THE LAW OF SALE OF GOODS

Isaac C. Lubogo (Doctor of Laws Candidate Law) UCU Lecture notes

Law Applicable:
The Contract Act 2010
Sale of Goods Act Cap 82
Common Law
Case Law

Contract of Sale of Goods

A contract of sale of goods is defined in Section 2(1) of the Sale of Goods Act as a contract
whereby a seller transfers or agrees to transfer the property in the goods to the buyer for a money
consideration called the price. So, where property in the goods is transferred from the seller to
the buyer, the contract constitutes a sale.

Where the transfer of property in the goods is to take place at a future time or subject to some
condition thereafter to be fulfilled, the contract is called an agreement to sell.

Characteristics of a Contract of Sale

The essential characteristics of a contract of sale of goods are the following:

1. There must be two distinct parties to a contract of sale; i.e a buyer and a seller.

2. There must be a transfer of property. Property here means ownership of the goods. The seller
must own the property in the goods, i.e he must have title to the goods. The seller must either
transfer or agree to transfer the property in the goods to the buyer.

3. The subject matter of the contract of sale must be goods. Goods include all chattels other than
choses in action and money, industrial growing crops and things attached to or forming part of the
land which are agreed to be severed before sale or under a contract of sale. It means every kind
of moveable and immoveable property.

4. The consideration for a contract of sale must be money consideration called the price. If the
goods are sold or exchanged for other goods, the transaction is barter trade and not a contract of
sale of goods.

The term contract of sale includes both “a sale” and “an agreement to sell”.

Distinction between “a sale” and “an agreement to sell ”

Section 2(4) of the Sale of Goods Act Cap 82 provides that where under a contract of sale the
property in the goods is transferred from the seller to the buyer, the contract is called “a sale”, but
where the transfer of the property in the goods is to take place at a future time or subject to some
condition there after to be fulfilled, the contract is called “an agreement to sell”

The following are the main points of distinction between a sale and an agreement to sell:

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1. Transfer of property (ownership)
In a sale, the property in the goods passes to the buyer immediately at the time of
making/execution of the contract. In other wards, a sale implies immediate conveyance of
property in the goods so that the seller stops/ceases to be the owner of the goods and the buyer
becomes the owner there of (becomes the owner of such goods).

However in an agreement to sell, there is no transfer of property to the buyer at the time of
making/execution of the contract. The conveyance of property will wait until the agreement
becomes a sale either by/after the expiry of a certain time or fulfillment of some condition.

2. Risk of Loss
The general rule is that unless otherwise agreed by the parties, the risk of loss passes with
property. Therefore, incase of a sale, if the goods are destroyed, the loss falls on the buyer even
though the goods may never have come into his possession. This is so because the property in the
goods has already passed to the buyer. Thus the general rule is: “risk passes with property unless
the parties intended otherwise”.

On the other hand, in case of an agreement to sell, where the ownership in the goods in yet to
pass from the seller to the buyer, and the goods are destroyed, such loss has to be borne by the
seller even though the goods are in the possession of the buyer. This is so because the property in
the goods was still with the seller.

3. Consequences of Breach
In a sale, if the buyer wrongfully neglects or refuses to pay the price for the goods, the seller can
sue for the price even though the goods are still in his possession.

In case of an agreement to sell, if the buyer fails to accept and pay for goods, the seller can only
sue for damages and not for the price even though the goods are in the possession of the buyer.
This is so because the property in the goods is still with the seller therefore he is still the owner of
the goods and cannot sue for the price.

4. Right of resale
In a sale, the property is with the buyer and as such the seller in possession of goods after a sale
cannot resale the goods. If he does so, the subsequent buyer having knowledge of the previous
sale does not acquire a good title to the goods. Because the person who sold to him the goods did
not have title to the goods which such buyer knew about.

In an agreement to sell, the property in the goods remains with the seller and as such, he can
dispose of the goods as he wishes and the original buyer can only sue him for breach of contract
only and not claim for the goods since they still belonged to the seller who still had the property
in such goods.

5. Insolvency of the buyer before he pays for the goods

In a sale, if the buyer is insolvent before he pays for the goods, the seller in the absence of the
right of possession must deliver the goods to the official receiver or assignee. The seller is
entitled to only the price of the goods. This is so because, since the property in the goods already
passed to the buyer, the goods belong to him and must therefore be handed over to the official
receiver.
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However in an agreement to sell, the seller may refuse to deliver the goods to the official receiver
or assignee as the property in the goods still rests with him (the seller). On the other hand, in an
agreement to sell if the buyer has already paid the price and the seller is insolvent, the buyer can
only claim as a creditor for the price and not the goods because the property in them rests with the
seller.

Distinction between a Contract of Sale and other kinds of contracts.

Contract of Sale Vs a Contract for work and Materials:

A distinction has to be made between a contract of sale and a contract for work and materials.
However the difference between the two is very minute/minor.

The Sale of Goods Act Cap. 82 does not apply to contracts for work and materials. It is a contract
of sale even though some labour on the part of the seller of goods may be necessary. E.g. in Love
Vs Norman Wright (Builders Ltd) 1944 ALL ER 618 court held that an order for making and
fixing curtains in a house is a contract of sale of goods although it involves some work and labour
in fixing the same.

Contracts for supply of services are essentially comprised of a part of a contract of supply of skill
and labour i.e. where one sells a dress to another at 2 million shillings and contracts an advocate/a
lawyer to draft a contract of sale. The lawyer drafts the necessary documents for the seller,
however, the seller refuses to pay the lawyer. The lawyer brings an action based on a contract of
sale of goods arguing that the agreements/documents prepared for the seller is a good for which
he must be paid a consideration (the price).

In Lee V Griffin, Court held that a contract for the supply of the services of a solicitor was a
contract for supply of services even though the solicitor must be expected to draft some
documents and deliver them to the client, thereby becoming the client ’s property.

Where a person goes to a hospital and requests for a blood transfusion and the blood is sold to
him/her at a specific price, if that blood turns out to be defective and the person suffers as a result,
can she argue that there was a contract of sale of the blood so as to sue the hospital or company
that supplies?

In the Pelmutter case, the plaintiff obtained a blood transfusion from the defendant hospital.
Unfortunately, the blood was contaminated with jandice which according to expert evidence were
not detectable by any scientific tests at the time. The plaintiff suffered injury as a result of the
contamination. The plaintiff was a private paying patient and in the account rendered to him, he
was charged a separate account for the blood supplied. The plaintiff claimed that the blood had
therefore been sold to him and the defendants had been liable for the defects in the blood which
now constituted goods.

Court held that the transaction was one of supply of services only and that the supply of the
blood was merely incidental to the said supply of services.

Contract of Sale Vs Barter

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Under a contract of sale the consideration must be money. See sec 2(1) Sale of Goods Act (herein
after called SOGA).

In Moss V Hancock (1899) 2 QB 318 court held that since barter is an exchange of goods for
foods and does not involve money, it is not a contract of sale.

