SALE OF GOODS & AGENCY
https://youtu.be/s5BUO2RNQZ0 - Youtbe revision slides
This is a statute course. Cap 31 Laws of Kenya essential.
Sale of goods is a specialised branch of the law of contract.
Principles of the law of contract are a prerequisite to the study of sale of goods.
Only after there is a valid contract can one approach the sale of goods. Unless there is a valid contract there can be no sale of goods contract. The rules of the Sale of Goods Act Cap 31 must apply. The provisions of The Sale of Goods Act must be seen to apply to be able to decide if there was a sale of goods contract.
There are many contracts that look like sale of goods contract that need to be distinguished from a sale of goods contract. The distinction is crucial to be able to apply the sale of goods act provisions.
What are the sources of Sale of Goods Law in Kenya?
There are 3 sources of Law in the Sale of Goods
Sale of Goods Act Cap 31 Laws of Kenya – it is fashioned after the English Sale of Goods statute of 1893. It is basically a carbon copy of the English Statutes and therefore it is the Bible for our law.
Case Law – Law, which has grown arising from court decisions. Case Law is massive. To understand case law as a source of law, one needs to understand the legal methods. A decision in any given case depends on the hierarchy of decisions.
Relevant case law that predates 1893 English Act on Sale of Goods. Its importance is that on points that are not specifically covered by provisions of The Sale of Goods Act Cap 31 then the provisions made prior to 1893 are valid and can be relied on.
Bank of England V. Vagliano Bros 1891 A.C. 105 Page 144 through 145. this case deals with principles of statutory interpretation.
This was laid down by Lord Herschell who observed that “I think the proper course is in the first instance to examine the language of the statute and to ask what is its natural meaning, uninfluenced by any considerations derived from the previous state of the law, and not to start with inquiring how the law previously stood, and then, assuming that it was probably intended to leave it unaltered, to see if the words of the enactment will bear an interpretation in conformity with this view. If a statute, intended to embody in a code a particular branch of the law, is to be treated in this fashion, it appears to me that its utility will be almost entirely destroyed, and the very object with which it was enacted will be frustrated. The purpose of such a statute surely was that on any point specifically dealt
with by it, the law should be ascertained by interpreting the language used instead of, as before, by roaming over a vast number of authorities in order to discover what the law was, extracting it by a minute critical examination of the prior decisions.” Therefore
A judge examines the language of the statutes in its natural meaning uninfluenced by considerations from the previous state of the law before the legislation was enacted. The purpose of legislation is to come up with a new concept of a particular area. If legislation was to reinstate what existed, then why have it?
Even where there are ambiguities in the statutes, you need to apply the same kind of principle to understand what it is that a particular word or words was supposed to convey.
You try to look at the mischief that that particular law was meant to avoid. The meaning of the words as stated in the statutes. Where there is ambiguity, it is the duty of the courts to try and get the meaning of that ambiguity. You must however not create your own ambiguity and then try to interpret it. The ambiguity must have been there originally in the statutes.
In interpretation the idea is to find out the meaning of the language but not the meaning of the meaning.
The Definition of Sale of Goods Contract
A contract of sale of goods is defined in Section 3 (1) of Cap 31 Laws of Kenya.
“A Contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price.” (Emphasis on the key words)
The sale of goods law sees items from two different perspectives or goods composed of 2 major components. You have property in goods i.e. the title in goods and the physical aspect, which are two different things.
Goods are different from property. E.g. If you have borrowed a shirt, you have possession but not property or title. Ownership could be with one person whereas control is with somebody else. When we talk of goods we are talking of the tangible aspect and when we talk of property we are talking of ownership.
In the definition it is said that it is a contract by which the seller or the offeror transfers or agrees to transfer the property to the buyer or offeree. A contract of sale of goods does not deal with the tangible, it deals with property. You do not transfer goods, you transfer property, you deliver goods and transfer property.
Once the property has been transferred then the buyer must pay a consideration in your ordinary contract and in this case the consideration must be in money. Money consideration is called the price. In a sale of goods contract, the beacons are that the seller agrees to transfer the property for money consideration called the price.
Under Section 3 (4) the difference drawn in terms of sale contract where the property has already been transferred whereas where he has agreed to transfer it is an agreement to sell.
Transfer and Passing of Property; the two effectively mean that the ownership has moved but they carry different meanings. In the case of sale of goods transfer refers to active actions being taken by seller and buyer to transfer ownership from seller to buyer, through agreement where the parties have agreed to transfer the ownership of property to the buyer. The parties are actively involved.
When you talk of passing of property, property can pass to the buyer by operation of the law and the parties have done nothing to aid this. E.g. when you attend an auction, you have an authorised auctioneer who is selling goods for other people. The property in the goods passes from the seller to the buyer when the hammer falls. The owner of the goods is not the auctioneer but has given the goods to the auctioneer. The buyer is usually the highest bidder. Imagine the hammer has fallen and the highest bidder approached the auctioneer and says he does not have enough money to pay, but can pay by cheque and the auctioneer who is the agent for the owner of the goods tells the buyer that he accepts the cheque provided the title remains with him until the cheque clears. That buyer takes the goods but sells the goods in the next corner. So you have a situation where there is the seller, the buyer, but the seller has delivered the goods to the buyer at an auction without the price consideration and the buyer has sold them to another buyer. The dispute arises when the cheque bounces. The second buyer has no notice of the circumstances. The tussle is between the seller and the second buyer. Who gets a better claim to the goods? The title has not moved so the first buyer has no title to the goods and cannot transfer that which he does not have. But under the sale of goods Act S. 58 as long as the second buyer bought without being aware of the defect, then the second buyer has a better claim than the seller. (owner of the goods). The second buyer has to have bought the goods without notice i.e. not knowing that there were defects in the sale.
The law holds the second buyer to have a better claim due to equity. There is balancing of equity between the 2 owners. The second owner is innocent if he bought the goods without notice.
The second buyer is the most innocent because the owner of the goods by giving the goods to the auctioneer facilitated the commission of fraud by the first buyer so the goods are given to the second buyer only if he genuinely bought the goods without notice that there was a defect in the original sale.
He who facilitates commission of fraud is less innocent than he who had no way of facilitating the same.
This situation can be controversial.
A just judgment is not necessarily fair. Fairness is a value judgement.
Distinguishing a Sale of Goods Contract from other similar contracts.
Provisions of Cap 31 apply only to a Sale of Goods Contract.
There are 8 transactions that resemble Sale of Goods contract but are not a sale of goods contract.
Contract of Barter or Exchange.
Contract of Gifts
Contract of Bailment
Contract of Hire Purchase
Contract of Loan on Security of goods
Contract of Supply of services
Contract of Agency
Contract of Licences of intellectual property such ‘sales’ of computer software and patents.
The distinction is important because the results are critical to the resolution of disputes if they do go to court.
Remedies available are different for different types of contracts.
Read Distinction of Sale of Goods from the other 8 contracts.
Sale of Goods Act Cap 31 Laws of Kenya Section 3 (4)
“Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale; but, where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.”
Section 3(5)
“An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.”
Section 2 (1)
“action” includes counterclaim and set-off;
“buyer” means a person who buys or agrees to buy goods;
“contract of sale” includes an agreement to sell as well as a sale;
“delivery” means voluntary transfer of possession from one person to another.
“document of title to goods” includes a bill of lading, dock warrant, warehouse-keeper’s certificate or warrant or order for the delivery of goods, and any other document used in the ordinary course of business as proof of possession or control of goods, or authorizing or purporting to authorize, either by endorsement or by delivery, the possessor of the document to transfer or receive goods thereby represented;
“fault” means wrongful act or default;
“future goods” means goods to be manufactured or acquired by the seller after the making of the contract of sale;
“goods” includes all chattels personal other than things in action and money, and all emblements, industrial growing crops and things attached to or forming part of the land which are agreed to be severed before sale or under a contract of sale;
“plaintiff” includes a defendant counterclaiming;
“property” means the general property in goods, and not merely a special property;
“quality of goods” includes their state or condition;
“sale” includes a bargain and sale as well as a sale and delivery;
“seller” means a person who sells or agrees to sell goods; “specific goods” means goods identified and agreed upon at the time a contract of sale is made;
“warranty” means an agreement with reference to goods which are the subject of a contract of sale, but collateral to the main purpose of the contract of sale, the breach of which gives rise to a claim for damages, but not to a right to reject the goods and treat the contract as repudiated.
SALE OF GOODS & AGENCY
1. Sale of Goods Distinguished from Barter
In a sale of goods contract or in any sale, there must be a consideration and in the case of sale of Goods it must meet all the criteria of a contract. The consideration must be money consideration.
The term Goods is defined to exclude money in the Act.
Barter Exchange is a contract where goods are exchanged for goods or where the consideration is anything but not money. No money is involved in barter. It is a valid contact but it is not a Sale of Goods Contract because it does not entail money. You cannot buy money but you can exchange one currency for another. There are occasions when money as a collector’s coin can be sold so long as it has ceased to be legal tender. You can exchange the collector’s coins for money.
SALE OF GOODS DISTINGUISHED FROM GIFT
Gift is transfer of property without any consideration. It is not binding unless it is made by a deed i.e. in writing. It is not easy to distinguish gifts from sale of goods.
