LECTURE ONE

INTRODUCTION & NATURE AND FORMATION OF THE CONTRACT

It is difficult giving a precise definition of commercial law. This is due to the fact the syllabus of
commercial law is broad and hence there is the need to look at the various units and deal with same
accordingly. Basically, commercial law deals with the rights and duties which arise from the supply
of goods and services in the course of trade. This has led authorities in the subject to argue that
commercial law indeed is not a distinct subject but a collection of subjects. Under our syllabus for
commercial law, units covered include, Sale of Goods, Hire Purchase and Agency.

What is Commercial Law?

It is really difficult to get an all encompassing definition for commercial law. Various definitions
have been offered. It has been defined variously as that portion of the law concerned with
‘commerce, trade and businesses’, ‘special rules applicable to contracts for sale of goods,
insurance and finance’.

Professor Sir Roy Goode one of the leading commercial law academics did not define it but
described it as that branch of the law dealing with rights and duties emanating from the supply of
goods and services in trade. Professor Goode’s description of the subject seems to cover a wide area
and is thus preferred.

Lex Mercatoria;
It simply means the law of the merchant which evolved in the Middle Ages. Merchants during these
periods travelled with their goods across Europe to sell. During these periods where there is a
dispute with regards to the transaction between the parties the merchant’s courts decided the
disputes by relying on the lex mercatoria which was basically an international law of commerce.
This was basically derived from the customs and practises of the merchants at the time.

During the C 15th & C 16th the lex mercatoria was taken over by the Court of Admiralty and finally
in the C17th, the Admiralty court’s commercial jurisdiction was taken over by the common law. As
the common law developed, there were conflicting decisions which led to a call for codification of
commercial law to ensure uniformity. This has led to the codification of aspects of commercial law.

This class will begin with the study of the Sale of Goods. The principal legislation on the sale of
Goods in Ghana is the Sale of Goods Act, 1961 Act 137. Our discussion will thus focus on this Act.

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Sale of Goods;
Nature and formation of Contract;
Definition;
Section 1 (1) of the SGA states that a contract of sale of goods is a ‘contract whereby the seller
agrees to transfer the property in the goods to the buyer for a consideration called the price,
consisting wholly or partly of money’.
Elements of the definition;
- Agreement- offer & acceptance
- seller to transfer property (title) in the goods,
- to the buyer for a consideration (price),
- money or otherwise.

Capacity section 2;
Subsection 1 state that one’s capacity to buy and sell is governed by the general law on capacity.
Capacity is crucial because of intention to create legal relations. That is where there is a breach;
the injured party may enforce his rights under the contract. A person who has capacity under our
laws is someone who has attained eighteen1 years of age. Anyone under eighteen is a minor and
hence lacks capacity.
Subsection 2 gives an exception to the general rule that infant’s cannot enter into contracts. In this
sense where the contract is one of necessaries2 the infant is bound.

Nash V. Inman [1908] 2 K.B. 1;

A Cambridge minor undergraduate, was supplied with eleven fancy waistcoats and was sued for the
price when he failed to pay. The plaintiff argued that the items supplied were necessaries. The court
rejected the plaintiffs claim solely because the goods were not necessaries, since the father had
already supplied him with same. Subsection 3 defines necessaries as goods suitable to the condition
in life of the person so supplied and to his actual needs at the time the goods were supplied.

Section 3, form of contract;

Like all other contracts, a contract of sale of goods may be in writing or oral or combination of
both.

1 Section 1 of the Children’s Act, Act 560 of 1998 & Section 1 (1) of the Wills Act, 1971, Act360.
2 The others are beneficial contracts of service, Contracts that are beneficial to the infants and where the
infant has performed his part of the bargain.

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Section 4, auction sales;
Section 4 (1) (a) and (b) states the common law rules which governs auction sales. The person who
bids is the offeror whose bid may either be accepted or rejected. Until the hammer falls the offeror
may withdraw his offer.

Section 5, Types of goods;

Section 81 of the SGA defines goods to include ‘ movable property of every description and
includes growing crops or plants and other things attached to or forming part of the land which is
agreed to be severed before sale by or under the contract of sale’. It is submitted that the goods
which is the subject of a contract of sale must be a movable property.

Halaby V. Wiredu [1973] 2 G.L.R. 249;

The sale of business stock in trade and premises of the defendant was said to be inconsistent with
the provisions of the SGA.

Morgan V. Russell [1909] 1 K.B. 357;

This case has held that the sale of cinders and slag which were not detached from the soil, was not a
sale of goods, but a sale of an interest in land and hence not a sale of goods.

Under SGA3 goods, may be specific, unascertained or future goods. Specific goods are goods
which are agreed upon at the time of the contract. See section 81 of the SGA. Unascertained goods
on the other hand refer to goods which are not identified at the time of the contract. The phrase
unascertained goods is not defined under the SGA but this phrase clearly refers to all goods which
are not specific. Once the goods are ascertained, they become ascertained goods (the goods can
never become specific goods because goods can only be specific if identified and agreed upon when
the contract is made).

According to subsection 2, goods which are the subject of the contract may be goods to be
manufactured or grown or acquired by the seller after entering into the contract. Such goods have
thus come to be known as future goods. The goods are future because the goods are not yet in
existence. Examples include contract to build a ship. Title cannot pass in future goods until they
become existing goods

3 Section 5 of the SGA.

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Howell V. Coupland [1876] 1Q.B.D. 258;
It was however held that a sale of 200 tons of potatoes to be grown on a named land was specific
goods notwithstanding the fact that the goods were not in existence at the time of the contract. The
case was decided based on the common law rules of frustration and when the crop failed the
contract was held avoided. In so far as our Act is concerned, any such goods shall be future goods.

Section 6, the Price;

The price may be determined as follows;
- by the contract
- fixed in a manner so agreed
- determined by the course of dealing
Subsection 2 is to the effect that where the price is not determined according to subsection 1, the
buyer must pay reasonable price (not defined) which is a question to be determined.
Where the price is determined by a contract, there is no problem with same. However, there are
problems with the other two modes. The problem here is that price plays a very important role in
any sale contract and where there is this vagueness, it may suggest that there has not been a
concluded contract.

May & Butcher V. The Republic [1934] 2K.B. 17;

The HOLS held that an agreement for the sale of goods, whose price was to be determined later by
the parties, was not a concluded contract.
However, the courts attitudes have shifted to the contrary.
See the following;

Hillas & Co. V Arcos Ltd. [1932] All E.R. Rep 494;
Although the contract which was for an option to buy timber did not specify price, the HOLS held
that the contract was binding. This was due to the fact that the HOLS made a finding of fact that the
agreement had a clause for calculating the price by reference to an official list.

Foley V. Classique Coaches Ltd. [1934] 2 K.B. 1;

In this case, the plaintiff owned a filling station and an adjoining land. He sold the land to the
defendant on condition that the two should enter into an agreement, whereby the defendant will buy
fuel needed for his transport business from him. The defendant reneged on this on the ground that
the agreement provided that the fuel should be bought ‘at a price agreed by the parties from time to
time’

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The court held that the agreement was not void for uncertainty. The parties both believed the
contract to be binding and had acted on it for some years.

Section 7, Valuation;
Section 7 is to the effect that the price may also be determined by valuation. This is where the price
at which the good is to be sold is fixed by a valuation.

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 LECTURES TWO & THREE
DUTIES OF THE SELLER AND THE BUYER
Duties of the Seller I;
Under the SGA, the seller’s duties can be divided into two, namely fundamental duties, comprising
the seller’s delivery, existence of the goods and title (sections 8, 9 and 10 of the SGA). The other
leg deals mainly with sale by description, sale by sample, quality and quantity of goods to be
supplied. (sections 11, 12, 13 and 14 of the SGA). Delivery will be treated as a sub topic in view of
its importance in the contract of sale of goods. The discussion will basically turn on two basic
principles in contract law namely, conditions and warranties.4

Section 8 generally states that in a sale of specific goods, the obligation of the seller is to deliver the
goods to the buyer; section 8(1) while with unascertained goods section 8(2) the seller is to deliver
goods which correspond to the description or sample given. Goods substantially correspond to the
description or sample shown if the goods so delivered correspond closely to the sample shown or
the description given to the extent that the difference cannot be recognised. The differences if any
must be so small or insignificant.

Section 9, Existence of goods;

The second duty of the seller in the sale of specific goods, there is an implied condition that the
goods are in existence. The reason is that where the goods are not even available the seller is given
opportunity to enter into another contract to procure same. In such a contract, the seller is given
time to deliver.

McRae V. Commonwealth Disposals Commission [1951] 84 CLR 377;

The defendants in this case contracted to sell a tanker which had shipped wrecked to the plaintiff.
The plaintiff incurred expenses in preparation to receive the subject matter of the contract. It
however turned out that the defendants had no such tanker at all or had contracted for one tanker.
The Australian High Court held that the defendants were liable for breach of contract.

4 Condition is an essential term of the contract which goes to the root of the transaction. Where a
condition is breached, gives the injured party the right to rescind from the contract and sue for damages. For
instance if the breach is committed by the seller, the buyer has the right to reject the goods and decline to pay
and if he has paid the price can recover same. A condition should be performed fully (seller’s obligation as to
quality and fitness).
A warranty on the other hand, is said to be collateral to the main purpose of the contract. Hence the
breach of it only gives rise to damages but not repudiating the contract.

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Section 10, Title to the goods;

The language of the section is that the seller will have a right (title) to sell at the time title (property)
is to pass. The problem here is what happens where the said right has not accrued to the seller when
property is to pass? That is, is it enough if the seller sells to the buyer with the consent of the one
who has title to the goods? It is thus possible that the buyer may sell the goods without the
authorisation of the owner of the goods. Such a situation will invariably affect the interest of the
buyer. These issues are not catered for under the SGA and thus it is the common law which has
remedied the situation with regards to the interest of the buyer. In all circumstances, the seller must
have the power to vest title (property) in the buyer. Conversely it is possible for a seller to own the
goods but have no ‘’right’’ to sell the goods because of a third party’s rights especially in areas of
trade mark.

Niblett V. Confectioners Materials Co Ltd [1921] 3 K.B. 387;

The defendants (S) in the United States sold to the plaintiffs’ condensed milk. When the goods
arrived in the UK, the goods were seized by the customs because it infringed a well known trade
mark (Nestle) in UK. It was held that the sellers had no right to sell the goods and that was a breach
of the right to sell. That the buyer was thus entitled to damages. Although the seller had the right to
sell, because the trade mark owners could restrain him by injunction, it was deemed that sellers had
no right to sell.

Under such circumstances, what is the remedy available to the buyer?

Rowland V. Divall [1923] 2 K.B. 500;

The plaintiff bought (£334) a car from the defendant and resold it (£400) to someone who used it
for four months. It later became clear to the plaintiff that the defendant did not have title to same.
The original owner claimed the car and the plaintiff refunded the purchase price and sued for the
price paid to the defendant.

It was held that the buyer was entitled to the entire purchase price. Atkin, L.J. observed that ‘the
buyer has not received any part of that which he contracted to receive, namely, the property and the
right to possession and, that being so, there has been a total failure of consideration’.

Butterworth V. Kingsway Motors Ltd. [1954] 1W.L.R. 1286;

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A took delivery of a car under a hire-purchase agreement and sold it to B when A had not finished
paying the instalments. B also sold it to C who further sold it to the defendant and the defendant
sold it to the plaintiff. Plaintiff after using the car for about 11 months received letter from the hire
purchase dealers (owners in law) demanding the car.

The plaintiff immediately wrote to the defendant asking for a refund of the total purchase price. A
immediately went to pay the hire purchase dealers. The payment by A meant that the defective title
held all along by the purchaser had been perfected but the court held that the plaintiff was entitled to
recover the full purchase price as the defendant at the time of the sale did not have power to the car.

There is the need to distinguish between the right to sell and the power of sale. Under the power of
sale, a seller who does not have the right to sell may still have the power to do so under one of the
exceptions stated under the nemo dat quod non habet rule. This will be discussed when we discuss
the passage of property.

Delivery of Goods, sections 15-20;

Ideally, the discussion should have followed from section 11 onwards but for the purposes of
clarity, the concept of delivery will be discussed before the quality and the quantity of the goods
will be discussed.

The concept of delivery, Meaning;

Under the Act, section 15, unless ….. the seller must be ready and willing to deliver the goods in
exchange for the price. The way delivery is used in the Act it means voluntary transfer of
possession of the goods from one person to another. Be that as it may, delivery has different
meanings and it is not confined to the transfer of physical possession as in carrying the goods
through any means to the buyer.

Delivery may thus take place as follows-

a) Actual or physical hand over of the goods to the buyer or his agent, s. 18(1)(a)
b) Delivery of documents of title, this includes handing over the bills of lading relating to the
goods, s. 18(1)(c)
c) Constructive delivery, which is the transfer of the right to possession of the goods which are
in the physical custody of a third party (warehouseman). This is done by attornment.
d) Delivery also takes place when the seller hands over to the buyer, the means of obtaining
actual control over the goods, s. 18(1)(b)

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Time of Delivery;
Section 16:
(1) If no time is fixed, the goods shall be delivered within a reasonable time since prima facie
time of delivery is of essence in commercial contracts. Reasonable time has not defined but it
is a question of fact i.e. it will depend upon the goods and the time it is needed.
(2) This is reinforced by subsection 2 which says that issues regarding time of delivery are a
condition of the contract of sale. Hence when the time of delivery is breached it gives right to
the buyer to reject the goods. This is more important when the goods are of a seasonal or
perishable nature.
(3) The parties may also without consideration agree that delivery should be made at a different
time. Under such circumstances, seller is bound to deliver and the buyer is bound to accept
the delivery of the goods at the date and time so agreed.

Mok Beer Bar V. Gada [1979] 1 G.L.R. 35;

The respondent (buyer) bought 2 bottles of locally made whisky from the appellant (seller). The
respondent (buyer) indicated that he would come for the drink later and that it be kept for him.
When the respondent (buyer) came for the drink, the appellant’s wife had sold same. The
respondent thus sued the appellant for the price and got judgment. The respondent later sued for
damages for breach of contract and got judgment again. The appellant applied for a review of the
judgment for damages and same was set aside and a new trial ordered. At this new trial, Counsel for
the appellant argued that keeping the drink was not part of the contract between the parties. This
argument was rejected and the damages increased. This decision was appealed against and the
counsel for the respondent had to justify the damages and he relied on sections 15 & 16 of the SGA

Held, allowing the appeal, the appellant was ready and willing to deliver the goods in exchange for
the price. That non-delivery was not a breach since there was no stipulation by the respondent to
postpone acceptance.

That it was the duty of the buyer to accept delivery of the goods after he had paid for it, this, the
respondent failed to do.
See also Kwetey V. Botchway [1980] G.L.R. 722,
Nanor V. Auto Parts [1992] 2 G.L.R. 273,
Japan Motors Trading Co. Ltd. V. Williams [1984-1986] 1

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 G.L.R. 634.

Modes of Delivery, section 18;

Section 18(1) invariably discusses what has just been discussed.
i) Transfer of document of title - 18(1) (c), this is where the seller transfers the document of title
to the buyer. This gives the buyer the legal control but this must be accompanied by the
transferor’s intention to transfer. The transfer is effective if the buyer is given possession of
the document and this possession must be authorised together with the intention to pass title
to the buyer.

Tabury V. G.C.B. [1980] G.L.R. 90; s.18 (1)(c )

The plaintiff was a dealer in fish and based in Dakar. He appointed two persons as his agents
in Ghana and sends some salted fish down. On one such shipment he used one of the agents
name in preparing the bill of lading .The plaintiff together with one of the agents were
collecting goods which had been supplied to customers and not paid for. In the exercise, the
military arrested the parties and when they enquired, they were told that they were arrested on
the orders of the Takoradi branch manager of the defendant bank because of one of the
agents’ failure to pay a loan contracted from the bank.
After the arrest the plaintiff and the agent were taken to their warehouse and same locked till
all the fish there went badly. The plaintiff insisted that the fish did not belong to the agent and
that she did also not owe the agent. The plaintiff thus sued the defendant bank for false
imprisonment, damages among others.
One of the issues discussed was whether title in the fish was vested in the agent or the
plaintiff.
The court held that the delivery of the bill of lading operated as symbolic delivery. That in
this case, although the agent’s name was on the bill of lading, title did not pass to the agent.
The agent only took delivery of the goods.

ii) Possession of means of getting physical control, section 18 (1) (b), this includes being given
the keys to a vehicle or having the keys to the room where the goods are kept.

iii) Section 18 (1) (a) talks about the actual physical transfer over the goods. This is the most
common method of delivery in domestic transactions. The others are referred to as
constructive transfer.

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Point / place of Delivery;
Section 19;
Unless a contrary intention appears the place of delivery- seller’s place of business, if he has one
and if not, his residence …

The provisions of the section will apply where nothing is said by the parties. Hence the place of the
delivery may be gleaned from the terms of the contract.

The place of delivery is the seller’s place of business and if he has none, it is his house. In the face
of this, the seller may nevertheless agree to deliver the goods at the buyers own premises at the
buyer’s cost or at the seller’s own cost.

The place of delivery is important in a contract of sale because

- it indicates that the seller may not be required to carry the goods beyond a certain point
- whether proper delivery has taken place or
- that the buyer must pay for all expenses to the point of delivery.
The proviso to the section is to the effect that where at the time of the sale, it was known to the
parties that the goods were at a place other than the seller’s place, then that place is the place of
delivery.

Question: where is the place of delivery when delivery is made by the transfer of documents? When
delivery is made by transfer of documents, frequently, delivery of documents is to be made against
payment. The delivery point and the place of payment will usually be the same.

Duties of the Seller II; Sections 11 -14;

The second leg of the seller’s duty deals mainly with the standard of quality of goods to be
supplied. These sections are titled quality and quantity of goods. They are statutory implied terms in
favour of the buyer.

Section 11, Sale by Description;

Description as used in the section is that ‘the goods shall correspond exactly with the description’.
The description so given is to help the seller acquire the goods or help the buyer identify the goods
when delivered. Clearly, goods are sold by description where the buyer, “has not seen the goods
and is relying on the description alone’’ per channel J. In Varley v. Whipp. However in Grant

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v. Australian Knitting Mills Ltd., Lord Wright held that ‘’there is a sale by description even though
the buyer is buying something displayed before him on the counter..’’.

The description of the good is very necessary and fundamental to the contract i.e. it should be a
term of the contract. So therefore any disconformity however minor offends section 11, unless it is
really microscopic.

Harlingdon & Leinster Enterprises Ltd. v. Christopher Hull Fine Art Ltd. [1991] 1 QB 564 at
574;
An art dealer, the seller, contacted another art dealer, the buyer, informing him that he had for sale
two paintings by Gabriele Munter. The buyer inspected the paintings. The seller, as the buyer knew,
had no expertise in, or knowledge of, German expressionist school. The buyer placed no reliance
upon the seller’s attribution but relied solely upon his own judgment and assessment. When later the
buyer discovered that the paintings were forgeries and were not by Gabriele Munter, he claimed that
the seller had been in breach. Indeed the paintings were for £ 6,000 but were a forgery worth
between £50-100.

The COA held that although the seller had used the words by Gabriele Munter in describing the
painting, it had not been sold by that description, the buyer having relied on his judgment in regard
to this question of attribution and not liable under the SGA.

