P leased piano to B – a 3 yr lease, B would pay rent for the piano, B could return the piano with no obligation beyond paying the current months rent. B under no obligation to purchase the piano – but if made all payments then would become owner of the piano. B pledged the piano to a pawn shop (case of fraud). P found out and B has disappeared. P sued the pawn shop to recover the piano. Pawn shop (D) – took position that B had agreed to buy the piano. S.25(2) of SGA – where person having bought or agreed to buy goods obtains possession then any transfer made by that person to a bona fide purchaser for value is a valid disposition of the goods in question.
Does the SGA apply?
Where goods are leased in a genuine lease arrangement then they are not subject to the SGA
Court said: have to look at substance of agreement between P and B to see if B had bought or agreed to have bought the piano. Did not constitute an agreement to sell – at best it amounted to an offer to sell.
If there is no legal obligation to buy there can be no agreement to buy. Legal obligation test, Is the thing that triggers passage of property a legal obligation?
This is not a contract for sale of goods the leasee was under no obligation to continue the payments until the full purchase price had been met. The point of last payment = sale. Until then it is like payment of rent with option to buy.
It was a lease arrangement, therefore the SGA does not apply