Commercial Law Flashcards

Question

The Elafi (1982)

Answer 1

A buyer had 2 contracts to buy 2 lots of coconut among a larger bulk travelling to Sweden on The Elafi. By the time it reached the port the ship had delivered the rest of the coconut so that only the amount capable of satisfying the 2 contracts was left from the bulk. The court held, confirming Midland, that the contract goods had been ascertained by exhaustion.

Answer 2

The parties to a contract to build a ship had agreed that the entire property in the uncompleted ship should pass to the buyer on the payment of the first instalment. The court gave effect to that intention even though one would expect property to pass only once the building is completed. The courts did not allow another part of the contract to give the buyers property over all the materials appropriated for the building which would have given the buyers property in material that did not become the ship and for which they had not paid.

Answer 3

The parties contracted for the sale of a crane. The contract specifically placed risk on the buyer but said nothing about property. The court inferred from this that if they had intended property to pass it would have been in the contract so property must still be with the seller.

Answer 4

An auctioneer sold a car to a bidder who made representations that he was reputable and trustworthy. So the auctioneer allowed him to pay by cheque which was dishonoured. The buyer had made a contract subsequent to the contract to sale saying that property would not pass until the cheque cleared. The judge held that the property had passed to the buyer at the fall off the hammer and that any subsequent contract purporting to retain property with the seller could not have been effective because the car was already sold in an unconditional contract.

Answer 5

An engine was to be detached from the premises of the seller in order to move it. The judge held that simply the fact that something needs to be dismantled before transit is not enough to count as something that needs to be done to put the object in a deliverable state. Deliverable does not mean convenient for transport.

Answer 6

Showfronts contracted with Head to lay and fit carpets in a refurbished office block. They left the carpet on the premises laid but not fitted permanently. They were consequently stolen. The judge held that property would not pass in the items until the carpet had been fitted properly. Until it had been so fitted there remained things to be done before the carpet was in a deliverable state and so property did not pass and the seller's had to bare the loss of the carpet.

Answer 7

Purchase of a new car from a seller. The car was not in a deliverable state while the licence plates had not been put on because it was illegal to drive and so it was not usable. The buyer did not have to take delivery of it.

Answer 8

Bates contracted for clay which he was bound to weigh at his own expense then pay for. When he did not pay fully he was sued by the seller for the price. If what remains to be done (in terms of weighing or measuring) is to be done by the buyer not the seller then property will pass. Only if it's the sellers responsibility will property not pass.

Answer 9

A buyer bought cocoa from the seller at a set price per unit weight and resold it on to a good faith sub-buyer. The sellers argued that the cocoa needed to be weighed before sale could go through. The court disagreed saying that weighing to test that the correct amount had been delivered was not a condition precedent to sale; only weighing to determine the price is a condition precedent.

Answer 10

A buyer bought a consignment of ice to be sold at £1 a ton to be weighed 'during delivery' by the seller. The ship was lost at sea. In the contract the buyer had taken on the risk of the transit. The court ruled that property probably passed but either way the risk was on the buyer so he should pay an estimated price. A lack of a definite price does not mean the buyer does not need to pay if the risk is on him.

Answer 11

The seller delivered jewellery to the buyer on sale or return. The buyer pledged the goods to a third party and the court held this was an act inconsistent with the buyer being anyone other than the owner and so was an act adopting the transaction and he was liable for the price.

Answer 12

Seller delivered jewellery to buyer on the condition that property would not pass until the seller had been paid. Buyer then delivered them to a potential sub-buyer which would have been interpreted as an act accepting the transaction. There is no mention of the seller being paid in rule 4, only of acts adopting the transaction and non-return. Thus this condition of payment is displaying an alternate intention as allowed by the top of s.18 and so it outside the statute and Kirkham is distinguished. Property is not presumed to pass under rule 4 because of the onwards delivery (as it would normally) and so property remained with the seller.

Answer 13

The seller delivered a car to the buyer saying that he could sell the car on his behalf for £325 and anything above that he could keep. Should he be unable to sell it he should return it. He asked by phone 2 months later for the car back and sent a letter saying that if the car wasn't returned by 10th November he would consider it sold. It was not returned until the end of November. The court held that this was a reasonable time to let the buyer keep the car and with it's expiry property had passed and the seller could sue for the price.

Answer 14

Neither the fact that the identity or quantity of goods was not specified nor the fact that collection was not possible affected the validity of the notice of rejection. Rejection simply needs to be in a reasonable time having not acted inconsistently with the seller's rights.

Answer 15

Horse given to potential buyer on a trial period for sale or return but the horse died during the trial. No acceptance and the although the goods are unreturnable the risk is on the seller.

Answer 16

The process of appropriation is where a specific article is selected and everything is done to it in order for it to pass.

Answer 17

Sellers sold 140 bags of rice to the buyers and later told them 125 bags were at one address and 15 at another. This amounted to an appropriation of the goods but the buyers failed to picked up the 15 and did not consent to the appropriation. The judge held that the silence after being reminded of the whereabouts of the 15 sacks was equivalent to them having consented and promised to take them away. The buyers were liable for their loss to theft therefore.

Answer 18

A buyer bought some bicycles to be manufactured by the seller. These were thus future unascertained goods. They packaged them up and set them aside with the intention of using them to fulfil the contract. They went into receivership before they could ship them. The buyers argued the bicycles were theirs but the judge held that appropriation would only take place once everything was done that needed to be fulfilled under the contract. He held that shipping the goods and delivering them to the carrier was a decisive act under the contract that needed to be done by the seller. Only on shipping would appropriation to take place.

Answer 19

Kidneys were the buyers risk because they had been segregated and left outside even after the agent (the driver) had been informed. This was an appropriation and property had passed.

Answer 20

Buyers of chemicals in HK accepted shipping documents and paid the sellers which transferred property under the contract. When they received the goods they discovered that the goods had been shipped out of the shipping dates and the document's forged to conceal this. The rejected the goods and this was upheld by the court which concluded that the property passed to the buyers defeasibly and re-vested I the sellers at rejection. It also followed that by pledging the shipping documents to their bank they had not acted inconsistently with the seller's rights and were able to reject.

Answer 21

The buyers contracted for the sellers to build a yacht for the '57 yachting season. The contract contained a term like that in Re Blyth where the whole property transferred at the first instalment of pay. The yacht was unstable when received and the terms on which the company was going to repair it were unsatisfactory so he buyers rejected the yacht. The judge, Diplock J, held that this was justified as the property, tough having passed, passed defeasibly and after rejection had re-vested in the seller.

Answer 22

A rogue bought linen on credit by impersonating a reputable firm and sold them on. The first contract was void for mistake of identity and thus title never passed to the rogue and he was unable to grant good title to the buyer.

Answer 23

Owner of a ring gave it to his friend to see if he could sell it for more than a certain price the surplus beyond which he could keep. The court held this was not akin to authority to sell.

Answer 24

Same facts as Nanka-Bruce. Cocoa was sent to a merchant who had not paid for it and who sold it on to the Trust. The original owner sued the Trust in conversion for the cocoa but lost. The court cited the dictum of Ashhurst J in Lickbarrow v Mason if one of two people must suffer by the acts of a third, he who enabled the third person to occasion such loss must bare it. This is rarely followed and normally only quoted to discredit it. Akotey, the original owner, was held to have allowed the merchant to cause the potential loss to the Trust by giving him the documents of title and so he should bare it.

Answer 25

A motor dealer persuaded a customer to sell his van to him which would give him enough money to put down a deposit and a new car then buy back his van and the other car both on hire purchase agreements over time. The customer left 2 blank hire-purchase forms with the dealer who sold the new car to him but sold the van to another person when payments were not made. The 2 blank forms were held to give the dealer authority to sell the van and he was estopped from denying it.

