Topic 5

🟢 Lite — Quick Review (1h–1d)

Rapid summary for last-minute revision before your exam.

Topic 5 covers the law of sale of goods in Nigeria. The Sale of Goods Act 1893 (as amended) governs contracts for the sale of goods. The seller transfers or agrees to transfer ownership of goods to the buyer for a money consideration called the price. The Act provides implied terms, rules on transfer of title, and remedies for breach — all essential for commercial practice.

Key Definitions:

• Goods: All chattels personal (movable property), including things attached to or forming part of the land only if severed under a contract of sale
• Contract of sale of goods: Transfer of ownership immediately (actual sale)
• Agreement to sell: Transfer of ownership at a future time or upon the happening of a condition
• Price: Money consideration for the goods

⚡ Exam tip: Distinguish between a contract of sale and other transactions: a contract of sale transfers ownership; a contract for work and materials does not necessarily transfer ownership of the materials (the materials become the property of the client when incorporated into the work).

---

🟡 Standard — Regular Study (2d–2mo)

Standard content for students with a few days to months.

Rules on Passing of Property (Ownership):

Under the Sale of Goods Act, property (ownership) passes when the parties intend it to pass. Intention is determined by:

1. Express agreement of the parties
2. If no express agreement, by the rules in Sections 18–20 of the Act

Rule 1 (Specific Goods — Identified at Time of Contract): Where there is an unconditional contract for the sale of specific goods in a deliverable state, property passes immediately when the contract is made (even if payment or delivery is to be made later).

Rule 2 (Goods to be Put in a Deliverable State): Where goods must be weighed, measured, tested, or some other act done by the seller to ascertain the price, property does not pass until the act is done AND the buyer has notice thereof.

Rule 3 (Goods Delivered on Approval or “On Sale or Return”):

• Where goods are delivered on approval, property passes when the buyer signifies approval or acceptance, or retains the goods without giving notice of rejection after the expiry of the agreed time (or a reasonable time if no time is agreed)
• “On sale or return”: property passes immediately unless the buyer returns the goods

Rule 4 (Unascertained or Future Goods): Property in unascertained or future goods cannot pass unless:

1. The goods are in a deliverable state
2. The goods are unconditionally appropriated to the contract

The Ascertainment Rule: Unascertained goods become ascertained by the act of both parties — either by the seller selecting and marking the goods, or by the buyer selecting them. Once goods are unconditionally appropriated, property passes.

Sale by Non-Owners (Title):

The general rule: Only the owner of goods can pass good title (nemo dat quod non habet — you can’t give what you don’t have). However, there are exceptions:

1. Estoppel: If the owner by conduct leads the buyer to believe the seller has authority to sell, the owner is estopped from denying the seller’s authority

2. Sale under a Voidable Title (Section 23): If the seller’s title is voidable (e.g., obtained by fraud), but the seller has not avoided the title before the sale, the buyer in good faith obtains good title

3. Mercantile Agent (Factors Act 1889 — applied in Nigeria): A mercantile agent with possession of goods can pass good title to a good faith purchaser even without the owner’s authority

4. Sale by One of Several Joint Owners: If one joint owner sells goods with the authority of the other joint owners, the buyer gets good title

5. Seller in Possession After Sale: If a seller remains in possession of goods after a sale, and delivers them to a third party who receives them in good faith, that third party obtains good title (Section 24 — “双重销售” rule)

6. Buyer in Possession Before Payment: If a buyer obtains possession of goods with the seller’s consent before payment, and sells them to a third party in good faith, that third party obtains good title (this is complex — read carefully)

Implied Conditions and Warranties:

Under the Sale of Goods Act, certain terms are implied into every contract of sale:

Condition	Description	Warranty (if breached)
Title (Section 12)	Seller has right to sell goods	Quiet possession
Description (Section 13)	Goods correspond with description
Quality/Fitness (Section 14)	Goods are of merchantable quality and fit for purpose
Sale by Sample (Section 15)	Bulk corresponds to sample; goods free from defect making them unmerchantable

Section 14 — Merchantable Quality: Goods must be of a quality that would be acceptable to a reasonable person. This means:

• Free from defects that would not be apparent on reasonable inspection
• Fit for all the purposes for which goods of that kind are commonly used
• In the case of second-hand goods, this standard is lower

Remedies of the Buyer:

1. Damages for non-delivery (Section 51): Difference between contract price and market price on date of breach
2. Specific performance (Section 52): Ordered at court’s discretion; only for specific goods
3. Repudiation — reject goods and treat contract as discharged
4. Damages for breach of warranty (Section 53): Difference between value of goods as warranted and their actual value
5. Right to reject — goods that do not conform to contract
6. Claims in tort — conversion, negligence (if applicable)

Remedies of the Seller:

1. Action for the price (Section 49): If ownership has passed and the buyer wrongfully neglects to pay, the seller may sue for the price
2. Damages for non-acceptance (Section 50): Difference between contract price and market price on date of buyer’s failure to accept
3. Lien: Right to retain goods until payment (possessory lien — goods in seller’s possession; vendor’s lien — unpaid seller who has transferred possession)

---

🔴 Extended — Deep Dive (exam-level mastery)

For students preparing for top-rank selection.

Anticipatory Breach:

If before the performance date one party repudiates (indicates they will not perform), the other party may:

1. Elect to treat the contract as discharged immediately and sue for damages
2. Elect to keep the contract alive and wait for performance (in which case they must be ready and willing to perform; if the breach does not occur on the anticipated date, they can then sue)

(Hochster v. De La Tour [1853]; applied in Nigeria).

Sale of Goods and the Consumer Protection Act:

Nigeria’s Consumer Protection Council Act (CPC) provides additional protections for consumers against unsafe goods, false advertising, and unfair trade practices. The CPC can order recall of unsafe goods, compensation, and prosecution of offenders.

International Sale of Goods (CIF and FOB):

CIF (Cost, Insurance, Freight):

• Seller’s obligations: Ship goods, obtain bill of lading, pay insurance, give notice to buyer
• Property and risk: Risk passes on shipment; property passes when documents are handed over (not when goods arrive)
• Payment: Against presentation of shipping documents (bill of lading, insurance policy, invoice)

FOB (Free on Board):

• Seller delivers goods on board a named ship at the named port
• Risk passes when goods cross the ship’s rail
• Property passes when goods are loaded (or when documents are handed over if that is earlier)
• The buyer books shipping space and tells the seller the ship name

Documents of Title:

A document of title includes a bill of lading, dock warrant, warehousekeeper’s certificate, and wharfinger’s certificate. Possession of the document gives constructive possession of the goods. A person who in good faith acquires a document of title obtains the same rights as if they had acquired the goods themselves.

Risk and Property — Section 20:

Unless otherwise agreed, the goods remain at the seller’s risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer’s risk whether delivery has been made or not.

Exceptions:

• Delivery to a carrier for transmission to the buyer (risk does not pass until carrier’s authority is exhausted)
• Delivery to a bailee for the buyer’s inspection (risk passes when goods are delivered; but if buyer inspects before accepting, goods are at buyer’s risk from delivery)

Sale by Sample (Section 15): A contract is a sale by sample where there is an express or implied term to that effect. In a sale by sample:

• The bulk must correspond with the sample in quality
• The buyer must have a reasonable opportunity of comparing the bulk with the sample
• The goods must be free from any defect making their quality unmerchantable, which would not be apparent on reasonable inspection of the sample

The Perfect Tender Rule: The general rule (derived from English common law) is that if the goods delivered do not conform perfectly to the contract, the buyer has the right to reject them entirely. However, this rule is subject to:

• The doctrine of acceptance (once the buyer accepts the goods, they can only claim damages, not reject)
• The cure doctrine (where the seller delivers non-conforming goods before the contract date, and the buyer rejects, the seller may cure and deliver conforming goods if time remains)

Damages — The Market Price Measure:

The standard measure of damages for non-delivery or non-acceptance is the difference between market price and contract price on the date of breach:

• If the buyer repudiates, the seller should mitigate by selling the goods elsewhere and claiming the difference from the contract price
• If the seller fails to deliver, the buyer should mitigate by purchasing substitute goods and claiming the difference

The market price is determined at the place where the goods should have been delivered or accepted (Williams v. Agius [1914]).

Retention of Title (Romalpa Clauses):

A Romalpa clause (from Aluminium Industrie v. Romalpa [1976]) is a term in a contract of sale by which the seller retains title to goods even after delivery until payment is made. The clause may provide that:

1. Title remains with the seller until payment
2. The buyer holds goods as bailee until payment
3. If goods are incorporated into other products, the seller retains proportionate ownership
4. Proceeds of any resale belong to the seller

Romalpa clauses are valid in Nigeria (subject to the insolvency rules). However, they are ineffective against a liquidator who has crystallised the company’s assets.