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Obligations of the seller

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2.2.1. Obligations of the seller

The seller has certain obligations which shall be performed. The seller assumes certain obligations under the contract of sales. These obligations are the obligation to deliver, the obligation to transfer ownership, the obligation to warrant the buyer against dispossession defects and non-conformity to the contract and other obligations. Failure to perform these obligation amounts to non-performance. In addition to these obligations the seller does have shared obligations with the buyer.

 

2.2.1.1. Obligation to deliver

The seller assumes certain obligations under the contract of sale. These obligations are the obligation to deliver, the obligation to transfer ownership, the obligation to warrant the buyer against defects and non-conformity to the contract and other obligations imposed on him by the contract of sale and gap filling provisions pursuant to Article 2273 of the Civil code. Failure to perform these obligations amounts to non- performance of sales contract.

 

The characteristic obligation of the seller is to deliver the thing sold. Delivery generally refers to transfers of possession willingly. Delivery takes place in accordance with the contract and the default rules of the law. It consists of handing over in not only the principal subject of the contract but also its accessories. The thing to be delivered shall, however, be the agreed thing in quantity and type.

 

Art. 2274. – Essence of obligation.

Delivery consists in the handing over of a thing and its accessories in accordance with the contract.

 

  1. Modes of Delivery: Delivery can be conducted in different modes. These modes of delivery can be actual delivery, constructive delivery, (constitutum possessorium), traditio longa manu, traditio brevi manu and symbolic delivery. Different legal systems may apply different modes of delivery and modes of transfer of ownership.

 

Actual delivery is the physical handing over of the thing directly to the buyer or his representative. Actual delivery is the most frequently used mode of delivery. Article 1140 of the civil code shows the possibility of actual delivery by entitling the party to whom delivery is made the actual control over the thing.

 

Constructive delivery (constitutum possessorium) does not involve physical handing over of the thing to the buyer. It is employed when the thing is already in possession of the buyer; when the thing is to remain in possession of the seller after the contract of sale or where the things is in the possession of the third party and the buyer decided to keep the thing with that third party. For example, X has hired his horse to Y and Y is using the horse for driving a cart. If X agrees to sell this horse to W and decides to keep the horse with Y, there is constructive delivery made by X.

 

Constructive delivery under Ethiopian laws refers to delivery when the seller is to remain in actual control of the thing after the conclusion of the contract. Article 1145 shows things which are certain and things pertaining to generic species which have been individualized are deemed to have been transferred when the holder declares that he detained the things on behalf of the new possessor. This provision clearly shows the possibility of transfer of possession by constructive delivery although the seller can be holder.

 

Sometimes delivery when the buyer in possession of the thing to be sold is termed as traditio longa manu. Traditio longa manu does not again show actual handing over of the thing. The seller points out the buyer where the thing is and makes it ready to be taken. The buyer can take the thing when ever he/she pleases. On this mode of delivery actual handing over of the thing is not possible for any reason at the time of conclusion of the contract. As temporary hindrance of actual handing over does not affect possession right pursuant to Article 1142 and possessor may exercise his right indirectly pursuant to Article 1141, the possibility of traditio longa manu can be inferred from these provisions.

 

Delivery when the things are in the possession of the third party is sometimes termed as traditio brevi manu. In traditio brevi manu the conclusion of the contract is the way of delivery. This mode of delivery is effected when the buyer has been in actual control of the thing before the conclusion of the contract. This avoids unnecessary repeated retaking back of the thing which has been in the hand of the buyer and sold to the buyer. Since there is possibility of actual control of the thing by the buyer before the conclusion of the contract, the application of traditio brevi manu also seems to be indisputable. It is indeed impractical to give subject of sale, which has been in the hands of the buyer, to the buyer and re-take it.

 

Symbolic delivery is similar to constructive delivery in that it does not effect the physical handing over of the thing sold. But it is different from constructive delivery as it involves the physical handing over of other things that represent the things sold. For example, if the seller gives the key of the store to the buyer, he makes symbolic delivery. Similarly, giving bill of lading to the buyer is a symbolic delivery.

 

The obligation of the seller to deliver the thing includes the obligation to deliver the agreed amount as well as the obligation to deliver the thing at an agreed time and place.

