Commercial Law II Notes

Emelda’ s Notes PS: There may be some repetitions or grammatical errors in the notes.
COMMERCIAL LAW II
Law 310
INTERNATIONAL SALES-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------2
Introduction-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------2
Export Transactions--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------2
1. The bill of lading.------------------------------------------------------------------------------------------------------------------------------------------------------------------------------2
2. The commercial invoice.----------------------------------------------------------------------------------------------------------------------------------------------------------------------2
3. The policy of marine insurance.-------------------------------------------------------------------------------------------------------------------------------------------------------------2
Other Secondary documents:-----------------------------------------------------------------------------------------------------------------------------------------------------------------------2
Typical Export transactions----------------------------------------------------------------------------------------------------------------------------------------------------------------------------2
FAS Contracts--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------2
NB:------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------3
FOB Contracts--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------3
NB------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------5
In summary--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------5
CIF Contracts---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------5
Documents in CIF contracts-------------------------------------------------------------------------------------------------------------------------------------------------------------------------6
NB------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------7
In summary--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------7
FINANCING INTERNATIONAL TRADE---------------------------------------------------------------------------------------------------------------------------------------------------------8
Ways to pay seller:---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------8
Open Account-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------8
Documentary Bills---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------8
Bills of Exchange----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------8
Note better---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------9
Parties to a bill of exchange-------------------------------------------------------------------------------------------------------------------------------------------------------------------------9
Elements of bill of exchange------------------------------------------------------------------------------------------------------------------------------------------------------------------------9
Note better---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------9
In summary--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------9
Documentary Credits----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------10
Main actors involved in the documentary credit---------------------------------------------------------------------------------------------------------------------------------------------------10
Note better--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------10
Types of documentary credits------------------------------------------------------------------------------------------------------------------------------------------------------------------------10
Applicable cases for documentary credits-------------------------------------------------------------------------------------------------------------------------------------------------------11
Issuance and notification of the documentary credit----------------------------------------------------------------------------------------------------------------------------------------------11
Fundamental principles--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------12
The principle of strict compliance----------------------------------------------------------------------------------------------------------------------------------------------------------------12
Applicable cases-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------12
NB-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------12
The doctrine of autonomy--------------------------------------------------------------------------------------------------------------------------------------------------------------------------12
Applicable cases-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------13
NB-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------13
Factoring-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------13
Types of Factoring----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------13
The Existing Laws that Relate to Credit Factoring in Ghana---------------------------------------------------------------------------------------------------------------------------------13
NEGOTIABLE INSTRUMENTS-----------------------------------------------------------------------------------------------------------------------------------------------------------------------15
Introduction:---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------15
0
Definition of a negotiable instrument----------------------------------------------------------------------------------------------------------------------------------------------------------------15
a. Instrument-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------15
b. Negotiability----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------15
c. Negotiable instrument (composite definition)--------------------------------------------------------------------------------------------------------------------------------------------15
How instruments come to be negotiable------------------------------------------------------------------------------------------------------------------------------------------------------------16
a. Statute------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------16
b. Mercantile usage------------------------------------------------------------------------------------------------------------------------------------------------------------------------------16
Types of negotiable instruments----------------------------------------------------------------------------------------------------------------------------------------------------------------------16
Advantages of a negotiable instrument--------------------------------------------------------------------------------------------------------------------------------------------------------------17
PRINCIPLES OF BANKING LAW--------------------------------------------------------------------------------------------------------------------------------------------------------------------18
Introduction---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------18
What is a Bank?-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------18
Common law definition of a Banker-------------------------------------------------------------------------------------------------------------------------------------------------------------18
Ghanaian legal definition--------------------------------------------------------------------------------------------------------------------------------------------------------------------------18
Who is a customer?------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------18
Nature of Banker & Customer Relationship--------------------------------------------------------------------------------------------------------------------------------------------------------19
Rights and Duties of the bank------------------------------------------------------------------------------------------------------------------------------------------------------------------------20
Rights of the bank-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------20
Duties of the bank-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------20
Rights and duties of the customer--------------------------------------------------------------------------------------------------------------------------------------------------------------------22
Rights-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------22
Duties-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------22
Termination of banker- customer relationship-----------------------------------------------------------------------------------------------------------------------------------------------------22
PAYMENT SYSTEMS-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------24
Payment Cards------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------24
Types of Payment Card----------------------------------------------------------------------------------------------------------------------------------------------------------------------------24
HIRE PURCHASE AGREEMENTS-------------------------------------------------------------------------------------------------------------------------------------------------------------------26
Definitions-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------26
Common law definition----------------------------------------------------------------------------------------------------------------------------------------------------------------------------26
Peculiar Features of a Hire Purchase Agreement (Under the Common Law)-----------------------------------------------------------------------------------------------------------------26
STATUTORY DEFINITION---------------------------------------------------------------------------------------------------------------------------------------------------------------------26
Requirements of Hire Purchase Agreement--------------------------------------------------------------------------------------------------------------------------------------------------------27
Discretion of Court to Dispense with Specific Requirements--------------------------------------------------------------------------------------------------------------------------------27
Hirer’s right of termination---------------------------------------------------------------------------------------------------------------------------------------------------------------------------28
Hirer’s right to complete transaction----------------------------------------------------------------------------------------------------------------------------------------------------------------28
Owner’s Right-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------28
Protected Goods----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------28
Consequences of Owner’s Recovery of Goods in Contravention of Section 8(1)---------------------------------------------------------------------------------------------------------28
Action to recover Protected Goods---------------------------------------------------------------------------------------------------------------------------------------------------------------29
Postponed order – Section 10------------------------------------------------------------------------------------------------------------------------------------------------------------------29
Effect of Postponed Order - Section 11-------------------------------------------------------------------------------------------------------------------------------------------------------30
Representation & Terms-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------30
Implied terms----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------30
Breach of Implied terms------------------------------------------------------------------------------------------------------------------------------------------------------------------------30
Implied term as to merchantable quality-----------------------------------------------------------------------------------------------------------------------------------------------------30
Further Implied Terms in Special Cases------------------------------------------------------------------------------------------------------------------------------------------------------31
Other cases----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------31
1
INTERNATIONAL SALES
Introduction
A sale of goods is said to be an international contract for the sale of goods when it involves international elements. Such international elements
can influence the international nature of the sale.
 Definition 1: International Sales contract is an agreement between a buyer and a seller that identifies the parties in a transaction, the
goods or services being sold, the terms and conditions of the sale and the price to be paid.
 Definition 2: It involves the transaction of parties in different states [Article 1].
International sales primarily fall under the United Nations Convention on Contract for the International Sale of Goods [CISG] also known
as the Vienna Convention. Parties can however opt to have other legislations regulating the sales as not all states have ratified the CISG.
Export Transactions
Export sales mostly involve the dispatch of goods overseas. Thus, it is crucial that proper shipping documents as acquired as documentary
evidence which is provided to represent the finalization the contract. Once the buyer has acquired documentary evidence; the contract is
considered complete. Provisions on proper shipping documents can be found in Section 64 of the Sale of Goods Act 1962 [expatiated in
footnote1].
The principal documents which serve as “proper shipping documents” are:
1. The bill of lading.

The bill of lading is a document with a threefold purpose. It is issued by the carrier (i.e., the owner or charterer of the ship) to the consignor of
the goods (i.e., the person who is giving over the goods) or to someone nominated by him, shortly after the goods have been loaded.
 First, it acknowledges the fact that the goods have been received, describing them in an itemised list, and evidences the fact that they have
been loaded in apparent good order and condition. If not, and a defect is noted the bill is then called a 'claused bill', as distinct from a
'clean', bill.
 Secondly, it normally contains the terms of the contract of carriage, identifying the route and destination.
 Thirdly, it is regarded in law as evidencing the rights of possession and ownership in respect of the goods, so that these rights are deemed (at
least prima facie) to be vested in the holder of the bill of lading—the person who is in possession. Delivery of the goods at their destination is
normally made by the carrier to the holder against the surrender of the bill. A bill of lading may be made out in different ways, rather like a
cheque. But, despite the similarity to a cheque, a bill of lading is not a negotiable instrument.
In summary.
A bill of lading is a legally binding document that provides the carrier and shipper which details the type, quality, quantity, and destination of
the goods being carried. The parties to the bill involve; the shipper [consignor], receiver [consignee] and the carrier. It is issued by the
carrier to the consignee, consignor, and bank. It serves as evidence of contract of carriage; Acts as a document of title; and shows that the
goods have been received by the carrier.
2. The commercial invoice.

This is an invoice itemising the goods sold and describing them in a way which makes it possible to identify them as the contract goods, or as
answering to the description of the contract goods.
3. The policy of marine insurance.

This must be expressed in such a way as to make it clear that it covers the goods specified in the other two documents for the whole of the
voyage covered by the bill of lading. When the bill of lading is transferred from one person to another, the policy of insurance will be assigned at
the same time.
Other Secondary documents:

1. Certificate of origin
2. Certificate of quality
3. Inspection certificate
Typical Export transactions

The parties to an international contract of sale are free to make any arrangement they choose as regards delivery, risk, and the other incidents of
the transaction. In practice, the contract is likely to fall under one of the most common and practised heads used in international exports. The
most used heads are listed out below:
1. Free alongside (FAS)
2. Free on board (FOB)
3. Cost, insurance, freight (CIF)
FAS Contracts
'FAS' stands for 'free alongside ship'.
1
Section 64; Meaning of Proper Shipping Documents.
For the purposes of this Part "proper shipping documents" means—
(a) the seller's invoices for the goods.
(b) bills of lading which acknowledge that the goods have been shipped and which contain no reservation as to the apparent good order and condition of the goods or the packing; and
(c) in a c.i.f. contract and in any other contract where the seller is bound to effect insurance on the goods, policies of insurance, or, where permitted by commercial custom, certificates of
insurance.
2
Here the first, inland journey to the port of shipment is the seller's responsibility, but he assumes no obligation beyond that (except, perhaps,
obligations regarding procuring certificates of origin, etc.). Typically, the seller's duties might include the following:
1. To supply the goods, with evidence of conformity with the contract.
2. To deliver the goods alongside the ship, at the place and at or within the time stipulated by the contract or nominated by the buyer.
3. To give the buyer notice of the above.
4. To provide a certificate of origin.
5. To co-operate with the buyer in obtaining other necessary documentation, e.g., an export license.
The buyer, for his part, will have the following obligations:
1. To procure a ship, or shipping space, and give the seller due notice of the name of the ship and the place and time of loading.
2. To pay the price.
3. To bear all the costs of loading from alongside ship.
4. to bear the costs of procuring all documentation, including the export license, bill of lading, etc.
NB:
Property, possession, and risk will normally pass to the buyer on delivery—i.e., when the goods have been placed alongside the ship so that they
can be taken on board by crane, ships tackle or the equivalent. 'Alongside' may mean (depending upon the custom of the port) on the docks, in a
lighter, etc.
FOB Contracts
FOB stands for “Free on Board”
It is a sales contract whereby the buyer pays the seller for the cost of the goods only. The seller undertakes not just to get the goods to the ship,
but to see them loaded on to the ship, and to bear the cost of loading them; but it is the buyer's business to make all the arrangements regarding
the shipping and insurance of the goods. The understanding then is that the seller must hold himself ready to put the goods on any ship
nominated by the buyer at a nominated port. The first step in performance will be taken by the buyer, who has the right (and the duty) to find a
suitable ship calling at the port of loading within the contract period. This may mean chartering a ship, if the goods are enough to constitute a
whole cargo or booking space on a general cargo ship if what he is buying is less than a shipload.
Then the respective duties of the parties unfold in sequence. The seller must have the goods ready to ship at that time and place; then he must
have them loaded on to the ship at his own expense. The buyer must be ready to pay the price on completion of the loading; and so on.
At the conclusion of the loading of the goods, the consignor (the one giving over the goods), is issued with a document called a 'mate's receipt' 2,
which acknowledges receipt of the goods, itemised as to quantity and description, and confirmed to be in apparent good order and condition. In
an FOB contract, this will be given to the seller, who receives it on behalf of the buyer; and the price may be payable under the contract in
exchange for this document. In that case, the buyer will shortly afterwards surrender the mate's receipt to the carrier and receive in its place the
bill of lading, which will of course be made out in the buyer's name.
Alternatively, the contract may provide for the seller to procure the bill of lading, in which case he will retain the mate's receipt and have the bill
of lading issued in either his own name or that of the buyer (depending upon the provisions of the contract) and receive payment in exchange for
the bill itself. If the bill is made out to the seller, he will be a party to the contract of carriage; and he will also have 'reserved the right of
disposal' regarding the goods, which will normally prevent the property from passing to the buyer until the bill is transferred to him.
The critical moment in an FOB contract occurs when the goods 'cross the ship's rail. At this point risk normally passes, and possession and
property may pass also – [Colley v Overseas Exporters: It was held that in an FOB contract, neither property nor risk will pass until the loading
is complete]. But the property will not pass if the seller has 'reserved the right of disposal' (e.g., by retaining the bill of lading), or the contract
goods are unascertained, or the contract provides other wise.
The seller's duties will typically include:
Generally:
1. To deliver the goods on board the ship, at the place and time stipulated by the contract or nominated by the buyer:
As stated, it is the duty of the seller to put the goods on board a ship, under a reasonable or ordinary bill of lading or other contract of carriage,
for the purpose of their transmission to the buyer. However, it is the buyer’s duty to give notice to the seller of the ship’s arrival. The buyer is to
name the vessel and give shipping instructions on time. This will enable the seller to send the goods according to the instructions given.
2. To bear all costs up to and including loading (across the ship's rail):
The seller at his own expense bears all the costs of loading the goods to the ship. Any costs thereafter are borne by the buyer. The costs on the
seller include the cost of loading: carrier’s charges, stacking and transferring the goods unto the ship. In circumstances where the buyer has
chartered the ship, the buyer pays the ship-owner and recovers it from the seller.
Under the Sale of Goods Acts, the following provisions govern the passage of property export sales.
i. Where, by the bills of lading are deliverable to, or to the order of the seller, the property passes to the buyer when the bills of lading are
transferred to him
2
Mate’s Receipt is a document signed by the officer of a vessel making a receipt that is evidence of shipment on board a vessel. It is not a title document. It only acts as an interim measure until
the issuing of a proper bill of lading. Mate’s receipt is prima facie evidence of the quantity and condition of goods received, and prima facie it is the recipient or the possessor of this who is
entitled to have the bill of lading issued to him.
3
ii. Where, by the bills of lading, the goods are deliverable to, or to the order of the buyer, the property passes to the buyer when the goods
are shipped.
3. Transfer of risk:
Under FOB contracts, the seller bears all the risks of loss of or damage to the goods until they are shipped. Once they are shipped, the risk is then
transferred to the buyer and the buyer bears all the risks of loss of or damage of the goods – KLM Royal Dutch Airlines v Birds, Beast &
Reptiles Agency:
The plaintiffs agreed to sell live animals to Messrs. Animal Distributors, Inc of New York but subject to the corporation finding a guarantor in Ghana.
Consequently, the defendants wrote to the plaintiffs a letter in which they stated that “we are holding guarantee from Messrs. Animal Distributors, New
York of 600 dollars plus freight charges for a shipment of live animals”. On the strength of this letter the plaintiffs shipped some crates of animals to the
corporation. Some of the animals died in transit. The plaintiffs successfully sued the defendants at the magistrate court for the balance of the purchase
price of the animals and on appeal by the defendants on the ground that their letter could not be construed to mean a letter of guarantee, the court in
holding that that the letter written by KLM amounted to a guarantee also that, in FOB contracts, the risk in the goods under Section 62 (g) of Act 137
passes to the buyer when they were shipped. Therefore, whatever deaths occurred amongst the animals after shipment were at the risk of the New York
corporation which on account of the letter of guarantee might be enforced against the defendants.
4. To provide documents evidencing delivery to the ship, certificate of origin, etc.:

Unless a contrary intention appears, it is the seller’s contractual duty to deliver to the buyer the bill of lading to enable the buyer to obtain
possession of the good. The bill of lading shows that the goods have been shipped and thus, it serves as a security which the seller may retain as
a security for payment. Unless otherwise agreed, the delivery of the necessary document prima facie indicates that payment has been
made. Payment and delivery are concurrent conditions.
 Concordia v Richco: Confirms that a seller is under a duty to send shipping documents CIF and FOB to the buyer with reasonable dispatch
however a question of fact to be determined by the court.
5. To give notice to the buyer to enable him to insure the goods during their sea transit:
The seller is bound to give such notice to the buyer as required by section 20(2) of Act 137 except where the buyer already has the necessary
information. Since under FOB contracts, the seller does not take insurance policy on the goods, the seller is to notify the buyer to insure the
goods during the voyage. Section 20(2) of Act 137 states:
(2) Unless otherwise agreed where goods are sent by the seller to the buyer by a route involving sea or air transit in circumstances in which it is usual
to insure, the seller must give such notice (if any) as may be required by the buyer to enable him to insure them during the sea or air transit, and if the
seller fails to do so the goods shall be at his risk during such transit.
 Wimble, Sons & Co. v. Rosenberg & Sons

