PROPERTY IN SALE OF GOODS CONTRACT

Too often the term property is used to refer to things that belong to someone. It is common for people to refer to property as a tangible thing. But in law, property denotes the relationship existing between a person and a thing. It is the bundle of rights that one has over something. As was stated by the court in Yanner versus Eaton (1999) 201 CLR 351;

The word "property" is often used to refer to something that belongs to another. But in the law, "property" does not refer to a thing; it is a description of a legal relationship with a thing. It refers to a degree of power that is recognised in law as power permissibly exercised over the thing. The concept of "property" may be elusive. Usually it is treated as a "bundle of rights". But even this may have its limits as an analytical tool or accurate description, and it may be that "the ultimate fact about property is that it does not really exist: it is mere illusion". Considering whether, or to what extent, there can be property in knowledge or information or property in human tissue may illustrate some of the difficulties in deciding what is meant by "property" in a subject matter. So too, identifying the apparent circularity of reasoning from the availability of specific performance in protection of property rights in a chattel to the conclusion that the rights protected are proprietary may illustrate some of the limits to the use of "property" as an analytical tool. No doubt the examples could be multiplied.

Property consists primarily in control over access. Much of our false thinking about property stems from the residual perception that 'property' is itself a thing or resource rather than a legally endorsed concentration of power over things and resources. There is a huge difference between property and possession. one of the property interests that one m2ay have is ownership, it consist of legal rights that one has over a thing, possession on the other hand denotes physical control over a thing. Possession is often times controlled and limited by ownership.

"Property" is a term that can be, and is, applied to many different kinds of relationship with a subject matter. It is not "a monolithic notion of standard content and invariable intensity". That is why, in the context of a testator's will, "property" has been said to be "the most comprehensive of all the terms which can be used, inasmuch as it is indicative and descriptive of every possible interest which the party can have". Because "property" is a comprehensive term it can be used to describe all or any of very many different kinds of relationship between a person and a subject matter. To say that person A has property in item B invites the question what is the interest that A has in B? The statement that A has property in B will usually provoke further questions of classification. Is the interest real or personal? Is the item tangible or intangible? Is the interest legal or equitable?

Ownership" connotes a legal right to have and to dispose of possession and enjoyment of the subject matter. As Holmes J said in Missouri v Holland “possession is the beginning of ownership." Property comprised legal relations not things, and those sets of legal relations need not be absolute or fixed.

In Yanner versus Eaton (1999) 201 CLR 351 Hohfeld said this of "property”:

"Sometimes it is employed to indicate the physical object to which various legal rights, privileges, etc., relate; then again - with far greater discrimination and accuracy - the word is used to denote the legal interest (or aggregate of legal relations) appertaining to such physical object. Frequently there is a rapid and fallacious shift from the one meaning to the other. At times, also, the term is used in such a 'blended' sense as to convey no definite meaning whatever."

The absolute property that one can have in a good is ownership. Ownership gives one the right to deal with the good as he so wishes in exclusion of all others. The principles of ownership include;

• ·         Control over the use of the good
• ·         Right to take any benefit from the good
• ·         Right to transfer or sell the good
• ·         Right to exclude others

Possession is also a form of property that one has over a good, though it is limited. It is a de facto relationship; it denotes physical control over a good and not legal right over it. Possession can easily be defeated by a claim of a de jure relationship.

In a contract, the rights that one gets over a good depend on the agreement between the parties and the terms of the contract. While for example, a sale of goods contract is intended to eventually transfer property absolutely to the buyer, Retention of Title Clause may reduce the right that the buyer gets to merely possessory until a certain condition be fulfilled.

LEGAL MEANING OF TRANSFER OF GOODS

The Black’s law dictionary defines transfer as the passing of a thing or of property from one person to another. It is an act of the parties or of the law by which the title to property is conveyed from one person to another.

John Bouvier's 8th edition law dictionary of 1914 defined a transfer as "the act by which the owner of a thing delivers it to another person, with the intent of passing the rights which he has in it to the latter". A mere change of possession does not amount to transfer.

Transfer is only complete when ownership changes from one person to another. While possession is a de facto relationship in which one has the physical control over a good or property, ownership is a de jure relationship that denotes one’s legal control over a good. Transfer is concerned with change of ownership.

Transfer is closely intertwined with the power of control. The question to be asked in determining transfer is, who has control over the good? The point was decided in the taxation case of Estate of Sanford v. Commissioner, 308 US 39 - Supreme Court 1939 where it was held that a gift upon trust, with power in the donor to revoke it is not taxable as a gift because the transfer is incomplete, and that the transfer whether inter vivos or at death becomes complete and taxable only when the power of control is relinquished.

