SALE OF GOODS TOPIC II FOR ICTM II

SALE OF GOODS TOPIC II FOR ICTM II 11/27/2012 IL. MGETA 1

Introduction • Matters relating to sale of goods are mainly regulated by; – The Sale of Goods Act. Cap. 214 R. E 2002. – The general principles of common law relating to business. – Customary rules 11/27/2012 IL. MGETA 2

CONCEPTS OF SALE & SELL • Sale is an act of selling a product or service in return for money. • Sell is a verb relating to sale • Parties to sale of goods are; – Seller: is the one who sells or agrees to sell goods. See s. 2(1) of Cap 214 – Buyer: is a person who buys or agrees to buy goods. See s. 2(1) of Cap 214 11/27/2012 IL. MGETA 3

TYPES OF AGREEMENT • There are two types; • Contract of sale: here the seller transfers or agrees to transfer the property in goods to the buyer for money consideration. See s. 3(1) Cap 214, • Agreement to sell: this takes place at future time or subject to some conditions to be fulfilled after the transfer. See s. 3(1) Cap 214, property will not pass immediately to the buyer at present as there may be no that property to sell. 11/27/2012 IL. MGETA 4

CONTRACT OF SALE • In this contract, ownership or title of property passes to the buyer immediately as the contract is executed. – Risk of loss passes with the title even if the goods are in the possession of the seller unless otherwise agreed. – A sale is an executed contract because the ownership passes to the buyer from seller simultaneously. 11/27/2012 IL. MGETA 5

Cont’… – Seller has no right to resell the goods even though they might be in his possession. – In case buyer is adjudged as insolvent the goods are to be delivered to the official receiver either by the seller or buyer. – In case seller is adjudged as insolvent, the buyer is entitled to recover the goods from the official receiver as title lies with him. 11/27/2012 IL. MGETA 6

Agreement to sell • In this agreement, Title in the goods passes at some certain future time or on fulfillment of some condition attached to the contract. – Risk of loss rests with the seller even though the goods are in the possession of the buyer. – An agreement to sell is an executory contract as the property in goods has to pass in future. 11/27/2012 IL. MGETA 7

Cont’… – Seller can resell the goods and give a good title to new buyer; – Original buyer can however sue for breach of contract. – The seller may refuse to deliver the goods to official receiver unless paid for. – The buyer can not recover the goods from official receiver. 11/27/2012 IL. MGETA 8

CONCEPT OF GOODS • S. 2(1) of Cap 214, define goods to include all personal chattels which are tangible and capable of moving. • It excludes all things which in action, money, emblements and things affixed on the earth such as trees, coal mines and the like. • But within the meaning of this section, goods also includes gases , water, electricity, trade marks copyrights and the like. • However, when things which are affixed on the earth, for example trees, when cut down and put in a compact form and delivered to the buyer, they become goods. 11/27/2012 IL. MGETA 9

TYPES OF GOODS • Ascertained or specific goods: • They are the ones which have been identified and agreed upon at the time a contract of sale is made by parties. See s. 2(1), 7(1) & 19(1) Cap 214 • Unascertained goods: • These are goods which have not been identified and agreed upon at the time of making the contract. E. g, any stock found in a hardware and no any buyer has offered to buy them. see also s. 18 Cap 214 11/27/2012 IL. MGETA 10

Cont’… • Conditional (contingent) goods: – These are goods either do not exist or are goods which are to be manufactured in the future. – Illustration: if Tanzanian government enters into contract of sale of fifty rescuing helicopters with Chinese company on condition that such helicopters should be supplied when El-nino erupts in Tanzania. 11/27/2012 IL. MGETA 11

ESSENTIAL REQUIREMENTS OF CONTRACT OF SALE • Price(consideration): • See s. 11. Cap 214, if no money is involved and parties exchange goods of equal value, it becomes barter trade. • Parties: seller and buyer, who are of the age of majority and with sound mind when contracting. • See s. 4, also the case of Nash V. Inman 11/27/2012 IL. MGETA 12

Cont’… • Transfer of property in the goods: this means transfer of ownership of goods from the seller to the buyer. Property passes to the buyer when price is paid intact or afterwards provided the contract was made, so risk also passes to the buyer. Note, a possessor may not be the owner, as one can possess on behalf of others see s. 23 Cap 214 • Goods: Sale and agreement to sale: in sale the property pass immediately. While in Agreement to sale goods do not pass immediately, it may in the future. 11/27/2012 IL. MGETA 13

FORMATION OF CONTRACT OF SALE • Contract of sale of goods may be; – in writing or – oral contract or – it may be partly in writing or – partly oral contract, or – implied from conduct of the parties. see also s. 5, 6 Cap 214 11/27/2012 IL. MGETA 14

EXECUTION OF THE CONTRACT (delivery) • Delivery means voluntary transfer of possession from one person to another, if transfer is not voluntary the delivery will not take place. • There are three types – Actual Delivery: When the goods are handed over by the seller to buyer or his authorized agent. – Constructive Delivery: When the person in possession of the goods of the seller acknowledges that he holds them on behalf of the buyer. 11/27/2012 IL. MGETA 15

