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Lawful Merchandise

Law and Sea.
Sale Contracts - CIF & FOB.

Contracts for the international sale of goods exhibit a characteristic which is not present in domestic contracts of sale, in that they are entwined with other contracts. These other contracts include the contract for the carriage of goods by whatever means has been agreed, the contract of insurance, and perhaps a contract with a bank or banks under which payment for the goods is to be effected.

Goods Undelivered. Seller’s property and the buyer’s risk.
Last updated: 01-Jun-2016

Lord Mance in PST Energy 7 Shipping LLC & Anor v OW Bunker Malta Ltd & Anor [2016] UKSC 23 at paras 56-57:

56. … [Martineau v Kitching (1872) LR 7 QB 436] Sugar was agreed to be sold, with the price payable “Prompt at one month; goods at seller’s risk for two months", to be kept at the seller’s premises and drawn down by the buyers as wanted. After two months and after only some of the sugar had been drawn down by the buyers, a fire destroyed the rest. The buyer having disputed his liability to pay for the undelivered sugar which had been burned in the fire, the seller brought an action “to recover the price of [the] sugars sold" and the question was whether the sellers were so entitled (see pp 436, 441, para 21; and p 445). The court held that they were. Cockburn CJ did so on the basis that property had passed. But Blackburn, Lush and Quain JJ found it unnecessary to decide this, and they all decided the case on the basis that after two months the risk had passed. Blackburn J put the matter thus, at p 455:

"[A]ssume that [property] had not passed. If the agreement between the parties was, ‘I contract that when you pay the price I will deliver the goods to you, but the property shall not be yours, they shall still be my property so that I may have dominion over them; but though they shall not be yours, I stipulate and agree that if I keep them beyond the month the risk shall be upon you;’ and then the goods perish; to say that the buyer could then set up this defence and say, ‘Although I stipulated that the risk should be mine, yet, inasmuch as an accident has happened which has destroyed them, I will have no part of that risk, but will throw it entirely upon you because the property did not pass to me,’ is a proposition which, stated in that way, appears to be absolutely a reductio ad absurdum; and that is really what the argument amounts to. If the parties have stipulated that, if after the two months the goods remain in the sellers’ warehouse, they shall, nevertheless, remain there at the buyer’s risk, it would be a manifest absurdity to say that he is not to pay for them; and I think the case of Castle v Playford is a clear authority of the Court of Exchequer Chamber, that where the parties have stipulated that the risk shall be on one side, it matters not whether the property had passed or not. The parties here have by their express stipulation impliedly said, after the two months the goods shall be at the risk of the buyer, consequently it is the buyer who must bear the loss."

57. The price may therefore be recovered in respect of goods undelivered which remain the seller’s property but are at the buyer’s risk and are destroyed by perils of the seas or by fire. The present situation is in my opinion a fortiori. The price of bunkers, which remain the seller’s property but which are both (i) at the buyer’s risk as regards damage or destruction (clause G.12) and (ii) also permitted by the express terms of the contract to be destroyed by use for the Owners’ commercial benefit, must be equally recoverable. I add that I do not suggest that this is the limit of the circumstances outside section 49 in which the price may be recoverable. The decision in Harry & Garry itself was that the price was recoverable for all the 2,494 sarees agreed to be bought back, although only 411 of them had been disposed of by the buyers with the seller’s permission. The precise limits of such circumstances - and the significance which may in particular attach to the use of retention of title clauses in combination with physical delivery of the goods and the transfer of risk - must be left for determination on some future occasion.

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