SALE OF GOODS ACT 1957

The Sale of Goods Act 1957(Revised 1989) is the law applicable to sale of goods in
Malaysia. Section 1 states that the Act shall have effect within the Peninsular
Malaysia only.

The Act does not apply to Sabah & Sarawak. These states are governed by the
English Sale of Goods Act 1893.

The Sales of Goods Act 1957 (Hereinafter we shall term it as SOGA for convenience)
applies to contracts for the sale of all types of goods including second- hand goods
and makes no distinction between commercial sales and private sales or between
wholesale and retail.

The basis for a contract for the sale of goods is essentially a contract.
Section 3 of the Sale of Goods Act (SOGA) states that the provisions of the Contracts
Act 1950 will apply in so far as they are not inconsistent with the provisions of the
SOGA. This means that the laws in SOGA will supersede that of the Law of Contract,
and if something cannot be found in SOGA then the Contracts Act can be applied to
fill in the gap in SOGA.

What is a Contract of Sale of goods?

Definition:
A contract for the sale of goods is defined in Section 4 (1) as:

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.

• Property is ownership. Ownership or title is sometimes use interchangeably.

Property in goods or title in goods means the ownership

• It is clear that the object of the contract of sale is the transfer of ownership of
the goods to the buyer for money consideration.

• If the goods are exchange with other goods without money consideration than
SOGA does not apply – see barter trade below.

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Difference between a Sale and an Agreement to Sell

S 4 (3) states that where under a contract of sale the property in the goods is
transferred from the seller to the buyer, the contract is called a sale, but where the
transfer of the property in the goods is to take place at a future time or subject to
some condition thereafter to be fulfilled, the contract is called an agreement to sell.

S 4 (3) shows two forms of Contract of Sale:-

1. A sale is a contract under which the property in the goods is transferred

immediately from the seller to the buyer.

2. An agreement to sell is a contract by which the transfer of the property in the

goods is to take place at a future time or subject to some condition thereafter
to be fulfilled.

NB: Therefore, a sale must be distinguished from an agreement to sell:

Seller & Buyer Transfer of property

Requirements of a
Contract of Sale of
Goods.

Goods Price

A contract for the sale of goods has four (4) requirements:-

Seller & buyer – transfer of property – goods – price.

(i) There must be a seller and a buyer:

‘Seller’ means person who sells or agrees to sell and

‘Buyer’ means person who buys or agrees to buy.

A contract of sale takes place only when the buyer is bound to buy & the
seller is bound to sell.

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(ii) The sale involves transfer of property:

The legal object of the sale transaction is the transfer of ownership or title in
goods from the *owner to the buyer.

Ownership is to be distinguished from possession. A party may be in

possession of the goods but he is not the owner.

*Only the party who is the owner can transfer or pass title to the buyer.

Therefore, a seller is not necessarily the owner.

(iii) The contract to sell must be in relation to goods:

What are Goods?

Goods is defined in Section 2 SOGA as ‘every kind of moveable property other
than actionable claims & money, includes stock & shares, growing crops, grass
and things attached to or forming part the land which are agreed to be severed
before sale or under the contract of sale’

What are not goods under Section 2?

These are not goods -
• Money
• Selling of services are not goods.
• Immovable properties such as land and buildings (house / factory)
• Actionable items –e.g. chose in action i.e. a right to sue another person for
a debt.
• Trees are part of the land but logs that have been severed are goods.

(iv) PRICE:

Price is the consideration. Section 2 defined ‘PRICE’ as ‘the money

consideration’ for a sale of goods.

If no money is involved
If the transaction is an exchange of goods, then this is not a contract of sale of
goods but a barter trade system.

In a barter trade system, the consideration is goods alone and no money is

involved in the transaction. This is not a contract of sale of goods under SOGA.

However, if the contract of sale is part goods & part money then it is still a
contract of sale of goods.

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 Fixing of Price

A contract of sale is basically an offer to buy or sell goods for a price and the
acceptance of such an offer.

Price is the money consideration for the sale of goods.

Price may be fixed in various manners:

a. it may be fixed by the contract, e.g. X agrees to sell a dress to Y for

RM100.

b. it may be determine by the course of dealing between parties – s.9(1).

c. If the price is not fixed or determine, then the buyer must pay a
reasonable price. What is a reasonable price is a question of fact
dependent on the circumstances of each particular case: S9 SOGA.

Once all the above four (4) requirements are satisfied, there is a contract of sale of
goods even though:

i. Payment may be immediate or in installments, or

ii. Delivery of the goods may be in installments or

iii. The goods –

a) Do not exist at the time of the contract but the goods is to be acquired in
the future (future goods) or

b) Have yet to be identified or ascertained (unascertained goods).

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CATEGORIES OF GOODS

Exisiting goods

Categories of goods Specific goods

Ascertained goods

Unascertained
goods

Future goods

Section 6(1): the goods that form the subject of a contract of sale may be either
existing goods, owned or possessed by the seller or future goods.

a. Existing goods – these are goods that are already existing or available at the time
of making the contract. These goods are already owned or in possession of the
seller.

Existing goods may be specific or identified as the goods to be sold, or it may be

unascertained.

b. Specific goods – goods are specific goods if the goods are identified and agreed
upon at the time the contract of sale is made. These are goods that are identified
and you know exactly which one you are buying or selling.

E.g. A agrees to sell to B his car registered as BCY 121. Here the goods are
specific and identified, as the car is BCY 121.

c. Ascertained Goods – these are goods that are already separated from the bulk
and identified.

d. Unascertained Goods – Unascertained goods are goods that are identified by

description only. These are goods that are still together or still in its bulk form.
The goods have not been appropriated (set aside) to the contract after the
contract has been made.

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 Example of ‘goods identified by description’.
A has 10 bags of rice and agrees to sell 6 bags. The question is ‘which 6 bags?’ Once
the 6 bags have been set aside or set apart, then the goods have become specific
and ascertained goods.