Esso Petroleum Limited V. Commissioners of Customs & Excise [1976] Vol 1 AER 177
The Esso petrol station put out on the signboard the following advert “free gift of a coin bearing the likeness of a footballer to anyone buying 4 gallons of petrol.” The Defendant bought petrol from this petrol station and when the petrol station was required to pay taxes by the Customs Department, the argument was whether this transaction consisted a sale of goods or a gift. Their Lordships were confused
“Although the transaction was not a gift, in as much as the garage was contractually bound to supply coins to anyone buying 4 gallons of petrol… but it was not a sale of goods contract either.
It was not a sale of goods and it was not a gift. Getting the coin there was no money involved the consideration
“There was no intention to create legal relationship between Esso and the customers
“In substance it was a collateral contract existing alongside a contract for the sale of petrol.”
If there were a Sale of Goods, then the company would have been liable to pay taxes.
SALE DISTINGUISHED FROM BAILMENT:
A bailment is a transaction under which goods are delivered by one party (the bailer) to another (the bailee) on terms, which normally require the bailee to hold the goods and ultimately to redeliver them to the bailor or in accordance with his directions. The property in the goods is not intended to pass and does not pass on delivery, though it sometimes be the intention of the parties that it should pass in due course, as in the case of the ordinary hire-purchase contract. But where goods are delivered to another on terms which indicate that the property is to pass at once, the contract must be one of sale and not bailment.
In bailment, the goods are delivered by the bailer to the bailee on terms which normally require the bailee to hold the goods and ultimately deliver those goods in accordance with the instructions of the bailer. There is no intention in bailment that property in ownership is to pass from the bailer to the bailee. The bailee only has custody for a small fee to take care. The bailee is empowered to sell the goods only for purposes of recouping the demurrages.
Chapman Bros V. Verco Bros & Co. Ltd [1933] Vol. 49 CLR P306
Farmers delivered bags of wheat to a company carrying on business as millers and wheat merchants. The wheat was delivered in unidentified bags which were identical to those in which other farmers delivered wheat to the company. The terms of the transaction required the company to buy and pay for the wheat on request by the farmer or failing such a request, on a specified date, to return an equal quantity of wheat of the same type; but there was no obligation to return the identical bags. Although the contract referred to the company as ‘stores’, it was held by the Australian High Court that this transaction was necessarily one of sale as the property passed to the company on delivery. Property must pass even if not at once. That is the nature of transaction and this transaction seems inconsistent with the possibility of a bailment.
The question was whether this was a sale of goods contract in terms of the ownership of the bags. The court held it to be an agreement of sale within Section 2 (1) of Cap 31
One of the difficulties is that where goods are given to the buyer before the buyer has paid for those goods, where this happens, then we say that he is a buyer in possession because the seller has agreed to transfer the property.
In conversion if you went to a car dealer who allowed you to test drive it but instead of test driving it you advertised by putting adverts on the car, that is behaviour inconsistent with the owner’s wishes and you will be converting.
SALE OF GOODS DISTINGUISHED FROM HIRE PURCHASE:
Contracts of hire-purchase resemble contracts of sale very closely and, indeed, in practically all cases of hire-purchase the ultimate sale of the goods is (in a popular sense) the real object of the transaction. A contract of hire-purchase is a bailment of the goods coupled with an option to purchase them which may or may not be exercised. Only if and when the option is exercised is there a contract of sale.
A contract of Hire Purchase is a bailment of goods coupled with an option to purchase those goods. That option may or may not be exercised. Only after the option has been exercised does hire purchase become sale of goods contract. In a sale of goods contract there is no option to acquire property of goods you have no option of whether to retain goods or not but in Hire Purchase you have the option to become the owner of the goods by exercising the option of paying the nominal fee. You are given possession and enjoyment of the goods before you finish payment and even before you have expressed your intentions to own. The risk in Hire Purchase there is the intention that if the hirer opts to own the goods, they can become owners but in Sale of Goods there is no option of owning or not owning, you pay for the goods you own them. Possession is usually after payment.
The owner of the goods in Hire Purchase undertakes the risk that the seller transfers or agrees to transfer to the buyer and by virtue of possession of the goods the owner of the goods takes the risk that the owner may sell the goods to a third person and the only safe area is with durable goods such as a car where to sell the car again you need to transfer the logbook.
Section 2 (1) and Section 23 (2) (a) 47
The fear of a financier is that having given possession or documents of title in durable goods then any disposition by the person who has acquired possession with consent of the owner if they sell the goods to another person who is without notice and for value, the 2nd buyer acquires better title than the first buyer.
SALE OF GOODS DISTINGUISHED FROM A LOAN ON SECURITY OF THE GOODS
This is a transaction that is designed to enable someone ‘A’ who owns some goods to borrow money from ‘B’ and give possession of those goods to the money-lender. The goods can only be reclaimed upon completion of repaying the loan. This transaction does not mean that the person borrowing the money has delivered the goods to the money-lender but only delivers the goods to the money lender to hold as security. He has not sold the goods but has only given them to operate as security. The understanding is that A will retain possession of the goods and the borrower will repay the lender capital plus the agreed interest and lastly the borrower will have the right to take back the goods if he has repaid or paid all the claims by the lender to him. The lender has no right at all to resell the goods unless the borrower has defaulted. This transaction differs from hire-purchase contract which is designed to enable a person to acquire goods on credit. A loan on security is designed to enable someone who already owns goods to borrow money on the security of the goods.
SALE OF GOODS DISTINGUISHED FROM CONTRACT OF SUPPLY OF SERVICES
Historically contracts for supply of services were divided into two:
Contracts for Skill and labour
Contracts for labour and material.
It was also assumed that the applicable law was not the Sale of Goods Law for example services of a lawyer. When you contract a lawyer to draw a will, you pay for the services of the lawyer making the will but you receive a document which is incidental. The contract is for the services of making a will and the document that you receive is incidental.
In the United Kingdom until 1954, the law required that contracts for sale of goods of £10 or more be evidenced in writing. If the goods were valued at over £10, it had to be in writing for services there was no value limit.
A contract in which one party is to manufacture goods and then supply the same as a finished product. Is it a contract in Sale of Goods or is it a contract for services?
A more general reason why it may be necessary to distinguish between a contract of sale of goods and a contract for services is simply that provisions of the Sale of Goods Act do not in general apply to contracts for services. The other reason concerns the implied duties of the seller or supplier as to the quality and fitness of the goods or services supplied. If the contract was for the supply of services only then, insofar as the services themselves were concerned, the supplier’s duties were generally duties of due care only where in the contract for sale of goods the duties remain, prima facie duties of strict liability, that is to say the seller is responsible for defects in the goods, even in the absence of negligence.
For supply of services, you apply the law of torts and the measure is reasonable care. The test in supply of services is due or reasonable care but in Sale of Goods, goods are of a particular perceivable quality. They are tangible.
The test for deciding whether a contract falls into the one category or the other is to ask what is ‘the substance’ of the contract. If the substance of the contract is the skill and labour of the supplier, then the contract is one for services, whereas if the real substance of the contract is the ultimate result – the goods to be provided, then the contract is one of sale of goods.
The law of Sale of Goods was developed and has developed as a consumer protection mechanism. It came in to bridge the gap between the seller and the buyer. The seller is supposed to have more knowledge than the buyer and the buyer is no longer bound by ‘caveat emptor’.
Goods must be fit for the purpose. The sale of goods law was meant to bridge the gap in terms of product knowledge between the seller and the buyer.
Cap 31 has been overtaken by technological development. It is difficult for the buyer to know all the information about for instance a computer just by looking at it. The protection has to keep pace with the changes and buyers cannot keep up.
Robinson V. Graves [1935] Vol. 1 KB P 579
The issue in this case was the distinction between sale of goods and supply of services.
The contract here was one whereby an artist agreed to paint a portrait of his client’s wife. It would appear that such a transaction should be regarded as one of sale. In the event however this transaction was held as one for services and in reaching this conclusion, the court sought to identify the prime purpose of the contract. In the often quoted words of LJ Greer: -
“If the substance of the contract … is that skill and labour have to be exercised for the production of the article and … it is only ancillary to that that there will pass from the artist to his client or customer some material in addition to the skill involved in the production of the portrait, that does not make any difference to the result, because the substance of the contract is the skill and experience of the artist in producing the picture.”
This case lays down an elastic test of this nature for distinguishing contracts of sale from contracts for skill and labour, and a similar approach may sometimes be justified here.
SALE OF CONTRACT DISTINGUISHED FROM PATENTS
Items of intellectual property such as copyrights, patents and trademarks are not ‘personal chattels or corporeal movables and so fall outside the definition of goods although goods may exist which embody these intellectual property rights. In modern times, an important point, not yet wholly resolved, is whether computer software may constitute ‘goods’ within the meaning of the Act. Software is normally embedded in some physical form, such as disks or as part of a package in which it is sold along with computer hardware, that is computer or computer parts. It is protected as a literary work by the law of copyright.
Usually only the medium in which the software is embedded, e.g. a disk is sold. The copyright in the software remains in the software house which developed it. The software house licences the user to make working copies of the disks and to load the software into a computer, acts which otherwise would be infringements of copyright. Software can also, of course, be delivered on-line subject to licensing terms.
