SALES OF GOODS

The law relating to the sale of goods is contained in the Sale of Goods Act (Cap.
31).

Definition
A contract for the sale of goods is defined as:
“A contract whereby the seller transfers or agrees to transfer the property in
goods to the buyer for a money consideration called the price”.

The essential characteristics of a contract of sale of goods

a) There must be two distinct parties to a contract of sale a buyer and a seller.
b) There must be a transfer of property. Property here means ‘ownership’. A
seller must either transfer or agree to transfer the property in goods to the
buyer.
c) There subject-matter of the contract of sale must be goods. ‘
d) The consideration for a contract of sale must be money consideration called
the price. If goods are sold or exchanged for other goods the transaction is
barter and not sale of goods.
e) There term contract of sale includes both a sale and an ‘agreement to sell’.

Differences between Sales of Goods and Agreement to Sell

Sales of Goods Agreement to Sell

i) The property in goods passes i) There is no transfer of

to the buyer immediately at property to the buyer at the
the time of making the time of the contract.
contract ii) Where the ownership in the
ii) If the goods are destroyed the goods is yet to pass from the
loss fails on the buyer even seller to the buyer, such loss

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 though the goods may never has to be borne by the seller
have come into his possession even though the goods are in
because the property in the the possession of the buyer.
goods has already passed to
the buyer.
iii) If the buyer wrongfully iii) If the buyer fails to accept
neglects or refuses to pay the and pay for the goods, the
price of the goods, the seller seller can only sue for
can sue for the price. damages and not for the
price.
iv) The property in the goods is iv) The property in the goods
with the buyer and as such remains with the seller and
the seller (in possession of as such he can dispose of the
goods after sale) cannot resell goods as he likes and the
the goods. If he does so, the original buyer can sue him
subsequent buyer having for the breach of contract
knowledge of the previous only.
sale does not acquire a title to
the goods.

Capacity to Buy and Sell:

The capacity to buy and sell is governed by the general law concerning capacity to
contract and to transfer and acquire property. Minors and persons of unsound
mind must pay a reasonable price for necessaries and not necessarily the agreed
price. Necessaries are goods suitable to the condition in life of such or minor or
other person, and to his actual requirements at the time of sale and delivery.

Subject Matter of Contract:

Goods form the subject matter of a contract of sale:

Definition of goods:

i) All chattels personal other than things in action and money

ii) All emblements (annual growing crops and produce or profits of such crops)
iii) Industrial growing crops e.g. tobacco, cotton e.t.c.
iv) Things attached to or forming part of the land which are agreed to be
severed before sale or under the contract of sale.
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Classification of Goods

(i) Existing Goods:

These are Goods which are physically in existence and which are in seller‘s
ownership and /or possession, at the time of entering the contract of sale are
called ‘existing goods’. Where seller is in possession, say as an agent or a pledge,
he has a right to sell them. These can be classified into the following:

a) Specific goods: These are goods identified and agreed, upon at the time the
contract of sale is made.

b) Unascertained goods: These are goods, which are not separately identified
or ascertained at the time of the making of the contract,
Categories of Unascertained Goods
 Goods to be manufactured by the seller
 Crops to be grown by the seller
 Purely generic goods
 An unidentified portion of a special bulk or whole.

(ii) Future Goods:

These are Goods to be manufactured, produced or acquired by the seller after the
making of the contract of sale are called ‘future goods’.

Example: Kipkoech agrees to sell milk to Nyachae all the milk that his cow may
yield during the coming year.

(iii) Contingent Goods:

These are Goods, the acquisition of which by the seller depends upon an uncertain
contingency are called ‘contingent goods’.

Example: Mr Kimeu agrees to sell mr. George a diamond provided he is able to

import it from Congo.

The Price

Ascertainment of price

(1) The price in a contract of sale may be fixed by the contract,

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 (2) or may be left to be fixed in a manner thereby agreed by the parties
(3) Or may be determined by the course of dealing between the parties.

N.B. Where the price is not determined in accordance with the above provisions,
the buyer must pay a reasonable price; and what is a reasonable price is a question
of fact dependent on the circumstances of each particular case.

Implied Conditions and Warranties

A contract of sale of goods contains various terms or stipulations which may either
be conditions or warranties. Conditions and warranties may be either express or
implied.

They are said to be express when they are inserted in the contract at the will of the
parties and they are said to be implied when the law presumes their existence in
the contract automatically though they have not been put into it in express words.

