Sale of Goods versus Other Transactions

Note on Sale of Goods versus Other Transactions by Legum

Sale of Goods versus Other Transactions


There may be other transactions that share the characteristics of a contract of sale of goods, but would not be considered a contract of sale of goods because they do not embody some characteristics of a contract of sale of goods.

These characteristics are:

1. The property in the goods is transferred for a consideration consisting wholly or partly of money.

2. There must be the transfer of the property in the goods.

3. The subject matter of the contract must be goods.

The following distinctions shall be made:

1. Sale of Goods versus Barter Trade.

2. Sale of Goods versus Gifts.

3. Sale of Goods versus Bailment.

4. Sale of Goods versus Hire-Purchase.

5. Sale of Goods versus Contract for Work and Materials.

Sale of Goods versus Barter Trade:

Barter is the act of trading by exchanging goods and services for other goods and services without the use of money. The requirement in section 1(1) of the Sale of Goods Act, 1963 (Act 137) that a sale of goods contract has its consideration consisting wholly or partly of money, is absent in a barter transaction, as no money is involved.

The idea that the consideration must consist “wholly or partly of money” means that goods may be exchanged between the buyer and the seller, but the buyer must make a monetary payment to the seller. In the case of Dawson Ltd v Dutfield, the parties contracted for two lorries to be paid for by trading in two other lorries, with the difference to be paid off by cash. The court held that this was a contract of sale of goods.

Sale of Goods versus Gifts:

In gifts, there is the transfer of property in goods to another without the need for that person to make any monetary payments. The absence of monetary consideration makes gifts distinguishable from a contract of sale of goods.

In the case of Esso Petroleum v Customs & Excise, Esso petroleum ran a promotion where any customer who buys four gallons of petrol would get a free coin from their World Cup Coin Collections. If the coins were goods manufactured for resale, they would be subject to tax and then Esso would be liable to pay €200, 000 as tax. Because the coins were not exchanged for monetary compensation, the courts held that the coins were not manufactured for resale by Esso and the handing over of the coins to customers was not the sale of goods.

Sale of Goods versus Bailment

Bailment is a legal relationship where one party, known as a bailor, transfers the possession of the property to another party, known as the bailee, for holding or for use in a particular manner. Essentially, the bailor still has ownership of the property and merely transfers possession of the property to the bailee. Furthermore, the bailee is required to preserve the identity of the goods and simply hold it for the bailor. In the case of South Australian Insurance v Randall, corn was deposited by farmers with a miller who could and did mix the corn with other corn during his business. The parties agreed that the farmer could claim a quantity of grain of the same quality from the miller or the market price of the quantity from the miller. The fact that the miller did not have an obligation to preserve the goods in their original form meant there was no bailment situation.

Sale of Goods versus Hire-Purchase

Section 81(1) of Act 137 provides that a “hire-purchase contract" means a contract of sale of goods in which the price is to be paid in five or more instalments;”

In a hire purchase contract, the owner usually gives possession of the goods to the hirer who pays for them in instalments. During the period of the hire, the hirer may return the goods to the owner. A key difference between a hire purchase and a sale of goods is that in a sale of goods, the buyer agrees to buy the goods whereas, in a hire purchase, the hirer has not necessarily agreed to buy the goods.

In the case of Helby v Matthews, the owner of a piano gave possession of his piano to a hirer, Brewster, under an agreement where the hirer had to pay 36 monthly instalments, after which the property in the piano transfers to him. The hirer also had no obligation to purchase the piano. The hirer, however, only paid for a few months of instalments. He proceeded to pledge the piano with a pawnbroker. The court held that a person who takes possession of goods on hire purchase is merely a hirer and not someone who has agreed to buy the goods. Per Lord Herschell,

My Lords, I cannot, with all respect, concur in the view of the Court of Appeal, that upon the true construction of the agreement Brewster had ‘agreed to buy’ the piano. An agreement to buy imports a legal obligation to buy. If there was no such legal obligation, there cannot, in my opinion, properly be said to have been an agreement to buy. Where is any such legal obligation to be found? Brewster might buy or not just as he pleased. He did not agree to make thirty-six or any number of monthly payments. All that he undertook was to make the monthly payment of 10s. 6d. so long as he kept the piano. He had an option no doubt to buy it by continuing the stipulated payments for a sufficient length of time. If he had exercised that option he would have become the purchaser. I cannot see under these circumstances how he can be said either to have bought or agreed to buy the piano. The terms of the contract did not upon its execution bind him to buy, but left him free to do so or not as he pleased, and nothing happened after the contract was made to impose the obligation.’

Per Lord Shand,

In this case, however, I think there was an agreement of hiring only with an option to the hirer to become the purchaser; and that although there was an obligation to sell if the hirer should avail himself of the right of option to purchase, there was no obligation or agreement to purchase.

Thus, unlike in a sale of goods where the buyer agrees to buy the goods, there was no such agreement in the case of Helby v Matthews which was determined to be a hire purchase contract.

Sale of Goods versus Contract for Work and Materials:

According to Oxford Reference, a contract for work done and materials supplied is “a contract, the substance of which is that skill and labour must be exercised in carrying out the contract , in addition to supplying the materials used in the work. Examples are contracts by an artist to paint a portrait and by a builder to fit double glazing. Such a contract is distinct from a contract of sale of goods, in which the substance of the contract is a product to be sold.”

In a sale of goods contract, the substance of the contract is the goods, whereas, in a contract for work and materials, the substance of the contract is the skill and labour that is exercised in producing the good, which is merely ancillary to the contract for work and materials.

In the case of Robinson v Graves, the plaintiff was a painter who got commissioned by the defendant to paint a portrait of a lady. The plaintiff began painting, but the defendant repudiated the contract and the plaintiff brought an action against him to recover the price. The court had to determine whether the contract between the plaintiff and defendant was one for the sale of goods or work and labour or for work and materials. Geer LJ directed that

If you find, as they did in Lee v. Griffin, that the substance of the contract was the production of something to be sold by the dentist to the dentist's customer, then that is a sale of goods… …But if the substance of the contract, on the other hand, is that skill and labour have to be exercised for the production of the article and it is only ancillary to that that there will pass from the artist to his client or customer some materials in addition to the skill involved in the production of the portrait, that does not make any difference to the result, because the substance of the contract is the skill and experience of the artist in producing the picture.

It was found that the contract was one for works and materials.