THE RULES AND PRINCIPLES GOVERNING TRANSFER OF OWNERSHIP IN A CONTRACT FOR
THE SALE OF GOODS.
The execution of a sale of goods contract involves various approaches negotiated between
the seller and the buyer based on the specific circumstances. This influences the manner in
which transactions are carried out, necessitating the application of distinct rules and
principles to regulate these sales. In Kenya, these regulations are detailed in the Sale of
Goods Act Cap. 31. Specifically, Articles 18 to 27 of this legislation elucidate the guidelines
pertaining to the transfer of ownership from the buyer to the seller.
property in unascertained goods.
Property in unascertained goods" means the ownership or right to possess things that
haven't been specifically identified.
For instance, you ordered a box of assorted toys online, and you know you're going to get
toys, but you don't know which ones exactly. Until the specific toys are identified and set
aside for you, you have a property interest in the general category of toys (unascertained
goods). Once they are picked out and set aside just for you, the ownership becomes more
concrete because now you have a specific claim to those particular toys.
So, in simple terms, it's about owning things that are part of a general category, even before
you know exactly which ones you're getting.
Under Section 18, the rule is that 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.
If the goods are not specifically identified in the contract, ownership doesn't transfer until
the goods are identified.
Property in specific or ascertained goods
ascertained goods" means that the ownership or right to possess is related to particular
items that are clearly identified or specified. So, when we talk about "property in specific or
ascertained goods," we're saying that someone owns or has the right to possess particular
things that are clearly identified or known. It's not about owning a general type of item, but
rather specific ones that can be clearly identified or ascertained.
The rule to specific property under Section 19 of the sale of good Act are that:
Where there is a contract for the sale of specific or ascertained goods, the property in them
is transferred to the buyer at such time as the parties to the contract intend it to be
transferred.
(2) For the purpose of ascertaining the intention of the parties, regard shall be had to the
terms of the contract, the conduct of the parties and the circumstances of the case.
If the goods are specified in the contract, ownership transfers at the time agreed upon by
the parties. The agreement can be determined by the terms of the contract, the parties'
conduct, and the circumstances.
Rules for ascertaining intention as to time when property passes.
The rules for ascertaining the intention as to the time when property passes in a transaction
are typically governed by the terms of the contract between the parties involved. These
rules are crucial in determining when the buyer acquires legal ownership and control over
the purchased property
Section 20 to 27 of the sale of goods Act Provide rules for determining when ownership
passes in different situations. Under section 20, if there's an unconditional contract for
specific goods in a deliverable state, ownership passes when the contract is made. These
rules are as follow:
20(a) 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 when the contract is made, and it is
immaterial whether the time of payment or the time of delivery or both be postponed;
(b) where there is a contract for the sale of specific goods and the seller is bound to do
something to the goods for the purpose of putting them into a deliverable state, the
property does not pass until that thing be done, and the buyer has notice thereof;
(c) 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 that act or
thing be done, and the buyer has notice thereof;
(d) when goods are delivered to the buyer on approval or “on sale or return” or other
similar terms, the property therein passes to the buyer— (i) when he signifies his approval
or acceptance to the seller or does any other act adopting the transaction; (ii) if he does not
signify his approval or acceptance to the seller but retains the goods without giving notice of
rejection, then, if a time has been fixed for the return of the goods, on the expiration of that
time, or, if no time has been fixed, on the expiration of a reasonable time;
(e) (i) where there is a contract for the sale of unascertained or future goods by description,
and goods of that description, and in a deliverable state, are unconditionally appropriated to
the contract, either by the seller with the assent of the buyer or by the buyer with the
assent of the seller, the property in the goods thereupon passes to the buyer; and assent
may be express or implied, and may be given either before or after the appropriation is
made; (ii) where, in pursuance of the contract, the seller delivers the goods to the buyer or
to a carrier or other bailee or custodier (whether named by the buyer or not) for the
purpose of transmission to the buyer, and does not reserve the right of disposal, he is
deemed to have unconditionally appropriated the goods to the contract.
