Professional Documents
Culture Documents
By
CHARMAINE MTSHENA.
N011 2574D
LECTURER
MR DUBE
17 August, 2012
The legal principle applicable in this question is contract of sale. In its most
basic form, a contract of sale comes into existence when two people agree that
one of them (the seller) will sell to the other (the buyer) a certain article (the
thing sold) in return for a sum of money (the price). A binding contract of sale is
therefore concluded as soon as the prospective buyer and seller have reached
agreement on three essential aspects: they must intend to buy and sell
respectively, and they must agree on the subject-matter of the sale and the price
at which it is to be sold. No contract of sale exists until one party has made an
offer to buy or sell and the other party has accepted that offer. One of the key
legal concepts that is involved in an agreement of sale is passing of ownership
and risk (The Passing of Risk in Contracts for Sale in Roman Law and
Australian Law:
Entering into a contract alone does not cause ownership to pass, delivery seals
ownership. There must also be the intention of the transferor to the transferee
that right for ownership be transferred and acquired. If one party lacks intention
then ownership wont pass. The passing of risk is a different legal concept. The
passing of risk means that the risk of loss or damage to the hardware is
transferred from the transferor to the transferee. As of 15th December, 2010,
Mthabisi was now the owner of the 200 bags of cement through derivative
methods of acquiring ownership and this method applies to movables. In this
instance Cement Wholesalers Limited the transferor, transfered ownership to
Mthabisi the transferee. It is a Derivative method because transferee acquires
his ownership from transferor.
Mthabisi become the owner through delivery which was done on the
15th December, 2010 through:
1. Delivery through marking
Delivery took place by marking the cement with his name.
2. Delivery with long hand
Delivery took place in that the cement was pointed out by Cement Wholesalers
Limited to Mthabisi with the intention that ownership passes. The cement was
shown to him by the salesman on the 15th December, 2010.
The General Rule is that the owner suffers loss when his property is destroyed
or damaged. The doctrine of passing of risk, determines whether seller or buyer
bears the risk where accidental damage is caused by COINCIDENCE or ACTS
OF GOD and not by culpable conduct of either party.
Doctrine of passing of risk causes risk to pass to the buyer when sale is perfecta.
A Contract is perfecta when:
1. Buyer and Seller have intention of buying and selling
2. Purchase price is determined
3. Contract is not subject to a suspensive condition.
Result is that Buyer bears the Risk where the thing is damaged / destroyed
through coincidence or Act of God. Buyer still has to pay the purchase price
even where the seller has not delivered the thing to him. If the contract was
imperfect, the risk remained with the seller. It must be noted that, just as risk of
loss is transferred to the buyer, so too are the benefits, for whose the risk is, his
the gain should also be. (The Passing of Risk in Contracts for Sale in
Roman Law and Australian Law: A Comparative Perspective, Anneliese
Seymour 2009).
In the case of Jacobs v Petersen & Another [1914] CPD 705 J sold and
delivered a horse and cart to P for a price of $8 which was to be paid in
instalments. The contract was subject to the condition that ownership of the
property was to pass only on payment of the full purchase price. P paid the first
instalment but the horse died soon thereafter. J sued for the balance of the
purchase price. Held the sale was subject to the suspensive condition that
ownership was only going to pass on payment of the full purchase price, hence
the risk of destruction of the goods remained with the seller until the counting or
weighing is done.
The contract between Mthabisi and Cement Wholesalers Limited was perfecta
in that:
1. Mthabisi and Cement Wholesalers had the intention of
buying and
selling
2. Purchase price is determined
3. The contract was not subject to a suspensive condition.
Risk will not pass to Mthabisi in the aforesaid manner in the following
situations:
1. Where there has been an express or implied agreement varying the
general rule. (There was none).
2. Where the goods bought have to be measured, weighed or counted in
order to fix the price or appropriate them to the contract. ( the goods had
a price already)
3. Where there is fault on the part of the seller in making delivery.( delivery
had been done on the 15th of December by long hand and marking)
Case History - The duty on brandy 1
On 6 July 1878 A sold 200 hogsheads of brandy to B. On 25 July 1878, after
110 had been delivered, the government imposed a duty on stocks of brandy on
hand. A paid the duty on the remaining 90 hogsheads that had not yet been
delivered to B and then sought to recover this duty from B. Nothing had been
done by 25 July, however, to separate the remaining 90 hogsheads of brandy
that were due to be delivered to B from the rest of A's stock.
The court held that A could not recover the duty from B since the expense of
paying it formed part of the risk that A, as seller, bore until the further 90
hogsheads of brandy had been appropriated for delivery to B.
The general rule - subject, of course, to certain exceptions and any agreement to
the contrary on the part of the buyer and seller, is that as soon as the contract of
sale has been concluded, the risk passes to the buyer. The buyer will therefore
generally remain liable for the purchase price even if the article is totally
destroyed before delivery takes place, provided the seller is not to blame for the
destruction of the item sold. In the case of sales of goods that have to be
weighed, measured or counted out in order to determine the price due by the
buyer, the risk passes to the buyer only once the weighing, measuring or
counting has taken place.
The same applies when goods have to be separated from the remainder of a
supply held by the seller: the risk passes to the buyer only once the actual items
that will be delivered to the buyer have been appropriated, in other words, set
aside to meet the seller's obligation under the contract with the buyer. (Legal
City: You and your Rights, Purchase and Sale)
In the situation of Mthabisi, he has to pay the extra fee (duty) because:
1. His cement had been marked even while it was in the possession of
Cement Wholesalers Limited. In the event that it had not been marked
and was among the rest of the suppliers cement he would not have to like
in the Poppe, Schunhoff & Guttery v Mosenthal & Company in [1879]
Buch 91and the case of Taylor & Co v Mackie, Dunn &Co 1879.
2. The contract between Mthabisi and Cement Wholesalers Limited was
perfecta, thus risk was passed to Mthabisi, and thus he has to pay the
duty.
3. The general risk rule had not been varied in the contract
He has no ground to claim the duty he to paid Cement Wholesalers Limited.
References