The Sale of Goods Act is a piece of legislation that outlines the rights and responsibilities of both buyers and sellers in transactions involving goods. However, it's important to note that the Sale of Goods Act has been superseded in many jurisdictions by more modern legislation, such as the Sale...
6/11/24, 8:38 PM Sale of Goods Act (Passing of Property and Risk)
According to S.2(1) of the Sale of Goods Act (SOGA), “a contract in which the seller
transfers [called a sale: s.2(3)] or agrees to transfer [an agreement to sell: s.2(4)] the
property in goods to the buyer for a money consideration, called the price (s.2(1)).”
In commercial law, property means the ownership title to the good only.
SOGA only applies to business-to-business contracts, with only the rules relating to the
passing of property being used in business-to-consumer contracts.
On the other hand, the Consumer Rights Act (CRA) 2015 contains regulations for business-
to-consumer contracts regarding goods as well as services. S.2(2) of CRA 2015 defines
“consumer” as
Whilst s.2(3) of CRA 2015 defines traders as “
For consumer contracts, a contract of sales includes any contract where “(a) the trader
transfers or agrees to transfer ownership of goods to the consumer, and (b) the consumer
pays or agrees to pay the price.” (S.5(1) of CRA 2015)
The SOGA 1979 only regulates the contract of sales of goods and not situations like giving
of gifts, bailment, agency and so on. When determining whether the agreement is for a sale
of goods the court will look into the substance of the contract instead of the form. For
instance, a contract may state that it is not a sale contract but the courts may find otherwise
(PST Energy 7 Shipping v OW Bunker Malta (The Res Cogitans)).
Sale or Agreement to Sell:
● When the property in the good does not transfer simultaneously as the creation of the
contract, then the situation between the parties is called an agreement to sell.
● An agreement to sell may also be created even if the parties knew prior to the
agreement that the seller may not be able to convey the title to the good.
● Sale occurs when the contract is formed at the same time as the transfer of property
in the good (conveyance of the title of the good)
Price:
● Monetary payment made or promised to be paid constitutes the price of the good.
● It can include cheques, credit cards and so on.
● The price may be agreed upon in the contract or left to be fixed in the future in some
manner or measurement or via a third party as per the contract.
● Courts may not find any legally binding contract if the price remains to be fixed.
However, if there is an indication that the parties would take a reasonable price for
the good then the courts may deduce an intention to form a contract (s.8(2) of
SOGA).
● If as per the contract, the price was to be determined by the third party and the third
party did not do so, then the seller and buyer would not have any other remedy apart
from the return of goods or any payments paid.
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, 6/11/24, 8:38 PM Sale of Goods Act (Passing of Property and Risk)
What is a good under the SOGA?
● S.2(1) of SGA 1897 states, “all personal chattels other than things in action and
money… and in particular ‘goods’ includes emblements, industrial growing crops,
and things attached to or forming part of the land which are agreed to be severed
before sale or under the contract of sale; and includes an undivided share in goods
(s.61(1)).”
● Things that are excluded from the category of goods are land, shares, cheques as
well as bank notes. Money in the form of notes or coins can be good if they have
value for collectors (Moss v Hancock).
● There are persuasive authorities stating that software content in physical form like in
discs or USB drives can be goods under SGA (dicta in London Borough of
Southwark v IBM UK Ltd; Fern Computer Consultancy v Intergraph CADWorx).
● Energy does not constitute good.
● Bricks, crops and so on can constitute goods because they are easily detachable
from land as well as on the objective of the annexation. Indeed, as per S.61(1)
buildings, fixtures, crops, minerals and oils are goods if they are severed from the
land prior to or after the contract is formed.
● Generally, a dead body or any limb cannot be good unless the body has been altered
so that it gains additional value differentiating from a mere corpse then the courts
may view the body as good (Dobson v North Tyneside Health Authority).
● As per S.61(1), an “undivided share” of bulk can also be termed as goods. This
means shares like “half of 500 tonnes of rice.”
Transfers or agrees to transfer the property:
● It is important to know whether the buyer received the property in the goods following
the contract made between the seller and buyer. This is because if the property does
not pass from the seller to the buyer, then even if the buyer has possession of the
goods, and the seller becomes insolvent - the buyer will not be able to claim the
property in the good but would have to stand in line with other creditors of the seller
to get compensation for breach of the contract.
● Similarly, the transfer of property would also include the transfer of risk of the good. If
the property passes to the buyer, then the buyer will have to bear the loss of damage
to the goods. Otherwise, the seller would bear the burden of loss.
● When we say that property is being transferred to the buyer, the law is referring to
the general property in the good rather than special property (S.61(1) of SGA).
● This means that the complete interest in the good is being passed on from the seller
to the buyer, although the title need not be perfect
Categories of Goods:
1. Existing Goods: The seller has the good in their possession and has the title to the
good (S.5(1) of SGA).
2. Future Goods: As per S.5 (1) of the SGA, these are the goods that are yet to be
produced, possessed or the title to which is yet to be obtained by the seller even after
the contract is created (Varley v Whipp). The goods will still be future goods if the
seller is unable to obtain the title to it later as agreed (Hughes v Pendragon Sabre).
Future goods are always only part of an agreement to sell and never a part of a sale.
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