LA3009

International
commercial law
James Devenney
This module guide was prepared for the University of London by:
u James Devenney, Professor of Transnational Commercial Law, University of Reading,

UK and Visiting Full Professor, University College Dublin, Ireland.
This is one of a series of module guides published by the University. We regret that
owing to pressure of work the author is unable to enter into any correspondence
relating to, or arising from, the guide.
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International commercial law page i
Contents
Module descriptor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 The meaning of international (or transnational) commercial law . . . . . . . 3
1.3 Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.4 Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2 Sources and challenges in international

(or transnational) commercial law . . . . . . . . . . . . . . . . . . . . 7
2.1 Challenges in international (or transnational) commercial law . . . . . . . . 9
2.2 Sources of international (or transnational) commercial law . . . . . . . . . 12
2.3 The harmonisation debate in international (or transnational)
commercial law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3 International sales transactions . . . . . . . . . . . . . . . . . . . . . 17

3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.2 Ex-works and ex-store contracts . . . . . . . . . . . . . . . . . . . . . . . 19
3.3 F.O.B. contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.4 C.I.F. contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4 An introduction to the Sale of Goods Act 1979 . . . . . . . . . . . . . . 25

4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.2 Sale of Goods Act 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.3 Interpretation and commercial contracts . . . . . . . . . . . . . . . . . . 31
4.4 Good faith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.5 Non-existent goods at the time of the contract . . . . . . . . . . . . . . . 33
4.6 Frustration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5 The Sale of Goods Act 1979 and the obligations of the parties . . . . . . 39
5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.2 The express terms of the contract . . . . . . . . . . . . . . . . . . . . . . 41
5.3 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.4 Terms implied by the Sale of Goods Act 1979 . . . . . . . . . . . . . . . . . 44
6 Passing of property, risk and title under the Sale of Goods Act 1979 . . . 51
6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.2 The significance of the passing of property under the Sale of Goods Act
1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.3 The rules on the passing of property under the Sale of Goods Act 1979 . . . . 54
6.4 Sales by non-owners and the principle of nemo dat quod non habet . . . . . . 60
7 Remedies under the Sale of Goods Act 1979 . . . . . . . . . . . . . . . 75

7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.2 The remedies of the seller . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.3 The remedies of the buyer . . . . . . . . . . . . . . . . . . . . . . . . . . 82
page ii University of London
8 UN Convention on Contracts for the International Sale of Goods (CISG) . 89

8.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
8.2 Background to the CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
8.3 Field of application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
8.4 The scope of the CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
9 The financing of international trade . . . . . . . . . . . . . . . . . . . 99

9.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
9.2 In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
9.3 Documentary credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Feedback to comprehension . . . . . . . . . . . . . . . . . . . . . . . 107

Using feedback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Chapter 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Chapter 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Chapter 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Chapter 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Chapter 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Chapter 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Chapter 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Chapter 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
International commercial law page iii
Module descriptor
GENERAL INFORMATION
Module title
International commercial law
Module code
LA3009
Module level
6
Enquiries
The Undergraduate Laws Programme courses are run in collaboration with the
University of London. Enquiries may be made via the Student Advice Centre at:
https://sid.london.ac.uk
Credit value
30
Courses in which this module is offered

LLB, EMFSS
Module prerequisite
None
Notional study time

300 hours
MODULE PURPOSE AND OVERVIEW

International commercial law is offered as an optional module to students studying
on the Standard Entry and Graduate Entry LLB courses. It is also offered as an Individual
Module. Credits from an Individual Module will not count towards the requirements of
the LLB.
MODULE AIM
The module will develop critical understanding of key aspects of, and debates in,
commercial law in an international context. It will consider the context, history,
drivers and sources of international commercial law as well as mechanisms for dispute
resolution. Emphasis will be placed on both critical knowledge of key principles
and the ability to apply the rules of law to achieve practical solutions to practical
problems. During the module, students will explore and contrast competing legal
regimes in respect of international sale of goods transactions, highlighting that law
itself is a ‘commodity’. Students will also explore the rights/liabilities of carriers as well
as methods of financing international trade. The module will also provide a structured
opportunity for reflection on possible future directions in international commercial
law.
LEARNING OUTCOMES: KNOWLEDGE

Students completing this module are expected to have knowledge and understanding
of the main concepts and principles of international commercial law. In particular,
they should be able to:
page iv University of London
1. Demonstrate a critical understanding of international commercial law in context,
including its history, drivers, sources and key debates (such as the desirability of
harmonisation);
2. Explain common types of international sales transactions (including F.O.B.

contracts and C.I.F. contracts) and discuss the importance and nature of
documents in international sales transactions (including bills of lading);
3. Explain the significance of the Sale of Goods Act 1979 to international sales
transactions, and discuss and/or apply to complex facts the regime in the Sale of
Goods Act 1979 to international sales transactions;
4. Discuss and/or apply to complex facts the regime in the UN Convention on

Contracts for the International Sale of Goods (CISG) to international sales
transactions;
5. Critically compare and contrast the UN Convention on Contracts for the

International Sale of Goods (CISG) with the Sale of Goods Act 1979;
6. Critically discuss and apply to complex facts the legal framework for common
methods of financing international trade, including the documentary credit;
7. Critically discuss, in the appropriate social, economic and/or political context,

possible future directions in the law relating to international trade and, where
appropriate, make suggestions for reform.
LEARNING OUTCOMES: SKILLS

In addition to the skills developed at Levels 4 and 5, students are expected to be able
to:
8. Articulate well-argued solutions to complex legal questions and problems across a

range of legal areas;
9. Reflect on learning, identifying areas for improvement and responding

appropriately;
10. Evaluate legal issues in a social, economic and political context, taking account of
their policy and doctrinal importance.
BENCHMARK FOR LEARNING OUTCOMES

Quality Assurance Agency (QAA) Benchmark Statement for Law 2019.
MODULE SYLLABUS
(a) The nature of international commercial law. Discuss the nature of international
commercial law, including its history, drivers, sources and mechanisms for
dispute resolution. Discuss the key risks associated with international trade
and the challenges for international commercial law. Evaluate the need for the
harmonisation of international commercial laws.
(b) International sales transactions. Explain common types of international sales

transactions (including F.O.B. contracts and C.I.F. contracts). Discuss the
importance and nature of documents in international sales transactions (including
bills of lading). Outline the rights and liabilities of carriers. Identify competing
international sales law regimes.
(c) The Sale of Goods Act 1979. Explain the significance of the Sale of Goods Act 1979
to international sales transactions. Discuss and apply the approach taken to the
interpretation of the Sale of Goods Act 1979. Discuss the extent to which the law of
England and Wales recognises duties of good faith in commercial law. Analyse the
components of the definition of a contract of sale. Discuss the significance of the
passing of property under the Sale of Goods Act 1979 and explain/apply the rules
under which property in goods is passed. Discuss the significance of the passing
of risk in a contract of sale of goods and identify/apply the rules on how/when risk
is passed. Explain and apply the use of retention of title clauses and the limits of
such clauses. Explain the nemo dat rule. Discuss, illustrate and apply the exceptions
International commercial law page v
to the nemo dat rule. Explain and apply the duties of the seller to deliver and the
buyer to accept goods. Discuss and apply the implied terms in ss.12–15 of the Sale
of Goods Act 1979. Discuss and apply the remedies available to the buyer and the
seller where there is a breach of the sale contract.
(d) The UN Convention on Contracts for the International Sale of Goods (CISG). Explain the
background, application and scope of the CISG. Compare, contrast, discuss and apply
the key provisions of the CISG with the provisions of the Sale of Goods Act 1979,
including provisions on interpretation, good faith, obligations, remedies and risk.
(e) The financing of international trade. Explain the background considerations in

the financing of international trade. Discuss and apply the legal framework for
common methods of financing international trade, including the documentary
credit.
(f) The future: the emergence of a new lex mercatoria? Discuss, in the appropriate social,
economic and/or political context, possible future directions in the law relating to
international trade and to consider whether a new lex mercatoria has emerged or is
emerging.
LEARNING AND TEACHING
Module guide
Module guides are the students’ primary learning resource. The module guide
covers the topics in the syllabus and provides the student with the grounding to
complete the module successfully. It contains the Module Descriptor, which sets out
the learning outcomes that must be achieved. It also includes the core, essential and
further reading and a series of activities designed to enable students to test their
understanding and develop the relevant skills. The module guide is supplemented
each year with the pre-exam update, made available on the VLE.
The Laws Virtual Learning Environment

The Laws VLE provides one centralised location where the following resources are
provided:
u a module page with news and updates;
u a complete version of the module guides;
u pre-exam updates;
u past examination papers and reports;
u discussion forums where students can debate and interact with other students.
The Online Library

The Online Library provides access to:
u the professional legal databases LexisLibrary and Westlaw;
u cases and up-to-date statutes;
u key academic law journals;
u law reports;
u links to important websites.
Core text
Students should refer to the following core text. Specific reading references are
provided for this text in each chapter of the module guide:
¢ McKendrick, E. Goode and McKendrick on commercial law. (London: Penguin, 2021)

sixth edition [ISBN 9780141991887].
page vi University of London
ASSESSMENT
Formative assessment is conducted through tasks in the module guide. The formative
assessment will prepare students to reach the module learning outcomes tested in
the summative assessment.
Summative assessment is through a three hour and 15 minute unseen examination.

Students are required to answer four questions out of eight.
Please be aware that the format and mode of assessment may need to change in
light of extraordinary events beyond our control, for example, an outbreak such as
the coronavirus (COVID-19) pandemic. In the event of any change, students will be
informed of any new assessment arrangements via the VLE.
Permitted materials
Students are permitted to bring into the examination room the following specified
document:
¢ Hart core statutes on commercial & consumer law 2022–23 (Bloomsbury).

1 Introduction
Contents
1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 The meaning of international (or transnational) commercial law . . . . . 3
1.3 Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.4 Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
page 2 University of London
Learning outcomes
By the end of this chapter, and having completed the Essential readings and
activities, you should be able to:
u demonstrate an understanding of international commercial law in context,
including its history (this will be built upon in Chapter 2).
International commercial law 1 Introduction page 3
1.1 Introduction
A warm welcome to the International commercial law module. In this chapter and
Chapter 2, we shall introduce international (or transnational) commercial law and the
scope of the module. We shall explore the nature of international commercial law and
the context in which it operates. In so doing we shall identify a number of themes and
debates which will permeate the subsequent chapters, such as:
u the role of business practice and usage
u the importance of underlying business relationships
u interventionist versus non-interventionist approaches
u the case for international or regional harmonisation in this area
u new directions in our changing world.
Your learning will be further developed by a programme of carefully selected readings.

We very much hope you will enjoy the module.
Self-reflective activity 1.1

What is meant by the term ‘commercial law’? What is meant by ‘international (or
transnational) commercial law’?
1.2 The meaning of international (or transnational) commercial

law
This module is concerned with international (or transnational) commercial law. Our
first task, therefore, is to explore the meaning of commercial law. McKendrick (p.1393)
has defined commercial law as:
…the totality of the law’s response to the needs and practices of the mercantile
community.
Thus, commercial law covers a vast array of areas and certainly more than could
possibly be covered in one module. This module, therefore, focuses on a number of
fundamental or core aspects of international (or transnational) commercial law, in
particular, international sales and the financing of international trade.
Our second task is to explore the meaning of international, or transnational,

commercial law; a task not as easy as it might first seem. The difficulty is that these
terms are used in different ways by different writers. A useful starting point is the
work of Norbert Horn (Horn, N. ‘Uniformity and diversity in the law of international
commercial contracts’ in Horn, N. and C.M. Schmitthoff (eds) The transnational
law of international commercial transactions, Vol.2. (Deventer: Kluwer, 1982)
[ISBN9789065440921]) who identified:
…three separate usages of the term ‘transnational law’: (1) as a general description ofthe
legal regime of an international commercial transaction; (2) as a label for the factual
uniformity or similarity in contract laws applicable to or contractual patterns used in
international commercial transactions; and, finally, (3) as a term to denote international
sources of commercial law i.e. internationally uniform law in the proper sense.
Using Horn’s work, we can identify three possible meanings of international (or
transnational) commercial law:
u As ‘a general description of a legal regime application to an international (as

opposed to purely domestic) commercial transaction’: an example would be
the (UK) Sale of Goods Act 1979 which plays a very significant role in international
sales transactions. Thus, Bridge (Bridge, M. ‘Uniformity and diversity in the law of
international sale’ (2003) 15 Pace International Law Review 55 at 58 (available in
HeinOnline and LexisLibrary through the Online Library) has noted:
For various reasons, some of them historical, English law plays a leading role as the
governing law of international commodities sales. The great majority of reported cases
involve transactions and parties that have no physical connection at all with the United
Kingdom. The leading role played by English law and by the rules and by-laws of the
Liverpool Cotton Trading Association has been noted by Professor Bernstein in her study
on cotton sales, though cotton sales do not feature in the reported case law which instead
is concentrated heavily on grain and feedstuffs, with oil playing an increasing role in
recent years. A quite typical example of a transaction unconnected with England would be
a sale, by an Argentinian seller to a Swiss buyer, of soya bean meal in bulk to be loaded in
a Gulf of Mexico port on CIF Antwerp terms and paid for in cash against documents in US
dollars.

Why does the (UK) Sale of Goods Act 1979 play such a significant role, directly or
indirectly, in international sales contracts? You may find it useful to consider the
following passage from Bridge, 2020, 1-001:
The Act of 1893 [the predecessor of the Sale of Goods Act 1979] has been adopted with
little modification in many jurisdictions of the Commonwealth of Nations (formerly
called the British Commonwealth). In the United States, the first of the two uniform codes
governing sales, the Uniform Sales Act, was substantially modelled upon the English
legislation, so that decisions and commentaries relating to it may be relevant and helpful
in England. But this legislation has now been replaced in all states except Louisiana by
the Uniform Commercial Code, which is not derived from the English Act and is in many
respects fundamentally different from it.
u As ‘a label for the factual uniformity or similarity in contract laws applicable

to or contractual patterns used in international commercial transactions’: an
example, from the financing of international sales contracts (considered in Chapter
9), would be the Uniform Customs and Practice for Documentary Credits (UCP), the
most recent version of which is UCP 600 (1 July 2007). Commercial law may also
become factually similar through ‘judicial convergence’ and, as Goode, Kronke
and McKendrick (2015, pp.32–33) argue, such convergence can be a conscious or
unconscious decision on the part of a judge to develop the law in a way consistent
with other States.

What is the purpose of international commercial arbitration? Is there more scope
for applying ‘transnational’ principles in such a context (see Lando, O. The lex
mercatoria in international commercial arbitration’ (1985) 34 ICLQ 747 available in
HeinOnline through the Online Library)?
Reference should also be made to the lex mercatoria (or the law of merchants),
although there is some debate about the meaning of the lex mercatoria (see Goode,
Kronke and McKendrick, 2015, pp.5 and 6). The view of Goode, Kronke and McKendrick
is that the lex mercatoria is limited to merchants’ unwritten customs, usages and
practices. Such a view is consistent with the medieval lex mercatoria: a system of
resolving disputes between merchants, at special courts officiated by merchants, by
reference to the customs and practices of merchants.

What are the advantages and disadvantages of resolving disputes by reference
to the customs and practices of merchants (see Goode, R. Commercial law in the
next millennium. The Hamlyn lectures (London: Sweet and Maxwell, 1998) [ISBN
9780421636606])?
Other writers, such as Lando (1985), adopt a much wider lens and include, for example,
relevant public international law in the definition of the lex mercatoria. We shall return
to those sources of transnational commercial law below (in connection with Horn’s
third possible meaning of transnational commercial law) but, for present purposes,
it should be noted that in recent years there has been much discussion around the
International commercial law 1 Introduction page 5
emergence of a new lex mercatoria, and such debate often adopts a wider definition
of the lex mercatoria (see, for example, McKendrick, p.1400 and Mustill, M. ‘The new lex
mercatoria: the first twenty-five years’ (1988) 4(2) Arb. Int’l 86).
u ‘As a term to denote international sources of commercial law (i.e.

internationally uniform law in the proper sense)’: here we might refer to the
UN Convention on Contracts for the International Sale of Goods (CISG), which is
discussed in Chapter 8. The CISG is a significant alternative to choosing the Sale
of Goods Act 1979 as the governing law of the contract. At the time of writing,
the CISG has been ratified in 94 States, including China, Canada, Germany, the
Russian Federation and the USA, although that does not necessarily mean that it is
invariably used in international sales contracts involving those countries. On the
other hand, the CISG has not been adopted by the UK, India or South Africa.
This module, in keeping with the diversity of sources in transnational commercial law,
will touch upon all of these forms of transnational commercial law.
1.3 Reading
Core text
You should refer to the following compulsory text. Specific reading references are
provided for this text in each chapter of the module guide:
¢ McKendrick, E. Goode and McKendrick on commercial law. (London: Penguin, 2021)

sixth edition [ISBN 9780141991887]. (Referred to throughout as ‘McKendrick’.)
Further reading
Other useful texts referred to in this module guide include:
¢ Bridge, M. Benjamin’s sale of goods. (London: Sweet and Maxwell, 2020) 11th
edition [ISBN 9780414080225].
¢ Fox, D., R. Munday, B. Soyer, A. Tettenborn and P. Turner Sealy and Hooley’s
commercial law: text, cases and materials. (Oxford: Oxford University Press, 2020)
sixth edition [ISBN 9780198842149].
¢ Goode, R., H. Kronke, E. McKendrick Transnational commercial law: text,cases

and materials. (Oxford: Oxford University Press, 2015) second edition
[ISBN 9780198735441].
¢ Stone, R. and J. Devenney The modern law of contract. (Oxford: Routledge, 2022)
14th edition [ISBN 9780367697952 ].
¢ Twigg-Flesner, C. and R. Canavan Atiyah and Adams’ sale of goods. (London:

Pearson, 2020) 14th edition [ISBN 9781292251028] (available in VLeBooks via the
Online Library).
1.4 Assessment
This module is assessed through a three hour and 15 minute unseen examination. You
are required to answer four questions out of eight.
Permitted materials
You are permitted to bring into the examination room the most recent edition of:
¢ Hart core statutes on commercial & consumer law (Bloomsbury).

Notes
2 Sources and challenges in international
(or transnational) commercial law
Contents
2.1 Challenges in international (or transnational) commercial law . . . . . . 9
2.2 Sources of international (or transnational) commercial law . . . . . . . 12
2.3 The harmonisation debate in international (or transnational)

commercial law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Learning outcomes
u demonstrate a critical understanding of international commercial law in context,
including its history, drivers, sources and key debates (such as the desirability of
harmonisation)
u critically discuss, in the appropriate social, economic and/or political context,
possible future directions in the law relating to international trade and, where
appropriate, make suggestions for reform.
International commercial law 2 Sources and challenges in international (or transnational) commercial law page 9
2.1 Challenges in international (or transnational) commercial law

Commercial law is a dynamic subject. In part, this is due to continuing developments
in technology (for example, the use of electronic contracting or smart contracts) but,
more generally, it is due to the continuing innovation and entrepreneurship of the
business community:
One of the most powerful influences on human activity is the driving force of trade…
wars may break out, large areas of a country may be devastated by natural disaster, but
somehow traders find ways of establishing and continuing business relationships…[T]he
ingenuity of the trader in constantly developing new sales techniques, new instruments
to accommodate more efficiently the requirements of the commercial community, new
methods of surmounting hurdles thrown up by the law or by the actions of governments.
(McKendrick, p.3)

Consider the following passage:
The practicing lawyers are the main creative element, reacting to the needs of their client;
the courts then respond to the devices which the lawyers develop approving (with or
without qualification) or disapproving. Importantly, common law courts have in the main
approved – instead of being too concerned with elaborate edifices or logical consistency,
common law courts have crafted doctrinal lines consistent with commercial needs in a
largely pragmatic manner.
(Cranston, R. ‘Doctrine and practice in commercial law’ in Hawkins, K. The human face of law
– Essays in honour of Donald Harris. (Oxford: Clarendon Press, 1997) [ISBN 9780198262473]
pp.218–19).
What does this passage reveal about the work of commercial lawyers?
A key debate relates to how far the law should regulate business and, in particular,
whether or not the law should adopt a non-interventionist, laissez-faire approach. Such
a view is certainly predominant in the UK, at least in purely commercial transactions
(the position may be otherwise where a commercial party is dealing with a consumer).

What are the advantages and disadvantages of a non-interventionist, laissez-faire
approach? Do you think that the global financial crisis earlier this century revealed
anything about such approaches?
Indeed, any proposed intervention needs to be aware of unintended consequences, as
the following case study demonstrates.
Case study: Non-professional guarantees

A surety transaction is a transaction where, for example, A guarantees that B will pay
its debts to C. If B defaults, by not paying its debt to C, prima facie A is answerable to C.
For example, Ben may wish to enter into a loan agreement with Cranbrook Bank Ltd.
Cranbrook Bank Ltd may be concerned that Ben (the debtor) will default on the loan
and so may seek some further security for the repayment of the debt. One option
would be for a third party (the surety) to provide a guarantee to Cranbrook Bank Ltd
(the creditor). In the case law, in a number of such situations it was the debtor’s wife
who provided the guarantee and the guarantee was often supported by a charge
over the family home (meaning that if both the husband (the debtor) and the wife
(the surety) defaulted, the creditor could potentially use the family home to satisfy
the debt).
Cranbrook Bank Ltd Ben
Loan
Guarantee
Ben’s wife
One question which previously arose was whether or not the Unfair Terms in
Consumer Contracts Regulations 1999 (UTCCR 1999) (now replaced by the Consumer
Rights Act 2015) applied to surety transactions (in our example, the contract between
Cranbrook Bank Ltd and Ben’s wife). If so, a number of common terms in such
transactions could, potentially, have been rendered unenforceable on the grounds of
unfairness.
UTCCR 1999 implemented (pre-Brexit) the EC Council Directive on Unfair Terms in
Consumer Contracts and was concerned with ‘unfair terms in contracts concluded
between a seller or a supplier and a consumer’ (emphasis added). Seller/supplier
was defined as ‘any natural or legal person who…is acting for purposes relating
to his trade, business or profession…’ whereas a consumer was defined as ‘any
natural person who…is acting for purposes which are outside his trade, business
or profession’ (emphasis added). UTCCR 1999 thus contemplated the reverse
scenario to that typically operating in non-professional suretyship transactions. More
specifically, while the non-professional surety is typically acting for purposes outside
their trade, business or profession (and, therefore, might be seen as a ‘consumer’
in such transactions), they supply the service (whereas in most other transactions
consumers receive the service). By contrast, the creditor (in our example, Cranbrook
Bank Ltd), as beneficiary of the agreement, is usually acting in the course of a
business (and, therefore, is not a consumer) but might have been seen under UTCCR
1999 as a ‘seller or supplier’ in such transactions if, in line with other-language
versions of the Directive, this essentially meant ‘trader’.
In Bank of Scotland v Singh (QBD, unreported, 17 June 2005) HH Judge Kershaw QC,
on a literal approach to provisions, held that UTCCR 1999 did not apply to surety
transactions. His view has subsequently been described as ‘compelling’ (Manches
LLP v Freer [2006] EWHC 991) and ‘convincing’ (Williamson v Governor of the Bank of
Scotland [2006] EWHC 1289).
By contrast, in Barclays Bank Plc v Kufner [2008] EWHC 2319 (Comm), on a more
‘European’ approach to the provisions, it was held that UTCCR 1999 did apply to
contracts of suretyship (expressly disagreeing with Bank of Scotland v Singh).
The answer to this question was not without significance, given the importance of
such financing arrangements to small businesses:
The problem...raised by the present appeals is of comparatively recent
origin. It arises out of the substantial growth in home ownership over the
last 30 or 40 years...More than two-thirds of householders in the United
Kingdom now own their own homes. For most home-owning couples,
their homes are their most valuable asset. They must surely be free, if they
so wish, to use this asset as a means of raising money, whether for the
purpose of the husband’s business or for any other purpose…Bank finance
is in fact by far the most important source of external capital for small
businesses with fewer than ten employees. These businesses comprise
about 95 per cent of all businesses in the country, responsible for nearly
one-third of all employment...If the freedom of home-owners to make
economic use of their homes is not to be frustrated, a bank must be able
to have confidence that a wife’s signature of the necessary guarantee and
charge will be as binding upon her as is the signature of anyone else on
documents which he or she may sign. Otherwise banks will not be willing
to lend money on the security of a jointly owned house or flat.
(Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44 at [34]–[35] per Lord
Nicholls)
Yet the application of UTCCR 1999 to surety transactions (which is essentially now
the approach under the Consumer Rights Act 2015) may significantly alter the
balance of interests between the surety and the creditor. Increasing the level of
protection of sureties or increasing the duties incumbent upon financial institutions
may produce unintended consequences, resulting in suretyship transactions
becoming less attractive to banks and triggering a narrowing in access to credit
(thus disadvantaging those whom you are trying to protect) (see Devenney, J. and M.
Kenny ‘Unfair terms, surety transactions and European harmonisation: a crucible of
Europeanised private law?’ (2009) Conveyancer and Property Lawyer 295 at 305).
We should also note the importance of underlying business relationships in this

context:
There has been surprisingly little research on these issues, but such as there is suggests
that the law of contract is of much less importance to business people than lawyers
would like to think. In particular, where parties to a long-standing business relationship
find themselves in a dispute, the maintenance of their relationship is likely to be a much
stronger influence over the way they resolve their differences than are strict legal rights
between the parties, as determined by the law of contract.
(Stone and Devenney, 2022, pp.22 and 23)
This module is, of course, concerned with international (or transnational) commercial
law and so it is important to consider the particular challenges which may arise in a
cross-border context.

What particular challenges might arise in a cross-border context?
A number of challenges may be identified in this context (and see also Bridge, 2020,
18-001ff). First, there may be language or cultural differences between the parties
to the contract. Second, cross-border trade raises a number of legal issues, such as
compliance with (sometimes changing) export and import regulations. Furthermore,
what law will govern the relevant contract (conflict of laws)? For example, if a seller
in New Zealand is selling butter to a buyer in Germany, what law will govern the
contract? New Zealand law? German law? Or some other law? Although detailed
consideration of conflict of laws rules is outside the scope of this module, it is
important to note, in broad terms, the role of party autonomy in many conflict of
laws rules; in other words, the parties to the contract are often, with some important
exceptions, able to choose the law which governs their contract. Yet difference in law
may itself cause difficulties for cross-border trade: for example, in our earlier example,
the seller in New Zealand may be unfamiliar with German law and the German buyer
may be unfamiliar with New Zealand law. This has, for example, been a real concern of
the EU in relation to trade within the internal market and is one of the reasons for the
EU harmonisation agenda (we shall return to harmonisation below at 2.5):
The internal market is built on a multitude of contracts governed by different national

contract laws. Yet, differences between national contract laws may entail additional
transaction costs and legal uncertainty for businesses and lead to a lack of consumer
confidence in the internal market. Divergences in contract law rules may require
businesses to adapt their contractual terms. Furthermore, national laws are rarely
available in other European languages…Partly for these reasons, consumers and
businesses, in particular small and medium enterprises (SMEs) having limited resources,
may be reluctant to engage in cross-border transactions. This reluctance would in turn
hinder cross-border competition to the detriment of societal welfare. Consumers and
businesses from small Member States might be particularly disadvantaged.
(EU Green Paper on policy options for progress towards a European Contract Law for
consumers and businesses (COM(2010)348 final) at 2)
A third challenge relates to transportation of the goods. In our example above,

assuming the buyer wishes to use the butter in Germany (and not, for example, Spain),
how will the goods be transported to Germany? Who will be responsible for arranging
the transportation? What happens if the goods are damaged in transit? These are
issues which we will introduce in the next chapter.
A fourth challenge relates to payment. Of course, in all sale of goods contracts, a seller
will want to ensure payment but, where the parties are in different countries with
different legal infrastructures, the seller’s anxiety about payment may be increased.
Equally, a buyer may be reluctant to take the risk of paying for the goods before they
have received them. We will explore mechanisms for payment in international sales
transactions in Chapter 9.
2.2 Sources of international (or transnational) commercial law

Where does international (or transnational) commercial law come from?
As noted above (at 1.2), this module, in keeping with the diversity of sources
in transnational commercial law, adopts a wide definition of international (or
transnational) commercial law. We have already identified a number of sources of
international (or transnational) commercial law:
u contracts (noting conflict of laws issues)
u commercial practice and usage (we shall, for example, refer to a case from England
and Wales below, where practice in a particular commercial sector to some extent
shaped the remedy available for breaches of contract)
u national law applicable to international (or transnational) commercial transactions

(for example, as noted above, the UK Sale of Goods Act 1979 continues to play a
significant role in international sales transactions)
u international conventions (for example, the UN Convention on Contracts for the

International Sale of Goods (CISG), which is discussed in Chapter 8)
u regional instruments (for example, harmonisation initiatives by the European

Union such as the (then) EC Council Directive on Unfair Terms in Consumer
Contracts, discussed at 2.1 above)
u model laws from which States may draw inspiration
u trade terms of uniform rules which may be incorporated into a contract (an
example, from the financing of international sales contracts (considered in Chapter
9), would be the Uniform Customs and Practice for Documentary Credits (UCP), the
most recent version of which is UCP 600 (1 July 2007)).
Case study: Transfield Shipping Inc of Panama v Mercator Shipping Inc of

Monrovia (‘The Achilleas’) [2008] UKHL 48
A ship was chartered to X at a rate of $16,750 per day and it was due to be redelivered
by 2 May 2004. In anticipation of a timely redelivery the owners (Z) chartered the
ship to another party (Y) from 8 May 2004 at a rate of $39,500 per day. Subsequently,
it became clear that the ship would not be redelivered in time for the 8 May charter.
As a result, and in order to stop the 8 May charter from being cancelled, the owners
negotiated a later start date for that charter in return for a revised charter rate of
$31,500 per day.
The owners claimed damages for the late redelivery of the ship. The key issue was
whether the damages should be assessed by reference to the profit lost through the
renegotiation of the 8 May charter: $8,000 ($39,500 – $31,500) for 191 days, which
amounted, after some adjustments, to $1,364,584.37), or whether damages should
be assessed by reference to the difference between the original charter rate of
$16,750 per day and the market rate for the period by which the ship was delayed
(this amounted to $158,301.17). This second assessment reflected the industry
understanding of damages in this context.
Self-reflective activity
What damages would you have awarded?
The case turned on the remoteness of damages rules in contract law in England and
Wales which were famously stated by Alderson B in Hadley v Baxendale (1854) 9 Ex 341:
Now we think the proper rule in such a case as the present is this:—Where
two parties have made a contract which one of them has broken, the
damages which the other party ought to receive in respect of such breach
of contract should be such as may fairly and reasonably be considered
either arising naturally, i.e., according to the usual course of things, from
such breach of contract itself, or such as may reasonably be supposed to
have been in the contemplation of both parties, at the time they made the
contract, as the probable result of the breach of it.
At first instance, and in the Court of Appeal, it was held that the loss of $1,364,584.37
was not too remote. The case was then appealed to the House of Lords, which held
that the profit lost as a result of the renegotiation was too remote. Unfortunately,
there were some differences in approach between the judges in the House of Lords.
Lord Rodger and Baroness Hale adopted quite an orthodox analysis. For example, at
[60] Lord Rodger stated that the loss was too remote, given that it ‘could not have
been reasonably foreseen’. By contrast, Lord Hoffmann and Lord Hope essentially felt
that the loss was too remote as there had been no assumption of responsibility:
If, therefore, one considers what these parties, contracting against
the background of market expectations found by the arbitrators,
would reasonably have considered the extent of the liability they were
undertaking, I think it is clear that they would have considered losses
arising from the loss of the following fixture a type or kind of loss for
which the charterer was not assuming responsibility. Such a risk would be
completely unquantifiable, because although the parties would regard it
as likely that the owners would at some time during the currency of the
charter enter into a forward fixture, they would have no idea when that
would be done or what its length or other terms would be.
(Transfield Shipping Inc of Panama v Mercator Shipping Inc of Monrovia (‘The
Achilleas’) [2008] UKHL 48 at [23] per Lord Hoffmann (emphasis added))
Self-reflective activity
Would you support this decision? Are there any problems with using business
understandings?
2.3 The harmonisation debate in international

(or transnational) commercial law

What, if any, are the advantages and disadvantages of the harmonisation of
international (or transnational) commercial law?
In 2.1, above, we noted that differences in the laws of particular States can cause
difficulties for cross-border trade. For this reason, some would argue that harmonised
commercial law facilitates trade and such a view is prominent in, for example, the
European Union’s harmonisation agenda. On the other hand, some would argue that
differences in commercial law can also facilitate some forms of cross-border trade
(compare Reich, N. ‘Competition between legal orders: A new paradigm of EC law?’
(1992) 29 Common Market Law Rev 861). Thus, commercial law can itself be regarded
as a commodity, and differences in legal frameworks (e.g. for tax or financial services,
or perhaps in respect of systems that embrace the digital era more than others) may
result in competition between States or legal orders, wanting to attract more business
into the State or legal order. Such a view could, to some extent, be seen in some of the
debates on Brexit.
If harmonisation is, to some extent, deemed desirable, two key issues arise. First, how
is commercial law to be harmonised? There are several harmonisation mechanisms:
for example, international conventions, regional instruments, model laws, mercantile
practice, judicial convergence, and uniform rules which can be incorporated into
contracts. Each of these mechanisms raises challenges. For example, international
and regional instruments can require a significant amount of political negotiation
and compromise, with the resulting instrument being rather modest as a result (see
Devenney, J. and M. Kenny ‘Omission of personal property from the proposed CESL: the
Hamlet syndrome...without the prince?’ (2015) Journal of Business Law 607).

What, if any, are the advantages and disadvantages of the different mechanisms
for the harmonisation of international (or transnational) commercial law? Should
harmonisation be a blend of these different mechanisms?
Indeed, in so far as harmonisation ever merely consists of ‘transplanting’ (or
copying) a set of rules from one legal order into another legal order (so-called ‘legal
transplants’), some would argue that it will not work (see, for example, LeGrand,
1997). More specifically, some would argue that social, cultural and economic factors
colour or impact on the operation of particular rules. Thus, even if you have the
same rules in country A and country B, those rules may operate differently due to a
range of background factors that affect the way those rules are interpreted, applied
or enforced. Such concerns might, to some extent, be mitigated, for example,
by introducing appropriate cooperation and coordination frameworks between
States or legal orders (see for example, Regulation (EU) 2017/2394 of the European
Parliament and of the Council of 12 December 2017 on cooperation between national
authorities responsible for the enforcement of consumer protection laws and
repealing Regulation (EC) No 2006/2004). On the other hand, it is unlikely that any
harmonisation initiative could harmonise all areas of commercial law (remember
our wide definition in Section 1.2) and the interaction between harmonised and
non-harmonised (so-called background) rules in any State may result in different
outcomes. This has been recognised as an issue by the EU in relation to the Unfair
Terms Directive (see Section 2.1):
…the application of the same general criterion in two Member States may give rise to
very different decisions, as a result of the divergences between the rules of substantive
law that apply to different contracts. Hence harmonisation under the Directive is more
apparent than real.
(Report on Directive 93/13/EEC on Unfair Terms in Consumer Contracts (COM (2000) 248
final) p.30)
Thus, in UK Housing Alliance (North West) Ltd v Francis [2010] EWCA Civ 117 the (non-
harmonised) protection that could be offered by a court in England and Wales in
possession proceedings contributed to a finding that a term in a sale and leaseback
arrangement was not unfair under UTCCR 1999.
A second, associated, issue relates to enforcement and procedural matters, something

which has been of particular concern in relation to the CISG. If you harmonise
substantive law, how do you ensure it is consistently and appropriately enforced in
different States?

