CHAPTER 3 CONTRACT OF SALE The leaner should fully understand the following: Essential elements of a valid contract of sale Implied terms of the contract ®Modes of delivery ©Passage of ownership and risk ® Voetstoots sale ©Remedies for breach of contracts of sale DEFINITION A contract of sale is a legal agreement in which a person called a seller or vendor promises to deliver a thing (or merx) to another person called a purchaser, with the purchaser agreeing to pay a certain price (or pretium). x Four major essential elements of a contract of sale emerge namely: 1. CONSENT The buyer and seller should be in agreement as to the thing sold and the purchase price. There should be an intention to sell and related intention to buy.4 As regards consent, the general principles of contract apply. 2. SUBJECT MATTER (OR MERX) Manase and Madhuku'? define a merx as “any corporeal or incorporeal asset of some value.” © Parties to the contract must be in agreement as to the subject matter of the sale. Hence the merx should be clearly defined and ascertainable. ©Thus, if property is unknown to the parties or is not in existence at the time of sale or ceases to exist at the time of the contract, the contract becomes void for initial impossibility. ®A contract of sale is however, binding if the non-existence of the property is attributable to one party or if the seller represented that the property exists. ®Partial destruction of the merx unknown to both parties does not affect the validity of the contract of sale as long as substantial performance can be made by the delivery of what remains against "in their book “A Handbook in Commercial Law In Zimbabwe.” 46payment of a proportionally reduced price’. ®The sale of another person’s property was held to be valid, the seller’s duty being to deliver the merx and guarantee against eviction? 3. PURCHASE PRICE (PRETIUM) © Parties to a contract of sale must be in agreement to the purchase price of the merx. Cassimjee V Cassimjee* held that the purchase price “must be in current money and it must be fixed, certain and real” s2 see Hilliard and Westborne v Tabor Frost 1938 SR 89. Fries v Ryes 1957 (3) SA 575 @ S81. #1947 @) SA 701 * Requirements were summed up by the Zimbabwean Supreme Court in the case of Chikoma V Mukweza* where it was held that “There can be no valid sale unless the parties have agreed on a purchase price. If it is not stated clearly, it must be stated impliedly: there must be an agreed method by which the price can be ascertained - - -” In the case of Baxter V Maxwell’, the court held that the contract of the sale of milk at “ 47current wholesale rates” was void because the evidence showed that it was impossible to calculate the current wholesale rate in that trade at the time. ®On the contrary, Macey’s Consolidated Ltd V Chaseborough Ponds’ held that a sale of future goods at the ruling price at the time of the order being placed was valid as the ruling prices were readily ascertainable. * The moot question remains: whether in the absence of the sellers usual price ora ruling market price, an implied agreement to pay and accept a fair and «5 1998 (1) ZLR S41, 1923 SR 120 7 1967 RLR 253 reasonable price gives rise to a valid contract of sale? © This question was left unanswered in the case of Elite Electrical Contractors V Covered Wagon Restaurant ‘where the court vaguely observed that “There is no general rule of contract that a contract to pay a reasonable price for goods sold and delivered is invalid”. © However, in Smith _V Marketrite (Pvt) Ltd ° the court held that as a general rule, Roman Dutch Law, there can be no valid contract of sale 48at a reasonable price because it is difficult to determine a reasonable price. FACTS ~ parties entered into a contract for the manufacture and sale of nuts. No price was agreed between the parties, it being accepted that a reasonable price be charged. HELD - that despite the vague provision, sale at a reasonable price was valid because it was easy to determine or ascertain the price from the facts and circumstances of the transactions. In the court’s words “courts must strive to find what is fair and reasonable where prices are not mentioned in a contract of sale even 9 19722) RLR223. HH 156/90 if it means enlisting the services of experts to do it”. * English law provides that, where prices are not mentioned and there is no ruling market price, courts assume that there is an implied agreement to pay a reasonable price!®. 4, DELIVERY The seller has an obligation to deliver the thing under sale to the buyer in time. The seller 49however, has no obligation to transfer ; ownership to the buyer. He is only obliged to transfer the merx. In Kleynhans Brothers V Wessels Trustee'! the court observed that “A contract of sale with us does not have the effect of a translatio domini (transfer of ; ownership), it is simply an obligation to give vacua possession coupled with the further legal consequence of a guarantee against eviction”. PASSING OF OWNERSHIP Once a contract of sale is validly concluded, all what the purchaser is assured of is free and “1920 CPD 333, 1927 AD2T1 @ 282. undisturbed possession of the merx (vacuo possessio). NB Ownership does not automatically pass. For it to pass, the following should be satisfied: a. The purchase price must be fully paid. b. The seller must be the owner of the merx. In law, one cannot pass on tights which (s) he does not possess. If anon —owner transfers ownership illegally the true owner of the merx always has the right to take back the merx from whoever Possesses it.c. There must be an intention by the buyer to receive ownership. d. There must be delivery of the merx. MODES OF DELIVERY ca__ Immovable property is delivered by registering the names of the purchaser on the title Deeds of the property in terms of the Deeds Registries Act”. ca___ As regards movable property, there are 2 main modes of delivery namely: 1) FISCAL / NORMAL DELIVERY ESCAL/ AO Errors This refers to the actual movement of the merx from the seller to the buyer. 