CHAPTER ONE

INTRODUCTION

1. WHAT IS COMMERCIAL LAW?

What is commercial low? It's almost anything. It goes much beyond the regulation of the
relationships between merchants and traders, and it goes beyond those parts of the law most
commonly associated with business activities in that all major and fundamental areas of law
now commonly associated with business activities"1

The boundaries of commercial law are not easily defined. This definitional problem by be
due to shifting commercial practices, and to shifting legal responses to those practices. This
latter idea - that commercial law is in a state of change - has been suggested by a number of
commercial lawyers in recent years. In the absence of any standard definition of commercial
law, it is necessary to consider the definitions as given by various writers on the area of law.

1.1 SOME DEFINITIONS OF COMMERCIAL LAW

Commercial Law is said to be "an expression incapable of strict definition, but it is used to
comprehend all that portion of the law...which is more especially concerned with, commerce,
trade and business."2

W Gutteridge goes on to say that "the object of commerce is to deal in merchandise...” thus
commercial law to him can be defined as "special rules which apply to contracts for the sale
of goods and to such contracts as are ancillary res namely, contracts for the carriage and
insurance of goods and contracts the main purpose of which is to finance the carrying out of
contracts of sale"

Furthermore, Prof. Sir Roy Goode described it as the "branch of law which is concerned with
rights and duties arising from the supply of goods and services in the way of trade.”3

In the 1997 Hamlyn Lectures, Prof. Goode went on to say that "commercial law represents
the totality of the law's response to mercantile disputes. It encompasses all those principles,
rules and statutory provisions, of whatever kind and from whatever source, which bear on the
private law rights and obligations of parties to commercial transactions, whether between
themselves or in their relationship with others... Thus commercial law draws for its
sustenance on all the great streams of law that together make up the corpus of English
1
Justice Roger Giles, “Commercial Law-What is it?" (1997) Commercial Law Association Bulletin 16
2
H. W Disney, The Elements of Commercial Law (1931), Pg. 1
3 rd
R M Goode, Commercial law (3 Edn, 2004) at pg 8
1
Jurisprudence, with the law of contract as its core, whilst equity acts now as its handmaiden,
now as the keeper of its conscience."4

The above definitions and many more shows generally that commercial law possesses certain
characteristics. One is that it is based on transactions and not institutions, also it is concerned
primarily with dealings between merchants in the broad sense of professionals as opposed to
consumers, it is centered on contracts and not on the usages of the market and lastly it is
concerned with a large mass of transactions in which each participant is a regular player, so
that the transactions are typical and in large measure of repetitive and lend themselves to a
substantial measure of standardized treatment.5

From the above, it is clear that commercial law is the law of commerce and is concerned with
transactions which are commercial in nature i.e transactions in which parties deal with each
other in the course of business.

1.2 LEX MERCATORIA6

It means the law of the merchant which evolved in the middle Ages. The lex mercatoria was
originally a body of rules and principles laid down by merchants to regulate their dealings.
Merchants during these periods travelled with their goods across Europe to sell. During these
periods, where there was a dispute with regards the transaction between the parties, the
merchant's courts decided the disputes by relying on the lex mercatoria which was basically
an international law of commerce. This was basically derived from the customs and practices
of the merchants at the time. The merchants needed to solve their disputes rapidly, sometimes
on the hour, with the least costs and by the most efficient means. Public courts did not
provide this. A trial before the courts would delay their business, and that meant losing
money. The lex mercatoria provided quick and effective justice. This was possible through
informal proceedings, with liberal procedural rules. The lex mercatoria rendered
proportionate judgments over the merchants’ disputes, in the light of “fair price”, good
commerce, and equity. Judges were chosen according to their commercial background and
practical knowledge. Their reputation rested upon their perceived expertise in merchant trade
and their fair-mindedness. Gradually, professional judiciaries developed through the
merchant judges. Their skills and reputation would however still rely upon practical
knowledge of merchant practice. These characteristics serve as important measures in the
appointment of international commercial arbitrators today. The lex mercatoris also
strengthened the concept of party autonomy whatever the rules of the lex mercatoria were,

4
R Goode, Commercial Law in the Next Millennium (1998), pp. 8-9
5
R Goode, The Codification of Commercial Law (1998) 14 Mon LR 135, pp 141-143.
6
JH Baker, ‘The Law Merchant and the Common Law’ (1979) 38 Cambridge Law Journal 295
2
the parties were always free to choose whether to take a case to court, what evidence to
submit and which law to apply. Under the common law, the English courts applied merchant
customs only if they were "certain” in nature, “consistent with law" and "in existence since
time immemorial.” During the 15th & 16 Century, the lex mercatoria was takes over by the
Court of Admiralty and finally in the 17 Century, the Admiralty courts commercial
jurisdiction was taken over by the common law. As the common law developed, there were
conflicting decisions which led to a call for codification of commercial law to ensure
uniformity. This has led to the codification of aspects of commercial law.

1.3 CHARACTERISTICS OF COMMERCIAL LAW

From this above, commercial law has four distinctive and interrelated characteristics.

First, it is pragmatic. We are sold that commercial law is about getting things done, or, as
Goode puts it "commercial law is about problem-solving, about fashioning the contract
structures and other legal tools by which the legitimate needs of the market can be met.7

Secondly, commercial law is responsive. It is presented as a body of rules which has

developed is response to the seeds of commerce. To quote Professor Goode again:
"commercial law represents the totality of the law's response to mercantile disputes."8 Goode
makes the same point in a much stronger way when he says that without trading there would
be no commercial law.”9

Thirdly, the role of commercial law is often described as facilitating the effective operation of
commercial transactions, rather than mandating the form or content of those transactions.

Finally, commercial law tends to be consequentialist rather than normative. By

consequentialist' one means that it is concerned with providing determinate outcomes; it is
not overly concerned with the question of whether those outcomes ought to be achieved.

4 FUNCTIONS OF COMMERCIAL LAW

Commercial Law is of very much importance.

It allows commercial men to do business in the way they want to do it and not to require them
to stick to forms that they think to be outmoded.10

7
R. Goode, Commercial Law in the next millennium (1998), Sweet and Maxwell, London) at p 4
8
Ibid at 8 and also Goode, Commercial Law (2nd ed., 1995, Penguin), at 23).
9
R. Goode, Commercial Law in the next millennium (1998), Sweet and Maxwell, London) at p6
10
Per Lord Delvin in Kum v Wah Tat Bank ltd [1971]1 Lloyd’s Rep 439 at 444
3
It promotes and facilitates commercial transactions between parties dealing with each other in
the course of business.

Judges apply commercial law in order to give sensible commercial effect to transactions
entered into by commercial partners. This is what has been described by Lord Goff as oiling
the wheels of commerce as opposed to putting a spanner in the works or even grit in the oil"11

1.5 COMMERCIAL LAW TOPICS AND SUBJECT MATTER

There appears to be general agreement that the list of topics that constitutes commercial law
is expanding. Areas that were previously not thought of as commercial law have moved onto
the menu and thus reflect new developments in the substance of commercial practice.

Commercial law includes titles as principal and agent; carriage by land and sea; merchant
shipping: guarantee; marine, fire, life, and accident insurance; bills of exchange and
partnership. It can also be understood to regulate corporate contracts, hiring practices, and the
manufacture and sales of consumer goods. The growing importance of intellectual property
issues is also a modern example. Similarly, e- commerce has been designated as an area of
research and practice in its own right. It must be submitted that the list is not exhaustive.

Order 58 of the High Court (Civil Procedure) Rules, 2004 (CI 47) in defining what a
commercial claim is gives a hint of what subject matter can be classified as a commercial
event or subject matter.

A commercial claim is said to be any claim arising out of trade and commerce and includes
any claim relating to:-

 The formation or governance of a business or commercial organization:

 The winding up or bankruptcy of a Commercial or business or commercial
organization or corporate person;
 The restructuring or payment of commercial debts by or to business or commercial
organization or person;
 A business document or contract;
 The export or Import of goods;
 The carriage of goods by sea, air, land or pipeline;
 The exploration of oil and gas reserves;
 Insurance and reinsurance;
 Banking and financial services;
 Business agency;

11
Lord Golf, LMCLQ 382 at p. 391
4
  Disputes Involving Commercial Arbitration and other settlements awards;
 Intellectual property rights, Including patents, copyrights, and trademarks:
 Tax matters;
 Commercial fraud;
 Application under the Companies Code, 1969 (Act 179);
 Other claims of commercial nature.

CONCLUSION

Commercial law is a dynamic and responsive area of law which looks to facilitate the
commercial practices of the business community and thus it develops periodically as d when
commercial practices change and so as to accommodate new technology. A strict and rigid
definition of the subject would thus unnecessarily inhibit this process.

5
CHAPTER 2

2.0 THE PHILOSPHY AND CONCEPTS OF COMMERCIAL LAW

“…I believe that commercial low does exist and that it embodies a philosophy, not always
very coherent but nonetheless present and fundamental concepts, not always very dearly
articulated but nonetheless helping to implement that philosophy and to serve the needs of the
business community. By the philosophy of commercial low I mean those underlying
assumptions of fairness and utility which inform commercial law and run like a thread
through its different branches. By concepts of commercial law I mean those principles of law,
whether the common law or legislation, which are a particular response to the needs of the
commercial community and thus apply with special vigor to commercial transactions, even
though they are capable of application to non-commercial dealings"12

According to the writer, commercial law is made up certain concepts and assumptions of
fairness and utility, and these principles help to serve the needs of the business community.
The writer goes on to state that there are eight principles which together make up the
philosophy of commercial law.

They are;13

a. Party autonomy

b. Predictability

c. Flexibility

d. Good faith

e. The encouragement of self-help

f. The facilitation of security interests

g. The protection of vested rights

h. The protection of innocent third parties

At this juncture it is necessary to consider a little on each of them as explained by the writer.

2.1 PARTY AUTONOMY

12
He codification of Commercial Law, by Roy Goode (1988) 14 Mon LR, PP147-148
13
Ibid at p 148-149
6
The general philosophy of the common law is that businessmen should be free to make their
own law. A contract is a contract. A party is entitled to the benefit of his bargain and to the
strict performance of conditions of the contract, whether they relate to the time of
performance or the description or quality of what is to be rendered as performance. Only
where contract terms are so restrictive, oppressive or otherwise incompatible with society's
goals as to offend against the public interest should the courts intervene to curb the sanctity of
contract. One reason for upholding contracts is a philosophical one, that of freedom under the
law, including the freedom fetter one's own freedom. Another is that the enforcement of
contractual undertakings helps to promote security and predictability. Thus freedom of
contract is a concept of commercial law. But freedom of contract cannot be absolute. The
circumstances which are considered to justify legislative or judicial interference in the
bargain of the parties to a commercial transaction vary widely according to the norms of the
particular society, the familiarity of the judges with the problems of business life and the
relative importance of a particular State as an international center of commerce or finance.

PREDICTABILITY/CERTAINTY

One thing that is of utmost importance to the business world is predictability of judicial
decisions on legal issues. A reasonable degree of predictability is needed commercial world
because so much planning and so many transactions, standardized or high in value, are
undertaken on the basis that the courts vill continue to follow the rules laid down in preceding
cases. Without this, it would make it difficult for parties to commercial transactions to
conduct commercial activities with ease and confidence since commercial law is mostly
fraught with disputes which end up in litigation or arbitration proceedings.

2.3 FLEXIBILITY

It is expected that commercial law allows a great degree of flexibility in order to be able to
accommodate new practices and developments. There needs to be the continued expansion of
commercial practices through custom, usage and agreement of commercial parties. There also
needs to be upheld the obligations of good faith, diligence, reasonableness and care as well as
the preservation of general principles of law and equity. The courts must be very responsive
to the needs of the business community and reluctant to deny recognition to the legal efficacy
of commercial instruments and practices in widespread use.

2.4 GOOD FAITH

There needs to be enforced in all contractual and pre-contractual relationships, the principle
of good faith in every commercial activity. This principle ensures that there is fair and open

7
dealing in all commercial transactions and interactions. This is often thought to require
sincere, honest intentions or belief, regardless of the outcome of an action.

2.5 THE ENCOURAGEMENT OF SELF-HELP

Because of the frequency with which commercial transactions are entered into coupled with
the fact that time is of the essence since any delay means great loss, commercial law should
ensure that certain things be done without any need for judicial approval and intervention.
Some examples include the fact that acceleration clauses can be invoked, contracts can be
terminated or rescinded, goods repossessed, liens and rights of contractual set-off exercised,
receivers and managers appointed and securities realized without judicial approval.

The only limiting factor is that a person must not commit a breach of the peace.

Civilized self-help has the advantages of speed, efficiency, flexibility and cheapness upon
which the smooth functioning of business life so much depends.

2.6 THE FACILITATION OF SECURITY INTERESTS

This philosophy is closely linked with the above and together is extremely favorable to the
creation of security interests. Security can be taken over almost any kind of asset tangible or
intangible, usually with little or no formality; it can cover present and future property without
the need for specific description; and it can secure present and future indebtedness. The
creditor has the option of security by possession, ownership (mortgage) or mere charge. He
has the facility of appointing a reciver over the entirety of a debtor company's assets, with full
powers to take over and manage the company's business, without the creditor being in any
way responsible for his receiver's acts or omissions so long as the creditor does not intervene
in the conduct of the receivership.

2.7 THE PROTECTION OF VESTED RIGHTS.

2.8 THE PROTECTION OF INNOCENT THIRD PARTIES.

The above two well established principles of commercial law do run in opposite directions.
The first reflects a general feeling that an owner should not lose his property without fault;
the second, that innocent buyer (including incumberancers) should be protected against
proprietary rights of which they have no notice, in order to ensure the free flow of goods in
the stream of trade. These 2 are founded on the nemo dat quod no habet principle and the
bona fide purchaser for value without notice principle.

A rational commercial law system should seek to embody two principles: first, the no one
should suffer loss or subordination of his rights without fault; secondly, that no one should be

8
affected by a prior interest of which he has neither knowledge nor the means of acquiring
knowledge. Nevertheless considering the nature of commercial transactions, it is advocated
that the interference of equity into commercial transactions should however be slow.

3.0 SOME BASIC CONCEPTS OF COMMERCIAL LAW

Aside the philosophies as discussed above, Prof. R. Goode also outline some of the basic
concepts of commercial law though they are not exhaustive. They include:14

3.1THE CONCEPT OF A MARKET15

The concept of a market is central to commercial law. By this one means not necessarily a
physical market in which traders strike bargains in praesenti on the floor of the market but a
mechanism for bringing together substantial numbers of participants who deal in
commodities, securities or money and who make a market by acting both as buyers and as
sellers at prices determined by supply and demand.

With the advent of telecommunications physical markets are steadily giving way to markets
established by computer networks in which the participants are linked to each other and to a
central system operated by the relevant exchange for striking bargains and displaying market
prices. Commercial law is influenced by the concept of a market in a variety of ways.

Parties dealing in a market are deemed to contract with reference to its established and
reasonable customs and usages, which can have the effect of giving a special meaning to
ordinary words, of importing rights and obligations not normally implied, of permitting
tolerances in performance which would not be accepted in the general law of contract and of
expanding or restricting remedies for a shortfall in performance, as where a small deficiency
in quantity or quality is compensable by an allowance against the price, to the exclusion of
the remedy of termination of the contract

The market price is taken as the reference point in computing damages against a seller who
fails to deliver or a buyer who fails to accept the subject-matter of the contract, and a party
who reduces his loss by a subsequent sale at a higher price 6. a subsequent purchase at a
lower price is not normally required to bring this saving into account, contrary to the normal
contract rules as to mitigation of damages.

3.2 THE IMPORTANCE OF CUSTOMS OR USAGES OF A TRADE OR LOCALITY16

14
Excerpts from The Codification of Commercial Law, By Roye Goode (1988) 14 Mon LR
135, PP 147-155.
15
Ibid
16
Ibid
9
Even without a market a court will recognize established customs or usages, such as those of
a particular trade or locality, where the circumstances indicate that the parties were
contracting by reference to the custom or usage. An important example of how customs or
usages of a trade or locality are used is in the enforceability of abstract payment undertakings.

3.3 THE ENFORCEABILITY OF ABSTRACT PAYMENT UNDERTAKINGS17

General contract law requires a promise not made under seal to be supported by consideration
if it is to be enforceable. However, certain types of payment undertakings become binding
when communicated to the beneficiary, despite the absence of any consideration or any act of
reliance on the part of the beneficiary. The obligations of a bank issuing a documentary
credit, a standby credit and a c performance bond or guarantee. The contracts engendered by
such undertakings are of a peculiar kind, since they are neither unilateral nor bilateral in the
ordinary sense, they involve no acceptance of an offer and no consideration. The rules as to
which types of payment undertaking will be so enforced remains uncertain. Thus mercantile
custom and usage determines this.

THE IMPORTANCE OF A COURSE OF DEALING18

Traders are often concerned in a continuous and consistent course of dealing with each other,
thus to them the usual terms apply, whether or not spelled out in the contract. Terms implied
by a course of dealing are thus a useful source of implication into commercial contracts.

THE CONCEPT OF NEGOTIABILITY19

Key feature of commercial law is its recognition of the need for the ready marketability of
commercial assets, in particular goods, money obligations and securities. Hence the
development of documents of title and negotiable instruments and securities, the delivery of
which (with any necessary indorsement) passes constructive possession (goods) or legal title
(instruments and securities) to the underlying rights. The concept of negotiability derives
from the old law merchant and is a particular characteristic of commercial law. Its importance
in facilitating dealings with goods in transit and with negotiable securities may be expected to
decline as systems evolve for the paperless transfers of goods and securities.

17
Ibid
18
Ibid
19
Ibid
10
CHAPTER 3
SALE OF GOODS
1.0. NATURE AND FORMATION OF CONTRACT
A Contract of sale of goods is a contract whereby the seller transfers, or agrees to transfer, the
property in goods to the buyer for a money consideration called the price. It must be noted
that in Ghana, an agreement for the sale of goods is governed by the Sale of Goods Act, 1962
(Act 137). Section 1 of the Sale of Goods Act20 defines it as:
Section 1-Contract of Sale
(1) A contract of sale of goods is a contract whereby the seller agrees to transfer the property
in goods to the buyer for a consideration called the price, consisting wholly or partly of
money.
(2) Where, by virtue of one or more contracts, a person has agreed for value to bail goods to a
bailee on such terms that the property in the goods will or may at the option of the bailee pass
to the bailee then, for the purposes of this Act, that person is deemed to have agreed to
transfer the property in the goods to the bailee, and the bailor shall be deemed to be the seller
and the bailee shall be deemed to be the buyer.

The above definition has 3 elements:

 Agreement to transfer property: The basis of every contract is agreement which in
most cases may be analyzed into an offer made by one party to another and an
acceptance by that other of the offer made to him. The basic idea expressed in Latin is
consensus ad idem which means that both parties assent to all the terms of the
Agreement. The Agreement may be signified by oral or written words of the parties
and may be deduced from their conduct.
 Goods: The definition section of the Sale of Goods Act21 defines it to mean movable
property of every description, and includes growing crops or plants and other things
attached to or forming part of the land which are agreed to be severed (cut off) before
sale by or under the contract of sale. NB: Goods includes goods to be manufactured or
acquired by the seller after the making of the contract of sale known as future goods.
 Consideration: Unless contained in a deed or a seal, the agreement must be backed by
consideration on both sides, which is an advantage which moves from one party to the
other since the law will not enforce gratuitous promises. This is known as the price
under Act 137 which would be discussed further in details later.
Sale: Must be distinguished from an 'agreement to sell' since they are different and have
different legal implications. A contract under which the property in the goods is transferred
from the seller to the buyer is called a sale. Where the transfer of property in the goods is to
take place at a future time, or subject to some conditions, thereafter to be fulfilled, it is called
an agreement to sell. An agreement to sell becomes a sale when the time elapses or the
conditions are fulfilled subject to which the property in the goods is to be transferred.
A distinction however must be drawn between a contract for the sale of goods and other
contracts involving goods which are governed by different statutes or rules e.g contract of

20
1962 (Act 137)
21
Section 81 of Act 137
11
bailment, hire-purchase, conditional sales and leasing of goods. An agreement for the sale of
goods may be between one part owner and another and may be absolute or conditional.22

1.1. CONTRACT OF SALE: HOW MADE.

It may be made in writing or by word of mouth or partly in writing and partly by word of
mouth. It may also be implied from the conduct of the parties.
Section 3-Contract of Sale, how made.
Subject to the provisions of this Act and subject to any other enactment a contract of sale of
goods may be made in writing or by word of mouth or partly in writing and partly by word of
mouth, or may be implied from the conduct of the parties.
1.2. CAPACITY
The parties of an agreement for the sale of goods must have capacity to contract and to
acquire and transfer property. The parties must be capable of contracting as regards age and
understanding. Capacity is crucial because of intention to create legal relations. A person who
has capacity to contract is one who is above the infant age. In Ghana, there have been
difficulties in trying to define who an infant is. This is as a result of the inconsistencies in
various legal documents and statute books.23 Thus whether an infant is one below 18 or
below 21, the fact still remains that one above the infant age has capacity to contract. The
Sale of Goods Act provides that:
Section 2-Capacity to Buy and Sell
(1) Capacity to buy and sell is regulated by the general law concerning capacity to contract
and acquire property.
(2) Where necessaries are delivered to a person under an agreement which is void because of
that person's incapacity to contract he shall be bound to pay a reasonable price therefor.
(3) Necessaries in this section means goods suitable to the condition in life of the person to
whom they are delivered and to his actual requirements at the time of delivery.
Thus, the basic common law is that infants' contracts are enforceable by infants but not
against them. It is said that they are voidable, i.e. void as against the infant but enforceable by
him or her. Thus such contracts are one sided. However, where a person who lacks the
capacity to contract buys and obtains necessaries, that is, goods suitable to his condition in
life and to his actual requirements at the time the goods were obtained, he is bound to pay a
reasonable price for such goods.

22
Ibid Section 13) and 1(4)
23
Under the 1969 and 1979 Constitutions of Ghana, it was provided that every citizen of 18 years and above
and of sound mind has the right to vote and is entitled to be registered as a voter for the purposes of election
and referenda However, the same constitutions even the 1992 Constitution also provide that a person of 21
years and above shall qually to be an MP.A look at certain statutes makes this difficulty even more complex. The
Ghana Wills Act, 1971 (Act 360) provides that anyone of 18 years and above can make on Act of 18 chosen as an
executor of a will the person must be above 21 years of age. The Ghana Interpretation Act of 1960 section 32,
CA. 4, the Land Title Registration Law 1986 (PNDCL 1521, The Company's Code, 1963 (Act 179) section 4 of the
First Schedule and the Courts Act 1993 (Act 459) all define an infant as a person of 21years. Section 23 of the
Maintenance of Children's Decree 1977 defines an infant as a person of 18 years as well as the Children's Act of
1998 (Act 560). Under the Common Law however, an infant is a person under the age of 21 at the first moment
of time on the day before the twenty-first anniversary of his birth. This was the position before 1969.
12
NASH V. INMAN [1908] 2 KB 1
The plaintiff was a Savile Row tailor and the defendant was an infant undergraduate at
Trinity College Cambridge. The plaintiff sent his agent to Cambridge because he had heard
that the defendant was spending money freely and might be the sought of person who would
be interested in high class clothing. As a result of the agents visit, the plaintiff supplied the
defendant with various articles of clothing to the value of 145pounds during the period of
October 1902 to June 1903. The clothes included 11 fancy waistcoats. The plaintiff now sued
the infant for the price of the clothes. Evidence showed that the plaintiff's father was in a
good position being an architect with a town and a country house and could be said that the
clothes supplied were suitable to the defendant's position in life. However, his father proved
that the defendant was amply supplied with such clothes when the plaintiff delivered the
clothing now in question. Held: The plaintiff’s claim failed because he had not established
that the goods supplied were necessaries

1.3 AUCTION SALES

As in Contract Law, at an auction sale the call for bids by an auctioneer is an invitation to
treat and the bid itself is an offer. The acceptance is completed by the fall of the auctioneer's
hammer. Thus, immediately a bid has been made no contract is then concluded and the bid or
offer may be withdrawn.24 The Ghanaian Law on Auction Sales is embodied in statute
precisely the Sale of Goods Act25, and the Auction Sales Law26. If the auction is cancelled
anyone attending the place where the auction was to be held cannot claim successfully that by
his conduct he has accepted an offer to hold an auction. There is no contract in such a
situation.27 There are two types of auction sales. Auction sale with reserve price and auction
sale without reserve price. In the Auction Sale subject to Reserve Price, there is a specific
price below which the vendor will not sell the goods. Thus, the reserve price. The auctioneer
is not bound to sell the goods to the highest bona fide bidder if his bid is below the notified
reserve price. In the Auction Sale without reserve price, the highest bidder is to be the buyer
of the lot auctioned no matter how low the bid may be. Where the auction is held without
reserve, the call for bids by the auctioneer amounts to a firm promise to accept the bid of the
highest bidder and that this promise is accepted by the person making the highest bid. The
Sale of Goods Act provides that:
Section 4-Auction Sales
In the case of a sale by auction-
(a) where goods are put up for sale in lots each lot is prima facie deemed to be the subject of
a separate contract of sale.
(b) the sale is complete when the auctioneer announces its completion by the fall of the
hammer or in other customary manner;
(c) until such announcement is made any bidder may retract his bid and, subject to paragraph
(d), the seller may withdraw the goods,

24
Payne v Cave [1789) 3 Term Rep 148
25
1962 (Act 137)
26
1989 (PNDCL 230)
27
Harris v Nickerson (1873) LR QB 286

13
(d) where the sale is expressed to be without reserve the highest bona fide bidder shall be
entitled to buy the goods at the price bid notwithstanding that the auctioneer refuses to accept
his bid or to complete the sale;
(e) the seller or any one person on his behalf may bid if a right to bid is expressly reserved,
but, subject to paragraph (f), not otherwise;
(f) where the sale is notified to be subject to a reserve price it shall be lawful for the seller or
any person on his behalf to make one bid and no more; and such bid shall be openly declared
at the auction before any other bid is received.
(2) Where there is a breach of any of the provisions of paragraph (e) or (f) of subsection (1)
the buyer may treat the sale as fraudulent

The law on Auction Sales was summarized in the Ghanaian case of Zakari V. Nkusum Mart
[1992] 1 GLR 1, Per Ansah J. at page 10 it was stated that: "In auction sales, the bid
constitutes the offer which the auctioneer is free to accept or reject. An auction is complete
when the auctioneer announces its completion by the fall of the hammer or in any other
customary manner. Until such announcement is made, any bid may be retracted. It looks like
in this case the offer by Alhaji Nuhu was accepted by the auctioneer before he went to his
bankers for money. Obviously the property might have been knocked down before then. In
that situation then Alhaji Nuhu could not have retracted his offer, for the very simple reason
that in contract of sale revocation of offer is possible and effective at any time before
acceptance: see Payne v. Cave (1789) 3 Term Rep. 148. Section 28 of P.N.D.C.L.. 230 sums
this up by providing that: "28. A bid is a mere offer and may be retracted by the bidder at any
time before the auctioneer announces the completion of the sale and until the property is
actually knocked down there is no complete contract of sale."...When the property is then
sold, the auctioneer owes it a duty to sign a proper contract binding the purchaser or be liable
to the vendor for any damages sustained as a consequence of his neglect: see section 25 (3) of
P.N.D.CL 230. Where the auctioneer falls to sign a binding contract where the property is
knocked down at any auction, then section 34 (1) says the purchaser has a right of action
against the auctioneer. Again section 36 (1) says that the auctioneer may maintain an action
in his own name for the price of the goods sold and delivered by him."