What forms part of the Description;

Arcos Ltd. V. E. A. Ronnasen & Son [1933] All E.R. 646;
The buyers agreed to buy from the sellers, quantity of timber whose measurement was given in the
contract as ‘½ inch thick’. The goods arrived and only about 5% conformed to the description
contained in the contract.

Although the goods were fit for the purpose, the HOLS held that the buyers were entitled to reject
the goods for breach of contract. (Section 13 U.K. Act = section 11 of SGA) Lord Atkin said at
479-480 ‘that……..if the written contract specifies conditions of weight, measurement and the
like, those conditions must be complied with. A ton does not mean about a ton, or a yard
about a yard. ….if the seller wants a margin he must and in my experience does stipulate for
it…. If a condition is not performed the buyer has a right to reject.’

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Beale V. Taylor [1967] 1 W.L.R. 1193;
The plaintiff read an advertisement which offered for sale ‘Herald convertible, white, 1961’. The
plaintiff bought the car after examining same. In actual fact the car was of two models which have
been welded together and only one part was from the 1961 model. The COA, held that the words
‘1961 Herald’ were part of the contractual description and since the buyer had bought by reference
to the advertisement damages should lie against the defendant.

Re Moore & Co Ltd. V. Landauer & Co. Ltd. [1921] 2 K.B. 519;
The contract was for the sale of 3000 tins of Australian canned fruit packed in cases of 30 tins.
Although the 3000 tins arrived, it was in cases of 24 tins. The arbitrator held that there was no
difference in value; the COA nevertheless held that the buyers were entitled to reject the whole
consignment on the grounds that there was a breach of the description of the goods. It may be
concluded that the terms of the contract is crucial in so far as the description of the goods are
concerned. The subject matter of the contract must be defined beyond any reasonable doubt since
some buyers will not settle for anything other than the described goods.

Section 12, Sale by Sample;

Parker V. Palmer [1821] 4 B & A 387;
In this case, sale by sample was given a case law definition as ‘a sale whereby the seller expressly
or impliedly promises that the goods sold should answer the description of a small parcel exhibited
at the time of the sale’. Authorities5 in this area are not ad idem. Some argue that the mere fact that
a sample is exhibited during negotiations does not mean that such a transaction is a sale by sample
and vice versa. The effect of sample has been seen as speaking for itself, as it presents to the eye
the real meaning and intention of the parties so far as the subject matter of the contract is
concerned.

The classic exposition of the effect of sale by sample is that of Lord Macnagthen in the case of
Drummond v. Ingen [1887] 12 App Cas 284
‘’The office of a sample is to present to the eye the real meaning and intention of the
parties with regard to the subject matter of the contract which, owing to the imperfections
of language, it may be difficult or impossible to express in words. The sample speaks for
itself. But it cannot be treated as saying more than such a sample would tell a merchant of

5 Atiyah, any sample displayed must be intended to form the basis of the contract. (Subjective) The editors of
Benjamin also argue that a mere show of a sample does not mean that it is a sale by sample. (Objective)

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 the class to which the buyer belongs, using due care and diligence, appealing to it in the
ordinary way and with the knowledge possessed by merchants of that class at the time….’’

E.S. Reuben V. Faire Bros. [1949] 1 All E.R. 215;

The seller was to supply the buyer vulcanised rubber in 41 ft rolls, 5 ft wide in accordance with a
small sample produced. The sample was flat and soft but what was supplied was crinkly and folded.
It was held that the sellers were in breach since the goods were not in accordance with the sample
though a simple process was required to make them correspond.

Section 13, Quality & Fitness of the Goods; Liability is strict

The general principle at common law was caveat emptor-let the buyer beware but the courts have
gradually moved away from this position. Section 13(1) seems to introduce the caveat emptor
principle. But the exception has rendered it a myth rather than a reality. It is indeed a strict liability
because if you sell an item which is defective, the person selling the item must be responsible.

Exception:
Section 13 (1) (a), it is implied that the goods are free from defects which are not declared or made
known to the buyer before or at the time of the contract. Thus where the defect is not visible or
declared to the buyer the seller is bound by the defect and the buyer may reject same.

Proviso;
There is no such implied condition where,
i) Goods are examined and defects should have been revealed,
ii) Sale by sample, reasonable examination should have revealed same,
iii) Where goods are not sold in the ordinary course of his business in respect of defects that the
seller was not aware,

Ambit (Scope) of the Duty;

The seller is required to supply goods of satisfactory quality and it covers both new and used goods.
The state of the goods and the price at which the goods are sold are very relevant to the standard
and quality of the goods. Defect as used under the section is a controversial word. The question is,
is it the buyer who should point the defect out or what? Again, how much information should be
supplied by the seller to conclude that the defect has been declared? Is the mention of the outward
manifestation of the defect enough so that the buyer should look out for the rest? These questions
are really necessary but the test is;

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‘That it suffices to draw attention to a defect in general terms provided that the buyer is not
misled as to the nature of the defect’.
Section 13 (1) (a) (i) (ii) & (iii)

Continental Plastics Engineering Co. Ltd. v. IMC Industries-Technik GMBH [2009] SCGLR
298;
The plaintiff sued the defendant for the cost of a plastic machine sold to the defendant. The plaintiff
respondent sold a plastic machine to the defendant appellant ‘’as is as seen/inspected, without
warranty, delivered to factory without inspection’’ at the price of $40,000.00. The defendant which
held itself out as an experienced plastic engineering company installed the machine.

The plaintiff contended that before the sale was completed, the defendant inspected the machine
and certified it to be in good and perfect condition. The defendant on the contrary asserted that it
could only rely on the plaintiff’s representations at the time of the purchase as the machine had not
been installed and that it was only after installation and a test run that it discovered the defects
which was cleverly hid from the defendant.

The trial and the Court of Appeal rejected the defendant’s version and gave judgment to the plaintiff
company. The COA found that the defendant company failed to prove any defects and therefore
found the defendants liable.

It was against the judgment of the COA that the defendant appealed to the Supreme Court on the
grounds that the COA failed to give effect to section 13(1) of the SGA.

The Supreme Court unanimously held dismissing the appeal that section 13(1) of the SGA could
only be prayed in aid of buyers who have succeeded in establishing the existence of defects in
goods bought at the time the contract was concluded. That the decision of the COA that the
defendant was unable to establish the presence of any defects before or at the time of the contract
was right and therefore section 13(1) did not apply.

The Supreme Court further held that the plaintiff did not induced the defendant to enter into the
contract neither did the plaintiff made any misrepresentations about the quality of the machine.

Examination by the buyer;

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The issue is did the examination reveal any defects which the buyer complains of? Or whether the
examination conducted should have revealed the defects of which the buyer seeks to complain?

Where the buyer waives his right of examination, it means the buyer accepts the risk of the defects
that would have been revealed if he had examined, he cannot rely on this implied condition.
Secondly, if you are offered the opportunity to examine the goods and you do a cursory inspection
which does not reveal any defect, you cannot invoke this condition.

Thornett & Fehr V. Beers & Son [1919] 1 K.B. 846;

The defendants purchased glue in barrels from the plaintiff. The plaintiff offered materials for
examination but the defendant’s representative failed to open the barrel and just conducted outside
inspection. If the barrel had been opened, it would have revealed that the glue was defective.

Held that the defendants had inspected and were satisfied that the goods were in order and the price
being low was willing to take the risk involved in not conducting thorough examination.

This judgment although is right has been criticised on the grounds that the judge would have been
right if he has said that this was a case of waiver of examination, that would have been satisfactory
than they had inspected.

Quality or Fitness for Particular Purpose;

The purpose may be normal, water to drink, car to drive. If the goods are of a kind having only one
normal purpose, the sellers knowledge that the buyer requires it for that purpose is usually assumed
and no further indication is required. This means that if the goods are capable of serving more than
one normal purpose, it is the duty of the buyer to make known which purpose the buyer requires the
goods to serve. Section 13(1)(b)

If the goods are also bought for some particular purposes of the buyer the purpose must be
communicated to the seller if the seller is to be made responsible for ensuring that the goods are fit
for the particular purpose because the seller’s duty is to supply goods which are reasonably fit.

The issue is by whom must the purpose be communicated? It is submitted that the purpose must be
indicated clearly and with sufficient detailed particularity to the seller to enable the seller supply
goods fit for that purpose.

16
Under such circumstances can the buyer rely on the seller’s judgment? If the special purpose is not
communicated, buyer cannot rely on seller’s skill to supply goods fit for that purpose. However
where something goes wrong, it is for the seller to show affirmatively that there was no reasonable
reliance.

The seller may be liable if goods are supplied with inadequate information, warnings or
instructions.

Wormell v. RHM Agriculture (East) Ltd. [1987] 1 WLR 1091;

The plaintiff, a farmer, needed to kill the wild oats growing in his crop of winter wheat. He bought a
herbicide which had detailed instructions on the back of each container. It was stated that spraying
was not recommended after a certain stage in the growth of the crops. The plaintiff assumed that the
warnings were designed to caution users against using herbicide at a late stage and thereby
damaging their crops; as he was prepared to take that risk, he sprayed his crops at a late stage
(adverse weather conditions had prevented him doing so earlier). In fact the herbicide had little or
no effect on the wild oats.

The court held that instructions supplied with the goods have to be taken into account in considering
whether the goods are fit for their purpose. In other cases a failure to supply information about the
goods has been held to be a breach of the implied term as to description.

Grant V. Australian Knitting Mills Ltd. [1936] A.C. 85;

The buyer bought a pair of woollen pants and had dermatitis when he wore it because it contained
an irritating chemical. He bought it at a shop which dealt in this type of goods, although he did not
expressly make the purpose known to the seller.

Held-Privy Council, he had made known to the seller the purpose for which he wanted the goods so
as to show that he relied on the seller’s skill or judgment. Consequently, the seller was liable to him
in damages for breach of the implied condition that they should be reasonably fit for the purpose.

Ashington Piggeries Ltd. V. Christopher Hill Ltd. [1972] A.C. 441;

The seller sold herring meal to the buyer which was suitable for inclusion in foodstuffs for most
animals. But it was contaminated with toxic material which made it slightly harmful to most
animals. The buyers used this meal to prepare foodstuffs which were sold to companies and there

17
was a loss when the meal was served to the animals. The company sued the buyers who in turn
claimed against the sellers.
It was held that the meal was required to be fit for inclusion in feeding stuffs for any animals to
which the sellers ought to have contemplated that it might be fed. That there was breach of fitness
for purpose since the goods were sold for the purpose of being made into animal feed.

Duties of the Buyer, section 21-24;

Under the SGA, the buyer’s fundamental duty in a contract of sale is to pay the price and accept the
delivery of the goods the subject matter of the contract see section 21 of the Act.

 Payment of the Price, Section 22;

Ideally, the buyer must make payment at the seller’s place of business; however the contract
may provide a mode different from above. The buyer can pay by cash but where there is a
huge transaction, other forms of payment may be used for example cheques if the seller
agrees to it. This is normally deemed to be a conditional payment.

The problem with cheques is that, if for any reason, the buyer lacks funds and the cheque is
dishonoured, the seller may have to sue the buyer on the cheque or on the original
consideration given by the buyer. If the cheque is not paid the seller becomes unpaid seller
under the SGA with real rights over the goods iff the buyer has not taken possession of the
goods. With modern methods of payment, it is submitted that bank draft, direct debit, opening
of Letters of credit, cheques may not be used often.

Time of Payment, Section 23;

The seller is to be paid at the time expressly agreed upon under the contract and in the manner
so agreed. It is however subject to a condition being met. Time of payment is primae facie not
a condition of the contract, however where the money is needed by the seller to complete
some other transaction and this fact is known to the buyer at the time of the contract then, the
time of payment by implication becomes the essence of the contract.

Where property has passed, the seller cannot seize the property but his remedy lies in asking
for the money together with interest. According to section 22, the buyer unless otherwise
agreed, must be prepared to pay the price in exchange for the goods.

This right of the seller is however subject to two conditions namely;

18
 a) The seller must be ready and willing to tender the delivery of the goods in exchange for
the price.
b) The seller must show that the property in the goods has passed to the buyer.

 Duty to take Delivery;

Upon the payment of price, the buyer is required to take delivery of the goods i.e. that which
is delivered by the seller. Thus where the buyer fails to take delivery over a long time it is a
breach and the buyer will be deemed to have abandoned the contract and the seller may
repudiate same. Where the goods are of a perishable nature, the buyer’s duty to take delivery
at the time indicated is of essence. The buyer’s failure therefore to take delivery will entitle
the seller to dispose of the goods.

19
 LECTURE FOUR
TRANSFER OF PROPERTY & RISK
Property;
It is very important to state that before property passes, there is the need to:
- identify the subject matter of the contract
- Because the buyer needs to know what s(he) is purchasing. Property generally denotes
ownership or title as distinguished from possession.

Parties to contract of sale do not usually expressly agree when property (ownership) in the goods is
to pass. If there is no express agreement, then the provisions of the sale of Goods Act apply.
However under these provisions, ownership in the goods does not necessarily pass either when the
goods are delivered or when they are paid for. Ownership can pass earlier, and this can create
problems where the goods are damaged or destroyed

Under the Sale of Goods Act, the passing of property depends upon intention. Thus there is the need
to examine the general principles which govern the transfer. The passage of property is important
because:
a) Until property passes, the buyer will not have the right to deal with the goods i.e. legitimately
sell same to a third party although the price has not been paid,
b) During the buyer’s insolvency, and where there is a reservation of title clause the interest of
the seller will be taken out if the goods are still in sellers possession,
c) If the goods are damaged by a third party, the person who has property to the goods has the
right to sue,
d) The passing of property also gives the seller the right to sue for the price if the buyer defaults
in payment,
e) Risk passes prima facie when the property passes.

The SG Act;
Section 25; Unascertained Goods;
‘Where there is a contract for the sale of unascertained goods no property in the goods is
transferred to the buyer unless and until the goods are ascertained’.
Unascertained goods - property passes when the goods are ascertained.

20
Meaning of Ascertainment;
Goods become ascertained when they are earmarked or identified to the contract in a manner that
the seller demonstrate an intention that these particular goods fulfils the description of the goods as
contained in the contract. It is also important to ascertain the goods because at the time of the
contract, there were no goods which the parties can point to as being the subject matter of the
contract. Thus the goods must be unconditionally be appropriated by the seller and property passes
once the goods are delivered by the seller to the buyer.

Carlos Federspiel V. Charles Twigg [1957] 1 Lloyds Rep. 240;

The sellers agreed to sell bicycles to the plaintiff f.o.b. U.K. The bicycles were manufactured and
packed into containers with the buyers name and address. Preparations were made for the shipment
but same were not shipped. Meanwhile the plaintiff had made payment. The seller’s inability to ship
was due to the fact that their company went into liquidation. The plaintiff thus sued for the goods
arguing that property in the goods has passed.

It was held that, the property did not pass since the goods had not been shipped. Hence the plaintiff
was not entitled to the goods because the goods had not been unconditionally appropriated to the
buyer.

Pearson J. opined that, the mere fact that the goods are set apart by the seller is not enough, because,
the seller can change his mind and use the goods to perform another contract. Where the goods are
part of a bulk consignment, the portion sold to buyer must be appropriated (separated) to the buyer
at which time property passes to the buyer. Hence the phrase until the goods are ascertained is
referable to the goods which have been appropriated unconditionally to the buyer.

See also the following cases:

Hendy Lennox (Industrial Engines) Ltd v. Grahame Puttick Ltd. [1984] 2 All ER 152;
Lennox supplied Puttick with diesel engines, under a contract which reserved their title as sellers
until final payment of the price. The engines were incorporated into generating sets which would
then be sold Puttick’s customers; but each engine remained identifiable by its serial number and
could be unbolted from the generating set.

Puttick went into liquidation at a time when three generating sets were in its possession. Two sets
were in a deliverable state the court held that;

21
The property in them had passed to Puttick’s customers, so that Lennox claim to the two engines
concerned was lost; but since the third set was not in a deliverable state (although its engine had
been affixed) he held that Lennox could assert a proprietary claim to retake that engine.

The court the engines were not like the Acrilan which became a yarn and then carpet (the Bond
Worth), or the resin which became chipboard (Borden’s), or the leather which became handbags
(the Peachdart). They just remained engines albeit connected to other things.

Karlshamns Oljefabriker v. Eastport Navigation Corpn, The Elafi [1982] 1All ER 208;
K agreed in two separate contracts to buy two lots of copra, part of a larger cargo aboard the Elafi to
be delivered at a port in Sweden. All the copra which had been sold to other buyers had been
offloaded at Hamburg and Rotterdam, leaving only sufficient to meet the two sales to K.

The court held that the separate quantities which K had agreed to buy could be aggregated and that,
the total amount having been ascertained by exhaustion, the property had passed to them.

Specific Goods;
According to section 5(1), specific goods are those identified and agreed upon before or at the time
of the contract. When does property pass under specific goods? Subsection 1-3 of section 26
indicates the various modes under which property passes under specific goods.

Section 26(1);
‘…the property in goods passes under a contract of sale when the parties intend it to pass’
This subsection hinges on the intention of the parties to the contract. How is intention determined?
Our Act does not define intention but the English SG Act 6 , determines intention through one of
three modes namely;
- terms of the contract,
- conduct of the parties &
- Circumstances of the case.

From this one can only conclude that property has passed when the issue of intention has been
cleared and it depends solely upon the terms of the contract and the facts of a given case. It is
therefore submitted that under this, the passing of property is governed by the express contractual
provision.

6 Section 17(2)

22
A seller may have a term in the contract to the effect that property will only pass upon payment of
the purchase price. Such a term of the contract indicates that the seller has reserved title in himself
or herself till full payment. This is known as RETENTION CLAUSE. Where it is expressly absent,
title can pass even though the buyer has not paid any money at all.

Aluminium Industries BV v. Romalpa Aluminium Ltd. [1976] 1 WLR 676;

In this case, the plaintiffs; Dutch Company supplied aluminium foil to the defendants who were
based in U.K. The Contract stipulated that title to the goods did not pass to the defendants until
they paid in full the contract sum. The defendants went into liquidation when they had not finished
paying the contract sum. The plaintiffs sought an order to recover the goods which were in
possession of the defendants.

It was held that in accordance with the condition of the contract, the plaintiffs were entitled to the
goods belonging to them still in the possession of the defendants.

The decision has been criticised because it allows a seller to create a secret form of security over the
goods. Secondly, the buyer’s creditors are also deceived since title to the goods remains in the
seller.

Be that as it may the retention of title clause is applicable only where;

- the goods are still in the possession of the buyer
- the goods are identifiable i.e. the goods must have not been used in a manufacturing process,
- the goods are in their original state i.e. the goods have not been affixed to other property of
the buyer,
- the goods have not ceased to be the property of either the seller or buyer (through sale).

Section 26(2);
‘…….property passes under a contract of sale when the goods are delivered to the buyer’
Under this section, once the goods agreed upon are delivered in the absence of any contrary
intention, the property in the goods passes to the buyer.

Ghana Rubber Products Ltd. V. Criterion Co Ltd. [1984-86] 2 G.L.R. 56;

It was held among others that the property in the goods passed upon delivery.

23
Birch V Asempa & Ano. [1992] 2 G.L.R. 416;
The plaintiff and the brother purchased 7,000 blocks from the deceased and were issued with a
receipt. The plaintiff collected the blocks leaving 4,360 at the deceased’s residence. When they
called later the blocks were not there and they sued the seller’s administrators since the seller had
died.

