Happy is a semblance that was shaped into the wood of the slave caravan that Cole was locked in. He often throws in the word "silly" in what he's saying.
As his name indicates, he has a natural cheerful and optimistic mood, as he was created for that reason. He cheers up the people in the caravan who are feeling down.
Happy is a semblance created from the shaping by Liam, who was sold by his parents who raised him up. He was also apparently on the wood for some time. Happy was considered to be one of Liam’s early semblances.
He was Happy's creator. Liam shaped him while taken as a slave in a slave wagon.
Cole met Happy in a slave wagon, the same wagon that Liam rode in, since Happy says he takes shape elsewhere on the wagon whenever the wood he was on was scrapped.