What are the Seller’s Title Obligations?

What are the seller’s title obligations? • SGA implies s 16-19 into the contract as a seller’s obligation; S 16 stipulates the seller’s title obligations a. S 16(a): there is an implied condition that the seller has the right to sell the goods, or in an agreement to sell, that the seller will have the right to sell the goods when the property is to pass i. A breach of this implied condition gives the buyer to repudiate the contract and reject the goods b. S 16(b): there is an implied warranty that the buyer is to have and enjoy quiet possession of the goods c. S 16(c): there is an implied warranty that the goods are free from any charge or encumbrance in favour of a 3rd party i. Buyer: wants to extend temporal coverage of (c) to any possible period of seller’s interest in the terms of K a. (b) is forward looking, (c) is just a point-in-time guarantee – can be risky b. Could add obligation to reveal charges/encumbrance before transfer of ownership is made ii. Seller: wants to remove this clause entirely or put in some wording that makes it clear they’re only responsible for security interest in goods that they have created themselves (might not know of all) iii. Bruce: remedy is damages, but likely that original seller is insolvent (stopped paying creditor, creditor finds u) • Have the parties tried to contract out of s 16(a)? Consider section 20(3) a. S 20(3): in a consumer context for new or used goods, parties cannot contract out of s 16 b. If the contract purports to exclude section 16: can use section 20(3), or make arguments about unconscionability or other exclusion clause issues (see above) c. Parties in a commercial context can contract out of 16(a), but it is very difficult to convince the court that this is actually what you intended to do because “the whole object of a sale is to transfer property to another” i. Sloan v Empire Motors: A general or “catch-all” exclusion clause saying “there are no implied warranties/conditions” is not enough to contact out of s 16(a) ii. The exclusion clause must be very specific, it helps to include the particular property interest • Has the buyer accepted the goods? If yes, s 15(4) operates; If no, buyer can reject the goods a. Rowland v Divall: There is no property in stolen goods, a seller in possession cannot transfer title to a buyer i. Such a breach of s 16(a) is a “total failure of consideration”, buyer cannot have accepted because property has no passed, can repudiate the contract (Facts: buyer purchased a stolen car, wants repudiation) b. Butterworth v Kingsway: in the case of “feeding title” upon completion of payments in a conditional sale, the contract can be rescinded up until the good title passes down, after which can only claim damages i. Facts: B paid monthly payments on car, sold to C before finishing payments, so it still belonged to A; C then sold to D, then to E, then to F; B continued making payments; F wrote a letter to E wanting to repudiate the sale; F got out before title perfected (B paid off), so can repudiate; others only get damages ii. Distinguished from Rowland: car was not stolen, estoppel created possessory interest, not a TFC iii. Bruce: F had a bailment interest (not ownership); therefore, it was not a TOTAL failure of consideration, only partial; should not have been allowed to reject goods • Does the seller have the power to vest full and complete rights over the goods in the buyer? a. In 16(a), the right to sell means the seller has the power to vest full and complete rights over the goods in buyer b. Niblett v Confectioner’s Material: If the goods sold are subject to a trademark infringement injunction then the seller had no right to sell the goods in breach of 16(a) i. Facts: 3000 cases of milk- 2000 delivered, 1000 were subject to a trademark infringement injunction (Nissly) ii. Note: judge said if trademark infringement did not operate against buyer, might not be breach c. J Barry Windsor v Belgo: If sale is prevented by a process of law, seller will be in breach of 16(a) i. Facts: sale of lamps that did not meet government requirements, were not allowed to be sold • Warranties of quiet possession (16(b)) and freedom from charges encumbrances (16(c)) a. Sellers will want to contract out of these because it may make them responsible for things they do not know about b. S 16(b) overlaps with both 16(a)+(c), basically says that no 3rd party is going to come along and interfere i. This protection is ongoing for a period of time following transfer of possession c. S 16(c) is tested at the time the contract is made, that the property is free of any 3rd party security interests i. New charges could arise between the contract being made and possession transferring, (b) can be argued d. S 20(3) states that in this standard consumer context for new or used goods, the parties cannot contract out of s.16, which deals with 3rd party interests e. Microbeads AC: can recover damages for period of time after transfer, even if the vendor was innocent i. Facts: Swiss company sold line painting machine that infringed patent of US company; company asserted rights after sale – buyer successfully claimed breach of 16(b)