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LEARNING OBJECTIVES :

The aim of this topic is to enable students to;


This section aims to examine the protection given by the law to
consumers dealing in transactions involving the sale of goods and the
remedies provided if sellers break these implied conditions in such
contracts.

2. LEARNING OUTCOME

A successful student will be able to;


Identify and apply the appropriate law to the facts depending on the
problems
Suggests remedies to the buyer / seller
1. Introduction
The contract of sale of goods is governed
by the Sale of Goods Act 1957 (SOGA). It
is applicable in all states in Peninsular
Malaysia except Sabah and Sarawak.

The law of contract of sale of goods in


these states is governed by English sale
of goods statute.
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1.1. Definition of Goods
s. 2 of SOGA defines goods as follows:-
every kind of movable property other than
actionable claims and money and includes:-
a) stock and shares;
b) growing crops;
c) grass; and
d) things attached to or forming part of the land
which are agreed to be severed before sale or
under the contract of sale.

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1.1. Definition of Goods
(cont)
Actionable claims normally include rights
under a contract, copyright and stocks and
shares.
A owes B money. B cannot sell, as goods the
rights to claim the debt from A. In other words,
a debt is a debt, not convertible to other forms.
Land is excluded.
Goods to include second hand either
wholesale/retail
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2. Classification of goods (s. 6)

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GOODS
Existing goods (s. 6) Future goods (s. 2 of SOGA)
Goods already owned or possessed Goods to be manufactured or
by the seller. produced or acquired by the seller
after the making of the contract of
sale.
Specific Goods Unascertained Specific goods Unascertained
(s. 2 of SOGA) goods (s. 18) (s. 2 of SOGA) goods (s. 18)
Goods identified Goods which are Goods identified Goods which are
and agreed upon identified by and agreed upon identified by
at the time a description only. at the time a description only.
contract of sale contract of sale
is made. is made.
Existing- Existing- Future-specific Future-
specific goods unascertained goods unascertained
Example: goods Example: goods
Sale by Ali of his Example: An agreement to Example:
car which is Sale by a car sell particular car An agreement to
registered as dealer a new with both seller sell a unit of
WMM 211 to Honda Accord and buyer knows Toyota Avanza
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Muthu. 2006 model, belongs to 3rd 1.5 yet to be
until one party at the time manufactured by
1.3. Definition of contract of
sale
Sale (s. 4 (1) of SOGA)
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.

A contract under which the property in the


goods is transferred from the seller to the
buyer.
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According to the definition, contract of
sale can be in two (2) forms, a SALE or
an AGREEMENT TO SALE.

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Sale
Sale (s. 4 (1) of SOGA)
A contract under which the property in the goods is
transferred from the seller to the buyer.
It means transfer of title in the goods takes place
upon conclusion of the contract.
In a case of breach by seller, buyer may claim
specific performance to compel delivery of the
goods.
In a case of breach by buyer, seller may sue for
the contract price.
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Agreement to sell
An agreement to sell (s. 4 (3) of SOGA)
A contract under 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.
Conditions may be in respects of time or
performance of certain matters.
Breach from buyer seller can repossess the goods
and/or claim damages
Breach from seller buyer can only claim
unliquidated damages. Cannot claim the goods
belongings to seller.
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Case on agreement to sell
Harper Gilfillan (1980) Sdn. Bhd v Kean Toh Amang
Factory Sdn. Bhd. & Lee Kwee Hong (claimant) [1986] 1
MLJ 249
The agreement to purchase land and factory with all the
movables therein with a condition that it would only be
effected if the Menteri Besar gave consent was said an
agreement to sell. Thus the property in the movables
had not passed to the purchaser since the consent had
not been given on the date of seizure of the movables.

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The main function of the Act is to codify the terms implied into a contract of sale
of goods.
This means that the implied terms are automatically applicable in any contract
involving the sale of goods.

Furthermore, where there are express terms in the contract which contradict these
implied terms, it is the statutory implied terms which are more important and will be
applicable within the contract.
1. Section 14
It is an implied condition;
that the seller has, or will have
at the time when the property in goods is to be transferred,
a right to sell the goods.

The condition is broken (breached) if the seller does not have the right to
sell, example;
the seller, although he owns the goods, can be stopped by a third party
from selling them;
the goods are stolen goods.
In these cases, the buyer may sue him for breach of condition.
Q: Remedy?
The buyer can end the contract and recover the full price which he has paid.

Rowland v Divall [1923]


R, a motor dealer, bought a car from D. D did not know that the car was stolen. R resold the car to a
customer. Later, the owner of the car recovered it from Rs customer and R had to repay his customer
the price of the car. R sued D to recover the entire price which R had paid D. D argued that the sum
should be less as the car had been used by the new customer for 2 months before it was returned to
the owner. The courts held that no allowance should be made of the use of the car in calculating how
much was owing to R as the contract was for the transfer of ownership of the car and it had not been
transferred.

