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“Risk” in the law of sale

Published online by Cambridge University Press:  16 January 2009

L. S. Sealy
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Extract

The jubilee of the Journal happens to coincide with the centenary of Head v. Tattersall, the well-known but troublesome case in which the buyer of a horse was allowed to exercise a contractual right to return it (for failure to answer a warranty that it “had been hunted with the Bicester hounds”), despite the fact that it had been accidentally injured in the meantime and could be restored to the seller only in a damaged state. Most contract textbooks cite this as the classic instance of the condition subsequent, by virtue of which a contract or obligation, although initially effective, ceases to operate on the occurence of a specified event. It is apparent, however, on closer analysis that it was not the contract or any aspect of it which was terminated because the horse failed to meet the warranty, but the buyer's title: in other words, the property in the horse passed to the buyer immediately, but defeasibly, so that when he rejected the horse he divested himself of the title and revested it in the seller. Even this explanation leaves on one side the question of the damage sustained by the horse. In the language of the law of sale, it would be most natural to regard this issue as one of risk, and to say that the court held in effect, and indeed perhaps expressly, that the horse was at the seller's risk during the period allowed for its return.

Type
Research Article
Information
The Cambridge Law Journal , Volume 31 , Issue 1: Jubilee Issue , April 1972 , pp. 225 - 247
Copyright
Copyright © Cambridge Law Journal and Contributors 1972

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References

1 (1871) L.R. 7 Ex. 7.

2 “Warranty” is here used in a general sense, without reference to the question whether the undertaking is so “essential” as to amount to a “condition” in the language of the Sale of Goods Act 1893.

3 See Stoljar, “The Contractual Concept of Condition” (1953) 69 L.Q.R. 485, 506–511.

4 All unspecified references are to the Sale of Goods Act 1893. The same obligations are stated more explicitly in the Uniform Commercial Code (U.C.C.), § 2–301.

5 s. 28. The practical significance of the incidence of the property is limited in other ways: see Lawson, “The Passing of Property and Risk in Sale of Goods” (1949) 65 L.Q.R. 352, and Atiyah, Sale of Goods (4th ed., 1971), p. 139.

6 Rowland v. Divall [1923] 2 K.B. 500.Google Scholar

7 In a case of deterioration, the question may arise as one of breach of warranty of quality, as in Sterns Ltd. v. Vickers Ltd. [1923] 1 K.B. 78.Google Scholar

8 See below, § 4.

9 Not necessarily of course in the statutory sense of “wrongful act or default” (s. 62 (1) ): see below, p. 247.

10 Decisions on the meaning of “perish” for the purposes of ss. 6 and 7 may be helpful, but will not be conclusive, in “risk” cases, since the latter expression is plainly wider.

11 Inglis v. Stock (1885) 10 App.Cas. 263.

12 Elphick v. Barnes (1880) 5 C.P.D. 321; Chapman v. Withers (1888) 20 Q.B.D. 824, 826.

13 Head v. Tattersall (1871) L.R. 7 Ex. 7; Chapman v. Withers (supra).

14 Elphick v. Barnes (supra).

15 Rugg v. Minett (1809) 11 East 210.

16 Poole v. Smith's Car Sales (Balham) Ltd. [1962] 1 W.L.R. 744.Google Scholar

17 Sterns Ltd. v. Vickers Ltd. [1923] 1 K.B. 78.Google Scholar

18 Bevington v. Dale (1902) 7 Com.Cas. 112Google Scholar; but cf. Atiyah, Sale of Goods, p. 42 (do they “perish”?).

19 Sassoon, “Damage Resulting from Natural Decay” (1965) 28 M.L.R. 180; Atiyah, op. cit., p. 123.

20 See below, p. 231.

21 Sassoon, op. cit.

22 e.g., as coming from an identified source: Howell v. Coupland (1876) 1 Q.B.D. 258.

23 See below, § 4.

24 Demby, Hamilton & Co. Ltd. v. Barden [1949] 1 All E.R. 435.Google Scholar But such an act of appropriation will not necessarily pass the risk: for example, in a c.i.f. contract, risk will as a rule pass on or as from shipment, but the “notice of appropriation” may be given at an earlier date.

