FEDERAL UNIVERSITY OYE EKITI

FACULTY OF LAW
LPT 305: COMMERCIAL LAW LECTURE NOTES
BY
PROF. S.O. ABIFARIN AND MR. L. P. BOLARINWA

STUDY SESSION 1
Introduction
This module is to introduce the students to commercial law in Nigeria. In this part of the module
student will be made to know the meaning of commercial.
Learning outcome for study session 1
At the end of this study students will be able to:
1.1. Define commercial law
Commercial law is notoriously difficult to define but it must be defined so as to make it
easy for us to chart a course in the subject. Commercial law can be defined as law relating to
commercial activities especially transactions concerned with supply of goods and services and
the financing there of or the totality of laws response to the needs and practices of the mercantile
community.
Commercial law is a pragmatic fact based subject and its contents may change and
develop as commercial practices and activities change from time to time. In common law
jurisdiction, commercial law has been restricted or confined to subjects like Law of Agency, Sale
of Goods Law, Hire Purchase Negotiable Instrument and Partnership Law. Although other
subjects like Company Law, Taxation, Contract, Arbitration, Banking and Insurance are also in
commercial law class but for purpose of further exposition in them, they are treated as separate
subjects.
In order to accommodate commercial activities, commercial law draws on principles
from a number of different areas of jurisprudence such as contract law, tort, property law, equity
and trusts etc. A definition of commercial law based on its content is therefore doomed to fail.
1.2 Interrelationship of Commercial Law
The principle of contract law is the foundation of any commercial transaction. An agent
arranges the transaction; this involves or put into play the law of Agency. The sale and supply of
goods which includes sales, negotiation of price, payments and delivery of goods are regulated
by sale of goods law.
The transaction must be financed and this will necessarily bring into bear financing,
Credit and security, bill of exchange and other negotiable instruments (Banker/ Customer
relationship). Protection of the transaction is also very important and this leads to the
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involvement of contract of insurance in commercial transactions and finally resolution of
commercial disputes is the major concern of law of Arbitration.
The parties to the contract of sale can be an individual or sole proprietor, a partnership or
a firm or a company. This brings into focus law of business associations namely partnership and
company laws. Taxation is also involved because the state provided the enabling environment for
commercial activities and consequently it must raise tax to sustain it.
1.3 Purpose of Commercial Law
The purpose of commercial law is facilitation of commercial activities therefore, it has to
be gilded by certain principles such as certainty, predictability, and respect for party autonomy,
recognition of the customs and practices of the mercantile community and of course flexibility in
order to accommodate changing practices. Value of fairness and good faith is another important
aspect of commercial law.
1.4 Evolution of Commercial Law
Commercial law has its root in the Lex Mercatoria (Law Merchants) developed n the
medieval times. At that time much trade was carried on at fairs, in addition, much of it was of
ah:, international character Merchants from all over Europe traveled with their goods to fair all
over the continent, the importance of trade and the need to respect the rights of foreign
merchants was, acknowledged by the Magna Carta which provided that all merchants shall have
safety and security in coming into England and going out of England and in staying and traveling
through England.
Merchants trading at the fair formed a close-knit community. When disputes arose among
or between merchants, they needed some means of settling the deputes quickly or swiftly. Such
dispute were therefore settled at special courts which decide cases quickly and according to the
custom and practices of merchants.
Instead of lawyer-judges, cases were decided by juries composed of merchants, presided
by a judge drawn from the mercantile community and these courts may be regard as similar to
the modem day arbitration tribunals.
Since trade was international in nature, the courts decided disputes according to the
custom of merchants and mercantile courts. Different countries would decide cases according to
the same principles and this came to be known as “Lex mercatoria”. This became the law
universal throughout the world as at the 15th century. Many of the principles of the “Lex
mercatoria” differed from those of the general common law.
In fact the legal recognition of such important commercial document, such as, bill of
lading and bill of exchange dated back to the Lex mercatoria era. By the 17 th century, the
competition between the courts for business ultimately led to the common courts especially the
Kings bench taking over much of the business of the
mercantile courts together with the customs and practices such that by 1628 court noted that the
lex mercatoria is part of the law of the realm. The eventual codification of law in England led to
the absorption of the lex mercatoria into the national law thus making it to loose. Its
international character. The codification of these laws was largely influenced by Lords, Chief
Justices, Holt and Mansfield.

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These jurists also ensured harmonization of lex mercatoria into the common law rules.
It must also be emphasized that the codification was not done into one single enactment
but rather they were embodied in individual statutes dealing with individual areas e.g. Bills of
Exchange Act 1882, Factors Act 1889, Partnership Act 1890, Sale of Goods Act 1893, etc. The
strength of this codification is indicated in the fact that many of these statutes provided model
legislation in other part of the common law world.
The process of harmonization of international commercial law has led some to talk of a
new Lex mercatoria. It is common to find arbitration clauses in commercial contracts which
empower the arbitrator to decide disputes arising from the contract in accordance with Lex
mercatoria rather than any national law. Although the new lex mercatoria before it can be
effectual must be incorporated to the national laws. However, the point been made here is that
arbitration which started with commercial law is still a very important feature of commercial
law.

STUDY SESSION 2
Introduction
In this module is to introduce the students to sale of goods law in Nigeria. In this part of the
module student will be made to know the meaning of sale and differentiate sale from other
similar transactions. The will also to know the different between a sale and an agreement to
selling including the source of Nigeria law on sale of goods.
Learning outcome for study session 2
At the end of this study students will be able to:
2.1 Define sale, differentiate it from agreement to sell, 2.2 explain source of Nigerian law of
sale of goods, 2.3 assess the effectiveness of sale of goods law, 2.4 and appreciate the effect of
colonialism on sale of goods law in Nigeria.
2.1 SALE OF GOODS LAW IN NIGERIA
Sale of goods in Nigeria is governed partly by statute, partly by common law and equity
and partly by customary law.
It is important to note at the onset that sale of goods was not a new phenomenon in
Nigeria and it was not an invention by England but Nigerians and by extension Africans have
been engaging in sales and exchange of commodities, products and farm produce in their own
way. Trade by barter was the original mode of commercial transaction indigenous to Nigeria and
other part of Africa. This was followed by use of cowries shell as medium of exchange which
represented the modem day money. The era of trans-Sahara trade and slave trade is still fresh in
our memories.
Colonization and the consequent reception of English law only modified and modernized
the system but did not constitute an entire innovation. Thus, it is wrong to say that sale of goods
was an innovation of the British to Nigeria.

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 Having said this much, we shall now go on to consider the various laws governing sale of
goods in Nigeria. Sale of goods laws in Nigeria is not uniform.
1. Eastern and Northern Nigeria operate Sale of Goods Act of 1893 which is an
English Statute of general application since it is a pre 1900 law.
2. Western Nigeria and Midwest operate Sale of Goods Law of Western Nigeria 1959.
3. Lagos State operates Sale of Goods Law 1973. However, it must be noted that there is no
much difference between those laws and the 1893 Act. The only difference is local adaptation
and the change of name or nomenclature. Today, each of the 36 states of the federation has its
own sale of goods law.
2.2 Effectiveness of the Act
1. Illiteracy of Nigerian has made the enactment to be either dormant or irrelevant in our
daily transaction.
2. Secondly, most sales take place in our local markets which are largely controlled by local
custom Individual buyers and sellers openly strike oral bargains and the goods examined, paid
for and delivery effected simultaneously without contemplating court action.
In other cases bargaining may be effected on personal basis and should the goods bought
and sold not satisfy the customer in one way or the other, this can be made good when next he
calls. Because of mutual trust and confidence very few cases went to court apart from the fact
that retailing business was prominent as a result of lack of manufacturing activities. The recent
socio-eonomic change as a result of industrial revolution and globalization would be borne in
mind in the course of the study.
2.3 What Constitutes a Contract of Sale?
S. 1(1) of the l893Act defines a contract of sale as:-
A Contract whereby the seller transfers or agree to transfer the property in goods to the
buyer for a money consideration ca8ed the price.
From the definition Iwo types of contract are distinguishable namely (a) Contract
transferring property and (b) A contract agreeing to transfer property in the goods. The
distinction becomes clearer when you read section 3.
Section 3 says:-
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 but where the transfer of the property in the goods is to
take place at a future time, or subject to some condition thereafter to be fulfilled, the contract is
called an agreement to sell.
According to section 4 an agreement to sell becomes a sale when the time elapses or the
conditions are fulfilled subject to which the property in the goods is to be transferred.
From the above, analysis, sale of goods is a contract between buyer and seller, lbs the
transfer of property that makes the contract complete, and not any lesser right like mere

