W12

TOPIC 5 : Learning Outcomes :

SALE OF GOODS  Discuss the nature of sale of goods
 Apply implied terms relating to sale of goods
contract
 Discuss transfer of property and title under
sale
 Ascertain protections to buyers and owners
 Outline breach of contract and remedies of
remedies for buyer
DEFINITION OF GOODS

Section 2 SOGA 1957 defines the word ‘goods’ as

meaning ‘every kind of movable property other
than actionable claims and money; includes stocks
and shares, growing crops, grass and things
attached to or forming part of he land which
agreed to be severed before sale or under the
contract of sale’.

• By virtue of this definition, therefore, land is excluded from

the Sale of Goods Act.
• ‘Goods’ include tangible movable properties
 DEFINITION OF GOODS

• In other words, ‘goods’ are broadly defines and

include all chattels personal other than things in
action and money (this generally only includes
physical and movable things)
• It does not include :
• Land or things attached to land (though it does not
include timber and growing crops which are to be
harvested before sale or under the contract of sale)
• Choses in action or rights (debts, negotiable
instruments and patents) or
• Services such as work and labor or repair
 CLASSIFICATION OF GOODS
Goods can be classified in a number of ways under the sale
of goods legislation :

i. Existing – goods already owned and possessed by the seller

ii. Future – goods to be manufactured or produced or acquired
by the seller after the making of the contract of sale
iii. Specific – goods that are agreed upon at the time a contract of
sale is made
iv. Unascertained – goods that are defined by description only
v. Ascertained – goods which, in a contract for the sale of
unascertained goods, have become identified and agreed upon
by the parties

CONTRACT OF
SALE
Section 4(1) SOGA 1957 :
A contract of sale of goods
is a contract wherein the
seller transfers or agrees to
transfer the property in
goods (the ownership) to the
buyer for a price (money
consideration)
A sale occurs when the
ownership or property in goods
passes to the buyer
• There must be :
• Goods
• Money consideration
(price)
• Transfer of property
CONTRACT OF SALE &
AGREEMENT TO SELL AGREEMENT TO
SELL
Transfer of property
Section 4(3) SOGA 1957 :
Agreement to sell is a
MONEY contract under which the
(PRICE) transfer of the property in the
GOODS
goods is to take place at a
future time or subject to
some condition thereafter to
be fulfilled
An agreement to sell becomes a
sale when the time elapses or
the conditions are fulfilled
subject to which the property in
Transfer of property the goods is to be transferred –
Section 4(4) SOGA 1957
 IMPLIED TERMS RELATING TO SALE OF GOODS CONTRACT

A conditions is ‘ a stipulation essential to the main purpose

of the contract, the breach of which gives rise to a right to
CONDITIONS treat the contract as repudiated’ – Section 12(2) SOGA 1957
01 02 0
• As a general rule, a breach of condition entitles the innocent
party to repudiate the contract

A warranty ‘ a stipulation collateral to the main purpose of

the contract, the breach of which gives rise to a claim for
damages but not to a right to reject the goods and treat the
WARRANTY contract as repudiated’. – Section 12(3) SOGA 1957

• As a general rule, a breach of warranty entitles the innocent

party to claim for damages
 IMPLIED CONDITIONS

01 02 03 04 05
Implied Goods must be Implied
Goods must be
condition that of condition that
Implied reasonably fit
in a sale by merchantable in a sale by
condition as to fir purposes
description, quality sample, the
title for which the
the goods must goods must
buyer wants
correspond correspond
them
with the with the
description sample
 IMPLIED WARRANTIES

01 01 02

Implied Implied
warranty that warranty that
buyer shall the goods are
have quiet unencumbered
possession of
the goods
IMPLIED CONDITIONS

Section 14(a) SOGA 1957: the seller has a right to sell the goods
This is to ensure complete ownership to the buyer who has paid the
01 price.
01 02 0
There is an implied condition that the seller :
Implied • Has the right to sell the goods in the case of a sale; or
condition as to • In the case of an agreement to sell, will have the right to sell the
title goods when the time comes for the buyer to become the owner
(that is, by the time property is to pass)
• The main purpose of a contract for the sale of goods is to transfer
ownership to the buyer
• If the seller has not title (ownership) . Then there has been a total failure
of consideration
• A breach of this condition entitles the buyer to repudiate the contract ( to
treat the contract as at end and recover the price in full even though he
has used the goods)
IMPLIED CONDITIONS

Case : Rowland v Divall (1923)