Answer 26

The owner of some sacks of sugar was persuaded by a rogue to direct the warehouse where they were kept to hold the sugar to the rogue's order. The rogue sold the sugar to a buyer but never paid the original owner. The court held that the act of directing the warehouse to hold for the rogue estopped him from claiming the rogue had authority to sell.

Answer 27

The owners of some timber employed a clerk to direct deliveries to customers. The clerk fraudulently induced deliveries to buyers and when he was discovered the owners sued him in conversion and were successful. The court held they had done nothing to preclude their denial of his authority.

Answer 28

CN owner a car and were tricked into letting R have the car and the registration book who then used this to sell the car to a third party. It was alleged that CN were negligent but the CofA rejected this argument and CN retained possession. There was no representation, specifically of agency, that would preclude CN from denying the rogue's right to sell.

Answer 29

Handing over a document of title is not enough to constitute a representation or agency or ownership. This case disapproved Akotey where handing over documents were enough to be a representation to authority to sell

Answer 30

Woman wanted to raise money for a new car on the security of her Jaguar. A car dealer said he would sell the car to a finance company and buy it back on hire purchase and use the money from the sale to put down on a new car. She gave him blank, signed forms on the promise that he would get back to her but he didn't and sold it anyway. The court held that the owner was not precluded by her negligence from denying the dealer's right to sell the car.

Answer 31

Per Denning LJ: Generally the entrusting of goods to an agent with consent of the owner in his capacity as a mercantile agent is deemed to mean with the intention of having the agent deal with them in some way (probably for sale). If consent has been given with respect to the goods without the documents of title and both are sold then the entire transaction is treated as occurring without consent.

Answer 32

The owner of some jewellery sent W, the seller, all over the country selling his goods as a course of business. The seller pledged, without authority from the owner, pledged certain goods with a pawn broker. As Weiner was a textbook mercantile agent under the FA the pledge was held to be valid and the broker was entitled to assume the agent had the authority of the owner. Note – this reverses the decision of Jerome v Bentley where a mercantile agent is involved.

Answer 33

You do not have to be directly employed as an agent as long as your general profession is as a businessman who sells things.

Answer 34

An agent who sold lorries for a living sold his own lorry to BW, bought it back on hire-purchase then sold it on to a good faith buyer. The court held the transaction was not valid because he had the lorry qua hirer and not qua mercantile agent.

Answer 35

A car dealer obtained cars on hire-purchase and hired them out to customers. It sold one car to a good faith buyer and Astley claimed it back. Confirming Staffs, the court held that the car was sold by the dealer qua hirer not qua agent so s.2 FA does not apply.

Answer 36

An agent obtained consent to sell a car for a certain price but dishonestly sold it for less and pocketed the money. It was held that consent in the case of s.2 FA includes consent obtained by fraud.

Answer 37

Agent sold an owner's car without authority for a low price. s.2 provided no help for the buyers because they could not prove they acted in good faith. The onus of proof of good faith is on the buyer.

Answer 38

Turning a blind eye counts as notice for the purposes of s.2 of the Factors Act

Answer 39

Owner accepted a cheque for a car on the basis of the a rogue's purported reputation. The rogue then sold it to a student in London. The court ruled there was no mistake of identity because the seller was assumed to be dealing with the person in front of them but it was voidable for fraud. As the title had not been avoided before the sale to Averay, he got good title.

Answer 40

Car dealer would buy cars then sell them to a finance company for about 90% of their value to keep their cashflow. They would retain the cars as bailee for the finance company. When the dealer got into financial difficulties a creditor bought cars off the dealer which had already been resold to the finance company. It was held that it did not matter that the dealer was only a bailee, the good faith creditor was protected and could keep the cars. Physical possession is all that matters.

Answer 41

a company, E, sold and signed a lease agreement for a set of machinery which they then sold to and leased back from another company. It was held that despite E's position as a hirer the second sale was valid directly over turning Staffs. Delivery may be actual or constructive meaning that if the seller constructively delivers to the buyer then actually delivers to the sub-buyer the situation will still be one where the buyer is in possession delivering to the sub-buyer (relevant for the 7th exception).

Answer 42

A woman took furniture on a hire purchase agreement which in this case was treated as a conditional sale agreement because the hirer had no option to end the hire. Under a normal hire-purchase you do and you have only an option to buy making it not a sale agreement. The woman sold it to a good faith buyer before payment fo the full price and the owner claimed them back. The court held that the sale was valid under s.9 FA.

Answer 43

An owner of a car gave it to a rogue who gave them a worthless cheque. The rogue sold it for cash at a street market. The owner was said to have avoided the title which was voidable for fraud and thus the rogue had no title. Unless the rogue could be said to be a mercantile agent then the sale would not be valid. Lee v Butler had not taken this wording into consideration and in fact the court here held that it required the buyer in possession to be acting in the course of business. It was said on the facts, as the car was sold at a market which was commonly used to sell used cars, the buyer was acting in the course of business. The sale was therefore valid.

Answer 44

A woman's car was stolen and was eventually bought by Jones. The insurers claimed the car but Jones claimed s.25(1) protected him. The court held that it did not because the car had been stolen in the first place. Unless the true owner had given consent no person down the chain of possession can take advantage of s.25(1).

Answer 45

Jay sold canned peaches to Merrick. The buyers made it clear that they would pay Jay from the money they received after re-selling the peaches to Mount. Merrick never paid Jay but the court held that Jay had lost their right of lien because they had consented to the resale to Mount. They had been keen to sell the peaches in a falling market and it was held they had renounced their lien. Obiter: It does not matter for the purposes of s.25(1) whether the documents of title the buyer gets with consent from the seller are the same as the ones sold to the sub-buyer. As the goods here were unascertained there was only an agreement to sell. This did not concern the judge but it seems as if s.25(1) should not have applied. However s.9 FA would have applied as it includes the wording 'or under any agreement for sale' which would include contracts of sale for unascertained goods. It is not clear however how property would have passed and this point is probably open for reconsideration. Re Highway Foods (1995) held that agreements to sell where a buyer had possession and conformed in every way to s.9 FA property would not pass from the original owner.

Answer 46

B2 let B1 hire it's ship but later failed to pay the hire fee and B2 took it back. B1 had, however, 'bunkered' (fueled) the ship thus there was a lot of oil in the ship that neither B2 nor B1 had paid for. B2 claimed S had delivered the oil to B1 who had voluntarily given the goods to B2 so they had title however it was not voluntary so this argument did not work.

Answer 47

Part III of the Hire-purchase Act 1964 protects private people who buy a car with no notice of a previous hire-purchase agreement on the car. This will not work if the original hire-purchase agreement is void as it was here.

Answer 48

Contract said that delivery had to take place between certain months; it was not and in this mercantile context time was of the essence of the contract and thus breach of timing was sufficient to allow the buyer to refuse delivery.

Answer 49

S had loaded his ship with a contracted quantity of seed on the 1st and 3rd floor. He was unable to get to the bottom layer without first delivering the other goods on the 2nd floor. S arrived in London and delivered half the contracted quantity of some seed. He then went to hull to deliver the second floor good and then came back to London. Buyer rejected the second half and was entitled to do so.

Answer 50

Court may order the payment of price in another currency if that currency is what the contract price was in.

Answer 51

A buyer bought condensed milk from a seller. It had the name NISSLY on the side. Nestle claimed this violated their trademark and the buyer had to remove the labels which hurt their value. The buyer sued the seller for breach of contract and the court held that the seller had breach the condition implied by s.12(1). The right to sell includes title but also includes right to sell in light of trademark law. As the seller had no right to sell trademarked material then this was construed as a breach of s.12(1).

Answer 52

S sold oil to B in an international trade contract called an FOB contract. S loaded the oil on a ship chartered by the buyers. Property passed to B as it was loaded onto the ship. However an arm of the Nigerian government refused to give the relevant documents to the ship to let it leave claiming breaches of loading procedures until a fine of $12 million had been paid. The court held that simply because the seller had not provided for the departure of the ship that did not mean they had no right to sell. The Nigerian government did not claim ownership nor did they seize the goods.

