Commercial Law
Sale of Goods
Introduction
Focus is on the commercial and contractual
arrangements for the sale of goods (SOG) entered into
by businesses and private party
Based on the provisions of SOGA 1957
SOGA applies in Malay States only.
Melaka, Pulau Pinang, Sabah and Sarawak is governed
by the English SOGA 1893
Definition of Goods
S.2 SOGA – goods include every kind of movable
property other than actionable claims and money and
include stocks 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 contract
of sale.
Thus, based on the above, land is excluded
See also S.6 SOGA
Classification of Goods
S.6 SOGA – goods which form subject matter of a
contract of sale may either be existing goods or future
goods.
Existing goods – are goods already owned or possessed
by seller, and may either specified or agreed upon at
the time a contract is made.
Specified goods – means goods identified and agreed
upon at the time a COS is made (S.2 SOGA)
Unascertained goods – goods identified by description
only (Not defined in SOGA)
Future goods – goods to be manufactured or produced
or acquired by the seller after the making of COS
under S.2 SOGA.
Classification of Goods
Examples:
If A agrees to buy B’s motorcycle bearing registration
number XYZ123. It is a COS of specific goods.
A sale of a new Proton Persona 2014 model. It is a COS
of unascertained goods
A sale of a BMW sports car model Z3 yet to be
manufactured by seller. It is a COS of future goods and
unascertained.
A sale of a BMW sports car model Z3 owned by A who
is is selling it to B. B as A’s car dealer sell to C. It is a
COS of future goods and specified.
Contract of Sale
S.4(1) SOGA – a COS is a contract where the seller
transfers or agrees to transfer the property in goods to the
buyer for a price.
Note: Distinguish between a sale and an agreement to sell. A
sale is a contract under which the property in the goods is
transferred from seller to buyer.
Agreement to sell (ATS) is a contract under which the
transfer of property in the goods is to take place at a future
time or subject to some condition to be fulfilled later. See
S.4(3) SOGA.
Under S.4(4) ATS becomes a sale when time elapses or
conditions fulfilled.
Formation of COS
S.5(1) a COS is made by an offer to buy or sell at a
price and by acceptance of that offer.
The COS may provide for:
Immediate delivery of the goods; or
Immediate payment of the price; or BOTH.
Delivery or payment may also be done by installments.
S.5(2) a COS may be made in writing and partly by
word of mouth or may be implied from party’s
conduct.
Terms of Contract
There are various standard TOC in a COS. It can be
express or implied.
S.12(1) SOGA – in the COS there can be condition or
warranty. (express)
S.12(4) – whether a stipulation is a condition or
warranty depends in each case on the construction of
the COS.
The stipulation may be a condition though called a
warranty in the contract.
TOC: Conditions
Conditions: S.12(2) – it is a stipulation essential to the main
purpose of the contract.
Breach of Conditions – entitle the innocent party to repudiate
the contract and claim damages.
There are circumstances where innocent party can claim damages
only but cannot repudiate contract:
1. Where buyer waives condition
2. Where buyer elects to treat the breach of condition as a breach of
warranty and claim damages only
3. Where COS is not severable and buyer has accepted the goods or part
of it, the breach of any conditions must be accepted as breach of
warranty unless COS says otherwise
4. Where the COS is for specific goods, and it has passed to buyer, (See
3).
TOC: Warranty
S.12(3) – a warranty is a stipulation collateral to the
main purpose of the contract. BOW give rise to claim
for damages but not a right to reject the goods and
cannot treat the COS as repudiated.
TOC: Time
S.11 SOGA – unless different intention appears from
the TOC, stipulations as to time of payment are not
deemed to be essence with respect to COS
If COS don’t say that time is of the essence, then if
buyer don’t pay on the agreed date, it does not entitle
seller to repudiate the COS.
Implied Terms
SOGA implies a number of stipulations in every
contract of sale of goods a.k.a implied terms
When apply?
Applies when parties of the COS have not excluded or
implied to exclude them.
What are the implied terms?
Those provided under Ss. 14-17 SOGA
Implied condition as to title
S.14(a) SOGA
In a contract of sale, unless the circumstances of the
contract are such as to show a different intention, there is
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.
