B U S I N E S S  1L A W
R E V IE W
NIGERIAN JOURNAL OF BUSINESS AND CORPORATE LAW
v o l .;2 NO. 1 MARCH, 2011
Taxation of Expatriates and Foreign Companies in Nigeria
- Sola Salau
- Bimbo Atilola
When the Making of a Tax is an Abuse of Rights
- M. T. Abdulrazaq
The State Bonds: Papering the Crevices II
- D. A. Obluwevbi
Challenges of Tax Assessment and Imposition in Nigeria
-  M. N. Umenweke
- A. R. Aladegbaiye
Investment and Securities Act No. 29 of 2007: 
Constitutional and other Law Breaches
- 1. 0. Obijiaku
Sale of Goods in the Midst of Similar Transactions: 
Separating Wheat from Chaff
- Osuntogun, Abiodun Jacob
Conciliation as a Dispute Resolution Mechanism in Nigeria: 
An Overview
- Chiafor, Amaechi B.
BIMBO A TILO LA
Ed ito r -  In - Ch ief
IGHO B. OGHOGHORIE
Managing Editor
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SALE OP UO0DS IN THE MIDST OF SIMILAR 
TRANSACTIONS: SEPARATING WHEAT FROM CHAFF
1. INTRODUCTION
The initial problem in studying Sale o f goods is that o f  identification. 
This problem arises as a result o f its close similarity with other 
commercial transactions. The orgy o f confusion that permeates 
through almost every aspect o f  Sale o f goods sets in from that problem 
and leads to some issues that this article intends to address: The major 
issues o f appellation for commercial transactions and content 
distinction.
2. WHAT APPELLATION OR LABEL FOR COMMERCIAL 
TRANSACTIONS?
Many textbook writers and scholars all over the world from United 
Kingdom, European Union, United States o f America and Africa, 
particularly Nigeria, have written a plethora o f books on the subject 
called Commercial Law. The title or heading o f  their books itself 
admits the existence o f  Commercial law.* 1 And as if  to support the 
argument that commercial law exists, many legal practitioners are 
claiming to be experts in Commercial Law, while Universities and law 
schools have the subject Commercial law or Commercial Transactions 
in their curriculum. The issue we intend to consider here is to examine 
the reality o f the existence o f commercial law. To do that effectively, we 
need to understand the meaning o f  Commercial law. The problem 
begins, from that inquest because there is no acceptable definition o f
* O suntogun, Abiodun Jacob, LL.B (UNILAG), BL, LL.M (OAU Nigeria), LL.M (Pretoria, South 
Africa), CILS (American University, Washington DC, USA); Osuntogun Abiodun Jacob is a lecturer at the 
Faculty of Law, University of Ibadan, Ibadan, Nigeria. Presently, a Visiting Scholar to University of 
Wisconsin School of Law, Madison. Email: osunfolak@vahoo.com or aosuntogun@wisc.edu
1. See Okany M.C., Nigerian Commercial Law (Africana Fep Publishers L.td Nig 1992); Achike 
Okay, Commercial Law (Forth Dimension Publishers Ltd Nig 1985); Iwan Davies, Commercial 
Law (Blacks Stone Press Ltd Nig 1992); Michael Connolly, Commercial Law 2nd ed., (Cavendish 
Publishing Ltd, UK, 1998); Felicia Monye, Commercial Law (Chenglo Ltd, 2006); R. M. Goode, 
Commercial Law, (London: Penquin Books Ltd, 1982); Robert Bradgate, Commercial Law, 3rd ed. 
(Butterworths, London, 2000).
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Commercial law. Professor Goode comments on this issue with 
respect to England when he wrote:
“The absence o f  anything resembling a commercial code makes this 
[issue] harder. I f  by commercial law we mean a relatively self- 
contained, integrated body o f  principles and rules peculiar to 
commercial transactions, then we are constrained to say that this is not 
o befound in England.”2 3
If the absence of commercial code' may work to nullify the argument in 
favour of the existence o f commercial law in England, the situation in 
the USA where there is a commercial code, the Uniform Commercial 
Code (UCC)4 5, should be an easy ride in its support. On this issue, 
Professor Bruno Greene comments with respect to USA: “[i]f pressed 
for a definition of ‘commercial law’ as it appears in the system of the 
United States today, an American lawyer would be embarrassed for an 
answer, because the term does not denote to him a segment o f his law, 
but merely a convenient denomination of transactions which he had 
been trained to label commercial.”" Other scholars from the same 
country posit that ‘although the term commercial law is not a term of art 
in American law, it has become synonymous in recent years with the 
legal rules contained in the UCC.’6
2. Goode, op. cit, 6.
3. See Hawkland, Uniform Commercial "Code" Methodology, 1962 U. 111. L.F. 291 (1962). See also. 
U.C.C. § 1-102(1), (2). A "code" is a pre-emptive, systematic, and comprehensive enactment o f a 
whole field o f law. It is pre-emptive in that it displaces all other law in its subject area save only that 
which the code accepts. It is systematic in that all o f its parts, arranged in an orderly fashion and 
stated with a consistent terminology, form an interlocking, integrated body revealing its own plan 
and containing its own methodology It is comprehensive in that it is sufficiently inclusive and 
independent to enable it to be administered in accordance with its own basic policies".
4. Note that UCC is not a complete closed system. See Edward A. Dauer Ellen A. Peters, 'Commercial 
Transactions: Cases, Text and Problems on Contracts Dealing with Personality, Realty and Services' 
vol. 13,Issue l,N o . 1 ,Boston C ollegeofLaw  Review noting that'W hile theU .C .C .does notpartake 
o f  this definition to the extent o f being an entirely closed system, it does have its intrinsic 
methodology The use o f case precedent in problems o f Code interpretation differs from that in 
strictly common law controversies'.
5. ■ Greene, Commercial Law in the United States, in L'UNITt DU DROIT DES OBLIGATIONS (THE
UNITY OF THE LAW OF OBLIGATIONS) 159,164 (M. Rotondi ed. 1974). See also Schlesinger, 
The Uniform Commercial Code in the Light o f  Comparative Law, 1 INTER-AM. L. REV. 11,40 
(1959). For the rest o f  the common law world, see Schmitthoff, Commercial Law in the 19th and 
20th Centuries, in Then And Now 1799-1974: Commemorating 175 Years O f Law Bookselling And 
Publishing 33, 42 (1974); Ziegel, The American Influence on the Development o f Canadian 
Commercial Law, 26 Case W. Res. L. Rev. 861,861 (1976).
6. Jonathan A. Eddy & Peter Winship, Commercial Transactions: Text, Cases and Problems (Little 
Brown 1985) 997 pages. Take note that the drafters o f  the UCC themselves suggest that their object 
was to bring together all rules governing the commercial transaction. The General Comment to the 
official text o f the Code states th a t" [tjhis concept o f the present Act is (hat 'commercial transactions' 
is a single subject o f the law notwithstanding its many facets.... This Act purports to deal with all the 
phases which may arise in the handling o f a commercial transaction, from start to finish ”
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Since scholars are skeptical on the definitions of commercial law, it is 
essential to seek recourse from the dictionary for clarity and precision. 