We are living in a changing world. Has Brexit and/or some of the policies of the
previous Trump administration heralded different approaches to trade in the
future?
FURTHER READING
¢ De Ruysscher, D. ‘Conceptualizing lex mercatoria: Malynes, Schmitthoff and
Goldman compared’ (2020) 27 Maastricht Journal of European and Comparative
Law 465.
¢ Fox et al., Chapter 1 ‘An introduction to commercial law’.
¢ Goode, Kronke and McKendrick, Chapters 1, 5, 6, 7, 20 and 21.
¢ Hobhouse, J.S. ‘International conventions and commercial law: the pursuit of

uniformity’ (1990) 106 Law Quarterly Review 530.
¢ LeGrand, P. ‘The impossibility of “legal transplants”’ (1997) 4 Maastricht Journal of

European and Comparative Law 111.
¢ Siems, M. ‘Malicious legal transplants’ (2018) 38 Legal Studies 103.

CORE COMPREHENSION
1. What is meant by international (or transnational) commercial law?
2. What are the sources of international (or transnational) commercial law?
3. What role does business practice play in international commercial law?
APPLIED COMPREHENSION
Critically discuss the advantages and disadvantages of international harmonisation
in the area of international (or transnational) commercial law.
Feedback to the Comprehension questions can be found at the end of this module guide.
Notes
3 International sales transactions
Contents
3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.2 Ex-works and ex-store contracts . . . . . . . . . . . . . . . . . . . . . 19
3.3 F.O.B. contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.4 C.I.F. contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Learning outcomes
u explain common types of international sales transactions (including F.O.B.
contracts and C.I.F. contracts) and discuss the importance and nature of
documents in international sales transactions (including bills of lading).
International commercial law 3 International sales transactions page 19
3.1 Introduction
In this chapter we will explore some common forms of international sales
transactions. Take, for example, a proposed sale of goods by a seller in Exeter (UK) to
a buyer in Shanghai (China). In addition to negotiating the terms of such a contract,
three issues will arise. First, what legal framework will the parties select to govern the
contract? In Chapters 4–8 we will explore two important (competing) international
sales regimes: the Sale of Goods Act 1979 (SGA 1979) and the UN Convention on the
International Sale of Goods. Second, how will the seller be assured of payment? We
will explore this issue in Chapter 9. Third, who will be responsible for transporting the
goods to Shanghai? This issue forms the basis of this chapter.
Handy hint…
The International Chamber of Commerce has produced a list of trade terms (e.g.
F.O.B. or C.I.F.) which may be incorporated into contracts. These standard terms are
known as INCOTERMS (the latest version of which is 2020). See: https://iccwbo.org/
resources-for-business/incoterms-rules/
3.2 Ex-works and ex-store contracts
CORE TEXT
¢ McKendrick, pp.967–79.
In these contracts the buyer collects the goods at the seller’s place of work or business
and property presumptively passes at that point. The seller is not generally involved in
the transportation of the goods.
3.3 F.O.B. contracts
CORE TEXT
3.3.1 A classic F.O.B. contract

In a ‘classic’ F.O.B. contract the seller agrees to supply the goods and to deliver them
onto the relevant ship. Therefore, the seller is responsible for all costs up to and
including the loading of the goods onto the ship (the seller is not obliged under this
type of F.O.B. contract to make advance arrangements for shipping (e.g. by booking
space)). By contrast, under this type of F.O.B. contract, the buyer is responsible for
nominating the ship and making insurance arrangements:
It is worth noting that the problem which I have to consider does not arise as a matter
of course in every f.o.b. contract. The f.o.b. contract has become a flexible instrument. In
what counsel called the classic type as described, for example, in Wimble, Sons & Co. Ltd.
v Rosenberg & Sons the buyer’s duty is to nominate the ship, and the seller’s to put the
goods on board for account of the buyer and procure a bill of lading in terms usual in the
trade. In such a case the seller is directly a party to the contract of carriage at least until
he takes out the bill of lading in the buyer’s name.
(Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 2 QB 402 at 424 per Devlin J)
Typically, an F.O.B. contract will state a port and shipment period (e.g. ‘F.O.B., Dublin,
shipment in June 2022’) or a range of ports and shipment period (‘F.O.B., Ireland,
shipment in June 2022’). In the former situation, prima facie the buyer must nominate
a ship onto which the goods are to be loaded at an appropriate time at the relevant
port, giving the seller adequate notice of these matters. In the latter situation, prima
facie the buyer must nominate the port (in Ireland in the example above), the ship
onto which the goods are to be loaded and the time of loading, giving the seller
adequate notice of these matters (David T Boyd & Co Ltd v Louis Loura [1973] 1 Lloyd’s
Rep 209). The seller would normally be responsible for obtaining an export licence.
However, as Devlin J noted in Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 2 QB 402
at 424, the ‘classic’ F.O.B. contract is based on a number of assumptions which may no
longer reflect modern shipping conditions:
Probably the classic type is based on the assumption that the ship nominated will be
willing to load any goods brought down to the berth or at least those of which she is
notified. Under present conditions, when space often has to be booked well in advance,
the contract of carriage comes into existence at an earlier point of time.
Devlin J continued:
Sometimes the buyer engages his own forwarding agent at the port of loading to book
space and to procure the bill of lading; if freight has to be paid in advance this method
may be the most convenient. In such a case the seller discharges his duty by putting the
goods on board, getting the mate’s receipt and handing it to the forwarding agent to
enable him to obtain the bill of lading. The present case belongs to this…type; and it is
only in this type, I think, that any doubt can arise about the seller being a party to the
contract.
Indeed, in Ian Stach Ltd v Baker Bosley Ltd [1958] 2 QB 130 at 139 Diplock J seemed to
regard contracts where the buyer makes advance shipping arrangements as the new
‘classic’ F.O.B. contract, although it seems the phrase ‘classic’ F.O.B. often continues
to be used in the same manner as used by Devlin J (and we shall adopt a similar
approach).
3.3.2 Variations on the classic F.O.B. contract

The ‘classic’ F.O.B. contract can also be varied in a number of other ways. For example,
instead of merely loading the goods onto the ship, the seller may be responsible for
stowing the goods in, for example, the ship’s hold (an F.O.B.S. contract) or trimming
(levelling, for example, a cargo of sand) the goods (an F.O.B.T.) or stowing and trimming
(an F.O.B.S.T. contract). Thus, it is important to consider the precise terms of the
relevant contract (interpreted using normal principles (see, for example, Section 4.3) as
emphasised in BP Oil International Ltd v Vega Petroleum Ltd [2021] EWHC 1364 (Comm)), a
need underlined by Roskill LJ in The Albazero [1977] AC 774 at 809:
It is a trite observation that what is sometimes called a true f.o.b. or a true c.i.f. contract
is a comparative commercial rarity. Contracts vary infinitely according to the wishes of
the parties to them. Though a contract may include the letters f.o.b. or c.i.f. amongst
its terms, it may well be that other terms of the contract clearly show that the use of
those letters is intended to do no more than show where the incidence of liability for
freight or insurance will lie as between buyer and seller but is not to denote the mode
of performance of the seller’s obligations to the buyer or of the buyer’s obligations to
the seller. In other cases, though the letters c.i.f. are used, other terms of the contract
may show that the property is intended to pass on shipment and not upon tender of
and payment against the documents so tendered or though the letters f.o.b. are used,
other terms may show that the property was not intended to pass on shipment but upon
tender and payment, the seller by the form in which he took the bill of lading intending
to reserve his right of disposal of the property until he was paid against the shipping
documents.
Indeed, under some F.O.B. contracts, a seller may be responsible for making advance
shipping arrangements:
Sometimes the seller is asked to make the necessary arrangements; and the contract
may then provide for his taking the bill of lading in his own name and obtaining payment
against the transfer, as in a c.i.f. contract.
(Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 2 QB 402 at 424 per Devlin J)

Why might the parties wish the seller to make advance shipping arrangements in
an F.O.B. contract?
There are various reasons why a seller may be responsible for making advance
shipping arrangements under an F.O.B. contract, including that the seller may be
better placed to make these arrangements. In making a contract of carriage the
seller might act as principal or as the buyer’s agent. However, in either case, the cost
of the carriage, including any fluctuations in price, will ultimately be the buyer’s
responsibility (see Scottish and Newcastle International Ltd v Othon Ghalanos Ltd [2008]
UKHL 11 at [35] per Lord Mance) and the seller will usually charge an additional fee for
making such arrangements.
Where the F.O.B. contract is governed by the law of England and Wales and the seller is
to arrange the contract of carriage, SGA 1979, s.32(2) provides:
Unless otherwise authorised by the buyer, the seller must make such contract with the
carrier on behalf of the buyer as may be reasonable having regard to the nature of the
goods and the other circumstances of the case; and if the seller omits to do so, and the
goods are lost or damaged in course of transit, the buyer may decline to treat the delivery
to the carrier as a delivery to himself or may hold the seller responsible in damages.
The effect of this provision can be illustrated by Thomas Young & Sons Ltd v Hobson &
Partners (1949) 65 TLR 365 which involved an analogous contract by rail. In that case
the sellers made a contract which placed the goods at the owner’s risk rather than, as
was more usual, at the railway company’s risk during transit. The goods were damaged
and the Court of Appeal held that the seller had not made a reasonable contract with
the carrier with the result that the buyers could reject the goods.
3.3.3 Insurance
SGA 1979, s.32(3) provides:
Unless otherwise agreed, where goods are sent by the seller to the buyer by a route
involving sea transit, under circumstances in which it is usual to insure, the seller must
give such notice to the buyer as may enable him to insure them during their sea transit;
and if the seller fails to do so, the goods are at his risk during such sea transit.
Can this provision apply to F.O.B. contracts? It might be argued that this provision has
no application to F.O.B. contracts as the seller’s obligation in such a contract is merely
to deliver the goods on board the ship. This was the view of Hamilton LJ in Wimble Sons
and Co Ltd v Rosenberg & Sons [1913] 3 KB 743. However, the other judges in that case,
Vaughan Williams and Buckley LJ, disagreed, holding s.32(3) potentially applicable to
F.O.B. contracts. Moreover, they held that the fact that a buyer could affect a general
insurance policy over the goods without receiving relevant details from the seller, was
no defence to the application of s.32(3).
3.3.4 Risk and property

Therefore, the rules in SGA 1979, s.32(2) and (3) qualify the normal rule on the passing
of risk in F.O.B. contracts (risk will be considered in more detail in 6.2 and 8.4.2, below);
the normal (or traditional) rule being that risk passes as the goods pass over the ship’s
rail during loading. As we shall see below (in Chapter 6), where the law of England and
Wales is applicable prima facie risk and property pass at the same time (SGA 1979, s.20).
However, this is subject to SGA 1979, s.16 (which will be discussed at Section 6.3.4) and
also to contrary intention. In practice, it is common for there to be a contrary intention
that property does not pass until payment, with the seller retaining the shipping
documents as security for payment (see Twigg-Flesner and Canavan, 2020, p.331). We
shall explore the importance of documents in international sales in Section 3.4 but this
is another example of the importance of documents in international sales with the
buyer being able to reject documents which are not in conformity with the contract.
We shall examine the significance of the passing of property more below (see Section
6.2). However, for present purposes, it should be noted that if the buyer does not
have a proprietary interest in the goods at a point when the goods are damaged by a
third party (e.g. the carrier), they cannot generally sue that third party in the tort of
negligence (see Leigh & Sillivan Ltd v Aliakmon Shipping Co Ltd (The Aliakmon) [1986] AC
785 but compare s.2 of the Carriage of Goods by Sea Act 1992). By contrast, the seller
would be able to sue the carrier subject to the Carriage of Goods by Sea Act 1971, giving
effect to the Hague/Visby Rules.
3.4 C.I.F. contracts
CORE TEXT
3.4.1 General
An alternative international sales contract is the C.I.F. contract, the key characteristics
of which were outlined by Lord Wright in Ross T Smyth & Co Ltd v TD Bailey Son & Co
[1940] 3 All ER 60 at 67–68:
The contract in question here is of a type familiar in commerce, and is described as a cif
contract. The initials indicate that the price is to include cost, insurance and freight. It is a
type of contract which is more widely and more frequently in use than any other contract
used for purposes of sea-borne commerce. An enormous number of transactions, in value
amounting to untold sums, are carried out every year under cif contracts. The essential
characteristics of this contract have often been described. The seller has to ship or acquire
after that shipment the contract goods, as to which, if unascertained, he is generally
required to give a notice of appropriation. On or after shipment, he has to obtain proper
bills of lading and proper policies of insurance. He fulfils his contract by transferring the
bills of lading and the policies to the buyer. As a general rule, he does so only against
payment of the price, less the freight, which the buyer has to pay. In the invoice which
accompanies the tender of the documents on the ‘prompt’ – that is, the date fixed for
payment – the freight is deducted, for this reason. In this course of business, the general
property in the goods remains in the seller until he transfers the bills of lading.
Thus, in a C.I.F. contract, the seller’s duties are normally:
u to ship goods at the port of shipment, if any, which conform with the contract (or,
unless the contract provides otherwise, to appropriate goods which have already
been shipped (i.e. are ‘afloat’) to the contract)
u to procure a contract of carriage to the agreed destination (e.g. ‘C.I.F. Exeter’ means
the agreed destination is Exeter) and to obtain a bill of lading. The contract of
carriage will, in due course, be transferred to the buyer who will be able to sue
the carriers under it where the goods are lost or damaged (see Carriage of Goods
by Sea Act 1992). Where the law of England and Wales is applicable, SGA 1979,
s.32(2) applies (see Section 3.3.2). Importantly, under a C.I.F. contract, the seller is
responsible for the cost of carriage (the freight) and any fluctuations in the cost
of the freight (although sometimes the buyer will pay the freight at the agreed
destination and will deduct an equivalent amount from the seller’s invoice)
u to procure appropriate insurance of the goods
u to tender the relevant documents (usually the bill of lading, the insurance policy
and the seller’s invoice) to the buyer. As Twigg-Flesner and Canavan (2020, p.335)
state:
The bill of lading and the insurance policy are, in a commercial sense, the buyer’s
guarantee that he will receive the goods in due course or, if they are lost or damaged,
that he will have recourse either against the shipowners or against the insurers.

What are the key features of a bill of lading (see McKendrick, pp.989–1003)?
By contrast, the buyer’s usual duties are:
u to accept a conforming tender of the relevant documents and pay the price
(it is sometimes agreed that payment will be through a documentary credit as
discussed in Chapter 9)
u to accept a conforming tender of the goods
u to pay unloading cost
u to procure any necessary import licence and to pay any necessary customs duties.
3.4.2 Risk and property

Under a C.I.F. contract, risk normally passes on shipment. Therefore, the buyer will
normally be liable to pay for the goods if they are lost at sea, although, of course, the
buyer will have the support of the insurance policy (see Manbré Saccharine Co Ltd v
Corn Products Co Ltd [1919] 1 KB 198). Property normally passes when the documents
are transferred to the buyer and the price is paid (see Cheetham & Co Ltd v Thornham
Spinning Co Ltd [1964] 2 Lloyd’s Rep 17). Where the law of England and Wales applies, the
position will be otherwise where SGA 1979, s.16 is not satisfied (see Section 6.3.4).
3.4.3 The importance of documents
In focus: the importance of documents…

These rules, which are simple enough to state in general terms, are of the
utmost importance in commercial transactions. I have dwelt upon them perhaps
unnecessarily, because the judgment of the Court of Appeal might seem to throw
doubt on one of their most essential aspects. The property which the seller retains
while he or his agent, or the banker to whom he has pledged the documents, retains
the bills of lading is the general property, and not a special property by way of security.
In general, however, the importance of the retention of the property is not only to
secure payment from the buyer but for purposes of finance. The general course of
international commerce involves the practice of raising money on the documents
so as to bridge the period between shipment and the time of obtaining payment
against documents. These credit facilities, which are of the first importance, would
be completely unsettled if the incidence of the property were made a matter of
doubt. By mercantile law, the bills of lading are the symbols of the goods. The general
property in the goods must be in the seller if he is to be able to pledge them. The
whole system of commercial credits depends on the seller’s ability to give a charge
on the goods and the policies of insurance. A mere unpaid seller’s lien would, for
obvious reasons, be inadequate and unsatisfactory. I need not observe that particular
contracts may contain special terms, or otherwise indicate a special intention, taking
the contract outside these rules. Such a case, to take one example, was The Parchim, as
explained by Lord Sumner, in The Kronprinsessan Margareta, at 516. These special cases,
however, may be ignored when I am stating the general practice.
(Ross T Smyth & Co Ltd v TD Bailey Son & Co [1940] 3 All ER 60 at 67–68 per Lord Wright)
The importance of documents in C.I.F. contracts has sometimes led to them being
described as a sale of documents relating to goods rather than a sale of goods (see, for
example, Arnhold Karberg & Co v Blythe, Green, Jourdain & Co [1915] 2 KB 379 at 514 per
Warrington LJ). Such a view is tempting, especially given, as noted above, the seller may
seek payment even where the goods are lost at sea, and the documents must strictly
conform to the contract. On the other hand, the seller’s acceptance of the relevant
documents will not prevent a buyer from subsequently rejecting the goods if they are
found not to be in conformity with the contract and this was not apparent from the
relevant documents (see Kwei Tek Chao v British Traders and Shippers Ltd [1954] 2 QB 459).
3.4.4 Miscellaneous
C.I.F. contracts may be contrasted with D.A.P. contracts, where payment only becomes
due if the goods are actually delivered, with the seller covering all the costs of
shipment up to, but not including, unloading and import duties. Thus, unlike a C.I.F.
contract, the seller cannot seek payment even when the goods are lost at sea. For
contracts of carriage not entirely by sea, functional equivalents of the F.O.B. contract
and C.I.F. contract have been developed (the F.C.A. and C.I.P. respectively).
FURTHER READING
¢ Ademuni-Odeke, ‘Incoterms 2020 sellers and buyers beware! What the new
rules do not tell you about overall insurance obligations’ (2021) Journal of
Business Law 673 (available in the Online Library).
¢ Fox et al., Chapter 15 ‘International sales’.
¢ Bridge, Chapters 18, 19 and 20.
¢ Odeke, A. ‘The nature of a c.i.f. contract: Is it a sale of documents or a sale of

goods?’ (1993) Journal of Contract Law 158 (available in LexisLibrary through the
Online Library).
CORE COMPREHENSION
Compare some of the key features of F.O.B. contracts and C.I.F. contracts by completing
this table:
Area F.O.B. contracts C.I.F. contracts

Delivery point
Who is responsible for

arranging shipping?
Who is responsible for

arranging insurance?
When does risk pass to

the buyer?
When does property

pass to the buyer?
To what extent, if at all, is a C.I.F. contract a sale of documents relating to goods
rather than a sale of goods?
Feedback to the Comprehension questions can be found at the end of this module
guide.
4 An introduction to the Sale of Goods Act 1979
Contents
4.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.2 Sale of Goods Act 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.3 Interpretation and commercial contracts . . . . . . . . . . . . . . . . 31
4.4 Good faith . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.5 Non-existent goods at the time of the contract . . . . . . . . . . . . . . 33
4.6 Frustration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Learning outcomes
u explain the significance of the Sale of Goods Act 1979 to international sales
transactions
u discuss and apply the approach taken to the interpretation of the Sale of Goods
Act 1979
u discuss the extent to which the law of England and Wales recognises duties of
good faith in commercial law
u analyse the components of the definition of a contract of sale.
International commercial law 4 An introduction to the Sale of Goods Act 1979 page 27
4.1 Introduction
In Chapter 1 we referred to two competing international sale of goods regimes: the
(UK) Sale of Goods Act 1979 (SGA 1979) and the UN Convention on Contracts for the
International Sale of Goods (CISG). This chapter focuses on SGA 1979, providing an
introduction to SGA 1979 in preparation for Chapter 5 (which focuses on rights and
obligations under SGA 1979), Chapter 6 (which focuses on the passing of property and
title in sale of goods contracts under SGA 1979) and Chapter 7 (which focuses on the
remedies which sellers and buyers have under SGA 1979). Chapter 8 will introduce and
contrast the position under the CISG with the position under SGA 1979.
SGA 1979 applies to most domestic (generally non-consumer) sale of goods

transactions in the UK. More importantly, for our present purposes, it also applies to
international (commercial) sale of goods transactions where, for example, English
law governs the transaction. Indeed, regimes similar to SGA 1979 have been adopted
by many Commonwealth nations and, as Bridge notes, the SGA 1979 regime plays a
central role in international commodity sales even where neither the seller nor the
buyer have a connection with the UK (Bridge, M. ‘Uniformity and diversity in the law of
international sale’ (2003) 15 Pace International Law Review 55 at 58).
4.2 Sale of Goods Act 1979
CORE TEXT
4.2.1 Background
SGA 1979 can be traced back to the Sale of Goods Act 1893 (SGA 1893), an Act which,
at the time, sought to codify the law relating to the sale of goods in England, Wales
and Ireland as well as incorporate Scottish sale of goods law. SGA 1893 was replaced
and consolidated by SGA 1979. SGA 1979 remains one of the key pieces of legislation
in the UK in respect of the sale of goods, although it has been amended on a number
of occasions (including by the Consumer Rights Act 2015, under which consumer sale
of goods transactions were largely removed from the SGA 1979 regime). A preliminary
question, therefore, is how should the codifying provisions of SGA 1893/1979 be
interpreted? In particular, should such provisions be interpreted in accordance with
the pre-SGA 1893 case law? In Bank of England v Vagliano Bros [1891] AC 107 at 144 Lord
Herschell stated that the starting point should be the words of the statute:
I think the proper course is in the first instance to examine the language of the statute
and to ask what is its natural meaning, uninfluenced by any considerations derived from
the previous state of the law, and not to start with inquiring how the law previously
stood, and then, assuming that it was probably intended to leave it unaltered, to see if
the words of the enactment will bear an interpretation in conformity with this view.
To hold otherwise, of course, risks removing some of the efficiency of a codifying statute.
SGA 1979 applies to ‘contracts of sale of goods’ (s.1). Contracts of sale of goods are
defined in s.2(1):
A contract of sale of goods is a contract by which the seller transfers or agrees to transfer
the property in goods to the buyer for a money consideration, called the price.
SGA 1979, s.2(1) can be regarded as the gateway to SGA 1979; SGA 1979 applies only
where the components identified in s.2(1) are present. We now turn to consider each
of these components.
4.2.2 Contract
The first component of s.2(1) is that there must be a contract. This usually involves
finding an agreement (through offer and acceptance), intention to create legal
relations and consideration (see further Stone and Devenney, Chapters 1–4). There is,
however, generally no requirement that the contract should be evidenced in writing
(SGA 1979, s.4(1)).
4.2.3 Transfer or agreement to transfer property

What is meant by ‘property’?
The second component of s.2(1) is that the contract must involve the transfer or
agreement to transfer property. Thus, in PST Energy 7 Shipping LLC Product Shipping &
Trading SA v OW Bunker Malta Ltd [2016] UKSC 23 the Supreme Court held that a contract
which envisaged consumption of bunkers before the buyer became the owner of
them was not a contract of sale of goods. In everyday language, the word ‘property’
is often used to refer to the goods themselves. However, lawyers use the word
‘property’ to refer to the relationship (and associated rights) between an individual
(or individuals) and the goods (see Devenney, J. ‘Aspects of property, security and
guarantees’ in Furmston, M. and J. Chuah Commercial law. (London: Pearson, 2013)
second edition [ISBN 9781447904472], p.6). We will discuss the concept of property
further in Chapter 6 but, for our present purposes, it should be noted that SGA 1979,
s.61 provides that ‘“…property” means the general property in goods, and not merely
a special property’. General property can, in broad terms, be equated with ownership,
whereas a special property involves more limited rights, such as a bailment. For this
reason, neither contracts of hire nor (at least initially) contracts of hire purchase are
covered by SGA 1979.
4.2.4 Goods
The third requirement of s.2(1) is that the contract must relate to goods and not, for
example, to land. SGA 1979, s.61 defines goods as including:
…all personal chattels other than things in action and money, and in Scotland all
corporeal moveables except 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.
Four important points need to be made about this definition. First, we need to
distinguish contracts of sale of goods from contracts for work and materials (as SGA
1979 does not apply to contracts for work and materials (see also Supply of Goods and
Services Act 1982)). In broad terms, a contract for work and materials is a contract for a
service where some goods are also provided as part of the service. To take an example
from everyday life, if you take your car for a service and, as part of the service, the
garage puts oil into the engine of your car, that is probably a contract for work and
materials. In international sales the distinction between contracts of sale of goods
and contracts for work and materials might cause difficulties, for example, where the
‘goods’ are to be manufactured. For instance, would a contract for the manufacture
of propellers for a ship be a contract of sale of goods or a contract for work and
materials? In Cammell Laird & Co Ltd v Manganese Bronze and Brass Co Ltd [1934] AC 402
the House of Lords held such a contract to be a contract of sale of goods. In terms
of the relevant test for distinguishing between these two types of contract, in Clay v
Yates (1856) 1 H & N 73 the court employed a substance of the contract test in holding
that a contract for a printer to print a book was a contract for work and materials. By
contrast, in Lee v Griffin (1861) 1 B & S 272 a contract for a dentist to make and supply
false teeth was held, focusing on the end product, to be a sale. The matter seems to
have been settled by Robinson v Graves [1935] 1 KB 579 where a contract for a portrait
was held, on a substance of the contract test, to be a contract for work and materials.
The second important point which needs to be made in relation to the definition
of goods is that there is some doubt whether or not computer software (and
indeed other forms of digital content) are caught by this definition. This is, perhaps,
unfortunate, given the growing digital economy. The leading case is St Albans City and
DC v International Computers Ltd [1997] FSR 251 where Sir Iain Glidewell (at p.265) was
of the opinion that computer software would, in effect, come under SGA 1979 if it
was contained on a disk but not if it was downloaded over the internet. This view was
criticised in Software Incubator Limited v Computer Associates UK Limited [2016] EWHC
1587 (QB), with HHJ Waksman QC (sitting as a Judge of the High Court) stating (at [55]):
The first point to note is that these observations were clearly obiter. The second is that,
whatever the perception may have been in 1996, there is no logic in making the status of
software as goods (or not) turn on the medium by which they were delivered or installed,
as noted above.
The Court of Appeal in the same case ([2018] EWCA Civ 518) was much more traditional
in its approach (the case actually involved the Commercial Agents (Council Directive)
Regulations 1993), with Lady Justice Gloster stating:
55 However, despite the problems of principle which arise if one excludes electronically
supplied software from the definition of goods, I am not persuaded that it is open to
this court to impute what many might think was a common-sense meaning of ‘goods’
to the legislators of the Directive in 1986 and the Regulations in 1993 when the Directive
was implemented. To do so would be contrary to precedent. This court cannot simply
ignore the weight of judicial authority that supports maintaining the tangible/intangible
distinction.
56 The answer to the judge’s approach in this case is the same as the answer given by
this court in Your Response at [9] – [10], [27], [38] – [39], and [41]: namely, that an approach
which departs from precedent and the well understood meaning of ‘goods’ in law should
be resisted by the judiciary. The judge’s conclusion was inconsistent with his acceptance
at [45] that policy considerations were a matter for the European legislature and for the
UK parliament, not for the court.
57 In terms of context, it is relevant that the Directive is not aimed at consumers but
rather at commercial parties. Consumers have the consumer regulations, which I will
address later in this judgment. As such, I do not consider that commercial parties are so
in need of protection that the judiciary should adopt a completely different approach to
interpreting ‘goods’ than that established by precedent.
58 I find support for this conclusion from the way this has been dealt with in New Zealand
and Australia. In defining software as ‘goods’ within their respective consumer sales’
regimes, both countries have left it to the legislature to make the change.
Software Incubator Limited v Computer Associates UK Limited [2018] EWCA Civ 518 was
appealed to the Supreme Court and it decided to refer certain questions to the CJEU. On
17 December 2020 Advocate General Tanchev delivered his Opinion in the case (Case
C-410/19) that computer software supplied electronically can constitute ‘goods’ for
the purposes of the EU Directive 86/653/EEC of 18 December 1986 on the coordination
of the laws of the Member States relating to self-employed commercial agents.
Subsequently, the CJEU held on 16 September 2021:
…Article 1(2) of Council Directive 86/653/EEC of 18 December 1986 on the coordination

of the laws of the Member States relating to self-employed commercial agents must be
interpreted as meaning that it can cover the supply, in return for payment of a fee, of
computer software to a customer by electronic means where that supply is accompanied
by the grant of a perpetual licence to use that software (EU:C:2021:7420).
The extent to which this judgment is influential in the different context of the SGA
1979 remains to be seen.
Another reason why software may not be covered by the SGA 1979 is that property
does not always pass under contracts to supply software (see, for example, Beta
Computers (Europe) Ltd v Adobe Systems Ltd [1996] SLT 604 although compare the
Opinion of Advocate General Tanchev and the CJEU in the Software Incubator case that
software granted on a perpetual licence could be a ‘sale’ for the purposes of the EU
Commercial Agents Directive) and a contract for bespoke software may be a contract
for a service (see, for example, Salvage Association v CAP Financial Services Ltd (CA,
unreported, 9 July 1993)).

Does SGA 1979 need to be amended to clearly include digital content (look also at
the Consumer Rights Act 2015)?
The third point which needs to be made in relation to the definition of goods under
SGA 1979 is that, although land is excluded from this definition, ‘things attached to
or forming part of the land which are agreed to be severed before sale or under the
contract of sale’ are caught by this definition. On the other hand, contracts akin to
mining contracts may not come within SGA 1979. Thus, in Morgan v Russell [1909] 1 KB
357 a contract to sell cinders laying on a particular piece of land was held not to be a
contract of sale of goods.
Finally, goods can be classified as either ‘specific’ goods or ‘unascertained’ goods, a

distinction which is crucial in respect of, for example, the passing of property (see
Chapter 6). Specific goods refers to ‘…goods identified and agreed on at the time a
contract of sale is made and includes an undivided share, specified as a fraction or
percentage, of goods identified and agreed on as aforesaid’ (SGA 1979, s.61). For example,
the whole of a cargo of grain on a particular ship or a particular antique. By implication,
unascertained goods are not identified and agreed upon at the time of the contract
of sale – for example, a (generic) contract for 100 tons of wheat or a contract for a
shipment of 100 cars of a particular description. The key point is that unascertained
goods involve the sale of goods of a particular specification but where no particular
goods have been identified (the position would be different in the car example above
if, for example, the seller and buyer had identified a particular 100 cars). Unascertained
goods may be further sub-categorised into purely generic goods (e.g. 100 tons of barley)
or quasi-specific goods (e.g. 100 tons of barley from a cargo of 200 tons of barley).

Are the following specific or unascertained goods?
1. A particular cargo of grain.
2. 200 gallons of petrol from a storage unit containing 400 gallons of petrol.
3. 100 new tractors.
4.2.5 Money consideration

The final component of s.2(1) is that the buyer must provide a monetary consideration
called the price. Thus, contracts of barter (where goods are exchanged for other
goods) are not covered by SGA 1979. What about part-exchange transactions (which
are very common in, for example, the domestic car industry – see GJ Dawson (Clapham)
Ltd v H & G Dutfield [1936] 2 All ER 232)? In Aldridge v Johnson (1857) 7 E&B 885 the court
held the exchange of 100 quarters of barley (worth a certain amount per quarter) for
32 bullocks and £23 in cash amounted to a contract of sale of goods. The key factor
may be that the barley and bullocks were specifically valued and the £23 represented
the difference in value.
We also need to note SGA 1979, s.8:
(1) The price in a contract of sale may be fixed by the contract, or may be left to be fixed
in a manner agreed by the contract, or may be determined by the course of dealing
between the parties.
(2) Where the price is not determined as mentioned in sub-section (1) above the buyer
must pay a reasonable price.
(3) What is a reasonable price is a question of fact dependent on the circumstances of

each particular case.
However, care needs to be taken with s.8 as the fact that no price has been agreed may
indicate that no contract was formed, the first component of s.2(1) (see, for example,
May & Butcher [1934] 2 KB 17 where the fact that the price was left to be agreed in the
future resulted in the House of Lords holding that no contract had been concluded).
4.3 Interpretation and commercial contracts
CORE TEXT
4.3.1 Introduction
SGA 1979 is not, however, a complete code:
The rules of the common law, including the law merchant, except in so far as they are
inconsistent with the provisions of legislation including this Act and the Consumer
Rights Act 2015, and in particular the rules relating to the law of principal and agent and
the effect of fraud, misrepresentation, duress or coercion, mistake, or other invalidating
cause, apply to contracts for the sale of goods.
(s.62(2), SGA 1979)
In particular, SGA 1979 is built upon the law of contract: many of the provisions in
SGA 1979 are default provisions, while other provisions are shaped by the terms of
the contract. Thus, in Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441, at 502
Halsbury LC stated:
My Lords, since I believe that the basic principle of the English common law of contract,
including that part of it which is codified in the Sale of Goods Act 1893, is to give effect
to the common intention of the parties as to their mutual promises in the sense that I
have just described, I prefer to deal with each appeal by considering first the transaction
between the buyer and the seller in the light of common sense and good faith in business,
before examining the particular provisions of the code upon which the parties rely.
This raises the question of the approach adopted by, for example, the courts in
England and Wales to the interpretation of commercial contracts.
4.3.2 Move from literal interpretation to contextual interpretation

Traditionally, the courts in England and Wales adopted a literal approach to
interpretation on the basis that this promoted commercial certainty. Thus, in Lovell and
Christmas Ltd v Wall (1911) 104 LT 85 Cozens-Hardy MR stated: ‘[T]he duty of the court…
[is] to construe the document according to the ordinary grammatical meaning of the
words used therein’. However, in more recent years there has been a shift towards
a more contextual approach to interpretation (see Reardon Smith Line Ltd v Hansen-
Tangen [1976] 1 WLR 989 at 995 per Lord Wilberforce). One of the chief architects was
Lord Hoffmann who, in Investors Compensation Scheme Ltd v West Bromwich Building
Society [1998] 1 WLR 896 at 912, gave the modern statement of the courts’ approach to
the interpretation of contracts:
Interpretation is the ascertainment of the meaning which the document would convey
to a reasonable person having all the background knowledge which would reasonably
have been available to the parties in the situation in which they were at the time of the
contract.