 

  1. B) Quantity to be delivered: The seller has to deliver the agreed quantity of things. If the seller delivers in excess or in short of the agreed amount, there is non-performance of contract. The buyer may accept or reject the things delivered at his discretion. If the buyer accepts the quantity that is less than the agreed amount, he has to pay the agreed price for quantity delivered but he cannot require additional delivery. In cases of excess quantity, the buyer has to pay a contractual price of the quantity delivered.

 

The parties to the contract of sale, according to Article 2275, may agree on delivery of “about certain quantity” of specified goods. In such case there is a possibility of delivery of a thing, which is determined by gap filling provisions, where the seller has the discretion to decide the exact quantity to be delivered. However, the seller has no duty to determine the exact quantity if the stipulation about certain quantity was made for the sole interest of the buyer. Accordingly, this benefit might be given to the buyer where ‘it appears from the circumstances that such stipulation has been included in the contract in the sole interest of the buyer’. For instance, imagine that Fitsume is celebrating a graduation ceremony. He invited 50 persons to the ceremony. Since Fitsume was not sure about the number of persons who would show up, he ordered around 60 bottles of soft drink from Lelisa. In this case, we understand from the circumstance that Fitsume should determine the exact quantity.

 

? The parties to the contract of sale agreed to deliver “about certain quantity” of specified goods. Can the seller deliver the quantity as large as he wishes or as small as he wishes?

 

The difference between approximate quantity and actual quantity delivered, whether the decision is made by the seller or buyer, should not exceed ten percent in cases of the whole cargo or five percent in other cases. For example, if Awash agrees to deliver about 400 Kilograms of sugar to Yared, he cannot deliver less than 380 kilograms or more than 420 kilograms as five percent of 400 kilogram is 20 kilograms.

 

  1. C) Time and Place of delivery: The seller cannot deliver the thing whenever and wherever he likes. He must observe the provisions of the law and that of the contract. The seller should deliver the thing sold at agreed time. Failure to deliver at such time amounts to non-performance of the contract. However, the parties may fail to specify the time of delivery or the date of delivery cannot be inferred from the will of the parties, the seller shall deliver the thing as soon as the buyer requires him to do so according to article 2276.

 

It must be born in mind; however, that delivery shall be made immediately is meant to show that delivery of the thing shall be simultaneous with the payment of the price unless there is contrary agreement. If the parties agreed on the time of payment of the price, but fail to specify time of delivery, the seller should deliver at the time of payment of the price as per Art.2278. The seller may in such case retain the thing until payment is made.

 

Where the parties have agreed that delivery shall take place during a given period, it shall be for the seller to fix the exact date of delivery unless it appears from the circumstances that it is for the buyer to do so. Regarding this Article 2277 provides as follows:

 

Where the parties have agreed that delivery shall take place during a given period, it shall be for the seller to fix the exact date of delivery unless it appears from the circumstances that it is for the buyer to do so.

 

For example, if the seller agreed to deliver the thing sold between July14 and August 16, he has to make delivery during this period. However, the buyer determines the exact date where circumstances may give such power to determine the exact date of delivery to the buyer. For example, if Y agrees to deliver a wedding cake between June 6 and 19 to X, it is clear from circumstances that X needed the cake on the day of his wedding. Thus, it is X who should decide the exact date according to Article 2277 because Y has no interest in the date of delivery and for that matter Y does not know the date of wedding.

 

As far as place of delivery is concerned, unless otherwise agreed, the seller shall deliver the thing at the place where, at the time of the contract, he has his place of business or, failing such, his normal residence. On the other hand, where the sale relates to a specific thing and the parties know the place where such thing is at the time of the contract, the seller shall deliver the thing at such place. The same is true where the contract relates to fungible things selected from a stock or a specified supply or to things, which are to be made or produced in a place known to the parties at the time of the contract.

 

2.2.1.2. Obligation to Transfer ownership

The seller shall take the necessary steps for transferring to the buyer unassailable rights of ownership over the thing. Ownership transfers upon transfer of possession. Possession transfers upon delivery. Thus, the necessary step to be taken by the seller to transfer ownership is to deliver the thing to the buyer in any of the modes of delivery discussed in the previous section.

