24 March 1977
|SLOANS DAIRIES LIMITED|
The argument was in the first instance developed along the lines that a date of entry is an essential ingredient in every contract for the sale of heritage and particularly so in the present case where the subjects included tenanted property and what happened to the rents would be governed by the date of entry. It is no doubt true that entitlement to receive rents would depend upon entry, but there is nothing to suggest that the parties to this contract attached any particular significance to the receipt of rents, or that they regarded the date of entry to any of the property tenanted or un-tenanted as critical. For the general proposition that date of entry is an essential the only authority cited was a single sentence in Stobo v. Morrisons (Gowns) 1949 SC 184 where Lord Keith (at p. 194) after referring to the pursuer's offer as containing all the essentials necessary to instruct the sale of heritable property said "the subjects are identified, the price and term of entry are stated." That as I read it is merely a statement of the facts of the case. It does not bear to lay down any proposition in law, far less to enlarge the category of essential elements in a contract of sale beyond the stipulations as to price and identification of the property which have always been regarded as such by the conveyancers.
In the second speech for the defenders the argument on this point was put rather differently. The parties, it was said, had stipulated as part of their contract that the date of entry was to be a date agreed between them. Until a date of entry had been agreed the parties were not ad idem and since it was common ground that no date of entry had ever been agreed it followed that there could be no valid or enforceable bargain. That line of argument in my opinion fails to take account of the familiar rule of law that where parties are ad idem on the essentials of the contract, but in order to give efficacy to it something remains to be done which cannot be done unless the parties concur in doing it, the contract will be construed in such a way as to hold each party bound to do his part. Thus where parties have entered into a contract for the payment of money or the supply of goods at such time as may be mutually agreed it is not open to either party to escape from his bargain by refusing to agree. Gloag on Contract, (2nd ed.) p. 280. The same must I think apply in the present case where the parties have made a bargain for the sale of heritable property with entry on a date to be agreed. The pursuers aver that they removed from the subjects, so far as occupied by them, in May 1971, and that as the defenders were aware they were willing to give the defenders possession at any time. In that situation, as counsel for the pursuers put it, the defenders cannot scupper the contract by their own failure to agree a date. As I see it there is no obstacle to the grant of a disposition in terms of the missives, and if the defenders have not had entry already they will clearly be entitled to it on payment of the purchase price. I have no doubt that from the date of the conclusion of the missives this was a valid and enforceable contract and I turn to what, as I have indicated, was the principal subject of debate—the passing of the risk under the contract.
No great stress was laid on condition 5 which it appears from the form of the offer is a standard ingredient in the defenders' contracts for the requisition of heritage and does no more, in my opinion, than put on record the seller's acceptance of his common law obligations as regards upkeep. It does not bear to deal with accidental destruction of the property nor to lay on the buyer any responsibility for reinstatement. The defenders in the argument presented to me preferred to rely on the effect of condition 2 relative to the date of entry and to pose the question, esto that under the missives of sale the date of entry has been left over for determination by subsequent agreement, at what time does the risk of accidental damage to the subjects pass from seller to buyer ?
In the absence of any clear authority on the passing of risk in a sale of heritable property, counsel on both sides of the bar had recourse to the analogy of the law relating to the sale of moveables prior to 1893; and that approach has the sanction of the institutional writers who, in treating of the passing of the risk under a contract of sale, do not appear to differentiate between heritable and moveable property. The rule that the risk of accidental damage to the property passes to the purchaser on the conclusion of the contract stems from the Roman Law of Sale as set out in the Institutes of Justinian:
"As soon as the contract of Sale is concluded … the thing sold is immediately at the risk of the purchaser even though it has not been delivered to him. Accordingly, if a slave dies or is injured in any part of his body, or if a house is either totally or partially burnt down, or if a piece of land is wholly or partially swept away by a river flood or is reduced in acreage by an inundation or made of less value by a storm blowing down some of its trees, the loss falls on the purchaser who must pay the price even though he has not got what he purchased. The vendor is not responsible and does not suffer for anything not due to any design or fault of his own"
: Institutes 323 (Moyle's translation).
With the possible exception of Stair (1-14-6), where the position of the purchaser of goods which has perished without fault of the seller is treated as an undecided question, the importation of the rule into Scots Law is supported by a long line of authority (Erskine, Institutes 337; Bankton 1 19 35; Bell's Commentaries 2321; Bell's Principles, (10th ed.) para. 87; M'Donald v. Hutcheson Mor. 10,070;Anderson v. Walls & Co. 9 M. 122). Attempts to rationalise the rule have not been wholly successful. Erskine's theory that the seller is no more than a keeper of the subject for behoof of the purchaser appears to be more in line with the English doctrine than with the pre-1893 law of Scotland. A suggestion in Baron Hume's lectures (Stair Society, vol. 13, p. 52) that the loss is somehow to be regarded as arising from the buyer's fault in not taking the thing under his control is inconsistent with the premise of the argument, viz:—that the damage occurred without fault on the part of either party. Bell's explanation is even less convincing. The seller, said Bell, was freed by the destruction of the subjects from an obligation which he could no longer perform while the purchaser was still able to perform his obligation, viz:—to pay the price. As was later pointed out by Professor Brown (Sale of Goods, 2nd ed. p. 141) this seems to ignore the fact that the two obligations are part and parcel of a mutual contract—and that the impossibility of implementing it as a whole cannot afford a reason for freeing one of the contractors and holding the other bound. It may be that the Roman love of precision led to the adoption of what might be regarded as simply a convenient rule of thumb for the avoidance of disputes in particular cases or the theory behind it may have been that on the conclusion of the bargain the whole future interest in the subject matter of the sale lay with the purchaser so that it would be appropriate that he should suffer any diminution in its value just as he would gain from any accretion. Be that as it may, the importation of the brocard periculum rei venditae nondum traditae est emptoris into the common law of Scotland is beyond dispute, the rule having been succinctly restated as recently as 1967 by Lord President Clyde in Widenmeyer v. Burn Stewart 1967 S.C. 85:
"Prior to 1893 in Scotland the property in the goods sold (i.e. the jus in re) did not pass until the goods had been delivered. But the risk normally passed at an earlier date. That earlier date was the date when the contract of sale was complete, that is, when the price was certain and the seller has come under an obligation to supply a specific article to which the buyer has then a jus ad rem."
