Duty Of The Seller To Deliver Goods & Duty Of The Holder In Due Course

Duty of Seller

In maximum contracts of sale, duties of buyer and seller are concurrent in nature. Seller is under obligation to give the delivery of the goods and buyer is under obligation to pay the purchase money of the goods purchased by the seller. It must be noted that, parties related to the sales of Contract are bound to perform as per the terms of the contract. Both seller and buyer is under the duty to exercise good faith while performing and must not conduct any such action which reduce the expectation of other party that the contract will be underperformed.

It is the duty of the seller to make delivery, and this delivery does not refer to physical delivery only but also include the permission of seller to transfer the possession of the goods to the buyer. It is necessary that delivery of the goods must be made in accordance with the terms of the contract. This paper critically discusses the duty of seller to deliver the goods as per section 27 of the Sales of goods Act 1979. Lastly paper is concluded with brief conclusion which summarizes the key points of this paper.

Section 27 of the Sales of goods Act (SOGA) 1979 stated that seller is under obligation to deliver the goods to the buyer and buyer is under obligation to accept the goods and make payment. Section further stated that both buyer and seller must perform their duties as per the terms of   the Contract (Sales of goods Act, 1979).

Section 28 of the SOGA 1979 stated that, unless otherwise agreed by the parties both delivery of the goods and payment of price are considered as concurrent conditions. In other words, seller must be prepared and willing to provide the good’s possession to the buyer in exchange of the price paid by the buyer. This section further stated that buyer of the goods must be prepared and willing to pay the price in terms of the goods in exchange of the good’s possession (Sales of goods Act, 1979). In other words, seller of the goods is under obligation to deliver the goods purchased by the buyer as per the terms of the contract and as per the rules stated in the sales of Goods Act.

Modes of Delivery- There are different types of modes through which delivery can be made and these modes are actual, symbolic, and constructive. Actual delivery is the delivery in which goods are physically handed over to the buyer or his authorized agent by the seller. On the other hand, symbolic delivery is considered as that delivery under which goods are bulky and it is not possible to make actual delivery of the goods. In other words, in this mean of obtaining possession of the goods are delivered by the seller to the buyer of the goods. This can be understood through example, delivery of the warehouse key in which goods are stored or the bill of lading etc., are considered as delivery of the goods (Lawdit solicitors, n.d.).

Rules about Delivery

There is one more mode of delivery that is constructive delivery under which third person holds the possession of the goods and make acknowledgement that he holds the possession on behalf of the buyers. This can be understood through case law Mercuria v Citibank [2015] EWHC 1481 (Comm). In this case, Phillips J stated that mere transfer of goods or warrant or receipt issued by the third party in the absence of suck acknowledgement does not constitute valid delivery. Decision taken by Court based on the grounds of the Farina v Home (1846) 16 M&W 119 (HL) and Dublin City Distillery v Doherty [1914] AC 823 (HL). Therefore, Phillips J correctly stated that there is no constructive delivery of metals to Mercuria.

It must be noted that, only transfer of physical possession does not considered as delivery, it is necessary for the seller to follow other rules related to the delivery of the goods.

There is one more case law which helps in understanding the duty of seller under section 27 in better way, and that is Winery UK Ltd (“Exclusive”) vs Cuvée Ltd [2005]1 Ch 606. In this case, buyer is liable to make payment or show willingness to pay. Both the parties to the contract agreed to made payment in installment, and as per their agreement, exclusive made the payment of half a million at the point of contract and remaining payment is made at the time of delivery of the goods. Secondly, buyer already accepted some deliveries from the seller in this case. Therefore, it can be said that buyer does not had any intention to refuse the delivery of the goods made by the seller, and this clearly show that exclusive complied with the section 27 and 28 of the SOGA 1979.

In context of seller (Cuvee), duties under section 27 and 28 include duty to deliver the goods as per the description such as champagne send by cuvee must include rare vintage 1995. Willingness of the seller and is intention to deliver the goods to the buyer under s.28 of SGA 1979. In this case, seller is agreed to deliver the goods to the buyer on the basis of six months installments which clearly stated that this is the contract for installment delivery.