According to Black’s law Dictionary, Commercial law is ‘[t]he 
substantive law dealing with the sale and distribution of goods, the 
financing of credit transactions on the security of the goods sold and 
negotiable instruments.’7 A scholar adopts a functional approach when 
he defines commercial law as ‘the law relating to commercial activity, 
especially transactions concerned with the supply of goods and 
services and the financing thereof.’8 Another scholar defines it as the 
over all response of the law ‘to the needs and practices of the mercantile 
community.’9
From the perusal of many definitions, certain subjects clearly form part 
of commercial law, for instance the law relating to sale of goods10 which 
is the focus of this article. Other subjects are hire purchase transactions, 
agency, negotiable instruments, contracts, insurance etc.
Furthermore, a critical appraisal of different definitions implies that 
commercial law exists even if it is not governed by a distinct coherent 
uniform statutory provision. In Nigeria, like United Kingdom, the laws 
that regulate commercial transactions are scattered in different statutes 
and cannot be found in a single code. Such a jurisprudential system 
with uncoordinated regulatory provisions is prone to certain defects. 
The first is the problem of contents. There is no precision or certainty as 
to the contents of commercial law. A scholar explains this problem 
succinctly when he notes:
“Even the assertion that English lawyers might be able to describe the 
content o f  commercial law may be questioned. The content o f  academic 
courses and texts on commercial law varies widely, and a practicing 
lawyer might include within commercial law a number o f matters 
which would appear in none o f the courses and books. Thus, a 
commercial practitioner might deal with matters concerned with 
contracts; the supply o f  goods and services; finance, lending, and 
security; insurance; property; tax; competition law; and intellectual
7. Black's Law Dictionary, 9th ed. (2009).
8. Bradgate,opcit,4.
9. Goode,opcit,6.
10. Bradgate,opcit,4.
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property; partnerships; and companies. ”11
The situation is the same in Nigeria. The second problem is that of 
infiltration o f equitable principles in to the jurisprudence of 
commercial law. Since there is no clear cut jurisprudence on 
commercial transactions, Judges are tempted to apply technical 
concepts o f equity which are not meant for commercial disputes. Apart 
from general idiosyncrasies o f individual judges, confusion emanating 
from the absence o f a clear cut code for commercial law could be 
responsible. K.N. Llewellyn12 explained the emergence o f this problem 
in the USA before the enactment o f the UCC where a separate law is 
made for the merchants when he wrote:
‘It certainly tended long to cut Sales law loose from  some rather useful 
technical concepts developed in equity : such concepts as ‘legal 
property ‘ limited to security and divorced from  risk o f  damage or 
destruction ; or “equitable title ” in a person who had heavy interest 
though he had no “legal rights ”; or “equitable lien ’’fo r  advances; or 
power to transfer legal rights residing in a party whose own pow er and 
title were inter partes “dry ” o f  ju ice
Furthermore, the difficulty and burden associated with looking for law 
in different statutory provisions will be solved if  a commercial code is 
enacted for commercial transactions. This will give room for 
specialization and expertise even among courts and legal practitioners. 
The benefits that will spring up from the adoption of such a code can 
not be quantified particularly to developing countries.13 More likely 
than not, judges will have uncontrolled discretion to pick and choose 
what they deem to be applicable principles o f commercial law and the 
negative effects o f that can be cured with a uniform statutory 
provisions.
11. Noting that 'Company law is treated as a subject distinct from commercial law, despite the central 
role of companies in commercial activity and the separation extends to the courts, where there are 
separate Companies and Commercial Courts. This is a sharp contrast with the approach in many 
civilian jurisdictions where company law is regarded as part of the Commercial Code" Bradgate, op 
cit,3.
12. K.N Llewellyn, 'The First Struggle to unhorse sales' (1939) L11 (6) Harvard Law Review 874-904.
13. For example, litigants complain of delay in justice administration. If commercial courts are 
established and judges who are experts in commercial law are put to man the courts. This will result 
not only in speed but in efficiency. It may even reduce the number of litigants going for commercial 
arbitration.
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A body of law for commercial transactions makes synthesis o 
commercial cases easier. Scholars and law practitioners could predict 
the outcome of commercial litigation. According to Justice Oliver 
Wendell Holmes, the most famous advocate of legal positivism in 
American history, the ‘prophecies of what the courts will do in fact, and 
nothing more pretentious, are what I mean by the law’141 5. In making this 
statement, Holmes was suggesting that the meaning of any written law 
is determined by the individual Judges interpreting them, and until a 
judge has weighed in on a legal issue, the litigants should be able to 
guess the way a judge will rule in a case. A coherent statutory provision 
will make that possible."
In addition, it will be easy to develop common principles and legal 
doctrines that run through all commercial transactions. According to 
Lord Denning, there are two interests to be protected in law, those of 
property and commercial transactions.16 The essence of regulatory law 
in commercial transactions is to protect those two interests. The last is 
the problem of content distinction. Similarly, K.N Llewellyn also 
identified this problem in the USA when he was advocating for a 
uniform law for commercial transactions. He remarked with a tone of 
finality that:
‘[UJntil merchant-to-merchant sales ofwares are seen as thefocus o fa  
particular body o fl aw [which they already largely are, in fact and in the 
decisions ]  we go on lacking clear, neat doctrine to distinguish from 
them, where needed,sales by non- merchants, or to distinguish, where 
needed, sales to non-merchants [the ultimate consumer]from both. ’
In spite of what might be positive attributes of a uniform body of law for 
commercial transactions, the experience of the USA has proved that
14. O.W. Holmes Jr., The Path of the Law 10 Harvard Law Review 457 [1897].
15. K.N. Llewellyn, opcit, at 877, where he notes: “Whereas when the facts run clearly and repetitively 
on a single pattern, their pressures become so predictable that one can observe which judge is 
Sensitive to them, and which is not; one can then observe doctrine when it produces outlandish 
results attributable in reason to no other cause.”
16. Bishopsate Motor Finance Corpn. Ltd v. Transport Breaks Ltd [1949] 1K.B 322 at 326-327, per 
Lord Denning when he said: “In the development of our law, two principles have striven for mastery. 
The first is for protection of property; no one can give a better title than he himself possesses. The 
second is for the protection o f commercial transactions; the person who takes in good faith and for 
value without notice should get a good title.”
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there could be adverse effects.17 18Perhaps that can help us to appreciate 
the comment of Robert Bradgate that the absence of a clearly defined 
category of commercial law is ambivalent and not without its 
advantage in United Kingdom. Stressing its advantage, he said ‘the 
strength of the common law has traditionally being its pragmatism: 
English law has been concerned with providing solutions to practical 
problems rather than with theoretical categorization.,IS
Another issue is the use o f the label “commercial transactions” or 
“commercial law”. Why should some prefer one for another? This may 
be a matter o f preference but for the UCC19 20, the term “commercial 
transactions” is preferred to “Commercial law” because according to 
Professor Peter Winship, the use of the term “commercial transactions” 
instead of “commercial law” to describe the organizing principle has 
jurisprudential implications which relates to Karl Llewellyn’s concept 
of ‘situation sense’ by which the rule for resolution for a particular 
dispute should emanate from the factual context.7"
