Seller's Remedies
Effect of sub-sales by the buyer on the seller's rights: s. 47 SOGA
(1)Subject to this Act, the unpaid seller's right of lien or retention or stoppage in transit is not affected by any sale or other disposition of the goods which the buyer may have made, unless the seller has assented to it. (2)Where a document of title to goods has been lawfully transferred to any person as buyer or owner of the goods, and that person transfers the document to a person who take it in good faith and for valuable consideration, then— (a)if the last-mentioned transfer was by way of sale the unpaid seller's right of lien or retention or stoppage in transit is defeated; and (b)if the last-mentioned transfer was made by way of pledge or other disposition for value, the unpaid seller's right of lien or retention or stoppage in transit can only be exercised subject to the rights of the transferee. • It can be seen from section 47[1]that the unpaid sellers right of lien, is not affected by the sale or other disposition of the goods which the buyer may have made, unless the seller has assented to it. • It should be appreciated from section 47[2]that two different transfers are needed in order for the subsection to apply; first, the transfer of the documents of title to a person as buyer or owner of the goods, and second that person must then transfer the same document of title to another person in the circumstances stated in the subsection. • Cases discussing what amounts to a 'assent': • Mordaunt v British Oil and Cake Mills [1910] Buyer hadn't paid had sub sold good and informed seller of this after the sub sale does this effect right of lien of the seller? Right of lien not waived as they only knew of it after the sub sale. IT IS CRUICAL WHEN THE SELLER KNOWS OF THE SUB SALE AS COMMUNICATION WAS AFTER THE SUB SALE CON IT WAS STILL ENFORCAEBALE • D & F Mount-v-Jay & Jay [1960] The buyer provided a sub-buyer with the delivery order, which was different to the delivery order transferred by the seller. Judge: s. 47 did not apply because of the difference in the delivery orders. However, the seller lost the lien because he knew about the sub-sale in advance and had agreed to it (waiver of the lien)
How stoppage in transit is effected (s. 46 SOGA)
(1)The unpaid seller may exercise his right of stoppage in transit either by taking actual possession of the goods or by giving notice of his claim to the carrier or other bailee or custodier in whose possession the goods are. (2)The notice may be given either to the person in actual possession of the goods or to his principal. (3)If given to the principal, the notice is ineffective unless given at such time and under such circumstances that the principal, by the exercise of reasonable diligence, may communicate it to his servant or agent in time to prevent a delivery to the buyer. (4)When notice of stoppage in transit is given by the seller to the carrier or other bailee or custodier in possession of the goods, he must re-deliver the goods to, or according to the directions of, the seller; and the expenses of the re-delivery must be borne by the seller.
A. Personal remedies I. Action for the price (s. 49 SOGA)
(1)Where, under a contract of sale, the property in the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against him for the price of the goods. (2)Where, under a contract of sale, the price is payable on a day certain irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price, although the property in the goods has not passed and the goods have not been appropriated to the contract. Two Conditions: • The buyer has wrongfully refused or neglected to pay (e.g. if the seller gives the buyer a credit (allows them to pay later) then the buyer will be allowed to refuse to pay until the credit has expired) • The property has passed to the buyer or the price is payable on a day certain irrespective of delivery (e.g. if contract stipulates a day for price to be paid, then seller can claim even if delivery has not occurred ) • Section 49[2]sets out the rather exceptional situation where the seller may sue for the price for the property, before goods has passed to the buyer and the goods have not been appropriate to the contract. It applies in cases where the parties have agreed that payment is made upon the occurrence of a specific events rather than a particular date. • Where the contract provides that the prices to be paid in instalments each payable on a certain day, the seller may bring a claim in respect of each instalment as it falls due for payment. • Section 49[2] does not cover the situation where the price is payable upon delivery of the goods even if the parties have agreed a date for delivery. In such cases the sellers will only have a claim in damages for the non-acceptance of the goods under section 50, and will not to be entitled to the price. Even in cases where delivery has occurred before the 'day certain' the seller will not be entitled to claim payment until the day certain arrives.
