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Flashcards in Damages for non-delivery Deck (11):

Sale of Goods Act 1979, s.51

(1) Where the seller wrongfully neglects or refuses to deliver the goods (or documents) to the buyer, the buyer may maintain an action against the seller for damages for non-delivery.

(2)The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the seller’s breach of contract [Hadley v Baxendale principles]

(3)Where there is an AVAILABLE MARKET for the goods in question the measure of damages is PRIMA FACIE to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered or (if no time was fixed) at the time of the refusal to deliver.

[= MARKET PRICE RULE – a straight difference between what the buyer had to pay under the contract, and what he now has to pay as a result of an upward market movement]
(Whereas, if market has gone down, damages will be ZERO as buyer hasn't lost anything, and will actually be thankful as can now get them for a cheaper price than he first contracted for!


Tai Hing Cotton Mill v Kamsing Knitting Mill [1979]

Q: at what date is the 'market price' assessed, for the purpose of s.51 (3) SOGA?
- Commodities always flucuating, so crucial question.
- Normally price assessed 'at time when they ought to have been delivered', under s.51 (3)
- But what if contract repudiated well before that date, or there was no fixed date?
- No fixed answer to this question.

Here, contract had no fixed delivery date.
Seller told buyer he wasn't going to deliver; repudiated in June - but buyer didn't accept the repudiation as was hopeful seller would change his mind.
By November, finally gave up and accepted the repudiation.
Q: on what day should the court assess the market price, when assessing damages?

Court said that buyer acted reasonably in leaving the contract open until November – normally, court would expect buyer to give the seller notice when they had one more month left until he went to the market – so this would’ve been December.
Held; therefore, they would assess the market price as it was in DECEMBER – as that’s when the buyer could be reasonably expected to go to the market and get a substitute.


Kaines (UK) Ltd v Osterreichische Warrenhandelsgessellschaft [1993] 2 Lloyds Rep 1

600,000 barrels of crude oil for delivery in September.
Sellers repudiated; repudiation accepted by the buyers on the 18th June.
On 18th June, the market price for oil was higher than the contract price - but after that, soon fell to a price lower than contract price.
By the time buyer bought oil from an alternative source, on 29th June, the market price had risen again and was 75 cents per barrel higher than contract price.

Buyer tried to claim that that was the market price (the price they actually bought it at from the new seller) - wanted damages for the difference.

Held; this is a volatile market, and the buyer is under a duty to mitigate his losses - would have been reasonable for the buyer to go into the market quickly – the day after repudiation was accepted, the 19 June - so assessed the market price at that date (19 June)

Accordingly, the approach the court applied is WHEN IS A REASONABLE TIME TO GO TO MARKET?
Wouldn’t matter if the price had gone up more on the 19th June if the court thought that would have been the reasonable time to go to the market.

Thus, buyer can speculate at try and wait for market to reach lowest level before finding alternate source, but does so at own risk. If market goes up again and he's missed the chance to buy at low price, that's down to his own action - not the default of the seller.
Slightly different to Tai Hing Cotton Mill v Kamsing Knitting Mill.


C Sharpe & Co Ltd v Nosawa & Co [1917]

Failure to deliver DOCUMENTS also gives rise to right to damages
Q: is the market price for the goods assessed at the date the DOCUMENTS should have been delivered, or the date the GOODS should have been delievered?

Held; you assess the market price on the day the DOCUMENTS should have been delivered.

Rationale: once the buyer has the documents, he has control of the goods.
Thus doesn’t have to wait for the goods not to arrive before he goes into the market.
Can go to the market as soon as the seller fails to deliver the documents.

So as soon as the buyer knows he’s not getting the documents, that’s when he should go and source them elsewhere in the market.


The Mary Nour [2007]

S.51 (3) ONLY applies where there is an ‘AVAILABLE MARKET’ - buyer should only be able to get difference to market price as damages if the goods in question are generally available to buy from an alternate source, at the place of delivery to the buyer.

Here, import of cement, FOB, 'The Mary Nour', Padang, Indonesia - buyer trying to break local cement cartel.

Seller failed to load goods, but because every other seller was afraid of this cartel, the buyer couldn’t get an alternative source of supply in Asia.
So te buyer had to source alternative supply from Russia - cost a lot more.
When buyer sued for original loss, seller argued there was no loss as was available market in Padganf for cement which buyer could, theoretically, have got.

