by Susanna Macdonald-Mulvihill, Early Career Fellow, Edinburgh Law School
A woman walks into a bar. Her name is Janet. Janet tells the bartender, Luca, that she would like a dram for herself and to buy a drink for all the other customers currently in the pub. Luca duly pours the whisky and rings up the total for all the drinks. Janet pays, drinks her whisky, and leaves. Luca pours the drinks Janet has bought for the other customers and distributes them to the relevant people, who happily accept and enjoy their beverages.
Kevin, one of the regular customers, was in the toilets when Janet came in and does not know about the transaction. Luca had included a pint of beer for him along with the drinks for the other customers that Janet paid for. Luca had poured it and left it on the bar where Kevin was previously sitting. However, when Kevin, unaware of Janet’s generousity, left the toilet, he walked straight out of the bar to go home. He did not see the beer and the drink remains untouched. Whose pint is it? And why does it matter?
What this scenario demonstrates is an instance of an indirect donation. An indirect donation is where a donor engages in a transaction with a third party who in turn passes the benefit on to the donee. This can occur in a number of ways. For instance, a donor can be a parent who pays the rent of a university student child. The parent and landlord are the parties who transact but the student child receives the benefit of the accommodation. Alternatively, the donor may be a person who waives a right they have against a third-party in favour of the donee. An example of this could be the renunciation of an inheritance right resulting in that right vesting in the donee. Key to an indirect donation is that the donee is not actively involved in the transaction that leads to the benefit passing to them.
The scenario illustrates one of the most common types of indirect donation: a sale between a donor (Janet) and a third-party seller (Luca) with the goods to be delivered directly to the donee (Kevin). It is not clear in these types of indirect donations when, to whom, or even if ownership might pass from the seller. Knowing when ownership has passed is important when considering who bears the risk for the goods, or who has the right to dispose of the property (in this case, one important method of disposal would be the consumption of the beverage).
This question of ownership in indirect donations is a more pertinent issue than the basic conundrum of who has the right to a pint, particularly in situations where the donee is unaware of the gift. Such gifts are becoming more common, in no small part due to the rise in popularity of internet shopping, particularly for gift purposes. According to global data platform Statista, in 2022 78% of consumers bought their Christmas gifts from online stores (https://www.statista.com/topics/3157/uk-christmas-shopping/#topicOverview). Many of these will have involved the donor choosing to have the gift(s) delivered directly to the donee without the donor ever taking possession.
In light of these potential problems that may arise some time after the original purchase of sale between the donor and the third-party, clarity as to who owns what and when in the meantime would be welcomed
Thus, when looked at through the wider lens of indirect gifts in general, the importance of the central question posed by this blog becomes apparent: whose pint is it anyway?
There are three possible answers to this conundrum: Janet, Kevin, or Luca (on behalf of the bar).
When Janet purchases the drinks, does she gain ownership? Given the moveable nature of the property, the natural place to turn to for authority would be the Sale of Goods Act 1979 (“SoGA”). The SoGA s 16 states:
“Where there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained.”
Until the pint is poured, the goods are unascertained, so at the conclusion of the contract, Luca is still the owner.
What then when the pint is poured? Again, our property law students would note that SoGA s 17 tells us that the goods transfer when the parties intend and s 18 (rule 5) determines that intention is deemed to be formed when the goods are “ascertained and unconditionally appropriated to the contract”. Thus, ss 16-18 of SoGA would suggest that once Luca has poured the drink, Janet becomes the owner, or at least that by this stage the bar that employs Luca is no longer the owner of the drink.
However, the SoGA s 1(1) determines that the Act applies to contracts of sale but s 2(1) defines “contracts of sale” as:
“A contract of sale of goods is a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price.”
In the purchase of the pint there is no transfer or agreement for Luca to transfer “the property” to Janet. Janet specifically wants the transfer to be to another person – Kevin as well as the other customers in the pub at the time. As such, there is a strong argument that SoGA does not apply in this circumstance and therefore recourse must be made to the common law regarding transfer.
(*this anomaly was also present in the Sale of Goods Act 1893 s 1(1) and criticised by the Scottish Law Commission while SoGA was in draft form – (Memorandum on Corporeal Moveables: Passing of Risk and Ownership (Scot Law Comm CM no 25, 1976) para 52*)
The common law of transfer requires both parties to have an appropriate intention – animus transferendi for the transferor and animus acquirendi for the transferee – coupled with delivery (KGC Reid The Law of Property in Scotland (1996) para 619). Given that there is no intention from either party for Janet to become owner and delivery has not been made to her, she cannot be the owner.
It might be argued that Janet’s purchase amounts to a simultaneous intention to become owner and transfer that ownership on. If so, then SoGA would apply and she owns the pint, at least at the point it is poured, and immediately divests herself of ownership. However, this would be to employ a certain amount of legal contortionism that, arguably, defeats the purpose of Janet’s intention. She does not want to become owner of any drinks other than the dram of whisky, and to artificially imply an animus acquirendi onto her purely to make SoGA applicable undermines the purpose of requiring an intention at all.
Thus, it can be concluded that the pint is not, nor has it ever been, Janet’s.
If the pint is not Janet’s, could it then be Kevin’s? Janet and Luca’s contract of sale may fall outside the remit of SoGA but there is still a contract nonetheless. The terms of that contract are for Luca to provide drinks for the bar patrons and Janet to pay for them. The contract is completed. This does not, however, resolve the issue of whether the contract between Janet and Luca can have the effect of making Kevin the pint’s owner.
