BUSINESS LAW

DR. PETER APUKO AWUNI, FCCBA

Legal Researcher, ADR Consultant & Counselling Psychologist
(BEd, LLB, LLM,EMADR, PEMCLDP, PECArB)
 PART ONE

LAW AND THE LEGAL

SYSTEM
CONCEPT OF LAW?
 Law as a concept can be analysed from a number of perspectives
 According to Ocran law is an abstraction from the aggregate of individual rules of law in a given
community. It is a reference to that particular technique of social ordering which finds its
concrete expression in individual rules of law.
 Law is therefore a technique which takes the form of legal rules, for the control of the
behaviour of people in a given society (the idea of social ordering or social control through law)
 Law is a coercive instrument for the control of behaviour in society. Law is prescriptive or
normative in nature meaning that law prescribes conduct that people may engage in if they
wish, and conduct which people ought not to engage in. Law shares this prescriptive or
normative aspect with morality or religion.
 Law attaches specified consequences to behaviour that departs from the prescribed standard.
These unfavourable consequences are called Sanctions.
 LEGAL RULES AS LAW
 Legal Rules are words, statements or declarations that constitute a standard of behaviour
for members of society.
 To constitute a standard of behaviour, the words, statements or declarations must comprise
the following:
 They must prescribe a conduct which should or should not be engaged in.
 They must provide sanctions to be administered if the standard is not followed.
 They must be made or issued by a person or body that has the authority to make law.
The person or body making the law must have been designated by a fundamental rule
whose function it is to designate persons or bodies as law makers.
 They must be issued in accordance with a prescribed procedure.

THE LEGAL SYSTEM
The laws that regulate society are many and varied, reflecting the fact that the affairs of people of a
society are many and varied. Each law regulates a broadly defined set of activities thereby setting
standard in each of the areas where defined activities are carried out.
 In order that the various laws and their sources can constitute a system there must be some form of
unity among the various laws. Such unity ensures that even though they deal with separate
activities and originate from different sources, each law still forms part of a common system.
 Kelsen and Hart are two foremost legal scholars whose analysis of the concept of a legal system
have been discussed.
 THE LEGAL SYSTEM ACCORDING TO HART
 A legal system is a union of primary and secondary rules.
 Primary rules regulate conduct in a given society by imposing obligations on individuals in
their private and official capacities. Primary rules alone cannot constitute a legal system
because they suffer three defects which are:
 Lack of mechanisms for resolving doubts about the existence or precise scope of primary
rules.
 The static nature of primary rules despite changing times in society.
 The Inefficiency in the maintenance of primary rules

 To remedy these defects Hart suggests another category of rules known as Secondary Rules
which comprise secondary rules of recognition, secondary rules of change and secondary
rules of adjudication.
 Primary rules impose obligations whilst secondary rules confer power.
 THE LEGAL SYSTEM ACCORDING TO
KELSEN
 The Legal Order is a system of laws. In a legal order, the laws of a society must trace their existence
to a common source, called the basic law.
 The basic law is the supreme law in the society whose basic function is to regulate the creation of
laws in society. It performs this function by specifying and empowering individuals and bodies to
make law and to do so in accordance with a procedure specified by the basic law.
 Unlike other laws, the basic law does not trace its existence to another law. Its validity or existence
is presupposed.
 Like the rule of recognition in the case of Hart, the basic law in the case of Kelsen unifies all laws in
the society into a legal order by serving as the ultimate law according to which the validity of laws in
the legal order is established.
 Thus, whether a law is valid and binding depends on whether it traces its existence from the basic
law.
 SOURCES OF LAW IN GHANA
 The 1992 Constitution of Ghana itself
 Enactments made by or under the authority of parliament.
 Any Orders, Rules and Regulations made by persons or authorities under power conferred on them by
the constitution.
 The Existing law comprises the written and unwritten laws of Ghana as they existed immediately
before coming into force of this constitution and any Act, Decree, Law or Statutory Instrument issued
or made before that date, which is to come into force on or after that date..
 The Common law which comprises the rules of law generally known as common law, the rules
generally known as doctrines of equity and the rules of customary law including those determined by
the Superior Court of Judicature.
 ”Customary Law” means the rules of law, which by custom are applicable to particular communities in
Ghana.
 LEGISLATIVE PROCESS – ACTS OF PARLIAMENT
 The legislative process begins when a bill is introduced in parliament.
 A bill is a proposal made to parliament to enact into law. The president or a person acting on
his behalf has authority to introduce bills into parliament. Private individuals and
organizations may also introduce bills for passage into law.
 A bill must meet the following requirements before being laid in parliament;
 It must be accompanied by an explanatory memorandum stating the policy principles,
the defects of the existing law, proposed remedies for dealing with the said defects and
the necessity for introduction of the bill
 The bill must have been published in the gazette at least 14 days prior to its date of
introduction into parliament
 If the bill affects chieftaincy, the additional requirement is that the bill must have been
previously referred to the National House of Chiefs before being introduced into
parliament
 LEGISLATIVE PROCESS CONT’D
 When a bill is properly introduced into parliament it must be read for the first time and then
referred to an appropriate committee appointed by parliament for detailed examination. After
its deliberations the committee submits a report of its work to parliament for a full debate by
the whole parliament.
 The bill is read for the second time when the committee submits its report to parliament.
Parliament then conducts a full debate of the bill and it may accept or reject or make changes
to the bill including the committee report.
 The final step is the third reading of the bill. At this stage parliament passes the bill into law
which is then called Act of Parliament
 The President must to it and it must be published in the gazette before it finally becomes law
 ENACTING SUBSIDIARY LEGISLATION
 Orders, Rules or Regulations made by a person or authority under a power conferred by the
1992 Constitution or any other law must first be laid in parliament, and then published in the
gazette.
 The publication in the gazette must be done on the day the Order, Rule or Regulation is lad
before parliament.
 The Order, Rule or Regulation comes into force at the expiration of 21 sitting days after being
laid before parliament.
 Parliament may annul any Order, Rule or Regulation at any time before the expiration of the 21
sitting days by votes of not less than two thirds of all members of parliament.
 Besides Constitutional Instruments all other Rules or Regulations must comply with this
procedure
 PART TWO

LAW OF CONTRACT
 THE CONCEPT OF A CONTRACT
 A contract is an agreement which binds the parties to it.
 Trietel defines a contract as an agreement that gives rights to obligations which the law enforces
or recognizes.
 According to Sir Frederick Pollock a contract is a promise or a set of promises which the law will
enforce.
 An agreement or promise is a contract if it is binding or if the law will enforce it. Therefore it is
binding if the persons who make it ought to fulfil it.
 The person who makes a promise must voluntarily fulfil it and the person who fails to fulfil his
promise incurs liability.
 The intention to be bound by an agreement is what makes that agreement binding.
 As a concept, a contract facilitates the exchange of goods and services in a business.
 A contract creates rights and obligations called contractual rights and contractual obligations.
 A right is an entitlement and an obligation is a duty to act in a specified manner.
 Enforcement means giving legal effect to agreements and promises people have made.
 FEATURES OF A CONTRACT
 Offer
 Acceptance
 Intention to Create legal relations
 Consideration
 Capacity to contract
 The absence of vitiating factors like:
 Mistake
 Misrepresentation
 Duress and Undue Influence
 Illegality and conduct against public policy
 OFFER