Answer 53

3rd party claimed a breach of a patent on the machines used to mark roads but the patent had not been granted until after the contract between S and B had been signed. The court thus held there had been no breach of s.12(1) but because of the intervention of the 3rd party there had been a breach of s.12(2)(b).

Answer 54

S was upset at not getting paid for computer systems and he installed a time lock preventing use of systems until payment was made. This was a breach of s.12(2)(b) and gave rise to damages.

Answer 55

Buyer bought a pair of underwear which, because of a chemical used in the manufacturing that should have been washed off, irritated his skin. The court ruled that the goods were sold by description even though the buyer picked them out in a retail store and the implied condition was applied. Thus, as it is quite hard to find a contract where the goods are not sold with some sort of description, it is hard to find a situation where s.13 will not be implied.

Answer 56

Sale of a painting described as by a specific painter. The buyer was a specialist in this area but the seller was not. The painting turned out to be a forgery worth about 1/500th of the price. The buyer had relied upon their own judgement not upon the description so this did not come under the section. In fact the seller disclaimed any knowledge of the painting's provenance.

Answer 57

Parties contracted for boxed of tinned fruit. The fruit was to come with a certain number of cans per box. The goods, when they arrived, where half correct while the other half had the wrong number of tins per box despite having the right number of cans overall. The court held that rejection on the basis of s.13 was valid here.

Answer 58

Buyers contracted for wood staves to make cement barrels from. They were to be ½ and inch thick but when they arrived they were bigger by only by 1/16th of an inch. They were fit for the purpose and complied with every other rule. The court still held that the goods could be rejected under s.13.

Answer 59

Diplock LJ said 'The description by which goods are sold is confined to those words in the contract which were intended by the parties to identify the kind of goods which would ultimately be supplied...the key to s.13 is identification'

Answer 60

Ship was sold to the buyers as a new vessel being built in a certain lot in Osaka. Actually it was being built in Oshima and the buyers wanted to reject the goods. The court held there was no breach of s.13 because the description of being built in Osaka was not fundamental to the identity of the ship.

Answer 61

Adulteration of something which has the effect of changing it's identity may cause something not to comply with the description. Here livestock feed had been adulterated with poisonous beans thus it could not be described as animal feed so s.13 had been breached.

Answer 62

In the course of a business has a wide interpretation. Stevenson was a fisherman and he decided to sell his boat to buy a new one. He did not sell boats as a matter of course. The court of appeal however held that the sale was made in the course of business.

Answer 63

Goods supplied under the contract includes the container and other material that comes with the goods. Here a water bottle not sold with the water burst and was considered part of the goods.

Answer 64

If the buyer inspected the goods then any fault in the goods should have been noticed in that particular inspection cannot be complained about later. Here a US motor home was too wide for UK roads but the buyer spent 2 days inspecting it and sleeping in it so should have noticed.

Answer 65

Buyer told the car had a faulty clutch before purchase. He was not able to claim under s.14(2) for that same fault.

Answer 66

Buyer was installing boilers into some flats. Jewsons inspected the flats and recommended one type of boiler. They worked well but the buyer refused to pay and sued Jewsons saying the fact that the boilers did not have a good energy rating was a breach of s.14(2) because there were needed to sell his flats. The court held there was no breach. The reasonable person would consider the boilers satisfactory. The reasonable person is endowed with knowledge of the case but not with the buyer's agenda. This applies to s.14(3) too.

Answer 67

A boat was delivery new to the buyers but it had a heavy keel and tended to capsize. The court held this was not of satisfactory quality and further that if things are described as top of the market or are marketed as high quality the standards of quality may be higher. A brand new boat should be free from minor defects. They also asked the seller how heavy the keel would need to be for it to be unsteady. The sellers took a while to get back to them but their eventual answer implied that the yacht supplied under the contract might capsize and they immediately rejected. Held that time spend waiting for answers to questions or waiting for repairs is not counted in the reasonable time before acceptance is no longer allowed.

Answer 68

CO2 supplied to Britvic to make fizzy water contained trace parts of benzene, a carcinogen. Although the levels were so low as to be insignificant to human health Britvic still recalled the product to protect it's reputation. The court held that this reaction could be taken into account when deciding whether the goods were of unsatisfactory quality which they were in this case.

Answer 69

Fit for purpose does not mean fit for every conceivable purpose. With very versatile materials, like polyethylene in this case, this would be unreasonable.

Answer 70

Potatoes were found to be rotten at Liverpool after transportation from Cyprus. Goods should be durable enough to withstand further transportation. If they do not this raises the presumption that the goods were not of satisfactory quality at the beginning point of transportation.

Answer 71

Gas oil being transported internationally met the contract specifications at departure but by its destination had developed a sediment which made it unusable. The court held that just because the defect was latent and not discoverable at departure does not mean they were not defective. If goods fail to make it to their destination they can be assumed to have been defective at departure.

Answer 72

The buyer told the seller he was buying buses for Bristol so it can be assumed that the buses should be fit to go up the hills in Bristol.

Answer 73

A animal feed producer accidentally contaminated some product with chemicals toxic to poultry. It made it's way to the claimant's farm where it killed some birds there. The court held that feeding to poultry was not too wide to be a particular purpose for s.14(3) and that good should be fit for those purposes that are reasonably foreseeable. Here, it was reasonably foreseeable that the feed would be used for poultry and as it was not fit for that purpose it breached the s.14(3) condition.

Answer 74

Tractors would be used in Iran about which the seller knew nothing. The buyers did know about the terrain and could be shown not to have relied upon the seller. An agent for a foreign principal is no longer held to be implicitly contracting personally. The principal is the one liable.

Answer 75

Sellers of faulty plumbing equipment that caused a flood were held to be experts in plumbing equipment and as such were experts who were being relied upon.

Answer 76

A delivery of rubber contained, unlike previous deliveries which were used as reference for quality of new supplies, a preservative which made it difficult to use. In the buyer's line of work inspections were done visually and so the court concluded that an ordinary commercial person doing a visual inspection (as was normal in the buyer's line of work) would see nothing different about the new delivery and thus the condition implied by s.15(2) was not breached.

Answer 77

The word unsatisfactory means in s.15(2) is what an ordinary commercial person in the buyer's line of business would consider unsatisfactory.

Answer 78

Payment was due against delivery of the documents of title. The buyers refused to take delivery however and so property did not pass meaning not action for the price could stand. However the sellers could sue for damages for non-acceptance.

Answer 79

Even where it is the buyer's own fault that the action which would cause property to pass did not happen as in this case failing to nominate a ship for delivery the action for the price will fail unless property passes.

Answer 80

Price for the building of a ship was due on stated dates in installments. Held that each installment was payable as it became due. The date of delivery, though not set at the beginning of the contract became ascertained on completion of each part of the ship.

Answer 81

Jenkins LJ defined 'available market' for the purposes of s.50(3) said that a market is one where goods are available at prices set by supply and demand. Thus, in that case, where a car the price of which was fixed by the manufacturer s.50(3) does not apply.

Answer 82

The seller is not under an obligation to mitigate losses until the breach actually happens.

Answer 83

When shipping internationally the next available market will be either selling the goods afloat or at the port of arrival. Here a consignment of padlocks were sent from New York to India and the market price was set as that in India at the time of the ships arrival.

Answer 84

A consignment of tapioca was to be shipped from Thailand to Turkey. Importation was banned by law and the buyers told the sellers not to load the ships they had already chartered. They successfully sued for the cost of the cancelled ships. The C of A however said the market price rule cannot apply here because the Turkish government had banned the product.

Answer 85

Buyers were required by a term in the contract to provide a vessel for the seller with 15 days notice. They were 4 days late in doing this and this being held to be a condition it relieved the sellers of any other obligations. Failure to nominate a ship in an extended FOB contract is a repudiation of the contract. If the buyer does not nominate a ship capable of transferring the goods this will also be a repudiation of the contract.