What are the relative advantages and disadvantages of these different approaches
to contractual interpretation?
Arguably, such an approach better reflects the reality of communication (see, for
example, the Irish case of The Law Society of Ireland v The Motor Insurers’ Bureau of
Ireland [2017] IESC 31); certainly words may mean something in one context but
something totally different in another context. On the other hand, such an approach
is arguably less certain and may increase the amount of litigation on issues of
interpretation (which caused concern to Lord Neuberger in BNY Mellon Corporate
Trustee Services Limited v LBG Capital No 1 Plc [2016] UKSC 29). Moreover, how should
the courts deal with the interpretation of standard clauses which have been given a
consistent interpretation over the years which does not necessarily reflect the more
modern contextual interpretation? In Bominflot Bunkergesellschaft fur Mineraloele
mbH & Co KG v Petroplus Marketing AG (The Mercini Lady) [2010] EWCA Civ 1145 in such a
situation Rix LJ (at [61]) felt unable to depart from the established meaning:
The jurisprudence extends beyond individual decisions and has become expressive of a
principle, and what is more the principle also encompasses clauses very similar to clause
18. I must consider that the parties to this English law contract, foreign as both of them
are and quite possibly ignorant of the consequences of their choice of language, intended
to contract by reference to what English law had to say about the language which they
have adopted.
Some would argue that a contextual interpretation is, in effect, a ‘commercial’

interpretation (for example, McMeel, 1998). Indeed, in Rainy Sky SA and Others v
Kookmin Bank [2011] UKSC 50 Lord Clarke (at [21]) stated that: ‘If there are two possible
constructions, the court is entitled to prefer the construction which is consistent
with business common sense and to reject the other’. More recently, however,
Lord Neuberger has warned against taking business common sense too far and
undervaluing the language used in the agreement (see Arnold v Britton [2015] UKSC 36
at [17]). The apparent differences in approach between Lord Clarke and Lord Neuberger
were most recently considered by the Supreme Court in Wood v Capita Insurance
Services Limited [2017] UKSC 24, with Lord Hodge (at [11]) stating:
[I]n striking a balance between the indications given by the language and the
implications of the competing constructions the court must consider the quality of
drafting of the clause…and it must also be alive to the possibility that one side may have
agreed to something which with hindsight did not serve his interest…Similarly, the court
must not lose sight of the possibility that a provision may be a negotiated compromise or
that the negotiators were not able to agree more precise terms.
These principles were applied recently in Nord Naphtha Ltd v New Stream Trading AG
[2021] EWCA Civ 1829, a case that involved a contract to supply diesel. The contract was
terminated following a force majeure event (on which see Section 4.6.1) and the key
issue was whether or not the intended suppliers of the diesel were required to repay
an advance payment. This in turn raised an issue about the correct interpretation of
Clause 14.5 of the contract, which provided that:
...nothing herein shall impair the obligations by the Seller to repay to the Buyer the
amount of the advance payment or any Outstanding Advance Amount under this Contract
in the event that the delivery...is not made...due to Force Majeure Event.
The suppliers argued that this clause did not create a right of repayment (it merely
preserved any rights that might otherwise exist). The Court of Appeal disagreed
and held that Clause 14.5 did create a right of repayment in such circumstances.
Interpreting the Clause in the light of the experience of the parties and noting that the
contract was sometimes ‘clumsily drafted’, the Court of Appeal held that the words
‘nothing herein shall impair’ were merely introductory and not intended to act as a
limitation. Moreover, the Court of Appeal was of the opinion that such a conclusion
was supported by business common sense, it not making business common sense for
a buyer to not have a right of repayment in such force majeure circumstances.
4.4 Good faith
4.4.1 Traditional position

To some extent, the principles of interpretation are linked to the question of whether
or not commercial transactions are subject to a duty of good faith in England and
Wales. This may arise, for example, where one (or both) of the parties argues that
contractual provisions have to be performed in good faith. Traditionally, however, the
law of England and Wales, unlike many continental European legal systems, has not
recognised an overriding duty of good faith in contractual dealing (see Interfoto Picture
Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433 at 439 per Bingham LJ). Such an
approach is often justified on the grounds of commercial certainty:
There is in my view a real danger that if a general principle of good faith were established
it would be invoked as often to undermine as to support the terms in which the parties
have reached agreement. The danger is not dissimilar to that posed by too liberal an
approach to construction, against which the Supreme Court warned in Arnold v Britton
[2015] UKSC 36, [2015] AC 1619.
(MSC Mediterranean Shipping Co SA v Cottonex Anstalt [2016] EWCA Civ 789 at [45] per
Moore-Bick LJ)
Such concerns were also present, albeit in the slightly different context of duress, in
Pakistan International Airline Corporation v Times Travel (UK) Ltd [2021] UKSC 40.
4.4.2 More recent developments

Nevertheless, in recent years there is some evidence of duties/principles of good
faith gaining traction across the common law world (see, for example, the Supreme
Court of Canada in Bhasin v Hrynew [2014] SCC 71). In this area, a key case in England
and Wales is Yam Seng Pte Limited v International Trade Corporation Limited [2013] EWHC
111 where Leggatt J held that it was possible, depending on the context of the case,
to imply on normal principles a term of good faith into a contract. This does not,
however, mean that such a duty will always be implied:
I start by reminding myself that there is no general doctrine of ‘good faith’ in English
contract law, although a duty of good faith is implied by law as an incident of certain
categories of contract: see…Yam Seng Pte Ltd v International Trade Corporation Ltd [2013]
EWHC 111 (QB) at paragraphs 120–131. If the parties wish to impose such a duty they must
do so expressly.
(Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd (trading as
Medirest) [2013] EWCA Civ 200 at [105] per Jackson LJ)
On the other hand, in Alan Bates and Others v Post Office Limited (No 3: Common Issues)
[2019] EWHC 606 (QB) at [711] Fraser J stated that in cases where there is an implied
duty of good faith:
This means that the parties must refrain from conduct which in the relevant context
would be regarded as commercially unacceptable by reasonable and honest people. An
implied duty of good faith does not mean solely that the parties must be honest.

Should commercial parties be subject to a duty of good faith?
4.5 Non-existent goods at the time of the contract
CORE TEXT
4.5.1 Introduction
Occasionally, a seller and buyer may purport to enter into a contract for the sale of
goods which, unbeknown to either party, have perished (e.g. the ship which was
transporting them had been lost at sea). At common law this may engage the doctrine
of common mistake (see generally Chandler, A., J. Devenney and J. Poole ‘Common
mistake: Theoretical justification and remedial inflexibility’ (2004) Journal of Business
Law 34–58). The important point to note is that at common law the doctrine of
common mistake is subject to the terms of the contract. Therefore, if we were to apply
the common law rules to a situation where the goods have already perished at the
date of the contract, there would be at least four possible outcomes:
1. The contract is void for common mistake (Bell v Lever Bros [1932] AC 161). The
doctrine of common mistake is not easy to establish, as is demonstrated by Great
Peace Shipping Ltd v Tsavliris (‘The Great Peace’) [2002] EWCA Civ 1407. That case
involved a charter contract for The Great Peace to provide assistance with a salvage
operation. When the contract was concluded both parties thought The Great Peace
was approximately 35 miles away when, in fact, it was approximately 410 miles
away. When a closer ship was found which could provide assistance, the charterers
sought to argue that the charter of The Great Peace was void for common mistake.
The Court of Appeal thought that the mistake was not sufficiently serious for the
contract to be rendered void: although The Great Peace was further away than
anticipated, it could still have provided assistance.
2. The contract was subject to a condition precedent that the goods are in existence,
meaning neither party is bound (see Associated Japanese Bank v Credit du Nord
SA [1988] 3 All ER 902 where a contract of guarantee was subject to a condition
precedent that the subject matter of the contract being guaranteed existed).
3. The seller promised that the goods were in existence, meaning that the seller is
now in breach (McRae v Commonwealth Disposals Commission (1951) 84 CLR 377).
4. The buyer might have taken the risk as to whether the goods were in existence
(sometimes referred to as ‘buying a chance’) in which case they are still liable to
pay (Couturier v Hastie (1856) 5 HLC 673).
4.5.2 Sale of Goods Act 1979, s.6

For many years, however, Couturier v Hastie (1856) 5 HLC 673 was thought to be the
authority for the proposition that when specific goods have perished before the
contract is concluded, the contract is void (see, for example, Atiyah, P.S. ‘Couturier v.
Hastie and the sale of non-existent goods’ (1957) 73 Law Quarterly Review 349). This is
reflected in SGA 1979, s.6 (which sought to (partially) codify this area of sale of goods
law):
Where there is a contract for the sale of specific goods, and the goods without the
knowledge of the seller have perished at the time when the contract is made, the
contract is void.
Prima facie s.6 does not appear to be subject to the terms of the contract (e.g.
what happens if S explicitly promises the goods are in existence – see McRae v
Commonwealth Disposals Commission (1951) 84 CLR 377). Is this correct in principle (see
Joseph Constantine SS Line Ltd v Imperial Smelting [1942] AC 154 at 184 where Lord Wright
(obiter) suggested that s.6 is subject to the terms of the contract)?
SGA 1979, s.6 only covers cases involving specific goods (see Section 4.2.4); other cases
are dealt with by the common law. Can a contract for unascertained goods be void for
common mistake at common law on the ground that the goods have perished? Certainly,
in relation to purely generic goods the contract will generally not be void for common
mistake as the seller has promised to supply the buyer with goods of a particular
description rather than particular, identified goods – therefore S can usually acquire
appropriate goods from another source (Intertradex SA v Lesieur Tourteaux SARL [1977] 2
Lloyd’s Rep 146). The position may be otherwise with quasi-specific goods (see Howell v
Coupland (1876) 1 QBD 258 (case on subsequent impossibility) and below at 4.6.2).

When do goods perish?
SGA 1979, s.6 applies only where the goods have perished (other cases – e.g. res sua
where, unbeknown to the parties, the buyer already owns the goods in question – are
dealt with by the common law). Thus, s.6 does not apply where the goods have never
existed (McRae v Commonwealth Disposals Commission (1951) 84 CLR 377). Perished does
not necessarily mean that the goods have been completely destroyed. For example,
in Asfar v Blundell [1896] 1 QB 123 dates were contaminated with sewerage when the
vessel on which they were being carried sank and were held perished for insurance
purposes (although could, apparently, have been used for making alcohol). By
contrast, in Horn v Minister of Food [1948] 2 All ER 1036 rotten potatoes were held not to
have perished, which is arguably a harsh decision in the light of Asfar v Blundell. Stolen
goods may also have ‘perished’ (see Barrow, Lane & Ballard Ltd v Philip Phillips & Co Ltd
[1929] 1 KB 574).
What is the position where only part of the goods perish? In Barrow, Lane & Ballard
Ltd v Philip Phillips & Co Ltd a seller sold 700 bags of nuts believed to be in a particular
warehouse. In fact, only 109 bags were stolen. It was held that the contract was void,
despite the fact that 591 bags were still available. By contrast, in HR & S Sainsbury Ltd v
Street [1972] 1 WLR 834 (actually a case on subsequent impossibility – see Section 4.6.2)
McKenna J held that the seller had to offer the available goods to the buyer (although
the buyer did not have to accept them).
4.6 Frustration
CORE TEXT
4.6.1 Introduction
When goods perish after the contract has been formed, this may raise issues of risk
(SGA 1979, s.20, which will be considered in Chapter 6). It may also raise the issue of
whether or not the contract has been frustrated (on which see, generally, Stone and
Devenney, Chapter 13). The modern statement of the doctrine of frustration can be
found in Davis Contractors Ltd v Fareham UDC [1956] AC 696 at 728–29:
So perhaps it would be simpler to say at the outset that frustration occurs whenever the
law recognises that without default of either party a contractual obligation has become
incapable of being performed because the circumstance in which performance is called
for would render it a thing radically different from that which was undertaken by the
contract. Non haec in foedera veni. It was not this that I promised to do.
At this juncture three key points need to be made about common law frustration:
1. It is not limited to situations where the goods perish (it also covers, for example,
subsequent illegality).
2. It is subject to the terms of the contract (express clauses dealing with what would
otherwise be frustrating events are sometimes called force majeure clauses).
3. It is difficult to establish. Take, for example, Tsakiroglou & Co v Noblee and Thorl
[1962] AC 93. In that case the appellants had agreed to sell groundnuts to the
respondents. The goods were to be shipped from Port Sudan to Hamburg. It was
anticipated by the parties that the groundnuts would be shipped via the Suez
Canal although this was not specified in the contract. The appellants argued
that the contract was frustrated when the Suez Canal was closed by the Egyptian
government as this meant that the groundnuts would need to be shipped via the
Cape of Good Hope, extending the journey by about four weeks. The House of Lords
disagreed. The mere fact that the shipping had become more expensive was not
enough for the doctrine of frustration to operate. Significantly, neither the route
for shipment nor the precise delivery date had been specified in the contract.
4.6.2 Sale of Goods Act 1979, s.7

SGA 1979, s.7 includes a ‘partial’ codification of the doctrine of frustration:
Where there is an agreement to sell specific goods and subsequently the goods, without
any fault on the part of the seller or buyer, perish before the risk passes to the buyer, the
agreement is avoided.
SGA 1979, s.7 applies only where the goods have perished (on which, see Section 4.5.2);
other cases of subsequent impossibility (e.g. illegality) are still dealt with by the
common law. SGA 1979, s.7 also applies only where there is an agreement to sell (i.e.
property has not passed – on which see Chapter 6). Can a sale of goods contract where
the property has passed be frustrated at common law? Generally not, as the essence
of a contract of sale of goods is the passing of property (see Re Shipton [1915] 3 KB 676).
However, compare Kursell v Timber Operators and Contractors Ltd [1927] 1 KB 298 which
concerned the contract for the sale of timber from a Latvian forest. The contract was
frustrated (by the nationalisation of the forest), the court having held that property
had not passed. However, Scrutton LJ went further and held that even if the property
had passed the contract was frustrated as there was still much to be done to the
timber (cutting, measurement, etc.).
SGA 1979, s.7 applies only to specific goods; situations involving unascertained goods
are dealt with under the common law of frustration. Can a contract for unascertained
goods be frustrated at common law? Generally, no: if an anticipated source fails, the
seller can usually get the goods from another source (see Blackburn Bobbin v Allen
[1918] 2 KB 467 and Re Badische Co Ltd [1921] 2 Ch 331). The position may be different in
respect of quasi-specific goods where it becomes impossible to supply the goods from
the identified source (see HR & S Sainsbury Ltd v Street [1972] 1 WR 834). Most recently, in
CTI Group Inc v Transclear SA [2008] EWCA Civ 856, Moore-Bick LJ (at [23]) stated:
These authorities, in particular Société Co-operative Suisse des Céréales et Matières

Fourragères v La Plata Cereal Company S.A. and Lewis Emanuel & Son Ltd v Sammut, make
it clear that the principles of frustration are capable of applying to a contract for the
sale by description of unascertained goods of a specified origin, a conclusion that is
also supported by the observations of Russell J. in In re Badische Co Ltd [1921] 2 Ch. 331 at
pp.381–383, another case on which Mr. Nolan relied. However, they also make it clear
that, in the absence of some exceptional supervening event, such a contract will not
be frustrated simply by a failure on the part of the ultimate supplier to make goods
available for delivery. The reason for that is not far to seek: it is implicit in a contract of
this kind that the seller will either supply the goods himself or (more likely) will make
arrangements, directly or indirectly, for the goods to be supplied by others. In other
words, he undertakes a personal obligation to procure the delivery of contractual goods
and thereby takes the risk of his supplier’s failure to perform…
In terms of the consequences of frustration, at common law (and under SGA 1979, s.7),
the obligations of the parties are discharged from the point of frustration whereas
obligations which arose before the frustrating event remain binding. This can cause
harsh consequences. For example, A and B enter into a contract on Monday under
which A is to sell goods to B. Under the contract B is to pay (in advance) on Tuesday
and the goods are to be delivered on Friday. B pays on Tuesday but the contract is
frustrated on Wednesday. Under traditional principles, A is discharged from delivering
the goods (as this was due after the frustrating event), whereas prima facie B cannot
reclaim their pre-payment. This is arguably harsh on B. This rule was modified in
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe [1943] AC 32: B can reclaim their money
under the law of restitution if they have obtained nothing for it. However, that might
operate harshly on A who, perhaps, has made goods to B’s specification. Arguably,
as frustration is by definition the fault of neither party, there should be some way of
apportioning loss. To some extent this has now been achieved by the Law Reform
(Frustrated Contracts) Act 1943 but this does not apply to cases under SGA 1979, s.6.

Can contracts be frustrated by the consequences of COVID-19? Cf. Li Ching Wing v
Xuan Yi Xiong [2003] HKDC 54 and Salam Air SAOC v Latam Airlines Groups SA [2020]
EWHC 2414 (Comm).
FURTHER READING
¢ Fox et al., Chapter 8 ‘Introduction and definitions’ and pp.343–55.
¢ Moore, H. ‘Unconventional “sales”’ (2016) 75 Cambridge Law Journal 465.
¢ Green, S. and D. Saidov ‘Software as goods’ (2007) Journal of Business Law 161.
¢ Rodger, A. ‘The codification of commercial law in Victorian Britain’ (1992) 108

Law Quarterly Review 570.
¢ McMeel, G. ‘The rise of commercial construction in contract law’ (1998) Lloyd’s
Maritime and Commercial Law Quarterly 382.
¢ Saintier, S. ‘The elusive notion of good faith in the performance of a contract,

why still a bête noire for the civil and the common law?’ (2017) Journal of Business
Law 441.
¢ Campbell, D. ‘Good faith and the ubiquity of the “relational” contract’ (2014)
77(3) Modern Law Review 475 (available on the VLE).
CORE COMPREHENSION
Which of the following situations are potentially covered by SGA 1979?
a. The purchase of computer software.
b. The sale of all of the mushrooms growing in a particular field.
c. A contract for the construction and sale of a cargo ship.
d. A contract for a solicitor to produce a detailed legal document.
Last month Alpha Ltd agreed to purchase a cargo of papaya which was on board the
SS West Country. The cargo was to be delivered at the Port of Bristol with property
passing once the goods had been delivered. When the cargo was unloaded at the Port
of Bristol, it was discovered that the cargo had been contaminated with diesel oil and
was no longer fit for human consumption.
Advise Alpha Ltd.
guide.
Notes
5 The Sale of Goods Act 1979 and the obligations of
the parties
Contents
5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.2 The express terms of the contract . . . . . . . . . . . . . . . . . . . . 41
5.3 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.4 Terms implied by the Sale of Goods Act 1979 . . . . . . . . . . . . . . . 44

Learning outcomes
u explain and apply the duties of the seller to deliver and the buyer to accept
goods
u discuss and apply the implied terms in ss.12–15 of the Sale of Goods Act 1979.
International commercial law 5 The Sale of Goods Act 1979 and the obligations of the parties page 41
5.1 Introduction
In this chapter we will explore the rights and obligations of the parties to a contract of
sale of goods under the law of England and Wales. Our starting point is, of course, the
express terms of the contract. However, we shall also explore (a) the provisions of SGA
1979 relating to delivery, and (b) the terms implied by SGA 1979 into certain contracts
of sale of goods. Also, in relation to express and implied terms we shall explore the
classification, and the importance of this classification, of terms into either conditions,
warranties or innominate terms.
5.2 The express terms of the contract
CORE TEXT
¢ McKendrick, pp.341–55 (and revise pp.99–113).
5.2.1 Introduction
As noted above (4.3.1), in mapping the rights and obligations of the parties under a
contract of sale of goods our starting point is to consider the express terms of the
contract. Such terms commonly include terms relating to the nature of the goods to
be delivered, the price and provisions as to delivery. In more detailed contracts, the
contract may include provisions such as exclusion clauses, limitation clauses and force
majeure clauses (see Section 4.6.1).

What is meant by (a) an exclusion clause, (b) a limitation clause, and (c) a force
majeure clause?
5.2.2 The classification of terms

Traditionally, at common law the law of England and Wales classified promissory terms
as either conditions or warranties, with conditions being the more important terms
(sometimes described as terms going to the root of the contract, see Poussard v Spiers
(1876) 1 QBD 410). This classification is also adopted in SGA 1979 (see Section 5.4). The
significance of the distinction is that if a condition is breached, the non-breaching
party can potentially reject the goods (and terminate the contract) and/or claim
damages; in contrast, if a warranty is breached the non-breaching party can only claim
damages (this is discussed further in Chapter 7).
The advantage of such an approach is that there is certainty as to the remedies

available for different types of breach. On the other hand, there can sometimes be
debate about whether a term is a condition or warranty. This is, of course, not the
case in respect of the terms implied by SGA 1979, ss.12–15, which are classified by the
legislature as either conditions or warranties. However, the labelling of the express
terms of a sale of goods contract by the parties as either conditions or warranties
is not conclusive as they may not, for example, have been using those terms in
a technical sense (see, for example, Schuler AG v Wickman Tools Sales Ltd [1974] AC
235). The distinction is based on the (objective) intention of the parties and relative
importance of the term at the time of the contract.
Another possible argument against the traditional classification of promissory terms

into conditions or warranties is that it might allow a person (who may, for example,
have changed their mind about the contract) to terminate a contract for a trifling
breach of a condition. With this in mind, a third type of term was developed: the
innominate term. With an innominate term, the consequences of breach of that
term are not known at the outset. Rather, the consequences are determined by the
seriousness of the breach. If the consequences of the breach are sufficiently serious
the non-breaching party will be able to reject the goods (and terminate the contract)
in addition to claiming damages. In contrast, if the consequences of the breach are not
so serious, only damages will be available.
The leading case is Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha Ltd [1962] 2 QB
26. This case concerned a 24-month charter party of a ship. The ship was required to
be ‘seaworthy’. The ship was not seaworthy on delivery as a result of the state of the
engines which necessitated repairs. This resulted in delays and four months into the
contract the charterers purported to terminate the charter. The owners disputed the
charterer’s right to terminate the contract and sued for wrongful repudiation. The
trial judge agreed with the owners and the charterers appealed. The Court of Appeal
agreed that the breach did not go to the root of the contract and that the charterers
had not been deprived of substantially the whole benefit of the contract. Therefore, as
an innominate term, the charterers did not have the right to terminate the contract
for breach.
More recently, in Ark Shipping Co LLC v Silverburn Shipping (IoM) Ltd (The Arctic) [2019] EWCA
Civ 1161 the Court of Appeal, in the context of a charter party, held that unless it is clear
that a term is intended to be a condition (or indeed a warranty) it would be treated as an
innominate term if the consequences of breach could be trivial or very serious.

What are the advantages and disadvantages of the use of the innominate term?
It is, of course, true that some terms can be broken in a range of ways, only some of
which will have serious consequences. However, it may be that the introduction of a
third category of term – innominate term – has created more uncertainty. First, a court
now has to determine whether (objectively assessed) the parties intended a particular
term to be a condition, warranty or innominate term. Second, a non-breaching party,
perhaps under serious time pressures, has to decide whether or not the consequences
of a particular breach are sufficiently serious so as to give them the right to terminate
the contract; if the non-breaching party purports to terminate a contract on this
ground but a court subsequently decides that the breach was not serious enough for
termination, then the purported termination amounts to a breach itself.
As noted above, the terms implied by SGA 1979, ss.12–15 are classified by the legislature
as either conditions or warranties. Therefore, in respect of these statutory implied
terms, there is no need to consider innominate terms. The position is otherwise in
relation to the express terms of a sale of goods contract, as was confirmed by the
Court of Appeal in Cehave NV v Bremer Handelgesellschaft mbH (The Hansa Nord) [1976]
QB 44. In that case, Dutch buyers purchased 12,000 tons of certain pellets for use as
animal feed from German sellers. The contract was made on standard (GAFTA) terms,
with clause 7 providing that ‘shipment to be made in good condition’. The buyers
paid the price (£100,000) but when the goods arrived in Rotterdam it was discovered
that part of the shipment had been damaged by overheating. The buyers rejected
the whole shipment. However, the sellers refused to refund the purchase price. The
Rotterdam county court ordered the shipment to be sold. The shipment was sold to a
party who immediately resold the whole cargo to the original buyers for £30,000. The
buyers then used it for their original purpose of making animal feed. Mocatta J held
that terms under SGA 1979 must be either conditions or warranties and that ‘shipped
in good condition’ was a condition. The Court of Appeal allowed the appeal on the
ground that the ‘shipped in good condition’ term was an innominate term. Since
the whole cargo was eventually used for its intended purpose, the breach was not
sufficiently serious as to allow rejection.
5.3 Delivery
CORE TEXT
5.3.1 Introduction
SGA 1979 contains a number of default rules on delivery. In other words, they apply
unless the parties have agreed otherwise (for example, under the special trade terms
discussed in Chapter 3). Thus, s.28 provides that, unless otherwise agreed, payment
and delivery are concurrent conditions:
Unless otherwise agreed, delivery of the goods and payment of the price are concurrent
conditions, that is to say, the seller must be ready and willing to give possession of the
goods to the buyer in exchange for the price and the buyer must be ready and willing to
pay the price in exchange for possession of the goods.

What is meant by delivery?
It should be noted that under SGA 1979 delivery does not necessarily mean that S has
to transport the goods to, for example, B’s place of business: delivery merely ‘means
voluntary transfer of possession from one person to another’ (s.61). In terms of the
place of delivery, SGA 1979, s.29(2) provides:
Apart from any such contract, express or implied, the place of delivery is the seller’s place
of business if he has one, and if not, his residence; except that, if the contract is for the
sale of specific goods, which to the knowledge of the parties when the contract is made
are in some other place, then that place is the place of delivery.
On the other hand, SGA 1979, s.32(1) provides:
Where, in pursuance of a contract of sale, the seller is authorised or required to send the
goods to the buyer, delivery of the goods to a carrier (whether named by the buyer or
not) for the purpose of transmission to the buyer is prima facie deemed to be a delivery of
the goods to the buyer.
An interesting case on delivery is Albright & Wilson v Biachem Ltd [2002] UKHL 37. In
that case the claimant purchased consignments of different chemicals: chemical A
from seller A and chemical B from seller B. Both sellers, by coincidence, used the same
carrier to deliver their chemicals on the same day. Unfortunately, there was a mix-up
resulting in the carrier delivering chemical A with the paperwork for chemical B. Thus,
it appeared to the buyer that chemical B had been delivered and accordingly the
buyer discharged this delivery into its existing stock of chemical B. The mixing of what
was, in fact, chemical A with existing stock of chemical B caused an explosion! One
question which the House of Lords had to consider was whether there had been an
effective delivery and, if so, on behalf of which seller? It was held that the delivery was
on behalf of seller A; the paperwork was merely ancillary.
A refusal to take delivery might amount to a repudiatory breach of contract: see

Fercometal SARL v Mediterranean Shipping [1988] 2 All ER 742. Note, however, s.29(5)
which provides: ‘Demand or tender of delivery may be treated as ineffectual unless
made at a reasonable hour; and what is a reasonable hour is a question of fact’. In
terms of the time of delivery, s.10 states that whether or not time is of the essence (and
hence a condition) depends on the terms of the contract (although in commercial
contracts time will in fact often be of the essence: Bunge v Tradax [1981] 1 WLR 711).
5.3.2 Delivery of the wrong quantity

What is the position if the seller delivers more or less than the amount which should
have been delivered under the contract? Where a seller delivers less than the
contractual amount of goods, the buyer has two options: the buyer can either (1)
reject the goods or (2) accept the goods and pay for them at the contractual rate (SGA
1979, s.30(1)). Where a seller delivers more than the contractual amount of goods, the
buyer has three options: the buyer can either (1) reject all the goods, (2) accept the
goods included in the contract, or (3) accept all the goods and pay for them at the
contractual rate (SGA 1979, s.30(2) and (3)). However, in either case the buyer cannot
reject the whole delivery if the discrepancy is (1) de minimis (trifling) or (2) so slight as
to be unreasonable to reject the whole (SGA 1979, s.30(2A)). The de minimis rule was
considered in Shipton, Anderson v Weil Bros [1912] 1 KB 574, which involved a sale of
4,500 tons of wheat (+/- 10 per cent). The seller delivered 4,950 tons and 55Ib (i.e. 55Ib
over the tolerances) and the court held that the extra amount was de minimis.
5.4 Terms implied by the Sale of Goods Act 1979
CORE TEXT
¢ McKendrick, Chapter 11.
5.4.1 Introduction
The express terms of a contract of sale of goods may be supplemented by implied
terms.

What rationales might there be for the implication of terms into contracts?
Terms may be implied by the courts and/or by statute. The power of the courts to
imply terms is exercised cautiously as the courts do not want to rewrite the parties’
agreement (see Marks and Spencer plc v BNP Paribas Securities Services Trust Company
(Jersey) Limited [2015] UKSC 72). Broadly, a court might imply a term into a contract in
two situations:
1. As a matter of law (that is, as a matter of policy).
2. As a matter of fact (that is, as representing the parties’ presumed intentions). We

consider a term implied on this ground in 4.4.2 (Yam Seng Pte Limited v International
Trade Corporation Limited [2013] EWHC 111). Terms may also be implied as a matter of
custom (e.g. the custom of a particular market, see Hutton v Warren (1836) 1 M & W
466) and this might be thought of as a term implied in fact.
In the current context, statute also implies a number of important terms into
contracts of sale of goods. We now turn to consider those terms (SGA 1979, ss.12–15).
5.4.2 Section 12 – the right to sell, etc.

SGA 1979 implies three terms into contracts of sale of goods. First, s.12(1) implies a
condition that the seller has the right to sell the goods:
(1) In a contract of sale, other than one to which subsection (3) below applies, there is
an implied term on the part of the seller that in the case of a sale he has a right to sell
the goods, and in the case of an agreement to sell he will have such a right at the time
when the property is to pass…
(5A) As regards England and Wales and Northern Ireland, the term implied by subsection
(1) above is a condition and the terms implied by subsections (2), (4) and (5) above
are warranties.
It is important to note that s.12(1) does not apply where, for example, the seller (or
a third party) has a limited and/or disputed title to the goods and the agreement is
that the seller shall transfer such title as the seller (or a third party) has in the goods
(s.12(3)). There is a clear link between s.12(1) and s.2(1), which underlines that the
transfer of property is ultimately the essence of a contract of sale of goods. The strict
nature of s.12(1) is illustrated by Rowland v Divall [1923] 2 KB 500, where the defendant
innocently purchased a stolen car and then innocently sold it to the plaintiff. This
was a breach of s.12(1) as the defendant did not have the right to sell the car, which
entitled the plaintiff to reclaim the purchase price even though the defendant acted
innocently and the plaintiff had gained substantial use of the car before the issue
came to light.

Do you think that the result in Rowland v Divall [1923] 2 KB 500 is harsh?
However, it is important to note that s.12(1) is not limited to cases where the
seller does not have property in the goods at the relevant time: see Niblett Ltd v
Confectioners’ Materials Co Ltd [1921] 3 KB 387. In that case a seller sold condensed
milk to a buyer with the brand name ‘nissly’. This infringed Nestlé’s trademark, who
obtained an injunction. The buyer successfully claimed the seller was in breach
of s.12(1) as the seller had no right to sell as it could be stopped by process of law.
In contrast, in Great Elephant Corp v Trafigura Beheer BV [2012] EWHC 1745 (Comm)
(reversed on other grounds, see [2013] EWCA Civ 905) the court held there was no
breach of s.12(1) where the goods (oil) were loaded on a ship in Nigeria but the ship
was prevented from leaving by local authorities as a result of not obtaining the
necessary paperwork to load the ship. The court held that this did not affect the
seller’s ‘right to sell’ the goods. However, the court did find the seller in breach of
s.12(2)(b) (which will be considered below).
The second term implied into contracts of sale of goods by s.12 is a warranty that the
goods are free from any charge or encumbrance (s.12(2)(a)). This is supplemented by a
third implied term, a warranty that the buyer will have quiet possession of the goods
(s.12(2)(b)). Thus, in Rubicon Computer Systems v United Paints Ltd (2000) 2 TCLR 453
(available in Westlaw through the Online Libary), where a seller inserted a time lock
into a computer as a result of a dispute, it was held that the seller was in breach of
s.12(2)(b).
5.4.3 Section 13 – correspondence with description

Section 13(1) implies a condition into contracts of sale of goods where the goods are
sold by description:
(1) Where there is a contract for the sale of goods by description, there is an implied term
that the goods will correspond with the description.
(1A) As regards England and Wales and Northern Ireland, the term implied by subsection
(1) above is a condition.
The meaning of a ‘sale of goods by description’ was considered by the Court of Appeal
in Harlingdon & Leinster Ltd v Christopher Hull Fine Art Ltd [1991] 1 QB 564. That case
concerned the sale of a painting thought to be by a famous artist. Crucially, although
the seller was not a specialist in this area, the buyer was. The Court of Appeal held that
there was no ‘sale by description’ as it could not reasonably have been expected that
the buyer would rely on the description given by the seller.
The precise reach of s.13 depends on what does and does not form part of the
description for the purposes of that section. For example, the law of England and
Wales had traditionally recognised a distinction between pre-contractual statements
which become terms of the contract and pre-contractual statements which do not
become part of the contract but may give rise to liability in, for example, the law of
misrepresentation. The distinction between a term and a representation is based on
the intention of the parties. Does s.13 cover what would otherwise be regarded as a
descriptive non-contractual representation? In other words, does s.13 to some extent
render the distinction between terms and representations redundant? The orthodox
view is that s.13 does not abolish the traditional distinction between terms and
representations (see Oscar Chess Ltd v Williams [1957] 1 All ER 325).
So, the orthodox position is that only pre-contractual statements which were intended
to be part of the contract are within the ambit of s.13. Are all descriptive words which
were intended to have contractual effect part of the description for the purposes of s.13?
Traditionally, a strict approach was adopted to this issue in England and Wales. Thus, in Re
Moore & Co and Landauer & Co [1921] 2 KB 519 a buyer was able to reject goods where some
were packed in crates of 24 instead of 30 as required under the contract. In Arcos Ltd v EA
Ronaasen [1933] AC 470 there was a contract for the sale of wooden staves which were
required to be half an inch thick. Although a large number of the wooden staves were
one-eighth of an inch smaller, they were still perfectly suitable for the intended use. The
court nevertheless held that there was a breach of s.13 and so the buyer could reject the
staves and get its money back. Some would criticise these cases as being too strict and as
allowing a buyer to undo a contract on a technicality. Others would argue that from the
point of view of certainty there is much to be said for such an approach, particularly in
the commodity markets (see Fox et al., 2020, p.403).
More recently, sometimes a more generic approach seems to have been adopted
(meaning that not all descriptive words intended to be contractual in nature come
within s.13), although Moore & Co and Landauer & Co and Arcos Ltd v EA Ronaasen have
never been overruled. Thus, in Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441,
at 503, Lord Diplock stated (emphasis added):
The ‘description’ by which unascertained goods are sold is, in my view, confined to those
words in the contract which were intended by the parties to identify the kind of goods
which were to be supplied. It is open to the parties to use a description as broad or narrow
as they choose. But ultimately the test is whether the buyer could fairly and reasonably
refuse to accept the physical goods proffered to him on the ground that their failure to
correspond with that part of what was said about them in the contract makes them goods
of a different kind from those he had agreed to buy. The key to section 13 is identification.