Seller's power to pass good title on resale: s. 48
(3)Where the goods are of a perishable nature, or where the unpaid seller gives notice to the buyer of his intention to re-sell, and the buyer does not within a reasonable time pay or tender the price, the unpaid seller may re-sell the goods and recover from the original buyer damages for any loss occasioned by his breach of contract. (4)Where the seller expressly reserves the right of re-sale in case the buyer should make default, and on the buyer making default re-sells the goods, the original contract of sale is rescinded but without prejudice to any claim the seller may have for damages. Ward v Bignall [1967] CA (principle - (if seller applies for resale property returns to seller and s can't sue for price) Contract of sale: 2 cars for £850 B pays deposit £25, but after didn't pay the balance, and then did not accept delivery of the cars S re-sold one car 350, couldn't sell the other one, so he brought a claim against the B for the balance of the purchase price £475 and advertising expenses 22.10 The court held that he didn't have the right to ask for the repayment of the good, only the right to damages, as by giving notice that he wanted to re-sell the good the property went back to the seller, so he could only claim damages for the non-acceptance of delivery. Damages remaining car worth 450 S's loss on the resale was 850 - (450+350)=50 50 - 25(deposit)+ 22.10 = 47.10 damages
Unpaid seller's rights (s. 39 SOGA)
(Three types of real remedies) (1)Subject to this and any other Act, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law— (a) a lien on the goods or right to retain them for the price while he is in possession of them; (b)in case of the insolvency of the buyer, a right of stopping the goods in transit after he has parted with the possession of them; (c)a right of re-sale as limited by this Act. (resale means that the seller sells the good to buyer 1 and then realises that when he isn't going to pay, he can resell the good to buyer 2 even though property has passed. Conversely sub-sale is when the seller sells to B1 and then B1 resells to B2.) (2)Where the property in goods has not passed to the buyer, the unpaid seller has (in addition to his other remedies) a right of withholding delivery similar to and co-extensive with his rights of lien or retention and stoppage in transit where the property has passed to the buyer. ➢ For real remedies the property has passed but the possession has not
II. Damages for non-acceptance (s. 50 SOGA)
(less convenient for the seller normally gets smaller amount in damages than price and he has to prove a loss and has to mitigate loss and find another buyer) (1)Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against him for damages for non-acceptance. (2)The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer's breach of contract. (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 at the time or times when the goods ought to have been accepted or (if no time was fixed for acceptance) at the time of the refusal to accept. In exam not quantifying damages just state remedy available
The Seller will lose lien if:
1) S ceases to be unpaid 2) Termination of lien (s. 43 SOGA) (1)The unpaid seller of goods loses his lien or right of retention in respect of them— (a)when he delivers the goods to a carrier or other bailee or custodier for the purpose of transmission to the buyer without reserving the right of disposal of the goods; [seller may still be able to exercises his right of stoppage in transit under section 44 and thereby recover the contract goods] (b)when the buyer or his agent lawfully obtains possession of the goods; [has to be lwful] (c)by waiver of the lien or right of retention. 3) An innocent third party acquires title under an exception to the nemo dat rule (e.g. if the buyer has unlawfully obtained possession) • Innocent third-party sub buyer will acquire good title to the goods unfettered by the unpaid sellers lien. The innocent third-party Will then be in a position to require the unpaid seller to hand possession of the goods to him, leaving the unpaid seller to pursue a personal remedy against his buyer.
The seller has two sets of remedies:
A) personal remedies I) for the price II) for damages for non acceptance III) for damages for refusal of delivery B) real remedies I) Lien/right of retention II) Stoppage in transit III) Right of resale • Difference: • Personal remedy is a remedy the seller makes against the buyer personally, can be for price, damages, non acceptance or refusal. • Real remedy is where the seller makes an action in order to keep the good e.g. the lien or right to resale. In the case of insolvency the seller will apply the real remedy as this is the only way to get money.
Meaning of "unpaid seller
Benjamin considers that a seller will be "unpaid" if the whole of the price has not in fact been paid or tendered despite the fact that payment may not yet be due under the contract, e.g. because the seller has sold the goods on credit. Whilst the buyer remains solvent, the seller cannot exercise his right of lien over the goods during the credit period. Once the buyer becomes insolvent, however, the seller can exercise his right of lien if he still has possession of the goods, or stoppage in transit, if they are in transit to the buyer. The fact that payment is not yet due does not prevent the exercise of those remedies during the credit period once the buyer becomes insolvent.
Why do sellers not simply create charges?
If the seller has actual or constructive notice of this term (which under the rules of company law...he almost certainly will have) any attempt on his part to create a prior charge is doomed to fail. And so he will at all cost avoid making any concession that the contract of sale involves a charge. And in so doing he falls into a second trap; for if the court does hold that there is a charge, it will be void because it has not been registered under the Companies Act."