Answer 86

A seller sent off a consignment of cloth to a carrier. After it had been loaded on the buyer ordered they be repackaged. The seller was still in possession of them when the buyer went bankrupt. He claimed a lien but the court held that the delivery to the carrier was sufficient by virtue of s.43(1)(a).

Answer 87

An unpaid seller acknowledged and logged the delivery orders sent by the buyers concerning a sub-sale but merely acknowledging the information provided concerning a sub-sale by the buyer did not amount to assent. Assent by the seller such as would invalidate their lien would need to be of the effect that the sellers intended to give up their right to lien and to carry out the tasks stipulated by the buyer in relation to the sub-contract notwithstanding the terms of the original contract with the buyers (i.e. the sub-buyers could be guaranteed to get their goods regardless of whether the original contract is breached). This was not the case here and this is the normal view.

Answer 88

An unpaid seller attempted to exercise their right of stoppage tendering payment for the freight to the carrier when realising their buyer was bankrupt. The captain refused unless proof of ownership was provided. It was held that the captain was wrong in this regard and he should assume the seller is acting within their rights.

Answer 89

Barnard Bros sold barley to Sanders and consigned it to Elsenham station where the railway company acknowledged it held the barely to Sander's order. Sanders became insolvent and BB claimed a right of stoppage. It was held they had none the transit had ended at delivery to the train company as it had acknowledge it held for the buyer as per s.45(3)

Answer 90

he purported buyer of 2 cars refused to take delivery and pay the full price less a small deposit. The seller gave the buyer notice that he was intending to re-sell the cars. He did so with one but not the other. He then sued for the contract price less the amount received for the sold car plus expenses. The court held that the ability of the seller to resell under s.48(3) was inconsistent with the subsisting sale to the original buyer. As such, although it is not stated clearly, the seller may treat the contract as rescinded once reselling under s.48(3). In this case the act of disposing of one car had the effect, per s.48(3) of rescinding the whole contract and waiving the seller's right to payment under it. He could only sue for damages for not acceptance which obliged them to take into account the value of the unsold car. The amount awarded was much lower than the contract price.

Answer 91

A consignment of about 5000 tons of wheat was overweight by about 55 lbs and the court would not allow rejection. s.30(2B) – it is for the seller to show that the quantitative defect came within s.30(2A).

Answer 92

Bernstein bought a new car but was ill so Bernstein had not had a chance to drive it. It had only done 140 miles before it's engine failed. A reasonable time had passed so he had no rejection remedy because he had accepted. This is no longer good law and has been changed by s.35(5).

Answer 93

Sellers sold lifting equipment to the buyers and installed it on their trucks. The sellers always knew the buyers were buying for resale. Buyers did not inspect the truck and sold it. Sub-buyer did inspect it and found a fault with the equipment; it was discovered 6 months after the installation. It was held however that the buyers could reject the goods because the seller knew the goods were for resale. A reasonable time would include time to re-sell and time for the sub-buyer to inspect which was longer than 6 months.

Answer 94

Buyer purchased a seed drill and power harrow from the seller. The equipment vibrated a lot and the buyer didn't like this thinking it might damage the tractor so he returned the power harrow to the seller. No-one was sure why it was vibrating. So the seller agreed to investigate and if possible repair. Buyer later gets a phone call from the seller saying it was fixed but he refused to tell the buyer why it was faulty. Buyer was unhappy and wanted to reject it. The harrow had been repaired perfectly but here the buyer was entitled to reject. This was a collateral contract of inspection and repair. The conditions are that if the repair is successful you will not reject and that the buyer must be informed of the results of the inspection and repair. This condition had been breached. Obiter Dicta: invisible defects mean it is more important to tell the buyer why the equipment was defective. Obvious defects which have been fixed it will be harder to reject because the reason for rejection in the first place was obvious.

Answer 95

Seller agreed to sell cotton to the buyers. The sellers repudiated the contract before the arrival of the goods and the buyers accepted immediately. Although at the time of the breach the market price was higher than the contract price it fell to less than the contract price for 2 months before delivery date. The court held that the damages should be judged from the point at which the buyer should have bought replacement goods to mitigate their losses and in this case that was at a point where the market was lower than the contract price and so damages were only nominal.

Answer 96

Buyers bought cotton bales from the sellers for delivery of any specified number of bales on request with 1 month notice; there was therefore no fixed date of delivery. In July with about 1/3rd of the bales undelivered the sellers repudiated the contract. For 4 months the buyers encouraged the sellers to honour the contract but finally accepted the breach in November. The price of bales peaked in August and fell steadily from then on. The question what did 'time of the refusal to deliver' mean, the date of repudiation or acceptance? The Hong Kong Full Court held that damages should be calculated in July, the date of repudiation, but the PC disagreed holding that it should be at the latest time delivery could have been possible while the contract was valid which in this case 1 month after the date of acceptance of the repudiation because the one month notice would need to be added to any hypothetical delivery on the last day possible. In other words in cases of repudiatory breaches the damages are calculated at the latest point of delivery possible never at the time of breach. No evidence was provided as to the market price on that date so the damages were nominal.

Answer 97

Breach of contract; failure to deliver cotton; a further contract fell though denying the buyers of significant profit. These later losses arising out of a latter contract did not follow naturally from the breach of the first contract despite the fact the seller was aware the cotton was for resale as per s.51(2).

Answer 98

Due to a late shipment of boilers VL lost a lucrative contract from the government. They were only allowed to claim for the loss of ordinary profit not the extraordinary profits from the government. NI could not have known about the contract and it was not foreseeable according to Asquith LJ. Test widened in Heron II.

Answer 99

Shipment of sugar was 9 days late and the market had fallen. Seller knew it was for resale but not immediately thus did not foresee the loss. The HL said this was irrelevant as it was 'not unlikely' and therefore the damage was not too remote. Lord Reid obiter: the test for remoteness in contract is much more generous than in tort where the type of damage must be foreseeable. In contract, any damage if not entirely unlikely will not be too remote.

Answer 100

Exception: it was known to the seller that goods were to be sold to a sub-buyer abroad and it was requested that the goods be delivered sealed and unexamined, the court substituted the time and market price in the country of the sub-buyer because the buyer had no way to detect the quality when he had them.

Answer 101

Buyers contracted to sell vinyl film with writing on to be stuck to shipping containers. The goods breached a warranty as to quality because the writing quickly became illegible. Held that because the defect would not be detectable until after the contract had been concluded and delivered that s.53(3), the loss of value test, was not appropriate and instead the simple Hadley v Baxendale test was applied - The measure of damages for breach of warranty is the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach of warranty. It did not require a huge amount of evidence or argument to displace the test. Specific performance was allowed here.

Answer 102

Goods were dropped into the sea before they passed the ship's rail. Thus the goods were at the seller's risk. The seller tried to sue the carrier for negligence and the carrier wanted to rely on exclusion clauses in the contract of carriage. Court said that the seller was not privy to the carriage contract but there was a collateral contract with the seller to load the goods that included the exclusion clauses and the carrier was protected.

Answer 103

Consignment of sugar was lost after shipment. The question concerned the buyer's insurance contract and whether the buyer had an insurable interest because risk passes to the buyer after shipment.

Answer 104

s.32(3) - If the goods are sent by S to B by sea the seller must notify the buyer to allow the buyer to insure the goods. If not he is at risk. This provision is only really relevant in extended FOB because otherwise the buyer will already know the ship because he nominated it.

Answer 105

Once the buyer gets the documents especially the bill of lading he has the right to possession, has rights against wrongdoers in conversion, contractual rights against the carrier and the right to claim on the insurance.

Answer 106

If the buyer rejects documents that are in order the seller may treat this a breach.