25 See n. 1 below, p. 241.

26 A party who had the risk but neither property nor possession would have no power to sue the wrongdoers, but this is immaterial: see Margarine Union G.m.b.H. v. Cambay Prince S.S. Co. [1969] 1 Q.B. 219.Google Scholar

27 See above, notes 12–14; Demby Hamilton & Co. Ltd. v. Barden [1948] 1 All E.R. 435Google Scholar; and Horn v. Minister of Food [1948]Google Scholar 2 All E.R. 1036.

28 Poole v. Smith's Car Sales (Balham) Ltd. [1962] 1 W.L.R. 674.Google Scholar

29 The seller would surely be held liable under s. 12.

30 Contrast Couturier v. Hastie (1856) 5 H.L.Cas. 673 and Comptoir d'Achat et de Vente du Boerenbond Belge S/A v. Lius de Ridder Lda. (The Julia) [1949] A.C. 293Google Scholar, where the master's act followed upon an event respectively within and outside the normal “risk.”

31 Genn v. Winkel (1912) 107 L.T. 434.Google Scholar

32 Kursell v. Timber Operators & Contractors Ltd. [1927] 1 K.B. 298.Google Scholar

33 Fibrosa Case [1943] A.C. 32.Google Scholar

34 Nickoll & Knight v. Ashton, Edridge & Co. [1900] 2 Q.B. 298.Google Scholar

35 Appleby v. Myers (1876) L.R. 2 C.P. 651.

36 Howell v. Coupland (1876) 1 Q.B.D. 258; Re Badische Co. Ltd. [1921] 2 Ch. 331.Google Scholar

37 Shipton Anderson & Co. Ltd. and Harrison Bros. & Co. Ltd. [1915] 3 K.B. 676.Google Scholar

38 The Odessa [1916] 1 A.C. 145Google Scholar; The Parchim [1918] A.C. 157Google Scholar. Although the “enemy” character of a cargo is determined by the allegiance of the party who has the property and not that of the party who has the risk, this settles only whether the prize law operates, and does not mean that the former rather than the latter must bear the loss, or that condemnation is an event within “the risk.”

39 The Julia [1949] A.C. 293, 319Google Scholar. A similar view appears to have been taken by Scrutton, L.J. (obiter) in Kursell v. Timber Operators & Contractors Ltd. [1927] 1 K.B. 298, 312.Google Scholar

40 The scope of “the risk” and the insurance cover are unlikely to be co-extensive, since the latter will not include loss from natural causes or “inherent vice”: see Sassoon, op. cit. (above, n. 19).

41 If no goods of the contract description have ever existed, the seller ought ordinarily to be liable in damages without reference to any question of risk: McRae v. Commonwealth Disposals Commission (1951) 84 C.L.R. 377.Google Scholar It is submitted that an implied warranty that the goods have to the knowledge of the seller existed is logically presupposed by s. 7.

42 Law Reform (Frustrated Contracts) Act, 1943 (1944), 84.Google Scholar

43 This view is supported by the dictum of Scrutton L.J. (above, n. 39).

44 Of course, it is possible for the parties to make express provision for the allocation of “extra” risks and even for their “passing” from seller to buyer; but this raises no problem.

45 This view is perhaps supported by the dictum of Lord Normand (above, n. 39).

46 e.g., Nickoll & Knight v. Ashton, Edridge & Co. [1900] 2 Q.B. 298Google Scholar; Re Shipton Anderson & Co. and Harrison Bros. & Co. [1915] 3 K.B. 676Google Scholar; Tsakiroglou & Co. Ltd. v. Noblee Thorl G.m.b.H. [1962] A.C. 93.Google Scholar

47 [1949] A.C. 293.

48 See below, § 4.

49 [1949] A.C. 293, 312, per Lord Porter.

50 A fortiori, the purported present sale of goods which have never existed should raise no question of risk: see above, n. 41.

51 (1876) 1 Q.B.D. 258.