 An Offer is a proposal which a person, called offeror, makes to another person, called offeree, in
which the offeror expresses his willingness and intention to do business (enter into a contract)
with the offeree if the offeree accepts the offer.
 Intention to do business also means intention to be bound by the contract.
 Therefore where an offeror indicates his intention to be bound by an offer, it means that the
offeror indicates his readiness to carry out the terms of the offer if it is accepted and that
should he fail to do so then he is ready to suffer the legal consequences that will follow.
 FEATURES OF AN OFFER
 An offer must have terms – the terms of an offer are the conditions on which the offeror is
ready and willing to do business with the offeree.
 The terms of the offer must be clear, precise and definite – the terms of an offer must not be
vague, uncertain or ambiguous. An agreement that is vague, uncertain or ambiguous is not
binding and the court will not enforce such an agreement.
 In the case of Raffles v Wichelhaus 159 ER 375, A buyer contracted to buy cotton. The
contract stated that the cotton was to be delivered by a ship named ’peerless’ sailing from
Bombay. There were, however, two ships both named peerless and sailing from Bombay
but arriving in different months. One to arrive in October and the other in December. The
buyer had in mind the October bound ship while the seller had in mind the December
bound ship. The Court held that the contract was ambiguous since it failed to specify which
of the ships the parties had in mind. There was therefore no contract between the parties.
 An offer must be communicated – to communicate an offer means to make the existence and
the content of the offer known to those the offeror intends to do business with
 COMMUNICATING THE OFFER TO THE INTENDED PERSON(S)
 Where an offer is communicated to a person who is not the intended offeree and the offer is accepted
– once there is evidence that an offer has been accepted in accordance with its terms with the
intention to do business, then a contract should come into being, unless it is apparent that the offeree
has intercepted an offer meant for someone else.
 Where an offer is accepted by a different person other than the intended offeree – acceptance by a
person who is not the intended offeree does not lead to the creation of a contract. When an offer is
communicated to a named person, the implication is that the offeror intends to do business with the
said named person.
 Where an offer is communicated to a class or group of persons – it will depend on the intention of the
offeror.
 If the intention of the offeror is to enter into contract with members of the group in their
individual capacity there would be a contract between the offeror and an individual member of the
group who accepts the offer. However, if the intention of the offeror is to enter into a contract
with the group as a unit, then it is the group as a unit that can accept the offer in order for a
contract to be created.
 Where an offer is communicated to the general public – it means the offeror intends to do business
with any member of the public who is willing to do business with the public. See Carlill v Carbolic
Smokeball
 TERMINATION OF AN OFFER
Once an offer is terminated, it cannot be accepted so as to result in a contract. An offer may be terminated
by any of the following means
 Rejection – when an offer is made and communicated to the offeree, the offeree may either accept or
reject it. An offer which is rejected by the offeree cannot thereafter be accepted.
 Counter offer – is a conditional acceptance of an offer by the offeree. The effect of a counter offer is that
it terminates the offer.
 Lapse of time – where an offer is made and expressed to remain open for a specified period of time, the
offer terminates at the end of the specified period of time. However where there is no specified period
within which to accept an offer, the offer terminates after the lapse of a reasonable time.
 Death of the Offeror or offeree – the death of the offeree can terminate an offer made to him if he died
without accepting the offer. The death of the offeror may also terminate an offer if the personality of
the offeror is relevant to the formation of the contract otherwise his death may not terminate it.
 Revocation – can be done expressly (by means of words written or oral) or by implication (inference
from the conduct of the offeror). For a revocation of an offer to be effective the following must occur;
 The offeror must revoke the offer before the offeree unconditionally accepts it
 Where an offeror uses the post as a medium to communicate his notice of revocation, he must
ensure that the offeree actually receives the notice of revocation. This rule departs from the postal
rule.
 INVITATION TO TREAT
Certain acts look like an offer but in law they are not offers because they lack the contractual intention
which an offer has and they rather have an intention to negotiate. Examples include;
 Display of goods in a shop – the shop keeper in this situation invites members of the public to negotiate
with him to buy goods. The customer makes the offer by picking the goods, presenting them to the
shopkeeper and tendering the price. The price tendered by the customer is the offer. The shop keeper
accepts the offer by accepting the price tendered by the customer.
 Advertisement – Advertisement of the sale of goods is not an offer to sell goods but an invitation to the
general public for negotiation and not every declaration of intention to do a thing creates a binding
contract on those who act on it. However, promises contained in advertisements can constitute valid
offers if there is a clear indication of the intention to enter into a contract with who ever acts on the
promise contained in the advertisement.
 Auction sales – an advertisement of an auction sale is not a contractual offer by the auctioneer but its
only an invitation to the general public to attend the auction and make offers in the form of bids which
the auctioneer may accept or reject. The acceptance by the auctioneer is normally indicated by the fall
of the auctioneers hammer or some other mode indicating his acceptance. Where the auction sale is
without reserve the auctioneer must sell the good to the highest bidder and is prohibited from
withdrawing the good after a bid has been made. Where the sale is subject to a reserve price the
auctioneer cannot sell the item below the reserve price and is therefore not bound to sell the item to the
 ACCEPTANCE
 Acceptance of an offer refers to the agreement of an offeree to do business with the offeror on the
terms and conditions specified in the offer. The acceptance may be express ie in writing or oral, or
may be implied from the conduct of the offeree. The effect of an acceptance is that it transforms the
offer into a contract.
 Acceptance must be unconditional and absolute meaning that the offeree must agree to all the
terms of the offer without making changes or seeking to make changes.
 Counter offer not acceptance – where instead of unconditionally accepting an offer, the offeree
makes changes to the terms of the offer as a condition for his acceptance, his suggestion neutralises
his acceptance. Thus, a counter offer is defined as a qualified acceptance of an offer. Therefore,
where an offeree, instead of unconditionally accepting an offer, makes a qualified acceptance
(counter offer), the offeror is entitled to treat his offer as having been rejected and is free to
withdraw the offer and communicate it to any other person he wishes.
 Acceptance of an offer must be communicated by the offeree or by a person authorised by him to
the offeror, who must receive it in order for a contract to come into being. A contract does not come
into being if the offeree fails to communicate his acceptance of the offer to the offeror.
 ACCEPTANCE CONT’D …
 Where the offeror specifies a particular method for communicating the acceptance of the offer, the
offeree must use that method. The offeree may, however, use any other method provided such
other method is as quick and effective as the one the offeror specifies.
 Where the offeree uses a different method from the one specified by the offeror, the offeror may or
may not recognize the acceptance.
 There are exceptions to the rule that acceptance of an offer must be communicated to and received
by the offeror in order for there to be a contract between the offeror and the offeree. The exceptions
are;
 Where an offer requires the performance of an act or the fulfilment of a condition in return for
payment or reward. Here the offeree does not need to communicate to the offeror that he has
accepted the offer to perform the act in question.
 Where an offer is made requiring the performance of an act in return for reward, in order for the
performance of the act in question to result in a contract, the offeree must have known of the
existence of the offer at the time he purports to accept it.
 Where the offeror requires that the post be used to communicate the acceptance, the
acceptance is effective when the offeree posts his acceptance, and not when the offeror actually
receives it. This is called the postal rule.
 ACCEPTANCE CONT’D …
The situations in which the postal rule does not apply are;
 Where the communication of acceptance is through phone, telex, fax or other methods of
instantaneous communications
 Where the offeror indicates that he will only be bound by the acceptance if he actually receives
it
 CONSIDERATION
 Consideration is something of value in the eye of the law that is given for a promise in order to make
the promise enforceable as a contract. Or Consideration means an act or an object that is given out
in exchange for a promise
 Consideration need not be adequate, fair or reasonable but must be sufficient. ”Adequate
consideration” means that what is given out as consideration for the promise should be equal in
value to the promise for which the consideration is given. ”Sufficient” consideration means that the
act or object done or given as consideration must be recognized by the law as capable of
establishing a bargain or exchange.
 Consideration must be of some value in the eye of the law. Value means any lawful benefit which a
promisor derives from a promisee who has complied with a request by the promisor. Value also
includes a detriment which a person suffers as a result of his reliance on a promise.
 Consideration must be lawful and must not contravene any law or be against public policy.
 Consideration must not be past ie the act must not be a past act or service. An act or service is past if
the act or service is done or provided before the promise to which it relates is made. Past
consideration thus refers to the performance of an act which has not been requested for but for
which a promise has been made after it has been performed.
 INTENTION TO CREATE LEGAL RELATIONS
 This refers to the intention of persons who make agreements or promises to create legal rights
and obligations that can be enforced in a court of law.
 The intention to create legal relation is a legal basis for seeking the intervention of the courts to
enforce an agreement or a promise in the event of a default in honouring or fulfilling such
agreement or promise.
 The intention to create legal relations can be proved by what the parties to the agreement say
either orally or in writing.
 Generally, promises and agreements made in social and domestic contexts are presumed to
lack the intention to create legal relations
 CAPACITY
 Contracts are entered into by natural persons and legal persons. Natural persons are human
beings while legal persons include companies, corporations, partnerships and other entities that
have legal personality and capable of entering into agreements.
 Generally in Ghana, a person who is below 21 years is a minor or an infant, on the other hand, a
person who is 21 years and above is an adult.
 Adults who are of a sound mind have the legal capacity to enter into contracts, but minors lack
the legal capacity to enter into contracts even if they are of sound mind.
 When a minor enters into a contract with an adult, the adult cannot enforce the contract
against the minor while he remains a minor but can be enforced against the adult. Even where
an adult enters into a contract with a minor as a result of the minor misrepresenting his age, the
contract does not still bind the minor.
 Exceptions to the rule that minors lack capacity to contract include; contracts for necessaries,
beneficial contracts of service and voidable contracts like contracts that relate to leases and
purchase of shares in company’s
 EXCEPTIONS TO THE RULE
 Where a minor enters into a contract to purchase goods described as necessaries, that contract
binds the minor. Section 2(3) of Sale of Goods Act defines necessaries to mean goods suitable to
the conditions in life of the person (minor) to whom they are delivered and to his actual
requirements at the time of delivery. Under Section 2(2) of Sale of Goods Act a minor is not
required to pay the contract price but rather he is required to pay a reasonable price.
 Beneficial Contracts of service are contracts which are manifestly beneficial to the minor.
Beneficial contracts of service are binding on the minor. The terms of a beneficial contract of
service must not be harsh and oppressive to the minor having regard to his health and physical
condition.
 Voidable Contracts are contracts that bind all parties to it, except that, for some reason, a party
is entitled to rescind the contract. Voidable contracts bind minors. However, a minor who is a
party to a voidable contract can repudiate it any time before he attains adulthood. Examples of
voidable contracts are lease agreements, purchase of land and subscription for company shares.

