Download Special Sales 3.1.1 Auction Sales An auction is a special type of

Special Sales
3.1.1 Auction Sales

An auction is a special type of sale by an agent called an auctioneer who sells on
behalf of the seller

The auctioneer offers an item for sale at and invites bids from a group of
potential buyers knows as bidders at a named minimum price and there is a
form of competitive bargaining amongst the bidders and the item is sold to the
highest bidder

The sale is subject to special terms called ‘conditions of sale’ which are read out
at the beginning of the auction and the buyers are deemed to have assented to
these terms whether or not they were present at the time of the sale .see the
cases of Hofmeyer & Son v Luyt 1921 CPD 83 @ 837; Estate Francis v Land
Sales (Pty) Ltd & Others 1940 NPD 441 @ 457
3.1.2 Hire Purchase

In Zimbabwe, the law relating to hire purchase is governed by the Hire Purchase
Act [Chapter 14:01].

A hire purchase agreement is a form credit sale in which parties agree that the
price is to be paid into two or more instalments & that despite delivery, the
ownership of the merx will not pass to the purchaser until the last instalment has
been paid. It is therefore a sale, subject to suspensive condition as to the passing
of ownership.

Hire purchase is different form a Lay Bye. Under a lay-bye, the subject - matter
of the sale (the merx) remains with the seller, until the last instalment payment
has been effected.

The Hire Purchase Act is specifically aimed at protect the purchaser against
abuse at the hands of the seller and against their own improvidence and is to
that extent a qualification to the freedom to contract that occupies the central
position in contract law .

Section 2 of HP Ac provides that every HP Agreement must be reduced to
writing & must contain a statement of the cash price for it to be valid.
3.1.3 Protection of Buyers from HP Act

The first protection is provided for in section 12 (1), which provide an implied
warrant, that the purchaser shall have & enjoy quite possession of the goods.

Section 12 (1) (b) provides for an implied condition on the part of the seller that
he is not & will not be precluded from passing of ownership of the goods to the
purchaser, at the time ownership pass i.e. [ cannot plead supervening
impossibility]

S 12 (1) (c) provide for an implied want warrant that the goods shall be free of
any charge

S. 12 (2) which provides for an inclusion in the HP Agreement of other warranties
or conditions in our common law. Should a seller exclude such implied warrant,
he must bring the exclusion to the attention of the purchaser.

The purchaser’s right to be reinstated after recovery of possession by the seller.
Where a seller has recovered possession, otherwise by an order of the court, due
to the purchaser’s failure to meet instalments, the purchaser is entitled to the
return of the goods & to be reinstated in his right under the HP Agreement, if he
pays all arrears.
3.1.4 Buyer’s Right to Terminate Agreement

If the buyer tenders the return of the merx sold, he may terminate the HP
Agreement by a written notice to the seller (see sec 18). Sec 16 of the Act
provides that the purchaser can pay the instalments before due date. Section 9
of the Act provides that the buyer must be informed of all essential details of the
contract. S 22 of the Act provides that no waiver by a purchaser of any right
under the Act shall be of ant force or effect.
3.1.5 Import and Export Transactions

So far we have been looking at domestic sales that occur between parties that
reside in the same jurisdiction

Complicated issues arise when a contract of sale in concluded between parties
that live in different jurisdictions

Import-export transactions expose parties to greater risks as compared with
domestic sales: physical risks associated with transport and extra handling,
financial risks, such as movements in exchange rates, legal risks (i.e. if a
judgement or award has to be enforced in a different jurisdiction)

Some of these risks maybe covered by insurance and some are covered by
careful drafting of the contract of sale e.g. by inserting a choice of law clause
which insured that the contractual relationship is governed by a known set of
rules

The most common method example of an import-export international transaction
involves the transportation of goods by sea, and consequently we will focus on
such transactions because the law governing such transactions has evolved over
a long period of time and is consequently well established and clear

Because of the time which it takes for goods to be transported over the sea,
parties need to make arrangements to finance the transaction and such importexport transactions are financed by banks in the respective jurisdictions of the
parties to the contract of sale

The parties also have to provide security over the goods to their respective
banks. In order to address these challenges the documents involved in the
transactions have been elevated to a special symbolic significance where they
are in practise treated as the same with the goods they represent

The traditional documents that serve that purpose are as follows;
(i)

The bill of lading
(ii)
The commercial invoice
(iii)
The policy of marine insurance
The transaction in practice proceeds as follows; the seller contracts with a carrier
(shipping company) to transport the goods involved to a set destination and
procures a bill of lading for the carrier, the seller acquires insurance cover for the
goods and the goods are invoiced to the buyer and delivery of the goods is effected
by symbolic delivery of the enumerated documents (bill of lading, marine insurance
policy and invoice) and the buyer is not entitled to actual physical delivery of the
goods

See the cases of Frank Wright (Pty) Ltd v Corticas ‘BCM’ Ltd 1948 (4) SA 456 (C);
Standard Bank of SA Ltd v Efroinken & Newman 1924 AD 171 @ 191;
Intercontinental Export Co (Pty) Ltd v MV Dien Danielsen 1983 (4) SA 275 (N)
The Bill of Lading