52 (1856) 5 H.L.Cas. 673.

53 Note that the contract was for potatoes, and not for the crop as such, in whole or in part. But even if the contract had been for the crop, it was not wholly sown at the time.

54 See n. 1 below, p. 241.

55 (1863) 32 L.J.Q.B. 322. There is always an inherent contradiction in contracts which are in hybrid c.i.f.—“arrival” form: cf., The Julia (above), and Produce Brokers New Co. v. Wray, Sanderson & Co. Ltd. (1931) 39 LI.L.R. 257.Google Scholar

56 Subject (at least nowadays) to the possibility of discharge by frustration (below, § 10).

57 Martineau v. Kitching (1872) L.R. 7 Q.B 436, 453–454.

58 Williston on Sales, § 300, citing Noy's Maxims and Rugg v. Minett (1809) 11 East 210; cf. Fragano v. Long (1825) 4 B. & C. 219; Logan v. Le Mesurier (1847) 6 Moo.P.C. 116.

59 (1870) L.R. 5 Ex. 165.

60 (1872) L.R. 7 Q.B. 436.

61 The importance of control has been emphasised in some cases, such as Bevington v. Dale (1902) 7 Com.Cas. 112Google Scholar; Sterns Ltd. v. Vickers Ltd. [1923] 1 K.B. 78Google Scholar; The Julia [1949] A.C. 293Google Scholar. Cf. Gutteridge, “Contracts and Commercial Law” (1935) 51 L.Q.R. 91, 121.

62 s. 16.

63 e.g., The Julia [1949] A.C. 293, 312.Google Scholar

64 There may, of course, be an estoppel as against the bailee himself.

65 Equity was, in turn, baulked: Re Wait [1927] 1 Ch. 606.Google Scholar

66 Uniform Sales Act, s. 6 (2); U.C.C., § 2–105 (4).

67 (1885) 10 App.Cas. 263.

68 [1923] 1 K.B. 78.

69 [1917] 1 K.B. 337.

70 Atiyah, Sale of Goods 163.

71 [1949] A.C. 293; above, p. 232.

72 Margarine Union G.m.b.H. v. Cambay Prince S.S. Co. [1969] 1 Q.B. 219.Google Scholar

73 Sweeting v. Turner (1872) L.R. 7 Q.B. 310, 313; Mirabita v. Imperial Ottoman Bank (1878) 3 Ex.D. 164, 169.

74 Where the goods are hired, the benefits (at least in the case of livestock) belong to the hirer and not to the owner: Tucker v. Farm & General Investment Trust Ltd. [1966] 2 Q.B. 421.Google Scholar

75 [1923] 1 K.B. 78.

76 He could, of course, simply break the contract if it would pay him to do so.

77 The seller is sometimes said to be discharged by impossibility of performance: see the discussion of Rugg v. Minett (1809) 11 East 210 in Taylor v. Caldwell (1863) 3 B. & S. 826, 837; but this is surely not the primary question once it is held that the risk was with the buyer.

78 Alexander v. Gardner (1835) 1 Bing.N.C. 671; Taylor v. Caldwell, supra; Martineau v. Kitching (1872) L.R. 7 Q.B. 436; Castle v. Playford (1872) L.R. 7 Ex. 98; Manbre Saccharine Co. Ltd. v. Corn Products Co. Ltd. [1919] 1 K.B. 198.Google Scholar

79 Benjamin on Sale (8th ed., 1950), p. 830.Google Scholar

80 Manbre Saccharine Co. Ltd. v. Corn Products Co. Ltd., supra.

81 Alexander v. Gardner, supra, at p. 677.

82 Contrast the last cited case with Produce Brokers New Co. v. Wray, Sanderson & Co. Ltd. (1931) 39 LI.L.R. 257Google Scholar; and The Julia [1949] A.C. 293.Google Scholar

83 Merchant Shipping Co. v. Armitage (1873) L.R. 9 Q.B. 99, 111 (freight); Shell-Mex Ltd. v. Elton Cop Dyeing Co. Ltd. (1928) 34 Com.Cas. 39, 45–46.Google Scholar

84 U.C.C. § 2–709.

85 Stein Forbes & Co. v. County Tailoring Co. (1916) 86 L.J.K.B. 448Google Scholar; contrast Workman Clark & Co. Ltd. v. Lloyd Brazileño [1908] 1 K.B. 968.Google Scholar

86 Demby Hamilton & Co. Ltd. v. Barden [1949] 1 All E.R. 435Google Scholar; [1949] W.N. 72 (see especially the latter report).