How useful is s.13 today?
Such an approach raises a question about the precise utility of s.13: if s.13 applies
only to descriptive words which identify the kind of goods to be supplied (Ashington
Piggeries Ltd v Christopher Hill Ltd), and which were intended to have contractual effect
(Oscar Chess Ltd v Williams), why is it needed? Surely this is already covered by the
express terms of the contract? Interestingly, the strict approach in Arcos was approved
in Local Boy’z Ltd v Malu NV [2021] EWHC 2439 (Comm) where face masks did not
correspond with the description presented in a photograph prior to an order being
placed.
5.4.4 Section 14 – implied terms relating to quality

Section 14 implies two important terms into most contracts of sale of goods: a
condition that the goods are of satisfactory quality (s.14(2)) and a condition that the
goods are reasonably fit for their purpose (s.14(3)). With the exception of the terms
implied under s.15 (see Section 5.4.5), no other terms about the quality of goods are
implied by SGA 1979 (see s.14(1)). Unlike s.13, s.14(2) and (3) require the seller to sell in
the ‘course of a business’. This does not, however, mean that the seller has to be in the
business of selling those types of goods. Thus, in Stevenson v Rogers [1999] QB 1028 a
fisherman who sold his trawler was held to have sold it in the ‘course of a business’,
despite the fact that his business was not selling trawlers. Section 14(2) and (3) also
refer to ‘goods supplied under the contract’. The meaning of goods was discussed at
4.2.4. It is, however, important to note that this phrase includes packaging and is also
wide enough to bring within s.14 the impact of goods which should not have been
included in a delivery. Thus, in Wilson v Rickett [1954] 1 QB 598 a delivery of coal was
held to be in breach of s.14(2) where it contained explosives!
Section 14(2) implies a term into many contracts of sale of goods that the goods are of
satisfactory quality:
(2) Where the seller sells goods in the course of a business, there is an implied term that
the goods supplied under the contract are of satisfactory quality.
(2A) For the purposes of this Act, goods are of satisfactory quality if they meet the
standard that a reasonable person would regard as satisfactory, taking account
of any description of the goods, the price (if relevant) and all the other relevant
circumstances.
Satisfactory quality is defined broadly as ‘the standard that a reasonable person

would regard as satisfactory’, taking into account all ‘relevant circumstances’. Further
guidance is provided in s.14(2B):
For the purposes of this Act, the quality of goods includes their state and condition and
the following (among others) are, in appropriate cases, aspects of the quality of goods—
(a) fitness for all the purposes for which goods of the kind in question are commonly
supplied,
(b) appearance and finish,
(c) freedom from minor defects,
(d) safety, and
(e) durability.
The fact that something could have been made safer does not necessarily mean it is of
unsatisfactory quality. Equally, clear safety warnings are not necessarily a defence to
a claim of unsatisfactory quality: Medivance v Gaslane [2002] EWCA Civ 500. In Bramhill
v Edwards [2004] EWCA Civ 403 the seller sold the buyer a motor home which was
slightly too wide to be lawfully driven on UK roads. The buyer argued that the motor
home was, therefore, of unsatisfactory quality. The Court of Appeal disagreed with
Auld LJ, stating (at [38]):
In my view, there was ample evidence, albeit of a secondary and circumstantial nature, to
which the Judge referred in paragraphs 38, 39 and 40 of his judgment, on which he was
entitled to conclude that the authorities had turned a blind eye to wide-spread breaches
of the Regulations and that that was well-known to enthusiasts for such vehicles in this
specialist trade.
Section 14(2) does not extend to all matters making the goods of unsatisfactory
quality. In particular, under s.14(2)(C) it does not extend:
u to matters which have been brought to the buyer’s attention before the contract is
made
u in situations where the buyer examines the goods, to matters which should have
been revealed by that examination
u in sales by sample (see Section 5.4.5), to matters which a reasonable examination

of the sample should have revealed.
In certain circumstances, s.14(3) implies a condition into contracts of sale of goods that
the goods are reasonably fit for their purpose:
Where the seller sells goods in the course of a business and the buyer, expressly or by
implication, makes known—
(a) to the seller, or
(b) where the purchase price or part of it is payable by instalments and the goods were
previously sold by a credit-broker to the seller, to that credit-broker,
any particular purpose for which the goods are being bought, there is an implied term
that the goods supplied under the contract are reasonably fit for that purpose, whether
or not that is a purpose for which such goods are commonly supplied, except where the
circumstances show that the buyer does not rely, or that it is unreasonable for him to rely,
on the skill or judgment of the seller or credit-broker.
The key to s.14(3) is normally the seller’s knowledge of the purpose for which the
goods are being purchased. In Griffiths v Peter Conway Ltd [1939] 1 All ER 685 a buyer,
who had hypersensitive skin, suffered an allergic reaction to a tweed coat purchased
from the seller. However, it was held that the seller was not liable under s.14(3) as the
seller had not been informed of the buyer’s skin condition. Ashington Piggeries Ltd v
Christopher Hill Ltd [1972] AC 441 concerned a contract to purchase herring meal; the
general purpose (use in production of animal feed) was known to the seller but not
the specific purpose (animal feed for mink). The herring meal was contaminated. This
was bad for all animals but fatal to mink. The court held this was a breach of s.14(3): the
general purpose was known and making feed for mink was a not unforeseeable use
within that broad range. In Jewson v Kelly [2003] EWCA Civ 1030 it was held that there
was no breach of s.14(3) in relation to boilers which reduced the SAP rating of a flat as
no specific details of the flat were given to the seller.
5.4.5 Section 15 – correspondence with sample

Section 15 implies two conditions into contracts of sale of goods where the goods are
sold by sample. First, there is a condition that the bulk will correspond with the sample
(s.12(2)(a)). Second, there is a condition that the goods will be free from any defect
‘making their quality unsatisfactory, which would not be apparent on reasonable
examination of the sample’.
5.4.6 Exclusion and limitation of terms implied by SGA 1979

SGA 1979, s.55(1) prima facie permits the parties to exclude or vary the above implied
terms. Nevertheless, the ability to exclude or vary such terms is now subject to the
Unfair Contract Terms Act 1977 (UCTA 1977). More specifically, UCTA 1977 generally (1)
prohibits the exclusion of SGA 1979, s.12(1) (right to sell) and (2) subjects to exclusion
or variation of the terms implied by ss.13–15 to a test of reasonableness (UCTA 1979, s.6).
However, these provisions do not apply to international supply contracts as defined in
UCTA 1977, s.26:
(3) …one whose characteristics are the following—
(a) either it is a contract of sale of goods or it is one under or in pursuance of which the
possession or ownership of goods passes; and
(b) it is made by parties whose places of business (or, if they have none, habitual
residences) are in the territories of different States (the Channel Islands and the Isle of
Man being treated for this purpose as different States from the United Kingdom).
(4) A contract falls within subsection (3) above only if either—
(a) the goods in question are, at the time of the conclusion of the contract, in the
course of carriage, or will be carried, from the territory of one State to the territory of
another; or
(b) the acts constituting the offer and acceptance have been done in the territories of
different States; or
(c) the contract provides for the goods to be delivered to the territory of a State other
than that within whose territory those acts were done.
An interesting case in this regard is Trident Turboprop (Dublin) Ltd v First Flight Couriers
Ltd [2009] EWCA Civ 290 where an aircraft was delivered in the UK but the buyer
immediately flew it to India. The Court of Appeal held that this nevertheless satisfied
s.26(4)(a) (‘carried, from the territory of one State to the territory of another’).

Why exclude international supply contracts from UCTA 1977?
FURTHER READING
¢ Fox et al., Chapter 11 ‘Seller’s obligations as to quality’ and Chapter 12
‘Performance of the contract’.
¢ Brown, I. ‘Forgery, fine art and the sale of goods’ (1990) 106 Law Quarterly Review
561.
¢ Ervine, W.C. ‘Satisfactory quality: what does it mean?’ (2004) Journal of Business
Law 684.
¢ Twigg-Flesner, C. ‘The relationship between satisfactory quality and fitness for

purpose’ (2004) 63 Cambridge Law Journal 22.
CORE COMPREHENSION
1. How does the law of England and Wales classify terms and what are the
consequences of this classification?
2. What is meant by ‘delivery’ under SGA 1979?
3. What are the key terms implied into contracts of sale of goods by SGA 1979?
4. Is the Unfair Contract Terms Act 1977 applicable to international supply contracts?
At the end of Chapter 4, we considered the following scenario:
‘Last month Alpha Ltd agreed to purchase a cargo of papaya which was on board the
SS West Country. The cargo was to be delivered at the Port of Bristol with property
passing once the goods had been delivered. When the cargo was unloaded at the Port
of Bristol, it was discovered that the cargo had been contaminated with diesel oil and
was no longer fit for human consumption.
Advise Alpha Ltd.’
If the contract is not held to be void (for example, under SGA 1979, s.6) or frustrated
(for example, under SGA 1979, s.7), would the seller be liable to Alpha Ltd?
Alternatively, would the seller be liable if the relevant authorities prevented the
release of the goods?
guide.
Notes
6 Passing of property, risk and title under the Sale of
Goods Act 1979
Contents
6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.2 The significance of the passing of property under the Sale of

Goods Act 1979 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.3 The rules on the passing of property under the Sale of Goods Act 1979 . . 54
6.4 Sales by non-owners and the principle of nemo dat quod non habet . . . . 60
Learning outcomes
u discuss the significance of the passing of property under the Sale of Goods Act
1979 and explain/apply the rules under which property in goods is passed
u discuss the significance of the passing of risk in a contract of sale of goods and
identify/apply the rules on how/when risk is passed
u explain the nemo dat quod non habet rule
u discuss, illustrate and apply the exceptions to the nemo dat quod non habet rule.
International commercial law 6 Passing of property, risk and title under the Sale of Goods Act 1979 page 53
6.1 Introduction
The concept of property and its precise relationship with a contract of sale of goods
is not necessarily the same in all legal cultures. This has created problems for the
harmonisation of this area of law (see Devenney, J. and M. Kenny ‘Omission of personal
property from the proposed CESL: the Hamlet syndrome...without the prince?’ (2015)
Journal of Business Law 607). In this chapter we will explore the significance of the
passing of property in the context of a contract of sale of goods under the law of
England and Wales, and we will also explore the rules which, under the Sale of Goods
Act 1979 (SGA 1979), determine when property passes on a contract of sale of goods.
We shall also explore the situations when a non-owner can pass title to goods under
the law of England and Wales; this engages the principle of nemo dat quod non habet
and the exceptions thereto.
6.2 The significance of the passing of property under the Sale of

Goods Act 1979
CORE TEXT
¢ McKendrick, pp.37–79 and 269–75.
As noted in Chapter 4, the transfer of (or agreement to transfer) property in goods is

the essence of a contract of sale of goods (SGA 1979, s.2(1)). Moreover, the whereabouts
of property is highly significant in the law of England and Wales for the following
reasons:
u it impacts on whether the seller or buyer bears the risk of loss of, or damage to,
the goods (SGA 1979, s.20 although note SGA 1979, s.20(2): ‘where delivery has been
delayed through the fault of either buyer or seller the goods are at the risk of the
party at fault as regards any loss which might not have occurred but for such fault’)
u it impacts on whether a contract of sale of goods can be frustrated (see SGA 1979,
s.7 and Section 4.6.2 of the module guide)
u it impacts on a seller’s ability to claim the price of the goods (see SGA 1979, s.49 and
Chapter 7)
u it has real ramifications should either the seller or the buyer become insolvent.
For example, if a buyer pays for the goods in advance and the seller then becomes
insolvent, the whereabouts of property will be highly significant. If the property in
the goods had passed before the seller became insolvent, the buyer will usually be
able to claim the goods in preference to the seller’s other creditors. In contrast, if
the property in the goods has not passed to the buyer in such a situation, then the
buyer will be in an unenviable position: in theory the buyer will have a personal
remedy to reclaim the price but, as the seller is insolvent, it is unlikely that the
buyer will actually recover the full purchase price, nor will the buyer be able to
claim the goods as property had not passed in those goods.
Similarly, if the seller sells goods on credit and, before the buyer has paid for the
goods, the buyer becomes insolvent, the whereabouts of property will be highly
significant. If property has passed to the buyer, the seller is in an unenviable position:
in theory the seller will have a personal remedy for the price and/or damages but, as
the buyer is insolvent, it is unlikely that the seller will actually recover the full purchase
price or the full extent of the loss, nor will the seller be able to claim the goods as their
property, as property has already passed to the buyer. For these reasons sellers who
sell goods on credit often do so on the basis of a retention of title clause (on which,
see further Chapter 7). This usually means that property is not intended to pass to the
buyer until the seller has received payment in full.
6.3 The rules on the passing of property under the Sale of Goods
Act 1979
6.3.1 Introduction
CORE TEXT
SGA 1979, ss.16–20B deal with when property passes under a contract of sale of goods.
These rules make a distinction between specific goods and unascertained goods (on
which see Section 4.2.4). SGA 1979 also has rules for the passing of property in situations
where the goods are delivered on a ‘sale or return’ (or similar) basis. Thus, we shall
divide our discussion of the passing of property in goods into the following categories:
u contracts for the sale of specific goods
u goods delivered on approval, or on sale or return, and
u contracts for the sale of unascertained goods.

Referring back to Chapter 4, what do the following mean?
u Specific goods.
u Unascertained goods.
u Quasi-specific goods.
6.3.2 Specific goods

SGA 1979, s.17 provides that property in specific goods passes when the parties intend
it to pass:
(1) Where there is a contract for the sale of specific or ascertained goods the property in
them is transferred to the buyer at such time as the parties to the contract intend it
to be transferred.
(2) For the purpose of ascertaining the intention of the parties regard shall be had to the
terms of the contract, the conduct of the parties and the circumstances of the case.
In practice, it may be difficult to determine the intention of the parties and so s.18
provides a number of presumptive rules for determining intention (rules 1–3 are
relevant to specific goods). SGA 1979, s.18, rule 1 provides:
Where there is an unconditional contract for the sale of specific goods in a deliverable
state the property in the goods passes to the buyer when the contract is made, and it is
immaterial whether the time of payment or the time of delivery, or both, be postponed.
Three key points need to be made in connection with SGA 1979, s.18, rule 1. First,
there is some debate about the meaning of the phrase ‘unconditional contract’, but
it probably means that the contract is not subject to a condition precedent (e.g.
government approval), a retention of title clause, etc. Second, SGA 1979, s.61(5) defines
the phrase ‘deliverable state’: ‘Goods are in a deliverable state within the meaning
of this Act when they are in such a state that the buyer would under the contract be
bound to take delivery of them’. In Underwood Ltd v Burgh Castle Brick [1922] 1 KB 343,
P agreed to sell a condensing machine to D. The machine weighed over 30 tons and
was cemented to the floor. As part of the contract P had to detach it from the floor
and dismantle it. The court held that the property did not pass when the contract was
made as the goods were not in a deliverable state at that point. Similarly, in Head v
Showfronts [1970] 1 Lloyd’s Rep 140 (which was actually a case under rule 5(1), where
the same phrase is used), P sold carpet to D. P was required to lay the carpet but,
before it was laid, the carpet was stolen. The court held that the carpet was not in a
deliverable state. Third, it is important to remember that the SGA 1979, s.18 rules are
presumptive rules; in other words, they apply only if a contrary intention cannot be
identified.
SGA 1979, s.18, rule 2 builds upon rule 1 and applies where the goods need to be put
into a deliverable state by the seller:
Where there is a contract for the sale of specific goods and the seller is bound to do
something to the goods for the purpose of putting them into a deliverable state, the
property does not pass until the thing is done and the buyer has notice that it has been
done.
SGA 1979, s.18, rule 3 also builds on rule 1 and applies where, although the goods are in
a deliverable state, the seller needs to do something with the goods for the purpose of
ascertaining the price:
Where there is a contract for the sale of specific goods in a deliverable state but the seller
is bound to weigh, measure, test, or do some other act or thing with reference to the
goods for the purpose of ascertaining the price, the property does not pass until the act or
thing is done and the buyer has notice that it has been done.
It is important to note that SGA 1979, s.18, rule 3 applies only where the seller is bound
to weigh, measure, etc. (see, for example, Nanka-Bruce v Commonwealth Trust [1926] AC
77 – sub-buyer had to weigh the cocoa).
6.3.3 Goods delivered on approval or on ‘sale or return’

SGA 1979, s.18, rule 4 applies to ‘sale or return’ and similar transactions:
When goods are delivered to the buyer on approval or on sale or return or other similar
terms the property in the goods passes to the buyer:—
(a) when he signifies his approval or acceptance to the seller or does any other act
adopting the transaction;
(b) if he does not signify his approval or acceptance to the seller but retains the goods
without giving notice of rejection, then, if a time has been fixed for the return of the
goods, on the expiration of that time, and, if no time has been fixed, on the expiration
of a reasonable time.
Thus, under s.18, rule 4 property (presumptively) passes where:
u the buyer signifies their approval
u the buyer does some other act which adopts the transaction, such as reselling the
goods (Kirkham v Attenborough [1897] 1 QB 201)
u any specific time for returning the goods passes without the buyer rejecting the
goods. On non-acceptance see Atari Corporation v Electronics Boutique Stores [1998]
1 All ER 1010. In that case E were retailers who had stores all over the country.
They contracted with Atari for the supply of a quantity of a computer game called
Jaguar. The terms were ‘sale or return’ until 31 January 1996. The game did not sell
too well and on 19 January E decided to stop selling the game. E notified Atari of
this and indicated that unsold games would be transferred to E’s warehouse so a
detailed list of remaining games could be made. The court held that this was an
effective rejection despite the facts that (a) the goods were not immediately ready
for collection, and (b) the quantity and identity of the rejected games was not
immediately known
u although there is no specific term for returning the goods, the buyer does not
reject the goods within a reasonable time. In Poole v Smith’s Car Sales [1962] 1 WLR
744, which involved a sale or return transaction between two car dealers, the court
held that a reasonable time had elapsed, taking into account (1) the declining
second hand market at that time of year, (2) the rapid depreciation of the car, (3)
S’s requests for return, and (4) the temporary nature of the arrangement (it was
essentially a holiday arrangement).
6.3.4 Unascertained goods

Again, the intention of the parties is the cornerstone of the rules relating to
when property passes in unascertained goods and SGA 1979, s.18, rule 5 provides
presumptive guidance on intention. However, this is subject to s.16 SGA 1979:
Subject to section 20A below where there is a contract for the sale of unascertained
goods no property in the goods is transferred to the buyer unless and until the goods are
ascertained.
Thus, generally, no property can pass in unascertained goods until those goods are
ascertained (identified). This can be illustrated by Healey v Howlett & Sons [1917] 1 KB
337. P was an Irish fish exporter. D ordered 20 boxes of mackerel from P. P also received
orders from other buyers and so dispatched 190 boxes by rail. The boxes were to be
divided upon arrival for the different buyers at the end of the rail journey. The fish
deteriorated as a result of delays in the journey and one of the issues was whether
property (and, therefore, risk) had passed to D. The court held that property had not
passed as the goods had not been ascertained (the boxes had not been separated out
for individual buyers).

What is the rationale behind SGA 1979, s.16? Does it make sense?
Subject to SGA 1979, s.16 property passes when the parties intend it to pass, with SGA
1979, s.18, rule 5 assisting where the intention of the parties is not clear. SGA 1979, rule
5(1) provides:
Where there is a contract for the sale of unascertained or future goods by description,
and goods of that description and in a deliverable state are unconditionally appropriated
to the contract, either by the seller with the assent of the buyer or by the buyer with the
assent of the seller, the property in the goods then passes to the buyer; and the assent
may be express or implied, and may be given either before or after the appropriation is
made.
We have already considered the meaning of the phrase ‘deliverable state’: see s.18,
rule 1 (Section 6.3.2). The key concept in SGA 1979, s.18, rule 5(1) is ‘unconditional
appropriation’ (which might both evidence an intention and ascertain the goods for
the purposes of SGA 1979, s.16). What does this mean? SGA 1979, s.18, rule 5(2) provides
some assistance:
Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a
carrier or other bailee or custodier (whether named by the buyer or not) for the purpose
of transmission to the buyer, and does not reserve the right of disposal, he is to be taken
to have unconditionally appropriated the goods to the contract.
Other cases are less straightforward and it seems a high bar has been set for
‘unconditional appropriation’. The leading case is Carlos Federspiel v Twigg [1957]
1 Lloyd’s Rep 240. S manufactured bicycles for B. The bicycles were packed into
containers with B’s name and address on the containers. Before containers were
shipped, S became insolvent. Pearson J held there was not an ‘unconditional
appropriation’ as this required the goods to be irrevocably attached to the contract;
merely setting aside goods which are expected to be used to fulfil the order is
insufficient.

Is the decision in Carlos Federspiel v Twigg [1957] 1 Lloyd’s Rep 240 too strict?
A similar result was reached in Noblett v Hopkinson [1905] 2 KB 214. This case involved
a contract for the sale of half a gallon of beer to be delivered on a Sunday (the
sale of beer on a Sunday being prohibited at the time). The beer was poured on
Saturday night into a bottle belonging to the seller. The court held that there was no
appropriation on Saturday; therefore, an offence was committed when the beer was
delivered on Sunday. By contrast, in Aldridge v Johnson (1857) 7 E&B 885, a case involving
a contract for sale of 200 sacks of barley, property was held to have passed when S
filled 155 sacks. The key fact seems to have been that the sacks were B’s sacks. Although
this case has not been overruled, it arguably adopts a less strict approach than Carlos
Federspiel v Twigg.
Carlos Federspiel v Twigg can be contrasted with Hendy Lennox v Grahame Puttick [1984]
2 All ER 152. This contract involved the sale of generators. S sent B invoices and delivery
notes containing the individual serial numbers of the generators. The court held that
property had passed. Reference should also be made to Wardar v Norwood [1968] 2
QB 663. In that case S contracted to sell 600 cartons of frozen kidneys (out of 1,500
cartons) held in a cold store. S gave B a delivery note to obtain the cartons of kidneys.
B’s representative arrived at the cold store to find 600 cartons of kidneys on the
pavement awaiting collection. The court held that the 600 cartons of kidneys were
appropriated to the contract when the delivery note was tendered and accepted by
the warehousemen.
The unconditional assent must be with the assent of the other party. In Pignataro v
Gilroy [1919] 1 KB 459 assent was inferred from a month’s silence.
At common law it became established that goods could also be ascertained by

exhaustion (Wait & James v Midland Bank (1926) 24 LL Rep 313). SGA 1979, s.18, rules
5(3) and (4) deal with ‘ascertainment by exhaustion’. The concept is, perhaps, best
explained using an example:
EXAMPLE:
S has a barrel containing 30 gallons of cider. S sells 10 gallons from the barrel to B1, 10
gallons from the barrel to B2 and 10 gallons from the barrel to B3. The parties intend
the property to pass immediately (although, of course, this is not possible by virtue
of s.16). S draws 10 gallons from the barrel and gives it to B1. S then draws 10 gallons
from the barrel and gives it to B2. The remaining 10 gallons passes to B3 by virtue of
ascertainment by exhaustion.
In The Elafi [1982] 1 All ER 208 Mustill J took this reasoning further, applying it to
situations where, in our example, B3 is entitled to a portion of the bulk under more
than one contract:
S has a barrel containing 30 gallons of cider. S sells 10 gallons from the barrel to B1,
10 gallons from the barrel to B2 and 10 gallons from the barrel to B3. The parties
intend the property to pass immediately (although, of course, this is not possible by
virtue of s.16). B2 sells her entitlement to B3. S draws 10 gallons from the barrel and
gives it to B1. The remaining 20 gallons passes to B3 by virtue of ascertainment by
exhaustion.
A key case on the concept of ‘ascertainment by exhaustion’ is Re London Wine (1986)

PCC 121. In that case S sold wine to various customers but remained in possession of
the wine. The Bs paid for the wine and storage costs. None of the wine was earmarked
for particular customers. S became insolvent and the question was whether or not the
Bs were entitled to claim wine from the receiver. The court answered the question in
the negative, although the case was complicated by the fact that there were different
groups of customers with slightly different arguments. The first group claimed they
each had bought the entire stock of a particular description of wine and, therefore,
there was ascertainment by exhaustion. Oliver J disagreed. Although S probably
intended to use wine already owned, there was nothing to stop S ultimately using
other wine to fulfil orders. This was not a case of quasi-specific goods. The second
group claimed that between them they had bought the entire stock of a particular
description of wine and, therefore, there was ascertainment by exhaustion. Oliver J
again disagreed. The third group had received acknowledgements that the company
held wine for them but their case failed as there had been no ascertainment for the
purposes of s.16.
The results of these cases have now been confirmed by SGA 1979, s.18, rule 5 (as
amended by the Sale of Goods (Amendment) Act 1995):
(3) Where there is a contract for the sale of a specified quantity of unascertained goods
in a deliverable state forming part of a bulk which is identified either in the contract or by
subsequent agreement between the parties and the bulk is reduced to (or to less than)
that quantity, then, if the buyer under that contract is the only buyer to whom goods are
then due out of the bulk—
(a) the remaining goods are to be taken as appropriated to that contract at the time
when the bulk is so reduced; and
(b) the property in those goods then passes to that buyer.
(4) Paragraph (3) above applies also (with the necessary modifications) where a bulk is
reduced to (or to less than) the aggregate of the quantities due to a single buyer under
separate contracts relating to that bulk and he is the only buyer to whom goods are then
due out of that bulk.
6.3.5 Reform: Sale of Goods (Amendment) Act 1995

SGA 1979, s.16 can sometimes lead to harsh results (see Law Commission, Report on
Sale of Goods Forming Part of a Bulk (1993)). Unsurprisingly, therefore, over the years a
number of attempts have been made to sidestep s.16. Most, although not all, of these
attempts were unsuccessful (e.g. in Re London Wine (6.3.4, above) an argument using
a tenancy in common failed). A famous case is Re Wait [1927] 1 Ch 606. Wait had 1,000
tons of wheat loaded on The Challenger. Wait sold 500 tons to B who paid for the 500
tons. Subsequently, Wait became bankrupt and his trustee in bankruptcy claimed
all 1,000 tons. B claimed he had an equitable charge over 500 tons of the wheat. The
Court of Appeal rejected this argument, with Atkin LJ stating that equity could not
intervene as SGA 1979 was a complete code on passing of property (this was approved
in Re Goldcorp [1995] 1 AC 74).
One successful attempt to sidestep SGA 1979, s.16 was Re Stapylton Fletcher [1995] 1 All
ER 192, another situation where wine was sold and stored by S. Cases of wine which
became subject to a contract of sale were separated from S’s ordinary trading stock
and transferred to warehouse stacks where the wine was stored by type and vintage
but not marked for individual customers. Judge Paul Baker QC held that when the wine
was segregated it became ascertained for the purposes of s.16 (despite the fact that it
was not marked for individual customers). He (controversially) said that ascertainment
was different where S made constructive delivery to themselves as warehousemen. Re
London Wine was distinguished by this process of segregation. Property then passed in
accordance with the intention of the parties, and the intention was that the customers
should become tenants in common with other buyers of particular wines.
Nevertheless, the Sale of Goods (Amendment) Act 1995 was passed in response to
some of the harsh consequences relating to the passing of property in unascertained
goods. It added s.20A and s.20B into SGA 1979 (which can be excluded by contrary
intention). Section 20A allows some property to pass prior to ascertainment
(remember s.16 is now subject to s.20A). More specifically, s.20A allows the ‘property
in an undivided share in the bulk’ to be transferred to a B who becomes an ‘owner
in common of the bulk’ (s.20A(2)). The extent of the share is linked to the amount of
goods paid for (s.20A(3)–(4)):
(3) Subject to subsection (4) below, for the purposes of this section, the undivided share
of a buyer in a bulk at any time shall be such share as the quantity of goods paid for and
due to the buyer out of the bulk bears to the quantity of goods in the bulk at that time.
(4) Where the aggregate of the undivided shares of buyers in a bulk determined under
subsection (3) above would at any time exceed the whole of the bulk at that time, the
undivided share in the bulk of each buyer shall be reduced proportionately so that the
aggregate of the undivided shares is equal to the whole bulk.
This provides some protection for B against S’s insolvency. However, it is important to
note that B gets an ‘undivided share’ in a bulk, not property in any particular goods
(passing of property in particular goods is still governed by SGA 1979, ss.16–18).
The key section is the new s.20A(1):
This section applies to a contract for the sale of a specified quantity of unascertained
goods if the following conditions are met—
(a) the goods or some of them form part of a bulk which is identified either in the
contract or by subsequent agreement between the parties; and
(b) the buyer has paid the price for some or all of the goods which are the subject of the
contract and which form part of the bulk.
A specified quantity does not include a fraction (see Law Commission, Report on Sale
of Goods Forming Part of a Bulk (1993) at para.6.3). It is also important to note that this
new section does not apply to purely generic unascertained goods; it applies to quasi-
specific goods, namely forming part of an identified bulk. SGA 1979, s.61(1) provides:
‘bulk’ means a mass or collection of goods of the same kind which—
(a) is contained in a defined space or area; and
(b) is such that any goods in the bulk are interchangeable with any other goods therein
of the same number or quantity.
The Law Commission (at para.4.3) gave the following as examples of identified bulks:
u cargo of wheat on a named ship
u oil in an identified storage tank
u cases of wine (all of the same kind) in an identified cellar.
Nevertheless, there is some uncertainty in the definition of ‘a bulk’. For example, does
the phrase ‘of the same kind’ mean the goods have to be identical or is a more generic
test appropriate (for example, in relation to a contract for potatoes in a particular
warehouse, individual potatoes are unlikely to be identical)? Similarly, does a roll of
carpet come within the definition of a bulk?
SGA 1979, s.20B deals with miscellaneous issues (e.g. deemed consent between
co-owners as otherwise all deals with the bulk would require the consent of all
co-owners).

What impact has the Sale of Goods (Amendment) Act 1995 had on this area of law?
6.3.6 Future reform?

The Law Commission (Consumer prepayments on retailer insolvency 2015) Consultation
Paper No 221, p.1 stated:
Consumers often pay for goods and services in advance of receiving them. This is
common practice for a range of products – from flights and theatre tickets to football
season tickets and magazine subscriptions. Many furniture retailers rely on receiving
deposits to place orders with suppliers. Holiday companies and hotels need the security
of payment in advance to ensure consumers do not cancel at the last minute…the gift
card…market in the United Kingdom was valued at £5.4 billion. If the company that has
taken the prepayment becomes insolvent, consumers risk losing their money. Insolvency
law does not give consumers any special protection.
Accordingly, the Law Commission recommended changes to the rules governing

the passing of property in the consumer context (see Law Commission, Consumer
Prepayments on Retailer Insolvency ((2016) Law Com 368 at 114). This would include
when ‘the goods have been labelled with the consumer’s name or set aside for the
consumer in a way which is intended to be permanent’ (contrast Carlos Federspiel v
Twigg [1957] 1 Lloyd’s Rep 240).
In relation to these proposed reforms the UK Government has stated:
The government will explore options for taking forward the proposals to grant the
Secretary of State a power to require protection of consumer prepayments in sectors
which, in the opinion of the Secretary of State, pose a significant risk to consumers and
to mandate protection for consumer prepayments in schemes such as Christmas savings
clubs and others where it becomes apparent that there are significant risks to consumers.
This includes further consultation on the detail of the proposals and in particular
exploring the technicalities of how we would implement the proposals to transfer of
ownership of goods in advance of any legislation.
(Law Commission report on consumer prepayments on retailer insolvency – Government

response (December 2018) p.20.)
Subsequently the Law Commission issued a draft Bill and consultation paper on its
proposals (Law Commission Consultation Paper, Consumer sales contracts: transfer
of ownership (Consultation Paper 246 (2020)). More recently, the Law Commission
published a final draft Bill: see Law Commission, Consumer sales contracts: transfer
of ownership (Law Com 398, (2021)). This would insert a new s.18A and s.18B into the
Consumer Rights Act 2015. Section 18B(3) provides that ‘the contract is to be treated as
including a term that ownership of the goods, or the share of the goods, transfers to
the consumer when the first of…’ a number of things occur including:
(a) the goods are physically labelled with the consumer’s name in a way that is intended
by the trader to be permanent;
(b) the goods are physically set aside for the consumer in a way that is intended by the
trader to be permanent…
Note that the draft s.18B does not apply to conditional sales (s.18B(1)).
Should these reform proposals be extended to the commercial sphere?
6.4 Sales by non-owners and the principle of nemo dat quod non
habet
6.4.1 Introduction
CORE TEXT
In 6.2 and 6.3 we considered the significance of the passing of property in contracts of
sale of goods and the rules which determine when property passes in such contracts.
Implicit in our discussion of these issues was the assumption that the person selling
the goods (S) was the owner (O) of the goods. We now move on to consider the
principle of nemo dat quod non habet. Here, we are dealing with situations where
the seller of the goods is not the owner of the goods and may, in fact (to use the
terminology in some of the cases), be a rogue (R)! The key question is whether or not a
non-owner (say, R) can transfer good title in the goods to the buyer (B); see Figure 6.1.
If R is not able to transfer good title to B, then the real owner of the goods (O) may be
able to reclaim them from B under, for example, the Torts (Interference with Goods)
Act 1977, s.3(2). In such circumstances, B may be in an unenviable position: if B has paid
R for the goods, B may have a personal action against R for the return of the price and/
or damages, but those remedies will be of little use if, as has happened in many of the
cases, R is either insolvent or has absconded. By contrast, if R is able to transfer good
title to B, O may be in an unenviable position, O may have personal remedies against R,
but again those remedies will be of little use if R is either insolvent or has absconded.
O R B
Possession
but not property Purported sale
Figure 6.1

SGA 1979 refers, at different points, to ‘property’ and ‘title’. Are these concepts
interchangeable (see, for example, Battersby, G. and A.D. Preston ‘The concepts of
“property”, “title” and “owner” used in the Sale of Goods Act 1893’ (1972) 35 Modern
Law Review 269)?
Our starting point is the common law principle of nemo dat quod non habet: nobody
can give better title than they have themselves. Applying this principle to the above
scenario, O would be able to reclaim the goods from B, (perhaps) leaving B in a difficult
situation. The principle is now reproduced in SGA 1979, s.21:
(1) Subject to this Act, where goods are sold by a person who is not their owner, and who
does not sell them under the authority or with the consent of the owner, the buyer
acquires no better title to the goods than the seller had, unless the owner of the
goods is by his conduct precluded from denying the seller’s authority to sell.
(2) Nothing in this Act affects—
(a) the provisions of the Factors Acts or any enactment enabling the apparent owner
of goods to dispose of them as if he were their true owner;
(b) the validity of any contract of sale under any special common law or statutory
power of sale or under the order of a court of competent jurisdiction.

