Atari Corpn (UK) Ltd v Electronics Boutique Stores (UK) Ltd

In a sale-or-return contract, the buyer may reject the seller’s standing offer by clear notice before property passes, unless the contract requires physical return. The notice must identify the rejected goods with certainty, but a generic description suffices where objective identification is possible. A detailed list is unnecessary. The goods need not be available for collection when notice is given. The contract may require later delivery, and failure to comply may give rise to a claim in bailment or for wrongful interference, but does not invalidate the rejection. The particular contract determines the timing and mechanics of return. The court unanimously held that notice rejecting unsold Jaguar stock was effective, although the stock was being gathered from retail stores and the promised list had not yet been prepared.

Atari supplied electronic games and hardware to Electronics Boutique under contracts including a full sale-or-return term until 31 January 1996. Master Foster granted Atari summary judgment for £369,611.16, and Hooper J upheld that decision.

Electronics Boutique’s letter of 19 January 1996 stated that Jaguar stock would no longer be stocked, that stores were to return all Jaguar stock to a central warehouse, and that a list would later be supplied. Atari argued that the letter was not an effective rejection because it contemplated future action, did not identify the goods precisely, and did not make them immediately available. The central issue was whether the letter validly exercised the contractual right to return unsold sale-or-return goods.

The appeal was unanimously allowed. Waller LJ gave the principal judgment. Phillips LJ and Auld LJ agreed in the result and gave substantially consistent reasoning.

1. Nature of sale or return. A sale-or-return arrangement gives the prospective buyer an option to accept or reject the goods. Until acceptance, return, or expiry of the agreed period without rejection, the buyer holds the goods as bailee and property remains with the seller. Under the Sale of Goods Act 1979, notice of rejection is no more than notice rejecting the seller’s standing offer. It must be given before property passes.
2. Clarity and identification. The notice must clearly communicate rejection and identify the goods with certainty. A generic description is sufficient where the goods can later be identified objectively. No detailed list or written notice is required. The parties may, however, contractually require physical return rather than notice.
3. Availability and subsequent obligations. The goods need not be physically available when the notice is given. After rejection, the buyer must comply with the contract’s express or implied requirements for returning or holding the goods. Failure to do so may give rise to liability in bailment, conversion, or wrongful interference, but does not invalidate an otherwise effective notice. An earlier act adopting the transaction, such as resale, may prevent rejection.
4. Application. The 19 January letter clearly rejected the unsold Jaguar stock subject to the sale-or-return term. The reference to a later list concerned collection and accounting, not completion of the rejection. In the circumstances, collection could occur within a reasonable time after notice. The court did not decide whether goods had to be available before 31 January 1996.

Judgment was entered for £38,246.84, with a stay of execution to the extent of £27,025. A declaration was granted that the letter was a valid notice of rejection. Costs were divided between the stages as ordered, and leave to appeal was refused.

1. Court of Appeal: Allowed the appeal and granted a declaration that the 19 January 1996 letter was a valid notice of rejection of the unsold Jaguar stock subject to sale or return.
2. High Court: Hooper J upheld Master Foster’s summary judgment for £369,611.16.
3. Master: Master Foster granted Atari summary judgment for £369,611.16.