2. 1. LAW
APPLICABLE
Sales of Goods Act
1957 (Revised 1989)
2. CONTRACT
OF SALE
Sec 4(1) - A contract of SOG is a
contract
whereby the seller transfer or
agrees to
transfer the property in goods to
the buyer for a price.
There are two types of contract of sale
which is :
S 4(2) – a sale is an absolute
contract
S 4(3) – in sale, title passes to
the buyer at the time of
contract
S 4(2) – an agreement to sell is a conditional
contract
S 4(3) – in an agreement to sell, title
passes:
a) at some future time
b) subjects to some condition to
be fulfilled later
S 4(4) – an agreement to sell becomes a sale
when:
a) the time elapses
b) the conditions are fulfilled
Sale
Agreement to
sell
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3. 3. NATURE &
FORMATION
OF CONTRACT
FOR SALE OF
GOODS
Parties to
the contract
Goods – the
subject
matter of
the contract
Consideration
Formation
Formalities
Capacity
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4. Seller Buyer
3.1 Parties
to the
contract
3.2 Goods – the subject
matter of the contract
1. all form of moveable
property
2. stocks & shares
3. growing crops
4. grass
5. things attached to the
lands( fixture)
6. things forming part of
the lands(which are
agreed to be severed
before sale or under a
cont of sale)
Goods include: Goods not include:
1. Land( houses and
building)
2. Money( of any currency
being used as a legal
tender)
3. actionable claim( right to
sue another person for a
debt)
4. cheques
CASE: MOSS V HANCOCK
a gold coin, which was sold as a curio piece & not as a
currency, is regarded as goods.
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5. Existing Goods – S2
• goods already own & possessed by the seller
• may be specific or unascertained
Specific Goods – S2
• goods identified & agreed upon at the time a contract of the sale is
made
Unascertained Goods
• goods identified by description only
• e.g. 500 tons of wheat
Future Goods – S2
• goods to be manufactured or acquired by the seller after the making of
the cont of sale
• e.g. - a ship to be built by a seller to a specification
3.2.1 Category of Goods – S 6(1)
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6. • the consideration for the SOG is called ‘the price’
• therefore there must be an exchange between goods
and money
• S.2 – def of price – money consideration
• * cont of barter not a cont of sale.
3.3 Consideration
• a cont of sale is made by an offer to buy or sell
goods for a price & the acceptance of such offer
• the cont may provide for immediate delivery of the
goods or immediate payment of the price or both
• delivery or payment may even be made at a future
date.
3.4 Formation – S 5(1)
• under SGA, no special formalities required
• a cont of sale may be made either: in writing, orally,
partly in writing & partly orally or implied from the
conduct of the parties.
3.5 Formalities
• no specific provision
• govern by cont act
3.6 Capacity
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7. The terms of the contract of SOG are
classified into two : condition and
warranty
Whether the terms are conditions or
warranties depends on the construction
of the contract which has been made
4.
TERMS
OF
CONTRACT
Condition
Warranty
A TERM ESSENTIAL TO
THE CONTRACT
S.12(2): a condition is a
stipulation essential to the main
purpose of the contract.
Where the seller is in breach of
condition, the buyer’s right are:
• to terminate the contract,
• to reject the goods and
• to claim for damages.
LESS VITAL TERM OF A
CONTRACT
S.12(2): a warranty is a
stipulation collateral to the main
purpose of the contract
the breach of which gives rise
to a claim for damages but not a
right to reject the goods and to
right to treat the contract as
repudiated.
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8. Implied term as to title:s.S.14(a)
Implied warranty as to Quiet
Posession:S.14(b)
Implied warranty that the Goods are
Free from any Encumbrances:S.14(c)
Implied condition that the Goods shall
Correspond with Description:S.15
Implied condition as to Fitness for a
Particular Purpose:S.16(1)(a)
5. IMPLIED TERMS
SOGA provides 7 implied terms ( conditions and warranties) in a
contract of sale:
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9. 6. IMPLIED TERM/CONDITION TO TITLE:s.14(a)
S 14(a): Right to sell the goods
in a case of sale, it is implied that the seller has a right to sell the goods.
in an agreement to sell, the seller has a right to sell the goods at the time
the property is to pass
the effect if the seller has no right to sell the goods:
he cannot pass a good title to the buyer
he is in breach of condition in S 14(a)
the buyer’s right are:
I. to cancel the contract
II. to claim for the refund of the money paid
CASE: ROWLAND V DUVALL
R bought a car & used it for 4 months when he discovered that it was
stolen. The car was return to the true owner. R claimed a refund from D.
