Commercial Bul301

BUL 302: Commercial Law II S.A.R.I. 2019 (Johnson E.
Omotayo)
-SANTASMILES’s NOTE-
COMMERCIAL LAW
[BUL 302: COMMERCIAL LAW II
(LASULAWS)]
©Sapphires and Rubys Inspired 2019
BY: JOHNSON E. OMOTAYO.
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BUL 302: Commercial Law II S.A.R.I. 2019 (Johnson E. Omotayo)
COURSE OUTLINE
Chapter 1: SALES OF GOODS
Chapter 2: HIRE PURCHASE
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3RD OCT, 2018.

CHAPTER 1
SALES OF GOODS
The law governing Sales of goods in Nigeria is the Sales of Goods Act, 1893.
DEFINITION
According to section 1(1) of the SALES OF GOODS ACT 1893, a contract of sale of good is defined as:
“A contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a
money consideration, called the price”.
From the above definition, the Act makes a disparity between a contract of sale and an agreement to sell.
1. A contract of sale is where the transfer of property takes place at the time of the transaction. While;
2. An agreement to sell is where the transfer of the property in the goods is to take place ata future time
or subject to some condition thereafter to be fulfilled by both or either of the parties.
An agreement to sell becomes a sale when the agreed time elapses or the conditions are fulfilled subject to
which the property in the goods is to be transferred. For example, a contract for the sale of goods yet to be
manufactured is an agreement to sell because the property in the goods cannot pass until they are
manufactured and ascertained.
So, there must be a concurrence between the seller and the buyer for the former to sell or transfer the
property he has in the good either immediately or in future for a consideration from the latter called – price.
There must be voluntariness to contract between them.
It follows therefore that if property has passed to the buyer the seller can sue for the price and also if the
seller re-sells the goods after the property has been passed to the buyer, the second buyer acquires no better
title unless he falls within the exceptions to the “nemo dat” rule. The same us the case where the buyer re-
sells the goods before property passes to him.
Notwithstanding, it is possible in certain situations that possession of goods be transferred to the buyer
without ownership being transferred. For example, in contract of Hire-purchase or in contracts where the
seller has reserved his title in the goods i.e. the “Romalpa Clause”.
FORMATION OF CONTRACT OF SALES OF GOOD
 Formality
The contract of sale of good must conform to the principles of ordinary contract, that is, it must have the
essential elements of a contract, therefore, the ratio in the case of NASH V. IMAN is still applicable. Hence,
that an underage cannot and should not enter into a contract is applicable.
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In practice, there is no special formality for the formation of a contract of sale of good. The law (Section 3
SOGA) allows it to be either in oral, in written, or by deed and it can also be implied from the parties
conduct. As can be seen in the case of:
EMAPHIL V. ODILI[1987]
Where O entered into an unconditional oral contract to buy 230,000 bags of cement from the company’s
ship at Warri. He issued a bank draft of N 1.2 million to pay for the goods and the company later on
confirmed the transaction in writing.
The Court of Appeal affirmed that the company was liable for breach of contract when it failed to deliver
the cement as agreed.
The contract of sale of good must conform to the general principles of ordinary contract, that is, it must have
the essential elements of a contract like offer and acceptance, consideration, capacity, mistake,
misrepresentation and so on.
Interestingly, a corporate body contracts just the same way as individual persons contract as provided in the
section 71 of the Companies and Allied Matters Decree of 1990. It therefore means that, all the above rules
on sale of goods contract applies also to corporate bodies.
THREE (3) IMPORTANT FEATURES OF SALES OF GOOD
a. Goods
b. The Price
c. Passing (Transfer) of property through price.
A. GOODS
Two things exchange hands in a sale of goods transaction; they are the goods (delivered to the buyer) and
the money consideration (paid to the seller).
According to SECTION 62(1) of the Act, goods are defined as including:
“All chattels personal, other than things in action and money, … emblements, 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”.
Now, let us analyze the keywords in this definition one after the other
a. Chattels personal:
These are tangible personal things such as a car, clothes, shoe and even animals etc. the sale of any
of these things is a sale of good for the purpose of this Act.
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b. Emblements:
These are the products of the land which do not grow naturally but are the annual result of
agricultural labour. Hence, they are the profits on the land with the input of labour from man. E.g.
vegetables, maize, potatoes.
c. Industrial growing crops (fructus industralis):
These also include crops that are not naturally growing but are grown by man. It is wider than
emblements and may include crops not maturing annually (a year) e.g. rubber etc.
d. Things attached to and forming part of the land (fructus naturalis):
These include things that grow naturally on the land or that exists naturally on the land without the
labour of man, such as, timber, grass, rock, diamond etc.
NB: according to the Sales of Good Act, anything that falls within the category of (B to D) above,
would only be classified as a good, for the purpose of sale, if it is being severed from the land and
becomes movable before sale. Hence, the Act treats the sale of anything that falls in the category of (B
to D) as a sale of goods only if the thing is severed from the land and becomes movable before sale or
under a contract of sale. See the case of Morgan v. Russell (1909)1
So, for instance, where there is a plantation of cocoa in a particular land, the cocoa cannot be
classified as a good while still on the tree. It would only be classified as a good when it is been plucked
(severed) from the tree into a separate movable state. Hence, in such situation, it is a good and
property in it can be transferred.
Flowing from the definition of goods by the Act, the following are things exempted as a good.
a. Things in action and money:
Things in action are intangible things like shares and negotiable instruments. Money is also not a
good.
b. Money is also not a good.
c. Buildings, fixtures
d. Property real, such as land, estates etc.
CATEGORIES OF GOODS
1
The court held that the sale of cinders and slag which had become part of the ground and were not definite or detached heaps resting on the ground was not a sale
of goods but a grant of interest in land.
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The categorization of a good is important because it is useful in determining;

1. Whether the contract is a sale or an agreement to sale
2. When the property in the good would pass from the seller to the buyer
3. Whether specific performance of the contract can be ordered by court.
4. Whether the doctrine of frustration is applicable
There exist two (2) basic categories of goods, namely;
1. Future goods
2. Existing goods. Which is further subdivided into;
i. Ascertained goods
ii. Unascertained goods.
1. FUTURE GOODS
SECTION 5 (1) SOGA 1893.
The goods which form the subject of a contract of sale may be either ..., or goods to be manufactured or
acquired by the seller after the making of the contract of sale, in this Act called ‘future goods’.
NOTE
These are basically goods “on expectation”, they are neither specific nor ascertained nor existing. They are
yet to be manufactured goods or yet to be acquired goods by the seller, as at the time the contract of sale of
goods was been made. Hence, they are goods not yet in existence, or goods in existence but not yet acquired
by the seller as at the time of the contract of sale. What this means is that, at the particular time the contract
is been made, the goods which are the subject matter of the contract are not in existence (i.e. they are yet to
be manufactured by the seller), or if it is in existence, it is yet to be acquired by the seller at that particular
point in time that the contract was made. “Yet to be acquired” here, applies in situations where the seller
also resale.
NB: where the subject matter (goods) of a contract of sale of goods is a future good, such contract is
an agreement to sale and not a contract to sale by virtue of section 5 (3) SOGA 1893.
The property in a future good only passes when the goods are ascertained and appropriated into the contract
with the assent of the other party. The rule of ascertained goods applies here. See SECTION 17 (1) SOGA
1893.
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Hence, the property (ownership) in a future good would be said to have passed from the seller to the buyer,
when the goods is manufactured or acquired by the seller and it is ascertained and appropriated into the
already existing contract with the assent of the buyer.
Examples of future goods are: Yam not yet grown or harvested a car to be exported from a foreign country.
2. EXISTING GOODS
SECTION 5 (1) SOGA 1893.
The goods which form the subject matter of a contract of sale may be either goods, owned or possessed by
the seller, or …
NOTE
These are simply the goods that are owned or possessed by the seller at the time of the contract. Hence, they
are the goods in actual existence (i.e., manufactured, grown or produced etc.), and possessed or owned by
the seller when the contract is made. Examples includes; Yam already exhumed, manufactured goods etc.
Also, it is noteworthy that, “Ownership” or “Possession” as used in the Act means two different things, in
that, it is possible that a seller have ownership but is not in immediate possession of the goods, and in the
other hand, it is possible for a seller to have possession of the goods but no ownership on it. The
consequence of this is that; where a “seller with ownership” sells, “PROPERTY” is said to be passed to the
buyer. And where a “seller in possession” (without ownership) sells, “TITLE” is said to be passed to the
buyer.
An existing good can either be ascertained or unascertained.
i. ASCERTAINED (EXISTING) GOODS
SECTION 61 (1) SOGA defines ascertained goods as “goods identified and agreed upon at the time a
contract of sale is made”. This is also called specific goods. They are goods which the buyer has known
and agreed to buy from the seller. They are not only know to them but also identifiable by both parties.
Hence, they are goods that are present before both parties to see and are not sold on mere description.
For example, Ann wants to buy a pair of Bumaks Trousers from Ben the owner of the boutique. Ben
brought out the Bumaks trousers and Ann paid for it. The Bumaks trousers is said to be an ascertained good,
because at the time of the contract, both parties know and can identify it.
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 Transfer of Property (Title) in Ascertained Goods

SECTION 17 (1) SOGA 1893
Where there is a contract for the sale of specific or ascertained goods the property in them is transferred
to the buyer at such time as the parties to the contract intend it to be transferred.
NOTE
The above provision is very direct; it simply implies that, once the goods are ascertained goods, (i.e. they
are owned or possessed by the seller and the buyer knows and can identify them at the time of the sale) the
property (right to ownership) in the goods would pass from the seller to the buyer immediately at the time
they agreed it to pass.
By effect, this means that, it is possible for possession of goods to pass from the seller to the buyer, and the
property in the goods will not pass (until the time it is agreed to pass). The consequence of this is that, the
party who possesses the property in the goods would bear any liability or damage that occurs to the goods,
irrespective of whether he is in possession of the goods or not – general rule.
Note that, where there is no agreement between the parties as to when property is intended to be transferred,
Section 18 Rule 1-4 will apply. (These rules have been extensively discussed under “Transfer of Property”).
For example; Ann went to a Ben’s bookshop to buy a book, she pointed at the one she wants and Ben gave
it to her – (ascertained goods). But both of them agreed that the property (ownership) in the book would
pass to Ann after the third day of the sale. By effect, Ann would only be deemed to be the owner of the book
after the third day of the purchase, and Ben would bear whatever damage occurs to it, before the third day.
ii. UNASCERTAINED GOODS
These are goods which have not been specifically identified at the time of sale, but are agreed upon and sold
by mere description. They will become ascertained goods when they are earmarked or selected out or
identified, and appropriated into the contract (with the notice of the buyer).
 Transfer of Property in Unascertained Goods
SECTION 16, SOGA 1893
Where there is a contract for the sale of unascertained goods no property in the goods is transferred
unless and until the goods are ascertained.
NOTE
This simply implies that, the property in unascertained goods would pass from the seller to the buyer, when
the goods changes state from unascertained goods to ascertained goods. Also note that, the seller must notify
the buyer as to the change in the status of the goods. Transfer of property would only be complete when the
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buyer is notified. Note also that, where the goods have become ascertained and the buyer had notified of it,
the transfer of the property in the goods will still be dependent on the time the parties intend it to pass (just
as is the case of ascertained goods). But, where the parties fail to agree on when property is intended to be
transferred, Section 18 Rule 5 will apply.
CATEGORIES OF UNASCERTAINED GOODS
(a) The sale of purely generic goods: these are goods of a kind, e.g., a contract for the sale of 10
bottles of beer whether the stock out of which the beer is to be taken is specified or not. It is
unascertained goods because, even though the 10 bottles of beer in existence, they are not in a
separate state at the time of the contract for the parties to identify them. They become ascertained as
soon as they are earmarked and separated from the crate and appropriated to the contract.
(b) The sale of part of a whole or larger quantity of goods, e.g., 5 out of 10 bags of rice in a
warehouse; here no particular bags are specified or ascertained, any 5 bags will do, so once the 5
bags are selected out, they cease to be unascertained and becomes ascertained.
(c) The sale of goods to be manufactured or acquired or grown by the seller.
B. THE PRICE
In a contract of sale, the irreducible minimum obligations are for the seller to deliver the goods and the
buyer to pay the money consideration known as the price. The buyer must pay some price for the goods.
Accordingly, consideration in a contract of sale has necessarily to be money.
Where goods are offered as consideration for goods, it will not amount to a valid sale, but it will be
called a barter or exchange, a form of transaction that was prevalent before the inception of the sale of
goods act. Similarly, if a party offers the goods to another party for no consideration, such transaction
amounts to a gift or charity and not a sale, and it cannot be enforceable.
Payment of the price is not compulsory at the time of making the contract of sale for the contract/sale to
be valid. By the combined reading of sections 8 and 9 of the Act, the price must be in money which:
i) May be fixed by the contract; or
ii) May be fixed as provided by the contract; or
iii) May be determined by the course of dealing between the parties
iv) May be fixed by third party valuation.
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Where the price is fixed by the contract

