SECTION 2: THE LEGAL EFFECTS OF THE CONTRACT

In this section, the legal consequences of the contract of sale will be considered, along with those of conditional sales, which modify the usual consequences. Certain relevant contractual terms will also be discussed

(A) THE PASSING OF OWNERSHIP It is not a requirement of a valid contract of sale that ownership should pass from seller to buyer. Although parties to a sale usually contemplate this happening, it is not an essential feature of a contract of sale, and sales by non-owners are permissible. In our common law, the transfer of a real right of ownership (the performance of the contract) is regarded as a separate legal transaction from the contract itself, which creates only personal obligations Yet because ownership does pass as a result of most contracts of sale, the issue of ownership is an important incidence of a sale. Usually, in order to transfer ownership is a res, it is not only necessary that it is physically delivered by the owner, but also that the owner has the intention of transferring the right of ownership to the buyer, and the buyer has the intention of becoming the owner of the thing in question
Air-Kel (Edms) Bpk h/a Merkel Motors v Bodenstein at 922F Blote ooreenkoms kan dus nie eiendomsreg oordra nie - traditio (oorhandiging) moet ook geskied; en omgekeerd, blote oorhandiging is ook nie voldoende nie - dit moet gepaard gaan met 'n ooreenkoms tussen oorhandiger en ontvanger dat daarmee eiendomsreg gegee en geneem word. Hier kan van 'n "saaklike ooreenkoms" gepraat word.

As far as sales are concerned, there are certain additional refinements: (i) o Immoveable property

In the case of immovables, ownership passes upon registration of transfer in the Deeds Registry. The position is regulated by the Deeds Registries Act 47 of 1937. In other words registration constitutes delivery in the case of immoveables, and ownership passes whether the price has been paid or not (ii) Incorporeals

Ownership in incorporeals is transferred by means of cession (iii) Moveable property

Ownership in moveable property is transferred: a) upon delivery of the res, coupled with b) either payment of the purchase price, the provision of security, or the giving of credit

Delivery Delivery will usually occur by means of traditio. Ownership will pass on traditio only if the following essentials are present: o The thing must be capable of ownership o The seller must have legal capacity to sell

o o o o

Traditio must be made by the seller (or his agent), since the owner of the thing cannot be deprived of his ownership by the wrongful act of another, and no-one can transfer greater rights in a thing than he possesses (i.e. no-one can make someone else owner of a thing of which he is not the owner) The seller must intend to pass ownership to the buyer Delivery must be made to the buyer (or his agent) The buyer must have legal capacity to become owner of the thing The buyer must accept delivery intending to acquire ownership in the thing

Forms of delivery: Delivery may occur in two ways: o Actual delivery (traditio vera). This occurs where the res vendita is physically handed over by one person to another de manu in manum o Constructive delivery. This concerns those various methods of transferring ownership by which no physical handing over of the res vendita takes place. There are five methods of constructive delivery traditio longa manu; traditio brevi manu; constitutum possessorium; symbolic delivery and attornment Payment Ownership will pass on delivery only if cash is paid; or credit has been allowed
Laing v SA Milling Co Ltd at 398: On a sale of moveables followed by delivery the property does not pass until the purchaser has paid the money or secured the seller for the same, or unless the sale is on credit

At this juncture it is important to distinguish between how ownership passes in cash and credit sales respectively. o In a cash sale, ownership passes once there has been (in addition to delivery) due payment of the purchase price. o In a sale on credit, the fact that credit has been given is an indication that ownership merely passed on delivery. In an ordinary credit sale, the seller cannot claim that he did not intend ownership to pass until the full price had been paid (This does not cover the situation where the sale is one subject to a pactum reservati dominii this means reserving rights of ownership therefore if a party reneges on the contract, the other party can use the rei vindicatio to get it back) The way in which one can protect ones real right of ownership is to put it in ones contract In the absence of agreement (express or implied) that credit has been granted, it is presumed that every sale is a cash sale.
Lendalease Finance Ltd v Corporacion de Mercadeo Agricola at 490F In the absence of an express term as to the sale being for cash or on credit there is a presumption that it is for cash. This may be rebutted in various ways but the giving of credit cannot be inferred from mere delivery by the seller without receiving the purchase price. On the other hand, a sale which was expressly or presumptively for cash may by subsequent agreement, express or tacit, become one on credit Daniels v Cooper

