Chapter Four Contract of Sale

4.1.1 Definition
Art. 2266 of Ethiopian Civil code states that
A contract of sale is a contract whereby one of the
parties, the seller, undertakes to deliver a thing and
transfer ownership to another party, the buyer, in
consideration of a price expressed in money which
the buyer undertakes to pay him.
 4.1.2 Formation of Contract of Sale
I hope your remember elements of article 1678 of the civil
code.
So the first requirement of a valid contract, capacity of the
contracting parties, must be fulfilled. I hope you remember that
the law presumes every person is capable of concluding a contract.
However the law exceptionally declares certain categories of person
incapable.
The second requirement to form a valid contract is consent. The
contracting parties have to give their consent. The consent has to
be sustainable by law. This means the consent has to be free from
vitiating factors.
The third obligation of a valid contract is object of the
contract. The object of the contract refers to the
obligations of the parties. The obligation contracting
parties owe each other shall be sufficiently defined,
possible to perform, lawful and moral.
The last requirement for the formation of a valid
contract is form. In principle the law doesn’t require
that all contracts should be made in writing. Rather the
parties have the freedom to determine the form of the
contract.
 Obligation of Parties to sale contract
4.2.1. Obligations of seller
The obligation of the seller bears normally those imposed by the
contract itself. The law also imposes certain obligations up on the
seller either because of the silence of the contract or due to the
mandatory nature of the law. The main obligations of the seller are;

4.2.1.1 Obligation to deliver a thing sold

Delivery is the transfer of possession. By definition
delivery of a thing includes delivery of its accessories as
per Art. 2274.
 Modes of Delivery
Delivery of the thing may be conducted in three ways

A.Actual delivery.
Under this mode of delivery, the seller actually hands over
the thing sold to the buyer or his representative. If a seller
of horse actually hands over the horse to the buyer, the
mode of delivery is called actual.
B. Delivery may also be effected constructively.
This means the thing will not be actually
delivered to the buyer but after happening of
certain acts the law regards the thing delivered. If
you purchase a VCD from a shop in Mercado
and put it at the possession of the seller to pick it
after a week or at anytime, the legal assumption
is the thing is sold and delivered.
C. The third mode of delivery is symbolic delivery.
Symbolic delivery is almost similar to that of
constructive delivery. But in the case of symbolic
delivery, the seller delivers a document representing an
item sold or that facilitates taking delivery of the thing.
The seller may delivery a document (title deed) with
out which the thing can not be sold or may deliver a
key that makes use of the thing possible.
 4.21.2 Obligation to transfer ownership
The second important obligation of the seller is
obligation to transfer ownership of the thing sold to
the buyer. Ownership is the widest right that may
have on a corporeal thing. The owner has the right
the buyer purchases the thing with the intention to be
an owner. The seller shall do whatever he could do
the make the buyer an owner.
 
