COMMERCIAL LAW 1COMMERCIAL LAW 12012/2013 ACADEMIC YEAR 2012/2013 ACADEMIC YEAR LECTURE-SALE OF GOODSLECTURE-SALE OF GOODS

UGBS, 12UGBS, 12thth OCT 2012 OCT 2012

Rowland Atta-Kesson Esq.Rowland Atta-Kesson Esq.

TUTORIALTUTORIAL• On 1On 1stst December Soaka Computer School, a December Soaka Computer School, a

newly opened computer training school newly opened computer training school ordered from Aganogyiri Computer Ltd 24 IBM ordered from Aganogyiri Computer Ltd 24 IBM Computers at $1500 each delivery to be made Computers at $1500 each delivery to be made on 15on 15thth December. December.

• On 3On 3rdrd December, the Managing Director of December, the Managing Director of Aganogyiri Computers Ltd telephoned Mr. Aganogyiri Computers Ltd telephoned Mr. Abrakada a purchasing officer of Soaka Abrakada a purchasing officer of Soaka Computer School to come and inspect the Computer School to come and inspect the computers which he said were in bonded computers which he said were in bonded warehouse in Tema. warehouse in Tema.

• On arrival at the warehouse, Mr. Abrakada On arrival at the warehouse, Mr. Abrakada found that the warehouse was locked and found that the warehouse was locked and there was nobody there to grant him access to there was nobody there to grant him access to the computers at all. He however proceeded the computers at all. He however proceeded to confirm the order the following day. On 18to confirm the order the following day. On 18thth December Aganogyiri Computers Ltd delivered December Aganogyiri Computers Ltd delivered 22 IBM Computers and 6 Dell Computers to 22 IBM Computers and 6 Dell Computers to Soaka Computer School. Soaka Computer School.

• Upon examination of the computers, Upon examination of the computers, Soaka Computer School found that 4 of Soaka Computer School found that 4 of the IBM computers had faulty disk the IBM computers had faulty disk drives rendering them unusable. Soaka drives rendering them unusable. Soaka Computer School immediately sent a Computer School immediately sent a fax to Aganogyiri Computers Ltd fax to Aganogyiri Computers Ltd registering their dissatisfaction and registering their dissatisfaction and stating their intention to reject the stating their intention to reject the computers outright. computers outright.

• Aganogyiri Computers Ltd has Aganogyiri Computers Ltd has recovered the computers, promising to recovered the computers, promising to replace the faulty ones immediately. replace the faulty ones immediately.

• However, Soaka Computer School However, Soaka Computer School refused to accept any tender of re-refused to accept any tender of re-delivery by Aganogyiri Computers Ltd, delivery by Aganogyiri Computers Ltd, threatening to sue them for the loss threatening to sue them for the loss caused to them. caused to them.

• Soaka Computer School claims that the Soaka Computer School claims that the breach by Aganogyiri Computers Ltd has breach by Aganogyiri Computers Ltd has resulted in the loss of revenue Ghresulted in the loss of revenue Gh¢2000.00 being the fees which could ¢2000.00 being the fees which could have been paid by 4 students who could have been paid by 4 students who could not be registered on time. not be registered on time.

• After much effort Soaka Computer School After much effort Soaka Computer School was able to purchase the 24 IBM was able to purchase the 24 IBM Computers on a local market on 22Computers on a local market on 22ndnd December at $2000 each. The price of December at $2000 each. The price of one IBM on the local market on 15one IBM on the local market on 15thth December was $1500, $1,600 on 18December was $1500, $1,600 on 18thth December and $2000 on 22December and $2000 on 22ndnd December. December. Soaka Computer School is determined to Soaka Computer School is determined to sue Aganogyiri Computers Ltd for all the sue Aganogyiri Computers Ltd for all the loses they have incurred. Advise them.loses they have incurred. Advise them.

OUTLINEOUTLINE• Nature and Formation of a Contract for Nature and Formation of a Contract for

the Sale of Goodsthe Sale of Goods• Kinds of Obligations Created by the Sale Kinds of Obligations Created by the Sale

of Goods Act, 1962 (Act 137)of Goods Act, 1962 (Act 137)• Duties of the Seller under the Contract for Duties of the Seller under the Contract for

the Sale of Goodsthe Sale of Goods• Delivery of the Goods by SellerDelivery of the Goods by Seller• Duties of the BuyerDuties of the Buyer• Transfer of Property and Risk in the GoodsTransfer of Property and Risk in the Goods• Transfer of Property by a Non-OwnerTransfer of Property by a Non-Owner• Remedies of the SellerRemedies of the Seller• Remedies of the BuyerRemedies of the Buyer

INTRODUCTION INTRODUCTION • The law on the contract for the Sale of Goods The law on the contract for the Sale of Goods

is a branch of Commercial Law which is is a branch of Commercial Law which is generally concerned with the rights and duties generally concerned with the rights and duties arising from the supply of goods by way of arising from the supply of goods by way of trade.trade.

• In this course we will be concerned mainly In this course we will be concerned mainly with the legal principles and statutory with the legal principles and statutory provisions which govern contracts for the sale provisions which govern contracts for the sale of goods or movable property in Ghana.of goods or movable property in Ghana.

• This area of the law is governed for the most This area of the law is governed for the most part by statute. part by statute.

• The law or statute regulating this area of The law or statute regulating this area of commercial law is THE SALE OF GOODS ACT OF commercial law is THE SALE OF GOODS ACT OF GHANA, 1962, (ACT 137)GHANA, 1962, (ACT 137)

• This statute codifies and consolidates the law This statute codifies and consolidates the law on the Sale of Goods and so everything in the on the Sale of Goods and so everything in the course outlined from number 2 to 10 can be course outlined from number 2 to 10 can be found in the Act.found in the Act.

