McDougall v Aeromarine of Emsworth Ltd [1958] 3 All ER 431
Sale of goods; the right to reject goods; contract specifying time of transfer of ownership.
Facts: Aeromarine of Emsworth entered into a contract to build a yacht for McDougall, with payment to be made in instalments. Clause 8 of the contract stated that the yacht, together with all the materials, equipment and machinery purchased by the builders specifically for the yacht's construction, would become the absolute property of the buyer upon payment of the first instalment. The first instalment was paid on 12 November 1956, before work on the yacht had begun. After this date, due to various problems with the yacht resulting from poor workmanship and continuing delays by Aeromarine of Emsworth, McDougall rejected the yacht and sued for breach of contract.
Issue: Was McDougall entitled to reject the yacht, or had it already become his property (in which case it was too late to reject it)?
Decision: McDougall was entitled to reject the yacht.
Reason: The court recognised that it is generally possible for parties to specify in the contract the time at which ownership in the goods will pass to the purchaser. But when McDougall paid the first instalment work had not yet begun on the yacht: there was, therefore, no yacht to pass to his ownership. Clause 8 therefore did not preclude McDougall from exercising his right to reject the goods for serious breach of the contract. Diplock J said (at 1129-1130):
"There is…no evidence that any goods became the property of the plaintiff on the first instalment being paid, and it does not seem to me that on its true construction clause 8 provides for the passing to the plaintiff of the property in the craft, if it came to being after that date, or in any of the equipment, materials, fittings or machinery purchased by the defendants specifically for the construction of the craft after that date. The clause, which was no doubt designed for the protection of the purchaser in the event of the insolvency of the builders, thus seems to me quite inept for that purpose."