87 Stein Forbes & Co. v. County Tailoring Co., supra; cf. Colley v. Overseas Exporters Ltd. [1921] 3 K.B. 302.Google Scholar

88 He is not in fact bound to redeliver unless the contract so provides (s. 36). Even in that case, he will be excused if redelivery would be pointless, as where a horse dies: Chapman v. Withers (1880) 20 Q.B.D. 824.

89 An exceptional case is conceivable where, on analogy with Sumpter v. Hedges [1898] 1 Q.B. 673, the buyer might be held not to have made an election to keep the goods.

90 Devaux v. Connolly (1849) 8 C.B. 640; Behrend & Co. Ltd. v. Produce Brokers Ltd. [1920] 3 K.B. 530.Google Scholar Professor Williams, Glanville in The Law Reform (Frustrated Contracts) Act 1943 (1944), 85Google Scholar, does not refer to these cases.

91 It is possible that the contract may make the seller's right to payment conditional on delivery without obliging him to deliver: cf., Calcutta Co. v. De Mattos (1863) 32 L.J.Q.B. 322, 328.

92 Stoljar, “The Contractual Concept of Condition” (1953) 69 L.Q.R. 485; Smith “The Right to Rescind for Breach of Condition” (1951) 14 M.L.R. 173.

93 Poole v. Smith's Car Sales (Balham) Ltd. [1962] 2 All E.R. 482, 489.Google Scholar There may, of course, be independent liability on the bailment.

94 S. 18, rule 4. Contrast the position in the United States, where the two are distinguished, with differing provision as to risk: U.C.C. § 2–327.

95 Bevington v. Dale (1902) 7 Com.Cas. 112Google Scholar (fur trade).

96 Marten v. Whale [1917] 2 K.B. 480.Google Scholar

97 Inglis v. Stock (1885) 10 App.Cas. 263.

98 e.g., the buyer in Howell v. Coupland (1876) 1 Q.B.D. 258, could have agreed to pay the price “crop or no crop.”

99 The position where the seller is unaware of the loss has not arisen for consideration. There is plainly not the same room for objection, at least in the case of a sale c.i.f. of goods already shipped.

1 Contrast Clark v. Cox, McEuen & Co. [1921] 1 K.B. 139Google Scholar, with Re Olympia Oil & Cake Co. and Produce Brokers Co. [1915] 1 K.B. 233.Google Scholar The contracts in these cases were perhaps exceptional in that there was an express right to declare a lost vessel with consequent cancellation of the contract.

2 If the condition is waived, or prevented from operating (e.g., by legislative action), the sale becomes absolute: Maine v. Lyons (1913) 15 C.L.R. 671.Google Scholar

3 I am indebted to Tattersalls Ltd. for permission to refer to their current conditions of sale. These place the responsibility for the accuracy of all information concerning the pedigree, description, health and condition of a horse on the vendor and not Tattersalls Ltd. as auctioneers, and further provide that “if the purchaser of any horse sold with a Pedigree or Description contends that it does not correspond with such Pedigree or Description, the horse must be returned…to the place of sale before 5 o'clock p.m. on the seventh day after the last day of the sales and notice in writing of such contention must be received by Tattersalls within such time. Failure to return the horse, and give notice as prescribed in this condition, shall be an absolute bar to any claim in respect of any alleged error in Pedigree or Description, and the Purchaser shall be bound to keep and pay for the horse whether or not it complies with such Pedigree or Description.” Although expressed as a limitation rather than as a right, this wording would appear to afford ample scope for the application of the principle of Head v. Tattersall.

