BLC 2014 BUSINESS AND

COMMERCIAL LAW
Trimester 2, 2017/2018

Submission date: 2 February 2018

Lecturer: Puteri Nur Nabila Binti Megat Ahmad Kamaluddin
Prepared by:
Student ID Student Name

1141128747 SYUHAIDAH BINTI AZIZ ZUDIN

1161301023 FARAH AMANI BINTI ABDUL WAHAB
1161302569 NUR SHAHIRAH BINTI MD ASRI

Declaration by group leader

(This section is to be filled in the student’s own handwriting.)
I hereby declare that all group members’ names are correctly included in the
above section. I hold a copy of this assignment which I can produce if the
original is lost or damaged. I certify that no part of this assignment has been
copied from any other student’s work or from any other source except where
due acknowledgement is made in the assignment.

Group leader’s signature : _____________________________

Group leader’s name : _____________________________

Group leader’s student ID : _____________________________

Date : _____________________________
Contents
Issue 1: Implied Condition As To Merchantable Quality .................................................. 3
Issues 3 – Sale by Sample .............................................................................................................. 7
Issue 1: Implied Condition As To Merchantable Quality

The issue arises in this situation is whether Adam can sue David for breaching the
contract concerning implied condition as to merchantable quality under Section
16(1)(b) of the Sale of Goods Act 1957.

Based on the Sale of Goods Act 1957, it applies to contract for the sale of all types of
goods, including second-hand goods. The terms of the contract includes conditions and
warranties. Under conditions, a term which is essential to contract; breach of it would
allow the other party to treat the contract as repudiates under Section 12(2) of the Sale
of Goods Act 1957. If the condition is breached, the party not in default entitled to
repudiate the contract because the contract can be deemed to be void.

Section 4 (1) of the Sale of Good Act 1967 states that a contract of sales of goods is a
contract whereby the seller transfers the property in goods to the buyer for a price.
There is a contract between Adam, the buyer, and David, the seller. David agrees to
transfer the ownership of his supply of mineral water to Adam. Adam then pays
RM35000 for a price of a one-year supply of the 35000 bottles.

According to Section 16(1)(b) of the Sale of Goods Act 1957, it states that where goods
are bought by description from a seller who deals in goods of that description, there is
an implied condition that the goods shall be a merchantable quality. The manufacturer,
David, is liable for breach of contract concerning the implied condition as to
merchantable quality that was required by the buyer, Adam. The goods should have
met all the needed standard requirements according to the descriptions in the brochure.

The Act states that Merchantable Quality of Goods means the goods must meet the
standard, which a reasonable person would regard as satisfactory and goods sold must
be fit for particular use for which they were sold. In this case, the buyer, Adam, is not
satisfied with the supplied mineral water by the manufacturer, David. The mineral water
did not fit the merchantable quality because customers complained they suffered from
stomach pains, vomiting and diarrhea after consuming it.
David is also liable to the breach of contract because the mineral water sent to the
scientific laboratory finds that the water contains a virus undetectable to the naked eye.
Goods are sold by description where a consumer does not see actual item purchase. For
example, Adam examines only a display of the mineral water, an illustration from the
given brochure. To breach this condition, it must be shown that the goods do not comply
with the description or identity of the goods, rather that non-compliance with the
quality.

Based on the Kuantan Flour Mills Berhad v Wee Tuck Lee Food Industries (2007),
the plaintiff sold and delivered goods to the defendant. The defendant acknowledged
the receipt of goods by affixing the defendant’s rubber stamp, signature and the
respective date on each delivery. The defendant made part payment and was given
rebates. The plaintiff then claimed the outstanding balance sum due and owing,
particulars of which had been rendered. However, the defendant alleged that the goods
sold and delivered were not of merchantable quality and further denied had ordered or
purchased the goods from the plaintiff. The court decided that the defendant is entitled
to sign summary judgment in the sum of RM14400, with interest and costs. This is
because the extraction was sold under the ordinary description and it was merchantable
quality for the purpose of Sale of Goods act 1983, although it was contaminated but the
question is that whether the contaminated quality was merchantable quality being
determined during trial date. There was a close examination of the goods before the
plaintiff delivered it and the defendant had failed to identify the specific occasion on
which the goods were found not to be of merchantable quality.

