ICAN BUSINESS LAW WEEK 6 SOLUTION TOPIC: SALE OF GOODS & HIRE PURCHASE SECTION A 1. C 2. A 3. B 4. E 5. B 6. D 7. B 8. B 9. B 10.

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1 ICAN BUSINESS LAW WEEK 6 SOLUTION TOPIC: SALE OF GOODS & HIRE PURCHASE SECTION A 1. C 2. A 3. B 4. E 5. B 6. D 7. B 8. B 9. B 10. A SECTION B SOLUTION TO QUESTION 1 STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 1

2 a. A Credit sale agreement:- Is an agreement by which the seller sells and transfer ownership in goods (i.e property) to the buyer and agrees to accept payment by installment. The buyer is the owner of the goods and not merely a hirer of them. If he default in payment the installments, the seller s remedy is an action for the accrued installments but not for recovery of possession of the good. b. A conditional sale agreement: Is an agreement for the sale of goods under which the purchase price is payable by installments, until the last installment is paid and the property in the goods is to remain in the seller (notwithstanding that the buyer is to be in possession of the goods) until such conditions as to the payment of installments or otherwise as may be specified in the agreement are fulfilled. The difference between hire purchase and this is that there is an obligation, not merely an option to purchase the goods STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 2

3 c. Bailment: Bailment arises where the ownership and the possession of goods become vested in different person e.g. Where a car is given to the mechanic for repairs, the car owner still remains the owner of it and the mechanics acquires the possession of it in the interim for the purposes of repair thus becoming its bailee. A bailment is thus a delivery of goods on a condition, expressed or implied that they shall be restored by the bailee to the bailor or delivered according to his direction as soon as the purpose for which they are bailed shall be fulfilled. SOLUTION TO QUESTION 2 Advantages of equipment leasing are the following: 1. Convenience: It affords convenience to lessee who only needs little equipment for a short period. STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 3

4 2. Flexible financing term: Equipment leasing allows company to acquire equipment without the acquisition having much effect on the company capital budget. 3. Cancellation option: Some lease agreement provides the lessee with cancellation option in the event that the equipment proves inadequate for the company need. 4. Maintenance: This arrangement favors company with limited financial capacity who agrees for short term lease because the lessor is responsible for all maintenance associated with the equipment been leased. 5. Speed: Businesses In need of equipment often quickly find lease to be preferable and quick to arrange SOLUTION TO QUESTION 3 STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 4

5 The act was passed to check various injustices and malpractices in Hirepurchase transactions which were perpetrated by owners under the common law of hire purchase. Some of them may be highlighted as follows: 1. Hirers were usually lured by owners into entering hire purchase transactions without understanding of the financial obligation involved. 2. Hirers obtained goods under agreements of which copies were not given to them and such agreements usually excluded all conditions and warranties thereby passing off useless goods to the hapless hirer. 3. Owner reserved of the right to recover the goods on the slightest breach using force or entering the hirer s premises although only a small fraction of the hirer purchase remains to be paid as in Atere Vs. Amao. STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 5

6 4. Where an owner sells goods after seizure he was not accountable to the Hirer for any excess he might realize over the amount outstanding. But here he sells at a loss he could claim for the balance from the hirer. 5. The owner often supplied poor quality of goods to the hirer and relied on exemption clause. SOLUTION TO QUESTION 4 Section 3 of the Act renders void any provision in a hire purchase agreement:- 1. Whereby an owner or his agent is authorized to enter any premises to recover goods on hire purchase or is relieved from liability for any such entry. STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 6

7 2. Whereby the hirer s right under the Act to terminate the agreement is excluded or restricted or any additional liability (other than those imposed by the Act) is imposed on the hirer for terminating the agreement. 3. Whereby after termination of the agreement the hirer is subjected to any liability in excess of the liability which he would have incurred if the agreement was terminated by him under the Act. 4. Whereby anyone acting on behalf of the owner or seller in connection with the formation or conclusion of the agreement is deemed to be hirer s agent. 5. Whereby an owner or seller is relieved from liability for the acts or default of any person acting on his behalf in connection with the formation or conclusion of the agreement. STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 7

8 6.Whereby the services of a person as insurer, repairer or in other capacity whatsoever are imposed on the hirer. SOLUTION TO QUESTION 5 By section 1 (1) of the sale of goods. Act 1893,sale of goods is a contract whereby the seller transfers, or agrees to transfer, the property in the goods to the buyer for a money consideration called the price. The essence of a sale of Good contract is that the parties intend to transfers ownership or property in the goods from the seller to the buyer. Where 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 is to take place at a future time subject to some condition thereafter to be fulfilled, it is called an agreement to sell. STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 8

