Contract Law II

Contract Law II

Question 1


An unpaid seller is a seller who has not received a price that was agreed upon at the time of signing of the agreement. The price not paid could be partial or full. Furthermore, an unpaid seller is defined as a seller who has not received the conditional payment that was supposed to be paid upon transaction. In addition, unpaid seller can be the one who has not received the payment mentioned in any other legal instrument that was not executed due to any reasons.[1] If the instrument or bill of exchange has been provided as an absolute payment, the seller would not be considered an unpaid seller.[2] In this part of the assessment, the rights provided to the unpaid sellers in the case of Mansfield Ltd have been discussed. In addition, the advice is provided to Mansfield Ltd with respect to the rights under the law against Stephen Smith.


In accordance with section 38 (1) of the Sales of Goods Act 1979, when the total price has not been paid, the seller is defined as unpaid. Therefore, some paid sellers are sellers who are not paid any amount of money.[3] In other words, it can be said that the seller of goods is considered an unpaid seller in the 1979 sale deed:

  • When a person does not pay or bid for the total price;
  • When a request for a transaction or other instrument has been received as conditional payment, the conditions received are not met due to a tool failure or other reasons.

The seller is not paid, if the price has not been paid to him/her, and if the invoice or other negotiable instrument has been paid conditionally, and the buyer cannot satisfy them without the price was paid or offered. Lastly, the buyer went bankrupt before the price of the payment or offer. In the third case, the seller has the right to retain possession, if the goods are sold on credit, and the credit period has not expired. If the time of payment in the contract becomes critical, the clause becomes a condition of the contract.

The violation of the conditions allows the parties to sue for payment, sue for damages and refuse to sign an agreement as a free seller. If the contract does not specify the payment schedule, the item is a guarantee and the parties can only request payment and compensation. The contract cannot be refused.[4] According to the SGA 1979, if the ownership of the goods was transferred to the buyer, the seller of unpaid goods has the law:

  • keep the product at a price when owning the product;
  • in the event of a purchaser’s bankruptcy, the right to interrupt the goods after having purchased them separately
  • Resale rights in accordance with this law.

If the ownership of the goods is not transferred to the buyer, the unpaid seller, in addition to other legal remedies, has the right to withhold the same simultaneous transfer of liens and blocking rights transferred to the buyer. In accordance with the SGA 1979, the sellers of unpaid assets who own the assets have the right to maintain their goods until the payment or the price of the offer is subject to the following conditions:[5]

  • there are no credit rules for the sale of goods;
  • the case in which the assets are sold on credit, but the loan period has expired;
  • where the buyer went bankrupt

This section indicates that in three cases unpaid sellers are entitled to privilege. For the most part, local goods are sold at a price, but the payment time and delivery time are not fixed, secondly, the goods are sold on credit, but during the credit period the seller refuses to make a pledge in the currency of the letter of credit or the seller accepts the next day. He refused a privilege on the bill. In the last two cases, the privilege is restored after the loan expires or the account is rejected.

The right of retention with an unpaid seller depends on the actual ownership of the goods and its ownership, and the right of retention can be exercised provided that the actual possession of the goods is related to the seller. The seller of unpaid goods loses the right of retention when he delivers them and when it is delivered to the courier or other authorized people for transfer to the buyer without retaining the right to dispose of the goods. Furthermore, when a buyer or agent legally acquires the ownership of a product, it loses the right to retention.[6]

The general rule is that when the goods are delivered to the carrier or other goods for delivery to the buyer, the goods in the goods are transferred completely to the buyer, in which case the seller is not associated with the goods. However, the law recognized an exception to this rule. If the seller reserves the right to dispose of the goods, the goods would not be transferred to the buyer in the aforementioned circumstances.

Advice to Mansfield Ltd with respect to his Rights

Considering the provisions of the law of sales of goods, it can be advised to Mansfield Ltd. that it is provided with the right to sue for getting goods’ price under section 49 of SGA 1979 if the goods’ ownership has not been transferred. Furthermore, it is also advised to Mansfield Ltd. that right to keep the goods at full price and for reselling has been provided to it under Section 39 (1) of SGA 1979. In addition, under section 41 of the act, it has the right to maintain the goods unless the complete payment of the goods has been received. More significantly, damage for late payment could be granted by the court. Further, section 41 also allows Mansfield Ltd, for all the goods owned to exercise the right to storage. Moreover, under section 46 of SGA 1979, it can stop the goods in transit as the Matrix has become solvent.

Question 2

Development of Economic Duress

In contract law, duress is defined as the circumstances in which a person signs an agreement or a contract because of a threat. If it is established that the contract is concluded under duress, the contract may be suspended. There are three main types of duress including economic duress, duress to the goods and person.[7] Duress for this person means a situation in which a person signs a contract because of the threat of physical violence. Duress to goods occurs when one party refuses to release the property belonging to the other party until the other party signs an agreement with them. Economic duress occurs when the illegal use of economic pressure or the threat is used to overcome a person’s free will to force him into an involuntary agreement or to do something that he will not do.