VITIATING FACTORS
Vitiating factors are factors which adversely affect the effectiveness of valid contracts by rendering
them either void or voidable.
 A contract is void when the court will treat it as not existing in law and will therefore not enforce it.
 A contract is voidable if it exists in law and remains valid but can be set aside by one of the parties.
 The vitiating factors include mistake, misrepresentation, duress & undue influence and Illegality &
conduct against public policy

VITIATING FACTORS CONT’D…
Mistake – is a situation in which a party ends up contracting on terms he does not intend to contract on. It
may also arise in a situation where a party ends up contracting with a person or for a subject matter he
does not intend to contract with or contract for. Mistake may be committed by either one or both parties
to the contract. Where only one party commits a mistake its called unilateral mistake but where both
parties commit a mistake the mistake is called common mistake or mutual mistake.
 A party commits a unilateral mistake where he intends to contract on certain terms but ends up
contracting on different terms, not as a result of change of mind but as a result of an error of judgment.
Sometimes a mistake a party commits is induced, negligently, deliberately or innocently by the other
party.
 Generally unilateral mistakes do not affect the validity and enforcement of a contract. Therefore a party
who enters into a contract on mistaken terms is bound by it notwithstanding the mistake. Exceptions to
the general rule are;
 Where the unilateral mistake is the result of a misrepresentation of one of the parties or induced or
caused by the other party to the contract, the effect is to render the contract voidable and the
mistaken party may rescind the contract. Where the inducement is fraudulent, the prejudiced party
may additionally sue for damages for deceit. The contract may also be rescinded where there is an
ambiguity in the terms of the offer if the ambiguity is not caused by the party making the mistake.
 Where a party commits a unilateral mistake as a result of factors not attributable to him or to the
other party, the court may allow the party who makes the mistake to rescind it if no injustice will be

VITIATING FACTORS CONT’D…
Where both parties commit a mistake in thinking that the subject matter of the contract exists at the time
of the contract when in fact it does not exist, then a Common mistake about the existence of the subject
matter is said to have occurred. The effect of this is to render the contract void.
 When both parties to a contract or a party to the contract believes that the subject matter has a particular
quality when in fact it does not have the said quality then a common mistake about the quality of the
subject matter has occurred. The effect of this depends on whether the term is a condition or a warranty. If
it is a condition then the party who is prejudiced by the mistake is entitled to repudiate the contract and to
sue for damages. On the other hand, if it is a warranty then the prejudiced party is entitled to sue for
damages.
 Mistake regarding the identity of the subject matter of a contract is committed where at the time of the
contract, each party intends to contract in respect of a different thing from each other. This type of mistake
is called mutual mistake. According to Trietel, a mistake as to the subject matter of a contract has no effect
unless it is fundamental.
 Mistake regarding the identity of a party to a contract arises where a party enters into a contract with the
wrong person. The effect of a mistake regarding the identity of a party to a contract is that the contract is
rendered void.
 In Lewis v Averay it was held that a mistake about the attribute of buyer being credit worthy when in fact
he was not was caused by the fraudulent misrepresentation of the buyer and therefore the contract was
rendered voidable.

VITIATING FACTORS CONT’D…
Misrepresentation – is an inaccurate or incorrect or untrue statement of fact, which a person makes to
another person who enters into a contract as a result of that misrepresentation. Misrepresentation is
normally made in the course of negotiation to induce or persuade a person to enter into a contract.
Statements of opinion and intention are not statements of fact and cannot constitute
misrepresentation if they turn out to be inaccurate.
 Fraudulent misrepresentation is committed when a person makes a statement of fact knowing it to be
false or without belief in its truth or recklessly not caring whether it is true or not. Fraudulent
misrepresentation renders the contract voidable and the victim of the fraud is entitled to refuse to
perform his obligations under the contract and to claim for rescission of contract. He may also sue for
damages for deceit.
 Negligent Misrepresentation is committed when a person makes an inaccurate statement or false
statement of fact claiming or believing it to be true or accurate without reasonable grounds to support
that claim or belief. Negligent misrepresentation renders a contract voidable and a victim of negligent
misrepresentation is entitled to sue for damages for misrepresentation. He may also refuse to perform
his obligations under the contract and claim for a rescission of contract.
 Innocent Misrepresentation occurs where a person makes an inaccurate or false statement honestly and
reasonably believing it to be true and accurate. The effect of this is to render a contract voidable. The
party affected by it can refuse to perform his obligations and claim for rescission but he is however not
 VITIATING FACTORS CONT’D…
 Duress – refers to a situation where unlawful and illegitimate pressure is exerted on a person,
through the use of actual or threatened violence against him physically or against persons for whom
he is legally responsible for their protection, for the purpose of coercing him to enter into a contract.
The effect of duress on a contract is to render that contract voidable.
 Undue Influence – arises where a person uses the influence which he wields over another person to
get that person to enter into a contract or to transfer property on terms that are disadvantageous to
him (the influenced person). The effect of undue influence on a transaction is to render that
transaction voidable and the person influenced is entitled to set the transaction aside.
 There are two situations in which the court will set aside the transaction on grounds of undue
influence. These are;
 Where there is actual undue influence ie where there is evidence that the decision of the person
who undertakes the transaction has been so expressly influenced by another person in a way
that shows the decision to undertake the transaction cannot be regarded as his free and
independent decision.
 Where the court presumes undue influence ie where there is no evidence of express influence or
control of the decision to undertake the transaction yet the court will presume that there has
been undue influence.

VITIATING FACTORS CONT’D…
Contracts violating the law (Illegality) – Illegality arises where the purpose or subject matter of the
contract contravenes the provisions of any of the laws of Ghana. Even where the purpose or subject
matter of a contract if lawful, it may be tainted with illegality if the performance of the obligations
under the contract involves the contravention of laws of Ghana. The effect of illegal contracts is that
it renders the contract void and unenforceable.
 Contract against public policy – the courts will normally not enforce the terms of any contract that,
in their view, are against public policy. A contract is said to be against public policy if the contract
seeks to do or encourage the doing of something which society generally seeks to discourage.
Examples are contracts in restraint of trade that are unreasonable and unjust, contracts that
promote public immorality, contracts that promote corruption of public office holders,
discrimination, racism and doing business with the enemy of one’s country.