Conditions Defined:
A ‘condition ‘is a stipulation primary or essential to the main purpose of the
contract, the breach of which gives the aggrieved party right to repudiate (reject)
the contract itself in addition, he may maintain an action for damages for loss
suffered, if any.

Warranty Defined:
A ‘ warranty ‘ is a stipulation secondary to the main purpose of the contract, the
breach of which gives the aggrieved party a right to sue for damages only ,and not
to avoid the contract itself.

Implied Conditions
Unless otherwise agreed, the law under the Sales of Goods Act incorporates into a
contract of sale of goods the following implied conditions:

i) Right to sell (14)

In every contract of sale, there is a condition on the part of the seller that, in the
case of a sale he has the right to sell the goods and that in the case of an
agreement to sell; he will have a right to sell the foods at the time when the
property is to pass.

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 ii) Sale by description (S.15)
Where there is a contract of sale of goods by description, there is an implied
condition that the goods shall correspond with the description. The description
may be in terms of the qualities or characteristics of the goods.
iii) Sale by sample; (S.17)
When under a contract of sale, goods are to be supplied according to a sample
agreed upon, the implied conditions are:
a) That the bulk shall correspond with the sample in quality:
b) That the buyer shall have a reasonable opportunity of comparing the bulk
with the sample;
c) That the goods shall be free from any defect, rendering them
unmercha00ntable which would not be apparent on reasonable examination
of the sample. In other words, there should not be any latent defect in the
goods.

iv) sale by sample as well as by description: (S.15)

When goods are sold by sample as well as by description, there is an implied
condition that the bulk of the goods shall correspond both with the description

v) Condition as to merchantability [S.16 (b)]

Where goods are bought by description from a person who deals in such goods in
the ordinary course of business whether a seller or manufacturer, there is an
implied condition that the goods will be of merchantable quality.

For this condition applicable, not only that the sale must be by description, but the
following conditions must also be satisfied:
a) The seller should be a dealer in goods of that description, whether he be the
manufacturer or not; and:
b) The buyer must not have any opportunity of examining the goods
c) There must not be any latent defect in the goods which would both the
apparent on reasonable examination of the same.

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Implied Warranties:
Unless otherwise agreed, the law also incorporates into a contract of sale of goods
the following implied warranties:

i) Warranty of quiet possession [S.14 (b)]

The buyer shall have and enjoy quiet possession of the goods. If the quiet
possession of the buyer is in anyway disturbed by a person having a superior right
from the seller then the seller is said to breach this warranty.

ii) Warranty of freedom form encumbrances: [Sec.14 (c)]

This means that “the goods shall be free from any charge or encumbrance in
favour of any third party not declared or known to the buyer before or at the time
when the contract is made”. If the goods are afterwards found to be subject to a
charge and the buyer has to discharge the same, there is breach of warranty and
buyer is entitled to damages.

Doctrine of Caveat Emptor:

The maxim of ‘caveat emptor’ means “let the buyer beware”. According to the
doctrine of caveat emptor, it is the duty of the buyer to be careful while
purchasing goods of his requirement and. The buyer must examine the goods
thoroughly and must see that the goods he buys are suitable for the purpose for
which he wants them. If the goods turn out to be defective or do not suit his
purpose, the buyer cannot hold the seller liable.

Exceptions

The doctrine of ‘caveat emptor’ is subject to the following exceptions:

a) Where the seller makes a mis-representation and the buyer relies on it, the
doctrine of caveat emptor does not apply.
b) Where the seller makes a false representation amounting to fraud and the
buyer relies on it, or where the seller actively conceals a defect in the goods
so that the same could not be discovered on a reasonable examination, the
doctrine of caveat emptor does not apply.

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 c) Where the goods are purchased by description and they do not correspond
with the description.
d) Where the goods are purchased by description from a seller who deals in
such class of goods and they are not of ‘merchantable quality’, the doctrine
of caveat emptor does not apply.
e) Where the goods are bought by sample, the doctrine of caveat emptor does
not apply if the bulk dos not correspond with the sample, or if the buyer is
not provided an opportunity to compare he bulk with the sample, or if there
is any hidden or latent defect in the goods.

Transfer of Property in Goods

The phrase “transfer of property in goods” means transfer of ownership of the

goods.

1) Transfer of property in specific or Ascertained Goods:

It is necessary to determine the precise moment when the transfer of the property
in goods, under a contract of sale. Such determination is important is important
because:

i) If the goods were accidently destroyed or stolen, it would be necessary to

know which party has to bear the loss and,
ii) If the buyer or seller becomes bankrupt it would be necessary to know
whether the goods belong to the trustee in bankruptcy.
iii) It determines what remedies are available to the seller.