SCOPE SCOPE • Section 78 – Act applies to every Section 78 – Act applies to every

contract for the sale of goods made contract for the sale of goods made after its commencement, i.e., 1962.after its commencement, i.e., 1962.

• Section 79 – this Act applies to Section 79 – this Act applies to contracts entered into on behalf of contracts entered into on behalf of the Republic of Ghana by the the Republic of Ghana by the Government.Government.

• Section 80 – Act is a primary source. Section 80 – Act is a primary source. Secondary sources include Common Secondary sources include Common law and customary law e.g. age, law and customary law e.g. age, postal rule.postal rule.

FORMATION OF SALE FORMATION OF SALE CONTRACTCONTRACT

• Section 1(1)Section 1(1)– A contract of sale of goods is a contract by A contract of sale of goods is a contract by

which the which the seller seller agrees to agrees to transfer the transfer the propertyproperty in the in the goodsgoods to the to the buyer buyer for a for a consideration called the priceconsideration called the price, consisting , consisting wholly or partly of moneywholly or partly of money

• Essential elements of a contract for the Essential elements of a contract for the sale of goods:sale of goods:– Contract Contract – Seller and buyerSeller and buyer– The subject matter of the saleThe subject matter of the sale– Transfer of the property in goodsTransfer of the property in goods– Consideration – priceConsideration – price

• SELLER AND BUYERSELLER AND BUYER• In every contract for the sale of In every contract for the sale of

goods there must be two persons goods there must be two persons present-present-– the buyer and the seller.the buyer and the seller.

• A seller is one who sells or agrees A seller is one who sells or agrees to sell goods. to sell goods. – ““agreement to sell” has the same agreement to sell” has the same

meaning as “sale”;meaning as “sale”;– ““sale” means a contract of sale of sale” means a contract of sale of

goods;goods;

• A buyer is one who buys or agrees A buyer is one who buys or agrees to buy goodsto buy goods

• THE SUBJECT MATTER OF THE SALETHE SUBJECT MATTER OF THE SALE• Goods are defined in Section 81Goods are defined in Section 81– ““goods” includes movable property and growing goods” includes movable property and growing

crops or plants and any other things attached to crops or plants and any other things attached to or forming part of the land which are agreed to or forming part of the land which are agreed to be severed before sale by or under the contract be severed before sale by or under the contract of saleof sale• This means goods include all things which are at once This means goods include all things which are at once

tangible, movable and visible and of which possession tangible, movable and visible and of which possession can be taken.can be taken.

• It also includes things attached to land, which have It also includes things attached to land, which have been agreed to be severed or detached from the land been agreed to be severed or detached from the land under the contract.under the contract.

• E.g. of goods - animals, household utensils, cars, E.g. of goods - animals, household utensils, cars, jewels, corn, garments and everything else than can jewels, corn, garments and everything else than can properly be put in motion and transferred from place to properly be put in motion and transferred from place to placeplace

• Distinction from other things - choses in Distinction from other things - choses in action or things in action-goods, which action or things in action-goods, which cannot be physically possessed or intangible cannot be physically possessed or intangible form of property.form of property.– E.g. intellectual property - patent, copyright, E.g. intellectual property - patent, copyright,

shares etcshares etc

Classification of goods Classification of goods • Goods, which form the subject matter Goods, which form the subject matter

of a sale, are classified into 2 groups.of a sale, are classified into 2 groups.– Specific goodsSpecific goods– Unascertained goodsUnascertained goods

• Specific goodsSpecific goods– Goods, which by a process of identification Goods, which by a process of identification

and agreement of the parties are and agreement of the parties are designated as the unique goods, which are designated as the unique goods, which are to be delivered by the seller in to be delivered by the seller in performance of his obligations.performance of his obligations.

– The goods are specific goods if the parties The goods are specific goods if the parties have by a process of identification and have by a process of identification and agreement effectively distinguished or set agreement effectively distinguished or set aside the particular goods, which form the aside the particular goods, which form the subject matter of the contract of sale.subject matter of the contract of sale.

• Unascertained goodsUnascertained goods– Ascertained goods are goods identified and Ascertained goods are goods identified and

agreed on after a contract of sale is made;agreed on after a contract of sale is made;– In other words, unascertained goods, which In other words, unascertained goods, which

are not identified and agreed upon before or are not identified and agreed upon before or at the time of the contract of sale.at the time of the contract of sale.

– Unascertained goods are sold by sample or Unascertained goods are sold by sample or descriptiondescription

– E.g. Goods which are not yet in existence at E.g. Goods which are not yet in existence at the time the contract of sale is madethe time the contract of sale is made

– E.g. goods which are yet to be manufacturedE.g. goods which are yet to be manufactured– E.g. goods which are yet to be grownE.g. goods which are yet to be grown– E.g. goods which are yet to be acquiredE.g. goods which are yet to be acquired– E.g. goods, which are an identified portion of E.g. goods, which are an identified portion of

a bulk of goods. (100 bags of a stock of a bulk of goods. (100 bags of a stock of 1000)1000)

• TRANSFER OF THE PROPERTY IN TRANSFER OF THE PROPERTY IN GOODSGOODS

• Section 81Section 81– ““property” means the general property property” means the general property

in the goods and not merely a special in the goods and not merely a special propertyproperty

• Transfer of property in the goods and Transfer of property in the goods and not just transferring the goods. not just transferring the goods.

• There must be a transfer of the legal There must be a transfer of the legal title or the absolute right of title or the absolute right of ownership from the seller to the ownership from the seller to the buyerbuyer

• Property in the goods is different Property in the goods is different from having possessionfrom having possession

• CONSIDERATION – PRICECONSIDERATION – PRICE• Consideration in a sale of goods must Consideration in a sale of goods must

consist either wholly or partly in money consist either wholly or partly in money or cash.or cash.

• If consideration consists wholly in If consideration consists wholly in something other than money then the something other than money then the transaction is a barter sale or contract transaction is a barter sale or contract of exchange.of exchange.

