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I Must Remember to do that…..The Law of Forgotten Things!

I’m sure I’m not the only one who “occasionally” forgets jobs around the house, forgets to pick up a piece of dirty laundry, forgets to put away the tools after fixing something up, etc.  A wise man I know routinely throws objects around the house out after they haven’t been used or moved for a couple of months – he figures if no one’s noticed it’s gone by the time the rubbish truck comes it deserves to be gone.

What happens in the commercial world when things are just left, forgotten or unpaid?  The old saying that possession is nine tenths of the law is not necessarily wrong, but it’s also not the whole story.

Quite often an agreement between a customer on the one hand, and a business on the other will include a term that the thing being sold (whatever if may be) remains the property of the business until paid for in full.

It is also common for businesses who hold another’s property temporarily to have a similar term in their agreements, namely that the property won’t be released until the work done to that item is paid for.  They can also have terms as to what is to be done with the goods if they remain unpaid for and no arrangement can be agreed.

Even in the absence of an express agreement a business can assert what is known as a “possessory lien” over the item.  This is an old common law right which arises regardless of whether there is a contract in place.  Like any of the old common law concepts the word itself derives from French (or ultimately Latin).

Probably the most common place and easily understandable example of a lien is where a car is delivered to a mechanic for repairs to be undertaken.  The mechanic having done the repairs is entitled to retain possession of the car (ie claim a lien) until the bill has been paid.

Being able to hold onto goods is all well and good, and in the majority of cases would be sufficient to get things resolved, however occasionally things reach an impasse and there is no contract in place to govern what happens next.  That’s when the Uncollected Goods Act comes into play.

The Act allows the bailee (the person holding the goods) to sell the goods if they are uncollected by the bailor (the person to whom the goods belong).  The Act provides that the goods are uncollected if they are ready for collection but the bailor hasn’t made arrangements or taken delivery, or if the bailee can’t contact the bailor (either to arrange for their delivery, or after they can no longer reasonably be expected to look after the goods).

How the goods can be disposed of, and what notice needs to be given depends on their value.  For example for less than $100, 28 days notice is required and they can then be sold in any appropriate manner.  At the other end of the spectrum, for goods between $500 and $5,000 there is a mandatory six months written notice, a newspaper notice in a NSW wide newspaper must be circulated 28 days before the sale, and the goods must be sold at public auction.  For goods over $5,000 there must be an order from the Court.

When the goods are sold the bailee can only recover the fee (ie the cost of the original service being provided), the costs of the sale and any storage costs.  The bailee won’t make a profit on the sale.

There are three lessons that come out of this.  The first is it’s much better to have a contract in place dealing with this.  The second is that if you don’t have a contract make sure you follow the Act or you will be liable to pay compensation, and the third is that I’d better pick up my socks from the lounge room floor – I’ve certainly been given enough notice about them!