01
01 02 a car from D and
Facts : R bought 0 used it for 4 months before
discovering that it had been stolen. R then had to hand over
Implied the car to the true owner
condition as to
title
Held : Although R had the use of the car for some time, he was
entitled to recover the full price he had paid because D had no
right to sell him the car because it was stolen. R had failed to
get the property (title/ownership) of the car, so there was a
total failure of consideration
IMPLIED CONDITIONS

Section 15 SOGA 1957 : the goods must correspond with both

02 sample and description
01 02 03 0
Implied • The sale by description arises where the consumer selects
condition that goods on the basis of the description of the goods, or the
in a sale by consumer agrees to buy the goods to be made to their
description,
the goods must specifications
correspond
with the • Sale of goods by description covers all cases where the buyer
description has not seen the goods but is relying on the description alone

• Example : sale through advertisement, catalogue or online shops

IMPLIED CONDITIONS

02 Case : Varley v Whipp (1900)

01 02 0
Implied Facts : the buyer purchased a second hand reaping machine
condition that
without ever having seen it. The seller had described it as new
in a sale by
description, the previous year and used it to cut only 50 or 60 acres. In
the goods must fact, the machine was very old
correspond
with the Held : This was a sale by description and since the machine
description
did not correspond to its description, the seller was in breach
IMPLIED CONDITIONS

Case : Nagurdas Purshotumdas & Co v Mitsui Bussan

02
Kaisha(1911)
01 02 0
Implied
condition that Facts : Under previous contracts between the parties for the
in a sale by sale of flour, the flour had been sold in bags bearing a well
description, known trade mark. Further flour was ordered ‘the same as
the goods must
our previous contracts’. Flour identical in quality was
correspond
with the delivered but it did not bear the same well known trademark.
description
Held : the goods did not comply with the description
IMPLIED CONDITIONS

Section 16 SOGA 1957 : the good s shall be reasonably fit for

03 particular purpose.
02 0
Goods must be As a general rule, there is no implied warranty or condition as
reasonably fit to the quality or fitness for any particular purpose of goods
fir purposes supplied under a contract of sale
for which the
The 2 exceptions to this rule are :
buyer wants
them i. Goods must be reasonably fit for purposes for which
the buyer wants them
ii. Goods must be of merchantable quality
IMPLIED CONDITIONS

03
The common 02 rule is “Let the buyer
0 beware” -
Goods must be CAVEAT EMPTOR : the buyer could not recover from
reasonably fit the seller for defects on the property that rendered the
fir purposes property unfit for ordinary purposes
for which the • A buyer must exercise care when he makes
buyer wants
them purchases. If he does not, he must bear the
consequences
IMPLIED CONDITIONS

03 Case : Griffiths v Peter Conway Ltd (1939)

02 0
Facts : A women with abnormally sensitive skin bought a coat
Goods must be
without telling the salesman that she had sensitive skin. She
reasonably fit
fir purposes subsequently contracted dermatitis from wearing the coat
for which the
buyer wants Held : She was unable to recover for breach of fitness for
them purpose because there was nothing in the cloth that would
have affected the skin of a normal person. She failed to
disclose that she suffered from skin problems
IMPLIED CONDITIONS

Case : Grant v Australian Knitting Mills (1936)

03 Facts : Grant bought cellophane packaged, woolen underwear

02that specialized in 0
from a shop selling goods of that
Goods must be description. After wearing the garments for a short time he
reasonably fit developed severe dermatitis because the garments contained
fir purposes chemicals left over from processing the wool.
for which the
buyer wants
them Held : The goods were not reasonably fit for their only proper
use. The plaintiff relied on the retailer’s choice of a quality
product that could be worn without being washed first. As
this was not the case, there was a breach of the implied
condition of fitness for purpose
IMPLIED CONDITIONS

 Where goods are bought by description from a seller

04 who deals in goods of that description,
• there
02is an implied condition
0 that the goods shall be of
Goods must be merchantable quality provided that if the buyer has
of examined the goods, there shall be no implied condition as
merchantable regards defects which such examination ought to reveal
quality
 As in the case of fitness for purpose, the implied
condition that goods must be of merchantable quality only
applies where the sale by description from a dealer in
goods of that description
IMPLIED CONDITIONS

04
 Factors02 0
to be taken into account to determine
Goods must be ‘merchantability’ include :
of • price
merchantable • the description applied to the goods
quality
• whether the purpose for the goods had been made known
to the seller
• any circumstances relevant to the sale
IMPLIED CONDITIONS

Case : David Jones Ltd v Willis (1934)

04
Facts : Willis went to the shoe department of David Jones and told
02 that she wanted a0comfortable pair of walking shoes
the saleswoman
Goods must be because she had a bunion on her foot. She bought a pair which was
of recommended by the saleswoman after trying on number of pairs.
merchantable
The third time she wore the shoes, the heel broke off on of them,
quality
causing her to fall and break her leg. The evidence shows that the
shoes were not well made and that the heels had not been properly
attached to the shoes.

