SALE OF GOODS LAW NOTES

In a sale of goods contract or in any sale, there must be a consideration and in the case of sale of Goods it must meet all the criteria of a contract. The consideration must be money consideration. The term Goods is defined to exclude money in the Act. Barter Exchange is a contract where goods are exchanged for goods or where the consideration is anything but money. No money is involved in barter. It is a valid contact but it is not a Sale of Goods Contract because it does not entail money. You cannot buy money but you can exchange one currency for another. There are occasions when money as a collector’s coin can be sold so long as it has ceased to be legal tender. You can exchange the collector’s coins for money.
2. SALE OF GOODS DISTINGUISHED FROM GIFT
Gift is transfer of property without any consideration. It is not binding unless it is made a deed i.e. in writing. It is not easy to distinguish gifts from sale of goods. Esso Petroleum Limited V. Commissioners of Customs & Excise [1976] The Esso petrol station put out on the signboard the following advert “free gift of a coin bearing the likeness of a footballer to anyone buying 4 gallons of petrol.” The Defendant bought petrol from this petrol station and when the petrol station was required to pay taxes the Customs Department, the argument was whether this transaction consisted a sale of goods or a gift. Their Lordships were confused “Although the transaction was not a gift, in as much as the garage was contractually bound to supply coins to anyone buying 4 gallons of petrol… but it was not a sale of goods contract either. It was not a sale of goods and it was not a gift. Getting the coin there was no money involved the consideration. There was no intention to create legal relationship between Esso and the customers. In substance it was a collateral contract existing alongside a contract for the sale of petrol. If there were a Sale of Goods, then the company would have been liable to pay taxes.
3. SALE DISTINGUISHED FROM BAILMENT
A bailment is a transaction under which goods are delivered one party (the bailor) to another (the bailee) on terms, which normally require the bailee to hold the goods and ultimately to redeliver them to the bailor or in accordance with his directions. The property in the goods is not intended to pass and does not pass on delivery, though it sometimes be the intention of the parties that it should pass in due course, as in the case of the ordinary hire-purchase contract. But where goods are delivered to another on terms which indicate that the property is to pass at once, the contract must be one of sale and not bailment. In bailment, the goods are delivered the bailor to the bailee on terms which normally require the bailee to hold the goods and ultimately deliver those goods in accordance with the instructions of the bailor. There is no intention in bailment that property in ownership is to pass from the bailor to the bailee. The bailee only has custody for a small fee to take care. The bailee is emto sell the goods only for purposes of recouping the demurrages. In Chapman Bros v. Verco Bros & Co. Ltd [1933],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. The terms of the transaction required the company to buy and pay for the wheat on request the farmer or failing such a request, on a specified date, to return an equal quantity of wheat of the same type; but there was no obligation to return the identical bags. Although the contract referred to the company as „stores‟, it was held the Australian High Court that this transaction was necessarily one of sale as the property passed to the company on delivery. Property must pass even if not at once. That is the nature of transaction and this transaction seems inconsistent with the possibility of a bailment. The question was whether this was a sale of goods contract in terms of the ownership of the bags. The court held it to be an agreement of sale within Section 2 (1) of Cap 31One of the difficulties is that where goods are given to the buyer before the buyer has paid for those goods, where this happens, then we say that he is a buyer in possession because the seller has agreed to transfer the property. In conversion if you went to a car dealer who allowed you to test drive it but instead of test driving it you advertised putting adverts on the car, that is behaviour inconsistent with the owner’s wishes and you will be converting.
4. SALE OF GOODS DISTINGUISHED FROM HIRE PURCHASE
Contracts of hire-purchase resemble contracts of sale very closely and, indeed, in practically all cases of hire-purchase the ultimate sale of the goods are (in a popular sense) the real object of the transaction. A contract of hire-purchase is a bailment of the goods coupled with an option to purchase them which may or may not be exercised. Only if and when the option is exercised is there a contract of sale.A contract of Hire Purchase is a bailment of goods coupled with an option to purchase those goods. That option may or may not be exercised. Only after the option has been exercised does hire purchase become sale of goods contract. In a sale of goods contract there is no option to acquire property of goods you have no option of whether to retain goods or not but in Hire Purchase you have the option to become the owner of the goods exercising the option of paying the nominal fee. You are given possession and enjoyment of the goods before you finish payment and even before you have expressed your intentions to own. The risk in Hire Purchase there is the intention that if the hirer opts to own the goods, they can become owners but in Sale of Goods there is no option of owning or not owning, you pay for the goods you own them. Possession is usually after payment. The owner of the goods in Hire Purchase undertakes the risk that the seller transfers or agrees to transfer to the buyer and virtue of possession of the goods the owner of the goods takes the risk that the owner may sell the goods to a third person and the only safe area is with durable goods such as a car where to sell the car again you need to transfer the logbook.
The fear of a financier is that having given possession or documents of title in durable goods then any disposition the person who has acquired possession with consent of the owner if they sell the goods to another person who is without notice and for value, the 2ndbuyer acquires better title than the first buyer.
5.SALE OF GOODS DISTINGUISHED FROM A LOAN ON SECURITY OF THE GOODS
This is a transaction that is designed to enable someone „A‟ who owns some goods to borrow money from „B‟ and give possession of those goods to the money-lender. The goods can only be reclaimed upon completion of repaying the loan. This transaction does not mean that the person borrowing the money has delivered the goods to the money-lender but only delivers the goods to the money lender to hold as security. He has not sold the goods but has only given them to operate as security. The understanding is that A will retain possession of the goods and the borrower will repay the lender capital plus the agreed interest and lastly the borrower will have the right to take back the goods if he has repaid or paid all the claims the lender to him. The lender has no right at all to resell the goods unless the borrower has defaulted. This transaction differs from hire-purchase contract which is designed to enable a person to acquire goods on credit. A loan on security is designed to enable someone who already owns goods to borrow money on the security of the goods.
6.SALE OF GOODS DISTINGUISHED FROM CONTRACT OF SUPPLY OF SERVICES
Historically contracts for supply of services were divided into two:
1.Contracts for Skill and labour
2.Contracts for labour and material.
It was also assumed that the applicable law was not the Sale of Goods Law for example services of a lawyer. When you contract a lawyer to draw a will, you pay for the services of the lawyer making the will but you receive a document which is incidental. The contract is for the services of making a will and the document that you receive is incidental. In the United Kingdom until 1954, the law required that contracts for sale of goods of £10 or more be evidenced in writing. If the goods were valued at over £10, it had to be in writing for services there was no value limit. A contract in which one party is to manufacture goods and then supply the same as a finished product. Is it a contract in Sale of Goods or is it a contract for services? A more general reason why it may be necessary to distinguish between a contract of sale of goods and a contract for services is simply that provisions of the Sale of Goods Act do not in general apply to contracts for services. The other reason concerns the implied duties of the seller or supplier as to the quality and fitness of the goods or services supplied.