In Lloyds Bank v Bundy,[8] Lord Denning argues that economic duress is, to a certain extent, an example of the principle of disparity of power in negotiations. This question explains the decision of Lord Denning, who stated in his decision that the key principle can relieve those who signed a contract or transferred property in highly unfair conditions because their market power was seriously violated. Ignorance itself, weakness or necessity, as well as excessive influence or pressure on it on the other side or in the interest of the other.

When formulated a contract, the complexity of a commercial transaction leaves adequate space for the doctrine of economic duress. This principle tells us that the agreement between the parties to a treaty can be reached not only by pointing their arms at their head but also by an economic threat to the party. Some provisions, such as antitrust and consumer protection laws, have been strengthened to protect the parties from signing such agreements. In addition to these rules, the court also renounced the contract related to illegal pressure. The doctrine of economic stress is part of the modern and evolutionary concept of duress according to the common law.

The theory was officially applied in the case of The Sibeon and The Sibotre,[9] in the Privy Council. But it has become more intrinsic and evolutionary due to decisions provided in cases Universe Tankships v International Workers Federation[10] and Dimskal Shipping Co. SA v International Transport Worker’s Federation (The Evia Luck)[11] presented to the Privy Council. Therefore, the tugboat is not available, therefore, the boat cannot sail, which leads to disastrous consequences. The union insisted on paying it to the welfare fund as a condition to exclude the name of the blacklisted ship. The ship’s owner paid the amount to the union, but then presented a request for success based on the principle of economic duress.

Inequality of Bargaining Power

In Suisse Atlantique Société d’ Armement Maritime SA v NV Rotterdamsche Kolen Centrale,[12] the negotiation problem unequal power deal, indicating that the exception clauses differ in many respects. Perhaps the most undesirable thing is that under difficult standard conditions it is now common. Extrinsically, there is no time available to the customers to read and, if read, they might not comprehend it. If a person understands or opposes any of them, he/she is usually told that he/she can accept or leave. If a person goes to another supplier, the result will be the same. The freedom to hire necessarily involves a space to choose or negotiate. At the other end, there is a party that is quoted on an equal footing and accepts strict exemptions for terms of exchange or other convincing reasons. It is stated that the comments of Lord Reed foreshadow the development of three main teachings in this area.

The first development highlighted the legally rapid disagreement between the principles applicable to the contracts made for commercial purposes and the principles applicable to the contracts of the consumer. Consequently, for modern contract law, the commercial world is seen as a class division, on the one hand, consumer contracts and, on the other, commercial contracts. The concept’s second application of bargaining power could be seen in the legal system, which in the current time defines the exclusion clauses’ validity. For example, in the Unfair Contract Terms Act 1977 (UCTA), if the reasonableness of the controlled release clause is discussed, the normative guide in Schedule 2 of the UCTA makes the parties’ relative bargaining power an appropriate factor to consider in a court of law.

In principle, Schedule 2 applies to exceptions in contracts made for commercial purposes and contracts of the consumer, provided that the exceptions in commercial contracts are included in standard format contracts or are sometimes referred to as interconnection contracts. The relative bargaining power and the exclusion in the courts between the contract’s commercial parts has been a factor to be deemed. In Photo Production Ltd v Securicor Transport Ltd,[13] Lord Wilberforcedecided that commercial parties are extrinsically free to share the risks they deem appropriate and believe that this opinion is the basis of the UCTA regime. The intention and therefore the court should respect the decision of the commercial party regarding the distribution of risks.

In contrast, in George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd,[14] the superior courts feel appropriate to consider cases besides the fact that a part may be approximately equal in transactions contractual. Moreover, the main objective of the statutory principles of the UCTA is to verify the negotiating position in each case. The support could be found in the evolving judicial practice reasonableness test, as UCTA, which states that if the parties are invited to accept or abandon the terms of the transaction, there would be inequality found in the negotiations. It may be a factor affecting the validity of the state. Although the third theoretical development remains controversial, it is increasingly recognized that the importance of inequality in bargaining power goes beyond consumer contracts and goes beyond exceptions.



Dimskal Shipping Co. SA v International Transport Worker’s Federation [1991] 3 W.L.R. 875 (The Evia Luck)

George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1983] 2 AC 803

Photo Production Ltd v Securicor Transport Ltd [1980] AC 827

Suisse Atlantique Société d’ Armement Maritime SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 36

The Sibeon and The Sibotre [1976] 1 Lloyd’s Rep 293

Universe Tankships v International Workers Federation [1982] 2 All ER 67


Sales of Goods Act 1979

Unfair Contract Terms Act 1977


Eggers, Peter MacDonald. Vitiation of Contractual Consent. Informa Law from Routledge, 2016.

Hawes, Cynthia, and Christian Twigg-Flesner. “Sales and guarantees.” In Handbook of Research on International Consumer Law, Second Edition. Edward Elgar Publishing, 2018.

Lista, Andrea. International Commercial Sales: The Sale of Goods on Shipment Terms. Informa Law from Routledge, 2016.

MacIntyre, Ewan. Essentials of Business Law. Cengage Learning, 2018.

Journal Articles

Bridge, Michael. Risk, property and bulk goods in international sales. 2019. Lloyd’s Maritime and Commercial Law Quarterly.

Taylor, Simon. UK Sale of Goods Legislation 1893-2015: Towards Plain (er) Language? 2018. ASp. la revue du GERAS 74 95-112.

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