2. Personal property

What these notes are

English commercial law, as the lecture uses it: The chapter follows the LLB 1 lectures on personal property, which take their shape from Goode's Commercial Law, chapter 2. The cases are English. They are not Sierra Leone statutes. Where the lecture states a rule more widely than the cases allow, the correction is in the paragraph.

A map, not the whole of property: Land, fixtures and tenure are in the land-law notes. Bailment, which is one way of dealing with goods, is the previous chapter. Company charges are in the company-law notes. This chapter is the vocabulary those subjects share.

What personal property is

Things personal: Personal property is what is not freehold land. Blackstone's classroom sentence is that it covers goods, money and other assets that are not realty. The merchant's stock, a vehicle, a debt, a share and a patent are personalty. A freehold is not.

Two groups: Tangible personal property can be touched and moved. A bag of rice, a generator and notes and coins are tangibles. Intangible personal property cannot be picked up. Its value is a right: a debt, a share, a patent, a contractual claim.

Documentary intangibles and pure intangibles: Some intangibles are locked into a paper or an electronic record that the law treats as carrying the right. A bill of exchange, a bearer bond and a bill of lading are the lecture's examples. Transfer of the document, in the way the instrument requires, transfers the right the document represents. A pure intangible, such as an ordinary contractual debt, has no document that is itself the right. It is transferred by assignment, not by handing over a piece of paper as if it were the goods.

A patent is an intangible: Exclusive rights granted for an invention are personal property of the intangible kind. A lecture slide that dates a particular Facebook patent is a classroom picture, not a citation. Do not repeat those dates as facts.

Leaseholds: A lease is an interest in land, but for historical reasons the common law classed it as personalty, a chattel real. It is its own category. The land-law notes explain why the tenant who was turned out once recovered damages rather than the land itself. Do not call a lease a bag of rice, and do not call a bag of rice a lease.

Why goods are not treated like land

Land stays. Goods move: Land is permanent, identified and, in a registered system, capable of a check of title. Goods deteriorate, pass through many hands, and often cannot be told apart from other goods of the same description. Their commercial value is that they can be turned into money by sale or hire.

Recovery: A person kept off their land is not told to go and buy another plot. The court puts them back. For ordinary goods the common law did not give specific recovery as of right. The court could award the value as damages, because the buyer can go to another seller. The lecture cites section 78 of the Common Law Procedure Act 1854, an English statute, as giving the court a power to order specific delivery. That is the lecture's source. It is not a statement of current Sierra Leone procedure. If a problem asks for the remedy in Freetown, use the High Court Rules that are in force, not an English section from 1854.

Specific performance remains exceptional: Equity will sometimes order a contract to transfer a unique chattel to be performed. It will not do that for ordinary stock. Damages are enough where the buyer can get the same goods elsewhere. The maxim that equity treats as done what ought to be done belongs in that sentence. It applies where the contract is one equity would specifically enforce. It does not turn every shop sale into an immediate transfer of property.

The honest buyer: The starting rule is that a person cannot give a better title than he has. Commercial law has built limited exceptions so that trade is not stopped by a hidden defect in the seller's title. Those exceptions are narrow and mostly statutory. Do not write that every honest buyer defeats the true owner. The sale-of-goods chapter, when it is added, is the place for the list.

Real rights, rights ad rem, and personal rights

A real right: A right in or over an identified asset. In personal property the lecture's three main real rights are ownership, possession and an equitable charge. A real right can be asserted against third parties. It survives the bankruptcy of the person who owed the duty, because the claimant points to the asset, not only to the debtor's promise.

Three questions the lecture asks: If B steals O's goods and then becomes bankrupt while still in possession, O's claim is to the goods, not a dividend in the bankruptcy. If C has an equitable charge over D's goods and D becomes bankrupt, C looks to the charged asset ahead of unsecured creditors, to the extent the charge is valid. If H has hired equipment from L for a fixed term and L goes into liquidation, H can keep possession for the term against the liquidator, because the hire gave H a right in the goods, not a mere hope that L would perform.