In the case of Public Bank Bhd v Ng Kang Sian & Anor (2011), the plaintiff bank
sought a declaration for the repudiation of a sale and purchase of a motor-vehicle from
the defendants, a refund of the purchase price, indemnity, interest and costs, the Court
granted the declaration sought as it was found that the car sold was half-cut car. There
was a breach of the implied conditions as to quality and fitness, the motorcar was not
merchantable quality and reasonably fit for its purpose. The motorcar was not road
worthy and unsafe for use. As a condition stipulated the main purpose of the contract,
the plaintiff is entitled to a refund of the monies paid and for an indemnity of monies
paid out to the hirer.
According to the case of Atico Overseas Ltd v Procast Furniture Industry Sdn Bhd
(2012), it was agreed that the said goods were to be delivered to an end purchaser,
Wilkinson Hardware Stores Ltd in England. The plaintiff paid for the said goods and
the defendant delivered the said goods to Wilkinson in batches. It was subsequently
discovered that the goods were defective and not in merchantable quality. The goods
were tainted with mold, inconsistent timber quality and product color finishing, and
unacceptable levels of use of timber with splits in it. In addition, the plaintiff had to
compensate Wilkinson for the defective goods. The plaintiff tried to sue for the
damages from the defendant. The court held that there was a breach of the conditions
and did not fit for the purpose as according to the Section 16(1)(b) of the Sale of Goods
Act 1957. The plaintiff was entitled to the damages.

Relating to the case, Adam is able to take legal actions towards David for selling him
the contaminated mineral water. David had failed to provide goods that are fit to be
sold, as the mineral water did not fit the merchantable quality. Merchantability requires
that the mineral water should be free from any contaminated matters that would affect
the health of others. Where the product has some defects, which cannot be revealed by
ordinary examination, the condition of merchantability would apply when even if the
buyer has examined the good. As decided in the case of Kuantan Flour Mills Berhad
v Wee Tuck Lee Food Industries (2007), the failure to identify the specific occasion
on which the goods were found not to be of merchantable quality made the implied
condition does not apply. If there was an examination before or at the time of the
contract, the buyer cannot later complain of defects, which a proper examination would
have revealed.

In general, the goods should be in satisfactory factor to his buyers. Adam has the
authority to take legal actions towards David because it causes losses to his business
and providing goods that are unhealthy to the market. The seller has the obligation to
make sure the goods that they buy are in good condition or merchantable. David did
not meet the requirements because the goods sold had cause consumers to suffer from
stomach pains, vomiting and diarrhea.

In conclusion, there is a contract of sale made by Adam, the buyer, and David, the
seller. According to the Section 16(1)(b) of the Sale of Goods Act 1957, under implied
condition of the contract by merchantable quality, Adam is able to sue David for not
fulfilling the satisfaction of the product sold and not providing goods that are not fit for
particular use for which they were sold. The presence of the virus that cannot be seen
by the naked eye in the mineral water may cause harm to the people who consumes it.
Therefore, legal actions can be made towards David.
Issues 3 – Sale by Sample

The legal issues in this case is whether Adam can sue David for breach of contract
based on SOGA’s implied condition which is Sale By Sample under Section 17(1) of
Sales of Good Act 1957.

According to section 4 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.
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).

Section 5 of the SOGA deals with the formation of, the contract of sale of goods.
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.

Sale by sample is a sale in which the buyer purchases goods under an agreed
condition that goods sold are as good as one shown to the buyer as a sample. Sample is
a part of transaction constituting express guarantee that whole goods conform to the
sample. Sale by sample is a contract based on understanding between the parties. Goods
not exhibited must conform to the standard exhibited by the sample. The sample is a
fair representation of the quality of the bulk, and the seller is bound by the warranty.
This is also known as sample sale.

