Introduction
The Sale of Goods Act 1979 (SGA 1979) serves as a cornerstone of commercial law in the United Kingdom, providing a structured legal framework for contracts involving the sale of goods. Two significant provisions within this legislation are section 7, which addresses the doctrine of frustration, and section 20, which governs the passing of risk. Section 7 stipulates that a contract for the sale of specific goods is void if the goods perish before the risk passes to the buyer, thereby releasing both parties from their obligations. Conversely, section 20 deals with the allocation of risk, typically transferring it to the buyer once property in the goods passes, unless agreed otherwise. This essay explores the contention that the concept of frustration under s.7 renders the concept of risk under s.20 redundant. By examining the interplay between these provisions, their practical implications, and relevant case law, this discussion will argue that while there is some overlap, s.20 retains distinct relevance in contexts beyond the narrow scope of s.7. The analysis will also consider limitations in the application of frustration and the broader utility of risk allocation, ultimately concluding that the two concepts are complementary rather than substitutive.
The Scope and Application of Frustration under s.7
Section 7 of the SGA 1979 provides a specific application of the broader doctrine of frustration, which arises when an unforeseen event renders contractual performance impossible or fundamentally different from what was agreed (Davis Contractors Ltd v Fareham Urban District Council, 1956). Under s.7, if specific goods, which are the subject of a contract of sale, perish before the risk passes to the buyer without fault of either party, the contract is deemed void. This provision effectively discharges both parties from their obligations, preventing unfair outcomes where performance is no longer possible. For instance, in the case of Howell v Coupland (1876), a contract for the sale of specific crops was frustrated when the crops failed due to disease, illustrating the narrow but protective focus of frustration under s.7.
However, the scope of s.7 is limited to specific goods and does not extend to unascertained or generic goods, which are often subject to different risk considerations. Furthermore, frustration can only be invoked in exceptional circumstances where the destruction of the goods is beyond the control of either party. This raises questions about whether s.7 adequately addresses all scenarios of loss or damage, or whether the concept of risk under s.20 remains necessary to fill these gaps. Indeed, the restrictive nature of frustration suggests that it cannot wholly replace the broader mechanism of risk allocation, as many contractual disputes fall outside its ambit.
The Concept of Risk under s.20 and Its Practical Relevance
Section 20 of the SGA 1979 establishes that, unless otherwise agreed, the risk of loss or damage to goods passes to the buyer when property in the goods transfers, regardless of whether delivery has occurred. This provision is pivotal in determining which party bears the burden of loss if the goods are damaged or destroyed after the contract is made. For example, if property has passed to the buyer but the goods remain in the seller’s possession and are subsequently destroyed, the buyer generally bears the loss (Sterns Ltd v Vickers Ltd, 1923). This principle ensures clarity in commercial transactions by providing a default rule for risk allocation, which can be modified by contractual terms, such as those under Incoterms.
Unlike frustration under s.7, the concept of risk in s.20 applies to a wider range of goods, including unascertained goods, and operates irrespective of whether the loss results from an unforeseen event. This broader applicability arguably makes s.20 an indispensable tool in everyday commercial dealings. Moreover, s.20 allows parties to negotiate and allocate risk through express terms, offering flexibility that the rigid application of frustration lacks. Therefore, while s.7 offers a remedy in specific cases of impossibility, s.20 provides a foundational framework for risk management in a variety of contractual contexts, suggesting that it is far from redundant.
Overlap and Tension between s.7 and s.20
There is undoubtedly some overlap between the concepts of frustration and risk, particularly in scenarios where specific goods perish before the transfer of property or risk. In such cases, s.7 may render the contract void, potentially negating the need to consider risk allocation under s.20. For instance, if goods are destroyed before the risk passes to the buyer, s.7 discharges both parties, and the question of who bears the loss becomes moot. This overlap might suggest that frustration can, in limited circumstances, render risk allocation irrelevant, supporting the argument that s.20 is redundant in those specific contexts.
However, this overlap is not comprehensive. Section 20 continues to govern risk in cases where s.7 does not apply, such as where goods are damaged rather than destroyed, or where the goods are unascertained at the time of loss. Additionally, s.20 operates in situations where the parties have agreed to transfer risk before property passes, a flexibility not accommodated by s.7. Case law, such as Pignataro v Gilroy (1919), further illustrates that risk under s.20 remains relevant even when frustration might be a consideration, as the courts often prioritise contractual intent over statutory defaults. Thus, while there is tension between the two provisions, the broader utility of s.20 ensures its continued relevance.
Critical Evaluation of the Redundancy Argument
The argument that s.7 renders s.20 redundant overlooks the distinct purposes and scopes of these provisions. Frustration, as encapsulated in s.7, serves as an exceptional remedy designed to prevent injustice in cases of impossibility. In contrast, s.20 establishes a default rule for risk allocation that underpins the predictability and stability of commercial transactions. As noted by Bridge (2017), the passing of risk under s.20 is a fundamental principle of sale of goods law, ensuring that parties can plan and insure against potential losses. Without s.20, the absence of a clear risk allocation mechanism would create uncertainty in contracts not covered by frustration, particularly in international trade where risk is often explicitly allocated through terms like CIF or FOB.
Moreover, the application of frustration is rare and confined to specific circumstances, whereas risk allocation is a daily concern for buyers and sellers. The courts’ reluctance to invoke frustration, as seen in cases like Tsakiroglou & Co Ltd v Noblee Thorl GmbH (1962), further limits the scope of s.7, reinforcing the necessity of s.20 as a practical tool. Therefore, while s.7 may overlap with s.20 in isolated cases, it does not render the latter redundant; rather, the two provisions complement each other by addressing different facets of contractual risk and loss.
Conclusion
In conclusion, the assertion that the concept of frustration under s.7 of the Sale of Goods Act 1979 renders the concept of risk under s.20 redundant is not wholly convincing. While there is some overlap in cases involving the destruction of specific goods before the risk passes, the broader applicability and flexibility of s.20 ensure its continued relevance in commercial law. Section 7 operates as a narrow, exceptional remedy for impossibility, whereas s.20 provides a foundational framework for risk allocation across a wide range of transactions. The interplay between these provisions, as evidenced by case law and academic commentary, suggests a complementary rather than substitutive relationship. Ultimately, both concepts address distinct issues within the sale of goods, and their coexistence strengthens the legal framework by offering clarity and fairness in different contractual scenarios. This analysis highlights the importance of maintaining both provisions to ensure comprehensive protection and predictability in commercial dealings.
References
- Bridge, M. (2017) The Sale of Goods. 4th edn. Oxford University Press.
- Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696.
- Howell v Coupland (1876) 1 QB 258.
- Pignataro v Gilroy [1919] 1 KB 459.
- Sterns Ltd v Vickers Ltd [1923] 1 KB 78.
- Tsakiroglou & Co Ltd v Noblee Thorl GmbH [1962] AC 93.