1.4 TYPES OF GOODS

As stated above, it is submitted that the goods which is the subject of a contract of sale must
be a movable property. Thus in the case of Halaby v Wiredu28, the sale of business stock in
trade and premises of the defendant was said to be inconsistent with the provisions of the Sale
of Goods Act.
HALABY V WIREDU [1973] 2 GLR 249
The plaintiff sold his business and stock-in-trade together with the business premises to the
defendant by two separate agreements. The value of the goods as disclosed in the first
agreement was ghc37,602.00 payable by monthly instalments of ghc5,000.00 and the
purchase price for the premises in the second agreement was ghc29,924.32 defrayable by
monthly instalments of ghc5,000.00. The purchase prices and monthly instalments were later
reduced in supplementary agreements but at the time of the action the total indebtedness of

28
[1973] 2 GLR249
14
the defendant stood at ghc35,108.48. As the plaintiff's claim was in debt, he took out a
summons for summary judgment under Order 14, r. 1 of the Supreme [High] Court (Civil
Procedure) Rules, 1954 (L.N. 140A), after the defendant had entered an appearance to the
writ. The defendant filed an affidavit asking for leave to defend the action on the ground that
as the purchase price was payable in more than five instalments, the agreements forming the
basis of the action were hire-purchase contracts but that these agreements had infringed
section 66 (1)- (3) of the Sale of Goods Act, 1962 (Act 137). Held: (1) although section 81
(1) of the Sale of Goods Act, 1962, defined a hire-purchase contract to mean a contract of
sale of goods in which the price was to be paid in five or more instalments, that definition
could not be taken to include every contract of sale. There was still a distinction between a
credit sale and a hire-purchase contract under the Act which defined "hire- purchase price" as
excluding "any sums payable as penalty or as damages or compensation. Buyers in credit
sales did not pay any sums as a penalty, and the term "hire-purchase price" could neither
apply to any instalment payment made towards the agreed purchase price under a credit sale
agreement nor mean "purchase price under an ordinary sale transaction. The agreements in
the instant case were not hire- purchase agreements and fell outside the hire-purchase
provisions of Act 137.
Domestic Electric Rentals Ltd. v. Dawson (1943) LJ.N.CCR 31 distinguished. (2) The sale of
a business was not the sale of goods within the meaning of Act 137. The sale of a business
was a sale of more than the goods that were sold by the businessman. It included the sale of
goodwill and a whole business organization. In the Instant case what was sold consisted also
of an Interest In land and this could not be the sale of goods.

MORGAN V. RUSSELL [1909] 1 K.B. 357

The owner of a slag heap agreed to sell all the slag to the buyer. After some slag had been
removed by the buyer, the lessor and the licensors of the seller intervened and prevented the
further removal of the slag by the buyer. The buyer sued for damages for the seller's default
in delivering or giving access to the slag sold. HELD: the agreement was not a contract for
the sale of goods within the section of the Sale of Goods Act to entitle the buyer to recover as
damages the difference between the contract and the market price of the slag under the Sale
of Goods Act. The agreement was a contract to grant an interest in land and as the seller's
failure to perform his contract was due solely to a defect in his title, the buyer could not
recover any damage for the loss of their bargain.

TYPES OF GOODS
The goods sold under an agreement for the sale of goods may either be specific goods,
unascertained or future goods. Specific goods29 are goods identified and agreed upon before
or at the time the agreement is made. Unascertained goods are goods that have not been
identified and agreed upon at the time of the contract. The phrase unascertained goods is not
defined under the Sale of Goods Act but this phrase clearly refers to all goods which are not
specific. Once the goods are ascertained, they become ascertained goods30 (the goods can
never become specific goods because goods can only be specific if identified and agreed
upon when the contract is made). The goods or sale may be manufactured or produced or
acquired by the seller after the agreement for sale has been made known as future goods. The
goods are future because the goods are not yet in existence. Examples include contract to

29
Section 81 of the Sale of Goods Act
30
Section 81 of the Sale of Goods Act
15
build a ship. Title cannot pass in future goods until they become existing goods. There may
also be a sale of goods the acquisition of which depends on a contingency which may or may
not happen.
Section 5-Specific and Unascertained Goods
(1) The goods which form the subject of a contract of sale may be either specific goods,
identified and agreed upon before or at the time when the contract is made, or unascertained
goods not being so identified and agreed upon.
(2) There may be a sale of goods to be manufactured or grown or acquired by the seller after
the making of the contract.
(3) There may be a sole of goods the acquisition of which by the seller depends upon a
contingency which may or may not happen.
HOWELL V. COUPLAND [1876] 10.B.D. 258
A farmer sold in March for delivery upon harvesting the following autumn, 200 of tons of
potatoes to come from his farm. In facts only 80 tons were harvested. The buyer accepted
delivery of the 80 tons and brought an action for damages for the non- delivery of the balance
of 120 tons. It was held that the unforeseen potato blight which had affected the crop released
the seller from his obligation to deliver any more than in fact had been grown.
NB: The buyer was happy to accept and pay for the 80 tons. It was certainly arguable that if
the potato blight released the seller, it also released the buyer from the obligation to take the
potatoes at all. They were not specific goods but rather unascertained goods. In our Act they
would have been classified as future goods.

1.5 THE PRICE OF THE GOODS

The price which must be paid for the goods may be fixed by the agreement of left to be fixed
in a manner agreed by the parties or determined by the course of dealing between the parties,
otherwise the buyer must pay a reasonable price. What is a reasonable price is a question of
fact dependent on the circumstances of each case.31
It is advised however that in order to avoid uncertainties and vagueness, the price would
always be agreed and determined in the contract.
Section 6-the Price
(1) The price in a contract of sale may be fixed by the contract or may be left to be fixed in
manner thereby agreed, or may be determined by the course of dealing between the parties.
(2) Where the price is not determined in accordance with the foregoing provisions the buyer
must pay a reasonable price. What is a reasonable price is a question of fact dependent on the
circumstances of each particular case.
MAY & BUTCHER V. THE REPUBLIC [1934] 2K.B. 17
The parties entered into a contract under which the government agreed to sell the whole of
the tentage which might become available in the UK for disposal up to 31" March. The terms
were that the price to be paid and the date of payment were to be agreed from time to time
between the parties as tents become available and offered for sale. All the disputes were to be

31
Section 6 of the Sale of Goods Act

16
decided by an arbitrator. May and Butcher argued that their agreement should be interpreted
as an agreement to sell at a fair or reasonable price or at a price to be fixed by an arbitrator.
The court held that there was no agreement on these matters because there were too many
details to be resolved and thus there was no contract. The arbitration clause could not be
invoked because only disputes arising from an enforceable contract could be considered.

HILLAS V. ARCOS [1932] ALL ER 494

The parties had agreed a contract for the sale of soft wood timber in 1930. The contract gave
the buyers an option to purchase further timber in 1931 at a reduction price of 5% off the
official list price. No details were given as to the size, quantity and date of the shipment of
the timber referred to in the option. The buyer tried to exercise the option to enter into a new
contract with the sellers but the seller had already the sold the wood to another party. Hillas
sued for damages for breach of contract and the defendants argued that the contract was too
uncertain to be performed. The H.O.L. held that the opinion was not an agreement to
negotiate a further contract but was a definite offer to sell timber in 1931 on the terms of the
1930 agreement where all such details were settled. It was binding and enforceable as the
parties had a history of course of dealing.

FOLLEY V. CLASSIQUE COACHES LTD. [1934] 2 XB 1

There was an agreement for the sale of petrol at a price to be agreed by the parties in writing
from time to time". This was obviously a vague term but the contract went on to provide that
in the event of dispute reference should be made to Arbitration in accordance with the
Arbitration Act, 1889 (since replaced by the arbitration act 1950). The court interpreted this
as meaning that the sale was at a reasonable price and where there was a dispute about this
the dispute was to be referred to arbitration "An agreement to agree in the future is not a
contract nor is there a contract if a material term is neither settled nor implied by the law and
the document contains no machinery for ascertaining it."

1.6 VALUATION
The agreement may provide that the price of the goods should be fixed by the valuation of a
third party. Where there is such a provision, the agreement becomes void if the third party
cannot or does not make the valuation. If the third party is prevented from making the
valuation by the fault of one of the parties, the party not in fault may maintain an action for
damages against the party in fault.32
Section 7-Agreement to Sell at Valuation
(1) Where there is an agreement to sell goods on the terms that the price is to be fixed by the
valuation of a third party, and the third party cannot or does not make such a valuation, the
agreement is avoided.
(2) Where the third party is prevented from making the valuation by the fault of the seller or
buyer the party not in fault may maintain an action for damages against the party in fault.

32
Section 7 of sale of goods Act
17
CHAPTER 4
DUTIES OF THE SELLER AND THE BUYER
1.0 INTRODUCTION
Due to the basic principle in Contract and Commercial law which deals with the Freedom of
contract, parties to a sale of goods agreement import into the agreement certain duties and
obligations by themselves. However, there are also certain duties and obligations which are
imposed on them by statute. Certain provisions are also implied by statute.
1.1 DUTIES AND OBLIGATIONS OF THE SELLER
Under the Sale of Goods Act, the seller's duties can be divided into 2, namely fundamental
duties, comprising the seller's delivery, existence of the goods and title (Le sections 8, 9 and
10 of the Sale of Goods Act). The other deals mainly with sale by description, sale by sample,
quality and quantity of goods to be supplied. (1.e. sections 11, 12, 13 and 14 of the Sale of
Goods Act).

1.2 FUNDAMENTAL DUTIES OF THE SELLER

Section 8-Fundamental Obligation of the Seller
(1) In a sale of specific goods the fundamental obligation of the seller is to deliver those
goods to the buyer.
(2) In a sale of unascertained goods the fundamental obligation of the seller is to deliver to
the buyer goods substantially corresponding to the description or sample by which they were
sold.
(3) Any provision in a contract of sale which is inconsistent with, or repugnant to the -
fundamental obligation of the seller, is void to the extent of the inconsistency or repugnance.
The above is to the effect that there are certain obligations of the seller which by statute are
fundamental to the sale of goods. These are that:
a. In the sale of specific goods the seller must deliver the goods t to the buyer.
b. In a sale of unascertained goods the seller must deliver to the buyer goods substantially
corresponding to the description or sample by which they were sold.
These fundamental obligations cannot be avoided by the agreement of the parties. Any
provision in a contract which is inconsistent with or repugnant to the fundamental obligations
is therefore void to the extent of such inconsistency.33

1.2.1 EXISTENCE OF THE GOODS

Section 9-Implied Condition that Specific Goods are in Existence
In a contract for the sale of specific goods there is an implied condition on the part of the
seller that the goods are in existence at the time when the contract is made.

33
Section 813) of the Sale of Goods Act
18
Closely related to the above obligation is the existence in the sale of specific goods of an
implied condition that the goods are in existence.34 The reason is that where the goods are not
even available the seller is given opportunity to enter into another contract to procure same.
In such a contract, the seller is given time to deliver.

MCRAE V. COMMONWEALTH DISPOSALS COMMISSION (1951) 84 CLR 377

The defendants had invited tenders for the purchase of a tanker, said to be lying on the
Jourmand Reef off Papua, together with the oil it was said to contain. The plaintiff submitted
a tender of 285ponds which the defendants accepted. The plaintiffs went through
considerable trouble and expense to modify a ship he owned for salvage work, and also
brought equipment and engaged a crew. In fact there was no tanker anywhere near the
latitude and longitude given by the defendants, and there was no such place as the Jourmand
Reef. The plaintiff sued for damages for breach of contract. The Court distinguished
Couturier v Hastie (1865) on the ground that in that case the goods had existed but perished
whereas in the present case the goods had never existed at all. The Court thus held that the
defendants were liable to pay damages to the plaintiff as the defendant had promised that the
tanker existed. Thus the contract was not void.

OTHER DUTIES AND OBLIGATIONS

Apart from the fundamental obligations of the seller there are other duties and obligations
which are imposed on a seller. These are:
a. The implied undertakings as to title.
b. The implied conditions where the sale of goods is by description or by sample.
c. Warrant or condition as to the quality and fitness of the goods for any particular purpose.
d. The duty to be ready and willing to deliver the goods in exchange for the price.

3.1 UNDERTAKING AS TO TITLE

Section 10-Implied Undertakings as to Title
(1) In a contract of sale there is an implied warranty on the part of the seller that he will have
a right to sell the goods at the time when the property is to pass.
(2) The provisions of subsection (1) are not affected by any agreement to the contrary where
the goods are of descriptions which are supplied by the seller in the ordinary course of his
business.
In a Contract for the sale of goods there is an implied warranty on the part of the seller that he
will have a right to sell the goods at the time when property is to pass.
The problem in the Sale of Goods Act is that it does not address the fact that it is possible that
the buyer may sell the goods without the authorization of the owner of the goods and thus
such a situation will affect the interest of the buyer. The common law however has remedied
the situation with regards to the interest of the buyer. Thus though the seller must have the

34
Section 9 of the Sale of Goods Act
19
power to vest title (property) in the buyer, it is possible for a seller to own the goods but have
no "right" to sell the goods because of a third party's rights

The Act provides that where however the goods are of a description which are supplied by
the seller in the ordinary course of business, the implied warranty does not apply unless there
is a contrary agreement. This means that the agreement may expressly stipulate warranty as
to title even where the goods are such as the seller supplies in the ordinary course of
business.35

NIBLETT V. CONFECTIONERS MATERIALS CO LTD [1921] 3 K.B. 387

The Claimants in the UK purchased 1,000 tins of condensed milk from the defendants in the
U.S. The tins were labeled "Nissly. Nestle told the claimants that if they attempted to sell
those ones, they would apply for an injunction to prevent the sale as the label was similar to
Nestlé's label for their condensed milk. In fact the goods were seized by the customs because
it infringed a well-known trade mark (Nestle) in UK. The claimants agreed not to sell and
brought an action against the sellers. The sellers did not have the right to sell the gods and
therefore the buyers were entitled to repudiate the contract.

NB: the buyer was thus entitled to damages. Although the seller had the right to sell, because
the trade mark owners could restrain him by Injunction, it was deemed that sellers had no
right to sell.
It must be noted therefore that if it is found that the seller has no title, he is liable in damages
to the buyer.
ROWLAND V. DIVALL [1923] 2 K.B. 500
The claimant, a car dealer, bought a car from the defendant for 334pounds. He painted the car
and put it in his showroom and sold it to the customer at 400pounds. 2 months later the car
was impounded by the police as it had been stolen. It was then returned to the original owner.
Both the claimant and the defendant were unaware that the car had been stolen. The claimant
returned the 400pounds to the customer and brought a claim against the defendant under the
Sale of Goods Act. HELD: The defendant did not have the right to sell the goods as he did
not obtain good title from the thief. Ownership remained with the original owner. The
claimant had 4 months use of the car which he did not have to pay for. There was a breach of
an implied warranty as to title and the buyer who had paid to become the full owner of the car
had therefore received nothing from him. Thus there is a complete failure of consideration
and the full purchase price was recoverable and the fact that the buyer had enjoyed the use of
the car for 4 months did not prevent the claimant from recovering the purchase money in full.

Atkin, L.J. observed that 'the buyer has not received any part of that which he contracted to
receive, namely, the property and the right to possession and, that being so, there has been a
total failure of consideration'.

35
Section 10 of sale of Goods Act
20
BUTTERWORTH V. KINGSWAY MOTORS LTD. [1954] 1W.L.R. 1286
A took delivery of a car under a contract of hire purchase. Mistakenly thinking that she had a
right to sell it subject to her continuing to pay all the Installments, she purported to that sell it
to B. B sold it to C, who sold it to the Kingsway Motors Ltd. Kingsway Motors Ltd sold It to
Butterworth. After Butterworth had had the use of the car for 11½ months, he received
notification from the original hire-purchase dealers claiming delivery up to them of the
vehicle. HELD: Butterworth was entitled to recover the full purchase price as the defendant
has been in breach of s.12 (1) of the Sale of Goods Act because the defendant at the time of
the sale did not have power to the car.

1.3.2 IMPLIED CONDITION WHERE THE SALE IS BY DESCRIPTION

Section 11-Sale by Description
In a contract for the sole of goods by description whether or not the sale is by sample as well
as by description, there is an implied condition that the goods shall correspond exactly with
the description.
Where the goods are sold by description, there is an implied condition that the goods shall
correspond exactly with the description.36 Goods are sold by description when they are
described in the contract and the buyer contracts in reliance on that description though
normally he has not seen them.37 The description so given is to help the seller acquire the
goods or help the buyer identify the goods when delivered. It must be said however that the
courts have held that even if he does see them he may be buying them by description.38

GRANT V. AUSTRALIAN KNITTING MILLS LTD. [1963] A.C. 85

Dr. Grant, the plaintiff, contracted dermatitis as a result of wearing woolen underpants which
had been manufactured by the defendants (Australian Knitting Mills). The garment contained
an excess of sulphate. Upon purchase, he wore them for one entire week without washing
them beforehand. The Privy Council held that the defendants were liable to the plaintiff. ie.
liable for defective products and thus they owed a duty of care which was breached.
The description of the good is very necessary important to the contract and thus should
normally be a term of the contract. So therefore any disconformity however minor offends
section 11, unless it is really minute or negligible.

HARLINGDON & LEINSTER ENTERPRISES LTD. V. CHRISTOPHER HULL FINE

ART LTD. [1991] 1 QB 564 AT 574
The claimant purchased a painting from the defendant for 6,000pounds. The painting was
described in an auction catalogue as being in an auction catalogue as being by German
impressionist artist Gabrielle Munter. Both the buyers and the sellers were not experts on
German paintings whilst the buyers specialized in German paintings. The purchasers sent

36
Section 11 of the Sale of Goods Act
37
Channel J. In Varley v. Whipp
38
Grant v. Australian Knitting Mills Ltd. (1963) A.C. 85, Lord Wright held that "there is a
sale by description even though the buyer is buying something displayed before him on the
counter".
21
their experts to inspect the painting before agreeing to purchase. After the sale the buyers
discovered that the painting was a fake and worthless than 100pounds. They brought an
action based on s.13 of the Sale of Goods Act in that the painting was not as described.
HELD: By sending their experts to inspect the painting this meant that they had relied on
their judgment and thus the sale was no longer by description since the section only applies to
goods sold by description and therefore the buyers had no protection.
A buyer cannot be compelled to accept the goods which do not, in fact, correspond with the
description, even though they are merchantable under that description.
ARCOS LTD. V. E. A. RONNASEN & SON [1933] ALL E.R. 646
The seller was required to supply a quantity of staves (bar of wood). The seller delivered
staves which were slightly out of conformity with the description in terms of size. The buyer
rejected the goods as the price of wood had fallen and he could purchase them cheaper
elsewhere. The issue was whether the buyer had relied on the description given by the seller
and therefore she could reject the goods. Held: The purchasers were entitled to reject the
goods under s.13 as they were not as described. The judge noted that the seller must deliver
the goods that they correspond with the description and that an inch does not mean about ½
an inch; neither does a ton mean about ½ a ton.
Lord Atkin said at 479-480 that......if the written contract specifies conditions of weight,
measurement and the like, those conditions must be complied with. A ton does not mean
about a ton, or a yard about a yard.....if the seller wants a margin he must and in my
experience does stipulate for it.... If a condition is not performed the buyer has a right to
reject."
NB: However, despite the strict requirement for goods to correspond with the contract
description, precisely, the courts have also followed the principle of "deminimis non curat
lex" which means the law pays no attention to trifles. By virtue of this rule, the court might
hold that the damage is so insignificant and the difference above or below the described
amount or quality is so small that there is only a breach in a very technical sense and because
the law does not pay regard to trivialities, only nominal damages may be awarded or none at
all.

BEALE V. TAYLOR [1967] 1 W.L.R. 1193

The owner of a car advertised it for sale as a Herald Convertible, white, 1961, twin carbs. The
buyer answered the advertisement, went to the seller's home and having seen the car there and
having been driven in it by the seller bought it. In fact, though neither the seller nor the buyer
realized this at the time of the seller, the rear half of the car was part of the 1961 Herald
Convertible car, but the front half was part of an earlier model, the 2 halves haven been
welded together. The rear of the care bore the mark 1,200 which was first applied to the 1961
model. No one could see, from looking at the car in the ordinary sort of examination which
would be made, that he car was anything other than that which it purported to be. The buyer
on discovering the true position, kept the car and bought an action against the seller for the
damages for the breach of condition implied by the Sale of Goods Act, on a contract for the
sale of goods by description; the seller contended that the sale was of a thing seen by the
buyer and bought on the buyer's own assessment of its value. The buyer's claim was
dismissed. The buyer appealed. HELD: The issue was whether the buyer who had fully
examined the car had bought by description or whether he had bought a specific thing. It was
held that the sale was by description and the words "1961 Herald" formed part of the
contractual description. The seller was accordingly bound to sell goods fitting the description.

22
RE MOORE & CO LTD. V. LANDAUER & CO. LTD. [1921] 2 K.B. 519
A contract provided for the sale of 3,000 tins of canned fruit. The tins of fruit were to be
packed in cases of 30 tins. It was discovered on delivery that half the cases contained only 24
tins although the total number of tins was still 3,000. The market value was not affected. The
Court of Appeal invoked the Sale of Goods Act and held that, notwithstanding that there was
no loss, the buyer could reject the whole consignment because goods must correspond with
the description. NB: It may be concluded that the terms of the contract is crucial in so far as
the description of the goods are concerned. The subject matter of the contract must be defined
beyond any reasonable doubt since some buyers will not settle for anything other than the
described goods.

23 IMPLIED CONDITION WHERE THE SALE IS BY SAMPLE

Section 12-Sale by Sample
In a contract for the sale of goods by sample, whether or not the sale is by description as well
as by sample there is an implied condition that the with the sample goods shall correspond
exactly with the sample.
Where the goods are sold by sample, there is an implied condition that the goods shall
correspond exactly with the sample.39 Sale by sample is a sale in which the buyer purchases
goods under an agreed condition that goods sold are as good as one shown to the buyer as a
sample. Sale by sample is a contract based on understanding between the parties. Goods not
exhibited must conform to the standard exhibited by the sample.

PARKER V. PALMER [1821] 4 B&A 387

In this case, sale by sample was given a case law definition as 'a sale whereby the seller
expressly or impliedly promises that the goods sold should answer the description of a small
parcel exhibited at the time of the sale'. Authorities40 in this area are not ad idem. Some argue
that the mere fact that a sample is exhibited during negotiations does not mean that such a
transaction is a sale by sample and vice versa. The effect of sample has been seen as speaking
for itself, as it presents to the eye the real meaning and intention of the parties so far as the
subject matter of the contract is concerned.