Van Dorn Limited vs East African Breweries Limited [2014] eKLR the trial judge stated with approval
that: “I concur with the submissions of the appellant when it maintained that the provisions of
section 20(a) of the Sale of Goods Act (Supra) applied to the contract between the parties. I find that
the respondent purchased specific goods from the appellant in a deliverable state and as a result, the
property passed to it when the contract was made.
The judge expresses agreement with the appellant's arguments, acknowledging that section 20(a) is
applicable to the contractual relationship between the parties involved in the case.
Section 20(a) of the Sale of Goods Act likely addresses the transfer of property in a sale of goods
transaction. In this context, the judge indicates that the respondent, who is the buyer in this case,
purchased specific goods from the appellant, and these goods were in a deliverable state at the time
of the transaction. According to the judge's reasoning, the moment the contract was formed, the
property in the goods passed from the seller (appellant) to the buyer (respondent).
This decision is significant because it establishes a legal determination regarding the transfer of
property in the sale of goods, providing clarity on when ownership or title to the goods is transferred
between the parties involved in the transaction. The judge's concurrence with the appellant's
submissions suggests that the court finds merit in the interpretation and application of the Sale of
Goods Act as argued by the appellant.
The seller to reserve the right to dispose of the goods until certain conditions are met, even
after delivery. For example, if the goods are shipped and the bill of lading is in the seller's
name, the seller is presumed to retain the right of disposal.
Under Section 21, it is stipulated that, Where there is a contract for the sale of specific
goods, or where goods are subsequently appropriated to the contract, the seller may, by the
terms of the contract or appropriation, reserve the right of disposal of the goods until
certain conditions are fulfilled; and in that case, notwithstanding the delivery of the goods to
a buyer, or to a carrier or other bailee or custodier for the purpose of transmission to the
buyer, the property in the goods does not pass to the buyer until the conditions imposed by
the seller are fulfilled.
(2) Where goods are shipped, and by the bill of lading the goods are deliverable to the order
of the seller or his agent, the seller is prima facie deemed to reserve the right of disposal.
(3) Where the seller of goods draws on the buyer for the price, and transmits the bill of
exchange and bill of lading to the buyer together to secure acceptance or payment of the bill
of exchange, the buyer is bound to return the bill of lading if he does not honour the bill of
exchange, and if he wrongfully retains the bill of lading the property in the goods does not
pass to him.
Sale by person not the owner.
where the seller is not the owner of the goods. The buyer only gets the same title as the
seller, unless the owner is estopped from denying the seller's authority.
Subject to the provisions of Section 23 (1), where goods are sold by a person who is not the
owner thereof, and who does not sell them 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.
Sale under voidable title
If the seller has a voidable title at the time of sale, and the buyer purchases the goods in
good faith without knowing about the defect in the seller's title, the buyer gets a good title.
This is stipulated in section 24 of the Act that, When the seller of goods has a voidable title
thereto, but his title has not been avoided at the time of the sale, the buyer acquires a good
title to the goods, provided he buys them in good faith and without notice of the seller’s
defect of title.
In the CIVIL SUIT NO. 16 OF 2006 Rift Valley Products Limited vs Plexus Cotton Limited the judge
found that the defendant failed to provide evidence to prove the lawful acquisition of cotton for
Tristar, putting the burden of proof on the defendant. Since no evidence was presented, the judge
concluded that the defendant did not have a valid title to the goods and, therefore, had no right to
sell them. The court inferred that the cotton was stolen based on the lack of evidence. As a result,
the judge ruled in favor of the plaintiff, stating that the defendant must return the proceeds from the
sale of the goods to the plaintiff. The judge rejected the defendant's argument that its title to the
goods was voidable, stating that the title was void from the beginning because it was illegally
obtained. The judge cited the Sale of Goods Act in support of this decision. Consequently, the court
entered a judgment in favor of the plaintiff for the sum of USD 60,773.89, representing the amount
received by the defendant for the benefit of the plaintiff.