Should O always be protected?
However, as is apparent from s.21, the nemo dat quod non habet principle is not
absolute; there are a number of exceptions (situations where a non-owner can pass
good title to B). At this point, we see competing policy aims, such as the protection
of property (which would tend towards protecting O) or the facilitation of commerce
(which might tend towards protecting B, if B acted in good faith, as not to do so might
impede commercial transactions). These competing policy aims were identified by
Denning LJ in Bishopsgate Motor Finance Corp Ltd v Transport Brakes Ltd [1949] 1 KB 322 at
336–37:
In the development of our law, two principles have striven for mastery. The first is for
the protection of property: no one can give a better title than he himself possesses. The
second is for the protection of commercial transactions: the person who takes in good
faith and for value without notice should get a good title. The first principle has held sway
for a long time, but it has been modified by the common law itself and by statute so as to
meet the needs of our own times.
On the other hand, note that the current patchwork of exceptions to the principle of
nemo dat quod non habet have not necessarily developed in a coherent manner:
Statutory protection for the bona fide purchaser has developed in a piecemeal and
haphazard fashion; and some of the relevant provisions have been so drafted and
interpreted as to make their application depend not on principles of equity or justice but
on fine technicalities which have little rhyme and less reason.
(The Crowther Committee on Consumer Credit (1971) Cmnd 4596, para.4.2.8)
A key issue, where both O and B are ‘innocent victims’ of R, relates to how the law
balances, or should balance, competing policy aims. In Lickbarrow v Mason (1787) 2 TR
63 Ashhurst J famously stated:
…whenever one of two innocent persons must suffer by the acts of a third, he who has
enabled such third persons to occasion the loss must sustain it.
We can, of course, debate the concept of enabling, but there is a bigger problem. It is
not always easy to identify whether O or B is ‘more’ innocent. Thus, in Shogun Finance
Limited v Hudson (FC) [2003] UKHL 62 at [181]–[182] Lord Walker noted:
181. A recurring theme in the authorities, starting with the very first sentence of the
speech of Lord Cairns LC in Cundy v Lindsay (1878) 3 App Cas 459, 463, is the Court’s difficulty
in deciding which of two innocent parties should bear the loss caused by the fraud of a
third person (who may be beyond the reach of the law). Typically one innocent party is a
seller who has parted with goods to a rogue, without obtaining payment in cash, and the
other innocent party has bought the same goods from the rogue for cash. But although
the Court recognises both as innocent there is sometimes an inclination to regard the
eventual buyer from the rogue as the more deserving of sympathy. Thus Lord Denning MR
said in Lewis v Averay [1972] 1 QB 198, 207,
‘As I listened to the argument in this case, I felt it wrong that an innocent purchaser
(who knew nothing of what passed between the seller and the rogue) should
have his title depend on such refinements. After all, he has acted with complete
circumspection and in entire good faith: whereas it was the seller who let the rogue
have the goods and thus enabled him to commit the fraud’.
182. In that case both of the innocent parties were young men and both might be thought
to have been over-trusting. By contrast in Phillips v Brooks Ltd [1919] 2 KB 243, the seller
was an Oxford Street jeweller, and the ultimate holder was a pawnbroker, both of whom
were presumably experienced in their trades. In other cases one or other of the innocent
parties may appear to have a stronger claim on the Court’s sympathy. But your Lordships
have to lay down a general rule to cover the generality of cases, and it would not be right
to make any general assumption as to one innocent party being more deserving than the
other. That is especially true in this case which is concerned, not with a sale but with a
hire-purchase transaction, and in which the issue to be decided is (as Lord Hobhouse has
pointed out) ultimately a question of statutory construction
It is for this reason that in Ingram v Little [1961] 1 QB 31 at 73–74, Devlin LJ (dissenting)
suggested a different solution (in the context of the distinction between void and
voidable contracts):
There can be no doubt, as all this difference of opinion shows, that the dividing line
between voidness and voidability, between fundamental mistake and incidental deceit, is
a very fine one. That a fine and difficult distinction has to be drawn is not necessarily any
reproach to the law. But need the rights of the parties in a case like this depend on such a
distinction? The great virtue of the common law is that it sets out to solve legal problems
by the application to them of principles which the ordinary man is expected to recognise
as sensible and just; their application in any particular case may produce what seems to
him a hard result, but as principles they should be within his understanding and merit his
approval. But here, contrary to its habit, the common law, instead of looking for a principle
that is simple and just, rests on theoretical distinctions. Why should the question whether
the defendant should or should not pay the plaintiff damages for conversion depend upon
voidness or voidability, and upon inferences to be drawn from a conversation in which
the defendant took no part? The true spirit of the common law is to override theoretical
distinctions when they stand in the way of doing practical justice. For the doing of justice,
the relevant question in this sort of case is not whether the contract was void or voidable,
but which of two innocent parties shall suffer for the fraud of a third. The plain answer
is that the loss should be divided between them in such proportion as is just in all the
circumstances. If it be pure misfortune, the loss should be borne equally; if the fault or
imprudence of either party has caused or contributed to the loss, it should be borne
by that party in the whole or in the greater part. In saying this, I am suggesting nothing
novel, for this sort of observation has often been made. But it is only in comparatively
recent times that the idea of giving to a court power to apportion loss has found a place
in our law. I have in mind particularly the Law Reform Acts of 1935, 1943 and 1945, that
dealt respectively with joint tortfeasors, frustrated contracts and contributory negligence.
These statutes, which I believe to have worked satisfactorily, show a modern inclination
towards a decision based on a just apportionment rather than one given in black or in
white according to the logic of the law. I believe it would be useful if Parliament were
now to consider whether or not it is practicable by means of a similar act of law reform
to provide for the victims of a fraud a better way of adjusting their mutual loss than that
which has grown out of the common law.
Yet, such a solution raises further practical difficulties and was rejected by the 1966
Law Reform Committee (Cmnd 2958 (1966)). Indeed, although it is largely recognised
that this area of law is in need of some revision, it is not clear whether there is the
appetite to take forward such a revision. Thus, in the Law Commission’s Eleventh
Programme of Reform ((2011) Law Com 330) it was stated:
3.4 This project was also included in our Ninth Programme. The project would consider
circumstances where a person buys an item in good faith only to discover that the seller
did not own it, or that it is subject to a claim by a third party. The basic rule is summed
up by the maxim ‘nemo dat quod non habet’ (one cannot give what one does not have).
However, the rule is subject to an array of piecemeal exceptions and has been criticised as
overly harsh on innocent buyers. The issues involved in this project remain controversial.
3.5 The project was not taken up in the Tenth Programme as there was little enthusiasm
within Government or industry for reform, following the Companies Act 2006. This
remains the case.
3.6 These projects will not be deferred for consideration as part of the Twelfth Programme
of law reform. They may, of course, be proposed afresh at that stage.
It is against this backdrop that we will consider current exceptions to the principle of
nemo dat quod non habet.
6.4.2 Exception one: consent

Unsurprisingly, s.21 is made subject to situations where the goods are sold ‘with the
consent of the owner’. This might, for example, apply in relation to retention of title
clauses where O sells, subject to a retention of title clause, goods to B who, with O’s
consent, sells them to a sub-buyer (B2).
6.4.3 Exception two: authority/agency

SGA 1979, s.21 also refers to agency (authority) as an exception to the principle of nemo
dat quod non habet. Agency rules are also applicable by virtue of SGA 1979, s.62(2).
Where the agent (A) actually has the principal’s (P’s) authority to sell the goods, the
agent cannot really be classified as a rogue (see Figure 6.2). Actual authority may be
express or implied, and implied actual authority may include:
u incidental authority: an agent may, for example, have been given actual authority
to enter into a transaction (such as selling P’s goods) – this authority may include
implied authority for acts necessary to complete this transaction (such as
negotiating the price)
u usual authority: authority which is usual in A’s position given A’s role, trade,
business, etc. (see Hely-Hutchinson v Brayhead [1968] 1 QB 549)
u customary authority: authority which is usual in a particular market or location

(see Cropper v Cook (1867–68) LR 3 CP 194).
Moreover, in some situations P can retrospectively authorise an agent’s actions (see

Bolton Partners Ltd v Lambert (1889) LR 41 Ch D 295).
Principal Agent Third party

A has P’s A negotiates on
authority P’s behalf
Principal Third party

Contract
Figure 6.2
Sometimes, however, P will be bound by an A’s actions despite the fact that A did not
have actual authority (express or implied). Of particular interest in the current context
is the concept of apparent or ostensible authority. Apparent or ostensible authority
can arise in a number of ways, including where A is placed in a position where A usually
has particular authority (but, unbeknown to T, A does not actually have authority on
this occasion):
Ostensible or apparent authority is the authority of an agent as it appears to others. It

often coincides with actual authority. Thus, when the board appoint one of their number
to be managing director, they invest him not only with implied authority, but also with
ostensible authority to do all such things as fall within the usual scope of that office.
Other people who see him acting as managing director are entitled to assume that he has
the usual authority of a managing director. But sometimes ostensible authority exceeds
actual authority. For instance, when the board appoint the managing director, they may
expressly limit his authority by saying he is not to order goods worth more than £500
without the sanction of the board. In that case his actual authority is subject to the £500
limitation, but his ostensible authority includes all the usual authority of a managing
director. The company is bound by his ostensible authority in his dealings with those who
do not know of the limitation.
(Hely-Hutchinson v Brayhead [1968] 1 QB 549 at 583 per Lord Denning MR)
In Freeman & Lockyer v Buckhurst Park (Mangal) Properties Ltd [1964] 2 QB 480 Kapoor
was a director of Buckhurst, a company formed to purchase and resell a large estate.
Kapoor acted as managing director of Buckhurst, with the board’s acquiescence,
although he had never been formally appointed to that role. He engaged a firm of
architects who, after completing their work, claimed payment. Buckhurst refused to
pay on the ground that Kapoor had no authority to enter this contract. The court held
that Kapoor had apparent authority.
The basis of apparent/ostensible authority is disputed by academics, although the

courts seem to be of the view that it is based on estoppel:
Ostensible or apparent authority which negatives the existence of actual authority is

merely a form of estoppel, indeed, it has been termed agency by estoppel, and you
cannot call in aid an estoppel unless you have three ingredients: (i) a representation, (ii) a
reliance on the representation, and (iii) an alteration of your position resulting from such
reliance.
(Rama Corporation Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147 at 149 per
Slade J)
Generally, the representation cannot come from the agent (see, for example, First
Energy (UK) Ltd v Hungarian International Bank Ltd [1993] BCC 533).
6.4.4 Exception three: special powers of sale

SGA 1979, s.21(2)(b) provides that the nemo dat quod non habet principle in the earlier
part of that section does not affect ‘the validity of any contract of sale under any
special common law or statutory power of sale or under the order of a court of
competent jurisdiction’. There are many different types of common law and statutory
powers of sale. For example, in Bulbruin Ltd v Romanyszyn [1994] RTR 273 the Court of
Appeal dealt with an exception to the nemo dat quod non habet principle under the
Road Traffic Regulation Act 1984 and the Removal and Disposal of Vehicles Regulations
1986, Regulation 15.
6.4.5 Exception four: estoppel
6.4.5.1 General principles

SGA 1979, s.21 states that the principle of nemo dat quod non habet will not apply where
‘...the owner [O] of the goods is by his conduct precluded from denying the seller’s
[R’s] authority to sell’. This seems to be a particular statutory form of estoppel. Yet, it
is important to appreciate that, unlike some estoppels, this type of estoppel is more
than an evidential tool; it can actually transfer O’s title to B (Eastern Distributors Ltd v
Goldring [1957] 2 QB 600). So, when will O be ‘precluded’ from denying R’s authority
to sell? How wide (or narrow) is this exception? Will O be so ‘precluded’ whenever,
to use the famous theme from Ashhurst J in Lickbarrow v Mason (1787) 2 TR 63, he has
‘enabled’ R to cause a loss? A useful starting point is the following example given by
Lord MacNaghton in Farquharson Brothers & Co v C King & Co [1902] AC 325 at 335:
Nothing is better settled than this, that if a person buys a chattel and it turns out that the
chattel was found by the person who professed to sell it, the true owner can recover his
property, unless there has been a sale in market overt. The right of the true owner is not
prejudiced or affected by his carelessness in losing the chattel, however gross it may have
been. If I lose a valuable dog and find it afterwards in the possession of a gentleman who
bought it from somebody whom he believed to be the owner, it is no answer to me to
say that he never would have been cheated into buying the dog if I had chained it up or
put a collar on it or kept it under proper control. If a person leaves a watch or a ring on a
seat in the park or on a table at a cafe and it ultimately gets into the hands of a bona fide
purchaser, it is no answer to the true owner to say that it was his carelessness and nothing
else that enabled the finder to pass it off as his own.

Is such an approach too protective of O?
Similarly, an O is generally not ‘precluded from denying’ R’s authority to sell simply by
the fact that O gave R possession of the goods: see Central Newbury Car Auctions Ltd v
Unity Finance Ltd [1957] 1 QB 371. In that case R discussed with O acquiring a car on hire
purchase. The transaction was to involve a finance company. After completing various
forms, R was permitted to leave with the car and registration book. Ultimately, the
finance company refused the hire purchase proposal and the car was found in the
possession of B. B contended that O was ‘precluded’ from denying R’s authority to sell
as O had permitted R to take possession of the car and the registration book. The court
held (Denning LJ dissenting) that there was no estoppel. Merely giving R possession of
the goods was not sufficient and a car registration book was not a document of title.
Similarly, merely giving R possession of documents of title is insufficient to create an

estoppel. In Mercantile Bank of India Ltd v Central Bank of India Ltd [1938] AC 287 Lord
Wright also spoke of estoppel by representation. Indeed, for many years Professor
Atiyah has argued that this exception to the principle of nemo dat quod non habet
requires a representation (an approach endorsed by Popplewell J in Lenn Mayhew-Lewis
v Westminster Scaffolding plc (5th March 1999, unreported)). The key requirements of
estoppel by representation are:
u A representation by O that R is either the true O or has O’s authority to sell the
goods. In Eastern Distributors Ltd v Goldring [1957] 2 QB 600 the O of a van (Murphy)
wanted to use the van to raise money. O and R (Coker), who was a motor dealer,
completed HP forms for a finance company so that it appeared that R was the
true O and O was his customer. The HP proposal was accepted, meaning that the
finance company purchased the van from R and let it back to O on HP terms. O
did not pay the instalments and sold the car to B. Did B get good title? It was held
(Devlin J giving the judgment of the court) that the finance company obtained
title by estoppel from O as a result of the way in which the forms were filled out.
The original owner (Murphy) did not regain title when the van was let under a hire
purchase agreement to him and so he could not transfer good title to B.
u Reliance. The representation does, however, need to be voluntary. Thus, in Debs v

Sibec Developments Ltd [1990] RTR 91, where the alleged representation was made at
gunpoint, Simon Brown J stated:
As it seems to me, the owner who is induced to sign a document by force, not least at
gunpoint, must be in at least as good and quite arguably a better position than one
who signs as a result of fraud. Certainly there was here no want of reasonable care by
the plaintiff in signing the receipt document. I am clear that it cannot therefore found a
defence of estoppel by representation against him.
In addition, the representation by O must have been relied upon by B (Farquharson

Brothers & Co v C King & Co [1902] AC 325 at 341). It is not clear whether or not the
reliance needs to be reasonable (for a suggestion that reliance needs to be reasonable,
see General Guarantee v East Anglian Finance Ltd (unreported, 25 June 1999)).
6.4.5.2 Exception four extended: estoppel by negligence?

In Mercantile Bank of India Ltd v Central Bank of India Ltd Lord Wright referred to the
notion of estoppel by negligence. Yet, as we have seen, merely giving possession of
goods or documents of title to R is insufficient to found estoppel for the purposes
of s.21. A number of principles can be distilled from the judgment of Popplewell J in
Lenn Mayhew-Lewis v Westminster Scaffolding plc. First, estoppel by negligence requires
O to owe B (or the world) a relevant duty of care. Second, that duty must have been
breached by O. Third, there must be a causal link between O’s negligence and B
purchasing the goods.
Traditionally, it has not been easy to establish a duty of care in this area. In Moorgate
Mercantile Co Ltd v Twitchings [1977] AC 890, O let a car on hire purchase terms to R, who
sold it to B. Before purchasing the car, B had checked with HPI whether or not the car
was subject to a hire purchase agreement (the vast majority of such hire purchase
agreements were registered with HPI, although it was not compulsory to do so). B
purchased the car after HPI could find no record of a hire purchase agreement relating
to the car in question. The question was whether or not O’s failure to register with HPI
created an estoppel by negligence against them. It was held (Lord Wilberforce and
Lord Salmon dissenting) that there was no estoppel by negligence as there was no
duty to register with HPI.

Do you agree with the decision in Moorgate Mercantile Co Ltd v Twitchings [1977] AC 890?
On the other hand, a duty of care was found in Mercantile Credit Co Ltd v Hamblin [1965]
2 QB 242. In that case O, the owner of a car, wished to use the car as security for a loan.
She went to R who seemed to be a perfectly respectable car dealer. O signed a number
of hire purchase forms (thinking they were forms to use the car as security). O was
given a blank cheque and allowed to keep possession of the car. R sought to sell the
car, using the hire purchase forms, to B, a finance company, and one of the questions
was whether O was estopped by negligence from denying her title. It was held that O
did owe B a duty of care given the ‘proximity’ between O and persons in B’s position.
If a duty of care can be established, the next issue is, of course, whether or not that duty
has been breached. Indeed, in Mercantile Credit Co Ltd v Hamblin, the Court of Appeal
held that O was not in breach of the duty which she owed to B, Pearson LJ stating:
The next question is whether she committed any breach of duty, that is to say, whether
she was negligent. On the peculiar facts of this case I think that there should not be a
finding of negligence against her. She was well acquainted with the dealer, who was
apparently respectable, solvent and prosperous, and the blank cheque which he gave her
would naturally give her confidence that she could rely on his due performance of the
arrangement which they had made.
If a duty of care can be established and that duty has been breached, the final issue is
whether or not the breach caused B’s loss.
6.4.6 Exception five: the Factors Act 1889, s.2(1)

A non-owner (R) who sells goods with the actual authority of the owner (on which
see Section 6.4.3) can pass good title to those goods (although, as R has O’s actual
authority, R is not really a rogue). Equally, a non-owner who lacks O’s actual authority
to sell the goods, may, on general agency principles, be able to pass good title to the
goods if the sale is within the scope of R’s ostensible/apparent authority and/or usual
authority. The Factors Act 1889, s.2(1) links to these notions. In broad terms, s.2(1)
deals with unauthorised dispositions (authorised dispositions would be covered by
the actual authority) by mercantile agents and, if the relevant requirements are met,
the unauthorised disposition is essentially regarded as having been authorised. This
exception is grounded in the needs of the commercial community.
Of course, as we have seen (6.4.3), merely giving somebody possession of goods/

documents of title is not sufficient to create an estoppel. The key point here is that
it is the combination of the mercantile agent (MA) having possession of the goods/
documents of title and their status as a mercantile agent which gives rise to the
misleading picture, the MA being somebody who has ‘in the customary course of
his business as such agent authority either to sell goods, or to consign goods for the
purpose of sale, or to buy goods, or to raise money on the security of goods’ (s.1(1)).
SGA 1979, s.21 is expressly made subject to the provisions of the Factors Act 1889 (see
SGA 1979, s.21(2)(a)). The Factors Act 1889, s.2(1) provides:
Where a mercantile agent is, with the consent of the owner, in possession of goods or of
the documents of title to goods, any sale, pledge, or other disposition of the goods, made
by him when acting in the ordinary course of business of a mercantile agent, shall, subject
to the provisions of this Act, be as valid as if he were expressly authorised by the owner of
the goods to make the same; provided that the person taking under the disposition acts
in good faith, and has not at the time of the disposition notice that the person making
the disposition has not authority to make the same.
Pivotal to this exception is R’s status as a ‘mercantile agent’. It is, therefore, unfortunate
that the concept of a mercantile agent is a little hazy, not least as the phrase is not
commonly in use and the courts have, sometimes, given the interpretation of a
mercantile agent in s.1(1) a rather generous reading. A useful starting point is Goode
and McKendrick’s notion of a ‘professional dealer’ (McKendrick, p.505). In Fadallah v
Pollack [2013] EWHC 3159 it was held that to be an MA, the agent needs to buy and sell
on behalf of others. Twigg-Flesner and Canavan (2020, p.294) state:
By a somewhat strange twist, the provisions of the Factors Act are now usually applied to
situations quite different from those for which they were enacted. The typical Factors Act
case envisaged by Parliament was that of the commercial agent who pledged or resold
goods (or documents of title to goods) consigned by foreign merchants to English ports;
the typical case to which the Act is applied today concerns a motor vehicle entrusted to a
motor dealer for sale or to obtain offers.
There have also been a number of cases involving art/antiques/jewellery dealers (see,
for example, Lowther v Harris [1927] 1 KB 393). It is clear that a mere employee is not
a mercantile agent (Lamb v Attenborough (1862) 1 B & S 831). On the other hand, a
‘mercantile agent’ does not need to act for more than one principal and, indeed, the
transaction in question may be the first time that R acted as an MA. Thus, in Lowther v
Harris [1927] 1 KB 393 at 398 Wright J stated:
The first question is whether Prior was a mercantile agent – that is, an agent doing a
business in buying or selling, or both, having in the customary course of his business
such authority to sell goods. I hold that he was. Various objections have been raised.
It was contended that Prior was a mere servant or shopman, and had no independent
status such as is essential to constitute a mercantile agent. It was held under the earlier
Acts that the agent must not be a mere servant or shopman: Cole v. North Western Bank;
Lamb v. Attenborough; Heyman v. Flewker. I think this is still law under the present Act. In
my opinion Prior, who had his own shops, and who gave receipts and took cheques in his
own registered business name and earned commissions, was not a mere servant but an
agent, even though his discretionary authority was limited. It is also contended that even
if he were an agent he was acting as such for one principal only, the plaintiff, and that
the Factors Act, 1889, requires a general occupation as agent. This, I think, is erroneous.
The contrary was decided under the old Acts in Heyman v. Flewker, and I think the same is
the law under the present Act. In Weiner v. Harris it appears that the agent was not acting
for any other principal than the plaintiff, and this was so also in Hastings, Ld. v. Pearson, in
respect of which case the Court of Appeal, in Weiner v. Harris, held that the agent was a
mercantile agent. It is also clear that pictures, as objects of purchase and sale, constitute
those who deal in them on commission mercantile agents within the Factors Acts: see
under the old Act Heyman v. Flewker and under the present Act Turner v. Sampson.
The MA needs to be in possession (see Beverley Acceptances v Oakley [1982] RTR 417) of
the goods or documents of title. The Factors Act 1889, s.1(3) provides that goods shall
‘include wares and merchandise’. It seems the MA must also be in possession as an MA
(Astley Industrial Trust v Miller [1968] 2 All ER 36). The definition of goods generally does
not create a problem, although in Pearson v Rose & Young [1951] 1 KB 275 it was held that
in the context of a car, goods meant the car plus the registration document. We shall
return to the significance of this case below, but it should be noted that the Court of
Appeal in Stadium Finance v Robbins [1962] 3 WLR 453 was clearly uncomfortable with
such an approach.
In terms of consent, at one time it was thought that there would be no consent if O was
tricked into giving the goods to the mercantile agent (Oppenheimer v Frazer [1907] 2 KB
50). However, this changed with Pearson v Rose & Young (although it seems there is still no
consent if you are tricked in such a way that you do not know you are giving possession).
In that case O left the car with the MA with instructions to obtain offers but not to
sell it. The MA orchestrated an emergency which meant that O rushed off, leaving the
registration book. The court held that the MA was in possession of the car with consent of
the owner but not the registration book with consent of the owner (and remember that
the Court of Appeal thought that goods meant the car and registration book).
‘Ordinary course of business’ means during proper business hours, at a proper place
of business, etc. (see Oppenheimer v Attenborough [1908] 1 KB 221). In Stadium Finance
v Robbins [1962] 3 WLR 453 the Court of Appeal held that the sale of a car without the
registration document was not a sale in the ordinary course of business. We shall
consider the meaning of ‘[o]ther disposition’ below, in connection with the Factors Act
1889, s.8.
6.4.7 Exception six: Sale of Goods Act 1979, s.23

It is commonplace to consider SGA 1979, s.23 as an exception to the principle of nemo
dat quod non habet, although it is possible to debate the extent to which it is really an
exception to that principle. Section 23 applies where a party (whom, for the sake of
convenience, we shall call R) gets title to goods from O but, for some reason R’s title is
voidable (e.g. as the result of a misrepresentation) and R sells the goods to B before O
avoids R’s title (at common law the same principle applies where R pledges the goods
– Phillips v Brooks [1919] 2 KB 243). In such circumstances, if the requirements of s.23 are
fulfilled, B gets good title. Section 23 is set out in the following terms:
When the seller of goods has a voidable title to them, but his title has not been avoided at
the time of the sale, the buyer acquires a good title to the goods, provided he buys them
in good faith and without notice of the seller’s defect of title.
Of course, at the time R sells the goods to B, R does have good title (albeit a voidable
one) and so, as noted above, it is possible to debate the extent to which this is really
an exception to the principle of nemo dat quod non habet.
O R B
Voidable title Sale before
contract O–R avoided
Figure 6.3
In cases where R has a voidable title, it is important, for the purposes of s.23, that O
avoids that title before R sells the goods to B. So how does O avoid R’s title? In general
terms, O’s decision to rescind the transaction needs to be communicated to R (see
Reese River Silver Mining Co v Smith (1869) LR 4 HL 64 at 74) but what if R, being a rogue,
disappears? The issue was considered by the Court of Appeal in Car and Universal
Finance Co Ltd v Caldwell [1965] 1 QB 525 which held that in such circumstances O should
evidence a clear intention and take reasonable steps (such as informing the police).
6.4.8 Exception seven: the Factors Act 1889, s.8 (seller in possession)
The Factors Act 1889, s.8 provides:
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, or under any agreement for sale, pledge, or other disposition
thereof, to any person receiving the same in good faith and without notice of the
previous sale, shall have 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.
Curiously, s.8 is reproduced, with the omission of the words in bold, in SGA 1979, s.24.
We will focus on s.8, given that it is expressed in wider terms. In broad terms, s.8 may
apply in situations where O sells goods to B1 and property in those goods passes to
B1 but O remains in possession of the goods and purports to sell them to B2. If the
requirements of s.8 are satisfied, B2 will acquire good title.
O B1
1. Property but
not possession
B2 2. Purported sale, etc.
Figure 6.4
What is meant by the phrase ‘a person, having sold goods, continues, or is, in
possession of the goods or of the documents of title to the goods’? At one time it was
thought that the person would have to remain in possession as a seller (Staffs Motor
Guarantee v British Wagon [1934] 2 KB 305). However, in Pacific Motor Auctions Pty Ltd
v Motor Credits (Hire Finance) Ltd [1965] AC 867 it was held that this was not necessary
(key is continuity of possession). This was approved by the Court of Appeal in Worcester
Works Finance v Cooden Engineering [1972] 1 QB 210. Is there a potential problem with
this interpretation? Does the ‘or is…in possession’ suggest continuity of possession
is not necessary? The Court of Appeal in Worcester Works Finance v Cooden Engineering
cited the New Zealand case of Mitchell v Jones (1905) 24 NZLR 932 (‘or is…in possession’
refers to situations where O did not have possession of goods when they sold them).
Does ‘delivery or transfer’ of goods/documents of title to B2 include constructive

delivery? Constructive delivery refers to situations where physical possession is not
altered but right to possession is altered. In Gerson v Wilkinson [2000] 3 WLR 1645 the
Court of Appeal held that constructive delivery is sufficient. That case involved a sale
and leaseback to B2 but the goods remained with O throughout.
In Worcester Works Finance v Cooden Engineering Co [1972] 1 QB 210 at 218 Lord Denning
MR interpreted the phrase ‘[s]ale, pledge or other disposition’ very widely:
To my mind the word ‘disposition’ is a very wide word. In Carter v. Carter [1896] 1 Ch. 62,
67, Stirling J. said that it extends ‘to all acts by which a new interest (legal or equitable)
in the property is effectually created.’ That was under an entirely different statute, but I
would apply that wide meaning in this section. When the Cooden company retook this
car (because the cheque had not been met) there was clearly a transfer back to them
of property in the goods. They would not thereafter be able to sue on the cheque. By
retaking the goods they impliedly gave up their remedy on the cheque. That retransfer of
the property back to the Cooden company was a ‘disposition’ within the section.
In that case D sold a car to G. G paid with a cheque which was dishonoured. G sold the
car to P but remained in possession. D, with consent of G, retook the car. The Court of
Appeal held that when G sold the car to P but remained in possession, he became a
seller in possession. Retaking of the car with consent was a ‘disposition’, therefore D
was protected.
6.4.9 Exception eight: Factors Act 1889, s.9 (buyer in possession)
6.4.9.1 Introduction
The Factors Act 1889, s.9 provides a further exception to the principle of nemo dat quod
non habet. Curiously, s.9 is reproduced, with the omission of some words (the utility of
which, as we shall see, is unclear), in SGA 1979, s.25. We will focus on s.9, given that it is
expressed in wider terms. In broad terms (see Figure 6.5), s.9 may apply in situations
where a seller (O) lets a person who has ‘agreed to buy’ goods (R) have possession of
those goods before the property in those goods has passed, and R wrongly attempts
to sell those goods to B. In such circumstances, if the requirements of s.9 are fulfilled,
B may obtain good title. Section 9 is written in the following terms (the words in bold
are the words omitted from SGA 1979):
Where a person, having bought or agreed to buy goods, obtains with the consent of
the seller possession of the goods or 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, or under any
agreement for sale, pledge, or other disposition thereof, to any person receiving the
same in good faith and without notice of any lien or other right of the original seller in
respect of the goods, shall have the same effect as if the person making the delivery or
transfer were a mercantile agent in possession of the goods or documents of title with
the consent of the owner.
O R/B1 B2
Possession Sale, pledge or
but not property other disposition
Figure 6.5
6.4.9.2 A person who has ‘bought or agreed to buy goods’

Section 9 applies only where R has ‘bought or agreed to buy goods’. The fact that one
circumstance where s.9 might apply is where R has ‘bought’ the goods is puzzling; if ‘R’
has property in the goods R can pass property in the goods without need for recourse
to any exception to the principle of nemo dat quod non habet. We will, therefore, focus
on situations where R has ‘agreed to buy’ the goods. Significantly, a bailee under a hire
purchase agreement is not somebody who, at least initially, has ‘agreed to buy’ the
goods subject to the hire purchase transaction: see Helby v Matthews [1895] AC 471.
In contrast, conditional sale agreements were traditionally regarded as situations where

R had ‘agreed to buy’ the goods (Lee v Butler [1893] 2 QB 318). The distinction between a
conditional sale agreement and a hire purchase agreement is that under a conditional
sale agreement the buyer is committed from the outset to buying the goods, whereas
under a hire purchase agreement the bailee is not committed to buying the goods from
the outset (although it is highly likely that they will do so). On the other hand, it is not
always easy to distinguish between these two types of transaction (see, for example,
Forthright Finance Ltd v Carlyle Finance Ltd [1997] 4 All ER 90). Particularly where the price
payable under a conditional sale agreement is to be paid in instalments, functionally the
two types of agreement are very similar. Indeed, s.9 has now been amended, so that Lee v
Butler is largely reversed, by the following addition:
For the purposes of this section—
(i) the buyer under a conditional sale agreement shall be deemed not to be a person
who has bought or agreed to buy goods and
(ii) ‘conditional sale agreement’ means an agreement for the sale of goods which is a
consumer credit agreement within the meaning of the Consumer Credit Act 1974
under which the purchase price or part of it is payable by instalments, and the
property in the goods is to remain in the seller (notwithstanding that the buyer is to
be in possession of the goods) until such conditions as to the payment of instalments
or otherwise as may be specified in the agreement are fulfilled.
It is important to note that not all conditional sale agreements are included for these
purposes. The definition of a conditional sale, for these purposes, is linked to the
Consumer Credit Act 1974 and is narrowed to situations where the price, or part of it, is
to be paid in instalments.
In terms of other situations, it has been held that: a person who obtains goods on
a ‘sale or return’ basis is not somebody who, at least initially, has agreed to buy the
goods (Edwards v Vaughan (1910) 26 TLR 545) nor is a mere agent (Shaw v Commissioner
of Metropolitan Police [1987] 1 WLR 1332).
6.4.9.3 Possession and consent

Under s.9 the goods must be in the possession of R with the consent of the seller (O).
In terms of consent, we can refer back to our discussion under the Factors Act 1889,
s.2 (above at 6.4.6). ‘Possession’ clearly includes actual possession but it has also been
interpreted to include some forms of constructive possession. In Four Point Garage v
Carter [1985] 3 All ER 12, at R’s request, S delivered the goods directly to B (R’s buyer).
Did this mean that R had not been in possession, as required by s.9, at the relevant
time? The court held s.9 applicable as, although R did not get physical possession, S
constructively delivered the goods to R who constructively delivered them to B.
The analogy with Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd [1965]
AC 867 also suggests that R does not need to be in possession qua a buyer (see also
Marten v Whale [1917] 2 KB 480).
6.4.9.4 Delivery or transfer of the goods

The next requirement under s.9 is for R to deliver or transfer the goods to B. As Four
Point Garage v Carter demonstrates, it is (sometimes) sufficient if R constructively
delivers the goods to B. The transfer or delivery must, however, be voluntary. Thus, in
Forsythe International (UK) Ltd v Silver Shipping Co Ltd (The Saetta) [1993] 2 Lloyd’s Rep
268, s.9 did not apply as the bunkers (the goods in question) were involuntarily taken
from R when the ship on which they were held was retaken by the owners of that
ship (who were not the owners of the bunkers). Forsythe International (UK) Ltd v Silver
Shipping Co Ltd (The Saetta) was approved in Angara Maritime Ltd v Oceanconnect UK Ltd
[2010] EWCA Civ 1050.
6.4.9.5 Sale, pledge or other disposition

The delivery or transfer of the goods must be: ‘under any sale, pledge, or other
disposition thereof, or under any agreement for sale, pledge, or other disposition
thereof…’. We can refer to our discussion in relation to the Factors Act 1889, s.8 (above
at 6.4.8) in relation to the meaning of ‘disposition’. The words in bold, which, as noted
above, are omitted from SGA 1979, s.25, require some discussion. In particular, what
is the significance of those words? There is some authority to the effect that these
words protect B from an action in conversion where R delivers or transfers the goods
to B under an agreement for sale, pledge or other disposition (Shenstone & Co v Hilton
[1894] 2 QB 452). However, a B who receives goods ‘under any agreement for sale,
pledge, or other disposition thereof’ does not obtain title to the goods. Thus, in Re
Highway Foods International Ltd [1995] BCC 271, Nugee QC essentially had to consider
the situation where R obtains goods subject to a retention of title clause and then
disposes of them to a B also subject to a retention of title clause. The learned Judge
held (emphasis added):
The receivers say that Highway, having agreed to buy the meat and obtained possession of
it with the consent of Harris, delivered it under an agreement for sale to Kingfry; that this
agreement was a sale or other disposition of the goods within s. 2(1); that this disposition
was as valid as if it had been expressly authorised by Harris; and that the title to the meat
therefore passed to Kingfry.
There is an obvious weakness in this line of reasoning. Had Highway actually sold the meat
to Kingfry, I do not think Harris could have disputed that title would have passed. But the
contract between Highway and Kingfry was not a sale but an agreement for sale, under
which the title was not to pass until, at the earliest, Highway had been paid in full for the
meat (for the distinction between a sale and an agreement for sale see the Sale of Goods
Act 1979, s. 2(4) and (5)). On 13 January 1993 Highway had not been paid any part of the
purchase price…Benjamin adds a footnote:
‘[…]. But the sub-purchaser may be able to rely on the words “or under any agreement
for sale…or other disposition” in s. 9 of the Factors Act 1889.’
Mr Burroughs, counsel for the receivers, took up the suggestion in the footnote, and
argued that the fact that the contract between Highway and Kingfry was only an
agreement for sale and was subject to a Romalpa clause did not prevent the title passing
to Kingfry. In my judgment the suggestion is not well-founded. It is quite true that, under
s. 9, unlike s.25 of the Sale of Goods Act 1979, s. 2(1) applies where the buyer in possession
has entered into an agreement for sale to a sub-purchaser as well as where he has actually
sold; but the effect of s. 2(1) is only to render the buyer’s agreement for sale as valid as
if it had been expressly authorised by the seller; and this is not enough to get the sub-
purchaser home if the conditions for the passing of title under the buyer’s agreement for
sale to the sub-purchaser have not been satisfied.
This obviously reduces the potential utility of the words in bold.
6.4.9.6 Good faith

To gain the protection of s.9, B must take the goods in good faith and without notice of
the rights of O.
6.4.9.7 Effect of s.9

As Nugee QC noted in Re Highway Foods International Ltd, the way in which the effect of
s.9 is phrased is intriguing. As will be remembered, the effect of the Factors Act 1889,
s.8 is that the disposition has ‘…the same effect as if the person making the delivery or
transfer [R] were expressly authorised by the owner of the goods to make the same’.
By contrast, the effect of s.9 is expressed differently:
[s.9]…shall have the same effect as if the person making the delivery or transfer were a
mercantile agent in possession of the goods or documents of title with the consent of the
owner.
In other words, s.9 links its effect to the effect a delivery or transfer by a mercantile
agent etc. would have had. It will, of course, be remembered that, under the Factors
Act 1889, s.2, unauthorised dispositions by mercantile agents can be effective if the
other criteria are satisfied, including that the disposition was in the ordinary course of
business of a mercantile agent. Therefore, in Lambert v G&C Finance (1963) Sol Jo 666 it
was held that s.9 would only provide B with protection if R was acting in the ordinary
course of business as a mercantile agent. One difficulty with this view is, of course, that
R is not (normally) a mercantile agent! That difficulty was dismissed by the Court of
Appeal in Newtons of Wembley v Williams [1965] 1 QB 560.
6.4.9.8 Effect of s.9 where the seller is not the owner

So far we have proceeded on the assumption that the S (who gives possession of the
goods to R) is the O. What is the position where the S is not the O? It is perhaps best
to explain this with an example (see Figure 6.6): O owns a car which is stolen by a thief
(T); T (now S) sells the car to B1 who sells the car to B2. Obviously, T(S) does not get title
from O by the thief and B1 does not get good title from T(S) as none of the exceptions
to the principle of nemo dat quod non habet seem to apply. But what about B2? Is
B2 protected by s.9? If we look at s.9, B1 is, of course, somebody who has bought or
agreed to buy the goods and is somebody who has acquired possession of the goods
with the consent of the seller (in this case T). The effect of s.9 is phrased in terms of the
title of O not the title of S (the thief):
[s.9]…shall have the same effect as if the person making the delivery or transfer were a
mercantile agent in possession of the goods or documents of title with the consent of the
owner.
O T B1 B2
Figure 6.6
This question was considered by the House of Lords in National Employers Mutual
General Insurance Association v Jones [1990] 1 AC 24 which dismissed the possibility that
B2 would gain good title in such circumstances:
In my opinion, section 9 of the Factors Act 1889 must be read as providing that the
delivery or transfer given by the intermediate transferor (B) shall have the same effect as
if he was a mercantile agent in possession of the goods or documents of title with
the consent of the owner who entrusted them to him (A). Such a construction is, in my
opinion, to be derived from the terms of section 2(1) of the Act, to which section 9 evidently
refers, and also from the legislative context which I have already discussed. The same
construction must, of course, be placed upon section 25(1) of the Sale of Goods Act 1979.
6.4.9.9 Exception nine: Hire Purchase Act 1964, Part III

For the purposes of the Factors Act 1889, s.9 a bailee under a hire purchase agreement
(and, indeed, some conditional sales) is not a person who has ‘agreed to buy’ goods.
This, of course, means that a person (B) who purchases goods from a bailee (R) under
a hire purchase agreement, and some conditional sales, is not protected by s.9.
However, in the context of motor vehicles, B may be protected by the Hire Purchase
Act 1964 (as amended). In broad terms, the Hire Purchase Act 1964 (as amended), Part
III enables, in defined circumstances, a hire purchaser or conditional buyer (R) of a
motor vehicle to pass good title to B despite the fact that they (R) do not have title to
the motor vehicle.
Part III applies ‘…where a motor vehicle has been bailed or (in Scotland) hired under
a hire purchase agreement, or has been agreed to be sold under a conditional sale
agreement, and, before the property in the vehicle has become vested in the debtor,
he disposes of the vehicle to another person’ (s.27(1)). Disposition ‘…means any sale or
contract of sale (including a conditional sale agreement), any bailment or (in Scotland)
hiring under a hire purchase agreement and any transfer of the property in goods in
pursuance of a provision in that behalf contained in a hire purchase agreement, and
includes any transaction purporting to be a disposition (as so defined) and “dispose
of” shall be construed accordingly’ (s.29 and see also VFS Financial Services Ltd v JF Plant
Tyres Ltd [2013] 1 WLR 2987).
Where Part III is applicable, a distinction needs to be made between situations

where R (the hire purchaser or conditional buyer) disposes of the motor vehicle to a
‘private purchaser’ and situations where R disposes of the motor vehicle to a ‘trade
or finance purchaser’. The distinction is important as, essentially, if this disposition is
made directly to a ‘private purchaser’, they may obtain good title. In contrast, if this
disposition is made directly to a ‘trade or finance purchaser’, the ‘trade or finance
purchaser’ will not obtain good title (although, by virtue of s.27(3), a subsequent
‘private purchaser’ may do so).
In Stevenson v Beverley Bentinck Ltd [1976] 1 WLR 483 the Court of Appeal held that
a person would still be a ‘trade or finance purchaser’ even if, on the occasion in
question, they purchased the motor vehicle for their private use. B must have acted in
‘good faith’. The key to this phrase seems to be honesty, even if that honesty was less
than wise (see Dodds v Yorkshire Bank Finance [1992] CCLR 92).
FURTHER READING
¢ Fox et al., Chapter 9 ‘Passing of the property in the goods as between seller and
buyer’ and Chapter 10 ‘Transfer of title’.
¢ Ulph, J. ‘The Sale of Goods (Amendment) Act 1995: Co-ownership and the rogue
seller’ (1996) Lloyd’s Maritime and Commercial Law Quarterly 93.
¢ Llewellyn, K. ‘Through title to contract and a bit beyond’ (1937–38) 15 New

York University Law Quarterly 159 (available in HeinOnline through the Online
Library).
¢ Sealy, L. ‘Risk in the law of sale’ (1972B) Cambridge Law Journal 225.
¢ Devenney, J. ‘Dispositions under the Hire Purchase Act 1964 and the principle of
nemo dat quod non habet’ (2014) 71 Student Law Review 10.
¢ Merrett, L. ‘Is possession nine tenths of the law of Sale of Goods?’ (2010) 69
Cambridge Law Journal 236.
¢ McMeel, G. ‘The philosophical foundations of the law of agency’ (2000) 116 Law
Quarterly Review 387.
CORE COMPREHENSION
1. What is the significance of the passing of property in contracts of sale of goods
under the law of England and Wales?
2. When does property in specific goods pass under SGA 1979?
3. When does property pass under a ‘sale or return’ transaction under SGA 1979?
4. When does property in unascertained goods pass under SGA 1979?
Critically evaluate the extent to which the principle of nemo dat quod non habet and
the exceptions thereto are in need of reform.
guide.
7 Remedies under the Sale of Goods Act 1979
Contents
7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.2 The remedies of the seller . . . . . . . . . . . . . . . . . . . . . . . . 77
7.3 The remedies of the buyer . . . . . . . . . . . . . . . . . . . . . . . . 82

Learning outcomes
By the end of this chapter and the relevant readings you should be able to:
u discuss and apply the remedies available to the buyer and the seller where there
is a breach of the sale contract
u explain and apply the use of retention of title clauses and the limits of such
clauses.
International commercial law 7 Remedies under the Sale of Goods Act 1979 page 77
7.1 Introduction
In this chapter we will consider, under the law of England and Wales, the main
remedies available to sellers and buyers where the other party is in breach of a
contract of sale of goods. It should also be remembered that parties to a contract of
sale of goods will sometimes include clauses in contracts of sale of goods which deal,
or partially deal, with the consequences of a breach of contract. For example, the
contract may include a liquidated damages clause (a clause which seeks to determine
the sum, or sums, payable if a party to the contract breaches that contract). In line
with general principles of freedom of contract, such clauses are generally permitted
under the law of England and Wales, although, traditionally, such clauses would not
have been enforceable if they were penal in nature (a so-called penalty clause). Thus,
in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 at 86 Lord
Dunedin famously stated:
The essence of a penalty is a payment of money stipulated as in terrorem of the offending

party; the essence of liquidated damages is a genuine covenanted pre-estimate of
damage…
In recent years there has been some recasting of the test for an unenforceable penalty
clause with the Supreme Court in Makdessi v Cavendish Square Holdings BV; ParkingEye
Ltd v Beavis [2015] UKSC 67 defining a penalty clause as a secondary obligation which
bears no proportion to the legitimate interest, if any, which the innocent party has in
the enforcement of the primary obligation.

