General principles

i The right of property and the right of possession are distinct from each other; the right of possession may be in one person, the right of property in another. (Tarling v Baxter [1827] 6 B & C 360, Sealy and Hooley, p.303, Bayley J). The distinction is demonstrated by the facts of Dennant v Skinner and Collom [1948] 2 KB 164 (Sealy and Holley, pp.303304), in which Roche J also notes that a seller, who, while not having property, remains in possession of the goods, has rights against a buyer who fails to pay (see 6.2). ii Where there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained. (s.16) This is based on what Lord Mustill called a priori common sense, which dictates that the buyer cannot acquire title until it is known to what goods the title relates (Re Goldcorp Exchange Ltd (in receivership) [1995] 1 AC 74). But this general principle is subject to an important exception in s.20A (discussed in 4.4.8 below). iii Where the goods are specific or ascertained property will pass when the parties intend it to be transferred (s.17(1)). To determine their intention regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case (s.17(2)). Property may still pass even though the time for payment or delivery has not arrived (but see the remarks of Diplock LJ quoted in section 4.4.2 below). iv If no such intention can be discerned, the Act provides rules in s.18 to resolve the issue of when the property is to pass (see section 4.4.2 below). With the exception of rule 5, these rules are concerned with the passing of property in specific goods.

v The courts have always rejected the idea that under a sale contract the buyer may acquire an equitable interest in the goods. Atkin LJ said in Re Wait [1927] 1 Ch 606 (see also Lord Brandon in Leigh v Sillavan Ltd v Aliakmon Shipping Co Ltd, The Aliakmon [1986] AC 785): It would have been futile in a code intended for commercial men to have created an elaborate structure of rules dealing with rights at law, if at the same time it was intended to leave, subsisting with the legal rights, equitable rights inconsistent with, more extensive, and coming into existence earlier than the rights so carefully set out in the various sections of the code. Nevertheless, he did go on to say that the provisions in the Act have: no relevance when one is considering rights, legal or equitable, which may come into existence dehors [outside] the contract for sale. A seller or a purchaser may, of course, create any equity he pleases by way of charge, equitable assignment or any other dealing with or disposition of goods, the subject matter of sale; and he may, of course, create such an equity as one of the terms expressed in the contract of sale. The parties may, therefore, agree in the sale contract that the goods are to be held by the seller on trust for the buyer. The parties must intend to create a trust and to limit the freedom of the seller to deal with the goods, and the goods must be clearly identified. An attempt to establish a trust in relation to unascertained goods would fail to satisfy the second of these criteria. See Re London Wine Co (Shippers) Ltd [1986] PCC 121, Sealy and Hooley,

pp.29498; Re Goldcorp Exchange Ltd (in receivership) [1995] 1 AC 74). But see also Re Stapylton Fletcher Ltd [1995] 1 WLR 1181 (section 4.4.8). Activity 4.4