3. MEANING OF SALE OF GOODS.
Sale of goods can be defined as a contract where the seller agrees to 
relinquish the ownership in his goods to the buyer in return for price
17. Peter Winship, Contemporary Commercial Law Literature in the United States. 43 Ohio St. L. J. 643 
1982, noting that “to focus on the Code is to focus on commercial law as private law, thereby 
ignoring public regulatory law except where it impinges on the private law rules. The predominance 
o f  the Code discourages other ways o f  organizing the study o f commercial transactions, such as 
studying together different legal devices for raising business capital (the issuance o f  investment 
securities and loans secured by an Article 9 security interest) or contrasting rules governing real 
estate transactions with the Code rules for personal property. This predominance o f  the Code has 
also pushed aside the study o f  certain legal subjects, with the result that many recent law school 
graduates have only hazy notions o f the basic principles governing such subjects as suretyship and 
personal property leases...” R. Pound, Jurisprudence 73-75 (1959), noting that [it is] unfortunate to 
set up a category o f commercial law in a classification o f common law. Such may be one effect o f the 
Uniform Commercial Code... and a tendency in the law schools to set up a course on commercial 
law. In such a course there is likely to be consolidated what had been taught as distinct courses in one 
heterogeneous artificial course so as to make room in the crowded curricula for a variety o f new 
subjects which are acquiring importance with the advent o f the service state... We...ought not to be 
setting up a substantive division which will take everyday subjects o f  litigation out o f  the general 
setting o f our law and put up a barrier setting off related subjects in separate categories o f civil and 
commercial and creating possibilities o f  conflict where they overlap. The problem with such a 
heterogeneous course, he added, was that -[i]t cuts across many subjects in the law. with no 
common principal to hold the selected severed parts together.- Pound, op. cit, at 74 n.
18. Bradgate, op cit, 9.
19. Ibid.
20. SeeK. Llewellyn, The Common Law Tradition: Deciding Appeals 121-28(1960).
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72 BUSINESS LAW REVIEW
paid or to be paid by the buyer. Section 1 (1) of the Sale of Goods Act"1 
which regulates the sale of goods defines it as ‘a contract by which the 
seller transfers or agrees to transfer the property in goods to the buyer 
for a money consideration, called the price.’ The contract of sale ol 
goods is between the seller” and the buyer.2' However, the Act further 
explains that ‘there may be a contract of sale between one part owner 
and another.’12 34 It has been argued that the word ‘owner’ is not intended 
to have any flavour different from the word ‘seller’, just as ‘the seller’ is 
a person who sells or agrees to sell a particular title, as such, the owner 
is a person who owns a particular title, and as part owner owns that title 
concurrently with another.2’
The essence of the contract is the transfer property in the goods to the 
buyer. The property here means ownership. Once property has been 
transferred, there is a sale whether or not the goods remain with the 
seller. But a mere transfer of possession is not termed as sale under the 
Sale of Goods Act. Another thing is that the consideration for the 
contract of sale of goods must be in money26 and the subject matter of 
the transaction must be goods.27 28
The Act identifies two types of transactions termed sales and 
agreement to sell.29 Sale is an executed contract while agreement to sell 
is an executory contract. The main distinction is that property passes 
immediately in sale, whereas in agreement to sell, it is to be transferred 
at a later time. But that main distinction alters rights and duties of the
21. Sale o f Goods Act, 1893.
22. Section 62( 1), “A person who sells or agrees to sell goods.”
23. Ibid; “A person who buys or agrees to buy goods.”
24. Ibid.
25. See G. Battersby & A. D. Preston, The Concepts o f “Property” “Title” and “Owner” used in the Sale 
of Goods Act 1893.
26. Section l(l)oftheSalesofGoodsAct.
27. Ibid; See section 62[ 1 ] which defines goods as all chattels personal other than things in action and 
money, and includes emblements, industrial growing crops, and things attached to or forming part 
of the land which are agreed to be severed before sale or under the contract of sale'. For further 
reading, see Osuntogun Abiodun, “Goods in Sale o f Goods Act: An examination of the Subject 
Matter” (2010) 6( 1) Nigerian Bar Journal 85-103.
28. Section 1 (3) “Where under a contract of sale the property in the goods is transferred from the seller 
to the buyer the contract is called a sale.” See also Osuntogun, op. cit,
29. 'Where under a contract of sale, the transfer of the property in the goods is to take place at a future 
time or subject to some condition later to be fulfilled the contract is called an agreement to sell.” See 
Osuntogun, op cit.
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part, i• es. 30
4. SALE OF G O O D S  AN D  O T H E R  S I M I L A R  
COMMERCIAL TRANSACTIONS.
A contract of sale of goods differs from several other commercial 
transactions such as a contract of bailment, a gift, a contract of hire- 
purchase, a contract of agency, a contract of loan on the security of 
goods, a contract for the supply of services, a contract of barter or 
exchange, and a contract of licenses of intellectual property such as 
‘sales’ of computer software. Though for efficiency in the 
administration of justice, the need for specialization and easy access for 
research, there could be a commercial code for all commercial 
transactions, yet the reality is that they are distinct from each other. In 
order to avoid confusion and miscarriage of justice, each transaction 
must be distinguished so as to arrive at the true identity of the 
transaction before any court of law can determine any dispute on any of 
them. 301
The reasons for such distinctions are not far fetched. Even in the USA, 
where there is UCC, different rules and regulations apply. Similarly in 
Nigeria, different statutory provisions apply to commercial 
transactions depending on their categories, for example, a contract of 
sale of goods is governed largely in N igeria by the 1893 English Sale of 
Goods Act while Hire Purchase is regulated by the Hire Purchase Act of 
1965.3" If distinction is not made between sale of goods and other 
transactions, other regulatory or statutory provisions can be applied to 
commercial disputes relating to sale of goods and that error is likely to 
occasion miscarriage of justice. Another reason for distinction is the 
ignorance of the parties. Ordinary business people are not learned in 
law and are prone to make mistakes in entering in to contracts.33 They
30. A sale creates jus-in rem [right against the whole world while agreement to sell creates jus-in 
personam (right against an individual.) Note Section 20 o f Sales o f Goods Act to the effect that risk 
prima facie passes with property and on the effects of that on the rights and duties of the seller and 
buyer. See Osuntogun, op cit note 27.
31. The House of Lords in Young & Marten Ltd v McManus Childs Ltd [ 1969] 1 AC 454 expressed its 
reservation by condemning unnecessary distinctions between different classes of contract but 
Atiyah explains that the 'legislative structure o f the law sometimes makes [distinction] an 
inescapable result'. See P.S. Atiyah, The Sale of Goods, 8"' ed. (London: Pitman Publishing, 1990).
32. Hire Purchase Act o f 1965 now amended as Hire-Purchase Act, Cap. H4, Laws of the Federation of 
Nigeria 2004. At present the current statute regulating hire-purchase transactions in Nigeria.
33. Even lawyers that are learned make mistakes too.
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label their transactions in one form of commercial transaction or the 
other without critically assessing the true nature of their transactions.