What are the advantages of including a liquidated damages clause in a sale of goods
contract? Is the Makdessi v Cavendish Square Holdings BV; ParkingEye Ltd v Beavis
[2015] UKSC 67 test too vague?
7.2 The remedies of the seller
7.2.1 Introduction
CORE TEXT
In this section we shall explore the remedies of a seller where a buyer is in breach of a
contract of sale of goods. A distinction needs to be made between sellers’ (so-called)
real remedies and sellers’ personal remedies. A real remedy is a remedy against the
goods, which, as we have already noted (see Section 6.2), is particularly significant
where the buyer becomes insolvent. A personal remedy – essentially a remedy
demanding a monetary payment – is much less potent where the buyer cannot satisfy
the demand as they are insolvent (and, therefore, have no money).
7.2.2 Real remedies

SGA 1979, ss.38–39 make provision in respect of three real remedies which may be
available to an ‘unpaid seller’: lien, stoppage in transit (where the buyer becomes
insolvent) and the right to resale. An ‘unpaid seller’ is defined in SGA 1979, s.38 and
essentially refers to situations where the whole of the price has not been paid or
tendered:
(1) The seller of goods is an unpaid seller within the meaning of this Act—
(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.
The first real remedy mentioned by SGA 1979, s.39 is the lien. In Hammonds v Barclay
(1802) 2 East 227 Grose J defined a lien in the following terms:
A lien is a right in one man to retain that which is in his possession belonging to another,
till certain demands of him the person in possession are satisfied.
There are various forms of lien (see Devenney, J. ‘Aspects of property, security and
guarantees’ in Furmston, M. and J. Chuah Commercial law. (London: Pearson, 2013)
second edition [ISBN 9781447904472]). In the current context, a lien is the seller’s right
to retain possession of the goods until the buyer pays for the goods. SGA 1979, s.41
provides:
(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:—
(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.
A lien will generally be lost where the seller loses possession of the goods (see SGA
1979, s.43). On the other hand, the second real remedy mentioned by SGA 1979, s.39
– stoppage in transit – may allow the seller to regain possession of the goods (and,
therefore, to exercise a lien) while they are in transit to the buyer if the buyer becomes
insolvent (SGA 1979, s.44). Crucially, the carrier needs to be an independent carrier and
if the carrier is the buyer’s carrier, the goods are deemed to have been delivered to the
buyer (SGA 1979, s.45(1)). Indeed, SGA 1979, s.45(5) provides:
When goods are delivered to a ship chartered by the buyer it is a question depending on
the circumstances of the particular case whether they are in the possession of the master
as a carrier or as agent to the buyer.
The third real remedy mentioned by SGA 1979, s.38 – the right to resale – essentially
allows a seller to recoup losses by reselling goods if a buyer ultimately refuses to pay
(see SGA 1979, s.48). In such circumstances, the subsequent buyer obtains good title
over any title of the original buyer (see SGA 1979, s.48(2)). SGA 1979, s.48(3)–(4) makes
provision in respect of the circumstances where there is a right to resale:
(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.
7.2.3 Retention of title clauses

In Chapter 6 we noted, in the context of a buyer’s insolvency, the significance of
whether or not the property has passed to the buyer (see Section 6.2). We also noted
that, subject to SGA 1979, s.16, property in goods passes to buyers when the parties
intend it to pass. Therefore, a contract of sale of goods will sometimes stipulate that
property in the goods will not pass until the seller has been paid for those goods
(a simple retention of title clause). Such a clause provides the seller with some
protection if the buyer becomes insolvent (although there may be some restrictions
on the enforcement of such clauses such as, for example, those emanating from
the Corporate Insolvency and Governance Act 2020) and, at least functionally, such
clauses are similar to the real remedies we considered earlier in this chapter. Indeed,
in Armour v Thyssen Edelstahlwerke AG [1991] 2 AC 339 the House of Lords confirmed
that such clauses could prevent property passing to the buyer until all money owed
by the buyer to the seller is paid (and not just the money owing under this particular
contract).
Simple retention of title clauses cause few problems and such clauses usually permit
buyers, before the goods are paid for, to sell the goods or to use the goods supplied in
the manufacture of other goods.

Why do retention of title clauses usually permit buyers, before the goods are paid
for, to sell the goods or to use the goods supplied in the manufacture of other
goods? Would a buyer be able to pass good title to a sub-buyer in the absence of
such permission (see the Factors Act 1889, s.9, which was discussed above at 6.4.9)?
More problems arise where the retention of title clause is more elaborate and seeks,
for example, to assert (1) that the seller has title to any products made using the goods
supplied (e.g. title to handbags made using leather supplied by the seller) and/or (2)
that the seller is entitled to any proceeds of the resale of the goods supplied. The key
issue here is whether or not such (extended) clauses create a charge which is void
unless registered under, for example, Companies Act 2006, s.859A (s.859A(7) defines a
company as ‘a UK-registered company’). Such clauses are often not registered as it may
be commercially inconvenient to do so.

What is the purpose of such registration requirements? Do such notice
requirements inform other creditors who might advance credit to the buyer?
Should all retention of title clauses be registrable?
It is not always easy to predict whether or not a particular retention of title clause
amounts to a registrable charge. In general terms, the distinction turns on whether or
not the seller reserves property in its goods or whether the buyer grants an interest
over its property. Thus, in Armour v Thyssen Edelstahlwerke AG [1991] 2 AC 339 at 353 Lord
Keith stated:
I am, however, unable to regard a provision reserving title to the seller until payment of
all debts due to him by the buyer as amounting to the creation by the buyer of a right of
security in favour of the seller. Such a provision does in a sense give the seller security for
the unpaid debts of the buyer. But it does so by way of a legitimate retention of title, not
by virtue of any right over his own property conferred by the buyer.
In Re Peachdart Ltd [1984] Ch 131 leather was sold to a buyer subject to a retention of
title clause. The contract also provided that products (handbags) made out of the
leather would belong to the seller until the leather had been paid for. The seller became
insolvent and the question for the court was whether or not the seller could assert title
over unsold handbags. The court held that the leather had lost its identity when it was
manufactured into handbags and, accordingly, the seller had lost its title. The attempt
of the clause to give the seller a claim over the handbags was a charge; the handbags
did not originally belong to them so there was no reservation of title but a grant of an
interest in them (a charge). As the clause was unregistered it was void in this context.
The position would have been otherwise if the leather had been held not to have lost its
identity (which is a question of fact to be decided on the facts of each case).

Where livestock is supplied to an abattoir under a retention of title clause, will the
livestock lose its identity when it is slaughtered (see Chaigley Farms Ltd v Crawford,
Kaye & Grayshire Ltd [1996] BCC 957)?
Note, however, that in Clough Mill Ltd v Martin [1984] 3 All ER 982 the Court of Appeal
was of the opinion that the fact that it was agreed that the seller of the goods would
become the owner of any new products that were made using those goods did not
necessarily, and without more, mean the clause constituted a charge. Nevertheless,
the Court of Appeal was of the opinion that the clause in that case did constitute a
charge. Central to this position was the view that if the original sellers had seized and
resold the manufactured products, by implication they would only have been entitled
to retain such proceeds as equalled the money owing from the buyer (in other words,
they would not have been entitled to retain all proceeds).
As noted above, retention of title clauses sometimes expressly provide that the
seller is entitled to any proceeds of the resale of the goods supplied. By analogy with
Clough Mill Ltd v Martin [1984] 3 All ER 982, it is likely that such clauses would usually be
interpreted as only entitling the seller to an amount equal to the amount or amounts
owing from the buyer. To hold otherwise would seemingly undermine the essential
nature of the relationship between the seller and buyer. Yet, such an interpretation
would usually require such a clause to be registered. Interestingly, in the leading
case in this area, Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR
676, a clause entitling the sellers of aluminium to the proceeds of the sub-sale of
that aluminium was held valid despite not being registered as a charge. At least one
subsequent judge has questioned the correctness of this decision (see Tatung (UK)
Ltd v Galex Telesure Ltd (1989) 5 BCC 325 per Philips J), although the Romalpa decision
probably turns on a concession made by the buyers that they were in a fiduciary
relationship with the sellers.
7.2.4 Personal remedies
7.2.4.1 Action for the price

As noted above (see Section 7.2.1), a seller has two main personal remedies: an action for
the price and a claim for damages. The action for the price is broadly linked to SGA 1979,
s.27:
It is the duty of the seller to deliver the goods, and of the buyer to accept and pay for
them, in accordance with the terms of the contract of sale.
An action for the price is an action for a liquidated (or particular) sum and, therefore,
unlike an action for damages, the seller does not have to show loss, that the loss was
not too remote, etc. SGA 1979, s.49 deals with such actions:
(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.
There has been some discussion as to whether or not SGA 1979, s.49 is a complete
statement of the situations where, in this area, an action for the price is available.
In other words, is an action for the price available even if the property in the goods
has not passed to the buyer (s.49(1)) and the price is not payable on a particular day
(s.49(2))? In PST Energy 7 Shipping LLC Product Shipping & Trading SA v OW Bunker Malta
Ltd [2016] UKSC 23, the Supreme Court held that SGA 1979, s.49 is not an exhaustive
statement of when an action for the price is available in this context. In particular,
the Supreme Court felt that a seller might be able to claim price where risk (but not
property) in the goods has passed and the goods have been destroyed.
An interesting issue arose in Readie Construction Ltd v Geo Quarries Ltd [2021] EWHC
3030 (QB) around the interpretation of s.49. In that case it had been conceded that,
on the facts, the supplier of the goods could only bring an action for the price if the
requirements of s.49(2) were satisfied (s.49(1) was not applicable due to a retention
of title clause). The difficulty was that, under the contract, delivery of the goods was
a pre-condition of the payment of the price. Therefore, it was argued, that the price
was not ’payable on a day certain irrespective of delivery’. This argument was rejected
by Spencer J, relying on a decision of the High Court of Singapore in Mitsubishi Corp
RTM International Pte Ltd v Kyen Resources Pte Ltd [2019] SGHCR 6, where it was held that
the phrase in question ‘means that the time for payment may be, but need not be
contingent on delivery or the time of delivery’ ([62]).
7.2.4.2 Damages
A seller may be able to claim damages where the buyer is in breach of contract. The
starting point is that the general rules for assessing damages for breach of contract
apply here. However, SGA 1979 translates these general principles into specific rules for
use in particular situations (e.g. in relation to non-acceptance) and these rules draw
heavily on market prices.
Hint…
To refresh your understanding of the general principles of contractual damages, see
Stone and Devenney, Chapter 15 ‘Remedies and restitution’.
As noted above (see Section 7.2.4.1), SGA 1979, s.27 provides that it is the buyer’s duty
to accept and pay for the goods in accordance with the contract. Of course, there
are situations where a buyer will be excused from accepting and paying for the
goods: for example, the contract may be frustrated (see Section 4.6) or the buyer
may legitimately refuse to accept defective goods (see Section 7.3.3). Where a buyer
wrongfully refuses to accept the goods, SGA 1979, s.50 provides:
(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.
Two points need to be made about this provision. First, such damages are
compensatory in nature (SGA 1979, s.50(2)). Second, where there is an available
market, the measure of damages for wrongful non-acceptance of goods is the amount
by which, if at all, the contract price of the goods at the date of delivery exceeds the
market price. This is based on the assumption that in such situations, the seller can
mitigate their loss by going into the market and reselling the goods at the market
price. In such situations their loss will, therefore, be the additional amount of profit,
if any, they would have made under the original sale as a result of the contract price
being higher than the market price. If the seller chooses not to mitigate their loss in
this manner, then prima facie they are not able to claim a greater loss.

What is the position where the seller manages to resell the goods at a price higher
than the market price? Should the calculation then be the amount, if any, by which
the original contract price exceeded the actual resale price? Twigg-Flesner and
Canavan (2020, p.409) argue that:
…there does seem to be a modern trend to deny recovery for a ‘loss’ which is
in fact counterbalanced by a profit, and it seems probable that a court would
today hold that the seller is only entitled to the difference between contract and
resale price, as this is the true measure of loss.
Worked example…
Blake Ltd contracts to buy 100 crates of Ballycotton crabs from Cashman Ltd for
£30 per crate. Blake Ltd wrongfully fails to accept the crabs at the contractual
date for delivery. At that date the market price of Ballycotton crabs is £25 per
crate. What damages will Cashman Ltd be able to claim?
Cashman Ltd will be able to claim £5 of damages per crate (£30 – £25). As Blake Ltd
had contracted to purchase 100 crates, that equates to a total of £500 (£5 x 100).
SGA 1979, s.37 deals with situations where the buyer ultimately accepts the goods but
delays in so doing. It provides:
(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.
(2) Nothing in this section affects the rights of the seller where the neglect or refusal of
the buyer to take delivery amounts to a repudiation of the contract.
7.3 The remedies of the buyer
7.3.1 Introduction
CORE TEXT
In this section we will focus on the main remedies available to a buyer if the seller is in
breach of a contract of sale of goods under the law of England and Wales. In particular,
we will consider the remedies of specific performance, rejection and damages.
7.3.2 Specific performance
CORE TEXT
Where a seller is in breach of a contract of sale of goods, the buyer may wish to obtain
a court order compelling the seller to perform the contract. Such an order – an order
for specific performance – is sometimes available under the law of England and Wales.
Indeed, SGA 1979, s.52 provides:
(1) In any action for breach of contract to deliver specific or ascertained goods the court
may, if it thinks fit, on the plaintiff’s application, by its judgment or decree direct that
the contract shall be performed specifically, without giving the defendant the option
of retaining the goods on payment of damages.
(2) The plaintiff’s application may be made at any time before judgment or decree.
(3) The judgment or decree may be unconditional, or on such terms and conditions as to
damages, payment of the price and otherwise as seem just to the court.
However, as SGA 1979, s.52(1) makes clear, specific performance is a discretionary

remedy and, in practice, is rarely awarded in the context of the sale of goods. In
particular, specific performance would generally not be awarded where damages are
an adequate remedy, where the buyer could easily purchase substitute goods on the
market. The position might be otherwise in respect of, for example, antique goods but,
even then, Cohen v Roche [1927] 1 KB 169 demonstrates the reluctance of the courts of
England and Wales to award specific performance (in that case specific performance
was refused in respect of the sale of particular antiques), although compare Gregor
Fisken Ltd v Carl [2020] EWHC 1385 (Comm), where the court awarded specific
performance in respect of a unique and original gearbox to a Ferrari purchased for
$US44 (approved on appeal: [2021] EWCA Civ 792).
SGA 1979, s.52 is framed in terms of ‘specific or ascertained goods’. Can a contract for
unascertained goods (on which see Section 4.2.4) be specifically enforced at common
law? Traditionally, it was thought that this was not possible, although Sky Petroleum
v VIP Petroleum [1974] 1 All ER 954 provides some, inconclusive, contrary authority
(although that was a case involving injunctions) and that case was approved in VTB
Commodities Trading DAC v JSC Antipinsky Refinery [2020] EWHC 72 (Comm).

Why are the courts of England and Wales so reluctant to grant orders of specific
performance (see Dawson, J.P. ‘Specific performance in France and Germany’ (1959)
57 Michigan L Rev 495)?
7.3.3 Rejection
CORE TEXT
7.3.3.1 A powerful self-help remedy

In some situations a buyer can reject the goods delivered by the seller. Rejection of
the goods does not require a court order; and, following the introduction of SGA 1979,
s.35A, partial rejection is also sometimes possible. Nor is there a formal form of words
which need to be used when rejecting goods. However, the buyer must demonstrate a
clear intention to reject the goods through words or conduct. Thus, in Lee v York Coach
and Marine [1977] RTR 35 it was held that merely telling someone that you have the
right to reject is insufficient.

Why is rejection such a powerful self-help remedy? Does it assist with negotiations
post-breach?
If a buyer legitimately rejects the goods, a number of important consequences follow:
u the buyer can also refuse to pay the price (or can recover the price already paid on
grounds of a total failure of consideration)
u B may be able to claim damages for non-delivery (see Section 7.3.4.2)
u if property in the goods has passed to the buyer, it re-vests in the seller
u the buyer is not normally obliged to return the goods to the seller and the seller
must usually collect the goods (SGA 1979, s.36)
u the buyer may also be able to terminate the contract (as rejection is not necessarily
the same as termination of the contract).

How does the right of rejection (and termination) operate in relation to instalment
contracts (see Maple Flock v Universal Furniture Products [1934] 1 KB 148)?
7.3.3.2 When might the right of rejection arise?

What is the position where a buyer purports to reject goods without having the
right to reject the goods (see Fercometal SARL v Mediterranean Shipping Co SA [1989]
AC 788)?
If a buyer wrongfully rejects goods, then prima facie the buyer commits a fundamental
breach of contract. It is, therefore, important to be clear on when the right to rejection
might arise. A right of rejection may arise in four situations:
1. pursuant to express right in contract
2. pursuant to a statutory right (e.g. SGA 1979, s.30 (delivery of wrong quantity), see
Section 5.3.2)
3. following a breach of condition (e.g. the conditions in SGA 1979, ss.12–15, see
Section 5.4)
4. following a serious breach of an innominate term (see Section 5.2.2).

Should a buyer be able to reject goods for a minor breach of condition (you may
find it useful to consider, on a related area, Brownsword, R. ‘Retrieving reasons,
retrieving rationality? A new look at the right to withdraw for breach of contract’
(1992) 5 Journal of Contract Law 83)?
7.3.3.3 Limitations on the right of rejection

In some circumstances, a buyer can lose the right of rejection. There are a number
of ways in which a right of rejection may be lost, such as through the common law
doctrines of affirmation, waiver and estoppel (and much will depend on the precise
facts of the case and the source of the right to reject). A particularly important
limitation on the right to reject for breach of condition is the doctrine of acceptance.
Section 35 SGA 1979 indicates three situations where a buyer will be deemed to have
accepted the goods (and, therefore, lost the right of rejection):
(1) The buyer is deemed to have accepted the goods subject to subsection (2) below—
(a) when he intimates to the seller that he has accepted them, or
(b) when the goods have been delivered to him and he does any act in relation to
them which is inconsistent with the ownership of the seller.
(4) The buyer is also deemed to have accepted the goods when after the lapse of a
reasonable time he retains the goods without intimating to the seller that he has
rejected them.
(Emphasis added)
The first and second forms of acceptance – acceptance by express intimation and
acceptance by an act inconsistent with the ownership of the seller – are both subject
to SGA 1979, s.35(2), meaning the buyer must have had a reasonable opportunity to
examine the goods before there is deemed acceptance. The meaning of an express
intimation is fairly straightforward but the meaning of an act inconsistent with the
ownership of the seller is more problematic (not least as the property may have
passed to the buyer). In the New Zealand case of Armaghdown Motors v Gray [1963]
NZLR 5 the court held that the registration of a car in the buyer’s name was an act
inconsistent with the ownership of the seller. One might argue that this is a harsh
decision on the buyer as the registration of a car (which is often required by law)
is merely a routine step in such situations rather than something which indicates
acceptance of, for example, defective goods. By contrast, in the Scots case of Fiat Auto
Financial Services v Connelly 2007 SLT (Sh Ct) 111 the court held that there was not an
inconsistent act where a buyer purchased a taxi and drove it for 40,000 miles while
the parties were in discussions during this period about the defects. Note also Galtrade
Limited v BP Oil International Limited [2021] EWHC 1796 (Comm) at [105] where the court
linked the concept of an ‘inconsistent act’ to the contractual framework:
…I struggle to see how the mere acceptance of the cargo prior to the contractual testing
upon which the Defendant had insisted would be an act inconsistent with the exercise of
the Claimant’s right to reject (if it had such a right).
Whatever the meaning of an act inconsistent with the ownership of a seller, it seems
that the seller does not need to know of the ‘inconsistent act’: see Phoenix Interior
Design Ltd v Henley Homes plc, Union Street Holdings Ltd [2021] EWHC 1573 (QB) at [103].
SGA 1979, s.35(6) provides:
The buyer is not by virtue of this section deemed to have accepted the goods merely
because—(a) he asks for, or agrees to, their repair by or under an arrangement with the
seller, or (b) the goods are delivered to another under a sub-sale or other disposition.
(Emphasis added)
However, it is important to note that SGA 1979, s.35(6) does not provide that there can
never be acceptance in those situations (see Jones v Gallagher [2004] EWCA Civ 10).
The third form of acceptance – lapse of a reasonable time without accepting – was
traditionally applied quite strictly. For example, in Bernstein v Pamson Motors [1987]
2 All ER 220 the right of rejection was lost within three weeks. This was particularly
problematic in relation to goods where defects might not be immediately apparent
and where such defects only become apparent after a period of use. Thus, SGA 1979
was amended and SGA 1979, s.35(5) now provides:
The questions that are material in determining for the purposes of subsection (4) above
whether a reasonable time has elapsed include whether the buyer has had a reasonable
opportunity of examining the goods for the purpose mentioned in subsection (2) above.
The leading case is now Clegg v Andersson [2003] EWCA Civ 320. In that case a yacht
was delivered in August 2000. On delivery the seller informed the buyer that the keel
was heavier than the manufacturer’s specification. This led to discussions between
the seller and buyer in August and September 2000, as the buyer was concerned
about the impact of the heavier keel. On 15 February 2001 the buyer finally received
information about the impact of the heavier keel on the yacht and three weeks later
the buyer sought to reject the yacht. Under the Bernstein approach it was fairly clear
that the right to rejection would have been lost by a lapse of time, but the Court of
Appeal regarded Bernstein as no longer amounting to good law. The Court of Appeal
held that, on the facts, rejection was still possible and in considering a reasonable
time, the court could ignore any time the parties were in discussion. Such an approach
arguably encourages alternative means of resolving disputes.
An interesting question is whether the qualification in s.35(5) around a reasonable

opportunity to examine the goods applies where the buyer already knows the seller is
in breach of contract? This point was raised but not decided in Galtrade Limited v BP Oil
International Limited [2021] EWHC 1796 (Comm).

To what extent, if at all, does the current approach to lapse of reasonable time in
this context result in uncertainty (see also Truk (UK) v Tokmakidis [2000] 1 Lloyd’s
Rep 543)?
7.3.4 Damages
CORE TEXT
7.3.4.1 Introduction
A buyer may be able to claim damages where the seller is in breach of contract. As with
situations where the buyer is in breach of contract and it is the seller who is claiming
damages (see Section 7.2.4), the general rules for assessing damages for breach of
contract apply here. Again, SGA 1979 translates these general principles into specific
rules for use in particular situations (e.g. in relation to non-delivery) and these rules
draw heavily on market prices.
Hint…
To refresh your understanding of the general principles of contractual damages, see
Stone and Devenney, Chapter 15.
7.3.4.2 Damages for non-delivery

SGA 1979, s.51 makes provision in respect of damages for non-delivery:
(1) Where the seller wrongfully neglects or refuses to deliver the goods 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.
(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.
A number of points need to be made about this provision. First, damages for non-
delivery are only available where the seller ‘wrongfully neglects or refuses to deliver
the goods to the buyer’ (SGA 1979, s.51(1)). Thus, such damages would not be available
where, for example, the contract has been frustrated (see Section 4.6). Second, such
damages are compensatory in nature (SGA 1979, s.51(2)). Third, where there is an
available market, the measure of damages for wrongful non-delivery of goods is the
amount by which, if at all, the market price of the goods at the date of delivery exceeds
the contract price. This is based on the assumption that in such situations, the buyer
can mitigate their loss by going into the market to buy replacement goods (perhaps to
satisfy a sub-sale) and their loss will, therefore, be the additional amount, if any, they
had to pay for the substitute goods; if the buyer chooses not to mitigate their loss in
this manner, then prima facie they are not able to claim a greater loss.
Worked example…
Blake Ltd contracts to buy 1,000 sacks of Ballycotton potatoes from Cashman Ltd for
£3 per sack. Cashman wrongfully fails to deliver the potatoes at the contractual date
for delivery. At that date the market price of Ballycotton potatoes has risen to £4 per
sack. What damages will Blake Ltd be able to claim?
Blake Ltd will be able to claim £1 of damages per sack (£4 – £3). As Blake Ltd had
contracted to purchase 1,000 sacks, that equates to a total of £1,000 (£1 x 1,000).
Where there is not an available market for the goods in question, a buyer would
be able to claim damages on general compensatory principles. For example, and
depending on the precise facts, the buyer may be able to claim the difference, if any,
between the value of the goods at the date of breach and the contract price.
7.3.4.3 Damages for delayed delivery

Perhaps surprisingly, SGA 1979 does not specifically provide for damages for delayed
delivery. Nor does it specifically deal with the relationship between such damages and
the remedy of rejection (see Section 7.3.3). If time was of the essence (see Section 5.3.1)
then delayed delivery may entitle B to reject the goods and claim for non-delivery (on
which see Section 7.3.4.2). If rejection is not available or is not chosen, then damages
will be calculated using general common law rules and principles. For example, if
goods are bought for resale, the measure may be the amount by which the value of
the goods has fallen during the period of delay. By contrast, if the buyer was to use the
goods as profit-earning chattels, the measure may be lost profit during the period of
unavailability (see Victoria Laundry v Newman [1949] 2 KB 528).
7.3.4.4 Damages for defective delivery

As noted above (see Section 7.3.3), a buyer may sometimes be able to reject goods
on the ground that those goods are defective. Where this occurs, the buyer may
claim damages for non-delivery (see Section 7.3.4.2). On the other hand, damages for
defective goods (where the goods are not rejected) are governed by SGA 1979, s.53:
(2) 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.
(3) In the case of breach of warranty of quality such loss is prima facie the difference
between the value of the goods at the time of delivery to the buyer and the value
they would have had if they had fulfilled the warranty.
(Emphasis added)
Thus, the prima facie measure of damages is the amount by which the value of the
goods (if they had not been defective) exceeds the value of the defective goods.
Additional losses (such as personal injury) can also be recovered (see Godley v Perry
[1960] 1 All ER 36 (loss of an eye)).
Further reading
¢ Fox et al., Chapter 13 ‘Remedies of the seller’ and Chapter 14 ‘Remedies of the
buyer’.
¢ Harris, D. ‘Specific performance – a regular remedy for consumers?’ (2003) 119

Law Quarterly Review 541.
¢ Goode, R. ‘The concept and implications of a market in commercial law’ (1991)

Lloyd’s Maritime and Commercial Law Quarterly 177.
¢ Adams, J. ‘Damages in sale of goods: A critique of the provisions of the Sale of

Goods Act’ (2002) Journal of Business Law 553.
¢ Mak, V. ‘The seller’s right to cure defective performance – a reappraisal’ (2007)

Lloyd’s Maritime and Commercial Law Quarterly 409.
¢ Gullifer, L. ‘“Sales” on retention of title terms: is the English law analysis broken?’
(2017) 133 Law Quarterly Review 244.
Core comprehension
1. What is the distinction, under the law of England and Wales, between a penalty
clause and a liquidated damages clause?
2. What is the significance of the distinction between a seller’s real remedies and a
seller’s personal remedies under SGA 1979?
3. What are the main remedies under SGA 1979 which a buyer has when a seller
delivers defective goods?
applied comprehension
At the end of Chapter 4 we considered the following scenario:
‘Last month Alpha Ltd agreed to purchase a cargo of papaya which was on board the SS
West Country. The cargo was to be delivered at the Port of Bristol with property passing
once the goods had been delivered. When the cargo was unloaded at the Port of Bristol, it
was discovered that the cargo had been contaminated with diesel oil and was no longer fit
for human consumption.
Advise Alpha Ltd.’
We noted that a key question related to when the cargo was contaminated with diesel
oil. If it was before the contract was made, this situation may result in the ‘contract’
being void under SGA 1979, s.6; in contrast, if the contamination occurred after the
contract was made but before the property in the goods passed to Alpha Ltd, the
contract may be frustrated under SGA 1979, s.7.
In many ways SGA 1979, ss.6 and 7 operate as a defence to contractual liability.
However, as we noted in Chapter 4, there are limits to these defences. What would the
position be in this situation if SGA 1979, ss.6 and 7 are not applicable?
guide.
Notes
8 UN Convention on Contracts for the International
Sale of Goods (CISG)
Contents
8.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
8.2 Background to the CISG . . . . . . . . . . . . . . . . . . . . . . . . . 91
8.3 Field of application . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
8.4 The scope of the CISG . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

Learning outcomes
u explain the background, application and scope of the CISG
u compare, contrast, discuss and apply the key provisions of the CISG with the
provisions of the Sale of Goods Act 1979, including provisions on interpretation,
good faith, obligations, remedies and risk.
International commercial law 8 UN Convention on Contracts for the International Sale of Goods (CISG) page 91
8.1 Introduction
In Chapter 1 we referred to two competing international sale of goods regimes: the
(UK) Sale of Goods Act 1979 (SGA 1979) and the UN Convention on Contracts for the
International Sale of Goods (CISG). Chapters 4 to 7 focused on the international sale of
goods regime based on SGA 1979. This chapter examines an alternative regime under
the CISG, contrasting the relevant provisions of the CISG with those of SGA 1979. At
the time of writing, the CISG has been ratified in 94 States, including China, Canada,
Germany, the Russian Federation and the USA. On the other hand, the CISG has not
been adopted by the UK, India or South Africa.