Answer 107

The sellers send corn syrup and starch to the buyers CIF London. The ship was hit by a torpedo and lost. The sellers tendered the goods to the buyers and the buyers refused to pay. The court held that the buyers were bound to pay and by not doing do this was a breach of contract. Clearly the contract is fulfilled by delivery of the documents not of the goods. By taking on the commercial venture the buyer also takes on the problems the seller has including lost goods.

Answer 108

Norwegian cod guano sent CIF Kobe, Japan. The journey had to be done in 2 legs. Buyer rejected the bill of lading because it only covered the first leg. They were judged to be correct.

Answer 109

Due to England's declaration of war on Germany at the time of tender the bill of lading was invalid for illegality and the buyers were entitled to reject it. Bill of lading must remain valid up to tending not just at creation.

Answer 110

Normally risk passed retrospectively but in this case the seller was responsible for shortfalls in the goods and condition of the goods even as they arrived in the destination port and after the documents had been exchanged for the price. The court held that this was not a CIF contract at all because the buyer did not take property or risk with the purchase of the documents. Instead it was a contract to get goods to the destination in good condition in the right quantities. It was held to be an Ex Ship or Arrival contract where the seller has property and risk until the goods actually arrive with the buyer and only then is the buyer bound to make payment. In such contracts therefore the buyer is bargaining for the goods and the documents not just the documents as with a CIF contract.

Answer 111

Thomas LJ: UCP is interpreted in accordance with it's underlying aims and intentions in accordance with the uses of intentional traders and bankers.

Answer 112

Credit was revoked on goods already shipped. The sellers sued saying they should have been informed but it was held there was no obligation even if it was the custom.

Answer 113

Diplock LJ explains irrevocable credits and their underlying justification of certainty and assurance. One exception to the rule of strict compliance is fraud which is where the seller presents documents to the CB containing material representations of fact that to his knowledge are false. In this case the bill of lading by the loading broker was edited to make it look as if the shipment was made within the delivery date. The bank however was wrong to reject the documents because they were in conformity with the contract. The false statement did not affect the validity of the document. Illegality in the credit relationship is sufficient to not require strict compliance

Answer 114

Contract required a certificate of quality issued by 'experts'. The certificate was only signed by one person thus it was rejected for not being signed by more than one.

Answer 115

2 different names for the same goods. Bank rejected the letter of credit because it did not use the exact same wording used in the contract.

Answer 116

Letter of credit given to confirming has the name Bulgrains Co Ltd while the documents supplied by the beneficiaries had Bulgrains and Co Ltd on it. The court held this was not an obvious typo so rejection was allowed.

Answer 117

Claimant tried to rely on breach of sale contract not to pay under an irrevocable letter of credit. He was not entitled to.

Answer 118

A taxpayer assigned to his wife interest on a loan he had made and further assigned the dividends from certain shares. The tax comr claimed these were taxable as the taxpayers income but the taxpayer argued they counted as his wife's income because of the assignment. The High Court of Australia held that the assignment, being an assignment of future interests, was ineffective for lack of consideration relying in the Holroyd case.

Answer 119

Contracts to assign future property can apply provided value is paid. It is a right in equity that assigns the future chose the moment it comes into existence providing a method for companies to give security of more than their assets. Otherwise assignments can only operate on existing choses in action. Assignments of future choses will be treated as agreement's to assign and will take effect only when the interest comes into existence.

Answer 120

Contractors agreed to build cottages for the district council. Each month the contractors were to be paid 90% of the value of the work they had done that month. The remaining 10% was to be put in a retention fund until all the cottages were built and only when the buildings are built correctly as judged by an architect. The money in the fund was assigned. At the time all the money had accrued but was not yet payable. The question before the court was whether the money existed despite the fact that it was not payable yet. Scrutton LJ said if the property arose from an existing contract it existed. 'English law treats as existing not only earned receivables whether or not presently payable and whether or not presently ascertained...'

Answer 121

Taxpayer had rights under a contract to royalties from the manufacture of goods subject to a patent he owned. He purported to assign the right to 90% of the future royalties with no consideration. The court held that he had assigned an existing chose in action to future royalties. Norman was distinguished on the basis that the loan in that case was terminable unilaterally by repayment. In this case the royalties were not conditional or contingent and the interest in those royalties could be said to be in existence. Kitto J used the analogy of a tree and fruits. The tree is an existing contract which is not unilaterally terminable and the fruits are the potential future goods/monies. As long as the tree exists the fruits can be assigned.

Answer 122

Where there is no reason to protect the debtor or no risk of cross-claims then the court can waive this requirement and allow and assignee to bring an action in his own name.

Answer 123

A sum agreed to be paid to the assignors was conditional on them paying a higher rent on some houses. The assignors tried to assign the sum to the assignees and gave notice of it to the debtor. The assignees started an action to claim the money from the debtor but it was held that a debt which is conditional cannot be absolutely assigned. The purported assignment actually used the word charge so was unsurprisingly held to be a charge which is expressly excluded by s.136. Obiter - If only part of the debt is assigned then it cannot be a legal assignment. It must be absolute.

Answer 124

The assignment of rights under an insurance contract was not absolute because the assignors retained limited protection under it and as such it was not a legal assignment.

Answer 125

Barclays Bank did not in fact know of the direction given to the debtor that an assignment had been made to them and there was no evidence of any previous arrangements. It was held that as such the notice, which in this case was held to be sufficient to be and assignment itself, was a relationship only between the debtor and assignor and could not involve the assignee and as such the assignment failed. Written notice referring to previous arrangements with an assignee was sufficient to count as the assignment itself.

Answer 126

The assignment must be signed by the assignor and not someone else such as his wife, as in this case, or it will be invalid.

Answer 127

The notice of the assignment which was given to the debtor referred to a date of assignment which was actually earlier than the actual date. Notice was sent one day after the assignment and received a day after that. The notice referred to a date 2 days earlier, 1 day before it had actually been assigned. The notice also included an incorrect amount. Denning LJ said that the notice must be strictly accurate even if it is one day out. Morris LJ agreed but he stressed that the date was inaccurate because it referred to an assignment that pre-dated the assignment. Some commentators have said this indicates that a mistake as to date which post dates the assignment would be good. This is not decided yet.

Answer 128

No formality is required however Burke is not overruled.

Answer 129

Customer suspected his debt had been assigned by the bank. He made a freedom of information request and the bank revealed there had been an assignment – did this constitute notice – No, not where the bank states the information is given solely to satisfy an information requests.

Answer 130

There is no need to provide consideration.

Answer 131

Equitable interests in property can be transferred by the beneficiary in a number of ways.

Answer 132

The court held that a trust of a number shares unascertained from a known bulk, being over fungible goods, need not fail.

Answer 133

A bank, which was funding a business, agreed with that business that when the business sold goods the price would be paid to the bank by the third party. When goods were sold the bank sent notice to the buyers and asked them to acknowledge that they would pay the bank. The buyers in this case did so but paid a third party by accident. The court held that it did not matter that even without consideration or unusual language; there was evidence of an assignment and the intention to assign and so the court could give effect to it.

Answer 134

The actions of a police chief were held to be enough to constitute an assignment of the benefit of a judgement to his successor.

Answer 135

'It is not necessary for an equitable assignment to follow any particular form'.

Answer 136

Notice to the assignee is necessary to effect an equitable assignment of a legal or equitable chose.

Answer 137

A company that owed money to a creditor wrote to the creditor to tell they they would hold a sum owed to them at the creditors disposal until the debt was paid off. Before notice reached the debtors the company went into liquidation. It was held that the equitable assignment was valid even though notice had not been given to the debtor and the assignee would get good equitable title as against the assignor. He might not against other assignees who might have priority however.

Answer 138

Notice to the debtor, though not necessary, must be more than a mere request

Answer 139

Australian case that says that equitable assignments of legal choses will only be valid if done in writing.

Answer 140

Assignments of rights of action tainted by maintenance and champerty are not allowed. This is for public policy reasons. We don't want 'the trafficking of litigation'.

