Chapter 9 Interactive flashcards of key cases

Chapter 9 Interactive flashcards of key cases

The buyer failed to accept delivery of a Hillman Minx car which he had contracted to buy from the seller. Shortly after the buyer’s breach, the seller resold the car for the same price to another purchaser, the retail price having been fixed by the manufacturer. The seller claimed the loss of profit on the repudiated sale. Demand for Hillman Minxes exceeded the supply which the seller was able to obtain. In other words, the number of sales of Minxes the seller could make was limited to the number of the cars he could obtain. He, therefore, did not lose a sale or any profit.

The Court of Appeal held that on the facts of the case the seller had failed to prove any loss arising from the buyer’s breach. The case was one to which s 50(2) of the (1893) SGA should be applied in preference to s 50(3). Section 50(2) explains that the measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the buyer’s breach of contract. The seller was entitled to recover only nominal damages. Sellers LJ explained that where a seller can prove that a profit has been irretrievably lost on a sale of goods by the buyer’s default, it would be recoverable as damages in accordance with s 50(2). But where there has been a resale of the goods, the seller has the burden of proving a loss of profit beyond that which, on the face of it, has been recouped by the resale.

Wilson was a manufacturer and seller of generators and parts. Wilson’s standard terms included a retention of title clause providing that title to the purchased goods did not pass until Holt had paid in full. When Holt failed to pay a number of invoices, Wilson brought proceedings for the price.

The Court of Appeal held that a claim for the price under the contract meant a claim falling within s 49 SGA. Wilson could not have a claim for the price independently of that section. Wilson’s claim had to comply with the condition in s 49(1) that property in the goods had to have passed to Holt. The court observed that if an action for the price could be maintained whenever the obligation to pay had arisen, s 49 would be largely otiose, which indicated that the section was intended to specify the only circumstances in which a seller could maintain an action for the price. Thus, unless Wilson could establish that property in the goods had passed to Holt, it would have no claim for the price. That was an inherent result of a retention of title clause, and it showed the dangers, as well as its benefits, of such clauses. As title in the goods had not passed to Holt, Wilson did not have a valid action for the price. This could have been avoided by the seller stipulating that the price is payable on a day certain irrespective of delivery, thereby bringing it within the scope of s 49(2) and giving it an entitlement to bring an action for the price. Section 49(2) applies irrespective of whether or not delivery has been made or title has passed.

The buyer agreed to buy 10,000 tons of steel. The goods were to be delivered free-on-board (FOB) during August/September at the seller’s option. The seller notified the buyer in July that the goods would be ready at the beginning of August and requested him to arrange a vessel. The buyer failed to reply but on 1 August notified the seller that they would be calling forward half the goods in mid-August with the remainder to be loaded by the end of August. On 3 August, the buyer told the seller that due to non-confirmation the mid-August stem vessel had been missed and that as a consequence the buyer could not now ship in August. On 11 August, the buyer demanded a reply within 24 hours as to whether the seller could guarantee all the goods ready for loading between 20 and 27 August. On 22 August, the buyer informed the seller that they accepted the seller’s conduct as repudiation of the contract. The seller claimed against the buyer, alleging wrongful failure to accept the goods on or before 30 September.

Roskill J held that the buyer was liable. The only term that was necessary to imply was that the seller would notify the buyer when the seller expected to load and then the buyer would be under the normal duty under a FOB contract to provide the vessel at the correct time. The seller’s only obligation was to give the notice they had given but which the buyer had ignored. As there was no available market in the steel, the measure of damages was, according to s 50(2) of the (1893) SGA, the difference on 30 September between the contract price of the goods and the then value to the seller. The seller had taken back 1,500 tons of the steel and the measure of damages would be the loss of profit equal to the difference between the price at which the seller bought and the price he would have got from the buyer.

