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Is the Kenyan Sale of Goods Act outdated for modern commercial transactions? A reform proposal

However, the act has not undergone any significant amendments, as is the case in other countries like the UK. As a result, the Sale of Goods Act (SGA), Cap. 31 Laws of Kenya, has proven to be insufficient for modern business transactions. The Act contains a number of antiquated sections that need to be reformed in order to make it applicable to current circumstances and requirements. Evidently, the SGA of Kenya covers conventional transactions which prevailed in the past. Today, the commercial world is nothing similar to traditional commercial transactions. Firstly, some commercial transactions are now carried out through the internet commonly known as online shopping. Unlike the past when business transactions were carried out in the physical markets, transactions in the modern days are mostly carried out through global online markets such as eBay, Alibaba and Amazon. The situation is not different in Kenya as we have online markets such as Jumia, Kilimall and Jiji. Despite this, there is no clear legislation that governs the sale of goods in the online space. This raises contentious issues such as online contract formation and the legality of such contracts which will be discussed in another section.

Additionally, the application of these archaic principles to contemporary business transactions may result in inequities, particularly on the side of the consumer, hence violating Article 46 of the Constitution.[1] Under Article 46, consumers have the right to; ‘goods and services of reasonable quality, information necessary for them to gain full benefit from goods and services, protection of their health, safety and economic interest and compensation for loss or injury arising from defects in goods.’

This paper shall focus on discussing some provisions of the SGA which are insufficient for such modern commercial transactions. It will also outline the injustices they create on the consumers’ side. Such provisions include the merchantability clause, the formation of contracts and the principle of caveat emptor. The paper will finally offer recommendations for reform in the conclusion section.

The merchantability clause

The clause is provided for in section 16(b) of the sale of goods act. It provides for an implied condition that the goods be of merchantable quality. The phrase simply means ‘fit for purpose.’ The requirement was to ensure that the goods sold in the course of business were fit for their ordinary purpose as it is reasonable to expect. However, the phrase being rooted in the 19th century is not a phrase of common usage today. [2] Hence, there is a lack of common comprehension of this phrase, both in a commercial and consumer context. Despite this, the sale of goods Act in Kenya continues to apply this phrase.

The phrase “merchantable quality” was replaced in the UK by the term “satisfactory quality.” Consequently, the  reference to “unmerchantable quality” in section 17 (sale by sample) was so changed to “unsatisfactory quality.” The report of the law commission which was the basis for reforms in the UK described ‘merchantability’ as a word of uncertain meaning which is obsolete.’[3] Additionally, the UK sale of goods Act added another section that provides for an objective test of determining satisfactory quality which is now section 14(2A). The section provides that; “goods are of satisfactory quality if they meet the standard quality that a reasonable person would regard as satisfactory, taking into account any description of the goods, the price (if relevant), and all other relevant circumstances.”

Further, section 14(2B) provides that the quality of goods includes the state and condition and the appropriate cases aspects of the quality of goods which include the following:

  1. Fitness for all purposes for which goods of the kind in question are commonly supplied
  2. Appearance and finish
  3. Freedom from minor defects
  4. Safety; and
  5. Durability

Earlier on, in the UK case of Aswan Engineering v Lupdine (1987)[4]  the court of appeal held that multi-purpose goods need only to be fit for some of their purposes, not all of them. The new section 14(2B) (a) would mean that the ruling in the above case is no longer the case.

The statutory meaning of merchantability was concerned merely with the fitness of goods for their purpose and other non-functional characteristics. Particularly, the definition seemed to ignore the possibility of minor and cosmetic defects in goods.[5] Section 14(2B) would therefore remedy this weakness[6] due to the requirements in subsection (c) supra. As a matter of fact, courts in the UK had already started to take a broad approach to the question of quality. For example, in the case of Bernstein motors v Pamson motors (1987)[7] safety was given a factor in determining whether a car was merchantable. In another case of Lambert v Lewis (1982)[8] Lord Reid stated that; “it was a continuing warrant that goods will continue to be fit for that purpose for a reasonable time after delivery”.