Counsel for the defenders accepting that such was the general rule pointed out that it allowed a number of exceptions as in particular when the seller was under obligation to deliver at a particular place. In a contract of that nature the risk did not pass to the buyer until the goods had been delivered. Spence v. Ormiston Mor. 3153, Milne v. Miller F.C. February 1, 1809. "When the seller becomes obliged to deliver the subjects at a certain place the periculum continues his till it be so delivered." Erskine 337. A similar situation it was contended arose where the seller had not yet come under a prestable obligation. The seller who undertook to deliver (or, in the present case, give entry) at a later date was in a similar position, it was argued, to the seller who undertook to deliver at a particular place. There is some force in this argument and the law might well have treated a deferred right of delivery as giving rise to an exception to the general rule. Since the right to have goods delivered at a particular place is treated in law as an exceptional circumstance which postpones the passing of the risk it might not be unreasonable for the law to make a similar exception in a situation where the right to delivery is deferred. But the short answer, is, I think, that the law has not made it. During the centuries in which the doctrine of the civil law formed part of the law of Scotland the rule was repeatedly stated and the exceptions to it listed and it is inconceivable that if the exception contended for by the defenders had existed it would not have appeared in the list, yet diligent and exhaustive research on the part of counsel for the defenders has failed to yield a trace of such an exception in any of the authorities. The most that could be said was that the existence of such an exception might be inferred from some observations of Lord Justice-Clerk Inglis in Hansen v. Craig (1859) 21 D. 432. That case, however, was no more than an application of the general rule which was held to be unaffected by a special agreement for postponement of delivery and the Lord Justice-Clerk's review of the effect of the special arrangement yields no inference that a postponed right of delivery is to be regarded as altering the incidence of risk. Indeed, the exception relative to the delivery at a particular place on which by analogy the defenders rely is in a sense against them for in all such cases the right to delivery would necessarily have to be postponed until such time as the goods were delivered at a specified place and if it were the law that in all cases of a postponed right to delivery the risk remained with the seller there would be no need to provide for a special exception in relation to delivery at a particular place.
The final contention for the defenders was to the effect that, since the risk did not pass until the contract was perfected, the fact that no date of entry had been agreed prevented the passing of the risk in as much as the contract could not be said to be perfected until there was a prestable obligation to give entry. I do not think that that is so. It is plain from the authorities and it is indeed the whole basis of the doctrine of passing of the risk that the contract is perfected and complete as soon as the missives of sale have been concluded. As Professor Burns put it, "the risk passes with the contract (though the seller remains liable for fault till delivery of possession)": Burns' Conveyancing Practice, (4th ed.) p. 170. From that time onwards the purchaser has a jus ad rem in relation to the subjects and from that time onwards, in my opinion, the risk of accidental damage passes to him along with the right to any accretion to the property before the date of entry, whenever that may be.
For the sake of completeness I ought to mention an argument advanced by counsel for the pursuers to the effect that even if the risk of loss was held to lie with them it would in the peculiar circumstances of the case make no difference to the defender's liability. The situation, counsel said, must be looked at from the point of view of the purchasers. Allan v. Markland (1882) 10 R. 383. It was the defenders' admitted intention to demolish the subjects in the course of re-developing the area in which they were situated and, albeit that the market value of the property had been considerably diminished, the subjects in their damaged state with a substantial part of the building demolished were no less suitable for the defenders' purpose than they had been before. It followed that no loss had been sustained such as the defenders could set off against the price agreed to be paid. I found this an attractive argument and it may well be right, but on the view I have taken of the case it is unnecessary for me to decide the point. It is, however, satisfactory to think that if the pursuers obtain decree the defenders will be getting in return for their money precisely what they bargained for and that the doctrine of risk can be applied without producing iniquity—an aim which Lord Justice-Clerk Inglis in Hansen at p. 439 observed should be kept in mind in this chapter of the law.
Counsel for the pursuers invited me to sustain their plea to relevancy of the defenders' averments and to grant decree de plano. The plea is, I think, sound in law so far as it relates to the defenders' case on the passing of the risk. The defenders, however, deny that the pursuers were willing to give the defenders possession at any time and the case cannot be disposed of so long as that matter remains in contention. I shall accordingly repel the first and third pleas-in-law for the pursuers and quoad ultra allow a proof before answer.
The defenders reclaimed, and the reclaiming motion was heard before the Second Division on 1st, 2nd and 3rd March 1977.
