Ownership of Property in a Bulk, And Right to Possession
Hyde Onuaguluchi*
Abstract
The rule that no property can pass in unascertained goods can cause serious difficulties to people engaged in the bulk trade such as petroleum and grains merchants. This article seeks to highlight the problems involved and as much as possible proffers some ways whereby some of those problems highlighted may have been addressed or may still be addressed.
1. Introduction
The rule that no property can pass in unascertained goods can cause serious difficulties to people engaged in the bulk trade such as petroleum and grains merchants. It may be recalled that section 16 of the Sale of Goods Act 1893 provides that property in unascertained goods cannot pass unless and until the goods are ascertained. This article seeks to highlight the problems involved and as much as possible proffers some ways whereby some of those problems highlighted may have been addressed or may still be addressed. Of course the starting point is to define some legal terms which pervade this area of law and which may occasionally cause some difficulties to a young lawyer and merchant alike due to the fact that some of the terms are capable of being employed in more than one context. For example, how can one explain what Earl Jowitt said “… English law has never worked out a complete logical and exhaustive definition of possession.”[1] And yet the word possession is the soul of international sale of goods.
2. Property
First, it is important to dispel one common notion concerning property. Generally, people sometimes speak loosely of property as the thing which is owned. This is because such a notion obscures certain salient features of property as a legal phenomenon.[2] Although property can be said to be a relation between the owner and a thing, it is still possible for conflicting claims to be brought by two or more ‘subjects’ in respect of the same ‘object.’ Property is therefore the name given to the bundle of mutual rights and obligations which may prevail between ‘subjects’ in respect of certain ‘objects.’ The fact or law of the matter should rightly be that “property is not a thing, but a set of legal relations between persons governing the use of things.”[3]
According to Gray three important points would readily emerge from any reasonable definition of property as follows:
(a) Property is not a thing but rather a set of legal relations existing between persons in respect of thing;
(b) Property is a relative not absolute concept. Two or more ‘subjects’ may have concurrent property rights in respect of the same ‘object’ and these rights may or may not conflict;
(c) Property is a dynamic relationship. Both the ‘subjects’ and ‘objects’ of property may change.[4]
Characteristics of property rights have been stated as follows:
… Before a right or an interest can be admitted into the category of property, or of a right affecting property, it must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability.[5]
The common law recognises two types of property rights over personal rights. They are:
(i) Ownership, and
(ii) Possession (for a limited interest including liens, and rights under a pledge).
Both rights are assignable and are enforceable against third parties. But it should be borne in mind that property rights are relative and not absolute since under certain circumstances, common law property rights may be overridden and equitable rights may be defeated.[6]
2.1 Ownership
Black’s Law Dictionary[7] defines ownership as:
Collection of rights to use and enjoy property, including right to transmit it to others …. The right of one or more persons to possess and use a thing to the exclusion of others; ownership of property is either absolute or qualified. The ownership of a property is absolute when a single person has the absolute dominion over it, and may use it or dispose it according to his pleasure, subject only to general laws. The ownership is qualified when it is shared with one or more persons, when the time of the enjoyment is deferred or limited, or when the use is restricted.
In connection with burglary, “ownership” means any possession which is rightful against the burglar.
According to Goode,[8] ownership attracts several advantages, and some disadvantages in law and is frequently a condition precedent to the assertion of contractual rights. Goode stated that ownership carried with it the right to possession, where no one would have a better right and that such a right would be protected by the law of torts, in particular the law of conversion. He also stated that acquisition of ownership is a prerequisite to certain statutory transfer of contractual right, such as the transfer of the shippers rights under a bill of lading to a consignee or indorsee under section 1 of the Bill of Lading Act 1855.[9]
Goode posited that it was upon the debtor’s insolvency that the distinction between ownership and personal right to an asset would become crucial since according to him, owners and secured creditors could withdraw from the pool of the asset they owned or over which they had security, whilst unsecured creditors would be left to prove in competition with each other after proprietary right, the expenses of the insolvency proceedings and claims of preferential creditors might have been satisfied.
From the foregoing therefore, it appears right to state that:[10]
The right to possess viz have exclusive physical control of a thing, or to have such control as the nature of thing admits, is the foundation on which the whole superstructure of ownership rests.