Held: D (seller) had breached condition as to title. R was allowed to recover
full price.
Stolen car
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10. Section 14(b) SOGA (quite possession)
Buyer shall have enjoy quiet possession of the goods unless specified
otherwise.
Exception in the case where title is defective and subsequent failure
disturbance of possession of the goods.
The purpose of this is to cover the buyer rights against wrongful
interference by a stranger claiming a lawful right by virtue of a better title
than the seller as well as the wrongful act of the seller himself.
Eg- A sold his car to B. A sometimes persuaded B to allow him to use the car. A had
spare key and sometimes used the car regardless whether B needed the car or not. A
= breached the Implied warranty (B did not have Quiet Possession ).
CASE: HENG LONG MOTOR TRADING CO v OSMAN BIN ABDULLAH
[1994] 2 MLJ 456, Respondent brought a van from appellant worth
RM13,500 in 1983. However, the van was seized by the Custom in 13th May
1983 because it was material evidence in an investigation. Court held that
the implied warranty of quite enjoyment is not fulfilled. Therefore, the
Plaintiff were entitled to damages for breach of implied warranty.
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11. ikhwannaguib@uitm.edu.my
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S.14 (c) SOGA– goods are free from encumbrance
Goods must be free from any charge or
encumbrance at the time when the contract is
made in favor of any third party not declared or
known to the buyer
When the goods transferred , it must be a free
title i.e no one can claim it is under a charge or the
goods are attached to some legal obligations
Case: STEINKE V EDWARD [1935] 8 ALJ 386, the
plaintiff who had bought a car from the defendant
had to pay off the tax which was still owing to the
government. The plaintiff sought to recover the
amount he has paid for the tax from
defendant(seller). It was held by the court that
the plaintiff was entitled to recover the money as
the defendant had breached the implied warranty.
12. 7. IMPLIED CONDITION THAT GOODS CORRESPOND
WITH DESCRIPTION: S.15
where the purchaser has not seen the goods but relying on description alone- sale of
unascertained goods.
Specific goods only apply where the buyer has not seen the goods such as mail
orders & sale from a catalogue
e.g. sale in a self service shop where the goods are selected & examined- describe
either on the label or packaging.
NAGURDAS PURSHOTUMDAS & CO v MITSUI BUSSAN KAISHA LTD.
Under previous contracts between the parties for the sale of flour, the flour had been
sold in bags bearing a well known trademark. Subsequently, the flour was ordered ‘the
same as the previous contract‘. Flour of the same quality was delivered but it did not
bear the same well-known trademark. The court HELD the goods did not comply with
the description.
CASE: BEALE V TAYLOR
The buyer discover that the car was a mixture of a 1961 model and the earlier model. HELD : in the
case of sale by description, the buyer was entitled to damaged for breach of an implied condition
relating to the sale by description where the car did not correspond with the description.
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13. 8. IMPLIED CONDITION AS TO FITNESS FOR A PARTICULAR
PURPOSE: S.16(1)(a)
General rule: The buyer is expected to exercise care in making purchases. This rule is
known as Caveat Emptor (let the buyer beware) Buyer must exercise care in making
purchases, if he does not, he must bear the consequences. The seller will not be liable
if the goods is not fit or does not have the quality as required by the buyer.
However,S16(1)(a) provides some Exception to the caveat emptor general rule. S.16
(1) (a) provides that there is an implied condition that the goods must be reasonably
fit for a particular purpose of the buyer
If the goods are not fit for the particular purpose of the buyer, the seller would be
liable for breach of this condition and the buyer is entitled to claim for damages
and/or rescind the contract.
Under this section there are 4 conditions to be fulfilled:
i. Disclosure of purpose
ii. Reliance on the seller’s skill and judgement
iii. The goods supplied are of the description which it is in the course of the seller’s
business to supply
iv. If the goods are specific, they must not be bought under the patent or trade name.
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14. the buyer must make known either expressly or impliedly to the seller at or
before the time when the contract is made the particular purpose for which
the goods are required.
CASE: GRIFFITHS V PETER CONWAY LTD
A woman with an unusually sensitive skin who bought a
Harris Tweed coat without disclosing her sensitivity to the
seller, did not succeed in her claim against the seller for
breach of implied condition as to fitness for a particular
purpose because the coat would not harm a normal person.
However if the description of the goods show that it has only one purpose, no
disclosure is required. It is implied that the goods is fit for that particular
purpose. E.g If A buys a loaf of bread which contains a stone on which he
breaks a tooth on eating, is there a breach of implied condition that the bread
if fit for the purpose i.e. to be eaten ?
