Sale of Goods Notes

THE LAW OF SALE OF GOODS
Law Applicable: The Contract Act Cap 73 Sale Of Goods Act Cap 82
Common Law Case Law
The law relating to sale of goods is principally governed by the Sale of Goods Act
(SOGA), Cap 82. The general principles that relate to contracts e.g. offer, acceptance,
consideration, etc. apply to a contract of sale of goods and the parties are free to agree on the
terms which will govern their relationship. The SOGA however lays down certain terms intended
to protect a party to the contract as well as rules of general application where the parties fail to
provide for contingencies which may interrupt the smooth performance of a contract of sale e.g.
destruction of things sold before delivery.
History and Origin of SOGA
The Uganda Sale of Goods Act has its roots in English law and is fashioned upon the English
Sale of Goods Act of 1893. Prior to the enactment of the 1893 English Act, sale of goods
transactions in England were regulated by common law and trade usage. In 1888 Sir Mackenzie
Chalmers was given the task of drafting the Sale of Goods Act and he did this by codifying the
scattered rules made by English courts.
The 1902 Order in Council introduced the Sale of Goods Act in Uganda and this appears to mean
that the problems earlier existing in trade relations would be resolved there and then. However,
like any other law, the Sale of Goods Act has its own structural issues and shortcomings as
analysed below.
The Sale of Goods Act has a number of weaknesses. S.54 of the Act allows the parties to
negative or vary by express agreement or by trade usage any right, duty or liability arising under
a contract of sale by implication of law. This makes the Act far from being comprehensive
because it subjects itself to the terms agreed by the parties or to the course of their dealings. S.54
permits parties to contract out of the Act. In practice, most vendors and suppliers make
consumers accept the exclusion or limitation of the protective provisions embodied in the Act
Also S. 4(1) provides that a contract of sale may be made in writing (either with or without seal)
or by word of mouth, or partly in writing and partly by word of mouth, or may be implied from
the conduct of the parties. This leaves some kind of uncertainty. Ascertainment of terms in the
contract is left open to argument, conjecture and endless source of conflicts because of this
provision. It‘s because of this provision that the otherwise good rules of evidence forming the
best evidence rule doctrine are rendered useless.
Furthermore under S.58 of the Act the rules of the common law, including the law merchant,
continue to apply except insofar as they are inconsistent with the express provisions of the Act.
Under this provision the common law rules relating principal and agent, and the effect of fraud,
misrepresentation, duress or coercion, mistake or other invalidating cause, continue to apply to
contracts for the sale of goods as long as they are consistent with the provisions of the Act. This
shows that the Act is not conclusive because it incorporates common law and trade usage. This
defeats the purpose of codification. The purpose of codification was to make the rules relating to
sale of goods certain, clear and consistent. This provision means that there are certain rules that
are applicable which are not in the Act, so why was it codified? .
MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

Also S.5 of the Act requires that a contract for the sale of goods of the value of two hundred
shillings or more has to be in writing if it is to be enforceable. In Adam v The Tanga Mombasa
transport Company (1955) 28 KLR 14 court held that a contract for the purchase of vehicle
without a memorandum in writing was unenforceable by suit. This provision is very limiting,
first because in Uganda today two hundred shillings does not buy anything of value. Secondly
most of the contracts for sale of goods in Uganda are not in writing. Therefore a consumer who
buys defective goods may fail to enforce the breach in a court of law because the contract of sale
was not in writing.
On application the Act allows for the application of common law and the law of merchant
together with the Act if consistent with it. S. 58 provides that the rules in bankruptcy relating to
contracts of sale shall continue to apply thereto, notwithstanding anything in the Act. By
preserving common law, rules of bankruptcy and law of merchant makes the Act inconclusive
with regard to the sale of goods transactions. This means that as long as the Act and common law
do not contradict both can be applied. But where the common law contradicts the Act, the
principle in the Act prevails.
It must be noted that the law of sale of goods is part of the general law of contract. Therefore the
rules of the general law of contract also apply to a contract for sale of goods. The Act does not
cover various rules governing a contract of sale of goods. Under S.3(1) the Act appeals to the
general law of contract in regulating capacity to contract and to transfer and acquire property.
However, the Act does not mention the essential elements of a contract. In this regard recourse is
made to the law of contract as offer, acceptance, consideration and intention to be legally bound.
This therefore shows that the Act is not comprehensive in its application, that‘s why common
law, rules relating to merchant law and the general law of contract continue to apply to a contract
for sale of goods in order to fill the lacunae created by the incomprehensiveness of the Act
At the centre of the Act is the notion of freedom to contract; the Act does not dictate the terms
of the contract for sale of goods. Parties are free to contract as freely as they wish. The Act gives
a lot of freedom to parties to contract according to their intentions. Under S.54, parties are free to
contract as they desire so that the Act only regulates issues that are not governed by the parties
contract. In addition all implied terms and rights can be changed by the parties‘ freedom to
contract. A classical example of this is S.11 which makes stipulations as to time of payment not
deemed to be of the essence of a contract of sale unless a different intention appears from the
terms of the contract and whether any other stipulation as to time is of the essence of the contract
or not depends on the terms of the contract. This means that the Act is subject to the parties‘
agreement. Most provision of the act begins with words like ―unless a different intention
appears‖
S.15 provides for implied terms in a contract of sale but goes ahead to provide under S.15(d) that
parties by their express agreement parties can exclude such implied terms. The sum effect of the
Act making freedom to Contract as its priority means that parties can contract out of the Act
thereby reducing its application to a secondary position.
The above structural issues could be as a result of the fact that the Sale of Goods Act was
adopted in Uganda based on the Sale of Goods Act of 1893. This English Act has received
numerous amendments in the UK including the Sale of goods Act 1979, The Unfair Contracts
Terms Act 1977. However, in Uganda the provisions remain unchanged.

On construction or interpretation of the Act.; the proper method of interpreting this statute
was laid down by Lord Herschell in Bank of England v Vagliano Brothers. 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.”
However, subsequent decisions have not strictly adhered to Lord Herschell‘s views. In Re Wait,
Lord Atkin stated that in constructing of this act, emphasis should be on the plain language and
don‘t dwell on the former cases. No need to look for other principles before the codification of
the Act. ;“the total sum of legal relations (meaning by the word „legal‟ existing at equity as well
as at common law) arising out of the contract for the sale of goods may be well regarded as
defined by the code. It would have been futile in a code intended for commercial men to have
created an elaborate structure of rules dealing with rights of law, if at the same time it was
intended to leave, subsisting with the legal rights into existence earlier than the rights so
carefully set out in the various sections of the code‟‟
However in his dissenting view in Ashington Piggeries Limited v Christopher Hill Limited, Lord
Diplock instead emphasized the intention of the parties in the construction of the Act. He stated
that ‗the provisions set out in the various sections and sub sections of the code ought not to be
construed so narrowly as to force upon parties to contracts for the sale of goods promises and
consequences different from what they must reasonably have intended.‖ To Lord Diplock
therefore freedom of contract supersedes the Act.
THE SUBJECT MATTER OF THE CONTRACT OF SALE

Section 6, 7 and 8 of the S.O.G Act Cap 82 relate to the subject matter of the contract of sale.
The subject matter of a contract of sale are goods.
Definition of Goods
S.1(1)(h) ―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 the contract of sale.
Personal chattels include things in possession. These are tangible things which one can move
while things in action are sometimes called choses in action. These are intangible things such as
copyrights, shares etc. The law does not deal with things in action but rather things in possession.
The section includes things such as animals, human remains, tissues of organs eg hearts or
kidney and other bodily products such as blood.
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.

With regard to money, the section doesn‘t seem to regard money as a good but the courts of law
have decided otherwise as in Moss v Hancock. In this case there was a 50 pound gold piece, coin
of the realm that had been stolen and sold by the thief to a dealer in curiosities. The question was
whether the defendant had received the coin as money or currency or as an article valuable in
itself? It was held that the coin was the subject of the sale as a medal might have been to a dealer
in old curious things. The coin had been dealt with as if it were a medal or ancient coin or other
curiosity and was of more than its nominal value and it could be recovered by the owner.
Emblements covers crops and vegetables produced by the labour of man and ordinarily bringing
a profit to him which is distinct from things which grow on their own.
Things attached to land. If things are attached to or form part of the land and parties have agreed
to severe them before sale or under the contract of sale such things qualify to be goods and vice
versa. In Morgan v Russel the vendor was the lessee of certain land which was composed of
slag and cinders. He then sold the purchasers all the slag on his premises so much as the
purchasers should desire to remove. It was held that the sale of cinders and slag was not a sale of
goods but a sale of an interest in land. The vendor did not sell any definite quantity of mineral
which could be said to be a separate thing
Classification of goods
It must be emphasized that the subject matter of a contract of sale are goods. Goods are defined
in Sec 1(1) h to goods 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
The Act goes ahead to classify goods under section 6(1) by providing that the goods which form
the subject of a contract of sale may be either existing goods, owned or possessed by the seller,
or goods to be manufactured or acquired by the seller after the making of the contract of sale, in
this Act called ―future goods‖. This therefore means that the subject matter of the contract may
be either existing or future goods.
Existing goods are those which exist and are owned by the seller at the time the contract is
made. Existing goods are sometimes called specific or unascertained. S.1(1)(n) specific goods‖
means goods identified and agreed upon at the time a contract of sale is made. The Act does not
define ascertained goods but we rely on case law to understand this. In Re Wait, Lord Atkin
stated that ascertained goods are goods that have been identified. This means therefore that
ascertained goods refer to specific goods.
Future goods are those which do not exist or which the seller does not own when he contracts to
sell them. S.1(1)(g) defines existing goods to mean goods to be manufactured or acquired by
the seller after the making of the contract of sale.

The act also provides for contingent goods. These are goods the acquisition of which by the
seller depends upon an uncertain contingency. S.6(2) provides that there may be a contract for
the sale of goods, the acquisition of which by the seller depends upon a contingency which may
or may not happen.
Goods are defined in Sec 1(1) h. Under section 6(1) S.O.G A, the subject matter of the contract
may be either existing or future goods. These may be specific, ascertained or unascertained
goods.
1. Existing Goods
These are goods, which are physically in existence and which are in the seller‘s ownership and/or
possession at the time of entering into/making the contract of sale. They can be seen and
touched by the buyer. Where the seller is in possession of such goods as an agent, he has a right
to sell them. Existing goods may again be either ―specific‖ or ―ascertained‖ goods.
2. Specific Goods/Ascertained goods
Specific Goods in Sec 1(1) (n) are the goods, which are identified and agreed upon at the time
the contract of sale is made. In a sale of such goods, property does not pass until the goods are
ascertained. In actual practice, the term-ascertained goods is used in the same as specific goods.
The Act does not define ascertained goods but we rely on case law to understand this. In Re
Wait, Lord Atkin stated that ascertained goods are goods that have been identified.
3. Future goods Are goods defined by description only.
Under sec (1)(g) S.O.G.A, they are goods to be manufactured or acquired by the seller after the
making of a contract of sale. Therefore these goods include those, which are not yet in existence,
and those, which though are in existence, have not yet been ascertained by the seller e.g. parties
may agree to buy whatever crop is produced from a particular field at a fixed price. Such crops
are future goods but not specific goods. (Goods that are to be acquired in the future)
4. Unascertained goods
These are goods that are not separately identified or ascertained at the time of making the
contract but include those goods to be manufactured or grown by the seller which are necessarily
future goods e.g. if one enters into a contract to buy 100 tonnes of sorghum growing on a field.
Such goods are not ascertained because they have not yet been acquired by the seller and
property will only pass to the buyer when the 100 tonnes of maize are harvested, separated from
the rest and specifically ear marked with the buyer‘s names and sent to him. Such goods are
indicated or defined only by description but have not yet been acquired by the seller.
5. Contingent goods:
These are goods the acquisition of which by the seller depends upon an uncertain contingency.
They are a type of future goods and therefore a contract for sale of contingent goods also
operates as an agreement of sell and not a sale as far as the passing of property to the buyer is
concerned. S.6(2) provides There may be a contract for the sale of goods, the acquisition of
which by the seller depends upon a contingency which may or may not happen. It should be
noted that a contract of sale of contingent goods is only enforceable if the event on the happening
of which the performance of the contract is dependent happens. Otherwise the contract becomes
void. E.g. Ssajjabi agrees to sell to Walakira a specific rare painting provided he is able to
purchase it from its present owner. This is a contract for the sale of contingent goods.
6. Perishable goods

Under sec 7 S.O.G A, where there is a contract for the sale of specific goods and the goods
perish without the knowledge of the seller, the contract is void. Section 8 of the Act states that
where there is an agreement to sell specific goods and subsequently the goods without any fault
on the part of the seller or buyer perish before the risk passes to the buyer, the agreement is
thereby avoided.
Assignment; identify the nature of the following goods

 100kg of maize to be harvested from Mbale farm;
 A second hand decoder to be bought by Adrian from Betty for purposes of
selling it to Catherine;
 A Samsung galaxy phone ordered from E-bay
 A packet of sugar from the shelf of Tuskys by a customer.
Scope of the Sale of Goods Contract

A contract of sale of goods is defined in Section 2(1) of the Sale of Goods Act as a contract
whereby a seller transfers or agrees to transfer the property in the goods to the buyer for a money
consideration called the price. So, where property in the goods is transferred from the seller to
the buyer, the contract constitutes a sale. Where the transfer of 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.
From the definition, the following are the essential characteristics of a contract of sale of goods.
Characteristics of a Contract of Sale

The essential characteristics of a contract of sale of goods are the following:
1. There must be two distinct parties to a contract of sale; i.e a buyer and a seller.
2. There must be a transfer of property. Property here means ownership of the goods. The
seller must own the property in the goods, i.e he must have title to the goods. The seller
must either transfer or agree to transfer the property in the goods to the buyer.
3. The subject matter of the contract of sale must be goods. Goods include all chattels other
than chooses in action and money, 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. It means every kind of moveable and immoveable property.
4. The consideration for a contract of sale must be money consideration called the price. If
the goods are sold or exchanged for other goods, the transaction is barter trade and not a
contract of sale of goods.
5. No formalities to be observed; There are no formalities prescribed under the SOGA to be
fulfilled, in order for a valid contract of sale to be concluded. The contract may be oral or
written or both or it may be implied from the circumstances
6. The term contract of sale includes both ―a sale” and “an agreement to sell‖.

Distinction between ―a sale‖ and ―an agreement to sell‖ Section 2(4) of the Sale of Goods Act
Cap 82 provides that 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‖. S.2(5) provides that 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. S.6(3) provides that Where by a contract of sale the seller purports to
effect a present sale of future goods, the contract operates as an agreement to sell the goods.
In Wamala Growers Co-operative Union v Attorney General, the commissioner for veterinary
services advertised the sale of imported Germany Fresian Heifers. The plaintiff applied for 31
heifers , selected them and paid 3.5 million. However, only 10 animals were delivered after a lot
of pestering. It was argued by the defendant that since the goods were not in existence (to be
imported) at the time of the contract, it was not a contract but merely an agreement to contract.
Court held that S.6(3) of the sale of Goods Act provides that where the seller purports to effect a
present sale of future goods, the contract operates only as an agreement to sell goods. However
in this case, the agent of the defendant accepted payment of the animals and allowed the plaintiff
to select from a herd of over 500 heifers. Therefore there was created an express contract which
was breached. The animals were already in the country at the time the offer was made to the
public through the media.
The following are the main points of distinction between a sale and an agreement to sell:
1. Transfer of property (ownership)
In a sale, the property in the goods passes to the buyer immediately at the time of
making/execution of the contract. In other words, a sale implies immediate conveyance of
property in the goods so that the seller stops/ceases to be the owner of the goods and the buyer
becomes the owner there of (becomes the owner of such goods) and the buyer acquires a “jus in
rem” i.e. a right to enjoy the goods against the whole world.
However in an agreement to sell, there is no transfer of property to the buyer at the time of
making/execution of the contract with the result that the parties acquire only a ―jus in personam”
i.e. a right to either the buyer or the seller against the other for any default in fulfilling his part of
the agreement. The conveyance of property will wait until the agreement becomes a sale either
by/after the expiry of a certain time or fulfilment of some condition.
2. Risk of Loss
The general rule is that unless otherwise agreed by the parties, the risk of loss prima facie passes
with property i.e. goods remain at the seller‘s risk until the property therein is transferred,
whereupon the goods are held at the buyer‘s risk. Therefore, in case of a sale, if the goods are
destroyed, the loss falls on the buyer even though the goods may never have come into his
possession. This is so because the property in the goods has already passed to the buyer. Thus
the general rule is: ―risk passes with property unless the parties intended otherwise‖.
On the other hand, in case of an agreement to sell, where the ownership in the goods is yet to
pass from the seller to the buyer, and when the goods are destroyed, such loss has to be borne by
the seller even though the goods are in the possession of the buyer. This is so because the
property in the goods was still with the seller.
3. Consequences of Breach In a sale,

If the buyer wrongfully neglects or refuses to pay the price for the goods, the seller can sue for
the price even though the goods are still in his possession.
In case of an agreement to sell, if the buyer fails to accept and pay for goods, the seller can only
sue for damages and not for the price even though the goods are in the possession of the buyer.
This is so because the property in the goods is still with the seller therefore he is still the owner
of the goods and cannot sue for the price.
4. Right of resale
In a sale, the property is with the buyer and as such the seller in possession of goods after a sale
cannot resale the goods. If he does so, the subsequent buyer having knowledge of the previous
sale does not acquire a good title to the goods. Because the person who sold to him the goods did
not have title to the goods which such buyer knew about. However, the right to recover the goods
from the third person is lost if the subsequent buyer had bought the goods bonafide [in good
faith] and without notice of the previous sale.
In an agreement to sell, the property in the goods remains with the seller and as such, he can
dispose of the goods as he wishes and the original buyer can only sue him for breach of contract
only and not claim for the goods since they still belonged to the seller who still had the property
in such goods. Under the circumstances, the subsequent buyer acquires a good title to the goods,
(irrespective) whether or not he had knowledge of the previous sale.
5. Insolvency of the buyer before he pays for the goods

In a sale, if the buyer is insolvent before he pays for the goods, the seller in the absence of the
right of possession must deliver the goods to the official receiver or assignee. The seller is
entitled to only the price of the goods. This is so because, since the property in the goods already
passed to the buyer, the goods belong to him and must therefore be handed over to the official
receiver. However in an agreement to sell, the seller may refuse to deliver the goods to the
official receiver or assignee as the property in the goods still rests with him (the seller).
6.Insolvency of seller before delivering the goods but after the buyer has already paid the
price;
In case of a ―sale‖, the buyer would, in the circumstances, be entitled to recover the goods from
the official receiver since the property in the goods rests with him. However, in case of ―an
agreement to sell‖, the buyer would only be able to claim as a creditor but he cannot claim the
goods because property in them still rests with the seller
THE PRICE
The money consideration for the sale of goods is known as the price. Price is an essential
element in every contract of sale of goods. That is, there cannot be a valid sale without a price.
The price should be paid or promised to be paid in legal tender (money form) unless the parties
agree otherwise. It may be paid in the form of a cheque, bank deposit, bank draft etc.
In actual sense, the mode of payment of the price does not matter much but the agreement to pay
a price in money that is required to constitute a valid contract of sale. If goods are exchanged
with other goods that transaction does not give rise to a sale of goods but instead is an exchange
for barter. However if the parties exchange goods and top up the consideration with some
money, then there is a contract for the sale of goods. Aldrige V Johnson, which involved a

contract for the exchange of 52 bullocks with 100 quarters of barley and the difference in value
was to be paid out in money. Court held that the transaction was a sale.
In Rowland V Divall (1923) Rowland purchased a car from Divall and used the car for several
months. Divall had no title to the car and therefore Rowland was compelled to return the car to
the true owner. Rowland sued Divall to recover back the price, which he had already paid. Held;
He was entitled to recover the whole of the price paid by him for the car despite the fact that he
had used the car for some months. The seller had no title and the buyer who had paid to become
the full owner of the car had therefore received nothing from him. That there was a complete
failure of consideration and the full purchase price was recoverable and the fact that the buyer
had enjoyed the use of the car for 4 months was not a benefit conferred by the seller under the
contract.
Under section 9(1) of the S.O.G Act, the price may be expressly fixed by the parties in the
contract sale or the contract may provide for the method in which the price is to be fixed. Where
the price is not stated in the contract and no provision is made for its determination, the buyer
must pay a reasonable price (Sec 9 (2). What is reasonable price is a question of fact, determined
upon the circumstances of a given case.
Distinction Between A Contract Of Sale And Other Kinds Of Contracts
Contract of Sale Vs a Contract for work and Materials:

A distinction has to be made between a contract of sale and a contract for work and materials.
However the difference between the two is very minute/minor.
For supply of labour and services includes a contract of supply of skill and labour as well as a
contract for the supply of raw materials. Such a contract does not fall within the provisions of the
Sale of Goods Act
The Sale of Goods Act Cap. 82 does not apply to contracts for work and materials. It is a
contract of sale even though some labour on the part of the seller of goods may be necessary.
E.g. in Love Vs Norman Wright (Builders Ltd) 1944 ALL ER 618 court held that an order for
making and fixing curtains in a house is a contract of sale of goods although it involves some
work and labour in fixing the same.
Contracts for supply of services are essentially comprised of a part of a contract of supply of skill
and labour The major distinction between the two lies in their legal effects; if the contract is a
sale of goods, the implied duties under the SOGA are incorporated in the contract and
these are duties of strict liability whereby the seller is made responsible for defects in the goods,
even in the absence of negligence. On the other hand, if the contract is for the supply of services,
then in so far as the services supplied are concerned, the supplier‘s duties are generally those of
due care only i.e. services must be carried out with reasonable care and skill. i.e. where one sells
a dress to another at 2 million shillings and contracts an advocate/a lawyer to draft a contract of
sale. The lawyer drafts the necessary documents for the seller, however, the seller refuses to pay
the lawyer. The lawyer brings an action based on a contract of sale of goods arguing that the
agreements/documents prepared for the seller is a good for which he must be paid a
consideration (the price).

In order to determine the nature of the contract one must ask the question, what is the substance
of a contract? If it is the production of something for the purposes of selling it, then it is a sale.
However, if the contract is that skill and labour have to be exercised and the production of the
good is only ancillary although some material would pass, the substance of the contract is the
skill and experience.
In Lee V Griffin, there was a contract to make a set of artificial teeth to fit the mouth of the
customer. It was held that it was a contract for sale of goods and not a contract for work, labour
and materials. Crompton J stated. ― I do not agree with the proposition that whenever skill is to
be exercised in carrying out the contract, that fact makes it a contract for work and labour, and
not for the sale of a chattel. In the present case the goods to be furnished, viz, the teeth, are the
principle subject matter and the case is nearer that of a tailor who measures for a garment and
afterwards supplies the articles fitted.‖
Where a person goes to a hospital and requests for a blood transfusion and the blood is sold to
him/her at a specific price, if that blood turns out to be defective and the person suffers as a
result, can she argue that there was a contract of sale of the blood so as to sue the hospital or
company that supplies?
In the Pelmutter case, (Perlmutter V Beth David Hospital (1955)123, N.E 2d.792;) the plaintiff
obtained a blood transfusion from the defendant hospital. Unfortunately, the blood was
contaminated with jaundice which according to expert evidence were not detectable by any
scientific tests at the time. The plaintiff suffered injury as a result of the contamination. The
plaintiff was a private paying patient and in the account rendered to him, he was charged a
separate account for the blood supplied. The plaintiff claimed that the blood had therefore been
sold to him and the defendants had been liable for the defects in the blood, which now
constituted goods.
Court held that the transaction was one of supply of services only and that the supply of the
blood was merely incidental to the said supply of services.
In Dodd V Wilson (1946)2 ALLER 691; The plaintiff contracted a surgeon to inoculate his cattle
using a serum. The vet had bought the vaccine from a supplier and he used the serum in
inoculating the plaintiff‘s cattle. An issue arose whether there was a contract of sale or simply of
supply of services and it was held that although this was not a contract of sale, the surgeon
impliedly warranted that the vaccine was fit for the purpose for which it was supplied to the
plaintiff. Hence, he was liable despite the fact that he was not himself guilty of any negligence
In Robinson v Graves; the plaintiff an artist was commissioned by the defendant to paint the
portrait of a lady and was promised 250 guineas thereof. The defendant subsequently repudiated
the contract before the portrait was completed. The plaintiff sued for the agreed price of the
portrait. It was held that the contract was one for work and labour and not for the sale of goods as
the substance of the contract was that skill and labour should be exercised upon the production of
the portrait and that it was only ancillary to that there would pass from the artist to his customer
some materials, viz, the paint and the canvas in addition to the skill and labour.
In j. Marcel Ltd v Tapper (1953)1 ALL ER 15 The defendant ordered from the plaintiff a mink
jacket for his wife. After inspecting several skins he chose a colour and selected a style for the
jacket. Court referring to the decisions in Lee v Griffin and Robinson v Graves, held that the
transaction was a sale. That a high degree of skill and craftsmanship goes into the making of a
jacket but it was no more than making an article for sale to the defendant on his special order.
The purpose of the transaction is the supply of the complete article and receipt of the price.

In Sultan Ltd v JB Morgan (1960)1 EA 434; the defendant took his car to the defendant‘s
garage for repair. They agreed 800/= but was later found that other materials would be necessary
costing 400/=extra. However, when the defendant came for his car he was asked by the plaintiff
to pay 2179/= for the value of goods sold and delivered and work done for the defendant. The
defendant found the vehicle unsatisfactory after alleged repairs done. HELD; The transaction
was a contract for hire of work and labour and the plaintiffs were to do the work required and fit
the necessary parts on the footing that if there was any defect in the materials supplied, the
repairers were liable due to poor workmanship or poor quality of goods supplied.
Contract of Sale Vs Barter
Under a contract of sale the consideration must be money. See sec 2(1) Sale of Goods Act
(herein after called SOGA). If the transaction takes another form e.g if goods are exchanged for
other goods or anything of value then it‘s a contract of barter or exchange. In such a case the Sale
of Gods Act wouldn‘t apply.
In Moss V Hancock (1899) 2 QB 318 court held that since barter is an exchange of goods for
foods and does not involve money, it is not a contract of sale.
However if the consideration is partly delivery of goods and payment of money as a balance then
that‘s a contract of sale. If the buyer fails to deliver the goods which constitute part of the price,
then the seller‘s proper remedy will be an action for the price which the goods represent but not
detinue. In Aldrige V Johnson, which involved a contract for the exchange of 52 bullocks with
100 quarters of barley and the difference in value was to be paid out in money. Court held that
the transaction was a sale.
In determining whether a transaction is an exchange or a sale, normally the courts consider
whether the money constitutes the substantial part of the contract consideration. The court does
also look at the intention of the parties.
Contract of Sale Vs A Contract of Bailment
The contract of bailment is a transaction whereby goods are delivered by one party who is known
as the bailer to another who is a bailee to hold the goods and ultimately re- deliver them to the
bailer in accordance with the given instructions. In a bailment, property in the goods is not
(never) intended to pass and does not pass on delivery of the goods.
In the Australian case of Chapman Brothers Vs Verco Brothers & Co. Ltd (1933) 49 CLR
306, 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. Under the transaction, the company was required
to buy and pay for the wheat on request by the farmer or a farmer could file a request on the
specific date to return an equal quantity of wheat at the same time but there was no obligation to
return the identical bags which a farmer had deposited (the company was not obligated to return
to the farmer exactly the same bags which the farmer had deposited).
Though under the contract, the company was referred to as ―stores‖. Court Held; the transaction
was necessarily one of sale as property passed to the company on delivery. This is so because the
mere fact that the company was not obligated to return exactly the same bags, which the farmers
had deposited, then it meant that property was meant/intended to pass immediately at the time of
deposit of the goods.

