- Definition of goods — Passing of property — Payment of price — Formation of contract
2.01 Section 2(1) defines a sale of goods contract for the purpose of the Act as one ‘whereby the seller transfers or agrees to transfer the property in the goods for a money consideration called the price’. Sale is to be distinguished from other contracts in that it involves the transfer of ownership (that is, the property) in goods (as opposed to other items) for money (as opposed to some other type of consideration). Ownership is a notion that should be treated with some care in personal property law. For present purposes,1 it may be seen as the best available possessory right to a thing. If any of these three elements of ownership, goods, or money is absent, the contract will not be one of sale of goods for the purpose of the Act, no matter how similar in spirit it may be to such a contract. The fate of such cognate transactions will be dealt with later in this chapter.
Definition of ‘Goods’
Definition of ‘goods’.
2.02 These are defined by section 61(1) as including ‘all personal chattels other than things in action and money’ and in particular ‘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’. Personal chattels consist of what remains of property after (p. 34) land and chattels real (leasehold interests in land) are abstracted.2 Once things in action3 and money4 are also removed, the personal chattels that may be the subject of a sale of goods agreement consist of those tangible, movable items that we call things in possession.5 The definition of goods therefore embraces all personal chattels (with the above exceptions). Large and unusual items such as ships6 and aircraft,7 certainly personal chattels, are therefore dealt with by the Act,8 from whose provisions special statute may depart in their case.9 The particular mention of various types of crop and agricultural produce in the above definition needs to be explained in the light of the legislative history governing the observance of forms in sales of land and of goods.
2.03 Before 1954, contracts for the sale of goods above a certain value had to be evidenced in writing. This requirement, introduced in section 17 of the Statute of Frauds 1677 for the sale of ‘goods, wares and merchandizes’ (not defined in the statute),10 was continued by section 5 of the Sale of Goods Act 1893 for ‘goods’, defined in terms almost identical to those used in the 1979 Act. Section 4 of the Statute of Frauds also required writing for the sale of ‘lands, tenements and hereditaments or any interest in or concerning them’ (again not defined). It was superseded by a similar requirement in section 40 of the Law of Property Act 1925, which defined land in lengthy terms, specifically referring to buildings and minerals.11 When section 40 was repealed by the Law of Property (Miscellaneous Provisions) Act 1989, which introduced a more stringent writing rule, land itself was not defined in the new Act.
Crops and Natural Produce
Goods and land.
2.04 For writing purposes, it is important to distinguish goods and land,12 since contracts concerning the latter are invalid if not in writing. Unfortunately, a reading of the case law and the definition of ‘goods’ in the Sale of Goods Act suggests that crops and other agricultural produce are capable of being both goods and land. In principle, things attached to land form part of the land: thus, while a conveyance of land does not include chattels (p. 35) upon the land, attached things, even if not expressly listed, will pass to the transferee.13 It is commonly contemplated that crops and natural produce will be severed, at seasonal intervals in the case of crops, and treated as goods. Where severance is contemplated pursuant to contract, the question is whether the contract must comply with section 2 of the 1989 Act or might be made by informal means, as is permitted by the Sale of Goods Act. It cannot safely be assumed that, just because such items are ‘goods’ for the purpose of the latter Act, a contract for their sale need not satisfy any writing requirement for land. Had the sanction for non-compliance with the writing requirement for land remained unenforceability, it might have been arguable that the plaintiff should have been allowed to characterize and enforce the contract as one for the sale of goods: the Sale of Goods Act in section 60 states that rights and liabilities declared by the Act may be enforced by action. But the Law of Property (Miscellaneous Provisions) Act 1989 now provides that a contract for the disposition of an interest in land ‘can only be made in writing’.14 To allow such a contract to be enforced just because it is also a sale of goods contract is too sharp an inroad into a recently enacted statute to be a permissible outcome of litigation.
Nineteenth-century Case Law
Characterizing crops and produce.
2.05 The nineteenth-century cases characterizing crops and produce as either goods or land are difficult to follow and summarize. Abinger CB once said that no general rule laid down in one case was not contradicted in another.15 Numerous criteria were brought into play in Statute of Frauds cases: whether it was the buyer or the seller who was to sever growing things from the soil;16 the putting of those things into a deliverable state and the intention of the parties to pass the property in them before or after severance;17 the practical necessity of the buyer having an interest in the land in order to enter upon it and effect a severance;18 the introduction of human labour into the growing process;19 the intention of the parties to have mature growths severed immediately after the contract so that after the contract the soil would serve only as a natural warehouse;20 and the collateral issues of whether for the purpose of execution of judgments the growing things would have been treated as goods, and whether for the purpose of descent on death they would have gone to the next-of-kin (goods) or the heir-at-law (land).21 Implicit in some of these older authorities is a confusion between contract and conveyance, namely that because the property in future crops cannot pass before they come into existence, so a contract for their sale cannot concern goods. Further, the application of multiple criteria in some cases compounds the difficulty of stating the law, and the sparseness of reasoning in others encourages a search for an overarching rule that fits the results, if not the reasoning in the cases.
2.06 Lord Blackburn was responsible for the central position given to the passing of property in sales law. In a magisterial classification of the cases, he said that, if the property in growing things was to pass after severance, the contract was one of sale of goods; but if it was to pass before severance, it was not a sale of goods contract at all and might or might not concern land under section 4 of the Statute of Frauds.22 Although early editions of Benjamin supported this thesis,23 there was only partial backing for it in the cases, which are more fully explained as follows.
2.07 In the case of fructus naturales, the spontaneous growth of the soil such as timber or grass, the contract disposed of an interest in land if the buyer was to sever,24 and of an interest in goods if the seller was to sever.25 But the cases consistent with this distinction rely upon other reasons: if the seller severed, the contract could be seen as reserving in him a controlling intention to pass the property only after the growing things acquired the identity of goods upon severance;26 if the buyer severed, he could be seen as needing at least a limited proprietary interest in the land in order to carry out that purpose.27
2.08 These consist of fruits and crops grown by the labour of the agricultural year. They were treated as goods no matter who was responsible for their severance,28 even if they were not in a mature state at the contract date.29 The probable reason was that a buyer did not need anything so enduring as an interest in land to achieve a purpose whose success depended upon dispatch.30 Where the crops were mature at the date of the contract and had to be severed immediately, there was the further reason that the soil had no more to give and served merely as a natural warehouse for the crops.31 Any divergence between fructus naturales and fructus industriales was narrowed by the controversial decision in Marshall v Green,32 which extended the warehouse principle to fructus naturales.
Extended statutory meaning.
2.09 Interpreted literally, the statutory definition of ‘goods’ set out previously significantly extended the definition to be drawn from the cases. This definition clearly gives support to the Blackburn proprietary thesis and, though not explicitly, is by (p. 37) virtue of its width consistent with the natural warehouse principle in Marshall v Green.33 In practical terms, any extension of the definition would lie in the area of fructus naturales where the buyer severs. It is hard to say what the draftsman meant when inserting the expression ‘industrial growing crops’ but it seems designed to serve as the Scots equivalent of fructus industriales,34 just as ‘emblements’ has come loosely to mean the same thing.35
2.10 English decisions based on the statutory definition give some support for the view that it should be given its literal meaning. It seems to have been assumed in Kursell v Timber Operators and Contractors Ltd36 that the grant to a buyer of a licence to sever timber in a Latvian forest over a fifteen-year period was a transaction caught by the Sale of Goods Act. A contract permitting the buyer to enter land and sever timber was regarded in James Jones & Sons Ltd v Earl of Tankerville37 as a sale of goods contract and thus amenable to specific performance under the Sale of Goods Act. In contrast, the Privy Council, construing a New Zealand tax statute in Kauri Timber Co Ltd v Commissioner of Taxes,38 held that a buyer’s right to cut and haul timber was an interest in land: the natural warehouse principle in Marshall v Green39 could not be applied since the contract required a lengthy occupation of the land by the buyer until the timber reached maturity. Further, an Australian court has held that a contract conferring the right to enter land to harvest nuts from trees conferred a profit à prendre, and was not a contract of sale of goods since the buyer was under no obligation to sever.40 The Court of Appeal in Saunders v Pilcher41 held that a conveyance of land to a buyer included also the natural produce growing on the land, but it was not denied that the scope of ‘goods’ had been extended by the Act. There seems no reason to doubt that crops and natural produce might be the subject of both a sale of land and sale of goods agreement.
2.11 It is submitted that the definition of ‘goods’ should be given a straightforward reading and the Act be applied even to cases where the buyer, pursuant to an obligation to do so, effects severance of natural produce, with the possible exception of contracts where the buyer is given an interest in land pending a lengthy maturing of the produce. Difficulties may arise where the definitions of goods and land overlap: we have seen that this may happen with regard to the writing requirement. There may also be a title dispute between a purchaser of land and a purchaser of goods. This is unlikely to be a problem apart from cases where the seller of crops or produce that have attained maturity then sells the land before the crops or produce have been severed. A similar difficulty could arise with fixtures. Where property has a dual existence as land and goods, the rule of nemo dat quod non habet, together with its exceptions, could resolve title disputes.42 Statutory rules for the (p. 38) registration of interests in land may have to be followed by the buyer of crops or produce if his interest is to be asserted successfully against a later buyer of the land.
Meaning of fixtures.
2.12 Chattels attached to land have long been treated as land for various legal purposes.43 They vest in the owner of the land once they are so attached to the land as to comply with the legal test of a fixture and accompany the land when it is conveyed.44 Whether a chattel becomes a fixture depends upon a dual test consisting of a factual element and an intentional element: the degree of attachment of the chattel to the land and the object and purpose of the attachment.45 The role accorded to intention, however, is limited. It must be apparent from the degree and the object of annexation that the intention of the parties, the owner of the chattel and the owner of the land, is that ownership should be retained by the owner of the chattel.46 That intention must be ‘apparent’ and ‘patent for all to see’.47 Where an engine was bolted to the floor through iron plates set in newly poured concrete to prevent it from rocking, and a plate was attached to the engine stating it to be the property of the owner of the engine, this was held not to be sufficient to prevent the treatment of the engine as a fixture.48 The mirror image of this approach is presented by objects that the parties seek to treat as a fixture. An intention to treat a chattel as though it were land, in circumstances where it can readily be disconnected from the land and moved elsewhere, will not suffice to have the chattel treated as a fixture.49 An object that cannot be removed from the land without its destruction will be treated as a fixture.50 An object whose attachment to the land is temporary, however, may for that reason retain its character as a chattel even though it is firmly secured to the land.51 Overall, however, the test of a fixture is not easy to apply or predict in its application.52 In addition, even if a chattel becomes a fixture in this way, as between a landlord and a tenant it may be a tenant’s fixture or a landlord’s fixture.53 Those fixtures in the former category attached by the tenant under the lease may be removed by the tenant, pursuant to a common law right, at the end of the lease, whereupon they are reinvested with the character of chattels.54 Consistently with this entitlement, an agreement by a tenant to transfer this right of severance is not treated as disposing of an interest in land; nor is it treated as a sale of goods agreement.55
2.13 There is surprisingly little authority for the case where the owner of land agrees to sell fixtures to a buyer whilst retaining ownership of the land itself. Before the enactment of the Sale of Goods Act, it might have been useful to ask whether fixtures were akin to growing crops and who was to sever them, and whether it was significant that the parties might or might not have intended the property in them to pass before severance. In Lavery v Pursell,56 Chitty J held that a contract permitting a buyer to sever building materials from land concerned land for the purpose of section 4 of the Statute of Frauds. In one Canadian case, where it was the seller who was to sever a saw-mill together with its machinery at the end of the logging season, the court surprisingly concluded that the contract concerned land.57 Regardless of whether it is the seller or the buyer who is to sever, the definition of ‘goods’ in the Sale of Goods Act is broad enough to embrace all sales of a fixture to be severed from land under the contract. Given the cautionary purposes served by the Law of Property (Miscellaneous Provisions) Act 1989, which do not appear to be in play where a building is dismantled and sold, it is submitted that a narrow view should be taken of land where fixtures are separated from the soil and that a contract capable of being classified as a sale of goods contract under the Sale of Goods Act should not at the same time be a contract for the sale of an interest in land under the 1989 Act.
Minerals and Energy
Similarity to fructus naturales.
2.14 Similar principles apply where the buyer extracts minerals under a contract of sale. The closest analogy is with fructus naturales, where it is the buyer who severs. Despite the breadth of the statutory definition, however, there seems to be great reluctance to treat contracts for buyer severance other than as sale of land agreements,58 the justification apparently being that the words in the definition of goods ‘attached to or forming part of the land’ ought to be read eiusdem generis with emblements and industrial growing crops. The natural warehouse principle of Marshall v Green59 will not serve to extend the definition of goods for items like minerals that have never derived sustenance from the land. Thus in Morgan v Russell & Sons,60 the sale of a heap of slag and cinders resting on the land was held to dispose of an interest in land. In rejecting the statutory extension of the definition of ‘goods’, this approach is restrictive and out of line with other types of thing attached to or part of land.
2.15 The sale of energy, which will usually take the form of oil, gas, or electricity, presents more problems. Oil is conventionally bought and sold in crude and refined versions, subject to the Sale of Goods Act. So far as other types of energy amount to tangible, physical personalty, there should be no difficulty in treating them as goods under the Sale of Goods Act, provided that the relationship between seller and buyer is one of private contract.61(p. 40) The sale of bottled gas is clearly governed by the Act.62 There is every reason why the sale of gas transported by pipeline should also be governed by the Act. Even if the gas is acquired under a gas lease permitting the buyer to extract gas from the ground, the Sale of Goods Act should be applied on its terms to the transaction.63 Similarly, the supply of running water should be regarded as a contract of sale of goods,64 especially if it is metered, the quantity recorded and a unit price paid. Old issues concerning the classification of the contract by reference to whether it is the seller or the buyer who is to sever should not encumber a straightforward reading of the Act.65 It is certainly possible to commit the tort of conversion by extracting gas without permission.66 As for other types of formless energy, one Canadian case accepts that steam for heating purposes was tangible personalty under a tax statute, but its supply took place under a contract for services since the residue of steam was returned to the supplier in the form of a vapour.67 As tangible personalty, the steam supplied should be treated as goods if the subject of a sale. The supply of other formless things such as electricity should be seen as a sale of goods transaction if capable of being bought and sold.68 The Sale of Goods Act, if applicable, is likely to add little to a contract for the supply of electricity that is not already provided for in the general law of contract. This inclusive approach would bring the Sale of Goods Act into line with other legislation. Electricity has been treated in England as a ‘product’ for the purpose of the Consumer Protection Act 1987, which defines ‘product’ as meaning goods or electricity.69 In unfair contract terms regulations,70 originating like the Act in an EC Directive and drawing on a broader European sense of ‘goods’, it has been recognized that ‘goods’ should not be confined to its Sale of Goods Act meaning.71
2.16 In this developing area of law, the focus has not been mainly on whether a contract for the sale of parts of the human body is a contract of sale of goods for the purpose of the Sale of Goods Act. There are vital preliminary questions to be resolved, namely, whether parts of the human body are capable of ownership72 and whether contracts for their disposition are illegal under statute.73 The general rule is that the law does not recognize a property right in a corpse or a part thereof,74 but there is an exception if the body or its part has been processed or treated by human skill by way, for example, of stuffing or embalming,75 and it is a commonplace that human skeletons are owned by medical students and bought and sold accordingly. In the case of living persons, the application of human skill in treating the body part appears not to be a relevant consideration. Human hair has for centuries been bought and sold without controversy.76 In Yearworth v North Bristol NH Trust,77 a quantity of the claimants’ sperm was stored in a hospital unit and damaged as a result of negligence. This was not a case of personal injury suffered by the claimants. The consequence of the separation of the sperm and claimants meant that the claimants, for the purpose of their negligence claim, had ownership of the sperm that they had bailed to the hospital. Once recognized, a property right in body parts may also be protected with the aid of the property torts.78 The existence of a thing capable of being the subject of a property right is a necessary precondition for a contract of sale of goods. Otherwise the seller could not perform one of the primary obligations of a seller of goods, which is to transfer the general property to the buyer. Subject to public policy considerations,79 the conclusion that sperm could be the subject of a contract of sale would seem to follow from the decision in Yearworth. So far as a human body part may be treated as property, it should naturally be sub-classified as goods.
Public policy and illegality.
2.17 There is nevertheless the likelihood that a contract for the sale of body parts may be illegal, so that whether the transaction is in the first case a sale of goods contract may be a matter of little consequence. Transplant surgery has shown that body organs have a transfer value, whether they come from corpses or from living transferors. Legislative recognition has been given to the need to protect vulnerable people. The Human Tissue Act 2004 establishes a scheme whereby activities in relations to ‘relevant material’80(p. 42) are prohibited unless they are on a statutory list and are the subject of the appropriate consent.81 The Act also makes it a trafficking offence to conduct various activities in relation to ‘controlled material’, for example, commercial dealings in human material for transplantation.82 Controlled material is defined, inter alia, as consisting of or including human cells, removed or intended to be removed from the human body, but excludes ‘material which is the subject of property because of an application of human skill’.83 Transplantable material is as defined by regulations84 and does not include sperm.85
Implications of selling.
