CHAPTER 16:

Contract of Sale

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 Content
1. Definition

2. Formalities

3. Essential elements

4. Sale distinguished from other of transactions

5. Duties of the seller

6. Duties of the buyer

7. Ownership

8. Warranties

9. Remedies

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 Introduction
• In South African Law, it is legal to sell
something that one does not own.
• This is because ownership and possession are
two different rights, which can pass at different
times when a thing is sold.

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What is a contract of Sale?
Definition

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 What is a contract of sale?

Thing / merx

Mr. Jones has

a car he wants Ms. Clifford
to sell for wants to buy
R100,000 the car
Seller / vendor Buyer / emptor

Price / pretium 5
 Formalities
As a general rule: A valid contract of sale needs no formalities.

But the parties can agree on certain formalities that must be adhered to before the contract can be
considered valid!

However the following contracts form an exceptions to the general rule.

o Sale of land, Alienation of Land Act, all agreements must be in writing and signed by the
parties.
o Credit agreements, National Credit Act, credit agreements must be in writing and signed by
both parties.
o Sales of an insolvent business, Insolvency Act a notice must be published in the local press r
government gazette
o Express Agreement, parties agree between themselves
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 Essential elements

To decide whether a valid contract of sale has been concluded, a court will examine whether the
parties have agreed on the THREE ESSENTIAL ELEMENTS.

•1 Agreement to deliver
•2 Agreement on the merx
•3 Agreement on the particular price

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 Agreement to deliver

• Sale agreement in itself DOES NOT transfer the real right of ownership from the seller to the buyer.

• A valid sale agreement merely creates a personal right in the buyer to enforce delivery by the seller.

• The seller only undertakes to give the buyer the real right of possession (vacua possessio) and NOT a
real right of ownership.
• Legal right and duties in a contract of sale arise once there is an agreement to sell.

• For a contract of sale to be perfect or perfecta, it is not necessary that the price was paid or the thing
was delivered. (See when discussing passing of risk and ownership)

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 Agreement to deliver (cont.)

• Legal rights and duties arise from the agreement to sell:

Right:
Right: To
To receive receive
payment the thing
(pretium) (merx)
Duty: Duty:
To deliver To pay
the thing the price
(merx) Seller Buyer
(pretium)

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 Agreement on the identity of the thing or merx

• Parties MUST agree on the thing that is being sold!

• The merx does not need to be in existence at the time of the contract.
Provided that there is a possibility of its future existence, that is, a sale of a hope.

“Hope of a thing” is the seller’s expectation of the thing in future. The buyer takes the risk
that thing sold will be of inferior nature.

• There will be a contract of sale even if the merx sold did not belong to the seller, as
the sale does not guarantee that the seller is the owner or that ownership of the thing
will be transferred to the buyer. All that is sold is an implied warranty that the buyer will
have free and undisturbed possession of the thing sold.
• Where the seller innocently sold a thing not belonging to him or her, the buyer must
keep the contract until the true owner threatens to take the thing back or eviction.
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 Agreement on the merx (cont.)

• As a general rule: anything can be sold, even something that does not belong to the seller , BUT certain
things that already exist MAY NOT be sold:
o Right of inheritance from a person still alive
o Certain public property may not be sold by officials, example parks
o Those things that has a restrictive statutory conditions, example poison and firearms
o Certain things cannot be owned, example sea, air & outer space

Certain things that do not yet exist MAY be sold:

o Hope of thing (Emptio spei), for example a future harvest
o Goods anticipated in the future, for example goods that will only be manufactured on
conclusion of the contract (custom made bicycle)
o Goods not belonging to the seller, for example agent selling a house

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 Agreement on the particular price

• The parties must agree on the price/pretium to be paid.

1 The price MUST be certain and consists of money

o Contract to exchange goods – is a contract of barter and not sale
o Court will compare the money being paid to the value of the goods being bought

2 The price must be fixed / ascertainable, parties may fix the price.
3 The price must be real and serious
o Must not be a donation
o Must not be in such a way to reduce or avoid VAT

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See provisions in terms of the Consumer Protection Act in relation to the price.
 Sale distinguished from other types of transactions

• Barter this is where goods are exchanged for other goods.

• Expropriation occurs when the State, or provincial or local authority forces the sale of land
required for public projects.

• Sale on consignment see under the contract of agency.

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 Duties of the seller

1. Duty to take care of the thing sold until it is delivered

• General rule: the seller will be responsible for the negligent loss of or damage to the merx until it is
delivered
• But the buyer will be responsible for any accidental loss of the merx before delivery by the seller
• In sale ‘risk’ refers to the potential for loss resulting fro accidental damage or destruction of the thing.
Risk passes to the buyer as soon as the contract is perfecta
• When is a sale perfecta? The following requirements must be met:
o The particular pretium must have been fixed
o The particular merx must have been ascertained and appropriated
o Any suspensive condition has been fulfilled
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 “Risk” situations where risk does not pass
immediately
1. Agreement, where there is an agreement between the parties.
2. While the goods are in transit.
3. Delivery to an address of the buyer, if the agreement states that the seller must
deliver at a nominated address by the buyer.
4. Suspensive condition, where the contract is delayed until a future event occurs.
5. Where goods must still be set aside, or identified, to fix the price.
6. Where counting is required to determine the price.
7. Where counting is required to separate the purchased material from greater quantity
of the same material in the seller’s possession.
8. Where the transaction is covered by the CPA, the risk remains at the seller’s until
delivery.
9. Where the seller is in default in delivering the thing sold. 15
 Duties of the seller (cont.)