In Aldrige V Johnson which involved a contract for the exchange of 52 bullocks with 100 quarters
of barley and the difference in value was to be paid out in money. Court held that the transaction
was a sale.

In determining whether a transaction is an exchange or a sale, normally the courts consider

whether the money constitutes the substantial part of the contract consideration.

The court does also look at the intention of the parties.

Contract of Sale Vs A Contract of Bailment

The contract of bailment is a transaction whereby goods are delivered by one party who is known
as the bailer to another who is a bailee to hold the goods and ultimately re- deliver them to the
bailer in accordance with the given instructions. In a bailment, property in the goods is not
(never) intended to pass and does not pass on delivery of the goods.

In the Australian case of Chapman Brothers Vs Verco Brothers & Co. Ltd (1933) 49 CLR 306,
Farmers delivered bags of wheat to a company carrying on business as millers and wheat
merchants. The wheat was delivered in unidentified bags which were identical to those in which
other farmers delivered wheat to the company. Under the transaction, the company was required
to buy and pay for the wheat on request by the farmer or a farmer could file a request on the
specific date to return an equal quantity of wheat at the same time but there was no obligation to
return the identical bags which a farmer had deposited (the company was not obligated to return
to the farmer exactly the same bags which the farmer had deposited). Though under the contract,
the company was referred to as “stores”.

Court Held;
The transaction was necessarily one of sale as property passed to the company on delivery. This is
so because the mere fact that the company was not obligated to return exactly the same bags
which the farmers had deposited, then it meant that property was meant/intended to pass
immediately at the time of deposit of the goods.

From the above case, it’s clear that where goods are delivered by one person to another on terms
that indicate that property is to pass at once, the contract is one of sale and not of bailment.

The case also illustrates that if the nature of the transaction is such that property is not to pass, the
contract is one of bailment. If the goods are delivered to the buyer before the property passes he
is a buyer in possession of the goods rather than a bailee and the transaction is a contract of sale
rather than a bailment.

Question: How about if the goods are supplied to be used in the manufacture of something?

In Broden (UK) Ltd V Scottish Timber Products Ltd (1981) CH 25 resin was supplied for use in
the manufacture of clip boards.

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Issue: Whether there was a sale or a bailment.

Court held that this could not give rise to a bailment since the goods would be completely used
in the manufacturing process. Such a transaction is taken by the courts to be a sale since the seller
can have no right to trace the goods supplied when they have been used or resold.

Contract of Sale Vs Hire Purchase

A contract of hire purchase is a mixture of bailment and an option to purchase. This option to
purchase may/maynot be exercised. Only when the option to purchase is exercised is there said to
be sale.

Where a person lets out a commodity to another, where the hirer is to pay a specified amount of
money in a specified number of installments, possession of the goods passes to the hirer who
retains possession but does not become a buyer.i.e owner of the goods until he exercises the
option to purchase.

Paying the entire amount due under the installments does not necessarily pass the property in the
goods unless the terms of the hire purchase agreement are complied with. This may be adduced
from the Hire Purchase agreement terms.

In Helby V Mathews (1895) Ac 471, the case involved the hire of a piano.

Held;
A person in possession of goods under a hire purchase agreement had not bought or agreed to buy
the goods.

The major purpose of hire purchase agreements therefore is to give the seller a degree of security
since the goods are delivered before the price is paid. But there are other similar transactions that
can give security similar to that of hire purchase such as a conditional
sale where by the seller simply sells and delivers the goods on credit while expressly stating that
property in the goods should remain his until the buyer has paid the price.

Differences between a contract of sale and hire purchase

1. In a sale, property is the goods passes to the buyer immediately at the time of making the
contract where as in hire purchase, the property is the goods passes to the hirer upon payment of
the last installment or when the hirer exercises the option to purchase.

2. In a sale, the buyer holds/ acquires the position of owner of the goods (has title to the goods)
but in hire purchase the hirer acquires, the position of a bailee until he pays the last installment.

3. In the case of a sale, the buyer can not terminate the contract and is bound to pay the price of
the goods. On the other hand, in the case of hire purchase, the hirer may, if he so wishes,
terminate the contract by returning the goods to the owner without any liability to pay the
remaining installments.

4. In a sale, the seller takes the risk of any loss resulting from the insolvency of the buyer.
However in case of a hire purchase, the owner takes no such risk, for if the hirer fails to pay an
installment, the owner has the right to take back the goods.
THE SUBJECT MATTER OF THE CONTRACT OF SALE

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Section 6, 7 and 8 of the S.O.G Act Cap 82 relate to the subject matter of the contract of sale.
The subject matter of a contract of sale are goods. Goods are defined in Sec 1(1) h. Under
section 6(1) S.O.G A, the subject matter of the contract may be either existing or future goods.
These may be specific, ascertained or unascertained goods.

1. Existing Goods
These are goods which are physically in existence and which are in the seller ’s ownership and/or
possession at the time of entering into/making the contract of sale. They can be seen and touched
by the buyer.

Where the seller is in possession of such goods as an agent, he has a right to sell them.

Existing goods may again be either “specific” or “ascertained ” goods.

2. Specific Goods/Ascertained goods

Specific Goods in Sec 1(1) (n) are the goods which are identified and agreed upon at the time the
contract of sale is made. In a sell of such goods, property does not pass until the goods are
ascertained. In actual practice, the term ascertained goods is used in the same as specific goods.

3. Future goods
Are goods defined by description only. Under sec (1)(g) S.O.G.A, they are goods to be
manufactured or acquired by the seller after the making of a contract of sale. Therefore these
goods include those which are not yet in existence and those which though are in existence have
not yet been ascertained by the seller.

E.g Parties may agree to buy whatever crop is produced from a particular field at a fixed price.
Such crops are future goods but not specific goods. (Goods that are to be acquired in the future).

4. Unascertained goods
These are goods that are not separately identified or ascertained at the time of making the contract
but include those goods to be manufactured or grown by the seller which are necessarily future
goods. E.g if one enters into a contract to buy 100 tonnes of sorghum growing on a field. Such
goods are not ascertained because they have not yet been acquired by the seller and property will
only pass to the buyer when the 100 tonnes of maize are harvested, separated from the rest and
specifically ear marked with the buyer ’s names and sent to him. Such goods are indicated or
defined only by description but have not yet been acquired by the seller.

5. Contingent goods:
These are goods the acquisition of which by the seller depends upon an uncertain contingency.
They are a type of future goods and therefore a contract for sale of contingent goods also operates
as an agreement of sell and not a sale as far as the passing of property to the buyer is concerned.
It should be noted that a contract of sale of contingent goods is only enforceable if the event on
the happening of which the performance of the contract is dependent happens. Otherwise the
contract becomes void. E.g. SSajjabi agrees to sell to Walakira a specific rare painting provided
he is able to purchase it from its present owner. This is a contract for the sale of contingent
goods.