On the contrary, the court has a duty to determine the correct nature of 
their transactions by considering the substance of the contracts and to 
do that the court must distinguish between one form of commercial 
transaction and the other. Therefore, in Ibrahim Yakassai v. Incar 
Motors Nig. Ltd,34 the Supreme Court distinguishes between a 
contract of sale of goods and hire purchase to determine the legal 
dispute in the case. The court observes:
‘The difference between an Outright Sale and a Hire Purchase 
Agreement is that in theformer, the property in the vehicle passes to the 
purchaser as soon as the contract is entered into, whereas in Hire 
purchase agreement, the property in the vehicle still remains vested in 
the owner until payment is fu lly made. In other words, under a Hire 
Purchase Agreement, the property in the vehicle still remains vested in 
the owner until payment is fu lly made. In other words, under a Hire 
Purchase Agreement, it is always open to the owner o f  a vehicle to take 
possession o f  it on failure o f  the hirer to pay the installments. In an 
outright sale, the seller's remedy lies in an action to recover the 
balance o f  payment owed by the purchaser. ’
4.1 SALE OF GOODS AND HIRE PURCHASE.
Hire Purchase is the ‘bailment of goods in pursuance of an agreement 
under which the bailee may buy the goods or under which the property 
in the goods will or may pass to the bailee’.35 In Samuel Aro v Joe Allen 
& Co. Ltd,36 Okagbue JCAdefined it as:
\.. .  a system whereby the owner o f  the goods lets them on hire fo r  
periodic payments by the hirer upon an agreement that when a certain 
number o f  payments have (sic) been completed, the absolute property 
in the goods will pass to the hirer, but so however, that the hirer may 
return the goods at any time without any obligation to pay further
34. [1975] 5 SC 113. Also in Odufunade v. Antoine Rossek [1962] 1 All NLR 98 the Supreme Court 
decided that acquisition by the government of an interest in land under a compulsory purchase order 
was not a sale. In Helby v. Mathews [1985] A.C. 475, where Lord Herschel seems to be explaining 
the relevance of distinction when he said: “the parties cannot by calling it hiring or by mere juggling 
with words escape from the consequences of the contract into which thev entered.”
35. Section 20 ofthe Hire Purchase Act, 1965.
36. [1979]2FNR292.
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balance o f  rent accounting after return; until the condition have been 
fulfilled the property remain (sic) in the owner s possession.,v
Hire Purchase and Sale o f Goods are closely similar. The similarity 
between the two transactions is actuated by the artificial nature of most 
hire-purchase agreements. This could be explained by the 
consideration of three points.37 8 First, the real object of a contract o f hire- 
purchase is ‘almost invariably the ultimate sale of the goods to the 
hirer.’39 Secondly, in the contract of Hire Purchase, the amount which 
the hirer is expected to pay is usually far in excess o f that which he 
would have had to pay if  he were really hiring the goods40. And thirdly, 
the legal purchase price for which the hirer has the option to buy the 
goods is frequently nominal only and, in fact, is sometimes not exacted 
in practice.41 However, the court in Joe Allen Co. Ltd v. Sani 
Adewale42 explained the yardstick to be adopted in distinguishing the 
two when it states: ‘.. .the test to be applied is whether or not the party 
receiving the goods has the legal right to return them at his own option 
and there upon to cease paying installments. If he has, the agreement is 
an agreement to hire, with possibly an option to the hirer to purchase. If 
he has not, the agreement is an agreement to sell. ’
In hire purchase, the owner delivers goods to the hirer at the time of 
commencement o f the agreement on the condition that the hirer must 
pay the agreed amount in periodic payments. Though, the hirer has 
possession of the goods, the ownership of the goods still remains with 
the owner. The hirer has a right to use the goods43 but default in payment 
o f any installment as at when due may result in adverse consequences
37. At 295.
38. Atiyah, op. cit.
39. Ibid.
40. Ibid.
41. Ibid.
42. 9NLR 111 at 115.
43. See section 20( l) of the Hire Purchase Act which defines a contract of hire-purchase as 'bailment of 
goods.”
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to him.44 The ownership o f the good continues to be with the owner until 
the payment of last installment by the hirer though the hirer too has a 
right to terminate the agreement at any time.45 However, if he decides 
not to terminate the agreement, he becomes the owner of the goods after 
he has paid all installments in terms of the agreement.
While hire purchase and sale of goods are both commercial in nature, 
distinction comes in the mode of regulatory provisions that govern 
them. Hire purchase transactions are governed in Nigeria by the Hire 
Purchase Act while the sale of goods Act governs sale of goods 
transactions. The structure of each transaction also contributes to their 
distinction: the sale of goods is essentially a simple transaction between 
the seller and the buyer with no formality required to enter into it. On 
the contrary, hire purchase transaction is complex and formal, it often 
involves three parties and there are statutory requirements to comply 
with.46
Furthermore, the major difference between the two is the effect o f the 
transactions in both contracts which culminates into each having 
different legal obligations. The effect of transactions in sale of goods is 
to transfer the property in the goods to the buyer while in hire purchase, 
it is the possession of the goods by the hirer. The issue o f transfer of the
44. Under the common law, due to the terms o f  the agreement between the owner and the hirer, if the 
hirer defaults even in paying the last installment, he may loose the right to use and to own the good
again. In Atere v. Amao and Anor [1957] WRNLR 176, the hirer failed to pay the last installment of 
#5 after he had paid the sum o f  #995. The court held that the owner had a right to repossess the 
vehicle notwithstanding that the balance of the hire purchase price was #5. Coker, J in Animashawijn 
v. CFAO explained the position under the common law when he stated: “At the time o f the seizure 
the plaintiff was in areas with his rent and even if  he paid up all the amounts due after the seizure and 
before the institution o f proceedings against him, he will not be relieved o f the consequences o f his 
breach either at common law or in equity.” Note that recovery o f possession must be through an 
action in the court once the hirer has p'aid relevant proportion o f the hire purchase price. See section 
9( 1) o f  the Hire Purchase Act.
45. The right to terminate is subject to the payment o f  minimum payment clause both under the 
common law and the statute.
46. Atiyah explains the tripartite nature o f hire purchase very well when he observes "Many retailers 
have no wish to act as financiers themselves supplying credit to consumers. So a hire-purchase 
transaction often involves, first, a sale, under which the retailer sells the goods to a finance company, 
and then, secondly, a hire-purchase contract, under which the finance company lets the goods on 
hire-purchase terms to the ’buyer’. It follows that the ’buyer’ has no contractual relations with the 
seller and this sometimes has important legal consequences, although the reality is that ’the identity 
or even existence o f the finance company is a matter (to customers) o f indifference; they look to the 
dealer, or his representative, as the person who fixes the payment terms and makes all the necessary 
arrangements." See Atiyah, op. cit, note 32.
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property is not an essential but optional. Consequentially, legal 
obligations differ. In sale of goods, since property has passed, the seller 
has a right to price and could enforce this right even if the goods perish 
so soon as they are acquired by the buyer, but in hire purchase, the 
owner is not entitled to recovery of future installments if the hirer 
decides to terminate the contract and return the goods to the owner. 
Implicitly, therefore, the issue whether there is an option to return the 
goods is a distinguishing factor between the two as explained by 
Kingdom, CJ in Joe Allen & Co Ltd. v. Sani Adewale & Anor.4
4.2. SALE OF GOODS AND BAILMENT.
Though there are different categories of bailment,48 bailment could be 
defined as the delivery of goods by one person (the bailor) to another 
(the bailee) on a condition which normally requires that the bailee must 
return the goods back to the bailor or to any other person in accordance 
with his directions. Unlike sale of goods, the property in the goods does 
not pass on delivery of the goods by the bailor to the bailee.49 In
47. (Supra.) See also Kasali Raimi v. Ogundara & Anor.[ 1986] 3 NWLR 97.
