ESSENTIAL ELEMENTS OF A CONTRACT OF SALE OF GOODS
CONTENTS
1.0 Introduction
2.0 Objectives
- Main Content
- Contract
- Agreement to Sell
- Price
- Goods
- Existing
- Specific or Ascertainable
- Unascertained
- Further
4.0 Conclusion
5.0 Summary
6.0 Tutor Marked Assignment
7.0 Reference/Further Readings.
INTRODUCTION
The validity or otherwise of any contractual arrangement is usually premised on the presence or otherwise of certain elements. In this unit, the elements or ingredients for ascertaining whether there exists or not a contract of sale of goods shall be thoroughly discussed. Section 1(1) of sale of Goods act define contract of sale “…as a contract whereby the seller transfers or agrees to transfer the property in the goods to the buyer for a money consideration called price…”. In this unit we distill and examine the component of this definition.
OBJECTIVES
The objective of this unit is to examine the basic elements in a contract of sale of goods. At the end, the learner should be able to discuss the elements of contract of sale of goods.
MAIN CONTENTS
Contract
Every sale of goods must be preceded by a contract where the seller agrees to sell and transfer the possession absolutely and the buyer on the other hand agrees to buy and obtain possession for a price. All the basic ingredient of a valid contract must be present. There must be consensus ad idem; there must be agreement as to the price, time and place of delivery. There must be intention to create binding legal obligation.
Agreement to Sell
The contract of sale of goods must be either for transfer or agreement to transfer property in goods from the seller to the buyer. Section 1(3) of the Act provides that “Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale; but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled the contract is called an agreement to sell.” The second arm of contract of sale is the agreement to sell which takes place upon fulfilment of certain condition(s). Section 1(4) provides that an agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. Some these conditions include payment of price, measurement, putting the goods in deliverable state. Without the fulfilment of any of the required condition there would be no transfer of property as well as sale.
THE PRICE
The basic element in a sale of goods contract is the price which must be in monetary consideration. This usually includes payment by credit card, but excludes contracts of barter. e.g. exchange of goods for good involving no payment. If the parties have not fixed a price, they may not have reached an agreement, in which case, there is no contract.
Section 8 of the Act defines what constitutes “the price” in a contract of sale of follows:
- “The price in a contract of sale may be fixed by the contract, or may be left to be fixed in manner thereby agreed, or may be determined in the course of dealing between the parties ”
- “Where the price is not determined in accordance with the foregoing provisions, the buyer must pay a reasonable price dependent on the circumstances of each particular case.”
Therefore, the price in a contract of sale may be fixed (a) by the parties, or (b) may be left to be fixed in a manner provided by the contract e.g. by a valuation or an arbitration, or (c) may be determined by the course of dealing between the parties.
If however, the price is not so fixed or determined, there is a presumption that the buyer will pay a reasonable price. In Matco Ltd v. Santer FE Development Co. Ltd (1971)2 N.C.L.R.1, it was held that the burden was on the seller to prove that the price he demanded was reasonable.
On the other hand in May & Butcher v. the king (1929) ALL E R. 679, the parties had agreed that the appellants should purchase tentage that should become available for disposal at a price to be agreed upon by the parties themselves. It was also understood that all disputes with reference to or arising out of the agreement would be submitted to arbitration. There was no subsequent agreement as to price. It was held by the House of Lords that, the agreement between the parties did not constitute an effective contract.
It is noteworthy that under section 9 of the Act
- If the price is to be fixed by the valuation of a third party and he cannot or does not make such valuation, the contract is voided. But if the goods or any part thereof have been delivered to the buyer and he has appropriated them to his use, he must pay a reasonable price thereof. If not appropriated, there is no contract since the parties could still be restored to their status quo ante.
- If the valuer is prevented from making the valuation by the fault of the seller or buyer, the non-defaulting party may maintain an action for damages against the party in default.
SELF ASSESSMENT EXERCISE (SAE) ONE
In the case of price that is not yet fixed, the presumption is that there is no contract or is yet to be concluded. Discuss.
GOODS
Generally, Goods are defined by section 62(1) of the Act to include: “All chattels personal other than things in action and money, emblements, industrial growing crops and things attached to or forming part of the land such as agreed to be severed before sale or under the contract of sale”.
This definition was adopted in section 7(2) of the Law Reform (Contracts) Law, 1961, which applies only in Lagos state.
Therefore, the term “Goods” embraces widely varying objects such as clothes, shoes, aircraft, motor cars, machinery, ships, books, furniture and growing crops.
However, the term does not include “choses in action” like bills of exchange and cheques.
