COMMERCIAL LAW
EPPA2413 SET 1
SEMESTER 2 2023/2024
SALES OF GOODS ACT 1957
GROUP 5:
NAME: MATRICS NO:
PUTAARSINI HARI KRISHNAN A197824
PIRIYAH RAMACHANDRAN A197724
AISWARIYA DEVI A/P KRISHNAN A197723
FARHAIN BT MOHD MUSTAPA A197767
PREPARED FOR: DR AFFAF BT ABDUL HALIM
Question: Explain the terms of conditions and warranties in the sale of goods contract
according to the Sale of Goods Act 1957 and relevant cases.
INTRODUCTION:
Section 2 SGA 1957:
● Defines the word ‘goods’ as meaning ‘every kind of moveable property other than
actionable claims and money 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.
Section 6(1) SGA 1957:
● The goods which form the subject of a contract of sale may be either existing goods,
owned or possessed by the seller or future goods.
THE CONTRACT OF SALE:
Section 4(1) SGA 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 may be a contract of
sale between one part-owner and another.
● A sale occurs when there are these elements:
1. Goods
2. Money consideration (the price)
3. Transfer of property
THE AGREEMENT TO SELL:
Section 4(3) SGA 1957:
● Where under a contract of sale the property in the goods is transferred from the seller
to the buyer, the contract is called as sale, but where the transfer of the property in
the goods is to take place at a future time or subject to come condition thereafter to
be fulfilled, the contract is called an agreement to sell.
Section 4(4) SGA 1957:
● An agreement to sell becomes a sale when the time elapses or the conditions are
fulfilled subject to which the property in the goods is to be transferred.
TERMS OF THE CONTRACT
Section 12(1) SGA 1957:
● A stipulation in a contract of sale with reference to goods which are the subject
matter thereof may be a condition or warranty.
Section 12(2) SGA 1957:
● 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.
Section 12(3) SGA 1957:
● 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 to the right to reject goods and treat
the contract as repudiated.
As a general rule, a breach of condition entitles the innocent party to repudiate or cancel the
contract. However, in the following circumstances, the innocent party cannot repudiate the
contract but can merely claim damages:
❖ Where the buyer waives the condition.
❖ Where the buyer elects to treat the breach of condition as a breach of warranty and
claim damages only.
❖ Where the contract of sale is not severable and the buyer has accepted the goods or
parts thereof, the breach of any condition must be accepted as a breach of warranty
unless otherwise provided in the contract.
❖ Where the contract is for specific goods, the property in which has passed to the
buyer, the breach of any condition must be accepted as a breach of warranty unless
otherwise provided in the contract.
Section 13(1) SGA 1957:
● Where a contract of sale is subject to any condition to be fulfilled by the seller, the
buyer may waive the condition or elect to treat the breach of the condition as a
breach of warranty and not as a ground for treating the contract as repudiated.
● Following cases:
○ Tham Cheow Toh v. Associated Metal Smelters (1971)
Failure on the part of the appellant to supply furnace according to
breach of condition but entitled the respondent to treat is as a breach
of warranty
○ Cehave NV v. Bremer Handelsgesellschaft mbh: The Hasna Nord (1976)
The buyer was not entitled to reject the shipment. The goods cannot
have been so bad if they were actually used for their intended
purpose. It was only a breach of warranty. The buyer has the right to
claim damages.
IMPLIED TERMS
Implied terms are those that are recognised from the parties’ actions, the situation and
accepted term but are not expressly stated. A lot of provisions were implied in each good
sale contract under the Sale of Goods Act 1957. These inferred terms, however, only take
effect if they haven’t been explicitly stated or suggested by the parties to the sale agreement.
According to Sections 14 through 17 of the Sales of Goods Act, these implied terms are as
follows:
1. Implied Conditions
a. Implied condition as to title
When the buyer becomes the owner, that is, when property is to pass,
there is an implied condition that the seller has the right to sell the goods in the
event of a sale or in the case of an agreement to sell, will have the right to sell
those goods. The condition is equivalent to a guarantee. Transferring ownership
to the buyer is the main objective of a contract for the sale of goods. There has
been a complete lack of concern if the seller lacks ownership or title.
Section 14(a) Sale of Goods Act 1957, in a contract of sale, unless the
circumstances of the contract such as to show a different intention, 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.
The buyer is entitled to reject the contract, which means to treat it as
invalid even though he has used the items, and to receive his entire purchase
price back in cases where the seller violates Section 14(a) because he lacks the
legal authority to sell the goods. The reasoning for this is that the buyer must pay
for the products in order to both utilise and benefit from ownership.
Case Rowland v. Divall (1923), for the fact that Rowland bought a car
from Divall and used it for four months before discovering that it had been stolen.
Rowland then had to hand over the car to its true owner. The issue was whether
Rowland could recover the full amount he had paid from Divall, even though he
had used the car for four months. So the court held that although Rowland had
used the car for some time, he was entitled to recover the full price he had paid
because Divall had no right to sell him the car because it was stolen. Rowland
had failed to get the property (title) in the car, so there was a total failure of
consideration.
