SALE OF GOODS
DEFINITION
A
contract of sale of goods is defined 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.
The
General rules of the law of contract continue to apply on the contract of sale
of goods.
Where
the transfer of property from the seller to the buyer takes place immediately,
the contract is called a sale but where the transfer of property is to take
place at a future date and subject to conditions thereafter to be fulfilled, it
is an agreement to sell.
An
agreement to sell becomes a sale when the condition subject to which the goods
are to be transferred is fulfilled.
DISTINCTION BETWEEN A
SALE AND AN AGREEMENT TO SELL
·
Where the transfer of
property from the seller to the buyer takes place immediately, the contract is
called a sale.
·
Where the transfer of
property is to take place at a future date and subject to conditions thereafter
to be fulfilled, it is an agreement to sell.
·
An agreement to sell
becomes a sale when the condition subject to which the goods are to be
transferred is fulfilled.
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Sale
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Agreement
to sell
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1
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Property passes at
the time of contract
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Property passes at a
future time
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2
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In case of
deterioration to the goods, the buyer bears the loss
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In case of
deterioration, the seller bears the loss
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3
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The seller can sue
for the price
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The seller can sue
the buyer for damages for the buyer’s failure to accept the goods.
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FACTORS OR ELEMENTS OF
THE DEFINITION
1. Seller-
this is a person who sells or agrees to sell goods.
2.
Property –This is the general property in goods
or ownership. It signifies the bundle of rights that a person has in relation
to a subject matter .Eg. Right to use, misuse and to dispose
3.
Goods- goods includes
a) All
chattels personal other than things in action and money
b) And
all implements
c) Industrial
growing crops
d) Things
attached to or forming part of the land which are agreed to be severed before
sale or under the contract of sale
Classification/Types of Goods
a.
Specific
or Ascertained and Unascertained
These
are identified and agreed upon by the parties at the time when the contract of
sale is made. Other goods are unascertained
b.
Existing and Future Goods
These
are goods owned a possessed by the seller when the contract of sale is made.
Future Goods are goods to be manufactured or
acquired by the seller after the contract of sale is made.
4.
Buyer: buyer means a person who buys or agrees
to buy goods
5.
Price: This is the consideration that passes
from the buyer to the seller to support the contract of sale of goods. The
consideration must be monetary which distinguishes a contract of sale of goods
form related transactions. E.g. Contracts of exchange or batter, contracts for
skills and labour and materials.
CAPACITY
Capacity
for enter into a contract of sale of Goods is governed by the General Law of
contract. However, if an infant, drunken person or a person of unsound mind is
supplied with necessaries, he is liable to pay a reasonable price.
FORMALITIES
A
contract of sale is not subject to any legal formalities, the contract may be:-
a)
Oral
b)
Written with or without seal
c)
Partly oral and partly written
d)
Implied from the conduct the parties
However,
a contract of sale of Goods of Kshs. 200 and above is unenforceable unless: -
1.
The buyer has accepted part of the goods and actually received the same or
2.
The buyer has given something in concert to bind the contract.
3.
It is evidenced by some note or memorandum signed by the parties.
IMPLIED TERMS {Exceptions
to Caveat Emptor}
The
Sale of Goods Acts implies both conditions and warranties in Sale of
Goods of Contracts unless a different intention appears on the part of the
parties
These
are terms which though not agreed to by the parties, are an integral part of the
contract. These terms may be implied by statutes or by a court of law.
CONDITIONS
1.
Right to sell:
There is an implied condition that the seller of goods shall have the right to
sell when property in the goods is to pass.
2.
Correspond to
description: in a sale by description there is
an implied condition that the goods shall correspond to the description.
3.
Fitness for purpose:
where the buyer expressly or by implication makes known to the seller the
particular purpose for which the goods are required so as to rely on the
seller’s skill and judgment, there is an implied condition that the goods shall
be reasonably fit for that purpose.
4.
Merchantable Quality:
where goods are bought by description from a person who deals in such goods in
the ordinary course of business whether a seller or manufacturer, there is an
implied condition that the goods will be of merchantable quality.
5.
Sale by Sample:
In a sale by sample, the following conditions are implied:
a.
The bulk shall correspond with the sample in quality.
b.
The buyer shall be afforded a reasonable opportunity to compare the bulk with
the sample.
c.
That the goods shall be free from any defects rendering them unmerchantable.
WARRANTIES
1.
Quiet Possession: there
is an implied warranty that the buyer shall have and enjoy quiet possession of
the goods.
2.
Free from Charge or encumbrance:
there is an implied warranty that the goods shall be free from any charge or
encumbrance not made known to the buyer when the contract was made.
TRANSFER OR PASSING OF
PROPERTY
When does property in
goods pass from the seller to the buyer?
