WEEK 5&6

LAWS 3348
SEM II 23/24

RIGHTS AND OBLIGATIONS

OF BUYER AND SELLER:
REMEDIES
RIGHT TO REMEDY

BREACH OF CONTRACT

REMEDY

SELLER BUYER
SELLER’S RIGHT TO REMEDY

BREACH

NON-ACCEPTANCE
NON-PAYMENT BY BUYER

 Seller’s Lien  Damages

 Stoppage in Transit
 Resale
 Withholding Delivery
 Sue for Breach (Personal Remedy)
REMEDY FOR NON-PAYMENT

SELLER’S RIGHT TO REMEDY

DEFINITION OF ‘UNPAID SELLER’
SECTION 45 (1) OF SOGA 1957

The seller of goods is deemed to be an “unpaid seller” within the meaning of this Act—

A When the whole of the price has not been paid or tendered;

B
When a bill of exchange or other negotiable instrument has been received as conditional
payment, and the condition on which it was received has not been fulfilled by reason of the
dishonour of the instrument or otherwise.

SELLER’S RIGHT TO REMEDY

 BUYER REJECTED GOODS

Name of Case J L Lyons v May and Baker Ltd [1923] 1 KB 685

In this case, L Co, sold a quantity of citric acid crystals to one P, who resold
Facts the goods to M & B. The goods were not of the contract quality. L Co,
therefore, agreed to take them back and refunded the price to P. The latter
gave a cheque to M & B, in refund of the price. This cheque was
dishonoured and, therefore, M & B sought to retain the goods till their price
was refunded.

Decision
Held that M & b could not retain the goods. They were held bound to return
the goods as the court refused to believe “that a person who has bought
and paid for, and afterwards rejected the goods, is a person like an unpaid
seller.”

A buyer who has rejected the goods is not, however in the position of a
seller within the meaning of ‘unpaid seller’ and the therefore cannot claim
for any unpaid seller’s rights in order to secure repayment of the price.
RIGHTS OF ‘UNPAID SELLER’ UNDER SOGA
SECTION 46 OF SOGA 1957

Subject to this Act and of any law for the time being in force, notwithstanding that the property in the goods
may have passed to the buyer, the unpaid seller of goods, as such, has, by implication of law—

1 A lien on the goods for the price while he is in possession of them

2 In case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with
the possession of them;

3 A right of resale as limited by this Act.

4
Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other
remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage
in transit where the property has passed to the buyer.
SELLER’S RIGHT TO REMEDY
 LIEN

A legal right or interest that a creditor has in

another's property, lasting usually until a debt
or duty that it secures is satisfied.

Seller’s lien:

A right to retain the goods until the whole of the

price has been paid or tendered.

SELLER’S RIGHT TO REMEDY

SELLER’S LIEN
SECTION 47 OF SOGA 1957

Subject to this Act, the unpaid seller of goods who is in possession of them is
entitled to retain possession of them until payment or tender of the price in the
following cases, namely-

a) Where the goods have been sold without any stipulation as to credit;
b) Where the goods have been sold on credit, but the term of credit has
expired;
c) When the buyer becomes insolvent.

SELLER’S RIGHT TO REMEDY

SELLER’S LIEN
 Statutory lien: Lienee [Seller/Creditor/beneficiary] gets the right to retain
possession of the lienor’s [Buyer/Debtor] goods until the full price is
respect of the particular contractual goods has been settled.

 In cases where Buyer becomes insolvent, the Seller gets preference of

retaining the goods.

3 CONDITIONS TO BE SATISFIED UNDER SECTION 47

1. Party must be an ‘unpaid seller’.

2. Goods must not be sold on credit.
3. Seller must be in possession of the goods.

SELLER’S RIGHT TO REMEDY

RIGHT TO LIEN: PART DELIVERY

SECTION 48 OF SOGA 1957

e.g Installment contracts

Where an unpaid seller has made part delivery of the goods, he may
exercise his right of lien on the remainder, unless such part delivery has
been made under such circumstances as to show an agreement to
waive the lien.

Seller is entitled to exercise his lien over any part of

the goods if any part of the price is outstanding.