A right ad rem: A personal right to have a particular asset transferred. The buyer of goods online, before delivery, has a contract. He has no real right yet. The right becomes real when the property passes, which for goods is often on delivery or appropriation. Until then a third party who takes the asset in good faith is not bound by the buyer's contract, and if the seller is made bankrupt the buyer is an unsecured creditor.

A purely personal right: A right to be paid, or to damages, out of the debtor's general assets. No identified thing is due. On bankruptcy the claimant proves for a dividend with the other unsecured creditors.

Equities: The lecture uses "equity" here for a personal power to set aside or cut down an asset in someone else's hands, not for a real right. One kind is the right to have an asset returned because it was obtained by fraud or duress. The other is a right of set-off, which can bind a trustee in bankruptcy where the law of insolvency allows it. The lecture's further sentence, that ownership of goods "reverts" whenever a cheque in payment is dishonoured, is too wide. A dishonoured cheque does not, by itself, undo a transfer that has already happened. The seller may have a right to rescind if the contract makes payment a condition, or if the cheque was a fraud. Say that. Do not say title always springs back.

Property and obligation

Owns, or is owed: Property is what the merchant owns. Obligation is what he is owed. The common law keeps them apart. A contract to transfer an asset is not the transfer.

Bankruptcy before the transfer: A agrees to buy a specific generator from B. Before B executes the transfer, B is made bankrupt. A has a contractual claim. A does not have a proprietary claim to that generator unless property has already passed or equity would specifically enforce the contract and treat the buyer as owner in equity. For ordinary goods, A proves as an unsecured creditor.

Legal ownership

The residue: Ownership is the residue of rights in an asset after limited rights, such as a pledge, a lien or a bailment, have been carved out. An interest describes how large that bundle is against other people. Title describes whether the claim can be defeated.

Relative title: O owns a car. T has possession. O's title is the better one. T's title is real against strangers and fragile against O. The law still protects the possessor. In Costello v Chief Constable of Derbyshire Constabulary the police seized a car under their statutory power, believing it stolen. When that power ended they refused to return it. The Court of Appeal held that possession gives a title good against everyone except a person with a better right, and that this is so even where the possession was obtained by theft. The police had no general power to confiscate the car once the statute no longer authorised them to keep it. The true owner, if he appeared, would defeat the possessor. The police were not that owner.

Legal title is not cut into fractions: Goods may be held on trust, or charged, so that one person holds the legal title and another has the benefit. The legal title itself is transferred whole. A lecture that says a trustee is not an owner is wrong. The trustee is the legal owner. The beneficiary is the equitable owner. A hirer or a bailee does not take a slice of legal ownership. He takes a limited possessory interest.

Co-ownership: Two or more people can own goods together. At common law they hold one title, and a dealing that is to sever that unity has to be looked at in its own terms. Do not invent a statutory trust of the family home and apply it to a shop's stock.

Original and derivative acquisition: Original acquisition does not depend on a previous owner's title. Taking unowned things, and some creations of new rights, are the textbook examples. Derivative acquisition is a succession to someone else's title, by gift or sale, or by operation of law on death or bankruptcy. Consensual transfer is the ordinary commercial case.

Loss: Ownership is lost by a voluntary transfer, by a re-transfer when a voidable title is set aside, by operation of law on bankruptcy or bona vacantia, by destruction of the thing, by expiry of a time-limited right such as a patent, or by abandonment where the facts really show it. Do not treat carelessness as abandonment.

Equitable ownership

Equity does not repeal the common law: It supplements it. In commercial dealings it can require a person to transfer what he agreed to transfer, hold him to a trust he agreed to observe, and, where specific performance is available, treat the agreed transfer as already done in equity. Legal title stays with the transferor until the legal transfer. The intended transferee has the beneficial interest.

Future property: The common law cannot transfer what the transferor does not yet have. Equity, where the assignment is for value, treats the assignment as attaching automatically when the property is acquired. Holroyd v Marshall is the classic illustration of an equitable assignment of future property. A fresh legal act is still needed if what is wanted is a legal title.

Inchoate interests: A floating charge is the lecture's example of an interest that exists before it fastens on particular assets. The company may deal with the assets in the ordinary course until crystallisation. The company-law notes on debentures and charges carry the detail. Do not describe a floating charge as present legal ownership of each asset.