The question as to whether or not a supply of computer software is a sale of goods was answered by the Court of Appeal in Beta Computers (Europe) Ltd v. Adobe Systems (Europe) Ltd. The Defendant had ordered from the pursuer by telephone a standard computer package to upgrade its existing software. The software was delivered in a package, which bore the words ‘Opening the Informix S.I. software package indicates your acceptance of these terms and conditions’. These were the terms and conditions of Informix’s copyright licence, Informix being the proprietor of the software. The defendant did not return, and sued for payment of the price. The pursuer argued that it was not concerned with the terms of the licence imposed by the authors of the software. The defender argued that acceptance of the licence conditions was an implied suspensive of its agreement with the pursuer. Lord Penrose held that the supply of proprietary software for a price was a single contract sui generis though it contained elements of contracts such as sale of goods and the grant of a licence. It was an essential feature of such a contract that the supplier undertook to make available to the purchaser both the medium on which the program was recorded and the right to access and use the software. There could be no consensus ad idem until the conditions of use stipulated by the copyright owner were produced and accepted by the parties, which could not occur earlier than the tender of those conditions to the purchaser. Furthermore, whether the tender of software subject to conditions for use was regarded as a breach of a previously unconditional contract, or as being subject to a suspensive condition entitling the purchasers to reject if the conditions for use were unacceptable, or as made when there was no concluded contract, the defender was entitled to reject.
SALE & AGENCY:
Distinction between a Sales of Goods Contract and a contract of agency is a difficult one. For example where A asks B a commercial agent, to obtain goods for him from a supplier or from any other source, and B complies by sending the goods to A, it may well be a fine point whether this is a contract under which B sells the goods to A, or is a contract under which B acts as A’s agent to obtain the required goods from other sources. In an agency contract there may be privity of contract between the buyer and the agent’s supplier, which will enable action to be brought between them. On the other hand, if it is a sale, there will be no privity between the buyer and the seller’s own supplier. The duties of a commission agent are less stringent than those of a seller and, in the event of a breach of contract; the measure of damages may also be different. Thus if a seller delivers less than he is bound to under the contract, the buyer can reject the whole, but if despite his best endeavours, a commission agent delivers less than his principal has ordered he has committed no breach of contract and the principal is bound to accept whatever is delivered. Should the commission agent deliver goods of the wrong quality he will only have to pay as damages the actual loss suffered by the buyer but should a seller be guilty of such a breach he may have to pay damages for the buyer’s probable loss of profit. The contract is not a Sale of Goods.
FORMATION OF THE CONTRACT OF THE SALE OF GOODS
A contract for the Sale of Goods is formed according to the ordinary principles of the Common Law that is to say by offer and acceptance.
Section 3. Of the Sale of Goods Act
3. (1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price.”
There may be a contract of sale between one part owner and another.
A contract of Sale may be absolute or conditional.
Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale; but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.
An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.
Section 4. (1) Capacity to buy and sell is regulated by the general law concerning capacity to contract, and to transfer and acquire property;
Provided that, where necessaries are sold and delivered to an infant or minor, or to a person who by reason of mental incapacity or drunkenness is incompetent to contract, he must pay a reasonable price therefore.
AUCTION SALES
SUBJECT MATTER OF THE CONTRACT:
The term ‘goods’ is defined by The Sale of Goods Act to include all chattels personal other than things in action and money, and all emblements, industrial growing crops and things attached to or forming part of the land, which are agreed to be severed before sale or under the contract of sale.
The definition is extensive but there are nevertheless things, which do not or may not fall within this definition. The definition excludes non-physical items, such as company shares, which are technically ‘things in action’ or incorporeal movables and so are excluded by the plain words of the definition. Similarly, items of ‘intellectual property’ such as copyrights, patents and trademarks are not ‘personal chattels’ or corporeal movables and so fall outside the definition, although of course goods may exist which embody these intellectual property rights.
NUMBER OF PARTIES IN A SALE OF GOODS CONTRACT
For a transfer of property in the goods to occur there must be at least 2 distinct parties. The transfer implies necessity for more than 1 distinct person. There must be a seller and a buyer.
A person cannot buy one’s own property or goods. If one by mistake buys his own goods, he can recover the price paid on the grounds of total failure of consideration. The seller and buyer must be two different legal entities.
Although the Act contemplates two distinct parties to the contract, namely a buyer and a seller, it does not follow that the buyer cannot already be the owner of the goods, for the seller may be a person having legal authority to sell them, for example a sheriff acting in execution of a writ of execution. However, if a person contracts to buy his own goods from someone else under the mistaken impression that the goods belong to the seller, it seems clear that he can recover any price paid on the ground of total failure of consideration.
PRICE:
Price is defined under section 10 if Cap 31
10. (1) The price in a contract of sale may be fixed by the contract, or may be left to be fixed in a manner thereby agreed, or may be determined by the course of dealing between the parties.
Where the price is not determined in accordance with the foregoing provisions, the buyer must pay a reasonable price; and what is a reasonable price is a question of fact dependent on the circumstances of each particular case.
Section 10 assumes that a contract has been made by the parties and
The two beacons of the sale of goods are property and price. Section 10 presupposes the existence of a contract. It assumes that a contract has been made by the parties and then proceeds to explain the methods by which the price can be ascertained. But the first point to consider is whether a contract has in fact been finally agreed upon by the parties, and the absence of an agreement as to the price may show that the parties have not yet reached a concluded contract.
Definition of price can be used as clear evidence to show lack of a meeting of the minds.
Section 10 Cap 31
10. (1) The price in a contract of sale may be fixed by the contract, or may be left to be fixed in a manner thereby agreed, or may be determined by the course of dealing between the parties.
Where the price is not determined in accordance with the foregoing provisions, the buyer must pay a reasonable price; and what is a reasonable price is a question of fact dependent on the circumstances of each particular case.
The two beacons of the sale of goods are property and price.
Section 10 assumes that a contract has been made by the parties and
Section 10 presupposes the existence of a contract. It assumes that a contract has been made by the parties and then proceeds to explain the methods by which the price can be ascertained. But the first point to consider is whether a contract has in fact been finally agreed upon by the parties, and the absence of an agreement as to the price may show that the parties have not yet reached a concluded contract.
Definition of price can be used as clear evidence to show lack of a meeting of the minds. (no consensus ad idem)
Section 10 by and large begs the entire course of the Sale of Goods. Terms like buyer and seller, price which has not been fixed etcetera.
The Sale of Goods law falls into the group of facilitative law. Law has two categories, facilitative and command law. Facilitative law is law that you are not bound to apply but if you undertake certain transactions and you want them to be legally enforceable then the Sale of Goods law or Contract law comes in as facilitative law. Facilitative law covers areas like contract law. A will also falls under facilitative law. In facilitative law, the parties are not forced to apply that law but if they enter into transactions that require this law then it has to be applied.
Only the courts can ascertain the right price, then the Sale of Goods ceases to be facilitative and becomes command if the court comes in to decide the price.
May & Butcher V. King [1934] 2 KB 17
The House of Lords here held that an agreement for the sale of goods at a price to be later fixed by the parties was not, in the circumstances of the case, a concluded contract.
The ratio decidendi was that an agreement for the sale of goods at a price to be later fixed by the parties is not a concluded contract.
Recent cases have confirmed that the law does not recognise an agreement to agree.
Courtney Fairburn Ltd v. Tolaini [1975] 1 WLR 1
The Court of Appeal refused recognition of a contract at a price ‘to be agreed’. An agreement to negotiate was not enforceable, and was not persuaded that the argument was improved by glossing a bare agreement to negotiate with a duty to negotiate in good faith.
In this case the terms of a contract were to be negotiated and the courts as late as 1975 said that that did not constitute a Sale of Goods Contract. The terms had not been agreed upon so there was no contract.
Walford V. Miles [1992] 2 AC 128
The plaintiffs negotiated to buy a photographic processing business from the defendants and they entered into what was allegedly a ‘lock out’ agreement according to which the defendant agreed to terminate negotiations with the third parties and not to consider alternative offers from third parties. There was no time frame given. The defendant sold the business to a third party and naturally the potential plaintiffs went to court asserting that the agreement provided that parties with an exclusive opportunity could try and come to terms with the defendant. They further argued that the agreement implied a duty to negotiate in good faith with the plaintiffs and that the opportunity should endure for a reasonable time. The argument went all the way to the House of Lords and as one of the Q.C’S argued at that level, he said that it was strange that a simple legal issue should occupy the minds of all levels of the English Courts.
The House of Lords held that
An agreement to negotiate was not enforceable;
That an agreement to negotiate was not enforceable and was not made any better by glossing other words like a duty to negotiate in good faith.
‘Lock out’ is when a potential Seller and potential Buyer give each other time to think over a bargain. The time is not endless.
The court also held that the content of the lock out agreement while legally acceptable must legally conform with all the factors but cannot be just open ended.
Section 10 needs looking at! Should
THE SUBJECT MATTER OF A CONTRACT OF SALE OF GOODS:
Copyrights, patents, trade marks are not personal chattels and are thus not goods that can be sold.
Different Types of Goods
2. (1) 3 types of goods
Existing Goods;
Future Goods; &
A spes.
Existing Goods
Existing Goods may be either owned by or in possession of the seller. Existing Goods may also be specific or unascertained. The distinction between specific goods and unascertained goods is crucial. The key thing being that in a sale of goods contract, the purpose is to transfer or pass the property in the goods from the seller to the buyer and property will not pass to the buyer from the seller subject to …
Specific goods are goods, which have been identified and set aside for the purposes of contract of sale. That particular contract, property passes instantly in a sale of specific goods.
Section 18. Property in unascertained goods.
Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained.”
Section 19 property in specific goods or ascertained goods passes when intended to pass.
(1) Where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.
(2) For the purpose of ascertaining the intention of the parties, regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.
2. FUTURE GOODS:
Future goods include goods not yet in existence e.g. crops to be grown, industrial products to be processed or manufactured. Future goods also include goods that physically exist but they are not yet acquired by the seller. Future goods cannot be specific goods within the Act within Cap 31 but note that under certain circumstances future goods may be so sufficiently identified that courts have sometimes said that future goods can be specifically identified.