This is the simplest and probably the most common situation. Obviously, the parties may fix the price in a
number of different ways.
Where the price is fixed as provided by the contract
Section 8(1) of the Sale of Goods Act clearly contemplates that the contract may leave the price to be fixed
later in an agreed manner.
One such manner would be third party valuation, but this is expressly dealt with by section 9. The Act is
silent on other methods of price-fixing. One possibility is that the contract may provide for the price to be
fixed by the seller (or the buyer).In May and Butcher Ltd v R 2, Lord Dunedin said: “With regard to price it
is a perfectly good contract to say that the price is to be settled by the buyer”.
The parties may also agree that the price shall be fixed by agreement between them later. Although, this is a
common but potentially dangerous course. There is no problem if the parties do agree on a price, but
difficulties may arise if they do not. It might be thought that, in that case, section 8(2) would apply and a
reasonable price would be due.
However, in May and Butcher v R(1934), the House of Lords held otherwise. In that case, there was a
contract for the sale of tentage at a price to be agreed between the parties. The parties failed to agree and the
House of Lords held that there was no contract. The argument which was accepted was that s 8(2) only
applied where there was no agreement as to the price, such that its operation was excluded where the parties
had provided a mechanism for fixing a price which had not worked.
Where the price may be determined by the course of dealing between the parties
This may arise where the parties make no contemplation as to the price of the goods. The fact that no price
has been agreed might be good evidence that the parties had not completed a contract, but it is clear that, in
practice, people often make binding contracts without having agreed on the payment terms. In such a case, it
is clear that there is a contract to buy at a reasonable price – (section 8(2) of the Act).
What is a reasonable price is a question of fact 3 that is to be determined by the court in respect to the
circumstances of each case. If the seller is in business, evidence of his or her usual prices will be good
evidence of what is a reasonable price but, in theory at least, it is not decisive.
Where the seller is not in business or not in the business of selling goods of the kind sold, there will be no
seller’s standard price to appeal to and the court will have to do the best it can with such evidence as the
parties present to it.
2
[1934] 2 KB 17
3
Section 8(2) SOGA 1893
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Where the price is to be fixed by third party valuation