2) CONSTRUCTIVE / FICTITIOUS DELIVERY This occurs where actual delivery is difficult, or impossible or unnecessary. Where fictitious delivery takes place, the merx stays where it is at the time of legal delivery and need to move. x This delivery takes the following form: ® Chapter 20.10 31a. Symbolic delivery - here, the seller delivers some symbol of the merx and not the merx itself. E.g. handing over keys of the warehouse where the merx is stored. b. Delivery with the long hand - (Traditio longa manu) This takes the form of pointing out the merx by the seller to the buyer and giving the buyer the right to remove the merx at his own convenience. - This may occur where actual delivery is impossible because of the weight/bulk or the special circumstances eg Government regulations. c. Delivery with short hand - (Traditio brevi manu) Occurs where the buyer is already in physical possession of the merx and subsequently takes possession as the owner. d. Constitutum possessorium_ - Occurs where the seller retains possession of goods but continues to hold the goods as an agent of the buyer. e. Attornment - Occurs when an agent has Possession of the merx but continues to hold the goods not for the principal but for buyer. PASSING OF RISK- R isk relates to the destruction or damage of the merx or the profit of the merx. - Under Roman Dutch Law, risk generally passes to the purchaser immediately at the conclusion of the contract of sale. In legal terms, risk passes when the contract is perfecta. (Clear as to what is to be sold and the purchase price thereof). ® Exceptions to this rule include: LI f the seller is negligent or where he Intentionally damages the merx. Here risk remains with the seller. NB Where the merx is damaged by the actions of the 3" party, risk is with the purchaser. The buyer can however, sue the 3" party for damages only If he has received cession of goods or the right to sue from the seller. This is because the seller is still the owner of the goods and has the locus standi to sue. .Risk does not pass where the sale is subject to a suspensive condition until the condition passes or is fulfilled. 2. Risk does not pass where pretium cannot be fixed without weighing, measuring orcounting the merx. Risk only passes where pretium is fixed. 3, Where the parties agree that the risk rule does not apply, risk does not pass. 4. In cases where risk has passed, such risk will return to the seller if he fails to deliver the merx on time. NB where risk has passed to the purchaser, the purchaser has to pay the purchase price even though the merx is destroyed and he cannot plead supervening impossibility. UTIES OF THE SELLER DUTIES OF THE SELLER _To take care of the merx — Before delivery, the seller must take proper care of the merx even if risk is not on him. He is liable for any loss caused by his willful act or negligence. If delivery is late because of the purchaser’s fault, then the seller is only responsible for willful acts and gross negligence. Buyer’s remedies — He can claim damages. But if damage of the merx is extensive, then he is allowed to cancel the contract. 2. Duty to deliver the merx — the merx must be delivered at the stipulated contractual time. If notime is stipulated, then delivery must be effected within a reasonable time. - The quantity delivered must not be more or less than what was contracted. Tf more, the buyer may reject it in fofo or accept what has been delivered but pay its prorata value and proceed to sue for what has not been delivered. _ Ifhe has been mixed delivery, the buyer may reject the whole package or may opt to sort them out but be paid damages for so doing. _ If there is no delivery and delivery is material to the contract, the buyer may opt out of the contract with or without damages or he may seek damages or specific performance. If the buyer had paid pretium, he has the right to reclaim it. 3. To guarantee against eviction - all contracts of sale have an implied warrant against eviction ie the seller promises the buyer that he would not be disturbed in his possession of the merx. The buyer would enjoy vacant possession of the merx. Relevant Considerations of eviction ~ _ Eviction should not be due to the fault, acts or negligence of the buyer. - When threatened by 3 parties, the buyer must give the seller notice of the 3 parties action so as to enable the seller to take 58over proceedings and defend whatever legal action on behalf of the buyer. This is only irrelevant where the 3" party’s superior rights to the seller are so glaring that notice would be considered absurd in the circumstances. - When threatened by 3" parties, the buyer must not give up possession voluntarily unless if the rights of the 3° party are unassailable (obvious that they cannot be challenged). - Under the Old Roman law, the buyer was obliged to raise every defence available to defend