48. See Coggs v Bernard (1703) 2 Ld Raym 909 Sir John Holt Chief Justice of the Kings Bench Court 
explained different categories of bailment when he said: “And there are six sorts of bailments. The 
first sort of bailment is, abare naked bailment of goods, delivered by one man to another to keep for 
the use of the bailor; and this I call a depositum, and it is that sort of bailment which I mentioned in 
Southcote's case (1601) Cro Eliz 815. The second sort is, when goods or chattels that are useful, are 
lent to a friend gratis, to be used by him; and this is called commodatum, because the thing is to be 
restored in specie. The third sort is, when goods are left with the bailee to be used by him for hire; this 
is called locatio et conductio, and the lender is called locator, and the borrower conductor. The fourth 
sort is, when goods or chattels are delivered to another as a pawn, to be a security to him for money 
borrowed of him by the bailor; and this is called in Latin vadium, and in English a pawn or a pledge. 
The fifth sort is when goods or chattels are delivered to be carried, or something is to be done about 
them for a reward to be paid by the person who delivers them to the bailee, who is to do the thing 
about them. The sixth sort is when there is a delivery of goods or chattels to somebody, who is to 
carry them, or do something about them gratis, without any rewards for such his work or carriage, 
which is this present case. I mention these things, not so much that they are all of them so necessary 
in order to maintain the proposition which is to be proved, as to clear the reason of the obligation, 
which is upon persons in cases of trust". In that case, William Bernard undertook to carry several 
barrels of brandy belonging to John Coggs from Brooks Market, Holbom to Water Street, just south 
of the Strand (about half a mile). Bernard's undertaking was gratuitous; he was not offered 
compensation for his work. As the brandy was being unloaded at the Water Street cellar, a barrel was 
staved and 150 gallons were lost. Coggs brought an action on the case against Bernard, alleging he 
had undertaken to carry the barrels but had spilled them through his negligence. Court held that the 
defendant was negligent in carrying the casks and was therefore liable as a bailee. Holt made clear 
that Bernard's responsibility to Coggs was not formally contractual in nature, since he received no 
consideration. Instead, his responsibility rested on the trust that Coggs placed in him to use due care 
in transporting the casks, and by his tacit acceptance of that trust by taking the casks into his custody. 
Thus, because Bernard acted negligently when he was under a responsibility to use care, he was held 
to be in breach of a trust.
49. In some circumstances, the parties may have the intention that the property will pass in the future as 
in the case ofhirepurchase.
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Chapman Bros v Verco Bros & Co Ltd50 bags o f  wheat were 
delivered by some farmers to a company carrying on business as millers 
and wheat merchants. The wheat was delivered in unidentified bags 
which were identical to those in which other farmers delivered wheat to 
the company. According to the terms o f the contract, the company is 
expected to buy and pay for the wheat on request by the farmer but if  the 
farmers do not make such a request, then the company must return an 
equal quantity o f wheat o f the same type on a specified date; but there 
was no obligation to return the identical bags. Despite the fact that the 
contract referred to the company as ‘storers’, it was held by the 
Australian High Court that this transaction was necessarily one o f  sale 
as the property passed to the company on delivery.
The problem o f distinction between bailment and sale o f  goods has 
been made difficult by the use o f reservation o f title clause51 by the 
seller o f goods which has the effect o f eroding the distinguishing mark 
between the two [that o f  possession and ownership]. But clear 
understanding of how the retention o f title clause works and the true 
nature o f bailment will show the difference. Despite the reservation o f 
title clause, a buyer o f goods in such circumstance could still not be 
regarded as a mere bailee whereas; a mere bailee in a contract o f 
bailment o f goods could not be regarded as an owner.
4.3 SALE OF GOODS AND SECURITY AGREEMENT.
Security agreement or a loan on security is intended to enable someone 
who is already an owner o f  goods to borrow money on the security of 
those goods. The goods serve as collateral for the loan, if  the borrower 
doesn’t pay the debt, the lender has the right to take back the property 
and sell it to cover the debt.52 This form of transaction could not be
50. (1933) 49 CLR 306. See also The South Australian Insurance Company v. Randell [1869-71] 
3L.R RC 101. In this case court held that the deposit of a quantity of com by a fanner with a 
miller was a sale because the farmer could claim an equal quantity of com of the same quality or th e  
market price of the goods in lieu o f his deposit. Court observes “Whenever there is a delivery of 
property on a contract for an equivalent in money or some other valuable commodity, and not for the 
return of the identical subject-matter in its original or altered form, this is a transfer of 
property for value— it is a sale and not a bailment.”
51. On reservation of title clause, see Osuntogun, A.J., “Transfer of Property in Commercial 
Transactions” (2009) 4( 1 &2) International Journal of law and Contemporary Studies 181 -208.
52. Example of that agreement is a mortgage between the mortgagor and the mortgagee, others are 
pledge, Chaise etc.
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regarded as sale because the use and the enjoyment of the goods are not 
contemplated by the parties. Consequentially, the Act prohibits the 
application of its provisions to such transactions." Despite the specific 
statutory prohibition, the courts have not been finding it easy to 
distinguish between the two. However, in Kingsley v Sterling 
Industrial Securities Ltd 4 Winn, LJ explained the mechanism for 
distinction when he observed:
‘In m y definite view, th e ... dom inant question ...is w hether in reality and  
upon a true analysis o f  the transactions and each o f  them, and  having  
regard in particu lar to the intention o f  the parties, they constitu ted  
loans or sa le s ...it is equally c lear that each case m ust be determ ined  
according to the proper inference to be drawn fro m  the fa c ts  and  
w hatever the fo rm  the transaction m ay take the court w ill decide  
according to its real substance. ’
The major problem with the application of that mechanism is the 
difficulty encountered by the courts on how to formulate the criterion 
by which the ‘real intention’ of the parties may be judged. Therefore, 
the modem tendency has been to uphold the genuineness of these 
transactions, though judicial disagreements have been frequent.’’ In 
Jajira v. Northern Brewery Co Ltd," the problem of distinction was 
overcome by considering the genuineness of the transaction despite the 
fact that the terms of the agreement were drafted to conceal its true 
nature.’'
4.4 SALE OF GOODS AND SUPPLY OF SERVICES.
In the past, supply of services was divided into two which are contracts 
for skill and labour, and contracts for labour and materials. ” But the653 478
53. Section 61 [3] o f  the Act provides “The provisions o f this Act relative to contracts o f sale do not 
apply to any transactions in the form o f a contract o f sale which is intended to be operated by way of 
mortgage, pledge, charge, or other security.”
54. [1967] 2 QB 747,780.
55. See Fitzpatrick [1969] J Bus Law 211. SeealsoA tiyah,op.cit,note32.
56. [1972]NMLR290.
57. In that case, the defendant employer under a written agreement described as loan advanced credit to 
the plaintiff his employee to purchase a motor scooter for his use. The agreement is described as Hire 
purchase 'but giving the plaintiff ownership o f the motor scooter until all installment' which is 
payable by six monthly installments has been paid. Court held that the agreement was a security 
agreement [a loan of money upon security for good] and not a credit sale or hire purchase.
58. SeeA tiyah,op.cit,note32.
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distinction is no longer relevant. " However, the distinction between 
sale of goods and supply of services is still relevant for a number of 
reasons.59 60 Yet, it has been difficult for the court to distinguish between 
these two similar commercial transactions. In Lee v. Griffin,61 where a 
dentist made two sets of false teeth upon the oral order o f A; and A died 
before the teeth could be fitted, court held that no action would lie 
against A’s executor, the contract being one for the sale of goods. 
