Diploma In Management

May/ 2023

BDUK 3103

Introductory Law of Contract

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PUSAT PEMBELAJARAN :Johor Bahru Learning Centre

 TABLE OF CONTENT

1.0 ISSUES RELATED TO IMPLIED TERMS ON

QUALITY AND FITNESS UNDER CONTRACT OF
SALE OF GOOD

1.1 PROVISIONS FROM SALES OF GOODS ACT 1957

ON THE ISSUES

1.2 APPLICATION OF THE PROVISIONS TO THE ISSUES

1.3 CITATION OF RELEVANT CASES

1.4 SUMMARY

1.5 REFERENCES

2.0 ONLINE CLASS PARTICIPATION

1.0 Issues related to implied terms on quality and fitness

S.4 (1) of Sales of Goods Act 1957 (SOGA) states that 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. In this act, buyer means a person who buys or agrees to buy goods. Seller means

a person who sells or agrees to sell goods. Goods refer to moveable property other than

money and includes stock and shares.

Implied term is contractual term that has not been expressly agreed between the parties, but

has been implied into the contract either by common law or by statue. Although implied

terms are not stated, they are understood from parties’ conduct, circumstances and prevailing

practice. Among the implied terms under SOGA 1957 include S.16(1) (a) Implied condition

as to the quality and fitness for a particular purpose and S.16(1) (b) Implied condition as to

the merchantile quality of the goods.

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S.16 (1) of SOGA 1957 stipulates that there is no implied warranty or implied condition as to

the quality or fitness for a particular purpose of goods supplied under a contract of sale,except

as follows-where the buyer, expressly or by implication, makes known to the seller the

particular purpose for which the goods are required, to show that the buyer relies on the

seller’s skill or judgement, and of the goods are of a description which it is in the course of

the seller’s business to supply, there is an implied condition that the goods shall be

reasonably fit for such purpose. According to common law, the buyer should be aware of the

terms of the contract under the Caveat Emptor principle where the buyer is expected to

exercise care in making any purchases in concluding any contract. This indicates that the

buyer has to bear the consequences if he or she does not exercise prudence in buying goods.

The buyers cannot blame the seller if the goods bought do not fit the purpose they intend.

One of the issues related to S.16 (1) (a) is that some of buyers do not make known to the
seller the particular purpose for which the goods are required. If the purpose of the goods is
evident, the purpose of purchase need not be known. However, some of the buyers provides
the seller a range of purposes when buying goods. Without sufficient and specific information
provided, the seller cannot reasonably exercise his skill or judgement to select from the goods
he dealt and identify the characteristics of the goods that can meet the purpose of the buyers.
Sunrise Bhd & Anor v L & M Agencies Sdn Bhd demonstrates the importance of making the
seller know the specific purpose of buying certain goods. In this case, the plantiff contended
that the tower crane bought from the defendant frequently malfunction which breaches the
defendant’s responsibility to ensure that the cranes had to fit for the purposes for which it was
bought. The court held in favour of the plantiff that at all times during the negotiations of the
contractual terms, the plaintiff had made known to the seller that the construction of the
condominium requires tower cranes.

Another issue concerned with S.16 (1) (a) is that the seller’s skills and judgement do not
comply with the purpose of buyer for which the goods is bought. For example, a retail store
assistant ,who is in charge of selling healthcare products ,does not have sufficient knowledges
on the products. Although the buyer establishes reliance on the store assistant’s skills and
judgement to buy drug, he cannot suggest the buyer the drug which can fit his particular
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purpose. To promote his products, he will only talk about the aspects of the condition that
supports his product or service. Consequently, some of the buyer might complain about
allergy after consuming drug suggested by him and the seller will be held liable for breach of
condition as to fitness because the buyer who relies upon his skills or judgement is entitled to
reject the goods and have refund of the price paid.

Other than that, Section 16 (1) (a) of the SOGA 1957 states that there is an implied condition
that the goods are of the description which it is in the course of the seller’s business to
supply. The issue concerning this condition is that whether the seller is the dealer of the kinds
of product transacted when entering into the contract of sale. This indicates that the seller
needs to be in the course of his business when supplying goods to the buyer so that the goods
is reasonably fit for such purpose. For instance, the seller has to be a vehicle dealer when he
sells car to the purchaser. Another issue is that the goods delivered to the buyer does not
correspond to its description as the seller nowadays tends to use beautiful descriptive words
to induce the buyer into the contract by means of fraud. The buyer, who depends on the
description of the goods, has the right to reject the goods if the description of the goods is
different in any respect as the goods should be sold as described.

