2-1 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev This is the prescribed textbook for your course. Available NOW at your campus bookstore!

2-2 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Sale of goods Chapter

2-3 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Learning objectives At the end of this chapter you should understand: the main statutory and common-law rules relevant to the sale of goods the difference between specific, unascertained and future goods the difference between contracts for the sale of goods and agreements to sell the definition of a contract for sale of goods the rules relating to the passing of title in goods from the seller to the buyer the application of the exceptions to the nemo dat rule when implied condition and warranties apply and the consequences of their breach the remedies available to an unpaid seller or to a buyer if seller is in breach of contract.

2-4 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Introduction When goods are sold, there exists a contract for the sale of goods. Both common law principles and statutory provisions apply to these types of contracts.

2-5 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Relevant legislation Each state has its own Act that regulates the sale of goods. –All states but Victoria title them the Sale of Goods Act. These acts apply to all types of entity from companies to individuals and to all types of goods. Requirements of the legislation: –Contracts must involve an exchange of monetary consideration for goods. –Ownership of goods must pass to the buyer. –Only covers contracts for sale of goods, not for work done or materials supplied, otherwise the provisions of the relevant Sale of Goods Act cannot be relied upon. –In NT, WA and Tasmania, such contracts must be evidenced in writing, elsewhere, maybe verbal, written or implied.

2-6 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Types of goods The type of goods determines the point in time at which ownership will pass to the buyer, along with the 'risk' associated with those goods. –Specific goods:  in existence  identifiable at time of contract. –Unascertained goods:  described  not identifiable at time of contract. –Future goods:  to be acquired by the seller  manufactured by seller after contract made.

2-7 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Distinction between a contract for the sale of goods and an agreement to sell Sale: Property or title in the goods passes to the buyer at the time the contract is made. Agreement to sell: Title or property in goods is to pass at some point in time after the contract is made.

2-8 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Distinguishing contracts for the sale of goods from other contracts Covers goods The delivery of the goods is the main substance of the agreement not The work done or materials supplied— involving skill and effort with goods resulting from the effort.

2-9 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Property in goods and possession of goods Property in goods: –Ownership or title to goods, i.e. risk of goods Possession in goods: –Custody or control of goods

2-10 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev When property (and risk) in goods passes, ownership passes Type of goods—indicates when property or title in goods passes to buyer. Specific/ascertained At time parties intend it to pass, considering: –terms of contract –conduct of parties –circumstances. Future/unascertained: At time goods become identifiable and buyer has been notified, or when the parties to the contract of sale intend that it should pass.

2-11 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Specific rules for determining when property in goods passes Rule 1 Unconditional contract for specific goods: –When contract is made Rule 2 Specific goods that need to be placed in a deliverable state: –When goods are in a deliverable state –Buyer has been notified Rule 3 Specific goods that need weighing or measuring to obtain their price: –When goods have been weighed or measured –Buyer has been notified

2-12 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Specific rules for determining when property in goods passes (cont.) Rule 4 Goods purchased on approval: –Buyer communicates approval or acceptance of the goods to the seller. or –Buyer does not communicate approval or acceptance to the seller but:  keeps goods without notice of rejection  on expiration of any specified time  on expiration of reasonable time.

2-13 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Specific rules for determining when property in goods passes (cont.) Rule 5(1) Future or unascertained: –Goods in deliverable state –Unconditionally appropriated –Buyer assents Rule 5(2): Delivery of future or unascertained goods to a carrier: –When delivered to the carrier

2-14 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Romalpa clauses Retention of title clauses –Buyer cannot claim title before full payment has been received. –Seeks to protect seller from buyer’s failure to pay. –Must be very carefully drafted to be effective.

2-15 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Seller without title The common law principle nemo dat quod non habet means sellers of goods cannot pass better title than they actually have.

2-16 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Seller without title (cont.) Estoppel Sale by a mercantile agent Sale by a seller still in possession Sale by a buyer in possession (without title) Statutory and common law power of sale Sale in the market overt Sale under voidable title

2-17 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Estoppel If the owner creates an impression by word or conduct that another party has the authority to sell the goods, and a purchaser buys those goods in good faith without knowledge of the deficit in title, for value, the purchaser will gain good title.

2-18 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Performance of a contract for the sale of goods Rules regarding delivery Duty of seller to deliver: –place of delivery –time –timing –third person in possession –expenses –carrier –delivery by sea –quantity –instalment deliveries

2-19 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Shipping contracts CIF (Cost insurance freight) Price includes: –cost of the goods –insurance (seller organises) –freight (seller organises). FOB (Free on board) Price includes: –cost of the goods –delivery on board ship –insurance (buyer organises) –freight (buyer organises).

2-20 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Rules regarding acceptance Seller notified Reasonable time Conduct of buyer Rejection

2-21 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Rules regarding payment Pay correct amount on delivery: –contracted price or –reasonable price

2-22 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Relationship between the sales of goods Acts and the ACL The sale of goods Acts imply certain conditions and warranties into contracts for sale of goods which must be met by the seller. Under the state sale of goods Acts the parties can agree to exclude these implied terms and conditions. The Australian Consumer Law is federal law which applies across Australia and provides for non- excludable ‘guarantees’ by the seller where the buyer is a ‘consumer’ (discussed in Chapter 13). The Australian Consumer Law takes precedence over the sale of goods Acts where both apply.

2-23 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Relationship between the sales of goods Acts and the ACL (cont.) The guarantees are very similar to the implied conditions and warranties provided in the sale of goods Acts. Therefore, the sale of goods Acts will continue to apply to sale of goods not regulated by the Australian Consumer Law, e.g. business to business sales where the goods are purchased for resupply—namely where the buyer does not fall into the classification of a ‘consumer’.

2-24 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Implied conditions Breach of an implied condition will terminate the contract and allow damages to be claimed. As to title, it is implied that the seller has the right to sell the goods to pass good title to the buyer the seller must possess good title. Correspondence with description: –Goods must correspond with the description where goods have been sold by description. Merchantable quality: –Goods must be fit for a purpose for which goods of that description are normally used, unless an examination by the buyer should have revealed any defect.

2-25 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Implied conditions (cont.) Fitness for purpose: –Where the buyer buys goods in reliance upon the seller’s skill, after purpose of good is known to seller Sale by sample: –The quality of the bulk of goods supplied must correspond with the quality of the sample supplied –The buyer must have a reasonable opportunity to compare the bulk of the goods to the sample. –The goods must be free of defect rendering them unmerchantable.

2-26 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Implied warranties Breach will enable the innocent party to claim damages. –The buyer shall have quiet possession. –The goods shall be free of any undisclosed encumbrances.

2-27 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Remedies for breach of contract for sale of goods Rights of the unpaid seller Against the goods: –Right to withhold delivery –Right to a lien (possessory) –Right to stop goods in transit –Right to resell the goods Against the buyer (breach of contract): –Sue for damages –Sue for the price

2-28 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Remedies for breach of contract for sale of goods (cont.) Rights of the buyer: Damages for non-delivery of goods Breach of warranty of quality Specific performance Rescission of contract