Ownership of a thing may be transferred
from one person to the other in two ways.
As stated in article 1184 of the civil code,
ownership of a thing may be transferred
by operation of law and
by virtue of contract.
There are various ways in which the law transfers
ownership of a thing from one person to the other by
the operation of the law.
If a person abandons a property, the one who takes
the property will be an owner by virtue of law. If an
owner dies, his/her successors will take ownership of
properties of the deceased. Finder of a lost thing after
passage of longer period of time may acquire
ownership.
In order to transfer ownership through
contract certain requirements must be
fulfilled.
 To transfer ownership by contract, the
first requirement is the existence of the
contract itself.
 A valid contract must come into
existence.
In order to transfer the ownership of a corporeal
movable, the conclusion of a contract alone is not enough.
There are some special chattels or movables that require
additional formality of registration for the transfer of
ownership. Corporeal movables such as motor vehicles,
TV sets, airplanes, ships, etc..., require the registration of
contract with an appropriate authority.
To transfer ownership by contract, the seller must have a
valid title on the thing. He must be the owner or the agent
of the owner.
If the seller does not have a valid title on the thing, the
buyer may not acquire ownership by contract.
However, a buyer may become owner of a movable
thing by acquisition or possession in good faith.
This is effected by the operation of the law in
accordance with Article 1161 of the Civil Code.
Good faith must exist at the time of contract or at the
time the buyer entered into possession of the thing.
There are cases under the law where possession in good faith cannot
serve as a defense. That is, there are certain movables whose
ownership cannot be acquired by acquisition in good faith.
1) Special Movables that Require Registration of Contract: you noted
that in order to transfer the ownership of certain special movables,
registration of the contract is a requirement.
2) Public Domain (Public Property): This is the second case where
possession in good faith does not apply.
3) Stolen property - This is a third case where possession in good
faith does not apply. A person who has bought a stolen thing cannot
acquire the ownership of such thing. This conclusion is based on
Article 1165 c.c. It reads:
3.3.1.3 Warranty
Warranty, or sometimes called guaranty, here refers to
assurance of quality or performance of the thing sold and
delivered to the buyer. Generally there are two types of
warranty: express warranty and implied warranty.
Express warranty: a warranty given by express
statements made by the seller. To persuade a customer to
buy a product, a seller of a computer for instance may say,
"I will give three years warranty for the monitor, two years
to the system unit." When such an assurance of quality or
promise of performance is explicitly stated by the seller of
goods, it is an express warranty.
Discuss the three modes
of delivery ?
Implied warranty: A warranty created or imposed by
law. In many cases, the law requires that sellers to
provide certain minimum standards of quality and
performance even if no explicit promises or
representations are made at the time of the sale.
The Ethiopian law of warranty provides three heads of
(implied) warranties:
Warranty against dispossession
Warranty against defect
Warranty against non-conformity
A. Warranty against dispossession
To protect the buyer of goods, the law implies a
warranty on the part of the seller that the seller has the
right to sell the goods and that the title transferred is
good. Normally it may happen that third parties have
some claim over the property the buyer took delivery
and possessed. The claim of the third parties may be
ownership claim or any other claim that may lead us to
partial or total dispossession (the taking away of the
property from the buyer).
 B. Warranty against defect
This is a warranty given for the use or quality of the thing.
There are three cases of this warranty under the law. These
are where the thing does not possess the quality required
for its normal use or commercial exploitation there is a
breach of contract against defect and the seller will be
liable under the law.
 C. Warranty against non-conformity
Where a description of the goods or a sample or model is
made part of the contractual agreement, there is a
warranty that all the goods supplied shall confirm to the
description, Sample or model which is provided in the
contract.
What is the important thing here is the difference between
the thing provided in the contract and the thing delivered
to the buyer.
 Obligations of the buyer

A. Payment of price
The important consideration for the seller when he
delivers the thing, transfers ownership and gives
warranty is the fact that he is going to be compensated
by money that we call price. So the buyer must give the
price to the seller and do everything necessary to
transfer the money from himself to the seller.
 B. Taking delivery
As you remember from our discussion of obligations
of the seller, delivery is the duty of the seller. But how
can the seller carry out his obligation of delivery if the
buyer is not cooperative and refuses to take delivery?
This is the reason why taking delivery is the buyer's
obligation. The buyer must take delivery when the
seller offers the goods for delivery.
 If he does not take delivery while the seller is ready,
the buyer will be responsible for the subsequent loss
and expenses the seller incurs.
 C. Examination and notification
According to this Civil Code, as soon as the buyer
has the opportunity, he shall without delay examine
the thing.
The examination is to look for the existence of
possible defects and non­conformity over the
property.
The time of examination is normally at the time of
delivery or immediately following delivery.
 Transfer of risk and preservation duty
Since ownership is transferred by delivery, so is risk.
The risk will be transferred form the seller to the buyer at
the time of delivery.
However there are exceptions to this rule. Risk of loss
may transfer from the seller to the buyer on different times
depending on the agreement of the parties and the
provisions of the law.
That is risk may be transferred before delivery or
sometimes it may remain with the seller even after
delivery.
In the first case risk may pass form the seller to the buyer
before delivery. This happens when the buyer is in default
in taking delivery. As we said under the obligations of the
buyer and the seller, the buyer must take delivery while the
seller offers it. If the buyer does not take it due to his default
and the property is lost due to uncontrollable event, the
buyer will assume the risk and must pay for the property.
Had the buyer taken the property as agreed, he could have
saved the property from the loss.
But the fact that the risk is transferred
against the buyer does not mean that the
seller can throw the property out. Until he
delivers the property to the buyer, the seller
must take good care of the property. This is
the preservation duty the law expects from
the seller.
The other case where the exception to the transfer of risk
by delivery applies is where the seller bears the risk
although the property is given or transferred to the buyer.
This happens when the property suffers a problem and
the buyer has the right to demand the return of the thing
back to the seller.
This usually happens in cases of non-conformity where
the delivered property is entirely different from the
property agreed. There is no possibility that the buyer bears
the risk for property to which he has not consented to.
 Remedies for non-performance
Both the buyer and the seller may enforce rights which are
specified by valid terms of the contract. In addition to legal
remedies available under the general provisions of contract,
certain varied forms of remedies are provided under sales
law. The seller who fails to perform as agreed becomes
liable to the buyer for breach of contract.
Forced(specific) performance
Cancellation
Damages
Thank you !