r t y i n f a u l t as regards any l o s s which might not have occurred but f o r such f a u l t " . This proviso a p p l i e s where t h e r e has been a delay i n d e l i v e r y through the " f a u l t " of e i t h e r p a r t y t o the c o n t r a c t o f s a l e . Fault i s d e f i n e d , i n s e c t i o n 61(1) o f the A c t , as meaning a "wrongful act or d e f a u l t " . . Presumably the s e l l e r , or buyer, i s only i n " d e f a u l t " i f he i s i n breach of an o b l i g a t i o n t o make or take d e l i v e r y , ^ i n which case there i s only an apportionment o f r i s k where the delay i n d e l i v e r y was, i n i t s e l f , a breach of c o n t r a c t . I n such circumstances the party i n breach must bear some of the r i s k , even though the 'general' r i s k may be upon t h e other p a r t y . The party i n d e f a u l t must bear the r i s k o f l o s s "which might not have occurred but f o r such f a u l t " w h i l s t the other p a r t y r e t a i n s t h e 62 r i s k i n r e l a t i o n t o other l o s s . I t i s s i g n i f i c a n t t h a t the word "might" i s used i n the p r o v i s o , f o r t h i s choice o f word would appear t o have cons i d e r a b l e i m p l i c a t i o n s i n r e l a t i o n t o the e v i d e n t i a l problem of t h e burden of p r o o f and the s u b s t a n t i v e question o f c a u s a t i o n . Co. L t d . v. B a r d e n ^ S e l l e r s J. c i t e s ^ 4 I n Denby Hamilton and Benjamin on Sale o f Personal The word " d e f a u l t " does not n e c e s s a r i l y have such a c o n n o t a t i o n . I n Doe d. Dacre v. Dacre (Lady) (1798) 1 B & B 250, 258 Eyre C.J. asserted t h a t , " I do not know a l a r g e r or looser word than ' d e f a u l t ' i n i t s largest and most general sense i t seems t o mean, f a i l i n g ...... I t i s a r e l a t i v e term and takes i t s colour from i t s c o n t e x t " . Support f o r t h e view t h a t , i n the present c o n t e x t , a breach o f c o n t r a c t i s r e q u i r e d may, however, be found i n the judgment of Lord Hewart L.C.J, i n J.J. Cuninqham L t d . v. Robert A. Munro and Co. L t d . (1922) 28 Com. Cas. 42, i n which he held t h a t a delay by a purchaser i n t a k i n g d e l i v e r y d i d not throw any r i s k upon him, as he was n o t , a t the time of d e t e r i o r a t i o n of the goods, under an o b l i g a t i o n t o take d e l i v e r y . 62 An example of such 'other l o s s ' may be found i n the f o l l o w i n g a s s e r t i o n by P o t h i e r : " I f I s e l l you a horse, and make d e f a u l t i n d e l i v e r y , and i t i s s t r u c k by l i g h t n i n g i n my s t a b l e s , the loss f a l l s on me, because the accident would not have happened i f I had duly d e l i v e r e d the horse. But i f the horse dies from a disease which would have k i l l e d him i n any case, I am not l i a b l e " (Contrat de Vente, a r t i c l e 58). 6 3 /"1949_7 1 A l l E.R. at page 437. 435. - 65 - Property 65 which s t a t e s : "Moreover, the r i s k t o be borne by the party i n d e f a u l t i s the r i s k of loss which 'might' not otherwise have occurred; and the p r o v i s i o n seems t o throw on the p a r t y i n f a u l t the onus o f showing p o s i t i v e l y t h a t the loss would have occurred independently of h i s f a u l t " . S e l l e r s J. doubted t h a t the words of the proviso placed the burden of proof upon the party i n d e f a u l t and was of the opinion t h a t , " a l l the f a c t s and circumstances have t o be looked a t ...... i n order t o see whether the loss can p r o p e r l y be a t t r i b u t e d t o the f a i l u r e of the buyer t o take d e l i v e r y of the goods at the proper t i m e " . ^ He f u r t h e r a s s e r t e d ^ t h a t "the r e a l question i s whether the loss which has accrued was brought about by the delay i n d e l i v e r y " . At t h i s stage i t would appear t h a t S e l l e r s J. has gone beyond the words of the s t a t u t e . As a r e s u l t of so doing he 68 concludes thatr i f the s e l l e r i s i n a p o s i t i o n t o s e l l the goods e l s e - where and acquire other goods f o r d e l i v e r y , at the postponed time, t o the o r i g i n a l buyer, a f a i l u r e t o make such a sale w i l l place upon the s e l l e r the r i s k of loss or d e t e r i o r a t i o n . I t i s submitted t h a t t h i s conclusion i s only v a l i d i f one approaches the problem of causation p o s i t i v e l y , asking the question, "was cause of the loss?". the delay i n t a k i n g d e l i v e r y the From such a s t a r t i n g p o i n t i t might f o l l o w t h a t the s e l l e r should bear t h a t loss which ' r e s u l t s ' from h i s f a i l u r e t o r e - s e l l . I f , however, one adopts a more negative approach and the question posed i s "might the loss not have occurred i f there had been no delay i n d e l i v e r y ? " , i t can more r e a d i l y be appreciated t h a t any f a i l u r e of the s e l l e r t o r e - s e l l cannot a l t e r the f a c t t h a t the loss would not have occurred but f o r the d e f a u l t i n t a k i n g d e l i v e r y . The Sale of Goods Act requires the question t o be posed negatively and there would seem t o be no good reason why t h i s approach should not be 65 66 7th e d i t i o n , page 426. I.-Z-I page 437. * ^ a t page 438. 6 8 a t page 438. adopted. - 66 - There i s , o f course, an o b l i g a t i o n on the p a r t o f the s e l l e r t o m i t i g a t e h i s l o s s , i n the event o f breach, and any f a i l u r e t o do so w i l l be r e f l e c t e d i n the damages awarded f o r the breach. This o b l i g a t i o n 69 w i l l , however, only be s i g n i f i c a n t i n an a c t i o n f o r damages and would not r e l a t e t o an a c t i o n f o r the p r i c e . 7 Fridman ^ p o i n t s t o a f u r t h e r problem o f causation which a r i s e s out of s e c t i o n 20(2). He suggests t h a t the sub-section i s so worded t h a t the t e s t i s one o f directness rather than f o r e s i g h t . I f the buyer has defaulted i n t a k i n g d e l i v e r y i t would seem t h a t he must take the r i s k o f any loss which might not have a r i s e n but f o r such d e f a u l t , even though he could not have contemplated such l o s s . A s e l l e r b r i n g i n g an a c t i o n f o r damages f o r non-acceptance would, o f course, be able t o recover only 7 such loss as could have been contemplated by the buyer. ^ This suggestion together w i t h the question o f m i t i g a t i o n , emphasises the care w i t h which a s e l l e r must frame h i s a c t i o n when suing i n respect o f loss which might not have occurred but f o r d e f a u l t on the p a r t o f the buyer. 72 statement o f c l a i m must s t a t e t h e s p e c i f i c remedy claimed The s e l l e r ' s and, presumably, any claim f o r damages would a t t r a c t r u l e s r e l a t i n g t o m i t i g a t i and remoteness. I s the s e l l e r confined t o such a claim? misled by the f a c t t h a t the buyer i s i n breach. One must not be A buyer who i s not i n d e f a u l t , but who has r i s k i n the goods, i s l i a b l e t o the s e l l e r , should the goods p e r i s h , because he has t h e r i s k . In a situation f a l l i n g within s e c t i o n 20(2) the buyer i s , because of h i s d e f a u l t , l i a b l e t o the s e l l e r 69 W h i t e and Carter (Councils) L t d . v. McGregor /"1962_7 A.C. 413, and see Benjamin's'Sale of Goods, a r t i c l e 1173. 70 T h e Sale of Goods, page 240. 71 H a d l e y v. Baxendale (1854) 9 Exch. 341. 72 R.S.C. Ord. 18 r 15 ( 1 ) . - 67 - independently of the breach and the s e l l e r ' s remedy w i l l not, t h e r e f o r e , necessarily be an a c t i o n f o r damages, though he may r e l a t i o n t o the b r e a c h . ^ e l e c t t o sue i n I f the s e l l e r does not b r i n g an a c t i o n f o r damages he u / i l l not hav/e been under a duty t o m i t i g a t e and the of causation may, question indeed, be determined by reference t o directness rather than f o r e s i g h t . /"A s e l l e r w i l l , however, only need t o r e l y upon the second sub- s e c t i o n t o s e c t i o n 20 where property and r i s k has not passed t o the buyer i n accordance w i t h the general p r o v i s i o n contained i n section 20. The property not having passed t o the buyer, there must be doubt as t o the a v a i l a b i l i t y of an a c t i o n f o r the p r i c e . I f , however, i t i s accepted t h a t the n o t i o n of r i s k obviates the need f o r property t o have passed, i t would f o l l o w t h a t an a c t i o n f o r the p r i c e would be a v a i l a b l e t o the seller. 7 I t would appear, then, t h a t the apportionment of r i s k which r e s u l t s from s e c t i o n 20(2) i s t h a t the party who has property i n the goods w i l l , normally, bear the "general" r i s k of l o s s , w h i l s t the party i n d e f a u l t w i l l bear the r i s k of any loss which might not have occurred but f o r such default. he may I t i s submitted t h a t where the party i n d e f a u l t i s the buyer, have t o bear such loss even though the s e l l e r could have acted to minimise the loss but has f a i l e d t o do Risk and O b l i g a t i o n as so. Bailee To f r e e the s e l l e r of the duty t o m i t i g a t e w i l l not, i n every s i t u a t i o n , f r e e him from a l l r e s p o n s i b i l i t y i n r e l a t i o n t o the goods, for the t h i r d sub-section of s e c t i o n 20 s t i p u l a t e s t h a t : "Nothing i n '"as i n Denby Hamilton and Co. v. Barden /"1949_7 1 A l l E.R. 435, where the s e l l e r claimed the c o n t r a c t p r i c e or, as a n " a l t e r n a t i v e , damages for breach. - 68 - t h i s s e c t i o n a f f e c t s t h e d u t i e s or l i a b i l i t i e s of e i t h e r s e l l e r or buyer as a b a i l e e .... o f t h e goods o f the other p a r t y " . I t should be noted t h a t t h i s sub-section does not impose a bailment i n any s i t u a t i o n , nor does i t i n d i c a t e the d u t i e s o f t h e b a i l e e . The proviso merely r e t a i n s whatever l i a b i l i t y there may be a t common law. I t i s not easy t o appreciate t h a t a s e l l e r who has never l o s t possession o f the goods which form the s u b j e c t matter o f the sale can possess such goods under a bailment. The buyer, who would be t h e b a i l o r i n r e l a t i o n t o any such bailment, has never come i n t o possession o f the goods and, as a r e s u l t , cannot have d e l i v e r e d the goods t o the s e l l e r . The existence o f a d e l i v e r y appears t o be basic t o the n o t i o n o f bailment. Jones on B a i l m e n t , ^ f o r example, i d e n t i f i e s f i v e categories o f bailment: 1) a g r a t u i t o u s deposit w i t h the b a i l e e , who must keep i t f o r the b a i l o r (depositum); 2) the d e l i v e r y o f a c h a t t e l t o t h e b a i l e e , who i s t o do something without reward t o or w i t h the c h a t t e l (mandatum); 3) t h e g r a t u i t o u s loan of a c h a t t e l by the b a i l o r t o the b a i l e e for the b a i l e e t o use (commodatum); 4) the pawn or pledge o f a c h a t t e l by the b a i l o r t o the b a i l e e , who i s t o hold i t as a s e c u r i t y f o r a loan or debt or t h e f u l f i l m e n t o f an o b l i g a t i o n ( p i g n u s ) ; 5) the h i r e o f a c h a t t e l or services by the b a i l o r t o the b a i l e e for reward ( l o c a t i o c o n d u c t i o ) . A l l of the categories involve a t r a n s f e r o f possession. i s , indeed, defined i n Halsbury's Laws of E n g l a n d ^ as " of personal c h a t t e l s on t r u s t 74 F i r s t e d i t i o n (1786). 75 Fourth e d i t i o n (para. 1501). Bailment a delivery " and i n Crossley Vaine on Personal - 69 - 7 P r o p e r t y ^ as " e s s e n t i a l l y a d e l i v e r y on terms ". No a c t u a l d e l i v e r y i s made t o a s e l l e r who remains i n possession o f the goods, but i t i s possible f o r a c o n s t r u c t i v e d e l i v e r y t o have been made. I t was, f o r example, accepted i n Wiehe v. Dennis B r o s . 7 7 that a seller who continued t o possess a pony he had sold d i d so as a b a i l e e . The p l a i n t i f f purchaser had expressly requested the defendant s e l l e r t o r e t a i n the pony i n order t h a t he might continue t o c o l l e c t money a t the I n t e r n a t i o n a l Horse Show f o r "Our Dumb Friends League", and such an express request presumably amounted t o a c o n s t r u c t i v e d e l i v e r y so as t o c o n s t i t u t e mandatum. S i m i l a r l y , i n S t a f f s Motor Guarantee L t d . v. 78 B r i t i s h Wagon Mackinnon J. Found t h a t a s e l l e r who had s o l d goods t o a finance company, from which he had then h i r e d the goods under a h i r e purchase agreement, was a b a i l e e o f the goods, even though there had been no d e l i v e r y t o him. I n P a c i f i c Motor Auction Pty. L t d . v. Motor Credits 79 (Hire Finance) L t d . the J u d i c i a l Committee o f the Privy Council 80 i d e n t i f i e d t h i s bailment as one which arose from an attornment, p o i n t i n g out t h a t there was a separate and express t r a n s a c t i o n creating the bailment. What, however, o f the s i t u a t i o n i n which there i s no express agreement t h a t the s e l l e r should r e t a i n the goods? What, indeed, of the s i t u a t i o n i n which there i s express agreement t h a t he should not r e t a i n possession, but should, instead, make d e l i v e r y t o the purchaser? Can a bailment be implied i n such circumstances? I t would appear t h a t 81 one can. I n Koon v. B r i n k e r h o f f Haight J., r e l y i n g on Story on the Law 7 ^ F i f t h e d i t i o n (page 76). 77 ( 1 9 1 3 ) 29 T.L.R. 250. 7 8 7 9 /"1934_7 2 K.B. 305. /"1965_7 A.C. 867. 80 4. a t page 885. 81 ( 1 8 8 6 ) 39 Hun 130. - 70 - of Sales, asserted t h a t " where the delay ( i n d e l i v e r y ) i s occasioned by t h e vendee .... the vendor i s only l i a b l e depositary and mandatory ". as a Relying t o some extent on t h i s 82 a u t h o r i t y , Halsbury's Laws of England assert t h a t , " a seller i n possession of the buyer's goods i s i n respect thereof probably subject t o the o b l i g a t i o n s of a bailee f o r reward u n t i l the e x p i r a t i o n o f the time expressly or by i m p l i c a t i o n appointed f o r the buyer t o take d e l i v e r y . A f t e r the e x p i r a t i o n of t h a t time the s e l l e r i s probably subject t o the 83 obligations of a gratuitous bailee". I t should be noted t h a t the above 84 passage r e f e r s t o the s e l l e r being i n possession o f the buyer's goods. Section 20(3) Sale o f Goods Act 1979 confirms t h a t the s e l l e r w i l l only be considered t o be a bailee i f property has passed, f o r i t provides t h a t the s e l l e r r e t a i n s h i s l i a b i l i t y as b a i l e e " o f the goods o f the other party". The t h i r d sub-section t o s e c t i o n 20 also provides t h a t nothing i n t h a t s e c t i o n s h a l l a f f e c t the o b l i g a t i o n s o f the buyer as bailee o f the 82 goods. Halsbury's Laws i n d i c a t e t h a t a buyer i n possession o f the s e l l e r ' s goods, perhaps on sale or r e t u r n terms, i s probably a bailee f o r reward u n t i l the e x p i r a t i o n o f the time appointed f o r passing o f property A f t e r a v a l i d r e j e c t i o n o f the goods and t h e e x p i r a t i o n o f a reasonable time f o r the s e l l e r t o remove them, the buyer becomes a g r a t u i t o u s Taken together, the various provisions bailee o f section 20 would seem t o indicate that: 1) where property has passed t o t h e buyer, he w i l l have r i s k i n the goods, but a s e l l e r i n possession r e t a i n s h i s o b l i g a t i o n s as b a i l e e ; 82 Third e d i t i o n (page 7 9 ) . 83 s u b s t a n t i a l l y the same conclusion i s a r r i v e d a t i n Benjamin's Sale of Goods (para. 417). 84 as does Benjamin's Sale o f Goods, supra. - 71 - 2) where property has not passed t o t h e buyer, t h e s e l l e r will have general r i s k i n the goods, but the buyer w i l l have r i s k i n r e l a t i o n t o any loss which might n o t have occurred b u t f o r d e f a u l t on h i s p a r t i n t a k i n g d e l i v e r y . The buyer w i l l , i n a d d i t i o n , be l i a b l e as a b a i l e e o f t h e goods should he have came i n t o possession o f them. Request t h a t D e l i v e r y be taken Section 20 must, however, be considered t o g e t h e r w i t h t h e separate p r o v i s i o n s o f s e c t i o n 37 o f t h e 1979 A c t . Section 37 provides t h a t : "When t h e s e l l e r i s ready and w i l l i n g t o d e l i v e r the goods, and requests the buyer t o take d e l i v e r y , and the buyer does n o t w i t h i n a reasonable time a f t e r such request take d e l i v e r y o f the goods, he i s l i a b l e t o t h e s e l l e r f o r any loss occasioned by his n e g l e c t or r e f u s a l t o take d e l i v e r y , and also f o r a reasonable charge f o r the care and custody o f t h e goods". This s e c t i o n throws upon the buyer t h e r i s k o f any l o s s , p r o v i d i n g such loss has been "occasioned by" t h e buyer's d e f a u l t . I n Diqht v . 85 Craster H a l l (Owners) Cozens-Hardy M.R. equated t h e words "occasioned 86 by" w i t h "due t o " and, as a r e s u l t , i t would appear t h a t s e c t i o n 37 may be taken t o e s t a b l i s h t h a t the buyer must bear t h e r i s k o f any loss due to his f a u l t . What does t h i s s e c t i o n add t o s e c t i o n 20? Apart from g i v i n g t h e s e l l e r t h e r i g h t t o sue f o r storage charges, the s e c t i o n appears t o be intended t o throw some element o f r i s k upon the buyer i n default. ascertain. The e x t e n t of t h i s " e x t r a " r i s k i s , however, d i f f i c u l t t o I f the buyer has property i n the goods he w i l l , by s e c t i o n 20, normally have general r i s k i n r e l a t i o n t o them, and i f property has not passed, he w i l l i n any event have r i s k i n r e l a t i o n t o loss which r e s u l t s (1913) 6 B.W.C.C. 674. at page 676. - 72 - from any d e f a u l t on h i s p a r t "in t a k i n g d e l i v e r y . Perhaps the t r u e r e l a t i o n s h i p of s e c t i o n 20 and s e c t i o n 37 can be determined by reference t o the nature of the r i s k t r a n s f e r r e d . Section 20 deals w i t h r i s k i n r e l a t i o n t o "the goods" and whatever i s the o b l i g a t i o n imposed upon a buyer who bears such r i s k , i t would seem t h a t i t cannot be greater than an o b l i g a t i o n t o pay t o the s e l l e r the contract p r i c e . Section 37, however, r e l a t e s t o "any l o s s " and, perhaps, would cover other, consequential, loss flowing from the buyer's d e f a u l t . The s e l l e r may, f o r example, have t o pay someone t o remove the goods, or t h e i r remains, from h i s premises, or he may, due t o t h e f a c t t h a t he has l o s t storage space, have s u f f e r e d a slowdown i n the turnover of his stock, r e s u l t i n g i n loss of p r o f i t on sales which would otherwise have taken place. I t should be noted t h a t , u n l i k e section 20, s e c t i o n 37 requires the s e l l e r t o expressly request the buyer t o take d e l i v e r y . Where the buyer d e f a u l t s i n t a k i n g d e l i v e r y , i n circumstances i n which property has not passed from the s e l l e r , there would, then, appear t o be the f o l l o w i n g apportionment of r i s k : 1) The buyer has r i s k i n r e l a t i o n t o loss which might n o t have occurred but f o r h i s d e f a u l t . and, This r i s k r e l a t e s t o the goods a t most, involves an o b l i g a t i o n t o pay f o r them should they p e r i s h . 2) The buyer also has r i s k i n r e l a t i o n t o any consequential l o s s , provided there has been an express request t h a t he should take delivery. 3) The s e l l e r r e t a i n s only a p a r t i a l r i s k , the r i s k o f loss which would have occurred whether or not t h e buyer had defaulted i n taking delivery. — 87 /"Fridman suggests t h a t i t i s possible t h a t s e c t i o n 37 o f t h e Sale o f Goods, page 240. - 73 - Act may provide a means by which the s e l l e r of t h e goods can r e l i e v e himself o f h i s o b l i g a t i o n s as b a i l e e where property has passed t o the buyer. There would appear t o be some support f o r t h i s view i n the sections. Section 20(3), which makes reference t o the s e l l e r ' s o b l i g a t i o n s as a b a i l e e , i s couched i n r e s t r i c t e d terms. The second sub-section o f s e c t i o n 20 i s so worded as t o create an out-and-out exception t o the general r u l e t h a t r i s k passes w i t h property t h a t one aspect o f r i s k i s t o be c a r r i e d by the buyer. and provides The t h i r d sub- s e c t i o n i s not so p o s i t i v e l y expressed and merely provides f o r t h e r e t e n t i o n o f common law l i a b i l i t y . t h a t "nothing Further, s e c t i o n 20(3) indicates i n t h i s s e c t i o n s h a l l a f f e c t t h e d u t i e s or l i a b i l i t i e s o f e i t h e r s e l l e r or buyer as a bailee This wording may be contrasted o f the goods o f the other p a r t y " . w i t h the much stronger wording o f sections l i k e s e c t i o n 54 o f the Act, which provides t h a t "Nothing i n t h i s Act s h a l l a f f e c t the r i g h t o f the buyer or the s e l l e r ". Presumably s e c t i o n 20(3) was i n s e r t e d merely t o e s t a b l i s h t h a t a general passing o f r i s k , i n accordance w i t h s e c t i o n 20, d i d not, i n i t s e l f , r e l i e v e t h e s e l l e r o f h i s o b l i g a t i o n s as a b a i l e e . Section 37, however, may provide a means by which the s e l l e r can d i v e s t himself o f such o b l i g a t i o n s . Should he expressly request the buyer t o take d e l i v e r y o f the goods, a f a i l u r e t o do so w i t h i n a reasonable time w i l l throw any loss upon t h e buyer. /"One cannot, however, escape the problem o f causation. The buyer takes, under s e c t i o n 37, t h e r i s k o f loss occasioned by (due t o ) h i s f a i l u r e t o take d e l i v e r y . What i f a buyer does not take d e l i v e r y when requested t o do so, and the goods are subsequently destroyed, or s t o l e n , i n circumstances i n which i t i s clear t h a t the s e l l e r has been i n breach of even the l i m i t e d o b l i g a t i o n s of a g r a t u i t o u s bailee? What would be taken t o have caused such l o s s , the d e f a u l t i n t a k i n g d e l i v e r y or the - 74 - breach o f bailment? I t i s submitted t h a t i t would be the l a t t e r . 