Jurisprudence
December 18, 2017
28 Nov 2017
Commercial Law
November 28, 2017
Personal Remedies Available to the Seller for Breach of Contract of Sale
The sales of goods act provides
for actions that can be undertaken by either buyer or seller if there is a
breach of the contract of sale by any of the parties. The actions available to
the seller would first be examined, followed by the
actions available to the buyer.
Actions Available to the
Seller
The main actions available to
the seller in case of a breach of contract of sale are an action for the price
and damages for non-acceptance. These two remedies would be subsequently
highlighted below.
Action for the Price
An action for the price is a
situation in which the seller asks the court to force the buyer to pay the
price agreed upon by both parties in the contract of sale.
Where under a contract of sale,
the property in the goods have been transferred to the buyer but he refuses to
pay the price, the seller can maintain an action for the price against the
buyer; S.49(1) SOGA. If
according to the contract of sale, the price of the goods is to be paid on a
particular day irrespective of whether the goods are to be delivered or not, if
that date elapses and the buyer hasn’t paid, the seller can bring an action for
the price whether or not property in the goods has passed to the buyer; 49(2) SOGA.
Damages For
Non Acceptance
This action is used when the
buyer refuses to take acceptance for the goods and the seller suffers losses as
a result of this’
Where the buyer wrongfully
refuses to accept and pay for the goods, the seller can maintain an action
against him for damages for non-acceptance;S.50(1) SOGA. The measure of damages is
the estimated natural loss that results from the buyer’s breach of the
contract; S.50(2). Where
there is an available market for the goods, the damages to be paid would prima facie be the difference
between the market price and the contract price at the time(s) the buyer was
supposed to accept the goods. If no time for acceptance was fixed, the relevant
time would be the time that the buyer rejected the goods; S.50(3) SOGA.
Actions Available to The
Buyer
There are three actions that
have been made available to the buyer in case of the breach of a contract of
sale. they are:
- Damages for non-delivery
- Specific Performance
- Remedy for a breach of warranty.
Damages for
Non-Delivery
This action is applied when the
seller neglects or wrongfully refuses to deliver the goods to the buyer; S.51(1) SOGA. The
measurement of damages is the estimated loss resulting naturally from the
seller’s breach of the contract; S.51(2).
If there is a market for the goods, then the measure of damages is prima facie the difference
between the market price and the contract price at the time(s) the goods were
supposed to be delivered. If there is no stipulated tike for delivery, the
relevant time would be thge time when the seller refused to deliver the goods; S.51(3).
Specific
Performance
This is used in order to order
a defaulting party to do his own part of the contract. The Sales of Goods Act
provides in S.52
that in an action for breach of contract concerning specific or ascertained
goods, the court may, on the application of the plaintiff, order that the
defendant specifically performs the contract, without him having the option of
retaining the goods on the payment of damages. The order could be unconditional
or could be done according to the terms and conditions which the courts think
to be just.
Remedy For a
Breach of Warranty
A warranty has been earlier
defined in S.11(1)(b)
of the SOGA
as a stipulation in a contract the breach of which would not give rise to a
repudiation of the contract but only an action for damages. According to the
provision of S.53(1)
of the Sales of Goods Act,
where there is a breach of a warranty or the buyer elects, or is compelled to
treat the breach of a condition as a breach of warranty, such breach would not
entitle him to reject the goods. He can however set the breach of warranty in
diminution or extinction of the price; S.53(1)(a).
The measure of damages for a
breach of warranty is the estimated loss that results directly and naturally
from the breach of such warranty; S.53(2).
In a situation of a breach of warranty as to quality, such loss is prima facie the difference
between the value of the goods at the time they were delivered and the value
they would have been had they answered to the warranty; S.53(3). Also, the fact
that the seller sets up the breach of warranty in diminution or extinction for
the price does not stop him from applying for further damages if he has
suffered additional loss; S.53(4).
Finally, it is provided under S.54 of the Sales of Goods Act that
nothing in the act would affect the right of the buyer or seller to recover
special damages or interests where they are entitled to such under the law.