Revesting of property in stolen goods on conviction of offender.
If stolen goods are recovered, the property reverts to the original owner after the thief is
convicted. However, this does not apply to goods obtained by fraud.
Section 25. (1) Where goods have been stolen and the offender is prosecuted to conviction,
the property in the goods so stolen revests in the person who was the owner of the goods,
or his personal representative, notwithstanding any intermediate dealing with them,
whether by sale or otherwise. (2) Notwithstanding any enactment to the contrary, where
goods have been obtained by fraud or other wrongful means not amounting to theft, the
property in the goods shall not revest in the person who was the owner of the goods or his
personal representative, by reason only of the conviction of the offender.
Resale of goods in certain cases.
This is a ssituation where a person in possession of goods can transfer them to a third party
without the original owner's explicit permission, provided the third-party acts in good faith
and without notice of any conflicting claims.
Section 26 stipulations are that:
(1) Where a person having sold goods continues or is in possession of the goods, or of the
documents of title to the goods, the delivery or transfer by that person, or by a mercantile
agent acting for him, of the goods or documents of title, under any sale, pledge or other
disposition thereof, to any person receiving them in good faith and without notice of the
previous sale shall have the same effect as if the person making the delivery or transfer were
expressly authorized by the owner of the goods to make it.
(2) Where a person having bought or agreed to buy goods obtains, with the consent of the
seller, possession of the goods or the documents of title to the goods, the delivery or
transfer by that person, or by a mercantile agent acting for him, of the goods or documents
of title, under any sale, pledge or other disposition thereof, to any person receiving them in
good faith and without notice of any lien or other right of the original seller in respect of the
goods shall have the same effect as if the person making the delivery or transfer were a
mercantile agent in possession of the goods or documents of title with the consent of the
owner.
(3) In this section, “mercantile agent” means a mercantile agent having, in the customary
course of his business as agent, authority either to sell goods, or to consign goods for the
purposes of sale, or to buy goods, or to raise money on the security of goods.
Effect of writs of execution.
a writ will bind the property of the debtor from the time it is given to the sheriff, but it does
not affect the rights of a person who acquires goods in good faith and for value unless that
person had notice of the writ. Under 27 (2) “sheriff” includes any officer charged with the
enforcement of a writ of execution.
Section 27 provided that:
(1) A writ of fieri facias or other writ of execution against goods shall bind the property in
the goods of the execution debtor as from the time when the writ is delivered to the sheriff
to be executed; and, for the better record of that time, the sheriff shall, without fee, upon
the receipt of the writ endorse upon the back thereof the hour, day, month and year when
he received it:
Provided that no such writ shall prejudice the title to goods acquired by any person in good
faith and for valuable consideration, unless that person had at the time when he acquired
his title notice that the writ or any other writ by virtue of which the goods of the execution
debtor might be seized or attached had been delivered to and remained unexecuted in the
hands of the sheriff.
THE PASSING OF RISK IN SALE OF GOOD
The passing of risk is guided by the contractual agreement and statutory provisions. The
passing of risk in a contract for the sale of goods refers to the point in the transaction at
which the responsibility for the risk of loss or damage to the goods shifts from the seller to
the buyer. The rules governing the passing of risk are essential for determining which party
bears the risk in different situations. The specific rules can vary based on the terms of the
contract, the governing law, and any applicable trade customs. The principles related to the
passing of risk are therefore illustrated as follows.
Risk follows ownership:
The basic principle is that the risk of loss or damage to the goods passes with the property in
the goods. In other words, whoever owns the goods at a particular point in time bears the
risk associated with those goods. Sale of Goods Act specifically address the issue of passing
of risk in the sale of goods.