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possession and it also distinguishes between outright sale and an agreement to sell-see Odumade
vsAntonio Rossek and Talabi vs Mandillas Ltd.
2.4 Distinction Between Sales and other Contracts
There are other contract similar nature to sale but are not sale in substance therefore, it is
necessary to distinguish these types of transactions from sales.
Sale and Hire Purchase
Contract of the Hire purchase is a bailment of goods coupled with an option to the bailee
(hirer) to purchase the goods when certain stipulated conditions have been satisfied. This option
may or may not be exercised and until it is exercised there cannot be a contract of sale of goods.
Bailment and hiring is the basic contract, option to purchase, which may or may not be exercised
distinguishes the contract from contract of sale.
Majekodunmi vs. Joseph Daboul Ltd P and D entered into an agreement for the sale by the
latter to the former of fourteen lorries for the sum of £50. 000.00 of £20.000 Of this was to be
paid as deposit and the balance payable on twelve monthly installments. The parties also agreed
inter alia that the fourteen lorries will be handed over to the plaintiff at the completion of the
instalmental payment. A Lagos High Court held that the transaction between the parties was a
conditional agreement of sale and not a hire purchase agreement as contended by the defendant.
In Amao vs Ajibade and 3 others An Ibadan High Court held a similar transaction to be one of
sale rather than hire purchase despite the use of the words purchase and hire purchase in the
embodying document.
Sale and Exchange
An exchange is the transfer of the property in goods for other goods rather than for a
money consideration. It is therefore the price, the money consideration paid by the buyer for the
transfer to him of the property in the goods which distinguished a contract of sale from that of
pure exchange. However, there can be a contract of sale where by the price is paid partly in
money and partly in kind or other goods. Thus in Shedon vs Cox a contract for the transfer of the
property In a horse in exchange for a mare and forty guineas plus five more of the horses as
suitable, was held to be a contract of sale arid not exchange.
In Akliidge vs. Johnson
Where fifty-two bullocks were exchange for hundred quarter of barley with the deference in
value to be made up in money payment, it was held to be a sale and not an exchange.
Sale and Bailment
Bailment is an agreement under which goods are delivered or transferred by one party the
(bailor) to another the (bailee) on terms that the goods be returned to the bailor or transferred to
the third party or dealt with in accordance with his instructions. Usually, the property in the
goods is not intended to and does not pass to the bailee on delivery of the goods to him. Where
however, the contrary is the case, the transaction should be a sale and not a bailment. In South
Australia Insurance Co vs Randell Sir Joseph Napier stated whenever there is a delivery of
property or a contract for an equivalent in money or some other valuable commodity and not the
return of an identical subjects in its original form or an altered form there is a transfer of property
for value, it is a sale and not a bailment.
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Sale and Skill, Work, Labour and Material
Where the contract is such that the apparent seller himself manufactures, produces the
goods and particularly if he does so with materials or parts thereof and or specifications supplied
by the apparent buyer, the issue as to whether such contract is one of sale or skill and labour or
work and materials. The approach to this problem was laid long ago in the case of Lee vs. Griffin
where it was held that a contract to make a set of artificial teeth to fit the mouth of the employer
was a contract of sale of a chattel and not a contract for work, labour and materials. But if the
real substance of the contract is the performance of work by A to B for money consideration, the
contract for skill labour and material will be inferred.
Sale and Loan and Security
S. 61(4) of the 1893 Act provides that “The provisions of this Act relating to contract of
sale do not apply to any transaction in the form of a contract of sale is intended to be operated by
way of mortgage, pledge, charge or other security.
In spite of these provisions, parties sometimes purport to enter into contract of sale with
the intention that it should operate as Security for loan on money or vice versa
In considering such transaction that court insists that the substance and not merely the
form or the label chosen by the parties should be examined in order to decide what type of
transaction is encompassed. Jajira vs. Northern Berwery CO.Ltd.
STUDY SECTION 3
Introduction
This section is out to make student understand and be able to explain capacity to make a contract
of sales. It will also define goods audits, types and price which is essential in a contract.
Learning out come for studying section 3
At the end of this section, student should be able to explain capacity to make a contract of sales,
to explain good and its categories and to explain what price is and his price can be determined or
ascertained.
3.1 CAPACITY OF THE PARTIES TO A CONTRACT OF SALE
S. 2 of the 1893 Act provides that capacity to buy and sell is regulated by the general law
concerning capacity to contract and to transfer and acquire property provided that where
necessaries are sold and delivered to an infant or minor, or to a person by reason of incapacity or
drunkenness is incompetent to contract he must pay a reasonable price therefore.
Necessaries here mean goods suitable for the condition in life of such infant or minor or
other person and to his actual requirements at the time of sale and delivery.
Form of Contract of Sales
No formality is required in a contract of sales. It can be in writing, by word of mouth, or
partly in writing and partly by the word of mouth and it may be implied by the conduct of the

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parties. See section 3 Sale of Goods Act 1893. However, some contract of sale may be required
to be done in writing e.g. sale of land, Hire purchase or credit sales.
Subject Matter of the Contract of Sales
The Subject matter of the contract of Sale may be the goods, the property in which the
seller transfers or agrees to transfer to the buyer or the price the money consideration which the
buyer provides in exchange for the transfer.
1. Goods
S. 62(1) defines as including all chattels personal other than things in action and money,
enablement, industrial growing Crops and things attached to or forming part of the land which
are agreed to be severed before sale under the contract of sale. Sale under the Act by this
definition excludes sale or leases of land or interests in land and choses in action such as shares
or bills.
There has been problem of correct interpretation of this section because vegetation or
cash crops grown and attached to the land has been held to be a subject matter of sale under the
Act, Kursell vs. Timber Operators and Contractors Ltd’5:- cutting of timber from a piece of land
for 15 years was held to be a contract of sale.
Howe vs. Coupland - Sale of potatoes to be grown was held to be contract of sale of
goods.
Goods may be existing goods or future goods.
a. Existing Goods: Goods owned or possessed by the seller at the time of the contract of
sale.
b. Future Goods: Goods b be manufactured or acquired by the seller after the making of
the contract of sale or existing goods the property in which the seller has not yet
acquired at the time of the contract. That is where the seller has acquired some existing
goods e.g. unascertained goods but the property in them has not passed to him before he
sold to the sub buyer.
c. Specific Goods: Goods which are identified and agreed upon at the time of the
contract of sale.
d. Unascertained Goods: Goods which are not defined but which are goods identified by
description only such as a pound of milk, or a carton of beer.
This distinction is very important in regard to the application of the law relating to
perished goods and in passing of the property in the goods sold. In Ajayl vs. Eburu. The court
held that a sale of gold dust in form of trinkets, lockets, earrings and chains was a contract of sale
of specific goods within the meaning of
The Act and not for the sale of unascertained good.
Also in Howell vs. Cc pland Supra

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A sale of 200 tons of potatoes to be grown on a particular piece of land was held to be a contract
for the sale of specific goods despite the fact that the goods were not in existence at the time of
the contract of sale.
2. Price
This is an essential element of the contract of sale and this distinguishes it from a gift, bailment,
an exchange or barter, which the seller transfer or agrees to transfer the property in the goods to
him. It may consist partly in money consideration or partly of other goods.
Section 8 of the Act provides
1. The price in a contract of sale may be fixed by the Contract or may be left to be fixed in
manner thereby agreed or may be determined by the course of dealing between the parties.
2 . When the price is not determined by the forgoing provisions the buyer must pay a
reasonable price. What is a reasonable price is a question of fact depending on the circumstances
of each particular case.
Application of the above provision especially section 8(2) has given rise to some
difficulty when price is not fixed at the time of the contract, will the contract be valid and
enforceable? In May & Buffer Ltd vs. R the Court held that an agreement for the sale of tentage,
which provide that the price, dates of payment and manner of delivery should be agreed upon
from time to time. It also agreed that all disputes will be referred to arbitration. Held, in the
absence of any subsequent agreement as to the price there was no enforceable contract.
Determination of price by a third party
Section 9 provides
1. Where there is an agreement to sell goods on such terms that the price is to be fixed by
the valuation of a third party and such third party cannot or does not make such valuation,
the agreement is avoided: provided that if the goods or any part thereof have been
delivered to and appropriated by the buyer, he must pay a reasonable price thereof.
Where such third party is prevented from making the valuation by the fault of the seller or buyer
the party not in fault may maintain action for damages against the party at fault. Whatever
valuation done by the third party is binding on the buyer and seller.