At advising on 24th March 1977,—
The other argument presented by defenders' counsel to the Lord Ordinary was that when the fire occurred the risk had not as a a matter of law passed to the defenders and so the pursuers' case was irrelevant. The Lord Ordinary was against them on this argument too, and refused to sustain their plea to the relevancy. He accordingly repelled the defenders' first and third pleas-in-law. It is against that judgment that the present reclaiming motion has been taken by the defenders. The pursuers sought to have their plea to the relevancy of the defenders' averments sustained and decree granted de plano, and while the Lord Ordinary considered that the plea was well-founded in relation to the question of the passing of the risk, he felt unable to grant decree de plano because of conflicting averments by the parties in relation to the pursuers' claim that they were willing to give the defenders possession at any time. Thus, while repelling the defenders' first and third pleas-in-law he allowed parties a proof before answer. Pursuers' counsel intimated that they accepted the Lord Ordinary's interlocutor.
The issue posed for the determination of this Court is—where did the risk lie in the circumstances here present when the subjects of sale were extensively damaged by fire through the fault of neither party, at which time the missives of sale had been completed but the defenders as purchasers had not taken entry and, it was argued, were not entitled to take entry of the subjects ? The pursuers maintained that the risk passed with the completion of the missives while the defenders contended that the risk did not pass until the pursuers, as sellers, had come under a prestable obligation to give the defenders entry to the subjects. Counsel for both parties provided ample evidence of the diligence of their researches in their endeavours to find an answer to the problem consistent with the interests of their respective clients. The principles in the Institutes of Justinian and Commentaries thereon by well-known writers pertinent to their arguments were extensively reviewed by counsel, as were the works of our own institutional writers, text-book writers and cases ancient and modern. The problem for the Court lay not so much in ascertaining the principles enunciated therein as in applying those principles to the facts of the instant case.
It was not in dispute that where ownership of the property has been transferred the risk passes to the buyer—res perit domino. So, too, the risk may pass prior to the transference of the property as a result of contractual agreement. In any given case the question then becomes whether the contractual provisions so provide and permit the brocard periculum rei venditae nondum traditae est emptoris to be applied. It is not in dispute that this brocard finds a place in the law of Scotland, and the rule of law which it enunciates falls within the law of consensual obligations and not within the law relating to the transference of property. Thus while admittedly a contract had been concluded here by the exchange of missives, it is necessary to consider what that contract provided for. The inclusion of a definite date of entry was not necessary for the conclusion of the contract. Nor was it necessary in the disposition of the property. Paragraph 6 of the terms and conditions provides for a conveyance of the property by the pursuers in the form of Schedule A to the Lands Clauses Consolidation (Scotland) Act 1845, and the form in Schedule A makes no specific reference to the date of entry. The absence of such a term in the conveyance is catered for by section 28 of the Conveyancing (Scotland) Act 1874 which provides that when no term of entry is stated in a conveyance the entry shall be at the first term of Whitsunday or Martinmas after the date or last date of conveyance, unless it appears from the terms of the conveyance that another term of entry was intended. The issue accordingly narrowed to this. In the circumstances here present had the parties each a prestable right which they could enforce on the conclusion of the contract ? At that point could the pursuers insist on receiving the purchase price on presenting a valid disposition of the subjects or could the defenders demand a valid conveyance on tendering the purchase price ? The pursuers submitted that this question fell to be answered in the affirmative with the consequence that the risk passed to the defenders on the conclusion of the contract. The defenders maintained that since they could not insist on delivery and possession by payment of the price until the date of entry (whether prescribed in the contract or otherwise agreed or imported by the operation of section 28 aforesaid), the risk did not pass till then and so the answer was in the negative. The argument on which this was based was that since the party in possession was the party in the position to protect the property, possession was the proper criterion of where the risk lay. It seems somewhat surprising, to say the least of it, that this issue has not been the subject of judicial decision over the centuries, but the diligent researches of counsel have revealed none, nor have my own. The only case which was cited as having a near-bearing on the subject was a Sheriff Court one, Meehan v. Silver 1972 S.L.T. (Sh. Ct). 70, where views were expressed by the Sheriff-substitute and the Sheriff-principal which run contrary to the pursuers' contention as an absolute proposition, but as that case was decided on negligence and the views expressed were obiter it was recognised that this in effect left the question open untrammelled by any Scottish judicial authority. The relatively modern text-book, Wood's Lectures on Conveyancing, at p. 550 leaves the matter open, and the modern practice there referred to of taking out an insurance policy in name of the purchaser for a sum sufficient to reinstate the property in case of fire seems to rest more on an abundance of caution than on any acceptance of settled law. The deep analysis by counsel of the civil law of risk as the basis on which an answer to the present disputation can be found was justified on the ground that it was the basis on which the institutional writers and text-book writers founded their own opinions, and had the approval and sanction of Lord Justice-Clerk Inglis in Hansen v. Craig & Rose 21 D. 432 at p. 438 and Lord President Clyde, Lord Guthrie and Lord Fraser (in the Outer House) in Widenmeyer v. Burn, Stewart & Co. 1967 S.C. 85. Stair's doubts as to whether the Roman law was incorporated into Scots law seem to be overwhelmed by the contrary view.
While the examples of the passing or non-passing of the risk considered by the civilians and our own institutional writers mostly relate to moveables, it has been accepted that the brocard periculum rei,etc. applies to heritage. For instance, Stair 1.14.7 refers to the case of Hunter v. Wilson 1667 Mor 10067, which related to heritage where the disposition bore an obligement to put the buyer in possession but the buyer was infeft before the property was burned, and the buyer voluntarily took possession after the burning. This was accepted by counsel, but its application to the circumstances here present was of course at the root of the argument. The legal mechanics attaching to sale differ in relation to heritage and moveables, and since the applicability or non-applicability of the brocard periculum rei etc. have been considered in relation to moveables, the question narrowed further to determining whether a factor in the legal mechanism attached to the sale of heritage would result in this case falling into one or other of the well-established categories attaching to the sale of moveables. For instance, leaving aside the question of negligence which does not arise here, it is well established in the sale of moveables that if there is a condition which specifies that the article will be delivered at a particular place then the risk does not pass until the article is delivered at that place. A suspensive element is thereby introduced. Defenders' counsel argued that a date of entry, whereby the defenders could obtain physical possession of the subjects could be equiparated to delivery at a particular place, and so the risk did not pass until the date of entry had been reached.
