LAW OF SALES | Course Paper

ODA Bultum University

Law School

LAW OF SALES

Chiro,2021

CHAPTER ONE

INTRODUCTION

1.1 Understanding the Organization of the Civil Code

Sale is a part of the civil code, your better understanding of the subject under study (sale)

depends on your knowledge of the placement of law of sales in the civil code and its relation

with other parts of the civil code. This view in mind, we will consider the organization of the

civil code.

The civil code is divided in to five separate parts. The first part of the civil code (the law of

persons) deals with the subjects of the law. It determines entities that may have rights and

obligations under the law. Such entities are called persons and the definition of the term person;

the process of acquiring personality; the attributes of personality and other related matters are

regulated under this.

Once the first part of the civil code determines physical persons as entities that may have rights

and obligations, the second part governs matters relating to families of such persons and the

consequent issue of succession among family members and relatives.

The third part of the civil code, on the other hand, regulates questions of property (goods). That

is we find legal rules and principles relating to possession and ownership (both individual and

joint) of goods (and other matters relating to) in this part of the civil code.

The fourth part, as a continuation to the preceding parts, provides legal rules and principles

concerning issues of civil obligation. In this part, you can see that the sources of civil liability

(obligation) are contracts (consent), representation and the law itself (extra-contractual liability).

In other words, apart from these sources, a person may never be held liable civilly.

In the end, the fifth part, as a constitution to the contractual source of civil obligation, goes on

providing special rules relating to the different special contracts in existence in Ethiopia. Sale

contract, as a special contract, is found in this part of the civil code. As such its placement in the

civil code and its connection with the other parts of the civil code be understood accordingly.

Before we can discuss the nature of the concept, it is necessary to deal with the idea and meaning

of contract.

1.2 What is a Contract?

Contract are probably a necessary device is any kind of market economy where goods and

services are exchanged by people acting in their own interest. Contracts are so crucial in daily

life.

There is in old economic principle which says that resources are limited while men’s needs are

always growing multiplying and increasing. In simple terms, we can bare at a particular point in

time can not be the only thing you need for a comparable survival. It is because of this that the

concepts of sharing and exchanging have come in to existence.

Most of the social relationships in any society are based on contracts. Think of, for instance, your

interactions with people before you read this part of the module. Have you got your shoe

polished? Have you used a pension? A taxi? Purchased a pen? A coca cola? If you had, your

acts definitely constitute a contract.

It is clear that a contract is an agreement or an under taking entered in to by two or more persons

to do something in exchange for consideration. But, Can any such agreement amount to a

contract? The answer is, No! In order for an agreement or an under taking to be consider for an

agreement or an undertaking to be considered as a contract, there has to be the fulfillment of four

prerequisites, these are that the contract/agreement has to be entered in to with free and full

consent, free from defects the persons entering the agreement should be capable or have capacity

as required by law, the object or subject matter or the contract has to be both legal and moral,

finally, if there are any requirements of form laid down by law, such requirement should be

respected.

What do you think would happen if the prerequisites of a contract were not fulfilled?

______________________________________________________________________________

______________________________________________________________________

In short, a contract is legally enforceable promise or set of promises. However, note that not all

agreements (promises) are contracts. There are preconditions for the valid creation of contracts

more over, validly created contracts have effect only on parties to the contract and not on

outsiders (third party). Validity of contracts, therefore depend on

1. Capacity of parties forming the contract,

2. Consent of parties forming the contract,

3. Object of the contract

4. Formality requirements.

So, when we are dealing with contract sale, we should realize this special form of contract should

also respect all requirements of a valid contract.

The civil code’s article 2266 and the following deals with contract of sale and the obligations of

parties as well as consequences of non-performance, but we have to first deal with the definition

given their in by looking in to the elements of the definitive article:

Article: 2266

A contract of sale is a contract where, by one of the parties, the seller undertakes to deliver a

thing and transfer its ownership to another party, the buyer, in consideration of a price

expressed in money which the buyer under takes to pay him.

What elements of the above definition cay you identify?

_____________________________________________________________________________

_____________________________________________________________________

The first thing that has to be noticed from the above definition is that a contract of sale as we

have said previously is a contract. This is simply mean that it is a special type of contract. The

implication that this is that, in addition to fulfilling the requirements of a valid contract dictated

by the general rules on contract, there are certain features or additions that would make the

contract of sale particular or contract of sale always remembers that it is always a contract

subject to the rule governing the same issue to consider as rules we will discuss through out this

module.

The second issue to consider would be the parties, i.e., the two parties will be called the seller

and the buyer. Therefore, here after, when we are dealing with a contract of sale, the two parties

will be the buyer and the seller who will each have distinct obligation.

Why do you think the nomenclature is different for a sale contract?

_____________________________________________________________________________

_____________________________________________________________________

The third thing here is that the contract of sale is an undertaking, which in plain terms means a

promise. In the legal sense, it would be a contract in which the seller undertakes or promises to

fulfill obligations in return for consideration. This clearly indicates that the contract of sale is at

the formation stage since there is just a promise to perform certain duty and not performance it

self.

