“A Contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price.” (Emphasis on the key words)
The sale of goods law sees items from two different perspectives or goods composed of 2 major components. You have property in goods i.e. the title in goods and the physical aspect, which are two different things.
Goods are different from property. E.g. If you have borrowed a shirt, you have possession but not property or title. Ownership
could be with one person whereas control is with somebody else. When we
talk of goods we are talking of the tangible aspect and when we talk of
property we are talking of ownership.
In
the definition it is said that it is a contract by which the seller or
the offeror transfers or agrees to transfer the property to the buyer or
offeree. A contract of sale of goods does not deal with the tangible, it deals with property. You do not transfer goods, you transfer property, you deliver goods and transfer property.
Once
the property has been transferred then the buyer must pay a
consideration in your ordinary contract and in this case the
consideration must be in money. Money consideration is called the price. In a sale of goods contract, the beacons are that the seller agrees to transfer the property for money consideration called the price.
Under
Section 3 (4) the difference drawn in terms of sale contract where the
property has already been transferred whereas where he has agreed to
transfer it is an agreement to sell.
Transfer and Passing of Property; the two under Kenya law effectively mean that the ownership has moved but they carry different meanings. In
the case of sale of goods transfer refers to active actions being taken
by seller and buyer to transfer ownership from seller to buyer, through
agreement where the parties have agreed to transfer the ownership of
property to the buyer. The parties are actively involved.
When you talk of passing of property, property can pass to the buyer by operation of the law and the parties have done nothing to aid this. E.g. when you attend an auction, you have an authorised auctioneer who is selling goods for other people. Under the Kenya laws the property in the goods passes from the seller to the buyer when the hammer falls. The owner of the goods is not the auctioneer but has given the goods to the auctioneer. The buyer is usually the highest bidder. Imagine
the hammer has fallen and the highest bidder approached the auctioneer
and says he does not have enough money to pay, but can pay by cheque and
the auctioneer who is the agent for the owner of the goods tells the
buyer that he accepts the cheque provided the title remains with him
until the cheque clears. That buyer takes the goods but sells the goods in the next corner. So
you have a situation where there is the seller, the buyer, but the
seller has delivered the goods to the buyer at an auction without the
price consideration and the buyer has sold them to another buyer. The dispute arises when the cheque bounces. The second buyer has no notice of the circumstances. The tussle is between the seller and the second buyer. Who gets a better claim to the goods? The title has not moved so the first buyer has no title to the goods and cannot transfer that which he dos not have. But under
the sale of goods Act S. 58 as long as the second buyer bought without
being aware of the defect, then the second buyer has a better claim than
the seller. (owner of the goods). The second buyer has to have bought the goods without notice i.e. not knowing that there were defects in the sale.
The law holds the second buyer to have a better claim due to equity. There is balancing of equity between the 2 owners. The second owner is innocent if he bought the goods without notice.
The
second buyer is the most innocent because the owner of the goods by
giving the goods to the auctioneer facilitated the commission of fraud
by the first buyer so the goods are given to the second buyer only if he
genuinely bought the goods without notice that there was a defect in
the original sale.
He who facilitates commission of fraud is less innocent then he who had no way of facilitating the same.
This situation can be controversial.
A just judgment is not necessarily fair. Fairness is a value judgement.