Additionally, when comparing the two textual wordings—“Merchantable quality” and “Satisfactory quality”—the latter appears to carry more significance in the context of online transactions.  This is due to the possibility that a product may be suitable for the intended purpose yet unsatisfactory to the buyer. An aluminum cooking pan serves as an example. The item’s intended purpose is for cooking things like pancakes and eggs. Despite being appropriate for its intended purpose the pan might not be of satisfactory quality to the consumer if the manufacturer overlooked small flaws like the brittleness of the panhandle. In such cases, the application of section 14 (2B) of the UK SGA would serve justice to the consumer as it obliges the sellers to provide not only goods fit for the intended purpose but also safe, durable, and free from minor defects.

Formation and validity of the sale of goods contracts

The general requirement for the validity of the sale of goods is entirely based on the SGA and the law of contracts.

A valid contract according to the Laws of contract must include the following: offer, acceptance and monetary consideration called the ‘price.’[9] On the other hand formation of sale and purchase contracts is provided for in section 5 of the SGA and section 3(2) of the Laws of contract.

Section 5 of the Sale of Goods Act[10] provides that; “… a contract of sale of goods may be made in writing (either with or without seal) or by word of mouth, or partly by word of mouth, or maybe implied from the conduct of parties.”

Further the Law of Contracts Act provides that some contracts ought to be in writing. Section 3(2)[11] which provides that in orderfor a claim on the sale of goods to be successful it ought to have been in writing.

Section 3(2) of the Law of Contracts Act:

no suit shall be brought whereby to charge any person upon which or by reason of any representation or assurance made or given concerning or relating to the character, conduct, credit, ability, trade or dealings of any other person to the intent or purpose that such person may obtain credit, money or goods, unless such representation or assurance is made in writing, signed by the party to be charged therewith.”

In modern times, however, the sale of goods being carried out online results into a different form of a contract referred to as e-contracts or online contracts.

 Online contracts formation

The most popular way to create electronic contracts is using emails sent over internet providers like Safaricom. The Law of Contracts Act[12] and the sale of goods  Act  however,  does not solve the issue of validity and enforceability of e-contracts since there is no provision on the effect of e-mail communication. In contrast, there seems to be a clear consensus about validity of e-mail communications at the international level. In the US case of Rosefeld v Zerneck (2004)[13]the supreme court of New York recognized e-mail as valid form of communication and accepting offers. In the UK case of Bernuth lines ltd v High seas shipping ltd (2005)[14], it was ruled that “an e-mail is valid form in which to communicate the acceptance regardless of being created as a spam by the email system.’ Nearer home in the South African case of Jafta v Ezemvelo KZN Wildlife (2008)[15] the court held that; “an SMS has the same weight legally as an email or written document.”

A “web rap” or “click wrap agreement,”  is another popular way to enter into an online contract, using the World Wide Web.[16] Here the terms and conditions for the contract are already laid by the seller and the consumer is only required to click on a button labelled ‘ok’, ‘I agree’ or ‘I accept’ in order to enter into a contract. Some companies in enhancement of the validity of the process move ahead to send confirmatory e-mails.

The question raised by this kind of contract formation is to when can it be said that a contract has been made validly online?

To start with, in the English  Court of Appeal case of Entores v Miles Far East Corp (1955),[17]Lord Denning in his leading judgment took an approach of a simple form of communication over a distance, that is, two people making a contract by shouting actions a river. He argued that; “there would be no contract unless and until the acceptance was heard by the offeror. In a situation where there is an interruption, for example, noise do as to prevent the offeror from hearing what the acceptor had to say there would be no contract unless the acceptor repeated the acceptance after the noise was just over. He then argued by analogy that the same approach should apply to contracts made by mode of communication which are instantaneous or virtually instantaneous.”