The plaintiff’s sold 200 bags of rice FOB Antwerp to the defendants. The buyers sent instructions for the shipment, but the sellers were to select the sip.
The sellers shipped the goods but did not insure it. The buyers did not have an open cover. The practice of the buyers was to take out an insurance only
after being notified of the name of the ship. The ship was lost at sea and the sellers sued for the price. The courts held that, the sellers were entitled to
the price. most of the COA reasoned that it was the buyer’s responsibility to fix the loading date, knew the date of departure and knew the freight, port of
loading and dispatch. The name of the ship was the only thing lacking and this was not a bar to insuring. The buyer already had enough information to
effect the insurance. Thus, the courts were of the view that, if before the goods are shipped, the buyer has the necessary information to enable him to
insure, the seller is not obliged to give notice to the buyer of the shipment of goods on a particular ship.
6. To co-operate with the buyer in procuring the bill of lading and other documentation
7. To obtain the export licence
8. To supply the goods, with evidence of conformity with contract
NB:
It is the duty of the buyer to ensure that the ship is insured, but that does not make it the duty of the seller to insure the ship himself. It is simply
the duty of the seller to inform the buyer to take out an insurance policy to cover the period of transit.
The buyer's duties are as follows:
1. To procure a suitable ship or shipping space and give the seller due notice of the ship and place and time of loading [Nominate a ship]:
The buyer is under a duty to nominate the ship and give the relevant particulars of the vessel to the seller. The nominated vessel must be a
suitable or effective vessel able to carry the cargo- The New Prosper [1991] Lloyd’s Rep 93:
There was an FOB contract for sale of barely under a G.A.F.T.A standard form, subject to A.U.S.B.A terms, which stated that the vessel must comply
with Australian Barley Board draft requirements. The vessel nominated could enter some but not all optional loading ports and so was rejected by the
shipper.
The court held that rejection was permitted. It was not a suitable vessel. The buyer was in breach of the contract and not the seller. Thus, the normal
rule is that an effective vessel is one, which can carry the contract cargo.
4
In Bunge Corporation v Tradax3, the court held that it is a condition that the buyer must nominate an effective vessel and communicate
nomination to the seller in time for the seller to get the goods to the dock ready for loading.
The time of loading is of essence of the contract and thus if not done, it entitles the seller to treat the contract as repudiated and claim for
damages. Therefore, there would be a breach of the contract of sale for which the seller can sue for damages and not for price because the
property in the goods has not yet passed.
2. To pay the price
3. To bear all costs after the goods passing the ship's rail [after the goods have been shipped]
4. To bear the costs of procuring all documentation, including the bill of lading and certificate of origin.
The duties of the seller and buyer according to the Sale of Goods Act, 1965 (Act 137)- Section 62:
In a f.o.b. contract, unless a contrary intention appears —
(a) The buyer is entitled and bound to nominate a ship to the seller calling during the agreed period, if any, at the agreed, or where the buyer has an
option, one of the agreed, ports, and ready and willing to carry the goods-
(b) The seller is bound, at his own expense, to have the goods loaded on the ship nominated by the buyer-
(c) The seller is bound to give such notice to the buyer as required by section 20(2) 4 of this Act except where the buyer already has the necessary
information-
(d) The seller is not bound to effect any insurance on the goods-
(e) The seller is bound to transmit to the buyer bills of lading by which the goods are deliverable to the buyer or his order or to transfer to the buyer
bills of lading by which the goods are deliverable to the seller or his order-
(f) Whereby the bills of lading, the goods are deliverable to, or to the order of the seller, the property passes to the buyer when the bills of lading are
transferred to him, and whereby the bills of lading the goods are deliverable to, or to the order of the buyer, the property passes to the buyer when
the goods are shipped-
(g) The risk in the goods passes to the buyer when they are shipped.
NB
Section 60 of Act 137 states:
(2) In a f.o.b. contract, unless a contrary intention appears—
(a) where the buyer is resident in the country from which shipment is to be made, it is the duty of the buyer to obtain any necessary export licence
(b) in any other case, it is the duty of the seller to obtain any necessary export licence
(c) it is the duty of the buyer to obtain any necessary import licence
In summary
In FOB the buyer is therefore responsible for procuring his own insurance and arranging the contract of carriage and payment of freight. The
seller is responsible for delivering the goods to the ship named by the buyer. It is usually used in international sales to signify that the seller’s
delivery obligation is accomplished when the goods are loaded on board. In an FOB, unless a contrary intention appears, where the buyer is a
resident in the country from which shipment is made, it is the duty of the buyer to obtain any necessary export license. In any other case, it is the
duty of the seller to obtain any necessary export license. Here, the seller’s duties include – supplying and delivering the goods to nominated ship,
provide documentary evidence, cooperate with buyer to acquire documentation [Concordia v Richco], bear all loading costs, and give insurance
notice to buyer [Section 20 (2) of Act 137 & Wimble Sons & Co v Rosenberg Sons]. The buyer’s duties are – nominating a ship/vessel [New
Prosper (1991) & Bunge Corporation v Tradax], paying the price of goods, bearing costs and risks after goods have been shipped and bearing
costs of all documentation [KLM Royal Dutch Airlines v Birds, Beast & Reptiles Agency].
CIF Contracts
The letters 'CIF' stand for 'cost, insurance, freight'.
In a CIF contract, the buyer looks to the seller to make the whole of the shipping arrangements, including those relating to insurance, and the
buyer takes delivery of the goods symbolically, commonly while they are somewhere at sea, by taking over the shipping documents relating to
the consignment—including, at least, the bill of lading, commercial invoice, and insurance policy.
In practice, the freight is often deducted from the overall price and left to be paid by the buyer when the ship has reached its destination
In contrast with the FOB contract, which specifies the port of loading, a CIF contract specifies the port of arrival.
In CIF contracts the buyer and the seller are both privy to the sale contract and both provide consideration. One crucial feature of CIF contract is
that it is a contract to procure and tender to the buyer the conforming shipping documents and to transfer the property in those goods to the buyer
at the due time for such transfer. If the goods are shipped in good condition but damaged when they arrive, the buyer cannot sue the seller, the
buyer’s right is against the carrier and/or the insurer.
3
Bunge Corporation v Tradax Export SA [1981]
This was a case of FOB contract for the sale of soya bean. It was agreed that the shipment was to be made in June by the 30 th. The buyers must provide a vessel and give at least 15 days notice
of its probable readiness. The buyer gave notice of five days late. This was too late to enable the seller to perform the contract within the shipment period. The sellers thus brought this action to
repudiate the contract on the grounds that the buyer had broken a condition. The court held, that the term was a condition, and the sellers were entitled to rescind on the grounds that the notice
reached them days too late.
Two justifications were given by the courts for this decision:
1. The seller could not as a practical matter perform their own obligation of nominating port for delivery until the buyer has given them notice of the readiness of the ship to load.
2. The classification promoted certainty for it enabled the seller to tell, immediately on receipt of the ships readiness to load whether they were bound to deliver.
4
Section 20(2) of Act 137
(2) Unless otherwise agreed where goods are sent by the seller to the buyer by a route involving sea or air transit in circumstances in which it is usual to insure, the seller must give such notice
(if any) as may be required by the buyer to enable him to insure them during the sea or air transit, and if the seller fails to do so the goods shall be at his risk during such transit.
5
It must be noted that CIF contracts are normally referred to as contracts for the sale of document relating to goods and not the sale of goods
itself. The cases below establish this rule:
 Manbre Saccharine v Corn Products Ltd [1919]

Under two separate contracts, Corn Product sold starch and syrup to Manbre Saccharine on terms of CIF London. Goods answering to the contract
description was shipped aboard the SS Algonquin, which was sunk by a torpedo or a mine. The seller tendered the documents relating to the goods, but
the buyer refused to take them up and pay the price. The court held that the seller may validly tender the documents even though he knows the ship to be
lost, that the buyers were bound to do so and that their refusal to pay amounted to a breach.
McCardie J stated that “I conceive that the essential feature of an ordinary contract of the sale of goods rests in the fact that the essential feature of an
ordinary contract of the sale of goods rests in the fact that performance of the bargain is to be fulfilled by the delivery of documents and not by the actual
physical delivery of the goods by the vendor”.
 Zakour v Pillsbury Mills, Inc. [1961]

The plaintiffs were a company based in the United Stated. It received orders from the defendant [appellant] for the supply of flour on CIF basis. The
goods were supplied, and the defendant took delivery of the goods. The plaintiffs sued the defendant for an outstanding amount on the contract. The
defendant contended that some of the goods were damaged in transit and thus not liable. The High Court gave judgement for the plaintiff holding that a
CIF contract is performed by the delivery of documents and not by the actual physical delivery of the goods. The defendant appealed to the Supreme
Court and admitted however that they had benefitted from insurance. The Supreme Court held that the essential feature of a CIF contract is that
delivery is satisfied by the delivery of documents and not by actual delivery of goods, on presentation of shipping documents and not by actual delivery of
goods. On presentation of shipping documents, if they are complete and regular, the buyer is bound to pay the price irrespective of the arrival of the
goods, but by so paying, he is not precluded from subsequently pursing any remedy as may be available to him, either under the terms of the contract or
under the terms of insurance.
 Comptoir D’achat v Luis De Riddler

It was held that the obligation imposed on a seller under a CIF contract is well-known. It includes the tender of a bill of lading covering the goods
contracted to be sold. Coupled with an insurance policy and commercial invoice which shows the price. Against the tender of these documents, the
purchaser must pay the price. In such case, the property may pass either on shipment or on tender. The risk general passes on shipment but possession
does not until the documents which represent the goods are handed over in exchange for the price.
Documents in CIF contracts

The term of CIF indicates three essential documents which include:
1. The commercial invoice [sale contract]

2. An insurance contract [an insurance policy]
3. Contract of carriage [Bill of lading]
The seller's duties will include:

1. To ship at the agreed port of shipment goods of the contract description (or procure goods afloat which have been so shipped):
One major duty of the seller is to make the contract of carriage to the goods to the named port of destination. However, except the contract
requires, the seller himself is not obliged to ship the goods. Instead, he may purchase the goods afloat and appropriate them to the contract. Thus,
the seller has the obligation to shup or appropriate the ship which departs from the port of shipment on the date or within the period of shipping
specified in the contract.
In Ashmore v Cox, the court held that, failure to perform this duty amounts to a repudiatory breach. Generally, the seller has the duty to deliver
the goods which is met once the documents are delivered even if the goods are lost.
2. To tender these documents to the buyer (or his agent or bank):
The seller’s obligation is to provide to the buyer a commercial invoice, a clean bill of lading and an insurance policy. In the absence of any
agreement to the contrary, the bill of lading to be tendered under a CIF contract must be a shipped bill of lading. The tender of documents also
allows the buyer to claim the goods and to have property in the goods. The bill of lading must however cover the entirety of the transit of goods.
The bill of lading and the insurance policy among others assures the buyer that the goods shall arrive. In situations where the goods do not arrive
due to destruction or damage, it assures the buyer that he can claim against the carrier or insurer.
In Kaguin Ent. (Gh) Ltd v Umarco (Gh) Ltd:
The courts stated that under a CIF contract, the duty of the seller as far as physical handing over of the goods themselves is concerned, it is
accomplished when the goods are put on board the ship for the purpose of transit. In addition, he is under obligation to make a contract of affreightment
with the carrier under which the goods will be taken to the contractual destination and then to create an insurance for the buyer and to forward the bill of
lading, policy of insurance, and invoice to the buyer.
3. To procure a contract of sea carriage by which the goods will be delivered to the contract destination
4. To insure the goods under an insurance contract which will be available for the benefit of the buyer
5. To procure a commercial invoice in conformity with the contract
The buyer's duties will be:
1. To accept the documents, if they are in conformity with the contract, and pay the price:
The tender of documents plays a vital role in CIF contracts. The buyer’s duty is to confirm a good tender of documents, because it represents the
goods, the buyer must pay for the goods against the receipt of the documents, the buyer is also under a duty to pay the seller in the currency
which conforms to the document of sale. The buyer is bound to pay the price even if the ship has not arrived or the goods are damaged or lost.
6
Once the bill of lading and the goods correspond to the terms of the contract, the buyer is bound to accept the documents and make payment to
the seller through the bank.
If the bill of lading corresponds with the contract but not the goods, the buyer cannot recover the money paid from the bank to the seller. The
buyer can however proceed to freeze payment by the bank. This is because the banks deal with the documents of the contracts and not the gods.
Again, where neither the bill of lading nor the goods correspond, the buyer is entitled to rescind the contract and sue the seller for damages
together with the cost of documentary credits. In this case, the seller is not entitled to any remedy.
Also, where the bill of lading does not correspond with the contract, but the goods are corresponding, the buyer may reject the goods.
However, if the seller can make fresh and conforming tender in time, the buyer may accept the goods. Where the buyer refuses to accept a fresh
tender, the seller has no cause of action against the buyer.
2. To procure any necessary import licence
3. To take delivery of the goods at the agreed destination, and pay all unloading costs
4. To pay customs and other duties at the port of arrival
The duties of the seller and buyer according to the Sale of Goods Act, 1965 (Act 137)- Section 61 [C.I.F. Contracts]:
In a c.i.f. contract, unless a contrary intention appears —
(a) the seller is bound at his own expense, to ship the goods during the agreed period, if any, to the port agreed upon or to acquire goods afloat which
have been so shipped
(b) the seller is bound, at his own expense, to effect on the goods an insurance of the type normal for goods and a voyage of the kind in question
(c) the seller is bound to transfer to the buyer proper shipping documents in accordance with the terms of the contract
(d) the buyer is bound to take up proper shipping documents and, on doing so, to pay the price in accordance with the terms of the contract
(e) the goods are deemed to be delivered to the buyer, and the property therein accordingly passes to the buyer, on the transfer to him of the bills of
lading
(f) the risk in the goods passes to the buyer when they are shipped or acquired afloat [Farah v Robin Hood Flour Mills Ltd & Another5].
NB
Section 60 of Act 137 states:
(1) In a c.i.f. contract, unless a contrary intention appears—
(a) it is the duty of the seller to obtain any necessary export licence
(b) it is the duty of the buyer to obtain any necessary import licence.
In summary
CIF contract is a contract for the international sale of goods with package deal covering the cost of goods, the insurance premium and carriage
costs all of which are then paid for and arranged by the seller or shipper. Delivery of goods, which involves passage of possession and risk of the
goods here is completed by delivery of documents to the buyer. The buyer can only sue for damages or repudiation of the contract once the seller
does not complete his duties as required. However, the buyer cannot sue or refuse to pay the seller if there has been damage to or loss of goods.
He, the buyer, must first pay the seller before proceeding to sue the carrier or insurance for damage to or loss of goods. The seller’s duties
include -- shipping goods to nominated port, tendering documents to buyer, procuring all necessary documents and nominating ship and port of
export. The buyer’s duties include --- accepting conforming documents and pay the price. Supporting cases include: Manbre Saccharine v Corn
Products Ltd; ⁋ Zakour v Pillsbury Mills, Inc.; ⁋ Ashmore v Cox; ⁋ Farah v Robin Hood Flour Mills Ltd & Another; ⁋ Kaguin Ent. (Gh) Ltd v
Umarco (Gh) Ltd.
5
At the Supreme Court it was held that, in a CIF contract where the seller completely satisfies his part of the contract, the incident of risk passes to the buyer upon shipment of goods.
Thereafter, the buyer will be under an obligation to pay even if the goods get lost in transit or become damaged through any intervening circumstances. Thus, the buyer can only reject the goods
if they do not conform to contract quality of if they were not merchantable at shipment. Since a clean bill of lading was delivered to the plaintiffs with special insurance to cover for inherent vice
and that the flour shipped was Robin Hood flour and was of merchantable quality, the plaintiff had no right to reject the flour and was therefore not entitled to any damages.
7
FINANCING INTERNATIONAL TRADE

Export sellers ultimately want to be paid for the goods that they have supplied, after all they do not manufacture goods for fun. To be able to
complete an international transaction, there are different ways/ modes of payment. Parties decide mode of payments which depend on the
solvency of the buyer, i.e., the measure of a person/company’s financial health. The seller ultimately decides/agrees on the mode of payment.
The seller also decides which bank, or third party intermediates the mode of payment.
Ways to pay seller:

1. Open account – 3rd party involvement low; relatively straight forward (1 party under risk)
2. Bill of exchange – sold to a third-party buyer in good faith, immediate or fixed date
3. Documentary bill – Seller draws bill of exchange for Buyer and attaches to Bill of Lading
4. Documentary credit – Buyer sets up credit in favour of seller with bank (trustworthy 3rd party)
Other ways to pay seller include Forfeiting, International Factoring, International financial leasing and Confirming houses.
Open Account
Where there is a good and possibly long-standing relationship between buyers and sellers the parties will probably want to trade on ‘open
account’. This is like how domestic buyers and sellers would trade. This relationship on ‘open terms’ is usually seen where the seller produces
goods and delivers them to the buyer, followed by an invoice requiring payment, either for immediate payment or at some future specified date,
such as ’90 days from date of invoice’. The buyer would then send payment using an appropriate method:
 Buyers own cheque – problem with this is that the cheque very often is drawn in the currency of the buyer, which itself could cause cost
to the seller in converting to the home currency.
 Banker’s drafts – This is a draft drawn by the buyer’s bank on its correspondent bank in the seller’s country of business. Costs are usually
borne by the buyers and are irrevocable.
 International Money Orders
 Mail or Telegraphic Transfer
 SWIFT – Society of Worldwide Interbank Financial Telecommunications
 International Direct Debit
This method of ‘open account’ is the simplest and least costly method, however it is not always to the seller’s benefit, not least in terms of stress
of whether they will be paid for their labours.
The two other major methods of payment in international trade involves Documentary bills and Documentary credits.
Documentary Bills
[A bill is a printed or written statement of the money owed for goods or services]
A bill with which shipping documents like a bill of lading, an insurance policy, invoice, etc. are enclosed is known as a ‘documentary bill.
A documentary Bill of Exchange is one where the relative shipping documents such as the Bill of Lading, marine insurance policy, invoice, and
other documents are sent along with the Bill of Exchange. It is a bill of exchange drawn on a consignee of goods and has appended to it the
shipment documents by way of collateral security for its payment. These documents are required to take delivery of goods from the shipping
company and from the customs authorities on, importation from any country. These documents include the bill of lading, insurance policy, dock
warrant, invoice, etc.
When the exporter is unable to get the advance payment from the importer, the next best alternative mode of payment is ‘Documentary Bills’.
Exporter gets paid only if the importer makes payment. If the importer fails to make a payment on the due date, an exporter has no alternative
other than filing a civil suit against importer as it is not legally possible to get back possession of goods. Under those circumstances,
‘Documentary Bills’ is a bridge, as documents are routed through the bank. It provides the required solution as it satisfies the claims of both
parties. In this system of payment, banks act as a media to reconcile the conflicting requirements of the exporter as well as importer.
Under a Documentary Bill, the bank opens no letter of credit. The bank functions as an agent for the collection of the bill. The role of a bank is
that of medium only. There is no commitment on the part of the bank for any payment, whatsoever.
[A letter of credit is a letter issued by a bank to another bank (especially one in a different country) to serve as a guarantee for payments made to a specified
person under specified conditions]
Bills of Exchange
Regulated by the Bills of Exchange Act, 1961(Act 55)
Section 1(1) of Act 55 defines a bill of exchange as an unconditional order in writing, addressed by one person to another, signed by the person
giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to
the order of a specified person, or to bearer.
Simply, a bill of exchange is an unconditional order in writing requiring payment on demand.
A bill is not invalid by reason—
(a) That it is not dated
(b) That it does not specify the value given, or that any value has been given therefor
(c) That it does not specify the place where it is drawn or the place where it is payable.
8
Note better
The seller will send a documentary bill to the buyer to ensure that the buyer does not take up the bill of lading without paying. Should the buyer
refuse/fail to pay the bill of exchange, he is bound to return the bill of lading to the seller.
Parties to a bill of exchange

