Commercial Law: Sale of Goods - Case Study Example

Running head: ANALYSIS OF CASE STUDIES ON SALE OF GOODS Commercial Law - Sale of Goods Malik Vs Constance In the first case where Malik had contracted with Constance, the issue of modifying goods before sale arises. Under the sale of goods Act, if the buyer and the seller have agreed that certain modifications need be done on the goods before sale then this must be so. Malik finished modifying the goods and the communicated to Constance who unfortunately never received Malik's communication. Under The Rules Governing Communication In The Law Of Contract: - (a) Acceptance must be communicated by the offering in the manner prescribed by him otherwise the acceptance is ineffective. This was held in the case of ELIASON v. HENSHAN. In this case, E offered is buy flour from H, asking the reply to be sent by the wagon drives who communicated the offer. But the accepted offer by post instead of the agreed wagon driver. The wagon driver arrived before the letter of acceptance reached E. It was held that there was no contract. In Malik vs. Constance however, there was no particular mode agreed upon of accepting the offer and therefore, Malik had the liberty of to use any. The question however is, if by leaving his acceptance on Constance's' telephone answering machine there was a valid acceptance. 1 (b) For acceptance to be effective, it must be communicated to the offeror. However, there are exceptions when an acceptance would be effective through no communication has taken place. Some of these exceptions include when acceptance is by post. It contrasts with the general rule that a contract is complete only when acceptance is actually communicated to the offeror. However, communication by telephone is not captured in this exception to the rule of communication. The law says that where there is such a communication between the parties i.e. where the means of communication is telephone, telex etc, and the contract is only complete when acceptance is received by the offeror. This was held in the case of Entores Ltd Vs. Mles Far East Corporation. In this case, the plaintiffs in London made an offer by telex to the defendants through their agent in Holland. Acceptance of the offer was communicated and received by their plaintiff on their telex machine in London. The court had to determine whether the contract was made in London or in Holland. It was held that since communication by telex was instantaneous, the contract was concluded in London where the acceptance was received by the offeror. 2 In the case of Malik vs. Constance, Malik cannot claim that he had accepted Constance's offer to buy the suit unless contrast admits that he opened and listened to his phones answering machine the message Malik had left. Malik's action against Constance to recover the damage caused by vandals will not succeed because the damage would not be foreseeable by Constance by the time the contract was being made. On of the rules of consideration is that it must be real. The fact is that the suit had not been delivered to Constance and it would be illegal for Malik to recover money from him for nothing sold. Consequently, Constance cannot successfully sue Malik for breach of contract. Under the law of contract two parties are under an obligation to fulfil their requirements under the contract and also to be bound by its terms and regulations. In this case, the only term condition that was to be maintained in the contract was that of further modifications to the suit long of furniture. And Malik made the modifications as agreed. In fact Constance, knowing very well that he was away on business could've taken reasonable steps to check for any information in this telephone. Malik could not have foreseen the theft that occurred in this premises. Therefore Constance action will also fail. 3 Malik Vs Bedenhams Under the sale of goods act, there is an implied condition that the goods must correspond with the description. This was held in the case of Varley vs. Whip. In this case, the seller agreed to sell second hand reaping machine, which he described as anew the previous year. The buyer had not seen the machine on arrival. It was found to be too much older and he proposed to reject it. The buyer sued for the price. It was held that the age of the machine was part of the description and there was a breach of condition. 4 The contract/agreement between Mali and Benenhams was that Malik was to supply high quality, mahogany bedside cabinets. But the cabinets supplied did not correspond to the agreement as it was found that some of them were not from the high quality mahogany as agreed. Instead Malik used a very inferior wood with a mahogany coloured veneer. There was a breach of condition on the part of the Malik. Under the law and sale of goods in particular, break of condition by the seller gives a right to the buyer to regulate the contract completely. He (buyer) also is at liberty to refuse to pay the price. Thirdly, he is entitled to recover the price already paid. Lastly he can sue the seller for damages. From the above case, it was of vital importance that the furniture be made of mahogany. It was not a term that as collateral to the contract but primary and fundamental. Its breach will therefore be implied as a breach of condition. This reason Malik has a liability, which he ought to be accepted because of breaching this condition. Breach of Condition of Merchantability Under the sale of goods act, it is implied that the goods shall be merchantable. Merchantable here means that the goods must be of high quality. One of Bedenhams customers who were looking at the cabinet supplied realized that the wood was so badly cracked and splintered. It means that then the cabinets were not merchantable. 