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The Price is Right

When a person sells goods to another person under a contract of sale and that person doesn’t pay for them, they can be successfully sued for the price of the goods sold, right?

Not always!

Section 49 of the Sale of Goods Act 1979 (referred to as “the Act”) enables a seller to sue for the price where (1) the seller has transferred property, with or without delivery, and the buyer has failed to pay or (2) the “price is payable on a day certain” irrespective of delivery e.g. within 30 days of the date of invoice even where delivery has not been made.

In F G Wilson (Engineering) Ltd v John Holt & Co (Liverpool) Ltd [2014] 1 WLR 2365 (referred to as “Caterpillar”) the Court of Appeal decided that the two scenarios in Section 49 of the Act were the only way a seller could sue for the price of goods under a contract of sale. In Caterpillar the seller, under its contract terms, had retained property in the goods. Its buyer had then sold them on under the terms as agent for the seller to a third party and never therefore acquired any property. The seller tried to sue its buyer for the price but failed because property had never passed to them; they could not bring themselves within the terms of section 49 of the Act.

On 11th May 2016 the Supreme Court gave judgment in PST Energy 7 Shipping LLC and another (Appellants) v O W Bunker Malta Limited and another (Respondents) [2016] UKSC 23 (referred to as “PST”). The Supreme Court were asked to decide in PST whether the Court of Appeal was wrong in Caterpillar about section 49 of the Act being a seller’s exclusive basis of claim for the price of goods sold. It was not actually necessary for them to decide this, so their comments are not technically binding on lower courts, but clearly persuasive.

They thought that section 49 of the Act did not provide a complete code and that a seller may sue for the price of goods sold outside of it. They did not however spell out the circumstances outside of the Act, where a seller can do so. They also said a court should be cautious about recognising claims to the price of goods in cases not falling within section 49 of the Act. In PST they said had the contract been one of sale, then the price would have been recoverable under the agreement itself.

The Consumer Rights Act 2015

Whilst the Consumer Rights Act 2015 came into force on 1st October 2015, that mainly brought into one piece of legislation implied terms for most types of business to consumer contracts and remedies for breach of the same (together with provision for unfair terms and notices in a business to consumer context). It did not affect section 49 of the Act.

Section 49 of the Act certainly still covers actions for the price of goods in a business to business context and likely covers actions for the price of goods sold in a business to consumer context since the definition of “Sales Contract” in the Consumer Rights Act 2015 is in substance the same as the definition of a “Contract of Sale” under the Act, but of course its only the latter label that section 49 explicitly refers to.

A “seller” and “buyer” under section 49 of the Act could of course be a trader and consumer for Consumer Rights Act purposes depending upon what purpose they are acting for when selling and buying respectively.

Another reason why it is likely that section 49 of the Act covers claims for the price of goods in a business to consumer context also is that there has been no separate provision made under the Consumer Rights Act 2015 for trader’s claiming the price of goods sold.

It seems therefore that a contract under which property/ownership in goods is transferred or agreed to be transferred for the price could be both a “Sales Contract” for Consumer Rights Act purposes and a “Contract of Sale” for the purpose of the Act covering the trader’s ability to sue the consumer for the price.

Summary

In either context, in what many would think should be a straightforward claim, the law is not presently as certain as it could be in light of Caterpillar and latterly PST. If you are considering taking someone to court for the price of goods sold, it may be best to take advice first!

 

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