Sale of Goods

 LECTURE 3 & 4
Subtopics
Definition of Goods
The Contract of Sale
Terms of Contract – condition & warranty
Implied terms
Transfer of Property
Transfer of Title
INTRODUCTION
The Sale of Goods Act 1957 (Act 382)
(hereinafter referred to as SOGA) governs
the law with respect to the sale of goods
It deals with such matters as contracts for
the sale of goods, the passing of
ownership and the risk of goods sold, and
remedies of the buyers and sellers for
breaches by the other party
Definition of Goods
Section 2 of Sale of Goods Act 1957 (SOGA)
defined ‘goods’ as :
“every kind of movable 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”
‘Goods’ – all chattels, physical and moveable
things
Contracts for the Sale of Goods
under the SOGA
 S4(1) SOGA defines a contract of sale of goods as follows: -
“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”
 The purpose of a contract of the sale of goods is to transfer the
property in the goods from the seller to the buyer for a price
 The word ‘property’ in s4(1) refers to ownership of the goods
 S4(1) specifically provides that the transfer of property in the
goods must be ‘for a price’
 ‘Price’ is defined in s2 as meaning ‘the money consideration for
a sale of goods’
The Contract of Sale
S.4 SOGA
A sales occur when the ownership or property
in goods passes to the buyer.
Sales of goods must have :
i. Goods;
ii. Money consideration (called price) and ;
iii. Transfer of property
Agreement to sell
S.4(3) & S.4(4) of SOGA
A sale must be distinguished from an
agreement to sell
A sale – contract where the property is
transferred form the seller to the buyer
An agreement to sell – contract where the
transfer of property take place at a future time
or subject to some condition
 Classification of ‘goods’
1. Existing – S.6 SOGA. For e.g. dealer has for sale
and in stock a year 2008 new white Mercedes Benz
2. Future – S.2 SOGA - goods to be manufacture or
produced or acquired by the seller after the making
of the contract of sale
3. Specific – S.2 SOGA - goods identified and agreed
upon. For e.g. a white Mercedes number WAA 123.
4. Unascertained – goods indentified by descriptions
only
5. Ascertained – unascertained goods that have been
identified
Conditions and Warranties
 s12(1) states that a term in a contract may be a
condition or a warranty
 A condition is defined as 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
(s12(2))
 A warranty is a collateral term, the breach of which
gives rise to an action for damages without the right to
either reject the goods or to treat the contract as
repudiated (s12(3))
 S12(4) – whether a term in a contract is a condition or
warranty is to be determined by construing the contract
 S12(4) – a term may be a condition though labeled as
a warranty in the contract
S.12 (1) of SOGA stated contract of sale as;

a) Conditions – S.12(2)
b) Warranty – S.12(3)
c) Condition or warranty? Depend on the facts –
S.12(4)
Condition
S.12(2)
Important stipulations
Innocent party can rescind the contract
Warranty
S.12(3)
Less important
Innocent party can claim for damages but no
right to reject the goods and treat the contract
as repudiated
Implied Terms
The SOGA implies a number of
stipulations in every contract for the sale
of goods.
Provided the parties have not excluded or
modified them
S.14 to S.17 of SOGA
1. Implied condition as to title
S.14 (a)
There is an implied condition that the
seller :
i. Has the right to sell the goods in the case
of a sale or;
ii. In a case of agreement to sell, will have
the right to sell the goods when the time
comes for the buyer to become the owner
( i.e. by the time property is to pass)
Nemo Dat rule
Nemo dat quod non habet
Means "no one gives what he doesn't
have" is a legal rule
The main purpose of a contract for the sales
of goods is to transfer ownership to the
buyer.
If the seller does not have title for ownership
= nothing pass, total failure of consideration
A breach of this – entitle the buyer to
repudiate the contract + recover the price in
full even though he has used the goods.
The rationale is the buyer pay the price to
get the ownership and use the goods
Rowland v Divall [1923] 2 KB 500
Facts – Rowland bought a car from Divall &
used for 4 months before discovered that it
was stolen car. He had to return the stolen car
to the owner.
Issue – whether Rowland can recover the full
amount that he has paid even he has used the
car for 4 months?
Held – he was entitle to recover the full price
because he didn’t get the property (title) in the
car, a total failure of consideration
Implied warranty that buyer shall have
quiet possession of the goods
S. 14(b)
Quite possession = undisturbed
Means seller or 3rd party will not come and
claim that he is the owner / has right in the
goods
However, this is merely warranty, breach
of which innocent party cannot repudiate
the contract
Implied warranty that the goods
are not encumbered
S.14 (c)
Means the goods are free from any charge
from 3rd party unknown to the buyer
E.g. storage charges which have to be paid
before the goods can be collected
E.g Company A sold a machine to Company
B. Company B didn’t know that the Company
A had charged the machine to Bank Z.
Company A had breached the warranty but if
Company B know about it, there is no breach
2. Implied condition that in a sale of goods by
description, the goods must correspond with the
descriptions (Section 15)

Sale by description is where the consumer selects

goods based on the description.
The goods shall correspond with the description
Varley v Whipp [1900] 1 QB 513
Facts – the buyer purchased a 2nd hand machine
without ever seen it. The seller had described it as
new and used it to cut only 50 to 60 acres. In fact, the
machine was very old
Held – this was a sale by description and since the
machine didn’t correspond to its description, the
seller was in breach.
 3. Goods must be reasonably fit for purposes for
which the buyer wants them ( Section 16)
…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:
(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 skills or judgement, and
the goods are of a description which it is in the course of the
seller’s business to supply there is an implied condition that the
goods shall be reasonably fit for such purpose
(b) Where goods are bought by description from a seller who
deals in goods of that description there is an implied condition that
the goods shall be of merchantable quality: provided that if the
buyer has examined the goods, there shall be no implied condition
as regards defects which such examination ought to have revealed
Section 16(1)(a)
Where the buyer expressly or impliedly
makes known to the seller the particular
purpose for which the goods are required,
there is implied condition that the goods
shall be reasonably fit for the purpose -
Union Alloy (M) Sdn Bhd v Syrkt
Pembenaan Yeoh Tiong Lay Sdn Bhd
[1993] 3 MLJ 167.
Goods must be reasonably fit for purpose