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 CHAPTER TWO
CONDITIONS, WARRANTIES AND EXCLUSION CLAUSES
The Sale of Goods Act retains the common law doctrine of freedom of contract. But
some contracts of sale may not be explicit or may be silent on some facts that are material to a
contract of sale. The Act therefore stipulates certain implied conditions and warranties where the
contract is silent on how the contract is to be performed or on statement of the consequences of
the performance or non-performance of those promises. It is therefore of utmost importance that
the parties should direct their minds to such implied terms and decide for themselves whether or
not they should adopt, vary or negative them.
Conditions and Warranties
The terms of a contract of sale may be a condition or warranty
Condition
This is not specifically defined in the Act but section 11(1 ) (b) states that — whether a
stipulation in a contract of sale is a condition, the breach of which may give rise to a right to treat
the contract as repudiated or a warranty the breach of which may give rise to a claim for damages
but not a right to reject the goods and treat the contract as repudiated, depends in each case on
the construction of the contract. A stipulation may be a condition though called a warranty in the
contract,
Warranty
The term warranty is defined by S. 62(1) as an agreement with reference to goods which
are subject of a contract of sale, but collateral to the main purpose of such contract. The breach
of which gives rise to a claim for damages but not to a right to reject the goods and treat the
contract as repudiated.
Thus the statue defines a warranty distinguishing it from a condition merely by reference
to their legal effect.
The condition is usually taken to mean a fundamental term minor term respectively.
Representation Distinguished From Warranty

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 Representation is generally understood as a collateral promise by one party to a contract
which is not made a term of the contract. Whether a statement is a warranty or a representation
depends on the intention of the parties including their conduct and the surrounding
circumstances. In Hopkins vs Tranquera D offered his horse for sale by auction and gave an
assurance to the plaintiff on the day before the sale that the horse was sound. It was held that the
statement that the horse was sound was a mere representation and not a term of a contract.
On the other hand in Couchman vs. Hills2 D offered a heifer for sale by auction. In the
catalogue published for the sale, the heifer was described as ‘unserveth’ Both the owner and the
auctioneer confirmed this to the bidder in an answer to a question. The heifer was subsequently
found to be defective and died shortly afterwards. It was held that the statement that the heifer
was unserved was a term of the contract (a warranty).
Because of the uncertainties and confusion likely in interpreting condition and warranty
in a contract of sale of goods the court concluded that a term of a contract of sale of goods could
be classified as follows:
(a) A condition in which case any breach would justify repudiation
(b) A warranty in which ease a breach could not possibly justify repudiation but damages only.
(c) An intermediate term in which case the remedy for any breach would depend upon the nature
of the breach rather than the status of the term.
Time in the Contract of Sale
Section 10(1) provides
Unless a different intention appears from the terms of the contract, stipulation as
to time of payment are not deemed to be of the essence of a contract of sale. Whet
her any stipulation as to time is of the essence of the contract or not depends on
the terms of the contract. In a contract of sale of goods time of delivery is always
of essence. There can also be term stipulation as to payment.
Title to Property in the Subject Matter of Sale
Unless a different intention appears in the contract, there is implied
On the part of the seller that:
1. A condition that he has a right to sell
2. A warranty for quiet possession arid enjoyment
3. A warranty that the goods are free from third party charge or encumbrance
Condition as to right to sell is covered by Section 12(1) which provides for;
An implied condition on the part of the seller that in the case of a sale, he has a right to
sell the goods and that in the case of an agreement to sell, he will have a right to sell the goods at
the time when the property is to pass.

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This provision seeks to protect the buyer, so that it is only a beneficial owner or absolute owner
who sells to the buyer and it also makes the time of the passing of property as the core of
determining when a breach of the provision has occurred.
In Akosile vs. Ogidari
The defendant sold a car to the plaintiff which he bought from a European. The European
seller was convicted of having stolen the car. The court held that the plaintiff could repudiate the
contract of sale and claim a refund of his money as the defendant has no right to sell a stolen car.
In essence the right to sell means, that nobody has a superior title in the goods than the
seller.
In Mortforts vs. Marsden1
A right to sell has been said to be more than a right to pass the property in the goods. If a
vendor can be stopped by process of law from selling, he had no right to sell it also includes the
right to confer on the buyer the undisputed possession of the goods.
In NibIet vs. Confectioner Materidi the cjr4i
The liability imposed on the seller in section 12(1) is a strict one and does not depend on fault.
Negligence or knowledge of the seller so when the seller honestly believed that he h e or right to
sell he may still be liable.
Warranty of a Quiet Possession
Section 12(2) provides for;
An applied warranty that the buyer shall have and enjoy
Quiet possession of the goods.
What is the scope of this provision? Is there any limitation or exception to this rule?
In Monforts vs. Marsden6 Lord Russel CJ took the view that section 12(2) was to be read
with qualification like those which limit the implied covenant for quiet enjoyment in conveyance
of real property by a grantor who conveys as a beneficial owner. He therefore imposed upon the
implied obligation a restriction limiting its operation only to acts and omissions of the vendor
and those acting by his authority.
In Niblet vs. Confectioner’s Material Co., Lord Atkin considered that the warranty has
been broken in as much as the buyer had to remove the labels before they could assume
possession of the goods.
In Mason vs. Burmingham Lord Green observed that in the language used in the Act,
there is no exception for any disturbance of title paramount. It has been held that the warranty
does not cover unlawful seizure by a third party. E.g. Seizure by Customs officers for failure to
pay custom duty- Udeku vs. Abosi
Warranty of Freedom from Encumbrance
Section 12(3) provides for

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An applied warranty that the goods shall be free from any charge or encumbrance in favor of any
third party not declared or known to the buyerorat the time when the contract is made.
This provision has a limited application because when there is an encumbrance on any
good in favor of a third party the goods may not be in possession of the setter.
In Lloyds & Scottish Finance Ltd vs. Modern Cars & Caravans Ltd’°
The Defendant bought a caravan from a debtor against whom a sheriff had issued and
served a writ of fifa. Soon afterwards, the defendant learnt of this situation but nevertheless sold
the caravan to the plaintiffs who let the caravan from the hirer. It was held inter alia that although
the defendant now obtained a good title from the debtor which they were able to transfer to
plaintiffs it was not free from the sheriff1s right and therefore they transferred it on breach of the
warranty that is free from charge or encumbrance in the provisions of section 12(3)
Correspondence with Description
Under section 13 of the Act of 1893— it is provided that:
Where there is a contract for the sale of goods by description, there is an implied condition that
the goods shall correspond with the description and if the sale is by sample as well as by
descriptions, it
Is not sufficient that the goods do not also correspond with the description.
In interpreting this section — description may be any statement made during
negotiations, in respect of the goods, such a statement may also be either a description or a term
of the contract. Description refers to particular class or kind of goods and statement essential to
the identification of the goods. I.e. to their place of origin or shipment, mode of packing. trade o
normal commercial understanding.
In T& J Harrison vs. Knowles & Foster - The sellers of two ships described them as
having each a dead weight of 460 tons. The capacity of the ships turned out to be 350 tons each.
The court of first instance held that the statement and description as to capacity to be a term of
the contract but on appeal, it was held that it was a mere representation which does not form part
of the contract.
Similarly in Osca Chess Ltd vs. Williams12
The defendant sold a car to the plaintiff, which he stated too be a ‘1948 Morris 10
Saloon” a description which he had taken from the log book of the car. The car later turned to be
a 1939 model, though of the same outward appearance. The court held: that the statement was
not a term of the contract but a mere innocent misrepresentation.
In Beal vs. Taylor
The defendant sold a car, which he advertised as Triumph Herald Convertible White
1962 model. The car turned out to be the front of 1948 Triumph Herald wedded with the rear of
1961 model. The court held that the statement constitutes a contractual description of the car and
section 13 was therefore applicable,
Section 13 has been held to apply not only to the description of the goods themselves but
also to the mode of packing them.
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 If the contract of sale of canned fruits specified that the goods will be packed in cases
containing 30 tin each but were packed in cases containing 24 tin each. The seller has breached
Section 13 of the Sale of Goods Act. Safe did not correspond with description.
Re: Moose & Co Ltd vs. Laudaver.& Co
The Court has gone further to say that if a written contract specified conditions of weight,
measurement and the like, those conditions must be complied with.
No doubt, there may be microscopic deviations which businessmen and lawyers will
ignore. But apart from this consideration, the right view is that the condition of the contract must
be strictly performed — Across Ltd vs. E.A. Ronnasen & Sons’5 A sale contract of quantity of
starves of half an inch thick. Only 5% of the supply corresponds with the description. The House
of Lord held
That the buyers were entitled to reject the goods because it did not correspond with the
description.
The term sales by description must apply to all cases where the purchaser has not seen the
goods but he is relying on the description alone,
Sale by description is also applicable to specific and ascertained goods displayed on a
counter. If a reference is made to specific goods, or goods of a kind, like woolen garment, hot
water bottle, second hand seeping machine e.t.c.
Sale by example
Section 13 also cover sale by sample. If sale is by sample it is reasonable to infer that the sample
describes the goods. Goods supplied or delivered must correspond with sample.
In Boshali vs. Allied Commercial Exporters Ltd6
There was a contract of sale of textile materials described as Quality As 1000. A sample
described as Quality AS 1000 was sent by post to the seller. The quantity later supplied did not
correspond with the sample. The court held that the buyer has a right to reject the goods as the
goods did not correspond with description and sample.
Quality and Fitness for Purpose
Section 14 of the Act recognizes the common law principle of caveat emptor and provides one of
the major exceptions to the rule. The section provides that except in so far as the section or any
trade usage permits or recognizes. there is an implied warranty or condition as to the quality or
fitness for any particular purpose of goods supplied under a contract of sale of goods. The
provision is to protect buyers from unscrupulous and fraudulent sellers.
Section 14(1) provides that where the buyer expressly or by implication makes known to
the seller the particular purpose for which the goods are required so as to show that the buyer
relies on the sellers skill or judgment and the goods are of a description which it is in the course
of the sellers business to supply (whether he is the manufacturer or not) there is an implied
condition that the goods shall be reasonably fit for that purpose. Provided that in the case of a
contract for the sale of a specified article under its patent or other trade name, there is no implied
condition as to its fitness for any particular purpose.

