THE LAW RELATING TO SALE OF GOODS

Class Notes

Course Instructor: Faith Odhiambo

INTRODUCTION

This is a branch of the law of contract. This is a special kind of contract. It is governed by the

Sale of Goods Act (Cap 31, Laws of Kenya). This Act is based on the 1893 Sale of Goods Act

of England which has since been amended and modernized.

Section 59(2) of the SOGA is known as the saving provision. It saves the application of the

common law rules to sale of goods transactions in Kenya. It provides that sale of goods

transactions will be governed by the rules of common law – particularly the law of agency and

contract.

This law is part of consumer protection. The Constitution of Kenya 2010 under Article 46

provides for the protection of consumers. Consumers have the right to goods and services of a

reasonable quality, to information, protection of their health, safety and economic interests and to

compensation for injury caused by defective goods and services.

Definition of a Contract for the Sale of Goods:

Under section 3(1) SOGA A contract for the sale of goods is defined as:

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“A contract whereby a seller transfers or agrees to transfer the property in goods, the subject

matter of the contract, to a buyer for money consideration called the price.”

Elements of a contract for the sale of goods (ANALYSIS OF DEFINITION)

1. A contract for sale under the Act includes both a contract for sale and an agreement to

sell. The distinction between the two is contained in section 3(4) of the SOGA.

In a sale the transfer of the property in the goods takes place immediately. In an

agreement to sell the transfer in the property of the goods is to take place at a future time

or is subject to certain condition(s) to be fulfilled.

A sale can therefore be considered both a contract (agreement) and a conveyance (a

transfer in the ownership) in goods. An agreement to sell is merely a contract with no

conveyance.

2. It is a contract – therefore all the essentials of a contract need to be met: there must be an

offer and acceptance, there must be intention to enter into legal relations, there must be

capacity of the parties, there must be consideration (consideration is the forbearance on

the part of one party so that the other acquires a benefit – in this case the consideration

must be money consideration), there must be consent; the contract must be lawful and not

against morality and public policy; the contract must be capable of performance.

3. The consideration must be monetary in nature. An exchange of goods for goods (barter

trade) is not a contract for the sale of goods. This monetary consideration is the price. In

section 10, the price of goods is either fixed by the contract, of fixed in the manner

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 provided in the contract or by the course of dealing between the two parties. If the price is

not determined, then the buyer must pay a reasonable price for the goods (what is

reasonable is a matter of fact).

4. A contract for the sale of goods worth two hundred shillings or upwards must be entered

into or evidenced in writing for it to be enforceable

5. The contract is for the transfer in property of the goods, not necessarily the goods

themselves. Where the transfer is immediate, it is a sale and where the transfer is delayed,

it is an agreement to sell. Property in goods means the ownership of the goods.

In a contract for the sale of goods, the buyer pays for the right to own goods, not necessarily the

goods themselves.

6. The property must be transferred, meaning that there are two different parties in the

contract.

7. Meaning of goods – in lay men terms, the term goods simply means merchandise. But in

legal terms the definition (section 2(1)) is:

“ all chattels personal (moveable goods) other than things (choses) in action (these are intangible

things e.g. debts, shares, copyrights and other things which only exist as claims recoverable by

action in law) and money, and all ablements (cultivated crops that are normally harvested

annually), 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.”

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There are different ways of classifying goods

 Existing or future goods (see section 7(1) of the SOGA) – existing goods are those that

are owned or possessed by the seller at the time of entering into the contract. Future

goods are those that are to be manufactured or acquired by the seller after the making of

the contract of sale. At the time of making the contract the goods are not in existence.

Where there is a contract for the sale of future goods the contract operates as an

agreement to sell.

 Specific (ascertained) or unascertained (generic)– specific goods are those goods which

are identified and agreed upon at the time of the contract. Unascertained goods are those

that are yet to be agreed upon at the time of making the contract.

The importance of identifying whether goods are ascertained or unascertained lies in

section 18 of the SOGA – No property in the goods can pass to the buyer in ascertained

goods until they become ascertained. The only exception to this rule is in section 20(e)(1)

which we shall consider later.

Terms of the contract

Terms are the promises that parties make to each other with respect to the performance of the

contract. They are to be distinguished from mere representations which are statements that are

not within the contract but are made before the contract is entered into. The basic test for

distinguishing between terms and representations is the intention of the parties.

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The terms of the contract are those statements that set out the legal rights and obligations of the

parties in the contract.

Terms can be classified into the following:

 Express or implied

Express are what the parties explicitly state in the contract. They are either orally or in writing or

partly oral and partly in writing.

Implied terms are what can be inferred from the conduct of the parties or by the customer or

usage peculiar to the particular trade or profession. They have not been specifically expressed in

the contract but the parties may have intended to express them. They may not have been

expressed because:

i. They may have been too obvious to state

ii. It was customary

iii. The parties have not considered each and every eventuality

These express or implied terms can either be conditions or warranties.

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In order to protect the buyer, there are certain conditions and warranties that are implied by the

SOGA. Even if the parties have not expressly stated these terms in the contract, by virtue of the

fact that the contract is one for the sale of goods, then these conditions and warranties are

implied.

Conditions are fundamental terms that go to the root of the contract. The parties have attached so

much importance to them that if they knew they would be breached they would not enter the

contract in the first place. Per Fletcher Moultion LJ, in Wallis v Pratt [1910] 2 KB 1003 at 1012:

“It is an obligation which goes directly to the substance of the contract or in other words so

essential to its very nature that its non – performance may be fairly be considered by the other

party as a substantial failure to perform the contract at all.”

If a condition is broken, the aggrieved party will have two choices – see section 13(1) SOGA:

A) To treat the contract as repudiated and reject the goods and claim damages for any loss

suffered

B) OR allow the contract to be performed and claim damages only for any loss suffered.

Warranties are stipulations in the contract that are not of such importance as to go to the root of

the contract. They are collateral to the main purpose of the contract. A breach of warranty gives

rise to a right to a claim for damages only and not a right to reject the goods and treat the

contract as repudiated.

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According to section 13(2) SOGA – whether a term is a condition or a warranty depends on the

construction of the contract

Note: A stipulation may be treated as a condition even though called a warranty in the contract.

This simply means that if the breach of the term goes to the root of the contract or deprives the

other party the benefit of the contract then it may be repudiated.

CONCLUSION

It is worth noting that the doctrine of laissez faire is evident in the statutory provisions governing

the terms of contract of sale of goods. The intention of the parties is given primary consideration

and the parties are also given the freedom although to some limited extent to treat terms as either

conditions or warranties as they wish (although some terms are necessarily conditions and others

are warranties by virtue of the SOGA and the parties cannot vary them)

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