From the above case, it‘s clear that where goods are delivered by one person to another, on terms
that indicate that property is to pass at once, the contract is one of sale and not of bailment.
The case also illustrates that if the nature of the transaction is such that property is not to pass,
the contract is one of bailment. If the goods are delivered to the buyer before the property passes
he is a buyer in possession of the goods rather than a bailee and the transaction is a contract of
sale rather than a bailment.
Question: How about if the goods are supplied to be used in the manufacture of something?
In Broden (UK) Ltd V Scottish Timber Products Ltd (1981) CH 25 resin was supplied for use
in the manufacture of clipboards. The resin would be used in the manufacture within two days of
delivery, and could no longer be recovered. The resin was supplied on credit and the company
went into liquidation. The plaintiffs claimed for the sum due to the company for resin supplied.
Issue: Whether there was a sale or a bailment. Court held that this could not give rise to a
bailment since the goods would be completely used in the manufacturing process. Such a
transaction is taken by the courts to be a sale since the seller can have no right to trace the goods
supplied when they have been used or resold.
Sale v a gift
In a gift there is no monetary consideration for the transfer of property in the goods.
Contract of Sale v Hire Purchase.
In practical terms these two contracts are similar but legally they are different. In a contract of
sale, the seller transfers or agrees to transfer the property in the goods to the buyer as soon as the
contract is made. Under hire purchase contract, a hirer can buy goods by making payments over
a period of time. As such the property does not pass for some considerable time that is until all
the instalments of the price have been paid out and the buyer chooses to exercise an option on the
goods.
Under the hire purchase, the hirer is given possession of the goods for the specified period of
time at the end of which he or she may exercise an option to purchase the goods
A contract of hire purchase is a mixture of bailment and an option to purchase. This option to
purchase may/may not be exercised. Only when the option to purchase is exercised is there said
to be sale.
Where a person lets out a commodity to another, where the hirer is to pay a specified amount of
money in a specified number of instalments, possession of the goods passes to the hirer who
retains possession but does not become a buyer i.e. owner of the goods until he exercises the
option to purchase. Paying the entire amount due under the instalments does not necessarily pass
the property in the goods unless the terms of the hire purchase agreement are complied with.
This may be adduced from the Hire Purchase agreement terms.
In Helby V Mathews (1895) Ac 471, the case involved the hire of a piano Held; A person in
possession of goods under a hire purchase agreement had not bought or agreed to buy the goods.
The major purpose of hire purchase agreements therefore is to give the seller a degree of security
since the goods are delivered before the price is paid. But there are other similar transactions
that can give security similar to that of hire purchase such as a conditional sale where by the
seller simply sells and delivers the goods on credit while expressly stating that property in the
goods should remain his until the buyer has paid the price.

In Lee v Butler; Lee being in possession of furniture under a hire and purchase agreement made
with the plaintiff, sold and delivered the furniture before the last payment had accrued or been
paid to the defendant who received it in good faith and without notice that the plaintiff had any
right in respect of it. Lee under the contract had agreed to buy the goods. It was HELD that the
sale and delivery to the defendant was within the provisions of S59 and therefore valid as Lee
had agreed to buy the goods and the defendant received the same in good faith. The contract was
a sale not hire.
In Matayo Musoke v Alibhai George Ltd (1960) EA 31 the defendant had hired a motor car
under a hire purchase agreement to one S and gave him possession of the car and the registration
book. Having had the car registered in his name S defaulted in payment of instalments under the
hire purchase agreement and sold the car to the plaintiff who registered it in his own name. The
defendant later seized the car in terms of the agreement with S and the plaintiff then sued for the
return of the car or its value. HELD; not having paid a single instalment under the hire purchase
agreement S had never exercised his option to purchase the car hence the sale of goods ordinance
was not applicable (S.26 name is conclusive of ownership). A motor car registration book is not
a document of delivery thereof and does not give to the person to whom it is delivered the means
of appearing to be the owner or of having apparent authority to sell. A hire purchase agreement
is not an agreement to buy goods, there is no purchase and no agreement to purchase until the
hirer actually exercises the option given him. Court applied Helby v Matthews
Differences Between A Contract Of Sale And Hire Purchase

1. In a sale, property is the goods passes to the buyer immediately at the time of making the
contract where as in hire purchase, the property is the goods passes to the hirer upon payment of
the last instalment or when the hirer exercises the option to purchase.
2. In a sale, the buyer holds/ acquires the position of owner of the goods (has title to the goods)
but in hire purchase the hirer acquires, the position of a bailee until he pays the last instalment.
3. In the case of a sale, the buyer cannot terminate the contract and is bound to pay the price of
the goods. On the other hand, in the case of hire purchase, the hirer may, if he so wishes,
terminate the contract by returning the goods to the owner without any liability to pay the
remaining instalments.
4. In a sale, the seller takes the risk of any loss resulting from the insolvency of the buyer.
However in case of a hire purchase, the owner takes no such risk, for if the hirer fails to pay an
instalment, the owner has the right to take back the goods.
5. In the case of a sale, the buyer can pass a good title where he sells to a bonafide purchaser but
in a hire-purchase, the hirer cannot sell and where he sells, he cannot pass any title even to a
bonafide purchaser.
FORMATION OF A SALE OF GOODS CONTRACT

A sale of goods contract is governed by the general law o contracts, in this case the Contracts
Act. As such, all factors which affect the validity of a contract apply under a sale of goods
contract. A look at most agreements would make one think that the contents (terms agreed upon
therein) are the only major guiding principles in such a contract but this is not always the case

because in most cases, such agreements or negotiations or terms are not reflected or included
within the terms of such a contract.
If parties are planning to enter into a contract, it‘s always advisable that they write down all the
serious negotiations (the major terms) and leave out the unserious or minor terms. In most cases
whenever there is a sale of goods transaction, the buyer always tries as much as possible to get
assurance from the seller that the goods are in good condition and encumbrance free. On the
other hand, the seller is trying as much as possible to avoid assurances so as to avoid risks in the
future.
TERMS OF THE CONTRACT

The terms of a contract maybe express or implied and by far the most important implied terms
are those contained in Sections 11-16 of the Sale of Goods Act and these are incorporated into a
contract of sale with very limited powers of exclusion.
A person hoping t execute a contract of sale is likely to make numerous statements during
negotiations. It is important to determine which of these statements were mere representations
aiming at inducing the other party and which of them are contractual terms, because the type of
remedy depends on whether there has been a misrepresentation or breach of the contract.
Esso Petroleum v Philip Mardon 1976 EWCA; the plaintiff while selling a petrol station to the
defendant told him that the thorough put would be 200,000 gallons a year, yet the plaintiff was
aware of a decision by the Local Council regarding planning permission which meant that there
would be no direct access from the main street and hence few customers. The defendant after
buying the station made losses and claimed damages for breach of warranty.
It was HELD that there was contractual warranty and that the statement by the plaintiffs was a
forecast made by a party who had special knowledge and skill. Lord Denning stated ― if a person
who had special knowledge and skill makes a forecast intending that the other should act upon it,
it can well be interpreted as a warranty that the forecast is sound and reliable in the sense that
they made it with reasonable skill and care. If the forecast turned out to be an unsound forecast,
such as no person of skill or experience should have made, there is breach of warranty.‖ If there
had been no warranty, there would still be negligent misrepresentation.
This case shows that a statement of opinion becomes factual if one holds himself out as having
expert knowledge.
In analysing these terms courts consider the consequences arising from them and the parties‘
intention that is whether one party intended to act upon such statements. The intention of the
parties can be judged from their conduct. The statements may include mere puffs, conditional
precedent and representation among others.
In order to test for the intention of the parties Lord Moulton in Heibutt v Buckleton stated that all
the circumstances of a case must be taken into account in order to find out the intention. And in
Oscar Chess v Williams, Lord Denning stated that the intention can be derived by looking at the
party‘s conduct, words, behaviour and not so much their thoughts.
Mere Puff
A mere puff is something said without intention that it would that it would be acted upon or that
it would give rise to any legal intention.

In Smith v Land and House Property Corp (1884) 28 CH D 17; LHP contracted with Mr.
Smith for the purchase of a house. Mr Smith advertised that the house was let to Mr. Fleck ―a
most desirable tenant‖ and LHP agreed to buy the house. However Mr. Fleck, who had been
overdue with rent (and this was known to Smith,) went bankrupt just before transfer of title. LHP
refused to complete the transaction on the basis that the description of Fleck‘s virtues was
grounds for misrepresentation. HELD; there was a misrepresentation relied on by LHP. Bowen J
stated ―statements of opinions can often involve statements of facts because if the facts are not
equally known to both sides, then a statement of opinion by the one who knows the facts best
involve very often a statement of a material fact, for he impliedly states that he knows facts
which justify his opinion.‖
Conditional Precedent
This is a statement made during negotiations or prior to and which forms the basis for the entire
contract. In other words it refers to the major object of a contract in question. In Bannerman v
White (1861) the claimant agreed by contract to purchase some hops to be used for making beer.
He asked the seller if the hops had been treated with sulphur and told him if they had he
wouldn‘t be able to use them for making beer if they had. The seller assured him that the hops
hadn‘t been treated with sulphur. In fact they had been treated with sulphur. It was HELD that
the seller‘s statement was a condition of the contract rather than a representation as the claimant
had communicated the importance of the term and relied on the statement. His action for breach
of contract was successful. Without that assurance, the buyer would not have contracted and
hence the buyer was not bound to pay.
Representation
This basically is a statement that is made by the parties while making a contract but it does not
form any part of the contract. The difference between a representation and warranty comes in
relation to commitment to the effect that when a person makes a warranty he intends to make the
other contracting party believe in the statement as being true and any default at a later stage
makes the person making such a statement responsible. A representation on the other hand is a
statement made without any responsibility attached to the maker therefore it does not intend to
make the maker part of the contract in question.
In Routledge v Mckay the claimant acquired a motorcycle from the defendant, with the
registration documents showing that it was a 1942 model and the defendant stating to be the year
to the claimant. After seeing the motorcycle, the purchaser went away to think about it and then
returned a few days later. A written agreement was produced to the effect that when the price is
paid the transaction is closed. No mention was made of the date of the model. The motorcycle in
fact was a 1936 model but had been modified and re-registered by the previous owner. It was
HELD; the statement was a representation and not a contractual term. Neither party was an
expert and there was a lapse of time between the making of the statement and entering into the
contract giving the claimant the opportunity to check the statement. Furthermore there was no
mention of the date in the written agreement and the words of the agreement stating that the
transaction was closed excluded any possible collateral warranty.
In Hopkins v Tanqueray 1854; the defendant was going to sell a horse and on the day before
the sale, the plaintiff was examining the horse and the defendant said ―I assure you he is
perfectly sound‖. The plaintiff relying on the statement bought it the next day. In fact the horse
was not sound. It was HELD that the statement was a representation and not a term of the

contract. That a representation to constitute a warranty must have shown to have been intended
to form part of the contract.
In Oscar Chess Ltd v Williams (1957) 1 WLR 370; Williams sold Oscar Chess a Morris car
for 290 pounds. It was described as a 1948 Morris but it was in fact a 1939 model worth 175
pounds. Williams said it was a 1948 in good faith, relying on the car log book but the book was a
forgery. It was HELD; that the statement relating to the age of the car was not a term but a
representation. The representee, Oscar Chess as a car dealer, had the greater knowledge and
would be in a better position to know the age of the manufacture than the defendant. That a
reasonable man in the position of the car dealer would not have thought that a person with no
experience in the car market would have guaranteed the truth of the statement.
CONDITIONS AND WARRANTIES

A contract of sale of goods contains various terms or stipulations regarding the quality of the
goods, the price and the mode of its payment, the delivery of the goods and its time and place of
delivery. These terms are however not of equal in importance. Some terms may be major (very
important) stipulation/terms that go to the very root of the contract, and their breach may
frustrate the very purpose of the contract, while others may be minor terms, which are not vital
that their breach may not frustrate the contract or be seen as a breach of the contract as such. In
the Law of sales, such major terms are called ―conditions‖ and minor terms are called
―warranties‖.
A condition can be defined as a stipulation/term that is essential to the main purpose of a
contract, the breach of which gives the aggrieved party a right of action against the other party
for breach of contract. Such aggrieved party may in addition maintain an action for damages for
the loss suffered (if any) on the ground that the whole contract is broken and the seller is guilty
of non-delivery.
A warranty is a stipulation/term collateral to the main purpose of the contract, the breach of
which gives the aggrieved party a right to sue for damages only and not to avoid the contract
itself i.e. a breach of a warranty does not give the aggrieved party the right to reject the goods.
In some cases conditions are referred to as collateral warranties. Refer to Esso Petroleum v
Mardon. But depending on the circumstances of the case it may lead to recovery of damages. It
is important to note that a breach of warranty does not relieve a party from its obligations.
Under the S.O.G.A S.12 (1), a buyer may elect to waive the condition or may elect to treat the
breach of such condition as a breach of warranty and not as a ground for treating the contract as
repudiated (i.e. not binding on him anymore.).
Intermediate stipulations; this arises where a party has successfully argued that a certain term
in a contract makes such a contract lose commercial value (sense)and for this reason the court
can be moved to vitiate the contract. In such a case the term in question does not qualify to be a
condition or a warranty although its breach makes the contract lose commercial sense or
marketable value.
In Cehave v Bremmer; there was a contract for the sale of citrus pellets to be used in animal
feed stuffs with a clause in the contract that the goods were to be in god condition./ after delivery
of the goods some of them were damaged and the buyers rejected all of them and the sellers

refused to repay the money. The goods were later sold to a third party who again sold them to the
original buyers at a reduced price. The same goods were used by the buyers for cattle food. Lord
Denning; ―Is the provision a condition? If the answer is no, then we must look to the extent of
the breach. Buyers cannot reject the goods unless the defect is serious and substantial. It was held
that in this case, the buyer was not entitled to reject the goods because he used them for their
intended purpose.
If the condition is breached, the buyer is entitled to reject the goods but if it is an intermediate
stipulation that was breached, the buyer cannot reject the goods unless the breach goes to the root
of the contract. Therefore the test is; does the effect of the breach deprive a party substantially of
the benefit expected to be received out of the contract?
In Hong Kong Fir Shipping v Kawasaki Kissen Keisha (1962) 2 QB 26 a ship was chartered
to the defendants for a 2 year period with a stipulation in the agreement that the ship would be
seaworthy throughout the period of hire. The problems developed with the engine of the ship and
the engine crew were insufficient and incompetent. Consequently the ship was out of service for
a 5 week period and then a further 15 week period. The defendants treated this a breach of
condition and repudiated the contract. The claimants brought an action for wrongful repudiation
arguing that the term related to seaworthiness was not a condition of the contract. The court
introduced the innominate term approach. HELD; Rather than seeking to classify the term as a
condition or warranty, the court should look to the effect of the breach and ask if the breach has
substantially deprived the innocent party of the whole benefit of the contract. Only where this is
answered affirmatively is it to be a breach of a condition. That, 20 weeks out of a 2 year period
did not substantially deprive the defendants of whole benefit and therefore they were not entitled
to repudiate the contract.
Note: A condition forms the very basis of a contract of sale, and its breach causes irreparable
damage to the aggrieved party so as to entitle him even to repudiate the contract, where as a
―warranty‖ is only of secondary importance and its breach only causes such damage as can be
compensated for in damages.
It should further be noted that there are no hard and fast rules as to which stipulation in a
contract is a condition and which one is a warranty.
Criteria to determine whether a term is a condition or warranty; I

 By statute.S.12 (2) provides that whether a stipulation in a contract of sale is a condition
or a warranty depends in each case on the construction of the contract. A stipulation may
be a condition though called a warranty in the contract. Court is therefore guided by and
looks at the intention of the parties by referring to the terms of the contract, its
construction/interpretation and the surrounding circumstances to judge whether a
stipulation/term was a condition or a warranty.
Various sections thereafter expressly identify the contractual terms as either conditions or
warranties. Eg S.14, 15
The most suitable test to distinguish between the two terms is that that if the stipulation is such
that its breach would be fatal to the rights of the aggrieved party, then such a stipulation is a
condition and where it is not so, the stipulation is only a warranty.
 Case law. Eg Cehave v Bremmer, court lays out the criteria to follow

 Construction/interpretation of the contract; this is applicable where the statute or
case law does not shed any light as to whether the term is a condition or warranty. The
courts will look at the intention of the parties at the time of the making of the contract.
Courts will be inclined to interpret a particular term as a warranty so as to encourage
business transactions that is courts do not want to be looked at as frustrating business
transactions,
In Bunge v Trandex (1981)2 ALL ER 513 ; Under a contract the buyers agreed to purchase
from the sellers 15,000 tons of soya bean meal, , for shipment from the United States. By
agreement between the parties one of the shipments was to be during June 1975. The buyers
were to provide a vessel at the nominated port and they were required to ‗give at least 15
consecutive days‘ notice‘ of the probable readiness of the vessel. If the goods were to be shipped
during June the buyers were therefore required to give notice of their vessel‘s readiness by 13
June. In fact the buyers did not give notice until 17 June. The sellers claimed that the late notice
was a breach of contract amounting to repudiation and claimed damages from the buyers on the
basis that by then the market price had fallen by over $US60 a ton.
On whether notice required was a condition or an intermediate term and the lateness of the notice
amounted to a breach of contract?
HELD;
(a) Stipulations as to time in mercantile contracts were generally to be treated as conditions
(breach of which, no matter how minor, entitled the innocent party to treat the contract as at an
end) and not as intermediate or innominate terms, because the reason for such a clause was to
enable each party to organise his affairs to meet obligations arising in the future under the
contract and not merely to determine, with the benefit of hindsight, the appropriate remedy when
a breach occurred. Furthermore, the need for certainty, especially when there was a string of
contracts involved, required such a clause to be strictly adhered
(b)time is of essence in mercantile contracts. . That the buyers were to give at least 15 days‘
notice of readiness was a condition, and the sellers were therefore entitled to treat the contract as
repudiated when the buyers failed to give the requisite 15 days‘ notice and to claim damages.
Differences Between A Condition And A Warranty

1. Regarding Value
A condition is a stipulation/ which is very essential to the main purpose of the contract where as
a warranty is a stipulation/term which is collateral to the main purpose of the contract and is
therefore of secondary importance in the contract.
In Poussard v Spiers; the plaintiff was contracted to perform at an opera but fell sick a few days
before the first performance. The defendants hired a replacement. It was held that by failing to
turn up for the first performance entitled the defendants to rescind the contract for this went to
the root of the matter.
2. Regarding Breach
Breach of a condition gives the aggrieved party the right to repudiate the contract and also to
claim damages where as the breach of warranty gives the aggrieved party a right to claim
damages only. S.12(2)
3. Regarding Treatment Of The Term

A Breach of a condition may be treated as a breach of warranty if the aggrieved party so wishes.
But a breach of warranty cannot be treated as a breach of condition. Instances when breach of
condition is to be treated as breach of warranty:
Voluntary Waiver by the buyer
Although on a breach of a condition by the seller, the buyer has a right to treat the contract as
repudiated and reject the goods, he is not bound to do so. That is S.12(2) is not mandatory .He
may elect/decide instead to waive the condition and treat the breach of condition as a breach of
warranty and accept the goods and sue the seller for damages for breach of warranty. E.g. If
Sarah agrees to supply Mukuba with 10 bags of first quality sugar each at 20,000/= but supplies
only second quality sugar, the price of which is 10,000/= per bag. There is a breach of condition
and the buyer can reject the goods. However the buyer may elect /decide to treat the breach of
condition as one of warranty and accept the second quality sugar and sue the supplier/Sarah for
damages. S.12(1) allows parties to waive a condition or choose not to treat the contract as
repudiated in case of breach of condition.
Determining whether the provisions of S.12(1) have been utilised;
 The courts will look at the intention of the parties which is inferred from the parties‘
conduct and the circumstances surrounding the case. In Harling v Eddy the vendors of a
heifer represented that there was nothing wrong with the animal but in fact it had
tuberculosis from which it died within three months of sale. It was held that the statement
was a term of the contract as the vendors were in a special position to know of the
heifer‘s condition
 S.12(3) A stipulation may be a condition, though called a warranty in the contract.
 Acceptance Of Goods By The Buyer
S.12(4) Where a contract of sale is not severable, and the buyer has accepted the goods,
or part of the goods, or where the contract is for specific goods, the property in which has
passed to the buyer, the breach of any conditions to be fulfilled by the seller can only be
treated as a breach of warranty and not as a ground for rejecting the goods and treating
the contract as repudiated, unless there is a term of the contract, express or implied, to
that effect.
Where the buyer has accepted the goods and subsequently/later gets to know of the breach of
condition, he cannot reject them, but can only maintain an action for damages (sue for damages).
The law in this case treats the breach of condition as a breach of warranty on the basis of the
doctrine of caveat emptor, which requires the buyer to examine the goods before accepting them,
in bid to ensure that they comply with the contract.
A contract is not severable if it is for the sale or delivery for the goods at once and not in
instalments. This section requires the buyer to accept the goods in order for the breach to be
treated as a warranty as opposed to a condition. Acceptance is dealt with Sections 34 and 35
Under S. 34 a buyer cannot be deemed to have accepted the goods which are delivered to him or
her and he or she is given an opportunity to previously examine the goods. As such in order for
acceptance to occur, such a buyer must be given a reasonable opportunity to examine the goods
in order to confirm that they are in conformity with the contract.
Under S.34(2) unless otherwise agreed, when the seller delivers the goods, the buyer must be
afforded an opportunity to check the goods.

The other instances of acceptance are dealt with under S.35 of the Act. They are three. The
section stipulates that The buyer is deemed to have accepted the goods when he or she intimates
to the seller that he or she has accepted them or when the goods have been delivered to him or
her, and he or she 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, the buyer retains the goods without
intimating to the seller that he or she has rejected them.
So acceptance is deemed where there is intimation of acceptance, any act inconsistent with
seller‘s ownership and retaining the goods. Intimation covers words like ‗okay‘ or ‗hope they
will work‘
In Hardy and Co. V Hillerns and Fowler by an agreement , wheat was shipped to certain
buyers who received them and dispatched part of the goods to the sub-buyers. When the buyers
later discovered that they did not conform with the terms of the contract; it was HELD; that, the
act of dispatching the goods to sub-buyers was inconsistent with the ownership of the sellers and
though the goods had not been examined by the buyer, he was deemed to have lost his right of
rejection because parting with possession means acceptance.
Similarly in E&S Ruben v Faire Brothers (1949) 1 ALLER 215; vulcanised rubber materials
were sold with a small sample consisting of a flat soft piece to the defendants. The defendants
resold the sample to one of their customers. The buyers requested the sellers to send half of the
material ordered to their customer who rejected the material for the material supplied did not
correspond with the sample and not of the measurement specified. The buyers purported to reject
the material. HELD; the goods were not supplied in accordance with the sample. There was
constructive delivery when the material was set aside and delivery to the buyer‘s customers,
being effected by the sellers, constituted acceptance of the material by the buyers within the sale
of Goods Act S.35. Therefore, the buyers could not reject the material but could claim only for
breach of warranty. Court considered Hardy v Hillerns to the effect that if the acct of the buyer is
inconsistent with the ownership of the seller, the buyer is deemed to have accepted the goods.
FORMALITIES OF THE CONTRACT OF SALE
According to Sec.4 of the S.O.G Act a contract of sale may be in writing, by word of mouth or
partly in writing and partly by word of mouth (orally) or it may be implied from the conduct of
the parties. The purpose of S.4 is to protect commercial transactions and this is illustrated by the
decision in Hillas v Arcos 1932. In this case arcos agreed to supply Hillas with timber in a
contract stating the sale of 22,000 standards of softwood of fair specification. In the contract
there was an option to purchase additional 100,000 standards of timber the following year with a
5% reduction on price. Arcos later refused to sell the 100,000 standards the following year. The
issue was whether you can make a contract to enter into another contract? HELD; there was a
binding contract to sell the 100,000 standards. Lord Wright concluded that ―Courts must
interpret contracts fairly and broadly following the maxim that ‗words are to be so understood
that the subject matter maybe preserved rather than destroyed‘‖. Both parties had experience in
trade and had completed similar bargains in the past thus each would have known each other‘s
intentions at the time. Therefore the option to contract was valid.
Value of the contract;
In Sec 5(1) of S.O.G Act it is provided that a contract of sale of goods of the value of 200/= or
more shall not be enforceable by action unless when the buyer accepts and receives part of the
goods sold or gives something in earnest to bind the contract or pays partly or unless some note
or memorandum is made and signed by the party to be charged or his agent in that behalf.