7 Contributory Negligence A f u r t h e r instance o f apportionment o f r i s k as a r e s u l t o f f a u l t might be thought t o a r i s e from the provisions of the Law Reform ( C o n t r i b u t o r y Negligence) Act 1945. C e r t a i n l y , t h i s i s considered t o be 88 a r e a l p o s s i b i l i t y i n Benjamin's Sale o f Goods. Section 1(1) o f the 1945 Act provides: "Where any person s u f f e r s damage as the r e s u l t p a r t l y o f h i s own f a u l t and p a r t l y o f the f a u l t o f any other person or persons, a c l a i m i n respect of t h a t damage s h a l l not be defeated by reason o f t h a t f a u l t o f the person s u f f e r i n g the damage, but the damages recoverable i n respect t h e r e o f s h a l l be reduced t o such extent as the Court t h i n k s j u s t and equitable having regard t o the claimant's share i n the r e s p o n s i b i l i t y f o r the damage". Consider, f o r example, the s i t u a t i o n i n which property has not passed from the s e l l e r t o the buyer, the buyer has defaulted i n t a k i n g d e l i v e r y and the goods have perished, p a r t l y as a r e s u l t o f t h e s e l l e r f a i l i n g t o take care o f them. The s e l l e r would, i n such circumstances, b r i n g an a c t i o n against the buyer, r e l y i n g upon s e c t i o n 2 0 ( 2 ) . the buyer invoke the provisions o f the 1945 Act? Could He would need t o show t h a t the s e l l e r had been a t " f a u l t " w i t h i n the meaning o f s e c t i o n 4 of the 1945 Act, which provides t h a t : " ' f a u l t ' means negligence, breach of s t a t u t o r y duty or other a c t or omission which gives r i s e t o a l i a b i l i t y i n t o r t or would, apart from t h i s Act, give r i s e t o the defence of c o n t r i b u t o r y negligence". I t would seem t h a t negligent mis-performance of a c o n t r a c t i s n o t , o f i t s e l f , considered t o be " f a u l t " w i t h i n the 89 meaning of section 4. I n Quinn v. Burch Bros. ( B u i l d e r s ) L t d . 9 asserted: ^ 8 8 p a r a . 419. 8 9 /"1966_7 2 Q.B. 370. 90 at page 380. P a u l l J. - 75 - " I n my judgement, i n l o o k i n g t o see whether t h e r e was a f a u l t w i t h i n the meaning o f the Act, one cannot look a t the manner i n which a c o n t r a c t has been broken; only the terms o f the c o n t r a c t and the consequences o f a breach of any such term. I n order to apply the Act one has t o f i n d t h a t t h e r e was some term which imported a duty not t o be n e g l i g e n t and a breach o f t h a t term". Thus, the nature of the breach of c o n t r a c t i s not i n i t s e l f s i g n i f i c a n t , the important f a c t o r i s the e x i s t e n c e of a duty of care which, i n a con- t r a c t u a l s i t u a t i o n , may r e s u l t from a term o f the c o n t r a c t o r , presumably, may e x i s t independently o f the c o n t r a c t . There are circumstances i n which a s e l l e r o f goods may be i n breach of such a duty o f care when misperforming h i s c o n t r a c t , as, f o r example, when he s e l l s goods which 91 are dangerous per se w i t h o u t warning the buyer o f the danger. the s i t u a t i o n p r e s e n t l y envisaged, however, the s e l l e r would not appear t o be i n breach o f any such d u t y . In The property i n t h e goods not having passed t o the buyer, the e x i s t e n c e of a duty a r i s i n g out o f a bailment would not appear t o be l i k e l y and the l a c k of care on the p a r t o f the s e l l e r would appear t o amount t o no more than n e g l i g e n t misperformance of t h e c o n t r a c t u a l o b l i g a t i o n . Where property has passed t o the buyer and the s e l l e r holds t h e goods as b a i l e e f o r the buyer, the s e l l e r w i l l , should he be i n breach o f the b a i l m e n t , be i n breach of a duty of care owed'to t h e buyer and, i n such circumstances i t might appear t h a t the p r o v i s i o n s of t h e 1945 Act could apply. They w i l l , however, only be s i g n i f i c a n t should the Court f i n d the buyer l i a b l e t o the s e l l e r . I n circumstances i n which t h e r e has been a breach o f bailment i t would appear t h a t t h e buyer would not be l i a b l e t o the s e l l e r , d e s p i t e the f a c t t h a t he has r i s k . Section 20(3) does, a f t e r a l l , expressly reserve the s e l l e r ' s o b l i g a t i o n s as b a i l e e . I t may be t h a t the buyer would be l i a b l e t o the s e l l e r i n circumstances as i n Clarke v. Army and Navy Co-operative Society /"1903 7 1 K.B. 155. - 76 - i n which the p r i c e he has agreed t o pay f o r the goods exceeds t h e i r market value. His a c t i o n against the s e l l e r , f o r w r o n g f u l i n t e r f e r e n c e w i t h goods, 92 w i l l be f o r the value o f t h e goods w h i l s t the s e l l e r w i l l be able t o sue the buyer f o r the p r i c e ( t h e property having passed). Even here, however, i t would appear t h a t t h e p r o v i s i o n s o f t h e 1945 Act would be o f l i t t l e a s s i s t a n c e , f o r s e c t i o n 1(1) o f the Act provides t h a t " damages recoverable s h a l l be reduced t o such e x t e n t as the Court t h i n k s j u s t and e q u i t a b l e the the ". Where t h e s e l l e r sues f o r the p r i c e , buyer must counterclaim i n respect o f t h e breach o f bailment. I t would appear t h a t t h e 1945 Act has l i t t l e s i g n i f i c a n c e i n r e l a t i o n t o apportionment of r i s k . Risk and T r a n s i t ( 1 ) So f a r , we have considered instances o f apportionment of risk i n s i t u a t i o n s i n which i t i s l i k e l y t h a t the goods have e i t h e r not l e f t t h e s e l l e r ' s possession o r , a l t e r n a t i v e l y , have a c t u a l l y been d e l i v e r e d t o the buyer p r i o r t o p e r i s h i n g . The remaining instances o f apportionment of r i s k r e l a t e t o t h e s i t u a t i o n i n which goods have been dispatched by the s e l l e r and p e r i s h w h i l s t i n t r a n s i t t o t h e buyer. Section 33 Sale o f Goods Act 1979 provides t h a t : "Where the s e l l e r o f goods agrees t o d e l i v e r them a t h i s own r i s k a t a place other than t h a t where they are when s o l d , t h e buyer must, nevertheless (unless otherwise agreed) take any r i s k of d e t e r i o r a t i o n i n the goods n e c e s s a r i l y i n c i d e n t t o the course o f t r a n s i t " . In the circumstances envisaged i n s e c t i o n 33 t h e r e i s c l e a r p r o v i s i o n for The s e l l e r has the "general" r i s k i n the an apportionment of r i s k . goods and the buyer bears a p a r t i c u l a r r i s k , he must bear any loss which i s n e c e s s a r i l y i n c i d e n t t o the t r a n s i t . This apportionment Clerk and L i n d s e l l on Torts (14th e d i t i o n ) para. 337. only takes - 77 - place, however, where the several requirements o f s e c t i o n 33 are complied w i t h , t h a t i s t o say: 1) t h e s e l l e r has agreed t o d e l i v e r the goods a t a place other than t h a t where they are s o l d ; 93 2) the goods have been s o l d , t h a t i s t o say property has passed (and, as a r e s u l t general r i s k would normally have passed t o the buyer); 3) the s e l l e r has agreed t o d e l i v e r a t h i s own r i s k (despite the f a c t t h a t r i s k would, otherwise, probably be upon the buyer). What o f the s i t u a t i o n i n which a l l o f t h e requirements o f s e c t i o n 33 are complied w i t h save f o r the f a c t t h a t the s e l l e r has not expressly 94 agreed t o d e l i v e r a t h i s own r i s k ? Sassoon argues t h a t i f the buyer must, because o f s e c t i o n 33, bear the r i s k o f loss which i s necessarily i n c i d e n t t o the t r a n s i t when the s e l l e r has expressly undertaken t o send the goods a t h i s own r i s k , i t must f o l l o w , a f o r t i o r i , t h a t t h e buyer has such r i s k where the s e l l e r has made no such express promise. Such a conclusion i s , however, apparently a t odds w i t h the f o l l o w i n g 95 d i c t a o f Diplock J. i n Mash and M u r r e l l v. Joseph Emmanuel L t d . : " I t i s e x t r a o r d i n a r y d e t e r i o r a t i o n o f the goods due t o abnormal c o n d i t i o n s experienced during t r a n s i t f o r which the buyer takes the r i s k . A necessary and i n e v i t a b l e d e t e r i o r a t i o n d u r i n g t r a n s i t which w i l l render them unmerchantable on a r r i v a l i s normally one f o r which the s e l l e r i s l i a b l e " . Diplock J. a r r i v e d a t t h i s conclusion having considered the pleadings i n 96 Bowden Brothers and Co. L t d . v. L i t t l e , which s t a t e t h a t the appellants s.2(ft) Sale o f Goods Act 1979. 28 M.L.R. 180. /"1961 7 1 A l l E.R. 485, 493. (1907) 4 C.L.R. 1364. - 78 - had promised t h a t "the onions upon a r r i v a l i n Sydney would be i n merchantable c o n d i t i o n except f o r such d e t e r i o r a t i o n as would be t h e necessary and i n e v i t a b l e r e s u l t o f the t r a n s i t , yet t h e onions upon 97 a r r i v a l were not i n such c o n d i t i o n " . Diplock J. regarded t h i s express warranty (which i s , i n e f f e c t , the promise made by the s e l l e r i n the s e c t i o n 33 s i t u a t i o n ) as the converse o f t h e warranty ( o f merchantable q u a l i t y ) implied by s e c t i o n 14(2) Sale of Goods Act 1979. I n a r r i v i n g a t 98 t h i s conclusion he r e l i e d upon Beer v. Walker. I n t h a t case a whole- s a l e r , i n London, s o l d a q u a n t i t y o f dead r a b b i t s t o a r e t a i l e r i n B r i g h t o n , the r e t a i l e r agreeing t o pay the cost o f t r a n s i t . Upon a r r i v a l a t Brighton some o f t h e r a b b i t s were found t o be u n f i t f o r human food. Grove J. expressly found t h a t t h e t r a n s i t was i n the "usual course" and t h a t the r a b b i t s which were u n f i t f o r human food had become so i n the ordinary course o f t r a n s i t . He nevertheless held t h a t the implied warranty t h a t goods should be f i t f o r t h e i r purpose extended t o the time a t which, i n the ordinary course o f t r a n s i t , the r a b b i t s should reach t h e i r d e s t i n a t i o n , and, f u r t h e r , maintained t h a t they should remain so f i t u n t i l the r e t a i l e r should have a reasonable o p p o r t u n i t y o f dealing w i t h them i n the ordinary course o f business. t o O l l e t t v. Jordan 99 Diplock J. a l s o r e f e r r e d 100 i n which A t k i n J. concluded that, " the u e f f e c t o f the d e c i s i o n i n Beer v. Walker i s t h a t the c o n d i t i o n t h a t t h e goods must be merchantable means t h a t they must be i n t h a t c o n d i t i o n when appropriated t o the c o n t r a c t and t h a t they w i l l continue so f o r a reasonable time. That does not necessarily mean t h a t goods s h a l l be 97 at page 493. 98 9 9 (1877) 46 L.J.Q.B. 677. /"1918 7 2 K.B. 4 1 . 100 a t page 47. - 79 - merchantable on d e l i v e r y i f the vendee d i r e c t s them t o be sent by a long and unusual t r a n s i t Diplock J. agreed w i t h AtkinJ.'s analysis of the meaning of the decision i n Beer v. Walker and held t h a t goods should be merchantable u n t i l a r r i v a l a t t h e i r d e s t i n a t i o n . The defendant appealed, t o the Court of Appeal, on two grounds: 1) t h a t Diplock 3, had drawn a wrong inference o f fact,- the appellant contending t h a t the t r a n s i t was not a normal voyage as submitted by the p l a i n t i f f s ; 2) t h a t the warranty recognised by Diplock J. was not j u s t i f i e d at law. The Court of Appeal e l e c t e d not t o argue the second ground o f appeal, for i t ass.umed, f o r the purposes- of the appeal, t h a t the warranty existed. I t nevertheless found f o r the a p p e l l a n t on the basis t h a t , because of lack of v e n t i l a t i o n , the voyage was not a normal one and t h a t there was no evidence t h a t the goods would not have survived normal transit. The goods were, t h e r e f o r e , at the r i s k of the buyer as a r e s u l t of the abnormality of the voyage, not as a r e s u l t o f t h e i r having perished as a necessary i n c i d e n t t o the t r a n s i t . This conclusion i s d i r e c t l y a t odds w i t h the a f o r t i o r i advanced by Sassoon. argument B r i n g i n g together the r u l e contained i n s e c t i o n 33 and the case-law o u t l i n e d above one might a r r i v e a t the f o l l o w i n g conclusions: 1) Where r i s k i s upon the buyer, but the s e l l e r , having agreed t o send the goods t o the buyer, undertakes r i s k during t r a n s i t , the buyer, nevertheless, has r i s k of unavoidable loss which r e s u l t s from normal t r a n s i t . 2) Where r i s k i s upon the buyer, and the s e l l e r , having agreed t o send the goods t o the buyer, does not undertake t o do so a t h i s - 80 - own r i s k , the buyer has t o take the r i s k of loss r e s u l t i n g from abnormal t r a n s i t . The s e l l e r , however, has r i s k i n r e l a t i o n t o loss r e s u l t i n g from normal t r a n s i t . I t would thus appear t h a t , i n r e l a t i o n t o loss which i s necessarily i n c i d e n t t o the t r a n s i t , the buyer i s i n a worse s i t u a t i o n where the s e l l e r has expressly undertaken t o d e l i v e r a t h i s own r i s k than he would be i n the absence o f such an express s t i p u l a t i o n . Conversely, the s e l l e r would only have r i s k i n r e l a t i o n t o such loss where he had elected not t o undertake r i s k f o r the d u r a t i o n o f the t r a n s i t . The very p e r v e r s i t y o f such conclusions their validity. appreciated 1) compels one t o question Sassoon a s s e r t s ' ^ t h a t the t r u e p o s i t i o n can be only upon drawing a d i s t i n c t i o n between two s i t u a t i o n s : I n the f i r s t s i t u a t i o n , a s e l l e r dispatches d e t e r i o r a t e during t r a n s i t . goods which A l l goods matching the c o n t r a c t d e s c r i p t i o n would, n e c e s s a r i l y , perish during t h a t p a r t i c u l a r course o f t r a n s i t and the goods dispatched d e t e r i o r a t e no more than would any other goods o f the genre. 2) I n the second s i t u a t i o n , a s e l l e r dispatches goods which perish during t r a n s i t because o f an inherent d e f e c t , which defect i s not common t o a l l goods of the genre. Other goods, matching the c o n t r a c t d e s c r i p t i o n , could have survived the t r a n s i t . Sassoon concludes t h a t the case-law o u t l i n e d above r e l a t e s t o the f i r s t s i t u a t i o n whereas s e c t i o n 33 l e g i s l a t e s f o r the second. I n support of 102 t h i s conclusion Sassoon c i t e s B u l l v. Robinson - asserted"* ^ t h a t " 1 0 1 102 103 i n which Alderson B. hoop-iron t o be manufactured i n S t a f f o r d s h i r e , /"1962 7 J.B.L. 351, 354 and /"1965 7 28 M.L.R. 180 a t 190, 191. (1854) 10 Ex 342. at page 345. - a l - and t o be forwarded by canal and r i v e r , t o be d e l i v e r e d i n L i v e r p o o l , must be accepted by the vendee, i f only so d e t e r i o r a t e d as a l l such i r o n must necessarily be d e t e r i o r a t e d i n i t s t r a n s i t from S t a f f o r d s h i r e t o Liverpool". Alderson B. concluded t h a t "A manufacturer who c o n t r a c t s t o d e l i v e r a manufactured a r t i c l e a t a d i s t a n t place must, indeed, stand the r i s k o f any e x t r a o r d i n a r y or unusual d e t e r i o r a t i o n ; but we t h i n k t h a t the vendee i s bound t o accept the a r t i c l e , i f only d e t e r i o r a t e d t o t h e extent t h a t i t i s necessarily subject t o the course o f t r a n s i t from one place t o the other, o r , i n other words, t h a t he i s subject t o and must bear the r i s k o f d e t e r i o r a t i o n necessarily consequent upon the t r a n s mission" . I t would seem, then, t h a t where goods are dispatched t o the buyer, at h i s general r i s k , and the s e l l e r does not undertake r i s k during t r a n s i t , the s e l l e r w i l l not bear any p a r t o f the r i s k where the goods perish as a necessary i n c i d e n t t o the course o f t r a n s i t . Section 33 w i l l not apply d i r e c t l y t o the s i t u a t i o n , but the existence o f i t s provisions would surely persuade a Court t h a t a buyer cannot be i n a b e t t e r situation, v i s - a - v i s the s e l l e r , where the s e l l e r has refused t o provide an undert a k i n g t h a t he w i l l carry r i s k than he would upon the g r a n t i n g o f such an undertaking. Where s e c t i o n 33 does apply there i s , as previously s t a t e d , a clear apportionment o f r i s k between s e l l e r and buyer. The s e l l e r has t h e r i s k he has undertaken, save f o r the r i s k o f d e t e r i o r a t i o n i n the goods which i s necessarily i n c i d e n t t o the t r a n s i t . This r i s k i s upon the buyer. The r i s k upon the buyer i s , however, a r i s k i n r e l a t i o n t o " d e t e r i o r a t i o n " . Would there be a s i m i l a r a l l o c a t i o n o f r i s k where the goods perish? If the perishing o f the goods i s necessarily i n c i d e n t t o the course o f t r a n s i t , would the buyer s u f f e r the l o s s , even though the s e l l e r has undertaken t o - 82 - t r a n s p o r t t h e goods at h i s r i s k ? Surely i f i t i s not thought appropriate t h a t t h e s e l l e r should bear the r i s k o f an i n e v i t a b l e d e t e r i o r a t i o n , i t i s even less appropriate t h a t he should bear the r i s k of a d e t e r i o r a t i o n so massive t h a t i t r e s u l t s i n the goods being taken t o have perished. One cannot", however, ignore the use o f the word " d e t e r i o r a t i o n " i n s e c t i o n 33. Perhaps the best c o n s t r u c t i o n o f s e c t i o n 33 i s one which would r e s u l t i n the buyer bearing t h e r i s k o f any p e r i s h i n g necessarily i n c i d e n t t o the course o f t r a n s i t p r o v i d i n g the p e r i s h i n g r e s u l t s from a n a t u r a l d e t e r i o r a t i o n of the goods. The buyer would n o t , however, be l i a b l e f o r a p e r i s h i n g which i n e v i t a b l y r e s u l t s from t h e t r a n s i t but which a r i s e s independently of a n a t u r a l d e t e r i o r a t i o n . circumstances One c o u l d , f o r example, contemplate i n which a s e l l e r would agree t o d e l i v e r goods t o a p o r t sub- j e c t t o a h o s t i l e blockade. As a r e s u l t o f t h i s t r a n s i t t h e ship c a r r y i n g the goods i s sunk, or taken, by the h o s t i l e force and the goods a r e l o s t . Section 33 would, i t i s submitted, have no a p p l i c a t i o n here. The s e l l e r has taken upon himself the r i s k o f the venture and t h a t i s t h a t . The reference t o " d e t e r i o r a t i o n " i n s e c t i o n 33 i s not, i t i s submitted, exclusive of p e r i s h i n g , i t i s , however, r e s t r i c t i v e o f the cause of p e r i s h i n g . Risk and T r a n s i t ( 2 ) Section 32 Sale o f Goods Act 1979 c o n s i s t s o f three sub-sections, two o f which provide, p o t e n t i a l l y , f o r an apportionment s e l l e r and buyer. o f r i s k between The 'key* sub-section, sub-section ( 1 ) , provides t h a t : "Where, i n pursuance o f a c o n t r a c t o f s a l e , t h e s e l l e r i s a u t h o r i s e d or r e q u i r e d t o send the goods t o the buyer, d e l i v e r y o f t h e goods t o a c a r r i e r , whether named by the buyer or n o t , f o r the purpose of transmission t o the buyer i s prima f a c i e deemed t o be a d e l i v e r y of the goods t o the buyer." Sub-section ( 2 ) , however, provides t h a t : "Unless otherwise authorised by the buyer, the s e l l e r must make such c o n t r a c t w i t h the c a r r i e r on behalf of the buyer as may be reasonable having regard t o the nature of the goods and the other circumstances o f the casej.and i f the s e l l e r omits bo do so, and the see Part One f o r a c o n s i d e r a t i o n of circumstances i n which goods w i l l be taken t o have perished as a r e s u l t of d e t e r i o r a t i o n . - 83 - goods are l o s t or damaged i n course of t r a n s i t , the buyer may decline t o t r e a t the d e l i v e r y t o the c a r r i e r as a d e l i v e r y t o h i m s e l f , or may hold the s e l l e r responsible i n damages". What i s t h e e f f e c t o f t h i s second sub-section? The sub-section provides t h a t the buyer may, i n the circumstances s p e c i f i e d t h e r e i n , e l e c t t o exercise e i t h e r of two remedies. 