COMMERCIAL LAW

(SALE OF GOODS)

BY SAMUEL MANTEAW

LAW FACULTY, UG.

SALE OF GOODS Sale of Goods is an aspect of

commercial law. Commercial law is broad-scoped and

covers a lot of areas: Agency Sale of goods, Secured financing such as

hire purchase, conditional sale agreements and finance leasing,

Insurance Banking Non-banking financial transactions

SALE OF GOODS Commercial law covers many

other areas: Negotiable instruments, Trade, investment, contracts, Electronic commerce, Companies, Taxation, Securities, Project finance and joint

ventures, Intellectual property, Unfair competition, Alternative dispute resolution.

SALE OF GOODS SALE OF GOODS ACT, 1962 (ACT 137) P.S.ATIYAH, SALE OF GOODS(8TH EDITION)

R. M. GOODE, COMMERCIAL LAW

1. Nature and Formation of the Contract of Sale of Goods

A contract of sale of goods is defined as a contract whereby the seller agrees to transfer the property in goods to the buyer for a consideration called the price, consisting wholly or partly of money.

section 1(1).

SALE OF GOODS The price in a contract of sale may be

fixed by the contract or may be left to be fixed in an agreed manner.

It may also be determined by the course of dealing between the parties.

If the price is not so fixed or determinable, then the buyer must pay a reasonable price –

a question of fact dependent on the circumstances of each particular case.

Contracts of part-exchange are admitted within this definition of sale.

SALE OF GOODS Capacity to buy and sell is regulated by the general

law on capacity to contract and to transfer and acquire property.

section 2(1).

A contract for the sale of goods may be made in writing or by word of mouth (orally), or partly written and partly oral, or may be implied from the conduct of the parties.

section 3

The goods forming the subject of the contract of sale may be either

specific goods, identified and agreed upon before or at the time when the contract is made, or

unascertained goods not being so identified and agreed upon.

section 5(1).

It may even be crops on the field, or to be planted.

SALE OF GOODS Duties of the Seller

Act 137’s fundamental obligations, conditions and warranties impose various duties on the seller

and

a breach of any such duty or obligation

entitles the buyer to remedies.

sections 55, 49, 57, and 58

SALE OF GOODS Delivery of Goods is a

Seller’s Fundamental Obligation

Section 81 of Act 137 defines ‘delivery’ as the voluntary transfer of possession from one person to another.

Delivery of goods sold is seller’s fundamental obligation under the Act; and

by its sections 8, 11 and 12 relating to the fundamental obligation of the seller to deliver goods sold, the Act introduces a complete innovation particularly regarding the sale of unascertained goods.

SALE OF GOODS Of course, in a sale of specific goods

the seller is to deliver those goods to the buyer. section 8(1).

But, in a sale of unascertained goods, the seller is to deliver goods substantially corresponding to the description or sample by which they were sold.

section 8(2); Birch v. Asempa [1992] 2 GLR 416

Birch v. Asempa The plaintiff, B, on her own behalf and on

behalf of her brother, K, sued the defendants jointly and severally as administrators of the estate of S (deceased) for the return to her of 4,360 cement blocks or their current value, together with damages.

In support of her case, B deposed that in December 1981 she and K purchased a total of 7,000 cement blocks from S and that a receipt, exhibit A, was issued to evidence the sale.

After the sale they collected 2,640 out of the blocks purchased, leaving 4,360 blocks at the residence of S.

Birch v. Asempa But that when she went to collect

the remaining 4,360 blocks after the death of S in 1984, she found them missing;

whereupon she and her mother called on S's family to demand the return of the blocks, but the family refused.

B tendered in evidence exhibit A, which unambiguously stated that S had sold 7,000 cement blocks belonging to him to K; as well as exhibit B, a power of attorney from K to B, authorising her to institute the action.