• When consideration consists partly in When consideration consists partly in money and partly in goods, there must money and partly in goods, there must be evidence that the part of the price be evidence that the part of the price consisting of money is an integral part consisting of money is an integral part of the price and not merely added on for of the price and not merely added on for the sake of appearance.the sake of appearance.

OTHER ISSUES-OTHER ISSUES-• Sale of goods may be conditional or Sale of goods may be conditional or

absolute contractsabsolute contracts• Section 1(4) of the Sale of Goods Act Section 1(4) of the Sale of Goods Act

states that a contract for the sale of states that a contract for the sale of goods may be absolute or conditionalgoods may be absolute or conditional– Absolute – if the contract is intended to Absolute – if the contract is intended to

come into effect immediately, i.e., where come into effect immediately, i.e., where the coming into force of the contract is the coming into force of the contract is not dependent on any condition.not dependent on any condition.

– Conditional – if the contract is intended Conditional – if the contract is intended to come into effect only upon the to come into effect only upon the fulfillment of a specified condition or fulfillment of a specified condition or contingency.contingency.

• Capacity to enter into a contract of saleCapacity to enter into a contract of sale– According to section 2(1) of the Act capacity to buy According to section 2(1) of the Act capacity to buy

and sell is regulated by the general law on capacity and sell is regulated by the general law on capacity to contract. to contract.

– In other words, any one who under the general In other words, any one who under the general contract law can enter into a contract may enter into contract law can enter into a contract may enter into a contract for the sale of good. a contract for the sale of good.

– The general principles on the immunity of infants The general principles on the immunity of infants from suit therefore apply. from suit therefore apply.

– The exception in the case of “necessaries” is The exception in the case of “necessaries” is reproduced in section 2(2) of the Act to the effect reproduced in section 2(2) of the Act to the effect that the buyer shall be bound to pay a reasonable that the buyer shall be bound to pay a reasonable price where necessaries are delivered to an infant.price where necessaries are delivered to an infant.

– The question however is if the infant has no money The question however is if the infant has no money then what?then what?

• Form of a contract for the sale of goodsForm of a contract for the sale of goods– According to section 3 a contract for the sale of According to section 3 a contract for the sale of

goods may be;goods may be;• WritingWriting• OralOral• Partly writing, partly by word of mouthPartly writing, partly by word of mouth• Inferred from the conduct of the parties.Inferred from the conduct of the parties.

• Auction salesAuction sales::– An auction notice advertising sale is An auction notice advertising sale is

merely a statement of an intention to merely a statement of an intention to treat and in the absence of fraud an treat and in the absence of fraud an intending purchaser has no right to sue intending purchaser has no right to sue if the auction is cancelled or the items if the auction is cancelled or the items withdrawn. HARRIS v. NICKERSONwithdrawn. HARRIS v. NICKERSON

– Where the goods are sold in lots, each Where the goods are sold in lots, each lot put up at the auction sale constitute lot put up at the auction sale constitute the subject matter of a separate the subject matter of a separate contract of sale. The authority for this contract of sale. The authority for this is Section 4(1)(a) of the SALE OF is Section 4(1)(a) of the SALE OF GOODS ACT, 1962 (ACT 137)GOODS ACT, 1962 (ACT 137)

– The auctioneer by putting up the goods The auctioneer by putting up the goods and inviting bids makes an invitation to and inviting bids makes an invitation to treat and not an offer. At the auction treat and not an offer. At the auction sale each bid submitted constitute an sale each bid submitted constitute an offer which the auctioneer may or may offer which the auctioneer may or may not accept. The authority for this point not accept. The authority for this point is PAYNE v. CAVEis PAYNE v. CAVE

– The contract of sale is complete when The contract of sale is complete when the auctioneer announces his the auctioneer announces his acceptance by the fall of the hammer or acceptance by the fall of the hammer or in any other customary manner. Section in any other customary manner. Section 4(1)(b) of ACT 1374(1)(b) of ACT 137

– At any time before the auctioneer At any time before the auctioneer announces his acceptance, the bidder is announces his acceptance, the bidder is entitled to withdraw or revoke his bid. entitled to withdraw or revoke his bid. Section 4(1)(c) of ACT 137Section 4(1)(c) of ACT 137

• There are two kinds of auction sale; There are two kinds of auction sale; • (i) auction sale subject to reserve price and (i) auction sale subject to reserve price and • (ii) auction sale without a reserve price(ii) auction sale without a reserve price

• Auction sale with reserved price; Auction sale with reserved price; • the vendor/seller or his agent is allowed to bid the vendor/seller or his agent is allowed to bid

once only and openly at the beginning of the once only and openly at the beginning of the auction before any other bid is made. Section auction before any other bid is made. Section 4(1)(f) of ACT 137.4(1)(f) of ACT 137.

• It has been held in MCMANUS v. FORTESCUE It has been held in MCMANUS v. FORTESCUE that the auctioneer in an action sale subject to that the auctioneer in an action sale subject to a reserve price is not bound to sell the goods a reserve price is not bound to sell the goods to the highest ‘to the highest ‘bona fide’ bona fide’ bidder if his bid is bidder if his bid is below the notified reserved price and this is so below the notified reserved price and this is so even if the auctioneer accidentally knocks even if the auctioneer accidentally knocks down the goods to him. down the goods to him.

• Section 17(7) of the AUCTION SALES LAW, 1989 Section 17(7) of the AUCTION SALES LAW, 1989 (PNDCL230) is the Ghanaian authority on this (PNDCL230) is the Ghanaian authority on this point.point.