The claimant car dealer bought a second-hand BMW car in February 1974 for £1,325. A few days later, W agreed to buy it from them for £1,670 and to take delivery on 1 March. He then told the dealer that he did not wish to proceed with the purchase and refused to accept delivery. About six weeks later, the dealer sold the same car to another buyer for £1,770. Despite that more profitable sale, the dealer claimed damages from W for what they described as their ‘loss of profit’ of £345, being the difference between the £1,325 they had paid and the £1,670 agreed with the defendant. W’s defence was that the dealers had not suffered any loss by his refusal to accept delivery.

The Court of Appeal held that where the subject matter of a repudiated sale was a unique article like a second-hand car, for which there was no available market within the meaning of s 50(3) of the (1893) SGA, the seller could recover as damages only the particular loss sustained on the transaction and nothing more. In this case, as the seller had resold the very car at a higher price, they had not suffered any loss and therefore were not entitled to recover any damages.

The company operated a charge card scheme with garages whereby the garages accepted its credit cards and charged the company the price of petrol and other products supplied to its cardholders. In return, the company undertook to pay the garages the price of the goods less its commission. The company issued cards to account holders, who authorised the company to pay for fuel and debit them accordingly. The company went into voluntary liquidation owing sums to the garages and being owed debts from cardholders. Transactions involving credit or charge cards involved pre-existing schemes of separate bilateral contracts between the company and the suppliers and the company and the cardholders whereby the suppliers agreed to accept cards in payment for goods and the cardholders were entitled to use the cards to commit the company to honour its obligation to pay the suppliers. In turn, the cardholders were liable to pay the company the price charged by the suppliers.

The Court of Appeal held that since it could not have been intended that the cardholder was liable to pay twice (to the company and the garage), payment by card was an absolute discharge of the cardholder’s liability to the garage. Browne-Wilkinson LJ explained that ‘the cardholder is liable to pay the company whether or not the company has paid the garage … . Payment by credit card is normally to be taken as an absolute, not a conditional, discharge of the buyer’s liability.’ Subject to the terms of the contract, the buyer ordinarily discharges their obligation to the seller fully on paying by credit or charge card, and if the credit company cannot pay the seller, the seller has no redress against the buyer. The cardholders discharged their obligations absolutely to the garages when they obtained fuel using their cards.

The buyer contracted to purchase a new Standard Vanguard car from the seller but wrongfully failed to take delivery when it was available. The price of the car was fixed by the manufacturers. The seller mitigated their loss by persuading their supplier to take the car back without penalty. The seller then brought a claim against the buyer for their loss of profit amounting to £61. The buyer argued that as there was no difference between the market price of the car and the selling price, the seller was only entitled to nominal damages. Their case was that s 50(3) SGA applied because there was an available market for that particular car and that the price for the car had been fixed by the manufacturer. The seller had mitigated their loss and therefore had suffered no loss. The court rejected this argument.

Upjohn J held that an ‘available market’ in s 50(3) is not limited to a market such as the Cotton Exchange or Baltic or Stock Exchange but merely means that the situation in the trade in the particular area is such that the goods can freely be sold if a purchaser defaults. If there is not a demand which can readily absorb all the goods available for sale, so that if a purchaser defaults the sale is lost, there will not be an ‘available market’ within the meaning of the subsection. In such a case, the seller’s loss is the loss of their bargain, and they will be entitled by way of damages to the profit which they would have made but for the buyer’s wrongful failure to take delivery. The judge stated that even if there had been an available market, s 50(3) provided only a prima facie rule and, if it was unjust to apply it, it was not to be applied. As a result, the measure of damages was the seller’s loss of profit amounting to £61.

The seller contracted with the buyer for the construction of a steamer, the price for which was to be paid by the buyer by five instalments, which were respectively to become due at different stages of the construction of the vessel. The contract provided for the hull and materials of the vessel to become the absolute property of the buyer upon payment of the first instalment, subject only to the seller’s lien for any unpaid sums. When the first payment instalment remained unpaid, the seller sued the buyer.

The Court of Appeal held that this case fell within the meaning of s 49(2) of the (1893) SGA and that all the seller had to show in order to entitle them to payment of the instalment claimed was that they had fulfilled the conditions upon which this instalment was, by the contract, payable.

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