13
 For this section to apply, the following conditions must be fulfilled.
1. The buyer must have made known to the seller expressly or by implication the particular
purpose for which the goods are required. Where it is clear that the description of the goods point
to one particular purpose only or the purpose for which the goods are used is obvious, the law
implied that no further indication is needed.
Priet vs. Last
In this case, the buyer went to a shop and asked for a hot water bottle. The court held a hot water
bottle was required for a particular purpose within the provisions because it has only one purpose
and the buyer could only require it for that purpose.
In Grant vs. Austrialian Knitting Mill Ltd’8
The plaintiff had bought an under pant manufactured by the
Defendant and contact dermatitis after wearing it. The court held that there is no need to specify
the particular purpose which the buyer requires the goods which is nonetheless the particular
purpose within the meaning of the section because it is the only purpose for which any one
ordinarily want the goods.
In DIC Industries Ltd. vs. Jim fat Nig. Ltd. Defendant orally agreed to purchase from the
plaintiff 13 tons of coil wire of 16 bwg. The defendant refused to pay because he claimed that the
wire coil supplied was of inferior quality to the one he bargained for. The court held that the coil
supplied was capable of being used for several purpose and there was no evidence that the
defendant indicated
The purpose he wanted the wire coil for which the plaintiff relied on their skill and judgment, to
attract the condition, the buyer must make the purpose he wants the goods known to the seller.
2. The buyer must have relied on the skill and judgment of the seller, the indication that the
buyer requires the goods for a particular purpose must be given in such circumstances as to show
that he relied on the skill and judgment of the seller.
In ljeoma vs. mid motors Ltd.
Plaintiff purchased from defendant a dealer in motor vehicles a Nysu Zuk Truck. He requires
these vehicles for the purpose of carrying passengers within Lagos but there was no evidence
that this was revealed to the defendant at the time of the sale. The vehicle developed series of
faults and eventually proved to be unsuitable for this purpose. The court held that there was no
breach of section 14(1) on the evidence available before the court.
3. Goods must be of the description which it is in the ordinary course of the sellers business
to supply. Description has been described to mean goods of a kind of goods of that description.
4. The goods should not have been sold under its patent or other trade name. This rule
applies to manufactured goods only.
In Brissol Trumways Ltd vs. Fiat Motors Ltd.
The plaintiff bought from the defendant 243/4 h.p Fiat Omnibus which they had previously
inspected. They had informed, the defendant that the Omnibus id Chassis were required for

14
conveyance of passengers in a hilIy district, on delivery, they were found to be unfit for that
purpose. It was held that the proviso did not apply on the finding of fact the there was no such
thing known to the trade as a fiat omnibus.
The exception in the provision was given because if a man orders in express terms an
article known by a patent or trade name under that name and gets it. He cannot complain that it
will not answer some specific purpose for which he wanted it, even though he told the vendor
before he ordered ft the purpose for which he required it. The court concluded that it is one thing
to order an article known as a Fiat Omnibus an order which is intelligible only if there be such an
article known to the public or the trade.
The proviso is restricted to goods bought on its trade name or patent only where the buyer
relies on trade name is different from where the buyer relies on skill and judgment of the seller.
Where the buyer relies on trade name, he cannot complain but where he relied on skill and
judgment of seller, the goods must be fit for purpose.
In Onotu vs. AdeIeke
The plaintiff approached the defendant agent and informed him that he wanted a brand of
new car. The agent in pursuance of a Contrast of sale delivered to him second hand car which
subsequently broke & several times. It was not until the pIaintiff sent the car for repairs at a
garage that it was revealed that it wasn’t a
New car but a reconditioned or second hand car. The court held that fitness for purpose in the
contract of sale of a car means that the car was reasonably fit to be driven on the road for
reasonable time and the fact that it broke down five days after its purchase was evidence that it
wasn’t fit for the purpose at the time of the sale.
In Griffith vs. Peter Conway Ltd23
Plaintiff bought a Harris Coat and he contacted dermatitis from it when he wore it. He
caught dermatitis because he has a sensitive skin, It was held that, as the coat would not have
been harmful if put to ordinary use, there is a breach of Section 14(1).

Conditions of Merchantable Quality

Section 14(2) of the 1893Act provides that;
Where goods are bought by description from a seller who deals in goods of that
description (whether he be manufacturer or not) there is an implied condition that the goods shall
be of merchantable quality, provided that if the buyer has examined the goods, there shall be no
implied condition as regard defects which
Such examination ought to have revealed.
In this section three factors are pertinent to the application of the condition:
1. Conditions to be satisfied before the application of this section
2. The obligation or responsibility imposed on the seller
3. What are the exceptions to the rule or condition

15
 The sale should be by description and the seller must be a person who deals in goods of
that description. Interpreting this section, it has been held that if a seller regularly deals in goods
of the description of the goods sold or if he accepts orders to supply them in the way of business
(whether or not he has accepted such orders before) then section 14(2) will apply.
Goods are of merchantable quality if they are fit for the purpose for which goods of that
kind are commonly bought as it is reasonable to expect having regard to any description applied
to them, the price and all other circumstances.
In British & Overseas Credit Itd vs. Animashaun
The defendant bought 700 cease to tomato paste from the plaintiff,
Most of the consignments were declared unfit for human consumption by
Health Authority. Dfendant was invited to come and examine the goods
which he did and still bought the goods. After delivery he refused to pay
for the goods on the ground that the goods were not of merchantable
quality. The court held that since the defendant would have, discovered
any defect while examining the goods, he cannot reject the goods.
See also the case of Thornett vs. Beer & Sons Ltd Wren vs. Helt Beer contained Arsenic
which was poisonous. Held beer was not of merchantable quality.
Merchantable Quality was defined as the article of such quality or condition that a reasonable
man when acting reasonably would after a full examination accept under the circumstances of
the case in performance of his offer to buyer whether to buy for his own use or to sell again.
On sale of second hand car, it is merchantable if it is in usable condition even though not
perfect. A buyer should know that when he buys a second hand car, defects might appear sooner
or later. Even when he buys from a dealer, the most he can require is that it should be reasonable
fit for purpose of being driven along the road, except, there is an express warranty.
Section 15(1)—A sale by sample is where there is a term in the contract expressly or implicitly
to that effect. Section 15 provides: In case of a contract for sale by sample.
a. There is an implied condition that the bulk shall correspond with the sample in quality.
b. There is an implied condition that the buyer shall have a reasonable opportunity of
comparing the bulk with sample.
c. There is an implied condition that the goods shall be free from any defect, rendering them
unmerchantable, which would not be apparent on reasonable examination of the sample.
The buyer is expected under this section to carry out every test that may be practicable.
However, not extreme ingenuity is expected from the buyer but reasonableness. Godleyvs. Perry
In Boshali vs. Allied Commercial Exporter Ltd
The office of sample is to present to the buyer, the real meaning and intention of parties
with regard to the subject matter of contract which owing to imperfection of language it may be
difficult or impossible to express in words. The sample speaks for itself.
Exclusion Clauses