Facts Plaintiff brought this action to recover four ostriches, his property. He had sold these ostriches to Martin for 100 after saying to him "You are quite aware that this is a cash transaction. You are quite aware they are my birds until you pay for them;" to which Martin assented. The ostriches were taken to an enclosure of the defendants father, and on the same day Martin offered the birds to defendant for 110. Defendant accepted this offer and paid Martin, believing that the birds belonged to Martin, and at the same time, lent Martin 5. Martin left the same evening, and had not since been heard of The plaintiff inquired from defendant about Martin, and after two or three interviews, informed defendant that if Martin did not return that day, he plaintiff, would come for the birds, when defendant for the first time informed plaintiff he had bought the ostriches from Martin. On the same day plaintiff consulted his solicitor, when a letter of demand was sent. The defendant having declined to deliver up the birds, this action was instituted. Issues Whether where there has been a contract to sell for cash, and the seller delivers the thing sold, he must in law be presumed to have given credit, and in so doing have parted with the entire ownership so as to divest himself of all right to recover the thing from a person who without fraud or knowledge of fraud in the purchaser bought and paid for the thing so delivered. Whether an express contract that the delivery under a contract to sell for cash shall not divest the seller of his ownership, will be inoperative where the purchaser in violation of such express agreement re-sells to a bona fide purchaser for value the thing so delivered. Law and Application The court considered a number of authorities and from these inferred that the sale and delivery of a moveable article do not per se transfer ownership; that where there are no circumstances to show that the sale is on credit, it must be presumed to be for cash; and that in sales for cash, followed by delivery, there is no transfer of ownership until payment be made or is unreasonably delayed; and that where delivery has taken place under such a contract, and the purchaser has resold and delivered that property to a third person, who has paid him, the thing may be recovered from such third person by the original seller (if he has followed it within a reasonable time) without compensation. The mere sale and delivery of movables does not pass the property therein to the purchaser, unless the price is paid, security found, or credit be given. Goods sold for cash and delivered can be followed by the unpaid vendor in the hands of third persons, if the vendor reclaims the goods within a reasonable time. Conclusion The defendant was ordered to deliver to plaintiff at the paddock, within twenty-four hours, the four birds, or, in default, 25 for each bird.

The presumption of a cash sale may therefore be rebutted by adducing evidence of an express or implied agreement to give credit. If the rebuttal succeeds, ownership will pass on delivery. If credit has not been granted, then ownership will not pass until the price has been paid even if delivery has in the mean time taken place. An agreement to give credit must be clear and specific. For example there is NO presumption that credit has been given if delivery occurs before payment Situations of where ownership passes on delivery despite it being a cash sale: o Where the seller fixes a date for payment which is after the date of delivery, or allows a postponement of the time for payment until after delivery o The course of previous dealings between the buyer and seller had been on credit terms (Eriksen Motors) o The seller knew the goods were intended for resale in the ordinary course of business (Eriksen Motors)

Eriksen Motors (Welkom) Ltd v Protea Motors, Warrenton and Another Facts The appellant was an accredited agent for Ford vehicles in its district, and the first respondent the accredited agent for its district. There was a verbal agreement between them that they would sell vehicles to each other on a cash basis payable by cheque. When second respondent wished to purchase a specific Ford vehicle, first respondent did not have one in stock, so obtained one from appellant. Second respondent paid first respondent by cheque which was honoured. Second respondent in turn paid appellant by cheque, but its cheque was dishonoured. First respondent was then placed under provisional liquidation. Appellant then applied for an interim interdict by way of a rule nisi calling upon the second respondent, and all other interested parties, to show cause why the deputy-sheriff should not be authorised to remove the vehicle from second respondent's possession pending the institution of an action by the appellant to establish its ownership of the vehicle. Law and Application In general payment by cheque is prima facie regarded as immediate payment subject to a condition. The condition is that the cheque be honoured on presentation. When the cheque is so honoured, the date of payment of the debt is the date of the giving of the cheque. Conversely, if the cheque is dishonoured there has been no payment. This position is unaffected if the cheque is payable at a bank some distance away. The general rule is that (a) in a sale for cash, ownership does not pass until the price is paid, even if delivery has meantime been given; (b) in a sale on credit, ownership passes on delivery. This, however, is not an irrefrangible principle of law. It is basically a question of fact in each case. It depends whether the totality of the circumstances shows, by inference or otherwise, that the parties intended ownership to pass, as the case might be. In the circumstances the question whether the sale was for cash or credit was not conclusive. Because appellant knew that first respondent was intending an immediate resale to second respondent, the probabilities were strongly against any intention by appellant to retain ownership of the vehicle sold to first respondent. The court found that all the probabilities pointed to an intention on the part of first respondent to receive ownership and transfer it to second respondent. Conclusion The extent to which any balance of convenience might possibly favour appellant did not make up for the weakness of its claim. There was no or insufficient foundation to support a possible vindicatory claim, and that the rule nisi had rightly been discharged.

Note that where a sale is for cash, and the seller accepts a cheque for payment of the cash price, ownership will not pass (notwithstanding the delivery of the res vendita) unless the cheque is met when presented for payment
Bold v Cooper Facts o Applicant entrusted a car to his son, who was to sell it for cash. The son advertised the car in the local paper and sold it to one Harvey for 550 pounds, payable in cash against delivery o Applicants son handed over the car and all relevant documentation upon receiving the cheque, however the next day the cheque was dishonoured. o On the day of delivery of the car, Harvey fraudulently sold the car to respondent, handing over the same registration and licence papers. o Applicants claim is for the return of the car Law and Application o The principle of our law is that ownership of a movable does not pass on the mere conclusion of the contract of sale. Not only must delivery be effected, but either credit

must be given if the sale is not for cash, or, if the sale is for cash, the cash must be paid. It is only when the cheque is paid that the purchaser has complied with his obligation to pay cash and only then does dominium pass. o In consequence even assuming that Harvey's fraudulent conduct did not avoid the purchase ab initio he did not become vested with the ownership at any time and consequently had no title which he could pass on to respondents. o The delivery of the papers to Harvey was insufficient to clothe Harvey with the apparent right of an owner and did not constitute any implied representation of power to dispose Conclusion o The application succeeds thus applicant was entitled to the return of the car