Future goods meaning that the goods do exist but the seller does not yet have property in those goods and so he cannot transfer them.
Howell V. Coupland (1876) 1 Q.B.D. 258
The case was decided on the basis of future goods. It was held that a sale of two hundred tonnes of potatoes to be grown on a particular piece of land was a specific sale of goods. Although the potatoes were not grown the contract was held to have existed. The piece of land that was supposed to grow the potatoes disappeared under water but it had been so well defined that a contract was held to have existed. The contract was frustrated. The doctrine of frustration cannot apply in any case where the goods are not specific. Specific goods are those that have been set aside and agreed upon by the parties. The potatoes were not even grown yet the court used the doctrine of frustration. The goods in this case were future goods and you cannot have frustration in goods that did not exist in the first place.
Could this case have been decided on the basis of A spes?
A spes
This is a sale of a chance, which is different from future goods mainly through the construction of the terms used by the courts. It arises where a potential buyer agrees to buy future goods from a particular source and agrees to take the risk of the goods never coming into existence e.g. I agree to buy whatever crop is produced from plot ‘A’ of your land in Kitale Town at a thousand shillings per bag. The buyer has offered to buy whatever crop is grown on that land and is taking a chance because the crop might never get grown. It looks like a gamble and in a gamble one party stands to lose and one party stands to gain. The buyer takes the risk and undertakes to pay the price of the non-existent goods. The seller undertakes to produce and deliver the crop come rain come shine. So there is no winner and no loser. If the goods do not get produced on that piece of land, the seller is bound to deliver and he might have to go out and buy the goods elsewhere because he must deliver. The buyer by undertaking to pay 1000 still has to pay 1000 even if the crop price was to drop to 200 per bag because he has undertaken to do the same.
It is a risk by both parties, the seller undertaking the risk that the goods might never be produced and the buyer taking the risk that the price might depreciate in the meantime.
There are 3 categories of goods
Existing goods – goods that actually exist when the contract is entered into, future goods - goods yet to be produced or grown and don’t necessarily exist and are not in the possession of the seller and
A spes- here each party chances or gambles
KEY TYPES OF GOODS
There are two key types of goods
Specific
Unascertained goods.
The crux of Sale of Goods Contract is the passing of the property in the goods from seller to buyer. This can only happen where the goods are unascertained, property cannot pass.
Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained.”
Specific goods are goods which have been identified, agreed upon and set aside by the parties for the contract and the goods can be specific either at the time the contract is entered into or they can be made specific in the course of dealing. For instance when talking of a motor vehicle, you will be talking about the engine number and the chassis number being what you specified so only that vehicle is the specific goods subject of the contract. Only the property in specific goods will pass. No other goods will do.
(1) Where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.
(2) For the purpose of ascertaining the intention of the parties, regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.
An identified part of a specific whole.
Kursell V. Timber Operators & Contractors Ltd.
The Plaintiff sold to the defendant all the trees in a Latvian forest which conformed to certain measurements namely 15 meters on the date of the contract. The Buyer would have 15 years on which to cut and remove the timber. Almost immediately afterwards, the Latvian Parliament passed a law confiscating the forest. The matter went to court and went to the House of Lords primarily on one issue. Had the property in the trees passed from the Seller to the Buyer or as one of the Judges did “whose forest and therefore the trees was confiscated by Parliament? Remember he who has the property bears the risk. The court held as follows
“the property in the goods had not passed to the defendant the buyer as the goods were not sufficiently identified since not all the trees were to pass to the buyer but only those conforming to the stipulated measurements namely 15 metres.”
TRANSFER OF PROPERTY:
In this context, property means and includes title, ownership.
Transfer of Property involves some action by the parties themselves. If there is a contract to be signed for ownership to pass from seller to buyer, then you sign and transfer.
In passing of property, the parties need not do anything. Basically this is ownership moving from seller to buyer by operation of the law. It is inactive
there is no direct participation of the parties.
Property in the goods means ownership in these goods.
The practical consequences of transferring property.
If property has passed to the buyer the buyer has a title to them and even when the seller becomes insolvent after the transfer, the fact that the seller is still in possession does not entitle the receiver in bankruptcy to touch the goods. Where there are 2 legislation in conflict, ordinary legislation could mean that they have seen some loopholes that need to be addressed so the latter takes precedent.
If goods are delivered subject to a reservation of a title or property (ownership) by the seller, then the buyer may have good title to the goods should the seller become insolvent.
The right to sue a third party for loss or damage to the goods rests in the person who has the property. The owner is the one who can sue.
The risk whether of damage or loss prima facie passes when property passes. He who has property bears the risk.
Once property has passed the seller can only sue for price. The seller cannot file a suit seeking to rescind the contract.
PASSING OF PROPERTY:
Exactly when property passes depends on whether the goods are specific or unascertained
Section 2 (1)
Section 19
(1)“Where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend to it to be transferred.
For the purpose of ascertaining the intention of the parties, regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.”
Where the sale involves specific goods, property passes when the parties intend for property to pass. Section 19 is the only section in Cap 31 that addresses local circumstances.
Section 19 (2) raises issues of what to consider when trying to ascertain intentions of the parties.
Section 20. Unless a different intention appears, the following rules apply for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer—
Where there is an unconditional contract for the sale of specific goods, in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery or both be postponed;
Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until that thing be done, and the buyer has notice thereof;
Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until that act or thing be done, and the buyer has notice thereof;
When goods are delivered to the buyer on approval or “on sale or return” or other similar terms, the property therein passes to the buyer—
When he signifies his approval or acceptance to the seller or does any other act adopting the transaction;
If he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of that time, or, if not time has been fixed, on the expiration of a reasonable time;
Section 20 (a) to (d) deal with Sale of Goods Contract where the goods are specific and there are other things to be done. In (b) where goods are specific and the seller has to put them in a deliverable state, until this has been done and the buyer notified property does not pass.
Section 20 (e) (I) where there is a contract for the sale of unascertained or future goods by description, and goods of that description, and in a deliverable state, are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer; and assent may be express or implied, and may be given either before or after the appropriation is made;
(ii) Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee or custodian (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract.
Section 20 (e) does not deal with specific goods ‘appropriation’ means selected and put aside. The action of appropriation makes the goods specific. You still need to ascertain the intentions of the parties.
Section 20 (d)
Illustration: if you go to buy a Matatu and you say you want such and such a matatu and you are given one to test drive and when you come back from the test drive you have already written words on the matatu, that act is inconsistent with the rights of the owner. Your action amounts to conversion.
S. 20 (d) (2)
The action of painting the vehicle is taken to indicate that property has passed. The intention is that when the buyer does something inconsistent with the rights of the seller.
S. 20 (e)
The intention of the parties is that property will pass.
S. 20 (e) (ii)
Property passes upon delivery of goods in this Section.
Rules in Section 20
Quite often the parties have no clear intention or expressly stated intention as to when the property will pass and therefore they don’t have the intention of deciding that actually you do not often get into that discussion normally. The intentions of the parties which Section 20 deals with basically are imaginary.
Even if the parties have expressed certain intentions, it will be of no consequence if property has already passed according to rules laid down in Section 20. Section 20 deals with intentions i.e. 20 (e) which says where … The property is meant to pass when the goods are either loaded or delivered to the agent of the buyer. This is not the truth being that the intentions were never discussed. It is the courts that will sit down and apply the said rules after there has been a breach. The intention is only constructed by courts after the behaviour
Dennant V. Skinner & Collom
Important for
It shows when the term passing of property is appropriately used. The property will have passed irrespective of intentions of the parties.
The decision in Dennant V. Skinner raises a complication as to whether the Sale of Goods Law is a facilitative or command law. These two rules are violated here and one is left wondering how to read
The facts of Dennant were as follows:
The plaintiff an auctioneer sold a car to Mr. X by auction. Mr. X was a swindler and gave a false name and address and he asked the auctioneer to allow him to take the car (goods) away in return for his cheque. The Plaintiff allowed Mr. X to take away the goods without paying and the auctioneer was left with a cheque but before the Swindler Mr. X took the goods away, the Plaintiff required him to sign a document, which stated that the title to the vehicle would not pass until the cheque cleared. Mr. X upon receiving the goods sold the car to the Defendant and what went to court was the dispute as between the auctioneer (plaintiff) and the defendant (buyer) as to who had the better title. The issue was whether the property in the car had passed from the auctioneer to the fraudster since you cannot transfer that which you don’t own and if X had no property in the car, (the intention of the parties was that the property would not pass until the cheque was cleared). We can say that the intention was clear that property did not pass since the cheque didn’t clear.
The other argument was that in an auction sale under Section 58 property in the goods passes to the highest bidder on the fall of the hammer.
It was held that applying Section 58, property passed to the fraudster when the hammer fell and by the time the parties signed the document, property had already passed. Document was signed after the hammer had fallen and therefore X had property in the goods and could pass a good title to the buyer. If you apply Section 20 (a) you arrive to the conclusion that property would pass after the payment was done.
In the case of auction when is a contract made? Is it at the fall of the hammer or at the agreed time?
Kursell V. Timber Operators & Contractors ltd
Section 20 (a)
You come across the term ‘deliverable state’; goods are in a deliverable state if the buyer will be bound to take delivery of those goods.