Birch v. Asempa Although exhibit A unambiguously

stated that S had sold the blocks to only K

and exhibit B not only clearly indicated that the 7,000 blocks belonged to K alone, but further clearly directed B, inter alia, to institute action against those who had stolen the blocks,

B explained in respect of exhibit A that although she had jointly purchased the 7,000 blocks with K, S decided to issue the receipt in the name of K only.

Birch v. Asempa B's claim that she owned the subject blocks

jointly with K was supported by her mother who was not present at the purchase of the

cement blocks but testified that her two children had later

informed her that they had bought the blocks.

In their defence, the defendants testified that when B and her mother called on their family for the return of the blocks, the family had doubts regarding the veracity

of their claim and on examining exhibit A they found

nothing on the receipt to substantiate B's claim,

but nevertheless offered her an ex gratia payment of ¢26,000 on account of the cordial relationship that had existed between B and S in his lifetime.

B however refused the offer.

Birch v. Asempa At the conclusion of the evidence on both

sides, counsel for the defendants raised two fundamental objections to B's action:

(a) that the 7,000 blocks were purchased by K alone and not by K and B so that B had no capacity to maintain the action on her own behalf and on behalf of K; and

(b) since B's claim was founded in detinue,

she could only succeed if she could establish that she had made a demand from the defendants as personal representatives of S and yet they had refused to give up possession of the remaining blocks.

Birch v. Asempa

Counsel for B however maintained in reply that B's action was founded on breach of contract in the sense that the defendants as personal representatives of S had by their conduct breached the contract for the sale of the 7,000 blocks.

Birch v. Asempa The trial court, inter alia, found that:

(i) although B had made a demand on S's family for the return of the remaining blocks, at no time had B made such a demand on the defendants qua personal representatives of S;

(ii) although B had averred in paragraph (5) of her statement of claim that the blocks in dispute were collected by one N who claimed that he had purchased them, there was no evidence in respect of the person who had sold the blocks to N; and

Birch v. Asempa (iii) the 7,000 cement blocks were

bought by K and that he owned the blocks alone, and not jointly with B.

After raising, on its own motion, the issues of:

(i) whether K by leaving the cement blocks at the premises of S after the purchase thereby imposed on him the duties of a bailee; and

(ii) the propriety of amending the title of B's case to read that B had sued as the representative of K.

Birch v. Asempa The court held:

(1) under section 8(2) of the Sale of Goods Act, 1962 (Act 137) the fundamental obligation of the vendor under a contract for the sale of goods was to

deliver them to the purchaser when they were paid for, and

the purchaser was also obliged under section 21 of Act 137 to accept delivery of the goods.

Unless a contrary intention appeared in the contract, the place of delivery was the vendor's place of business or his residence as provided under section 19 of Act 137.

Birch v. Asempa In the instant case, the contract of sale of

the 7,000 blocks was negotiated and concluded when

the purchaser tendered the full purchase price to S who received same, gave a receipt to the purchasers and

delivered the 7,000 blocks which were at his premises to the purchasers.

The property in the goods together with the risks in them then passed onto the purchasers with the consequence that the entire or part of the blocks which were left at the premises of S were on account of sections 26(2) and 27(1) of Act 137 left there at the purchaser's own risk.

Birch v. Asempa Hence, it was clearly untenable to talk of

breach of contract by S or his personal representatives in the circumstances.

Furthermore, even if it was assumed that the defendants were in breach of a contract for the sale of the 7,000 blocks,

the legal remedies of the purchaser lay not in an action for the return of the blocks or their value

but for any of the remedies set out in sections 48-58 of Part VI of Act 137, which included

damages for non-delivery and a recovery of the purchase price.

Thus, in so far as the plaintiff claimed for a return of the cement blocks or their current value, her action could not be said to lie in a breach of the contract of the sale.

Birch v. Asempa (2) The law distinguished three categories

of bailees, namely a bailee for reward,

a gratuitous bailee and

an involuntary bailee.