DRUMMOND V. INGEN [1887] 12 APP CAS 284

Van Ingen bought cloth prescribed as worsted coatings and sold it to tailors who made coats.
Van Ingen wanted more for some purpose. He was shown samples and bought in accordance
with the samples. The Cloth delivered conformed to the samples but was not good for coats
due to a latent defect. The same defect existed in the sample but could not be detected on
reasonable examination. HELD: That he buyer was entitled to reject he cloth.

39
Section 12 of sale of Goods Act
40
Ayah said that any sample displayed must be intended to form the basis of the contract.
(Subjective) The editors Benjamin also argue that a mere show of a sample does not mean
that it is a sale by sample. (Objective)
23
Lord Herschel said: "when a purchaser states generally the nature of the requires and asks the
manufacturer to supply specimens of the model in which he proposes to carry out the order,
he trusts to the skill of the manufacturer just as much as if he asked for no such specimens.
And I think he has a right to rely on the samples supplied representing a manufactured article
which will be fit for the purpose for which such an article is ordinarily used, just as much as
he has a right to rely, on manufactured goods supplied on an order without samples
complying with such a warranty. Implied warranty will be excluded if due diligence would
have disclosed defect. What amounts to due diligence depends Nothing here could reasonably
lead them to anticipate the problem."
Lord Macnagthen also said: "The office of a sample is to present to the eye the real meaning
and intention of the parties with regard to the subject matter of the contract which, owing to
the imperfections of language, it may be difficult or impossible to express in words. The
sample speaks for itself. But it cannot be treated as saying more than such a sample would tell
a merchant of the class to which the buyer belongs, using due care and diligence, appealing to
it in the ordinary way and with the knowledge possessed by merchants of that class at the
time....”

E.S. REUBEN V. FAIRE BROS. [1949] 1 ALL E.R. 215

The seller was to supply the buyer vulcanized rubber in 41 ft rolls, 5 ft wide in accordance
with a small sample produced. The sample was flat and soft but what was supplied was
crinkly and folded. It was held that the sellers were in breach since the goods were not in
accordance with the sample though a simple process was required to make them correspond.

1.3.4 IMPLIED CONDITION AS TO QUALITY AND FITNESS OF GOODS

The General rule is that there is no implied warranty or condition as to the quality or fitness
for any particular purpose of goods supplied by a seller under a contract for the sale of
goods.41 Thus, the basic rule denies that a seller is deemed to give any undertaking as to the
quality of the goods and their fitness for a particular purpose. This is based on the traditional
Common law principle of Caveat Emptor which means “let the buyer beware" and thus any
buyer or purchaser intending to buy a property or goods does so at his or her own risk. Thus a
vendor under this rule is under no duty to communicate the existence even of latent defects in
his wares unless by act or implication he represents such defects not to exist.42
Section 13-Quality and Fitness of Goods
(1) Subject to the provisions of this Act and any other enactment there is no implied
warranty as to the quality or fitness for any particular purpose of goods supplied under
a contract of sale except as follows-
It must be stated that notwithstanding the above provision, the Sale of Goods Act contains
provisions by which undertakings on the part of the seller as to the quality of the goods and

41
Section 13(1) of sale of Goods Act
42
WR. Anson, Principles of the Law of Contract 245 (Arthur L. Corbin ed., 3d Am. Ed.
1919).

24
their fitness for a particular purpose are implied into certain contracts of sale. However, it is
most important to note that these provisions institute exceptions to the general rule. Thus
though there is no implied warranty or condition as to the quality or fitness for any particular
purpose of goods supplied under a contract for the sale of goods. There are exceptions in the
following instances set out in section 13 of Act 137:

EXCEPTIONS TO THE GENERAL RULE UNDER SECTION 13

FIRST EXCEPTION
Section 13(1) (a) There is an implied condition that the goods are free from defects which are
not declared or known to the buyer before or at the time when the contract is made:
Provided that there is no such implied condition-
(1) Where the buyer has examined the goods, in respect of defects which should have been
revealed by the examination,
(ii) In the case of a sale by sample, in respect of defects which could have been discovered by
a reasonable examination of the sample;
(iii) Where the goods are not sold by the seller in the ordinary course of his business, in
respect of defects of which the seller was not, and could not reasonably have been aware
Thus this exception as a general rule states that there is an implied condition that goods are
free from defects which are not declared or known to the buyer before or at the time of the
making of the contract.
This implied condition however still has provisos or its exceptions in that it does not apply in
a situation where the buyer has examined the goods and there are defects which should have
been revealed by the examination. Also, in the case of a sale by sample, the implied condition
will not apply in respect of defects which could have been discovered by a reasonable
examination of the sample. Lastly, if the goods are not sold by the seller in the ordinary
course of his or her business, there is no implied condition in respect of defects of which he
was not and could not reasonably have been aware.43
NB: The summary of the provisos are that:
There is no such implied condition where,
1) If the goods are examined the defects should have been revealed.
ii) If done by Sale by sample, reasonable examination should have revealed same.
iii) if the goods are not sold in the ordinary course of his business in respect of defects that
the seller was not aware.

CONTINENTAL PLASTICS ENGINEERING CO. LTD. V. IMC INDUSTRIES-

TECHNIK GMBH [2009] SCGLR 298
On a date in July 1998, a plaintiff (respondent company) which is registered under the laws
of Germany as a supplier of industrial machinery sold a plastic machine HBD to a defendant
(appellant). The parties agreed that the equipment was sold to the defendant company "as is,
as seen/inspected, without warranty, delivered to factory without inspection." The was no

43
Section 13(1) of sale of Good Act
25
disagreement at which the machine was sold nor the fact that it was not installed by the
plaintiff company but by the defendant company which held itself out as an experienced
plastics engineering company capable of doing so itself. However the parties diverged on the
condition of the equipment the plaintiff company represented it was selling to the defendant.
The defendant company denied as alleged by the plaintiff company that before the contract of
sale was concluded, it inspected the machines and certified it to be in a good and perfect
condition. The defendant company asserted that it could only rely on the plaintiff's
representations at the time of the purchase as the machine had not been installed and that it
was only after the installation and a test run that on a closer examination it is covered to its
utter chagrin, a number of latent defects which were clearly not discoverable when Its
representative first saw the machine and which the plaintiff company from its version
appeared to have clearly hid from it. The trial High Court and the Court of Appeal rejected
the defendant's version outright and found against it. Essentially, the Court of Appeal found
that the defendant company failed to prove the existence of the defect complained and was
liable for the claim. Aggrieved by the decision of the Court of Appeal which affirmed the
judgment of the trial High Court, the defendant company appealed to the Supreme Court on
the following original and additional grounds: that the Court of Appeal erred in law and on
the evidence on record when it held that the defendant had failed to prove that the machine,
the subject matter of the dispute was defective at the time of execution of the contract of sale
dated 17th July, 1998 where there was profuse evidence to the effect that the machine could
not have been examined for defects at the time of signing the agreement... The main
important legal issue was that which criticized the Lordships in the Court of Appeal for
failing to appreciate the full scope of s. 13(1) of the Sale of Goods Act. The defendant urged
that the plaintiff was in total breach of the implied warranty imposed by the statute namely
section 13(1) of Act 137 to the effect that the machine was free from all defects.
HELD: Dismissing the appeal by the defendants,
1. Act 1962 could only be prayed in aid of buyers who have succeeded in establishing the
existence of defect in goods bought at the time of concluding the contract. In the instant case
the court of appeal had rightly made the basic finding that the defendant was unable to
establish the presence of any defect in the machine before or at the time the contract was
executed and therefore s. 13 of Act 137 did not apply. The Supreme Court was disposed to
affirming the finding of the finding of the trial court that the plaintiff did not make any false
misrepresentation about the quality of the equipment and which representation induced the
defendant to enter into the contract. The Supreme Court also found that the claim by the
claim by the managing director of the defendant company, that he was induced by false
representation to purchase the defective machine not trustworthy. Consequently the court of
appeal did not misinterpret nor misapply the provision of s. 13 of the Act 137. 2. The court of
appeal had properly dealt with the question of who bore the burden of persuasion regarding
the issue of the presence of latent defects. Thus the court of appeal had rightly observed that
nowhere either in the pleading or evidence did the defendant state exactly when the defect
was detected. Apart from mounting the witness box to recount the defect enumerated in its
statement of defence, there was no proof that the defect complained of were real, and on the
evidence, there was no proper proof that the defect complained of were real. In the absence of
any such proof, the plaintiff cannot be held to have breached the implied condition that the
machine was free from defects which were not declared at the time when the contract was
entered into.

26
GEORGIA HOTEL LTD. v SILVER STAR AUTO LTD. [2012] 56 G.M.J S.C. 52
In October 2004 Hotel Georgia Limited, a limited liability company engaged in hotel and
hospitality industry in Kumasi and Accra, the plaintiff company (appellant at the supreme
court), purchased for the use of its managing director, a brand new Mercedes Benz E240
Avant-garde at a cost of €58,500 from the Silver Star Limited, the sole dealer of German-
made Mercedes Benz vehicles in Ghana, the defendant company (Respondent in the supreme
court). In September 2006 the vehicle broke down at Ejisu en route to Kumasi after minor
repairs at the workshop of the defendant company at Tema. The plaintiff company had the
vehicle towed to Kumasi and inspected by a private mechanic who declared the car engine
defective. After that the plaintiff company brought a claim against the defendant company
alleging that the vehicle suffered from latent defects. The plaintiff company claimed for inter
alia: The replacement of Mercedes Benz E240 Avant-garde vehicle...with a brand new one,
by reason of the latent defect in the said vehicle which the plaintiff bought from the defendant
in October 2004, and in the alternative, the payment of the full replacement value of a brand
new Mercedes Benz saloonE240 Avant-garde to the plaintiff by the defendant by reason of
the wrongful sale of the wrongful sale of the defective brand new vehicle to It The High
Court delivered judgment in favor of the plaintiff company for recovery of €58,500, Interest
at the prevailing bank rate from October 2006 to the date of payment, $10,000 for loss of use
and costs of GH2, 000. This decision was reversed on appeal on 2 December 2010. The
plaintiff company is appealed at the Supreme Court.
The Supreme Court held that;
1. According to Black's Law Dictionary, a latent manufacturer's defect is a fault in a product
that cannot be discovered by reasonable inspection upon its delivery to the buyer.. It is a
matter of total absence or lack of knowledge of the state of fact and it would not therefore
reasonably or justifiably be expected that a person would talk or complain about the state of
affairs that he had no knowledge of. A person would therefore only become aware of that
state of fact when the defect becomes patent according to this interpretation. Reasonable
Inspection of the vehicle and the acceptable time period for claiming a latent defect exists are
also factors to be weighed in determining the outcome of this case. Latent defects "become
manifest after the subsequent owner's purchase and [were] not discoverable had a reasonable
inspection of the structure had been made prior to purchase.

2. "On our part we hold that the burden of proof is on the plaintiff company to prove the
existence of latent defects in the car." Since the plaintiff company failed to follow the
guidelines for inspection of the Mercedes after a certain mileage and did not have a properly
licensed or experienced electrician conduct the inspection after the vehicle broke down en
route to Kumasi, there is evidence suggesting there are other potential causes to the faults in
the vehicle rather than latent defects. Since Plaintiff Company had the car in their possession
for almost two years without any complaints, and did not bring the car in for proper servicing,
the action accordingly fails.

3. In order for there to be a breach of Section 13 (1) of the Sale of Goods Act, a purchaser
must show that the seller of the vehicle knew or was in the first place aware of defects in the
vehicle they sold to him at the time of sale or delivery, and also that the seller deliberately gr
negligently failed to disclose his knowledge of the defects to the purchaser.

27
Where the buyer waives his right of examination, it means the buyer accepts the risk of the
defects that would have been revealed if he had examined the goods. Thus he cannot rely on
this implied condition. Similarly, if one is offered the opportunity to examine goods and one
does a cursory inspection which does not reveal any defect, he cannot invoke this condition.

THORNETT & FEHR V. BEERS & SON [1919] 1 K.B. 846

The buyer had ample opportunity to examine some barrels of glue. He examined the outside
of the barrels and accepted the goods though if he had looked inside the barrels he would
have discovered that the glue was merchantable. It was held that the implied condition was
excluded. The defendants had inspected and were satisfied that the goods were in order and
the price being low was willing to take the risk involved in not conducting thorough
examination.
NB: If you have plenty of time to inspect and you don't, you will be held to have done a
reasonable inspection and to have discovered the defects that would have been discovered in
a reasonable inspection. If the buyer has examined the goods, there is no implied condition as
regards to defects. The buyer who conducts only a cursory Inspection does so at his own risk.
Thus, a buyer who inspects goods and becomes aware of a defect in the goods may then
reject the goods. But if a buyer knowing of a defect or ought to have known of a defect
proceeds to buy the goods nonetheless, then it can't be later said that the goods are not
merchantable due to the defect. There is no implied condition of merchantability as regards
defects that are visible. One who sees a defect and still purchase the goods cannot complain
about it. Latent and hidden defects are an exception to this rule.
NB: In the Georgia Hotel Ltd v Silver Star Auto Ltd. case court defined a latent defect to
mean "a manufacturing defect, which must exist at the time of production and delivery of the
product. By being a hidden or latent defect both the seller and most importantly the buyer
could not detect or be aware of the defect upon reasonable examination at the time of
conveyance."44
It was also stated in the above case that "under the Sale of Goods the buyer bears the burden
to prove the existence of latent defects in goods bought at the time the contract was
concluded. In order for there to be breach of section 13(1) of the Sale of Goods Act a
purchaser must show that the seller of the vehicle knew or was in the first place aware of
defects in the vehicle they sold to him at the time of sale or delivery, and also that the seller
deliberately failed to disclose his knowledge of the defects to the purchaser.”45

B. SECOND EXCEPTION
Section 13(1) (b) Where the goods are of a description which are supplied by the seller in the
course of his business and the buyer expressly or by implication makes known the purpose
for which the goods are required there is an implied condition that the goods are reasonably
fit for that purpose.

44
"Per Adinyira JSC.
45
Georgia Hotel Ltd. v Silver Star Auto Ltd. (2012) 56 GMJ 52 SC; (at page 77] Per
Adinyira, JSC, See also Continental plastic Engineering Co. Ltd. IMC Industries-Technik
GMBH [2009] SCGLR 29.

28
If goods are of a description supplied by a seller in the course of his business and the buyer
expressly or by implication makes known to the seller the purpose for which the goods are
required, there is an implied condition that the goods are reasonably fit for that purpose.46
The above means that when a buyer expressly or impliedly makes known to a seller the
particular purpose for which the goods are required, it shows that the buyer is relying on the
skill and judgment of the seller and thus a condition implied on the part of the seller that the
goods are reasonably fit for such purpose, where the goods are of a description which is in the
course of the seller's business.
It must be stated that if the goods are of a kind having only one normal purpose, the sellers
knowledge that the buyer requires it for that purpose is usually presumed and no further
indication is required. Furthermore, it implies that if the goods are capable of serving more
than one normal purpose, it is the duty of the buyer to make known which purpose the buyer
requires the goods to serve. It is submitted that the purpose must be indicated clearly and with
sufficient detail and particularity to the seller to enable the seller supply goods fit for that
purpose. If the special purpose is not communicated, buyer cannot rely on seller's skill to
supply goods fit for that purpose. However where something goes wrong, it is for the seller to
show affirmatively that there was no reasonable reliance.

WORMELL V. RHM AGRICULTURE (EAST) LTD. [1987] 1 WLR 1091

The plaintiff, a farmer who had sown winter wheat was prevented by the cold and wet
weather in 1983 from spraying his crops before March in order to control the growth of wild
oats on his land. In March and April, he purchased from the defendants who were suppliers of
agricultural goods a wild oats killer which they recommended for use at a later stage than
usual. The plaintiff understood the manufacturers' instruction on the can as meaning that
under optimum growing conditions the weed killer would kill wild oats at any stage of
growth, but that it might damage his own crop if used beyond the recommended stage of
growth. The plaintiff decided to take the risk of some damage to his crops by applying the
weed killer on the late side. Although he applied the weed killer properly, it had only a
limited effect on the wild oats. The plaintiff brought a claim against the defendants for breach
of the implied terms that the weed killer was of merchantable quality and fit for its purpose.
HELD: (Queen's Bench Division) the court found for the plaintiff and awarded him -
damages on the ground that the plaintiff understood the instructions as a reasonable farmer or
user would understand them. The word "goods" In the Act had to be construed to mean the
weed killer in its container with its packaging and instructions. If the instructions made the
goods not fit for their purpose, there was a breach of the Act.
The defendant Appealed.
The judge said that the manufacturers were not required to spell out in greater detail why it
was not recommended that spraying should take place after the "stop praying" growth stages
had been reached or to explain how the chemical worked or to give any further warning of
the reasons why the directions were given not to apply the weed killer to wheat or barley
crops beyond the recommended crop growth stage. The plaintiff decided to take a chance. He
could not claim that the weed killer was not reasonably fit for its purpose when it would have
been bad weather conditions allowed it to be used within the limits and in the conditions
prescribed by the instructions. The appeal was allowed.
46
section 13(1)(b) of the Sale of Goods Act.

29
GRANT V. AUSTRALIAN KNITTING MILLS LTD. [1936) A.C. 85
The buyer bought a pair of woolen pants and had dermatitis when he wore it because it
contained an irritating chemical. He bought it at a shop which dealt in this type of goods,
although he did not expressly make the purpose known to the seller. Held- Privy Council, he
had made known to the seller the purpose for which he wanted the goods so as to show that
he relied on the seller's skill or judgment. Consequently, the seller was liable to him in
damages for breach of the implied condition that they should be reasonably fit for the
purpose.
ASHINGTON PIGGERIES LTD. V. CHRISTOPHER HILL LTD. [1972] A.C. 441
In 1960, accordance with a particular formula Ashington made. Christopher Hill Ltd. fulfilled
this using in part ingredients it acquired from a Norwegian company, Sildemelutvalget (who
had been replaced by Norsildmel by the time of trial). Many of the animals who consumed
the food died from liver disease resulting from improper processing of the herring meal in the
feed. Ashington Piggerles was sued by Christopher Hill for refusing to pay for the feed and
countersued that Christopher Hill failed to fulfill its contractual obligations by providing poor
quality ingredients that did not meet the contract's requirements. Christopher Hill in turn sued
Norsildmel for failing to fulfill its contractual obligations for the same reason. The House of
Lords heard the case in February 1971, holding that while quality issues or contamination did
not make an ingredient different in definition, there was a reasonable expectation of quality
where ingredient suppliers knew the purpose of the ingredient and had reason to know the
risks. It was held that the meal was required to be fit for inclusion in feeding stuffs for any
animals to which the sellers ought to have contemplated that it might be fed. Thus there was
breach of fitness for purpose since the goods were sold for the purpose of being made into
animal feed.
It must be noted as provided in the Sale of Goods Act that an agreement for the sale of goods
cannot exclude the implied provisions relating to defects in the goods and fitness of the goods
for a particular purpose unless the seller proves that before the agreement was made the
provision in the contract excluding these provisions was brought to the notice of the buyer
and its effect made clear to him.47 A warranty or a condition as to the quality or fitness for a
particular purpose may be implied by the usage of trade.48 This warranty or condition applies
to all goods delivered in purported fulfillment of the contract and extends to all boxes, tins,
bottles or other containers in which the goods are contained.49

1.3.5 QUANTITY OF GOODS

Section 14-Quantity of Goods

47
Ibid, s.13(2) which provides that (2) The condition implied by paragraph (a) of subsection (1) is not affected
by any provision to the contrary in the agreement where the goods are of a description which are supplied by
the seller in the ordinary course of his business and the condition Implied by paragraph (b) of subsection (1) is
not affected by any provision to the contrary in the agreement unless the seller proves that before the
contract was made the provision was brought to the notice of the buyer and its effect made clear to him.
48
ibid, s.13(3) which provides that (3) an implied warranty or condition as to quality or fitness for a particular
purpose may be annexed by the usage of trade.
49
Ibid, s.13(5) which provides that (5) The provisions of this section apply to all goods delivered in purported
pursuance of the contract and extend to all boxes, tins, bottles or other containers in which the goods are
contained.

30
(1) Where the seller delivers to the buyer a quantity of goods less than he contracted to sell
the buyer may reject them but if he accepts the goods so delivered he must pay for them at
the contract rate.
(2) Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell
the buyer may not reject all the goods delivered by reason only of the excess in quantity but
he may accept all the goods so delivered, paying for the extra goods at the contract rate, or he
may accept the goods which should have been delivered and reject the remainder. In the latter
event the buyer may recover damages from the seller representing the cost, if any, of
separating the goods which should have been delivered from the remainder.
(3) Where the seller delivers to the buyer the goods he contracted to sell together with goods
of a different description not included in the contract-
(a) the buyer may accept all the goods so delivered, paying a reasonable price for the extra
goods; or
(b) if the goods which the seller contracted to sell and has delivered are less than the quantity
specified in the contract, the buyer may reject the whole; or
(c) the buyer may accept the goods included in the contract and reject the remainder, in this
event the buyer may recover damages from the seller representing the cost (if any) of
separating the goods included in the contract from the remainder, and also damages (if any)
in respect of the deficiency (if any) in the goods delivered.
A seller is bound to deliver the exact quantity of the goods he has contracted to sell. I
however, he delivers to the buyer a quantity of goods less than he has contracted to sell, the
buyer may either reject or accept them. If the buyer does not reject but decides to accept the
goods so delivered, then he is bound to pay for them at the contract rate. On the other hand, if
the seller delivers to the buyer a quantity of goods larger than he has contracted to sell, the
buyer cannot reject all the goods by reason only of the excess quantity. He may have the
option of accepting the quantity stipulated by the contract to be delivered and reject the goods
in excess. If the buyer rejects the excess goods, he may recover damages from the seller to
cover the cost if any, of separating the goods which should have been delivered from the
remainder.50
If the seller delivers to the buyer the goods he has contracted to sell together with goods of a
different description not included in the contract, the buyer has the following options-

(i) He may accept all the goods so delivered paying a reasonable price for the extra
goods; or
(ii) He may reject the whole goods if the goods which the seller has contracted to sell
and has delivered are less than the quantity specified in the contract; or
(iii) He may accept the goods included in the contract and reject the remainder. In this
event the buyer may recover damages from the seller representing the cost, if any,
of separating the goods included in the contract from the remainder. He may also
recover damages, if any, in respect of any deficiency in the goods delivered.51

50
Ibid.s.14(2).
51
ibid, s. 14(3).

31
1.4 DELIVERY OF GOODS
Section 15-Delivery Concurrent with Payment
(1) Unless otherwise agreed the seller must be ready and willing to deliver the goods in
exchange for the price
(2) Tender of delivery may be treated as ineffectual unless made at a reasonable hour.
It is the case that under the Sale of Goods Act, it is the duty of the seller to deliver the goods
and of the buyer to accept and pay for them, in accordance with the contract of sale. It is also
the case that unless otherwise agreed, payment and delivery are concurrent conditions52 and
thus both take place at the same time as in a cash sale over a shop counter.53
Delivery is the voluntary transfer of possession from one person to another. It may be actual
or constructive. It is constructive when the goods themselves are not delivered, but the means
of obtaining possession of the goods delivered e.g. by delivering the key of a warehouse
where goods are stored or the bill of lading which will entitle the holder to receive the goods
on the arrival of the ship.
Whether the seller has to send the goods to the buyer or the buyer has to take them from the
seller depends on the terms of the contract. In the absence of any such terms, the rules as to
delivery are provided in the Sale of Goods Act.

Section 16-Time of Delivery

(1) If no time is fixed for the delivery of the goods, they must be delivered within a
reasonable time.

(2) Unless a contrary intention appears stipulations as to the time of delivery are conditions of
a contract of sale.

(3) The parties to a contract of sale may, whether with or without consideration, agree that
delivery should be made at a date or time other than that stipulated for In the contract, and in
this event, the seller is bound to deliver and the buyer is bound to accept delivery of, the
goods at that date or time unless the parties agree to any further change.

(4) Where the buyer agrees to accept delivery from the seller at a date later than stipulated in
the contract without substituting another date therefor the seller must deliver the goods within
a reasonable time, having regard in particular to the reasons for which delivery was
postponed, and the buyer may, on reasonable notice to the seller, notify him of the latest date
on which delivery will be accepted.

(5) Where the seller contracts to use his best endeavors to deliver the goods on, or not later
than, a given date the seller must, unless a contrary intention appears (but without prejudice

52
Ibid, s. 15.
53
Ibid, s. 22
32
to his obligations so to use his best endeavors), deliver the goods within a reasonable time
after that date.

