Chapter 6:
Sale of Goods
Topic Outline
Contracts of Sales and Agreement to Sell
Implied Terms
Transfer of Property
Performance of Contract
Remedies
Contract of Sales and Agreement to Sell
3
The Law Applicable
• The governing statute as to Peninsular Malaysia is the
Sales of Goods Act 1957. (SOGA)
• Sabah and Sarawak - still apply the English Sale of
Goods Act 1979
• Sec 3 of SOGA - provides for the application of
Contract Acts where relevant as long as it does not
contradict SOGA itself - in which case the latter would
prevail.
• Scope of SOGA - applies to all types of sale of goods
but is not comprehensive in covering all aspects of
sale or offer adequate protection to the parties
involved.
The Contract of Sale
Sec 4 (1) - A contract of sale is a contract whereby the seller
transfers or agrees to transfer the property in goods to the buyer for
a price. There may be a contract of sale between one part- owner
and another.
SELLER BUYERPRICE
Transfer of property in goods
Price - the money consideration for a sale of goods
and may be fixed by the contract, or by a third party
or determine in the course of dealing - Sec 9 (1).
Elements of the Contract
1. Parties to the contract.
– must fulfilled all the capacity as required under
CA.
2. Transfer of property in the goods sold.
– not only transfer of possession but also ownership.
3. Price as consideration of the contract.
4. Subject matter is within the definition of ‘goods’
What are Goods?
- every kind of movable property other than
actionable claims and money, and includes stocks
and shares, growing crops …and things attached..
which are agreed to be severed before sale.
Elements of the Contract
GOODS
Existing Goods
Future
Goods
Ascertained/ Specific
Goods
Un -ascertained
Goods
Perishing Goods
Elements of the Contract
• Sale must be distinguished from Agreement To Sell.
• Sec 4 (3) - where under a contract of sale the
property in the goods is transferred from the seller to
the buyer, the contract is called a sale, but where
the transfer of the property in the goods is to take
place at a future time or subject to some agreement
to be fulfilled, the contract is called an agreement
to sell.
• Sec 4 (4) - agreement to sell becomes a sale when
time elapses or condition fulfilled
• Difference btw SALE and ATS - in term of remedies in
case of breach.
Implied Terms
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The Terms of Contract
IMPLIED TERMS
TITLE
QUIET
POSSESSION
OF
GOODS
UN ENCUMBERED
GOODS
SALE
BY
SAMPLE
MERCHANTABLE
QUALITY
FITNESS
FOR
PURPOSE
CORRESPOND WITH
DESCRIPTION
The Terms of Contract1. Title
• Sec 14(a) - requires the seller to have the rights to sell the goods
• Based on the rule - Nemo dat quod non habet - one cannot give what one does not have.
• Breach will entitle the buyer to repudiate the contract and recover the price in full even though he has used the goods - Rowland v. Divall
2. Quiet Possession Of The Goods
• Sec 14 (b) - buyer shall have an enjoy quiet possession of the goods.
• A warranty rather than a contract
• protect the buyer from unnecessary claims from any third party or the seller himself.
The Terms of Contract
3. Free From Encumbrance
• Sec 14 ( c) - goods free from any encumbrance in
favour of any third party.
• In form of charge or mortgage - Steinke v. Edwards.
4. Correspond With Description
• Sec 15 - implied condition.
• Absolute condition - latent defect not a defense
• Covers sale of unascertained goods and sale of
specific goods from catalogue or mail order
– Arcos Ltd v. E.A Ronaasen
– Associated Metal Smelters v. Tham Cheow Toh
– Nagurdas Purshotumdas & Co v Mitsui Bussan
Kaisha
The Terms of Contract
5. Fit For Buyer’s Purpose
• The common law rule is - caveat emptor or let the
buyer beware.
• If the buyer does not exercise prudence - he must
bear the consequence.
• Sec 16 - no implied warranty or condition as to the
fitness of goods supplied under the contract of sale.
The Terms of Contract
• Exception [sec 16 (a)] :
▪ When there’s disclosure, express or implied of the
purpose for which the goods is bought.
▪ The buyer is relying on the seller’s skills or
judgment.
