Lectures discusses the classification of goods and passing of property and risk.

1. The Nature of
Goods
Lyla Latif

2. Content
Covered
Legal Formalities in the Formation
of a Contracts under SOGA, 1979
Specific and Unascertained Goods
Passing of Property and Risk

3. Class Exercise 1
Spare owns 140 greyhounds. He has kept them all in a warehouse which he converted into a doghouse.
Ronaldo wants to pursue a new hobby: hunting hares in Nottingham. He sees an advert where Spare has advertised
his greyhounds for sale. Ronaldo books a meeting with Spare at the doghouse.
While at the doghouse, Ronaldo goes round inspecting all the 140 greyhounds and an hour later, Spare and
Ronaldo walk to the nearest Café Nero which is 15 mins from the doghouse to agree on the sale. At the Café,
Ronaldo informs Spare that he wants to purchase 7 greyhounds. Spare indicated that he would sell them for $700
each. They agree and Spare takes out a standard contract, writes down the names of the parties to the sale and the
purchase price.
While at the Café negotiating the contract, there happened to be a gas leak in the warehouse next to the doghouse.
All 140 greyhounds were exposed to the gas and died. Spare and Ronaldo sign the contract and Spare is to deliver
the 7 greyhounds in the evening. The dogs are no more. Ronaldo threatens to sue.
Advice Spare.

4. Class Exercise 2
1. Nemr and Jasmine on their way to Laikipia in Kenya spot a 1-acre farm. They decide to
purchase it. When drafting the contract for sale, their lawyer refers to the terms implied under
the Sale of Goods Act.
2. Grace and Kante are traders. Kante sells timber. When inspecting the timber at Kante’s farm,
Khadija spots a fountain and is interested in purchasing it. The fountain has not been detached
from the land. Can they refer to the Sale of Goods Act to govern their transaction?
3. Abe designs murals specific to the request of his clients. Wambua asks him to draw Van
Gogh’s ‘Starry Night’. Before beginning the work, Abe and Wambua want to draft their terms
and conditions. Can they use SOGA? If no, why not?

5. LEGAL FORMALITIES IN THE FORMATION OF A CONTRACT
UNDER SOGA, 1979
These are the essentials:
1. There must be a transfer of property in goods
(sec 2)
2. Money consideration must be paid (sec 2)
3. Parties must have the capacity to buy and sell
(sec 3)
4. The contract must either be in (a) writing, (b)
oral, (c) partly in writing and partly oral and
(d) implied by conduct (sec 4)
5. Terms must be agreed on

6. Examples of cases where contracts have been implied by conduct:
1. Parker v Taswell (1861) - defendant had been in possession of the plaintiff's goods for several months, and had
made use of them, with the understanding that he would pay for them at a later date: possession of goods and
payment over time can create an implied conduct.
2. Hancocks Cash & Carry Limited v First Quench Retailing Limited [2010] EWHC 3104 (Ch), First Quench
Retailing had placed orders for goods with Hancocks and received the goods but argued that no contract existed
because no written agreement had been signed and no terms and conditions were agreed upon. Hancocks argued
that an implied contract existed as First Quench Retailing had ordered and received goods and made payments
for them. The court found in favor of Hancocks, stating that an implied contract existed between the parties:
The court noted that the parties (1) had been carrying out transactions for an extended period of time and that
(2) First Quench Retailing had ordered and (3) received goods from Hancocks on the basis that it (4) would pay
for them. The court also noted that First Quench Retailing had (5) not raised any objections to the existence of a
contract during the transactions.
This case demonstrates that even in absence of written contract, if one party has ordered goods, received
them and made payment, it implies that they accept the contract and therefore an implied contract may
be established under the Sale of Goods Act

7. SPECIFIC AND UNASCERTAINED GOODS
Sec 61: specific goods are goods that are identified and agreed on at the time a contract of sale is made (and includes an undivided share,
specified as a fraction or percentage, of goods identified and agreed on as aforesaid)
No definition of unascertained goods in SOGA so to be understood as opposite of specific goods. Unascertained goods are goods that are
not identified at the time of the contract but may be identified at a later date.
The transfer of property in the goods from the buyer to the seller depends on the classification of the goods - whether they are specific or
unascertained. Property in goods can only pass when the goods are ascertained. There is an exception to this - when unascertained goods
are unconditionally appropriated to the contract.
Section 16: where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and
until the goods are ascertained. That is, specific goods.
McDougall v Aeromarine of Emsworth Ltd: confirms that no property in unascertained goods can be transferred (Diplock J: construction
of the ship had not yet begun, no materials intended for use had been identified and consequently, no property in the goods passed on
the payment of the first instalment).