Blackburn J said:
‘I f  the contract be such that it will result in the sale o f  a chattel, the 
properform ofaction, i f  the employer refuses to accept the article when 
made, would be fo r  not accepting. But i f  the work and labour be 
bestowed in such a manner as that the result would not be anything 
which could properly be said to be the subject ofsale, then an action fo r  
work and labour is the proper remedy. An attorney employed to draw a 
deed is a familiar example o f  the latter proposition; and it would be an 
abuse o f  language to say that the paper or parchment o f  the deed were
59. Ib id" in England until 1954 the law required that contracts for the sale o f goods o f the value o f £ 10 or 
more should be evidenced in writing. No such requirement applied to contracts for the supply of 
services. This difference between the two kinds o f  contract disappeared with the repeal o f the 
requirement o f  writing, but older authorities on the distinction which may still be cited today were 
often concerned with this requirement.”
60. See Atiyah, op. cit, note 32. “ ....the time at which the property in the goods is to pass from the 
supplier to the buyer or client may differ in the two cases.. .if the contract is a pure sale, the whole 
consideration for the buyer's price is the transfer o f the property in the goods to the buyer: hence it is 
inconsistent for the seller at one and the same time to claim that he need no longer transfer the goods 
to the buyer because o f  the buyer's default, and yet that he may retain the buyer's advance payment, 
which is simply the consideration for that transfer o f the goods. On the other hand, where the 
contract is for the manufacture and supply o f the goods, the manufacture o f  the goods is itself part o f 
the consideration for the price; if  the seller has devoted time and money to making the goods, any 
advance payment can be considered as a payment towards the manufacture as much as a payment 
towards the actual transfer o f the goods. Hence, the mere fact that as a result o f  the buyer's default the 
goods will no longer be transferred to him at all does not mean that the consideration for the advance 
payment has wholly failed. However, despite this element o f  logicality, the result is far from 
satisfactory, and the law remains in a somewhat uncertain state". Hence different law may govern 
both.
61. 1861, 1 B. & S. 272, 23 R.C. 191. In Atkinson v. Bell, two frames ordered by the defendants had 
been ready for the last three weeks, before Sleddon was declared a bankrupt. The assignees 
afterwards required the defendants to take the frames, but they refused to do so. It was held that the 
action was not maintainable. Bayley J expressed the view that "Ifyou employ another to make up his 
own materials in making a chattel, then he may appropriate the produce o f  that labor and [those] 
materials to any other person. No right to maintain any action vests in him during the progress o f  the 
work; but when the chattel has assumed the character bargained for, and the employer accepted it, 
the party employed may maintain an action for goods sold and delivered". However that decision 
particularly the dictum o f  Bayley J was overruled in Grafton v. Armitage, 2 C. B. 336, in which an 
action by an inventor for services performed on his own materials was sustained. Coleman J 
declares: "the claim o f  a tailor or shoe maker is for the price o f  goods when delivered and not for the 
labour bestowed by him in the fabrication o f  them.”
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goods sold and delivered... Here if  the teeth had been delivered and 
accepted, the contract for the sale o f a chattel would have been 
complete. I  do not think that the relative value o f the labour and o f the 
materials on which it is bestowed can in any case be the test o f what is 
the cause o f action; and that i f  Benvenuto Cellini had contracted to 
execute a work o f art for another, much as the value o f the skill might 
exceed that o f the materials, the contract would have been none the less 
for the sale o f a chattel. ’
The court in that case expressed doubt on the soundness of the principle 
of law applied in Clay v Yates62 36where the court laid emphasis on the 
quantum of skill and labor61 as the determinant factor and treated it as a 
unique case. In fact, Blackburn J reviewed the earlier cases of Grafton 
v. Armitage64 56and Atkinson v. Bell61 and declared the test used was 
inappropriate:
‘Ido not think that the test to apply to these cases is whether the value o f  
the work exceeds that o f the materials used in its execution; fo r i f  a 
sculptor were employed to execute a work o f art, greatly as his skill and 
labor, supposing it to be o f the highest description, might exceed the 
value o f the marble on which he worked, the contract would, in my 
opinion, nevertheless be a contractfor the sale o f a chattel. ’
Greer LJ modified the test applied in Lee v. Griffin supra in Robinson 
v Graves66 and advocated the ‘substance of the contract’ test. Court 
held in the case that a contract for a painter to paint a portrait was one
62. [1856] 1 H & N 3 .In th is c a se , The plaintiff a printer, verbally agreed to print for the defendant, 500 
copies o f  a treatise, to which a dedication was to be prefixed, at a certain price per sheet, including 
the paper The treatise was printed, and after the proof sheet o f  the dedication was revised by the 
defendant and returned to'the plaintiff. The plaintiff discovered for the first time that it contained 
libelous m atter and refused to complete the printing o f  it. Court held that this was not a contract o f  the 
sale o f goods and that the dedication was libelous and that the plaintiff was justified in refusing to 
complete the printing o f  it.
63. Ibid. Pollock, C.B. comments: “M y impression is that in the case o f  a work o f  art, whether it is gold, 
silver, marble or plaster, where the application o f  skill and Labor is o f  the highest description, and the 
material is o f  no im portance as com pared with the Labor, the price may be recovered as work, labor 
and materials. No doubt it is a chattel that was bargained for and, if  delivered, might be recovered as 
goods sold and delivered, still i t may also be recovered as work, labor and materials Therefore it 
appears to me that this is properly a contract for work, labor and materials.”
64. Ibid.
65. Ibid.
66. (1935] All E R 191.
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for work and materials. Greer LJ67 observed in that case that:
‘I f  you-find, as they did in Lee v. Griffin, that the substance o f the 
contract was the production ofsomething to be sold by the dentist to the 
dentist s customer, then that is a sale o f goods. But ifthe substance ofthe 
contract, on the other hand, is that skill and labour have to be exercised 
fo r  the production o f the article and that 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 o f the portrait, that 
does not make any difference to the result, because the substance o f the 
contract is the skill and ■ experience o f the artist in producing the 
picture. ’
Therefore, in Cammell Laird Co Ltd v. Manganese Bronze and 
Brass Co. Ltd,68 a contract for the construction of two ships’ propellers 
was held by the House of Lords as a contract for the sale of goods. 
Similarly, a contract for the supply of a meal in a restaurant was held to 
be a contract of sale of goods69. In Isaac v. Hardy70 Mathew J: held that 
a contract by an artist to paint a picture at an agreed price was a contract 
for the sale of a chattel.71
67. Id. At 587-8. Slesser, L. J also explained his own difficulty too with the dictum of Blackburn J when 
he said: “It is that observation of that very learned judge which has given me considerable doubt and 
difficulty in this case, but I have come to the conclusion, looking at the authorities as a whole, and 
considering the matter as one of principle myself, that if Blackburn J. there meant to state that 
whenever there was an agreement whereby a chattel would ultimately have to be delivered there was 
of necessity a sale of the chattel, he is stating the matter too broadly... if that be the only test, so that 
the ultimate delivery o f some material decides that the subject-matter is the sale o f goods, I would 
find it difficult to understand how such cases as the delivery o f written documents of parchment by a 
solicitor, which have always been agreed to be questions o f work and labor and not sale o f goods, 
would not fall within the category of sale of goods. But I think that the authorities are clear to the 
contrary, notwithstanding the weighty observations o f Blackburn J.”
