ANSWER GUIDE TRANSFER OF PROPERTY & RISKBasic structure:1. Is this a contract for the sale of goods?a. S4(1) SGAb. Ramifications of being a SG contract2. Classification of the goods & the effect of that classificationa. Existing SGA s 8i. Specific?ii. Unascertained?3. When do the goods pass?a. Intention of the parties SGA s20(1), ORb. SGA s21 rulesi. Rule 1 specific + deliverableii. Rule 2 specific, but not deliverableiii. Rule 3 specific, deliverable, but price not determinediv. Rule 4 approval or sale/returnv. Rule 5 unascertained goodsc. Is there a reservation of title clause?i. SGA s 22ii. Romalpa clause4. Risk prima facie passes with property s23 SGAa. Delayed through fault?i. Buyer fault?ii. Seller fault?5. ConclusionHeading: Is this a contract for the sale of goods?ANSWER:A sale of goods contract (SOGC) exists when the seller transfers property rights to the buyer for a money consideration called the price, SOGA s 4(1). In a SOGC, the time must be ascertained when ownership of goods passes from seller to buyer. Here, A SOGC exists as there has been a transfer in title of goods for a price, SOGA s 4(1). Heading: Classification of goods & the effect of that classificationANSWER:Depending on how goods are classified will determine when property will pass. Goods may be either existing (SOGA s 8) or future (SOGA s 3),. Goods can be further classified as [specific, SOGA s 3/unascertained].

Here, [SELECT BELOW]:If existing & specificANSWER:The goods already exist and have been clearly identified when the contract was made, SOGA s 3. The property will pass when the parties intend the property to pass, SOGA s 20(1). NOTE: If no clear intention, look at the terms of the agreement, the conduct of the parties and the circumstances of the case.

If existing & unascertainedANSWER:The goods already exist, but have not yet been ascertained because [state why theyre not ascertained yet], SOGA s 3. Goods will not pass until they are ascertained, irrespective of the parties intentions, SOGA s 19. Eg: a specific quantity of a bulk supply of wheat being sold by the seller. The goods will be unascertained it hasnt been identified which specific tonne youre entitled to. Whenever you buy goods based on description (eg, on the internet), the goods will be unascertained!If futureANSWER:The goods do not exist yet, and therefore cannot be ascertained, SOGA s 3. Goods will not pass until they are ascertained, irrespective of the parties intentions, SOGA s 19.May be identified and agreed upon at the time of the sale (specific), but the seller may not be the owner at the time of the contract (eg A agrees to buy from B, but B needs to buy from C first). Or, they may not exist at all (eg, seller is going to manufacture the goods).

Heading: When do the goods pass?ANSWER:Where no different intention appears, SGA s 21 will determine when property passes. Here, the goods are:RULE ONE - Specific & deliverable ANSWER:Property will pass to the buyer when the contract is made, regardless of whether payment or delivery is postponed. Therefore, property will pass when [A] and [B] contracted, on [date]. This is like going to a car yard, selecting a specific car, and signing the contract there and then.

RULE TWO - Specific, but not deliverableANSWER:Property will pass to the buyer when the thing which needs to be done to the goods is done and the goods are in a deliverable state, and the buyer has notice thereof. Therefore, property will pass when [A] [does what he was meant to do] to the [goods] and [B] has notice. This is like going to a car yard, selecting a specific car, but then asking for the windows to be tinted. Until the windows are tinted and the buyer knows that the job is done, the property will not pass. RULE THREE - Specific, deliverable, but the price has not been determinedANSWER:Property will pass when [B] does some act or thing with reference to the goods for the purpose of ascertaining the price. Therefore, property will pass when [A] [weighs/measures/tests] the [goods], and has determined a price for the goods. This is like buying apples from a fruit shop, selecting six apples, but the seller needs to weigh them to work out the price. Property will not pass until the seller works out how much the apples cost.

RULE FOUR - On approval/on a sale or return (On consignment)ANSWER:Property will pass to [B] when: [SELECT BELOW]a) [B] signifies approval or acceptance to the seller, or any other act adopting the transaction; ora. Eg, ringing the manufacturer and saying I want to buy it, or on-selling to someone else. ANY act inconsistent with returning the car. b) If the buyer retains the goods without notice of rejection for a fixed time, or if no time has been fixed, for a reasonable time (question of fact).a. If the parties have agreed on 3 months, and the dealer keeps the cars, property passes after 3 months. If no time, reasonable would be determined by such a period of time that it would be unreasonable to send them back.Therefore, property will pass to [B] when he [adopted the transaction/retained the goods without notice of rejection beyond the time affixed]. This is like a financier delivering some cars to a motor vehicle dealer on a contract for sale or return for, say, 3 months. The dealer gets possession and can keep them for 3 months and can think about whether they want to buy them. If a customer comes to the dealer, the dealer may decide they want to buy from the manufacturer in order to sell to the consumer. CONTRARY INTENTION: Weiner v GillDealer delivered to a third party, who stole the goods. Contract stated goods pass when settled for or charged, but the goods were stolen. Act adopting vs. term of ownership. HELD: Term of ownership wins parties had expressed the intention that property would not pass until PAID for. Despite adopting the transaction, the goods still belonged to the manufacturer manufacturer beared the loss.