Also, they are entitled to recover money paid if what the money was paid in
consideration for has failed.
Commercial Law
November 28, 2017
The Sale of Goods Act on the Concept of an "Unpaid Seller"
An unpaid seller has been
defined by S.38 of the Sales of Goods Act.
It provides:
38.(i) The seller of goods is
deemed to an “unpaid seller” within the meaning of this Act—
(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 dishonour of the instrument or otherwise.
(2) In this Part of this Act
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
indorsed, or a consignor or agent who has himself paid, or is directly
responsible for, the price.
From the above, it can be
deduced that an unpaid seller is a person who has not being paid, either by
cash or other negotiable instruments. For negotiable instruments, the mere fact
that they haven’t been tendered by the seller doesn’t mean that he is an
unpaid seller. He becomes an unpaid seller when after tendering them, they are
rejected.
The term “seller” was also
defined; it doesn’t only refer to the seller in his person but includes the
seller’s agents.
The Rights of An Unpaid
Seller
The act further provides for
means of redress in the situation of an unpaid seller. The means are
a right of lien on the goods, the right to stop the goods in transit if
it is discovered that the buyer is insolvent and a right to resell the goods.
This is encapsulated in the provisions of S.39 of the Act which provides:
39.—(i)
Subject to the provisions of this Act, and of any statute in that behalf,
notwithstanding that the property in the goods may have passed to the
buyer, the unpaid seller of goods, as such, has by implication of law—
(a) A lien
on the goods or right to retain them for the price while he is in possession of
them;
(b) In
case of the insolvency of the buyer, a right of stopping the goods in transitu
after he has parted with the possession of them;
(c) A right
of re-sale as limited by this Act.
(2) Where
the property in goods has not passed to the buyer, the unpaid seller has, in
addition to his other remedies, a right of withholding delivery similar to and
co-extensive with his rights of lien and stoppage in transitu where the
property has passed to the buyer.
The Unpaid
Seller’s Right of Lien
A right of lien is simply the
right of a seller to withhold the delivery of goods to the seller till he has
been paid. The act provides for situations in which an unpaid seller would be
able to exercise his right of lien: where the goods are not sold on credit, if
they were sold on credit; the term of the credit has expired, where the buyer
becomes bankrupt.
The act also provides that the
seller can exercise this right notwithstanding that he is an agent, bailee or
custodier for the buyer.
All these are encapsulated in
S. 41 which reads:
41.—(1) Subject to the
provisions of this Act, the seller of goods who is in possession of them is
entitled to retain possession of them until payment or tender of the price in
the following cases, namely; —
(a) Where
the goods have been sold without any stipulation as to credit;
(b) Where
the goods have been sold on credit, but the term of credit has expired;
(c) Where
the buyer becomes insolvent.
(2) The
seller may exercise his right of lien notwithstanding that he is in possession
of the goods as agent or bailee or custodier for the buyer.
However, in a situation in
which the seller makes part delivery of the goods, he may exercise his right of
lien on the remaining part unless there is an agreement in which he waives this
right. This is provided in S.42
of the Sales of Goods Act which states:
42. Where
an unpaid seller has made part delivery of the goods, he may exercise his right
of lien or retention on the remainder, unless such part delivery has been made
under such circumstances as to show an agreement to waive the lien or right of
retention.
By the provision of S.43 of the sales of Goods Act,
the following are situations in which the seller loses his right of lien:
43.—(1) The unpaid seller of
goods loses his lien or right of retention thereon
(a) When
he delivers the goods to a carrier or
other bailee or
custodier for the purpose of transmission to the buyer without reserving the
right of disposal of the goods;
(b) When
the buyer or his agent lawfully obtains possession of the goods;
(c) By
waiver thereof.
(2) The
unpaid seller of goods, having a lien or right of retention thereon, does not
lose his lien or right of retention by reason only that he has obtained
judgment or decree for the price of the goods.