9 SOLUTION TO QUESTION 6 The types of goods are the following: Specific Goods: By section 62 of the Act these are goods which are identified and agreed on at the time a contract of sale is made. It must thus be perfectly clear which goods are being sold, e.g all the red bags in the room. Unascertained goods: The time the distinction is made is when the contract of sale is made. At that time, if the goods are identifies and agreed on they are specific good; if they are not identified and agreed on they are unascertained goods e.g where the contract relates to part of a larger quantity of goods as in 40 bags of cement out of 100 bags in the store. It is important to remember that unascertained goods can become ascertain goods but can never be specific goods again because goods are only specific when they are identified and agreed upon at the time the contract is made. STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 9

10 Existing Goods: By section 5(1), these are goods which the seller owns or possesses at the time of the contract and they may be either specific or unascertained. Future Goods: Also by section 5(1), they are goods which the seller is to manufacture or acquire after the contract of sale is made, they are generally unascertained goods. SOLUTION TO QUESTION 7 The terms implied in a contract of sale of goods are as follows: Title: Section 12(1) provides that there is an implied condition on the part of the seller that in the case of a sale he has a right to sell the good and that in the case of an agreement to sell he will have a right to sell the goods when the property is STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 10

11 to pass. There is thus an implied condition on the part of the seller that he shall have a right to sell the goods. If therefore the seller has no title, as may be where the goods are stolen, he is liable to the buyer. Akoshile V Ogidan. (1950): The plaintiff bought a car from the defendant which turned out to be a stolen car, which was later taken away by the police. He recovered his full purchase price from the defendant. Quiet possession: Section 12(2) provides that there is an implied warranty that the buyer shall have and enjoy quiet possession of the goods i.e. the seller will be liable in damages if the buyer is disturbed in the enjoyment of the goods in consequence of the seller s defective title or for the act of seller s representative or servant., STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 11

12 Charge or encumbrance: Section 12(3) provides that there is an implied warranty that the goods shall be free from charge or encumbrance in favor of a third party, not declared or known to the buyer before or at the time when the contract to a made. A failure to disclose that a repairman s fees (which entitles him to a lien to retain the car) are still outstanding In respect of a sale concerning a second hand car amounts to a charge or an encumbrance which entitles the buyer to seek damage for this breach of warranty. Also a property under a mortgage. Description: Section 13 provides that where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description, and if the sale be by sample, as well as by description it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description. Goods are sold STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 12

13 by description when they are described in the contract and the buyer contract in reliance on that description. Fitness for Purpose: Section 14(1)provides that where the buyer expressly or by implication makes known to the seller the particular purpose for which the goods are required, so as to show that he relies on the seller s skill and judgment and the goods are of a description, which is in the course of the seller s business to supply (whether he be the manufacturer or not), there is an implied condition that the goods must be reasonably fit for such purpose. Hence, if the buyer points out what he wants the goods for, then the goods must be fit for that purpose. This applied whether or not the purpose is the normal one. Sales by sample: Section 15(2) provides that in the case of a contract for sale by sample there is an implied condition- STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 13

14 a. That the bulk correspondent with the sample in quality b. That the buyer have a reasonable opportunity of comparing the bulk with the sample c. That the goods will be free from any defect, rendering them unmerchantable, which would not be apparent on reasonable examination of the sample. SOLUTION TO QUESTION 8 Conditions can a person who buys from a non owner obtain a good title to the goods are the following: 1. Estoppel: If the true owner stands by and allows an innocent buyer to pay over money to a third party, who professes to have the right to sell an article STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 14

15 in the belief that he is becoming the owner of it, the true owner will be estopped from denying the third party s right to sell. 2. Sales by mercantile agent or (Factor): A mercantile agent is a person who sells or otherwise deals with goods as business and on behalf of other people. He deals in his own name, dependently of his employer (his principal). Anyone dealing with a mercantile agent obtains good title even if the agent was not authorized to sell. A mercantile agent is also known as a factor. 3. Sale in Market Overt This is provided for under section 22 which provides as follows: Where goods are sold in market overt, according to the usage of the market, the buyer acquires a good title to the goods provided he buys them in faith and without notice of any defect or want of title on the part of the seller. STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 15