CASE:PRIEST V LAST
The Plaintiff purchased a hot water bottle from the defendant, a retail
chemist.Some days later, the bottle,while in use by the P’s wife burst.As a
result,she was scalded and the P sued the D. HELD: the description of the
goods by which they were sold pointed to one particular purpose only,then the
requirement of disclosure of purpose is fulfilled.
i. Disclosure of
purpose
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15. The buyer must establish that he had relied on the seller’s skill &
judgment before purchasing the goods
CASE: GRANT V AUSTRALIAN KNITTING MILLS
The court held that reliance usually arises by implication from the
circumstances. For instance, of a purchase from a retailer, the reliance will
be inferred from the fact that a buyer goes to the shop in the confidence
that the seller has selected his stock with skill and judgment.(underpants
contained excessive sulphites which caused dermatitis to the buyer)
CAMMELL LAIRD & COMPANY V MANGANESE BRONZE & BRASS CO
LTD
A contract to build a propeller in accordance with the specification and
design and to fit a particular ship and its engine. However the details as to
the thickness of the blades were left to the S’s skill and judgment. The
propeller supplied complied with the specification but did not suit the ship
engine. The court held that S was liable for breach of implied condition
because the B had informed the S of the purpose for which he needed the
propeller & relied on the S’s skill and judgment.
ii. Reliance on the seller’s skill and
judgment
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16. CASE: SPENCER TRADING CO LTD v DEVON
The manufacturer had previously supplied to the Plaintiff on a special order, an
adhesive substance made from gum resin for making flypapers. The following
year, the P’ ordered a further supply for the same purpose from the
manufacturer, who on occasion used synthetic raw materials in place of the
natural material previously used. Consequently, the flypapers were unsatisfactory
for its purpose. HELD: the goods are of the description which is in the course of
the seller’s business to supply. Therefore the manufacturer was liable for breach
of implied condition that the goods were fit for the purpose for which they were
required.
CASE:ASHINGTON PIGGERIES LTD v CHRISTOPHER HILL LTD
The seller was the manufacturer & dealer of the animal feed. It had never made
feed for drink. This was made clear to the B but the seller however agreed to
make up such a compound from a formula provided by the B. The compound
produced was not fit for the mink. The issue was whether the compound was of
the description which was in the course of the seller’s bss to supply. HELD: the
product was a feeding compound. Although the seller has never supplied
iii. The goods supplied are of the description which it is
in the course of the seller’s business to supply
iv. The goods were not bought under particular
patent or trade name
If the buyer asks for specific goods under a patent or trade name with
the impression that he is not relying on the sellers skill or judgment, he
cannot later complain if the goods bought are not for the purpose which
he requires them.
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17. But if the buyer purchases the goods under a trade name and relying on the
seller’s skill or judgment, this means that the buyer is relying on the seller’s
skill or judgment
In Baldry v Marshall, a contract for the sale of a Bugatti car was entered
into between the buyer and the dealer as a result of the dealer’s
recommendation that the car was suitable for touring. However it was found
that the car was unsuitable for touring. It was held that the dealer was
liable for breach of contract because the buyer had relied on the dealer’s
judgment in the selection of a car suitable to the buyer’s stated purpose
even if it was sold under a trade name.
In Frost v. Aylesbury Dairy Co. Ltd [1905] The defendant in this case is
a milk dealer where he supplied milk contained germs of typhoid fever.
Plaintiff’s wife died due to the infection. Court held that it was an implied
condition that the milk must be reasonably fit for consumption
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18. 9. IMPLIED CONDITION AS TO MERCHANTABLE QUALITY-
S.16(1) (b)
need not have made known to the seller, the particular purpose for which
the goods are required so long as they are bought:
i. by description
ii. from a seller who deals in goods of that description
iii. exclude private sale
iv. include sale under patent or trade name.
Facts: Mineral water was sold in the bottles. A defective bottle burst and injured
the buyer. It was an implied condition of the contract that the water and the bottle
supplied must be of merchantable quality. Court held that there is an implied
condition as to merchantable quality even though the goods were sold under patent
or trade name.
Fuel by its trade name ‘coalite’ was ordered from a fuel merchant, contaminated,
resulting in an explosion. Held: the consignment was unmerchantable, having
defects, making it unfit for burning. However, the requirement of implied condition
on merchantable quality does not apply where the buyer has examined the goods.
GEDDLING V MARSH
WILSON V RICKETT
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19. 10. GOODS CORRESPOND WITH SAMPLE – S.17
usually used in the sale of bulk goods like rice, wheat or flour & in a household item
like tile, floor covering, carpets.