2.18 In those countries with a broader sense than English law of what constitutes an enforceable contract for the sale of human tissue, the extent of the seller’s liability has caused acute difficulties. North American case law has dealt with the responsibilities of a supplier of blood,86 a matter of great importance if the blood carries hepatitis or is HIV-infected. In one Canadian case, the court, for unclear reasons, held that a doctor supplying HIV-infected semen for artificial insemination did not owe the recipient the strict warranty obligations of a seller of goods.87 Another Canadian case concluded that a hospital patient, not billed for the cost of blood supplied, did not provide a money consideration; consequently, the Sale of Goods Act did not apply.88 Furthermore, it held, the fact that blood fell outside normal commercial channels of distribution made the case an inappropriate one for fashioning common law warranties akin to the strict implied terms in the Sale of Goods Act.89 In England, though blood may not lawfully be sold, its supply can give rise to liability in tort. Blood has been recognized as a product for the purpose of the Consumer Protection Act 1987.90
Things in Action and Money
2.19 The statutory definition of ‘goods’ excludes things in action and money, which is consistent with the pre-Act case law. This exclusion would affect documentary intangibles, which are documents that express an obligation, such as the right to receive payment (under a bill of exchange) or delivery (under a bill of lading), and hence are things in action. The exclusion would also affect pure intangibles whether or not these are documentarily evidenced. For this reason, shares in a company (unless for special reasons the share certificates themselves have become collectors’ items and are bought and sold accordingly) are not goods under the Act. A share is an intangible proprietary right in a company measured by a sum of money.91 In Colonial Bank v Whinney,92 shares were found to be things in action under (p. 43) bankruptcy legislation. Lord Blackburn thought they were personal chattels but not goods; they were outside section 17 of the Statute of Frauds93 since the property in them did not pass by delivery. In accordance with the express language of the Act, however, an undivided interest in goods may be the subject matter of a sale of goods contract.94
2.20 Money itself may not be goods, for otherwise the exchange of money for a money consideration called the price could be regarded as a sale of goods contract instead of a loan or a moneylending agreement,95 clearly a more natural representation of the transaction.96 The same conclusion should follow in the case of a foreign exchange transaction.97 Where, nevertheless, currency and bank notes have attributes enhancing their face value,98 rarity for example, these additional attributes may be sufficient to give them the character of goods for the purpose of the Act. Again, if money is treated as a commodity instead of a medium of exchange, authority exists for treating the money as goods, at least for the purpose of a special statute.99
Shares in Goods100
2.21 According to section 2(2): ‘There may be a contract of sale between one part owner and another.’ The parties may be joint tenants or tenants in common and their interests may arise in varying degrees. More difficult is the case, not covered by section 2(2), where a co-owner wishes to sell an undivided share in goods to an outside buyer,101 since it was held, before the Sale of Goods (Amendment) Act 1995, that an undivided share is not goods but a chose in action for the purpose of bills of sale legislation.102 There are also licensing cases holding that members of unincorporated associations do not buy the drinks supplied to them but obtain on terms a distribution of the property owned by the association.103 For contracts (p. 44) concluded before the implementation of the Sale of Goods (Amendment) Act 1995,104 the position is as follows. The effect of section 2(2) is to modify the definition of goods to admit shares disposed of between co-owners. The provisions of the Sale of Goods Act thus apply to such contracts, with the presumable exception of section 16,105 since otherwise the contract under section 2(2) could never be executed. Where a co-owner’s share in goods is the subject of a contract with an outside buyer, section 2(2) does not apply. Nevertheless, by common law analogy,106 the relevant provisions of the Sale of Goods Act could be applied to a contract concerning the sale of an undivided share.107
2.22 Where the changes to the Sale of Goods Act brought in by the Sale of Goods (Amendment) Act 1995 apply, the position now is that an undivided share in goods is within the definition of goods in the Sale of Goods Act. This is accomplished by the addition to that definition of the words ‘and an undivided share in goods’.108 Furthermore, where the subject matter of a contract is a share in an existing identified bulk at the contract date, this is defined as specific goods,109 with the result that section 16 again will have no application. A bulk that is subsequently identified to the contract is a different matter, for in that case the undivided share in the bulk cannot be treated as specific goods.110 Although the amended definition of ‘goods’ tends to erode the distinction between a contract of sale of goods from an identified bulk and a contract for the sale of a share of the goods in that bulk, that distinction has not disappeared. The acquisition of an undivided share where there is a contract for the sale of unascertained or future goods requires the buyer to have paid a part or the whole of the contract price.111 No such requirement exists if the contract from its inception was a contract for the sale of a share in identified goods.
2.23 Computer hardware is obviously goods and it has been said that a contract for the sale of both hardware and software (but not software alone) is a contract of sale of goods.112 In St Albans City and District Council v International Computers Ltd,113 the contract concerned bespoke software containing a database that was provided under an agreement for the supply of a computer system. At trial, the judge was of the view that the software was ‘probably’ goods for the purpose of the Sale of Goods Act since ‘[p]rograms are...of necessity contained in some physical medium’.114 In the Court of Appeal, Sir Iain Glidewell went further when saying that the disk carrying the program was goods under the Act, though (p. 45) the program itself was not.115 Taking into account the possibility that the program might be directly transferred under a licensing agreement to a customer’s computer system without the ownership of any disk changing hands, he was of the view that the transaction would fall outside the Sale of Goods Act116 and outside the Supply of Goods and Services Act 1982 as well.117 The question whether software directly transferred in an intangible form for downloading into a computer system, and not embodied in a disk, was goods for the purpose of the Sale of Goods Act was further considered by an Australian court in Gammasonics Institute for Medical Research Pty Ltd v Comrad Medical Systems Pty Ltd.118 The court took note of American authority119 treating software as goods under the Uniform Commercial Code only when embodied in the form of a disk, but went on to consider an argument that, in the present case and notwithstanding St Albans, software transmitted directly into a computer system should be treated as goods once it became embodied in the computer system to which it was transmitted. The court noted a logically defensible distinction between treating the supply of a remote download as goods, while treating on-line access to a database as a service. This would have given the court a clear opportunity to treat a remote download as one of sale of goods. That said, the court went on to hold that the lower court, which had followed St Albans, was not wrong in so doing. The distinction between the case of software remotely supplied and software supplied in the form of a disk is difficult to justify.120
2.24 As important as the taxonomic question is, the real question in St Albans was whether the supplier of software owes the due care obligation of the supplier of services or the strict obligations of the seller of goods.121 Sir Iain Glidewell was of the view that the licensor’s standard of liability should be the same as that of a seller of goods under section 14 of the Sale of Goods Act and that, as a matter of common law implication into the contract, the parties ‘must have intended’ that a standard of strict liability should apply.122 This approach surpasses the business efficacy approach to implied (p. 46) terms123 and owes more to a desire for uniformity of liability across the wide range of supply of goods and of intangible property than to an assessment of what contracting parties genuinely intend. Under the Sale of Goods Act, a book would certainly be regarded as goods but information or advice therein would probably be subject to a due care standard. It might be the case, however, that a distinction would be drawn between the presentation of material as fact and its presentation as authorial judgment. It is one thing for an author to assert that software is not goods; it is quite a different thing to claim that the past participle of the French verb ‘vendre’ is ‘vendé’ instead of ‘vendu’. It may be, nevertheless, that strict liability should apply only in those cases of factual inaccuracy that would bespeak negligence in any case, so that the importance of any distinction between different levels of liability would fall away.
2.25 A further distinction might be drawn between software that serves the purpose of using goods, like the satellite navigation system in a car, and goods that are provided so that software might be used. A computer hardware system would be an example of the latter case. For the purpose of the seller’s liability under section 14, where goods are provided with a manual without which they cannot be used, the manual is regarded as one with the goods it accompanies, so that the two taken together attract strict liability under section 14.124 Computer software designed to perform tasks such as running an accounts system or a council tax operation performs a task that might once have been performed by a professional supplying professional services, subject to liability based on the negligence standard. It is not at all obvious that in such a case liability for non-performing software should be strict. The standard of liability certainly ought not to depend upon whether the software comes with a disk or not.125 A contract for the supply of software has been said to be sui generis,126 so an authoritative decision needs to be taken whether liability should be strict or fault-based. The quality and fitness of the disk for embodying software is nevertheless perfectly appropriate for strict liability under the Supply of Goods and Services Act 1982.127
A ‘Money Consideration Called the Price’
2.26 A contract of sale of goods under the 1979 Act is one where the buyer pays a money consideration called the price. There is no reason why a contract should not be one of sale of goods just because the currency of payment is foreign.128 Certain difficulties arise (p. 47) where goods are exchanged or traded in for other goods: these will be examined later, when the sale of goods contract is compared to similar transactions. The present purpose is to distinguish money from similar forms of payment.
2.27 The most obvious physical mediums in which money is expressed are coins and bank notes. In the United Kingdom, coinage is issued exclusively by the Royal Mint in accordance with Treasury permission.129 According to section 9(1) of the Coinage Act 1971: ‘No piece of gold, silver, copper, or bronze, or of any metal or mixed metal, of any value whatever, shall be made or issued except with the authority of the Treasury, as a coin or a token for money, or as purporting that the holder thereof is entitled to demand any value denoted thereon.’ In England and Wales, banknotes are issued exclusively by the Bank of England,130 the denominations and overall amounts being the subject of Treasury approval.131 The Coinage Act 1971 prescribes the quantity and denomination of coin acceptable as legal tender132 (for bank notes issued by the Bank of England and authorized by the Treasury, no similar limits are laid down),133 but it does not define what is meant by legal tender, which is a not entirely clear concept. It is a well-known practice for traders not to accept large bank notes for small transactions, and not to accept notes of large denomination at all. The meaning of legal tender, therefore, comes to the fore when a buyer tenders performance or a debtor tenders payment.134 A seller is entitled to insist on tender of the exact amount due from the buyer and is entitled also to refuse payment of this sum in the form of a cheque.135 Apart from that, a seller is entitled to demand payment in a particular form or denomination as a matter of contract if the contract has not yet been concluded by the time the buyer proffers payment. For the purpose of including a contract in the Sale of Goods Act as a contract for the sale of goods, it should be no objection that the buyer’s consideration consists of money in a foreign currency. The essence of money for present purposes is that it is a freely circulating medium of exchange.136
2.28 A clear and liquidated financial advantage accruing to the ‘seller’ will not, however, amount to money as such: money is not the same as money’s worth. Thus an agreement to transfer leasehold land in return for the transferee agreeing to assume substantial rent payments has been held not to be a sale.137 A contract to transfer goods in forgiveness of indebtedness is not a contract of sale.138 Similarly, the transferor of shares (p. 48) paid with shares in the transferee company (who alternatively might have taken a stated money price for the transferred shares) does not sell them to the transferee.139 But it is no objection to the characterization of an agreement as one of sale that the buyer pays with a cheque or banker’s draft, for here the instrument serves as conditional payment140 until the bank, acting as agent for the buyer, puts the seller in funds with the amount of the cheque or draft. The instrument itself may not be money but it is the means by which the seller obtains money.
Instruments and absolute payment.
2.29 An instrument may be given in payment for goods supplied where it serves as absolute and not conditional payment. It has been held in one old case141 that the contract is not one of sale but one of barter (or exchange) of the instrument against the goods. The buyer of seven pipes of Guernsey red wine paid the seller with a bill of exchange drawn by one stranger on another and due on a later date, without recourse against the buyer if the bill were dishonoured. When the bill became due, it was dishonoured by the drawee, whereupon the seller brought action against the buyer in debt on one of the old money counts, namely, for goods sold and delivered. The seller’s action failed because the goods had been bartered and not sold; the buyer had never undertaken to pay a money sum. Accepting that the buyer in the case described was not liable to pay when the drawee defaulted, it does not necessarily follow that the contract may not be treated as one of sale. An alternative argument is that the payment of the money consideration is entrusted under the contract to a third party but that the seller takes the risk of third-party default and so may not have recourse to the buyer in that event.142
2.30 The approach just described may be useful in dealing with the relationships arising out of the use of trading checks, which are vouchers issued by a lender to a borrower and used by the latter, who trades them in for goods at certain nominated retail outlets, pursuant to arrangements between those outlets and the lender.143 The borrower uses the checks exactly as though they are cash, yet they lack the universality of money. In Davis v Customs and Excise Commissioners,144 the court concluded that a contract of sale had been entered into between the borrower and the retailer, so that value added tax could be levied. Moreover, the court also rejected the argument that there had been a sale of goods by the retailer to the lender, but delivered at the latter’s request to the borrower. Circulating credit tokens in local trading areas145 should by this same reasoning be regarded as a money consideration for the purpose of the Sale of Goods Act, and the same may be said for ‘open source’ digital currencies,146 even though they are not State sanctioned or backed.
Use of credit cards.
2.31 Davis v Customs and Excise Commissioners147 is of assistance in analysing the relationships arising out of the acquisition of goods by means of a bank credit card.148 The card-holding buyer presents the card in payment to a seller, who has pre-existing arrangements with the issuer of the card to accept the use of the card in payment.149 Until quite recently, the seller would make a graphite impression of the card on a sales voucher signed by the cardholder. The seller would then retain a copy of the voucher, present a copy to the customer, and then send a third copy to the issuer, who would pay the face amount less an agreed commission.150 The current practice is for the card to be ‘swiped’ or read on a credit card terminal linked to the card issuer, which captures information from the card. The customer will then receive a copy of the till receipt, after either signing the receipt or inserting a personal identification number (PIN) on the credit card terminal. There is no need for the customer to present the card physically to a distant seller. Instead, details of the card may be given over the telephone or entered online in an internet transaction, in both cases with the addition of a security number inscribed on the back of the card. From the cardholder’s point of view, it is like a deferred cash transaction, with payment of the sale price eventually being made to the issuer. The card issuer will not invoice the cardholder until the seller has presented a claim for reimbursement.
Credit cards and money consideration.
2.32 It is sometimes loosely said that the credit card is the equivalent of a money consideration, but the reality is that a credit card, like a cheque drawn on a bank account, is the means by which a money consideration can be paid to the seller by the credit card issuer.151 Where goods are supplied in return for a credit card payment, the contract is one of sale of goods.152 The payment mechanism for bank credit cards differs from payment by means of a cheque drawn by a buyer on his bank in that, whereas the cardholder always draws on a line of credit provided by the issuer, a buyer paying by cheque receives credit only if the account on which the cheque is drawn is in debit or is a special loan account. The bank credit card differs in terms of degree from trading checks in that many fewer sellers will accept trading checks than credit cards.
2.33 Unlike the case of trading checks, where the seller receives payment from the lender without having commission deducted, the seller is paid less than the face amount of the transaction by the card issuer. While the grant of a commission from seller to issuer comes close to being a notorious fact, the amount of it is not, and there is usually no disclosure of either by the issuer to the cardholder. The contract between seller and (p. 50) cardholder should remain nonetheless a contract of sale of goods, with the presentation of the credit card constituting the agreed method of paying the price.153
2.34 Certain problems, however, remain. First, there is the question of contractual certainty, which is a problem in that most cardholders never know the final price received by the seller.154 This is unlikely to matter in practice, since certainty is usually a problem in executory contracts and one of the advantages of bank credit cards is that they accelerate the execution of contracts. A second problem concerns the liability of the cardholder to the seller if the issuer fails to pay the seller. This is a small risk, but it has been settled that, as a matter of construction, the cardholder and seller agree on a paymaster, the issuer, with no recourse against the cardholder if the issuer defaults.155 In this respect, bank credit card payment differs from payment by means of a cheque or under a banker’s letter of credit.156 The ruling thus given that payment by credit card constitutes absolute and not conditional payment is not inconsistent with treating the credit card, not as a money consideration in itself, but as the means by which the seller obtains a money consideration. Absolute payment means that seller and cardholder have agreed that, when the cardholder selects the card issuer as the paymaster, the seller shall have no recourse to the cardholder if the card issuer fails. The use of the credit card as a means of obtaining payment, therefore, would not prevent the contract between seller and cardholder from being one of sale of goods.157 Thirdly, if the view is taken that the issuer is the agent of the cardholder in effecting payment to the seller, it might be argued that the undisclosed commission by seller to card issuer is a secret profit which the agent issuer should disgorge to its principal, the cardholder.158 Any such difficulty, if it arises, could be resolved if issuers took it upon themselves to make full and frank disclosure of their discounts to their cardholders.159 If it should be argued that the strict rules on bribes and secret profits ought to apply only to those agents who negotiate the formation and terms of contracts, which card issuers do not, it must be said that the law supports no such distinction. In addition, card issuers come within the spirit of the rules governing secret profits. They hold out to sellers that acceptance of their credit cards will increase business volume and their commission has a manifest tendency to drive up selling prices at the expense of cardholders, who may be denied the cash discounts sometimes given to other buyers or surcharged for using a credit card.