For instance, Mary sold Jean a piano and Jean gave Mary the money for
the sale. After a year, Jean learned that Mary was truly taking care of John's
belongings and house while he was away, and that the piano actually belonged to
John. Even though Jeans only used the piano for a year, she is still eligible to
receive her full refund.
b. Implied condition that the goods correspond with descriptions
Any circumstances in which the buyer relies entirely on the description
without having seen goods is covered by the sale of goods by description.
According to the Section 15 Sales of Goods Act 1957, 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 the goods corresponds with the
sample if the goods do not also correspond with the description.
According to the case Varley V Whipp (1900), for the fact that the buyer
purchased a second-hand reaping machine without ever having seen it. The
seller had described it as quite new and used to cut only 50 or 60 acres. In fact,
the machine was very old. So the court held that this was a sale by description
and since the machine did not correspond to its description, the seller was in
breach.
Lastly, the case suitable for this implied condition is case Re Moore and
Landauoer (1971). A consignment of canned fruit was ordered to be delivered in
boxes of 30 tins. The fact that some of the boxes supplied contained only 24 tins.
The court held that the consignment did not conform to the description and was a
breach of the condition implied by Section 15 of the Sales of the Goods Act 1957.
c. Implied condition as to fitness for particular purpose
According to the Section 16 Sales of Goods Act 1957, subject to the
provisions of this Act and of any other law for the time being in force, there is no
implied warranty or condition as to the quality or fitness for any particular purpose
of goods supplied under a contract of sale, except as follows:-
❖ Section 16 (1)(a):
➢ Where the buyer, expressly or by implication makes known 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 judgement, and the goods are
of a description which it is in the course of the seller’s business to
supply (whether he is the manufacturer or producer or not) there is an
implied condition that the goods shall be reasonably fit for such purpose.
For instance, if a customer wants to buy a running shoe. He
would go to a shoe store and express as well as seek advice from the
seller about the running shoes that are good for him. This portrays that
the customer relies on the seller’s skill or judgement for the shoe that is
fit for him. Whether the seller is the manufacturer or producer or not, the
course of the seller's business matches the particular purpose of goods
supplied.
According to the case of Griffith v. Peter Conway Ltd (1939),
where the buyer did not disclose to the seller the fact of her sensitive
skin gave clear indication that the buyer did not rely on the seller’s skill
or judgement. Therefore, the woman did not succeed in her claim
against the seller.
Another case to consider is Priest v. Last (1903), Ashington
Piggeries v. Christopher Hill Ltd (1922) and Baldry v. Marshall
(1925).
❖ Section 16 (1)(b):
➢ Where goods are bought by description from a seller who deals in
goods of that description (whether he is the manufacturer or producer or
not) there is an implied condition that the goods shall be of
merchantable quality. Provided that there would be no defects which
such examined by the buyer ought to have revealed.
For instance, there are many good brands like Prada, Gucci and
Louis Vuitton. All these brands sell different kinds of handbags with
different descriptions. It is accountable to the seller to make sure that all
the goods are merchantable quality to sell towards the buyer. The seller
will have to examine if the handbags are of good quality and according
to description before selling to the buyer. Plus, there would be no
defects.
According to the case of Sen Hing v. Arathoon sons Ltd
(1968), tapioca flour claimed to be unfit for human consumption as there
was a discoloration of a small portion of the flour. It was discovered that
it did not contain any injurious ingredients. The court held that the
plaintiff failed to prove that tapioca flour was unmerchantable quality.
Other cases to look at are Grant v. Australian Knitting Mills ltd
(1936), Bristol Tramways v. Fiat Motors Ltd (1910) and Wilson v.
Ricket, Cockerall & Co Ltd (1954).
d. Implied condition that the goods must be in accordance to the sample
❖ Section 17(1)
➢ 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.
❖ Section 17(2)
➢ In the case of a contract for sale by sample there is an implied
condition:
■ The bulk shall correspond with the sample in quality;
■ Buyer shall have a reasonable opportunity of comparing the
bulk with the sample;
■ The goods shall be free from any defect rendering them
unmerchantable which would not be apparent on reasonable
examination of the sample.
The case to support this is Drummond v Van Ingen (1887), where a
manufacturing firm submitted a sample of material to cloth merchants.
Subsequently an order was made for quantity of material of a weight and
quality equal to the sample. It was later discovered that the cloth, when made
into garments by tailors who were customers of the cloth merchants, split at
the seams and was therefore unsuitable for the purpose for which it was
intended, though it was equal to the sample. The court held that while the
cloth was equal to the sample, this did not protect the manufacturer where the
defect could not have been discovered by a reasonable examination, and so
the purchaser was not bound to accept the material.
Another case is E & S Ruben Ltd v. Faire Bros & Co Ltd (1949)
where a kind of cloth ‘Linatex’ was sold in a state of flashing wrinkles, while
the sample shown was smooth and soft. The seller says that the fabric can be
smooth and soft like the sample shown when rubbed. The court held that
because the actual sale of goods is not the same as the sample shown, the
seller has breached the implied conditions of sale by sample. Thus, the buyer
is entitled to make a claim.