The case demonstrates that the acceptance rule should take precedence over all other rules, including the mail delivery rule, when the means of communication used by contractual parties is almost instantaneous. Therefore, the rule is that the agreement is reached after the trader has the buyer’s acceptance.

In another case of Brinkibon ltd v Stahag Stahl and another, the House of Lords approved the decision in the Entores case. Regarding the case of e-mails and click-rap contracts falling into the ‘instantaneous’ category, it was held that; “acceptance should take place where it was received, rather than where it was sent”.  

Terms and conditions in online contracts

The precedent for terms and conditions of contract was set in the case of Gray Patchett v SPATA ltd (2009)[18]  where it was held that: “it is the obligation of the customer to read entirety of the terms and conditions document before signing the contract”.

However, in the e-contracts, the terms and conditions of the contract are set by seller prior. This therefore leaves no opportunity for the consumer go negotiate on the terms placing him or her in a position where they cannot bargain.

The principle of caveat emptor

Caveat emptor is a Latin word used to mean “let the buyer beware.” [19] It places a burden on the buyer to take a reasonable examination of the goods before making a purchase.

The provision is covered under section 16(b) of the Sale of goods Act[20] which provides that; “if the buyer has examined the goods, there shall be no implied condition as regards which that condition ought to have revealed.

Origin of the principle

 The principle emerged following the case of Chandellar v Lupos (1603)[21] which urged consumers to be “meticulous and cautious” before making a purchase.[22]

The verdict stated that; “the seller appointed as the defendant did not hold any liability on any visible defect of the warehouse sold to the plaintiff. The court argued that since the plaintiff had the opportunity to reasonably inspect the warehouse to make sure it wasclear from any defect; it would be considered that the plaintiff was contended with the state of the warehouse before signing the contract.”[23]

The decision in Chandler v Lupos  supra was later affirmed by the decision in the case of Laidlaw v Organ (1817).[24]

The original objectives of caveat emptor application is that the parties to a sale contract would have freedom besides justice for the often disadvantaged consumers.[25]

 Application of the principle

During the formation of a sale, if defects are found in the goods, consumers are at liberty to decide whether to proceed or decline the purchase before confirming the transaction.[26] However, if the consumer goes ahead to sign the sale contract, they are no longer entitled to return, exchange or even compensation if defects are discovered later.[27]

For the above reason, consumers are given the opportunity to examine the goods before making the purchase.

Caveat emptor in the modern transactions

Modern-day commercial transactions have seen a great transition from the old conventional purchase to online purchases. Online markets globally include; Amazon, eBay and Alibaba. In Kenya, online markets are the likes of Jumia, Kilimall and Jiji.

The caveat emptor principle continues to apply in online purchases since there is no other provisions providing otherwise. Due to the nature of online shopping, the rule provides minimal protection for consumers generally and e-consumers in particular.

Nature of online purchases

Generally, online purchases can be divided into four phases; Offering, Accepting, Payment and Delivery.[28]

  1. Offering: consumers browse the internet to examine and choose the products of their choice from online marketplaces or social media  platforms like Facebook and Instagram, or chat applications like Whatsapp.
  2. Accepting—At this stage, consumers can contact sellers to ask questions or get more information about the products. The consumer will make an order after determining the price and confirm it with the seller.
  3. Payment – alternatives are typically provided to customers. For instance, they can pay with credit cards, PayPal, Visa, and Mpesa.
  4. Delivery is the last step of an online purchase, and the seller is in charge of this step. Once the customer obtains the ordered items within the set time frame, the transaction is deemed successful.

 It is evident that the online purchase process is poles apart from conventional purchases which involve a face-to-face encounter.[29]

Caveat emptor is unfit for online purchases

Arguably, the application of caveat emptor is appropriate for traditional and conventional sell-and-purchase transactions. This is because consumers can be more meticulous and cautious when choosing the things to purchase because the goods are physically available for them to scrutinize. Additionally, a face-to-face transaction offers consumers the chance to inquire about the products, lowering the danger of fraud.