SELLER’S RIGHT TO REMEDY

 EXAMPLE
SELLER’S RIGHT TO REMEDY

1 SELLER + BUYER
(CONTRACT OF SALE FOR
GOODS)
SELLER READY TO DELIVER
GOODS &
BUYER AGREES TO COLLECT
BUYER DOES NOT
HAVE ENOUGH
MONEY TO PAY FOR
SELLER CLAIMS LIEN
OVER THE GOODS

GOODS FROM SELLER’S GOODS

FACTORY

2 SELLER + BUYER
(CONTRACT OF SALE FOR
SELLER READY TO DELIVER
GOODS TO BUYER
BUYER BECOMES
INSOLVENT
SELLER CLAIMS LIEN
OVER THE GOODS
GOODS)

3 SELLER + BUYER
(CONTRACT OF SALE FOR
1ST AND 2ND
INSTALLMENT:
3rd INSTALLMENT:
BUYER BECOMES
SELLER CLAIMS LIEN
OVER THE REMAINING
GOODS: 3 INSTALLMENTS) SUCCESSFUL DELIVERY INSOLVENT OR HAVE GOODS
AND PAYMENT INSUFFICIENT FUNDS
LOSS OF LIEN

SECTION 49 OF SOGA 1957

Deemed as delivery to buyer

(1) The unpaid seller of goods loses his lien thereon—

(a)when he delivers the goods to a carrier or other bailee for the purpose of transmission to
the buyer without reserving the right of disposal of the goods;

(b) when the buyer or his agent lawfully obtains possession of the goods; With Seller’s consent

(c) by waiver thereof. (e.g delivery on credit)

(2) The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only
that he has obtained a decree for the price of the goods.

SELLER’S RIGHT TO REMEDY

 STOPPAGE IN
TRANSIT
SECTION 50 OF SOGA 1957

Seller Buyer

Section 2: Ceased to pay his

debts in the ordinary course
of business, or cannot pay his
debts as they become due,
Goods in transit
Unpaid Insolvent whether he committed an
act of bankruptcy or not

SELLER’S RIGHT TO REMEDY

STOPPAGE IN TRANSIT

SECTION 50 OF SOGA 1957

Subject to this Act when the buyer of goods becomes insolvent the unpaid seller
who has parted with the possession of the goods has the right of stopping them in
transit, that is to say, he may resume possession of the goods as long as they are in
the course of transit, and may retain them until payment or tender of the price.

3 CONDITIONS TO BE SATISFIED UNDER SECTION 50

1. Seller must be an ‘unpaid seller’.

2. Buyer must be insolvent.
3. Goods must be ‘in the course of transit’.

SELLER’S RIGHT TO REMEDY

DURATION OF TRANSIT
SECTION 51 OF SOGA 1957

Section 51(1):
“..from the time when they are delivered to a carrier or other bailee for the purpose of transmission to the
buyer, until the buyer or his agent in that behalf takes delivery of them from such carrier or other bailee.”
Name of Case Taylor v G.E Railway Co [1901] 1 KB 774

Goods in transit had reached the destination which

Facts was a railway station. Buyer was informed of arrival by
station master who was asked to hold it for the Buyer.
Master agreed to do so.

Decision Transit had ended although Buyer had not gone personally
to take possession of the goods.

SELLER’S RIGHT TO REMEDY

 SECTION 51 (2) - (7) OF SOGA
1957

RULES TO DETERMINE COURSE OF TRANSIT

SELLER’S RIGHT TO REMEDY

EFFECTING STOPPAGE IN TRANSIT
SECTION 52 OF SOGA 1957

Stoppage in transit is effected by the unpaid seller in the following ways:

By taking actual possession of the goods; or
By giving notice of the Seller’s claim to the carrier or bailee in whose
possession the goods are.

Once notice has been given, the carrier or bailee shall redeliver the goods to or according to the
directions of the seller at the seller’s expense.

