LAW OF SALES OF GOODS
BY SHANKARI BALAKRISHNAN
Introduction
▪ The Sale of Good Act 1957 (SOGA herein forth) was enacted in 1957
and the statue was applicable to sale of goods in peninsular Malaysia
(West Malaysia), excluding the states of Penang and Malacca.
▪ The Act was later revised in 1990 and it includes both states. The
states of Sabah and Sarawak (East Malaysia) are not governed by this
act instead they are governed by section 5(2) of the Civil Law Act of
1956, which provides, among others, that the law to be administered
in England in the like case at the correspondent period.).
▪ The English statue applied is the Sale of Goods Act 1979, which is a
revision of the Sales of Goods Act 1893.As a result Sabah and
Sarawak are bound by statute to continue to apply principles of
English law relating to the sale of goods.
▪ The contrast between the laws West and East Malaysia has the
potential to raise unwarranted legal problems, even though English
statue is the principle source of law for both parts of Malaysia.
WHAT IS LAW OF SALES OF GOODS?
▪ The Law of Sale of Goods provides such guidelines and liabilities for
the safety and security of the consumers.
▪ Any firm or person entering into the business of selling goods to
consumers should be aware of the fact that the law will impose
certain terms and conditions on each transaction.
▪ Consumers can be defined as the group of people who buy certain
commodities which will not be involved in their trade, profession or
business. Consumers lie at the end of the trade chain
Definitions of Key Term in SOGA
KEY TERMS
DEFINATION
Buyer
A person who buys or agrees to buy goods.
Seller
A person who sells or agrees to sell goods.
Goods
Means every kind of movable property other than actionable claims and money; and
includes stock and shares, growing crops, grass and things attached to or forming part
of the land which are agreed to be severed before sale or under the contract of sale.
Specific goods
Means goods identified and agreed upon at the time a contract of sale is made; and
any expression used but not defined in this Act which is defined in the Contracts Act
1950 [Act 136], shall have the meaning assigned to it in that Act.
Future goods
Means goods to be manufacture or produced or acquired by the seller after the making
of the contract of sale
Definitions of Key Term in SOGA
Price
Means the money consideration for a sale of goods.
Document of title to goods
Includes a bill of lading, dock warrant, warehouse keeper’s certificate,
wharfinger’s certificate, railway receipt, warrant or order for delivery of
goods and any other document used in the ordinary course of business as
proof of the possession or control of goods, or authorizing or purporting to
authorize, either by endorsement or by delivery, the possessor of the
document to transfer or receive goods thereby represented.
Nemo dat quod non habet
No one gives what he does not own
SALE OF GOODS ACT 1957
▪ Is an Act relating to the sale of goods.
▪ When enacted it was applicable in Federal Territory, Johore, Kedah,
Kelantan, Negeri Sembilan, Pahang, Perak, Perlis, Selangor and
Terengganu —23 April 1957.
▪ The statutory was later extended to Malacca and Penang—23
February 1990.
Application of Contracts Act 1950
▪ It is important to note that the principles of the Contract Act 1950
continue to apply as long as they do not contradict or are
inconsistent with SOGA
A Contract of Sale of Goods
▪ Section 4 of SOGA
▪ Section 5 of SOGA
▪ A contract of sale of goods is a contract
whereby the seller transfers or agrees to
transfer the property in goods to the buyer
for a price.
▪ Deals with the formation of, the contract of
sale of goods.
▪ Section 4 also states that the contract of
sale may be absolute or conditional. The
difference between the two is that an
absolute contract of sale entails a seller
transferring property in goods to the buyer,
and the contract is known as a sale, where
as in a conditional contract of sale the seller
consents to transfer the property in goods
to the buyer for a price pending the
fulfilment of certain conditions and
according to section 4 of SOGA the contract
is known as, agreement to sell.
▪ The agreement to sell will become a sale
when the conditions are fulfilled (SOGA
section 4).
▪ For the contract of sale of goods to exist,
there has to be an offer to buy or an offer to
sell for a price. Furthermore an acceptance
of the offer has to follow and ultimately the
contract may provide for immediate
delivery or immediate payment or both or
instalments delivery or instalments
payment or both.