Cont’… – Symbolic Delivery: When the means of obtaining the goods, i. e. their symbol is transferred, it is called symbolic delivery. • Delivery takes place; – As per the terms of the contract. – By the usage of trade. – In the absence of contract and usage, the place of delivery will be the place where they are at the time of the sale. 11/27/2012 IL. MGETA 16

Cont’… – In case of future goods, the place where they are to be manufactured or produced. – In case of an agreement to sell, the place where they are at the time of the agreement. 11/27/2012 IL. MGETA 17

DISTINCTION BETWEEN SALE AND HIRE PURCHASE • HP: the buyer has an option to return the goods if any latent defect is noted before the last installment is paid. • HP: hirer cannot pass any title even to bonafide purchaser • HP: Registration mandatory for enforcement • HP: parties are the hirer and the owner 11/27/2012 • CS: here buyer is bound to buy the goods with no option to return and the property in goods passes to the buyer at once. • CS: buyer can pass a good title to bonafide purchaser • CS registration of contract is not mandatory. • CS parties are seller and buyer IL. MGETA 18

Continue • HP there is no sales tax • HP: takes no risks if the buyer undergoes insolvency, • HP: hirer is given immediate possession of the goods, 11/27/2012 • CS: tax is payable • CS seller takes risk of any loss resulting from insolvency of the buyer. • CS buyer may get possession immediately or may decide not to get immediate possession of the goods. IL. MGETA 19

TRANSFER OF PROPERTY BETWEEN THE SELLER AND THE BUYER • Transfer of property between seller and buyer is regulated by four basic RULES, i. e Rule I-IV. • The Rules are set out in S. 20(a)(b)(c)(d) of Cap 214 11/27/2012 IL. MGETA 20

RULE I S. 20(a) • Illustration: A is a carpenter operating his business at Morogoro, he produces 5 ft × 6 ft beds at Tshs. 150, 000, B is interested in such type of furniture, hence he visits the premises of A, He agrees with the price and he promises in writing to come shortly to pay the price and collect the same. • Therefore in this illustration the goods were identified and ascertained by the buyer and they are in a deliverable state(finished goods ready for delivery. 11/27/2012 IL. MGETA 21

RULE II S. 20(b) • Illustration: Mr. Mpinzile is interested in buying a car, approaches Frontline(T) LTD, for a second hand car Toyota Verossa, apparently on the display window there was Toyota Verossa T 110 BQR, costing 15, 000/. The car missed one reflector which was to be fitted in later, Mpinzile got interested in the car, paid the price and promised to collect it a day after. On the very same day some one who could not be traced stole wheel cover. • The car is not in a deliverable state. 11/27/2012 IL. MGETA 22

RULE III S. 20(C) • Where measuring, weigh or some other things is to be done to ascertain the price of the goods, unless such measuring is done the property cannot pass to the buyer in sale of specific goods and when such act is done the buyer should have noticed thereof. 11/27/2012 IL. MGETA 23

RULE IV S. 20(d) see. Mussa Mahaba V. Rukia Shamte (1979)LRT. 6(HC) • Justice Samatta( as he then was) Held; • (i)where in a contract for sale by description and the goods delivered do not correspond to that description, the buyer has the right to repudiate the contract and reject the goods within a reasonable time. • (ii) the right to repudiate a contract and reject the goods on ground of breach of contract cannot be exercised after the buyer has accepted the goods. 11/27/2012 IL. MGETA 24

Continue • (iii) A buyer is deem to have accepted the goods when intimate to the seller, he has accepted the goods or retains them without indicating that he has rejected them, or does any act inconsistent with the ownership of the seller. 11/27/2012 IL. MGETA 25

SALE BY NON OWNER ‘Nemo dat quod non habet’ • The maxim simply means “no one can give or transfer what he does not have. ” • It further insists that no one can pass a better title than what he has. See S. 23 of Cap 214 • Note, that the seller may not be always the owner of the goods, sometimes he may have stolen them. • Likewise, he may believe he is the owner when in fact he has been misled by the previous seller, and his buyer gets no better title than he has, then the goods are to be returned to the true owner and the buyer can then recover damages from the seller. 11/27/2012 IL. MGETA 26

EXCEPTIONS TO NEMO DAT RULE • Estoppel: when the true owner of the goods by his conduct precluded from denying the sellers authority to sell. • Sale by the seller in possession after sale, where the seller continues to be in possession of document of title to the goods, see s. 27 of Cap 214 • Market overt-Open market, see s. 24 of Cap 214 11/27/2012 IL. MGETA 27

Continue • Sale by one of several joint owners who is in possession of goods by permission of the coowners; – here the buyer in good faith gets good title to the goods. • Sale by unpaid seller who exercises his right to lien, or stoppage in transit to resell the goods. 11/27/2012 IL. MGETA 28

DOCTRINE OF CAVEAT EMPTOR • The doctrine means ‘let the buyer be aware’ • In CSG seller has no duty to reveal unflattering truth about the goods sold. • The buyer is duty bound to examine the goods thoroughly with his own skills or hired expert, failure to do that he cannot blame anybody except himself. 11/27/2012 IL. MGETA 29