SELLER’S RIGHT TO REMEDY

EFFECT OF LIEN OR STOPPAGE ON SALE
SELLER’S RIGHT TO REMEDY

Subject to this section, a contract of sale

is not rescinded by the mere exercise by
an unpaid seller of his right of lien or
stoppage in transit

Section 54 (1) of Sale of Goods Act 1957

Since the contract is not rescinded, the Seller would not be allowed to resell the goods.
RESALE

SELLER’S RIGHT TO REMEDY

RESALE
SECTION 54 (2) & (4) OF SOGA 1957

It has been established in Section 54(1) that since the contract is not rescinded, the seller is
not allowed to resell the goods.

However, Section 54(2) & (4), provides that the Seller has the authority to resell where:

The goods are perishable in nature; or

He gives notice to the buyer of his intention to resell and the buyer does not within a
reasonable time pay or tender the price; or

The Seller expressly reserves the right of resale in the event the buyer defaults (Section
54(4).
SELLER’S RIGHT TO REMEDY
RESALE
• If Seller resells pursuant to section 54(2), he must do so within a reasonable time.

• Seller can still recover from the original buyer damages for any loss occasioned by his
breach.

• If Seller makes a profit from the resale, the buyer is not entitled to the profit.

• If unpaid Seller does not give notice to the buyer of his intention to resell before the resale,
the Seller cannot recover damages from the original buyer and the Buyer can claim profit
(if any).

• If the Seller resells pursuant to Section 54(4), the effect is that the original contract of sale
is rescinded but the Seller can claim for damages.

SELLER’S RIGHT TO REMEDY

POSITION OF SUBSEQUENT BUYER
SECTION 54 (3) OF SOGA 1957

Where an unpaid seller who has exercised his right of lien or stoppage in transit resells the
goods, the buyer acquires a good title thereto as against the original buyer, notwithstanding
that no notice of the resale has been given to the original buyer.
Name of Case The Bineta [1966] 2 Lloyd’s Rep 419
Facts
In June 1963 a yacht was sold by the Seller to the Buyer. The yacht
was subsequently registered in the buyer’s name. When Buyer
defaulted in the payment of the purchase price, in exercise of her
unpaid seller’s lien, the Seller retained possession of the yacht and
sold it to a TP.
Decision An application for a declaration by TP to be registered as the new
owner was granted on the ground that S could vest a good title in
the TP under the equivalent provision of s 54 of the Act.

SELLER’S RIGHT TO REMEDY

Name of Case R V Ward Ltd v Bignall [1967] 2 All ER 449
The Seller sold 2 cars, a Vanguard car and a Zodiac to the Buyer for £850.
Facts Buyer paid deposit of £25 and when he refused to pay the balance, the
Seller wrote to him informing him that if he did not pay by a specified date,
the Seller would try to resell the cars.

Two weeks after the specified date, the Seller sold the Vanguard for £350
but could not find a buyer for the Zodiac. The Seller brought an action
claiming the balance of the purchase price[ 850-25-350] of £475 and cost of
advertising expenses amounting to £22 10s.

Decision
By reselling the Vanguard, the Seller had rescinded the contract of sale with
the Buyer and could not recover the price of the Zodiac because it is now
regarded as his property. He is only limited to claiming the loss (damages)
sustained by the Buyer’s default and the advertising expenses.

SELLER’S RIGHT TO REMEDY

WITHOLDING
DELIVERY

SELLER’S RIGHT TO REMEDY

WITHHOLDING DELIVERY
SECTION 46 (2) OF SOGA 1957

“Where the property in goods has not passed to the buyer, the unpaid seller has, in
addition to his other remedies, a right of withholding delivery similar to and co-
extensive with his rights of lien and stoppage in transit where the property has
passed to the buyer.”

SELLER’S RIGHT TO REMEDY

PERSONAL REMEDY

SUITS FOR
BREACH OF
CONTRACT

SELLER’S RIGHT TO REMEDY

SUE FOR PRICE OF GOODS
SECTION 55 (1) OF SOGA 1957
Contract must stipulate payment

Passing of goods to the Buyer

1
Where under a contract of sale the property in the goods has passed to the buyer
and the buyer wrongfully neglects or refuses to pay for the goods according to the
terms of the contract, the seller may sue him for the price of the goods.

