Property – Contract and
Commercial Law Act 2017
(Sale of Goods)
Lecture 11
Helen Edwards
Housekeeping
Readings for this lecture: Chapter 8
Exam (draft timetable): Monday, 15 June 2020, 2:00pm –
6:10pm (four hours, in an online format)
Sale of Goods Act 1908
(repealed)
The SOGA relates to goods or chattels (not land)
“Goods” include computer software (meaning disks) but
not rights associated with that software
Rules are derived from the laws developed in medieval
markets and fairs
In England these laws were written down in the Sale of
Goods Act 1893 (English Act)
In 1908 New Zealand enacted legislation modelled on
the English Act
Contract and Commercial
Law Act 2017
Came into effect on 1 September 2017
SOGA now repealed
Sections previously in the SOGA now appear in Part 3 of
the Contract and Commercial Law Act 2017 (ss 120 –
206)
Contract of Sale of Goods
Consider against Law of Contract –
Law of contract provides legal framework
Part 3 of the CCLA on Sale of Goods provides supplementary
body of law for trade contracts with emphasis on conditions,
warranties and passing of title and risk in contracts
Consider Consumer Guarantees Act –
CGA on domestic, Part 3 of CCLA on business
Part 3 of CCLA also applies to auctions, competitive tenders
and private sales
The CGA applies to the sale of goods involving ‘consumers’,
Part 3 of CCLA will apply unaffected to other sales of goods
Exclusions where CGA applies (s 198)
Sale of Goods
Provides rules which regulate sale and purchase of goods
Subparts:
Formation of contract
Effects of contract
Performance of contract
Rights of unpaid seller against goods
Remedies for breach of contract
Supplementary matters
United Nations Convention on Contracts for the International
Sale of Goods
The application of the CCLA
on SOG
Part 3 of the CCLA applies to contracts for the sale of goods
S 120 defines a contract for sale:
A contract of sale of goods is a contract by which the seller
transfers or agrees to transfer the property in goods to the
buyer for a money consideration (the price)
A contract of sale can be absolute (i.e. sale of printer) or
conditional (i.e. sale of car subject to WOF) – s122
First example is a “sale” (s123(1))
Second example is an “agreement to sell” (s123(2))
An agreement to sell becomes a sale when the time for the
transfer of the property to take place elapses or the condition
or conditions of the transfer of the property are fulfilled –
s123(3)
How contract of sale is made
125 How contract of sale is made
(1) A contract of sale may be—
a) made in writing (either with or without seal); or
b) made orally; or
c) made partly in writing and partly orally; or
d) implied from the conduct of the parties.
(2) This section is subject to the provisions of this
Act and of any other Act.
(3) Nothing in this section affects the law relating
to corporations.
Making a valid sale of goods
contract
S125
Except where CCLA provides special rules,
common law requirements observed for a
valid contract; i.e. offer & acceptance
Express terms; what parties settle on
after negotiation
Implied terms; what the Court are
prepared to imply (may be excluded by
agreement)
The application of the CCLA
on sale of goods
Key terms are defined in section 119 of the CCLA
(“interpretation”)
EXCEPTIONS: Contracts that do not meet the definition in s 120
are not covered by the Act e.g.
An exchange of goods (barter) – no money consideration;
consideration may be other goods
A gift; no consideration
A mortgage
A trust, a hire-purchase sale (consumer credit contract)
A lease or hire
Goods under the CCLA on sale
of goods
The CCLA divides goods into different categories
Existing Goods: owned or possessed by the seller
at the time the contract is made s126(1)(a) (i.e.
couch in store) – “sale”
Future Goods: Goods which must be subsequently
manufactured or acquired ss 126(1)(b) and 126(3)
(i.e. couch to be made in factory) – “agreement
to sell”
Goods under the CCLA on SGA
Where the subject of the contract is future goods the
contract operates as an agreement to sell s126(3)
Specific Goods: existing goods the parties have
identified and agreed on (i.e. car, registration XYZ)
Unascertained goods: existing goods that cannot be
clearly identified as those belonging to the contract.
Usually because they are part of a pile or mass and are
yet to be selected out (i.e. 30m of electric cable)
Sale of goods
The CCLA divides goods in to different categories
Goods
s119
Existing
s126(1)(a)
Future
s 126(1)(b)
and 126(3)
Specific s119
Unascertained
Sale of Goods
Identify the following using the legal definitions:
John offers to sell Bill his Holden Barina
Amy orders bookcase to be custom-made over
the internet
Elaine asks the shop attendant for 1 m of ribbon
to be cut from a reel behind the counter
Georgia agrees to buy one of the new
photocopiers coming in the next shipment
Tom asks for a wheelbarrow load of stones from
a big pile at the hardware store
Conditions and Warranties
(ss 131 – 141)
Whether a term is a condition or warranty is a matter of
interpretation of contract, based on the construction
of the contract – s132(3)
CCLA classifies implied and express terms as either
conditions or warranties:
A condition is a term of major importance, if breached,
entitles party to rescind (overturn) contracts1(s 132(1)).