 

However, delivery alone does not transfer ownership. The seller must be the owner of the thing sold. It is the basic principle of property law that a person can transfer no greater right in property than he himself possesses. For example, if Kebede steals a watch from Degu and sells it to Boron, Boron has no greater title to the watch than Kebede possessed. Thus a non-owner cannot transfer ownership. This principle is called nemo dat quod non habet in Latin. Thus the obligation to transfer ownership includes the obligation to have a good title.

 

The rule that holds a person can transfer no greater right than his own suffers an exception. That is, this rule does not apply in certain cases. This exception is possession in good faith. The principle of possession in good faith holds that a person who in good faith enters for consideration into a contract to acquire ownership of a corporeal chattel will become owner of that corporeal chattel by virtue of this good faith when he takes possession of such chattel. Good faith is honesty in fact in the transaction. The buyer is in good faith when he purchased the thing with an innocent belief that the seller is an owner.

 

2.2.1.3. Obligation to warranty title, defects, and non – conformity

The obligation of the seller to warrant is extended to warranty of dispossession, defect, and non-conformity. Warranty is a contractual promise by the seller regarding the quality, character, or suitability of the goods he has sold. Warranty is classified into express warranty and implied warranty.

 

Express warranty is created when the seller makes a statement of facts or a promise to the buyer concerning the goods that become part of the bargain.  The seller who gives an opinion or recommends the goods does not create an express warranty. Whether a statement made by a seller is interpreted as an opinion or as an express warranty often depends on the relative experience and knowledge of the buyer and the seller. If the seller deals in the types of goods he is selling and the buyer does not deal in such goods and knows little about them, a statement by the seller about the quality or character of the goods might be interpreted as an express warranty. On the other hand, if the buyer is a dealer in such goods and has had experience and knowledge similar to that of the seller, the same statement might be interpreted as an expression of an opinion.

 

In negotiating, a seller may use descriptive terms to convey to the buyer an idea of the quality or characteristics of the goods Similarly a seller might use pictures, drawings, blue prints or technical specification or in some cases a sample or model.

 

Implied warranty is responsibilities imposed by law on the seller for the quality of goods he sold. Implied warranty arises whether or not the seller has made express promises as to the quality of the goods.

 

Implied warranties are imposed on the seller in the interest of promoting higher standards in the market place for the following three reasons. First, the buyer commonly has little or no opportunity to examine goods carefully before making a decision to buy them. This might result in information asymmetry.  Secondly, the buyers are often not in a position to test the goods to determine their quality prior to buying them due to complexity and the nature of many goods. Lastly, the seller or manufacturer of such goods is in a much better position to make a thorough examination or test of the goods to determine their adequacy and quality. The obligation of the seller to warrant dispossession, defect and non-conformity can in certain circumstances be set aside by the agreement of the parties.

 

  1. A) Warranty of dispossession: Warranty against dispossession has been provided as oan bligation of the seller in Article 2282 of the civil code. The seller shall warrant the buyer against any total or partial dispossession, which he might suffer in consequence of a third party exercising a right he enjoyed at the time of the contract. In addition to assuring the buyer that the seller is a rightful owner the obligation to transfer ownership includes the obligation to transfer unassailable rights over the things.

 

The seller may be an owner of the thing sold. His title to the thing is not defective. However, the seller may never encumber the thing sold with some rights of third parties; chief among such encumbrance is pledge and liens. If the seller transfers ownership over the thing encumbered with pledge or liens, the seller fails in his obligation to transfer unassailable rights over the thing according to Art. 2281 which provides that:

 

The seller shall take the necessary steps for transferring to the buyer unassailable rights over the thing.

To perform his obligation of transferring unassailable rights, the seller is duty bound to warrant the buyer against total or partial dispossession. Warranty against dispossession is an implied warranty which does not depend upon the agreement of the parties. But this implied warranty against dispossession is not effective in the following legal limits. These legal limits are when the buyer is aware of the threat of dispossession, when the parties excluded or restricted warranty against dispossession, when the buyer fails to join the seller in the proceeding against him and when dispossession is due to the act or contribution of the buyer.