Held : As the shoes had been bought by description, there had been
a breach of implied condition of merchantable quality
IMPLIED CONDITIONS

Section 17 SOGA 1957 : a contract is a contract of sale by

05 sample where there is an express or implied term to that effect
in the contract
• 02 0
the bulk of the goods must correspond with both sample and
Implied
condition that description
in a sale by • 3 implied conditions in contracts of sale by sample :
sample, the i. The bulk shall correspond with the sample in quality
goods must ii. If the differences are only of a minor nature and the
correspond quality of the goods is still the same, this condition will
with the
not be breached
sample
iii. The buyer shall have a reasonable opportunity of
comparing the bulk with the sample

* If any one of them is broken, the buyer may be able to reject the goods and
treat the contract ended
IMPLIED CONDITIONS

Case : Godley v Perry (1960)

05 Facts : a boy bought a catapult. While using it, the catapult broke and
he lost the02 0
sight of an eye. The shopkeeper had bought it from a
Implied wholesaler by sample and tested it by pulling back the elastic. The
condition that
shopkeeper was sued and the court held that the catapult was not fit
in a sale by
for the purpose for which the buyer wanted it and it was of
sample, the
goods must unmerchantable quality The shopkeeper then filed an action against
correspond the wholesaler.
with the
sample Held : Although the shopkeeper had made reasonable examination,
the defect was not one which was apparent on such examination.
Thus, he had an action against the wholesaler.
 1. Define goods under SOGA 1957? [2 m]

2. Differentiate ‘contract of sale’ and

‘agreement to sell’? [4 m]
REFLECTION
3. Last 2 months, Raju had bought a car
from Lim. The price for the car is
RM5000. After using it for 2 months, Raju
has been informed that it is a stolen car.
When he told Lim about it, Lim does not
realize that it was a stolen car. Raju would
like to claim RM5000 that has been paid
to Lim. Advise them. [15 m]
W13
 IMPLIED WARRANTIES

01 01 02

Implied Implied
warranty that warranty that
buyer shall the goods are
have quiet unencumbered
possession of
the goods
IMPLIED WARRANTIES

Section 14(b) SOGA 1957 : in a contract of sale, unless the

01 02 of the contract are
circumstances 0 such as to show a different
intention, there is an implied warranty that the buyer shall
Implied have an enjoy quiet possession of the goods
warranty that
buyer shall • this assume that a third party will not come and claim to be
have quiet
possession of
the true owner or that they have a right in the goods after the
the goods sale has taken place
• a breach of this stipulation will not entitle the innocent party
to repudiate the contract but claim for the damages
IMPLIED WARRANTIES

02 02 0
Section 14(c) SOGA 1957 : there is an implied
Implied warranty that the goods are free from any charge in favor of a
warranty that third party who is unknown to the buyer.
the goods are • For example, storage charges which have to be paid before the
unencumbered goods can be collected
• a breach of this stipulation will not entitle the innocent party
to repudiate the contract but claim for the damages
TRANSFER OF PROPERTY AND TITLE UNDER SALE OF GOODS

‘Property’ (ownership) and ‘possession’ should be distinguish

• When property passes to the buyer, the goods are at the buyer’s risk irrespective
of whether the goods have been actually delivered to the buyer or not - Section
26 SOGA 1957
• It is important to know when property passes from seller to the buyer because :
 Risk of loss or damage to goods is with the owner assuming that the goods have
not been lost or damaged because of the party’s fault
 If property in the goods has passed to the buyer, generally the buyer is no longer
able to reject the goods for breach of a condition, the seller’s breach can only be
treated as breach of warranty
 Once property in the goods has passed to the buyer , good title can be given to
third parties, even though the buyer may not have paid for the goods
 If the seller or buyer has gone bankrupt, it is necessary to determine whether
property has passed for the purpose of determining whether the goods vest in
the trustee
TRANSFER OF PROPERTY AND TITLE UNDER SALE OF GOODS

Section 26 SOGA 1957 provides that unless the parties agree otherwise, risk
is borne by the owner regardless of whether he is in possession or not
Section 18 SOGA 1957 in the case of unascertained goods, the
property in the goods can only be transferred to the buyer after the goods
are ascertained
Case : Re RC Goldcorp Exchange Ltd