2.2 Possession
Black’s Law Dictionary[11] defines ‘possession’ as
Having control over a thing with the intent to have and exercise control; the detention and control, or the mutual or ideal custody, of anything which may be subject of property, for one’s use and enjoyment, either as owner or as the proprietor of a qualified right in it, and either held personally or by another who exercises it in ones place and name. The law, in general recognizes two kinds of possession: actual possession; and constructive possession.
However, before proceeding with this topic, it appears necessary to restate that Earl Jowitt had observed that “English law never worked out a completely logical and exhaustive definition of “possession”[12] and Bell[13] posited that “possession” had no single meaning, and was used in difference senses, in different context, since according to him it was reasonable that the essence of possession was control and the degree of control required for a particular rule would depend on the purpose of that rule. He stated that the price of the inherent flexibility in the said definition was ‘uncertainty’.
It may be recalled that Black’s Law Dictionary above stated that the law recognized two kinds of possession:- actual and constructive.
2.3 Actual and Constructive Possession
A summary of actual and constructive possession is presented below in the form of examples so as to give an idea of the subject matter:
(a) Where a bailee holds possession of a chattel for his own interest, for example, asserting a right of lien, the bailor maintains a right to possess but does not have legal possession of the chattel because possession is single and exclusive.
(b) But where the bailee holds possession for the bailor’s interest that is to say, he is a bailee at will holding to bailor’s order, both will share legal possession and the bailor may be said to have constructive possession.
(c) When right to possess is separated from possession, it may be called constructive possession.
(d) According to Pollock and Wright: [14]
‘Actual possession’ as opposed to ‘constructive possession’ is in the same way an ambiguous term. It is most commonly used to signify physical control, with or without possession in law … The whole terminology of the subject, however is still very loose and unsettled in the books …
2.4 Importance of Possession
One might be tempted to ask, why bother with a rule of law or legal terminology which is still very loose? The answer is of commercial importance, so careful attention should be paid in every case to ascertain the context of every type of possession. The following are some commercial importance of possession:
(i) It is relevant to acquisition of legal ownership and other legal interests such as bailment, pledges and liens.
(ii) In a contract of sale of goods, passing of ascertained and identifiable property may not depend on possession.[15] But in bulk cargo, property under the old law cannot be transferred until ascertained.[16]
(iii) The plaintiff in an action for conversion must either have been in actual possession or entitled to immediate possession before the conversion.
(iv) Possession may be relevant in cases of insolvency.[17]
In Nigeria the law relating to sale of goods is contained in Sale of Goods Act, 1893 of the United Kingdom which is a statute of general application in Nigeria.[18] Some states such as former Bendel State, Lagos State and former Western Nigeria have enacted their own Sale of Goods Laws. But it may be more convenient to employ the Sale of Good Act 1979 of the United Kingdom which is a successor to the Sale of Goods Act 1893 for this article. It may be recalled that it was stated earlier that this article would discuss delivery, passing of property and passing of risk as follows:
3.1 Bulk Cargo
3.1.1 Definition: Delivery; and Specific Goods
Section 62 provides as follows:
- ‘delivery’ means voluntary transfer of possession from one person to another [except that in relation to section 20A and 20B … it includes such appropriation of goods to the contract which results in property in the goods being transferred to the buyer][19]
- ‘specific goods’ means goods identified and agreed on at the time a contract of sale is made [and includes an undivided share, specified as a fraction or percentage of goods identified and agreed on as aforesaid].[20]
3.1.2 Passing of Property
This article concerns bulk cargo so the provision relevant to passing property in such cargo is section 16 which provides as follows:
16. Goods must be ascertained
[Subject to Section 20A below][21] where there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained.
2.1.2 Passing of Risk
The purpose of a contract of sale of goods is the transfer of property (ownership) from the seller to the buyer. Therefore:
(i) If the goods have not been appropriated or ascertained from a bulk cargo, pursuant to section 16 of the Sale of Goods Act, no property or risk has passed and any loss will normally fall on the seller. Section 20 provides as follows:
20. Risk prima facie passes with property
(1) Unless otherwise agreed, the goods remain at the sellers 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 buyers risk whether delivery has been made or not.[22]
(2) But where delivery has been delayed through the fault of either buyer or seller the goods are at the risk of the party at fault as regards any loss which might not have occurred but for such fault.[23]
(3) Nothing in this section affects the duties or liabilities of either seller or buyer as a bailee or custodian of goods for the other party.[24]
From the foregoing it is clear that since this article concerns bulk cargo, a situation may arise in which the unascertained cargo may still be in the possession of the seller and property may not have been transferred to the buyer (because of section 16), before either the cargo is lost or the seller becomes insolvent.
