Key Point

It is possible that a contract for the sale of goods that contains a reservation of title term in favour of the Seller will fall outside of the Sale of Goods Act 1979 definition of a "sale of goods" and therefore some of the protections afforded by that Act will not apply.

Facts

There was a complex chain of contracts for the supply of bunkers to a ship operator – the Buyer. Each of the contracts in the chain contained a standard industry reservation of title clause designed to protect the Seller against non-payment. It was understood by all parties that the fuel delivered under the contracts might be used prior to payment being made by the Buyer.

The Buyer defaulted and went into an insolvency process. The Seller and its funding bank sued for the money due to the Seller.

Decision

On the facts the Court allowed recovery of a sum equal to the price payable for the fuel by the Seller and its bank to whom the debt had been assigned. The critical part of the decision was that in these circumstances the contracts did not fall within the Sale of Goods Act 1979. All parties understood the goods would be extinguished before payment was made – that made it impossible for any title to pass from Seller to Buyer which is critical to a "contract for the sale of goods" as defined in the Act.

Comments

There have been a number of cases recently where the English Courts have explored the unintended consequences that ROT terms might have on the parties to the contract. This case shows that in some cases the ROT provisions takes the contracts outside of the Sale of Goods Act altogether. That would mean the Buyer loses the benefit of the implied terms in the Act and the Seller cannot sue for the "price" under s49 of the Act.

PST Energy 7 V OW Bunker Malta Limited