If no time is fixed for the delivery of the goods, they must be delivered within a reasonable
time and at a reasonable hour.54 In the absence of a contrary intention which is apparent in the
contract for the sale of goods, stipulations as to the time of delivery are conditions of a
contract of sale and thus are of essence of the contract. 55 The parties to the contract may
however agree that delivery should be made at a date or time other than stipulated in the
contract, in which event, the seller is bound to deliver and the buyer must accept delivery of
the goods at the date or time unless the parties agree to any further change.56 This agreement
need not be backed by consideration. Also, a buyer may agree to accept delivery from the
seller at a date later than the stipulated date in the contract without actually specifying the
later date. If he does so, the seller must then deliver the goods within a reasonable time. It
must be noted that what is a reasonable time is dependent on the facts of the case and the
reasons for which the delivery was postponed. A buyer, however, may on reasonable notice
to the seller inform him of the latest date on which delivery will be accepted.57 In an instance
where a seller agrees to use his best endeavors and skills to deliver the goods on or later than
a given date, he must, unless a contrary intention appears, without prejudice to the obligation
to use his best endeavors, deliver the goods within reasonable time after that date.58

MOK BEER BAR V. GADA [1979] 1 G.L.R. 35

The respondent purchased two bottles of locally made whisky from the appellant for $11.00,
and afterwards asked him to reserve the drinks for collection at a later date. When the
respondent called to collect the drinks he was told by the appellant that his wife had
mistakenly sold the drinks to another customer. The respondent therefore sued the appellant
in the district court to recover his money and judgment was given in his favor. He instituted
another action in the district court to recover damages for breach of contract against the
appellant, and again judgment was given in his favor. Dissatisfied with the award of damages
against him, the appellant applied for a review of the judgment, and it was accordingly set
aside by the district court magistrate. At the new trial, counsel for the appellant contended
that since the agreement to keep the drinks for the respondent was not part of the contract of
sale, there could be no breach of it. The court rejected this contention and increased the award
of damages against the appellant to c350.00. On appeal by the appellant, counsel for the
respondent was asked to justify the decision of the district court. Counsel relied on Act 137,
ss. 15 and 16 and contended that the agreement to keep the drinks was an integral part of the
54
Ibid, s. 15(1) & (2) and s. 16
55
Ibid, s. 16
56
Ibid, s. 16 (2) & (3)
57
Ibid, s. 16 (4)
58
Ibid, s. 16(5)
33
contract of sale and Inasmuch as the appellant failed to deliver the drinks when they were
required the appellant was in breach of the contract and therefore liable in damages. Another
issue that came up for the consideration of the court was whether the appellant was a bailee
of the drinks purchased by the respondent. On the question of damages, counsel for the
respondent contended that because the respondent failed to deliver the drinks to the friend on
whose behalf he purchased them, he had disappointed the friend and thereby lost his
reputation as an honest person.

It was held that:

1) since the appellant was ready and willing on the spot to deliver the goods in exchange for
the purchase price he had complied with Act 137, s. 15. Further, under Act 137, s. 16 (2)
there was no evidence that the stipulation by the respondent to postpone acceptance of
delivery of the whisky was specifically made a condition of the contract of sale. If It was a
condition of the contract that the delivery of the whisky by the appellant was not to take place
until the respondent called for it, there would have been no need, after the respondent had
paid for the whisky, to appeal to the appellant to keep it for him until he was able to collect it.
The non-delivery of the two bottles of whisky at the time the respondent called for them was
not therefore a breach of a condition of the contract of sale, and inasmuch as the learned
magistrate held to the contrary he erred in law under Act 137, s. 21.

(2) It was the duty of the buyer to accept delivery of the goods after he had paid the purchase
price. The respondent failed to perform that duty, but rather begged the appellant to keep the
whisky as his bailee. (3) It was the duty of a ballee to take reasonable care to keep and
preserve goods, and it was also his duty to exercise that degree of care which might
reasonably be expected from a reasonable man in respect of his own goods, if he failed to
exercise that degree of care he had to pay for them when they were lost. In the present case if
it were not that the appellant had already paid for the two bottles of whisky the district court
could legitimately have ordered recovery of the value of the whisky by the respondent from
the appellant.

KWETEY V. BOTCHWAY [1980] G.L.R. 722

On 30 June 1966, the plaintiff by a hire-purchase agreement between her and the Boatyard
Division of the Ghana Industrial Holding Corporation purchased a 40-footer fishing boat with
registration No. T.F. 298. Subsequently, the boat's engine broke down and the plaintiff took a
loan from the Agricultural Development Bank (hereinafter referred to as the A.D.B.) to
purchase a new engine. The plaintiff mortgaged her house to the bank to secure the loan. As
part of a general exercise, the bank rehabilitated all the broken down engines of all fishing
34
vessels belonging to its customers and gave such customers the first option of paying
whatever balance was outstanding or have the boat sold to someone else. On 9 February
1978, the A.D.B. wrote to the plaintiff asking her to pay a balance of $149,775.01 which was
outstanding on the boat and gave her up to 28 February 1978 to settle. Unfortunately, this
letter was never received by the plaintiff. Meanwhile, the counterclaimant K had submitted
an application to the A.D.B. expressing her desire to purchase one of the rehabilitated vessels
to be sold by the bank. On 21 March 1978, the A.D.B. offered the plaintiff's boat to K at a
price of t150,000 and gave her up to 4 April 1978 to settle. However, the bank later accepted
payment of the outstanding balance on the boat then owed to the bank by the plaintiff. Not
long after the plaintiff had settled her debt, the bank after the expiry of the deadline given to
K, accepted payment from K for the same boat and instructed that the boat should be released
to K. The plaintiff on learning that K wanted to appropriate the boat instituted an action
against the bank, the Boatyard Division of the Ghana Industrial Holding Corporation and K,
for a declaration, inter alia, that the sale to K was null and void, K on her part counterclaimed
for a declaration of title to the boat, recovery of possession, perpetual injunction against the
plaintiff and the bank as well as specific performance and damages for loss of use of the
fishing vessel. Ultimately, the court made an order releasing the boat to the plaintiff. On
receipt of the boat, the plaintiff discontinued her action against the defendants, but K decided
to proceed with her counterclaim, in spite of the fact that the bank had repaid into her
account, the whole purchase price of the boat.

The court held that:

1. The bank forbore to insist on payment within the stipulated time, and their acceptance of
the money and direction to release the boat to the plaintiff was conduct from which it could
clearly be inferred that it waived its rights to insist on payment within the terms of the
contract. Having led K to believe that it had accepted the payment, the bank could not now be
heard to set up K's lateness as a basis for its non- delivery of the boat. Having accepted
payment, the bank was obliged to deliver what it had contracted to sell, therefore its non-
delivery constituted a breach of contract.

2. By operation of the Sale of Goods Act, 1962 (Act 137), a seller was under an obligation to
deliver the goods to the buyer. The bank was not in a position to deliver and did not deliver to
the buyer. This was a fundamental term by operation of the law, and a breach of it constituted
a fundamental breach and section 55 of Act 137 provided the remedy for such breach. By
section 56 of Act 137, the measure of damages recoverable was the loss sustained by the
buyer and which could have been foreseen by the seller at the time when the contract was
made as likely to result from the breach. In the present case, where the counterclaimant was
expecting to buy the boat for her own use, her loss should be assessed on the basis of what it

35
would cost her to buy an alternative boat at the time when the bank failed to deliver the boat.
There was no evidence that it would have cost her more than she paid. That being the case,
her loss was the price she paid. There being evidence that the purchase price had been repaid
by the bank into K's account, her loss should be nominal.

NANOR V. AUTO PARTS [1992] 2 G.L.R. 273

The plaintiff entered into a contract with the defendants, a motor firm, to purchase a Nissan
Homer bus. The plaintiff paid $19,000 as the purchase price and the defendants promised to
deliver the vehicle within six months, ie, by 29 December 1977. They failed to deliver the
vehicle on the due date. However, they subsequently demanded and received a further sum of
$1,000

The court held that:

(1) under section 1 (1) of the Sale of Goods Act, 1962 (Act 137) a contract of sale of goods
was one whereby the seller agreed to transfer the property in goods to a buyer in
consideration of a price consisting wholly or partly of money. And under section 6(1) of Act
137 the price might be fixed by the parties or might be determined by the course of dealing
between the parties. Accordingly, since the parties were agreed that the plaintiff offered to
buy and the defendants promised to sell him a Nissan Homer bus, the mere fact that there was
a dispute over the price and delivery date did not invalidate the contract.

(2) It was clear under the provisions of section 16(4) of Act 137 that parties. could lawfully
enter into contracts for which there had been a change in the time of delivery and yet no
specific date had been substituted for the original date. In the instant case, therefore, when the
plaintiff with full notice of the breach waived his right to insist on delivery of the vehicle by
29 December 1977 the agreement was varied to the effect that the vehicle was to be delivered
within a reasonable time. What was a reasonable time was a question of fact dependent
principally on the reasons for the postponement of delivery and the nature of the goods to be
delivered. Since there was no evidence that the plaintiff was unwilling to pay additional sums
and yet the defendants refused to deliver the vehicle to him, the defendants were in breach
and accordingly the plaintiff was entitled to treat the contract as at an end.

(3) By the provisions of section 58 of Act 137 an order for specific performance of a contract
for sale of goods could properly be made only in respect of ascertained or specific goods.
Section 81(1) defined "ascertained goods" as goods "identified and agreed upon after a
contract of sale is made" and "specific goods" as "goods identified and agreed upon at the

36
time the contract is made." On the evidence, at no point in time, i.e. neither at the time the
contract of sale was made nor after it had been concluded, did the parties identify or agree
upon a particular vehicle that it should be the subject matter of the contract. Accordingly, the
plaintiff was not entitled to an order of specific performance.

JAPAN MOTORS TRADING CO. LTD. V. WILLIAMS (1984-1986] 1 G.L.R. 634

The plaintiff purchased a Nissan diesel bus from T.A. Co. Ltd. However, when the bus broke
down for lack of spares, he placed an order for the needed spare parts from Japan with the
defendants. The order was placed with T.S.S. Co. Ltd. which by telex headed, "we quote for
Japan" supplied the defendants with the requisite quotation. The plaintiff then got his foreign
bankers to transfer the amount being the cost of the spare parts to the defendants' bankers.
The defendants in turn paid the amount to the suppliers. When the parts were not forthcoming
the plaintiff sued the defendants In the High Court, Accra for the return of his money, interest
on it and damages. Before hearing was concluded the plaintiff received the spare parts and he
therefore abandoned the claim for the purchase price and interest. The claim for damages was
however upheld by the High Court on the ground that the defendants had failed to deliver the
spares to the plaintiff within three months as was indicated in the telex quotation.

On appeal against the decision, the court held, allowing the appeal: (1) The import of the
words "for Japan" appearing at the head of the telex message sent to the defendants showed
clearly that the time for delivery was the time for delivery in Japan. The contract was of the
type known in commercial circles as a free on board (FOB) contract. It was a type of contract
which the Sale of Goods Act, 1962 (Act 137) recognized and enforced and it was to be
distinguished from a cost insurance freight contract (CIF) under which the seller assumed the
responsibility for shipping the goods to the buyer. The rules governing FOB contracts in
section 62 of Act 137 provided, inter alia, that unless a contrary intention appeared the buyer
was to nominate a ship to carry the goods and the duty of the seller was to have the goods
loaded on the ship at his own expense. The seller assumed no responsibility for insurance or
freight nor did he give any guarantees as to the time of arrival of the ship at its destination.
The only representation therefore which the suppliers made was that they were ready, willing
and able to deliver the goods within three months to any port in Japan nominated by the
defendants and load them at their own expense on the ship designated by them. (2) As
between the plaintiff and the defendants the agreement was one of agency and not of sale of
goods. When a supplier agreed to procure goods for another he might do so as the latter's
agent or as a principal party standing towards him in the relationship of a seller. A supplier
who was a seller would ordinarily contract to supply the goods at an agreed price whatever
might be the cost to himself, and would undertake absolutely to do so; a supplier who was an
37
agent would merely bind himself to use due diligence to fulfil the order. In the instant case,
the defendants never delivered to the plaintiff a pro forma invoice of their own stating the
price at which they would sell the goods to him, or the time within which they would deliver
them. All they did was to give him a copy of the telex from the suppliers and asked him to
pay the cost of the goods calculated from the unit prices given therein. The obligation which
the defendants assumed towards the plaintiff was that of using their best endeavors to procure
the goods for him on the most favorable terms available and on the evidence they were not
responsible for the delay which occurred.

1.4.2 MODES OF DELIVERY

Section 18-Means of Delivery

(1) Unless otherwise agreed the seller may deliver the goods to the buyer by-

(a) Transferring to him the actual physical control over the goods; or

(b) Transferring to him the means of obtaining actual physical control over the goods; or

(c) Transferring to him documents of title to the goods.

(2) Unless a contrary intention appears, delivery of the goods to the buyer's agent or to his
order is a delivery to the buyer.

(3) Unless a contrary intention appears, delivery of the goods to a carrier, pursuant to, or
consequent upon a contract of sale, for transmission to the buyer is a delivery to him.

(4) Where the goods are in the possession of a third party they are delivered to the buyer
when the third party acknowledges to him that he holds the goods on his behalf.

Provided that nothing in this subsection affects the operation of the delivery of any document
of title.

Most contracts for the sale of goods may specify expressly the mode of delivery of the goods.
However, in the absence of such express provisions the seller may deliver the goods to the
buyer in any of the following ways:

a. By transferring to the buyer actual physical control over the goods.

b. By transferring to the buyer the means of obtaining actual physical control over the goods.
Eg. giving the buyer keys to a vehicle.

38
c By transferring to the buyer the documents of title to the goods.59 This gives the buyer the
legal control and this must be accompanied by the transferor's intention to transfer without
which the transfer is in-effective.

TABURY V. G.C.B. [1980] G.L.R. 90

The plaintiff, a fish dealer, based in Dakar, Senegal, sued the Ghana Commercial Bank for
unlawful arrest, wrongful imprisonment and recovery of 339 bags of salted fish or their value
wrongly seized by persons acting on behalf of the defendants. According to the plaintiff,
sometime before 1971, he appointed Ekua Manang and her sister Ama Atta as her agents in
Ghana. As part of the agreement, Ama Atta was the person appointed to receive all
consignment of fish sent to Ghana by the plaintiff. In September 1976 the plaintiff sent to
Ama Atta 1,108 bags of salted fish (with the bill of lading endorsed in the name of Ama Atta)
and later came over to Ghana to take delivery of the fish with her. The fish was later
distributed to their customers. On one occasion when the plaintiff and the two sisters were
taking delivery of 339 bags of salted fish recovered from a customer who was unable to pay
for them, they were arrested by a team of soldiers who were led by a major. They were then
informed that the soldiers had been sent by the manager of the Sekond! branch of the Ghana
Commercial Bank to arrest them for Ama Atta's failure to repay a loan granted her by the
bank. The three persons were taken in an army truck, accompanied by armed soldiers to the
office of the bank manager where a discussion took place as to [p.91] how Ama Atta was to
repay the loan. Meanwhile the plaintiff had been protesting all along that he did not owe the
bank, and the fish being delivered did not belong to Ama Atta, but to him but all his protests
fell on deaf ears. After the discussion, the plaintiff, Ekua Manang and Ama Atta in the
company of the soldiers were taken back to the warehouse where the fish was being kept. The
bags of fish were checked, and the doors locked until all the fish got rotten. Not long after
this incident, the plaintiff instituted the present action asserting that the Ghana Commercial
Bank was liable for the actions of the bank manager and the soldiers.

The court held that:

(1) The delivery of the bill of lading operated as a symbolical delivery of the cargo, and
whether property in the goods by the endorsement and delivery of the bill of lading would
pass, would depend upon the intentions of the parties that the property should pass. In the
present case there was no agreement between the parties that the possession of the fish was to
pass to Ama Atta with the delivery of the bill of lading to her. That in this case, although the

59
s. 18(1)

39
agent's name was on the bill of lading, title did not pass to the agent. The agent only took
delivery of the goods.

In the absence of a contrary Intention, the delivery of the goods to the buyer may be affected
indirectly by the delivery to the buyer's agent or to his order or by the delivery to a carrier for
transmission to the buyer.60 Once done in accordance with this section, it is deemed as prima
facie delivery to the buyer. It must be stated that if the contract provides that the seller is
authorized or required to send the goods to the buyer by a carrier, there is an implied
condition that the seller should make such a contract with the carrier on behalf of the buyer as
may be reasonable having regard to all the circumstances of the case. If the goods are sent by
the seller to the buyer by a route involving sea or air transit in circumstances in which it is
usual to insure, the seller must give such notice (if any) as may be required by the buyer to
enable him insure them during the sea or air transit. If the seller fails to give such notice, the
goods will be at the seller's risk during such transit unless the parties agree otherwise.61

Also, the goods may be in the hands of a third party and thus delivery to the buyer may be
effected when the third party acknowledges to the buyer that he holds the goods on the
buyer's behalf. This however is without prejudice to the obligation of the seller to deliver to
the buyer any necessary documents of title to the goods.62

1.4.3 POINT/PLACE OF DELIVERY

Section 19-Place of Delivery

Unless a contrary intention appears the place of delivery is the seller's place of business. If he
has one, and if not, his residence:

60
Ibid, 18(2) & (3)

61
Ibid, 20(1) & (2)
62
Ibid, 18(4),

40
Provided that in a contract for the sale of specific goods which to the knowledge of parties
when the contract is made ore in some other place, then subject to any contrary intention that
place is the place of delivery.

The point and place of delivery is very important because it determines whether proper
delivery has indeed taken place and also it determines the point beyond which the seller is not
obliged to carry the goods beyond.

Unless otherwise provided in a contract for the sale of goods, the place of delivery is the
seller's place of business if he has one and if not, his residence. However, where the sale is of
specific goods, which to the knowledge of the parties, is in some e other place when the
contract is made, then that place is the place of delivery unless a contrary intention appears.63

Also, the expenses incurred in putting goods into a deliverable state must be borne by the
seller and not the buyer unless it is otherwise agreed.64

NB: It is worthy of note that the rules on the place and point of delivery seem to be concerned
with delivery of goods under the mode of transferring to the buyer actual physical control
over the goods. However there are other modes such as where the documents of title to the
goods are transferred. It is normally uncertain where delivery is deemed to occur. It is
submitted that the point of delivery should be the point and place where payment is made and
documents are delivered since it normally is not done at the business place of the seller. But
another question arises where payment is made at a different place and time as opposed to the
date of delivery of the documents. This may poses problems and thus there is a need to make
these rules certain.

1.5 DUTIES OF THE BUYER

Section 21-Fundamental Obligations of the Buyer

The fundamental obligations of the buyer in a contract of sale are to pay the price and accept
delivery of the goods.

63
Ibid, s. 19.

64
Ibid, s. 17 which provides that unless otherwise agreed, the expenses of and incidental to, putting the goods
into a deliverable state must be borne by the seller.

41
Section 22-Payment Concurrent with Delivery

Unless otherwise agreed the buyer must be ready and willing to pay the price in exchange for
delivery of the goods.

Section 23-Time of Payment and Accepting Delivery

Unless otherwise agreed stipulations as to the time of payment or as to the time for accepting
delivery are not conditions of a contract of sale.

Section 24-Buyer not bound to Accept Delivery by Installments.

Unless otherwise agreed the buyer is not bound to accept delivery of the goods by
installments.

Just as done for the seller above, the buyer also has certain fundamental duties and
obligations to perform in every contract for the sale of goods. They are found in sections 21-
24 of the Sale of Goods Act. The fundamental duty or obligation of the buyer under the Sale
of Goods Act is to pay the price and accept delivery of the goods

Thus the fundamental duties are:

a. Payment of the price to the seller.

b. Acceptance of delivery of the goods by the seller.

1.5.1 PAYMENT OF PRICE

The buyer must be ready and willing to pay the price of the goods at the time they are
delivered to him unless the contract provides otherwise. Normally, buyer must make payment
at the seller's place of business. However modern contracts provide different modes of
payment due to the sophisticated means of payment. This can be done by cash, cheque,
electronically, banker's draft, etc... But these may have different associated problems eg, the
problem with cheques is that, if the buyer lacks funds the cheque would be dishonored. This
means the seller may have to sue the buyer on the cheque or on the original consideration
given by the buyer. If the cheque is not paid the seller becomes unpaid seller under the Sale
of Goods Act with rights over the goods if the buyer has not taken possession of the goods.

42
1.5.2 TIME OF PAYMENT

As said earlier, the buyer must be ready and willing to pay the price of the goods at the time
they are delivered to him unless the contract provides otherwise.65 The seller is to be paid at
the time expressly agreed upon under the contract and in the manner so agreed. Stipulations
as to the time of payment or time of acceptance are not of the essence of the contract (l.e. not
a condition of a contract) unless the parties otherwise agree. Also, where the money is needed
by the seller to complete some other transaction and this fact is known to the buyer at the
time of the contract then, the time of payment by implication becomes the essence of the
contract. It is the case that where property has passed, the seller cannot seize the property but
his remedy lies in asking for the money together with interest. This right of the seller is
however subject to two conditions namely that the seller must be ready and willing to tender
the delivery of the goods in exchange for the price and secondly that the seller must show that
the property in the goods has passed to the buyer.

1.5.3 DUTY TO TAKE DELIVERY

It is the case that upon the payment of price, the buyer is required to take delivery of the
goods delivered by the seller. Thus, where the buyer fails to take delivery over a long time it
is a breach and the buyer will be deemed to have abandoned the contract and the seller may
repudiate same. Where the goods are of a perishable nature, the buyer's duty to take delivery
at the time indicated is of essence to the contract though generally time of acceptance is not
an essence of the contract for sale of goods. The buyer's failure therefore to take delivery will
entitle the seller to dispose of the goods. A buyer is not bound, in the absence of an express
agreement, to accept delivery of de goods by installment.66

A buyer is thus deemed to have accepted the goods when -

a. He makes know to the seller that he accepts them.

b. He does not, within a reasonable time, make known to the seller that he rejects them.

He wrongfully refuses or neglects to place the goods at the disposal of the seller after
notifying the seller that he rejects them.67

65
Ibid, s. 22
66
Ibid, s. 24
67
Ibid, s. 52
43
CHAPTER 5

TRANSFER OF PROPERTY & RISK

1.0 TRANSFER OF PROPERTY

In a contract of sale of goods, one of the fundamental points worth discussing is the passing
of property in goods from the seller to the buyer. Specifically, transfer of property deals with
the determination of a point in a sale of goods transaction when the seller ceases to be the
owner of a property and the buyer becomes the owner of it. Transfer of property is basically
the transfer of title or ownership from the seller to the buyer.68 Property in goods must
however be distinguished from possession of goods. The passing of property in goods is an
act independent of delivery and possession.69 This means that the owner can become the
owner of the goods before they are actually delivered to him and the seller can retain property
after delivery. However, possession simply refers to the custody of goods. 70 Thus, property in
goods may pass from the seller to the buyer but the goods may be in possession of the seller
as bailee or as an unpaid seller. In other cases, the property in goods may remain in the seller
even though the goods are in the possession of the buyer or his agent or a carrier for
transmission to the buyer.

Usually the intention of parties in a transaction remains the focal point for determining the
time at which property in goods are transferred unless a different intention appears. However,
parties in a contract of sale in most transactions do not unequivocally reach a consensus on
when property in goods is to pass. In the absence of any express Intention by the parties as to
when property in the goods (the subject matter of the contract) is to pass, the Sale of Goods
Act applies.

Under the Sale of Goods Act, the rules governing the transfer of property depend upon the
type of goods. The Act has classified goods into four: (i) unascertained goods (ii) specific
goods (iii) future goods and (iv) goods delivered on sale or return basis (which could either
be specific or unascertained).

From the foregoing, the singular most recurring theme appears to be "transfer of property".
Thus, the question which naturally emerges is: 'what is the importance of the transfer of
property or title? Transfer of property is important for the following reasons:

68
Complete Principles of Business Law, page 301
69
English Commercial Law, Dr. A.E Platsas, page. 15

70
mercantilelaws.blogspot.uk/2012

44
1. Usually, the Passage of property determines at what time the buyer will have the right to
deal with the goods.

2. Transfer of property determines the person with the locus standi to sue if the goods are
destroyed/damaged by a third party.

3. Passage of property gives the seller the right to sue for the price if buyers default in
payment.

4. Also, in the case of destruction of the goods by fire or other accidental cause, it is
necessary to know which party has to bear the loss.

5. In the case of the bankruptcy of either seller or buyer, it is necessary to know whether the
goods belong to the trustee of the bankrupt or not.

6. Risk prima facie, passes when property passes.

7. Finally, during a buyer's insolvency (i.e. inability to pay a debt) and there is a retention of
title clause, the interest of the seller will be protected even if the goods are still in the buyer's
possession.

Having discussed the importance of knowing when property in goods passes from the seller
to the buyer, it is important to state that, the type of goods in question determines when
property in the goods passes. The position of the law with regard to transfer of property in the
various types of goods delineated above will be discussed below.

1.1 UNASERTAINED GOODS71

Section 25-Goods Must be Ascertained.

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.

Property in unascertained goods can only pass if the goods are ascertained. Therefore it can
be argued that, a purchaser of unascertained goods to be delivered to him has no proprietary
interest in the goods he has paid for and is merely a creditor who can only sue for the return
of the price paid. The question then is, what is meant by ascertained goods?

Section 81 of the Sale of goods Act, 1962 defines ascertained goods as goods identified and
agreed in after a contract is made. This definition only provides a myopic view on what is

71
25 of the sale of goods Act, 1962(Act 137)

45
meant by ascertained goods. Reference will therefore be made to definitions given in decided
cases in an attempt to provide a clear understanding on what is meant by ascertained goods.