It was held that under section 8(2) of the SGA, the vendors’ obligation was to deliver the goods to
the buyer when they were paid for. That the sale was completed when the vendor tendered the full
purchase price and the deceased accepted same. Delivery took place when the receipt was issued
and both the property and the risk in the goods passed unto the plaintiff. The goods were at the
sellers’ residence at the risk of the buyer.

Section 26(3);
Goods delivered on approval or ‘on sale or return’;
Properties pass when the buyer signifies his approval or acceptance to the seller or do something to
adopt the transaction. Under the earlier sections, property passes depending on either intention of
the parties or when the goods are delivered to the buyer.

The situation under subsection 3 is different. The seller under this section is merely making an
offer of sale to the buyer. Where the buyer accepts the offer, the property in the goods passes to the
buyer.

The section also requires that where the buyer does not accept the goods but fails to return it to the
seller, within the time stated or within a reasonable time, then the property in the goods shall pass to
the buyer.

Under this, the goods are delivered to the prospective buyer and the position of the law is that if the
buyer does not like the goods same should be returned to the seller. So that where the goods are not
returned to the seller and in the absence of any contrary intention, title in the goods passes to the
buyer.

Since delivery on approval or ‘on sale return’ is a consensual arrangement, the seller should not
foist (force someone to accept) the goods on an unwilling recipient and then turn around and claim
that silence implies consent.
Kirkham V. Attenborough [1895-9] All E.R. 450;

24
A Jeweller manufacturer (plaintiff) delivered jewellery to Winter ‘on sale or return’. Shortly
afterwards, Winter pledged the goods with the defendant a pawnbroker. The price remained unpaid,
so the plaintiff brought an action to recover them from Attenborough.

The COA held that by pledging the goods, Winter had adopted the transaction. Consequently the
property in the goods had passed to Winter and therefore the claim to recover the goods from the
defendant failed. The only remedy was to claim the price from Winter.

Genn V. Winkel [1911-13] All E.R. Rep. 910;

The plaintiff delivered diamonds to the defendant on sale or return. The defendant in turn handed it
to a third party on the same terms. The third party also handed the diamonds to a fourth person on
the same terms. But the diamond got lost whiles in possession of the 4th person.

Held, COA, since the defendant was unable to return the goods to the plaintiff, the transaction had
been adopted, i.e. property has passed and he was responsible to him for their loss.

Transfer of Risk;
Risk involves the allocation of loss due to goods being damaged, destroyed or lost by an external
event for which neither party is responsible. This is not always the case since the goods may be
destroyed through the fault of one of the parties it is generally a negative concept.
It includes the ff:
a) loss or damage caused by acts of God,
b) Misbehaviour of third parties (carriers),
c) Government intervention

Relevance of the concept;

i) Seller not generally responsible for the loss or damage after risk has passed,
ii) If goods are lost or damaged seller can nevertheless claim the payment from the buyer
iii) If goods are lost or damaged, the buyer should look to the insurance company,
iv) If there is no insurance, carrier is responsible.

General Principle of Risk;

If I contract to buy goods and they are mine, any subsequent loss is mine in the absence of any
contrary intention. The Act surprisingly does not distinguish between specific or unascertained

25
goods. Hence the general rule is that risk passes with the property. The principle is thus ‘res perit
domino’- things perish to the disadvantage of the owner.

Section 27 of the SGA;

The section applies where nothing has been said about who assumes the risk.
- intention
- goods at seller’s risk till property passes (if no contrary intention),
- if delivery is delayed through the fault of either party, goods at risk of person at fault and
- nothing in this section affects the buyer or seller as a bailee’s duties or liabilities in possession
of the other person’s goods.

The general rule is that risk passes with property. This is subject to several qualifications;
1) This may be displaced by a contrary agreement between the parties to the contract;
2) Even where a party assumes the risk, it may be shifted, wholly or partly as a result of fault by
the other party;
3) Where the seller is to deliver the goods to an independent carrier for onward transmission to
the buyer. It is prudent for the buyer or carrier to take insurance.
4) Section 27 of the SGA fails to distinguish between specific and unascertained goods when it
comes to the passage of risk.

1) Intention, section 27(1)

This section works in the same way as section 26(1). Hence, to be able to locate who
assumes the risk, the terms of the contract is very important. It is thus possible for the seller to
be in possession and the risk will be on the buyer and vice versa.

2) Seller in possession;
If the seller is in possession of the goods, and property has not passed to the buyer, the risk is
with the seller if the goods are destroyed or damaged. Once the property passes to the buyer,
then in the absence of an express provision to the effect that the risk is on the seller, same is
on the buyer. Birch V. Asempah and Others. It is thus submitted that risk is linked to passage
of property and not delivery.

Sterns V. Vickers (seller) [1923] 1 K.B. 78, COA;

Vickers (defendant) bought 200,000 gallons of white spirit. The defendant sold 120,000
gallons out of the 200,000 to the plaintiff’s which was in a storage tank belonging to a third

26
party. The 120,000 gallons was not separated. The defendant obtained from the storage
company a delivery order that the 120,000 gallons was being held on plaintiff’s behalf which
the plaintiff accepted. This amounted to attornment since it was being held on behalf of the
buyer and not on behalf of the seller.

The plaintiff’s did not take immediate delivery and thus made arrangements with the storage
company to further keep the spirit. The plaintiffs resold the same quantity afterwards to a
third party. When the third party came to take delivery, he found that the quality of the spirit
had deteriorated in storage and claimed damages from the plaintiff, who claimed over against
the defendants alleging that the spirit was not of the quality by the terms of the contract. The
spirit had deteriorated in quality when the plaintiffs came to take it.

Despite the fact that property has not passed because there was no appropriation, the Court of
Appeal held that the risk has passed to the buyers (plaintiffs).

The COA, though not deciding whether the property had passed to the plaintiffs prior to the
deterioration, held that even if it had not, the risk was on the plaintiff’s, for the defendants had
done all that they undertook to do, the plaintiff’s could have demanded delivery from the
storage company as soon as they had received the delivery warrant and if they had done so
they would have procured spirit which was then in conformity with the contract. The
plaintiff’s claim was therefore dismissed.
It has been argued that the acceptance of the delivery order probably meant that it gave the
buyer the right to possess the goods.

Professor Roy Goode has argued that this case is usually treated as exceptional but the
principle it embodies is eminently sensible, and he submits that unless otherwise agreed, it
applies to any case in which the seller loses control of the goods by giving constructive
delivery provided that in so doing he fulfils the delivery obligation imposed on him by the
contract.

Commentators have argued that the decision in Sterns v. Vickers Ltd must be accepted as
correct on its particular facts, but the case raises many problems.

Immediately after this case the English amended their Act by inserting a new section 20A
which stated that where the buyer has paid part or all of the price of an unascertained goods

27
 which forms part of a bulk that is identified, then unless the parties otherwise agree, property
in the undivided portion of the bulk passes to the buyer and the buyer becomes a part owner.

Our Act is silent on this issue but subsection 2 says that, if the property has passed whether in
identifiable goods or goods in bulk unless a different intention appears the risk passes to the
buyer and vice versa.

3) Delivery is delayed by the fault of either party, goods at that person’s risk;
Risk is generally concerned with accidental destruction or damage. It does not include
damages or destruction caused by the fault of either party. Whoever is at fault assumes the
risk. Whoever has delayed is responsible for the loss.

Demby Hamilton V. Barden [1949] 1 All E.R. 435;

The defendant agreed to buy from the plaintiff, 30 tons of apple juice to be collected once per
week. The sellers made the goods ready for collection as agreed. The defendant (buyer) was
late in taking delivery and some of the juice deteriorated.
The court held that the risk was on the buyer and hence he assumes the loss since the delay in
taking delivery was entirely his fault. In this case property has not even passed and the court
so held.

Seller’s J. Went ahead and made the following observations;

1) was there anything the sellers could reasonably do to dispose of these when they still
had an outstanding obligation to keep them at the disposal of the buyer and when they
had to be ready and willing to deliver them when requested.
2) If delivery has been asked for at a later date and they had let these goods go elsewhere
they could not have fulfilled their contract.

The judge after these observations answered that ‘l do not hesitate to find (although to
construe this proviso is not easy) that in a practical and business sense this loss has fallen on
the sellers by reason of the fact that the buyer refused to take delivery at the proper time and
postponed the date of delivery until the goods had deteriorated, and l come to the conclusion
that the liability for that loss falls on the buyer.

Where property has passed and the fault is from the seller, the seller assumes the risk and vice
versa.

28
4) Either party being a bailee (custodian);
Once a party decides to act a custodian of another party’s goods the provisions discussed
above are not applicable and the custodian is solely responsible for any loss. Bailment is the
transfer of the possession of goods by the owner (bailor) to another (bailee) to receive or hold
possession of a thing for another upon an undertaking with the other person to keep or return
or deliver to him the specific thing.

 The ingredients are possession of goods by the bailee;

 Bailor must retain superior title to the bailee;
 Bailee must consent to take possession of the goods.

It has been argued that any person who voluntarily assumes possession of goods belonging to
another will be held to owe at least the principal duties of the bailee at common law. The
position has been endorsed by the Privy Council in the case The Pioneer Container [12994]2
A.C. 324.

Wiehe V. Dennis Bros. [1913] 29 T.L.R. 250;

Wiehe contracted to buy a Shetland pony known as ‘Tiny’ from the Dennis Bros which was
intended to be presented along with a car to Princess Juliana of the Netherlands. The pony
was to be delivered in Rotterdam. The pony was bailed back to the seller who wanted to use it
for charity.

The pony was destroyed. The sellers were held liable since the horse was in their possession
and was injured.

Frustration;
This is the prevention of carrying out of a contract. It may be due to the destruction of the subject
matter. Thus the contract has been entered into legally, but it is determined prematurely owing to
the occurrence of an intervening event so fundamental to make the performance of the contract
impossible.

29
The SGA does not have any provision on frustration of Sale of Goods contract unlike in the U.K.
where there is an express provision7 to that effect. Frustration simply means that a party’s
contractual obligation cannot be performed due to some unforeseen event to the extent that any
attempt at performance would amount to something different.

The Courts appear not too keen to apply the doctrine of frustration to sale of goods because the
goods have been lost or damaged. If a contract (sale of goods contract) is frustrated, both parties are
discharged from any further obligation under it, whether performance of duties or payment of
money.

If the contract is frustrated before the price had been paid, the buyer would be relieved of payment
of the price and the seller is not liable for non-delivery. Whether the rules of risk or the doctrine of
frustration will apply will solely depend on particular facts available.

However in Ghana the Contracts Act8 has made some changes to the strict rule of frustration and
these sections are applicable to the contract for the sale of goods. See section 1-4 of the Contracts
Act.

7 Section 7 of their 1979 Act states that ‘where there is an agreement to sell specific goods, and subsequently
the goods, without any fault on the part of the seller or buyer, perish before the risk passes to the buyer, the agreement is
thereby avoided.
8 1960 (Act 25)

30
 LECTURE FIVE
TRANSFER OF PROPERTY BY A NON-OWNER.
As a general rule, it’s only the owner of goods or his duly authorised agent who can validly transfer
title in goods to another. This is expressed in a Latin maxim ‘nemo dat quod non habet’ translated
loosely to mean no one can give a better title than he himself possesses. This rule is expressed at
section 28(1) of the sale of goods Act;
‘Subject to the provisions of this Act and any other enactment where goods are sold by a
person who is not the owner thereof and who does not sell them under the authority or with
the consent of the owner, the buyer acquires no better title than the seller had’.

This rule is obviously harsh on buyers since they are unable to ascertain at the time of the contract
or purchase the background of the seller.

Jerome V. Bentley & Co. [1952] 2 All E.R. 114;

The plaintiff gave one Major Tatham a stranger, a diamond ring and the terms were that if within 7
days, he is able to dispose of it for more than £550, he could keep any surplus. He was to return the
ring if he was unable to dispose of it as instructed. About eleven days later, Tatham sold it to
Bentleys for £175 who bought it in good faith believing that he was the owner. Bentley resold the
ring and Jerome sued them in conversion and he was successful. The court held that at the time of
the sale Tatham had no authority to sell.

This clearly is a harsh rule on innocent or bonafide purchasers. Hence there are numerous
exceptions to this rule. With time a need arose to protect innocent purchasers without notice of the
defect in owner’s title.

Prominent among the defenders of innocent buyers was Denning L.J.,

Bishopsgates Motor Finance Ltd. V. Transport Brakes Ltd. [1949] 1 K.B. 322, CA,
Denning L.J. said ‘in the development of our law, two principles have striven for mastery. The
first is for the protection of property: no one can give a better title than he himself possesses. The
second is for the protection of commercial transactions: the person who takes in good faith and
for value without notice should get a good title. The first principle has held sway for a long time,
but it has been modified by common law itself and by statute so as to meet the needs of our
times’.

31
Exceptions;
1) Sale by agent;
An agent can pass a good title if he has actual or apparent authority from the owner to make
the sale. Thus where one has by his conduct held out another as having his authority to sell to
a third party, then the principal is precluded from denying that authority. The holding out
must be voluntary and not a forced one. This means a sale within the agent’s authority.

Shaw V. Commissioner of Police of the Metropolis [1987] 3 All E.R. 405;

The owner of a car who was an overseas student in Britain after his studies gave possession of
same to an agent who was a rogue called London. The owner held the agent out as his
authorised agent who had power to sell by signing documents which indicated that he had
given London the authority to sell. London delivered the car to the plaintiff, Shaw pursuant to
an agreement to sell it to him who issued a bank draft to London who disappeared. As a result
of this the bank was alerted and it was not paid. The car was taken into custody by the
Metropolitan Police. The owner claimed the car from the Police and the third party claimed
that he had acquired title.

Held by the COA that what transpired between the agent and the third party was not a contract
for sale within the meaning of the sale of goods Act. The agreement between them was an
agreement for sale and since the third party had never paid for the car, the property had not
passed.

It is important to note that the third party’s claim was unfounded as he was seeking to assert
title to a vehicle for which he had not paid any money. If the money had been paid and
London ran away with it, the cause of action available to the owner would be to sue the agent
and not the third party because the owner held London out as his agent.

This exception also include situations where the real owner does not sell himself but
authorises an agent to sell the goods on his behalf even though the agent is not the owner, the
third party shall acquire good title to the goods.

2) Section 28(2) - Concept of Estoppel;

This arises where the true owner stands by and allows an innocent buyer to pay money to a
third party, who professes to have the right to sell an article or goods in the honest belief that he

32
is becoming the owner of it; the true owner will be estopped from denying the truth of the
representations made to the buyer and the buyer will take good title.

The Evidence Decree, 1975 (NRCD 323), section 26 confirms this legal position as;
‘‘Except as otherwise provided by law, including a rule of equity, when a party has, by his own
statement, act, or omission, intentionally and deliberately caused or permitted another person to
believe a thing to be true and to act upon such belief, the truth of that thing shall be
conclusively be presumed against that party or his successors in interest in any proceedings
between that party or his successors in interest’’.

a) Estoppel by representation;
This may be express or by conduct. In either case, it must be clear and unequivocal. It
becomes easier when the true owner made the representation by express words. But
where it is by conduct, then the purchaser must show that the conduct of the true owner
misled him into believing that the seller was the owner.

Cases;
Farquharson Bros & Co. V. King & Co. [1902] AC 325 HOLS;
The plaintiffs company employed a confidential clerk by name Capon. The plaintiffs
had a warehouse where they kept timber which they had imported from abroad. This
clerk had authority to sign delivery orders to the warehouse on the strength of which
timber will be released to plaintiff’s customers. The clerk set up a non existent company
and signed delivery orders and when timber was released, he sold same to the
defendant. The fraud was detected and the plaintiff company sued the defendant in
conversion.

Held, nothing which the plaintiff’s had done precluded them from denying that Capon
had had authority to sell their timber, they were estopped and title had passed to the
defendants.

Eastern Distributors Ltd V. Goldring [1957] 2 Q.B. 600;

A car owner (M) gave a dealer(C) documents which made the dealer appear to be the
owner, as part of a scheme to enable the car owner borrow money without security and
also enabled C to represent that he had M’s authority to sell the car belonging to him. It
was held by the Court of Appeal held that where the owner of goods held out another as

33
 apparent owner and thus able to dispose of the goods to a third party, the third party had
acquired a real title (property has passed) and the owner is estopped from challenging
the disposition.

b) Estoppel by Negligence;
This is where the true owner by his negligent conduct may be precluded from denying
the sellers authority to sell particular goods where he has by his negligent conduct has
allowed a seller to create an appearance of ownership of the goods. But the
circumstances in which a true owner is or may be estopped by his negligence are very
limited or strictly circumscribed by the following;
- the true owner owes him (TP) a duty of care,
- that the true owner has breached that duty(negligent)
- that this negligence of the true owner was the proximate or real cause which
induced the buyer to purchase the goods from the seller.
The duty of care on the true must be established beyond doubt.

Cases;
Coventry Shepperd V. Great Eastern Railway Co. [1883] 11 Q.B. 776;
In this case, the defendant issued two delivery orders in respect of the same bulk of
goods. This negligent act enabled the issuee to represent that the goods were in fact
available thereby raising an estoppel.

See also Mercantile Co Ltd. V. Hamblin [1965] 2 QB 242;

Morgate Mercantile Co Ltd. V. Twitching [1977] A.C. 890

3) Section 29-Voidable title;

A voidable title is a title which is good until set aside as against a void title which is bad from
the beginning. Hence under the section, any sale, pledge or other disposition for value made
by the person till his voidable title is set aside, the title he transfers shall be effective provided
the purchaser bought it in good faith9 without notice of the seller’s defective title.

This reinforces the common law principle that ‘a person cannot avoid a voidable contract to
the prejudice of third-party rights acquired in good faith and for value’.

9 The onus of proof of lack of good faith lies on the original owner. See Whitehorn v. Davison [1911] 1K.B.
463.

34
 A seller will have a voidable title where he is induced by some misrepresentation (fraudulent
or innocent) to acquire goods under the contract. Where the title under which the goods are
sold is void, the third party acquires no title.

Cases;
Lewis V. Averay [1972] 1 Q.B. 198;
The plaintiff advertised the sale of his car. He agreed with someone who misrepresented
himself as a well known actor by name Richard Greene who showed an identity card to that
effect. Lewis allowed the rogue to take the car away when the rogue issued a cheque. The
cheque was worthless. The rogue later sold the car to the defendant for £ 200 who bought it in
good faith. The COA held that the first sale was voidable for fraud and hence the defendant
obtained good title.10

For the voidable contract to be rescinded, the original party must rescind the contract by
communicating with the other party that the contract has been rescinded.

Car & Universal Finance Ltd. V. Caldwell [1965] 1 Q.B. 525;

In this case the buyer fraudulently bought a car with a valueless cheque. The seller
communicated with the police and the automobile company of the fraud but did not get the
rogue to inform him who later on sold the car.

The COA held that the seller can rescind the contract by expressing an intention to do so and
take all reasonable steps available to him where he is unable to communicate with the
fraudulent party who is running away from the owner.

Colwyn Bay Motorcycles V. Poole [2000] CLY 4675;

In this case a rogue bought a motorcycle with the details of credit card which was non
existent. This was discovered by the plaintiff two days thereafter. He informed the police but
all efforts to get to the rogue failed. The rogue sold same to a dealer who subsequently sold
same to an innocent purchaser. It was held that the plaintiffs were entitled to recover. This
was due to the fact that the transaction was avoided before the item was sold.

