By Dr Mark Campbell, Teaching Associate (University of Bristol Law School).
Section 2(1) of the Sale of Goods Act 1979 (the ‘Act’) defines a sale of goods as ‘a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price.’ There are, accordingly, three reasons why a contract may fall outside that definition and, thus, the Act’s jurisdiction. First, there may be no transfer of property in the goods, as in a bailment where there is transfer of possession but not ownership. Second, the transfer may relate to subject matter other than goods: e.g. an assignment of intangible property such as copyright or debt. Third, there may be an absence of money consideration: e.g. a gift or a contract involving goods given wholly in exchange for other goods.
In PST Energy 7 Shipping LLC v O W Bunker Malta Ltd  UKSC 23,  2 WLR 1193 the UK Supreme Court has recently examined the reach of s 2(1) and, in particular, the requirement for a transfer of property in the goods. The transaction in question involved the supply of bunkers (marine fuel) by O W Bunker Malta Ltd (‘OBWM’) to PST Energy 7 Shipping LLC (‘PST’), the owners of a vessel, Res Cogitans. That agreement contained a retention of title clause. Where goods are supplied on credit terms, a retention of title clause allows the seller to retain ownership of the goods pending payment by the buyer. OBWM had been supplied with the bunkers by its parent company, O W Bunker & Trading A/S (‘OWBAS’), which in turn had been supplied by Rosneft Marine UK Ltd (‘RMUK’). The contract between OWBAS and RMUK also contained a retention of title clause. Physical delivery of the bunkers to the vessel was made by RN-Bunker Ltd, an associate company of RMUK and the supplier to RMUK. The legal proceedings arose following an application for restructuring by OWBAS, an event which would allow ING Bank NV to claim the contract price from PST as assignee of debts owed to OWBM. Concerned that it may not recover the contract price from OWBAS, RMUK indicated that it would seek payment from PST on the basis that RMUK remained the owner of the bunkers. (more…)