Price-fixing by third party valuation is valid but dependent on the third party actually undertaking the
valuation. This is provided in section 9(1) of the Act:
“Where there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of a
third party, and such third party cannot or does not make such valuation, the agreement is avoided;
provided that if the goods or any part thereof have been delivered to and appropriated by the buyer he
must pay a reasonable price therefore”.
Where the valuation is impossible to be make either owing to the incapacity or failure of the third party (the
valuer) to make the valuation, there is no sale as the agreement is avoided. But, where the goods or nay part
of it having being delivered to and appropriated by the buyer he would be bound to pay a reasonable price
for the goods or any part of it so appropriated. In such case, the reasonable price is to be determined by the
court.
By section 9(2) of the If one party prevents the valuation, the innocent party is entitled to a right of action
against the other party. In most cases it is the seller who would usually prevent the valuation by not making
the goods available. It is worth noting that the result of such obstruction by the seller is not a contract to sell
at a reasonable price, as is the case where the goods are delivered and no valuation takes place, but an action
for damages.
An important question to be asked is what, if anything, can the seller do if he thinks the valuation is too low,
or buyer, if he thinks it is too high?. No doubt the valuation would not be binding, if it can be shown that the
valuer was fraudulently acting in concert with the other party.
C. TRANSFER OF PROPERTY
Property (ownership) in goods is the totality of interest that a seller has in the goods that he wants to transfer
(pass) to the buyer. Hence, it is the right a seller has in the goods that a buyer wants to acquire from him.
The mere fact that a person has possession of goods does not justify that property (ownership) resides in
him, thus, property (ownership) and possession are two different phenomenons when it comes to sale of
goods.
It is crucial to know what moment property (ownership) passes in a transaction of sale, for the following
reasons:
1. Transfer (passing) of risk; risk generally passes with property, so it helps to know who suffers the
loss or damage that occurs to the goods.
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2. Right to sue for price; a seller can only sue the buyer for his price only when the property in the
goods has passed to the buyer.
3. Breach of condition; in cases of specific goods, if property has passed to the buyer, he cannot reject
the goods for breach of condition by the seller but can only sue for damages. See Section 11(1)(c) of
the SOGA 1893.
The passing of property in goods is dependent on what category the goods that is transacted falls into, so we
shall examine at what time property in goods passes from the seller to the buyer as regards the following
kinds of goods
1. Ascertained (specific) goods
2. Unascertained (future) goods.
NB: Note that, ‘transfer of property’ and ‘transfer of title’ are quite similar. The former applies to
sale of goods by the bona fide owner (seller) to the buyer, while the latter applies to the sale of goods
by the non bona fide owner (seller) to the buyer.
TRANSFER (PASSING) OF PROPERTY IN ASCERTAINED/SPECIFIC GOODS
Ascertained goods has already been defined as ‘goods identified and agreed upon at the time a contract of
sale is made’ section 62 (1) SOGA.
The general rule for the transfer of property in ascertained goods is provided in
SECTION 17 (1) SOGA 1893
That: “Where there is a contract for the sale of specific or ascertained goods the property in them is
transferred to the buyer at such time as the parties to the contract intend it to be transferred”.
NOTE
This means that, in a contract for the sale of specific or ascertained goods, the property (ownership) in the
goods will pass from the seller to the buyer at such time (if any) that the parties, expressly or impliedly,
stipulated in the contract of sale that it should pass. Here, the passage of property in the goods from the
seller to the buyer is founded upon the intention of the parties.
It is noteworthy that, the transfer of property from the seller to the buyer is not affected by the non-payment
of consideration (price) by the buyer to the seller. Thus, property will pass even where performance of
consideration has been suspended, except there is a contrary agreement by the parties. So, for example, if
Ann buys a Mercedes Benz GLK 350 car on credit from Ben and they agree that property in it should pass
to Ann immediately, property in the car would be deemed to have passed on that same day even though Ann
is yet to pay for the car. But if on the contrary, the agreement was that property will pass to Ann until she
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completes payment, property in that car would still be with Ben, even though Ann is in possession of the
car, hence, Ben is still seen as the owner of the car until Ann completes the payment.
The question now is what happens where the parties did not contemplate on when property in the goods is to
pass? In reality, parties to a contract of sale do not usually express their intentions as to the time property
would pass; therefore, dispute may result in determining who bears the loss where the goods are damaged.
For this reason, the Sale of Goods Act, 1893 in section 18 made provision for five (5) rules that should
apply/guide the transfer of property, where the parties have failed to make a provision for the time they
intend property to pass. Note that only the first four rules in Section 18 of the SOGA apply to specific
goods.
The preamble of the section 18 SOGA 1893 states that;
‘Unless a different intention appears, the following are rules for ascertaining the intentions of the parties
as to the time at which the property in the goods is to pass to the buyer.’
NOTE
This implies that, unless the parties have agreed to a particular time that property should pass to the buyer,
the rules under section 18 shall apply in ascertaining the intentions of the parties as to the time they intend
property in the goods to pass to the buyer. That is to say, if the parties have agreed in the contract on when
property in the goods is to pass, their agreement will apply and be binding on them, but where they fail to
make such agreement, the rules in Section 18 will apply and be binding on the parties as to when they intend
the property in the goods to pass.
The rules are:
SECTION 18 – RULE 1: (UNCONDITIONAL SALE OF SPECIFIC GOODS IN DELIVERABLE
STATE)
“Where there is an unconditional contract for the sale of specific goods, in a deliverable state, the
property in the goods passes to the buyer when the contract is made and it is immaterial whether the time
of payment or the time of delivery or both, be postponed”.
NOTE
It implies that, where the contract for the sale of goods between the seller and the buyer is made
unconditional (non-subject to any condition/agreement), the property in the goods is deemed to have passed
to the buyer as at the time the contract is made, and it is immaterial whether both or either time of payment
of price by the buyer to the seller, or time of delivery of the goods by the seller to the buyer is postponed.
(Provided there is no contrary intention (agreement) by the parties as to when property will pass).
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What this means is that neither payment of price or delivery of the goods or both affects the transfer of
property in the goods once the contract of sale between the seller and the buyer is (1) unconditional i.e. not
subject to any agreement, and(2) the goods are in a deliverable stateat the time of the contract hence, the
property in the goods in such a situation is deemed to have passed from the seller to the buyer immediately
the contract is made.
TALABI V. MANDILAS LTD (1976)
The buyer paid N3,087 for a vehicle which the seller obtained and registered in the buyer’s name. the seller
later refused to release the vehicle to him on the ground that the new price was N3,940. The court held that
property had already passed to the buyer upon the making of the contract, and the seller’s refusal to deliver
it amounted to breach of contract.
The two (3) important conditions for this rule to apply are;
1. The Contract of Sale must be Unconditional;
This means that the contract must not contain any condition precedent or subsequent that may give
effect to the suspension of performance of the contract or the passing of property. For example, it
must not contain a condition like: “until A and B is done, property in the 3 bales of Bumaks Boxers
will not pass.”
It may also mean a contract not containing any conditions in the sense of essential stipulations, the
breach of which gives the buyer the right to treat the contract as repudiated. In the case of
McPherson, Thom, Kettle & Co v Dench Bros 4 it was stated that a sale is unconditional if, it is not
subject to any condition suspensive of the passing of property.
2. The Goods must be in a Deliverable State;
Section 62 (4) SOGA 1893defines deliverable state as “goods are in a ‘deliverable state’ within the
meaning of this Act when they are in such a state that the buyer would under the contract be
bound to take delivery of them.”
Applying this definition to the rule 1, it means that, physically, the goods be in a good state such
that, the buyer at that particular point in time can take delivery/possession of it, hence, the goods
must be in a finished state. For example, where Ann wants to buy 2 kilos of catfish from a pond, the
fish would be said to be in a deliverable state if they have been brought out of the pond (ascertained)
and bagged for her to take.
4
[1921] VLR 437)
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The locus classicus case on “deliverable state” is Tarling v Baxter,5 in this case, a farmer sold a
haystack, which remained on his farm to be collected in the spring. Before collection, the stack was
destroyed. It was held on the facts that ownership had passed to the buyer and therefore, bore the
loss.
Note that, what amounts to a ‘deliverable state’ is a matter of circumstances peculiar to each case, it
is not general
3. There must be no Contrary Intention by the Parties:
There must be no existence of a different agreement between the parties as to when the property in
the goods should pass to the buyer.
ILLUSTRATION TO RULE 1
Ann came to Ben’s store to buy to packs of indomitable noodles. Ben went in and brought out two packs
from where they are stacked and gave it to Ann. By doing this the property in the indomitable noodles is
deemed to have passed to Ann, irrespective of whether she has paid Ben or not. Provided that they did not
subject the transaction to any condition.
EXCEPTIONS TO RULE 1
1. Existence of a Contrary Intention/Agreement:
The application of section 18 Rule 1 is dependent on there being no evidence of a contrary intention
as to when property will pass. Where the contracting parties have a contrary intention/agreement as
to when property should pass, then the provisions of section 18 Rule 1 will not apply.
2. Commercial Practice/Custom
Although, Rule 1 says time of payment or time of delivery or both is immaterial to the transferring
of property in unconditional contract of sale, notwithstanding, commercial practices or customs in
certain sales e.g. in a ‘cash and carry’ shop or a supermarket is different, thus the rule will not apply.
So, for example, in ordinary sale in a shop, property does not generally pass, at least until the parties
have agreed on the mode of payment. And in a big superstore, where buyers usually go round the
shop to collect items he wishes to buy, property does not pass until the price is paid.
SECTION 18 – RULE 2: (PUTTING GOODS IN A DELIVERABLE STATE)
5
(1827) 6 B & C 360
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“Where there is a contract for the sale of specific goods and the seller is bound to do something to the
goods, for the purpose of putting them into a deliverable state, the property does not pass until the thing
be done, and the buyer has notice thereof”.
NOTE
What this simply imply is that, where the goods is specific but certain steps have to be taken to put the good
into a deliverable state (i.e. a state where the buyer would be bound to assume immediate delivery of the
goods at the time the contract is made), except such steps have been undertaken and the buyer has
knowledge of it, no property will pass.(Provided there is no contrary intention/agreement of the parties, as to
when property should pass).
The case of Underwood Ltd v Burgh Castle Brick and Cement Syndicate 6is instructive on this rule. In this
case, the owners of a horizontal condensing engine agreed to sell it at a price free on rail in London. It
weighed thirty tons and was bolted to and embedded in a flooring of concrete. Before it could be delivered
on rail it had to be detached and dismantled. The seller detached it, but in loading it on a truck they damaged
it by accident, so that the buyers refused to accept it. Plaintiffs argued property passed when contract was
made. It was held that that the property in the engine had not passed to the defendants.
Firstly, this rule makes us to understand that, not all specific/ascertained goods may be in a deliverable state
when a contract of sale is made. Therefore, where the subject matter of the contract of sale are specific
goods, but is not yet in deliverable state at the time of the contract, upon completion of the contract, the
property in the specific goods does not pass to the buyer (unlike rule 1), until the seller does what is
necessary to bring the specific goods to a deliverable state and the buyer has notice of it.
Secondly, property in the specific goods (that is not in a deliverable state)will duly pass to the buyer only
when the buyer has notice that the goods are in a deliverable state. Hence,the mere fact that the seller has
done what is necessary to bring the goods to a deliverable state is not sufficient for the property in the goods
to pass to the buyer, property in the goods will only be deemed to have passed to the buyer when the buyer
gets notice that the goods are now in a deliverable state. It is important to note also that, the law did not
specify that the seller should communicate/notify the buyer as regards the deliverable state of the goods;
therefore, knowledge of it by the buyer himself will suffice. Hence, where the buyer has personal
knowledge that the goods are in a deliverable state, property in the goods would also be deemed to have
duly passed to him.
6
[1922] 1 KB 343
16
Where Ann sells a car to Ben and agrees to replace its faulty carburetor with a new one, the property in the
car will not pass to Ben until Ann replaces the faulty carburetor with the new one and Ben gets notice of it.
SECTION 18 – RULE 3: (ASCERTAINING OF PRICE)
“where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to
weigh, measure, test or do some other act or thing with reference to the goods for the purpose of
ascertaining the price, the property does not pass until such act or thing be done, and the buyer has
notice thereof”.
NOTE
It implies that, where the contract of sale is for a specific good that is in a deliverable state (unlike rule 2),
but the seller has to either weigh, measure, test or do some other act or thing to the goods, in other to
determine the price of the goods, the property in the goods will not pass to the buyer until the act or thing is
done and the buyer has notice of it.
Firstly, this rule makes us to understand that, even where the goods is specific and already in a deliverable
state, property in such goods will not still pass to the buyer; in cases where the price has to be determined by
certain act or thing (e.g. measuring, testing, weighing etc.). Thus, where the price of a specific goods in a
deliverable state is not fixed, property in the goods will not pass to the buyer until the price is determined by
the “necessary act or thing” e.g. by weighing, measuring etc. in succinct, the act of weighing, measuring and
any other requirement under this rule must be done by the seller, and the buyer being aware of it before
property in it can be deemed to have passed to the buyer. In the case of: Boro v. Kenedy (1955),where a
written contract provided that the seller should measure the sold timber logs. The logs were lost whilst being
transported to the place of measurement. The court held that the seller is to bear the loss since property
could not pass until the goods had become ascertained through measurement. See also the case of: Turley v.
Bates.7
Secondly, just as explained in rule 2, property in a specific goods that is in a deliverable state, but requires
determination of its price by any act or thing, will duly pass to the buyer when the buyer has notice that that
the price has been determined. It is important to note that the law did not specify that the seller should
communicate/notify the buyer as regards the ascertainment/determination of the price of the goods;
therefore, knowledge of it by the buyer himself will suffice.
7
(1863) 2 H&C 200
17
A good example of the application of rule 3 is when buying grainy goods e.g. rice, beans, garri, wheat etc.
or purchase of cooking gas from a Fuel Station.
SECTION 18 – RULE 4: (DELIVERY ON APPROVAL OR “SALE OR RETURN”)
“When goods are delivered to the buyer on approval or ‘sale or return’ or other similar terms, the
property therein passes to the buyer:-
a. When he signifies his approval or acceptance to the seller or does any other act adopting the
transaction;
b. If he does not signify his approval or acceptance to the seller but retains the goods without giving
notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of
that time, and, if no time has been fixed, on the expiration of a reasonable time. What is a
reasonable time is a question of fact.”
NOTE
Rule 4 deals with a different type of transaction altogether, although it is very similar to a conditional sale.
Delivery on Approval or “Sale or Return” is a kind of transaction whereby, possession of the goods is given
to the buyer upon the condition to buy or return the goods within a specified period of time, if he will not
buy it. Under Rule 4, property in goods can pass to the buyer in two ways; this we shall examine in this
book under Rule 4 (A) and Rule 4 (B).
RULE 4 (A): (Signification of Approval or Acceptance)
It implies that property in goods would pass to the buyer if possession of the goods are delivered to him on
approval or ‘sale or return’ or in other similar terms and he signifies his approval or acceptance of the goods
to the seller or does any act adopting the transaction.
In summary, under Rule 4 (A), when goods are delivered to the buyer on approval or ‘sale or return’ or
other similar terms, property will pass to the buyer in two (2) different ways;
1. By Signification of Approval or Acceptance:
Here, property will pass to the buyer who takes goods on delivery, or on “sale, or return”, or in other
similar terms, if he signifies/communicates his approval or acceptanceof the transaction (the goods)
to the seller. The person to whom the goods have been delivered has the option of buying the goods
or not as he chooses, and until he has bought them (or deemed by Rule4 to have done so), property
in the goods remains with the seller. Therefore no sale is exercised until such an option is exercised. 8
8
NANYUMBA NICHOLAS, Law of Sale of Goods, pg.38
18
In ElphickVs Barnes,9A, delivered a horse to B on the terms of ‘sale or return’ within 8 days.’ The
horse died on the third day without any fault on the part of B. it was held that A was to bear the loss
as the horse was still his property when it perished.
For example, Ann ordered for 2 pairs of exotic Bumaks Collections tracksuits at their outlet in
Mandilas, and it was delivered to her house on the same day with the option of “purchase or return
within 2 days”. Property in the tracksuits will pass to Ann, when Ann calls Bumaks Collections
Sales manager and tells her she likes and have accepted the delivery of the goods within 2 days.
2. Adoption of the Transaction by any other Act:
Here, property will pass to the buyer who takes goods on delivery, or on “sale, or return”, or in other
similar terms, if by any other act he adopts the transaction (the goods). This could be done by:
keeping the goods for longer than the period agreed for its return, selling the goods to another person
etc. Here, communication of his adoption of the goods to the seller is not necessary; as adoption or
acceptance of the goods can be implied from his/her conduct. See, Kirkham v. Attenborough.10
For example, Ann ordered for 2 pairs of exotic Bumaks Collections Shirts at their outlet in Mandilas,
and it was delivered to her house on the same day with the option of “Purchase or Return within 2
days”. Property in the Shirts will pass to Ann, if within or after the two days, Annwears or sells the
shirts to somebody else.
RULE 4 (B): (Non-Signification of Approval or Acceptance)
It implies that, if a buyer who takes goods on delivery, or on sale, or on return, or in other similar terms does
not signify his approval or acceptance of the goods to the seller, but instead retains the goods without giving
any notice of rejection to the seller, then, if a time has been fixed for the return of the goods, upon expiration
of that time (property in the goods will pass to the buyer), and, if no time has been fixed, upon expiration of
a reasonable time (property in the goods will pass to the buyer).However, What is a reasonable time is a
question of fact to be determined by the court.
Rule 4 (B) is quite similar to the second part of rule 4 (A); that property transfers to the buyer, when the
buyer does any other act adopting the transaction. Because not signifying approval or acceptance of the
transaction to the seller may mean the buyer adopts the transaction by any other act (e.g. by silence), if he
does not give notice of his rejection of the goods to the seller.
9
1880(5) CPD 321
10
[1897] 1 QB 201
19
Rule 4 (B) can be seen as an extension/helping hand of rule 4 (A), in that rule 4 (A) talks about when
property will pass if the buyer signifies his approval or acceptance of the goods, while rule 4 (B) talks about
when property will pass if the buyer did not give notice of his rejection of the goods to the seller.
In summary, under Rule 4 (B), where goods are delivered to the buyer on “Approval” or on “Sale or
Return”. Or other similar terms, property in it will pass to the buyer in (3) different ways;
a. Retention of Goods Longer than the Time Specified for its Return:
If a time has been fixed for the return of the goods, the buyer is deemed to have exercised his option
to buy the goods if he signifies his rejection of the goods after the time agreed elapses. Here, the
seller is allowed to treat the transaction has been accepted or approved by the buyer since he did not
signify his approval or acceptance of the goods nor give notice of his rejection of the goods within
the time frame agreed. In such a case the property in the goods passes to the buyer after the
expiration of the agreed time.
For example, Ann ordered for 2 pairs of exotic Bumaks Collections Shirts at their outlet in Mandilas,
and it was delivered to her house on the same day on the agreement that she should give notice of
her rejection of the Shirts within two days if she doesn’t like them. Property in the Shirts will pass to
Ann, if after the two days deadline, Ann did not signify her approval or acceptance nor give notice of
her rejection of the shirts.
b. Retention of Goods beyond Reasonable Time:
Retention of goods beyond ‘reasonable time’ may arise where no time is specified in the agreement
between the parties for the return of the goods; if the buyer retains the good without giving notice of
his rejection within a reasonable time, property in it will pass to him. This is the reasoning in the
case of:
POOLE v. SMITH’S CAR SALES (BALHAM) LTD, [1962] 2 ALL ER 482.
A car was handed over to the defendant by the plaintiff ‘on sale or return’. The defendant
returned the car to the plaintiff nearly three months later in poor condition and the car had been
driven 16,000 miles. The court held: that, property has passed under Rule $ (b)to the defendant,
since more than a reasonable time has elapsed, so the defendant was bound to pay E325 – the
price of the car.
20
c. Non-notification of Rejection of Goods:

Property will pass under Rule 4(B), if the buyer does not give notice of rejection either within
stipulated time or within a reasonable time, if none is stipulated. Note that a reasonable time is a
matter of fact, to be determined by the court. Also, there is no duty on the buyer to return the goods
to the buyer in order to prevent property from passing to him; the only duty he owes the buyer is to
notify the seller of his rejection of the goods. However, he may be liable in detinue if he withholds
the goods after giving notice of rejection.
TRANSFER (PASSING) OF PROPERTY IN UNASCERTAINED GOODS
Where the agreement of sale is for unascertained/ future goods, the overriding rule is that no property is
transferred to the seller until the goods becomes ascertained – as provided in section 16 SOGA. So, once the
goods becomes ascertained, section 17 of SOGA will apply, just as it does in to ascertained/specific goods,
and the property is passed at the time the parties intend it to pass. However, where the parties did not
stipulate when they intend the property to pass, then section 18 Rule 5 will apply. This rule also apply to
transfer of property in “Future Goods”
SECTION 18 – RULE 5
RULE 5 (1)
“Where there is a contract for the sale of unascertained or future goods by description, and goods of the
description and in a deliverable state are unconditionally appropriated to the contract, either by the seller
with the assent of the buyer, or by the buyer with the assent of the seller, the property in the goods
thereupon passes to the buyer. Such assent may be expressed or implied, and may be given either before
or after the appropriation is made”.
NOTE
It implies that, property will pass in unascertained goods sold by description, if the goods while in a
deliverable state, are unconditionally appropriated into the contract either by the seller with the assent of the
buyer or by the buyer with the assent of the seller. And the assent that is required may be given expressly, or
impliedly either before or after the appropriation is made.
So, the conditions necessary for property to pass to the buyer where the goods are unascertained are:
1. The Goods must be in a Deliverable State
This means that the unascertained goods must have become ascertained, and must have been put into
a state such that the buyer will be bound to take immediate possession or delivery of it.
21
2. The Goods must be Unconditionally Appropriated into the Contract