6. Perishable goods
Under sec 7 S.O.G A, where there is a contract for the sale of specific goods and the goods perish
without the knowledge of the seller, the contract is void. Section 8 off the Act states that where
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there is an agreement to sell specific goods and subsequently the goods without any fault on the
part of the seller or buyer perish before the risk passes to the buyer, the agreement is thereby
avoided.

THE PRICE
The money consideration for the sale of goods is known as the price. Price is an essential
element in every contract of sale of goods. That is, there cannot be a valid sale without a price.

The price should be paid or promised to be paid in legal tender (money form) unless the parties
agree otherwise. It may be paid in the form of a cheque, bank deposit, bank draft etc. In actual
sense, the mode of payment of the price does not matter much but the agreement to pay a price in
money that is required to constitute a valid contract of sale.

Under section 9(1) of the S.O.G Act, the price may be expressly fixed by the parties in the
contract sale or the contract may provide for the method in which the price is to be fixed.

Where the price is not stated in the contract and no provision is made for its determination, the
buyer must pay a reasonable price (Sec 9 (2). What is reasonable price is a question of fact,
determined upon the circumstances of a given case.

Under section 10(1) of the Act, it’s provided that the price may also be left to be fixed by the
valuation of a third party provided he accepted the duty and performs it. But if the third party
fails to make such valuation, the agreement is said to be voidable provided that if the goods or
part thereof have been delivered to the buyer, then he must pay a reasonable price.

Where a third party is prevented from making the valuation (to enable him determine the price)
through the fault of the seller or the buyer, the party not at fault may maintain an action for
damages against the party at fault (Sec 10, (2).

If no valuer is specified and the parties fail to agree on some form of valuation in bid to determine
the price, sec 9(2) then applies and a reasonable price can be paid.

In Campbell V Edwards, Lord Denning MR said that it is simply the law of contract that if two
persons agree that the price of property should be fixed by a valuer on whom they agree and he
gives that valuation honestly, they are bound by it (the price fixed by such valuer).

If there is fraud or collusion, of course it would be different. In Arenson V Carson, Court said
that the valuer may be liable if it can be shown that he adopted a wholly incorrect basis for his
valuation.

In Wright V Frodoor, Court held that if the method of valuation used or disclosed is unsound in
law, the valuation may be challenged.

FORMALITIES OF THE CONTRACT OF SALE

According to Sec.4 of the S.O.G Act a contract of sale may be in writing, by word of mouth or
partly in writing and partly by word of mouth (orally) or it may be implied from the conduct of
the parties.

In Sec 5(1) of S.O.G Act it is provided that a contract of sale of goods of the value of 200/= or
more shall not be enforceable by action unless when the buyer accepts and receives part of the
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goods sold or gives something in earnest to bind the contract or pays partly or unless some note
or memorandum is made and signed by the party to be charged or his agent in that behalf.

This therefore implies that a contract of sale of goods of the value 200/= or more cannot be
enforced in a court of law unless it is shown that;
i) the buyer accepted part of the goods sold and actually received them, or
ii) if the buyer gave something ith respect to the goods in bid to bind him under the
contracte.g, if he paid the price or part of the price, or
iii) Unless a note in writing acting as evidence to the contract is made and nd signed by
the party to be charged or his or her agent authorized to sign on his behalf.

CONDITIONS AND WARRANTIES

A contract of sale of goods contains various terms or stipulations regarding the quality of the
goods, the price and the mode of its payment, the delivery of the goods and its time and place of
delivery. These terms are however not of equal in importance. Some terms may be major (very
important) stipulation/terms that go to the very root of the contract, and their breach may frustrate
the very purpose of the contract, while others may be minor terms which are not vital that their
breach may not frustrate the contract or be seen as a breach of the contract as such.

In the Law of sales, such major terms are called “conditions ” and minor terms are called
“warranties”.

A condition can be defined as a stipulation/term that is essential to the main purpose of a contract,
the breach of which gives the aggrieved party a right of action against the other party for breach
of contract. Such aggrieved party may in addition maintain an action for damages for the loss
suffered (if any) on the ground that the whole contract is broken and the seller is guilty of non-
delivery.

A warranty is a stipulation/term collateral to the main purpose of the contract, the breach of which
gives the aggrieved party a right to sue 4 damages only and not to avoid the contract itself i.e. a
breach of a warranty does not give the aggrieved party the right to reject the goods.

Under the S.O.G.A, a buyer may elect to waive the condition or may elect to treat the breach of
such condition as a breach of warranty and not as a ground for treating the contract as repudiated
(i.e. not binding on him any more.).

Note
A condition forms the very basis of a contract of sale, and its breach causes irreparable damage to
the aggrieved party so as to entitle him even to repudiate the contract, where as a “warranty ” is
only of secondary importance and its breach only causes such damage as can be compensated for
in damages.

It should further be noted that there are no hard and fast rules as to which stipulation in a contract
is a condition and which one is a warranty. A stipulation may be a condition though called a
warranty in the contract. Court is therefore guided by and looks at the intention of the parties by
referring to the terms of the contract, its construction/interpretation and the surrounding
circumstances to judge whether a stipulation/term was a condition or a warranty.

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The most suitable test to distinguish between the two terms is that that if the stipulation is such
that its breach would be fatal to the rights of the aggrieved party, then such a stipulation is a
condition and where it is not so, the stipulation is only a warranty.

Differences between a condition and a warranty

1. Regarding Value
A condition is a stipulation/ which is very essential to the main purpose of the contract where as a
warranty is a stipulation/term which is collateral to the main purpose of the contract and is
therefore of secondary importance in the contract.

2. Regarding Breach
Breach of a condition gives the aggrieved party the right to repudiate the contract and also to
claim damages where as the breach of warranty gives the aggrieved party a right to claim
damages only.

3. Regarding treatment of the term

A Breach of a condition may be treated as a breach of warranty if the aggrieved party so wishes.
But a breach of warranty cannot be treated as a breach of condition.

Instances when breach of condition is to be treated as breach of warranty:

Voluntary waiver by the buyer

Although on a breach of a condition by the seller, the buyer has a right to treat the contract as
repudiated and reject the goods, he is not bound to do so. He may elect/decide instead to waive
the condition and treat the breach of condition as a breach of warranty and accept the goods and
sue the seller for damages for breach of warranty. E.g. If Sarah agrees to supply Mukuba with 10
bags of first quality sugar each at 20,000/= but supplies only second quality sugar, the price of
which is 10,000/= per bag. There is a breach of condition and the buyer can reject the goods.
However the buyer may elect /decide to treat the breach of condition as one of warranty and
accept the second quality sugar and sue the supplier/Sarah for damages.

Acceptance of goods by the buyer

Where the buyer has accepted the goods and subsequently/later gets to know of the breach of
condition, he cannot reject them, but can only maintain an action for damages (sue for damages).
The law in this case treats the breach of condition as a breach of warranty on the basis of the
doctrine of caveat emptor which requires the buyer to examine the goods before accepting them,
in bid to ensure that they comply with the contract.

