LAW OF SALE OF GOODS (I)

SOURCES:
1. Sale of Goods Act 1957
2. Lee Mei Pheng, Ivan Jeron Detta (2011). Business Law : ,Kuala Lumpur:Oxford
University Press
Hassan, Mumtaj and Md. Salleh, Khuzaimah and Mohamed Yusoff, Zuryati and Mohd Ali
@ Ramli, Azlin Nam (2017). Undang-undang Perniagaan di Malaysia, Sintok:UUM Press
 (1)INTRODUCTION

1) Meaning:
§ 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.
2) The law:
§ The law relating to the sale of goods is the Sale of Goods Act 1957 (Act
382).
§ Section 3 of the SOGA 1957 provides that the provisions of the
Contracts Act 1950 will apply to all contracts for the sale of goods unless
they are inconsistent with the express provisions of the SOGA 1957.
 (2)CLASSIFICATION OF PROPERTY

e.g: Land, house, debts,

Immoveable Property
services such as work
(Real Property)
and labour.
Property
e.g: clothes,
Moveable Property stationeries,
(Personal Property) table,computer,
smartphone, etc.
 (3) DEFINITION OF SOME IMPORTANT
TERMS
1) Goods
§ Section 2 of the SOGA
a) Types of goods:
§ Goods which form the subject of a contract of sale may either be:
i) existing goods; or
ii) future goods.
§ This is stated under Section 6 of the SOGA 1957

i) Existing goods
§ It means goods that are already in the possession of the seller.
§ It can be divided to:
v Specific goods
v Unascertained goods

ii) Future goods

§ S. 2 of the SOGA 1957 defines “future goods”
2) Contract of sale
§ Section 4(1) SOGA
§ Case:
a) Lee v. Griffin [1861-73] All ER Rep 191
§ Facts: A dentist had made and supplied two sets of dentures to a
patient.When the patient did not pay, the dentist sued.
§ Held: A contract for the making of two sets of false teeth was a
contract for the sale of goods. Where the contract is such that a
chattel is ultimately to be delivered … the cause of action is goods sold
and delivered. The substance of the contract was the production of
something to be sold by the dentist to the dentist’s customer, therefore
it was a sale of goods.
3) Price
§ Section 2 SOGA - definition
§ The consideration for the transfer of goods must be monetary.
§ If the consideration is other than money, then the transaction is not
covered by the SOGA.
 (4) TERMS OF CONTRACT: CONDITIONS AND
WARRANTIES