I accordingly propose to examine in the first instance the nature and legal effect and consequences of the contract constituted by the missives.
It is accepted that the missive concluded a binding legal contract. The terms and conditions of that contract were specified in the defenders' original letter of 14th February 1972, and these were simply accepted by the pursuers without qualification in their letter of 4th April 1972. A date of entry was left open on the missives, but a specified date of entry was not necessary for a binding contract to be completed, nor was it necessary to have a date of entry in the disposition which the pursuers would be obliged to hand over in fulfilment of their obligations under the contract. The missives did provide for the essentials, namely the parties, the subject matter of the sale and the price. Section 28 of the 1874 Act, supra, provided a long stop with regard to the date of entry so far as the conveyance was concerned. In Secretary of State for Scotland v. Ravenstone Securities Limited 1976 S.C. 171 Lord President Emslie said at p. 189:
"in a case in which parties have agreed that settlement shall take place on fulfilment of certain conditions and have not specified any earlier or later date for entry it will be presumed that the date of entry as purchasers will be the date of settlement itself."
Lord Cameron expressed an opinion to the same effect.
Standing that contract the parties to it acquired certain prestable rights. On payment of the agreed price the defenders were entitled to a valid conveyance in terms of clause 6 of the contract and could thereby become infeft in the subjects. On delivering such a conveyance the pursuers were entitled to the purchase price. What was the position in relation to the date of entry ? It is agreed that this was not an essential of the contract. If the date was agreed, then presumably it would find its way in to the conveyance. If it was not, then it would notionally be imported into it by the operation of section 28 aforesaid. Possession of the subjects was to be given as at that date of entry. Did this constitute a suspensive condition or was it simply a resolutive condition ? The defenders maintained it was the former, and sought to equiparate it to the type of suspensive condition in the sale of moveables hereinbefore referred to where the risk remained with the seller until delivery was made. The pursuers contended that it was only a resolutive condition, and that as they were able to fulfil their obligation under the contract by delivering a valid conveyance even if it made no reference to the date of entry, they had a prestable right from the conclusion of the contract which entitled them to invoke and found upon the brocard periculum rei, etc. A difficulty arises from seeking to apply principles that were enunciated in relation to the sale of moveables to cases relating to the sale of heritage. In the sale of heritage, ownership is only acquired when the buyer has become infeft following upon the conveyance. In the normal course of events this means that some time must elapse between the missives and infeftment (after which res perit domino) so where does the risk lie in the interval ? One is then driven back to the terms of the contract. In this regard assistance can, in my opinion, be obtained from a passage in the opinion of Lord President Clyde in Widenmeyer v. Burn Stewart & Co., supra, at p. 98, where his Lordship said:
"Prior to 1893 in Scotland the property in the goods sold (i.e. the jus in re) did not pass until the goods had been delivered. But the risk normally passed at an earlier date. That earlier date was the date when the contract was complete, that is, when the price was certain and the seller has come under an obligation to supply a specific article, to which the buyer has then a jus ad rem. The time when that jus ad rem emerges will depend, of course, on the terms of the particular contract. Prior to 1893, if it was a contract for the sale of a specific article, the risk obviously passed when the contract was made, for the buyer had then a jus ad rem. If, however, something has still to be done by the seller to give a jus ad rem specificam to the buyer, as for instance the identification of the particular quantity to be delivered to the buyer out of a general mass, then the risk will not pass before the particular quantity is segregated in some way from the mass. Prior to that being done the buyer has not a jus ad rem to any specified part of the mass. These principles have come down to us from the Roman system and are well settled in our law."
While this was said in a case which involved moveables, I consider that the principles are equally apposite in a case dealing with heritage.