If you read closely, Art .2266 also clearly defines the obligations of the parties. Firstly, the

seller has two obligations; delivery of the thing and transfer of ownership.

Delivery, as defined by Art. 2274, is just an act of handing over of the thigh and its accessories,

transfer of ownership on the other hand has a wider scope than the mere handing over the thing

since it implies the obligation of the seller to warranty against defects and dispossession which

will be discussed further.

What do you understand, the difference between delivery and transfer of owner ship?

_____________________________________________________________________________

_____________________________________________________________________

Next, let’s note the subject matter of sale, which as laid down in Art. 2266, what does a thing

mean and what scope of coverage is also covered by the succeeding article.

Article 2267

1. The provision of this chapter shall apply to the sale of corporeal chattels.

2. Nothing in this article shall affect the special provisions relating to the

sale of certain kinds of corporeal chattels.

It is, therefore, mainly that the corporeal chattels, which this article of the civil code governs.

What is the meaning of corporeal chattel?

It is the property in question should be tangible. There fore, properties such as intellectual ones

which are intangible can not be treated under this part. The term “Chattels” implies that

coverage will be give to ‘moveable property or properties’ and not immovable ones in this part.

In other words, immovable properties are not subject of sale and the provisions in this part of the

code although looking at Art.2875 of the civil code fells us that there is a possibility to refer to

this part when dealing with immovable as long as there is no contradiction between the spirit of

the two parts and a gap in the provisions dealing with immovable. But when we exclude

immovable, it doesn’t mean that all properties that have a connection or relation with immovable

properties are excluded. This can be traced from Art.2268 of the civil code.

Article 2268

1. The Sale of intrinsic parts of immovable shall be deemed to be a sale of

movables where such parts are under the contract to be separated from

the immovable and transferred as corporeal chattel to the buyer.

2. The provision of sub-Art. (1) Shall in particular where the sale relates to

corps, materials of a building under demotion or product of a quarry.

Article. 2268 is talking of a concept that you may have covered in the course “The property

and Land Law. Regarding that, a thing can be called an immovable by destination if it

is an intrinsic element of its destined thing. A simple illustration would be a window

“ frame that would be affixed to a house an immovable and frame thought initially a

movable, because it is an intrinsic element of the other thing, which is the house,

would be called be called immovable by destination. So, in essence, Art, when sold

separating from the immovable that they are eventually destined for, they will still be

considered as movable and treated under the contract of sale and its provision.

On the other hand, different legal systems use different Yardsticks to identify between a

contract of service and that of sale. In Ethiopian context, however, Art.2269 has a great role to

play in their identification

Arti 2269

“ ……….. The delivery of corporeal chattels to be manufactured or

produced shall be deemed to be a sale where the party who undertakes

delivery is to provide the main materials necessary for the manufacture

production..”

Here, the words we have to give attention to be main materials. This provision has indirectly set

the Yardstick that the main materials for delivery have to be provided by the seller for the

contract to be considered as a contract of sale.

Mean while, the price, which has to be stated in the contract, is also another requirement for the

existence of valid contract of sale. This can be affirmed by reading Art.2266 together with

Art.2271.

This article implies that if the seller and buyer can not reach an agreement as to the price of the

thing or do not have expert knowledge to give a reasonable price for the thing, then a third party

arbitrator has to resolve the issue of price. Going to the next sentence of this same article, we

can clearly see that there shall be no contract of sale if the arbitrator is unable for what ever

reason to determine the price.

The other issue in relation to the same article that can be raised is the scope of power endowed to

the third party arbitrator. This is to mean, we have to understand how binding the price

estimation of the third party arbitrator. This is to mean, we have to understand how binding the

price estimation of the third party arbitrator is.

In the strict sense of the word, an arbitrator is a person who settles a dispute and whose decision

is binding. If we are going to stick to this definition, we will also be implying that the inability of

the parties to determine price would amount to a dispute and the price given by the arbitrator

would be binding whether one or none of the contracting parties disagree. But the above would

lead to a very dangerous conclusion since the parties would still be forced to remain in the

contract though there is no consent of either one of the parties.

This confusion can however be cleared by saying that the third party who is called up on by the

parties would only be considered if the parties that is “both” parties agree up on it, so, in short,

the arbitrator in Art.2271 shouldn’t be taken in the strictest sense but rather as a third party or an

expert who can be called up on to give an expert or experienced opinion which can either be

taken or other wise.

1.3. Sale: One of the Special Contracts

How would you give meaning to sale contract?

Have you said that sale is the transfer of ownership over things in exchange for money? Yes, sale

is a contract to transfer ownership in goods for price. As stated earlier, individuals are not

capable to produce everything they want, but they can get things they do not have from others

having in excess their needs. And sale is one of the devices through which individuals may

obtain thing they don’t produce from other producing in excess.

Let’s refer back to Art .2266, again. From the article we make two critical points. They are:-

• The sale is a contract.