The statement of Pearson J. in the case of Carlos Federspiel Charles Twig72 is instructive in
understanding the meaning of ascertained goods. The learned Judge opined: The mere fact
that the goods are set apart is not enough... because the seller can change his mind and use the
goods to perform another contract where the goods are part of a bulk consignment, the
portion sold to the buyer must be appropriated to the buyer at which time property passes to
the buyer.73

In a nut shell from Pearson J's view, goods are ascertained when the goods have been
appropriated unconditionally to the buyer. It was also stated by Atkin LJ in the case of Re
Wait74 that, ascertained goods are unascertained goods which later become identified as the
goods to be delivered to the buyer as a results of those goods becoming separated out and
irrevocably earmarked for the buyer in accordance with arrangement made after the tie the
contract was concluded.

The combined effect of the above definitions is that Goods become ascertained when they are
earmarked or identified to the contract in a manner that the seller demonstrate an intention
that these particular goods fulfils the description of the goods as contained in the contract.

The cases below are instructive on the transfer of property of unascertained goods:

CARLOS FEDERSPIEL V. CHARLES TWIGG (1957) 1 Lloyds Rep. 24075

In this case, the seliers agreed to sell bicycles to the plaintiff "free on board" United
Kingdom. The plaintiff made payment for the purchase of the bicycles. The bicycles were
manufactured and packed into containers with the buyers name and address. The goods were
registered for consignment and ordered shipping space in a named ship. The sellers made
preparations for the shipment of the goods bu. same were not shipped. The seller's inability to
ship was due to the fact that their company went into liquidation. The plaintiff thus sued for
the goods arguing that property in the goods has passed, hence the bicycles are theirs

72
(1957) 1 Lloyds Rep. 240. See also Hendy Lenox (Industrial Engines) Ltd v Graham Puttick (1984) 2 ALL
ER 152; and Karlshamns Oljefabriker v Eastern Navigation Corpn, The Elafl (1982) 1ALL ER 208.

73
Ibid.

74
(1927) 1 Ch 606
75
(1957) 1 Lloyds Rep. 240

46
The court rejected the plaintiff's argument and held that merely segregating the bicycles into a
container by the defendants with the buyers name on it did not amount to sufficient
unconditional appropriation. Therefore the property in the goods has not passed Thus though
the buyer had already paid, it was still held that he had not obtained any property in them, the
seller having been wound up before the goods had been shipped. The seller had not finally
appropriated the goods to the contract prior to their shipment.

Pearson J. stated that the intention of the parties was that the property in the goods should
pass on shipment and that there was no such prior appropriation of goods and assent thereto
as would pass on shipment. This is because in Free on board contracts, property in the goods
passes at the option of the buyer when the goods are shipped."76

Again, the courts have held that, property will pass to buyer in a bulk consignment of goods
remaining if the total amount of goods contracted for can be aggregated and ascertained by
exhaustion.77

KARLSHAMNS OLJEFABRIKER V EASTPORT NAVIGATION CORPN, THE ELAFI

[1982] 1All ER 20878

The plaintiff purchased 6000 tons of copra to be delivered at a port in Sweden, He received
bills of lading for the 6000 tons. The sellers shipped 22,000 tons of copra which were carried
in the Elafi part of which was intended to the plaintiff and the rest of which was for other
buyers. All the copra which had been sold to other buyers had been offloaded at Hamburg
and Rotterdam, leaving only sufficient to meet the two sales to the plaintiff. However during
the discharge, about 825 tons of copra was damaged by water. The plaintiff sued the ship
owners in the tort of negligence. The ship owners claimed that at the time of the damage to
the cargo, the buyers had no title and therefore could not sue. The thrust of this case was
whether the property in the goods has passed to the buyer and if so when the property in the
goods passed.

The Court held that, property could not have passed on shipment of upon the transfer of the
bill of lading. The ship first stopped at Rotterdam and then at Hamburg, discharging the copra
meant for the other buyers, and hence it was clear that the copra left on board was for the
plaintiff Therefore, the goods became ascertained when discharge was complete in Hamburg
and the buyers could then say all the copra on board was destined to them

76
See section 62(f) of the sale of goods Act 1962
77
Karlshamns Oljefabriker v Eastport Navigation Corpn. The Elafi (1982) 1All ER 208.

78
[1982] 1All ER 208.

47
NB: Mustill slated that at this point, the property has been ascertained by exhaustion.
Therefore the property has passed to the plaintiff. The claim against the ship owner was
therefore successful.

Another case which throws more light on the passage of property in a contract for the sale of
goods is the case of:

HENDY LENNOX (INDUSTRIAL ENGINES) LTD V. GRAHAME PUTTICK LTD79

The Plaintiff, Lennox supplied Grahame Puttick with diesel engines, under a contract which
reserved their title as sellers until final payment of the price. The engines were incorporated
into generating sets which would then be sold Puttick's customers; but each engine remained
identifiable by its serial number and could be unbolted from the generating set. At the time
when Puttick was in possession of 3 generating sets, Puttick went into liquidation. Two sets
were however in a deliverable state. Lennox brought an action against Puttick to claim the
engines supplied to Puttick arguing that property has not yet passed to the buyers.

The court held that, the property in the goods has passed to Puttick's customers. Therefore
Lenox could not claim the two engines since they were in a deliverable state, thus
unconditionally appropriated to the buyers. However, since the third set was not in a
deliverable state, (although the engines had been fixed) Lenox could assert a proprietary
claim to retake that engine. The court arrived at this decision because of the absence of any
statement in the clause expressly dealing with the proceeds of sub sales or a fiduciary
relationship, which was fatal to the claim of the plaintiffs.

From the above case, it is suggested that in order for sellers to adequately protect themselves
from such situations, the sellers must ensure that the buyers register a charge created by the
buyers themselves over the goods in which the sellers will be able to take possession and titie
to the goods should its customers fall to pay their debt.

In sum, property in an unascertained goods can only pass if the goods ascertained. Goods are
only ascertained when they are unconditionally appropriated to the contract either by the
seller with the assent of the buyer or the buyer with the assent of the seller. Also, where the
goods are part of a bulk consignment and all the other consignment have been delivered
leaving sufficient goods for the buyer, the remaining goods can be ascertained by exhaustion
thereby making it possible for property to pass.

79
[1984] 2 All ER 152

48
NB: If there is a sale of a quantity of goods out of a larger quantity, e.g. 10 tons of scrap iron
out of a heap in Kojo's yard, the property will only pass on the appropriation of the specified
quantity by one party with the assent of the other. If the buyer has told the seller to send the
goods by rail or some other mode of carriage, he will be deemed to have given his assent in
advance to the subsequent appropriation by the seller of the goods he has put on the rail.

1.2 SPECIFIC GOODS

As defined in section 5 of the Sale of Goods Act 1962, Specific goods are goods identified
and agreed on before or at the time of the contract. In proffering a suitable solution to the
question of when property passes under specific goods, subsections 1 -3 of section 26 of Act
137 provide a useful indication of the various modes under which property passes in specific
goods.

According to section 26(1) of the sale of goods Act, 1962,

Section 26-When Property Passes

1) The property in goods passes under a contract of sale when parties intend it to pass This is
however subject to the provisions in section 25 of the sale of goods Act.

The sections provides for intention as a sine qua non for the passage of property in specific
goods. Unfortunately the Sale of Goods Act offers no clue as to how intention is determined.
In the absence of any clear provisions in the Act 137 as to what constitutes intention, resort
will be made to the English Sale of Goods Act.

Precisely section 17(2) of the English sale of goods Act provides that, the intention of the
parties can be determined through the terms of the contract, conduct of the parties and
circumstances of the case.

The combined effect of section 26(1) and the provision in the English sale of goods Act leads
to the inevitable conclusion that property passes when the parties intend it to pass and this
clarity of intention depends solely on the terms of the contract and the fact in the given case.

In most situations, the passing of property is governed by the express contractual provisions.
The seller under this may insist on having a term in the contract to the effect that property
will only pass upon payment of the purchase price. This is usually referred to us the Romalpa
or the Retention of title clause or Reservation of title clause.

49
According to LS Sealy & HJA Hooley80, a retention of title clause is a clause in a contract of
sale which may stipulate that the seller shall retain the title to the goods until a stated even
has happened and in particular, until the seller has been paid the price and this may be done
even though the buyer is given possession of the goods.

The learned authors further remark that, the term retention of title has, however, has a special
connotation in a commercial context as a result of the land mark decision in Aluminum
Industries Vaassen BV v Romalpa Aluminum Ltd.81 The Romalpa cases are concerned with
goods often of a consumable kind-which both parties contemplate may be used up or
disposed of in some way before the price is paid, and the main risk for the seller is the buyer's
insolvency. Thus, in

ALUMINUM INDUSTRIES VAASSEN BV V ROMALPA ALUMINUM LTD [1976] 1

WLR 67682

The plaintiff supplied aluminum foil to Romalpa who based in England, on AIV standard
term of trading. A clause in the terms of trading read as follows; "The ownership of the
material to be delivered by AIV (that is the plaintiffs) will only be transferred to purchaser
when he has met all that is owing to AIV, no matter on what grounds". Thus the contract
stipulated that title to the goods did not pass to the defendants until they paid in full the sum.
The defendant went into liquidation when they had not finished paying the contract sum. The
defendants however, had in their possession unprocessed aluminum worth £50,000 and an
amount of £35,152 representing the proceeds of sub sale of foil which had been made by the
defendants (Romalpa). The plaintiffs sought an order to recover the goods (the unprocessed
aluminum foil) which were in the possession of the defendants.

The court held that (i) the plaintiffs claim to the unprocessed aluminum prevailed over that of
the receiver because AIV's had effectively retained title to it; and (ii) that AIV was entitled to
the money representing the proceeds of sub sales on the basis of the doctrine of tracing
established in Re Haslett's Estate(1880)

The decision in the Romalpa case has been criticized because it allows a seller to create a
secret form of security over the goods. Secondly, the buyer's creditors are also deceived since

80
Commercial Law Text Cases and Materials 48th Edition at page 452
81
[1976] 1 WLR 676.

82
Ibid.

50
title to the goods remains in the seller.83 It is expedient to note that retention of title clause is
only applicable under the following conditions or situations.

1. Where the goods must be identifiable.84

2. Where the goods have not being resold so as to rob the seller or the buyer of property in
the goods.

3. Where the goods are in their original state.

4. Where the buyer is still in possession of the goods.

Certain problems have been identified with retention of title clause. They include:

1. Usually a problem can arise where the goods sold are mixed with other goods of similar
nature, so that they are no longer identifiable.

2. Where the seller tries to have a clause which provides that if the buyer resells the goods,
then the proceeds of sale of the goods shall be held on trust for the seller, this can be re-
characterized as a registerable charge, which may also be void for non- registration

3. Another frequently litigated problem occurs where the goods which are subject to the
clause are then either improved or mixed with other raw materials to form a new product.85

NB: It must be noted that there are many different types of clauses in circulation and many
cases turn upon their individual facts or the wording of the clause at issue. If the clause states
that the supplier remains the owner of the goods until payment, the clause will be effective
and enforceable. This type of clause is usually referred to as simple clause. It is important that
the clause expressly states that the owner remains the legal owner of the goods. If the goods
are to remain only in the equitable ownership of the supplier the clause is likely to be
interpreted as a charge.

The case of Re Bond Worth Ltd deals with such a situation.

RE BOND WORTH [1980] Ch 228

The supplier sold synthetic fibre to the company. The company used this fibre in a
manufacturing process to make carpets. The fibre had therefore undergone a manufacturing
process and was no longer identifiable as the fibre supplied. The terms of the supply claimed

83
Commercial Law Text Cases and Materials 48th Edition, LS Sealy & HJA Hooley

84
Indian Oil v Greenstone Shipping (1987) 3WLR 869.

85
Re Peachdart (1984) Ch 131.

51
that the supplier remained the equitable owner of the fibre and had an equitable interest in
any mixed goods such as the end product, the carpet. The court therefore refused to recognize
that any trust of the carpets had been created. The clause was held to have created a floating
charge only in favor of the supplier which was void for non-registration. The court viewed
the clause as an attempt to give the supplier some security interest over the assets of the
company. As this interest in the company's assets was defeasible upon the payment of money,
in that as soon as the fibre was paid for the interest lapsed, the interest could not only be the
way of charge.

Section 26(2) of Act 137 also provides another mode in which property will pass in a contract
of sale of Specific goods. The section provides that:

"Unless a different intention is apparent, property in the goods passes under a contract of sale
when they are delivered to the buyer"

Thus the section is to the effect that aside the intention of the parties to a contract, property in
goods can be said to pass when the goods are delivered to the buyer. This statutory provision
has also received judicial backing in the case of Ghana Rubber Products Ltd. V. Criterion Co
Ltd86 in which the court held inter alia that that the property in the goods passed upon
delivery. Also in the case of Birch V Asempa & Another87, the court per Acquah J. opined
that after delivery has taken place, both the property and the risk in the goods pass unto the
buyer. The facts culminating this case is that:

BIRCH VASEMPA & ANOTHER [1992] 2 G.L.R. 416,

The plaintiff and the brother, one Adekpuitorm bought 7,000 six inches cement blocks from
this Seth Awumah on 9 December 1981. A receipt was issued to evidence the sale After the
sale they collected in bits 2,640 out of them, leaving 4.360 blocks at the premises of Seth
Awumah. After the death of Seth Awumah, which death occurred in 1984, she went for the
remaining 4,360 blocks, but the blocks were nowhere to be found. She and her mother
therefore called on the head and other members of Seth Awumah's family to demand the
return of the blocks, but the family refused. She therefore instituted this action on of herself
and Adekpultor: "against the defendants jointly and severally as administrators of the estate
of the late Seth Awumah for the return to her of 4,360 6" blocks being the balance of 7,000
blocks which the plaintiff and her brother, Kudzo Adekpultor, purchased and paid for from
Seth Awumah now deceased in 1981 or the current value. One of the major issued considered
in this case was whether or not 4,360 of the blocks remain wholly undelivered.

86
(1984-86) 2 G.LR. 56.

87
[1992] 2 G.L.R. 416
52
The court held that the contract of sale of the 7,000 blocks was negotiated and concluded
when the purchaser tendered the full purchase price to Seth who received same, gave a
receipt to the purchasers (plaintiff) and delivered the 7,000 blocks which were at his premises
to the purchasers (plaintiff). The property in the goods together with the risks in them then
passed onto the purchasers with the consequence that the entire or part of the blocks which
were left at the premises of S were on account of sections 26(2) and 27(1) of Act 137 left
there at the purchaser's own risk. Hence, it was clearly untenable to talk of breach of contract
by S or his personal representatives in the circumstances. Thus according to the court,
delivery took place when the receipt was issued and both the property and the risk in the
goods passed unto the plaintiff.

YIRENKYI v TORMEKPEY [1987-88] 1 GLR 533-539

The plaintiff-respondent (T) bought a second-hand Toyota truck for $157,000 from the
defendant-appellant (Y), a motor vehicles dealer. He then spent e56,860 to make substantial
repairs to rehabilitate the truck. In a subsequent action he brought against Y to recover both
sums and for damages for loss of use, he pleaded that after taking delivery of the truck he
found that contrary to the warranty given by Y to him, the truck was not roadworthy, and that
Y then authorized him to have the truck repaired and promised to refund the cost of repairs.
However, despite persistent demands, Y had refused to make the refund. He also claimed that
as a result of Y's failure to transfer ownership of the muck to him, he had not been able to use
it and had thereby sulered substantial loss. Although Y admitted receipt of the purchase price,
he denied having pven T any warranty and claimed that before T bought the truck he brought
his ow mechanics to examine it. He also denied having agreed to refund the cost of repairs.
He also pleaded that before T bought the truck he had made him aware that the owner was
out of the jurisdiction and so he would not be able to effect the transfer immediately. T then
moved for summary judgment under Order 14 of the High Court (Civil Procedure) en the
ground that Y had admitted receiving the purchase price. The trial judge allowed the motion
on the grounds that (1) T was entitled to repudiate the contract return the vehicle and claim
the refund because Y was in breach of the implied condition under the Sale of Goods Act
1952 (Act 137), s. 13 (1) (b) that the vehicle was reasonably fit for the purpose it was
required, and (U) the failure to transfer ownership in the truck at the time of delivery, without
any agreement to the contrary, was in breach of sections 10 (1) and 15 (1) of Act 137 and
consequently title did not pass. He, however, gave y leave to defend the other reliefs. Y
appealed on the grounds that (a) the pleadings disclosed several disputable issues which
could only be resolved by evidence; and (b) the trial judge had failed to appreciate that the
relief was based on breach of contract which he had denied

53
Held, allowing the appeal:

(1) the trial judge's finding that title and property in the goods had to pass at one and the same
time was wrong because section 26 (1) of the Sale of Goods Act, 1962 (Act 137) provided
that the property in ascertained goods passed under a contract of sale when the parties
intended it to pass and section 26 (2) also stipulated that unless a different intention appeared,
the property in the goods passed under a contract of sale when they were delivered.

(2) The trial judge was not entitled to conclude without evidence that there was a breach of
warranty that the vehicle (a second-hand one) was reasonably fit for the purpose for which it
was required, especially as the allegation of un-roadworthiness, deposed to by the plaintiff,
was denied by the defendant. The judge should have admonished himself that in buying a
second-hand car defects might appear sooner or later, and that in the absence of an express
warranty the buyer had no redress. And even if he bought & from a dealer the most he could
require was that it should be reasonably fit for the purpose of being driven along the road.
Dictum of Lord Denning M.R. in Bartlett v. Marcus (Sidney) Ltd. [1965] 2 All ER 753 at
755, CA. applied.

Sometimes the parties may enter into the contract for delivery to be made on approval or "on
sale or return". Section 26(3) of Act 137 clearly provides when property is to pass under
contract entered into on such terms. The seller under this section is merely making an offer of
sale to the buyer, Where the buyer accepts the offer, the property in the goods passes to the
buyer. ie. when the buyer signifies his approval or acceptance to the seller, or coes any act
adopting the transaction or if he retains the goods, without giving notice of rejection, beyond
the time fixed for the return of the goods or if no time is fixed, beyond a reasonable time. The
provisions in section 26(3) as to when property passes are stated below:

"Where goods are delivered to the buyer on approval or on sale or return" or other similar
terms, then, in the absence of a contrary intention, the property therein passes to the buyer-

(a) When he signifies his approval or acceptance to the seller or does any other act adopting
the transaction:

(b) 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 such time, and if no time has been fixed, on the expiration of a reasonable
time."

54
In the case of Kirkham V. Attenborough88 the court defined "any other act adopting the
transaction as being an act inconsistent with his being other than a purchaser.

KIRKHAM V. ATTENBOROUGH [1895-9] All E.R. 450

In this case, the plaintiff, a manufacturing jeweler brought an action against a pawnbroker to
recover property pledged by a man of the name of winter. The plaintiff had delivered to
Winter a large quantity of jewelry on sale or return. Winter also pledged the goods with the
defendant a pawnbroker. The plaintiff brought an action claiming the return of the goods or
their value.

The court per Bonsey (C. L. Attenborough with him), held that "By the Sale of Goods Act,
1893, s. 18, r. 4(a): "When goods are delivered to the buyer on approval or on sale or return
or other similarcterms the property therein passes to the buyer: When he signifies his
approval or acceptance to the seller or does any other act adopting the transaction." A person
who receives goods on sale or return recelves them with an option of becoming owner, and
the evidence that winter adopted the transaction is that he put it out of his power to return the
goods. The property in the goods thereupon passed to him, and the only remedy of the
plaintiff is by action against him for the price."

In Genn. Winkel: the court had to consider whether or not a buyer, passing goods to a second
and subsequently passed to the third and fourth buyer for approval, was another act adopting
the transaction under the original 14 day approval contract it seems from the judgments that
when the sub-buyer accepts the goods sold to him by a buyer, the buyer adopts the
transaction and property passes to the buyer. If on the other-hand the sub-buyer does not
accept the goods and returns them to the first buyer within the approval period, property will
not have passed to the first prospective buyer.

GENN V. WINKEL [1911-13] All E.R. Rep. 91089

In this case, the plaintiff delivered diamonds to the defendant on sale or return. The defendant
in turn handed it to a third party on the same terms. The third party also handed the diamonds
to a fourth person on the same terms. But the diamond got lost whiles in possession of the 4
person. The issue was whether the property in the goods has passed to the defendant. The
court held that, since the defendant was unable to return the goods to the plaintiff, the
transaction had been adopted, i.e. property has passed and he was responsible to him for their
loss.

88
(1895-9) All E.R.450
89
(1911-13] All E.R. Rep. 910.

55
Fletcher Moulton LJ said a person who receives goods on sale or return and at once passes
them on to someone else under a like contract is entitled to demand them from that third party
just as soon as the original owner of the goods has the right to demand the from him, but I am
clear, if he allows a period to elapse before he hands them on to a 3rd person on sale or
return, he has done an act which limits and impedes his power of returning the goods. If 14
days be a reasonable length of time in such a contract in this particular trade and if he waits 7
days before entrusting the goods to a 34 person on sale or return, that 3rd person has the right
to keep them as against him for 14days."

WEINER V GILL [1906] 2 K.B. 574

K delivered jewelry to W on the terms that it was to remain K's property until settled for or
charged, the property would not have passed to W until either of those events happened.

From above provisions, we can infer that delivery under section 26(3) mainly consensual
agreement. Special notice should therefore be taken of the fact that e delivery on approval or
'on sale return' is a consensual arrangement, the seller could not force someone to accept the
goods on an unwilling recipient and then turn around and claim that silence implies consent.
The cases discussed below throw more light on the transfer of property under contract
requiring goods to be delivered on approval or on sale or return.

NB: It must be stated that under Common Law where there is an unconditional contract for
the sale of specific goods in a deliverable state, the property passes to the buyer when the
contract is made. Deliverable state means such a state that the buyer would be bound to take
delivery of them. The fact that the time of delivery or the time of payment is postponed does
not prevent the property from passing at once. For example if X goes into a shop and buys a
hat, asking the shopkeeper to send it to his house and to put it down to his account, and the
shopkeeper agrees to do so, the hat immediately becomes the property of X.90

But where there is a contract for the sale of specific goods not in a deliverable state Le the
seller has to do something to the goods to put them in a deliverable state, the property does
not pass until that thing is done and the buyer has notice of it.

Where even the contract is for the sale of specific goods in a deliverable state, but the seller is
bound to weigh, measure, test or do something with reference to the goods for the purpose of
ascertaining the price, the property does not pass until that thing is done and the buyer has
notice of it.

90
Judge Charlesworth LL.D, Principles of Mercantile Law, 8th Ed. Stevens and Sons Ltd, 1955 pg. 132.

56
2.0 TRANSFER OF RISK

The transfer of risk in the contract of sale is a question of great practical significance because
of its potential for harsh consequences. Risk involves the allocation of loss due to goods
being damaged, destroyed or lost by an external event for which neither party is responsible.

Risk of loss rules establish whether (a) the seller may still recover the price of the goods, and
(b) whether the buyer must pay for the goods and take delivery, despite the fact that they are
partially damaged or totally destroyed. The transfer of risk rules are ius dispositivum (laws
adopted by consent). Therefore, reference to actual rules as to the transfer of risk is necessary
only if the parties have not contractually provided for the transfer of risk.

Generally 3 rules have been expounded to include the risk of loss rules which establish
whether (a) the seller may still recover the price of the goods, and (b) whether the buyer must
pay for the goods and take delivery, despite the fact the goods are partially damaged or totally
destroyed.91

It is important to pay particular attention to the transfer of risk in a sale of good due to the
outlined reasons below:

It informs one that after the risk has passed,

1. The Seller will not generally be responsible for the loss or damage to the goods

2. If goods are lost or damaged seller can nevertheless claim the payment from the buyer's

3. 1f goods are lost or damaged the buyer should look to the insurance company

4. Where the subject matter of the contract has not been insured, the carrier of the goods is
responsible for any damage to the goods.92

The general rule governing the passage of risk is that, the risk prima facie passes with the
property. It is a general rule which is subject to exceptions, which can be created through the
agreement between the parties.

The principle is thus 'res perit domino'- things perish to the detriment of the owner

In this section, attention will be devoted to the provisions of the sale of goods Act, 1962 on
passing of risk. Before proceeding to examine section 27 of the Act, it is expedient to note

91
DE Goodfriend, After the Damage is Done. Risk of Loss Under the United Nations Convention on Contracts
for the International Sale of Goods (1984) 22 Col. J TransLaw 575, 577.

92
Secretariat Commentary (art. 66) In J Honnold, Documentary History of the Uniform Law for International
(1989) 453

57
that the section did not make any distinction between specific and unascertained goods when
it comes to the passage of risk. Passage of risk under the sale of goods Act is governed by
section 27.

Section 27-Transfer of Risk

(1) The risk in the goods in a contract of sale is transferred to the buyer when the parties
intend it to be transferred.

As explained under transfer of property, the intentions of the parties can be ascertained by
having recourse to the terms of the contract, conduct of the partie and the circumstances of
the case.

It should be noted that, risk in a goods can pass although property in the goods has not
passed. Thus it has been held in the case of Multanmal Champalal v CP Shah & Co93, that it
is permissible for the contracting parties to enter into an agreement that although the property
does not pass, the risk passes and they may fix the point of time when it so passes.