 

The awareness of the buyer about the threat of dispossession is among the limits of warranty of dispossession. The buyer may sometimes know that there is a possibility that a third party would dispossess him. For example, the buyer may know that the thing has been given as a security for loan. Where, at the time of the contract, the buyer knows that he risks dispossession, the seller shall not warrant the thing unless he has expressly undertaken to do so. Since it is implied warranty, the presumption is that the parties know that there is warranty of dispossession. If the knowledge of the buyer is established, however, the implied warranty shall not be considered. If the buyer is aware of the risk of dispossession he is expected to have taken advantage of the risk in their negotiation to enter in a contract of sale.

 

Even though the buyer is aware of the dispossession, warranty shall be due where dispossession is due to the falling in of a pledge made by the seller. The basic reason for favoring warranty against dispossession while the buyer knows the risk is the role of the seller in avoiding dispossession by performing the obligation for which the thing is pledged.

 

Relieving the seller from warranting dispossession owing to falling of the thing in pledge directly implies that the seller will not discharge his obligation secured by pledge. Failure to discharge the obligation may not affect the seller at least in his interest in the pledged property.

 

Exclusion or restriction of warranty against dispossession is also another limit of warranty of dispossession. The parties exclude the warranty against dispossession when they agree that the seller would not be responsible if the third party dispossesses the buyer. Contracting parties can exclude or restrict the above warranty which emanates from the law. But the law provides some mandatory and gap-filling provisions regarding an agreement to exclude or restrict the legal warranty against dispossession:

 

Art.2284.__ provisions excluding or restricting warranty.

(1) Provisions which exclude or restrict the warranty shall be construed restrictively;

(2) Unless otherwise expressly agreed, such provisions shall impose on the seller the obligation to return the price to the buyer, in whole or in part, in cases of dispossession; and

(3) A provision excluding or restricting the warranty shall be of no effect where the seller has intentionally concealed that a third party had a right on the thing or dispossession is due to the act of the seller.

 

In addition to the aforementioned grounds, the failure of the buyer to join the seller in the proceeding against him is also another limit of implied warranty of dispossession. Third parties may sue the buyer. In such case, the buyer must inform the seller that he had been sued. The seller may raise objections in the court and may win the case. He shall, therefore, join the seller as a party to the proceedings instituted against him in due time. However, if the seller is not joined in the proceedings without any fault on his part, he shall be released from his warranty where he can show that the proceedings might have had more favorable issue, had he been joined in due time.

 

Finally, when dispossession is due to the act or contribution of the buyer, dispossession of warranty is limited. If the dispossession is due to the buyer, for example, the thing is attached by the creditor of the buyer and sold by auction according to the order of the court. The seller will not warrant such dispossession. When the dispossession is also due to the act of the buyer, the seller is released from his warranty. If the buyer acknowledges the right of a third party outside judicial proceedings or he has entered into a compromise with such a third party, he may not avail himself of the warranty given by the seller. He can however be benefited from warranty if he can show that the latter could not have prevented dispossession.

 

  1. B) Warranty against defects in the thing: The seller shall guarantee to the buyer that the thing sold conforms to the contract and is not affected by defects in addition to the warranty of dispossession. There are circumstances where the seller gives an express warrant against defect. When a seller uses descriptive terms and the buyer takes them into consideration while making the purchase, the seller has expressly warranted that the goods he delivers will meet that description. Express warranty can be given in a limited manner. Where the seller has warranted during a specified period, certain qualities or the good working condition of the thing, it shall be sufficient for the buyer to inform the seller of the defect before the expiry of such period.

 

It must be born in mind that the fact that the seller has given express warrant does not necessarily mean that he has the obligation to warrant. If the seller can prove that the buyer knew of the defects at the time of the contract, he is not liable on his warranty against defects.  According to Article 2295(2) Express warranty given by the seller is void where the buyer knew of the defects in the thing at the time of the contract. To have a valid express warranty, the warranty must relate to the defects that the buyer does not know during the conclusion of contract.

 

The seller does not only warrant for what he has expressly warranted but also for warranties he is presumed to have undertaken by implication. Implied warranties are imposed by law and arise only under certain circumstances and they can be excluded or restricted by the parties as they are not absolute.