–Auction sale without a reserve price Auction sale without a reserve price • Where there is no minimum price the Where there is no minimum price the law presumes that the seller is prepared law presumes that the seller is prepared to sell the goods to the person who to sell the goods to the person who submits the highest bid no matter what submits the highest bid no matter what that price may be. that price may be. • The general principle is that the highest The general principle is that the highest ‘bona fide’ bidder is entitled to buy the ‘bona fide’ bidder is entitled to buy the goods at the price bid even if the goods at the price bid even if the auctioneer refuses to accept his bid or auctioneer refuses to accept his bid or complete sale. Section 4(1)(d) of ACT complete sale. Section 4(1)(d) of ACT 137. 137. • Neither the seller nor his agent can bid Neither the seller nor his agent can bid at the auction sale. WARLOW v. at the auction sale. WARLOW v. HARRISONHARRISON

• Determination of the price of goodsDetermination of the price of goods– Where the price is stated in the contract then Where the price is stated in the contract then

that will be the price payable by the buyer for that will be the price payable by the buyer for the goods.the goods.

– Secondly where the parties agree in their Secondly where the parties agree in their contract on the manner in which the price is to contract on the manner in which the price is to be determined such provision will be binding be determined such provision will be binding on both parties.on both parties.

– Thirdly, where there is an established course Thirdly, where there is an established course of dealing between the parties, the price which of dealing between the parties, the price which applied in their previous dealings will be used applied in their previous dealings will be used if the parties did not indicate the price in a if the parties did not indicate the price in a particular transaction. [see section 6(1)]particular transaction. [see section 6(1)]

– Section 6(2) provides that where the price of Section 6(2) provides that where the price of the goods cannot be determined by any of the the goods cannot be determined by any of the methods prescribed in section 6(1) the buyer methods prescribed in section 6(1) the buyer will be required to pay a reasonable price for will be required to pay a reasonable price for them. them.

– What is reasonable price will depend on the What is reasonable price will depend on the particular circumstances or facts of each case.particular circumstances or facts of each case.

• Price to be Fixed by Valuation of Third Price to be Fixed by Valuation of Third PartyParty– Generally the parties are free to agree on the Generally the parties are free to agree on the

manner in which the price of the goods is to manner in which the price of the goods is to be determined. One possible manner may be be determined. One possible manner may be by the valuation of a third party. Where the by the valuation of a third party. Where the parties agree that the price be fixed or parties agree that the price be fixed or determined by valuation of a third party and determined by valuation of a third party and the third party does not or cannot make the the third party does not or cannot make the valuation, the entire agreement would valuation, the entire agreement would thereby be avoided. However if the third thereby be avoided. However if the third party is prevented from making valuation by party is prevented from making valuation by the fault of the seller or the buyer, the party the fault of the seller or the buyer, the party not at fault may bring an action against the not at fault may bring an action against the party at fault for damages. [NB. This would be party at fault for damages. [NB. This would be a breach of implied promise not to prevent a breach of implied promise not to prevent the valuation]the valuation]

TYPES OF OBLIGATIONSTYPES OF OBLIGATIONS• Fundamental obligationFundamental obligation• ConditionCondition• Warranty Warranty

• Fundamental Obligations; [see section 8]Fundamental Obligations; [see section 8]• The seller has two fundamental obligations:The seller has two fundamental obligations:

– In a sale of specific goods the fundamental In a sale of specific goods the fundamental obligation of the seller is to deliver those obligation of the seller is to deliver those goods to the buyer.goods to the buyer.

– In a sale of unascertained goods the In a sale of unascertained goods the fundamental obligation of the seller is to fundamental obligation of the seller is to deliver to the buyer goods substantially deliver to the buyer goods substantially corresponding to the description or sample by corresponding to the description or sample by which they were sold.which they were sold.

• Section 49(1)(a) provides that where the Section 49(1)(a) provides that where the seller is in breach of a fundamental seller is in breach of a fundamental obligation the buyer is entitled to:obligation the buyer is entitled to:– Reject the goods and to refuse to pay the Reject the goods and to refuse to pay the

price, or if he has already paid, to recover it price, or if he has already paid, to recover it and;and;

– To sue for damages for the breach under To sue for damages for the breach under section 53 of the Act.section 53 of the Act.

• ConditionsConditions• Section 49(1)(b) also provides that where the Section 49(1)(b) also provides that where the

seller is in breach of a condition, the remedy seller is in breach of a condition, the remedy of the buyer depends on the consequence of of the buyer depends on the consequence of the breach, which has occurred. the breach, which has occurred.

• Where the breach is of a serious nature, the Where the breach is of a serious nature, the buyer is entitled to: buyer is entitled to: – Reject the goods delivered and refuse to pay the Reject the goods delivered and refuse to pay the

price or if he has already paid is entitled to price or if he has already paid is entitled to recover it and recover it and

– Sue for damages for non-delivery.Sue for damages for non-delivery.• Where the breach is of a trivial or non-serious Where the breach is of a trivial or non-serious

nature the buyer is entitled to sue for nature the buyer is entitled to sue for damages but is not entitled to reject the damages but is not entitled to reject the goods or refuse to pay the pricegoods or refuse to pay the price

• The breach of a condition of a contract will be The breach of a condition of a contract will be considered to be trivial if it does not affect considered to be trivial if it does not affect the substance or core of the contract, or is the substance or core of the contract, or is very easily remedial, or causes minimal very easily remedial, or causes minimal damage to the buyer’s interests under the damage to the buyer’s interests under the contract.contract.

• WarrantiesWarranties• Where the seller is in breach of a Where the seller is in breach of a

warranty the buyer is only entitled to warranty the buyer is only entitled to sue for damagessue for damages

• The buyer cannot reject the goods or The buyer cannot reject the goods or refuse to pay for them where there is a refuse to pay for them where there is a breach of warranty.breach of warranty.

• This breach does not go to the root of This breach does not go to the root of the contract thus the buyer cannot the contract thus the buyer cannot rescind.rescind.

• The Ghanaian approach seeks to mitigate The Ghanaian approach seeks to mitigate the harsh English approach stated in the harsh English approach stated in ARCOS v. RONAASEN which entitles the ARCOS v. RONAASEN which entitles the buyer to reject for the slightest breach of buyer to reject for the slightest breach of a condition.a condition.