2.35 The use of a cheque guarantee card to make payment by cheque160 raises no issues concerning the characterization of the transaction concluded between seller and buyer. Such issues as arise concern mainly the relationship between the seller and the bank that has issued the card.161 Debit cards can be used to make automated transfers from an (p. 51) account to which they are linked, which results in a simultaneous depletion of the cardholder’s account and crediting of the seller’s account. They therefore serve as a means of paying a money consideration to the seller which is faster than drawing a cheque on the bank account.162 They differ from cheques in that the seller will pay a small fixed sum by way of deduction from the amount of the transaction credited to the seller by the bank. The amount thus deducted will be less than the amount of commission paid by the seller to the issuer of a credit card. Smart cards163 do need to be assessed in terms of the money consideration. Smart cards can perform a wide variety of functions, one of which, not fully developed in the United Kingdom, is that of electronic purse:164 a digital chip on the card can be charged with value, either once and for all or on a renewable basis, by the cardholder, who pays value for the charging to be done.165 When used off-line at authorized terminals, typically for small transactions, the amount of the transaction is deducted from the value stored on the card. The smart card is thus a convenient substitute for cash itself and should be treated as a money consideration under the Sale of Goods Act. The card is issued by a financial institution, such as a bank, which may reimburse the seller in respect of the value transferred under this and other transactions. Alternatively, the seller may simply take the value received from a card and transfer it for value to another card that is being recharged or to its own supplier.
2.36 Finally, similar problems are posed by trading stamps accumulated on certain purchases and then later surrendered for goods. The supply of goods for stamps was examined in a Canadian case, where the court appears to have concluded that the surrender of intrinsically worthless trading stamps for goods was a barter contract and not a sale of goods.166 The trading stamps could not therefore be seen as a money consideration. A similar approach underlay legislation, now repealed, that was passed on the assumption that it was necessary to ensure that the supply of goods in return for trading stamps attracts the same obligations concerning description, fitness, and quality of the goods as are laid down by the Sale of Goods Act.167 If the issuer is paid for the stamps before or when they are issued by retailers to their customers, then this payment is divorced from any subsequent transaction involving the surrender of accumulated stamps by those customers in return for goods. It cannot therefore be said that the supplier of the goods receives stamps in order to recover the price of goods supplied from some other paymaster. (p. 52) The stamps themselves lack the currency of money, so, though perhaps they are money’s worth, they are not money.168
Basic Statutory Distinctions
2.37 The implementation of the Sale of Goods Act is based on sets of key definitions. These definitions are of major importance in the application of the passing of property rules. The sale of goods is a hybrid of contract and conveyance in which the contractual and proprietary aspects of the transaction are virtually inseparable, in contrast with the sale of land where the contract and the conveyance are formally and chronologically distinct.169 Under the Sale of Goods Act, the passing of property from seller to buyer is the fulcrum on which depend issues as diverse as the incidence of risk, the impact of frustration, the seller’s entitlement to recover as a debt the unpaid price, and the rights of buyer and seller in the event of the other’s bankruptcy. As this last item shows, the passing of property does not merely provide the key to the resolution of contract problems between the parties inter se; it also affects strangers to the contract and may be significant for certain statutory, non-sale purposes where it is important to identify the owner of the goods. The definitions in the Sale of Goods Act do not bear upon the passing of property as an end in itself, but rather as a medium through which contractual rights and liabilities are resolved.
Contract and Conveyance
‘Contract of sale’.
2.38 The Act defines ‘contract of sale’170 as comprised of ‘an agreement to sell’ and ‘a sale’.171 The former is merely the description of the contract at the executory stage; the latter, in its pure form, refers to the actual conveyance of the goods,172 though sometimes it designates the cumulation of contract and conveyance arrived at when the contract is executed. Consistent with this latter usage is section 2(6): ‘An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.’ Section 2(4) recognizes that, under some contracts of sale, the property in the goods passes automatically by virtue of the conclusion of the contract itself: ‘Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale.’ Here, the contract and conveyance are thoroughly fused and inseparable. According to section 2(5) on the other hand: ‘Where under a contract (p. 53) of sale the transfer of the property in the goods is to take place at a future time or subject to some condition later to be fulfilled the contract is called an agreement to sell.’ In this case, the contract and conveyance may be chronologically distinct, but the absence of forms in the passing of property in goods renders it just an incident in the performance of the contract.
2.39 The Act also provides in section 61(1) that ‘“sale” includes a bargain and sale as well as a sale and delivery’, which has no practical significance in modern conditions. This is an unexplained reference to the old common (or indebitatus) counts of goods bargained and sold and goods sold and delivered.173 These counts were simplified actions identifying in abbreviated form the circumstances in which the seller could maintain a debt action for the price. Briefly, if the seller were unable to fit his case into either of these counts, he could not sue in debt but was generally limited to a damages action against the buyer for non-acceptance. The factor uniting the two counts was the passing of property in the goods: the count of goods bargained and sold applied where the property had passed, usually on the conclusion of the contract, but delivery had not occurred; the count of goods sold and delivered lay when the property passed at a later time and delivery had been made. It was always possible for the seller to maintain a right to sue in debt if he stipulated in the contract that the buyer was to pay for the goods at a date prior to the passing of property: the buyer’s duty to pay thus became a condition precedent to the seller’s duty to convey the goods to the buyer.174 To succeed in his debt action, however, the seller would have to continue holding himself ready and willing to convey the goods to the buyer on the eventual payment of the price, and would be disqualified if he conveyed the goods to a third party in the meantime.175 These rules establishing the scope of the seller’s debt action are preserved, albeit in different language, in section 49 of the Act.
Significance of sale.
2.40 Broadly speaking, sale is the event on which a seller’s breach of contract action passes from damages to debt, though in the latter instance the seller has always been free to elect to sue for damages instead.176 Sale is also significant in determining whether a buyer denied delivery of the goods may pursue an action in the tort of conversion; such a buyer may thereby succeed in establishing the right to immediate possession177 needed for bringing an action of this kind. A right to immediate possession does not necessarily follow the passing of property to the buyer, for example, where the buyer has not yet paid and payment is a contractual condition of delivery.178 Conversely, a buyer may already (p. 54) be in possession of goods though the property has not yet passed under the contract of sale. The buyer’s possession of the goods will support an action in trespass or conversion against a third-party tortfeasor, or against a seller who is guilty of a wrongful interference with the goods.179 A buyer with the right to immediate possession may, where the seller has wrongfully not delivered, elect to sue for damages for non-delivery instead of in conversion. Commonly, there will be little difference between these two actions since the rules on specific delivery in tort have been aligned with the rules on specific performance in contract, with the result that specific delivery is rarely awarded to the buyer.180 The greater frequency of the seller’s debt action for the price, when contrasted with the buyer’s correlative action for the recovery of the goods themselves, is explicable on the ground that debt is not a discretionary remedy181 and that specific delivery has been infected by the discretionary limitations of specific performance.
Meaning of conditional contract.
2.41 The Act also provides in section 2(3), a very general provision of no particular significance dealing with an important and complex matter, that a ‘contract of sale may be absolute or conditional’. This provision may refer either to a contract whose existence or whose performance turns upon the occurrence or non-occurrence of a ‘condition’,182 a word which is quite possibly the most ambiguous in the contract lexicon.183 The conclusion of a binding contract may be held up pending the occurrence of a condition external to the contract.184 Or one or more obligations of a binding contract may be suspended until a condition internal to the contract has been fulfilled.185 The advantage of the latter type of condition is that, if there has been performance, it can be dealt with under the terminated contract instead of on a restitutionary basis. Where there is an internal condition, it may be non-promissory, in that neither party has undertaken that it will or will not occur.186 Nevertheless, a non-promissory condition may be accompanied by an obligation of (p. 55) varying degrees of intensity requiring a party to take steps to assist or not to impede its occurrence.187 The condition may in some cases be promissory in the sense of its occurrence being guaranteed, so that the party bound is answerable in damages while the other is entitled to discharge himself from the contract.188 In the case of well-established conditions of this sort, the practice is firmly entrenched in English law of conflating the condition, in the sense of an event, and the promise relating to it.189 The obligee is entitled to terminate the contract when the other party fails to fulfil the condition. Where the performance of a contract is dependent upon compliance with a condition, this may also have an effect on the passing of the property.190 A common example is a conditional sale contract whereby the buyer obtains possession of the goods and agrees to pay the price by deferred instalments, the property passing upon payment of the final instalment. A similar example is the supply of goods on reservation of title terms.
Existing and Future Goods
2.42 Section 5(1) of the Act states: ‘The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to be manufactured or acquired by him after the making of the contract of sale, in this Act called future goods.’ This distinction between existing and future goods comprises the universe of goods: all goods are either one or the other and may not be both. Goods that are in existence but are not yet owned by the seller are, for the purposes of the Act, treated as future goods.191 The significance of section 5(1) and the remaining provisions of section 5 is as follows. First of all, section 5(1) resolves any doubt that future goods may lawfully be the subject of a contract of sale.192 The common law has not always been sympathetic to futures and forward delivery trading193 and, as stated previously, there has also been a discernible tendency to confuse an impossible conveyance of future goods with a feasible agreement to convey future goods once they become existing goods. This point is reinforced by section 5(2), which provides that the seller’s acquisition of future goods may depend upon a contingency.194 Whether the seller will be liable in the event that he does not acquire the goods is a (p. 56) different matter: that depends upon the construction of the contract.195 It is a characteristic feature of modern commodities trading that abstract futures may be the subject of a contract of sale with the possibility that a physical delivery will be made at the due date but the greater likelihood that a settlement will be made in favour of the party who read the market correctly between the contract date and the delivery date.196 Alternatively, contracting parties may agree on physical delivery at a future date but, for one of various reasons, will substitute a financial settlement in favour of the party who has read the market correctly for physical delivery.197 In both of these cases, the parties perform as though the contract were one for the settlement of financial differences instead of a true sale of goods contract. A number of questions are posed by such transactions, including whether the contract is one of sale of goods at all, whether the contract is a lawful one and whether the contract is a regulated one. The question whether a contract is truly one of sale or one for the payment of financial differences seems not to be a significant one: the provisions of the Sale of Goods Act relevant to such a contract could apply directly or by analogy. The Gambling Act 2005 permits gambling activity if it is conducted in accordance with the regulatory scheme laid down in the Act or with the Financial Services and Markets Act 2000.198 A contract of sale of goods is regulated if in fact it amounts to the carrying on of a regulated activity under the Financial Services and Markets Act 2000.199
Passing of property.
2.43 Secondly, section 5(1) leads into section 5(3). Taken together, the two provisions establish that a contract is not invalidated just because the subject matter does not exist as defined by the Act.200 Although the contract may be valid, section 5(3) makes it clear that there can be no passing of property in future goods.201 This provision recognizes the physical impossibility of the seller transferring the property in goods that do not exist, or that exist but are not owned by him.202 Furthermore, a purported present conveyance of future goods will not automatically be converted by the Act or by common law into an effective (p. 57) conveyance at the moment future goods become existing goods. Even if the seller purports to transfer the property in future goods before they become existing goods, he will be treated as having undertaken to transfer the property once they become existing goods by manufacture or acquisition as the case may be.203 At common law, it has always been impossible to direct the passing of property in goods at some future date without performing a fresh act of conveyance.204 Nevertheless, a category of goods with a potential existence, such as the unborn young of particular animals or the crop of a particular field owned by the seller, has long been recognized at common law as an exception to this rule, so that a fresh conveyance is not needed when the goods come into existence.205 This common law exception is the general rule in equity which, looking on that as done which ought to be done, transmits automatically the equitable property in goods, in response to a purported present conveyance, once the goods have come into existence.206 The equitable rule, however, does not assist volunteers, namely those who have given no consideration for the purported present conveyance.207 As discussed in a later chapter,208 it was never clear to what extent these equitable rules applied to ordinary contracts of sale that were not designed as part of a scheme to provide security for a loan. Furthermore, as the present authorities hold, it seems that the Sale of Goods Act concedes no part or very little part to equitable rules concerning the passing of property.209
Specific and Unascertained Goods
2.44 Specific goods are those ‘identified and agreed on at the time a contract of sale is made’.210 They are unique and may not be replaced by goods otherwise identical, though whether goods given a precise identification in a contract are intended to be unique goods is a question of contractual construction.211 The Act also makes references to unascertained goods,212 which are nowhere defined. By inference, however, unascertained goods are all those goods that, at the date of the contract, are not specific goods. Although the Act is clear that these goods cannot be specific,213 goods that subsequently become ascertained so as to acquire some of the properties of specific goods are occasionally and loosely referred to as specific goods.214 Just as the distinction between existing and future goods exhausts all goods (p. 58) at the contract date, so too does the distinction between specific and unascertained goods. But the two sets of distinctions do not quite rotate on the same axis. Existing goods may be either specific or unascertained, while future goods are nearly always unascertained and specific goods are almost always existing goods. An identified second-hand reaper owned and possessed by a third party at the contract date, and thus future goods, was regarded as specific goods in Varley v Whipp.215 A more difficult case is that of goods, not yet physically in existence, such as a contract for the sale of a manufacturing seller’s entire output over a stated, future period. If that output cannot be measured at the contract date, the question is whether it has been ‘identified’; it would seem to have been ‘agreed on’. Identification supposes a process of ascertaining uniqueness that is certain. The treatment of an entire future output as specific goods will depend upon whether courts are prepared to invoke the principle of subsequent ascertainment (id certum est quod certum reddi potest). The words ‘at the time a contract of sale is made’ point away from the application of this principle and towards the treatment of the future output as unascertained goods. A contract to sell a fungible item possessed in bulk by a seller in his store room will involve goods that are both existing and unascertained. A contract to sell a fungible item that the seller intends to manufacture in bulk will involve goods that are both future and unascertained. A contract for the sale of a fungible item often will not stipulate whether the goods to be supplied are existing or future goods, leaving the seller with the choice of appropriating either to the contract.
Unascertained goods and specific bulk.
2.45 Two refinements have to be introduced to the distinction between specific and unascertained goods. First, the parties may contract for the sale of unascertained goods but limit the seller’s power of selection to a specific bulk. A seller may be required to supply widgets from the stock currently in his store room just as, in an example used by Chalmers,216 a seller may undertake to supply a number of bottles of a particular vintage of wine from the larger stock currently lying in his cellar. Despite sometimes being described as specific goods,217 these quasi-specific goods remain in principle unascertained goods since it cannot be said of any particular widget or bottle in the larger stock whether it has been identified and agreed upon at the contract date. The seller’s power of selection may be constrained in varying degrees between the cases of unlimited selection and quasi-specific goods. A seller, for example, may have to supply amber durum wheat shipped from a Pacific Coast port in July. Although these are not quasi-specific goods, the seller’s choice is limited: he may not tender to the buyer amber durum wheat of the same quality as the contract demands shipped from a Great Lakes port in a different month.
Quasi-specific goods in the Act.
2.46 Quasi-specific goods cannot be treated as specific goods where the Act lays down particular rules for specific goods, as it does for example in sections 6–7 for initial and subsequent impossibility of performance arising out of the perishing of goods.218 Indeed, the Act itself makes it plain that the passing of property rules for specific goods cannot be applied to quasi-specific goods.219 Yet this hybrid category of quasi-specific (p. 59) goods has certain of the characteristics of specific goods and, even if a provision of the Act does not apply to it, careful thought should be given to the application of that provision by analogy or as the statutory expression of a broader and relevant common law principle.
Effect of ascertainment.
2.47 The second refinement concerns ascertained goods which appear to defy the binary classification of goods as specific or unascertained. Ascertained goods, along with specific goods, are eligible for specific performance.220 Ascertained goods do not exist in that state at the contract date: they are goods initially unascertained that have subsequently been identified to the contract.221 At that date, the impediment to the passing of property in unascertained goods, laid down by the Act and motivated by the same consideration of impossibility that prevents the property passing in future goods, is lifted.
Significance of distinction between specific and unascertained.
2.48 The distinction between specific and unascertained goods formerly had a dramatic impact on the incidence of contractual rights and duties. It is much less important nowadays.222 In principle, as the Act maintains, the property in specific goods passes at the contract date and in unascertained goods at a later date.223 Judicial interpretation of the relevant provisions has blunted this distinction in the area of the passing of property, partly at least to avoid the application of the now-repealed rule that specific goods could never be rejected by the buyer if the property in them had already passed.224 The distinction retains its force in the contractual areas of discharge for initial and subsequent impossibility.225 For much of the nineteenth century, the distinction was important for the incidence of the seller’s obligations concerning the quality and fitness of goods. The rule of caveat emptor was more effective in diluting the obligations of the seller of specific goods than those of the seller of unascertained goods.226 This discrepancy showed a tendency to diminish during the course of the nineteenth century, though it persisted to a lesser degree in a disguised form in the Act.227
General and Special Property
2.50 Personal property law is vague on the definition of its basic concepts. The Sale of Goods Act does not speak of ownership, and for a good reason. At common law, proprietary rights are protected from tortious interference by means of personal actions requiring the plaintiff to be in possession or have the right to immediate possession at the time of the wrong.230 Before the enactment of the Torts (Interference with Goods) Act 1977, the position was as follows. A plaintiff succeeded in a conversion action because his possessory right was superior to the defendant’s.231 The judgment operated finally as between the parties to the action without having an in rem effect on strangers. Only in exceptional cases was the defendant permitted to resist the plaintiff’s possession-based claim by pointing to the superior possessory right (the ius tertii) of a third party.232 Such relativity of right as between plaintiff and defendant233 hardly accorded with anything so absolute as ownership.234 It was quite consistent with this lack of absoluteness that delivery up of the disputed thing was not available as a remedy until quite recent times;235 even today, it is infrequently awarded.236
Abolition of ius tertii.
