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Sale of Goods and the Nigerian Constitution

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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.

Trade and Commerce and the Nigerian Constitution

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Trade and Commerce and the Nigerian Constitution

In a previous entry we argued that despite the fact that “trade and commerce” is listed as an item on the Exclusive Legislative List of the Nigerian 1999 Constitution, state legislatures also have legislative competence to enact arbitration legislation even in respect of interstate and international commercial transactions.

In this entry, we examine the “trade and commerce” provision in the Exclusive Legislative List from another dimension. In particular, we are going to briefly raise a question concerning the validity of some of the extant state legislation on sale of goods in light of the trade and commerce provision in the Exclusive Legislative List.

Historically, during the colonial era Nigeria adopted the English Sale of Goods Act of 1893 (under the concept of ‘statute of general application’) as the law generally governing sale of goods transactions. Around the time of independence, the then Western Region enacted the provisions of the same statute which it reproduced in the form of its own Sale of Goods Law 1959. When states were later created out of the old regions, some of the states which emerged from the old Western Region also continued the reproduction of the Sale of Goods Act by again enacting it locally as the Sale of Goods Law of the state concerned. Presently, a number of Nigerian states now have a Sale of Goods Law while in the states or parts of Nigeria (e.g. the Federal Capital Territory) which do not have a local sale of goods law, the English Sale of Goods Act will continue to apply under the statute of general application concept.

The issue that arises for the purpose of this entry is that of the scope of the Sale of Goods Law of a state that has enacted one in light of the trade and commerce provision in the Exclusive Legislative List of the 1999 Constitution. The most directly relevant provisions of the 1999 Constitution are items 62 and 62(a) as follows:

62 “Trade and commerce, and in particular —

(a) trade and commerce between Nigeria and other countries including import of commodities into and export of commodities from Nigeria, and trade and commerce between the states”

From these provisions it would appear at first sight that as legislative power in respect of matters of “interstate” and “international” trade and commerce is exclusive to the federal legislature, a state legislation concerning trade and commerce must be confined in its application to trade and commerce with connections solely and entirely with the particular state. Thus it would at first appear that a state’s Sale of Goods Law can only apply in respect of sale transactions with connections solely to that state.

Are the conclusions or suppositions above truly correct or even practical, however?

Let us examine a few possible scenarios arising from the trading activities of an imaginary company – Johnson Cars Ltd which we take to be a company with its registered office and place of business in Lagos.

  1. The company sells a car to Mr Simpson who is an indigene and resident of Ogun State. Mr Simpson is unhappy with the condition of the car and commences legal action in Lagos.
  2. The company sells 10 lorries to Kaluka Ltd which is a company with registered office and place of business in Eboyin State. Kaluka Ltd is unhappy with the condition of the lorries and wishes to sue in Lagos.
  3. The company sells a car to Mrs Donald who is an indigene and resident of the Federal Capital Territory, Abuja. Mrs Donald is unhappy with the car and she wishes to sue in Abuja.
  4. The company buys some car parts from a UK based and registered company (Northern Parts) and the contract provides that disputes will be referred to the Nigerian courts and that Nigerian law will apply. Johnson Cars Ltd is unhappy with the parts delivered and wishes to sue Northern Parts in Lagos.

The ultimate question to be addressed is whether the Sale of Goods Law of Lagos State can be applied by the court dealing with the dispute in any of these given scenarios.

Each of the scenarios is a sale of goods transaction and each will almost certainly be held to be a matter of “trade and commerce”; (see Attorney General of Ogun State v Aberuagba (1985) 1 NWLR (part 3) 395). On the other hand none of the transactions is connected solely to one state – in particular, Lagos State. However, are scenarios (1)-(3) trade and commerce between the states and is scenario (4) trade and commerce between Nigeria and another country?

In Aberuagba, the Supreme Court did not treat provisions of the 1979 Constitution identical to item 62 of the 1999 Constitution’s Exclusive List as relating only to transactions between government entities. The lead judgment of Bello JSC, with which the majority of the court concurred, considered the movement of products across states as “interstate trade and commerce” and from another country into Nigeria as “international trade and commerce” and it considered that both of these fell within the constitution’s provisions under consideration. Indeed the court held that “international trade and commerce” and “interstate trade and commerce” are reserved for the federal legislature while trade and commerce within a state is left as a residuary matter to the states.

The Supreme Court’s understandable approach as summarised in the immediately preceding paragraph however helps to see in stark relief the conundrum that arises in relation to ascertaining the true scope, purpose and intention behind the “trade and commerce” provisions in the Constitution’s Exclusive Legislative List.

If the court’s decision as so far summarised were taken extremely literally without further careful consideration, the conclusion would have to be reached that the Sales Law of Lagos State cannot be applied to any of the four hypothetical scenarios presented in this essay. More alarmingly, it would mean that the Sale of Goods Law of Lagos State or any other Nigerian State for that matter would have to be declared null and void to the extent that it concerns “interstate trade and commerce” and/or “international trade and commerce”.

The matter of whether the Sale of Goods Law of a state in Nigeria cannot be applied in respect of a sale transaction with connections to another state or indeed another country in light of the allocation of legislative competence in the 1999 Constitution deserves further careful consideration. It is a matter that will be addressed further in a future entry on this blog.