England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE No QBENI 97/0309/E

Royal Courts of Justice

Strand

London WC2

Tuesday, 15th July 1997

B e f o r e:

LORD JUSTICE AULD

LORD JUSTICE PHILLIPS

LORD JUSTICE WALLER

ATARI CORP (UK) LTD

- v -

ELECTRONICS BOUTIQUE STORES (UK)

(Handed down judgment prepared by

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 831 3183

Official Shorthand Writers to the Court)

MR N UNDERHILL QC and MR M SHANKS (Instructed by Brookstreet Des Roches of Witney, Oxfordshire) appeared on behalf of the Appellant

MR G LEGGATT QC (Instructed by Barnett Alexander Chart of London) appeared on behalf of the Respondent

J U D G M E N T

(As Approved by the Court )

(Crown Copyright)

This is an appeal from a decision of Hooper J who upheld the decision of Master Foster granting summary judgment to the plaintiffs for the sum of £369,611.16.

The sum claimed by the plaintiff is the price of certain electronic computer games and hardware delivered to the defendants pursuant to orders made in August/October and November 1995. Details are conveniently set out in a schedule to the statement of claim. The first and largest order provided expressly for:

Payment 30th November 1995

Full S.O.R. until 31st Jan 1996”

S.O.R. stood of course for Sale Or Return.

The arrangement for Sale Or Return was negotiated between the parties and the terms confirmed by two faxes which are at pages 42 and 43 of the bundle. There is some dispute about what precisely was agreed, and indeed there may be a dispute as to the admissibility of any agreement said to have been reached outside the strict confines of the orders placed having regard to the Defendants’ terms of purchase. Suffice it to say that the plaintiffs will contend at any trial that Sale Or Return applied only to the original stocking order in which it was specifically referred to and possibly one other order in which express reference is made to Sale Or Return. They will say it did not apply to any other orders at all; and indeed, if a later order repeated an item the subject of the original stocking order they will wish to contend that those items delivered under the original stocking order lost the Sale Or Return element. The defendants contend that Sale Or Return was to apply to any "first" order for items, and that as regards orders repeating items the subject of the previous order, the agreement was that Sale Or Return would not apply to the items the subject of the repeat orders, but would continue to apply to the items the subject of the "stocking" order. In the result, the defendants accept that in relation to the contracts identified in the schedule to the statement of claim, there are three to which the Sale Or Return term does not apply, and it is to those that the plaintiffs’ respondent’s notice is applicable.

The original stocking order is the largest order, and accordingly it has been sensibly recognised that for summary judgment purposes, the disputes as to whether Sale Or Return applies to certain of the smaller orders, and as to whether some items, by virtue of repeat orders, lost their Sale Or Return element, raise triable issues. On the application for summary judgment the point argued by the plaintiffs has simply been that the defendants have in any event failed to give notice of rejection of any goods which they held on Sale Or Return.

As appears from the express terms of the first order which I have set out, it was the intention of the parties that payment would be made by 30th November 1995, albeit the defendants were to have the "full" right of Sale Or Return up until 31st January 1996. Furthermore, the defendants in fact confirmed their intention to pay, by fax dated 28th November 1995 (page 74), but in the result the defendants have only paid very limited sums. It is the defendants case that once the 1st December went by, and it was appreciated that the goods were not selling well, some arrangement was reached under which the defendants only paid for those goods which they in fact sold. This is disputed by the plaintiffs and is a matter again which could only be resolved at a trial. The defendants further say that they in fact paid for the goods that were sold, and identified in schedules supplied monthly to the plaintiffs those items that had been sold and those that had not. The defendants then wrote the letter on which this appeal turns which I should set out so far as material:

""A review of all formats within the Electronic Boutique chain has recently taken place and the outcome was that Atari Jaguar is to be no longer stocked within the chain. Our decision was made on performance, participation, gross profit earned from footage allocated to product, and general market analysis on the Jaguar format. All stores have been requested to return all Jaguar stock to our central warehouse and when this is all received we will submit to you a complete list of what you will need to raise RA ( agreed to mean Return Authorisation ) numbers against.

This decision falls in line with our current trading agreement."

The response from the plaintiffs was by fax dated 22nd January 1996, and so far as relevant read:

"On receipt of your fax we reviewed our files and have asked our solicitors to advise us, in particular about the sale or return arrangement. Our initial conclusion is that we believe that you have lost the right to return goods to us as you were in breach of contract by not settling the invoices relating to the initial order on the due date."