EXPRESS & IMPLIED CONDITIONS AND WARRANTIES

Conditions and warranties may be either express or implied. They are said to be express when
they are written/stated in the contract at the will of the parties. They are said to be implied when
the law presumes their existence in the contract automatically though they have not been
put/stated in the contract in express words.

It should however be noted that implied conditions and warranties might however be negatived or
varied by express agreement, or by the course of dealing between the parties or by usage of a
particular trade. This provision is merely an application of the general maximum of law, “what is
expressly done puts an end to what is tacit or implied ” and “custom and agreement over rule
implied conditions and warranties”.

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 IMPLIED CONDITIONS
Although the parties may agree on what terms to include in a contract between them, such terms
are normally dictated by the seller who normally has a higher bargaining power in the contract
than the seller.

However, unless otherwise agreed, the law incorporates into a contract of sale of goods the
following implied conditions which are intended to protect the buyer.

1. Right to sell; (The seller must have title to the goods) (Sec 13 SOGA)
In every contract of sale, the first implied condition on the part of the seller is that in the case of a
sale, he has the right to sell the goods and that in the case of an agreement to sell, he will have a
right to sell the goods at a time when the property is to pass.

Ordinarily, the seller has the right to sell the goods if he is either the owner of the goods or if he is
an agent of the owner of the goods. As a result of this condition, if the seller ’s title turns out to be
defective, the buyer is entitled to reject the goods and to recover his price.

In such case, the buyer cannot even treat this breach of condition as a breach of warranty and
accept the goods for the goods must be returned to the rightful owner.

In Rowland V Durall (1923)

Rowland purchased a car from Durall and used the car for several months. Durall had no title to
the car and therefore Rowland was compelled to return the car to the true owner. Rowland sued
Durall to recover back the price, which he had already paid.
Held;
He was entitled to recover the whole of the price paid by him for the car despite the fact that he
had used the car for some months.

Condition in a sale by description

Where the parties enter into a contract of sale of goods by description there is an implied
condition that the goods shall correspond with the description in the contract.

Under section 14 of the S.O.G Act, it is provided that the seller is under an implied condition that
the goods correspond with the description under the contract. It is very important that the goods
must correspond with the description whether it is a sale of specific goods or of unascertained
goods.

Further, the fact that the buyer has examined the goods on delivery will not affect his right to
reject the goods if the difference in the nature of the goods from the description is such deviation
that could not have been discovered by casual examination i.e. where the goods show latent
defects.

The description of the goods could cover the quality or characteristics of the goods e.g. if the
good is known by a trademark, a brand name, or type of packing.

In Albhai Pangui V Sunderegi Nanji (1949) 16 EACA 72

Facts
In this case, by the contract executed through a broker, the defendant/respondent agreed to
purchase from the plaintiff (appellants) 30 tones of Mtama to be delivered at Dar-es-Salaam. The
defendant/ respondent refused to accept part of the consignment on the ground that it consisted of
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red and not white Mtama. It was established that the contract price sufficiently indicated that it
was white Mtama that the parties intended to cover under the contract, since white Mtama cost
500/= per tone and the red one 350/= per tone and the price stated in the contract was 500/=.
Issue: -
Whether the defendant/respondent could accept only part as to quantity delivered.
Held;
The Mtama tendered by the plantiff/appellant was not of the description for which the bargain
was struck, which was for the sale of white Mtama. However the defendant/respondent had not
alleged a sale by sample or by custom of the trade and therefore he had to accept the delivery.

In Varley V Whippe there was a supply of a second hand reaping machine. The defendant agreed
to buy from the plaintiff such machine which was stated to have been new the previous year and
hardly used at all. This was a gross misdirection because on delivery, the defendant who had to
pay for the transport charges wrote complaining that the machine was very old and he refused the
machine, to which the defendant took him to court.
Issue
Whether the sale had amounted to one by description.
Held; By Channel J
That if a man says that he will sell the black horse in the last stall in his stable and the stall is
empty or there is no horse in it but only a cow, then there is no sell of any good in which property
could pass and the buyer relies on the description. In essence, since the seller described the
machine to have been new the previous year and hardly used at all, a description on which the
buyer relied upon to enter into the contract, then there was breach of the implied condition as to
sell by description when the machine turned out to be very old on delivery.

Condition on a sale by sample (Section 16 SOGA)

When under a contract of sale goods are to be supplied according to a sample agreed upon by the
parties, the implied conditions are the following:-

That the bulk of the goods to be supplied by the seller should correspond with the sample as far as
quality is concerned.

That the buyer shall have a reasonable opportunity of comparing the bulk with the sample.

That the goods shall be free from any defect rendering them unmerchantable which would not be
apparent on the reasonable examination of the sample i.e. there should not be any latent defect in
the goods. Where the defect is one that is easily discoverable by the exercise of ordinary care and
the buyer takes delivery of the goods after inspection, there is no breach of implied condition and
the buyer has no remedy since he ought to have seen such defect on examination and rejected
goods immediately.

In Lorymer V Smith (1822) Two parcels of wheat were sold by sample. The buyer went to
examine the bulk a week after. One parcel was shown to him but the seller refused to show the
other parcel that was not there in the warehouse.
Held;
The buyer was entitled to rescind the contract (i.e. to treat the contract as not having any legal
effect/power/or binding).

In Drummond and Sons Vs Van Ingen (1887) 12 AC 284, some mixed worsted coatings were sold
by sample. The goods when supplied corresponded to the sample but it was found that owing to a
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latent defect in the cloth, coats made out of it would not stand ordinary wear and were therefore
unsaleable. The same defect existed in the sample but couldn ’t be detected on a reasonable
examination.
Held;
The buyer was entitled to reject the cloth.

Condition in a sale by sample as well as by description

When goods are sold by sample as well as by description, there is an implied condition that the
bulk of the goods shall correspond both with the sample and with the description. If the goods
supplied correspond only with the sample and not with the description, or vise versa, the buyer is
entitled to reject the goods. The bulk of the goods must correspond with both.

In Wallis V Pratt (1911) AC 394 there was a contract of sale by sample of seeds described as
“Common English Sainfoin”. The contract contained a term excluding all warranties express or
implied. The seed was sewn and when the crop was ready, it was discovered that the seed
supplied and the sample shown were a different and inferior variety known as “giant sainfoin ”.
Held;
That there was a breach of condition and the exemption did not protect the sellers. The buyer was
therefore entitled to recover damages.

Condition as to fitness for purpose

In most cases, in a contract of sale, there is no implied condition or warranty as to the quality or
fitness for any particular purpose of the goods supplied.
This is so because the rule of law is “Caveat Emptor ” which means, “Let the buyer be ware ”.

However, despite the above, an implied condition is deemed to exist on the part of the seller that
the goods supplied shall be reasonably fit for the purpose for which the buyer wants them, if the
following conditions are satisfied;

(i) The buyer should expressly or impliedly make known to the seller the particular
purpose for which the goods are required; and
(ii) The buyer should rely on the seller’s skill or judgement; and
(iii) The goods sold must be of a description in which the seller deals in the ordinary
course of his business, whether he is the manufacturer or not.