Answer 141

The sellers sold cement to some buyers in Lagos, Nigeria. They used a letter of credit issued by the Central Bank of Nigeria (CBN). CBN failed to honour the letter of credit and the seller sued them fr breach of contract. Credit Suisse (CS) who had provided funding for the deal guaranteed the seller's legal costs and in return the seller assigned by way of security it's action against CBN. As the case moved to the HL the seller assigned the right of action to CS who agreed they would assign it again to a purchaser of their own choice. CS sold the right of action for $1.1m and the 3rd party settled for 8m soon after. T was suspicious and sued CS claiming the original assignment had been tainted by maintenance. Held that CS had a genuine commercial interest in the litigation and could take it but the sale to the assignment third party who did not was champertous.

Answer 142

Woman contracted MRSA in the hospital and settled with the hospital. She regretted settling so bought the claim of another patient for £1 but the court held that the assignment was ineffective for lack of commercial interest.

Answer 143

Boxing promoter's identity was crucial to the contract and was a reason why the contract could not be assigned.

Answer 144

company paid a building contractor to remove asbestos from a building. The contractors breached the contract many times but the company sold the leasehold of the premises to Linden who had to spend money fixing the breaches. The company purported to assign it's rights under the building contract which contained a non-assignment clause. The court held that the non-assignment clause dealt with both rights to future performance and rights accruing because of breaches of contract. The purpose of the clause was to ensure that the obligor had contractual dealings only with the obligee, which was a legitimate aim to pursue. The parties could not have intended a confused state of affairs whereby the right to future performance was vested in the obligee and the right to pursue causes of action was vested in the assignee to whom this right has been assigned by the obligee. As such the non-assignment clause was valid and the assignment was invalid.

Answer 145

The debtor owed money to the plaintiff who had provided 2 computers by 2 separate contracts and a third on hire purchase. The plaintiffs thus owed the debtor monthly instalments. After the plaintiff failed to make some payments. Some creditors appointed a receiver over the plaintiff under the terms of a floating charge which had the effect of assigning the debt to the creditors. The debtor was notified promptly of this assignment. The creditors tried to claim the debt from the debtor but they tried to set it off against the payments missed by the plaintiff under the hire-purchase agreement (which was conceded by the receiver) and damages for repudiation of the hire purchase agreement (which had been accepted). The court held that they could not set off the £30,000 claim because it had arisen after the notice of assignment. Claims arising after the notice of assignment cannot be set off against the original debt.

Answer 146

Debt of £15,000 owed to the debtor was to be set off against a £100,000 debt owned by the debtor. There as no connection between the two sums and as such he was not allowed to set off the 15,000 against the debt.

Answer 147

Defences in contract that the original agreement is vitiated can be raised even after notice of assignment but they must be so closely related to the contract as it would be inequitable not to allow set off.

Answer 148

Claims for damages for deceit inducing the debtor into the contract cannot be claimed until the contract is rescinded

Answer 149

If the debtor has so many claims their value exceeds the value of the debt he can nullify the debt but can never recover from the assignee more than the assigned debt because the assignee has not actually done anything wrong.

Answer 150

The original contract between debtor and assignor may have a term in it which states that the assignee takes free of equities thus precluding any future claims by the debtor.

Answer 151

A liquidated debt is a money demand which can be readily and without difficulty ascertained.

Answer 152

S owned land and he wanted planning permission to develop it and he needed a soil report so he employed T to do that and planning permission was given. Land was sold to L and L started building on the land. There was a land slide as a result which caused damage to buildings up the hill. L claimed T had been negligent in the soil report so took an assignment from S for his bare right to litigate against T. However T claimed S, the assignor, would never have been able to recover anything given he received full price for the land so L could not recover anything either. Court held that you need to look at the damages the assignor would have been able to recover not the loss he suffered. The assignee is entitled to the damages the assignor would have gotten and no more – in other words he is entitled only to claim for those damages suffered in the original breach to the assignor, the breach for which the assignor has assigned his right of action. Linden Gardens v Linesta Sludge (1994).

Answer 153

A beneficiary assigned his interest to two different people. The trustees were not given notice. Later the beneficiary assigned it to a 3rd person, Hall. Hall enquired as to the trust which he was told was unencumbered so he gave notice to the trustees. Held that where two or more equitable assignees are competing for priority the first in time to give notice to the debtor will get priority provided all assignees are in good faith. What if one of the assignments is legal? Dr Odita claims the legal assignment will take priority every time. The couple of first instance decision indicate he might be wrong but the issue is debatable.

Answer 154

Rule in Dearle v Hall still applied even though one was a statutory assignment.

Answer 155

A pledge is where good are delivered to the pledgee as security for a loan.

Answer 156

Merchants raised a loan from the bank and gave as security, by way of pledge, the receipt which entitled the holder to take delivery of groundnuts on the train to Madras. The assignee, in whom the property had vested after the merchants became insolvent disputed the pledge. The PC held that under Indian law the pledges were valid but under English law they would not have been because neither actual nor constructive delivery had been provided to the bank. Had they given the goods to a bailee (attornment or bailment) who held on behalf of the bank it would have been valid under English law. As delivery is so crucial to the pledge it follows that only tangible goods can be pledged. You cannot pledge choses in action unless they are represented by a tangible object which can be so pledged.

Answer 157

Debtor pledged some shares as security for his debt by giving him the share certificates. These, being only evidence of title not the ability to claim the shares, could not pledged. The judge in fact held there was an equitable mortgage over the shares.

Answer 158

Bearer bonds can be pledged because they are unnamed and as such give the bearer the ability to claim the value of the bond.

Answer 159

There were two locks on the door of a warehouse containing goods purported to be pledged to the pledgee. The pledgee didn't have independent or ultimate access or control so the goods were held not to have been delivered. It was held that a pledge can be made by the pledgor contracts that he continues to hold the subject goods as baliee for the pledgee; this will be constructive delivery to the pledgee followed by a redelivery for the purpose of bailment.

Answer 160

A company, as security for the creditor giving more time for another debtor to pay back his loan, granted certain goods to the creditor locking them in a room with the only keys given to the creditor and it was said in the contract that he had the right to remove the goods from the room whenever. This was held to be a pledge not a charge, which would have been void for non-registration, because the creditor had the only access to the room and so this was a constructive delivery.

Answer 161

Pledgee had a key to a room containing property pledged to him. The pledgor also had access but this was held not to invalidate the constructive delivery (which would normally require exclusive control) because the pledgor only had limited access for a certain purpose (cleaning) which was acknowledge to be subject to the pledgee's permission.

Answer 162

A ship captain pledged his chronometer to Capper as security for a loan. They allowed him to have it back for a specific voyage but when he returned he pledge the same chronometer to another person. It was held that the re-delivery did not destroy the original pledge because it had been returned for a limited time and purpose.

Answer 163

However a pledgee that redelivers goods with the intention of divesting their special property in the goods then to be paid from proceeds of sale will lose his rights against a subsequent bonefide buyer or pledgee. In this case it was because of s.2 of the Factors Act so is limited to cases where the pledgor is a mercantile agent. To avoid this the first bank should make a note of their security interest on the bill of lading so that the second bank and never be bonefide.

Answer 164

Goods are not redelivered obtained by fraud

Answer 165

Pledgor deposited debentures as security for payment and then re-pledged the goods as security for a debt they owed. The pledgor tried to recover the goods but failed. The court held that the re-pledge was valid and was part of the bundle of rights the pledgee receives in the pledge document. If in the process of selling or re-pledging the goods the pledgee makes a profit, that profit is held on trust for the pledgee. The pledgee does not have the right of foreclosure (Carter v Wake (1877)) or in other words, the right to take the goods as his own should the pledgor fail to pay his debt. He only has the right to sell the goods and get his money back.

Answer 166

A lien is a right of one man to retain that which is in his possession belonging to another, till certain demands of him the person in possession are satisfied.