1) He may e i t h e r : d e c l i n e t o t r e a t the d e l i v e r y t o the c a r r i e r as a d e l i v e r y t o h i m s e l f , or 2) hold the s e l l e r responsible i n damages. What e f f e c t w i l l these remedies have upon the a l l o c a t i o n of r i s k ? Should the buyer e l e c t t o t r e a t the goods as not having been d e l i v e r e d , h i s remedy u/ould, presumably, be t o sue f o r damages f o r nondelivery. However, i f the general r i s k i s on the buyer, t h i s remedy may not be a v a i l a b l e t o him, f o r most academic w r i t e r s would accept t h a t i f the buyer has r i s k he must, i f the goods p e r i s h , pay the c o n t r a c t p r i c e even though they have not been d e l i v e r e d t o h i m . " ^ I t i s , however, possible t h a t the sub-section w i l l , i n some circumstances, d i v e s t the buyer of r i s k which would, but f o r the sub-section, be on him. This would appear t o be the case where the property, and t h e r e f o r e the r i s k , only passed t o the buyer upon d e l i v e r y of the goods t o the c a r r i e r . In Waite v. B a k e r " ^ Parke B. s a i d , i n r e l a t i o n t o a c o n t r a c t f o r unascertained goods: " I t may be admitted, t h a t i f goods are ordered by a person, a l though they are t o be selected by the vendor, and t o be d e l i v e r e d t o a common c a r r i e r t o be sent t o the person t o whom they have been ordered, the moment the goods, which have been selected i n pursuance o f the c o n t r a c t , are d e l i v e r e d t o the c a r r i e r , the c a r r i e r becomes the agent o f the vendee, and such d e l i v e r y amounts t o a d e l i v e r y t o the vendee; and i f there i s a binding c o n t r a c t between the vendor and the vendee then there i s no doubt t h a t the property passes by such d e l i v e r y t o the c a r r i e r " . see page 37. (1848) 2 Exch. 1, 7. - 84 - The d e l i v e r y t o t h e c a r r i e r amounts t o an u n c o n d i t i o n a l a p p r o p r i a t i o n o f the goods so as t o t r a n s f e r property t o the buyer i n accordance w i t h Rule 5 o f s e c t i o n IS Sale o f Goods Act 1979. As a r e s u l t , r i s k would normally then a t t a c h t o the buyer. I f , however, the buyer e l e c t s t o d e c l i n e t o t r e a t t h e d e l i v e r y t o t h e c a r r i e r as a d e l i v e r y t o h i m s e l f , i t may be t h a t property w i l l n o t be considered t o have passed upon d e l i v e r y t o t h e c a r r i e r and, as a r e s u l t , the s e l l e r w i l l s t i l l have general r i s k i n r e l a t i o n t o the goods. The buyer who has thus been r e l i e v e d o f property and r i s k i n r e l a t i o n t o the goods w i l l not be l i a b l e t o the s e l l e r f o r t h e p r i c e and, moreover, upon any subsequent f a i l u r e t o d e l i v e r he would be able t o maintain an a c t i o n f o r damages f o r n o n - d e l i v e r y . Section 32(2) can, however, only operate t o so r e l i e v e t h e buyer o f r i s k where property and r i s k have not passed p r i o r t o t h e d e l i v e r y t o t h e c a r r i e r . and r i s k have passed t o the buyer p r i o r t o the c a r r i e r being I f property given possession o f the goods (as a r e s u l t o f express agreement between t h e parties, or because o f t h e o p e r a t i o n o f the r u l e s o f s e c t i o n 18 Sale o f Goods Act 1979) t h e f a c t t h a t t h e buyer has the r i s k w i l l n o t be r e l a t e d t o t h e d e l i v e r y t o the c a r r i e r and the deemed d e l i v e r y t o t h e buyer. circumstances, I f , i n such the buyer, r e l y i n g upon s e c t i o n 3 2 ( 2 ) , e l e c t s t o t r e a t t h e goods as not having been d e l i v e r e d t o him, t h i s s e c t i o n w i l l only r e s u l t i n there having been no d e l i v e r y t o the buyer, i t w i l l not a l t e r t h e f a c t t h a t the goods have been l o s t w h i l s t a t h i s r i s k . Following h i s e l e c t i o n , the buyer w i l l f i n d t h a t he has no remedy against t h e s e l l e r and, having received property i n the goods, he w i l l n o t , presumably, be able t o c l a i m a t o t a l f a i l u r e o f c o n s i d e r a t i o n . Moreover, the s e l l e r , having t r a n s f e r r e d property and r i s k , w i l l be able t o maintain an a c t i o n against the buyer f o r the c o n t r a c t p r i c e . The r i g h t given t o the buyer, by s e c t i o n 3 2 ( 2 ) , t o : e l e c t t o d e c l i n e - 85 - t o t r e a t a d e l i v e r y t o a c a r r i e r as a d e l i v e r y t o h i m s e l f , w i l l n o t , i n any circumstances, r e s u l t i n an apportionment of r i s k between s e l l e r and buyer. I t may, i f property has not passed t o the buyer p r i o r t o the d e l i v e r y t o the c a r r i e r , r e s u l t i n r i s k r e - v e s t i n g i n the s e l l e r . In a l l other circumstances i t u / i l l have no e f f e c t on the a l l o c a t i o n of r i s k which w i l l remain, i n i t s e n t i r e t y , w i t h the buyer. I t i s , however, possible t h a t the a l t e r n a t i v e remedy provided by s e c t i o n 32(2) may result i n an apportionment of r i s k . The a l t e r n a t i v e remedy, of damages, i s framed i n a p o s i t i v e manner, the sub-section p r o v i d i n g t h a t the buyer "may hold the s e l l e r responsible i n damages". I f r i s k i s on the buyer he w i l l , presumably, be able t o counterclaim against the s e l l e r u/hen sued f o r the p r i c e . There i s , however, some doubt as t o the extent of the buyer's r i g h t s i n these circumstances, f o r i t i s u n c e r t a i n whether the buyer can sue only i n r e l a t i o n t o loss which r e s u l t s from the unreasonable c o n t r a c t o f or whether he can sue f o r any l o s s . carriage Benjamin"*"^ argues t h a t w h i l s t the only duty imposed upon the s e l l e r i s one of ensuring t h a t the c o n t r a c t w i t h the c a r r i e r i s a reasonable one, " i t would seem t h a t , i f the s e l l e r i s i n breach of t h i s duty, the buyer would be e n t i t l e d t o decline t o t r e a t the d e l i v e r y t o the c a r r i e r as a d e l i v e r y t o himself notwithstanding t h a t the loss or damage might have occurred without such breach". Benjamin contrasts t h i s s i t u a t i o n w i t h t h a t provided f o r by s e c t i o n 20(2) which, i t w i l l be r e c a l l e d , r e l a t e s only t o loss which might not have occurred but f o r the buyer's d e f a u l t . Whilst Benjamin mentions only the f i r s t of the remedies provided f o r by s e c t i o n 3 2 ( 2 ) , presumably the same argument would suggest t h a t the buyer can also e l e c t t o sue f o r damages i n respect of loss which might have occurred without a breach of the s e l l e r ' s o b l i g a t i o n t o Sale of Goods (1974) para. 594. - 86 - negotiate a reasonable c o n t r a c t . C e r t a i n l y Atiyah notes 108 t h a t " i t 109 appears t h a t the buyer's remedies f o r the damage t o or loss o f the goods operate whether or not the loss or damage was the consequence of the s e l l e r ' s f a i l u r e t o make a reasonable c o n t r a c t w i t h the c a r r i e r " . In s h o r t , given t h a t the s e l l e r has not e f f e c t e d a reasonable c o n t r a c t of c a r r i a g e , i t i s possible t h a t i f r i s k has passed t o the buyer, i t w i l l re-vest i n the s e l l e r i n r e l a t i o n t o any loss which may occur during transit. What, however, i s the mischief of the sub-section? There i s a u t h o r i t y f o r the p r o p o s i t i o n t h a t the purpose of ensuring t h a t the s e l l e r makes a reasonable c o n t r a c t w i t h the c a r r i e r i s t o ensure t h a t the buyer w i l l , i n the event of l o s s , have an indemnity against the c a r r i e r . In Clarke v. H u t c h i n s ^ ^ Lord Ellenborough a s s e r t e d ' ^ t h a t "he ( t h e s e l l e r ) had an implied a u t h o r i t y , and i t was h i s duty t o do whatever was necessary t o secure the r e s p o n s i b i l i t y of the c a r r i e r s f o r the safe d e l i v e r y of the goods, and t o put them i n t o such a course of conveyance as t h a t i n case of a loss the defendant might have an indemnity against the 112 carriers". S i m i l a r l y , i n Thomas Young and Sons L t d . v. Hobson and Partners Tucker J. was of the opinion t h a t "...... the question was whether a proper c o n t r a c t was made on t h e i r (the buyer's) behalf by which the defendants could have recovered from the railway f o r the damage which i n f a c t occurred".'''^ the I t would appear, then, t h a t one important aspect of sub-section i s the encouragement i t gives t o s e l l e r s t o e f f e c t contracts of carriage which w i l l provide an indemnity t o the buyers. 1 0 8 T h e Sale of Goods ( 5 t h e d i t i o n ) page 223. 109 i.e. both of them. 1 1 0 ( 1 8 1 1 ) 14 East 475. H I 4hIC at page 476. 1 1 2 ( 1 9 4 9 ) 65 T.L.R. 365. 113 -tec n pages 366,7. I t may w e l l be, - 87 - how/ever, t h a t i n c e r t a i n circumstances i t i s , because o f c o s t , not comm e r c i a l l y p r a c t i c a b l e t o negotiate a c o n t r a c t which provides f o r such an indemnity i n respect o f each and every p o t e n t i a l cause o f l o s s . I n such circumstances i t would, presumably, be recognised t h a t a c o n t r a c t of c a r r i a g e was not unreasonable merely because i t d i d not provide f o r a complete indemnity. Would a s e l l e r be l i a b l e i f he has not e f f e c t e d a reasonable c o n t r a c t o f c a r r i a g e , but the loss t h a t has a c t u a l l y occurred i s such t h a t , i n a l l p r o b a b i l i t y , i t would not have been covered by a reasonable c o n t r a c t o f c a r r i a g e . Bearing i n mind t h a t the buyer has t h e r i s k , i s i t not l i k e l y t h a t a c o u r t would not f i n d the s e l l e r l i a b l e i n such a s i t u a t i o n ? I f so, there i s here, yet again, p r o v i s i o n f o r apportionment o f r i s k . Given t h a t a s e l l e r has not e f f e c t e d a reasonable c o n t r a c t of c a r r i a g e , he must bear the r i s k o f loss which would have been covered by such a c o n t r a c t . The buyer, nevertheless, would r e t a i n r i s k i n r e l a t i o n t o loss which, commercial p r a c t i c e i n d i c a t e s , would not have been covered by such a c o n t r a c t . Risk and T r a n s i t (3) The t h i r d sub-section t o s e c t i o n 32 provides t h a t : "Unless otherwise agreed, where goods are sent by the s e l l e r t o the buyer by a route i n v o l v i n g sea t r a n s i t , under circumstances i n which i t i s usual t o i n s u r e , the s e l l e r must.give such n o t i c e t o the buyer as may enable him t o insure them during t h e i r sea t r a n s i t , and, i f the s e l l e r f a i l s t o do so, the goods s h a l l be deemed t o be a t h i s r i s k during such sea t r a n s i t " . This sub-section would not appear t o provide f o r any apportionment of r i s k , r a t h e r i t provides t h a t where r i s k has passed t o the buyer i t w i l l , i n the circumstances envisaged i n the sub-section, re-vest completely i n the s e l l e r f o r the d u r a t i o n o f the voyage. " r i s k " borne by the s e l l e r ? What, however, i s the nature o f the Normally, the f a c t t h a t t h e s e l l e r has the r i s k means simply t h a t he cannot recover from the buyer should the goods - 88 - perish. Being r e l i e v e d o f h i s o b l i g a t i o n t o pay f o r the goods may, however, be l i t t l e comfort t o the buyer, who may have secured a bargain i n h i s dealing^ w i t h the s e l l e r , or may have bought the goods on a r i s i n g market. to Had the buyer been given n o t i c e s u f f i c i e n t t o have allowed him have insured the goods, he would, presumably, have insured them f o r t h e i r market value and would, as a r e s u l t , nave received a f u l l indemnity upon t h e i r p e r i s h i n g . Does the r e - v e s t i n g o f r i s k , i n accordance w i t h s e c t i o n 3 2 ( 3 ) , r e s u l t i n an o b l i g a t i o n on the p a r t o f the s e l l e r t o pay to the buyer h i s a c t u a l l o s s . Must he, i n f a c t , not only abandon h i s claim 114 to the p r i c e , but also pay compensation t o the buyer? Surely n o t , for the concept o f r i s k attaches t o the goods themselves r a t h e r than t o the bargain which has been made i n r e l a t i o n t o them. The buyer would, presumably, being r e l i e v e d of h i s o b l i g a t i o n t o pay the p r i c e , recover his at compensation by way o f an a c t i o n f o r damages f o r non-delivery. t h i s stage, however, t h a t the s i t u a t i o n becomes unclear. I t is The s e l l e r w i l l only be l i a b l e f o r non-delivery i f h i s c o n t r a c t w i t h the buyer survives the perishing o f the goods. I f , however, the p e r i s h i n g o f the goods f r u s t r a t e s the c o n t r a c t he w i l l be f r e e o f such l i a b i l i t y . the Where goods are s p e c i f i c , the c o n t r a c t can be f r u s t r a t e d by v i r t u e o f s e c t i o n 7 Sale o f Goods Act 1979, which provides t h a t : "Where there i s an agreement t o s e l l s p e c i f i c goods, and subsequently the goods, without any f a u l t on t h e p a r t o f the s e l l e r or buyer, perish before the r i s k passes t o the buyer, the agreement i s thereby avoided". Several problems a r i s e , i n these circumstances, i n r e l a t i o n t o the prov i s i o n s o f t h i s s e c t i o n , not the l e a s t of which i s t h a t which r e s u l t s There i s j u d i c i a l expression of doubt on t h i s p o i n t . I n Wimble Sons and Co. v. Rosenberg and Sons /~1913 7 3 K.B. 757 Hamilton L.J. asserts that: " I f the s e l l e r f a i l s t o f u l f i l t h i s o b l i g a t i o n , then, i n a d d i t i o n to or s u b s t i t u t i o n f o r ( I know not which) any provable damages for the breach, he loses both the goods and the p r i c e i n case the goods are l o s t a t sea". - 89 - from the r e - v e s t i n g of r i s k i n the s e l l e r . Normally a c o n t r a c t can f r u s t r a t e d i f the s e l l e r has r i s k , as he has i n the s e c t i o n situation. Section 7 expressly be 32(3) provides, however, t h a t the c o n t r a c t may only be f r u s t r a t e d "before the r i s k passes t o the buyer" and, i n the s e c t i o n 32(3) s i t u a t i o n , i t w i l l have passed t o the buyer, though i t w i l l subsequently be taken t o re-vest i n the s e l l e r . Should the Court decide t h a t the important f a c t o r i s the f a c t t h a t the s e l l e r does have the r i s k , r a t h e r than the f a c t t h a t i t has p r e v i o u s l y , and t e m p o r a r i l y , passed t o the buyer, i t may y e t experience f u r t h e r d i f f i c u l t i e s i n applying s e c t i o n 7 i n these circumstances. C e r t a i n l y the c o n t r a c t could, as required by the s e c t i o n , be an "agreement t o s e l l " r a t h e r than a s a l e , for r i s k may have passed t o the buyer ahead of property. A more t a x i n g problem, however, whould be t o determine, i n such circumstances, whether the goods have perished seller? "without any f a u l t " on the p a r t of the " F a u l t " , as has previously been i n d i c a t e d , includes "any wrongful act or d e f a u l t " and, q u i t e c l e a r l y , the s e l l e r has, i n the s e c t i o n 32(3) s i t u a t i o n , "defaulted" i n r e l a t i o n t o h i s o b l i g a t i o n t o give notice t o the buyer s u f f i c i e n t t o enable him t o insure the goods. I t i s not, however, c l e a r whether the reference to " f a u l t " i n section 7 incorporates i n t o t h a t s e c t i o n a f a u l t notion i n r e l a t i o n t o causation whether i t has a wider meaning. The f a i l u r e of the s e l l e r t o give notice w i l l not cause the goods t o perish and, i f the reference to causation, the s e l l e r w i l l not be at f a u l t . to " f a u l t " relate An element of f a u l t attaches t o the s e l l e r ' s performance of his c o n t r a c t u a l o b l i g a t i o n s , however, and should the reference s e c t i o n 7 w i l l not or t o " f a u l t " be given a wide meaning, apply. I f s e c t i o n 7 can be applied i n the s e c t i o n 32(3) s i t u a t i o n , the s e l l e r and buyer w i l l each share an aspect of r i s k . The s e l l e r , having - 90 - the r i s k , may lose h i s r i g h t t o sue f o r the" p r i c e , w h i l s t the buyer, because of the l i k e l i h o o d of the c o n t r a c t being f r u s t r a t e d , may lose h i s r i g h t t o sue f o r non-delivery and, as a r e s u l t , t h a t p a r t of the value of the goods which exceeds the c o n t r a c t p r i c e . I t i s submitted however, t h a t s e c t i o n 7 should not apply i n t h i s s i t u a t i o n , f o r the f a c t t h a t the s e l l e r i s "deemed" t o have the r i s k , as a r e s u l t of s e c t i o n 32(3) should not obscure the f a c t t h a t r i s k has, i n r e a l i t y , passed t o the buyer. Section 7 c o u l d , i n any event, only apply where property had not passed t o the buyer. Further, where the goods are purely generic there w i l l be no question of f r u s t r a t i o n . therefore, Generally, s e c t i o n 32(3) w i l l not r e s u l t i n any apportionment o f r i s k I t w i l l , however, n o t i o n a l l y re-vest r i s k i n the s e l l e r . - 91 - PART THREE FRUSTRATION OF THE CONTRACT - 92 - The p e r i s h i n g o f goods which form the s u b j e c t matter o f a c o n t r a c t of s a l e w i l l n o t , o f i t s e l f , discharge the c o n t r a c t : a man i s n o t discharged from h i s o b l i g a t i o n o f f u l f i l l i n g h i s c o n t r a c t because he i s able t o say t h a t he c o u l d n o t f u l f i l i t . This i s one o f the main reasons f o r h i s paying damages, t h a t he c o u l d not f u l f i l it" A The c o n t r a c t w i l l be discharged only where the p e r i s h i n g of the goods r e s u l t s i n a f r u s t r a t i o n o f the c o n t r a c t ; and t h a t w i l l occur where the p e r i s h i n g o f the goods r e s u l t s i n : a) the a p p l i c a t i o n o f the r u l e contained i n s e c t i o n 7 Sale o f Goods Act 1979; or b) the a p p l i c a t i o n o f common law p r i n c i p l e s which recognise t h a t the c o n t r a c t i s f r u s t r a t e d . per Rowlatt J. Sargant and Sons v. Paterson and Co. (1923) 129 L.T. 471, 473. - 93 - SECTION A: FRUSTRATION BY SECTION 7 SALE OF GOODS ACT 1979 Section 7 o f the 1979 Act provides t h a t : "Where there i s an agreement t o s e l l s p e c i f i c goods and subsequently the goods, without any f a u l t on t h e p a r t o f the s e l l e r or buyer, perish before t h e r i s k passes t o the buyer, the agreement i s thereby avoided." Must the Goods be Specific? I t w i l l be seen t h a t t h i s s e c t i o n appears t o r e l a t e only t o s p e c i f i c goods, which goods are defined i n s e c t i o n 61(1) o f the Act as being "... i d e n t i f i e d and agreed upon a t the time a c o n t r a c t o f sale i s made". S i r Mackenzie Chalmers, however, was o f the opinion t h a t s e c t i o n 7 applied whether the goods had been i d e n t i f i e d a t the time o f c o n t r a c t or 2 not o r , indeed, whether i n existence a t the time o f c o n t r a c t or n o t . Chalmers r e l i e d upon d i c t a by M e l l i s h J. i n Howell v. Coupland 3 relating to a c o n t r a c t f o r the supply o f 200 tons o f potatoes t o be grown on a p a r t i c u l a r farm. M e l l i s h J. asserted t h a t : "This i s not l i k e the case o f a c o n t r a c t t o d e l i v e r so many goods of a p a r t i c u l a r k i n d , where no s p e c i f i c goods are t o be s o l d . Here there was an agreement t o s e l l and buy 200 tons o f a crop t o be grown on s p e c i f i c land, so t h a t i t i s an agreement t o s e l l what w i l l be, and may be c a l l e d s p e c i f i c t h i n g s ; t h e r e f o r e n e i t h e r party i s l i a b l e i f the performance becomes impossible." The d e f i n i t i o n contained such a conclusion. i n s e c t i o n 61(1) i s , o f course, i n c o n s i s t e n t w i t h Goods which have not been i d e n t i f i e d or agreed upon at the moment of c o n t r a c t cannot, under the d e f i n i t i o n , be s p e c i f i c goods. However, i t may not f o l l o w from t h i s t h a t s e c t i o n 7 cannot apply t o such goods. Chalmers "Sale o f Goods Act 1893" (16th ed) page 74. 3 ( 1 8 7 6 ) 1 Q.B.D. 258, 262. - 94 - Consider, f o r example, an analogous s i t u a t i o n , i n v o l v i n g s e c t i o n 52 of the Act. That s e c t i o n provides: " I n any a c t i o n f o r breach of c o n t r a c t t o d e l i v e r s p e c i f i c or ascertained goods the c o u r t may, i f i t t h i n k s f i t , on the p l a i n t i f f ' s a p p l i c a t i o n ... d i r e c t t h a t the c o n t r a c t s h a l l be performed s p e c i f i c a l l y The express reference t o " s p e c i f i c or ascertained goods" i n s e c t i o n 52 would appear t o i n d i c a t e t h a t the s e c t i o n does not extend t o c o n t r a c t s f o r unascertained goods. I n Sky Petroleum v. V.I.P. Petroleum Ltd., 4 however, the High Court s p e c i f i c a l l y enforced a c o n t r a c t f o r the sale o f unascertained goods i n circumstances i n which damages would, i n t h e opinion o f the Court, have been inadequate. (The c o n t r a c t was f o r t h e supply o f p e t r o l t o a f i l l i n g s t a t i o n , and the breach occurred d u r i n g the 1973 p e t r o l c r i s i s . ) I n doing so Goulding J. recognised t h e d i f f i c u l t y presented by the words o f the s e c t i o n but asserted t h a t t h e Court should not be confined by those words but should look r a t h e r t o the ' r a t i o behind the r u l e " ^ o r , i n other words, t o the mischief. The r a t i o behind the r u l e contained i n s e c t i o n 52 was, t o Goulding J., the p r i n c i p l e t h a t s p e c i f i c performance o f a c o n t r a c t f o r the sale o f goods should never be awarded where damages would be an adequate remedy. I n v i r t u a l l y a l l cases damages would adequately compensate a purchaser f o r the non-delivery o f unascertained goods, f o r , w i t h the damages, he could re-enter the market and purchase the goods he r e q u i r e s . Where, however, there was no a v a i l able market (as was the case f o r p e t r o l i n 1973) the goods, though unascertained, acquired a uniqueness which made them s i n g u l a r l y important. Having such importance, the unascertained goods f e l l w i t h i n the r a t i o underpinning the words o f s e c t i o n 52 and the s e c t i o n could be applied t o 4 /"1974_7 1 A l l E.R. 954. ''at page 956. - 95 - the c o n t r a c t f o r t h e i r s a l e . I t would, presumably, be possible t o extend t h i s approach t o s e c t i o n 7 Sale o f Goods Act and f i n d t h a t goods other than s p e c i f i c goods could be embraced by t h a t s e c t i o n . The draftsman, u/e may assume, r e f e r r e d t o s p e c i f i c goods only on the basis t h a t the d e s t r u c t i o n of unascertained goods should not be taken t o f r u s t r a t e a c o n t r a c t f o r t h e i r s a l e , as f u r t h e r supplies o f such goods would be a v a i l able t o the s e l l e r . s o as t o enable him t o perform h i s c o n t r a c t u a l undertaking. I f the goods were ascertained a t the time of d e s t r u c t i o n property would, i n a l l p r o b a b i l i t y , have passed t o the buyer and i t was m a n i f e s t l y not t h e draftsman's i n t e n t i o n t o f r u s t r a t e a c o n t r a c t i n which property had passed.