Transfer of Property (Commercial Law)

Transfer of Property

It is important in all contract of sale to know the nature of goods that from the subject matter of sale. This will enable us to determine the point in time that the property in the goods lie at any point in time is important because the liability of the seller or buyer will depend largely bon whether or not the property has passed at the time of the loss. Section 16-20 deals with the transfer of property in the goods to the buyer under a contract of sale.

The rules governing the passing of property depends primarily on whether the good are specific or unascertained. The basic rules can be considered under those two headings:

I. UNASCERTAINED GOODS

By S.16 where there is a contract for sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained. Thus, the property will not pass until the goods have been earmarked or appropriated to the contract with the consent of both parties. In laurie & morewood V John Dudin & sons, a contract for the sale of some maize from the defendant’s warehouse was held not to be the sale of unascertained goods.
The question that would arise is what is ascertained goods?
Section 18 rules 5 (1) puts it thus: subject to contrary intention of a sale of unascertained or future goods by description, where goods of that description in a deliverable in a deliverable state are unconditionally appropriated to the contract.

II. SPECIFIC GOODS

The second basic rule concerns specific or unascertained goods and is contained in S.17 which provides as follows

  1. Where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer.
  2. For the purpose of the intention of the parties, regards shall be had to the terms of the contract. The conduct of the parties and the circumstances of the case.

    The key word in this section is “intention”. The intention of the parties as to when the property shall pass can be easily determined when there is a term in the contract stating when this should happen.

THE SPECIAL RULE

From the opening word of section 18, it is clear that these rules will only apply when no different intention is shown by the parties. It says that unless a different intention appears the following are the rules for ascertaining the intention of the parties.

5 rules follow these opening words. The first four rules deal with specific rules, while the fifth deals with unascertained goods.

i. RULE 1: Specific goods in a deliverable state: where there is an unconditional contract for the sale of specific goods in deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment be postponed. The essential element are that
a. Contract must be unconditional
b. Goods must be specific, that is not unascertained or future goods as seen in kursell v. timber.
c. Goods must be in a deliverable state.

ii. RULE 2: specific goods must be put in a deliverable state: where there is a sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them in a deliverable state, the property does not pass until such things be done and the buyer has notice thereof. It is therefore essential that the buyer is notified once the goods have been put in a deliverable state.

iii. RULE 3: specific goods to be weighed measured and tested: where there is contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test or do some other act or thing with reference to the goods for the purpose of ascertaining the price. The property does not pass until such act or thing be done and the buyer has notice thereof. This rule is only applicable where the seller is to do something. This was illustrated in boro v. kenedy

iv. RULE 4: approval, sale or return: when goods are delivered to a buyer on approval or on sale or returns or other similar terms the property therein passes to the buyer.
a. When he signifies his approval or acceptance to the seller
b. If he fails to signify his acceptance or approval but retains the goods without giving notice of rejection

Where the buyer does not intend to buy the goods, he must not retain them beyond a reasonable time. In poole v. smith car sale (balham) ltd. It was held that a car had been retained beyond a reasonable time & therefore t3e buyer were liable to pay. The buyer has been responsible for retaining the goods beyond a reasonable time as seen in re ferrie case

v. RULE 5: unconditional appropriation: this deal with unascertained goods and provide that
a. Where there is a contract for the sale of unascertained or future goods… and the goods in a deliverable state are unconditionally appropriated to the contract, the property thereon passes to the buyer.
b. Where in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier, he is deemed to have unconditionally appropriated the goods to the contract.

This rule must be read along with s.16 which says that property in unascertained goods will not pass until they have been ascertained. RULE 5(1) says that when there is a sale of unascertained goods in a deliverable state, property will not only pass when the goods have been unconditionally appropriated to the contract.

To constitute an appropriation of the goods to the contract, the parties must have attached the contract irrevocably to those goods. Assent to appropriation may come before and after the appropriation and may be express or implied.


Contributed by: Abdulganiyu Ismail (AKA) Mastermind
Prepared and Written by: Ucheakonam Chijioke Joshua (CJ)

Transfer of Title (Commercial Law)

Transfer of Title

Want to learn about transfer of title in commercial law? Continue reading below.