10 Contrast this case with Cundy V. Lindsay [1878] 3 App Cas 459. In this case, the parties negotiated through
the post. The seller had dealt with one Blenkiron but someone with a similar name set up on the same street that the
seller taught to be the same person and dealt with him. It was held that the contract was void. Case has been criticised
on the grounds that it should have been a voidable contract.

35
4) Section 30 - Sale by Mercantile Agent;
A mercantile agent according to section 81 of the Act is an agent having in the ordinary
course of his business as an agent with authority to sell goods, or consign goods for sale or to
buy goods, or to raise money on the security of the goods.

1) Consent of the Owner;

Where a mercantile agent is in possession of goods or documents of title to the goods,
with the consent of the owner any sale or pledge or disposition of the goods for value in
the course of his business as a mercantile agent, shall be valid as if he were authorised
by the owner once the purchaser has acquired same in good faith.

2) Where consent is terminated;

Even in situations where consent of the owner has been terminated, the mercantile agent
can still pass good title to the purchaser, provided that the purchaser at the time of
purchase had no notice that consent has been terminated.

5) Section 31- Disposition by Seller in possession;

Where a person who has sold goods but remains in possession of the goods or of the
documents of title to the goods, any re-sale by the seller to a buyer who takes in good faith
without notice of the previous sale will give a good title to the new buyer. Under subsection 2,
the same position applies even if the seller is in possession of the goods as a bailee.
Points to note;
- It applies where the goods have been sold
- Seller must continue in possession- for the title to pass to the second buyer, seller must
continue in possession, there should not be a break and
- Second buyer will not acquire title until there is delivery
Cases;
Mitchell V. Jones [1905] 24 NZ LR 932;
A person, who sold a horse, obtained it back from the buyer on a lease and sold it the second
time to an innocent purchaser. The court held that the innocent purchaser was not protected
since there had been a break in possession.

36
 Pacific Motor Auctions Ltd. V. Motor Credits (Hire Finance) Ltd. [1965] AC 867;
M Ltd., sold some vehicles to the plaintiff’s. M Ltd was to remain in possession and display it
in their show room. The plaintiff’s paid 90% of the prize and were authorised to sell the
vehicles as agents of the plaintiff’s. M Ltd. had financial difficulties and the plaintiff’s
revoked M Ltd.’s license to sell the vehicles. M Ltd. in the face of this sold some of the
vehicles to the defendants who bought in good faith. When the plaintiff’s sued, the high court
said that the defendant’s were not protected.

On appeal, it was held that, the defendants were protected. The basis of the court’s decision
was that the word continued in possession in the section refers to continuity of physical
possession regardless of any private arrangement. That since there was no physical transfer of
the goods to the plaintiff’s, M Ltd was in continued possession and is able to pass good title.

Worcester Works Finance Ltd V. Cooden Engineering Co Ltd [1972] 1QB 210;
Under section 31(3) (b), the buyer has the power to institute an action against the seller for
damages for wrongful sale, pledge or disposition.

6) Section 32 – Sale by Buyer in Possession;

The section envisages a situation where the buyer has not acquired a full and indefeasible title
nevertheless once the buyer is in possession of the goods with the consent of the seller he can
transfer title in the goods to a third party.

The Consent of the Seller;

For the third party to benefit from the protection under the section, the buyer must be in
possession of the goods with the consent of the seller. Indeed for the section to apply there
must be a sale in the first place. So that where the goods are stolen any subsequent sale cannot
pass good title.

In addition to this the buyer must be in possession of the goods or documents of title. The
third party must also receive the goods in good faith without notice of any other person’s
interest in the property. Subsection also allows the third party to pay the unpaid balance and
either retain the goods or recover the goods after which title in the goods shall vest in the third
party.

37
7) Sale under an enactment;
This arises where a particular enactment empowers any person or a body to sell goods belonging to
another person. Where the goods are sold the buyer gets good title although the seller is not the
owner of the goods. Such sales include sale by an auctioneer under the Auction Sales Law, (1989)
PNDCL 230. Sale by the Customs, Excise and Preventive Services Management Law, (1993)
PNDCL 330. Under a contract of pledge, if the pledgor agrees that the pledgee could sell the
property in default, then the pledge has the right to sell the property to a prospective purchaser. In
such a case, the buyer nevertheless acquires good title to the goods.

38
 LECTURE SIX
EXPORT SALES
Overseas sales gives rise to special problems. This is due to the fact that there is often a long period
of time between the dispatch of goods and their arrival at the designated port. The parties to the said
contract of sale are exposed to three risk i.e. financial (credit rating), physical (garbage) and legal
(default requires action).

Bill of Lading; Section 64;

Section 64(a) Proper shipping documents;
This is the seller’s invoices for the goods. The bill of lading indicates that the goods have been
shipped and it should not contain any reservation with regards to the nature of the goods or the
packaging.

Documents play a vital role in export sales and the bill of lading is one of them. A bill of lading is a
document issued by or on behalf of a carrier of goods to the shipper with whom he has contracted
for the carriage of goods. It sets out the particulars of goods to a named location and will provide
for delivery to a named person, the holder of the bill of lading or his agent.

Functions;
a) It is evidence of contract of carriage. When it is issued, it indicates that the shipper and the
carrier have agreed that the goods be shipped to a named destination.
b) It is also a receipt for the goods. The bill of lading shows that the goods have been received by
the carrier. It is usually signed by the master of the vessel.
c) It also acts as a document of title. At common law, it is transferable by endorsement.

Mate’s Receipt;
This is a document, issued on the receipt or shipment of goods, by or on behalf of the ship owner.
It’s a temporal receipt given to the seller or his agent who transmit it to the buyer who exchanges it
for the proper bill of lading.

F.O.B.; Contract section 62;

F.o.b. generally means free on board. It is a delivery term used in international sales to signify that
the seller’s delivery obligation is accomplished when the goods are loaded free on board.

39
Duties of the Parties;
FOB Buyer; section 62(a);
1) Nominate a ship;
The buyer is to procure a space on a vessel and give the relevant particulars thereof to the seller.
The seller must be given time to arrange the goods at the dock. Time of nomination is of essence of
the contract. If this is not done, it entitles the seller to treat the contract as repudiated and claim for
damages. In all cases the seller cannot sue for price because the property has not passed.

Colley V. Overseas Exporters [1921] 3 K.B. 302;

The buyers in this case failed on five occasions to nominate an effective ship. Goods were stranded
at the docks and the seller sued for the price.
Held that the seller was unable to maintain an action for the price because property has not passed
until shipment and that has not occurred. The case thus establish the principle that in an FOB
contract, the property and the risk in the goods do not pass to the buyer until the goods are actually
placed on board the ship.

2) The buyer also bears all expenses after the goods have been shipped.

FOB Seller;
a) Put goods on board a nominated ship-Buyer Section 62(b);
It is the buyer’s duty to give notice to the seller of the ship’s arrival. The buyer is to Name
the vessel and give shipping instructions on time. This will enable the seller to send forward
goods to the ship according to instructions given.

Late Nomination;
Bunge Corporation V. Tradax Export SA [1981] 1 W.L.R. 711;
This was a case of a fob contract on the GAFTA 119 standard form. It was for the sale of soya
bean. The buyer was required to give 15 days notice of probable readiness of the vessel.
According to the contract, the last day of the shipment was 30/6. However the information
about the readiness of the ship was given to the seller on 17/6. This was too late to enable the
seller perform the contract within the shipment period. The sellers thus brought this action to
repudiate the contract on the grounds that the buyer had broken a condition.

Held that, the sellers were entitled to damages for breach of the condition in the contract.

40
 Failure to nominate an effective vessel on time;
Bunge & Co Ltd V. Tradax England Ltd. [1995] 2 Lloyds Rep 235;
The nominated ship arrived too late for the sellers to load within the shipment period. The
seller commenced loading, but were unable to complete it before the shipment period expired.
The sellers offered to continue loading the following day but bad weather made it impossible.
The sellers demanded a market rate for the further cargo loaded and the buyers refused to pay.

Held, the buyers had broken a condition of the contract by failing to nominate an effective
vessel capable of loading the cargo within the period. The sellers had elected to keep the
contract alive but their obligation to load did not extend beyond the shipment period. That
‘‘under an f.o.b. contract, the obligation to deliver and the obligation to accept delivery are
mutual and both are confined to the shipment period’’

b) Seller to bear cost up to the point of shipment; section 62(b);

Seller is at his own expense bear the cost of loading the goods to the ship. Any cost thereafter
is borne by the buyer. The cost on the seller includes the cost of loading i.e. carrier’s charges,
stacking and transferring the goods unto the ship. In circumstances where the buyer has
chartered the ship, the buyer pays the ship-owner and recovers it from the seller.

c) Seller to inform buyer to enable buyer insure; section 62(c);

According to section 20(2) of the SGA, seller must give notice to buyer to enable the buyer
insure the goods in transit to cater for any risk. Since under fob contracts, the seller does not
take insurance policy on the goods, the seller is to notify the buyer so as to insure the goods
during the voyage.

Wimble Sons & Co. V. Rosenberg & Sons [1913] 3 K.B. 743;
The case involved the shipment of 200 bags of rice fob Antwerp. The plaintiffs sold the goods
to the defendants. The buyers sent instructions for the shipment but the sellers were to select
the ship. The sellers shipped the goods but did not insure it. The buyers did not have an open
cover. The practise of the buyers was to take out insurance only after being notified of the
name of the ship. The ship was lost at sea and the sellers sued for the price.

Held that the sellers were entitled to the price. The majority of the COA reasoned that it was
the buyer’s responsibility to fix the loading date, knew the date of departure, and knew the

41
 freight, port of loading and despatch. The name of the ship was the only thing lacking and this
was not a bar to insuring. The buyer already had enough information to effect the insurance.

d) Seller not obliged to take any insurance on the goods; section 62(d);
Under fob contract, the seller is not obliged to take out an insurance policy. It is the
responsibility of the seller to inform the buyer to take out an insurance policy to cover the
period of transit.

e) Seller to procure and tender necessary shipping documents; section 62(e);

Unless otherwise agreed it’s the duty of the seller to furnish the buyer with the necessary
documents to enable the buyer obtain possession of the goods. It is the seller’s contractual
obligation to deliver to the buyer the bill of lading. The bill of lading shows that the goods
have been shipped and it thus serve as a security which the seller may retain as a security for
payment. Usually the mates receipt is transmitted to the buyer and with that the buyer is
issued with the bill of lading.

Unless otherwise stated, delivery of the necessary documents prima facie indicates that
payment has been made. Payment and delivery are concurrent conditions.

Transfer of property; section 62(f);

Generally in fob contracts, property passes when the goods are placed on board the named
vessel. Our Act has gone further to state two categories under section 62(f);
a) Where according to the bills of lading, it is deliverable to or to the order of the seller, the
property in the goods passes to the buyer when the bill of lading are transferred to the
buyer (transfer).
b) Secondly, where according to the bill of lading, the bills of lading are deliverable to or to
the order of the buyer, property passes to the buyer when the goods are shipped
(shipment).

Transfer of risk; section 62(g);

In domestic sales, it is presumed that risk passes with property. However in export sales, this
position is usually rebutted. In fob sales, the seller bears all the risk of loss or damage to the
goods until such time as the goods have passed the ship’s rail i.e. shipped at the named port of
shipment.

42
 KLM Royal Dutch Airlines V. Birds, Beast & Reptiles Agency [1967] G.L.R. 679;
The plaintiff’s (BBRA) agreed to sell live animals to Messrs Animals Distributors Inc in New
York on condition that the buyers get a guarantor locally. KLM agreed and gave the guarantee
upon which some animals were sent to the buyers in the USA. Some of the animals died in
transit. The plaintiffs sued for the remaining purchase price from KLM as guarantors and they
were successful.

It was against this judgment that the KLM appealed to the High Court arguing that by their
letter they did not guarantee. The appeal was dismissed and the court held that the letter
written by KLM amounted to a guarantee. Secondly in accordance with the sale of goods Act,
immediately the goods were shipped, the goods were at the risk of the buyer and so the
animals which died were at the risk of the buyer and on the strength of the guarantee KLM
was liable.

CIF CONTRACTS; SECTION 61;

It is loosely interpreted to mean that the price of the goods includes cost, insurance and freight. The
essential nature of a c.i.f. contract is that the seller does not undertake that the goods shall arrive but
agrees;
a) to procure and tender to the buyer the conforming shipping documents,
b) to transfer the property in the goods to the buyer at the due time for such transfer, provided
that the goods are in existence.

This means that if the goods are shipped in good condition and they are damaged, the buyer cannot
sue the seller, the buyer’s right is against the carrier and or the insurer.
As a result c.i.f. contracts have been referred to as sale of documents relating to the goods and not
sale of goods.

Manbre Saccharine V. Corn Products Ltd [1919] 1 K.B. 198;

Corn Products agreed to sell corn syrup and starch to Manbre Saccharine on CIF terms London.
Goods answering the contract were accordingly shipped to the buyers. The ship was sunk by a
torpedo mine on 12/3/1917. The sellers tendered the shipping documents relating to the goods on
14/3/1917 but the buyers refused to take them up and pay the price.

It was held that the seller may validly tender the documents even though he knows the ship to be
lost, that the buyers were bound to do so, and that their refusal to pay amounted to a breach.

43
McCardie J. poses the question whether the seller can tender documents on goods that are lost. ’’I
conceive that the essential feature of an ordinarily contract of sale of goods rests in the fact
that performance of the bargain is to be fulfilled by the delivery of documents and not by the
actual physical delivery of the goods by the vendor’’.

Arnhold Karberg & Co. V. Blythe, Green, Jourdain & Co. [1915] 2 K.B. 379;
Blythe & Co. had contracted to buy Chinese horse beans CIF Naples. Beans were duly shipped in
July 1914 aboard a German ship the gernis but before the documents were tendered, Britain
declared war against Germany, with the consequence that the contract of carriage contained in the
bill of lading became void for illegality. The trial court held that the buyers were within their
mandate to reject the bill of lading.

Scrutton J. ‘‘But l am strongly of the opinion that the key to many of the difficulties arising in
c.i.f. contracts is to keep firmly in mind the cardinal distinction that a c.i.f. contract is not a sale
of goods, but a sale of documents relating to goods’’.
On appeal by the sellers - [1916] 1 K.B. 495,

The COA held that the outbreak of the war dissolved the contract of carriage and so far as any
further prosecution of the voyage was concerned, the bill of lading was no longer an effective
document. Under those circumstances, the bill of lading was not a bill of lading within the meaning
of the contract in respect of which the seller was under a duty to pay. The COA per Bankes L. J.
said in relation to Scrutton’s observation that ’’Contract for the sale of goods to be performed by the
delivery of documents and what the documents are must depend upon the terms of the contract
itself’’. The COA therefore held that documents tendered must be valid and effective at the time of
the tender; it is not sufficient that they were valid when issued.

Zakour V. Pillsbury Mills, Inc [1961] GLR 401; S.C.

This case has also held that the essential feature of a c.i.f. contract is the delivery of documents
and not by actual delivery of the goods.

Duties of the Parties;

C.I.F. Seller;
To ship goods or buys goods afloat; section 61(a);
The seller ships the goods or buys them afloat and appropriates it to the contract. In c.i.f. contract,
there is no obligation that the seller delivers the goods personally to the buyer. The seller performs

44
his obligations if he is able to furnish the buyer with the requisite conforming shipping documents.
In effect, the seller duty to deliver the goods is met when the documents are delivered even if the
goods are lost.

The cost of shipment and insurance borne by the seller; section 61(b);
The seller also at his own expense bears all the cost of the freight and an insurance policy necessary
for that type of the goods in question.

Seller to tender proper shipping documents; section 61(c) & 64;

The seller must also tender to the buyer proper shipping documents. Proper shipping documents has
been defined at section 64 as-
a) commercial invoice i.e. sellers invoice for the price,
b) a bill of lading and
c) a policy of insurance.
The bill of lading and the insurance policy assures the buyer that the goods shall arrive and even if
they don’t arrive because they are destroyed or damaged, it assures the buyer that he can claim
against the carrier or the insurer as the case may be. If the documents are not in order, the buyer
may reject them. However the seller may make fresh and conforming tender if there is time.

C.I.F. Buyer;
Buyer to take up conforming shipping documents and pay the price; section 61(d);
The only duty of the buyer under a c.i.f. contract is to pay against the tender of conforming
documents. The buyer is blind, here because the buyer pays without seeing the goods. This is the
case even if where it is known that the goods have perished or deteriorated. Thus where the both the
bills of lading and the goods agree with the terms of the contract, the buyer accepts the goods and
the bank pays the seller.

If the bills of lading correspond with the contract but the goods do not. The seller will proceed to
the bank to receive the money. This is because the banks deal with documents and not goods. C.i.f.
contract is not a contract of sale of goods but sale of documents relating to the goods. Once proper
shipping documents are tendered, that is it for the seller. The buyer may validly reject the goods and
sue seller for breach of contract and damages. The only problem here is that the buyer must have a
strong case and once the bank does not take instructions from the buyer, the buyer should proceed
to the court and freeze payment to the seller.

45
Thirdly, where neither the bills of lading nor the goods correspond, the buyer is entitled to rescind
the contract and sue the seller for damages together with the cost of the documentary credits. The
seller is not entitled to any remedy.

Fourthly, the bills of lading are not but the goods are corresponding. The buyer may reject the
goods but where the seller is able to make fresh and conforming tender if there is time, buyer will
accept the goods. Where the buyer decides not to accept a fresh tender, the seller has no cause of
action against the buyer.

Passage of property; section 61(e);

In c.i.f. contracts, buyers pay against shipping documents. Thus property in c.i.f. contracts passes on
the transfer of the bill of lading to the buyer. This is because in most cases, the goods would have
been shipped before the seller contracts to sell them to the buyer.

Passage of risk; section 61(f);

The case of a c.i.f. contract is that often the goods are already on high seas before they are
appropriated to the contract. In accordance with the section, the established rule is that risk passes
as from shipment. The buyer however obtains the benefit of an insurance contract which covers the
usual risk on the documentary exchange.

Cases;
Farah V. Robin Hood Flour Mills Ltd & Ano. [1962]G.L.R. 377;
The plaintiff ordered flour from the defendant in Canada on c.i.f. basis. The plaintiff paid against
documents to the Bank of West Africa Ltd. and was given the bill of lading and the plaintiff
consequently took delivery of the flour. On opening, ten of the flour had gone bad and the
defendant’s representative was informed whereupon an inspection was conducted. It was concluded
that the goods were not fit for consumption and hence were destroyed. The plaintiff thus sued for a
refund of the price paid. The High Court held among others the flour was not fit for human
consumption and thus destroyed the defendants were guilty of a breach of that condition. Since the
flour was not in accordance with the contract, the plaintiff was entitled to reject.

Robin Hood Mills Ltd. V. Farah [1963] G.L.R. 149;

The defendant appealed to the Supreme Court and the appeal was allowed and the Supreme Court
held that

46
 a) On the evidence, the flour was not ceased but the plaintiff voluntarily surrendered them for
destruction. The power of surrendering for destruction can only be done by the owner. The
plaintiff by his conduct was the owner and thus not entitled to a refund.
b) That in a c.i.f., the seller completes his bargain when he ships goods conforming to the
contract and submits conforming documents to the buyer. The risk passes on to the buyer on
shipment of the goods. Thereafter the buyer is obliged to pay even if the goods are
destroyed. The buyer can only reject if the goods did not conform to the contract.