In terms of the buyer need to be given an opportunity to compare the
bulk with the sample, the case of Polenghi Brothers v. Dried Milk Co ltd
(1904) where the sellers sell powdered milk to purchasers and requires
buyers to make payments once the goods arrive either sent by ship or train
and related documents are delivered to the buyer. The court held that the
buyer needs to be given an ample time to compare the goods with the
sample. If any defect to the goods the contract will be invalid.
2. Implied Warranty
a. Implied warranty that the buyer shall have and enjoy quiet possession of
the goods
There is an implied warranty that the buyer shall have and enjoy quiet
possession of the goods. This assumes that a third party will not come and claim
to be the true owner or that they have a right in the goods after the sales have
taken place.
Section 14(b) SGA 1957, states that in a contract of sale,unless the
circumstances of the contract are such as to show a different intention, there is
an implied warranty that the buyer shall have and enjoy quiet possession of the
goods. It should be noted that this implied stipulation is merely a warranty and
not a condition. Therefore, a breach of contract of this stipulation will not entitle
the innocent party to repudiate the contract.
The case of Rowland v. Divall [1923] established the principles of the
implied warranty of quiet possession in English law, which Malaysian law
follows. Rowland purchased a car from Divall for £334, but later discovered it
had been stolen before Divall acquired it. The police seized the car and returned
it to the original owner. Rowland sued Divall for a refund, claiming a total failure
of consideration. The court ruled in Rowland's favor, finding that Divall breached
the implied warranty of quiet possession because Rowland's use of the car was
disturbed by the rightful owner. The court ordered Divall to refund Rowland the
purchase price. This case established that buyers are entitled to enjoy goods
without disturbances from third parties, and sellers guarantee that the goods are
free from undisclosed claims. These principles are reflected in Section 14(b) of
the Malaysian Sale of Goods Act 1957, protecting buyers against third-party
claims and providing a framework for remedies when this right is violated.
In MGG Pillai v. Tan Sri Dato’ Vincent Tan Chee Yioun & Anor [2001], the
case primarily dealt with defamation but also touched upon issues of possession
and rights, offering insights into how Malaysian courts view the concept of quiet
possession in broader property disputes. The plaintiff, MGG Pillai, had published
articles alleging misconduct by the defendant, Tan Sri Vincent Tan, leading to a
defamation suit. The court found in favor of Tan, awarding substantial damages
for the defamation. While the primary focus was on defamation, the court's
analysis included considerations of the defendant's legitimate rights and
possession of his business interests and properties, underscoring the principle
that individuals are entitled to quiet possession and enjoyment of their property
without unlawful interference. This case illustrates the broader application of
quiet possession in Malaysian jurisprudence, reinforcing the notion that legal
rights to property must be respected, free from wrongful claims or disturbances.
b. Implied warranty that the Goods are unencumbered
There is an implied warranty that the goods are free from any charge in
favour of a third party who is unknown to the buyer; for example, storage
charges which have to be paid before the goods can be collected.
Section 14(c) of the Sale of Goods Act 1957: This section provides that
there is an implied warranty that the goods are free from any charge or
encumbrance in favor of any third party not declared or known to the buyer
before or at the time when the contract is made.
In Karuppan Chetty v. Suah Thian [1916], the Malaysian court addressed
the principle that goods sold must be free from undisclosed encumbrances,
forming the basis of the implied warranty in Section 14(c) of the Sale of Goods
Act 1957. Karuppan Chetty purchased a piece of land from Suah Thian, but later
discovered that the land was subject to an undisclosed charge in favour of a
third party. Chetty sued Suah Thian for misrepresentation and breach of the
implied warranty that the goods (in this case, the land) were free from any
encumbrance unknown to the buyer at the time of the contract. The court ruled
in favour of Chetty, holding that Suah Thian had breached the implied warranty
by failing to disclose the existing charge on the land. The judgement
emphasised that sellers are obligated to ensure that goods sold are free from
undisclosed encumbrances, protecting buyers from unexpected claims or
charges. This case reinforces the legal requirement for transparency in sales
transactions and the protection of buyers' rights to goods free from hidden
encumbrances.
CONCLUSION
In conclusion, the Sales of Goods Act 1957 serves as a comprehensive legal
framework for the sale and purchase of goods in Malaysia. It ensures that contracts are
clearly defined, protects the interests of both buyers and sellers through implied terms and
conditions including implied condition as to title, implied condition that the goods correspond
with description, implied condition as to fitness for particular purpose, implied condition that
the goods must be in accordance to the sample, implied warranty that the buyer shall have
and enjoy quiet possession of the goods and implied warranty that the goods are free from
encumbrances. By providing a structured approach to resolve disputes and outlining the
rights and obligations of the parties involved, the act maintains the fairness, transparency
and trust in commercial transactions. This legislation is pivotal in sustaining a balanced and
efficient market environment.
REFERENCES
● Lee Mei Pheng & Ivan Jeron Detta. 2018. Business Law, 3rd. ed. Oxford University
Press.