Where breach of condition and buyer has accepted goods,
there is no right to end the contract but only has right to
damages (s 133(2));
A warranty is of lesser importance, if breached, may
entitle party to damages (s 132(2)).
Implied terms under the CCLA
Good title and quiet possession (section 135)
Matching with description (section 136)
Quality or fitness(section 137)
Reasonably fit for purpose (section 138)
Merchantable quality (section 139)
Sample sales have special terms (section 142)
Note: an express warranty or condition in a contract of
sale does not negate a warranty or condition implied by
Part 3 of the CCLA unless it is inconsistent with the
implied warranty or condition (s 141)
Ownership
The purpose of “sale of goods” is to transfer ownership from the seller
to the buyer
It is important to establish the exact moment when ownership passes
This is because under s 148 the goods remain at the seller’s risk until
the buyer acquires ownership (unless otherwise agreed)
The seller cannot sue the buyer for the price of the goods until
ownership has passed
Creditors have a right to goods of a bankrupt trader –Seller may not get
the goods or recover their money
Ownership and ss 119, 145
and 146
Specific Goods – are goods identified and agreed on at the time a
contract of sale is made (s 119).
Future Goods – goods to be manufactured or acquired by the
seller after making the contract (s 126(1)(b)).
Deliverable state – Goods are in a deliverable state when they are
ready, in terms of the contract, for the buyer to take delivery of
them (subpart 4).
Unconditionally appropriated to the contract – Where the goods
are no longer in the control of the seller. (See Carlos Federspiel &
Co v Twigg Ltd [1957] in text book p532 re shipment of bicycles).
Rules for Ownership
Section 144: property passes when intended to pass
Often there are express terms in the contract
The CCLA establishes a set of rules for ascertaining
intention in sections 145 and 146, where there is no
express term
Under section 148, goods remain at seller’s risk until
buyer acquires ownership (i.e. damage, destruction,
loss etc.)
Section 146 of the CCLA provides the
RULES for determining WHEN ownership
passes
Deliverable state
S119 (4) –
(4) Goods are in a deliverable state within the meaning
of this Part if—
a) the goods are in a particular state; and
b) the buyer is bound under the contract to take delivery of
the goods when they are in that state.
Rule One
Rule One – unconditional contract for specific goods
in a deliverable state
Where there is an unconditional contract for the sale of
specific goods in a deliverable state, the property in the
goods passes to the buyer when the contract is made
(s146(1))
It doesn’t matter whether the time of payment or delivery
or both is postponed (s146(2))
Rules Two
Rule Two – specific goods to be put into a deliverable state
Where there is a contract of specific goods and something
is required of the seller to put the goods into a deliverable
state, ownership passes when that act/thing is done
(s146(3)(a)); and
The buyer has notice that the act/thing is done (s146(3)(b))
Rule Three
Rule Three – specific goods in a deliverable state but action
required to ascertaining price
Where there is a contract for the sale of specific goods in a
deliverable state, but the seller is bound to do something
(i.e. weigh, measure, test etc.) with reference to the
goods for the purpose of ascertaining the price, the
ownership in the goods passes when that act/thing is done
(s146(4)(a)); and
The buyer has notice that act/thing is done (s146(4)(b))
Rule Four
Rule Four – goods sold on “approval” or “sale or return”
Where goods are sold subject to the buyers approval, or on sale
or return or other similar terms ownership passes when:
That approval or acceptance is signified or communicated
(s146(5)(a)); or
The buyer does not indicate acceptance of approval but
keeps the goods and does not communicate any rejection
(within a fixed or reasonable time) (s146(5)(b))
Rule Five
Rule Five – Unascertained or future goods by description
Ownership passes when:
The goods exist which correspond to the description
They are in a deliverable state
They are unconditionally appropriated to the contract
with the other parties’ agreement (ss146 (6) and (7))
“Unconditionally appropriate”: separation from the pile
and clearly assigned to the contract and some form of
delivery (actual or constructive) – see Carlos
Determining Ownership
- Did the contract say when
ownership passes?
Yes – section 144(2)(a), ownership passes when contract
says so
No – rules in section 146 apply - What type of property is it?
Specific goods? Rules 1-3
Goods sold on approval? Rule 4
Unascertained / future goods? Rule 5
Risks passes with property
Section 148
Goods remain at the seller’s risk until the buyer
acquires ownership – then the goods are the
responsibility of the buyer
The issue of risk passing is important if the goods are
destroyed or damaged – insurance implications
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