As a general rule,' said Blackburn J. in Martineau v. Kitching, the risk of loss follows the
ownership of property, stating 'res perit domino,' the old civil law maxim, is a maxim of
our law. When you can show that the property passed, the risk of loss prima facie is in
the person with whom the property is. This decision means that the owner has to
assume the risk of accidental harm to him or accidental loss to his property
Risk prima facie passes with property
Risk prima facie passes with property indicates that, in a typical or default situation, the risks
related to a property are assumed by the new owner upon the transfer of ownership.
Section 22 of the sale of goods Act specifies the passing of risks in a different situation.
Goods at Seller's Risk:
Section 22 of the sale of Act outlines that Unless otherwise agreed, the goods remain at the
seller's risk until the property is transferred to the buyer.
Goods at Buyer's Risk: Once the property is transferred to the buyer, the goods are at the
buyer's risk, regardless of whether the delivery has been made.
Delayed Delivery: If delivery is delayed due to the fault of either the buyer or the seller, the
party at fault bears the risk of any loss that might not have occurred but for that fault.
Risk where goods delivered elsewhere than at place of sale
The Act often links the passing of risk to the delivery of goods. If the contract involves the
physical delivery of goods, the risk may pass at the time when the goods are delivered to the
buyer.
However, Section 34 of the Act establishes that, If the seller agrees to deliver goods at his
own risk to a place other than where they are when sold, the buyer must bear the risk of any
deterioration in the goods that is necessarily incident to the course of transit.
Delivery to carrier as buyer’s agent.
If the goods are in a deliverable state but the seller is bound to do something to the goods
for the purpose of putting them into a deliverable state, the risk passes when the seller does
that thing.
Delivery to Carrier: The position of the Act under Section 33 is that:
If the seller is authorized or required to send the goods to the buyer, delivering the goods to
the carrier (even if not named by the buyer) is considered prima facie (at first glance) as
delivery to the buyer.
The seller must make a reasonable contract with the carrier on behalf of the buyer, unless
the buyer authorizes otherwise. If the seller fails to do so, and the goods are lost or
damaged in transit, the buyer can either refuse to consider the delivery to the carrier as a
delivery to themselves or hold the seller responsible for damages.
Sea Transit: If the goods are sent by sea transit and it's customary to insure, the seller must
notify the buyer to enable them to insure the goods during sea transit. Failure to do so
means that the goods are at the seller's risk during sea transit.
Agreement of the parties:
The parties involved in the contract for the sale of goods can agree on when the risk should
pass from the seller to the buyer. This agreement may be explicit in the contract or inferred
from the circumstances.
Force Majeure:
Force majeure clauses, if included in the contract, may impact the passing of risk in
situations where unforeseen events or circumstances prevent performance.
THE DUTIES OF THE SELLER
In a contract for the sale of goods, the seller has various obligations that are crucial to the
successful and lawful completion of the transaction. These obligations are often defined by
the terms of the contract, as well as by the relevant legal framework, such as the Sale of
Goods Act in various jurisdictions. The key obligations of the seller in a contract for the sale
of goods include:
Transfer of Title:
The seller is generally obligated to transfer a valid title to the buyer. This means that the
buyer should receive legal ownership of the goods being sold. Under Section 18 of the sale
of goods Act, the seller must have the right to sell the goods, and the title to the goods
should pass to the buyer at the time the contract is made, unless otherwise agreed.
Documentation:
The seller is often responsible for providing necessary documentation related to the goods,
such as invoices, bills of lading, certificates of origin, and any other documents required for
the buyer to take possession and clear customs.
Transfer of Possession and Delivery of Goods
In addition to the transfer of title, the seller is generally responsible for transferring
possession of the goods to the buyer. This involves making the goods available for the buyer
to take delivery.
The seller is typically responsible for delivering the goods to the buyer or arranging for their
delivery, as specified in the contract. The terms of delivery, such as the shipping method and
location of delivery, are often outlined in the contract. Under Section 29 of the Act the seller
is responsible for delivering the goods to the buyer unless there is an agreement to the
contrary. The delivery should be in accordance with the terms of the contract.