In the cases of bailment for reward and gratuitous bailment it was the duty of the bailee to take all reasonable precautions for the safety of the goods bailed to him.

There must however be positive evidence that the one concerned was a gratuitous bailee or a bailee for reward.

Birch v. Asempa On the other hand, an involuntary

bailee,

that is a person who through no act of his own and who without asking for them came into the possession of the property of another,

had no duty of care as imposed on the gratuitous bailee or bailee for reward.

The involuntary bailee was impliedly authorised to take reasonable steps to return the property

but he could not be held tortiously liable where he merely kept and lost a chattel even though the loss occurred through his negligence.

Birch v. Asempa In the instant case, there was no

evidence that after the purchase transaction S accepted to hold onto the blocks gratuitously or for reward.

If anything at all, S stood in the position of an involuntary bailee and as such he could not be sued in detinue;

therefore his personal representatives could likewise not be sued.

Birch v. Asempa (3) To succeed on a claim in detinue the plaintiff

must prove that he made a demand for the possession of the goods and the defendant wrongfully refused to deliver up possession.

Thus, where there was neither a demand nor a refusal, no action in detinue could lie.

On the evidence, the plaintiff made a demand for the possession of the 4,360 cement blocks on the family of S and

not on the defendants who were the personal representatives and who at the time did not even have letters of administration in respect of the estate.

The liability of the family was however not coterminous with that of the personal representatives.

Consequently, the plaintiff having failed to make any demand on the defendants as personal representatives, detinue could not lie.

SALE OF GOODS Thus, under Act 137, the seller’s fundamental

duty (which cannot be evaded by exemption clauses)

section 8(3)

is to deliver goods substantially in accordance with the description or sample.

Sections 11 and 12 take this duty further by imposing a condition on the seller that the goods will correspond exactly with the description or sample.

Unlike the fundamental obligation, this condition may be excluded by express agreement, and

moreover, it does not give the buyer a right of rejection where the breach is trivial only.

section 49(1)(b)

(Breach of sections 11 and 12 only entitles buyer to damages.)

SALE OF GOODS Under the Act, delivery is

concurrent with payment subject to agreement by the parties. sections 15(1) and 22

Seller bears the cost of and incidental to putting the goods in a deliverable state, unless otherwise agreed. s.17. Place of delivery is usually

seller’s place of business, if he has none, his residence.

s.19. Birch supra

SALE OF GOODS Section 18 of Act 137 provides

guidance on the legal methods of delivery that a seller may adopt. It includes transferring to the buyer

actual physical control over the goods, transferring to the buyer the means of

obtaining actual physical control over the goods, or

transferring documents of title to the goods to the buyer.

In certain instances, delivery of goods to buyer’s agent or to his order, or to a carrier for transmission to buyer is a delivery to buyer; and where goods are in the possession of a third party, they are delivered to buyer when the third party acknowledges to him that he holds the goods on his behalf.

See Sales of Goods Act, 1962 (Act 137), sections 18(2)-(4).

SALE OF GOODS Existence of Goods is an Implied

Condition Imposed on Seller Section 9 of Act 137 imposes an

implied condition on the seller in sale of specific goods that the goods are in existence at the time when the contract is made.

Section 9 focuses on specific goods

This is because sec. 5(2) permits sale of unascertained goods including “goods to be manufactured or grown or acquired by the seller after the making of the contract.”

Section 5(2)

SALE OF GOODS Right to Sell is an Implied

Warranty The right to sell the goods at the

time when the property in the goods is to pass is an implied warranty under Ghana law, not an implied condition. Section 10. Section 28(1) of Act 137 further applies

the nemo dat quod non habet rule to the sale of goods and as such, subject to statute,

a buyer acquires no better title than the seller had where the 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.