title of goods NB The guarantee against eviction will not be implied in the following circumstances: a. Where parties expressly agree that the seller will not be liable in the event that the buyer is evicted. b. Where it is within the buyer’s knowledge at the time sale is concluded that the 3" party is the owner of the merx. c. Where the cause of eviction arises after the sale and the seller is fraudulent. Its important to note that where the guarantee against eviction is breached, the buyer has a right to claim for recovery of the purchase price and other damages, depending on the nature of the sale. 56HLONAY. vauxa dod Na N NONDAS ay over proceedings and defend whatever legal action on ‘behalf of the buyer. This is only irrelevant where the 3" party’s superior rights to the seller are sO glaring that notice would be considered absurd in the circumstances. When threatened by 3" parties, the buyer must not give Up possession voluntarily unless if the rights of the 3” party are ‘nassailable (obvious that they canno' challenged). 2 Under the Old Roman jaw, the buyer was obliged to raise every defence available to defend title of goods NB The guarantee against eviction will not be implied in the following circumstances: a. Where parties expressly agree that the seller will not be liable jn the event that the buyer is t be evicted. p. Where it js within the buyer’s know ledge at the time sale is concluded that the 3" party is the owner of the merX: on arises after the sale c. Where the cause of evicti and the seller is fraudulent. Its important to note that where the guarantee against eviction is preached, the buyer has a right to claim for recovery of the purchase price and other damages, depending on the nature of the sale.4 HLONGULS Naas wuixa 40d NOIL4) 4. The duty to guarantee against defects - the buyer must be given the opportunity to inspect the merx and see whether it tallies with what was agreed. If it does not tally, the buyer may reject the merx and the seller will have failed to effect delivery. X Defects may take 2 forms namely: a. Patent defects — are those that must have been obvious to an ordinary purchaser at the time of sale. A buyer who, at the time of sale, inspects the merx when it is suffering from a patent defect cannot complain when the seller delivers the merx to her in the same defective condition. However, where there has been no inspection of the merx, the buyer’s remedy when a patently defective merx is de ivered depends on whether the sale is one of as tained or unascertained goods. If unascertained, then the buyer’s remedy lies in aedilition damages. b. Latent Defects — are hidden defects at the time sale is concluded. It is the seller’s duty to guarantee against latent defects. In fact, every agreement of sale has an implied warranty ° against latent defects. ie the law assumes that the merx is sold free from defects which make itv unfit for the purpose (ordin: ific )i eee (ordinary or specific it was EXCEPTIONS EXCcrEReY I. Where the defect does not exist at the time of sale. The ordinary rule as to risk of the thing sold applies and the loss falls on the buyer. Il. Where the buyer is aware of the defect at the time of the sale or becomes SO aware subsequently one expressly or impliedly accepts the position, he is taken to have waived his rights against the seller in respect of that defect. TI. Where the actions for claim of damages have prescribed, the buyer has no claim against the seller. Tv. Where the seller expressly contracts out of liability by agreement with the buyer, the goods are sold Syoetstoots’ (or as they stand) and the buyer, in contracting on this basis, becomes pound by the term. {£ the seller knows that the goods are defective and fraudulently conceals this to the buyer, the sale would not be considered Voetstoots. This js called fraudulent non= disclosure. Here the buyer can cancel the contract and seek damages or he can seek a reduction of the purchase price.Elston No V Dicker 2! EC Ker Eacts ~ Dicker mother. Befo: cracks started appearing in, major at the end of the rainy season. All were old cra icks, which had been previously patched up and plastered over, Experts were called in to assess the damage and as a result, major repair work to the foundations of the house was carried out, The buyer sued the seller’s estate for the expenses and succeeded in the High Court. On appeal the court held - that to establish the seller’s liability for the latent defect complained of, the buyer must show directly or by inference that the seller actually knew of the defect. It was clear from the evidence that the seller must have known of the defects at the time of the sale and deliberately refrained from disclosing them. Even if she had been aware of the exact cause of 11995 (2) ZLR 375 ($C), 59the cracking, she must at least have appreciated that there was something remiss with the structure. NB Where there is doubt as to whether a sale is voetstoots or not, there is a presumption against voetstoots. It is also presumed that a defect that manifests shortly after the sale existed at the time of sale. Buyer’s remedies — Come in the form of aedilition damages. These come in 2 types namely: a. Actio redhibitoria — This relief entitles the buyer to rescission of contract (or redhibition). x The purchase must prove the following: (i) That the defect is so serious as to render the property unfit for the purpose for which it was sold and