GOODS DAMAGED: Poole v Smiths car salesAugust 1960 Owners left a car with a dealer for $325. October owner asked for return but was told the dealers were holding a deposit on it (about to sell it). November 3, owner demanded return within 3 days or the price. Returned at end of November, but damaged through dealer employees unauthorised use. HELD: The possessor will be liable for damage that occurred through their own fault, or beyond the time specified for the goods to be returned, or after a reasonable time. Motor vehicle dealer liable because damaged through fault + reasonable time expired (after 7th nov = unreasonable). This means if goods are on a contract for sale/return, and damaged while with possessor, and not possessors fault, and reasonable time hasnt elapsed, then the owner will bear the risk unless theres a contrary intention in the contract.

AGENCY RELATIONSHIP OR CONSIGNMENT?Agency Property will pass from the wholesaler to the customer through the dealer, as agent. The dealer will never own the goods as he has no right to buy them hes merely an agent. Consignment Property will pass to the dealer when the dealer pays the wholesales, or under rule 4.

RULE FIVE - UnascertainedANSWER:Unascertained goods will pass from [A] to [B] once they have been unconditionally appropriated to the contract, Carlos Federspiel/SOGA s 21. Unconditional appropriation will occur when the goods are undoubtedly destined for [B], Carlos Federspiel. Mere setting aside is not sufficient, Carlos Federspiel. Unconditional appropriation can occur via exhaustion, Karlshamns Olfefabriker.

Here, [A] has unconditionally appropriated the goods to the contract by [exhaustion/placing the items beyond retrieval]. Therefore, property will pass to [B] when [A] [state how A unconditionally appropriated the contract]. Carlos FederspielBicycles were sold, buyers paid the price. The goods needed to be shipped. They were addressed and the shipping space was to be booked, but no shipping space was available direct. The buyers said to ship to new york. In the interim sellers went bust. No unconditional appropriation, even through goods were of contractual description, in deliverable state and marked up for shipping, this was only mere preparatory steps. Karlshmans OlefabrikerContract to sell 6000 tonnes of copra, but seller was shipping 22,000 tonnes. Along the way, 16,000 tonnes was dropped off and 6000 tonnes was left. This was appropriation by exhaustion. Also note, appropriation by delivery to buyer, carrier or other bailee for transport to the buyer:If the seller delivers goods to the buyer, carrier or other bailee for transport to the buyer and does not reserve right of disposal then the seller would have unconditionally appropriated the goods to the contract. Assent must be present. Assent?Eg, ordering online, ticking a box saying Australia post is ok, youve assented to a carrier. Goods will be unconditionally appropriated once seller delivers to the carrier. Heading: Is there a reservation of right of disposal clause?ANSWER:Property will not pass if a reservation of disposal (Romalpa) clause is present and the conditions of the clause have not been fulfilled, SGA s 22. This is indicative of an agreement to sell, rather than a sale (a conditional sale). Here, clause [##] appears to be a Romalpa clause which requires [B] to [state what the clause requires B to do]. Basic form; Buyer may take possession of goods sold Buyer has untilto pay price Property in the goods will not pass to the buyer until price paid Risk of loss passes to buyer on deliveryGenerally must be kept separate from other stock. Must deposit proceeds in a separate bank account. Buyer holds the goods or proceeds on behalf of the seller; the buyer is a trustee. If the buyer sold the goods, then the equitable remedy of tracing will be of use to the seller.

Romalpa Reservation of right of disposal clauseSellers sold foil to buyer. Buyer went into liquidation owing sellers $122000. $50,000 worth of foil and a bank account with $35,000 was found in the buyers possession. Seller took back the $50,000 and claimed a charge on the $35,000 in proceeds. HELD: Seller entitled to trace the $35,000.