That was followed by a further fax of 25th January 1996 from the plaintiffs saying:-

"For your information we have had confirmation from our legal people that your non-payment does constitute a breach of the original agreement, but we are willing to take back the unsold inventories subject to the agreement of a restocking charge."

There was a suggestion, not pursued, that there might be some dispute on the admissibility of this last letter on the basis that it was really an offer to settle, but since it was quoted by the Judge, and since in any event it does in fact firm up the position taken in the previous letter, the lack of pursuit is quite understandable.

There were attempts to negotiate a compromise which failed and the 31st January went by. In the meanwhile neither side had taken any further steps. The defendants did not give any notice that they wished to try and collect any stock. The plaintiffs did not prepare any list identifying the goods to be returned. The date simply went by without any further step being taken by either party.

After the 31st January, and in particular by the affidavits on the summary judgment application, the point about failure to pay having deprived the defendants of their right to exercise the sale or return condition has not been pursued. The point argued before the Master and before the judge has simply been that the 19th January 1996 letter was not a notice of rejection because:-

(1) it postulated some future action being taken in order to exercise the right of rejection,

(2) it failed to describe the goods which were being rejected with sufficient specificity;

and

(3) the defendants did not have the goods available when the notice was served.

In the affidavits it is said that the defendants even now may not be able to identify the goods they are seeking to return, and reliance is placed on some correspondence later in the year where the defendants purported to deliver schedules and then withdrew the same as inaccurate. It also appears that at some time in June 1995 the defendants may have sold some of the items, which, if their rejection was valid, they would accept was a conversion of those items. But it is common ground that we are not assisted in our task of construing the contractual provisions or identifying whether or not a valid rejection took place by reference to the later history.

Both parties commenced their arguments as to whether the defendants had successfully exercised their right under the term allowing for Sale Or Return by reference to Section 18 Rule 4 of the Sale of Goods Act 1893 which, so far as material, provides as follows:-

"Unless a different intention appears the following are rules for ascertaining the intention of the parties as to the time at which property in the goods is to pass to the buyer ...

Rule 4 - When goods are delivered to the buyer on approval or on sale or return or other similar terms the property therein passes to the buyer:-

(a) When he signifies his approval or acceptance to the seller or does any other act adopting the transaction;

(b) If he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, if a time has been fixed for the return of the goods, on the expiration of such time. ..."

We were also referred to Benjamin on Sale 5-051 which deals with sale or return, and what Benjamin suggests constitutes a notice of rejection under Section 18 Rule 4. Authorities on the subject are sparse but the key sentence is:-

"It is probable (my emphasis) that any intimation to the seller which clearly demonstrates that the buyer does not wish to exercise his option to purchase will suffice, but it is open to the parties to agree that the buyer shall be entitled to reject only by returning the goods".

What that sentence demonstrates is that the starting point must be to construe the terms of the particular contract providing for Sale Or Return, and decide what in the particular agreement the parties mean by Sale or Return or, as in this case, "Full Sale Or Return until 31st January 1996". For example "full Sale Or Return until 31st January 1996" could be construed as requiring the actual physical return of the goods to the seller prior to 31st January 1996; alternatively, it could be construed as requiring the buyers to have the goods which they intended to return available for collection prior to the 31st January 1996, (and thus a requirement for notice to the plaintiffs to enable that to be achieved); alternatively, it could be construed as the buyers having the right until 31st January 1996 to notify the sellers that they were exercising the right to return the goods the obligation thereafter being to have the same available after 31st January 1996; and there may be other possible constructions. If on a proper construction of the terms it is a case where a notice must be given, what the notice must contain and when it must be given will also need resolution. For example, (1) is it permissible to give a notice that goods will be available for collection at some future date, or must the notice allow the plaintiff to take immediate delivery in order to be effective? (2) Can the notice describe the goods generically for them to be specifically ascertained only at the time of collection?

