Where the seller wrongfully fails to deliver, the buyer’s action lies under Section 53, and by Section 54 the measure is the loss reasonably foreseeable at the time of contracting as likely to result from the breach, prima facie (where there is an available market) the difference between the market price and the contract price. Where the seller is in breach of a fundamental obligation, or of a condition or warranty, the buyer’s remedy is under Section 55 whether by action for damages or by setting up the claim in diminution or extinction of the price and Section 56 fixes the same foreseeability measure.
The buyer’s right to reject is conferred by Section 49 of the Act. By Section 49(1) the buyer is entitled to reject the goods, and to refuse to pay or to recover the price, in three situations only: (a) where the seller is guilty of a breach of a fundamental obligation; (b) where the seller is guilty of a breach, not being of a trivial nature, of a condition of the contract; or (c) where the buyer entered the contract as a result of fraudulent or innocent misrepresentation by the seller.
Around that fundamental obligation, the Act arranges a series of implied conditions and warranties. The distinction between the two is fundamental and is preserved by the Act: a condition is a stipulation going to the root of the contract, breach of which entitles the buyer to reject the goods and treat the contract as repudiated; a warranty is a subsidiary stipulation, breach of which sounds only in damages and does not justify rejection.
The second is that, the characterisation of a term as condition or warranty does not depend on the label the parties attach to it but on its place in the contract, whether, as a matter of construction, it goes to the root of the bargain.
A condition is an essential term of a contract, the breach of which entitles the injured party to rescind the contract and sue for damages. Not only does the breach entitles the injured party to rescind the contract and sue for damages, it equally entitles the innocent party to treat the contract as terminated and consider himself discharged from the obligation of further performance of the contract.
Contrariwise, warranties are subsidiary terms of the contract, the breach of which does not go to the root of the contract and thus only entitles the injured party to sue for damages. The learned author of The Law of Contract in Ghana, 2016 makes the point that breach of a warranty does not entitle the innocent party to repudiate the contract or treat himself as discharged from the obligation to perform the contract.
Effect of an examination by the buyer on the implied condition as to defects
The implied condition that goods are free from defects does not apply, by the proviso to Section 13(1), in respect of defects which an examination actually made by the buyer ought to have revealed, nor, in a sale by sample, in respect of defects a reasonable examination of the sample would have disclosed.
This court speaking through that legal luminary, Acquah JSC (as he then was) stated the principle in Frimpong v Nyarko [1998-99] 734 @ 743 that fraud vitiates everything and that when a court of law in the course of the proceedings has cause to believe that fraud has been committed, it is duty-bound to quash whatever that has been done in the strength of that.
Election by a buyer faced with a breach of condition
Two refinements of the condition/warranty distinction should be kept in mind, for they were the subject of confusion in argument. The first is that a buyer faced with a breach of condition is not obliged to reject; he may elect instead to treat the breach as a breach of warranty, retain the goods, and sue or set off in damages. The election is the buyer’s, but once made by acceptance it is irrevocable: he cannot accept the goods, take their benefit, and afterwards purport to reject them.
Well aware of all these facts, the respondent took the car. It must be inferred that, he exercised his own judgment in the matter and elected to continue with the purchase. This was a risk he took and in my view he is bound by his election: see Thornett and Fehr v. Beers & Sons [1919] 1 K.B. 486.
Fundamental obligation of the seller and exclusion clauses
The cornerstone of the seller’s position is Section 8, which is in these terms. In a sale of specific goods the fundamental obligation of the seller is to deliver those goods to the buyer; in a sale of unascertained goods it is to deliver goods substantially corresponding to the description or sample by which they were sold; and a provision of great practical importance, any term of the contract inconsistent with or repugnant to that fundamental obligation is void to the extent of the inconsistency. Section 8(3) thus places the seller’s core obligation beyond the reach of exemption clauses: a seller cannot, by the small print of his contract, contract out of the duty to deliver what he agreed to sell. This is one of the respects in which Act 137 is more protective of the buyer than the common law was, and it should be well understood by those who draft contracts of sale.
Implied conditions as to description, quality and fitness
Under Section 11 of the Act, where goods are sold by description, there is an implied condition that, the goods correspond with the description; and it is settled that a sale may be by description even where the buyer has seen the goods, if he relies substantially on the description. By Section 13, although the general rule preserves the maxim caveat emptor, there being no implied condition of quality or fitness except as the section provides, there is an implied condition that the goods are free from defects not declared to or known by the buyer, save where he has examined the goods and the examination ought to have revealed the defect; and, where the seller deals in goods of that description and the buyer makes known the purpose for which they are required, an implied condition that the goods are reasonably fit for that purpose.
In any event, in absence of an express term of the contract, Section 13 of the Sale of Goods Act [137] implied a condition that the goods are free from defects unknown to the buyer and a further implied term that in certain circumstances, the goods are reasonably fit for the purpose for which they are required. The Court of Appeal acknowledged as proper, the trial court’s finding of fact that the defendants were in breach of their contractual obligation to supply a proper and fit vehicle. The Court of Appeal in explaining the meaning of Section 13 of Act 137, stated unequivocally that Ghana by that provision of the law, has moved away from the common law position of caveat emptor where the buyer must beware, to one of caveat glovoson that is to say, the seller must be aware of the goods he is selling.
