SALE OF GOODS

Mary Ongore
LEARNING OUTCOMES
 Meaning of goods
 Formation of the contract

 Formalities of the contract

 Sale distinguished from other contracts

MEANING OF GOODS
 “Goods” is defined by s 2 (1)
 “goods” includes all chattels personal other
than things in action and money, and all
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;
 Personal chattels :tangible moveable items for which
possession can be taken that can be transferred from
place to place
 Choses in action: include shares and other securities,
debts, bills of exchange and other negotiable
instruments, patents, copyrights, lottery tickets etc.
MONEY?
 Coins may be bought or sold as a goods when they are
collectors coins. Moss v Hancock
 Foreign money bought on an exchange is not goods. It is
treated as a supply of services.
 Cheques & credit cards are not goods.
MINERALS/GRAVEL AND SOIL?
 “all 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”
 These are not merely attached but form part of the land
itself.
 Owner may sell the land or grant an interest in the land.

 Contract for the sale of minerals not a contract of sale.

See Morgan v Russell
EMBLEMENTS?

 These refer to growing crops annually produced by

agricultural labour e.g. wheat, corn, flax, potatoes, as
opposed to a crop occurring naturally.
 There is a contract for the sale of goods where the
intention of the parties is that the property in the growing
things should pass after severance
 A contract for the sale of emblements which grow
through labour and industry while still growing is a
contract for the sale of goods whether or not the goods
are still in a state of maturity or whether they still need to
derive nutrient from the soil. See Settlement Trustees v
Nurani (1970) EA 370
WATER?
 Water which has been appropriated or taken into
possession either from a defined channel or from that
percolating beneath the land is the subject of property.
 Water is capable of being bought and sold as goods. See
Ferens v O’brien
CLASSIFICATION OF GOODS
 Existing goods
 Goods which form the subject of a contract of sale and
which are owned or possessed by the seller: see s7(1) Sale of
Goods Act
 Future goods
 Goods to be manufactured or acquired by the seller after the
making of the contract of sale. See sec 2(1) and 7(1) Sale of
Goods Act
 Goods to be manufactured by the seller whether from materials
which are now in existence or not
 Goods which are to become the property of the seller e.g. by
purchase
 Goods expected to come into the existence of the seller in the
ordinary course of nature e.e. young to be born of livestock
 Specific goods:
 Goods identified and agreed upon at the time a contract
of sale is made. See s. 2(1)
 Unascertained goods:

 Goods not identified and agreed on at the time that the

contract of sale is made. NB- not defined by the Act.
 Generic goods e.g. 100 tons of barley or a Ford Fiesta
 Goods not yet in existence which are to be manufactured or
acquired by seller
 A part unidentified out of a whole e.g. 100 tons out of 1000
tons of barley stored in the warehouse
FORMATION OF THE CONTRACT
Intention to create legal relations
Choitram v Lazar (1959) EA 157
 Sale of Goods Act s 10 (2) Where the price is not determined in
accordance with the foregoing provisions, the buyer must pay a
reasonable price
 S 6 (1) required contract to be in writing above 200 shillings
which did indeed happen
 When the terms of a contract have been reduced to writing no
other evidence shall be included to prove the contract except by
means of what is in writing. Intention was inferred from the
written document itself.
 Test of intention is an objective one

 Where the parties agree to contract but say nothing about the
price the law will imply a reasonable price
 Uncertainty of terms
Bhulam Kadir v British Overseas Eng Corpn (1957) EA
131
Claim was that there was no agreement as to price which
was “subject to fluctuation”
Price was what was reasonable.
 Offer and acceptance
 Parkars Music and Sports House v Notorn Ltd (1959)
EA 534
 Offer and acceptance between the buyer and the seller

 A contract to be made by an agent on behalf of a

principal is considered to be the contract of the principal
and not that of the agent.
 Mistake
 Ingram v Little
FORMALITIES OF THE CONTRACT
 Sale of Goods Act
 5. Contract of sale, how made
 Subject to the provisions of this Act and of any Act in that behalf, a
contract of sale may be made in writing (either with or without seal)
or by word of mouth, or partly in writing and partly by word of
mouth, or may be implied from the conduct of the parties: Provided
that nothing in this section shall affect the law relating to corporations.
 6. Contract of sale for ten pounds or more to be in writing
 (1) A contract for the sale of any goods of the value of two hundred
shillings or upwards shall not be enforceable by action unless the
buyer accepts part of the goods so sold, and actually receives them, or
gives something in earnest to bind the contract or in part payment, or
unless some note or memorandum in writing of the contract is made
and signed by the party to be charged or his agent in that behalf.
A.J. Karia v V.K. Shah (1962) EA 43
 Forged document cannot be a contract

 Leslie Anderson v Kassam Jivraj (1950) 17 EA 84

 The written document must include the name and the
sufficient description of the seller
SALE DISTINGUISHED FROM OTHER
CONTRACTS
 The Sale of Goods Act applies only to contracts of sale
of goods and does not apply to other dispositions of
goods.
 The following are other transactions whose commercial
objects may be similar but are otherwise quite different.
SALE DISTINGUISHED FROM
BARTER/EXCHANGE
 Exchange or barter involves a transfer of one chattel in
exchange or in return for another.
 Goods exchanged for work done, for the making of
another contract, for rent, or boarding and lodging or in
return for the extinction of a right or the abandonment of
a claim does not constitute a sale. In such instances you
cannot sue for the price but may only be able to sue for
unliquidated damages.
WHAT IS MONEY?
 Note however that a coin which is a collector’s item may be
‘goods’. Even though it is legal tender there may be a sale of such
of such a coin. In such an event the coin does not posses the usual
negotiable qualities of money.