SELLER’S FUNDAMENTAL SELLER’S FUNDAMENTAL OBLIGATION OBLIGATION

• The first duty of the seller in a contract for the sale of goods The first duty of the seller in a contract for the sale of goods is classified as fundamental obligation and is stated in is classified as fundamental obligation and is stated in section 8(1) as follows;section 8(1) as follows;

• In a contract for the sale of specific goods the fundamental In a contract for the sale of specific goods the fundamental obligation of the seller is to deliver those goods to the obligation of the seller is to deliver those goods to the buyer.buyer.

• This duty arises only in the case of a contract for the sale of This duty arises only in the case of a contract for the sale of “specific goods” and can be stated as follows;“specific goods” and can be stated as follows;

• Where the contract is for the sale of goods which were Where the contract is for the sale of goods which were identified and agreed upon before or at the time of the identified and agreed upon before or at the time of the contract of sale the seller’s duty is to deliver those specific contract of sale the seller’s duty is to deliver those specific and particular goods which were identified and agreed upon.and particular goods which were identified and agreed upon.

• It should be noted that this duty is classified as a It should be noted that this duty is classified as a fundamental obligation which means that if the seller does fundamental obligation which means that if the seller does not deliver the specific goods to the buyer then the buyer is not deliver the specific goods to the buyer then the buyer is entitled to:entitled to:– Reject the goods and refuse to pay the price and Reject the goods and refuse to pay the price and – To sue for damages for non-delivery under section 53 of the Act.To sue for damages for non-delivery under section 53 of the Act.

• This duty of the seller, being a fundamental obligation This duty of the seller, being a fundamental obligation cannot be excluded by an exclusion clause no matter how cannot be excluded by an exclusion clause no matter how widely drawn. [see section 8(3)]widely drawn. [see section 8(3)]

• Where the goods involved in the contract of sale are Where the goods involved in the contract of sale are unascertained goods the duty of the seller is to unascertained goods the duty of the seller is to deliver the goods, which substantially correspond to deliver the goods, which substantially correspond to the description or sample by which they were sold.the description or sample by which they were sold.

• Whether the goods correspond generally with the Whether the goods correspond generally with the description or sample will depend on the goods in description or sample will depend on the goods in question.question.

• Generally however the rule is that they should Generally however the rule is that they should correspond in such a way that any deviation should correspond in such a way that any deviation should be trivial, Negligible, inconsequential or be trivial, Negligible, inconsequential or insignificant. insignificant.

• In the case of lack of correspondence with the In the case of lack of correspondence with the description the courts will consider the following:description the courts will consider the following:– Purpose for which goods are required Purpose for which goods are required – Whether deviation can easily be remedied or corrected Whether deviation can easily be remedied or corrected

andand– At what cost can it be remediedAt what cost can it be remedied

• Read Sections 8, 11 and 12 Read Sections 8, 11 and 12 • If the seller does not deliver the specific goods then If the seller does not deliver the specific goods then

the buyer is entitled to:the buyer is entitled to:– Reject the goods and refuse to pay the price and Reject the goods and refuse to pay the price and – To sue for damages for the breachTo sue for damages for the breach

SELLER’S DUTY AS TO SELLER’S DUTY AS TO EXISTENCE OF GOODSEXISTENCE OF GOODS

• In a contract for the sale of specific In a contract for the sale of specific goods it is the duty of the seller to goods it is the duty of the seller to ensure that the goods are in ensure that the goods are in existence at the time when the existence at the time when the contract is made. contract is made.

• This duty is an implied condition.This duty is an implied condition.• The seller must ensure here that The seller must ensure here that

goods are in fact in existence at the goods are in fact in existence at the time of the contract of sale is time of the contract of sale is actually concluded.actually concluded.

SELLER’S DUTY AS TO SELLER’S DUTY AS TO TITLETITLE

• The seller must have the legal right The seller must have the legal right or power to transfer the absolute or power to transfer the absolute legal interest in the goods to the legal interest in the goods to the buyer.buyer.

• To do this the seller must himself To do this the seller must himself have full title to the goods or have have full title to the goods or have authority to transfer such title.authority to transfer such title.

• The seller will be in breach of this The seller will be in breach of this duty (implied warranty) if he has no duty (implied warranty) if he has no title to the goods thus can be sued title to the goods thus can be sued for damages.for damages.

SELLER’S DUTY AS TO SELLER’S DUTY AS TO QUALITY QUALITY

• The seller has a duty to deliver the The seller has a duty to deliver the right quality of goods [see section right quality of goods [see section 13(1)]13(1)]

• Whether the goods are sold by the Whether the goods are sold by the seller in the ordinary course of his seller in the ordinary course of his business or not there is an implied business or not there is an implied condition that in every contract of condition that in every contract of sale the goods are free from defects sale the goods are free from defects which are not declared or known to which are not declared or known to the buyer before or at the time the buyer before or at the time when the contract is madewhen the contract is made

• The seller is liable for any defects in The seller is liable for any defects in the goods unless such defects were the goods unless such defects were known or declared to the buyer by the known or declared to the buyer by the seller before or at the time of the seller before or at the time of the contract of salecontract of sale

• The seller is bound by this duty The seller is bound by this duty whether or not he knew of the defects whether or not he knew of the defects except in certain exceptional casesexcept in certain exceptional cases

• Under these exceptional cases the Under these exceptional cases the seller is under no duty to ensure that seller is under no duty to ensure that the goods are free from undeclared the goods are free from undeclared defects and if the goods turn out to defects and if the goods turn out to be defective the seller is not liable for be defective the seller is not liable for any breachany breach

Exception to seller’s Exception to seller’s duty as to qualityduty as to quality

• Where the buyer has examined Where the buyer has examined the goods and the examination the goods and the examination should have revealed the should have revealed the defects, that is, obvious defects, defects, that is, obvious defects, the implied condition does not the implied condition does not arise at all and the seller is not arise at all and the seller is not liable for any breach in respect liable for any breach in respect of those defectsof those defects

• For the exception to apply two For the exception to apply two conditions must be fulfilled:conditions must be fulfilled:

1.1.The buyer must have examined the The buyer must have examined the goodsgoods– The buyer is deemed to have examined The buyer is deemed to have examined

the goods where the seller gives him the goods where the seller gives him access to the goods and a full access to the goods and a full opportunity to inspect or examine opportunity to inspect or examine them.them.