SELLER’S RIGHT TO REMEDY

Name of Case Colley v Overseas Exporters [1921] All ER Rep 596

Facts Sellers brought an action for the price of goods sold on terms fob Liverpool.
The buyers made five successive nominations of vessels to take delivery of
the cargo but in each case the vessel was eventually unable to take the
goods. No effective nomination was made, the goods remained at the
dock awaiting shipment, and the sellers brought an action for the price.

Decision
Since it is an FOB contract, it is the responsibility of the Seller to deliver the
goods on board of the ship. The goods therefore had not passed to the
Buyer. Although this was due to the wrongful act of the Buyer, the Seller’s
remedy was an action for damages and not for the price.

SELLER’S RIGHT TO REMEDY

EXCEPTION TO SECTION 55(1)
SECTION 55 (2) OF SOGA 1957

Where under a contract of sale the price is payable on a day certain irrespective of

2 delivery and the buyer wrongfully neglects or refuses to pay such price, the seller
may sue him for the price although the property in the goods has not passed and
the goods have not been appropriated to the contract.”

• Concerns cases where the price is payable irrespective of delivery

SELLER’S RIGHT TO REMEDY

 ‘On a day certain’

Name of Case Workman Clark & Co Ltd v Brazileno [1908] 1 KB 968

Facts Seller undertook to construct a ship for the Buyer. Payment was by
instalment and this became ascertainable with reference to the stage of
work completed by Seller.

Decision
That the equivalent provision to S. 55(2) applied to instalments payable on a
day certain and also to this case as the contract provided to determine the
timing of instalments on a day certain.

SELLER’S RIGHT TO REMEDY

Action for Price
In the absence of a fixed price or the provision of a mechanism to determine the price,
Section 9(2) applies:

“Where the price is not determined in accordance with the foregoing provisions, the buyer
shall pay the seller a reasonable price. What is reasonable price is a question of fact
dependent on the circumstances of each case.”

• Sharkey v Wernher [1956] AC 58

• Watson Bros v Hornby [1942] 2 All ER 506

SELLER’S RIGHT TO REMEDY

PERSONAL REMEDY

DAMAGES FOR NON-

ACCEPTANCE OF
DELIVERY/GOODS

SELLER’S RIGHT TO REMEDY

LIABILITY OF BUYER FOR NEGLECTING OR REFUSING DELIVERY OF GOODS

SECTION 44 OF SOGA 1957

When the seller is ready and willing to deliver the goods and requests the buyer to take delivery,
and the buyer does not, within a reasonable time after such request, take delivery of the goods,
he is liable to the seller for any loss occasioned by his neglect or refusal to take delivery, and
also for a reasonable charge for the care and custody of the goods: Provided that nothing in this
section shall affect the rights of the seller where the neglect or refusal of the buyer to take
delivery amounts to a repudiation of the contract.

SELLER’S RIGHT TO REMEDY

DAMAGES FOR NON-ACCEPTANCE OF GOODS
SECTION 56 OF SOGA 1957

Where the buyer wrongfully neglects or refuses to accept and pay for the goods the seller may sue him
for damages for non-acceptance.

SECTION 74 OF CONTRACTS ACT 1950 MEASURE OF DAMAGES

When a contract has been broken, the party who suffers by the breach is entitled to receive, from the party
who has broken the contract, compensation for any loss or damage caused to him thereby which naturally
arose in the usual course of things from the breach, or which the parties knew, when they made the contract,
to be likely to result from the breach of it.

SELLER’S RIGHT TO REMEDY

Name of Case Hadley v Baxendale (1854) 9 Ex 341
The measure was formulated as; any loss or damage for the breach which:
Principle
(a)Naturally arose in the usual course of things; or which the parties knew,
when they made the contract, to be likely to result from the breach of it;
and
(b)Is caused by special circumstances. Where such circumstances have
been made known to the party in default.

