Law of sale of goods.

By ahmed mayanja
 Law applicable
• Contracts Act NO. 7 of 2010
• Sale of Goods Act Cap 82
• Common law
• Case law.
 Topics.
• Definition and features of a contract of sale.
• Comparison
• Subject matter of the contract
• The price
• Formalities
• Terms of the contract
• Caveat emptor
• Transfer of property
• Transfer of title: nemo det quod non habet
• Performance of the contract
• Rights of the seller
• Rights of the buyer
 definition
• A contract of sale of goods: is a contract whereby a
seller transfers or agrees to transfer the property in
the goods to the buyer for a money consideration
called the price. S. 2 SOGA.
• If property in goods is transferred from the seller to
the buyer it’s a contract of sale.
• If property in goods is to be transferred at a future
date or subject to a condition that is to be fulfilled
it’s an agreement to sell.
 Features of a sale
• There must be two distinct parties; the buyer and the
seller.
• Transfer of property. Seller must transfer or agree to
transfer property (ownership) in the goods to buyer.
• Subject matter is goods. Includes all chattels, crops,
moveable and immoveable. Not services.
• Consideration is price. Barter trade is no contract of sale.
• Contract of sale includes a sale and agreement to sell.
• Sale : sale and delivery , bargain and sale.
 Sale v. agreement to sell
1. Transfer of property sale: passes immediately at time of
execution of contract. Agreement to sell: property does
not pass till condition is fulfilled/ in the future.
2. Risk of loss . Sale- Risk passes with property, unless
otherwise agreed. (In international sales risk/property
pass when the goods pass the ships rail) . E,g CIF, FOB
Agreement to sell: risk does not pass until
property(ownership) passes. E.g. on a certain condition.
If goods are destroyed the loss is borne by seller . E.g
sale of a car without logbook.
 .
3. Breach. Sale: If buyer refuses to pay, seller can sue
even if goods still with seller.
• Agreement to sell: Seller cannot sue for breach but
damages., if buyer refuses to accept and pay for
goods coz property has not passed.
4. Right of resale. Sale: Seller cannot re-sell the goods
coz they are now property of buyer.
• Agreement to sell: seller can re-sell the goods for
property has not passed. Buyer cannot sue for
breach, nor claim on goods.
 .
5. Insolvency of buyer before he pays .
Sale: property has passed, so seller is entitled to price.
He can deliver goods to official receiver /assignee of
buyer.
Agreement to sell: seller may refuse to deliver the
goods since property hasn’t passed.
If seller is insolvent and cannot deliver, and buyer
has already paid price, buyer becomes creditor, for
goods.
 Sale and contract for work and materials

• contract for work and materials is a contract for sale

where some labour/ work on part of seller is
necessary.
• Robinson v. Graves artist promised to make a
portrait for 250 guineas. Held not a kt of sale. Appn
of artists skill towards production of good/ good non
existent . Hes paid for work-delivers product.
• Like contract of supply of services. e.g. advocate and
client, where lawyer drafts some documents for
client. Can sue on contract, lee v. griffin
 Sale v. barter trade

• Barter trade is an exchange of goods for goods, does

not involve money. Moss v. Hancock.
• Aldridge v. Johnson kt for exchange of 52 bullocks
for 100 quarters of barley, the difference of which
was payable with money, was held to be a sale.
• Part exchange is a sale.
 Contract of sale v. bailment
• A bailer delivers goods to a bailee who holds unto
them until he redelivers them to bailer under given
instructions.
• Bailment property does not pass and is not intended
to pass.
• Same goods returned to owner.
• Contracts Act 2010 part ix
 Hire purchase

• A mixture of bailment and option to purchase. Seller

delivers goods to you , to use on hire, with an option
for buyer to purchase. If option is exercised there is a
sale.
• Buyer is hirer of goods, by paying installments, he is
not owner until he buys.
• Hire purchase is security for seller for his goods
delivered to buyer, pending payment of price.
• CAR HIRE/ RENTAL?
 Hire purchase v. sale
• Hire purchase , buyer only has possession (bailee) .
Seller has ownership.
• Sale: buyer cannot terminate kt. Hire purchase: hirer
can cancel kt & return the goods without liability.
• Sale: seller takes risk of insolvency of buyer. HP :
owner has no risk , if hirer fails to pay seller can take
back the goods.
• HP. property does not pass until final payment/
option to purchase sale: property passes
immediately.
 Subject matter: the GOODS.
• What is dealt in is goods.
• Future goods and existing goods. May be :
• Specific goods
• Ascertained goods
• Unascertained goods.
• Existing goods. Are goods physically existent, in a
sellers ownership/possession at time of kt. Can be
touched, seen.
• If seller is agent, he can sell existing goods.
 Existing goods:
• Specific or ascertained goods. S.1 are goods which
are identified and agreed upon at the time the kt of
sale is made. Property does not pass until goods are
ascertained.
• Future goods. Are goods to be manufactured or
acquired by the seller after entering a kt of sale. They
include goods not yet in existence, and goods thou
existing are not ascertained by seller. E.g. “all the
vehicles in the container asea.”
• E.g ROLLS ROYCE
 Unascertained goods

• Goods not identified or ascertained at the time of Kt.

