We buy and sell things every day, and no doubt most of us assume that it is only when we become the owner that we take the risk of our purchase being damaged or destroyed. Not always – in our law, passing of ownership and passing of risk are two different concepts, and although in our day-to-day lives they are normally simultaneous, sometimes they aren’t.
What happens then? The general rule in our law – unless the parties have agreed otherwise – is this –
- A buyer becomes the owner of a movable asset only when it is “delivered” to him/her (be careful here – “delivery” is a much more complicated concept in law than you might think).
- Risk however passes to the buyer on conclusion of the contract of sale; in other words, you could buy something, and if it is stolen or destroyed before you take ownership, you could end up losing both it and the purchase price. There are many provisos and exceptions to this rule (such as when the seller causes the loss) but the legal principles are complex and all in all it’s a minefield for the unwary.
A recent SCA (Supreme Court of Appeal) decision illustrates two particular dangers.
A buffalo dies – whose loss?
- A game farmer sold a bull buffalo to another game farmer.
- Before delivery to the buyer, the buffalo had to be tested for disease, which meant darting it to draw a blood sample.
- The darting itself went well, but the buffalo naturally enough made a run for it and could not be found in time to prevent it from lying down and suffocating.
- The seller sued the buyer for R1.14m, his case being this –
- Whilst on top of the truck in which the buffalo had been transported, the buyer decided then and there he wanted it, and the parties agreed verbally on a sale at R1m + vat.
- The buyer, said the seller, also specifically agreed to assume the risk of death or injury arising from the darting and sedation.
- The death resulted from the darting operation.
- The buyer at first denied everything, but, by the time the parties ended up in the Supreme Court of Appeal, he had conceded all three points. He argued however that the seller had to deliver the buffalo before claiming payment, that it was up to the seller to prove that his conduct hadn’t caused the buffalo’s death, and that the seller’s inability to deliver (“impossibility of performance” in legal speak) was self-created.
- Having resolved a number of factual disputes in favour of the seller, and holding that the buyer’s specific contractual assumption of risk arising from the darting operation made the question of “self-created impossibility of performance” irrelevant, the Court held that it is the buyer who must suffer the loss.
- The end result therefore – the buyer is down one buffalo, R1.14m, and legal costs (which, after three bouts in senior courts, will be substantial).
Verbal contracts, high risk events, and deep pockets
It boils down to this –
- Relying on a verbal sale agreement is a recipe for disaster – dispute, delay, and the costs and frustrations of litigation. Rather have your lawyer record in a written contract, in the clearest possible terms, exactly what you have agreed to in regard to the passing of ownership and the passing of risk.
- If you accept the danger of loss from a “high risk event” – such as sedating R1m worth of wild buffalo – you’d better have deep pockets.