At this point, it appears reasonable to look at what Goode said about ‘Ownership’ in insolvency as follows:[25]
In commercial world, the distinction between ownership of an asset and purely personal right to acquire an asset, e.g. under a contract, is usually of little significance so long as the debtor is traceable and solvent, for the interest of a commercial creditor in the performance of a transfer undertaking is usually monetary rather than in ownership for its own sake … it is upon the debtor’s insolvency that the distinction between ownership and a personal right to an asset becomes of crucial significance for its basic policy of insolvency law to adopt the non-bankruptcy ordering of rights and thus to respect proprietary rights held by another prior to the debtor’s bankruptcy … owners and secured creditors can withdraw from the pool the assets they own or over which they have security, whilst unsecured creditors are left to prove in competition with each other for such crumbs as remain ….
3.0 This article will at this point discuss the implication of section 16 in relation to bulk cargos and bulk carriers by sea. To that end two cases will be discussed. They are, (a) The Aramis,[26] and (b) The Gosforth.[27]
3.1 The Aramis
It may be recalled that section 16 of the 1979 Act provides that in the contract to an export sale of unascertained goods, (or even warehouse unascertained goods), the property does not pass to the buyer unless and until the goods are ascertained.[28]
As a general principle, the passing of full title to the goods depends upon the ability to identify the goods. Therefore in The Aramis[29] the ship was trip chartered for a voyage from South America to Europe. Linseed was loaded in bulk and two parcels were to be delivered from this bulk at Rotterdam. One parcel was subject to bill of lading No. 5 (204 tonnes), the other bill of lading No. 6 was for 255 tonnes. At Rotterdam, it was discovered that there was a considerable shortage of cargo, possibility because of over-delivery at an earlier port of call. Only 11.55 tonnes was delivered on presentation of bill of lading No. 6. No delivery at all was made under bill of lading No. 5. The goods in question formed part of a single undivided bulk and pursuant to section 16 of the Sale of Goods Act 1979[30] no property in the goods had passed to the plaintiff purchasers who were therefore not entitled to sue the shipowners under section 1 of Bill of Lading Act 1855.[31] The plaintiffs claimed that if the Bill of Lading Act did not protect them, they could claim under Brandt v Liverpool, Brazil and River Plate Steam Navigation[32] (implied contracts). The Court of Appeal rejected their claim and held that mere presentation of bill of lading coupled with non availability of any goods to deliver was not sufficient to find an implied contract for the holder of bill of lading No. 5. The court stated that it was obvious that the draftsman of the 1855 Act was not concerned with undivided bulk cargos consigned or assigned to a number of different consignees and assignees, and called for a commercially workable solution to the problem of passing of property in undivided bulk cargos, along the line of the United Kingdom Law Commission’s review on the matter.
Based on the recommendation of the Law Commission the Carriage of Goods by Sea Act 1992 was enacted by United Kingdom Parliament and Section 3(1)(a) of the 1992 Act appears to have addressed the problem discovered in The Aramis. The Section 3(1)(a) provides as follows:
3. Liability under shipping documents
(1) where subsection (1) of section 2 of this Act operates in relation to any document to which this Act applies and the person in whom rights are vested by virtue of that subsection[33]
(a) takes or demands delivery from the carrier of any of the goods to which the document relates;
(b) …
(c) …
that person shall … become subject to the same liabilities under that contract as if he had been a party to that contract.
3.2 The Gosforth[34]
As stakeholders were still considering the effect of the 1992 Act on bulk carriers especially in respect of grains and petroleum, it soon became obvious to the Law Commission that from a decision in he Netherlands in The Gosforth, the 1992 Act might not have covered the critical aspects of passing of property in unascertained goods forming part of a bulk, to third parties. The Dutch decision had made a passing reference to the fact that under English law which governed the contract in The Gosforth, section 16 of Sale of Goods Act 1979 prevented property passing before goods were ascertained.
