The Gazette 1991

GAZETTE

JANUARY/FEBRUARY 1991

Express and imp l i ed reservation

of r i ght of disposal.

Even if the goods are specific or

ascertained within the meaning of

the Sale of Goods Act 1893,

property will only pass to the buyer

when the parties intend it to pass;

Section 19 of the Sale of Goods Act

1893 provides that despite the

appropriation of the goods to the

contract, property in the goods will

not pass if a right of disposal is

reserved. This is the case even if

the goods have been delivered to

the buyer or a carrier.

It is further provided that where

goods are shipped, and by the bill

of lading the goods are deliverable

to the order of the seller or his

agent, the seller is

prima facia

to be

taken to have reserved a right of

disposal.

The effect of this section is that

a reservation of right of disposal,

either express or implied, will deny

a purchaser the benefit of Section

1 of the Bills of Lading Act 1855 as

a basis for the establishment of a

right of action against the carrier in

the event of the cargo being lost or

damaged. This pos i t i on was

confirmed in the recent English

case of

Sullivan -v- Aiiakmon

Shipping Co. Ltd.

In that case the

purchaser's bank had refused to

back their bill of exchange in

payment for the price of the goods.

An exchange of letters then

occurred, the effect of which was

to vary the contract so that the

sellers retained a right of disposal

and thus preventing the property

passing to the purchaser. This took

the purchaser out of the ambit of

the Bills of Lading Act 1855 and left

him without a basis for an action

against the carrier when the goods

were damaged.

In any case, as mentioned above,

the seller is

prima facie

deemed to

have reserved a right of disposal

where the bill of lading is made out

to his order.

Thus property will

pass on indorsement of the bill of

lading. This will normally occur only

against payment of the price, either

directly by the buyer or on a

commercial credit from a bank.

Section 20(1) of the Sale of

Goods Act 1893 provides as

follows:

"Unless otherwise agreed the

goods remain at the seller's risk

until the property in them is

transferred to the buyer, but 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."

While this provides for a

presumption that risk passes with

the passing of property in the

goods, this is subject to the proviso

that the parties have not "agreed

otherwise". It is to be noted that

this section does not provide

authority for a reverse presumption

that property passes with risk. Risk

can pass to the buyer even though

property has not passed, thus

denying him a basis of action.

Where payment is by way of

documentary credit, the parties will

be deemed to have not intended

property in the goods to pass, even

if the bill of lading makes the goods

deliverable to the order of the

buyer. This is because it will be

essential to the transaction that the

seller retains property in the goods

in order to pass it to the bank.

Therefore where this method of

payment is agreed by the parties it

is implied that property will remain

with the seller.

In summary then, the implication

of a reservation of a right of

disposal will arise where the bill of

lading is made out to the order of

the seller, where payment is by

banker's commercial credit or

where the bill of lading is retained

as a security against payment. On

the other hand, the presumption

will be undermined if, for example,

the sale is between two closely

associated companies

or the bill

of lading is retained by the seller

purely as an admi n i s t r a t i ve

convenience.

General and special property and

banker's commercial credits.

Further difficulties arise in relation

to commercial credits. If the sale of

a cargo is financed by a banker's

commercial credit instead of

sending the bill of lading and other

documents directly to the buyer the

seller will forward them to the

bank. The bank then retains them

as security in case the buyer fails

to reimburse it. The documents can

then be used by the bank to claim

the goods at the port of discharge.

This type of transaction gives rise

to a relationship between the bank

and the carrier. The bank will want

to have recourse to the carrier in

the event of the goods being lost or

damaged and the carrier may have

to claim unpaid freight or demur-

rage. However, a bank under a

commercial credit, as pledgee,

Co-Authors Professor William Duncan and Paula Scully, Solicitor at the launch of

Marriage Breakdown in Ireland: Law and Practice

in Trinity College Dublin on 1st

November 1990. The book is published by Butterworths (Irl.) Ltd.