contract of sale

Contract of Sale

Written by BATSHO NTHOI

WEDNESDAY, 10 MARCH 2010 00:00

In every day life, there are some contracts that are concluded more often than others, and the contract of sale is the commonest. It is virtually impossible to live or carry on any kind of business without either buying or selling goods from time to time. What then is a contract of sale? A contract of sale may be defined as a contract in which one person known as the seller undertakes to deliver a thing (merx) to another party known as the buyer, the latter agreeing to pay a certain price (pretium). What is therefore critical is that the seller and the buyer reach a consensus regarding the nature of the contract, the thing sold and the purchase price, before a contract of sale comes into existence. It is important that there must be an agreement as to the thing to be sold (the merx). It must either be in existence, definite or ascertainable. To create a binding contract the subject matter of the contract must not be vague. What can be sold? As a general rule, anything can be sold, provided that it can form part of one’s patrimony, that is, it can be owned by someone. Goods that are not yet in existence can also be sold. For example if the seller expects to have bags of sorghum in the future , this can be sold and he can receive the payment today although the grains will be available in six months. You can also buy a car that is yet to be manufactured. So the merx, can be movable, immovable goods, or may even be incorporeal things such as patents and copy rights. However, no contract will come into existence where the law prohibits the sale of the merx, for example the sale of marijuana. Where both the buyer and the seller know that the object sold does not belong to the seller and that the seller is not entitled to sell the object, such as a stolen thing, the sale is null and void. There can be no valid contract of sale unless the parties have agreed, expressly or tacitly, upon a purchase price. The parties to a contract of sale must therefore either agree on the price from the onset or stipulate a price per unit or determine a method by which the purchase price can be determined. They may agree that a specified third party will determine the price. A method of calculating the price may also be agreed to by the parties. The price must be certain and consist of money. A contract for the exchange of goods is one of barter, and not a contract of sale. Where a price is set by a third party and the seller or the buyer complains, that the price is manifestly too high or low, the contending party must provide evidence (in case it goes to court), of what a just determination would have been. A contract of sale creates a personal right for the buyer to enforce delivery by the seller. Until delivery, the buyer has no right in the article itself. Legal rights and duties arise from mere agreement to sell, for example, the duty to pay or deliver the thing. This has implication on transfer of ownership and passage of risk. For movable things ownership will be transferred upon delivery, whereas for immovable especially sale of landed property, the requirements of the Deeds Registry Act have to be complied with for ownership to be effected. The issue of risk shall be dealt with in due course. The intention of the parties to buy and sell must be clear. If the parties only create a pretence of sale, but in reality conclude another type of contract, the courts will not give effect to the pretence but rather to the true intention of the parties. The intention of the parties to a contract of sale is to deliver the rights of undisturbed use, enjoyment and disposal of the thing to the buyer, in other words, to enable the buyer to obtain ownership of the thing sold. Consequently, there can be no question of a contract of sale if there is a stipulation in the contract that ownership will not pass to the buyer.