• They form reaching elements of thing and price.

Surely, sale is a contract, but a special one.

The special status of sale contract are the result of its nature that it involves transfer of

owner ship. In sale contract, in opposition to other contracts, you always find assignment of

rights. There is always change of title. Of course, there are some contracts that result in

change of title. To that extent, these few contracts (like donation) are same as sale. But sale

is different from these contracts because it always involves consideration element is always

expressed in terms of price (money). Missing this price element, a contract is never a sale

one. It may be a contract, but could not be a sale contract.

Activity 1

1. Can you state the reason why sale is different from barter? Donation?

________________________________________________________________________

____________________________________________________________

2. Feyisa has several old and rare coins. Do you think that he can make such coins subjects

of a sale contract? Why?

________________________________________________________________________

____________________________________________________________

3. What is a contract of service? How is it different from the contract of sale?

________________________________________________________________________

________________________________________________________________

4. Can you identify some of the obligations of the seller and the buyer?

________________________________________________________________________

____________________________________________________________

5. It was agreed that one of the parties, in addition to a sum of money, was bound to hand

over a thing in consideration to the other party’s transfer of owner ship of a thing. Do you

think this agreement constitutes a sale contract? Why or what not?

________________________________________________________________________

____________________________________________________________

1.4 Contract of Sale and Contract Allied to Sale

From our previous investigations you can realize that the existence of contracts that

resemble sale. But you should note that such contracts are only appear sale contracts and

are never sale contracts. The reasons why these contracts are precluded from being considered

sale is because they do not fit to the definition give to sale contract, from our earlier discussion.

The consequence of maintaining the difference is that the area of the law governing such similar

transactions it different from the one governing sale contract. As such a distinction be made

between sale and contracts resembling sale. Of course, Some times it is difficult to distinguish

between sale contracts and other contracts, resembling sale. Different contracts that can be allied

to sale and their distinction from sale contract needs better clarification.

1.4.1 Sale and Barter

Barter is an exchange of goods for other goods rather than for money. As you may have a clear

information on the historical account of development of sale, before the innovation of money as

a medium of transaction, people used to practice exchange of goods to obtain resources that they

do not produce on their own. Historically, barter preceded sale. But, later the system of barter

was superseded by the use of price terms-money. Even today, especially in rural areas, you may

find people exchanging goods for different goods, which they consider, are of equal value. They

only used to exchange each other their items belonged only to themselves.

Do you think there are similarities between sale contracts and bartering? Of course, that you do

recognize the similarities between the two types of contracts. Can you state any ground? If you

say, both transactions involve delivery of a thing and transfer of ownership of the item, then you

are quite correct. In fact, it is this nature of involvement of transfer of little that makes both sales

contract and barter special contracts. It is on this ground that these contracts are different from

other types of contracts. To this extent the two are similar.

But their similarity should not cloud our vision and there by blind us from realizing their

differences. In the case of sale contract the obligation of the buyer is always expressed in terms

of price (monitory terms.) The buyer may not assume as a consideration performance of any

obligation other than paying the purchase price. In the case of barter, the obligation of parties to

the contract, wholly or partly, involves delivery of a thing to the other party.

For our better understanding of the obligation of parties to contract of barter, let’s refer the

relevant legal provisions here:

Art. 2408 – Differences from sale

1. Each of the exchangers shall, as regards the thing subject to the exchange,

have the same rights and obligations as a seller.

2. The exchanger who is bound by the barter contract to pay a balance shall,

as regards the payment of the balance, have the same obligations as a buyer.

3. Unless other wise agreed, the exchangers shall share equally in the expenses

of the barter contract.

Art. 2409 – Reference to provisions regarding Sale.

The provisions applicable to contracts of sale for the remainder apply to barter

contracts.

As can be seen from the provision above, each party to the contract of barter is assimilated to a

seller. In other words, the obligations that the law of sales imposes against the seller are also

imposed against both parties to contracts of barter towards the other contracts party. The

obligations that the law of sales imposed on sellers include duty of delivery of the thing, duty of

transferring perfect title over the thing and warranty against dispossession, duty of delivering a

thing that may serve its normal purpose or useful for commercial exploitation, and duty of

warranty against non-conformity.

Another important point is that when one of the contracting parties, in the case of barter,

undertakes to pay money in addition to delivering of a thing, he is considered in relation to the

payment of that money as a buyer. In other words, the obligations imposed on the buyer by the

law of sales are imposed on him. Such obligations include, interalia, the obligation to pay the

price and the attendant duties in relation to this obligation.

Another point of difference between contract of sale and contract of barter goes to the

determination of the contract. In the case of sale contract the expenses of the contract, unless

other wise agreement, will have to be covered by the buyer (Art.2314) When it comes to barter

both parties are responsible to cover expenses of the contract jointly, unless there is an other wise

agreement (Art.2408 (3),) Except these differences discussed here in above, the two forms of

contracts are same. In effect, the legal regime governing both transactions in one and the same

for the remainder issues (Art. 2409).