In the Gosforth, a Brazilian company ‘Commodity SA’ agreed to sell to ‘Josco USA,’ 50 – 60 thousand tons of citrus pulp pellets, f. o. b. Santos, payment to take place within 15 days of the issuance of any bill of lading. Pursuant to the contract 6,000 tons of the goods were loaded on 8 January 1985 at Santos by ‘Commodity’ into the Gosforth for shipment to Rotterdam.
‘Josco USA’ should have paid ‘Commodity’ for those goods (US$420,000) by 23 January 1985 but failed to do so. ‘Commodity’ invoiced ‘Josco USA’ for that sum on 8 January but endorsed the bill of lading in blank and handed it to ‘Josco’s’ local agents who forwarded it to ‘Josco N-L,’ the Dutch agent to ‘Josco USA.’ The document of title to the goods had thus been surrendered by ‘Commodity’ without their having received payment for it.
When ‘Josco N-L,’ received the bill of lading, they handed it to ICM, a Dutch company which is a member of SGS group of international surveying and valuing companies. ‘Josco’ had resold the goods in smaller parcels to 13 European buyers, and ICM was requested, as was usual in the trade to issue delivery orders in respect of those parcels. ICM retained the bill of lading and gave 13 delivery orders to ‘Josco N-L.’ The delivery orders were handed to Bank Mees and Hope N.V at Rotterdam, and on 17 January 1985 the European purchasers received their respective delivery orders by making appropriate payment to the bank.
When the Gosforth[35] arrived on 29 January 1985, ICM surrendered the bill of lading to the shipowner’s local agents and were given in return, delivery order confirming that the shipowner would deliver the goods under the bill of lading to ICM. They probably were not aware that the previous day 28 January 1985 ‘Commodity’ had in the light of ‘Josco’s’ failure to pay the price, applied for and been granted permission by the District Court of Rotterdam to attach the goods. When the ship arrived, the goods were off-loaded into a warehouse for account and risk of the rightful claimants.
In this case the plaintiffs were the 13 European buyers and ICM (second plaintiffs); the defendants were ‘Commodity SA.’ The European buyers claimed that the attachment was unlawful since they were the owners of the goods. They sought the order of court for the goods to be delivered to them under the ICM delivery orders. They also argued as follows:
(i) that when the bill of lading was transferred by ‘Josco NL’ to ICM, property in the goods passed to ‘ICM’
(ii) That under the delivery orders, ICM acknowledged that they held the goods for the European buyers
ICM in adopting the above argument, further contended that they never held the bill for or on behalf of ‘Josco USA’ or ‘Josco NL,’ but for themselves in order to be able to fulfill their obligations towards the European buyers, who were the holders of their delivery orders;
On their part ‘Commodity’ argued as follows:
(a) ICM had never become owners of the goods, whether by transfer of the bill of lading or otherwise
(b) ICM were at all times the agents of Josco USA carrying out the instructions of their principal
(c) The European buyers were not the owners of the goods at the time when the attachments were levied
(d) They could not become owners of the goods because property in them could only be transferred at the moment of actual delivery when the bulk was broken down into the individual parcels for each purchaser.
It should be mentioned here that the sales from ‘Josco USA’ to the European buyers were on the terms of Grains & Free Trade Association (GAFTA) form 100, which provides that the shipping documents to be supplied shall include full set of onboard bill(s) of lading and / or ships delivery order(s) and / or other delivery orders in negotiable and transferable form. Such other delivery orders as the ones issued to the European buyers were required to be certified by the shipowners, their Agents or recognized Bank: But the delivery orders issued to them do not appear to have been so certified.
The District Court at Rotterdam decided in favour of ‘Commodity’ and dismissed the applications of the European purchasers and ‘ICM.’ The court also held as follows:
(i) That as between ‘Josco USA’ and ICM, the later were merely agents of the former;
(ii) That ‘ICM’ had a right, as against the shipowner, to receive delivery of the goods, which right could have been enforced but for the order of attachment;
(iii) It did not however mean that ICM were in their own right, owners of the goods. They were only agents of ‘Josco USA,’ who failed to pay for the goods and against whom an attachment could validly be made;
(iv) The European buyers were only holders of ‘ICM’s’ delivery orders which gave them no title to the goods. All that the delivery order conferred was a right to delivery against ‘ICM.’;
(v) The sale contracts between ‘Josco USA’ and the European buyers were governed by English law in which the holder of a merchant’s delivery order (in contrasts to a ships delivery order) only obtained title to the goods upon the physical delivery and not upon transfer of the delivery order.