(a) Drawer (seller): will draw the bill of exchange
(b) Drawee (buyer): to whom it is addressed to and who accepts it
(c) Payee: person in whose favour the bill is drawn
(d) Acceptor: When the drawee indicates his willingness to pay, he is then called the acceptor
A bill payable to order is negotiated (meaning transferred) by the indorsement of the payee (or of a subsequent transferee) completed by
delivery. The person indorsing the bill is called the Endorser' and the person to whom it is indorsed, the 'indorsee'. A bill payable to bearer is
negotiated by mere delivery. The payee or an indorsee of a bill who is in possession of it, or the bearer, is called the 'holder'. If the holder of the
bill puts his signature on the back of the bill with a view to transfer the property contained in it (right to receive money from the acceptor),
then he becomes endorser, and the person to whom the bill of exchange is transferred will become endorsee.
Elements of bill of exchange

An instrument must comply with all the requirements set out in Section 3(1) of Act 55 if it is to be a bill of exchange.
1. Unconditional order: The order given by the drawer to the drawee must be unconditional. An order to pay provided funds are available or
out of a particular fund, would therefore not be a bill -- Section 1(3) of Act 556. An order directing payment to be made upon a contingency
is void. This is because it may or may not occur. Therefore, an instrument expressed to be payable on a contingency is not a bill, and the
happening of the contingency event does not cure the defect -- Section 9(2)
2. Writing: The order to pay must be in writing, which includes print [Act 55, section 2]. The order must not be given orally. The bill does not
have to be drawn on any material. However, it is doubtful whether an electronic communication, such as an email or electronic data
interchange (EDI) message (SWIFT), can satisfy the statutory requirement of writing. The case in point is Standard Chartered Bank
Ghana Ltd v Victoria Island Properties & Anza Grinlays Bank, where it was stated that the writing may be in any language and in any
form of words.
3. Addressed by one person to another: The bill of exchange must be addressed by the drawer to the drawee. The drawee must be named or
otherwise indicated in a bill with reasonable certainty -- Section 4 of Act 557. If the drawer draws the instrument on himself, it is not a bill
of exchange, but the holder of such an instrument has the option of treating it either as a bill of exchange or as a promissory note -- [Act 55,
Section 5(2)]. The instrument is a bill of exchange where the drawer names himself as the payee.
4. Signed by the person giving it: The validity of a bill of exchange or liability on a bill of exchange as drawer, endorser, or acceptor is
premised on signing the Bill -- Section 21. The drawer may sign the bill personally or through an agent. If the signature of the drawer is
forged or placed on the bill without his authority, the signature is wholly inoperative -- Section 22. However, where a person signs a bill in a
trade or assumed name, he is liable thereon as if he had signed it in his own name --Section 21.
It may in appropriate circumstances be possible for a person whose signature has been forged or one whose signature has unlawfully been
placed on a bill to be estopped/ precluded from setting up the forgery or want of authority -- Section 22. The case in point is Greenwood v
Martin ‘s Bank. A person who is so authorized to sign on behalf of another person may sign a bill. This is known as procuration of
signatures [Section 23]. A signature by procuration operates as notice that the agent has but a limited authority to sign, and the principal is
only bound by such signature if the agent in so signing was acting within the actual limits of his authority. Where a person signs a bill as
drawer, endorser, or acceptor, and adds words to his signature, indicating that he signs for or on behalf of a principal, or in a representative
character, he is not personally liable thereon; but the mere addition to his signature of words describing him as an agent, or as filling a
representative character, does not exempt him from personal liability -- Section 24.
5. On demand at a fixed or determinable future time: By Section 10(1) of Act 55, a bill is payable on demand: (a) which is expressed to be
payable on demand, or at sight, or on presentation; or (b) in which no time for payment is expressed.
By Section 11, a bill is payable at a fixed or determinable future time: (a) if it is expressed to be payable at a fixed period after date or sight;
or (b) on or at a fixed period after the occurrence of a specified event which is certain to happen, though the time of happening may be
uncertain. It is vital that the time of payment is certain according to the terms of the bill. This renders the bill saleable. Where time of
payment is not certain from the face of the instrument it will not be treated as a bill of exchange.
Note better
An unsigned document cannot be a bill of exchange but a signed document, though failing to comply with all the requirements of Section 3(1),
may be converted into a bill of exchange where the signatory (the drawer, the acceptor or an indorser) delivers it to another person in order that
the missing details may be completed by him. Such a document is an 'inchoate' instrument. The person who takes delivery of an inchoate
instrument has prima facie authority to fill it up as a complete bill and to rectify any omission of any material, for example the amount or the
name of the payee [Act 55, Section 20(1)]. In order that the instrument, when completed, may be enforceable against a person who became a
party to it prior to its completion, it must be filled up within a reasonable time and strictly in accordance with the authority given [Act 55,
Section 20(2)].
In summary
A documentary Bill of Exchange is one where the relative shipping documents such as the Bill of Lading, marine insurance policy, invoice, and
other documents are sent along with the Bill of Exchange. These documents include the bill of lading, insurance policy, dock warrant, invoice,
6
(3) An order to pay out of a particular fund is not unconditional within the meaning of this section; but an unqualified order to pay, coupled with (a) an indication of a particular fund out of
which the drawee is to reimburse himself, or a particular account to be debited with the amount, or (b) a statement of the transaction which gives rise to the bill, is unconditional.
7
Section 4 -- Address to Drawee
(1) The drawee must be named or otherwise indicated in a bill with reasonable certainty.
(2) A bill may be addressed to two or more drawees, whether they are partners or not, but an order addressed to two drawees in the alternative, or to two or more drawees in succession, is not a
bill of exchange.
9
etc. When the exporter is unable to get the advance payment from the importer, the next best alternative mode of payment is Documentary Bills.
Under a Documentary Bill, the bank opens no letter of credit. The bank functions as an agent for the collection of the bill and the role of a bank
is that of medium only. The seller will send a documentary bill to the buyer to ensure that the buyer does not take up the bill of lading without
paying. Should the buyer refuse/fail to pay the bill of exchange, he is bound to return the bill of lading to the seller.
A bill of exchange is an unconditional order in writing requiring payment on demand. It is invalid by reason that; it is not dated; it does not
specify the value given; and it does not specify the place where it is drawn or the place where it is payable. There are 3 parties to a bill of
exchange; the drawer (seller); the drawee (buyer); the payee [person in whose favour the bill is drawn]; and the acceptor [When the drawee
indicates his willingness to pay, he is then called the acceptor]. The person indorsing the bill is called the Endorser' and the person to whom it is
indorsed, the 'indorsee'. Bills of exchange are indorsed by the party writing his name on the back. Should the buyer refuse/fail to pay the bill of
exchange, he is bound to return the bill of lading to the seller.
For a document to be classified as a bill of exchange, it must be -- Unconditional; In writing; Addressed by the drawer to the drawee [The
instrument is a bill of exchange where the drawer names himself as the payee]; Signed by the person giving it; and on demand at a fixed or
determinable future time.
Documentary Credits
Documentary Credit is a payment technique whereby a bank commits itself, on behalf of its client (the importer), to pay to a beneficiary (the
exporter) within a fixed period, the price of goods / services against the delivery by the exporter of previously agreed and compliant documents
proving the value and shipment of the goods / services. The Documentary Credit is used when the transaction amounts are very high or
when one party has doubts about the morality or solvency of the other. It provides security for both the exporter and the importer. The seller
(the exporter) receives an advance assurance of payment upon presentation of documents listed in the agreement, and the buyer is assured that
the bank will not pay unless the seller has submitted all the documents strictly complying with the documentary credit. The credit worthiness of
the importer is substituted by the guaranty of a bank (usually his own bank). The term “Letter of Credit” or the abbreviation “L/C” is
predominantly used in the USA while Europeans prefer to use “Documentary Credit” or the abbreviation “D/C”. The Uniform Customs &
Practice for Documentary Credits (The UCP) is the set of rules governing the use of documentary credits.
Main actors involved in the documentary credit

The documentary credit involves four main actors. The importer and his bank on one side and the exporter and his bank on the other side. The
importer’s bank is the issuing bank. The exporter’s bank is the notifying bank. It can be the confirming bank if it confirms the Documentary
Credit.
 The importer: It is the buyer who gives the instructions for opening the Documentary Credit. He is the originator of the documentary credit.
 The importer’s bank: It receives instructions from the importer, the client, and opens or issues the documentary credit. That is why it is
called the issuing bank.
 The exporter: It is the beneficiary of the documentary credit. He is the seller in favour of whom the documentary credit is open. To receive
payment, he must prove compliance with his obligations by submitting all the required documents in the documentary credit to his bank
 The exporter’s bank: Located in his country, it is the bank that notifies the exporter, the beneficiary, upon receipt of the documentary credit
and either --
 transmits it to him, without making any commitment. In this case, it is called the notifying bank.
 or confirms it by agreeing to add its payment commitment to that of the issuing bank. It is then called confirming bank.
Note better
The importer’s bank prefers to do business with a correspondent bank in the country of the exporter. And the exporter may not be the customer
of that bank. So, it is not mandatory for this bank to be the bank of the exporter.
Types of documentary credits

There are many types of documentary credits. In its main forms, a documentary credit may be revocable or irrevocable, notified or confirmed,
transferable & non-transferable, revolving and standby.
1. The revocable documentary credit: It may be amended or cancelled any time by the importer without the approval of the exporter. Or the
importer’s bank may cancel its commitment before the goods are shipped. Given the sums generally involved, the risk for the exporter is
significant (Production of goods that he will not be able to ship because the client or his bank has retracted). This explains why this form of
documentary credit is almost never used in practice.
2. The irrevocable documentary credit: The bank of the importer makes a firm commitment to pay. This type of documentary credit cannot
be changed or cancelled without the agreement of all parties. The exporter considers the irrevocable documentary credit as an order
confirmation. He can start manufacturing the goods because he is assured of being paid by the importer’s banker if he meets all his
commitments.
3. The notified documentary credit: Notifying a documentary credit is informing its beneficiary, the exporter, that it has been issued in its
favour. This notification is made by a bank (called the notifying bank or advising bank) located in the exporter’s country. It may be the
exporter’s bank, but it is not always the case. When the documentary credit is notified, only the banker of the importer is committed to pay.
The notifying bank credits the exporter’s account after receipt of funds from the importer’s bank.
4. The confirmed documentary credit: This type of documentary credit contains a guarantee on the part of both the issuing and the notifying
banks to make the payment to the seller if the terms of the documentary credit are met. Confirmation is only added to irrevocable
documentary credits. The bank that gives the second guarantee is called the confirming bank. If he wants a confirmation, the applicant
(the importer) must state this expressly in his documentary credit application. The confirming bank assumes the credit risk of the issuing
bank as well as the political and transfer risks of the importer’s country. The confirming bank is usually the correspondent of the importer’s
10
bank located in the country of the exporter. Without confirmation of the documentary credit, the notifying bank just forwards it to the
beneficiary without taking on its own commitment -- Bunge Corp v Vegetable Vitamin Foods (Pte) Ltd; A credit is only ‘opened ‘when
the advice of the opening of the letter of credit or the confirmation of the letter of credit is communicated to the beneficiary.
5. Transferable & Non-transferable credit: Transferable credits allow the seller to transfer the rights embodied in the credit to a third party.
6. Revolving Credits: They allow the seller to present documents and obtain payment as often as he wants during a credit period, so long as
the overall financial limit specifies in the credit is not exceeded.
7. Standby credits are issued by a bank and embodies an undertaking to make payment to a third party.
Contracts arising from documentary credit transaction
Where an irrevocable credit is opened, the following contracts may arise –
 Contract of sale between seller and buyer
 Contract between issuing bank and buyer
 Contract between issuing bank and advising bank
 Contract inferred from the payment undertakings by the issuing bank and the seller
Applicable cases for documentary credits

Hamzeh Malas & Sons v British Imex Industries Ltd
Facts: The plaintiffs, a Jordanian firm, purchased from the defendants a large number of reinforced steel rods. The goods were to be delivered in two
instalments. The payment was to be made through letters of credit confirmed with the bank in London. The plaintiff buyers discovered that the first
instalment of goods was defective. They sought an injunction to restrain the payment and bar the defendant from realizing the second letter of credit.
The judge granted the injunction. Although, the judge refused to extend the injunction on the second occasion. The plaintiffs immediately appealed to
the Court of Appeal against the refusal to extend the injunction.
Issue: Whether the court had jurisdiction to grant the injunction sought by the plaintiff buyer?
Held: The plaintiffs’ appeal failed. The Court of Appeal held that the court’s jurisdiction to grant injunctions is wide. There may well be cases where
the court would exercise jurisdiction should there be a fraudulent transaction. However, the present case was not such to require the court, in the
exercise of its discretion, to grant an injunction.
Pavia and Co SPA v Thurmann-Nielsen
In CIF contracts the credit must be opened at the latest at the beginning of the shipment period. The seller is entitled, before he ships the goods to be
assured that when he does so, he will get paid
Garcia v Page:
Buyer’s obligation to have a documentary credit opened in favour of the seller is usually a condition precedent to the seller’s obligation to deliver the
goods
United City Merchants (Investments) Ltd v Royal Bank of Canada

Facts: There was a contract between the parties for the sale of manufacturing equipment. The contract provided that the goods would be shipped by
December 15, 1976. Although, the goods were shipped a day later, on December 16. The loading agent, not acting for the sellers, forged and misdated
the date on the bill of lading in order to reflect the earlier date of shipment. December 15. The sellers were unaware of this fraud and presented the
relevant documents to the bank to obtain payment. However, the bank, on becoming aware of the discrepancy, refused to pay the sellers. Then they
bought an action against the bank. The judge at first instance held in favour of the plaintiff sellers and stated that the plaintiffs were innocent of the
brokers’ fraud, the defendants were not entitled to reject the documents. However, the Court of Appeal rejected the plaintiffs’ action, and the case
went to the House of Lords.
Issue: Whether the forged bill of lading was sufficient reason for the bank to refuse payment to the sellers?
Held: The House of Lords held that the bill of lading was fraudulently misdated by the loading agent. Although, the latter’s fraud could not defeat the
plaintiff sellers’ claim for payment. The sellers in the present case were innocent because the documents were forged by a third party and the sellers
were not aware of such forgery. To sum up, the House of Lords concluded that they could only refuse payment of the beneficiary were a party to the
fraud. Here, in the present case, the sellers were not the party to the fraud and thus they were entitled to the payment. Their claim was considered
enforceable.
Issuance and notification of the documentary credit

Documentary credit operates as follows
1. The seller and buyer agree in the contract of sale that payment shall be made under documentary credit.
2. The buyer applies to his bank (i.e., the issuing bank) to open a documentary credit in favour of the seller
3. The issuing bank opens an irrevocable credit and undertakes to pay the price upon presentation of specific documents to it by the seller.
4. The issuing bank may open the credit by sending it to the seller. And may arrange for a bank in the seller’s country (i.e., that advising or
correspondent bank) to advise the seller that the credit has been opened.
5. The issuing bank asks the advising bank to add its own confirmation to the credit and the seller benefits from having payment obligation
localized in his own country.
6. The seller ships the goods and tenders the required documents to the advising bank or confirming bank and if the documents conform to
the terms of the credit, the payment is made.
11
7. Before releasing the documents to the buyer, the issuing bank will in turn seek payment from him.
Fundamental principles
The principle of strict compliance
This principle of strict compliance is one of the fundamental principles governing the operation of documentary credits. It is defined as the legal
principle that entitles the bank to reject documents which did not strictly comply with the terms of documentary credits. The issue of strict
compliance is applied during the process of checking documents in documentary credit transactions. It aims to protect the buyer who has no
opportunity to inspect physically the goods prior and during the loading and benefits the seller by providing fast payment. Apart from that, the
bank is also protected against any legal consequence as far as the payment was made upon strict compliance of the seller’s documents. Simply,
strict compliance, aims to reduce ambiguity and differences in interpretation, and documentary discrepancies and the associated financial risks. It
is governed by the rules of the Uniform Customs & Practice for Documentary Credits [UCP600].
If documents do comply completely, the bank is required to honour it [Article 15 of the UCP 600]. However, If the bank determines the
presentation is discrepant, it may refuse to honour or negotiate [Article 16a of the UCP 600].
Applicable cases
Equitable Trust Co. v Dawson (1927)
Facts: In the present case, the respondents, Dawson Partners Ltd, purchased a quantity of vanilla beans from a seller in Indonesia. The respondents
opened a credit in favour of the seller. A confirmed letter of credit opened through the appellant bank, Equitable Trust Co, instructed to provide
finances upon the presentation of certain documents, including a certificate issued by experts (more than one). Later, it turned out that the seller was
fraudulent and shipped mainly rubbish but the expert who inspected the cargo failed to notice it.
Issue: Whether the appellant bank was entitled to be reimbursed?
Held: The House of Lords gave judgment for the respondents and dismissed the appellant bank’s claim. In particular, the Lords considered that the
appellant bank was not entitled to be reimbursed since they acted contrary to the instructions issue by Dawson Partners Ltd. They had made finance
available on the certificate of quality of just one expert and instead of two experts as required by the letter of credit in question.
Midland Bank Ltd v Seymour [1955]
Facts: The defendant, an English merchant, purchased Hong Kong duck feathers from a seller in Hong Kong. The defendant ordered the plaintiff, an
English bank, to open a letter of credit in favour of the seller. In the letter of credit, he specified expiry date and that the credit was available in Hong
Kong. Acting in accordance with the defendant’s instructions, the plaintiffs opened the letter of credit. The seller presented the required documents,
but the plaintiff bank refused to reimburse on the ground that the letter of credit did not state the description, quantity and price of the goods.
Issue: Whether the bank was obliged to reimburse?
Held: The Court held that the bank must comply strictly with the instruction given by its customers. Also, it was not necessary for all the particulars
of condition, weight, etc., to be included in the bill of lading if this information is contained in the whole set of documents tendered to the bank. In the
present case, by refusing to reimburse under the letter of credit the bank was in breach of its contractual duty to the defendant. It is worth noting that
the present case shows how important it is for the bank to follow the instructions of its customers.
NB
The bank is only obliged to pay against strictly conforming documents and is only entitled to reimbursement if the terms of the credit have been
strictly complied with.
The doctrine of autonomy