The effect of a contract of sale as regards transfer of title may be broadly divide into three main groups:

  1. The seller would be transferring a valid title
  2. If the property in the goods is not transferred immediately, it would be transferred at some stage of the contract
  3. The person on whom the risk of loss is with is known at all times and the effect on both parties

THE BASIC RULE

The general rule is that a person cannot transfer a better title than he has himself. In simple language, you cannot transfer what you do not have. This principle has been summed up in the Latin maxim “nemo dat quod non habet”. However, the rule is that a buyer cannot acquire a better title than that which the seller has. This basic rule has been embodied in section 21(1).

Strict adherence to the basic rule would protect & preserve property so that no one can give a better title than himself has despite the rule, however, it must be emphasied that the sellers either fraudulently allowed innocent third parties to deal with such seller in respect of those goods for value.

Lord denning elucidated this in the case of bishopgates motor finance corp v. transport blakes ltd. This principle was also illustrated in the classical case of Hollins v. fowler. It must further be noted that s.21 of the sale of goods act, provides that a seller is under a duty to transfer a good title to the purchaser and failure to do so would lead to a breach. For a third party to succeed against the original owner, he must show the following:

i. He had taken the goods in good faith and for value
ii. He had no knowledge or notice that anyone else had a better title than the person form whom he was purchasing the goods.

EXCEPTION TO THE BASIC RULE

  1. AGENCY: the very wordings of s.21(1) provides for this exception i.e where a person sells goods under the authority of the owner, he can pass a good title. Such authority may be implied, express, or apparent.
  2. ESTOPPEL: the wording of s.21(1) further adds to this exception when it stated “… unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell”. Thus, an owner can be estopped from denying the seller’s authority to sell where by his words he represents to the buyer that the person in possession of the property was either the true owner or had authority to sell. Thus, in Henderson & co v. Williams, the real owner was estopped from denying the seller’s right to sell since had been held out to be real owner. Estopped can be divided into various types: these are
    i. Estopped by representation
    ii. Estopped by negligence
  3. MERCHANTILE AGENT: although the SGA makes no specific reference to merchant agents s.21(2)(a) cover it by implication by stating that nothing the act is to affect the provisions of the factors act 1889. S.21(1) of the factors act 1889 provides that “where a merchantile agent is the consent of the owner in possession of goods any sales or pledge made by him when acting in the ordinary course in business… shall be valid as if he were expressly authorized by the owner”.
  4. MARKET OVERT: s.22 of the act provides that where goods are sold in the market overt according to the usage of the market, the buyer acquires a good title to the goods provided he buys them in good faith and without notice of any defect or want of title on the part of the seller. A market overt has been defined as an open, public & legally constituted market where people buy and sell openly as opposed to shop outside the market. This is evident in mbanugo v. UAC of nig.
  5. SALE UNDER VOIDABLE TITLE: s.23 provides that “where the seller has a voidable title thereto, but is title has not been avoided at the time of the sale, the buyer acquires a good title to the goods provided that he buys them in good faith”. Note that this section only applies to voidable title & not void ones. Thus, in philps v. brookes ltd, it was held that the pawn broker had a good title to the ring since the contract between the jeweler was good.

Other exceptions to the basic rule include: seller in possession, buyer in possession & writ of execution.


Contributed by: Abdulganiyu Ismail (AKA) Mastermind
Prepared and Written by: Ucheakonam Chijioke Joshua (CJ)

Power of Recovery of Possession of Goods (Commercial Law)

Power of Recovery of Possession of Goods

The hire purchase act 1965, CAP H4 LFN 2004 was passed to regulate hire purchase transaction and it possesses 21 sections. It has been described as the hirer’s act as it is revolutionary and highly protective of the hirer.

Most of the injustices that has characterized the hire purchase system at common law were eliminated. Hire purchase is defined as the bailment of goods in pursuance of an agreement under which the bailee may buy the goods.

The act applies to hire purchase agreement and credit sales agreement of goods where the hire purchase price does not exceed 1000pounds. For hire purchase to be valid under the agreement, there must be a note or memorandum in writing setting out the terms of agreement and signed by the hirer.

HIRER’S RIGHT OF TERMINATION

The hirer has a right to determine the agreement after giving due notice in writing to the owner. This he can do at any time before the final installment falls due. The hirer must then pay

  1. The areas of payment due but which are unpaid at the date of termination.
  2. Any further amount necessary to complete payment of half the hire purchase price unless this has already been paid. This is provided for in section 8. The hirer will also pay damages if he has not taken reasonable care of the goods. According to section 8(2) on termination, the hirer must return the goods to the owner and make the payment stated. This is also evident in section 8(3) of the 1970 amendment. According to section 8(3) in any circumstances where:

    a. A hirer determines or has determined a hire purchase agreement under this section, he shall immediately upon the determination return the goods to the owner and settle all outstanding liabilities subject as prescribed in the foregoing provisions of this section, &
    b. (when amended). Section 8(4) also provides for the rights of the hirer to terminate apart from as provided in this section.