General rule:

Where there is a contract for the sale of specific or ascertained goods the property
in them is transferred to the buyer as such time as he parties to the contract
intend it to be transferred.

It is only when the intention of the parties cannot be judged from their contract or
conduct or other circumstances that the following rules will apply:

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 a) When goods are in deliverable state:

Goods are said to be in a deliverable state if they are in the state required by the
actual contract between the parties. The property in the goods passes at the time
of the contract.

b) When goods have to be put into a deliverable state:

When there is a contract for the sale of specific goods and the seller is bound to do
‘something to put them in a deliverable state. E.g. Packing the goods. The
property in the goods does not pass to the buyer until the goods are put in such a
deliverable state and the buyer is notified.

c) When the goods have to be measured etc. to ascertain price:

When there is a contract for the sale of specific goods in a deliverable state, but
the seller is bound to weigh, measure, test e.t.c. for the purpose of ascertaining
the price, the property does not pass until such act or thing done and the buyer
has notice thereof.

d) When goods are delivered on approval (sale or return):

When goods are delivered to the buyer on approval or ‘on sale or return’, or on
other similar terms, the property therein passes to the buyer:

i) When he signifies his approval or acceptance to the seller

ii) When the seller does any other act adopting the transaction e.g., uses
the goods or resells them.
iii) If the seller does not signify his approval or acceptance to the seller but
retains the goods, without giving notice of rejection, beyond the time
fixed for the return of goods, or if no time has been fixed, beyond a
reasonable time.
2) Transfer of Property in Unascertained and Future Goods:

Where goods contracted to be sold are not ascertained or where they are future
goods, the property in goods does not pass to the buyer unless and until he goods
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are ascertained or unconditionally appropriated to the contract so as to bring them
in a deliverable state.

Auction sales

Rules governing sale by action

i) Where goods are put up for sale by auction in lots, each lot is deemed to be
the subject of a separate contract of sale;
ii) A sale by auction is complete when the auctioneer announces its completion
by the fall of the hammer, or in other customary manner;
iii) until the announcement of completion of sale is made any bidder may
withdraw his bid;
iv) If the right of the seller to bid is not expressly reserved, he cannot bid nor do
so through another person.
v) A sale by auction maybe subject to a reserved or price,
vi) The right to bid may also be reserved.

Transfer of Title on Sale:

The general rule relating to the transfer of title on sale is that “the seller cannot
transfer to the buyer of goods a better title than he himself has”. If the tile of the
seller is defective the buyer’s title will also be subject to the same defect.

This rule is expressed by the maxim, “nemo det quod no habet,” which means that
no one can give what he does not have.

Exceptions to the nemo dat quod no habet rule

a) sale by a mercantile agent:

Under the Factors Act, a sale by a factor passes a good title. A factor is a mercantile
agent who is entrusted with possession of goods and who sells in his own name. A
factor passes a good title, even if he has no authority to sell.

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 b) Transfer of title by estoppel

A non-owner can pass a good title if the true owner is by his conduct precluded
(prohibited) from denying the seller’s authority to sell. Therefore if the true owner
of the goods makes it appear that some other person is the owner, the true owner
is estopped from denying the apparent ownership of the other.

c) Sale by person in possession under voidable contract

If the seller’s title is voidable but he sells the goods before his title is avoided, to a
buyer who buys in good faith, for value and without notice of the seller’s defective
title, he passes a good title.

d) Sale by seller in possession after sale

If the seller, who has already sold goods, but retains their possession or documents
of title, sells them to a 3rd party who buy’s in good faith, for value without notice of
the previous sale, the seller passes a good title.

e) Sale by buyer in possession

Where a buyer who has bought or agreed to buy goods, obtains their possession or
documents of title with the seller’s consent before title passes to him and as a
consequence he transfers them to a bonafide purchaser who buys them in good
faith and without notice of the original’s seller’s lien on the goods, he passes a
good title.

f) Sale under statutory power

A sale made in exercise of power conferred by an Act of Parliament passes a good

title e.g. sale by a:

i) Liquidator under the Companies Act

ii) Sale by a charge or morgagee under the Lands Act
iii) Sale under the Disposal of Uncollected Goods Act
g) Sale under common law power

A sale made in pursuant to an order of a competent jurisdiction passes a good title.