This therefore implies that a contract of sale of goods of the value 200/= or more cannot be
enforced in a court of law unless it is shown that;
i. The buyer accepted part of the goods sold and actually received them. The acceptance
is envisaged in this section under S.5(3) to mean that the buyer does an act in relation to
the goods in recognition of a pre existing contract of sale.
ii. If the buyer gave something with respect to the goods in bid to bind him under the
contract e.g, if he paid the price or part of the price, or
iii. Unless a note in writing acting as evidence to the contract is made and signed by the
party to be charged or his or her agent authorized to sign on his behalf.
In Adam v The Tanga Mombasa Transport Company (1955) 28 KLR 14; the defendant firm
agreed mutually with the plaintiff firm for purchase of a vehicle from Nairobi and consigning it
to Tanga. The vehicle was consigned to a bank with instructions to deliver it to the defendant
upon payment of shs 75,000. The defendant rejected the vehicle on ground that the price agreed
was 45,000 and not 75,000 as claimed. In a claim for damages, the defendant pleaded that the
contract was unenforceable by action since there was note or memorandum in writing as required
by the Sale of Goods Ordinance. It was HELD; as the defendant did not receive the vehicle the
contract did not fall within the exception of S.5 and as there was no memorandum in writing, the
contract was unenforceable by suit.
Subject matter of the contract.
Contract of sale of goods must have gods as the subject matter and these goods can be either
existing or future goods. S6(1). As earlier discussed there are 2 types of goods that is specific
goods which are sometimes called existing or ascertained goods and future goods which are
sometimes called unascertained goods.
If a contract relates to goods that are sold by description eg grain, coal, oil etc and the seller
undertakes to procure for the buyer the agreed quantity of such goods with such further
characteristics as to quality, then it will be a sale by description.
Under sec 7 S.O.G A, where there is a contract for the sale of specific goods and the goods
perish without the knowledge of the seller, the contract is void. Section 8 of the Act states that
where there is an agreement to sell specific goods and subsequently the goods without any fault
on the part of the seller or buyer perish before the risk passes to the buyer, the agreement is
thereby avoided. The section does not put an obligation on the seller to ensure existence of
goods.
In Courturie v Hastie, The plaintiff merchants sold a cargo of Indian corn to the defendant.
Unbeknown to either party, a few days before the contract was made, the cargo, which was on
board a ship, had overheated and started to ferment, and as a result the captain had sold the cargo
in order to prevent it from deteriorating further. The buyer contended that since the subject
matter of the contract, the corn, had ceased to exist prior to the entering into of the contract, then
the contract was void and he was not liable to pay the price. It was held by the House of Lords
that the purchaser was not bound to pay for the cargo. The contract contemplated that the goods
sold actually existed, and since they did not, the seller could not be required to deliver the goods,
nor the buyer to pay for them.
Atiya PS; ‗Sale of Goods‘ gives three interpretations from the above decision;
 There might have been an implied condition precedent that the goods were in existence in
which case if they were not, neither party would be bound.

 Alternatively, the seller may have contracted or warranted that the goods were in
existence in which case he would be liable for non delivery but the buyer will not be
liable for non acceptance.
 The buyer might have taken the risk of the goods having perished in which case, he
would be liable for the price even in the absence of delivery and the seller would not be
liable for non delivery. S.21 risk passes with property.
Payment of the Price

The buyer has a duty to pay the price of the goods he has bought or agreed to buy and in the
absence of a different agreement he is not entitled to claim possession of the goods he is ready
and willing to pay the price in accordance with the contract.
S. 28 provides that Unless otherwise agreed, delivery of the goods and payment of the price are
concurrent conditions, that is to say, the 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 possession of the goods.
The price is determined or ascertained in accordance with sections 9 and 10. S.9(1) provides that
The price in a contract of sale may be fixed by the contract, or may be left to be fixed in the
manner agreed in the contract, or may be determined by the course of dealing between the
parties.
Therefore under s.9 the price may be determined in 3 ways.

 It may be fixed by the contract
 It may be left to be determined in accordance or in the manner which the parties have
agreed. 9parties‘ agreement)
 It may be determined in the course of dealings of the parties.
Where it is not determined by any of the aforementioned terms, S.9(2) provides that the buyer
must pay a reasonable price. Under S.9(3) What is a reasonable price is a question of fact
dependent on the circumstances of each case.
 The price can also be determined by relying onS.10 where it‘s provided that the price
may also be left to be fixed by the valuation of a third party provided he accepted the
duty and performs it. But if the third party fails to make such valuation, the agreement is
said to be voidable provided that if the goods or part thereof have been delivered to the
buyer, then he must pay a reasonable price.
Where a third party is prevented from making the valuation (to enable him determine the price)
through the fault of the seller or the buyer, the party not at fault may maintain an action for
damages against the party at fault (Sec 10, (2). If no valuer is specified and the parties fail to
agree on some form of valuation in bid to determine the price, sec 9(2) then applies and a
reasonable price can be paid.
In Campbell V Edwards, Lord Denning MR said that it is simply the law of contract that if two
persons agree that the price of property should be fixed by a valuer, on whom they agree and
when he gives that valuation honestly, they are bound by it (the price fixed by such valuer).
If there is fraud or collusion, of course it would be different.

Time of payment; the time to effect payment of the price is determined by the terms of the
contract or it can be fixed by the parties. If no such time is fixed, then payment can be effected at
the time of payment. S.28 and S11. Both sections look at the intention of the parties.
Medium of payment; Unless otherwise agreed, the medium of payment in a contract of sale of
goods is money consideration and that means cash. If a seller accepts anything beside this then
such a seller is to remain in possession of goods, for example if the payment is by cheque, until
such cheques is honoured.
There are two forms of payment;

 Absolute payment; this is the receipt of the value agreed sum in total eg if the price is 1
million and the buyer pays this.
 Conditional payments; this occurs where the seller accepts payment by bill of exchange
eg by cheque. This is treated as conditional payment and if the cheque is not honoured,
then the seller has two options, to sue for the price or to exercise the rights of unpaid
seller. Ref to S.s 38 &39
EXPRESS & IMPLIED CONDITIONS AND WARRANTIES

Conditions and warranties may be either express or implied. They are said to be express when
they are written/stated in the contract at the will of the parties. They are said to be implied when
the law presumes their existence in the contract automatically though they have not been
put/stated in the contract in express words.
It should however be noted that implied conditions and warranties might however be negatived
or varied by express agreement, or by the course of dealing between the parties or by usage of a
particular trade S.54, SOGA. This provision is merely an application of the general maxim of
law, ―what is expressly done puts an end to what is tacit or implied‖ and ―custom and agreement
over rule implied conditions and warranties‖.
1.TIME;
According to S.11(1) time of payment is not of essence unless the parties agree otherwise.
Accordingly in order to determine whether, the time of payment is a condition one must look at
intention of the parties to the contract. If time is of the essence it becomes a condition. For
example if parties have agreed that payment is to be effected in 4 weeks and the buyer does not
do this, then the seller can be advised to rely on S.12(1) to decide to waive the condition or to
elect to treat the breach of condition as a breach of warranty.
According to S.29(3) ) provides that where the seller is bound to send the goods to the buyer but
no time for sending them is fixed, the seller is bound to send within a reasonable time. Under
S.55 the question of reasonable time is a question of fact.
The provisions in S.55 weaken the terms relating to time of payment. This is because what is
reasonable to one man may not be reasonable to another.
It is important to note that time is of the essence when dealing with situations such as delivery,
passing of property in the goods and acceptance of goods.
In Hartley V Hyman (1920) 3K.B. 475 a seller requested to be allowed to make late delivery and
the buyer agreed to this. When the seller delivered, the buyer refused to accept. It was held that

the seller was entitled to recover damages despite the fact that delivery was outside the terms of
the contract and that the buyer‘s promise to accept delivery was unsupported by consideration.
The buyer had waived the right to insist on delivery at a particular time and could not go back on
that. After the waiver by the buyer of the delivery period, the parties had implied a new
agreement to extend the period of delivery to a reasonable time of which notice was to be given
by the buyer to the seller. Therefore where a buyer of goods has waived the time period of
delivery, the buyer is subsequently entitled to give notice making time of the essence.
Consequences of the breach of the time clause; this will depend on whether this is a condition
or a warranty. If it‘s a condition this would lead to repudiation. However if it‘s a warranty, it
attracts damages but not repudiation. There has been case law illustrating that time can be of the
essence.
In Bowes v Shand; there was a contract for the sale of rice which provided for shipment during
the month of March and/or April. Most of the rice was loaded in February and the rest in early
March making delivery earlier than anticipated. The buyers refused to accept delivery and were
sued. Court held that the shipment amounted to a February shipment and that the shipment
period formed part of the description of goods such that there will be a breach of S.13 of the Sale
of Goods Act. That time is of the essence in mercantile contracts since early or late delivery
might lead to losses on the part of the buyer.
It is important that even if the contact does not make time of the essence, the parties to the
contract can change this position through their conduct. For example if the buyer does not pay
the price and the seller gives the buyer reasonable notice for payment by including a date when
this payment should be effected, then time becomes of the essence. Patries conduct making time
of the essence can be illustrated by the case of Charles Rickards v Oppenheim;
In Charles Rickards v Oppenheim [1950] 1 All ER 420

A chassis for a Rolls-Royce was ordered from the plaintiffs, who later also agreed to build a
body for it in ‗six to seven months‘. At the end of seven months the body had not been
completed and the defendant agreed to wait another three months. At the end of this period it was
still not ready so the defendant gave notice that if it was not ready within four weeks he would
cancel the order. At the end of this period the body was still not ready so the order was cancelled.
The Court of Appeal held that he was entitled to do so since, even though he had waived the
stipulation as to time of delivery, he had given reasonable notice of his intention to make time of
the essence. Lord Denning commented:
According to S.47(3) Where the goods are of a perishable nature, or where the unpaid seller
gives notice to the buyer of his or her intention to resell, and the buyer does not within a
reasonable time pay or tender the price, the unpaid seller may resell the goods and recover from
the original buyer damages for any loss occasioned by his or her breach of contract
2 implied condition as to TITLE;
Right to sell; (The seller must have title to the goods) This is provided for under Sec 13(a)
SOGA that In a contract of sale, unless the circumstances of the contract are such as to show a
different intention, there is an implied condition on the part of the seller that in the case of a sale
he or she has a right to sell the goods, and that in the case of an agreement to sell he or she will
have a right to sell the goods at the time when the property is to pass.

This section requires the seller to transfer property and title in the goods to the buyer. The right
to sell envisaged under this subsection covers the power to sell and the power to transfer property
in the goods to the buyer. The question we are interested in is; can a seller confer good title to the
buyer when he has no right to sell the goods? Note that under the implied condition as to title it
is not enough for the seller to prove that he/she was the owner of the goods and he/she had power
to transfer; the seller must be able to uphold the validity of the contract. Accordingly, if the
goods sold bear labels which infringe upon the trademark of another, the seller is guilty of breach
of the implied condition as to title although he had full ownership of the goods.
In Niblett V Confectioner’s Material Co. (1921) 3K.B.387 where the defendant, an American
Co., sold 3,000 tins of preserved milk to the plaintiff from New York, to be transported to
London. On arrival of the goods in England, they were retained by the customs authorities on the
ground that 1,000 of the tins contained labels which infringed the trademarks of a well-known
English company. The plaintiff was compelled to remove the labels and the tins were
consequently sold at a loss. The plaintiff sued the defendant for breach of condition as to title and
claimed compensation for the loss suffered. It was held that the seller did not have the right to
sell the goods and therefore the buyers were entitled to repudiate the contact. There being an
infringement of another company‘s trademark, an injunction could have been obtained to restrain
sale of the goods and therefore the defendant had no right to sell.
Ordinarily, the seller has the right to sell the goods if he is either the owner of the goods or if he
is an agent of the owner of the goods. As a result of this condition, if the seller‘s title turns out to
be defective, the buyer is entitled to reject the goods and to recover his price. If the seller delivers
goods to the buyer without the right to sell, there s a total failure of consideration and the buyer
cannot obtain ownership of the goods In such case, the buyer cannot even treat this breach of
condition as a breach of warranty and accept the goods for the goods must be returned to the
rightful owner. In such a case the buyer must give the goods to the real owner and recover the
entire original price from the seller without any deduction from the use of the goods. This was
illustrated by Rowlands v Dival
In Rowland V Divall (1923) Rowland purchased a car from Durall and used the car for several
months. Durall had no title to the car and therefore Rowland was compelled to return the car to
the true owner. Rowland sued Durall to recover back the price, which he had already paid. Held;
the full owner of the car had therefore received nothing from him. That there is a complete
contract.
In Butterworths v Kingsway Motors; a person was buying a car on hire purchase and thus had
no title to the car. He sold it before all installments had been paid. The car was the bought and
sold by several persons until it was eventually sold by the defendant to the plaintiff. The plaintiff
used the care for 12 months before being told the defendant had no title to the car but that the
plaintiff could acquire title by passing off the final amount on the hire purchase agreement of 175
pounds. The plaintiff instead claimed the refund of his purchase price even though the price of
the car had depreciated. However 8 days after the plaintiff was told by the Finance Company

that he had no title, and after he had claimed the price paid, the original hirer paid off the final
installment so that the title to the vehicle should have fed to the plaintiff.
It was HELD that rescission of the contract took place before the original hirer perfected the title.
The plaintiff was entitled to receive repayment of the purchase price as money paid on a
consideration which had wholly failed in that the defendants had no title to the car which they
purported to sell.
In Maier v Kersten (2005) EA 245; the appellant sold a motor vehicle to the respondent and
transferred possession to him after he received the purchase price. The vehicle was later
impounded by police on the ground that the motor vehicle was stolen and had a fake logbook.
HELD; the purpose of the contract of sale is transfer of the property in gods sold. Where the
seller has no right to sell the goods sold, a fundamental condition has been broken and the buyer
can recver the price from the seller because consideration for its payment has totally failed. This
would be the case where the vehicle turned out to be stolen. Therefore the seller had no right to
title to the motor vehicle and could pass none to the buyer at the time of the contract.
Remedies for breach of S.13(a)

Repudiation because it‘s a condition
Recovery of full price because there is a total failure of consideration.
General and special damages.
Note; S.13(a) can be varied by parties express agreement as provided for by S.54
Implied warranty Of Quiet Possession S. 13 (b)

In every contract of sale there is an implied warranty on the part of the seller that the buyer shall
have and enjoy quiet possession of the goods. For this section to be effective, a buyer should be
free to abuse and use the property, so as to say that he or she enjoys quiet possession of the sale.
This is so because if a person buys goods and the seller keeps probing the user, then there is no
quiet possession enjoyed.
The quiet possession is supposed to be enjoyed, so the use of the word ‗enjoy‘ means that it
should continue even after the conclusion of the agreement. If the quiet possession of the buyer
is in any way disturbed by a person having a superior right than the seller, the buyer can claim
damages from the seller.
Since disturbance of quiet possession is only likely to arise where the seller‘s title to the goods is
defective, this warranty may be regarded as an extension of the implied condition, that a seller at
the time of selling the goods (entering into a contract of sale), must have title to the goods and
therefore the right to sell the goods. Therefore whenever there is a breach of S.13(a) there is an
automatic breach of S.13(b)
In Mason Vs Burningharm (1949) 2 KB 545, the plaintiff, a lady, purchased a second hand
typewriter from the defendant. She thereafter spent some money on its repair and used it for
some months. Unknown to the parties, the typewriter was a stolen one and the plaintiff was
compelled to return it to its true owner. The plaintiff brought an action against the defendant
claiming the repayment of the purchase price and the cost of repair as damages for breach of

warranty. Held; That she was entitled to recover from the sellers for the breach of this warranty,
damages reflecting not only the price paid but also the cost of the repair.
In Microbeads v Vinhurst Road Markings Ltd (1975) 1 WLR; the claimant purchased some
road marking machines from the defendant. After the purchase, a third party was granted patent
rights in the machines. This meant that the claimant could not use the machines unless they were
granted license to do so. HELD; the seller had the right to sell the goods. However, there was
breach of S.13(b) in that the buyer could not enjoy quiet possession of the goods. The law
implied a warranty that the buyer shall have and enjoy quiet possession in the future and not
merely at the time of sale. The proceedings by the patentee constituted a disturbance of the
buyer‘s possession and therefore a breach of warranty.
In Lakhamshi Brothers Ltd v Raja and Sons (1966* EA 178; The appellant company
purchased from the respondents 44 cases of boot polish, of which they resold 12.The remaining
32 cases were seized by the police, who suspected that they were stolen property.
The respondents refused to refund the purchase price and the appellant then sued.
Held –There was proof that the appellant‘s possession had been disturbed by the police together
with evidence of the respondents‘ knowledge that their title was liable to challenge established
prima facie a breach of warranty for quiet possession of the goods which the respondents had
failed to rebut;
Warranty Of Freedom From EncumbrancesS.13 (c)

This implied warranty on the part of the seller means that the goods shall be free from any charge
or encumbrance in favour of any third party, which was not made known to or declared to the
buyer before or at the time of making the contract of sale. Where the goods are later on found to
be subject to a charge and the buyer has to discharge the same, (to pay for that charge for it to be
discharged) there is breach of this warranty and the buyer is entitled to damages for this breach,
from the seller.
It should be noted that the breach of this warranty will only occur when the buyer in fact
discharges (pays) the amount of the encumbrance and he had no notice of that encumbrance at
time of making/entering into the contract of sale.
If the buyer knew/had knowledge of the encumbrance on the goods at the time of entering into
the contract of sale, he becomes bound by the same and he is not entitled to claim compensation
from the seller for discharging the same.
E.g. A, the owner of a watch pledges it with B. After a week, A obtains possession of the watch
from B for some limited purpose and sells it to C. B approaches C and tells him about the pledge
affair. C has to make payment of the pledge amount to B. There is breach of this warranty and C
is entitled to claim compensation from A.
How can someone has a charge on the goods? The Transfer of Chattels Act allows someone to
use the goods as security. This creates a charge. When this happens, the borrower creates a
charge on the goods in favour of the lender. The law states that if such a transaction occurs prior
to the execution of the contract of sale and the buyer is not aware of the same, there is an implied
warranty that there is no charge on the goods. This has been illustrated in Mercantile Bank of
India v Central Bank of India.
Condition In A Sale By Description S.14

Where the parties enter into a contract of sale of goods by description there is an implied
condition that the goods shall correspond with the description in the contract. Under section 14

of the S.O.G Act, it is provided that the seller is under an implied condition that the goods
correspond with the description under the contract. It is very important that the goods must
correspond with the description whether it is a sale of specific goods or of unascertained goods.
Lord Blackburn in Bowes V Shand (1877)2 A.C 455 had this to say;
“If you contract to sell peas, you cannot oblige a party to take beans. If the description of the
article tendered is different in any respect, it is not the article bargained for and the other party
is not bound to take it.”
Further, the fact that the buyer has examined the goods on delivery will not affect his right to
reject the goods if the difference in the nature of the goods from the description is such deviation
that could not have been discovered by casual examination i.e. where the goods show latent
defects. In Beale V Tailor (1967)1 W.L.R 1193, the defendant advertised his car for sale as a
―Herald, convertible, 1961‖ and the plaintiff bought the car after examination. He later
discovered that the car was in fact made of two parts which had been welded together, only one
of which was from a 1961 model. The issue was whether the buyer who had fully examined the
car had bought by description or whether he had bought a specific thing. It was held that the sale
was by description and the words “1961 Herald” formed part of the contractual description. The
seller was accordingly bound to sell goods fitting the description.
The description of the goods could cover the quality or characteristics of the goods e.g. if the
good is known by a trademark, a brand name, or type of packing, if the goods have acquired a
trade name, the trade name may correspond with their description even if the goods are not what
a literal reading of the trade name suggests they are. In Lemy V Watson (1915)3 R.B 731 at 752,
Justice Darling had this to say;
“If anybody ordered for Bombay ducks and somebody supplied him with ducks from Bombay, the
contract to supply Bombay ducks will not have been complied with.”
In Livi Carli & Ors V Salem Mohamed (1959) E.A 701, the plaintiffs contracted
to sell to the defendants 200 tons of cement, described as ―2lions brand‖. The cement delivered
by the plaintiff was instead ―Salona towers brand‖. The defendants rejected the cement on
grounds that it was not in accordance with the contract description. The major issue was whether
the buyers were entitled to reject the goods for failure to correspond with their description.
Campbell C.J. stated that there was a failure by the plaintiffs to tender to the defendants cement
according to the agreed description and since there was a sale by description the defendants were
entitled to reject the goods.
In Albhai Pangui V Sunderegi Nanji (1949) 16 EACA 72

Facts; In this case, by the contract executed through a broker, the defendant/respondent agreed
to purchase from the plaintiff (appellants) 30 tones of Mtama to be delivered at Dar-es-Salaam.
The defendant/respondent refused to accept part of the consignment on the ground that it
consisted of red and not white Mtama. It was established that the contract price sufficiently
indicated that it was white Mtama that the parties intended to cover under the contract, since
white Mtama cost 500/= per tone and the red one 350/= per tone and the price stated in the
contract was 500/=.
Issue: - Whether the defendant/respondent could accept only part as to quantity delivered.

Held; The Mtama tendered by the plantiff/appellant was not of the description for which the
bargain was struck, which was for the sale of white Mtama. However the defendant/respondent
had not alleged a sale by sample or by custom of the trade and therefore he had to accept the
delivery.
In Varley V Whippe there was a supply of a second hand reaping machine. The defendant
agreed to buy from the plaintiff such machine, which was stated to have been new the previous
year and hardly used at all. This was a gross misdirection because on delivery, the defendant who
had to pay for the transport charges wrote complaining that the machine was very old and he
refused the machine, to which the defendant took him to court.
Issue: Whether the sale had amounted to one by description. Held; By Channel J That if a man
says that he will sell the black horse in the last stall in his stable and the stall is empty or there is
no horse in it but only a cow, then there is no sell of any good in which property could pass and
the buyer relies on the description. In essence, since the seller described the machine to have
been new the previous year and hardly used at all, a description on which the buyer relied upon
to enter into the contract, then there was breach of the implied condition as to sell by description
when the machine turned out to be very old on delivery.
As to whether goods correspond with their description will normally be a question of fact, but
the duty of the seller in this regard is very strict. The rationale for the seller‟s duty being strict is
because the buyer relies on the seller‟s skill and knowledge of his goods/stock.
In Arcos Ltd V Arrenson (1933) A.C. 470 the seller was required to supply a quantity of staves.
The seller delivered staves which were slightly out of conformity with the description in terms of
size and the issue was whether the buyer had relied on the description given by the seller and
therefore she could reject the goods. The judge noted that the seller must deliver goods that
correspond with the description and that ½ an inch does not mean ―about ½ an inch; neither does
½ a tone mean about ½ a tone.‖
However, despite the strict requirement for goods to correspond with the contract description,
precisely, courts have also followed the principle of ―Deminimis non curat lex‖, which is
literally translated as ―the law pays no attention to trifles‖. By virtue of this rule, the court might
hold that the damage is so insignificant and the difference above or below the described amount
or quality is so small that there is only a breach in a very technical sense and because the law
does not pay regard to trivialities, only nominal damages may be awarded or none at all.
Breach of this condition (sale by description) entitles the innocent party to reject the goods.
S.30(3) gives options available to the parties. Where the seller delivers to the buyer the goods he
or she contracted to sell mixed with goods of a different description not included in the contract,
the buyer may accept the goods which are in accordance with the contract and reject the rest, or
he or she may reject the whole.
4. Condition as to quality and purpose;
The opening paragraph of S.15 shows that there is no guarantee that where there is a contract for
the sale of goods, the seller will sell goods of good quality or those that suit the purpose for
which the buyer purchases the goods. This is the principle of caveat emptor (buyer beware).
However the section lays down exceptions thereafter which include the following;

Condition for fitness or purpose; S.15 (a), provides that where the buyer, expressly or by
implication, makes known to the seller the particular purpose for which the goods are required,
so as to show that the buyer relies on the seller‘s skill or judgment, and the goods are of a
description which it is in the course of the seller‘s business to supply, whether the seller is the
manufacturer or not, there is an implied condition that the goods shall be reasonably fit for the
purpose;
Therefore, an implied condition is deemed to exist on the part of the seller, that the goods
supplied shall be reasonably fit for the purpose for which the buyer wants them, provided the
following conditions are fulfilled;
(i) the buyer should have expressly or impliedly made known to the seller the particular purpose
for which the goods are required;
(ii) the buyer should rely on the seller‘s skill and judgment;
(iii) the goods sold must be of a description in which the seller deals, in the ordinary course of
his business, whether he is the manufacture or not. If the goods to be supplied can be used for
several purposes, the buyer must expressly make known to the seller the specific purpose for
which he needs the goods.
In order to exclude the application of this section, there should be circumstances that show
either;(a) that the buyer does not or it is unreasonable for him to rely on the seller‘s skill or
judgment.
In Teheran-Europe Corp v S T Belton Ltd [1968] 2 QB 545
The plaintiff was a Persian company who bought machines from an agent in
London, the agent inspected all goods. It turned out that the goods were not
suitable for the home market.
Held – Was the buyer relying on the sellers ―skill and judgment‖ that the goods were fit for their
purpose. They weren‘t, it would be contrary to common sense to apply the seller‘s skill and
judgment to a market they knew nothing about and the buyers knew everything
(b) the goods which were sold do not fall within the goods sold in the seller‘s course of business.
We have two kinds of goods; multipurpose and one purpose goods. If goods can only be used for
one purpose, they must be suitable for that purpose eg. Hot water bottle or a pair of underpants.
If goods are not fit for that purpose then they are not of merchantable quality.
In Priest V Last (1838)4 M&W.399, a draper who had no special knowledge of hot water bottles
went to a shop of a chemist and asked for a hot water bottle. He was shown an American rubber
bottle which he bought. The bottle, though meant for hot water could not stand boiling water.
Accordingly, the bottle burst after a few days while it was being used by the buyer‘s wife and
she got injured. It was found that the bottle was not fit for use as a hot water bottle. It was held
that since the bottle could be used only for one particular purpose, there was a breach of implied
condition as to fitness and the seller was liable to pay damages
Grant V Australian Knitting Mills Ltd (1936) A.C. 85; under wears which were supplied
contained excessive sulphide chemical which could cause skin disease to a person wearing them
next to the skin. It was held that because of such defect, the under wears were not of
merchantable quality and the buyer was entitled to reject them

Multipurpose goods are gods that can be used for several purposes and according to Aswan
Engineering v Lupdine, it does not need to satisfy all the purposes, if it satisfies one, then it is fit
for that purpose. In this case the sellers supplied waterproofing material in plastic pails. These
collapsed spilling their contents, having been stacked on a dock in Kuwait by the buyer in piles
six high in bright sunshine and temperature up to 150º F for several days.
The buyer claimed they were not fit for the purpose.
Held – The sellers were not in breach of their duty. The packaging was fit for most ordinary
purposes
In Re Andrew Yule & Co. (1932) A.I.R. 879, a buyer ordered for Hessian cloth which is
generally used for packing purposes, without specifying the purpose for which he wanted it. The
cloth was supplied but the buyer found it unsuitable for packing food products because it had an
unusual smell. It was held that the buyer had no right to reject the cloth since it was generally
suitable for packing purposes. The buyer ought to have disclosed his particular purpose to the
seller in order to make him liable for the breach of implied condition as to fitness. However,
where goods are fit for one particular purpose, only or if the purpose of the goods is by
implication, ascertainable from the nature of the goods, then the purpose need not be expressly
told to the seller who is deemed to know the purpose by implication.
It should further be noted that the implied condition as to fitness applies only in case of sale of
goods to a normal buyer. If the buyer is suffering from an abnormality such as an allergy, he
must make such abnormality known to the seller, otherwise the seller will be discharged. He
won‘t be liable for any injury suffered.
In Griffith Y Peter Conway Ltd The plaintiff bought a Harris Tweed, tailor-made coat from
the defendants. Due to her abnormally sensitive skin, she contracted dermatitis from wearing the
coat. Only someone who had a similar skin type would have suffered from this problem.
Held – Plaintiff failed. The defendants did not know of the plaintiff‘s sensitive skin and could
not be expected to assume its existence. The coat was fit for most people. That since she had
sensitive skin and the coat was not known to cause that disease among the normal skin users, she
had failed to make known to the seller the purpose for which the coat was required in the
relevant sense.
Sale Under Patent or trade name; the proviso to S.15(a) is to the effect that in case of a
contract for sale of a specified article under its patent or other trade name, there is no implied
condition as to its fitness for any particular purpose. This is so because under such
circumstances, the buyer does not rely on the seller‘s skill and judgment but relies on the good
reputation which the goods have acquired and buys on the strength of that reputation. The
seller‘s duty therefore is limited to supplying the goods of the same trade name as demanded by
the buyer.
There is no implied condition as to fitness for any particular purpose. However, the condition as
to fitness will still apply if the buyer relies on the seller‘s skill and judgment as regards
suitability of the goods for a particular purpose made known to the seller, even though the goods
are described by their trade name.
Ashington Piggeries v Christopher Hill Ltd [1972] AC 441

Herring meal was sold for compounding into animal feed, but the meal was contaminated, this
rendered it mildly toxic to some animals but seriously toxic to mink. And the farmer suffered
heavy losses upon feeding the food compound to his minks.

