Article I. Sale of Goods

The term goods includes all personal chattels other than things in action and money. It also includes emblements, industrial growing crops, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.¹

A contract of sale of goods may be made in writing, or by word of mouth, or partly in writing and partly by word of mouth, or it may be implied from the conduct of the parties. If the value of the goods sold be ten pounds or upwards, the contract cannot be enforced by action unless the buyer accept part of the goods so sold, and actually receive the same, or give something in earnest to bind the contract or in part payment, or unless some note or memorandum in writing of the contract be made and signed by the party to be charged or his agent in that behalf. This is a rule of the external forum and does not affect the conscience.

¹ Sale of Goods Act, 1893.

The subject-matter of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to be manufactured or acquired by the seller after the making of the contract of sale. The contract may be absolute or conditional. Whether a stipulation in a contract of sale is a condition, the breach of which may give rise to a right to treat the contract as repudiated, or a warranty the breach of which may give rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated, depends in each case on the construction of the contract, and in the forum of conscience on the intention of the parties. In a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is: (1) An implied condition on the part of the seller that in the case of a sale he has a right to sell the goods, and that in the case of an agreement to sell he will have a right to sell the goods at the time when the property is to pass; (2) an implied warranty that the buyer shall have and enjoy quiet possession of the goods; (3) an implied warranty that the goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time when the contract is made.

According to English law there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows:

1. Where the buyer expressly or by implication makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller’s skill or judgement, and the goods are of a description which it is in the course of the seller’s business to supply (whether he be the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose, provided that in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose.

2. Where goods are bought by description from a seller who deals in goods of that description (whether he be the manufacturer or not), there is an implied condition that the goods shall be of merchantable quality; provided that if the buyer has examined the goods there shall be no implied condition as regards defects which such examination ought to have revealed.

But whatever may be the rules of law for the external forum, in the forum of conscience the contract will be invalid whenever on account of hidden defects the thing sold is substantially different from what the buyer thinks that it is, for then there is no consent in the same matter and the contract is void by natural law. If hidden defects only lessen the value of the thing, but do not make it substantially different from what it appears to be, the price should be accommodated to the value, but the seller is not bound to point out the defects to the buyer. If asked about them, the seller should make known even accidental defects, or say that he does not guarantee their absence. _

By law the price may be fixed by contract, or may be left to be fixed in manner thereby agreed on, or it may be determined by the course of dealing between the parties. If no price is thus determined, the buyer must pay a reasonable price, and what is a reasonable price is a question of fact dependent on the circumstances of each particular case,¹ In conscience, however, the price of things sold does not depend merely on the agreement of the parties. In contracts the equality which justice demands must be observed, and so in sale the price must be equivalent to the value of the thing sold. We do not mean the individual value in use to the buyer or to the seller, but the social or exchange value which the thing possesses. This value will be represented by what the law calls a reasonable price, and sometimes it is fixed by law, so that certain commodities and services have a legal price. In the Middle Ages there was a legal price for most of the articles of commerce, and theologians taught that there is an obligation in conscience to adhere to the legal price as long as the law is in force. In cases where the law has not determined the price, theologians teach that there is an obligation in conscience to adhere to the natural or common price of the commodity. This is not something purely subjective, much less is it purely individualistic; it depends upon supply and demand, upon the costs of production, the manner of sale, and on other factors. It is proximately determined by the common judgement or the common estimation of those who are best acquainted with all the factors which determine social value in the particular case. This is the famous theological doctrine of the just price of commodities, and it only needs to be properly understood to be appreciated as eminently practical and equitable. The just price of a commodity is not something which can be mathematically determined; it admits of a certain latitude, like everything that depends on a general moral estimate. Theologians distinguish the highest, the lowest, and the mean just price. The highest is that above which the commodity in question is not commonly sold, the lowest is that below which it is not commonly sold, and the mean is between the two. Justice will be observed if the price at which a thing is sold is not above the highest nor below the lowest at which the thing sells at the time and in the place in question. As a rule, market prices are just, because they are settled according to the common estimate of buyers and sellers as to what are fair and reasonable prices under the circumstances, Here theologians usually discuss a number of questions concerning the price of commodities in particular cases where there is special difficulty. In the case of rare or single objects, such as a first folio of Shakespeare, or a painting by a great master, or a winner of the Derby, where there is no market price, many theologians teach that no injustice is committed whatever be the price received from a buyer who acts with full freedom and knowledge. Fancy prices may be foolish, but they are not unjust. No difficulty is made by theologians in allowing one to sell at the current rate who has certain information of an imminent fall in price. A merchant may also buy things of value from uncivilized owners for trinkets. In the place and among the people concerned there is equality of value between merchandise and price. A seller is justified in asking a higher price—a price of affection the theologians call it—for what he cannot part with without more than ordinary pangs. The seller may not, however, charge for some special value in use which the thing sold has for the buyer. That belongs to the buyer, not to the seller, who cannot therefore sell it.