The Unpaid
Seller’s Right of Stoppage In Transitu
Stoppage in transit is the
right of the unpaid seller to stop delivery of the goods if he discovers that
the buyer is bankrupt. This is provided for in S.44 of the Sales of Goods Act
which provides:
44.
Subject to the provisions of this Act, when the buyer of goods becomes
insolvent, the unpaid seller who has parted with the possession of the goods
has the right of stopping them in transitu, 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.
The Act further discusses the
intricacies and technicalities of stoppage of goods in transit, This is done in
S.45 which provides thus:
45.—(1) Goods
are deemed to be in course of transit from the time when they are delivered to
a carrier by land or water, or other bailee or custodier for the purpose of
transmission to the buyer; until the buyer, or his agent in that behalf, takes
delivery of them from such carrier or other bailee or custodier.
(2) If the
buyer or his agent in that behalf obtains delivery of the goods before their
arrival at the appointed destination, the transit is at an end.
(3) If,
after the arrival of the goods at the appointed destination, the carrier or
other bailee or custodier acknowledges to the buyer, or his agent, that he
holds the goods on his behalf and continues in possession of them as bailee or
custodier for the buyer, or his agent, 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 or custodier
continues in possession of them, the transit is not deemed to be at an end,
even if the seller has refused 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 particular case, whether they are in the possession
of the master as a carrier, or as an agent to the buyer.
(6) Where
the carrier or other bailee or custodier wrongfully refuses to deliver the
goods to the buyer, or his agent in that behalf, the transit is deemed to be at
an end.
(7) Where
part delivery of the goods has been made to the buyer or his agent in that
behalf, the remainder of the goods may be stopped in transitu, unless such part
delivery has been made under such circumstances as to show an agreement
to give up possession of the whole of the goods.
The unpaid seller can exercise
his right of stoppage in transitu by either taking actual possession of the
goods or by notifying the carrier, bailee or custodier in possession of the
goods of his right of stoppage in transitu. He can also notify the principal of
the person in possession of the right of stoppage in transitu if it is in a
situation in which the principal would be able to communicate such right to the
person in actual possession; S.46(1).
When the notice of stoppage in
transitu is delivered to the carrier, bailee, custodier or any other
person in possession, such person must re-deliver the goods according to the
seller’s instructions. The cost of re-delivering the goods in this situation
would be borne by the seller; S.46(2).
The
Unpaid Seller’s Right of Re-Sale
According to the provision of S.47 of the Act, the unpaid seller’s
right of lien or stoppage in transitu is not affected by any resale or other
disposition done by the buyer to a third party without the seller’s consent.
However, in a situation in which the documents of title, having been lawfully
transferred to the buyer, are then given to the third party who receives them
in good faith for a reasonable consideration, the seller’s right of lien and
stoppage in transitu has been defeated. If the said transfer was by way of
pledge or other disposition for value, the unpaid seller’s right can only be
exercised subject to the right of the transferee.
Also, S.48(1) provides that
subject to its provisions, the exercise of the seller’s right of lien or
stoppage in transitu does not repudiate the initial contract. It is further
provided for in S.48(2)
that where an unpaid seller that has exercised his right of lien or stoppage in
transitu resells the goods, the new buyer has a right to the goods over the
former buyer.
Where the goods are perishable
in nature and the unpaid seller notifies the buyer of his intention to resell
them, if the buyer doesn’t pay within a reasonable time, the seller can resell
the goods. He would also be able to recover from the original buyer any damages
incurred due to his breach of the contract; S.48(3).
Where the seller, in the contract of sale, reserves the right to resell the
goods on the default of payment by the buyer and the buyer defaults in payment,
the subsequent resale by the seller brings the contract to an end but it does
not affect the seller’s right to recover damages from the buyer; S.48(4) SOGA.
SOURCES
- MC Okany: Nigerian Commercial Law
- Sale of Goods Act 1893
Commercial Law
November 28, 2017
The Sale of Goods on Delivery
DUTY OF BUYERS AND SELLERS
By the
provision of S.27
of the SOGA, it is the duty of the seller to deliver the goods
and it is the duty of the buyer to accept and pay the price for the goods in
accordance with the terms of their contract.