SALE OF GOODS Seller’s Duty to Supply Goods of Right

Quality and Fitness

Supplying Goods Corresponding to Description or Sample

Sections 11 and 12 of Act 137 impose a condition on the seller that the goods will correspond exactly with the description or sample.

section 11 (on contracts for the sale of goods by description) and section 12 (on contracts for the sale of goods by sample.).

This condition may be excluded by express agreement.

SALE OF GOODS Breach of sections 11 and 12 entitles buyer to

damages, if any. section 55

In the old Ghanaian case of Sackey v. Fattal, Ollennu J (as he then was) held that

“where a contract is breached by the delivery of goods below sample-quality, the quantum of damages is the difference in market price fetched by the goods delivered and the prevailing market price for goods of the sample quality”.

Breach of sections 11 and 12 does not give buyer a right of rejection where the breach is trivial only.

49(1)(b)

Rejection rights may be triggered under Sections 11 and 12 only where the seller also breaches section 13’s requirements on quality and fitness of goods sold for any particular purpose

SALE OF GOODS Supplying Goods Free from Defects Section 13(1)(a) implies a condition that the

goods are free from defects which are not declared or known to the buyer before or at the time the contract is made.

The seller cannot exclude this obligation where he deals in those particular goods in the ordinary course of his business.

section 13(2)

And a breach of this condition entitles buyer to reject the goods.

This condition is subject to some exceptions including where buyer has examined the goods or sample (in respect of defects which should have been revealed by the examination) and in cases where the seller was not and could not have been aware of the defects (in respect of goods not sold by the seller in the ordinary course of his business.)

13(1)(a)(i)-(iii).

SALE OF GOODS Supplying Goods of Reasonable Fitness for

Required Purpose There is an implied condition that the goods are

reasonably fit for the purpose for which they are required.

13(1)(b)

This condition is predicated on two contingencies: (1) the goods must be those which are supplied by the

seller in the course of his business, and (2) the buyer must have expressly or by necessary

implication made the purpose for which the goods are required known to the seller.

Buyer can reject the goods if this condition is breached.

Excluding this condition has been strictly limited, though not prohibited:

seller must bring the provisions of any such exclusion clause to the notice of buyer and

make its effect clear to him before any contract is made. section 13(2)

SALE OF GOODS In one case, the Amporisco Case, the court stated as

follows:

“Section 13(1)(b) does clearly talk of an implied condition that the goods are reasonably fit for the purpose for which they are supplied. The section did not explain what amounts to goods being reasonably fit for a purpose but I am of the opinion that it means the machines may not be completely or exactly fit for the purpose. Where a few fittings could be made to it in order to make them work, the condition is satisfied for they are reasonably fit for the intended purpose.”

In the case of Yirenkyi v. Tormekpe, involving the sale of a second-hand vehicle, it was emphasized by the court that even if a vehicle was bought from a dealer, the most that was required of the seller was that the car sold should be reasonably fit for the purpose of being driven along the road.

As Rockson v. Armah noted, a second-hand car must be taken as it is and not elevated into a new car with all expectations of factory freshness.

Generally, Section 13 applies to all goods delivered in purported pursuance of the contract and extends to all boxes, tins, bottles or other containers in which the goods are contained.

SALE OF GOODS Seller’s Duty to Supply

Goods of Right Quantity Where the seller delivers to

the buyer a quantity of goods less than he contracted to sell, the buyer may reject them.

But if he accepts the goods, he must pay for them at the contract rate. section 14(1)

SALE OF GOODS In cases where the seller

delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer may not reject all the

goods by reason only of the excess in quantity.

He may accept all the goods (paying for the extra goods at the contract rate) or

he may accept the goods which should have been delivered and reject the remainder

(in which case the buyer may recover damages from the seller for the cost of separating the goods which should have been delivered from the remainder.)

SALE OF GOODS Duties of the Buyer Paying Price & Accepting

Delivery are Buyer’s Fundamental Obligations

The buyer has two fundamental obligations in a contract of sale, namely; (1) to pay the price and (2) accept delivery of the goods.