This principle is also known as the ‘independence principle’. This determines the separation and independence of the letters of credit from the
underlying contract for the credit in respect of which the letter of credit is issued. This means that those claims made, or defense taken under the
contract cannot specifically affect the payment undertaking of the banks. The doctrine of autonomy is considered lying at the heart of the
documentary credits. In effect, the performance or non-performance of the contract agreed between the buyer (applicant) and the seller
(beneficiary) is irrelevant to the performance under a documentary credit.
Simply, the autonomy of a documentary credit reflects the principle that a documentary credit is to be treated as a separate transaction from the
contract of sale itself.
12
Applicable cases
1. RD Harbottle (Mercantile) Ltd v National Westminster Bank Ltd
The plaintiffs had entered into contracts of sale with Egyptian buyers. Each contract provided that the plaintiffs would establish a guarantee confirmed by
a bank in favour of the buyers. The guarantees were widely expressed, and secured payment on the buyers’ demand. They were established with Egyptian
banks and confirmed by the defendant English bank. The buyers demanded payment under the guarantees. The plaintiffs maintained that there was no
justification for the demand for payment and sought declarations to that effect and injunctions against the defendants from making payment under the
guarantees. Interlocutory injunctions were granted ex parte but then discharged on the application of the defendant bank.
It was held that if [the threatened payment] is in accordance with the contract, then the plaintiffs have no cause of action against the bank and, as it
seems to me, no possible basis for an injunction against it. There should not be interference of the courts in the letter of credit transactions as it is
indispensable for the smooth flow of international commerce. Except in cases where there is fraud of which the banks have notice, the irrevocable
obligations under documentary credits cannot be undone by the parties for the reasons of dispute between them.
NB
With credits, the parties deal in documents and not in goods and a bank is obliged to pay it on the face of the documents presented if they
conform to the credit. Where the fraudulent conduct of the seller or beneficiary or other person presenting the document is clear and obvious to
the bank, the bank need not pay else it will not be entitled to reimbursement from the buyer.
Factoring
Factoring is a financial business and a form of debtor finance scheme where businesses sell their account receivables to a factoring entity at a
discount. Its essence is for the supplier to meet an immediate and pressing cash need and to sustain or take up other business opportunities. It is,
therefore, the purchase of account receivables, also called invoices, by a factoring company from an operating company known as the creditor or
the exporter to provide instant financing to that business or creditor.
It is important to note that factoring has been part of the commercial world for over a century.
Types of Factoring
Factoring can be divided depending on different criteria because factoring has different functions critical to the industry.
1. Factoring can first be divided by its scope of function: An important consideration for the divisions of factoring has to do with the scope
of functions that comes under a specific factoring activity. Based on the scope, factoring can be grouped into “real” factoring and
“quasi” factoring.
i. In “real” factoring, the functions of crediting, payment ensuring, and rendering professional services are present. In “real”
factoring the factor assumes the position of the creditor to claim from the third party (the debtor) the payments for sales of
goods or services, undertakes advance payment of the client, does bookkeeping, and assumes the risk of insolvency of the
buyer.
ii. In “quasi” factoring, some of the functions usually associated with real factoring are missing, such as the duty of assuming
the risk of insolvency of the debtor.
2. Factoring can be done either on a “non-recourse” or “recourse” basis against the factor’s client (the sellers): In non-recourse
factoring, the factor does not only assume title to the accounts but also assumes most of the default risks because the factor does not have
recourse against the supplier if the accounts default. For recourse factoring, however, the factoring company has a claim (recourse) against
the creditor for any payment default.
3. “Open or disclosed” factoring and “undisclosed” factoring: In “open” factoring, the exporter who is a client to the factor offers his
receivables to the factor which claims against the foreign buyer. In this case, the client is to notify the foreign importer about the claim and
demand payment when due to the factor. There are two kinds of “open” factoring.
i. In the first instance, the exporter (client to the factor) transfers its claims against the importer to the factor; the factor then
becomes the claimant of the cession.
ii. In the other kind of “open” factoring, the exporter assigns the claim to the factor only for the collection but not to transfer the
claims to the factor, but only so the factor could collect the claims from the foreign buyer in the name of the client.
Undisclosed factoring is a complex legal business where the presence of the factor in business is not known to the third party (the debtor). In
undisclosed factoring, the exporter sells the goods ready for export, for cash. The factor then resells the same goods, on credit, through the
exporter, to the foreign buyer. Before the foreign buyer, there appears only the client, who is not the owner of goods since it has been sold to the
factor. The client, as a commission agent of the factor, appears in his name and on behalf of the factor. This is a complicated transaction that
allows the increase in price with the addition of the factor’s profit and short-term credit given to the exporter. This allows the client to access
cash even though the goods are being sold on credit while the factor receives a relatively larger commission.
4. Another division of factoring business is the one where we can distinguish factoring between “factoring with right of recovery” and
“factoring without right of recovery”: In factoring with the right of recovery, the factor has the right towards the client in case of
inability to collect the claim from the buyer, but in factoring without the right of recovery, when the buyer fails to pay, the factor has no
right of claim from the client. The latter comes naturally with a higher commission on the transaction.
5. Domestic and international factoring: Domestic factoring, as the name suggests, takes place within the boundaries of a country where all
the participants in the factoring business are. International factoring is intended for exporters and importers and is a kind of instrument for
promoting international exchange. The exporter can finance, assure, and manage the claims, which makes it easier for the importer to
purchase goods from abroad. To the exporter, international factoring is ideal since he is not expected to concern himself with the
creditworthiness of the buyer, the risk of non-payment, and socio-political risks
The Existing Laws that Relate to Credit Factoring in Ghana

1. The Banking Act 673 of 2004, Amended by Banking Act 738 of 2007:
13
The Act was passed to amend and consolidate the laws relating to banking, regulate institutions that carry on banking business, and provide for
other related matters.95 From all the sections and provisions of this Act, one finds no mention of factoring and a possible definition in the
context of the permissible banking activities of banks in Ghana. In addition, the Act does not provide a clue as to how factoring must be
regulated and promoted in the banking sector.
2. The Bank of Ghana Act 612 of 2002:
The Bank of Ghana Act is the enabling instrument that established the BoG as the Central Bank. The BoG is an independent with the broad
objective of maintaining stability in the general level of prices and supporting the general economic policy of the government for economic
growth through effective and efficient banking and credit systems and operations in the country.
Its general mandates include the following: to formulate and implement monetary policies for the country; promote measures to stabilise the
value of the currency; institute measures to shore up the balance of payment; protect public finances and engender national economic
development; regulate, supervise and direct the banking and credit system of the country; to license, promote, regulate and supervise non-
banking financial institutions; and to promote as well as maintain relations with international banking and financial institutions. Factoring
businesses would come under the direct control of the BoG within these mandates. Therefore, upon the satisfaction of all the requirements for
establishing a business as a company in Ghana, a factoring company would be obliged to be appropriately licensed and certified to operate as a
financial institution. The mandate of BoG allows it to set regulations and minimum qualification criteria that a company must satisfy to be
licensed or to continue operations as such
14
NEGOTIABLE INSTRUMENTS
Introduction:
Despite its longevity, negotiable instruments are still used to a significant degree as a method of making payment in the commercial world,
especially in international trade. Bills of exchange, one type of negotiable instrument, are frequently used where a seller of goods allows his
overseas buyer a period of credit but needs access to funds in the interim. The seller draws a bill of exchange in his own favour on the buyer or,
more usually, on a bank that has undertaken to pay under the terms of a documentary credit. The second important reason for examining the law
relating to negotiable instruments is because it encapsulates many of the fundamental principles and concepts or" commercial law in general.
Mercantile custom and usage have been, and remains, an important influence in this area.
Protection of the bona fide purchaser for value is essential. It is a fundamental principle of the law relating to negotiable instruments that the
bona fide holder for value of a negotiable instrument can acquire a better title than that of his transferor. Negotiable instruments represent a
major exception to the nemo dat rule [which states that a person who does not own goods or property cannot sell those goods or property. ‘Nemo
dat quod non habet’ means ‘no one can give what they do not have’]. The marketability of the instrument is enhanced through the protection
afforded to the good faith purchaser.
Definition of a negotiable instrument

There is no statutory definition of the term negotiable instrument'. Any definition must be drawn from the common law. To define the term, the
concepts of' instrument' and 'negotiability' require separate consideration.
a. Instrument
Def: An instrument is a document which physically embodies a payment obligation so that the possessor of the instrument (following any
necessary indorsement in his favour) is presumed to be entitled to claim payment of the money it represents. Simply put, an instrument refers to
a piece of paper that is used to pay someone, a piece of paper that one uses to claim money or an instrument of payment.
It has been described as 'a document of title to money' and must be distinguished from a document of title to goods, such as a bill of lading. To
be a document of title to money an instrument must contain an undertaking to pay a sum of money (e.g., as in a promissory note) or an order to
another to pay a sum of money to the person giving the order or a third person (e.g., as in a bill of exchange).
Alternatively, the undertaking or order may relate to the delivery of a security for money [Goodwin v Robarts]. A document which is primarily
a receipt for money, even if coupled with a promise to pay it, is not an instrument - Claydon v Bradley [1987].
If an instrument is made payable to bearer, or if it is made payable to a specified person or his order and it has been indorsed (i.e., signed on the
back) by or with the authority of that person, it is 'in a deliverable state'. The possessor, otherwise known as the 'holder', of an instrument in a
deliverable state is presumed to be entitled to payment of the money due under it. This is because the instrument embodies the contractual right
to payment and that right is transferable by mere delivery
b. Negotiability
Negotiation is the transfer of negotiable paper from one holder to another. Negotiability concerns the rights of the holder of commercial paper.
Paper that is not negotiable may still be transferred; however, it is far less valuable than negotiable paper. This is because the holder has fewer
rights in enforcing payment of the non-negotiable, commercial paper. Therefore, the true owner is the person entitled to the property in and
possession of the instrument against all others. An individual in possession of a non-negotiable instrument stands in the shoes of the original
issuee. That is, she has the exact same rights in the instrument as the original issuee held however, the holder of negotiable paper may have
greater rights than the original issuee. That is, when paper is negotiable and validly negotiated to a subsequent holder who qualifies as a holder in
due course, the holder may acquire greater rights to enforce the instrument against the payor or maker.
In the case of Crouch v Credit Foncier of England Blackburn J defined negotiability. He stated that it is “a safe rule that where an instrument is by
the custom of trade transferable, like cash, by delivery, and is also capable of being sued upon by the person holding pro tempore, then it is entitled to
the name negotiable instrument, and the property in it passed to a bona fide transferee for value, though transfer may not have taken place in market
overt”.
Therefore, according to Blackburn a negotiable instrument has two characteristics, namely:

i. It is 'transferable, like cash, by delivery' (which assumes it is in a deliverable state) so that the transferee can enforce the rights
embodied in it in his own name; and
ii. The transferee, being a bona fide holder for value, can acquire a better title to it than that of his transferor.
c. Negotiable instrument (composite definition)

In summary, a negotiable instrument is a document of title embodying rights to the payment of money or a security for money, which, by custom
or legislation, is
i. transferable by delivery (or by indorsement and delivery) in such a way that the holder pro tempore may sue on it in his own name
and in his own right, and
ii. a bona fide transferee for value may acquire a good and complete title to the document and the rights embodied therein,
notwithstanding that his predecessor had a defective title or no title at a
Simply, negotiable instruments are signed legal documents that guarantee paying a particular amount to a person or party at a set date or on-
demand. It acts as an assurance of payment or repayment that the assignee expects.
15
How instruments come to be negotiable

They come to be negotiable once the instrument is said to be in a deliverable state. They come to be in a deliverable state once the instrument is
made payable to a specified person or the bearer of the instrument and the instrument has been indorsed.
However, there are two ways in which documents may come to be recognised as negotiable instruments: by statute; and mercantile usage.
a. Statute
In most, perhaps all, cases, statutory recognition of negotiability merely confirms previous judicial acceptance of a mercantile usage which
recognised an instrument as negotiable. For example, bills of exchange and cheques were accepted as negotiable by the courts before they were
recognised as such. For instance, bills of exchange were recognized as negotiable by the Bills of Exchange Act 1882.
b. Mercantile usage
Instruments may be regarded as negotiable through judicially recognised mercantile usage.
Goodwin v Rob Arts
Through his stockbroker Goodwin purchased certain Russian and Hungarian government scrip. The scrip promised to give the bearer, after all
instalments had been paid, a bond for the amount paid, with interest. Goodwin allowed his stockbroker to retain possession of the scrip and the
stockbroker fraudulently pledged it with the defendant bankers as security for a loan. The stockbroker went bankrupt, and the bankers sold the scrip.
Goodwin brought an action against the bankers to recover the amount realised on the sale. The bankers argued that through mercantile usage such
scrip had been treated as negotiable by delivery so that Goodwin had lost his title to it. It was held that by the usage of trade, scrip issued here by the
agents of a foreign Government had been treated for a long time as negotiable. Thus, it was negotiable.
Before a court will recognise an instrument as negotiable through mercantile usage the following conditions must be satisfied:
i. The usage must be reasonable, certain, and notorious: Devonald v Rosser & Sons
ii. The usage must be general and not 'a custom or habit which prevails only in a particular market or particular section of the
commercial world': Easton v London Joint Stock Bank
iii. The instrument's terms must not be incompatible with negotiability (e.g., not marked non-negotiable') nor stated to be transferable by
some method other than delivery: London and County Banking Co Ltd v London and River Plate Bank Ltd
Note: An instrument is negotiable if it meets the following qualifications:
1. A writing: The negotiable instrument must be in writing. The writing must be permanent in nature and must be moveable.
2. Signed by the Issuer: The issuer must sign the instrument. A mark may constitute a signature if the issuer intends for the mark to be a
signature.
3. Contain an Unconditional Promise to Pay: The instrument must contain an unconditional promise to pay. A condition is any
requirement that a holder must undertake before she has the right to present the paper for payment. The only acceptable condition is
providing a time when the note becomes valid. That is, the note can state that it may only be presented for payment after a certain date.
Further, any acceleration or extension clauses are valid and do not destroy negotiability. Reciting that consideration was provided for the
instrument does not harm negotiability. Limiting the payment to a specific fund may destroy negotiability, unless it is an order instrument
drawn on a specific account.
4. A Definite Amount: The instrument must state a specific amount of money that it will pay. The promise cannot be to pay in anything
other than money. If the instrument pays an interest rate, the interest rate may reference a standard rate for calculation.
5. Payable on Demand or on Time: A demand instrument must be paid whenever the holder requests payment, while a payable on time
instrument indicates a specific date and time. An instrument that does not have a specific maturity date or payment time is assumed to be
payable on demand.
6. Payable to Order or to Bearer: To be negotiable, an instrument must be either order paper or bearer paper. Order paper is payable to a
specific individual. This individual’s signature is required if the instrument is transferred to another holder. Bearer paper means that any
holder of the paper can present it for payment. Order paper can be converted to bearer paper with the holder’s signature (indorsement). A
holder can also make bearer paper into order paper by signing and making a restrictive indorsement.
Types of negotiable instruments

Negotiable instruments include the following documents:
1. Bills of exchange
2. Cheques
3. Promissory notes
4. Banknotes
5. Treasury bills
6. Banker's drafts
7. Dividend warrants
8. Share warrants
9. Bearer scrip
10. Bearer debentures
11. Bearer bonds
12. Floating rate notes
13. Certificates of deposit.
The following documents are not negotiable instruments:
1. Bills of lading
16
2. Dock warrants
3. Delivery orders
4. Postal or money orders
5. Registered share certificates
6. Registered debentures
7. Insurance policies
8. IOUs.
The list is not closed. New instruments may be recognized as negotiable at any time through statute or mercantile usage.
Advantages of a negotiable instrument

1. The transferee of a negotiable instrument can sue in his own name, even though there has been no assignment in writing, or notice to the
obligor or even if the transfer is not absolute, as required for assignments under the statute; and
2. The transferee of a negotiable instrument who takes it for value and in good faith acquires a good title free from equities, whereas an
assignee under the statute always takes subject to equities.
3. Negotiable Instruments helps in smoothing secured commercial and other transactions for money or monies worth.
There are other advantages that I do not think are relevant to exams
NB
Negotiable instrument is fully transferable in the sense that the transferee (a person to whom it is transferred) becomes a holder free from
equities. Where equities mean defects and defences (e.g., a defective contract will a contract signed by a minor or other person who has no legal
capacity to act). Where there is a breach of a contract, the other party has defences. When one is free from equities, he/she will be free from any
potential defects or defences - Standard Bank v Sham Magazine Centre where it was therefore held that:
“Negotiable” means fully transferable in the sense that the transferee becomes a holder free from equities, as it is dais, i.e., untainted by
any defect attaching to the predecessor’s title. The court held that the words “account payee only does not prohibit transferability.
17
PRINCIPLES OF BANKING LAW

Introduction
Banking law is basically the law governing the relationship between a bank and its customer. The law that governs the procedure and the
statutory requirement for obtaining a banking license in Ghana is the Banking Act, 2004 (ACT 673) [repealed by the Banks And Specialised
Deposit-Taking Institutions Act, 2016 [Act 930]. Under the Ghanaian laws, a bank must be incorporated and given a certificate of
incorporation before it starts operation. The nature of the bank’s relationship with its customers is important as it determines each party’s
respective legal rights and obligations or duties. Two basic questions must be asked:
1. Who is a bank?
2. Who are the bank’s customers?
What is a Bank?
The common law definition of bank, banker or banking remains important because; under general law certain rights and duties are only
conferred on a bank or banker; and some statutes use the terms bank, banker, or banking without further or proper definition.
Shorter Oxford Dictionary gives the meaning of a 'bank' in modem use as:
An establishment for the custody of money received from, or on behalf of, its customers. Its essential duty is to pay their drafts on it: its profits
arise from the use of money left unemployed by them
Common law definition of a Banker