Also, in the case of Sterns V. Vickers (seller)94 that despite the fact that property had not
passed because there was no appropriation, the risk had passed to the buyers (plaintiffs). The
fact which gave rise to the action in that case are

STERNS V. VICKERS (SELLER) [1923] 1 K.B. 78, COA95

The defendants sold to the plaintiffs 120,000 gallons of white spirit, being part of a larger
quantity then lying in a certain tank belonging to a storage company, and handed to the
plaintiff's delivery warrant whereby the company undertook to deliver that quantity of the
spirit to the plaintiffs' order. The 120,000 gallons was not separated. The defendant obtained
from the storage company a delivery order that the 120,000 gallons was being held on
plaintiff's behalf which the plaintiff accepted. The plaintiff's did not take immediate delivery
and thus made arrangements with the storage company to further keep the spirit. The
plaintiffs resold the same quantity afterwards to a third party. When the third party came to
take delivery, he found that the quality of the spirit had deteriorated in storage and claimed
damages from the plaintiff, who claimed over against the defendants alleging that the spirit
was not of the quality by the terms of the contract. The spirit had deteriorated in quality when
the plaintiffs came to take it.

93
AIR 1970 Mys 106

94
(1923) 1 K.B. 78, COA

95
Ibid
58
The court held that, whether the property in the undivided portion of the larger bulk had
passed or not upon the acceptance of the delivery warrant the risk passed to the buyers, and
the los must be borne by the plaintiff.

Lord Atkinson stated that "The fact that they were not separated from the bulk did not
prevent the property from passing. Suppose the owner of goods in bulk sold part to A. and the
residue to B, and then hefore the bulk had been separated became bankrupt, surely his trustee
could not claim them on the ground the property in their respective portions had not passed to
the buyers. In fact the property in the whole would have, passed to them as tenants in
common. That is equally the case here. But even if the property in the unsevered portion did
not pass the risk passed upon the acceptance of the warrant. As the plaintiffs did not wish to
take immediate actual delivery the defendants by handing them the warrant gave them what
was equivalent to dry From that time the storage company held the spirit on the buyers and
the buyers pad the storage rent. Thence forward as between the plaintiffs and the defendants
the spirit lay at the plaintiffs' risk"

However, it has been argued by Professor Roy Goode96 that this case is usually exceptional
but the principle it embodies is eminently sensible. He perefore opined that unless otherwise
agreed, it applies to any case in which the weared as eller loses control of the goods by giving
constructive delivery provided that in so doing he fulfils the delivery obligation imposed on
him by the contract.

The Sale of Goods Act is silent on this issue but section 27(2) provides that, if the property
has passed (whether in identifiable goods or goods in bulk) unless a Jafferent intention
appears the risk passes to the buyer and vice versa.

It is therefore possible for the seller to be in possession and the risk will be on the buyer and
vice versa.

Section 27(2) of Act 137

"Unless a different intention appears, the goods are at the seller's risk until the property in
them passes to the buyer, after which the goods are at the risk of the buyer."

The effect of this section is that, goods are generally at the sellers risk until the property in
the goods are transferred to the buyer. This is however subject to any trary intention by the
parties. Thus, until property in the goods passes to the yer, any risk of destruction or loss of
goods is borne by the seller.

96
Goode, Commercial Law in the Next Millennium (1998) 97

59
In Birch V Asempa and others97 (discussed above), the court held that the risk in remaining
4,360 blocks left on the defendant's premises passed to the buyer when the property in blocks
passed to the buyer (plaintiff)

The Act 137 also makes provisions for when the risk in goods passes in situations where
delivery of goods is delayed by the fault of either party.

27(3) "Where delivery of the goods has been delayed through the fault of either buyer or
seller the goods are at the risk of the party in fault as regards any loss, damage or
deterioration which might not have occurred but for the delay."

This will be the case if the loss can properly be attributed to the failure of the buyer to take
delivery of the goods at the proper time.98 Notice must be taken of the fact that risk under this
section does not include, damages or destruction caused by the fault of either party, Risk is on
the party in whose fault the goods were delayed.

DEMBY HAMILTON & CO. LTD V BARDEN [1949] 1 All E.R. 43599

The seller agreed with the buyer to supply apple juice to a third party in weekdy instalments.
The third party asked the seller to delay some deliveries and the seller followed. The
defendant (buyer) was however late in taking delivery. The juice later turned bad. Although
the property in the juice Pemained in the seller, the court held that the risk has passed to the
buyer since he is liable to the delay.

In this case, Sellers J in stating his decision asked the following questions;

1) Was there anything the sellers could reasonably do to dispose of these when they still had
an outstanding obligation to keep them at the disposal of the buyer and when they had to be
ready and willing to deliver them when requested?

2) If delivery has been asked for at a later date and they had let these goods go elsewhere
could they have fulfilled their contract? Which he answered in the negative.

97
[1992] 2 GLR. 416

98
Demby Hamilton V Barden (1949) 1 All ER 435

99
[1949) 1 All E.R. 435.

60
The learned judge after maxing the above propositions stated that "I do not hesitate to find to
construe this proviso is not easy) that in a practical and business sense this loss has fallen on
the sellers by reason of the fact that the buyer refused to take (although delivery at the proper
time and postponed the date of delivery until the goods had deteriorated, and I come to the
conclusion that the liability for that loss falls on the buyer"

Lastly, any person who voluntarily assumes possession of goods belonging to another will be
held to owe at least the principal duties of the ballee at common law and thus the custodian or
ballee is solely responsible for any loss.100

A Bailment is the temporary placement of control over, or possession of Personal Property by

one person, the ballor, into the hands of another, the ballee, for a designated purpose upon
which the parties have agreed. The term bailment is derived from the French bailor, "to
deliver." It is generally considered to be a contractual relationship since the bailor and bailee,
either expressly or impliedly, bind themselves to act according to particular terms. The ballee
receives only control or possession of the property while the bailor retains the ownership
interests in it. During the specific period a bailment exists, the bailee's interest in the property
is superior to that of all others, including the bailor, unless the bailee violates some term of
the agreement. Once the purpose for which the property has been delivered has been
accomplished, the property will be returned to the bailor or otherwise disposed of pursuant to
the bailor's directions.

In the case of:

WIEHE V. DENNIS BROS, (1913) 29 T.LR 250101

Wiehe contracted to buy a Shetland pony known as Tiny from the Dennis Bros which was
intended to be presented along with a car to Princess Juliana of the Netherlands. The pony
and the car were to be delivered Rotterdam in a month's time. While the pony was in the
seller's custody, a charitable ball was held in Olympia, which the seller attended with the
Shetland pony, In the course of the event, an unauthorized person took the pony from its stall
and led it among the dancers. The pony was mishandled and suffered injuries. The court held
that the sellers were liable on the basis that they had failed to show that, they had taken
proper care of the pony as bailee pending delivery.

100
The Pioneer Container [12994]2 A.C. 324.

101
(1913) 29 T.L.A. 250

61
BULLEN V SWEN ELECTRIC ENGRAVING CO. (1906) 22 TLR 275

Mr. Justice Walton said that there was in the case of gratuitous ballee an obligation to use
such care as a reasonably prudent owner would take of his own property and also that in an
action such as the present it was not sufficient for the defendants, in order to escape liability,
merely to prove that the goods were not in their possession because they had been lost but
that they must prove much more than that in order to escape liability.

The same position seems to have been adopted under the Sale of goods Act, 1962. Precisely
section 27(4) states that,

"Nothing in this section affects the duties or liabilities of either seller or buyer as a as a bailee
of the goods of the other party or any destruction or loss or deterioration of or damage to the
goods which is caused by the fault of either party"

Thus, per s. 27(4), where a party decides to act as a bailee of another party's goods the
provisions discussed under section 27(1-3) are not applicable and the bailee is exclusively
responsible for any loss.

FRUSTRATION

Frustration generally occurs when unforeseen contingencies or events which occur through
no fault of either party to the contract after a contract has been made and thus makes the
performance of the contract physically impossible or which may radically change the nature
of the obligations under the contract.102

The doctrine allows the court to bring the contract to an end in other to do justice between the
parties.103

Under common law, if a contract (sale of goods contract) is frustrated, both parties are
discharged from any further obligation under it, whether performance of duties or payment of
money. Where a party pays money to secure the performance of a contract, and the
performance fails because the contract was subsequently frustrated, the party who paid the
money can only recover the amount paid under the contract if there is total failure of
consideration.108 However, it is solely a question of fact to be determined in individual case
as to whether the doctrine of frustration will apply in a given case. In view of the

102
Christiana Dowuona- Hammond, The Law of Contract in Ghana. Pg.288.

103
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd (The Fibrosa case) (1943) A.C.32

62
unsatisfactory doctrine of total failure of consideration under common law, the Ghanaian
Legislature has modified the provisions on frustration.

The Sale of Goods Act, 1962 has not made any provision on frustration of Sale of Goods
contract to that. However, provisions have been made in the Contracts Act104 to deal with the
rights and obligation of parties under a frustrated contract and these are applicable to the
contract for the sale of goods.

Section 1-Adjustment of Rights and Liabilities of Parties to Frustrated Contracts.

(1) Where a contract to which this Part applies has become impossible of performance or
been otherwise frustrated and the parties thereto have for that reason been discharged from
the further performance of the contract the following provisions of this section shall, subject
to sections 2 and 3 of this Act, have effect in relation thereto.

(2) Subject to subsection (3), all sums paid or payable to any party in pursuance of the
contract before the time when the parties were so discharged (in this Port referred to as "the
time of discharge") shall, in the case of sums so paid, be recoverable from him, and in the
case of sums so payable, cease to be so payable.

(3) Where a party has incurred expenses before the time of discharge in, or for the purpose of
the performance of the contract, the Court may allow him to recover or to retain out of any
sum received by him under the contract, such amount (if any), not exceeding the expenses so
incurred or the total sum payable to him under the contract, as the Court may consider just
having regard to all the circumstances of the case.

(4) In estimating, for the purposes of the foregoing provisions of this section, the amount of
any expenses incurred by any party to the contract, the Court may, without prejudice to the
generality of those provisions, include such sums as appear to be reasonable in respect of
overhead expenses and in respect of any work or services performed personally by that party.

(5) In considering whether any sum ought to be recovered or retained under the foregoing
provisions of this section by any party to the contract, the Court shall not take into account
any sums which have, by reason of the contract, become payable to that party under any
contract of insurance unless there was an obligation to insure imposed by an express term of
the frustrated contract or by or under any enactment.

104
1960 (Act 25).

63
The overall effect of s.1 is that, once a contract is frustrated, the parties are discharged from
any liability under the contract. Money which have hitherto been paid are recoverable and
money which are payable or due to be paid are recoverable whether or not there is a total
failure of consideration. However, if a party has spent money on the performance of the
contact, that amount of money can be recovered. It should however not exceed his or her
expenses or the total sum payable under the contract.

In computing the expenses the court may include such sums as appear to be reasonable in
respect of overhead expenses and in respect of any work or services performed personally by
that party. However the court will exclude any sum incurred der any contract of insurance
unless there was an obligation to insure imposed by an express term of the frustrated contract
or by or under any enactment

Section 2 of the contract Act also delineates that

Section 2-Severance of Frustrated Contract

Where it appears to the Court that a part of any contract to which this Part applies can
properly be severed from the remainder of the contract, being a part wholly performed before
the time or so performed except for the payment in respect of that part of the contract of ms
which are or can be ascertained under the contract, the Court shall treat that part of the of
discharge contract as if it were a separate contract and had not been frustrated and shall treat
section 1 of this Act as only applicable to the remainder of that contract.

Thus per section 2 of the Contract Act, the court can treat a part of a contract which have not
being frustrated as enforceable if that part of the contract can be properly severed from the
entire contract. This is usually common in divisible contracts in which the performance of
one part of a contract is usually independent of the other part of the same contract Also,
section 3 is to the effect that the sections on ustration is applicable to a contract although the
performance of that contract is antingent upon a circumstance occurring. Finally, s. 4 of the
Act stipulates that the above sections shall not apply to any charterparty, except a time
charterparty or a Carterparty by way of demise, or to any contract (other than a charterparty)
for the carriage of goods by sea; or any contract of insurance.

Section 3-Parties may Contract Out of Part I.

Where any contract to which this Part applies contains any provision which, upon the true
construction of the contract is intended to have effect in the event of circumstances arising
which operate, or would but for that provision operate, to frustrate the contract, or is intended
to have effect whether such circumstances arise or not, the Court shall give effect to that
provision and shall only give effect to the provisions of this Part to such extent, if any, as
appears to the Court to be consistent with that provision.
64
Section 4-Application of Part 1

(1) This Part applies to contracts made before or after the commencement of this Act, in
respect of which the time of discharge is after the commencement of this Act

(2) This Part does not apply-

(a) to any charterparty, except a time charterparty or a charterparty by way of demise, or to

any contract (other than a charterparty) for the carriage of goods by sea; or

(b) to any contract of insurance

The High Court in Ghana has had an opportunity to apply the provisions in the Contract Act
on frustration in resolving a dispute involving a contract for the sale of timber logs which was
frustrated.105

R. T. BRISCOE (GHANA) LTD v. ESSIEN [1962] 1 GLR 265-267106

The plaintiffs claimed EG17, 748 14s, as the value of equipment and balance of cash
advances given to the defendant, a timber merchant, against supply of logs. The defendant
pleaded that while he was performing the contract "legislation came into force which
declared the Ghana Timber Marketing Board the sole buyer of Ghana Wawa and redwoods.
The performance of the said contract was thus rendered impossible and subsequently both the
plaintiffs and defendant were discharged by frustration." The court held that:

1. by section 1 of the Contracts Act, 1960 (Act 25), where a contract is frustrated moneys
paid thereunder are recoverable, subject to a deduction for reasonable expenses incurred In
the performance of the contract:

2. Although the defendant incurred some expenses in obtaining a timber concession and in
preparing some logs for the plaintiffs before the contract was frustrated, those expenses can
be recovered when the logs are sold to the Ghana Timber Marketing Board. The defendant
will recover the expenses twice and will be unjustly enriched if he is allowed to retain those
expenses out of the sums paid to him by the plaintiffs. The expenses contemplated by section
1. subsection (3) of Act 25 are those which must have benefited the plaintiffs.

105
RT. Briscoe (Ghana) Itd v Essien.

106
[1962] 1 GLR 265-267-

65
CHAPTER 6

TRANSFER OF PROPERTY BY A NON- OWNER

The General Rule under transfer of property by a non-owner is that, only the owner goods or
his duly authorised agent can validly transfer title in goods to another. Thus the sale of an
article by a person who is not or has not the authority of, the owner Presco title to the buyer,
who will be obliged to give the article up to the true owner without any recompense from
him.

The general rule is expressed in the maxim Nemo dat quod non habet: that is to say, transfer a
better title in property than he himself has. Therefore if one has no tittle in the goods, one
cannot transfer a title. This obviously means that, one cannot buy from a non-owner either.

For instance if William wrongly sells goods belonging to Raphael to a buyer called Melissa,
the goods remain the property of Raphael. The fact that Melisa has innocently purchased
goods that he believed were owned by Raphael is irrelevant. The rule is primed on the
assumption that, it is logical to protect the original owner's title.

Lord Denning in the case of Bishopsgate Motor Finance Corporation Ltd v thespert Brakes
Ltd107 expressed his opinion on the nemo dat rule in the following in the development of our
law, two principles have striven for mastery. The frst is the protection of property: no one can
give a better title than he himself possess. The second is for the protection of commercial
transaction: the person who takes in good faith and for value without notice should get a good
title. Thus the rule represent common law traditional favour of the preservation of proprietary
rights," The rule is now stated in section 28(1) of the Sale of Goods Act, 1962 as: Section 28-
Non-Owner Cannot Generally Pass Good Title

(1)Subject to the provisions of this Act and of any other enactment where goods are sold by o
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 rule has
been demonstrated in the case of

JEROME V. BENTLEY & CO. [1952] 2 All E.R. 114108

The plaintiff had entrusted a diamond ring to a man named Major Tatham a stranger. The
terms were that if within 7 days, he is able to dispose of it for more than £550, he could keep
any surplus. He was to return the ring if he was unable to dispose of it as Instructed. Tatham
sold the ring after eleven days for £175 to Bentleys and represented himself as the owner.
The defendants, Bentley bought it in good faith believing that he was the owner. Bentley

107
(1945) 1KB 322 791

108
1341952) 2 All ER. 114
66
resold the ring and Jerome sued them in conversion and he was successful. The court held
that at the time of the sale Tatham had no authority to sell. The defendants were also were
beld not able to rely on usual authority because Tatham belonged to no well Known class of
agent but was merely an individual entrusted with the sale of the ring. Tatham's authority had
expired within the seven days and the defendants were not entitled to assume that, he had
authority.

Clearly this rule seems to be very harsh. Because of the apparent harshness of the nemo dat
rule, several exceptions to it were developed by the common law which has also been
incorporated in the Sale of Goods Act. Also in the words of Lord Denning LJ. in the case of
Bishopsgates Motor Finance Ltd. V. Transport Brakes Ltd, where he stated that "the principle
of nemo dat quod non habet has held sway for time but it has been modified by common law
itself and by statute so as to meet needs of our times."

One problem in this area of the law is that there is often a conflict between the ewner of
goods and the ultimate buyer of the goods. For instance, if a car is stolen and or acquired by a
fraudulent means and finds its self in the hands of an innocent buyer the law has to make a
policy choice between two conflicting innocent interests. Can the ultimate purchaser take a
good title or can the owner claim the goods back? The following exceptions have therefore
been developed to mitigate the harshness of the nemo dat rule.

1.0 EXCEPTIONS:

1.1 SALE BY AGENT: The general rule of nemo dat quod habet does not apply if the non-
owner "sells with the authority or with the consent of the owner". This depends on normal
common law principles of agency. Thus where a principal has by his conduct held out
another as having his authority to sell to a third party, then the principal is precluded from
denying that authority. This could only be possible where the actual sale to the buyer has
taken place rather than a mere agreement to sell. Also apparent authority is capable of giving
rise to an exception under the nemo dat rule but this must be established since a mere
appearance of authority will not suffice. The case below is instructive on sale by agent as an
exception to the nemo dat rule.

SHAW V. COMMISSIONER OF POLICE OF THE METROPOLIS (1987) 3 All E.R. 405109

The owner of a car who was an overseas student in Britain after his studies gave possession
of same to an agent who was a rogue called London. The owner, wishing to sell his car,
permitted a dealer who promised to sell the car to hold possession. The owner furthermore

109
35 (1987) 3 All ER. 405.

67
gave the dealer a transfer notification form signed in blank London delivered the car to the
plaintiff, Shaw pursuant to an agreement to sell it to him who issued a bank draft to London
who disappeared. As a result of this the bank was alerted and it was not paid. The car was
taken into custody by the Metropolitan Police. The owner claimed the car from the Police and
the third party claimed that he had acquired title.

The court held that, The claimant had clearly made a representation to the dealer as his agent
to sell the car and therefore would have been estopped from claiming return of the car under
section 21 or 25 of the Sale of Goods Act 1979 had the contract between the owner and the
dealer not stated that title was only to pass at such time as the car was sold, thus rendering the
contract a contract to sell the car as opposed to a contract of sale.

It is important to note that, if the money had been paid and London ran away with it, the
cause of action available to the owner would be to sue the agent and not the third party
because the owner held London out as his agent.

Section 28(2) of the Sale of Goods Act states that:

Nothing in this section affects the operation of the doctrine of estoppel, or any power of sale
which may be conferred By or under any enactment or by a contract of pledge or otherwise.

Thus the section establishes estoppel as an exception to the application of the nemo dat rule.
Estoppel arises where the owner of a good is, by virtue of his conduct precluded from
denying the sellers authority to sell, for instance the owner of the good will be estopped in the
case that he gives the impression that the seller is hisbwent with apparent authority to sell the
good meaning that the buyer will receive d title to the good.110

Although the estoppel usually refers to "conduct it is clear that it potentially encompasses:

1. Estoppel by representation: whether by words or conduct; and

2. Estoppel by negligence;

These are discussed below.

Where the true owner of goods has represented that the purported seller is in fact the true
owner of the goods, the law "estoppes" the true owner from later saying differently, that is,
that he was joking, or spoke in error. He cannot say one thing on one day and another thing
110
This is also confirmed in s. 26 of the evidence Act, 1975 which states that: "Except as otherwise provided by
law, including a rule of equity, when a party has, by his own statement, act, or omission, intentionally and
deliberately aused or permitted another person to belleve a thing to be true and to act upon such belief, the truth
of that thing shall be conclusively be presumed against that party or his successors in Interest in any proceedings
between that party or his successors in interest."

68
later. The representation may be express or by conduct, but in either ways, it should be clear
and explicit. For instance, where the purported seller has no agreement from the true owner to
sell (such as a sales agency agreement), if the true owners says "Yes, you can buy from this
guy", in a clear and definite term, then the buyer receives good title. Also, where the
representation is by conduct, then the purchaser must show that the conduct of the true owner
misled him into believing that the seller was the owner.

FARQUHARSON BROS & CO. V. KING & CO. [1902) AC 325 HOLS111

The plaintiffs company employed a confidential clerk by name Capon. The plaintiffs had a
warehouse where they kept timber which they had imported from abroad. This clerk had
authority to sign delivery orders to the warehouse on the strength of which timber will be
released to plaintiff's customers. The clerk set up a non-existent company and signed delivery
orders and when timber was released, he sold same to the defendant. The fraud was detected
and the plaintiff company sued the defendant in conversion.

The House of Lords held that nothing which the plaintiff's had done precluded them from
denying that Capon had had authority to sell their timber, they were estopped and title had
passed to the defendants.

EASTERN DISTRIBUTORS LTD V. GOLDRING (1957) 2 Q.B. 600112

The claimant wished to purchase a Chrysler car from a car dealer but was unable to pay the
deposit. The dealer then offered to buy the claimant's Bedford van with the Idea that both cars
would then be sold back to the plaintiff on hire purchase terms. The claimant then signed the
hire purchase agreement form in blank and forwarded the forms to the dealer who
subsequently rejected the proposal in respect of the Chrysler but accepted the deal on the
Bedford van in any case (which has remained in his possession), notwithstanding the fact that
he could only deal with the Bedford In conjunction with the purchase of the Chrysler. The
dealer subsequently sold the Bedford.

It was held that the claimant's signing of the hire purchase form in blank had the effect of
estopping him from denying the dealer's right to sell the van and therefore he was estopped
from forcing the return of his van.

1.2.2 ESTOPPEL BY NEGLEGENCE

Estoppel by negligence applies where the original owner has not taken sufficient care to
ensure that his or her goods are not sold by a rogue third party. Common examples of this
include cases where the original owner fails to take steps to register his title over goods, e.g.

111
[1902] AC 325 HOLS
112
[1957] 2 Q.B.600
69
by informing the relevant authorities. However, the conditions in which a true owner may be
estopped by his negligence are very limited or strictly circumscribed by the following:

1. The true owner owes the purchaser a duty of care,

2. That the true owner has breached that duty of care owed to the purchase. Thus he was
negligent

3. That this negligence of the true owner was the proximate or real cause which induced the
buyer to purchase the goods from the seller.

4. The duty of care on the true must be established beyond reasonable doubt.

It should be noted that, the court are highly reluctant to remove title away from people who
are even extremely careless with their own property 119 For instance, there is no duty of care
on the owner of goods to protect his own interest in those goods or to protect the possible
interest of third parties.113

The cases below highlights how the courts have dealt with cases involving estoppel by
negligence.

COVENTRY SHEPPERD V. GREAT EASTERN RAILWAY CO. [1883] 11 Q.B. 776114

The defendants negligently issued two delivery orders in respect of the same goods. Person to
whom they were issued was thereby able to pledge and sell goods. The court held that, the
defendants were estopped from claiming the goods. This was because, documents had a
mercantile meaning attached to them and therefore owed a duty to merchants and people
likely to deal with those documents.

MERCANTILE CO LTD. V HAMBLIN [1965] 2 QB 242115

A car owner who entrusted the borrowing of money, the documents and procedure with the
Intention to buy a new car to a car-dealer who was apparently solvent respectable and
prosperous and whom the car-owner knew in the social context for many years. The car-
dealer requested the car-owner to sign forms in blank and promised that he would later pass
her the money In fact, the car-dealer made a fraudulent transaction and absconded with the
money which he got from selling the car-owner's car to a financial company- the Plaintiff.
The court held that due to the circumstances of the factual situation, a duty of care was
establish, which fulfilled the first part of the requirement of estoppel by negligence, but the

113
Industrial and Corporate Finance Ltd Wyder Group (2008 252/375.39.

114
Moorgate Mercantile Co Ltd Twite ps (1977 92 390)

115
[1965] 2 QB 242
70
plaintiff could not establish a breach of that duty- the chain of causation was held to be
broken

MORGATE MERCANTILE CO LTD. V. TWITCHING [1977] A.C. 890116

The owner of the goods and the buyer were finance companies and both were members of a
hire purchase Information, a company set up to keep a register of hire purchase agreements
relating to motor vehicles offering additional services to members to reduce the risk of fraud
and theft. The buyer received proposal to buy a car from the owners. He searched the hire
purchase register and found no extent hire purchase registered and bought the car to relet it on
hire purchase. However the car was already subject to an existing hire purchase agreement.
This was because, contrary to the usual practice, the owners had not registered the hire
purchase agreement.