Was the contract here complete, or to use the term of the civilians "perfected"? The answer is "Yes." The parties, the subjects and the price were specified. Was anything further required to be done to give the buyer, i.e. the defenders a jus ad rem specificam? The answer is "No." It was conceded that a date of entry was not an essential of the contract, and that section 28 provided a certain date of entry if one was not included in the conveyance. On the completion of the contract the defenders acquired a jus ad rem in the specified subjects, and what they were entitled to get in respect thereof on payment of the agreed price was in terms of clause 6 of the missives a valid conveyance in the form of Schedule A to the Lands Clauses Consolidation (Scotland) Act 1845, which did not require any reference to the term of entry. They would have a prestable right to delivery or possession of the subjects on the date of entry, however that date was determined, and that was a right which they enjoyed from the "perfection" of the contract and thus at the time of the fire. The position can perhaps be tested by considering what would have been the position if a specified term of entry had been included in the missives. If this required the incorporation of the date of entry in the conveyance, the pursuers would have discharged their obligation under the missives by including it, even if that date was subsequent to the date of the conveyance. On the completed contract, which gave both parties a jus ad rem, all the pursuers were bound to give and all the defenders were entitled to receive was a conveyance in that form. If the date of entry was subsequent to the conveyance that would not be a suspensive condition. In the cases where the brocard has been applied in the sale of moveables the risk lies with the buyer although the property remains in the possession of the seller. That being so, the defenders' argument that the test is that the risk rests with the party who is in a position to protect the property cannot be upheld. On that view of the case I find myself able to sustain the pursuers' contention that the Lord Ordinary was right in holding that in the circumstances here present the risk had passed to the defenders at the time when the fire took place and destroyed part though not all of the subjects. I have been able to do so without a detailed examination of the writings of the civilians and the commentaries thereon and the works of the institutional writers and text-books which were so extensively canvassed before us. My colleague Lord Dunpark has made an exhaustive study of these from which he has arrived at the same conclusion as myself, and if it be necessary to have regard to these writings, I am content to adopt his analysis and findings thereon. I can find in them nothing which vitiates the view which I have formed, but only support for that view. There were, however, two further arguments by the defenders to which I find it necessary to advert. It was argued under reference to the conditions of the missives and in particular clause 5 thereof that since the pursuers were entitled to the rents of the property and were responsible for the up-keep of the subjects until the defenders took possession, the risk remained with the pursuers. The rents were said to be part of the commodium, and where the commodium effeired to the sellers so did the risk. There is no direct reference to the rents in the missives, but it seems a reasonable inference from clause 2 that they would effeir to the pursuers until possession was taken by the defenders. On the other hand any incremental increase in the value of the subjects would accrue to the defenders. In the light of the whole circumstances of the bargain which was reached between the parties, it seems not unreasonable to assume that these were matters which were taken into account in arriving at the purchase price, and I do not consider that this factor displaces the factors on which I have relied in coming to the conclusion that the risk had passed to the defenders. So far as clause 5 is concerned, which is in general terms, I agree with the Lord Ordinary that this does no more than relate to the legal obligations which would attach to the person holding the property even when the risk had passed to the other party. Incidentally there is nothing in the case to indicate what the pursuers had been informed about their responsibility.
Defenders' counsel advanced a further argument based on the legal consequences of the total destruction of the subject matter of the contract, and the effect of that on the contract. I do not find it necessary to go into the merits of that argument since the subjects here were not wholly destroyed but only diminished in value as a result of the fire.
I am accordingly of the opinion that the Lord Ordinary was correct in holding that the risk had passed to the defenders. He found, however, that he could not grant the pursuers decree de plano because of the defenders' denial of the pursuers' averment that they were willing to give the defenders possession at any time. He accordingly allowed a proof before answer, presumably on this one point of contention, because he repelled the defenders' first and third pleas-in-law. I must confess that I have difficulty in seeing the practical point in having a proof before answer on such a limited point, standing the pleadings as they are, particularly when that issue arises only from the general denial of the pursuers' averments and the defenders have no specific plea directed towards the consequences of it. But pursuers' counsel stated that they were satisfied to abide by the Lord Ordinary's decision and moved this Court to affirm his interlocutor. Defenders' counsel simply asked us to sustain their pleas which had been repelled and dismiss the action, and made no submissions anent the proof before answer if we were otherwise affirming the Lord Ordinary. It would appear that both parties are prepared to have such a limited proof when the Court has held that the risk had passed to the defenders. And, of course, proof may be required in respect of the pursuers' alternative conclusions. I accordingly consider that in the circumstances the appropriate course is simply to refuse the reclaiming motion and adhere to the interlocutor of the Lord Ordinary dated 23rd March 1976. I would only add by way of post-script that the pursuers' said averment which is to be found at the end of Condescendence 3 might have raised a further point if this Court had decided that the risk did not pass to the defenders until they had obtained possession of the subjects. If that had been the legal position generally, then the successful establishment by the pursuers that all along—even before the completion of the missives—they had been willing to give the defenders possession of the subjects, might well have had an effect on the legal position in those particular circumstances. That situation, however, does not arise in view of the decision which this Court has reached, and I need say no more about it.
The solution of this question is undoubtedly rooted in Roman law, which acknowledged no distinction, in relation to the passing of risk effected by contracts of sale, between heritable and moveable property. The civilians recognised that consensual contracts of sale formed an exception to the general rule of res perit domino, that exception being formulated in the brocard periculum rei venditae nondum traditae est emptoris. Scots law also recognises this exception in relation to the sale of moveable property, and I did not understand counsel for the defenders to contend that this exception had no place in Scots law relating to heritable property. The issue between the parties is, therefore, whether or not the terms of their contract of sale bring this contract within the exception as it is, or should be, applied by Scots law.
Some initial difficulty is created by the fact that different reasons are given by different writers for the existence of the risk rule in the Roman and Scots law relating to consensual contracts, and some of the passages referred to by counsel are open to construction. However, having examined these, I have come to the conclusion that the equitable reason for the existence of the risk rule, both in Roman law and Scots law, is that "all the benefit of the thing goes with the risk" (see Voet's Commentary on the Pandects—Berwick's translation—at page 136). "Nam et commodum eius esse debet cuius periculum est" (Justinian's Inst., III, 23, 3). Bankton (Inst., I, xix, 35) is to the same effect. Brodie, at page 857 of his Supplement to Stair's Institutions, put it this way:—
"The principle of the civil law, which we have adopted, as to delivery being necessary to transfer the property, seems, in regard to the risk, to have been founded on this—that, as things are in a constant state of fluctuation, it necessarily happens that, if any considerable period of time intervene between the sale and the transference, a change of some kind must occur: that the buyer has, however, on performance of his obligation, or a tender of it, a right to the specific article, with all the advantage of its intermediate improvement, and therefore is justly subjected to any loss which may attend it: that the contract having regard to a particular subject, which is thus far at the buyer's risk, it follows that, since all he can demand is the specific article as it, without the vendor's fault or his being in mora, exists at the moment of delivery, so, if it hath wholly perished without the seller's fault, or his being in mora, the price is still due, on the ground of the buyer not having been kept out of his right by the seller, and of his obligation covering that hazard, and thus, in such an event, inferring a debt as for the property."
