SALES OF GOODS
Terms of the Contract
Implied Terms
Implied Condition as to Title
Rowland v Divall
Facts: Rowland bought a car from Divall and used it for four months before discovering that
it had been stolen. Rowland then had to hand over the car to the true owner. The issue
was whether Rowland could recover the full amount he had paid from Divall even
though he had used the car for four months.
Held: Although Rowland had the use of the car for some time, he was entitled to recover the
full price he had paid because Divall had no right to sell him the car because it was
stolen. Rowland had failed to get the property (title) in the car, so there was a total
failure of consideration.
Implied Condition that in a Sale of Goods by Description, the Goods must Correspond with
the Description
Nagurdas Purshotumdas & Co v Mitsui Bussan Kaisha Ltd
Facts: Under previous contracts between the parties for the sale of flour, the flour had been
sold in bags bearing a well-known trade mark. Further flour was ordered ‘the same as
our previous contracts’. Flour identical in quality was delivered but it did not bear the
same well-known trade mark.
Held: The goods did not comply with the description.
Varley v Whipp
Facts: The buyer purchased a second-hand reaping machine without ever having seen it. The
seller had described it as new the previous year and used it to cut only 50 or 60 acres.
In fact, the machine was very old.
Held: This was a sale by description, and since the machine did not correspond to its
description, the seller was in breach.
Goods Must be Reasonably Fit for Purposes for which the Buyer Wants Them
Deutz Far East (Pte) Ltd v Pacific Navigation Co Pte Ltd
Facts: The plaintiffs are the manufacturers and suppliers of Deutz marine engines and spare
parts. They claimed for the sum being the price of a new top part of the injector jump
(‘NTP’) supplied to be used on the main engine of the defendant’s ship. The
defendants maintained that the NTP was defective as it had four oversized springs.
The main engine was badly damaged and the vessel was crippled and was repaired at
considerable expense. The defendants counterclaimed that the equipment supplied by
the plaintiffs for the engine of their ship was not fit for the purpose and was not of
merchantable quality.
Held: 1. The defendants relied entirely on the plaintiffs to supply the NTP which could be
used with the engine on the ship. Section 14(3) of the UK Sale of Goods Act 1979
(which is materially the same as section 16(1)(a) of the Malaysia SOGA 1957)
provides that where the seller sells goods in the course of a business and the buyer,
expressly or by implication, makes known to the seller any particular purpose for
which the goods are being bought, there is an implied condition that the goods
supplied under the contract are reasonably fit for that purpose, except where the
circumstances show that the buyer does not rely, or that it is unreasonable for him to
rely, on the skill and judgment of the seller.
2. Further, by section 14(2) of the Sale of Goods Act (UK) which is materially the
same as section 16(1)(b) of its Malaysian equivalent, in the case of a seller who sells
goods in the course of business, there is an implied condition that the goods supplied
under the contract are of merchantable quality, except that there is no condition as
regards defects specifically drawn to the buyer’s attention before the contract is made;
or if the buyer examines the goods before the contract is made, as regards defects
which that examination ought to reveal.
3. As the plaintiffs in this case are both the sellers and manufacturers of the NTP
supplied to the defendants, they are liable to the defendants both in contract for breach
of contract and in tort for negligence in the manufacture of the NTP.
Grant v Australian Knitting Mills
Facts: Grant bought cellophane-packaged, woolen underwear from a shop that specialized in
selling goods of that description. After wearing the garments for a short time he
developed severe dermatitis because the garments contained chemicals left over from
processing the wool. The issue was whether there was reliance on the retailer’s choice
of a quality product such that there was a breach of the implied condition of fitness for
purpose.
Held: The goods were not reasonably fit for their only proper use. The plaintiff relied on the
retailer’s choice of a quality product that could be worn without being washed first.
As this was not the case, there was a breach of the implied condition of fitness for
purpose.
Griffiths v Peter Conway Ltd
Facts: A woman with abnormally sensitive skin bought a coat without telling the salesman
that she had sensitive skin. She subsequently contracted dermatitis from wearing the
coat.
Held: She was unable to recover for breach of fitness for purpose because there was nothing
in the cloth that would have affected the skin of a normal person. She had failed to
disclose that she suffered from skin problems.
Cammell Laird & Co Ltd v Manganese Bronze & Brass Co Ltd
Facts: A firm of shipbuilders orders two ship’s propellers from MB to be built according to
the firm’s own design and specifications to fit a particular ship and its engine. The
thickness of the propellers was left to the manufacturers. One of the propellers, after
fitting, was noisy due to the thickness of the blade. The propeller supplied complied
with the specification but did not suit the ship’s engine.
Held: The manufacturers were liable for breach of an implied condition of fitness for a
particular purpose because part of the manufacturing process was in the control of the
blade manufacturers, and the ship-owners were relying on the manufacturer’s skill to
determine the correct thickness of the blade. The buyer had informed the seller of the
purpose for which he required the goods and relied on the seller’s skill and judgment
to provide them.