1) Division
§ Section 12(1) SOGA
Q:What is condition?
§ Section 12(2) SOGA
Q:What is warranty?
§ Section 12(3) SOGA
Q: When breach of condition can be treated as breach of
warranty?
§ S.13(1) SOGA
§ Once the buyer choose to treat the breach of condition as breach of
warranty, he cannot set aside the contract because the right has been
set aside.
§ The party entitled to claim for damages without having to cancel the
contract.
§ S.13(2) SOGA
§ Breach of condition is treated as breach of warranty when
a) the contract is not severable, and the buyer has accepted the
goods or part
b) it is for specific goods and the property has passed to a buyer.
§ Case:
i) Associated Metal Smelters Ltd v Tham Cheow Toh [1971] 1 MLJ 271, HC
§ Facts: The defendants had agreed to sell a furnace to the plaintiff and had given an
undertaking that the melting furnace would have a temperature of not lower than
2600 degrees. The furnace supplied by the defendants in fact did not meet the
required temperature. In this case, the plaintiff claimed damages for breach of
warranty of the metal melting furnace.
§ Held: The stipulation that the furnace would reach the specified temperature was a
condition. The failure of the defendant to supply a furnace which would meet the
required temperature constituted a breach of the condition. However, the plaintiff was
entitled, by virtue of s.13(1) of the SOGA, to elect to treat such breach as a breach of
warranty.
2) Implied terms / Indirect terms
§ Sections 14 – 17 of the SOGA imply certain terms into every
contract of sales, even though they are not directly mentioned by the
seller or buyer.
§ Every contract of sale of goods is subject to the implied terms, until and
unless the buyer and seller clearly mentioned that they do not want the
terms to be binding upon them.
a) Implied terms regarding payment time.
§ Section 11 SOGA: Stipulation as to the time of payment is not the essence of the
contract of sale, unless the parties stipulated otherwise.
§ Case:
i) Harrington v. Brown (1917) 23 CLR 297
§ In this case, the contract involved livestock.
§ Therefore, stipulation as to the time of delivery was regarded as the essence of the
contract.
b) Implied terms of ownership
§ Section 14(a) SOGA
§ A seller must have the right or entitlement to sell the goods at the time the goods are
sold to the buyer.
§ Case:
i) Lian Lee Motor Sdn. Bhd.V Azizuddin bin Khairuddin [2001] 5 MLJ 334, HC
§ Facts: The plaintiff was a motor car dealer from whom the defendant wished to buy a
Proton Saga car. In order to buy the car, the defendant sold to the plaintiff a Toyota
Corolla, of which he was the registered owner. The proceeds of that sale were used to
purchase the Proton Saga on the same date. The Toyota was later seized by the police. It
was found to be a stolen car, with its registration card having been forged. Neither the
plaintiff, nor the defendant aware that the Toyota had been stolen. The plaintiff sued the
defendant for the refund of the money received by the defendant as consideration for the
Toyota.
§ Held: When the defendant sold the Toyota to the plaintiff, there was an implied condition
on his part, under s.14(a) of the SOGA, that he had a right to sell it. But the defendant did
not have the right in the Toyota and could not consequently give it to the plaintiff.
Therefore, the plaintiff had the right to sue for the price that he had paid.
c) Implied warranty as to the right of the buyer to enjoy quiet possession
§ Section 14(b) SOGA
§ Cases:
i) Microbeads AG v.Vinhurst Road Markings Ltd [1975] 1 All ER 529
§ The buyer has the right to enjoy quiet possession of the goods at the time the
contract is made as well as future enjoyment and quiet possession.
ii) Healing (Sales) Pty Ltd v. Inglis Electrix Pty Ltd [1968] 121 CLR 584
§ The right to enjoy quiet possession is also given to the buyer who has not paid the
goods in full, i.e., has partially paid the price.
d) Implied warranty that the goods are free from charge or encumbrances
§ Section 14(c) SOGA
§ Case:
i) Steinki v. Edwards [1935] 3 ALJ 368
§ Facts: The plaintiff bought a car. Later, he found that the tax had not been paid by
the defendant (the seller). The plaintiff had to pay the tax. He made a claim against
the defendant.
§ Held: The tax due was an encumbrance. The defendant in this case failed to fulfilled
the implied warranty. Therefore, the plaintiff has the right to claim damages from the
defendant.
 (5) SALE BY DESCRIPTION

§ Section 15 SOGA
§ Where the buyer buys goods without seeing them and by relying on the description
made by the seller, the transaction is called ‘sale of goods by description’.
§ There is an implied condition that the goods shall correspond with the description.
§ Cases:
i) Nagurdas Purshotumdas & Co v Mitsui Kaisha Ltd
§ The seller and the buyer were under the normal transaction to have a contract of
buying flour under a famous brand. The buyer ordered for the same brand as
normally ordered but he did not receive the same brand of flour.
§ Held: the goods did not correspond with the description.