In contrast, an online transaction is made purely through the internet, thus the buyer and the seller do not meet physically. Additionally, before making a purchase, buyers are unable to touch, look at, analyze, and—most importantly—test the suitability of the goods.[30]As for the information and details of the goods, consumers resort only to the advertisement and description provided by the seller.[31]

Further, they are disadvantaged by the internal policies of the online market companies which do not allow inspection of goods before making a purchase.[32]

For example, in the case of Consumer Federation of Kenya v Fone Express (2014 unreported) “the customer had purchased a phone and a computer from Fore Express (the defendants) which turned out to be defective later. The customer was therefore seeking legal redress as the internal policies of the phone company do not address consumer’s interests sufficiently.”[33]

What constitutes a reasonable opportunity is the question that the aforementioned case raises. This is because some products’ properties may call for the consumer to test them out first before making a purchase in order to evaluate their quality. An illustration is electrical devices like phones, which may need to be tested by the user for a few hours in order to see if certain aspects, like the phone battery, are of good or described quality. Due to this, consumers have a lower bargaining power as compared to the sellers.[34]

Furthermore, issues could arise if the seller provided ambiguous or deceptive information about the goods.[35]Consequently, the consumer might end up receiving different goods from those purchased such as different colors or sizes compared to the ones viewed online. [36]  A good example of this is the social media viral posts labeled “what I ordered versus what I got.”[37] The posts consist of disappointed buyers posting pictures of what they expected being totally different in reality after the delivery is done.  

These scenarios demonstrate why it is inappropriate to apply the caveat emptor principle to online sale and buy contracts. It is therefore important to consider the application of caveat emptor, particularly in the online sale and purchase contracts. In order to effectively promote consumer justice, there needs to be a defined point of equilibrium between the principle and the seller’s obligation to provide the consumers with relevant and adequate information.[38] This not only promotes consumer justice but also upholds their constitutional rights to information necessary for them to gain full benefit from goods and services[39] as well as compensation for loss or injury arising from defects in goods.

Conclusion and recommendations

The modern world generates modern issues that call for modern solutions. It is so unfortunate that despite the advancement in the commercial world, the Kenyan sales law remains where it was two centuries ago. The law which ought to protect the consumers remains silent as they continue being oppressed due to lack of its clarity on such contentious issues.

Following the above-discussed issues the SGA should be amended firstly, to cater to the formation of online contracts. The new provision ought to incorporate what amounts to a legal contract with regard to online transactions. Additionally, the numerous ways of forming such contracts should be distinguished. Alternatively, the Courts could interpret Section 5 of the SGA with effect to the formation of online contracts. This can be done by, for instance, evaluating what amounts to offer and acceptance in relation to online transactions as seen in the analogy of Lord Denning in the case of Entores v Miles Far East Corp (1955) supra. In a similar manner, the Court should clarify the legal effect of emails and click-wrap agreements.

Secondly, on the issue of the caveat emptor principle the Act should be amended to include the application of the caveat emptor principle in online purchases. There ought to be a clear consensus on what amounts to reasonable examination in online transactions. Since the buyers rely on the sellers’ advertisements of the products, the law should be fair so as to allow the return of goods in cases of misleading and deceptive advertisements. Along the same line, the new provision ought to incorporate rules on what constitutes fraud advertisements in the online sphere.

Lastly, the word “merchantability” being an uncommon word in the current century compels the legislators to review the SGA and come up with a more applicable phrase. This ensures that there is a common comprehension both in the commercial and consumer context. The Kenyan legislation may adopt the UK phrase “satisfactory quality” to replace the “merchantability” one. Additionally, this paper proposes the additions of section 14(2B) of the UK Act into the Kenyan Act so as improve the quality of goods produced in the marketplace.