Retention of title clauses
Possession passes but title doesn't until payment is made • Aluminium Industrie v Romalpa Aluminium Ltd [1976] ➢ Facts: contract for delivery of aluminum. It stated that the ownership of the foil would be transferred to the buyer only when B had fully paid. ➢ Retention title clauses can be called Romalapa clauses Fact sheet for Romalpa Seller -------- ROT clause ------> Buyer --------> Sub-buyer Bailor --------- Fiduciary -------> Bailee Principal ------Fiduciary -------> Agent The seller's terms and conditions of sale provided that: • The ownership of the foil would be transferred to the buyers (B) only when B had paid the sellers (S) all the amounts B owed S • B was required to store S's foil in such a way that it could be identified as belonging to S • If B used S's foil to manufacture articles, the ownership of those articles was to be transferred to S as security for the payment of B's debts to S Until payment by B of its debts to S, B was to hold any articles manufactured out of S's foil as S's fiduciary, and to store them in such a way that they could be identified as belonging to S • B was entitled to resell articles manufactured out of S's foil to third parties, but until payment by B of its debts to S, B was to transfer to S any claims which B had against such third parties • Buyer became insolvent and so could the seller repossess his goods? To claim the proceeds that the buyer had got by manufacturing the aluminum ? Court said seller could because the buyer was in a fiduciary relationship with the seller, he was the seller's agent, so seller had the right to get payments that buyer had received, before other creditors. Extract from Romalpa judgment It seems to me clear that to give effect to what I regard as the obvious purpose of clause 13 one must imply into the first part of the clause not only the power to sell but also the obligation to account in accordance with the normal fiduciary relationship of principal and agent, bailor and bailee. Accordingly I think the (sellers) are entitled to trace these proceeds of sale and to recover them." Per Roskill L.J
Attempts to claim title to manufactured products (so raw material has been changed)
Re Bond Worth acrilan fibre was supplied for spinning, dyeing and weaving into carpets. The carpets were treated as a new species "In my judgment, any contract which, by way of security for the payment of a debt, confers an interest in property defeasible...upon payment of the debt or appropriates property for the discharge of the debt, must necessarily be regarded as creating a mortgage or charge as the case may be." Per Slade J • Re Peachdart [1984] (contract for leather under retention of title clause, buyer produced hand bags, could seller recover? Court stated that good has changed significantly so become new product, so goods could not be easily repossessed by seller, unless charge has been placed on the goods. • Borden (UK) Ltd v Scottish Timber Products Ltd [1981] resin supplied and combined with wood chips to make chipboard lost its identity in the process. Modelboard Ltd v Outer Box Ltd [1993] cardboard sheets had been made into boxes and printed. It was held that by processing the original board, the boxes were no longer "the goods" to which title had been retained, and the seller's title to the board had disappeared. The seller's claim to the boxes was therefore created simply by way of security, and being unregistered was void
Right of stoppage in transit: s. 44-46 SOGA
S delivered goods to carrier so he loses right of possession but can stop in transit Right of stoppage in transit (s. 44 SOGA) Subject to this Act, when the buyer of goods becomes insolvent the unpaid seller who has parted with the possession of the goods has the right of stopping them in transit, that is to say, he may resume possession of the goods as long as they are in course of transit, and may retain them until payment or tender of the price. Conditions: • Unpaid seller • Insolvent buyer • Goods are in course of transit (when they have been delivered to an independent middleman can't be a buyers agent) ➢ Has to be independent middleman , cannot be agent of the buyer as then possession is the buyers
Exceptions to nemo dat
S. 24 SOGA: Seller in possession after sale. Where a person having sold goods continues or is in possession of the goods, or of the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title under any sale, pledge, or other disposition thereof, to any person receiving the same in good faith and without notice of the previous sale, has the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same. S. 48 (2) SOGA (2)Where an unpaid seller who has exercised his right of lien or retention or stoppage in transit re-sells the goods, the buyer acquires a good title to them as against the original buyer. Conditions: • Unpaid seller • Lien or stoppage in transit • Resale of goods Remedies are finished, but another way to protect seller:
III. Buyer's liability for not taking delivery of goods
S. 37 SOGA (1)When the seller is ready and willing to deliver the goods, and requests the buyer to take delivery, and the buyer does not within a reasonable time after such request take delivery of the goods, he is liable to the seller for any loss occasioned by his neglect or refusal to take delivery, and also for a reasonable charge for the care and custody of the goods. ➢ seller can claim compensation for refusal of delivery within a reasonable time (e.g. if the goods have perished) normally time is not the essence in this case it's a reasonable time^^^^ this is not the same as a buyer refusing to take delivery of goods refusing to take delivery of goods may signify an intention to reject but is not conclusive
Summary of Lord Diplock's explanation of section 48(3) in Ward v Bignall
The purpose of section 48(3) was to make time for payment of the essence whenever the goods were of a perishable nature and to enable a seller of non-perishable goods to make time of the essence by the service of a notice requiring payment within a reasonable time. If, in the case of perishable goods, the buyer fails to pay by the payment date, and in the case of non-perishable goods, by the time specified in the notice, the seller is entitled to treat the contract as repudiated by the buyer, and by reselling the goods effectively terminates the contract. If the property in the goods has already passed to the buyer, it revests in the seller, enabling him to sell as owner. The original buyer is relieved of his obligation to pay the price, but is under an obligation to pay damages to the seller to compensate him for any loss he may have suffered on the resale.