Property
in goods passes to the buyer at different times in different contracts hence
the passage of property is governed by various rules or principles.
Property
means the general property in goods or ownership. It signifies the rights a
person has in relation to a subject matter.
It is important to
ascertain when property in goods passes from the seller to the buyer for the
following reasons:
1. It
is the purpose of the contract of sale of Goods that property passes to the
buyer.
2. It
determines when risk passes to the buyer and hence the party liable in the extent
of loss or destruction.
3. It
determines what remedies are available to the seller e.g. the seller cannot sue
for the price before property in the goods passes to the buyer.
RULES RELATING TO THE
PASSING OF PROPERTY
- Sale
of Unascertained Goods:,property passes
to the buyer when the goods are ascertained. Examples of Unascertained Goods:
Goods to be manufactured by the seller, Crops to be grown by the seller.
- Sale
by Reservation: in a Contract for
the sale of Specific Goods or where goods are subsequently appropriated to
the contract, but the seller reserves the right of disposal until a
certain condition is fulfilled, property in the goods will pass to the
buyer when the condition is fulfilled.
- Sale
by Auction: Under Sec. 58 of the Act, in
a Sale of Auction, property passes when the Auctioneer announces its
completion by the fall of the hammer or in any other customary manner.
- Unconditional
Sale of Specific Goods in a deliverable state. Property
passes when the contract is concluded.
- Sale
of Specific goods not in a deliverable State: Where
specific goods, the subject matter of the contract, are to be put in a
deliverable state, property passes when they are so put and the buyer is
notified.
- Sale
of specific goods to be weighed, measured, tested etc.if
specific goods are to be weighed, measured, tested or that other thing is
to be done for the purpose of determining the price, property passes when
the thing is done and the buyer is notified.
- Sale
by approval or On Sale or Return: Under
sec. 20 of the Act, where goods are delivered to the buyer by approval or
on sale or return or on such other term, property in them passes to the
buyer: -
a. When he signifies his acceptance or
approved to the seller.
b. When he does any act adopting the
transaction e.g. selling goods.
c. When he retains the goods even after expiration
of the stipulated or reasonable time without signifying his rejection.
8.
Sale by description: Under Section 20 of the
Act in a sale of future goods by Description, property to the buyer when: -
a.
Goods of that description
b.
In a deliverable state
c.
Are unconditionally appropriated to the contract.
d.
By the seller with consent of the buyer or the buyer with the consent of the
seller.
ACCEPTANCE
OF GOODS
A
buyer is deemed to have accepted goods if:-
1.
He intimates to the seller his acceptance
2.
He does any act in relation other goods which is inconsistent with the seller’s
ownership
3.
He retains the goods after the expiration of the stipulated or reasonable time
without intimating his rejection.
TRANSFER OF TITLE BY A
NON-OWNER (NEMO DAT QUOD NON HABET)
The
principle of Nemo dat means that a seller cannot give to the
buyer a better title to the goods than he himself has.
The
principle provides inter alia “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 than the seller
had.”
The
principle of Nemo dat was developed to protect the true owners of goods.
The
Nemo dat principle is subject to various exceptions. These are
circumstances in which a seller can give a better title to the buyer than he
has in the goods.
Exceptions to Nemo dat
Rule
There
are circumstances under which a valid title can be given by a person who is not
the true owner of the goods. They include;
1. Sale under voidable title
When
a seller of goods has a voidable title to them but his title has not been
avoided at the time of sale the buyer acquires a good title to the goods
provided he buys them in good faith and without notice of the seller’s
defective title to the goods.
2. Sale by mercantile agent
A
mercantile agent acting in the ordinary course of business can give a good
title to the purchaser of goods who buys them in good faith and without notice
of any restriction imposed on the agent.
3. Sale by buyer in possession
Where
a buyer having bought or agreed to buy goods obtains possession or title to the
goods with the consent of the seller sells them to a person who buys them in
good faith, the buyer obtains a good title.
4. Sale by seller in possession.
Where
a seller having sold the goods continues to be in possession of the goods or
documents of title to the goods and again sells them to a person who buys in
good faith, the buyer gets a good title.
5. Sale by order of the court
On
sale by the order of a court of competent jurisdiction or under any special
common law or statutory power of sale, the buyer gets a good title.
6. Sale under Estoppel title
A
contract of sale by estoppel may arise where the owner by any act or omission
leads the buyer to believe that the seller has the right to sell. In such
circumstances, the buyer gets a better title than the seller had.
7. Sale in market overt
A
marker overt is an open public and legally constituted market usually held at
periodic intervals in some particular place and often for the sale of
particular goods. Where goods are sold in such a market, the buyer acquires a
good title to them provided he buys them in good faith.