Name of Case Scandinavian Bunkering (Singapore) Pte Ltd v MISC Berhad [2015] AMEJ 457
…where there is an available market on the goods, general damages in the
Principle form of market price differential is recoverable by an innocent seller upon
breach of contract on sale of goods by the buyer. Accordingly, on authority
as well as on principle, there is no difference between English law and
Malaysian law on the assessment of recoverable damages. When there is
an available market, pursuant to s 74(1) of the Contracts Act 1950, the loss
directly and naturally resulting in the ordinary course of events is the market
price differential. Thus, the Defendant’s liability was for the difference
between the Contract price and the market price at the time and place
fixed by the Contract ... SELLER’S RIGHT TO REMEDY
RIGHT TO REMEDY

BREACH OF CONTRACT

REMEDY

SELLER BUYER
BUYER’S RIGHT TO REMEDY

Right to Damages: Breach of

Reject Non-Delivery Warranty

Specific Tortious
Rescission
Performance Remedies

BUYER’S RIGHT TO REMEDY

RIGHT TO REJECT
BUYER’S RIGHT TO REMEDY

PROVISIONS EXPLANATION
S. 12(2): A condition is a stipulation essential to the main Breach: B can repudiate the contract and reject the goods
purpose of the contract, the breach of which gives rise to a unless he elects to treat such a breach as a breach of
right to treat the contract as repudiated warranty and claim damages. (s. 13)
S. 14 (IC : Title) The terms are regarded as implied conditions which in the
S. 15 (IC: Description) event of breach, gives rise to treat the contract as repudiated.
S. 16 (IC: Quality or fitness)
S.17 (Sale by Sample)
S. 37: (Delivery of Wrong Quantity) Buyer given the right to reject the goods in the event the Seller
delivers the wrong quantity of goods.
S. 38 (Installment Deliveries) Buyer given the right to reject the goods in the event the Seller
delivers the goods in installment.

S. 41 (Examination of Goods) Buyer has the right to reject the goods when after examining
the goods, finds that it is against the contract.
DAMAGES FOR NON-DELIVERY
BUYER’S RIGHT TO REMEDY

SECTION 57 OF SOGA 1957

Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the
buyer may sue the seller for damages for non-delivery.
Name of Case Eikobina (M) Sdn Bhd v Mensa Mercantile (Far East) Pte Ltd [1994] 1 MLJ 553

S agreed to sell 24 units of heavy construction equipment to B who agreed to sell 15

Facts units to TP sub-buyers. S failed to deliver the goods on the contractual date and B
brought an action claiming general damages which included loss of profits on the sub-
sale and RM 456,000 for loss of reputation among his associates and customers.

Decision The sub-sale and reputational damage were too remote (outside both rules in Hadley
v Baxendale) and the claim for loss of profits on the remaining 9 units was also outside
the first rule in Hadley v Baxendale.

the Supreme Court reaffirmed the contractual measure of damages provided by S. 74 of the
Contracts Act 1950 which incorporates the rules in Hadley v Baxendale.
Name of Case Malaysian Rubber Development Corp Bhd v Glove Seal Sdn Bhd [1994] 3 AMR 2407

Principle …it is important to bear in mind that normal measure of damages for breach of contract in
this country is prescribed by s 74(1) of the Contracts Act 1950, which is the statutory
enunciation of Hadley v Baxendale [1854] 9 Exch 341. In essence, the section states that the
party may recover any loss or damage or any breach which :

(a) naturally arose in the usual course of things or

(b) which the parties knew, when they made the contract, to be likely to result from the
breach of it.

For the sake of completeness, it should be mentioned that our courts have treated the
position under the second limb of the section to be similar to the second limb of Hadley v
Baxendale, which is, the party may recover damages which may “reasonably be supposed
to have been in contemplation of both the parties at the time they made the contract”.

BUYER’S RIGHT TO REMEDY

REMEDIES FOR BREACH OF WARRANTY
BUYER’S RIGHT TO REMEDY

SECTION 59(1) OF SOGA 1957

Where there is a breach of warranty by the seller, or where the buyer elects or is compelled to
treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by
reason only of such breach of warranty entitled to reject the goods; but he may—

(a) Set up against the seller the breach of warranty in diminution or extinction of the price; or
(b) Sue the seller for damages for breach of warranty.