The plaintiffs do not suggest that to exercise the right to return the goods the defendants had to physically return the goods to the plaintiffs' premises prior to the 31st January 1996. It follows therefore that it is common ground that this is a notice case i.e. what is required is some form of notice that the defendants are exercising their right to return goods the subject of the Sale Or Return term. What however the plaintiffs stress is that the right to be exercised by the defendants is the right to return the goods, and thus they submit that if the right to return the goods is to be exercised by a notice, that notice must conform to certain criteria. Mr Leggatt QC on their behalf submitted that the letter of 19th January 1996 could not on any view be such a notice because it merely indicated that at some future date a list would be prepared. It was submitted in effect that what the letter was saying was that that list would constitute the rejection. In the alternative, and with greater emphasis, he submitted first, that the notice must specify with precision the goods that are being returned, and second that the buyers must have the goods physically available so that the sellers can come and collect the same immediately. He did accept that it might be possible to have a valid notice allowing for collection at some future date, but suggested that the defendants' case had always been that their notice was of immediate effect. Mr Leggatt QC submitted there were three reasons why the notice should identify the goods with precision. First, he submitted that the whole purpose of having a notice was so that a seller would know precisely what was being rejected and what was not, and that it was of no comfort to the seller to be told that the answer could be objectively ascertained. Second, he submitted that certainty in commercial transactions was critical. Thirdly, he submitted that a seller might want to sell to others and accordingly must know precisely to what he now had the right to immediate possession.

Mr Underhill QC submitted that on the language of the letter it was not simply foreshadowing the future possibility of a rejection. He accepted that a notice of rejection must clearly refer to goods capable of being objectively identified, and submitted that the reference to Jaguar Stock carried with it the obvious implication that to be returned were the unsold stock. He further answered the three points put forward by Mr Leggatt QC in support of the requirement for a notice that had greater specificity than the letter of 19th January in the following way. First, the notice which he suggested the buyer was entitled to give was one that simply triggered obligations and rights e.g. the right of the seller to come and collect the goods at which time he accepted the buyer must have the goods available for collection and thus precisely identified. Second, he submitted that there were many situations in which at the time that obligations or rights are created there will be some lack of certainty, but in the instant case there would be certainty at the time it matters i.e. when the seller comes to collect the goods. Third, for much of the period while goods are held on Sale Or Return, there is uncertainty as to which goods the buyer still holds on Sale Or Return and which have been sold or consumed, and it cannot really be suggested that it is any more crucial for the seller to know at the time of the notice precisely which goods are being returned when he will obviously know on collection. He further submitted that the form of notice given might have immediate effect in the sense that the defendants could not have gone back on it (i.e. the defendants could not, after the notice, sell goods the subject of the same without being guilty of conversion). He stressed however that it had always been his submission that the notice was allowing for collection within a reasonable time, and that thus the defendants' obligation to have the goods available for collection would only arise as at the moment of collection.

I admit to not having found this an easy case and it follows that if the question that had to be decided was simply whether leave to defend should be given, in my view leave to defend would be given. But it has certainly been the plaintiffs’ submission that this is one of those cases where at the summary judgment stage the court is in as good a position as the trial judge to decide the point on construction of the contract and/or of the notice, and that thus the point should be decided under Order 14. In this court both sides were content to accept that if that was so then equally the point was capable of being decided under Order 14A in the defendants' favour were that to be the court’s view. In other words, to save the costs of a full trial, if a clear view were formed on the point however difficult, the parties would like that view expressed.

My starting point is, as I have already indicated, to define what was intended by the term "full Sale Or Return until 31st January 1996". It is possible, though it is unnecessary to decide the point, that the plaintiffs are right to this extent that they were entitled to be put in a position to be able to collect any goods that the defendants were seeking to return by 31st January 1996. Even if that were right, it would merely show that to be effective as a notice of rejection that notice would have to be issued so as to enable the goods to be available for collection before that date, but the question would still remain whether the notice must give an immediate right of possession to the seller or a right to possession at some reasonable period from the notice.

It must on any view be right, whichever form of notice is appropriate, that at least at the time of collection, the goods to be returned must be physically available for collection. There is however no requirement that a notice should be in writing, and I do not see why it is in any sense necessary to set out in detail the precise goods in the notice by which the defendants exercised their right as long as the notice, whether oral or in writing, referred clearly to the goods generically. Furthermore certainly if a notice was sent or given which did suggest that goods were available for immediate collection, then a failure to hand over immediately would constitute a conversion of the goods by the buyer; it would not however invalidate the notice. Furthermore, if it were permissible to serve a notice prior to the date by which goods have to be returned, giving reasonable notice of some future date for collection, I can see no reason why there should be a requirement to have the goods physically available at the time of the notice as opposed to the time of collection, and once again a failure to have the goods available at the expiry of the reasonable notice would constitute a conversion but would not invalidate the notice. In my view in the context of this contract where goods were spread out in various different outlets, it was open to give a notice exercising the right to reject with the sellers' entitlement to collect the goods arising only at a reasonable time after the notice. Whether the sellers were entitled to insist that that reasonable time could not extend beyond 31st January 1996 does not arise for decision.