Finally, issue that may emerge from the fourth implied condition of S. 16 (1) (a) of the
SOGA 1957 is that the buyer buy his specific goods for its patent or brand name, but not
relying on the skills or judgement of the seller. He may not reject the goods if later found that
the goods do not match the purposes for which they are acquired, unless the buyer could
prove that he is induced by the seller’s encouragement. Such issue can be seen in Medicon
Plastic Industries Sdn Bhd v Syarikat Cosa Sdn Bhd where the plaintiffs sued the defendants
for damages in respect of an Alpha hs 40/ 2000 blow machine and a Boe-Therm temperature
controller as both of them were not merchantable and not fit for the purposes they were
bought. The court held that the claim of plaintiffs against the defendants was rejected because
both of the machines were bought under their patent name, but not depending on the seller’s
skills or judgements.

1.2 Provision
There are several provisions under SOGA 1957 that can address the issues regarding to
implied terms on quality and fitness under the contract of sale of goods. The main provision
is S.16 (1) of SOGA 1957 which include a few implied terms as to fitness for particular
purpose namely the buyer makes known the the seller the particular purpose for which the
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goods are bought, reliance of buyer on the seller’s skills and judgement, the goods are of the
description which is in the course of seller’s business to supply and specific goods which are
bought not for its patent or trade name. These implied terms not only protect the interest of
buyer during the breached event, but also defense the right of seller.

Under S.16 (1)(a) of SOGA 1957 , the seller is not held liable if the the buyer does not tell the
specific purpose for which the goods are bought. It is because under S.14 (a) of SOGA 1957,
the seller has a right to sell the goods. The buyer needs to disclose the specific purpose for
which the goods are required but not a range of wide purposes . Nevertheless, the seller will
be held liable for any breach of warranty or condition of the goods if the purpose of acquiring
the goods is well expressed. In the case of Sunrise Bhd & Anor v L & M Agencies Sdn Bhd,
where the plantiff is able to claim for any loss caused by the malfunction tower cranes
bought from the defendant because the plantiff told the defendant the purpose of buying the
tower cranes during the negotiations.

Secondly, the issue of seller’s skills and judgement not compatible with the buyer’s purpose
can be addressed under S.16 (1) (a) of SOGA 1957 as the buyer relies on the seller’s skills or
judgement to purchase their goods. The buyer brings home the products based on the
information provided by the seller after expressing the special purpose to the seller.
Therefore, the buyer must ensure that the seller whom they obtain information from possess
certain skills or knowledges to judge the goods. When the breach of implied condition or
warranty occurs, the purchaser has to prove that he establishes reasonable reliance on the
seller’s expertise so that he can repudiate the contract or claim for loss under S.13 of SOGA
1957.

Furthermore, S.16 (1) (a) of SOGA 1957 also tackles the issues where the seller supplying
the goods is not the dealer of the kind of products transacted. If the seller is not in the course
of his business to supply, the breach of implied condition happens and the purchaser has the
right to reject the goods provided that he relies on the description of goods at the time of
purchase. Besides, S.19 (1) of SOGA 1957 enables the seller to rescind the contract if he can
prove that his consent to contract is caused by fraud. Additionally, S. 16 (1) (b) of SOGA
1957 also states that when the goods is sold by description, there is an implied condition that
the goods shall be of merchantable quality. Merchantable means that the article is of such
quality and in such condition that a resonable man acting resonably would after full
examination accept it in performance of his offer to buy it. However, this provision does not
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apply where the buyer examines the goods beforehand and the examination actually made
should reveal the particular defect.

Moreover, S.16 (1) (a) of SOGA 1957 also addresses with the circumstances where the buyer
purchases the goods under the patent or trade name. If the buyer purchases the goods under
its trade name, there is no implied condition to their quality and fitness of the goods. This
indicates that the buyer does not buy their goods based on the seller’s judgement and skills,
hence he cannot claim for loss when the breach of warranty or condition takes place, unless
the buyer can prove that he enters into the contract through the inducement of the seller. .
However, S.16 (1) (b) of SOGA 1957 states that the goods has to be merchantable despite
being bought under trade name. Merchantable means that the goods are capable of being
resold on the description without a reduction in price.

If the implied condition or warranty under S.16 (1) of SOGA 1957 is breached, the contract
of sale cannot be performed. S. 12 (2) of SOGA 1957 stipulates that breach of condition gives
the injured party to repudiate the contract whereas S. 12 (3) of SOGA 1957 states that breach
of warranty entitles the injured party to claim for damages but not to reject the goods and
treat the contract as repudiated. Condition is the main purpose or fundamental term of the
contract while warranty is stipulation collateral to the main purpose of contract.