FORMS OF CONTRACTS
Contracts may be oral, written or implied from the conduct of parties. Whether written, oral or
implied an agreement qualifies as a contract, which the court will enforce, provided the agreement
is binding. Thus, generally oral or implied agreements are enforceable except that certain
agreements in Ghana must necessarily be in writing. These include;
 All agreements for leases whose term exceeds three (3) years, must be evidenced in writing in
order that they can be enforced. Agreements for the sale of land and other immovable property
must be evidenced in writing. The writing must state the names of the parties, a clear
description of the property (the subject matter of the contract), the rent and duration of the
lease (in the case of a lease), the purchase price (in the case of a sale), any special terms agreed
on by the parties and the signature of the party against whom the agreement is to be enforced
or his agent.
 A contract of guarantee must be in writing and must be signed by the guarantor or his agent in
order that the contract can be enforced against him.
 A hire purchase agreement must also be in writing. In hire purchase agreements the seller must
state the cash price of the item in writing and a memorandum or note of the agreement must be
made in writing and signed by the buyer and by or on behalf of all the parties to the agreement.

PAROLE EVIDENCE RULE
The Parole Evidence Rule states that where parties reduce their oral contracts or the terms of those contracts into
written documents and sign the documents they will be bound by the facts contained in the documents which they
have signed. The court will therefore not permit the introduction of oral or other external evidence or facts to
contradict, add to or vary the facts contained in the written documents. Except
 Where the writing is ambiguous or vague. In such a case the court may permit oral or external evidence only to
clear the ambiguity and or vagueness.
 Where a party’s signature to a written document is obtained by fraud. Is such a case the court may permit
evidence to expose the fraud.
 A party to a contract who signs a contractual document is bound by its clauses, whether the party has read it or not.
The courts will therefore give effect to the presumed wish of the parties as expressed by their agreement which is
signified by their respective signatures. There are exceptions to the rule and a person who relies on these exceptions
is putting up the defence of non est factum meaning not my deed. Exceptions are;
 Where the document was signed involuntarily and under duress or undue influence.
 Where a person is misled either by fraud or otherwise to sign the document but through no fault of his
 If the document is signed as a result of mistake and the other party knows of the mistake and seeks to take
advantage of it.
 A person who signs a document which is written in a language he cannot read either because he is an illiterate in
that language or blind or for some other reasons is incapable of reading the language is not bound by the content of
the document and the legal consequences of his signature except where there is a jurat.

TERMS OF CONTRACT
The terms of a contract comprises of the respective rights and obligations of the parties that are
contained in the promises and agreements of the parties. Terms of contract are things the parties have
agreed on or promised. A representation is a statement that is made in the course of negotiations
leading up to the formation of a contract, and made with the intention of inducing the person to whom
it is made to enter into a contract.
 The terms of a contract may be express or implied. Express terms are those the parties themselves have
actually stated, agreed on and indicated their intent to be bound by. Implied terms are those that the
parties have not expressly stated, but which can logically be deduced or inferred from the express
terms, the conduct of the parties and the nature and circumstances of the transaction.
 Terms may be implied based on statute, the conduct of the parties and the custom of the trade in which
the contract is made.
 Terms of a contract may also be classified into warranties and conditions. Conditions are obligations
created by a contract which are so vital to the existence of a contract that their non performance will
render the contract useless or make the contract substantially purposeless. The breach of a condition
entitles the party prejudiced by the breach to repudiate the contract and sue for damages. Warranties
are obligations that are subsidiary to the main terms of the contract. Warranties are not essential to the
existence of a contract but only relate to the quality of the performance of the main obligations created
under the contract. The breach of a warranty does not entitle the prejudiced party to repudiate the

EXCLUSION CLAUSES/PRIVITY
A clause is a statement in a contract that indicates what the parties have agreed on. Exclude means
keeping something out. Exclusion clauses refer to provisions in a contract that exempt a party from
liability arising from breach of his obligations under the contract.
 Exclusion clauses form part of the terms and conditions of a contract. They are therefore
enforceable like any other terms and conditions of the contract.
 Privity of contract means being party to a contract. According to the doctrine of privity of contract,
only parties to a contract can enforce its terms. Specifically, a person who is not a party to a contract
cannot enforce an obligation created by it. A person who is not a party to a contract is called a third
party.
 However, section 5 of Act 25 provides that a provision in a contract which purports to confer a
benefit on a third party may be enforced by the third party as though he were a party to the contract

DISCHARGE OF CONTRACTS
To discharge a contract means to relieve parties to the contract of their respective obligations under
the contract. A contract may be discharged by performance, by agreement, by breach or by
frustration.
 Discharge by performance – the general rule is that, the performance must be exact and complete.
The exceptions to the rule on performance include;
 If the contract can be divided into several parts, the complete performance of each part
constitutes performance in respect of those parts, but the obligation to perform the rest of the
parts still remains.
 Where a party who is to benefit from the performance of a particular obligation accepts part
performance of the obligation. In that case whether the contract is severable or not, the
acceptance of part performance discharges the party having the obligation to perform from
further performance.
 Where the party to benefit from the performance prevents the party having the obligation to
perform from performing.
 Where there is substantial performance of the entire obligation.

 Discharge by agreement – an agreement to discharge a contract is ineffective unless supported by

consideration or made by deed.

DISCHARGE OF CONTRACTS
Discharge by Frustration – a contract is frustrated when the performance of the obligations under
the contract has become impossible or impracticable as a result of the occurrence of events, after
the formation of the contract, beyond the power and control of the parties. The effect of frustration
on a contract is that obligations of the parties are discharged.
 Where a party to a contract pays money to another party before the contract is frustrated, the
party who pays the money can recover the money from the party to whom the money is paid if
the purpose for which the money has been paid can no longer be accomplished as a result of the
frustration of the contract.
 Where money is payable but has not yet been paid before a contract is frustrated, that money
will no longer be payable if because of the frustration of the contract the purpose for which the
money is paid can no longer be accomplished.
 Where a party, to whom money has been paid before a contract is frustrated, incurs expenses
relating to the contract, that party can retain from the money paid to him an amount that is
equivalent to the expenses so incurred. If no money has been paid to him, he can recover from
the other party the amount of money equivalent to the expenses incurred.
 Discharge by breach – a breach of contract is a failure to carry out a contractual obligation in
accordance with the terms of the contract without the consent of the other party and without any
other lawful excuse.

DISCHARGE OF CONTRACTS
An ordinary or actual breach occurs where a party fails to carry out his obligations when the time
stipulated in the contract for him to perform is due. An anticipatory breach occurs where a party
fails to carry out his obligations before the time for the performance of the contract is due.
 An ordinary or actual breach terminates the contract and the innocent party can sue the defaulting
party for damages. An anticipatory breach does not automatically terminate the contract. It rather
gives right to 2 causes of action;
 The prejudiced party can accept the breach and sue for damages.
 The prejudiced party can ignore the breach and treat the contract as still subsisting until the
time performance is due for him to treat the contract as breached and then sue for damages.
 REMEDIES FOR BREACH OF CONTRACT
 Remedies are legal solutions the law provides for a party to a contract who has suffered a breach of contract.
Examples of remedies for breach of contract are;
 Damages – refers to money that a court orders a defaulting party to pay as compensation to an innocent
party. The purpose of this is to put the innocent party in a position he would have found himself in if the
contract had been performed.
 Action for agreed sum – arises in 2 situations ie 1. where parties to a contract agree that an agreed sum
of money should be paid in exchange for the performance of a specified act and the specified act is
performed but the money is not paid. 2. Where the parties agree that a specified sum of money be
payable to a named party when a specified event occurs. The occurrence of the said event entitles the
named party to the agreed sum.
 Action to recover money had for lack of consideration – Where a party to a contract gives money or
deposits money with another party to the contract in exchange for the performance of an act or the
provision of a service, the non performance of the act or provision of service entitles the party who gives
the money to take action to recover the money for failure of consideration.
 Quantum meruit – This is instituted by a person to claim money from another person in respect of work
done but for which no amount of money is stated as payable. The amount of money claimed in quantum
meruit normally represents a fair value of the work done.
 Specific Performance – is an order of a court compelling a party who is unwilling to perform his
contractual obligations to perform them.
 Injunction – is an order of a court restraining a party from doing a thing
 PART THREE

LAW OF AGENCY
 MEANING OF AGENCY
 Agency refers to the relationship that exists between an agent and a principal. In that relationship
the principal consents, expressly or impliedly, that the agent acts on his behalf in transaction with
other persons (called third parties).
 The relationship of agency is created when the principal authorises the agent and the agent agrees
to act on behalf of the principal in respect of matters that the principal himself will otherwise have
personally undertaken.
 A fiduciary relationship arises where a person who acts on behalf of another is under a legal duty to
pursue the best interest of the person on whose behalf he is acting as against his personal interest.
This relationship imposes on the fiduciary (the one acting) the obligation to act in good faith. To act
in good faith entails acting honestly, sincerely and fairly.