By the
provision of S.28
SOGA, except it is otherwise provided in the contract, delivery
of goods and payment for same are concurrent conditions. That means the seller
must be willing to deliver the goods in
exchange for the price and the buyer must be willing to pay for the goods in
exchange for possession of the goods.
DELIVERY OF GOODS
Delivery has
been aptly defined by S.62 of the Sales of Goods Act as “the voluntary transfer of
possession from one person to another”. The Act in a number of sections,
ranging from section 29 to 34, provides for rules that should be applied when
delivery of goods is in question. These rules would be highlighted below.
General
Rules of Delivery
1.Whether it is for the buyer to take possession of the goods or it
is for the seller to send them to the buyer depends in each case on the terms
of the contract express or implied between the parties;S.29(1)
SOGA.
Apart from
any contract express or implied, the place of delivery is the seller’s place of
business if he has one.
If he
doesn’t have a place of business, the place of delivery is the seller’s place
of residence. If the contract is for the sale of specific goods that to the
knowledge of the parties is at another place, that place would be the place of
delivery.
2. Where under the contract the seller is meant to
send the goods to the buyer but no time for delivery is specified, the time for
delivery should be within a reasonable time; S.29(2)
SOGA.
3. Where at the time of sale the goods are in the
possession of a third party, there is no delivery until the third party
acknowledges to the buyer that he holds the goods on the buyer’s behalf;S.29(3). However,
nothing in this section would affect the operation of the issue or transfer of
documents of title to the goods.
This method
of delivery is called an attornment. For example, if the goods are in a
warehouse, delivery will be said to occur when the warehouseman acknowledges to
the buyer that the goods are held by him for the buyer.
4. Demand or tender of delivery might be termed
ineffectual unless it is made at a reasonable hour. What is a reasonable hour
is a question of fact; S.29(4) SOGA.
5. Unless otherwise agreed, the expenses of and
incidental to putting the goods into a deliverable state must be borne by the
seller; S.29(5) SOGA.
Delivery of
Wrong Quantity or Mixed Goods S.30 SOGA
1. Where the
seller delivers to the buyer goods that are less than the amount agreed upon,
the buyer may reject them. If the buyer accepts them, he must pay for them at
the contract rate; S.30(1).
2. Where the
seller delivers to the buyer a quantity that is more than the amount agreed
during the contract, the seller could either accept the quantity agreed upon
and reject the rest. He could also choose to reject the whole quantity; S.30(2). If
the buyer chooses to accept the whole quantity, he has to pay for them at the
contract rate.
In the case
of Polak and Faon vs George Cohen Ltd 1969
NCLR 433 the
defendant contracted to sell goods to the plaintiff stating the quantity as
“3500 tonnes, 10% more or less at buyer’s option”. The plaintiff after enquiry
accepted the figure of 3500 tonnes 10% over 3500 tonnes. The defendant supplied
3568 tonnes.
The court
held that where a contract of the supply of goods states the quantity followed
by a given percentage “more or less”, and the buyer makes no choice, the
supplier is not bound to deliver the exact quantity but within given percentage
of it whether more or less so that the delivery of the least quantity within
the given percentage is good performance.
Where the
variance allowed is at the buyer’s option, and the buyer validly exercises his
option, the supplier is bound to deliver the quantity so demanded by the buyer.
It was also
held that in a situation in which the buyer makes no choice, the damages would
not be for non-delivery of the initial amount, but for non-delivery of the
least quantity within the percentage range. But when the buyer makes a
choice which the seller doesnt comply with, the damages are for non-delivery of
the specific amount requested for by the buyer.
Thus, in
this case, since the buyer made a choice of 10% above 3500 tonnes(3850) and the
seller delivered 3568, the seller is liable under this contract of sale.
3. Where the
seller delivers to the buyer goods agreed upon in the contract but they are
mixed with other goods, he may accept the goods according to the contract and
reject the rest or he may reject the whole goods supplied;S.30(3)
SOGA.