2.51 The 1977 Act abolished the ius tertii defence and promoted the joinder of multiple actions involving the same disputed goods.237 It also made provision for the avoidance of the overcompensation that came with the award of full damages to plaintiffs with only a limited possessory interest; the defendant was concomitantly protected from multiple liabilities exceeding the value of the goods.238 The 1977 changes may betoken the start of a movement towards absolute ownership going beyond the text of the Act itself; they do not affect the earlier239 provisions of the Sale of Goods Act.
2.52 The general property in goods can therefore be understood as encapsulating the best possessory right there can be in the contract goods, a possessory right that is good against the whole world. If even such a possessory right seems fugitive, it should be remembered that goods, in contrast with land, which is permanent and ineradicable, have always been regarded at common law as transient and so hardly deserving of the complex proprietary structure (the doctrine of estates) that is capable of dividing land in a multiple fashion among various owners and over time.240 Quite simply, the general property in goods is the most exalted interest that the law deems personal property fit to have: nothing more enduring is necessary for a species of property that does not last forever.
Sale of limited interest.
2.53 Despite this modest statement of the general property, it may not be the interest that the buyer and seller have agreed that the former shall have. It is common for a limited interest to be the subject of a sale agreement,241 even an interest that is precarious to a degree unknown by the parties.242 Notwithstanding such shortcomings in the seller’s proprietary interest, the contract should still be regarded as one governed by the Sale of Goods Act. To reach this result, the definition of general property in the previous paragraph needs to be modified. For the contract to be one of sale, it is necessary for the seller to transfer or agree to transfer the whole of his interest in the goods, and not reserve a part of that interest unconditionally or direct the buyer to hold the goods on bailment terms,243 for a bailee’s interest is but a special property in the goods.244 The difference between general and special property will nevertheless in certain cases appear to be quantitative,245 but that is hardly unusual given the extent to which the notion of relativity of right has pervaded this area of law. In the last resort, what matters is the scope of the interest that the seller warrants will be transferred and not the interest the seller succeeds in transferring.246
2.54 Though the issue is rather less important than it used to be, it may still be important for various reasons to distinguish sale of goods contracts from related contracts involving the transfer of goods. It should not be forgotten, however, that much of the Sale of Goods Act consists of prima facie rules, departed from in numerous types of sale contracts, and of duties that may be excluded subject to external statutory controls. Furthermore, section 62(2) exists to prevent the divergence of sales law from the general law of contract.
2.55 The scope of the Act may present itself in different contexts. No longer do sale of goods contracts have to be evidenced in writing when related contracts need not be.247 Furthermore, as regards the quality and fitness of goods supplied under transfer contracts akin to sale, such as work and materials contracts, the courts displayed a willingness at common law to mimic the statutory terms of fitness and quality even before these were enacted in the Supply of Goods and Services Act 1982. Nevertheless, the rules in the Act on the passing of property and on the seller’s action for the price find no statutory counterpart in legislation dealing with related contracts. These rules may be applied by analogy outside the Act, an expedient adopted for the implied terms of quality and fitness before these were expressly enacted in separate legislation. What precisely is meant by application by analogy is a different matter. A statute might serve as a policy inspiration for innovation in the common law.248 It might even be argued that cases outside the Sale of Goods Act fall within the equity of the statute.249 These approaches hardly fit a codifying statute like the Sale of Goods Act which, in its 1893 form, drew upon case law that also sustained contracts akin to sale of goods. The Act in this respect may be regarded as evidence of the common law that applied to related contracts, or the common law that would have developed had it not been cut off by the process of enactment and confined to sale of goods, the most important of a group of like transactions. The enactment of a codifying statute should not be relied upon to prevent the cross-pollination between sale and related contracts that would certainly have occurred if sales law had remained uncodified.
Work and Materials Contracts
Range of contracts.
2.56 Work and materials250 contracts fall within a spectrum running from the supply of services to sale of goods. A contract to supply services, such as transport or dry-cleaning, is not a sale of goods contract. Nor is it a work and materials contract.251 There (p. 63) are, however, few contracts for services where only labour is supplied: even a dry-cleaner supplies wire coat hangers. Work and materials differ from services in that goods supplied are integral, not collateral, to the supplier’s performance. At the other end of the spectrum, a sale of goods contract may include services, for example, the sale of a kitchen appliance with a labour and parts warranty, or the sale of a fixture which the seller agrees to dismantle prior to delivery.252 Labour is inherent in the manufacture and distribution of goods, so the distinction between sale of goods and work and materials is one of degree.
Interplay of labour and goods.
2.57 It is therefore necessary to explore the conjunction of labour and goods before drawing a line between sale of goods and work and materials. Labour and goods may be blended in an integrated way in the manufacturing process, as where a painter produces a portrait in oils253 and a dentist a set of dentures.254 Or the labour may be collateral to goods that are made serviceable, as where a plumber installs a furnace255 or a garage fits replacement parts in a car.256 Sometimes labour is both integral and collateral, as where boilers are built and then installed.257 In so far as labour and goods are capable of being separated, it might be argued that the Sale of Goods Act should be applied to that part of the transaction concerning goods, the remainder being governed by a separate regime.258 The abolition of the writing requirement and the enactment of the Supply of Goods and Services Act 1982 have created the opportunity to move away from contractual classification questions and ask more specific questions about the different incidents of contracts on a sliding scale of variation.259 Where labour and goods are inseparably blended, the Act could be applied to the ingredients used, if not to the overall product. Support for this type of partial application of the Sale of Goods Act, however, is hardly at all in evidence in the case law.260
2.58 If a transaction concerning the product of labour and goods must be classified definitively as a sale of goods or supply of work and materials, the choice seems to lie among three possible tests. First, the transaction may be seen in substance or essence as (p. 64) one or the other; secondly, a comparative value test may be applied to determine whether the goods or the labour have the greater financial value; or thirdly, the transaction may be seen as a sale of goods contract if the property in some goods is conveyed and these goods are not wholly incidental to the transaction. Drawing the line between sale of goods and work and materials has in the past been distorted in favour of the latter by the judicial desire in some cases to avoid the old writing requirement for sale of goods. In the current state of English law, it is impossible to say which test is predominant. The first has merit in allowing for judicial discretion; the second is easy to apply but is somewhat mechanistic; but the third, also easy to apply, is truer to the spirit of sale of goods transactions and therefore is to be preferred.
Substance of the transaction.
2.59 In Lee v Griffin,261 the plaintiff dentist contracted to prepare two sets of false teeth. When his patient died before payment, her executor, citing the absence of writing, declined to pay. The contract was held to be one of sale of goods and thus unenforceable. Blackburn J purportedly applied a substance test, but considered it satisfied if the property in goods was transferred by one party to the other. The breadth of his approach is evident in the example he gives of the sculptor who, despite all his art and labour,262 is a seller of the statue he makes. The comparative value test was firmly rejected by the court,263 which also excluded from the category of sale supplies of collateral goods, such as the paper used by an attorney for an opinion and the book produced by the printer.264 It is hard to see why these are excluded by the letter of the test applied by Blackburn J, who was plainly yielding to the imperative of an impressionistic judgment guided by some sense of substance.
2.60 The leading modern statement of the law, Robinson v Graves,265 concerned a contract to paint a portrait of the defendant’s future wife, which was held to be one of work and materials. The reasoning is unpersuasive and the court is unsure whether it is applying or departing from Lee v Griffin,266 a case hard to distinguish on its facts. Some emphasis was placed on the degree of co-operation required of the sitter as tending towards work and materials, but the same could be said of a patient whose mouth is modelled for dentures. The core of the decision in Robinson, however, was that a contract was in substance one for work and materials where the value of the skill well exceeded that of the accompanying materials.267 This pragmatic blend of language accepted and rejected in Lee v Griffin is unproductive of precision and encourages the search for differences of degree between, for example, a photographer who produces quick passport photographs268 and one who prints portraits, or between a society painter and a street artist. (p. 65) In defence of Robinson, however, the court seemed unwilling to allow an unconscientious contract-breaker to put up the defence of non-compliance with the sale of goods writing requirement.
Materials supplied by customer.
2.61 A particular difficulty along the line between work and materials and sale of goods occurs in those cases where materials are supplied by a customer to be made up into a new product. The supply of the new product by the manufacturer is unlikely to be treated as a sale of goods if no goods of the manufacturer are used in the process.269 The position is more complicated if the manufacturer’s own goods are added to the customer’s. There is support for the view that such a contract is one of sale,270 but this conclusion would be unattainable if the customer never intended to convey the property in his materials to the manufacturer and the preponderance of the materials came from the customer rather than the manufacturer. In this case, the manufacturer’s materials would, under the rule of accession, vest in the customer once they were irrevocably attached to the customer’s materials271 and there would be nothing to convey to the customer.
2.62 To a large extent, the repeal of the writing requirement has robbed this issue of any practical significance. Even before the enactment of the Supply of Goods and Services Act 1982, the House of Lords in Young & Marten Ltd v McManus Childs Ltd272 was prepared to extend by analogy implied terms of fitness and quality in the Sale of Goods Act to related transactions, since it would be invidious for the strength of warranty rights to be determined by the side of the line on which a transaction fell.273 In the Canadian case of Borek v Hooper,274 a painting was commissioned to fill a particular space in the purchaser’s home. The painting cracked and the court, ruling in favour of the purchaser, applied a common law warranty of fitness for purpose, not to the painting as such, but to the materials used. It is unlikely that the Supply of Goods and Services Act 1982 would permit such a distinction between the ingredients and the final product, but it would probably be immaterial in most cases. Modern legislation also enacts a standard of due care for the supply of services275 so that, whilst the line between sale of goods and work and materials may not be important for warranty reasons,276 the line between services and goods will be.277
2.63 Where goods are supplied in return for goods, the transaction is one of barter (or exchange).278 A similar conclusion follows where goods are exchanged for labour279 or for some consideration other than a money consideration. The absence of a money consideration means it is not a sale of goods and so the rules governing actions for the price will not apply.280 Extending these rules by analogy will not assist a plaintiff if a liquidated money value cannot be assigned to the undelivered goods. It is sometimes possible to construe a barter as back-to-back sales with a mutual set-off of the prices owed, but this may only be done if a cash-value can be assigned to the subject matter of the transaction.281 In some running account agreements, the periodic striking of a settlement figure should give the supplier in credit a debt action.282 Some transactions may be analysed as requiring the recipient of goods to pay cash subject to an option to supply goods instead.283 This inference will be a likely one if a cash price is first agreed before the buyer is given the option.284
2.64 Trade-in agreements, as well as the similar promotional agreements under which money and vouchers are supplied for goods, merit a separate mention. Lord Reid was of the view that the party giving the mixed consideration in a promotional transaction was not a buyer of goods,285 but the Act does not require an exclusively money consideration. If the seller’s consideration (goods) may be leavened with some labour, it ought to follow that the buyer’s consideration (money) may be supplemented with some goods. Suppose the seller of a new car wishes to sue for the price a defaulting buyer who agreed to pay with cash and a trade-in. This should be permissible if a price was agreed and the buyer given the option, as is usually the case, of paying a stated amount in the form of the trade-in.286 A buyer who defaults is thereby not exercising his option to pay part of the price in kind. A further complex problem in trade-in transactions is whether both parties deal in the dual capacities (p. 67) of buyer and seller. The difficulty here is that no money at all moves from the seller to the trade-in buyer. If these transactions can be classified as two-way sales, the dealer will be entitled to the benefit of whatever implied terms might be available if he were the buyer of the trade-in vehicle. The liability of trade sellers being greater than private sellers,287 this question is more significant if the trade-in supplier is also in the motor trade. It should not unduly strain matters to regard both parties as sellers under back-to-back transactions with a set-off and outstanding cash balance.288
Meaning of bailment.
2.65 Bailment is a transaction in which possession of goods is transferred from bailor to bailee, whether for a fixed, determinable, or indeterminate term, on the understanding that the goods will be returned at the end of the term, or transferred to or held on behalf of someone else at the bailor’s direction.289 In those cases where the bailee pays hire for the enjoyment of the goods, it is his acquisition of only a special property that distinguishes the bailment from a sale.290 The distinction between sale and bailment fades away in practical terms, where depreciating goods are hired to a bailee for the rest of their useful life, or under that form of bailment called hire purchase where a purchase option is given to the bailee.291 Bailment is usually a consensual relationship292 which in most cases flows from a contract between bailor and bailee, though in some cases it is gratuitous.293 Sometimes the bailor will pay the bailee for his services in relation to the goods; sometimes the bailee will pay the bailor for his enjoyment of them. It is the latter of these cases that approximates more to a sale of goods agreement, from which it is to be distinguished by the transfer under the bailment of only a special property in the goods in return for a sum called hire, representing not the value of the goods themselves but the value of their use.
Similarity to sale.
2.66 Hire purchase294 is functionally similar to conditional sale, a transaction plainly covered by the Sale of Goods Act.295 Both transactions permit the possession and enjoyment of goods on credit in the expectation of paying the contract price over time. Hire (p. 68) purchase developed in the furtherance of statutory avoidance. As a credit-granting transaction, permitting the hirer to enjoy goods before paying for them in full, hire purchase was distinguishable from a security bill of sale and free from bills of sale legislation prescribing stiff formalities and registration procedures.296 Furthermore, it was not a type of loan, and so the bailor finance companies were free from the Moneylenders Acts. Hire purchase was useful to finance companies, too, in that the hirer in possession was not treated as someone who had ‘agreed to buy’ the goods,297 so as to have the power to pass a good title to a third-party purchaser under the buyer in possession exception298 to the rule of nemo dat quod non habet.299 In contrast, a conditional purchaser was someone who had agreed to buy and who therefore had that disposing power.300
Sham and artificial transactions.
2.67 Unlike hire purchase, a security bill of sale (or chattel mortgage) involves the sale of goods to a lender defeasible upon the repayment of the loan.301 Although the law condones artificial transactions, so long as the parties to the transaction do what they say they are doing,302 it does not permit parties to enter into wholly fictitious ‘sham’ transactions.303 For that reason, transactions taking the form of a sale to a financier with a bailment back on hire purchase terms have often in the past been struck down as unregistered security bills of sale,304 perhaps with greater alacrity than now would be the case. In contrast, hire purchase is an agreement based on the acquisition of goods by the hirer and structured around the payment of hire for the goods in instalments, with an option to purchase, exercisable for usually a nominal sum, after all the instalments of hire have been paid.305 As the agreement proceeds to term so that, as very often is the case, the value of the goods exceeds the amount of hire not yet paid, it makes commercial sense to acquire the general property in the goods for a nominal sum when the last instalment of hire has been paid.306 Nevertheless, no matter how irresistible may be the (p. 69) economic argument in favour of exercising the option to purchase as the final instalment draws near, the hirer is still not, and never does become, someone who has ‘agreed to buy’ the goods.307 Even the exercise of the option itself, which brings about an instant sale,308 cannot import any prior undertaking to buy. Until special hire purchase legislation was introduced many decades after the development of hire purchase,309 the bailor’s title was secure against good faith purchasers from the hirer.310
2.68 The nature of hire purchase was settled in the early cases. Nevertheless, some further attention was given to its nature in Forthright Finance Ltd v Carlyle Finance Ltd, where the contract required the ‘hirer’ to pay all of the instalments and thus deemed him to have exercised a hirer’s option to purchase, ‘unless [he] has told the owner before that time that such is not the case’. Despite the quit option given to the ‘hirer’, criticized as ‘specious’, the agreement was held to be one of conditional sale.311 It can fairly be said that there is a commitment to purchase under a contract of this nature, so long as the quit option has not been exercised. When the argument was consequently pressed in another case312 that a supposed hire-purchase contract should be treated as one of conditional sale where the option was for a nominal amount, the court rejected it. The judge, referring to Forthright Finance, said: ‘The peculiar feature there was that, instead of there being an option to purchase, there is a clause which deemed the option to have been exercised if the payments were made and the hirer there had to indicate that he was not going to take the goods in order to prevent that happening. That is not the case in the instant case, which has the standard option to purchase, albeit for a nominal amount.’ The approach taken in earlier hire purchase cases was therefore reaffirmed and Forthright Finance was not taken to have altered the legal understanding of hire purchase contracts.
Meaning of pledge.
