COMMERCIAL LAW INTERIM ASSESMENT FLAW 345/497/445 10941291 THEODORA SITSOPE ABLA KASU

Q2
Using statutory law and decided cases, critically analyze the assertion that “under
Ghanaian Law, the common law rule ‘caveat emptor’ has become ‘caveat venditor’?” (20
MARKS)

“Caveat emptor” is a principle at Common Law which consistently applies to transactions. It is

loosely translated as “ Buyer Beware”. What this popular maxim means at law is that it is the
sole responsibility of the buyer to ensure of goods to ensure that all the necessary background
investigative work among others including any defect. This is contrasted with another Common
Law principle “caveat venditor”, “seller beware” at the heart of this maxim is the protection of
the consumer and holding sellers accountable for quality in goods sold.

In Act 137 The Sale of Goods Act, 1962, Section 13(1) the general position by law in Ghana is
that there is no implied condition by a seller that goods sold are free from defect(caveat emptor).

However, under Section 13(1)(a), there is an implied condition that the goods sold are free form
any defects known by the seller. This means that, where a seller is aware of defects and does not
disclose those defect to a potential purchaser, then the seller is implying that the goods are free
from defects.

If the seller however gives the buyer an opportunity to examine the goods, in Section 13(1)(a)(i),
then there is no duty on the seller even if the defect was obvious (caveat emptor) or the buyer
performs an incomplete examination Thornet v Beers & Sons. In respect of defects that should
have been revealed upon examination, there is no longer a condition on the seller that goods are
free from defects. In the case of Godley v. Perry, it was held that the examination means it
should be reasonable examination and of a nature that an average reasonable buyer of these kinds
of goods would have examined the goods. Where the defects are not discovered upon reasonable
examination, then the buyer still bears the risk if any defects is found “caveat emptor Godley v.
Perry

In Section 13(1)(a)(ii), there is no implied condition on the part of the seller where the sale is by
sample in respect of defects which should have been discovered by reasonable examination of
the sample. Godley v. Perry.

In Section 13(1)(a)(iii), There is no implied condition on the part of the seller if (i) goods are not
sold by the seller in his ordinary course of business and defects are such that one cannot be
reasonably aware of them. Rockson v Armah where the appellant was the owner of a car of which
he sold to the respondent. It showed signs of being involved in an accident. This fact was relayed to the
appellant who took it to a wayside fitter to fix. The car was delivered to the respondent who accepted it
used it for two months and attempted to repudiate the contract by stopping payment of his final post-
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dates check on the grounds that he had discovered latent defects. Held- the seller was a non-dealer and
was not aware and could not reasonably have been aware of the defects.

Under Section 13 (1) (b) There is an implied condition that a seller who sells goods during his
usual course of business for which the buyer has expressly or impliedly made known the purpose
will sell goods which are fit for purpose. Priest v. Last

From Section 13(3) the quality of goods or their fitness for purpose may be adopted or
annexed from trade usages. Peter Darlington, Partner Ltd v. Gosho Co. Ltd

Also, according to Section 13(5) and as held in Geddling v Marsh, the discussions on quality
and fitness for purpose do not just apply to the goods but to also the containers which they come
in.

Overall, as earlier on stated, the general position of the law in Ghana under section 13(1) of Act
137 on defective goods is caveat emptor which is buyer beware and that position remains
unchanged which is same as the Common Law position. However the law on Sale of Goods in
Ghana makes some exceptions that manifest themselves as seller beware “caveat venditor”
thereby protecting the rights of buyers which is even more important due to the economic crunch
that the country is experiencing and very similar to the position held by J.E.A. MILLS in
Rockson v. Armah: A Case of Caveat Emptor, Caveat Venditor or Neither? “that in the
light of the prevailing economic conditions the buyer needs to be protected against
unscrupulous sellers”.

References

R. M. GOODE, COMMERCIAL LAW

P.S. ATIYAH, SALE OF GOODS (8TH EDITION)
SALE OF GOODS ACT, 1962 (ACT 137)
Thornett v. Beers & Sons Ltd [1919] 1 K.B. 486
Rockson v. Armah [1975] 2 G.L.R. 116
Godley v. Perry [1960] 1 W.L.R. 9
Priest v. Last [1903] 2 K.B. 148
Peter Darlington, Partner Ltd v. Gosho Co. Ltd [1964] 1 Lloyd’s Rep. 149
Geddling v. Marsh [1920] 1 K.B. 668
J.E.A. MILLS, Rockson v. Armah: A Caser of Caveat Emptor, Caveat
Venditor or Neither? [1987] 15 U.G.L.J. 168
COMMERCIAL LAW INTERIM ASSESMENT FLAW 345/497/445 10941291 THEODORA SITSOPE ABLA KASU

Q1

With the aid of decided cases, discuss how the Sale of Goods Act, 1962 (Act137) has tried to
reconcile these two principles – “no one can give a better title than he himself possesses”
(the protection of property) and “the person who takes in good faith and for value without
notice should get a better title (the protection of commercial transactions) (20 MARKS)

Contract of sale (1) “A contract of sale of goods is a contract by which the seller agrees to
transfer the property in the goods to the buyer for a consideration called the price, consisting
wholly or partly of money.” Normally, selling goods involve a seller or buyer or their authorized
representatives. It is assumed that the seller has the right to sell the goods as it is a “transfer of
the property in goods” to the seller. In certain circumstances however, a seller may not have the
right to sell. In this instance the buyer that does have a valid title to the goods and thus cannot
pass on a valid title to the buyer. This essay will look how the Sale of Goods Act, 1962, (Act
137) which is the legislation that regulates transactions which relates to the sales and purchase of
goods has looked at these two principles, the protection of property and the protection of
commercial transactions.