¹ Sale of Goods Act, 1893, sec. 8.

The following rules as to the transfer of property in the goods sold are given in the Sale of Goods Act, 1893: 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. Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.

For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties, and the circumstances of the case.

Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer: Rule I.—Where there is an unconditional contract for the sale of specific goods, in a 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 or the time of delivery, or both, be postponed.

Rule II.—Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods, for the purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof.

Rule III.—Where there is a 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.

Rule IV.—When goods are delivered to the buyer on approval or “‘on sale or return,” or other similar terms, the property therein passes to the buyer: (a) When he signifies his approval or acceptance to the seller or does any other act adopting the transaction; (b) if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact.

Rue V.—Where there is a contract for the sale of unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer, or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made.

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.

Provided that where delivery has been delayed through the fault of either buyer or seller, the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault.

As a general rule, the buyer acquires no better title to goods than the seller had, but where goods are sold in 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.

Market overt in the country is only held on the special market-days provided for particular prescription; but in London towns by charter or every day, except Sunday, is Sale of Goods Act, 1893, secs. 16-18. 2 ibid., sec. 22. market-day. The market-place or spot of ground set apart for the sale of particular goods is also in the country the only market overt; but in the city of London every shop in which goods are exposed publicly to sale is market overt, for such things only as the owner professes to trade in. It is of the essence of the custom that the sale should be an open and public sale, so a sale in a salesroom and apart from the shop, or at a wharf, is not within it. Nor is sale by sample, the bulk sold not being exposed in the shop. Nor does the sale of horses come within the rule of market overt.

When the seller of goods has a voidable title thereto, but his title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of the seller’s defect of title.

Where goods have been stolen and the offender is prosecuted to conviction, the property in the goods so stolen revests in the person who was the owner of the goods or his personal representative, notwithstanding any intermediate dealing with them, whether by sale in market overt or otherwise.

Notwithstanding any enactment to the contrary, where goods have been obtained by fraud or other wrongful means not amounting to larceny, the property in such goods shall not revest in the person who was the owner of the goods, or his personal representative, by reason only of the conviction of the offender.

Where a person having sold goods continues or is in possession of the goods, or of the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title under any sale, pledge, or other disposition thereof to any person receiving the same in good faith, and without notice of the previous sale, shall have the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same.¹

¹ Sale of Goods Act, secs. 23-25.

In execution of the contract it is the duty of the seller to deliver the goods, and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale.

Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions; that is to say, the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer must be ready and willing to pay the price in exchange for possession of the goods.

Whether it is for the buyer to take possession of the goods, or for the seller to send them to the buyer, is a question depending in each case on the contract, express or implied, between the parties. Apart from any such contract, express or implied, the place of delivery is the seller’s place of business, if he have one, and if not, his residence, provided that if the contract be for the sale of specific goods, which to the knowledge of the parties when the contract is made are in some other place, then that place is the place of delivery.

Where, under the contract of sale, the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time.

Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state must be borne by the seller.

Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them; but if the buyer accepts the goods so delivered, he must pay for them at the contract rate.

Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell, the buyer may accept the goods included in the contract and reject the rest, or he may reject the whole. If the buyer accepts the whole of the goods so delivered, he must pay for them at the contract rate.

Where the seller delivers to the buyer the goods he contracted to sell, mixed with goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the contract and reject the rest, or he may reject the whole.

The provisions of this section are subject to any usage of trade, special agreement, or course of dealing between the parties.¹

Unless otherwise agreed, where goods are delivered to the buyer and he refuses to accept them, having the right so to do, he is not bound to return them to the seller, but it is sufficient if he intimates to the seller that he refuses to accept them.²

Notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law (a) a lien on the goods or right to retain them for the price while he is in possession of them; (b) in case of the insolvency of the buyer, a right of stopping the goods in transitu after he has parted with the possession of them; (c) a right of resale as limited by the Sale of Goods Act.

Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and coextensive with his rights of lien and stoppage in transitu where the property has passed to the buyer,³

¹ Sale of Goods Act, secs. 27-30.

² ibid., sec. 36.

³ Sale of Goods Act, sec. 39.