16
 Exclusion, exemption or exception clauses refer to terms in a contract which are intended
to abrogate or negative, limit or vary a legal right, duty, liability or remedy of a party which
might otherwise arise,
In the case of sale of goods, any of the implied warranties and conditions discussed above
may be excluded, varied or abrogated.
Thus in recognition of the common law concept of freedom of contract, the Sale of
Goods Act 1893 in section 55
In Bryne vs. Reid
Partnership articles between B. and R. gave B power to introduce into the
partnership any of his Sons of his sons on their attaining 21. His son, S attained 21
and B therefore proposed to make him a partner. R refused to consent. Held, R
could not prevent S. from being a partner as the clause in the articles operated as
consent.
If under the partnership articles a partner is entitled to nominate by his will a
person to succeed him in the partnership the party nominated cannot enforce the
nomination as he is not a party to the partnership agreement (Frarklin and
Swathing ‘s Arbn)
6. Any deference arising to ordinary matters connected with the partnership business
may be decided by a majority of partners: but no change may be made in the
nature of all partnership business without the consent of all. The majority of the
partners, in exercising their powers, must do so in good faith, and after giving
consideration to the views of the majority. It is not competent for a majority to act
without consulting the minority.
7. A majority of partners cannot expel a partner unless a power to do so h been
reserved by the articles of partnership (S.25)
8. A partner is entitled to be indemnified by the firm in respect of payment made and
liabilities incurred.
a. In the ordinary and proper business of the firm, or
b. About anything necessarily done for the preservation of the business or
property of the firm. If, for example, A partner, to save the firm credit, has
paid its debt out his own pocket, he is entitled to an indemnity.
9. A partner making, for the purpose of the partnership any advance beyond the
amount of capital which he has agreed to subscribe is entitled to interest on that
no that amount at five percent.
10. The partnership books are to be kept at the place of business of the partnership (or the
principal place, if there is more than one) and every partner may, when he thinks
fit, has access to and inspect and copy any of them. A partner can have the books
examined on his behalf by an agent.

17
 Partnership articles provided that proper books of account should be kept. Held
any partner was entitled to have the books examined on his behalf by an agent,
provided
i. The agent was one to who no reasonable objection could be taken by the other
partner, and
ii. The agent would undertake not to make of the information obtained except for
the purpose of confidentially advising his principal. Bevan vs Webb.
In addition to the above, every partner is under a duty to his fellow partners;
a. To render true accounted and full information on all things affecting the
partnership (S. 28)
b. To account to the firm for any benefit by him, without the consent of the other
partners, from an transaction concerning the partnership, or from any use by him
of the partnership property, name or business connection (s.29) (1).
X,Y and Z were partners, X without the knowledge of Y and Z obtained for his
own benefit the renewal of the lease of the business
Premises, that lease belonged to the partnership. Held, the lease so renewed was
partnership property, Featherstonhaugh vs. Fewwick.
Each partner must also disclose any secret profit made in dealing with the firm
and account for that profit to the firm.
B. and C. were partners and C was employed k buy sugar for the firm. C. without
B’s knowledge, sold goods of his own to the firm at the market price and made a
considerable profit. Held he must account to the firm for profit made Bentley vs.
Craven
If one partner sell his share of the partnership business to another partner, and the
purchaser knows, and was aware that he knows more about the partnership
accounts, than the vendor, then the purchaser must disclose his knowledge to the
vendor, otherwise the sale is void able at the vendors option(Law vs. Laws)
c. Not to compete with the firm
Any partner without the consent of the others, carrying on a competing business
must account to the firm for all profits so made (S. 30). There is nothing,
however, in the absence of an agreement to the contrary, to prevent a partner from
carrying on a non-competing business which does not involve the use of the
partner’s property from the partnership office for use elsewhere.
A partner is not entitled to remove partnership documents and other confidential
information behind the back of the other partners from the partnership office for
use elsewhere.
A. Assignment of Shares in Partnership

18
 If a partner mortgages or assigns his share in the partnership, the mortgagee or assignee is
not entitled to interfere in the management of the partnership business, or to require any
partnership accounts, or to inspect the partnership books, All he is entitled to is to receive the
share of profit to which the assigning partner would otherwise be entitled, and he must accept the
account of profits agreed to by the partners. (S. 3).
A, B, and C were partners under partnership articles which made no provision for the
payment of salaries to any of them. A charged his share to X, subsequently, A, B and C made an
agreement under which in consideration of their doing more work, for the business. They
received salaries. Held as the agreements was bonafide one it was binding on X: ReGarwood’s
Trust.
In the case of dissolution of partnership, the assignee is entitled to the share of the
assigning partner and in order to ascertain that share he is entitled to an account section 31(2).
One of two partners mortgaged his share in the partnership to X .Afterward, without the
mortgagee’s consent , the partners agreed to a dissolution on the terms that the partner who had
mortgaged should sell his share to his co-partners for a sum less than the mortgage debt. Held the
agreement was not binding on X, who was entitled to an account on the dissolution of the
partnership. Watts vs.Driscoll.

CHAPTER SIX
DISSOLUTION OF PARTNERSHIP
A partnership may be dissolved by order of the court, but there are many cases when
dissolution occurs without any order. Dissolution occurs without any order of the court by
1. Expiration or Notice (S.32) Subject to any agreement between the parties, a partnership
is dissolved.
a. If entered into for a fixed term, by the expiration of that term
b. If entered into for a simple adventure or undertaken by the termination of that adventure
or undertaking.

19
c. If entered into fro an undefined time, by any partner giving Notice of dissolution to the
other. Such a partnership is a partnership at will and may be determined at any time on
notice. Where the partnership was originally constituted by deed notice in writing is
required (S. 26), but in other cases
verbal notice is sufficient.
Moss vs. Eliphick1
M and E were partners under an agreement which provided that the partnership should be
terminated by mutual arrangement only. Held one partner could not terminate the partnership
without the consent of the other.
2. Bankruptcy or Death (S. 33) Subject to any agreement between the partners. A
partnership is dissolved by the death or bankruptcy of any partner. Often, however, the partners
do not want death, bankruptcy or retirement of one partner to dissolve the partnership, so it is
frequently provided in the partnership deed that in such event the continuing partners shall have
the option of purchasing the share of that partner at a valuation.
If one partner sends notice of dissolution to the other partner, and dies before the other partner
received the notice, the partnership is dissolved by death and not by notice. (McLeod vs.
DoUng2).
3. Charge (S. 33) If one partner suffers his share to be charged to his separate debt, the
others have the option of dissolving the partnership.
4. Illegality (S. 34) if an event happens which makes it unlawful Ióc the business of the
firm to be carried in or for the members of the firm to carry it on in partnership, the partnership is
dissolved.
A resident in England and B in Utopia are partners. War broke out between England and Utopia.
The partnership has become unlawful and is dissolved automatically on the outbreak of war.
On application by a partner, the court may decree dissolution of the partnership in the
following cases (S. 35, as amended).
On application by the partner, the court may decree dissolution of the partnership in the
following cases (S. 35, as amended).
1. When a partner is incapable b reason of mental disorder of managing d administering his
property and affairs.
2. When a partner, other than the partner suing, in any other way becomes permanently
incapable of performing his duty under the contract of partnership.
3. When a partner, other than the partner suing has been guilty of conduct calculated to affect
prejudicially the carrying on of the business,
C and E were partners and C was convicted of travelling on the rail way without a ticket and
with intent to defraud. Held as the conviction was for dishonesty, it was calculated to be
detrimental to the partnership business.
Carmichael vs. Evans3.

