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LA313 - Commercial Law - Cases
[IN THE COURT OF APPEAL]
[1922. R. 2746.]
Sale of Goods-Implied Condition that Vendor has a Right to Sell-Breach of- User of Goods by Buyer-Total Failure of Consideration-Recovery Back of Price.
The plaintiff bought a motor car from the defendant and used it for several months. It then appeared that the defendant had had no title to it, and the plaintiff was compelled to surrender it to the true owner. The plaintiff sued the defendant to recover back the purchase money that he had paid, as on a total failure of consideration:
Held, that notwithstanding that he had had the use of the car the consideration had totally failed, and he was entitled to get the purchase money back. The use of the car that he had had was no part of the consideration that he had contracted for, which was the property in and lawful possession of the car, whereas what he got was an unlawful which exposed him to the risk of an action at the suit of the true owner.
APPEAL from the judgment of Bray J. at the trial.
In April, 1922, the defendant, who lived at Brighton, bought an "Albert " motor car, and on May 19 he resold it to the plaintiff for 334l. The plaintiff, who was a motor-car dealer, drove the car from Brighton to Blandford, where he carried on business. When he got there he repainted it and exposed it for sale in his showroom. In July, 1922, he sold it to a Colonel Railsdon for 400l. In September, 1922, the police took possession of the car on the ground that it had been stolen from the owner by the person from whom the defendant had bought it, and the plaintiff refunded to Colonel Railsdon the 400l. that he had paid. Under these circumstances the plaintiff brought his action against the defendant to recover the price that he had paid to the defendant for the car, 334l, as money paid the consideration of which had failed. Bray J. held that as the plaintiff and his purchaser had had the use of the car from May to September there had not been a total failure of consideration, and that under those circumstances the plaintiff must be limited to his remedy in damages. He accordingly gave judgment for the defendant.
The plaintiff appealed.
Rayner Goddard K.C. and Tucker for the appellant. Since the passing of the Sale of Goods Act, 1893, there is in every contract of sale " an implied condition on the part of the seller that he has a right to sell the goods," and if that condition is not satisfied the buyer may if nothing more has happened recover back the price. It is only where the buyer has done something to convert the condition into a warranty that he is driven to seek his remedy in damages. But nothing was here done by the plaintiff which could have that effect. The judge below thought that the mere fact of his retaining possession of the car for a time was sufficient to change the condition into a warranty, but it is contended that that view was wrong. The plaintiff did not get what he had bargained for, which was the property in the car. No property passed to him, for his vendor had no title to convey. During the period in question the plaintiff was not in lawful possession, and was liable to the true owner. Bray J. relied upon the case of Taylor v. Hare1. There A. having obtained a patent for an invention of which he supposed himself the inventor agreed to let B. use it in consideration of an annual sum. The sum was paid for several years, when it was discovered that A, was not the inventor, as the invention was not new. B. sued to recover back the money that he had paid, and it was held that he could not recover. But the Court there were of opinion, rightly or wrongly, that B, did derive a benefit from the contract, and the judgment proceeded upon that ground.
Doughty and R. Jennings for the respondent. Here the buyer was not entitled to rescind the contract of sale, for there can be no rescission where a restitution in integrum is no longer possible. And after the car had suffered the deterioration which was necessarily incidental to a four-months' user it was impossible to restore the seller to his original position. There was not a total failure. of consideration here, for the temporary use of a chattel is of some value. The case is undistinguishable from Taylor v. Hare2, for the plaintiff here derived just as much benefit from the contract as did the plaintiff in that case, who had a right to make use of the invention without paying anything for it. That shows that 1923 the benefit which will preclude the buyer from recovering the price need not be the precise benefit contracted for Heath J. there said : "There never has been a case, and there never will be, in which a plaintiff, having received benefit from a thing which has afterwards been recovered from him, has been allowed to maintain an action for the consideration originally paid . . . . . It might as well be said that if a man lease land, and the lessee pay rent, and afterwards be evicted, that he shall recover back the rent., though he has taken the fruits of the land." That case was treated as well decided in Lawes v. Purser3, where to an action by a patentee for money payable by a manufacturer who had used the patent under the plaintiff's licence a plea that the patent was void was held bad on demurrer, upon the ground that the defendant, having derived benefit from the licence, could not set up the invalidity of the patent. In Hunt v. Silk4 the defendant in consideration of 10l. paid by the plaintiff agreed to give the plaintiff immediate possession of a house, and to do certain repairs and execute a lease within ten days. The plaintiff paid the money and entered into possession. The defendant neglected to do the repairs or to execute the lease within the time stipulated, but the plaintiff remained in possession for some days after the ten days had expired, and then on vacating the house sought to recover back the 10l. It was held that he could not rescind, as the fact of his occupation of the premises under the agreement precluded him from restoring the defendant to the status quo ante.