Condition:
a) the bulk shall correspond with the sample in quality – S 17(2) (a)
b) that the buyer shall have a reasonable opportunity of comparing the bulk with the
sample.
c) goods are free from any defect rendering them unmerchantable which would not be
apparent on reasonable examination of the sample –S 17(2)(c)
breach of any of the three conditions entitle the buyer to reject the goods &
terminate contract.
Facts: The cloth supplied by the seller was equal to samples previously examined.
However, there was a latent defect not discoverable by a reasonable examination.
Court held that the seller was held liable for breach of the subsection because
eventhough the bulk correspond with the sample. There was a latent defect rendering
the goods unmerchantable. The buyer was entitled to reject the goods.
CASE: DRUMMOND V. VAN INGEN
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20. General Rule – Section 27 SOGA 1957
“ If goods were bought from a person who is not the owner and who sold
them without the owner’s authority, the buyer does not get any title”
Maxim Nemo Dat Quad Non Habet ( No one can transfer a better title
than he has himself”
Rationale is for the protection of the ownership of goods to be retained. In
the same time to protect the interest of true owner in the case goods are
stolen
Basically Section 27 explained or adopted nemo dat principle that is only a
person with title can transfer good title to another. A person with title
could be the owner or the authorised agent. Only sale by those persons can
transfer good title to another. Objective is to protect right of ownership .
Example, if the goods were stolen and sold to another party.
CASE : LIM CHU LAI V. ZENO LTD (1964)
Court held that at the time sale happened, the seller had no title to the
goods ( he was the bailee and not the owner). Therefore, he had no
authority to sell them. No title has passes as the title of the goods
remained with the owner.
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22. • when the owner of the goods is by his
conduct precluded from denying the S
authority to sell i.e makes it appear to the
B that the person who sells the goods has
his authority to do so & the B acts in
reliance on it
• -the B who takes in good faith for value
will acquire a good title by estoppels.
ESTOPPEL –
S.27
• under the law of agency, an agent may pass a
good title in selling goods belonging to his P
provided he is acting the scope of his actual
authority.
• a person who sells his own goods is not not a
MA
• to be a MA, the person must in the customary
course of business as an agent usual authority
to sell goods or consign them for sale or by
them or raise money on their security
• e.g. broker, auctioner
SALE BY
MERCHANTILE
AGENT – S.27
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23. • -goods may be jointly owned by several persons.
A sale by one of the owner not only of his share
but also that of the others may effectively
transfer title to a B not withstanding absence
of authority.
• -two conditions:
• a)one of the several joint owners has the sale
possession of the goods by permission of the
co-owners.
• b)the B acts in good faith & has not at the
time of the cont of sale notice that the S
lacks authority to sell.
SALE BY ONE OF
JOINT OWNERS
– S.28
• where the true owner transfer to the S
possession of the goods through fraud or
other factors that are voidable, the S may
pass a good title to a bona fide purchaser so
long as the cont has not been rescinded by
true owner at the time of the sale.
• refer S.19 & 20 of Contract Act 1965
(coercion, fraud, misrepresentation, undue
influence)
SALE UNDER A
VOIDABLE
TITLE – S.29
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24. • a S who has parted with the title to the goods
but remains in possession of the goods or of
the doc of title can pass a good title to a bona
fide purchaser
• the 2nd B gets a good title, whereas the
original B loses it
• the 1st B has to pursue his remedy against the
S
SALE BY
SELLER IN
POSSESSION –
S.30 (1)
• a B having bought goods or agreed to
buy good, obtain possession of the
goods or d.o.t. with the consent of the S
can pass a good title to an innocent
disponee under any sale, pledge or
other disposition
• the B must obtain the goods or the
d.o.t. after the sale or agreement to buy
SALE BY BUYER
IN
POSSESSION –
S.30
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25. CASE : NEWTONS OF WEMBLEY LTD V. WILLIAMS
Plaintiff sold the car to Y who paid by cheque and the
car was given to YY subject to an agreement that the
title to the car would not pass unless the cheque was
honoured. Cheque was dishonoured but YY had resold
the car to XX who bought it without knowing the real
situation. XX resold it to William. Plaintiff tired to
recover the car from him. Court held in this case that
YY , the original buyer was in possession of the car with
the consent of the owner. Therefore , he can pass good
title to XX, who in turn later transferred the car to
William.Thus, William was entitled to keep the car.
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26. CASE : NEWTONS OF WEMBLEY LTD V. WILLIAMS
Plaintiff sold the car to Y who paid by
cheque and the car was given to YY
subject to an agreement that the title
to the car would not pass unless the
cheque was honoured.