Section 19(1) SOGA 1957 in the case of a contract for the sale of
specific or ascertained goods, the property in them is transferred to the
buyer at such time as the parties to the contract intend it to be transferred

Unless otherwise determined by the parties, the rule ascertaining the

intention of the parties as to the time at which the property in the goods
is to pass to the buyer is laid down in Section 20-24 SOGA 1957
TRANSFER OF PROPERTY AND TITLE UNDER SALE OF GOODS

 Section 20 : Where there is an unconditional contract for the sale of

specific goods in a deliverable state, the property in the goods passes once
the contract is made regardless of payment and delivery.
Case : Underwood Ltd. v Burgh Castle Brick & Cement Syndicate
 
 Section 21 : the property in goods passes when goods are put into a
deliverable state and the buyer is not notified about it.

 Section 22 : the property in goods passes when goods are in deliverable state
and the price is ascertained and the buyer is notified about the price.
• To ascertain the price, the seller is bound to weight, measure and test or do
some other act for the same purpose.
Case : Chop Why Joo Hak Lee v. Official Assignee
TRANSFER OF PROPERTY UNDER SALE OF GOODS

 Section 23 : for an unascertained goods or future goods by

description, the property in these goods is passes when :
• they are in deliverable state
• they are unconditionally appropriated to the contract,
• either by the seller or the buyer
• the other party consents to the appropriation and such
assent may be express or implied and may be given before or
after the appropriation is made appropriation
• involves selection, separation and weighing from a bulk.
 
TRANSFER OF PROPERTY UNDER SALE OF GOODS

 Section 24 : when goods are delivered to the buyer on

approval or ‘on sale or return’, the property in goods shall pass to
the buyer :
• When he signify his approval or acceptance to the seller
• When he retain the goods without giving notice of rejection on
the expiration of time if a time is fixed, or on the expiration of
reasonable time if it is fixed
Case : Kirkham v. Attenborough
Poole v. Smith’s Car Sales
 
TRANSFER OF PROPERTY UNDER SALE OF GOODS

 Section 23 : for an unascertained goods or future goods by

description, the property in these goods is passes when :
• they are in deliverable state
• they are unconditionally appropriated to the contract,
• either by the seller or the buyer
• the other party consents to the appropriation and such
assent may be express or implied and may be given before or
after the appropriation is made appropriation
• involves selection, separation and weighing from a bulk.
 
PROTECTIONS TO BUYERS AND OWNERS

CAVEAT EMPTOR PRINCIPLE

CAVEAT EMPTOR :
the buyer could not recover from the seller for defects on
the property that rendered the property unfit for ordinary
purposes
A buyer must exercise care when he makes purchases. If he
does not, he must bear the consequences
PROTECTIONS TO BUYERS AND OWNERS

THE PRINCIPLE OF NEMO DAT QUOD NON HABET

Title of the goods refers to a right to obtain the property in the goods
or right to its ownership

General rule : nemo dat quod non habet (no one can give what he
does not have)
 Person having no title to the goods cannot pass a good title to
another

The objective of the rule is to protect a right of ownership, even

if it is stolen the owner still has such right. The effect is that the
buyer must return the goods to the owner unless the buyer proves
that his case comes within exceptions.
THE PRINCIPLE OF NEMO DAT QUOD NON HABET

Exceptions to nemo dat quod non habet rule :

i. Sale by merchantile agent
ii. Estoppels
iii. Sale by joint owners
iv. Sale under voidable contract
v. Sale by seller in possession of the goods after sale
vi. Sale by buyer in possession
THE PRINCIPLE OF NEMO DAT QUOD NON HABET

i. Sale by merchantile agent

Section 27 SOGA 1957 provides that 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.

Case : Folkes v King

THE PRINCIPLE OF NEMO DAT QUOD NON HABET

ii. 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.

Case : Syarikat Batu Sinar Sdn. Bhd. & ORS v UMBC

Finance Bhd & ORS
THE PRINCIPLE OF NEMO DAT QUOD NON HABET

iii. Sale by joint owners

Section 28 SOGA 1957 provides that if one of several
joint owners of goods has the sole possession of the
goods 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 noticed that the seller had no authority to
sell.
THE PRINCIPLE OF NEMO DAT QUOD NON HABET

iv. Sale under voidable contract

Section 29 SOGA 1957 provides that where the seller
of goods has obtained possession thereof under S19 or
20 of the Contract Act 1950, 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.