Section 29 of the SOGA 1979 defines the rules related to the delivery and these rules must be fulfilled by the parties to the contract:

• Whether it is the buyer who wants to take the possession of the goods or seller who wants to send the goods possession to the buyer, is considered as the question which depends on the facts mention in the contract such as express or implied.
• Apart from any existing contract, place of delivery must be the seller’s place of business, and in case seller does not have any place of business then it must be the seller’s residence. There is one exception also, which state that if contract of goods include the sale of any specific goods, and this is in the knowledge of the parties at the time making the contract that good is made at any other place then that place is considered as the place of delivery. This can be understood through case law Kling & Freitag GmbH v. Societa Reference Laboratory S.r.1. (2004).
• If under the sale contract, the seller is under obligation to send the goods to the buyer, but contract does not state any specific time of delivery, then seller is under obligation to send these goods within reasonable time period.
• If at the time of sale, goods are in the possession of the third person then it is not considered as delivery of the goods until that third person acknowledges that he holds the goods on the buyer’s behalf.
• Demand or tender of delivery can be considered as ineffectual unless it is made in reasonable hour.
• Unless agreed by the parties, seller bear the expenses related to the delivery (Lex Mercatario, n.d.).

Conclusion

Above stated rules must be met by the seller, and if seller fails to meet these conditions then it is clearly considered as non-delivery of the goods.

Conclusion:

After considered the above facts, it is clear that duty stated under section 27 of the SOGA 1979 is the duty which is concurrent in nature. In other words, seller must be prepared and willing to provide the good’s possession to the buyer in exchange of the price paid by the buyer. Seller of the goods is under obligation to deliver the goods purchased by the buyer as per the terms of the contract and as per the rules stated in the sales of Goods Act.

Any person who received the negotiable instrument and takes that instrument in good faith, and fails to notice that instrument is overdue at the time of receiving it such as there is any prior claim or there is any defect in the person’s title who negotiated it, the such person is known as holder in due course.

The position of the holder in due course is very important in the banking law and also in the transactions of the bills of exchange because it is they that these instruments are issued by a drawer. This paper defines the qualification of the holder in due course and also the meaning of this term as per relevant law. Lastly paper is concluded with brief conclusion.

Section 29 of the Bill of Exchange Act 1882 defines the meaning of holder in due course, and as per this section, a holder in due course is the person who has taken a bill, complete the bill, and regular on the face of the bill in following situations:

• Such person became the holder of the bill before the bill was overdue, and fails to notice that bill was previously dishonored.
• Bill taken by person is in good faith and for appropriate value, and at the time when bill was negotiated to the person he fails to notice any defect in the title of the person to negotiate the bill.

Clause 2 of this section stated that title of the person who negotiates the bill is defective for the purpose of this Act and when he get the bill or the acceptance of bill is affected by fraud, duress, force and fear, other unlawful means, illegal consideration, when bill is negotiated in the breach of faith, or under any such situations which can be considered as the fraud.

Clause 3 of this section states if any person who derives his title to a bill through the holder in due course, who himself does not involve to any fraud or illegality which affect the bill, possesses all right as the holder in due course in context of acceptor and all the parties related to the bill before to that holder (Bills of Exchange Act, 1882).

Relevant Law

A holder for value has right to enforce the bill even though the person against whom such bill is enforced receives no consideration for his promise to pay. However, other defenses can also be raised against the holder for value. This can be understood through case law, bill was obtained by person from fraud or duress. It must be noted that, holder in due course has power to enforce the bill from all the defenses and defects in context of the title of his predecessors in title. Following are the requirements which must be fulfilled by the person before claiming as holder in due course:

