COMMERCIAL LAW 1
2012/2013 ACADEMIC YEAR
LECTURE-SALE OF GOODS
UGBS, 12th OCT 2012
Rowland Atta-Kesson Esq.
TUTORIAL
• On 1st December Soaka Computer School, a newly
opened computer training school ordered from
Aganogyiri Computer Ltd 24 IBM Computers at $1500
each delivery to be made on 15th December.
• On 3rd December, the Managing Director of Aganogyiri
Computers Ltd telephoned Mr. Abrakada a purchasing
officer of Soaka Computer School to come and inspect
the computers which he said were in bonded
warehouse in Tema.
• On arrival at the warehouse, Mr. Abrakada found that
the warehouse was locked and there was nobody
there to grant him access to the computers at all. He
however proceeded to confirm the order the following
day. On 18th December Aganogyiri Computers Ltd
delivered 22 IBM Computers and 6 Dell Computers to
Soaka Computer School.
• Upon examination of the computers, Soaka
Computer School found that 4 of the IBM
computers had faulty disk drives rendering
them unusable. Soaka Computer School
immediately sent a fax to Aganogyiri
Computers Ltd registering their
dissatisfaction and stating their intention to
reject the computers outright.
• Aganogyiri Computers Ltd has recovered the
computers, promising to replace the faulty
ones immediately.
• However, Soaka Computer School refused to
accept any tender of re-delivery by
Aganogyiri Computers Ltd, threatening to sue
them for the loss caused to them.
• Soaka Computer School claims that the breach by
Aganogyiri Computers Ltd has resulted in the loss
of revenue Gh¢2000.00 being the fees which
could have been paid by 4 students who could not
be registered on time.
• After much effort Soaka Computer School was
able to purchase the 24 IBM Computers on a local
market on 22nd December at $2000 each. The
price of one IBM on the local market on 15th
December was $1500, $1,600 on 18th December
and $2000 on 22nd December. Soaka Computer
School is determined to sue Aganogyiri
Computers Ltd for all the loses they have incurred.
Advise them.
OUTLINE
• Nature and Formation of a Contract for the Sale of
Goods
• Kinds of Obligations Created by the Sale of Goods
Act, 1962 (Act 137)
• Duties of the Seller under the Contract for the Sale of
Goods
• Delivery of the Goods by Seller
• Duties of the Buyer
• Transfer of Property and Risk in the Goods
• Transfer of Property by a Non-Owner
• Remedies of the Seller
• Remedies of the Buyer
INTRODUCTION
• The law on the contract for the Sale of Goods is a
branch of Commercial Law which is generally
concerned with the rights and duties arising from the
supply of goods by way of trade.
• In this course we will be concerned mainly with the legal
principles and statutory provisions which govern
contracts for the sale of goods or movable property in
Ghana.
• This area of the law is governed for the most part by
statute.
• The law or statute regulating this area of commercial
law is THE SALE OF GOODS ACT OF GHANA, 1962,
(ACT 137)
• This statute codifies and consolidates the law on the
Sale of Goods and so everything in the course outlined
from number 2 to 10 can be found in the Act.
SCOPE
• Section 78 – Act applies to every contract
for the sale of goods made after its
commencement, i.e., 1962.
• Section 79 – this Act applies to contracts
entered into on behalf of the Republic of
Ghana by the Government.
• Section 80 – Act is a primary source.
Secondary sources include Common law
and customary law e.g. age, postal rule.
FORMATION OF SALE
CONTRACT
• Section 1(1)
– A contract of sale of goods is a contract by which the
seller agrees to transfer the property in the goods to
the buyer for a consideration called the price,
consisting wholly or partly of money
• Essential elements of a contract for the sale of
goods:
–
–
–
–
–
Contract
Seller and buyer
The subject matter of the sale
Transfer of the property in goods
Consideration – price
• SELLER AND BUYER
• In every contract for the sale of goods
there must be two persons present– the buyer and the seller.
• A seller is one who sells or agrees to sell
goods.
– “agreement to sell” has the same meaning as
“sale”;
– “sale” means a contract of sale of goods;
• A buyer is one who buys or agrees to buy
goods
• THE SUBJECT MATTER OF THE SALE
• Goods are defined in Section 81
– “goods” includes movable property and growing crops
or plants and any other things attached to or forming
part of the land which are agreed to be severed before
sale by or under the contract of sale
• This means goods include all things which are at once
tangible, movable and visible and of which possession can be
taken.