Conformity of Goods:
The goods delivered by the seller must conform to the specifications and quality agreed
upon in the contract. If the contract is silent on this matter, the goods must at least meet the
standards implied by law. Section 13 of the sale of goods Act implies that: The goods
delivered must correspond with the description given in the contract. This includes quantity,
quality, and other specifications.
Section 14 and 15 Nonetheless provided that the goods should be of merchantable quality
and fit for the purpose for which goods of that description are commonly bought, as well as
any specific purpose agreed upon by the buyer. This falls under the obligation for the seller.
Under Section 17 If the sale is by sample, the fell to the seller to ensure the bulk
corresponded with the sample in quality.
Passing of Property (Section 20): Unless otherwise agreed, the property in the goods is
transferred to the buyer at the time the parties intend it to be transferred.
Warranty of Title:
The seller typically warrants that they have the right to sell the goods and that the goods are
free from any encumbrances or claims by third parties. This is a guarantee that the buyer
will receive clear title to the goods.
Express and Implied Warranties:
The seller may provide express warranties regarding the quality, performance, or
characteristics of the goods.
Inspection and Testing:
If the contract allows, the seller may be obligated to allow the buyer to inspect and test the
goods before acceptance. This is especially relevant in contracts for the sale of goods where
the buyer has the right to inspect before finalizing the purchase.
Delivery at the Agreed Place and Time:
The seller must deliver the goods at the agreed place and time specified in the contract. The
terms of delivery determine when the risk of loss or damage transfers from the seller to the
buyer. Under Section 29 of the Act if a specific time for delivery is agreed upon, the seller
must deliver the goods within that time.
Notification of Shipment:
In some contracts, the seller is required to notify the buyer of the shipment, providing
details such as the expected time of arrival, shipping method, and tracking information.
REMEDIES OF THE BUYER
The "Remedies of the Buyer" refer to the legal actions a buyer can take if a seller fails to
fulfill their obligations under a contract for the sale of goods. In simpler terms, it outlines
what a buyer can do if they don't get the goods they paid for or if the goods don't meet the
agreed-upon conditions. There are various remedies provided under 51 to 54 of the sale of
good Act. The remedies are: In vivid printing equipment solutions limited vs Monicah Ng’ong’oo,
the appeal judge found that the printer sold to the respondent did not meet the expected quality
standards. The evidence showed poor image quality, ink overflow, and smudging. As a result, the
court agreed with the trial court's decision that the printer was not fit for its intended purpose. The
buyer, in this case, is entitled to remedies, and since there was a breach of an implied condition, the
buyer can seek a refund of the purchase price as a remedy, effectively canceling the contract.
Action for Non-Delivery
Action for Non-Delivery" refers to the legal recourse a buyer can take when a seller
wrongfully neglects or refuses to deliver the goods as agreed upon in a contract. The Act
provides that:
(1) If the seller wrongly refuses to deliver the goods, the buyer can sue the seller for
damages due to non-delivery.
(2) The amount of damages is the estimated loss that naturally occurs because of the seller's
breach of contract.
(3) If there's a market for the goods, the damages are generally the difference between the
agreed price and the market price at the time they were supposed to be delivered.
Right to Specific Performance
The 'Right to Specific Performance' originated from the laws of equity. In the sale of goods, it
refers to a legal remedy available to a party in a contract, typically the buyer, to compel the
other party, usually the seller, to fulfill their specific obligations as outlined in the contract. In
simple terms, the Act under section 52(1), (2) implies the following:
(1) In a case where there's a breach of contract to deliver specific goods, the court, upon the
buyer's request, can order that the contract be specifically performed, meaning the seller
must deliver the goods.
(2) The court can make the order unconditional or set conditions related to damages,
payment, or other factors it deems fair. The buyer can request this at any time before a court
judgment.