^ I f t h i s i s so, and the reference t o s p e c i f i c goods i s merely an attempt t o exclude the p e r i s h i n g of ascertained goods or unascertained unascertained goods which can be replaced ( i . e . purely generic goods), i t would be open t o a Court t o include w i t h i n the " r a t i o " o f s e c t i o n 7 the d e s t r u c t i o n o f unascertained goods from a s p e c i f i c source. Whether a c o u r t would be prepared t o do so i s , o f course, another question. P r i o r t o 1943, i t would have mattered l i t t l e whether such a c o n t r a c t was f r u s t r a t e d by s e c t i o n 7 or by normal p r i n c i p l e s o f common law. The passing of the Law Reform ( F r u s t r a t e d Contracts) Act 1943 has, however, changed t h i s , f o r the provisions of t h a t Act do not apply t o contracts f r u s t r a t e d by s e c t i o n 7. As a r e s u l t , i t i s a matter of some doubt t h a t a court would s t r i v e t o b r i n g w i t h i n s e c t i o n 7 a s i t u a t i o n which would otherwise a t t r a c t the p r o v i s i o n s of the 1943 Act. Property and Risk must not have passed Section 7 w i l l not apply t o contracts i n which property has the s e c t i o n only applies where there i s "an agreement t o s e l l " . passed - 96 - for the draftsman expressly r e f e r s only t o an "agreement t o s e l l " . Nor w i l l i t apply t o a c o n t r a c t i n which the r i s k o f l o s s has passed t o the buyer. Various commentators^ conclude from t h i s t h a t the p e r i s h i n g of the goods cannot f r u s t r a t e an executed c o n t r a c t f o r the s a l e o f those goods. Surely, however, the only l e g i t i m a t e conclusion t h a t can be drawn from the wording of s e c t i o n 7 i s t h a t there can be no f r u s t r a t i o n under s e c t i o n 7 o f a c o n t r a c t i n which p r o p e r t y , or r i s k , or both p r o p e r t y r i s k , has passed t o the, buyer. and Whether there can be a common law f r u s t r a t i o n o f such c o n t r a c t s w i l l be discussed elsewhere. For the moment, however, i t i s s u f f i c i e n t t o e s t a b l i s h t h a t f o r s e c t i o n 7 t o apply n e i t h e r property nor r i s k must be w i t h the buyer. There i s a l s o a u t h o r i t y f o r the p r o p o s i t i o n t h a t an agreement w i l l not be avoided by s e c t i o n 7 where the p a r t i e s have determined t h a t r i s k g s h a l l l i e w i t h the s e l l e r . I n Logan v. I_e Mesurier, Committee of the P r i v y Council considered goods were destroyed The Court held t h a t r i s k had not passed t o the buyer and, r i s k being w i t h the s e l l e r , i t was purchaser. a s i t u a t i o n i n which s p e c i f i c p r i o r t o t h e i r measurement and consequent d e t e r - m i n a t i o n o f the p r i c e . The s e l l e r was, the J u d i c i a l :he who should bear the l o s s . a c c o r d i n g l y , ordered t o r e t u r n the p r i c e paid by the This p a r t of the judgment i s unexceptional and i s not incon- s i s t e n t w i t h the o p e r a t i o n o f the r u l e contained i n s e c t i o n 7. was, however, also ordered t o pay damages f o r n o n - d e l i v e r y . The seller The basis of the award of damages i s not explained i n Lord Brougham's judgement"^ and i s d i f f i c u l t t o determine. I t i s argued i n Benjamin's "Sale o f Goods''"^ see, f o r example, Fridman "Sale of Goods" page ^see Section E of t h i s Part. 9 ( 1 8 4 7 ) 13 E.R. 1 0 n 628. s e t out at 13 E.R. art. 426. 634. 243. - 97 - t h a t the case i n d i c a t e s the Court's w i l l i n g n e s s t o f i n d t h a t the p a r t i e s had agreed t h a t the goods were t o be a t the s e l l e r ' s r i s k u n t i l property had been t r a n s f e r r e d t o the buyer and t h a t such agreement r e s u l t e d i n a s i t u a t i o n i n which the " f r u s t r a t i n g event" d i d not avoid the c o n t r a c t . I f c o r r e c t , t h i s would mean t h a t section 7 w i l l not avoid a c o n t r a c t where t h e p a r t i e s have agreed t h a t r i s k s h a l l l i e w i t h the s e l l e r u n t i l property i s t r a n s f e r r e d t o the buyer. This p r o p o s i t i o n appears, however, t o ignore the f a c t t h a t goods are always a t the s e l l e r ' s r i s k p r i o r t o the buyer a c q u i r i n g r i s k and t h a t , normally, r i s k i s t r a n s f e r r e d t o t h e buyer a t the same time as property. I n any event, the f a c t t h a t the goods are a t the s e l l e r ' s r i s k w i l l not impose an o b l i g a t i o n upon him t o pay damages f o r non-delivery, but w i l l merely determine t h a t he w i l l not be able t o secure recompense from the buyer f o r h i s loss i n the event o f the goods p e r i s h i n g . A court would need t o ;be s a t i s f i e d t h a t the p a r t i e s intended the s e l l e r t o bear the r i s k o f a f r u s t r a t i n g event o c c u r r i n g , r a t h e r than mere r i s k o f d e s t r u c t i o n o f the goods, i f i t was t o be i n a p o s i t i o n t o impose upon the s e l l e r l i a b i l i t y i n damages f o r non-delivery. Moreover, i t may be t h a t t h e award o f damages i n Logan v. Le Mesurier d i d not depend upon the presumed i n t e n t i o n o f the p a r t i e s as t o r i s k . There had been, i n t h a t case, a breach of c o n t r a c t p r i o r t o the " f r u s t r a t i n g event", f o r the goods had not been d e l i v e r e d a t the agreed place o f d e l i v e r y upon the agreed day. The subsequent f r u s t r a t i n g event would n o t , r e t r o s p e c t i v e l y , erase t h i s breach and damages would have been a v a i l a b l e t o the buyer as compensation f o r t h i s e a r l i e r breach rather than f o r the non-delivery r e s u l t i n g from the perishing o f the goods. I f so, i t would appear t h a t any express or implied agreement between the p a r t i e s t h a t the s e l l e r s h a l l bear the r i s k o f d e s t r u c t i o n o f the goods w i l l c e r t a i n l y have the e f f e c t o f ensuring t h a t - 98 - the buyer does not bear t h i s r i s k , but w i l l not be taken t o i n t e r f e r e w i t h the operation o f s e c t i o n 7. Fault A f u r t h e r requirement o f s e c t i o n 7 i s t h a t the goods must perish without any f a u l t on the p a r t o f s e l l e r or buyer. Obviously there can be no f r u s t r a t i o n where e i t h e r party i s a t f a u l t and, as a r e s u l t o f t h a t f a u l t , the goods p e r i s h . Thus, there w i l l be no f r u s t r a t i o n where e i t h e r s e l l e r or buyer has d e f a u l t e d i n the making ( o r t a k i n g ) o f d e l i v e r y . As a r e s u l t , i f the s e l l e r has been a t f a u l t i n not e f f e c t i n g d e l i v e r y t o the buyer the goods w i l l , because o f s e c t i o n 20(2) Sale o f Goods Act 1979, be at t h e r i s k o f the s e l l e r who must bear the loss of the goods and, s e c t i o n 7 o f the Act not applying because o f h i s f a u l t , the s e l l e r w i l l also be l i a b l e t o the buyer f o r damages f o r non-delivery. Where the buyer has, as a r e s u l t o f f a u l t , not taken d e l i v e r y o f t h e goods he w i l l , s i m i l a r l y , bear the r i s k o f loss and w i l l be l i a b l e i n damages f o r nonacceptance. What, however, i f f a u l t i s not causative o f the loss? Consider, f o r example, a s i t u a t i o n i n which a s e l l e r has agreed t o s e l l s p e c i f i c goods which are not merchantable or which deviate from t h e i r c o n t r a c t d e s c r i p t i o n . W i l l t h e s e l l e r ' s f a u l t take the c o n t r a c t outside the provisions o f s e c t i o n 7 so t h a t there w i l l be no f r u s t r a t i o n o f the c o n t r a c t should the goods perish p r i o r t o the passing o f property and r i s k ? Perhaps i t can be argued t h a t i n the above s i t u a t i o n the s e l l e r does not break h i s c o n t r a c t , I t may be t h a t the s e l l e r i s e n t i t l e d t o the "replacement value"-of h i s goods by v i r t u e o f the buyer having the r i s k o f loss and t h a t recovery of p r o f i t depends upon the a v a i l a b i l i t y of the a c t i o n f o r damages. (See Part Two) - 99 - and, thus, i s not a t f a u l t , u n t i l d e l i v e r y i s e f f e c t e d . then, there may be Until delivery, no f a u l t on the p a r t o f the s e l l e r , the contingent l i a b i l i t y , which would have developed i n t o a c t u a l l i a b i l i t y but f o r d e l i v e r y being prevented by the goods p e r i s h i n g , being i r r e l e v a n t . A more s u b t l e form of non-causative f a u l t may, however, prove more taxing. I t may be t h a t the f a u l t of the s e l l e r r e l a t e s t o the precautions he should have taken t o ensure the s a f e t y of the goods. He may not have taken the steps t h a t a reasonable businessman would have taken t o have prevented t h e i r p e r i s h i n g . I t may be, however, t h a t had he taken such steps, these normal precautions would n o t , i n the event, have been s u f f i c i e n t t o have prevented the goods p e r i s h i n g as a r e s u l t o f some enormous and unpredictable i n t e r v e n t i o n by the forces o f nature. W i l l the c o n t r a c t be f r u s t r a t e d as a r e s u l t o f t h i s unforeseen and non-preventable n a t u r a l i n t e r v e n t i o n , or w i l l the s e l l e r ' s f a u l t preclude the a p p l i c a t i o n of s e c t i o n 7? Section 20(2) of the Act which r e f e r s t o "... any loss which might not have occurred but f o r such f a u l t " c l e a r l y r e q u i r e s f a u l t t o have been a l i k e l y cause of the l o s s ; the causative nature o f the f a u l t i s n o t , however, expressly r e f e r r e d t o i n s e c t i o n 7 and, indeed, by t h i s omission may be taken t o have been excluded. Would, then, the s e l l e r ' s f a u l t i n the above s i t u a t i o n render him l i a b l e i n damages f o r non-delivery even though he would not have been i n a p o s i t i o n t o d e l i v e r had he not been a t fault? Exclusion of s e c t i o n 7 I t i s possible t h a t the operation of s e c t i o n 7 cannot be prevented by contrary agreement. Section 55(1) Sale of Goods Act provides: Section 14(2) r e f e r s t o the goods supplied under the c o n t r a c t being merchantable, w h i l s t s e c t i o n 13 provides t h a t the goods s h a l l ( a t the time of d e l i v e r y ! ) correspond w i t h t h e i r d e s c r i p t i o n . - 100 - "Where a r i g h t , duty or l i a b i l i t y would a r i s e under a c o n t r a c t of sale of goods by i m p l i c a t i o n of law, i t may (subject t o the Unfair Contract Terms Act 1977) be negatived or v a r i e d by express agreement, or by the course of d e a l i n g between the p a r t i e s , or by such usage as binds both p a r t i e s t o the c o n t r a c t . " This sub-section r e f e r s t o " r i g h t s , d u t i e s or l i a b i l i t i e s " which a r i s e by i m p l i c a t i o n of law. I t may be argued t h a t s e c t i o n 7 does not create r i g h t s , d u t i e s or l i a b i l i t i e s , but r a t h e r , by i t s o p e r a t i o n , negatives them. for I f so, s e c t i o n 55(1) w i l l not apply t o s e c t i o n 7. Further support the view t h a t s e c t i o n 7 may not be excluded by agreement i s t o be found i n the wording of the s e c t i o n and of other sections w i t h i n the Act. Sections such as sections 20 and 33 expressly provide t h a t they operate "unless otherwise agreed". A perusal of Part IV of the Act i n d i c a t e s t h a t these words are a "golden formula" used by the draftsman t o s i g n a l h i s i n t e n t i o n t h a t the p a r t i e s are free t o vary h i s s t a t u t o r y terms i n t h e i r contracts. There i s no such wording i n s e c t i o n 7 which may, by i m p l i c a t i o n , i n d i c a t e t h a t the s e c t i o n must apply i n any s i t u a t i o n i n which i t s p r o v i s i o n s have been s a t i s f i e d . = 101 - SECTION B; CONSEQUENCES OF A CONTRACT BEING FRUSTRATED BY SECTION 7 Where the several requirements of s e c t i o n 7 Sale of Goods Act have been f u l f i l l e d the s e c t i o n provides t h a t "... thereby avoided". 1979 the agreement i s I t would appear from t h i s wording t h a t the agreement a u t o m a t i c a l l y ceases t o e x i s t upon the goods p e r i s h i n g . I t does not, 14 however, cease t o have e x i s t e d ; i n the Fibrosa case, r e f e r r i n g t o the s e c t i o n 7 s i t u a t i o n , pointed t o "... made and continuing i n existence t h a t the c o n t r a c t "... Lord P o r t e r , a contract v a l i d l y u n t i l the goods p e r i s h " ' ^ and asserted i s not void ab i n i t i o , but f u r t h e r performance i s excused a f t e r the d e s t r u c t i o n has taken p l a c e " . ^ I t would appear, then, t h a t where a c o n t r a c t i s f r u s t r a t e d by operation of s e c t i o n 7: 1) both p a r t i e s are released from a l l o b l i g a t i o n s which had- not accrued a t the time of the p e r i s h i n g of the goods; 2) any o b l i g a t i o n which had accrued before t h i s time must be performed; 3) any o b l i g a t i o n which had accrued and which had been performed remains undisturbed. I n short,- the r i g h t s and o b l i g a t i o n s of the p a r t i e s are determined as a t the time the goods p e r i s h . Contracts) Act 1943 that: The provisions of the Law Reform ( F r u s t r a t e d do not apply, f o r s e c t i o n 2(5) of t h a t Act provides "This Act s h a l l not apply ... (c) 1979 .... applies ..." ... t o any c o n t r a c t t o which s e c t i o n seven of the Sale of Goods Act The consequences of f r u s t r a t i o n are, those of the unamended provisions of the common law. w i l l now accordingly, These consequences be considered i n d e t a i l . 14 Fibrosa Spolka Akcjna v. F a i r b a i r n Lawson Combe Barbour L t d . /~1943 7 A.' 15 at page 83. - 102 - Discharge o f both p a r t i e s i n r e l a t i o n t o O b l i g a t i o n s which have not Accrued Benjamin's "Sale o f Goods" s t a t e s unequivocally t h a t .... "The e f f e c t of the o p e r a t i o n o f s e c t i o n 7 i s t h a t the agreement i s avoided. Both p a r t i e s are released from a l l o b l i g a t i o n s which have not yet accrued a t the time a t which the goods p e r i s h " . " ^ On the wording o f the s e c t i o n t h i s i s the only c o n c l u s i o n t h a t can reasonably be drawn. G l a n v i l l e Williams a s s e r t s , " ^ however, t h a t the wording of the s t a t u t e r e s u l t s from the draftsman's mistaken i n t e r p r e t a t i o n o f the r a t i o of 18 Taylor v. Caldwell.- He maintains t h a t , i n the s e c t i o n 7 s i t u a t i o n , the s e l l e r should be t r e a t e d as being discharged from h i s o b l i g a t i o n s by v i r t u e o f the i m p o s s i b i l i t y o f performance the subsequent t o the p e r i s h i n g of goods which form the s u b j e c t matter o f the c o n t r a c t . The buyer, however, should be t r e a t e d as being discharged not by reason o f imposs i b i l i t y o f performance, f o r he may perform h i s o b l i g a t i o n under t h e c o n t r a c t ( i . e . payment o f the p r i c e ) , but r a t h e r by f a i l u r e o f c o n s i d e r a t i o n by reason o f the s e l l e r ' s i n a b i l i t y t o perform. approach l a t e r . More w i l l be said o f t h i s Where, however, s e c t i o n 7 a p p l i e s t o a c o n t r a c t f o r the s a l e of goods i t would appear c l e a r from the wording a c t u a l l y used by the draftsman, whether r e s u l t i n g from a mistake or n o t , t h a t both p a r t i e s are discharged by reason of the c o n t r a c t being avoided. I t w i l l be r e c a l l e d from Part One, t h a t goods may be taken t o have perished where, i n r e a l i t y , some considerable p o r t i o n of the goods remain 19 i n e x i s t e n c e . I n Barrow Lane L t d . v. P h i l l i p P h i l l i p s and Company L t d . , 16 a r t . 428. page 202. 17 The Law Reform ( F r u s t r a t e d Contracts) Act 1943" page 82. 18 19 (1863) 3 B. and S. /"1929 7 1 K.B. 826. 574. - 103 - for example, a consignment o f 700 bags o f nuts was taken t a have perished as a r e s u l t o f 109 o f the bags having been s t o l e n . Ina s i t u a t i o n i n which goods are deemed t o have p e r i s h e d i n t h i s way and i n which s e c t i o n 7 a p p l i e s , w i l l the buyer be able t o i n s i s t t h a t the goods which have not a c t u a l l y perished should be d e l i v e r e d ? I t i s submitted 20 t h a t he can n o t . I n Sainsbury L t d . v. S t r e e t Flackenna J . d i s t i n g u i s h e d two, s i m i l a r , s i t u a t i o n s : a) t h e Howell v . Coupland s i t u a t i o n , i n which there i s an agree- ment t o buy goods s u b j e c t t o a c o n d i t i o n precedent t h a t s u f f i c i e n t goods be grown or acquired by t h e s e l l e r ( o r t o a c o n d i t i o n subsequent which w i l l determine the c o n t r a c t i f s u f f i c i e n t goods are not b) available); t h e s i t u a t i o n i n which s e c t i o n 7 Sale o f Goods Act a p p l i e s . In t h e former s i t u a t i o n , he was able t o a s s e r t t h a t the e x i s t e n c e o f a c o n d i t i o n r e l i e v i n g t h e s e l l e r o f h i s o b l i g a t i o n t o make complete d e l i v e r y need not excuse him from d e l i v e r i n g the s m a l l e r , a v a i l a b l e , q u a n t i t y should t h e buyer be w i l l i n g t o accept i t . the Having d i s t i n g u i s h e d two s i t u a t i o n s , and having addressed h i m s e l f t o the former (and f o r him, r e l e v a n t ) s i t u a t i o n , he d i d n o t comment on t h e l a t t e r . ment does, however, demonstrate t h a t the Howell v. Coupland His j u d g situation and the s e c t i o n 7 s i t u a t i o n are d i s t i n c t and t h a t j u d i c i a l comments made i n r e l a t i o n t o the former cannot the be taken t o apply t o t h e l a t t e r . In l a t t e r s i t u a t i o n , the words o f the s t a t u t e are c l e a r and unambiguous. S i m i l a r l y c l e a r wording i n s e c t i o n 6 o f t h e Sale o f Goods Act has caused the e d i t o r s o f Benjamin's "Sale o f Goods" t o q u e s t i o n the suggestion t h a t a buyer can i n s i s t upon a reduced d e l i v e r y i n a s e c t i o n 6 s i t u a t i o n : 2 0 /"1972 7 3 A l l E.R, 1127. - 104 - " I t has been suggested t h a t the buyer may always i f he wishes waive h i s r i g h t t o f u l l and complete d e l i v e r y and i n s i s t on having the remainder i f he i s w i l l i n g t o pay the f u l l c o n t r a c t p r i c e , or perhaps i n a proper case, the appropriate p a r t of a d i v i s i b l e p r i c e . I t i s d i f f i c u l t t o see how t h i s can be_ 21 reconciled w i t h the s t a t u t o r y r u l e t h a t the c o n t r a c t i s v o i d " . Equally, i t i s submitted, i t i s d i f f i c u l t t o see how a buyer's c l a i m t o e n t i t l e m e n t t o d e l i v e r y can survive an avoidance of a c o n t r a c t by s e c t i o n 7. By c o n t r a s t , i t may be noted t h a t s e c t i o n 7(2) American Uniform Sales Act provides t h a t i f the goods have perished i n part or have wholly or i n a m a t e r i a l part so d e t e r i o r a t e d i n q u a l i t y as t o be s u b s t a n t i a l l y changed i n character, the buyer can, a t h i s o p t i o n , t r e a t the sale as avoided or as t r a n s f e r r i n g property i n e x i s t i n g goods ( i n which case he must pay the whole p r i c e i f the c o n t r a c t was indivisible). Performance o f Obligations which have Accrued Notwithstanding the operation of s e c t i o n 7, the p a r t i e s are bound to perform o b l i g a t i o n s which had accrued p r i o r t o the moment a t which the goods perished. S i m i l a r l y any performance o f such o b l i g a t i o n s which had taken place a t the time of p e r i s h i n g w i l l remain undisturbed. I n Chandler 22 v. Webster C o l l i n s M.R. asserted t h a t : "... where, from causes outside the v o l i t i o n o f the p a r t i e s , something which was the basis o f , or e s s e n t i a l t o the f u l f i l m e n t o f , the c o n t r a c t has become impossible, so t h a t , from the time when the f a c t o f t h a t i m p o s s i b i l i t y has been ascertained, the c o n t r a c t can no f u r t h e r be performed by e i t h e r p a r t y , i t remains a p e r f e c t l y good c o n t r a c t up t o t h a t p o i n t and everything previously done i n pursuance of i t must be t r e a t e d as r i g h t l y done". 23 Thus, t o borrow an example provided by Lord A t k i n i n the Fibrosa case, i f "A agrees t o s e l l a horse t o B f o r £50, d e l i v e r y t o be made i n a month 21 art. 2 2 119, page 75. 23 /"1904 7 1 K.B. 493 at 499, at page 50, - 105 - the p r i c e t o be paid f o r t h w i t h , but the property not t o pass t i l l d e l i v e r y , and B t o pay A each u/eek an agreed sum f o r keep o f the horse during the month", then, i f the horse dies i n a f o r t n i g h t , D i s bound to pay the sum due f o r the f o r t n i g h t . The purchaser may, however, b r i n g an a c t i o n f o r recovery of any p a r i o f the p r i c e paid ( t h e f u l l £50 i n the above example) where there has been a t o t a l f a i l u r e o f c o n s i d e r a t i o n . for The a c t i o n i s q u a s i - c o n t r a c t u a l money had and. received: "The claim f o r money had and received i s not ... a c l a i m f o r f u r t h e r performance o f the c o n t r a c t . I t i s a claim outside the c o n t r a c t . I f t h e p a r t i e s are l e f t where they a r e , one feature o f the p o s i t i o n i s t h a t the one who has received the prepayment i s l e f t i n possession o f a sum o f money which belongs t o the other. The f r u s t r a t i o n does not change the property i n the money, nor i s the c o n t r a c t wiped out a l t o g e t h e r , but only t h e f u t u r e performance".24 Compensation f o r Expenses Incurred As the p r o v i s i o n s o f the 1943 Act do not apply t o c o n t r a c t s avoided by s e c t i o n 7 o f the 1979 A c t , there i s no p r o v i s i o n by which the s e l l e r can recover a share o f expenses i n c u r r e d p r i o r t o f r u s t r a t i o n . Moreover, because o f the d e c i s i o n i n the Fibrosa case he w i l l have t o refund, i n f u l l , any p a r t o f the purchase p r i c e which has been paid over (assuming t h a t there has been a f a i l u r e o f c o n s i d e r a t i o n ) and w i l l , thus, not be permitted t o r e t a i n any p o r t i o n o f t h a t sum t o compensate him f o r expenses i n c u r r e d . Payment f o r Goods Delivered 25 I f a c o n t r a c t o f sale i s non-severable, the r u l e i n Cutter v. Powell would lead one t o conclude t h a t there can be no payment f o r goods d e l i v e r e d per Lord Wright, the Fibrosa page 7 1 . (1795) 6 T.R. 320. - 106 - i n part-performance o f a c o n t r a c t , p r i o r t o t h e p e r i s h i n g o f the remainder o f the goods contracted f o r . 