• It also includes things attached to land, which have been
agreed to be severed or detached from the land under the
contract.
• E.g. of goods - animals, household utensils, cars, jewels, corn,
garments and everything else than can properly be put in
motion and transferred from place to place
• Distinction from other things - choses in action or
things in action-goods, which cannot be physically
possessed or intangible form of property.
– E.g. intellectual property - patent, copyright, shares etc
Classification of goods
• Goods, which form the subject matter of a sale,
are classified into 2 groups.
– Specific goods
– Unascertained goods
• Specific goods
– Goods, which by a process of identification and
agreement of the parties are designated as the
unique goods, which are to be delivered by the
seller in performance of his obligations.
– The goods are specific goods if the parties have by
a process of identification and agreement effectively
distinguished or set aside the particular goods,
which form the subject matter of the contract of sale.
• Unascertained goods
– Ascertained goods are goods identified and
agreed on after a contract of sale is made;
– In other words, unascertained goods, which are
not identified and agreed upon before or at the
time of the contract of sale.
– Unascertained goods are sold by sample or
description
– E.g. Goods which are not yet in existence at the
time the contract of sale is made
– E.g. goods which are yet to be manufactured
– E.g. goods which are yet to be grown
– E.g. goods which are yet to be acquired
– E.g. goods, which are an identified portion of a
bulk of goods. (100 bags of a stock of 1000)
• TRANSFER OF THE PROPERTY IN
GOODS
• Section 81
– “property” means the general property in the
goods and not merely a special property
• Transfer of property in the goods and not just
transferring the goods.
• There must be a transfer of the legal title or
the absolute right of ownership from the
seller to the buyer
• Property in the goods is different from having
possession
• CONSIDERATION – PRICE
• Consideration in a sale of goods must consist
either wholly or partly in money or cash.
• If consideration consists wholly in something
other than money then the transaction is a
barter sale or contract of exchange.
• When consideration consists partly in money
and partly in goods, there must be evidence
that the part of the price consisting of money
is an integral part of the price and not merely
added on for the sake of appearance.
OTHER ISSUES• Sale of goods may be conditional or absolute
contracts
• Section 1(4) of the Sale of Goods Act states
that a contract for the sale of goods may be
absolute or conditional
– Absolute – if the contract is intended to come into
effect immediately, i.e., where the coming into
force of the contract is not dependent on any
condition.
– Conditional – if the contract is intended to come
into effect only upon the fulfillment of a specified
condition or contingency.
• Capacity to enter into a contract of sale
– According to section 2(1) of the Act capacity to buy and sell is
regulated by the general law on capacity to contract.
– In other words, any one who under the general contract law can
enter into a contract may enter into a contract for the sale of
good.
– The general principles on the immunity of infants from suit
therefore apply.
– The exception in the case of “necessaries” is reproduced in
section 2(2) of the Act to the effect that the buyer shall be bound
to pay a reasonable price where necessaries are delivered to an
infant.
– The question however is if the infant has no money then what?
• Form of a contract for the sale of goods
– According to section 3 a contract for the sale of goods may be;
•
•
•
•
Writing
Oral
Partly writing, partly by word of mouth
Inferred from the conduct of the parties.
• Auction sales:
– An auction notice advertising sale is merely a
statement of an intention to treat and in the
absence of fraud an intending purchaser has
no right to sue if the auction is cancelled or
the items withdrawn. HARRIS v. NICKERSON
– Where the goods are sold in lots, each lot put
up at the auction sale constitute the subject
matter of a separate contract of sale. The
authority for this is Section 4(1)(a) of the
SALE OF GOODS ACT, 1962 (ACT 137)
– The auctioneer by putting up the goods and
inviting bids makes an invitation to treat and
not an offer. At the auction sale each bid
submitted constitute an offer which the
auctioneer may or may not accept. The
authority for this point is PAYNE v. CAVE
– The contract of sale is complete when the
auctioneer announces his acceptance by the
fall of the hammer or in any other customary
manner. Section 4(1)(b) of ACT 137
– At any time before the auctioneer announces
his acceptance, the bidder is entitled to
withdraw or revoke his bid. Section 4(1)(c) of
ACT 137
• There are two kinds of auction sale;
• (i) auction sale subject to reserve price and
• (ii) auction sale without a reserve price
• Auction sale with reserved price;
• the vendor/seller or his agent is allowed to bid once
only and openly at the beginning of the auction before
any other bid is made. Section 4(1)(f) of ACT 137.