The Common Law maxim nemo dat quod non habet is a general principle that posits that a
person can only give that which he has. In Ghana, it finds its expression in Section 28 (1,2) of
Act 137 Alternatively, a person cannot give a better title than he has. The Onus therefore, lies
with the buyer to ensure that at all due times due diligence has been carried out i.e “buyer
beware” because if it turns out that the seller has no valid title then the buyer as well acquires no
title and the courts are called in to decide which party is the rightful owner and which party loses
in this instance as held in the case of Bishopsgate Motor Finance Corporation Ltd v
Transport Brakes Ltd and Philips and Brooks and also in Philips and Brooks

In certain circumstances however and in advancement of commerce, equity had to develop a rule
to protect innocent (bona fide) buyers who without notice of a defect in title purchases goods.
Simply put, the law in certain circumstances would allow a person to acquire title if a person
purchased the good in good faith with no knowledge of a defective title. Here, purchasing in
good faith includes where a person does all the due diligence and still does not get to know of the
defective title.

Under Section 10 of the Act, there is an implied condition on the part of the seller who sells that
he/she has the right to sell goods at the time the property needs to pass. Therefore, a transferor
who sells without the right to title will first and foremost be in breach of section 10.

In Section 28(1) a non-owner of goods who sells goods to another person without authority or
consent of the owner transfers no title. “Subject to this Act and to any other enactment where
goods are sold by a person who is not the owner of the goods and who does not sell them under
the authority or with the consent of the owner, the buyer does not acquire a better title than the
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seller had.” Even though a non-owner without authority does not transfer title, the doctrine of
estoppel is still applicable in appropriate situations. Where the true owner through his words or
behavior represents or permits to be represented that another person is the owner of the goods or
has his authority to sell then the true owner is barred from denying the glaring ownership of the
seller. The true owner is therefore estopped from asserting his rights over the goods and the
buyer therefore acquires a valid title as seen in the case of Pickard v Sears.

The Nemo Dat Rule however does not apply to affect any power of sale that may be conferred by
pledge or under a law or enactment Section 29(2). There are various laws that permit certain
persons under specific circumstances to sell goods belongs to others.

According to Section 29, where a person has a voidable title to goods, any transfer or sale made
to a person before the voidable title is voided is effective and shall be a valid transfer of property
in goods for as long as the person acquired it under a voidable title and acted in good faith and
with out notice of defect of title of the transferor. However, if the voidable title was set aside
before the purchase, then the transferor has no valid title to pass on to the purchaser.

In Section 30 A disposition done by a mercantile agent may transfer valid title. In section 81, a
mercantile agent is an agent who in his ordinary course of business has the authority to sell
goods. In referencing section 30, and Lowther v Harris where a mercantile agent has obtained
goods without title or the consent of the owner, any sale or disposition by the agent in the
ordinary course of this business shall be valid provided the purchaser acted in good faith and
without notice of defect in the authority of the agent.

Under Section 30(2) If a mercantile agent sells goods which he has obtained with the consent of
the owner, even though that consent be revoked, a sale or transfer is still valid despite the
termination of the consent if the transferee is (equity’s darling). It is important to note where a
mercantile agent comes into possession of goods, his possession shall be deemed to be with the
consent of the owner. In Section 30(4) the consent of an owner is presumed unless otherwise
proven as held in Folkes v King.

In Section 30(5), if the supposed mercantile agent is not acting in his capacity as a mercantile
agent, then he does not have title to the goods and property.

Under Section 31, there is another exception to the Nemo Dat rule which applies where the
buyer of goods remains in possession of the goods after property has passed unto the buyer. If
the seller on possession sells the goods to another person and that person purchases it in good
faith without notice of the previous sale, the buyer obtains a valid title as it would be treated as
the original buyer expressly authorizing the seller to resell. In this situation, the aggrieved
original buyer may seek remedies against the seller.
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In Section 32(1) which has got to do with a buyer in possession contrary to the position in
Section 31, it is where a buyer of goods obtains documents or title with the consent of the seller
before property passes. A transfer or sales by the buyer to another person shall be deemed as if
the buyer was expressly instructed by the seller to sell if the other buyer is doing so in good faith
and without notice of the defective title

Also, where goods are sold in a market overt and according to the usages of the market e.g.,
buying a phone from a shop at Tip Toe Lane in Circle a buyer acquires a valid title to the goods
provided he has acquired them in good faith and without notice of the defective title. This
acquisition must be done during the ordinary hours of business as seen in Reid v Metropolitan
Police Commissioner. A market overt is an open, public, and legally constituted market
including shops. This market should have been established and known for the sale of goods of
that nature. BishopGate Motor Finance Corp v Transport Brakes

Lastly, in Section 33, in the instance of motor vehicles, once a vehicle in licensed by a licensing
authority, it is notice that the person in whose name it is in is the true owner as held in the case of
Alhassan v Social Security Company LTD

In conclusion, generally, a person without title or a person with defective title cannot transfer a
better title that he has, In Act 137, provisions has been made for people and circumstances where
an innocent purchaser “Equity’s Darling” will not lose title acquired if due diligence waw done
on the part of the purchaser.

References

R. M. GOODE, COMMERCIAL LAW

P.S. ATIYAH, SALE OF GOODS (8TH EDITION)
Mok Beer Bar Proprietor v. Gada [1979] GLR 35

Alhassan v. Social Security Bank Ltd. [1989-90] 1 GLR 549

Phillips v. Brooks [1949] 2 K.B. 243

Lowther v. Harris [1927] 1 K.B. 393