68. [1934] A11ER Rep 1,151 LT 142,50TLR350. But note that a contract for the manufacture of a ship 
may be a contract-for sale of goods and a contract for services. Part o f the contract under which the 
supplier is to make the ship is a contract for services while a contract under which the supplier 
agrees to sell the completed is a contract of sale of goods. See Hyundai Heavy Industries Co Ltd v 
Papadopoulos [ 1980] 1W LR 1129.
69. LockettvA&M CharlesLtd[1938]4AllER 170.
70. [ 1884] Cab. &Eb. 207.
71. The case was considered in Robinson v. Graves and the court distinguished it by saying “that in 
deciding as we have done we are not deciding anything which is necessarily contrary to the decision 
o f Mathew J. in the shortly reported case of Isaacs v. Hardy, which dealt with a contract of a very 
different kind-namely, where a picture dealer, whose sole object was to acquire something which he 
might sell in his business, engaged an artist to paint and deliver to him a picture of a given subject at 
an agreed price. It must not be taken that we are in any way overruling that case or deciding whether 
it was right or wrong.”
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The ‘substance of the contract’ test has not resolved the complexity of 
distinction between the two. The test could hardly be resolved with 
many difficult and divergent cases on the burner. The truth is that, there 
can hardly be an adequate test that will resolve the emerging modem 
problems on the issue. In Dodd v W ilson,72 the plaintiff engaged a 
veterinary surgeon to inoculate his cattle with a serum, which the 
surgeon did, using vaccine which he had himself bought from suppliers 
of vaccine. It was held that this was not a contract of sale but that, 
nevertheless, the surgeon impliedly warranted the vaccine to be fit for 
the purpose for which it was supplied. Therefore, he was liable, despite 
the fact that he was not himself guilty of any negligence 3.
Similarly, a contract to produce gramophone records was held to be a 
contract of sale of goods747 56. In an American case from the New York 
Court of Appeals, Perlm utter v Beth David Hospital, the plaintiff 
suffered injury when he was given a blood transfusion in the 
defendants’ hospital because the blood was contaminated with 
jaundice viruses which the plaintiff claimed that the blood had been 
‘sold’ to him and that the defendants were, therefore, liable for ‘defects’ 
on the basis of implied warranties. But the majority of the court held 
that the transaction was one of services only and that the supply of the 
blood was merely incidental to those services.6 In Deta Nom inees v 
Viscount Plastic Products Ltd, the Supreme Court of Victoria in 
Australia has described Robinson v Graves as a ‘hard case’ and 
expressly rejected its test as ‘illogical and unsatisfactory’, ‘wrong in 
principle’ and ‘too erratic’ to be useful.
72. [1946] 2 A11ER 691.
73. Note that if the contract is for sale, the defendants may be liable for implied duties [strict liability] 
but if it is for sale and services the defendants could only be liable for negligence if defendant 
exercises due care and skill he is absolved of the wrongs.
74. Friedrichshorf& Co. v. Fujah[1967]LL.R 115.
75. 123 NE 2d 792 ( 1955). Atiyah comments on this case that “an English court would almost certainly 
concur with this decision 'though according to him' not the all US states follow this approach, but in 
most states where warranty liability has been recognized at common law, the result has been 
reversed by statute.” See Atiyah, op. cit.
76. Id. The court comments that the “Informed opinion is at hand that there is today neither a means of 
detecting the presence of the jaundice-producing agent in the donor's blood nor a practical method of 
treating the blood to be used for transfusion so that the danger may be eliminated.”
77. ( 1979)[7]). The court preferred Lee v. GrifTin noting that the court in Robinson was confused and 
could not decide accurately whether it departed from Lee v. Griffin or applied it.
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84 BUSINESS LAW REVIEW
The position is still uncertain particularly with the emerging problems 
relating to services in the area of technology and the appurtenant sale of 
goods.78 The ideal approach is that no test should be discarded and none 
should be seen as sacrosanct. Each test should be evaluated to see 
which one is applicable to a particular case.
4.5 SALE OF GOODS AND EXHANGE OR TRADE BY 
BARTER.
In the global commercial world in which we find ourselves, it seems 
interesting that trade by barter which many believe is a vestige of under 
development, has been transformed to be the cornerstone o f modem 
day enterprise. In all developing countries, many trade their goods for 
other goods or trade old one for new one or pay part in money to get new 
one. The emergence o f modem day businessmen and industrialists and 
the manner in which they used trade by barter has complicated the 
distinction between trade by barter and the sale o f goods. Through 
newspaper advertisements, websites and televisions, the modem day 
business men and industries offer their goods in form o f trade by 
barter.79 The result is the difficulty in understanding the difference 
between the two.
In the Irish case of Flynn v. Mackin and Mahon,80the second 
defendant agreed to supply the first defendant with a new car, in return 
for which the first defendant promised to pay #250 and to trade - in  his 
own model car. While driving the car to the place o f meeting agreed to 
by all o f them, the second defendant was involved in an accident as the 
car collided with a car in which the plaintiff was a passenger. The latter 
sued the defendants in the High Court for negligence. The court held
78. The Author is of the opinion that this aspect is so verse that it should be treated separately in another 
paper.
79. For example 'Save Cash! Convert your business' goods and services into IMS trade dollars that work 
like cash to purchase needed items We've been growing the most successful barter trading network 
for 25 years. Yes, barter - just way bigger and way better than ever before. Check out how it can work 
for you" See IBM website http://www.imsbarter.com/?gclid=CLaro5uu2qUCFOTNKgodYzcnlw 
[assessed on the 7lh of December 7,2010]. "First barter site that verifies users to enhance the security 
o f  th e ir  trades , V erify befo re  you reg is te r"  W ebsite o f  B arte r-Q u e sth ttp :/ 
/www.barterquest.com/?gclid=CIyIOrOw2qUCFULNKgodtlsykw [assessed on the 7,h of 
December ,2010]. “Trade in your old TV and qualify for a £ 150 discount on a new Sony Bravia TV.” 
Website of guardian.co.uk - http://www.guardian.co.uk/environment/2010/iun/07/sonv- 
television-replace-world-cuplassessed on the 7lh of December 2010].
80. [1974]I.R. 101.
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that the second defendant had been negligent in the driving of the car. 
However, the judge withdrew from the jury the plaintiff’s claim against 
the first defendant on the ground that property in the new car had not 
passed to him at the time of the accident. The plaintiff and the second 
defendant appealed to the Supreme Court. In disallowing the appeal, 
Walsh J. with whose judgment Budd J. and Fitzgerald C.J. concurred, 
held that the transaction between the defendants was one of exchange 
or barter, in which the absence of delivery rendered a transfer of 
ownership impossible. Both courts considered the 1893 Sale of Goods 
Act in reaching their decisions. .
The pertinent question herein is: what is trade by barter? It is a 
commercial transaction by which people exchange their goods for 
other goods with an intention to transfer the property in those goods to 
each other or one another. The sale of goods is, however, different; 
property in goods is transferred for money consideration. That money 
consideration which is the main distinction between the two also fuels 
the confusion because in some circumstances goods are exchanged not 
only for goods but substituted by partial payment in money. In such 
circumstance, a glance at plethora of cases will make us to conclude 
that such transaction will be regarded as sale o f goods. In Sheldon v. 