• It has been held in MCMANUS v. FORTESCUE that
the auctioneer in an action sale subject to a reserve
price is not bound to sell the goods to the highest
‘bona fide’ bidder if his bid is below the notified
reserved price and this is so even if the auctioneer
accidentally knocks down the goods to him.
• Section 17(7) of the AUCTION SALES LAW, 1989
(PNDCL230) is the Ghanaian authority on this point.
– Auction sale without a reserve price
• Where there is no minimum price the law
presumes that the seller is prepared to sell
the goods to the person who submits the
highest bid no matter what that price may
be.
• The general principle is that the highest
‘bona fide’ bidder is entitled to buy the
goods at the price bid even if the
auctioneer refuses to accept his bid or
complete sale. Section 4(1)(d) of ACT 137.
• Neither the seller nor his agent can bid at
the auction sale. WARLOW v. HARRISON
• Determination of the price of goods
– Where the price is stated in the contract then that will
be the price payable by the buyer for the goods.
– Secondly where the parties agree in their contract on
the manner in which the price is to be determined
such provision will be binding on both parties.
– Thirdly, where there is an established course of
dealing between the parties, the price which applied
in their previous dealings will be used if the parties did
not indicate the price in a particular transaction. [see
section 6(1)]
– Section 6(2) provides that where the price of the
goods cannot be determined by any of the methods
prescribed in section 6(1) the buyer will be required to
pay a reasonable price for them.
– What is reasonable price will depend on the particular
circumstances or facts of each case.
• Price to be Fixed by Valuation of Third Party
– Generally the parties are free to agree on the
manner in which the price of the goods is to be
determined. One possible manner may be by the
valuation of a third party. Where the parties agree
that the price be fixed or determined by valuation
of a third party and the third party does not or
cannot make the valuation, the entire agreement
would thereby be avoided. However if the third
party is prevented from making valuation by the
fault of the seller or the buyer, the party not at
fault may bring an action against the party at fault
for damages. [NB. This would be a breach of
implied promise not to prevent the valuation]
TYPES OF OBLIGATIONS
• Fundamental obligation
• Condition
• Warranty
• Fundamental Obligations; [see section 8]
• The seller has two fundamental obligations:
– In a sale of specific goods the fundamental obligation
of the seller is to deliver those goods to the buyer.
– In a sale of unascertained goods the fundamental
obligation of the seller is to deliver to the buyer goods
substantially corresponding to the description or
sample by which they were sold.
• Section 49(1)(a) provides that where the seller is
in breach of a fundamental obligation the buyer is
entitled to:
– Reject the goods and to refuse to pay the price, or if
he has already paid, to recover it and;
– To sue for damages for the breach under section 53
of the Act.
• Conditions
• Section 49(1)(b) also provides that where the seller is
in breach of a condition, the remedy of the buyer
depends on the consequence of the breach, which has
occurred.
• Where the breach is of a serious nature, the buyer is
entitled to:
– Reject the goods delivered and refuse to pay the price or if
he has already paid is entitled to recover it and
– Sue for damages for non-delivery.
• Where the breach is of a trivial or non-serious nature
the buyer is entitled to sue for damages but is not
entitled to reject the goods or refuse to pay the price
• The breach of a condition of a contract will be
considered to be trivial if it does not affect the
substance or core of the contract, or is very easily
remedial, or causes minimal damage to the buyer’s
interests under the contract.
• Warranties
• Where the seller is in breach of a warranty
the buyer is only entitled to sue for damages
• The buyer cannot reject the goods or refuse
to pay for them where there is a breach of
warranty.
• This breach does not go to the root of the
contract thus the buyer cannot rescind.
• The Ghanaian approach seeks to mitigate
the harsh English approach stated in ARCOS
v. RONAASEN which entitles the buyer to
reject for the slightest breach of a condition.