2.69 Pledge is a form of bailment313 in which possession of goods or documents of title to goods is granted to a pledgee as security for a loan.314 This loan is not comparable to the price paid by a buyer since, unlike the payments made by a hirer, it is not related to the use and enjoyment of the pledge itself by the pledgee. The pledgee has only a special property;315 consequently, the analogy with sale is slender. At common law, the pledgee may sell the pledge (p. 70) if the pledgor defaults on repayment of the loan, though any surplus realized will have to be turned over to the pledgor.316 The general property, therefore, never passes to the pledgee.
Sale or Return and Sale on Approval
2.70 A more compelling analogy with sale of goods is afforded by those bailments called sale or return and sale on approval in which the bailee obtains possession with an option to buy the goods at a stated price, no hire being paid in the meantime. In a sale or return, a potential buyer acquires the goods with an eye to their resale, a common arrangement in certain businesses such as bookselling. Sale on approval refers to the acquisition of goods for the personal enjoyment of the potential buyer, a transaction once familiar to stamp-collecting juveniles. Legislation hostile to the sending of unsolicited goods317 has reduced certain types of sales on approval.
Formation of contract.
2.71 Though they may ripen into a sale and although the parties may be subject to an innominate contract in the meantime,318 in neither type of bailment has the bailee ‘bought or agreed to buy’ the goods.319 The Sale of Goods Act deals with sale or return and sale on approval in section 18, Rule 4, which lays down certain rules for the formation of a contract of sale pursuant to the option given by the bailor.320 Upon conclusion of the contract, the seller’s property passes immediately to the buyer, which is consistent with the presumptive rule that the property in specific goods passes to the buyer at the contract date. These bailments should be distinguished from those defeasible sales where the buyer is entitled to return the goods and annul the sale within certain limits, including time. Such transactions are regular sales unless and until the buyer’s divesting option is exercised.321 The option to return the goods may involve placing the interim risk of loss on the buyer,322 but the presumptive rule seems to put the risk on the seller in the absence of special language in the agreement.323
Extended rejection rights.
2.72 Defeasible sales of this type may be barely distinguishable from sales where the buyer is given wider rights of rejection than those arising under the Act.324 Suppose a buyer rejects goods under a provision in the contract allowing him to do so if he is not satisfied with the goods. As a matter of construction, it may be difficult to determine whether the buyer determines the contract because of a discharging breach by the seller or pursuant to a non-promissory condition, his own lack of satisfaction. Only in the former case will the buyer be entitled to damages. The further the buyer goes beyond the entitlement given by the Act, it is submitted, the more should a court tend to construe as non-promissory the event giving rise to the right of rejection.
2.73 The relation between sale and bailment emerges in a number of cases, mainly from the Commonwealth, involving grain stored for a period in grain elevators prior to one of three events: its eventual return to the depositor; the return of an equivalent quantity and standard of grain;325 and the sale of the grain to the elevator company.326 The depositor’s objective will normally be the sale of the grain, though he may simply want it stored or treated prior to its use for seeding and animal feed purposes. If the producer sells the grain, this may occur some time after its initial deposit in the elevator.
Substituting the goods.
2.74 Where under the agreement the grain is deposited in a special bin, isolated from other depositors’ grain, the contract gives rise to a bailment,327 even though a later sale may be contemplated. The general property in the grain remains in the bailor. Until recently,328 it could have been said with some confidence that grain commingled as part of a common stock vests in the elevator company, whose obligation to return an equivalent amount under what is a contract of barter is in the nature of a debt obligation and not a proprietary matter. Unlike Roman law, where the real contract of mutuum constituted a loan of fungibles for consumption,329 the common law of bailment required a return of the very goods bailed, in their original or altered form.330 Consequently, a loan of cattle, to be returned, either as the original cattle or their comparable substitutes, with a number of their young, was held not to be a bailment.331
Bailment and agreed mixing.
2.75 In Mercer v Craven Grain Storage Co. Ltd,332 however, the House of Lords, in a summary judgment appeal, concluded in abbreviated terms and without considering prior authority that a bailment survived an agreed mixing where the bailee had authority to extract goods from the common stock and substitute other goods for them.333 In that case, the bailors sometimes removed their grain from storage to execute sale transactions and sometimes ordered the bailee to deliver directly to buyers. The case concerned an action in conversion334 by the bailors against the bailee, which had exceeded (p. 72) its authority to sell by disposing of grain for less than the minimum stipulated price and was in no financial position to pay the proceeds to the bailor. Bailment arrangements of the sort described would involve the treatment of the various bailors as tenants in common of the commingled goods, liable to share rateably the losses arising from any shrinkage in the bulk. A particular bailor’s percentage entitlement, moreover, in the case of a fluctuating common stock, would in principle have to be measured against the lowest intermediate balance existing after the date of deposit.335 This in turn would involve, in a case where the bailors came in at different intervals, a running computation of their various entitlements as each addition and withdrawal were made, unless, as in complex financial transactions, the view were taken that one single, final calculation should be made336 at the critical point, usually the commencement of insolvency proceedings. Subject to that, any reduction in the stock after the time of the deposit would be shared by the bailor with other interested parties, including the bailee, and a wrongdoing bailee with a proprietary interest in the stock would have the reduction charged in full, and not rateably, against his interest.337
Tenancy in common.
2.76 The principle of tenancy in common, successfully pressed by the bailors in Mercer, had earlier been invoked sparingly by the common law,338 and was seemingly inconsistent with the bailee having the freedom to deal beneficially with the common stock.339 Tenancy in common was to be found where the owner of goods was not privy to their mixing by a bailee, which might occur accidentally340 or through the actions of a wrongdoer, often a bailee.341 Furthermore, where the depositor knew no more than that his goods might be mixed with those of an identical kind belonging to others, the transaction gave rise to a tenancy in common between this depositor and others on the ground that the depositor had not done enough to surrender his property interest in full.342 In Re Stapylton Fletcher Ltd,343 certain buyers of vintage wine authorized the seller to hold their wine in the seller’s different capacity as warehouseman. The goods having been ascertained,344 the buyers’ property in the wine survived the removal of the wines from the seller’s trading stacks and its storage commingled with the wines of others in warehouse stacks. Although there was nothing in the warehouse stacks to indicate ownership of particular bottles or cases, the seller’s meticulous stock record was valuable evidence of an intention that the buyers were not to be divested of property rights by the fact of commingling in this way. In addition to Mercer, tenancy in common has in effect been incorporated in modern reforms of the Sale of Goods Act,345 which could give tenancy in common an added impetus at common law and outside the terms of the Act itself.
2.77 There seems no good reason why principles of bailment and tenancy in common might not be combined. Goods are commonly stored in bulk prior to sale, with no intention on the part of any of the depositors to transfer the general property in their goods to the storage company.346 If the storage company is given an authority to dispose of the goods, there seems no reason why the conferment of this authority should expropriate the depositor. Where goods have been delivered on retention of title terms, the grant of an authority or permission to the buyer to sub-sell the goods does not serve to expropriate the seller.347 Moreover, if the storage company as agent were given authority to acquire substitute goods and replenish the common stock, there is no reason why this act of feeding the common stock should not serve to transfer a proprietary interest to the depositor.348
2.78 It is not clear to what extent the inference of tenancy in common at common law is dependent upon intention, whether it is express349 or implied.350 Consequently, it is difficult to know how far the Mercer decision may be taken outside its immediate facts, given the brief treatment that the subject received in the House of Lords. Assuming the relevance of an intention that the depositor should be a tenant in common or should retain a proprietary entitlement, and that a bailment leading to a tenancy in common will not be inferred from the simple mixing of goods with the consent of the depositor, complex problems could arise from multiple deposits of different types. If there are a number of depositors, only some of whom have the requisite intention, then the warehouse would presumably stand in for those who fail to show the requisite intention to retain an interest by way of tenancy in common.
2.79 The practical problems arising out of commingled bailment cases concern principally the risk of loss, by fire for example, and the insolvency of the bailee. Where the general property is transferred to the warehouse or elevator company, as would happen in the case of an exchange or sale of the goods, the risk of loss will pass to the transferee but the risk of insolvency will be assumed by the transferor. The position is reversed if there is a bailment. It is probably easier to insure against fire than someone else’s insolvency, and the spate of insolvencies in recent times means that developments like the Mercer case are a source of encouragement to those depositing goods for storage and similar purposes.351 Tenancy in (p. 74) common, on the other hand, is not needed to effectuate sales by the bailor of goods that have been deposited in a common stock. Whether the bailor has a surviving proprietary right or not, the consent and cooperation of the bailee in delivering the goods to the buyer, in the process transferring the general property in the goods to the buyer, should suffice for the bailor selling the goods to have the right to sell them as required by section 12 of the Sale of Goods Act.352 There is no need for the bailee to be a party to the contract of sale or for the bailee to be more than a ministerial agent in assisting performance of the contract.
Gift and contract.
2.80 Unlike the civil law, the common law does not treat a gift as a species of contract. Rather, it is a gratuitous conveyance of the general property complete upon delivery,353 coupled with an intention on the donor’s part to vest the general property in the donee. Neither at common law nor under the statute does the donor owe duties in respect of title, description, satisfactory quality, or fitness.354 A promise to give, unless made by way of deed,355 is unenforceable at common law for lack of consideration. Furthermore, equity will not perfect an imperfect gift and so will not intervene by, for example, inferring a fictitious trust in favour of the donee.356
Goods with gifts.
2.81 The distinction between gift and sale emerges under certain promotional schemes where the buyer obtains a ‘gift’ with the contract goods. Esso Petroleum Co. Ltd v Customs and Excise Commissioners357 involved the supply of coins celebrating a sporting event with the purchase of a minimum quantity of petrol. The question was whether the coins had been produced for ‘general sale’, in which case their supply would attract purchase tax. The various analytical possibilities were that the coins were the subject of a gift, or were supplied under an innominate collateral contract separate from the sale of the petrol, or were sold to the customer together with the petrol for the same money consideration. On the first possibility, tax could not be levied in the absence of any contractual obligation relating to the coins. Nor could it be levied on the second possibility, since the customer’s consideration, entry into the main contract of sale, was not itself a money consideration, which meant that the coins had not been sold. Only on the third possibility would tax be payable. By a majority,358 the House of Lords held that tax was not payable, the majority of four being equally divided between the first two possibilities.359 It is submitted that the court should clearly (p. 75) have preferred the second. The first hypothesis would not meet the legitimate complaints of qualifying customers denied the coins after buying the petrol, and oil companies are not benevolent institutions. The third possibility was rightly rejected: the garages were seeking to expand their petrol sales, not to diversify their trading activities.
Buyer or agent.
2.82 It may be uncertain whether goods are delivered to a recipient in his capacity as buyer or as agent on behalf of the remitting principal. The classification of a relationship as one of agency or of sale depends upon the construction of the underlying agreement and is therefore a question of law.360 There are various reasons why classifying the relationship may be important, including whether the recipient is entitled to the protection afforded to commercial agents upon the termination of a commercial agency.361 A buyer may wish to rescind a contract for a fraudulent misrepresentation committed by someone further up the distribution chain, which is possible if that person was the undisclosed principal of the apparent seller but not otherwise.362 Or a problem of title transfer may arise in which it is important to know in what capacity a person is in possession of goods.363 In construing the agreement, a court, though guided by the label chosen by the parties, will not be bound by their characterization of the relationship. Parties’ conduct is more important than what they say.364 Where a contract described the plaintiffs as ‘sole selling agents’ of the defendants’ bricks, the price to be paid by them not being fixed but settled at 90 per cent of the retail price paid by builder customers, the conclusion was that the agent was really a buyer.365 Nevertheless, despite the relationship between the parties being a question of substance rather than form, the difficulty of drawing the line between sale and agency ensures that, sham transactions apart, the description by the parties of their own relationship will play an important part in the court’s classification of the relationship.366
2.83 Subject to the parties’ own description of their relationship, courts are guided by the circumstances of the case in classifying that relationship,367 but not all the circumstances are helpful. Agents establish privity of contract between their customers and their principals; this is a consequence and not a diagnostic test of agency.368 A similar (p. 76) case is that of the person asked to procure goods for another at a price not exceeding a stated figure. If that person is an agent, he owes his principal a duty of diligence to acquire the goods as cheaply as possible, accounting for any savings made.369 Since any such duty to account will be consequent on the relationship being one of sale or agency, the existence of the duty cannot be a diagnostic tool. Any relevant circumstances considered will have to be weighed, which lends an unpredictable character to the law. Perhaps the most helpful indication of agency is the degree of control exercised by one party over the activities of another,370 though in certain cases, as where a manufacturer wishes to preserve the integrity of its distribution network, sellers may have considerable control over buyers.371 Control may take the form of requiring the recipient of goods to disclose the names of his customers and account for sums received from them, which points strongly towards agency.372 A close integration of two businesses, common with exclusive distributorships and output and requirements contracts, will not necessarily influence judicial interpretation in favour of agency.373 The freedom of a recipient of goods to determine the date of payment and the amount of the price when passing the goods on, whilst having to pay the consignor a fixed price and at a fixed date, is indicative but not determinative of the relationship between consignor and recipient being one of sale.374 Indeed, it has been stated that someone may be an agent even if he is allowed to retain any surplus over a minimum sale figure.375 If a person receiving goods is paid a pre-arranged commission376 or percentage of the mark-up instead of being exposed to the market with its advantages and disadvantages, this points towards agency.377 Likewise if he need not pay for them until paid in turn by his customer.378 If the recipient of goods is to be responsible for their fitness and quality to the next person in the distribution chain, this is a factor pointing towards sale.379 It is quite possible for a court to conclude that a relationship of agency arises between consignor and recipient, but that the agent enters into separate collateral contracts with principal and third party containing duties that themselves are not indicative of an agency relationship.380 Lastly, a reservation of title clause in a contract requiring a buyer to hold the goods as a fiduciary agent should not be construed so that the buyer resells the goods as agent for the seller, if the commercial expectations of the parties are that the seller will not be liable to the sub-buyer on any contracts made by the buyer.381
Form of security agreement.
2.84 Certain security agreements borrow the form of a contract of sale. Though similar in economic purpose to a conditional sale, which certainly comes under the Sale of Goods Act, a security bill of sale is accorded special treatment precisely because it is a sale only in formal terms. It consists of an outright sale by a mortgagor who remains at all material times in possession of the goods, the conveyance to the mortgagee buyer being defeasible on the occurrence of a condition, namely the repayment in full of the loan made by mortgagee to mortgagor.382 Since the use and enjoyment of the goods by the mortgagee is not contemplated by the parties, it would be inappropriate to apply the provisions of the Act regarding, for example, delivery, quality, fitness, and damages.383 Hence section 62(4) of the Act provides: ‘The provisions of this Act about contracts of sale do not apply to a contract in the form of a contract of sale which is intended to operate by way of mortgage, charge, pledge, or other security.’
Limited application of Act.
2.85 The question is whether section 62(4) excludes the operation of the whole of the Act or only those provisions that operate between buyer and seller inter se. Excluded from the latter group would be those sections concerning title transfer arising out of a contract of sale but concerning disputes between parties who are not buyer and seller. If a conditional buyer is in principle a buyer in possession under section 25 of the Act,384 and thus able to overreach the seller’s title when disposing of the goods to a good-faith transferee, it is difficult to see why the grantor of a security bill of sale should not be a seller left in possession of the goods by the buyer under section 24 with similar disposing powers.385 Both conditional sales and security bills may be used to acquire goods on financed terms and both pose the risk of deception of third parties by the party given or left in possession by the owner of the goods. Section 62(4) can be sensibly confined to the terms of the contract of sale so as not to deprive of disposing power the grantor of the bill. Further, had the draftsman sought to exclude the whole Act, it would have been easy enough to say just that by omitting the words ‘about contracts of sale’.
2.86 The question of sale or security sometimes arises too in respect of title-based schemes that serve as security whilst retaining the form of sale, for example, a sale of goods followed by a resale or leaseback. The question that often arises in such transactions is whether the transaction is a disguised charge void for want of registration as a company charge.386 A sale and resale arrangement was struck down for this reason in Re Curtain Dream plc,387 because the documents as drafted made reference to interest and a credit line. Furthermore, the link between initial sale and resale, the latter having to be completed at ninety days, was so pronounced that the seller was seen as retaining an equity of redemption in the goods that formed the subject matter of the transaction. It was never contemplated that the buyer would ever take possession of the goods, and the original seller remained in possession at all times under the terms of an agreement to repurchase, under (p. 78) which the interests of the reseller out of possession were protected by a reservation of title clause. On one view, as long as the language is clear and the parties follow the steps laid down in the documentation for a sale and a resale, a transaction of this nature will be recognized. Nevertheless, a transaction built up as a sale followed by an automatic resale if a prescribed condition is met (payment of the enhanced repurchase price) looks too much like a mortgage (‘once a mortgage, always a mortgage’) for this conclusion to be safely reached.
1 Discussed at para. 2.50.
3 So called because rights in them cannot physically be vindicated by taking possession and so depend upon legal proceedings. See Torkington v Magee  2 KB 427, 430. Lord Blackburn said the expression extended to ‘all personal chattels that are not in possession’: Colonial Bank v Whinney (1886) 11 App. Cas. 426, 439–40.