Although Brodie's comments are made in a chapter which relates to moveable property only, in my opinion he correctly states the equitable reason why Roman law provided that the risk of destruction or damage of the subject matter of a contract of sale, whether heritable or moveable, should pass to the purchaser before delivery. He also states, what appears to me to be, the legal basis of the rule, namely, that the concluded contract of sale gives to the buyer the legal right to the specific article on tendering the price, and that, if the seller has not been at fault or in mora, he is merely a debtor for the property.
This principle is also explained by M'Laren in the seventh edition of Bell's Commentaries, Vol. I, page 473:
"The exception in the case of sale originated not in any idea that the vendor and vendee's obligations were not reciprocal and conditional upon each other … but from the letter of the old Roman formula expressing the vendor's obligation, which was not to deliver the thing, … or to make the vendee dominus rei venditae, but ‘hactenus tenetur venditor, ut rem emptori habere liceat, non etiam ut eius faciat.’ (L. 30, sec. 1, D. de Act. Empt; Poth. Vente, No. 1.)"
Moyle's (Contract of Sale in the Civil Law, page 91) explanation for the rule is similar in respect that the purchaser is deemed "to have" the thing for the delivery of which he can sue.
Erskine (Inst., III, iii, 7) states the same legal and equitable bases for the rule as follows: … "[the seller] is truly no better than the keeper of the subject for behoof of the purchaser, and so he is debtor for its delivery; and no debtor for the delivery of a special subject can in equity be answerable for the casual misfortunes to which it may be exposed." After referring to Stair's opinion that the total destruction of the subject matter of a sale deprives the seller of his claim for the price, Erskine proceeds as follows:
"Admitting, however, his Lordship's doctrine to be well founded in the case of the entire extinction of the subject, it is agreed on by all that the seller is entitled to the full price, though the subjects should by mere accident have turned worse while in his hands; because, seeing the purchaser has the whole benefit arising from the improvement of it, he ought also to run the risk of its deterioration; Cujus est commodum, ejus debet esse periculum."
These passages from Erskine must also be read in their context of obligations arising from consent, as opposed to obligations, such as those relating to heritage, which require writing for their constitution; but it is plain that the Roman doctrine of periculum rei venditae nondum traditae est emptorisbecame part of the law of Scotland, and that we have applied it on the Roman basis (see e.g. Hansen v. Craig & Rose, (1859) 21 D. 432, per Lord Justice-Clerk Inglis, at pages 438–9). There is no logical reason why the rule should apply to moveables but not to heritable property, and no hint in the Scottish authorities that it should not be applied to heritage. Indeed the assumption made by conveyancers is that it does apply to heritage (see Wood, Conveyancing, page 550, and Burns' Conveyancing Practice, (4th ed.) page 170). I am, therefore, satisfied that Scots law has adopted the Roman rule in its entirety.
The principle is that, on the conclusion of a perfect contract for the sale of heritable property, the risk of damage passes from the seller to the buyer, because the buyer immediately acquires a jus ad remto the specified subjects, with a right of action for delivery. If the contract is subject to a suspensive condition, the contract is not perfect, and the buyer does not acquire a right of action to sue for delivery until that condition is fulfilled; but if the terms of the contract are such as to bind the purchaser to tender the agreed price for the agreed subjects, and the seller to no more than to allow the purchaser "to have" the agreed subjects when he tenders the price, the risk passes to the buyer on completion of the contract. The question in this case is whether or not this contract had this effect.
Before I turn to the missives of sale in this case, I mention that this rule could operate inequitably in respect that the risk could be transferred to a purchaser without his knowledge. By our law a contract is concluded when the unconditional acceptance of an offer is posted, and I would not like to see the risk rule applied so that the risk of damage passed to the purchaser before he received the acceptance. However, that is not the position here, as the disposition of the subjects appears to have been prepared by the defenders, revised by the pursuer's solicitors and engrossed by the defenders before the fire occurred.
The first specialty in this contract is that the date of entry was not fixed. What was agreed was that the date of entry would be agreed later, and that vacant possession of part of the subjects would be given at the date to be agreed. I was initially troubled by this deferred agreement, but my difficulty was eliminated by the approach of counsel for the defenders, who, no doubt rightly, did not found upon the fact that the missives did not fix a date of entry. Their position was that the missives concluded a contract for the sale of the specified subjects, and that the date of entry would subsequently have to be agreed by the parties, failing which, fixed by "some other means." They conceded that the argument which they presented would have been the same if the missives had fixed a date of entry which was later than the fire which damaged the property. Senior counsel made the further concession that an agreed date of entry was not of the essence of a contract for the sale of heritage, as section 28 of the Conveyancing (Scotland) Act 1874 provided a statutory date where none was stated in a conveyance of lands. It is, therefore, apparent that missives of sale, which are silent as to the date of entry, may be implemented by a conveyance. These concessions seem to me to undermine the first submission of counsel for the defenders, which was that the defenders did not have, at the date of the fire, a prestable right to obtain from the pursuers a disposition of the subjects, the delivery of which was essential to their acquisition of dominium. In my opinion, however, the fact that the date of entry was to be the subject of future agreement did not preclude the defenders from acquiring, on completion of the missives of sale, a vested, indefeasible right to demand from the pursuer at some future date a valid disposition of the subjects in exchange for the price.