Note: Unascertained goods is mentioned but not defined in s.18 SGA 1957.

e. Future goods – is defined in section 2 SGA 1957 to mean goods that has yet to be
manufactured or produced or acquired by the seller after the making of the
contract of sale. These are goods that do not exist at the time of making the
contract but will be ready only in the future.

Future goods are goods to be manufactured, produced, or acquired by the seller

after the contract has been made. Future goods may be specific or unascertained.
However, most future goods are unascertained.
E.g. An agreement to sell a particular car, which both Seller and Buyer knows has
yet to be made in the factory or it belongs to a third party at the time of the
contract and the Seller has yet to acquire it

FORMATION OF THE CONTRACT

A contract of sale is made by an offer to buy or sell goods at a price and by the
acceptance of such an offer - S 5(1) SOGA.
.
A contract for the sale of goods can be in writing or orally , or partly in writing and
partly by oral means or it may even be implied from the conduct of the parties -
Section 5 (2) SOGA.

TERMS OF THE CONTRACT

Terms of the contract can be expressed or implied.

The terms in SOGA, as in contract, is divided into ‘Conditions’ & ‘Warranties’.

Section 12 (2) defines that a condition is a stipulation essential to the main purpose
of the contract, the breach of which gives the innocent party the right to treat the
contract as repudiated

[Note: - Repudiate means to terminate the performance of the contract, e.g. by

rejecting the goods. -Affirm means to treat the breach of condition as a breach of
warranty and to continue with performance of contract.]

Section 12 (3) defines that a warranty is a stipulation collateral to the main purpose
of the contract, the breach of which gives the innocent party the right to a claim for
damages but not a right to reject the goods and treat the contract as repudiated.

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Other than the expressed terms that are agreed upon by the parties, there are
certain implied terms. These implied terms are provided and regulated by SOGA.

IMPLIED TERMS
There are several important terms that are implied into a contract for the sale of
goods under SOGA. These implied terms are meant to protect the buyer or
consumer (not the seller).

Thus, even if the parties to the contract did not expressly state the conditions of the
goods, the SOGA implies certain terms into the contract.

But these implied terms can be excluded or exempted by the seller (section 62).

If the seller did not exclude them then these implied terms will automatically apply
to every contract for the sale of goods.

The implied terms in the SOGA regulate a number of factors such as (1) time, (2) title,
(3) possession, (4) free from encumbrance, (5) description, (6) fitness for particular
purpose, (7) merchantable quality, and (8) sale by sample etc.

1. Section 11: Stipulation as to Time

Generally, time of payment is not deemed to be of the essence of the contract.

However, this depends on the terms of contract.

If time is not of the essence of the contract, then the seller cannot automatically
repudiate the contract where the buyer fails to pay.

Time of delivery is prima facie of the essence of the contract. This means the
buyer can legitimately refuse to accept any late delivery of goods, and can in turn
sue for damages
Harrington v Browne: where the contract involves livestock, time of delivery
being of the essence of the contract is appropriate.

2. Section 14(a): Implied term as to Title.

S14 (a) states ‘there is an implied condition on the part of the seller, that in the
case of a sale, he has a right to sell the goods,

and that in the case of an agreement to sell, he will have a right to sell the goods at
the time when the property is to pass’.

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 Note: This is an implied ‘Condition’. If breach, the innocent party can terminate
contract.

S14(a) requires the seller to have the ‘right to sell’ when he sells the goods. The
seller need not be the owner of the goods. He is only required to have the right to
sell the goods.

If the seller sells the goods without having the ‘right to sell’ then he is in breach
of condition and the buyer can repudiate or terminate the contract and recover
the price in full even though buyer has used the goods.

The rationale (reasoning) is that the buyer of the goods pays the price in order to
enjoy ownership as well as the use of the goods – Rowland v Divall

In Rowland v Divall – Plaintiff bought a used car and after using it for 4 months
discovered that it was a stolen car. He had to return it to the owner. He sued the
seller. The Court held that seller had breached the implied condition that the seller
must have the right to sell. P was allowed to recover the full price even though he
had used the car.

3. Section 14(b): Implied warranty as to Quiet Possession.

S14 (b) - Unless a different intention is shown, there is an implied warranty

that the buyer shall have and enjoy quiet possession of the goods.”

Note: This is a ‘Warranty’. If breached innocent party cannot terminate contract.

Meaning of Quiet Possession

The rationale (reason) is that after the buyer had bought the goods he must be
allowed to use the goods without interference from the seller.

Illustration of Quiet Possession

E.g. X sold his car to Y. But X likes the car so much that he often persuade Y to lend
him the car. X also had a set of keys to the car and he used the car whenever he
liked regardless of whether Y needed the car or not. X has breached the implied
warranty that Y should have and enjoy quiet possession of the car.

Healing (Sales) Pty Ltd v Inglis Electrix Pty Ltd:

The seller who has not been fully paid by the buyer may not wrongfully interfere
with the goods sold by repossessing it.

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4. Section 14(c): Implied warranty that goods are free from encumbrances.

There is an implied warranty that the goods shall be free from any charge or
encumbrances in favour of any third party not declared or known to the buyer
before or at the time when the contract is made.

NB: This is a ‘warranty’. If breach the innocent party cannot terminate the contract.

Steinke v Edwards
Owner sold car to P without informing that there was still an encumbrance on the
car i.e. government tax was still not paid. The government seize the car. Owner
had breach the warranty. P paid the tax and recovered the money from the owner.

5. Section 15: Implied condition that goods correspond with description.

‘Where there is a contract for the sale of goods by description there is an implied
condition that the goods shall correspond with the description, and if the sale is
by sample as well as by description, it is not sufficient that the bulk of goods
corresponds with the sample if the goods do not also correspond with the
description.

This is a ‘Condition’. If breached innocent party can terminate contract.

Note: All sale of unascertained goods are sale by description. Specific goods
especially where the buyer has not seen the goods e.g. a mail order or sale by
catalogue or goods in a self-service shop where the buyer has seen the goods,
selected and examined it or the goods are describe whether on the label or
packaging, these are categorized as sale by description.