Similarly, according to the court in Burnet v. Chicago Portrait Co., 285 U.S. 1, 16, 20, a transfer is only complete when "the transferor has so parted with dominion and control as to leave in him no power to cause the beneficial title to be revested in himself."

Whether a transfer has been effected and is complete is a question of control over the good. Even where a party purports to have transferred a good to the buyer, the transfer will not be complete if he holds power and control over the good. This is so especially in contracts with a Retention of Title Clause, where property in the goods only vests in the buyer upon the fulfillment of a condition such as full payment of the purchase price. In such contracts, though possession of the goods may change hands from the seller to the buyer, transfer is not complete when the condition is fulfilled and the clause becomes ineffective in the contract.

As the court observed in the case of Burnett versus Guggenheim, 288 U.S. 280, 287, the essence of a transfer is the passage of control over the economic benefits of a good rather than technical changes. The court in Corliss versus Bowers, 281 U.S. 376, 378 was of a similar view when it stated that “retention of control over the disposition of the property……………..renders the transfer incomplete until the power is relinquished……………..”

LEGAL MEANING OF A SELLER

by Mercy Maina,

Section 2 of the Sale of Goods Act, Cap 31 Laws of Kenya defines a seller as a person who sells or agrees to sell goods. The Black’s law dictionary defines a seller as one who sells anything; the party who transfers property in the contract of sale. Section 3 of the Sale of Goods Act, cap 31 Laws of Kenya defines a contract of sale of goods as a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer………… it therefore follows that for a contract of sale of goods to exist there must be a seller who is transferring or agreeing to transfer the property in the goods to a buyer. A seller can therefore be simply defined as the person who transfers or agrees to transfer property in goods to another under a contract of sale.

Who a seller is in a contract will depend on the terms of the contract, in some contracts a seller maybe defined to include his agents, representatives, employees etc. this however does not negate the fact that at the end of the day the seller is the entity or person who has the responsibility to transfer the property in the goods.

To determine who a seller is in a contract, it is therefore prudent to look into who bears the legal obligation to transfer property in the goods. Though it may be done on his behalf by an agent or representatives and though payment for the goods may be received by another on his/its behalf, the seller of goods is the person who is directly obligated to transfer property in the goods as the terms of the contract.

In the case of Geoffrey Munyua v Mombasa Centre Complex & John Felix Kariuki [2014] eKLR, the 1^st Respondent claimed that the agreement of sale subject of this case existed between the Appellant and the 2^nd Respondent as the 1^st Respondent’s company seal had not been used in execution of the contract. The court however found from evidence tendered that the 2^nd Respondent worked for the 1^st Respondent and he executed the contract on behalf of the 1^st Respondent. The court found that the contract existed as between the Appellant and the 1^st Respondent as the 2^nd Respondent was merely an agent of the 1^st Respondent. In reaching this conclusion the court relied on section 38 of the Companies Act which states that

“a document or proceeding requiring authentication by a company may be signed by a director, secretary or other authorized officer of the company, and need not be under its common seal.”

The general rule is that where a person contracts as agent for a principal, the contract is the contract of the principal and not that of the agent so that, the only person who may sue or be sued and to whom all rights and obligations in the contract vest is the principal and not the agent as was held in Montgomerie versus United Kingdom Mutual Steamship Association (1891) 1QB 370.

A seller is therefore in whom the obligation to ensure a transfer of the property to the buyer vests. All others whether agents, representatives or employees simply act on behalf of the seller and cannot therefore are deemed to be the seller. Similarly, even in contracts where parties get into a contract upon the introduction of another party, the third party falls out of the contract and the only parties existing as seller and buyer is the supplier of the goods (seller) and the consumer (buyer).

LEGAL DEFINITION OF A BUYER

by Mercy Maina,

A buyer is a person who buys or agrees to buy goods. To buy is simply to agree to have the property in a good transferred to you pursuant to a contract. In determining who a buyer is in a contract, regard must be had to the terms of the contract. The terms of the contract should show the intention of the parties as to who was meant to supply goods (seller) and who was meant to receive supply of those goods (buyer).

In the case of John Nderebe Kahuthia t/a Kirurumo Filling Station v Jaribu Farmers Co-operative Society Ltd [2016] eKLR the court observed that a contract can only exist between the supplier and the consumer. Payment may be made by the consumer or another third party on behalf of the consumer but that cannot be implied as giving rise to a contract between the supplier and the third party. The contract will still be between the supplier and the consumer.

In the case of John Nderebe Kahuthia t/a Kirurumo Filling Station v Jaribu Farmers Co-operative Society Ltd [2016] eKLR the issue of who a buyer was in a contract arose out of an agreement which was evidenced by a letter which read in part;

“Please issue fuel worth 3,500/= daily to  Jaribu Farmers Co-operative Society. They have been contracted by NKCC to transport milk for Passenga Scheme and Siranga Scheme.  Payments will be made monthly by themselves on payment of their milk transport dues.