5 In Waren vs. Holt. It was held that beer which contained excessive quantity of a certain acid was not merchantable. The plaintiff became sick. This proved its fitness for its general use as a beer. In Morreli vs. Fitch and Gibson, the plaintiffs were awarded damages after the neck of a bottle of ginger wine they had bought, came off and seriously injured him. He was awarded damages because the plaintiff had breached the condition that goods sold must be merchantable. From the above facts, Malik cannot escape the liability for the loss that Bedenham suffered. Ben hams have all the right to:- (a) Reject the cabinets supplied. (b) Refuse to pay for any price unpaid (c) Recover any price unpaid (d) Be awarded damages for the loss suffered. But it is not lost for Malik. Malik has a remedy with regard to the rules that govern delivery of goods by instalments. The buyers are not forced to accept goods supplied in instalments unless he agrees to do so. But Malik had agreed with Bedenhams that the goods were to be delivered by instalments of to cabinets monthly each separately paid for. Where the seller makes a defective delivery in one instalment, it doesn't entitle the buyer to treat the whole contract as repudiated. He can only reject the defective instalment, refuse to pay or recover what he had actually paid further he can sue the seller for damages. Malik can only compensate Bedenham for the price of the ten cabinets of the second instalment. If Benham could have brought to the attention of Malik of the defectiveness of the first delivery at the earliest time possible, then Malik could have compensated them. Delay defeats equity. It can also be argued that by keeping quiet after the first delivery Bedanhams accepted the delivery and cannot turn back later reject to take the cabinets. Acceptance by Buyer of Goods The buyer normally has a right tom only accept delivery in accordance with the stipulations of the contract. He has a right to also reject the goods of their mode of delivery do not coin idea as agreed by the seller. The justification that Malik has no obligations to compensate Ben hams for the first batch of goods manifests itself from the following rules that govern acceptance by her buyer. Acceptance of goods by the buyer is valid / takes place when the buyer:- (a) Initiates to the seller that he has accepted the goods or (b) When delivery of goods has been made to him and e in one way or the other makes alterations to the goods. (c) Retains the goods so supplied for the considerable reasonable time without informing the seller of his intention to reject them. Bedenhams did not inform Malik within a reasonable time that they had rejected the first batch of goods. Hence their suit for compensation arising from the first instalment will fail. Malik therefore have a right to maintain an action for damages if Bedenhams do not make good payment for the first instalment of goods. Malik Vs Des Res Designs In this case, Malik has a right to take into possession. The fabric that was lying on Des Res Design premises after the latter went under. This is because already there was a clause into the contract providing that the property in the fabric would remain with Malik until the full price of the fabrics had been cleared. This clause takes us into the rules governing the transfer of property in goods. And it is important to know the time at which property in the goods passes from the seller to the buyer because:- (a) If the goods perish or get damaged, then the loss will have to be borne by the party in whom the property was vested at that time of the loss. (b) In case of a person being liquidated. It will be possible to determine in whose possession the property of the goods is vested. Section 19 of the sale of goods act states that "where there is a contract for sale of specific or ascertained goods, the ownership in them is transferred to the buyer at such a time as the parties to the contract intended them to be transferred. But if no intentions have been made by the parties then certain rules as laid by the act will be4 used in determining when property passes to the buyer". 6 RULE 1 In Cases of Unconditional Contract for the Sale of Specific Goods in a Deliverable State The property passes to the buyer when the contract is made. It is of less relevance of the time o payment of delivery is procrastinated. This was held in the case of Dennant vs. Skinner. In this case, an auctioneer knocked down several motorcars to abider who then tendered payment through cheque responding himself as the son of a well-known car dealer. Before taking away the car, he was made to sign a statement that ownership in the car would not pass to him until when all the proceeds of the cheque were paid to his account. The cheque was dishonoured. It was held that the contract was completed on the fall of the hammer and that was the time when property of the car passed to the bidder. The defendant, it was held had acquired a good title. 