Ethiopian Legal Brief

Function and scope of law of sales

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Function and scope of law of sales

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Having seen the subject matter of law of sales, it is worth discussing the function of law of sales and its scope of application. In discussing the function and scope of law of sales, the role which the law of sales plays, the transactions which are under the ambit of law of sales and the things or goods which can be and cannot be subject of law of sales will be discussed. Hence this sections aims at acquainting you with

  • The ability to identify what the function of law of sales is
  • The ability to demarcate the function of law of sales in governing transactions
  • The ability to list major functions of law of sales

Generally, the function of law is fashioning the social behavior in a desired manner. In so doing laws are categorized into different subject matters trying to regulate certain social behaviors in a desired manner. As one category of laws on the basis of subject matter, law of sales does have function, which aims at shaping the social interaction in certain area of contractual relationship. That contractual behavior is generally encouraging sales contract in a way it is in light with public policy. It does also provide gap filling provisions in case the contracting parties should fail to agree on all the terms of the contract.

 

As it is known the society does not produce all kinds of goods that it consumes and it does not provide all the services by itself. It produces some goods and obtains the rest through trade. In primitive society, people used to barter one kind of goods for another. With the emergence of modern money, people began exchanging goods by using money as medium of transaction. As a result, the agreements to exchange goods through the medium of money and the rules regulating these agreements emerged. These agreements are contracts of sale and the rules regulating them are Law of sales.

 

Law of sales contract, therefore, governs and helps the movement of goods from the original maker to the final user to fulfill social wants. The movement of goods from the original maker to the ultimate user through the marketing process is under the ambit of law of sales contract.

 

Law of sales as a law of contract is expected to have different functions such as regulating the contract. It can regulate the contract by providing mandatory requirement in the definition, formation, performance and remedies and other issues of sales contract. In its regulating role, it takes social interest, public policy into consideration.  Accordingly, when the law of sales provides mandatory regulating rules the parties cannot set the rule aside.

 

It also fills the gap, which might result from on imperfect nature of a contract. As it is known contracting parties cannot predict all the contingencies, which would happen subsequent to the formation of the contract. As the contracting parties may not agree on the term for which there is no agreement, the law of sales plays a role by filling the gap by providing gap-filling provisions.

 

It also creates conducive environment for optimal reliance by encouraging change of behavior on possible and probable performance with greater benefit of change of behavior and entitling compensation. It also discourages excessive reliance by using different ways of assessing compensation.

 

Protecting optimal performance by allowing alternative remedies of non-performance of sales contract is also one of its functions. The remedies are, however, required to be in a way they do not erode certainty and security of transaction and demote cooperation.

 

The subject matter of contract of sale delimits the scope of contract of sales. The subject matter of law of sales is things. However, all things are not subject of contract of sale. Things, which cannot be appropriated by human beings, cannot be the subject of contract of sale. The thing must be a corporeal chattel pursuant to Article 2267 (1) of the Civil Code. Corporeal chattels are things that have a material existence and can move themselves or be moved by man without losing their individual character. Cumulative reading of 1226 and 1227 connotes that things, which are under the category of goods, are corporeal chattels. Things, which are not corporeal chattels, are not subject of sales would be logical conclusion of the above premises. For example goats sheep, refrigerator, watch, book, pen etc are corporeal chattels while sun moon and stars are not corporeal chattels although they are things.

 

Intrinsic elements and accessories of corporeal chattels are also under the ambit of contract of sale. Clear connotation of Article 1131, which says, “Unless otherwise provided, right on or dealings related to, goods shall apply to all intrinsic elements thereof” is testament for the inclusion of intrinsic elements of a subject of sales. Article 1135 also shows that in the absence of clear indication rights on or dealings with regard to certain goods is also applicable to the accessories.

 

However, some corporeal chattels are excluded from primarily being subject to contract of sale according to Article 2267 (2) of the Civil Code. They are called special corporeal chattels. For examples, airplanes and ships are special corporeal chattels. When the special provisions dealing with the special corporeal chattels are silent, provisions of sales contract and general contract can be applied.

 

? Can land, building and incorporeal claims such as shares and stocks be a under the scope of contract of sale?

 

Some things are not corporeal chattels although they can be appropriated by man. Immovable can be appropriated but they are not corporeal chattels as they cannot move by themselves or be moved without losing their individual character. Although the possibility of being appropriated makes them goods, they are not subject to contract of sale for they are not corporeal chattels. The immovable goods under the civil code of Ethiopia are goods such as building and land. In fact, land is not subject to any form of exchange, by which ownership is transferred, as it belongs to the state, nations, nationalities and peoples of Ethiopia pursuant to Article 40 (3).

 

Things attached to land such as trees, crops and plants are also considered to be corporeal chattels once they are subjected to juridical acts for their separation from the land expressly or implicitly as to the connotation of article 1133(2) of the civil code. Although they are immovable by destination for they are destined to be part of an immovable, they are considered to be movables once they are subjected to juridical acts.

 

Incorporeal rights, pursuant to Art 1128, in securities to bearer and claims are assimilated to corporeal chattels in the absence of contrary stipulation. Although they do not have material existence, the provision has clearly provided under the title of security to bearer that claims and other incorporeal chattels embodied in securities to bearer to be presumed as corporeal chattels. However, it must be born in mind that such kind of things are not corporeal chattels. It is only by presumption that such goods are assimilated. Intangible things like intellectual property, shares and stocks are also subject of contract of sale corporeal chattels by analogical interpretation, albeit the applicability of special provisions.

Actionable claims, which can be enforced by legal action or suit like debts, are also included under corporeal chattels in certain legal system. The sale of goods act of India of 1930, which was amended in 1963, is an example of such legal systems where actionable claims are subject matter of law of sales contract. Whether such claims are included under the provision of sales contract of Ethiopia might raise a question. Be that as it may, this does not mean that only law of sales is applicable on such incorporeal chattels. Sales contract is applicable if and only if there is no special and contrary provision.

 

Natural forces, which have economic value like electricity, are also assimilated to movables once they are mastered by man and put to their use. These natural resources are required to be subjected to appropriation by human beings. Unless they are under the control of human beings or are appropriated, transfer of possession and then ownership will not be possible.

 

It is also moot if business can be subject matter of sales contract. Business can consist of corporeal and incorporeal chattels. Business may consist of corporeal chattels like chairs, tables, television, tape computer and incorporeal chattels like copy rights, patent rights. It actually mainly consists of good will. Having seen what business is, it is questionable if business can be governed by contract of sale.

 

Accordingly, movable goods including things like cars, stocks and shares, goods like trade mark, copy rights, patent rights, water, gas, and decree of a court of law are regarded as corporal chattels either by assimilation or by definition. They can be subject of sales contract provided that there is no special contrary provision.

 

? Do you think that money is a goods and under the scope of law of sales? Why? Why not?

? Assume someone sold older rare coins. Can the transaction be considered as sales contract and can the coin be treated as goods?

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