If the contract was for the supply of services only then, insofar as the services themselves were concerned, the supplier’s duties were generally duties of due care only where in the contract for sale of goods the duties remain, prima facie duties of strict liability, that is to say the seller is responsible for defects in the goods, even in the absence of negligence. For supply of services, you apply the law of torts and the measure is reasonable care. The test in supply of services is due or reasonable care but in Sale of Goods, goods are of a particular perceivable quality. They are tangible. The test for deciding whether a contract falls into the one category or the other is to ask what is „the substance‟ of the contract. If the substance of the contract is the skill and labour of the supplier, then the contract is one for services, whereas if the real substance of the contract is the ultimate result –the goods to be provided, then the contract is one of sale of goods. The law of Sale of Goods was developed and has developed as a consumer protection mechanism. It came in to bridge the gap between the seller and the buyer. The seller is supposed to have more knowledge than the buyer and the buyer is no longer bound „caveat emptor‟. Goods must be fit for the purpose. The sale of goods law was meant to bridge the gap in terms of product knowledge between the seller and the buyer. Cap 31 has been overtaken technological development. It is difficult for the buyer to know all the information about for instance a computer just looking at it. The protection has to keep pace with the changes and buyers cannot keep up. Robinson V. Graves [1935]The issue in this case was the distinction between sale of goods and supply of services. The contract here was one wherean artist agreed to paint a portrait of his client’s wife. It would appear that such a transaction should be regarded as one of sale. In the event however this transaction was held as one for services and in reaching this conclusion, the court sought to identify the prime purpose of the contract. In the often quoted words of LJ Greer: If the substance of the contract … is that skill and labour have to be exercised for the production of the article and … it is only ancillary to that that there will pass from the artist to his client or customer some material in addition to the skill involved in the production of the portrait, that does not make any difference to the result, because the substance of the contract is the skill and experience of the artist in producing the picture. This case lays down an elastic test of this nature for distinguishing contracts of sale from contracts for skill and labour, and a similar approach may sometimes be justified here.

