Laws on Contract of Sale in Ethiopia

Being a business owner means that you will have to sign many contracts, with vendors, customers, and others. Here is a compilation of the essential elements of Ethiopian contract of sale:

  1.  Article 2266 of the Ethiopian civil code

Article 2266 of the Ethiopian civil code - contract of sale is a contract whereby one of the parties, the seller, undertakes to deliver a thing and transfer its ownership to another party, the buyer, in consideration of a price expressed in money which the buyer undertakes to pay him.

Obligations of the Seller in case of sale of movables

1. Obligation to Deliver

Article 2273 of the Civil code Art. 2274-Delivery consists in the handing over of a thing and its accessories in accordance with the contract.
Quantity: (Article 2275 of the civil code)The seller has to deliver the agreed quantity of things. If the seller delivers in excess or in short of the agreed amount, there is non-performance of contract.

Time and Place of delivery:

Time of Delivery: The seller should deliver the thing sold at agreed time. However, if the parties fail to specify the time of delivery or the date of delivery, the seller shall deliver the thing as soon as the buyer requires him to do so according to Article 2276 of the Civil Code.

Article 2277 provides as follows: Where the parties have agreed that delivery shall take place during a given period, it shall be for the seller to fix the exact date of delivery unless it appears from the circumstances that it is for the buyer to do so.

Place of Delivery: unless otherwise agreed, the seller shall deliver the thing at the place where, at the time of the contract, he has his place of business or, failing such, his normal residence. On the other hand, where the sale relates to a specific thing and the parties know the place where such thing is at the time of the contract, the seller shall deliver the thing at such place.

2. Obligation to Transfer ownership

The seller shall take the necessary steps for transferring to the buyer unassailable rights of ownership over the thing. Ownership transfers upon transfer of possession. Possession transfers upon delivery. Thus, the necessary step to be taken by the seller to transfer ownership is to deliver the thing to the buyer in any of the modes of delivery discussed in the previous section.


3. Obligation to warranty title, defects, and non – conformity.

Article 2281 which provides that:

The seller shall take the necessary steps for transferring to the buyer unassailable rights over the thing.

Art.2284.__ provisions excluding or restricting warranty.

(1) Provisions which exclude or restrict the warranty shall be construed restrictively;
(2) Unless otherwise expressly agreed, such provisions shall impose on the seller the obligation to return the price to the buyer, in whole or in part, in cases of dispossession; and
(3) A provision excluding or restricting the warranty shall be of no effect where the seller has intentionally concealed that a third party had a right on the thing or dispossession is due to the act of the seller.

According to Article 2295(2) Express warranty given by the seller is void where the buyer knew of the defects in the thing at the time of the contract.

Article 2297which provides that:

Any provision excluding or restricting the warranty shall be of no effect where the seller has fraudulently concealed from the buyer the defects in the thing.

Article 2288(1) which provides that:

The thing shall not be deemed to conform to the contract where:
(a) The seller delivered to the buyer part only of the thing sold or a greater or lesser quantity than he had undertaken in the contract to deliver; or
(b) The seller delivered to the buyer a thing different to that provided in the contract or a thing of a different species.

Article 2298 provides that:

 (1) The buyer shall, under pain of losing his right, bring proceedings on a warranty against defects within one year from his having given notice to the seller, unless the seller intentionally misled him.
 (2)  The parties may not shorten this period.
 (3) Where specified qualities or the good working condition of the thing have been warranted by the seller for a specified period, the time within which the buyer may bring proceedings shall be reckoned from the day when this period has expired

Obligation of the Buyer

1. Obligation to pay price

Art. 2303 provides that:

(1) The buyer shall pay the price and take delivery of the thing.
(2) He shall be bound by any other obligation imposed upon him by the contract of sale

Place of payment: If no place is fixed in the contract, the buyer should pay the price at the address of the seller.

2. Obligation to take delivery of the thing

Article 2313 which provides that:
The buyer shall, after delivery, take such steps as may be necessary for completing the delivery of the thing.

Common Obligations of the Seller and the Buyer

1. Obligation to pay expenses-Article 2314-2319 of the Civil Code

  • Expenses of a contract of sale;
  • Expenses of payment;
  • Any expense arising after delivery;
  • Expenses of transport where the thing sold has to be sent to another place than the place of delivery and if the delivery is not to be carriage free;

2. Obligation to preserve the thing Article 2320-2322 of the Civil Code

Although risk might be transferred to the buyer, the seller has the obligation to preserve the thing and if the thing is damaged for lack of preservation, the seller will be liable for the damage.

The buyer has also the obligation to preserve the thing at the seller’s expense where the thing sold has been received by him and he intends to refuse it either owing to defect or non-conformity.

Transfer of risk under contract of sales of movables

Article 2323 of the Civil Code:

Where the risks are transferred to the buyer, he shall pay the price not withstanding that the thing is lost or its value altered.
Risk transfers from the seller to the buyer in the following cases.