RIGHTS AND DUTIES OF SELLER AND BUYER • S. 29 Cap 214 -the duty of seller to deliver goods and of the buyer to accept and pay the price • S. 36(1) of Cap 214 -buyer’s right to examine the goods before he/she takes delivery. • S. 36(2) of Cap 214 -seller’s duty to afford the buyer, on request, a reasonable opportunity of examining the goods. • S. 38 of Cap 214, buyer is not bound to return rejected goods to the seller. 11/27/2012 IL. MGETA 30

RIGHTS OF UNPAID SELLER • S. 40(1)-unpaid seller, means the seller is unpaid when the whole of the price has not been paid, or when the bill of exchange of other negotiable instruments is given in respect of the price but it is dishonoured or otherwise. • His rights include; – Rights against the goods. – Right to lien s. 42 -44, Cap 214 – Right of stoppage in transit s. 45 -47, cap 214 – Right of resale s. 48 -49, Cap 214 11/27/2012 IL. MGETA 31

Cont’…. – Rights against the buyer personally. – Action for price s. 50, – Action for non acceptance and measures s. 51, – Action for interest and special damage s. 55 Cap 214 11/27/2012 IL. MGETA 32

AUCTION SALE • Auctioneer invites bids from prospective purchasers and sells the goods to the highest bidder, see s. 59(1) of Cap 214, (a)-(d) as well as s. 59(2) • In contract language, a notice or an advertisement of an auction sale is simply an invitation to an offer, and the bid constitutes an offer, while the fall of hammer constitutes acceptance. 11/27/2012 IL. MGETA 33

Cont’… • The auctioneer has the right to make the auction subject to any conditions he likes. See The Coffee Board V. Famous coffee and Tea Works(1965) A. I. R Mad 14. • In certain usage or customs where the sale is without reserve, the goods must be sold to the highest bidder irrespective of the bid amount. • But under normal conduct the auctioneer is free to accept or reject any offer or bid made to him. 11/27/2012 IL. MGETA 34

‘KNOCK OUT’ AGREEMENT • A ‘knock out’ agreement between the intending buyers not to bid against each other is not illegal. • See. Lanchman Dass & Others V. Sita Ram & Others (1975) A. I. R Delhi, 159 • Restrictions; – The auctioneer cannot sell the goods on credit – Also he can not be compelled to accept a cheque for the purchase price. 11/27/2012 IL. MGETA 35

CONDITIONS AND WARRANTIES • Contract of sale contains various terms or stipulations regarding; – the quality of goods, – the price and the mode of payment, – the delivery of the goods and its time and place. • Some of these stipulations may be major terms which go to the very root of the contract and their breach may frustrate the very purpose of the contract. 11/27/2012 IL. MGETA 36

Cont’… • Others may be minor terms which are not so vital that their breach may not seem to be a fundamental breach of contract. • These major terms are called Conditions, and minor terms are called warranties. • It is also necessary to distinguish mere statements of commendation or praise or expressions of opinion made by the seller in reference to his goods. 11/27/2012 IL. MGETA 37

Cont’… • Such commendatory statement are neither conditions nor warranties, and • They do not form a part of contract and as a result give no right of action. 11/27/2012 IL. MGETA 38

Condition & Warrant defined • S. 13(2) of Cap 214, • Conditions are terms when breached may give rise to a right to treat the contract as repudiated. • Warrant are terms, the breach of which may give rise to a claim for damages but not the right to reject the goods and treat the contract as repudiated. • Hence, condition is a stipulation essential to the main purpose of the contract, while warrant is stipulation collateral to the main purpose of the contract. 11/27/2012 IL. MGETA 39

When condition is to be treated as warrant. • Waiver by the buyer: where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the condition or elect to treat the breach of condition as the breach of warrant. The buyer has option to accept the goods and claim damage from the seller. • Note: if the buyer decides to waive the condition, he can not afterwards insists on its fulfillment. 11/27/2012 IL. MGETA 40

Case laws for Condition & warrant • Hartley V. Hyman (1920) 3 K. B 475 • Timber furniture Agency V. Dodoma District Council. Civ. Case No. 13 OF 1989 (HC) Dodoma (Unreported) 11/27/2012 IL. MGETA 41

EXPRESS AND IMPLIED CONDITIONS AND WARRANTIES. • Express conditions and warranties are those which have been expressly agreed upon by the parties at the time of the contract of sale. • Implied conditions and warranties: are the ones the law presumes their existence in the contract automatically, though they have not been put into contract in express words. • They may be cancelled or varied by an express agreement or by the course of dealings or by usage and custom. 11/27/2012 IL. MGETA 42

Implied conditions & warranties • Implied conditions: See s. 14(a), s. 15, s. 16(a), (b) s. 17(2) (a), (b) & (c) of Cap 214 • Implied warranties: see s. 14(b), (c), and s. 16(c), (d) 11/27/2012 IL. MGETA 43

THE END 11/27/2012 IL. MGETA 44