This case remained very important even after the Carriage of Goods by Sea Act 1992 had repealed the Bill of Lading Act 1855. This is because the 1992 Act applies to contracts covered by:[36]
- bill of lading
- sea waybill
- ships delivery order
However, the document given to the European buyers were merchant’s delivery order. The case also remains important even after the enactment of the Sale of Goods (Amendment) Act 1995 because the amendments contained therein would still not have given the European buyers title to the goods if the Gosforth case were decided today. Some amendments effected by the 1995 Act on the Sale of Goods Act of 1979 are as follows:
With the amendment introduced into the Sale of Goods Act 1979 by the Sale of Goods (Amendment) Act 1995 of the United Kingdom, section 18 rule 5 (3) and (4) provide that property in ascertained bulk in a ship or warehouse or anywhere, may pass to a third party in appropriate circumstances by exhaustion.[37]
The amended section 18 rule 5 of the Sale of Goods Act 1979 which concerns passing of property in bulk cargo is in the following terms:
18. Rule for ascertaining intention
Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time which the property in the goods is to pass to the buyers….
(3) where there is a contract for the sale of a specified quantity of unascertained goods in a deliverable state forming part of a bulk which is identified either in the contract or by subsequent agreement between the parties and the bulk is reduced to (or less than) that quantity, then if the buyer under that contract is the only buyer to whom goods are then due out of the bulk –
(a) the remaining goods are to be taken as appropriated to that contract at the time when the bulk is so reduced; and
(b) the property in those goods then passes to the buyer.
(4) Paragraph (3) above applies also (with the necessary modifications) where a bulk is reduced to (or less than) the aggregate of the quantities due to a single buyer under separate contracts relating to that bulk and he is the only buyer to whom goods are then due out of that bulk.
Rules 5 (3) and (4) of section 18 Sale of Goods Act were introduced into the section by the Sale of Goods (Amendment) Act 1995. It appears the Law Commission had hoped that rules 5 (3) and (4) above would address the problem observed in The Aramis[38] in respect of holders of bill of lading Nos. 5 and 6[39] but rule 5 (3) of section 18 concerns an only buyer while rule (4) concerns a single buyer so they do not cover the event that occurred in The Aramis where there were two holders of bills No. 5 and No. 6. Rules 5 (3) and (4) also do not address the problem identified in the The Gosforth[40] where thirteen persons or buyers were issued with delivery orders.
Furthermore, section 20A inserted into the 1979 Act by the 1995 Act provides the basic rule of passing of property in an undivided share in the bulk. So pursuant to section 20A (1) of the Sale of Goods Act 1979:
Property in an undivided share in the bulk would be presumed to have intended to pass to the buyer only when:
- Goods are identified
- The price or part thereof is paid
The presumption would however give way to evidence of a contrary intention.
And pursuant to section 20A(2), where, the section applies and paragraph (a) & (b) above are satisfied and the parties agree, property is transferred to the buyers who become “owners in common.”
The problem in the Gosforth Case is that at the time of the purported sale by ICM to the European buyers, section 16 of the 1979 Act was not subject to section 20(A) and (B) which were inserted by the 1995 Act, and property did not pass to the European buyers before the court injunction was issued. Also as stated above, the European buyers obtained merchants delivery orders instead of ship’s delivery orders: This would make the 1992 Act inapplicable since the 1992 Act applies to bills of lading, sea waybills and ship’s delivery orders only.[41]
Furthermore, although goods in the bulk were identified as required by section 20A(1) of Sale of Goods Act 1979 (as amended) it is submitted that the requirement of the second limb of the section – that price or part thereof is paid should mean that payment should have been made to the “true owners,” but the thirteen European buyers in The Gosforth paid their own money to a person who was not the “owner” of the cargo and therefore they could not have acquired ownership in common.
However if no fraud was intended and ‘Commodity SA’ was only interested in his price pursuant to sections 28, and 44 of the sale of Goods Act 1979[42] there was no reason for the European buyers to have problems since it would have been easy to pay ‘Commodity’s’ price from the money collected from the European buyers, and all the parties would have been satisfied. But then there was litigation and the Commercial Court decided the matter based on the facts of the case especially in view of section 16 of the Sale of Goods 1979 Act which provided as follows:
Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained.
