SALE OF GOODS - media.openlearning.com

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.


GOODS

Existing Goods

Future

Goods

Ascertained/ Specific

Goods

Un -ascertained

Goods

Perishing Goods


• 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

9

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.


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


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.


• 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.


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


18


• 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.


• 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.


• 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’.


• 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.


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.


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.


26


• 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

31

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

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