– Once the buyer has been afforded this Once the buyer has been afforded this opportunity to inspect or examine them opportunity to inspect or examine them even if he performs an incomplete or even if he performs an incomplete or haphazard examination or if he fails to haphazard examination or if he fails to examine the goods at all.examine the goods at all.• Thornett v. Beers & Sons LtdThornett v. Beers & Sons Ltd

2.2. The defects should be such that they The defects should be such that they should have been revealed by the should have been revealed by the examination, that is, there must be examination, that is, there must be obvious defects and not latent defects.obvious defects and not latent defects.– Not only must it be shown that the buyer Not only must it be shown that the buyer

examined the goods but also that the examined the goods but also that the defects in the goods were such that they defects in the goods were such that they will have been revealed to the buyer upon will have been revealed to the buyer upon examination.examination.

– If the defects were latent or hidden such If the defects were latent or hidden such that no amount of examination would have that no amount of examination would have revealed them the exception cannot be revealed them the exception cannot be invoked and the seller would be liable for invoked and the seller would be liable for the breach. E.g. contract for beer. the breach. E.g. contract for beer. Inspection will not reveal a chemical Inspection will not reveal a chemical dysfunction. Car- buyer cannot see that it dysfunction. Car- buyer cannot see that it had an accident.had an accident.

– This was illustrated in the case of Wren v. This was illustrated in the case of Wren v. HoltHolt

• Where the goods are sold by sample there is Where the goods are sold by sample there is no implied condition that the goods are free no implied condition that the goods are free from undisclosed defects, if the defects could from undisclosed defects, if the defects could have been discovered by a reasonable have been discovered by a reasonable examination of the sample.examination of the sample.– The sample will represent the bulk that will be The sample will represent the bulk that will be

delivered and so if the defects are obvious in the delivered and so if the defects are obvious in the sample and the buyer goes ahead to contract for sample and the buyer goes ahead to contract for the bulk there will be no liability for the seller in the bulk there will be no liability for the seller in respect of the defects in the goods.respect of the defects in the goods.

– For this exception to be invoked the defects in For this exception to be invoked the defects in question must be such that they could have been question must be such that they could have been discovered by a reasonable examination of the discovered by a reasonable examination of the sample. sample.

– Simply put, “reasonable examination” refers to Simply put, “reasonable examination” refers to how an average, reasonable buyer of the class to how an average, reasonable buyer of the class to which he belongs would have examined the which he belongs would have examined the goods. It follows therefore that where the defects goods. It follows therefore that where the defects in the sample were latent or hidden such that no in the sample were latent or hidden such that no reasonable examination would have revealed reasonable examination would have revealed them, this second exception cannot be relied up, them, this second exception cannot be relied up, and seller would be liable for a breach of the and seller would be liable for a breach of the implied condition in section 13 (1)(a).implied condition in section 13 (1)(a).• Godley v. PerryGodley v. Perry

• The seller has a duty to deliver goods, which The seller has a duty to deliver goods, which are fit, for the purpose of which they were are fit, for the purpose of which they were contracted for.contracted for.

• Where the goods are of the kind normally Where the goods are of the kind normally supplied by the seller in the ordinary course supplied by the seller in the ordinary course of his business and the buyer expressly or of his business and the buyer expressly or impliedly makes known to the seller the impliedly makes known to the seller the purpose for which the goods are required, purpose for which the goods are required, there is an implied condition that the goods there is an implied condition that the goods delivered are reasonably fit for the purpose delivered are reasonably fit for the purpose for which they are requiredfor which they are required

• For this to apply the following must be met:For this to apply the following must be met:– The seller must be a dealer in the goodsThe seller must be a dealer in the goods– The goods must be goods which the seller The goods must be goods which the seller

supplies in the ordinary course of his business supplies in the ordinary course of his business even if in a particular instance they are sold in even if in a particular instance they are sold in a special or unusual forma special or unusual form• Spencer Trading Co. v. DevonSpencer Trading Co. v. Devon

• The purpose must be known to the The purpose must be known to the sellerseller– The buyer must have expressly or The buyer must have expressly or

impliedly informed the seller of the impliedly informed the seller of the purpose for which he required the goods. purpose for which he required the goods.

– The purpose for which goods are The purpose for which goods are required may be stated expressly or may required may be stated expressly or may be conveyed to the seller by implication.be conveyed to the seller by implication.

– The courts have generally given a liberal The courts have generally given a liberal interpretation to this requirement.interpretation to this requirement.