Held; NO - selller's argument was incorrect.
Held; here, the obligation under this FOB contract was to ship goods on ‘The Mary Nour’ – there was no other available source of supply that could be shipped on ‘The Mary Nour’, because no other Asian seller was willing to do it.
This was an important part of the contract.
The available market, therefore, was Russia – and the buyer was thereby entitled to get damages for the extra expenses of shipping from that market.


Air Studios v Lombard North Central [2012]

An ‘available market’ requires the goods in question to be fungible or generic goods – goods that are easily substitutable for one another.
WHEREAS, if the goods are more specialised or bespoke, then that affects whether there is an ‘available market’ for those goods.
The more specialised, the less likely there is an available market, for the purpose of s.53 (1).

However, here, held; if there is a market for something BROADLY SIMILAR to the goods being sourced, that will suffice as an ‘available market’ – need not be exactly the same – just so long as it shares same features of the goods.


Williams v Agius [1914]

- Big issue that arises - s.51 (3) market price rule is only a 'PRIMA FACIE' rule - thus, courts can substitute a different rule, if it will better compensate a buyer.
- Buyer will often want damages that reflect the RESALE price they would have gone under a subsequent re-sale agreement they had in place for the goods - this may be more than the market price on the relevant day - often will be higher as buyer will normally be making a profit.

E.G. if contract price £50 per tonne, the market price when delivery should be made is £60, but the buyer’s resale price is £70; if seller has not delivered, and so that buyer has not been able to fulfil that onward sale, should the buyer be able to get that resale price, in the assessment of damages?

Here - authority for GENERAL RULE - answer is NO
Here, contract for coal; 16 shillings per tonne.
Buyer had contracted to sell it on to a sub-buyer for 19 shillings per tonne.
Seller failed to deliver the coal.
At the date delivery should have been, market price was 23 shillings per tonne.
Seller argued that buyer's damages were limited to the resale price only; 19 shillings per tonne.
Buyer argued no - 51 (3) says MARKET PRICE RULE.

H of L HELD; for buyer.
Held; damages should be assessed by reference to the market price on the day goods should have been delivered – ignored the resale price.
Reasoning: in order to actually now fulfil that onward sale contract, the buyer would have to go into the market at the higher price of 23 shillings per tonne, and then sell them to his sub-buyer at a loss (19 shillings per tonne).


R H Hall Ltd v W H Pim & Co [1928]

there are exceptions to the rule in Williams v Agius.

Authority: If the sub-sale is in the contemplation of the seller, then the buyer may be able to recover the resale price.

Here, the buyer was able to recover their resale price – wasn’t limited to the market price - but there are special features of this case which distinguish it.
- Firstly, seller was aware that the buyer wan’t buying goods for use, that he was going to sell them on.
- But the more important consideration here was that the buyer had bought a specific cargo of corn, from a specific ship, and THIS is what he had sold to his sub-buyer.
- Seller was aware of the specificty of the onward sale.
- Once the seller had failed to deliver, it wasn’t the case that the buyer could easily subsitute another cargo for it.
Thus the damages were assessed on the basis of the resale price – the lost profit – because the buyer wasn’t able to source the goods in the market – you cannot substitute something that’s specific.


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

Said that, notwithstanding that there are the odd authroties which say that resale price can be taken into account, this is not enough to oust the GENERAL RULE – the market price rule (William v Agius), when the goods are easily substituable.

Thus, the exception to the market price rule will only operate where there are special considerations – e.g. when the goods are specialised, or it is a one-off product that the seller is supplying (e.g. artwork).

But stuff like commodities are fungible and interchangeable, and accordingly, the market price rule applies.


Contigroup Companies Inc v Glencore AG [2004]

Authority: the compensation that the buyer pays to his sub-buyer for failing to deliver the goods to *him* may be recoverable from the SELLER, providing not too remote.


Commercial Analysis of Market Price Rule

- It doesn’t actually matter if the buyer doesn’t buy a substitute set of goods – even if the seller fails to deliver, the buyer can still get the difference between the contract price and the market price even if he doesn’t actually go on to buy those goods.

- In commodities and documents trading, it’s all about making the profit rather than utilising the goods themselves – all about speculating in prices.

Thus the market price rule helps to keep things flowing – everyone just knows that if they don’t deliver the goods, the buyer just gets the market price