SELLER’S FUNDAMENTAL
OBLIGATION
• The first duty of the seller in a contract for the sale of goods is
classified as fundamental obligation and is stated in section 8(1) as
follows;
• In a contract for the sale of specific goods the fundamental obligation
of the seller is to deliver those goods to the buyer.
• This duty arises only in the case of a contract for the sale of “specific
goods” and can be stated as follows;
• Where the contract is for the sale of goods which were identified and
agreed upon before or at the time of the contract of sale the seller’s
duty is to deliver those specific and particular goods which were
identified and agreed upon.
• It should be noted that this duty is classified as a fundamental
obligation which means that if the seller does not deliver the specific
goods to the buyer then the buyer is entitled to:
– Reject the goods and refuse to pay the price and
– To sue for damages for non-delivery under section 53 of the Act.
• This duty of the seller, being a fundamental obligation cannot be
excluded by an exclusion clause no matter how widely drawn. [see
section 8(3)]
• Where the goods involved in the contract of sale are
unascertained goods the duty of the seller is to deliver the goods,
which substantially correspond to the description or sample by
which they were sold.
• Whether the goods correspond generally with the description or
sample will depend on the goods in question.
• Generally however the rule is that they should correspond in
such a way that any deviation should be trivial, Negligible,
inconsequential or insignificant.
• In the case of lack of correspondence with the description the
courts will consider the following:
– Purpose for which goods are required
– Whether deviation can easily be remedied or corrected and
– At what cost can it be remedied
• Read Sections 8, 11 and 12
• If the seller does not deliver the specific goods then the buyer is
entitled to:
– Reject the goods and refuse to pay the price and
– To sue for damages for the breach
SELLER’S DUTY AS TO
EXISTENCE OF GOODS
• In a contract for the sale of specific goods
it is the duty of the seller to ensure that the
goods are in existence at the time when
the contract is made.
• This duty is an implied condition.
• The seller must ensure here that goods
are in fact in existence at the time of the
contract of sale is actually concluded.
SELLER’S DUTY AS TO TITLE
• The seller must have the legal right or
power to transfer the absolute legal
interest in the goods to the buyer.
• To do this the seller must himself have full
title to the goods or have authority to
transfer such title.
• The seller will be in breach of this duty
(implied warranty) if he has no title to the
goods thus can be sued for damages.
SELLER’S DUTY AS TO
QUALITY
• The seller has a duty to deliver the right
quality of goods [see section 13(1)]
• Whether the goods are sold by the seller
in the ordinary course of his business or
not there is an implied condition that in
every contract of sale the goods are free
from defects which are not declared or
known to the buyer before or at the time
when the contract is made
• The seller is liable for any defects in the
goods unless such defects were known or
declared to the buyer by the seller before or
at the time of the contract of sale
• The seller is bound by this duty whether or
not he knew of the defects except in certain
exceptional cases
• Under these exceptional cases the seller is
under no duty to ensure that the goods are
free from undeclared defects and if the goods
turn out to be defective the seller is not liable
for any breach
Exception to seller’s duty as to
quality
• Where the buyer has examined the goods
and the examination should have revealed
the defects, that is, obvious defects, the
implied condition does not arise at all and
the seller is not liable for any breach in
respect of those defects
• For the exception to apply two conditions
must be fulfilled:
1. The buyer must have examined the goods
– The buyer is deemed to have examined the
goods where the seller gives him access to the
goods and a full opportunity to inspect or examine
them.
– Once the buyer has been afforded this
opportunity to inspect or examine them even if he
performs an incomplete or haphazard
examination or if he fails to examine the goods at
all.
• Thornett v. Beers & Sons Ltd
2. The defects should be such that they should
have been revealed by the examination, that
is, there must be obvious defects and not
latent defects.
– Not only must it be shown that the buyer
examined the goods but also that the defects in
the goods were such that they will have been
revealed to the buyer upon examination.
– If the defects were latent or hidden such that no
amount of examination would have revealed them
the exception cannot be invoked and the seller
would be liable for the breach. E.g. contract for
beer. Inspection will not reveal a chemical
dysfunction. Car- buyer cannot see that it had an
accident.
