Hand Out 22-A

(Session 24)

Contract of Sale

The transfer of property (ownership rights) or title, as opposed to the physical fact
of handing over of possession, of goods will be discussed in some detail in the next two
lecture (Sessions 25 and 26).

Sale (in which property passes immediately from seller to buyer) differs from
an agreement to sell (in which property is expected to pass at a future date), in terms
of the rights and liabilities of the parties. (See Khawaja Amjad Saeed, p. 36, for a detailed
comparison.)

Barter or exchange of goods for goods, or a gift, is not a contract of sale; but a
part exchange (or exchange of goods for goods and money) is.

It is preferred that a contract of sale be in writing, mainly so that it becomes

easier (a) to prove its existence in case of difficulty/dispute later on, and (b) to include
specific terms needed to deal with a complicated transaction.

Implied terms are included in a contract of sale entered into in the course of a
business. This can be any business, and not necessarily the business of selling goods,
such as professional or governmental activities). A private sale is clearly excluded.,
which means the caveat emptor rule continues to apply.

The rules for passing ownership and about remedies, respectively, will be taken
up in the next two lectures (Sessions 25 and 26).

A contract of sale can include a stipulation that time is of the essence. In this
respect, differs from most commercial contracts, and some non-commercial
contracts, in which time is not of the essence.

These are some instances where time was held to be of the essence of a
contract of sale. Sanday & Co v Keighly, Maxted &Co (1922): buyer was allowed to
reject a grain shipment because it was not ready to be loaded on board the vessel when
the contract stated that it was “expected to be [so ready] late September;” Bowes v
Shand (1877): buyers were allowed to reject a shipment of Madras rice when most of it
was shipped in February when the contract stated that it would be shipped in March
and/or April, even though there was no difference in the quality of the rice as actually
shipped and the rice which might have been shipped in March.

The buyer can return the goods even after he has used them for sometime and ask
for all of his money back, where the seller has breached the condition that he has the
right to sell those goods, for example, a motorcar (Rowland v. Duvall (1923)).
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The warranty of quiet possession is breached, for example, by a third party

obtaining a patent that interferes with such right (Microbeads AG v. Vinhurst
Road Markings Ltd (1975)).

Goods that can be seen are still bought by description, for example, goods taken
from a shelf in the supermarket, with a description displayed on the tin/packet. In
Beale v. Taylor (1967), where the buyer of a motor car, which had been cannibalized,
relied somewhat on an advertisement description of it, even though he could and did
see the car before buying it. Condition does not hold good if the buyer relies on his own
inspection instead (Harlington and Leinster Enterprises Ltd v. Christopher Hull
Fine Art Ltd (190))

Description can cover packaging. Re Moore & Company and Landauer &
Company (1921): where the seller failed to pack the goods the way the buyer had
stipulated (in packages containing 30 tins of canned fruit each).

Under the English Sale and Supply of Goods Act 1994, this has become a
condition about “satisfactory quality,” which is wider than “merchantable quality,”
encompassing more than fitness for normal purposes, to include such things as
appearance and finish, freedom from minor defects, safety and durability.

Goods are of merchantable quality, i.e., reasonably fit for the purpose for which
they are normally used. Baldry v. Marshall (1924): where the buyer was allowed to
reject a Bugati which he had bought specifically for “the ordinary purpose of a
touring car,” relying on the skill and judgment of the seller, when the car was found
unsatisfactory for that purpose. Crowther v. Shannon Co Ltd (1975): where the buyer
bought a Jaguar, whose the engine seized up after 2000 miles within three weeks of
purchase, held that the engine must have been at the point of failure when bought,
therefore car was not reasonably fit for the purpose of being driven on the road

Goods in bulk must conform to the sample, if sold by sample. Aitkin v Boullen
(1908): in a contract for sale by sample of a quantity of maroon twill, buyer was allowed
to reject the whole consignment when a part of it turned out to be inferior to the
sample, or to accept the whole consignment, claiming damages for the inferior part, but
was not allowed to keep the part equal to the sample and to reject the rest.
Champanhac & Co Ltd v Waller & Co Ltd (1948): in a sale by sample of government
surplus balloons “with all faults and imperfections,” sellers were still required to
deliver balloons which corresponded with the sample, and buyers would have been
allowed to reject inferior balloons if they hadn’t decided to accept them anyway.

Goods must be free from defects that make them not merchantable. Defects
can be either “latent” or “patent” defects. Under this condition, the seller is
warranting that the goods are free from “latent” defects. A latent defect is a fault in
the goods that could not have been discovered by a reasonably thorough inspection
before the sale (in such cases, destructive testing is required or other means which the
seller cannot be expected to allow, e.g., taking apart a motor car engine). In this case,
there is a presumption that the seller knew or should have known of the defect but did
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not disclose it to the buyer, which the seller has to rebut. A patent defect is a fault that
could have been discovered by the buyer thru a thorough inspection. In this case, the
seller is not liable unless he can be shown to have taken active steps to hide the defect
from normal inspection.