4. The
provisions of this section are subject to any usage of trade, special agreement
or course of dealing between the parties; S.30(4) SOGA.
Instalmental Delivery of Goods S.31
SOGA
1. Unless otherwise agreed, the buyer of goods is
not obligated to accept goods delivered by installments;S.31(1).
In the case
of Mustapha and Co vs NCEI (1955) 21 NLR p 69, the terms of the contract provided inter alia for “delivery from factory January
1954”. Part of the goods left the factory in January 1954 and the remainder
left early the following month as a result of which the buyer refused to take
any part of the contract.
The
court held that the word “delivery” was to be construed in its normal as
distinct from its legal or technical sense and that it meant that all the goods
should leave the factory during January 1954. Since this had not been complied
with, the defendant could not be compelled to accept even that part which
arrived in January but could reject the whole because the contract was not
severable.
2. Where there is a contract for sale of goods to
be delivered by installment and to be paid for installment by installment, if
the seller delivers defective goods for one or more installments or the buyer
doesn’t take delivery or pay for one or more installments, the question of
whether this would cause the repudiation of the contract or the payment of
damages depends on the terms of the contract and the circumstances of the
particular case; S.31(2).
In the case
of Mapleflock
Co Ltd vs Universal Furniture Product Ltd (1934) 1 KB p.148 Parties entered into a contract for
the sale of 100 tonnes of ragflocks. Delivery was to be made at the rate of
three loads a week and each delivery to be separately paid for. The first 15
loads delivered were satisfactory but the 16th was not. In spite of this, the
buyer took four more deliveries and then sought to repudiate the contract.
The court
observed inter alia:
“…The true test would generally be
the relation in fact of the default to the whole purpose of the contract. The
main test to be considered are first, the ratio quantitatively which the breach
bears to the contract as a whole. Secondly, the degree of probability or
improbability that such a breach will be repeated…”
Thus, from
the above, considering that 1 out of 20 installments was defective, the ratio
is insignificant. Also, the probability that there would be a repeat of
defective goods is very little since only one had been defective so far. Thus,
the buyer cannot repudiate the whole contract. Rather, he only has a right to
reject the defective installment.
Another case
is that of Regent
OGH vs Francessco of Jenmy Ltd (1981) 3 ALL E.R @ 327. In this case, men
suits were to be delivered by installments, the size of each
installment/consignment being left to the plaintiff’s(the seller’s) discretion.
One installment of 22 was delivered short of one and the buyer sought to
repudiate the whole contract.
It was held
that in this circumstance, the buyer could not repudiate. Comparing S.30(1) & 31(2) the court observed that:
“… if a misdelivered consignment is rejected, the
result is to create a short delivery. S.30(1) and 31(2) in this respect, are not mutually
consistent, one must yield to the other and it seems to me that the business
sense of the contract of sales requires enough flexible provisions of S.31(2) to be applied in preference to those ofS.30(1)…”
Thus,
considering the circumstances of the case, it was held that the buyer could
only reject the defective consignment and not the whole contract.
Delivery by Carrier S.32 SOGA
1. Where in pursuance of a contract of sale, the
seller is authorised or required to send the goods to the buyer, delivery of
the goods to a carrier, whether named by the buyer or not, for the purpose of
transmission to the buyer, is prima
facie deemed to be a
delivery of the goods to the buyer; S.32(1).
In the Case
of Nads Imperial Pharmacy vs Siemgluse
(1989) NLR under
a contract of sale, goods were sent by S in Hamburg to M in Lagos. The goods
arrived in Lagos and M was notified. When M went for collection, it was
discovered that the goods were lost through some unexplained cause and so M
sued S for the goods or the price paid.The court held that according to the
provisions of S.32(1) SOGA, delivery of goods to a carrier is prima facie
delivery to the buyer. Thus, in this present case, delivery to the ship, who
acted as the carrier, was considered as delivery to M. Since risk passes with
transfer of property, M would have to bear the risk since they have been prima facie delivered to
him.