Why has the UK not adopted the CISG?
8.2 Background to the CISG
CORE TEXT
One of the themes we explored in Chapter 2 was that of the harmonisation of

international commercial law. There have been a number of attempts to harmonise
international sales law, including the Uniform Law on the International Sale of Goods
(ULIS) (1964), otherwise known as the Hague ULIS. Interestingly, the UK did adopt
the Hague ULIS but it only applied where parties opted into it (Uniform Law on
International Sales Act 1967). The drafting of the Hague ULIS received a mixed reaction
and was ultimately succeeded by the CISG (1980), sometimes referred to as the Vienna
Convention. The CISG came into force on 1 January 1988. As noted above, the UK has
not adopted the CISG as the result of ‘…opposition from a number of influential
organisations, lack of public services resources and fear that London would lose its
edge in international arbitration and litigation’ (Twigg-Flesner and Canavan, 2020,
p.352).
Handy hint…
For information on the CISG (text, adoptions, etc.) see: https://uncitral.un.org/en/texts/
salegoods/conventions/sale_of_goods/cisg
8.3 Field of application
CORE TEXT
The CISG, Article 1 provides:
(1) This Convention applies to contracts of sale of goods between parties whose places of
business are in different States:
(a) when the States are Contracting States; or
(b) when the rules of private international law lead to the application of the law of a
Contracting State.
A number of important points need to be made about the field of application of the
CISG. First, it applies only to ‘contracts of sale of goods’. The CISG does not define a
‘contract of sale’, nor does it define ‘goods’. Thus, it is unclear whether, for example,
sales of software come within the CISG, although Professor Diedrich has argued
that ‘computer software is generally a “good” according to Article 1 CISG, despite its
non-physical existence and different appearances…the CISG is prima facie applicable
to international transactions involving the transfer of computer software for a price.
The limitations can be found in the structure of the transaction and the parties’ will’
(Diedrich, F. ‘The CISG and computer software revisited’ (2002) 55 Vindobona JCLAS 74
and 75).
In 2020 UNCITRAL, HCCH and Unidroit published a Legal guide to uniform instruments
in the area of international commercial contracts, with a focus on sales, which stated (at
[444]):
…the question of whether transactions in digital information (software, computer

programs, applications, music, e-books, smart goods, etc.) are within the scope of the
CISG poses a challenge to the interpretation of the CISG. This issue was not foreseen when
the CISG was adopted in 1980. Different views are expressed. The issue involves both
the definition of ‘goods’ (e.g., the question of whether goods must be tangible) and the
nature of the transaction (e.g., sale, licence of property or access to data not protected by
a property regime). Due consideration must also be given to the desirability of achieving
uniformity of law by a broad application of the CISG on the one hand, and the desirability
of developing a suitable rule tailored to changing modern information technology on the
other.
On the other hand, the CISG, Article 2 excludes the following sales from its ambit:
(a) of goods bought for personal, family or household use, unless the seller, at any time
before or at the conclusion of the contract, neither knew nor ought to have known
that the goods were bought for any such use;
(b) by auction;
(c) on execution or otherwise by authority of law;
(d) of stocks, shares, investment securities, negotiable instruments or money;
(e) of ships, vessels, hovercraft or aircraft;
(f) of electricity.
Thus, consumer sales are generally outside of the CISG (compare SGA 1979 – although
consumer sales are now generally outside of its ambit, some provisions continue to apply
to consumer sales (e.g. the provisions on the passing of property)). The CISG, Article 3 also
excludes contracts where the ‘predominant part’ of the seller’s obligations consists of
the supply of services (compare, in the law of England and Wales, contracts for work and
materials (see Section 4.2.4) and Robinson v Graves [1935] 1 KB 579).
The second important point to make in connection with the CISG, Article 1 is that the
CISG applies when the place of business of each party is in different States (by CISG,
Article 1(2), this needs to be apparent at the time of contracting). This differs from, for
example, UCTA 1977, s.26 (see Section 5.4.6) which is partially framed in terms of the
goods being carried from one State to another State. Of course, some businesses have
more than one place of business; in such a case the CISG, Article 10 provides that:
…the place of business is that which has the closest relationship to the contract and
its performance, having regard to the circumstances known to or contemplated by the
parties at any time before or at the conclusion of the contract.
Third, Article 1 also requires either: both of the States in which the places of business
of the contracting parties are situated to have adopted the CISG, or conflict of laws
rules to result in the application of the law of a State which has adopted the CISG.
Finally, it should be noted that, as an alternative to Article 1, the parties to a contract

may incorporate the CISG into their contract as they would other terms. Thus, in broad
terms, the CISG can govern contracts where the applicable law is the law of a State
(such as the UK) which has not adopted the CISG.
8.4 The scope of the CISG
CORE TEXT
¢ McKendrick, pp.1032–37 and 1041–43.
8.4.1 Formation of the contract

The CISG, Article 11 provides that the contract does not need to be in, or evidenced by,
writing. This is similar to the position under SGA 1979 (see Section 4.2.2). This proved
controversial to some States and, therefore, under the CISG, Article 12, adopting States
may depart from this provision. In addition, the CISG, Part II – unlike SGA 1979 (where
such issues are largely left to the common law) – provides a number of rules relating
to contract formation. For example, in relation to the ‘battle of the forms’ (where each
party is trying to conclude the contract on its standard terms), the CISG, Article 19(1)
provides:
A reply to an offer which purports to be an acceptance but contains additions, limitations

or other modifications is a rejection of the offer and constitutes a counter-offer.
This reflects the position under the law of England and Wales (although compare
Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd [1979] 1 WLR 401). However, in
contrast to the law of England and Wales, the CISG, Article 19(2) also provides:
(2) However, a reply to an offer which purports to be an acceptance but contains

additional or different terms which do not materially alter the terms of the offer
constitutes an acceptance, unless the offeror, without undue delay, objects orally
to the discrepancy or dispatches a notice to that effect. If he does not so object, the
terms of the contract are the terms of the offer with the modifications contained in
the acceptance.
8.4.2 Sale of goods
8.4.2.1 Generally
The CISG also makes provision in respect of the rights, obligations and remedies of
the parties under the sale of goods contract. However, the CISG does not deal with
every aspect of the parties’ relationship. Thus, the CISG, unlike SGA 1979, does not deal
with the passing of the property in the goods, which generally would be resolved by
an application of conflicts of law rules. This is perhaps understandable, given, as was
noted at Section 6.1, that the concept of property and its precise relationship with
a contract of sale of goods is not necessarily the same in all legal cultures. This has
created problems for the harmonisation of this area of law (see Devenney, J. and M.
Kenny ‘Omission of personal property from the proposed CESL: the Hamlet syndrome...
without the prince?’ (2015) Journal of Business Law 607).

Do retention of title clauses come within the ambit of the CISG (see McKendrick,
p.1033)?
On the other hand, the CISG does include provisions on risk. This may seem odd to
a lawyer trained in the law of England and Wales where risk is usually linked to the
whereabouts of property (SGA 1979, s.20). However, under the CISG, risk is not linked
to the passing of property but, broadly, to control. The CISG, Article 69 provides:
(1) In cases not within articles 67 and 68, the risk passes to the buyer when he takes over
the goods or, if he does not do so in due time, from the time when the goods are
placed at his disposal and he commits a breach of contract by failing to take delivery.
(2) However, if the buyer is bound to take over the goods at a place other than a place of
business of the seller, the risk passes when delivery is due and the buyer is aware of the
fact that the goods are placed at his disposal at that place.

Might this approach to risk cause problems in respect of unascertained goods?
Article 69(1) is interesting as it deals, broadly, with the problem (in the context of
unascertained goods) of which goods are at the buyer or seller’s risk:
(3) If the contract relates to goods not then identified, the goods are considered not to be
placed at the disposal of the buyer until they are clearly identified to the contract.
Article 69 is subject to Articles 67 and 68. Article 67 concerns situations where the
contract of sale involves the carriage of goods. In such situations, risk normally passes
when the goods are ‘handed’ to the carrier. Article 68 deals with the sale of goods
which are in transit. In such cases risk usually passes when the contract is concluded
(although the contract may provide that risk is retrospectively on the buyer from the
moment the goods were ‘handed’ to the carrier).
The CISG also includes provisions on frustration (or, to use the language of the CISG,
force majeure). Again, this might appear odd to a common lawyer so familiar with
frustration being linked to passing of property (see Section 4.6). The CISG, Article 79(1)
provides:
A party is not liable for a failure to perform any of his obligations if he proves that the
failure was due to an impediment beyond his control and that he could not reasonably
be expected to have taken the impediment into account at the time of the conclusion of
the contract or to have avoided or overcome it, or its consequences.

Does Article 79(1) cover situations where performance has become much more
onerous, rather than impossible (see McKendrick, p.1042)?
In some respects, this provision operates in a similar fashion to the doctrine of
frustration under the law of England and Wales. For example, it is subject to the terms
of the contract (Article 6 – in fact, the parties can normally exclude any provisions
of the CISG) and, therefore, will not apply where the parties make provision for a
particular intervening act. On the other hand, there are some significant differences
between Article 79(1) and the doctrine of frustration under the law of England and
Wales. For example, under the CISG:
The party who fails to perform must give notice to the other party of the impediment and
its effect on his ability to perform. If the notice is not received by the other party within a
reasonable time after the party who fails to perform knew or ought to have known of the
impediment, he is liable for damages resulting from such non-receipt.
Moreover, under the law of England and Wales, frustration discharges both parties
from further obligations under the contract. By contrast, Article 79(1) has only
suspensory effect (see Article 79(3)), thus the parties’ obligations are restored if
the ‘impediment’ is removed. In situations where the ‘impediment’ is permanent,
Article 79(1) only prevents an action for damages (see Article 79(5)); prima facie the
other remedies remain so that, for example, the buyer might avoid the contract for
non-performance.
8.4.2.2 Good faith?

As noted above (see Section 4.4 above), the law of England and Wales does not
currently recognise an overriding duty of good faith in commercial dealings. What is
the position under the CISG? A key provision is the CISG, Article 7:
(1) In the interpretation of this Convention, regard is to be had to its international

character and to the need to promote uniformity in its application and the observance
of good faith in international trade.
(2) Questions concerning matters governed by this Convention which are not expressly
settled in it are to be settled in conformity with the general principles on which it is
based or, in the absence of such principles, in conformity with the law applicable by
virtue of the rules of private international law.
There is some debate on the impact of the CISG, Article 7. At one level it appears
to merely require the provisions of the CISG to be interpreted in accordance with
‘the observance of good faith in international trade’. On the other hand, it can be
argued that there is a wider role for good faith in the CISG (‘the need to promote…the
observance of good faith in international trade’), and such a perspective is more likely
to appeal to lawyers from a civilian tradition.
Finally, it should be noted that the CISG, Article 9(2) provides:
The parties are considered, unless otherwise agreed, to have impliedly made applicable to
their contract or its formation a usage of which the parties knew or ought to have known
and which in international trade is widely known to, and regularly observed by, parties to
contracts of the type involved in the particular trade concerned.
8.4.3 Obligations of the seller under the CISG
CORE TEXT
The obligations of a seller under the CISG are not dissimilar to those under SGA 1979.
The general position is explained in the CISG, Article 30:
The seller must deliver the goods, hand over any documents relating to them and transfer
the property in the goods, as required by the contract and this Convention.
Articles 31–34 provide default rules relating to delivery. Article 35 contains important
provisions about the quality of the goods delivered:
(1) The seller must deliver goods which are of the quantity, quality and description
required by the contract and which are contained or packaged in the manner required
by the contract.
Article 35 continues:
(1) Except where the parties have agreed otherwise, the goods do not conform with the
contract unless they:
(a) are fit for the purposes for which goods of the same description would ordinarily
be used;
(b) are fit for any particular purpose expressly or impliedly made known to the seller
at the time of the conclusion of the contract, except where the circumstances
show that the buyer did not rely, or that it was unreasonable for him to rely, on the
seller’s skill and judgement;
(c) possess the qualities of goods which the seller has held out to the buyer as a
sample or model;
(d) are contained or packaged in the manner usual for such goods or, where there is
no such manner, in a manner adequate to preserve and protect the goods.
(3) The seller is not liable under subparagraphs (a) to (d) of the preceding paragraph for
any lack of conformity of the goods if, at the time of the conclusion of the contract, the
buyer knew or could not have been unaware of such lack of conformity.
These (excludable) requirements resonate with SGA 1979, ss.14–15, although Article
35(2)(d) (on packaging) perhaps goes beyond SGA 1979. Articles 41–42 resonate with
SGA 1979, s.12, with Article 41 providing:
The seller must deliver goods which are free from any right or claim of a third party, unless
the buyer agreed to take the goods subject to that right or claim. However, if such right or
claim is based on industrial property or other intellectual property, the seller’s obligation
is governed by article 42.
8.4.4 Remedies of the buyer under the CISG

So, what remedies does a buyer have under the CISG for breach of these obligations?
The buyer’s remedies are contained in Articles 45–52 and 74–77. The buyer’s remedies
include: require delivery of substitute goods (Article 46(2)); repair, unless this is
unreasonable (Article 46(3)); avoiding the contract (Article 49); reduction of the price
(Article 50); and damages (Articles 74–77).

To what extent, if at all, are these remedies available under SGA 1979?
Although, in broad terms, some of these remedies are available under the SGA 1979
regime, there are some differences in terms of the precise operation of such remedies.
For example, the right to require substitute goods for a lack of conformity, the right
to avoid the contract for a lack of conformity and the right to avoid the contract for
a partial delivery (Article 51) are all dependent on the breach being a fundamental
breach. In contrast, the law of England and Wales has not traditionally recognised a
requirement of fundamental breach (at least in this sense). Thus, for example, non-
conforming goods can be rejected if the breach amounted to a breach of condition
(whatever the consequences of that breach).
The CISG, Article 25 defines a fundamental breach in the following terms:
A breach of contract committed by one of the parties is fundamental if it results in such

detriment to the other party as substantially to deprive him of what he is entitled to
expect under the contract, unless the party in breach did not foresee and a reasonable
person of the same kind in the same circumstances would not have foreseen such a result.

To what extent, if at all, does this chime with the approach to innominate terms
under the law of England and Wales? Does SGA 1979 recognise innominate terms?
Interestingly, under the CISG, the buyer must examine the goods ‘within as short a
period as is practicable in the circumstances’ (Article 38(1)) and, under Article 39:
(1) The buyer loses the right to rely on a lack of conformity of the goods if he does not
give notice to the seller specifying the nature of the lack of conformity within a
reasonable time after he has discovered it or ought to have discovered it.
(2) In any event, the buyer loses the right to rely on a lack of conformity of the goods if he
does not give the seller notice thereof at the latest within a period of two years from
the date on which the goods were actually handed over to the buyer, unless this time
limit is inconsistent with a contractual period of guarantee.
However, if the buyer has a ‘reasonable excuse’ for not giving such notice then the
buyer may still have some remedies: reduction in price and, to some extent, damages
(see Article 44). In addition to this notice of non-conformity, if the buyer wishes to
avoid the contract they must act before that right is lost:
…in cases where the seller has delivered the goods, the buyer loses the right to declare
the contract avoided unless he does so: (a) in respect of late delivery, within a reasonable
time after he has become aware that delivery has been made; (b) in respect of any
breach other than late delivery, within a reasonable time: (i) after he knew or ought to
have known of the breach…
Two final points need to be made in respect of the buyer’s remedies. First, a seller may
have the right to cure a defective delivery under Article 48 if this can be done without
unreasonable delay or inconvenience to the seller (the buyer will, however, retain the
right to damages). This cannot be done if the buyer has exercised a right to avoid a
contract. Second, under Article 74 the general measure of damages is:
Damages for breach of contract by one party consist of a sum equal to the loss, including
loss of profit, suffered by the other party as a consequence of the breach. Such damages
may not exceed the loss which the party in breach foresaw or ought to have foreseen at
the time of the conclusion of the contract, in the light of the facts and matters of which he
then knew or ought to have known, as a possible consequence of the breach of contract.
The CISG, Article 75 provides:

If the contract is avoided and if, in a reasonable manner and within a reasonable time after
avoidance, the buyer has bought goods in replacement or the seller has resold the goods,
the party claiming damages may recover the difference between the contract price and
the price in the substitute transaction as well as any further damages recoverable under
article 74.
8.4.5 Obligations of the buyer and remedies of the seller under the CISG
The CISG, Article 53 provides that the buyer must pay for the goods and take delivery
of them in accordance with the contract and the relevant provisions of the CISG.
Under the CISG, Article 61, where the buyer breaches these obligations, the seller is
entitled to remedies under the CISG Articles 62–65 and Articles 74–77. We have already
mentioned Articles 74–77 (on damages above (at 8.4.4)). The remedies in Articles 62–65
include: requiring the buyer to pay the price (note that this is not linked to passing
of property as it is under SGA 1979) or taking delivery (Article 62) and avoiding the
contract under Article 64:
The seller may declare the contract avoided: (a)if the failure by the buyer to perform
any of his obligations under the contract or this Convention amounts to a fundamental
breach of contract; or (b) if the buyer does not, within the additional period of time fixed
by the seller in accordance with paragraph (1) of article 63, perform his obligation to pay
the price or take delivery of the goods, or if he declares that he will not do so within the
period so fixed.
Again, the ability of the seller to avoid is, to some extent, linked to the concept of
fundamental breach.
FURTHER READING
¢ Bridge, M. ‘Uniformity and diversity in the law of international sale’ (2003) 15
Pace International Law Review 55 (in HeinOnline and LexisLibrary through the
Online Library.
¢ Goode, Kronke and McKendrick, 2015, Chapter 8 ‘International sales and the
Vienna Sales Convention’.
CORE AND APPLIED COMPREHENSION

Compare some of the key provisions of SGA 1979 and the CISG by completing this table:
Area CISG SGA 1979

Jurisdiction
Applicable to what type of

contracts?
Applicable to consumer contracts?
Deals with contract formation?
Deals with passing of property?

Area CISG SGA 1979

Provisions on risk?
Provisions on frustration?
Overriding requirement of good

faith?
Deals with obligations of sellers and

buyers?
Remedies?
guide.
9 The financing of international trade
Contents
9.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
9.2 In general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
9.3 Documentary credits . . . . . . . . . . . . . . . . . . . . . . . . . . 101

Learning outcomes
By the end of this chapter and the relevant readings you should be able to:
u explain the background considerations in the financing of international trade
u discuss and apply the legal framework for common methods of financing
international trade, including the documentary credit.
International commercial law 9 The financing of international trade page 101
9.1 Introduction
In Chapter 2 we considered some of the risks and challenges of cross-border
commercial sales transactions. One risk or challenge which is, perhaps, amplified in a
cross-border commercial sales transactions relates to payment:
Overseas sales give rise to special problems mainly because there is often a considerable
lapse of time between the despatch of the goods and their arrival at the agreed or
contemplated destination. During this period, the parties are exposed to three types
of risk: financial, physical and legal. So far as the financial risk is concerned, the seller
will want to obtain payment as early as possible and to retain some interest in the
goods, at least by way of security, until he has received, or been adequately assured
of receiving, payment. On the other hand, the buyer will not want to pay for goods,
which he has not yet received, until he has acquired an interest in the goods on which
he can rely by way of security in the event of the seller’s insolvency before actual
delivery of the goods. To a large extent these conflicting desires have been reconciled
by the law relating to documents of title to goods, to the passing of property in goods in
transit, and to the unpaid seller’s rights against the goods.
(Bridge, 2020, 18-001 (emphasis added))
In this chapter we explore payment mechanisms in relation to cross-border sales

transactions with particular emphasis on the documentary credit (see Section 9.3).
9.2 In general
CORE TEXT
u McKendrick, pp.1067–69 and 1141–66.
As with domestic sales, a seller may allow an international buyer to take the goods on
credit. Indeed, Fox et al. have remarked (2020, p.714) that this is reasonably common.
Such a transaction may be supported by a third party acting as surety (in other words,
guaranteeing payment). Alternatively, the seller may be able to negotiate for payment
in advance, and that will, in general terms, throw the risk of the seller’s insolvency
onto the buyer. As a third alternative, it may be that the parties agree that the price is
payable on shipment (see, for example, SGA 1979, s.28).
As noted in the above quote from Bridge, documents of title can be used, to some
extent, to balance the risk of the seller and the risk of the buyer. At one time a
common payment in cross-border sales transactions was the ‘documentary bill’. This
involved sending a bill of exchange and the shipping documents to the buyer, with
the idea being that the buyer would only accept the shipping documents if the bill of
exchange was accepted. The bill of exchange and shipping documents might also be
delivered through a bank to minimise the risk of the buyer acting fraudulently.

What is a bill of exchange?
A seller may alternatively gain greater peace of mind through an autonomous
payment obligation such as a documentary credit, to which we now turn.
9.3 Documentary credits
CORE TEXT
u McKendrick, pp.1069–41.
9.3.1 An introduction to documentary credits

A common mechanism for payment in an international sales transaction is the
documentary credit. The key components of this payment mechanism are as follows
(although, of course, the detail can vary).
1. The buyer will instruct its bank (the issuing bank) to open a credit with a bank
(the correspondent bank) in the seller’s country for the benefit of the seller.
The instructions will specify the documents the seller will need to present to
the correspondent bank in order to be paid by it. Typically, these documents
will include the bill of lading (traditionally indicating that the goods have been
shipped), an invoice and an insurance policy. The buyer may also require, for
example, a certificate of origin.
2. The correspondent bank will advise the seller that a credit has been opened in its
favour. It will also advise the seller of the precise documents which the seller will
need to present to the correspondent bank in order to be paid.
3. The seller will in due course present the relevant documents to the correspondent
bank for payment. The correspondent bank will pay the seller if the documents
are as required under the credit. This is linked to a fundamental principle
of documentary credits: the payment obligation is an autonomous payment
obligation (see Section 9.3.5) and, therefore, the correspondent bank is generally
not concerned with the underlying contract of sale (e.g. whether the goods
are actually of satisfactory quality) but with whether the documents meet the
requirement of the credit.

Why is it important that the payment obligation is an autonomous payment
obligation?
4. The correspondent bank will present the documents to the issuing bank. The
issuing bank will pay the correspondent bank if the documents are as required
under the credit.
5. The issuing bank may present the documents to the buyer for payment, in which
case the buyer will want to ascertain that the documents are as required under the
contract. Alternatively, the issuing bank may have granted credit to the buyer, in
which case the issuing bank may release the documents (which are necessary for
the buyer to obtain the goods and, for example, resell them to raise funds to pay
the issuing bank) under a ‘trust receipt’ (the aim of which is to give the issuing bank
some security against non-payment by the buyer).

If, for example, the goods when delivered turn out to be of unsatisfactory quality,
what remedies are available to the buyer? Do you agree with Twigg-Flesner and
Canavan (2020, p.348) that a ‘…letter of credit thus throws the onus of litigation on
to the buyer who must pay first and sue afterwards’?
9.3.2 Types of documentary credit

In 9.3.1 we outlined the key components of the documentary credit mechanism of
payment in international sales. We also noted that there can be variations in the
process in terms of detail. At this point we need to distinguish irrevocable credits from
revocable credits, and confirmed credits from unconfirmed credits:
u A revocable credit can be amended or withdrawn at any time by the issuing bank
without giving notice to the seller (see Cape Asbestos Co Ltd v Lloyds Bank Ltd [1921]
WN 274) subject only to the issuing bank paying the correspondent bank if it has
already paid a seller. As such, revocable credits are rarely used and indeed are
not covered by the most recent version of the Uniform Customs and Practice for
Documentary Credits (UCP 600) which will be discussed below (at 9.3.3).
u An irrevocable credit, on the other hand, generally cannot be amended or

withdrawn without the consent of the seller and the relevant banks. UCP 600,
Article 3 deems credits to be irrevocable unless otherwise indicated.
u A confirmed credit is where the correspondent bank provides its own distinct
undertaking to the seller to honour the credit.

What is the consideration for such a distinct undertaking?
u Such an undertaking may present difficulties in terms of consideration from the
seller but is well-established as enforceable.
u An unconfirmed credit is where the correspondent bank does not provide its own
distinct undertaking to the seller to honour the credit. Therefore, the seller will
generally not be able to sue the correspondent bank in the event of non-payment.
9.3.3 The Uniform Customs and Practice for Documentary Credits (UCP 600)
Most documentary credits incorporate the Uniform Customs and Practice for Documentary
Credits (UCP), the most recent version of which is UCP 600 (1 July 2007). The UCP are
drafted and revised by the International Chamber of Commerce and are an example of
the importance of custom and usage in the international sale of goods. As such, in Fortis
Bank SA/NV, Stemcor UK Limited v Indian Overseas Bank [2011] EWCA Civ 58 at [29] Thomas LJ
stated:
In my view, a court must recognise the international nature of the UCP and approach
its construction in that spirit. It was drafted in English in a manner that it could easily
be translated into about 20 different languages and applied by bankers and traders
throughout the world. It is intended to be a self-contained code for those areas of practice
which it covers and to reflect good practice and achieve consistency across the world.
Courts must therefore interpret it in accordance with its underlying aims and purposes
reflecting international practice and the expectations of international bankers and
international traders so that it underpins the operation of letters of credit in international
trade. A literalistic and national approach must be avoided.
Handy Hint…
For information on the International Chamber of Commerce see: https://iccwbo.org/
9.3.4 Strict compliance?

As noted above, the seller presents the relevant documents to the correspondent
bank for payment and the correspondent bank pays the seller if the documents are as
required under the credit. Under the law of England and Wales this traditionally gave
rise to the doctrine that the documents must strictly comply with the terms of the
credit. Thus, in JH Rayner & Co Ltd v Hambro’s Bank Ltd [1943] KB 37 the bank was able to
reject the documents where the credit referred to ‘Coromandel groundnuts’, but the
bill of lading referred to ‘machine-shelled groundnut kernels’ even though it was well
known, at least in the trade, that these were the same things!

Do you agree with the decision in JH Rayner & Co Ltd v Hambro’s Bank Ltd [1943] KB 37?
On the other hand, obvious typographical errors may be overlooked. Thus, in Seaconsar
Far East Ltd v Bank Markazi Jomhouri Islami Iran [1993] 1 Lloyd’s Rep 236 Lloyd LJ stated:
It would not, I think, help to attempt to define the sort of discrepancy which can properly
be regarded as trivial. But one might take, by way of example, Bankers Trust Co. v. State
Bank of India [1991] 2 Lloyd’s Rep 443 where one of the documents gave the buyer’s telex
number as 931310 instead of 981310. The discrepancy in the present case is not of that
order. (For the appeal see [1994] 1 AC 438.)
Moreover, in Kredietbank Antwerp v Midland Bank plc [1999] 1 All ER (Comm) 801 at 806
Evans LJ stated:
The court’s judgment recognised that ‘some variations in a bill of lading might be so
insignificant as not to relieve the issuing or confirming bank of its obligation to pay’, citing
Harfeld’s Bank Credits and Acceptances at 75–78, and gave, as an example of an ‘obvious
typographical error’, the possible misspelling of ‘Smith’, as ‘Smithh’ (p. 6). Since there
might have been, but was not, evidence that ‘Soran’ would be recognised as an obvious
misspelling of ‘Sofan’ in the Middle East (sic.: it is not clear from the report whether the
collecting and confirming banks were there or in the US), the judgment implied that the
bank must at least consider whether the different spelling of a name does amount to a
material discrepancy or not. For these reasons, the requirement of strict compliance is
not equivalent to a test of exact literal compliance in all circumstances and as regards
all documents. To some extent, therefore, the banker must exercise his own judgment
whether the requirement is satisfied by the documents presented to him.

What are the advantages and disadvantages of the traditional doctrine of strict
compliance in the law of England and Wales?
It seems that discrepancies between the tendered documents and the terms of the
credit are a common problem (see Twigg-Flesner and Canavan, 2020, p.347). UCP 600
responds to this in two ways. First, it defines a ‘complying presentation’ as a tender
‘that is in accordance with the terms and conditions of the credit, the applicable
provisions of [UCP 600] and international standard banking practice’ and in Crédit
Industriel et Commercial v China Merchants Bank [2002] EWHC 973 (Comm) David Steel
J referred to the ICC Banking Commission in establishing ‘international standard
banking practice’. Second, there are specific provisions within UCP 600 which provide
for tolerances such as: UCP 600, Article 30(b) and a tolerance of +/-5 per cent in terms
of quantity (subject to some exceptions); or UCP 600, Article 14(e) provides that, with
the exception of the invoice, the goods may be described in general terms.
9.3.5 The autonomy of the credit

As noted in 9.3.1, a fundamental principle of documentary credits is the autonomy of
the credit and, therefore, the correspondent bank is generally not concerned with
the underlying contract of sale (e.g. whether the goods are actually of satisfactory
quality) but with whether the documents meet the requirement of the credit. This
was powerfully stated by Lord Diplock in United City Merchants (Investments) Ltd v Royal
Bank of Canada [1983] 1 AC 168 at 183:
Again, it is trite law that in contract (4), with which alone the instant appeal is directly
concerned, the parties to it, the seller and the confirming bank, ‘deal in documents and
not in goods,’ as article 8 of the Uniform Customs puts it. If, on their face, the documents
presented to the confirming bank by the seller conform with the requirements of
the credit as notified to him by the confirming bank, that bank is under a contractual
obligation to the seller to honour the credit, notwithstanding that the bank has
knowledge that the seller at the time of presentation of the conforming documents is
alleged by the buyer to have, and in fact has already, committed a breach of his contract
with the buyer for the sale of the goods to which the documents appear on their face to
relate, that would have entitled the buyer to treat the contract of sale as rescinded and to
reject the goods and refuse to pay the seller the purchase price. The whole commercial
purpose for which the system of confirmed irrevocable documentary credits has been
developed in international trade is to give to the seller an assured right to be paid before
he parts with control of the goods that does not permit of any dispute with the buyer as
to the performance of the contract of sale being used as a ground for non-payment or
reduction or deferment of payment.
As is clear from this quote, this principle is also reflected in the UCP (now UCP 600,
Article 5) statement that the banks ‘deal in documents and not goods’. Nevertheless,
there are limits to this principle. In particular, a bank is not required to pay in cases
of fraud. However, care must be taken with this exception for, at least, two reasons.
First, the fraud of a third party may not entitle the bank to refuse to pay if the seller
did not know of the fraud. Thus, in United City Merchants (Investments) Ltd v Royal
Bank of Canada the seller presented a document which, unknown to the seller,
misrepresented the shipping date. The House of Lords held that the bank had to pay
the seller; the position may have been otherwise if the seller knew of the fraud or the
documents were a nullity (see Montrod Ltd v Grundkötter Fleischvertriebs GmbH [2001]
EWCA Civ 1954). Second, even where the seller is guilty of fraud, the bank is entitled to
pay the seller unless it has clear evidence of this fraud (see United Trading Corpn SA v
Allied Arab Bank [1985] 2 Lloyd’s Rep 554).
Where fraud is clearly present the buyer may even be able to obtain an injunction to
prevent the correspondent bank from paying the seller.

Should wider exceptions to the autonomy principle be permitted (see, for example,
Donnelly, K. ‘Nothing for nothing: a nullity exception in letters of credit?’ (2008)
JBL 316)?
FURTHER READING
¢ Fox et al., Chapter 21 ‘The financing of international trade’.
¢ Ellinger, P. ‘The Uniform Customs and Practice for Documentary Credits (UCP):
Their development and current revisions’ (2007) LMCLQ 152.
¢ Debattista, C. ‘The new UCP 600 – Changes to the tender of the seller’s shipping
documents under letters of credit’ (2007) Journal of Business Law 329.
¢ Antoniou, A.M. ‘New rules for letters of credit: time to update the UCP 600’
(2017) 32 Journal of International Banking Law and Regulation 128.
¢ Hwaidi, M. ‘Four uncertainties around the fraud exception in documentary

letters of credit under English law’ (2018) 24 Journal of International Maritime
Law 39.
¢ Richards, K. ‘Revisiting the fraud exception: a critique of United City Merchants v

Royal Bank of Canada 40 years on’ (2019) 39 Legal Studies 656.
CORE COMPREHENSION
1. What are the challenges involved in financing cross-border sales transactions?
2. Sketch a diagram illustrating how a documentary credit works.
3. What is meant by (a) an irrevocable documentary credit, and (b) a revocable

documentary credit?
4. What is the significance of the Uniform Customs and Practice for Documentary Credits
(UCP)?
5. Is the autonomy principle in relation to documentary credits absolute?
What are the advantages of the documentary credit from a seller’s point of view?
guide.
Notes
Feedback to comprehension
Contents
Using feedback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Chapter 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Chapter 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Chapter 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Chapter 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Chapter 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Chapter 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Chapter 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Chapter 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Using feedback
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material you have been studying. It gives you answers to – or guidance on answering –
the questions.
Please do not bypass the work in the comprehension questions and go straight to the
feedback.
International commercial law Feedback to Comprehension page 109
Chapter 2
CORE COMPREHENSION ANSWERS

1. See Section 1.2.
2. See Section 2.2.
3. Business practice or usage is significant in this area of law (see Goode, 1997). For
example, it may inform the resolution of dispute (see, for example, Transfield
Shipping Inc of Panama v Mercator Shipping Inc of Monrovia (‘The Achilleas’) [2008]
UKHL 48) or form the basis of codification or harmonisation mechanisms.
Reference should be made to the lex mercatoria (or the law of merchants),
although there is some debate about the meaning of the lex mercatoria as
discussed in Chapter 2.
APPLIED COMPREHENSION ANSWER

It is useful to place this question in the context of some of the challenges for
international (or transnational) commercial law. In particular, cross-border trade
raises a number of legal issues, such as, for example, compliance with (sometimes
changing) export and import regulations. Furthermore, what law will govern the
relevant contract (conflict of laws)? For example, if a seller in Ireland is selling wool
to a buyer in Canada, what law will govern the contract? Irish law? Canadian law?
Or some other law? Although detailed consideration of conflict of laws rules is
outside the scope of this module, it is important to note, in broad terms, the role
of party autonomy in many conflict of laws rules; in other words, the parties to the
contract are often, with some important exceptions, able to choose the law which
governs their contract.
Notwithstanding the role of party autonomy in many conflict of laws rules,

differences in the laws of particular States can still cause difficulties for cross-
border trade: for example, parties may be reluctant to contract on the basis of
unfamiliar legal frameworks (the uncertainty argument) and/or it may increase
transaction costs (as a result of, for example, a need for additional, specialist
legal advice). For this reason, some would argue that harmonised commercial law
facilitates trade and such a view is prominent in, for example, the European Union’s
harmonisation agenda. On the other hand, some would argue that differences in
commercial law can also facilitate some forms of cross-border trade (compare
Reich, 1992). Thus, commercial law can itself be regarded as a commodity and
differences in legal frameworks (e.g. for tax or financial services, or perhaps in
respect of systems that embrace the digital era more than others) may result in
competition between States, or legal orders, wanting to attract more business into
the State or legal order.
It is important that you adopt a position on the extent to which harmonisation

is desirable. It really does not matter if this view is different to the view of your
examiner! The key consideration is that you make a reasoned case for your view.
In developing your case you should consider the following:
u How might international (or transnational) commercial law be harmonised? In

1.4, above, we referred to a number of harmonisation mechanisms: for example,
international conventions, regional instruments, model laws, mercantile practice,
judicial convergence and uniform rules which can be incorporated into contracts.
Each of these mechanisms raises challenges. For example, international and
regional instruments can require a significant amount of political negotiation and
compromise, with the resulting instrument being rather modest as a result (see
Devenney and Kenny, 2015).
u Should harmonisation be targeted at particular (problematic) areas?
u What impact do non-legal factors have? In so far as harmonisation ever merely

consists of ‘transplanting’ (or copying) a set of rules from one legal order into
another legal order (so-called ‘legal transplants’), some would argue that it will
not work (see, for example, LeGrand, 1997). More specifically, some would argue
that social, cultural and economic factors colour or impact on the operation of
particular rules. Thus, even if you have the same rules in country A and country B,
those rules may operate differently due to a range of background factors which
affect the way those rules are interpreted, applied or enforced.
u What is the impact of procedural rules or enforcement frameworks? A further,

related, issue links to enforcement and procedural matters, something which has
been of particular concern in relation to the CISG. If you harmonise substantive law,
how do you ensure it is consistently and appropriately enforced in different states?
Chapter 3
CORE COMPREHENSION ANSWER

Delivery point On board nominated ship. On board nominated ship (the seller may seek
payment even where the goods are lost at
sea).
Who is responsible for In a ‘classic’ F.O.B. contract the seller agrees Under a C.I.F. contract, the seller is responsible
arranging shipping? to supply the goods and to deliver them for the cost of carriage (the freight) and
onto the relevant ship. Therefore, the seller is any fluctuations in the cost of the freight
responsible for all costs up to and including (although sometimes the buyer will pay the
the loading of the goods onto the ship (the freight at the agreed destination and will
seller is not obliged under this type of F.O.B. deduct an equivalent amount from the seller’s
contract to make advance arrangements for invoice).
shipping (e.g. by booking space)) . By contrast,
under this type of F.O.B. contract the buyer
is responsible for nominating the ship and
making insurance. However, even under an
F.O.B. contract, a seller may be responsible
for making advance shipping arrangements
(Pyrene Co Ltd v Scindia Navigation Co Ltd [1954]
2 QB 402).
There are various reasons why a seller may
be responsible for making advance shipping
arrangements under an F.O.B. contract,
including that the seller may be better placed
to make these arrangements. In making the
contract of carriage the seller might act as
principal or as the buyer’s agent. However, in
either case, the cost of the carriage, including
any fluctuations in price, will ultimately be
the buyer’s responsibility (see Scottish and
Newcastle International Ltd v Othon Ghalanos
Ltd [2008] UKHL 11 at [35] per Lord Mance), and
the seller will usually charge an additional fee
for making such arrangements.
Who is responsible for Normally the buyer but note SGA 1979, s.32(3) Seller.
arranging insurance? provides:
Unless otherwise agreed, where goods are
sent by the seller to the buyer by a route
involving sea transit, under circumstances in
which it is usual to insure, the seller must give
such notice to the buyer as may enable him to
insure them during their sea transit; and if the
seller fails to do so, the goods are at his risk
during such sea transit.