 

What shall be taken into consideration is that exclusion or restriction is of no effect when the seller has fraudulently concealed from the buyer the defects in the thing according to Article 2297which provides that:

 

Any provision excluding or restricting the warranty shall be of no effect where the seller has fraudulently concealed from the buyer the defects in the thing.

 

The other limitation on implied warranty is the gross negligence of the seller. The seller is not liable on a warranty against defects which are so obvious that the buyer could overlook them only as a result of gross negligence. However, the warranty holds the seller who has expressly declared that the thing was free from defects or has expressly warranted certain qualities albeit the presence of obvious defects.

 

The seller who can prove that the buyer was not in gross negligence but in knowledge of the defect can, however, be relieved of his warrant liability whatever their agreement is. Express warranty while the buyer is cognizance of the defect does not have effect and for stronger reason implied warranty while the buyer is cognizance of the defect relieves the seller from warranty liability.

 

All defects are not warrantable. Certain defects are warrantable and others are not warrantable. A warrantable defect for which warranty shall become effective according to Article 2289 is where the thing:

  • Does not possess the quality required for its normal use or commercial exploitation;
  • Does not possess the quality required for its particular use as provided expressly or impliedly in the contract; (warranty of fitness for particular use)or;
  • Does not possess the quality or specifications provided expressly or impliedly in the contract (warranty of fitness specified in the contract)

 

Warranty of fitness for normal use obliges the seller to deliver goods that are fit for the ordinary purpose. For example, a person of normal weight who buys a chair should be able to sit on it without it collapsing. The chair should also withstand other things people commonly do with chairs, such as occasionally standing on them or dragging them across the floor. If the chair fails to have such qualities, it is believed not to have the quality required for normal use.

 

Warranty for commercial exploitation exists when the goods are of such quality and in such condition that a reasonable man would accept them under the circumstances of the case in performance of his offer to buy those goods. Thus, to be fit for commercial exploitation the goods must be such as are reasonably saleable under the description by which they are known in the market. For example, Becky bought a tape recorder from Natoly. If Natoly could not resell the tape recorder to another seller, the tape recorder is not fit for commercial exploitation. If Ato Dawit agrees to sell four cans of Nido milk and if it is unsealed, it is not possible to resell. Therefore it does not possess the quality required for commercial use.

 

Warranty of fitness for particular purpose is made to the seller when the seller knows the particular purpose for which the buyer needs the goods and knows that the buyer is relying on the seller to select goods sailable for that purpose. For instance, a person goes to the shop and tells the shop owner that he needs a scissors that will cut cloth. If the shopkeeper knows the buyer is depending on him to pick a suitable pair of scissors, there is warranty that the scissors selected are fit for the buyer’s need.

 

Warranty of fitness to specification provided in the contract is available when the thing is described in the contract. In this case, the thing that may serve normal use or particular use may not comply with the specifications in the contract. For example, the seller agrees to deliver a table which is 3 meters long, two meters wide and one meter high. If the seller delivers a table with a width of three meters, the seller is liable on warranty even though the table serves the need of the buyer.

  1. C) Warranty against non-conformity: A seller, in addition to warranty against dispossession and defect, has the obligation to warrant against non-conformity of the thing. Non-conformity can be warranted as of article 2287 if it is warrantable non-conformity and Article 2288 has given positive meaning of warrantable non-conformity.

 

Warrantable non-conformities: The thing is deemed not to conform to the contract where the seller delivered to the buyer part only of the thing sold or a greater or lesser quantity than he had undertaken in the contract to deliver or the seller delivered to the buyer a thing different from that provided in the contract or a thing of a different species as per Article 2288(1) which provides that:

 

The thing shall not be deemed to conform to the contract where:

(a) The seller delivered to the buyer part only of the thing sold or a greater or lesser quantity than he had undertaken in the contract to deliver; or

(b) The seller delivered to the buyer a thing different to that provided in the contract or a thing of a different species.

 

For example, if the seller agrees to deliver 500 kilograms of sugar, the seller breaches the warranty against non-conformity if he delivers a thing different from that provided in the contract or a thing of different species. For example, if the seller agrees to deliver a Sony TV set, he breaches the warranty against non-conformity when he delivers a tape recorder or JVC TV set as tape recorder is a different thing and JVC TV set is a thing of different species.