7. SALE OF CONTRACT DISTINGUISHED FROM PATENTS

Items of intellectual property such as copyrights, patents and trademarks are not „personal chattels or corporeal movables and so fall outside the definition of goods although goods may exist which embody these intellectual property rights. In modern times, an important point, not yet wholly resolved, is whether computer software may constitute „goods‟ within the meaning of the Act. Software is normally embedded in some physical form, such as disks or as part of a package in which it is sold along with computer hardware, that is computer or computer parts. It is protected as a literary work the law of copyright. Usually only the medium in which the software is embedded, e.g. a disk is sold. The copyright in the software remains in the software house which developed it. The softwarehouse licences the user to make working copies of the disks and to load the software into a computer, acts which otherwise would be infringements of copyright. Software can also, of course, be delivered on-line subject to licensing terms. The question as to whether or not a supply of computer software is a sale of goods was answered the Court of Appeal in Beta Computers (Europe) Ltd v. Adobe Systems (Europe) Ltd. The Defendant had ordered from the pursuer telephone a standard computer package to upgrade its existing software. The software was delivered in a package, which bore the words „Opening the Informix S.I. software package indicates your acceptance of these terms and conditions‟. These were the terms and conditions of Informix’s copyright licence, Informix being the proprietor of the software. The defendant did not return, and sued for payment of the price. The pursuer argued that it was not concerned with the terms of the licence imposed the authors of the software. The defender argued that acceptance of the licence conditions was an implied suspense of its agreement with the pursuer. Lord Penrose held that the supply of proprietary software for a price was a single contract sui generis though it contained elements of contracts such as sale of goods and the grant of a licence. It was an essential feature of such a contract that the supplier undertook to make available to the purchaser both the medium on which the program was recorded and the right to access and use the software. There could be no consensus ad idem until the conditions of use stipulated the copyright owner were produced and accepted the parties, which could not occur earlier than the tender of those conditions to the purchaser. Furthermore, whether the tender of software subject to conditions for use was regarded as a breach of a previously unconditional contract, or as being subject to a suspensive condition entitling the purchasers to reject if the conditions for use were unacceptable, or as made when there was no concluded contract, the defender was entitled to reject.

8. SALE & AGENCY

Distinction between a Sales of Goods Contract and a contract of agency is a difficult one. For example where A asks B a commercial agent, to obtain goods for him from a supplier or from any other source, and B complies sending the goods to A, it may well be a fine point whether this is a contract under which B sells the goods to A, or is a contract under which B acts as A‟s agent to obtain the required goods from other sources. In an agency contract there may be privity of contract between the buyer and the agent’s supplier, which will enable action to be brought between them. On the other hand, if it is a sale, there will be no privity between the buyer and the seller’s own supplier. The duties of a commission agent are less stringent than those of a seller and, in the event of a breach of contract; the measure of damages may also be different. Thus if a seller delivers less than he is bound to under the contract, the buyer can reject the whole, but if despite his best endeavours, a commission agent delivers less than his principal has ordered he has committed no breach of contract and the principal is bound to accept whatever is delivered. Should the commission agent deliver goods of the wrong quality he will only have to pay as damages the actual loss suffered the buyer but should a seller be guilty of such a breach he may have to pay damages for the buyers probable loss of profit. The contract is not a Sale of Goods.

