LAW ON SALE OF GOODS
5.1 Introduction
The Sale of Goods Act (cap 31) Section 3 (1) defines a sale of goods as "a contract whereby
the seller transfers or agrees to transfer the property in goods to the buyer for a money
consideration called the price".
This means that;
i. It is "a contract"
ii. Two or more parties are involved
iii. There is a transfer of "the property/claim in the goods" to the buyer.
iv. Any sale of goods worth two hundred shillings or more must be in writing
v. Consideration for the transfer of ownership must be "a money consideration"
vi. There must be an offer to buy, or sell, followed by a corresponding acceptance.
5.2 A “Sale” versus an “Agreement to Sell”
It is very important to understand the difference between the two as it will determine the kind
and extent of liability. Here are a few of their differences;
Sale; Agreement to Sale;
i. Transfer of ownership is immediate i. Transfer of ownership is later
ii. Sue for price as well as damages ii. Buyer can sue for damages
iii. Buyer has right to resale iii. Buyer has no right to resale
iv. Risks borne by buyer iv. Risks are borne by seller
5.3 Type of Goods
Goods include all chattels personnel other than things in action and money, unless it is sold as
curio by coin collector. It covers anything that can be touched, moved or taken away but does
not cover land and other species of commercial property such as shares, debts, etc which
cannot be physically moved or taken away.
The Act classifies goods into:
i. Specific Goods; those identified and agreed upon at the time the contract
ii. Unascertained Goods; goods to be manufactured or acquired by the seller
iii. Future Goods; those yet to be acquired or manufactured when contract is made
iv. Existing Goods; those goods owned/possessed by the seller when contract is made
5.4 Terms and Conditions of a Sale Contract
There are certain terms, called conditions and warranties, which are implied into every
contract covered by the Sale of Goods Act, unless the contract shows a different intention.
The common law seems to have been oblivious of the fact that, in practice, buyers do not ask
such questions—since it would be mutually embarrassing to ask such a question.
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The implied conditions
i. Buyer must have the right to sell.
ii. Goods must correspond with description
iii. Goods must correspond to sample as well as the description
iv. Goods should be of "Merchantable quality".
v. Goods must be fit for intended purpose
vi. Bulk of goods shall correspond with the sample
vii. Opportunity to compare bulk and sample
In Wren v Holt it was held that beer which contained an abnormal quantity of arsenic acid
was not of merchantable quality. The fact that plaintiff became sick after drinking the beer
proved that it was not fit for its general use as beer. The seller would not be liable if he proves
that the goods were sold under a patent or other trade name, as was explained in Bristol
Tramway Company Limited v Fiat Motors. The implied warranties of the contract are that
the buyer should enjoy quiet possession and the goods are free from any charge or
encumbrances.
5.5 Exceptions of the “Nemo Dat quod Non Habet” Rule
Another common law maxim that applies to sale of goods is a buyer acquires no better title to
the goods than the seller had. It was developed by the common law courts to protect the
interest of the true owner of the goods. It was the case in Cundy v Lindsay & Co. where if
the goods had been obtained by fraud and the seller had a voidable title thereto, the buyer
would acquire a voidable title even if he were not aware of the fraud. If the seller had a valid
title, the buyer would get a valid title.
This rule has the following exceptions;
i. Transfer by Estoppel
ii. Sale under a court order.
iii. Sale under a Voidable Title
iv. Resale by a Seller in Possession
v. Sale Under Statutory powers of sale
vi. Sale by a buyer in Possession or in an open market .
vii. Sale by a Factor or common law powers eg agent of necessity
Where goods have been stolen and the thief has been prosecuted and convicted, the property
in the goods reverts to the original owner. This is so even if the goods had been resold or
otherwise dealt with in the meantime. This rule should make people extremely careful when
buying goods so that they do not buy them from a thief. If that really happened thieves would
have no buyers and would be forced to abandon stealing.
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5.6 Rights and Duties of a Seller
A seller has the following rights;
i. Right to be paid price
ii. Right of lien if unpaid
iii. Right to resale if unpaid
iv. Right to cancel the contract
v. Right to stoppage in transit if unpaid
vi. Right to sue the buyer for breach
A seller has the following duties
i. To transfer a good title
ii. Write the contract of sale
iii. Put the goods in a deliverable state
iv. Withhold/pay tax/V.A.T.
v. Deliver the goods to buyer
vi. To deliver the right quantity/quality
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5.7 The Duties of the Buyer
The buyer has the following Duties
i. To take delivery
ii. To pay the consideration promptly
iii. Pay in the mode, manner, currency agreed
iv. To inform seller of any rejects/surplus promptly
v. Inform seller change of location of delivery
In Hart v Mills, buyers ordered two-dozen bottles of wine. In response, the sellers sent four
dozen. It was held that all the four-dozen could be returned. Although the buyer’s behaviour
appeared to be unreasonable, it was consistent with the provision of the Act. However, where the
delivery is greater, or less, than the amount contracted for, and the buyer accepts part of whole of
the delivery, he is liable for the price at the contract rate. He cannot then claim damages
afterwards.
ACTIVITY 5.1
STATE WHEN PROPERTY IN GOODS IS DEEMED TO HAVE PASSED FROM SELLER
TO BUYER
ACTIVITY 5.2
DISCUSS THE REMEDIES AVAILABLE TO THE PARTIES INVOLVED IN CASE OF
BREACH OR FRUSTRATION