Now to the terms of the letter of 19th January 1996. First, in my view it did give notice that the defendants were intending to exercise their right to return all unsold Jaguar stock. Second, it was not saying that the goods were immediately available. That is clear from its terms because it was saying that they were being collected from the stores. Third, as I have said, it was permissible in the context of this contract, to give a notice exercising the right of rejection without the goods being immediately available, and the natural reading of the letter would indicate that the goods would be available within a reasonable time taking account of the time it would take to collect from the stores. Fourth, again as I have said, the plaintiffs might have been entitled to insist that the goods should be available prior to 31st January 1996, but the point does not arise in this case. It also follows from what I have said previously, that I can see no necessity for identifying the goods with the specificity for which Mr Leggatt QC contended.

The letter does say that the defendants would list the goods once they had been returned to the warehouse so as to enable the plaintiffs to raise RA numbers. It is that phrase in the letter which has created the main difficulty for the defendants. First, it is on that phrase which reliance is placed in support of the argument that the letter foresees some future act as necessary for the rejection by the defendants to be complete. Second, it may well be that it was the appearance of that phrase which was responsible for planting the seed for the argument that such a list was actually necessary before rejection could be validly affected. However, I think that on a fair reading of the letter of 19th January 1996, (1) the defendants were exercising their right to return unsold Jaguar stock; in the result from the moment they wrote that letter the defendants had no right to continue to sell such stock as they had left; (2) the letter was saying that it would take a little time to collect the stock from the stores and that thus the plaintiffs could collect not immediately but a reasonable time after the notice; and (3) that to assist in the handover and in the accounting exercise that would take place, the defendants would prepare lists.

On receipt of that notice the plaintiffs would have been entitled to insist on being able to collect the goods within a reasonable time from the notice and possibly prior to 31st January 1996. The plaintiffs did not attempt to collect the goods from the defendants prior to 31st January 1996 or at all, and firmly denied that the defendants had any right to return the goods at all. The fact that the plaintiffs did not take up the goods is not to the point when considering the validity of the notice. In my view accordingly the 19th January letter was a good notice exercising the right of return of the goods purchased by the defendants on Sale Or Return.

In the light of the above it follows that no point on estoppel arises.

This appeal thus in my view should be allowed, but in the result there should still be

judgment for £38,246.84 the amount the subject of the Respondents' notice and a stay of execution to the extent of £27,025.00.

There should also be a declaration that the 19th January 1996 letter was a valid notice of rejection of the unsold Jaguar stock, subject to the term Sale Or Return, (or in such other terms as Counsel should agree reflects this judgment).

I agree that this appeal must be allowed. To explain why, it is first necessary to analyse the nature of the contracts in this case in the light of basic principles of the law of contract. I do not propose to repeat the material facts, which are set out in the judgment of Waller L.J.

In a simple case a contractual offer will remain open for acceptance until (i) it is withdrawn or (ii) it is rejected or (iii) the time for which the offer was stated to remain open, or, if no time was specified, a reasonable time, has elapsed.

Acceptance

Acceptance may be by word, spoken or written, communicated to the offeror, or, if the terms of the offer so permit, may be by conduct.

An offeror is usually free to withdraw his offer at any time prior to acceptance, even if he has stated that the offer will remain open for acceptance for a specified period.

Rejection takes place when the offeree communicates to the offeror that the offer that has been made is rejected.

A contract of sale of goods is :

"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"

Sale of Goods Act 1979 S.2(1).

Benjamin's Sale of Goods, 4th Ed., describes the effect of delivery on "sale or return" as follows:

A person to whom goods are delivered on "sale or return" has a true option to buy, in the sense that he is free to buy or not as he chooses. In such a transaction the goods are bailed to a prospective buyer on the understanding that he may buy them at a stated price: he may elect either to buy or to return the goods, and by the terms of the agreement, or in accordance with the presumed intention of the parties set out in section 18, rule 4, of the Sale of Goods Act 1979, will be deemed to have bought them in certain events if he does not give notice of rejection. Since the property remains in the bailor until there is an election to buy, and the bailee is not until such time under any obligation to buy, there is no contract of sale within the meaning of the Act.