FACTORS OR ELEMENTS OF THE DEFINITION

1. Seller – Under sec 2(1) of the Act, 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
ofrights that a person has in relation to a subject matter .Eg. Right to use, misuse and
to dispose
3. Goods– Under sec 2(1) of the Act, 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
b. Existing and Future Goods

Specific or Ascertained Goods
These are indentified and agreed upon the parties at the time when the contract of sale is made. Other goods are unascertained

Existing Goods
These are goods owned a possessed the seller when the contract of sale is made. Future Goods
These are goods to be manufactured or acquired the seller after the contract of sale is made.
4. Buyer: Under sec 2(1) of the Act, 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 butter, contracts for skills and labour and materials.
In Aldridge v. Johnson where bullocks were being exchanged for quarters of barley and the difference in the values were payable in money, it was held that the contract was one of sale of goods.
A similar holding was made in Lee v. Griffin where a doctor agreed to make 2 sets of false teeth for a client at a price exceeding £10. The contract was held to be one of sale of goods.
However in Robinson v.Graves where an artist was engaged to paint a portrait for £ 250, the contract was held to be one for skill and labour as the payment was for the person’s skill.

Ascertainment or Determination of Price
Under sec. 10 of the Sale of Goods Act, in a contract of sale of Goods, price is determined or
fixed:-
1. By the contract itself
2. In the manner thereagreed
3. By the course of dealing
If the price is not so fixed, the buyer pays a reasonable price.

CAPACITY
Under sec. 4 (1) of the Act, 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 under Sec. 5 (1) of the Act, 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 under sec. 6(1) of the Act, 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 some note or memorandum signed the parties.

VOID CONTRACTS OF SALE OF GOODS
Certain contracts of sale of goods are void:-
1. Under Sec. 8 of the Act, where there is a contract for the sale for the specific goods which without the seller’s knowledge have perished at the time the contract is made, the contract is void.
2. Under sec. 9 of the Act, where there is an agreement to sell specific goods which subsequently perish without the fault of either party before risk passes the buyer, the agreement is avoided.
3. Under sec. 11(1) of the Act, where in an agreement to sell specific goods, price is to be fixed the valuation of a 3rd party who fails to do so, the agreement is avoided.

IMPLIED TERMS
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 the parties, are an integral part of the contract.
Theses terms may be implied statutes or a court of law.

A. Terms implied Statutes
Certain statutes imply terms in contracts entered into pursuant to their provisions. These terms become part of the contract.
Terms implied in Sale of Goods contracts Sale of Goods Act.
The Sale of Goods Act implies both conditions and warranties in contracts of Sale of goods unless a different intention appears.

CONDITIONS
1. Right to sell
Under Section 4 (a) of the Act 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
Under Section 5 of the Act, in a sale description there is an implied condition that the goods shall correspond to the description.

3. Fitness for purpose
Under Section 16(a) of the Act, where the buyer expressly or implication makes known to the seller the particular purpose for which the goods are required so as to rely on the sellers skill and judgement, there is an implied condition that the goods shall be reasonably fit for that purpose.

4. Merchantable Quality
Under Section 16 (b) of the Act, where goods are bought 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 Sample
Under Section 17(1) of the Act, in a sale 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
Under Section 14 (b) of the Act there is an implied warranty that the buyer shall have and enjoy quiet possession of the goods.

2. Free from Charge or encumbrance
Under Section 14 (c) of the Act 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.

2. Terms Implied By Courts of Law
Courts of law reluctantly imply terms in contracts as it is the duty of the parties to agree as to what the contractual terms shall be.
However in certain circumstances, courts are called upon to imply terms in contracts and do so for 2 reasons:
a) To give effect to the intentions of the parties.
b) To facilitate commercial transactions or give business efficiency.

Courts of law imply terms in contracts on the basis of:
• The reasonable stander test.
• Trade usages and customs.

