Buyer's LOSS of Rights of Rejection Flashcards Preview

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Flashcards in Buyer's LOSS of Rights of Rejection Deck (17):
1

Sale of Goods Act 1979, s.30 (2A)

Buyer's right to reject goods for delivery of incorrect quantities is limited by a "de minimis rule"

(2A) A buyer may not—
(a)where seller delivers a quantity of goods less than required by contract, reject the goods under subsection (1), or
(b) where seller delivers a quantity of goods larger than required by contractl, reject the whole under subsection (2),

if the shortfall or, as the case may be, excess is SO SLIGHT THAT IT WOULD BE UNREASONABLE FOR IM TO DO SO.

(2B) It is for the seller to show that a shortfall or excess fell within subsection (2A) above.

(5)This section is subject to any usage of trade, special agreement, or course of dealing between the parties.

2

Shipton Anderson & Co Ltd v Weil Bros & Co Ltd [1912]

Where SOGA s.30 (2A) derives from:

Seller had to deliver not more than 4960 tonnes of wheat - amount delivered was 55 pounds over.
The difference in price worked out at about 4 shillings, on a contract value of £4000.
The buyer tried to reject the goods on the basis that it was an incorrect quantity (he wanted to reject because the price had gone down, he would have been able to buy the goods more cheaply in the market).

Held; no, the breach here was so slight that buyer did not have the right to reject the whole quantity (as unreasonable).

3

Moralice (London) Ltd v ED & F man [1954]

Court says that the de minimis rule as established in Shipton Anderson & Co Ltd v Weil Bros & Co Ltd, now found in s.30 (2A) SOGA, HAS NO APPLICABILITY IN RELATION TO DOCUMENTARY SALES WHICH ARE FACILITATED THROUGH A LETTER OF CREDIT.

Establishes that a bank who is paying the seller under a letter of credit is entitled to demand COMPLETE COMPLIANCE with that letter of credit.
If there’s any difference between the contract quantity as set out in the letter of credit and the quantity that’s actually appearing from the shipping documents, the bank can refuse to pay

But note: rules on the financing of international trade, t have been developed by the International Chamber of Commerce (UPC600).
UCP600, Article 30 (b) Provided the parties don’t oust the operation of UCP600 in their contract terms, it stipulates that there is a margin of +/- 5% on the contract quantities whereby the bank can pay against the letter of credit.

4

Sale of Goods Act 1979, s.15A

+ analysis

(1) Where in the case of a contract of sale—
(a)the buyer would, apart from this subsection, have the right to reject goods by reason of a breach on the part of the seller of a term implied by section 13, 14 or 15 above, but
(b) the breach is SO SLIGHT that it would be UNREASONABLE for him to reject them,

THE BREACH IS NOT TO BE TREATED AS A BREACH OF CONDITION BUT MAY BE TREATED AS A BREACH OF WARRANTY.

(2)This section applies unless a contrary intention appears in, or is to be implied from, the contract.
(3) It is for the seller to show that a breach fell within subsection (1)(b) above.


- Note: doesn’t apply to stipulations about time for delivery (s.10) -only to those 3 sections (13, 14 and 15).
- Note: this is different to s.30 which is about slight discrepancies in quantity; this is about slight breaches overall - so this argument could be extended to many minor breaches.

5

Two unanswered questions arising from s.15A SOGA

Q1: if shipment is very slightly out - e.g. one day late - can buyer still reject the documents that show this, or will this breach be too 'slight', on the basis of this section? (Forms part of the ‘description of the goods’, under s.13.
NO CASE LAW ON THIS.
Unlikely to provide such a defence to a seller who ships goods slighly late.
From a commercial certainty perspective - chains of buyers etc., delay, even if slight will exacerbate things down the line.
Whether something is ‘slight’ is difficult interpretation to make – if you isolate a single sale out of the chain it is easier to interpret a small delay as ‘slight’ – but when you look at the whole chain, less straightforward.


Q2: as seen from
- Tradax Internacional SA v Goldschmidt SA, and
- Vargas Pena Apeztieguia y Cia v Peter Cremer GmbH if conforming documents accurately reveal a defect in the goods that is breach of a condition, the buyer can reject those documents - BUT if the breach it reveals is only very SLIGHT, does s.15A mean buyer loses his right to reject those documents, on the basis of those two authorities?
This exact point not tested - answer thought to probably be no.