Yours faithfully

For New KCC LTD

The Respondents denied the existence of the contract claiming that the contract existed between the appellant as the seller and NKCC as the buyer. The court held that as per the wording of the letter, the supplier of fuel was the Appellant while the consumer was the Respondents. In that regard the court concluded that the Respondent was the buyer.

In determining who a buyer is, the court will give regard to the wording of a contract. As was stated in Jiwaji & Others -vs- Jiwaji & Another (1968) EA 547:

“--- where there is no ambiguity in an agreement it must be construed according to the clear words actually used by the parties, and it would be wrong to adopt a different construction or to imply a term to contrary effect. --- I think I am not entitled to put into the instrument something which I did not find there in order.”

Therefore, who a buyer is in a contract will largely depend on the intention of the parties as expressed in the terms of their agreement. The easy and quick way to discover who a buyer is in a contract is to evaluate who is receiving the goods. Even if the goods are received on his behalf by a third party or payment made by a third party on his behalf. The buyer will still be the person who the parties intended to supply the goods to.

WHAT IS ADVERSE POSSESSION?

Section 7 of the Limitation of Actions Act states that an action may not be brought by any person to recover land after the end of twelve years from the date on which the right of action accrued to him or, if it first accrued to some person through whom he claims, to that person. The effect of this provision is that once one has been in adverse possession of land for over 12 years, the registered owner looses his interest in the land to him. The claim on adverse possession must however meet the law requirements before one can be said to be entitled to have the interest in the land transferred to him or her.

Under common law adverse possession has 2 elements:  first, the fact of single exclusive physical possession accompanied by the animus possidendi (an intention to possess the land to the exclusion of all other persons, including the owner). Secondly, the intention must be manifested unequivocally, not necessarily in a hostile manner, to indicate an intention to dispossess the owner.  Thus any form of acknowledgement of the true owner's title will operate to negative such intention. A claim for adverse possession cannot therefore succeed if one is in possession with the permission of the true owner.

In the case of Wambugu v Njuguna (1983) KLR 172 the Court of Appeal stated that in order to acquire land by virtue of the statute of limitation, the claimant must show that the owner has lost his right to the land upon being dispossessed or by the owner discontinuing possession by his volition.

The Court of Appeal stated in that case:

“Where the claimant is in exclusive possession of the land with leave and licence of the appellant (Owner) in pursuance to a valid agreement, the possession becomes adverse and time begins to run at the time the licence is determined.  Prior to the determination of the licence the occupation is not adverse but with permission.  The occupation can only be either with permission or adverse, the two concepts cannot co-exist”. 

This was also the view of the court in Buckinghamshire County Council v Moran [1990]ch.623. It therefore follows that one cannot be said to have been in adverse possession if her occupation of the property was with the permission of the owner.

In the case of Malcom Bell v Daniel Toroitich Arap Moi & Another [2012] eKLR the appellant who had inherited the suit land measuring about 100acres from his father brought a suit seeking, inter alia, a perpetual injunction and an order for eviction against the respondents.  In response, one of the respondents filed a counter claim for adverse possession on the basis that the said respondent had been in continuous and uninterrupted possession of the suit land thereby acquiring title to the same; and that the appellant's claim was time-barred.  The High Court found in favor of the respondents but on appeal, the Court of Appeal held that a claim in adverse possession could not be sustained as the trial court had overlooked the circumstances in which the respondents came into possession – namely, through the permission of the deceased father of the appellant.  The court also restated the position that the burden of proof lies with the person asserting adverse possession.

Similarly in Samuel Miki Waweru v Jane Njeri Richu CA No. 122 of 2001 (UR) the court said:

“it is trite law a claim of adverse possession cannot succeed if the person asserting the claim is in possession with the permission of the owner of, or in (accordance with) provisions of an agreement of sale or lease or otherwise. Further as the High Court correctly held in Jandu  vs Kilipal [1975]EA 225 possession does not become adverse before the end of the period for which permission to occupy has been given.  The principle to be extracted from the case of Sisto Wambugu vs Kamau Njuguna [1982 – 88]I KLR (172)....seems to be that a purchaser of land under a contract of sale in possession of the land with the permission of the vendor (can lay a claim for possession of such land) only after the period of the validity of the contract unless and until the contract has been repudiated...adverse possession starts from the date of the termination of the contract.”  

A claim on adverse possession must meet the common law and statutory threshold of adverse occupation. Any acknowledgement of ownership of land by the registered proprietor or being in possession with the permission of the registered proprietor would defeat adverse possession.