RULES ON PASSING OF PROPERTY IN CONDITIONAL SALE OF SPECIFIC GOODS

CONTENTS

1.0    Introduction

2.0    Objectives

• Main Content
• Rule 2
• Rule 3
• Rule 4

4.0    Conclusion

5.0    Summary

6.0    Tutor Marked Assignment

7.0    References/Further Readings.

INTRODUCTION

The application of the rules in Section 18 depends upon the existence of the intention of the parties. This is usually discernible from evidence.

According to Rule 1, the fact that the time of delivery or the time for the payment of the price is postponed does not prevent the property from passing when the contract is made.

In an ordinary sale in a shop, property does not pass until the parties have agreed as to the mode of payment. And in big departmental shops, where the buyer usually goes round the shop to collect items he wishes to buy, property does not pass until the price is paid. It should be noted that Rule 1 does not take the time of payment as crucial since it may be postponed.

Another factor that may point to a contrary intention is the existence of a specific agreement on the transfer of risk. Generally,  risk  in goods passes with the property, so that where the risk has passed, it will be that the property also passed. Conversely, where the risk remains with the seller, the property has not passed.

OBJECTIVES

The objective of this unit is to explain how Rules 2, 3, and 4 deal with conditional sale of specific goods in contradistinction to Rule 1 which deals with unconditional contracts of sale of goods.

MAIN CONTENTS

RULE 2

Rule 2 provides as follows;

“Where there is a contract for the sale of specific goods and the seller is bound to do something to  the goods, for the purpose of putting them into a deliverable state, the property does not pass until such things be done, and the buyer has notice thereof.”

For the principle under Rule 2 to apply, reference must be drawn   from the terms of the contract and the circumstances of the case.

It is only when it is for the seller to put  the goods in a deliverable  state that the Act draws that inference. For example, if Inyang sells a house to Bitrus and agrees to replace the roof with a new one,  property will not pass until Bitrus has notice that this has been done.

It is presumable that the rule is also applicable where the buyer has  to do something to the goods, although Rule 2, refers to the seller  only.

The fact that goods have to be repaired or altered before delivery is more likely to lead a court to conclude that the property is not to pass until delivery. This rule is basically applied to “goods not in  deliverable state”.

RULE 3

Rule 3 provides as follows;

“Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, or do some other act or thing  with  reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing be done and the buyer has notice thereof.”

The Rule is explicit in that it makes it clear that where the passing of the property is conditional upon the performance of some act with reference to the goods property does not pass until the buyer has notice of the fulfillment of that condition. Examples of this include weighing, testing etc.

Thus, for instance, an agreement to sell an a fairly used Peugeot car  at a price after the seller has tested the car does not pass the ownership of the car to the buyer until the seller has tested the car and the buyer has been informed.

Under Rule 3, goods do not acquire the character of being in a deliverable state until the seller has done all that he was supposed to do, including measuring or testing them.

If the seller of specific goods in a deliverable state is required to carry out some procedure to ascertain the price, such as weighing, testing  or measuring, property will not pass until that has been done and the buyer notified.

It therefore follows that if the contract demands that someone other than the seller is to undertake this task, Rule 3 will not apply if it is the buyer or the third party and not the seller who has to do something to the goods as in the case of Turley v. Bates (1863)2 H  and C. 200.

RULE 4

When goods are delivered to the buyer on approval or "on sale or return " or other similar terms the property therein passes to the buyer : —

• When he signifies his approval or acceptance to the seller or does any other act adopting the transaction:
• If he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time, What is a reasonable time is a question of fact.

The above rule deals with different types of transactions altogether, although similar to a conditional sale and may become a sale  in course of time.

The two arms of Rule 4 shall be discussed.

1. Signifying his approval or adopting the transaction; under this Rule property will pass to a buyer who takes property on sale or return, if he signifies his acceptance to the seller or does any act which shows that he adopts the transaction, or keeps the goods for longer time than the period agreed for their return, or for an unreasonable length of time.

Where the prospective buyer informs the seller that he wishes to buy, this is enough to allow the property to pass.

Similarly, where the buyer does an act in relation to the goods which  is consistent only with having become owner of them, for example, pledges or resells the goods, this is an act adopting the transaction within the meaning of Rule 4.