20
4. When a partner, other than the partner suing willfully or persistently commits a breach of
a partnership agreement. Or otherwise so conducts himself that it is not reasonably practicable
for other partners to carry on business in partnership with him.
5. When the business of the partnership can only be carried on at a loss.
6. Whenever the court think it just and equitable to dissolve the partnership. This provision
enables the court to decree dissolution in any case not specifically covered by the first five cases
if it thinks it equitable to do so, e.g. when the partnership has reached a deadlock.
W. and R., who had traded separately as tobacco and cigarette manufactures agreed to
amalgamate and form a private company. W and R were the directors and had equal voting
power. after a time the relations between them became so strained that neither would speak to the
other, communications having to be conveyed between them through the secretary of the
company, the company had made and continued to make profits it was also held that a deadlock
has made ground for dissolution in the case of a partnership and as this was, in substance, a
partnership in the guise of a private company it was just and equitable that the company should
be wound up: Re yenidje Tobacco ltd.
On dissolution, any partner may give public notice of dissolution and can compel the
other partners to sign the necessary notices of dissolution (S.37). The effect of a dissolution is to
revoke the power of each partner to bind the firm except to complete transactions begun, but not
finished, at the time of the dissolutions and to do what may be necessary to wind up the
partnership affairs
(S. 38).
A surviving partner carried on business in the partnership name and continued the
partnership banking account which was overdrawn at the death of the deceased partner, and
remained overdrawn until the final winding up of the business to secure the overdraft be
deposited with the bank the title deeds of partnership real estate. Held s as the deposit was made
for the purpose of winding up the partnership estate, it was binding on the executors of the
deceased partner. Re Bourn.
To wind up the partnership, the court may appoint a receiver and manager. A receiver
receives the income and pays the necessary expenses. While a manager manages the business
with the object, a rule of its being sold as a going concern.
Notwithstanding the dissolution of a partnership, where assets remain undistributed, the
duty of good faith between the parties continues. Thus, where a leasehold interest had been a
partnership asset and the assets of a dissolved partnership remained undistributed. One of the
former partners could out, acquires the reversion for himself without giving his former partners
the opportunity of sharing in the acquisition. Thompson’s Trustee in BarnyvsHeaton.
Application of Partnership Property on Dissolution
On dissolution each partner is entitled to have the partnership property, including the
goodwill, sold, and the proceeds applied payment of the debts and liabilities of the firm. In the
case of the bankruptcy of any of the partners the rule is that the partnership estate is applicable in
the first instance in payment of the partnership debts and the separate estate is dealt with as part
of the partnership estate. A surplus of the partnership estate is dealt with as part of the separate
estate of each partner in such proportion as he shares in the partnership estate.
21
 Example A and B were partners and became bankrupt A’s private debts are £1,000. And
B’s £1 ,500 the partnership debts are £5,000 and the assets £6,000 the partnership creditors will
be paid in full, and the surplus £1000 will be divided among the private creditors of A and B in
proportion to their rights in the partnership property.
If the partnership assets are insufficient to discharge then debts and liabilities of the firm,
and partners must bear the deficiency in the proportion in which they were entitled to share
profits. The order of application of assets to meet losses is
a. Out of profits
b. Out of capital
c. By the partners individually in the proportion in which they were entitle to share
profits 9s. 44(a).
Apart from this, the assets, including any sum contributed by the partners to make
up losses w deficits of capitals are applied (S.44(b).
1. In paying the debts and liabilities of the firm to persons who are not partners.
2. In paying each partner rateably what is due from the firm to him for advances as
distinguished from capital.
When a partnership wound up, a partnership brought action against the other partners for the
recovery of a loan made by him to the partnership. Held the action was misconceived and
had to dismissed. A partner advancing money to the partnership. was advancing some of the
money to himself, and the only way in which the money could be recovered was
proceedings for taking the account of the partnership, as provided by S. 44(b) (2) Green vs
HertZag.
3. In paying each partner rateably what is due to him in respect of capital.
4. The ultimate residue if any, to be divided among the partners in the proportion in the which
profits are divisible.
If the assets, are sufficient to pay (1) and (2), above, but insufficient to repay to each partner his
full capital, the deficiency in the capital is to be borne by the partners in the proportion in which
profits are divisible.
GM. and W. were partners on the terms that profits should be divided equally. The capital
was contributed unequally. G.
Contributing more than M. on dissolution, the assets, though sufficient to pay the creditors, were
insufficient to repay the capital in full. Held, the true principle of division was for each partner to
be treated as liable to contribute a third of the deficiency, and then to apply the assets in paying
to each partner rateably his share of capital: Gamervs. Murray.
If one partner has paid a premium on entering into a partnership fora fixed term and the
partnership is dissolved before the expiration of the term, otherwise than by the death of a
partner, the court may order the return of such part of the premium as may be just, having regard
to the terms of the partnership and the time it has continued. Unless (S. 40).
a. The dissolution is due to the misconduct of the partner who paid the premium or
22
 b. The partnership has been dissolved by an agreement containing no provision for a
return for a return of the premium. When a partnership in rescinded on the ground of the fraud or
representation of one of the partners, the partner entitled to
rescind is entitled.(S.41).
a. To a lien on the partnership assets, after the liabilities have been discharged, for any
sum has contributed;
b. To stand in the place of any of the firm’s creditors for any payment he has made to
them to discharge the firms liabilities. .
c. To be indemnified by the person guilty of the fraud or misrepresentation against al the
firm’s liabilities. When a partner dies or retires and the surviving partners carry on the
business of the firm without any settlement of account with the late partner or his estate,
the outgoing partner or the estate of the deceased partner may:
a. Claim such share of the profits made since the dissolution as in attributable to his share of the
assets; or
b. Claim interest at five percent on his share of the partnership assets (S. 42).
In Manley vs. Sartori
C and M, carried on business in partnership, on C’s death the partnership was dissolved.
But M. earned on the business for a further period. In an action to decide how the profit earned
since C’s death should be divided, held, Cs estate was entitled to a share in such part of
proportionate to his share in the total partnership asset and that inquiry should be made k
ascertain what part of the profits had been earned otherwise than th-c4 the use of his
management of the business.
In Pathrana vs. Pathrana1°
R and A were partners ii set1g petrol at a service station in Ceylon. A gave notice
terminating partnership, but before its termination procure new agreement with the petrol
company giving him the sole agency, and after termination continued trading on the partnership
property under his own name R discovered the new agreement and claimed an account for his
share in the profits. Held R. was entitled there to under section 42 of the Partnership Act 1890
(Which applied in Ceyton). Further. R’s claim was also justified by virtue of section 29 applied.

3. Goodwill
Goodwill is the benefits arising from a firm’s business connection or reputation. It is
defined by Lord Elton in Cruttwell Vs. Lye as the probability that the old customers will resort to
the old place”. This definition is not complete and must be supplemented by that given by Wood
V.C. in Churton Vs. Douglas12. “Goodwill must mean every advantage every positive
advantage, if I may so
Express it, as contrasted with the negative advantage of the late partner not carrying on the
business himself- that has been acquired by the old firm, or with any other matter carrying with it
the benefit of the business’. On a purchase of goodwill the purchaser usually obtains the
premises of the old firm and the right to use the name of the old firm and in all cases, the right to
23
represent himself as the successor of the old firm. Goodwill is a partnership asset and on the
death or retirement of a partner it does not survive to the continuing partners, but must be bought
by them. if, on a dissolution of partnership, the goodwill is not sold, each of the partners is
entitled to carry o business under the name of the old firm, provided he does not expose his
former partners to any risk of liability (Burchell vs. Wilde’3). For this reason, when there is an
agreement that on dissolution the partnership assets, including goodwill, shall be taken by one
partner at a valuation, the goodwill must be valued on the footing that the outgoing partner is
entitled to carry on a similar business.
The rights and duties between the vendor and the purchaser of goodwill, in the absence of
agreement to the contrary, are:
1. The vendor may carry on a similar business to that sold in competition with the purchaser, but
he must not use the old firm name or represent himself as continuing the old business.
2. The vendor may not canvas the customers of the old firm or solicit any customer of the old
firm to deal with him (Trego vs. Hunt14).
3. The vendor may advertise the fact that he is carrying on business as long as he does not offend
the two preceding rules (Labourchere vs. Dawson15) R.C. and J.D carried on a business as J.D.
& Co J.D. retired and B and C carried on the business under a new name with the
addition of business in the premises adjoining the old firm’s premises in the name of J.D & Co
and circulating the old firm customers in the immediate vicinity, but.
(2) although his name was J.D. he could not carry on his new business in the name of J.D.
and Co and
(3) he could be restrained by the old firm from canvassing their customers. Churton vs.
Douglas16.
4. Unless the right to use the old firm name is expressly assigned the purchaser of the
goodwill must not use that name so as to expose y of the partners in the old firm to liability.
(Townsend vs. Jarnal) When a partnership is dissolved on the terms of one partner taking over
the assets, the other partners must not solicit the
Customers of the firm.
A partnership between X V was dissolved on the terms that Y retained the “Assets’
Goodwill’s was not specifically mentioned. Held the assets included good will, and X would be
restrained by injunction from canvassing the customers of the old firm: Jennings vs. Jennings.
When the deed of partnership provides that on the death of a partner the surviving partner
shall acquire the deceased partner’s share of the assets an w be granted to restrain an executor of
the deceased p1ier from soliciting customers of the firm (Borne vs. Wicker)
When the assignment of the goodwill of a business is involuntary, s on these by the
trustee in bankruptcy of the business carried on the bankrupt, the purchaser cannot restrain the
bankruptcy of the business carried on by the bankrupt, the purchaser cannot restrain the bankrupt
from canvassing his old customers (Walker vs. Mottram’). Similarly, if a debtor has assigned all
his property to a trustee for the benefit of his creditors, he cannot be restrained by the trustee
from canvassing his old customers (Pareyvs. Cooper.

