QUESTION 1

Adli bought a digital camera from Click Shop. Before he bought it, he was only given the
chance to inspect the camera visually without being able to actually test it. When he used it
for the first time at home, he found that the camera was faulty and could not function at
all. However, the owner of Click Shop refused to allow Adli to return the camera as he said
that Adli was not careful when he selected the camera and hence, Adli has to bear the risk.

Advise Adli on his rights.

The issue is whether the term in the contract of sale of goods is fulfilled in the account of
implied condition as to merchantable quality.

According to Section 4 (1) Sales of Goods Act 1957, 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. There must be three elements for a contract of sale of goods to exist. Firstly, Section 2
stated that every kind of moveable property other than actionable claims and money, and
includes stock 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 the contract of sale. Secondly, goods can
either be existing, owned or possessed by the seller, or future goods. In order for the contract of
sale of goods to occur, the seller must transfer or agree to transfer the ownership (property) in the
goods to the buyer. Lastly, according to Section 2 price is money consideration for a sale of
goods. Therefore, there must be an exchange between goods and money. Section 12 (2) stated
that a condition is a stipulation essential to the main purpose of the contract, the breach of which
gives rise to a right to treat the contract as repudiated. If the condition is breached, the party not
in default is entitled to repudiate the contract. Meanwhile, Section 12 (3) provided that a
warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives
rise to claim for damages but not a right to reject the goods and treat the contract as repudiated. If
the warranty is breached, the party not in default cannot terminate the contract but can only claim
for damages. Both condition and warranty may be made either expressly in the contract or
implied from conduct of the parties or by operation of law which are provided under Section 14
to 17 of SOGA. Section 16 (1) (b) on implied condition as to merchantable quality, this is
another exception to the caveat emptor rule where there is an implied condition that goods must
be merchantable quality, which means that the goods sold must be fit for the particular use for
which they were sold. If the goods are defective and not suitable for their purpose, they are
unmerchantable. To determine whether the goods have merchantable quality depends on the
description of the goods. The case that can be referred is HENDRY KENDALL & SONS v
WILLIAM LILICO & SONS LTD. It was held if the description in the contract was so limited
that goods sold under it would normally be used for only one purpose, thus the goods would be
unmerchantable if they were of no use for that purpose. However, if the description were so
general, used for several purposes, the goods would be merchantable if they were fit for any one
of those purposes. . The other cases that can be referred to are MUN KEONG MEDICAL
HALL v ASTRACO INDUSTRIAL SUPPLIES AND TRADING & CO. In this case, the
plaintiff bought a pellet-making machine from the defendant to produce tiny medicinal pellets
that he would pack into small rounded plastic containers for sale. He claimed that the machine
was not operative and functional when delivery was made and although demand and notice were
sent to its manufacture, the defendant failed to rectify the defects and hence, this claim. The
court applied the test for merchantable quality as decided in one case where a machine that is of
merchantable quality is one that is reasonably capable of performing the work for which it was
designed. Since there was evidence in this case that the machine was in actual fact operating and
functioning well when it was installed the first time to the plaintiff’s premises, the court
dismissed the plaintiff’s claim. If the goods were unmerchantable, the seller would be liable for
breach of implied condition, even though they are sold under their patent or trade name. The case
that can be referred is WILSON v RICKET COCKERELL & CO LTD. The lady ordered fuel
by its trade name ‘Coalite’ from fuel merchant. The consignment included a piece of coal in
which a detonator was embedded, resulting in an explosion in the fireplace. It was held that the
consignment as a whole was unmerchantable. It had defects making it unfit for burning.
However, Section 16 (1) (b) does not apply where the buyer has examined the goods and by such
examination, the buyer would have discovered the defects i.e. the defects ought to have been
revealed. Nevertheless, if the defects could not be discovered by any reasonable examination,
then the implied condition as to merchantable quality would apply. The case is WREN v HOLT,
the plaintiff recovered damages for breach of condition of merchantability of beer which was
contaminated by arsenic. The exception was not applicable because the defect was not
discoverable on reasonable examination. Another case that can be referred is THORNETT &
FERH v BEERS & SONS. In this case, though the buyer had conducted a superficial look at the
outside of some barrels of glue, there was no examination and therefore, the condition did not
apply. A proper examination such as opening the barrel would have revealed the defect.