Does this mean that if the buyer is not bound to take delivery of goods, then the goods are not in a deliverable state? When you talk of deliverable state, the buyer is not bound to take delivery if the goods are not deliverable or do not conform to the contractual terms and the buyer cannot be forced to take delivery.
Defects in the goods do not prevent the passing of property. The fact that goods do not conform to specifications does not prevent the passing of property. That is why the buyer cannot be forced to take delivery of goods if they do not conform to the contract. Can a person reject his/her own goods? The intention of the parties should have been that property would not pass until one has examined the goods and the goods conform to all specifications of the contract. The intention in S. 35 that the property will not pass in goods until they have been examined and that they conform to the description and everything else in the contract.
Read concept of identification and setting aside.
Identification is most important though it does not conform to practice. In practice identification is usually for specification and not amount.
SALE BY A NON-OWNER – NEMO DAT QUOD NON HABET
A seller with no right to the goods may nonetheless pass a good title to a third party. The question that arises is which of the two innocent people is to suffer for the fraud of a third party. For instance a thief steals goods and sells them to someone who buys in good faith and for value, a person hands goods to an agent to obtain offers and the agent sells them without authority and disposes of the proceeds; In all of these cases the law has to choose between rigorously upholding the rights of the owner to his property, on the one hand, and protecting the interests of the purchaser who buys in good faith and for value on the other hand. As Lord Denning once put it
“In the development of our law, two principles have striven for mastery. The first is for the protection of property: no one can give a better title than he himself possesses. The second is for the protection of commercial transactions: the person who takes in good faith and for value without notice should get a better title. The first principle has held sway for a long time, but it has been modified by the common law itself and by statute so as to meet the needs of our times.
Cap 31 Section 23 (1) states as follows: -
“Subject to the provisions of this Act, where goods are sold by a person who is not the owner thereof, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.”
This rule is frequently dignified by the use of Latin in the tag nemo dat quod non-habet, or for short nemo dat. The part in Section 23 stating that a non-owner cannot pass title – is merely a re-enactment of the common law principle so it would seem that that part of the subsection, or the common law in lieu, is of the subsection (beginning with the word ‘unless’) has the positive effect of enabling a non-owner to pass a good title, although this also appears to be merely a restatement of the common law doctrine of estoppel. The only substantive question, therefore, is whether a person who has merely agreed to buy the goods can rely upon the doctrine of estoppel.
CONSENT OF THE OWNER
Where the goods are sold with the express authority of the owner, the ordinary rules of principal and agent apply and no special difficulty arises.
Reference should be also be made of Section 47
“ Subject to the provisions of this Act, the unpaid seller’s right of lien or retention or stoppage in transitu is not affected by any sale or other disposition of the goods which the buyer may have made, unless the seller has assented thereto:
If therefore the buyer not being in possession resells the goods and the seller assents to such sale, the sub-buyer obtains a good title free from the first seller’s lien or right of stoppage in transit. The effect of such assent on the part of the seller is very similar to that of estoppel, but the difference seems to be that whereas estoppel can only operate if the assent is communicated to the sub-buyer, the seller may assent to the resale within the meaning of Section 47 even though he only communicates his assent to the buyer. But the mere fact that the seller has been informed of a resale and has not objected to it does not amount to an assent within Section 47.
In Mourdaunt Bros V. British Oil & Cake Mills Ltd the defendants sold oil to X, who resold part of it to the plaintiffs and gave them delivery orders in respect of that part. The Plaintiffs paid X for the oil and sent the delivery orders to the defendants, who accepted them without comment. The defendants delivered instalments of the oil direct to the plaintiffs as and when they were paid by X, but on X’s falling into arrears with the payments, they refused to deliver any more. Pickford J held that the defendants had not assented to the resale within S. 47. In my opinion, he said the assent which affects the unpaid seller’s right intends to renounce his rights against the goods. It is not enough to show that the fact of a sub-contract has been brought to his notice and that he has assented to it merely in the sense of acknowledging receipt of the information.
In D F Mount Ltd v Jay & Jay Co Ltd: Salmon J came to a different conclusion on the following facts. The defendants were owners of 500 cartons of tinned peaches lying at the wharf of D. The defendants were approached by M at a time when the market was falling, and M told them that he had a customer for 250 cartons. He made it clear that he, M, would pay the defendants out of the price he obtained from the sub-purchaser. The defendants agreed to sell the cartons to M and gave him a delivery order. M sent the order to D, who received it without acknowledgement. Later M sold the cartons to the Plaintiffs who paid M. The defendants, never having received the price from M, subsequently claimed to be still entitled to the cartons. Salmon J held that the defendants had assented to the sale within the meaning of S. 47:
“In the present case, the defendants were anxious to get rid of the goods on a falling market. They knew M could only pay for them out of the money he obtained from his customers, and that he could only obtain the money from his customers against delivery orders in favour of those customers. In my view the true inference is that the defendants assented to M reselling the goods, in the sense that they intended to renounce their rights against the goods and to take the risk of M’s honesty.”
Nemo dat also covers those cases where an owner sells goods, but is unable to sell them free from some encumbrance or charge existing in favour of a third party. The law generally sets its face against the recognition of encumbrances, which run with chattels into the hands of thirds parties so this is very unusual. Where a person pledges goods, or the documents of title to goods, and subsequently the pledgee returns the goods, or the documents to the pledgor for a limited purpose, for example to obtain clearance of the goods from the warehouseman, any unauthorized disposition by the pledgor will not prejudice the rights of the pledgee… in other words the seller, although owner of the goods cannot sell them free from the pledgee’s right.
EXCEPTIONS TO NEMO DAT
Estoppel
The first exception is provided by the doctrine of estoppel which is embodied in the concluding words of S. 23 “… unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.” This provision takes us back to the common law doctrine of estoppel for it gives no indication when the owner is precluded from denying the seller’s authority to sell. However there are two distinct cases where the owner is so precluded. The first is where he has by his words or conduct represented to the buyer that the seller is the true owner, or has the owner’s authority to sell, and the second is where the owner, by his negligent failure to act, allows the seller to appear as the owner or as having the owner’s authority to sell. These are called estoppel by representation and estoppel by negligence respectively.
REPRESENTATION BY NEGLIGENCE:
A person may make a representation by words or by conduct, but how does a person make a representation by negligence? This is really a representation through an omission. A person who negligently omits to inform another of certain facts may be said to be representing that the facts calling for report do not exist. Again, a person who omits to correct a misrepresentation made by a third party may in certain circumstances be treated as responsible for that representation. Thus if A stands by while B makes a representation to C which A knows to be incorrect, and which he has a duty to correct, A may be said, loosely to be guilty of misrepresentation by negligence.
ESTOPPEL BY WORDS
A good example of estoppel by words is the decision of the Court of Appeal in Henderson & Co V Williams in this case, G & Co. were induced by the fraud of one F to sell him goods lying in certain warehouses of which the defendants were warehousemen. The circumstances were such that the contract between G & Co and F was void for mistake. On the instructions of G & Co, the defendants transferred the goods in their books to the order of F. F sold the goods to the plaintiffs who, being suspicious of the bona fides of the seller, made inquiries of the defendants. The latter supplied the plaintiffs with a written statement that they held the goods to the order of F, and when this did not satisfy them, they endorsed it with a further statement that they now held the goods to the plaintiffs’ order. G & Co., not having been paid by F, instructed the defendants not to deliver the goods to the plaintiffs but to themselves, and they gave them an indemnity against so doing. It was held that both G & Co. and the defendants were estopped from denying the plaintiffs’ right to the goods, the former because they had represented that F was the owner by ordering the defendants to transfer the goods into his name in their books, and the latter because they had attorned to the plaintiffs, that is represented to them, that they held the goods to their order.
Section 23 – 27 of the Sale of Goods Act.
Most important topic apart from passing of property.
Constitutional right of every person to private property and the need to promote international and national commerce at the same time protecting individual rights to own property. All these issues are balanced in nemo dat.
The basic rule in nemo dat is that a person who is not an owner of goods or who does not sell those goods under the authority or consent of the owner cannot pass a better title than she/he had.
Section 23 (1) you find the first exception to that rule
Cap 31 Section 23 (1) states as follows: -
“Subject to the provisions of this Act, where goods are sold by a person who is not the owner thereof, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.”
The proviso starts with where it says …unless the
When we look at nemo dat as a topic, the take off point is that a person who is not the owner of goods cannot sell or pass a better title than the owner. Even though you are not the owner you can sell and pass a good title if you have the consent of the owner.
The problem with nemo dat is that it was developed with the aim to do justice, we are not talking about fairness, and we are talking about justice. Fairness is substantive, justice is procedural. Nemo dat rule balances justice or the legal rules being followed and then fairness on the other hand – i.e. are the social ethos endorsed as the right thing to do?
In the nemo dat rule, we are balancing between justices for 2 innocent parties each claiming ownership or title to the same goods and asserting that he/she has a better claim on those goods than the other party. The problem can arise in any of the following
Where a thief steals goods and sells those goods to someone else who buys in good faith, for value and without notice;
Where a swindler buys goods and induces the seller to let him have possession of the goods on credit and he promptly resells or pledges those goods for whatever he can get;
Where the person hands goods to an agent to obtain quotations for those goods and the agent sells those goods without authority or disposes of the proceeds of the sale;
Where a person sells goods, transferring the property in the goods but retains the possession of the goods and then fraudulently resells those goods to a third party.