6

Borrowman Phillips & Co. v Free & Hollis (1878)

Generally, the seller does not have the RIGHT to have another go at performance - the buyer does not have to give seller chance to 'cure the breach' before rejecting the goods/documents - seller cannot insist on another opportunity to perform.
BUT - this is only general rule - depeds on the facts and the terms of the agreement.

Here, was held that seller DID have the opportunity to cure a defective performance.
Here, seller tendered a cargo of maize with the shipping documents to the buyer - documents inaccurate description of the cargo, so buyer rejected them.
Seller then came up with an alternative cargo of maize and attempted to give it to the buyer, this time with the correct documents.
Held; buyer was bound to accept this correct tender, because the time for performance had not yet expired,.

However, this case confined to its facts:
First cargo had not been appropriated to the contract, which meant seller was able to substitute a second cargo - enabled seller to offer an alternative cargo.
But most of the time, it will be a specific cargo or specific shipping documents that must be tendered by a particular time, and the seller won’t be able to cure their performance.

7

Sale of Goods Act 1979, s.11 (4)

The most important exception to the buyer’s right of rejection is if the buyer has ‘accepted’ the goods or the documents, in the specific SOGA sense under s.15,

'(4) Where a contract of sale is not severable and the buyer has accepted the goods or part of them, the breach of a condition to be fulfilled by the seller can only be treated as a breach of warranty, and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is an express or implied term of the contract to that effect'.

Thus, acceptance turns the condition into a warranty – so only damages.

8

Sale of Goods Act 1979, s.35

Deals with 'acceptance'

(1) The buyer is deemed to have accepted the goods subject to subsection (2) below—
(a)when he INTIMATES TO THE SELLER that he has accepted them, or
(b)when the goods have been delivered to him and he does any ACT in relation to them which is INCONSISTENT with the ownership of the seller.

(2)Where goods are delivered to the buyer, and he has not previously examined them, he is not deemed to have accepted them under subsection (1) above until he has had a reasonable opportunity of examining them for the purpose—
(a)of ascertaining whether they are in conformity with the contract, and
(b)in the case of a contract for sale by sample, of comparing the bulk with the sample.

(4) The buyer is also deemed to have accepted the goods when after the lapse of a reasonable time he retains the goods without intimating to the seller that he has rejected them.

(5)The questions that are material in determining for the purposes of subsection (4) above whether a reasonable time has elapsed include whether the buyer has had a reasonable opportunity of examining the goods for the purpose mentioned in subsection (2) above.

(6)The buyer is not by virtue of this section deemed to have accepted the goods merely because—
(a)he asks for, or agrees to, their repair by or under an arrangement with the seller, or
(b)the goods are delivered to another under a sub-sale or other disposition. [The fact alone that buyer jas sold goods on to sub-buyer not necessarily 'act inconsistent...'.]

9

Sale of Goods Act 1979, s.34

(1) Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound on request to AFFORD THE BUYER A REASONABLE OPPORTUNITY OF EXAMINING THE GOODS for the purpose of ascertaining whether they are in conformity with the contract and, in the case of a contract for sale by sample, of comparing the bulk with the sample.


Buyer cannot be deemed to have accepted if he has not had opportunity to examine the goods, under s.35 (2).
BUT NOTE: buyer only needs to have had the ‘opportunity’ to examine; he need not actually undertake that examination.

10

Hardy and Company v Hillerns and Fowler [1923]

Provided the buyer is given a reasonable opportunity to examine the goods, if he chooses not to, or if he misses a defect that examination ought to have revealed, and then he sells them on, he will be held to have accepted the goods.
Thus, what the buyer leads the seller to believe is very important, as seller will think he has fulfilled his obligations.

11

Kwei Tek Chao v British Traders and Shippers Ltd [1954]

Issue arises in documentary sales, that because property passes upon payment against documents, the buyer had not yed had his 'reasonable opportunity to examine the goods' under s.35 (2) SOGA , and can't do so until he's paid for the documents.

This case deals with the issue - says upon payment against documents, property passes 'CONDITIONALLY' - it is conditional property.
- If buyer discovers a defect later, which would allow him to reject, he can still do so.
- Property in the goods initially passes conditionally and will re-vest in the seller if the buyer rejects.
- Thus, the fact that the buyer has taken the documents and paid, doesn’t necessarily mean he’s accepted the goods.