Therefore, if the seller delivers goods to the buyer without having the right to sell, there is a total
failure of consideration and the buyer does not obtain ownership of the goods.
If the buyer has to give up the goods to the real owner, he may recover the entire price from the
seller, regardless of whether he has used the goods or not.
2. Section 15:
Goods must correspond with the contract description.
A sale will be by description where
the buyer is buying on a mere description, having never seen the goods; or
the goods are in a packaging
Most goods are described by the package in which they are contained but the buyer must
still rely on the description of the goods on the packaging, even if they see and examine
the goods. Therefore, the sale in a self-service store will be covered by Section 13
though no words were spoken by the seller.

Beale v Taylor [1976]


A car was advertised as a 1961 Triumph Herald 1200. The buyer came to inspect the car
and noted that on the rear of the car, there was a metal disc showing 1200. After buying
the car, he found that only the back half corresponded with the description. It had been
welded to a front half which was part of an earlier Herald model. The seller tried to argue
that the buyer had inspected the goods before buying and therefore, he could not sue
under a sale by description.
The court held that the advertisement described the car as a 1200 model. This
description could not be relied on as the buyer inspected the goods. However, the metal
disc on the back of the car also described the car as a 1200 and the buyer had believed
this description. There was therefore, a sale by description.
3. Section 16:
This applies to fitness and satisfactory quality of the goods.
However, section 16 only applies in the course of business.
caveat emptor buyer must exercise care in making purchases. If he dont, he
must bear the consequences.

Section 16(1)(a):
Where the seller sells goods in the course of a business and the buyer expressly
or impliedly
makes known to the seller that he is buying the goods for a particular purpose,
there is an implied condition that the goods supplied under the contract are
reasonably fit for that purpose,
whether or not it is a purpose for which such goods are commonly supplied.

Section 16(1)(b):
Where the seller sells goods in the course of a business, there is an implied
condition that the goods supplied under the contract are of satisfactory quality.
Griffiths v. Peter Conway Ltd
[1939] 1 All ER 685
Facts: A woman with an unusually sensitive
skin who bought a Harris Tweed coat without
disclosing that fact to the seller.

Held: The woman could not succeed in her


claim because:-
She did not disclose to the seller the fact that her
skin is sensitive to the tweed.
The coat will not harm a normal person.
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Implied condition that goods must be of
satisfactory quality/merchantable quality (s.
16(1)(b))
Merchantable quality means the goods sold
are fit for the particular use to which they were
sold. If they are defective for the purpose,
they are unmerchantable.
Case: David Jones v. Willis [1934] 52 CLR
110

Held: A pair of shoes whose heels came off on


the third occasion was held unmerchantable.
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Exceptions:
These implied conditions apply unless:
i. the defects are specifically drawn to the buyers attention before the contract is
made;
This refers to obvious defects. If the seller specifically informs buyer about the obvious defects
in the goods, the buyer can no longer use this section to sue if he finds the goods are not
satisfactory. However, the buyer may still sue for latent defects.

ii. the buyer examines the goods before the contract is made and the examination
ought to reveal the defects.
Again, this refers to obvious defects. If the buyer examines the goods and should have seen
the defect, it is his fault if he goes on to buy the goods. He can no longer sue the seller if he
finds out about the obvious defect after the contract has been entered into.

However, he may still sue for latent defects.

iii. the transaction is a non-business transaction.

If the seller normally does not deal in goods of the type in question, there is no condition as to
fitness.
The only condition in such a case is that the goods correspond with the description.

If S, who is not a dealer, sells a car to B with no express terms as to quality and fitness, the
court is prevented by section 14 from implying conditions or warranties, even though S seems
to have been warranting the car in good order.
Therefore, the law allows this condition to be left out of the contract if the above situations
occur.
Reliance on sellers skill and judgement

a. There is no need for the buyer to show that he relied on the sellers skill and judgement. The
reliance is implied- S.16(1)(b)

b. Under section 16(1)(a),

i. Where the goods have several uses, the seller may escape liability if he can show that
the buyer did not rely or it is unreasonable of him to rely, on the skill and judgement of
the seller.
Here, buyer must expressly make known to seller the reason he wants the goods.

ii. However, where there is only one use for the goods, it is not necessary for the buyer to
show that he relied on the sellers skill and judgement. The reliance of the buyer on the
seller is implied.
The seller will remain liable if the goods cannot be used for that purpose.