Goods to be manufactured (future goods). E.g. contract
to buy 10 kg of maize growing in a field, are not
ascertained because they have not been acquired by
seller. They are defined only by description.
• Contingent goods. Are future goods whose
acquisition depends on an uncertain contingency.
Contract of sale of contingent goods is like agreement to
sell. It is enforceable on the happening of contingency.
“Ill sell you a brown goat once I acquire it from the village.”
 Perishable goods
• S. 7 where in a contract for sale of specific goods, the
goods perish without knowledge of seller, it is void.
• Couturier v hastie sale of corn at sea
• Claim against couturier/ agent failed. Coz contract
was void.

• s.8 where in an agreement to sell specific goods and

without either party's fault they perish before risk
passes to buyer, kt is avoided.
• Effect?
 THE PRICE
• The money consideration for the sale of goods. In a sale
there should be a price.
• Price should be paid or promised to be paid in legal
tender.
• Mode of payment is irrelevant as long as it is monetary.
• S.9 price may be fixed by parties or the contract may
provide the method of fixing the price.
• Reasonable price , if it is not fixed.
• Price can be fixed by a valuer. E.g. in land matters.
• if valuer does not fix price , kt is avoided.
• If the non fixture of price by valuer was caused one of
parties, he must pay damages.
 .
• Campbell v. Edwards, Denning, LJ it is simply the law
of contract that if two persons agree that the price of
property should be fixed by a valuer on whom they
agree and he gives that valuation honestly, they are
bound by it.
 Formalities
• S.4 a kt of sale may be in writing, by word of mouth
or partly in writing and partly by word of mouth
(orally) or it can be implied from the conduct of the
parties.
• S.5 a contract of sale of goods of more than 200sh
cannot be enforced by action unless:
• -buyer accepted part of the goods sold and actually
received them
• -if buyer gave something
• Its in writing. / memorandum
 Terms of a contract of sale
• Stipulations regarding quality of goods, price and
mode of payment, delivery, etc.
• Express terms
• Implied terms
• Terms can be classified as:
• conditions and warranties.
• What is a condition?
• What is a warranty?
 .
• Condition is a main term whose breach leads to
termination of contract.
• Warranty is a secondary term, breach of which does not
rescind the contract. Sue for damages.
• breach of a condition can be treated as breach of
warranty at option of innocent party e.g. non payment of
rent, where tenant intended to buy. S. 12
• breach of a warranty cannot be treated as breach of
condition.
• Stipulation can be a condition thou called warranty
• NB. An express term can vary an implied term, or by
usage/ dealing btn parties.
 Implied conditions

• Implied by the law, SOGA.

• Intended to protect the buyer.
• 1. the seller has right to sell the goods. (title).s.13
• Seller must be rightful owner of goods. Rowland v.
Durall . P was entitled to sue and recover the price
where the sold car did not belong to Durall.
• 2. That the goods correspond with their description.
In a sale by description S.14 .
 terms
• Varley v. Whipp. W bought a second hand reaping
machine , that was hardly used. He validly rejected it
on delivery as it didn’t correspond to its description.
• “sale by description must apply to all cases where
the purchaser has not seen the goods but is relying
on the buyer’s description alone. “
• 3. condition on sale by sample . S. 16. three
conditions
• -the bulk of goods shall correspond with sample
in terms of quality.
 sample
• -the buyer shall have opportunity to compare bulk
with sample.
• Seller should wait for buyer to make comparison
before he demands a price.
• The goods will be free from any defect rendering
them unmerchantable which would not be apparent
on reasonable examination by sample.
• Latent defects. S15 (b)
• If defect easily discoverable, and buyer still accepts
goods on inspection, theres no breach of condition
 .
• Lorymer v. Smith sale of wheat by sample but buyer
was never showed other sample. So he rescinded kt.
• 4. Sale by sample and description.
• Goods shd correspond to both conditions sample
and description. Or buyer can reject goods.
• Wallis v. Pratt the seeds were described as
“common English sainfoin” , and yet they were
“giant sainfoin”. Breach of condition entitled buyer
to damages.
 .
• 5. goods are of merchantable quality (description)
• Godley v. Perry the catapult injured the boy was not fit
for the purpose, was not of merchantable quality albeit
the defect could not be reasonably discovered.
a) Seller to be manufacturer or dealer of gds of such
description e.g Spear motors
b) Buyer must not have chance of examining the goods

• “reasonableness and not extreme ingenuity by buyer”