Based on Godley v Perry (1960) case, the case was about a boy was injured using
a defective catapult bought from a retailer. The retailer had bought it by sample from
the wholesaler. Inspection of the sample followed by purchase of the consignment. The
boy successfully sued the retailer under Section 14(2)(3)(equivalent tos.17 SOGA).
Consequently, the retailer successfully sued the wholesaler since the defect was not
revealed by a reasonable inspection.

Adam and David case can be related to Maher vs W Draper and Sons PTY Ltd
case which is about the appellant delivered hay to the respondent's premises on a semi-
trailer carrying about 35 bales and weighing in total some 16 to 17 tones. He made at
least 26 deliveries. The magistrate's conclusion proceeds on the premise that the
appellant was willing to drive from Warracknabeal in Victoria to Keith in South
Australia, some 200 kilometers on at least 26 occasions on the chance that he might be
able to sell his hay and that the respondent could simply have said that it did not wish
to treat with him.

The premise has only to be stated to demonstrate the flaw in the reasoning. It is
quite unrealistic to expect that the appellant would have driven so far on so many
occasions with such a substantial load of hay on the off-chance that he could sell it. The
appellant was willing to undertake these journeys because he knew that the respondent
had agreed to purchase his hay if it was of the standard required by the respondent and
because he believed that his hay was of that quality. He knew that the hay would be
rejected if it was not of the required standard but that is altogether different from making
a long journey in the hope of being able to sell the hay. The finding also fails to have
regard to the fact that the respondent acquiesced in the practice of permitting the
appellant to deliver hay at weekends and out of hours. The practice is more consistent
with a contract for sale by description than a series of contracts as found by the
magistrate.

For these reasons, the magistrate erred in concluding that there was no contract.
The parties had agreed that the respondent would purchase all of the appellant's hay if
it was of the standard required by it.

As the respondent had not previously seen the hay, it would not be deemed to
have accepted it unless and until it had had a reasonable opportunity of examining the
hay for the purpose of ascertaining whether it conformed to the contract: s34 of the Act.
Once the respondent had examined the hay, the question then arose whether the
respondent in fact accepted the hay or was by virtue of s35 of the Act deemed to have
accepted it. S35 provides: "The buyer is deemed to have accepted the goods when he
intimates to the seller that he has accepted them, or (subject to s34 of this Act) when
the goods have been delivered to him, and he does any act in relation to them which is
inconsistent with the ownership of the seller, or when, after the lapse of a reasonable
time, he retains the goods without intimating to the seller that he has rejected them."

Next, for instance, Perkins v Bell cases which is about plaintiff sold barley to
defendant by sample, to be delivered at T railway station, which was near plaintiff's
farm. On the same day defendant resold the barley to a brewer. Afterwards plaintiff
discovered that his servants had by mistake mixed some inferior barley with the barley
sold to defendant, and gave defendant notice of the mistake, offering to make good any
deficiency of quality. He duly delivered the barley at T Station, and while it was there
the station master, at defendant's request, took a bulk sample of the barley and sent it
to defendant.

Defendant having received the bulk sample, directed the station master to send
on the barley to the brewer who had purchased it; but he rejected it as not being
according to the sample. Defendant then himself claimed to be entitled to reject the
barley: Held there was nothing in the contract or the circumstances to rebut the
presumption that the place of delivery was to be the place of inspection; and as
defendant had inspected a sample at such place of delivery, and ordered the barley to
be sent on to the sub-purchaser, he must be considered to have accepted the barley, and
could not afterwards reject it.

In conclusion, Adam is entitled to REJECT the goods and treat the contract as at
END.
References

Sree Kumar C Nair (2008). Implied Conditions in the Sales of Goods. Available at:
http://www.lawyersclubindia.com/articles/IMPLIED-CONDITIONS-IN-THE-SALE-
OF-GOODS--379.asp (Accessed on 29 January 2018)

Law Teacher Website (2018). Definition of Merchantable Quality.

https://www.lawteacher.net/free-law-essays/contract-law/definition-of-merchantable-
quality-contract-law-essay.php (Accessed on 29 January 2018)