McCandless Aircraft LC v Payne & Anor

A court determines the legal character of an arrangement for goods by examining the whole agreement and the parties’ obligations. A transaction may constitute a sale even where the recipient also acts as bailee or agent and the seller retains title pending specified conditions. Acceptance of delivery may be powerful evidence of contractual assent, particularly where the recipient could have rejected the goods. If the parties have agreed to sell and purchase but have not fixed the price, Sale of Goods Act 1979, section 8 may require a reasonable price to be determined by reference to the circumstances. A buyer who retains possession must take reasonable care of the goods and bears the relevant contractual expenses. Damages for non-acceptance are assessed under section 50 where there is no available market.

McCandless Aircraft LC, an Iowa aircraft dealer, supplied a helicopter to Andrew Payne for sale in the United Kingdom. The claimant alleged a conditional sale under which Payne was to pay an agreed price within six months if he had not sold the helicopter. The defendants contended that the arrangement was an agency, bailment or joint venture, and that Eminence Aviation Limited had later replaced Payne as contracting party. The helicopter was accepted, used and retained for more than two years before court-ordered delivery up. The claimant sought the unpaid price or damages. The defendants counterclaimed expenses, repairs and alleged restitution. The central issues were the nature of the agreement, the identity of the contracting party, the price and payment terms, and entitlement to the counterclaim.

1. The claim succeeded in damages of $85,000, with interest to be determined. The counterclaim succeeded only in the sum of £1,864.

2. The court examined the whole agreement and the parties’ conduct. The contemporaneous documents consistently referred to prices, invoicing and sale. Those features were more consistent with a sale than with a mere agency or profit-sharing arrangement. The recipient could also be a bailee and agent for particular purposes while remaining the buyer.

3. Payne accepted delivery despite being told that the claimant regarded him as liable for the price, interest and delivery costs. Acceptance was inconsistent with the contention that there was no agreement or that the goods could be rejected for misdescription, delay or condition. The later references to Eminence Aviation Limited did not establish a novation. At most, they authorised the company to act as bailee.

4. The court found an oral agreement for the claimant to sell, and Payne to purchase, the helicopter for $265,000, subject to retention of title and terms consistent with the Sale of Goods Act 1979. The price became payable on 16 August 2007. Alternatively, if no price had been agreed, section 8 would have required a reasonable price to be fixed.

5. Under section 50, the claimant was entitled to damages for non-acceptance. There was no available market for the second-hand helicopter, and the proper measure was the difference between the contractual price and the resale price: $265,000 less $180,000. The claimant was also entitled to the agreed interest incurred on its borrowing.

6. The counterclaim failed in respect of the later repairs, insurance, storage and servicing. The defendants had not shown that the defects were pre-existing or that the expenditure conferred an uncompensated benefit on the claimant. The claimant was liable for £1,864 of damage caused during disassembly before delivery, which was set off against the claim.