Real remedies (remedies against the goods)
Unpaid seller defined (s. 38(1) SOGA) (1)The seller of goods is an unpaid seller (...): (a)when the whole of the price has not been paid or tendered; (b)when a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise. • e.g.: unpaid seller: a seller who has received a check (bill of exchange) which is later dishonoured
Lien/right of retention (41, 43, 47(2) SOGA)
Unpaid seller's lien: s. 41 (1)Subject to this Act, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases:— (seller needs to be in possession, and he has the right to retain until payment) (a)where the goods have been sold without any stipulation as to credit; (b)where the goods have been sold on credit but the term of credit has expired; (c)where the buyer becomes insolvent. (2)The seller may exercise his lien or right of retention notwithstanding that he is in possession of the goods as agent or bailee or custodier for the buyer. Meaning of "insolvent": section 61(4) SOGA A person is deemed to be insolvent within the meaning of this Act if he has either ceased to pay his debts in the ordinary course of business or he cannot pay his debts as they become due,(...). • Only a lien if the property in the goods has already passed to the buyer, where as, if the property in the goods is still with the seller it is a right of retention • The effect of section 41[1][b]is that the seller is not entitled to retain possession of the goods during the term of credit, although where the credit has been granted it is usual for delivery to be made before payment becomes due. • Section 41 [1][c]is an important exception to the rule and [b] means that notwithstanding the fact that credit has been granted to the buyer, if the buyer becomes insolvent, the seller will have lien provided he is not relinquish possession of the goods. [c] Can only be invoked if the buyers insolvent, it will not be sufficient that the buyers merely failed to pay.
Part delivery: s. 42
Where an unpaid seller has made part delivery of the goods, he may exercise his lien or right of retention on the remainder, unless such part delivery has been made under such circumstances as to show an agreement to waive the lien or right of retention.
Duration of transit (s. 45 SOGA)
• (1)Goods are deemed to be in course of transit from the time when they are delivered to a carrier or other bailee or custodier for the purpose of transmission to the buyer, until the buyer or his agent in that behalf takes delivery of them from the carrier or other bailee or custodier. • (2)If the buyer or his agent in that behalf obtains delivery of the goods before their arrival at the appointed destination, the transit is at an end. • (3)If, after the arrival of the goods at the appointed destination, the carrier or other bailee or custodier acknowledges to the buyer or his agent that he holds the goods on his behalf and continues in possession of them as bailee or custodier for the buyer or his agent, the transit is at an end, and it is immaterial that a further destination for the goods may have been indicated by the buyer. (...) • (6)Where the carrier or other bailee or custodier wrongfully refuses to deliver the goods to the buyer or his agent in that behalf, the transit is deemed to be at an end. ➢ goods have to be delivered to an independent middleman
Seller Attempts to retain title to the goods themselves
• Clough Mill Ltd v Martin [1985] (if the goods remain identifiable (original state -separate from other goods) then situation is clear and the seller can repossess them in case of non payment ) • Armour v Thyssen Edelstahlwerke AG [1991] (T was a manufacturer and supplier of steel it sold it to Carron for use in its manufacturing process. The contract contains a clause that this still remains the property of T after delivery until debts were paid. -The House of Lords held that a condition in the contract preserving title in the seller after delivery until all debts are paid is valid and enforceable and that by virtue of section 17 and 19 (one) of the sale of goods act property remained with the seller until the condition was complied with. Such a provision does not give the seller security for the unpaid debts of the buyer but it does by way of legitimate retention of title and not by virtue of any right over its own property conferred by the buyer. • Hendy Lennox Ltd v Grahame Puttick Ltd [1984] (seller delivered engines to buyer under a retention of title of clause, goods were attached to engines, are the goods identifiable? Court said yes seller has the right to recover the goods in case of insolvency as the good could be detached from engine without any damage.
Attempts to claim title to the proceeds of sale
• Pfeiffer Gmbh v Arbuthnot Factors [1988] • "Where the seller retains title by way of security prior to sub-sale but the contract expressly or impliedly authorises the buyer to effect sub-sales, I do not consider that any prima facie implication arises that sub-sales are to be effected by the buyer as agent for and for the account of the seller. On the contrary, I consider that the normal implication that arises from the relationship of buyer and seller is that if the buyer is permitted to sub-sell in the normal course of business, he will do so on his own account. • Seller can't request he be paid before other creditors as need a registered charge • Unless the Aluminium Industrie v Romalpa Aluminium Ltd [1976] case applies where there was a ROT clause and there is a fiduciary relationship as seller is principle, and buyer is an agent therefore is selling on behalf of the seller I consider that the conclusions of the Court of Appeal in (Romalpa ) as to the fiduciary relationship of the plaintiffs and the defendants turned on the particular wording of clause 13 and the concession that the relationship of the parties was one of bailor and bailee." Per Phillips J in Pfeiffer (supra)