8. Let’s consider some case law:
1. Routledge v Grant (1828) 4 Bing 653: In this case, the court held that a
contract for the sale of "a quantity of hops" was a contract for the sale of
unascertained goods.
• Why? Because the hops had not yet been identified or selected at the time
the contract was made, and the buyer did not have the right to take
possession until the hops had been appropriated to the contract
2. Re Guaranty Trust Co of New York [1919] 1 KB 627: This case involved a
contract for the sale of "a quantity of wheat stored in the ship 'S.S.
Alinda.'" The court held that the wheat was specific goods.
• Why? Because it had been identified and agreed upon by the parties at
the time the contract was made. The buyer had the right to take
possession of the wheat, and the seller had the obligation to deliver it.
3. The Helena (No 2) [1962] 2 Lloyd's Rep 169: This case involved a contract
for the sale of "a shipment of steel coils." The court held that the steel coils
were specific goods, as they had been identified and agreed upon by the
parties at the time the contract was made.

9. Principles for the determination of whether
goods are specific or unascertained:
• Under SOGA 1979, there are different rules that apply to specific and unascertained
goods.
• With specific goods, the Act provides that the risk of loss or damage to the goods passes
to the buyer when the goods are delivered to the buyer. The rules for unascertained goods
are slightly different. The risk of loss or damage to the goods passes to the buyer when the
goods are identified and agreed upon by the parties.
• The principles of specific and unascertained goods have been discussed in several cases.
1. In the case of British Celanese Ltd v. Regency Motors Ltd [1970] 1 QB 462, the court
held that the risk of loss or damage to the goods passes to the buyer when the goods are
identified and agreed upon by the parties.
2. In the case of Roffey Bros & Nicholls (Contractors) Ltd v. The Council of the
Borough of Worthing [1992] 1 AC 185, the court held that the risk of loss or damage to
the goods passes to the buyer when the goods are delivered to the buyer, regardless of
whether the goods are identified or unascertained.
3. In the case of Short v Rothenberg [1935] Ch 183, the court held that the risk of loss or
damage to the goods passes to the buyer when the goods are identified and agreed upon
by the parties, even if the goods are not delivered to the buyer.

10. PASSING OF PROPERTY AND RISK
• Property is important because it determines who is the legal owner of the goods and who bears the risk of
damage and loss of the goods. It is crucial to identify when during the performance of the contract of sale
property is transferred to the buyer and also when risk is transferred to the buyer.
• When does property pass?
• Section 16: where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the
buyer unless and until the goods are ascertained. Re Goldcorp Exchange Ltd: ‘buyer cannot acquire title until it is known
to what goods the title relates.’
• Property in goods only passes when goods are characterised as specific goods. Relatedly, risk passes with property. Therefore,
it is important to understand the exact moment when property passes so as to establish with whom its risk also lies.
• When do unascertained goods become ascertained? Re Wait: when the goods are identified as the goods to be
used in the performance of the contract. When they become specific.
• So at what point does property in the specific goods pass?

11. Class Reflection Exercises 1/2
Mariya walks into Abdul’s warehouse and picks up a vaccum cleaner which she
can digitally control. She does not have the full amount to make the payment but
promises Abdul that she will pay him in two weeks.
Abdul agrees and allows her to take the vaccum on condition that if she doesn’t
pay within two weeks, he will take away the vaccum and charge her user fees. On
day 16 Abdul sells the vaccum to Thomas and rings Mariya to return the vaccum
and charges her £180.
Mariya comes with the purchase price and refuses to release the vaccum. To
whom does the property in the vaccum belong to? And why?

12. Class Reflection Exercises 2/2
Tobias is a distributor of grain. He telephones Martha and asks her to deliver 200 bags
of grain. Martha has a shipment due to depart for the port of Liverpool where Tobias
will collect his 200 bags of grain.
Martha dispatches 500 bags to Asli with instructions to release 200 bags to Tobias, 100
to Lily and 200 to Sainsbury Ltd. The grain arrive and are stored at a warehouse.
Overnight, thieves break in and steal 300 bags of grain. In the morning Tobias, Lily and
Sainsbury Ltd arrive and demand that the grain be released to them. Tobias argues that
the 200 bags belong to him and him alone as he paid for the goods.
Is Tobias correct?

13. When does property pass in ascertained goods
Sec 17(1): property passes when
the parties intended it to pass. How
do we establish this intention? See
sec 17(2)
Sec 17(2): in ascertaining the
intention - consider the terms of
the contract (what does the
contract say?), the conduct of the
parties and the circumstances of
the case (perishables).
Sec 18: 5 rules on ascertaining
intention (terms can be clear: e.g.
on delivery, but conduct and
circumstances require further rules
for ascertaining the intention) -
apply only when intention cannot
be determined under sec 17.