Real property is completely outside the ambit of the Act. In other words, land or any interest therein is excluded from the definition of goods. Although money is excluded, coins brought as commodities (e.g Roman or Biafran Coins) which ordinarily lack the usual negotiable attributes of money would be regarded on goods.
The term “emblements” which was borrowed from ancient real property law, comprises crops and vegetables (such as coins and potatoes) produced by the labour of man and ordinarily bidding a present annual profit. In other words, the term covers crops which are planted and harvested annually. Such annual crops like yam, cassava, maize, etc are popularly called “emblements” are not part of land, but are regarded as chattels, even before they are separated from the land.
The term “industrial growing crops,” has not yet been judicially defined, but presumably it is under emblements and may include crops which may be harvested outside the annual period.
The second part of section 62(1) refers to “things attached to or forming part of the land which are agreed to be severed.
In this instance, the Act applies to “things” forming part of land but not to the land itself. There is need to briefly discuss the position as regards minerals. The sale of minerals will be regarded as sale of goods, if the minerals have been separated from the land. The mere fact that the minerals have been quarried is not enough to make them “goods” and the question is what state is the quarried minerals as at the time of contract.
Thus, in MORGAN V RUSSEL AND SONS (1909) 1 K. B 357, the seller agreed to sell all the slag and cinders lying on a particular piece of land. After the buyer had taken some of the slag, the third parties claimed that the slag belonged to them and effectively prevented the buyer from collecting further supplies. The buyer sued the seller for damages for non-delivery under the Sale of Goods Act. It was held that since the minerals were severed and then left as cinders and slag which are separate heaps resting on the ground, the contract of sale in respect of the mineral was a sale of an interest in the land and not of goods and therefore the Sale of Goods Act did not apply.
SELF ASSESSMENT EXERCISE (SAE) TWO
Goods are chattels personal other than “choses in action” and money. Industrial growing crops and things attached to or forming part of the land or to be severed from land before sale or under the contract of sale. Discuss.
There are different categories of goods and they are provided for by virtue of Section 5 of the Act which states as follows:
- The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller or goods to be manufactured or acquired by the seller after the making of the contract of sale, in the Act called “future goods”.
- There may be a contract for the sale of goods, the acquisition of which by the seller depends upon a contingency which may or may not
- Where by a contract of sale, the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the
Therefore, Goods may be categorized as:
- Existing
- Specific (or ascertained)
- Goods sold by
- Future Goods
EXISTING GOODS
These are goods that are owned and possessed by the seller at the time of contract. This can be meant to be that they are goods actually in existence when the contract is made. Such existing goods may either be specific or unascertained.
SPECIFIC (OR ASCERTAINED) GOODS
These are goods identified and agreed upon at the time the contract of sale was made. For example, “a 2009 Rhumba Motor Boat with Engine number 10465 and chassis number AB60421”.
GOODS SOLD BY DESCRIPTION
These are goods sold by description, but which were not identified or agreed upon at the time of the contract but are included in a particular class of goods, for example “10” “18 kilogrammes mahogany wood”.
FUTURE GOODS
These are goods not yet in existence, and goods in existence but not yet acquired by the seller. That is to say, goods yet to be acquired or manufactured by the seller after the contract has been made. In HOWELL V COUPLAND (1876) 1 Q.B. 258, a sale of 200 tons of
potatoes to be grown on a piece of land was held to be a sale of specific goods, despite the fact that they were not existing goods.
CONCLUSION
This unit has exposed learners to the rudiments of “price” in sale of goods. The interwoven nature of various categories of goods such as the specific goods, future goods, existing goods and ascertained or unascertained goods is also fully discussed.
SUMMARY
Through this unit, learners should be able to understand the following;
- various elements of contract of sale of goods
- the disparities between different types of goods
- the explanation of different categories of goods
TUTOR MARKED ASSIGNMENT
- Under the provision of the Sale of Goods Act, goods are chattel personals and they are distinguishing from real property or chattel real and these are chattels attached to or forming part of the land.
- Strictly explain the different categories of goods as provided for in the Sale of Goods Act with the aid of judicial authorities.
REFERENCES/FURTHER READING
- Laws of the Federation, 1990 Hire Purchase Act, Cap
- Sale of Goods Act, 1893.
- Rawlings, Commercial Law, University of London Press, (2007) 4.. Okany, Nigerian Commercial Law, Africana – Fep Publishers Limited, (1992).
- A. M. Agbonika and J. A. A. Agbonika, Sale of Goods (Commercial Law), 2009, Ababa Press Ltd
- j. Okoro (2013), Business Law for Professional Exams, MaltHouse Press Ltd