BANKES L.J. Whatever doubt there may have been in former times as to the legal rights of a purchaser in the position of the present plaintiff was settled by the Sale of Goods Act, 1893, by s. 12 of which it was provided that: " In a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is (1) An implied condition on the part of the seller that .... he has a right to sell the, goods." The facts are shortly these. The plaintiff bought a motor car at Brighton from the defendant in May,1923 1922. He took possession of it at once, drove it to his place of business at Blandford, where he exhibited it for sale in his shop, and ultimately sold it to a purchaser. It was not discovered that the car was a stolen car until September, when possession was taken of it by the police. The plaintiff and his purchaser between them had possession of it for about four months. The plaintiff now brings his action to recover back the price that he paid to the defendant upon the ground of total failure of consideration. As I have said, it cannot now be disputed that there was an implied condition on the part of the defendant that he had a right to sell the car, and unless something happened to change that condition into a warranty the plaintiff is entitled to rescind the contract and recover back the money. The Sale of Goods Act itself indicates in s.53 the circumstances in which a condition may be changed into a warranty: "Where the buyer elects, or is compelled, to treat any breach of a condition on the part of the seller as a breach of warranty " the buyer is not entitled to reject the goods, but his remedy is in damages. Mr. Doughty contends that this is a case in which the buyer is compelled to treat the condition as a warranty within the meaning of that section, because, having had the use of the car for four months, he cannot put the seller in status quo and therefore cannot now rescind, and he has referred to several authorities in support of that contention. But when those authorities are looked at I think it will be found that in all of them the buyer got some part of what he contracted for. In Taylor v. Hare5 the question was as to the right of the plaintiff to recover back money which he had paid for the use of a patent which turned out to be void. But there the Court treated the parties, who had made a common mistake about the validity of the patent, as being in the nature of joint adventurers in the benefit of the patent; and Chambre J expressly pointed out that " The plaintiff has had the enjoyment of what he stipulated for." The language there used by Heath J., though it may have been 1923 correct as applied to the facts of that case, is much too wide o be applied to such a case as the present. In Hunt v. Silk6 Lord Ellenborough went upon the ground that the plaintiff had received part of what he bargained for. He said : " Where a contract is to be rescinded at all, it must be rescinded in toto, and the parties put in status quo. But here was an intermediate occupation, a part execution of the agreement, which was incapable of being rescinded." And Lawes v. Purser7 proceeded on the same ground, that the defendant had derived benefit from the execution of the contract. But in the present case it cannot possibly be said that the plaintiff received any portion of what he had agreed to buy. It is true that a motor car was delivered to him, but the person who sold it to him had no right to sell it, and therefore he did not get what he paid for-namely, a car to which he would have title; and under those circumstances the user of the car by the purchaser seems to me quite immaterial for the purpose of considering whether the condition had been converted into a warranty. In my opinion the plaintiff was entitled to recover the whole of the purchase money, and was not limited to his remedy in damages as the judge below held. The appeal must be allowed.