4 Hard to classify as a thing in possession or a thing in action: see M. Bridge, Personal Property Law (3rd edn, OUP, 2002), 9–10; M. Bridge, L. Gullifer, G. McMeel and S. Worthington, The Law of Personal Property (Sweet & Maxwell, 2013), paras 1-016 et seq.
5 For the simplified definition of ‘goods’ in the Consumer Rights Bill, see cl. 2(7). The expression ‘goods’ is used and defined in a large number of statutes with divergent purposes. The definition in the Fair Trading Act 1973, s. 137(2), is especially wide in including ‘buildings and other structures’. Decisions on the meaning of goods under such statutes must therefore be approached with some caution.
8 For ships see Sirius Shipping Corpn v The Ship Sunrise  NSWSC 398; cf. Hooper v Gumm (1867) 2 Ch. App. 282, 290 (Turner LJ). Ships are, however, excluded by the Vienna Convention on the International Sale of Goods 1980, Art. 2(e).
20 Parker v Staniland (1809) 11 East 362; Sjt. Williams’s notes to Duppo v Mayo (1670) 1 Wms. Saund. 275, 276 (6th edn, by E. V. Williams, 1845). These reports were edited on various occasions, and it is the last edition, subsequently incorporated in the English Reports, that is referred to here.
28 Evans v Roberts (1826) 5 B & C 829; Parker v Staniland (1809) 11 East 362; Warwick v Bruce (1813) 2 M & S 205; Jones v Flint (1839) 10 A & E 753; Sainsbury v Matthews (1838) 4 M & W 334; Sjt. Williams’s notes to Duppo v Mayo (1670) 1 Wms. Saund. 275. But see the inconsistent results in Rodwell v Phillips (1842) 9 M & W 501, and Emmerson v Heelis (1809) 2 Taunt. 38; also the result in Waddington v Briscoe (1801) 2 B & P 452, where the speculative nature of a contract for the supply of crops encouraged a disapproving court to deny the exemption from stamp duty accorded by the Stamp Act, 55 Geo. 3, cap. 184, to contracts for the sale of goods, wares, and merchandise.
29 Evans v Roberts (1826) 5 B & C 829; Jones v Flint (1839) 10 A & E 753; Sainsbury v Matthews (1838) 4 M & W 334. This was also the view of Scrutton LJ in English Hop Growers Ltd v Dering  1 KB 174, 178–9.
34 But the expression is not a term of art in Scots law: Benjamin’s Sale of Goods (8th edn, by M. Bridge (ed), Sweet & Maxwell, 2010), para. 1-093; see also Boskabelle Ltd v Laird  ScotCS CSOH 173.
35 Chalmers used emblements and fructus industriales interchangeably: M. Chalmers, The Sale of Goods Act, 1893, Including the Factors Acts, 1889 & 1890 (4th edn, Butterworths, 1899), 117. But see the technical meaning of emblements in Benjamin’s Sale of Goods (8th edn, by M. Bridge (ed), Sweet & Maxwell, 2010), para. 1-093.
38  AC 771, not cited in Kursell  1 KB 298. See also Mohanlal Hargovind of Jubbulpore v Commissioner of Income Tax, Central Provinces and Berar, Nagpur  AC 521, applying the Kauri case.
49 Chelsea Yacht and Boat Co. Ltd v Pope  1 WLR 1941 (houseboat). But the occupation of a permanently moored boat may be treated as rateable occupation of the licensed riverbed for the purpose of paying rates: Rudd v Cinderella Rockerfellas Ltd  EWCA Civ 529;  1 WLR 2423.
58 See British Columbia Law Reform Commission, Report on the Statute of Frauds (1977), 11. Royalty agreements are treated, however, as involving neither a sale of goods nor a sale of land: Emerald Resources Ltd v Sterling Oil Properties Management Ltd (1969) 3 DLR (3d) 630, affd (1971) 15 DLR (3d) 356 (Can.).
60  1 KB 357; see also Mills v Stokman (1967) 116 CLR 61; McNeil v Corbett (1907) 39 SCR 608 (Can.); Saskatoon Sand & Gravel v Steve (1973) 40 DLR (3d) 248 (Can.) (gravel to be extracted by the buyer).
61 For a discussion of statutory entitlement ousting private sale, see Pfizer Corpn v Minister of Health  AC 512. A compulsory purchase of railway equipment was held not to be a sale for the purpose of income tax legislation in Kirkness v John Hudson & Co Ltd  AC 696.
62 Marleau v People’s Gas Supply Co. Ltd  4 DLR 433 (Can.); Bradshaw v Boothe’s Marine Ltd  2 OR 646 (Can.); Britvic Soft Drinks Ltd v Messer UK Ltd  1 Lloyd’s Rep 20. Gas is regarded as goods for the purpose of the Consumer Rights Bill 2013 (see Ch. 1, para. 1.05), and therefore the subject of a consumer supply of goods contract, ‘if and only if’ it ‘is put up for supply in a limited volume or set quantity’: cl. 2(7).
63 The supply of power (whether in the form of ‘gas, electricity or any other motive power’) was treated as occurring under a sale, and therefore attracting fitness for purpose liability, in Bentley Bros v Metcalfe & Co.  2 KB 548, though the court was uncertain about the precise definition of the subject matter. The supply of any form of power, heating, refrigeration or other cooling, or ventilation is treated as a supply of goods, rather than services for VAT purposes: Value Added Tax Act 1994, Sch. 4, para. 3.
65 There is no reference to the Sale of Goods Act, however, in Erie County Natural Gas and Fuel Co. Ltd v Carroll  AC 105, but this concerned an appeal from Ontario and Ontario did not codify the law of sale of goods until 1920; see also Tilbury Town Gas Co. Ltd v Maple City Oil and Gas Co. Ltd (1915) 35 OLR 186 (Can.).
68 The question whether a supply of electricity was covered by an exemption from a taxing clause provided for agreements ‘for or relating to the sale of goods’ was left open in County of Durham Electrical Power Distribution Co. v IRC  2 KB 604; another taxing clause was applicable. A county court has decided that electricity is not goods for the purpose of companies legislation (s. 108(4) of the Companies Act 1948): East Midlands Electricity Board v Grantham  CLY 271. The supply of electricity was treated as the supply of a service in Karnataka Power Transmission Corpn v Ashok Iron Works Pvt Ltd  INSC 252 (India). Electricity is excluded from the Vienna Convention on the International Sale of Goods 1980, Art. 2(f), and is differentiated from goods in the definition of ‘product’ in the Consumer Protection Act 1987, s. 1(2) (‘any goods or electricity’).
69 S. 1(2). Electricity is regarded as goods for the purpose of the Consumer Rights Bill 2013, and therefore the subject of a consumer supply of goods contract (see Ch. 1, para. 1.05), ‘if and only if’ it ‘is put up for supply in a limited volume or set quantity’: cl. 2(7).
70 See Ch. 9, paras 9.36 et seq.
75 R v Kelly  QB 621; Dobson v North Tyneside Health Authority  1 WLR 596; Doodeward v Spence (1908) 6 CLR 406; see also Williams v Williams (1882) 20 Ch. D 659, 662–63. These exceptional cases are referred to as examples of ‘work and skill’ in Re Organ Group Litigation  EWHC 644 (QB);  QB 506 at .
79 The New South Wales Human Tissue Act 1998 more specifically prohibits in s. 32 contracts to acquire sperm for a valuable consideration. For a discussion of damages where the sperm constituted assets that were part of the sale of a business, and did not attract a stated portion of the price, see Macourt v Clark  NSWCA 367.
86 e.g. Perlmutter v Beth David Hospital (1954) 123 NE 2d 792 (services not sale); Reilly v King County Central Blood Bank Inc. (1972) 492 P 2d 246 (sale); R. Magnusson, ‘Proprietary Rights in Human Tissue’ in N. E. Palmer and E. McKendrick (eds), Interests in Goods (2nd edn, LLP, 1998) (Magnusson), 46–8. For Australian authority on the question whether blood can be ‘goods’, see E v Australian Red Cross Society (1991) 105 ALR 53; PQ v Australian Red Cross Society  1 VR 19.
94 Discussed at paras 2.21–2.22.
95 For a discussion of whether common law implied terms, akin to those of fitness for purpose and satisfactory quality, ought to be implied in a loan agreement (funds frozen in a Swiss account), see North Shore Ventures Ltd v Anstead Holdings Inc  EWHC 1485 (Ch);  1 All ER (Comm) 81, revd in part on other grounds  EWCA Civ 230;  Ch 31.
96 Similarly, gaming chips in a casino are not goods: Lipkin Gorman v Karpnale Ltd  2 AC 548, 575. (The chips are simply a convenient mechanism for facilitating gambling with money. The property in the chips as such remains in the club, so that there is no question of a gambler buying the chips from the club when he obtains them for cash.)
97 Foreign exchange is explicitly excluded from the definition of ‘goods’ in UCC Art. 2-103(1)(k). For the purpose of now-repealed United Kingdom exchange control legislation, exchange transactions had to be distinguished from legitimate sale of goods transactions: see, e.g., Wilson Smithett & Cope Ltd v Terruzzi  QB 683. For the currency exclusion in the Consumer Rights Bill, see cl. 3(2)(a).
98 Moss v Hancock  2 QB 111 (restitution of stolen property, which would not be ordered if the sovereigns had passed in currency). See also statements about the difference between goods and currency in Banque Belge pour l’Etranger v Hambrouck  1 KB 321, 326, 329 (recovery of stolen money not yet passed into currency).
99 R v Vanek  2 OR 724 (Can.) (bags of silver coin under export licence statute). Naturally, the mischief of individual statutes will have an enlarging or diminishing effect on the scope of ‘goods’.
101 In the case of ‘chattels’ that are divisible, such a buyer may be assisted against uncooperative co-owners by an application to the court under s. 188 of the Law of Property Act 1925. The court’s power is broad enough for it to order a separation. In the case of indivisible chattels, the court’s order may take the form of a valuation of shares in the chattel.
103 Graff v Evans (1882) 8 QBD 373; Trebanog Working Men’s Club & Institute Ltd v Macdonald  1 KB 576. The light thrown on the civil aspect of sale of goods by tax, licensing, and criminal cases is often unilluminating.
107 Again, s. 16 should be excluded. See Law Commission, Sale of Goods Forming Part of a Bulk (Law Com. No. 215, 1993), paras 2.5–6; see Ch. 3, paras 3.51 et seq.
108 S. 2(c) of the 1995 Act amending s. 61(1) of the Sale of Goods Act; see further Ch. 3.
110 On this point, see Ch. 3, para. 3.60.
112 Toby Constructions Products Pty Ltd v Computer Bar (Sales) Pty Ltd  2 NSWLR 48. The Sale of Goods Act has been applied to the sale of a computer system: Rubicon Computer Systems Ltd v United Paints Ltd  2 TCLR 453; also to the sale of hard disk drives: Amstrad Plc v Seagate Technology Inc. (1987) 86 BLR 34. See generally S. Green and D. Saidov  JBL 161.
117 The definition of goods in the Supply of Goods and Services Act 1982, s. 18, is the same as that in the Sale of Goods Act 1979, s. 61(1). In SAM Business Systems Ltd v Hedley and Co.  EWHC 2733 (TCC);  1 All ER (Comm) 465, the court at  considered that a contract for the supply of developed (not bespoke) software was covered by the Supply of Goods and Services Act 1982 and attracted strict liability under s. 4. See also Astea (UK) Ltd v Time Group Ltd  EWHC 725 (TCC) at ;Kingsway Hall Hotel Ltd v Red Sky IT (Hounslow) Ltd  EWHC 965 (TCC); (2010) 26 Const. LJ 542 (front office software system dealt with under s. 4). Cf. Brocket v DSG Retail Ltd  CLY 3269 (county court applied the Sale of Goods Act to the supply of software packages).
120 In UsedSoft GmbH v Oracle International Corp  CJEU C-128/11 at –, the European Court of Justice asserted without reasons that the permanent supply of a computer program to a licensee user, whether in the form of a disk or by download, was a ‘first sale’ for the purpose of Art. 3(1) of Directive 2001/29/EC on the harmonization of certain aspects of copyright and related rights in the information society. English courts have focused on the question whether software is goods rather than on the question whether a licensing agreement falls outside the Sale of Goods Act or related legislation.
121 Discussed in Ch. 7. The Consumer Rights Bill 2013 (see Ch. 1, para. 1.05) contains provisions dealing with contracts for the provision of ‘digital content’, defined as ‘data which are produced and supplied in digital form’: cl. 2(8). The ‘trader’ (defined in cl. 2(2)) supplying digital content to a consumer (defined in cl. 2(3)) is bound to supply digital content that conforms to its contractual description and is of satisfactory quality and fit for purpose (cll. 36–8).
125 In cases decided under the Vienna Convention on the International Sale of Goods 1980, where the definition of goods cannot be assumed to be the same as it is under the Sale of Goods Act, the major question that has arisen in the case law is not whether liability should be strict or fault-based, nor whether the Convention goes beyond sales to embrace licensing agreements, but whether a contract for the sale of software consists preponderantly of the supply of labour or other services so as to fall outside the Convention under Art. 3. The cases seem to have settled on the view that standard software amounts to goods but that bespoke software may be the subject of a contract for the labour or other services. The Convention does not explicitly recognize a category of contracts corresponding to the work and materials contract of English law and therefore has nothing to say on the question whether software can be ‘materials’; see M. G. Bridge, International Sale of Goods (3rd edn, OUP, 2013), 486–7.
128 Daewoo Australia Pty Ltd v Suncorp-Metway Ltd  NSWSC 35; (2000) 33 ACSR 481 (Aust.) at ; see also The Halcyon the Great  1 WLR 515 (lawful ‘sale’ in foreign currency by Admiralty Marshall).
134 According to the Royal Mint at <http://www.royalmint.com>: ‘Legal tender has a very narrow and technical meaning in the settlement of debts. It means that a debtor cannot successfully be sued for non-payment if he pays into court in legal tender. It does not mean that any ordinary transaction has to take place in legal tender or only within the amount denominated by the legislation. Both parties are free to agree to accept any form of payment whether legal tender or otherwise according to their wishes. In order to comply with the very strict rules governing an actual legal tender it is necessary, for example, actually to offer the exact amount due because no change can be demanded.’
135 See Ch. 6, para. 6.91.
137 Robshaw Bros Ltd v Mayer  Ch. 125. It is questionable that it is a binding contract at all as opposed to a gift with a burden attached to it: see Thomas v Thomas (1842) 2 QB 851. A promise of land for the extinguishment of an antecedent debt was held not to be a sale in Simpson v Connolly  1 WLR 911.
140 Currie v Misa (1875) LR 10 Ex. 153, 163, reversed on other grounds (1876) 1 App. Cas. 554; Re Romer & Haslam  2 QB 286, 296, 300, 303; Royal Securities Corpn Ltd v Montreal Trust Co. (1966) 57 DLR (2d) 666.
146 e.g. Bitcoin, which shares with regular currencies the capacity to fluctuate in value and which faces a number of challenges if it is to function fully as money by, e.g., amounting to a secure store of value.
148 M. Bridge (1977) 28 NILQ 382. The expression ‘bank credit card’ signifies a card other than one that is issued by the seller itself as a means of identifying customers who have an existing account and as a convenient means of recording sales on credit.
149 This is a so-called three-party system. There is also a four-party system, whereby a so-called merchant-acquirer (who recruits the seller to the credit card network) is interposed for payment purposes between the seller and the card issuer. See the description in Office of Fair Trading v Lloyds TSB Bank Plc  EWHC 2600 (Comm) at ;  1 All ER 843; also Lancore Services Ltd v Barclays Bank Plc  EWHC 1264 (Ch);  1 CLC 1039.
153 A contract of sale of goods is defined in s.2(1) as one in which the seller agrees to transfer the property in goods to the buyer for a money consideration: it does not say that the price must come from the buyer. The buyer’s duty to pay (s. 27) may be ‘negatived or varied’ (s. 55(1)) so that the seller looks to a third party instead for payment. For the joint and several liability of that third party for misrepresentations and breaches of contract by the seller, see Consumer Credit Act 1974, ss. 56 and 75 and Ch. 8, paras 8.96–8.101.
154 See paras 1.41 et seq.
157 See para. 2.33.
158 On agency and secret profits, see Bowstead & Reynolds on Agency (19th edn, by P. Watts, Sweet & Maxwell, 2010), paras 6-084 et seq and Art. 49; Phipps v Boardman  2 AC 46; Keogh v Dalgety (1916) 22 CLR 402; Aas v Bentham  2 Ch. 144.
163 See R. J. A. Hooley, ‘Payment in a Cashless Society’, in B. A. K. Rider, The Realm of Company Law—a Collection of Papers in Honour of Professor Leonard Sealy (Kluwer Law International, 1998), discussing the relationships of the various parties involved in the ‘handling’ of electronic money, including participating banks and the originator of the electronic money.