The case of Kirkham v. Attendborogh (1897)1 Q. B. 201 is an example of “an act adopting the transaction”. There, the plaintiff, allowed W to have jewellery on sale or return and W pawned the jewellery with A, the defendant. The plaintiff brought an action to recover the jewellery from the defendant. It was held that, the action must fail as W’s act of pawning the jewellery was “an act of adopting, and therefore, the property in the jewellery passed to him, so that K could not recover it from A.

In this context, it should be noted that it is immaterial that the buyer obtained the goods by fraud.

Elements or Ingredients of Rule 4(B)

• Retention of goods where time is specified:- If a time has been fixed for the return of the goods, the buyer is deemed to have exercised his option to buy if he returns them after this time. Hence, the transaction may be completed without expression of acceptance.
• Retention of goods where no time is specified:- Retention of goods “beyond a reasonable time” may arise where no time is specified in the arrangement between the parties. If the buyer retains the property without giving a time of their rejection, property will pass to him.
• Rejection of the goods:- Property will pass under Rule 4(B), if the buyer does not give notice of rejection within either the stipulated time or within a reasonable time, if time is stipulated. Though there is no duty on the buyer to return the goods in  order to prevent the goods from passing.

The buyer may therefore be liable for detinue if he holds unto the goods after notice of rejection.

• Evidence of contrary intention:- the operation of Rule 4 of Section 18 is subject to there being no evidence of a contrary intention. It is clear that the court have allowed the seller some form of freedom. In Weiner v. Gill (1906)2 KB 574, the plaintiff delivered jewellery to Y, on the terms of a memorandum which stated that “on appropriation, on sale for cash only or return … goods will be on probation or on sale or return remain the property of Weiner …. until such goods are settled or charged” Y thought X had a potential buyer and he handed the goods to X who pledged them with the defendant. It was held that, the plaintiff brought this action to recover them from him. That is to say, X (or even Y’s) act of pledging the goods which would have amounted to an act adopting the transaction was expressly excluded by the memorandum.

CONCLUSION

From the foregoing, conditional sale of specific goods and factors negating the application of Rule 1of Section 18 are shown as enshrined in Rule 2, 3, and 4. In Rule 2 it is clear that the fact that goods have to be repaired or altered before delivery is more likely to lead a court to conclude that property is not to pass until delivery. It can be therefore be inferred that the Rule is also applicable where the buyer has to do “something to the goods”.

Inference can also be drawn that Rule 2 or Rule 3 will not apply if it is the buyer or the third party who has to do something to the property and not the seller.

Also, under Rule 4, it should be observed that property (and risk) in goods taken on sale or return remains in the seller. If they are destroyed or stolen while in buyer’s possession, the seller cannot sue for the price, if the damage was not occasioned by the buyer’s default.

SUMMARY

This unit has revealed the main intents of Rules 2, 3 and 4, of Section 18 that they deal with conditional sale of specific goods and that the Rules input in them certain factors negating the application of Rule 1 of Section 18 which deals basically with unconditional sale of specific goods.

Rule 2 of Section 18 deals with goods not in deliverable state, whilst Rule 3 of Section 18 deals with what the seller of specific goods in a deliverable state is required to carry out. Rule 4 of Section 18 deals with where goods are “delivered to the buyer on approval or sale or return”, in this instance, property passes when the buyer signifies acceptance or does an act adopting the transaction, or retains the goods beyond the time fixed by the agreement for a decision without giving notice of rejection, or if no time s is fixed, retains the goods beyond a reasonable time (rule 4(b).

TUTOR MARKED ASSIGNMENT

1a. Tunde expresses an interest to buy a particular car owned by  Joke for N1 million provided it will be suitable for his nephew to use in Lagos traffic. Joke agrees that Tunde can take the car for 10 days in order to determine its suitability. After a week the car breaks down. Is Tunde liable for the price?

1. Would your answer be different if Tunde had used  the  car  himself on a number of occasions and had travelled a long distance with it.
2. Explain the conditional sale of specific goods in Rule 2, 3 and 4 as conversely different from “conditional contract in Rule 1 of Section 18).

REFERENCES/FURTHER READING

1. Sale of Goods Act,
2. Rawlings, Commercial Law, University of London Press,
   1. Okany Nigeria Commercial Law, Africana-Fep Publisher, Limited, 1992.
   2. A.   M.   Agbonika   and   J.   A.   A.   Agbonika,   Sale   of   Goods (Commercial Law), 2009, Ababa Press Ltd
   3. J. Okoro   (2013),    Business    Law    for    Professional    Exams, MaltHouse Press Ltd.