When does risk pass to The normal (or traditional) rule is that risk Under a C.I.F. contract, risk normally passes on
the buyer? passes as the goods pass over the ship’s rail shipment. Therefore, the buyer will normally
during loading. be liable to pay for the goods if they are lost
at sea, although, of course, the buyer will
have the support of the insurance policy (see
Manbré Saccharine Co Ltd v Corn Products Co Ltd
[1919] 1 KB 198).
When does property Where the law of England and Wales is Property normally passes when the
pass to the buyer? applicable prima facie risk and property pass at documents are transferred to the buyer
the same time (SGA 1979, s.20). However, this and the price is paid (see Cheetham & Co Ltd
is subject to SGA 1979, s.16 and also to contrary v Thornham Spinning Co Ltd [1964] 2 Lloyd’s
intention. In practice it is common for there Rep 17). Where the law of England and Wales
to be a contrary intention that property applies, the position will be otherwise where
does not pass until payment, with the seller SGA 1979, s.16 is not satisfied.
retaining the shipping documents as security
for payment (see Twigg-Flesner and Canavan,
2020, p.350). This is another example of the
importance of documents in international
sales, with the buyer being able to reject
documents which are not in conformity with
the contract.

In answering this question you should set out the key features of a C.I.F. contract (see
Lord Wright in Ross T Smyth & Co Ltd v TD Bailey Son & Co [1940] 3 All ER 60 at 67–68).
You should explain that the importance of documents in C.I.F. contracts has sometimes
led to them being described as a sale of documents relating to goods rather than a
sale of goods (see, for example, Arnhold Karberg & Co v Blythe, Green, Jourdain & Co [1915]
2 KB 379 at 514 per Warrington LJ). Such a view is tempting, especially given the seller
may seek payment even where the goods are lost at sea and the documents must
strictly conform to the contract. On the other hand, the seller’s acceptance of the
relevant documents will not prevent a buyer from subsequently rejecting the goods
if they are found not to be in conformity with the contract and this was not apparent
from the relevant documents (see Kwei Tek Chao v British Traders and Shippers Ltd [1954]
2 QB 459).
Chapter 4
CORE COMPREHENSION ANSWER

SGA 1979 applies to ‘contracts of sale of goods’ (s.1). Contracts of sale of goods are
defined in s.2(1):
A contract of sale of goods is a contract by which the seller transfers or agrees to transfer
the property in goods to the buyer for a money consideration, called the price.
The position in situation (a) is unclear for three reasons. First, quite often property
does not pass under contracts to supply software (see, for example, Beta Computers
(Europe) Ltd v Adobe Systems Ltd [1996] SLT 604, although compare the Opinion of
Advocate General Tanchev and the CJEU in the Software Incubator case (Case C-410/19)
that software granted on a perpetual licence could be a ‘sale’ for the purposes of
the EU Commercial Agents Directive) and therefore SGA 1979 would not apply (as s.2
requires the seller to transfer or agree to transfer property in goods (on which see
below)). Second, if the contract is one to supply a bespoke piece of software it may
be a contract for a service rather than a contract of sale of goods (see, for example,
Salvage Association v CAP Financial Services Ltd (CA, unreported, 9 July 1993)). Third,
there is some debate as to whether software is ‘goods’ for the purposes of SGA 1979
(see, for example, St Albans City and DC v International Computers Ltd [1997] FSR 251),
although compare the Opinion of Advocate General Tanchev and the CJEU in the
Software Incubator case (Case C-410/19) that computer software supplied electronically
can constitute ‘goods’ for the purposes of the EU Directive 86/653/EEC of 18 December
1986 on the coordination of the laws of the Member States relating to self-employed
commercial agents).
Situation (b) would potentially come within SGA 1979 if ‘severed before sale or under
the contract of sale’ (s.61). In situation (c) we need to distinguish contracts of sale of
goods from contracts for work and materials (as SGA 1979 does not apply to contracts
for work and materials (see also Supply of Goods and Services Act 1982)). In broad
terms, a contract for work and materials is a contract for a service where some goods
are also provided as part of the service. In Cammell Laird & Co Ltd v Manganese Bronze
and Brass Co Ltd [1934] AC 402 the House of Lords held that a contract to construct
ship propellers was a contract of sale of goods. Situation (d) also revolves around the
distinction between contracts of sale of goods from contracts for work and materials.
On the substance of the contract test (see Robinson v Graves [1935] 1 KB 579) this
appears to be a contract for work and materials.

When was the cargo contaminated with diesel oil? If it was before the contract was
made, this situation may result in the ‘contract’ being void under SGA 1979, s.6; in
contrast, if the contamination occurred after the contract was made but before the
property in the goods passed to Alpha Ltd, the contract may be frustrated under SGA
1979, s.7. In both cases, we need to consider the meaning of ‘perish’ as the cargo is still
in existence, although unfit for human consumption. Perished does not necessarily
mean that the goods have been completely destroyed. For example, in Asfar v Blundell
[1896] 1 QB 123 dates were contaminated with sewerage when the vessel on which they
were being carried sank and were held perished for insurance purposes (although
could, apparently, have been used for making alcohol). By contrast, in Horn v Minister
of Food [1948] 2 All ER 1036 rotten potatoes were held not to have perished, which is
arguably a harsh decision in the light of Asfar v Blundell.
Chapter 5

1. Traditionally, at common law the law of England and Wales classified promissory
terms as either conditions or warranties, with conditions being the more
important terms (sometimes described as terms going to the root of the contract,
see Poussard v Spiers (1876) 1 QBD 410). The significance of the distinction is
that if a condition is breached, the non-breaching party can potentially reject
the goods (and terminate the contract) and/or claim damages. In contrast, if
a warranty is breached, the non-breaching party can only claim damages. In
Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 a third type
of contractual term was recognised: the innominate term. With an innominate
term, the consequences of breach of that term are not known at the outset.
Rather, the consequences are determined by the seriousness of the breach. If the
consequences of the breach are sufficiently serious, the non-breaching party will
be able to reject the goods (and terminate the contract) in addition to claiming
damages. In contrast, if the consequences of the breach are not so serious, only
damages will be available.
2. Delivery does not necessarily mean that S has to transport the goods to, for
example, B’s place of business: delivery merely ‘means voluntary transfer of
possession from one person to another’ (s.61). In terms of the place of delivery, SGA
1979, s.29(2) provides:
Apart from any such contract, express or implied, the place of delivery is the seller’s
place of business if he has one, and if not, his residence; except that, if the contract is
for the sale of specific goods, which to the knowledge of the parties when the contract
is made are in some other place, then that place is the place of delivery.
On the other hand, SGA 1979, s.32(1) provides:
Where, in pursuance of a contract of sale, the seller is authorised or required to send

the goods to the buyer, delivery of the goods to a carrier (whether named by the buyer
or not) for the purpose of transmission to the buyer is prima facie deemed to be a
delivery of the goods to the buyer.
3. SGA 1979, s.12 implies three terms, the most important of which is a condition that
the seller has the right to sell the goods (s.12(1)). SGA 1979, s.13 implies a condition
in contracts of sale of goods that, where goods are sold by description, those goods
will correspond with that description. However, s.13 applies only to descriptive
words which identify the kind of goods to be supplied (Ashington Piggeries Ltd v
Christopher Hill Ltd [1972] AC 441) and which were intended to have contractual
effect (Oscar Chess Ltd v Williams [1957] 1 All ER 325). This raises questions about its
utility: does it do anything which would not already be covered by the express
terms of the contract? SGA 1979, s.14 implies two important terms into most
contracts of sale of goods: a condition that the goods are of satisfactory quality
(s.14(2)) and a condition that the goods are reasonably fit for their purpose (s.14(3)).
With the exception of the terms implied under s.15, no other terms about the
quality of goods are implied by SGA 1979 (see s.14(1)). Unlike s.13, s.14(2) and 14(3)
require the seller to sell in the ‘course of a business’. This does not, however, mean
that the seller has to be in the business of selling those types of goods. SGA 1979,
s.15 implies two conditions into contracts of sale of goods where the goods are sold
by sample. First, there is a condition that the bulk will correspond with the sample
(s.12(2)(a)). Second, there is a condition that the goods will be free from any defect
‘making their quality unsatisfactory, which would not be apparent on reasonable
examination of the sample’.
4. UCTA 1977 does not apply to international supply contracts (although note the
particular definition of such contracts in UCTA 1977, s.26).

In the first situation the goods are probably of unsatisfactory quality (under SGA
1979, s.14(2)) and/or unfit for purpose (under SGA 1979, s.14(3)). We shall return
to this answer to the Applied Comprehension question in Chapter 7, where we
consider the menu of remedies which may be available.
Under the second situation we need to consider delivery obligations and also
SGA 1979, s.12. It is important to note that s.12(1) is not limited to cases where the
seller does not have property in the goods at the relevant time: see Niblett Ltd v
Confectioners’ Materials Co Ltd [1921] 3 KB 387. In that case a seller sold condensed
milk to a buyer with the brand name ‘nissly’. This infringed Nestlé’s trademark, who
obtained an injunction. The buyer successfully claimed the seller was in breach
of s.12(1) as the seller had no right to sell as it could be stopped by process of law.
In contrast, in Great Elephant Corp v Trafigura Beheer BV [2012] EWHC 1745 (Comm)
(reversed on other grounds, see [2013] EWCA Civ 905) the court held there was no
breach of s.12(1) where the goods (oil) were loaded on a ship in Nigeria but the ship
was prevented from leaving by local authorities as a result of not obtaining the
necessary paperwork to load the ship. The court held that this did not affect the
seller’s ‘right to sell’ the goods. However, the court did find the seller in breach of
s.12(2)(b).
Chapter 6

1. The whereabouts of property is highly significant in the law of England and Wales
for the following reasons:
u it links to the essence of a contract of sale of goods (see SGA 1979, ss.2 and 12)
u it affects whether the seller or buyer bears the risk of loss of, or damage to, the
goods
u it affects whether a contract of sale of goods can be frustrated (see SGA 1979,
s.7)
u it affects a seller’s ability to claim the price of the goods (see SGA 1979, s.49)
u it has real ramifications should either the seller or the buyer become insolvent.
2. Property in specific goods passes when the parties intend it to pass (SGA 1979, s.17)
and intention is determined with reference to ‘…the terms of the contract, the
conduct of the parties and the circumstances of the case’ (SGA 1979, s.17(2)). SGA
1979, s.18, rules 1–3 outline rules of presumptive intention (where it is not possible
to identify contrary intention).
3. Prima facie property passes in a sale or return transaction when the parties intend
it to pass (SGA 1979, s.17 which is subject to s.16 (see below)). SGA 1979, s.18, rule
4 outlines rules of presumptive intention (where it is not possible to identify
contrary intention): for example, where there is no specific term for returning
the goods and the buyer does not reject the goods within a reasonable time, the
property in the goods passes to the buyer. In Poole v Smith’s Car Sales [1962] 1 WLR
744, which involved a sale or return transaction between two car dealers, the court
held that a reasonable time had elapsed, taking into account (a) the declining
second hand market at that time of year, (b) the rapid depreciation of the car, (c)
S’s requests for return, and (d) the temporary nature of the arrangement (it was
essentially a holiday arrangement).
4. Again, property in unascertained goods passes when the parties intend it to pass
(SGA 1979, s.17). However, s.17 is subject to s.16: thus, generally no property can pass
in unascertained goods until those goods are ascertained (identified). This can be
illustrated by Healey v Howlett & Sons [1917] 1 KB 337. P was an Irish fish exporter. D
ordered 20 boxes of mackerel from P. P also received orders from other buyers and
so dispatched 190 boxes by rail. The boxes were to be divided upon arrival for the
different buyers at the end of the rail journey. The fish deteriorated as a result of
delays in the journey and one of the issues was whether property (and, therefore,
risk) had passed to D. The court held that property had not passed as the goods
had not been ascertained (the boxes had not been separated out for individual
buyers). Attempts to avoid the effect of s.16 have generally been unsuccessful (see,
for example, Re Wait [1927] 1 Ch 606 but Re Stapylton Fletcher [1995] 1 All ER 192). The
Sale of Goods (Amendment) Act 1995 was passed in response to some of the harsh
consequences relating to the passing of property in unascertained goods. It added
s.20A and s.20B into SGA 1979 (which can be excluded by contrary intention).
Section 20A allows some property to pass prior to ascertainment (remember s.16 is
now subject to s.20A). More specifically, s.20A allows the ‘property in an undivided
share in the bulk’ to be transferred to a B who becomes an ‘owner in common of
the bulk’ (s.20A(2)). The extent of the share is linked to the amount of goods paid
for (s.20A(3)–(4)):
(3) Subject to subsection (4) below, for the purposes of this section, the undivided share
of a buyer in a bulk at any time shall be such share as the quantity of goods paid for
and due to the buyer out of the bulk bears to the quantity of goods in the bulk at that
time.
(4) Where the aggregate of the undivided shares of buyers in a bulk determined under
subsection (3) above would at any time exceed the whole of the bulk at that time, the
undivided share in the bulk of each buyer shall be reduced proportionately so that
the aggregate of the undivided shares is equal to the whole bulk.
This provides some protection for B against S’s insolvency. However, it is important
to note that B gets an ‘undivided share’ in a bulk, not property in any particular
goods (passing of property in particular goods is still governed by SGA 1979,
ss.16–18).

Outline the principle of nemo dat quod non habet and the exceptions. Consider
competing policy aims (see Bishopsgate Motor Finance Corp Ltd v Transport Brakes Ltd
[1949] 1 KB 322). Is it possible to link the exceptions together (‘Statutory protection
for the bona fide purchaser has developed in a piecemeal and haphazard fashion;
and some of the relevant provisions have been so drafted and interpreted as to
make their application depend not on principles of equity or justice but on fine
technicalities which have little rhyme and less reason’ (The Crowther Committee
on Consumer Credit, (1971) Cmnd 4596, para.4.2.8))? Are some of the exceptions
outdated (e.g. do we really have mercantile agents any more)? Are some very
technical (e.g. Hire Purchase Act 1964)? Consider the overall case for reform and,
perhaps, the shape of possible reform.
Chapter 7

1. A liquidated damages clause is a clause which seeks to determine the sum, or
sums, payable if a party to the contract breaches that contract. Such a clause
would save the non-breaching party from, for example, having to show loss, that
the remoteness rules are satisfied, etc. In line with general principles of freedom of
contract, such clauses are generally permitted under the law of England and Wales,
although, traditionally, such clauses would not have been enforceable if they were
penal in nature (a so-called penalty clause). Thus, in Dunlop Pneumatic Tyre Co Ltd v
New Garage and Motor Co Ltd [1915] AC 79 at 86 Lord Dunedin famously stated:
The essence of a penalty is a payment of money stipulated as in terrorem of the

offending party; the essence of liquidated damages is a genuine covenanted pre-
estimate of damage…
In recent years there has been some recasting of the test for an unenforceable
penalty clause with the Supreme Court in Makdessi v Cavendish Square Holdings
BV; ParkingEye Ltd v Beavis [2015] UKSC 67 defining a penalty clause as a secondary
obligation which bears no proportion to the legitimate interest, if any, which the
innocent party has in the enforcement of the primary obligation.
2. A real remedy is a remedy against the goods, which is particularly significant where
the buyer becomes insolvent (see Section 6.2). A personal remedy – essentially a
remedy demanding a monetary payment – is much less potent where the buyer
cannot satisfy the demand as they are insolvent (and, therefore, have no money).
SGA 1979, ss.38–39 make provision in respect of three real remedies which may be
available to an ‘unpaid seller’: lien, stoppage in transit (where the buyer becomes
insolvent) and the right to resale. An ‘unpaid seller’ is defined in SGA 1979, s.38 and
essentially refers to situations where the whole of the price has not been paid or
tendered. The real remedies in SGA 1979 are: lien, stoppage in transit and rights
to resale. A contract of sale of goods will sometimes stipulate that property in the
goods will not pass until the seller has been paid for those goods (a retention of
title clause). Such a clause provides the seller with some protection if the buyer
becomes insolvent and, at least functionally, such clauses are similar to the real
remedies we considered in Chapter 7.
A seller has two main personal remedies: an action for the price and a claim for
damages. An action for the price is an action for a liquidated (or particular) sum
and, therefore, unlike an action for damages, the seller does not have to show loss,
that the loss was not too remote, etc. SGA 1979, s.49 deals with such actions. In
respect of the remedy of damages, the starting point is that the general rules for
assessing damages for breach of contract apply here. However, SGA 1979 translates
these general principles into specific rules for use in particular situations (e.g. in
relation to non-acceptance) and these rules draw heavily on market prices.
3. The main remedies available to a buyer if the seller is in breach of a contract of sale
of goods under the law of England and Wales are specific performance, rejection
and damages.
Specific performance: Where a seller is in breach of a contract of sale of goods,

the buyer may wish to obtain a court order compelling the seller to perform
the contract. Such an order – an order for specific performance – is sometimes
available under the law of England and Wales (see SGA 1979, s.52). However, as SGA
1979, s.52(1) makes clear, specific performance is a discretionary remedy and, in
practice, is rarely awarded in the context of the sale of goods. In particular, specific
performance would generally not be awarded where damages are an adequate
remedy, as where the buyer could easily purchase substitute goods on the market.
Rejection: In some situations a buyer can reject the goods delivered by the
seller. Rejection of the goods does not require a court order and, following the
introduction of SGA 1979, s.35A, partial rejection is also sometimes possible. Nor
is there a formal form of words which need to be used when rejecting goods.
However, the buyer must demonstrate a clear intention to reject the goods
through words or conduct. Thus, in Lee v York Coach and Marine [1977] RTR 35 it was
held that merely telling someone that you have the right to reject is insufficient.
If a buyer legitimately rejects the goods, a number of important consequences

follow:
u the buyer can also refuse to pay the price (or can recover the price already paid
on the grounds of a total failure of consideration)
u B may be able to claim damages for non-delivery
u if property in the goods has passed to the buyer, it re-vests in the seller
u the buyer is not normally obliged to return the goods to the seller and the
seller must usually collect the goods (SGA 1979, s.36)
u the buyer may also be able to terminate the contract (as rejection is not
necessarily the same as termination of the contract).
A right of rejection may arise in four situations:
1. pursuant to express right in contract
2. pursuant to a statutory right (e.g. SGA 1979, s.30 (delivery of wrong quantity))
3. following a breach of condition (e.g. the conditions in SGA 1979, ss.12–15)
4. following a serious breach of an innominate term.
In some circumstances, a buyer can lose the right of rejection. There are a number
of ways in which a right of rejection may be lost, such as through the common
law doctrines of affirmation, waiver and estoppel (and much will depend on
the precise facts of the case and the source of the right to reject). A particularly
important limitation on the right to reject for breach of condition is the doctrine of
acceptance. SGA 1979, s.35 indicates three situations where a buyer will be deemed
to have accepted the goods (and, therefore, lost the right of rejection):
(1) The buyer is deemed to have accepted the goods subject to subsection (2)
below—
(a) when he intimates to the seller that he has accepted them, or
(b) when the goods have been delivered to him and he does any act in
relation to them which is inconsistent with the ownership of the seller.
(4) The buyer is also deemed to have accepted the goods when after the lapse
of a reasonable time he retains the goods without intimating to the seller
that he has rejected them.
(Emphasis added)
Damages: A buyer may be able to claim damages where the seller is in breach of
contract. As with situations where the buyer is in breach of contract and it is the
seller who is claiming damages (see Section 7.2.4), the general rules for assessing
damages for breach of contract apply here. Again, SGA 1979 translates these
general principles into specific rules for use in particular situations (e.g. in relation
to non-delivery) and these rules draw heavily on market prices.

If SGA 1979, ss.6 and 7 are not applicable, we need to consider whether or not the seller
is in breach of contract. This engages the material covered in Chapter 5. In particular,
we would need to consider the express and implied terms of the contract between
the parties. Are there any express terms relating, for example, to the quality of the
papaya? If so, are those terms conditions, warranties or innominate terms (as this is
relevant to the precise remedies)? Reference might be made to the Court of Appeal
decision in Cehave NV v Bremer Handelgesellschaft mbH (The Hansa Nord) [1976] QB 44.
In that case Dutch buyers purchased 12,000 tons of certain pellets for use as animal
feed from German sellers. The contract was made on standard (GAFTA) terms, with
clause 7 providing that ‘shipment to be made in good condition’. The buyers paid the
price (£100,000) but when the goods arrived in Rotterdam it was discovered that part
of the shipment had been damaged by overheating. The buyers rejected the whole
shipment. However, the sellers refused to refund the purchase price. The Rotterdam
county court ordered the shipment to be sold. The shipment was sold to a party who
immediately resold the whole cargo to the original buyers for £30,000. The buyers
then used it for their original purpose of making animal feed. Mocatta J held that terms
under SGA 1979 must be either conditions or warranties and that ‘shipped in good
condition’ was a condition. The Court of Appeal allowed the appeal on the ground that
the ‘shipped in good condition’ term was an innominate term. Since the whole cargo
was eventually used for its intended purpose, the breach was not sufficiently serious
as to allow rejection.
In relation to implied terms, reference should be made to SGA 1979, ss.12–15. In

particular, SGA 1979, s.14 implies two important terms into most contracts of sale of
goods: a condition that the goods are of satisfactory quality (s.14(2)) and a condition
that the goods are reasonably fit for their purpose (s.14(3)). With the exception of the
terms implied under s.15 (see Section 5.4.5) no other terms about the quality of goods
are implied by SGA 1979 (see s.14(1)).
If the seller is in breach of contract, what remedies will be available to Alpha Ltd?
An order of specific performance would be unlikely (specific performance would
generally not be awarded where damages are an adequate remedy, as where the
buyer could easily purchase substitute goods on the market). If there has been a
breach of condition (e.g. SGA 1979, s.14(2)) or a serious breach of an innominate term,
then Alpha Ltd may be able to reject the goods and claim damages for non-delivery
under SGA 1979, s.51. Remember, however, the limitations on a buyer’s ability to reject
goods (e.g. the doctrine of acceptance).
If Alpha Ltd is unable to reject the goods or chooses not to do so, then Alpha Ltd may
claim damages for defective goods, which are governed by SGA 1979, s.53:
(2) 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.
(3) In the case of breach of warranty of quality such loss is prima facie the difference
between the value of the goods at the time of delivery to the buyer and the value
they would have had if they had fulfilled the warranty.
(Emphasis added)
Thus, the prima facie measure of damages is the amount by which the value of the
goods (if they had not been defective) exceeds the value of the defective goods.
Additional losses (such as personal injury) can also be recovered (see Godley v Perry
[1960] 1 All ER 36 (loss of an eye)).
Chapter 8
CORE AND APPLIED COMPREHENSION ANSWERS
Area CISG SGA 1979

Jurisdiction The CISG, Article 1 sets out three requirements: SGA 1979 applies to most domestic (non-consumer)
(1) the contract must be a contract for sale of sale of goods transactions in the United Kingdom. More
goods (see below); (2) the place of business of importantly for present purposes it also applies to
each party needs to be in different States (by international (commercial) sale of goods transactions
CISG, Article 1(2), this needs to be apparent at where, for example, English law governs the
the time of contracting – this differs from, for transaction. Indeed, regimes similar to SGA 1979 have
example, UCTA 1977, s.26 (see Section 5.4.6) been adopted, for example, by many Commonwealth
which is partially framed in terms of the goods nations and, as Professor Bridge notes, the SGA 1979
being carried from one State to another State); regime plays a central role in international commodity
and (3) either both of the States in which the sales even where neither the seller nor the buyer have
places of business of the contracting parties are a connection with the United Kingdom (Bridge, M.
situated to have adopted the CISG or conflict of ‘Uniformity and diversity in the law of international sale’
laws rules to result in the application of the law (2003) 15 Pace International Law Review 55 at 58).
of a State which has adopted the CISG.
It should also be noted that, as an alternative
to Article 1, the parties to a contract may
incorporate the CISG into their contract as they
would other terms. Thus, in broad terms, the
CISG can govern contracts where the applicable
law is the law of a State (such as the UK) which
has not adopted the CISG.
Applicable to what Applies only to ‘contracts of sale of goods’. SGA 1979 applies to ‘contracts of sale of goods’ (s.1).
type of contracts? The CISG does not define a ‘contract of sale’; Contracts of sale of goods are defined in s.2(1):
nor does it define ‘goods’. Thus, it is unclear
‘A contract of sale of goods is a contract by which the
whether, for example, sales of software come
seller transfers or agrees to transfer the property in
within the CISG. On the other hand, the CISG,
goods to the buyer for a money consideration, called
Article 2 excludes some sales from its ambit,
the price.’ There is some debate as to whether or not
including contracts for the sale of ships.
contracts relating to software come within SGA 1979
(Software Incubator Limited v Computer Associates UK
Limited [2016] EWHC 1587 (QB) and [2018] EWCA Civ 518
although, subsequently, the CJEU held on 16 September
2021 ‘…Article 1(2) of Council Directive 86/653/EEC of 18
December 1986 on the coordination of the laws of the
Member States relating to self-employed commercial
agents must be interpreted as meaning that it can
cover the supply, in return for payment of a fee, of
computer software to a customer by electronic means
where that supply is accompanied by the grant of a
perpetual licence to use that software’ (EU:C:2021:7420)
(the extent to which this judgment is influential in the
different context of the SGA 1979 remains to be seen)).
Applicable No – Article 2. Following the Consumer Rights Act 2015, generally
to consumer not applicable to consumer sales (although see the
contracts? provisions on passing of property).
Deals with contract To some extent: see CISG, Part II. Generally, no.
formation?
Deals with passing No. Yes – a key aspect of SGA 1979.
of property?
Provisions on risk? Yes, but not linked to property as under SGA Yes, SGA 1979, s.20.
1979.
Provisions on Yes, but different consequences than under SGA Yes, although restrictive (see SGA 1979, s.7).
frustration? 1979.
Area CISG SGA 1979

Overriding Not entirely clear. There is some debate on No.
requirement of the impact of the CISG, Article 7. At one level it
good faith? appears to merely require the provisions of the
CISG to be interpreted in accordance with ‘the
observance of good faith in international trade’.
On the other hand, it can be argued that there
is a wider role for good faith in the CISG (‘the
need to promote…the observance of good faith
in international trade’) and such a perspective is
more likely to appeal to lawyers from a civilian
tradition.
Deals with Yes. Yes (broadly similar to the CISG).
obligations of sellers
and buyers?
Remedies? A wider range of remedies than SGA 1979, Primarily damages and/or rejection.
although some are linked to the concept of
‘fundamental breach’.
Chapter 9

1. As with domestic sales, a seller may allow an international buyer to take the goods
on credit. Indeed, Fox et al. (2020) have remarked that a ‘surprising number of sales
are on an open account: that is, on simple credit, with the seller taking the risk
of the buyer’s insolvency’. Such a transaction may be supported by a third party
acting as surety (in other words, guaranteeing payment). Alternatively, the seller
may be able to negotiate for payment in advance and that will, in general terms,
throw the risk of the seller’s insolvency onto the buyer. As a third alternative, it may
be that the parties agree that the price is payable on shipment (see, for example,
SGA 1979, s.28).
2.
Issuing bank Correspondent bank
(2), (5)
(1), (6) (3), (4)
Buyer Seller
Contract of sale
(1) The buyer will instruct its bank (the issuing bank) to open a credit with a bank (the
correspondent bank) in the seller’s country for the benefit of the seller.
(2) The instructions will specify the documents the seller will need to present to the
correspondent bank in order to be paid by the correspondent bank. Typically, these
documents will include the bill of lading (traditionally indicating that the goods
had been shipped), an invoice and an insurance policy. The buyer may also require,
for example, a certificate of origin.
(3) The correspondent bank will advise the seller that a credit has been opened in its
favour. It will also advise the seller of the precise documents which the seller will
need to present to the correspondent bank in order to be paid.
(4) The seller will, in due course, present the relevant documents to the correspondent
bank for payment. The correspondent bank will pay the seller if the documents
are as required under the credit. This is linked to a fundamental principle of
documentary credits: the payment obligation is an autonomous payment
obligation and, therefore, the correspondent bank is generally not concerned with
quality) but with whether the documents meet the requirement of the credit.
(5) The correspondent bank will present the documents to the issuing bank. The
issuing bank will pay the correspondent bank if the documents are as required
under the credit.
(6) The issuing bank may present the documents to the buyer for payment, in which
case the buyer will want to ascertain that the documents are as required under
the contract. Alternatively, the issuing bank may have granted credit to the buyer,
in which case the issuing bank may release the documents (which are necessary
for the buyer to obtain the goods and, for example, resell them to raise funds to
pay the issuing bank) under a ‘trust receipt’ (the aim of which is to give the issuing
bank some security against non-payment by the buyer).
3. A revocable credit can be amended or withdrawn at any time by the issuing bank
without giving notice to the seller (see Cape Asbestos Co Ltd v Lloyds Bank Ltd [1921]
WN 274), subject only to the issuing bank paying the correspondent bank if it has
already paid a seller. As such, revocable credits are rarely used and indeed are not
covered by UCP 600. An irrevocable credit, on the other hand, generally cannot be
amended or withdrawn without the consent of the seller and the relevant banks.
UCP 600, Article 3 deems credits to be irrevocable unless otherwise indicated.
4. Most documentary credits incorporate UCP 600. The UCP are drafted and revised
by the International Chamber of Commerce and are an example of the importance
of custom and usage in the international sale of goods. As such, in Fortis Bank SA/NV,
Stemcor UK Limited v Indian Overseas Bank [2011] EWCA Civ 58 at [29] Thomas LJ stated:
In my view, a court must recognise the international nature of the UCP and
approach its construction in that spirit. It was drafted in English in a manner that
it could easily be translated into about 20 different languages and applied by
bankers and traders throughout the world. It is intended to be a self-contained
code for those areas of practice which it covers and to reflect good practice
and achieve consistency across the world. Courts must therefore interpret it in
accordance with its underlying aims and purposes reflecting international practice
and the expectations of international bankers and international traders so that it
underpins the operation of letters of credit in international trade. A literalistic and
national approach must be avoided.
5. No. There are limits to this principle. In particular, a bank is not required to pay in
cases of fraud. However, care must be taken with this exception for, at least, two
reasons. First, the fraud of a third party may not entitle the bank to refuse to pay if the
seller did not know of the fraud. Thus, in United City Merchants (Investments) Ltd v Royal
Bank of Canada [1983] 1 AC 168 the seller presented a document which, unknown to
the seller, misrepresented the shipping date. The House of Lords held that the bank
had to pay the seller; the position may have been otherwise if the seller knew of the
fraud or the documents were a nullity (see Montrod Ltd v Grundkötter Fleischvertriebs
GmbH [2001] EWCA Civ 1954). Second, even where the seller is guilty of fraud, the bank
is entitled to pay the seller unless it has clear evidence of this fraud (see United Trading
Corpn SA v Allied Arab Bank [1985] 2 Lloyd’s Rep 554).
Where fraud is clearly present the buyer may even be able to obtain an injunction
to prevent the correspondent bank from paying the seller.

In relation to this question you should explain the overall nature of the
documentary credit payment mechanism. You should then focus on the key
features of the documentary credit from a seller’s perspective: (a) the autonomy
principle which, at least in irrevocable credits, assures payment, and (b) again on
the autonomy principle the correspondent bank is generally not concerned with
quality) but with whether the documents meet the requirement of the credit. This
was powerfully stated by Lord Diplock in United City Merchants (Investments) Ltd v
Royal Bank of Canada [1983] 1 AC 168 at 183:
Again, it is trite law that in contract (4), with which alone the instant appeal is
directly concerned, the parties to it, the seller and the confirming bank, ‘deal in
documents and not in goods,’ as article 8 of the Uniform Customs puts it. If, on their
face, the documents presented to the confirming bank by the seller conform with
the requirements of the credit as notified to him by the confirming bank, that bank is
under a contractual obligation to the seller to honour the credit, notwithstanding that
the bank has knowledge that the seller at the time of presentation of the conforming
documents is alleged by the buyer to have, and in fact has already, committed a
breach of his contract with the buyer for the sale of the goods to which the documents
appear on their face to relate, that would have entitled the buyer to treat the contract
of sale as rescinded and to reject the goods and refuse to pay the seller the purchase
price. The whole commercial purpose for which the system of confirmed irrevocable
documentary credits has been developed in international trade is to give to the seller
an assured right to be paid before he parts with control of the goods that does not
permit of any dispute with the buyer as to the performance of the contract of sale
being used as a ground for non-payment or reduction or deferment of payment.
As is clear from this quote, this principle is also reflected in the UCP (now UCP 600,
Article 5) statement that the banks ‘deal in documents and not goods’. This, in
effect, means that the buyer takes the risk of litigation (see Twigg-Flesner and
Canavan, 2020, p.348).

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International

u James Devenney, Professor of Transnational Commercial Law, University of Reading,

Published by: University of London

2 Sources and challenges in international

3 International sales transactions . . . . . . . . . . . . . . . . . . . . . 17

4 An introduction to the Sale of Goods Act 1979 . . . . . . . . . . . . . . 25

7 Remedies under the Sale of Goods Act 1979 . . . . . . . . . . . . . . . 75

8 UN Convention on Contracts for the International Sale of Goods (CISG) . 89

9 The financing of international trade . . . . . . . . . . . . . . . . . . . 99

Feedback to comprehension . . . . . . . . . . . . . . . . . . . . . . . 107

Courses in which this module is offered

Notional study time

MODULE PURPOSE AND OVERVIEW

LEARNING OUTCOMES: KNOWLEDGE

2. Explain common types of international sales transactions (including F.O.B.

4. Discuss and/or apply to complex facts the regime in the UN Convention on

5. Critically compare and contrast the UN Convention on Contracts for the

7. Critically discuss, in the appropriate social, economic and/or political context,

LEARNING OUTCOMES: SKILLS

8. Articulate well-argued solutions to complex legal questions and problems across a

9. Reflect on learning, identifying areas for improvement and responding

BENCHMARK FOR LEARNING OUTCOMES

(b) International sales transactions. Explain common types of international sales

(e) The financing of international trade. Explain the background considerations in

LEARNING AND TEACHING

The Laws Virtual Learning Environment

u a module page with news and updates;

u a complete version of the module guides;

u past examination papers and reports;

The Online Library

u the professional legal databases LexisLibrary and Westlaw;

u cases and up-to-date statutes;

u key academic law journals;

u links to important websites.

¢ McKendrick, E. Goode and McKendrick on commercial law. (London: Penguin, 2021)

Summative assessment is through a three hour and 15 minute unseen examination.

¢ Hart core statutes on commercial & consumer law 2022–23 (Bloomsbury).

1.2 The meaning of international (or transnational) commercial law . . . . . 3

u the role of business practice and usage

u the importance of underlying business relationships

u interventionist versus non-interventionist approaches

u the case for international or regional harmonisation in this area

u new directions in our changing world.

Your learning will be further developed by a programme of carefully selected readings.

Self-reflective activity 1.1

1.2 The meaning of international (or transnational) commercial

Our second task is to explore the meaning of international, or transnational,

u As ‘a general description of a legal regime application to an international (as

Self-reflective activity 1.2

u As ‘a label for the factual uniformity or similarity in contract laws applicable

Self-reflective activity 1.3

Self-reflective activity 1.4

u ‘As a term to denote international sources of commercial law (i.e.

¢ McKendrick, E. Goode and McKendrick on commercial law. (London: Penguin, 2021)

¢ Goode, R., H. Kronke, E. McKendrick Transnational commercial law: text,cases

¢ Twigg-Flesner, C. and R. Canavan Atiyah and Adams’ sale of goods. (London:

¢ Hart core statutes on commercial & consumer law (Bloomsbury).

2.2 Sources of international (or transnational) commercial law . . . . . . . 12

2.3 The harmonisation debate in international (or transnational)

2.1 Challenges in international (or transnational) commercial law