Sections 13(1) (a) & (b) of Act 137 contain two different implied conditions of sale: 1) that the goods are free from defects that the seller does not inform the buyer of or that the buyer did not know of and 2) that where the buyer informs the seller of the purpose for the purchase, the goods are fit for that purpose.
Implied conditions in a private sale of second-hand goods
In my view the class of goods and the status of the persons contracting rule out any obligations as to conditions or warranties. In my view even if it were assumed that the subsequent state of the Mercedes Benz car at the time of sale constituted a breach of a condition, the respondent must be presumed to have waived his rights by retaining the car unduly long.
Sections 51 and 52 then mark the outer limit of the right. By Section 51 the buyer may not reject goods which he has accepted. By Section 52 the buyer is deemed to have accepted the goods in any of three events: (a) where he intimates to the seller that he accepts them; (b) where, after delivery, he does an act in relation to the goods which is inconsistent with the seller’s continued ownership such as using, consuming, reselling or otherwise dealing with them as his own; or (c) where, after a reasonable time, he retains the goods without intimating to the seller that he rejects them. The first is acceptance by words; the second, acceptance by conduct; the third, acceptance by lapse of time. The policy is that a buyer may not keep goods, treat them as his own, and hold in reserve a right to reject them whenever it later suits him to do so.
Because the question is one of fact, the trial court’s finding upon it is entitled to great weight, and a second appellate court will be slow to disturb it. The short point, which we shall develop when we reach ground (ii), is that a buyer who takes delivery, transports the goods to his site, raises them into use on his project, and says nothing about rejection until a dispute over payment erupts many months later, has on any view accepted the goods within Section 52 and lost the right to reject under Section 51.
That the right to reject is readily lost by delay or by dealing with the goods is well illustrated in our own cases. In ROCKSON VS. ARMAH [1975] 2 GLR 116 the buyer of a second-hand car who retained and used it for about two months before attempting to repudiate was held to have waived any right of rejection by retaining the goods for an unduly long period; and in ARMAH VS. BAFFOUR (supra) a like result followed upon some five months’ use of an engine. These decisions show that what is a reasonable time under Section 77 is measured not by the calendar alone but by the buyer’s opportunity to examine and by what he does with the goods in the meantime. A buyer who puts the goods to the very use for which he bought them can rarely be heard to say that the time for rejection has not run.
In our candid opinion, and so do we find, that the plaintiffs never “accepted” the state of the vehicle. In these circumstances, we emphasize that title in the property did not pass. Title would have passed if the vehicle met the specification and purpose for which plaintiffs acquired it. Put differently, title in the property did not pass until the defendants had fulfilled their part of the bargain and delivered a brand new vehicle they contracted to sell to the plaintiffs. The plaintiffs set out to purchase a brand new Toyota Landcruiser station wagon vehicle and not an empty shell. Ordinarily, a person who has purchased a brand new vehicle would not expect thick smoke emitting from the vehicle. The Court of Appeal, therefore, erred in law in holding that there was an acceptance by the plaintiffs of that defective vehicle.
But it seems to me that the right to reject is lost by any unreasonable delay in doing so: see Fisher, Reeves & Co., Ltd. v. Armour & Co., Ltd. [1920] 3 K.B. 614, C.A. and Chao v. British Traders and Shippers [1954] 1 All E.R. 779. Where a buyer elects to keep a defective car for an inordinately long time, it is not open to him thereafter to avoid the transaction. By section 51 of the Sale of Goods Act, 1962 (Act 137), a buyer may not reject goods which he has accepted and by section 52 (b) a buyer is deemed to have accepted if “he does not, within a reasonable time after delivery of the goods, inform the seller that he rejects them.”
By Section 50, where the buyer has the right to reject and exercises it, he need not return the goods to the seller; it is enough that he intimates to the seller that he rejects them, whereupon the seller becomes entitled to have them placed at his disposal.
The first is that a rejection presupposes communication: there must be an intimation to the seller. A decision to reject locked in the buyer’s own breast, never conveyed, is no rejection. The second is that the buyer who would reject must be able to prove that he did so, and when; the burden of establishing a valid and timely rejection lies on the buyer who asserts it.
Meaning of a contract of sale of goods and classification of goods
By Section 1 of Act 137 a contract of sale of goods is a contract whereby the seller agrees to transfer the property in goods to the buyer for a money consideration called the price. The Act draws, and builds much upon, a threefold classification of goods. Specific goods are goods identified and agreed upon at the time the contract is made. Unascertained goods are goods defined only by description and not identified at the time of contracting. Ascertained goods are goods that, though unascertained at the outset, have become identified to the contract afterwards.
The third mode of acceptance turns on what is a “reasonable time,” and here Section 77 is decisive: what is a reasonable time is in every case a question of fact. There is no fixed period. It depends on the nature of the goods, the circumstances of the trade, the opportunity the buyer has had to examine the goods, and the use, if any, to which he has put them.