Held: there was a reasonable expectation of quality where the ingredient suppliers knew the
purpose of the ingredient and had reason to know the facts. The farmer was entitled to damages,
the meal was unfit for its purpose, although deadly to mink, it was also toxic to other animals
Conditions As To Merchantability
This condition as to merchantability is only implied where the sale is by description. It has
already been discussed that where there is an implied condition in such instances/cases, goods
supplied should correspond with the description.
Sec 15(b) S.O.G. A. lays down another implied condition in such cases, that the goods should be
of merchantable quality. For this condition to apply, it is not only that the sale must be by
description but the following conditions must also be satisfied;
i. The seller should be a dealer (should deal) in goods of that description whether he is a
manufacturer or not
ii. The buyer must not have any opportunity of examining the goods or there must be some
latent defect in the goods, which would not be apparent on reasonable examination of the
same (goods).
iii. Where the buyer had an opportunity to inspect and examine the goods but he did not do so,
or if he has examined the goods, there is no implied condition as to merchantability as
regards the defects which such examination ought to have revealed.
The phrase ―merchantable quality ―means that the goods are of such quality and in such
condition that a reasonable man, acting reasonably, would accept them under the circumstances
of the case in the performance of his offer to buy them for his own use or to sell them again.
Courts usually look at several factors to determine this eg durability, appearance, and visible
defects among others.
The term “merchantable quality” is not defined in the text. However, Manning J in Doola
Singh & Sons V The Uganda Foundry & Machinery Works 12 EACA 33 said;
“The phrase “merchantable quality” must in its context be used as meaning that the article is of
such quality and in such condition that a reasonable man acting reasonably, would, after full
examination, accept it under the circumstances of the case in performance of his offer to buy that
article‖.
The facts of the case are that the defendant had sold a saw bench to the plaintiffs, which seized
after it had been installed and it had worked for 5 minutes. This was because the seller had
carelessly assembled it and had used wrong components. Manning J. had this to say;
“This is a case of a seller who deals in goods of this particular description and there is an
implied condition that the goods supplied by him shall be of merchantable quality. The proviso to
the sub-section clearly does not apply as prior to delivery there was no opportunity for such
examination by the appellant of the parts as would have revealed defects therein…. This is not a
case of a saw bench being no saw-bench at all but a case in which the material parts of the
machine are not of merchantable quality.”
Wilson v Rickett Cockerell & Co Ltd [1954] 1 QB 598

The claimant was a housewife who purchased a consignment of Coalite from the defendants.
When lit, a detonator in the Coalite exploded blowing up the fireplace. At first instance, it was
held that it was the detonator, which had exploded and the coalite itself was of merchantable
quality. Held - On appeal, the Coalite was sold in units of one bag, contained in which was the

explosive material, and that the bag of Coalite, as a unit, was not fit for its purpose as a
household fuel. Damages were awarded to the claimant under s 15(2) of the Act.
There is also the question of what is the buyer required to do to render the item
merchantable?
Heil v Hedges [1951] 1 TLR 512

Purchaser bought a pork chop which caused a tape worm infestation the buyer, claimed it was of
unmerchantable quality. Held - The judge found the chop was of merchantable quality: there
would have been no danger if it had been cooked properly before eating it, and the importance of
cooking pork properly was well known
So that if the buyer should do something to the goods the fact of doing it incompetently will not
render them unmerchantable.
However in; Grant v Australian Knitting Mills [1936] AC 85

The claimant bought some woollen underpants which contained a sulphite. When mixed with
water they formed an acid. When Mr Grant got out of hospital he sued the company.
Held – The goods were not of merchantable quality Simple washing would have removed the
chemicals, but it was not reasonable to expect the buyer to wash the pants before wearing them
Under S15(b) there is an exception to the effect that if the buyer‘s attention is drawn to the
defects before the contract is made or where the buyer examines the goods before the contract is
made and the examination ought to reveal the defects.
Note; goods are of merchantable quality if they are fit for a particular purpose for which the
goods of that description are commonly used having regard to any description applied to them
such as second hand goods. The relationship between a and b is that if goods are not fit for a
particular purpose, they are not of merchantable quality.
B S Brown & Son v Craiks Ltd [1970] 1 All ER 823
The appellants ordered a quantity of cloth from the respondents, for making dresses. The
respondents believed that it was for industrial purposes. The price
(36.25d per yard) was higher than normal for industrial fabric but not unreasonably high. The
cloth was not suitable for making dresses and the appellants cancelled the contract and claimed
damages. Both parties were left with substantial quantities of cloth; the respondents managed to
sell some of this for industrial purposes at 30d per yard.
Held - The cloth was of merchantable quality, because it could still be sold, even at a lower
price.
Bartlett v Sidney Marcus Ltd [1965] 1 WLR 1013

The plaintiff bought a used car for £950; he was warned of possible problems with the clutch and
was allowed a £25 discount on the basis that he would get this fixed himself, or he could pay
£975 and the seller would repair the clutch. He used the car for about a month, but the repair
would cost £48, the plaintiff tried to reject the car.
Held – The plaintiff‘s case failed. It was not unmerchantable just because the defect proved more
serious than expected.
Henry Kendall & Sons v Lillico & Sons Ltd [1969] 2 AC 31

The plaintiffs bought ―ground nut extract‖ without any previous experience of dealing with it.
They bought it to make poultry feed, unfortunately it contained a toxin that was poisonous to
poultry, but not for its normal use (cattle feed). The buyer fed it to his pheasants and most of
them were killed. The plaintiff claimed the product was of unmerchantable quality
Held – It was not unmerchantable just because it was not fit for one purpose, theoutcome may
have been different if the purpose it was to be used for had beendisclosed to the seller when it
was bought The use of the words ‗shall be‘ means the implied condition should continue for a
reasonable period of time after the execution of the contract.
Condition As To Wholesomeness
This condition is only implied in contracts for the sale of eatables. In such cases, the goods
supplied must not only comply with the description and be of merchantable quality but they must
also be wholesome i.e. free from any defect which may render them unfit for human
consumption.
In Frost V Aylesbury Dairy Co. Ltd. (1905) 1 KB 608, the plaintiff bought milk from a dairy
owner. The milk was contaminated with germs of typhoid fever. His wife on taking the milk
became infected and died of it. Held – The milk was not fit for the purpose; it is not a defence
that no amount of skill or judgement would have allowed the sellers to spot the defect. The
defendant was held to be liable in damage.
In Chapreniere V Massen (1905) the plaintiff bought a bun at a baker‘s and confectioners shop.
The bun contained a stone, which broke one of the plaintiff‘s teeth.
Held; The seller was liable in damages because he violated the condition of wholesomeness.
Trade usage 15(c)

S.15(c) means that apart from statute, a term relating to the quality or fitness for purpose may be
implied by usage or trade. Accordingly where a transaction is connected with a particular trade,
the custom and usage of that trade must be considered as part of the background against which
the parties contracted.
In Hutton v Warren it was stated that, ―it has been long stated that in commercial transactions
extrinsic evidence of custom and usage is admissible to annex incidents to written contracts in
matters with respect to which they are signed.
In Peter Darlington v Gosho Co Ltd, there was a sale of canary seed and according to the
custom of the trade, the buyer was not entitled to reject the goods for impurities in the seeds but
was entitled to a ribet on the price proportionate to the percentage of the impurities. Court held
that the contract was governed by this trade custom.
5.Condition On A SALE BY SAMPLE (Section 16 SOGA)

S.16(1) shows that in order to have a sale by sample, there must be consensus ad idem between
the parties. In addition there is a further agreement that the subject matter of the contract should
correspond with the specimen that the buyer has seen.

A sale by sample is a sale in which the buyer purchases goods under an agreed condition that
goods sold are as the goods shown to the buyer as a sample. This therefore means that the buyer
must have inspected a sample. The purpose of a sample was dealt with Drummond v Van Ingen.
In Drummond & Sons V Van Ingen (1822)1 B&C, 1 Lord MacNaughtern had
this to say;
“The function of the sample is to present to the eye the real meaning and intention of the parties
with regard to the subject matter of the contract which, owing to the imperfections of
language, it may be difficult or impossible to express in words. The sample speaks for itself. But
it cannot be treated as saying more than such a sample would tell a merchant of the class to
which the buyer belongs, using due care and diligence, and appealing to it in the ordinary way
and with the knowledge possessed by merchants of that class at that time.”
In Jafferali Abdul V Jan Mohammed 18 ACA 21; there was sale of 22 cases of plates by
auction. The auctioneer raised up a plate and said ―this is a sample‖ and that the intending
purchasers could inspect the goods in the auction room. It was later discovered that many of the
plates were broken and the issue was whether this was a sale by sample. It was held that this was
a sale by sample and that in the circumstances; the seller did not accord the buyer a reasonable
opportunity to examine the goods which amounted to a violation of the provisions of the Act.
When under a contract of sale goods are to be supplied according to a sample agreed upon by the
parties, the implied conditions are the following:-S.16(2)
a. That the bulk of the goods to be supplied by the seller should correspond with the
sample as far as quality is concerned.
b. That the buyer shall have a reasonable opportunity of comparing the bulk with the
sample.
c. That the goods shall be free from any defect rendering them unmerchantable which
would not be apparent on the reasonable examination of the sample i.e. there should not
be any latent defect in the goods. Where the defect is one that is easily discoverable by
the exercise of ordinary care and the buyer takes delivery of the goods after inspection,
there is no breach of implied condition and the buyer has no remedy since he ought to
have seen such defect on examination and rejected goods immediately.
In Lorymer V Smith (1822) two parcels of wheat were sold by sample. The buyer went to
examine the bulk a week after. One parcel was shown to him but the seller refused to show the
other parcel that was not there in the warehouse.
Held; The buyer was entitled to rescind the contract (i.e. to treat the contract as not having any
legal effect/power/or binding).
In Drummond and Sons Vs Van Ingen (1887) 12 AC 284, some mixed worsted coatings were
sold by sample. The goods when supplied corresponded to the sample but it was found that
owing to a latent defect in the cloth, coats made out of it would not stand ordinary wear and were
therefore unsaleable. The same defect existed in the sample but couldn‘t be detected on a
reasonable examination.
Held; The buyer was entitled to reject the cloth. Condition in a sale by sample as well as by
description when goods are sold by sample as well as by description, there is an implied
condition that the bulk of the goods shall correspond both with the sample and with the
description. If the goods supplied correspond only with the sample and not with the description,

or vise versa, the buyer is entitled to reject the goods. The bulk of the goods must correspond
with both.
In Wallis V Pratt (1911) AC 394 there was a contract of sale by sample of seeds described as
―Common English Sainfoin‖. The contract contained a term excluding all warranties express or
implied. The seed was sewn and when the crop was ready, it was discovered that the seed
supplied and the sample shown were a different and inferior variety known as ―giant sainfoin‖.
Held; That there was a breach of condition and the exemption did not protect the sellers. The
buyer was therefore entitled to recover damages. Condition as to fitness for purpose in most
cases, in a contract of sale, here is no implied condition or warranty as to the quality or fitness
for any particular purpose of the goods supplied. This is so because the rule of law is ―Caveat
Emptor‖ which means, ―Let the buyer beware‖.
However, despite the above, an implied condition is deemed to exist on the part of the seller that
the goods supplied shall be reasonably fit for the purpose for which the buyer wants them, if the
following conditions are satisfied;
i. The buyer should expressly or impliedly make known to the seller the particular purpose
for which the goods are required; and
ii. The buyer should rely on the seller‘s skill or judgement; and
iii. The goods sold must be of a description in which the seller deals in the ordinary course of
his business, whether he is the manufacturer or not. Therefore the purpose for which the
buyer wants to use the goods must be made known expressly to the seller, if the goods to be
supplied can be used for several purposes. Otherwise the condition as to fitness will not be
implied and the buyer will have no right to reject the goods merely because they are unfit
for the specific purpose for which he had in mind, if he did not disclose such purpose to the
seller.
In Andrew Yule & Company (1932) A buyer ordered for a Lessian cloth, which is generally
used for packing purpose, without specifying the purpose for which he wanted the same. The
cloth was supplied accordingly. On receiving the cloth, the buyer found that it was not suitable
for packing food products as it had an unusual smell.
Held; That the buyer ought to have disclosed the particular purpose for which he wanted the
goods to the seller in order to make him liable for the breach of an implied condition as to
fitness. Therefore the buyer had no right to reject the cloth, as it was suitable for packing
purposes.
Proof of conformity; this is by way of expert opinion given by an expert who has had a chance
to compare a sample with the bulk of the goods supplied.
The remedies available for breach; repudiation since it‘s a condition and damages for loss
incurred.
4. Condition where a sale is by both sample and description; S.4 provides that if goods are
sold by sample as well as by description, there is an implied condition that the bulk of the goods
shall correspond with both the sample and the description. In Nichol V Godts (1854) 10 EX 191,
the plaintiff agreed to sell some oil described as ―foreign refined rape oil ―, warranted only equal
to sample. The oil supplied, though corresponded with the sample, was adulterated with hemp

oil. It was held that since the oil supplied was not in accordance with the description, the buyer
was entitled to reject the same.
Warranty of Disclosing The Dangerous Nature Of Goods To The Ignorant Buyer

This warranty on the part of the seller is that in case the goods sold are of a dangerous nature he
will warn the ignorant buyer of the possible danger. It there is breach of this warranty the buyer
is entitled to claim compensation for the injury caused to him.
In Clarke V Army & Navy Co-operative Society Ltd (1903) IKB, 155 Romer J observed; “I
think that apart from any question of warranty, there is a duty cast upon a vendor, who knows of
the dangerous character of goods which he is supplying and also knows that the purchaser is
not, or may not be aware of it, not to supply the goods without giving some warning to the
purchaser of that danger”.
E.g. C purchases a tin of disinfectant powder from A. A knows that the lid of the tin is defective
and if it is opened without special care, it may be dangerous, but tells C nothing. C opens the tin
in the normal way where upon the disinfectant powder flies into the eyes and causes injury. A is
liable in damages to C as he should have warned C of the probable danger.
EXCLUSION OF SELLER’S LIABILITY
The law imposes liability on a seller where the seller does not comply with any of the implied
terms. However, S.54 provides that where any right, duty or liability would arise under a contract
of sale, by implication of law, it may be negatived or varied by express agreement or by the
course of dealing between the parties or by usage if such usage is such as would bind both
parties. Also S.15(d) an express warranty or condition does not negative a warranty or condition
implied by this Act unless inconsistent with it.
This provision is the basis for incorporation of exclusion clauses under contracts, whose effect is
to negate terms that would normally be implied in favour of the buyers. The section promotes
freedom of contact with the effect that when parties have agreed on terms of a contract, the
Courts should let those terms stand.
Exemption clauses are those which seek to enable one of the parties to a contract to exclude their
liability. Limitation clauses, although governed by the same principles, seek to restrict the
liability of a particular individual
A party to a contract who seeks to rely on the protection of an exemption clause has to be able to
show that it has become incorporated into the contract. There are three ways in which the person
may be able to do this.
Incorporation by signature
Should a party sign a contractual document they will be prima facie bound by the terms of that
contract, even if they have failed to read that document, unless they have been induced to sign by
virtue of some misrepresentation or fraudulent conduct. The general principle is well illustrated
by the case of L’Estrange v Graucob [1934] 2 KB 394, where the plaintiff purchased an
automatic vending machine. The purchase was made on terms set out in a document stated to be
a ‗Sales Agreement‘. A number of the terms were set out in what was described by the court as

‗legible, but regrettably small print‘. The plaintiff signed the ‗agreement‘ but did not bother to
read it. It was held that the plaintiff was bound by the terms of the agreement, so that the
exclusion clause contained in it meant that the defendants were not liable on the basis that the
machine was not fit for the purpose for which it was sold
Incorporation by notice
A party to a contract may be bound by its terms provided reasonable notice of those terms is
brought to the party‘s attention, despite the fact that the contractual document has not been
signed.
Incorporation by a previous course of dealing

The courts may infer notice of an exemption clause in a contract where there has been a previous
course of dealings between the parties in which exclusion clauses have been part of a contract,
either by virtue of the document being a signed document or by virtue of reasonable notice of the
clause being brought to the parties‘ attention.
The possibility of such an inference can be seen to operate in the case of Spurling v Bradshaw
[1956] 2 All ER 121, where the defendant and plaintiffs had previously dealt with each other for
a number of years. The defendant delivered eight barrels of orange juice to the plaintiffs for
storage, later receiving an acknowledgement of the deposit of the goods which exempted the
plaintiffs ‗from any loss or damage occasioned by negligence, wrongful act or default‘ either of
themselves or their servants. When some time later the defendant went to collect the barrels he
found them empty and thus refused to pay the storage charges. When sued for the charges he
counter-claimed for negligence, though the plaintiffs defended this action on the basis of the
exemption clause. The defendant, for his part, attempted to maintain that the notice of the
exemption clause was not contemporaneous with the making of the contract and as such could
not form part of the contract. The defendant admitted that in his previous course of dealings with
the plaintiffs he had been sent such a document though he had never bothered to read it. The
terms and conditions were held to be part and parcel of the present agreement by virtue of the
previous course of dealings that had taken place between the parties
Limitations.
Exemption clauses are to be construed contra proferentem
The rule here is that exemption clauses are construed against the party relying on them. The
result of this is that if the clause fails to deal with a particular matter then it is deemed not to
cover that matter. The case of Baldry v Marshall [1925] 1 KB 260 provides an example of this
process where the defendant car dealers were asked to supply a car ‗suitable for touring
purposes‘. The dealer recommended a Bugatti which proved eminently unsuitable for the
required use. The plaintiff rejected the car and claimed to recover the price. The contract
contained a clause excluding ‗guarantees or warranties, statutory or otherwise‘. The court held
that the stipulation as to the suitability of the car was a condition, not a guarantee or a warranty,
and as such was not covered by the exemption clause.
The attitude of the court in the above case was clearly to construe the clause against the person
seeking to rely on it. A further example can be seen in Andrews Bros (Bournemouth) Ltd v
Singer and Co. [1934] 1 KB 17 where there was a contract to purchase ‗new Singer cars‘. The
contract contained a clause which excluded ‗all conditions, warranties and liabilities implied by
statute, common law or otherwise‘. One of the cars delivered by the dealer was a used car and
when sued for damages he attempted to rely on the exemption clause. The Court of Appeal held

that the term regarding ‗new Singer cars‘ was an express term and thus the exemption clause,
which only excluded liability for implied terms, did not protect the dealer
Exempting liability for fundamental breach of contract

The processes analysed here are really only particular applications of the contra proferentem
rule discussed above. The courts developed a substantive rule of law that exemption clauses that
sought to exclude liability for fundamental breach would be ineffective. An example of the first
approach by the courts can be seen in the case of ;
Karsales (Harrow) Ltd v Wallis. [1956] 1 WLR 936

The defendant, having inspected a second-hand car and found it to be in good order, decided to
buy it on hire purchase terms. The hire purchase agreement contained a clause which stated that
‗no condition or warranty that the vehicle is roadworthy or as to its condition or fitness for any
purpose is given by the owner or implied therein‘. The car was eventually delivered one night
and, while it appeared to be the car the defendant had inspected, daylight revealed the car to be a
mere shell. The cylinder head and pistons were broken, valves were burnt out; in short, it was
incapable of propulsion. Not surprisingly the defendant refused to accept the car or pay the hire
purchase instalments and, when eventually sued, pointed to the condition of the car. The
plaintiffs in turn attempted to rely on the clause. The Court of Appeal held that there had been a
fundamental and substantial deviation between the thing contracted for and that which was
actually delivered. In such circumstances the plaintiffs could not avail themselves of the clause
and judgment was given to the defendant.
In Wallis V Pratt (1911) AC 394 there was a contract of sale by sample of seeds described as
―Common English Sainfoin‖. The contract contained a term excluding all warranties express or
implied. The seed was sewn and when the crop was ready, it was discovered that the seed
supplied and the sample shown were a different and inferior variety known as ―giant sainfoin‖.
Held; That there was a breach of condition and the exemption did not protect the sellers. The
buyer was therefore entitled to recover damages.
During the 1950s and 1960s, the courts developed the principle that as a matter of
law no exclusion clause could protect a party from liability for a very serious breach of
contract – even if the wording of the clause clearly covered the breach which had been
committed. However, this ‗doctrine of fundamental breach‘ was rejected by the House of
Lords in Suisse Atlantique Société d’Armement Maritime SA v NV Rotterdamsche Kolen
Centrale (1967). Their Lordships stated obiter that there was no rule of substantive law that an
exclusion clause could never excuse liability for such a breach. Whether the clause covered the
breach in question would always be a question of fact involving the interpretation of the contract.
Viscount Dilhorne stated:
“In my view, it is not right to say that the law prohibits and nullifies a clause exempting or
limiting liability for a fundamental breach or breach of a fundamental term. Such a rule
would involve a restriction on freedom of contract and in the older cases I can find no trace
of it.‖
This approach was confirmed in Photo Production Ltd v Securicor Transport Ltd
(1980). Photo Production employed Securicor to protect their factory by means of a visiting
patrol. A clause in their contract provided that ‗under no circumstances shall the [defendant]
company be responsible for any injurious act or default by any employee of the company‘. One

night, one of the Securicor guards lit a small fire inside the factory (for no rational reason so far
as anyone could tell). The fire got completely out of control and destroyed the plaintiffs‘
premises, at a cost of £615,000. The House of Lords held that there was no rule of law that a
fundamental breach could not be covered by an exclusion clause, and pointed out that since the
Suisse Atlantique case, the Unfair Contract Terms Act 1977 had been passed, ensuring that
exemption clauses could not be freely applied in consumer contracts. In commercial agreements,
their Lordships pointed out, the parties were likely to be of roughly equal bargaining power, and
to be able to cover their own risks by insurance (as in this case, where the case was actually
being fought to decide which of the parties‘ insurance companies should pay for the damage).
Therefore there was no need for a doctrine of fundamental breach. On the facts of the case, their
Lordships decided that the exclusion clause clearly covered negligence, and so the defendants
were allowed to rely on it.
FACTORS THAT INHIBIT A BUYER FROM ENJOYING LEGAL PROTECTION

UNDER IMPLIED CONDITIONS
1. Section 54 of the SOGA, which forms the basis for incorporation of exemption/exclusion
clauses in sale of goods contracts. Such clauses are absurd considering the high levels of
illiteracy, inequality of bargaining power between sellers/manufacturers on the one hand and
buyers/consumers on the other, coupled with the unscrupulous character of
sellers/manufacturers.
2. The doctrine of caveat emptor the law retains some aspects of the doctrine. The provision to
sec 15(b) SOGA limits the seller‘s liability where a defect in the goods was one, which could
have been seen upon a reasonable examination of the goods. The effect of the proviso to section
15(b) coupled with massive advertising is that consumers tend to buy goods under their trade
names or patent names, with result that they lose protection of the law under the implied
condition as to fitness for purpose.
3. Many sellers are inexperienced and as such they are not in position to tell whether or not the
goods, which they sell, are fit for the required purpose. As such, the buyers can hardly rely/
depend on the seller‘s skill and judgment to get goods which suit the required use.
4. Limitations concerning examination; i.e. where goods are bought in bulk or where they are
pre-packed, examination is not practical. Expiry dates are also tampered with while examination
of certain goods requires high technology and/or expertise.
5. The doctrine of privity of contract; this limits enforcement of a contract to parties to the
contract with the result that a buyer can not sue a manufacturer who would be in a better position
to pay off damages awarded by court. Similarly, where a buyer purchases goods for the benefit
of others, such as members of his or her household, these beneficiaries of the goods bought
cannot sue because they are not privy to the contract.
6. Enforceability of these terms is very limited due to the following;
i) Majority of the buyers are ignorant of them
ii) At times the value of goods is so small that court would not be a viable option of enforcing
the terms
iii) Court process is timely and time consuming
Therefore protection of the buyer by law under implied conditions is very limited and so
inadequate to be relied upon by an ignorant buyer.