• Person must be the holder- as per this requirement, person who is the original payee of the bill cannot be considered as the holder in due course in his capacity as payee, and this can be understood through case law RE Jones Ltd v waring and Gillow Ltd (1926) AC 670. It must be noted that there is one exception also which stated that  original payee can also be the holder in due course in situation when such negotiated the bill and later same bill negotiated to him back, and this can be understood through case law Jade International. Steel Stahl und Eisen GmbH & Co. Kg. v. Robert Nicholas (Steels). Ltd. [1978] 3 W.L.R. 39. However, any person who acquired the bill with forged endorsement can never become the holder in due course.
• The bill must be complete and regular on its face- if any of the detail related to the bill is missing at the time when bill was transferred then the transferee cannot qualify as a holder in due course. Although, such person has prima facie authority to fulfill the inchoate bill. If similar thing is happen with the subsequent transferee which may qualify as a holder in due course. This can be understood through case law Arab Bank Ltd v Ross [1952] 2 QB 216. In this case, Court stated face includes the rear of the bill for the purpose of analyzing that if the endorsement was not present at the rear of the bill then the bill was not considered as complete and regular on its face.
• The bill must be transferred to the person before it was overdue- bill is considered as overdue bill if the time of payment related to that bill was passed. In case of bill payable on demand is considered as overdue if such bill is in circulation for an unreasonable length of time which is in under question as stated under section 36(3) of the Act. Banks generally considered the Cheque as overdue if these cheques are presented for payment for more than 6 months after these cheques are drawn.
• Person must fail to notice that bill is dishonored, and bill can be considered as dishonored because of its non-acceptance or non-payment.
• Good faith- it is necessary that person must take the bill in good faith and fails to notice any defect in the person’s title that negotiated the bill. For this purpose notice means actual notice and not only constructive notice. Section 90 of this Act stated that just because person is intelligent that does not means that person is acting in bad faith. However, a person who deliberately ignores the suspicious situations can be considered as acting in bad faith and such person is under evidential burden for the purpose of convincing the Court that such person is not aware about the facts which any reasonable person would appreciate.
• For value- another important qualification in this regard states that it is sufficient if value is given by the holder or at any previous time been provided in context of bill, but holder of the bill must not give value of the bill, and this can be understood with the help of case law Clifford Chance v Silver [1992] 2 BLR 11.

It must be noted that, it is necessary that person meet the above stated qualification for be the holder in due course, and if any of the qualification is not met by the person then such perso is not considered as the holder in due course.

Conclusion:

After considering the above facts, it can be said that holder in due course is very important in the banking law and also in the transactions of the bills of exchange, and only that person can be the holder who received the negotiable instrument and gets that instrument in good faith, and fails to notice that instrument is overdue at the time of receiving it such as there is any prior claim or there is any defect in the person’s title who negotiated it.

Reference:

Arab Bank Ltd v Ross [1952] 2 QB 216.

Bills of exchange Act 1882- Section 29.

Bills of exchange Act 1882- Section 30.

Bills of exchange Act 1882- Section 36.

Bills of exchange Act 1882- Section 90.

Clifford Chance v Silver [1992] 2 BLR 11.

Dublin City Distillery v Doherty [1914] AC 823 (HL).

Farina v Home (1846) 16 M&W 119 (HL).

Kling & Freitag GmbH v. Societa Reference Laboratory S.r.1. (2004).

Lawdit Solicitors. Duties of the Seller and Buyer in respect of Delivery of Goods. Available at: https://www.articles.scopulus.co.uk/Duties%20of%20the%20Seller%20and%20Buyer%20in%20respect%20of%20Delivery%20of%20Goods.htm. Accessed on 17^th April 2018.

Lex Mercatoria. England, Sale of Goods Act 1979. Available at: https://www.jus.uio.no/lm/england.sale.of.goods.act.1979/doc.html#145. Accessed on 17^th April 2018.

Mercuria v Citibank [2015] EWHC 1481 (Comm).

RE Jones Ltd v waring and Gillow Ltd (1926) AC 670.

Sales of Goods Act 1979- Section 27.

Sales of Goods Act 1979- Section 28.

Sales of Goods Act 1979- Section 29.

Steel Stahl und Eisen GmbH & Co. Kg. v. Robert Nicholas (Steels). Ltd. [1978] 3 W.L.R. 39.

Winery UK Ltd (“Exclusive”) vs Cuvée Ltd [2005]1 Ch 606.