However with the coming into effect of the Sale of Goods (Amendment) Act 1995 of the United Kingdom, section 16 of the Sale of Goods Act now reads as follows:
Subject to section 20A below, where there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained.
As stated earlier, even the amended section 16 above will not assist buyers in the position of European buyers in The Gosforth because the said section 16 is subject to the new section 20A which requires that price should be paid and if price was not paid to the “true owners” of the bulk cargo, neither section 16 nor section 20A can help the type of buyers in The Gosforth.
Fraud may not have been mentioned in the Gosforth but the circumstances of the case would make a prudent merchant suspect fraudulent intent. It may be recalled that ‘Josco USA’ had tried to convince the court that ‘ICM’s’ ‘third party right had intervened and property had passed to ‘ICM;’ and had the court accepted this position, the remedy available to ‘Commodity SA’ would have been to sue for the price of goods against ‘Josco SA’ who might have become insolvent with all its implications. But ‘Commodity’ was able to retrieve his cargo and avoided the unpleasantness of the effects of ‘Josco’s’ insolvency, because the Commercial Court held that property in the cargo did not pass to the European buyers.
On the part of the European buyers, since they paid the price, but the property in the goods did not pass to them, they should claim alongside ‘Josco’s’other creditors if meanwhile ‘Josco’ had become insolvent. It is submitted that the Gosforth case presents all the colorations of fraud and the third world merchants should be advised to be wary.
4. The Contracts (Right of Third Parties) Act 1999
From the foregoing, it has become obvious that trying to review only the law relating bills of lading without a review of the Sale of Goods Act and the doctrine of privity especially as they concerned bulk cargos and passing of property to third party buyers is not particularly useful. It was probably that realization that impelled the English Law Commission to recommend to parliament to review the law of privity with a view to bringing it in harmony with many other jurisdictions.[43] Consequently, the Parliament enacted The Contracts (Right of Third Parties) Act 1999. The statute provides that a third party is entitled to enforce a contractual provision in his or her own name where either the contract contains an express term to that effect[44] or where the contract purports to confer a benefit on a third party,[45] unless in the second limb above, it is clear on a true construction of the contract that the contracting parties did not intend the third party to have a personal right to enforce such benefit.[46] However in both cases the right of enforcement depends upon the third party being expressly identified in the contract by name, class or description.[47]
But then, section 6(5)(a) of the Contracts Rights of Third Parties) Act 1999 provides that in contracts for the carriage of goods by sea the statutory right to enforce a contractual provision is not intended to confer positive rights on a third party, its effect being expressly restricted to enabling a third party to avail himself of an exclusion or limitation of liability provision in such a contract.
The implication of the foregoing is that except for claim by third parties to the right conferred on them by exclusion or limitation of liability clauses in a contract of carriage of goods by sea, any other claim to a positive right by third party will not be covered by the 1999 Act, and such claim of positive right by a third will have to seek a cover from other exceptions to the privity doctrine,[48] since the Act specifically preserves existing common law remedies.[49] It appears appropriate at this point, to mention that Canada and Australia have judicially modified the application of privity of contract in relation to third party benefits.[50]
The contracts (Right of Third Parties) Act 1999 will definitely help the holders of bills of lading Nos 5 and 6 in The Aramis situation but does not appear to be capable of helping the European buyers in The Gosforth situation unless they remember to pay the price to the rightful owners of the goods as provided in section 20A of the Sale of Goods Act 1979 (as amended), which provides as follows:
Undivided shares in goods forming part of a bulk
(1) This section applies to a contract for the sale of a specified quantity of unascertained goods if the following conditions are met –
(a) the goods or some of them form part of a bulk which is identified either in the contract or by subsequent agreement between the parties; and
(b) the buyer has paid the price for some or all of the goods which are the subject of the contract and which form part of the bulk.
(2) Where this section applies, then (unless the parties agree otherwise), as soon as the conditions specified in paragraphs (a) and (b) of subsection (1) above are met or at such later time as the parties may agree –
(a) property in an undivided share in the bulk is transferred to the buyer; and
(b) the buyer becomes an owner in common of the bulk.
(3) Subject to subsection (4) below, for the purposes of this section, the undivided share of a buyer in a bulk at any time shall be such share as the quantity of goods paid for and due to the buyer out of the bulk bears to the quantity of goods in the bulk at that time.