In all these scenarios, the law has to choose between upholding the rights to private property of the owners to the goods and this right is a constitutional right, which is protected that one cannot lose property in their goods. Legal rights to private property are protected while at the same time trying to promote national and international trade. You have 2 innocent persons claiming title to the goods and therefore you have to look at the nemo dat rule and you are saying that the basic rule is that a person cannot give that which he/she does not have. If you have no ownership of goods you cannot pretend to sell those goods to another person.
The court is now caught up in the exercise of protecting the owner of the goods while at the same time protecting buyers who buy in good faith and without notice.
AGENT:
Sale by an Agent:
An agent is a person employed to do any act for another or to represent another in dealings with third persons. Agency law is covered under Cap 23 Laws of Kenya.
In agency law we have 3 parties
1. The Principal – person who owns the goods or who hires or employs the agent; usually the principal and the agent enter into a contract where the principal gives consent for the agent to do whatever representation that the principal wants the agent to do for him. This is a complete contract unto itself.
The principal goes through the agent and if the agent is the one selling the goods to 3rd persons with the authority of the principal. The agent by definition is employed or authorised to transact on behalf of the principal e.g. an auctioneer is an agent of the owner.
When the Agent is selling those goods to a third party, then there is a sales contract that is governed by the law of contract and both the agent and the 3rd party must meet all the requirement of a contract. This is another contract.
NB: When the law says that the Agent is a person employed to act for the principal, the agent can only perform those acts which the principal is empowered legally to do. So when we say act it should be qualified to be any legal act.
The purpose of the Agent is to link the 3rd party with the principal and once he has done this, he can actually disappear. The agent is there as a middleman to link the principal and third party.
NB: The person with the property has power to transfer the property; the agent has only authority to sell on behalf of the principal but has no power. Power begets authority. He who has the power can authorise somebody else to do that which he who has the power is authorised to do. The power to transfer property is with the principal. The authority of the agent binds the principle. The agent has 3 types of authority
Actual authority; I am authorising you to drive my truck to Mombasa
Apparent authority;incidental if the agent is the driver of the principal’s lorry and stops at a petrol station and tells the attendant to fill the lorry with diesel, and after this is done can he now ask the attendant to sign a document and later to claim money from his boss? He has apparent authority to fill, refill the truck if the need arose. Apparent authority comes with the drivers’ responsibilities i.e. to refuel the vehicle etc. The principal is bound by the acts of the agent if and when he exercises the apparent authority for example to refuel the car.
Ostensible authority: - this is close to apparent authority but arises from a scenario of dealings. It has not been given but the dealings between the agent and the 3rd parties are such that the agent has led 3rd parties to believe that he actually has that authority. For instance an insurance broker will approach you and lead you to believe that they have authority to waive disclaimers in the application form and all that you need to do is sign.
In Agency Law as soon as a contract is complete, for all purposes, the Agent can disappear after connecting the principal and the 3rd Party. The termination of the contract is crucial. If by the time the Agent sells the goods he has been already deprived of the authority by the principal, then the contract is not legal. The principal would still be liable however. If the Agent or the Principal are declared insane, the contract is terminated.
SALE OF GOODS
Under Section 23(1) only the owner of the goods can sell and pass a good title and no non-owner can pass a good title unless the owner of the goods is estopped or excluded from denying that the seller had his authority or circumstances to sell.
The Rule of Estoppel or Exclusion is a rule of evidence and not a rule of law. A person can be precluded from giving evidence if by his conduct he has led other persons to believe that the goods weren’t his.
A non-owner cannot pass any good title to another person except where the owner is estopped from denying the authority of the seller. Where a seller sees his goods being sold and he keeps quiet, he is estopped from giving evidence that the goods were his. His conduct of omission precludes him from claiming the goods.
What is the effect where the owner has been estopped the person who has the goods keeps the goods. The effect of estoppel is to invest title to the 3rd party who is an innocent buyer.
Eastern Distributors Ltd V. Goldring (1967) 2 QB
In pursuance of a plan to deceive a finance company, one M signed and delivered forms to C which enabled C to represent that he had M’s authority to sell a car belonging to him, it was held by the court of Appeal that M was estopped from setting up his title against the plaintiffs who had bought the car from C. It was also held that the estoppel in fact operated to pass a good title to the plaintiffs not only against M himself, but also against a buyer in good faith from M.
The effect of estoppel in sale of goods is to pass title.
Only an owner of goods can sell and pass a good title. When can a non-owner sell and pass good title? Under what circumstances?
Where the owner is estopped by his conduct from denying the auctioneers’ authority to sell.
Sale by an agent S. 23(1) agent is authorised or sells the goods with consent of the owner. The agent never becomes the owner he is only selling the goods and passing the property because he is authorised by the owner. A sale by an Agent passes a good title.
Section 23 (2) (b) the validity of any contract of sale under any special common law or statutory power of sale or under the order of a court of competent jurisdiction. Section 23 (2) a and b deal with special powers of sale where a non-owner may pass a good title if the or the sale is under the order of a court of competent jurisdiction…
The courts may authorise a Sale of Goods where a decree holder has sought to sell the goods because the party is unable to clear the money owed. The decree holder applies to the court to attach the goods; neither the court nor the auctioneer is the owner of the goods but they can sell the goods.
Order of Court – A court can order a sale. The court may order a Sale of Goods even though there is no decree holder. Where goods that are perishable have been deposited with the courts or where the prices of the goods are falling, the court can order that the goods be sold while waiting for determination of the case.
Sale in Market Overt: - A market overt is an open public and legally constituted market. Sale of Goods Cap 31 Laws of Kenya does not have any provisions for a market overt. This is found in the English Sale of Goods Act. What we have are public markets. The key distinction between market overt and other markets is that a person who purchases goods in a market overt passes good title irrespective of whether the seller had authority.
The goods in the market overt are determined by the market overt. Goods sold in market overt are specific goods i.e. if you go to Wakulima Market you can buy vegetables but you do not expect to buy, lets say a car! In the market overt situation, all our markets qualify to be market overt but we call them public markets and anything that you buy in those markets that is generally sold there you get good title so long as it is specific to that market.
SALE UNDER VOIDABLE TITLE
S. 24
“When the seller of goods has a voidable title thereto but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of the seller’s defect of title.”
Void, null and void, null and void ab initio
s. 24 talks of a situation where there has been a voidable contract and goods have passed hands at a time before that contract was avoided meaning that a voidable contract can pass a good title so long as the transaction is entered into prior to that contract being avoided. For instance if you enter into a contract through coercion, one can opt out and void the contract. So long as the contract was entered into fraudulently, before the person who has the right to avoid the contract has not avoided the contract, then the contract is still good and the seller the person possessing the title prior to that contract being avoided can pass a good title.
Null and void contract is not avoidable because it does not exist, null and void ab initio
S. 26 (1) Where a person having sold goods continues or is in possession of the goods, or of the documents of title to the goods, the delivery or transfer by that person, or by a mercantile ..
Transfer applies only to title
This section talks of delivery of transfer – weird, as these two don’t go together. You don’t transfer documents of title you deliver. In Nemo dat we are trying to see how the courts have gone about ameliorating justice for the owner of the goods who has bought goods in good faith and without faith from a non-owner. This section is talking about seller in possession. He is still in a position to sell those goods to a third party so who should get a better title? There is the issue of balancing the equities.
If you go to the shops in market street for example and want to buy a suitcase, you buy it and tell the seller that you have gone to bring the vehicle but when you get back you find that the suitcase has been sold to somebody else, but the seller resells the same goods to another person, the second buyer will be a bona fide purchaser for value since he has bought the suit case without notice for value.
City Far Co. Ltd. V. Fureenbord (1937) AER 799
STAFFS MOTOR GUARANTEE LTD V. BRITISH WAGON CO. LTD [1934] 2 KB 305
S B
(O)
T
O’S goods are stolen by T and T sells the goods to B. Since T has no title to the goods he cannot pass a good title to B1. Then the owner of the goods finds the goods with B1 who is claiming he bought the goods from T for value without notice. T would ordinarily get prosecuted. When the owner of the Goods discovers this, he does not go negotiating with T but goes directly to S and tells the owner to name his price so that he can pay for them to avoid a scandal. S names a price and T pays the price and buys the goods from S to cover up his own exposure as a thief. Does a seller who at the time of sale had no title but subsequently acquires a good title; does the acquiring of a good title go to cover the deficiencies of the first mistake?
T as a non-owner of the goods without authority cannot sell and pass a good title to B 1. (Nemo dat basic rule).
His subsequent acquisition of a good title from O has two facets, at the time when T and B entered into an agreement there was no title in T which he could pass, the original contract cannot be cured by the subsequent acquisition of title by T.
The action by the seller to agree to have the goods bought by T original thief
s. 26 (1) deals with seller in possession and the seller has already sold the goods and possession has passed. The seller can pass a good title to the 2nd buyer.
Where the buyer has acquired possession and does not have a good title and sells the goods to buyer 2, there is a contract of sale between the seller and Buyer 1 who has sold the goods but retains property. The goods are with buyer but title with the seller. Buyer 1 sells the goods to B 2 while the title is still with the seller
Section 26(2) says that:
The effect is that where the buyer has bought or agreed to buy and he/she acquires possession of those goods with the consent of the owner, any sale or pledge by the buyer even though title is still with seller so long as B2 buys in good faith and without notice, B2 has a good title.