167 Trading Stamps Act 1964. The Act was repealed by the Regulatory Reform (Trading Stamps) Order 2005, SI 2005 No. 871, subject to a saving provision in reg. 3. Previously, trading stamp transactions were excepted contracts under the Supply of Goods and Services Act 1982, but the Order removed the exception in the 1982 Act (ss. 1(2)(c), 6) so that the Act, otherwise applicable on its terms, could be applied to trading stamp transactions.
168 Similarly, gambling chips are not money: CHT Ltd v Ward  2 QB 63, 79 (‘People do not game in order to win chips; they game in order to win money. The chips are not money or money’s worth; they are mere counters or symbols used for the convenience of all concerned in the gaming’), approved in Lipkin Gorman v Karpnale Ltd  2 AC 548, 575. Yet a casino supplying gambling chips in return for a cheque is to be regarded as making a loan of the sum represented by the chips to the gambler: Crockfords Club Ltd v Mehta  1 WLR 355, 358. According to Crockfords, there is no sale of the chips (Henry J), but this is inconsistent with the decision of the Court of Appeal in Khodari v Tamimi  EWCA Civ 1109 at  (‘Crockfords...sold chips’);  CTLC 288.
170 When the Consumer Rights Bill 2013 is brought into force, contracts for the sale of goods to consumers will be referred to as sales contracts. A sales contract is one under which ‘a trader transfers or agrees to transfer ownership of goods to the consumer and the consumer pays or agrees to pay the price’: cl. 4(1). Cl. 4 for the most part tracks s. 2 of the Sale of Goods Act.
172 In criminal legislation, a narrow view of ‘sale’ or ‘sells’ is unlikely to be taken: see, e.g., Reading BC v Wm Morrisons Supermarkets plc  EWHC 1358 (Admin);  2 Cr App R 16 (s. 7 of the Children and Young Persons Act 1933).
177 Marquess of Bute v Barclays Bank Ltd  1 QB 202; Rodgers v Kennay (1846) 9 QB 594, 596; Jarvis v Williams  1 WLR 71; International Factors Ltd v Rodriguez  QB 351. Although the right to immediate possession will suffice for conversion, the better view is that possession at the time of the wrong is needed for trespass: F. Pollock and R. Wright, An Essay on Possession in the Common Law (Clarendon Press, 1888), 28; Penfold’s Wines Pty Ltd v Elliott (1946) 74 CLR 204; see also E. H. Warren (1936) 49 Harv LR 1084.
178 Lord v Price (1874) LR 9 Ex. 54. In Chinery v Viall (1860) 5 H & N 288, where sheep had been bought on credit and left in the possession of the seller qua agent, the buyer had title to sue without payment or tender of payment. In actions against the seller where the property has passed but the unpaid seller has a lien for the price, the unlawful action of the seller will terminate the lien and endow the buyer with the right to immediate possession so as to be able to sue the seller in conversion: Gurr v Cuthbert (1843) 12 LJ Ex. 309. A mere contractual expectancy of receiving goods is not equivalent to the right to immediate possession of them: see Jarvis v Williams  1 WLR 71. It may be, however, that the property need not have passed for a buyer in conversion to have the right to immediate possession: International Factors Ltd v Rodriguez  QB 351 (but see MCC Proceeds Inc v Lehman Bros International (Europe)  4 All ER 675).
179 The Winkfield  P 42; Wilson v Lombank Ltd  1 WLR 1294; Healing (Sales) Pty Ltd v Inglis Electrix Pty Ltd (1968) 121 CLR 584 (also a breach of the quiet possession warranty in s. 12(2)(b): Chinery v Viall (1860) 5 H & N 288.
180 Cohen v Roche  1 KB 169 (specific delivery); Behnke v Bede Shipping Co. Ltd  1 KB 649 (specific performance); see Ch. 11, paras 11.94 et seq.
184 As in the ‘subject to contract’ cases: Winn v Bull (1877) 7 Ch. D 29; Von Hatzfeldt-Wildenberg v Alexander  1 Ch. 284, 288–89; Astra Trust v Adams & Williams  1 Lloyd’s Rep 89; Thoresen & Co (Bangkok) Ltd v Fathom Marine Co. Ltd  EWHC 167 (Comm);  1 Lloyd’s Rep 622 (sale of boats: ‘subject details’ equivalent to subject to contract). See also Aberfoyle Plantations Ltd v Cheng  AC 115 (no contract of sale concluded when condition that vendor obtain renewal of seven leases was not fulfilled by the due date).
185 Pym v Campbell (1856) 6 E. & B. 379 (agreement to purchase share of invention did not come into force until a designated third party had approved the invention). See also Total Gas Marketing Ltd v Arco British Ltd  2 Lloyd’s Rep 209 (duties of delivery and acceptance under a gas supply agreement dependent upon the seller entering into an allocation agreement with third parties). On the implied obligation of parties to cooperate with respect to the occurrence of conditions, see Mackay v Dick (1881) 6 App. Cas. 251; A.V. Pound & Co. Ltd v M.W. Hardy & Co. Inc.  AC 588; Phoebus D. Kyprianou v Cyprus Textiles Ltd  2 Lloyd’s Rep 60, 64; North Sea Energy Holdings NV v Petroleum Authority of Thailand  2 Lloyd’s Rep 418, 430. On the notion of good faith, in the sense of fidelity to the parties’ bargain, as underlying the duty of cooperation, see Yam Seng Pte Ltd v International Trading Corp Ltd  EWHC 111 (QB) at . See also Cie Noga d’Importation et d’Exportation SA v Abacha (No. 3)  EWCA Civ 1142;  1 WLR 307 at – (Rix LJ) on the effect of non-cooperation by one party on the condition.
186 It was a common practice in the days of sail for certain overseas contracts to be concluded on ‘to arrive’ terms, according to which the contract was conditional upon the safe arrival of the ship in the port of discharge. Safe arrival would therefore be a condition precedent to further performance of the contract. The seller was not liable in the event of the goods failing to reach their destination and the buyer was not bound to pay the price; see Calcutta and Burmah Steam Navigation Co. v De Mattos (1863) 32 LJQB 322, affd (1864) 33 LJQB 214; Hollis Bros & Co. Ltd v White Sea Timber Trust Ltd  3 All ER 895. But the courts leant against interpreting contracts to exculpate the non-delivering seller: Fragano v Long (1825) 4 B & C 219.
188 Trans Trust SPRL v Danubian Trading Co. Ltd  2 QB 297. This is the sense in which the word is used in the sections dealing with the termination of the contract for breach and with the seller’s duties in respect of title, description, fitness, and quality of the goods.
190 See Ch. 3, para. 3.10.
193 As an example of a number of early sale of goods cases, see Lorymer v Smith (1822) 1 B & C 1, 2. The Statute of Frauds (Amendment) Act (Lord Tenterden’s Act) 1828, 9 Geo. IV, cap. 14, s. 7, reproduced in substance as s. 5(2) of the Sale of Goods Act, recognized the existence of such contracts as binding sale of goods agreements. For the exploded belief that such contracts were wagers on commodity prices, see Bryan v Lewis (1826) Ry. & Moo. 386. See also K. Llewellyn (1937) 37 Col. LR 341, 351 n. 21 (reference to sixteenth-century market regulations and the forbidden practice of forestalling).
195 Watts v Friend (1858) 10 B & C 446; Hale v Rawson (1858) 4 CB(NS) 85. For the buyer claiming a contractual right not to take future goods, see Messervey v Central Canada Canning Co.  3 WWR 365; Wingold v William Looser & Co. Ltd  1 DLR 429.
197 See Gebruder Metelmann GmbH & Co KG v NBR (London) Ltd  1 Lloyd’s Rep 614, 523 (explaining the operation of the terminal market in sugar); R. Pagnan & Fratelli v Schouten (NGJ) NV (The Filipinas I)  1 Lloyd’s Rep 349 (contract performed by matching resale and payment of price difference).
198 According to s. 10(1) of the Gambling Act 2005, a ‘bet’ within the meaning of the Act does not include a bet whose making or acceptance amounts to a ‘regulated activity’ within the meaning of s. 22 of the Financial Services and Markets Act 2000. For concerns that certain financial activities excluded from the 2000 Act might thereby be inadvertently caught by the 2005 Act, see Financial Markets Law Committee, Legal aspects of the potential problems for financial markets arising from the Gambling Act 2005 (Issue No. 138, 2008).
199 See M. G. Bridge, The International Sale of Goods (3rd edn, OUP, 2013), paras 1.49–50, discussing CR Sugar Trading Ltd v China National Sugar & Alcohol Group Corpn  1 Lloyd’s Rep 179. That case concerned the grant of put options for the sale of sugar on f.o.b. terms which the parties never intended should be exercised. It was held that the parties were carrying on an investment business for the purposes of the Financial Services Act 1986, which preceded the Financial Services and Markets Act 2000. The net cast by the latter statute is potentially very wide: it extends to futures, defined in a way that catches forward delivery contracts—‘[r]ights under a contract for the sale of a commodity or property of any description under which delivery is to be made at a future date’ (Sch. 2, para. 2).
200 See also s. 5(2) and para. 2.42.
202 But note that s. 5(1) appears to include, in the definition of existing goods, goods that the seller possesses but does not own. It may be that the seller of such goods may, prior to acquiring ownership from the third-party owner, divest himself of the whole of his entitlement in the goods on the proprietary transfer (see Ch. 5, para. 5.18). As soon as the seller acquires proprietary rights from the owner, the buyer’s title would then be automatically fed. The seller’s contractual responsibility in respect of that transfer, however, would fall under s. 12.
204 Lunn v Thornton (1845) 1 CB 379; Langton v Higgins (1859) 4 H & N 402. The same effect would be achieved if the buyer took possession under a licence to seize: Congreve v Evetts (1854) 10 Ex. 298; Hope v Hayley (1856) 5 E & B 830.
208 See Ch. 3, paras 3.36–3.38.
209 Ch. 3, paras 3.36–3.38; Re Wait  1 Ch. 606.
210 S. 61(1). This now includes an ‘undivided share, specified as a fraction or percentage, of goods identified and agreed on’ at the contract date: see the definition of specific goods in s. 61(1) of the Sale of Goods Act (as am. by s. 2(d) of the Sale of Goods (Amendment) Act 1995).
211 See AerCap Partners 1 Ltd v Avia Asset Management Ab.  EWHC 2431;  2 CLC 578, where aircraft engines were held not to be specific even though their serial numbers were listed in a schedule to the agreement.
216 M. Chalmers, The Sale of Goods Act, 1893, Including the Factors Acts, 1889 & 1890 (4th edn, Butterworths, 1899), 19–20 (‘five dozen of the ’74 champagne wine in my cellar’); see Howell v Coupland (1876) 1 QBD 258.
221 Re Wait  1 Ch. 606, 630 (Atkin LJ). On ascertainment, see Ch. 3, para. 3.30.
222 The distinction did not feature in the draft bill attached to the Ontario Law Reform Commission, Report on Sale of Goods (1979). A periphrastic reference to a hybrid of specific and ascertained goods emerges in the Canadian Uniform Sale of Goods Act, s. 92(2)(a) (‘a contract that requires for its performance goods identified when the contract is made or goods that have been subsequently identified to the contract with the consent of both parties’). See Alberta Institute of Law Research and Reform, The Uniform Sale of Goods Act 1982 (Report No. 38), 203–4.
226 See Ch. 7.
230 The Winkfield  P 42; Marquess of Bute v Barclays Bank Ltd  1 QB 202. According to F. Pollock and R. Wright, An Essay on Possession in the Common Law (Clarendon Press, 1888), 5, ‘so feeble and precarious was property without possession, or rather without possessory remedies...that Possession largely usurped not only the substance but the name of Property’. For the recovery in damages of the full value of the chattel by the bailee, see The Winkfield, above, and The Joanna Vatis  P 92. Owners out of possession were given a new remedy in the form of an action on the case for damage done to their reversionary interest in Mears v London and South Western Railway Co. Ltd (1862) 11 CB (NS) 850. The damage has to be done to the interest and not to the goods themselves: HSBC Rail (UK) Ltd v Network Rail Infrastructure Ltd  EWCA Civ 1437;  1 WLR 643.
232 Where the defendant had not interfered with the plaintiff’s possession and was not the plaintiff’s bailee: Leake v Loveday (1842) 4 M & G 972; Biddle v Bond (1865) 6 B & S 225. A defendant unable to plead the ius tertii might yet defend the action on the authority of the true owner: Biddle v Bond, above; Rogers Sons & Co. v Lambert & Co.  1 QB 318. He could also plead eviction by title paramount: Ross v Edwards (1895) 73 LT 100.
233 Waverley Borough Council v Fletcher  QB 334, 345: ‘[T]he English law of ownership and possession...is not a system of identifying absolute entitlement, but of priority of entitlement’ (Auld LJ). See also Costello v Chief Constable of Derbyshire  EWCA Civ 381;  1 WLR 1437.
236 See Ch. 11, paras 11.98–11.99; General and Finance Facilities Ltd v Cook’s Cars (Romford) Ltd  2 All ER 314. For a case where the court exercised its discretion in favour of the plaintiff, see Howard E. Perry & Co. Ltd v British Railways Board  1 WLR 1375 (‘Steel is gold’).
243 But a contract can still be one of sale if the buyer is charged with redeeming a carrier’s lien by paying outstanding freight or with redeeming a pledge advance: see Franklin v Neate (1844) 13 M&W 481.
244 The Odessa  AC 145 (terminology criticized); Nyberg v Handelaar  2 QB 202; Donald v Suckling (1866) LR 1 QB 585; O. W. Homes, The Common Law (Little Brown, 1881), 242. For the proprietary interest of a commercial pledgee of documents of title, see Burdick v Sewell (1884) 13 QBD 157, 174 (Bowen LJ dissenting), reversed sub nom. Sewell v Burdick (1884) 10 App. Cas. 74, 92–3 (Lord Blackburn); Harper v Godsell (1870) LR 5 QB 422, 426 (Blackburn J) (delivery warrants); The Orteric  AC 724.
245 e.g., the lease of goods for a period equal to their useful life. From an early date, a finder has been considered to hold the chattel under the terms of a deemed bailment, yet where the true owner is not to be found it is in practical terms indefeasible; see W. Laidlaw (1931) 16 Cornell LQ 286, 287. The same idea was implicit in the fourteenth-century extension of the writ of detinue to finders: J. Williams, Principles of the Law of Personal Property etc. (14th edn, by T. Cyprian Williams, Sweet & Maxwell, 1894), 16. See also Newman v Bourne and Hollingsworth (1915) 31 TLR 209.
246 ‘The purpose of the contract [of sale] is that the seller divests himself of all proprietary rights in the thing sold in favour of the buyer’: M. Chalmers, The Sale of Goods Act, 1893, Including the Factors Acts, 1889 & 1890 (4th edn, Butterworths, 1899), 3. Cf. Atkin LJ’s statement that ‘there can be no sale of goods at all which the seller has no right to sell’: Rowland v Divall  2 KB 500, 507, criticized in Ch. 5, para. 5.10 and in Kulkarni v Motor Credit (Davenham) Ltd  EWCA Civ 69 at –;  2 All ER (Comm) 1017 (Rix LJ). An example that tests the proposition in the text to the limit is the sale of the Mona Lisa, hanging on the walls of the Louvre, by a seller who is devoid of any proprietary interest in the painting and who has no expectation ever of acquiring such an interest. See also G. Battersby and A. D. Preston (1972) 35 MLR 268.
248 The Queen in Right of Canada v Saskatchewan Wheat Pool (1983) 143 DLR (3d) 9; Bhadauria v Board of Governors of Seneca College (1979) 105 DLR (3d) 707, revd (1981) 124 DLR (3d) 193. See also Bingham MR, referring to s. 3(2)(b) of the Unfair Contract Terms Act 1977, stating that it is ‘at least arguable that the common law could, if the letter of the statute does not apply, treat the clear intention of the legislature expressed in the statute as a platform for invalidating or restricting the operation of an oppressive clause in a situation of the present, very special, kind’: Timeload Ltd v British Telecommunications Plc  EMLR 459. A process of common law development beyond the words of the statute may lead to the expansion of tenancy in common principles boosted by statutory changes to the Sale of Goods Act (principally ss. 20A–B) introduced in the mid-1990s. See the discussion at paras 2.74 et seq of loans for consumption.
251 But the two are sometimes confused: Grouse Mountain Resorts Ltd v Bank of Montreal (1960) 25 DLR (2d) 371. For a discussion of the difference between services contracts and work and materials contracts, see Foster Wheeler Wood Group Engineering Ltd v Chevron UK Ltd (Unreported, 29 February 1996) at  et seq. (as to whether the doctrine of abatement applied to the contract).
253 Robinson v Graves  1 KB 579 (work and materials); Isaacs v Hardy (1884) Cab. & El. 287 (sale of goods). In such cases, the law tends towards work and materials: Dodd and Dodd v Wilson  2 All ER 691 (inoculation of cattle). But see Philip Head & Sons Ltd v Showfronts Ltd  1 Lloyd’s Rep 140 (installation of carpet).
