Contract of Sale of Goods:

1. Section 4(1), Sale of Goods Act 1957:A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in
goods to the buyer for a price.
(Purpose: to transfer ownership of goods immediately or in the future or subject to conditions)
2. Section 2: PRICE must be money consideration (entirely or in part), otherwise not a Sale of Goods.
- Price may be fixed by (i) stating in contract; (ii) left to be fixed in manner stated in contract; (ii) determined by
reference to the course of dealings between the parties.
3. Section 2: GOODS = MOVEABLE PROPERTY only. (excludes land and actionable claims/right to sue for debt)
4. PROPERTY = legal right of ownership possession of goods
5. POSSESSION = actual control of property + intention to use as ones own (regardless right/wrong intention)
It is possible to have ownership without possession or possession without ownership (see Hire-Purchase)
Sale of Goods

Contract for
Work &
Materials

Barter/
Exchange

Hire-Purchase

Hire/ Leasing

(gives hirer a
bailment of the
goods, with an
option to purchase)

(contract of
bailment for right
to possess the
goods)

Transfer of
goods

Transfer of
goods =
substance of
contract?

(ancillary to
contract of skill
& labour)

(only the right to

use)

(no transfer)

$ consideration?

But if got part

$, then

Governed by
SOGA?

or if got
$ consideration

Formation of Contract:
- S 5(1): contract of sale made by an offer to buy/ sell goods at a price and by the acceptance of such an offer.
- S 5(2): Contracts may be made in writing or orally or partly in writing and partly orally or may be implied from
conduct of parties. There are no special formalities.
- Capacity to buy & sell see Contracts Act 1950 i.e. attained age of majority (> 18 y/o)(S 2, Age of Majority
Act 1971) and must be of sound mind (S 11 CA1950 and S12: capable of understanding the contract and
forming rational judgment as to its effect upon his interest).

Terms of Contract of Sale:

- May be expressed (oral/ written) or implied from conduct of the parties
- S 12 SOGA,
(i) these terms may be conditions or warranties
(ii) CONDITIONS: essential to the main purpose of the contract if breached = can repudiate contract
(iii) WARRANTY: collateral to the main purpose if breached, can claim damages but cannot repudiate
- Implied Terms (S 14- S17)
(14) There is an implied condition that the seller has the right to sell and pass all ownership rights
i. Seller must have title to property
ii. Rowland v Divall Bought a stolen car and later had to return to true owner. Seller to repay
full price to Buyer even though both of them didnt know that the car was stolen.
iii. See S 27(1) : nemo dat quod non habet rule (no one can give what he has not) no one can
transfer a better title than he himself possess.
Exception to nemo dat rule:
a. Estoppel
b. Sale by mercantile agent/ one of joint owners/ seller in possession after sale/
buyer in possession
c. Sale under a voidable title
(15) There is an implied condition that the goods must match the description given
i. Varley v Whipp Second hand reaping machine had only cut 50 acres but on delivery, machine
much older and in bad condition. Buyer recovered the full price.
(16) (1) There is no implied warranty/ condition as to the quality or fitness for any particular purpose
- Preist v Last Plaintiff bought a hot water bottle from Defendant who was a chemist and in
his ordinary course of business sells hot water bottles. Plaintiffs wife used it and the bottle
burst, severely scalding her. Plaintiff entitled to claim for treatment costs for his wife for
Defendants breach of implied condition of fitness as the bottle was used for usual and obvious
purpose.
(1) (a) if goods sold in the course of business and the buyer make known to the seller the purpose for
which he buys it, there is an implied condition that the goods will be reasonably fit for it.
(1) (b) if goods sold in the course of business, there is implied condition that it must be of
merchantable quality. (BUT if buyer examined the goods, then no implied condition as to the
defects which could have been revealed by examination)
(17) Implied conditions for sale by sample that the bulk will correspond to the sample, buyer can compare
the bulk and the sample and the bulk is free from unmerchantable defect which wouldnt be revealed
by reasonable examination of the sample.