(4) Where the aggregate of the undivided shares of buyers in a bulk determined under subsection (3) above would at any time exceed the whole of the bulk at that time, the undivided share in the bulk of each buyer shall be reduced proportionately so that the aggregate of the undivided shares is equal to the whole bulk.
(5) Where a buyer has paid the price for only some of the goods due to him out of a bulk, any delivery to the buyer out of the bulk shall, for the purposes of this section, be ascribed in the first place to the goods in respect of which payment has been made.
(6) For the purpose of this section payment of part of the price for any goods shall be treated as payment for a corresponding part of the goods.
From the foregoing, it is obvious that with the amendments carried out by the United Kingdom Parliament in respect of the laws governing bills of lading; sale of goods and privity, if the bill of lading issued in The Gosforth had stated that the bulk cargo was for the benefit of the 13 European buyers, as soon as the said European buyers paid the price of the total bulk cargo to the ‘real’ owner – “Commodity,” the 13 buyers could have become owners in common of the bulk cargo in the The Gosforth pursuant to section 20A of Sale of Goods Act 1979 (- as amended).
5. Conclusion
If people understand the concept of property as a dynamic relationship which is liable to change, they will no longer place much trust on the players in this area of activity without adequate background information, since there is currently a great wealth of shipping details available.
Also, to ensure that correct cargo is loaded at all, independent and reputable survey firms should be asked to issue loading certificates. The use of reliable forwarding agents should be agreed between buyer and seller and in Nigeria for example where laws in relation to international trade and shipping are hardly updated, merchant may be advised to always engage the services of shipping lawyers especially for petroleum and grains bulk shipments. It should further be borne in mind that property in this area of activity can be very mobile: it may therefore be useful to remind businessmen in this area of activity to discard the primitive lay notion regarding ownership since according to Ackerman, only the ignorant think it meaningful to talk about owning things free and clear of further obligation. Ackerman stated as follows:[51]
It is probably never true that the law assigns to any single person the right to use any thing in absolute, any way he pleases. Hence, it risks serious confusion to identify any single individual as the owner of any particular thing. At best the location may sometimes serve as identifying the holder of the bundle of rights, which contains a range of entitlement, more numerous or more valuable than the bundle held by any other person with respect to the thing in question. Yet like shorthands, talk about ‘the’ property owner invites the fallacy of misplaced correctness, of rectification. Once one begins to think sloppily, it is all too easy to start thinking that the property owner, by virtue of being ‘the’ property owner, must necessarily own a particular bundle of rights over a thing and this is to commit the error that separates layman from lawyer. For the fact or law of the matter is that property is not a thing but a set of legal relations between persons governing the use of things.
* LL.B (Hons), LL.M, (Buckingham), Ph.D (Nig), is a Legal Practitioner and a Shipping Consultant.
[1] United States of America and Republic of France v Dollfus Meig et Cie SA and Bank of England [1952] AC 582, 605.
[2] K. Gray, Elements of Land Law (Isted, 1987) pp. 8-14, cited in L.S. Sealey & R.J.A. Hooley, Text and Materials in Commercial Law (London: Butterworths, 1994), p.34.
[3] Ibid., p.35.
[4] Gray, note 2 at p. 37.
[5] National Provisional Bank Ltd v Ainsworth [1965] AC 1175 (H.L.), see also S. 16 Sale of Goods Act.
[6] Gray, note 2 at p. 41.
[7] B. A. Garner, Black’s Law Dictionary, (6th ed.) (St. Paul, Minn: West Publishing, 1990), p. 1106.
[8] R.M. Goode: “Ownership and Obligation in Commercial Transactions” (1987) 103 LQR 433, at 433 – 435.
[9] Section 375(1), Merchant Shipping Act, CAP M 11, LFN 2004 is in similar terms which have now been repealed by the Carriage of Goods by Sea Act 19921992 Act of United Kingdom. In Nigeria S. 375(1) of CAP. M 11 LFN 2004 is still in force.
[10] A.M. Honoré, in Oxford Essays in Juriprudence ‘Ownership’ (1961) (ed A.G. Guest) pp. 107 – 108 – cited by Sealy and Hooley, note 2 at p.44.
[11] Garner, note 7 at p. 1163.