26 Atiyah a s s e r t s , however, t h a t i t may be possible t o imply a c o n t r a c t under which the purchaser i s o b l i g e d t o pay f o r the goods he has r e c e i v e d . This i m p l i e d c o n t r a c t would, he suggests, a r i s e from the purchaser's r e f u s a l t o r e t u r n t o the s e l l e r t h e goods d e l i v e r e d t o him. 27 There i s some j u d i c i a l support f o r t h i s view; i n Pattinson v. Luckley, Bramwell B. i n d i c a t e d t h a t ... " I n t h e case o f goods s o l d and d e l i v e r e d , i t i s easy t o shew a c o n t r a c t from t h e r e t e n t i o n o f the goods Whether or not there would be s i m i l a r support i n a s i t u a t i o n i n which a c o n t r a c t has a c t u a l l y been made, b u t t h e s e l l e r urges t h e c o u r t t o imply another, t o a s s i s t him i n h i s c l a i m f o r part-payment, i s , o f course, f a r from c e r t a i n . I t would seem, however, t h a t a c o u r t might be more w i l l i n g t o imply a c o n t r a c t where goods have been d e l i v e r e d than i n other circumstances i n which there has been part-performance (say, f o r example, p a r t completion of a b u i l d i n g ) . The reason f o r t h i s i s the o p t i o n t h a t the 28 purchaser o f goods has t o r e t u r n a p a r t - d e l i v e r y t o the s e l l e r and thereby r e f r a i n from t a k i n g the b e n e f i t o f the s e l l e r ' s a c t i o n ; " i t i s only where t h e circumstances are such as t o give t h a t o p t i o n t h a t there i s 29 any evidence on which t o ground the i n f e r e n c e o f a new c o n t r a c t " . ""The Sale of Goods" ( 4 t h ed) page 173. 27 ( 1 8 7 5 ) L.R. 10 Ex. 330. 2 8 I n B.P. E x p l o r a t i o n v. Hunt (No. 2) /"1979_7 1 W.L.R. 783, however, Goff L.J. asserted ( a t page 806) t h a t " u n l i k e money, services can never be r e s t o r e d , nor u s u a l l y can goods, since they are l i k e l y t o have been consumed or disposed o f , or t o have depreciated i n value". 2 9 p e r C o l l i n s L.J., Sumpter v. Hedges /"1898 7 1 Q.B. 676. - 107 - There may be, however, no need t o r e f e r t o quasi-contractual p r i n c i p l e s where, p r i o r t o goods p e r i s h i n g , the s e l l e r has made a p a r t delivery. Section 30(1) Sale of Goods Act 1979 provides: "Where the s e l l e r d e l i v e r s t o the buyer a q u a n t i t y of goods less than he contracted t o s e l l , the buyer may r e j e c t them, but i f the buyer accepts the goods so d e l i v e r e d he must pay f o r them a t the c o n t r a c t rate". The wording of the sub-section would seem t o cover the s i t u a t i o n presently envisaged. Professor Atiyah s u g g e s t s ^ t h a t s e c t i o n 30(1) has no a p p l i c a t i o n i n such a s i t u a t i o n "... because i t postulates circumstances i n which the d e l i v e r y o f only p a r t o f the goods i s a breach of c o n t r a c t , and i n which the buyer may r e j e c t t h a t p a r t a t once'. case put here / " i . e . The the s i t u a t i o n i n which there has been a p a r t - d e l i v e r y p r i o r t o f r u s t r a t i o n 7 i s one i n which the d e l i v e r y o f p a r t o f the goods i s not a breach of c o n t r a c t and the buyer cannot therefore them when d e l i v e r e d " . argument. reject I t may be t h a t a c o u r t would be persuaded by t h i s I t should be noted, however, t h a t the sub-section only imposes upon the buyer an o b l i g a t i o n t o pay f o r the p a r t - d e l i v e r y where he "accepts" the goods and, by v i r t u e of s e c t i o n 35 of the A c t , mere r e t e n t i o n of the goods would not, by i t s e l f , c o n s t i t u t e an acceptance u n t i l a "reasonable time" had elapsed. Presumably, where there has been a p a r t - d e l i v e r y p r i o r t o f r u s t r a t i o n , a court would not consider a reasonable time t o have elapsed u n t i l such time as the goods had been r e t a i n e d by the purchaser i n f u l l knowledge t h a t the remainder of the goods contracted 3 for had perished and would not be delivered. ''' I f section 30(1) does apply i n t h i s s i t u a t i o n , i t should be noted t h a t the buyer w i l l not be l i a b l e t o pay merely a reasonable price f o r the goods d e l i v e r e d , he w i l l be l i a b l e t o pay a t the contract 30 rate. "The Sale of Goods" (4th ed) page 173. ^ I t i s , admittedly, also possible t h a t the buyer could r e - s e l l the goods d e l i v e r e d , thereby accepting them, and render himself l i a b l e t o pay f o r those goods w h i l s t unaware t h a t l a t e r d e l i v e r i e s were not t o f o l l o w . - 108 - SECTION C: FRUSTRATION AT COMMON LAW Section 7 Sale o f Goods Act 1979 applies only t o the p e r i s h i n g of s p e c i f i c goods. A s e l l e r i n possession o f unascertained goods which perish w i l l normally f i n d a c o u r t unsympathetic t o any claim t h a t a c o n t r a c t of sale should, as a r e s u l t , be f r u s t r a t e d : "... a bare and u n q u a l i f i e d c o n t r a c t f o r the sale of unascertained goods w i l l not (unless most s p e c i a l f a c t s compel an opposite i m p l i c a t i o n ) be dissolved by the operation of the p r i n c i p l e of K r e l l v. Henry even though there has been so grave and unforeseen a change i n circumstances as t o render i t impossible f o r the vendor t o f u l f i l h i s bargain".32 In most circumstances, o f course, the p e r i s h i n g o f the s e l l e r ' s stock o f unascertained goods w i l l not prevent him from d i s c h a r g i n g h i s c o n t r a c t u a l o b l i g a t i o n s , f o r he w i l l be f r e e t o secure replacements f o r the goods t h a t have perished. Where, however, the s e l l e r has contracted t o d e l i v e r unascertained goods from a s p e c i f i c source, the p o s i t i o n may w e l l be d i f f e r e n t ; f o r , should the s p e c i f i c source p e r i s h , i t w i l l be impossible t o d e l i v e r goods which correspond t o the c o n t r a c t d e s c r i p t i o n . There are no reported cases i n which the courts have recognised f r u s t r a t i o n of a c o n t r a c t of t h i s type, but there are statements of p r i n c i p l e which are 33 wide enough t o embrace the s i t u a t i o n . I n r e Badische Co., Bayer Co. e t c . , for example, Russell J. asserted t h a t "... I can see no reason why, given the necessary circumstances t o e x i s t , the d o c t r i n e / " o f f r u s t r a t i o n 7 should not apply equally t o unascertained goods. I t i s , of course, obvious from the nature of the c o n t r a c t t h a t the necessary circumstances 32 per McCardie J., Blackburn Bobbin Company v. T.W. A l l e n and Sons /"1918_7 1 K.B. 540, 550. /"1921 7 2 Ch. 331, 382. 3 3 - 109 - can only very r a t e l y a r i s e i n the case o f unascertained goods. they may a r i s e appears t o me undoubted That One o f the circumstances i n which Russell J. a n t i c i p a t e d the p o s s i b i l i t y o f f r u s t r a t i o n was where the goods had, i n h i s words, "almost a s p e c i f i c touch".It seems l i k e l y , then, t h a t there i s a t l e a s t one s i t u a t i o n i n which there w i l l be a common law f r u s t r a t i o n o f a c o n t r a c t o f sale r e s u l t i n g from the p e r i s h i n g of goods; t h a t i n which the goods are unascertained, but to be drawn from a s p e c i f i c b u l k . G l a n v i l l e Williams suggests another t h a t i n which the goods which have perished were, a t the time o f c o n t r a c t , unascertained, b u t , p r i o r t o t h e i r p e r i s h i n g , have become ascertained. I f , he maintains, r i s k has not passed t o the buyer a t the time o f the goods p e r i s h i n g (as a r e s u l t , perhaps, of express agreement between the p a r t i e s ) , then the s e l l e r w i l l be discharged from h i s o b l i g a t i o n t o d e l i v e r by the r u l e i n Taylor v. Caldwell and the buyer w i l l be discharged from h i s o b l i g a t i o n to pay the p r i c e because o f a f a i l u r e o f c o n s i d e r a t i o n . I t may be possible t o deny the l i k e l i h o o d o f t h i s outcome i n such a s i t u a t i o n by reference t o the f a c t t h a t i t i s i n c o n s i s t e n t w i t h the common law approach t o unascertained goods. Ascertained goods are, i n e f f e c t , goods which are so designated when a c o n t r a c t f o r the sale o f unascertained goods has been performed t o some extent ( i . e . a t l e a s t as f a r as i s necessary t o enable the goods t o be i d e n t i f i e d ) . The c o n t r a c t i s s t i l l , i n essence, one f o r unascertained goods and the uniqueness o f the goods r e s u l t s more from the operation o f l e g a l r u l e s designed t o b r i n g i n t o operation concepts of property and r i s k than from any f e e l i n g expressed by the p a r t i e s . at page 383. "The Law Reform ( F r u s t r a t e d Contracts) Act 1943" page 89. - 110 - For the buyer, and indeed f o r the s e l l e r , the goods w i l l be replaceable. However, there i s no doubt t h a t ascertained goods have "almost a s p e c i f i c touch" and t h e i r uniqueness t o the buyer i s suggested i n s e c t i o n 52 o f the 1979 Act which permits s p e c i f i c performance o f a cont r a c t t o d e l i v e r goods which are s p e c i f i c o r , s i g n i f i c a n t l y , ascertained. I t i s possible t h a t the " q u a s i - s p e c i f i c " nature o f these goods would r e s u l t i n f r u s t r a t i o n o f the c o n t r a c t should, they p e r i s h . I f so, i t seems c l e a r t h a t such goods are not s p e c i f i c w i t h i n the meaning o f s e c t i o n 61(1) and t h a t s e c t i o n 7 Sale o f Goods Act could not apply. Any f r u s t r a t i o n o f the c o n t r a c t would, t h e r e f o r e , have t o be a t common law. A t h i r d s i t u a t i o n i n which there may be f r u s t r a t i o n a t common law i s 3 the Howell v. Coupland ^ s i t u a t i o n . I n t h a t case there was an agreement to purchase 200 tons o f regent potatoes grown on a s p e c i f i c parcel o f land belonging t o the s e l l e r . S u f f i c i e n t o f t h i s land was sown t o produce the required crops, b u t , because o f potato b l i g h t , the crop f a i l e d . The s e l l e r u/as, a t f i r s t instance and on appeal, r e l i e v e d o f his o b l i g a t i o n s . At f i r s t instance 37 Blackburn J. asserted 38 that: "The p r i n c i p l e o f Taylor v. Caldwell which was followed i n Appleby v. Myers i n the Exchequer Chamber, a t a l l events, decides t h a t where there i s a c o n t r a c t w i t h respect t o a p a r t i c u l a r t h i n g , and t h a t t h i n g cannot be d e l i v e r e d owing t o a p e r i s h i n g without any d e f a u l t i n the s e l l e r , the d e l i v e r y i s excused. Of course, i f the p e r i s h i n g were owing t o any d e f a u l t of the s e l l e r , t h a t would be q u i t e another t h i n g . But here the crop f a i l e d e n t i r e l y owing t o the b l i g h t , which no s k i l l , care or d i l i g e n c e of. the defendant could prevent ... But the c o n t r a c t was f o r 200 tons of a p a r t i c u l a r crop i n p a r t i c u l a r f i e l d s , and t h e r e f o r e there was an implied term i n the c o n t r a c t t h a t each party should be free i f the crop perished. The property and r i s k had c l e a r l y not been t r a n s f e r r e d under the terms o f the c o n t r a c t , so t h a t the consequence o f the f a i l u r e of the crop i s , t h a t the bargain i s o f f so f a r as the 120 tons are concerned". 36 ( 1 8 7 6 ) 1 Q.B.D. 258. 37 ( 1 8 7 4 ) L.R. 9 Q.B. 462. 3 • ^pages 465-66. - Ill - The goods i n question were not such as t o be s p e c i f i c w i t h i n the meaning of section 61(1) of the 1979 Act. I n t h i s kind of s i t u a t i o n , t h e r e f o r e , section 7 of the Act w i l l not apply. How, then, would a 39 court proceed i n such a s i t u a t i o n ? I n Sainsbury v. S t r e e t , Mackenna J. c i t e s w i t h approval the conclusion of A t k i n L.J. i n Re W a i t e d 0 "The case of Howell v, Coupland would now he covered by section 5(2) of the Code o r , as i s suggested by the learned authors of the l a s t two e d i t i o n s of 'Benjamin on Sale', by section 61(2) of the Code". There would, thus, appear t o be two p o s s i b i l i t i e s : 1) A court would f i n d t h a t the contract was c o n d i t i o n a l , w i t h i n section 5 ( 2 ) , and t h a t e i t h e r i t had not come i n t o operation because of n o n - f u l f i l m e n t of a c o n d i t i o n precedent or had been discharged by c o n d i t i o n subsequent ( i . e . by agreement). 2) Howell v. Coupland may be taken as a u t h o r i t y f o r the p r i n c i p l e t h a t such a c o n t r a c t i s discharged by the r u l e i n Taylor v. Caldwell. I f so, t h i s common law p r i n c i p l e i s preserved by section 62(2) of the 1979 Act (formerly section 61(2) of the 1893 A c t ) . I f the second of the above a l t e r n a t i v e s i s adhered t o , i t would, perhaps, be as w e l l t o note t h a t G l a n v i l l e Williams would, no doubt, point t o the f a c t t h a t the s e l l e r would be discharged under the p r i n c i p l e of Taylor v. Caldwell and t h a t the buyer would be discharged because of f a i l u r e of consideration. Nevertheless, these terms would, today, both be regarded as f a l l i n g w i t h i n the generic term " f r u s t r a t i o n " and Howell v. Coupland would provide a t h i r d s i t u a t i o n i n which there i s a p o s s i b i l i t y of discharge by f r u s t r a t i o n , a t common law, of a contract which have subsequently perished. 3 9 /"1972_7 1 W.L.R. 834, 837. 4 0 /" 1927 7 1 Ch. 606, 631. f o r the sale of goods - 112 - SECTION D: CONSEQUENCES OF A CONTRACT BEING DISCHARGED BY COMMON LAW Section 2 ( 5 ) ( c ) Law Reform ( F r u s t r a t e d Contracts) Act 1943 provides only t h a t the provisions o f t h a t Act do not apply t o c o n t r a c t s f o r t h e sale o f s p e c i f i c goods which p e r i s h , s e c t i o n 2 ( 5 ) ( c ) does not r e f e r t o contracts f o r the sale o f non-specific goods. Thus, t h e provisions o f the 1943 Act w i l l apply t o any c o n t r a c t f o r the sale o f unascertained or ascertained goods which i s f r u s t r a t e d by reason o f the p e r i s h i n g o f those goods. The consequences o f such a c o n t r a c t being f r u s t r a t e d are now s e t out i n d e t a i l . Discharge of Both Parties F r u s t r a t i o n o f a c o n t r a c t f o r the s a l e o f unascertained or ascertained goods w i l l r e l i e v e the s e l l e r of h i s o b l i g a t i o n t o d e l i v e r and the buyer of h i s o b l i g a t i o n t o pay the p r i c e . This r e s u l t s from common law, n o t from the provisions o f the 1943 Act, f o r the Act applies only t o c o n t r a c t s which have been discharged i n t h i s way; the mutual discharge o f the p a r t i e s i s , i n e f f e c t , a c o n d i t i o n precedent t o the operation o f t h e Act, s e c t i o n 1(1) o f which provides that: "Where a c o n t r a c t governed by English law has become impossible o f performance or been otherwise f r u s t r a t e d and the p a r t i e s t h e r e t o have f o r t h a t reason been discharged from the f u r t h e r performance of the c o n t r a c t , the f o l l o w i n g p r o v i s i o n s of t h i s s e c t i o n s h a l l ... have e f f e c t i n r e l a t i o n t h e r e t o " . The Act c l e a r l y applies only t o c o n t r a c t s which have: a) become impossible t o perform; or b) been "otherwise frustrated". 41 G l a n v i l l e Williams asserts t h a t where goods perish subsequent t o an "The Law Reform ( F r u s t r a t e d Contracts) Act 1943" page 22. - 113 - agreement f o r t h e i r sale i t i s only the s e l l e r who can plead imposs i b i l i t y o f performance for ( r e l y i n g upon the p r i n c i p l e i n Taylor v. C a l d w e l l ) , there i s nothing t o prevent the buyer from paying the p r i c e . The purchaser i s r e l i e v e d of h i s o b l i g a t i o n because of the f a c t t h a t he has received nothing from the s e l l e r and there i s a f a i l u r e o f con- s i d e r a t i o n r e s u l t i n g from the i m p o s s i b i l i t y o f performance. Glanville Williams p o i n t s , however, t o the modern usage of the term " f r u s t r a t i o n " to embrace discharge f o r f a i l u r e o f c o n s i d e r a t i o n as w e l l as discharge r e s u l t i n g from i m p o s s i b i l i t y o f performance. The buyer's obligations have, t h e r e f o r e , i n the terms used by the Act, been "otherwise f r u s t r a t e d " and the Act w i l l apply t o the c o n t r a c t which has been d i s charged. When a s e l l e r i s discharged by the p r i n c i p l e i n Taylor v. Caldwell, from h i s o b l i g a t i o n t o d e l i v e r i n accordance w i t h h i s c o n t r a c t u a l undert a k i n g , the problem o f a p a r t - p e r i s h i n g a r i s e s , as i t does i n r e l a t i o n t o s e c t i o n 7 Sale o f Goods Act 1979. I t has been noted t h a t s e c t i o n 7 expressly avoids the c o n t r a c t and thus appears t o end any c l a i m the buyer has t o enforce d e l i v e r y o f any p a r t o f the c o n t r a c t goods which remains unscathed. I s the outcome the same where the s e l l e r i s released from h i s o b l i g a t i o n by the p r i n c i p l e i n Taylor v. Caldwell rather than by 42 s e c t i o n 7 of the 1979 Act? I n Howell v. Coupland, the s e l l e r , who had undertaken t o d e l i v e r 200 tons o f potatoes, d e l i v e r e d t o the buyer 80 tons which survived potato b l i g h t ; what i f he had not done so? Quinn J., who declared himself t o be applying the p r i n c i p l e i n Taylor v. Caldwell, c i t e d 43 44 w i t h approval a statement i n "Sheppard's Touchstone": 42 L.R. 9 Q.B. 462. 43 at pages 466-7. 44 at page 382. - 114 - "And when the c o n d i t i o n of an o b l i g a t i o n i s t o do one s i n g l e t h i n g , which afterwards, before the time when i t i s t o be done, doth become impossible t o be done i n a l l or i n p a r t , the o b l i g a t i o n i s wholly discharged; and yet i f i t i s possible t o be done i n any p a r t , i t s h a l l be performed as near t o the c o n d i t i o n as may be". Equally, Blackburn J., who also expressly applied the p r i n c i p l e i n 45 Taylor v. Caldwell determined t h a t "... the consequences of the failure of the crop, i s t h a t the bargain i s o f f so f a r as the 120 tons are concerned". So, f o r him t o o , the s e l l e r was only discharged from h i s o b l i g a t i o n t o d e l i v e r t h a t part o f the c o n t r a c t goods which had a c t u a l l y perished. I t may be, t h e r e f o r e , t h a t where a s e l l e r agrees t o s e l l unascertained goods from a s p e c i f i c b u l k , the consequences of a p a r t - p e r i s h i n g of the goods w i l l d i f f e r from those where there has been a p a r t - p e r i s h i n g of s p e c i f i c goods. I f , f o r example, a s e l l e r agrees t o s e l l t o a buyer 100 cases of goods from h i s stock of 1,000, the d e s t r u c t i o n of 950 cases i n the stock would n o t , i t appears, release him from h i s r e s i d u a l o b l i g a t i o n t o d e l i v e r the remaining 50 cases. I f , however, t h a t same s e l l e r had agreed t o s e l l t o the buyer a l l of the cases i n h i s s t o c k , then a d e s t r u c t i o n of 950 cases would seem t o r e s u l t i n the c o n t r a c t being avoided and, w i t h i t , the o b l i g a t i o n t o d e l i v e r any of the goods. Financial Adjustments Where the 1943 Act a p p l i e s , the Court has power t o order the following: a) recovery by the purchaser of money paid p r i o r t o f r u s t r a t i o n ; b) r e t e n t i o n by the s e l l e r of money paid i n advance t o compensate for expenses i n c u r r e d ; at page 466. - 115 - c) recovery by the s e l l e r o f payment f o r goods d e l i v e r e d p r i o r to frustration. a) Recovery of money paid p r i o r _ t o f r u s t r a t i o n Where s e c t i o n 7 Sale o f Goods Act 1979 a p p l i e s , the purchaser i s only able t o recover a pre-payment where there has been a t o t a l f a i l u r e o f consideration. Thus, the d e l i v e r y t o the purchaser, p r i o r t o f r u s t r a t i o n , of any p a r t o f the goods contracted advance payment. f o r w i l l preclude t h e recover o f any Where the 1943 Act a p p l i e s , however, s e c t i o n 1(2) provides t h a t : " A l l sums paid or payable t o any party i n pursuance o f the c o n t r a c t before the time when t h e p a r t i e s were so discharged ... s h a l l , i n the case o f sums so paid, be recoverable from him as money received by him f o r the use o f the party by whom the sums were paid, and, i n t h e case o f sums so payable, cease t o be payable". C l e a r l y , the wording o f the sub-section permits recovery o f a pre- payment even though the f a i l u r e of c o n s i d e r a t i o n i s only p a r t i a l . Indeed, the r u l e s r e l a t i n g t o f a i l u r e o f c o n s i d e r a t i o n are not r e l e v a n t , f o r the sub-section received i n d i c a t e s t h a t the pre-payment i s t o be regarded as "money ... f o r the use o f the ( b u y e r ) " r a t h e r than, as might, perhaps, have been expected, money paid on a c o n s i d e r a t i o n t h a t has f a i l e d . I t i s possible t o argue t h a t a pre-payment may be i n d i c a t i v e o f an i n t e n t i o n by the p a r t i e s t o s h i f t the r i s k o f loss from s e l l e r t o buyer to the extent of the pre-payment, the s e l l e r r e t a i n i n g the r i s k i n r e l a t i o n t o loss not covered by the pre-payment. the 1943 Act would negative I f so, s e c t i o n 2(3) of the provisions o f s e c t i o n 1 ( 2 ) . Section 2(3) provides t h a t : "Where any c o n t r a c t t o which t h i s Act applies contains any p r o v i s i o n which, upon the true c o n s t r u c t i o n o f the c o n t r a c t , i s intended t o have e f f e c t i n the event of circumstances a r i s i n g which operate, or would but f o r the said p r o v i s i o n operate, t o f r u s t r a t e the c o n t r a c t , - 116 - or i s intended t o have e f f e c t whether such circumstances a r i s e or not, the c o u r t s h a l l give e f f e c t t o the said p r o v i s i o n and s h a l l only give e f f e c t t o / " s e c t i o n 1 7 t o such e x t e n t , - i f any, as appears t o the Court t o be~consistent~with the said p r o v i s i o n " . However, a pre-payment may i n d i c a t e ntohing o f the kind. I t may, f o r example, be a payment secured as a safeguard against the p o s s i b i l i t y o f the purchaser becoming i n s o l v e n t or d e f a u l t i n g i n payment. I t seems l i k e l y , t h e r e f o r e , t h a t a court w i l l