• Buyer expected to use ordinary care to inspect

 Conditions.
6. . Fitness for purpose. S. 15
-buyer should tell seller the purpose of buying goods
-buyer to rely on seller’s skills/ judgment
-sold goods to be in seller’s ordinary business
 Andrew Yule & co.
• Buyer ordered for lessian cloth, but did not tell seller
purpose of gds, so he rejected them since they had
unusual smell not suitable for packing foods
• buyer was held liable. Didn’t tell seller the purpose .
• Held gds were suitable for packing purposes.
 .
• . merchantability of goods.
Grant v. Australian knitting mills
Underwear supplied contained chemicals that cd
harm skin . Coz of defect they were not of
merchantable quality.
 .
• 7. wholesomeness. Free from any defect in sales by
description.
If eatables (dairy) are sold they should be fit for human
consumption. Free from defects.
dairy co. paid damages for death of buyers wife.
Frost v. aylesbury dairy
Res extincta dealing in goods believing they exist whereas
not. Barrow lane & Ballard limited v. Phillips & co.
plaintiffs contracted to sell defendants 700 bags of nuts
believed to be lying in certain warehouses. Unknown to
them 109 bags disappeared at time of kt. And 450 bags
disappeared before goods could be delivered.
 Implied warranties

1. Quiet possession of the goods sold. E.g immovable

property, the seller warranties that he has the best title
to the land.
No adverse claim / trespassers, caveats etc
• Tenants, too enjoy quiet possession.
• Mason v. burningharm stolen typewriter did not warrant
buyer quiet possession. P Entitled to cost/ repairs
• 2.freedom from encumbrances.. Goods sold should not
be charged i.e. under mortgage, pledges, caveats etc E.g.
land. Inform buyer.
 .
• 3. disclosing the dangerous nature of goods to buyer.
• E.g. sale of a loaded gun.
 Doctrine of caveat emptor: “buyer be aware”

• Buyer should examine the goods to satisfy himself as

to their quality / his specification. E.g. if he wants
unencumbered land.
• Land transactions. “you buy this land at your risk”.
• Buyer to make inquiries from seller.

• Ward v. hobbs pigs sold by auction “with all faults”.

Pigs had fever , infected buyers pigs buyer should
have examined pigs before accepting them.
 Transfer of property
• Passing of property determines who bears the
risk in the goods.
• Risk passes with property.
• Whoever has ownership bears the risk,
irrespective of possession.
• E.g. international sales CIF.
 .
• Parties can decide when risk should pass e.g. on delivery.
• Action against third party. Is only brought by the party
with property in goods. EMAG AG v. Stanchart

• Suit for price. Seller brings action for price if property is

vested in buyer.
• If seller still has property ? Sue for damages.

• Property vests in official receiver if either seller or buyer

is bankrupt.
 Transfer of title

• Seller cannot transfer better title to buyer

than he himself has.
• If goods are stolen/ defective , buyer does not
get better title.
• Land with encumbrances.
• Nemo dat quod non habet
• No one can give what he has not got.
• Protects owner of goods.
 Exceptions.
• Sale by joint owner, without authority of co-owners.
Buyer becomes co- owner.

• Sale by “seller in possession after sale”, will convey

good title if buyer is bonafide purchaser for value.
• Katarikawe v. Katwiremu.

• Sale by order of court. Property can be transferred to a

third person who was not party to kt, court order
katatumba ‘s case.
 Performance of the sale contract
• Delivery of goods by seller.
• S. 27 duty of seller to deliver and buyer to accept
and pay.
• Seller to hand over possession
• buyer- to take possession
• Place of delivery? Seller’s place of business/
residence
• Or Goods to be delivered to a known place s. 29
• Time of delivery? Seller to send them within
Reasonable time.
 .
• S.29 (4) if goods with third party there is no delivery until
3rd P acknowledges to buyer that he holds such goods.

• Seller to put goods in a deliverable state e.g. packed fish.

• Delivery of wrong quantity: buyer can reject goods. S. 30
• If he accepts wrong /surplus quantity he has to pay.

• If other goods not fitting description. Then buyer can reject

whole/ pay only for kt goods.
 Acceptance

• Buyer intimates to seller acceptance

• Buyer does an act inconsistent with sellers
ownership
• S. 35
• Buyer retains goods without intimating to
seller he has rejected goods.
• N.B buyer not bound to return rejected goods.
 Rights of unpaid seller (part v
• Right against the goods S.38
• Right against the buyer.
• 1. right of lien. (retention of goods) S. 40
• If goods in sellers possession.
• Only for non-payment. E.g. bill not honoured /
bounced cheque
• Seller’s lien lapses, if buyer obtains possession of the
goods S. 42
• Waiver of lien
• Right of lien not affected by Judgment for seller for
price!
 .
• 2. right of stoppage in transitu S 43-45
• Before goods arrive at final destination, seller can stop
them in transit, e.g. if buyer becomes insolvent.
• By notification e.g. of carrier
• Or taking actual possession
• NB. Sale not rescinded by lien/stoppage in transit s. 47
• Right of re-sale. S. 46
• -to mitigate the damages/loss. E.g. buyer is insolvent.
• Perishable goods.
• The resale is allowed by contract
 Rights of seller
• Against the buyer:
• -Action/suit for price, if property has passed S.
48
• Damages for non-acceptance, and non-
payment. S. 49
 Rights of the buyer
• Action for non-delivery of goods . S.51
• Suit for recovery of price, if purchased goods not
delivered.
• Specific performance. S. 52
• Action for breach of contract. : if seller breaches
a condition e.g. delivery of non- conforming
goods
• Rejection of goods.
• Damages/ special damages / interest S. 53
 Conclusion.
• .