At common law, there is no exhaustive definition of ‘bank’. In Bank of Chetttinad v Commissioner of Income Tax Colombo, the privy
council observed that the terms banking and bank may bear different shades of meaning at different periods of history, their meaning may not be
uniform in countries due to different habits of life and degrees of civilization.
The Court of Appeal in United Dominion Trust Ltd v Kirkwood defined the following characteristics of the business of banking: The conduct
of current accounts; the payment of cheques drawn on bankers; and the collection of cheques for customers. In this landmark case, it was held
that it is essential to the business of banking that a banker should accept money from its customers upon a running account into which sums of
money are from time to time paid by the customer and from time to time withdrawn by him.
Facts: The defendant was a managing director of a company that financed the purchase of cars through loans from the plaintiffs, United Dominion
Trust Ltd. The loans were secured by the company accepting bills of exchange drawn by UDT and the defendant indorsing them to guarantee
payment. The company went into liquidation and the bills of exchange were dishonoured by the company’s liquidators. UDT brought an action
against the defendant as indorsers, who argued that UDT as moneylenders were not registered under the Moneylenders Act and therefore were not
entitled to recover the money or enforce the security for the loans. UDT claimed that as bankers they were exempted from the provisions of the
Moneylenders Act. The court therefore had to determine the status of UDT. The court found for the plaintiffs. The defendant appealed.
Appeal: The Court of Appeal held in favour of the plaintiffs and said that UDT were carrying on the business of bankers, as commonly understood
within the banking community
Aitkin LJ gave a modern picture of a characteristic banking account in Joachimson v Swiss Bank Corpn: The bank undertakes to receive
money and collect bills for its customer's account. The proceeds so received are not to be held in trust for the customer, but the bank borrows the
proceeds and undertakes to repay them. The promise to repay is to repay at the branch of the bank where the account is kept, and during banking
hours. It includes a promise to repay any part of the amount due against the written order of the customer addressed to the bank at the branch...
bankers do make a payment to a customer in respect of a current account except on demand.
There are, therefore, two characteristics usually found in bankers today:
1. They accept money from, and collect cheques for, their customers and place them to their credit
2. They honour cheques or orders drawn on them by their customers when presented for payment and debit their customers accordingly.
These two characteristics carry with them also a third, namely
3. They keep current accounts, or something of that nature, in their books in which the credits and debits are entered.
Ghanaian legal definition

Under Section 156 of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930), a bank has been defined to be a body
corporate which engages in a deposit-taking business and is issued with a banking license in accordance with this Act. Some permissible
activities of banks according to section 18 of Act 930 include: Accepting of deposits and any other repayable funds from the public; Lending;
Financial leasing; Investment in financial securities; Money transmission services; Issuing and administering means of payment including credit
cards, travelers cheques and bankers’ drafts; Guarantees and commitments etc.
Who is a customer?
Banking law is basically the law governing the relationship between a bank and its customer. A contractual and consensual relationship serves as
a basis to the relationship between a bank and a customer.
Even though there is no clear legal definition of a customer, it may be defined as a person or entity that maintains an account and/or has a
business relationship with the bank; one on whose behalf the account is maintained (i.e., the beneficial owner); Any person or entity connected
with a financial transaction which can pose significant reputational or other risks to the bank.
This definition is summarized from some cases, which are stated below.
18
In Robinson v Midland Bank Ltd– the court held that the relationship of banker and customer does not come into existence unless both parties
intend to enter it. In this case, a person purporting to be a customer sought to make the bank liable for funds passing through the account which did
not belong to him.
In Ladbroke & Co v Todd– the bank opened an account for a thief who, as first transaction handed to the bank for collection a cheque which he has
stolen. The court needed to decide whether the thief was a customer of the bank or not. It was contended that as the banker-relationship could only be
established over a period, so the thief is not considered as a customer. Finally, the court held that a person need not have a series of dealings with the
bank before he gets the status of a customer. The costumer status will be given now the bank received money or cheque and agreed to open an
account in the bank. To become a customer, it was not necessary that ‘he should have drawn any money or even that he should be in a position to
draw money’.
In Woods v Martins Bank Ltd– the plaintiff wrote to the defendant bank asking it to collect monies he had ordered a building society to pay to the
bank, to pay part of the sum received to a particular company and to retain the balance of the proceeds to his order. The bank agreed to comply with
the instructions, even though the plaintiff did not have an account with them at the time. It was held that the relationship of banker and customer
existed from the date when the bank accepted instructions contained in a letter although the account was not opened until about 3 weeks after the date.
In Oriental Bank of Malaya v Rubber Industry (Replanting Board)– a person becomes a customer immediately when he opens an account. The
term ‘customer’ does not only cover natural persons, but also entities, such as an incorporated company.
In Importers Company Ltd v Westminster Bank Ltd., it was held that a bank can be a customer to another bank; either if it has a drawing account
with the other bank, or if it is a non clearing bank which regularly uses a clearing bank to clear its cheques
Stoney Stanton Supplies (Coventry) Ltd v Midland Bank Ltd
As part of a scheme to defraud a third party, F forged the signature of the directors of the plaintiff company on documents requesting the defendant
bank to open an account in the plaintiff company's name. The account was opened. The plaintiff company was unaware of this and at no time was F
authorised to act on the company's behalf. The question that arose was whether a person claim to be a customer of the bank when an account is
opened in his name, but without his authority? It was held that there was never any relationship of banker and customer. As far as the opening of the
account was concerned, it was not taken out by the company but by F, who forged all the documents. The company did not authorize it at all. It is
quite impossible to hold that there was any relationship of banker and customer between this company and the Bank.
Nature of Banker & Customer Relationship

The banker-customer relationship is contractual in nature. Basically, all banking transactions are based on the law of contracts in general,
together with the law on special contracts which govern specific transactions or banking services such as standing orders, bankers’ drafts, letter
of credit and foreign currency. The terms of the banker-customer contract are either express or implied, and often, the contract is governed by
both express and implied terms. Once there is in existence a banker customer relationship, the rights and obligations between the parties would
come into existence. In Bank Pertanian Malaysia v Mohd Ghazzali Mohd Ismail, the court held that where there is a relationship between
banker and customer and where there are express contractual terms agreed upon, these express terms, being the intention of the parties, apply.
The nature of the relationship between the banker and its customer can be either:
1. Relationship between Debtor and Creditor:
The type of contractual relationship between banker and customer is mainly that of debtor and creditor. That is, the bank being the debtor and the
customer the creditor. This debtor-creditor relationship was first highlighted in the case of Foley v Hill.
In Foley v Hill, a customer brought an action against his banker for moneys had and received. He claimed that the relationship between him and the bank
was of a fiduciary nature like that of principal and agent and that he was entitled to know what happened to his money and what profits had been derived
from it. It was held that the relationship between a banker and its customer was contractual. It was one of debtor and creditor. It was stated that: Money
when paid into a bank cease altogether to be the money of the principal... it is then the money of the banker who is bound to return an equivalent by
paying a similar sum to that deposited with him when he is asked for it.... The money placed in the custody of a banker is, to all intents and purposes, the
money of a banker, to do with it as he pleases.
In Joachimson v Swiss Bank Corporation, it was stated that: “The bank undertakes to receive money and to collect bills for its customer’s account. The
proceeds so received are not to be held in trust for the customer, but the bank borrows the proceeds and undertakes to repay them. The promise to repay is
to repay at the branch of the bank where the account is kept, and during banking hours...”
Therefore, when customer deposited his money into his account with a bank, the relationship between the customer and the bank is that of
creditor and debtor where the bank owes money to the customer, and as such, the money belongs to that bank. This money is not money held in
trust, and as such the bank is free to deal with the money as its own, to make and retain any resulting profit subject to its obligation to pay the
interest (if agreed), to lend the money to others or even to invest it in risky investments. The bank is not accountable to the customer as to how
the money is used. Bank is only liable to repay the money to the customer when the customer makes a demand for his money at the branch of the
bank where the account is kept and during banking hours. The right to repayment of the money deposited by a customer only arises when the
customer makes a demand for his money. In the absence of demand, the right to repayment does not arise. It follows that there is no cause of
action, i.e., no right to sue for the money until there has been a refusal to pay – Joachimson v Swiss Bank Corporation.
2. Relationship between Principal and Agent:
This happens where the customer gives the banker a mandate to do certain acts in connection with his account or to permit any other person to
do such an act, e.g., in the buying or selling of shares. The bank acquires all the duties and responsibilities of an agent and as such owes a duty of
care and must not take a secret profit (e.g., the stockbrokers’ and bank commissions must be clearly quoted on the sale contract). It also happens
when a banker collects the proceeds of cheques for his customer.
In Westminster Bank v Hilton, Lord Atkinson in referring to the banker and customer relationship said: “It is well established that... the drawing and
payment of the customer’s cheques as against money of the customer’s in the banker’s hands, the relation is that of agent and principal”.
19
Sometimes courts hold that a banker owes a fiduciary duty towards its customer. E.g., is where equity imposes a duty on a bank not to take
undue advantage over a customer - Woods v Martins Bank. The bank granted a large overdraft to a certain company. The bank advised Woods
to invest in that company. It was held that there was a breach of fiduciary relationship since it would benefit the bank if that company could
repay the loan with the money invested by Woods.
3. Relationship between Bailor and Bailee:
This relationship exists in the bank’s safe deposit or safe custody services. Security and other valuables are often delivered by customers to the
banker for safe custody in the bank’s safe deposit boxes. In this situation, the customer (the holder of a safe deposit box) would be treated as
bailor to whom the bank is liable as bailee. It has been widely accepted that the courts expect a very high standard of care from a bank when
acting as bailee. The bank is not liable for loss, theft or fire damage provided the bank’s negligence did not lead to the event. The banks do not
wish to know the contents of the deposit boxes and advise the depositors to arrange their own insurance for items deposited.
4. Relationship between Trustee and Beneficiary8:
When a bank receives money or other valuable securities, then the banker’s position is of a trustee. On the other hand, when a bank receives
money and uses it in various sectors, the bank becomes the beneficiary. A constructive trust is an equitable remedy imposed by a court to benefit
a party that has been wrongfully deprived of its rights due to either a person obtaining or holding a legal property right which they should not
possess due to unjust enrichment or interference, or due to a breach of fiduciary duty.
When a bank receives property for customer and proceeds act with it as it would in a debtor-creditor relationship (where the bank deals with the
property as its own, to make and retain any resulting profit subject to its obligation to pay the interest), a constructive trust would apply if the
bank should have known that the property in their possession was to be held in trust - Re Gross (ex parte Kingston). In Barnes v Addy (1874),
the court laid down the 3 main elements which must be proven before a banker is held liable as constructive trustee, namely:
i. That the bank offered assistance (e.g., by releasing the money)
ii. That the bank had actual or constructive knowledge
iii. That there was dishonest or fraudulent design or intention
Where a bank knowingly receives for its own benefit money which an agent obtains because of a breach of trust, bank is liable as a constructive
trustee to the true owner of the money (namely the beneficiary) and is liable for any loss. A bank may also be found to be liable as a constructive
trustee where it makes payment with knowledge of breach of trust. In Rowlandson & Ors v National Westminster Bank Ltd, it was decided
that where a paying banker is aware of a fraudulent and dishonest design, it was under a duty to prevent withdrawals from the account.
Rights and Duties of the bank

By virtue of the bank-customer relationship, each party has rights and duties arising from the relationship. Joachimson v Swiss Bank
Corporation. These rights and duties are based on the contractual relationship of both parties.
Rights of the bank

Three of the banker’s rights are as follows: 1) Right to commission or service charge; 2) Right to interest; and 3) Right to set-off
1. Right of banker to charge a customer commission and services: A banker has a right to charge a customer commission and service
charges for keeping the customer’s account, clearing cheques and for other banking service. In practice, these charges and commission
are generally standard and are fixed by the Association of Bankers.
2. Right to charge interest upon loan/ other credit facilities/ granted to the customer: The interest charged by the banker is determined
by express agreement between the banker and the customer (borrower). Sometimes, interest is determined by an agreement implied from
the usual course of dealings between the banker and his customer, e.g., when a customer draws a cheque which takes his account into
overdraft and the banker allows this overdrawing, the banker’s normal interest rate for unsecured advances applies.
3. Right of bank to set-off: Where a customer has an account which is in credit but owes money to the banker in respect of another
account, the banker may have the right to set-off or right of combining accounts - Garnet v M’Kewan. In other words, the banker may
have the right to reduce his liability to repay the customer by the amount which the customer owes him, or, to reduce the amount which
the customer owes to him by the credit balance in the customer’s account. The banker may exercise the right of set-off only when the
money owed to him is a sum certain, which is due, and where there is no agreement, express or implied, to the contrary. In Bradford
Old Bank Ltd v Sutchliffe– the right to set-off was not permissible where the bank had agreed with the customer that the two accounts
would be kept separate. Generally, a banker may exercise the right of set-off when all the relevant accounts are held ‘in the same right’.
In Buckingham v London & Midland Bank Ltd, it was held that bank had no right to combine a loan account (secured) with a current
account. The bank has no right to exercise set-off in relation to accounts maintained with a bank by one customer but in 2 capacities e.g.,
where a customer maintains an account in his personal capacity and also holds a trust account – Union Bank of Australia Ltd v
Murray-Aynsley & Another. Set-off also is not available for contingent liabilities. In Jeffryes v Agra and Masterman’s Bank Ltd– it
was held that the bank could only set-off such sums as were due and payable immediately and it could not retain the balance as security
for amounts the customer might owe the bank in future.
Duties of the bank

Generally, there are many duties of a banker in a banker-customer relationship.
1. It is the bank’s duty to honor the customer’s mandate and obey the customer’s countermand: A banker has a duty to obey his
customer’s instructions or mandate, and this includes the duties of the banker to accept cash and other financial instruments such as cheques,
drafts and bill of exchange to be credited into the customer’s account, to honour the cheque issued by the customer and etc. A banker must
not make payment from the customer’s account except in accordance with the customer’s mandate and must take reasonable care to ensure
8
A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. A Trustee is a person who acts as a custodian for the assets held
within a Trust. He or she is responsible for managing and administering the finances of a Trust per the instructions given.
20
that the person paid is entitled to receive the payment. The duty to honour the customer’s cheques will exists as long as the relevant
documents are presented in normal banking business transactions and during normal banking period - Whitaker v The Governor of the
Bank of England. In Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank - the bank must only act on its customer’s valid instructions and
not on any forgery of those instructions. In Morzetti v Williams & Ors. – it was held that the plaintiff is entitled to sue the banker where the
banker has wrongfully denied from honouring the customer’s cheques. This is because, the banker is legally bound to make payment against
cheques issued by the customer in a reasonable period if the banker has received sufficient funds for the purpose. The banker’s duty to
honour the customer’s cheques is subjected to the following conditions:
i. The cheques are drawn in the proper form
ii. The account on which they are drawn is in credit to an amount sufficient to pay them, or arrangements have been made for
an overdraft facility and the agreed overdraft limit will not be exceeded
iii. There is no legal cause (e.g., the service of a garnishee order) which makes the credit balance, or the agreed overdraft limit
unavailable
iv. They are presented during working hours
Countermand is usually used in the context of stopping a payment. In the case of check payments, a customer can countermand the
payment at any time before the check is presented, through a stop-payment order.
2. A duty of care: A banker has a contractual duty to exercise reasonable care and skill in carrying out his banking business - Westminster
Bank Ltd. v Hilton. This duty of care includes in giving advice to the customers in their investment- Woods v Martins Bank Ltd. A
banker also has an obligation to take exercise reasonable care and skill in acting according to his customer’s instruction. This duty includes
the duty to ensure that the customer’s mandate is strictly obeyed and to make inquiries where the bank suspects that an agent may commit a
fraud against his principal. However, this duty does not include the duty to give a warning or to advice the customer on the risks related to a
particular transaction - Redmond v Allied Irish Bank PLC. When a bank pays or collects a cheque it does so as agent for its customer and
as such it owes a duty of care. The test to be applied to determine whether a bank is in breach of its duty as agent is: if a reasonable banker
would have had reasonable grounds for believing that the customer's account was being operated fraudulently by another.
3. Duty of banker to repay the customer: Bank also has a duty to make repayment to the customer when a proper demand is made, namely a
written application to the branch where the customer holds his account. Foley v Hill - Money, when paid into a bank, ceases altogether to be
the money of the customer; it is then the money of the banker, who is bound to return an equivalent by paying a similar sum to that deposited
with him when he is asked for it. Atkin J in Joachimson v Swiss Bank Corporation stated as follows: “… The bank undertakes to receive
money and to collect bills for its customer’s account. The proceeds so received are not to be held in trust for the customer, but the bank
borrows the proceeds and undertakes to repay them. The promise to repay is to repay at the branch of the bank where the account is kept, and
during banking hours.
4. Duty of confidentiality (secrecy duty): A banker owes a duty to his customer to keep information regarding the affairs of his customer
confidential. This is a duty which arises by virtue of the banker and customer relationship and is normally implied by law. Where a breach is
threatened by the bank, the customer can obtain an injunction to prevent it from disclosing the information. If disclosure has already been
made by the bank, then the only remedy available to the customer is to sue for damages for breach of contract. This duty of secrecy was
considered in the landmark case of Tournier v National Provincial & Union Bank of England -
Facts: The plaintiff was a customer of the def bank at their Moorgate Street Branch. The plaintiff’s account was in debit to the extent of some
£9. The bank pressed the plaintiff for payment, and it was arranged that the plaintiff should reduce the debt by making a payment of £1 a
week to the defendant. After 3 payments, the plaintiff defaulted. The branch manager of the defendant bank noticed that another customer of
theirs issued a cheque in favour of the plaintiff for £45. The cheque was paid into the plaintiff’s account at another bank. The defendant’s
manager then inquired the collecting bank for whom the cheque was for, and he was informed that the cheque had been collected for the
account of a bookmaker. The defendant’s manager then rang up the plaintiff’s employer to get the plaintiff’s private address. During
conversation, the defendant’s manager informed the plaintiff’s employer that the plaintiff’s account was in debit and that he was a
bookmaker. As a result of this disclosure, the plaintiff’s contract of employment was not renewed. The plaintiff then sued the bank for slander
and for breach of the banker’s duty to keep information relating to a customer’s account confidential. At the trial, the case was dismissed. The
plaintiff appealed. On appeal, the COA held in favour of the plaintiff and that the right of a customer to confidentiality regarding his account
is a legal right.
In Tournier, the court further held that the bank is only entitled to disclose information about his customer’s affairs in 4 circumstances: -
i. Where disclosure is compelled by law
(a) By court order. A subpoena duces tecum is a court order compelling disclosure. There is a duty to produce documents in court
under the subpoena - Robertson v Canadian Imperial Bank of Commerce
(b) Provision of statute(s). Disclosure can be made if it is mandated by the statutes
ii. Where the banker owes a duty of disclosure to the public
iii. Where the interests of the bank require disclosure
iv. Where the disclosure is made by the express or implied consent of the customer
5. Duty to give a reasonable notice before closing an account: When a bank wishes to close a customer’s account, the bank must first give
reasonable notice to the customer and repay the credit balance to the said customer - Joachimson v Swiss Bank Corporation. The period of
notice must be long enough to enable the customer, having regard to all the surrounding circumstances, to make alternative arrangements –
Prosperity Ltd. v Lloyds Bank Ltd. In Prosperity Ltd. v Lloyds Bank Ltd, it was held that one’s month notice was not adequate as the
period of notice must be long enough to enable the customer, having regard to all the surrounding circumstances, to make alternative
arrangements. Reasonable notice would mean the banks must give sufficient notice to their customers in order that they can make alternative
arrangements and thus, the length of such notice depends on the facts and circumstances of each case. In practice, the closure of account and
the notice period for closure are usually governed by the terms and conditions of the customers’ contracts with their respective banks.  The
period of notice is usually 14 days or 30 days, in practice, depending on the circumstances of the case.
6. Duty with regards to garnishee orders: A garnishee order is a court-approved order that allows a creditor to redirect a person's funds to
them when they are owed money. It is a post judgement order and is one of the modes of execution of judgement – Midland Bank Ltd. The
word “garnishee” is derived from the Norman French which denotes one who is required to ‘garnish’, namely, to furnish a creditor with the
21
money to pay off a debt. As soon as the garnishee order is served, the financial institution should freeze the entire balance standing to the
credit of the customer’s account unless the order directs otherwise. The financial institution would then instruct its lawyers to attend the
hearing relating to the garnishment. At the hearing, the court would either direct that the garnishee order be discharged (where there are
reasons why the money should not be paid to the judgement creditor) or be made absolute. If the order were made absolute, the bank would
then proceed to pay the sum stated in the order to either the judgement creditor or the court.
7. Duty to safeguard trust property: The duty to safeguarding the trust or customer property is fundamental to the notion of trusteeship and to
the operation of trusts. In a banker-customer relationship, one of the roles of banker is to act as the trustee for customers. A bank is a place
for customers to keep their properties especially cash to secure the safety of the properties, hence it is the responsibility of bank to ensure the
security of these properties. Consequently, it is obviously comprehended that the trustee’s aka bankers are responsible for ensuring that they
can minimize the harm that might goes to any property which they hold on to trust. To that extent, of course, this duty will be dependent on
the nature of the property, to prevent the property from becoming broken, run-down or reduce in its worth.
8. Duty regarding Mareva Injunction: A Mareva injunction is an ex parte or interlocutory injunction granted by the court to restrain the
defendant from removing assets from or within the jurisdiction pending trial. The Mareva injunction took its name from the case Mareva
Compania Naviera SA v International Bulkcarriers SA where the Court of Appeal upheld the decision to grant an injunction restraining
the defendant from removing out of the jurisdiction the credit balance in the defendant’s bank account in London. Once a financial institution
receives notice of a Mareva injunction, it must freeze the defendant’s accounts and assets as instructed by the order. In Z Ltd v A and
Others- the Court of Appeal held that as soon as a bank had notice of a Mareva injunction, it must freeze the defendant’s account and other
assets, such as valuables in a safe deposit box. It would be contempt of court to knowingly assist in the disposal of the defendant’s assets.
Rights and duties of the customer