. Cheque was dishonoured but YY had
resold the car to XX who bought it
without knowing the real situation. XX
resold it to William. Plaintiff tired to
recover the car from him.
Court held in this case that YY , the
original buyer was in possession of the
car with the consent of the owner.
Therefore , he can pass good title to
XX, who in turn later transferred the
car to William. Thus, William was
entitled to keep the car.
YEA
YEAAHHH!
The car is
MINE!!!
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27. Breach done by the Buyer or the Seller. The other party who is not in breach (the
innocent party) is entitled to remedies.
BREACH BY THE BUYER
May occur as a result of the following:
i. Failure of the B to take delivery – S.44
If the seller is ready and willing to deliver the goods and requests buyer to take
delivery but the buyer does not within reasonable time take delivery upon the request,
the buyer will be liable to the seller for any loss occasioned by his neglect or refusal to
take delivery.
Buyer also responsible for additional charges for care and custody of the goods.
Seller must make delivery if the buyer is later willing to take delivery
ii. Failure of the B to accept and pay the goods – S.56
Deals with damages for non acceptance where the seller may sue the buyer for
damages for non acceptance if the buyer wrongfully neglects or refuses to accept and
pay for the goods.
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28. RIGHTSOF UNPAIDSELLER
Definition of UNPAID
SELLER-
Sec. 45 (SOGA)
b)when one condition on a bill of
exchange or other negotiable
instruments to which has been
received as a conditional payment has
not been fulfilled
• -includes agent of the SELLER
a)when the whole of
the price has not
been paid
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29. RIGHTSOF UNPAID
SELLER
Right to retain possession of the goods until payment or tender of
the price
Sec 46 (1) (a): where the property in the goods has passed to the
B but delivery has not been made.
Sec 46 (2) : if the property in the goods has passed to the B, the
S may with hold delivery
Sec 47 (1) –the right of lien arises where the goods sold without
stipulation as to credit OR Goods sold on credit but the period of
credit has expired OR the buyer becomes insolvent.
Sec 48- What if part delivery has been done? – The lien can be
done over the remaining goods
When lien is terminated? Sec.49- Seller delivers the goods to a
carrier or bailee to send it to buyer
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30. Section 50- Rights can be exercised in the case where the buyer
becomes insolvent and the seller has parted with possession.
The rights is exercised by taking actual possession of the goods OR
giving notice to carrier or bailee.
Section 50-the seller may resume possession of the goods as long
as they are in the course of transit and may retain them until
payment.
Section 51(1) – What is in the course of transit? From the time
when they are delivered to a carrier or bailee ( for the purpose of
delivering it to the buyer) and until the buyer/agent takes delivery
of them from the carrier or bailee
The transit is at an end if the buyer/agent takes delivery of the
goods either at the destination or before the arrival at the
destination.
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31. Section 54- The seller obtains possession of the goods where he has
exercised the right of lien and right of stopping the goods in transit.
Resell can be done if:
the goods are of a perishable nature – Section 54(2)
Notice to resell has been given to the original buyer and he fails to pay the
price within the time allocated – Section 54(2)
The seller reserved a right to resale in case of buyer’s default – Section
54(4)
What is the effects of resale?? – Section 54(3) stated that the 2nd buyer
will get a good title
OTHER RIGHTS
Seller may sue the buyer for the price if the title of the goods passed to
the buyer – Section 55 (1)
Section 56 deals with damages for non acceptance where the seller may
sue the buyer for damages for non acceptance if the buyer wrongfully
neglects or refuses to accept and pay for the goods.
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32. Section 57 – Deals with damages for non delivery of
goods when seller wrongfully neglects or refuses to
deliver goods to the buyer.
Measure of damages?? – Section 74 Contract Act
1950
Question of whether the goods are available in the
market- If No, then buyer entitled to loss of profits on
resale as the result of the seller’s non delivery
If the price has been prepaid by the buyer then he is
entitled to cover the price plus any other damages that
is legally obtainable.
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33. SPECIFIC PERFORMANCE – Section 58
Court may grant specific performance of contract for breach of
contract to deliver specific goods.
Nonetheless, if court grant SP , the seller cannot be given an option
to retain the goods on payment of damages.
LAW OF TORT
also gives remedies to buyer (for wrongful interference) – conversion
with the goods where the property in goods has passed to the buyer
and where his entitlement for delivery is being suspended.
SECTION 59
This section deals with treating breach of condition as breach of
warranty.
Therefore, the buyer may sue for damages on account of breach of
warranty if they elect to treat the breach of condition as breach of
warranty.
Buyer may even sue for further damages that is damages not taken
into account in assessing the extent of the reduction in price in the
first action.
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