Voidable contract – caused by coercion, undue

influence, fraud, misrepresentation and mistakes.
THE PRINCIPLE OF NEMO DAT QUOD NON HABET

v. Sale by a seller in possession after sale

Section 30(1) SOGA 1957 provides that if a seller

continues or is in possession of the goods or holds
documents of title after sale, and the he or she or
mercantile agent transfers the goods or the documents
of title to a third party, who buys them in good faith
and without knowledge of the previous sale, the
second sale is considered as good. It is assumed that
the owner authorized it.
THE PRINCIPLE OF NEMO DAT QUOD NON HABET

vi. Sale by a buyer in possession

Section 30(2) SOGA 1957 provides that if a buyer,
having bought or agreed to buy goods, obtains with the
consent of the seller possession of the goods or the
documents of the title to the goods, the delivery or
transfer by that person or by mercantile agent acting
for him have the same effect of sale.
 1. Describe the principle of ‘caveat emptor’ by
providing the correct section and a case. [10 m]

2. The maxim of “nemo dat quod non habet”

REFLECTION explains the concept of transfer of title.
i. Describe briefly the term of Nemo dat quod
non habet. [4 m]
ii. Clarify FIVE(5) exceptions to the maxim.
[10 m]
W14
 REMEDIES FOR THE BUYER
Section 57 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
 
Breach by the
seller
Section 58 SOGA 1957 :
the buyer may bring an action
for the specific performance
of the contract by the delivery
of specific or ascertained
goods.
• But this remedy is available only
at the discretion of the courts.
• Usually, specific performance is
ordered by the court only when
goods are of a special or peculiar
kind
 REMEDIES FOR THE SELLER

Section 45 SOGA 1957 :

an unpaid seller as a seller when ;
Breach by the
buyer
 the whole price has not been paid or tendered OR
 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 dishonor of the instrument or otherwise

 The rights of an unpaid seller against the goods are :

i. S 46(1)(a) : a lien on the goods for the price.
ii. S46 (1)(b) : a right of stopping the goods in transit in the
case of buyer’s insolvency.
iii. S46(1)(c) : a right to resale, subject to S 54.
iv. S 46(2) : a right of withholding delivery
RIGHTS OF AN UNPAID SELLER AGAINST THE GOODS

1. A lien on the goods for the price

S 46(1)(a) : a lien on the goods for the price
 The unpaid seller of goods who still possess the goods is
entitled to retain possession of them until payment or
tender of the price in any of the following events :
i. The goods have been sold without any stipulation as to credit
ii. The goods have been sold on credit, but the term of credit has
expired, or
iii. The buyer becomes insolvent (S 47(1) SOGA 1957

 If the seller has made part of delivery of the goods, he may

exercise his right of lien on the remainder unless the part
delivery has been made under such circumstances which
indicate that the seller waived the lien (S 48 SOGA 1957)
RIGHTS OF AN UNPAID SELLER AGAINST THE GOODS

2. A right of stopping the goods in transit in the case of

buyer’s insolvency
S 46(1)(b) : when the buyer of goods becomes insolvent
and the unpaid seller has parted with the possession of the goods,
the seller has the right of stopping them in transit so long as
the goods are in the course of transit
• This means that the seller may resume possession of the goods
and retain them until payment or tender of the price
• Goods are still in transit unless the buyer or his agent or bailee
takes or obtains delivery of the goods
• Stoppage in transit is effected by the unpaid seller in the
following ways :
i. By taking actual possession of the goods; or
ii. By giving notice of the seller’s claim to the carrier or bailee in
whose possession the goods are
RIGHTS OF AN UNPAID SELLER AGAINST THE GOODS

3. A right to resale, subject to S 54

S 46(1)(c) : a right of resale as limited by this Act
 In Section 54(2) SOGA 1957 provides that the seller has
authority to resell where :
i. The goods are of a perishable nature – S 54(2)
ii. 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 – S 54(2); or
iii. The seller expressly reserves a right of resale in case
the buyer should make a defaults and the buyer makes
such default – S 54(4)
RIGHTS OF AN UNPAID SELLER AGAINST THE GOODS

4. A right of withholding delivery

S 46(2) :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.
RIGHTS OF THE SELLER TO SUE FOR BREACH OF CONTRACT

The seller can sue for the price of the goods where :

i. the property in the goods has passed to the buyer and

the buyer wrongfully neglects or refuses to pay for the
goods; and
ii. where it is contracted that the price be paid on a
certain date irrespective of delivery and the buyer
wrongfully neglects or refuses to pay such price even
though the property in the goods has not passed and
the goods have not been appropriated to the contract
 1. An unpaid seller is entitled to claim for
certain remedies. Clarify the remedies. [8 m]
REFLECTION

2. Name the TWO(2) remedies for the buyer

upon breach of contract. [2 m]