THE DOCTRINE OF CAVEAT EMPTOR
This is a major doctrine in the law of contract. It can also be referred to as the ―Maxim of Caveat
Emptor‖. The maxim ―Caveat emptor‖ means, ―let the buyer beware‖ according to this doctrine,
it is the duty of the buyer to be careful while purchasing goods of his required specification. On
receiving the goods the buyer has a right to examine the goods and ascertain whether they
comply with the contract and where they do not, he can reject them. But where he accepts them
and later finds a defect, which could have been detected upon a reasonable examination, then
caveat emptor comes into play and he cannot reject the goods but can only sue for damages.
Where such buyer does not make any inquiry regarding the goods he is purchasing, the seller is
not bound to disclose every defect in the goods of which he may be cognisant (know about). The
buyer must examine the goods thoroughly and ascertain that the goods he is supplied with are
suitable for the purpose for which he wants them or that they comply with the contract. If the
goods turn out to be defective or do not suit his purpose, the buyer cannot hold the seller liable
for the same, as there is no implied undertaking by the seller that he shall supply such goods as
suit the buyer‘s purpose.
If therefore, while making purchases of goods the buyer depends upon his own skill and makes a
bad choice, he must curse himself for his own folly (stupidity), in the absence of any
misrepresentation or fraud or guarantee by the seller.
In Ward V Hobbs (1878) AC 13, certain pigs were sold by auction ―with all faults‖. The pigs
were suffering from typhoid fever and all of them but one died. They also infected a few of the
buyer‘s own pigs.
Held; that the seller was not bound to disclose that the pigs were unhealthy. Caveat emptor being
the rule, the buyer could not claim damages from the seller as he ought to have examined the
pigs before accepting them to ascertain whether they were of good health.
TRANSFER OF PROPERTY
This is the process by which ownership of goods is transferred from the seller to the buyer. It is
different from possession that is physical custody or control of the goods. It should be noted that
the buyer of goods would at the end of the day like to take possession and own the goods,
without this, the very object of sale would not be achieved.
Property in the goods is said to be transferred from the seller to the buyer when the buyer
acquires proprietary rights over the goods and the obligations linked thereto. Transfer of property
is the essence of a contract of sale, therefore the moment it happens is significant because of the
following reasons.
a. Ownership; when property passes, the seller ceases to be the owner of the goods and
the buyer acquires ownership and can therefore exercise the proprietary rights over the
goods for example suing for non delivery of the gods.
b. Risk passes with property; under S.21 the general rule is that prima facie risk passes
with the property irrespective of whether delivery has been made or not. If goods are
damaged or destroyed, the loss shall be borne by the person who was the owner of the
goods at the time of the loss or destruction but not on the basis of possession of the

goods. Whoever is the owner of the goods at the time loss is occasioned bears the loss
e.g. X buys goods from R and property passes to him but the goods remain in the
warehouse. Before delivery of the goods to X, a fire sets out in R‘s warehouse and all the
goods are destroyed. X must bear the loss and pay the price of the goods to R, if he has
not paid yet.
c. Action against a third party; Instituting actions against third Parties where after a
contract of sale the goods have been damaged by a third party, only the person in whom
property is vested, i.e. who had property in the goods can take action against the wrong
doer.
d. Suits For Price; The seller can only sue for the price of the goods supplied only if the
property in the goods has passed to the buyer.
e. Insolvency Of The Seller Or Buyer; In the event of insolvency of the buyer or seller,
an issue will arise as to whether the official receiver can take over the goods or not and
this will depend on whether the property in the goods was with the party who has become
insolvent. If property in the goods was with the party who has become insolvent, the
goods are vested in the official receiver.
RULES REGARDING TRANSFER OF PROPERTY

Transfer of property is determined by the nature of goods and the intention of the parties.
1. Nature of goods. This depends on whether the goods are specific or unascertained.
S.17 provides Where there is a contract for the sale of unascertained goods, no property in
the goods is transferred to the buyer until the goods are ascertained. This could be interpreted
to mean that property in specific or ascertained goods passes at the time of sale.
In Kursell v Timber Operators & Contractors Ltd [1927] 1 KB 298
The seller agreed to sell all merchantable timber defined in the agreement. The contract was to
remain in force for 15 years. Forest expropriated by Latvian Government passed a law by which
the forest became the property of the government with all property and rights of vendors and
purchasers in the forest confiscated. This made it illegal to perform the contract. Seller sued
buyer for the price, but to succeed, had to prove that property had passed. The seller argued that
the goods were specific, and that property had passed at the time the contract was made. Held -
The goods had not been identified at the time of the contract. Only trees conforming to certain
measurements could be cut. This was because merchantable timber was subject to change over
time as the trees grew, and there was no identification of which trees were included and was
therefore not in a deliverable state hence property in the timber had not passed.
2. The intention of the parties; S.18(1) provides 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
Under S.18(2), the intention of the parties as to when property is intended to pass shall be
determined from the contract terms, the conduct of the parties and the circumstances of the case.
The parties may intend to pass the property at once at the time when the contract of sale is made
or when the goods are delivered or when the goods are paid for.

In Tarling v Baxter (1827) 6 QB; A agreed to sell to B a stack of hay on 4th January for the
price to be paid on 4th February, the same to be allowed to stand on A‘s premises until 1st May. B
stipulated that the hay should not be cut until it was paid for. The haystack was destroyed by fire.
Held; this was a contract for an immediate and not a future sale and that property in the hay had
passed immediately to the buyer and thus the loss fell on him. Where there is an immediate sale,
property vests in the buyer.
In Dennant v Skinner and Collom [1948] 2 KB 164
At auction, a van was bought by cheque. When paying the buyer signed a statement stating that
ownership would not pass to him until the cheque was cleared. He sold the car to a third party
and there was a dispute regarding ownership of the car
Held – The contract was complete when the auctioneers hammer fell, the third party therefore
had good title to the car. (If s18 r1 is satisfied, property passes immediately.) The statement was
made too late
Rules for establishing the time of passing the property.

Where the intentions of the parties cannot be determined or judged from either contract or
conduct or other circumstances, it can be determined from the rules enshrined in S.19 (a-f)
a. Specific goods in a deliverable state;
When goods are in a deliverable state; 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 as soon as the
contract is made, and it is immaterial whether the time of payment of the price or the time of
delivery of the goods or both are postponed e.g. X buys a bicycle for 20,000/= on a months‘
credit and asks the shopkeeper to send it to his house and the shopkeeper agrees to do so, the
bicycle immediately becomes the property of X.
This only applies where the contract is unconditional which means that the sale is not subject to
any conditions that need to be fulfilled before property can pass. Goods also have to be in a
deliverable state. S.1(4) provides Goods are in a ―deliverable state‖ within the meaning of this
Act when they are in such a state that the buyer would under the contract be bound to take
delivery of them.
In Bwiriza v Osapil (2003) EA 30 it was held that withholding of the logbook meant that yhe
contract was a conditional one subject to the full payment of the price, therefore property could
not pass at the signing of the contract as had been contended by the plaintiff, the High Court and
the Court of Appeal.
In Anwar v Kenya Bearing Co (1973) 1 EA 352

The appellant bought a lot of tractors from the respondent and when he came to collect them, he
alleged that some of them were missing. He failed to meet the cheques and the promissory notes
given for the purchase price alleging a total failure of consideration. Held; the transaction was
for specific goods in a deliverable state. Property had passed to the buyer and as the appellant
had taken delivery of a substantial part of the goods there was no total failure of consideration
b. When goods have to be put into a deliverable state:
Where there is a contract for the sale of specific goods and the seller has to do something for the
purpose of putting the goods in a deliverable state e.g. packing the goods, loading them aboard a
ship, rail, filling them in containers etc, the property does not pass until such thing is done and

the buyer has notice thereof. It should be noted that the act of merely putting the goods into a
deliverable state would not result in the transfer of property in the goods to the buyer. It is
further necessary that the buyer must have notice thereof i.e. the fact that the goods have been
put in a deliverable state must come to the knowledge of the buyer.
Underwood Ltd v Burgh Castle Brick and Cement Syndicate [1922] 1 KB 343
The plaintiffs sold a ―condensing engine‖ which was bolted to a floor. It needed two weeks to be
uprooted and was consequently damaged by the sellers when it was lifted from its fixings.
Plaintiffs argued property passed when contract was made.
Held – property had not passed as the engine was not in a deliverable condition when the
contract was made, as the engine was a fixture.
In Phillip Head and Sons v Burgh Castle Brick and Cement;

The plaintiff sold carpet to the defendant which they were required to lay. The carpet was
delivered to D‘s premises but was stolen before it could be laid. Held; that the carpet was not in
a deliverable state because it was a heavy bundle and very difficult to move. Therefore the
property had not passed from the plaintiffs to the defendants.
c. Specific goods in a deliverable state whose price has to be ascertained.
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 such act or thing is done and
the buyer has notice thereof.
In Naika Bruce v Commonwealth (1926) AC 77
A sold Cocoa to B at an agreed price it being arranged that B would resell the goods and that the
cocoa would be weighed by the purchaser in order to ascertain that the true measurements had
been given. B resold the cocoa, however a sought to rescind this sale between B and a third party
contending that weighing the cocoa was a condition to the contract and that no property had
passed to B. Held; the original weighing and ascertainment of the price was sufficient and
property had passed to B therefore the equivalent of S.19(c) could not apply.
In Zagury V Furnell (1809) A sold to B 289 bales of goatskins, each bale containing five
dozens and the price was for a certain sum per dozen skins. It was the duty of A to count the
goatskins in each bale. Before A could do the same, the bales were destroyed by fire.
Held; That the property in the goods had not passed to the buyer (i.e. B) as something still
remained to be done by the seller (A) for ascertaining the price (counting the skins in each bale),
therefore the seller had to suffer the loss.
d. When goods are delivered on approval;
When goods are delivered to the buyer on approval or ―on sale or return‖, or on some other
similar terms, the property there in passes to the buyer;
 When he signifies his approval or acceptance to the seller or does any other act
adopting the transaction e.g. pledges the goods or resells them.
 If he does not signify his approval or acceptance to the seller but retains the goods
without giving notice of rejection beyond the time fixed for return of the goods or if no
time has been fixed, beyond a reasonable time.

The essence of a sale or return is that the person to whom the goods have been delivered has the
right for a period of time to retain them and is given the option during that period either to
purchase the goods for himself or dispose of them to another on his own account.
In Poole v Smith’s Car Sales (1962) 1 WLR 744
The Plaintiff having no room for a car which he wished to sell arranged in August for the
defendants to keep the car at their premises on a sale or return basis, to sell the car if they could,
provided the plaintiff received a minimum sum of 325 pounds for it. In October and November,
the plaintiff repeatedly asked the defendant to return the car and at the end of November it was
returned in a badly damaged condition and the plaintiff refused to accept it. Held; the contract
was one of delivery on sale or return basis and accordingly since there was no rejection of
property, it passed to the defendant after a reasonable time and that in the circumstances a
reasonable time had elapsed, so the defendants were liable for 325 pounds.
e. Transfer of property in unascertained goods;
It should be remembered that unless goods have been ascertained, no property in the goods
passes from the seller to the buyer. Under S.19(e) property in the goods passes to the buyer
where;
 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. Such assent may be express or implied and may be given either
before or after the appropriation is made;
Where the goods contracted to be sold are not ascertained or where they are future goods, the
property in the goods does not pass to the buyer unless and until the goods are ascertained or
unconditionally appropriated to the contract so as to bring them in a deliverable state either by
the seller with the buyer‘s assent or vice versa.
Until the goods are ascertained or appropriated, there is merely ―an agreement to sell‖. E The
contract can specify what amounts to appropriation but often identification and the assent will be
by the seller physically taking goods to the buyer and the buyer accepting them or the buyer
going to the seller who hands over the goods. Appropriation requires an irrevocable
indemnification of the goods that are the subject of a contract. The process of ascertainment or
appropriation consists in earmarking or setting apart/aside goods, which are the subject matter of
the contract. It involves separating, weighing, measuring, counting, or similar acts done in
relation to the goods with an intention to identify and determine the specific goods to be
delivered under the contract.
The difference between ascertainment and appropriation is that where as ascertainment can be a
unilateral act of the seller, i.e. he alone may set a part the goods, ―appropriation‖ involves the
element of mutual consent of the seller and the buyer i.e the ascertainment of the goods must be
brought to the knowledge of the buyer.
Essentials of valid appropriation

The following must exist for a valid or proper appropriation of the goods;
i) The appropriation must be of goods answering (in accordance with) the contract description,
both as to quantity and quality.
ii) The appropriation must be intentional i.e. it must be made with the intention to appropriate
goods to a specific contract and it must not be due to mere accident or mistake.
iii) The appropriation must be made either by the seller with the assent (consent/approval) of the
buyer or by the buyer with the assent of the seller. Assent of the other party is therefore a
prerequisite, whether before or after appropriation is made.
If the seller delivers the goods to a carrier still mixed with other goods, no property can pass
because the goods are still unascertained despite what would otherwise amount to an
unconditional appropriation.
Healey v Howlett [1917] 1 KB 337
Howlett (in Ireland) supplied fish to England, via an agent in Holyhead, the agent, at Holyhead,
selected parcels of fish for dispatch to customers in England. Howlett sent 122 boxes of mackerel
to the agent who sent 20 boxes to London. Because the fish were delayed at Holyhead it had
gone bad by the time it arrived. The appellant refused to pay for the fish.
Held – The fish had gone rotten before the goods were ascertained, there was no appropriation
until the boxes were earmarked by the agent in Holyhead, so property could not pass to the
buyer, therefore, the buyer could reject the goods
It is possible that goods not identified can become identified not by selection but by the removal
of the remainder.
Karlshamns Oljerfabriker v East Navigation Corp [1982] 1 All ER 208
The plaintiffs bought 6,000 tons of copra on one ship which was part of a load of 22,000 tons.
The ship docked at Hamburg and offloaded 16,000 tons, on arrival in Sweden it was found that
the remaining cargo was damaged by water; the buyer claimed that property had not passed.
Held – Property had passed. It was only when the copra left on the ship was for the plaintiff, that
the goods became ascertained by process of `exhaustion` and property passed to the plaintiff
Re Blyth Shipbuilding Co [1926] Ch 494

―A‖ agreed to build a ship for ―B‖, the price paid in installments as the work progressed, the
contract stated that on payment of the first installment ―the vessel and all materials and things
appropriated for her should become and remain the property of the purchaser”. ―A‖ went
bankrupt before the ship was completed and there was semi fabricated materials lying about the
yard that were to be used on the ship.
Held – The incomplete ship was the property of the buyers and that which was affixed to the
ship. The materials lying in or around the yard had not been sufficiently appropriated to become
the property of the ship buyers
East African Navigators Ltd v Mohanlal Mathuradas & Bros[1968] 1 EA 535

The Rufiji Co-operative Society ordered goods from the respondents, a firm of general
merchants in Dar-es-Salaam. There had been similar dealings between these parties before and
the usual practice was that the Society would only pay for goods on delivery. The respondents

delivered the goods to the appellants for transportation by sea to Ndundu, on the terms of a
document issued by the appellants to the respondents. The respondents insured the goods and
paid the freight, adding the cost of transport to the price of the goods. The goods were lost on the
way owing to the negligence of the appellants. The respondents themselves sued the appellants
for the value of the goods. Whether the respondents had any right to sue?
Held –
( i) there was such a contract here between the respondents and the appellants upon which the
respondents could sue, even though the property in the goods had passed to the buyer;
(ii) although the property passed to the Society as consignee the risk pending delivery of the
goods remained with the respondents; but this did not give the respondents a proprietary interest
in the goods entitling them to sue in contract (though it probably would suffice to support a cause
of action in tort);
(iii) it did not necessarily follow that, because the respondents could sue, they would recover the
full value of the good
TRANSFER OF TITLE
The general rule relating to transfer of title is that the seller cannot transfer to the buyer of goods
a better title than he himself has. Thus where goods are sold by a person who is not the owner of
such goods, the buyer acquires no better title than the seller had. If the seller‘s title is defective,
the buyer‘s title will also be subject to the same defect. The rule above is expressed by the
maxim ―Nemo det quod non habet‖, which means, ―no one can give what he has not got‖.
The rationale of the rule is to protect the true owner of goods against anyone who buys his goods
from a person who has sold without his authority or without having any right in them.
Section 22 (1) S.O.G.A states that where the goods are sold by a person who is not the owner
thereof and who does not sell either 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.
Therefore, if a thief disposes of (sells) stolen property, the buyer acquires no title though he may
have purchased the goods bonafide for value and the real owner of the goods is entitled to
recover possession of the goods without paying anything to the buyer.
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 Bishopsgate Motor Finance Corp. Ltd. V. Transport Brakes Ltd. [1949] 1 KB 332
“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.‖

In Cundy v Lindsay (1878) the plaintiffs received an order by post for a large number of
handkerchiefs from a Mr Blenkarn of 37 Wood Street, Cheapside. Mr Blenkarn rented a room at
that address, and further down the road, at number 123, were the offices of a highly respectable
firm called Blenkiron & Co. On the order for the handkerchiefs, Blenkarn signed his name so
that it looked like Blenkiron. The plaintiffs sent off the goods, addressed to Blenkiron & Co; Mr
Blenkarn received them, and by the time the fraud was discovered, he had sold most of them to
the defendant, Cundy, who bought them in good faith. The plaintiffs sued the defendant to get
the goods back, and whether they could be successful in this depended on whether there was a
contract between the plaintiffs and Blenkarn. If there was, Blenkarn would have become the
owner of the goods and so would have been able to transfer ownership to the defendant; if not,
the plaintiffs would be able to get their goods back. The House of Lords held that there was no
contract between Blenkarn and the plaintiffs, because they had intended all along to deal with
Blenkiron & Co, and not with a Mr Blenkarn, of whom they had after all never heard. The
plaintiff was entitled to recover the goods.
Mamujee Bros Ltd v Awadh[1969] 1 EA 520

One Shah delivered to the plaintiff a forged order note alleged to have been drawn by a limited
company requesting the plaintiff to deliver goods to Shah. The goods were delivered to Shah
who purported to sell them to the defendant. After discovery of the fraud, Shah was convicted of
forgery, uttering a false document, and obtaining goods by false pretences, contrary to the Penal
Code, ss. 349, 353 and 313. The plaintiff and the defendant both claimed to own the goods.
Held –
( ii) the plaintiff intended to contract only with the limited company and delivery to Shah was
only as the agent of that company;
(iii) Shah accordingly obtained no title to the goods and could pass no title to the defendant.
Exceptions To The Rule Of “Nemo Dat Quod Non Habet”

There are the following exceptions to this rule.
Under these exceptions, a valid title can be given by a person who is not the owner of the goods.
The exceptions include;
1. Transfer Of Title By Estoppel

Estoppel arises when one is precluded from denying the truth of anything that he has represented
as a fact although it is not a fact. Thus estoppel means that a person who by his conduct or
words leads another to believe that a certain state of affairs existed, he would be estopped from
denying later on that such a state of affairs did not exist. The essence of the rule of estoppel is
that it will be unfair to allow a party to depart from a given state of affairs that he permitted
another person to believe to be true.
The first exception is provided by the doctrine of estoppel which is embodied in the concluding
words of S. 22 ―… 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.
Estoppels by representation
Estoppel by representation is where the true owner of goods, by words or conduct, voluntarily
represents or permits it to be represented that another person is the owner of the goods, any of
which, by the person, is valid against the true owner as if the seller were actually the owner
thereof, with reference to anyone buying the goods in reliance on the representation which must
be clear and unequivocal. Thus, mere parting with possession of goods is not conduct which
estops the true owner from setting up his title. Parting with possession of goods alone is not a
representation of ownership, even if the person receiving the goods has the authority of the true
owner to deliver them to third parties, otherwise, any bailor would be estopped from denying the
bailee‟s right to sell the goods. There must be something more; the true owner must have so
acted as to mislead the buyer into the belief that the seller was entitled to sell the goods. This
representation must be made by the owner not the seller and further must be addressed to the
buyer who alleges to have relied on it and in addition, a buyer who is unaware of the
representation cannot establish such reliance.
Under sale of goods law, estoppel may arise in any of the following ways:-
-The owner standing by when the sale is effected, or
-The owner assisting in the sale, or
-The owner permits goods to go into the possession of another with the intent that the other party
shall have such possession and title thereof.
-If he has otherwise acted or made representations so as to induce the buyer to alter his position
to his prejudice.
In O‟Connor V Clark, M the owner of a wagon allowed one of his employees K, to have his
name painted on it. M did so for the purpose of inducing the public to believe that the wagon
belonged to K. C purchased the wagon from K in good faith. C acquired a good title as M was
estopped from denying K‘s authority to sell.
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.
Kapadia v Laximidus (1964) EA

On the appellant‘s instructions to Jethalal the goods were shipped to Mombasa and therefore had
to be received and dealt with by someone. To enable the goods to be so received and dealt with
the appellant knowingly allowed Jethalal to send to the respondent invoices which on their faces
were documents recording the fact that the goods had been sold by Jethalal to the respondent for
specified sums, which thus impliedly warranted the authority of Jethalal to sell the goods; and
which according to the custom of the port enabled the respondent to obtain the possession of the
goods.

Held; that the true common law principle is that where the true owner of goods, in breach of his
duty to a third party, arms his agent, or knowingly permits his agent to arm himself, with some
indicia of title to the goods and allows the agent to deal with the goods as if they were his own,
then the true owner is precluded as against this third party (and any subsequent dealer) who deals
bona fide with the goods and without the knowledge of the rights of the true owner from denying
the authority of the agent to deal with the goods in the manner in which they were dealt with. In
such a case it is unnecessary that the agent should have possession of the goods.
The appellant thus armed Jethalal, or knowingly permitted Jethalal to arm himself, with what
were, in the circumstances of this case, indicia of title to the goods and not mere delivery orders
and thus allowed him to deal with the goods as if they were his. As the appellant knew that the
goods were being sent to the respondent he was under a duty to inform the respondent, or to
ensure that the respondent was informed, of his (the appellant‘s) interest in the goods. He did not
do so; and the respondent, unaware that the appellant was the true owner, dealt with the goods in
a manner inconsistent with the appellant‘s rights. On these facts the appellant is precluded from
denying the authority of Jethalal to deal with the goods as he did, and is thus precluded from
asserting that the respondent dealt with the goods wrongfully or is liable to the appellant in
conversion
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.
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 negligence is available where the owner has been negligent in allowing the seller to
create an appearance of ownership of the goods. It is necessary for the buyer to show, first, that
the true owner owed him a duty to be careful; secondly, that in breach of that duty the owner was
negligent; and, thirdly, that this negligence was the proximate or real cause of the buyer being
induced to buy the goods and part with the price to the seller. The requirement of a duty of care
is essential to this type of estoppel.
In Mercantile Credit Co. Ltd V. Hamblin 27; the Court of Appeal held that there was a
sufficient relationship of proximity between the defendant (the owner) and the plaintiff (the
buyer) to give rise to a duty of care; however, the plaintiff failed to establish any breach of the
duty or that the defendant‘s negligence was the effective cause of its loss.
It should be noted, however, that there is no general duty of care on the owner of goods to
protect his own interest in those goods or to protect the possible interest of third parties and such
owner may sue for recovery of those goods should they fall in the hands of another person. The
courts have been reluctant to rule that the owner has a duty of care to the whole world such that
when he gives possession to another party he cannot assert his title.
Mercantile Bank of India Ltd v Central Bank of India Ltd (1938)1 ALLER
The appellant and respondent banks were in the habit of making loans to merchants on the
security of goods consigned to them, the practice being that the merchant should deliver to the
bank the several railway receipts covering the consignment, and should give at the same time a
promissory note for the amount advanced, and a letter of lien. The bank would then pass the
railway receipts on to their own go-down keeper, so as to enable him to obtain possession of the
goods. In practice, the bank‘s go-down keeper, in order to avail himself of the merchant‘s
services, would hand the railway receipts back to the merchants, for the specific purpose of
clearing the goods and storing them in the bank‘s go-down. A firm of merchants carrying on
business as buyers and exporters of ground nuts obtained a loan from the respondent bank upon
the security of a consignment of ground nuts, and, on the return to them of the railway receipts,
in accordance with the usual practice, fraudulently obtained a second advance from the appellant
bank—who were unaware of the pledge to the respondent bank—upon the security of the same
goods by pledging the same railway receipts with them. In some cases the railway receipts had
been stamped with the respondent bank‘s stamp, but in general the respondent bank had omitted
to do so. When subsequently the merchants were declared insolvent, the respondents brought an
action against the appellants for conversion of the goods the subject-matter of the railway
receipts:—
Held – (i) the respondents were not estopped, by their conduct in returning the receipts to the
merchants, from setting up their title to the goods as against the appellants. They had not
committed any breach of duty owing either to the appellants or to anyone else. They had no
reason to think that the documents would ever be handed to the appellants. All that they did was
to deal with their own property, as pledgees, in the usual course of business, which was well
known to, and had been followed by, both the appellants and the respondents. No authority had
been given to the merchants to deal with the goods otherwise than by handling them for the
limited purpose of clearance, and it was impossible to say that the respondents made any
representation to the appellants that the merchants had authority, or were entitled, to obtain an
advance on the goods for themselves.
(ii) the omission to place the bank‘s stamp upon the receipts did not create any liability because
there was no duty as between the appellants and the respondents to stamp the receipts.

Central Newbury Car Auctions Ltd v Unity Finance Ltd and Another (1956)3 ALLER
The plaintiffs, who were motor car dealers, had bought a second-hand car at an auction,
acquiring the registration book in which the last owner, A, had not signed his name. As dealers,
the plaintiffs did not register any change of ownership on their purchase. Subsequently they
agreed with C for his acquiring the car on hire-purchase. They took from C another car in part
exchange, and he completed a form of proposal for hire-purchase of the car which the plaintiffs
were selling. The proposal was on the basis that a finance company would buy the car. In a
dealer‘s statement to the finance company the plaintiffs agreed to sell the car to the finance
company and stated that delivery of the car would not be made to C except on instructions from
the finance company. Notwithstanding this statement, the plaintiffs delivered the car and its
registration book to C. The finance company, when the proposal was communicated to them,
rejected it, as the address given by C was fictitious. The car was subsequently sold by a man
representing himself to be A, the person last named as owner in the registration book, to the third
parties. The third parties‘ manager compared the signature on the receipt that he took from the
vendor of the car with the last signature in the registration book which purported to be the
signature of A., and checked that the car was not on hire-purchase. Subsequently the third
parties parted with the car on hire-purchase of it by the second defendant, the car being bought
on this occasion by another finance company, the first defendants. The plaintiffs brought an
action for damages for conversion of the car against the second finance company and the
ultimate hire-purchaser.
Held – Denning LJ dissenting): by delivering the car registration book, as well as the car itself,
to C the plaintiffs had not given him the means of appearing to be the owner or of having
apparent authority to sell the car, since the registration book was not a document of title to the
car, and since delivery of the car without more would not have amounted to giving C apparent
authority to sell it; and therefore the plaintiffs, who were the true owners of the car, were not
estopped from denying the title of the third parties to sell the car to the first defendants, and were
entitled to recover damages for its conversion.
Per Morris LJ. it cannot be assumed that the person in possession of a car and its registration
book is the owner of the car. The absence of a registration book when a car is being sold will
naturally give rise to much inquiry. The existence of one in the hands of a seller does not
remove all occasion for inquiry and does not prove legal ownership
Appeal allowed.
2. An unauthorized sale by a mercantile agent

A mercantile agent is an agent who in his customary course of business as such agent, has
authority to sell goods or to buy goods or to raise money on the security of the goods. Thus as a
rule, a mercantile agent having authority to sell goods conveys a good title to a buyer. Therefore
such agent can convey a good title to the buyer even though he sells goods without having any
authority from the principal to do so, if the following conditions are fulfilled/satisfied; (in respect
of the mercantile agent).
i) He should be in possession of the goods or documents of title to the goods in his capacity as
mercantile agent and with the consent of the owner.
ii) He should sell the goods while acting in his ordinary course of business
iii) The buyer should act in good faith without having any notice at the time of the contract that
the agent has no authority to sell.