Payment is concurrent with delivery unless the parties agree otherwise.

section 22

SALE OF GOODS Unless otherwise agreed, stipulations as to

the time of payment or for accepting delivery are warranties and not conditions of a contract of sale.

section 23 This may be contrasted with section 16(2)

which makes stipulations as to the time of delivery conditions binding the seller.

A buyer is not bound to accept delivery of the goods by instalments, unless the parties agree to do so.

section 24

“caveat venditor” rather than one of caveat emptor. section 13

SALE OF GOODS 1.5. Transfer of Property and Risk

Transfer of Property in Goods

Generally, the property in goods under a contract of sale passes when the parties intend it to pass,

But

in the absence of a contrary intention, property passes when the goods are delivered to the buyer.

section 26(1)&(2); see Birch v. Asempa

However, unascertained goods must be ascertained before the property in the goods can be transferred to the buyer.

section 25

SALE OF GOODS Transfer of Risk in Goods

The question of risk usually arises where the goods which form the subject matter of the sale are lost, damaged or destroyed and it is necessary to decide which of the parties must bear the loss.

Risk in goods under a contract of sale is transferred to the buyer when the parties intend it to be transferred,

But

in the absence of any contrary intention, the goods are at the seller’s risk till property in them is transferred to the buyer, in which case risk passes at the same time as property.

Section 27(1)&(2); Birch v. Asempa

SALE OF GOODS The rule on transfer of risk is subject to a

number of exceptions including:

(1) Delays Where the party at fault must bear the risk of

any loss, damage or deterioration which might not have occurred but for such delay.

Section 27(3)

(2) Bailment Where a party in possession of the goods – be

it seller still in possession after property has passed or buyer in possession before property passes – is deemed a bailee and expected to exercise reasonable care over the goods, failing which he will bear the risk of any loss, damage or deterioration caused to the goods by his fault.

Section 27(4). Birch v Asempa

SALE OF GOODS Transfer of Property by

Non-Owner Nemo dat quod non habet, Estoppel,

Disposition under voidable title, Disposition by mercantile agent in

possession, Disposition by seller in possession,

and Disposition by buyer in possession.

Sections 28-32

SALE OF GOODS In all the transfer by non-owner

cases listed above, the disposition will be valid if the transferee takes in good faith and for value without notice of the defect in title of the transferor. [BPFVWN].

However, with regards to the sale of motor vehicles, the Act provides that licensing constitutes notice of ownership or interest of the person in whose name it is so licensed;

Section 33(1); Seidu v. Agricultural Development Bank

[1992] 1 GLR 536

SALE OF GOODS Remedies

Remedies Available to Seller

A seller has two kinds of rights when a buyer defaults in his obligation to accept and pay for the goods:

(1) Real rights (lien, stoppage in transit, resale, and recovery of

possession)

And

(2) Personal rights (action or suit for the price, and damages for non-

acceptance).

sections 34-48

SALE OF GOODS Remedies Available to Buyer Real rights

Rejection of goods and refusal to pay the price

lien rights (where a buyer has paid the price or any part thereof he may retain possession (of the goods he has rejected) until the seller repays or tenders the amount(s) he has received from the buyer.)

sections 49-52

The rejection right is usually triggered in cases where:

(1) the seller is guilty of a breach of a fundamental obligation,

(2) the seller is guilty of a breach, not being of a trivial nature, of a condition of the contract and

(3) the buyer entered into the contract as a result of fraudulent or innocent misrepresentation on the part of the seller.

SALE OF GOODS Personal rights:

Damages for non-delivery (including non-delivery resulting from rightful rejection of delivered goods),

Damages for breach of warranty or condition,

Recovery of amounts paid by buyer from seller, and

Specific performance to compel seller to deliver goods.

section 49 - 58

THANK YOU

ANY QUESTIONS