SCRUTTON L.J. The discussion which this case has received in the course of the argument has made it reasonably clear to me that the learned judge below came to a wrong conclusion. The plaintiff purchased a car from the defendant for 334l. He drove it from Brighton, where he bought it, to the place where he had a garage, painted it and kept it there for about two months. He then sold it to a third person who had it in his possession for another two months. Then came the police, who claimed it as the stolen car for which they had been looking. It appears; that it had been stolen before the defendant became possessed of it, and consequently he had no title that he could convey to the plaintiff. In these circumstances the plaintiff sued the defendant for the price he paid for the car as on a total failure of consideration. Now before the passing of the Sale of Goods Act there was a good deal of confusion in the authorities as to the exact nature of the vendor's contract with respect to his title to sell. It was originally said that a vendor did not warrant his title. But gradually a number of exceptions crept in, till at last the exceptions became the rule, the rule being that the vendor warranted that he had title to what he purported to sell, except in certain special cases, such as that of a sale by a sheriff, who does not so warrant. Then came the Sale of Goods Act, which re-enacted that rule, but did so with this alteration: it re-enacted it as a condition, not as a warranty. Sect.12 says in express terms that there shall be " An implied condition on the part of the seller that . . . . he has a right to sell the goods." It being now a condition, wherever that condition is broken the contract can be rescinded, and with the rescission the buyer can demand a return of the purchase money, unless he has, with knowledge of the facts, held on to the bargain so as to waive the condition. But Mr. Doughty argues that there can never be a rescission where a restitutio in integrum is impossible, and that here the plaintiff cannot rescind because he cannot return the car. To that the buyer's answer is that the reason of his inability to return it-namely, the fact that the defendant had no title to it is the very thing of which he is complaining, and that it does not lie in the defendant's mouth to set up as a defence to the action his own breach of the implied condition that he had a right to sell. In my opinion that answer is well founded, and it would, I think, be absurd to apply the rule as to restitutio in integrum to such a state of fasts. No doubt the general rule is that a buyer cannot rescind a contract of sale and get back the purchase money unless he can restore the subject matter. There are a large number of cases on the subject, some of which are not very easy to reconcile with others. Some of them make it highly probable that a certain degree of deterioration of the. goods is not sufficient to take away the right to recover the purchase money. However I do not think it necessary to refer to them. It certainly seems to me that, in a case of rescission for the breach of the condition that the seller had a right to sell the goods, it cannot be that the buyer is deprived of his right to get back the purchase money because he cannot restore the goods which, from the nature of the transaction, are not the goods of the seller at all, and which the seller therefore has no right to under any circumstances. For these reasons I think that e plaintiff is entitled to recover the whole of the purchase money as for a total failure of consideration, and that the appeal must be allowed.
ATKIN L.J. I agree. It seems to me that in this case there has been a total failure of consideration, that is to say that the buyer has not got any part of that for which he paid the purchase money. He paid the money in order that he might get the property, and he has not got it. It is true that the seller delivered to him the de facto possession, but the Feller had not got the right to possession and consequently could not give it to the buyer. Therefore the buyer, during the time that he had the car in his actual possession had no right to it, and was at all times liable to the true owner for its conversion. Now there is no doubt that what the buyer had a right to get was the property in the car, for the Sale of Goods Act expressly provides that in every contract of sale there is an implied condition that the seller has a right to sell; and the only difficulty that I have felt in this case arises out of the wording of s. 11, sub-s. 1 (c), which says that: " Where a contract of sale is not severable, and the buyer has accepted the goods . . . . the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty, and not as a ground for rejecting the goods and treating the contract as repudiated, unless there be a term of the contract, express or implied, to that effect." It is said that this case falls within that provision, for the contract of sale was not severable and the buyer had accepted the car. But I think that the answer is that there can be no sale at all of goods which the seller has no right to sell. The whole object of a sale is to transfer property from one person, to another. And I think that in every contract of sale of goods there is an implied term to the effect that a breach of the condition that the seller has a right to sell the goods may be treated as a ground for rejecting the goods and repudiating the contract notwithstanding the acceptance, within the meaning of the concluding words of sub-s. (c); or in other words that the sub-section has no application to a breach of that particular condition. It seems to me that in this case there must be a right to reject, and also a right to sue for the price paid as money had and received on failure of the consideration, and further that there is no obligation on the part of the buyer to return the car, for ex hypothesis the seller had no right to receive it. Under those circumstances can it make any difference that the buyer has used the car before he found out that there was a breach of the condition ? .To my mind it makes no difference at all. The buyer accepted the car on the representation of the seller that he had a right to sell it, and inasmuch as the seller had no such right he is not entitled to say that the buyer has enjoyed a benefit under the contract. In fact the buyer has not received any part of that which he contracted to receive-namely, the property and right to possession-and, that being so, there has been a total failure of consideration. The plaintiff is entitled to recover the 334l. which he paid.
Solicitors for the appellant: Peacock & Goddard, for Luff, Raymond & Blanchard, Blandford.
Solicitor for the respondent : J. C. Buckwell, Brighton.
(1) (1805) 1 B. & P. (N. B.) 260.
(2) 1 B. & P. (N. R.) 260, 262.
(3) (1856) 6 E. & B. 930.
(4) (1804) 5 East, 449.
(5) 1 B. & P. (N.R.) 260, 262.
(6) 5 East. 449, 452.
(7) 6 E. & B. 930.