CREATION OF AGENCY
Creation of Agency by Agreement – The principal agrees that the agent acts on his behalf in
specified matters and sometimes in a specified manner. The agent similarly agrees or accepts to act
on behalf of the principal. The agency agreement may be express or implied.
 Creation of Agency by implication – This arises from the conduct of the principal towards the agent.
Where without expressly stating in words that one is an agent of the other, two persons conduct
themselves towards each other in such a way that a reasonable person who observes their conduct
will infer that one of them is consenting to the other acting on his behalf in respect of specified
transactions, the law will interpret such a relationship as one of Agency.
 Creation of Agency by estoppel – where a person (principal) allows another person (agent) to
transact business with other persons on his (principal’s) behalf in such a way that those other
persons reasonably and honestly believe that an agency relationship exist between the 2 of them
and on the basis of that belief deal with them as principal and agent. In such a case, even if the two
people did not intend to create a relationship of agency the law will impose an agency relationship
on them.
 Creation of Agency by ratification – where a person (agent) acts on behalf of another person
(principal) without the previous authorization of the principal, but after the act the principal decides
to adopt the acts as his own. In this case the agency is deemed to have commenced from the date
on which the transaction was undertaken and not when it was ratified.

CREATION OF AGENCY
The conditions for a valid ratification are;
 The agent must have acted on behalf of and in the interest of the principal
 The principal must have been in existence as a principal and must have had the capacity to
undertake the transaction at the time the agent undertook the transaction.
 The agent discloses all material facts about the transaction to the principal and the principal
agreed to ratify it.
 The principal must ratify the whole transaction and not part of it
 The ratification must take retrospective effect
 The transaction must not be illegal or against public policy

 Creation of Agency by necessity – is created when a person (agent) acts to save the property from
harm or danger. The danger or harm to which the property is exposed creates a situation of urgency
needing immediate and urgent action to deal with the danger. The conditions for the creation of
agency by necessity are;
 There must be an emergency which makes it necessary that a particular action is taken to deal
with the emergency.
 It must be impossible for instructions to be obtained from the person on whose behalf the
action is being undertaken
 CATEGORIES OF AGENTS
 A Special Agent is an agent who is engaged to undertake or complete a single transaction or a series
of single transactions. This relationship is intended to cover a limited period and it is not continuous
 A general agent is engaged to undertake a series of transactions over a period of time.

AUTHORITY OF AN AGENT
The authority of an agent refers to the power agent has to act on behalf of his principal so as to bind
the principal with the acts. The source of authority for the agent is the principal.
 The scope of the agents authority describes the limits within which the agent may act on his
principals behalf. An agents authority may be express, implied or apparent.
 Express authority refers to the set of things which the principal has specifically authorized either
orally or in writing, the agent to do and the manner in which he should do them. If an agent acts
within his express authority his principal is legally responsible for his conduct. However, if the agent
acts beyond the scope of his express authority he is personally responsible for his conduct
 Implied authority – sometimes, the power of an agent to undertake certain transactions on behalf of
his principal may not be expressly provided. In such cases, the authority of the agent is ascertained
by reference to the conduct of the principal towards the agent.
 Apparent authority - an agent has apparent authority if his principal acts towards a third party in a
manner that creates the impression in the mind of the third party that that the agent has authority
to act for the principal.

CATEGORIES OF PRINCIPALS
Disclosed principal – is a principal whose existence or identity is disclosed or known to a third party
with whom an agent undertakes a transaction on behalf of the principal. The legal consequence is
that the transaction between the agent and the third party is, in law, actually between the principal
and the third party and not between the agent and the third party.
 Undisclosed principal – is a principal whose existence or identity is not disclosed by the agent to the
third party at the time of the transaction between the agent and the third party. The third party is,
therefore, unaware that the agent is transacting as an agent of another person and believes that the
agent is transacting on his own behalf. Where an agent does not disclose the fact that he is
transacting as an agent of another person, a number of legal consequences may arise;
 If in conducting the transaction with the third party the agent portrays himself as owner, the
undisclosed principal cannot intervene to enforce the transaction against the third party.
 Where personal factors relating to the agent influenced the third party to deal with him, the
undisclosed principal cannot be permitted to intervene to enforce the transaction against the
third party.

DUTIES OF AN AGENT
An agent owes his principal a contractual duty. An agent is obliged to carry out the things which he
has contracted to carry out and in the manner specified by the contract.
 An agent also owes fiduciary duties to his principal. The fiduciary duties are justified on the trust and
confidence which underpins this agency relationship. Examples of fiduciary duties are
 Duty to avoid conflict of interest – Conflict of interest arises where an agent, while undertaking
a transaction for his principal , is also interested in the transaction. It may also arise in a
situation where a person to whom an agent owes a duty to protect his interest is also interested
in a transaction in which the agents principal is interested. The rules on conflict of interest
require that an agent informs his principal about the nature and extent of his personal interest in
the transaction in which his principal has an interest. This enables the principal decide whether
to allow the agent act for him or not.
 Duty to be loyal – the agent is prohibited from competing against his principal or aiding others
compete against his principal. The agent must not serve the interest of two or more principals.
 Duty to reject bribes – an agent must not without the consent and permission of his principal
accept commission from a third party.
 Duty to account – the agent has a duty to account to his principal for any property, information
or profits he acquires in the course of his work as agent for the principal.

DUTIES OF AN AGENT
Duty to act with care, skill and diligence – the agent has a duty to act with due care, diligence
and skill in his dealings with or on behalf of his principal.
 Duty of personal performance of assigned task – an agent has a duty to personally perform
tasks assigned to him by his principal and not to delegate the performance of such tasks to
other persons without the consent of the principal.

DUTIES OF THE PRINCIPAL
The principal has a duty to pay the agreed commission or remuneration to the agent, when the
agent carries out his obligations under the contract.
 The principal has a duty to indemnify his agent in respect of liability the agent incurs while acting
within the scope of his authority
 Where the agent spends his personal money and other resources on behalf of the principal for the
purpose of carrying out his task as an agent and acting within his authority, the principal is obliged
to reimburse the agent

TERMINATION OF AGENCY
An agency relationship may be terminated by;
 The agreement of the parties
 Either the principal or the agent
 The principal dismissing the agent if the agent breaches any of his duties which entitle the
principal to lawfully dismiss him.
 The death of either or both of the parties or where one of them becomes insane
 The completion of the purpose for which the agency was created
 The frustration of the subject matter of the agency
 Bankruptcy
 PART FOUR

LAW OF SALE OF GOODS


MEANING & TYPES OF GOODS
Goods are tangible personal property or movable things. The sale of goods Act defines goods to
mean movable property of every description.
 The sale of goods Act has categorized goods as specific, unascertained, ascertained and future
goods.
 Specific goods are goods which the parties to the contract have identified and agreed on, before the
contract is made as goods they intend to sell and buy.
 Unascertained goods are goods that the parties do not identify and agree on, before the formation
of the contract, as goods they intend to sell and buy.
 Ascertained goods are goods the parties have identified and agreed on after the contract of sale is
made. Unascertained goods become ascertained through appropriation, ie a process by which
goods which were not identified and agreed on at the time of the contract are, subsequent to the
contract, identified and then agreed on as goods the parties have contracted to buy and sell.
 Future goods are goods that do not yet exist at the time the contract is formed. Such goods are yet
to be manufacture, grown or acquired.
 MEANING & NATURE OF A
SALES TRANSACTION
 A ’Sale’ means a contract of Sale of Goods, ie, a contract under which a seller agrees to transfer
ownership of goods to a buyer for consideration called price. The price may be wholly or partly
money.
 The difference between a Sales transaction and a barter transaction is that the essence of a barter
transaction is the transfer of ownership of goods in return for consideration in the form of goods
and not price, as is the case with a sales transaction.
 A sales transaction differs from a gift transaction in the sense that, with a gift ownership of goods is
transferred for free but a sales transaction is concerned with the transfer of ownership in return for
payment in the form of price.
 Bailment on like sale of goods does not entail transfer of ownership of goods. Bailment entails the
delivery of goods to a particular person for a particular purpose after which the goods must be
returned to the owner.
 Price is the consideration for the transfer of ownership of goods under a sale of goods contract.
 MEANING & NATURE OF A
SALES TRANSACTION
 Determination of Price under a sale of goods contract may be done in the following ways –
 It may be fixed by the parties to the contract,
 It may be left out by the parties to be fixed in a manner agreed on by them
 The price may be determined by the course of dealing between the parties
 Where the price is not determined by any of the above methods, the buyer must pay a
reasonable price as determined by court.
 The parties to a sale of goods contract are the seller and the buyer, acting either personally or acting
through their respective authorized agents. The seller contracts to transfer ownership of goods to
the buyer in exchange for price and the buyer contracts to acquire ownership of goods and to pay
the price for it.
 The general law on formation of contracts governs the formation of sale of goods contracts.

