Contracts of Sale of Goods

Introduction The governing law regulating this area of business law is the Sale of Goods Act, 1962 (Act 137) By Section 78 it is applicable to every contract of the sale of goods made after its commencement, i.e., 1962 Section 79 extends its application not only to private persons but also to contracts entered into by the Government

There is no requirement of writing in respect of a sale of goods under the Act However, where transactions involve large sums and quantities, it is desirable that such contracts should be in writing

What is a Contract of Sale of Goods? The Act defines it as “a contract by which the seller agrees to transfer the property in the goods to the buyer for a consideration called the price, consisting wholly or partly of money.” Note the following key words: – Contract – Goods – Parties, i.e. buyer and seller – Price: wholly or partly of money – Transfer of property (ownership) in the goods

Contract: – Offer – Acceptance – Consideration – Intention to create legal relations – capacity

Goods – The Act applies only to transactions involving goods. In other words the subject matter for every transaction under the Act must be goods – Section 81 defines goods as: “movable property of every description, including growing crops or plants and other things attached to or forming part of the land which are agreed to be severed before sale by or under the contract of sale”

Thus the following are goods: – Minerals and sand when collected – Crops produced by labour or growing naturally – Wildlife, birds, fish – Clothes, jewelry, household items etc Goods thus exclude immovable property, i.e., land and buildings.

Also excludes debts, shares, money and currencies Except where the currency is no longer legal tender and sold as antiques and collectible items, then they qualify as goods.

Parties: sellers and buyers – Seller could be manufacturer, producer, trader, wholesaler, retailer etc – Buyer, a natural person as well as a legal person. Price: wholly or partly of money Includes cash, cheques and other forms of payment as agreed by the parties Section 6 stipulates that the price may be fixed by the contract or determined by the course of dealing between the parties. Where no price is determined, buyer must pay reasonable price.

If the consideration consists wholly in something other than money then the transaction is a barter sale or contract of exchange. When consideration consists partly in money and partly in goods, there must be evidence that the part of the price consisting of money is an integral part of the price and not merely added on for the sake of appearance.

Flynn v. Mackin: a car dealer agreed to supply a car in part-exchange for the customer’s car plus £250 cash. No value was accredited to either car. Held: this was a contract of barter or exchange, and not a contract of sale of goods.

Transfer of Property – Objective is to transfer the right of ownership/legal title of the goods from the seller to the buyer – Law distinguishes between possession and ownership. A person in possession is not necessarily the owner. – Rowland v. Divall: the plaintiff purchased a car from the defendant. Two months later it was discovered that the car was stolen property and the plaintiff had to give it up to the police. The car was stolen before it came to the defendant and both parties were innocent of the crime. Nonetheless the defendant had no title to pass on and so the plaintiff sued the defendant for the whole of his money back. This was despite the fact that he had had two months use of the car

Held: the whole object of a sale of goods is to transfer the property from the seller to the buyer. No property had been transferred here, there was a total failure of consideration and the buyer was entitled to his money back.

– Section 26 (1) provides that property in goods passed under a contract of sale when the parties intend it to pass. – 26 (2) provides that unless a contrary intention appears, property passes to the buyer when the goods are delivered. – Note that a seller has no obligation to deliver unless price has been paid or seller has extended credit to the buyer Transfer of property and risk – Risk passes to the buyer when the parties intend it to. – If the parties have expressly or impliedly indicated the time when risk should pass, the courts would simply give effect to their stated intention. – In the absence of any contrary intention the goods are at the sellers risk until the property in them passes to the buyer, after which the goods are at the risk of the buyer.

This general rule is subject to two important exceptions or qualifications: 1.where delivery has been delayed through the fault of one of the parties then the goods are at the risk of the party at fault in relation to any loss, damage, etc which arose as a result of the delay. – Thus where property has passed but buyer pleads with the seller to keep the goods for collection later, risk passes to the buyer.

Demby Hamilton v. Barden: the plaintiff sold 30 tons of apple juice to be collected by February By November 1946 much of the apple juice remained uncollected by the buyer, and this had become putrid. The courts held that as the delay in the delivery of the goods was through the fault of the buyer the apple juice was at his risk.

2. Where the seller remains in possession of goods after the property in them have passed to the buyer, or, Where the buyer obtains possession of the goods, at the time when property has not yet passed to him, The party in possession is deemed to be a bailee and therefore under a duty to exercise reasonable care over the goods.

Poole v. Smith Car Sales: In August 1962 Poole supplied a second-hand car to Smiths on a sale or return basis. However, Smiths never sold the car and despite many requests only returned it in poor condition in October. Held: property had passed to Smiths. Had the property not passed Smiths would have been liable for the deterioration of the car as bailees.

Duties of Parties Obligations are created for both the seller and the buyer under a sale of goods Under the Act, there are 2 different types of goods with different duties attached to them. These are: – Specific goods – Unascertained goods

Duties of the Seller – Specific goods: these are existing goods that the parties have identified and agreed upon at the time the contract is made. E.g. the buyer selects a green shirt in a shop to buy and the seller agrees to sell it, it has become a specific good. – Duty: under section 8 (1), it is the duty of the seller to deliver the goods identified and agreed upon to the buyer, i.e. the green shirt, if he delivers another, which is identical and may even be of a superior quality he is in breach. Buyer is entitled to reject the goods and refuse to pay the price and to sue for damages for non-delivery.

Unascertained goods: goods, which are not identified and agreed upon before or at the time of the contract of sale. They are sold by sample or description. E.gs.: – goods which are not yet in existence at the time the contract is made – goods yet to be manufactured – goods yet to be grown – goods yet to be acquired – goods which are an unidentified portion of a bulk of goods

Duty: to deliver the goods, which substantially correspond to the description or sample by which they were sold. Otherwise buyer is entitled to reject the goods and refuse to pay the price and sue for damages for the breach. In Re Moore and Landauer: a contract for the sale of 3,000 tins of canned fruit stipulated that the consignment would be packed in cases, each containing 30 tins. In fact about half of the consignment was packed in cases, each containing 24tins. The buyers rejected the whole consignment. Held that the stipulation as to the number of tins per case was part of the description and so the sellers were in breach of the condition implied in the Sale of Goods Act. That entitled the buyers to reject the whole consignment.

Exercise Coca cola company advertises that a crate of coke goes for GHC 150 with empty bottles and GHC 200 without empty bottles. Ann Michelle buys a crate with empty bottles and pays GHC 150. Is this a contract for the sale of goods? Why? Support your answer with the law.

Answer Yes, it is a contract for the sale of goods. Why? – Clear agreement to transfer the property in the goods for consideration – Consideration for the goods (crate of coke) was partly money and partly goods. Section 1 of SGA: “a contract by which the seller agrees to transfer the property in the goods to the buyer for a consideration called the price, consisting wholly or partly of money”