Goods are said to be appropriated to the contract when they are separated from the bulk and
earmarked to a particular buyer. Hence, ascertainment or appropriation consists of earmarking or
setting apart/aside goods of which are the subject matter of the contract. So, this means that the
appropriation of the goods into the existing contract must not be made subject to any condition
present or subsequent. In Re Goldcorp Exchange Ltd (in receivership),11a New Zealand company
dealt in gold and sold to customers on the basis that the company would store and insure the gold
free of charge. They issued certificates to the customers. No specific gold was set aside for any
specific customer though there were assurances (which were not kept) that a sufficient supply of
gold would be held at alltimes to meet orders for delivery by customers. In fact, the company
became hopelessly insolvent and had inadequate supplies of gold. The Privy Council held that it was
elementary that property had not passed from the sellers to the buyers because the company was free
to decide what bullion to allocate to a particular investor.
3. There must be Assent of either Parties to the Appropriation
This means that, irrespective of who is making the appropriation of the goods between the parties,
the other party must assent to it, for property in the goods to be duly transferred. And the assent
could be either express or implied, and it could be made before or after the appropriation has been
made. An implied assent to appropriation may occur in a situation where a buyer orders goods to be
sent by post. Where the seller dispatches the goods, this amounts to appropriation by the seller with
the buyer’s (implied) consent.
The following are examples of when unascertained goods may become ascertained as provided by
the Act:12
1. Where the seller separates the sold goods from the whole consignment and informs the buyer.
seeTijani v. Palmers Ltd(1975).
2. By measuring the sold portion from the whole and informing the buyer. seeBorov. Kenedy
(1955).
3. By a process of exhaustion: this occurs where a bulk of unascertained good is sold in separate
contract to different buyers and all the buyers cart away their lots leaving that which corresponds
to the exact quantity sold to a particular buyer, his goods will be deemed to have become
11
[1995] 1 AC 74
12
M.O Olatunji, General Principles of Business and Co-operative Law, Soft Assoiates, 1999, page 21.
22
ascertained through a process of exhaustion. Once the buyer is informed that only his portion
remains, the good have become ascertained and property may pass to him.
ILLUSTRATION
For example, Lagos State University made a contract with Bumaks Ideas Limited, a top notch garment
Industry in Nigeria; to sew and supply them 5,000 pieces of branded security uniforms (future goods).
Property in the 5,000 pieces of branded security uniforms would be deemed to have duly passed to LASU,
when Bumaks, having sewn the uniforms, packages them, separates/appropriates (earmarks) 5,000 pieces
exclusively for LASU from the other uniforms, and call on LASU for its delivery and LASU okay’s it.
The above illustration is on Future Goods (don’t forget that Section 18 Rule 5(1) also applies to transfer of
property in Future Goods). However, the same thing will still apply if the example was for unascertained
goods, the only disparity would be that, the uniforms would have already been sewn, and it would only be
for it to be earmarked.
RULE 5 (2)
“Where in the pursuance, of the contract, the seller delivers the goods to the buyer or to a carrier or other
bailee or custodier (whether named by the buyer or not) for the purpose of transmission to the buyer and
does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the
contract”.
NOTE
The key elements in this provision are ‘right of disposal’ and ‘delivery’. Once delivery is made without the
reservation of right of disposal by the seller, then, the goods is deemed to have been unconditionally
appropriated into the contract, and property in the goods will be deemed to have passed to the buyer.
Hence,ifin pursuance of a contract (of sale of unascertained goods), the seller makes delivery of the goods to
the buyer and does not reserve the right of disposal; or if the seller delivers the goods to a carrier or other
bailee or custodier (whether named by the buyer or not) for the sole purpose of delivering it to the buyer,
and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to
the contract.
ILLUSTRATION
If Ann ordered for a pair of shoes from Ben’s Footies Ltd, which is to be made to her description. If upon
the completion of the making of the shoes, Ben gave it to a dispatch rider to deliver to Ann, according to
this, that singular act of Ben is deemed to be an unconditional appropriation of the shoes to the contract
23
(even though the dispatch rider is unknown to Ann), and property in the shoes will be deemed to have
passed to Ann.
TRANSFER OF RISK
The question of “Risk” in a contract of sale will arise when goods which have been sold or agreed to have
been sold gets lost, damaged, destroyed or deteriorated and it becomes incumbent to determine who to
suffer the loss – either the seller or the buyer.
The general rule is that prima-facie the risk passes with the property unless otherwise agreed; the goods
remain at the seller’s risk. This presupposes that risk resides in property, therefore, whoever is the owner of
the goods at the material time bears the risks in the goods. This principle is embodied in section 20 of
SOGA.
SECTION 20, SOGA, 1893:
“Unless otherwise agreed, the goods remain at the seller’s risk until the property therein is transferred to
the buyer, but when the property therein is transferred to the buyer, the goods are at the buyers risk
whether delivery has been made or not.”
NOTE
It implies that, except there is a contrary agreement between the seller and the buyer, the party who bears
any damage or loss to the goods is the seller, unless property/ownership in the goods has passed to the buyer
before the damage or loss occurred, irrespective of whether delivery of the goods have been made to the
buyer or not.
From this section, it is apparent that risks in the goods reside in ownership (property), andit is the party that
possesses ownership/property in the goods at the time the damage or loss occurred that bears the risk,
irrespective of whose actual possession the goods are. This means that merely having the goods in ones
possession does not mean one will bear the risk in the goods, unless property in the goods has passed to the
person at the time the damage or loss occurred.
Note that, the rule in section 20 SOGA 1893, that the seller bears the risks in the goods is only
circumvented, when the property in the goods has passed from the seller to the buyer, even though delivery
of the goods has not been made. So, where property has passed to the buyer, the risk in the goods
automatically resides in the buyer, irrespective of whether delivery has been made or not.
For example, Ann (seller) and Ben (buyer) made a contract of sale for a 2018 Benz model which at that time
was an ascertained goods, and they agreed that the property in the Benz passes to Ben that same day that the
contract was made, although, the Benz will be delivered to Ben in two weeks time. However, on the day of
24
delivery, the trailer in which the Benz was in had an accident which caused serious dent to the Benz. Based
on this section 20, Ben would bear the loss on the Benz because, even though delivery has not been made,
the risk in the Benz is deemed to have passed to him since two weeks ago when the property/ownership
passed to him. Ann could have borne the loss, if the agreement was that; property will pass to Ben after
delivery has been made, in that case, since the property still resides in Ann, the risk resides in her still.
It should be noted that, risks in goods is not linked to who has possession of the goods, because a person
may have possession while ownership/property resides in someone else, therefore, as stated earlier, risk
resides in ownership, except has otherwise agreed by the parties. See the case of;
PIGNATORY V. GILROY [1919] 1 K.B. 459
Here, goods which were the subject of the sale remained stored in the seller’s warehouse after the buyer
failed to collect them. The goods were subsequently stolen from the warehouse. The court held that the
risk of the loss falls on the buyer because ownership/property has passed to him under section 18 rule 5.
The phrase “unless otherwise agreed” as used in this section means that; the general rule that risks resides
in the seller until property is transferred to the buyer will not apply, if the parties has agreed otherwise. For
example, if the parties agree that the risk in the goods will pass to the buyer, even where property in the
goods has not passed to him, e.g. in hire purchase. Therefore, it should be noted that risk may pass even
where property has not passed.
TRANSFER OF TITLE (BY NON-OWNER)
Transfer of title is very similar to transfer of property as have been explained earlier. In short, they both man
the same thing, which is the transferring of the totality of the right of ownership in the goods from the seller
to the buyer. Usage/Application is the only disparity between the two phenomenon; as “Transfer of
Property” is used or applies where the seller is the bona fide owner of the goods sold to the buyer, while
“Transfer of Title” is used or applies when the seller is not the bona fide owner of the goods sold to the
buyer. Hence, whether a non bona fide seller can pass a valid title(right of ownership) to the buyer of the
goods. Therefore, where goods is being sold by the true owner the term ‘property’ is being used, but where
is being sold by a person who is not the true owner the ‘title’ is being used.
The general rule under transfer of title is that, a seller of goods who has no ownership in the goods and does
not sell by the authority of the owner, cannot pass a good title to the seller. This general rule is being
expressed in the Latin maxim ‘NEMO DAT QUOD NON HABET' (a person cannot give what he does
not have). See the case of:
25
CUNDY V LINDSAY13
Blenkiron were a well-known and respected firm who carried on business at 123 Wood Street, Cheapside. A
rogue, called Blenkarn, from 37 Wood Street, impersonated the neighbouring firm and ordered a quantity
of linen from Lindsay. Lindsay sent the linen on credit believing that they were dealing with the firm,
Blenkiron. Blenkarn (the rogue) then sold some of the linen to Cundy. Lindsay brought a claim in conversion
against Cundy. It was held that the contract between the rogue and Lindsay was void for mistake.
Consequently, the rogue had no title to pass to Cundy and Lindsay would succeed.
The principle of ‘nemo dat quod non habet’ is being established in section 21(1) of SOGA 1893, it
provides:
SECTION 21(1), SOGA, 1893;
Subject to the provisions of this Act, Where goods are sold by a person who is not the owner thereof, and
who does not sell them under the authority or with the consent of the owner, the buyer acquires no better
title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from
denying the seller’s authority.
NOTE
It implies that a non bona fide owner of goods cannot pass a good title to the buyer, unless he either sells
with the authority or consent of the owner of the goods, or where the owner of the goods by his conduct has
held out or represented the seller as having his authority or consent to sell the goods.
The consequence of this rule is that, where a non-owner of goods sells to a buyer without the authority or
consent or any kind of implied representation/holding out by the owner, the buyer of the goods by virtue of
this section will be bound to repatriate the goods back to their true owner as he is deemed not to have
ownership in the goods.
This rule appears to be hardship on unsuspecting buyers who often have no means of detecting whether the
immediate seller is the true or absolute owner of the property. As a result, the principle has been modified
and there exists some exceptions at common law and under the statute (SOGA). The exceptions in the
SOGA are provided in section 21(1) – 25 of the SOGA.
EXCEPTIONS TO SECTION 21 (1) SOGA i.e. NEMO DAT QUOD NON HABET
1. Sale under Agency Relationship section 21(1)
2. Sale under Apparent Ownership section 21(2)(a).
3. Sale under Factors Act section 21 (2)
13
(1878) HL
26
4. Sale under Estoppel section 21 (1)