Sale by Description – S 15
S15 states that where there is a contract of sale by description, there is an implied
condition that the bulk of the goods must correspond with the description; and if
the sale is by sample and description then the bulk of the goods must
correspond with the sample and the description.

(i) Goods by description

In a contract for the sale of goods by description, the bulk of the goods must
correspond with the description. Description includes any physical attributes of
the goods.

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 Beale v Taylor
Seller advertised for sale and described the car as a ‘Herald Convertible, white
1961 twin carb’. Buyer bought the car and later discovered that the rear half of
the car was a 1961 Herald Convertible but the front part of the car was from an
earlier model. The court held there was a breach of condition of sale by
description.

Re Moore & Landauer:

A contract provided for 3,100 cases of canned fruit to be packed “30 tins to case”.
Some of the cases were packed 24 tins to case. The total quantity was still correct.
Despite this, it was held that the goods failed to correspond to description and so
the buyer was entitled to reject the whole consignment of goods.

(ii) Goods by Sample & Description – S 15

If the sale is by sample and description then the bulk of the goods must
correspond with the sample and the description.

6. Section 16: Implied condition as to quality or fitness.

S16 (1) states that there is no implied warranty or condition as to quality or

fitness for any particular purpose of goods supplied under a contract of sale‘.

NB: The basic rule here is that buyer must be aware and to exercise care in making
purchases because the law in section 16 does not protect the buyer.
S16 (1) adopts the common law principal of ‘Caveat emptor’ meaning ‘let the
buyer beware’. The buyer must make sure the goods he buys are of the quality he
wants or that the goods fits the particular purpose that he wants. If he does not do
so he must bear the consequences. S16 (1) does not protect the buyer.

But S16 (1) makes two exceptions i.e. S16 (1) (a) & (b).

1st exception: Implied condition that the goods must be reasonably fit for a
particular purpose.

S 16 (1) (a) – where the buyer makes known expressly or impliedly to the
seller, the particular purpose for which the goods are required, so as to show
that the buyer relies on the seller’s skill or judgment, and the goods are of a
description which it is in the course of the seller’s business to supply (whether
as manufacturer or producer or not) there is the implied condition that the
goods shall be reasonably fit for such purpose.

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 Provided that, in the case of a contract for the sale of a specified article under its
patent or other trade name there is no implied condition as to its fitness for any
particular purpose.

There are four (4) requirements in S16 (1) (a):-

✓ The buyer must make known, expressly or impliedly, to the seller at or

before the time when the contract is made, the particular purpose for
which the goods are required.

✓ And the buyer is relying on the seller’s skill or judgment.

✓ The goods are of a description which it is in the course of the seller’s

business to supply, and reasonably fit for its purpose

✓ If the goods are specific, they must not be bought under their patent
or trade name –

If all this 4 conditions are satisfied, then goods must be reasonably fit for a
particular purpose.
.

1. Buyer makes known to seller the particular purpose of the goods

Good bought for it normal purpose

In Priest v Last, when the buyer poured hot water into a thermos flask, it
exploded and injured the buyer. The normal purpose of the thermos flask is to
keep hot water. Therefore, when it exploded, there is breach of its implied
condition i.e. it showed that the flask was not reasonably fit for its normal purpose
i.e. to hold hot water.

Goods bought for a special purpose

If the goods is to be used for a special purpose, then the buyer must make known
to the seller the special purpose.

Griffiths v Peter Conway Ltd.

A woman bought a Tweed coat without disclosing that she had unusually sensitive
skin. She sued but the court held that there was no breach of implied condition as
to fitness of purpose of the coat because she had not made known to the seller of
her sensitive skin. The coat would not harm a normal person.

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2. The buyer is relying on the seller’s skill and judgment
It is necessary to show that the buyer relied on the seller’s skill and judgment,
either expressly or impliedly.

Grant v Australian Knitting Mills laid the principle that it was necessary to show
that there was reliance on the seller’s skill and judgment and that the reliance can
be inferred from the fact that a buyer goes to the shop in the confidence that the
seller has selected the goods with skill and judgment.

3. The goods are of description, which it is in the course of the seller’s business
to supply…and reasonably fit for a particular purpose.
This means the seller is in that kind of trade or business e.g. if seller is in the
cigarette business, it is no defense for the seller of cigarettes to argue that he had
not previously sold or supply cigarettes of that brand.

Ashington Piggeries Ltd V Christopher Hill Ltd

A seller of animal foods, was asked and supplied mink food even though seller had
never previously supplied such kind of food.
Held: It is no defense for an animal food seller to argue that he had not previously
supplied such brand, because making and selling animal feed is in the course of
the sellers business.

As long as seller dealt with the goods of that particular kind it did not matter that
he had not dealt in goods of the contract description i.e. the mink food.

…and reasonably fit the particular purpose

This means the condition of the goods does not have to be absolutely fit for the
buyer’s purpose, but only that it should be reasonably so.

In Griffiths v Peter Conway Ltd, the Tweed coat was reasonably fit for wearing
by normal persons but not for one who has sensitive skin.

4. If the goods are specific, they must not be sold (or bought) under their
patent or trade name.

If a buyer ask for specific goods under a patent or trade name with the
impression that he is not relying on the seller’s skill or judgment, then he cannot
later complain if the goods bought are not fit for the purpose for which he requires
them.

But, if the buyer buys under a trade name and relies on the seller to select a
suitable item, an implied condition arises that the buyer is relying on the seller’s
skill or judgment.

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 In Baldry v Marshall the buyer had asked the dealer (seller) for a car suitable for
touring and the dealer recommended a ‘Bugatti’ car. Buyer later found out that the
car was not suitable for touring.
The court held that the said dealer is liable because buyer had relied on the
dealer’s judgment to select a suitable car for his purpose.