14. Rule 1:
There is an unconditional contract for the sale of specific goods
The goods are in a deliverable state
Property passes when the contract is made
It would not matter even if time of payment or delivery is
postponed

15. Rule 1: case law
a. Varley v Whipp: rule 1 applies to unconditional contract of sale - so when at the time of making a
contract, S had not yet acquired ownership in the goods himself, it prevented the contract from being deemed
as an unconditional contract of sale - where there is a retention of title clause, rule 1 cannot apply
b. Underwood Ltd v Burgh Castle Brick & Cement Syndicate (1922): U sold an engine to B. It was to be
delivered via rail. To transport the engine to the rail, it was bolted to a concrete flooring. At the rail before
loading it was detached from the flooring and in the process the engine was damaged and B refused to accept
it. U sued B. B argued that property in the engine had not at the date of the accident passed to B. CA: rule 1
not applicable, property had not passed - because U was bound to do something to put the engine in a
deliverable state and he did not (place the engine safely on the rail)
c. Re Anchor Line (Henderson Brothers) Ltd (1937): B wanted to buy a crane. He wanted its possession and
control but was to pay its purchase price much later - 4-5 years later. In the meantime, he was to pay interest
and depreciation. In the third year the buyer became insolvent. Purchase price had not been paid. Liquidator
then sought to transfer B’s assets to a new company - this included the crane. S disputed this. He argued that
the property in the crane had not passed to B and therefore liquidator could not transfer it to the new
company.
i. Court of first instance: property in crane passed from S to B under sec 18 rule 1
ii. On appeal: sec 18 applied unless a different intention appeared - a different intention did appear: that property in the crane
should not pass until the purchase was completed by payment of the entire price. Liquidator was bound to pay.

16. Rule 2:
There is a contract for the sale of specific goods
Seller is to do something to the goods to put them in a deliverable
state (Underwood Ltd case)
Property passes when (that something is done) goods are put in the
deliverable state
AND buyer has notice that this has been done (not clear from SOGA
what constitutes notice and who needs to provide the notice)

17. Rule 3:
There is a contract for the sale of specific goods
The goods are in a deliverable state
BUT seller is to weigh, measure, test or do some other act or thing with those goods in order to ascertain their price
Lord Eldon v Hedley Brothers: S sold haystack. Terms: Delivery was made at B’s convenience and price was to be paid
immediately the haystack was weighed.
Property passes when this has been done
AND buyer has notice that it has been done

18. Rule 4:
Goods are delivered to buyer on approval*, on sale or return, property in goods
passes to the buyer
• When buyer signifies his approval or acceptance to the seller
• Or when buyer does any other act adopting the transaction (Kirkman v Attenborough)
If buyer does not signify his approval or acceptance to the seller BUT retains the
goods WITHOUT giving notice of rejection, then:
• If a time was fixed for the return of the goods - on the expiration of that time
• If no time fixed - on the expiration of a reasonable time (Poole v Smiths’ Car Sales, Re Ferrier)
* Is a type of sale that closes on the acceptance of the buyer (buyer receives the
goods for evaluation before deciding whether to purchase them or return them)

19. Rule 4: case law
 Kirkham v Attenborough (1897): K was a jeweller. He delivered jewellery to B. B pledged
some of it to A - pawnbroker. K sought return of the jewellery or its value. B by virtue of his act in
pledging the jewellery, adopted the transaction within the meaning of rule 4. K could not recover
from A since property had passed to B.
 Poole v Smith’s Car Sales Ltd (1962): Both were care dealers. Poole asked Smith to keep a car
at its premises on a sale or return basis in August. P told S to sell if he could get £325. In Oct and
Nov P asked S to return the car. S returned the car in Nov, damaged. P refused to accept and sued
S for £325. CA: S was liable. Contract was of delivery on sale on return and there was no
rejection of the property, it passed to S. Reasonable time had lapsed.
 Re Ferrier (ex p Trustee v Donald) (1944): D delivered furniture to F on a sale or return basis.
D gave 1 week for returning goods if unwanted. F was in debt so 2 days after delivery, his
creditors seized the goods. F was declared bankrupt and D recovered possession of the goods. F’s
trustee in bankruptcy sought to reclaim the goods. Held: F had not retained the goods so property
did not pass. D could retain the goods.

20. Rule 5:
There is a contract for the sale of unascertained goods or future goods by description
They are in a deliverable state
And they are unconditionally appropriated to the contract (attaching the contract irrevocably to the
goods, such that those goods and no others are the subject of sale and become the property of the buyer)
•Either by the seller with the assent of the buyer
•Or by the buyer with the assent of the seller
Property in the goods passes to the buyer
Assent may be express or implied, and may be given either before and after the appropriation is made.