▪ The agreement to form a contract between
the buyer and the seller may be in writing or
partly in writing and partly by word of
mouth or by word of mouth or may be
implied from the conduct of the parties.
Terms of a contract of Sale of Goods
▪ The terms of a contract of sale of goods are based on section 12 of
the SOGA and can be split into two parts;
– condition and
– warranty.
▪ CONDITION
▪ WARRANTY
▪ Condition is the fundamental term of
the contract, and the breach of the
condition gives the injured party the
right to reject the contract.
▪ Warranty refers to stipulation
collateral to the main purpose of the
contract, the breach of which gives
the injured party the right to claim for
damages but not to reject the goods
and treat the contract as repudiated.
▪ According to section 13 of SOGA, the
injured party can treat a breach of
condition as a breach of warranty,
which means that the injured party is
entitled to claim for damages but not
reject the contract. The case in point
is the case of:
▪ Associated Metal Smelters Ltd v.
Tham Cheow Toh(1972)
Benefits to concerned parties
▪ SOGA aims to protect concerned parties in the transaction and the
eventual transfer of ownership of a good from a seller to a buyer.
Implied terms of the Sale of Goods Act,
1957
▪ The statutory of implied terms main function is to protect the rights
to every buyer or consumer.
▪ These statutory implied terms are in Section 14- 17 of the Sales of
Goods Act, 1957 and are the implied terms in every contract of sale of
goods
Section 14 of SOGA
▪ Section 14 of the SOGA is divided into three parts;
– The first part states that an implied condition on the part of the seller, that, in
the case of a sale, he has a right to sell the goods, and that in the case of an
agreement to sell, he will have a right to sell the goods at the time when the
property is to pass. This in short means that it is an implied condition to the
seller to ensure that the buyer will enjoy the ownership as well as possession and
use of the goods, failure to do so gives the buyer the right to reject the contract
as the issue constitutes an implied condition
Section 14 of SOGA
– The next part states that there is an implied warranty that the buyer shall enjoy
quit possession of the goods, and if the seller fails to comply, the buyer is
entitled to claim for damages since the matter is being constituted as an implied
warranty.
– Paragraph c, the last part of Section 14 of SOGA, states that there is an implied
warranty that the goods shall be free from any charge or encumbrance in favour
of any third party not declared or known to the buyer before or at the time when
the contract is made. If the seller fails to comply, the buyer is entitled to claim
for damages since the matter is being constituted as an implied warranty
Section 15 of SOGA
▪ Section 15 of the SOGA is on the sale of goods by description. It
states that where there is a contract for the sale of goods by
description there is an implied condition that the goods shall
correspond with the description; and, if the sale is by sample as well
as by description, it is not sufficient that the bulk of the goods
corresponds with the sample if the goods do not also correspond
with the description.
▪ The case in point is the case of:
Purshotumdas and Co. v Mitsui Bussan Kaisha Ltd. (1911)
Purshotumdas and Co. v Mitsui Bussan
Kaisha Ltd (1911)
▪ In this case, the party’s previous contracts entailed the sale goods
being flour, which was sold in bags bearing a recognized trademark.
▪ Later the previous contract description of flour was used to order and
flour of identical quality was delivered but, short of the same wellknown trade mark.
▪ The court held that the goods did not comply with the description
Section 16 of SOGA
▪ In a nutshell says that there is no implied condition or warranty as to
the quality or fitness for any particular purpose of goods, unless the
buyer requests the goods be reasonable for a purpose and the goods
be of merchantable quality.
Section 17 of SOGA
▪ In summary points out that, when dealing with goods by sample, it is
required by the seller to ensure that the bulk of the goods must
correspond with the sample.
▪ If the seller fails to comply, the buyer is entitled to reject the contract
since the matter is being constituted as an implied condition.
Nemo dat quod non habet
rule
‘No one can give better tittle than he himself has’
Introduction
▪ As a general rule, when a person takes goods (e.g buyer), he or she
gets only the same rights to the goods as the person from whom he
or she took them (e.g seller).
▪ This rule is expressed in the latin maxim nemo dat quad non habet.