Possession

A real right of variable strength: The person in possession has a right in the asset. How strong it is depends on his title. Costello is the modern statement.

A working description: Control of the asset, or of the larger thing that contains it, directly or through another, with the intention of excluding others. The common law treats that person as possessor. A civil-law system may call someone who holds only for another a mere custodian. The common law, in a bailment, calls him a bailee in possession. The previous chapter is the full account.

Actual and constructive: Actual possession is physical control. Constructive possession is control through another, or through a document that the law treats as the key. A bill of lading can give constructive possession of the goods. It does not, by itself, make the holder the owner. Ownership passes by the contract of sale, not by the paper alone.

Sole and shared: Sole possession is exclusive control. Shared possession is common in commerce. A warehousekeeper who stores goods for a merchant and then attorns to the merchant's nominee acknowledges that he now holds for the nominee. The goods need not move. Attornment is the acknowledgement that switches the possession.

When possession is doubtful: The rule of thumb is that possession follows title. It is a way of resolving doubt, not a reason to ignore a person who is in fact in control.

Dealings

Outright dealings: Property in goods passes by sale, exchange or gift, and by operation of law on death or bankruptcy. A declaration of trust passes the beneficial interest. An agreement to transfer is not, without more, the transfer. Ask whether the contract is executed or still executory.

Limited interests: At law, a limited interest in goods is typically created by taking possession under a pledge, a hire, a bailment or a lien. The chapter on bailment covers the duty that follows possession. The chapter on commercial credit covers pledge and lien as security.

Debts: A debt is transferred by assignment. Notice to the debtor is what stops him paying the original creditor. English statute lays down formalities for a legal assignment. Do not assume the Law of Property Act 1925, which is later than the reception date in the Courts Act 1965, is in force in Sierra Leone. Between assignor and assignee an equitable assignment can be effective without those formalities. Against the debtor, notice matters.

Negotiable paper: For instruments that are documents of title to money, and for bearer securities, delivery in the manner the instrument allows can pass the right. Mercantile usage decides whether a document is negotiable. A bill of lading is not in that class for ownership. It is a document of title to possession.

The four elements of a consensual transfer

All four, not one: The transferor must have title, or a power to dispose. He must intend to give up his title. He must take a positive step to transfer, or make the agreement that is to have that effect. The subject matter must be identified, or have been appropriated to the contract.

If one is missing: No title and no power means the buyer takes subject to nemo dat, unless an exception applies. No intention means there is no transfer, however much the goods have moved. No step means the contract may exist and the property has not passed. No identification means the buyer cannot point to the asset.

Bulks and insolvency: Unascertained goods in a bulk, a part of a mass owned by several people, and a bankruptcy before appropriation, are the standard problems. Where the store must return the same quantity of identical goods and the depositor has not kept property, title passes and the depositor is unsecured if the store fails. Chapman Bros v Verco Bros is that case. Where the agreement keeps the property in the depositors and the store must account for a quantity out of a mixed bulk, there can still be a bailment. Mercer v Craven Grain Storage is that case. Read them together. They are in the bailment chapter.

Conflicting claims

Two absolute claims: If each party claims an indefeasible title to the whole interest, one of them is wrong. The better title wins.

Two defeasible claims: A sells the same car first to B and then to C, and neither has a title that survives every attack. Priority rules decide. Do not assume the later buyer always wins because he is honest.

Absolute against limited: A leaves a car for repair and refuses to pay. The repairer's lien is a limited interest. The court asks whether the lien is valid. It does not reopen A's ownership.

Tracing: A person whose asset is wrongly disposed of may follow the asset, or in equity the proceeds, into the hands of a later holder. The later holder may have a defence. State the claim. Do not invent a tracing result the problem does not support.

What the obligation is to transfer

In specie: The duty is to transfer that asset, not its price and not a similar thing.

Fungibles: Units that the law treats as interchangeable. A duty to deliver grain or flour of a type can be performed by delivering the right quantity of that type. If the goods are unascertained, property does not pass merely because a quantity exists somewhere in a warehouse.

A fund: An interest in the proceeds of a disposition, or in a mixed fund. Misapplied money is traced into the fund on the terms equity allows. It is not the same as owning every asset the defendant happens to hold.