Based on the question given, as we know Adli only given the chance to inspect the
camera visually without being able to actually test it and he found that the camera was faulty and
could not function at all when he want to used it for first time. This can be referred to Section 16
(1) (b) and case THORNETT & FERH v BEERS & SONS where there no actual examination.
Goods must be merchantable quality, which means that the goods sold must be fit for the
particular use for which they were sold. Seller is not liable if the seller ask buyer to check the
product before buy it. But in this case, Adli only can visually check the camera without test the
product.

In conclusion, Adli can repudiate the contract as seller breached the contract on implied
condition as to merchantable quality.
QUESTION 4

Discuss whether ownership is transferred to the buyer in the following situations:

a) Datuk J asked his friend, Mr. Ting, a licensed auctioneer, to keep some antique vase and
jewelry belonging to his late wife before he decides which of them he would want to
auction for charity purposes. Mr. Ting auctioned off the jewelry without permission.
The buyer, Datin K who was successful in the bid, had no idea that Datuk J did not
approve of the sale. Datuk J wants the jewelry back but Datin K insists on keeping them
as she had paid for them.
Advise the parties.

b) Chip and Dale are best friends who stay in the same rented apartment. They shared the
household expenses and jointly bought a television, DVD player, refrigerator,
microwave oven and sofa. While Chip was away on a business trip for a week, Dale who
was in a lot of debt, sold off the television and microwave oven to Wang to pay off his
debt. When Chip returns, he demanded the goods back from Wang as he did not
consent to the sale. Wang who is innocent buyer refused to return them as he had paid
for them.
Advise the parties.

The issue in this question is whether the owner can transfer the good title to the buyer
under the view of exceptions to the NEMO DAT QUOD NON HABET RULE.

Section 27 Sale and Goods Act 1957 states that when the goods are sold by a person
who is not the owner, and does not sell them under the authority or consent of the owner, the
buyer acquires no better title to the goods than the seller had. This general rule comes from the
maxim Nemo dat quod non habet which means no one can transfer a better title than he has
himself. In related to the case of Lim Chu Lai v Zeno Ltd, Zeno was to provide Ahmad (a
contractor) with all the materials for the construction of the culverts. Zeno bought the materials
for the project and delivered them to the construction site. Subsequently, Ahmad’s contract with
the Petaling Jaya Authority whom Ahmad had an agreement with was cancelled. When Zeno
tried to sell the materials, they discovered that the materials had been sold by Ahmad to one Lim
Chu Lai. The court held that Ahmad was not the owner of the goods when he sold the goods to
Lim Chu Lai. Since Ahmad had no title to the goods or authority to sell them, he could not pass
any title to Lim Chu Lai. In Commercial & Savings Bank of Somalia v Joo Seng Company,
the plaintiffs (a bank in Somalia) were pledges of a cargo of rice on board the mv Lynna. The
rice were brought to Singapore by the charterers of mv Lynna and sold part of the cargo to the
defendants at half price. This was done without the permission of both the plaintiffs and the
buyers of the rice. The plaintiffs sued the defendants for conversion and retinue. The defendants
claimed that they bought and acquired good title to the rice without any notice of the plaintiff’s
title. It was held by the court that the defendants did not acquire a good title as the general rule
applied.