Section 8
Sections 28 – 53
Types of obligations created between seller and buyer
Duties of seller
Duties of buyer
Rights of unpaid seller against the goods
RESALE BY A SELLER:
OBLIGATIONS CREATED BY A CONTRACT OF SALE OF GOODS
Duties of the Seller:
Under Section 8 there is no implied condition that the goods exist, the reason being that where the goods perish at the time of the contract the contract is void. If the existence of the goods were an implied condition, then the section would read that where the goods perished at the time of the contract the contract would be voidable. Under S. 8 there is no implied condition that the goods exist at the time of the contract because where goods perish at the time of the contract getting entered into, the contract is voidable.
Under Section 14 of Cap 31 the seller has a duty to pass a good title and under the Act, there is an implied condition that the seller shall pass a good title to the buyer. The seller has a right to sell the goods either he has the title or has authority to sell the goods. The seller is in effect under an obligation to pass a good title to the buyer. A good title is a title without any encumbrances.
In a contract of sale there is an implied condition under 14 (a) that in the case of sale he has a right to sell the goods and in the case of an agreement to sell he will have such a right at the time when property is to pass. This requirement does not require that the seller to be the owner, only that he has authority to sell. 14(a)
If there is a breach of a condition, the innocent party has a right to repudiate a contract or if he doesn’t choose to repudiate, he has a right to claim for damages (i.e. he will be treating it as breach of a warranty) in the sale of goods the innocent party is allowed to recover monies paid if there is failure to transfer ownership. If seller has no authority then he should not receive your money and you can receive your money back
Read Section 14 (b) and (c) Cap 31
Kenya Law Reports 1982 Page 191
There are expectations that the goods exist
PERFORMANCE OF THE CONTRACT:
When parties to a sale of goods contract enter into that contract there are certain expectations from both parties. The seller has duties to perform and so does the buyer. These obligations unless discharged, neither can say that they have met the obligations of the contract.
Section 28 – 38 of SALE OF GOODS ACT
THE SELLER
The seller has the duty to deliver the goods; in S. 3(1) the seller transfers or agrees to transfer the property in the goods for a money consideration. Transfer of property is not the same as delivering the goods. In effect if the seller does not have the property in the goods or has no authority to sell, then there is total failure of consideration and if he has paid, the money must be returned but the seller still has a duty to deliver the goods and the buyer has a corresponding duty to accept delivery of the goods in accordance with the terms of the contract. One of the very confusing sections, is Section 29
S. 29. Payment and delivery concurrent condition. To talk of concurrent creates an idea of mutual lack of trust between the parties. S. 29 talks of an impossible method of performing a contract namely concurrent. It also talks of comparables.
S. 30(1) Whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer is
Rules as to delivery. Delivery is at the place of the business of the seller but it can be agreed different. This is a facilitative law and the parties set the pace. Where the seller is to send the goods to the buyer but no time for sending the goods is fixed, the seller is bound to send those goods within reasonable time.
One of the basic problems is that when one places an order for drinks, there is nervous tension as to whether the proceedings are going to move as per the clock. If the drinks are not there by 10a.m, on the 24th December there is anxiety, to put the parties at ease so 10 O’clock on the 24th of December has been held to be an unreasonable hour to deliver drinks for Christmas. What is reasonable depends on the circumstances. When the law talks about reasonableness, they bring in facts that are difficult to measure. One needs to study case law.
4. The third rule of delivery is that where at the time of the contract the goods are not with the possession but in the possession of a 3rd party, the seller does not discharge his obligations to deliver the goods by informing the buyer that the goods are with a 3rd party and that the 3rd party will deliver the goods, this does not discharge the obligations because the duty to deliver the goods is with the seller. An uncertainty is created if when the buyer goes to collect the goods from the seller and complications arise and the buyer is caught unawares that there was an un-payment that the goods must be paid for before delivery can be effected. Delivery is not effected until the 3rd party has informed the buyer that they are holding the goods that were sold to the buyer by the seller. This rule changes the volume of goods to bailment in that the 3rd party is now holding the goods as an agent of the seller. It has to be bailment free of any encumbrances.
There are other rules that tie on the duties of the seller to deliver.
There has to be a demand from the buyer to the seller to deliver the goods where the time for delivery is not specified. The seller tenders delivery of those goods and the tendering of the goods has to be made at a reasonable hour. Where the seller tenders delivery of drinks for Boxing Day at 11. Am that has been held to be unreasonable. People don’t ordinarily start anything until noon on Boxing Day and therefore it is not reasonable to deliver drinks at 11 a.m on boxing days.
How can we apply Section 19(2) of the Sale of Goods Act Cap 31?
Expenses and other incidentals of putting the goods in a deliverable state are on the seller unless the contract provides otherwise.
Section 8 and Section 9
S. 9 presupposes that the timing of the passing of property is unknown which is not known as Section 19 and 20 talk of determination of the parties as to when the property is to pass.
Drafting of the Sale of Goods Act is very poor.
Section 31. The duties of the seller to deliver the right quantities of the agreed upon goods.
The buyer may reject the goods if the quantities are not what he ordered. The seller has an undertaking that he will deliver the right quantities of goods as agreed in the contract but should the buyer accept the delivered quantity, then he must pay for the goods at the agreed upon price.
Where the seller delivers goods, which are short of the quantities agreed upon, in both cases higher quantities or lower quantities, he has a right to reject the goods. Similarly where the seller supplies a lesser amount of the goods the buyer still has the right to reject the entire lot but should he accept the lesser quantities he has to pay for the less quantities at the contractual price.
Where the seller delivers mixed goods and some of those goods comply with the contractual terms and others don’t meet the contractual agreement, then the buyer has a right to reject all of it or he has also the right to accept those goods that meet the contractual description and reject the ones that don’t. He also has the right to accept the total mixed and if he does, then he must pay at the contractual price.
Section 31 (3) has become contentious you remember the case of the 10 cows in calf? Revisit it and think of whether they were mixed goods and what the buyer should have done in this case. If you were the judge what would you decide?
Section 31 (3) we are saying that property has not passed since property only passes when goods are of a given description. Can the buyer and the seller under facilitative law have the option to keep the mixed goods?
Section 32: (1) Unless otherwise agreed the buyer of goods is not bound to accept delivery thereof by instalments.
In this section, you have a contract for the Sale of Goods and once the contract has been entered, its delivery is by instalments and payment is also by instalments.
When sale is by instalments, it is up to the court to determine how to treat a breach of contract. It is usually a unitary contract but performance is by instalments.
Can you rescind a contract where some instalment does not meet the contractual standard? In a situation where one party has performed its obligation, breach of a condition is treated as a warranty and the contract cannot be repudiated. Sale by instalments is a unitary contract where performance is by instalment in which case once the buyer has dealt with the first instalment, he cannot repudiate the contract if one of the other instalments does not meet the standard.
2 possible scenarios – a unitary contract performed by instalments and where each instalment is a contract in its own right.
Section 35. Buyers right of examining the goods
“Where goods are delivered to the buyer which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract.”
Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract.”
Two questions arise
It is a one key section which goes out to protect the consumer and it is the most direct section in terms of ameliorating the principle of ‘Caveat Emptor’.
The second problem is at whose risk do the goods remain while the buyer is examining them? Who would bear the risk if there was a fire for example?
Section 35 is a useless section in that it presupposes a certain amount of knowledge in the buyer to identify and detect defects in the goods. The law of contract took both parties to be at par in the product knowledge but the sale of goods is asserting that the seller and buyer are not at par.
The critical issue in Section 35 is in keeping in trying to protect the consumer in a market where technology has advanced so much while the consumer is still the way he was in the 1900s. Section 35 deals with simple tangible goods which are not capable of complicated physical condition and the buyer can identify most of the defects. Modern technology has now ruled out the buyer examining good and noticing any tangible defects. Consequently the consumer protection Sections need a total overhaul whereby an independent body can examine goods and certify fitness in respect of when they are to be bought and when they are to be consumed.
The consumer accepts that in light of technology, they have to tell them about the goods. In the wake of technology, the consumer is worse of than he was in 1920. There is nothing you can discover as a consumer from the manufacturer and the government is doing nothing to protect the consumer. The consumer is at risk.
Section 36. Acceptance
“ The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them or when the goods have been delivered to him, and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains goods without intimating to the seller that he has rejected them.
When he intimates to the seller his acceptance of the goods or after a lapse of reasonable time he intimates to the seller that the goods are okay when they have been delivered to him.
In accordance with Section 35, if you have not examined the goods, you have not accepted them. No property passes until the goods have been examined to ascertain that they conform with the contract.
Read Sale by Description
Sale by Sample.
Regulatory Rules and Authorities Sections 15, 16, 17 and 18.
Modern Law Review 2000 on Sale of Goods.
Section 37
REMEDIES OF A SELLER
Where the buyer defaults in his principle obligation then the seller can claim her/his damages. When parties go to court it can take a long time to sort out court litigation and there are cases that have been pending for the last 6 years. It is therefore important for the seller to consider the best option in enforcing his remedies. There are two remedies for the seller
Real Remedy
Personal Remedy
Real remedy is that right which the seller has by virtue of being in possession of the goods. He holds the goods as security until the price is paid. Real remedy is only available where the seller has possession where property has passed and he has not delivered the goods to the buyer or he has repossessed the goods. This real remedy is based purely on possession of goods by the seller and as soon as the seller has released possession, the remedy passes. One must be in possession of the goods.
The second remedy has to do with where the seller must be an unpaid seller. The seller is unpaid where he or she has not received the total price. A seller is unpaid if he/she has not received total price or the total price has not been tendered to him/her no matter how small the balance is. The seller is also unpaid when the bill of exchange or negotiable instrument has been dishonoured. Note that the seller includes the seller’s agent.
There is another remedy – the lien.