5. Sale in Market Overt section 24
6. Sale by a Seller in Possession section 25(1)
7. Sale by Buyer in Possession section 25(2)
EXCEPTION 1: SALE UNDER AGENCY RELATIONSHIP – SECTION 21(1)
SECTION 1(1) SOGA 1893, provides that:
“Subject to the provisions of this Act, where goods are sold by a person who is not the owner thereof, and
who does not sell them under the authority or with the consent of the owner …”
NOTE
What this section implies is that, the Act recognizes sale of goods made by a (agent)seller acting as an agent
to the real owner of the property (principal), hence, an agent can pass a good title to the buyer. Therefore, a
buyer would get a good title in the goods if he purchased it from the owner’s agent, provided that the
transaction was within the agent’s actual or apparent authority.
In summary, the conditions for an agent to pass a good title are:
 The agent must act within his actual or apparent authority
EXCEPTION 2: SALE UNDER APPARENT OWNERSHIP – SECTION 21(2)(a)
SECTION 21(2)(A) SOGA 1893, provides that:
“Provided also that nothing in this Act shall affect: the provisions of the Factors Act, or any enactment
enabling the apparent owner of goods to dispose of them as if he were the true owner thereof”.
NOTE
A person who sells goods in the position of apparent owner will pass a good title to the buyer of the goods,
provided there is an enactment that confers such right of sale to the person. Therefore, the buyer of goods
from an apparent owner possesses a good title in the goods bought.
Apparent ownership here, means that, though the person in possession of the goods is not the bona fide
owner, yet he has an implied ownership in the goods. This could be due to the lien the person has in the
goods, e.g. Trusteeship. A good example of apparent ownership is when the court of law gets possession of
goods from a defaulting judgment debtor through ‘writ of FIFA’. Here, though the court of law is not the
real owner of the goods, it is an apparent owner of it (by statute). So where the court sells the goods to a
third party, the court will pass a good title to the third party.
In summary the conditions for an apparent owner to pass a good title are:
 The right to sale must be derived from statute or an enactment.
27
EXCEPTION 3: SALE UNDER FACTOR’S ACT i.e. MERCANTILE AGENT – SECTION 21(2)(a)
SECTION 21(2)(A) SOGA 1893, provides that:
“Provided also that nothing in this Act shall affect: the provisions of the Factors Act, or any enactment
enabling the apparent owner of goods to dispose of them as if he were the true owner thereof”.
NOTE
Section 1 Factor’s Act [1889] defined mercantile agent as a person having in the customary course of his
business authority either to sell or to buy or raise money on goods.
A mercantile agent will pass good title to the buyer, (even if the goods has come to his possession illegally),
provided the buyer of the goods is unaware of the illegal possession, hence, he bought it in good faith.
It is important to note that for a mercantile agent to pass a good title to the buyer, the sale/transaction must
be done in line with the ordinary/customary course of the mercantile agent’s business. Also, the goods must
be in possession of the mercantile agent at the time the sale was made.
In summary, the conditions for a mercantile agent to pass a good title are:
 The goods must be in the agents possession at the time of sale
 The buyer must purchase it in good faith
 The sale must be done in line with the ordinary/customary course of the agent’s business.
EXCEPTION 4: SALE UNDER ESTOPPEL – SECTION 21(1)
“… Unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell
…”
NOTE
The concluding sentence of this subsection makes the principle of estoppel an exception to the rule of
‘nemo dat quod non habet’ established in this section 21. The principle of estoppel states that, a person
would be prevented (estopped) from denying a representation of fact previously made by him (either
expressly or impliedly), if another person have acted in reliance on it to his detriment.
So, a seller will pass a good title to a buyer, if the true owner of the goods expressly or impliedly by his
conduct, allow an innocent buyer to believe that the immediate seller has the rights to sell the goods. Hence,
the true owner of the goods would be estopped from denying the representation made by him, and the buyer
will get a good title in the goods.
In summary, the conditions for a good title to be passed under estoppel are:
 There must have been a representation as regards the immediate seller by the true owner to the buyer
28
 The buyer must act in good faith

EXCEPTION 5: SALE IN MARKET OVERT – SECTION 24
SECTION 24 SOGA, provides that:
“Where goods have been stolen and the offender is prosecuted to conviction, the property in the goods so
stolen revests in the person who was the owner of the goods, or his personal representative,
notwithstanding any intermediate dealing with them, whether by sale in market overt or otherwise”.
NOTE
What this section implies is that, where goods is stolen, if the thief is being prosecuted up to the stage of
conviction, the property/title (ownership) in the stolen goods will go back to the true owner of the goods or
his personal representative as the case may be, irrespective of the fact whether the stolen goods had been
sold to another person either in a market overt or otherwise.
A market overt can be simply defined as a legally constituted market, i.e. a market in whose its business is
being regulated by the government. Therefore, where goods are being stolen, and the thief, who is in
possession of the goods sells it to a honest buyer in a market overt, in accordance with the customary rules
of the market, the thief (seller) would pass a good title to the honest buyer.
The idea is this section is that a honest purchaser who bought goods in a recognized market in a public and
open way and according to the customary rules of that business should be protected.
However, as provided in section 24, the honest purchaser of the goods will lose ownership/title of the goods,
should the thief (the seller) be prosecuted up to the stage of conviction.
The implication of this rule is that, the ownership (property) in the goods will automatically revest in the
true owner of the goods, and possession of the goods will be recovered and delivered from the honest buyer
to the real owner of the goods.
It is important to note, that where the person who stole the goods had been prosecuted and both the title and
possession of the stolen goods reverted back to the true owner of the goods, the buyer who bought the goods
in good faith has the right to refund of the price paid to the seller (the thief).
It should be noted also that, this rule of revesting of property in the true owner of the goods will only apply
where the thief (the seller) has being prosecuted to conviction. Thus, where the thief (seller) is not
convicted, the property/title (ownership) in the goods will still reside in the buyer.
In summary, the conditions necessary for the applicability of this exception are:
1. The buyer must have bought in good faith
2. The sale must have been made in a market overt or otherwise
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3. The seller (thief) if prosecuted must not be convicted.

EXCEPTION 6: SALE BY A SELLER IN POSSESSION – SECTION 25(1) SOGA
SECTION 25(1) SOGA provides that:
“Where a person has sold goods and continues or is in possession of the goods or of the documents of the
title of them, any sale or pledge by him to a buyer or pledgee who takes the goods in good faith without
notice of the previous sale will pass a good title to the buyer or pledgee”.
NOTE
This implies that, where a seller (the true owner of the goods) sells goods to a buyer and the goods or
documents of it still continue to remain in his possession, if he resells or pledges the goods or goods to
another buyer or pledgee, he will pass a good title to either of them, even though by law he is not deemed to
be the owner of the goods again, as he has already sold the goods out in the first place. And, as a matter of
fact, by virtue of section 21 SOGA, property in the goods has passed to the first purchaser.
So, from the above, it can be deduced that this exception is for both passing of good title and passing of
property.
For example, Ann sold 20 bags of Thailand rice to Ben, but Ben left the possession of the goods with Ann
till he is able to come and carry them. On the second day, before Ben arrived Ann had already sold the
goods out to can. Under the above exception/rule, Ann has passed a good title to Can.
EXCEPTION 7: SALE BY BUYER IN POSSESSION – SECTION 25(2)
SECTION 25(2) SOGA provides that:
“Where a person having bought or agreed to buy goods obtains, with the consent of the seller, possession
of the goods or the documents of title to the goods, the delivery or transfer by that person, or by a
mercantile agent acting for him, of other disposition thereof, to any person receiving the same in good
faith with or without notice of any lien or other right of the original seller in respect of the goods, shall
have the same effect as if the person making the delivery or transfer were a mercantile agent in
possession of the goods or documents of title with the consent of the owner”.
NOTE
What this subsection implies is that, if a person (buyer) buys goods or agrees to buy goods from a seller, and
with the consent of the seller he gets possession of the goods or documents of title to the goods, should the
buyer (by himself) or by a mercantile agent acting for him delivers or transfers the property to another
person(2nd buyer) who receives it in good faith with or without the notice that the original seller has a right
or lien in it, the transaction shall have effect as if the person making the delivery or transfer (i.e. the 1 stbuyer
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or a mercantile agent) was a mercantile agent in possession of the goods or documents of title with the
consent of the owner.
In a layman explanation, the above subsection talks about sales where the buyer has possession of the
goods, but the seller still has lien or rights in the goods. For example, where a buyer buys goods on credit. A
buyer who has possession of goods in which the seller has a right or lien in it, will pass a good title to a
second buyer, who bought the goods in good faith with or without notice of the right or lien of the first seller
in the goods.
In circumstances like this, the Act treats the first buyer as a mercantile agent who is acting for the owner of
the goods (1st seller) and has the seller’s the goods of the seller in his possession, and by virtue of this Act a
mercantile agent will pass a good title to a buyer who buys in good faith.
For this rule to apply, it should be noted that the first buyer must have actual possession of the goods or the
documents of title and its possession must have been obtained with the consent of the seller.
PERFORMANCE OF THE CONTRACT OF SALE
Three things are involved in the performance of a contract of sale of goods, they are:
1. Payment.
2. Delivery.
3. Acceptance
This is so by virtue of rule in section 27 of SOGAthat, “the seller must deliver the goods and the buyer
must accept and pay for them in accordance with the contract of sale”.SS
Naturally, the parties are free to make their own agreements in relation to performance of the contract of
sale e.g. time and place of delivery, time of acceptance, and time and place of payment etc. but in any
situation where the parties did not specifically deal with these matters in their agreement, the Act has set out
obligations/rules of the seller and the buyer in performance of the contract.
1. PAYMENT
SECTION 28 SOGA provides that:
“Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that
is to say, the seller must be ready and willing to give possession of the goods to the buyer in exchange for
the price and the buyer must be ready and willing to pay the price in exchange for possession of the
goods”.
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NOTE
This section is very precise and concise. It implies that delivery of goods to the buyer and payment of price
to the seller works hand in hand, hence, they should take place at the same time (unless the otherwise is
agreed by the parties). Therefore, at the time the seller is delivering possession of the goods to the buyer, the
buyer also, must be willing and ready to pay the price to the seller so that he can obtain possession.
So in summary, the buyer must be willing and ready to pay the agreed price of the goods at the time of
delivery. Except the otherwise is agreed by the parties, for example where there is a credit sale. However, it
is important to note that, where there is a credit sale, the right of the buyer is not absolute; his right may be
defeated where he becomes insolvent. This is recognized under section 41 of SOGA 1893, for example, the
seller may retain possession of the goods.
2. DELIVERY
SECTION 61 SOGA defines ‘delivery’ to mean:
“The voluntary transfer of possession from one person to another”.
NOTE
This implies that delivery of possession of goods by the seller to the buyer must be voluntary. Such transfer
may be: Actual, Constructive, or by attornment.
i. Actual Delivery:
Physically handing over the goods to the buyer
ii. Constructive Delivery:
Handing over means of control of the goods to the buyer. e.g. handing the key to a car to the
buyer.
iii. Delivery by Attornment:
Where a third party in possession of the goods acknowledges to the buyer that he (the third
party) holds the goods in his possession on behalf of the buyer.
iv. Symbolic Delivery:
Handing over documents of title of the goods sold to the buyer.
The parties are free to make whatever arrangement they wish with regard to delivery and payment, but in
the absence of any arrangement, the rule in section 28 SOGA will apply.
RULES AS TO DELIVERY
According to section 28 SOGA 1893, delivery of goods and payment of the price are to be done
concurrently, provided there is no contrary consensus by the parties. So, whether the seller has to send the
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goods to the buyer, or the buyer has to take them from the seller depends on the terms of the contract. In the
absence of any such terms, the following rules regulating delivery will apply, as provided in section 29(1)-
(5)
1. Place of Delivery
2. Delivery of Wrong or Lesser Quantity
3. Attornment
4. Expenses
5. Time of Delivery
6. Mixed Delivery
7. Delivery by Installments
1. PLACE OF DELIVERY
SECTION 29(1) SOGA 1893 provides that:
“Whether it is for the buyer to take possession of the goods or for the seller to send them to the buyer is a
question depending in each case on the contract, express or implied, between the parties, apart from any
such contract, express or implied, the place of delivery is the seller’s place of business, if he have one,
and if not, his residence: Provided that, if the contract be for sale of specific goods, which to the
knowledge of the parties when the contract is made are in some other place, then that place is the place of
delivery”.
NOTE
The above subsection implies that, possession of goods (delivery) is dependent on the agreement between
the parties, express or implied. Hence, whether the buyer will go and take possession of the goods by
himself from the seller or whether the seller will have to make delivery of the goods to the buyer by himself
is dependent on what agreement they make. However, where they did not make such agreement as to
delivery of the goods, the place of delivery is deemed to be the seller’s place of business i.e, where the sale
was made. And where the seller has no business place, his residence is the place of delivery. However,
where the goods in question are specific goods provided the goods, and which at the time the sale is made
both parties are aware that it is in a particular place, then that particular place where the goods are is deemed
to be the place of delivery.
It is important to note that the “place of delivery” as used in this section implies where delivery of the goods
is deemed to have taken place.
There are three (4) perspectives enunciated by section 29(1) as regards place of delivery of the goods:
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i. Place of Delivery Based on the Parties Agreement