TRANSFER OR PASSING OF PROPERTY
When does property in goods pass from the seller to the buyer?
Under Sec. 2(1) of the sale of Goods Act, 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.
Property in goods passes to the buyer at different times in different contracts hence the passage of property is governed various rules or principles.

RULES RELATING TO THE PASSING OF PROPERTY
1. Sale of Unascertained Goods: Under Sec. 18 of the Act, In a Sale of Unascertained goods, property passes to the buyer when the goods are ascertained.
Categories of Unascertained Goods
i. Goods to be manufactured the seller.
ii. Crops to be grown the seller.
iii. Purely generic goods.
iv. An unidentified portion of a special bulk or whole.

2. Sale Reservation: Under sec. 21 of the Act, 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.
3. Sale Auction: Under Sec. 58 of the Act, in a Sale of Auction, property passeswhen the Auctioneer announces its completion the fall of the hammer or in
any other customary manner.

Rules Governing Sale Auction
1. If goods are offered in lots, each lot is deemed to be the subject matter of a separate contract.
2. If the right of the seller to bid is not expressly reserved, he cannot bid or do so through another person.
3. A sale auction may be the subject to an agreed price
A sale auction may expressly reserve the right of the seller to bid. In which case he may do so at the auction.
4. Unconditional Sale of Specific Goods in a deliverable state. Property passes when the contract is concluded.
5. 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.
6. Sale of specific goods to be weighed, measured, tested etc. Under sec. 20 of the Act, 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.
7. Sale approval or On Sale or Return: Under sec. 20 of the Act, where goods are delivered to the buyer 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 description: Under Section 20 of the Act in a sale of future goods 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.
To unconditionally appropriate means making the goods, the subject matter of the contract irrevocably.

ACCEPTANCE OF GOODS
Under Section. 36 of the Act, 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 sellers 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)
At Common Law, a sale of goods a non-owner is incompetent. As it is contrary to the principle of Nemo dat i.e. one cannot give what he has not.
It means that a seller cannot give to the buyer a better title to the goods than he himself has. The principle of Nemo dat was developed the Common Law to protect the true owners of goods.
However, its strict application interferes with commercial transaction in that the bona fide purchaser cannot acquire a god title if the seller had none.
In the words of Lord Denning in Bishop Gate Motor Finance Corporation v. Transport Brakes Ltd,
“… Two principles have competed at Common Law. The first is Nemo dat, that a person cannot give a better title to the buyer than he has in the goods. The second is that a bona fide purchaser for value without notice acquires or good title.”
The law has attempted to reconcile these principles upholding Nemo dat as the general rule but admitting exceptions to protect the bona fide purchaser.
In Cundy v. Lindsay and Co. Ltd, the principle of Nemo dat was upheld where Blenkan acquired no title for the goods and hence had none to pass to Cundy.
The principle of Nemodat is now contained in sec 23 (1) of the Sale of Goods Act which provides inter alia “Where goods are sold 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.”
However, the Nemodat 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:-
1. Estoppel: – Under sec. 23(1) of the Act, a non-owner can pass a good title if the true owner is his conduct precluded from denying the seller’s authority to sell. This is the equitable doctrine of estoppel. If the true owner of goods makes it appear that some other person is the owner, the true owner is estopped from denying the apparent ownership of the other.
2. Sale Mercantile Agent or Factor: Under the Factors Acts, 1859, a sale a factor, passes a good title. A factor is a mercantile agent who is entrusted with
possession of goods and who sells in his own name. A factor passes a good title, even if he has no authority to sell provided he sells the goods: –
a. In his capacity as mercantile agent
b. In the ordinary course of business
c. To a bona fide purchase for value without notice.
d. Of which he has possession of with the owner’s consent.
3. Resale Seller in Possession: Under Sec. 26(1) if the seller who has already sold goods but retains their possession or documents of title, sells them to a 3rd party who takes in good faith for value without notice of the previous sale, the seller passes a good title.
4. Sale buyer in Possession: Under Sec. 26(1) of the Act, where seller who has bought or agreed to buy goods, obtains their possession or documents of title with the seller’s consent before title passess to him and as a consequence he transfers them to a bona fide purchaser who takes them in good faith and with notice of the original seller’s lien on the goods, he passes a good title.
5. Sale Under voidable title: Under Sec. 24 of the Act, if the seller’s title is voidable but he sells the goods before his title is avoided, to a buyer who takes in good faith for value and without notice of the seller‟s defective title, he passes a good title. This was
the case in Phillips v. Brooks as well as Lewis v. Avery
6. Sale Under Statutory Power: A sale made in exercise of a power conferred an Actof parliament passes a good title e.g. Sale a :-
a. Liquidator Under the Companies Act
b. Sale a chargee under the Registered Land Act or Mortgagee under the I.T.P.A.
c. Sale under the Disposal of Uncollected Goods Act
7. Sale Under Common Law Power:
Under Section 23 (2) (6) of the Act a sale made in pursuant to an order of a court of competent jurisdiction passes a good title in accordance with the provisions of Section 23(2) (b) of the Act.
8. Sale in Market Overt: At Common Law, sale in market overt passed a good title to the buyer provided he took the gook the goods in good faith, for value and without notice of any defect in the seller’s title. Market Overt has been defined as an open, public and legally constituted market. Before 1994, every shop in the city of London was market Overt and all goods sold under defective title conferred good title to the buyers provided the buyer took in good faith and the sale took place in public place.
Market Overts in the U.K. were created statute, charter or arose from prescription.
This is the oldest exception to the principle of Nemo Dat but does not apply in Kenya.

