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The Definition of Sale of Goods Contract


A contract of sale of goods is defined in Section 3 (1) of Cap 31 Laws of Kenya.

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 a money consideration, called the price.   (Emphasis on the key words)

The sale of goods law sees items from two different perspectives or goods composed of 2 major components.   You have property in goods i.e. the title in goods and the physical aspect, which are two different things.

Goods are different from property.  E.g. If you have borrowed a shirt, you have possession but not property or title.  Ownership could be with one person whereas control is with somebody else. When we talk of goods we are talking of the tangible aspect and when we talk of property we are talking of ownership.

In the definition it is said that it is a contract by which the seller or the offeror transfers or agrees to transfer the property to the buyer or offeree.  A contract of sale of goods does not deal with the tangible, it deals with property.  You do not transfer goods, you transfer property, you deliver goods and transfer property.

Once the property has been transferred then the buyer must pay a consideration in your ordinary contract and in this case the consideration must be in money. Money consideration is called the price.  In a sale of goods contract, the beacons are that the seller agrees to transfer the property for money consideration called the price.

Under Section 3 (4) the difference drawn in terms of sale contract where the property has already been transferred whereas where he has agreed to transfer it is an agreement to sell.

Transfer and Passing of Property; the two effectively mean that the ownership has moved but they carry different meanings.  In the case of sale of goods transfer refers to active actions being taken by seller and buyer to transfer ownership from seller to buyer, through agreement where the parties have agreed to transfer the ownership of property to the buyer.  The parties are actively involved.

When you talk of passing of property, property can pass to the buyer by operation of the law and the parties have done nothing to aid this.  E.g.   when you attend an auction, you have an authorised auctioneer who is selling goods for other people.  The property in the goods passes from the seller to the buyer when the hammer falls.  The owner of the goods is not the auctioneer but has given the goods to the auctioneer.  The buyer is usually the highest bidder.  Imagine the hammer has fallen and the highest bidder approached the auctioneer and says he does not have enough money to pay, but can pay by cheque and the auctioneer who is the agent for the owner of the goods tells the buyer that he accepts the cheque provided the title remains with him until the cheque clears.  That buyer takes the goods but sells the goods in the next corner.  So you have a situation where there is the seller, the buyer, but the seller has delivered the goods to the buyer at an auction without the price consideration and the buyer has sold them to another buyer.  The dispute arises when the cheque bounces.  The second buyer has no notice of the circumstances. The tussle is between the seller and the second buyer.  Who gets a better claim to the goods?  The title has not moved so the first buyer has no title to the goods and cannot transfer that which he dos not have. But   under the sale of goods Act S. 58 as long as the second buyer bought without being aware of the defect, then the second buyer has a better claim than the seller. (owner of the goods).  The second buyer has to have bought the goods without notice i.e. not knowing that there were defects in the sale.

The law holds the second buyer to have a better claim due to equity.  There is balancing of equity between the 2 owners.  The second owner is innocent if he bought the goods without notice.

The second buyer is the most innocent because the owner of the goods by giving the goods to the auctioneer facilitated the commission of fraud by the first buyer so the goods are given to the second buyer only if he genuinely bought the goods without notice that there was a defect in the original sale.
He who facilitates commission of fraud is less innocent then he who had no way of facilitating the same.
This situation can be controversial.
A just judgment is not necessarily fair.  Fairness is a value judgement.

 
 
 

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