Dispositions by Sellers and Buyers. 73 goods or of the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title under any sale, pledge, or other disposition thereof, or under any agreement for sale, pledge, or other disposition thereof, to any person receiving the same in good faith and without notice of the previous sale, shall have the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same. This section (which took the place of section 3 of the Factors Act, 1877) is re-enacted in virtually the same terms by section 25 (1) of the Sale of Goods Act, 1893; the original intention having been to repeal the present section, which, however, has not been done. It was formerly decided that if the buyer chose to leave the goods or documents of title in the hands of the seller, and the latter fraudulently pledged them for an advance to an innocent pledgee, the buyer could nevertheless recover the goods without repaying the advance.* This enactment overrides that decision. In order to bring a case within this section, there must be a delivery or transfer after sale, without notice that such sale has taken place i.e. a delivery of the goods by the seller in possession, or the transfer of documents of title. Therefore, where a merchant sold goods stored in a warehouse, a letter of hypothecation sent by him after the sale to the warehousemen for advances made by them in good faith without notice of the sale conferred no title on them.† 9. Disposition by buyer obtaining possession.-Where a person, having bought or agreed to buy goods, obtains with the consent of the seller possession of the goods or the documents of title to the goods, the delivery or transfer, by that person or by a mercantile agent acting for him, of the goods or documents of title, under any sale, pledge, or other disposition thereof, or under any agreement for sale, pledge, or other disposition thereof, to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods, shall have the same effect as if the person making the delivery or transfer were a mercantile agent in possession of the goods or documents of title with the consent of the owner. * Johnson v. Crédit Lyonnais Co. (1877), 3 C.P.D. 32. This section (which replaced section 4 of the Factors Act, 1877) is, like section 8, reproduced by the Sale of Goods Act, 1893, section 25 (2). Before this enactment it had repeatedly been decided that a sale or pledge of a delivery order or other document of title (not being a bill of lading) by a buyer did not defeat the seller's rights, because the buyer held the documents as buyer and not as the seller's agent, and the transaction was therefore not protected by the earlier Factors Acts.* This enactment overrides those decisions, and treats the buyer as though he were a mercantile agent in possession of the goods or documents with the consent of the owner; so that such a transaction is now treated as though it came within the terms of section 2. I may remind you that if the document dealt with by the buyer was a bill of lading, the protection of the Factors Acts was in most cases not needed, for at common law the transfer of a bill of lading to the buyer by giving him constructive possession of the goods put an end to the seller's lien, and the subsequent sale or pledge by the buyer to a third party defeated, either wholly or to the extent of the advance, the original seller's right of stoppage in transitu.† Yet if the buyer became possessed of the bill of lading conditionally, and so without any intention on the part of the seller to transfer at the time the property therein, he could not have made a valid disposition of it, unless the seller had so acted as to be estopped from disputing the buyer's right of disposal.‡ In order to bring a case within the protection of section 9, the seller must still have a lien or other right in respect of the goods. If, therefore, he has sold and delivered them to the buyer, and has lost all right in respect of them, except a right of action for the price or part of it, the section does not apply. Thus, if a man buys goods which are lying in a warehouse, and the warehouse-keepers are instructed by the seller to deliver them to the buyer, and they thereupon transfer the goods into the name of the buyer in their books, and issue warrants to him, the possession of these warrants is obtained by the buyer in his own right, and is not deemed to have been obtained with the seller's consent within the meaning of this section.§ * See per Blackburn, J., in Cole v. North Western Bank (1875), L.R. 10 C.P. at 373. † Lickbarrow v. Mason (1793), 1 Smith's Leading Cases, 7th ed. 756; 10th ed. 674; Re Westzinthus (1833), 5 Barnewall & Adolphus' Rep. 817. See per Lord Campbell, C.J., in Gurney v. Behrend (1854), 3 Ellis and Blackburn's Rep., at 633-634. § Inglis v. Robertson (1898), A.C. 616, H.L. (Scottish). That the seller gave such instructions is stated in the Appellant's Case, and not denied in the Respondent's Case, but is not stated in the report. Effect of Disposition by Buyer. 75 10. Effect of transfer of documents on vendor's lien or right of stoppage in transitu.-Where a document of title to goods, has been lawfully transferred to a person as a buyer or owner of the goods, and that person transfers the document to a person who takes the document in good faith and for valuable consideration, the last-mentioned transfer shall have the same effect for defeating any vendor's lien or right of stoppage in transitu as the transfer of a bill of lading has for defeating the right of stoppage in transitu. When the Sale of Goods Act, 1893, was introduced in Parliament as a Bill, it was intended to repeal this section as well as sections 8 and 9 of the Factors Act, but, as has been already said, this was not done, although these sections were re-enacted in the Sale of Goods Act-sections 8 and 9 in virtually the same words by section 25 (1) and (2) of the Sale of Goods Act, and section 10 in a more elaborate form by section 47 of the Sale of Goods Act, which I will now read. It begins with a general statement of law not contained in section 10 of the Factors Act. 47. Effect of sub-sale or pledge by buyer.