The above reforms would bring the very heart of sales law in the 21st Century. This would mean capable legislation for providing a statutory framework suitable for modern-day needs and conditions.

Victoria Mumo Titus is a student at the University of Nairobi School of Law


[1] Constitution of Kenya, 2010.

[2] Fidelma White, Sale of Goods Law Reform: an Irish Perspective, vol.42 Issue 2, Common Law world Review, (2013) para.5

[3] Law Commissions, Report on Sale and Supply of Goods.(Law com, No:160, 1987)

[4] 1 WLR 1.

[5] Patrick Milne, Goodbye to Merchantable quality, Vol.145, The New Law Journal, (1995) pp.1

[6] Ibid.

[7] 2 All ER 220.

[8] AC 225.

[9] See, Chris Turner, Unlocking Contract Law, 4th Edition, Routledge New York, (2014).

[10] Ibid.

[11] The Law of Contracts Cap 24 , Laws of Kenya.

[12] Ibid

[13] 776 N.Y. 2d 458.

[14] EWHC 3020.

[15] ZALC 84.

[16]  See, Holly Bartuska, “Click wrap and Other Types of Online Contracts: Four Principles to Follow In Creating a Legally Enforceable Electronic Agreement,” ProctorBrant, (May, 2019) Available at https://proctorbrant.com/clickwrap-and-other-types-of-online-contracts-four-principles-to-follow-in-creating-a-legally-enforceable-electronic-agreement/.

[17] 2 QB 327.

[18] ECWA civ 777.

[19] Nur Rabiatuladawiah Abdul Rahman, ‘The Rule of Caveat Emptor for E-commerce Transactions in Malaysia,’ volume 2 (No.1), Journal of Law & Governance,( 2020) P.20

[20] Cap 31, Laws of Kenya.

[21] Cro Joe, 4.79 ER.

[22] Billah, M.I., Caveat emptor versus khiyar: A dichotomy,’ vol.13 issue 3, Arab law quarterly, (1998) pp. 278-299.

[23] Ibid

[24] 15 U.S. 178.

[25] ibid

[26] Mane, R., ‘ An analysis of the concept of caveat emptor,’ vol. 19 issue 1, Indexed Peer Reviewed Half Yearly Journal, (2019) pp. 54-58

[27] Kumar, S. , ‘ The concept of Caveat Emptor and Caveat Venditor Still Govern the International Commercial Transactions in the 21st centuries,’ vol.2 issue 5, International Journal of the Trend in Scientific Research and Development ,(2018) pp. 957-961. doi.org/10.31142/ijstrd17007.

[28] Ibid.

 

[30] Sinha, P, ‘Electronic contracts and consumer protection: Does legislation provide adequate consumer protection?’ Bharati Law Review, (2017) pp. 12-30.

[31] Ibid.

[32] Benjamin Musau, ‘Electronic Commerce Law: A Special Emphasis on the Kenya Legal Tax and Regulatory Challenges,’ July 18, 2018.

[33] Ibid 

[34] Nasser, S.A. , ‘General principles of consumer protection in e-commerce trade: A comparative study between Sharia Law and the EU Laws,’ (2018)

[35] Franklyn Sunday, ‘Consumers raise red flag over false advertising,’ The Standard, April 2nd, 2013, Nairobi Kenya.

[36] Wu, Y., Ngai &others, ‘Fake online reviews: Literature review, synthesis, and directions for future research,’ (2020)

[37] Oluoch Okafor, ‘What I Ordered Versus what I got – beyond memes,’ Business Day, Sep 5, 2020.

[38] Adnan A., Manap A. and Zakaria Z., ‘Analysis of caveat emptor application in online purchases, vol.24 issue 5, Journal of Legal, Ethical and Regulatory Issues, (2021) pp.1-6.

[39] Article 46 (1)(b)