It is a document that serves a threefold purpose;
(i)
It acknowledges the fact that goods have been received
(ii)
It normally contains the terms of carriage, identifies the route and destination
(iii)
It evidences the rights of possession and ownership in respect of the goods,
so that these rights are prima facie deemed to be vested in the holder of the
bill of lading

Delivery of the goods at their destination is normally made by the carrier to the
holder against the surrender of the bill

A bill of lading can be made out to a named person or his order or to a bearer

Mercantile tradition recognises the bill of lading as the symbol of the goods described
in it and the delivery of the bill of lading operates as a symbolic delivery of the goods
Commercial invoice

This is the invoice itemising the goods sold and describing them in a way which
makes it possible to identify them as the contract goods, or as answering to the
description of the contract goods
Marine insurance policy

This is an insurance policy that covers the goods specified in the other two
documents for the whole of the voyage covered by the bill of lading

When the bill of lading is transferred from one person to another, the policy of
insurance will be assigned at the same time
3.1.6 Cost, Insurance and Freight (CIF)

A CIF contract is distinguished from an FOB (Freight on Board) in that it
specifies the port of arrival e.g. CIF Durban

In a CIF contract the buyer relies on the seller to make all the shipping
arrangements and the buyer takes delivery of the goods symbolically, commonly
while the ship is still at sea by taking over the shipping documents especially the
bill of lading

Under a typical CIF contract the seller is obliged to ship and insure the contract
goods and to invoice them to the purchaser for an amount which includes the
price of the goods, the cost of the insurance and the amount payable under the
contract of affreightment

To guard against the risk of non-delivery by the ship owner a CIF contract
requires the seller to take out a policy of marine insurance upon which the buyer
may sue

Thus the person who holds both a bill of lading and a policy of marine insurance
is in a good position as if the goods were actually in his possession

As soon as possible after the goods have been dispatched the seller must tender
to the buyer or his agent, the bill of lading evidencing the contract of
affreightment, the policy of insurance and the invoice and these are collectively
referred to as the shipping documents

The key feature of the CIF contract is the role played by the documents in the
performance of the contract. Once the buyer has had the shipping documents
delivered to him he is placed in a position to assert his title to the goods

The buyer takes over from the seller the whole package of rights and liabilities
which make up the commercial venture. This means he is bound to go through
with the whole deal- to pay the price and take up the documents when tendered
even though the goods may have been lost

However, he is only bound to take up the shipping documents if they strictly
comply with the underlying contract of sale

The commercial invoiced, the insurance policy and the bill of lading must describe
the goods in exactly the same terms as the contract description; the quantities
must tally, the contract of carriage must be consistent with the contract, the
policy of marine insurance must accurately reflect the details of the voyage
contemplated by the contract and the risks which the contract stipulates must be
guarded against

The buyer is entitled to insist on continuous cover i.e. the goods must be covered
for the whole period of transit

The buyer under a CIF contract has the right to reject the contract If the
documents are not in order, he may refuse to take them up and treat this as a
repudiatory breach by the seller and even if he has accepted the shipping
documents, he has a right to reject the goods upon arrival if they prove not to be
in conformity with the contract

In a CIF contract the risk of accidental loss is deemed to have passed
retrospectively back to the time of shipment. This may mean that he has to pay
the price and take up the documents even though the goods have been lost. See
the case of Manbre Saccharine Co Ltd v Corn Products Co Ltd [1919] 1 KB 198

See also Ross T Smyth & Co Ltd v TD Bailey, Sons & Co [1940] 3 All ER 60;
Anrhold Karberg & Co v Blythe, Green, Jourdain & Co [1916] 1 KB 495; Hansson
v Hamel & Horley Ltd [1922] 2 AC 36; Kwei Tek Chao v British Traders &
Shippers Ltd [1954] 2 QB 459
3.1.7 Free on Board (FOB) Contracts

Under an FOB contract the seller undertakes not just to get the goods to the
ship, but to see them loaded on to the ship and to bear the cost of loading them
but it is the buyer’s business to make all the arrangements regarding the
shipping and to secure insurance cover for the goods

The contract typically states that ‘FOB, Manchester, shipment in June’ or ‘FOB,
Manchester Port’

The understanding is that the seller must be ready to put the goods on any ship
nominated by the buyer at the nominated port at any time during the named
month e.g. June

The first step in performing the contractual duties must be performed by the
buyer who has the right and in fact the duty to find a suitable ship calling at the
port of loading within the contract period

The seller must have the goods ready to ship at the time and place, then he has
to have them loaded on to the ship at his own expense

The buyer must be ready to pay the price on completion of the loading

At the conclusion of the loading of the goods, the consignor is given a document
called a ‘mate’s receipt’, which acknowledges receipt of the goods, itemised as to
quantity and description, and confirmed to be in apparent good order and
condition

The mate’s receipt will be given to the seller who receives it on behalf of and the
price may be payable under the contract in exchange for this document

In such a case the buyer will shortly afterwards surrender the mate’s receipt to
the carrier and receive in its place the bill of lading

Alternatively the contract may provide for the seller to procure the bill of lading,
in which case he will retain the mate’s receipt and have the bill of lading issued in
either his own name or that of the buyer

See the cases of Pyrene Co Ltd v Scindia Navigation Co Ltd [1954] 2 QB 402
Financing International Trade
Will be dealt with under negotiable instruments