CAVEAT EMPTOR
Caveat
Emptor means “Let the buyer beware” according to this it is the duty of the buyer
to be careful while purchasing goods of his requirement, and in the absence of
any inquiry from the buyer, the seller is not bound to disclose every defect in
goods of which he may be aware.
The buyer must examine the goods thoroughly
and must see that the goods he buys are suitable for the purpose for which he
wants them. If the goods turn out to be defective the buyer cannot sue the
seller because there is no implied undertaking by the seller that he shall
supply goods to suit the buyer’s purpose. If the buyer depends on his own skill
and makes bad choice he must suffer in the absence of any misrepresentation or
fraud or guarantee by the seller.
Exception
to Doctrine of Caveat Emptor
Exceptions
to Caveat Emptor include the Conditions and Warranties Implied
by the Sale of Good Act
{SEE IMPLIED TERMS}
OBLIGATIONS/DUTIES OF
THE PARTIES
DUTIES
OF THE SELLER
1.
Put the goods into a deliverable state-
The
seller is bound to ensure that the goods are in a condition in which the buyer
is bound to take delivery when the contract is made and unless otherwise
agreed, the cost of doing so is borne by the seller.
2.
Pass a good title-
It is the duty of the seller to pass a clean title to the buyer failing which
he is liable in damages.
3. Deliver the goods: it
is the duty of the seller to deliver the goods to the buyer
4. Supply goods of the right quality: The
seller is bound to ensure that the quality of the goods supplied is consistent
with the terms of the contract.
5. Supply goods of the right quantity –The
seller must deliver goods of the quantity agreed to by the parties.
If fewer goods are delivered the right buyer is entitled to:
a. Reject the goods
b. Accept and pay at the contract price
If more goods are delivered, the buyer may:
a. Reject the goods
b. Accept those included in the contract
c. Accept all and pay at the contract rate
DUTIES
OF THE BUYER
1. Take delivery-
it is the duty of the buyer to take delivery of goods, the subject matter of
the contract, failure to which he is liable in damages.
2. Pay the price-
it is the duty of the buyer to pay the price of the goods failure to which the
seller may maintain an action against him for the price.
The
duty of the buyer to take delivery and pay the price and that of the seller to
deliver the goods should be concurrent i.e. the seller must be ready and
willing to give possession of the goods in exchange for the price and the buyer
must be ready and willing to take possession and pay the price.
REMEDIES
FOR BREACH OF CONTRACT
Rights and Remedies of the Unpaid Seller
a) Right of lien
This
is the right to withhold the goods which remain in the seller’s possession
until full payment has been made. The right is exercisable where the goods have
been sold without any stipulation as to credit. Lien can only be exercised for
non payment of the price and not for any other reason. It is only exercised by
the seller on goods in his possession.
b) Stoppage in transit
Goods
are said to be in transit if they are in the process of delivery, but before
they reach the buyer or his agent. The right of stoppage in transit can only be
exercised when the buyer is insolvent but not for any other reason.
Difference between
stoppage in transit and lien
1. The right to stop goods in transit
arises only when the buyer is insolvent while lien is exercisable whether the
buyer is insolvent or not.
2. Lien is only available when the goods
are in actual possession of the seller while stoppage in transit is exercisable
when goods are in the process of delivery.
3. Stoppage in transit can be exercised
inspite of credit having been agreed upon while a stipulation to credit
destroys the lien.
c) Unpaid sellers right of re-sale.
–
The
unpaid seller can resale the goods where;
·
The goods are
perishable
·
The right to do so is
expressly stipulated in the contract
·
After giving reasonable
notice to the buyer of his intention to resell the goods but the buyer does not
tender the price within a reasonable time.
d). Rights against the
buyer
The
unpaid seller has the following rights against the buyer
1. To sue the buyer for the price of the
goods
2. Maintain an action for damages against
the buyer if the buyer wrongfully refuses to accept the goods.
3. Action for recovery of deficit on
resale.
REMEDIES OF THE BUYER
1. Damages
for Non-Delivery The buyer can maintain an action for damages
against the seller for failing to deliver the goods
2. Recovery
of price; the buyer will exercise this right where he had already paid the
price but the goods were not delivered.
3. Specific
performance; this remedy is available to the buyer where the goods are
unique in their nature e.g. rare goods and paintings
4. Rejection of Goods
The buyer is
entitled to reject the goods delivered by the seller in certain circumstances
without incurring any liability. E.g.:1) If the quantity delivered is greater
than that contracted for
2)
If the quantity delivered is less than than that contracted for
3)
Where the goods delivered are mixed with goods of another description. Right to
reject the goods if they do not correspond with the contractual agreement.
5. Damages
for the Breach of warranties