Where goods are supplied pursuant to a "sale or return" agreement, a contract is nonetheless concluded. Such a contract was described by Lord Esher M.R. in Kirkham v. Attenborough [1897] 1 QB 201 at p.203 as follows:

This contract is so common in business that it is well known to the Courts, and has been interpreted, and all Courts will now adopted the interpretation which has been put upon it. In the absence of other terms the contract does not pass the property in the goods directly it is made. The person who has received them may return them, but the person who has entrusted them to another cannot demand their return, and his only remedy is to sue for their price or value.

Section 18 of the Sale of Goods Act 1979 makes the following provisions in relation to the passing of property where goods are delivered on sale or return:

"unless a different intention appears... the property in the goods passes to the buyer:

(a) when he signifies his approval or acceptance to the seller or does any other act adopting the transaction;

(b) if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of that time, and, if no time has been fixed, on the expiration of a reasonable time.

An ordinary agreement for the supply of goods on sale or return thus has the following features:

- the seller cannot withdraw his offer to sell the goods;

- the buyer can accept by signifying acceptance to the seller, or by an act adopting the transaction, or by keeping the goods beyond the agreed period or, absent agreement, a reasonable period.

- the buyer can give a notice of rejection.

In my judgment the notice of rejection referred to by the 1979 Act is no more than the notice that an offeree can always give that a contractual offer is rejected.

Until the property passes, the prospective buyer holds the goods as bailee. The Act makes no provision as to what he has to do with the goods if he gives notice of rejection. It seems to me that his duty at this point must depend upon the express or implied terms of the contract. He may simply have to hold the goods at the seller's disposal or he may have to return them to the seller. To be effective, a notice of rejection must be given before the property in the goods has passed. If a buyer so acts as to render it impossible for him to perform whatever the contract requires after rejection, e.g. if he ships the goods overseas to a potential sub-purchaser, such conduct is likely to constitute an act adopting the transaction, so that he cannot thereafter give a valid notice of rejection.

It is open to the parties to agree that the prospective buyer is not entitled to give a notice of rejection but will be deemed to have accepted the goods unless he returns them physically to the buyer within the "sale or return" period. Such a case was Ornstein v. Alexandra Furnishing Company (1895) 12 TLR 128. The Plaintiffs accept that no such term falls to be implied in the present case.

The contracts which are the subject of this appeal have two unusual features. (1) The contract price is payable before the expiry of the agreed "sale or return" period. (2) The "sale or return" condition does not apply to all the goods the subject of the transaction, but permits the Defendants to purchase some and reject others. The first feature has, in my judgment, no relevance. It is the second that has led to the dispute.

By the 19th January 1996, when the Defendants wrote the letter that they contend constituted a notice of rejection, they had distributed the goods to the stores in their chain and, through those stores, had sold approximately 25% of those goods. They had also taken delivery of other goods of the same types as those the subject matter of this dispute, which were not on "sale or return" terms.

Mr Leggatt, Q.C., helpfully summarised the Plaintiffs' case as follows:

In the absence of a contrary intention, if goods are supplied on " sale or return " it is not necessary for the buyer, in order to exercise his right of "return", physically to redeliver to the seller those goods which he does not wish to keep. The buyer can "return" goods to the seller within the meaning of such a provision at the place where the goods were delivered to him by making the goods available for collection there and sending a notice to the seller informing him that the goods are rejected. Two requirements, however, must be satisfied:

(1) The notice given to the seller must describe the goods which are being rejected with sufficient specificity, not merely to make those goods capable in principle of being identified by inquiry ex post facto , but to leave the seller in no reasonable doubt about what goods fall within the description at the time when the notice is given (with the effect that the right to immediate possession of those goods is now revested in the seller); and

(2) The buyer, although he does not need to send the goods described in the notice back to the seller, must make the goods available at the time when and place where the goods are being " returned".

NOTE

This formulation assumes that the notice is intended to take effect immediately. In principle it would seem possible to exercise a right of return by sending a notice of rejection which is expressed to take effect, not immediately, but at a specified later date (within the time fixed for return). In such a case the relevant time by which the buyer would need to have sufficiently identified to the seller what goods were being rejected and to have made those goods available for collection would be the date when the notice took effect and the goods were thus " returned" within the meaning of the " sale or return " provision. But on any view this is not such a case - the Defendants' contention is that the letter of 19 January 1996 gave notice of immediate rejection.

Hooper J. accepted that the first requirement had been applicable and that it had not been satisfied. Before us Mr Leggatt further submitted that the second condition was not satisfied either.

