Retentionof titleclausecreateda trust,nota charge

1 The High Court of Australiahas breathed new

life into retention of title ('ROT') clauses.By a

four-to-one majority,the Court has upheld the

effectivenessof an agreementprovidingfor the

proceedsof sale of manufacturedgoods to be

held in trust, thereby securing the

manufacturer'sindebtednessto the seller.The

fact that the ROTclause createda trust, rather

than a charge,meant it was effective despite

not being registered under the Australian

equivalentof the CompaniesAct.

2 In the caseof AssociatedAlloysv ACN001 452

106, AssociatedAlloys ('Seller') sold steel to a

customer('Buyer') subjectto a ROTclause.The

criticalprovisionin the clausestated:

'In the event that the [Buyer] uses the

goods/product in some manufacturing or

constructionprocessof itsown or of somethird

party,then the [Buyer] shall hold such part of

the proceeds of such manufacturing or

construction process as relates to the

goods/product in trust for the [Seller].Suchpart

shall be deemed to equal in dollar terms the

amount owing by the [Buyer]to the [Seller]at

the time of the receipt of such proceeds:

3 The Buyerusedthe steel in the manufactureof

pressurevessels,heat exchangers,and columns

('steel products'). It was agreedthat the Seller

had not retainedtitle to the steel productssince

the steel it had supplied was no longer

ascertainablein the products;the steel products

were physically different property. The steel

products were sold to a third party, with the

third party making paymentsto the Buyer.The

questionfor the Courtto considerwaswhether

the Sellerhad priority over those paymentsby

virtue of the provisionset out above.

4 The Judge at first instance, and the Court of

Appeal, had held that the clause insofar as it

operated to confer on the Sellera proprietary

interest in the proceeds, was a charge over

book debts and was void for non-registration.

The majority in the High Court rejected that

reasoning. In the majority's view, there is a

critical distinction to be drawn between trusts

and charges.

5 In drawing the distinction in relation to the

particular clause in question, the Court noted

that effect had to be given to the legal

relationship the parties had entered into. On

that basis,the Court held that the ROTclause

createda trust.Thefact that the amount subject

to the trust was determined by referenceto the

amount that the Buyerowed the Sellerdid not

reducethe importance of this characterisation.

6 In the end, and despite substantiallyupholding

the Seller'sarguments as to the effect of the

clause,the Court dismissedthe Seller'sappeal

on an evidential ground. The Seller had not

adduced evidence to show a link between the

steel it had supplied and the payments for

productssuppliedto the third party.Thisgapin

the evidence meant that the Seller's appeal

failed.

7 However, despite the Seller's ultimate failure,

the majority's decision strengthens a seller's

position and consequently could alter the

balance where sellers and secured creditors

compete for priority.

23Underline the phrases in the text used to introduce these components.

EXAMPLEa:The ruling or holding of a court = para. 1: the Court has

upheld.. .

a The ruling or holding of the court

b A summary of the facts of the case

c The legal issue(s) involved in the case

d The name of the case, and the names and roles of the parties

e The reasoning of the court

24Find the phrases in italics in the text which match these definitions.

1 invalid because it was not registered

2 the income received from producing a product

3 offered evidence as proof

4 when property or assets are held by one party for the benefit of another

5 right of ownership

6 for evidence-related reasons

7 as a result of

ng 0 on ng

The first sentence the ROT

clause rather than a charge, meant it was effective despite

not being registered under the Australianequivalentof the Companies Act.

That's what we France would call...

In Russia, we have something similar calledthe

Our law is comparabletothe UK's Companies Act.

It's basically the same asour/your

25Work in pairs. Using the phrases above, explain your country's equivalent of:

1 the Companies Act

2 Companies House

3 the Uniform Commercial Code

D

(~\ Unit 9

To improve your web-based research skills, visit www.cambridge.orgjeltjlegalenglish.click on

Research Tasks and choose Task 9.

Unit9 Sale of goods E

Language

:t. Vocabulary: distinguishing meaningWhich \Nordin each group is the odd one

out? You may need to consult a dictionary to distinguish the differences in

meaning.

1 purchaser buyer consumer

2 comparable corresponding equivalent

3 plaintiff appellant defendant petitioner

4 postpone decide delay defer

5 void non-arbitrary invalid non-binding

6 material pecuniary monetary financial

7 originate from lead to arise out of result from

2 Word formationComplete these tables by filling in the correct forms. Ul1derline

the stressed syllable in each word with more than one syllable.

I acceptable

! implied

bind

ascertain

3 PrepositionsComplete the sales contract clause below with the prepositions in

the box.

Governing Law

Anderson County, Texas, shall be the proper place of venue 1)suit

on or in respect 2)., the Agreement. The Agreement and all of the

rights and obligations of the parties hereto and aU of the terms and conditions

hereof shall be construed, interpreted and applied 3),,'..,.., accordance

4)and governed 5), , and enforced 6), "... the laws

of the State of Texas.