But the principal proposition, upon which counsel for the defenders founded in support of their submission that the risk of damage had not passed to the purchasers in this case, was that the transfer to the buyer of heritable property of risk of damage to it was directly related to the date of entry, whether agreed or imposed by section 28 of the 1874 Act, so that loss through damage which occurred before the due date fell upon the seller, while damage which occurred after the due date would fall upon the purchaser. As the damage in this case had occurred before the purchasers had become entitled to enter the subjects, the loss, counsel submitted, remained with the seller. The reason given for the date of entry governing the transfer of risk was that the buyer had no physical means of protecting the property from damage until he had become entitled to take the property into his possession. In support of this proposition reference was made to Hume's Lectures (Stair Soc., Vol. 13, page 51) where it is said:
"Now, here, it lies with the buyer immediately and at his own charge, to send for the thing, to the place where it is at the time, and there to receive it."
My comments on this passage are that it can only be related in its context to moveable property, and that it is a particular example of the principle of the seller being, as Erskine put it, "debtor for its delivery."
Counsel also construed the passage in Brodie's Supplement to Stair's Institutions, at page 857, in the sense that the buyer did not acquire a jus ad rem specificam until the time came for him to tender the price against delivery of the subject matter of the sale (i.e. in this case, the disposition). In my opinion this is too narrow an interpretation of the passage. The learned author is dealing with the transfer of risk to the buyer before delivery, although, as he says, delivery is necessary to transfer the property (i.e. dominium). During the period of time between the contract of sale and delivery, Brodie firmly places the risk with the buyer, unless the seller is at fault, in mora or under the obligation to deliver the goods at a particular place and time. None of these exceptions apply in this case. The last seems to me to be an example of a special agreement whereby the seller undertakes to become creditor for delivery of the goods and thereby impliedly accepts the risk of everything that may happen to them while they are in his hands (see Bell's Comm. I, page 474, Note 2, and Walker v. Langdales Chemical Co., (1873) 11 M. 906).
Counsel for the defender also construed Moyle's (cit. supra, at page 91) reference to Windscheid in the sense that the subject matter of a sale was not deemed to have become the property of the purchaser until the arrival of the agreed delivery date; but what is said is that from the time when a perfect contract is concluded, the goods are deemed to have ceased to be the vendor's even before delivery. He does not say that the risk remains with the seller until the arrival of the date for delivery. Counsel also prayed in aid the passage from Bankton, to which I have already referred (Inst., I, xix, 35), as meaning that, as the seller had no right to the price before the agreed date of delivery, the risk remained with him until the arrival of that date. This construction, however, is inconsistent with what I believe to be the rationale of the rule governing the transfer of risk on sale.
Meehan v. Silver 1972 S.L.T. (Sh. Ct.) 70 was founded on for an obiter dictum of the Sheriff-principal that "without express authority in relation to heritage … it would be dangerous to hold that the risk of damage passes to the purchaser before he obtains actual possession of the property and before he is in a position to take precautions against its occurrence." While this supports counsel's proposition that the transfer of risk to the buyer is collateral with the buyer's acquisition of the right to immediate possession, I can only apply the rule which, for the reasons given, I consider to be part of our law.
Senior counsel for the defenders also adverted to the equitable reason of the rule, namely, "Nam et commodum ejus esse debet cujus periculum est," and contended that in this case the sellers retained until the date of entry the beneficial interest in the subjects, in respect that they were entitled to the rents until that date (see Hume's Lectures, page 52, and Bankton's Inst., I, xix, 35 and 37). That is true, but the price was fixed in this contract, and thereafter any increase in market value enured to the benefit of the purchaser. Moreover, if the right to rents or crops was of importance in a particular sale, the amount of the purchase price would surely take into account the date when the seller's right to the rents or crops was to be transferred to the buyer. Erskine (Inst., III, iii, 9) was founded on as showing the extent of the seller's obligations; but this passage must be read as ancillary to, and not as detracting from, the earlier passage in paragraph 7.
Senior counsel for the defenders further submitted that in Roman law the emphasis was upon the transference of physical possession of the subjects of sale, and that the rule must therefore be directly related to that. He was doubtless referring to the acquisition of dominium by usucapio and prescriptive possession; but this is to ignore the fact that there were in Republican times two formal ceremonies for the transfer of dominium of res mancipi, namely, mancipatio and in jure cessio.Each of these ceremonies had the common factor that it was the buyer who had to take the positive act of claiming dominium. Moreover, counsel's reference to Zulueta (Studies in the Roman Law of Sale, page 86), in order to demonstrate that the seller's only obligation by Roman law was to guarantee peaceful possession to the buyer until he acquired dominium by prescription, does not, in my opinion, assist him. The passage begins by stating that "the seller was never under any obligation to make the buyer owner." In Scots law there is such an obligation, and the sellers were taken bound by these missives to grant to the buyers a valid title to the property; but this obligation does not prevent the contract from being "perfect." It constitutes, in my opinion, a resolutive condition, the non-fulfilment of which would entitle the buyer to resile.