– This was illustrated in the case of Wren v. Holt
• Where the goods are sold by sample there is no
implied condition that the goods are free from
undisclosed defects, if the defects could have been
discovered by a reasonable examination of the
sample.
– The sample will represent the bulk that will be delivered
and so if the defects are obvious in the sample and the
buyer goes ahead to contract for the bulk there will be no
liability for the seller in respect of the defects in the goods.
– For this exception to be invoked the defects in question
must be such that they could have been discovered by a
reasonable examination of the sample.
– Simply put, “reasonable examination” refers to how an
average, reasonable buyer of the class to which he
belongs would have examined the goods. It follows
therefore that where the defects in the sample were latent
or hidden such that no reasonable examination would
have revealed them, this second exception cannot be
relied up, and seller would be liable for a breach of the
implied condition in section 13 (1)(a).
• Godley v. Perry
• The seller has a duty to deliver goods, which are fit,
for the purpose of which they were contracted for.
• Where the goods are of the kind normally supplied
by the seller in the ordinary course of his business
and the buyer expressly or impliedly makes known
to the seller the purpose for which the goods are
required, there is an implied condition that the
goods delivered are reasonably fit for the purpose
for which they are required
• For this to apply the following must be met:
– The seller must be a dealer in the goods
– The goods must be goods which the seller supplies in
the ordinary course of his business even if in a
particular instance they are sold in a special or unusual
form
• Spencer Trading Co. v. Devon
• The purpose must be known to the seller
– The buyer must have expressly or impliedly
informed the seller of the purpose for which he
required the goods.
– The purpose for which goods are required may
be stated expressly or may be conveyed to the
seller by implication.
– The courts have generally given a liberal
interpretation to this requirement.
– Hence, it has been held that there is no need to
state the purpose if there is a purpose for which
anyone would ordinarily require the goods. E.g.
under pants, hot water bottle.
• Grant v Australian Knitting Mills
• Where the goods have only one normal purpose it
will be assumed that the seller knew that the
goods were required for that purpose
– Priest v. Last
• But where the buyer intends to use the goods for
an uncommon purpose or where special or
peculiar circumstances exist with respect to the
buyer’s use of the goods, the implied condition
under section 13(1) (b) will apply only if the buyer
expressly informed the seller of the special
circumstances or the uncommon use.
– Ingham v. Ames
• Where the goods are sold by the seller in the
ordinary course of his business, the seller cannot
exclude this duty unless its proved that before the
contract was made the exclusion clause was
brought to the notice of the buyer and its effect
made clear to him
• Section 13(3) states that implied warranties and
conditions as to the quality and fitness of the
goods may be annexed or added by usage of
trade. Generally where a transaction is connected
with a particular trade or business, the customs
and usages of that trade are considered to be part
of the background against which the parties
contracted. Such terms could be implied into the
contract on grounds of custom. Thus apart form
the provisions stated in section 13 with regard to
quality and fitness of the goods, any other
customs or usages relating to quality and fitness of
the goods, which apply in the particular trade or
business will also be enforced. [see section 76]
– Peter Darlington Partners v. Gosho
• According to section 13(5) the duties of
the seller as to the quality and fitness of
the goods apply not only to the goods
themselves but extends to the containers
such as boxes, tins, bottles in which the
goods are sold. This means that there is
an implied condition here that such
containers are free from undisclosed
defects and also that they are reasonably
fit for the purpose for which they are sold.
– Geddling v. Marsh
SELLER’S DUTY AS TO
QUANTITY
• The duty to deliver goods of right quantitysection 14
• Where the seller delivers a quantity of
goods less than the buyer contracted for
the buyer has two options:
– Reject the lesser quantity delivered
– Accept the quantity delivered
– Accept the quantity delivered and pay for
them at the contract price
• Where the seller delivers goods greater
than what was agreed upon:
– The buyer is not entitled to reject all the goods
delivered by reason only of the excess
– He may accept all the goods delivered and
pay for the extra goods at the contract price
– The buyer may accept only the quantity he
contracted for and reject the remainder
– The buyer here may recover from the seller
the cost if any of separating the goods which
should have been delivered from the
remainder
• Where the seller delivers in addition to the
contracted goods other goods with different
description.