Verb!.. Noun

disclaim cLi,scWi.mer

exclusion

indemnify

tolerance

specifications

retain

postponement

Word ch()ic::eCompletethisparagrqph abput consurner rights by Ghoosing the

correct word each case.

When you bUygoods from any seller, you have the right to expect certain

standards...The UKSaTepf Goods Act 1979 states that the goods mustbe

1)forI@y in satisfactory qUqlity?) in Qomparisonto / by virtue of / in

respect ofthe appearqnce and fjqlsh of the goods,their safety and durability,

and theirfreedomfromdefects --'except where they have been. pointed out to

you before puxchase. They must also be ~) special/fit / made for their

pUrpose,including any particUJarpUxposementioned byyoUto the 4)vendor/

purchaser / consU.mer.1fthe 5)merchan.dise/ supply / sale does not meet

these standards, you are 6) obliged/ entitled / required to (eject it and get

your moneyback...YoU/havea/an 7).reasonable / i3cceptable/ exclusive time

to return faulty goods, afterYVhichyou are 8)requested / deemedl implied to

have accepted the goods and their faults, although you may still be able to

9)claim / incur; charge damages.

ContracteXf)re~siol'1sMqtch eqCh of the words and phrases used in sales

contracts Ui=7)'vV.jththe phrase that best expresses its meaning (a--'g).

1 to be subject to

2 on delivery

3 prior to receipt

4 to conformto

5 in a workman

6 to hold harmless

7 to xeservea right

a before receiving

b to retain an entitlement

c at the time of delivery

d to secure against loss or damage in the future

e may be chqnged

f to be in agreement with or to followprecise description

g competently

Disclaimer expressionsMatch the words italics in the text (1-9) with the

word or phrase below has a similar meaning.

a financial

b told about

c suitability

d resulting from

e denies

f acceptable quality

g restriction

h for no reason

i in the present condition

D

D

OJ

Contracltaw

e e

Yourlaw firm hasaskedyouto reviewthe following UScontractlaw caseandthe relevant

documentsin preparationfor a meetingwith a client.

Readthe facts of the case. Whyis this type of case referred to as a 'battle of forms'?

Colonial Incorporated makes cooling units that contain steel tubing supplied by a company called Lehigh

Steel Incorporated. Each year, Colonial sends a purchase order to Lehigh for the tubing Colonial will need

for the year. During the year, Colonial sends out release orders to receive parts of the year's order from

Lehigh. In return, Lehigh sends acknowledgement forms in response to the release orders to Colonial and

then ships the tubing.

Lehigh's acknowledgement form disclaims all liability for consequential damages (such as lost profits)

and limits Lehigh's liability for defects. These terms are different from Colonial's purchase order and, of

course, are not contained in it.

Unfortunately, some of the tubing supplied by Lehigh, which Colonial incorporated into a cooling unit,

was defective and burst, causing considerable damage and loss to one of Colonial's customers, Best

Produce Corporation. Best Produce Corporation is claiming damages against Colonial, including

consequential damages. In turn, Colonial has claimed recovery from Lehigh. In response, Lehigh argues

that it has disclaimed all liability for any damages in accordance with the terms set out on its

acknowledgement form.

Task1: Speaking

Work with a partner. Follow steps 1-3 below for each role-play.

Role-play 1

Student A: You are the client, a representative

from Lehigh Steel.

Student B: You are the lawyer.

Role-play 2

Student A: You are the lawyer.

Student B: You are the client, a representative

from Colonial.

1 If you are the client, prepare for the meeting by becoming familiar with the facts of the case.

If you are the lawyer, prepare for the meeting by:

0 identifying the legal issues of the case and determining arguments for your side

0 listing the strengths and weaknesses of your side of the case

0 deciding which parts of the relevant legal documents most strongly support your case and can be

used to argue against the other party's case

0 making notes for the meeting: What course of action do you think your client should take?

2 Lawyers: pair up with your client to explain the legal issue involved and review the relevant documents.

Remember to paraphrase their contents so that they are easy to understand. Advise your client on a

course of action.

3 Report the results to the group, focusing on the client's willingness or unwillingness to settle.

Task2: Writing

You are an associate at the law firm representing Colonial Incorporated. The senior lawyer handling the

case needs assistance regarding Colonial Incorporated's legal argument. Write a memo to the senior

lawyer based on all the information you have.

e

Text1:statementprintedon Lehigh'sform

Text 2: Uniform CommercialCode, Section 2-207

Section 2-207 of the Uniform Commercial Code applies in your jurisdiction and to

this case. It addresses the issues arising from a 'battle of the forms'.

u.c.c, §2-207

Date: 2015-12-11; view: 994