254 Lee v Griffin (1861) 1 B & S 272 (sale); Samuels v Davis  1 KB 526 (sale). See also Marcel (Furriers) Ltd v Tapper  1 All ER 15 (sale of fur jacket made to order); Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd  VR 167 (sale of custom-built manufacturing dies); Lockett v A. and M. Charles Ltd  4 All ER 170; Gee v White Spot Ltd (1986) 7 BCLR (2d) 235 (Can.) (sale of restaurant meal).
256 Stewart v Reavell’s Garage  2 QB 545 (work and materials); G.H. Myers & Co. v Brent Cross Service Co.  1 KB 46 (work and materials); Sterling Engine Works v Red Deer Lumber Co. (1920) 51 DLR 509 (work and materials).
257 Anglo-Egyptian Navigation Co. v Rennie (1875) LR 10 CP 271 (work and materials). See also Clark v Bulmer (1843) 11 M & W 243 (installation of engine: work and materials); Fairbanks Soap Co. v Sheppard  1 SCR 314 (Can.) (building of machinery: work and materials); Wolfenden v Wilson (1873) 33 UCQB 442 (Can.: manufacture and installation of tombstone: sale sed quaere?).
258 It has been recognized that a transaction may be mixed: Hyundai Heavy Industries Co. Ltd v Papadopoulos  1 WLR 1129 (contract for sale of ship to be built contained features making it akin to work and materials and services contracts); Stocznia Gdanska SA v Latvian Shipping Co  1 WLR 574, 588–9. See also Pritchett & Gold v Currie  2 Ch. 515 (sale of storage battery later to be installed); Matheson v Meredith (1955) 1 DLR (2d) 332. Cf. H. Parsons (Livestock) Ltd v Uttley, Ingham & Co. Ltd  QB 791. But shipbuilding contracts have usually been treated as sale of goods contracts: Reid v Macbeth & Gray  AC 223; McDougall v Aeromarine of Emsworth Ltd  3 All ER 431.
260 But see Borek v Hooper (1994) 18 OR (2d) 470 (Can.), discussed at para. 2.62.
264 (1861) 1 B & S 272, 277–8. But see Canada Bank Note Engraving and Printing Co. v Toronto Railway Co. (1895) 21 OAR 462 (Can.) (printing of a special debenture form a sale of goods), purportedly applying Lee v Griffin (1861) 1 B & S 272.
269 One possibility is a contract for services, but the property in new goods vests under the specificatio rule in the manufacturer, so a work and materials contract (at least) ought to be required if the property is later to be transferred to the supplier of the materials.
272  1 AC 454. See also G.H. Myers & Co. v Brent Cross Service Co.  1 KB 46; Watson v Buckley Osborne Garrett & Co. Ltd  1 All ER 174; Stewart v Reavell’s Garage  2 QB 545; Hart v Bell Telephone Co. of Canada Ltd (1976) 26 OR (2d) 218 (Can.). Cf. Helicopter Sales (Australia) Pty Ltd v Rotor-Work Pty Ltd (1974) 132 CLR 1.
273 Lord Upjohn in Young & Marten  1 AC 454, 473 (‘most unsatisfactory, illogical, and indeed a severe blow to any idea of a coherent system of common law’). See also Samuels v Davis  KB 526, where the court made it very plain that, for the purpose of a dentist’s liability, it made no difference whether the contract was one of sale or one of work and materials.
276 The Supply of Goods and Services Act does not include provisions on the passing of property and rejection. In the latter case, the court in Jones v Gallagher  EWCA Civ 10;  1 Lloyd’s Rep 377 simply applied the rules in Sale of Goods Act, s. 35.
277 See Ch. 7.
278 Pearce v Brain  2 KB 310. The Sale of Goods Bill originally contained a provision applying its provisions mutatis mutandis to contracts of exchange, but this was deleted in the House of Commons Select Committee: M. Chalmers, The Sale of Goods Act, 1893, Including the Factors Acts, 1889 & 1890 (4th edn, Butterworths, 1899), 5. The Consumer Rights Bill 2013 incorporates, along with sales agreements, contracts for the ‘non-money transfer of goods’: cl. 7. The protection given to buyers in the form of the implied terms of title, description, satisfactory quality, fitness for purpose, and equality to sample apply also to non-money transfers: cll. 8 et seq.
279 See Doyle v East  1 WLR 1080 (land); Robshaw Bros Ltd v Mayer  Ch. 125. Cf. Koppel v Koppel  1 WLR 802 (where the passing of property rules in the Sale of Goods Act 1979 were applied to a contract for services in return for goods).
280 Harrison v Luke (1845) 14 M & W 139; W.J. Albutt & Co. v Riddell  4 DLR 111; R v Langley (1899) 31 OR 295 (Can.). Since the contract of exchange or barter is governed by s. 1 of the Supply of Goods and Services Act 1982 (‘a contract under which one person transfers or agrees to transfer the property in goods’), the implied terms of title, description, satisfactory quality, and fitness for purpose are to be found in that Act (ss. 2–4).
281 e.g., Aldridge v Johnson (1857) 7 E & B 855; Messenger v Greene  2 DLR 26 (goods exchanged at ‘regular prices’); Saxty v Wilkin (1843) 11 M & W 622; Hands v Burton (1808) 9 East 349; Flynn v Mackin & Mahon  IR 101; but see Davey v Paine Bros (Motors) Ltd  NZLR 1122 (explicable on apparent authority grounds).
283 South Australian Insurance Co. Ltd v Randell (1869) LR 3 PC 101 and similar cases discussed at paras 2.73 et seq.
286 See G.J. Dawson (Clapham) Ltd v Dutfield  2 All ER 232; see also Forsyth v Jervis (1816) 1 Stark 437. A trade-in was, however, treated as an exchange in Davey v Paine Bros (Motors) Ltd  NZLR 1122.
290 But see Motor Mart Ltd v Webb  NZLR 773, where the court treated a conditional sale agreement as a bailment: sed quaere? See also the reservation of title cases discussed in Ch. 3, paras 3.82 et seq.
291 The Consumer Rights Bill 2013 incorporates, along with sales agreements, contracts for the hire of goods and hire purchase agreements: cll. 5–6. The protection given to buyers in the form of the implied terms of title, description, satisfactory quality, fitness for purpose, and equality to sample apply also to consumer bailees under these agreements: cll. 8 et seq.
293 Despite attempts to fit it into a contract mould, it is submitted that this is the better rationalization, on the facts presented, of Bainbridge v Firmstone (1838) 8 A & E 743. See C. Davidge (1925) 41 LQR 433 and Sir F. Pollock’s sharp observation at (1925) 41 LQR 440.
295 Except in the case of s. 25(1) of the Act and conditional sale agreements as defined by the Consumer Credit Act: s. 25(2) of the Sale of Goods Act. The Consumer Credit Act 1974 introduces also, for regulatory purposes, the so-called ‘credit-sale agreement’(see s. 189(1)), but this has no significance for the purpose of the Sale of Goods Act.
299 See Ch. 5.
301 The transaction in Beckett v Tower Assets Co.  1 QB 1 was held not to be a chattel mortgage, where the lender first bought the goods at a friendly distress sale before returning the goods to the borrower on hire purchase terms. See also Manchester, Sheffield and Lincolnshire Railway Co. v North Central Wagon Co. (1888) 13 App. Cas. 554, 567–8; W.J. Albutt & Co. Ltd v Riddell  4 DLR 111; Re Estate of Smith & Hogan Ltd  SCR 661 (Can.).
302 e.g., Welsh Development Agency v Export Finance Co.  BCLC 148. This is what is meant in English law by the rule that the law looks at the substance of the transaction; see North Central Wagon Co. v Brailsford  1 WLR 1288. According to Lord Millett in Agnew v Commissioner of Inland Revenue  UKPC 28 at ;  2 AC 710, the court’s task is to construe the parties’ agreement in order to determine the rights and liabilities they have created. The court then, without paying any further regard to the parties’ intention, characterizes the transaction thus concluded in the light of those rights and duties.
304 See para. 2.67; Re Watson (1890) 25 QBD 27; Polsky v S and A Services  1 All ER 185; North Central Wagon Co. v Brailsford  1 WLR 1288; Stoneleigh Finance Ltd v Phillips  2 QB 537; Snook v West Riding Investments Ltd  1 QB 786.
306 Warman v Southern Counties Car Finance Corpn  2 KB 576, 582. In accordance with the economic purpose of the transaction, the hirer is usually liable to maintain the hire for a minimum period, having to face a minimum payments clause if desiring to withdraw from the agreement before that date. This minimum sum is a primary alternative to the hire that was agreed to be paid over the instalment period. See Associated Distributors Ltd v Hall  KB 83; Bridge v Campbell Discount Co. Ltd  AC 600. It is not a liquidated damages clause, and thus not open to scrutiny as a penalty. The rule against penalties applies only to secondary obligations liability: Export Credits Guarantee Department v Universal Oil Products Co.  1 WLR 399; Protector Endowment Loan & Annuity Co. v Grice (1880) 5 QBD 592; Wallingford v Directors, &c, of the Mutual Society (1880) 5 App. Cas. 685; Re Emerald Christmas Tree Co. (1979) 105 DLR (3d) 75. Cf. Oresundsvarvet Aktiebolag v Lemos (The Angelic Star)  1 Lloyd’s Rep 122 (no acceleration of future interest). Confined to the improper commutation of primary into secondary liability, the rule against penalties does not exist to police the fairness of contracts; see further Ch. 12, paras 12.10 et seq.
308 The sale option should qualify as a contract of sale of goods under s. 2(1) of the Sale of Goods Act (see Mountford v Scott  Ch. 258), and is a sale under s. 2(4) as opposed to an agreement to sell under s. 2(5).
314 H. Beale, M. Bridge, L. Gullifer, and E. Lomnicka, The Law of Security and Title-Based Financing (2nd edn, OUP, 2012), ch. 5; M. Bridge, L. Gullifer, G. McMeel, and S. Worthington, The Law of Personal Property (Sweet & Maxwell, 2013), paras 7.020 et seq.; Palmer on Bailment (3rd edn, Sweet & Maxwell, 2009), ch.22; E. I. Sykes and S. Walker, The Law of Securities (5th edn, Law Book Co., 1993).
316 Mathew v T.M. Sutton Ltd  1 WLR 1455 (pawnbroker as fiduciary); Ex p Hubbard (1886) 17 QBD 690, 698; Halliday v Holgate (1868) LR 3 Ex. 299; Burdick v Sewell (1884) 13 QBD 157, 174 (Bowen LJ). Pledge is described as a security halfway between a lien and a mortgage by Willes J in Halliday v Holgate (1868) LR 3 Ex. 299, 302. For the position governing that type of pledging known as pawnbroking, see the Consumer Credit Act 1974, ss. 114–121.
317 The Unsolicited Goods and Services Act 1971, as amended by the Unsolicited Goods and Services (Amendment) Act 1975 and partly repealed by the Consumer Protection (Distance Selling) Regulations 2000, SI 2000 No. 2334; see Ch. 1, paras 1.26 et seq.
320 See Ch. 3, paras 3.16 et seq.
326 The depositor may have a sale option; cf sale or return where the option is exercised by the buyer. Or the elevator company may exercise a purchase option on the producer’s failure to remove the grain or its equivalent amount by a certain date.
329 In Wincanton Ltd v P&O Trans European Ltd  CLC 962 at –, mutuum is treated as giving rise to a personal obligation to redeliver the equivalent thing, to be inferred generally in the case of consumables, but only where the contract so provides in the case of non-consumables.
330 Chapman Bros v Verco Bros and Co. Ltd (1933) 49 CLR 306; South Australian Insurance Co. Ltd v Randell (1869) LR 3 PC 101. See also Wincanton Ltd v P&O Trans European Ltd  CLC 962 at  and  (pallets delivered by A to B, thence, with A’s consent, by B to C); Palmer on Bailment (3rd edn, Sweet & Maxwell, 2009), para. 1-009: ‘What is necessary is that the goods themselves, whether in altered or original form, should be returnable and not merely some other goods of equivalent character or value. There must be a clear physical heredity between what has been delivered to the bailee and what must be returned.’
334 The principal point was whether the bailee had an arguable defence to the bailors’ claim that they had sold the grain without authority. Apart from this, the bailors, to succeed in conversion, would need to show a right to immediate possession stemming from their retained ownership.
337 L. Smith, The Law of Tracing (OUP, 1997), and see para.2.76. See also Mercer v Craven Grain Storage Ltd  CLC 328, 329: ‘The storage society was guilty of conversion if it allowed the mix to be so depleted by withdrawals that the balance remaining was not sufficient to satisfy the demands of the plaintiffs.’
341 Indian Oil Corpn v Greenstone Shipping SA  QB 345, departing from earlier dicta of Lord Moulton in F.S. Sandeman & Sons v Tyzack and Branfoot Steamship Co. Ltd  AC 680, penalizing the wrongdoer by vesting the whole of the commingled goods in the person whose goods were wrongfully mixed; see P. Matthews  CLP 159.
344 Under s. 16: discussed in Ch. 3, para. 3.30.
345 Ss. 20A–B, discussed in Ch. 3, paras 3.51 et seq. The expression tenancy in common is not expressly used in the Act but the proprietary rights in an identified bulk created by the legislation is a tenancy in common right.
347 See Ch. 3, para. 3.85.
348 If the storage company repurchases as agent, then the property in the goods might be transferred directly to the depositor under the contract of sale. That general property would survive as a tenancy in common entitlement from the point the goods are submerged in the common stock: Re Stapylton Fletcher Ltd  1 WLR 1181. Otherwise, if the storage company purchases the goods as a principal, the relationship between the depositor and storage company might be classified as one of sale, with the proceeds of the earlier sale, if not previously remitted to the depositor, being offset against the depositor’s duty to pay the price. Or it might be an innominate contract of the kind dealt with by the Supply of Goods and Services Act 1982, with the passing of property rules in the Sale of Goods Act brought in by way of analogy. The application of these rules by way of analogy might be the best explanation for why s. 18 Rule 1 of the Sale of Goods Act 1979 was applied to a contract for the transfer of goods in return for services: Koppel v Koppel  1 WLR 802.
351 The decision in Mercer v Craven Grain Storage Co. Ltd  CLC 328 invites a comparison with the securities market for fungible securities that are commonly transferred under a ‘repo’ (sale and repurchase) scheme. In a repo transaction, the enhanced repurchase price represents the equivalent of interest on the advance to the transferor made when the transferor (seller) transfers the securities under the sale leg of the transaction to the transferee (buyer). There is no expectation that the self-same securities will be returned to the transferor when the repurchase leg of the transaction takes place. Consequently, the seller contracts for the buyer’s personal obligation to resell the fungible equivalent of the securities sold on the repurchase leg. A repo transaction contemplates that the buyer might deplete altogether any holdings of those fungible securities and buy or borrow (under a securities lending agreement) fungible replacements at a later date to service the repurchase leg.
352 See Ch. 5, paras 5.02 et seq.
353 Irons v Smallpiece (1819) 2 B & Ald. 551; Re Ridgway (1885) 15 QBD 447; Cochrane v Moore (1890) 25 QBD 57; Re Cole  Ch. 175. Alternatively, a gift may be completed by deed without delivery: Cochrane v Moore (1890) 25 QBD 57.
361 The Commercial Agents (Council Directive) Regulations 1993, SI 1993 No. 3053. See Mercantile International Group plc v Chuan Soon Huat Industrial Group Ltd  EWCA Civ 128;  1 All ER (Comm) 788.
364 W.T. Lamb & Sons v Goring Brick Co.  1 KB 710; International Harvester Co. of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Co. (1958) 100 CLR 644; Ex p. White (1871) LR 6 Ch. App. 397, 399, affirmed sub nom. John Towle & Co. v White (1873) 29 LT 78, 79.
366 Mercantile International Group plc v Chuan Soon Huat Industrial Group Ltd  EWCA Civ 128;  1 All ER (Comm) 788, especially at  (noting the absence of such documentation in Ex p White (1871) LR 6 Ch. App. 397, and AMB Imballaggi Plastici SRL v Pacflex Ltd  2 All ER (Comm) 249).
368 For the possibility that the property in goods passes through a commission agent without privity of contract being established between principal and third party, see Ireland v Livingstone (1874) LR 5 HL 395.
377 Weiner v Harris  1 KB 285; AMB Imballaggi Plastici SRL v Pacflex Ltd  2 All ER (Comm) 249; Re Smith (1879) 10 Ch. D 566; Mercantile International Group plc v Chuan Soon Huat Industrial Group Ltd  EWCA Civ 128;  1 All ER (Comm) 788 at .
380 Mercantile International Group plc v Chuan Soon Huat Industrial Group Ltd  EWCA Civ 128;  1 All ER (Comm) 788 at ,  and , where the agent conducted its own independent refund policy and its own marketing support, and did not account to the principal for proceeds of sale received from third-party buyers.
383 The mortgagee may previously have sold the goods to the mortgagor before taking back a security bill of sale. The initial sale would thus be a genuine sale and governed by the Act in the usual way.
384 Subject to the position in consumer contracts, discussed in Ch. 5, para. 5.155.