not, i n the words of Lord P o r t e r , ^ "speculate as t o the object f o r which the advance was obtained" and w i l l only accept t h a t a pre-payrnent represents an assumption o f r i s k where the c l e a r e s t language i s used by t h e p a r t i e s . b) Retention by t h e s e l l e r o f money paid i n advance t o compensate f o r expenses incurred The proviso t o s e c t i o n 1(2) o f the 1943 Act s t i p u l a t e s t h a t : ".... i f the party t o whom the sums were so paid or payable incurred expenses before the time o f discharge i n , or f o r t h e purpose o f , the performance o f the c o n t r a c t , the Court may, i f i t considers i t j u s t t o do so having regard t o a l l the circumstances o f the case, allow him t o r e t a i n or, as the case may be, recover the whole or any p a r t o f the sums so paid or payable, not being an amount i n excess of the expenses so i n c u r r e d " . I t i s c l e a r t h a t the sub-section gives the Court a d i s c r e t i o n t o make an order r e l a t i n g t o expenses; there i s no duty upon the Court and no corresponding r i g h t vested i n the s e l l e r . The Court only has t h i s d i s - c r e t i o n , however, where: a) a payment i n advance has been made t o the purchaser p r i o r t o the p e r i s h i n g o f the goods, or where such a payment was payable at t h a t time; and b) the expenses have been incurred p r i o r t o f r u s t r a t i o n and i n , or f o r the purpose o f , the performance o f the c o n t r a c t . Fibrosa case /"1943 7 A.C. 32, 78. - 117 - The requirement t h a t there be a payment i n advance has been c r i t i c i s e d as perpetuating " i n a d i f f e r e n t form the o l d vice of Chandler v. Webster, namely, t h a t the incidence o f loss depends on the 47 accident o f payment i n advance"; though i t i s possible t o argue t h a t a prudent s e l l e r w i l l make p r o v i s i o n f o r h i s contingent loss by r e q u i r i n g advance payment from the purchaser so as t o enable the Court t o exercise i t s d i s c r e t i o n i n h i s favour i n the event o f h i s having incurred expenses p r i o r t o the p e r i s h i n g of the goods and the f r u s t r a t i o n of h i s c o n t r a c t . Whatever the merits o f the r u l e , however, i t i s c l e a r t h a t , g e n e r a l l y , there can be no recovery by the s e l l e r o f an apportionment o f h i s expenditure; there may only be a r e t e n t i o n o f moneys paid over i n advance. Recovery i s only possible where an advance payment had f a l l e n due p r i o r t o f r u s t r a t i o n and had not been made. There i s no power t o apportion expenditure which has taken place subsequent t o the f r u s t r a t i n g event and the power t o make such an apportionment i n r e l a t i o n t o expenditure which preceeds t h e time o f discharge e x i s t s only i f the expenditure was i n c u r r e d " i n , or f o r the purpose o f , the performance of the c o n t r a c t " . This phrase suggests t h a t expenses can be awarded t o the s e l l e r where he has i n c u r r e d those expenses: a) " i n • • o performance o f the c o n t r a c t " ; or b) " f o r the purpose o f the performance o f the c o n t r a c t " . Some expenditure w i l l c l e a r l y be incurred " i n performance o f the c o n t r a c t " and, as such, may be awarded t o the s e l l e r . Thus, t h e packaging of goods which, under the terms o f the c o n t r a c t , are t o be 'The Law o f R e s t i t u t i o n " , Goff and Jones ( 1 s t ed) page 333. - 118 - d e l i v e r e d i n packaged form w i l l be an act i n performance o f the c o n t r a c t and any expenditure involved w i l l have been so i n c u r r e d . What, however, i s meant by the words, " f o r the purpose of the performance of 48 the contract"? of these words. G l a n v i l l e Williams suggests two possible i n t e r p r e t a t i o n s The "narrower" i n t e r p r e t a t i o n would embrace only expenditure which r e l a t e s t o a c o n t r a c t which has been made but which i s not d i r e c t l y r e l a t e d t o an act of performance. Thus, the purchase of packaging m a t e r i a l would, i n the above example, not be expenditure i n v o l v e d ' i n performance" o f the c o n t r a c t , f o r i t i s merely an act pre- paratory t o performance, but c l e a r l y the expenditure has been incurred " f o r the purpose o f the performance of the c o n t r a c t " . The "wider" i n t e r p r e t a t i o n suggested by G l a n v i l l e Williams would also embrace expenditure i n c u r r e d i n a n t i c i p a t i o n of the c o n t r a c t being made; such expenditure not being expenditure involved " i n performance" of a c o n t r a c t , f o r , at t h a t stage, there i s no c o n t r a c t t o perform. 49 G l a n v i l l e Williams suggests t h a t the narrower of these two i n t e r - p r e t a t i o n s i s p r e f e r a b l e , but Gough and J o n e s , w h i l s t accepting t h a t t h e words "exclude expenditure i n c u r r e d i n mere s p e c u l a t i o n on f u t u r e c o n t r a c t s " assert t h a t the proviso "would include expenditure incurred before the c o n t r a c t i s entered i n t o on the reasonable assumption t h a t i t w i l l be made". They provide the f o l l o w i n g example: "A and B enter i n t o serious n e g o t i a t i o n s which, i n the l i g h t of past experience, A assumes w i l l very l i k e l y r e s u l t i n a c o n t r a c t . I n a n t i c i p a t i o n of such c o n t r a c t , A incurs expenditure f o r the purpose of i t s performance. The c o n t r a c t i s duly made, but i s subsequently f r u s t r a t e d " . 48 "The Law Reform ( F r u s t r a t e d Contracts) Act 1943", page 43. 49 at page 44. 50 "The Law of R e s t i t u t i o n " (2nd ed) page 567. - 119 - I n such a s i t u a t i o n , they conclude, A should be able t o secure h i s expenses. This, of course, could only be the p o s i t i o n i f an advance payment had been negotiated and such payment had e i t h e r been made before f r u s t r a t i o n or was due a t t h a t time. Section 1(4) provides t h a t : " I n e s t i m a t i n g f o r the purposes o f the foregoing p r o v i s i o n s of t h i s s e c t i o n , the amount o f any expenses incurred by any party t o the c o n t r a c t , the c o u r t may ... include such sum as appears t o be reasonable i n respect o f overhead expenses and i n respect of any work or services performed personally by the said p a r t y " . The term "overhead expenses" i s not defined i n the Act and G l a n v i l l e Williams t u r n s ' ^ t o "Webster's D i c t i o n a r y " f o r a d e f i n i t i o n o f "Overhead Costs" which are s t a t e d t o be "... t h e general expenses of a business, as d i s t i n c t from those caused by p a r t i c u l a r pieces of t r a f f i c ; i n d i r e c t or u n d i s t r i b u t e d c o s t s " . This d e f i n i t i o n appears t o r e l a t e "overhead c o s t s " t o " f i x e d " , r a t h e r than " v a r i a b l e " costs and, i f so, i t i s d i f f i c u l t t o see why a s e l l e r should be compensated f o r a f i x e d expenditure which could not have been avoided i r r e s p e c t i v e o f the existence or non-existence o f the c o n t r a c t which has been f r u s t r a t e d . The d i s c r e t i o n afforded t o the Court i s t h a t i t may award a sum which does not exceed the whole o f the money paid ( o r payable) i n advance. Having exercised i t s d i s c r e t i o n t o award expenses, the Court has a f u r t h e r d i s c r e t i o n as t o the amount t o award w i t h i n t h i s maximum. How should t h i s d i s c r e t i o n be exercised? The Law Revision 52 Committee recommended t h a t "... the payer should be e n t i t l e d t o the repayment o f a l l moneys he has paid t o the payee, less the amount of any loss d i r e c t l y incurred by the payee f o r the purpose o f performing the contract". 51 52 There i s , i n t h i s recommendation, no notion of apportionment "The Law Reform ( F r u s t r a t e d Contracts) Act 1943" page 55. Cmmd 6009 of 1939. - 120 - and i t c l e a r l y envisages t h a t the s e l l e r should have f u l l recompense f o r his expenditure, i f such i s possible out of the sum paid (or payable) i n advance. The r a t i o n a l e f o r t h i s view i s t h a t " i t i s reasonable t o assume t h a t i n s t i p u l a t i n g f o r pre-payment the payee intended to p r o t e c t himself against loss under the c o n t r a c t " . " 3 This view i s supported by the words used by L u r u Chancellor Simon when i n t r o d u c i n g the B i l l t o the 1943 Act i n the House o f Lords: " I f , f o r example, there has been £1,000 paid i n advance or i f the c o n t r a c t t h a t has been made confers the r i g h t t o pre-payment, and i f he /"the s e l l e r J can show t h a t he has already spent £800 i n p a r t i a l performance, he i s not r e q u i r e d t o r e t u r n the £1,000, but only the balance of £200".54 The r a t i o n a l e f o r t h i s view i s suspect, f o r the o b j e c t o f the advance may very w e l l not have been r e l a t e d t o loss a r i s i n g under the c o n t r a c t . "The object of the advance may be t o put the payee i n funds t o continue the c o n t r a c t , or t o p r o t e c t him from loss flowing,from the payer's breach 55 or insolvency." I t i s d i f f i c u l t t o disagree w i t h G l a n v i l l e Williams' suggestion^ that i n the normal case the j u s t course, as required by the Act, and also the s o c i a l l y d e s i r a b l e course, would be t o order the r e t e n t i o n or repayment of h a l f the loss i n c u r r e d ... not the whole of i t " . I t may, f i n a l l y , be noted t h a t s e c t i o n 1(2) of the 1943 Act does not expressly override the r u l i n g i n the Fibrosa case t h a t where there has been a t o t a l f a i l u r e of c o n s i d e r a t i o n , there may be recovery i n f u l l , without any deduction t o compensate the s e l l e r f o r h i s expenditure. It i s , suggests G l a n v i l l e W i l l i a m s , ^ possible t o argue t h a t the proviso 33 Cmmd 6009 1939, 5 4 7. 0 f f i c i a l Report 29 June 1943 c o l 138. 55 "The Law of R e s t i t u t i o n " Goff and Jones (2nd ed) page 567. 56 "The Law Reform ( F r u s t r a t e d Contracts) Act 1943", page 36. 57 at page 34. - 121 - t o s e c t i o n 1(2) only operates where t h e purchaser needs t o rely-upon s e c t i o n 1 ( 2 ) , t h a t i s t o say where there has been only a p a r t i a l of c o n s i d e r a t i o n . failure Having r a i s e d t h i s argument " f o r t h e sake o f complete- ness" G l a n v i l l e Williams r e j e c t s i t . I t i s submitted c o r r e c t and t h a t the L e g i s l a t u r e intended, t h a t t h i s must be i n t h e 1943 Act, t o d e a l , w i t h i n the l i m i t s o f t h e Act, w i t h a l l s i t u a t i o n s i n which t h e r e had been a pre-payment, whether or not t h e f r u s t r a t i o n o f t h e c o n t r a c t r e s u l t e d i n only a p a r t i a l f a i l u r e o f c o n s i d e r a t i o n . c) Recovery by t h e s e l l e r o f payment f o r goods d e l i v e r e d p r i o r t o frustration Section 1(3) o f the 1943 Act provides t h a t : "Where any p a r t y t o t h e c o n t r a c t has, by reason o f anything done by any other p a r t y t h e r e t o , i n , or f o r t h e purpose o f , t h e performance of t h e c o n t r a c t , obtained a valuable b e n e f i t ( o t h e r than a payment o f money t o which the l a s t f o r e g o i n g sub-section a p p l i e s ) before the time o f discharge, there s h a l l be recoverable from him by the s a i d other p a r t y such sum ( i f any), n o t exceeding t h e value o f the s a i d b e n e f i t t o the p a r t y o b t a i n i n g i t as the c o u r t considers j u s t , having regard t o a l l t h e circumstances o f the case and, in particular (a) t h e amount o f any expenses i n c u r r e d before t h e time o f d i s charge by the b e n e f i t t e d p a r t y i n , or. f o r t h e purpose o f , t h e performance o f the c o n t r a c t , i n c l u d i n g any sums paid or payable by him t o any other party i n pursuance o f the c o n t r a c t and.retained or recoverable by t h a t p a r t y under t h e l a s t f o r e g o i n g subs e c t i o n , and (b) t h e e f f e c t , i n r e l a t i o n t o t h e s a i d b e n e f i t , o f t h e c i r cumstances g i v i n g r i s e t o t h e f r u s t r a t i o n o f t h e c o n t r a c t " . Where, t h e r e f o r e , the s e l l e r has conferred a "valuable b e n e f i t " upon the purchaser p r i o r t o f r u s t r a t i o n he i s e n t i t l e d t o a sum not exceeding the value o f t h a t b e n e f i t . I n most cases, a s e l l e r who has d e l i v e r e d goods p r i o r t o discharge o f the c o n t r a c t w i l l c l e a r l y have c o n f e r r e d a b e n e f i t upon h i s purchaser and w i l l , as a r e s u l t , be e n t i t l e d t o recom58 pense. The wording o f the sub-section i s such as t o i n d i c a t e t h a t One s i t u a t i o n i n which there i s questionable b e n e f i t accruing t o the purchaser as a r e s u l t o f a p a r t - d e l i v e r y , i s t h a t i n which d e s t r u c t i o n o f the goods which have n o t been d e l i v e r e d renders unusable those which have. - 122 - there i s a r i g h t t o payment, but a d i s c r e t i o n as t o the amount of such payment. The Court may not award a sum which exceeds "the value of the said b e n e f i t t o the party o b t a i n i n g i t " , but t h a t would appear t o be the only l i m i t on i t s d i s c r e t i o n as t o quantum. Three possible bases f o r assessment of the sum t o be awarded have been suggested: a) t h a t the sum should be a rateable p a r t of the c o n t r a c t p r i c e * b) t h a t the a c t u a l value of the goods t o the buyer a t the time of f r u s t r a t i o n should be awarded; c) t h a t a reasonable p r i c e should be p a i d . The wording of the sub-section, which appears t o envisage a s i t u a t i o n i n which less than the value conferred may be awarded, would seem t o preclude any suggestion t h a t the sum should always be c a l c u l a t e d i n accordance w i t h (b) a b o v e . I t i s suggested i n Benjamin's "Sale of Goods''^ t h a t " i n c o n t r a c t s of sale of goods, the value of the b e n e f i t should prima f a c i e be assessed as a r a t e a b l e p a r t o f the c o n t r a c t p r i c e " . There would seem t o be no f i r m basis f o r t h i s conclusion and no reason why the Court should not, at i t s d i s c r e t i o n , award a reasonable p r i c e . The d e c i s i o n , a t f i r s t instance, i n B.P. E x p l o r a t i o n Co. v. Hunt (No. supports t h i s view. 2)^ Goff J. asserted, i n t h a t case, t h a t : " F i r s t i t has t o be shown t h a t the defendant has, by reason of something done by the p l a i n t i f f i n , or f o r the purpose o f , the performance of the c o n t r a c t , obtained a valuable b e n e f i t (other than payment of money) before the time of discharge. That b e n e f i t has t o be i d e n t i f i e d and valued and such value forms the upper l i m i t of the award. Secondly, the c o u r t may award t o the p l a i n t i f f such sum, not greater than the value of such b e n e f i t , as i t considers j u s t having regard t o a l l the circumstances of the case62 „. the basic measure of recovery i n r e s t i t u t i o n i s the reasonable value of the p l a i n t i f f ' s 59 Though G l a n v i l l e Williams does suggest ("The Law Reform ( F r u s t r a t e d Contracts) Act 1943" page 47) t h a t the sub-section appears t o be based upon quasi-contract which normally "depends upon unjust enrichment, t h a t i s upon b e n e f i t conferred upon the defendant, not detriment i n c u r r e d by the p l a i n t i f f " . at page 211. 6 1 62 /"1979_7 1 W.L.R. 783. at page 801. - 123 - performance - i n a case o f s e r v i c e s , a quantum meruit or. reasonable remuneration, and i n a case o f goods, a quantum valebat or reasonable price".63 I t should, however, be noted t h a t Goff J . accepted^"* t h a t "the c o n t r a c t c o n s i d e r a t i o n i s always r e l e v a n t as p r o v i d i n g some evidence o f what w i l l be a reasonable sum t o be awarded i n respect o f the p l a i n t i f f ' s work". I f the Court i s prepared t o sever t h e c o n t r a c t , t h e provisions o f s e c t i o n 2(4) o f the Act w i l l apply. The sub-section provides that: "Where i t appears t o the Court t h a t a p a r t o f any c o n t r a c t t o which t h i s Act applies can properly be severed from the remainder o f t h e c o n t r a c t , being a p a r t wholly performed before the time o f discharge, or so performed except f o r the payment i n respect o f t h a t p a r t o f t h e c o n t r a c t o f sums which are or can be ascertained under the c o n t r a c t , t h e Court s h a l l t r e a t t h a t p a r t o f the c o n t r a c t as i f i t were a separate c o n t r a c t and had not been f r u s t r a t e d and s h a l l t r e a t the foregoing s e c t i o n o f t h i s Act as only a p p l i c a b l e t o t h e remainder o f t h a t c o n t r a c t " . I f the c o n t r a c t i s s e v e r a b l e , ^ the s e l l e r w i l l be able t o claim h i s c o n t r a c t u a l remuneration f o r the goods d e l i v e r e d , r a t h e r than a sum a t the d i s c r e t i o n o f the Court under s e c t i o n 1(3) and t h i s remuneration w i l l not be l i m i t e d by reference t o t h e value o f the b e n e f i t conferred upon the buyer. The p o s s i b i l i t y o f s e c t i o n 30(1) applying where there has, p r i o r t o f r u s t r a t i o n , been a p a r t d e l i v e r y has been discussed e a r l i e r . ^ I f the sub-section why i s a p p l i c a b l e there would seem t o be no good reason i t s operation should be a f f e c t e d Jay s e c t i o n 1(3) o f the 1943 Act which would then, i n e f f e c t , be r e s t r i c t e d t o c o n t r a c t s other than those i n v o l v i n g the sale o f goods. at page B05. 64 G l a n v i l l e Williams suggests ("The Law Reform ( F r u s t r a t e d Contracts) Act 1943", pages 64 and 68) t h a t a c o n t r a c t o f sale w i l l be severable i f , f o r example, i t c o n s i s t s o f an agglomeration o f e n t i r e p a r t s , f o r each of which a separate c o n s i d e r a t i o n has been s p e c i f i e d ; or i f i t was one i n which the c o n s i d e r a t i o n appeared t o be e n t i r e but was, i n f a c t , the r e s u l t of an express or implied agreement f o r payment on a pro r a t a basis. See Section B of t h i s Part. - 124 - Prorating A s e l l e r may f i n d t h a t he has several contracts unascertained goods from a s p e c i f i c bulk. t o deliver What would be the p o s i t i o n i f , as a r e s u l t o f the perishing of part o f t h a t bulk, he can perform some, but not a l l , o f h i s contracts? The American Uniform Commercial Code" provides"' t h a t i n such circumstances the s e l l e r "... must a l l o c a t e production and d e l i v e r i e s among h i s customers Would an English c o u r t adopt a s i m i l a r approach? There i s some a u t h o r i t y f o r t h e p r o p o s i t i o n t h a t a court would have sympathy 68 f o r t h i s view. I n Tennants (Lancashire) L t d . v. C.S. Wilson and Co. L t d . , 69 Lord Finlay L.C. asserted that: "Probably i t would be held i n such a case t h a t the d e l i v e r i e s would f a l l t o be made i n the order o f p r i o r i t y as they f a l l due and t h a t , i n the event o f d e l i v e r y being due under several contracts a t the same time, the amount which i t was possible t o be divided among them pro r a t a ....". The o b l i g a t i o n t o d e l i v e r the remaining goods a t the time f i x e d f o r d e l i v e r y would, Lord Finlay L.C. concluded, be discharged. I t should, however, be noted t h a t the House o f Lords was, i n t h i s case, considering the a f f e c t o f an express term dealing w i t h unforeseen contingencies, which term provided t h a t there should be no l i a b i l i t y i f i t became imposs i b l e t o make d e l i v e r y a t the appointed time. The a t t i t u d e o f the House i n r e l a t i o n t o the p o s i t i o n t h a t would obtain i n the s i t u a t i o n presently considered r e s u l t e d from t h e i r i n t e r p r e t a t i o n o f the expressed and implied i n t e n t i o n of the p a r t i e s rather than from any general p r i n c i p l e s of law. I t seems l i k e l y t h a t , i n the absence of express p r o v i s i o n i n h i s various c o n t r a c t s , the s e l l e r would be obliged t o discharge as many 66 1 9 6 2 O f f i c i a l Text w i t h Comments. 