The reason why counsel were able to present the proposition in the form in which they did is, in my opinion, that the Roman rule was not related to the transfer of dominium, but to the transfer of possession; and all the relevant Scottish authorites (except two, in which the purchaser had taken infeftment before the damage occurred) relate to moveable property, whereby delivery passed the right of property along with possession. But, if I have found the true bases for the existence of the Roman risk rule in contracts of sale, it has nothing to do with the date when a buyer becomes entitled to physical possession, and everything to do with the purchaser's jus ad rem specificam,which entitles him, whenever delivery is due, to acquire the subject matter of the sale as it exists at the due date, with all accretions and improvements on the one hand, and deteriorations on the other. This was certainly the view taken by Lord President Clyde and Lord Guthrie in Widenmeyer v. Burn, Stewart & Co., 1967 S.C. 85, at pages 98, 102 and 104, in a case concerning the appropriation of previously unascertained barrels of whisky to a contract of barter. The Court held that, in dispatching to the defenders' agents delivery orders for specific numbered barrels of whisky, the pursuer had done all that the contract required him to do, that the defenders thereby acquired a jus ad rem specificam, and that the risk passed to them concurrently with that acquisition. It necessarily follows that, if the original contract had specified particular barrels by their numbers, the defenders would have acquired their jus ad rem in relation to the specified barrels on completion of the contract, although they would not have acquired a jus in re until they had intimated their document of title to the third party custodiers.
Counsel for the defenders in the present case did not refer to the Widenmeyer decision, but, if they had done so, they would no doubt have distinguished it upon the ground that in Widenmeyer the delivery order gave to the defenders an immediately prestable right to delivery of the barrels specified therein, whereas in the present case the defenders had acquired no prestable right of entry before the property was damaged by fire. This distinction certainly exists, but it seems to me that Widenmeyer applied the rule that the buyer of subjects, be they heritable or moveable, acquires a jus ad rem specificam immediately upon the conclusion of a "perfect" contract of sale, by which I mean one in which the subject matter is ascertained and the price therefor agreed, and which is not dependent upon the purification of a suspensive condition.
The argument for the defenders is, in my opinion, based upon the fallacy that the risk does not pass to a purchaser until he acquires a personal right of action for the immediate transfer of possession. Jus ad rem specificam is a short form of jus in personam ad rem specificam acquirendam. The concession made by counsel for the defenders that an agreed date of entry was not of the essence of a contract for the sale of heritable property necessarily results in the defenders having acquired a jus ad rem specificam on the conclusion of the contract. Although they had then no right to demand immediate entry, they nevertheless acquired a personal right to become proprietor of the subjects of the sale at some future date, which was to be fixed by agreement. It is the vesting of that right which is material—dies cedit—not the date when performance may be demanded—dies venit.
None of the authorities cited by counsel for the defenders supports their proposition that mere deferment of a delivery date will per se be sufficient to leave the risk with the seller between completion of the contract and the date of delivery. Indeed, the various references to the risk of damage to moveable property being with a seller who is at fault or in mora in delivery seem to me to support the converse proposition, namely, that, in the absence of special agreement, the loss lies with the buyer unless the damage is caused by the fault of the seller or occurs at a time when the buyer was prevented from taking delivery by delay on the part of the seller.
The rule which is applicable to the passing of risk in a contract of sale is an exception to the general rule of res perit domino,and my interpretation of that exception is that it is based, not upon the right to possession, but upon the unconditional right of the buyer to become owner at some future date, so that the transfer of the risk is coincident with the acquisition of that right.
The last submission of counsel for the defenders was based upon the terms of clause 5 of the offer missive:
"Your client has been informed of his responsiblity for the upkeep of the subjects up to the date when the same are taken over by the Corporation."
The argument was that, under this agreement, the risk of damage concurred with the responsibility for upkeep. However, agreeing with the Lord Ordinary, I cannot read this clause as more than a reminder of the seller's common law duty to maintain the subjects until the purchasers took them over. As this is a duty which the law imposes on all sellers of heritable property, it does nothing to transfer the risk of damage, which I have held was imposed by law on the purchasers on completion of these missives of sale.
For these reasons, I am of opinion that in this case the fact that the subjects of the sale were damaged by fire before a date of entry was agreed does not affect the pursuers' right to demand payment of the agreed price in exchange for a valid disposition. Now, the Lord Ordinary repelled the first and third pleas-in-law for the defenders, but allowed a proof before answer because the defenders denied "that the pursuers were willing to give the defenders possession at any time." I observe, however, that there is no reference in the opinion of the Lord Ordinary to section 28 of the 1874 Act. It seems to me that the effect of that section upon the pursuers' averments (which are admitted by the defenders) that a draft disposition was prepared by the defenders, revised by the pursuers' solicitors and engrossed by the defenders, is that the date of entry would be "the first term of Whitsunday or Martinmas after the date or the last date of the conveyance," whenever it was executed, unless the conveyance referred to another date. In the absence of any averment by the defenders that the pursuers were unwilling to grant a disposition in exchange for the price, the position, as I see it, is that, following the engrossment by the defenders of the draft disposition, they became bound to pay the price in exchange for a disposition in the terms of the agreed draft. The defenders admit that the pursuers' solicitors wrote to them on 17th August 1972, informing them that the engrossment of the conveyance had been fully executed and asking them about settlement. In my opinion, it then became the defenders' duty to tender the price in exchange for the disposition, and I can find in the pleadings no relevant averments which require to be proved.
Counsel for the pursuers moved us to adhere to the interlocutor of the Lord Ordinary, but, for my part, I would be willing, if so moved, to ordain the defenders to pay to the pursuers the sum of £66,735.50, with interest at the rate of seven per centum per annum from 18th August 1972 until payment, in exchange for a valid disposition of the said subjects executed by the pursuers in favour of the defenders. However, if that motion is not made, I agree with the proposal of your Lordship in the chair that we should refuse the reclaiming motion and affirm the Lord Ordinary's interlocutor.
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