The court held that, the owners owed no duty of care to the buyers despite the fact that they
were both members of the Hire purchase information and hence the owners were not
estopped.

1.3 SECTION 29 VOIDABLE TITLE

A person with a voidable title has the power to transfer a good title to a good faith purchaser
for value. A transaction or an action which is voidable title is valid until it is annulled by one
of the parties to the transaction.

In the case of United States v Price12 the court defined a voidable title as "a title which may
be avoided, or declared void, not absolutely void, or void in itself. It imports a valid act
which may be avoided rather than an invalid act which may be ratified."

In general a voidable title is a title which is good until set aside as against a void title which is
bad from the beginning

Per section 29 of the Sale of Goods Act,

Section 29-Disposition under Voidable Title

Where a person has a voidable title to goods any sale, pledge or other disposition for value
made by that person before his title to the goods has been avoided shall be as effective as if
his title were not voidable, if the person taking under the disposition acts in good faith and
without notice of the defect in title of the person making the disposition.

116
[1977] A.C. 890
71
Thus, under section 29 a person cannot avoid a voidable contract to the prejudice of third-
party rights acquired in good faith and for value. Thus when goods are delivered under a
transaction of purchase, the purchaser has power over the goods even though

1. The transferor was deceived as to the identity of the purchaser.

2. The deliverer was in exchange for check which was later dishonoured.

3. It was agreed that the transaction was to be a cash sale.

4. The delivery was procured through fraud.

This is because all the above scenarios make a transaction voidable and not void.

The following cases illustrate dispositions under voidable title.

LEWIS V. AVERAY [1972] 1 Q.B. 198117

Lewis advertised his car for sale. A man, who turned out to be a rogue, called on Lewis,
tested the car and said that he liked it. He called himself "Richard Green and made Lewis
believe that he was a well-known film actor of that name They agreed a price and the rogue
wrote out a cheque. He said he wanted to take the car at once. Lewis asked for proof of
identity and he was shown a studio pass which bore the name "Richard Green" and a
photograph of the rogue. On seeing this Lewis was satisfied and let the rogue have the car
and log book. The cheque was dishonoured. Meanwhile the rogue had sold the car to Avery,
who bought in good faith and without knowledge of the fraud. Lewis brought an action for
the conversion of the car. It was held by the Court of Appeal, distinguishing and doubting
Ingram v Little, that

(a) The fraud perpetuated by the rogue was voldable and not void

(b) where a transaction had taken place between a seller and a person physically present
before him there was a presumption that the seller was dealing with that person even though,
because of the latter's fraud, the seller thought that he was dealing with another Individual
whom he believed to be the person physically present. In the present case there was nothing
to rebut the presumption that Lewis was dealing with the person present before him, the
rogue;

117
[1972] 1 Q.B. 198
72
(b) Lewis failed to show that, at the time of offering to sell his car to the rogue, and he
regarded his identity as a matter of vital importance. It was merely a mistake as to the
attributes of the rogue, Le his creditworthiness.

(2) Accordingly, since Lewis had failed to avoid the contract before the rogue parted with the
property in the car to Avery, the latter, having bought the car bona fide and without notice of
the fraud, had acquired a good title thereto and the action failed.

However, it has been stated that the seller can rescind the contract by expressing an intention
to do so and take all reasonable steps available to him where he is unable to communicate
with the fraudulent party who is running away from the owner.118

CAR & UNIVERSAL FINANCE LTD. V. CALDWELL [1965] 1 Q.B.525.119

A rogue induced the owner of a car to sell his car to him by some fraudulent
misrepresentation. The rogue paid the owner with a cheque which was dishonored when the
owner presented it the next day. Subsequently, the rogue could not be traced but the owner of
the car promptly notified the Automobile Association and the priest of the fraud and asked
them to help him find the car. The rogue sold the car to a third party after the plaintiff have
given the notice to the Automobile Association and the Police. The court of Appeal held that,
the act of notifying the Automobile Association was sufficient notice of the owner's Intention
to rescind the contract since the rogue had deliberately absconded and thus made it
Impossible for the owner to notify him personally of his intention to rescind the contract

COLWYN BAY MOTORCYCLES V. POOLE [2000] CLY 467120

A rogue bought a motorcycle with the details of credit card which was nonexistent. This was
discovered by the plaintiff two days thereafter. He informed the police but all efforts to get to
the rogue failed. The rogue sold same to a dealer who subsequently sold same to an Innocent
purchaser.

It was held that the plaintiffs were entitled to recover. This was due to the fact that the
transaction was avoided before the item was sold.

Mercantile agents, are professional agents who trade in their own names and may not disclose
the identity of their principals. Third parties dealing with mercantile agents may therefore
satisfy the good faith without notice doctrine 130 The Sale of Goods Act defines mercantile

118
(1965) 1 Q.8. 525

119
(2000) CLY 4675

120
Section 30

73
agents as an agent having in the ordinary course of his business as an agent with authority to
sell goods, or consign goods for sale or to buy goods, or to raise money on the security of the
goods. Thus, a mercantile agent able to bind his principal by disposition of the principles
property. Section 30 of the Sale of Goods Act makes provision on disposition of goods by a
mercantile agent.

Section 30-Disposition by Mercantile Agent in Possession of Goods, Etc

(1)Where a mercantile agent is, with the consent of the owner, in possession of goods or of
the documents of title to goods any sale, pledge or other disposition for value of the goods or
documents of title made by him apparently in the ordinary course of his business as a
mercantile agent shall be as valid as if he were expressly authorised by the owner of the
goods to make the same, if the person taking under the disposition acts in good faith, and has
not at the time of the disposition notice that the mercantile agent has not authority to make
the same.

(2) Where a mercantile agent has, with the consent of the owner, been in possession of goods
or of the documents of title to goods, any sale, pledge or other disposition for value, which
would have been valid if the consent had continued, shall be valid notwithstanding the
determination of the consent unless the person taking under the disposition has at the time
thereof notice that the consent has been determined.

(3) Where a mercantile agent has obtained possession of any documents of title to goods by
reason of his being or having been, with the consent of the owner, in possession of the goods
represented thereby, or of any other documents of title to the goods, his possession of the first
mentioned documents shall, for the purposes of this section, be deemed to be with the consent
of the owner.

(4) For the purposes of this section the consent of the owner shall be presumed unless the
contrary is proved.

(5) The goods or documents of title thereto are not deemed to be in the possession of a
mercantile agent within the meaning of this section unless they are in his possession in his
capacity as mercantile agent

(6) Nothing in this section affects the liability of a mercantile agent to the owner for any
wrongful sale, pledge or other disposition of the goods or documents of title.

Thus per section 30, if the owner of the goods consents to a mercantile agent being in
possession of the goods or documents of title to the goods, any sale or pledge or disposition
of the goods for value in the course of his business as a mercantile agent, or documents made
by such agent in the ordinary course of business shall be valid as if authorised by the owner

74
once the purchaser has acquired same in good faith and without notice at the time of the
transaction.121 Even in situation where consent of the owner has been withdrawn, any
disposition by the mercantile agent will still be valid, unless the person taking under the
disposition, has at the time of the disposition knowledge of the withdrawal of the consent.122

1.5 DISPOSITION BY SELLER IN POSSESSION

In certain situations, a seller of the goods retains possession of the goods after they have been
sold and property has passed to the buyer. In such a situation, if a seller, with the consent of
the buyer, remains in possession of goods after the sale has taken place and goes on to make a
further sale, the final purchaser will gain a good title to those goods, providing he had no
knowledge of the original sale.123
Essentially, the most recent sale takes precedence over any earlier sale. It is immaterial
whether the seller is in possession of the goods as a bailee or in any other capacity.
The following provisions of the Sale of Goods Act are instructive on disposition of goods by
a seller in position.

Section 31-Disposition by Seller in Possession

Where a person having agreed to sell goods continues or is in possession of them after the
property has passed to the buyer, the delivery or transfer by the seller, of the goods or
documents of title under any contract for sale, pledge or other disposition for value thereof, to
any person receiving the same in good forth and without notice of the previous sole, shall
have the same effect as if the seller were expressly authorised by the original buyer to make
the same
(2) This section applies whether the seller is in possession of the goods as ballee or in any
other capacity
(3) Nothing in this section-
(a) derogates from the powers of a seller in whom the property in the goods is vested; or (b)
Affects the liability of the seller to the buyer for any wrongful sale, pledge or other
disposition for value of the goods or documents of title.
Thus, per section 31(3) (b), the buyer has the power to institute an action against the seller for
damages for wrongful sale, pledge or disposition.

MITCHELL V. JONES (1905) 24 NZ LR 932124

121
Section 3011

122
See section 30(2)

123
Worcester Works Finance Ltd v Couden Engineering Ltd (1972) 1 Q8 210
124
[1905] 24 NZ LR 932

75
The owner of a horse sold it to a buyer and some days later obtained it back from him on
lease. Then having possession of the horse in the capacity of lessee, he sold it a second time
to an innocent purchaser.
The court held that the person who sold the goods gave up possession of them and gave
delivery of them to the buyer. The relationship of buyer and seller between them ended It is
true that the seller got possession of the goods again, but not as a seller. He got the goods a
second time as a ballee of the buyer, and as a ballee he had no warrant to sell goods again,
nor could he make a good title to them to even a ban fide purchaser. This was because there
was a break in possession

PACIFIC MOTOR AUCTIONS LTD. V. MOTOR CREDITS (HIRE FINANCE) LTD125

M Ltd, sold some vehicles to the plaintiff's M Ltd was to remain in possession and display It
in their showroom: The plaintiff's paid 90% of the prize and were authorised to sell the
vehicles as agents of the plaintiff's. M Ltd. had financial difficulties and the plaintiff's
revoked M Ltd.'s license to sell the vehicles M Ltd. in the face of this sold some of the
vehicles to the defendants who bought in good faith. When the plaintiff's sued, the high court
said that the defendants were not protected.
On appeal, it was held that, the defendants were protected. The basis of the court's decision
was that the word continued in possession in the section refers to continuity of physical
possession regardless of any private arrangement. That since there was no physical transfer of
the goods to the plaintiff's, M Ltd was in continued possession and is able to pass good title.

WORCESTER WORKS FINANCE LTD V. COODEN ENGINEERING CO LTD126

The buyer bought a car from the owner with a cheque which was dishonored. The buyer's tide
was voldable. The buyer resold the car to TP, however the buyer retained possession and
gave it back to the original owner, TP sued for the owner for the recovery of the car It was
held that the buyer was a seller who remained in possession and by allowing the buyer to take
the car, he had delivered the car to the buyer and TP acquired a good one, since he did not
know about the dealings with the plaintiff.

1.6 SALE BY BUYER IN POSSESSION127

A bayer may also obtain possession of goods or documents of title to them before property
passes to him. If such a buyer resells, pledges or makes any other disposition for value
thereof to any person receiving the same in good faith and without notice of the buyer's lack
of title, the sale, pledge or disposition shall have the same effect as if the buyer were
expressly authorised by the seller to make the same.
Subsection 2 also allows the third party to pay the unpaid balance and either retain the goods
or recover the goods after which title in the goods shall vest in the third party. It should be

125
[11965] AC 857
126
[1572] 108 210
127
Section 32
76
noted that the liability of the buyer to the seller remains unaffected if the disposition was
wrongful.

Section 32 of the Sale of Goods Act provides thus:

Section 32-Disposition by Buyer in Possession.
(1)Where a buyer of goods obtains the possession thereof or of documents of title to the
goods with the consent of the seller before the property passes to him, the delivery or transfer
by the buyer, of the goods or documents of title under any sole, pledge or other disposition
for value thereof to any person receiving the same in good faith and without notice of the
buyer's lack of title, shall have the same effect as if the buyer were expressly authorised by
the seller to make the same.

2) Where a buyer of goods obtains the possession thereof with the consent of the seller before
the property passes to him and resells pledges or otherwise disposes of the goods for value to
a third party in such circumstances that the sale, pledge or other disposition would not, but for
this subsection transfer any rights in the goods to the third party, under this Act or otherwise,
the third party may, notwithstanding anything in the original contract retain or, as the case
may be, recover possession of the goods on tendering to the seller the unpaid balance of the
price due to the seller and on his doing so the seller's title shall thereupon vest in him, but
subject to the rights of the buyer (if any) against the third party.
(3) This section applies whether the buyer is in possession of the goods as a boilee or in any
other capacity.
(4) Nothing in this section-
(a) derogates from the powers of a buyer in whom the property in the goods is vested; or
(b) affects the liability of the buyer to the seller for any wrongful sole, pledge or other
disposition for value of the goods or documents of title.

1.8 SALE UNDER AN ENACTMENT

There are also situations where, a particular enactment empowers any person or a body to sell
goods belonging to another person. Where the goods are sold under an enactment, the buyer
gets a valid title to the goods even though the seller is not the owner of the goods. Such sales
include Sale by the Customs, Excise and Preventive Services Management Law, (1993)
PNDCL 330: Auction Sale under the Auction Sales Law, (1989) PNDCL 230 etc
Under a contract of pledge, if the pledgor agrees that the pledgee could sell the property when
he or she defaults to honour his obligation under the pledge, then the pledgee has the right to
sell the property to a prospective purchaser. In such a case, the buyer acquires good title to
the goods. This is provided for under section 28(2) of the Sale of Goods Act. The section
provides that:
Nothing in this section affects... any power of sale which may be conferred by or under any
enactment or by a contract of pledge or otherwise
Thus, section 28(2) displaces the general rule where goods are sold under special powers
such as pledges or goods seized under warrants of execution.

77
CHAPTER 7
RIGHTS & REMEDIES OF THE SELLER
Under Common Law and Equity once a contract has been breached, the injured party should
have a remedy. Usually equity comes in to provide a remedy t to an aggrieved party where
the common law offers no such remedy.
The sellers' remedies both at common and law and under the Sale of Goods Act arises where
the buyer fails to perform his obligations under the contract. The sellers' remedies are divided
into real and personal remedies. Whether the seller will exercise real or personal remedy will
depend upon the facts in issue. The real and personal remedies of the seller are discussed
accordingly.

78
1.0 REAL RIGHTS OF THE SELLER128
Usually the power of the seller to exercise his or her real right arises where the price remains
unpaid the seller becomes an unpaid seller within the Sales of Good Act
According to the sale of goods Act, a seller becomes an unpaid seller when the whole of the
price has not been paid, when a bill of exchange has been dishonored.129 The section provides
thus,
Section 34-Unpaid Seller Defined.
(1)The seller of goods is an unpaid seller within the meaning of this Part-
(a) when the whole of the price has not been paid or tendered;
(b) when a bill of exchange or other negotiable instrument has been received as conditional
payment and the condition on which it was received has not been fulfilled by reason of the
dishonor of the instrument or otherwise
(2) In this Part the term "seller" includes any person who is in the position of a seller as, for
instance, an agent of the seller to whom the bill of lading has been endorsed, or a consignor
or agent who has himself paid or is directly responsible for the price.
Subsection (a) has been criticized on the grounds that it should have rather read where 'any
part of the contract sums remains unpaid; it also refers to a seller who has sold on credit.
The Sale of Goods Act section 35 allows the unpaid seller to exercise these rights as stated
below:

Section 35-Unpaid Seller's Rights

(1) Subject to the provisions of this Act, an unpaid seller of goods has by implication of law-
(a) whether or not the property therein has passed to the buyer-
(1) a lien on the goods;
(ii) in case of the insolvency of the buyer a right of stopping the goods in transit after he has
parted with the possession of them but before the buyer has obtained the possession of them;
iii) a right of resale;
(b) where the property has not passed to the buyer but the goods have been delivered to him,
a right to recover possession of the goods.
(2) Nothing in this Part derogates from the powers of an unpaid seller where the contract is
for the sale of unascertained goods and no goods have been appropriated to the contract
Thus from the section above, an unpaid seller has:
1. A lien on the goods, or the right to retain them for the price while in his possession.
2. The right to stop the goods in transit.
3. The right to resell the goods.

128
Section 35
129
Section 34
79
4. The seller also has the right to recover the goods so delivered because the property has not
passed

1.2 UNPAID SELLER'S RIGHT OF LIEN130

An unpaid seller who is in possession of the goods, in whatever capacity is entitled to
exercise a lien by retaining possession of the goods until payment of the price has been made.
Thus, the right of lien allows the seller to withhold delivery until he has been paid even if
property has passed to the buyer.
Snell's Principles of Equity states the meaning of a lien as "being the right to hold property of
another for the performance of an obligation. A Common Law Lien lasts only so long as
possession is retained. A possessory lien is the right of the creditor to retain possession of the
debtor's property until his debt has been satisfied. A particular lien exists only as security for
the particular debt incurred, while the general lien is available as a security for all debts
arising out of a similar transaction between the parties... A charging lien is the right to charge
property in another's possession with the payment of a debt or performance of a duty.131

Also, in the case of Golden Grace Ltd. v Takoradi Flour Mills Ltd.132 a Lien was defined as a
right in one man to retain that which is rightfully and continuously in his possession
belonging to another until the present and the accrued claim of the person in possession are
satisfied. In this primary sense it is given by law and not by contract.

Section 36 states certain conditions under which the right of lien can be exercise among
others. The section provides thus:
Section 36-Seller's Lien
(1)Subject to the provisions of this Act, an unpaid seller of goods who is in possession of
them is entitled to retain possession of them until payment or tender of the price if-
(a) the seller has not agreed to deliver the goods before payment of the price,
(b) the goods have been sold on credit but the term of credit has expired; or
(c) the buyer has become insolvent.
(2) The seller may exercise his right of lien notwithstanding that he is in possession of the
goods as bailee or in any other capacity.
(3) Where an unpaid seller has made part delivery of the goods he may exercise his right of
lien on the remainder unless the part delivery has been made in such circumstances as to
show an agreement to waive the lien
(4) A contract of sale of goods is not rescinded by reason only that the seller has exercised his
lien.

130
Section 36&37
131
Snell's Principles of Equity, 20th Edition, pg. 438.

132
[2012] 40 MLRG 25 SC at Page 35 per Aryeetey, JSC Also see Halsbury's Laws of England, 4° Ed. Va: 28
paragraph 502 at page 221
80
Therefore, this remedy is only available where:
A. there is no agreement that the goods should be delivered before payment or
B. if the goods have been sold on credit but the term of the credit has expired or:
C. if the buyer has become insolvent
If the unpaid seller has delivered part only of the goods to the buyer, he may exercise his
right of lien on the remainder unless the part delivery has been made in such circumstances as
to show that the seller has agreed to waive the lien. The exercise of the unpaid seller's lien
amounts to a rescission of the contract of the sale of goods.
One should note that, the exercise by an unpaid seller of his or her right of lien over goods
can only be for price and not for storage purposes as held in the case below

SOMES V. BRITISH EMPIRE SHIPPING CO. [1860] 8 HLC 338133

A repair yard exercised a lien over a ship for 27 days and included in its claim a charge of
£21 per day for occupying the dock while the lien was exercised. The ship owner paid the
entire claim under protest and then sued to recover the £21 a day cost from the yard on the
basis of the general rule that the costs of retaining possession of goods in the exercise of a
lien are not Pecoverable from the owner of the goods.

The HOLS held that a seller had no lien for storage charges under any circumstances. The
case decided that the seller cannot claim a lien in respect of storage charges which arise as a
result of the seller's exercise of his lien for the price.

1.3 LOSS OF LIEN134

Because a lien is a possessory remedy it will be lost in the following ways as stated under
section 37 of the Sale of Goods Act.

Section 37-Termination of lien

(1)An unpaid seller of goods loses his lien thereon-
(a) when he delivers the goods to a carrier or other bailes for the purpose of transmission to
the buyer without reserving the right of disposal of the goods,
(b) when the buyer obtains the possession of the goods with the consent of the seller, or
(c) by waiver thereof.
(2)An unpaid seller of goods does not lose his liten by reason only that he has obtained
judgment for the price.
Thus from the above a lien is lost:

133
(1860) 84LC 338
134
Section 37
81
  When the goods are delivered to a carrier or other bailee for the purpose of
transmission to the buyer, without reserving the right of disposal.
 When the buyer or his agent lawfully obtains possession of the goods i.e. with the
consent of the seller.
 When the seller waives the right. NB: The fact that the seller obtained a judgment for
the price of the goods does not invalidate his lien thereon:

VALPY V. GIBSON [1847] 4 CB 837135

Brown, a merchant in Birmingham, bought cloth from Gibson. Gibson sent the cloth to
Leech, Harrison, and co, shipping agents, at Liverpool, in four cases marked for shipment to
Valparaiso which was consequently sent to shippers on the instructions of Brown. The goods
were packed in four cases. After loading the goods unto the ship the buyer's agent one Alison
ordered the return of the goods to the seller (Gibson) and the goods were repackaged into 8
cases. Whiles the goods were still in the possession of Gibson and as unpaid seller, Brown
(the buyer) was declared bankrupt. The seller was sued for the goods. It was held that, it was
too late for Gibson to cla an unpaid seller's lien

1.4 UNPAID SELLER'S RIGHT OF STOPPAGE IN TRANSIT136

This is a right of stopping the goods while they are in transit, resuming possession of them
and retaining possession until payment of the price. This right is usually exercise in instances
where the seller has lost his right to a lien due to delivery of the goods to a carrier.

In these circumstances if the buyer becomes insolvent while the goods are in transit, the
unpaid seller has the right to stop the goods in transit and recover possession of the goods
until payment. An insolvent person is a person who is unable to pay his debts as they fall due
and owing.137

NB: Goods are in the course of transit from the time they are delivered to a carrier or another
bailee until the buyer takes delivery of them from the carrier or bailee.
Under these circumstances, the seller shall remain in possession till the price is paid. In Booth
Steamship Co Ltd V. Cargo Fleet Iron Co Ltd138, Lord Reading stated the rationale for the
existence of the right of stoppage in transit in the following words, It is a right founded upon
the plain reason that one man's good's shall not be applied to the repayment of another man's
debt". Atiyah139 also argues that this remedy is Important only when the buyer has bought the
goods on credit. The scope of the seller's right of stoppage in transit is set out in section 38 of
the Sale of Goods Act

135
(1847) 4 CB R37
136
Sections 38-43
137
See section 77 of the Insolvency Act. 2006 Ac: 708
138
(1916) 2 KB 570 at 580

139
JN Adams, Atiyah's Sale of Goods (12 edn Pearson, Harlow 2010)
82
Section 38--Stoppage in Transit
(1) Subject to the provisions of this Act, when the buyer of goods becomes insolvent on
unpaid seller who has parted with the possession of the goods has the right of stopping them
in transit, that is to say, he may resume possession of the goods as long as they are in course
of transit and may retain them until payment or tender of the price.
(2) A contract of sale is not rescinded by reason only that the seller has exercised his right of
stoppage in transit
Therefore, under section 38 (1), a seller to be able to stop goods in transit must establish the
following conditions:
1. That, the seller is an unpaid seller
2. The buyer is insolvent
3. The goods must be in course of transit
As said above, goods are in course of transit from the time when they are delivered to a
carrier or other bailee until the buyer takes delivery of them from the carrier or bailee.140
However, where the carrier is an agent of the seller, the issue of stoppage in transit does not
arise because effectively the goods are still in the possession of the seller. The seller under
this can exercise only the right of lien. In this situation, the seller or his agent can only
exercise the right where the carrier is an independent party. The goods are however not in
transit if the carrier is the buyer's agent, since possession by an agent is prima facie
possession by the principal. If the goods are rejected by the buyer and the carrier or other
bailee continues in possession of them, the goods are still deemed to be in transit. The
following provisions of section 39 are instructive as to the when goods are deemed to be or
not to be in transit.

Section 39-Duration of Transit

(1)Goods are in course of transit from the time when they are delivered to a carrier or other
bailee until the buyer takes delivery of them from the corrier or ballee.
(2)If the buyer obtains delivery of the goods before their arrival at the appointed destination
the transit is at an end.

(3)1f, after the arrival of the goods at the appointed destination, the carrier or other ballet
acknowledges to the buyer that he holds the goods on his behalf and continues in possession
of them as ballee for the buyer, then subject to subsection (4), the transit is at an end, and it is
immaterial that a further destination for the goods may have been indicated by the buyer
(4) If the goods are rejected by the buyer and the carrier or other bailee continues in
possession of them the transit is not deemed to be at an end even if the seller refuses to
receive them back
(5) When goods are delivered to a ship chartered by the buyer it is a question depending on
the circumstances of the case whether they are in the possession of the master as a carrier, or
as agent for the buyer.

140
Section 39
83
(6) Where the carrier or other bailee wrongfully refuses to deliver the goods to the buyer, the
transit is deemed to be at an end.
(2) Where part delivery has been made to the buyer the remainder of the goods may be
stopped in transit unless the part delivery has been made under such circumstances as to show
an agreement to waive the right of stoppage in transit.

1.4 TERMINATION OF THE RIGHT OF STOPPAGE IN TRANSIT141

From the provisions in section 39 above, it can be gleaned that in certain circumstances, the
right of stoppage in transit by the seller can be terminated and these are discussed below:
1. Where the buyer obtains delivery of the goods before their arrival at the appointed
destination.142

The case below discusses this point:

PLISCHKE & SOHNE GMBH V. ALLISON BROS LTD. [1936] 2 All ER 1009143
Plischke agreed to sell linen to Napier under the Term of contract "Free house, London". The
linen was shipped from Germany to England. On arrival on 14.1, it was placed in a
warehouse by Allison on instructions Napier. Napier entered arrangement with creditors
Plischke discovered this and on 18.1, Plischke ordered Allison not to deliver to Napier and
Allison refused. The goods were stopped in transit.