RECOVERY OF POSSESSION BY THE OWNER (SECTION 9)

The act prohibits the owner from enforcing a right to repossess otherwise than by action when relevant. Proportion of the hire purchase price has been paid or tendered unless he had himself terminated the agreement or the hiring as seen in section 9(1) & (3). Relevant proportion means in the case of goods other than motor vehicle (1/2) and in the motor vehicles (3/5) of hire purchase price as evident in section 9(4).

Once the relevant proportion, the owner can only recover possession by action. Failure to do this will lead to the determination of the hire purchase agreement and hirer or any guarantor can recover from the owner all sums already paid by them under the agreement without any deduction.

The hirer will sue for money had & received by the owner and the guarantor can recover any paid under any security given by him as in section 9(2).

Section 9(5) gives the owner a limited right to repossess the goods even though the relevant proportion has been paid. This right exists in the case of agreement relating to motor vehicles only. It arises only when three or more instalments are due and unpaid and only after the owner has commenced proceedings. That is the effect of the words “pending the determination of any action” in the sub section. Thus, if an action is not pending when the owner removes the vehicle, the act of the removal will be unlawful. This is illustrated in the case of tabansi agencies ltd v. incar motors (nig) ltd.

Except as provided from subsection (5) below, in the application of the foregoing provisions to motor vehicles where three or more instalments of the hire purchase price of a motor vehicle under the agreement and unpaid, the owner may removes the motor vehicle to any premises under his control for the purpose it from danger and retain it there pending the determination of any action and the owner shall be liable to the hirer for any damages or loss caused by the removal. This equivalent to section 2 of the hire purchase act (amendent) Decree no 23 of 1970.


Contributed by: Abdulganiyu Ismail (AKA) Mastermind
Prepared and Written by: Ucheakonam Chijioke Joshua (CJ)

Undisclosed Principal (Law of Agency)

Undisclosed Principal

Who is an undisclosed Principal? What are his rights and Duties? Read on.

The principle of agency is a type of special contract entered into by two or more people, wherein one person acts on behalf of the other.

In the contract law, the term “undisclosed principal” relates mainly to the liability of an agent for the obligations incurred on behalf of the principal. He is a person who acts through an agent for the purpose of any negotiation with the third party without his identity being disclosed.

The third party does not know about the existence of the principal and deems the agent as if he is acting for himself. The agent usually makes such representation as per instructions of the principal or at times if he clearly wishes to bind himself only.

Professor Stoljar has remarked that the origin of the doctrine while being uncertain seems to be a reasonable antiquity, substantial solidity and eminent judicial responsibility under the doctrine of undisclosed principal, a person who is not overtly a party to a contract may acquire rights and be subject to liabilities under such a contract.

In Crompton richardmond co v. salami alhaji atanda, it was held that “where a party contracts with an agent whom he does not know to be an agent, the undisclosed principal is generally bound by the contract and is entitled to enforce it”. it is important to emphasize that the doctrine cannot operate where the agent is unauthorized. This was the view of the house of lords in keighley maxstead & co v. Durant

Rights & Duties of an Undisclosed Principal

Generally speaking, there is no difference between an undisclosed principal and one who is disclosed. If a contract is made on behalf an undisclosed principal, he can sue and be sued in his own name as regards the contract.

According to section 231, if an agent makes a contract with a person who neither knows nor has a reason to suspect, that he is an agent, his principal may require the performance of the contract. The rule is, however not without qualification which are as follows:

  1. PROOF OF IDENTITY OF THE UNDISCLOSED PRINCIPAL: this involves a consideration of the circumstances in which evidence may be introduced to proof the existence of and the identity of the undisclosed principal so as to enable him to sue and be made liable. In hunter v. humble, the agent described himself in the charter as “owner” of a ship.