24
The Rights and Duties of a Limited Partner Are:
1. He may not take part in the management of the partnership business. If he does so he
becomes liable for all the firm’s debt and liabilities during that period. He has no power
to bind the firm.
2. He may inspect the firm’s books and examine into the state d prospects of the partnership
business and may advice with partnership there on.
3. His death, bankruptcy or mental disorder does not dissolve the partnership.
4. He can assign his share with the consent of the general partners
5. He cannot dissolve the partnership b notice. Any partner who is not a limited partner is a
general partner. The general partner’s manage the partnership business and b a security can
decide differences arising out of the ordinary conduct of the partnership business. The can also
introduce a new partner any come a limited partner by registering the change with the register. In
the event of a dissolution of the partnership, its affairs are would up by the general partners,
unless the court otherwise under,

25
 CHAPTER SEVEN
THE LAW OF AGENCY
Agents play a vital commercial activities. Commerce would literally grind to a halt if
businessmen and merchants could not employ the service of factors, brokers, forwarding agents,
estate agent auctioneers etc and are expected to do everything themselves. The primary role of
the agents in commerce -egc4a and conclude contracts on behalf of someone else, the pincipaL1
The agent may possess special skill or expertise or have special knowledge of a particular
market, area or commodity, the principal may need someone ‘on the spot’ to negotiate the
contract particularly in an international context or the principal may simply be too busy to make
every contract personally. Agents are to be found in all advance or developed societies and their
activities are an inevitable feature of a developed economy.2
Agents are middlemen and are primarily concerned with the negotiation and conclusion of
contracts. Agency is a flexible and complex concept which this chapter shall examine briefly.
The Law of Agency
The law regulating agency relationship in Nigeria the received English law as reflected in
common law and equity. This law deals with the relationship which arises where a person
expressly or implicitly employs another or deemed to have employed such person by law, to
perform some tasks tor and on his behalf. it is not a relationship of employer and employee but a
more complicated legal relationship which was developed by the law merchants in the medieval
period. This fact makes the law of agency Part and parcel of the lex mercatoria (commercial law)
or mercantile law.
Nature of Agency
Definition

An agency is a relationship which subsists between one person called the principal and
another called the agent by which the later is by Law invested with legal authority to alter the
relationship of the former with the third parties3 or a person who is recognized by law as having
power to affect the legal rights, liabilities and relationship of another person, the principal.
Whether an agency relationship exists or not in a particular circumstances is a question
of both fact and law. However, for agency re1xistp to exist between a principal and agent, the
acts of the ager must produce legal consequence, there must be express or implied consent of the
parties and the principal must have expressly or implicitly authorized the agent to act for him or
on his behalf either by words or conduct.

26
 It has been argued that the consent of the parties may not a conclusive determinant of
existence of agency relationship but another actual, real or apparent authority of the principal
may be presumed in certain cases and this may bind the principal. Freeman and hickervs.
Burkhust Park Properties Ltd.5
Distinction Between Agency and other Similar Relationships
Although agency is a common commercial phenomenon, it is not always easy to
recognize an agent. And there are some who engage in commercial activities who are called
agents but are not. It is therefore necessary to distinguish between agency and other relationship
that may confuse a student of commercial law. Such other relationships are: Trustee servant,
Bailee and independent contractor etc.

Agent and Trustee

A trustee is a person holding property or money for or o behalf of someone else at the
direction of another party. Trusteeship creates a tripartite relationship of a trustee, settler and
beneficiary just as agency is tripartite in nature that it involves a principal, agent, and third party
with whom the agent relates and concludes business. In certain cases an agent may be treated as
trustee of his principal. However, there are still certain distinguishing factors between agency
relationship and trustee. These are:
1. The relationship of Agency is in most cases a product of consensual agreement
whereas trust is not in most cases. A trust can be created without the consent of either the
trustee or the beneficiary of the trust.
2. An agent is normally appointed by the principal whereas a trustee is not usually
appointed by the beneficiary.
3. The agent is usually the representative of the principal whereas the trustee
representative of the beneficiary of the trust.
4. Actions between pr and agent can become statute barred under the limitation Act but in
trust limitation Act does not apply A beneficiary has right and interest in the trust which is not
defeasible by time.
Agent and Servant
In master and servant relationship, the master always has the right to control the due
execution by the servant of the terms of his employment. While a servant merely works for his
master, an agent acts for and in place of his principal to effect legal relations with third parties.
Agency is representative in character and has a derivative authority which gives the agent a
discretionary power in executing the terms of the contract of an agency. A servant does not
possess those attribute.
Agent and Independent Contractor
An independent contractor renders services to his employer in the course of his
occupation and calling or expertise. His contract with his employer relates to results to be
achieved and not the mode achieving the result. An independent contractor employs his own
means and skill in the performance of the contract; he is not under the control and direction of
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his employer in relation to the performance of the contract. An independent contractor may
under certain circumstances be his employer’s agent but the fact SI remains that he is not a
general agent of his employer.

Agent and Baillee

A bailee is a person who takes possession of a property far and on behalf of another
person called the bailor either for safekeeping or to deal with in manner indicated or prescribed
by the bailer. A bailee is not an agent of the bailor strictly speaking since h has no authority to
deal with the property in any other way except in accordance with the instruction of the bailor.
Though a situation may arise in which a bailee may also double an agent but in real leg sense a
bailee is not an agent of the bailor.
Agent in Fact but not in Name
Company Directors and other officers
A company is a legal person, but as an artificial person it must act through human agents.
Authority to act on behalf of and the name of the company is vested primarily in the board of
directors as a whole. They therefore act as company agents. In general, the company must act
collectively. However, a company’s article a association will generally contain the power for the
board to delegate part of or all of its functions to individual members of the board and is
common for one or more executive director to be appointed manage the day to day affairs of the
company. Powers of management may be delegated to other officers of the company the
secretary but there are rarely called agents but in fact they agents.
Partners
A partnership has no Legal identity separate from the members. By statute, every partner
in a firm is an agent of the firm and all other partners of the firm for the purpose of the business
of the firm.
Professionals
Professionals acting on behalf of clients may be the agents of those clients for limited purpose.
Thus a solicitor conducting litigation on behalf of a client is the client’s agent Wand may have
authority to make settlement of the case binding on the client. Similarly an Accountant who
negotiates on behalf of a client with Inland Revenue Service is his client’s agent and the
accountant’s statements or agreement may bind his client according to the principles of agency.
Agency Relationship in Commercial Transactions (Types of Agency)
Although the primary role of agents in Commerce is to negotiate and/or enter ink
contracts on behalf of their principals, a number of different classes of agent are identified both
in practice and in case law. These are:
a. General and Special Agents
The distinction between general or special agents depends on the nature of the authority
given by the principal to the agent. A general agent has general authority to act for the principal

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in a particular trade or class of transactions. A special agent is authorized only to act in one
particular transaction.

b. A Commissioner Agent
A commission agent acts to buy or sell on• behalf of a principal but is not authorized to
create privity of contract with whom certain goods have been consigned for a foreign principal.
He does not bind his principal contractually to a third party but he stands in the position of a
principal to such third parties.
In Ireland vs. Livingstone, Lord Blackburn held that a person who supplies goods to
commission agents sell them to him and not his foreign principal. The property in the goods
passed from the manufacturer or producer to the commission agent. And a commission agent in
relation to the third part is principal but in relation to the principal, he is an agent.
c. Mercantile Agent or Commercial Agent
A mercantile or commercial agent is an agent having in the ordinary course of his
business as such agent authority to sell goods or to consign goods for the purpose of sale or to
buy goods or raise money on the security of goods. He is always in the possession of the goods
to be sold. A commercial or mercantile agent can either be a factor, a broker or a Del credere
agent.
a. Factor: A factor which is not defined in Factors Act1889 has been judicially defined as a
mercantile agent who has been with possession of goods for sale only.
He may sell for a disclosed or undisclosed principal. Stevens Vs. BiIlar8And Boning vs.
Corrie.7
b. Broker: In Summit Finance Ltd vs. Iron Baba & Sons Ltd8 it was held that a broker is an
agent. A broker is a mercantile agent who is employed to make contract with third parties for the
purchase of goods or property or for the sale of his principal’s goods or property of which he is
in possession or document of title thereto.
He is employed to make contact or bargas between persons in matters of trade, commerce
and navigation. He is a mere negotiator who is not in possession of the goods.
c. Del Credere Agent
A Del Credere Agent negotiates contract for a principal and guarantees to the principal
that the third party will pay any sum due under the contract. This may be important where the
third party is not known to the principal. The Del Credere agent charges the principal an extra
commission for providing the guarantee.
There are other commercial marketing arrangements such as Distributorship, franchising,
confirming house, licensing and the use of subsidiaries which are also in form of limited agency.
Creation of Agency
Our concern, here, is how is agency relationship formed or created? Before an agency
relationship is created, there must be a competent principal and a competent agent in law. The