1.3
The applications of the provisions under S.16 (1) SOGA 1957 can be demonstrated on the
issues arising from implied terms on quality and fitness under the contract of sale of good.
The first implied condition of S.16 (1) (a) of SOGA 1957 can be applied on the situation
where the buyer does not expressly or impliedly make known the seller the special purpose of
purchasing the goods. A farmer, X wants to plough a land where its soil is fine and dusty in
nature. X buys a tractor for the purpose of ploughing the land from a local supplier of
agricultural machinery, Y. Having no specific information about the types of land X is going
to plough, Y cannot supply X with the tractor that can meet his purpose and thus will not be
held responsible for breach event. Although the purpose of a tractor is to plough the land, X
still has to make Y aware of his specific intention of using a tractor to plough in such fine and
dusty soil. In this case, X should bear the consequences of purchasing the tractor. X is not
entitled to rescind the contract or claim Y for any loss due to the breach of condition or
warranty as it is the right of the seller to sell his goods under S.14 (a) of SOGA 1957.

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Next, the second implied condition of S.16 (1) (a) of SOGA 1957 can be put in place when
the seller’s skills and judgement does not comply with the buyer’s particular purpose of
acquring the goods. A young man, Alex contracts dermatitis after wearing a T-shirt bought at
the clothing store nearby. He tells the store assistant, Andrew that he wants to buy a cotton T-
shirt which is suitable to be worn on a hot day and his skin is allergic to the wool which
contains sulphite. At the time of purchase, there is a label on the side of the T-shirt stated that
it is 100% cotton. Alex examines the goods and satisfies with what stated in the label and
therefore buying the shirt. In this situation, Alex has established reasonable reliance on the
skills and judgement of the seller, Andrew to buy the T-shirt. He trusts that Andrew is
equipped with sufficient skills and judgement to help him with the purchase as he has worked
in the store for more than five years. Since the specific purpose of acquiring the shirt is made
known clearly and reasonable reliance is established on the seller, Andrew is held responsible
for any breach of warranty in this situation.

Moreover, the third implied condition of S.16 (1) (a) SOGA 1957 can be applied on issue
where the seller supplying the goods is not the dealer of the kinds of products transacted. The
buyer must purchase the goods from the place which the seller has the expert to sell the goods
or which is in the course of the seller’s business supply. Besides, S.16 (1) (a) of SOGA 1957
states that if 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 resonably fit for such purpose.
The application is seen in the situation when Ken, a young man, buys a hiking bike from an
auto accessories dealer ,Sean after being attracted to the description and stylish photos of the
bike posted by Sean on Facebook. Ken gets his bike from Sean and discovers that Sean is not
a bike dealer. As Sean does not describe himself as a dealer of bike on his Facebook page,
Ken is not aware that Sean is not in the couse of his business supply when entering the
contract of sale. Therefore, Ken is entitled to reject the goods if the breach of implied
condition that the goods must fit for the purpose for which they are required occurs.

Moreover, the application of S.16 (1) (b) of SOGA 1957 can also be seen in the situation
where the goods delivered to the buyer do not correspond with the description of
goods..When a product is described by a descriptive word or phrase in the contract of sale,
the goods should correspond to the description ,otherwise the other party is not bound to take
it. A housewife, Madam Wong buys a washing machine from a promoter, Mr Tan based on
the description that the washing machine can be utilised to wash all types of clothes.
However, after using the washing machine, Madam Wong discovers that bleach spots appear
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on her jeans. In this situation, Madam Wong relies upon the ‘can be utilised to wash all types
of clothes’ to buy the washing machine but it does not correspond to description and fit the
particular purpose. Thus, she is entitled to reject the goods as the goods is not merchantable
and does not fit her purpose.

Lastly, the fourth implied condition of S.16 (1) (a) of SOGA 1957 can be applied on
circumstances where buyer purchases his goods under the patent or trade name. When the
buyer specifies his product under its trade name in such a way as to indicate that he is
satisfied, he is not relying on the skill or judgement of the seller and cannot reject the goods if
they do not fit his particular purpose. Nevertheless, the purchaser relies upon the seller to
secure him the goods of merchantable quality under S.16 (1) (b) of SOGA 1957.Madam
Wong suffers from hand injury after using a X brand thermoflask bought at the mall. The
thermoflask explodes when she pours some hot water into it to warm up soup for her son. She
insists on buying a X brand thermoflask despite being reminded about some dreadful
incidents related to the product. In this case, Madam Wong buys the goods based on her
personal preference and judgement about the quality of X brand products but not rely on the
skills and judgement of the seller. Madam Wong is thus not entitled to reject the goods or
claim for any losses. Besides, X company is held that its goods are not of merchantable
quality as they cannot be used for the purpose they are bought.
1.4
There are several relevant cases that can be cited for each issue arising from implied terms on
quality and fitness under the contract of sale of goods.