Rights
The customer’s rights include
1. A right to repayment: It is an implied term of the contract between the banker and his customer that the banker promises to repay the
customer ‘a sum equivalent to that paid into his hands’. In Foley v Hill – it was held that ... “Money, when paid into a bank, ceases
altogether to be the money of the customer; it is then the money of the banker, who is bound to return an equivalent by paying a similar
sum to that deposited with him when he is asked for it.” The bank has a duty to make repayment to the customer when a proper demand
is made, namely a written application to the branch where the customer holds his account.
2. A right to draw cheques: By virtue of the banker’s implied promise to repay current accounts on demand, the customer has an implied
right to draw cheques up to the amount of any credit balance on his account, and the banker has an implied duty to honour any such
cheques. The customer does not have any right to draw cheques more than the credit balance on his current account unless he has an
overdraft arrangement or some other arrangement with his banker.
3. A right to interest: Deposit account customers normally have a right to receive interest payments from the banker on the balance in their
accounts. The rate of interest, however, fluctuates in line with changes in prevailing market rates. Normally, a current account customer
whose account is in credit is not paid any interest by the banker.
Duties
Customers have 3 main duties as follows:
1. Duty of reasonable care in drawing cheques: The customer has an implied duty ‘to exercise reasonable care in executing his written
orders so as not to mislead the bank of facilitate forgery’ – Joachimson v Swiss Bank Corporation. In London Joint Stock Bank v
Macmillan and Arthur, it was stated that the customer contracts that ‘in drawing his cheques, he will draw them in such a form as will
enable the banker to fulfil his obligations and therefore in a form which is clear and free from ambiguity’. The court held in this case that
a customer who had left it to his clerk to fill in a cheque for £2 was negligent when the clerk left spaces in the cheque which enabled him
to later increase the amount on the cheque to £120. In Young v Grote, it was decided that a customer was in breach of his duty of care
when he signed a cheque in blank. It was held that the customer was negligent in the way he allowed the cheque to be filled in and the
bank was misled because of this breach of duty.
2. Duty to disclose forgeries: Although there is no duty on the part of the customer to prevent the forgery of his signature, a customer is
under a duty to inform the bank if he is aware that somebody has forged his signature. The duty of the customer to inform the bank arises
the moment he is aware that his signature has been forged - Greenwood v Martins Bank. In Greenwood v Martins Bank– the court
held that the plaintiff owed a duty to inform the bank about the forgery of his signature by his wife. By remaining silent, he had let the
bank to believe that the forged signatures were his and he was therefore estopped from alleging that his signature had been forged. In
1United Asian Bank Bhd v Tai Soon Heng Construction– the Supreme Court held that a customer owes his banker, 2 main duties:
i. Duty to refrain from drawing a cheque in such a manner as may facilitate fraud or forgery (the Macmillan duty); and
ii. Duty to inform the bank of any forgery of a cheque drawn on the account as soon as the customer becomes aware of it
(the Greenwood duty)
3. Duties to pay reasonable charges: A customer also has a duty to pay any reasonable charges / fees imposed by the bank to operate his
accounts. In practice, these charges and fees are generally standard and are fixed by the Association of Bankers.
Termination of banker- customer relationship

The relationship of banker-customer comes to an end by the following methods, namely:
1. Closure of account by customer / banker: The relationship of banker-customer may be terminated in the following ways:
i. by mutual agreement; or
ii. unilaterally - the relationship of banker- customer is terminated either by one of the parties taking appropriate steps for
that purpose
22
Customer may terminate his contract with the bank by demanding repayment of the balance of his current or deposit account. If the customer has
more than one account with the bank, the banker-customer relationship will terminate only when all the accounts are closed by the customer. It is
advisable that the bank obtain in writing the customer’s intention to close the account - Wilson v Midland Bank Ltd. A demand for the
repayment of a current account will normally take effect immediately but if the demand is made at a branch other than the branch where the
customer maintains his account then the balance should be made available within a reasonable time. In Clare & Company v Dresdner Bank
AG - it was held that a demand for repayment of the credit balance must be made at the branch where the account is kept if the customer wants
the repayment immediately.
A bank may terminate its contractual relationship with its customer by giving him a reasonable notice to that effect and tendering repayment of
the credit balance. In Joachimson v Swiss Bank Corporation – it was held that the basis of the banker-customer relationship is that the bank
cannot cease to do business with the customer unless it gives reasonable notice of its intention to close his account. The test as to what is
reasonable will vary from account to account, with greater notice being necessary on more complicated account. In Prosperity Ltd. v Lloyds
Bank Ltd, it was held that 1 month notice was not adequate. As such, the period of notice must be long enough to enable the customer, having
regard to all the surrounding circumstances, to make alternative arrangements. Written notice to close the customer’s account must be given by
the bank - Ng Cheng Kiat v Overseas Union Bank.
When the customer’s account is closed via any of these 2 methods, the relationship between banker and customer comes to an end. Neither
parties will be liable for any obligations under the contract except for banker who will still bound to his duty of confidentiality as to the
customer’s account -- Tournier v National Provincial & Uni.
2. Termination by operation of law:
i. Death of the customer or mental illness. The death of the customer terminates the contract between him and the bank because
of the personal nature of the relationship. A bank’s duty to pay cheques on the deceased’s account is terminated when the
bank receives notice of the customer’s death and not by the fact of the death if that is unknown to the bank. The credit
balance on the death of the customer vests in his personal representatives although they are not entitled to operate the account
by drawing cheques on it. If a customer suffers from a mental disorder to such an extent that he cannot manage his own
affairs properly, the banker- customer relationship is also terminated - Re Beavan.
ii. Customer becomes bankrupt/wound up (in case of a company): When a customer is bankrupt/ insolvent, the relationship
between customer and his banker comes to an end. The bank must immediately freeze the customer’s account.
iii. Mareva injunctions and garnishee orders: Upon freezing the accounts of a customer by order of the courts, the account seizes
to work, effectively terminating the banker-customer relationship. Upon the grant of garnishee orders, the account seizes to
belong to the creator of the account (the customer). The banker-customer relationship seizes between the bank and the
original customer and is re-established between the bank and the judgement creditor (new customer).
3. Winding up/liquidation of bank: The relationship between a banker and his customer will end where the bank fails or becomes unable to
pay the customer’s cheques or to repay the customer’s balance credit in his account irrespective whether the bank is in the process of
liquidation or not.
4. Break of war: The outbreak of hostilities between the country where the bank is established or where the branch at which the customer
maintains his account and the country of which he is a resident does not terminate the banker-customer relationship. Arab Bank Ltd. v
Barclays Bank - the court held that in case of war, the right to repayment of credit balance survived the outbreak of war. That right remained
in existence subject to the right to suspend payment. Therefore, the effect of the outbreak of war merely to suspend the rights of the customer
but legislation enacted in the country where the bank is established or where the customer’s account is maintained may effectively
23
PAYMENT SYSTEMS
Any act accepted by the creditor in performance of a money obligation can constitute payment. Payment may be made by the delivery of
physical money (i.e., coins and bank notes by way of legal tender) from the debtor to the creditor.
A Payment System is a mechanism that facilitates the transfer of value between a payer and a beneficiary by which the payer discharges the
payment obligations to the beneficiary. Payment systems help consumers to transfer funds to each other. Banking channels provide payment
instruments through different platforms, and these are also widely used in commerce. They are used by individuals, banks, companies,
governments, etc. to make payments to one another.
Payment Systems can be broadly classified into Large Value Systems and Retail Payment Systems, which are listed below.
1. Large Value Payment System
2. Retail Payment System:
i. Cash Payment
ii. Paper-Based Payments – Cheques, Demand Drafts, Payment Orders or Banker’s Cheques:
3. Card-Based Payments:
i. Credit Card
ii. Debit Card
4. Electronic Payments and Remittances
i. Electronic Clearing Services:
ii. Electronic Funds Transfer:
iii. Real-Time Gross Settlement:
iv. Internet Banking:
v. Mobile Banking:
Focus will be on Card–Based payments which are also known as Payment cards.
Payment Cards
Payment cards are part of a payment system issued by financial institutions, such as a bank, to a customer that enables its owner (the cardholder)
to access the funds in the customer's designated bank accounts, or through a credit account and make payments by electronic transfer and access
automated teller machines (ATMs). Such cards are known by a variety of names including bank cards, ATM cards, client cards, key cards or
cash cards. There are several types of payment cards, the most common being credit cards, debit cards, charge cards, and prepaid cards
Types of Payment Card

The main types of payment card in general circulation are:
1. Cheque cards—which are issued by banks and building societies to their customers for use with cheques drawn by the customer. Through
the card the issuing bank undertakes to the payee that payment of the drawer’s cheques (drawn up to the limit indicated on the card itself, ie
£50, £100 or £250) will be made, regardless of the state of the drawer s account, provided that certain conditions are met:
(i) the cheque bears the name and code number, where printed, on the card
(ii) the cheque is dated with the actual date of issue
(iii) the cheque is signed before the expiry of the card in the presence of the payee by the account holder
(iv) the card number is written on the cheque by the payee
(v) the card has not been altered or defaced.
First Sport Ltd v Barclays Bank plc: A banker is obliged to pay on a forged cheque presented by thief holding a valid cheque card
2. Credit (and charge) cards— Unlike a credit card, the primary function of a charge card is to facilitate payment, rather than to provide a
credit facility. Charge cards enable the holder to whom such a card is issued to obtain goods and services without payment in cash or by
cheque, and to obtain cash.
 A credit card is linked to a line of credit (usually called a credit limit) created by the issuer of the credit card for the cardholder on
which the cardholder can draw (i.e., borrow), either for payment to a merchant for a purchase or as a cash advance to the cardholder.
The cardholder can either repay the full outstanding balance or a lesser amount by the payment due date. The amount paid cannot be
less than the “minimum payment,” either a fixed amount or a percentage of the outstanding balance. Interest is charged on the
portion of the balance not paid off by the due date. A credit card gives the holder a revolving credit facility with a monthly credit
limit. The cardholder does not have to settle his account in full at the end of each month but has the option to take extended credit,
subject to an obligation to make a specified minimum payment each month. The holder of a charge card must normally settle his
account in full within a specified period after the date of a monthly statement sent by the card-issuer to the cardholder.
24
In re Charge Card Services Ltd 9: Payment by card is not conditional upon anything that may or may not happen in the chain of separate
contracts between the buyer, the card-issuing company and the store, since ‘the general understanding of the public’ is ‘that when a customer
signs the voucher he has discharged his obligations to the supplier and that he pays for the goods or services he has obtained when he pays the
card-issuing company’.
3. A debit card -- With a debit card (also known as a bank card, check card or plastic card) when a cardholder makes a purchase, funds are
withdrawn directly either from the cardholder's bank account, or from the remaining balance on the card, instead of the holder repaying the
money later. In some cases, the "cards" are designed exclusively for use on the Internet, and so there is no physical card. Thus, debit cards
perform a similar function to that performed by cheques, and it is not surprising that the increased use of debit cards has contributed, together
with the increased use of direct debit payments, to a significant drop in the number of cheque transactions in recent years. Like credit cards,
debit cards are used widely for telephone and internet purchases. Debit cards can also allow instant withdrawal of cash, acting as the ATM
card, and as a cheque guarantee card. Merchants usually do not charge a fee for purchases by debit card. Debit card transactions involve four
discrete contractual relationships, namely those between:
i. card-holder and supplier
ii. card-issuing bank and card-holder (giving the card-holder authority to use the card and the card-issuing bank authority to debit the
card-holder's account with the amount of any card transaction entered)
iii. supplier and merchant acquirer (obliging the supplier to accept all cards issued under the scheme in payment for goods or services
and containing the merchant acquirer's undertaking to pay the supplier for the value of good and services supplied); and
iv. the participating banks and financial institutions themselves (covering various matters including, most importantly, the means of
transfer of funds from one institution to another).
4. ATM cards—which give customers access when used in conjunction with their 'PIN', to Automated Teller Machines (ATMs). ATMs now
provide a variety of services. Typically, a customer can use an ATM to withdraw cash from his account, make a balance enquiry, order a
bank statement, order a cheque book, change his PIN, pay bills, and accept deposits. An ATM card can only be used in the ATMs of the
card-issuing bank and the ATMs of other banks with whom the issuing bank has reached a reciprocal agreement. There are also a few
international ATM networks, e.g., the Visa and MasterCard networks.
5. Multifunctional cards—often a single card will have several functions, e.g., debit cards usually also operate as cheque cards and/or ATM
cards. For legal analysis, each function must be examined separately
9
Charge Card Services Ltd ('the company) ran a fuel card scheme for the purchase of petrol and other fuels from approved garages with the use of charge cards issued by the company. The
company went into creditors' voluntary liquidation owing substantial sums to garages which had supplied fuel in return for vouchers signed by fuel card holders. There were also substantial
sums owing to the company from cardholders who had purchased fuel with the use of their fuel cards before the date of the liquidation. Under a factoring agreement the company had assigned
all its receivables to Commercial Credit Services Ltd. A dispute arose between the unpaid garages and the factoring company as to which of them was entitled to the moneys owed to the
company by the card-holders. Millett J's first instance decision (at [1987] Ch 150), that the factoring company was entitled to the moneys on the ground that a cardholder's payment obligation to
the garage was absolutely, not conditionally, discharged by use of the fuel card, was upheld on appeal
25
HIRE PURCHASE AGREEMENTS

Definitions
In Ghana, hire purchase and conditional sale agreement is regulated by the Hire Purchase Decree, 1974 NRCD 292.
Common law definition

At common law, a contract of hire purchase is defined as an agreement under which an owner delivers goods on hire to the hirer in return for
certain periodic payments made by the hirer and further agrees that the hirer may return the goods and terminate the hiring or elect to purchase
the goods at the end of the hiring period. In sum, a hire purchase contract is an agreement under which goods are delivered on hire to the hirer,
and the hirer makes periodic payments to the owner, the hirer having an option to purchase the goods, but being under no obligation to do so.
Generally, a hire-purchase agreement may be likened to a bailment transaction, the owner being the bailor and the hirer, the bailee. After
completing the agreement, the hirer is given actual possession and use of the goods hired.
In hire purchase, the owner retains the property in the goods, or the title to the goods. This property or title remains in the owner until such time
that the hirer exercises his option to purchase –by paying the full hire purchase price. The hirer therefore cannot lawfully dispose off the property
in the goods to a third party until he has exercised the option to purchase.
There can be a contract of sale where the goods are delivered to the buyer and payment to be made in a period. There are credit and conditional
sales-here property passes only upon the payment of a price. These two kinds of sales are both different from the hire purchase because in a hire
purchase agreement, the hirer has not agreed to buy the goods and it is likened to a bailment transaction unlike the sale of goods where the buyer
is bound to pay the price for the goods.
Peculiar Features of a Hire Purchase Agreement (Under the Common Law)