According to Professor Gordon (and others) a donation does not need to be accepted to be complete: W W Gordon “Donation” Stair Memorial Encyclopaedia (Reissue) para 11 fn 11. Yet, as already noted above, as a matter of property law a person must have both an animus acquirendi to become owner coupled with delivery of the thing to be transferred. If acceptance is not required for a donation, then it would appear that the fundamental rules of property law do not apply to one of the three modes of derivative acquisition in Scotland. Surely, this cannot be the case.
Erskine argued that a donee’s acceptance can be presumed (Erskine Inst III.iii.88). This is a corollary of the presumption against donation, which Erskine claimed arose from the proposition that no person is assumed to do anything which must be accompanied by a loss (Erskine Inst III.iii.92). This would, therefore, presume Kevin’s acceptance and intention to become owner. But presumptions of law can be rebutted by contrary evidence, and such evidence is provided when Kevin leaves the bar. He is entirely unaware of the gift and clearly has no intention to become owner of any further beverages, whether bought by him or anybody else.
Additionally, it is unclear whether the second arm of transfer at common law – delivery – has been complete. Luca places the pint at the place where Kevin was previously sitting. Whether this is enough for it to be considered “delivered” is debatable. Delivery requires a surrender of control: for the property to be put beyond the recall of the transferor (W W McBryde The Law of Contract in Scotland 3rd edn (2007) ch 4; D Carey Miller Corporeal Moveables in Scots Law 2nd edn (2005) para 8.21). Simply placing a drink on a bar may in some circumstances satisfy this but not necessarily where the intended recipient fails to take possession or, indeed, is unaware of the gift as is the case here.
Furthermore, readers who have themselves visited licensed establishments may have witnessed a bar steward placing a customer’s drink on the bar then taking it back again when they deem the behaviour of the patron to be “inappropriate”. If the bartender still has the right to reclaim a drink once on a bar, it is questionable whether it has truly been delivered.
True, a bar person’s right to remove a drink of an unruly customer could be considered a separate issue from whether ownership originally transfers, particularly when coupled with statutory duties imposed on licensed establishments and their staff. The objectives of the Licensing (Scotland) Act 2005 s 4 state that at the heart of the legislation is a desire to prevent crime and disorder and public nuisance, and to protect public safety, health and children. Taking back a drink is commensurate with the obligations of pubs to fulfil these objectives. Regardless, it is difficult to see in the circumstances of the scenario above that delivery has taken place.
All these things considered, it is doubtful that Kevin can be considered to have acquired ownership, and thus the attempted gift has failed.
Having excluded both the possibility of Janet or Kevin being the owner of the pint, Luca must be the owner, or at least the bar she works for is. No ownership right has passed, either as a result of the sale or from the placing of the drink on the bar. As such, she has the right to use or dispose of it as she sees fit, although if this should entail drinking the pint herself, she should be mindful that she must not be drunk while in charge of the premises: Licensing (Scotland) Act 2005 s 114 (a).
If the bar remains owner, this would also mean that the bar has been enriched at Janet’s expense due to a failed donation. Some commentators have suggested that there should be a special form of condictio to cover such instances: the condictio donandi causa (N Whitty “Unjustified Enrichment” Stair Memorial Encyclopaedia (reissue, 2021) para 281). This is because failed donations do not always fit neatly into the existing system of the condictiones. Yet, this could also be considered an instance of the condictio causa data causa non secuta – Janet purchased the drink to be transferred to Kevin and this has not happened. Regardless of the appropriate action, the fact of enrichment is unaltered. Luca (or the bar) have been enriched at the expense of Janet to the extent of the price of beer and there is no legal ground for the retention of that enrichment (Dollar Land (Cumbernauld) Ltd v CIN Properties Ltd (1998 SC (HL) 90). This automatically gives Janet a right to redress, unless it can be shown that it would be inequitable to do so.
One such inequity may be the de minimis nature of the price of beer. As an action in unjustified enrichment requires judicial proceedings, it is highly improbable that any court would entertain such a claim. Furthermore, Janet would have to know of the failed donation in order to claim, and we are told she has left the bar. This will not always be the case with indirect donations. Should the gift not have entailed a pint of beer but a bespoke engraved diamond watch ordered online but not delivered to the intened donee, the de minimis defence may not apply. As such, depending on nature of the object being donated there may still be grounds for a claim.
The bar may plead another “inequity”: as a commercial enterprise the bar should not be expected to suffer a loss by refunding the money and wasting their product in the process (it is difficult to sell on a pre-poured pint, or a bespoke, engraved watch for that matter) because the purchaser intended to incur a loss through making a gift. One party is voluntarily undertaking a diminishment to their patrimony, the other is operating in the course of business with the aim of making a profit. That said, if the goods were resold to another purchaser, then the donor may be able to reclaim the price charged from the seller as there would no longer be a loss. Thus, account should be taken of the characteristics of the original contracting parties and nature of the donum when deciding whether redress should be granted.
The scenario posited at the start of the post may seem frivolous, but has been offered to shed some light on wider issues of ownership and transfer of property in indirect donations.
For one, such gifts cannot be subject to the Sale of Goods Act 1979. Thus, the common law applies, and both delivery and intention of the donee are necessary to transfer ownership. Thus, until they have the property delivered to them and accept ownership, they cannot become owner. Should the donee reject, or be unavailable to accept, ownership remains with the seller. The donor does not at any point become owner of the property, although their contract of sale with the seller is enforceable. Furthermore, there is a possibility that the donor will not be entitled to redress from the seller under enrichment law if the goods are perishable or unable to be resold for another reason, for example, because they are bespoke. This is because, on balance, it is more equitable for any loss to fall on the donor than the seller as the donor intended to incur a loss by making a gift in the first place.
The law aside, this author hopes that Luca enjoys the pint responsibly. Cheers.