Answer 167

Owner of a horse stabled his horse with a trainer. Every weekend he would take the horse to races. The trainer attempted to retain the horse using a lien but the court held that you needed to be in continuous possession to exercise a lien and every weekend he had been re-delivering the horse and had thus lost his lien.

Answer 168

Employer exercised a contractual right to take goods against the will of some contractors and then claimed a lien over them. Held that the initial delivery must be voluntary. Where class of asset(s) is appropriated to the satisfaction of a debt.

Answer 169

The owner of a car contracted with a company to maintain his car. When he didn't pay his bill they exercised a lien over the car. The court held there could be no such lien. The repairer's lien was only available to people who improved the things in their possession not people who merely maintained them.

Answer 170

Farmer agreed to 'care for' herd of pigs and supervise the breeding of them. The owner then supplied boars for breeding but later went bust and wanted the pigs back. The farmer claimed a lien but was not allowed to maintain it because he wasn't improving the pigs (and even if you could claim that a pregnant pig is an improved pig it was not the farmer who had done it but the boars).

Answer 171

A lien altering the position at common law can be set up but it must arise out of the contract and there was no evidence that it did here.

Answer 172

Artus was using Tappenden's van; Artus gave the van to a garage when it broke down. Tappenden removed his permission for Artus to use the van. But when the garage refused to give the van back until they were paid. The lien was effective against Tappenden. The court held that Artus had implied actual authority because he'd been given the van to use it (bailment into his possession for use) and he as bailee has been given the authority to do what was reasonably incidental to his use. Incidental to use means anything necessary for its use.

Answer 173

Hirer had ostensible authority to give cabs in for repair despite terms in the contract preventing parting with possession and couldn't rely on those terms agains the repairers because they didn't know about the terms.

Answer 174

Innkeeper exercised a lien over a guest's horses and cart as security for debt he was owed. He wrongfully sold the goods which destroyed the lien and gave rise to a claim in conversion.

Answer 175

A mortgage is a conveyance of land or an assignment of chattels as security for a debt with the security redeemable on payment of the debt. The right to redeem is not a personal right but as equitable estate or interest in the property mortgaged.

Answer 176

Plaintiff lent money to a company to buy shares and bonds in a bank. The loan agreement required that the shares be held in a separate bank account until the money was paid back by sale of the shares. The court held that the contract, though being capable of creating a mortgage in equity being specifically enforcible and for value, was not clear enough to be able to infer an intention to mortgage the goods; the loan did not require the loan to be paid back from the proceeds of sale. Equitable charges are created when property is expressly or constructively made liable to the discharge of a debt and confers on the chargee a right of realisation by judicial process (appointment of a receiver). Nature of equitable mortgages explained.

Answer 177

A mortgagor was in debt and had granted to his creditors certificates for 390 shares with a share transfer form signed. The creditors later warned him they would have to sell the shares and eventually did so. The mortgagor sued in conversion but the court held that the mortgagees had reasonably used their implied right of sale.

Answer 178

Mortgagee is not under a general duty of care but when selling is under a duty to act in good faith and get the best price.

Answer 179

A floating charge is a charge that is ambulatory and shifting in nature hovering over the property subject to the charge until some event which causes the charge to crystallise on the property. The property subject to a floating charge may be dealt with without the permission of the chargee and may be exchanged for other property.

Answer 180

A company had given security over it's book debts to it's bank on terms that purported to give a fixed charge over the book debts while they remained uncollected and a floating charge after thy had been collected. The terms left the company free to collect the book debts and use them as they liked. The council held that in deciding if something is a fixed or floating charge you have to consider how the companies characterised it and whether that was consistent with the law. Here the fixed charge over book debts, as characterised by the parties, was inconsistent with the nature of a fixed charge because the company should not be free to deal with such charged property without the chargee's permission even to collect the book debts. It is the inchoate nature of a floating charge until a future event which crystallises the charge which is the characterising element.

Answer 181

The company (SP) opened an account with NatWest with an overdraft of 250,000 with security in the form of a debenture. It included a fixed charge of all book debts present and future and a floating charge over all it's assets and rights now and future including the book debts under the specific charge should that charge fail. Another term said that the company would ensure the book debts pay into the account with NW and it would not deal with the money without the banks permission. The company went into liquidation later. If the fixed charge held then the bank would get all of their value, if it was not other preferential creditors would be entitled to them. Held that the wording of the fixed charge was sufficient to make it a fixed charge because of the limitation on the company not to deal with the goods without permission.

Answer 182

A company supplied aluminium to Romalpa in England on standard terms. Romalpa went into receivership owing AIV money and in possession of unprocessed aluminium foil. It was held that AIV had a better claim than the receiver to the foil because they had retained title through a clause in their contract and it was held that AIV was entitled to the proceeds of sale because of the doctrine of tracing and Re Hallet's Estate (1880). If you can trace there must be a fiduciary relationship which is hard to see here. Only in FG Wilson v Holt (2013) did the court find another case of fiduciary relationships.

Answer 183

A company supplied fibre to make carpets and the contract purported to allow the seller to retain beneficial ownership. The court held that in a retention clause general property remains with the seller and only special property passes to the buyer however in this case the rights of the seller were substantial and significantly more than one with special property and so the retention clause was ineffective and instead a floating charge had been created which was void for non-registration. Distinguished from a mortgage because the latter recreates, as per LPA 1925, the right the mortgagor would have had if title was conveyed. A charge is a mere encumbrance on a property and thus the remedies such as possession and foreclosure are not allowed.

Answer 184

Goods must be unaltered. Any part of the goods which have been changed or altered they cannot be identified as the claimant's property.

Answer 185

Supplied diesel engines only needed to be unscrewed from the generators they were in to be recognisable as the goods sold. Where the manufacturing process is as easily reversible as this the goods can still be claimed. However in this case some of the generators were in a deliverable state and as such property passed as per rule 1 of s.18.

Answer 186

In the absence of a fiduciary relationship the proceeds of sale will not be available to the seller. In Romalpa they were but the fiduciary relationship is hard to see. One was found here however where the contract described the buyer as a fiduciary and said specifically he would account for the proceeds of sale.

Answer 187

Agent → Principal relationships will always be consensual but don't have to be contractual. It does not require payment.

Answer 188

Principal wrote to the agent and asked him to ship 500 tons of sugar. The agent shipping 400 and was intending to send the rest in another ship. The principal rejected the delivery. It was held he was bound to take delivery. Where a principal's words are vague or omit something and where the agent acts on one interpretation of those words in good faith the principal cannot repudiate the act.

Answer 189

A chairman of the company was also, to the knowledge of the board, the de facto managing director. He purported to guarantee a loan with company money made to a subsidiary of the company. The subsidiary consequently became insolvent and the lender sought to recover the loan from the company on the basis that it had guaranteed it. The court held he could because although the chairman had no express authority he did have authority which could be implied from his conduct as de facto MD thus the company was bound.

Answer 190

2 people formed a company to buy and resell a large estate. Both were directors but neither was appointed MD. When one entered into a contract with architects When the architects claimed their fees the issue arose as to whether the director had the power to bind the company. It was held he did, he had apparent authority. The judge set out 4 requirements for a company to be estopped from denying they are bound by an agent without actual authority: A representation was made by the company to the contractor That representation was made by someone with actual authority to manage the company The contractor was induced by this representation to enter into the contract That the contract was not ultra vires the company.

Answer 191

Principal owned a bank and hired an employee, the employee took money off customers and the principle was bound by the employee's actions because he employed the man and gave the impression that the agent had authority to take payment for him.

Answer 192

A former agent had the apparent authority to bind the principal because a course of dealing had become an implied representation that the agent had authority.

Answer 193

'It is trite law that an agent cannot ordinarily confer ostensible authority on himself'.