 

There are certain preconditions and limitations which affect the liability of the seller for warranties of defect of the thing and non-conformity. The time when defects are to be considered, examination of the thing by the buyer, notification of defects, period for suing on a warranty, are among the conditions which affect the effectiveness of warranty.

 

Time when defects are to be considered is one of the preconditions and limitations on which the liability of the seller depends. The conformity with the contract and the absence of defects is to be ascertained having regard to the conditions of the thing at the time of the transfer of risks. Where there is no transfer of risks because of the cancellation of the contract having been declared or the replacement of the thing having been required, then regard is to be given to the time when the risks would have been transferred, had the thing been in conformity with the contract. As an exception, however, the seller is held to his warranty if the non-conformity or the defects occur at a later date and are caused by the seller or a person who he is liable.

 

Examination of the thing by the buyer is also another condition on which the liability of the seller depends and it is the duty of the buyer to examine the thing. The buyer should examine the thing without delay as soon as he has the opportunity. Unless otherwise agreed, the examination is to be carried out in accordance with the usages of the place of examination. Where the buyer intends to avail himself of the results of the examination, he shall in due time invite the seller or his representative to attend such examination, unless the thing is likely to perish.

 

The buyer must examine the thing as soon as he has an opportunity and notify the defects or non-conformity without delay to the seller to avail himself of warranty. Failure to notify the existence of defects may also results in loss of rights of the buyer unless there is a latent defect, i.e. a defect that cannot be disclosed at the time of examination, in the thing. Where the examination discloses non-conformity with the contract or a defect in the thing, the buyer shall without delay give notice thereof to the seller. In notifying the defect, the buyer shall indicate its nature in accordance with custom and good faith. Where the buyer has not notified the seller, he may no longer avail himself of the non-conformity or defects unless the seller admitted their existence.

 

Where a defect which could not be discovered by the normal process of examination, is subsequently discovered the buyer may avail himself of such defect where he notifies the seller as soon as he discovers it. The seller who has intentionally misled the buyer may not avail himself of the fact that the notification of defects has not been sufficiently precise or made in due time.

 

In addition to the above mentioned conditions, there is also period of limitation for suing on a warranty. The buyer must sue the seller within one year from the date of notification of the defects or non-conformity to the contract except when the seller misled the buyer. The parties may provide in their agreement a period exceeding two years for suing on warranty but they cannot lessen this period to less than two years. In this regard, article 2298 provides that:

 

 (1) The buyer shall, under pain of losing his right, bring proceedings on a warranty against defects within one year from his having given notice to the seller, unless the seller intentionally misled him.

 (2)  The parties may not shorten this period.

      (3) Where specified qualities or the good working condition of the thing have been warranted by the seller for a specified period, the time within which the buyer may bring proceedings shall be reckoned from the day when this period has expired

 

Where specified qualities or the good working condition of the thing have been warranted by the seller for a specified period, the time within which the buyer may bring proceedings shall be reckoned from the day when this period has expired.

 

After the expiry of the above period, the buyer may no longer avail himself of the defect or non-conformity. However, where he has not paid the price and he notified the defect or non conformity in due time, The buyer may, however set off against the demand for payment a claim for reduction in price or damages.

 

In a sale of fungible things, the seller may replace defective things by new ones within the period provided for in the contract. In a sale of goods to be manufactured or produced by the seller on the specifications of the buyer, the seller may put right the defects within a reasonable time, even after the expiry of the period fixed for delivery, provided that the delay causes the buyer no substantial inconvenience or expenses. But this will not affect the right of the buyer to claim damages.

 

  1. D) Other obligations of the seller: The seller does have other accessory obligations as provided in the gap filling provisions. Other obligations of the seller relate to handing over of documents and insurance. If it is customary for the seller to hand over to the buyer documents concerning the thing sold, the seller shall, in addition to delivery, hand over such documents. The documents shall be handed over as carefully and quickly as possible at the place fixed in the contract or provided by custom. The buyer shall not be bound to accept the documents unless they conform to the contract.

 

Where the seller must know from the circumstances that carriage insurance is the custom and where the seller is not bound to contract such insurance himself, he shall provide the buyer with the necessary information to enable him to contract insurance, where the buyer requires such information from him.

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