Associated AlloysAA delivered steel to MEF. MEF used AAs steel to manufacture things and sold to third parties. MEF did not keep the money separate and it wasnt possible to relate any payment to AA AA had no evidence to link MEF with their product. Clause in the contract stated if buyer used goods in some process, then buyer to hold proceeds of manufacturing on trust for seller. HELD: seller had a trust over payments made by third party buyer, but they couldnt prove the link with sellers product, so they failed.

Heading: What is the effect of property passing?ANSWER:Risk prima facie passes with property, SGA s 23(1).

If no fault-based delay by either partyANSWER:Given that no fault-based delay has occurred, the risk in the property passes when [state when property passed to B].

If fault based delayBy the seller [A]ANSWER:However, here [A] has caused a delay by [state how A delayed delivery]. This will mean that [A] will bear the risk and the loss of the property, SGA s 23(2).

By the buyer [B]ANSWER:However, here [B] has caused a delay by [state how A delayed delivery]. This will mean that [B] will bear the risk and the loss of the property, SGA s 23(2).Allied Mills v Gwydir Seller delaySale of 130 tonnes of linseed meal. Agreed delivery during February, but seller failed to deliver 100 tonnes. In march a fire occurred and destroyed the 100 tonnes. HELD: Specific goods (I want THAT 130 tonnes), property had passed to the buyer. Normally, risk would pass with property, but the seller had delayed delivery. Seller bore the risk per SGA s 23(2).

Sterns v Vickers Buyer delay120,000 gallons of spirit purchased from a 200,000 gallon tank. Seller gave buyer a delivery warrant. Before severance from the 200,000, quality had deteriorated. HELD: unascertained goods (200,000 in tank, no one knows which 120,000 we get). Because goods unascertained, property had not passed to buyer risk is still with the seller per s23(1). But, buyers fault they hadnt taken delivery buyer at fault per s23(2) buyer at risk because they delayed.

Heading: ConclusionANSWER:State:1. When the property passed and WHY it passed (rule 1/2/3/4/5)2. Who bears the risk & loss.

ANSWER GUIDE SECURITY INTERESTS1. Is a security interest present?a. S 12(1) PPSAb. s 12(2) PPSA2. Has there been attachment s19 PPSAa. A security interest attaches to collateral when:i. the grantor has rights in the collateral; andii. the creditor has given value for the security interest.3. Is there enforceability s20 PPSAa. Generally, must be signed and include description of the collaterali. Serial no. required for cars & boats described as consumer property4. Is there perfection s 21PPSA?a. If the security interest has been registered5. Will [A] take free of the security interest?a. S 43 unperfected security interestsb. S 44 SN propertyc. S45 (1)(2) motor vehiclesd. S 45(3)(4) licensed motor vehicle dealerse. S 46 ordinary course of business f. S 47 low value personal, domestic, household property6. If no taking free, SI continues in the property s32 PPSAHeading: Has a security interest been created?ANSWER:A security interest is an interest in personal property which secures payment or performance of an obligation, PPSA s 12(1). PPSA s 12(2) details which types of transactions may be deemed security interests. The transaction here, a [SELECT BELOW]:a) A fixed chargeb) A floating chargec) A chattel mortgaged) A conditional sale agreemente) A hire purchase agreementf) A pledgeg) A trust receipth) A commercial consignment, PPSA s 10 defn.i) A lease of goodsj) An assignmentk) A transfer of titlel) A flawed asset arrangement

will be considered a security interest, PPSA s 12(2).

Heading: Can the security interest be enforced against third parties?ANSWER:In order for a security interest to be enforceable against third parties, three elements must be satisfied; attachment (PPSA s 19), enforceability (PPSA s 20), and perfection (PPSA s 21).

Heading: Has there been attachment?ANSWER:A security interest will only be enforceable if it attaches to the collateral, PPSA s 19(1). This will occur when the grantor has rights in the collateral and the secured party has given value for the security interest, PPSA s 19(2)(a). Here, [person who receives the goods the GRANTOR] has rights in the collateral and [the person giving the goods the SECURED PARTY] has given value. NOTE: Grantor has rights in goods leased or consigned when they obtain possession, PPSA s 19(5).

Heading: Has there been enforceability?ANSWER:A security interest will be enforceable against third parties if the contract is signed by the grantor and contains a description of the collateral, PPSA s 20(2)(a)-(b). In the case of consumer property, the collateral needs to be described by serial number, PPSA s 20(2)(4). Here, the goods have been clearly described [by serial number], making the SI enforceable against third parties.

Heading: Is the SI perfected?ANSWER:Perfection will occur when the collateral has been registered on the PPSR, PPSA s 21(2). Here, this [has/has not] occurred.