– Hence, it has been held that there is no Hence, it has been held that there is no need to state the purpose if there is a need to state the purpose if there is a purpose for which anyone would purpose for which anyone would ordinarily require the goods. E.g. under ordinarily require the goods. E.g. under pants, hot water bottle.pants, hot water bottle.• Grant v Australian Knitting MillsGrant v Australian Knitting Mills

• Where the goods have only one normal Where the goods have only one normal purpose it will be assumed that the seller purpose it will be assumed that the seller knew that the goods were required for that knew that the goods were required for that purposepurpose– Priest v. LastPriest v. Last

• But where the buyer intends to use the But where the buyer intends to use the goods for an uncommon purpose or where goods for an uncommon purpose or where special or peculiar circumstances exist with special or peculiar circumstances exist with respect to the buyer’s use of the goods, the respect to the buyer’s use of the goods, the implied condition under section 13(1) (b) implied condition under section 13(1) (b) will apply only if the buyer expressly will apply only if the buyer expressly informed the seller of the special informed the seller of the special circumstances or the uncommon use.circumstances or the uncommon use.– Ingham v. AmesIngham v. Ames

• Where the goods are sold by the seller in Where the goods are sold by the seller in the ordinary course of his business, the the ordinary course of his business, the seller cannot exclude this duty unless its seller cannot exclude this duty unless its proved that before the contract was made proved that before the contract was made the exclusion clause was brought to the the exclusion clause was brought to the notice of the buyer and its effect made notice of the buyer and its effect made clear to himclear to him

• Section 13(3) states that implied warranties Section 13(3) states that implied warranties and conditions as to the quality and fitness and conditions as to the quality and fitness of the goods may be annexed or added by of the goods may be annexed or added by usage of trade. Generally where a usage of trade. Generally where a transaction is connected with a particular transaction is connected with a particular trade or business, the customs and usages trade or business, the customs and usages of that trade are considered to be part of of that trade are considered to be part of the background against which the parties the background against which the parties contracted. Such terms could be implied contracted. Such terms could be implied into the contract on grounds of custom. into the contract on grounds of custom. Thus apart form the provisions stated in Thus apart form the provisions stated in section 13 with regard to quality and fitness section 13 with regard to quality and fitness of the goods, any other customs or usages of the goods, any other customs or usages relating to quality and fitness of the goods, relating to quality and fitness of the goods, which apply in the particular trade or which apply in the particular trade or business will also be enforced. [see section business will also be enforced. [see section 76]76]– Peter Darlington Partners v. GoshoPeter Darlington Partners v. Gosho

• According to section 13(5) the According to section 13(5) the duties of the seller as to the quality duties of the seller as to the quality and fitness of the goods apply not and fitness of the goods apply not only to the goods themselves but only to the goods themselves but extends to the containers such as extends to the containers such as boxes, tins, bottles in which the boxes, tins, bottles in which the goods are sold. This means that goods are sold. This means that there is an implied condition here there is an implied condition here that such containers are free from that such containers are free from undisclosed defects and also that undisclosed defects and also that they are reasonably fit for the they are reasonably fit for the purpose for which they are sold.purpose for which they are sold.– Geddling v. MarshGeddling v. Marsh

SELLER’S DUTY AS TO SELLER’S DUTY AS TO QUANTITYQUANTITY

• The duty to deliver goods of The duty to deliver goods of right quantity-section 14right quantity-section 14

• Where the seller delivers a Where the seller delivers a quantity of goods less than the quantity of goods less than the buyer contracted for the buyer buyer contracted for the buyer has two options:has two options:– Reject the lesser quantity deliveredReject the lesser quantity delivered– Accept the quantity deliveredAccept the quantity delivered– Accept the quantity delivered and Accept the quantity delivered and

pay for them at the contract pricepay for them at the contract price

• Where the seller delivers goods Where the seller delivers goods greater than what was agreed upon:greater than what was agreed upon:– The buyer is not entitled to reject all the The buyer is not entitled to reject all the

goods delivered by reason only of the goods delivered by reason only of the excessexcess

– He may accept all the goods delivered He may accept all the goods delivered and pay for the extra goods at the and pay for the extra goods at the contract pricecontract price

– The buyer may accept only the quantity The buyer may accept only the quantity he contracted for and reject the he contracted for and reject the remainderremainder

– The buyer here may recover from the The buyer here may recover from the seller the cost if any of separating the seller the cost if any of separating the goods which should have been delivered goods which should have been delivered from the remainderfrom the remainder

• Where the seller delivers in addition Where the seller delivers in addition to the contracted goods other goods to the contracted goods other goods with different description. with different description.

• The buyer has the following options:The buyer has the following options:– He may accept all the goods delivered He may accept all the goods delivered

and pay for the extra non-contract goods and pay for the extra non-contract goods at a reasonable priceat a reasonable price

– He will be entitled to reject all the goods He will be entitled to reject all the goods delivered if and only if the quantity of delivered if and only if the quantity of the contract goods which the seller the contract goods which the seller supplied is less than the quantity supplied is less than the quantity specified in the contractspecified in the contract

– He may accept only the goods contracted He may accept only the goods contracted for and reject the remainder. Here the for and reject the remainder. Here the buyer can recover any cost incurred from buyer can recover any cost incurred from separating the goods contracted for and separating the goods contracted for and those not contracted for.those not contracted for.

SELLER’S DUTY AS TO SELLER’S DUTY AS TO DELIVERY OF GOODSDELIVERY OF GOODS

• Section 15 to 20 of the ActSection 15 to 20 of the Act• It’s the seller’s duty to deliver the goods in It’s the seller’s duty to deliver the goods in

accordance with the terms of the contractaccordance with the terms of the contract• A seller must be ready and willing to give A seller must be ready and willing to give

possession of the goods to the buyer in exchange possession of the goods to the buyer in exchange for the price and the buyer must be ready and for the price and the buyer must be ready and willing to pay the price in exchange for deliverywilling to pay the price in exchange for delivery

• If the seller is to avoid a breach of the delivery If the seller is to avoid a breach of the delivery obligation he must ensure that the goods conform obligation he must ensure that the goods conform to the specification of the contract. to the specification of the contract.

• Delivery is tendered at the time and in the manner Delivery is tendered at the time and in the manner prescribed in the contract of saleprescribed in the contract of sale

• Where the contract is silent on the manner of Where the contract is silent on the manner of delivery section 15 – 20 will applydelivery section 15 – 20 will apply

• Section 81 definition of deliverySection 81 definition of delivery• Where the seller has transferred to the buyer Where the seller has transferred to the buyer

control over the goods without physical possession control over the goods without physical possession the Act will still recognize that there’s delivery.the Act will still recognize that there’s delivery.