In my judgment Mr Leggatt's second requirement and his Note confuse two different matters - the notice of rejection and the defendants' obligations after rejection. To be effective the notice of rejection simply had to give notice that the Defendants rejected the Plaintiffs' standing offer to sell those goods in respect of which the property had not yet passed to the Defendants. Such notice, if valid, was of immediate effect. Thereafter the Defendants were obliged to do whatever the contract required to restore the goods to the plaintiffs. What the contract required and whether there was a failure to comply with that requirement were not in issue before the Judge, nor are they in issue before us. A case might have been made that the Defendants, by intermixing the goods with other similar goods, or by otherwise disposing of the goods, had "adopted the transaction" in relation to them, so that the notice of rejection could not apply to them. Once again, such a case was not before the Judge. He was simply concerned with an application for summary judgment based on the contention that the notice was bad on its face for want of certainty.

Where a seller offers goods for sale on terms that the buyer can accept all or part of the goods, a rejection of the offer in relation to part only of the goods cannot have legal effect unless it identifies with certainty the goods to which it relates. So much was accepted by Mr Underhill, Q.C., for the Defendants. He submitted, however, that this identification did not have to be effected by listing the goods in question. It sufficed for the notice to identify them generically, provided that the generic description would enable the goods to be identified with certainty. Mr Underhill submitted that the notice in this case satisfied that requirement. It related expressly to the goods in all the stores and, implicitly, only to those goods which had been supplied on sale or return terms. Alternatively, if the notice related to all goods remaining in stock, whether subject to sale or return term or not, it would still be valid in relation to the goods covered by that term.

Mr Leggatt argued that to be valid the notice had to inform the Plaintiffs precisely what stock was covered by it, so that they would be in a position to take appropriate action, such as selling the goods in question to another purchaser.

In my judgment, Mr Underhill's argument is to be preferred. The Defendants had been steadily accepting the goods on offer by disposing of them, thereby "adopting the transaction" in relation to them. While they were periodically informing the Plaintiffs of the goods so sold, the Plaintiffs did not have up to date information as to what was sold and what remained. Just as the Plaintiffs had no entitlement to immediate notification of precisely which goods were accepted in this way, I can see no basis for contending that they were entitled to immediate notification of precisely which goods remained in their ownership when the Defendants gave notice of rejection in relation to the goods unsold. The notice was, in my judgment, a valid notice and one that disentitled the Plaintiffs to payment for the goods to which it related. Accordingly, I would allow the appeal, concurring in the result proposed by Waller L.J.

I too am of the view that the appeal should be allowed. In my judgment the notice of rejection was an effective proxy for the return of the goods.

Where under a contract goods are delivered on sale or return the prospective buyer is entitled to return them without incurring a contractual liability to pay for them at any time within the period fixed by the contract for return. Until

acceptance or return within that period or, failing either, until the end of the period, the potential buyer remains a contractual bailee of the goods. Acceptance within the period or failure to return them before the end of it converts the contract into one of sale and the prospective buyer and bailee into a buyer and owner of the goods. Return of the goods or, if the contract so provides, notice of their rejection within the period ends both the contractual bailment and any contingent contractual liability to buy. Here, the parties agree that the contract allows for rejection by notice.

A notice of rejection must be clear. First, borrowing the words of Saville J. in Vargas Pena Apezteguia Y CIA v. Cremer [1987] 1 Lloyd's Rep.394, at 398, in the context of rejection of sale goods for breach of condition, it must indicate that the buyer "want[s] and will have nothing more to do with the goods". See also Grimoldby v. Wells [1875] LR 10 CP 391 in which it was held that rejection of goods for non-conformance with sample may be by notice, providing it unequivocally indicates rejection. Second, a notice of rejection must also make clear to what goods it refers. If a notice served within the stipulated period does both those things it removes the contingent contractual obligation to buy, determines the sale or return contract and entitles the "seller" to immediate re-possession. Any delay or failure thereafter by the "buyer" to return or deliver up the goods may expose him to a claim by the "seller" under the contract of bailment, if it so provides, or for wrongful interference with the goods. As to the latter, see, for example, Vargas Pena, per Saville J. at 398 and Benjamin, paragraph 5-052.

The two main questions for determination on this appeal are whether:

Electronics' letter to Atari of 19th January 1996 was a clear notice of rejection of goods;

and

if it was, whether it had that effect regardless of Electronics' failure to make them available for return to Atari at the time of the notice.