• The buyer has the following options:
– He may accept all the goods delivered and pay
for the extra non-contract goods at a reasonable
price
– He will be entitled to reject all the goods delivered
if and only if the quantity of the contract goods
which the seller supplied is less than the quantity
specified in the contract
– He may accept only the goods contracted for and
reject the remainder. Here the buyer can recover
any cost incurred from separating the goods
contracted for and those not contracted for.
SELLER’S DUTY AS TO
DELIVERY OF GOODS
• Section 15 to 20 of the Act
• It’s the seller’s duty to deliver the goods in accordance with the
terms of the contract
• A seller must be ready and willing to give possession of the
goods to the buyer in exchange for the price and the buyer must
be ready and willing to pay the price in exchange for delivery
• If the seller is to avoid a breach of the delivery obligation he must
ensure that the goods conform to the specification of the
contract.
• Delivery is tendered at the time and in the manner prescribed in
the contract of sale
• Where the contract is silent on the manner of delivery section 15
– 20 will apply
• Section 81 definition of delivery
• Where the seller has transferred to the buyer control over the
goods without physical possession the Act will still recognize that
there’s delivery.
•
•
•
•
METHODS OF DELIVERY
Section 18
Section 81
Unless otherwise agreed the seller may deliver the goods to the
buyer in the following ways:
– Transferring to the buyer the actual physical control over the goods
– Transferring to the buyer the means of obtaining actual physical
control over the goods
– Transferring to the buyer the documents of title to the goods.
– See sect 81 for def of documents of title
– E.g. bill of lading, dock warrant, warehouse keepers certificate,
receipts
• Delivery of the goods by the seller to a carrier for onward
transmission to the buyer constitutes delivery to the buyer
• Delivery of the goods to the buyer’s agent or order constitutes
delivery of the goods
• Where the goods are in possession of a 3rd party delivery is
affected when the 3rd party acknowledges to the buyer that he
holds the goods for and on behalf of the buyer. If the 3rd party
refuses to make such an acknowledgement there’s no delivery
except where the doc of title have already been given to the
buyer.
• PLACE OF DELIVERY
• Section 19
• Unless the parties indicate otherwise the place of
delivery is the sellers place of business or his
residence
• If the contract is for specific goods which to the
knowledge of both parties is located at a place
different from the sellers place then that place is
the place of delivery
•
• TIME OF DELIVERY
• Section 15(2)
• Delivery must be made at a reasonable hour in
order to be treated as effectual
•
•
•
•
•
•
•
•
•
•
DATE OF DELIVERY
Section 16
Time of delivery are conditions of the contract
Where the seller fails to deliver the goods on the date stipulated in
the contract he is in breach of a condition of the contract and the
buyer will be entitled to reject the goods if the breach is of a serious
nature
Where no date is stated then delivery must be within a reasonable
time
Where both parties agree to postpone the date of delivery then both
parties will be bound to deliver and accept on that latter date
Where the parties agree to postpone the date of delivery without
substituting a new date for delivery the seller is under a duty to
deliver within a reasonable time.
Such reasonable time will be determined with particular reference to
the reasons for postponement
Where there’s delay the buyer upon reasonable notice can give the
seller a deadline as to when he will accept delivery
Where the seller simply contract to use his best endeavors to deliver
the goods on a particular date or before a given date the seller will
be bound to deliver the goods within a reasonable time after that
date
• OTHER DUTIES WITH REGARD TO DELIVERY
• Section 17
• Unless otherwise agreed the expenses of putting the goods
into a deliverable state must be borne by the seller
• Section 81(3) defines deliverable state
• Section 20(1) is an implied condition. The seller must take
such a contract on behalf of the buyer as is reasonable when
the goods are to be sent by a carrier
• The contract with the carrier should ensure that there will be:
– Safe delivery of the goods to the buyer
– Adequate compensation to the buyer in the event of loss or
destruction of the goods in transit
– Where the goods are to be sent by air or sea transit to the buyer
and it’s the buyer’s responsibility to insure the goods during
transit, the seller is under a duty to give the buyer such
reasonable notice as will enable the buyer to effect the
insurance of the goods
– When the seller does not give notice then it will be the seller’s
risk during transit
– This duty arises only when it’s the buyer’s responsibility to insure
the goods