Notesale: Turn your study into money

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Non-existent goods at date of contract

Legal Principle
What it says

Legal Principle
What it says
Notes

S6 SGA 1979
S6 - perishing of specific goods
• The normal expectation is that there is an implied condition on S that at
the time of the conclusion of the contract, the goods were in existence,
and S responsible for any defects – s6 says otherwise:
• It gives rise to presumption that S is not contracting that the goods exist
• No implied condition that the goods exist at all – no liability under S
• Goods have to be specific goods for s6 to apply
• Goods have to have perished at time contract made
• S must not know goods perished
• Contract is void
• Rule of construction (not law) – have to think about it as part of the
contract
S7 SGA 1979
S7 – perishing between agreement to sell and sale
Virtually same as s6, BUT agreement to sell (not sale)
Deals with goods that perish between the agreement to sell and contract of sale
This is good point to highlight in exam
Couturier v Hastie

Legal Principle
Facts

Ratio

Notes

What s6 is based on
• Cargo was shipped by C for delivery in London
• In may, H (acting as agent taking personal liability for B’s obligations)
contracted to sell his cargo to A
• Unknown to A or H, cargo had been sold in April by ships captain en
route to London because it was overheating
• A refused to pay for cargo – therefore sued C and H for price
• Held – would NOT fall under s6, as should categorise as purchase of ‘a
chance’ of the corn
• As contract said corn existed, and it ceased to exist – B shouldn’t have to
pay 😊
• Interestingly – HoL said was on construction of the contract that there
was a problem – as opposed to simply being void
• Purchase wasn’t of the cargo absolutely as a thing to be assumed as in
existence, but merely for the benefit of the expectation of its arrive, and
securities against its loss
• Purchaser bought in fact the shipping documents, rights and interests of
S (in other words – B didn’t buy the corn, be bought the benefit of the
voyage)
• The subject matter was, however, the cargo – and as it hadn’t been
delivered, S couldn’t sue for the price
• Lots of academic criticism
• 3 ways court could’ve construed the contract:

1) implied condition precedent that the goods were in existence – if they
were not then neither party would be bound
2) S might have contracted/warranted that the goods were in existence – if
there was there non-delivery, S would be liable (B not liable for nonacceptance)
3) B might have taken the risk of the goods having perished – B would be
liable for the price even in the absence of delivery, and S would not be
liable for non-delivery
C v H couldn’t have been (3), but not determined whether (1) or (2) – I think a
mixture of the two, because even though there was an implied condition that
the goods exist (1), S still liable – BUT HoL said was because of construction of
contract, therefore appears to be (1) because it’s not a breach by S (which (2)
would be more like)

Legal Principle
Facts
Ratio

Legal Principle
Facts

Ratio

Legal Principle
Facts

Ratio

Bell v Lever Bros
Contract must be void for mistake
Employment case – right to make someone redundant – paid more than they
wanted and said was a mistake
• Held – Not mistake - a common mistake doesn’t lead to a void contract
• The mistake must be FUNDAMENTAL TO and GO TO THE CORE OF the
contract
• Reason = we want people to uphold their contractual obligations
McRae v CDC (Australian case)
S may have promised the existence of the goods
• CDC – tender for shipwrecked oil tanker – gave specific coordinates
• M – won the tender and spent lots of money preparing to take it out of
ocean
• When M got there – no tanker – never existed
• M sued for damages
• CDC argued there was never a contract
• Held – of course there was contract
• CDC impliedly warranted the wreck existed, therefore contract not void
– CDC pay for costs
• COURT LOOKED AT S6 IN IDENTICAL TERMS - IT DOESN’T APPLY –
DOESN’T APPLY TO GOODS THAT NEVER EXISTED IN THE FIRST PLACE
(only where existed then perished)
Goldsborough v Carter
S may have promised existence of goods
• C agreed to sell ‘about 4,000 sheep’ from certain land (therefore specific
goods)
• If found less than 4,000, B would pay actual number delivered
• Only 890 sheep found
• B claimed damages for short delivery
Held – implied condition that sheep were/would be in existence and that they
should be in existence at the time for performance

Notes

Legal Principle
Facts

Ratio

What it says

Problem = where S didn’t know how many sheep there were, and B accepted the
possibility of a shortage and that he would take less, why is the contract not
valid?
Associated Japanese Bank v Credit du Nord SA
Contract may be subject to a condition precedent
• B wanted to borrow money from AJB
• AJB bought 4 machines for £1m plus interest
• CN guaranteed B’s obligations under the sale and leaseback agreement
• B was arrested for fraud
• Machines didn’t exist at all, AJB claimed all monies from CN
• Held – CN did NOT have to pay – guarantee was subject to an express
condition precedent that the machines existed, and if they didn’t CN
were entitled to treat the agreement as repudiated
• If have a sale and leaseback – have conditional precedent – S is
guaranteeing the existence of the goods
S55 SGA 1979
You can contract out of s6 as long as it doesn’t effect 3rd parties

Specific goods
What it says

Legal Principle
Facts
Ratio
Notes

S61 SGA 1979
Goods identified and agreed upon at the time a contract of sale is made
Distinguished from future and generic goods
HR & Sainsbury v Street
Specific/perished and unascertained goods
Sale of 275 tons of barley to be grown at a particular farm
Only 140 tons grown
Held – where B contracted to buy specific amount of crop, but that crop isn’t
available, B isn’t able to claim damages BUT S is obliged to deliver what he has
Must Q what would happen if some goods have perished but some haven’t?
Barrow v Phillip

Legal Principle
Facts

Ratio

Notes

Perish – stolen goods
S agreed to sell 700 bags of nuts
109 bags stolen before contract made
150 bags delivered – at this point discovered some stolen
B sued for all 700 bags
Held – B failed – s6 applied as the parcel of 700 bags had perished when the 109
were stolen
If it was done in separate lots/contracts, then some might have applied – if it’s
one big contract, then it doesn’t apply
If something is stolen – it’s perished – we don’t have any more of a definition
than that!