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 h) Sale in market overt

At common law, sale in market overt passed a good title to the buyer provided he
took the goods in good faith, for value and without notice of any defect in the
seller’s title. Market overt has been defined as an open, public and legally
constituted market. This exception to the principle of nemo dat does not apply in
Kenya.

Performance of the Contract

It is the duty of the seller to deliver the goods and of the buyer to accept and pay
for them, in accordance with the term of the contract of sale. Therefore, the
performance of a contract of sale involves delivery of goods by the seller and
acceptance of the delivery of goods and payment for them by the buyer, in
accordance with the terms of the contract.

DUTIES OF THE SELLER

a) Put the goods into a deliverable state-The seller is bound to ensure that the
goods are in a condition in which the buyer is bound to take delivery when
the contract is made and unless otherwise agreed, the cost of doing so is
borne by the seller.
b) Pass a good title- It is the duty of the seller to pass a clean title to the buyer
failing which he is liable in damages. This is because under sec14 (a) of the
Act, there is an implied condition that the seller shall have the right to sell
the goods when the property is to pass.
c) Deliver the goods: Under Section 28 of the Act, it is the duty of the seller to
deliver the goods to the buyer
d) Supply goods of the right quality: The seller is bound to ensure that the
quality of the goods supplied is consistent with the terms of the contract.
This is the principle of Caveat emptor and its exceptions

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 e) Supply goods of the right quantity –The seller must deliver goods of the
quantity agreed to by the parties.

Delivery of the goods:

Delivery of goods means voluntary transfer of possession of goods from one

person to another.
Rules to Delivery of Goods:

1. Whether it is for the seller to transmit the goods to the buyer or for the
buyer to take delivery at the seller’s premises depends on the agreement
between the two.
2. Unless otherwise agreed, the cost of and incidental to putting the goods into
a deliverable state is borne by the seller.
3. Unless otherwise agreed the place of delivery is the seller’s place of business
if not then his residence.
4. Where specific goods are in some other place known to both parties, that
other place is the place of delivery
5. If the goods are in the hands of a 3rd party, delivery is complete when the
3rd party notifies the buyer that he holds the goods on his behalf.
6. If the seller is bound to transmit, the goods to the buyer, he must do so
within the stipulated time if any or within a reasonable time.
7. Delivery by common carrier is Prima Facie complete when the goods are
handed over to the carrier.
8. If the seller delivers less goods, the buyer may reject them or accept and pay
at the contract rate
9. If the quantity delivered is more, the buyer may reject the goods, or accept
those included in the contract or accept all and pay at the contract rate.
10. If the goods delivered are mixed with those of a different description, the
buyer may: -
a. Reject the goods.
b. Accept those included in the contract
11. Unless otherwise agreed, the buyer is not bound to accept delivery by
instalment

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 12. Where delivery is by instalment to be paid for separately and the seller
makes one or more defective deliveries or the buyer refuses to take delivery
or pay for one or more instalment whether such breach entitles the
innocent party to treat the contract as repudiated or is severable depends
on the terms of the contract and the circumstances of the case.
13. If the buyer rejects the goods as of right, he is not bound to return the same
to the seller but must notify him the fact of rejection.

a) Acceptance

The buyer is deemed to have accepted the goods in the following circumstances:

i. When he intimates to the seller that he has accepted this goods.

ii. When the goods have been delivered to him, and he does not act to the
goods which is inconsistent with the ownership of seller.
iii. When he retains the goods, after the lapse of a reasonable time, without
intimating to the seller that he has rejected them.

If fewer goods are delivered the right buyer is entitled to:

a. Reject the goods
b. Accept and pay at the contract price
If more goods are delivered, the buyer may:
a. Reject the goods
b. Accept those included in the contract
c. Accept all and pay at the contract rate

Rights of Unpaid Seller

Unpaid seller Defined: The seller of goods is deemed to be an ‘unpaid seller’

When the whole of the price has not been paid or ;

Where a bill of exchange or other negotiable instrument e.g. a cheque has
been received as a conditional payment and has been dishonored.