S. 58 (2) provides that common law rules relating to the law of principal and agent continue to
apply to contracts for the sale of goods. Therefore agency is an exception to the general rule laid
down in S.22(1)
Folkes v King, where Folkes owned a car and delivered it to a mercantile agent for sale at not
less than £ 575. The agent sold the car to King for £ 340. King bought it in good faith. Folkes
sued King to recover the car. The court held that for the purposes of sale, King had acquired a
good title. The purpose of this law is to protect third parties since in such sales, an impression is
created that the agent owns the subject matter of sale.
Oppenheim v Fraser; in this case the plaintiff gave diamonds to an agent who was a diamond
broker. The agent agreed with the plaintiff to sell the diamonds to 2 firms. He however, instead
sold them to other people other than the agreed firms. It was held that the agent was guilty of
larceny by trick and hence had sold without the consent of the plaintiff and was as such not a
mercantile agent. Fletcher Moulton LJ said ([1907] 2 KB 71):
―A mercantile agent is as capable of stealing as any other man, and, if he has stolen the
goods, there can be no question, in my opinion, that he must be taken to hold possession of
them without the consent of the owner. One of the recognised methods of stealing at
common law is distinguished from other types of larceny, and called larceny by a trick, but
it is in the eye of the law pure stealing.‖
Pearson v Rose & Young Ltd (1950)2 ALL ER 1027
The plaintiff gave possession of his motor car to H, a motor car dealer and a mercantile agent
within the Factors Act, 1889, s 2(1), for the purpose of inviting offers to purchase it. By means
of a trick H induced the plaintiff to hand him the registration book relating to the car. Later the
same day H, acting without the authority or knowledge of the plaintiff, sold the car and handed
the registration book to the fourth party who acted in good faith without notice of any absence of
authority. The fourth party subsequently sold the car to the third party, and the third party sold it
to the defendants. In an action by the plaintiff against the defendants claiming damages for the
conversion of the car,
Held – Though the plaintiff consented to H‘s having possession of the car as a mercantile agent,
within the meaning of s 2(1), he did not consent to his possession in that capacity of the
registration book; the sale of a car without the registration book relating to it was not a sale of
goods ―in the ordinary course of business‖ within s 2(1), and the consent necessary to pass a
good title to a purchaser under s 2(1) was a consent to possession of both the car and the
registration book; and, therefore, H was unable to pass a good title to the fourth party
Lloyds Bank Ltd v Bank of America National Trust and Savings Association (1938) 2 ALL
ER 63
A company pledged certain bills of lading with the plaintiff bank as security for bills of exchange
or advances. The letter of hypothecation gave the bank power without further reference to the
company to sell or otherwise deal with the goods as though the bank were the absolute owners
thereof. The plaintiff bank then handed the bills of lading back to the company at its request, so
that they or the goods represented by them might be sold and the proceeds held in trust for the
plaintiff bank, as stipulated in trust receipts which were given to the plaintiff bank. Instead of
selling the bills of lading and goods and paying the proceeds to the plaintiff bank, the company

pledged the bills of lading to the defendant bank by way of security for advances made. The
company became insolvent, and the plaintiff bank sought to recover from the defendant bank the
bills of lading or the goods or damages for their conversion:—
Held – (i) the rights of ownership in these bills of lading had by the course of dealing between
them become so divided between the company and the plaintiff bank as to make them jointly
owners within the meaning of the Factors Act 1889, s 2(1).
(ii) alternatively the letter of hypothecation made the plaintiff bank the owner of the goods
within the meaning of that section.
(iii) the bills of lading had in either case come into the company‘s hands with the consent of the
owners, as so determined.
(iv) the company, acting as mercantile agent, having pledged the bills of lading, the defendant
bank had acquired a good title to them.
3. Sale by a Joint Owner

Where one of the several joint owners of goods has the sole possession of them by permission of
the co-owners, the property in the goods is transferred to any person who buys them from such
joint owner in good faith without notice of the fact that the seller has no authority to sell.
Otherwise the buyer would have obtained only the title as co-owner and become merely a co-
owner with the other co-owners.
Refer to Loyds Bank v Bank of America above.
4. Sale By Seller In Possession After Sale
Where a seller after having sold the goods to a buyer continues to be in possession of such goods
or of the documents of title to them and again resells or pledges them either himself or through a
mercantile agent, he will convey a good title to the buyer or the pledgee provided the buyer or
the pledgee acts in good faith and without notice of the previous sale. For this exception to
apply, it is essential that the possession of the seller must be as seller and not as hirer or bailee.
S.25(1) provides that 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 agent acting for him or her, of the goods or documents of title under any sale, pledge
or other disposition thereof, to any person receiving the same in good faith and without notice of
the previous sale, shall have the same effect as if the person making the delivery or transfer were
expressly authorised by the owner of the goods to make it.
Possession includes where goods are not in the physical possession of the seller but are under
their control. For example goods held by a warehouse owner to the order of the seller. The
seller‘s possession does not have to be in any particular capacity or even lawful. It is sufficient if
he remains continuously in possession of the goods that he has sold to the purchaser.
For a second buyer to acquire a good title, the seller must deliver possession of the goods or
documents of title. Merely contracting a second sale is not sufficient to give title to the second
buyer. However, delivery could be constructive.
Michael Gerson (Leasing) Ltd v Wilkinson and another [2001] 1 All ER 148
The claimant finance company, G Ltd, had purchased plant and machinery from E Ltd under a
sale and leaseback agreement under which E Ltd remained in physical possession of the goods. E
Ltd sold part of the equipment (the schedule 3 goods), also under a sale and leaseback

agreement, to the second defendant, S Ltd, a finance company. S Ltd was not aware that E Ltd
might not own the goods. All the equipment remained in the physical possession of G Ltd. E Ltd
did not maintain the payments due under the lease and it was terminated by G Ltd. G Ltd
thereupon purported to sell the goods, including the schedule 3 goods, to B Ltd. Payment was not
forthcoming from B Ltd. E Ltd did not maintain the payments due to S Ltd under the agreement
and the lease was terminated. The schedule 3 goods were thereupon sold by S Ltd to B Ltd. G
Ltd claimed damages for conversion against S Ltd and the second defendant, W, a subsequent
innocent purchaser of the goods from B Ltd. The judge dismissed the claim and held that the
effect of the transaction between E Ltd and S Ltd was that S Ltd became owner of the schedule 3
goods by virtue of s 24 of the Sale of
Goods Act 1979, which provided that ‗Where a person having sold goods continued or was in
possession of the goods, or of the documents of title to the goods, the delivery or transfer by that
person … of the goods or document of title under any sale … to any person receiving the same in
good faith and without notice of the previous sale, has the same effect as if the person making
the delivery or transfer were expressly authorised by the owner of the goods to make the same‘.
G Ltd appealed, contending (i) that E Ltd had not delivered the goods to S Ltd under a sale and
that s 24 of the Act did not therefore apply
________________________________________
Held – (1) Where a seller in possession of goods sold acknowledged that he was holding the
goods on account of the buyer in circumstances where he recognised the purchaser‘s right to
possess as owner and that his continuing possession was as a bailee with possession derived from
that right, the transaction amounted to delivery to the buyer immediately followed by redelivery
to the seller as bailee, whether the seller‘s custody was in the character of a bailee for reward or
of a borrower.
An application of those principles to the instant case established a delivery of the goods by E Ltd
to S Ltd and a redelivery by S Ltd to E Ltd. It was not necessary to identify a moment at which
the goods were delivered by S Ltd to E Ltd. The effect of the sale and leaseback arrangement
was that the goods had to be taken to have been delivered to S Ltd as S Ltd could not otherwise
have leased them back to E Ltd. Moreover, the terms of the lease were consistent only with an
acknowledgement by E Ltd that it held the goods on behalf of S Ltd. It followed that the making
of the agreement for sale and the entering into of the lease was a sufficient voluntary act on the
part of E Ltd for the requirement that for ‗delivery‘ to be established there had to be a voluntary
transfer of possession to be satisfied. Furthermore, it made commercial sense to hold that sale
and leaseback arrangements involved a transfer of constructive possession to the finance
company which bought the goods and leased them back, such that the innocent finance company
might take advantage of the provisions of s 24 of the 1979 Act.
That the second defendant having purchased and taken constructive delivery of the
schedule 3 goods in good faith and without knowledge of their previous sale had obtained
good title by virtue of section 24 of the 1979 Act and was able to pass it on to the first
defendant; Accordingly, S Ltd and thence W had acquired good title to the schedule 3 goods
In Mitchell v Jones, a case under the New Zealand Sale of Goods Act, 1895. There the owner of
a horse sold it to a buyer and some days later obtained it back from him on lease. Then, having
possession of the horse in the capacity of lessee, he sold it a second time to an innocent
purchaser. The full court held that the innocent purchaser was not protected. Stout CJ said
((1905), 24 NZLR at p 935):

―The point turns on how the words ‗or is in possession of the goods‘ … are to be
construed … The meaning is—first, that if a person sells goods and continues in possession,
even though he has made a valid contract of sale, provided that he has not delivered them,
he may to a bona fide buyer make a good title; and, secondly, the putting-in of the words ‗or
is in possession of the goods‘ was meant to apply to a case of this character: If a vendor had
not the goods when he sold them, but they came into his possession afterwards, then he
would have possession of the goods, and if he sold them to a bona fide purchaser he could
make a good title to them. He would be in the same position as if he had continued in
possession of the goods when he made his first sale. In such a case as that he could make a
good title to a bona fide purchaser. That is not this case. In this case the person who sold
the goods gave up possession of them, and gave delivery of them to the buyer. The
relationship, therefore, of buyer and seller between them was at an end. It is true that the
seller got possession of the goods again, but not as a seller. He got the goods the second
time as the bailee of the buyer, and as the bailee he had no warrant, in my opinion, to sell the
goods again, nor could he make a good title to them to even a bona fide purchaser.‖
And Williams J said ((1905), 24 NZLR at p 936) that the section ―does not … apply where a
sale has been absolutely final by delivery, and possession has been obtained by the vendee.
In Staffs Motor Guarantee v British Waggon Co Ltd. In April, one Heap agreed with a finance
company to sell his lorry to it and then to hire it from the company on hire-purchase terms. He
filled up a proposal form which was accepted, and a hire-purchase agreement, dated 2 May was
signed. During the term of the hiring he sold it to an innocent purchaser. It seems that there was
an interval between the agreement to sell and the hire-purchase agreement, but it does not appear
from the report that there was any physical delivery or interruption of Heap‘s physical
possession. MacKinnon J held that ([1934] All ER Rep at p 325, [1934] 2 KB at p 314):
―Heap‘s possession of the lorry [at the time of the second sale] … was not the possession
of a seller who had not yet delivered the article sold to the buyer, but was the possession of a
bailee under the hire-purchase agreement … ‖
Although the sale had not been completed by physical delivery nor had there been interruption of
the seller‘s physical possession, he held that the case was covered by the principle in Mitchell v
Jones.
In Union Transport Finance v Ballardie, Du Parcq J while not doubting the correctness of the
decision of MacKinnon J, came to a contrary conclusion in slightly different circumstances. One
Clark sold his car to a finance house with a view to its being let on hire-purchase to his
employee. The employee signed the agreement, but the whole transaction was colourable and
Clark at all times was intended to keep possession of the car. The learned judge held that, at
different stages, the finance house and the employee had a right to the possession of the car but
that neither had exercised the right at the date of delivery of the car to the innocent purchaser.
Clark had never attorned to the employee so as to make his possession a bailment under the hire-
purchase. The section, therefore, applied. This conclusion is, in their lordships‘ opinion, correct.
In Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd
Goods were bought by finance company from motor car dealer for purpose of hire-purchase
transactions. The Motor car dealer continued in possession with authority to resell in own name

and retain purchase money subject only to obligation to account to finance company. Later the
dealer sold the cars to a third party. Held; The words ―continues in possession‖ were intended to
refer to the continuity of physical possession regardless of any private transactions between the
seller and the purchaser which might alter the legal title under which the possession was held and
since, when M sold to the respondent the sixteen cars whose ownership was disputed, M
continued in possession of them, the appellant acquired a good title
Worcester Works Finance Ltd v Cooden Engineering Co Ltd [1971] 3 All ER 708
In June 1966 the defendants sold a car to G for £525. G gave them a cheque for this sum. G
took delivery of the car and was registered as owner. Subsequently G made arrangements with
M to enter into a transaction whereby M was to obtain the car on hire-purchase from a finance
company, the plaintiffs, to whom G was to sell the car. On 14 July G invoiced the car to the
plaintiffs at a price of £645 less initial payment of £195. The plaintiffs paid the difference, ie
£4530, to G and, on the same day, let the car on hire-purchase terms to M, who signed a delivery
receipt acknowledging that he had taken delivery of the car. In fact M never took delivery of the
car and never paid any of the instalment charges. In the meantime G‘s cheque to the defendants
for the £525 was dishonoured. In consequence, on 15 August, the defendants, with G‘s consent,
retook possession of the car which was still in G‘s custody, and thereafter used it in their own
fleet of self-drive cars. In order to conceal his fraud from the plaintiffs G kept up the payment of
M‘s hire instalments but, after some months, stopped doing so, the balance of the hire-purchase
price outstanding being then some £315. Subsequently the defendants let the car out on hire-
purchase themselves and registered their interest with the Hire-Purchase Information Bureau. In
consequence the plaintiffs came to know that the defendants had the car and brought an action
claiming that the car was theirs and that they were entitled to £315 damages for conversion.
Held – The defendants had a good defence to the action by virtue of s 25(1)a of the Sale of
Goods Act 1893 for the following reasons—
(i) G was a person who, having sold the car to the plaintiffs, continued in possession of it
since the words ‗continues … in possession‘ in s 25(1) referred to the continuity of physical
possession and it was irrelevant whether the seller remained in possession as bailee or trespasser,
or whether he was lawfully in possession or not; having sold the car to the plaintiffs G continued
in physical possession of it, albeit wrongfully, until it was retaken by the defendants; (per
Megaw LJ) s 25(1) was to be construed in conjunction with s 8 of the Factors Act 1889 and
contrasted with s 2(1) of that Act which contained the words ‗is, with the consent of the owner,
in possession.
(ii) the retaking of the car by the defendants constituted a ‗delivery‘ of the car by G since G
had voluntarily acquiesced in the retaking; it was furthermore a delivery under a ‗disposition‘ in
that a new interest in the car had been effectually created since it was clear that in retaking the
car the defendants had waived any right to sue on G‘s cheque in consideration of his
surrendering to them his interest in the car
; (iii) on the evidence it was clear that the defendants had retaken the car ‗in good faith and
without notice‘ of the sale to the plaintiffs; (per Lord Denning MR) the word ‗notice‘ in s 25(1)
meant actual notice, ie knowledge of the sale or deliberately turning a blind eye to it
Per Lord Denning MR. If there is a substantial break in the continuity of possession by the
seller, eg if he actually delivers over the goods to a purchaser who keeps them for a time and
then the seller gets them back, s 25(1) may not apply.

Kressmann & Co v Lakhani Ltd and another [1964] 1 EA 249
In 1960 the second defendant purchased 176 cases of wine from the plaintiffs, a firm at
Bordeaux, and the consignment when it arrived in Kenya was placed in a bonded warehouse.
From time to time the second defendant having paid duty and warehousing charges withdrew
from bond parcels of the consignment and at the beginning of May 1961, there remained in the
bonded warehouse 120 cases. In payment of the price the second defendant had drawn a bill in
favour of the plaintiffs but the bill was dishonoured and as a result of negotiations he agreed to
return the 120 cases to the plaintiffs and on May 1, instructed the owners of the warehouse in
writing to return the cases to the plaintiff. On May 8, 1961, the owners of the warehouse
confirmed to the plaintiffs‘ agent receipt of these instructions. Meanwhile on February 7, 1961,
the first defendant obtained a decree against the second defendant and on June 14,
1961, obtained an order of attachment of the cases of wine.
The plaintiffs objected to the attachment and objection proceedings were instituted in which they
claimed that they were entitled to 120 cases of wines on the grounds that the transaction
amounted to rescission of the original agreement of sale by the plaintiffs to the second defendant;
or alternatively that there was an agreement of resale by second defendant to plaintiffs, and that
the agreement was completed by delivery to the plaintiffs in accordance with s. 30 (3) of the Sale
of Goods Ordinance (Cap. 31). For the first defendant it was submitted inter alia that the letter of
May 1, 1961, was ineffective to pass any property or interest in the cases of wine to the
plaintiffs; alternatively, that if it did so, it was an instrument within the meaning of the Chattels
Transfer
Ordinance (Cap. 28) and being unregistered was void against the first defendant by virtue of s.
13 of the Ordinance.
Held –
(i) there was neither rescission of the original contract, which had been completely executed on
the part of the plaintiffs, nor there was any revival of an expired unpaid seller‘s lien on the cases
of wine, but there was an agreement of resale by the second defendant to the plaintiffs
the letter of May 1, 1961, addressed to the owners of the warehouse was no more than a delivery
order, taking effect under s. 30 (3) of the Sales of Goods Ordinance, whereby not title but
possession in the goods is passed;
(ii) the letter of May 1, 1961, was not an instrument within the Chattels Transfer Ordinance and
the property in the wine passed to the plaintiffs by an agreement of resale towards the end of
April, 1961;
(iii) at the date of the order for attachment, namely, June 14, 1961, the property in the wine was
no longer in the second defendant and he had no apparent possession by reason of which the
wine must be deemed to continue in his possession at that date.
Order that the attachment order be discharged
5. Sale By Buyer In Possession After buying or “Agreement To Buy”

Where a buyer has bought or agreed to buy the goods and has obtained possession of the same or
the documents of title to them with the consent of the seller and he resells or pledges the goods,
he will convey a good title to the buyer or the pledgee provided the latter acts in good faith
without notice of any other right of the original seller in respect of the goods.
s.25(2) provides that Where a person having bought or agreed to buy goods obtains, with the
consent of the seller, possession of the goods or the documents of title to the goods, the delivery
or transfer by that person, or by a mercantile agent acting for him or her, of the goods or

documents of title, under any sale, pledge or other disposition thereof, to any person receiving
the same in good faith and without notice of any lien or other right of the original seller in
respect of the goods, shall have same effect as if the person making the delivery or transfer were
a mercantile agent in possession of the goods or documents of title with the consent of the owner.
Under this exception the person must have obtained possession of the goods under a sale or an
agreement to sell. Therefore, a void contract is insufficient as is acquisition as a bailee or under a
hire purchase contract or under a sale or return agreement.
The provision in S.25 that the transaction will have the same effect as if the person making the
delivery were a mercantile agent means that the buyer in possession is placed in the position of a
mercantile agent and the second buyer must show that the sale was in the ordinary course of
business of a mercantile agent.
Newtons of Wembley Ltd v Williams (1964)3 ALL ER

On 15 June 1962, the plaintiffs sold a motor-car to A, accepting a cheque and allowing him to
take away the car and the log-book. On the same day A was registered as the owner of the car.
On 18 June 1962, the plaintiffs learnt that the cheque would not be met. A had obtained the car
by false pretences, and thus acquired only a voidable title to it. The plaintiffs effectively
disaffirmed and avoided the contract with A within a few days of 18 June 1962, but were unable
to find the car. In July 1962, B bought the car from A, and resold it to the defendant, the trial
judge finding that both B and the defendant acted in good faith and without notice of any defect
in title to the car. The sale by A to B was effected by the kerbside in Warren Street, London, a
place where there was an established street market for cash dealing in used cars. Soon
afterwards the plaintiffs were informed of the whereabouts of the car and attempted both orally
and by letter, but without success, to repossess it from the defendant. In an action against the
defendant for alleged conversion and detinue of the car,
Held – The sale of the car by A to B was on the facts one effected in what would have been the
ordinary course of business if A had been a mercantile agent, and, the defendant having
established that B bought the car in good faith and without notice of the plaintiffs‘ rights or of
any lack of authority in A to sell, the defendant was entitled to possession of the car and the
plaintiffs were not entitled to damages for conversion or judgment in detinue
The words with the consent of the owner prevent the nonsense of a thief starting the whole chain
of events and still passing good title. There can only be a buyer in possession where possession
of the goods or documents of title has been obtained with the consent of the owner.
Worcester Works Finance Ltd v Cooden Engineering Co Ltd [1971] 3 All ER 708 (above)
Refer to Helby v Mathews, Lee v Butler and Matayo Musoke v Albhai
6. Sale Under A Voidable Title

S.23 provides that when the seller of goods has a voidable title to such goods but his title has not
been avoided at the time of the sale, the buyer acquires a good title provided he buys them in
good faith and without notice of the seller‘s defect of title.

There are many illustrations of voidable contracts for example those induced by fraudulent
misrepresentation or mistake. The issue that arises is whether property has passed from the
original seller to the rogue who later sells the goods to the innocent party. If it has not, S.23 will
not operate.
It should also be noted that where the original owner makes efforts to render the title void but
faces difficulty from the rogue, the third party will not be protected.
Car and Universal Finance Co Ltd v Caldwell (1964) 1 ALL ER 290

On the evening of 12 January 1960, C sold a motor car to N, and accepted a cheque in part
payment of the price. When he presented the cheque to the bank the next morning it was
dishonoured, and he thereupon went to see the police. The police informed him that there was a
warrant out for the arrest of N. C asked them to recover the car and he also asked the
Automobile Association to trace it. The car was found on 20 January 1960, being driven by a
director of M Ltd a firm of motor car dealers, but they chaimed to have bought it on 15 January
from N and that it was their property. M Ltd had notice from which they could have inferred that
N had acquired the car fraudulently, having had a similar transaction with him the previous
week. Immediately after acquiring the car, M Ltd filled up hire-purchase forms by which they
sold the car to a finance company, G & C Ltd and expressly warranted that the car belonged
absolutely to themselves. On 29 January 1960, C demanded the return of the car from M Ltd but
they claimed to have a good title to it. Eventually, in August 1960, the car was bought by
another finance company, C & U Ltd who bought it in perfect good faith without notice of any
defect in title. In 1962 C obtained judgment against M Ltd for the return of the car or its value.
The trial judge found that G & C Ltd entrusted M Ltd as dealers, with the conduct of all
negotiations and placed themselves entirely in the hands of the dealers. On the trial of an issue
whether the car belonged to the second finance company, C & U Ltd or to C,
Held – (i) the title to the car was vested in C (the original owner) because C had rescinded the
contract of sale of the car to N on 13 January 1960, when he asked the police to get the car back,
so that the later purported sales of the car to M Ltd and to C & U Ltd (the second finance
company) were ineffective to pass the property in it to them.
(ii) M Ltd the dealers, were not the agents of G & C Ltd the first finance company, to inquire
into the title to the car which the dealers were selling to G & C Ltd and so G & C Ltd were not
fixed with the dealers‘ knowledge of N‘s defective title.
Although in the ordinary course an election to rescind a contract must be communicated to the
other party to the contract, yet, where a fraudulent rogue by absconding renders communication
with himself impracticable, communication with him by the party seeking to rescind the contract
is not essential to its rescission; in such circumstances a seller of goods sufficiently exercises his
election to rescind if he at once, on discovering the fraud, takes all possible steps to regain the
goods, even though he cannot find the rogue nor communicate with him
In Phillips V Brooks Ltd. (1919) A fraudulent person by the name of North entered the plaintiff
shop and selected a diamond ring. North paid for the ring by cheque by falsely representing
himself to be a well-known Lord, where upon, the plaintiff allowed him to take the ring. North
pledged the ring with Brooks. The cheque was dishonoured and the plaintiff sued the defendant
for the recovery of the ring. Held; Court held that there had been no mistake as to identify i.e.
the plaintiff intended to deal with the person in the shop. The property in the goods had rightly
passed to the purchaser.

Refer to Cundy v Lindsay above
Also refer to Cundy v Lindsay above
Lewis v Averay [1971] 3 All ER 907

The plaintiff was the owner of a car that he wished to sell, and to do so he advertised it in the
local newspaper. A rogue arranged to see the car and on doing so offered to buy it at the stated
price. The plaintiff accepted the offer and the rogue then wrote out a cheque signing it ‗R A
Green‘. The rogue asked if he could take the car straight away but at this the plaintiff became
hesitant and did not want to part with the car until the cheque had cleared. The plaintiff asked the
rogue whether he had some evidence as to his identity. The rogue produced a pass to Pinewood
Studios as proof that he was Richard Greene, the well-known actor. The plaintiff, on examining
the pass, allowed the rogue to take the car. The rogue then sold the car to an innocent third party
and the cheque was subsequently dishonoured. The plaintiff then claimed the goods from the
third party in conversion on the basis that the contract between himself and the rogue was void
for mistake as to identity. The Court of Appeal held that his action must fail since the plaintiff
intended to deal with the person in front of him irrespective of his identity and that the contract
was subsequently only voidable for fraudulent misrepresentation. Since the plaintiff had
disaffirmed the contract only after the third party had purchased the car, the third party acquired
a good title in the vehicle.
7. Sale By The Order Of Court

In a sale by order of a court of competent jurisdiction, or under any common law or statutory
power of the sale, the buyer gets a good title.
S.22(2)(b) of the SOGA provides that the general rule does not take away the validity of a sale
under order of a court of competent jurisdiction. Court should have the jurisdiction to make the
order.
There are a number of instances where court may order sale of goods for example, under the
Civil Procedure Rules, if the court is convinced that the subject matter of the suit is deteriorating,
the court can order the disposal of the subject matter and the proceeds are kept in court pending
the disposal of the suit. It also covers situations where a bailiff goes to court to get permission to
allow sale of the goods in the suit and get money.
Larner v Fawcett (1950) 2 ALL ER
On 19 January 1949, F agreed with D that D should take F‘s filly on lease for a certain period on
the basis that any money won in racing her should be equally shared and that D should pay all
expenses and have the right to purchase her at any time. D agreed with L that L should train the
filly. In October, 1949, F learned that L had the filly, and L informed him that he had started an
action against D in respect of her upkeep. F wrote to L stating the facts and asking him to ―hold
the filly on behalf of‖ F who would ―be responsible for any expenses in connection therewith.‖
On 9 November 1949, F wrote to L that ―I shall have to withdraw or modify‖ the request to L to
hold the filly on his behalf. L obtained judgment against D and on 30 June 1950, began an
action against F claiming, inter alia, a declaration that he was entitled to a lien on the filly in
respect of its upkeep and an order that the filly should be sold, and on the same day L filed a
notice of motion asking for an order of sale under RSC Ord 50, r 2.