SALE OF GOODS BY AUCTION
Where goods are put up for sale by auction in lots, each lot, is deemed to be the subject of a
separate contract.
 In an auction sale, the sale is complete when the auctioneer announces its completion by the fall of
the hammer or in other customary manner.
 Until the auctioneer announces the completion of the sale, a bidder may withdraw his bid and the
seller may also withdraw the goods.
 However, if the auction is expressed to be without reserve price, the highest bidder is entitled to buy
the goods at the price bid even if the auctioneer refuses to accept his bid or complete the sale.
 Generally where goods are sold by auction, the seller is not entitled to bid for the goods unless the
right to bid is expressly reserved.
 Additionally, if the sale of goods is notified to be subject to a reserve price, it is lawful for the seller
or any person on his behalf to make one bid and no more; and such bid must be openly declared at
the auction before any other bid is received.

AUTHORITY TO SELL
The authority to sell goods has to do with the legal right to transfer ownership in return for
payment. Ownership is the legal basis of the right to sell, and title is the means by which a person
demonstrates or shows his ownership of the property. Thus a person who has title to goods has the
right to sell them. This is illustrated by the maxim ‘nemo dat quod non habet’
 The ‘nemo dat quod non habet’ principle states that a person cannot give what he does not own.
Section 28(1) of the Sale of Goods Act provides that a seller who is not the owner of goods and who
does not sell under the authority or with the consent of the owner cannot transfer ownership of
goods to a buyer.
 The legal consequence of a transaction by a person who has authority to sell is that, the person is
able to transfer ownership to the buyer who becomes the new owner of the goods and the seller
ceases to be the owner of the goods.
 The legal consequence of selling good without authority to sell is that a seller who sells goods to a
buyer without authority to do so cannot transfer ownership of the goods to the buyer. The effect is
that the owner of the goods can retrieve them from the buyer where goods have been delivered to
the buyer.

AUTHORITY TO SELL
A seller who sells goods without authority to do so commits a breach of his contractual obligation
called Implied Warranty of title. Implied Warranty of title is an obligation imposed by the sale of goods
Act on a seller of goods to ensure that a buyer of goods obtains ownership of the goods.
 The breach of this obligation entitles the buyer to sue the seller for damages. If the buyer has paid the
price already he can recover it from the seller. If the buyer is yet to pay the price he is free not to do so,
and if he has already paid it he can recover it.
 The owner of goods, sold by a seller without his consent, can sue the seller for a return of the goods,
and where it is not possible to have the goods back, he can sue for their market value.
 The owner can sue the buyer to recover the goods from him if the goods are in his possession.
 If goods are bought from a seller who is not the owner, and who does not sell under the authority or
with the consent of the owner, the buyer does not acquire ownership of the goods.
 A buyer in good faith is a buyer who buys goods without knowledge that the seller lacks title to the
goods or has a defective title to the goods. However, a buyer in bad faith is a buyer who, at the time of
buying the goods knows or ought to have known that the seller lacks title to the goods, and yet goes
on to buy the goods.
 The law protects the right of a buyer in good faith to own the goods he has bought but a buyer in bad
faith has no protection to own goods bought in bad faith.

EXCEPTIONS TO SECTION 28
Sale by Mercantile Agent in possession – a mercantile agent is an agent who, in the ordinary course of his
business as an agent, has authority to sell goods; to consign goods for sale; to buy goods or to raise money on
the security of the goods. Where, with the consent of the owner of goods, a mercantile agent obtains
possession of them, the mercantile agent can sell the goods so as to transfer ownership to the buyer on
condition that the buyer buys in good faith.
 Sale by a person with voidable title – If before the contract is rescinded the person with the voidable title
succeeds in selling the goods to a buyer, ownership of the goods will lawfully pass from the seller to the buyer
if the buyer acts in good faith and does not know of the sellers voidable title.
 Sale by a seller in possession – a seller in possession can sell the goods in his possession to another buyer and
transfer ownership on condition that, the second buyer buys in good faith. The legal consequence is that the
first buyer can take legal action against the seller for damages for conversion to recover the goods or their
market value. However if the second buyer buys in bad faith he acquires no title and the first buyer can recover
the goods from him.
 Sale by a buyer in possession – a buyer in possession is a buyer who obtains delivery of goods without
ownership passing from the seller to him. If while having possession of goods, without ownership, a buyer
sells them to another person, the second buyer acquires a good title if he buys them in good faith.
 Exception based on doctrine of estoppel – If the owner of goods by his words or conduct leads a buyer to
believe that some other person has authority to sell the goods, and as a result of that belief the buyer buys the
goods from the person the sale is valid and the buyer will acquire a good title to the goods.

TRANSFER OF OWNERSHIP
Property in goods means ownership. Transfer of property in goods means the transfer of ownership
of goods from seller to buyer so that, the buyer becomes the new owner whilst the seller ceases to
own the goods.
 Ownership of unascertained goods passes to the buyer when they become ascertained ie, the
parties must have identified and agreed on the goods after the contract of sale is made.
 The general rule is that the intention of the parties determines when ownership of the goods passes
from seller to the buyer.
 The delivery of goods by the seller to the buyer transfers ownership of goods to the buyer if there is
no contrary intention.
 In cases of goods sold on a “sale or return” or “on approval” basis, ownership passes in any of the
following situations
 If the buyer signifies his approval or acceptance of the goods
 If the buyer does any act that suggests that he adopts the transaction
 If the buyer does not signify his acceptance to the seller but retains the goods without giving
notice of the rejection, after the time fixed for the return of the goods has expired, and if no
time is fixed for the return of the goods, then on the expiration of a reasonable time.
 IMPLICATIONS OF TRANSFER OF

OWNERSHIP OF GOODS
A seller can no longer exercise any ownership rights over goods whose ownership has transferred to
the buyer without the consent of the buyer.
 The risk in the goods may also pass from the seller to the buyer, unless the parties decide otherwise.
The general rule is that, the owner of the goods bears the risk. Thus the transfer of ownership of
goods to the buyer makes the buyer responsible for the risk associated with the goods unless
otherwise stated
 A seller can sue the buyer to recover the contract price where the buyer fails to pay the price and
ownership of the goods passes to him. The seller can also sue for damages for breach of contract.

TRANSFER OF RISK
Risk refers to the responsibility to bear the loss, damage or other harm that the goods which are
subject matter of a sales contract may suffer from. Responsibility has to with who should bear the
loss, damage or harm.
 The owner of the property and in some situations the person having possession or control of the
property bears the risk that the property may be subject to.
 The rules which regulate when and how risk pass from the seller to the buyer include;
 Intention of the parties – risk passes from seller to buyer if the parties intend it to pass.
 Passage of property – risk passes from seller to buyer at the same time that property in the
goods passes from seller to buyer.
 Delay in delivery – if delivery of the goods is delayed, the party responsible for the delay bears
the risk to which the goods may be subject to.
 The legal consequence of the transfer of the risk in goods from a seller to a buyer is that, the buyer
becomes responsible for any loss, disappearance, damage, deterioration and other harm that may
afflict the goods.