ii. Seller’s Business Place as Place of Delivery
iii. Seller’s Residence as Place of Delivery
iv. Some other Place as Place of Delivery, where Goods are Ascertained.
We shall examine them briefly.
i. Possession/Place of Delivery Based on the Parties Agreement:
Here, whether the buyer is to take possession of the goods from the seller by himself or whether
the seller by himself will deliver the goods to the buyers place is dependent on whatever express
or implied agreement between the parties. It is when such an agreement does not exist that the
other two (3) perspectives will apply.
Note that, the duty of the seller to deliver the goods to the buyer at his premises is discharged if
the seller delivers the goods to someone who has the authority to receive the goods at the buyer’s
premises e.g. his agent.
Also, where in a contract of sale where the seller is bound to send/deliver the goods to the buyer
and no specific time is agreed, the seller must make the delivery within a reasonable time.
And lastly, where the agreement is for the seller to send/deliver the goods to the buyer’s
premises, unless the otherwise is agreed, the expenses/cost of the delivery is to be borne by the
seller.
ii. Seller’s Business Place as Place of Delivery:
Here, where the parties did not make any agreement, express or implied as regards the place of
delivery, then the place of delivery of the goods is deemed to be the seller’s place of business.
Hence, where there is no agreement that the buyer should take possession of the goods by
himself at the place of sale or that the seller should by himself send/deliver the goods at the
buyer’s premises, should any dispute arise as to delivery, the place of the delivery of the goods is
the deemed to be the seller’s business place.
Note that, the seller’s business place could means his office, store etc,(hence, where the sale was
made) and not necessarily/exclusively where the goods where the goods are stored or displayed.
The effect/consequence of this rule is that, the buyer is to take possession/delivery of the goods
at the seller’s business place or his residence (where he has no business place), as the goods are
deemed to have been delivered to him while still at the sellers possession i.e. business place.
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Thus, any resulting damage to the goods after a reasonable time while still in possession of the
seller is to be borne by the buyer.
iii. Seller’s Residence as Place of Delivery:
Here, where the parties did not make any agreement, express or implied, as to place of delivery
of the goods, should any dispute arise as to delivery, if the seller also did not have a place of
business, then, the place of delivery is deemed to be the seller’s residence. The
effect/consequence of this rule is that, the buyer is to take possession/delivery of the goods at the
seller’s residence (where he has no business place), as the goods are deemed to have been
delivered to him while still in the seller’s possession i.e, at his residence. Thus, any resulting
damage to the goods after a reasonable time while still in the seller’s possession is to be borne by
the buyer.
iv. Some other Place as Place of Delivery where the Goods are Specific Goods:
Here, where the parties did not make any agreement express or implied as regards delivery, if the
goods in question are specific goods, and the parties are both aware that the goods are in a
particular place, then, such particular place where the goods are will be deemed to be the place of
delivery, (and not the seller’s business place or residence).
The two (2) important conditions for this rule to apply are
1. The goods must be specific or ascertained goods
2. Both parties must have knowledge of the place where the goods are.
2. DELIVERY OF WRONG OR LESSER QUANTITY
“Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may
reject them, but if the buyer accepts the goods so delivered he must pay for them at the contract rate”.
NOTE
This provision implies that, if the delivery of goods made to the buyer by the seller is lesser than the
quantity they contracted, the buyer has the option/choice to either: reject the whole of the (less) quantity
delivered to him, or accept the whole of the (less) quantity delivered to him; but where he chooses to accept
them, he must pay for them at the agreed rate (as if the complete quantities were delivered).
This rule can be succinctly summarized in three sentences; where the seller delivers to the buyer lesser
quantity of goods than contracted:
1. The buyer has the right to terminate/reject the whole contract i.e. lesser quantity delivered; or
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2. The buyer has the right/choice to accept the whole contract I.e. the lesser quantity delivered.
3. Where he chooses to accept the contract/goods, he must pay for the goods at the contracted rate
ILLUSTRATION
Sonorous ordered from April Footies (a reputable footwear brand), 3 pairs of Adaptive Brogues shoes at the
rate of 15k each. Upon delivery, only 2 pairs were delivered to Sonorous. Going by this rule, Sonorous has
the right/choice to either reject or accept the 2 pairs of brogues delivered to him. But where Sonorous
chooses to accept the 2 pairs delivered to him, he must pay for them at the contracted rate of 15k each, he
must not vary the price.
4. DELIVERY OF HIGHER QUANTITY
SECTION 30 (2) SOGA 1893provides that:
“Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer
may accept the goods included in the contract and reject the rest, or he may reject the whole. If the buyer
accepts the whole of the goods so delivered he must pay for them at the contract rate”.
NOTE
This provision implies that, in a case where the seller delivers goods the buyer more than they contracted,
the buyer of the goods has the right to either accept only the actual quantities he contracted for, and reject
the other added goods, or he may reject the whole goods, i.e. the actual quantities plus the added quantities,
or he may accept the whole of the goods so delivered to him, i.e. the actual quantities plus the added
quantities. But in case he accepts the whole of the goods so delivered, he must pay for them at the actual
contract rate/price.
This rule can be succinctly summarized in three sentences; where the seller delivers a higher quantity of
goods to the buyer more than he contracted:
1. The buyer has the right to accept only the goods he contracted for and reject the other included
goods. Or
2. The buyer has the right to reject/terminate the whole of the goods delivered to him, i.e. the actual
quantity plus the included quantities. Or
3. The buyer has the right to accept all the goods so delivered to him. i.e. the actual quantity plus the
included quantities.
Note that, where he agrees to accept all the goods i.e. the actual quantity plus the added quantities, he must
pay for the goods (the added quantities) at the contracted rate i.e. at the rate he bought the actual quantities.
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For example: Ann made a contract of sale for the sale of 5 bales of Bumaks Collections Handkerchief at an
X amount which was agreed to be delivered to her store the second day. However, on the day of delivery, 7
bales of handkerchief were delivered at her store. In this instance Ann has the options to either; accept only
the 5 bales she contracted for and reject the remaining 2 bales, or she may reject the whole 7 bales of
handkerchief, or she may accept the whole 7 bales of handkerchief; but if she does, she must pay for the
remaining 2 bales at the same X amount that she pays for the other 5 bales.
4. DELIVERY OF MIXED GOODS
SECTION 30 (3) SOGA 1893provides that:
“Where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a different
description not included in the contract, the buyer may accept the goods which are in accordance with the
contract and reject the rest, or he may reject the whole”.
NOTE
The above provision implies that, if the seller delivers to the buyer the particular goods he contracted to buy,
but mixed with other kinds of goods which the buyer did not contract to buy, the buyer has the option to
either accept only the particular goods that he contracted to buy and reject the other goods which he did not
contract to buy, or he may reject the whole goods altogether i.e. the ones he contracted to buy and the ones
that were mixed with it.
This rule can be succinctly summarized in two sentences: where the seller delivers mixed/different kinds of
goods to the buyer contrary to what he contracted:
1. The buyer may choose to accept only the particular kind of goods he contracted to buy and reject the
other kinds of goods delivered. Or
2. The buyer may reject the whole goods that are delivered, i.e. both the ones the buyer contracted for
and the other kinds that were delivered.
For example, if Ann contracted to buy 10 bags of (Sir Lorenzo) parboiled rice from Ben to be delivered in a
week time. And upon delivery, Ben delivered 6 bags of (Sir Lorenzo) parboiled rice and 4 bags of
(Lampido) ofada rice. Going by the above rule, Ann has the option to either accept only the 6 bags of (Sir
Lorenzo) parboiled rice and reject the 4 bags of (Lampido) ofada rice, or she can choose to reject all the 10
bags of rice.
However, having stated the rule, it is noteworthy that, if the departure/change in delivery of what is
contracted for is minute or trivial, the seller would still be entitled to his commission/price, provided the
departure/change is not a warranty or condition (term) of the contract.
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5TH MAR, 2019.

HIRE PURCHASE
Hire purchase has been defined by SECTION 20 OF THE HIRE-PURCHASE ACT, 1965 as: “Hire
purchase means the bailment of goods in pursuance of an agreement under which the bailee may buy the
goods or under which the property in the goods will or may pass to the bailee…”.
In a simple and expansive term, hire purchase is a contract whereby the owner of a good lets it out on hire
for a periodic rent with the provision that on due compliance with the various terms of the agreement, and
the completion of the agreed number of payments of rent, the hirer either becomes the owner of the goods
automatically or shall have the option of purchasing the good by payment of a small agreed sum.
Hire purchase contract is an agreement that is completed between a bailor (owner) and a bailee (hirer). The
bailee (hirer) in law only has immediate possession of the goods which are the subject matter of the
contract, subject to the conditions that the he pays every instalment on the goods in accordance with the
original contract between him and the owner; upon which ownership or property in the goods will pass to
him.
In distinguishing hire purchase from credit sale agreement, note that, in the former there is an option to
purchase or terminate the contract hence, he is not obliged to buy, while in the latter, the buyer is obliged to
complete the payment hence, he must buy, if he does not the seller can sue for breach of contract.
A hirer who pays instalments has no good title to pass, but a buyer under credit sale has a good title to pass.
It should be noted that a hirer is not a buyer within the provisions of Sales of Goods Acts and for this
purpose title does not pass upon delivery of possession. As reasoned in the case of: HELBY v.
MATTHEWS 1895 A.C 471.
HIRE PURCHASE AGREEMENT UNDER COMMON LAW
Under common law, a hire purchase agreement may be oral or in writing. However, because of the detailed
arrangements associated with them, are usually in writing and indeed should be in writing. The common law
does not provide any uniform pattern or form for hire purchase agreements; nor are the terms of hire
purchase uniform. However, irrespective of this non-uniformity, it is common knowledge that hire purchase
agreements are characterized by three (3) main essentials:
1. A clause by which the owner agrees to let out the goods and the hirer agrees to hire the the goods.
Note that, this provision indicates the consideration upon which the mutual promises of both parties
rest and a breach of this clause gives a right of action for damages.
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2. A clause which empowers the hirer to determine the hiring and the returning of the goods. To this
clause may be annexed condition or conditions.
3. A clause giving the hirer the right or option to purchase the goods for a nominal sum at the end of
the hiring. And in most agreements, the option is stated to be the consideration for the initial
payment.
Apart from these three (3) essentials, other terms may be included in the agreement, for example, the period
of hire, hire purchase price, number of instalments, care and maintenance etc.
CREATION OF THE CONTRACT OF HIRE PURCHASE
No special form is required so long the contract complies with rules of law, parties are free to contract on
any terms. In the vast majority of cases, the transaction involves two parties – the owner and the hirer. But
where the goods are expensive or where the seller wants to realize his capital immediately a finance
company is introduced.
The relationship of owner and hirer may involve 3 parties, where there is a finance company, three basic
relationships arise viz:
1. The finance company and the hirer: the hire purchase Act may apply because this is a hire purchase
transaction and for this purpose the finance company is the owner.
2. The dealer and the finance company: where the dealer sells to the finance company, the
relationship is governed by the Sales of Goods Act. Most finance company requires the dealer to
enter into a recourse agreement whereby the dealer agrees to repurchase the goods or indemnify the
finance company in the event of hirer’s default.
3. Dealer & Hirer: where a finance company is involved, the hire purchase agreement is made between
the finance company & the hirer, the dealer is a stranger to the contract. Note that, where he gives a
warranty to the hirer the court may interpret it as a collateral contract whereby such representation
will be binding on him. See the case of ANDREWS v. HOPKINS [1957] 1 Q.B 221
OFFER AND ACCEPTANCE
The first essential requirement of a hire purchase agreement is that the parties thereto must as in the case of
a simple contract show that they have reached a firm agreement on the same terms in relation to the subject
matter. This is traditionally regarded as ‘offer’ and ‘acceptance’ of the hire purchase contract.
Where the number of the parties to a hire purchase agreement is two (2), the offer (in writing) is constituted
or made by the hirer signing the hire purchase agreement, while the acceptance is signified by the owner
executing the agreement already signed by the hirer. The acceptance must be communicated to the offeree
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in order to be valid; otherwise, there will be no binding contract. Where the acceptance is communicated by
post, acceptance takes effect from the time of posting; as is the case in a simple contract. Note that, an offer
and acceptance by word of mouth, between the owner and the hirer is also possible in hire purchase
transaction.
But, if the hire purchase agreement involves three parties, i.e, the owner (finance company), the dealer and
the hirer, it is a bit complex. As usual, the offer is made by the hirer. The question is who is to accept the
offer? The dealer or the owner (finance company)? There are respectable authorities that the dealer is not an
agent of the finance company, although the dealer may have limited powers to receive offers from the
hirers. It is therefore important to note that the dealer may only be expressly constituted an agent of the
owner (finance company) for the purpose of accepting offers. It is also not full proof that mere delivery of
the goods, the subject matter of hire purchase agreement, necessarily implies that the owner (fiancé
company) has accepted the offers as dealers often deliver the goods to the hirer when the owner (finance
company) has only approved the agreement in principle. Therefore, for avoidance of doubt, it is necessary in
practice to ensure that the finance company informs the hirer specifically that his offer has been accepted
and not to leave the matter to be inferred from the conduct of the parties.
CAPACITY OF THE PARTIES (INFANTS)
Prima facie, infants are not liable under hire purchase agreements except those relating to necessaries and
beneficial contracts.
OBLIGATION OF PARTIES AT COMMON LAW
OBLIGATION OF THE OWNER
1. Duty to make Delivery of Goods:
The first obligation of the owner at common law is to deliver to the hirer the goods which are the
subject matter of the hire purchase agreement. If no place of delivery is designated the place of
delivery the owner’s business place will be the place of delivery, and the delivery must take place in
the ordinary hours of business. This duty is fundamental, and a breach of it entitles the hirer to
repudiate the agreement. It is on the acceptance of delivery of the goods that the bailment begins to
operate. Delivery necessarily need not be by way of physical or actual carriage of the goods to the
hirer, it could be by way of: constructive, attornment or symbolic delivery (as had been explained
under delivery in sales of goods). But where the hirer wrongfully rejects the goods, the owner’s
remedy lies in a suit for damages & not payment of an instalment. See: NATIONAL CASH REG
CO. v. STANLEY [1921] 2 KB 292
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2. Duty to possess good title in the goods:

The must possess good title in the goods, where this title is successfully impeached by third party,
there is failure of consideration, and the hirer can recover instalments paid.
3. Duty for the goods to be fit for purpose
If the hirer makes known to the owner the purpose for which the goods is to be hired, it is clear from
circumstances that he is relying on the owner’s skill and judgement that the goods supplied shall be
fit for use. Thus, the owner of the good has the duty to ensure that the goods which is the subject
matter of the hire purchase agreement is fit for purpose for which the goods are hired. See the case
of: RE YEOMAN CREDIT LTD [1962] 2 Q.B 508
4. Duty of warranty of Quiet Enjoyment:
This presupposes that, the owner has the duty to ensure that he does not interfere wrongfully with the
hirer’s use of the goods. A breach of this warranty may be remedied by an action for damages. See
the case of: ASTLAY INDUSTRIAL CO LTD v. GRUNLEY [1963] 1 WLK 589
OBLIGATION OF THE HIRER
1. Duty to take Delivery:
It is the duty of the hirer to take delivery of the goods. He will be liable in damages if he fails to take
delivery within a reasonable time after he had been duly requested to do so. Furthermore, where the
hirer refuses or neglects to take delivery, any loss arising from such refusal or neglect and such
expenses that may be reasonably made for the care and safe custody of the goods will be payable by
the hirer. See the case of: GREAVES V. ASHLIN [1813] 3 CAMP. 426.
It should be noted that the owner’s remedy in damages is limited to damages for breach and such
consequential damages, e.g. loss of property, but it excludes arrears of rents which would have
accrued had the hiring commenced.
2. Duty to Pay:
It is also the duty of the hirer to pay, punctually, the various sums provided for in the agreement in
accordance with the provisions of the agreement. Where a hirer defaults in the payment of
instalment, the owner may terminate the agreement in pursuance of the contract. As reasoned in the
case of:
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ANIMASHAUN v. C.F.A.O [1960] L.L.R

In an hire purchase for a mini bus, P deposited €400, he defaulted in payment of instalment and
D terminated the contract. The D later sold the bus in pursuance of his contractual right. The
court held that the hirer had no remedy because the owner was entitled to recover the goods upon
the termination of contract. Even if nearly all the instalments had been paid or arrears are
tendered, after a default a hirer may still be open to this seizure.
Note, that where the agreement has been terminated by the owner, the hirer must pay all the
instalments due up to the date of termination. Also, the owner is not obliged to account for profit
made in the exercise of his right of sale and if he incurs any loss the hirer may be liable to pay
damages.
The payments comprised in the hire purchase agreement are essentially the initial payment made at
the commencement of the hire purchase agreement, generally called the deposit, and the rentals, i.e,
the instamental or periodic (usually monthly) payments.
3. Duty to Custody and Care of the Goods:
The hirer also has a duty to use the goods for the purpose for which they were hired, for example, a
transport lorry cannot be used as if it is a tipper lorry. If the goods are used other than for the purpose
for which they were hired and sustain damage, whether there is negligence or not, the hirer will be
liable.
Under the common law, it is generally implied that the hirer must take reasonable care of the goods
under hire, or else he will be liable in conversion for loss or damage. However, he is not liable for
fair wear and tear of the goods, except for incidental repairs which may be necessary for proper
functioning of the subject matter of the hire.
OBLIGATION OF THE DEALER
Who is a dealer? A dealer is a person who buys goods or property for the purpose of selling as a business.
Where a hire purchase contract involves three parties sometimes, there is always an ambiguity in
determining the legal relationship between the finance company and the dealer, the finance company and the
hirer, and the dealer and the hirer, especially for the hirer. In stricto senso, the finance company is the owner
of the goods, as well as the seller of the goods. Therefore, the finance company assumes certain
responsibilities for the description, quality and fit for purpose of the goods. There exists a wrong impression
that, the hirer’s action lies squarely with the dealer who delivers the goods directly to him and in most cases,
42
receives the installment payments. However, it should be noted that, where the dealer does not the owner of
the goods nor finance the business, it is wrong for the hirer to think that he has made an agreement with the
dealer. The agreement, which is usually a proposal from which the dealer gives to the hirer to sign, is an
offer addressed to the finance company who alone can accept the offer and the dealer drops out. In law,
therefore, there is no contract of hire purchase between the dealer and the hirer. As reasoned in the case of:
FALODUN v. BENTWORTH FINANCE (NIG.) LTD [1969] N.C.L.R 230.
“The court stated that: a dealer should not by reason of taking care of certain aspect of the transaction
on behalf of the finance company thereby become its general agent. In normal circumstances, the
dealer’s duty is just to introduce the hirer to the finance company. He assumes no contractual obligation,
and if agency is to develop between them, it should be through an agreement, in which case the functions
of the dealer would be spelt out in clear terms of the contract”.
However, in practice, the hirer is allowed to enforce certain rights on the dealer for an independent contract
entered into between them. There may exist a contract between the dealer and the hirer which is merely
peripheral to the main contract and on which the hirer may have an enforceable right against the dealer. Any
warranty or representations made by the dealer to the hirer during negotiations for the hire purchase contract
will be treated as a consideration for entering into the main contract. So, where the warranty or
representation turns out to be untrue, the dealer will be liable to the hirer for damages that may arise from
the breach of the warranty or representation. As reasoned in the case of:
ANDREWS v. HOPKINS [1957] 1 Q.B 229.
Where the dealer said to the hirer during negotiations: “It is a good little bus; I will stake my life on it”,
and on delivery of the motor vehicle after the hire purchase agreement the hirer found it totally defective,
it was held that the hirer could recover from the dealer damages for breach of contract.
Another instance where the dealer will be liable to the hirer is where the dealr himself, as the owner, lets out
the goods on hire.
THE MINIMUM PAYMENT CLAUSE UNDER THE COMMON LAW
One of the dominant features of the hire purchase agreement is the right of the hirer to determine the
agreement as there is no contractual obligation on him to complete the hiring agreement and exercise his
option in order to become the owner of the goods under the agreement.
As a way of providing for the loss which arises from normal depreciation, the usual practice at common law
is to incorporate a clause in the hire purchase agreement which provides for the termination of the
agreement at any stage by the hirer, or where the owner is obliged to determine the agreement in
43
consequence of a breach committed by the hirer. Such stipulation is called the ‘minimum payment clause’.
In other words, most hire purchase agreements usually contain minimum payment clauses which stipulate
that in event of the termination of the agreement, a specified sum is payable by the hirer. However, although
the need to protect the owner from such financial loss is recognized, there is no justification to receive an
extravagant sum of money under the pretext of ‘compensation for depreciation’. Lord Denning condemning
the pretext in which the ‘minimum payment’ was made, in the case of: BRIDGE v. CAMPBELL
DISCOUNT CO. LTD, stated that:
The truth is that this minimum payment is not so much of compensation for depreciation but rather
compensation for loss of further instalments which the respondents is expected to receive, but which they
have no right to receive. It is a penal sum which they exact because the hiring is terminated before two-
thirds had been paid. In cases where the hiring is terminated, as it was here, within few weeks, it is
beyond doubt oppressive and unjust.
Consumers view stipulation/provision for ‘minimum payment’ on termination of the agreement by the hirer
with suspicion. However, there is nothing inherently wrong about such stipulation/provision provided they
are fair and equitable between the parties. Since the common law is familiar with the principles of fixing of
mutually agreed pre-estimate of damage likely to result from a breach of contract. Such a specific sum of
money is recoverable and is called liquidated damages. But, for the sum to be recoverable, it must be
established to be a genuine pre-estimate of the damage which would flow from the breach of contract.
Where, however, the mutually agreed pre-estimate is fixed in ‘terrorem’ with the primary purpose of
securing performance of the contract, by imposing a penalty in excess of the actual loss likely to be
sustained if the breach occurred, the estimate will not be recoverable. What this simply mean is that, the
‘minimum payment’ that is agreed by the parties in case of breach of the contract must justify the likely
damage or loss that the owner of the goods is likely to sustain as a result of the breach. It must not be
aggravated for the purpose of compelling the hirer to complete performance of the contract.
In deciding whether a pre-estimate is genuine and therefore recoverable as a liquidated damages, or as a sum
held in ‘terrorem’ (penalty) and therefore irrecoverable:
i. If the owner terminates the agreement in consequence of the breach of the agreement by the hirer
and, prima facie, makes a claim under the ‘minimum payment’ the claim is generally viewed as a
penalty and therefore irrecoverable. As reasoned in the case of:
44
AMUSAN AND THOMAS v. BENTWORTH FINANCE (NIG) LTD

The court stated that, if the sum described as agreed depreciation is in reality an amount charged
not as a genuine pre-estimate of the loss of the owner but as an insurance in any event for
securing to them a minimum proportion of the cost of the article hired, the court will take the
view that the clause constitutes a penalty and that the amount encompassed within it is not as
such recoverable.
ii. If the hire-purchase agreement can be shown to have been voluntarily terminated by the hirer in
exercise of powers vested in him under the agreement, the minimum payment clause is usually
recoverable, for it is regarded as a genuine pre-estimate of the damages or loss sustainable under
the circumstance. It will be not be viewed as a penalty to enforce performance of the contract on
the hirer but, as a payment by the hirer as expressly provided for under the agreement, which
enables him to exercise his right of option to return the goods.
The summary of the above is that, where a hire purchase agreement provides for a minimum payment
clause and the hirer terminates (not breach) the agreement, the minimum payment clause will be
enforceable and the question of penalty (terrorem) will not arise. But, where the action of the hirer in
relation to the agreement amounts to a mere breach of the contract, the minimum payment clause usually
does not come into operation.
SOME OTHER COMMON LAW RULES/PRINCIPLES HIRE PURCHASE
1. Owner’s Rights against Third Parties
Prima facie, where a third party has obtained a good title to the goods which is the subject matter of
the hire purchase contract, the owner has no right of action against the third party. But if the third
party did not acquire a good title, the owner may repossess the goods both under common law and
under the act. The owner may also sue the third party for damages in tort of conversion if he has a
right to immediate possession of the good.
Likewise if a third party has negligently destroyed or damaged the goods under the hire purchase
agreement, the owner may sue for damages, unless he is restricted from doing so, by express or
implied provisions of the agreement.
2. Right of Hirer against Third Party
The essential characteristic of a hire purchase agreement is that, as long as the agreement lasts, the
property in the goods remains with the owner, i.e. the finance company retains the legal ownership.
But since the hirer has possession of the goods, he can effectively sue anyone who interferes with his
45
right of possession in trespass, conversion or in detinue. However, if he obtains damages, he has to

