According to Section 4 of the sale of goods and supply of services Act, a contract of sale may be in

writing, by word of mouth or partly by word of mouth or it may be implied from the conduct of the
parties. To break this down by example, Okello may make a contract with Nakafero verbally or by word
of mouth both stating out the conditions of their contract or what each party is meant to do, thus becomes
a valid contract, perhaps they may put it in writing and both parties sign or consent to that. This is done to
protect monetary or commercial transactions.

In the case of Hillas V Arcos (1932) ALLER 494, Hillas bought some timber from the timer merchants
Arcos Ltd. They purchased 22,000 units of timber, and the agreement also contained an option that they
would be able to buy up to 100,000 units the next year at a discounted rate of 5%. The next year, Arcos
refused to sell them the timber at this rate and Hillas sued for breach of contract. Arcos claimed that the
agreement could not be valid because it required further agreement in the future. The issue was Whether
or not the agreement to enter into another agreement was an enforceable term of the first agreement.
Whether or not the contract to enter into a future contract was valid. HELD; There was a valid and
enforceable agreement that allowed Hillas to purchase 100,000 staves of wood for at a reduced rate. This
was more than a mere agreement to agree’ because the only thing necessary for the agreement to be
brought into existence was for the buyers to decide to exercise their option to purchase the wood. Whilst
the price had yet to be agreed, this was only because it naturally fluctuated as a commodity depending on
market conditions. Where the issue was in the balance, as here, it was held that the court should try to
interpret the words of the agreement in such a way as to preserve the subject matter of the agreement
rather than destroying it, and contracts made between merchants in this way should be upheld where the
court can interpret the terms in order to do so.

The Value of the commodity or item on sale

Section 5(1) of the Act provides that for any contract above the value of 200Shs to be binding or
enforceable, the buyer must accept ad receive part of the of the goods sold or should give something in
earnest to bind the contract or pays partly or some note or memorandum should be made and signed for
him or her or his agent in that behalf. This therefore implies that a contract of sale of goods of the
value 200/= or more cannot be enforced in a court of law unless it is shown that the buyer accepted
part of the goods sold and actually received them and the acceptance is envisaged in this section under
S.5(3) to mean that the buyer does an act in relation to the goods in recognition of a pre-existing contract
of sale, if the buyer gave something with respect to the goods in bid to bind him under the
contract for example if he paid the price or part of the price, Unless a note in writing acting as evidence to
the contract is made and signed by the party to be charged or his or her agent authorized to sign on his
behalf. In the case of Adam V The Tanga Mombasa Transport Company (1955) 28 KLR 14; the
defendant firm agreed mutually with the plaintiff firm for purchase of a vehicle from Nairobi and
consigning it to Tanga. The vehicle was consigned to a bank with instructions to deliver it to the
defendant upon payment of Shs 75,000. The defendant rejected the vehicle on ground that the price
agreed was 45,000 and not 75,000 as claimed. In a claim for damages, the defendant pleaded that the
contract was unenforceable by action since there was note or memorandum in writing as required by the
Sale of Goods Ordinance. It was HELD; as the defendant did not receive the vehicle the contract did not
fall within the exception of S.5 and as there was no memorandum in writing, the contract was
unenforceable by suit.

The Subject matter of the contract of sale;

Section 6, 7 and 8 of the Act relates to the subject matter of the contract of sale. S.6 provides for existing
or future goods. The goods which form the subject of a contract of sale may be existing goods owned or
possessed by the seller, or goods to be manufactured or acquired by the seller after the making of the
contract of sale, these are referred to as future goods. However, where the seller in a contract of sale of
goods or supplier in a contract for the supply of services purports to effect a present sale of future goods
or to supply future services, the contract operates as an agreement to sell. The Act provides under S.7
that where there is a contract of specific goods but without the knowledge of the seller the goods perished
at the time when the contract is entered into, the contract is void. In the case of Courturie V Hastie, the
plaintiff merchant sold a cargo of Indian corn to the defendant. Unknown to either party, a few days
before the contract was made, the cargo, which was aboard a ship, had over heated and started to ferment
and as a result sold the cargo to prevent it from further deteriorating, the buyer contended that since the
subject matter, the corn, had ceased to exist prior to entering of the contract, the contract was void he was
not liable to pay the price, it was HELD that the purchaser was not bound to pay the cargo. The contract
contemplated goods sold actually existed, and since they could not, the seller could not be required to
deliver the goods nor the buyer to pay for them.

The Price;

S.9 of the Act provides for the ascertainment of price. The price under such contracts may be fixed by the
contract or may be left to be determined in a manner agreed by the contract, or may be determined by the
course of dealing between the parties. Where the price is not determined by the contract, then buyer shall
pay a reasonable price and what is reasonable depends on the circumstances of each case and may include
the prevailing market price. In the case of Campbell V Edward, Lord Denning MR said that it is simply
the law of contract that if two persons agree that the price of the property is fixed by valuer, on whom
they agree and when he gives the valuation honestly, they are bound by it and if there is fraud then it
would be different.

This is to mention the formalities of contract in the sale of goods but a few.