2nd exception – Implied condition that the goods must be of merchantable

quality – S 16 (1) (b):

Section 16 (1) (b) states that where goods are bought by description from a seller
who deals in goods of that description (whether or not he is the manufacturer or
producer) there is an implied condition that the goods shall be of merchantable
quality.

But if the buyer has examined the goods, there shall be no implied condition as
regards defects which such examination ought to have revealed.

And it is implied that the goods shall be of merchantable quality.

What is merchantable quality?

Merchantable quality means the goods sold must be fit for the particular use to
which they were describe and sold. It is reasonable to expect the goods to be of
certain standard of quality or fitness. If the goods are defective, it is not of
merchantable quality.

Davis Jones v Wills – a pair of shoes where the heels came off on the third occasion
of use was held to be of unmerchantable quality.

Price
Price can sometime be a relevant consideration to determine whether the goods are
of merchantable quality, especially if there is a substantial difference in price.

However, the fact that the goods are sold at substantial reduction in price is not
conclusive that the goods are not of merchantable quality - Cehave v Bremer

Buyer has examined the goods – Proviso to S 16 (1) (b):

Proviso to S16 (1) (b) states that if the buyer has the opportunity to examine the
goods and such examination would have revealed the defect, then this implied
condition will no longer apply to protect the buyer.

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Thornett & Fehr v Beers & Sons- in this case the buyer made a superficial
examination i.e. he only examine the outside of some barrels of glue. A proper
examination such as opening the barrel would have revealed that the glue was
defective. It was held that since there was already an examination, the implied
condition of merchantable quality did not apply anymore and the buyer could not sue
the seller.

Thus, if the buyer had made some form of examination on the goods he cannot later
complain of the defects, which on reasonable and proper examination would have
revealed.

Note: Both 16 (1) (a) & (b) are implied condition, if breach, can lead to termination of
the contract. It would also appear that both sections exclude a private sale.

SALE BY SAMPLE - Section 17

S17(1) provides that a contract of sale is a contract for sale by sample where there is
a term in the contract express or implied to that effect’.
This is an implied condition.

Under S 17(2) there are 3 implied conditions of sale by sample:

1. S17(2)(a) - that the bulk shall correspond with the sample in quality.

2. S17(2)(b) - that the buyer shall have reasonable opportunity of comparing the
bulk with the sample, before acceptance and,

3. S17(2)(c) - that the goods shall be free from any defects rendering them
unmerchantable which would not be apparent on reasonable examination of the
sample. (apparent here means ‘not easily seen or detected’)

The three conditions are independent of one another, meaning a breach of any one
will entitle the buyer to reject the goods and terminate the contract.

Drummond v Van Ingen

The manufacturer submitted a sample of material (cloth) to the cloth merchants who
later bought the material. The cloth when made into garments will split at the seams.
It was therefore unsuitable for its purpose.
The cloth supplied was equal to the sample previously examined but because of a
latent defect not discoverable upon reasonable examination, the court found the
seller in breach of section 17 (2) (c). (latent here means ‘not visible’).

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TRANSFER OF PROPERTY in the Goods

Sections 18, 19, 20, 21, 23 & 24 deals with transfer of property.

Transfer of property is known as Passing of Property.

Property in goods means title or ownership.

Ownership or title must be distinguished from possession.

Possession means physical possession.

Property in goods is not the same as possession. Although property in goods sold may
have passed to the buyer, but the seller may continue to be in possession of the goods
– here buyer has title – Seller has possession.

Buyer has possession – owner has title:

On the other hand, person may be in possession of goods but title or ownership still
remains with the owner e.g. in hire-purchase of cars where the hirer has physical
possession of the goods but the title or ownership still remains with the finance
company until the final installment is discharged.

Why is it important to ascertain the time when property is to pass?

It is important to know when property (title or ownership) is to pass because of 2

reasons:
i. To ascertain when RISK passes – S26.
ii. To see if the Nemo Dat Rule apply – S27.

RULES ON PASSING OF PROPERTY

When does property pass or when is there transfer of property in a contract for the
sale of goods?

General rule is that title passes when the parties to a contract of sale intend that it
should pass.

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Section 18 – Goods must be ascertained
Where there is a contract for the sale of unascertained goods (i.e. goods defined by
description only and not identified until after the contract is made), no property in
the goods will be transferred to the buyer unless and until the goods are ascertained
or identified.

E.g. X contracts to buy a new car, which will only be delivered in 3 months’ time. This
car is part of a larger consignment of new cars. Which new car belongs to X is not
known at the time the sale was made. Thus, the car has not been identified. It is a sale
of an unascertained car.

Property in the car does not pass to B until the seller has ascertained i.e. set aside or
identified the particular new car for the purpose of the sale.

Section 19 – property passes when intended to pass

Where there is 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.

The parties to a contract for the sale of specific goods can expressly state when the
property is to pass e.g. the parties can agree on a date or upon some event happening
that will cause the property to pass to the other party.

(Note: What is the meaning of ‘intend’? To ascertain the intention of the parties, S20
and S21 provide 3 rules governing the time at which property in specific goods
passes.)

Example of s19 application:

A sells his Proton car bearing registration number WWW 23 to B. The contract of sale
states that B will only have title to the goods when full payment of the goods is made.

Therefore, the property will not pass until B has made full payment.
But if before B can make full payment, the car which is in A’s possession is damaged,
A has to bear the risk because property has not passed to B yet.
What if the parties did not expressly indicate when the property is to pass?
In specific goods, if the parties did not expressly indicate when the property is to
pass, sections 20, 21 & 22 will apply.

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Section 20 – applies to specific goods already in a deliverable state
Where there is a sale of specific goods in a deliverable state, the property in the goods
passes to the buyer at the time when the contract is made, not when there is
payment or delivery.

E.g. 1- B buys a certain book on credit. Property in the book passes immediately on
the sale even though payment has yet to be made.

E.g. 2 - Ben agree to buy Joe’s bicycle. Ben said he will pay for it next month and Joe
agreed. The property passes immediately to Ben even though Ben has not paid for it
yet.