6 7 s e c t i o n 2-615b 6 8 69 /"1917_7 A.C. 495. at page 508. - 125 - c o n t r a c t s as possible and render himself l i a b l e i n damages f o r breach of a l l o t h e r s . ^ I n Hong Guan and Co. L t d . v. R. Jumabhoy and Sons L t d . the respondents contracted t o s e l l t o the appellants f i f t y tons o f cloves "subject t o force majeure and shipment". The s e l l e r s procured shipment of s u f f i c i e n t cloves t o perform t h i s c o n t r a c t , but i n s u f f i c i e n t i n relation to a l l their contracts. They elected t o use the cloves i n performance of t h e i r other c o n t r a c t s and were held l i a b l e t o the buyers. The case d i d not t u r n on f r u s t r a t i o n but on the c o n d i t i o n precedent t h a t the goods be shipped. Nevertheless, the opinion o f the Court t h a t the c o n d i t i o n precedent had been s a t i s f i e d because s u f f i c i e n t goods f o r the p a r t i c u l a r c o n t r a c t i n question had been shipped would, no doubt, b e ' r e f l e c t e d i n a s i m i l a r view t h a t there can be no f r u s t r a t i o n where s u f f i c i e n t goods remain t o perform the p a r t i c u l a r question. This a t t i t u d e Borth-Y-Gest: contract i n i s s t a t e d q u i t e b a l d l y by Lord Morris o f 72 "Their Lordships are c l e a r l y of the opinion t h a t the respondents -cannot be allowed t o excuse t h e i r non-performance by reference t o t h e i r other commitments, or t o seek t o give other commitments p r i o r i t y over the a p p e l l a n t s ' c l a i m " . on the basis t h a t the " f r u s t r a t i n g event" has been s e l f - i n d u c e d , Maratime National Fish L t d . v. Ocean Trawlers L t d . /~1935 7 A.C. 524. /"196Q 7 A.C. 684. at page 708. - 126 - SECTION E: CAN THERE BE A COMMON LAW FRUSTRATION OP A CONTRACT FOR THE SALE OF SPECIFIC GOODS WHICH HAVE PERISHED? What i f s e c t i o n 7 Sale o f Goods Act does not apply because property or r i s k has passed t o the buyer? Does the s e l l e r r e t a i n h i s o b l i g a t i o n t o d e l i v e r the goods he has promised t o d e l i v e r ? Where s e c t i o n 7 applies the c o n t r a c t i s avoided and, as a r e s u l t , the buyer cannot maintain an a c t i o n f o r non-delivery. I s i t possible t o assert t h a t the converse i s also t r u e ; t h a t where s e c t i o n 7 does n o t apply the c o n t r a c t i s not avoided and the s e l l e r r e t a i n s h i s c o n t r a c t u a l obligations? I t would not, perhaps, seem unreasonable t o suppose t h a t where Parliament has made p r o v i s i o n f o r the avoidance o f a c o n t r a c t f o r the sale o f s p e c i f i c goods only where the goods perish before property or r i s k passes t o the buyer, i t was not the i n t e n t i o n o f the L e g i s l a t u r e t h a t the c o n t r a c t should be avoided i f e i t h e r has passed a t the time of t h e p e r i s h i n g o f the goods. I f the c o n t r a c t i s not avoided the o b l i g a t i o n t o d e l i v e r remains, as do the buyer's o b l i g a t i o n s t o accept and pay f o r the goods, and, i n the absence o f any other means o f t e r m i n a t i n g t h e c o n t r a c t u a l o b l i g a t i o n s , i t would f o l l o w t h a t : 1) the buyer must pay f o r the goods, and 2) the s e l l e r must d e l i v e r them. Presumably, as the buyer has the r i s k o f loss or d e t e r i o r a t i o n i n the goods he can only i n s i s t upon the s e l l e r d e l i v e r i n g the perished goods. As we have s e e n , ^ however, goods may be considered t o have "perished" see Part One. - 127 - f o r t h e purposes of the c o n t r a c t where they s t i l l p h y s i c a l l y e x i s t i n some recognisable form and r e t a i n some, perhaps considerable, : 74 commercial value. I n Asfar v. B l u n d e l l , f o r example, the consignment of dates which was taken t o have perished was u l t i m a t e l y s o l d , f o r the purposes o f d i s t i l l a t i o n i n t o s p i r i t , a t a p r i c e o f £2,400 (a not inconsiderable sum i n the nineteenth c e n t u r y ) . I f i n cases such as t h i s , t h e s e l l e r r e t a i n s h i s o b l i g a t i o n t o d e l i v e r the goods, the buyer can i n s i s t upon d e l i v e r y and, should the s e l l e r d e f a u l t , s e t - o f f damages f o r nond e l i v e r y against any claim made by the s e l l e r f o r the p r i c e . Conversely, i f the o b l i g a t i o n s under t h e c o n t r a c t survive the p e r i s h i n g o f the goods and the 'remains:*' of the perished goods have no value, the s e l l e r can, presumably, i n s i s t t h a t the buyer accepts d e l i v e r y o f t h e goods and, by so doing, r e l i e v e the s e l l e r o f the expense o f disposing o f the same. Any d e f a u l t i n t a k i n g d e l i v e r y would, i t would seem, give r i s e t o an 7 a c t i o n under section 37 "* o f the 1979 Act by which t h e s e l l e r could recover the expense of disposing o f the c o n t r a c t goods. 7 I t has, since Taylor v. C a l d w e l l ^ been assumed t h a t t h e s e l l e r ' s o b l i g a t i o n t o d e l i v e r does not survive t h e perishing o f the s p e c i f i c goods which form the subject-matter o f the c o n t r a c t . I n t h a t case 7 7 Blackburn J. a s s e r t e d t h a t : "Where a c o n t r a c t o f sale i s made amounting t o a bargain and s a l e , t r a n s f e r r i n g presently the property i n s p e c i f i c c h a t t e l s , which are t o be d e l i v e r e d by the vendor a t a f u t u r e day; t h e r e , i f the c h a t t e l s , without the f a u l t of the vendor, perish i n the i n t e r v a l , the purchaser must pay the p r i c e and the vendor i s excused from performing h i s contract t o d e l i v e r which has become impossible." H / 1896_7 1 Q.B. 123. 73 "When the s e l l e r i s ready and w i l l i n g t o d e l i v e r the goods, and requests the buyer t o take d e l i v e r y , and the buyer does not w i t h i n a reasonable time a f t e r such request take d e l i v e r y o f the goods, he i s l i a b l e t o the s e l l e r f o r any loss occasioned by h i s neglect or r e f u s a l t o take d e l i v e r y , and also f o r a reasonable charge f o r the care and custody o f the goods." 76 7 7 ( 1 8 6 3 ) 3 B &S, 824. a t page 837. - 128 - The conceptual basis o f t h i s a s s e r t i o n i s not apparent and, w h i l s t Blackburn J. c i t e s as a u t h o r i t y Ruqq v. M i n e t t , that 78 he does concede 79 " i t seems i n t h a t case r a t h e r t o have been taken f o r granted than decided t h a t the d e s t r u c t i o n o f the t h i n g s o l d before d e l i v e r y excused the vendor from f u l f i l l i n g h i s c o n t r a c t t o d e l i v e r on payment". Moreover, T a y l o r v . Caldwell pre-dates t h e 1893 Act and cannot i n f l u e n c e the i n t e r p r e t a t i o n o f the c l e a r meaning o f s e c t i o n s o f t h a t Act or i t s replacement. I t i s , i n s e c t i o n 28 o f the A c t , provided t h a t "Unless otherwise agreed, d e l i v e r y o f the goods and payment o f the p r i c e are conc u r r e n t c o n d i t i o n s , t h a t i s t o say, the s e l l e r must be ready and w i l l i n g t o g i v e possession o f the goods t o the buyer i n exchange foe t h e p r i c e No doubt the c o u r t s would be prepared t o assume t h a t , the r i s k being on the buyer, the s e l l e r i s r e l i e v e d o f ~ t h i s o b l i g a t i o n where t h e goods have, i n the f u l l e s t sense o f the word, p e r i s h e d . Indeed, we have 80 noted p r e v i o u s l y t h a t Sealey a s s e r t s t h a t t h i s i s the very meaning o f the n o t i o n o f r i s k ; i t i s a negative concept which a c t s , q u i t e s i m p l y , so as t o excuse the s e l l e r from the need t o d e l i v e r and thus s a t i s f y the normal c o n d i t i o n precedent t o an a c t i o n f o r the p r i c e . Would a c o u r t , however, be w i l l i n g t o depart from the c l e a r wording o f s e c t i o n 28 where the goods, w h i l s t deemed t o have perished f o r the purposes o f the cont r a c t , are s t i l l i n existence and are capable o f being s o l d at a p r i c e ? Presumably they could do so only on the basis t h a t s e c t i o n 28 r e q u i r e s d e l i v e r y of "the goods" and t h a t these goods, the goods i d e n t i f i e d i n the c o n t r a c t , are no longer i n e x i s t e n c e . Such an i n t e r p r e t a t i o n would, of course, permit the s e l l e r t o p r o f i t from the f r u s t r a t i n g event. He may maintain an a c t i o n against the buyer f o r the p r i c e and, i n a d d i t i o n , s e l l the "remains" of the goods i n the r e l e v a n t market. 7 8 1 1 East 210. 7 9 a t page 837. 80 see Part Two. - 129 - The d i f f i c u l t i e s o u t l i n e d above would disappear i f the c o n t r a c t u a l o b l i g a t i o n s of s e l l e r and buyer were t o terminate as a r e s u l t o f frustration. C l e a r l y there can be no avoidance o f the o b l i g a t i o n s by v i r t u e of s e c t i o n 7 o f the 1979 Act where property or r i s k has passed. Any f r u s t r a t i o n o f the c o n t r a c t u a l o b l i g a t i o n s i n such contracts must, t h e r e f o r e , a r i s e a t common law. The i n t e n t i o n o f Parliament? There i s , i n the 1943 Act, an i n d i c a t i o n t h a t Parliament accepted the p o s s i b i l i t y of f r u s t r a t i o n where property or r i s k i n s p e c i f i c goods has passed t o the buyer a t the time o f p e r i s h i n g . Section 2 ( 5 ) ( c ) o f the Act, as amended, provides t h a t the Act s h a l l not apply t o : a) "any c o n t r a c t t o which s e c t i o n seven o f the Sale o f Goods Act 1979 (which avoids c o n t r a c t s f o r the sale o f s p e c i f i c goods which perish before the r i s k passes t o the buyer) a p p l i e s " ; or b) " t o any other c o n t r a c t f o r the s a l e , or f o r the sale and d e l i v e r y , o f s p e c i f i c goods, where t h e c o n t r a c t i s f r u s t r a t e d by reason of the f a c t t h a t the goods have perished". I t would appear from (b) above t h a t the L e g i s l a t u r e contemplated t h e p o s s i b i l i t y o f a c o n t r a c t f o r the sale o f s p e c i f i c goods being f r u s t r a t e d , as a r e s u l t o f the p e r i s h i n g o f the goods, other than by 81 v i r t u e of s e c t i o n 7. What i s not apparent i s whether Parliament con- templated the p o s s i b i l i t y o f a common law f r u s t r a t i o n of a c o n t r a c t f o r the sale o f s p e c i f i c goods where: a) property (but not r i s k ) has passed t o the buyer; or though some academic w r i t e r s deny any such inference and assert e i t h e r t h a t the p r o v i s i o n i s as i t i s simply as a r e s u l t o f clumsy draftmanship or t h a t the p r o v i s i o n was i n s e r t e d "ex abundanti cautela", f o r the avoidance of doubt. See, f o r example, Benjamin "Sale o f Goods" a r t . 443, " C h i t t y on Contracts" a r t . 4431, Cheshire and F i f o o t "Law o f Contract" (9th ed.) page 565. - 130 - b) where r i s k has passed t o the buyer (perhaps w i t h property, perhaps w i t h o u t ) ; or c) i n e i t h e r case. A consideration of the requirements of s e c t i o n 7 reveals t h a t a c o n t r a c t w i l l be avoided under t h a t s e c t i o n i f : 1) the s e l l e r and buyer enter i n t o an "agreement t o s e l l 1 1 ( i . e . an executory agreement i n which property does not pass at the time of c o n t r a c t ) ; and 2) the goods which form the subject matter of the c o n t r a c t are s p e c i f i c ; and 3) the goods subsequently p e r i s h ; and 4) the p e r i s h i n g of the goods i s not a t t r i b u t a b l e t o the f a u l t of e i t h e r p a r t y ; and 5) a t the time of p e r i s h i n g , r i s k has not passed t o the buyer. Of these f i v e v a r i a b l e s , those o u t l i n e d i n (2) and (3) above are common t o a s e c t i o n 7 f r u s t r a t i o n and t o whatever other form o f f r u s t r a t i o n may have been contemplated by Parliament when i t enacted s e c t i o n 2 ( 5 ) ( c ) of the 1943 Act. The remaining v a r i a b l e s a r e , t h e r e f o r e , the key t o t h a t other s i t u a t i o n , i f one e x i s t s , i n which a c o n t r a c t f o r the sale o f s p e c i f i c goods may be f r u s t r a t e d by reason o f t h e i r p e r i s h i n g . I t i s surely inconceivable t h a t a c o n t r a c t w i l l be f r u s t r a t e d where the i m p o s s i b i l i t y r e s u l t s from the f a u l t of one o f the c o n t r a c t i n g p a r t i e s , which r e s t r i c t s the present c o n s i d e r a t i o n t o the v a r i a b l e s o u t l i n e d i n (1) and (5) above. I f we i n v e r t v a r i a b l e ( 1 ) , i n our attempt, t o i d e n t i f y the s i t u a t i o n i n which there may be f r u s t r a t i o n other than under s e c t i o n 7, we must contemplate a s i t u a t i o n i n which the c o n t r a c t i n g p a r t i e s have entered i n t o a s a l e , r a t h e r than an agreement t o s e l l . I s i t possible t o con- - 131 - template frustration i n this situation? Some academics would argue t h a t a c o n t r a c t of sale cannot be f r u s t r a t e d where property has passed because i t has, by v i r t u e of the passing of property, been executed. Advocates of t h i s view r e l y upon the d e f i n i t i o n of a sale of goods con83 t r a c t , set out i n s e c t i o n 2(1) of the Act, which i d e n t i f i e s the s a l i e n t feature of the c o n t r a c t as the o b l i g a t i o n t o t r a n s f e r property t o the buyer. Support f o r t h i s approach might also appear t o be con84 tained i n the decision o f the Court of Appeal i n Rowland v. D i v a l l t h a t there was a complete f a i l u r e of c o n s i d e r a t i o n when a purchaser received possession, but not ownership, of goods from a s e l l e r who had no t i t l e t o them. The d e c i s i o n , i n so f a r as i t i n d i c a t e d t h a t the buyer's possession of goods d i d not prevent him from having s u f f e r e d a t o t a l f a i l u r e of c o n s i d e r a t i o n , suggests t h a t , i n a c o n t r a c t of s a l e , t r a n s f e r of property i s a l l t h a t i s of concern t o the buyer. 85 r e j e c t e d by others This approach i s and, indeed i s d i f f i c u l t t o r e c o n c i l e w i t h the express provisions of the Act. Section 27, which appears under a heading "Performance of the c o n t r a c t " , i n d i c a t e s , uncompromisingly, t h a t " i t i s the duty of the s e l l e r t o d e l i v e r the goods ance w i t h the terms of the c o n t r a c t of s a l e " . i n accord- Surely a c o n t r a c t of sale can be f r u s t r a t e d , whoever has the property i n the goods, so long as t h i s o b l i g a t i o n has not been performed. There i s , i n r e a l i t y , nothing i n the decision i n Rowland v. D i v a l l t o suggest t h a t t h i s i s not so. The Court of Appeal ignored the possession enjoyed by the purchaser simply because See, f o r example, A t i y a h , "The Sale of Goods" ( 4 t h ed.) page 167, Greig "Sale of Goods" page 220. 8 5 ' "A c o n t r a c t of sale of goods i s a c o n t r a c t whereby the s e l l e r t r a n s f e r s or agrees t o t r a n s f e r the property i n goods t o the buyer f o r a money c o n s i d e r a t i o n , c a l l e d the p r i c e " . 8 4 85 /"1923 7 2 K.B. 500. See Macleod, "Sale and Hire Purchase" page 257. - 132 - he had not, a t any time, enjoyed a " r i g h t t o possession". 86 This cannot be a u t h o r i t y f o r the p r o p o s i t i o n t h a t a c o n t r a c t o f sale may be f u l l y executed a t a stage p r i o r t o d e l i v e r y being e f f e c t e d . I t would appear t o be f a r from outrageous t o suggest t h a t there can be f r u s t r a t i o n of a c o n t r a c t f o r the sale o f s p e c i f i c goods even though property i n the goods has passed t o the buyer p r i o r t o t h e i r p e r i s h i n g . Indeed, Pro- 87 fessor G l a n v i l l e Williams i d e n t i f i e s the s i t u a t i o n i n which p r o p e r t y , but not r i s k , has passed t o the buyer p r i o r t o the s p e c i f i c goods p e r i s h i n g as a casus omissus i n s e c t i o n 7 o f the 1893 Act. This, then, may be the s i t u a t i o n contemplated by Parliament i n s e c t i o n 2 ( 5 ) ( c ) o f the 1943 Act. Let us not, however, f o r g e t the remaining v a r i a b l e i n s e c t i o n 7. I f s e c t i o n 7 applies only where r i s k has not passed, i t may be t h a t Parliament contemplated the a l t e r n a t i v e s i t u a t i o n i n which there can be f r u s t r a t i o n as being t h a t i n which r i s k has passed t o the buyer p r i o r t o the p e r i s h i n g o f the goods. Such a p o s s i b i l i t y i s almost u n i v e r s a l l y 88 discounted. A t i y a h , f o r example, s t a t e s q u i t e b a l d l y t h a t " there cannot be f r u s t r a t i o n f o r t h i s would discharge the buyer's o b l i g a t i o n t o pay the p r i c e or enable him t o recover i t i f already p a i d , and t h i s would mean t h a t r i s k was on the s e l l e r and not t h e buyer". I t i s sub- m i t t e d t h a t t h i s conclusion i s untenable and r e s u l t s from a confusion as t o the r e l a t i o n s h i p between r i s k and f r u s t r a t i o n . I f there can be no f r u s t r a t i o n i n t h i s s i t u a t i o n i t i s not f o r t h i s reason. Risk r e l a t e s t o the l i a b i l i t y o f the buyer t o pay the p r i c e (or some other sum) should 8 ^ a t page 507. 87 88 "The Law Reform ( F r u s t r a t e d Contracts) Act 1943", page 83. S e e , f o r example, A t i y a h , "The Sale o f Goods" ( 4 t h ed.) page 167 and T r e i t a l "Law of Contract" (3rd ed.) page 778. But see also Macleod "Sale and Hire Purchase" page 257. - 133 - the goods perish or d e t e r i o r a t e ; f r u s t r a t i o n determines whether t h e s e l l e r i s l i a b l e i n damages f o r n o n - d e l i v e r y . To r e l i e v e t h e s e l l e r o f h i s o b l i g a t i o n t o d e l i v e r i s n o t t o r e l i e v e t h e buyer o f h i s obligation t o pay the p r i c e ( o r some other sum). A f r u s t r a t i n g event w i l l t e r m i n a t e contractual o b l i g a t i o n s which have not arisen a t the time o f f r u s t r a t i o n , but o b l i g a t i o n s which already e x i s t e d a t t h a t time w i l l remain. I f there can be common law f r u s t r a t i o n where r i s k has passed i n r e l a t i o n t o s p e c i f i c goods, the f r u s t r a t i o n o f the c o n t r a c t w i l l r e l i e v e the s e l l e r o f h i s o b l i g a t i o n t o d e l i v e r b u t i t w i l l not a f f e c t the p r i n c i p l e o f r i s k . the time of the p e r i s h i n g terms o f the c o n t r a c t At o f the goods one o f t h e p a r t i e s w i l l , under t h e or by v i r t u e o f t h e p r o v i s i o n s Act, have ,the r i s k o f l o s s . o f the Sale o f Goods That person w i l l , subsequent t o the c o n t r a c t being f r u s t r a t e d , r e t a i n t h a t l i a b i l i t y : " A l l Taylor v. Caldwell says i s t h a t the p a r t i e s are t o be excused from t h e performance o f the c o n t r a c t A l l t h a t can be s a i d i s t h a t when the procession was abandoned t h e c o n t r a c t was o f f , not t h a t anything done under the c o n t r a c t was v o i d . The l o s s 89 must remain where i t was a t the time o f the abandonment"-. Goods c o n t r a c t A Sale o f may be avoided by v i r t u e o f the f r u s t r a t i n g event, b u t i t i s not rendered v o i d . I f the buyer acquired r i s k , by v i r t u e o f s e c t i o n 20 o f the Act, he w i l l r e t a i n t h a t l i a b i l i t y . The c o n t r a c t may no longer e x i s t b u t i t does not cease t o have e x i s t e d , and w h i l e i t e x i s t e d the question o f r i s k was determined. To f r u s t r a t e the s e l l e r ' s o b l i g a t i o n t o d e l i v e r w i l l not, t h e n , r e - v e s t r i s k i n him. This conclusion i s 90 91 s t a t e d s u c c i n c t l y i n Chandler v. Webster where Lord Romer L.J. asserts t h a t , i n the Taylor v. Caldwell s i t u a t i o n , any l e g a l r i g h t p r e v i o u s l y 89 per E a r l Halsbury L.C. C i v i l Service Co-operative Society v. General Steam Navigation Co. / 1 9 0 3 / 2 K.B. 764. 9 0 /"1904_7 1 K.B. 493. 91 at page 501. - 134 - accrued according t o the terms o f the agreement /"or presumably, by operation of law 7 w i l l not be d i s t u r b e d " . Atiyah supports h i s a s s e r t i o n t h a t there can be no f r u s t r a t i o n where r i s k has passed by reference t o the f a c t t h a t i n c . i . f . c o n t r a c t s , where the r i s k normally passes before p r o p e r t y , the p e r i s h i n g o f the qoods between these two events does not f r u s t r a t e the c o n t r a c t . A c . i . f . c o n t r a c t i s , however, a s p e c i a l c o n t r a c t . I t has been described, by 92 Scrutton J., as "not a sale o f goods, but a sale o f documents r e l a t i n g 93 t o goods"; by Bankes L.J. and Warrington L.J., as "a c o n t r a c t f o r the sale o f goods performed by the d e l i v e r y o f documents"; and, by McCardie 94 J., as a c o n t r a c t i n which "the o b l i g a t i o n o f t h e vendor i s t o d e l i v e r documents r a t h e r than goods, t o t r a n s f e r symbols r a t h e r than"the p h y s i c a l property represented thereby". Quite c l e a r l y , such a c o n t r a c t cannot be f r u s t r a t e d by loss o f the goods, but t h i s i s due t o the f a c t t h a t the s e l l e r w i l l remain able t o d e l i v e r the documents and not t o t h e f a c t t h a t the buyer has the r i s k . Atiyah also c i t e s as a u t h o r i t y the d e c i s i o n o f 95 Morris J. i n Home v. M i n i s t e r o f Food. I n t h a t case however, Morris r J. decided only t h a t s e c t i o n 7 could not apply where r i s k had passed. There would seem t o be, t h e r e f o r e , no obvious reason why a c o n t r a c t f o r the sale of s p e c i f i c goods should not be f r u s t r a t e d , even though the buyer has acquired r i s k . 92 A r n h o l d Karberg & Co. v. B l y t h , Green, Jourdain & Co. /~1915 7 2 K.B. 379', ~S'6$", 93,Arnhold Karberg & Co. v. B l y t h , Green, Jourdain & Co. (supra) page 510, 5 IS 94 Manbre Saccharine Co. v. Corn Products Co. (191a) 24 Comm Cas 89, 97. 