Zakour V. Pillsbury Mills Inc. [1961] G.L.R. 401;

The plaintiffs (respondents) in the Supreme Court were a company based in the United States. It
received orders from the defendant (appellant) for the supply of flour on c.i.f. basis. The goods were
supplied and the defendant took delivery of the goods. The plaintiffs sued the defendant for an
outstanding amount on the contract. The defendant contended that some of the goods were damaged
in transit and thus not liable.

The High Court gave judgment for the plaintiff holding that a c.i.f. contract is performed by the
delivery of documents and not by the actual physical delivery of the goods. The defendant appealed
to the Supreme Court and admitted however that they had benefited from insurance.

The Supreme Court held that the essential feature of a c.i.f. contract is that delivery is satisfied by
delivery of documents and not by actual delivery of goods. On presentation of shipping documents,
if they are complete and regular, the buyer is bound to pay the price irrespective of the arrival of the
goods, but by so paying he is not precluded from subsequently pursuing any remedy as may be
available to him, either under the terms of the contract or under the terms of the insurance.

47
 LECTURE SEVEN
REMEDIES OF THE SELLER
Both in law and equity, once a contract has been breached, the injured party should have a remedy.
Equity will not suffer a wrong to be without a remedy. Under the SGA, there are two main remedies
available to the seller when a buyer breaches the terms of the contract. First there is the real right;
these are rights the seller can exercise against the goods which is the subject matter of the contract.
The other right is personal right which is exercisable against the buyer personally. Whether the
seller will exercise real or personal rights will depend upon the facts in issue. These rights are
exercised because the buyer has failed and or defaulted to pay the price and as well as failing to
fulfil his obligation as agreed under the contract. Where the price remains unpaid the seller becomes
an unpaid seller within the SGA.

Unpaid Seller; section 34(1);

a) when the whole of the price has not been paid
b) when a bill of exchange has been dishonoured
Subsection (a) has been attacked on the grounds that it should have rather read where ‘any part’ of
the contract sums remains unpaid; it also refers to a seller who has sold on credit.

Real Rights of the Seller; section 35;

Whether or not property has passed to the buyer, the seller has the following rights;
a) Lien over the goods;
b) Where the buyer is insolvent, the seller can stop the goods in transit after parting with
possession but before they reach the buyer;
c) Right to resell and
d) Right to recover the goods so delivered because the property has not passed.

Unpaid Seller’s Right of Lien; section 36 & 37;

A lien is the right to retain goods which are already in the seller’s possession. The seller thus has the
right to exercise his right of lien by retaining possession of the goods until the price is paid. The
conditions prescribed by section 36 are as follows;
a) if the seller has not agreed to deliver the goods before payment of the price,
b) if the goods have been sold on credit but the terms of the credit has expired,
c) the buyer has become insolvent.

The unpaid seller’s lien is for the price and not for storage purposes.

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Somes v. British Empire Shipping Co. [1860] 8 HLC 338;
The HOLS held that a seller had no lien for storage charges under any circumstances. The case
decided that the seller cannot claim a lien in respect of storage charges which arise as a result of the
seller’s exercise of his lien for the price. Atiyah for example has argued that, this case is not to
mean that such costs or expenses cannot ever be recovered from the buyer where he does derive
some benefit from them, i.e. before the seller exercised his right of lien.

Subsections 2- the seller can still exercise his right of lien even where he is a bailee.
Subsection 3- in situations where the seller has even delivered part, the right of lien can still be
exercised on the remainder of the goods in the seller’s possession.

Loss of lien; section 37;

The seller loses his right of lien in one of three ways;
a) when the seller delivers goods to a carrier or other bailee to transmit same to the buyer but
with no power of disposal11;
b) where the buyer possess the goods with the consent of the seller12
c) by waiving the right of lien13.

Valpy v. Gibson [1847] 4 CB 837;

It has been held that a seller who has lost his lien does not gain it by repossession of the goods once
more.

In this case Brown bought cloth from Gibson, which was consequently sent to shippers on the
instructions of Brown. The goods were packed in four cases. After loading the goods unto the ship,
the buyer’s agent one Alison ordered the return of the goods to the seller (Gibson) and the goods
were repackaged into 8 cases.

Whiles the goods were still in the possession of Gibson and as unpaid seller; Brown (the buyer) was
declared bankrupt. The seller was sued for the goods. It was held that, it was too late for Gibson to
claim an unpaid seller’s lien.

11 Section 37(1)(a) of the SGA

12 Section 37(1)(b) of the SGA
13 Section 37(1)(c) of the SGA

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Unpaid Seller’s Right of Stoppage in Transit; sections 38- 43;
The seller’s right of stoppage in transit is set out in section 38. The section gives the seller the right
to resume possession of the goods in transit once they have not been delivered to the buyer. The
seller shall remain in possession till the price is paid. The main reason according to the section is
when the buyer of the goods becomes insolvent.

A person becomes insolvent when that person is unable to pay his debts as they fall due and
owing14. The courts have favoured the right of stoppage in transit. In Booth Steamship Co Ltd V.
Cargo Fleet Iron Co Ltd [1916] 2 K.B. 570 at 580; Lord Reading had this to say; ‘It is a right
founded upon the plain reason that one man’s good’s shall not be applied to the repayment of
another man’s debt’’.

Under this the seller sees himself as a secured creditor and looks to the goods as a security before
they finally get into the buyer’s possession. Atiyah, for example argues that this remedy is
important only when the buyer has bought the goods on credit. In addition to this the seller need not
fear and can adopt a modern method of payment, opening letters of credit which assures the seller
of payment. .This has reduced the importance of the concept

The goods are still in transit when they leave the seller’s possession into the hands of a carrier but
are yet to be delivered to the buyer15. The goods are still in transit even where the buyer has rejected
them but the carrier or the bailee continues in possession of them even if the seller refuses to accept
them back16.

Conditions for the exercise of this right;

For an unpaid seller to exercise the right of stoppage in transit, the discussion above indicates that,
the seller must establish three things according to section 38(1);
- The seller must be an unpaid seller,
- The buyer must be insolvent,
- The goods must be in course of transit.

What does it mean to say ‘goods are in transit?’ section 39;

14 See section 77 of the Insolvency Act, 2006 Act 708.

15 Section 39(1) of the SGA
16

50
Goods are in transit from the moment the seller hands over the goods to a carrier but yet to reach the
buyer’s possession17. It is to be noted that where the carrier is an agent of the seller, the issue of
stoppage in transit does not arise because effectively the goods are still in the possession of the
seller. The seller under this can exercise only the right of lien. The right is operative only where the
carrier is an independent party. If the carrier is the buyer’s agent, the goods are not in transit
because the buyer in effect, is in possession.

The goods are still in transit when the buyer rejects the goods and the carrier continues in
possession even where the seller refuses to accept the goods18.

Termination of the right of stoppage in transit; section 39;

a) If the buyer obtains delivery of the goods, before the goods arrive at its destination, this right
cannot be exercised by the seller19.

Plischke & Sohne GmbH v. Allison Bros Ltd. [1936] 2 All ER 1009;
The seller agreed to deliver the goods free of charge to the buyer’s premises in London. The
carrier delivered the goods at a dock warehouse in accordance with instructions from the
buyer. The issue was whether the seller could exercise the right of stoppage in transit. The
court held that the right of stoppage was lost.

b) Where the carrier wrongfully refuses to deliver the goods to the buyer, the right to stop the
goods in transit is also lost20.

c) If part of the goods has been delivered, the remainder may still be stopped in transit21.

d) Where the goods arrive at its destination and the carrier acknowledges to the buyer that he
holds the goods on his behalf and continues to be in possession, the transit is at an end. See
section 39(3).

17 Section 39(1) of the SGA

18 Section 39(4) of the SGA
19 Section 39(2) of the SGA
20 Section 39(6) of the SGA
21 Section 39(7) of the SGA

51
Taylor v. Great Eastern Railway Co. Ltd. [1901] 17 TLR & [1901] 1 K.B. 774;
The seller sold goods (barley) to Sanders. The goods reached their destination which was a railway
station. The railway company acknowledges receipt of the goods and on request to hold the goods
for and on behalf of the buyer which was agreed to by the master of the station.

The buyer later became insolvent and the seller purported to invoke their right of stoppage in
transit. The court held that they could not do so, because the transit had determined when the
railway station acknowledged receipt of the goods. This is even the position when the buyer
intercepts the goods before they reach their intended destination.

Reddall v. Union Castle Mail Steamship Co Ltd. [1914] LJKB 360;

Rutherfords sold goods to Snow. The sellers knew that the Snow was buying the goods for someone
in South Africa. Snow instructed Rutherfords to send the goods to Union company’s ship named
Armadale Castle at Southampton to be shipped to Algoa Bay in South Africa.

Rutherfords send the goods to Southampton as instructed and Snow in anticipation of insolvency
stopped the shipment. The goods were thus kept in a warehouse at Snow’s expense and were
handed over to Rutherfords (seller) under a claim of stoppage in transit.

Snow’s trustee in bankruptcy sued the Union for conversion i.e. handing over the goods to the
sellers. He succeeded. The court ruled that the transit had ceased when the buyers intercepted the
goods before they had been loaded.

How stoppage in transit operates;

a) Taking actual possession of the goods or by giving a notice of claim to the carrier who is in
possession of the goods. The notice is given to either the person in possession or his principal.
Any notice to the principal of the person in possession must be such that the principal will be
able to communicate with the agent. See section 40.

b) Instructions about stoppage in transit must be given by the seller within a reasonable time to
the carrier so that the carrier can affect the redelivery of the goods back to the seller. The
expenses for both deliveries will be borne by the seller. See section 41(2).

52
c) If the goods are covered by an insurance policy and the seller exercises his right of stoppage
in transit over the goods which are lost, damaged or deteriorated, the proceeds of the
insurance shall be paid to the seller if he took the insurance and exercised the right before the
risk occurred. In any other case the proceeds shall go to the buyer. See section 42.

Loss of right (lien & stoppage); Section 43;

The right of an unpaid seller to exercise the right of lien or stoppage in transit may be lost under the
following circumstances;
- where the seller assents to the buyer to sell or otherwise dispose of same, S. 43a
- If the buyer disposes of the goods (sale or transfer of document of title) which such
disposition is effective to pass title then the right of lien and stoppage in transit is lost, S 43(b)
- Where the buyer disposes or documents of title other than by sale (credit, pledge etc) then the
right of lien and stoppage in transit are lost, S. 43(c).

Recovery of Possession from Buyer; Section 44;

An unpaid seller may also recover possession of goods from the buyer under any contract of sale
after they have been delivered provided that;
- the property in the goods has not passed to the buyer or
- the property has passed but the contract nevertheless permits the seller to recover possession.

The right of Resale; Section 45;

An unpaid seller in physical or actual possession of the goods after exercising the right of lien or
stoppage in transit may resell them to another buyer and that buyer shall have good title to the
goods. It must be quickly added that this right of the seller is dependent upon some conditions and
any such resale shall exclusively depend upon these conditions, these are;
- if the goods are perishable and the buyer does not within a reasonable time pay the price;
- where the buyer has repudiated the contract and the same has been accepted by the seller;
- where the seller notifies the buyer of his intention of resale and the buyer fails to pay the price
within a reasonable time.

The Personal rights of the Seller;

Under the Sale of Goods Act, the seller has another rights this time against the buyer personally and
not the goods.

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Action for Price; Section 46;
1) The seller can sue for the price where the property has passed to the buyer and he has failed to
pay,
2) Under subsection 2, where the price or part thereof is payable on a day certain and the buyer
fails so to do, despite the fact that the property has not passed the seller can still sue for the
price which has become due.
3) The seller may in addition to an action for price also claim damages.

Action for non-acceptance; Section 47;

The fundamental duty of the buyer under the Act is to accept the goods perfectly delivered by the
seller. Where therefore the buyer wrongly (without just cause) neglects or fails or refuses to accept
goods delivered to him and pay for them, the seller may bring an action against the buyer for
damages for non-acceptance of the goods. See section 47(1). This is even the case where the
deliveries are done by instalment. The Act at section 48 indicates how the damages are to be
assessed.

Assessment of damages; Section 48;

1) Loss which could reasonably have been foreseen by the buyer at the time of the contract was
made.
2) If there is an available market for the goods in question, the measure of damages is the
difference the contract price and the market or current price. It has been contended that the
question whether there is an available market is treated by the courts as a question of fact or a
degree. It may be possible for a commodity to be sold at a particular place in small quantities.
Similar or identical goods may also be available for sale. The courts have asked the question
whether it will be possible to dispose of the goods there and if it can, it becomes an available
market.

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 LECTURE EIGHT
REMEDIES OF THE BUYER.
Like the seller, the buyer has remedies when the seller breaches the terms of the contract. Under the
Sale of Goods Act, the buyer has two main types of remedies namely rejection of goods (sections
49 – 52) and personal rights (sections 53 – 58).

Rejection of Goods;
The buyer is entitled to repudiate the contract, reject the goods and refuses to pay where the seller
breaches the contract. The conditions are as follows;
- the seller’s breach is of a fundamental obligation,
- the seller is guilty of a breach (not condition or trivial) but by the nature and the consequence
of the breach,
- the seller induced the buyer to enter into the contract by virtue of fraudulent or innocent
misrepresentation.

Instalment Deliveries; section 49(2);

a) If every instalment is to be paid for separately, subsection (1), the right to reject, shall apply to
each instalment separately. The first proviso is to the effect that where there is a breach of two
or more instalment, the buyer may repudiate the whole contract. The second proviso is that
the subsection shall not affect the right of the buyer where there is fraudulent or innocent
misrepresentation on the part of the seller (severable).

b) In all other cases of instalment deliveries, a breach of one or more instalment shall be
considered as a breach of the whole contract (non-severable).

Consequences of Rejection; section 50;

1) A buyer, who rejects the goods having the right to do so, is not bound to return the goods, but
it is enough to intimate to the seller that he rejects the goods. The buyer is not required to pay
for the price and if it has been paid, the buyer can recover it on the basis of failure of
consideration. This is in addition to bringing an action for damages for non-delivery. If there
is enough time the seller can make a fresh tender. See Borrowman Philips & Co. V. Frere &
Hollis***

2) Under subsection 2, once the buyer gives the notice of rejection, the seller is to have the goods
placed at his disposal. Subsection 3 is that where the buyer has paid the price or part thereof

55
 the buyer shall retain possession of the goods until the seller pays back. This creates serious
problems as the Act fails to tell when property passes or who assumes the risk. Atiyah for
examples argues that practically, risk does not pass at all where the goods delivered are
defective.

Loss of right to reject; section 51;

The section is to the effect that
- the buyer may not reject goods which he has accepted,
- acceptance of a part of the goods is not a bar to rejecting the other part unless the contract is
not severable.

Under section 52, a buyer accepts goods when

a) the buyer intimates his acceptance to the seller,
b) the buyer failing to inform the seller of his rejection of the goods within a reasonable time,
c) after notifying the seller, buyer wrongly refuses or neglects to place rejected goods at seller’s
disposal.

The problems with the provision of these sections are many and varied. What happens when the
defect manifests itself after acceptance? What happens when the buyer is misled? What if the buyer
had no opportunity to examine the goods? These are questions which are not answered under the
Act.

Personal Rights of the buyer; section 53;

Damages for non delivery – where the seller neglects or refuses to deliver the goods and where the
buyer rejects the goods having the right to do so, the buyer may sue for damages for non delivery.

Assessment of damages for non delivery; section 54;

1) According to section 54(1), the measure of damages is the loss reasonably foreseeable by the
seller at the time when the contract was made.
2) If there is an available market for the goods, then the measure of damages is prima facie to be
ascertained by the difference between the market or current price and the contract sum.

Damages for breach of condition or warranty; section 55;

Where the seller has committed a breach, the buyer can sue under this head. Where the seller
breaches a condition or a warranty, the buyer may sue the seller for the breach complained of. The

56
buyer may in the alternative set up a claim to such damages in diminution or extinction of the price.
According to section 56, the measure of assessment is the loss foreseeable by the seller at the time
of the contract.

Recovery of the Price; section 57;

Under this the buyer can sue for the price if the buyer has already paid because of lack of
consideration.

Specific Performance; section 58;

This is an equitable remedy. If the contract is for the delivery of specific or ascertained goods and
the seller fails to deliver, the court may order that the seller specifically performs. This remedy
being an equitable remedy, the court may make the order if the goods are still in existence. Again
being a discretionary remedy, a court may grant same provided damages would not be adequate.

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 SECOND SEMESTER
LECTURE ONE
NATURE AND FORMATION OF HIRE PURCHASE AND CONDITIONAL SALE
AGREEMENTS
In Ghana, hire purchase and conditional sale agreement is regulated by the Hire Purchase Decree,
1974 NRCD 292. A conditional sale agreement is an agreement for sale, whereby the title to the
goods remains in the owner until the purchase price has been paid in full or any condition
prescribed by the agreement has been fulfilled by the buyer to enable title to pass. Under common
law title will pass when the full purchase price has been paid or a condition attached to the sale has
been fulfilled.
Section 24 of the decree defines a conditional sale agreement as an agreement for the sale of goods
under which the purchase price or part of it is paid by instalment. The title remains in the seller
notwithstanding the fact that, the buyer is in possession.
On the other hand, a hire purchase agreement allows the hirer to terminate the agreement anytime
by giving notice in writing and is required to return the equipment to the owner in good order as
well as compensating the owner for the loss i.e. for terminating it.
Under section 24 of the decree, a hire purchase agreement is an agreement for the bailment of goods
under which the bailee may buy the goods or under which the property in the goods will or may not
pass to the bailee. Thus a typical hire purchase contract contains two elements a contract for hiring
the goods and the option to purchase the goods. If you have not finished paying you are hiring.
Once the hirer exercises the option to purchase and concludes payment title in the goods passes to
the hirer.
There basic differences between a conditional sale and hire purchase agreements:
- Under CSA the buyer is committed to pay the full price. But in HPA, the hirer can put an
end to future rental liability by terminating the agreement.
- Under CSA, the object is the sale of goods whose price is paid by instalment. But in HPA,
the object is not to sell but their hire and the hirer has the option to buy the goods if he so
wishes.
A hire purchase agreement hinges on three or four parties. These are the owner- retailer, hirer, a
guarantor and the bank or financing house.
- Financier and Hirer:
The contract hinges on these two parties. The financier provides the money for the hirer to buy the
items on offer by the retailer. To the extent that the hirer has not paid the money as provided for
under the contract, the financier has a cause of action against the hirer his guarantor or the retailer
for the recovery of the money.