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rule of law is that no one can do through another, what he cannot do himself thus an infant, an
insane person or a drunkard cannot be a principal but in certain circumstances they can be agents
but liability in such circumstances are also limited and restricted.
No particular formality is required in creation of an agency relationship. It could be
created in writing, orally or by conduct of the parties. However, certain category of agency be
made in writing i.e. power of Attorney, and agent appointed to execute a deed must himself be
appointed by a deed. A solicitor may be appointed in writing.
Agency can be created by an agreement, by estoppel, by ratification and by necessity.
a. Agency by Agreement
This arises where a person called the principal indicated to the other person called the
agent of his intention to engage him to act for him or on his behalf. No particular form is
required for such agreement, it may be express, implied or by conduct. The relationship of
principal and agent can only be established by the consent of the principal and the agent. It is
immaterial that they call the relationship a different name.
b. Agency by Estoppel
This arises where a principal intentionally or otherwise causes a third party to believe that
another is his agent and a third party so relies on it in dealing with the supposed agent, the
principal will be estopped from denying the existence of an agency relationship. Agency by
estoppel is just like the doctrine of estoppel in the general law of contract based on ‘holding out’
by the principal or upon ostensible authority of the agent.
For agency by estoppel to be inferred from any circumstance, there must be a
representation or conduct by the principal showing that the supposed agent has altered his
position to his detriment by suffering some loss, or incurring some expenses. The representation
must be clear, unambiguous; it must have been the proximate cause of the loss or detriment. The
supposed agent must also have acted honestly.
c. Agency by Ratification
An agency by ratification is created when an alleged principal accepts or otherwise
affirms the act or conduct of one purporting to act on his behalf even though there was no
agreement or any express or implied authority authorizing the act. Ratification is the subsequent
authorization of an unauthorized act as if it had been authorized ab initio. A good example is
ratification of pre incorporation contract by the company after its incorporation.
For ratification to be valid and effective, the agent whose act is sought to be ratified must
have acted for the principal, there must have been a competent principal and the principal must
be capable of doing the act himself, the ratification must be done within a reasonable time or
time limit and ratification must impartial and unconditional. Ratification can be by express
conduct like acquiescence. The effect of ratification is that the principal accepts responsibility
and liability for the act of the agent.

d. Agency by necessity
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 This is an agency by operation of law this arises in cases of emergency or where
irreparable loss should be avoided or where injury or damage should be prevented or reduced.
For example, a deserted legally married wife is an agent of necessity too pledges her husband’s
credit for necessaries.
This principle relate to only marriage under the Act where a moral duty exist in a case of
carriage of goods by sea or rail and there is possibility of the goods perishing, damaging or lost
due to no fault of the carrier, the carrier becomes an agent of necessity for the purpose of
ameliorating loss, he can sell the goods on behalf of the owner. For his agency to be enforceable.
a. There must be an emergency situation necessitating an instant action.
b. It must not impossible for the agent to communicate with the principal and
c. That t he action taken was reasonably necessary having regard to the circumstances of the
case and
d. That the supposed agent acted bonafide and in the interest of the principal
Duty of agent to principal. The agent in any contract of agency owes certain duties to the
principal which arises out of their agency relationship. These duties are:
1. Duty to perform:
An agent has a duty to perform according to the terms and conditions in the contract of
agency. Where the contract is in writing there is usually no dispute as t o the scope of the
authority of the agent and where there is no excluding or limiting terms the agent must carry out
the business he has undertaken. He will be liable for breach of contract if he fails to perform his
obligation in accordance with terms of the contract. An agent may also be liable for negligence
or for any loss caused to his principal. Where it is apparent that he cannot perform the contract,
he must inform the principal within a reasonable time.
2. Duty of Obedience and Fidelity
An agent cannot depart from the instruction of his principal. This instruction he can carry
out within the legal bounds of his professional discretion and judgment. In an ambiguous
situation, the agent is to act fairly and in the interest of the principal and where the agent is a
professional, he is expected to act on the instruction of the principal subject to any custom or
usage of the particular trade, business or profession to which the agent belongs.
3. Duty of Care and Skill
An agent must exhibit reasonable care, skill and diligence. The degree of care, skill and
diligence required of an agent may depend whether he is a gratuitous agent or an agent for
reward. An agent for reward has a higher duty of care, skill and diligence than a gratuitous agent.
4. Duty to Perform Personally
Because of the confidential nature of agency relationship an agent is expected to perform
personally. The maxim delegates non potest delegare applies to contract of agency. An agent can
only delegagte his authority with the consent of h is principal or in a situation where the law
allows him.
Exception to the rule of non-delegation of authority
1. An agent m ay delegate his function or duty where he has express authority of the
principal
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 2. Where no personal confidence is reposed in him by the principal
3. Where his duty requires no particular skill or discretion
4. Where there is an emergency requiring immediate action in order to protect the interest
of the principal.
5. Where the nature of the agency itself necessitates a partial or total delegation
6. Where the custom or usage of the business involved allows it.
7. Where the authority to delegate derived from a statute.
5. Duty to Act in Good Faith
Since the agency relationship is a fiduciary one, an agent has a duty to act in good faith.
He must not allow his interest to conflict with that of his principal. He must not make secret
profit, take bribe or other benefits. He also has a duty to account to his principal and he has a
duty to disclose all facts within his knowledge about the transaction to his principal. He must not
use the property for himself without the principal’s consent. Where he sells his own property to
his principal, he must disclose to the principal and the profit he makes therein. Where he buys his
principal’s property, and he maixes gain or profit he must disclose and where he receives
commission, profit or gain from both his principal and any third party, he must disclose to the
principal.
6 Duty to Account
It is the duty of an agent to keep and render proper and accurate account of his
stewardship to his principal in respect of money and property of the principal. This duty extends
to making available to his principal or (his personal representatives books of record and
account). He must not mix his money with that of his principal. He must also have an account for
his principal in the bank.
Principal’s Duties to his Agent
Just as the agent has duties to perform for the principal there is a corollary that the principal also
owe his agent some duties under the law. The duties are:
1. Duty to Remunerate
A principal has a duty to remunerate his agent who has earned the remuneration. For an
agent to be entitled to remuneration, he must have performed his obligation under the contract.
The amount of remuneration may be fixed by the contract but when it is not fixed, the principal
is bound to pay a reasonable fee or pay according to the usage or custom of the trade, profession
or business.
Earning the income or remuneration by agent means when the agent has done all that is
expected of him in facilitating and making the transaction possible and he must be the effective
cause of the transaction from which the remuneration accrues and must have fulfilled all the
conditions for the remuneration to accrue under the contract. Where there is a condition
precedent to payment of remuneration to the agent under the contract, the condition must be met
before the agent earns his remuneration. The fact that a transaction is not profitable or beneficial
to the principal does not deny the agent of his earned remuneration. Neither will he be deprived,
if the transaction becomes abortive because of the principal an estate agent is entitled to his
commission upon introducing a ready willing and able buyer.
2 Duty to Reimburse and Indemnify the Agent

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 Unless a contrary intention is reflected in the contract of agency, it is implied in every
agency contract that the principal has a duty to indemnify or reimburse the agent for all losses,
damages, expenses or liabilities sustained or incurred by the agent in the discharge of his
authority but this right to in indemnify does not cover any loss resulting from his illegal conduct.
Exception to the rule of indemnify or reimbursement of an agent:
a. Where the agent acted without express or implied authority unless the transaction is
subsequently ratified by the principal.
b. Where the agent incurred the expenses, loss or liability in consequence of his own
negligence, fault or insolvency.
c. Where the agent acted in breach of his duty including violating of nay principal’s
reasonable instructions.
d. Where the agent acted in respect of a transaction which is manifestly or to his knowledge
unlawful or contrary to public policy.
Where the agent acted in respect of any transaction rendered null and void by the Gaming Act of
1892 or any other statute.

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