As to the clarity of the notice, there are two separate but related aspects, first whether it amounted to a rejection or an indication of an intention to reject, and second whether it sufficiently identified the goods to which it referred.

Mr. George Leggatt, Q.C., for Atari, suggested that the failure to identify the specific goods and the undertaking to list them reduced the notice to one of an intention to reject. In my view, the letter, read as a whole and in particular the following extracts from it, communicated an unequivocal rejection as distinct from an intention to reject -

"the outcome was that Atari Jaguar is to be no longer stocked within the chain. Our decision was made ... All stores have been requested to return all Jaguar stock to our central warehouse ... This decision falls in line with our current trading agreement."

On the issue of identification of the goods Mr. Leggatt submitted first that the notice did not make plain that it referred only to unsold goods and sale or return goods.

The majority speeches in the recent decision of the House of Lords in Mannai Investment Co. Ltd. v. Eagle Star, 21st May, 1997, indicate that a common-sense, objective, construction must be given to contractual notices generally, namely, that which a reasonable recipient of each such notice would give it. In my view, the letter, read as a whole, refers only to unsold goods and to such unsold goods as are the subject of the sale or return contract or contracts. As to unsold goods. It is hard to see what other sensible meaning and effect the following words could have had -

"All stores have been requested to return all Jaguar stock to our central warehouse and when this is all received we will submit to you a complete list of what you will need to raise RA [Return Authorisation] numbers against."

Electronics would not have attempted, and could not have been understood to have been attempting, to return goods they had sold. As to whether the unsold goods in question were the subject of the sale or return contract(s), it is my view that Atari can have been in no doubt - and, as Hooper J. found at page 3D of his judgment, its letter of 22nd January shows that it was not - that Electronics was only rejecting what it claimed to be unsold sale or return goods. The issue between the parties as to the goods covered by the sale or return condition does not bear on the question of what unsold sale or return goods were identified in the notice.

That leaves the further and central issue on the clarity of the notice, namely whether it sufficiently identified the unsold sale or return goods to which it referred. Mr. Leggatt submitted that it did not because it did not identify at the time it was given the precise goods to which it referred. Mr. Nicholas Underhill, Q.C., for Electronics, submitted that it did because it provided a means by which each of them could be objectively identified.

In my view, the maxim id certum est quod certum reddi potest applies to a notice of rejection in a sale or return contract as it applies to the issue of certainty in formation of contract. There is sufficient identification of the subject matter if it is described generically - as here, unsold Atari Jaguar sale or return stock - and/or in such other way as to enable individual identification later by some objective means. Although the leading authorities on which I draw for that conclusion concern the formation of contract, the maxim, in my view, is capable of wider application. See, as to formation of contracts, Foley v. Classique Coaches Ltd. [1934] 2 KB 17, HL, per Lord Dunedin at 21; Sudbrook Trading Ltd. v. Eggleton [1983] AC 444, HL, per Lord Diplock at 478B-C; Welsh Development Agency. Export Finance Co. Ltd. [1992] BCLC 148, CA, per Dillon LJ at 159e-g, per Ralph Gibson LJ at 177a-d and per Staughton LJ at 184g-h. Authority for treating the reasoning in those cases now as instances of a general common-sense rule of construction, applicable equally to notices as to contracts, is to hand in the majority speeches in Mannai, particularly that of Lord Hoffmann at page 28.

I can see no logical basis for applying a more rigorous rule to a notice, such as that here, which serves to determine a contractual bailment and to prevent the formation of a contract of sale. It is for the court to identify on the evidence before it the unsold Atari Jaguar sale or return goods held by Electronics at the date of the notice. The fact that Electronics did not in the event serve a list of unsold goods as promised in the letter of 19th January 1996 or that it may have sold some of them subsequently does not affect the validity of the notice as a rejection.

On the second main issue - availability of the goods for return at the time of the notice - Mr. Leggatt submitted that a notice of rejection, however clear, is ineffective unless the goods to which it refers are available for return at the contractual point of delivery at the time of serving the notice. Mr. Underhill argued that lack of such availability is irrelevant to the validity of the notice as an act of rejection.