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- Retailer and Hirer:
Strictly speaking there is no relationship between the retailer and the hirer. Basically the hirer fills
the forms and if it is accepted by the financier, the hirer then gets the item on offer by the retailer.
The rationale is that the form so filled is a proposal to the financier and once it is accepted; the
retailer will go ahead and sell the goods to the hirer.
Drury V. Victor Buckland Ltd. [1941] 1 All E.R. 269;
This English Court of Appeal has held in this case that where the goods are defective, the hirer will
prima facie have no cause of action against the retailer.
Be that as it may, the hirer or the debtor’s cause of action against the retailer lies in negligence for
supplying a defective item. Secondly, the warranty which is provided by the retailer may also give a
cause of action against the retailer and thirdly, exemption clauses provided in the contract may also
hold the retailer liable when the goods are defective.
- Financier and Retailer:
The financier is regarded here as the banker and as such sometimes insist that the retailer or
someone provided by the hirer acts as a guarantor to ensure payment of the purchase price and other
incidental cost to the financier. This is because where there is a default with the repayment
schedule; the financier may not be able to take possession of the goods with its attendant difficulties
i.e. court action and others. If for example the retailer pays, all that is left is for the retailer to
enforce the hire purchase agreement.
The retailer is also considered as an agent of the financier only for limited purposes. These are in
the areas of receiving offers from the hirer, delivering goods to the hirer and also receiving notice of
revocation of the hirer’s offer from the financier. The retailer is not an agent of the financier for
purposes of hire’s payments. In any other case, it is a question of fact to be determined.
- Financier and Guarantor;
The retailer or a third party may guarantee for the payment of the sum involved. The essence of this
provision is to assure the financier of repayment of money. The practise is for the hirer to look for
his own guarantor who will also be required to sign the standard form agreement which is part of
the hire purchase agreement or it may be a separate agreement. The guarantor’s duty arises where
there is a default on the part of the hirer.
Helby v. Matthews [1895] AC 471;
Helby contracted to hire a piano to Brewster for 3 years. The contract among others stipulated that,
hirer may terminate the hiring by delivering up to the owner the instrument. If the hirer was able to
pay all instalments by the stipulated time, the hirer shall become the absolute owner of the
instrument. Brewster pledged the piano with Matthews a pawnbroker, as a security for a loan
without the consent of Helby.

59
The House of Lords held that the agreement was not a conditional sale and Helby was entitled to
claim the piano from the pawnbroker. The decision is to the effect that the owner of goods which
are let out under a hire purchase agreement cannot lose his title to the goods until the payment has
been made by the hirer.
Formation of Hire Purchase Contracts;
The person who lets is known as the owner and the person to whom the goods are let is the hirer
and according to section 24 these parties includes their agents. The operative words under the
section are the rights and liabilities having passed by assignment or by operation of law.
Requirement;
Section 1;
The decree states that where goods are let under a hire purchase or conditional sale, the owner or
seller shall not enforce the agreement unless the agreement is in writing signed by all the parties or
on their behalf, section 1(1) (a) of the decree. The burden is on the owner/seller. For where there is
a default, it is the seller who suffers.

Section 1 (b);
Secondly, the parties shall comply with the provisions of sections 2-4.
Section 1(2);
This subsection is to the effect that where the owner or seller cannot enforce the agreement then
certain benefits under the agreement cannot be enforced
a) the owner or seller cannot enforce any contract of guarantee,
b) the owner or seller secondly cannot enforce any security so given by the buyer or the hirer in
respect of moneys payable and
c) the owner or seller shall not be entitled to enforce a right to recover the goods.
The rational behind these provisions are that they are designed to ensure that the owner /seller
comply with the statutory provisions in the decree and secondly once followed the hirer or buyer is
protected against the fraud of the owner or seller.
Section 2;
The decree at section 2 states that the owner or the seller shall state the price orally and in writing at
which the goods may be purchased, the hire purchase price or the total purchase price.
Ampadu & Ano. V. Dadzie [1978] GLR 54 C.A.;
The appellants acquired from Yellow Cab Company on hire purchase basis a bus. The appellants
delivered the car to the respondent without disclosing their interest and a hire purchase which
described the 2nd appellant as the owner but contrary to section 66 of Act 137 (then in force) failed
to state the cash price and purported to exclude part viii of Act 137.

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The car was seized twice and on the second ceasure, the respondent sued the appellants for the
return of the full amount paid under the agreement because there had been total failure of
consideration. The trial judge made a finding of fact that the appellants who represented themselves
as the owners of the vehicle at the time of the second ceasure were in arrears and secondly that the
parties did not comply with the provisions of the law, hence the agreement was void and
unenforceable.
The court thus gave judgment to the respondent and further ordered the appellant to refund
payments made by virtue of section 57(1) of the Act. The appellants appealed and the appeal was
dismissed. The COA held that the provisions of section 66 of the Act were mandatory and where
they had not been complied with, the seller or owner could not enforce the agreement against the
buyer. Non-compliance did not render the agreement null and void for if it did, there would be no
need for section 66(4). The section urges the courts to apply equity to dispense with non-
compliance.
The issue is what happens when the parties do not reduce their agreement into writing
Yayo V. Nyinase [1975] 1 G.L.R 422 COA;
By an oral agreement the plaintiff agreed to buy the defendant’s second hand vehicle. The plaintiff
paid a deposit and took delivery of the vehicle and agreed to pay the balance in six instalments. The
vehicle was sent to the mechanical shop for repairs which had developed. The defendant seized the
vehicle arguing that the instalments are outstanding.
The plaintiff thus brought this action claiming the moneys so far paid under the agreement and also
for damages. The defendant contended that the agreement was not a hire purchase properly so
called because it was not in writing and thus cannot be enforced under the law. The trial judge gave
judgment for the plaintiff. The defendant appealed on the grounds that the agreement was not in
writing and hence not enforceable under the law (Act 137 section 66(1)). Its counterpart is section
1(a) in the decree.
The appeal was dismissed because under Act 137, all that was necessary to constitute a hire
purchase agreement was an agreement by an owner to sell goods to a buyer whereby the purchase
price was payable in 5 or more instalment and hence was a hire purchase agreement.
Looking at the present decree at section 3(3) if a hire purchase agreement does not conform with
these requirements it cannot be enforced. However, where the court is satisfied that non compliance
of the subsection is not prejudicial to the parties the court will dispense with the non conformity.
Act 137 also had the same relief under it.
Section 3, Requirements of the agreement;
1(a) shall contain the cash price and the hire purchase price as the case may be as well as the total
purchase price.

61
 b) The amount of instalment payable and it shall include the date and mode of payment.
c) Description of the goods i.e. goods should be sufficiently be identified.
d) Notice to specify the statutory rights of the parties. These are the hirer’s right to terminate the
agreement and the owner’s, restriction to recover the goods.
Hire Purchase; First Schedule of the decree;
Hirer’s Right;
The fundamental right of the hirer is the ability to terminate the hire purchase agreement. The hirer
is required to notify the recipient of the instalment payments or if their agreement contains any such
clause. The following consequences flow from the termination by the hirer;
Firstly where there is any outstanding instalment at the time of termination, the hirer shall pay it. In
all hire purchase agreement there is a provision for minimum payments. If at the time of the
termination, the hirer has not paid this amount the hirer shall pay the difference to make it up.
Secondly, where the hirer has failed to take reasonable care of the goods at the time of termination,
the hirer shall compensate the retailer for any loss or damage that has been caused to the property.
Owner’s Right;
If the hirer has not personally written to terminate the agreement, and has made payments in
accordance with sections 8 & 9, the owner has no right to recover the goods from the hirer without
recourse to court action or with the consent of the hirer.
Where the owner resorts to court action to recover the goods, the court may either make fresh
repayment schedule for the hirer, or order a fair proportion of the goods to be given to the hirer
having regard to what has been paid.
Conditional Sale Agreement Second Schedule of the decree;
Buyer’s Right;
The buyer has the right to terminate the agreement by wring to the person who receives the
instalment. The mode of termination may also be stated by the contract which has been executed by
the parties.
Secondly, any instalment outstanding should be cleared at the time of the notice and also if what has
been paid is not up to the minimum payment the buyer shall pay same. The buyer is also liable to
compensate the owner if any deterioration or damage has occurred.
Where the goods have become a protected good, (half of the price has been paid) the seller shall not
recover them without the consent of the buyer or by a court action. The court may order fresh
repayment schedule order a portion of the goods which correspond to the payments made to the
seller. The issue is what happens when the goods are indivisible.
Mensah V. Osei [1962] G.L.R. 261 ;( Failure to incorporate statutory notice)

62
The defendant let a second hand car to the plaintiff on a hire purchase agreement. The agreement
did not contain the notice of the statutory rights of the parties. This right was contained at section
4(2) of the repealed HP Act of 1958 which is a verbatim production of section 3(d) of the present
HP decree NRCD 292. The right is about the right of the hirer or buyer to terminate the agreement
and the restriction of the owner’s right to recover the goods.
The car was seized by the owner when payment fell into arrears for five months. The plaintiff
therefore sued the defendant for the return of the vehicle and loss of earnings from the date of
seizure till date of judgment. The defendant counterclaimed for the arrears and the cost of repairs
which was paid by the defendant. The plaintiff contended that the counterclaim could not be
maintained because the hire purchase agreement did not contain the statutory notice and therefore
was not enforceable.
The court held that the plaintiff was in arrears at the time of the seizure and hence the seizure was
not wrongful. It further held that although the statutory notice was absent, it was not prejudicial to
the plaintiff. The defendant was not entitled to both the car and the arrears. Once he has decided to
go for the car he will not get the arrears but will get the cost of the repairs which was to the use of
the plaintiff. Plaintiff’s action is thus dismissed.

Section 3(2);
A copy of the agreement shall be given to the buyer or hirer 14 days after signing.
Section 3(3) if the hire purchase agreement does not comply with these requirements, it cannot be
enforced. However where the court is satisfied that non compliance of these subsections is not
prejudicial to the parties, the court will dispense with same and enforce the agreement.
Section 4;
Avoidance of certain provisions;
No party shall put the following provisions in a HP or CS agreement and same shall be void if it is
present;
a) Cannot enter upon a property to recover possession of goods which is the subject matter of a
HP or CS agreement or is relieved from liability for any such entry. The clause is important
because section 5 controls the owner or the seller’s right to recover the goods.
b) Any provision that restricts the hirer’s right to terminate and impose any liability on the
hirer or buyer over and above what section 6(1) stipulates (liability under the contract at the
time of termination). Thus at the time of termination, if the hirer has not paid 50%, same
shall be paid up. If there is any clause which increases this requirement, same is void.

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 c) Any clause which seeks to impose a higher liability on the hirer than what is required if
hirer exercises right of termination, section 5 & 6
d) Any clause that any person acting on behalf of the owner or the seller in a HP or CS
agreement is deemed to be as agent of the hirer or buyer is void.
e) Any provision that seller or owner is relieved from liability, for any liability arising from
the commission or omission of their agent.
Minimum Payments;
Under the first and second schedules of the decree, mention is made of minimum payments. This
minimum payment is agreed upon by the parties and same inserted in the agreement. If the hirer or
buyer decides to exercise the right of termination, then the hirer should pay any arrears and if what
has been paid is less than the minimum payment the hirer or buyer should made it up to that
minimum payment. This is how minimum payments arise. The effect of this is to cushion the seller
or owner by way of depreciation.

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 LECTURE TWO
TERMINATION, LIABILITIES AND PROTECTED GOODS.
Termination;
Section 5;
Under any hire purchase or conditional sale agreement, the decree permits the hirer or buyer to
terminate the agreement after having complied with the requirements under the law. The section
gives the right to either the hirer or buyer to exercise a right of termination before the final payment
is made.
Subsection 1;
This section indicates that under a hire purchase or conditional sale agreement the right of the hirer
or the buyer to terminate the agreement shall not in any way be inhibited or impeded. It thus
guarantees the hirer or buyer’s right to terminate the agreement. Under the section, the hirer or the
buyer is required to give written notice to the party who is entitled to receive the payments.
However subsections 2 and 3 make further provision about terminating conditional sale agreements.
Subsections 2 & 3;
At section 24 (1) of the decree, in a conditional sale agreement, title to the goods shall remain in the
seller until the full payment. Notwithstanding that the buyer is in possession, and under such
conditions specified in the agreement to be fulfilled by the buyer. It is thus possible that under these
subsections, immediately part (%) of the total purchase price is paid the parties by their contract
would agree that title in the goods should pass to the buyer.
Under subsection 2, where the agreement indicates that property will pass after payment of part of
the purchase price and same is paid, the property in the goods passes to the buyer. Where the buyer
in turn transfers the goods to a third party, the buyer immediately loses the right to terminate the
contract between H/B and the O/S. If the contract is terminated then the property in the goods will
ordinarily vest in the owner (seller). The question which needs to be answered is what becomes of
the interest of the third party?
Under subsection 3, there is no transfer to a third party where the buyer terminates the agreement
after property has passed but before final payment, then the property in the goods shall vest in the

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previous owner. The proviso is to the effect that where the owner i.e. the seller has died, the goods
shall devolve on the personal representatives.
Liability after notice of termination;
Section 6;
The section sets out the liabilities of the hirer or buyer after the agreement has been terminated as
per section 5 of the decree.
Subsection 1;
After furnishing the notice of termination any liability that has accrued shall be settled. In addition
to this, the hirer or the buyer is liable to pay the difference between the total sums paid and one half
of the HP (MP) or total purchase price or where the agreement specifies a lesser amount it shall be
paid. Thus where the hirer has paid half or more of the HPP or TPP the hirer or buyer shall not be
required to pay any further sum.
Subsection 2;
The hirer or buyer shall return the goods to the premises from where the hirer or the buyer was first
supplied with the goods at his own expense. The owner or seller may direct that the goods be sent to
another location. Where the goods are delivered to a different location on the instructions of the
seller or the owner, the cost of delivery shall be borne by the seller or owner.
Subsection 3;
If at the time of termination the goods have deteriorated, because the hirer or buyer has failed to
take reasonable care of same, then the hirer or the buyer shall be liable to compensate the owner or
the seller for such an omission.
Subsection 4;
If after termination the hirer or buyer continues to retain possession of the goods, the seller or the
owner may bring an action to recover the goods. In such an action having regard to all the
circumstances of the case, the court may order the hirer or buyer to return the goods without an
option to pay for the goods.

Completing the agreement;

Section 7;
Subsection 1;
Section 7 confers on the hirer or the buyer, the right to notify the seller or the owner of his intention
to purchase the goods outright by paying the outstanding sum (net balance) under the agreement on
a specified date.

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Subsection 2;
This subsection defines the net balance. This is the difference between the HPP or TPP and the
amount which has so far been paid.
Subsection 3;
Under this subsection, the right so conferred can be exercised under two conditions:
a) any time during the currency of the agreement;
b) Within 28 days of the owner or seller taking possession having the right to do so and within
which time the owner or seller shall not dispose of the goods. The hirer shall pay in addition
the cost incurred in taking possession of the goods as well as any cost incurred in storing,
repairing or maintaining the goods.
Protected Goods;
Section 8;
The section works to restrict the rights of the owner or seller to recover the goods from the hirer or
the buyer on default. The decree has thus designated some goods as protected goods under the
decree. This right exist to protect the interest of the hirer or the buyer so as not lose the goods
without having regard to what has been paid under the agreement.
A protected good is defined at subsection 4 as a good let under a HP/CSA, where half of the
HPP/TPP has been paid and that the hirer or buyer has not terminated the agreement.
Subsection 1;
The owner shall not recover possession of a protected good i.e. where 50% of the HPP or TPP has
been paid by the hirer or the buyer unless by a court action.

Subsection 2;
Where a good has become a protected good and the owner nevertheless recovers possession of it
without recourse to court, the agreement shall be terminated immediately with the following
consequences;
a) the hirer or buyer is released from any liability subsisting under the contract and is entitled
to recover by way of action from the owner or the seller any monies paid and security so
given;
b) any security or money provided by a guarantor shall be recovered by the guarantor.
Barnes V. Ameen Sangari & Co. [1962] G.L.R. 350;
The plaintiff bought a vehicle on HP from the defendant. There was a clause in the agreement to the
effect that if any execution or distress action is levied or threatened to be levied on the vehicle, the
owner may determine the hire purchase agreement without notice and retake possession.

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The vehicle was seized by the sheriff in execution of a judgment obtained against the plaintiff. The
defendant made representations and the car was released but refused to release the car to the
plaintiff. The plaintiff at this time had paid 75% of the HPP. The plaintiff thus brought the present
action for the return of the sums paid and damages for wrongful seizure. Section 12(1) HP A of
1958, section 69(1) of Act 137 and section 8(2) NRCD 292.
The trial court held that although 75% of the HPP has been paid, the vehicle was not taken from
him and hence section 12(1) was not applicable. Secondly since the plaintiff permitted the vehicle
to be seized in execution, the defendants were entitled to exercise their rights under the agreement
and determine the transaction. The seizure was therefore not wrongful and the plaintiff’s action was
dismissed.
Barnes V. Ameen Sangari [1966] G.L.R. 604; S.CT;
The plaintiff appealed to the Supreme Court and the appeal was allowed. The court held that the
seizure by the respondents was wrongful as it breached section 12(1) of the Act because at that time
of the seizure the appellant has paid more than 75% of the HPP. The appellant was entitled to a
refund of the 75% HPP paid.

De Horne Agah V. Farkye Brothers [1967] G.L.R. 473, CA;

The plaintiff sued under section 12 of HPA of 1958(s. 8 of the decree), i.e. protected goods to
recover all sums which has been paid to the defendant under the HPA together with general and
special damages for wrongful seizure. The defendants admitted the seizure but argued that at the
time of the seizure the amount paid was not up to the requisite 75% of the HPP. This was due to the
fact that the owner was keeping all payments (HPP, penalties and compensation) into one account.
The High Court dismissed the plaintiff’s action on the ground that at the time of the seizure he had
not paid the requisite 75% of the HPP.
The plaintiff appealed and the Court of Appeal held that the defendants putting HP payments,
penalties and damages into one account were wrong. When the vehicle was seized the hirer had
paid more than 75% of the total HPP. The owner’s right to seize the vehicle was lost and could only
do that by taking an action since the good had become a protected good. The hirer was thus entitled
to recover the sums paid under the contract.
Taylor V. Sasu & Sons [1973] 1 G.L.R. 176, CA;
The plaintiff/appellant bought a vehicle from the defendant on a hire purchase basis for 12,400 N
cedis. The appellant paid a deposit and paid five instalments but defaulted and the defendant seized
the vehicle. The appellant made some payments and the vehicle was released to him. The appellant
defaulted the second time and the vehicle was seized and upon payment of the outstanding
instalment, the vehicle was released. The appellant defaulted the third time and the owners seized

68
the vehicle the third time and the appellant contended that at the time of the last seizure he had paid
more than half of the HPP and hence the vehicle was protected under the law and therefore brought
an action to recover the payments so far made.
The defendant contended that when the vehicle was seized a new agreement was executed and
under the said agreement the appellant had not paid half of the HPP. The trial judge accepted this
and dismissed plaintiff’s action. The plaintiff appealed.
The Court of Appeal allowed it holding that one month after the seizure, the hirer appellant paid
part of the HPP and when the respondents accepted it they had waived any right they had to
exercise without the intervention of the court. That the amount paid was in reference to the first
agreement and hence was recoverable.
Apaloo J. A.; ‘…. It would take a lot to persuade me that our law would sanction two sales of the
same vehicle by the same vendor to same purchaser by two successive hire purchase agreements
having two different hire purchase prices’’
Subsection 3;
Notwithstanding subsection 2, the court is empowered on application by the hirer or buyer to order
the return of the goods of the HP/CSA to be returned to the hirer or the buyer and make fresh
repayment orders.
Action to recover Protected Goods;
Section 9;
The section discusses an action which has been brought by the owner or the seller to recover the
protected goods where section 8 has not been breached.
Subsection 1 (a);
In an action, to recover protected goods the court may suo moto make an order meant to protect the
goods from damage or depreciation.
1(b);
Once the application has been heard the court may make any of the following orders;
i) Order specific delivery of the goods without prejudice to the owner or the seller and this
may be subject to the condition that the owner refunds to the hirer or the buyer part of
the sums so paid. This invariably terminates the agreement between the parties. This is
to prevent the owner or the seller from benefiting twice i.e. unjust enrichment.
ii) Secondly the court may also make an order for specific delivery of the goods to the
owner or the seller but postpone the operation of the order and gives the hirer, buyer or
any guarantor the opportunity to pay outstanding balance on the transaction having
regard to their means.

