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@ExTra
I know Giffgaff is in theory O2 too, but are you sure it's locked to O2? Coz if your Giffgaff card works then it might not actually be locked to O2. Besides, O2 never used to lock their phones apart from when they had the monopoly deal with Apple and CPW, but I am not sure about the situation. Have you ever tried inserting a sim from other networks? It might surprise you.
Anyway, back to your question, technically, if you are still in contract, you are not really supposed to sell your phone. If it's a PAYG upgrade, then you probably could. But either way, your friend would have to do it as he was the one who bought the phone at the 1st place. They would ask you stupid question like where and when you bought it and under what name etc etc.