Note: It does not matter whether the time of payment of the price or the time of delivery
of the goods, or both, is postponed.

What is meant by ‘deliverable state’?

Goods are in a deliverable state when the goods are in a physical state that the buyer
can take delivery.

Underwood Ltd v Burgh Castle Brick and Cement Syndicate

There was a contract for the sale of an engine that was to be delivered by rail. At the
time of the contract, the engine was fixed to the floor. It had to be dismantled from
the concrete floor and delivered by rail.
While the engine was being loaded onto the railway track, it was partially broken by
accident.
Held : The title had not passed to the buyer at the time of the accident, it was still at
seller’s risk because the engine was still not in a deliverable state.

Section 21 – specific goods yet to be put into deliverable state

Where there is a contract for the sale of specific goods and the seller is bound to do
something to the goods for the purpose of putting the goods into a deliverable state,
the property does not pass until such thing is done and the buyer has notice of it.

‘until such thing is done’ - meaning seller has to do something to the goods in order
to make the goods ready to be delivered. The property or title will not pass until seller
has done something to make the goods ready for delivery.

‘buyer has notice of it’ means buyer has knowledge of it.

E.g. X agrees to sell his car to Y and X promise to change the tyres, the property in
the car does not pass to Y until the tyres are changed and Y knows about it.

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Section 22 – specific goods – seller to do something to ascertain price
Where there is a contract for the sale of specific goods in a deliverable state but the
seller has to weigh, measure, test or do something to the goods in order to fix the
price, the property does not pass until such act or thing is done and the buyer has
noticed.

E.g.: X agrees to sell all remaining sugar contained in a large bag for RM 2.00 per kg to
Y. How much sugar is in the large bag is not known until the seller
weighs the sugar in the large bag and informed Y as to how much sugar is left and
thus is able to fix the price. Property in the sugar passes when it is weighed, price
fixed and buyer Y knows about it.

Section 23 – Sale of unascertained or future goods

For the sale of unascertained or future goods by description, property in the goods
will pass when goods of that description and in a deliverable state are unconditionally
appropriated to the contract,

either by the seller with the assent of the buyer or

by the buyer with the assent of the seller.

For unconditional appropriation to take place, the goods must be

• Identified
• Separated from other goods where necessary
• irrevocably attached to the contract.

In this situation, a contract for the sale of unascertained or future goods by

description is not a sale but an agreement to sell.

The SOGA does not define ‘unascertained goods’ but ‘future goods’ is defined as ‘goods
to be manufactured or produced or acquired by the seller after the making of the
contract of sale’. Therefore, unascertained goods are goods which cannot be
specifically identified at the time of the contract of sale but are referred to by
description.

‘Appropriated’ means the selection and identification of the goods such as the act of
selection, separation or weighing from the bulk, e.g. the separation and weighing of rice
from the bulk into 10 kg bags each. This can be done by the seller or the buyer. Once
both parties agree on the appropriation of the unascertained goods, the goods become
ascertained and property in the goods passes.

‘unconditionally appropriated’ means the appropriation has been assented or agreed

by the seller or buyer

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 Aldridge v Johnson ((1857) 7 E & B 885), the buyer agreed to buy 100 quarters of barley out of
200 quarters which he had inspected and sent some sacks to contain the goods. The court
decided that property passed as soon as the seller filled the sacks, even before the goods left the
seller´s possession.

Section 24 – Goods sent to buyer on approval or ‘on sale or return’

Unless a different intention appears, when the goods are delivered to the buyer on
approval or ‘on sale or return’ the property in the goods passes to the buyer,

a) when the buyer signifies his approval or acceptance to the seller or does any
other act adopting the transaction; or

b) If the buyer does not signify his approval or acceptance to the seller but
retains the goods without giving notice of rejection, property passes on the
expiration of such time, and if no time is fixed, property passes on the
expiration of a reasonable time.

What is reasonable time? This will depend on the circumstances of the case.
Section 24 covers goods sent on trial, giving the buyer the option to purchase on the
terms specified.

If the buyer is unable to return the goods received ‘on sale or return’ because the
goods was lost or destroyed whilst in his possession but not due to his fault, then he
is not liable as long as the lost/destruction occurs BEFORE the due date to return the
goods or if no time is fixed, within a reasonable time.

But if the goods are lost or destroyed through his fault, he is liable to pay for the goods.

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RULES ON PASSING OF PROPERTY - A SUMMARY-
SECTION TRANSFER OF PROPERTY
18 For the contract of sale of unascertained
goods, property passes when goods are
ascertained or identified.
19 For the contract of sale of specific or
ascertained goods, property passes when
parties to the contract intend it to be
passed
20 For the unconditional contract of sale of
specific goods in a deliverable state,
property passes at the time the contract is
made and not at the time of payment or
delivery
21 For the contract of sale of specific goods yet
to be put in a deliverable state, property
passes when the seller has done what he is
bound to do under the contract and the
buyer has notice of it.
22 For the contract of sale of specific goods in a
deliverable state but the seller needs to do
something to ascertain the price,
the property passes when such an act is
done and buyer has notice.
23 When there is a contract for the sale of
unascertained or future goods by
description and goods of that description
and in a deliverable state are
unconditionally appropriated to the
contract by the seller with the assent of the
buyer or by the buyer with the assent of the
seller, the property in the goods thereupon
passes to the buyer.
24 When goods are delivered to the buyer on
approval or ‘on sale or return’ property
passes when buyer signifies his approval or
acceptance to the seller or does any other act
adopting the transaction.
If the buyer does not signify his approval or
acceptance to the seller but retains the
goods without giving notice of rejection,
property passes on the expiration of time
fixed for the return of the goods, and if no
time is fixed, property passes on the
expiration of a reasonable time.

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PASSING OF RISK

Section 26 – Risk prima facie passes with property

The general rule is that risk passes when the property in the goods passes, regardless
of whether delivery has been made. Thus, generally, unless otherwise agreed, the
goods remain at the seller‟s risk until the property is transferred to the buyer.