9 5 /"1948 7 2 A l l E.R. 1036. - 135 - E f f e c t of a Common Law F r u s t r a t i o n I f there can be a f r u s t r a t i o n , other than a s e c t i o n 7 f r u s t r a t i o n , of a c o n t r a c t f o r the sale o f s p e c i f i c goods which p e r i s h , there a r e , then, three possible s i t u a t i o n s i n which such a f r u s t r a t i o n may be recognised: 1) Where property has passed t o the buyer but r i s k has not; 2) Where r i s k has passed t o t h e buyer but property has n o t ; 3) Where property and r i s k have both passed t o the buyer. A common law f r u s t r a t i o n i n (1) above would r e l i e v e the s e l l e r o f h i s o b l i g a t i o n t o d e l i v e r the goods; and, the r i s k being w i t h the s e l l e r , the buyer would not be l i a b l e f o r the p r i c e . F r u s t r a t i o n i n (2) and (3) would,, however, occur i n r e l a t i o n t o a c o n t r a c t f o r t h e sale o f goods which were, a t the time o f f r u s t r a t i o n , a t the buyer's r i s k . What e f f e c t would such a f r u s t r a t i o n have i f , as has been argued, the buyer r e t a i n s the r i s k even though the c o n t r a c t i s a t an end? Obviously there would be no question of any o b l i g a t i o n t o make or take d e l i v e r y o f the goods, f o r these o b l i g a t i o n s would be f r u s t r a t e d . The s e l l e r would, however, be able t o sue the buyer as a r e s u l t o f the f a c t t h a t the goods were, a t the time of f r u s t r a t i o n , a t h i s r i s k . What, however, would the s e l l e r be able t o recover? I n s i t u a t i o n (3) there would appear t o be two p o s s i b i l i t i e s : a) I t might be argued t h a t the s e l l e r would be able t o recover the c o n t r a c t p r i c e from the buyer. No o b l i g a t i o n s on the contract remain f o r , the c o n t r a c t being f r u s t r a t e d , performance o f outstanding o b l i g a t i o n s i s excused. The implied term i n the c o n t r a c t t h a t d e l i v e r y and payment are concurrent would, t h e r e f o r e , not be relevant and the i n a b i l i t y t o tender d e l i v e r y no bar t o recovery of the p r i c e . The s e l l e r i s , q u i t e simply, able t o sue the buyer - 136 - because, as a matter of law, he bears the r i s k o f loss which would otherwise f a l l upon the s e l l e r . Property having passed t o the buyer p r i o r t o the perishing o f the goods, the s e l l e r had, p r i o r t o the f r u s t r a t i n g event, acquired the r i g h t t o sue f o r the p r i c e i n the event o f d e f a u l t . Had the goods not perished, t h e r e f o r e , he would have delivered the goods and received the price or, i n the event o f non-acceptance or non-payment by the buyer, have been able 96 t o sue f o r the p r i c e . I n T a r l i n q v. Bates, Bayley J. and Holroyd J. emphasise the c e r t a i n t y o f the s e l l e r ' s contingent r i g h t , i n these circumstances, by t h e i r a s s e r t i o n t h a t upon property i n the goods passing t o the purchaser, the vendor acquires a r i g h t of property i n the p r i c e . The buyer, who has the r i s k , i s , t h e r e f o r e , l i a b l e t o a s e l l e r who had a contingent r i g h t t o the p r i c e a t the time o f the f r u s t r a t i n g event. Subsequent t o the perishing o f t h e goods, t h e r e f o r e , the buyer must pay t h a t p r i c e . b) I t may, however, be possible t o argue t h a t the s e l l e r has no claim t o the p r i c e . that Section 28 Sale o f Goods Act 1979 provides "unless otherwise agreed, d e l i v e r y of the goods and payment of the p r i c e are concurrent c o n d i t i o n s " . U n t i l , therefore, d e l i v e r y i s tendered there may be no r i g h t t o payment. I f the s e l l e r has not e f f e c t e d or tendered d e l i v e r y p r i o r t o t h e f r u s t r a t i n g event, i t may thus be argued t h a t he had no r i g h t t o sue f o r the p r i c e a t t h a t time. The buyer, who has the r i s k , must bear the s e l l e r ' s l o s s , but the s e l l e r has not l o s t the p r i c e o f the goods f o r the s e l l e r had never acquired t h a t r i g h t . Where r i s k i s w i t h the buyer as a r e s u l t of express agreement between the p a r t i e s s e c t i o n 28 w i l l , presumably, be i n a p p l i c a b l e , f o r by t h e i r agreement the p a r t i e s must be taken t o have i n d i c a t e d t h a t the s e c t i o n w i l l (1827) 108 E.R. 484. - 137 - not apply where d e l i v e r y cannot be e f f e c t e d as a r e s u l t of a perishing of the goods. by operation of law, Where, however, r i s k has passed to the buye r a t h e r than by express agreement, there would seem to be no j u s t i f i c a t i o n for circumvention of the rule t h a t payment i s due may only upon d e l i v e r y . I f so, the s e l l e r f i n d t h a t he i s i n the same s i t u a t i o n as a s e l l e r i n s i t u a t i o n As in situation ( 3 ) , the s e l l e r i n s i t u a t i o n (2) has, prior (2). to f r u s t r a t i o n , acquired a r i g h t against the buyer, the r i g h t t o recover from him the loss which r e s u l t s from the goods p e r i s h i n g . Again, however, the question a r i s e s as t o the measure of t h a t l o s s . The s e l l e r has is selling. certainly He has, the goods, the sum l o s t the replacement cost of the goods he t o put i t another way, l o s t the pre-contract value of for which a prudent businessman who wished to carry no part of the r i s k himself would have insured the goods w h i l s t they formed part of his stocks and had not yet been selected or other- wise i d e n t i f i e d by the purchaser as the goods he wished to buy. s e l l e r a l s o l o s t his p r o f i t ? has, has the At the time of the f r u s t r a t i n g event he i t i s submitted, no r i g h t t o sue f o r the p r i c e , f o r , as property not yet passed to the buyer, t h a t r i g h t has i s , t h e r e f o r e , no o b l i g a t i o n Has not yet accrued. on the purchaser to pay the contract There price. Action for the Price or an Indemnity i n r e l a t i o n to Actual Loss? S i t u a t i o n s (2) and (3) above suggest, perhaps, t h a t where the i s w i t h the buyer at the time of p e r i s h i n g , the s e l l e r may able t o sue For, the buyer for the p r i c e i f the contract i s not i n the absence of f r u s t r a t i o n , the contract endures and attendant r i g h t s and a r i g h t t o sue obligations. The s e l l e r has, only be frustrated. w i t h i t the under t h i s c o n t r a c t , the buyer for the p r i c e , which r i g h t i s subject to c o n d i t i o n s precedent. He must: risk two - 138 - a) have t r a n s f e r r e d property t o the buyer, b) have made a d e l i v e r y t o the buyer. and I f the concept of r i s k acts so as t o dispense w i t h the necessity for f u l - f i l m e n t of these conditions (save t h a t he may be required t o d e l i v e r the perished goods), the s e l l e r w i l l be able t o sue the buyer f o r the price on the c o n t r a c t . I f , however, the c o n t r a c t i s f r u s t r a t e d , the s e l l e r w i l l be r e l y i n g upon the f a c t t h a t the buyer has r i s k , r a t h e r than upon the buyer being under a c o n t r a c t u a l o b l i g a t i o n . submitted, I n t h i s event, i t i s the buyer i s l i a b l e t o compensate the s e l l e r f o r h i s l o s s , which loss must be assessed without reference which no longer e x i s t . t o the c o n t r a c t u a l r i g h t s The s e l l e r ' s loss would, i n these circumstances, be c a l c u l a t e d by reference t o r i g h t s which had vested a t the time of the f r u s t r a t i n g event. Much, then, depends upon whether a c o n t r a c t can be f r u s t r a t e d , a t common law, where r i s k i n the goods r e s t s w i t h the buyer a t the time the goods are destroyed. The s t a r t i n g p o i n t f o r a court would, i n a l l p r o b a b i l i t y , be t h a t there can be no f r u s t r a t i o n i n these circumstances. Why t h i s should be i s , perhaps, less than obvious. A Casus Omissus In any event, there would appear t o be no reason why a c o n t r a c t f o r the sale of s p e c i f i c goods should not be f r u s t r a t e d where property, but not r i s k , has passed t o the buyer a t the time of the perishing o f the goods (the casus omissus i n s e c t i o n 7 noted by Professor G l a n v i l l e Williams). I f a c o n t r a c t f o r the sale o f s p e c i f i c goods may be f r u s t r a t e d i n such circumstances, the s e l l e r ' s o b l i g a t i o n t o d e l i v e r and the buyer's o b l i g a t i o n t o accept d e l i v e r y w i l l no longer e x i s t and, t o Section 49 S.G.A. 1979. - 139 - t h i s e x t e n t , they w i l l be i n the same p o s i t i o n as i f there had been a section 7 f r u s t r a t i o n . Further, as r i s k i s w i t h the s e l l e r he must bear h i s own loss and no l i a b i l i t y attaches t o the buyer. Here again, the p a r t i e s are i n the same p o s i t i o n as they would hold subsequent t o a f r u s t r a t i o n of the c o n t r a c t by s e c t i o n 7. The f r u s t r a t i o n w i l l n o t , however, be a s e c t i o n 7 f r u s t r a t i o n , i t v / i l l he a common lay/ f r u s t r a t i o n and, as such, w i l l f a l l uncomfortably a) between two sets o f p r o v i s i o n s : Because the goods which have perished are s p e c i f i c , the pro- v i s i o n s of the Law Reform ( F r u s t r a t e d Contracts) Act 1943 w i l l not apply. The buyer w i l l not, t h e r e f o r e , be able t o r e l y upon the 98 s t a t u t o r y r i g h t t o recover money paid i n advance. b) At common law, recovery of money paid i n advance i s only 99 possible where there has been a complete f a i l u r e o f c o n s i d e r a t i o n . A buyer whose c o n t r a c t has been f r u s t r a t e d by s e c t i o n 7 (and the consequences of which are determined by common law) w i l l , t h e r e f o r e , be able t o recover a deposit or advance payment i n most circumstances Where property has passed t o the buyer, however, he may be unable t o e s t a b l i s h a complete f a i l u r e of c o n s i d e r a t i o n and w i l l , thus, f a l l w i t h i n the mischief which l e d , i n p a r t , t o both the Fibrosa d e c i s i o n and t o the passing of the 1943 Act. 98see sections 1(2) and 2 ( 5 ) ( c ) Law Reform ( F r u s t r a t e d Contracts) Act 1943 99 — / 7 Fibrosa Spolka Akcjna v. F a i r b a i r n Lawson Combe Barbour L t d . / 1943_/ A *C o 32 e - 140 ADDENDUM - 141 - Having s e t out, i n the three Parts t o t h i s t h e s i s , the consequences o f a post-contract p e r i s h i n g o f goods which form the s u b j e c t matter o f a c o n t r a c t o f s a l e , i t might now be u s e f u l t o provide a posts c r i p t t o the t h e s i s . This w i l l not take the form of a summary o f the t h e s i s , f o r the d i v i s i o n of the t h e s i s i n t o Parts and Sections w i l l , h o p e f u l l y , permit the reader t o remind himself o f the main areas o f discussion w i t h i n the t h e s i s without the assistance o f a summary. The addendum t o the t h e s i s w i l l , r a t h e r , attempt t o b r i n g together the various strands o f one p a r t i c u l a r thread which l i e s concealed w i t h i n the f a b r i c of the t h e s i s . I n the main p a r t o f the t h e s i s aspects o f t h e i n t e r - r e l a t i o n s h i p of the concepts o f r i s k and f r u s t r a t i o n and o f t h e i r dependence, upon the n o t i o n o f " p e r i s h i n g " have been developed. The t o t a l i t y o f such i n t e r - r e l a t i o n s h i p s i n t h i s l i m i t e d context has, however, remained e l u s i v e . I t i s , perhaps, appropriate t h a t an attempt should now be made t o f i x the r e l a t i o n s h i p between the three areas o f p e r i s h i n g , r i s k and f r u s t r a t i o n which, separately, have provided a framework f o r each o f the three Parts o f the t h e s i s . The l i n k between " p e r i s h " and " r i s k " The word "perished" was introduced i n t o t h e 1893 Act by a draftsman who elected t o incorporate t h a t term i n t o a s e c t i o n ( s e c t i o n 7) dealing w i t h f r u s t r a t i o n o f a c o n t r a c t o f s a l e ; the,concept o f r i s k was also brought i n t o t h a t s e c t i o n . C l e a r l y , t h e r e f o r e , f o r the purposes of s e c t i o n 7 Sale o f Goods Act, the concept o f r i s k and the notion of perishing are each of s i g n i f i c a n c e . When one attempts t o determine the r e l a t i o n s h i p between these two areas, however, one i s handicapped by the f a c t t h a t n e i t h e r "perish" nor " r i s k " i s defined i n the Sale o f Goods Act. - 142 - The a n a l y s i s i n Part Two suggests t h a t i t may w e l l be t h a t the terms are r e l a t e d t o one another i n such a way t h a t each can only be d e f i n e d by reference t o the other. I t was suggested i n Part Two t h a t " r i s k " might be a term used w i t h i n the Act t o mean the burden t h a t a party t o the c o n t r a c t bears i n r e l a t i o n t o loss which might a r i s e as a r e s u l t o f the goods p e r i s h i n g , i t was suggested, f o r example, t h a t the term " r i s k " may have no relevance t o the s i t u a t i o n i n which goods are r e q u i s i t i o n e d . I f so, the concept o f r i s k i s a p p l i c a b l e only where goods perish and i s , as a concept, p a r a s i t i c t o the n o t i o n o f p e r i s h i n g , coming i n t o play only where goods p e r i s h or are deemed t o have perished and determining t h e outcome o f such an event. I t may be, however, t h a t t h i s conclusion d i s t o r t s the r e l a t i o n s h i p between r i s k and p e r i s h i n g t o an e x t e n t which completely reverses t h e i r r e l a t i v e importance. Throughout Part One o f t h i s t h e s i s i t was apparent t h a t v i r t u a l l y any event which r e s u l t e d i n goods being unavailable t o the s e l l e r i n performance o f h i s c o n t r a c t would be accepted as r e s u l t i n g i n t h e i r having "perished". Thus, not only i n the obvious case o f p h y s i c a l d e s t r u c t i o n were goods taken t o have perished, such was also deemed t o be the case where the goods had been subject t o m a t e r i a l p h y s i c a l d e t e r i o r a t i o n or t o t h e f t . Only i n the case o f r e q u i s i t i o n e d goods were academic w r i t e r s prepared t o refuse t o accept t h a t t h e goods had "perished" and, even here, they a r r i v e d a t t h i s conclusion when contemplating the a p p l i c a t i o n of r u l e s r e l a t i n g t o f r u s t r a t i o n r a t h e r than the concept o f r i s k . Any event l i k e l y t o a c t i v a t e the concept o f r i s k was i n v a r i a b l y accepted as amounting t o a p e r i s h i n g o f the goods. Surely, then, i f i t i s possible t o suggest t h a t " r i s k " r e l a t e s only t o the s i t u a t i o n i n which goods " p e r i s h " , i t i s equally possible t o reverse the p r o p o s i t i o n and maintain t h a t the term "perished" i s a term wide - 143 - enough t o embrace goods which have been s u b j e c t t o any event which commercial men would expect t o a c t i v a t e the concept of r i s k . Where goods are destroyed, where they are s t o l e n or where they are r e q u i s i t i o n e d , an informed businessman would surely expect t h a t the r e s u l t a n t loss would f a l l t o the party bearing r i s k . of For the purposes the c o n t r a c t o f sale the goods no longer e x i s t and i t surely does not s t r a i n c r e d i b i l i t y t o suggest t h a t the term " p e r i s h " may cover a l l of these s i t u a t i o n s and may thus be a f a i r l y e l a s t i c term covering any event which r e s u l t s i n an economic loss f o r which the party w i t h r i s k may be held t o be l i a b l e . I f t h i s p r o p o s i t i o n can be accepted, then the term " p e r i s h " i s c l e a r l y p a r a s i t i c t o the term " r i s k " and w i l l be taken t o apply t o goods subject t o any event which brings t h a t concept i n t o play. I t w i l l be r e c a l l e d t h a t Sealey suggests t h a t r i s k i s a negative concept which releases the s e l l e r from the normal pre-conditions t o an a c t i o n f o r the p r i c e ( i . e . passing property t o the buyer and e f f e c t i n g d e l i v e r y ) . I f one accepted t h i s view, i t would be possible t o suggest t h a t goods w i l l be taken t o perish whenever, through no f a u l t o f the s e l l e r , they cannot be d e l i v e r e d t o a buyer i n circumstances i n which the s e l l e r w i l l be released from h i s o b l i g a t i o n t o d e l i v e r the goods and the buyer w i l l be l i a b l e t o the s e l l e r f o r the p r i c e . Equally, the goods w i l l be taken t o have perished where, r i s k being w i t h the s e l l e r , the buyer i s not l i a b l e to the s e l l e r b u t , i n the opinion of the Court, would have been had r i s k been t r a n s f e r r e d . Whatever the true r e l a t i o n s h i p between the terms " p e r i s h " and " r i s k " , however, i t i s submitted t h a t they are i n t e r l o c k i n g terms and t h a t one cannot apply without the other. I f so, where goods are taken t o have "perished" then the concept of r i s k w i l l apply; e q u a l l y , where one of the c o n t r a c t i n g p a r t i e s i s taken t o have l i a b i l i t y f o r the loss of goods which - 144 - were, a t the time of l o s s , a t h i s r i s k , then i t f o l l o w s t h a t the goods must have perished. I f " r i s k " and " p e r i s h i n g " are inexorably entwined i t may be t h a t the courts could, i f they were prepared t o approach commercial s i t u a t i o n s at t h i s conceptual l e v e l , determine d i f f i c u l t cases by reference t o p r a c t i c a l r a t h e r than "academic" questions. Consider, for example, the s i t u a t i o n i n which s p e c i f i c goods are ' l o s t ' to the s e l l e r p r i o r t o property and r i s k passing t o the buyer. Section 7 of the 1979 Act w i l l apply t o the s i t u a t i o n only i f the goods " p e r i s h " . Conversely, the provisions of the Law Reform ( F r u s t r a t e d Contracts) Act 1943, w i l l apply t o the t r a n s a c t i o n only i f the goods have not perished. I f a Court attempts t o determine whether the goods have or have not perished through a debate as t o the meaning of t h a t term i t i s l i k e l y t o f i n d t h a t debate s t e r i l e . I t might be more p r a c t i c a l f o r such a c o u r t to accept the conceptual r e l a t i o n s h i p between " p e r i s h " and " r i s k " and t o ask i t s e l f a more s t r a i g h t f o r w a r d question: "Would the Court have determined t h a t the buyer was l i a b l e i f r i s k had passed t o him?". If the answer t o t h i s question i s "yes", then the Court has determined t h a t the event leading t o the 'loss' of the goods i s one which has l e d t o t h e i r having "perished". Consequent upon t h i s f i n d i n g the Court would then, presumably, apply s e c t i o n 7 of the Act. To suggest t h a t such an approach would be v a l i d , i s t o suggest t h a t i n at l e a s t one s i t u a t i o n i n v o l v i n g the concept of f r u s t r a t i o n , t h a t i n which s e c t i o n 7 Sale of Goods Act a p p l i e s , one concept, t h a t of f r u s t r a t i o n , w i l l a s s i s t the s e l l e r where the other, r i s k , does n o t , but would have done but f o r the f a c t t h a t r i s k remains w i t h the s e l l e r . an argument i n d i c a t e s t h a t the predominant concept i s r i s k . Such Where r i s k has passed t o the buyer and the Court i s w i l l i n g t o a c t i v a t e t h i s concept, then the s e l l e r can r e l y upon i t t o recover h i s loss from the buyer. - 145 - Where r i s k has not passed t o the buyer, but the Court would have a c t i v a t e d the concept t o a s s i s t the s e l l e r had i t passed, then the c o n t r a c t w i l l be taken t o have been avoided by s e c t i o n 7 and the s e l l e r w i l l be released from h i s c o n t r a c t u a l o b l i g a t i o n s and r e l i e v e d from any f u r t h e r economic l o s s . To extend t h i s approach t o a l l instances o f f r u s t r a t i o n i n the sale o f goods provides a basis f o r the view t h a t there can, indeed, be no f r u s t r a t i o n o f a c o n t r a c t where r i s k has passed. I t sharpens the r e l a t i o n s h i p between " p e r i s h i n g " , " r i s k " and " f r u s t r a t i o n " i n t o one i n which " p e r i s h i n g " i s the name given t o the process by which the r u l e s o f r i s k are a c t i v a t e d and " f r u s t r a t i o n " i s the process by which the s e l l e r ' s c o n t r a c t u a l o b l i g a t i o n s may be negatived when the concept o f r i s k , considered i n Sealey's terms, does not a s s i s t him. A wider meaning f o r " r i s k " Another approach t o the i n t e r - r e l a t i o n s h i p o f the terms " p e r i s h " , " r i s k " and " f r u s t r a t i o n " , i s t o give " r i s k " i t s widest possible meaning and t o accept the a s s e r t i o n made by G l a n v i l l e Williams, noted i n Part Two, t h a t t h i s term, as used i n s e c t i o n 20, "means a l l r i s k " . To assert such i s t o provide one explanation as t o the wording o f s e c t i o n 7 of the 1979 Act. Adopting t h i s approach i t can be argued t h a t there can be no f r u s t r a t i o n under s e c t i o n 7 (nor, presumably, a t common law) where r i s k has passed t o the buyer, as a buyer w i t h r i s k must accept loss r e s u l t i n g from any unforeseen event, f o r t h a t i s what having r i s k means. This approach, which elevates the s i g n i f i c a n c e o f the concept of r i s k , i n d i c a t e s p a r a d o x i c a l l y , t h a t there i s no s p e c i a l s i g n i f i c a n c e i n the use of the term " r i s k " i n section 7; the reference t o r i s k would, upon t h i s i n t e r p r e t a t i o n , merely represent a reminder t h a t there can be no f r u s t r a t i o n where r i s k i s w i t h the buyer. I f so, the term "perish" would - 146 - become correspondingly more important, f o r i t would not now e x i s t i n s e c t i o n 7 merely as an adjunct t o r i s k . A s e c t i o n 7 f r u s t r a t i o n and w i t h i t , since 1943, p a r t i c u l a r common law consequences, would apply only where goods are taken t o " p e r i s h " . There being no s p e c i a l s i g n i f i c a n c e i n the use o f the term " r i s k " i n s e c t i o n 7, the term would provide no assistance i n determining the meaning of the term " p e r i s h " and. a Court would be l e f t w i t h no a l t e r n a t i v e but t o determine, i n each and every case, whether or not goods may be taken t o have "perished". A narrower r o l e f o r " r i s k " Yet a f u r t h e r approach i s t o simply accept the view, without seeking t o make more o f i t , t h a t the term " r i s k " , as used i n s e c t i o n 20, i s a term which r e l a t e s t o the l i a b i l i t y r e s u l t i n g from a loss caused by t h e p e r i s h i n g o f goods. Following from t h i s acceptance, i t i s then possible t o p o s t u l a t e t h a t the concept o f r i s k may be o f no relevance whatsoever i n other instances o f f r u s t r a t i o n . Thus, f o r example, where goods are r e q u i s i t i o n e d then, i f such an event i s not accepted as r e s u l t i n g i n the goods p e r i s h i n g , a c o n t r a c t f o r t h e i r sale w i l l not be avoided by s e c t i o n 7 of the 1979 Act. Any f r u s t r a t i o n of the c o n t r a c t must r e s u l t from common law p r i n c i p l e s and, r i s k being o f relevance only where goods p e r i s h , the concept o f r i s k w i l l be i r r e l e v a n t . What can one f u r t h e r conclude from t h i s ? One could suggest, w i t h confidence, t h a t the concept of r i s k i s , a t l e a s t , l i m i t e d t o s i t u a t i o n s i n which goods p e r i s h . One could even be bolder and suggest t h a t the concept o f r i s k i s r e l e v a n t only t o the s i t u a t i o n i n which the draftsmen of the 1893 and 1979 Acts have made i t r e l e v a n t , t h a t i s t o say i n the section 7 s i t u a t i o n . This l a t t e r approach would then permit one t o pro- pose t h a t there i s no reason why the passing o f r i s k should prevent the - 147 - f r u s t r a t i o n of a c o n t r a c t of sale by operation of r u l e s other than those contained i n s e c t i o n 7. This i s , of course, the view t h a t was con- sidered i n Section E of Part Three of the t h e s i s . \ 2