bought. (ii) That the buyer will not have purchased the merx had he known of the defect. ca___ A redhibitory action is therefore available to the buyer who shows that the merx fails to live up to a dictum et promissium (This is a material statement made by the seller to the buyer during negotiations, bearing on the quality of the merx and going beyond mere praise and commendation)vw ca Aredhibitory action entails restitution. Parties are restored to the status quo ante (the situation he was before he entered into the contract). NB Where restitution is not possible, the buyer can make a claim under the actio quanti minoris. b. Actio Quanti Minoris_ - this means a reduction in the purchase price. The action is normally brought by a buyer who is entitled to redhibit but decides not to do so for either of the following reasons (i) He may not be able to give restitution (ii) The defect in the merx may not be sufficiently serious to justify redhibition or rescission of sale. (iii) Where the buyer is entitled to redhibit but does not, insisting on a reduction of the purchase price. The damages are usually measured by assessing the difference between the purchase price and the market value of the merx in its defective condition. S.A Soil and Fat Industries Ltd V Park Rynie Whaling Co Ltd” 21960 AD 400. 61Vv Facts — The defendant bought from the plaintiff certain oil used for soap making. The oil was delivered and most of the pretium was paid. The oil contracted was no. 3 Whale Oil but that which was delivered was a mixture of Whale and Sperm oil. The defendant separated the Whale from Sperm oil and used whale oil for soap making. The reminder sperm oil was useless and the defendant incurred loss. In an action for aedilition damages, the court Held — that since some of the oil was used, restitution was not possible. Hence the defendant was entitled to relief under the actio quanti minoris and the measure of relief was the difference between the purchase price and the actual value of the oil supplied. c. Aedilition damages have been extended to compensate the plaintiff resulting from the defect if the seller actually manufactured the article himself or makes it his business to deal in such articles or publicly profess to be an expert in such articles Lockie V Wightman and Co Ltd” Facts — the plaintiff sued the defendant for the sum of £250 being damages suffered by her as a result of the death of her horse. The death was ® 190(1) $A 361 @LONaYLS yuia wod NMAS NoILDaS caused by the horse eating fodder containing arsenic. The defendant company were dealers in produce including horse fodder. The fodder arrived to the Plaintiff packed very tightly in thick waterproof brown paper, intact and showed no sign of contamination. Held — that the general rule is that the vendor or seller is not liable to the buyer for damages where he is ignorant of a defect in the article sold. But where the merchant sells ‘works of his own manufacture or articles of which he professes to have special knowledge, he cannot escape liability even though he was not aware of the defect. This is because merchants ought to sell good products. Duties of the buyer 1. Duty to accept delivery of the merx. 2. Duty to pay the pretium. NB If the buyer neither accepts delivery nor pay the purchase price, he would have committed a breach that goes to the root of the contract (or fundamental breach). The seller can therefore have either of the following remedies: a. He can sue for specific performance or b. He can cancel the contract and claim damages.spECIAL SALES (1) C.LF Sales — refers to Cost, Insurance and Freight and is normally used when goods are transported by sea transport. Normally the seller will take out a marine insurance policy and load the goods at the port of departure. He is then issued with a Bill of Lading which he sends to the buyer together with the insurance policy and the invoice for payment of pretium. When the buyer receives these documents, he is obliged to pay the pretium. The legal significance of a C.LF sale is that goods are sold whilst they are afloat. Since the Bill of Lading contains a description of goods which are being transported, it necessarily follows that whosoever is in possession of the Bill is deemed to be the owner of the goods in question. He is allowed to sell the goods using the Bill of Lading. If goods are destroyed whilst afloat, the buyer is obliged to pay the purchase price. (2) F.OB sale —is the opposite of C.LF sales. Here, goods are transported Free On Board. It is the responsibility of theWy buyer to take out an insurance poli polic; and to pay for transport charges. z (3) F.O.R sales — Free On Rail. The above principles apply. (4) | C.O.D sales — Cash On Delivery. Vindication Provides that the true owner of goods has the right to reclaim his goods from whoever is in possession of them at the material time. However, this action is limited by the principle of estoppel. It provides that the true owner is prevented from denying that he assented to the disposition of goods if by his conduct he made a representation to that effect. Grosvenor Vv Douglas” convincingly held that the following should be satisfied for estoppel to succeed: _ There must have been some negligence or fault on the part of the owner. _ There must also be a representation by the owner. - The 3" party mus the representation. - The 3" party must t have acted in reliance on have been prejudiced. 24 1956 (3) SA 420. 65