The important thing is the right to sell NOT ownership.
If seller do not have right to sell, buyer may repudiate the
COS
Implied warranty that the buyer shall
have quiet possession of the goods
S.14(b)
In a contract of sale, unless the circumstances of the contract are
such as to show a different intention, there is an implied warranty
that the buyer shall have and enjoy quiet possession of the goods.
NOTE that it is a warranty not condition.
Thus breach of this stipulation will not entitle the buyer to
repudiate the COS.
What is quiet possession?
The right to enjoy the goods without disturbance to its
possession and title.
Implied warranty that goods are
unencumbered
S.14(c)
There is 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, unless the
circumstances of the contract are such as to show
different intention.
NOTE: it is a warranty
Example: A sold to B a sea vessel. B do not know know
that the vessel is charged to Bank C. A has breached
the warranty. No breach if A has already told B about
the charge and B still want to continue with the sale.
Implied condition that in sale of goods by
description, the goods must correspond
with the description.
S.15 SOGA
Where there is contract for 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 by description, it is
not sufficient that the bulk of the goods corresponds with the
sample if the goods do not correspond with the description.
Case: Nagurdas Purshotumdas Co v Mitsui Bussan Kaisha Ltd
(1911) 112 SSLR 67
Sale of flour case. Flour supplied identical in quality but packed with a
different trademark. Goods did not comply description.
If goods not described but seen. It is a sale by description. For
example self service shops.
Case: Grant v Australian Knitting Mills Ltd (1936) AC 85
Caveat Emptor
Buyer beware
S.16
There is no implied warranty or condition as to the
quality or fitness for any particular purpose of goods
supplied under a contract of sale.
Implied condition that goods must be
reasonably fit for purposes for which the
buyer wants them.
S.16(1)(a)
Where the buyer, expressly or impliedly, makes known to
the seller the particular purpose for which the goods are
required so as to show that he relies on the buyer’s skill or
judgment, and the goods are of a description which is in the
course of the seller’s business to supply, there is an implied
condition that the goods shall be reasonably fir for the
purpose.
Requirements
1.
2.
Buyer make known purpose of purchase
Buyer relied on seller’s judgment
Implied condition that the goods
must be of merchantable quality
S.16(1)(b)
Where goods are brought by description from a seller
who deals in goods of that description, there is an
implied condition that the goods shall be of
merchantable quality provided that if the buyer has
examined the goods, there shall be no implied
condition as regards defects which such examination
ought to reveal.
Nemo Dat Quad Non Habet
"no one gives what he doesn't have“
i.e. The Nemo Dat Rule
Contained in s27 – where goods sold by a person who is not
the owner, the buyer acquires no better title to the goods
than the seller had.
Rationale: to protect the right of ownership
This rule usually stays valid even if the purchaser does not
know that the seller has no right to claim ownership of the
object of the transaction (a bona fide purchaser)
Nemo Dat Rule:Exceptions
Estoppel – when the owner of goods by his conduct is
precluded from denying the seller’s authority to sell
Sale by one of joint owners – S.28 – the JO must have
sole possession and the buyer must have acted in good
faith and has no notice that the seller does not have
full authority to sell
See also S.29 (sale under voidable contract) and S.30
(sale by a seller in possession after sale and sale by
buyer in possession)
Rights of unpaid seller
Right of lien: s.46(1) – unpaid seller who still possess the
goods is entitled to retain possession until payment. This
right is lost when seller delivers the goods to a carrier or
when buyer obtains possession of the goods.
Right of stoppage in transit: S.50 – when buyer is insolvent
and the unpaid seller has parted with the possession of the
goods, the seller has the right to stop the goods in transit.
Right to resell: s.54(3) – seller may resell if the goods are of
perishable nature and he gives notice to the buyer of his
intention to resell and the buyer does not pay within
reasonable time
Protection to consumers
Consumer protection Act 1999
Focus on consumer’s rights rather than seller
It protect consumers against misleading and deceptive
conducts, false representation and unfair practices,
ensures safety standards and provides guarantees such
as guarantee as to title, as to acceptable quality, as to
fitness, as to description etc.