Griffiths v Peter Conway Ltd (1939) 1 All ER 685 is an example of case which can be cited
on issue where buyer does not make known the particular purpose of acquiring the goods to
the seller. A woman contracted skin problems after wearing a Harris Tweed coat. She did not
make known her sensitive skin condition to the seller. Thus, she was not entitled to claim
damages for breach of implied condition as to quality and fitness for purpose as the coat fit
the purpose of all normal people. Another case is Jewson Ltd. v Boyhan (2004) 1 Lloyd’s
Rep 505 whereby the buyer did not disclose the particular purpose of installing the boilers
into the buildings, which is that the boilers must satisfy certain SAP rating. Therefore, the
seller did not breach the implied condition as to quality and fitness for purpose.

For issue like the seller’s skills and judgement do not comply with buyer’s purpose, one
notable case to be cited is Cammell Laird and Co Ltd v The Manganese Bronze and Brass Co
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Ltd (1934) AC 402. The deal was between shipbuilders and the buyer, the shipbuilders
agreed to build two ships that would allow them to carry heavy liquid. Nevertheless, one of it
did not meet the specification. The court held the seller accountable for the breach of impled
condition. Another case is Pekat Teknologi Sdn Bhd v Novaris Pty Ltd & Anor (2014) AMEJ
1563. The plaintiff brought an action against the first and second defendants for the losses it
suffered arising from the faulty Novaris surge protective devices (SPD) supplied by the
defendants. Since the plaintiffs made the defendants known the purpose of acquiring goods
and relied upon the defendants’ skills and judgement to purchase the goods, the defendants
had breached the implied condition as to quality and fitness for purpose.

Furthermore, cases that can be cited on issue like goods delivered to the buyer do not
correspond with its description include Varley v Whipp (1900) 1 QB 513 where the reaping
machine sold by the seller to the claimant did not correspond with the description. Although
the defendant asked for a brand-new reaping machine, the defendant had discovered that the
reaping machine was not new. The defendant was entitled to reject the goods because it did
not correspond to the defendant’s description. Another case is Arcos Ltd. v EA Ronaasan &
Sons (1933) AC 470. The claimant ordered 1/2 thick wood from the defendant but only 9/16
thick wood was delivered to him.Thus, the purchaser had the right to not accept the goods as
it did not correspond to the description given by the defendant.

Lastly, Wilson v Ricket (1954) 1 QB 598 can be cited on issue such as the goods supplied by
sellers are not of merchantable quality. In this case, the plaintiff ordered a trade name called
as coalite coal from defendant, nevertheless, it was mixed together with a piece of explosive
item. The claimant was entitled to recover loss as the explosive item was not in satisfactory
quality. Another case is Mash and Murrell v Joseph Emmanuel 1961 1 all ER 485. The
plaintiffs company brought potatoes from the defendants. The potatoes were in good
condition when they were loaded into the ship but found to be rotten when they arrived at the
destination of the buyer. The sellers breached the implied condition that the goods would be
merchantable as the goods needed to be in good condition when the buyer received them.

1.5 Summary

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 according to S.4 (1) of Sales of Goods Act (SOGA)
1957. S.16 (1) of SOGA 1957 states that the standard of quality of goods must be reasonably
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fit for the purposes for which the buyer wants them. According to common law, the buyer is
expected to exercise Caveat Emptor principle when purchasing his goods. He must be aware
and satisfied himself as to the quality of the goods purchased. Under this principle, the buyer
has to bear the consequences of making the purchase while the seller will not be held liable if
the goods does not fit the purpose of buyer.

However,there are four implied conditions as to fitness for particular purpose under S.16 (1)
(a) of SOGA 1957 namely the disclosure of purpose, reliance on the seller’s skill and
judgement, the goods supplied are of the description which the seller’s business to supply and
not bought under patent or trade name. S.16 (1) (b) of SOGA 1957 emphasises on the
merchantable quality of the goods. The implied conditions under S.16 (1) (a) and (b) of
SOGA 1957 not only enable buyer to reject the goods or claim for any damages in the
breached events, but also provides defence to the seller.

In conclusion, the provisions under S.16 (1) of SOGA 1957 are insufficient to protect the
right of buyers when they enter into the contract of sale. SOGA 1957 is said to be outdated
because it is primarily based on the terms of the old English Sale of Goods Act 1893. The
enactment of the Consumer Protection Act 1999 has supplemented the incomplete protection
given under SOGA 1957. Therefore, prompt action for legislative reforms will be required in
the future to protect the right of buyer in the rapidly evolunised social and market.

Reference:

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 ATTACHMENT

REFERENCES

Author’s name (year). Book, Title, Publication

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