    It was held that parole evidence was not admissible, to show that he had contracted as agent for someone else, however in F, drug horn ltd v. rederiak trans atlantic, where the agent described himself in the chapter as “charterer”, it was held that the undisclosed principal could be identified by parole evidence. Thus, lord Haldane, drew the distinction between property and contract. In the caser of danzigel v. Thompson the agent was described in a lease as “tenant”. Parole evidence was admissible to show that he was acting for a principal who could be made liable for rent.
  2. DESCRIPTION USED BY THE AGENT IN CONTRACT: another view is the description used by the agent in making and signing the contract. It may show that he impliedly contracts that there is no principal. Thus, if the agent contracts as “owner” or proprietor” such a contract may imply that there is no principal, but if he contracts as “charterer” or “tenant” it may not.

    Also, where the description used is so ambiguous, then parole evidence is admissible. In the united kingdom mutual steamship v. nevill, contributions under an association’s article were only obtainable for members of the association. It was held that the could not be liable. the position was summarized in finzel berry & co v. east cheap dried fruit by MC nair .j. where he stated “it is clear law today that a person who has concluded a contract in his own name may proof by parole that he was acting for an undisclosed principal
  3. PERSONALITY OF THE AGENT: Another qualification to the general rule as to the right and duties of the undisclosed principal is the personality of the agent. Where the personality of the agent was instruments to bringing about the contract, the undisclosed principal even though identifiable may be unable to sue the third party. This was illustrated by scrutton .j in green v. downsupply and co 4. DUTY OF AGENT TO PERSONALLY ACT: the principal will also be unable to sue the third party, where the contract is one in respect of which the agent must act personally and cannot assign his right.

Undisclosed Principal and the Third Party

Before the undisclosed principal may enforce any right or be liable for any obligation under a contract, apparently made between the agent and a third party, two pre-conditions must be met:

  1. The agent must have actual authority (express or implied)
  2. The agent on entering the contract must have intended to act on behalf of the undisclosed principal and not for his own benefit.

Contributed by: Abdulganiyu Ismail (AKA) Mastermind
Prepared and Written by: Ucheakonam Chijioke Joshua (CJ)

Obligations of Agency (Commercial Law)

Obligations of Agency

Wondering what obligations exist in an agency relationship? This post is about obligations of Agency.

The relationship between a principal and agent is essentially consensual. Where an agent has agreed to serve as the agent of the principal and the principal has equally given his authority to the agent, certain duties are expected of the parties.

DUTIES OF AN AGENT

An agent having accepted to be an agent has certain duties to perform, such duties either arise from the agreement or from the fiduciary nature of the relationship. The following are the duties:

  1. DUTY TO PERFORM: where the agency is contractual, an agent must perform what he has undertaken to perform under the contract. This is simply governed by the rule of contract as stated in turpin v. bilton. Professor Powell in his book “law of agency” concludes that there is a duty on the agent to inform the principal within a reasonable time and failure to do so gives rise to liability in negligence. This is stated in otohamman v. senbanjo
  2. OBEDIENCE: The agent must act in accordance with the authority which has been given to him by the principal. Such authority may either be express, implied or usual authority. The paramount consideration where there are no express or usual custom to guide the agent, the agent will usually have some discretion as long as he acts for the principal as seen in bonsor v. musician union.
  3. CARE AND SKILL: an agent must perform his undertaking with care and skill. All agents owe this duty to their principal, whether the agency is contractual or gratuitous. Nevertheless, the decision is usually drawn between the standard of care and skill to be observed in each case. As stated in giblin v. mcmullen, gratuitous agent is only bound to show such skills as he in fact possess.
  4. PERSONAL PERFOEMANCE OR NON-DELEGATION: the general rule is that an agent must perform his undertaking personally. The contract of agency between both parties is a confidential one. This is normally expressed in the Latin maxim “delegatus non potest delegare”. Therefore, the employment of a sub agent is a bridge to the principal unless he has permitted it. This is illustrated in Allam co ltd v. Europa costa services ltd.
  5. RESPECT OF THE PRINCIPALS TITLE: an agent cannot deny the title of his principal to goods money or land in his possession on behalf of the principal. The possession of the agent is the possession of the principal for all purpose. There may be circumstances where the agent may be able to refuse to assent to claim by his principal. For example, the right of a third party called JUSTER TII
  6. DUTY TO ACCOUNT: An agent must pay over to the principal all sum received by him on behalf of the principal as seen in blaustein v. mattz mitchelle. This duty requires the agent to keep his principal’s property distinct from his own and also keep proper account of such property. The case of Ogbonnaya v. apostolic church provides a detailed illustration.

