Introduction
The concept of ‘res’—a Latin term often used in legal contexts to denote ‘a thing’ or an object of property—and the passing of property in goods are central to the law of sale of goods in the United Kingdom. The statement under examination, which suggests that property in goods only passes when complete payment is made, raises significant questions about the principles enshrined in the Sale of Goods Act 1979 (SGA), the foundational statute governing such transactions. This essay aims to critically assess the aptness of this assertion by exploring the legal rules surrounding the transfer of property in goods, with particular focus on the relationship between payment and the passing of property. It will argue that, while payment can be a relevant factor in certain contractual arrangements, the passing of property is primarily determined by the intention of the parties rather than the timing of payment. The discussion will be structured into three key sections: an overview of the legal framework under the SGA, an analysis of the role of payment in the transfer of property, and an evaluation of exceptions and practical implications. Through this analysis, the essay seeks to provide a nuanced understanding of the statement’s validity in the context of UK commercial law.
The Legal Framework for the Passing of Property under the Sale of Goods Act 1979
The passing of property in goods, which refers to the transfer of ownership from the seller to the buyer, is a cornerstone of contract law as it determines when risk and legal rights shift between parties. The Sale of Goods Act 1979 provides the primary statutory framework for such transactions in the UK. Under Section 17(1) of the SGA, property in goods passes at the time the parties intend it to pass, a principle that prioritises contractual autonomy and mutual agreement (Bridge, 2017). This intention can be derived from the terms of the contract, the conduct of the parties, or the surrounding circumstances. Section 18 further supplements this by providing default rules for ascertaining intention in cases where it is not explicitly stated, such as when property passes upon delivery or when goods are placed in a deliverable state.
This framework demonstrates a clear departure from any rigid requirement that property transfer is contingent upon complete payment. As Bridge (2017) notes, the SGA is designed to reflect the pragmatic needs of commerce, where flexibility in determining the timing of property transfer is often essential. For instance, parties may agree that property passes upon the formation of the contract (in the case of specific goods) or at a later stage (such as upon delivery or inspection), irrespective of whether payment has been made in full. The emphasis on intention, therefore, renders the statement under review—at least at first glance—somewhat inapplicable to the general principles of the SGA. However, to fully assess its aptness, it is necessary to consider specific contractual arrangements and judicial interpretations where payment might play a more significant role.
The Role of Payment in the Transfer of Property
While the SGA does not generally link the passing of property to payment, there are scenarios where payment—or the lack thereof—can influence the transfer of ownership, particularly through express contractual provisions or retention of title clauses. Under Section 19 of the SGA, a seller may reserve the right of disposal over goods until certain conditions, such as full payment, are fulfilled. Such provisions are commonly seen in commercial contracts where sellers, wary of buyer insolvency, include ‘Romalpa clauses’—named after the landmark case Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676 (Atiyah et al., 2010). These clauses explicitly stipulate that property does not pass until payment is made in full, thereby protecting the seller’s interest in the goods.
The effectiveness of such clauses, however, is not absolute and has been subject to judicial scrutiny. For instance, in cases like Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25, courts have emphasised that retention of title clauses must be clearly drafted and may not always prevent property from passing if the goods are mixed or incorporated into other products (Goode, 2009). Moreover, even when property does not pass due to non-payment under such clauses, Section 25 of the SGA allows a buyer in possession of goods to transfer good title to a third party acting in good faith, further complicating the seller’s position. This suggests that while payment can be tied to the passing of property through contractual mechanisms, it is not a default legal requirement under the SGA. Therefore, the statement’s assertion that property “only” passes upon complete payment oversimplifies the nuanced interplay between payment and ownership transfer in UK law.
Furthermore, it is worth noting that payment and delivery are concurrent conditions under Section 28 of the SGA, meaning that unless otherwise agreed, the seller is not obliged to deliver goods until payment is made, and vice versa. Yet, this rule pertains to the performance of the contract rather than the passing of property itself. As such, while payment may indirectly influence the timing of property transfer by delaying delivery, it remains distinct from the legal act of transferring ownership (Guest, 2012). This distinction reinforces the argument that the statement lacks precision in capturing the complexities of property law.
Exceptions and Practical Implications
Despite the general flexibility provided by the SGA, there are specific contexts and exceptions where the passing of property might appear to align more closely with the timing of payment, thus lending some limited credence to the statement. For instance, in conditional sale agreements, property may not pass until the final instalment of payment is received, reflecting a contractual intention to delay transfer until financial obligations are met (Goode, 2009). Similarly, in international sales governed by Incoterms or specific contractual terms, parties might stipulate that ownership transfers only upon receipt of payment, particularly in transactions involving documentary credit.
However, even in these scenarios, the underlying principle remains one of intention rather than a statutory mandate linking property to payment. As Atiyah et al. (2010) argue, such arrangements are exceptions rather than the norm, and they must be explicitly agreed upon by the parties. Moreover, practical challenges arise in enforcing such conditions, particularly in cases of buyer insolvency or disputes over whether payment has been ‘completed.’ The case of Re Wait [1927] 1 Ch 606 illustrates the difficulties in reserving title when goods are subject to sub-sales or other complicating factors, highlighting the limitations of tying property transfer solely to payment.
From a broader perspective, the statement’s emphasis on payment overlooks the importance of risk allocation, which often accompanies the passing of property under Section 20 of the SGA. Typically, risk passes with property, meaning that a buyer may assume responsibility for goods even if payment is pending. This further undermines the idea that complete payment is a prerequisite for ownership transfer. Indeed, in commercial practice, it is not uncommon for property and risk to pass upon delivery or shipment, long before payment is finalised, as seen in contracts involving credit terms. This flexibility is crucial for facilitating trade and underscores the inaccuracy of the statement in a practical context.
Conclusion
In conclusion, the assertion that property in goods passes only when complete payment is made does not hold true as a general principle under UK law. The Sale of Goods Act 1979 establishes that the passing of property is primarily determined by the intention of the parties, as expressed in the contract or inferred from circumstances, rather than being contingent upon payment. While specific contractual provisions, such as retention of title clauses, may link ownership transfer to payment, these are exceptions rather than the rule, and their enforceability is subject to legal and practical limitations. Moreover, statutory rules and commercial realities often separate the timing of payment from the passing of property, rendering the statement overly simplistic and, arguably, misleading. The implications of this analysis are significant for both legal practitioners and students of commercial law, as they highlight the importance of clarity in contractual drafting and an understanding of the nuanced balance between legal principles and practical needs in the sale of goods. Ultimately, a more accurate statement would acknowledge the predominance of intention over payment in determining when property passes, reflecting the flexible and pragmatic nature of the SGA.
References
- Atiyah, P. S., Adams, J. N., and MacQueen, H. (2010) The Sale of Goods. 12th ed. Pearson Education.
- Bridge, M. G. (2017) The Sale of Goods. 4th ed. Oxford University Press.
- Goode, R. (2009) Commercial Law. 4th ed. Penguin Books.
- Guest, A. G. (2012) Benjamin’s Sale of Goods. 8th ed. Sweet & Maxwell.
Word Count: 1502 (including references)