Priest v Last [1903]


A customer at a chemist shop asked for a hot water bottle and was told that it should no
be filled with boiling water. He asked whether he could pour hot water into it and
received an affirmative reply. The hot water bottle burst after 5 days of use.The courts
held that the buyer had relied on the sellers skill and judgement and although he had not
mentioned what he was using the hot water bottle for, he had used it for a usual and
obvious purpose.

Grant v Australian Knitting Mills Ltd [1936]


Underwear purchased from a retailer caused rashes.
The court held that the seller was liable as the article was not of satisfactory quality and the article
was
not fit for the purpose.
Duty to check goods

I. The buyer is not obliged to examine the goods.


II. However, if he does so, he will lose the protection of section 14(2) if he fails to
notice obvious defects.
III. Nevertheless, the protection given under this section continues for latent defects.

Second hand goods quality and fitness

I. In deciding fitness for the purpose in the case of second-hand goods, the buyer
must expect that defects will emerge sooner or later.
II. However, if the defects occur fairly quickly after sale, this is strong evidence that
the goods were not reasonably fit at the time of sale.
III. Therefore, the buyer may try and use section 14(2) if the second hand goods
cannot be used for a reasonable amount of time.

Crowther v Shannon Motor Co [1975]


C, relying on the skill and judgement of the sellers, bought a second-hand car from them.
After being driven for over 2,000 miles in the 3 weeks after the sale, the engine seized
and had to be replaced.The courts held that the fact that a car does not go for a
reasonable time after sale is evidence that the car was not fit for the purpose at the time
of sale.
Difference between fitness and satisfactory quality

I. Under section 16(1)(b) relating to satisfactory quality, if the goods were perfect,
they would have caused no problems. Here, there is a manufacturing defect.

II. Under section 16(1)(a) relating to fitness for the purpose, the article may be perfect
in manufacture, but its design does not allow it to fit the purpose and therefore, no
amount of adjustment or repair will ever make it right.
In other words, it is a perfect article but wrong for the purpose.

III. The goods may be fit for more than one purpose. However, under section 16(1)(a),
the goods must be fit for the buyers specification
4. Section 17:
A sale by sample is where there is a term in the contract that the sale is to be by sample.

It is not enough that the seller provides a sample for the buyers inspection.

The conditions which must be fulfilled for a sale by sample under section 17(2) are:
i. the bulk must correspond with the sample in quality;
ii. the buyer shall have a reasonable opportunity to compare the bulk with the sample;
iii. the goods shall be free from any defect which would not have been apparent on a reasonable
examination of the sample.

The effect of section 17(2)(ii) is that the buyer is not deemed to have accepted the goods
until he has had an opportunity to compare the bulk with the sample.

If the bulk does not correspond with the sample, the buyer can reject the goods even if
they have been delivered.

The effect of section 17(2)(ii) means the buyer will not be able to bring an action under
section 17 if he does not examine the sample for any defects which should have been
obvious.

This means that a buyer may never be able to sue for obvious defects under section 17(2)(ii).

Furthermore, under section 17(2)(iii), a buyer can ONLY sue for latent defects.
Godley v Perry [1960]

A 6-year old boy bought a toy catapult from the seller.


The toy catapult broke when used and the small boy lost his left eye. The seller claimed
that he had tested the catapult which he had bought in bulk from a wholesaler. As the
sale was by sample, the sellers wife had tested it by pulling the elastic.

The courts held that the seller was liable because goods was not of satisfactory quality
and not fit for its purpose.
The catapult was not reasonably fit for the purpose for which it was required and the
small boy had impliedly relied on the sellers skill and judgement.
Furthermore, it was not of satisfactory quality.
The wholesaler was found to be liable for sale by sample as the catapult had a defect
which rendered it not satisfactory and this defect was not apparent on a reasonable
examination of the sample. The pulling of the elastic was all that could be expected of a
potential purchaser in testing the sample.
SGA 1957

Def of contract :
General principles
S. 4(1)
Classifications of goods that applies to
Meaning of goods s. 6 SGA 1957
S. 2

Implied terms

.Time for payment Ss.11


.Ltd title S.14
.Description S.15
.Fitness S.16(1)(a)
.Satisfactory quality S.16(1)(b)
.Sale by sample S.17
TUTORIAL QUESTIONS

1. Ali visited Naza Motors with an intention to purchase one of the luxurious collection
there. He was fascinated with one of the car which was exhibited in the showroom.
Ahmad, a salesman in the showroom said that the car was a brand new car, it
comes in various colours, its of a new model and most importantly it is of good
condition. Ali took the car for a test drive and was very satisfied with the car. He
bought it. After 3 months, the car started to give some minor problems. Advise Ali.

2. State the differences between sale by sample and sale by description.