Moss v Hancock
 "Money ... (is) that which passes freely from hand to hand
throughout the community in final discharge of debts and full
payment for commodities, being accepted equally without
reference to the character or credit of the person who offers it and
without the intention of the person who receives it to consume it
or apply it to any other use than in turn to tender it to others in
discharge of debts or payment of commodities.“
 A coin which is a collectors item may be goods even though it is
legal tender and there may be a sale of such a coin.
 Part-exchanges
 What however is the position where goods exchanged
for goods plus money?
 It is possible to distinguish other situations where an
element of price is also discernible so that they may be
treated as sales.
 Used car trade-ins considered as sales

 Aldridge v Johnson
SALE DISTINGUISHED FROM A GIFT
 A gift differs from a sale because there is no
consideration for the transfer of the property in the
goods.
 Transactions may exist where a free gift is offered on the
condition of entering into some other transaction. See the
case of Esso Petroleum Ltd v Commissioners of
Customs & Excise. Transaction wasn’t a gift due to
intention to create legal relations (law of contract
applied) but it wasn’t a sale of goods either.
SALE DISTINGUISHED FROM BAILMENT
 Will include the delivery of goods for safekeeping, gratuitous bailments eg
coat checks, delivery of goods for use by the bailee for reward (hiring)
Lord Holt in Coggs v. Bernard (1703) 2 Ld Raym909; 92 ER 107

 Goods are delivered by one person to another for a limited purpose and on
the term that the very same goods will be returned to the bailor or
delivered to a third person in accordance with the bailor’s instructions at
the termination of the agreement when the purpose is fulfilled.

 The bailor parts with possession of the goods, but he retains the ownership
of them while under a contract of sale, the seller undertakes to part with
possession and ownership.

 Important case in the wake of the Romalpa case which has seen the rise of
retetion of title cases Aluminium Industrie Vaassen BV v Romalpa
Aluminium Ltd [1976] 1 WLR 676
SALE DISTINGUISHED FROM HIRE
PURCHASE
 This is a bailment with the (bailee not having the right
to sell goods) coupled with an option to purchase the
goods which may or may not be exercised.
 These contracts resemble the contracts of sale very
closely as in almost all hire purchase contracts the real
object of the transaction is the sale of goods, cost of
installments is usually far in excess of true hiring and
the final legal purchase price is usually nominal.
 Hire purchase will usually involve three parties.
Retailer sells goods to the financier. Financier lets the
goods on hire purchase to the buyer.
 Developed towards the end of the 19th century in
England and Wales to give proper security to the seller
over his goods. See Lee v Butler [1893] 2 QB 318 read
together with s 26 of Sale of Goods Act.
 See Helby v Matthews (buyer had an option to buy and
hadn’t agreed to buy goods)
 MatayoMusoke v Alibhai Garage Ltd (1960) EA 31
LOAN ON SECURITY

 Occurs where the parties go through a form of sale as a security

for a loan.
 The borrower A borrows money on the security of goods and
charges/mortgages them to B
 A (borrower) retains possession of the goods and repays B what
he/she has borrowed together with interest.
 B the lender will have a right to take the goods from A if A fails
to repay the loan/interest at the agreed time.
 The borrower transfers the ownership/interest in the goods to
the lender on condition that the ownership will be transferred
upon the repayment of the loan.
 Vide s 59 (4) The provisions of the Sale of Goods Act do not
apply to contracts of sale that operate by way of
mortgage/charge or any other security.
SALE OF GOODS DISTINGUISHED FROM
SUPPLY OF SERVICES
 Contract for the supply of services involve the provision
of services. They can be divided into a contract for skill
and labour or for contracts for labour and materials
depending on whether the supplier is providing services
only or materials as well.
 Implied duties of the seller as to the quality and fitness
of the goods (which bring about strict liability to the
seller even in the absence of negligence) do not extend to
supply of services.
 The test of distinguishing between goods and services
will be to consider the substance rather than the form of
the contract see Robinson v Graves
SALE OF GOODS DISTINGUISHED FROM
AGENCY
 Where a person A commissions a person to buy goods
for him the person can act in two capacities:
 As a supplier
 As an agent acting on his behalf

 If it is an agency relationship, there is privity of contract

between the buyer and the agent’s supplier.
 Duties of a commission agent are less stringent than
those of a seller. Commission agent only bound to use
due diligence to fulfil an order.
 Where agent is contracted to dispose of goods for a
person, he cannot do so without seller’s agreement as
title is not transferred to him.
 To distinguish the two we look at substance rather than
form. See Mercantile International group v Chuan
Soon Huat [2002] EWCA Civ 288
 Agent will generally act on the instructions of the
principal and is normally remunerated with a
commission.
 Agent accounts to the principal and periodically for the
proceeds of sale