7 Rule 2 Contract of Sale of Specific Goods Not In a Deliverable State Where the seller has to modify the goods before sale, the property in them passes after the modification has been made and the buyer is notified of it. This was held in the case of Underwood vs. Burgh castle syndicate. The plaintiff sold the defendant a fixed condensing engine. The engine was to be severed and delivered free of rail at a specified price. The engine was damaged in transit before reaching the railway. The defendants refused to pay. It was held that they were not liable as the property in the engine did not pass at that time to them. 8 In Malik vs. Des Res Designs, the property in the fibres was not to pass to Des Res Designs until they had paid the full price. Even though the goods lay on Des Res Designs hands, it legally belonged to the seller Malik. Malik had therefore all the right to seize his p-property from Malik. Transfer the Title The general rule governing transfer of title is that where a person who is not the owner sells goods to another, the buyer acquires no better title than that the seller had. This is the principle in 'nemo dat quad non habet' (i.e. no one can give what he has not). This rule is meant to protect owners of goods sold by other who had no right of selling them. The owner can only be precluded from denying the seller's right to sell if by this conduct it was believed that the seller had a right to sell the goods. Can The Malik Validly And Legally Seize The Sometimes Of Fabric That Des Res Designs Sold To Gordon This is the question. Unless the exceptions to the rules of the Nemo dat principle hold, then Malik can curtains from Gordon. (a) If Des Res Designs had acquired violable title of the goods and Gordon was not aware of such a violable title, then Gordon would've acquired good title of the goods. Malik would then have no legal right to take back the goods. (b) If Des Res Designs acquired a good title by estoppel, then again Malik would not have any action as Gordon will be presumed to have acquired a good title of them. This would arise if Malik made Gordon believe the Des Res Designs had a good title. But in this case, there are no any conducts on the part of the Malik that would have made Gordon to believe that Des Res Designs had a good title of the goods. 9 (c) Malik have also to seek and find out whether the goods sold to Gordon ere sold under the order of a court of competent jurisdiction. If found out that such a court order was given to them they (Malik) will not have any action against recovery of the goods, (d) According to the English law, a buyer of goods acquires a good title of the goods if the sale was made in marts over. But it must be shown that the buyer purchased the goods in good faith. But from the above case it is unlikely that Des Res Designs had sold the fabrics to Gordon in such an open market giving Malik a remedy for them. If now of the above exceptions to the rules of the Nemo dat can be proved by Gordon the Malik's will have had a right to reclaim the 80-meter of the fabric sold to the farmer. Malik Vs Homestead Malik has a right of lien i.e. right to retain the first lots of cushions. By the cheque being dishonoured, Malik has got rights like that of any unpaid seller. Under the sale of goods act, an unpaid seller has a right to retain the goods on tramat, which have not been delivered to the buyer if the buyer becomes insolvent. He can recover the goods if they are in his possession in transit or in the possession of any other carrier. In this case, the goods are n the possession of a carrier, Kwik Karriers and have not been delivered to homestead. 10 The buyer is said to be insolvent if he has failed to pay his debts. It is apparent that homestead has become insolvent because their bank accounts are devoid of money. Malik needs to know the following provision before excursing his lien rights or the right of stopping in transit:- 1. Right of stopping goods is enforceable only when the buyer is insolvent. Lien is enforceable whether or not the buyer is solvent. 2. Stopping in transit can be enforced in spite of credit having been agreed upon whereas a stipulation for credit will destroy the lien. 3. Lien is accessible only when goods are in actual or constructive possession of the seller. Stopping in transit is available only when the goods are still under the process of being transported. 4. Lien of sellers ceases when possession of goods is surrendered but his right to stop the goods begins and is in force provided that the goods are in transit and before they pass to the possession of this buyer. Duration of Transit Malik cannot effectively execute his rights of possessing the goods or stopping transit unless he knows when transit of goods commences or when it ends. This is because he cannot take lien of the goods that have already been delivered to the buyer. Goods are said to be in transit from the time they are delivered to a carrier by land or water or air or other bailee, to transit to the buyer until the buyer or his agent takes charges of their delivery. 11 Transit ends:- (a) When the carrier wrongly refuses to add the goods to the buyer. (b) If the goods are delivered to the master of the buyer's shop. (c) If the buyer or his agent obtains delivery of the goods before they arrive to the appointed destination. (d) If after arriving at the designated point, the carrier acknowledges to the buyer or his agent that he holds the goods on his behalf. Transit does not end of the goods are rejected by the buyers. Malik further has aright to resell the second hand lot of goods at his hands. But he has it give homestead a notice of his intention to resell the goods. If he goes ahead and gives such intention and homestead does not pay or tender the price within a reasonable tome, then Malik will have a right to resell them. And if there is a loss on resale such that the re sale price is lower than the price Malik had contracted to sell to homestead, Malik will be entitle to recover the difference. On the other hand, if the resale price is higher than the contract price Malik will not be bound to refund the surplus. References Emanuel, S. L: (2004): Fundamental of Business Law, 4th Edn, Sydney, Educational Publisher Emerson R. W. (2003): Business Law, 5th Edn, Sydney, Educational Publisher Jertz, A, Miller L. R, (2004), Fundamentals of Business Law, 3rd Edn, Nairobi, Macmillan Publisher Penrose, R, (2005), Road to Reality: A Complete Guide to the Laws of the Universe, Nairobi, Longman Publisher Tyler, T. R. (1990). Why People Obey the Law. Hew Haven: Yale. Read More