2. Unless otherwise authorised by the buyer, the
seller must make such contract with the carrier on behalf of the buyer as may
be reasonable, having regard to the nature of the goods and the other
circumstances of the case. If the seller omits to do so, and the goods are
lost or damaged in the course of transit, the buyer may decline to treat the
delivery to the carrier as a delivery to the buyer, or may hold the seller
responsible for the damages; S.32(2).
In the case
of Thomas Young and Sons Ltd vs Hobson &
Partners (1947) 6 ELR 365, under a contract of sale for certain
electric engines, they were to be sent by the seller to the buyer via railway.
The seller sent them at “owner’s risk” instead of at company’s risk at the same
rate. If the seller had chosen “at company’s risk”, the railway be
responsible for any loss sustained. Subsequently. the engines were
damaged in transit as they were not properly secured. The court, in applying
S.32(2) of the SOGA held that the seller did not make a reasonable contract
with the carrier and in such circumstances, the buyer can decide not treat
delivery to a carrier as delivery to himself.
3. Unless otherwise agreed, where goods are sent by
the seller to the buyer by a route involving sea transit under circumstances in
which it is usual to insure, the seller must give such notice to the buyer as
may enable the buyer to insure them during their sea transit.
If the
seller fails to do so, the goods shall be deemed to be at the seller’s risk
during such sea transit;S.32(3) SOGA.
Risk When Goods Are Delivered to
a Distant Place
Where the
seller of goods agrees to deliver them at the seller’s own risk at a place
other than that where they are when sold, the buyer must nevertheless, unless
otherwise agreed, take any risk of deterioration of the goods necessarily
incident in the course of transit; S.33
SOGA.
Buyers right of examining goods
S.34
Where goods
are delivered to the buyer which the buyer has not previously examined, the
buyer is not deemed to have accepted them unless and until the buyer has had a
reasonable opportunity of examining them in order to ascertain if they are in
conformity with the contract;S.34 SOGA.
Acceptance of
Goods
According to
the provision of S.35
of the Sales of Goods Act, the buyer would be deemed to have
accepted the goods under three circumstances:
- When he notifies
the seller of his acceptance.
- When the goods have
been delivered to him and he does an act to the goods which is
inconsistent with the ownership of the seller.
- If he retains the
goods after the lapse of a reasonable time without telling the seller that
he has rejected them.
In the case
of Ruben vs Faire Bros Co Ltd 1949 1 KB 254,
the buyer after completing the purchase of the goods, told the seller to
deliver the goods to a third party. When the seller did so, the third party
rejected them on the ground that the goods were not in conformity to the
contract. The court held that considering the fact that the goods were already
purchased before delivery to the sub-purchaser, selling them to a sub-purchaser
is an act inconsistent with the seller’s right and is thus acceptance.
In another
case of Hammer and Barrow vs Coca-Cola (1962) NZLR
723, Coca-Cola
bought 200 thousand yoyos from the plaintiff to be used in an advertising
campaign. One of the terms of the contract was that of the 200 thousand, 85,000
would be delivered to the Northern bottling Company’s premises in Auckland.
When the 85,000 yoyos were delivered, it was discovered that about 80 percent
of the yoyos were defective. Coca-Cola thus refused acceptance of the goods.
The
plaintiff company thus sued for the contract price. They relied on the
provision of S.35 that acceptance is deemed to have taken place when the buyer
does, in relation to the goods, an act inconsistent with the right of the
seller. Thus, according to them, coca-cola in delivering the goods to a third
party had accepted the goods.
The court
held that this doesn’t apply in this situation. This is due to the fact that
delivering the goods to the third party was part of the contract of sale. Thus,
the act of the seller in delivering them to the third party was synonymous to
delivering them to the buyer. Therefore, the acceptance of the goods would be
subject to the right of the buyer to inspect them for defects as stated under S.34.
Buyer Not Bound to Return
Rejected Goods
According to
the provision of S.36 of the Sales of Goods Act,
except otherwise agreed, if after the goods have been delivered to the buyer he
rejects them, he is not bound to return them to the seller. However it is
sufficient if the buyer notifies the seller of the rejection of the goods.