Held – Rule 2 was not confined to cases in which the applicant had, apart from the rule, a right
of sale at law or in equity, but conferred power on the court in the present case to order the sale
of the filly, and, on the facts, it was proper to make the order claimed.
.
8. Sale under power of statute.
There are many instances where legislations may allow a non-owner to sell goods and pass good
title. For example the Chattels Transfer Act under which a person can pledge chattels as security
for money, it also gives the lender powers of sale. Similarly under the Distress for Rent Act, the
landlord can recover his money without having to go through a court trial, the landlord can attach
properties of a tenant and sell them to recover his dues
9. Sale In A Market Overt
This is another very important exception under the Sale of Goods Act. Where goods are sold in a
market overt, a buyer acquires a good title to them provided he buys them in good faith and
without notice of any defect. In this case the buyer can acquire a good title even though the seller
has none at all.
A market overt has been defined by Jervis J in Lee v Bayes 1856 18 CB 599 at pg 601 as an
open, public and legally constituted market. In this case is where one in whose possession a
stolen horse, purchased at a public auction, had been placed for keeping, refused to deliver it to
the owner upon demand, he was held to be guilty of conversion. ―The horse having been stolen,
no property in it of course could pass to the defendant unless he had purchased it in market overt
―A sale by public auction at a horse repository out of the city of London, is not a sale in market
overt.‘‘
The only exception is where the goods were stolen and the thief has been convicted or where the
owner of the goods reported to the police immediately after the theft of the goods.
A market overt is an open public legally constituted market usually held at periodical intervals in
some particular place for the sale of particular goods.
Bishopsgate Motor Finance Corporation Ltd v Transport Brakes Ltd
A let a motor car on hire purchase to B who put it up for auction at a public market. The bidding
did not reach the reserve price and the motor car was withdrawn, but, in the course of the same
market, B sold it privately to C, who had been present at the auction, but had made no bid, and
who bought it in good faith and without knowledge of any defect in B‘s title. C subsequently
sold the car to D. Cars were sold in the market by private sale as well as by public auction, a
dealer or owner often selling a car himself after an auctioneer had failed to sell it. In an action
by A against D for the return of the car or damages, it was contended by A that the sale was not
in a market overt because (a) the protection of a sale in market overt applied only where the
goods were put up for sale by a trader in the market; and (b) the sale, being by private treaty, was
not ―according to the usage of the market,‖ within the Sale of Goods Act, 1893, s 22(1).
Held; (i) there was no authority for the proposition that, to obtain the protection of market overt,
goods must be sold by a trader in the market; if goods were exposed for sale and sold in the
market in the day time, a sale was equally good if made by their owner as if made, for example,
by an auctioneer. (ii) since cars were sold in the market by private sale as well as by public
auction, the car was sold to C ―in market overt, according to the usage of the market,‖ within the

Sale of Goods Act, 1893, s 22(1), and, therefore, C was able to give a good title to D, with the
result that A could not recover.
Reid v Commissioner of Police of the Metropolis and another
Thieves broke into the house of Mr. Reid and stole a pair of candelabra made by Robert Adam.
Two months later at the New Caledonian Market in Southwark which is open every Friday from
7.00 am onwards but dealers go there before that time so as to get the best prices. Mr.Norman
Cocks, an art dealer, went early to the market. It was still only half-light. The sun had not risen.
He saw a man putting up a stall on which there was a cardboard box. Mr Cocks examined it and
its contents. Wrapped up in a newspaper there were the main parts of a pair of candelabra.
Loose in the box were glass pear drops. He bought it at £200. He straightaway went and showed
it to two of his dealer friends who were in the market that morning and he let Mr Lloyd take the
box with its contents so that he might resell them. When Mr Lloyd got back to his own shop, he
put the pieces together and He put it on show in his own shop. Mr Reid learnt about his lost piece
and He told the police. They came and took the pair of candelabra into their custody. Mr Lloyd
told the police that he had got them from Mr Cocks. The police saw Mr Cocks. He explained
how he had bought the pair of candelabra for £200 in the market. He had no idea, he said, that
they were stolen. He said that the pair of candelabra were his, and he claimed them. The county
court judge held that Mr Cocks had a good title to the pair of candelabra. He held that the New
Caledonian Market, constituted under statute, was a market overt: He also found that the sale
was ‗during the permitted hours of the market‘ and that it was purchased in good faith.
The plaintiff felt it appealed on ground that a sale in market overt did not destroy the title of
the true owner unless it was made between sunrise and sunset. And here it was before sunrise. It
was in the half-light before the sun‘s rim rose above the horizon.
Held; In order to establish that a sale of goods has taken place in market overt, so as to
convey a good title to the goods even against the true owner, it must be shown that the goods
were sold between sunrise and sunset. The goods should be openly on sale at a time when those
who stand or pass by can see them. Thus it must be in the day time when all can see what is for
sale; and not in the night time when no one can be sure what is going on. Seeing that this sale
was made before sunrise, Mr Cocks did not get a good title. Mr Reid, the true owner, is entitled
to have the pair of Adam candelabra returned to him.
RISK AND FRUSTRATION

THE PASSING OF RISK
General principle: Risk of accidental loss or damage falls on the owner of the goods. However,
in special circumstances the Sale of Goods Act provides that risk does not always follow
ownership directly so that some other person besides the owner may have to cover the cost of
accidental loss or damage.
S.21 Sale of Goods Act.
(1). Unless otherwise agreed, the goods remain at the seller‟s risk until the property in the goods
is transferred to the buyer; but when the property in the goods is transferred to the buyer, the
goods are at the buyer‟s risk whether delivery has been made or not; except that—

a.) where delivery has been delayed through the fault of either buyer or seller, the goods are at
the risk of the party in fault as regards any loss which might not have occurred but for that fault;
b) nothing in this section shall affect the duties or liabilities of either seller or buyer as a bailee
of the goods of the other party.
Analysis. Under S.21 S.O.G.A. The goods remain at the sellerʹs risk until the property in them is
transferred to the buyer. When the property is transferred to the buyer then the goods are at the
buyer‘s risk, whether or not they have been delivered to the buyer.
In Tarling v Baxter (1827) 6 QB; A agreed to sell to B a stack of hay on 4th January for the
price to be paid on 4th February, the same to be allowed to stand on A‘s premises until 1st May. B
stipulated that the hay should not be cut until it was paid for. The haystack was destroyed by fire.
Held; this was a contract for an immediate and not a future sale and that property in the hay had
passed immediately to the buyer and thus the loss fell on him. Where there is an immediate sale,
property vests in the buyer.
Exceptions to the general rule. There are three qualifications to this general principle.
a). S.21. Subject to any contrary agreement between the parties, the goods remain at the sellerʹs
risk until ownership (not possession) is passed to the buyer. However the parties can agree that
risk should pass.
In Head v Tattersall 1871 LR EX 7 where B took a horse on the understanding that he had the
right to return it and end the contract if the horse was not as described. It was not as described
and B was entitled to his money back though the horse was injured in his care through no fault of
his own.
Held, as the effect of the contract was to vest the property in the buyer subject to a right of
rescission if property had not answered the description, at which point it would revest in the
seller, as this was an accident for which nobody is in fault the horse was at the seller's risk during
the period allowed for its return.
Refer to S.19(d) which provides that when goods are delivered to the buyer on approval or ―on
sale or return‖ or other similar terms, the property in the goods passes to the buyer— (i) when he
or she signifies his or her approval or acceptance to the seller or does any other act adopting the
transaction.
Therefore on a sale or return transaction where buyer receives goods and they are soon damaged
through no fault of buyer, seller will bear the loss because no ownership has passed.
In Elphick v Barnes,(1888)5 CPD a horse which was out on approval died during the approval
period without fault on the side of the buyer. It was held that the seller couldn‘t sue for the price.
Thus the seller can state in the contract that the risk shall pass to the buyer before ownership
passes. The problem is most likely to arise where the buyer negotiates for a portion of a larger
lot, for example, a share in an oil cargo. Since the oil cannot be ascertained until off loaded and
divided ownership cannot pass immediately according to S.17 S.O.G.A. unless the additional
requirements of allocating a percentage under the new s16 1994 provisions are complied with.
The ordinary rule under S.21 therefore is that the seller bears the risk until the property is
ascertained.
In Stern v Vickers,(1923)1 KB 78 a seller agreed to sell 120,000 gallons of spirit out of a
200,000 gallon lot, to the buyer. The spirit was in a storage tank under the control of a third

party, a bailee. The buyer was given a delivery order which was to be handed to the third party.
However, the buyers had decided to leave the goods in the tank for some time for their own
convenience, and thereby delayed for several months by which time the spirit had deteriorated.
The buyers had obtained a delivery order accepted by the third party to whom the storage tank
belonged.
The court held that the parties must have intended the risk to pass when the delivery warrant was
sent to the buyer, who had to bear the loss, and pay the price of the Spirit, even though the
ownership of the Spirit had not passed to the buyer because the seller had not set aside the
120,000 gallons. The Court of Appeal found that the risk passed to the buyer when the buyer
handed the delivery order to bailee. The bailee had attorned - acknowledged that he now held on
behalf of B. The bailee held the spirit on behalf of S and Buyer after receiving the delivery order
in proportion to their interest 80,000/120,000. Risk therefore passed before the property in this
case on the basis of implied intention.)
That whether the property in the undivided portion of the larger bulk had passed or not upon the
acceptance of the delivery warrant the risk passed to the buyers, and the loss must be borne by
them. What the buyers here are trying to do is to put the risk, after acceptance of the warrant
upon persons who had then no control over the goods (the sellers, as they had already ). For it
seems plain that after the acceptance of that warrant the sellers would have had no right to go to
the storage company (third party) and request them to refuse delivery to the buyer.
The transfer of undivided interest carries with it the risk of loss to the goods, such as
deterioration in quality, after the seller has given the buyer a delivery order. The vendor of a
specified quantity out of a bulk discharges his obligation to the buyer as soon as the third party
undertakes to the buyer to deliver him that quantity from the bulk.
b). S.21(a). Where delivery has been delayed through the fault of either the buyer or seller,
the party at fault must bear the risk of any loss which might not have occurred but for the delay.
In Demby Hamilton v Barden (1949)1 ALL ER 434 a buyer bought 30 tons of apple juice, and
took delivery of 20.5 tons. He failed to give instructions for the delivery of the rest, which went
putrid. The court held that the buyer was at fault and therefore had to bear the loss.
c.) where one party is the bailee of the goods and the loss occurs through bailee's lack of
reasonable care, in which case that bailee is liable . S. 21(b) provides nothing in this section shall
affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party.
In Wiehe v Dennis Bros, Buyers contracted to buy a Shetland pony, delivery in a month. While
the pony was in the sellers' possession it was taken to an event, mishandled and injured. Held:
Sellers were liable for failing to take reasonable care as bailees of the goods). That The general
rule that risk follows property will not apply where one party is the bailee of the goods and the
loss occurs through their lack of reasonable care, in which case the bailee will be liable - s.20(3)
Where property and risk have passed to the buyer, however, the seller retains possession of the
goods, the latter will be the bailee. A bailee's duty is to take reasonable care of the goods in his
custody and, as such, he will ordinarily be liable only for loss or damage caused by his
negligence
d.) delivery to carrier.

Where the seller is required by the contract to send goods to the buyer, in which case delivery to
a carrier is presumed to constitute delivery to the buyer, who, therefore, bears the risk of loss in
transit.
S.32(1) provides that Where, in pursuance of a contract of sale, the seller is authorised or
required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the
buyer or not, for the purpose of transmission to the buyer is prima facie deemed to be a delivery
of the goods to the buyer.
e.) delivery via sea transit; S.32(4) provides that Unless otherwise agreed, where goods are sent
by the seller to the buyer by a route involving sea transit, in circumstances in which it is usual to
insure, the seller must give such notice to the buyer as may enable him or her to insure them
during their sea transit; and if the seller fails to do so, the goods shall be deemed to be at his or
her risk during the sea transit
f). Risk where goods are delivered elsewhere than at place of sale.
S. 33 SOGA provides that Where the seller of goods agrees to deliver them at his or her own risk
at a place other than that where they are when sold, the buyer must, nevertheless, unless
otherwise agreed, take any risk of deterioration in the goods necessarily incident to the course of
transit.
If the seller agrees to deliver the goods at his own risk at a place which is different from where
they are sold, then the buyer must never the less bear the risk of any deterioration in the goods
which result from their transit. S.33 can itself be excluded by the parties.
Perishing goods (Frustration)
S.7 Sale of Goods Act 1979. Where there is a contact for the sale of specific goods, and the
goods without the knowledge of the seller have perished at the time when the contract is made,
the contract is void.
S.8 Sale of Goods Act 1979. Where there is an agreement to sell specific goods and subsequently
the goods, without any fault on the part of the seller or buyer, perish before risk passes to the
buyer, the agreement is avoided.
Section 7 deals with events before the contract is made while section 8 deals with the events after
the contract has been made. Another way of looking at this is to consider S.7 under the category
of "impossibility" or "mistake" and S.8 under the category of "frustration". The key difference
between these sections being that where a contract is impossible to perform at the time it was
made, it might be void for mistake whereas if the contract subsequently becomes impossible to
perform, illegal or radically different from that which was intended, then it might be deemed
frustrated
Analysis. Perishing goods are goods that have changed their commercial character. They do not
actually have to be destroyed.
Asfar& Co. Ltd v Blundell [1896] 1 QB 123
Goods have perished if they become significantly altered so that, for commercial purposes, they
can no longer be said to be the same goods that were contracted to. They do not actually have to
be destroyed.
In this case ―dates‖ were impregnated with river water and sewage when the barge on which they
were carried sank. The dates were covered by insurance only if they had perished. Insurers
argued that despite the contamination they were still dates and could still be used to distill

alcohol. Held, even though they still existed and were recovered from the river, goods have
perished if they have ceased to exist in a commercial sense.
Turnbull v Rendell [1948] 2 All ER 1036

The seller agreed to sell 75 tons of `table potatoes` from a specific crop, some of which were still
in the ground. At the time of the contract , the potatoes were so badly affected with secondary
growth that they no longer answered the description `table potatoes`. A claim under s.13 ―goods
do not match the description‖ was brought against the seller.
Held – The buyers claim for damages was rejected, the potatoes had `perished` within the
meaning of s.13 of the Act and the contract was void One result is that goods have perished
when they have ceased to be what was contracted for even, though still useable.
The topic of perishing goods subdivides into specific and unascertained goods.
Pre-Contract destruction of the subject matter. Regarding specific goods that perish before
the contract is made, without the sellers knowledge, under the provisions of sS.7 Sale of Goods
Act the contract is void.
This section is a statutory version of Couturier v Hastie. If the goods never existed they cannot
be said to have existed. The contract is void at common law. This case involved the sale of a
cargo of corn. The goods had already been sold by the shipʹs master at the time of the sale to the
claimant buyer. Thus at the time of the contract the goods did not exist. The contract was
accordingly void.
Pre Contract destruction of part of a consignment. S.7 applies if part of the goods have
perished, provided that the contract is indivisible.
Barrow, Lane and Ballard Ltd v Phillip Phillips & Co. Ltd [1929] 1 KB 574
The plaintiffs bought 700 bags of ground-nuts believed to be in a certain warehouse; in fact 109
of the bags had disappeared when the contract was made. The buyers took delivery of 150 bags
about two months later it was discovered no more bags were left at the warehouse. The buyers
had two bills of exchange, one for 150 bags and another for 700 bags; they admitted liability for
the 150 bags but not the 700 bags. The buyers refused to pay either bill on the grounds that the
sellers were in breach of an implied term that ―the goods existed‖ probably as their insurance
would not have paid but the sellers insurance probably would have done.
Held – The contract was void under s.6, rather than a breach of contract. The
goods had perished. This case turned on its facts. The contract was for the entire and indivisible
lot. Had the contract been severable (ie, for the sale of separate lots with each lot being invoiced
and paid for separately) then presumably the contract would have been void only as to those lots
which were not complete at the time of contract
However, where one party under the contract for the sale of goods agree to take the risk should
the goods perish, S.7 will not apply.
McRae v Commonwealth Disposals Commission (1951)84 CLR 377
The defendants sold an oil tanker described as lying on Jourmand Reef off Papua. The plaintiffs
incurred considerable expenditure in sending a salvage expedition to look for the tanker. There
was in fact no oil tanker, nor any place known as Jourmand Reef. The plaintiffs brought an

action for breach of contract. Held: the defendants had contracted to sell a ship and, as a term of
the contract, 'warranted that they had a ship to sell'. They were held liable to pay damages for
breach of this term. Section 7 did not apply because the tanker had not perished, it never existed.
Courturier v Hastie was distinguished because there the parties had both shared the assumption
the corn existed, but here CDC had actually promised the tanker existed and therefore had
assumed the risk that it did not.
Specific goods that perish after the contract is made. S.8. Sale of Goods Act provides that
where there is a contract for the sale of specific goods and the goods through no fault of either
party perish, before the risk passes to the buyer, the agreement is avoidable
If a contract becomes impossible to perform it is frustrated at common law. Contrast the
difference between the scope of S.8 and the common law. A contract for the sale of crops to be
grown on a specific farm will not be avoided under S.8 S.O.G.A. simply because the crops donʹt
materialise.
The Perishing of Unascertained Goods. The effect of the perishing of unascertained goods is
governed by the common law. This depends on whether the gods are generic unascertained
goods or unascertained goods from a specific source.
Generic goods; goods of this kind which are sold purely by description, such as 100 tones of king
Edward potatoes are subject to a firm rule, that is no exceptions, the seller undertakes the entire
responsibility of ensuring the potatoes are available for delivery and he accepts all risks
incidental to seeing that they are supplied.
An unqualified contract for the sale of unascertained goods will not be dissolved by the operation
of the doctrine of frustration.
Blacburn Bobbin v Allen (1918)2 KB 467

Seller agreed to supply the buyer with Finnish timber. Unknown to the buyer, the seller held no
stocks but customarily shipped orders directly from Finland. War broke out and the seller's
supplies were cut off. Held, this event did not frustrate the contract. The method of supply was
irrelevant to the contract, as all that the buyer knew was that the seller held stocks of Finnish
timber, or obtained it indirectly from some other country. The element in the contract which the
supervening event destroys must be something which both the parties must have regarded as
basic. Thus, having contracted in unqualified terms, the seller took the risk of being able to
obtain the goods needed to perform his contract, and must pay damages in the event of being
unable to deliver.
per McCardie J:
… a bare and unqualified contract for the sale of unascertained goods will not (unless
most special facts compel an opposite implication) be dissolved by the operation of [the
doctrine of frustration].
Unascertained goods from a specific source; if the source ceases to exist at the time of the
contract, the contract is void as it is impossible to perform the contract. For example 100 kgs of
Kakira sugar from Game stores at Lugogo, the contract will be frustrated if the entire store is
destroyed, that is both the seller and buyer are excused.
It is essential to distinguish between purely generic unascertained goods e.g 500 tons of wheat,
from unascertained goods from a specific source, e.g. 500 tons from a specific ship. If the purely

generic goods perish it is still possible to perform the contract, so the seller must obtain goods
from another source. If he doesnʹt he must pay damages for non-delivery.
Regarding unascertained goods from a specific source, if the source ceases to exist at the time of
the contract, the contract is void. It is impossible to perform the contract, for example, where a
ship is lost. Both the seller and buyer are excused.
DUTIES OF THE SELLER
(a) Duty to deliver the goods;
S.27 imposes a duty on the seller to deliver the goods.
S.1 (d) defines ―delivery‖ to mean voluntary transfer of possession from one person to another.
Delivery may take any of the following forms;
(i) Physical transfer of the actual goods;
(ii) Handing over to the buyer the means of control over the goods, e.g. where car keys or keys to
a warehouse where the goods are kept are handed over to the buyer.
(iii) Delivery by attornment e.g. where the seller gives the buyer a delivery order or warrant for
goods stored in a warehouse. Note that the person in charge of the warehouse must accept the
order or warrant.
(iv) Delivery of documents of title to buyer e.g. the Bill of Lading, or

warehouse certificate.
In Biddle Bros Ltd V E. Clemens (1911) 1 K.B 934, the House of Lords stated that delivery of a
bill of lading operates as a symbolic delivery of goods.
(v) Where the goods at the time of sale are in possession of a third party and such third party
acknowledges to the buyer that he holds the goods on his behalf.
(vi) Delivery to the buyer‘s agent or to the carrier. S.33(2) provides that where the seller is
authorized or required to send the goods to the buyer, delivery of the goods to the carrier for
purposes of transmission to the buyer is prima facie deemed to be a delivery of the goods to the
buyer.
The seller is required, under S.33(2) to make a contract with a carrier on behalf of the buyer as
may be reasonable, having regarding to the nature of the goods and the circumstances of the
case.
In Galbraith & Grant Ltd V Block (1922) 2 K.B. 255; there was delivery of wine to the
defendant‘s premises as requested. The wine was signed for by a person at the premises and it
was held that if the goods were received by a respectable person who had access to the premises
then there was effective delivery and therefore the loss fell on the buyer.

In Badische V Basle Chemicals Works (1893)AC 2004; the buyer requested that the goods be
sent through the poster and it was held that the contract of sale was completed by delivery to the
post office.
Place of delivery
Note: S.29 (1) provides that whether it is for the buyer to take possession of goods or for the
seller to send them is a question depending on the construction of the contract. The section
further provides that the place of delivery is the sellers‟ place of business or his residence.
However, where the contract is for sale of specific goods i.e. goods which are identified
and agreed upon at the time the contract is made], which to the knowledge of the parties, when
the contract is made, are in some other place, then that place is the place of delivery.
The relevance of delivery is provided for under S.29 which provides that payment and delivery
are prima facie concurrent conditions i.e. the seller must be 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 possession of the goods.
Time of delivery; S.11 provides that whether a stipulation as to time is of the essence depends
on the terms of the contract. In Hartley V Hyman (1920) 3K.B. 475 Lord Maccardic stated that
in ordinary commercial contracts of sale of goods, the rule clearly is that time is prima facie of
the essence with respect to delivery and therefore if time for delivery is fixed by the contract,
failure to deliver at that time will amount to a breach of condition, entitling the buyer to exercise
his right to reject the goods.
S.29 (3) provides that where the seller is bound to send the goods to the buyer but no time for
sending them is fixed, the seller is bound to send within a reasonable time, while S.29(5)
provides that delivery is ineffectual unless made at a reasonable hour. What is a reasonable hour
depends on the circumstances of the case.
Fercometal SARL v Mediterranean Shipping Co SA The Simona (1988) 2 ALL ER 742
In June 1982 the charterers entered into a charter party with ship owners for the carriage of a
cargo of steel coils from Durban to Bilbao on the owner‘s vessel. Under the terms of the charter
party the charterers were entitled to cancel the charter party if the vessel was not ready to load on
or before 9 July. On 2 July the owners requested an extension of the cancellation date because
the ship owners wished to load other cargo first, in which case the vessel would not be ready to
load the charterer‘s cargo until 13 July. The charterers cancelled the contract forthwith and
engaged another vessel, then at Durban, to carry the cargo. The owners did not accept the
charterers‘ repudiation, which was in any event premature because it was given in advance of the
cancellation date, and on 5 July the owners notified the charterers that the vessel would start
loading on 8 July. When the vessel arrived in Durban on that day the owners tendered notice of
readiness although they were not in fact ready to load the charterers‘ cargo. The charterers
rejected that notice and began loading their cargo into the substitute vessel.
The owners brought a claim for deadfreight, which was upheld on arbitration on the ground that
the charterers‘ wrongful repudiation of the contract relieved the owners from complying with
their own obligations and that therefore the owners‘ failure to tender the vessel ready to load on
time did not prevent them claiming damages for the charterers‘ wrongful repudiation. On appeal
the judge set aside the award. On further appeal, the Court of Appeal held that the charterers‘

prior unaccepted repudiation did not prevent them cancelling the charter party when the owners
failed to tender a valid notice of readiness on 9 July. The owners appealed.
Held – Where a party to a contract wrongfully repudiated his contractual obligations before he
was required to perform those obligations the innocent party could either affirm the contract by
treating it as still in force or treat it as being conclusively discharged, but if he elected to affirm
the contract he was not absolved from tendering further performance of his own obligations
under the contract. Accordingly, if a repudiation by anticipatory breach was followed by
affirmation of the contract the repudiating party could escape liability if the affirming party was
subsequently in breach of the contract. On the facts, the owners, having affirmed the contract
when they refused to accept the charterers‟ premature repudiation, could only avoid the
operation of the cancellation provision in the charterparty by tendering the vessel ready to load
on time (which they had failed to do) or by establishing (which they could not) that their failure
was the result of their acting on a representation by the charterers that they had given up their
option to cancel. Accordingly, the appeal would be dismissed
(b) Duty to deliver the right quantity; The seller has a duty to deliver goods of the right
quantity.
S.30(1) provides that where the seller delivers to the buyer a quantity of goods less than what he
contracted to sell, the buyer may reject them but if the buyer accepts the goods, he must pay for
them at the contract rate.
S.30(2) provides that where the seller delivers a quantity larger than that contracted for, the
buyer may reject the excess or he may reject the whole. Where the buyer accepts the whole of
the goods delivered, he must pay for them at the contract rate.
Further, S.30(3) gives the buyer an option to reject the goods where they are delivered, mixed
with goods of a different description not included in the contract, although the buyer may accept
goods conforming to the contract and reject the rest.
Delivery by Instalments
S.31 The buyer is not obliged unless he agrees to accept delivery of goods by instalments. Where
the buyer agrees that goods are to be delivered by instalments each separately paid for and the
seller makes a defective delivery in respect of one or more instalments, or the buyer neglects or
refuses to take delivery or pay for one or more instalments. It is a question in each case
depending on the terms of the contract, whether the breach is repudiation of the whole contract
or whether the breach is a severable breach giving rise to a claim for compensation and not a
right to treat the whole contract as repudiated.
Ross T Smyth & Co Ltd v T D Bailey Son & Co (1940) 3 ALL ER 60
A contract, dated 3 August 1938, provided for the purchase of 15,000 units, 2 per cent more or
less, of No 2 yellow American corn, with an option to the seller of shipping a further 3 per cent
more or less on contract quantity. At the foot of the contract were the words: ―Separate
documents for each 1,000 units and each 1,000 units to be considered a separate contract.‖ In
pursuance of this contract, the sellers wrote to the buyers on 27 August giving notice of
appropriation of about 15,444 quarters of corn as per ―Generton‖ bill of lading, and on 6
September sent a provisional invoice for 15,444 214/480 quarters, amounting to £17,471 10s 6d,
and the provisional invoice stated that there were 15 bills of lading dated 26 August, each for an
amount of bushels equivalent to 1,000 units, and one for an amount equivalent to 444 214/480
units. On 7 September the buyers rejected the provisional invoice as not being in accordance

with the contract, and on the same day the sellers sent an amended provisional invoice for 15,000
quarters amounting to £16,968 15s, stating that there were 15 bills of lading dated 26 August
each for a number of bushels equivalent to 1,000 units. This provisional invoice was received by
the buyers on 8 September, and it was then arranged that the matter should proceed to
arbitration:—
Held – (i) the buyers committed a breach by wrongfully refusing to accept the first documents
which were in accordance with the contract and covered the total quantity which the sellers were
bound to deliver.
(ii) the breach was not waived by the mere act of sending the amended invoice, which was no
more than an attempt by the sellers to meet the buyers‘ objection.
(iii) the tendering of the amended invoice did not constitute a repudiation of the contract, as there
was no categorical refusal on the part of the sellers, by words or conduct, to perform the contract
DUTIES OF THE BUYER