ii) Beale v Taylor

§ A car brand ‘Herald Convertible’ in white colour, year 1961 had been advertised.
The buyer agreed to buy after having a look at the car. Then, he realized that the
back of the car was not a 1961 model.
§ Held: although the buyer had a look before agreed to buy the car, the buyer still
entitled to claim for remedy because the seller had breached the implied terms as
to the description of the car.
 (6)FITNESS (SUITABILITY) AND
QUALITY OF TRADE (MERCHANTABLE
QUALITY)
1) The general rule:
§ The caveat emptor principle: where a person buys without proper description or
without stipulating the purpose for which he requires the goods or without sample,
he has no one to blame but himself.
§ In other words, there is no automatic implied condition as to fitness for purpose or
merchantable quality implied into a contract for the sale of goods. This is provided
under Section 16(1) SOGA.
2) Exceptions
§ If the buyer wishes to have the benefit of such conditions, he must show that
the sale comes within the terms of either:
a) section 16(1)(a) SOGA – regarding fitness for purpose; or
b) section 16(1)(b) SOGA – regarding merchantable quality.
a) Section 16(1)(a) SOGA
§ 4 requirements/conditions:
i) The buyer must make known, either 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.
ii) The buyer is relying on the seller’s skill or judgment.
iii) The goods are of the description which it is during the seller’s business to
supply
iv) If the goods are specific, they must NOT be sold under their patent or trade
name
§ Cases:
i) Griffiths v Peter Conway Rimmer
§ A woman bought a coat made of sheep skin without informing the
seller that she was allergic to it. She claimed compensation from the
seller.
§ Held – The woman failed to claim compensation. The seller did not
know of the plaintiff’s allergic skin and could not be expected to
assume its existence. The coat was fit for most people. The seller was
not liable.
b) Section 16(1)(b) SOGA
§ There is no implied condition or warranty as regard to the quality of
goods, except where goods are bought from a seller who normally
deals with such goods, then there is an implied condition that the
goods shall be of merchantable quality.
§ Cases:
i) Bristol Tramways v Fiat Motor Ltd [1910] 2 KB 831
§ The court defined merchantable quality as when the goods in such a
condition or quality that the buyer would reasonably buy after having
checked it in a reasonable way.
§ Cases:
i) Wilson v Ricket Cockerall & Co Ltd
§ Oil under ‘Coalite’ brand was bought from the dealer. After using, it caused explosion.
§ Held: the oil was not under merchantable quality.

ii) David Jones v Willis

§ The sole of the shoes damaged after third time of using it.
§ Held: No merchantable quality.

iii) Deutz Far East (Pte) Ltd lwn Pacific Navigation Co Pte Ltd
§ The defendant refused to make payment on the reason that there was defect in the engine
spare part for the ship supplied by the plaintiff.
§ Held:The plaintiff breached S. 16(1)(a) and (b) as there was no quality in the goods supplied.
 (7) SALE BY SAMPLE

§ A sample is a small part or quantity intended to show what the whole or

bulk is like, normally produced during negotiations.
§ S. 17(1) SOGA
§ S. 17(2) SOGA - the following conditions are implied in a sale by sample:
(a) the bulk shall correspond with the sample in quality
(b) the buyer shall have a reasonable opportunity to compare the bulk with
the sample
(c) the goods shall be free from any defect rendering them unmerchantable
which would not be apparent on reasonable examination of the sample
§ Cases:
i) Godley v Perry [1960] 1 All ER 36
§ Facts: A retailer purchased from a wholesaler a quantity of toy catapults. A
small boy bought one of them, and injured his eyes when it broke because
of its faulty construction. The retailer was held liable for damages to the
boy and claimed an indemnity from the wholesaler. The defect in the
catapult would not have been apparent on a reasonable examination of
the sample, and had not been discovered when the retailer pulled back the
elastic of the catapult.
§ Held: The wholesaler was liable. The test made by pulling back the elastic
was all that could reasonable be expected of a potential purchaser.
ii) E & S Ruben Ltd v Faire Bros & Co Ltd [1949] 1 All ER 215
§ Facts: The seller agreed to supply the buyer with a quantity of ‘Linatex’ (a type of
vulcanised rubber) in a certain measurement in accordance with a small sample.
The sample was flat and soft, but the rubber delivered was crinkly and folded, even
though these defects could have been put right if it were warmed.
§ Held: The goods had been sold by description, and the seller was in breach of his
duty for they were not in accordance with the sample, though only a simple
process was required to make them correspond with it.