Discharge of contracts and remedies for breach of contract

A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for money consideration called the price. It is an agreement to sell where the transfer of property in goods is at a future date or subject to the completion of specific conditions. The sale of goods contract is complete when the terms and clauses set out in the contract have been fulfilled and the transfer of property took place.

Essentials of sale of goods contract (characteristics)

1. Parties to contracts: The parties to sale of goods contract are seller and buyer
   • A seller means a person who sells or agrees to sell goods.
   • A buyer means a person who buys or agrees to buy goods.
2. Transfer of property: What is transferred in sale of goods contract is properly in goods
3. Subject matter of contract: The subject matter of sale of goods contract are goods.
4. Price: This is consideration which must be in terms of money. Goods for goods do not fall under contract of sale of goods.
5. Agreement to sell and sale: Contract of sale includes sale and an agreement to sell
   • Sale: There is immediate transfer of goods in property from seller to buyer.
   • An agreement to sell a property in goods is transferred in future or on fulfillment of certain conditions stipulated in a contract.
6. Formalities of a contract: The contract of sale of goods may be made in writing (either with or without seal) , orally that is by word of mouth or as implied from the conduct of parties
7. Nature of parties: The capacity to buy and sell is regulated by general law of capacity to contract (person entering into a contract must be competent). But under this contract persons who are incompetent to contract can also enter into a contract to sale but these contracts must be for necessaries and they will be liable to pay a reasonable price for them.
8. Value of goods: The value of goods is ascertained by price. It may be fixed by the contract or may be left to be fixed in manner provided by the contract(eg. by valuation). It may also be determined by the course of dealing between the parties eg: according to previous transactions between them, custom of trade profession.

Under the law of contract, two types of statement are made in the course of negotiating a contract of sale of goods

1. The pre-contractual i.e. Representations
2. Contractual statements or terms these being either conditions or warranties.

Implied condition and warranties in a contract of sale.

1. Title
   1. Conditions as to title: Unless the circumstances show different intention, there is an implied condition on the part of the seller that in case of a sell she has the right to sell goods, and in case of an agreement to sell will have the right to sell the goods at the time when the property is to pass. The implication is that the person who buys goods to which the seller has no title is allowed to recover the whole price even though she had some use and enjoyment from the goods before they are dispossessed by the true owner.
   2. Warranty as to title: unless the contract show different intention there is an implied warranty that the buyer shall have and enjoy quiet possession of the goods. Also there is an implied warranty that the goods shall be free from any charge/encumbrance in favor of any third part not known or declared to the buyer before or at a time when the contact is made.
2. Time
   1. Time of payment: Unless a different intention appears from the contract by stipulations the time of payment is not of essence so failure to pay on time is a breach of warranty not of condition but a seller can provide expressly for right of resale in the absence of prompt payment in case of perishable goods prompt payment is a condition not a warranty.
   2. Time of delivery: The act is silent but we use English laws where time of delivery is fixed by the contract and breach of it is breach of condition and the buyer can reject the goods.
3. Quality and Fitness: This is governed by Caveat Emptor (buyer beware) i.e. When buying you must be aware of all defects obtainable in the goods, except for :
   1. An implied condition of quality and fitness for any particular purpose of goods supplied: i.e. when the buyer expressly or impliedly makes known to the seller the particular purpose for which goods are required.
   2. An implied condition that the goods should be of merchantable quality where goods are bought by description from a seller who deals in goods of that description.
   3. An implied condition or warranty as to quality or fitness for goods attached by the usage of trade.
4. Sale by description: There is an implied condition that the goods shall correspond with the description in case there is a contract for the sale of goods by description .
5. Sale by sample. In the sale by sample there is:
   1. An implied condition that the bulk shall correspond with the sample in the quality.
   2. An implied condition that the buyer shall have a reasonable opportunity of comparing the bulk with sample.
   3. An implied condition as to freedom from any defect, rendering them un-merchantable which would not be apparent on reasonable examination of the sample.

Effect of contract of sales as provision of the act is divided into two parts

1. Transfer of property in goods
2. Transfer of title

The provisions of act regarding the transfer of property in the goods are important due to the following reasons:

1. The parties to contract of sale do not usually express their intentions as to the passing of the property.
2. The risk normally passes when the property passes and the seller can in general terms only sue for the price as distinct from damages if the property has passed."Res perit domino" (a thing perishes to the disadvantages of its owner).