▪ The goods are of a description which is in the
course of the seller’s business to supply
▪ If the goods are specific - not bought under their
patent or trade name
• Cases:
– Cammell Laird v. Manganese Bronz,
– Griffiths v. Peter Conway,
– Baldry v. Marshall.
The Terms of Contract
6. Merchantable Quality
• Sec 16 (b) - where goods are bought by description from a
seller who deals in such goods.
• What is merchantable quality?
– Generally means the goods sold are fit for the particular
use to which they were sold.
– To be applicable - buyer bought goods based on
description, the seller is a person who deals in such good
and the buyer has not been given the opportunity to
examine the goods.
• If buyer had given a chance to examine - the implied term
no longer applicable though the examination is superficial
- Thornett & Fehr v. Beers & Sons
• This implied term covers even goods sold under patent or
trade name. - Wilson v. Ricket, Cockerall & Co.
The Terms of Contract7. Sale By Sample
• Sec 17 - a contract of sale is a contract by sample
where there is a term in the contract express or
implied to that effect.
• The implied conditions:
– The bulk shall correspond with the sample in
quality.
– The buyer have reasonable opportunity of
comparing the bulk with the sample.
– The goods are free form any defect which are
not apparent on reasonable examination that
would make them unmerchantable.
The Terms of Contract• The three conditions are independent of each other
- breach of anyone entitled the buyer to reject the
goods.
• However to apply the terms - parties must show
intention to contract a sale by sample.
• Cases:
– Drummond v. Van Ingenue, Godley v. Perry
Transfer of Property
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Transfer of Property
• Passing of ownership not necessarily means passing
of possession vice versa.
• The time of transfer of property (ownership) have
important connotation in sale of goods as it relates
with who have to bear the risks on the goods.
• Sec 26 - risk prima facie passes with property - owner
bear the risk regardless of whether he have
possession or not.
• Provided - if delivery delayed due to fault of either
party, party at fault bear any risk that might occur
because of the delay.
Transfer of Property
• Legal consequences as regards to transfer of
property, title and risk:
– When there’s contract of sale, there must be
transfer of property - if not - failure of
consideration.
– Consequence as regards to who bear the risk.
– Determine whether buyer who have not paid
full price can keep the goods.
– Problems in time of insolvency of seller or
buyer.
Transfer of Property
• As a general rule - title passes when the parties to the
contract intends it to be.
• Sec 18 - sale of uncertain goods.
• Sec 19 - sale of specific goods - subject to sec 4 (3)
• Sec 20 - sale of specific goods in a deliverable state.
• Sec 21 - sale of goods to be put in a deliverable state.
• Sec 22 - sale of goods in deliverable state that needs to
be weighed, measured etc to ascertain the price.
• Sec 23 - contract of sale of unascertained or future
goods
• by description in a deliverable state.
• Sec 24 - sale of goods delivered to buyer on approval
or ‘sale or return’.
Transfer of Property
• Sec 27 requires that for a seller to be able to
transfer good title to the buyer, he must first have
title over the said goods - nemo dat quod non
habet
• If a buyer bought some goods from a seller who is
not the owner nor have any authority to sell them -
the buyer does not acquire any title even if he has
paid value in good faith.
• Rationale - to protect the right of ownership
– Lim Chui Lai v. Zeno Ltd.
– Ng Ngat Siang v. Arab Malaysian Finance.
Exception to the NEMO DAT RULE
1. Estoppel
• Arises when the owner of the goods is by his conduct
precluded from denying the seller’s authority to sell.
• Estoppels can be by record, by deed or by conduct.
2. Sale By Merchantile Agent
• Basic rule of agency is that an agent may pass a good title in
selling goods belonging to the principal provided he is acting
under the scope of his actual or apparent authority.
• Requirements to satisfy the provision:
– the agent is in possession of the goods at the time of sale.
– the possession is with consent of the owner.
– the sale was made when acting in the ordinary course of
business of a mercantile agent.
– buyer must act in good faith and have no notice of the
agent's lack of authority at the time of the sale.
Exception to the NEMO DAT RULE
3. Sale By One Of Joint Owner
• Goods may be owned by one or more persons.
• Sale by one of the joint owner is valid notwithstanding the
absence of the other’s consent.
• Two conditions must be satisfied:
– The seller have sole possession of the goods with
consent from the others.