21. Rule 5: case law
 Carlos Federspiel v Charles Twigg: Pearson J - it is not enough that the goods are set apart or
selected by the seller - they must be unconditionally appropriated to the contract - bicycles had
been packed and labelled but it was observed that the seller could still have changed his mind
about which goods to use in performing the contract.
 ComCorp Ltd: CC ordered 20 bags of coal to be delivered to its office. Driver loads his van with
100 bags, 20 which are for CC and 80 for others. The 20 bags are placed together near the rear of
the van. Property has not passed. It only passed when the 20 bags were placed in CC’s cellar.
 Re London Wine Co (1986): there must be an apparent intention to attach the goods irrevocably
to the contract. This case concerned the purchase of wine for investment. Buyers bought wine and
stored with seller for sale and profit. The seller made entries in his stock book and allocated each
buyer an identification number. Seller then went into liquidation. Question arose on the ownership
of wine, which belonged to whom? Held: impossible to determine this. No apparent intention to
attach the goods irrevocably to the contract.

22. Unconditional appropriation
• What does unconditional appropriation mean?
• Section 18 gives us two instances of when goods are unconditionally appropriated to the contract:
1. If seller delivers the goods to the buyer or a carrier for purposes of delivering to the buyer and the seller does not reserve the
right of disposal - the seller is then taken to have unconditionally appropriated the goods to the contract. Sec 19 explains what
reservation of right of disposal is. It basically means that property in goods will not pass until seller’s conditions are met by
the buyer - even if goods have been delivered to the buyer.
2. Where there is a contract for the sale of:
a. specified quantity of unascertained goods
b. in a deliverable state
c. forming part of a bulk which is identified in the contract or by subsequent agreement between the parties
d. and the bulk is reduced to that quantity
e. and if the buyer is the only buyer to whom the goods are then due out of the bulk
i. the remaining goods are to be taken as appropriated to that contract at the time when the bulk is so reduced
ii. the property in those goods then passes to that buyer

23. Unconditional appropriation: case law
Re Blyth shipbuilding and Dry Docks Company (1926)
• This was a contract for the building of a ship. Payment was to be made in instalments. First payment to be made at the signing of the
contract, and thereafter as the construction progressed. Some payments were made and then the seller was declared bankrupt, and a
receiver was appointed. The purchaser argued that property in the goods (materials for shipbuilding) had passed to him and sought
their delivery from the receiver. He based his argument on a clause in the contract.
• Clause: once the purchaser makes the first payment to the builders, all materials and things appropriated for the construction of the
ship becomes the absolute property of the purchases - subject to the lien of the builders of the unpaid purchase money.
• Court: Property in the partly constructed ship had passed to the purchasers BUT the property in the materials intended to be used to
complete the construction of the ship had NOT passed - why? Even if the intention of the shipbuilders was to use those materials
and those materials had been approved by the purchasers surveyor it had not been ascertained that those specific materials were to
be used to the EXCLUSION of any others such that it could be said that those materials had been unconditionally appropriated to
the contract.
• Pollock MR:
a. when goods have been appropriated and brought to the site to be used in the vessel and NO OTHERS CAN BE SUBSTITUTED
for them
b. any change in those goods comes with an increased cost on the buyer
c. they are the only goods which are to be used and if any misfortune happens, it falls on the purchaser
Aldridge v Johnson: by putting the grain into the buyer’s sack, the seller had constructively delivered the goods
Hendy Lennox v Grahame Puttick Ltd: the fact that the buyer’s name had been put on the goods and the goods had been put aside
was not enough to appropriate the good to the contract. What made them appropriated was the fact that the seller had sent to the buyer
invoices with the serial number of the goods written on them.

24. Key points
• Sec 18: Rule 1-3 deal with passing of property in specific goods
• Sec 18: Rule 4 deals with goods supplied on approval
• Sec 18: Rule 5 deals with unascertained goods
• Sec 18 contain rules of presumed intention. If the parties intended that
property should pass at a different time than under these rules then the
parties intention prevail (sec 17).

25. Risk
Joy contracts to sell a box of
pomegranates to Lyla. After the
contract is made, but before the
pomegranates are delivered to Lyla,
Tom steals the box and eats all the
pomegranates. Does Lyla have to
pay Joy?
If Lyla has already paid Joy, will
she be able to claim her money?

26. Risk
• The answer lies in the notion of risk. If the goods are at the buyer’s risk, he has to pay the
seller. If the goods were at the seller’s risk, the seller bears the loss. He will also be
required to find substitute goods to fulfil his contract with the buyer.
• Sec 20 (1): unless otherwise agreed, goods remain at the seller’s risk until the property
in them is transferred to the buyer. When property is transferred to the buyer, the goods
are at the buyer’s risk regardless of whether delivery is made or not.
• If delivery is delayed through the fault of either the buyer or seller, the goods are at the
risk of the party at fault as regards the loss.

27. Next: Terms of the Contract