Risk
The general rule is that the party who has ownership or title to the property (goods)
bears the risk and risk passes when property in the goods passes irrespective of
whether delivery has been made.
Thus if the goods are damaged or destroyed, the person who has the title bears the
risk (i.e. he will be responsible for the goods).

Generally goods remain at the seller’s (ownership) risk until the property has passed
or is transferred to the buyer. Once the property is passed to the buyer, the goods are
now at the buyer’s risk, even if buyer does not have possession of the goods and
whether or not delivery has been made, because the buyer is now the new owner. The
risk is now borne by the new owner.

Example:
If A has sold the car to B, and if property in the car has passed to B, then if the car is
damaged while at A’s premises, B bears the risk and will still have to pay for the car
despite it being damaged.

However, if property has not passed to B but remains with A, then when the car is
damaged, A bears the risk & will either have to repair the car or replace the car. If he
does not do so, B can rescind the transaction.

In short, under S26, risk is borne by whoever is the owner regardless of whether
he is in possession or not. (unless the parties agree otherwise as shown in the
exception below)

Exception to the general rule:

i. There may be a term in the contract where risk passes before property passes
e.g. the parties agreed that risk shall pass when the property in the goods
passes irrespective of whether delivery has been made.

ii. Where delivery has been delayed through the fault of either party (e.g. where
buyer wrongfully refuses or fails to give delivery instructions) the goods are
at the risk of the party in fault for any loss which might not have occurred but
for such fault.

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For goods delivered ‘on sale or return’, in the absence of terms to the contrary, risk
lies on the seller until the property has passed to the buyer unless the damage is
caused by the buyer’s fault.

TRANSFER OF TITLE – S 27

The basic rule of transfer of title is that no one can give what he does not have.

This rule is set in the maxim ‘Nemo Dat Quod Non Habet’ meaning No one can
transfer a better title than he himself has. (This is the English rule and is found in
Section 27 SOGA).

Thus, a person cannot give what he does not have, including he cannot transfer title
that he does not have e.g. no one can sell the goods and give a good title unless he is
the owner.

Section 27 – Sale by person not the owner

Where goods are sold by a person who is not the owner, and who does not sell them
with the owner’s authority or with the consent of the owner, the buyer does not
acquire a better title to the goods than the seller had.

S 27 simply means if goods are bought from a person who is not the owner and
without the owner’s authority (permission), the buyer will also not acquire (get) any
title even if he has paid for the goods and is NOT aware that the seller does not have
title.

Example:

a. Casey is the owner of a motorcycle. Casey lend it to his friend Alex, for a
week. Alex whilst in possession of the motorcycle sells it to Brian.
b. Brian does not know that Alex is not the owner. He pays Alex.
c. Casey now informs Brian that he is the real owner.
d. Brian has to return the motorcycle to Casey who is the rightful owner. If Brian
does not return, Casey can sue Brian.
e. After Brian has returned the motorcycle to Casey, Brian can then sue Alex for
misrepresentation as he led Brian to think that he, Alex, was the owner.
f. But if the owner Casey asks Alex to sell the motorcycle on his behalf, and Alex
sells it to Brian. Then Brian has a good title because Alex had the permission
of Casey, the owner, to sell.

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What is the purpose of the Nemo Dat rule?
The purpose of this rule is to protect the right of ownership so that when the goods
is stolen or sold without the owner’s consent, the right of the owner is preserved.

The nemo dat rule is illustrated in the case of -

Lim Chui Lai v Zeno Ltd.

Company entered into agreement with contractor Ahmad to provide him with
building materials for his culverts. Company bought the materials and delivered them
to the construction site. Later Company came to know that Ahmad’s contract was
cancelled by the Petaling Jaya Authority. Company informed PJ Authority that the
materials on the site belong to them. It was later discovered that Ahmad had sold the
materials to Lim.
Held: Ahmad was not the owner of the materials at the time he sold them to Lim. As
he had no title to the materials or authority to sell them, he could not give Lim any
title.

Exceptions to the Nemo Dat Rule:

What are the exceptions to the Nemo Dat Rule?

In cases where buyer buys in good faith without notice that the seller is not the owner
and he has paid a valuable consideration for the goods, it is not fair to him when it is
discovered that the seller does not have title.

Thus the law developed EXCEPTIONS to this rule where although the seller does not
have title to the goods, the buyer can STILL get a good title provided he falls within
the following categories:-

There are six (6) exceptions to the Nemo Date rule and they are:-

1. Estoppel : Section 27

What is estoppel?
Estoppel may arise when ‘the owner of the goods, by his conduct, make it
appear to the buyer that the person who sells the goods has his authority to
sell and the buyer acts in reliance on it.

The owner will be estopped or prevented from denying the seller’s authority
to sell. The buyer who takes the goods in good faith and for value will acquire
a good title by estoppel.

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 Example:
Sam tells Sue in front of Muthu that Sam wants to sell Muthu’s bicycle to her
and Muthu nodded his head and keeps quiet. If Sam sells the bicycle to Sue,
Muthu cannot complain that Sam has sold his bicycle without his authority.

N.Z Securities & Finance Ltd v Wrightcars Ltd

In this case, A agreed to sell his car to B.
B was given possession of the car. It was agreed that the title or property in
the car was not to pass until B’s cheque is cleared.

B then sold the car to C, but before the sale is finalized, C contacted A’s office
and was informed by A’s employee that B had paid for the car. So C then
finalized the sale with B.
The cheque by B was dishonoured and A repossessed the car from C.
C then sued A for conversion and was successful because A cannot deny B’s
authority to sell so that title pass to C. C had taken the car in good faith and for
value and thus will acquire a good title.

