We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
02 October 2013
The Isle of Man High Court has held that a buyer who has repeatedly used an item can still recover the whole purchase price if there has been a total failure of consideration.
Relying on the leading case from England, decided in 1923, the Manx Court ruled that the buyer of a £77,000 Cessna 303 aircraft was entitled to a return of the purchase price when it transpired that there were difficulties with the title that had supposedly been transferred to the buyer. This was in spite of the fact that the aircraft's new owner had made 52 return flights in the Cessna, 10 of which had been after the buyer had served notice of termination of the sales contract on the seller.
In a summary procedure judgment the court found that the key legal issue in the case was whether use of the aircraft after notice of termination was given barred the buyer from recovering the purchase price. This was material because the goods had been used after the buyer had discovered that there were issues with the passage of title to the goods to him. The court regarded English case law as highly persuasive because the Isle of Man sale of goods law is, to all intents and purposes, the same as in England.
The English case of Rowland v Divall (2 KB 500), decided by the Court of Appeal in 1923, was cited as the leading authority on the issue. In Rowland, where the item transferred was a motor car, the court held that even though there had been use of the car, the consideration had failed totally because the seller did not have proper title to it, meaning that the plaintiff (as he was then known) was compelled to surrender it to the true owner.
In the Isle of Man High Court case the seller was an individual who was regarded by the court as an honest and honourable man, but who had been caught up in the chequered history of the aircraft whereby there had been prior title issues. The seller had purported to sell the aircraft to the purchaser by an agreement in May 2011 and there were express provisions as to the proper transfer of title in the sale and purchase agreement. The aircraft also suffered minor faults, but the court ruled these to be largely immaterial to the main issue as to whether the title problems had caused total failure of consideration.
After hearing evidence from the parties, the court held that Rowland was still good authority and that, because of the ongoing title problems, the seller had been in breach of both the implied term as to title set out in the Supply of Goods and Services Act 1996 of Tynwald and the express term as to title as set out in the sale and purchase agreement between the parties.
Deemster Corlett reassured himself that Rowland was still good authority citing the 31st Edition of Chitty on Contracts. The court focused on the buyer's usage of the aircraft following notice of the termination as the real issue in the case, but decided that because of the principle in Rowland, as supported by its modern citation in Chitty on Contracts, the usage post-termination in the context of the case was irrelevant to the issue of enforcement of the right to claim title.
The defendant also sought to rely on Section 35(4) of the Sale of Goods Act 1983 of Tynwald, which provides that a buyer is deemed to have accepted goods after the lapse of reasonable time without rejection. The court held that the section is irrelevant where the buyer has rejected the goods, as had occurred in this case.
This ruling illustrates that sound principles from cases heard 90 years ago are still being followed in contemporary courts. In this case, the key issue was the title to the aircraft and the ongoing issues that caused the court to unravel the transaction and order a refund of the purchase price irrespective of the buyer's usage of the aircraft.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.
John T Aycock