DELIVERY
Under section 2(1) of the act, delivery is the voluntary transfer of possession from one person to another, delivery of goods may take various forms: –
1. Physical transfer of the goods.
2. Delivery of the means of control e.g. keys.
3. Delivery of the documents of title.
4. Delivery to a common carrier.
5. Delivery atonement: This is a situation where a seller of goods retains them as bailor for the buyer.

RULES OF DELIVERY
1. Whether it is for the seller to transmit the goods to the buyer or for the buyer to take delivery at the seller’s premises depends on the agreement between the two.
2. Unless otherwise agreed, the cost of and incidental to putting the goods into a deliverable state is borne the seller.
3. Unless otherwise agreed the place of delivery is the seller’s place of business if not then his residence.
4. Where specific goods are in some other place known to both parties, that other place is the place of delivery
5. If the goods are in the hands of a 3rd party, delivery is complete when the 3rd party notifies the buyer that he holds the goods on his behalf.
6. If the seller is bound to transmit, the goods to the buyer, he must do so within the stipulated time if any or within a reasonable time.
7. Delivery common carrier is Prima Facie complete when the goods are handed over to the carrier.
8. If the seller delivers less goods, the buyer may reject them or accept and pay at he contract rate
9. If the quantity delivered is more, the buyer may reject the goods, or accept those included in the contract or accept all and pay at the contract rate.
10. If the goods delivered are mixed with those of a different description, the buyer may: –
a. Reject the goods.
b. Accept those included in the contract
11. Unless otherwise agreed, the buyer is not bound to accept delivery instalment
12. Where delivery is instalment to be paid for separately and the seller makes one or more defective deliveries or the buyer refuses to take delivery or pay for one or more instalment whether such breach entitles the innocent party to treat the contract as repudiated or is severable depends on the terms of the contract and the circumstances of the case.
13. If the buyer rejects the goods as of right, he is not bound to return the same to the seller but must notify him the fact of rejection.

CAVEAT EMPTOR
It literally means “buyer beware” This is a Common Law principle to the effect that in the absence of fraud or misinterpretation, the seller is not liable if the goods sold do not have the qualities the buyer expected them to have. A buyer buys goods as they are.
The principle was developed the Common Law to protect manufacturers ensuring that their goods were sold irrespective of their quality. Sellers of goods at Common Law would not guarantee anything about the goods unless a buyer demanded a warranty. However, these principles turned out to be very harsh to the consumers and exception had to be developed.
The Doctrine of Caveat Emptor is now contained in sec. 16 of the sale of Goods Act which provides Inter-alia:
“There is no implied warrantee or condition as to the quality of fitness for any particular purpose of goods supplied under a contract of Sale.”
However the doctrine has been modified way of exceptions to protect consumers.