What is a reasonable time is a question of fact and may vary with the circumstances of a case; but retention for a month has been condemned as unreasonable in relation to a second-hand car: see Bartlett v. Sidney Marcus Ltd. [1965] 2 All E.R. 753, C.A. In that case Lord Denning M.R. had occasion to comment on the right to repudiate a sale of a second-hand car on the grounds of latent defects. Lord Denning M.R. said at p. 755: “on a sale of a secondhand car, it is merchantable if it is in usable condition, even though not perfect . . . A secondhand car is ‘reasonably fit for the purpose’ if it is in a roadworthy condition, fit to be driven along the road in safety, even though not as perfect as a new car. . . . A buyer should realise that, when he buys a secondhand car, defects may appear sooner or later; and, in the absence of an express warranty, he has no redress.”
Bartlett v. Marcus (supra) substantially turned on the use to which the car had been subjected before rejection - one whole month. If a car has been in use for a whole month it cannot be confidently urged that it is “no use for the purpose for which a car is usually used.” A second-hand car must be taken as it is and not elevated into a new car with all the expectations of factory freshness.
Time is a material element for consideration where repudiation of a contract of sale is sought, since it is an element in the determination of the question whether property in the goods has passed. Though the intention of the parties is the vital index in this determination, section 26 (2) of the Sale of Goods Act, 1962 (Act 137), provides that: “Unless a different intention appears the property in the goods passes under a contract of sale when they are delivered to the buyer.” Thus any undue delay in rejection amounts to a positive assumption that the property in the goods has passed. Further as by section 27 (2), risk is the necessary concomitant of the passing of property, indeed her hand maiden, any undue retention necessarily settles the risk in the one who retains. A long period of retention must be equated with acceptance, the transfer of the property in the goods and the assumption of all risks.
Proof of a latent defect existing at the time of sale
Latent Defects has been defined in a few cases such as in the case of GEORGIA HOTEL LTD V. SILVER STAR AUTO LTD [2012] 2 SCGLR 1277 as a manufacturing defect which must exist at the time of production and delivery of the product. This has to do with design failures and system failures. Nowhere in the record has the Plaintiff led concrete, verifiable evidence to show that at the time of sale or purchase the latent defects it alleges existed. We will agree with the Court of Appeal and hold that the Plaintiff failed to discharge this burden of prove.
Proof of such defects must entail evidence which exposes which mechanical parts of the trucks were not functioning. What was the diagnostic revelation on them and whether they were by an expert on the type of trucks in issue.
A buyer who claims to have rejected goods for breach of an implied condition must establish, first, the breach; secondly, that the breach grounds rejection under Section 49 (being a breach of a fundamental obligation, or a non-trivial breach of a condition, or a vitiating misrepresentation); thirdly, that he intimated his rejection to the seller within Section 50; and fourthly, that he did so before he had accepted the goods within Section 52 whether by words, by dealing with the goods as his own, or by retaining them beyond a reasonable time.
Reasonable price where the contract does not fix the price
The price is of the essence of a contract of sale, but the Act does not require that it be fixed in advance to the last cedi. Where the price is determined by the contract, that price governs, and there is no room for the court to substitute its own assessment. It is only where the price is not determined by the contract, and is not left to be fixed in a manner the contract lays down, such as valuation by a third party, that the law intervenes to imply an obligation to pay a reasonable price, what is reasonable being a question of fact Dependent on the circumstances of each case.
Seller’s remedies where the buyer fails to accept or pay
Where the buyer wrongfully neglects or refuses to pay for or to accept the goods, the seller may maintain an action for the price where the property has passed or the price is payable on a day certain, and otherwise an action for damages for non-acceptance. The damages recoverable on either side of a contract of sale are governed by the principle long associated with HADLEY VS. BAXENDALE (1854) 9 EXCH 341, which Act 137 reflects: the injured party recovers such loss as arises naturally, in the ordinary course of things, from the breach, together with such loss as may reasonably be supposed to have been in the contemplation of the parties, at the time they contracted, as the probable result of the breach. Losses outside that measure are too remote to be recovered.
The Sale of Goods Act, 1962 (Act 137) is the primary source of the law regulating contracts for the sale of goods in Ghana, customary law and the common law remaining secondary and operative only so far as they are not inconsistent with the Act (Sections 78 to 80). The Act is, in its structure and much of its language, modelled on the English Sale of Goods Act, 1893, and the English authorities decided on the parent statute remain of persuasive value where our provisions correspond.
The Sale of Goods Act, 1962, is said to be an Act to codify with amendments the law relating to the sale and hire-purchase of goods. It was therefore not intended to be merely a code of the existing law. It is not open to question that it was intended to alter, and did in fact alter the law in certain respects. And as was said by Lord Herschell under similar circumstances in Bank of England v. Vagliano Brothers [1891] A. C 107 at p. 145, H.L., “And I do not think that it is to be presumed that any particular provision was intended to be a statement of the existing law, rather than a substituted enactment.”