▪ This rule is set out in section 27 of SOGA 1957 2
Section 27 of SOGA
▪ Sale by person not the owner
– “subject to this Act and any other law for the time being in force, where the
goods are sold by a person who is not the owner thereof, and who does not sell
them under the authority or with the consent of the owner, the buyer acquires
no better title to the goods than the seller had, unless the owner of the goods is
by his conduct precluded from denying the seller's authority to sell”
Introduction
▪ Nemo dat quod non habet rule as explained previously, simply means
that the buyer of the goods does not acquire the title of the goods if
they are bought from a person who is not the owner of the goods or
does not have authority from the owner to sell the goods.
▪ This rule seeks to protect the right of ownership, and therefore the
sellers’ interest.
▪ The rule is illustrated in
Ng Ngat Siang v. Arab-Malaysian Finance Bhd
Ng Ngat Siang v. Arab-Malaysian Finance
Bhd (1988)
Facts
▪ The plaintiff bought a car from the second defendant. To affect 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 endorsement of MUI’s ownership, the second
defendant sold the car to B whose purchase was financed by the first
defendant. The first defendant endorsed its ownership claim on the
registration card. The plaintiff applied to the court to determine
whether or not the first defendant had a better title to the car
Ng Ngat Siang v. Arab-Malaysian Finance
Bhd (1988)
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 ownership over the ca
Exceptions to the nemo dat quod non
habet rule
1. 1.Estoppel
2. 2.Sale by mercantile agent
3. 3.Sale by one of joint owners
4. 4.Sale under a voidable title
5. 5.Sale by a seller in possession after sale
6. 6.Sale by a buyer in possession
Estoppel
▪ Where the owner by his conduct makes it appear to the buyer that
the person who sells the goods has his authority to do so and the
buyer relies on that conduct, the buyer obtains a good title because
the owner is precluded by his conduct from denying the seller’s
authority to sell –section 27, SOGA 1957
Sale by Mercantile Agent
▪ Where a mercantile agent is, with the consent of the owner, in
possession of the goods or of a document of title to the goods, any
sale made by him when acting in the ordinary course of business of a
mercantile agent shall be as valid as if he were expressly authorized
by the owner of the goods to make the same –section 27,
▪ SOGA 1957 however, the buyer must have acted in good faith and, at
the time of the contract of sale, had not received notice that the
seller has no authority to sell
▪ ‘A mercantile agent having in the customary course of business as
such agent authority either to sell goods, or to consign goods for the
purpose of sale, or to buy goods, or raise money on the security of
goods’ –section 2, SOGA 1957
Sale by One of Joint Owners
▪ If one of several joint owners of goods has the sole possession of
them by permission of the co-owners, the property in the goods is
transferred to any person who buys them from such joint owner in
good faith and has not at the time of the contract of sale notice that
the seller has no authority to sell –section 28, SOGA 1957
Sale under a Voidable Title
▪ Where the seller of goods has obtained possession thereof under a
contract voidable under sections 19 or 20, Contracts Act 1950
(Revised 1974), but the contract has not been rescinded at the time of
the sale, the buyer acquires a good title to the goods provided he
buys them in good faith and without notice of the seller’s defect of
title –sections 29, SOGA 1957
▪ A contract is voidable under either section 19 or section 20 of the
Contracts Act 1950 when the consent of the original owner is caused
by coercion, fraud, misrepresentation or undue influence
Sale by a Seller in Possession after
Sale
▪ If a seller resells to a second buyer the goods sold by him previously
to the first buyer, the second buyer will obtain good title to the goods
if he has received the goods in good faith and without notice of the
previous sale –section 30(1), SOGA 1957
Sale by a Buyer in Possession
▪ Another apparent exception to the Nemo dat Quod Non Habet rule is
where there is a sale by a buyer in possession
▪ In this situation, where a person, having brought or agreed to buy
goods, obtained with the consent of the seller, possessions of the
goods or documents of the title to the goods, the deliver or transfer
by that person, or by a mercantile agent acting for him, of the goods
or documents of title under any sale, pledge or other disposition
thereof or under any agreement for sale pledge or other disposition
thereof of any person receiving the same in good faith and without
notice of any lien or other right of the original seller in respect of the
goods, shall have the same effect as if the person making the delivery
or transfer were aa mercantile agent in possession of the goods or
documents of title with the consent of the owner.