Rules of ascertaining intention as time when property passes: According to the sale of goods act the rules of ascertaining intention as to time when property passes are five.

1. Rule 1. For the goods in a deliverable state the property in goods passes to the buyer when the contract is made.
2. Rule 2. In case of the goods not in a deliverable state, the property doesn't pass until the seller puts them into a deliverable state and the buyer is notified thereof.
3. Rule 3. Where there is a contract for the sale of specific goods in a deliverable state but the seller is bound to weigh, measure, test or do some other act or things for the purpose of ascertaining the price, the property doesn't pass until such act or thing is done and the buyer has notice thereof.
4. Rule 4. In case of sales on approval or in case of sale or return or other similar terms, the property passes to the buyer by either of the two ways:
   • When the buyer signifies her approval or acceptance to the seller.
   • The buyer retains the goods without giving notice of rejection and then the property passes on the expiry of a return period or reasonable time.
5. Rule 5. Where there is a contract of sale of ascertained / future goods by description and goods of that description the transfer to buyer will only be made when the goods have been ascertained, identified and valued.

This is that transfer of the right to legal ownership, this is only possible with the presence of true owner of the goods who possess a good title i.e. the buyer who takes goods from a seller with no title receives no better title than the seller e.g. buying goods from a thief goods would then have to be restored to the true owner possessing title when so claimed. Exceptions to this rule: According to the sale of goods act:

1. Buying in good faith from mercantile agents who holds the goods with the owner's consent.
2. Where a second buyer, acting in good faith buys goods left in possession of the seller by the first buyer.
3. Where a second buyer, acting a good faith buys goods held by a first buyer who has not fulfilled all the sellers conditions of purchase.
4. Where a buyer, acting in good faith, buys goods without notice of any defect of title of the seller.
5. where the sale is ordered by the court, the buyer received a good title and where a seller has led the buyer to believe in the formers title the buyer receives a good title.

A. Duties and rights to parties

1. Duties of seller: To deliver the goods to the buyer or to allow delivery of the goods to take place where the seller agree to deliver the goods at his own risk at a place than the place of sale the buyer (unless agreed) take any risk of deterioration in goods in transit.
2. Right of seller: To be paid the contract price for goods delivered. Where the ownership has not passed to the buyer, the seller is free to act on goods. Where the buyer has not paid and ownership has passed to the buyer the seller may exercise lien on the goods if they are still in his possession/stoppage in transit and the right of repossession and limited right of resale where the goods are perishable or the right is reserved in the contract.
3. Duties of buyer: To accept the goods and pay for them in accordance with terms of the contract of sale. The buyer is deemed to have accepted the goods when the he has accepted them or when the goods have been delivered to him or after lapse of a reasonable time or he retains the goods without information the seller that he has rejected them. When the seller is ready and willing to deliver the goods and the buyer does not with a reasonable time take delivery of the goods, the buyer will be liable to seller for any loss and charge for neglect to take delivery.
4. Rights of buyer: To receive goods under the terms of contract. When goods not previous examined, are delivered by the seller, the buyer is not deemed to have accepted them unless and until he examine them. A seller should give a buyer reasonable time of examining the goods. Where the wrong quantity is delivered, the buyer has the right either rejected the delivery or accepted and pay the contract price for what he has received. To reject delivery by instalments, unless he has agreed to this procedures.

B. Delivery of the goods:

Definition; Delivery is a voluntary transfer of possession from one person to another. Delivery may take any of the following forms:

1. By physical transfer of the goods and where the goods are handled to the buyer with the intention of transferring possession.
2. By delivery of the means of control e.g. handle of the key.
3. By attornment (where the goods are in possession of the third party) e.g. a warehouse man who acknowledges to the buyer that he holds the goods on his behalf.
4. By delivery of documents of title e.g. bills of loading representing the goods is delivered.
5. By constructive delivery as where the buyers already has possession of the goods as a bailee e.g. in a hire purchase.

Place of delivery: In absence of express agreement place of delivery is the place of business of the seller or if he has no place of business his residence. Therefore the sellers duty to deliver does not mean he must necessarily take or send the goods to the buyer. Therefore the buyer is under a duty to collect the goods from the seller's premises or storage center. NOTE : For sales of specific goods which are found in some other place then the place of delivery is where they are found. Time of delivery: Under the contract of sale, if the seller is bound to send the goods to the buyer if no time for sending is fixed the seller is bound to send them within a reasonable time and at reasonable hour. What is reasonable time/hour it is matter of fact.

