Chapter 3 – essay question

The Sale of Goods Act 1979 and the Consumer Rights Act 2015 both lay down certain rules relating to the passing of risk.

Critically evaluate these rules and consider whether risk always rests with the party who ought reasonably to bear it.

Answer

This question requires consideration of the rules relating to the passing of risk under the Sale of Goods Act 1979 as well as under the Consumer Rights Act 2015.

In both cases, you should explain that risk in this context means the risk of theft, loss or damage to the goods, but not the risk of non-payment. You will need to explain that the question of which party bears the risk in the goods depends on whether or not the buyer deals as a consumer:

• when the buyer deals as a consumer, the goods remain at the trader’s risk until they come into the physical possession of the consumer (s 29(2)(a) CRA) or a person identified by the consumer to take possession of the goods (s 29(2)(b) CRA). The position is different if the goods are delivered to a carrier who is commissioned by the consumer to deliver the goods and who is not a carrier the trader named as an option for the consumer (s 29(3)). In such a case, the goods are at the consumer’s risk on and after delivery to the carrier (s 29(4)) although this does not affect any liability of the carrier to the consumer in respect of the goods (s 29(5)).

• when the buyer does not deal as a consumer, then unless otherwise agreed, the goods remain at the seller's risk until the property in them is transferred to the buyer. When the property in them is transferred to the buyer the goods are at the buyer's risk whether delivery has been made or not (s 20(1) SGA). See, also, s 32(1)–(3) regarding risk when the delivery of the goods is to a carrier. You should also explain that delivery to a third-party carrier is prima facie delivery to the non-consumer buyer and risk will pass then.

Your answer will benefit from an explanation of the difference between ‘property’ and ‘possession’. This might be easier to explain by providing as an example the case of a non-consumer buyer. Unless otherwise agreed, with a non-consumer buyer, the goods remain at the seller’s risk until the property (ownership) in them is transferred to the buyer and that once the property in them has been transferred to the buyer they are then at the buyer’s risk whether or not the buyer has possession of them. In other words, property in the goods, and the risk, are transferred together. This means that a buyer might have to bear the risk of loss even if the seller has possession of the goods.

In conclusion, when the buyer is a consumer, risk only passes to him when he has physical possession of the goods (unless, as noted above, they are delivered to a carrier). But, when the buyer is not a consumer, risk ordinarily passes to him as soon as the property in the goods passes to him even if the seller retains possession of them. This means that if the goods are destroyed whilst at the buyer’s risk, he will not be able to claim for non-delivery and must still pay the price. Therefore, a sensible, well-advised buyer, will consider the question of insurance to cover this problem.

You should also explain that where the buyer is not a consumer, and where delivery has been delayed through the fault of either buyer or seller, the goods are at the risk of the party at fault as regards any loss which might not have occurred but for such fault (s 20(2)) SGA 1979. There is nothing in s 20 that will affect the duties or liabilities of either seller or buyer who acts as a bailee or custodier of the goods of the other party (s 20(3)).

You should explain this further by pointing out that neither a bailee nor a custodier actually own the goods they possess. Parties are frequently bailees of goods. For example, a buyer who buys goods on a sale-or-return basis is merely a bailee of the goods until such a time he either returns the goods or otherwise causes the property in them to pass to himself (under s 18 Rule 4).