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 iii) The third possible order is to order for the specific delivery of part of the goods to the
owner or seller and the remainder to the hirer or the buyer. This is known as ‘‘split
order’’. Such an order could be made where the goods are divisible. Such an order may
not be made in respect goods which are not divisible.
Subsection 2;
Where the court orders for specific delivery of the goods, the hirer or buyer has no option to pay for
the goods.

Subsection 3;
Irrespective of the order for specific delivery of the goods, the owner or seller may proceed in tort
against the hirer or the buyer for any damage that has been caused to the goods.
Postponed Order;
Section 10;
The order for specific delivery shall be postponed iff the goods are in the possession or under the
control of the hirer or buyer. So that where the goods are not in the possession of the hirer or the
buyer the order shall not be postponed.
Subsection 2;
The subsection allows the parties themselves to agree to different terms of payment. This shall be
entered and thereafter postpone the order of specific delivery.
Effect of Postponed Order;
Section 11;
The section sets out the effects of a postponed order. The effect of the subsection is to deal fairly
between the parties having regard to the fact that both parties have an interest in the goods.
a) Where the order for specific delivery of the good is postponed, the hirer or buyer is deemed
to be a bailee of the goods.
b) Where a postponed order is made having regard to a new arrangement, the terms of the new
arrangement replaces the old terms of the agreement.
c) The court in making the postponed order, modify, alter the original contract as it deems fit.
d) During the pendency of the postponed order, if the hirer, buyer or guarantor is unable to
fulfil the terms of the order, the owner or seller shall go to the court that made the order for
redress.
e) Either of the parties may also apply to the court to have the postpone order varied or
revoked.

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 LECTURE THREE
REPRESENTATIONS AND IMPLIED TERMS
SECTIONS 13-15

71
 LECTURE THREE
RIGHTS OF PARTIES AND LIMITATION OF ENFORCEMENT OF AGREEMENT.
Section 16;
Generally in HPP and CSA, title to the goods will pass to the hirer or buyer after the payment of the
HPP or the TPP i.e. after completing payments. In some cases, the parties may agree that title
should pass although full payment has not been made. Section 16 looks at the rights of the parties
where a hirer or buyer disposes of the goods when the property in the goods has not passed to the
hirer or the buyer. Be that as it may, under some conditions title will be conferred on a third party
who has bought from a non-owner. It seeks to protect the interest of third parties.
Subsection 1;
Where the hirer or buyer resells pledges or in any manner disposes of the goods and undertakes any
activity which gives the owner or the seller the right to terminate the agreement and recover
possession of the goods, then the third party has two rights. These are;
a) where the third party who has bought the item and is in possession, the item may be kept for
a period of 60 days.

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 b) where the owner or the seller is already in possession, the third party shall write to the
owner or seller to recover possession of the goods and retain same for 60 days.
Subsection 2;
That within the said 60 days, the third party must either;
a) pay to the seller or the owner all amounts due under the agreement or
b) the total due under any three instalments due and unpaid from the hirer or buyer to the seller
or the owner whichever is less.
The third party is thereafter (after the payment) deemed to be the hirer or the buyer.
Illustration;
Consider a HP/CSA transaction in which the HPP is one thousand Ghana cedis.
That the instalment payable is one hundred Ghana cedis per month.
The H/B sold the item at a time when five instalments had been paid.

1,000 – 500 = 500

a) Pay all sums due which is 500 or
b) Pay the total due under any three instalments (100 X 3) 300
Subsection 3;
The subsection applies where the third party has paid the hirer or buyer in full.
Where the third party decides to exercise the right under section 16(2) (b), the consequences thereof
are;
a) the third party after paying the total due under any three instalment, is not liable for any
amount which is outstanding,
b) the third party shall recover from the hirer or the buyer the amount of the three instalments
which has been paid to the owner or the seller,
c) the owner is permitted to thereafter recover from the hirer or the buyer, the outstanding
amount and
d) if there is no outstanding payments between the hirer and the third party, the contract
between them is terminated.
Subsection 4;
Where the third party owes (paid part or nothing at all) the third party shall pay the arrears together
with the three instalment to the owner or the seller.
Proviso;
Provided that what is to be paid under this to the owner or the seller shall not exceed what the hirer
or buyer owes the seller or the owner. This qualification ensures that the owner or seller does not
get more than what he is entitled.

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Illustration;
H/B – HPP/TPP – Ghana cedis 1,000.00
TP - NIL - (1,000.00) or 200 (800)
TP 1,000 + 300 = 1,300.00 or 800 + 300 = 1,100
Subsection 5;
It sets out the liability of the hirer or the buyer in the case of a wrongful disposition.
The owner or seller can sue for damages for wrongful sale, whiles the third party can also sue the
hirer for breach of the term of right to sell.
Subsection 7 indicates that the provisions of section 16 apply where the third party acquires the
goods without notice of the defect in title.
Section 17;
Restriction on enforcement of certain provisions;
Where the hirer or buyer has defaulted under the agreement, and the said default gives the seller or
the buyer the right to enforce any penalty under the agreement, then same shall not be done until the
hirer or buyer has been given written notice to carry out the obligation within two weeks. The
essence of the two weeks is to give the hirer or the buyer the right to remedy the situation.
Section 18;
Information about goods;
Where the hirer or buyer is keeping the goods the subject matter of the contract, the hirer or buyer is
duty bound to inform the seller or the owner on receipt of a letter inform the owner or the seller the
whereabouts of the goods. Failure to do shall amount to the hirer or buyer being fined. This is due
to the owner seller interest in the goods.
Section 19;
Removal of Goods from Ghana;
Subsection 1;
The hirer or buyer of goods under HP or CSA, cannot remove the goods from Ghana unless the
owner or seller consents in writing.
Subsection 2;
Where subsection 1 is breached, the hirer or buyer shall be guilty of an offence and liable to pay a
fine or to a term of imprisonment or both.
This is to ensure that the owner is not deprived of the goods and also to defeat the right of the owner
or seller to receive payments under the contract. Subsection 3 gives the owner or the seller the right
to institute an action where the owner believes that the hirer or buyer is removing the goods without
the necessary consent. The goods may be attached first and the applicant may provide security for
damage.

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Section 20;
Supplying documents to the hirer/buyer;
The hirer or the buyer before completing the payment may write and request from the owner or the
seller for information and documents about the agreement.
The owner or the seller on receipt of the letter shall within 7 days write to the hirer or buyer
supplying the following. See section 20 (1) (a)-(c).
Subsection 2;
Provides for consequences of the owner or seller defaulting;
a) the O/S cannot enforce the agreement against the H/B
b) any security or guarantee given cannot be enforced,
c) if default continues for 30 days, the O/S shall be guilty of an offence and liable to a fine.
Section 21;
Successive Agreement;
Where goods are let under HP/CSA, and part of the HP/TPP has been tendered and the O/S makes a
subsequent agreement in respect of the same goods, then the provisions affecting protected goods
shall come into play where one half of the HP/TPP has been paid in respect of the first agreement.

LECTURE FOUR & FIVE

DEFINITION, CREATION AND TYPES OF AGENTS.
DEFINITIONS;

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 1) Professor G.H.L. FRIDMAN in his book the ‘Law of Agency’ defines agency as ‘the
relationship that exists between two persons when one, called the agent is considered in
law to represent the other, called the principal, in such a way as to be able to affect the
principal’s legal position in respect of strangers to the relationship by the making of
contracts or disposition of property’. This definition is based on a power/liability analysis
between the parties and it is based on the agent acting to affect the principal’s legal relations
with third parties.
2) BOWSTEAD AND REYNOLDS on Agency defines agency as a fiduciary relationship
which exist between two persons, one of whom expressly or impliedly consents that the
other should act on his behalf so as to affect his relations with third parties, and the other
of who similarly consents so to act or so acts. This definition makes consent and trust the
basis of the law of agency.
3) BOWSTEAD in Bowstead on Agency defines agency as ‘the relationship which results
from the manifestation of consent, by one person to another, that the other shall act on his
behalf and subject to his control and consent by the other so to act. This is also explaining
agency based on what is known as the consent model.
4) SEAVEY in Rational of Agency also speaks of agency as ‘a consensual relationship’.
5) Section 26 of the Evidence Decree,1975 (NRCD 323) discusses estoppel by own statement
or conduct and state as follows-‘Except as otherwise provided by law, including a rule of
equity, when a party has by his own statement, act or omission, intentionally and
deliberately caused or permitted another person to believe a thing to be true and to act upon
such belief, the truth of that thing shall be conclusively presumed against that party or his
successors in interest in any proceedings between that party or his successors in interest and
such relying person or his successors in interest’. The Evidence Decree also makes ones
own statement or conduct the basis of agency relationship.
Hence any definition given should be treated with caution as same may run into difficulties at some
point in time.
CASES;
Pole V Leask [1863] 33 LJ Ch 155;
Lord Cranworth said of agency relationship as ‘‘no one can become the agent of another person
except by the will of that person. His will may be manifested in writing orally or simply by placing
another in a situation in which according to ordinary rules of law, or perhaps it would be more
correct to say, according to ordinary usage’s of mankind, that other is understood to represent
and act for the person who has so placed him; but in every case it is only by the will of the
employer that an agency can be created’’.

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State V Asantehene’s Divisional Court; Exparte Kusada [1963] GLR 238;
Korsah CJ defined agency as ‘‘where one has so acted as from his conduct to lead another to
believe that he has appointed someone to act as his agent, and knows that other person is about to
act on that other person’s behalf, then unless he interposes, he will, in general be estopped from
disputing the agency, though in fact no agency really existed’’.
Garnac Grain Co. Inc. V. HMF Faure and Fairclough Ltd. [1966] A.C. 1130 at 1137 per Lord
Pearson, the relationship of principal and agent can only be established by the consent of the
principal and the agent’.
The parties would be deemed to have consented ‘if they have agreed to what in law amounts to such
a relationship even if they do not recognise it themselves and even if they have professed to
disclaim it.
Boardman V. Phipps [1967] 2 A.C.46;
The House of Lords held that an agency relationship existed even though there was no consent by
the principal – ‘self – appointed agents’.
Authority on the other hand is an essential element of agency relationship. Authority indicates what
the agent can do, what he cannot do, how he can affect his principal.

Features of Agency definitions;

Certain characteristics run through the various definitions. These are;
- Agency may come into being through a contract which may be express, implied or
presumed by law,
- An agent acts with the principal authority,
- The agent must consent to acting on behalf of the principal,
- Agent affects principal’s legal relationship.
Simply put an agent is someone appointed to act on someone’s behalf.
CREATION AND AUTHORITY OF AGENTS
1) BY CONTRACT – express or implied agreement between the parties.
Express Contract;
The principal and the agent like all other parties must agree on what is to be done and their
agreement must not be affected by any vitiating factors. Such agents have clear terms of
appointment, their remuneration and the contract may be in writing or oral. But in some cases it
must be in writing.
Berkley V. Hardy [1826] 5 B. & C. 355,

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An agent was appointed to execute a deed. It was held that his authority must be in writing except
where the agent executes the deed in the presence of and with the authority of the principal as in
Ball V. Dunsterville [1791] 4 Term Rep 313.
Any act the agent has been instructed to undertake must be legal and enforceable both in law and
equity.
Implied Contract;
This occurs by the conduct of the parties. The parties do not expressly agree on terms but, it is
deemed that the parties have impliedly agreed that one act for the other. The act of the agent under
implied contract is not part of the agent’s duty. The position is that the agents have implied
authority to do everything necessary and incidental to achieving the stated objective (prepare
banku).The idea of doing what is necessary and incidental to achieve ones goal, introduces ‘usual’
and ‘customary’ authority. To be discussed when looking at the authority of agents.
For example an agent appointed to sell a property has an implied authority to sign documents on the
transaction. See section 1(1) of the Conveyancing Decree, 1973 (NRCD) 175 ‘A transfer of an
interest in land shall be by writing signed by the person making the transfer or his agent duly
authorised in writing…..’’. It is to be stressed that every agent has implied authority to do
everything necessary for, and ordinary incidental to carry out his express authority.
Cases;
Doing what is usual or customary in a particular trade or business or profession.
Watteau V Fenwick [1893] 1 Q.B. 346 at 348;
Wills J. said the principal is liable for all acts of the agent which are within the authority usually
confided to an agent of that character. This judicial pronouncement is supported by the principle of
law that if a person employs another as an agent, he cannot by secret reservation deprive him of that
authority.
Hely-Hutchinson V. Brayhead Ltd. [1968] 1 Q.B. 573;
The chairman of a company acted as a Managing Director when he had not been officially
appointed to that position. In that position he executed several contracts on behalf of the company.
The directors of the company had knowledge of this practise and honoured the company’s
obligation under those contracts.
In one such contract he agreed that the company guarantee for a third party. The issue was whether
the company was bound by those guarantees. The COA, held that the company was bound by the
guarantees irrespective of the man not being appointed as a Managing Director because the
company had acquiesced and allowed the chairman to act as the Managing Director i.e. he had been
impliedly been given power to so act. But for the agency principle, he could not have bound the
company.

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Baah Ltd. V. Saleh Brothers [1971] 1 G.L.R. 119;
In this case the plaintiffs who were importers of manufactured products had an agreement with the
defendants who supplied them goods on order. The plaintiff ordered goods on the instructions of the
defendants. The practise was that the plaintiff paid the expenses and the bank charges. He later
charged the expenses to the defendant account and charged the defendant commission. The plaintiff
sued for the recovery of certain sums the defendant owed. The defendant contended that they were
wrongfully and unlawfully debited. They argued that they had overpaid and also filed a
counterclaim.
The plaintiff brought an application for summary judgment, but the judge referred the matter to the
registrar for accounts to be gone into. The registrar concluded that the plaintiff is not entitled to the
sum being claimed but the defendant was entitled to his counterclaim which was overpayment made
by the defendant.
It was held that the relationship between the parties gave rise to implied agency and under the law
the plaintiff’s were to be reimbursed and indemnified in respect of expenses incurred. However,
since the plaintiff failed to corroborate the expenses, the plaintiff’s claim fails but the defendant was
entitled to counterclaim.
Agency resulting from ratification;
The Concept;
If the agent acts without authority or exceeds his authority, his acts cannot bind the principal. The
concept of ratification allows the principal to adopt (ratify) the act done by the agent without
authority. Ratification will validate the action of the agent from the date the action took place.
Ratification may be express or implied from the principal’s conduct
Requirements of Ratification;
Firth V. Staines [1897] 2 Q.B. 70 at 75;
Wright J. stated that for ratification to exist, the following shall take place -
a) The agent must have purported to act for the principal in his/her capacity as an agent. The
agent must not be on the frolic of his own.
Keighley Maxsted & Co. V. Durant [1901] A.C. 240;
Robert who was a corn merchant was instructed to buy wheat at a certain price on the joint
account of KM & Co and Robert. He bought it at a higher price in his own name from a
third party without informing Durant that he was acting for himself and KM & Co. The
principals decided to ratify it although the agent had acted outside his authority. The third
party however sought to enforce the contract against the principal.
The trial court dismissed the action against KM & Co. The Court Of Appeal reversed the
judgment and affirmed the trial courts judgment.

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 The HOLS held that the contract could not be ratified since the agent acted in his own name.
Lord MacNaughten said among others that;
‘‘Civil obligations are not to be created by, or founded upon undisclosed intentions. By a
wholesome and convenient fiction, a person ratifying the act of another, who, without
authority has made a contract openly and avowedly on his behalf, is deemed to be, though
in fact he was not, not a party to the contract. Does the fiction cover the case of a person
who makes no avowal at all, but assumes to act for himself and for no one else? On
principle I should certainly say no’’.
Once the agent discloses that he is acting as an agent, the unauthorised act can be ratified
even if the agent intends to defraud the principal.
Re Tiedemann and Ledermann Fre`res [1899] 2 Q.B. 66;
The agent entered into a contract as an agent. But the purpose was to take the benefit of it
himself and defraud the principal. The court held that the principal could ratify it because
the agent had acted as an agent.
But the position is different when the agent forges the signature of the principal.
Brook V. Hook [1871] LR 6 Exch. 89;
An agent forged his principal’s signature on a promissory note. It was held that the principal
could not ratify the agent’s act as the signature was a nullity .It may be argued that in the case
under consideration that, by forging the principal’s signature the agent did not purport to act for
and on behalf of the principal.
b) The principal must be competent (capacity) at the time the agent acts;
Once an agent’s act is ratified, it is deemed that, the act has been done by the principal from
the beginning. Thus if the principal lacked capacity himself at the time the act was done by
the agent, the principal cannot ratify the act of the agent.
Boston Sea Fishing & Ice Co Ltd V. Farnham [1957] 1 W.L.R. 1051;
An act done on behalf of a company which was an enemy alien due to war was held not to
be ratifiable.
c) The principal must be in existence at the time of the act;
Newborne V. Sensolid [1954] 1Q.B. 45;
A contract was made on behalf of a company which had not been registered at the time of the
contract. The company was accordingly not in existence when the person acting as the agent
made the contract. It was held that the contract was a nullity and could not be ratified by the
company.
Kelner V. Baxter [1866] LR 2CP 17;

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 Promoters of a company bought wine of behalf of the non-existent company. The company
attempted ratification after its incorporation. The court held that the contract could not be
ratified because the principal was not in existence at the time of the contract. The promoters
were therefore personally liable.
In Ghana this position is now governed by the statute. Section 13(1) of the Companies Code, titled
pre-incorporated contracts states that an agent can act for and on behalf a non-existent company and
the company shall become bound and entitled to the benefit thereof as if it had been in existence at
the time of the contract.
d) Principal must have capacity at the time of ratification;
The principle is usually illustrated in insurance contracts. For example where an insurance contract
is made and the principal decides to ratify the contract after the property has been destroyed.
Effect of Ratification;
1) Any act of the agent so ratified is as if the agent acted with prior authority from the
principal. It thus has a retroactive effect.
2) Ratification operates in respect of past acts. Irvine V. Union Bank of Australia [1877] 2
A.C. 366. Ratification does not give the agent the authority to continue performing such
unauthorised acts.
3) After ratification, the principal assumes all rights and liabilities that go with the contract
which has been entered into by the agent.
4) The agent is to be paid a reasonable commission after ratification. In Keay V. Fenwick
[1876] 1 CPD 745, the managing owner of a ship sold it through an agent. Later all the
parties who held interest in the ship ratified the sale by the agent. The agent sued for his
commission. It was held that all the owners were jointly liable to pay commission to the
agent not only the managing owner.
5) Ratification may operate to turn what is unlawful into a lawful act for which the agent will
not be liable because the third party and the principal are in direct relationship.
2) Agency by Estoppel;
Estoppel is where a person has allowed another to believe that a certain state of affairs exists with
the result that where a party relies upon such belief, the principal afterwards cannot be heard to say
that the true state of affairs was different. If this is allowed, it will be to the detriment of that party.
In agency, if a party by his words or conduct has allowed a party to appear to the outside world to
be his agent, with the result that outsiders deal with him as his agent, that person cannot afterwards
be allowed to repudiate this apparent authority if to do so would cause injustice to third parties, then
that person is deemed as having actually authorised the agent.