Liability of Buyer for Neglecting
or Refusing Delivery of Goods
According to
the provision of
S.37 of the Sales of Goods Act, when the seller is ready to
deliver the goods and he requests the buyer to take delivery, but the buyer
doesn’t within a reasonable time. The buyer would be responsible for any loss
that occurs due to his refusal to take delivery and he shall also be
responsible to the seller for a reasonable charge for the care and custody of
the goods.
However,
this section does not affect the right of the seller if refusal to take
delivery of the goods by the buyer would amount to a repudiation of the
contract.
Commercial Law
November 28, 2017
Understanding the concept of "Transfer Of Risk"
Whoever is the owner of goods would
bear the risk of damages that happen to the goods while it is still his
property. This is encapsulated in the maxim “res periit domino suo”
which literally means “the destruction of a thing is a loss to its owner”.
By the provisions of S.20 of
the SOGA, risk in the goods lies with the seller but passes from
seller to buyer when the property in the goods is passed,
whether or not delivery has been made. It is further provided that if delay of
delivery is as a result of the action of either buyer or seller, such person
would be liable for any damages that would not have occurred but for such
delay. However, this provision does not affect the duties which accrue if
the seller or buyer is the bailee or custodier for the other party.
In the case of Wardars
Import and Export Ltd vs W.Norwood & Sons (1968) 2 WLR 1440, X
had 1500 cartons of frozen kidneys in Y’s warehouse. He sold 600 cartons to Z
and gave him a delivery note addressed to Y. When Z’s carrier arrived at the warehouse,
he saw that the 600 cartons were already out on the pavement. Y accepted the
delivery note from the carrier. At 8 am, loading started, however, the carrier
didn’t turn on the refrigerator in his van till 10 am by which time the cartons
on the pavement were dripping.
Loading was concluded at 12 pm and the
carrier signed a receipt stating that he had received the goods in soft
condition. On delivery to Z, it was found out that the goods were of
unmerchantable quality. and thus Z refused to pay.
In court it was held that property in
the goods passed when Y, a third party, acknowledged that the goods were for Z
by accepting the delivery note. Thus, since property had already passed to the
buyer when the damage to the goods occured, the risk would have to be borne by
the buyer.
Exceptions to The Rule
- Where
there is a contrary agreement between the parties, the agreement binds
them;s.20
- If
delay is caused by either of the parties, the party responsible for the
delay would bear the risk;S.20.
- For
goods that are sent by sea, the right passes if the carrier successfully
delivers them to the buyer. However, the seller should inform the buyer of
the need to insure the goods. If the buyer refuses to insure the goods,
the risk passes to the buyer; 32 SOGA.
- Where
the seller agrees to deliver the goods at a place other than the agreed
place at the instance of the buyer, the buyer would bear the risk of
deterioration in the course of transit; S.33 SOGA
Commercial Law
November 28, 2017
The Concept of Transfer of Property in Goods
This is the moment at which it would be believed by the court that
the property in the goods has passed from buyer to seller. The application of
the rule is different in the instance of ascertained goods and unascertained
goods.
Transfer of
Specific Or Ascertained Goods
In the case of ascertained goods, it is provided by S.17 (1) that the property in the goods
will be transferred to the buyer at the time which was agreed upon by the
parties. In order to pin point the intention of the parties as to when the
property in the goods should be passed, S.17
(2) provides
that regard shall be had to the contract, the conduct of the parties and the
circumstances of the particular case.
There are also additional rules provided for ascertaining the
intention of the parties. The first rule as provided in S.18 rule 1 is that when there is an unconditional
contract for selling specific goods that are in a deliverable state, the
property in the goods will be passed when the contract is agreed upon. This is
regardless of whether or not the date for payment or delivery has been
postponed.
The second rule under S.18 is that in the case of goods
that are not in a deliverable state and the seller has to do something to the
goods to make them deliverable, property in the goods passes when such things
are done and the buyer is notified of such.