Purpose can be:

i. expressly made known; or
ii. impliedly made known
EXPRESSLY MAKES KNOWN: WALLIS v RUSSELL VL-22.23

FACTS: P went to a fishmonger and asked for

"two nice fresh crabs for tea". He was given
some boiled crabs that weren’t fresh and became
ill after eating them.

HELD: Seller liable as buyer had expressly made known

the particular purpose for which the goods were required
and the goods were of a description which it was in the
course of the seller's business to supply - there was
therefore an implied condition that the goods would be
reasonably fit for that purpose
IMPLIEDLY MAKES KNOWN:

GRANT v AUSTRALIAN KNITTING MILLS LTD VL-22.23

FACTS: Grants bought a woolen underwear from a

shop specialized in that. After wearing it, he suffer
severe dermatitis because it contain chemicals left
over from processing the wool. Issue was whether
there was a breach of implied condition?

HELD: There was an implied reliance upon the

skill & judgment of the seller as to the general
fitness of the article for the known purpose. The
Griffiths v Peter Conway Ltd [1939] 1 All
ER 685
Facts – a woman with abnormally sensitive
skin bought a coat without telling the
salesman that she had sensitive skin. She
contracted dermatitis from wearing the coat
Held – she was unable to recover for breach
of fitness for purpose because there was
nothing in the cloth that would have affected
the skin of a normal person. She failed to
disclosed that she had skin problems
Section 16(1)(b)
Goods must be of merchantable quality

S16(1)(b) implies into every contract for

the sale of goods a condition that the
goods are of merchantable quality if the
seller normally deals with such goods
There is no statutory definition of
‘merchantable quality’ in the SOGA
‘Merchantable’ has also been treated as
meaning something like ‘acceptable’ or
‘satisfactory’, or in other cases ‘saleable’

Lord Reid in Henry Kendall v Lillico (1969)

defined merchantable quality as:
◦ If the description in the contract was so limited
that goods sold under it would normally be used
for only one purpose, then the goods would be
unmerchantable under that description if they
were of no use for that purpose. But if the
description was so general that goods sold under it
are normally used for several purposes, then the
goods are merchantable under that description if
they fit for any one of these purposes
 7. Sale by Sample
 S.17
 For sale of goods by sample, implied conditions
are as follows ;
i. The bulk shall correspond with the sample in
quality
ii. The buyer shall have reasonable opportunity of
comparing the bulk with the sample before
acceptance; and
iii. The goods are free from the defect that will make
it unmerchantable which would not be apparent
on reasonable examination of the sample
If the differences are only of a minor
nature, the quality of the goods is still the
same, this condition will not be breached
The goods must not only correspond with
the sample, but also of merchantable
quality
Romalpa Clause
 Under s25 SOGA, parties may agree when title
passes in goods even though they are already
delivered to the buyer. Such clauses in the contract
are known as Romalpa clauses.
 The importance of such a clause is that if the buyer
goes into liquidation or bankruptcy, the unpaid
seller can take possession of the goods.
 Where goods are not incorporated into other goods,
the seller gets possession. BUT if goods are
incorporated, a simple Romalpa clause will not
prevent goods from passing to a third party,
although the buyer is liable in conversion.
Romalpa Clause
To prevent such a matter from happening,
a sophisticated Romalpa clause may be
incorporated, one which indicates that in
what circumstances property will not pass
when incorporated into other products.
When such a clause is effective, the seller
is entitled to the proceeds of sale.
 Transfer of Title
 “Nemo dat quod non habet” literally
translated this means, “no one may give
what he does not have”
 This is contained in s27 – when a non-
owner transfers goods, his purchaser does
not get a good title and the true owner can
recover them from the buyer
Performance of the Contract of
Sale
 SOGA deals with the physical
performance of the terms of the
contract which includes: -
 Delivery
 Acceptance
 The Delivery of Goods
 It is the duty of the seller to deliver the goods whilst the
buyer’s duty is to accept and pay for them in
accordance with the terms of the contract of sale (s31)
 S32 goes on to say that unless otherwise agreed,
delivery of goods and payment of the price are
concurrent conditions
 This means that the seller shall be ready and willing to
give possession of the goods to the buyer in exchange
for the price, and the buyer shall be ready and willing to
pay the price in exchange for possession of the goods
The Acceptance of Goods
 Under s42, the buyer is deemed to have accepted
the goods:
◦ When he intimates to the seller that he has accepted them
(Bragg v Villanova (1923)). This is not straightforward –
either words or conduct suffice to imitate acceptance.
◦ When the goods have been delivered to him and he does
any act in relation to them which is inconsistent with the
ownership of the seller e.g. the buyer resells or treating
the goods as if they were his own.
◦ When, after the lapse of a reasonable time, he retains the
goods without intimating to the seller that he has rejected
them
The Duty to Pay the Price
The buyer has the duty to pay the price of
the goods he buys
Unless the contract provides otherwise,
payment is due at the time the contract is
made provided the seller is ready, willing
and able to deliver the goods
Q &A