Goods Must be of Merchantable Quality
Wilson v Ricket, Cockerall & Co Ltd
Facts: A lady ordered fuel by its trade name ‘Coalite’ from a fuel merchant. The
consignment included a piece of coal in which a detonator was embedded, resulting in
an explosion in the fireplace.
Held:
The consignment as a whole was unmerchantable. It had defects making it unfit for
burning.
David Jones Ltd v Willis
Facts: Willis went to the shoe department of David Jones and told the saleswoman that she
wanted a comfortable pair of walking shoes because she had a bunion on her foot.
After trying on a number of pairs she bought a pair which was recommended by the
saleswoman. The third time that she wore the shoes the heel broke off one of them,
causing her to fall and break her leg. The evidence showed that the shoes were not
well made and that the heels had not been properly attached to the shoes.
Held: As the shoes had been bought by description, there had been a breach of the implied
condition of merchantable quality.
Henry Kendall & Sons v William Lillico & Sons Ltd
Facts: Brazilian groundnut extract was sold to manufacturers of cattle and poultry foods all
over England. The ultimate buyers of a large quantity of meal containing the extract
lost a large number of young poultry. It was discovered that this was due to a high
concentration of a poisonous substance in the extract which, while suitable for cattle
and older poultry, was deadly to young poultry. The suppliers had known from their
previous dealings with the manufacturers of the meal in question that they only made
poultry foods, and for this purpose the extract was obviously unsuitable.
Held: As the extract was suitable for compounding into meal for cattle and older poultry,
there was no breach of an implied condition of merchantable quality.
Sale by Sample
Drummond v Van Ingen
Facts: A manufacturing firm submitted a sample of material to cloth merchants.
Subsequently an order was made for a quantity of material of a weight and quality
equal to the sample. It was later discovered that the cloth, when made into garments
by tailors who were customers of the cloth merchants, split at the seams and was
therefore unsuitable for the purpose for which it was intended, though it was equal to
the sample.
Held: While the cloth was equal to the sample, this did not protect the manufacturer where
the defect could not have been discovered by a reasonable examination, and so the
purchaser was not bound to accept the material.
Godley v Perry
Facts: A boy bought a catapult. While using it, the catapult broke and he lost the sight of an
eye. The shopkeeper had bought it from a wholesaler by sample and tested it by
pulling back the elastic. The shopkeeper was sued and the court held that the catapult
was not fit for the purpose for which the buyer wanted it and that it was of
unmerchantable quality. The shopkeeper then filed an action against the wholesaler.
Held: Although the shopkeeper had made reasonable examination, the defect was not one
which was apparent on such examination. Thus, he had an action against the
wholesaler.
Transfer of Title
Lim Chui Lai v Zeno Ltd
Facts: The Chairman of the respondent company’s board of directors entered into an
agreement in January 1961 with a contract named Ahmad, who had secured contracts
from the Petaling Jaya Authority for construction of culverts, under which the
respondents were to provide Ahmad with all materials for his culverts and also to
finance the carrying out of the contracts. The respondents then bought the materials
for the project and delivered them to the construction site. In June 1961, the
respondents came to know that the Petaling Jaya Authority, after having some trouble
with Ahmad, had cancelled his contract. The respondents then informed the Petaling
Jaya Authority that the materials on the site belonged to them and also made attempts
to sell them. In September 1961, the respondents discovered that the materials had
been sold by Ahmad to the appellant for RM14,000 of which Ahmand had received
RM7,000 as part payment. The respondents then commenced this action for
conversion. The trial judge gave judgment for the respondents for the sum of
RM25,080.52 and costs. On appeal by the appellant, it was contended that:
1. As the respondents caused the chattels to be delivered to Ahmad, he became the
owner of the chattels and as such could pass a title in the chattels to the appellant; and
2. The chattels were the property of a partnership between the respondents and Ahmad,
and as such, Ahmad had the power to dispose of the goods under section 28 of the
Sale of Goods Act 1957.
Held: Ahmad was merely the bailee and not the owner of the chattels at the time he sold
them to the appellant. As he had no title to the chattels or authority to sell them, he could
not give the appellant any title.
Ng Ngat Siang v Arab-Malaysian Finance Bhd & Anor
Facts: The plaintiff bought a car from the second defendant. To effect the transfer of
ownership of the car into the plaintiff’s name, the second defendant had to pay off
MUI Finance from whom he had earlier obtained a hire-purchase facility. For this
purpose, the second defendant retained the registration card. After obtaining the
cancellation of indorsement of MUI’s ownership, the second defendant sold the car to
B whose purchase was financed by the first defendant. The first defendant indorsed its
ownership claim on the registration card. The plaintiff applied to the court for a
determination as to whether he or the first defendant had a better title to the car.
Held: Allowing the application:
After a full payment was made by the second defendant to MUI Finance and MUI
Finance had relinquished all rights to ownership over the car, the plaintiff had
acquired ownership to the car and the second defendant’s further dealings on the car
with the first defendant are therefore illegal. To that end, the first defendant acquired
no title or interest over the car when they purchased it and their only remedy, if any, is
against the second defendant personally for the return of the purchase price but as
against the plaintiff they cannot claim any right of ownership over the car.