[12] United States of America and Republic of France v Dolffus Mieg et Cie SA and Bank of England [1952] AC 582, 605.
[13] A. Bell (at p. 34) – cited by Sealy & Hooley, note 2 at p. 54.
[14] F. Pollock and R.S. Wright An Essay on Possession in the Common Law (1888), p. 50 – cited by Sealey and Hooley, note 2 at p. 53.
[15] (UK) Sale of Goods Act 1979, S. 18 v. 1.
[16] S. 16 The 1979 Act has now been amended by the Sale of Goods Act 1995. UK has now introduced ownership of bulk cargo if part of the price has been paid. s. 1(3) of the 1995 Act introduced s. 20A into the 1979 Act. It is doubtful if this amendment is available in Nigeria.
[17] The remedy of rights of unpaid seller – ss 39 – 46, S.G.A. 1979 (UK).
[18] s. 62(2). The 1893 Act is almost in similar terms as the Sale of Goods Act 1979 of the United Kingdom – which has further been amended by the Sale of Goods Act 1995 (UK). Since this article concerns international sale of goods and since the Nigerian statute originated from the UK, it may be reasonable to adopt Sale of Goods Act 1979 UK for this article.
[19] Contained in brackets are amendment introduced by S.G.A. 1995.
[20] Brackets contain introduction by the 1995 Act.
[21] Brackets contain amendment introduced by the 1995 Act.
[22] G. Ezejiofor, C O. Okonkwo, C.U. Ilegbune, Nigerian Business Law (London: Sweet & Maxwell, 1982) p. 158.
[23] It may be recalled that transfer of bill of lading is deemed to be the transfer of title to the goods – but transfer of bill is not the same as the transfer of possession.
[24] That is where the cargo has not been lost to perils of voyage.
[25] Goode, loc. cit., note 8 at 436 – 438.
[26] [1989] 1 Lloyd’s Rep 213.
[27] [1985] Nr. 91.
[28] See, Obestain Inc. v National Mineral Development Corporation Ltd. Sanix Ace [1987] 1 Lloyd’s Rep 465, 469, per Hobhouse J.
[29] [1989] 1 Lloyd’s Rep 213 CA.
[30] Or s. 16 S.G.A. 1893.
[31] Or s. 375(1) Merchant Shipping Act, Cap. M 11, LFN, 2004.
[32] [1924] 1 KB 575, CA.
[33] Subsection(1) of section 2 provides that lawful holders of bill of lading or sea waybill or ship’s delivery orders shall have transferred to and vested in him all rights of suit under the contract of carriage; irrespective of whether or not they are the owners of the goods covered by the document. There is still some doubt if mere right to suit alone can remove the effect of s. 16 S.G.A 1979 without the amendment introduced by s. 1(3) of Sale of Goods Act 1995 of the United Kingdom.
[34] [1985] Nr. 91.
[35] Ibid.
[36] S.1 (1) Carriage of Goods by Sea Act 1992.
[37] See s.1 (2) of Sale of Goods (Amendment) Act 1995. (United Kingdom).
[38] [1989] 1 Lloyd’s Rep 213.
[39] see para 3.1 supra.
[40] [1985] Nr. 91.
[41] s.1 (1), Carriage of Goods by Sea Act, 1992.
[42] Section 28 provides that payment and delivery are concurrent conditions and section 44 provides that when a buyer is unable to pay for the goods, the unpaid seller has the right of stopping the goods in transit and resume possession as was done in the The Gosforth case.
[43] Reforming Privity of Contract, Report No. 242 (1996).
[44] S.1(1) (a), Contracts (Right of Third Parties) Act, 1999.
[45] S.1(1) (b), ibid.
[46] S.1(2), ibid.
[47] S.1 (3), ibid.
[48] The first limb of the new statutory enforceability test appears to prove an alternative solution to the use of a Himalaya clause. The standard modern Himalaya clause expressly extends the protection of the terms of the contract of carriage by sea to any servant or agents of the carrier (including independent contractors employed by the carrier).
[49] S.7(1).
[50] London Drugs v Kuchne & Nagel (1992) 97 D.L.R. (4th) 261: Trident General Insurance Co. Ltd v McNiece Bros Pty Ltd (1988) 165 C.L.R. 107.
[51] Bruce Ackerman – cited in Gray, op. cit., note atpp. 8 – 14.