LAWS 2210
SEMESTER 1 2000
QUESTION 2
MARK: 76
4) Herseys Chocolates
(i) SGA
The events are in NSW so the SGA may apply. The sale from Geoff (G) to Katrina (K) is a sale of goods (contract
whereby the seller agrees to transfer the general property in goods for a money consideration) and it is not a security
transaction (s4(4)), so the SGA applies (s5).
(i) Has property passed to K?
In determining whether title has passed, the intention of the parties is primary, subject to the overriding rule that no
property can pass in unascertained goods. Here, there is no express intent as to when the property is to pass. Intent is then
to be ascertained by the conduct of the parties and the overall circumstances. Given the terms of the past deadlines
between the two, it is arguable that property passes only when K sells on the goods (because until then she has the right of
rejection). However, this transaction is different as K has asked for some to be set aside, implying that they are hers (ie.
Property has passed). In the absence of a clear intention otherwise, the rules in s23 determine intention.
(a) Rule 4 (s23)
Rule 4 may apply if the goods have been delivered to K on a sale or return basis. Here, there is no actual delivery but there
may be constructive as G has attorned to K (made it clear he holds them for K). If this section applies then property in
the goods passes when K does some act adopting the transaction or does not give notice of rejection in a set reasonable
time. Here, K has adopted the transaction a her own by selling 26 boxes to W.
(a) Rule 5 (s23)
This rule may also apply if the sale of unascertained goods by (?) K has asked for the goods by their trade name which may
mean that it's not a sale by transcription. If it is a sale by description the property passes when the goods are
unconditionally appropriated to the contract similarly to Larles Feelespiel, it is possible that the goods have not been so
appropriated as the act is not final and irrevocable. G could take the goods back and mix them with his own. However, in
later cases (Re Stapylton Fletcher) making clear that you held the goods to the buyer is sufficient. It would be important to
know if G had made any reference on stock lists, a inventory records that the goods were K's. Here, because all he did was
write the name on the box, it is unlikely that the goods have been unconditionally appropriated.
(a) The property probably has passed to K under rule 4. If it has then S (creditor) has no right to the goods. If it has not
then S can take them, however K may have passed title to W.
(3) Did K pass title to W?
If K did have title the so does W. If K did not, then prima facie, neither does W (neme dat). An exemption to neme dat
may give W good title.
(i) Heeding the title
K has sold future goods which she did not have yet. Probably doesn't apply as she never got them.
(i) Factors (s5 Factors Act)
K has sold to W as a mercantile agent (MA) acting in the ordinary cause of business as a MA. She was entrusted with the
goods in her capacity as a MA and W did not know that K did not have title to sell.
Conclusion
K has passed property to W.
(A) Who gets the Herseys?
If K had title from G then W. If K did not, there is a priority dispute between S and W, which W may win because she was
prior in time.
If W does not win she has an action against K (to breach of implied right to sell s17).
(B) Lovers Delight
(1) Application of s6A. S6A applies (see pt A.7) for similar reasons.
(2) Did property pass to J?
Rule 7 - the goods were specific goods in a deliverable state so the property passes when the contract was made. J also has
the title docs indicating title has passed even though in G's possession.
(3) Did J pass title to R?
If they were J's (ie. title had passed) then R has good title. If J had no title then the property will still pass as G will be
estopped from ascribing that he owns them as he has armed D with the title docs (Eastern Distributers - ostensible
ownership). Also, title passed even if J did not have title from G, yet as he was a buyer in possession of the title docs
(s28(2)), so title passes to a bona fide purchase without notice that J didn't have title. J sold in the cause of business as a
mercantile agent so this requirement is fulfilled (Newtons V Wembley)...
(4) Did G pass to Juliet?
If no title passed to Jack then yes. If title did pass then G did pass title to Juliet under s28(1). J will not be estopped from
asserting ownership as possession is not enough s28(1) - G is a seller continuing in possessing, and so passes good title to
Juliet. The factors exception was to apply as G wasn't entrusted with the goods as a mercantile agent ( he was a backer).
Conclusion
J probably did get title from G so R did get title. Juliet also has a claim, which leads to a priority dispute, which R will win
as he has a prior legal interest. AS the chocolate has been taken by Juliet, R should be able to claim it off her (if it still
exists). If not R should sue J, who can sue G.
(C ) Lover's Delight - consumer's action against the seller
R and J (assuming they are retailers) are exposed to liability to the people they sold to as the chocolates were clearly not:
(i) of merchantable quality, s6A 19(2), TPA 71(1)
(ii) fit for the purpose, TPA 71 (2) s6A (19(1))
(i) Merchantable quality for consumers is when the goods are as fit for the purpose for which goods of that kind are
commonly bought (s64B). Here, the chocolates are not fit for consumption (even if only to the very young and old).
(ii) The goods are clearly not fit for the purpose. The purpose, even though not made expressly known, have only one
purpose which... they're deemed to have made the purpose known.
Conclusion
Even though the Sale of Goods Act applies, the consumers will probably claim under the TPA as its easier to prove and
these terms cannot be excluded (not in SGA either - s64(8)). There are also procedural benefits.
Provided that none of the SGA implied terms have been excluded (s57 SGA).
R and Juliet can claim against J and G:
The goods are not of merchantable quality as they cannot be unsold (Kendall V Lillice). This matches the conditions
implied by s19(2) SGA, leading to recision, damages etc... (Hang Kei..).
They also have an action against J and G for breach of the warranty of quiet possession (s17(2)), as their possession of the
goods will be disturbed by liability from consumers and, presumably, from the Health Authorities. It is a warranty, so
damages only, net recision.
J's actions against G:
J has similar actions against G for breach of condition of Merchantable and quiet possession.