OBLIGATIONS OF THE SELLER
To transfer ownership of goods – having agreed to sell goods of a given description and quantity, a seller must
proceed to sell the goods by ensuring that the buyer gets ownership of the goods in question.
 To deliver the contracted goods – the delivery of goods must be done in accordance with the terms of the
contract. Delivery means transferring possession of the goods from the seller to the buyer. Actual delivery
refers to physically transferring possession of the goods to the buyer. Constructive delivery means providing
the buyer with means of access to the goods he has bought.
 Goods may be delivered at the sellers place of his business or residence, unless a contrary intention
appears.
 To deliver the right quantity – if the sellers goods less than the contract quantity, the buyer may accept them.
If the buyer accepts the lesser quantity he must pay for them at the contract rate. The buyer may also reject
the goods and refuse to pay for them. If the price is already paid then the buyer can recover the price from the
seller. If the quantity delivered is more than the contract quantity, the buyer may accept all the goods and pay
for the excess at the contract rate. The buyer may also select the right quantity and reject the excess. Where
the seller delivers goods of different description mixed with the goods contracted for the buyer may;
 Accept all the goods delivered and pay a reasonable price for them.
 He may reject all the goods if the contract quantity is less than the quantity delivered by the seller.
 The buyer may accept the contract goods and reject the rest.
If there is no fixed time for delivery the seller must deliver within reasonable time. If the parties fix a time for
delivery of the goods the seller must deliver within the time fixed for delivery.

OBLIGATIONS OF THE SELLER
In respect of the existence of the goods – it is obligatory on the seller to ensure that when the
contract is eventually formed the goods will be available for delivery.
 In respect of the right to sell – a seller impliedly assures the buyer that he has authority to sell the
goods in question so as to transfer ownership of them to the buyer.
 Where goods are sold by description – the implied obligation of the seller is to deliver goods that
correspond exactly with the description by which they are sold. While on the whole goods delivered
must comply with the description by which they are sold, minute deviations from description may
not constitute non compliance with the duty imposed on the seller by law.
 Where goods are sold by sample – the sellers obligation is to deliver goods that correspond exactly
with the sample by which the goods were sold.
 With respect to quality and fitness – unless a seller has contracted to sell goods of a given quality or
fitness for a given purpose, the sale of goods act does not impose an obligation on a seller to deliver
goods of any quality or fitness. The Caveat emptor rule imposes responsibility on the buyer, before
he contracts to buy goods, to specifically state the quality that he wants the goods to have and the
purpose for which he requires them and then proceed to contract on terms that would oblige the
seller to sell to and deliver goods of the buyers preference. The Caveat emptor rule does not apply to
a seller who sells goods in the course of his business.
 IMPLIED OBLIGATION OF A SELLER WHO
SELLS IN THE COURSE OF BUSINESS
 The sale of goods act implies an obligation on a seller who sells goods in the course of his business
to ensure that the goods he supplies to the buyer are free from latent defects. If goods supplied by a
seller who sells in the course of business are found by a buyer of the goods to have defects, the
buyer can reject them and refuse to pay the price for them. Latent defects are hidden defects. A
seller can only escape liability for supplying goods with latent defects if he, before the contract is
made, declares the defects to the buyer and the buyer becomes aware of the defects. Except;
 Where at the time of the contract a buyer examines the goods in respect of defects which could
have been revealed by examination.
 Where goods are sold by sample and the buyer examing the samples in respect of defects which
the examination of the sample could have revealed.
 In this case, a buyer can reject the goods, refuse to pay the price and sue the seller for damages if he
can show that;
 The defects existed
 The defects were not known to him (buyer) and
 The seller did not declare the defect to him
 IMPLIED OBLIGATION OF A SELLER WHO
DOES NOT SELL IN THE COURSE OF

BUSINESS
The sale of goods act imposes a duty on a seller who does not sell in the course of business to ensure
that the goods are free from defects known to him or which he reasonably is expected to be aware
of; but which defects he does not declare to the buyer at the time of the contract.
 In this case, a buyer can reject the goods, refuse to pay the price and sue the seller for damages if he
can show that;
 The defects existed
 The defects were not known to him (buyer)
 The seller knew or ought reasonably to have been aware of the defects and
 The seller did not declare the defects to him
IMPLIED OBLIGATION OF A SELLER WITH
RESPECT TO FITNESS OF GOODS FOR
INTENDED PURPOSE
 Where a buyer of goods, expressly or impliedly communicates the purpose for which he requires the
goods to a seller, before he contracts to buy them and the goods actually supplied to the buyer by
the seller are of a description supplied by the seller in the course of his business, the sale of goods
act imposes an obligation on the seller to ensure that the goods actually supplied are reasonably fit
for the required purpose of the buyer.
 Lord Denning in Bartlett vrs Sidney Marcus held that a second hand car is reasonably fit for its
purpose if it is in a road worthy condition, fit to be driven along the road in safety, though not as
perfect as a new car.
 Therefore, reasonable fitness for a given purpose means the basic and normal use or function the
goods in question can be put to.
 A seller sells goods in the course of business if the sale is integral to the business or if there is
sufficient regularity of similar transactions.

UNPAID SELLER & HIS RIGHTS
When the whole of the price for the goods sold has not been paid or tended in payment then the
seller is said to be an unpaid seller. The REAL RIGHTS of a seller include;
 Sellers Lien on goods – a seller is entitled to retain possession of the goods he has sold to the buyer
until the buyer has paid the price. This is called the right of lien. The right to lien may be exercised
under the following conditions:
 The seller must not have agreed to deliver the goods to the buyer before payment of the price is
completed.
 The goods must have been sold on credit and the term of credit must have expired.
 The buyer must have become insolvent.

 The Seller may lose his lien on the goods under the following conditions:
 Where the seller delivers goods to a carrier or bailee, without reserving the right of disposal of
goods, the seller will be entitled to sell the goods when the buyer defaults to pay the price.
 Where the buyer obtains possession of the goods with the consent of the seller
 Where the seller waives his lien on the goods.
REAL RIGHTS OF A SELLER C’TD
 Right to stop goods in transit – where a buyer of goods becomes insolvent and the goods are in
transit, the unpaid seller is entitled to stop the goods, retake possession and retain them until the
price is paid.
 An unpaid seller may recover possession of the goods from the buyer if (i) goods are delivered to the
buyer but ownership does not pass to him and (ii) if ownership passes to the buyer but the contract
confers on the seller the right to recover possession of the goods.
 An unpaid seller who is in possession of goods can resell the goods where the;
 Goods are of perishable nature and the buyer does not pay the price within reasonable time.
 Buyer has repudiated the contract and the seller has accepted the repudiation.
 Seller gives notice to the buyer of his intention to resell the goods and the buyer fails to pay the
price within a reasonable time on receipt of the notice, the seller will be entitled to resell the
goods
 PERSONAL RIGHTS OF SELLER
 Right to sue for the price – where ownership of the goods has passed from the seller to the buyer
but the buyer fails to pay the price, the seller is entitled to sue the buyer for the contract price. If the
contract requires the price to be paid on a specified date, whether or not ownership has passed to
the buyer, but the owner fails to pay the price, the seller will be entitled to sue the buyer for the
price.
 Right of the seller to sue for damages for non acceptance - the seller can sue the buyer for damages
for non acceptance of delivered goods.
Assessment of Damages
 The amount of money payable as compensation to a seller as damages for non acceptance of goods
is the monetary value of the loss which could reasonably have been foreseen by the buyer, at the
time of the contract, as likely to arise from a breach of contract.

OBLIGATION OF THE BUYER
To accept delivery of the goods he has contracted to buy.
 To pay the price of the goods.
 To pay the price within the time stipulated in the contract
Delivery of goods by Instalment
 The buyer is not bound to accept delivery by instalment unless the contract permits delivery on
instalment basis

RIGHTS OF THE BUYER
The Real Rights of a buyer entitle him to reject the goods and refuse to pay the price if he entered
into the contract as a result of misrepresentation by the seller.
Acceptance of Goods as a bar to the Right to Reject
 A buyer loses his right to reject the goods if he accepts them. However, the acceptance of a part of
the goods delivered to him does not deprive the buyer of the right to reject any other part of the
goods in question if the contract is severable. Thus if the contract is severable, the buyer may accept
the goods delivered to him and lawfully reject the other part.
Meaning of Acceptance
 There are three circumstances in which the buyer can be said to have accepted goods delivered to
him by the seller. These circumstances are
 Where the buyer intimates to the seller that he accepts the goods
 Where the buyer does not, within a reasonable time after delivery of the goods to him, inform
the seller that he rejects the goods
 The buyer is deemed to have accepted the goods if, after rejecting them, he fails to place them
at the disposal of the seller.