account to the owner. The hirer’s rights of action against the third party are not affected by reason of
termination of the agreement by the owner, provided the offence was committed at the time when
the hirer was in possession of the goods.
3. Right of Third Parties
If a third party receives the hired goods in circumstances in which he does not obtain a good title,
and he has been dispossessed of them by the owner, he has a right of action against the hirer for the
value he (the third party) paid for the goods.
DISPOSITION OF HIRE PURCHASE GOODS BY THE HIRER
In a hire purchase agreement, the hirer only has possession and not ownership. Therefore, if a hirer sells or
pledges goods subject to hire purchase, the purchaser or the pledgee does not acquire a better title in the
goods. This is based on the principle of ‘nemo dat quod non habet’. So, in consequence, both the hirer and
the purchaser or pledgee will be liable in conversion to the original owner (i.e. the finance company). As
reasoned in the case of:
OLAMETAN v. C.F.A.O [1959] L.L.R. 42
A hire purchase agreement between one David Ogunbayo and C.F.A.O was concluded in Ghana. The
hirer, however, fraudulently removed the lorry to Nigeria and sold it to the plaintiff. On the instruction of
the C.F.A.O, their agent in Nigeria seized the lorry from the plaintiff, the purchaser in Nigeria. The
plaintiff instituted the present proceedings against the defendants for damages for the conversion of the
lorry. The court held that: the hirer of an article on hire purchase term requires no proprietary interest
other than those conferred on him by the hire purchase agreement, and if he sold the goods without the
consent of the owner, a purchaser from him acquires no title, on the ground that the doctrine of nemo dat
quod non habet applies.
However, it is possible for a purchaser to claim the benefit of the hirer’s option to purchase under the
principle in the case of:
WHITLEY v. HILT [1918] 2 K.B 808
The plaintiff let a piano under a hire purchase agreement, whereby the hirer had an option to purchase it
by payment of certain number of quarterly instalments, but was to remain a bailee only until the last
instalments be paid, the hirer having the right to determine at any time to terminate the agreement by
returning the piano to the plaintiff. The piano was sold to a purchaser by the hirer before all the
instalments had been paid. In an action for detinue and conversion in the County Court, the defendant-
46
purchaser paid into Court the amount of the remaining unpaid instalments. The County Court held that,
the defendant by so doing had acquired the rights of the hirer under the agreement before anything had
been done to terminate it. The decision was upheld by the Court of Appeal.
EXCEPTIONS TO THE RULE OF NEMO DAT QUOD NON HABET
1. Sale by seller in possession
2. Sale in market overt
3. Sale by court bailiff
4. Sale by mercantile agent
5. Sale by buyer in possession
6. Estoppel
7. Assignment of an option to purchase
8. Feeding the title
1. Sale by Seller in Possession
By virtue of section 25 (1) of the Sales of Goods Act, where an owner sells his goods to a purchaser,
and he simultaneously takes the goods back on hire purchase, and thereby continues in possession of
it, if he resells the goods to a third party who has no notice of the first sale, the third party will
acquire a good title in the goods. What this simply mean is that, where a person sells goods and
continues or is in possession of the goods and then, before delivering them disposes of them to a
third person who takes them in good faith and without notice of the previous sale, the third person
shall have good title to the goods.
2. Sale in Market Overt
If a hirer disposes of the hired goods in a market overt to an innocent purchaser and who has
furnished consideration, the purchaser will acquire a good title in the goods. As reasoned in the case
of:
BISHOPSGATE FINANCE CORPORATION v. TRANSPORT BROKERS LTD [1949] 1 All E.R
37 (CA)
The hirer of a motor car under a hire purchase agreement drove it to Maidstone, a place reputed
for sale of motor vehicles, and sold it to the defendants who took it in good faith and unaware of
any defect or want of title on the part of the hirer. The plaintiff sued the defendant for return of
the car; it was held that, a good title passed to the defendant.
47
It is important to note that, under sale in market overt, the hirer is not protected, for he remains liable
to the owner in conversion by reason of the wrongful disposal of the goods. So, should the offender
(the hirer) be prosecuted to conviction, the property in the goods revests back in the owner, just as in
the case of sales of goods.
3. Sale by Court Bailiff
A purchaser from a court bailiff of goods which is the subject matter of a hire purchase agreement
gets a good title if he has no knowledge of any defect in the judgement debtor’s title. What this
simply mean is that, if a good is the subject matter of a hire purchaser agreement, and the court
bailiff sells the good to a third party who had no knowledge that the judgment debtor is the hirer and
that he had no title in the good, the purchaser will acquire a good title in the good. As reasoned in the
case of:
MBANUGO v. U.A.C. OF NIG LTD [1961] L.L.R 162
A bailiff in execution of a writ of fieri-facias seized and sold by public auction a Bedford Tipper
Lorry before it was sold to the plaintiff who now sued the defendants on the latter seizing the lorry,
because they let it on hire purchase to the judgement debtor. The court held that: under section 16 of
the Sheriff and Civil Process Act, that the purchaser had secured a clear title in respect of the lorry as
against the former owner.
4. Sale by Mercantile Agent
A seller can only confer a good title to the purchaser, if he is a mercantile agent within the meaning
of section 1(1) of the factors Act, and must have disposed of the goods in the ordinary course of his
business i.e. he must act in a way in which mercantile agent of his class would normally be expected
to act.
Thus, a hirer, who is a mercantile agent, would pass a good title in the goods (subject matter of the
hire purchase agreement) to a third party, if he customarily carries out the transaction in the ordinary
course of his business. As reasoned in the case of:
ASHLEY INDUSTRIAL TRUST LTD v. MILLER [1968] All E.R. 36.
A company carrying on the business of car hire received a car under a hire purchase agreement
from the plaintiff company, as owners and sold the car under hire purchase to the defendant. The
plaintiff sued the defendant in respect of the car.
48
For example, if a hirer, who is a mercantile agent, and customarily carries on the business of a car
dealer, obtains the possession of a motor car under hire purchase agreement from the owner and
dispose of it while acting as a mercantile agent, the innocent buyer of the car from him will be
protected.
TERMINATION OF THE HIRE PURCHASE CONTRACT
1. TERMINATION BY PERFORMANCE
This usually takes place when the hirer exercises his option to buy, in such a case the agreement
merges into contract of sale.
2. BY AGREEMENT
Where it has been provided under the hire purchase agreement that the agreement would only last for
a specified period of time, upon such time, the agreement terminates. Or, where it is provided in the
hire purchase agreement that the parties are free to withdraw from the terms of the contract.
Where the hirer exercises is right under the hire purchase agreement, to terminate the agreement, he
will be bound under the law to pay whatever ‘genuine estimate’ sum that is stipulated in the
agreement. But where it is the owner who terminates the agreement due to the breach of the hirer,
whether it is a ‘genuine estimate’ or damages or a penalty clause depends on the following:
i. The quantum of money payable in relation to the hirer purchase price
ii. The circumstances in which it is payable
iii. The name given to the sum payable. Generally the name given is “minimum payment clause”
3. BY REPUDIATION
This is relevant where a condition term of the agreement has been breached.
4. BY FRUSTRATION
Where circumstances that is unprecedented by both parties makes the purpose of the hire purchase
agreement to be impossible or unable to be performed.
5. If distress or an execution of court judgement is levied on the subject matter of the hire purchase
agreement
THE DEFECTS/SHORTCOMINGS OF COMMON LAW OF HIRE PURCHASE
1. EVALUATION OF CONTRACT
The hirer is often times ill equipped to properly evaluate the contract he signs because of his unequal
bargaining strength, the owner invariably requires him to sign a prepared standard form contract
which buries in small prints, the unpopular terms of the contract. Even if the terms are legibly stated,
49
where the hirer is incapable of reading, there is no excuse for him at Common Law. The case of:
LES STRANGE v. GRAUCOB [1934] 2 KB 394, firmly illustrates the predicaments of a hirer who
has put his hand on a document which he now considers onerous.
However, the Hire Purchase Act has remedied this shortcoming by providing in section 15, 16, and
17 a prescribed standard form, containing the material details that must be complied with by dealers.
Also, by virtue of section 2 of the Act, a separate statement of the cash price together with the hire
purchase price which may or may not differ must be furnished to the hirer. Although, this duty does
not apply where the hirer inspects the goods and such goods have price tags on them, or if the hirer
has selected such goods by reference to a catalog containing such price tags.
In addition, a note or memorandum of understanding must be signed by all the parties and must
contain the instalments, and the date due, deposits payable (if any), the interest rate and list of goods
covered by the contract. If the owner deaults in compliance with this provision he is barred from
enforcing the hire purchase and neither can he recover possession of the goods upon termination.
2. QUALITY AND FITNESS
In section 4 of the hire purchase Act, the following conditions and warranties are implied:
i. Quiet possession
ii. Right to sell
iii. Freedom from encumbrance
iv. Condition of mercantile quality of new goods in respect of defects which are originally
apparent upon examination. If the hirer examines the goods, there is no condition of
merchantable quality.
v. Condition of fitness:
All the other four conditions may be improved upon except this 5 th one. Any clause that
excludes this implied term is ineffective. Even where such clause exists, it must be brought to
the attention of the hirer and explained.
3. REPOSSESSION
Although the owner is entitled to recover possession of the goods upon termination of the contract,
the means of enforcing the recovery under common law in most cases involves the use of force and
violence, and the matter is made worse, especially where the owner’s liability in tort has been
excluded in the contract.
50
Where the owner sells the goods recovered, he is not accountable for profit to the hirer and this is so
irrespective of whether or not instalment have been nearly completed by the hirer. See the case of :
ATERE v. DADA AMOO.
Under the Act, by virtue of section 9, where the hirer is the person terminating, in the case of motor
vehicle, where 3/5 of the total instalment due, or in the case of other goods where ½ of such
instalments have been paid or tendered, the owner can only recover possession of the goods by an
action in court and if he violates this provision the contract terminates and the hirer is released from
further liabilities, and he is entitled to claim back the instalments paid so far.
Section 10 of the hire purchase Act outlines the power of the court to make specific delivery order
contingent or absolute. If the delivery order is contingent, it means it is made subject to a failure on
the hirer’s part to comply with certain conditions. If absolute, it takes effect immediately.
4. MINIMUM PAYMENT CLAUSE
By virtue of section 8 (1) of the Act, the hirer has a statutory right to terminate the agreement and
shall not be liable to pay more than ½ of the hire purchase price and any provision which restrict his
right of termination or impose a price higher than specified i.e ½ is void. See section 3 (3).
5. INTEREST RATE
Section 2 of the Act empowers the minister to regulate interest rates in hire purchase transaction.
SECTION 3 OF THE HIRE PURCHASE ACT
Under this section certain provisions/terms in a hire purchase agreement are rendered void:
a. A term which authorizes entry to any premises whether or not occupied by the hirer
b. A term which restricts the hirer’s right to terminate.
c. A term which makes the hirer’s liability upon termination higher than that which is stipulated in the
Act.
d. A term which compels the hirer to appoint dealer as agent.
e. A term which relieves the owner from the default of any of his representatives.
f. A term which stipulates an insurer or repairer to which the hirer is restricted to.
If any of the above terms features in the hire purchase agreement for a motor vehicle etc, such term would
be rendered void.
51
WAYS OF TERMINATION BY AN HIRER

1. By terminating immediately, and making a return of the goods to the owner and paying no more than
½ of the price.
2. By retaining the goods without paying the instalments. Thereby, the owner can take possession for
breach and the agreement is terminated and the hirer will be liable for damages that may have
occurred by his negligence.
3. By selling the hire purchase good and paying the owner the balance.
52

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BUL 302: Commercial Law II S.A.R.I. 2019 (Johnson E.

BY: JOHNSON E. OMOTAYO.

3RD OCT, 2018.

The categorization of a good is important because it is useful in determining;

 Transfer of Property (Title) in Ascertained Goods

Where the price is fixed by the contract

Where the price is to be fixed by third party valuation

SECTION 18 – RULE 2: (PUTTING GOODS IN A DELIVERABLE STATE)

c. Non-notification of Rejection of Goods:

2. The Goods must be Unconditionally Appropriated into the Contract

4. Sale under Estoppel section 21 (1)

 The buyer must act in good faith

3. The seller (thief) if prosecuted must not be convicted.

i. Place of Delivery Based on the Parties Agreement

5TH MAR, 2019.

2. Duty to possess good title in the goods:

ANIMASHAUN v. C.F.A.O [1960] L.L.R

AMUSAN AND THOMAS v. BENTWORTH FINANCE (NIG) LTD

right of possession in trespass, conversion or in detinue. However, if he obtains damages, he has to

WAYS OF TERMINATION BY AN HIRER

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