4 See Chalmers, Sale of Goods (1st ed., 1890), pp. 17–25. Only what is now s. 13 (implied condition that goods sold by description shall correspond with the description) and s. 15 (2) (b) (that there shall be an opportunity for comparison of sample with bulk) were drafted as conditions: the rest of the statutory implied conditions appeared as warranties. But Chalmers himself had doubts on the subject: see pp. 22, 25 and 95.

5 This was first demonstrated by Montrose in a note in (1934) 5 C.L.J. 275. See also Melville, “The Core of a Contract” (1956) 19 M.L.R. 26; Reynolds, “Warranty, Condition and Fundamental Term” (1963) 79 L.Q.R. 534: Jenkins, “The Essence of the Contract” [1969] C.L.J. 251.

6 See Chalmers, op. cit., clauses 14 (3), p. 16, and 56, p. 83.

7 The terms “specific,” “generic” and “sold” are here used in a general sense and not as strictly defined for the purposes of the Act.

8 For a recent example see Christopher Hill Ltd. v. Ashington Piggeries Ltd. [1971]Google Scholar 2 W.L.R. 1051. It is essentially the same question which is discussed in the articles mentioned in n. 5, above.

9 The buyer may, however, be liable as a bailee: see s. 20, second proviso.

10 Varley v. Whipp [1900] 1 K.B. 513Google Scholar; Ollett v. Jordan [1918] 2 K.B. 41.Google Scholar

11 See below, n. 17.

12 Cf. Taylor v. Combined Buyers Ltd. [1924] N.Z.L.R. 627.Google Scholar

13 See U.C.C., § 2–510.

14 See, e.g., Grimoldby v. Wells (1875) L.R. 10 C.P. 391, 395.

15 Clarke v. Dickson (1858) E.B. & E. 148. But perhaps the common law rule is subject to more qualification than has traditionally been supposed: cf. Treitel, Law of Contract (3rd ed., 1970), 320–21.

16 But quaere whether a buyer has an insurable interest in these circumstances, and whether a seller would have any claim to the insurance moneys if he has.

17 See e.g., Kwei Tek Chao v. British Traders & Shippers Ltd. [1954] 2 Q.B. 459Google Scholar; McDougall v. Aeromarine of Emsworth Ltd. [1958]Google Scholar 1 W.L.R. 1126. The amendment of the Sale of Goods Act by s. 4 (2) of the Misrepresentation Act 1967 has arguably strengthened the case for this interpretation.

18 Where the contract is frustrated without any loss or damage, the frustrating event is probably outside the scope of “the risk”: see above, § 2.

19 Note, incidentally, that these facts come within the peculiar wording of s. 2 (5) (c) of the Law Reform (Frustrated Contracts) Act 1943.

20 If the property had not passed, it would depend on s. 7.

21 Calcutta Co. v. De Mattos (1863) 32 L.J.Q.B. 322 (above, p. 233). An alternative view of these facts might be that the wetting was an event outside “the risk”: see above, p. 230.

22 Stein Forbes & Co. v. County Tailoring Co. (1916) 86 L.J.K.B. 448.Google Scholar

23 Atiyah, Sale of Goods, p. 161.

24 § 2, above. A different view is taken by Williams, Glanville: The Law Reform (Frustrated Contracts) Act 1943 (1944), pp. 82, 84.Google Scholar

25 Maine v. Lyons (1913) 15 C.L.R. 671.Google Scholar

26 s. 20, first proviso; s. 32 (2).

27 Williams, Glanville, Joint Torts and Contributory Negligence (1951)Google Scholar, s. 59; Treitel, Law of Contract (3rd ed., 1970), 829.

28 Wiehe v. Dennis Bros. (1913) 29 T.L.R. 250.Google Scholar

29 s. 62 (1).

30 Genn v. Winkel (1912) 107 L.T. 434Google Scholar; cf. Head v. Tattersall (1871) L.R. 7 Ex. 7, 10, 12; Curtis v. Hannay (1800) 3 Esp. 82.