16 4. Sale under Voidable Title: If the seller has a voidable title to goods and his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided that he did not know of the seller s defect of title and bought in good faith. 5. Sale by Seller in Possession: Section 25(1) of the Act provides this exception. It states. Where a person having sold goods continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title under any sale, pledge or disposition thereof, to any person receiving the same in good faith and without notice of the previous sale, has the same effect as if the person taking the delivery STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 16

17 or transfer were expressly authorized by the owner of the goods to make the same. 6. Sale by Buyer in Possession: This exception is provided by Section 25 (2) Where a person having bought or agreed to buy goods obtains with the consent of the seller possession of the goods or of the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title under any sale, pledge or disposition thereof, or under agreement for sale pledge or disposition thereof, to any person receiving the same in good faith any without notice of any lien or other right of the original seller in respect of the goods shall have the same effect as if the person making the delivery or transfer were mercantile agent in possession of the goods or documents of title with the consent of the owner. STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 17

18 7. Disposition of good under common law and statutory powers: Examples are: I The rights of a pawnbroker to sell unredeemed goods pledged with him. Ii The right of a hotel to sell property of guests to satisfy debts. Iii. The right of landlord in certain circumstances to sell tenant s goods for arrears of rent. ix. The rights of watch repairers, cobblers, or those of electronic items to sell uncollected goods. SOLUTION TO QUESTION 9 STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 18

19 SELLER S RIGHTS AND REMEDIES: They are of two kinds. He had right over the goods which are called real rights as against his rights against the buyer himself if which are regarded as personal rights. REAL RIGHTS An unpaid seller of goods, even though the property in the goods has passed to the buyer has the following rights. a) right of lien: A lien is the right to retain possession of the goods, until payment of the price. It arises by the provision of section 41 of the Act as follows i. When the goods have been sold without any stipulation as to credit; ii. When the goods have been sold on credit but the term of credit has expired. iii When the buyer becomes insolvent. STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 19

20 b) Right of stoppage in transitu: i.e. the right of stopping the good while they are on transit and resuming possession of them until payment of the price. To exercise this right, the following conditions become necessary: i. the seller must be an unpaid seller within the context of section 38(1) ii. the goods must be in the course of transit. iii. the seller must not have done anything contrary to his right of stoppage in transit. iv. the carrier must not be an agent of the buyer. c) Right of resale: The seller even though unpaid who resells is generally in breach. He must deliver the goods in return. However, in the following instances he has a right to resell. STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 20

21 i. Where the goods are of a perishable nature. ii. Where he give notice to the buyer of his intention to resell, and the buyer does not within a reasonable time pay or tender the price. iii. Where the seller expressly reserves a right of resale in case the buyer should make default. d. Right of retention: if property in the goods has passed to the buyer, the unpaid seller may exercise his right of lien over the goods. PERSONAL RIGHT STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 21

22 A seller is also entitled to these personal rights against the buyer where the buyer breaches the contract. i. To sue for the price: By section 49 of the Act this right avails the seller when the property in the goods have passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods. ii. To sue for Non-Acceptance: This action for damages lies when the buyer refuses or neglects to accept the goods. SOLUTION TO QUESTION C.I. F. Contract: This represents cost, insurance, freight. Under C.I.F. contract, the price of the goods will include the cost of insurance premium and freight. The contract is performed and title passes by delivery to the buyer the STARRY GOLD ACADEMY , , Page 22

23 shipping document which entitled him to claim the goods against the ship owner or insurer of the goods. The duties of a seller under a C.I.F. Contract. I. To make out an invoice of the goods sold. II. To ship the goods. III. To make a contract of carriage which will ensure delivery of the goods at their destination IV. To arrange for the insurance of the goods under favourable terms. V. To tender to the buyer with all reasonable dispatch, the invoice, bill of lading and insurance. 2. F.O.B. Contract. This means Free on Board Under this contract the seller must put the goods on board a ship at his own expense for transmission to the STARRY GOLD ACADEMY , , info@starrygoldacademy.com, Page 23

24 buyer. But the buyer will bear the cost of freight and insurance, if he wishes to insure. Risk passes to the buyer ship, property may pass at the same time STARRY GOLD ACADEMY , , Page 24

Summary. Sale of Goods Act, 1930

Summary. Sale of Goods Act, 1930 1 Summary Sale of Goods Act, 1930 The Sale of Goods Act involves Preliminary/ Introduction, Contract of Sales, Conditions and Warranties, Effects of the Contract- passing of Property; Unpaid Seller and