But whilst just accepting the documents and paying against them alone not enough to trigger the s.35 ‘acceptance’, if buyer deals in the documents AND also sells on the goods, that will probably be enough.
(Common occurence where buyer only discovers defect in goods after he has already sold them on - could be limited to damages only - bare in mind s.35 (6)(b) - selling them on alone not enough).

12

Vargas Pena Apeztieguia y Cia v. Peter Cremer G.m.b.H. [1987]

How the buyer acts is important in determining whether buyer has accepted the goods or documents.
Whatever he says to the seller is not as important as how he actually acts.

Here, fat content of cottonseed delivered was 0.73% too much - buyer could have rejected as breach of condition - but buyer didn't actually reject.
Instead, he tried to open negotiations with the seller.
23rd August: buyer sent a telex to the seller saying wasn't accepting the goods, but that he reserved his right to sell the goods on.
28th August, buyer actually resold the goods.

Held; it was on this last date, the 28th August, where the buyer accepted the goods for the purposes of SOGA.
The final resale was enough to constitute ‘acceptance’ under S.35 (1)(b) SOGA.

13

Molling & Co v Dean & Son (1901)

With regards to the buyer’s right to examine the goods before accepting them (s.35 (2)) SOGA, that examination should generally take place at the place of delivery of the goods.

BUT if the seller KNOWS that the goods are being sold on almost immediately, it is likely that they will not be examined until the place of the sub-buyer, then the examination will take place at the place of the sub-buyer; not the place of the buyer.

Here, a shipment of 40,000 books - buyer received them and without examining them, immediately shipped them on to his sub-buyer.
But seller was AWARE that this was the plan.
Sub-buyer discovered the defect – he rejected the books and returned them to the buyer.
Q: could the buyer then reject the books?
Held; yes, because the seller here would have been aware that the examination of the goods would not take place until the books reached the place of the sub-buyer - thus, the buyer had not yet 'accepted' under s.35 SOGA, notwithstanding that he'd sold the goods to a sub-buyer
(thus also an example of s.35 (6)(b) in operation.

14

Truk (UK) Ltd v Tokmakidis GmbH [2000]

Buyer can 'accept' the goods by the lapse of a reasonable time, under s.35 (4), which is judged by reference to whether buyer has had enough time to examine the goods, per s.35 (5).

Here, there was 6 months between delivery and rejection, but due to the nature of the goods (machinery) it was held not to be too long.

Otherwise, the question is whether a ‘reasonable time’ has elapsed without the buyer intimating that he rejects goods.

Whenever the Law Commission has considered reform of SOGA, it's consideres whether there should be time limits for how long the buyer has to examine the goods, keep them, accept them etc...
Has always decided against it, as it largely depends on the nature of the goods.
E.G. if they are perishable goods, a reasonable time will be very short, but if the goods are very durable, a reasonable time may be much longer, as exhibited by this case.

15

Hardy and Company v Hillerns and Fowler [1923]

If the buyer says that he isn’t too worried about a late delivery, he could have waived his right to reject the goods for late delivery

Example of buyer losing right of rejection by WAIVER.

16

Sale of Goods Act 1979, s.11 (2)

(2) Where a contract of sale is subject to a condition to be fulfilled by the seller, the buyer may waive the condition, or may elect to treat the breach of the condition as a breach of warranty and not as a ground for treating the contract as repudiated.


So buyer can lose right of rejection by WAIVER.

17

Panchaud Freres SA v Etablissements General Grain Co [1970]

Buyer can also lose his right to reject non-conforming documents if he waives his right or does an act which would bar him from enforcing his right later on.

I.E. if he intimates to the seller that he accepts the documents or if he misses a defect which is openly there on the face of the documents, then he can be held to have accepted them.

Here, shipment to be made in June or July 1965.
The bill of lading said shipment was on the 31st July.
Certificate of quality said goods were loaded on the 10th-12th August - clear inconsistency.
This revealed that bill of lading was incorrect, and the goods were shipped outside of the contract period.
Nevertheless, the buyers took up the documents and paid against them, even though they revealed ON THEIR FACE they were non-conforming.
Buyer tried to complain three years later about the lack of conformity and reject the goods.

Held; NO in taking up those documents and paying, the seller could rely on that as buyer having accepted those particular goods – buyer can’t then go back on that representation.
Key thing here was that the documents were defective ON THEIR FACE; often errors won’t be as obvious as here – just looking at them more carefully would have revealed the defect.
Held; “if the buyer with an entitlement to reject the goods conducts himself so he leads the other to believe he is not relying on that ground, he cannot later set it up as ground for rejection”.