2. Duty to deliver the thing being sold to the buyer

The seller must deliver the thing sold within the time specified.

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 Duties of the seller (cont.)
2. Duty to deliver the thing to the buyer. Can use two types, i.e.. Actual and Constructive delivery

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 Duties of the buyer

1. Duty to pay the purchase price

2. Duty to pay the seller’s necessary expenses
3. Duty to accept delivery of the thing

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 Special sales
• Auction
o Without reserve

o With reserve

• Cost insurance and freight (CIF)

• Free on board (FOB)

• Free on rail (FOR)

• Sale in execution

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 Ownership
• Rights of the true owner
o Rei vindicatio (true owner’s action) – any true owner may go to court dispossessing a
possessor of possession of anything that is owned by the true owner

• Passing of ownership
o For a court to determine whether ownership has passed, 3 elements must be proved:

1. The seller must have been then owner at the time of delivery
2. The seller must have intended to pass ownership to the buyer on delivery
3. The buyer must have intended to acquire ownership at the time of delivery

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 Ownership (cont.)
• Passing of ownership (cont)
o Transfer of ownership differs from each property:

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 Warranties
• What is a warranty?
It is a representation of fact made by one party that is intended to be a term of the contract.
• Warranties may be express or implied.
• Two types of warranties: Common law warranties

1. Implied warranty against eviction (right of possession)

2. Implied warranty against latent defects

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 Warranties (cont.)
1. Implied warranty against eviction (dispossession) it is implied by law in a contract of sale
• The seller warrants that the buyer will not be interfered with or disturbed by the seller or any
third party as a result of any defect in the seller’s title
• It is possible for the seller something he does not own, If the seller, he knew that the thing is not
his but represents himself as an owner, was fraudulent (mala fide) – contract may be set aside
as voidable
• If the seller acted in good faith - the contract is valid
3 ways in which the buyer is protected:
1. Seller has a duty to come to the buyer’s defence when the buyer’s possession is being
threatened
2. Buyer must give the seller proper notice and put a proper and competent defence (virilis
defensio) 23
 Warranties (cont.)
1. Implied warranty against eviction (dispossession) (cont.)
• This warranty will not be implied in any of the following situation:
1. Parties expressly agreed that the seller will not be liable in the event of the buyer’s eviction.
2. The buyer was aware that a third party is the owner of the thing being sold.
3. The cause of possession being lost occurs after the sale, and the seller was not at fault for
example a car accident

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 Warranties (cont.)
2. Implied warranty against latent defect
• A “latent defect” is a fault with the thing that is not apparent to an ordinary person, even if it would be
apparent to an expert.
• Defect must impair the usefulness or effectiveness of the thing for the purpose sold.
• A “patent defect” is one that is easily discernible by an ordinary buyer at the time of delivery.
• Seller has a duty to deliver the thing being sold free from defects that make it unfit for the purpose for
which it was sold.
• The seller will not be responsible for latent defects in any of the following situations:
1. The seller expressly contract out of the liability (voetstoots)
2. The defect does not exist at the time of sale
3. The buyer was aware of the defect at the time of the sale
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4. Prescription has intervened
 Warranties (cont.)

• If the thing being sold is totally unfit for the proposed use, then the
buyer may use the redhibitorian action.
• With a redhibitorian action the buyer cancels the contract,
• offers the return of the thing,
• reclaims the price with interest and
• claims reimbursement of all expenses necessarily incurred in
preserving the thing as well.

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 Remedies available to the buyer

Two types of remedies available:

1. Aedelitian remedies available to the buyer where
• Breach of implied warranty against latent defects; or
• False dictum et promissum (a seller’s material statement to the buyer during negotiations
concerning the quality of the thing sold preceding a contract):
a) Actio redhibitoria or redhibitorian action
o Available if the latent defect is material and would render the goods defective for ANYONE, not
just particular purchaser.
o The buyer may sue to the return to their respective positions prior to the contract.)
•
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 Remedies available to the buyer (cont.)

Two types of remedies available:

1. Aedelitian remedies (cont)
b) Actio quanti minoris
o Sue for the reduction of the purchase price
o No damages

2. Action for consequential damages or Actio ex empti

• Claim for consequential damages

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 Remedies available to the buyer (cont.)

Two types of remedies available:

2. Actio ex empti (cont):
• Which situations?
i. Seller is fraudulent
ii. Seller is manufacturer of the goods, or an expert, or publicly professes to have expert skill or
knowledge
iii. Innocent and negligent dealers are protected by voetstoots clauses
iv. In the case of a manufacturer who does not sell the defective product directly to the injured
party, there is no contract between the manufacturer and injured party.
v. Seller has given an express warranty against the existence of the defect

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 Remedies available to the seller

• If buyer does not pay the price on due date (mora debitoris), seller may sue for
o Payment, or
o Cancel the contract.

• If the buyer does not accept delivery (mora creditoris), the seller may sue for:
o Specific performance
o Cancellation
o Damages

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QUESTIONS?????

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