2. Sale by Mercantile Agent – S 27

S27 states that where a mercantile Agent is, with the consent of the owner,
in possession of the goods or of a document of titles 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

to make the same;

provided 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.

o The seller must be a mercantile agent. Under s.2 Sale of Goods Act 1957,
this is an agent who, in his customary course of business, has the
authority to sell or buy goods or to raise money on the security of
goods. E.g.:
brokers, auctioneers and second-hand car dealers.

o At the time of disposition, the mercantile agent must be in possession

of the goods or the document of title to the goods.

o Possession of the goods must be with the consent of the owner.

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 o The sale must be made when acting in the ordinary course of business
of a mercantile agent i.e. sale was done within business hours, at a
proper place of business or in any ordinary way in which a mercantile
agent would act.

o The buyer must have acted in good faith and at the time of contract of
sale must not have notice of the agent’s lack of authority to sell.
(Meaning the buyer honestly does not know that mercantile agent has no
authority to sell).

3. Section 28 - Sale by one of Joint Owner.

For a buyer to get a good title, the conditions in section 28 to be fulfilled are:

a. The goods are owned by several persons jointly.

b. One of the joint owner has sole possession of the goods with the
consent of the co-owners, and
c. the buyer buys in good faith and does not know at the time of the
contract of sale that the seller has no authority to sell
Example:

Alice & Bibi jointly bought a car. Both have equal share in the car.
The car is in Alice’s possession with Bibi’s consent.
Alice sells the car to Cate.
Bibi did not agree to the sale and had not given permission for Alice to sell.
Cate has title as she bought it from Alice, who is a joint-owner provided Cate
bought in good faith and without notice that Bibi did not authorize Alice to
sell.
Bibi will have to sue Alice.

4. Section 29 - Sale under a voidable contract.

S 29 states that:
• where the seller had obtained possession of goods under a voidable
contract under S19 or S20 Contracts Act 1950,

• but the contract has not been rescinded at the time of the sale by the
rightful owner,

• the buyer obtains a good title provided he bought in good faith and
without notice of the seller’s defect of title.

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 What is a sale under a voidable contract?
A sale under a voidable contract is caused by coercion, fraud, undue influence
or misrepresentation under S 19 & S 20 Contracts Act.
E.g.
In a situation, C either by coercion or undue influence give possession of his
car to A. A sells to B. At the time of the sale C has not rescinded the transaction.
B gets a good title to the car provided he buys in good faith and has no
knowledge that A had used coercion or undue influence to obtain possession
of the car from C.

If however, at the time B bought the car from A, C had already rescinded the
transaction, B will not get title.

5. Section 30 (1) - Sale by Seller in possession of goods after sale

S 30 (1) - Seller having sold the goods to a buyer, continues to be in possession
of the goods or document of title to the goods, the seller (or mercantile agent
acting for him), then sells or transfers the goods or title to another buyer. The
new buyer takes in good faith and without notice of previous sale.

Here, one seller sells the same thing to 2 buyers.

The seller sold the goods to the 1st buyer, title to the goods has passed to the
1st buyer but the seller is still in possession of the goods or the documents of
title to the goods, he can still pass title to another bona fide buyer.
The second buyer can get a good title, if he bought it without knowledge of the
first sale. The 1st buyer’s remedy is to sue the seller.

Example:
X sells goods to Y.
Title to the goods have passed to Y but X has possession of the goods.
X then sells the same goods to Z, the 2nd buyer.
But X has no title as title has passed to Y.
Under the Nemo Dat rule, Z will not get a title from X, but under this exception,
Z will get title if Z buys in good faith & has no notice of X’s lack of title.

6. Section 30 (2) - Sale by Buyer in possession:

✓ After buying or agreeing to buy, the first buyer obtains possession of the
goods or documents of title with the seller’s consent
✓ The title to the goods remain with the seller
✓ The first buyer or his mercantile agent sells the goods to a second buyer
(second sale).

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 ✓ The second buyer acts in good faith and without notice of the original seller’s
right in the goods.
✓ Section 30(2) of the Sale of Goods Act 1957 provides that a sale from a buyer
in possession after sale is valid as though the seller’s right did not exist.

PERFORMANCE OF THE CONTRACT FOR THE SALE OF GOODS

Delivery of the goods – Section 31:

It is the seller’s duty to deliver the goods to the buyer according to the terms of the
contract.

The duty of buyer is to accept and pay for the goods according to the terms in the
contract.

What is delivery?
Delivery is the voluntary transfer of possession from one person to another, and this
can involve the physical transfer of possession or documents of title.

What is seller’s obligation when delivering the goods?

Seller’s obligation when delivering the goods are divided into 4 main categories i.e.
Place, Time, Delivery of correct quantity and Installment delivery.

1. Place of delivery
Buyer can specify where the goods are to be delivered.

2. Time of delivery
Section 36 (2) – the seller is bound to send the goods to the buyer :

i. If time is fixed in the contract, then seller has to deliver accordingly.

ii. If no time is fixed, seller to deliver within a reasonable time.

Note: If seller is ready and willing to deliver and request buyer to take delivery
and buyer does not do so within reasonable time, the buyer will be liable to
the seller for loss caused by buyer’s neglect or refusal to take delivery and has
to compensate seller if seller incurs costs for storage.

3. Delivery of Correct Quantity

Section 37 states seller has a duty to deliver the correct quantity of goods and
the correct type. Failure to do so is a breach of contract. There are three (3)
situations:

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 i. S 37 (1): Less Quantity - where seller delivers less quantity, buyer
may reject or accept.

Harland and Wolff Ltd. v J. Burstall & Co.

There was a contract for 500 loads of timber. It was held that delivery
of 470 loads is a breach of contract entitling the buyer to reject the
goods.
If accept, the buyer must pay for the goods at the contract rate. Behrend
v Produce Brokers.

ii. S 37 (2) : Deliver More - where seller delivers more quantity, buyer
can:
1) accept the correct amount and reject the rest.
2) reject all
3) accept all

iii. S 37 (3): Mixed - where seller delivers goods mixed with goods of a
different description that is not included in the contract:
1) buyer can accept the correct type and reject the rest, or
2) buyer may reject all, or
3) accept those stated in the contract and reject those not stated
in the contract.