1. The Element of a Hire: Under the terms of a hire purchase agreement, the hirer is given actual possession and use of the goods hired, in
return for the payment of certain stated rents to the owner of the goods. The rental or the hire-rent is normally payable in installments.
Possession of the goods is with the hirer, but the property in the goods remains with the seller.
2. Possession And Property: The result is that, whereas possession of the goods is given to the hirer the absolute property in the goods
remains throughout in the owner of the goods. The property in the goods resides in the owner until the hirer exercise exercises his option
to purchase the goods. It follows therefore, that before the exercise of the option by the hirer, the hirer cannot in his own right lawfully
dispose of the absolute property in the goods to a third party. But the property retained by the owner is not absolute in that in practice, it
does not entitle him to dispose of the goods in any way of his own choosing without the hirer in possession.
3. It confers on the hirer an option to purchase not an obligation to purchase: The essential features of a hire-purchase agreement at
Common Law were identified in the case of Helby v Matthews:
Facts : The appellant the owner of a piano , agreed to let it on hire, the hirer to pay a rent by monthly installments, on the terms that the hirer might
terminate the hiring by delivering up the piano to the owner , he remaining liable for all arrears of hire; also that if the hirer should punctually pay all
until such full payments, the piano should become his sole and absolute property, and that until such full payment the piano should continue the sole
property of the owner. The hirer received the piano, paid a few of the installments and improperly and without the consent of the appellant, pledged
the piano with the respondents, who were pawnbrokers, as security for an advance. The appellant, upon discovering this, demanded the piano from
the respondents, and on their refusing to deliver it brought an action of trover. The defence set up by the respondents was that they had received the
piano from the hirer in good faith,and without notice of any claim on the part of the appellant , and that the hirer having “bought or agreed to buy” it
from the appellant, they were protected by section 9 of the Factors Act, 1889 [where a person, having bought or agreed to buy goods obtains with the
consent of the seller possession of het goods or the documents of title to the goods, the delivery or transfer , by that person or by a mercantile agent
acting for him, of the goods or documents of title , under any sale, pledge, or other disposition thereof, or under any agreement for sale, pledge , or
other disposition thereof, to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of
the goods, shall have the same effect as if the person making the delivery or transfer were a mercantile agent in possession of the goods or documents
of title with the consent of the owner.]
Issue: Whether the transaction between the appellant and the hirer was a hire purchase agreement or a contract of sale.
Held : It was held on appeal that , on a true construction of the agreement, the hirer was under no legal obligation to buy , but only had an option
either to return the piano or become its owner by paying the hiring price in full ; that since the hirer had not exercised his option to purchase he was
not a buyer of the goods and could not pass a valid title to a third party, the Pawnbroker.
STATUTORY DEFINITION
Section 24 of the Hire Purchase Act, (1974) N.R.C.D. 292. The Hire Purchase Decree defines a hire-purchase agreement as an “agreement for
the bailment of goods under which the bailee may buy the goods or under which the property in the goods will or may pass to the bailee”-
Mensah v Osei10. Comparing this definition to a contract for the sale of goods, this is an agreement for the bailment of goods and not the sale of
goods. Again, the property in the goods will or may pass to the bailee and does not automatically pass in the sale of goods.
Object: The object of the hire purchase agreement is to ensure that the property in the goods remains in the owner unless and until the hirer
exercises the option to purchase the goods.
The owner is said to have made an irrevocable offer to sell the goods to the hirer if the conditions set out in the agreement are fulfilled. Usually,
the condition referred to here is the full payment of the hire purchase price. On the hirer’s part however, he is under no obligation to buy the
goods. He may exercise the option, that is, he may accept the offer (to sell) once he has fulfilled the conditions-by completing the payment
schedule under the agreement. But he may also elect to terminate the hiring and return the goods to the owner without buying the goods. In sum,
the hirer has the power to purchase the goods but is not bound to do so.
10
A hire-purchase agreement is defined in the Hire-Purchase Act, 1958,1(1) as “an agreement for the bailment of goods under which the bailee may buy the goods.”
26
The High Purchase Act governs two kinds of transactions: hire purchase agreement, and conditional sale agreements. Section 24 of the act
defines a conditional sale agreement. It is essentially a sale transaction under which the price is payable in installments and the seller retains the
property in the goods until the fulfilment of all the conditions specified in the contract. Whilst the buyer in a conditional sale agreement is legally
bound to purchase the goods, the hirer is under no obligation but merely as an option to purchase and therefore the parties to a conditional sale
agreement are rightly described as buyer and seller.
Requirements of Hire Purchase Agreement

Sections 1-3 stipulate certain requirements which must be fulfilled for the creation of a valid and enforceable high purchase agreement.
1. Firstly, before a high purchase agreement or a conditional sale agreement is made, the owner or seller must state orally and in writing to
the prospective hirer or buyer the cash price and the hire purchase price or the total purchase price. The total purchase price is in
reference to the conditional sale agreement- Section 211; Ampadu & Another v. Dadzie:
The appellants acquired a bus from Yellow Cab Company on hire purchase basis. The appellants delivered the car to the respondent without
disclosing their interest and a hire purchase which described the 2nd appellant as the owner but contrary to section 66 of Act 137 (then in
force) failed to state the cash price and purported to exclude part viii of Act 137. The car was seized twice and on the second ceasure, the
respondent sued the appellants for the return of the full amount paid under the agreement because there had been total failure of
consideration. The trial judge made a finding of fact that the appellants who represented themselves as the owners of the vehicle at the time of
the second ceasure were in arrears and secondly that the parties did not comply with the provisions of the law, hence the agreement was void
and unenforceable. The court thus gave judgment to the respondent and further ordered the appellant to refund payments made by virtue of
section 57(1) of the Act. The appellants appealed and the appeal was dismissed. The COA held that the provisions of section 66 of the Act
were mandatory and where they had not been complied with, the seller or owner could not enforce the agreement against the buyer. Non-
compliance did not render the agreement null and void for if it did, there would be no need for section 66(4). The section urges the courts to
apply equity to dispense with non-compliance.
The issue is what happens when the parties do not reduce their agreement into writing
2. Secondly, for the hire-purchase agreement or Conditional Sale Agreement to be enforceable, it must be in writing and signed by the hirer
or buyer, and by or on behalf of all the other parties to the agreement. - Section 1(a). It should be noted that the hirer is required to sign
personally. The burden is on the owner/seller. For where there is a default, it is the seller who suffers.
3. Where the owner or seller cannot enforce the agreement then certain benefits under the agreement cannot be enforced – Section 1(2)
i. The owner or seller cannot enforce any contract of guarantee
ii. The owner or seller secondly cannot enforce any security so given by the buyer or the hirer in respect of moneys payable
iii. The owner or seller shall not be entitled to enforce a right to recover the goods.
The rational behind these provisions are that they are designed to ensure that the owner /seller comply with the statutory provisions in the decree
and secondly once followed the hirer or buyer is protected against the fraud of the owner or seller.
4. The case of Ekuona Construction Co Ltd v Bank for Housing and Construction stipulates the constituents of a High Purchase
Agreement. To qualify as a hire-purchase transaction, it is required that the agreement shall contain as provided in Section 3(1).
According to Section 3, every agreement shall contain:
a. A statement of the cash price and the hire-purchase price or total purchase price, as the case may be, of the goods
b. The amount of each instalment by which the price is to be paid and the date or the mode of determining the date upon which
each instalment is payable
c. A description or list of the goods to which the agreement relates sufficient to identify them and
d. A notice, which is at least as prominent as the rest of the contents of the agreement, in the terms set out in the First or Second
Schedule to this Decree
A copy of the agreement shall be delivered or sent to the hirer or buyer within 14 days after the making of the agreement.
Discretion of Court to Dispense with Specific Requirements

According to Section 3(3) where the parties fail to comply with the requirements in section 3(1) (b) and (c) and section 3(2), the court can
exercise its discretion and still hold the agreement enforceable if it considers it just and equitable to do so and if it is clear that the omission of
those requirements has not prejudiced the hirer in any way.
The effect of Section 3(3) therefore is that where the parties fail to include in the agreement the amount of each instalment/ date and the
description of the goods, or where the owner fails to deliver a copy of the agreement to the hirer within the stipulated period of 14 days, the
courts may, in exercise of their discretion, nevertheless hold the agreement enforceable if it is clear that the non-compliance with these
requirements has not in any way prejudiced the position of the hirer. It is important to note that the discretion of the court can be exercised only
when the parties fail to comply with the specific provisions mentioned in Section 3(3), namely sections 3(1)(b) and (c) and 3(2) – Ekuona
Construction Co Ltd v Bank for Housing and Construction12.
In summary,
This means that for a hire purchase agreement to be enforceable by the owner the following mandatory requirements must be fulfilled:
1. The High Purchase Act must be in writing and signed by or on behalf of both parties
2. Beyond that the high purchase agreement must contain the following
3. There must be a statement of the hire –purchase price; - Statutory Notice on the hirer’s right to terminate; and the restriction on the
owner’s right to recover the goods
11
Before any agreement is made the seller or owner shall state orally and in writing to the prospective buyer or hirer (otherwise than in the agreement referred to in section 1)
the price at which the goods may be purchased by him for cash (in this Decree referred to as the "cash price") and the hire-purchase price or total purchase price, as the case
may be
12
Even if the requirements of section 3(1) of N.R.C.D. 292 have not been strictly adhered to, the court has power to dispense with conditions (b) and (c) of section 3(1) of
N.R.C.D. 292.
27
Hirer’s right of termination

The fundamental right of the hirer is the ability to terminate the hire purchase agreement. The hirer is required to notify the recipient of the
instalment payments or if their agreement contains any such clauses. Section 5 guarantees the hirer’s right to terminate the Hire Purchase
Agreement at any time before final payment is due. According to Section 5(1), at any time before the final payment falls due, the hirer,
notwithstanding anything to the contrary stated in the agreement is entitled to terminate the hire purchase agreement by tendering a written
notice of termination to any person entitled to receive payment under the agreement. The right of termination has been extended to conditional
sale agreements, but subject to certain conditions.
Liability of the hirer upon termination – Section 6
The following consequences flow from the termination by the hirer:
1. Where there is any outstanding instalment at the time of termination, the hirer shall pay it. That is, the hirer or buyer is liable to pay the
difference between the total of the sums of money paid and one half (or 50%) of the hire-purchase or the total purchase price, or if the
agreement specifies a lesser amount, the buyer is liable to pay the amount so specified – Section 6(1). In all hire purchase agreement,
there is a provision for minimum payments. If at the time of the termination, the hirer has not paid this amount the hirer shall pay the
difference to make it up.
2. Section 6(2) provides that, the hirer shall return the goods at his own expense to the premises from which they were originally supplied
to him. Where the seller requires the hirer to return the goods to premises other than those from which they were originally supplied, the
owner shall be responsible for any additional expense incurred by the hirer or buyer in returning the goods to those premises
3. Where the hirer has failed to take reasonable care of the goods at the time of termination, the hirer shall compensate the retailer for any
loss or damage that has been caused to the property – Section 6(3)
4. Section 6(4) provides that if the hirer wrongfully retains the goods after termination, the owner can bring an action to recover the goods.
In such an action, the court is empowered to order to the hirer to return the goods to the owner without giving the hirer the option to pay
for them.
Hirer’s right to complete transaction

Section 7 allows the hirer to turn the Hire Purchase Agreement into an outright sale before the end of the hiring period. The hirer may convert
the agreement into an outright sale by: Notifying the owner in writing of his intention to purchase the goods outright; and the hirer must
then tender the net balance due to the owner on a specified date. The net balance due is the difference between the Hire Purchase Price and the
amounts paid so far. Section 7(2) defines the net balance due as the Hire Purchase Price less any amount paid by the hirer under the agreement.
After the payment of the net balance due, the purchase becomes complete.
When can the right to complete the agreement be exercised? - Section 7(3)
1. The right of the hirer to complete the agreement may be exercised at any time during the continuance of the agreement
2. The right to complete the agreement may also be exercised within twenty-eight days after the owner or seller has taken possession of the
goods, having the right to do so.
According to section 7(3)(b), an owner or seller who recovers possession of the goods from the hirer or buyer, having the right so to do is not
entitled to dispose of the goods until after twenty-eight days. Within those 28 days, the hirer or buyer is entitled to complete the agreement by:
a. Tendering to the owner or seller the net balance due; and

b. The reasonable costs incurred by the owner in taking possession of the goods; and
c. Any amount properly expended by the owner on the storage, repair or maintenance of the goods.
Owner’s Right
If the hirer has not personally written to terminate the agreement and has made payments in accordance with Sections 8 & 9, the owner has no
right to recover the goods from the hirer without recourse to court action or with the consent of the hirer. Where the owner resorts to court action
to recover the goods, the court may either make fresh repayment schedule for the hirer or order a fair proportion of the goods to be given to the
hirer having regard to what has been paid.
Protected Goods
Section 8 works to restrict the rights of the owner or seller to recover the goods from the hirer or the buyer on default. The decree has thus
designated some goods as protected goods under the decree. This right exists to protect the interest of the hirer, or the buyer so as not lose the
goods without having regard to what has been paid under the agreement. A protected good is defined at subsection 4 as a good let under a Hire
Purchase, where half of the Hire purchase price or Total purchase price has been paid and that the hirer or buyer has not terminated the
agreement.
The general rule as stated in Section 8(1) is that where goods have become protected because of the hirer having paid at least one-half of the
Hire purchase price, the owner cannot enforce his right to recover possession of the goods upon default except by court action.
Consequences of Owner’s Recovery of Goods in Contravention of Section 8(1)

According to Section 8(2) where the owner recovers possession of protected goods otherwise than by court action, the following consequences
will follow:
1. The Hire Purchase Agreement if not previously terminated shall be terminated i.e., the Hire Purchase Agreement shall automatically
come to an end.
28
2. The hirer shall be released from all liability under the agreement and shall be entitled to recover from the owner or seller, in an action for
money had and received all sums paid by him under the agreement, and shall be also entitled to recover any security given by him to the
owner in respect of moneys payable - De Horne Agah V. Farkye Brothers:
The plaintiff sued under section 12 of HPA of 1958(s. 8 of the decree), i.e., protected goods to recover all sums which has been paid to the
defendant under the HPA together with general and special damages for wrongful seizure. The defendants admitted the seizure but argued
that at the time of the seizure the amount paid was not up to the requisite 75% of the HPP. This was because the owner was keeping all
payments (HPP, penalties and compensation) into one account. The High Court dismissed the plaintiff’s action on the ground that at the time
of the seizure he had not paid the requisite 75% of the HPP. The plaintiff appealed and the Court of Appeal held that the defendants putting
HP payments, penalties, and damages into one account were wrong. When the vehicle was seized the hirer had paid more than 75% of the
total HPP. The owner’s right to seize the vehicle was lost and could only do that by taking an action since the good had become a protected
good. The hirer was thus entitled to recover the sums paid under the contract
3. Any guarantor shall be entitled to recover from the owner or seller all sums paid by him under the contract of guarantee.
4. Under section 8(3), instead of allowing the owner to keep the goods and suffer these consequences, the hirer can apply to the court for an
order for the return of the goods to him and for the rescheduling of the payments under the agreement.
For cases dealing with the effect of the owner’s wrongful repossession of goods, see
1. U.T.C. v. Johnson Okoro: Here the court held that since the plaintiff seized the vehicle without an order of the court the defendant was
released from all liabilities under the hire purchase agreement by virtue of the fact that the goods were protected, in that more than 50%
of the purchase price had been paid.
2. Danso v Taylor: By an agreement made in January 1964, the appellant hire-purchased a second-hand vehicle from the respondent, a car
dealer. The appellant paid no deposit and was to be responsible for the repair of the vehicle during the pendency of the agreement. He
defaulted in the payment of the instalments in June and July 1966 and on the 30th of August 1966 the respondent wrote to him that if the
appellant did not pay certain expenses incurred when he (respondent) repaired the vehicle, he would sell it. Subsequently he seized the
vehicle and sold it on the 16thSeptember, 1966. The appellant alleged that he had paid more than half of the purchase price and so under
section 69(1) of Act 137 the vehicle could not be lawfully seized except by court order. He therefore claimed from the respondent all the
installments he had paid and damages for wrongful seizure of the goods. The respondent on the other hand contended that the appellant
had paid less than half of the hire-purchase price and therefore he was entitled to seize the vehicle without court action.
Held allowing the appeal: Since the figures appearing in the pleadings and the evidence of the parties were inconclusive in determining
how much the appellant had actually paid on account of the hire-purchase price before the seizure, it was the duty of the trial circuit court
to have considered what the probabilities of the case showed. That the trial court failed to do. The court of appeal found on the balance of
probabilities that the appellant had paid more than half of the hire purchase price. The respondents’ seizure without an order of the court
was consequently wrongful. And that the fact that the appellant had breached a clause in the agreement relating to the repair of the
vehicle did not justify the seizure by the respondent
Action to recover Protected Goods

What happens in an action brought by the owner for an order for the recovery of protected goods? Sections 9-11
Section 9 discusses an action which has been brought by the owner or the seller to recover the protected goods where section 8 has not been
breached. In an action, to recover protected goods the court may suo moto (its own motion) make an order meant to protect the goods from
damage or depreciation – Section 9(1)(a)
Upon the hearing of the action, the court may make any of the following orders:
1. Order for specific delivery 9(1)(b)(i): The court may order the specific delivery of the goods to the owner, subject, if necessary, to the
condition that the owner refunds to the hirer or buyer, such part of the sums paid by the hirer as the court may direct. This is to prevent
unjust enrichment of the owner.
2. Secondly the court may also make an order for specific delivery of the goods to the owner or the seller but postpone the operation of the
order and gives the hirer, buyer, or any guarantor the opportunity to pay outstanding balance on the transaction having regard to their
means – Section 9 (1) (b) (ii)
3. The third possible order is to order for the specific delivery of part of the goods to the owner or seller and the remainder to the hirer or the
buyer. This is known as ‘‘split order’’. Such an order could be made where the goods are divisible. Such an order may not be made in
respect goods which are not divisible. Where the goods can easily be divided, the courts may allow the hirer to keep a portion of the
goods, the value of which approximates the installments paid so far and require him to return the remainder. Where however the goods
are not divisible (for example a car), such an order cannot be made, and in such a case it would be more appropriate for the court to adopt
the first approach.
According to Section 9(2), an order for specific delivery is an order for the delivery of the goods to the owner without giving the hirer or buyer
the option to pay their value. An order for specific delivery amounts to the court terminating the agreement and trying to restore the parties to
their original position (restititio in integrum).
An order for specific delivery be made: If the hirer is known to be a persistent defaulter or his financial position will not enable him to make
the payments necessary to discharge the agreement except over a very long period.
Postponed order – Section 10
The order for specific delivery shall be postponed if the goods are in the possession or under the control of the hirer or buyer. So that where the
goods are not in the possession of the hirer or the buyer the order shall not be postponed. Subsection 2; The subsection allows the parties
themselves to agree to different terms of payment. This shall be entered and thereafter postpone the order of specific delivery.
29
Effect of Postponed Order - Section 11