– The buyer acts on good faith and have no notice of
the lack of authority at the time of the sale.
4. Sale Under A Voidable Title
• When the seller acquires possession under a voidable
contract and the contract has not been rescinded at the
time of the sale, the buyer gets a good title provide he is a
BFPFVWN.
Exception to the NEMO DAT RULE
5. Sale By A Seller In Possession After Sale
• A seller who have parted with the title of the goods but
remain in possession of the goods or the title document
can pass a good title to a BFPFVWN.
• The second buyer then gets a good title over the first one,
but the latter can seek redress against the seller.
6. Sale By A Buyer In Possession
• If a buyer, having bought or agree to buy goods,
obtained possession of the goods or the title document
with the consent of the seller, he can pass good title to a
subsequent buyer of good faith for value without notice.
Performance of Contract
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Performance of Contract
• The Sale of Goods Act also deals with performance
of the contract of sale under Chapter IV of the Act.
• Sec 31 to sec 44 laid down the duties of both parties
under the contract.
1. Delivery of the goods.
2. Place of delivery.
3. Time of delivery.
4. Delivery of wrong quantity.
5. Delivery by installment.
6. Delivery by carrier or wharfingers.
7. Acceptance.
#1 Delivery
• Delivery means voluntary transfer of possession from
one person to another - not involve physical
delivery.
– Sec 31 - Duty of seller to deliver the goods.
– Sec 32 - Unless otherwise agreed - payment and
delivery - concurrent.
– Sec 36 (1) - whether seller has to send, or buyer
take possession - depends on agreement.
– Sec 36 (5) - expense of putting the goods into
deliverable state is to be borne by seller.
– Sec 36 (2) – seller bound to deliver goods within
reasonable time.
#1 Delivery
– Sec 37 (1) - if seller deliver wrong quantity (less) -
buyer may reject - if not, bound to pay at contract
rate.
• If deliver larger quantity -buyer may accept only the
contracted amount, or reject all, or accept all and pay
at contract rate.
– Sec 38 (1) - unless agreed, buyer not bound to
accept delivery by installment.
– Sec 39 (1) - where seller is authorized or required to
send goods sold to buyer through carrier / wharfinger
- such delivery is prima facie deemed delivery to
buyer.
• However - seller shall make such contract to secure safe
and speedy delivery on behalf of the buyer - if fail to do
so, may be responsible in event of damage.
#2 Acceptance
• Where goods not previously examined - buyer
deemed not accept until and unless given
reasonable opportunity to examine the goods -
see whether conform to contract or not.
• Buyer deemed to accept if he told the seller to
that effect or did anything to jeopardize the
seller’s ownership of the goods or after lapse of
reasonable time without any communication of
acceptance.
Remedies
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A. Remedies of the Buyer
1. Right to damages for non- delivery of goods
– Sec 57 of SoGA as well as Sec 74 or Sec 75 of
Contract Act to determine quantum of damages to
be paid.
2. Remedy for breach of warranty.
– Sec 59 - where buyer can elect to treat breach of condition as breach of warranty.
– If treat as breach of warranty - cannot reject goods but should claim damages.
3. Claim for specific performance.
– Sec 58 - granted on discretion of the courts if damages not sufficient.
– Only for specific or ascertained goods.
B. Remedies of the Seller
1. For failure of buyer to take delivery.
– Sec 44 - buyer will be liable to seller for any loss
and charge.
2. Failure of buyer to accept goods.
– Sec 56 - seller entitled to damages.
3. Failure of buyer to pay for the goods.
– Sec 55 - seller may sue for the price.
C. Rights of Unpaid Seller Against Goods
• Unpaid seller - to whom the whole price has not
been paid or the negotiable instrument serving as
conditional payment has been dishonored.
To create lien
• Has the right if the seller is in possession of the goods and to retain them until payment is made
• Sec 49 - circumstances where the seller will lose his lien.
Stoppage in
Transit
• When buyer becomes insolvent and not paid the price
• Stoppage in transit has the effect of restoring the seller’s rights over the goods.
• BFPFVWN is protected from this rights.
Resale
• The goods are of perishable nature.
• Seller gives notice of intention to resell to buyer, but buyer does not within reasonable time pay the price.
• The seller expressly reserves a right to resell in case of the buyer’s default.
End of Slides