• METHODS OF DELIVERY METHODS OF DELIVERY • Section 18Section 18• Section 81Section 81• Unless otherwise agreed the seller may deliver the goods to Unless otherwise agreed the seller may deliver the goods to

the buyer in the following ways:the buyer in the following ways:– Transferring to the buyer the actual physical control over Transferring to the buyer the actual physical control over

the goodsthe goods– Transferring to the buyer the means of obtaining actual Transferring to the buyer the means of obtaining actual

physical control over the goodsphysical control over the goods– Transferring to the buyer the documents of title to the Transferring to the buyer the documents of title to the

goods.goods.– See sect 81 for def of documents of titleSee sect 81 for def of documents of title– E.g. bill of lading, dock warrant, warehouse keepers E.g. bill of lading, dock warrant, warehouse keepers

certificate, receiptscertificate, receipts• Delivery of the goods by the seller to a carrier for Delivery of the goods by the seller to a carrier for

onward transmission to the buyer constitutes delivery onward transmission to the buyer constitutes delivery to the buyerto the buyer

• Delivery of the goods to the buyer’s agent or order Delivery of the goods to the buyer’s agent or order constitutes delivery of the goodsconstitutes delivery of the goods

• Where the goods are in possession of a 3Where the goods are in possession of a 3rdrd party party delivery is affected when the 3delivery is affected when the 3rdrd party acknowledges to party acknowledges to the buyer that he holds the goods for and on behalf of the buyer that he holds the goods for and on behalf of the buyer. If the 3the buyer. If the 3rdrd party refuses to make such an party refuses to make such an acknowledgement there’s no delivery except where the acknowledgement there’s no delivery except where the doc of title have already been given to the buyer.doc of title have already been given to the buyer.

• PLACE OF DELIVERY PLACE OF DELIVERY • Section 19Section 19• Unless the parties indicate otherwise the Unless the parties indicate otherwise the

place of delivery is the sellers place of place of delivery is the sellers place of business or his residencebusiness or his residence

• If the contract is for specific goods If the contract is for specific goods which to the knowledge of both parties which to the knowledge of both parties is located at a place different from the is located at a place different from the sellers place then that place is the sellers place then that place is the place of deliveryplace of delivery

•   • TIME OF DELIVERY TIME OF DELIVERY • Section 15(2)Section 15(2)• Delivery must be made at a reasonable hour Delivery must be made at a reasonable hour

in order to be treated as effectualin order to be treated as effectual

• DATE OF DELIVERY DATE OF DELIVERY • Section 16Section 16• Time of delivery are conditions of the contractTime of delivery are conditions of the contract• Where the seller fails to deliver the goods on the date Where the seller fails to deliver the goods on the date

stipulated in the contract he is in breach of a condition stipulated in the contract he is in breach of a condition of the contract and the buyer will be entitled to reject of the contract and the buyer will be entitled to reject the goods if the breach is of a serious naturethe goods if the breach is of a serious nature

• Where no date is stated then delivery must be within a Where no date is stated then delivery must be within a reasonable timereasonable time

• Where both parties agree to postpone the date of Where both parties agree to postpone the date of delivery then both parties will be bound to deliver and delivery then both parties will be bound to deliver and accept on that latter dateaccept on that latter date

• Where the parties agree to postpone the date of Where the parties agree to postpone the date of delivery without substituting a new date for delivery the delivery without substituting a new date for delivery the seller is under a duty to deliver within a reasonable seller is under a duty to deliver within a reasonable time.time.

• Such reasonable time will be determined with particular Such reasonable time will be determined with particular reference to the reasons for postponementreference to the reasons for postponement

• Where there’s delay the buyer upon reasonable notice Where there’s delay the buyer upon reasonable notice can give the seller a deadline as to when he will accept can give the seller a deadline as to when he will accept deliverydelivery

• Where the seller simply contract to use his best Where the seller simply contract to use his best endeavors to deliver the goods on a particular date or endeavors to deliver the goods on a particular date or before a given date the seller will be bound to deliver before a given date the seller will be bound to deliver the goods within a reasonable time after that datethe goods within a reasonable time after that date

• OTHER DUTIES WITH REGARD TO DELIVERYOTHER DUTIES WITH REGARD TO DELIVERY• Section 17Section 17• Unless otherwise agreed the expenses of putting Unless otherwise agreed the expenses of putting

the goods into a deliverable state must be borne by the goods into a deliverable state must be borne by the sellerthe seller

• Section 81(3) defines deliverable stateSection 81(3) defines deliverable state• Section 20(1) is an implied condition. The seller Section 20(1) is an implied condition. The seller

must take such a contract on behalf of the buyer as must take such a contract on behalf of the buyer as is reasonable when the goods are to be sent by a is reasonable when the goods are to be sent by a carriercarrier

• The contract with the carrier should ensure that The contract with the carrier should ensure that there will be:there will be:– Safe delivery of the goods to the buyerSafe delivery of the goods to the buyer– Adequate compensation to the buyer in the event of Adequate compensation to the buyer in the event of

loss or destruction of the goods in transitloss or destruction of the goods in transit– Where the goods are to be sent by air or sea transit to Where the goods are to be sent by air or sea transit to

the buyer and it’s the buyer’s responsibility to insure the buyer and it’s the buyer’s responsibility to insure the goods during transit, the seller is under a duty to the goods during transit, the seller is under a duty to give the buyer such reasonable notice as will enable give the buyer such reasonable notice as will enable the buyer to effect the insurance of the goodsthe buyer to effect the insurance of the goods

– When the seller does not give notice then it will be the When the seller does not give notice then it will be the seller’s risk during transitseller’s risk during transit

– This duty arises only when it’s the buyer’s This duty arises only when it’s the buyer’s responsibility to insure the goodsresponsibility to insure the goods