Asfar v Blundell
Legal Principle
Facts
Ratio

Notes

Perish defined
Dates on ship – sunk – can’t eat anymore but can make into drink
Held – dates had been so altered, therefore not the same goods that was subject
for contract
They HAD perished, therefore s6 applies
T’s not just physical destruction, it can be commercial destruction too if can’t use
for the purposes purchased for
Horn v Minister of Food

Legal Principle
Facts
Ratio
Notes

Perished
Potatoes had rotten so as to be worthless
Held – NOT perished within meaning of s7 – still potatoes?!
This decision is very harsh, and out of line with the other authorities
It’s clear otherwise that if there’s a slight deuteriation the court will try and
uphold contract as far as possible
Intertradex v Lesieur

Legal Principle
Facts

Notes

Legal Principle
Facts

Ratio

Unascertained goods
S agreed to sell 800 tons Mali groundnut to B
Suppliers failed to meet their commitments
S claimed they were excused from performance
Held – they were NOT excused
S had basic obligation to deliver the goods in account with their contract
Howell v Coupland
Goods which are to be appropriated from a specific bulk or source
Contract for sale of 200 tons of Regent potatoes – only 80 tons produced due to
disease
H took delivery and sued for damages for failure to deliver the correct amount
Held – the failure to deliver should be excused, therefore claim failed
There was no way S could get more Regent potatoes as he was the only one
growing them, therefore no obligation should arise for further performance if
the crop perished and it’s impossible to grow them

Post-contractual loss of goods and other forms of subsequent impossibility
Risk and Frustration
What it says
Notes

S33 SGA 1979
Where S agrees to dispatch specific goods at his own risk to B, S is liable for the
deterioration/destruction not necessarily incidental to the course of transit
S is NOT liable for risk of deterioration incidental to the court of transit because
defective condition of the goods at the start of transit is not covered
Mash & Murrell v Joseph Emmanuel

Legal Principle

S33

Ratio

An implied condition that the goods are of merchantable quality involved a
continuing obligation as to the condition of the goods for a reasonable time
after shipment in a CIF contract
S7 SGA 1979

Legal Principle
What it says

Notes

Frustration
Where there’s an agreement to sell in specific goods, and subsequently the
goods, without any fault by S or B, perish before the risk passes to B, the
agreement is avoided
Frustration basically means where the contract becomes impossible to complete

Perishing of unascertained goods
Legal Principle
Facts

Ratio

Legal Principle
Facts
Ratio

Notes

Legal Principle
Facts
Ratio

Blackburn Bobbin v TW Allen
Perishing of unascertained goods – main case
A contracted to sell timber to B – war broke out, and therefore there were no
sailings from Finland, where the timber was from – therefore impossible to
obtain it
It was normal principle to import timber from Finland to meet customer’s
orders, and stockpiles were not held in England
Held – A NOT excused from contractual obligations
B didn’t care how A got the goods when entering into the contract, therefore A
needs to find another way of getting timber
An unqualified contract for the sale of unascertained goods will not be dissolved
by the operation of the doctrine of fustration
Re Badische
Perishing exception
Contract – both parties knew unascertained goods could only be obtained from
Germany
Russell K implied into a contract a term saying that the pre-war commercial
conditions between England and Germany would continue – it was frustrated by
the outbreak of war
Held – S excused when the condition could no longer be met
This is VERY RARE case, and goes against all other authorities – worth
highlighting though
CTI Group v Transclear
Unascertainable goods and frustration
Supplier made goods unavailable to S, therefore rendering performance by S
impossible
Held – not in itself sufficient to frustrate contract for sale
S could’ve sought to obtain similar goods elsewhere
Tsakiroglou v Noble Thorl

Legal Principle

Frustration

Facts

Ratio

Legal Principle
What it says

Notes

Contracted to sell peanuts – just after contracted, the canal was closed to
shipping
S could’ve gone a different way, but would’ve taken 4 times as long and cost
loads more
Held – contract NOT frustrated – still possible to perform without damaging
peanuts
Fact it was more difficult/costly is insufficient to amount to frustration
S2(5)(c) Law Reform (Frustrated Contracts) Act 1943
Effects of frustration
Excludes:
i) Any contract within s7 SGA
ii) Any contract where the contract is frustrated because goods have
perished
(ii) is not clear – 3 interpretations:
1) Contract for sale of specific goods, in which property and risk have both
passed to B – Act doesn’t apply because after risk and property have
passed to B, the contract cannot be frustrated
2) Contract for the sale of specific goods, where property hasn’t passed,
but risk has – act doesn’t apply because risk is with B, so why frustrate
the contract?
3) Property has passed but goods are still at S’s risk – act doesn’t apply
because S has to bear the risk and loss



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