Heading: Will [B] take free of the security interest?Given that [attachment/enforceability/perfection] has occurred, for [third party] to take free, one of the taking free rules will need to apply, PPSA s 43-47. [APPLY EACH OF THE RULES, EVEN IF THEY DONT APPLY]

S 43 UNPERFECTED SECURITY INTERESTSIF IT DOESNT APPLY:Here, s43 will not apply because the security interest is perfected. IF IT APPLIES:Here, s43 will apply because the security interest has not been perfected. [third party] will take free under s 43. EXAMPLE:X obtains a loan from Bank Y to buy a forklift and gives a mortgage over the forklift to the bank. The bank does not register the security interest on the PPS register and lets X have possession. X then sells the forklift to Z. Z will take free because the interest was unperfected.

NOTE: the next three exceptions do not apply to inventory. Inventory = personal property that is held for sale or lease, or that have been leased, PPSA s 10.

S44 SERIAL NUMBER INCORRECT OR MISSINGIF IT DOESNT APPLY:Here, s44 will not apply because the serial number is not incorrect or missing, and searching the register would have disclosed the registration of the SI. IF IT APPLIES:Here, s 44 will apply because the serial number was incorrect or missing searching the register would not have disclosed the existence of a SI. [third party] will take free under s 44.EXAMPLE:Gerry Grantor owns to boats. Fast finance lends to Gerry and perfects its security interest by registering against all Gerrys boats generally, but does not register each boast by its serial number. Bob buyer buys a boat, searches by references to Gerrys name and finds the security interest but thinks it must be ok for Gerry to sell. Bob will take free because fast finance failed to take advantage of registering via serial number.

S45 (1)+(2) TAKING MOTOR VEHICLES FREE GENERALLYIF IT DOESNT APPLY:Here, s 45(1)-(2) will not apply because [SELECT BELOW]:a) The item in question is not a motor vehicle;b) The motor vehicle had been registered + the SI was not incorrect or missing and searching the register would have disclosed the existence of a SI;IF IT APPLIES:Here, s 45(1)-(2) will apply because [SELECT BELOW]:a) The item in question is a motor vehicle which had not been properly registered; orb) Had been registered with an incorrect serial number, and searching the register would not have disclosed the existence of a SI and the buyer had no knowledge of the SI. EXAMPLE:Gerry Grantor owns a motor vehicle. On Monday, fast finance lends to Gerry and its security interest attaches to the vehicle. On Tuesday, Gerry offers to sell the vehicle to Bob. Bob searches by reference to the serial number on Tuesday afternoon, but its not there. On Wednesday morning, Fast Finance registers by reference to the serial number. On Wednesday afternoon, bob pays for the vehicle. Bob will take free because Fast Finance wasnt quick enough theres 1.5 days before the sale and he searched before that, so he takes free.

S45 (3)+(4) TAKING MOTOR VEHICLES FREE FROM LICENSED DEALERSIF IT DOESNT APPLY:Here, s 45(3)-(4) will not apply because; Buyer failed to give new value Buyer was taking as inventory Buyer had constructive knowledge that sale was a breach of the SI.

IF IT APPLIES:Here, s 45(3)-(4) will apply because;1. Buyer gave new value;2. Buyer wasnt taking as inventory; and3. Buyer did not have constructive knowledge that sale was a breach of the SI.

EXAMPLE:Gerry is a licensed motor vehicle dealer. Gerry has cars in stock under contract for sale or return from fast finance. Fast finance registers its security interest by reference to serial number of each vehicle. Bob buys a vehicle from Gerry. Bob does not search the register before paying. FF v Bob = Bob can rely on s 45(3).

S46 ORDINARY COURSE OF BUSINESSIF IT DOESNT APPLY:Here, s 46 will not apply because;1. The transaction did not take place in the ordinary course of businessa. Ordinary course of business will involve a sale within business hours, within the regular place of business, on usual sales terms for adequate consideration, Pacific Motor Auctions. 2. The property must be described by serial number and the buyer took as inventory3. Buyer had actual knowledge the sale was a breach of the grantors security interest. IF IT APPLIES:Here, s 46 will apply because 1. the transaction took place in the ordinary course of business2. The property did not need to be described by serial number and the buyer did not take as inventory3. Buyer did not have actual knowledge the sale was a breach of the grantors security interest.

NOTE:Its not ordinary course of business per se, its the ordinary course of business for that seller, selling that kind of property.

EXAMPLE:Harry is in the business of buying, repairing/improving boats and selling them. Harry gives a charge over this stock to fast finance. Fast finance registers a security interest over each both by reference to serial number. Bob buys a boat from Harry without searching the registers. FF v Bob = Bob takes free.

S47 P/D/H where value