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Rights of an unpaid Seller:

An unpaid seller has two-fold rights:

(a) Rights of unpaid seller against the goods, and;

(b) Rights of unpaid seller against the buyer personally

Rights of Unpaid Seller against the Goods:

The seller has the following rights against the goods notwithstanding the fact that
the property in the goods has passed to the buyer:

1. Right of lien;

2. Right of stoppage of goods in transit;

3. Right of resale

1) Right of lien

‘Lien’ is the right to retain possession of goods and refuse to deliver them to the
buyer until the price due in respect of them is paid. An unpaid seller in possession
of goods sold is entitled to exercise his lien on the goods in the following cases:

i. Where the goods have been sold without any stipulation as to credit;
ii. Where the goods have been sold on credit, but the term of credit has
expired;
iii. Where the buyer becomes insolvent, even though the period of credit may
not have yet expired.

Termination of Lien:

The unpaid seller of goods loses his lien in the following cases:

i. When he delivers the goods to a carrier or other bailee for the purpose of
transmission the buyer without reserving the right of disposal of the goods;
or
ii. When the buyer or his agent lawfully obtains possession of the goods; or

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iii. When the seller expressly or impliedly waives his right of lien.
2) Right of Stoppage of Goods in Transit or Stoppage in Transit:

The right of stoppage in transit means the right of stopping further transit of the
goods while they are with a carrier for the purpose of transmission to the buyer,
resuming possession of them and retaining possession until payment of the price.

When can this right be exercised?

An unpaid seller can exercise this right only when:

a) The buyer becomes bankrupt. The buyer is said to be bankrupt when he has
ceased to pay his debts in the ordinary course of business, or cannot pay his
debts as they become due, whether he is declared bankrupt or not; and.
b) The property has passed to the buyer.
c) The goods are in the course of transit. This means that goods must be
neither with the seller nor the buyer no with their agent. They should be in
the custody of a carrier as an independent middleman (i.e. in his own right
as a carrier) e.g. railways and common carriers whose business is to
transport goods of others.

Termination of stoppage in transit

i) When the buyer or his agent takes delivery of the Goods after the goods
have reached destination
ii) When the buyer or his agent obtains delivery of the goods before their
arrival at the appointed destination
iii) When the goods have arrived at the Destination and the carrier
acknowledges to the buyer or his agent that he holds the goods on his
behalf.
iv) When the goods arrived at their destination but the buyer instead of taking
delivery requests the carrier to carry the goods to a further destination and
the carrier agreed to take them to the new destination.
v) When the carrier wrongfully refuses to deliver the goods to the buyer or his
agent.

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 vi) When part delivery of the goods has been made to the buyer with an
intention of delivering the whole of the goods, transit will be at end for the
remainder of the goods also which Are yet in the course of the transit.

3) Rights of Resale:

The right of resale is a very valuable right given to an unpaid seller. The unpaid
seller has a limited right to resell the goods in the following cases:

i) where the goods are a perishable nature ; or

ii) where such a right is expressly reserved in the contract in case the buyer
should make a default ; or
iii) Where the seller has given a notice to the buyer of his intention to resell and
the buyer does not pay or tender the price within a reasonable time.

Rights of Unpaid Seller against the Buyer Personally

The unpaid seller has the following three rights of action against the buyer
personally:

1) Suit for price: Where property in goods has passed to the buyer; or where
the sale price is payable ‘on a day certain’, although the property in goods
has not passed; and the buyer wrongfully neglects or refuses to pay the
price according to the terms of the contract, the seller is entitled to sue the
buyer of price, irrespective of the delivery of goods.
2) Suit for damages for non-acceptance: Where the buyer wrongfully neglects
or refuses to accept and pay for the goods, the seller may sue him damages
for non-acceptance .The seller’s remedy in this case is a suit for damages
rather than an action for the full price of the goods.

Rights of the Buyer

The buyer has the following rights against the seller for breach of contract:

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 a) Suit for damages for non –delivery: Where the seller wrongfully neglects or
refuses to deliver the goods to the buyer, the buyer may sue the seller for
damages for non-delivery.
b) Suit for specific performance: Where there is breach of a contract for the
sale for specific or ascertained goods, the buyer may file a suit for the
specific performance of the contract.
c) Suit for damages for breach of warranty: Where there is a breach of warranty
by the seller, or the buyer is entitled to file a suit for damages or the price if
the buyer has already paid.
d) Suit for rescission of contract and for damages for breach of ‘condition’: the
breach of ‘condition’ entitles the buyer to treat the contract as repudiated
or ended and for loss if he as incurred any loss.

Suit for recovery of the price together with interest: If the buyer has already paid
the price of the goods to the seller and the goods are not delivered or they are
stolen, he can sue the seller for the refund of the price and also for the interest at
reasonable rate from the date of payment to the date of refund.

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