Lien is the right to retain goods until the whole of price has been either paid or tendered. Note that the seller’s lien does not give the seller any property in the goods but the lien allows the unpaid seller the right to resell the goods subject to certain conditions
Seller must be unpaid seller
No right to lien if goods are sold on credit and the time for the credit has not expired;
The unpaid seller must be in possession of the goods; if for any reason the unpaid seller loses possession of the goods then both real remedy and lien remedy are lost. The two remedies are based on the seller being in possession.
Anytime between delivery of goods to an agent/carrier for onward transmission to the buyer, the unpaid seller has a right to stop the sale of goods, Stoppage in transit. Stoppage in transit applies when the buyer becomes insolvent in which case the seller may resume possession of the goods and he may retain the same until he/she is paid the same price.
Conditions for stoppage in transit
The seller must be unpaid,
Buyer must be insolvent
The goods must be in transit
Vendor v. Carrier
There is a carrier who is obviously an agent of the seller, if for instance the sale of goods contract says that the seller shall deliver the goods to the buyer and the seller loads the goods to vehicle to deliver to the buyer then the goods are still in the seller’s possession. Where the carrier is the agent of the buyer, then immediately the goods are delivered to that carrier, the seller has delivered the goods to the buyer and the stoppage in transit is only applicable where the goods have not reached the buyer. If you can determine that the carrier is the buyer’s agent, the goods have been delivered to the buyer as soon as they are loaded.
Where you have an independent contractor it is your duty to determine whose agent the independent contractor at the time you want to ascertain possession of the goods. Even with the independent contractor, the person who gives the initial instructions is by and large the principal, master and employer.
When you talk of vendor and carrier therefore if the seller gives orders to the carrier and that carrier happens to be the seller’s agent to stop delivery to the buyer and the carrier disobeys the instructions, if the carrier delivers the goods to the buyer he commits conversion. Where the carrier is a common carrier e.g. Malindi bus where you have loaded omena and the bus has left carrying the fish. Somewhere along Mtito you get information that the buyer has been declared bankrupt, who has possession of these goods?
Once the seller has possession either initially or through stoppage in transit, he has a right to resell or hold on the goods and force the buyer to pay, if the buyer cannot afford to pay, the seller can sell the goods if he still has possession and pass a good title to the second buyer. But supposing the unpaid seller after resale makes a profit? Who is entitled to the profit? The profit goes to the unpaid seller not the buyer. It is inequitable that an unpaid seller who is selling the goods because the buyer has defaulted that the seller is entitled to get whatever is over and above. The buyer who has acquired property in the goods without payment and now would want to make a profit of the goods that he has inconvenienced the seller by not paying should not benefit from the subsequent sale of the goods. Even when the seller sells the goods to reclaim his money, he can still sue the buyer for damages.
SELLER’S PERSONAL REMEDIES
Real remedy is that you have the goods and you hold the goods as collateral and force the buyer to pay for the goods before delivery. Suppose you have lost the property and the goods to the buyer and the buyer does not pay?
Action for price the unpaid seller is entitled to file a suit claiming the price and/or damages for the breach of the contract by the buyer; suffice it to say that action for damages is only available where property has not passed, where property has passed, one has to prove damage. The seller has already lost that which he had i.e. he has lost property in the goods and unfortunately he might lose possession. So when you file a suit claiming damage, what damage has one suffered and what damages can a court award. It is not prudent for the court to order the buyer to return the goods except in theft where the buyer has acquired goods illegally and the property reverts to the original owner. The bona fide purchaser would lose the title and the goods and the original owner gets back the goods and the good title. Pg 431 Attiyah 9th Edition read it.
Section 51 to Section 54 - REMEDIES HAVE THE BUYER
Like the seller the buyer has rights, which are as follows;
The buyer has a right to reject the goods; buyer’s first right or remedy where the seller fails to transfer property or deliver goods; right to reject goods, this goes together with repudiation. Repudiation is only possible when the seller’s breach goes to the root of the contract either because it is a breach of a condition or by its very nature because it renders the contract meaningless. Note that the right to reject is separate from the right to repudiate. When you repudiate you say the contract does not exist but when you reject you are saying yes there was a contract but there is something wrong i.e. the goods are defective etc. if you opt for repudiation you open yourself to all sorts of problems so the prudent buyer would not opt for repudiation but would opt for rejection and then pursue damages. This option is that until a certain reasonable period, there is still time for the seller to deliver conforming goods but when you repudiate you close the door for the seller to make good.
Read upto Section 54
CAVEAT EMPTOR
Sale of Goods Law is a consumer protection mechanism and is part and parcel of facilitative law. The doctrine of Caveat Emptor has been and is still most inequitable because you are equating two unequal parties. This consumer protection comes in to ameliorate the harshness of caveat emptor. In justice is treating equals as unequals or treating unequals as equals. In the law of contract caveat emptor treats unequals as equals and this is unjust and this was supposed to be cured by the Sale of Goods Act. Sale of goods was an effort to assist the buyer who is not equal to the seller in knowledge.
Section 15, 16 and 17 of Sale of Goods Act Cap 31
These sections deal with amelioration of the doctrine of caveat emptor. Section 15: deals with two concepts, sale by description and sale by sample. Where there is a sale by description there is an implied condition that the goods shall be of merchantable quality. A sale by description is realistically a sale of goods which the parties can neither see and if they can see the goods there are certain elements in those goods which cannot be seen or touched and therefore the parties have to revert to a method of trying to define the goods to make sure that the minds of the parties meet, this is especially true in contracts for future goods. The adjectives that try to explain the things that the parties can have the minds meeting other than through words e.g. you go to the Nairobi show the livestock section where Mr. Karanja a rancher visits Mr. Mwangi who is a breeder at his kennel and Mr. Mwangi has dogs that he is selling. Karanja sees the dogs and he tells Mwangi since he is an expert in dog breeding to tell him what breed the dogs are. Karanja says he is looking for watchdogs and he says he has been looking for the German Shepherds like the ones Mwangi is exhibiting. Mwangi gets back to his kennel at home and loads 4 German shepherd dogs and takes them to Karanja who pays him and accepts the delivery. The same night, the ranch is attacked and ravaged by 3 lionesses who clear all the sheep but the watchdogs not only do they fail to bark but they get scared and go to the watchman’s shed and bite the watchman out of fear? Is there a breach of contract? Was this a sale by description or a sale by sample? The description was I want Watchdogs and Mwangi pointed exactly what Karanja pointed at. One of the issues under Section 15 is that when the buyer goes ahead and describes the goods, i.e. German Shepherd Watchdogs and goes further and points at the sample. The goods which the buyer has identified cannot be exchanged with other goods. The dogs after biting the watchman on examination were found not to be German Shepherds but were a cross breed between a local bitch and second generation German shepherds, but Karanja had pointed at those particular dogs.
S. 16
Under S. 16 there is no implied warranty of fitness for any purpose unless the buyer states the purpose for which he needs those goods, after expressing the purpose for which he needs the goods, it is not enough and he must rely on the judgment and the expertise of the seller. Then there is an implied condition that the goods shall be fit for that purpose. In Karanja and Mwangi’s case, Karanja has specifically told Mwangi that he needs watchdogs for protection and according to S. 16 (a) the goods should be fit for purpose, which would be to protect the farm against wild animals. Is there a breach when the dogs do not protect but even bit the watchman and the sheep are killed by the lionesses? Both the seller in this case would not know the goods. The kind of purpose which the buyer is putting across to the seller can rarely meet the purpose for which the buyer wants the goods. If the buyer knew what exactly he wanted, he would go and describe what he wanted.
Section 16 assumes that the buyer knows what he/she wants to buy. The assumption is implied.
S. 16 (b)
The basic concept in this section is that if the buyer can identify defects just by looking at the goods, how can the seller be exempt from seeing the defects that the buyer is required to notice through examination. The seller is not supposed to identify these defects and this is absurd. It should only apply to manufactured goods and they are exempt in this Section.
S. 16 (c)
If the goods are sold under their trade names, there is no implied condition as to its fitness for any particular purpose. E.g. when you tell the pharmacist that I have a headache and I want Panadol to treat my headache, there is not implied condition that it will treat that headache and you have no action if the headache is not cured. When you ask for goods on their patent name you are not relying on the judgment of the seller so there is no implied condition.
Section 16 is very far from protecting the consumer.
S. 17
Except for simple types of goods, it cannot apply to goods in modern technology. S> 17 (2) it is very hard to assess the quality just by checking the sample. It is not often that the quality in the sample corresponds with the rest of the goods. For example if you bought an orange after tasting the sample, it is rare that another orange is likely to taste exactly like the sample so it is hard to tell even with simple goods like oranges. The consumer can taste and test and see-to-see defects but none of them operates it is still hard to tell.
Chapter 31 Laws of Kenya is a major legislation, which was enacted to try and bring parity between the amount of knowledge commanded between seller and buyer and consumer and manufacture, which was supposed to be ameliorated by Cap 31. The Legislation however is either poorly drafted or did not see far enough in terms of technology to anticipate what the consumers needed to be protected from.
The consumer is by and large ignorant of the injurious effects in goods which she/he is supposed to know about but will never know about no matter how long the consumer examines the goods Sections 15 to 16 were supposed to protecte the consumer through the doctrine of caveat emptor but the sections do not protect the consumer.
Why has Cap 31 survived for that long? The consumers need a legislation that tells the consumer how the high tech goods like computers are very hard to detect defects and Cap 31 should come up with a way to protect the consumer even from high tech goods
No comments:
Post a Comment