In my view, if the notice on its terms clearly rejects identifiable goods, then, unless the prospective buyer has done some earlier act, such as re-sale, amounting to an acceptance, his inability to make them available simultaneously, or even "forthwith" or later than that, cannot logically derogate from that rejection so as to signify acceptance after all. Where there has been clear notice of rejection of goods later events are irrelevant to the issue of its validity; see, for example, Tradax Export S.A. v. European Grain & Shipping Ltd.[1983] 2 Lloyd's Rep. 100; Vargas Pena, per Saville J. at 398; and Graanhandel T, Vink v. European Grain [1989] 2 Lloyd's Rep. 531, per Evans J. at 533.

Mr. Leggatt relied upon some words of Bankes LJ in Hardy & Co. v. Hillerns & Fowler [1923] 490, CA, as support for his proposition that a clear notice of rejection is ineffective unless there is also a simultaneous availability of the goods for return. There the issue was a refinement of that considered by the Court of Appeal in Kirkham v. Attenborough & Gill [1897] 1 QB 201, namely whether the buyer had accepted goods by re-selling them before purporting to reject them. The Court held, as it did in the earlier case, that the re-sale was an act of acceptance which put an end to the buyer's right of rejection. Bankes LJ said, at 496:

"Where under a contract of sale goods are delivered to the buyer which are not in accordance with the contract, so that the buyer has a right to reject them, the seller upon receipt of notice of rejection is entitled to have the goods placed at his disposal so as to allow of his resuming possession forthwith, and if the buyer has done any act which prevents him so resuming possession that act is necessarily inconsistent with his right."

In my view, that proposition is of a piece with the law as I have taken it from Tradax and the other authorities, namely that rejection determines the contract entitling the "seller" to immediate return of his goods. That entitlement results from the notice of rejection. Absent some previous act of acceptance - as in Hardy but not in this case - extinguishing the "buyer's" right to reject, his failure to make the goods available for return at the same time or "forthwith", or within a reasonable time or even within the contract period for return, cannot invalidate the rejection. As I have said, it simply exposes him to a claim by the "seller", as owner of the goods, under the contract of bailment if it makes provision for the manner and timing of their return, or for wrongful interference with

them.

Not only do I reject Mr. Leggatt's contention about availability as a matter of law, I consider that it would be likely in most cases to introduce an uncommercial outcome and uncertainty in many sale or return transactions. The circumstances here are likely to be typical of many such cases, involving as they do a large retailing operation. The prospective buyer will have distributed the sale or return stock to its retail outlets and will not be in a position to form a judgment whether to accept or reject them within the sale or return period until they have been exposed to its retail customers. If the goods are not selling, is it to gather all of them in and only after that serve a notice of rejection? Or should it first give notice in relation to all unsold stock and then gather them in for return - no doubt as speedily as it can? In a large transaction of a standard line of goods such as this, commercial reality and, it seems to me, normal business expectation and benefit to both parties, suggest the former course. It is in the interest of the "seller" to find at the earliest moment a purchaser for the rejected goods, wherever they are; similarly, it is in the interest of the prospective buyer speedily to shed his contingent contractual liability to buy.

As to uncertainty, if availability of goods for return were to govern the validity of a notice of their rejection, and the contract is silent upon the point, when, where and how are they to be made available? It is implicit in the notion of the notice of rejection as a proxy for physical return that there will be some delay after the legal act of rejection before they are returned to the "seller". If, as here, the notice is of immediate rejection, how long is the prospective buyer allowed before his delay invalidates, if it does, the notice? Is the test "forthwith" or within a reasonable period or within the stipulated period for return? How soon is "forthwith" or a reasonable time? What if the notice is served on the eve of the last day of the stipulated period and it is not feasible to make them available for return that day? Where are the goods to be made available? Clearly, it need not be at the "seller's" premises, otherwise there is no point in the notice. May it be at the prospective buyer's main premises as the original place of delivery, or in rented storage or with his retail outlets awaiting re-delivery direct to the "seller" or to the place of delivery? Or may it be in transit to either place? Just asking those questions makes plain that the notion of availability for return creates rather than removes uncertainty as to the effect of the notice at the time of its service on the contractual and property rights of the parties.

For all those reasons, I would hold that the letter of 19th January 1996 was a valid notice of rejection of such unsold goods as were subject to the sale or return condition and would allow the appeal on the terms stated by Waller LJ.

Order: Appeal allowed with a declaration granted on agreed terms. Plaintiff to the have costs of proceedings before the Master with the defendant to have costs of proceedings before judge and Court of Appeal. No order for immediate taxation or payment of costs. Plaintiff to have costs of respondent's notice. Leave to appeal was refused.

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