-Subject to the provisions of this Act, the unpaid seller's right of lien or retention or stoppage in transitu is not affected by any sale, or other disposition of the goods which the buyer may have made, unless the seller has assented thereto. The word retention is a Scottish technical term corresponding to our lien. It then introduces a proviso which is an elaboration of section 10 of the Factors Act-in fact merely crossing the t's and dotting the i's. It is as follows: Provided that where a document of title to goods has been lawfully transferred to any person as buyer or owner of the goods, and that person transfers the document to a person who takes the document in good faith and for valuable consideration, then, if such last-mentioned transfer was by way of sale the unpaid seller's right of lien or retention or stoppage in transitu is defeated, and if such last-mentioned transfer was by way of pledge or other disposition for value, the unpaid seller's right of lien or retention or stoppage in transitu can only be exercised subject to the rights of the transferee. This enactment makes the transfer of any of the other documents of title referred to in section 1 (4) have the same effect on the seller's right of lien or stoppage in transitu as was given to the transfer of a bill of lading by the Law Merchant. Considerable light may, I hope, be thrown on these enactments by presenting to you a concrete case which came before the Court of Appeal some two years ago-Cahn v. Pockett.* In July, 1897, Steinmann & Co. of Liverpool contracted to sell to a Prussian merchant named Pintscher ten tons of copper to be delivered at Rotterdam c.i.f.-i.e. he paying a fixed price to cover cost, insurance and freight-payment to be made by his acceptance. On 27th August Cahn & Mayer purchased of Pintscher ten tons of copper. Three days later Steinmann & Co. in fulfilment of their contract with Pintscher, having shipped the copper on a ship belonging to the defendants forwarded to Pintscher a bill of lading indorsed in blank together with a draft for the price for acceptance. These documents reached him on the 1st September, and he, being then insolvent, did not accept the sellers' draft, and thereupon, instead of returning the bill of lading to the sellers (as it was his duty to do if he did not honour the draft), he handed the bill of lading to his bank with instructions to deliver it to Cahn & Mayer in fulfilment of his contract with them upon payment by them of the price, which was to be placed to the credit of his overdrawn account at the bank. On 2nd September the bank accordingly handed the bill of lading indorsed by Pintscher to Cahn & Mayer, who paid the price in cash to the bank, where the amount was credited to Pintscher's account. Cahn & Mayer took the bill of lading in good faith and without notice of the rights of Steinmann & Co., who, however, having learned that Pintscher was insolvent before the copper arrived at Rotterdam, gave notice to the defendants, the shipowners, to stop it in transitu, which the defendants did upon receiving Steinmann & Co.'s indemnity. Cahn & Mayer then brought an action against the shipowners for non-delivery of the goods. The question was: Were the plaintiffs entitled to the copper as against the unpaid vendors? That depended upon the Sale of Goods Act coupled with the Factors Act, because apart from statute the plaintiffs clearly took no title, since, under the circumstances, the property had never passed out of the sellers; for the rule of the common law was the same as that now enacted by section 19 (3) of the Sale of Goods Act, 1893, which is as follows: -- Where the seller of goods draws on the buyer for the price, and transmits the bill of exchange and bill of lading to the buyer together to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading if he does not honour the bill of exchange, and if he wrongfully retains the bill of lading the property in the goods does not pass to him. * Cahn v. Pockett's Bristol Channel Steam Packet Co. (1899), 1 Q.B. 643. Possession of Buyer with Seller's Consent. 77 It was argued for the defendants, who of course really represented the sellers, that as by virtue of this rule the property did not pass to Pintscher, he could transfer no title to the plaintiffs; and that the transaction between them was not protected by section 9 of the Factors Act, because Pintscher had not obtained possession of the bill of lading with the consent of the sellers, as their consent was conditional upon his acceptance of their draft; and upon these grounds Mathew, J., held that the plaintiffs were not entitled to recover as indorsees of the bill of lading. This decision, however, was reversed in the Court of Appeal, where it was said that the crucial question was not whether the property had passed to Pintscher-which it clearly had not-but whether he obtained possession of the bill of lading with the consent of the sellers. Possession by section 1 (2) means actual custody, and by sending the bill of lading and the bill of exchange direct to Pintscher, Steinmann & Co. consented to his having the actual custody. There was no unlawful taking by him-no fraudulent trick so as to negative the sellers' consent to his having possession. He might have fully intended to accept the draft, and no subsequent change in his intention with regard to that could destroy the consent of the sellers to his having once had possession of the bill of lading. Even when, by electing not to accept the draft, it became his duty to return the bill of lading, it was still in his possession for that purpose with the consent of the sellers, who might have avoided all difficulty by sending the bill of lading to their own agent instead of to the buyer direct. The sellers had consequently no right of stoppage in transitu, for the bill of lading had been "lawfully transferred" to Pintscher as buyer by the sellers, who had indorsed it in blank, within the meaning of section 47 of the Sale of Goods Act; and the plaintiffs were entitled to recover. Supplemental. We now come to the Supplemental Part of the Act-sections 11 to 17. 11. Mode of transferring documents.-For the purposes of this Act, the transfer of a document may be by indorsement, or, where the document is by custom or by its express terms transferable by delivery, or makes the goods deliverable to the bearer, then by delivery. Document of title is defined by section 1 (4).* When a document is transferable by indorsement, there must also, it seems clear, be delivery in order to complete the transfer: cf. section 21 (1) of the Bills of Exchange Act, 1882. * Printed in Lecture II, ante, p. 45. |