C: Quantity of goods delivered

The provisions as to quantity delivered are

1. Where the sellers delivers to the buyer a quantity less than the contact quantity the buyer may reject them but if he accepts them he must pay at the contractual rate.
2. Where the seller delivers to the buyer a quantity larger than he contracted the buyer may accept the goods included in the contract and reject the rest or reject the whole.
3. Where the goods delivered are mixed with goods of different descriptions not included in the contract the buyer may accept the goods in accordance with contract and reject the rest or he may reject the whole.

NOTE : Usage of trade, special agreements or course of dealing between parties can lead to exceptionals.

D. Delivery by instalments: Unless agreed, the buyer is not bound to accept delivery thereof by instalments. If the agreement is the delivery by instalments and that the seller fails to make one or more instalments delivery or the buyer neglects or refuses to take delivery or pay for one or more instalments (depending on the terms of contract) the contract is repudiated or give rise to claim for compensation.

E. Delivery to a carrier:

Where the seller is required to send goods to the buyer through carrier (whether named by the buyer or not) for the purpose of transmission to the buyer it is deemed to be a delivery of goods to the buyer. Types of carriers

1. Common carrier : Is the carrier who publicly hold himself out to carry goods of any customers from place to place in accordance with specified routes and often scheduled timing. A common carrier accepts all customers offered to him except where:
   • No room is left in his transport.
   • The goods are not of kind which he advertises to carry.
   • The goods are improperly packed.
   • The goods are of dangerous character.
   • Goods are not fit to be carried by the public carrier.Duties of common carrier
     • To transport goods for any person on his schedules routes provided payment for the hire at reasonable rates is tendered.
     • To carry goods without unnecessary delay or deviation and deliver in similar manner.
     • To deliver in good condition and responsible for loss or damage except for Act of God, war, unsuitability of travel due to risk of injury (animals), negligence of the sender
2. Private carrier: Is a carrier who carry goods on selected routes for selective customers. He deals with each customers according to his specific needs and contract accordingly. Unless otherwise authorized by the buyer, the seller shall make contract with the carrier on behalf of the buyer as having regarded to the nature and other circumstances. If the seller to otherwise and the goods are lost/damaged in transit the buyer may hold the seller responsible.

The contract of sale may be either be breached by the seller or the buyer. The injured party is entitled to certain remedies. Remedies of the seller: This happens when there is a breach by the buyer. Remedies of the seller is divided in two:

a. Real remedies against the goods: Even if the property in the goods has passed to the buyer the unpaid seller of the goods has by implication of law the following remedies:

1. A lien on the goods or the right to retain them while he is in possession of them.
2. In the case of the insolvency of the buyer, a right of stopping the goods in transit.
3. A right to re-sale where the property has not passed to the buyer.

Definition of unpaid seller: A seller when the whole of the price has not been paid or tendered or a seller when a bill of exchange or other negotiable instruments has been received as conditional payment and the condition has not been fulfilled e.g. Dishonour

b. Personal remedies against the buyer: In addition to the real remedies the seller has personal actions against the buyer in the following ways:

1. Action for the price: This is maintainable where the property in the goods has passed to the buyer and the buyer neglects or refuses to pay for the goods according to the terms of contract.
2. Action for damage: This is maintainable where the buyer neglects or refuses to accept and pay for the goods.

Remedies of the buyer: This happens when there is a breach by the seller. Remedies of the buyer is divided in to three:

1. Rejection of the goods: Where the seller breaches a condition the buyer may repudiate the contract and reject the goods. The buyer is not bound to return the goods rejected but he must inform the seller of his rejection.
2. Action for damages: This can be maintained when,
   • Non-delivery of goods: When the seller neglects or refuses to deliver the goods, the buyer may maintain an action against seller for damages.
   • Breach of Warranty: In case of breach of warranty the buyer do not reject the goods but he may maintain actions against the seller for damages.
3. Right to specific performance: The court upon application by plaintiff may direct that the contract shall be performed specifically without giving the defendant the option of retaining the goods on payment of damages.