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In agency by estoppel, no relationship may exist between the parties but by the operation of the
doctrine of estoppel a relationship of agent and principal may be established between them. The
principle may also operate where an agent has authority but has exceeded it. This is because an
apparent or ostensible authority may be resorted to augment the agent’s actual power.
Section 26 of the Evidence Decree, 1975 (NRCD 323) states that;
‘‘Except as otherwise provided by law, including a rule of equity, when a party has, by his own
statement, act or omission, intentionally and deliberately caused or permitted another person to
believe a thing to be true and to act upon such belief, the truth of that thing shall be conclusively
presumed against that party or his successors in interest in any proceedings between that party or
his successors interest and such relying person or his successors in interest’’
Requirements of Estoppel;
Rama Corp Ltd. V. Proved Tin and General Investment Ltd [1952] 2 Q.B. 147; Slade J. gave the
three requirements of this type of agency as follows;
a) there must be a representation by the principal;
The statement or the conduct of the principal must be clear and unambiguous.
Royal Globe Life Assurance Co. Ltd. V. Kovacevic [1979] 22 S.A.S.R. 78;
An agent was employed by the principal to effect life assurance policies and was supplied with
receipt book. He took money but misappropriated same. The company was made liable for the
deposit received by the agent from parties who intended to insure. The issue here is that the fact that
the agent was acting in his own interest does not affect the question.
b) Representation made must be relied on
c) The third party must not know that the agent is acting without authority
Ada Co-operative Food Farmers Union vs. Abodei & Others [1982-83] 2 GLR 1144;
The plaintiff’s case was that the Plaintiff’s union bought tractors and equipments between 1969-70
with a loan from ADB and the tractors were in their joint names. In 1976, the officers of the
plaintiff’s union saw the defendants in possession of the tractors and the equipments. Attempts
made by the officers to recover the items failed. The defendants argued that they had bought the
items as broken down and scattered.
The union sued to recover the tractors. The defendants argued that officers of the plaintiff union had
told them that the union had at a general meeting agreed to sell the machine in that condition-
plaintiff pay the loan. Hence the plaintiff’s union is bound by the deeds of its officers and are
estopped from denying the sale i. e. raised estoppel against the plaintiff’s. The evidence at the trial
indicated that one Azakpoe who works with the department of Co-operatives the body that
guaranteed the loan sold the tractor.

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The issue was whether Azakpoe could pass title to the defendants. It was held that agency by
estoppel would arise where one person had so acted to lead another to believe that he had authorised
a third party to act on his behalf and with such belief, entered into transaction with the third party
within the scope of such ostensible authority.
From the evidence the plaintiff union had not by their conduct enabled Azakpoe to sell and the
defence fails. Judgment for the plaintiff to recover the tractors.
Effects of Estoppel;
a) It precludes the principal from disclaiming liability from the agent’s act. It does not however
mean that the agent can go ahead and to continue performing that act.
b) The liability which arises from the act of the agent can be prosecuted jointly and severally
against the agent and the principal.
c) If the agent’s act has transferred a principal’s title to a third party, the principal is presumed
to have authorised it.
3) Agency By Operation of Law;
Agency of Necessity;
In this type of agency, there is no agency relationship with respect to the act undertaken by the
agent. The party acts simply because the party is confronted with a danger and there is the need to
act to save the situation. Necessity has been defined in James Phelps & Co V. Hill [1891] 1 Q.B.
605;
‘….. Reasonably necessary, and considering what is reasonably necessary, any material
circumstances must be taken into account. Hence under this agency, an agent acts because an
unforeseen situation has arisen’’.
Conditions;
1) There shall be an imminent danger to the extent that the party had no option but was
compelled to act the way he did. For example a captain of a ship can dispose of (some or all)
of the ship’s cargo if the ship is in danger so as to save the situation.
2) A party who acts under such a circumstance should do so in good faith. Where it is
established that the party’s act was actuated by malice, the principle will not avail the party.
Munro V. Willmort [1949] 1 K.B. 295;
The defendant allowed the plaintiff to park her vehicle at his garage. The plaintiff then left and
after a while the defendant found it inconvenient to continue keeping the vehicle and was unable
to get in touch with the plaintiff. The defendant consequently sold the car and the plaintiff sued.
The court held that the defendant was liable for his act amounted to conversion. The defendant
by way of defence pleaded agency by necessity but the court held that there was no imminent
danger hence the defendant could not rely on it.

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 3) It must also be established that it was just impossible to communicate with his principals.
Hence if the agent can communicate with his principals, the issue of necessity does not
arise.

Bankes L.J. in Springer V. Great Western [1921] 1 K.B. 257at 265;

Improved methods of communication in the modern commercial world mean that this
requirement is now rarely met.
4) A fourth condition has been suggested, and that is, at the time of such act of necessity, the
agent must be in possession of the principals’ property.
Usual authority;
The agent has power to do what is usual in his trade, profession or business for the purpose
performing his duties.
Watteau (TP) V. Fenwick(P) [1893] 1 Q.B. 346;
The principal, a firm of breweries appointed the agent as the manager of a hotel and his name was
displayed at the entrance of the hotel. The agent was not authorised to buy cigars on credit. The
cigars, however, were such as would usually be supplied to and dealt in at such an establishment.
The vendor discovered the principal and sued. It was held that the principal was liable to the third
party for the articles the agent bought. At page 348 the principal is liable for all acts of the agent
which are within the authority usually confided to an agent. The case concerned the liability of an
undisclosed principal for an unthorised act of the agent. The case been criticised as being puzzling.
The difficulty is that the decision exposes the principal to a potentially wide and limitless liability
for what the agent does. The decision however protects third parties. The decision is inconsistent
with the rules of agency. The agent did not act within his usual authority. The case would have
perfectly right, if it had been discussed under agency by estoppel
Customary authority;
Under this an agent employed to act for the principal in a certain place, business or market has an
implied authority to act according to the customs and usages of such place, market or business.
Bayliffe V. Butterworth [1874] 1 EX. 425;
The rule was thus put as follows ‘if there is at a particular place an established usage in the manner
of dealing and making contracts, a person who is employed to deal or make a contract there has
implied authority to act in the usual way. Those who fall into this category include brokers,
auctioneers, shipmasters and solicitors.
Types of Agents;
1) Factors and Mercantile agents;

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These are agents who in the usual course of their business have possession of goods, or the
documents of title to the goods of another. They normally have the authority to pledge, sell or raise
money on the security of the goods.
2) Brokers;
Brokers are mercantile agents who purchase and sell goods, stocks and shares, policies of insurance
and other financial products. A broker is not personally liable on a contract unless the agent has
signed a written memorandum in his own name.
3) Del Credere Agents;
These are agents who in return of an extra commission known as del credere commission, promises
that they will indemnify the principal, if the third party who contracted with him fails to pay for the
goods. By this such an agent agrees to protect his principal against the risk of the buyers’
insolvency. This is not a contract of guarantee but one of indemnity.
4) Shipmasters;
A shipmaster is a captain of a ship who has been appointed by the owners of the affairs of the ship
to its destination safely. The shipmaster has wide powers so far as this duty goes. This has got to do
with the conduct of the ship in the areas of navigation, control of staff and crew and the handling of
cargo on board. In times of emergencies, he has power to dispose of some of the cargo under
agency of necessity.
5) Auctioneers;
Their ordinary course of business is to sell by public auction. They may or may not be given
possession of the goods. He is entitled to commission on the total cost of the item sold. He can
personally sue the purchaser for the price where the purchaser has failed or refused to pay.
6) Solicitors or Barristers or Counsel;
These variously refer to the same person. These are agents who are employed to conduct legal
duties for their principals; it includes litigation, legal advice, preparation of legal documents and
others.

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 LECTURE SIX
DUTIES OF AGENTS & PRINCIPALS, RIGHTS & TERMINATION OF AGENCY
RELATIONSHIP
Agents;
1) Duty to perform his obligation;
An agent must do what he has undertaken to do.
Turpin V. Bilton [1843] 5 Man & G 455;
An agent was tasked to insure the principal’s ship but failed to do so. The ship was thus lost
uninsured. It was held that the agent was liable for breach of contract. This was due to the fact that
the principal was unable to claim his loss from insurers. When performing his duties the agent must
obey the lawful and reasonable instruction.
2) Obedience;

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When an agent is performing his duties, he must obey the lawful and reasonable instructions. An
agent must obey instructions contained in his appointment. For example, a professional agent like a
lawyer may be under a duty to warn and advise the principal of any risks inherent in his
instructions. But an agent being obedient is not obliged to do anything that is illegal or which is null
and void by a statue or common law.
The Hermione [1922] P 162;
Where clear instructions given to agents to settle a claim for and on behalf of the principal for
10,000 ponds was ignored and settled for 100 pounds. The agents argued that that figure was
unreasonable. It was held that the principal’s instructions were clear and that if the agents were not
going to obtain that amount, it must have well stopped the settlement.
Christofrides V. Terry [1924] A.C. 566;
This case per LORD SUMNER, establishes three remedies in favour of a principal whose
instructions has not been obeyed;
- claim damages for breach of contract;
- any profit made by the agent shall be surrendered;
- principal can resist a claim for remuneration or indemnity

3) Duty of Care & Skill;

The agent must also perform his duties exercising reasonable skill and care. The agent is required
to exercise care and skill having regard to the nature of the business entrusted. What is the standard
of care an agent must exercise? Does the same duty and standard of care apply to a gratuitous
agent?
Chaudhry V. Prabhakar [1989] 1 W.L.R. 29 C.A.;
The plaintiff who had just passed her driving test asked the defendant, her friend to find her a
second hand car which has had no accident without any remuneration. The plaintiff knew nothing
about cars but the defendant knew something about them. The defendant got one with a dent on the
bonnet but did not enquire further and advice the plaintiff to buy. The plaintiff was told by the
defendant that the car has not been involved in an accident. The plaintiff later got to know that the
car was an accident car and she sued the defendant for breach of duty of care.
The trial judge gave judgment for the plaintiff and the defendant appealed but the appeal was
dismissed by the C.A. The Court of Appeal said the care needed in such circumstances is the skill
and care that a person ordinarily exercises in their own affairs.
4) Duty to account;
The agent must account to his principal by paying all monies received from the use of the
principal’s property.

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De Mattos V. Benjamin [1894] 63 L.J. Q.B. 248;
It was held that if a turf commission agent is employed to make bets he must pay over any winning
received by him from such bets.
Where the act performed is illegal, the principal is not entitled to any money received on his behalf.
Harry Parker Ltd V. Mason [1940] 2 K.B. 590;
The principal and the agent conspired to deceive others. The agent held on to the money and the
principal sued and the court held that the principal had no remedy.
Agbemashior & Others V. S.I.C. and Others
5) Non – Delegation;
Since the agent has been appointed to perform a special duty based on confidence and trust, reposed
in him by the principal he cannot delegate that duty. This duty is covered by the maxim delegatus
non potest delegare – a person to whom powers have been delegated cannot delegate to another.
Under this distinction must be made between acts that require confidence and trust which may not
be delegated and those acts which are considered as ministerial which do not require confidence and
trust and for that matter may be delegated.
Cases;
De Bussche V. Alt [1878] 8 Ch D 286, C.A.
The principal employed an agent to sell a ship in India, China or Japan at a stated price. The agent
could not sell and with the principal’s consent appointed Alt as sub agent in Japan to sell same. The
sub agent bought the ship and later sold it to a third party making a huge profit. It was held both by
the trial court and the Court of Appeal that the sub agent was liable to account to the ship owner for
the profit he made.
The case establishes that an agent should not delegate unless there is express or implied
instructions to do so. Thus an agent can only delegate his authority where he has express or implied
authority of the principal. It is mostly in cases where the principal places trust or confidence and
relies on the personal skill of the agent.
Burial Board of the Parish of St. Margaret, Rochester V. Thompson [1871] LR CP 445;
Where it was held that digging of a burial grave and ringing of church bell could be delegated as it
did not require personal skill.
Allam & Co Ltd. V. Europa Poster Services Ltd [1968] 1 W.L.R. 638;
Has held that solicitors, who were not parties to a contract, could be delegated to serve notice to quit
since they were carrying out purely ministerial functions.
John McCann & Co V. Pow [1974] 1 W.L.R. 1643, [1975] 1 All E.R. 129;

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An estate agent was authorised to sell an estate house. The agent advertised it in their shop as well
as at the shop of another estate agent. It was held that the agent did not have authority to delegate
the advertising because it was an act that required personal skills to be employed.
Fiduciary Duties;
Since an agent has power to legally affect the principal’s position, they are normally subject to
fiduciary duties. As a result the principal places a lot of trust and confidence in the agent as to how
the agent exercises the power so granted. It is meant to protect the principal from being abused by
the agent.
In Bristol and West Building Society V. Mothew [1998] Ch 1 at 18: Millet L.J.;
‘A fiduciary is someone who acts for and on behalf of another in a way that give rise to a
relationship of trust and confidence. The distinguishing obligation is that of loyalty……… A
fiduciary must act in good faith; he must not make a profit out of his trust; he must not place
himself in a position where his duty and his interest may conflict; he may act for his own benefit or
the benefit of a third person without the informed consent of his principal among others.’
1) An agent must not act in a way that his duties conflict with his own interest, or
interest of another.
Armstrong V. Jackson [1917] 2 K.B. 822;
Armstrong instructed Jackson who was a stockbroker to buy shares in a particular company for him.
Jackson sold his personal shares in that company to the plaintiff without disclosing that fact. The
truth came out and Armstrong sued to have the transaction set aside and the claim was upheld. The
defendant was asked to pay all sums received from Armstrong.22
McPherson V. Watt [1877] 3 App Cas 254;
Where it was held that the agent has breached this rule when he purchased the principal’s property
he was to sell in his brothers name to conceal the fact that he was buying it.
If the agent under such circumstances makes a disclosure as to his interest, and obtains the
principal’s consent, there will be no breach of this duty.
North and South Trust Co V. Berkley [1971] 1 W.L.R. 470;
It was held that having obtained the consent, the agent who sells his own property to the principal or
buys the principal property must demonstrate that the price was fair and that there is no abuse.

22 See also Kelly V. Cooper [1993] A.C. 205 P.C. Kelly instructed an estate agent to negotiate and sell his house.
An adjacent house owner also instructed the same estate agent to perform the same duty. A prospective purchaser
offered to buy the second house and later agreed to buy the first house as well which was not disclosed the first owner
and unknown to him he also accepted the price and both sale were completed. The plaintiff thus sued the estate agents
for breach of duty for failing to disclose that there were acting for another and secondly putting them in a situation
where there is a conflict as they obtained commission from both transactions. Held that the buyer’s interest in buying
both houses was a material factor which could have influenced the price at which the plaintiff’s house was bought. Case
has been criticised as the defendant was not acting for competing principals in the same transaction.

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2) An agent may not make a secret profit out of his duties since he is bound to account for such
profit.
If the agent keeps any secret profit, it amounts to a breach. Secret profit is any financial advantage
which the agent receives over and above what he is entitled to by way of remuneration.
Boardman V. Phipps [1967] 2 A.C. 46;
Boardman who was a solicitor and another person were appointed as trustees of an estate. The two
attended an annual general meeting in a company in which the estate was a minority shareholder.
The company was viable and so the two invested in the company without first obtaining consent.
They made profit for themselves and the estate from the dividends. The HOLS 3-2 held that the two
must account to the trust for the profit. For the profit had been made as agents by virtue of the
opportunity and the knowledge which they had whiles acting as agents.23
3)An agent must not accept bribes since complicity will set in.
Boston Deep Sea Fishing and Ice Co V. Ansell [1888] 39 Ch D 339;
The defendant was employed as a managing director of the plaintiff company. He undertook some
construction for the company and unknown to the company he took commission from three
companies which worked on the project. The company suspected foul play and dismissed the
defendant and brought the present action to recover the secret commission. The CA held that the
receipt of secret commission was aground for dismissal and the defendant should account for the
secret commission.24
Duties of Principal;
1) The principal is to remunerate the agent for his services having regard to the
agreement. The agent may be entitled to a commission, or a stated sum. Where there
is no such arrangement, the remuneration shall depend upon the circumstances.

In Way V. Latilla [1937] 3 All ER 759;

HOLS, the plaintiff agreed with the defendant (principal) that he shall send information regarding
gold mines and concessions in West Africa. There were no terms as to the amount to be paid. The
HOLS the agent was entitled to a reasonable remuneration on an implied contract to pay a quantum
meruit.

23 See also Hippisley V. Knee Bros [1905] 1 K.B., where the defendants were paid a full amount for the cost of
advertising when they had received a discount for the said work. The CA held that the defendants were in breach and
had to account as the discount amounted to a secret profit.
24 Industries & General Mortgage Co Ltd V. Lewis [1949] 2 All E.R. 573, Lewis employed an agent to arrange
for IGM to find someone to provide a short term loan.IGM agreed to pay the agent half of the fee to be paid by Lewis, a
fact unknown to Lewis. Held that IGM had no dishonest intention to lat the agent persuade Lewis to accept their terms,
it was liable to pay Lewis the amount of the bribe as damages.

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Where the agent does not complete the work the HOLS has laid down two guidelines for
determining the remeuneration.The case of Luxor V. Cooper [1941] 1All ER 33
- the agent shall be paid where his duty was to introduce the principal,
- where the agent has spent time , money and energy in disposing of
property but has not been successful, he shall be reimbursed.
The principal also has duty of Indemnify his agent against all losses, liabilities and expenses
incurred by the agent in the performance of his duties. To commit the principal, the agent must
prove that he acted within his express, implied or usual authority.
Remedies;
Agents;
Action
Where the agent has finished his work and the principal has refused to pay the remuneration, the
agent shall bring an action to recover the money.
Set Off;
If the principal brings an action against the agent for breach of duty and recovery of any amount due
him, the agent may reply by setting off against such claim any amount due him.
Lien
Where the principal has not discharged any of his duties by way of remuneration or indemnity, the
agent may exercise the right of lien (detain) over goods belonging to the principal which is in his
possession. He may keep them till the principal has satisfied any claims of the agent.

Principal;
Dismissal
The principal has the right to dismiss the agent when he misconducts himself in the performance of
his duties. Some acts that might call for dismissal are fraud, negligent, deceit and among others.
Prosecutions
Where the agent misconduct takes the form of a criminal offence, the principal beside his remedy in
damages can also bring the appropriate criminal proceedings against the agent to seek redress.
Termination;
By the act of the parties;
Since the principal and the agent agreed to create the agency relationship, either of them may also
withdraw the said agreement. This is done by giving of notices. The agent may do this by giving a
notice of renunciation or the principal giving a notice of
Death, insanity or bankruptcy;

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The death, insanity or bankruptcy of either the principal or the agent may also terminate the
relationship. Where the principal is also a company, winding up or dissolution will also terminate
the agency.
See Gordon V. Essien [1992] 1 G.L.R. 232
Frustration;
When the property which is the subject matter of the agency is destroyed or in any way ceases to
exist, the agency will come to an end.
Closure of business;
When the principal has ceased to carry on the business in respect of which the agent was employed.
Execution;
If the agent was appointed for a fixed term or to carry out a particular work, the execution of that
work or the given time being due terminates the relationship between the parties.

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