Therefore the purpose for which the buyer wants to use the goods must be made known expressly
to the seller, if the goods to be supplied can be used for several purposes. Otherwise the
condition as to fitness will not be implied and the buyer will have no right to reject the goods
merely because they are unfit for the specific purpose for which he had in mind, if he did not
disclose such purpose to the seller.

In Andrew Yule & Company (1932)

A buyer ordered for a Lessian cloth, which is generally used for packing purpose, without
specifying the purpose for which he wanted the same. The cloth was supplied accordingly. On
receiving the cloth, the buyer found that it was not suitable for packing food products as it had an
unusual smell.
Held;
That the buyer ought to have disclosed the particular purpose for which he wanted the goods to
the seller in order to make him liable for the breach of an implied condition as to fitness.
Therefore the buyer had no right to reject the cloth as it was suitable for packing purposes.
12
Conditions as to Merchantability
This condition as to merchantability is only implied where the sale is by description. It has
already been discussed that where there is an implied condition in such instances/cases, goods
supplied should correspond with the description.

Sec 15(2) S.O.G. A. lays down another implied condition in such cases, that the goods should be
of merchantable quality.

For this condition to apply, it is not only that the sale must be by description but the following
conditions must also be satisfied;

(i) The seller should be a dealer (should deal) in goods of that description whether he is
a manufacturer or not
(ii) The buyer must not have any opportunity of examining the goods or there must be
some latent defect in the goods, which would not be apparent on reasonable
examination of the same (goods).

Where the buyer had an opportunity to inspect and examine the goods but he did not do so, or if
he has examined the goods, there is no implied condition as to merchantability as regards the
defects which such examination ought to have revealed.

The phrase “merchantable quality “means that the goods are of such quality and in such condition
that a reasonable man, acting reasonably, would accept them under the circumstances of the case
in the performance of his offer to buy them for his own use or to sell them again.

In Grant V Australian Knitting Mills Ltd (1936) AC 85 where the under wears supplied contained
certain chemicals which could cause skin disease to a person wearing them next to skin.
Court Held;
That because of such a defect, the under wears were not of merchantable quality and the buyer
was entitled to reject the goods.

Condition as to wholesomeness
This condition is only implied in contracts for the sale of eatables. In such cases, the goods
supplied must not only comply with the description and be of merchantable quality but they must
also be wholesome i.e. free from any defect which may render them unfit for human
consumption.

In Frost V Aylesbury Dairy Co. Ltd. (1905) 1 KB 608, F bought milk from a dairy owner. The
milk was contaminated with germs of typhoid fever. F ’s wife on taking the milk became infected
and died of it. A, was held to be liable in damage.

In Chapreniere V Massen (1905) the plaintiff bought a bun at a baker’s and confectioners shop.
The bun contained a stone, which broke one of the plaintiff ’s teeth.
Held;
The seller was liable in damages because he violated the condition of wholesomeness.

IMPLIED WARRANTIES
Unless otherwise agreed, the law also incorporates into a contract of sale of goods the following
13
implied warranties.

Warranty of quiet possession

In every contract of sale there is an implied warranty on the part of the seller that the buyer shall
have and enjoy quiet possession of the goods. If the quiet possession of the buyer is in any way
disturbed by a person having a superior right than the seller, the buyer can claim damages from
the seller.

Since disturbance of quiet possession is only likely to arise where the seller ’s title to the goods is
defective, this warranty may be regarded as an extension of the implied condition, that a seller at
the time of selling the goods (entering into a contract of sale), must have title to the goods and
therefore the right to sell the goods.

This warranty is regarded as an extension of the implied warranty of quiet possession.

In Mason Vs Burningharm (1949) 2 KB 545, the plaintiff, a lady, purchased a second hand
typewriter from the defendant. She thereafter spent some money on its repair and used it for
some months. Unknown to the parties, the typewriter was a stolen one and the plaintiff was
compelled to return it to its true owner.
Held;
That she was entitled to recover from the sellers for the breach of this warranty, damages
reflecting not only the price paid but also the cost of the repair.

Warranty of freedom from encumbrances

This implied warranty on the part of the seller means that the goods shall be free from any charge
or encumbrance in favour of any third party, which was not made known to or declared to the
buyer before or at the time of making the contract of sale.

Where the goods are later on found to be subject to a charge and the buyer has to discharge the
same, (to pay for that charge for it to be discharged) there is breach of this warranty and the buyer
is entitled to damages for this breach, from the seller.

It should be noted that the breach of this warranty will only occur when the buyer infact
discharges (pays) the amount of the encumbrance and he had no notice of that encumbrance at
time of making/entering into the contract of sale.

If the buyer knew/had knowledge of the encumbrance on the goods at the time of entering into
the contract of sale, he becomes bound by the same and he is not entitled to claim compensation
from the seller for discharging the same.

E.g. A, the owner of a watch pledges it with B. After a week, A obtains possession of the watch
from B for some limited purpose and sells it to C. B approaches C and tells him about the pledge
affair. C has to make payment of the pledge amount to B. There is breach of this warranty and C
is entitled to claim compensation from A.

Warranty of disclosing the dangerous nature of goods to the ignorant buyer

This warranty on the part of the seller is that in case the goods sold are of a dangerous nature he
will warn the ignorant buyer of the possible danger.

It there is breach of this warranty the buyer is entitled to claim compensation for the injury caused
14
to him.

In Clarke V Army & Navy Co-operative Society Ltd (1903) IKB, 155 Romer J observed; “I think
that apart from any question of warranty, there is a duty cast upon a vendor, who knows of the
dangerous character of goods which he is supplying and also knows that the purchaser is not, or
may not be aware of it, not to supply the goods without giving some warning to the purchaser of
that danger”.

E.g. C purchases a tin of disinfectant powder from A. A knows that the lid of the tin is defective
and if it is opened without special care, it may be dangerous, but tells C nothing. C opens the tin
in the normal way where upon the disinfectant powder flies into the eyes and causes injury. A is
liable in damages to C as he should have warned C of the probable danger.

FACTORS THAT INHIBIT A BUYER FROM ENJOYING LEGAL PROTECTION

UNDER IMPLIED CONDITIONS

1. Section 54 of the SOGA, which forms the basis for incorporation of exemption/exclusion
clauses in sale of goods contracts. Such clauses are absurd considering the high levels of
illiteracy, inequality of bargaining power between sellers/manufacturers on the one hand and
buyers/consumers on the other, coupled with the unscrupulous character of sellers/manufacturers.

2. The doctrine of caveat emptor

The law retains some aspects of the doctrine. The proviso to sec 15(b) SOGA limits the seller ’s
liability where a defect in the goods was one which could have been seen upon a reasonable
examination of the goods. The effect of the proviso to section 15(b) coupled with massive
advertising is that consumers tend to buy goods under their trade names or patent names, with
result that they lose protection of the law under the implied condition as to fitness for purpose.

3. Many sellers are inexperienced and as such they are not in position to tell whether or not the
goods, which they sell, are fit for the required purpose. As such, the buyers can hardly rely/
depend on the seller’s skill and judgment to get goods which suit the required use.