In the case of Underwood
ltd vs Burgh Castle, the
plaintiffs intended to sell a condensing machine to the defendants. The machine
weighed 30 tons and was bolted to the ground. Thus the machine had to be
dismantled and transferred to the defendant. After dismantling the machine, as
it was about being loaded on the railway, it got spoilt. The court held that
property in the goods had not yet passed to the defendant since the goods were
not yet in a complete deliverable state when the machine got spoilt.
The third rule under S.18 is that when the goods are in a
deliverable state but the seller has to weigh, measure, test or do some other
thing to the goods in order to ascertain the price, property in the goods
passes when such thing is done and the buyer is notified.
The fourth rule provides that where the goods are delivered on a
“sale or return” term or any other such term, the property passes to the buyer
when he signifies the acceptance of the goods or he does an act that adopts the
transaction.
In a situation in which the buyer doesn’t signify any acceptance,
the property passes when the date specified for rejection is elapsed. If no
date is given, the goods will pass after a reasonable time. The determination
of a reasonable time is a question of fact.
See: Bull
vs Smith Car Sale 1962 2 All ER
Transfer of Unascertained
Goods
By the provision of S.18
rule 5(1) in the
case of unascertained or future goods by description and they are in a
deliverable state, the property passes to the buyer when they have been
unconditionally appropriated for such contract whether by the seller with the
consent of the buyer or by the buyer with the assent of the seller. The assent
could be given before or after the appropriation of the goods.
Unconditional appropriation of goods to a contract means that the
goods have been set apart from the bulk of unascertained goods and they would
be used for that particular contract without modification.
Also, if the goods are transferred by the seller to a third party
or carrier, whether selected by the buyer or not, for delivery to the buyer,
and the seller doesnt reserve a right of disposal, the goods will be considered
unconditionally appropriated to the contract S.18 rule5 (2) SOGA.
Commercial Law
November 28, 2017
Understanding Sale by Description under Commercial law
By the provisions of S.13 of the SOGA, where there is a sale of goods by description, there is an implied condition that the goods sold would fit the description that has been provided by the seller.
In the case
of Varley vs Whipp 1900 1 QB 513, the plaintiff sold a
reaping machine to the defendant. The machine was described to be about a year
old and used to cut about 50 to 60 acres. On getting the machine, it was
discovered to be very old and the
defendant returned it. The plaintiff sued for the contract price.
The court
held that the defendant could reject the goods since they didn’t fit the
description provided and were a breach of condition as provided by S.13 of the SOGA.
Also, if
goods are sold by description and sample, it is not sufficient if the bulk of
the goods correspond to the sample and they do not correspond to the
decription.
Quality Of Fitness For Purpose And
Merchantable Quality S.14 SOGA
The Sales of
Goods Act provides in S.14 that there is no impled condition as
to quality of fitness of purpose except in the following circumstances:
1. Where the buyer purchases the goods by
describing the purpose of the goods to the seller and he relies on the seller’s
skill or judgement in purchasing the goods, the goods must fit the purpose described.
Provided that it is in the seller’s business to supply goods of such
description, whether or not he is the manufacturer; S.14(1). However, this
doesnt apply to specified goods that are bought under their trade name or
patent.
2. Where goods are bought by description from a
seller who deals in goods of such description, there is an implied condition
that such goods should be of merchantable quality. However, if the buyer has
examined the goods this provision would not apply.
Sale by Sample S.15 SOGA
A
contract of sale is a sale by sample where there is a term either express or
implied in the contract that states it as such; S.15(1) SOGA. In a contract of sale by
sample, there is an implied condition that the bulk of the goods would
correspond to the sample in quality; S.15
(2) (a).
There is
also an implied condition that the buyer would have a reasonable opportunity of
comparing the bulk and the sample; S.15 (2) (b). There is another implied condition
that the goods are free from defects rendering it non merchantable if the
defects are such as cannot be discovered on examination of the sample; S.15(2)(c) SOGA.