4. Delivery by installments
S 38 (1) – Unless agreed by the parties, the buyer is not bound to accept
delivery by installment. Goods must be delivered all at one and same time.

E.g., if Ali agrees to buy 500 light bulbs from Wee, Wee must deliver all 500
light bulbs at once.
S 38 (2) - The parties may agree to delivery by installments but must expressly
state so in the contract.

E.g., Ali and Wee agreed that the light bulbs are to be delivered at the rate of
100 light bulbs on the 1st day of each month for 5 consecutive months. Ali is
bound to accept delivery by such specified installments.

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Acceptance of the Goods

1. Duty of buyer to accept & pay for the goods

S 31 - It is the duty of the buyer to accept and pay for the goods in accordance with
the terms of the contract of sale. If buyer wrongfully does not accept, it is a beach
of contract.

2. When breach of condition to be treated as warranty breach

Section 13 (2) – where the contract is not severable and buyer has accepted all or
part of the goods, buyer must treat any breach of condition as a breach of
warranty.

3. Buyer’s right of examining the goods

Section 41 gives the buyer the right to examine the goods:
Where goods are delivered to buyer who has not previously examined it, he is not
deemed to have accepted them unless and until he has had a reasonable
opportunity of examining them for the purposes of ascertaining whether they are
in conformity with the contract.

4. Meaning of acceptance
Section 42 states three (3) methods of acceptance. The buyer is deemed to have
accepted the goods:

i. When he notifies the seller that he has accepted the goods or

ii. When the goods have been delivered to the buyer, he does any act to
show that he has ownership of the goods e.g. by the buyer reselling and
delivering the goods to third parties
E Hardy & Co. (London) Ltd v Hillerns and Fowler.
Buyer contracted to buy wheat. After the wheat was delivered, the
buyer resold part of the goods by dispatching them to sub-buyers. It
was then that the buyer had the opportunity to examine the goods and
found that they did not conform to the contract.
The court held that it was too late for the buyer to reject for breach of
condition as he had accepted them under section 42.

iii. When, after the lapse of a reasonable time, he retains the goods
without notifying the seller that he has rejected them.

Note: Section 42 prevails over section 41. Section 42 is where the buyer
indicates to seller he has accepted the goods.

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REMEDIES FOR BREACH OF CONTRACT

Rights of the seller where breach is by the buyer:

Buyer may breach the contract in three (3) ways:-

- Failure to take delivery
- Failure of buyer to accept goods
- Failure of buyer to pay

a) Failure of buyer to take delivery

S 44 – when seller is ready to deliver the goods and ask buyer to take delivery, if
the buyer does not within a reasonable time take delivery of the goods, the buyer
is liable to the seller for any loss caused by his neglect or refusal to take delivery,
and to pay a reasonable charge for the care and custody of the goods.
b) Failure of buyer to accept goods
S 56 – where the buyer wrongfully neglects or refuses to accept and pay for the
goods, the seller may sue him for damages for non-acceptance. (whether the
property has or has not passed).

S 55 - where the property in the goods has passed to the buyer and he wrongfully
neglects or refuses to pay for the goods, the seller may sue him for the price of the
goods.

c) Failure of buyer to pay

S 55 (1) - the seller may sue for the price where the property has passed, and the
buyer fails to pay.

S 55 (2) - the seller may sue for the price where the property has not passed but
the parties have fixed the payment date irrespective of delivery and buyer fails to
pay.

RIGHTS OF THE UNPAID SELLER

An unpaid seller who has not received payment has rights against the goods and
under the contract. This is additional remedies in respect of the goods itself.

Who is an unpaid seller?

S45 states that the seller of goods is deemed an ‘unpaid seller’:-
(i) When the whole price has not been paid;
(ii) When payment is by cheque or other negotiable instruments, which is
subsequently dishonoured.

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Unpaid sellers Rights:

The unpaid seller has two basic rights –

1) Right against the goods – where property has passed to the buyer.
2) Rights under the contract – where seller can sue for breach of contract.

1) Rights against the goods, where property has passed to the buyer:
Under S 46 (1), the unpaid seller has three rights against the goods where
property has already passed to the buyer i.e. a lien on the goods, stoppage in
transit and the right to resell the goods.

i. Right of lien over the goods: S 47

Where the property has passed to the buyer but the seller is still in possession
of the goods, and the buyer does not pay, the seller is entitled to retain the
goods until payment by buyer.

S48 - If the seller has made part delivery, he may exercise lien on the
remainder.

ii. Right of stoppage in Transit S50 & S52

S 50 – when the buyer becomes insolvent and the seller has parted with
possession but the goods are still in transit on the way to the buyer, the seller
may resume possession of the goods that is still in the course of transit until
the buyer pays. (Insolvent means unable to pay for one’s debts).

How can the seller stop the goods in transit to the buyer?
Section 52:
a. by taking physical possession of the goods, or

b. if the goods have been sent thorough a carrier, by giving notice to the
carrier. The carrier has a duty to redeliver the goods back to seller.

iii. Right to resell the goods

S 54 - gives seller the right to resell the goods even though property or title
has passed to the buyer, when:-
a. The goods are perishable in nature. E.g. milk, fruits, vegetables.

b. seller having exercised right of lien or stoppage in transit gives notice to

the buyer that seller will resell.

c. the original contract expressly gives seller the right to resell when the
buyer defaults in payment.

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REMEDIES OF THE BUYER
What are the rights of the buyer?

1. S57 - Damages for non-delivery of goods.

a. If the seller fails to deliver, the buyer may sue the seller for damages for
non-delivery.

b. If buyer has already paid for the price, he can recover the price plus other
damages.

2. S58 - Specific performance.

The main remedy of the buyer in the event of non-delivery is damages.
The court has discretion to order specific performance but only for specific or
ascertained goods.

3. S59 - Breach of warranty

S 59 allows the buyer to sue the seller for damages for breach of warranty but
cannot reject the goods.
-o0o-

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