What sale of goods means
A sale of goods is an agreement to transfer ownership of moveable property in exchange for money.
That definition excludes a few things people assume are covered. Land is not goods. Services are not goods, though a contract can involve both. An exchange of goods for other goods is barter rather than sale, since there is no price.
What makes the area distinctive is that the law writes terms into the contract whether or not the parties mentioned them.
A term that the seller has the right to sell, so the buyer gets good title.
Where goods are sold by description, a term that they correspond with the description.
Where the seller sells in the course of a business, terms about quality and about fitness for a purpose the buyer made known.
A seller who says nothing about quality has still promised something. That is the point of implied terms.
How it is used
Two questions decide most disputes: when did ownership pass, and who carried the risk when the goods were damaged.
Ownership passes when the parties intend it to. For specific goods in a deliverable state, that is usually at the moment the contract is made, even before delivery or payment. For unascertained goods, such as ten bags out of a larger stock, ownership cannot pass until the goods are identified and appropriated to the contract.
Risk generally follows ownership unless the parties agree otherwise, which is why a contract should say so expressly. In consumer sales the expectation is that the seller carries risk until delivery.
A well drafted sale contract deals with the specification, the price and whether VAT is included, delivery terms and who arranges and pays for transport, when risk and ownership pass, inspection and rejection periods, warranties, remedies for defective goods, retention of title, and dispute resolution.
Retention of title is worth particular attention for a seller supplying on credit, because it allows the seller to keep ownership until payment is received.
Key features
- Transfers ownership of moveable property for a money price
- The law implies terms about title, description, quality and fitness
- Ownership passes when the parties intend, and risk generally follows it
- Specific goods can pass on contract; unascertained goods only when appropriated
- Retention of title clauses protect a seller supplying on credit
- Consumer sales carry statutory protections that cannot be excluded
How this works in Nigeria
Nigeria applies sale of goods legislation at state level, derived from the English statute, alongside the general law of contract. The implied terms about title, description, quality and fitness for purpose are the practical core of it.
The Federal Competition and Consumer Protection Act 2018 then sits on top for consumer transactions. It gives consumers rights to goods of good quality and fit for the purpose made known, rights to return goods in defined circumstances, and protection against unfair terms, and it established a commission with enforcement powers.
The consequence is a split. Between businesses, the parties have wide freedom to allocate risk and to limit liability, and a well advised buyer negotiates for it. In a consumer sale, a term excluding the implied protections is exposed, and a policy saying all sales are final does not defeat statutory rights.
For Nigerian importers and distributors, retention of title clauses deserve more use than they get. Where goods are supplied on credit and the buyer fails, a seller who retained title is in a materially better position than one ranking as an unsecured creditor.
And for online sellers, the implied terms apply exactly as they do in a shop. Selling through Instagram does not change what the law writes into the contract.
Sale of goods vs supply of services vs hire
Three contracts that look similar in an invoice and are treated differently.
A sale of goods transfers ownership of moveable property for a price. The implied terms about title, description and quality apply, and the buyer keeps the goods.
A supply of services is a contract to do something. The implied obligation is to perform with reasonable care and skill, and the remedies differ. A contract can be both, such as supply and installation, and the parts may be analysed separately.
Hire transfers possession for a period, not ownership. The goods come back, and it is a bailment for reward rather than a sale.
Getting the characterisation right matters because it decides which implied terms apply. A buyer complaining that installed equipment does not work may be complaining about the goods, the installation, or both, and the remedies are not identical.
Limits and risks
Between businesses, implied terms can be excluded or limited by clear agreement, so a buyer who signed the seller's standard terms may have given away protections the law would otherwise have supplied.
Rejection rights are also time limited. A buyer who accepts goods, keeps them beyond a reasonable period, or deals with them inconsistently with the seller's ownership, may lose the right to reject and be left with a claim for damages instead.
Proving defect is the practical difficulty. Where goods were used before the problem appeared, distinguishing a manufacturing defect from misuse requires evidence, sometimes expert evidence.
And enforcement against a seller with no assets is the familiar limit. A judgment about defective goods is worth what the seller can pay.
Worth knowing
Inspect and reject promptly, in writing. Nigerian buyers commonly accept delivery, discover a problem weeks later, and find the seller arguing that the goods were accepted. A dated inspection note sent the same week preserves the position that a phone call does not.
Questions people ask
What terms does the law imply into a sale of goods?
That the seller has the right to sell, that goods sold by description correspond with it, and where the seller sells in the course of a business, that the goods are of satisfactory quality and fit for a purpose the buyer made known.
When does ownership of goods pass?
When the parties intend it to. For specific goods in a deliverable state that is usually when the contract is made, even before delivery or payment. Unascertained goods cannot pass until they are identified and appropriated to the contract.
Who bears the risk if goods are damaged in transit?
Risk generally follows ownership unless the parties agree otherwise, which is why the contract should say. In consumer sales the expectation is that the seller carries risk until delivery.
Can a seller exclude the implied terms?
Between businesses, clear wording can exclude or limit them. In a consumer sale the Federal Competition and Consumer Protection Act 2018 exposes terms that strip away statutory protections.
What is a retention of title clause?
A clause under which the seller keeps ownership until payment is received, even though the buyer has possession. It puts a seller supplying on credit in a much better position if the buyer fails.
How long do I have to reject defective goods?
A reasonable period, and it runs from delivery. A buyer who accepts the goods, keeps them too long or deals with them inconsistently with the seller's ownership may lose the right to reject and be left with a damages claim.