DUTIES OF PRINCIPAL

There are two major duties of a principal namely:

  1. Renumeration
  2. Indemnity

Both terms will be discussed

  1. RENUMERATION: under a contractual relationship, the principal is bound to take the renumeration he has promised to pay the agent by agreement. Where it is expressly stated, he is bound to pay once the agent has discharged his own obligation under the contract. Where there is no express renumeration, it would be Implied to the contract agreement. As stated in taylor v. powell, where the agent is acting gratuitously, the principal is not bound to pay renumeration. Similar grounds were adopted in Bryant v. flight. In that case, the agent had to work for the principal in the terms “the amount of payment I am to receive, I leave entirely upon you”. It must also be noted that liability for renumeration only arises where it is earned.
  2. INDEMNITY: this duty may be express or implied and the extent of liability for indemnity will depend on the nature of the agreement between the principal and the agent on the grounds of business. For the agent to make his principal liable in indemnity, he must have acted within the express, implied or usual authority. Again, there is no duty to indemnity under the following in circumstances:

i. Where the agent has acted unlawfully

ii. Where the agent has breached any of his duties

iii. Where the agent has acted negligently.

Contributed by: Abdulganiyu Ismail (AKA) Mastermind
Prepared and Written by: Ucheakonam Chijioke Joshua (CJ)

Ratification in Law of Agency (Commercial Law)

Ratification

Would you like to know what ratification in commercial law is all about? Well, keep reading.

In discussing the creation of agency relationship, we often describe a situation where the agent has antecedent authority. On the other hand, there may be no antecedent authority, yet the agent purports to act on behalf of the principal. An agency by ratification, may be created whenever the alleged principal accepts or otherwise affirms the act of one purporting to act on his behalf even though there was no agreement authorizing the act.

Ratification is deemed to apply to consent which may be necessary in essence being that the prior authorization is treated as if it had been authorized by the alleged principal from the outset. It is thus RETROSPECTIVE IN NATURE, and has the effect of constituting the act so performed into that of the alleged principal, thereby making him liable. Thus, the doctrine of ratification was explained by TINDAL C.J in WILSON V. TUNMAN.

Validity For Ratification

In order to successfully rakes the issue of ratification, the purported set of ratification must be valid and effective. To be valid and effective, certain requirements must be fulfilled. In Firth v. Staines, wright j. gave three conditions

  1. The agent whose act is sought to be ratified must have purported to act on behalf of the principal.
  2. At the time the act was done, the agent must have had a competent principal
  3. At the time of the ratification, the principal must be legally capable of doing the act himself.

These requirements require further examination

  1. EXISTENCE OF COMPETENT PRINCIPAL: the alleged principal in order to effect a valid ratification must be in existence at the time the act was supposedly performed on his behalf. It is not sufficient that he will come into existence at some determinable future. Thus, a principal must be I. A natural human being II. Or a juristic person.
    The caser of CALGARI V. GLOVANNI SARFARI, provides an adequate illustration.
  2. ACT MUST BE ON BEHALF OF PRINCIPAL: The act of ratification can only be validly executed by the alleged principal on whose behalf the act was performed. It follows that such act must have been done on behalf of the alleged principal. In Folashade v. Duroshola, it was held that there would be no ratification unless A purported to act as an agent and to act for B in relation to the contract.
  3. LEGAL QUALITY OF THE ACT: Generally, the principal may ratify any act which he could have authorized at the time the act was being performed. However certain acts are not capable of ratification. Thus, an act which the principal could not have authorized in the first place because it was illegal to public policy does not become effective by ratification. This is evident in urhobo v. chief j.s tarka.
  4. TIME OF RATIFICATION: ratification in order to be valid must be within a time limit. In folashade v. duroshola, it was held that a proper case of ratification is subject to the important question that ratification must be within a reasonable time after which an act cannot be ratified. As seen in BIRD V. BROWN, where the agent and third party stipulates time for ratification, the principal can validly ratify only if he acted within the period so prescribed.

There are 3 qualifications which have be given to limit the operation of the doctrine of ratification

  1. Ratification will not be allowed to prejudice the vested right of a third party.
  2. If the third party’s offer is made subject to ratification then the offer is conditional.
  3. If anything happens before ratification, but after the third party had withdrawn his offer, he will be entitled to enjoy the advantages of such offer.

Contributed by: Abdulganiyu Ismail (AKA) Mastermind
Prepared and Written by: Ucheakonam Chijioke Joshua (CJ)