Sale of Goods and the Nigerian Constitution

‘It is hard to imagine a less well-defined boundary than that separating contracts which do from those which do not “affect” interstate commerce.’ (Robert Braucher, 1951)

In the last entry we started examining the extent of applicability of the sale of goods legislation of some of the states of Nigeria in light of the trade and commerce provision of the Nigerian Constitution. The trade and commerce clause confers exclusive legislative powers on the Nigerian federal legislature in respect of trade and commerce between Nigeria and other countries and between the states. It was noted that in Attorney General of Ogun State v Aberuagba (1985) the Nigerian Supreme Court did not confine the operation/application of the provisions to relationships between government entities. Instead the court considered the provisions as applicable in the particular case to the movement of products across the states or between Nigeria and another country. It was also noted that, taking account of the terms of the decision, the sale of goods would also fall within the meaning of trade and commerce.

Considering that, as the Supreme Court decided, international and interstate trade and commerce are within the competence of the federal legislature exclusively, the question then arises whether a state’s sale of goods law can be applied in respect of a sale transaction with connections to another state or country. This would be for example where a seller operating in Lagos State sells goods to a buyer based in another state and/or the goods have to be delivered from one state to another. Another example would be where a buyer resident in Lagos State purchases goods from an overseas seller and subsequently seeks redress from the Lagos courts in the event of a dispute.

The potential constitutional dimension of the applicability of sale of goods legislation is obscured by the fact that the sale of goods legislation of the states that have enacted one virtually all derive from the English Sale of Goods Act 1893. In addition to this, the English 1893 Act is also directly applicable in Nigeria – at least in the states that have not enacted their own legislation. Thus the statutory provisions that courts in different states will apply under Nigerian law to sale of goods contract disputes are virtually identical.

As a matter of doctrine and principle, it does matter that the constitutional dimension to the law of sale of goods is clarified. Secondly, the Nigerian Law Reform Commission is proposing reform of the Sale of Goods Act and its replacement with new legislation. The clarification of the constitutional dimension will help to forestall future constitutional controversy and help prevent or reduce potential waste of time and resources on expensive litigation for clarification. Thirdly, whatever the proposals of the Law Reform Commission, it is possible that one state’s legislature will revise its sale of goods law or introduce one which departs from the standard pattern and contains variant provisions. The current debacle over arbitration legislation demonstrates this possibility starkly.

On a practical level, as long as individual states have or are seen as being entitled to have their own sale of goods legislation, the courts are going to be confronted at some point inevitably with the question of whether a state legislation can be applied to a transaction that is not wholly an “intrastate” sale transaction. The first question that will arise is arguably whether a state has legislative competence to enact any form of sale of goods legislation at all. On one level, this is very easily answered i.e. as intrastate trade and commerce matters are not included in the Constitution’s trade and commerce clause, states are empowered to legislate on them since they will be ‘residual’ matters. Accordingly, a state would be entitled to enact a sale of goods legislation at least as far as intrastate sales are concerned.

An arrangement where state legislation applies to intrastate transactions and federal (or federally applicable) legislation applies to interstate transactions has its own advantages in terms of basic clarity and certainty. The federally applicable Sale of Goods Act 1893 of England would apply to interstate and international sale of goods whereas state sale of goods laws will apply to intrastate sale transactions. At present, it would not matter considerably since both sets of legislation are virtually identical. However, if and when the efforts of the law reform commission germinate the potential for constitutional controversy and even conflict of laws issues may become more apparent.

It appears that the Law Reform Commission is proposing a uniform sale of goods law for the entire country. Of course this is possible especially in respect of interstate and international sale of goods. On the other hand, it is not clear if the proposals intend that the various state sale of goods laws should become redundant. That would raise the question whether the federal legislature has the competence to extend the application of a future sale of goods legislation to intrastate sale transactions.

Another issue would be whether, if state sale of goods legislation are to continue in existence and operation, parties to an intrastate transaction can exercise freedom of choice and choose to subject their sale transaction to the federal legislation instead. Indeed the question also arises in reverse i.e. whether parties to an international or interstate sale transaction can exercise freedom of choice and choose to apply a state sale of goods legislation. As soon as there is significant disparity between federal sale of goods legislation and the legislation of at least one state, the questions being raised presently will no longer be purely academic as experience with arbitration legislation has now clearly shown.

It is interesting that Commonwealth and other countries with federal constitutions, comparable to Nigeria’s Constitution to an extent, tend to leave the question of sale of goods legislation specifically to their constituent states or provinces; compare for example the structure of sale of goods legislation in the United States, Australia and Canada. This is despite the presence similarly in the respective constitutions of a clause granting legislative power on commerce or trade and commerce to the federal legislature.

One other matter that does not seem to have exercised adequate consideration if any at all is whether Nigeria should adopt a separate regime for international sale of goods different from the regime(s) that may be made applicable to either interstate or intrastate sale of goods. Directly related to this is the question of whether Nigeria should consider ratifying and implementing the United Nations Convention on the International Sale of Goods 1980 (‘CISG’). Whether it be the ratification of the CISG or enactment of a fresh federal legislation specifically focused on international sale, this is one respect in which the government could deliberately and specifically make the legislation applicable mandatorily in respect of the transactions that it applies to – even by invoking the sometimes controversial doctrine of covering the field. In other words, if enacting federal legislation in respect of some international sale of goods transactions, the federal government could deliberately and expressly foreclose the possibility of state legislation on the same matters.

It is nevertheless to be noted that if the federal legislature goes with the option of implementing the CISG, there are some international sale transactions that will fall outside its regime. For example, consumer sale transactions are generally excluded from the purview of the CISG whereas consumer transactions with cross-border elements are a significant feature of the modern electronic and information technology age. Thus, if Nigerian law were to be the applicable law of such a transaction the question will yet arise whether federal or a state legislation would be the appropriate legislation to apply.