FACTORS AFFECTING LIABILITY UNDER CONTRACT OF SALE OF GOODS

 CONTENTS

1.0. Introduction.

2.0. Objective.

• Main
• Risk and Frustration
• Mistake

4.0. Conclusion

5.0. Summary

6.0. Tutor Marked Assignments (TMA)

7.0. References/Further Readings.

INTRODUCTION

There are numerous factors that may affect liability under the sale of goods. Some have already been discussed. Two important ones to be discussed here are the doctrines of frustration and mistake. These  two factors can terminate a contract without damages or right to sue for the price of the goods.

It is however important to note that an act of God or King’s enemies’ act can also bring the contract to an end with both the seller and the buyer losing. The concept of frustration and mistake will be discussed in this unit.

OBJECTIVE

The main objective of this unit is that learners should be able to understand the factors that may affect the contract of sale of goods through risk, frustration and mistake.

MAIN OBJECT

Risks and Frustration

If the goods sold are accidentally lost or damaged, then the loss or damage will fall on the party who bears the risk and the general rule  of res perit domino, that is, the risk of accidental loss, falls on the owner. The general principle attributing the risk is laid down in  section 20 as follows:

“unless otherwise agreed, goods remain at the seller’s risk until the property therein is transferred to the buyer, but where the property is transferred to the buyer, the goods are  at  the  buyer’s risk whether delivery has been made or not.”

In section 16 of the Act, property in goods cannot pass until they are identified. The risk is not usually upon the buyer in the case of unascertained goods. In this respect, the opening word of Section 20 should be noted. It states that parties may agree that risk will pass before or after property. (See Sterns Ltd v. Vickers Ltd (1923) 1KB 78)

Frustration

The general principle of law of contract is that where a contract has been frustrated, the rights and obligations of the parties are terminated and remain in the position in which they were at the time when the frustrating event occurred.

Section 7 of the Act buttress this point by providing that “where there is an agreement to sell specific goods, and subsequently the goods, without any fault on the part of the seller or buyer, perish before the risk passes to the buyer, the agreement is thereby frustrated.” From this point it clear that section 7 discharges the parties of their obligations under the contract at the occurrence of a peril on the goods.

It is important to note that the perishing of specific goods is the only aspect of frustration provided for by the Act. Perishing of goods  cannot frustrate a contract otherwise than under section 7. In Re Shipton Anderson and Co Ltd v. Harrison Bros. &Co Ltd (1915)3 KB 676, the court clearly thought there could be no frustration  if  property and risk had both passed.

Mistake

The discussion of this topic here will be limited to the Sale of Goods Act of 1893 where it relates to sale of specific goods which have perished. Section 6 of the Act is the section that makes provision for the doctrine of mistake and it states that

“where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made, the contract is void”.

In Couturie v. Hastie (1856) 5H.L.C. 673, the defendant was a del credere agent who sold, on behalf of the plaintiffs, a cargo of corn shipped from Salonika.  Before the date of the sale, the cargo had  been lawfully sold by the master of the ship. The purchaser  repudiated the contract and the plaintiff sued the agent, whose

liability depended on whether the purchaser would have been liable.   It then held that, the defendant was not liable and that the contract was void for mistake.

CONCLUSION

The factors affecting the sale of goods contract, which range from risk to frustration and to mistake, are discussed in this unit. However passing of risk in sale of goods contract depends on circumstances of each case, where generally risk passes with property. In cases of Frustration, the general principle is that parties return to status quo. In the case of mistake, the contract is void ab initio.

SUMMARY

The passing of risk in goods must pass with the goods as a general principle of the law. There are however instances where the risk will pass before the goods. This is based on agreement between the  parties. Frustration is a situation where the goods are either damaged or lost without the fault of any party. In this instance, parties return  to status quo as if the contract never existed.

TUTOR MARKED ASSIGNMENT (TMA)

1. The general principle of law of contract is that where a contract has been frustrated, the rights and obligations of the parties are terminated and remain in the position they were at the time when the frustrating event occurred. Critically examine this assertion with decided cases and relevant statutes of the
2. Sheron sold goods to Benson with the notion that the goods  were still in existence, but at the time of the contract the goods was no longer in existence. Advise

REFERENCES/FURTHER READING

• Sales of Goods
• Rawlings, Commercial Law, University Of London Press, (2007).
• Okany, Nigerian Commercial Law, Africana .FEP Publishers Limited, (1992).
• Hire Purchase
• Sofowora General Principles of Business and Coop Law, Soft Associates, (1999).