Cox81, where A agreed to give a horse, warranted sound, in exchange 
for a horse of B, and a sum of money; and the horses were exchanged, 
but B refused to pay the money, pretending that A’s horse was unsound, 
it was held that it was a contract of sale of goods and not exchange. In 
Aldridge v. Johnson,82 an exchange of 52 bullocks for 100 quarters of 
barley and the payment o f the difference in money was held to be a sale 
o f goods. Similarly in G. H. Dawson [Clapham] Ltd v. H.C. 
Dutfield,83 an old motor vehicle was exchanged for a new one with 
partial consideration paid in money. Court held it was a sale of goods.
Despite the criticism of the court’s decision in Flynn v. Mackin and 
Mahon,84 the ground upon which the decision was reached must be
81. [1824]3B&C.420.
82. [1857]7E& B 885.
83. [1936] 2 All E.R. 232.
84. See E. M. Clare Canton, “Sale of Goods and Barter a Note” (1976) 39 MLR 589. “It is submitted that 
the conclusion of Walsh J. is in line with the more recent authorities. Moreover, his readiness to 
consider the possibility that the transaction might be a barter merits commendation. However, with 
respect, it is suggested that a broader, more common-sense approach might have been appropriate.”
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8 6 BUSINESS LAW REVIEW
understood before taking a position ot condemnation or even approval. 
In that case, the court considered the fact that there was no evidence of 
agreement to buy the car for an agreed price. The parties did not assign a 
value to either vehicle: they simply agreed to transfer the new car in 
consideration of a sum of money together with another car which was 
not valued.85 Even in Aldridge v. Johnson,86the court observed that if 
the transaction had been that the bullocks plus a sum of money were to 
be transferred in return for the barley without valuation o f the chattels, 
the contract would have been barter. Similarly, Hilbery J was moved to 
decide that transaction in Dawson (Clapham) Ltd. v. Dutfield87 was a 
contract of sale o f goods because according to him the vehicles had 
been valued and that prices were nearly if  not exactly decided in 
conversation between the parties.
However, in Bull v. Parker88 the transaction was an exchange of new 
riding equipment for old and partial consideration of £2. Despite the 
fact that the parties had not made any valuation, the court accepted that 
the price of such equipment was £4, and held that the plaintiff could 
recover that sum for the defendant’s failure to perform his obligations. 
This decision suggests that if the value of the goods is apparent, a 
contract may be construed as a sale even if the parties have failed to 
assess the value of the goods in their transaction.89
Another issue raised by the court in Flynn v. Mackin supra is the 
difference in the time the property passes between sales of goods and 
barter.90 In Koppel v. Koppel,91 a man agreed to transfer the contents 
o f his house to his former housekeeper in exchange for her promise to 
return to his home on a permanent basis, the Court o f Appeal held that 
property in the goods had passed to the housekeeper solely by the 
contract itself. The court applied section 18 o f the Sale of Goods Act,
85. See Flynn v. Mackin and Mahon (supra).
86. Ibid.
87. Ibid.
88. 13 (1842)2 Dowling N.S. 345.
89. See Canton, op. cit, note 84.
90. Id. Noting that “Walsh J. went on to assume that ownership of the new car could only have been 
transferred.when it was delivered to the first defendant. However, it seems that the question whether 
property in bartered goods passes by the contract itself or at the moment of delivery has not been 
answered satisfactorily.”
91. [1966] 1WLR 802.
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1893 to the transaction. Harman L. J. insisted that the absence o f formal 
delivery was not fatal to the case.92
In the midst o f confusion, the best approach for the court is to decipher 
the intention o f the parties and to apply it. According to Atiyah, the 
reason why the distinction was o f practical importance in Flynn v. 
Mackin supra was that it was assumed that the property passes at 
different times in the two transactions. But if the contract is so close to 
the border between two classes o f contract, it would seem absurd if 
such consequences were held to depend on the label attached to the 
contract, though sometimes this m aybe inevitable.9'
4.6 SALE OF GOODS AND GIFT.
Since there is no money consideration or in almost all circumstances no 
consideration at all for the transfer of gift, it could not be regarded as a 
sale. In Esso Petroleum Co. Ltd v Customs and Excise 
Commissioners,94 95 Esso produced ‘World Cup Coins’ which they 
offered as ‘free gifts’ to purchasers o f their petrol. The issue was 
whether these coins were ‘produced... for sale’ under the Purchase Tax 
Act, 1963 (UK) in which case Esso would be liable to pay some tax on 
them. The coins were o f insignificant intrinsic value, but millions had 
been produced and the tax bill would be hundreds o f thousands o f 
pounds. The majority o f the House of Lord decided that the contract 
was not a contract o f sale o f goods but a collateral contract.9' This case
92. According to him, “there is no question o f  a gift here: it was money or m oney's worth.” Note 
however that the fact that he did not define what he means by money and m oney's worth lias been 
criticized. See Canton, op. cit, note 84 noting thus: “the assumed applicability o f  the 1893 Act 
precluding a conclusion that property in bartered goods can pass when the contract is made.”
93. Atiyah, op cit, note32.
94. [1976] 1 A11ER 117; 1 WLR. 1.
95. At the trial court, Pennycuick V-C held'that the motorist had a straightforward contract for the coins 
as part o f the undisputed contract for the purchase o f  petrol. According to him, the meaning o f  the 
word sale may be too wide in some circumstances. On appeal, his decision was set aside. The Court 
o f  Appeal held that that the motorist had no contract for the coins, the coins being a gift. On further 
appeal to the House o f  the Lord, the House held that there were two contracts involved in the 
transaction: one a straightforward contract for the purchase o f  the petrol, and the other a so-called 
"collateral contract" concerning the coins. The terms o f the suggested "collateral contract" 
concerning the coins were to the effect that the garage promised to give the motorist a coin in return 
for the motorist entering into a contract to buy four gallons o f  petrol, not, in return for the motorist 
promising to pay money for the coins as such. Despite the fact that the collateral contract analysis 
treated the coins as the subject m atter o f  a contract, the House concluded that under the definition o f 
a "contract o f  sale goods" in the (then applicable) Sale o f  Goods Act 1893, the transaction was not a 
contract o f  sale since the consideration for the coins under the contract was not money.
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has tjeen criticized sharply by scholars that the transaction could have 
been treated as sale of goods.96
5.0 CONCLUSION
Since, different law applies to different forms o f commercial 
transactions; the need to distinguish one [form of commercial 
transaction] from another is inevitable to decipher the true identity of 
the hidden nature of the transaction as well as the duties, obligations 
and rights of the parties. This paper has proved that no test is infallible; 
the courts must not prefer one test to another without a synthesis of the 
facts in conjunction with all the tests that have been developed. In 
addition, the idea of a common code for all commercial transactions is 
laudable but it is not a panacea to the confusion that might emerge in 
distinguishing one form of commercial transaction from another. 
Perhaps the partial antidote could be found in constant revision of 
commercial law.
96. See Igweike, K.I., Nigerian Commercial Law: Sales of Goods, 2“* ed. (Malthouse Ltd, Lagos); See 
Gus Merchandise Corporation Ltd v. Customs and Excise Commissioners [ 1981 ] 1 WLR 1309. See 
also Atiyah, P.S. “Conceptual Construction” [1976] 39 MLR 335-6.
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