4. Limitations concerning examination; i.e. where goods are bought in bulk or where they are
pre-packed, examination is not practical. Expiry dates are also tampered with while examination
of certain goods requires high technology and/or expertise.

5. The doctrine of privity of contract; this limits enforcement of a contract to parties to the
contract with the result that a buyer can not sue a manufacturer who would be in a better position
to pay off damages awarded by court. Similarly, where a buyer purchases goods for the benefit of
others, such as members of his or her household, these beneficiaries of the goods bought cannot
sue because they are not privy to the contract.

6. Enforceability of these terms is very limited due to the following;

i) Majority of the buyers are ignorant of them
ii) At times the value of goods is so small that court would not be a viable option of
enforcing the terms
iii) Court process is timely and time consuming

Therefore protection of the buyer by law under implied conditions is very limited and so
inadequate to be relied upon by an ignorant buyer.
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 THE DOCTRINE OF CAVEAT EMPTOR
This is a major doctrine in the law of contract. It can also be referred to as the “Maxim of Caveat
Emptor”.

The maxim “Caveat emptor” means “let the buyer be ware”

According to this doctrine, it is the duty of the buyer to be careful while purchasing goods of his
required specification. On receiving the goods the buyer has a right to examine the goods and
ascertain whether they comply with the contract and where they do not, he can reject them. But
where he accepts them and later finds a defect, which could have been detected upon a reasonable
examination, then caveat emptor comes into play and he cannot reject the goods but can only sue
for damages.

Where such buyer does not make any inquiry regarding the goods he is purchasing, the seller is
not bound to disclose every defect in the goods of which he may be cognisant (know about). The
buyer must examine the goods thoroughly and ascertain that the goods he is supplied with are
suitable for the purpose for which he wants them or that they comply with the contract. If the
goods turn out to be defective or do not suit his purpose, the buyer cannot hold the seller liable
for the same, as there is no implied undertaking by the seller that he shall supply such goods as
suit the buyer’s purpose.

If therefore, while making purchases of goods the buyer depends upon his own skill and makes a
bad choice, he must curse himself for his own folly (stupidity), in the absence of any
misrepresentation or fraud or guarantee by the seller.

In Ward V Hobbs (1878) AC 13, certain pigs were sold by auction “with all faults ”. The pigs were
suffering from typhoid fever and all of them but one died. They also infected a few of the buyer ’s
own pigs.
Held;
That the seller was not bound to disclose that the pigs were unhealthy. Caveat emptor being the
rule, the buyer could not claim damages from the seller as he ought to have examined the pigs
before accepting them to ascertain whether they were of good health.

TRANSFER OF PROPERTY

It is important to know the precise time at which the property in the goods passes from the seller
to the buyer for two main reasons.

i) To determine who is bear the risk of loss in case of damage or loss of goods
ii) In the case of bankruptcy or insolvency of either the buyer or the seller, it is
necessary to know whether the goods belong to the trustee of the bankrupt or not.

The following should be noted: -

Risk passes with property

As a general rule, the risk of the loss of goods is with the person in whom property is. Thus where
after the contract goods are destroyed or damaged, the question of who is to bear the loss is to be
decided not on the basis of possession of the goods but on the basis of ownership of the goods.
Whoever is the owner of the goods at the time loss is occasioned bears the loss e.g. X buys goods
16
from R and property passes to him but the goods remain in the warehouse. Before delivery of the
goods to X, a fire sets out in R’s warehouse and all the goods are destroyed. X must bear the loss
and pay the price of the goods to R, if he has not paid yet.

Thus risk passes with property unless the parties agree otherwise. However, parties can contract
that risk passes even before passing of property or on delivery of the goods.

Instituting actions against third Parties

Where after a contract of sale the goods have been damaged by a third party, only the person in
whom property is vested, i.e. who had property in the goods can take action against the wrong
doer.

Suits for price

The seller can only sue for the price of the goods supplied only if the property in the goods has
passed to the buyer.

Insolvency of the seller or buyer

In the event of insolvency of the buyer or seller, an issue will arise as to whether the official
receiver can take over the goods or not and this will depend on whether the property in the goods
was with the party who has become insolvent. If property in the goods was with the party who
has become insolvent, the goods are vested in the official receiver.

RULES REGARDING TRANSFER OF PROPERTY

These can be analysed/studied under two categories.

-Transfer of property in specific or ascertained goods

-Transfer of property in unascertained or future goods

TRANSFER OF PROPERTY IN SPECIFIC OR ASCERTAINED GOODS

Where there is a contract for the sale of specific or ascertained goods, the property in such goods
is transferred to the buyer at such time as the parties to the contract intend it to be transferred.

The intention of the parties as to when property is intended to pass shall be determined from the
contract terms, the conduct of the parties and the circumstances of the case.

The parties may intend to pass the property at once at the time when the contract of sale is made
or when the goods are delivered or when the goods are paid for.

Where the intentions of the parties cannot be determined or judged from either contract or
conduct or other circumstances, it can be determined from the rules below.

When goods are in a deliverable state; where there is an unconditional contract for the sale of
specific goods in a deliverable state, the property in the goods passes to the buyer as soon as the
contract is made, and it is immaterial whether the time of payment of the price or the time of
delivery of the goods or both are postponed e.g. X buys a bicycle for 20,000/= on a months ’ credit
and asks the shopkeeper to send it to his house and the shopkeeper agrees to do so, the bicycle
immediately becomes the property of X.

When goods have to be put into a deliverable state: Where there is a contract for the sale of
specific goods and the seller has to do something for the purpose of putting the goods in a
17
deliverable state e.g. packing the goods, loading them aboard a ship, rail, filling them in
containers etc, the property does not pass until such thing is done and the buyer has notice there
of.

It should be noted that the act of merely putting the goods into a deliverable state would not result
in the transfer of property in the goods to the buyer. It is further necessary that the buyer must
have notice thereof i.e. the fact that the goods have been put in a deliverable state must come to
the knowledge of the buyer.

When the goods have to be measured etc, to ascertain the price: Where there is a contract for
the sale of specific goods in a deliverable state but the seller is bound to weigh, measure, test or
do some other act or thing with reference to the goods for the purpose of ascertaining the price,
the property does not pass until such act or thing is done and the buyer has notice there of.

In Zagury V Furnell (1809) A sold to B 289 bales of goatskins, each bale containing five dozens
and the price was for a certain sum per dozen skins. It was the duty of A to count the goatskins
in each bale. Before A could do the same, the bales were destroyed by fire.
Held
That the property in the goods had not passed to the buyer (i.e. B) as something still remained to
be done by the seller (A) for ascertaining the price (counting the skins in each bale), therefore the
seller had to suffer the loss.