** S 62 allows exclusion of implied terms by express agreement or by previous dealings or by usage.

Wallis Sen and Wells v Pratt & Haynes Sale of common sainfoin seed but seller sold giant
sainfoin, Buyers accepted it then claimed damages. Seller relied on an exemption clause in the
Contract which only referred to warranties. Since sellers broke a condition, buyer can claim.
Rules in relation to Sales of Goods

1. Rule 1 Section 20
Where there is an unconditional contract to sell specific goods in a deliverable state, property passes to
the buyer when the contract is made, whether or not payment for or delivery of the goods takes place at
that time.
Tarling v. Baxter
Ex: John agrees to buy a bicycle from Joe and Joe agreed that John will pay him next
month. The property has already been transferred to John even though the payment is not
yet made.
2. Rule 2 - Section 21
If there is a contract to sell specific goods and the seller has to do something to put the goods in a
deliverable state, property will not pass to the buyer until the seller has done this thing and the buyer
has notice that it has been done.
Underwood Ltd. V. Burgh Castle Brick and Cement Sundicate
Ex: John agrees to buy Joes car on condition that it will be painted with a new coat of paint.
The property will only be transferred when the car has received a new coat of paint.
3. Rule 3 Section 22
Where there is a contract for the sale of specific goods in a deliverable state, but the seller has to weigh
the goods, or test or do some other action with reference to them in order to ascertain the price, property
will not pass to the buyer until this has been done and the buyer has notice that it has been done.
Ex: John agrees to sell vegetables to Joe at RM5 per kg. The property would only pass after
the vegetables have been weighed and Joe inform of the same.
4. Rule 4 Section 23
This rule applies to contracts for the sale of future or unascertained goods by description. Section 18
provides that in a contract for the sale of unascertained goods, no property in the goods is transferred to
the buyer unless and until the goods are ascertained. Section 23 shows that goods are ascertained when
goods of the description agreed and in a deliverable state are unconditionally appropriated to the
contract.
5. Rule 5 Section 24
If the buyer receives goods on approval or on sale or return, or some other similar terms, property will
only pass to the buyer when one of the following occurs:
i)
The buyer signifies his approval or acceptance to the seller.
ii)
The buyer does some other act which shows he has adopted the transaction, for
example, using the goods or re-selling them.
Performance of Contract:
- S 31: The seller must deliver the goods to the buyer and the buyer must accept and pay for them.
- S 32: The obligations of each party are concurrent (simultaneous).
Delivery of Goods
- DELIVERY = voluntary transfer of possession from one person to another including the means of control
- Place of delivery: as per contract terms
- Time of delivery: as per contract or if no time is stipulated, within reasonable time (Question of Fact)
- Quantity delivered: Seller is under a clear duty (condition of the contract) to deliver exactly the correct quantity

If Seller delivers less goods then Buyer can accept/ reject it.
If Seller delivers more goods then Buyer can accept the correct quantity and reject the rest, or
he may reject the whole delivery.
If Seller delivers goods of different description not included in the contract, then the Buyer may
accept the goods as per the contract and reject the rest or reject the whole of it.
Delivery by Instalments: Buyer not bound unless agreed to accept it like so.
Delivery to a Carrier: Sellers obligation to deliver to carrier and unless otherwise agreed, payment to be paid
upon such delivery.

Acceptance of Goods
- Acceptance deemed complete when:
(i) Buyer inform seller he has accepted the goods;
(ii) Buyer does any act inconsistent with the Sellers Ownership (i.e. for his own use)
(iii) Buyer retains the goods for more than a reasonable time without telling the Seller that he has rejected it.
Rejection of Goods
- Rejection can only be done when Buyer has right to reject goods for breach of condition, otherwise cannot.
- Sufficient for Buyer to inform the Seller of his refusal to accept goods.
Remedies for Breach
- Personal Rights of Seller
(i) Failure of Buyer to Take Delivery
When seller ready and willing to deliver but buyer does not take delivery within reasonable
time after being requested to do so, he is liable to the Seller for any loss.
The Seller is discharged from the contract if the Buyers refusal amounts to repudiation as per
the contract terms.
(ii) Failure of Buyer to Accept Goods
Seller entitled to damages for non-acceptance by buyer IF the property had passed to the buyer.
The seller may sue for the price.
(iii) Failure to Pay for Goods
Seller can sue for price if property in the goods passed to the buyer or when the buyer fails to
pay on a fixed date, even the property has not passed.
Unpaid seller has 3 rights:
(i) Right of Lien over the goods or to retain them for the price
(ii) Right of stoppage in transit (bankrupt the Buyer)
(iii) Right of Resale where goods are perishable in nature/ if notice of intention to resell
given but Buyer still failed to pay within reasonable time/ where seller has right of
resale if buyer defaults and he so defaulted.
- Personal Rights of Buyer
(i) Failure to Deliver Goods (seller wrongfully omits to deliver)
Specific performance IF goods are unique or of special value to buyer
If paid Seller, Buyer entitled to recover price paid.
(ii) Breach of Condition by the Seller treated as Breach of Warranty (S 59)
Buyer cannot reject the goods but may:
(i) Set up extinction of the price
(ii) Sue for damages for breach of warranty