Commercial & Savings Bank Of Somalia v Joo Seng Company
Facts: The plaintiffs, a bank in Somalia, were pledges of a cargo of rice on board the MV
Lynna. The characters of the MV Lynna brought the rice to Singapore and sold part of
the cargo to the defendants at half price. This was done without the permission of both
the plaintiffs and the buyers of the rice. The plaintiffs sued the defendants for
conversion and detinue. The defendants claimed that they bought and acquired good
title to the rice without any notice of the plaintiffs’ title. In consideration of the
defendants releasing the goods to the plaintiffs, the plaintiffs had to furnish a bank
guarantee in the defendants’ flavour. The plaintiffs sought the discharge of the
guarantee.
Held:
Allowing the plaintiffs’ claim:
1. The general rule under section 21 (1) of the UK Sale of Goods Act 1979 was that
where goods are sold by a person who is not their owner, and who does not sell
them with the consent of the owner or his authority, the buyer acquires no better
title to the goods than the seller had.
2. The three relevant exceptions to the general rule were sales in the market overt,
sales by merchantile agents…and where the owner was estopped from denying the
owner’s authority to sell.
3. The defendants were getting the rice on the cheap and the circumstances of
purchase were highly suspicious. The plaintiffs had therefore shown that the
defendants were not acting in good faith and without notice that the sale to them
was made without authority.
4. The sellers of the rice, who were charterers of the MV Lynna, were carriers and
were not merchantile agents when they sold the rice.
5. The third exception did not apply because there was no evidence that the owners
of the rice had done anything that would raise an estopped under the UK Sale of
Goods Act 1979.
6. As the defendants had not fallen within any exception to the rule that the buyer
acquires no better title than the seller had, the plaintiffs were pledges or holders of
value of the bills of lading and were therefore entitled to the rice.
7. The plaintiffs were therefore entitled to the damages claimed and the guarantee
would also be discharged.
Syarikat Batu Sinar Sdn Bhd & Ors v UMBC Finance Bhd & Ors
Facts: A leasing company (second plaintiff) bought a tractor from a tractor dealer (the third
defendant) and then leased it to the first plaintiff, a finance company. The registration
card showed the dealer as the first owner, the leasing company as second owner and
the finance company as third owner. The card contained the ownership indorsement
by the leasing company. Unknown to the plaintiffs, the dealer had earlier sold the
tractor to another finance company who then hired it to the second defendant.
Following the second defendant’s default in repayment, the finance company sought
to repossess the tractor. At the time the finance company bought the tractor from the
dealer there was no registration card. An application was made through the dealer for
its insurance. The finance company claimed ownership only in the form of a letter
sent to the dealer for registration. The registration card and possession of the tractor
were left to the dealer. The plaintiffs sued the defendants and sought a declaration that
the defendants were not entitled to the tractor.
Held: Allowing the plaintiffs’ application. The failure to carry out the practice of registering
an ownership claim on the registration card would create the necessary expectation in
the mind of a subsequent unknowing buyer of the vehicle or the necessary
representation to him with regard to the status of the vehicle.
Sale by Merchantile Agent
Folkes v King
Facts: Folkes left his car with a merchantile agent and told him not to sell it below a certain
price. The agent sold the car for less than the minimum price to King who purchased
the car in good faith and for valuable consideration, without any notice of any fraud.
The agent then disappeared with the money. Folkes sued to recover his car from King.
The issue was whether King received good title.
Held: As the merchantile agent was in possession of the car with the consent of the owner
for the purpose of sale, and as the sale had been in the ordinary course of the agent’s
business, the purchaser received good title. Folkes therefore could not recover the car
from King.
Sale by a Seller in Possession after sale
Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd
Facts: A car dealer entered into a display agreement with Motor Credits. Under the
agreement, cars bought by the dealer were sold to the finance company for 90 per cent
of their purchase price. The car dealer retained possession for display purposes. When
the dealer got into financial difficulty, the finance company cancelled its agreement
with him. The same day as its authority was withdrawn, the dealer sold all his stock to
Pacific Motor Auctions. Pacific Motor Auctions was unaware of the withdrawal of the
car dealer’s authority and the car dealer signed a declaration stating that all of its
stock was unemcumbered and was its sole property. The issue was whether the
finance company can successfully sue Pacific Motor Auctions for the return of the
cars.
Held: Pacific Motor Auctions had title to the cars as they had bought them in good faith and
without notice of the sale from the seller who had continued in possession of the
goods after the sale.
Sale by a Buyer in Possession
Newtons of Wembley Ltd v Williams
Facts: The plaintiffs sold a car to A who paid by cheque. Although he was given possession,
it was agreed that the property would not pass until the cheque was honoured. The
cheque was dishonoured but A had resold the car to B who bought it without
knowledge of the position. B resold it to the defendant. The plaintiffs tried to recover
the car from him.
Held: A, the original buyer, was in possession with the consent of the owner. Hence, he
could pass a good title to B, who in turn transferred it to the defendant. The defendant
was, therefore, entitled to keep the car.