It was held by Branson J that Free house means goods to be delivered to them and does not
exclude right to indicate goods should be delivered some other place. Allisons acted as agent
for Purchaser not Seller and transit ended when goods collected by Allisons for Napier.
2. Where after the arrival of the goods at the appointed destination, the carrier or other bailee
acknowledges to the buyer that he holds the goods on his behalf and continues in possession
of them as bailee for the buyer even if a further destination of the goods is indicated by the
buyer144
3 Where the carrier or other bailee wrongfully refuses to deliver the goods to the buyer.145
4. Where part delivery has been made to the buyer under such circumstances as to show an
agreement to waive the right of stoppage in transit.146

141
Section 39
142
Section 39(2) 0f the Act
143
(1936) 2 All ER 1009

144
section 39(3)
145
section 39(6)
146
section 39(7).
84
It should be noted that when goods are delivered to a ship chartered by the buyer it is a
question of fact, depending on the circumstances of the case, whether they are in the
possession of the master as a carrier, or as agent for the buyer.147

TAYLOR V. GREAT EASTERN RAILWAY CO. LTD. [1901] 17 TLR & [1901] 1 K.B.
774148
Barnard Brothers sold quantity of barley to Sanders and consigned it to Elsenham station,
where the railway company acknowledged that it was holding the grain to sanders' order.
Later, when Sanders became insolvent, Barnard Brothers purported to exercise a right of
stoppage. But it was held that they could not do so, because the transit had determined when
they acknowledgement was issued.

REDDALL V. UNION CASTLE MAIL STEAMSHIP CO LTD. [1914] LIKE 360149

Rutherfords sold a bale of good to Snow. The sellers knew that the Snow was buying the
goods for someone in South Africa. Snow instructed Rutherfords to send the goods to Union
company's ship named Armadale Castle at Southampton to be marked for shipment to Algoa
Bay in South Africa. Rutherfords send the goods to Southampton as instructed and Snow in
anticipation of Insolvency stopped all shipment. In consequence, the bale did not leave the
ship but was thus kept in a warehouse at Snow's expense and were handed over to
Rutherfords (seller) under a claim of stoppage in transit. Snow's trustee in bankruptcy sued
the Union for conversion Le handing over the goods to the sellers. He succeeded. The court
ruled that the transit had ceased when the buyers intercepted the goods before they had been
loaded.

1.5 HOW STOPPAGE IN TRANSIT OPERATES150

The right to stoppage of transit can be exercised by an unpaid seller in the manner below:
1. Either by taking actual possession of the goods or by giving a notice of claim to the carrier
or other bailee who is in possession of the goods. Such notice may be given either to the
person in actual possession of the goods or to his principal. If the notice is given to the
principal, it is not effective unless done must be given at such time and under such
circumstances that the principal, by the exercise of reasonable diligence, may communicate it
to his servant or agent in time to prevent a delivery to the buyer.151
2. The seller must be given Instructions about stoppage in transit within a reasonable time to
the carrier so that the carrier can affect the redelivery of the goods back to the seller. The
expenses for redeliveries and the original carriage will be borne by the seller.152 The carrier is
bound to deliver the goods according to those Instructions.

147
section 39(5)
148
(1901) 17-TUR & (1901) 8 774,
149
(1914) LIKB 360.
150
See section 40-42
151
Section 40
152
section 41(2)

85
3. If unpaid seller exercises his right of stoppage in transit over goods which are lost or
damaged, or which deteriorate, in transit, then, as between the seller and the buyer, the
proceeds of any policy of insurance respecting the goods shall be payable to the seller if the
insurance was effected by him and if he exercises his right of stoppage in transit before the
loss, damage or deterioration occurs to the buyer, in any other case.153

1.6 LOSS OF RIGHT (LIEN & STOPPAGE)154

Section 43 of the Sale of Goods Act provides circumstances under which an unpaid seller
loses the right of lien or stoppage of transit over goods. The section provides as follows:
Section 43-Effect of Resale or Other Disposition by Buyer
Where a seller has a right of lien or stoppage in transit over goods-
(a) if the seller assents to a resale or other disposition by the buyer he loses his right of lien or
stoppage in transit.

(b) if the buyer resells the goods or documents of title thereto in such circumstances that the
resale is effective to pass o title, under section 32 of this Act or otherwise the teller loses his
right of lien or stoppage in transit;
(c) If the buyer disposes of the goods or the documents of title thereto otherwise than by way
of sale, in such circumstances that the disposition is effective under section 32 of this Act or
otherwise, the seller may exercise his right of lien or stoppage in transit subject to the rights
of any person claiming by or under such disposition as aforesaid

Thus from the above, a seller who has a right of stoppage in transit may agree to a resale or
other disposition of the goods by the buyer. In that event, the seller loses his right of lien or
stoppage in transit. If the buyer disposes of the goods or documents of title by resale after
having obtained possession of the with the seller's consent, the seller loses his right of lien or
stoppage in transit. On the other hand if the disposition by the buyer is otherwise than by sale,
the seller may exercise his right of lien or stoppage in transit to the rights of any person
claiming by or under such disposition by the buyer.

1.7 RECOVERY OF POSSESSION FROM BUYER155

Section 44-Seller's Right to Recover Possession after Delivery
Subject to the provisions of this Act, and subject to any contrary intention an unpaid seller
may recover possession of the goods from the buyer after they have been delivered to him if-
(a) the property has not passed to the buyer, or
(b) the property has passed to the buyer but the contract nevertheless expressly confers a right
on the seller to recover possession: and the buyer fails to pay the price in accordance with the
terms of the contract but not otherwise

153
Section 42
154
Section 43
155
Section 44
86
Thus under section 44, an unpaid seller can recover possession of goods from the buyer if the
property in the goods has not passed to the buyer or the property has passed but the contract
nevertheless permits the seller to recover possession. The right to recover possession may be
exercised by the seller only if the buyer falls to pay the price in accordance with the terms of
the contract and not otherwise.

1.8 THE RIGHT OF RESALE156

An unpaid seller in actual possession of the goods after exercising the right of lien or
stoppage in transit is entitled as against the buyer to resell the goods to another buyer and that
buyer shall have good title to the goods.
Section 45 provides the conditions under which an unpaid seller may exercise the right of
resale of the goods.
Section 45-Resale by Seller
An unpaid seller who is in possession of the goods is entitled as against the buyer to resell
them in any of the following cases-
(a) where they are of a perishable nature and the buyer does not within a reasonable time pay
or tender the price;
(b) Where the buyer has repudiated the contract and the seller has accepted the repudiation;
(c) where the seller gives notice to the buyer of his intention to resell and the buyer does not
within a reasonable time pay or tender the price.

2.0 THE PERSONAL RIGHTS OF THE SELLER

The seller, in addition to his rights against the goods set out above, has 2 rights of action
against the buyer.
1. Action for Price
2. Damages for non-acceptance.

2.1 ACTION FOR PRICE157

A claim for price will generally arise where the property in the goods has passed to the buyer
and the price is payable on a certain day irrespective of delivery. To this end, section 46 of
the Sale of Goods Act gives a vivid explanation on an action for price by an unpaid seller
Section 46-Action for Price

156
Section 45
157
Section 46
87
(1)Where, under a contract of sale of goods, the property has passed to the buyer, and the
buyer wrongfully refuses or neglects to pay for the goods according to the terms of the
contract, the seller may maintain an action against him for the price of the goods.
(2)Where, under a contract of sale of goods, the price or a part thereof is payable on a day
certain, and the buyer wrongfully neglects or refuses to pay the price or the part which has
become due, according to the terms of the contract, the seller may maintain an action for the
price or the part which has become due, as the case may be notwithstanding that the property
in the goods may not have passed to the buyer.
(3) Where, under a contract of sale of goods, the seller delivers part only of the goods and the
buyer accepts or is bound to accept that part, the seller may maintain an action against the
buyer for a proportionate part of the price without prejudice to any counterclaim by the buyer
for damages in accordance with section 53 of this Act. This subsection does not apply to any
contract to which Part 1 of the Contracts Act 1960 (Act 25) applies.
(4) Nothing in this section prevents a seller from maintaining an action for damages in
addition to an action for the price where the circumstances warrant.

From the above section, it can be seen that, the seller can primarily sue for the payment when
the property has passed to the buyer. The passing of the property depends upon certain
conditions, and if these conditions are not fulfilled, he cannot sue for the payment under this
section..

However, where the price or part thereof is payable on a day certain and the buyer fails to pay
on such day, despite the fact that the property has not passed the seller can still sue for the
price which has become due. This can be seen in:

DUNLOP V GROTE (1945) 2 C & K 153: 80 RR 834158

There was a contract for the delivery of Iron between 3rd March and 30 April as per the
requirements of the buyer. The price was to be paid on the 30th of April. However, only a
part of the consignment was received by the buyer on April 30 as he did not require anymore.
In the action brought by the seller, it was held that the seller could recover the whole price
and was not required to show that the goods were appropriated to the contract.

COLLEY v OVERSEAS EXPORTERS [1921] 3 KB 302

C sold to O a quantity of leather fo.b. Liverpool, the goods being unascertained at the date of
the sale. O instructed to send the goods to Liverpool for shipment on the "K" and C did so.
The "K" and the other ships substituted could not take the leather which remained at the
docks for 2 months. C brought an action against O for the price. HELD: as the property in the

158
[1945] 2 C & K 153 80 2 834

88
goods had not passed to 0, and there was no agreement as to the price: being payable on a day
certain, irrespective of delivery, C could not sue for the price.

2.2 DAMAGES FOR NON-ACCEPTANCE159

An action for damages for non-acceptance lies when the buyer refuses or neglects to accept
the goods. Thus, where the buyer wrongly fails or refuses to accept goods delivered to him
and pay for them, the seller may bring an action against the buyer for damages for non-
acceptance of the goods. The measure of damages is the loss resulting from the buyer's
breach of contract. This is the loss of profit on the sale when the goods have a fixed retail
price and the supply exceeds the demand.

Section 47 makes provisions for an action for damages by a seller for non-acceptance of
goods by the buyer.
Section 47-Damages for Non-acceptance
(1) Where the buyer wrongfully neglects or refuses to accept and pay for the goods in
accordance with the terms of the contract the seller may maintain an action against him for
damages for non-acceptance.
(2)In a contract for the sale of goods to be delivered by instalments--
(a) if each instalment is to be separately paid for subsection (1) shall apply to each instalment
separately: Provided that where the buyer has by his words or conduct shown an intention to
repudiate the contract the seller may, if he accepts the repudiation, maintain an action for
damages for non-acceptance in respect of all the goods;
(b) in any other case, such a breach as is referred to in subsection (1) in respect of one or
more instalments shall be treated for the purposes of that subsection as though it were a
breach in respect of the whole contract or of all the remaining part of the contract, as the case
may be

From the above, it can be seen that, the section covers cases where the deliveries are done by
instalment. Thus, per the section, where goods are paid by installment the contract of sale
may provide that each installment must be separately paid for. In that event, the seller may
sue separately in respect of each installment. If however, the buyer has by his words or
conduct shown an intention to repudiate the contract seller may, if he accepts the repudiation,
sue for damages for non-acceptance respect of the entire goods

2.3 ASSESSMENT OF DAMAGES160

The damages are assessed on the basis of the principles contained in section 48 of Act 137. In
the assessment of damages for breach by the buyer, what is considered is the loss which

159
Section 47
160
Section 48
89
could reasonably have been foreseen by the buyer at the time the contract was made as likely
to arise from his breach.161
Section 48 of the Sale of Goods Act on assessment of damages for non-acceptance provides:
Section 48-Assessment of Damages
(1)The measure of damages in an action under section 47 of this Act is the loss which could
reasonably have been foreseen by the buyer at the time when the contract was made as likely
to arise from his breach of contract
(2)Where there is an available market for the goods in question the measure of damages is
prima facie to be ascertained by the difference between the contract price and the market or
current price-
(6) if a time has been fired for acceptance, or if the buyer repudiates the contract before the
time of performance, and the seller does not accept the repudiation, at the time or times when
the goods ought to have been accepted:
(b) in any other case, at the time or times of the refusal to accept the goods
(3) In this section a time is not deemed to have been fixed for acceptance by reason only that
the goods are to be accepted within a reasonable time.
When there is an available market for the goods, prima facie the measure of damages is the
difference between the contract price and the market price. Thus, assessment of damages for
non-acceptance is calculated as the difference between the contract price and the market
price. It has been the case that the question whether there is an Je market is treated by the
courts as a question of fact to be determined by the available m arcumstance of the case. The
time for determining the market price is the time or times of the refusal to accept the goods.
The contract may however fix a time for acceptance of the goods or the buyer may repudiate
the contract before acceptance. In that situation the market or current price is determined at
the time when the goods ought to have been accepted.
NB: When the seller is ready and willing to deliver the goods and requests the buyer to take
delivery, which the buyer does not do within a reasonable time, the seller may recover from
the buyer:
 Any loss occasioned by the buyer's refusal or neglect to take delivery;
 A reasonable charge for the care and custody of the goods.

161
Hadley Bakandale (1854 9 x 341, 24 Ex 173

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CHAPTER 8

REMEDIES OF THE BUYER

The buyer of goods in a contract for the sale of goods has a number of remedies available to
him for breach by the buyer depending on the circumstances. Basically, two main remedies
are available to the seller under the Sale of Goods Act. The remedies are rejection of goods
(sections 49-52) and personal rights (sections 53- 58) and these will be discussed below.

1.0 REJECTION OF GOODS162

The buyer may reject the goods and refuse to pay the price or if he has already paid, to
recover the price if any of the following situations exist:
1. The seller is guilty of a breach of a fundamental obligation; or
2. The seller is guilty of a breach, not being of a trivial nature, of a condition of the contract,
whether the breach is in respect of all of the goods or, subject to subsection (2), of part only,
or
3. The buyer has entered into the contract as a result of fraudulent or innocent
misrepresentation on the part of the seller.
After rejecting the goods, the seller may refuse to pay the price or if he had already paid to
recover the price paid.
Section 49 expressly captures provisions on rejection of goods:

162
Sections 49-52
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Section 49-When Buyer has Right to Reject
(1)Subject to the provisions of this Act the buyer is entitled to reject the goods and to refuse
to pay, or as the case may be, to recover, the price where
(a) the seller is guilty of a breach of a fundamental obligation, or
(b) the seller is guilty of a breach, not being of a trivial nature, of a condition of the contract,
whether the breach is in respect of all of the goods or, subject to subsection (2), of part only,
or
(c) the buyer has entered into the contract as a result of fraudulent or innocent
misrepresentation on the part of the seller.
(2) Where there is a contract for the sale of goods which are to be delivered by instalments,
then-
(a) if each instalment is to be separately paid for, subsection (1) shall apply to each instalment
separately: Provided that where there are persistent and grave breaches by the seller in respect
of two or more instalments the buyer may treat the whole contract as repudiated. Provided
further that nothing in this paragraph shall affect the buyer's rights under paragraph (c) of
subsection (1):

(b) in any other case, such a breach as is referred to in subsection (1) in respect of one or
more instalments shall be treated for the purpose of that subsection as though it were a breach
in respect of the whole contract

Thus, the section makes provision for a contract for sale of goods to be delivered by
instalment. In this case each instalment shall be paid for separately. The buyer may therefore
in this situation reject the goods in respect of each instalment separately llowever, if there are
persistent and grave breaches by the seller in respect of 2 or more instalments, the buyer may
treat the whole contract as repudiated. In the absence of a provision that each instalment shall
be separately paid for a breach by the seller in respect of one or more instalments shall be
treated as breach of the whole contract entitling the buyer to reject the whole of the goods.

1.1 CONSEQUENCES OF REJECTION163

This is captured under section 50 of the Sale of Goods Act as:
Section 50-Effect of Rejection
(1) Where goods are delivered to the buyer and he rejects them, having the right so to do, he
is not bound to return them to the seller, but it is sufficient if he intimates to the seller that he
rejects them.
(2) After the buyer has intimated to the seller that he rejects the goods the seller is entitled to
have the goods placed at his disposal: Provided that where the buyer has paid the price or any
part thereof he may retain the possession of the goods until the seller repays or tenders the
amounts he has received from the buyer.

163
Section 50
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The above is to the effect that if a buyer exercises his right to rejects delivered to him, he is
not bound to return them to the seller. It is sufficient if he intimates to the seller that he rejects
them.
BORROWMAN PHILIPS & CO. V. FRERE & HOLLIS
This case concerned a contract to buy a cargo of America maize, to be shipped between 15
May and 30 Pane. The sellers offered the buyers a cargo on the Charles Platt, but the buyers
rejected this offer (It was held, by an arbitrator, rightly) because the seller had no shipping
documents. The sellers then, within the period specified by the contract, offered a second
cargo on the Maria D, which was rejected. Consequently the sellers had to resell the Maria D
at a loss, and therefore sued the buyers for damages for non- acceptance. The trial Judge
(Denman J) held that the buyers were not bound to accept the second tender once the sellers
had appropriated the first cargo to the contract, but the court of appeal reversed this decision.

Once the buyer gives the notice of rejection, the seller is to have the goods placed at his
disposal. Where the buyer has paid the price or part of the price, the buyer shall retain
possession of the goods until the seller pays back or tenders the amount the buyer has paid.
This creates serious problems as the Act fails to tell when property passes or who assumes the
risk Atiyah164 for instance argues that basically, risk does not pass at all where the goods
delivered are defective.

1.2 LOSS OF RIGHT TO REJECT

Section 51 provides that:
Section 51-No Rejection after Acceptance
(1)The buyer may not reject goods which he has accepted
(2)The acceptance of a part of the goods does not deprive the buyer of any right to reject any
other part unless the contract is not severable.
The above is to the effect that once the buyer has accepted the goods, he cannot reject it. Also
if the buyer accepts part of the goods, the acceptance of the part will not deprive him of the
right to reject any other parts which have not been accepted unless the contract is not
severable.
Thus if the contract is severable then a breach by either party in relation to one severable part
of their obligations will not necessarily affect the other severable obligations under the
contract or the contract as a whole.

Per section 52
A buyer is deemed to have accepted the goods under the following:
Section 52-Acceptance
The buyer is deemed to have accepted the goods when-
(e) he intimates to the seller that he accepts them; or

164
JN Adams, Atiyah's Sale of Goods (12th edn Pearson, Harlow 2010

93
(b) he does not within a reasonable time after delivery of the goods, inform the seller that he
rejects them; or
(c) he wrongfully refuses or neglects to place the goods at the disposal of the seller after
notifying the seller that he rejects them.

This provision poses several problems. These include situations where the buyer is misled
into accepting the goods and situations where the buyer had no opportunity to examine the
goods among others. The Act is virtually silent on these issues.

2.0 PERSONAL RIGHTS OF THE BUYER165

The suits that may be instituted by the buyer against the seller can be roughly divided Into
three types;
1. Damages for non-delivery
2. Remedy for breach of warranty.
3. Performance

2.1 DAMAGES FOR NON-DELIVERY

Where the buyer has lost her right to reject she may still have the right to bring an action for
damages for non-delivery against the seller if the seller wrongfully refuses to deliver the
goods to the buyer according to the terms of the contract or where the buyer has other goods
reason to reject the goods, and this is provided for in section $3 of the Sale of Goods Act,
1962.
Section 53-Damages for Non-Delivery
Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, in
accordance with the terms of the contract, or where the buyer rejects the goods delivered by
the seller having the right so to do, the buyer may maintain an action against the seller for
damages for non- delivery.
When the property in the goods has passed, the buyer, provided that he is entitled to the
immediate possession, has all the remedies of an owner against those that deal with the goods
in a manner inconsistent with his rights. If, therefore, the seller wrongfully re-sells them
making it impossible for the goods to be delivered to him, he may sue the seller in trover, and
also against the second buyer.

2.2 ASSESSMENT OF DAMAGES FOR NON DELIVERY166

The measure of the damages is as in the case of the action for non-acceptance, the estimated
loss naturally resulting from the breach of contract which is, prima facie, when there is an
available market for the goods, the difference between the contract price and the market price

165
Section 53
166
Section 54
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at the time when the goods ought to have been deliveres or, if no time for delivery was fixed,
from the time of the refusal to deliver.
Thus, In the case of non-delivery, the true measure of damages will be assessed by the
difference between the contract price and the market price at the time of the breach The
market value of the goods means "the value in the market, independently of any
circumstances peculiar to the plaintiff (the buyer)".
One should first and foremost not lose sight of the fact that the measure of damages is the
loss reasonably foreseeable by the seller at the time when the contract was made. Section 54
provides:
Section 54-Assessment of Damages for Non-Delivery
(1)The measure of damages in an action under section 53 of this Act is the loss which could
reasonably have been foreseen by the seller at the time when the contract was made as likely
to result from his breach of contract.
(2)Where there is an available market for the goods in question the measure of damages is
prima facie to be ascertained by the difference between the market or current price and the
contract price-
(a) if a time has been fixed for delivery, or if the seller repudiates the contract before the time
of performance, and the buyer does not accept the repudiation, at the time or times when the
goods ought to have been delivered;
(b) in any other case, at the time or times of the refusal to deliver the goods.
(3) In this section a time is not deemed to have been fixed for delivery by reason only that the
goods are to be delivered within a reasonable time.

If time was of the essence of the contract and goods are delivered late. damages are on the
difference in value at the time of the required contractual delivery apportioned o and the
actual date of delivery.167

2.3 DAMAGES FOR BREACH OF CONDITION OR WARRANTY168

Section 55 of the Sale of Goods Act declares the methods by which a buyer who has a claim
for damages in either case may avail himself of it. It does not deal with the cases of
fraudulent misrepresentation, which may enable the buyer to set aside the contract nor with
cases where, by the express terms of the contract the buyer may return the goods in case of a
breach of warranty. The section provides:

Section 55-Damages for Breach of Condition or Warranty

Where the seller is guilty of a breach of his fundamental obligation or of a condition or
warranty of the contract the buyer may maintain an action against the seller for damages for
the breach complained of or may set up a claim to such damages in diminution or extinction
of the price.

167
See Victoria Laundry v Newman (1949) 2 KB 528 116Section 55 of the Sale of Goods Act
168
Section 56
95
According to section 56
Section 56-Assessment of Damages under Sec. 55
The measure of damages in an action under section 55 of this Act is the loss which could
reasonably have been foreseen by the seller at the time when the contract was made as likely
to result from his breach of contract.

2.3 RECOVERY OF THE PRICE169

Under this, the buyer is entitled to recover from the seller any amount he has paid either as
the full price or in part payment if the seller refuses or neglects to deliver the goods to the
buyer. This right is without prejudice to any other claim by the buy or to any counterclaim by
the seller for damages.170 To this end, it is important to fully state the provision on section 57
of the Sale of Goods Act which gives a vivid explanation on recovery of sum paid by the
buyer under the contract in case of breach by the seller. The heading of the section should not
confuse the reader since they connote the same in terms of content
Section 57-No Forfeiture of Sums Paid by Buyer
(1)Where under a contract of sale the buyer has paid a part or all of the price to the seller and
the seller refuses or neglects to deliver the goods to the buyer, having the right so to do, or,
ofter the entitled (without prejudice to any other rights, but subject to any counterclaim for
damages by the seller) to recover from the seller the amounts which he has paid.
(2) This section applies whether the amounts paid by the buyer were expressed to be by way
of part payment or deposit or otherwise, and notwithstanding any agreement to the contrary
(3)Nothing in this section affects any case where the seller's refusal or neglect to deliver the
goods, or his recovery of the possession thereof is wrongful.

2.4 SPECIFIC PERFORMANCE171

Specific performance is not generally available to the buyer as a remedy for breach of
contract of sale by the seller. It has been held that the court will only give specific
performance instead of damages, only when it can by that means do more and complete
justice.172 This is because specific performance is an equitable remedy and as such it is
discretionary and subject to equitable principles. The Act provides that:

Section 58-Specific Performance

169
Section 57
170
Section 57(1)
171
Section 58
172
Wilson.v.Northampton and Banbury Junction Rly

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In any action for breach of contract to deliver specific or ascertained goods the Court may, if
it thinks fit by its judgment direct that the contract should be specifically performed without
giving the seller the option of retaining the goods on payment of damages. The judgment may
be unconditional or upon such terms as to damages, costs and otherwise as the Court may
think fit
This section may best be explained by an illustration; if there is a contract to sell a ship to
Raphael, a Ghanaian ship owner. The ship is an old ship but her engines and boilers are new,
so as to satisfy the Ghanaian regulations, and Raphael could have the ship registered
immediately in Ghana. In view of these facts and the price, if the ship is of peculiar value to
the Raphael, the buyer, and there is only one other ship on the market that would suit his
requirements. The court will grant specific performance of the contract.

It should be noted that as a general rule specific performance will not be granted by the court
in a contract for sale of goods in the following circumstances:

 Where the contract is without consideration.

 Where the contract does not involve mutuality.
 Where there is a contract with contractual terms which are insufficiently precise.

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