When goods are delivered on approval; When goods are delivered to the buyer on approval or
“on sale or return”, or on some other similar terms, the property there in passes to the buyer;
When he signifies his approval or acceptance to the seller or does any other act adopting the
transaction e.g. pledges the goods or resells them.
If he does not signify his approval or acceptance to the seller but retains the goods without giving
notice of rejection beyond the time fixed for return of the goods or if no time has been fixed,
beyond a reasonable time.

TRANSFER OF PROPERTY IN UNASCERTAINED GOODS;

Where the goods contracted to be sold are not ascertained or where they are future goods, the
property in the goods does not pass to the buyer unless and until the goods are ascertained or
unconditionally appropriated to the contract so as to bring them in a deliverable state either by the
seller with the buyer’s assent or vise versa.

Until the goods are ascertained or appropriated, there is merely “an agreement to sell ”.

The process of ascertainment or appropriation consists in earmarking or setting apart/aside goods

which are the subject matter of the contract. It involves separating, weighing, measuring,
counting, or similar acts done in relation to the goods with an intention to identify and determine
the specific goods to be delivered under the contract.

The difference between ascertainment and appropriation is that where as ascertainment can be a
unilateral act of the seller, i.e. he alone may set a part the goods, “appropriation ” involves the
element of mutual consent of the seller and the buyer i.e the ascertainment of the goods must be
brought to the knowledge of the buyer.

Essentials of valid appropriation

The following must exist for a valid or proper appropriation of the goods;
18
i) The appropriation must be of goods answering (in accordance with) the contract description,
both as to quantity and quality.
ii) The appropriation must be intentional i.e. it must be made with the intention to appropriate
goods to a specific contract and it must not be due to mere accident or mistake.
iii) The appropriation must be made either by the seller with the assent (consent/approval) of the
buyer or by the buyer with the assent of the seller. Assent of the other party is therefore a
prerequisite, whether before or after appropriation is made.

TRANSFER OF TITLE
The general rule relating to transfer of title is that the seller cannot transfer to the buyer of goods
a better title than he himself has.

Thus where goods are sold by a person who is not the owner of such goods, the buyer acquires no
better title than the seller had. If the seller ’s title is defective, the buyer ’s title will also be subject
to the same defect.

The rule above is expressed by the maxim “Nemo det quod non habet”, which means, “no one
can give what he has not got” .

The rationale of the rule is to protect the true owner of goods against anyone who buys his goods
from a person who has sold without his authority or without having any right in them.

Section 23 (1) S.O.G.A states that where the goods are sold by a person who is not the owner
thereof and who does not sell either under the authority or with the consent of the owner, the
buyer acquires no better title to the goods than the seller had unless the owner of the goods is by
his conduct precluded from denying the seller’s authority to sell.

Therefore, if a thief disposes of (sells) stolen property, the buyer acquires no title though he may
have purchased the goods bonafide for value and the real owner of the goods is entitled to recover
possession of the goods without paying anything to the buyer.
EXCEPTIONS TO THE RULE OF “ NEMO DAT QUOD NON HABET”
There are the following exceptions to this rule. Under these exceptions, a valid title can be given
by a person who is not the owner of the goods. The exceptions include;

I) An unauthorized sale by a merchantile agent

A merchantile agent is an agent who in his customary course of business as such agent, has
authority to sell goods or to buy goods or to raise money on the security of the goods. Thus as a
rule, a mercantile agent having authority to sell goods conveys a good title to a buyer. Therefore
such agent can convey a good title to the buyer even though he sells goods without having any
authority from the principal to do so, if the following conditions are fulfilled/satisfied; (in respect
of the mercantile agent).

i) He should be in possession of the goods or documents of title to the goods in his capacity as
mercantile agent and with the consent of the owner.
ii) He should sell the goods while acting in his ordinary course of business
iii) The buyer should act in good faith without having any notice at the time of the contract that
the agent has no authority to sell.

2. Transfer of title by estoppel

19
Estoppel arises when one is precluded from denying the truth of anything that he has represented
as a fact although it is not a fact. Thus estoppel means that a person who by his conduct or words
leads another to believe that a certain state of affairs existed, he would be estopped from denying
later on that such a state of affairs did not exist. The essence of the rule of estoppel is that it will
be unfair to allow a party to depart from a given state of affairs that he permitted another person
to believe to be true.

Under sale of goods law, estoppel may arise in any of the following ways:-
-The owner standing by when the sale is effected, or
-The owner assisting in the sale, or
-The owner permits goods to go into the possession of another with the intent that the other party
shall have such possession and title thereof.
-If he has otherwise acted or made representations so as to induce the buyer to alter his position to
his prejudice. In O’Connor V Clark, M the owner of a wagon allowed one of his employees K, to
have his name painted on it. M did so for the purpose of inducing the public to believe that the
wagon belonged to K. C purchased the wagon from K in good faith. C acquired a good title as M
was estopped from denying K’s authority to sell.

3. Sale by a Joint Owner

Where one of the several joint owners of goods has the sole possession of them by permission of
the co-owners, the property in the goods is transferred to any person who buys them from such
joint owner in good faith without notice of the fact that the seller has no authority to sell.
Otherwise the buyer would have obtained only the title as co-owner and become merely a co-
owner with the other co-owners.

4. Sale by seller in possession after sale

Where a seller after having sold the goods to a buyer continues to be in possession of such goods
or of the documents of title to them and again resells or pledges them either himself or through a
mercantile agent, he will convey a good title to the buyer or the pledgee provided the buyer or the
pledgee acts in good faith and without notice of the previous sale. For this exception to apply, it
is essential that the possession of the seller must be as seller and not as hirer or bailee.

5. Sale by buyer in possession after “ agreement to buy”

Where a buyer has agreed to buy the goods and has obtained possession of the same or the
documents of title to them with the consent of the seller and he resells or pledges the goods, he
will convey a good title to the buyer or the pledgee provided the latter acts in good faith without
notice of any other right of the original seller in respect of the goods.

Under this exception the person must have obtained possession of the goods under an agreement
to sell. Where one has merely “an option to buy” eg in a hire purchase transaction, he can never
pass a good title to a sub buyer.

6. Sale under a voidable title

When the seller of goods has a voidable title to such goods but his title has not been avoided at
the time of the sale, the buyer acquires a good title provided he buys them in good faith and
without notice of the seller’s defect of title. In Phillips V Brooks Ltd. (1919) A fraudulent person
by the name of North entered the plaintiff shop and selected a diamond ring. North paid for the
ring by cheque by falsely representing himself to be a well-known Lord, where upon, the plaintiff
allowed him to take the ring. North pledged the ring with Brooks. The cheque was dishonored
and the plaintiff sued the defendant for the recovery of the ring.
20
Held
Court held that there had been no mistake as to identify i.e. the plaintiff intended to deal with the
person in the shop. The property in the goods had rightly passed to the purchaser.

7. Sale by the Order of Court

In a sale by order of a court of competent jurisdiction, or under any common law or statutory
power of the sale, the buyer gets a good title.

8. Sale in a Market Overt

This is another very important exception under the Sale of Goods Act. Where goods are sold in a
market overt, a buyer acquires a good title to them provided he buys them in good faith and
without notice of any defect. In this case the buyer can acquire a good title even though the seller
has none at all.

