Sale of specific goods that had already perished (Sale of Goods Act 1979 s.6)
On Monday morning Ashby Fine Wines Ltd agreed to sell to Marlow Hotels Ltd a specific consignment of 40 identified cases of a particular vintage claret stored in a named bonded warehouse in England, for £24,000. Unknown to either party, the warehouse had been destroyed by fire overnight and all 40 cases were lost. Marlow has paid nothing. Ashby says Marlow must pay because risk passed when the contract was made.
Which of the following best describes the legal position?
Choose one answer to see the reasoning.
Worked answer
Correct answer E: The contract is void, because the specific goods had perished, without the seller's knowledge, when the contract was made.
THE RULE TO REMEMBER
A contract for the sale of specific goods is void if, without the seller's knowledge, the goods had already perished when the contract was made (SGA 1979 s.6).
Sale of specific goods that had already perished (Sale of Goods Act 1979 s.6)
Section 6 of the Sale of Goods Act 1979 provides that where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made, the contract is void. The 40 cases were specific goods: identified and agreed upon when the contract was made. They had been destroyed overnight, before the parties contracted on Monday morning, and Ashby did not know. The contract is therefore void. No obligation to pay or deliver ever arose, so questions of when risk passed, or whether the seller is liable for non-delivery, do not arise. This is a statutory instance of the common law principle that a contract is void where its subject matter does not exist when it is made.
Why A is wrong: Risk is irrelevant because s.6 makes the contract void; no contract existed under which risk could pass.
Why B is wrong: Frustration concerns events after a contract is made; here the goods perished before the contract was concluded.
Why C is wrong: Section 6 makes the contract void, not voidable, and does not depend on either party electing to avoid it.
Why D is wrong: There is no valid contract to breach, so Ashby cannot be liable for non-delivery.
A little more practice done.
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