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The Conundrum of Balance Under Ghana's Legal System: The Protection of a Buyer in Good Faith and the Principle of Caveat Emptor

Document Cited in Related
DOI10.3366/ajicl.2022.0404
Author
Pages197-210
Date01 May 2022
Published date01 May 2022
INTRODUCTION

In the development of our law, two principles have striven for mastery. The first is for the protection of property: no one can give a better title than he himself possesses. The second is the protection of commercial transactions: the person who takes the transaction in good faith and for value without notice should get a good title.1

The above are the words of Lord Denning in 1949 in elucidating the complexities of protecting an innocent purchaser and the owner of goods with regards to transfer of title in goods. It has been argued that transfer of title is a constituent of the law of sale of goods and its importance lies in the fact that in the rumination of the law, this element cannot be overlooked.2 The title in goods ought to be transferred from the seller to the buyer as is a reasonable expectation of the latter. It is therefore an obligation on the seller of goods to transfer ownership and possession in the goods to the buyer to effect a completion of the sale transaction. In normal contemplation of the law, the real owner of goods is obligated to transfer title to the buyer. The principle of caveat emptor, meaning buyer beware, also comes to play in commercial transactions. The buyer is required to conduct due diligence regarding the ownership and the state of the goods under the sale transaction. Caveat emptor is a short form of quia ignorare non debuit quod jus alienum emit (‘Let a purchaser beware, for he ought not to be ignorant of the nature of the property which he is buying from another party’).3 This means that the buyer should assure himself that the product is good and that the seller had the right to sell it, as opposed to receiving stolen property or a property to which the purported seller does not have legal title. It may also be noted that the legal issue of transfer of title in goods under a sale transaction cannot be analysed without the application of the maxim nemo dat quod non habet. This maxim is to the effect that a person cannot purport to transfer title in goods to another if the former is not the legitimate owner or has not been properly authorised to do so.4 No person can therefore ‘transfer a better title in property than he himself has’.5 Therefore, a person who lacks title in goods cannot purport to transfer title. This rule aims at protecting real owners of goods

Jurisdictions across the world have enacted laws aimed at easing commercial transactions, more especially the protection of a buyer in good faith (bona fide purchaser) and an owner of goods. Ghana is no exception. In the United States of America for instance, it was a fixed common law policy to protect the real owner of his property.6 As far back as 1838, the jurisprudence in the United States of America with regard to ownership rights was upheld in Saltus v. Everett where it was held among others that:

The universal and fundamental principle of our law of personal property that no man can be divested of his property without his own consent; and consequently, that even the honest purchaser under a defective title cannot hold against the true proprietor.7

Consequently, a buyer in good faith who bought goods from a ‘thief’ cannot have title and possession in the goods against the original owner as was held in Basset v. Spofford.8 In 1878, the USA Court of Appeals in confirming the rule of protection of real owners of property held among others that

The purchaser buys at his risk of the title and if he would be safe, must make inquiry. He may not with certainty stop at the fact of possession, but must learn how the possession has been acquired.9

 Again, if one bought goods in good faith from a seller who was in possession by fraud, a buyer acquired nothing if the real owner had no intention to divest of his title to another.10

However, the application of the principles of caveat emptor and protection of the buyer in good faith has brought to the fore the complexities in balancing competing interests by the judiciary and the legal community as a whole.11 Sale of goods has been an integral part of commercial transactions and Ghana has not been exempted from the culture of trade. Transfer of title therefore remains the fulcrum of a sale transaction without which there are legal ramifications for both the seller and buyer. The Sale of Goods Act 1962, Act 137, lays down the fundamental principles underlying a sale transaction in Ghana, albeit common law principles and equity. The legal community is faced with this stark reality as to the right person to hold title in goods in a sale transaction. There are numerous hurdles to be overcome in deciding who owns the title in goods. Is there any protection for a buyer who bought goods in good faith from a seller who lacks authority? Does the law protect a seller whose goods have been sold without his authority? Where is the balance between protecting the buyer in good faith and the real owner of goods? Should the real owner of goods be deprived of his title because the buyer bought the goods in good faith? The courts have attempted to protect the property rights of individuals while at the same time ensuring that the rights of buyers in good faith are upheld. Clearly, some difficulties may be faced in deciding who to protect in peculiar instances. This article analyses Act 137 in conjunction with other legislation in selected jurisdictions and case law to ascertain whether there can be a balance between the protection afforded to buyers and sellers to promote good faith and certainty in sale transactions.

 THE APPLICATION OF THE PRINCIPLE OF CAVEAT EMPTOR IN GHANA

The caveat emptor principle arises primarily from the asymmetry of information between a purchaser and a seller. The information is asymmetric because the seller tends to possess more information regarding the product than the buyer.12 In the case of Davies v. Randall and Another, a case involving a dispute over immovable property, Koranteng-Addow JA mentioned that ‘… it is the principle of caveat emptor that is applicable. The purchaser had to investigate the genuineness of the title he intended to purchase.’13 This case gives the impression that sellers hold no fault whatsoever when it comes to property or items they have sold. It rather shifts the responsibility of ensuring that one purchases well to the buyer. This gives credence to the phrase caveat emptor which means buyer beware. In the case of Ansah v. Joe, where it was in dispute whether a defendant was a bona fide purchaser or not, Sarkodee-Addo JSC explained the maxim caveat emptor as follows:

A purchaser must look out for himself: caveat emptor. He must take precautions for his own protection – if he does not, he ‘asks for it’ and cannot complain if he ‘gets it’.14

In the Supreme Court case of Brown v. Quashigah, it was stated at p. 954 that

The burden must rest squarely on the vendor and the prospective purchaser to satisfy themselves that the land intended to be sold is available and vacant or not allocated. The principle of caveat emptor is still a postulate of our law. A prospective vendor or purchaser of land cannot shift onto the shoulders of the existing owner the burden of informing them of the encumbrance, title or interest held in him. In many cases it will not even be enough to conduct a search in the Deeds Registry or the Land Title Registry.15

 This means that a potential purchaser must take steps to conduct due diligence for his own benefit and that his failure to do so is to his own peril. Another case that is important to look at in understanding how the principle applies in Ghana is the case of Rockson v. Armah.16 The appellant owned a car which he sold to the respondent for 3,200 cedis. The respondent made cash payments to the value of 2,200 cedis and settled the balance of the purchase price with two post-dated cheques of 500 cedis each. When the car was delivered to respondent, it showed signs of recent involvement in an accident. There were serious defects in the clutch and starter systems and extensive damage to the mudguard and a head-lamp. After some initial hesitation, the appellant admitted to the accident, accepted responsibility for the defects and agreed...

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