The primary duties of the buyer are to take delivery of the goods when tendered and to pay the
price in accordance with the terms of the contract.
S.37 provides that when the seller is ready and willing to deliver the goods and requests the
buyer to take delivery of the goods, and the buyer does not, within a reasonable time after such
request, take delivery of the goods, he is liable to the seller for any loss occasioned by his neglect
or refusal to take delivery and also for a reasonable charge for the care and custody of
the goods. However, the seller would still have a right to take action against the buyer where
refusal or neglect to take delivery amounts to a repudiation of the contract.
In Demby Hamilton & Co. Ltd V. Barden

(1949) 1 ALLER 435 B contracted to purchase 30 tones of apple juice from S. S made juice out
of the apples, amounting to 30 tones and kept it in casks, ready for delivery. Upon delivery of a
few casks, B refused to take further deliveries. The juice became putrid and had to be disposed
off. It was held that although property in the goods was still with S, the loss had to be borne by
B.
Payment of price.
S.9 SOGA provides that the price may be fixed by the contract, or may be left to be fixed in a
manner thereby agreed or it may be determined by the course of dealing between the parties.
Where the price is not determined in accordance with the foregoing provisions, then the buyer
must pay a reasonable price and what is reasonable depends on the circumstances of a particular
case.
Unless there is an agreement to the contrary a seller is not bound to accept anything other than
cash if the seller accepts payment by bill of payments for example cheques, he is entitled to
remain in possession of the goods until the bill is honoured unless there is an agreement to the
contrary. This type of payment is treated as a conditional payment.
However, sometimes such instrument can be treated as an absolute payment, where the contract
between the parties clearly states so or where the intention of the parties is very clear on the
same.
W J Alan & Co Ltd v El Nasr Export & Import Co (1972) 2 ALL ER 127

On 12 and 13 July 1967 the sellers, who were coffee producers in Kenya, made two contracts
with the buyers, an Egyptian company, for the sale of coffee. The contracts were subject to the
terms and conditions of the London Coffee Trade Association which provided, inter alia, that
where payment was by letter of credit the credit should be opened in strict conformity with the
contract. By the Central Bank of Kenya Act 1966 the unit of currency of Kenya was Kenya
shillings, and all monetary obligations or transactions entered into or made in Kenya were
deemed to be expressed and recorded, and were to be settled in, Kenyan currency unless
otherwise provided. At the time when the contracts were made there was parity between Sterling
and Kenyan currency. The buyers re-sold the coffee to sub-buyers in Spain, and the sub-buyers
established an irrevocable transferable letter of credit in favour of the buyers. The credit did not
conform with the contracts of sale in several aspects. In particular the credit was for payment in
sterling, not Kenya shillings. The sellers raised no complaint about the letter of credit, in
particular they did not ask for the currency of the credit to be altered to conform with the
contract.
Before the sellers had sent the invoice and other documents to the confirming bank for the
payment, sterling was devalued on 18 November. On the same day the sellers sent the
documents together with a sight draft in sterling to the confirming bank and were paid by the
bank in sterling £57,877 15s 9d. Because of the devaluation of sterling, that amount of sterling
was then worth only 987,734·50 Kenya shillings. When it became known that Kenyan currency
was not going to be devalued, the sellers made a claim against the buyers to be paid an extra
165,530·45 Kenya shillings, in respect of the shipment of the 221 tons under the second contract,
that being the difference between the amount of Kenya shillings referable to 221 tons at the
contract price and the amount of Kenya shillings realisable in exchange for £57,877 15s 9d after
devaluation. The buyers contended that nothing more was owed to the sellers and refused to pay.
Held – The payment made by means of the letter of credit in respect of the shipment of the 221
tons discharged the buyers‘ debt to the sellers, and the sellers‘ claim therefore failed, for the
following reasons—
(i) On the proper construction of the original contract for sale, the money of account was
Kenyan currency, for the price was expressed in the contract in a form, ie ‗Shs‘, appropriate for
that currency but not appropriate for sterling; the contract was made in Kenya where the sellers
were; delivery and shipment were to be in Kenya; and by Kenyan law transactions made there
were deemed to be in Kenyan currency.
(ii) The sellers, however, by their conduct, had waived the right to have payment by means of a
letter of credit in Kenyan currency and instead had accepted a letter of credit in sterling; the letter
of credit, when given, was conditional payment with the result that, when it was duly honoured,
the payment was no longer conditional; it became absolute and dated back to the time when the
letter of credit was given and acted on; the sellers therefore, having received payment of the
price, could not recover more.
Per Lord Denning MR and Stephenson LJ. A confirmed irrevocable letter of credit is not to be
regarded as absolute payment at the time when it is given and accepted, unless the seller
stipulates, expressly or impliedly, that it should be so. He may do it impliedly if he stipulates for
the credit to be issued by a particular banker in such circumstances that it is to be inferred that
the seller looks to that particular banker to the exclusion of the buyers. In the ordinary way,
however, the letter of credit operates as a conditional payment only and the buyer‘s liability is
only discharged when the credit is honoured by the bank on presentation by the seller of the
relevant documents.

The duty to take delivery.
Under Sections 27-28 it is the duty of the buyer to accept and pay for the goods in exchange for
delivery of the goods by the buyer.
S.37 puts liability on the buyer who refuses to take his goods and he will be liable to the seller
for any loss suffered. If the buyer fails to take his goods, it does not give the seller a right to
resell them to a second buyer unless by conduct or expressly the buyer seems to have run out of
the original contract. If the goods are of a perishable nature, it is the buyer‘s duty to take them at
the time agreed and if he does not do so, the seller can resell them without notice.
Kampala General Agency (1942) Ltd v Mody’s (EA) Ltd [1963] 1 EA 549
The appellants sold to the respondents certain goods intended for use in the respondents‘ cotton
ginnery. The price specified in the contract was F.O.R. Mombasa, according to which delivery
was to be made by ―railing Mombasa‖ and the goods were to be delivered in instalments. The
first two instalments of goods were consigned to Atura Port which was the agreed destination
and the third instalment was consigned to Soroti station on the written instructions of the
respondents. When the appellants consigned the last instalment to the respondents at Aloi station,
which was nearer to their ginnery, the respondents refused to accept the goods after which the
appellants sued for damages for breach of contract. The defence was that the appellants had
broken their contract by consigning the goods to a place other than the place of destination
agreed under the contract and that this entitled the respondents to reject the goods. The trial
judge found for the respondents. On appeal,
Held – the respondents‘ action in consigning the goods to Aloi station instead of Soroti station,
as instructed by the respondents, was a breach of warranty and not a breach of condition;
accordingly the respondents were not entitled to reject the goods but were only entitled to
damages.
Appeal allowed
Kudu Enterprises Ltd v Prebal (1995) 5 KALR 67

The plaintiff entered into some understanding with the Uganda Catholic secretariat whereby he
was to secure souvenirs in commemoration of the visit of the pope to Uganda. He subsequently
agreed with the defendant to import the souvenirs and the defendant to purchase them for sale to
the public. The plaintiff was to import the souvenirs from Korea and the defendant drew two
cheques towards the payment for the goods. The defendant later made post dated cheques for
another payment. The goods arrived 2 weeks from the start of the visit of the pope. A few days
after the departure of the pope, the cheques were due and were banked but they were
dishonoured. The plaintiff sued for the remaining balance. The defendant contended that the
goods arrived late so close to the pope‘s visit and there was no sufficient time to sell the goods
ad that the post dated cheques were meant only to act as security.
Held; the defendant being fully aware of all the sale accepted and took exclusive delivery of the
goods unconditionally. Therefore the defendant was bound by the terms of the contract and must
pay for the goods. Stipulation as to time was irrelevant since the defendant unconditionally took
delivery of the goods.

LIABILITY OF THE BUYER
S.37 An action for damages for non-acceptance lies when the seller is ready and willing to
deliver the goods but the buyer refuses or rejects to accept the goods. The measure of damages is
the loss resulting from the breach of contract.
REMEDIES OF PARTIES
As with any other contract, a contract for sale of goods may be breached. The parties have rights
peculiar to this type of contract and these are categorised as follows;
a. Seller‘s remedies against the goods (remedies in rem
b. Seller‘s remedies against the buyer (remedies in personam)
c. The buyer‘s remedies against the seller
SELLER‘S REMEDIES
According to S. 27 it is the duty of the buyer to pay for the goods and accept them in accordance
with the contract. Therefore, where he is in breach of his duty to pay, the seller becomes known
as an unpaid seller.
RIGHTS OF THE UNPAID SELLER
According to S.38 the seller of goods is deemed to be unpaid.
i. When the whole of the price is not paid or tendered.
ii. When a conditional payment was made by a Bill of Exchange (or other negotiable
instruments) and the instrument has not been honoured.
Subsection 2 goes ahead to define a seller as including any person in the position of a seller for
example agents of the seller.
The unpaid seller has two rights i.e.
i. Rights against the goods.
ii. Rights against the buyer.
Rights against the goods

S. 39 gives the right of an unpaid seller. An unpaid seller of goods even though the property has
passed to the buyer has three rights against the goods.
i. Right of lien on the goods in his possession.
ii. Right of stopping the goods in transit i.e stoppage in transit after the buyer is insolvent
iii. A limited right of re-sale.
1. Right of Lien
S.40 The unpaid seller has a lien on the goods for the price as long as the goods remain in his
possession and he can refuse to deliver them to the buyer until the full payment or tender of the

price has been made in the following cases; Where the goods have been sold without any
stipulation as to credit, Where the goods have been sold on credit but the term of credit has
expired and where the buyer becomes insolvent.
S. 40(2) is to the effect that the seller can exercise the right to a lien even if he is not in
possession of the goods as a seller but agent or bailee of the buyer.The seller‘s lien is a
possessory lien i.e. the lien can be exercised only as long as the seller is in possession of the
goods. Lien can be exercised for non payment of the price and not for any other charges.
Termination of Lien
S.42 Lien depends on physical possession of the goods. Therefore the unpaid seller loses his lien
or right of retention on the goods in the following circumstances;
i. When he delivers the goods to a carrier or other party for the purpose of transmission to
the buyer without reserving the right of disposal of the goods.
ii. When the buyer or his agent lawfully obtains possession of the goods. Note possession
has to be lawful, therefore it doesn‘t work with one who steals the goods.
iii. By waiver of his lien i.e when the buyer waives his right to exercise the right of lien.
Eg where unpaid seller agrees to a sub-sell by the buyer. It should be noted that
waiver is a question of fact.
However, suing the buyer and obtaining judgement of the price is not to be regarded as a waiver
of the seller‘s right to lien. The seller can have the right co-existing with his personal right.
Effect of a lien.
Lien merely gives a right to retain the goods until the price is paid. It does not rescind the
contract or deprive the buyer of his ownership nor entitle the seller to resell the goods.
Uganda Hire Purchase v Magamboni; concerned a contract for hire purchase of a vehicle with
option to buy. The plaintiff paid part of the purchase price and the car was delivered to him.
Later the defendants seized the car to effect payment. In an action for wrongful seizure, it was
held unpaid seller has lien or right to retain goods in his possession but once he loses possession,
he has no right to seize goods but the only remedy is to sue for price of goods.
It was established in Somes v The British Empire Shippin Co that a party which had exercised
a possessory lien adversely to the interests of the true owner of the goods had not been entitled to
recover the costs of exercising that line but the defendant was entitled to the storage costs.
2.. Right Of Stoppage In Transit

The right of stoppage in transit exists under sections 43-45 when a buyer becomes insolvent. The
buyer is insolvent if he fails to pay his debts in the ordinary course of business, or cannot pay his
debts as they become due and if goods are in the possession of a carrier.
S43,The right of lien or right to retain the goods of the unpaid seller may even be enforced by
him after he has parted with the goods but they have not actually been delivered to the buyer. He
may reclaim the goods if they are in the hands of the railway or any other carrier in the process
of delivering (i.e when the goods are still in transit).
The right is known as stopping the goods in transitu. The unpaid seller has the right of stopping
goods in transitu when they have been delivered for transmission to the buyer and while they are
in the course of transit the buyer becomes insolvent..

Duration Of Transit
S44 Goods are in transit from the time they are delivered to the carrier by hand or water or air or
other means to transmit to the buyer until, the buyer or his agent takes delivery of them.
Goods cease to be in transit in the following circumstances;
i. If the buyer takes delivery of them

ii. If the buyer or his or her agent in that behalf obtains delivery of the goods before their
arrival at the appointed destination
iii. If, after the arrival of the goods at the appointed destination, the carrier or other bailee
acknowledges to the buyer, or his or her agent, that he or she holds the goods on his
or her behalf and continues in possession of them as bailee for the buyer or his or her
agent,.
iv. Where the carrier or other bailee wrongfully refuses to deliver the goods to the buyer, or
his or her agent in that behalf..
It should be noted that where part delivery has been made to the buyer or his agent, the
remainder of the goods may be stopped in transit unless the part delivery amounts to a waiver.
Methods of stoppage.
S. 45 deals with the methods of stoppage;
i. . The unpaid seller may exercise his or her right of stoppage in transitu either by taking actual
possession of the goods or
ii. By giving notice of his or her claim to the carrier or other bailee in whose possession the
goods are.
The right of stoppage is not lost whereby goods are through different carriers. The right exists till
the goods have reached their destination. This was held in Bethel v Clerk where goods passed
through different carriers and there was a claim that by a carrier delivering to another carrier, the
seller‘s right was lost but court rejected this argument.
3..Unpaid Seller’s Right Of Re-Sell

The unpaid seller may resale the goods under the following conditions:-
When The Goods Are Perishable

S. 47 keeps the original contract alive notwithstanding the exercise of the right of lien, retention
or stoppage in transit. Subsection 2 provides that anybody who buys from an unpaid seller who
has exercised his rights acquires a superior and real title as opposed to the original seller.
The section gives power to the unpaid seller to resell the goods in two instances.
a. Where the goods are perishable and the buyer does not pay within a reasonable time.
b. Where the unpaid seller gives notice of his intention to resell the goods and the buyer
does not within a reasonable time pay or tender the price.
Loss Due To Re-Sale

If on re-sale there is a deficiency between the contract price and the amount realised out of the
sale, the unpaid seller will be able to recover this from the buyer. But if on such resale a surplus
is left i.e. the goods are sold at a higher price than the contract price, the seller is not bound to
hand over the surplus to the buyer.
Gallagher v Shilcock (1949)1 ALL ER 921
The plaintiff agreed to purchase a boat from the defendant and paid £200 as deposit and part
payment. He was subsequently informed that he must pay the balance of the purchase money by
a certain date or the boat would be re-sold. After a reasonable time had elapsed in which to
make the payment, the plaintiff offered the money to the defendant, but the boat had already
been sold for more than the original contract price. In a claim by the plaintiff for, inter alia, the
return of the deposit:
Held – The defendant, by exercising his right of re-sale under the Sale of Goods Act, 1893, did
not rescind the contract or resume the property in the goods, but merely exercised his statutory
remedy of re-sale to obtain the contract price; and, therefore, the £200 paid by the plaintiff as
deposit and part payment must be brought into account, and, as there had been no loss on the re-
sale, the plaintiff was entitled to recover that sum.
4. Unpaid Seller’s Rights Against The Buyer

S.48 He is entitled to sue the buyer for the price of the goods, if the property in the goods has
already passed to the buyer. The action can also be maintained where price is payable at a certain
date stated in the contract; once this date expires and the buyer does not tender the price, the
seller may sue regardless of the fact that the property in the goods has not passed and that the
goods have not been appropriated to the contract. He is also entitled to maintain an action for
Damages if the buyer refuses to accept delivery and pay for the goods.
Omer Saleh v Besse [1960] 1 EA 907
The first appellant had entered into an agreement with the respondents which was meant to be a
hire-purchase agreement in respect of a motor lorry the payment for which the second appellant
guaranteed. When the instalments were not paid the respondents took possession and kept the
vehicle in the open for some time where it deteriorated. It was ultimately sold for Shs. 2,500/-.
The respondent then took proceedings against both the appellants who were ordered to pay the
sum of Shs. 14,050/- which was found to be due under the agreement. Clause 9 of the agreement
provided, inter alia, that the respondents would be entitled ―to resume possession of the truck for
selling the same to repay themselves out of the moneys realised therefrom . . .‖,
The issue was Whether vendor can repossess and also sue for purchase price
Held –
That the respondent could not re-take the vehicle and also sue for the price of it, except as
stipulated under the agreement.
Action for damages for non-acceptance
This is regulated by S.49; if a buyer ignore or refuses to accept and pay for the goods, then the
seller may sue for damages for non-acceptance. When the seller claims damages, the rule in
Hadley v Baxendale applies. Under the rule damages can only be awarded in respect of loss as
follows; (i). Loss which would arise naturally, ‗according to the usual course of things‘, from

their breach or the (ii) Loss ‗as may reasonably be supposed to have been in the contemplation of
the parties at the time when they made the contract, as the probable result of the breach of it‘.
A loss outside the natural course of events will only be compensated if the exceptional
circumstances which cause the loss are within the defendant‘s knowledge actual or constructive
when the contract is made.
Victoria Laundry (Windsor) Ltd v Newman Industries Ltd
The plaintiffs were launderers and dyers, who needed to buy a large boiler in order to expand
their existing business and take on a very well-paid Government contract. They contracted to buy
such a boiler, second-hand, from the defendants, making it clear that it was needed for immediate
use. As the defendants dismantled the boiler in preparation for delivery, it was damaged, and so
the delivery was considerably later than agreed. The launderers claimed loss of profits under two
heads: £16 per week for the loss of ‗normal‘ profits, which represented the additional ordinary
work they could have taken on with the extra boiler; and £262 per week for the loss of a lucrative
dyeing contract with the Government. Evidence was given that although the defendants knew the
plaintiffs wanted the boiler working as soon as possible, they did not know about the
Government contract, or the fact that it was so much more lucrative than the laundry‘s other
work.
Court of Appeal held that they were liable for the £16 per week, but not for the £262. The court
stated that a defendant should only be liable for such losses as were ‗reasonably foreseeable‘ as
arising from the breach.
REMEDIES OF THE BUYER

A buyer has six remedies which he can use to compel performance by the seller.
1. Rejection of the goods.

Where the seller is in breach of a condition the buyer can reject the goods subject to the
conditions laid down.
Livio Carli and others v Salem and Mohamed Bashanfer and others [1959] 1 EA 701
The plaintiffs, a Yugoslavian cement company, and their agent at Aden agreed to sell to the first
defendants 200 tons of cement described as ―Dalmation Portland Cement B.S.S./12/1947 of
Yugoslavian origin. Two Lions brand‖. The first defendants insured the shipment with the
second defendants. The cement which arrived at Aden was of ―Salona Towers‖ brand which the
first defendants refused to accept as not being in accordance with the description. According to
the plaintiffs the first defendants had orally agreed to the change in brand and to a change in the
description from ―Two Lions‖ brand to ―Standard Portland Dalmation Cement‖. After refusing
to take delivery the cement was damaged by rain whilst lying at the wharf.
The issue was Whether buyer was entitled to reject goods?
Held;
The first defendants had not agreed to a change of brand or in the description of the cement and
accordingly the plaintiffs had failed to tender to the first defendants cement according to the
agreed description; since this was a sale by description the first defendants were entitled to refuse
to accept delivery;

In Norman v Overseas Motor Transport [1959] 1 EA 131; it was held that a buyer may lose
his right to reject the goods if he exercises rights of ownership inconsistent with such
repudiation.
In Hardy and Co. V Hillerns and Fowler by an agreement , wheat was shipped to certain
buyers who received them and dispatched part of the goods to the sub-buyers. When the buyers
later discovered that they did not conform with the terms of the contract; it was HELD; that, the
act of dispatching the goods to sub-buyers was inconsistent with the ownership of the sellers and
though the goods had not been examined by the buyer, he was deemed to have lost his right of
rejection because parting with possession means acceptance.
Similarly in E&S Ruben v Faire Brothers (1949) 1 ALLER 215; vulcanised rubber materials
were sold with a small sample consisting of a flat soft piece to the defendants. The defendants
resold the sample to one of their customers. The buyers requested the sellers to send half of the
material ordered to their customer who rejected the material for the material supplied did not
correspond with the sample and not of the measurement specified. The buyers purported to reject
the material. HELD; the goods were not supplied in accordance with the sample. There was
constructive delivery when the material was set aside and delivery to the buyer‘s customers,
being effected by the sellers, constituted acceptance of the material by the buyers within the sale
of Goods Act S.35. Therefore, the buyers could not reject the material but could claim only for
breach of warranty. Court considered Hardy v Hillerns to the effect that if the acct of the buyer is
inconsistent with the ownership of the seller, the buyer is deemed to have accepted the goods.
2. Recovery of Price
If the buyer has paid the price and the goods are not delivered, he can maintain an action for the
recovery of the amount paid if consideration has failed entirely. For example where the seller had
no title to pass or where goods are destroyed while still at the seller‘s risk.
Under S.53 buyer can money as special damages in addition to other rights such as special
interests.
In Rowland V Divall (1923) Rowland purchased a car from Divall and used the car for several
months. Divall had no title to the car and therefore Rowland was compelled to return the car to
the true owner. Rowland sued Divall to recover back the price, which he had already paid. Held;
the full owner of the car had therefore received nothing from him. That there was a complete
contract.
3. Suit for breach of warranty

Under S.52 if a seller breaches a warranty or the buyer chooses to treat a condition as a warranty,
in both `cases the buyer can sue the seller and claim for damages for the breach. The second
option is that the buyer may choose to bring an action against the seller in extinction or
diminution of the price that is the price is reduced by the damage caused by the seller.
The section allows the buyer to maintain both options at the same time.

The amount of damages is determined on principles similar to those of the seller‘s claim against
the buyer.
4. Action For Non-Delivery

Section 50 SOGA entitles the buyer to maintain an action against the seller if he wrongfully
neglects or refuses to deliver the goods to the buyer. A seller can also be sued under this section
when he delivers goods that the buyer rejects.
The measure of damages is provided for under S. 50(2) Where there is an available market for
the goods in question, the measure of damages is prima facie to be ascertained by the difference
between the contract price and the market or current price of the goods at the time when they
ought to have been delivered, or, if no time was fixed, then at the time of the refusal to deliver.
In Apollo Construction V Take Me Home it was held that damages must be specifically
pleaded for in the plaint. In this case the claimant could not recover damages as they were no
pleaded for in the plaint.
In Wamala Growers v Attorney General the commissioner for veterinary services advertised the
sale of imported Germany Fresian Heifers. The plaintiff applied for 31 heifers , selected them
and paid 3.5 million. However, only 10 animals were delivered after a lot of pestering. Court
held that there was breach of contract and the plaintiff was entitled to damages for non-delivery
of the remaining heifers.
5. Specific Performance
Section 51 SOGA allows the buyer to sue for Specific performance when the goods are specific
or ascertained. The remedy is discretionary and will only be granted if the goods are of special
value or unique in either nature or rare. i.e. under this remedy, the seller is ordered to deliver the
goods.
In Isaac Bushari V Vitafoam Uganda Ltd court held that the remedy of specific performance is
only available where the goods are specific and ascertained. In this case Justice Oder held that
the goods in question were so particularised in a contract of sale that they must be regarded to
have become ascertained goods after the contract was made on ground that the appellant could
have been entitled to the statutory remedy of specific performance. The goods in question were
mattresses which were detailed in description according to size (inches)
In Fiat Kenya V Roble it was observed that for specific performance to issue the goods must
still be available and damages not an adequate remedy. In this case The appellant agreed to sell
to the respondent a new bus identified by chassis number and to take his old one in part-
exchange. The contract was repudiated by the appellant on grounds which the High Court found
were unjustified. The judge then ordered specific performance of the agreement to sell and
granted the parties liberty to apply for assessment of damages if specific performances were
impossible. No evidence had been led on whether the specific bus was still available
held;
i. the bus was specific property being identified in the contract;
ii. the specific goods must be still available for specific performance to be ordered, but the
onus was on the appellant to show that the bus was not available and it had not done
so

iii. the evidence failed to show any reason why damages would not afford an adequate
remedy
6. Remedy in Tort
The buyer has a remedy in tort; if the buyer knows that he is entitled to the goods he can sue the
seller for detinue or conversion of his goods.
COMPILED BY
TUMUHAISE ANTHONY FERDINAND
AMDG

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THE LAW OF SALE OF GOODS

History and Origin of SOGA

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

THE SUBJECT MATTER OF THE CONTRACT OF SALE

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

Assignment; identify the nature of the following goods

Scope of the Sale of Goods Contract

Characteristics of a Contract of Sale

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

5. Insolvency of the buyer before he pays for the goods

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

Distinction Between A Contract Of Sale And Other Kinds Of Contracts

Contract of Sale Vs a Contract for work and Materials:

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

Differences Between A Contract Of Sale And Hire Purchase

FORMATION OF A SALE OF GOODS CONTRACT

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

TERMS OF THE CONTRACT

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

CONDITIONS AND WARRANTIES

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

Criteria to determine whether a term is a condition or warranty; I

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

Differences Between A Condition And A Warranty

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

Payment of the Price

Therefore under s.9 the price may be determined in 3 ways.

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

There are two forms of payment;

EXPRESS & IMPLIED CONDITIONS AND WARRANTIES

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

In Charles Rickards v Oppenheim [1950] 1 All ER 420

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

Remedies for breach of S.13(a)

Implied warranty Of Quiet Possession S. 13 (b)

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

Warranty Of Freedom From EncumbrancesS.13 (c)

Condition In A Sale By Description S.14

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

In Albhai Pangui V Sunderegi Nanji (1949) 16 EACA 72

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

4. Condition as to quality and purpose;

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

Ashington Piggeries v Christopher Hill Ltd [1972] AC 441

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius

Wilson v Rickett Cockerell & Co Ltd [1954] 1 QB 598

MAGIS more is not enough ad majorem dei gloriam AMDG ferdinandius