  • Delivery 
  • Delay of buyer
  • Handing over to carriage

Non – performance of contract of sale and its legal effects

Art. 1772. – Notice necessary.
A party may only invoke non-performance of the contract by the other party after     having placed the other party in default by requiring him by notice to carry out obligations under the contract.

Art. 1773. – Form and time of notice
Notice shall be by written demand or by any other act denoting the creditor's intention to obtain performance of the contract. Notice may not be given unless the obligation is due.

Remedies in case of non – performance

According to Article 1771, the remedies for non-performance of contract of sale are:

  • Forced (specific) performance
  • Cancellation of the contract
  • Damages

Art. 1776. – Specific performance.

  • Specific performance of a contract shall not be ordered unless it is of  special interest to   the party requiring it and the contract can be enforced without affecting the personal liberty of the debtor.

Art. 1778. – Fungible things

  • Where fungible things are due, the creditor may be authorized by the court to buy at the debtor’s expense the things which the debtor assumed to deliver.
  • Article 2330 also provides that:
    The buyer may not demand the forced performance of the contract where the sale relates to a thing in respect of which a purchase in replacement conforms to commercial practice or such purchase can be effected by him without inconvenience or considerable expense.
    Cancellation of contract of sale

Cancellation by Court

Art. 1784. – Cancellation of contract by the Court
A party may move the court to cancel the contract where the other party has not or not fully and adequately performed his obligations within the agreed period of time.
Art. 1785. – Good faith.
(1) In making its decision, the court shall have regard to the interested of the parties and the requirements of good faith.
(2) A contract shall not be cancelled except in cases of breach of a fundamental provision of the contract.
(3) No contract shall be canalled unless its essence is affected by non-performance and it is reasonable to hold for such reason that the party requiring cancellation of the contract would not have entered into the contract without the term which the other party has failed to exacted being included.

Unilateral cancellation

Art. 1786. – Cancellation by a party. – 1.  Under the contract
A party may cancel the contract where a provision to this effect has been made in the contract and the conditions for enforcing such provision are present.

Art. 1786. – Cancellation by a party. – 1.  Under the contract
A party may cancel the contract where a provision to this effect has been made in the contract and the conditions for enforcing such provision are present.

Art 1787. – 2. Expiry of time limit
A party may cancel the contract where the other party has failed to perform his oblations within the period of time fixed in accordance with Art. 1770, 1774, or 1775 (b).

Art. 1788. – 3. Performance impossible
A party may cancel the contract even before the obligation of the other party is due where the performance by the other party of his obligations has become impossible or is hindered so that the essence of the contract is affected.

Art. 1789. – 4. Party refusing performance
(1) A party may cancel the contract where the other party informs him in an unequivocal manner that he will not carry out his obligations under the contract.
(2) The party who intends to cancel the contract shall place the other party in default and the contract shall not be cancelled where the party in default produces with in fifteen days securities sufficient to guarantee that he will perform his obligations at the agreed time.
(3) Notice shall not be required and the contract may be cancelled forthwith where a party informs the other party in writhing that he will not perform his obligations.

Compensation 

Art. 1791. – Damage when to be made good.
(1) The party who fails to perform his obligations shall be liable to pay damages notwithstanding that he is not at fault.
(2) He shall not be released unless he can show that performance was prevented by force majuer.
(3) Art 1792. – Force majuer.
(4) (1) Force majuer results form an occurrence which the debtor could normally not foresee and which. Prevent him absolutely from performing his obligations.
(5) (2) Force majuer shall not exist where the occurrence could normally have been foreseen by the debtor or where it renders more onerous the performance by the performance by the debtor of his obligation.

Art. 1793. – Cases of force majuer
The following occurrences may accordingly the circumstances, constitute cases of force majuer.
a) the unforeseeable act of a third party for whom the debtor is not responsible; or
b) an official prohibition preventing the performance of the contract; or
c) a natural catastrophe such as an earthquake, lightning or floods; or
d) international or civil war; or
e) the death or a  serious accident or unexpected serious illness of the debtor

Art. 1794. – Absence of force majuer.
Unless otherwise expressly agreed, the following occurrences shall not be deemed cases of force majuer:
(a) a strike or lock-out taking place in the undertaking of  a party or affecting the branch of business in which he careers out his activities; or
(b) an increase or reduction in the price of raw materials necessary for the performance of the contract; or
(c) the enactment of new legislation whereby the obligation of the debtor become more onerous.

 

Exchange Rates

Selling Buying
USD US 23.634  23.1706 
GBP UK 30.599  29.9897 
EUR EU 27.1508  26.6091 
CHF CHE 24.588  24.0959 
CAD CA 18.7378  18.3646 
AED UAE 6.4347  6.3084