Under certain exceptional circumstances, the Nemo dat rule does not apply. The buyer
will get the title to the goods even though the seller was not the owner or does not have the
authority to sell. There are 6 exceptions under the exceptions to the Nemo dat rule. First is the
Estopple. Under the section 27 of Sale and Goods Act states that unless the owner of the goods
is by his conduct precluded from denying the seller’s authority to sell. The owner of the goods
makes a representation to the buyer; the person who sells the goods has his authority to do so and
the buyer acts in reliance on it, the owner is stopped from denying the seller’s authority. The
buyer who buys the goods in good faith will get a good title. In N.Z. Securities v Wrightcars
Ltd case, B sold the car to C when he clearly did not have any possession to the car until the
price of the car had been received by A. Before the sale to C, he was informed by A’s employee
that B had paid for the car. The cheque given to A by B was dishonored and therefore A
repossessed the car. The court held that A was precluded by his conduct from denying B’s
authority to sell. C has good title. Second is the Sale by Mercantile Agent (section 27 of Sale
and Goods Act). The person must have the authority to sell goods such as an auctioneer. Under
this proviso, a number of requirements must be satisfied. The mercantile agent must be in
possession of the goods or document of title to the goods provided under section 2 of Sale and
Goods Act includes a bill of lading, dock warrant, warehouse keeper’s certificate, wharfinger’s
certificate, railway receipt, warrant and any other document used in the ordinary course of
business, the possession of the goods/document of title must be with the consent of the owner,
sells the goods in the ordinary course of business and the buyer acted in good faith. Third is the
Sale by one of the joint owners (section 28 of Sale of Goods Act). 2 conditions must be
fulfilled under this section are the owners has the sole possession of the goods by permission of
the co-owners, and the buyers acts in good faith. Fourth is the Sale under a voidable contract
(section 29 of Sale and Goods Act). Under the section 19 or 20 of the Contracts Acts 1950,
the contract is voidable when the consent of the owner is caused by coercion, fraud,
misrepresentation or undue influence. If the seller obtained possession of the goods under a
voidable contract, the voidable contract has not been rescinded, and buyer acted in good faith,
the buyer will get a good title to the goods. Fifth is the Sale by a seller in possession after sale
(section 30 (1) of Sale and Goods Act). This happens when a seller remains in possession of
the goods when he already transferred the property in the goods to a buyer. If the seller then
sells the goods to the 2nd buyer who buys in good faith, the buyer will get a good title. The
original buyer loses his title and has to get his remedy against the seller. In the case of Pacific
Motor Auctions Pte Ltd v Motor Credits (Hire Finance) Ltd, the plaintiffs became owners of
several cars in the possession of s dealer and the dealer would retain the cars and sell them
according to its nature of business. Whenever the cars were being sold, the plaintiffs will receive
the money. The plaintiffs revoked the dealer authority to sell when they found out he is in the
state of financial difficulties. The dealer went ahead and sold a number of vehicles. The
question was whether the buyer obtained a good title as the dealer had no authority to sell. The
court held that the situation fell under this exception as the seller was in continuous possession
after the sale. Sixth is the Sale by a buyer in possession after sale (section 30 (2) of Sale and
Goods Act). The buyer obtains possession with the consent of the seller. But, the property of
the good is still subject to some rights of the seller. Buyer can get a good title if he acted in good
faith. In the case of Newtons of Wembley Ltd. V Williams, the ownership to A cannot be
passed until the cheque is cleared. While A is under possession of the car, the cheque
subsequently dishonored and the plaintiff terminate the contract. A had sold the car to B who
acted in a good faith and B in turn resold the car to D. While the plaintiff attempted to recover
the car from B, the court held that A, the original buyer, was in possession of the car with the
consent of the plaintiff. A could pass a good title to B who transferred the car to D and D had a
good title to the car which he had bought.
 In both situations, under certain exceptional circumstances, the Nemo Dat rule does not
apply. This is mean, the buyer will get the tittle to the good even though the seller was not the
owner or does not have the authority to sell. So in this both cases, the buyer Datin K and Wang
are not guilty, they still get the tittle to the goods even though the seller Mr. Ting and Dale was
not the owner of the goods when they sell it. Thus, there are some exceptions that are same with
this both cases, there are Sale by a Mercantile Agent. Under Section 2 state that to be a
mercantile agent, the person must have the authority to sell goods or consignment for sale or buy
them or raise money on their security. This means, the owner Datuk K and Chip must give an
authority to the mercantile agent, Mr. Ting and Dale. But in this case, the owners did not give
any authority to the 2nd party to be their mercantile agent. When this happens, the 3rd party, the
buyer Datin K and Wang will get a good tittle over the goods. Section 27 provides that, the
buyer acts in good faith and has not at the time of the contract of sale notice that the seller has no
authority to sell. However, under this provision, there are number of requirements must be
satisfied. First, at the time of the sale, the mercantile agent Mr. Ting and Dale must be in
possession of the good or the document of the tittle to the goods. “Document of tittle” is under
Section 2 use as a proof of the possession or control of goods or authorizing or purporting to
authorize, either by endorsement or by delivery, the possessor of the document to transfer or
receive goods thereby represented. Second, the buyer has acted in good faith and must not have
knowledge of the agent’s lack of authority to sell. Thus, there is another exception in this both
situations; it is sale by One of the Joint Owners. Under Section 28 provides, “if one of the
several joint owners of the goods has the sole possession of them by permission of the co-
owners, the property in the goods is transferred to any person who buys the of such joint owner
in good faith and has not at the time of the contract of sale notice that the seller has no authority
to sell”. Applying section 2 in this situation, one of the owner Dale, has the sole possession of
the goods by the permission of the co-owners, Chip and the buyer acts in good faith and has no
knowledge of the seller’s lack of authority to sell.
In both case, although the 1 st party did not give the authority to the 2 nd party, the
contract between 2nd party and the buyer is still valid because the buyer has acted in good faith
and does not have knowledge of the agent’s has no authority to sell the goods. The buyer still
gets a good tittle over the goods.