Exceptions to Caveat Emptor include the Conditions and Warranties Implied the Sale of Good Act E.g.
1. In a sale description, the goods must correspond to the description
2. Sec. 16 (a) implies the Condition of Fitness for purpose
3. Under Sec. 16 (b) it implied that good should be of merchantable quality.
4. In a sale sample it is implied that:-
a. The bulk shall correspond with the sample in quality
b. The buyer shall be afforded a reasonable opportunity to compare the bulk and sample.
c. The goods shall be free from my defect rendering them unmerchantable
However, the effectiveness of these exceptions in protecting consumer in doubtful in that:-
1. Parties are free to contract outside the implied terms.
2. The stronger party may use exemption clauses in the contract.
3. The condition of fitness for purpose is not implied if the goods are sold under a patent or other trade name.
4. The condition as to merchantable quality is not implied if the buyer has examined the goods but failed to detect defects which such examination ought to reveal.
The Doctrine of Caveat Emptor also applies under the provision of the Hire Purchase Act.

OBLIGATIONS/DUTIES OF THE PARTIES
The contract of Sale of goods imposes upon the parties certain obligations:

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 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. This is because under sec14 (a) of the Act, there is an implied condition that the seller shall have the right to sell the goods when the property is to pass.
3. Deliver the goods: Under Section 28 of the Act, 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. This is the principle of Caveat emptor and its exceptions
5. Supply goods of the right quantity –The seller must deliver goods of the quantity agreed to 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:
d. Reject the goods
e. Accept those included in the contract
f. Accept all and pay at the contract rate

DUTIES OF THE BUYER
1. Take delivery-Under sec 28 of the Act, 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 pursuant to section 50 of the Act.
2. Pay the price-Under section 28 of the Act; 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 pursuant to section 49 of the Act.
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
Under Sec. 39 of the Act, a seller s deemed to be unpaid if:-
1. The whole of the purchase price has not been paid or tendered.
2. The bill of exchange or other negotiable instrument received as conditional payment is dishonoured.
Remedies of the unpaid seller fall into 2 broad categories namely:
i) Real
ii) Personal

REAL REMEDIES
These are remedies against the goods and are enforceable without any court action. Under Sec. 40 (1) and (2) these remedies are: –
1. Rights of lien (retention of the goods)
2. Right of stoppage in transitu
3. Rights of Re-sale
4. Rights to withhold delivery
These remedies are often referred to as self-help or extra juridical remedies and demonstrate the extent to which the Sale of Goods Act champions the interests of the seller.