Justice Maraga's decision in the case of Reliable Electrical Engineers Ltd. vs. Mantrac Kenya Limited
(2006) eKLR, states that the court has the discretion to grant specific performance, an equitable
remedy, based on well-established principles. Specific performance is only granted when there is a
valid and enforceable contract. If the contract has defects, like not meeting formal requirements,
containing mistakes, or involving illegality, specific performance will not be ordered. Even with a valid
contract, the court won't order specific performance if there is an adequate alternative remedy, such
as damages. Damages are considered adequate when the claimant can easily get the equivalent of
what was agreed upon from another source. Additionally, specific performance may be refused if
there is undue influence or if it would cause severe hardship to the defendant.
Remedy for Breach of Warranty
The remedy for a breach of warranty typically involves seeking compensation for losses
incurred due to the breach. There are different types of warranties, and the available
remedy may depend on the nature and terms of the warranty. Remedies for breach of
warranty under the Sale of Goods Act, Section 53, imply the following:
(1) If there's a breach of warranty (a guarantee) by the seller, the buyer can't automatically
reject the goods but can:
(a) Reduce or eliminate the price due to the breach, or
(b) Sue the seller for damages due to the breach.
(2) Damages for breach of warranty are the estimated loss resulting from the breach.
(3) In the case of a breach of warranty of quality, the loss is typically the difference between
the value of the goods at the time of delivery and what their value would have been if they
met the warranty.
(4) Even if the buyer has already reduced the price due to a breach, they can still sue for
additional damages if they've suffered more harm.
In Godfrey Ngatia Njoroge versus James Ndungu Mungai, the court has determined that there was a
valid sale agreement between the parties for a piece of land. The plaintiff claims to have fully paid for
the land, but the defendant has not fulfilled their part of the agreement, and the plaintiff is unable to
locate the defendant for the transfer of documents. The court has reviewed the evidence, including
the sale agreement and payment slips, confirming the plaintiff's payment. However, there is no
official document proving the defendant as the registered owner of the land. The court is inclined to
grant specific performance, allowing the plaintiff's request for the Deputy Registrar to sign the
transfer documents. This is conditional on the plaintiff providing an official search confirming the
defendant's ownership. The court rules in favor of the plaintiff, ordering judgment in line with the
plaintiff's prayers, with the specified condition.
In Civil Appeal No. 74 of 2011 – Dickson Maina Kibira vs David Ngari Makunya [2015] the court
stated that: “Once the respondent had accepted the goods, a breach of any condition by the seller
would, under section 13 of the Sale of Goods Act, be a breach of warranty which would not be a
sufficient ground for rejecting the engine or for treating the contract as repudiated. This section
states:-
Section 13(3) where a contract of sale is not severable and the buyer has accepted the goods or part
thereof, or where the contract is for specific goods the property in which has passed to the buyer, the
breach of any conditions to be fulfilled by the seller can only be treated as a breach of warranty and
not as a ground rejecting the goods and treating the contract as repudiated, unless there be a term
of the contract, express or implied, to that effect.”
Interest and Special Damages
Section 54 states that, “Nothing in this Act shall affect the right of the buyer or the seller to
recover interest or special damages in any case where by law interest or special damages
may be recoverable, or to recover money paid where the consideration for the payment of it
has failed”. This section provides that nothing in the Act affects the right of the buyer or
seller to recover interest or special damages. If the law allows the recovery of interest or
special damages, the buyer or seller can still seek them. It also preserves the right to recover
money if the reason for payment has failed.
according to Bowen L.J. in the case Birmingham and District Land Company vs. London and
North Western Railway Company (1887), if someone has a right to damages (compensation)
due to a breach of contract, it is not the same as a right to indemnity. A right to indemnity
comes from the original agreement between the parties, while the right to damages arises
as a consequence of the breach of that original contract. In other words, a right to damages
is a legal consequence attached to the violation of a contract and is not a direct provision
within the contract itself.