The only exception is where the goods were stolen and the thief has been convicted or where the
owner of the goods reported to the police immediately after the theft of the goods.

A market overt is an open public legally constituted market usually held at periodical intervals in
some particular place for the sale of particular goods.

PERFORMANCE OF THE CONTRACT OF SALE

It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them in
accordance with the terms of the contract of sale. Unless, otherwise agreed, delivery of the goods
and payment of the price are concurrent conditions both arising at the same time.

DELIVERY
This refers to the voluntary transfer of possession of goods from one person to another. Delivery
of goods in pursuance of a contract of sale to the carrier for the purpose of transmission to the
buyer is generally regarded as delivery to the buyer.
RULES AS TO DELIVERY
Unless the contract of sale specifies a place of delivery, the place of delivery is the seller ’s place
of business if he has one and if not, his residence.
Where the seller is bound to send the goods to the buyer and no time for sending them is fixed,
the seller has to send them within a reasonable time.
Where the goods at the time of sale are in the possession of a third party, there is no delivery by
the seller to the buyer unless and until such third person acknowledges to the buyer that he holds
the goods on his behalf.
Where the goods are not in a deliverable state, unless otherwise agreed, the seller must bare all
expenses of putting goods in a deliverable state.

Delivery of wrong quantity

The seller is under a strict duty to deliver the correct quantity of goods agreed. The breach of this
duty entitles the buyer to reject the delivery all together, but if the buyer accepts the goods so
delivered, he must pay for them at the contract price.

Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the
buyer may accept the goods included in the contract and reject the rest or he may reject the whole
consignment. But if the buyer accepts the whole of the goods so delivered, he must pay for them
at the contract price.

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Delivery by Installments
The buyer is not obliged unless he agrees to accept delivery of goods by installments.

Where the buyer agrees that goods are to be delivered by installments each separately paid for
and the seller makes a defective delivery in respect of one or more installments, or the buyer
neglects or refuses to take delivery or pay for one or more installments. It is a question in each
case depending on the terms of the contract, whether the breach is repudiation of the whole
contract or whether the breach is a severable breach giving rise to a claim for compensation and
not a right to treat the whole contract as repudiated.

Acceptance
The buyer has a right to have the delivery made to him in accordance with the contract and to
reject it if the delivery does not confirm with the rules agreed. Acceptance of the goods by the
buyer takes place when the buyer:-

a. Intimates to the seller that he has accepted the goods.

b. When the goods have been delivered to him (the buyer) and he does any act to the goods
that is inconsistent with the ownership of the seller.
c. Retain the goods after the lapse of a reasonable time, without intimating to the seller that
he refuses to accept the goods.

LIABILITY OF THE BUYER

An action for damages for non-acceptance lies when the seller is ready and willing to deliver the
goods but the buyer refuses or rejects to accept the goods. The measure of damages is the loss
resulting from the breach of contract.

RIGHTS OF THE UNPAID SELLER

The seller of goods is deemed to be unpaid.
When the whole of the price is not paid or tendered.
When a conditional payment was made by a Bill of Exchange (or other negotiable instruments)
and the instrument has not been honoured.

The unpaid seller has two rights i.e.

Rights against the goods.
Rights against the buyer.

Rights against the goods

An unpaid seller of goods even though the property has passed to the buyer has three rights
against the goods.

Right of lien on the goods in his possession.

Right of stopping the goods in transit i.e. stoppage in transitu.
A limited right of re-sale.

Right of Lien
The unpaid seller has a lien on the goods for the price as long as the goods remain in his
possession and he can refuse to deliver them to the buyer until the full payment or tender of the
price has been made in the following cases;
Where the goods have been sold without any stipulation as to credit
Where the goods have been sold on credit but the term of credit has expired
22
Where the buyer becomes insolvent.

The seller’s lien is a possessory lien i.e. the lien can be exercised only as long as the seller is in
possession of the goods. Lien can be exercised for non payment of the price and not for any other
charges.

Termination of Lien
Lien depends on physical possession of the goods. Therefore the unpaid seller loses his lien or
right of retention on the goods in the following circumstances;

When he delivers the goods to a carrier or other party for the purpose of transmission to the buyer
without reserving the right of disposal of the goods.
When the buyer or his agent lawfully obtains possession of the goods.
By waiver of his lien i.e when the buyer waives his right to exercise the right of lien.

Right of stoppage in transit

The right of lien or right to retain the goods of the unpaid seller may even be enforced by him
after he has parted with the goods but they have not actually been delivered to the buyer. He may
reclaim the goods if they are in the hands of the railway or any other carrier in the process of
delivering (i.e when the goods are still in transit).

The right is known as stopping the goods in transitu. The unpaid seller has the right of stopping
goods in transitu when they have been delivered for transmission to the buyer and while they are
in the course of transit the buyer becomes insolvent. The buyer is insolvent if he fails to pay his
debts in the ordinary course of business, or cannot pay his debts as they become due.

Duration of transit
Goods are in transit from the time they are delivered to the carrier by hand or water or air or other
means to transmit to the buyer until, the buyer or his agent takes delivery of them.

Unpaid seller’ s right of re-sale

The unpaid seller may resale the goods under the following conditions:-

When the goods are perishable

Where the right to resale is expressly reserved in the contract.
Where in exercise of the right of lien or stoppage in transitu the seller gives notice of his intention
to re-sale and the buyer does not pay or tender the price within a reasonable time.

Loss due to re-sale

If on re-sale there is a deficiency between the contract price and the amount realised out of the
sell, the unpaid seller will be able to recover this from the buyer. But if on such resale a surplus is
left i.e. the goods are sold at a higher price than the contract price, the seller is not bound to hand
over the surplus to the buyer.

Unpaid seller’ s rights against the buyer.

He is entitled to sue the buyer for the price of the goods, if the property in the goods has already
passed to the buyer.
He is also entitled to maintain an action for damages if the buyer refuses to accept delivery and
pay for the goods.

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RIGHTS OF THE BUYER

1.Action for non-delivery

Section 51 SOGA 1979 entitles the buyer to maintain an action against the seller if he wrongfully
neglects or refuses to deliver the goods to the buyer.

2.Recovery of Price
If the buyer has paid the price and the goods are not delivered, he can maintain an action for the
recovery of the amount paid.

3.Specific performance
Section 52 SOGA allows the buyer to sue for specific performance when the goods are specific or
ascertained. The remedy is discretionary and will only be granted if the goods are of special
value or unique in either nature or rare.i.e. under this remedy, the seller is ordered to deliver the
goods.

Suit for breach of conditions

On breach of a condition, the buyer is entitled to reject the goods and treat the contract as
repudiated. But the buyer cannot reject the goods in the following circumstances;

If he elects to treat the breach of such condition as a breach of warranty ex-pest-facto warranty.

If the contract of sale is not severable and the buyer has accepted the goods or part thereof.

If the contract is for specific goods and the property has passed to the buyer.

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