(2) The fact that a buyer has set up a breach of warranty in diminution of the price does not
prevent him suing for the same breach of warranty if he has suffered further damage.

the Supreme Court reaffirmed the contractual measure of damages provided by S. 74 of the
Contracts Act 1950 which incorporates the rules in Hadley v Baxendale.
Name of Case Lee Heng & Co v C Melchers & Co [1963] 1 MLJ 47

Facts Breach of an agreement to supply Buyer with shovels bearing the brand “Spatenmann”. The
Seller supplied shovels of a different brand.

Held Amounted to breach of warranty and the assessment of damages being the difference
between the market value of the goods supplied and the market value of the goods
ordered. (Affirmed by the Court of Appeal.)

Name of Case Mondel v Steel [1835–1842] All ER Rep 511

Seller agreed to build a ship for the Buyer. The ship however was defective and thus the
Decision court allowed the Buyer to deduct the price based on the value of the defective ship
compared to a contractually sound ship at the time of the delivery.

The Buyer was also entitled to recover damages for loss of the ship’s use during the repair
period.

BUYER’S RIGHT TO REMEDY

SPECIFIC PERFORMANCE
BUYER’S RIGHT TO REMEDY

SECTION 58 OF SOGA 1957

Subject to Chapter II of the Specific Relief Act 1950 [Act 137], in any suit for breach of contract to
deliver specific or ascertained goods, the court may, if it thinks fit, on the application of the
plaintiff, by its decree direct that the contract shall be performed specifically, without giving the
defendant the option of retaining the goods on payment of damages. The decree may be
unconditional, or upon such terms and conditions as to damages, payment of the price or
otherwise, as the court may deem just, and the application of the plaintiff may be made at any time
before the decree.

• Goods must be specific or ascertained - identified or agreed upon at the time the contract was
made.
• It is awarded at the discretion of the court.
• Generally it will not be granted where disputes relate to ‘ordinary mercantile commodities’ (Re
Wait) and where the loss can be remedied by awarding damages.
Name of Case Eikobina (M) Sdn Bhd v Mensa Mercantile (Far East) Pte Ltd [1994] 1 MLJ 553

Facts Non-delivery of 24 units of heavy construction equipment.

Held
Although Seller breached the contract, a decree of specific performance was refused as
the Buyer could buy those goods in the market and claim damages for the loss it suffered.

Name of Case Behnke v Bede Shipping Co Ltd [1927] 1 KB 649

Principle Remedy rests entirely within the discretion of the court and will not be granted in respect of
chattels of no special importance. But where a chattel is of peculiar importance and of
practically unique value to the Plaintiff, the court will grant the necessary decree.

BUYER’S RIGHT TO REMEDY

Name of Case Cohen v Roche [1927] 1 KB 169
Seller, as auctioneer sold a lot of chairs to Buyer but failed to deliver the goods to him. In an
Facts action for delivery or damages for breach of contract as an alternative, specific
performance was refused.

Held
The Hepplewhite chairs in lot 145 possessed no special features at all. They were ordinary
Hepplewhite furniture. The plaintiff bought them in the ordinary way of his trade for the
purpose of ordinary resale at a profit. He had no special customer in view. The lot was to
become a part of his usual trade stock…The law is thus, I am glad to find, consistent in its
several parts. In the present case the goods in question were ordinary articles of commerce
and of no special value or interest, and no grounds exist for any special order for delivery.
The judgment should be limited to damages for breach of contract …

BUYER’S RIGHT TO REMEDY

RESCISSION
BUYER’S RIGHT TO REMEDY

SECTION 60 OF SOGA 1957

Where either party to a contract of sale repudiates the contract before the date of delivery, the
other party may either treat the contract as subsisting and wait till the date of
delivery, or he may treat the contract as rescinded and sue for damages for the breach.
ACTION IN TORT

Buyer can sue the Seller in Tort by bringing an action in detinue and conversion.

Detinue: Wrongful detention of chattels belonging to the Plaintiff (Buyer) after their return has been
demanded.

Conversion: Dealing with the goods in a manner inconsistent with the ownership of the buyer.

BUYER’S RIGHT TO REMEDY

 THE END
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