RIGHT OF THE BUYER TO SUE
This right entitles the buyer to sue the seller for damages for non delivery if the seller fails to deliver
the goods in accordance with the terms of the contract.
 A buyer also has a personal right to sue the seller for specific performance where the seller fails to
perform his obligation to the buyer. Specific performance will not be granted if damages will suffice.
 PART FIVE

HIRE PURCHASE AND

CONDITIONAL SALE
AGREEMENTS

HIRE PURCHASE AGREEMENTS
A hire purchase agreement is an agreement under which an owner of goods delivers them to a
person called a hirer who agrees to make periodic payments for the goods, with the option to
purchase them after completing the periodic payments. At the outset there is no agreement by the
hirer to purchase the goods. He only agrees to purchase the goods when he exercises his option to
purchase the goods
 Three things to note about a hire purchase agreement is that –
 It is a bailment under which a hirer obtains possession of goods with ownership vested in the
owner
 There is an option in favour of the hirer to purchase the goods
 A contract of sale comes into being if the hirer exercises his option to purchase the goods.

 Here, the parties are described as owner and hirer respectively. They may also be described as bailor
and bailee. The owner or bailor is the party who owns the goods and who lets them under a hire
purchase agreement. The hirer or bailee is the party who agrees to take delivery of the goods and to
pay the price by instalment with the option to purchase them.

CONDITIONAL SALE AGREEMENTS
A conditional sale agreement is an agreement for the sale of goods under which the purchase price
or part of it is payable by instalments. With a conditional sale agreement, the parties at the outset
are committed to sell and buy goods, albeit, on credit. However, the ownership of goods remains
with the seller while the buyer has possession.
 The parties to a conditional sale are described as seller and buyer.
 The similarity between a hire purchase and conditional sale agreement is that they are both credit
sales. However, whereas the hire purchase is not an agreement to purchase goods, the conditional
sale is an agreement to purchase goods.
 ENFORCEABILITY OF
AGREEMENTS
 A hire purchase or conditional sale agreement must satisfy the following statutory requirements in
order to be enforceable;
 The agreement must be in writing and signed by the buyer or hirer and the other parties to the
agreement.
 Before the agreement is made, the owner or seller must have orally and in writing stated the
purchase and the hire purchase price or the total purchase price of the goods.
 The agreement must contain the mandatory provisions and avoid the prohibited provisions

MANDATORY PROVISIONS
The cash price and the hire purchase price or the total purchase price of the goods.
 The amount of each instalment by which the price is to be paid and the date or the mode of
determining the date on which each instalment is payable.
 A description or list of the goods to which the agreement relates and
 A notice in the terms set out in the first or second schedule of the Hire Purchase Act

A copy of the agreement must be delivered or sent to the hirer within 14 days after making the
agreement
 PROHIBITED PROVISIONS
A provision in a hire purchase or conditional sale agreement is void if it;
 States that an owner of goods or his agent is authorised to enter on private land or premises to take
possession of goods which have been let under a hire purchase agreement or conditional sale agreement.
 States that an owner of goods or his agent is relieved from liability for entering into private land or
premises to take possession of goods which have been let under a hire purchase agreement or conditional
sale agreement.
 Excludes or restricts the right of a hirer under section 5 to terminate the hire purchase agreement.
 Imposes a liability beyond that imposed by section 6 on the hirer for terminating the hire purchase
agreement by the hirer.
 States that a hirer, after the termination of the agreement or bailment, is subject to a liability higher than
the liability to which the hirer would have been subject if the agreement had been terminated by the hirer
under the Act
 States that a person acting on behalf of an owner or a seller in connection with a hire purchase or
conditional sale agreement, is treated as or deemed to be an agent of the hirer or buyer.
 Relieves the owner or seller from liability for the acts or defaults of a person acting on behalf of the owner
or seller in connection with a hire purchase or conditional sale.
 CONSEQUENCE OF NON
ENFORCEABILITY OF AGREEMENT
 Where a hire purchase and conditional sale agreement is not enforceable under the law
 The owner or seller cannot enforce a contract of guarantee relating to the agreement
 A holder of a security given by the hirer or buyer or a guarantor, cannot enforce the security against the
buyer or hirer; and
 The owner or seller cannot enforce a right to recover the goods from the hirer or buyer.

Restriction of Enforcement of Agreements

 The law restricts the right of an owner or seller of goods to enforce his right under a conditional sale or hire
purchase agreement. The restriction is that, the owner or seller must, as a condition precedent, make and
serve a written demand notice on the hirer or buyer requiring him to carry out his obligation within a
specified period, not less than 14 days from the date of service of the notice. If on receipt of the notice, the
hirer or buyer fails to comply with the demand within the period specified the owner is entitled to sue for the
following remedies;
 Payment of damages, forfeiture or penalty
 Acceleration of the payment of an instalment
 Termination of the agreement
 Repossession of the goods

TERMINATION
A hirer or buyer may, at any time before final payment is due, terminate the agreement by giving
written notice of the termination to a person who is entitled to receive payment under the
agreement.
 In the case of a conditional sale agreement, however, the buyer cannot terminate the agreement if
ownership of the goods passes to him before he makes final payment, and he has transferred the
goods to a third party.
 Where a buyer, under a conditional sale agreement, terminates it after ownership of the goods has
passed to him, but before he makes final payment, ownership of the goods shall revert to the
original owner.
Completion of Agreement
 A buyer or hirer who wishes to complete the purchase of the goods must give notice in writing to
the owner or seller of the intention to do so. The completion is effected by the purchaser or buyer
paying or tendering to the owner or seller on a specified day, the net balance due under the
agreement.
 A hirer or buyer’s right to complete the agreement may be exercised at any time during the
continuance of the agreement. It may also be exercised within 28 days after the owner has taken
possession of the goods.

PROTECTED GOODS
Protected Goods are goods which have been let under a hire purchase agreement or sold under a
conditional sale agreement, one half of the price or total price of which has been paid or tendered
and in relation to which the buyer or hirer has not terminated the agreement. Three things to note
are that;
 The hirer or buyer must have either paid or tendered one half of the price of the goods
 The hirer or buyer must not have terminated the agreement
 Implicitly, the buyer or hirer must have defaulted in his obligation

 Consequently, the hirer or buyer will be relieved of liability and entitled to recover from the owner or
seller sums of money previously paid or any security provided for the goods.
MISREPRESENTATION BY DEALERS
 Where a person lets goods under a hire purchase or a conditional sale agreement, and in the course of the
negotiation leading to the conclusion of the agreement, a dealer or salesman misrepresents facts about
the goods such misrepresentation shall be deemed to have been made by the dealer as agent of the owner
or seller of the goods.
IMPLIED TERMS UNDER NRCD 292
 There are three categories of implied terms under NRCD 292 which are;
 Implied Terms Generally – impose an obligation on the owner or seller to ensure that the hirer or buyer
enjoys quiet possession of the goods, the goods are free from a charge or encumbrance in favour of a
third party at the time when ownership of the goods is to pass, ownership of the goods to pass to the
buyer or hirer when ownership is to pass, and that the goods are reasonably fit for the purpose for
which the buyer or hirer makes known to the seller as the purpose for which the goods are required.
 Implied Terms as to Merchantability – the seller or owner is obliged to ensure that he delivers goods of
merchantable quality to the hirer or buyer.
 The owner or seller can only enforce his right to recover protected goods from the hirer or buyer by court
action. A violation of protection occurs when the owner or seller employs other means than court action to
enforce his rights. In such a case the position of the law is that the agreement automatically terminates.
 Implied Terms in Special Cases – these include cases where goods are sold by sample and by
description