Answer 194

The bank had 2 offices in the UK – in London and Manchester. The manager in Manchester did not have the authority to give out loans on his own. He needed another manager to co-sign and the claimant company knew this. The manager told a customer that the loan had been granted by head office but it hadn't. The bank was held to be bound by the manager's statement because he had usual apparent authority to convey that information. The court said that we need to look at the reasonable expectations of the 3rd party. It was not reasonable for the 3rd party to check with head office.

Answer 195

A purchaser at an auction argued the auctioneer was the agent of the seller and as such should be bound by a misrepresentation. It was held this was not so because before the sale the purchaser had been in possession of the brochure where is said explicitly that the auctioneer was not the agent of the seller so the purchaser could not have relied on this.

Answer 196

'If a person dealing with an agent knows that the agent does not have actual authority to conclude the contract...in question the person cannot rely on apparent authority' also 'If a person dealing with an agent knows or has reason to believe the contract or transaction is contrary to the commercial interests of the agent's principal, it is very difficult for the person to assert...that he believed the agent did have actual authority'

Answer 197

A director's undertakings on behalf of his company to pay off another unconnected company's debt was held not to bind the company because it was clearly not in the company's interests.

Answer 198

'The only detriment that has to be shown...is the entering into the contract.'

Answer 199

Wife contracted to sell her husband's house and the husband had not held her out to be able to sell the house. However once the husband knew the wife had done this he stayed silent even though he saw the 3rd party spending money on the house. Held that the subsequent silence meant that the husband was bound. Buckley LJ: B is under a duty to disclose the non-existence of the supposed obligation to A who thinks it exists.

Answer 200

A man called Humble owned a hotel. H sold the hotel to Fenwich and F retained H as manager of the hotel. Over the door of the hotel H's name still appeared as licencee. Watteau contracted to supply cigars to H for the hotel thinking H was still the owner. F had actually banned H from buying cigars on credit. Held that the principal is liable for acts within the usual authority of an agent. It's never been overruled but it's been disapproved of in Canada.

Answer 201

Man leased a Canon printer after assurances it would work well. It did not and rejected it and refused to pay rent. The lease agreement though titled as Canon said tiny writing he was actually dealing with LMS, unconnected with Canon. Canon could not said to be LMS's agent because there had been not representation by LMS to the buyer regarding the agency, necessary for apparent authority. The court accepted this but nonetheless held that the contract seemed on the face of it to be between Canon and Purnell thus LMS had held out Canon to be one and the same as themselves. Tettenborn wrote that this case and Wattaeu v Fenwick are decided on the same principles even if the latter is not mentioned in the former.

Answer 202

Ratification is as good as antecedent authority.

Answer 203

Agreements made between players and head coach were held to be ratified by the club by letting the players continue to play.

Answer 204

To ratify the principal must have full knowledge of the agent's conduct.

Answer 205

The principal may be taken to have ratified if he takes a risk as to how it will turn out despite not having full knowledge.

Answer 206

There must be a manifest intention of approval. Silence is not enough to ratify.

Answer 207

An agent contracting for himself without disclosing his principal cannot be said to bind the principal even after ratification.

Answer 208

Lambert made an offer to an agent of Bolton Partners to lease certain properties. The agent accepted which was beyond his authority but before ratification could occur the offer was rejected. Ratification had the effect of putting all parties into the position they would have been in if the agent had had authority the whole meaning the acceptance of the offer here was retrospectively valid. Bolton Partners were granted specific performance.

Answer 209

Must take place within a reasonable time.

Answer 210

The rule will not apply if the offer is made subject to ratification.

Answer 211

Principal will not be able to sue for breaches of contract that occur before ratification even though the party are put back as if the contract had been valid all along. Not easy to reconcile with B v L.

Answer 212

Montgomerie v UK Mutual Steamship Association (1891) – Montgomerie was the part owner of a steamship which he insured with the defendant association. The insurance was effected by a company which acted as his agent and their name was on the policy. When Montgomerie sued them under the policy they claimed they only had liability to the association as they were the ones on the contract. The court held they were right, Montgomerie in this case was an undisclosed principal but the general rule applies to disclosed principals. 'Where a person contracts as an agent for a principal the contract is the contract of the principal, and not that of the agent; and prima facie, at common law the only person who may sue is the principal, and the only person that can be sued is the principal'. An agent is not liable for or able to enforce a contract he has made on behalf of his agent.

Answer 213

Waston employed an agent to buy oil for them from Watson. The agent told them he was buying for the principal without revealing their name. The oil was delivered and the principal paid the agent in good faith who did not then pay the third party. Held that where the seller has made some representations that the principal will be discharged should he pay the agent then when such payment is made the seller is estopped from suing the principal.

Answer 214

Shipping agents insured in their own names the employers of the crew of as ship against liability as agent for the employers themselves. The insurer knew they did not own the boat but it was conceivable that they could have hired the crew rather than the owner. Hence the court held that while it was unusual for this to happen they could not be said to have known they were acting for another person. It was held the owners would have been able to intervene as undisclosed principals.

Answer 215

A son chartered a vessel owed by his mother but signed the charterparty as himself and described himself as the owner. It was held that the mother could not enforce the contract as an undisclosed principal and true owner because she was excluded by the description of the son as the owner. Where terms are vague the courts tend to side with the principal.

Answer 216

They entered into the R&D contract because they liked the person they were dealing with. They claimed that they were not bound because without the previous successful work of the agent they would never have entered into the contract. They meant to deal with the agent as they had previously and with them alone.

Answer 217

Theatre owners did not like Said and they didn't want him to come because he was a reviewer. He got his friend to act as his agent and buy a ticket for him. When he turned up on the night he was prevented from entering. It was held that the theatre was not bound by the contract because the negative attributes of the claimant meant he was excluded from intervening in the contract between his friend and the 3rd party.

Answer 218

Dyster knew Randall wouldn't sell land to him so he got his friend to buy it instead. Said was distinguished as a case in which personality was important. The friend had a right to sell the land on to whomever he liked. If personality is not an issue then the UP can intervene. See: Siu Yin Kwan case where the principal was able to intervene in the case enabling relatives of dead sailors to claim on the insurance provided.

Answer 219

Generally it seems that an undisclosed principal will avoid liability if he settles with the agent. This case has been subject to a lot of criticism however allowing the third party too much freedom.

Answer 220

Agent signed with his own name but there was a term describing him as an agent so he was saved.

Answer 221

Boat repairs claimed for the cost of boat repairs. The owners had hired the boat to his company and acted as agent for his company in procuring repairs through oral agreements and written contracts. The repairers wanted to make the owner personally liable not his company. Held that as he was the owner and never made it clear that the repairs would be for the company not him it was reasonable to assume he was contacting personally. He signed with his own name with the tag (Director). This was not enough to indicate agency.

Answer 222

The agent will be entitled to sue on the contract if that is clearly the intention of the parties.

Answer 223

An agent may be personally liable or entitled if that is the usual course of business either between the parties.

Answer 224

As above where there is a UP the agent may sue and be sued.

Answer 225

An agent contracted to sell goods to the third party. The third party realised he was his own principal but affirmed the contract by conduct. They were later sued for non-acceptance and the suit was upheld because it was held the identity of the principal was immaterial to the third party clearly as they affirmed the contract.

Answer 226

Enters into contract to charter a ship and revealed himself as the principal but here the identity was material because the P would be in charge of valuable freight.

Answer 227

Debenhams sued to get the return of items of clothing. They succeeded then went after the husband of the buyer for the purchase price claiming the wife was his agent. The court held that having gone after the wife they had elected her and thus had relinquished their claim against the husband, her principal.

Answer 228

Merely starting proceeding is not enough for an election.

Answer 229

Solicitor incurs costs while acting on behalf of a client. The solicitor did not know the client had been declared insane and thus the agency relationship was terminated. He was held to be in breach of his warranty of authority when he began proceedings after the principal had been declared insane.

Commercial Law Flashcards

(253 cards)