1. Unpaid Sellers Lien
This is the right of unpaid seller in possession of the buyer’s goods to retain them as a security for the price. The lien is possesory in nature and is dependent on possession which must be lawful and continuous.
It is particular since the seller can only retain the goods for which payment is due.
Under Section 41 of the Act, the unpaid seller’s lien is exercisable in the following circumstances:
a) Where goods have not been sold on credit
b) Where goods have been sold on credit but the term of credit has expired.
c) If the buyer becomes insolvent Loss of Lien
The unpaid seller losses the right to retain the buyer’s goods in the following ways: –
1. By waiver thereof
2. If the buyer or his agents obtain lawful possession of the goods.
3. If the seller delivers the goods to a common carrier for transmission to the buyer without reserving the right of disposal.
4. Payment for goods.
An unpaid seller is entitled to exercise a lien on the buyers goods in his possession even if the has made part delivery and the goods may be in his possession or that of his agent.
2. Stoppage in transitu
This is the right of unpaid seller who has already parted with possession of the goods to resume the same as long as the goods are still in the course of transit to the buyer. The exercise of this right enables the seller to resume possession of the goods. The rights are exercisable the seller only if the buyer becomes insolvent.
Under sec. 45(1) of the Act, goods are deemed to be in the course of transit from the time they are delivered to a common carrier to such a time as the buyer or his agent obtain possession.
Under Sec. 4(11) of the Act, the right of stoppage in transitu may be exercised in any of the following. Ways: –
1. Taking actual possession of the goods
2. Giving notice of the sellers claim to the party in possession. Such notice may be given to the person in possession of his employer.
>>> Loss of the Right of Stoppage
The seller right of stoppage in transitu will be defeated or is lost when transit ends. Transit ends
if:-
a) The buyer or his agent intercepts the goods before arrival at the agreed destination
b) Upon arrival the carrier notifies the buyer or his agents that he holds the goods on his
behalf.
c) The carrier wrongfully neglects or refuses to deliver the goods to the buyer or his
agents.
3. Rights of Resale
Under sec. 47 and 48 of the Act on unpaid seller in possession of the buyer’s goods is entitled to re-sell them to recover the price. A re-sale of the goods the seller passes a good title to the buyer in the following circumstances:
1. Where the goods are of a perishable nature.
2. Where the right to resale is expressly reserved the contract
3. When the seller notifies the buyer his intention to resale the goods but the buyer does not pay or tender the price within a reasonable time.
4. Rights to Withhold Delivery
Under Sec. 40(2) of the Act where property in the goods has not passed to the buyer, the seller
has the rights to withhold their delivery to the buyer.

PERSONAL REMEDIES
These are remedies against the buyer and are enforceable court action namely: –
i) Action for Price
ii) Damages for non-acceptance

1. Action for price
This right of the unpaid seller is exercisable in 2 circumstances:
a. Under sec 49(1) of the Act where property in the goods has already passed to the buyer who wrongly neglects or refuses to pay for them, the seller may maintain an action against him for the price
b. Under sec 49(11) of the Act where the price is payable on a certain day irrespective of delivery, but the buyer wrongfully neglects or refuses to pay the same, the seller may maintain an action against him for the price.
The seller’s action for price is an action for the liquidated sum.
2. Damages for Non – Acceptance
Under sec 50(1) of the Act, if the buyer wrongfully neglects or refuses to take delivery of goods, the seller may maintain an action against him in damages for non-acceptance and the amount recovered is the estimated loss directly and naturally resulting from the breach of contract.

REMEDIES OF THE BUYER
1. Damages for Non-Delivery
Under sec 51(1) of the Act, if the seller wrongfully neglects or refuses to deliver the goods, the buyer may maintain an action against him in damages for non-delivery and the amount recoverable is the estimated loss directly and naturally resulting from the breach of contract in the ordinary cause of events.
2. Specific Performance
Under sec 52(1) of the Act, if the seller wrongfully neglects or refuses to deliver specific goods, the buyer may maintain an action for the decree of specific performance which the court may grant if circumstances justify.
3. Damages for the Breach of warranties
Under sec 53(1) of the Act, if the buyer is compelled or agrees to treat breaches of conditions the seller as breaches of warranties he loses the right to treat the contract as repudiated hence any breach of warranty entitles the buyer to an action in damages
4. Recovery of price
Under sec 54 of the Act, if the buyer has already paid for the goods, but the same are unavailable, he is entitled to maintain an action for the price as consideration for the payment has totally failed.
5. Rejection of Goods
The buyer is entitled to reject the goods delivered 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.

A buyer may reject the goods and repudiate the contract:
i. If the seller delivers more goods than the quantity contracted for.
ii. If the seller delivers less goods than the quantity contracted for.
iii. If the seller delivers installments contrary to the terms of the contract.
iv. If the seller delivers goods mixed with those of a different description.

The buyer may lose the right to reject the goods:
i. If he has accepted the goods and given something in earnest to bind the contract.
ii. If the duration, if any, prescribed the contract has lapsed.
iii. If no duration is prescribed the contract but reasonable time has lapsed.

 

CS notes, revision kits and past papers with answers

(Visited 16 times, 1 visits today)
Share this:

Written by 

Leave a Reply

Your email address will not be published. Required fields are marked *