The section sets out the effects of a postponed order. The effect of the subsection is to deal fairly between the parties having regard to the fact
that both parties have an interest in the goods.
a. Where the order for specific delivery of the good is postponed, the hirer or buyer is deemed to be a bailee of the goods.
b. Where a postponed order is made having regard to a new arrangement, the term of the new arrangement replaces the old terms of the
agreement.
c. The court in making the postponed order, modify, alter the original contract as it deems fit.
d. During the pendency of the postponed order, if the hirer, buyer, or guarantor is unable to fulfil the terms of the order, the owner or
seller shall go to the court that made the order for redress.
e. Either of the parties may also apply to the court to have the postpone order varied or revoked.
Representation & Terms

Sections 12 - 15
The general rule as stated in Section 12(1) is that notwithstanding any disclaimer in the Hire Purchase Agreement any representation with
respect to the goods, made either orally or in writing by a dealer or salesman to the hirer during any antecedent negotiations between them shall
be deemed to have been made by the dealer or salesman as agent of the owner or seller. This provision deals with situations where the HPA is
concluded between a Finance Companies and the hirer through a dealer or salesman.
Financing Ltd v Stimson: The defendant saw a motor car on the premises of a dealer and signed a hire-purchase form provided by the plaintiff, a
finance company and produced by the dealer. The form contained amongst others, clauses that the agreement should be binding on the finance
company only on acceptance by their signature, that the hirer acknowledged that before he signed the agreement, he had examined the goods and
satisfied himself that they were in good order and condition, and that the goods should be at the risk of the hirer from the time of purchase by the
owner. Upon payment of the first instalment by the defendant he was allowed to take possession of the motor car, but being dissatisfied with it after
two days, he returned it to the dealer, saying that he did not want it and offering to forfeit the installment which he had paid. Neither the defendant nor
the dealer informed the finance company of the return of the car. On one night the car was stolen from the dealer’s premises and recovered severely
damaged. On the following day, the finance company signed the agreement. Subsequently the finance company sold the damaged car and claimed
damages from the defendant for breach of the hire purchase agreement or as bailee on the terms of the agreement.
Held: It was held among other things that the return of the motor car by the defendant to the dealer amounted to revocation of the offer by the
defendant since on the facts of the case, the dealer had ostensible authority to accept the revocation of the offer on behalf of the finance company .
Section 12(3) defines representation to include any statement or undertaking whether constituting a condition of warranty or not.
Implied terms
1. Quiet Possession – Section 13(1)(a): There shall be an implied term in every Hire Purchase Agreement that the hirer or buyer shall have
quiet possession of the goods; This means that in addition to putting the hirer into possession of the goods, the owner must leave him in
peaceful possession of them during the pendency of the agreement. It should be noted that this implied term is breached only where the
hirer’s enjoyment of possession is interfered with either by the owner himself or by the lawful acts of third parties. The owner for an example
of lawful acts of interference is not liable or any interference by persons having no lawful claim to possession. An example of lawful acts of
interference is outlined in Niblett Ltd v Confectioners Materials Co. Ltd:
A firm who dealt in confectioners’ materials agreed in writing to sell condensed milk in tins and of a certain standard at a price including insurance
and freight from New York to London. Payment was to be made in cash on receipt of the shipping documents. The buyers received the documents
and paid the price. The goods arrived bearing a name or brand which was an infringement of the registered trademark of certain manufacturers of
condensed milk, at whose instance the commissioners of customs detained the goods. The buyers were obliged to remove the name or brand to get
possession of the goods and could only ell them at a loss without any distinctive mark. In an action by the buyers against the sellers for breach of
warranty, it was held among other things that the sellers did not have a right to sell the goods since it bore a name which was an infringement of the
registered trademark of another company and that they also breached the implied warranty of quite possession of the buyer
2. Freedom from encumbrances: Section 13(1)(b) states that there is an implied term that the goods shall be free from any charge or
encumbrance in favour of any third party at the time when property is to pass to the hirer or buyer. Encumbrance refers to any claim, charge,
lien or liability attached and binding the property. It should be noted that this term does not come into operation until the time when property
is to pass to the hirer, usually at the end of the agreement so that even if there is an encumbrance binding the goods at the time it was
delivered to the hirer, the owner would not be in breach of this term provided he procures a discharge of the encumbrance before the time
fixed for the exercise by the hirer of his option to purchase.
3. Right to sell the goods: Section 13(1)(c) states that the owner has the right to sell the goods at the time when the property is to pass.
4. According to section 13(2)(a) and b, where the hirer or buyer , either expressly or by necessary implication has made known to the owner or
seller the particular purpose for which the goods are required, or in the course of antecedent negotiations has made that purpose known to
any person by whom the negotiations were conducted, there shall be , subject to section 14 , an implied term that the goods shall be
reasonably fit for that purpose.
Breach of Implied terms
Under Section 13(3), a breach of any of the above implied terms by the owner gives the hirer a right to damages in respect of the breach, or to
any other remedy that the Court thinks appropriate.
Implied term as to merchantable quality
Section 14: 14(1) enacts that in a hire-purchase agreement there is an implied term that the goods are of merchantable quality at the time of
delivery. Merchantable quality has been said to require that the goods must be in such condition that a reasonable man, acting reasonably, would
after full examination accept the goods in performance of his offer to buy them.
30
In the case of Bartlett v. Sidney Marcus Ltd, it was stated that: “Goods will be merchantable if they are in a usable condition, although not
perfect. A second hand car, for example, may not be in perfect condition but may still be fit for use.” “Merchantable does not mean that the thing
is saleable in the market simply because looks alright; it is not merchantable…if it has defects which make it unfit for the only proper use, but
which are not apparent on ordinary examination.”
The implied term as to merchantable quality does not arise in certain exceptional situations:
1. Where the hire has examined the goods or sample of the goods before delivery, there will be no implied terms as to merchantable quality
in respect of defects which ought to have been revealed by the examination - 14(2)
2. Where the goods are sold or let as second-hand goods and they have been so described in the agreement and the parties have expressly
excluded the implied terms as to merchantable quality-14(3)
3. Thirdly, the implied term as to merchantable quality does not apply, where the goods are let or sold as being subject to any Defect
specified in the agreement, and the agreement contains a provision that the implied term as to merchantable quality is excluded. -14(4)
Exclusion clauses in Hire Purchase Agreements: Section 14(5) provides that where the goods are sold subject to a defect, and the agreement
contains an exclusion clause relating to that defect, such clause will only be effective if the owner proves that the defect was brought to the
notice of the hirer.
Section 14(6) provides that a breach of the implied term as to merchantable quality shall give the hirer a right to rescind the agreement.
Further Implied Terms in Special Cases
1. Where goods are sold or let by reference to sample: Under Section 15(1) where goods are let under the HPA by reference to a sample,
there shall be an implied term that:
i. The bulk will correspond exactly with the sample
ii. The hirer or buyer will have a reasonable opportunity of comparing the bulk with the sample.
2. Where goods are let under a HPA by description: Under Section 15(2), there shall be an implied term that the goods will corresponds
exactly with the description. 15(3) stipulates that where goods are let or sold under the agreement by reference to a sample as well as by
description, there is an implied term in the agreement that the goods correspond both with the sample and the description.
15(4) makes it clear that a breach of any of these terms by the owner or seller gives the hirer or buyer the right to rescind the agreement.
Other cases
 Agyeibea v. Fahim & Co: The plaintiff obtained a car from the defendant under a hire-purchase agreement signed on 28 August1965 but
operative from 30 August 1965. The car was duly delivered to her even though she was unable to pay the deposit of £G400 stipulated in the
agreement. After she had duly paid the first instalment under the agreement on 30 September 1965, the defendant was persuaded to accept a
deposit of £G100 in place of that originally stipulated. Consequently, another hire-purchase agreement was entered into between the parties
relating to the same car, with the lesser deposit substituted for the original one. In this new agreement, the cash price of the car was expressed
to be £G1,250 although in the earlier one the cash price was stated as £G1,000. On 5 December 1965, the defendant seized the car on the
allegation that the plaintiff had not paid the installment due on 30 November. The plaintiff did not receive a copy or memorandum of either
agreement till after the defendant had seized the car. She brought an action seeking a return of the car or damages for conversion and for loss
of profits. (Image)
Holdings: The provisions of the Sale of Goods Act, 1962 (Act 137), were imperative in respect of hire-purchase transactions which were
genuinely within its purview, and it was not permissible to escape its consequences by adopting the ruse of inflating the cash price of the
subject-matter of the hire-purchase agreement. Under section 66(3) of the Sale of Goods Act, 1962 (Act 137), a seller was precluded from
enforcing a hire-purchase contract or exercising any right to recover the goods from the buyer unless he had previously complied with the
provisions of that section, one of which was that the seller must deliver to the purchaser, a copy of the note or memorandum of the
transaction within fourteen days of the making of the agreement. The discretion vested in the court under section 66(4) of the Sale of Goods
Act, 1962, would not be exercised to waive the statutory provisions in favour of a party who had himself acted unconscionably. The
defendant's hasty seizure of the car without warning after two days' default of payment and his failure to give a copy of the new agreement to
the plaintiff within fourteen days amounted to such unconscionable conduct. The plaintiff could not claim a return of the car or damages for
conversion, nor could she claim loss of profits in such circumstances based on wrongful seizure. The only damages to which she was entitled
were the damages measured by the loss of the instalments and deposit paid prior to the seizure.
 Transport Hire Purchase Ltd v Dede: In this case, a company sold a Toyota truck to the defendant under a hire-purchase agreement. The
stated purchase price, i.e., the cash price was ¢750,000 and the-hire purchase price were ¢1.4 million. Clause 11 of the hire purchase-
agreement reserved in the plaintiff the right to seize the vehicle when the defendant defaulted in the payment of any monthly installment. In a
purported exercise of that right the plaintiff subsequently impounded the vehicle. He then later brought an action for an order for the return of
the vehicle. The defendant resisted the claim and in turn counterclaimed for the refund of the sum of ¢715,000. She alleged she had paid to
the plaintiff in respect of the vehicle and other moneys she had expended on repairing and in insuring the vehicle; and an order for a lien on
the vehicle until the plaintiff had paid those sums. In support of the claim for refund of expenses on repairs and insurance, the defendant
contended that the plaintiff was not entitled under the Hire-Purchase Decree, 1974 (NRCD 292) to have added expenses not made at the time
of sale to the purchase price. The court found that
i. It was the plaintiff who authorized the defendant to make those expenses
ii. At the time the plaintiff impounded the vehicle the defendant had made total payments of ¢721,400 in respect of the vehicle;
and
iii. The defendant had not terminated the agreement at the time the plaintiff seized the vehicle.
Holding: Section 2 of the Hire-Purchase Decree, 1974 (NRCD 292) required that before a hire-purchase agreement was executed the seller
should state both the cash price and the hire-purchase price orally and inwriting to the buyer or hirer. No provision however made it unlawful
31
to add intended expenses or expenses not made at the time of the sale to either the cash price or the hire-purchase price. Accordingly, in the
instant case, even though the hire purchase agreement provided that the cash price was ¢750,000 and the-hire purchase price was ¢1.4
million the inclusion by the plaintiff of additional expenses for insurance and repairs in the selling price was lawful. Section 23 of NRCD
292 clearly permitted the parties to a hire purchase-agreement to vary their rights, duties, and liabilities by express agreement or by a course
of dealing between the parties or by custom which the parties might be taken to have agreed to be applicable to their agreement.
Accordingly, clause 11 of the hire-purchase agreement which reserved in the plaintiff the right of seizure on default by the defendant to pay
any monthly instalment was lawful. However, the power of variation was subject to other provisions of NRCD 292. Section 17 of NRCD
292 mandatorily demanded that before the right of, inter alia, forfeiture or repossession could be exercised by the plaintiff, it should have
a. Made a written demand to the defendant to pay the arrears of the instalments; and
b. Given the defendant fourteen days from the service of the demand before taking steps to repossess the vehicle should the
defendant fail to comply with the written demand.
Since the plaintiff failed to comply with those statutory provisions, the seizure was unlawful. Accordingly, the plaintiff was not entitled to an
order that the vehicle be returned to it. The plaintiff's right of repossession was also subject to section 8(1) of NRCD 292 which prohibited
any seller or hirer from enforcing any right to recover possession of 'protected goods' from the hirer or buyer otherwise than by action.
Section 8(4) defined protected goods as; (i) goods acquired under a hire-purchase or conditional sale agreement; (ii)one-half of the total
purchase price of which have been paid or tendered on behalf of the buyer or guarantor; and (iii) the agreement between the parties had not
been terminated by the seller.
Section 8 (2) provided very grave sanctions against a seller who violated the provisions of section 8 (1) of NRCD 292. On the evidence the
defendant had paid more than 50% of the total purchase price and consequently the vehicle was a protected good. Accordingly, the defendant
was entitled under section8 (2) of NRCD 292 to a refund of all the moneys she had paid to the plaintiff and a release from all her liabilities
under the agreement.
32

Commercial Law II Notes

Uploaded by

Copyright:

Available Formats

Commercial Law II Notes

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Commercial Law II Notes

Uploaded by

Copyright:

Available Formats

Emelda’ s Notes PS: There may be some repetitions or grammatical errors in the notes.

1. The bill of lading.------------------------------------------------------------------------------------------------------------------------------------------------------------------------------2

2. The commercial invoice.----------------------------------------------------------------------------------------------------------------------------------------------------------------------2

3. The policy of marine insurance.-------------------------------------------------------------------------------------------------------------------------------------------------------------2

Other Secondary documents:-----------------------------------------------------------------------------------------------------------------------------------------------------------------------2

Typical Export transactions----------------------------------------------------------------------------------------------------------------------------------------------------------------------------2

Documents in CIF contracts-------------------------------------------------------------------------------------------------------------------------------------------------------------------------6

FINANCING INTERNATIONAL TRADE---------------------------------------------------------------------------------------------------------------------------------------------------------8

Ways to pay seller:---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------8

Parties to a bill of exchange-------------------------------------------------------------------------------------------------------------------------------------------------------------------------9

Elements of bill of exchange------------------------------------------------------------------------------------------------------------------------------------------------------------------------9

Main actors involved in the documentary credit---------------------------------------------------------------------------------------------------------------------------------------------------10

Types of documentary credits------------------------------------------------------------------------------------------------------------------------------------------------------------------------10

Applicable cases for documentary credits-------------------------------------------------------------------------------------------------------------------------------------------------------11

Issuance and notification of the documentary credit----------------------------------------------------------------------------------------------------------------------------------------------11

The principle of strict compliance----------------------------------------------------------------------------------------------------------------------------------------------------------------12

The doctrine of autonomy--------------------------------------------------------------------------------------------------------------------------------------------------------------------------12

The Existing Laws that Relate to Credit Factoring in Ghana---------------------------------------------------------------------------------------------------------------------------------13

Definition of a negotiable instrument----------------------------------------------------------------------------------------------------------------------------------------------------------------15

c. Negotiable instrument (composite definition)--------------------------------------------------------------------------------------------------------------------------------------------15

How instruments come to be negotiable------------------------------------------------------------------------------------------------------------------------------------------------------------16

Types of negotiable instruments----------------------------------------------------------------------------------------------------------------------------------------------------------------------16

Advantages of a negotiable instrument--------------------------------------------------------------------------------------------------------------------------------------------------------------17

PRINCIPLES OF BANKING LAW--------------------------------------------------------------------------------------------------------------------------------------------------------------------18

Common law definition of a Banker-------------------------------------------------------------------------------------------------------------------------------------------------------------18

Ghanaian legal definition--------------------------------------------------------------------------------------------------------------------------------------------------------------------------18

Nature of Banker & Customer Relationship--------------------------------------------------------------------------------------------------------------------------------------------------------19

Rights and Duties of the bank------------------------------------------------------------------------------------------------------------------------------------------------------------------------20

Rights of the bank-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------20

Duties of the bank-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------20

Rights and duties of the customer--------------------------------------------------------------------------------------------------------------------------------------------------------------------22

Termination of banker- customer relationship-----------------------------------------------------------------------------------------------------------------------------------------------------22

Types of Payment Card----------------------------------------------------------------------------------------------------------------------------------------------------------------------------24

HIRE PURCHASE AGREEMENTS-------------------------------------------------------------------------------------------------------------------------------------------------------------------26

Common law definition----------------------------------------------------------------------------------------------------------------------------------------------------------------------------26

Peculiar Features of a Hire Purchase Agreement (Under the Common Law)-----------------------------------------------------------------------------------------------------------------26

Requirements of Hire Purchase Agreement--------------------------------------------------------------------------------------------------------------------------------------------------------27

Discretion of Court to Dispense with Specific Requirements--------------------------------------------------------------------------------------------------------------------------------27

Hirer’s right of termination---------------------------------------------------------------------------------------------------------------------------------------------------------------------------28

Hirer’s right to complete transaction----------------------------------------------------------------------------------------------------------------------------------------------------------------28

Consequences of Owner’s Recovery of Goods in Contravention of Section 8(1)---------------------------------------------------------------------------------------------------------28

Action to recover Protected Goods---------------------------------------------------------------------------------------------------------------------------------------------------------------29

Postponed order – Section 10------------------------------------------------------------------------------------------------------------------------------------------------------------------29

Effect of Postponed Order - Section 11-------------------------------------------------------------------------------------------------------------------------------------------------------30

Representation & Terms-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------30

Breach of Implied terms------------------------------------------------------------------------------------------------------------------------------------------------------------------------30

Implied term as to merchantable quality-----------------------------------------------------------------------------------------------------------------------------------------------------30

Further Implied Terms in Special Cases------------------------------------------------------------------------------------------------------------------------------------------------------31

1. The bill of lading.

2. The commercial invoice.

3. The policy of marine insurance.

Other Secondary documents:

Typical Export transactions

4. To provide documents evidencing delivery to the ship, certificate of origin, etc.:

 Wimble, Sons & Co. v. Rosenberg & Sons

 Manbre Saccharine v Corn Products Ltd [1919]

 Zakour v Pillsbury Mills, Inc. [1961]

 Comptoir D’achat v Luis De Riddler