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THE LAW ON SALE OF GOODS

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Nurnazida Nazri-Faculty of Law 1
INTRODUCTION

Statute applicable in Peninsular Malaysia SALE


OF GOODS ACT 1957.
In Sabah, Sarawak governed by Sec 5(2) Civil
Law Act 1956 English Law.
Our SOGA is almost identical to English SOGA.
Sec 3 SOGA provides that provisions of CA 1950
continue to apply unless they are inconsistent with
SOGA.

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SCOPE OF SOGA
Applies to all types of goods, including second hand
goods in commercial and private dealings.
Sec 2 SOGA defines the word GOODS as
meaning every kind of movable property includes
stock and shares, growing crops, grass and any
detachable things from land. This would mean land is
excluded from the definition of goods therefore it is
not governed by SOGA.
Goods which become the subject matter of the
contract of sale may be existing goods or future
goods.
- Existing goods already owned or possessed by the
seller.
- Future goods goods to be manufactured or
produced by the seller.

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THE CONTRACT OF SALE

Sec 4(1) SOGA provides that a contract of sale is


a contract whereby the seller transfers or agree to
transfer the property in goods to the buyer for a
price.
In Sec 2 SOGA price is defined as the money in
consideration for a sale of goods.
Object of contract of sale is the transfer of
ownership of goods to the buyer for money as the
consideration on the part of the buyer.
Contract of sale is not the same as the agreement
of sale.
- A contract of sale property is transferred to the
buyer by the seller.
- Agreement to sell is a contract under which the
transfer of property will take place in the future.
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Case: Harper Gilfillan Sdn Bhd (1980) v. Kean
Toh Amang Factory SB & Lee Kwee Hong
(Claimant) (1986) 1 MLJ 249
When the bailiff seized the goods in the factory,
the claimant claimed that the goods seized belong
to him, relying on a Sale and Purchase Agreement.
Held: The goods seized still belong to the
defendant. Courts finding that property did not
pass to the claimant in an agreement to sell, only
a jus in personam (right to sue the person) is
created.

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FORMATION OF THE CONTRACT
No special form under SOGA.
A contract of sale can be created orally or written
or be implied from conduct of parties [Sec 5(2)
SOGA].
(1)Formation:
- Sec 5(1) SOGA - Contract of sale is made by an
offer to buy or sell goods at a price and by the
acceptance of such an offer.
- The contract may be the immediate delivery of the
goods or the immediate payment of the price or
both.
- If no specific payment on delivery of goods and
payment, then Sec 32 provides that both payment
and delivery be made concurrently.

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(2)Price:
Price is the money consideration.
It may be fixed in the following manner:
- Fixed by the contract,
- Be left to be fixed in a manner agreed in the
contract e.g fixed by third party,
- Be determined by the course of dealing between
the parties,
- Where it is not determine in any of the above
ways, then the buyer shall pay a reasonable price.
Sec 9 provides that what is reasonable depending
on the circumstances of each particular case.
(3)Capacity:
Capacity is governed by Contracts Act 1950.
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(4)Terms of the Contract:
Condition and warranties.
Condition: Sec 12(2) SOGA a condition is an essential
terms of the contract, the breach of which gives rise to
the right to treat the contract as repudiated.
- As a general rule the innocent party can terminate the
contract.
- Exceptions: Where the innocent party cannot terminate the
contract of sale but can only claims damages where:
(i) Buyer waives the condition;
(ii) Buyer treats the breach as breach of warranty and
claim for damages only;
(iii) Buyer had accepted part of the goods which is
not possible to be severed; and
(iv) Where the goods had been passed to the buyer and
breach of any condition must be accepted as
breach of warranty.
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Warranty:
- Sec 12(3) SOGA terms collateral to the
object of the contract, the breach of which
gives rise to claim for damages but not to a
right to reject the goods and terminate the
contract.
- Whether the term is condition or warranty
depends on the facts of each case.

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(5)Implied Terms:
Time:
- Sec 11 SOGA provides that unless the parties
intend to make time as important to the contract, it
will not be the essence of the contract.
- For example, if the buyer did not stipulate any time
period for the payment of the goods supplied then the
buyer may pay within a reasonable time period. But if
the seller wanted the buyer to pay the price of the
goods on the date of delivery and failing which the
buyer is said to have breached the contract. Then
time is regarded as important to the contract.
Title:
- Sec 14(a) SOGA implied condition on part of the
seller that , in the case of sale, he has a right to
sell the goods.

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Quiet possession:
- Sec 14(b) SOGA the buyer shall enjoy quiet
possession of the goods.
- This right covers against wrongful interference
by stranger claiming a lawful right by stating
that his title is better then the seller himself.
- But the seller who has not been paid or partly
been paid can interfere with quiet possession e.g
by repossessing the goods.
- Interference of quiet possession can be by
physical interference or other means.

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Goods free from any encumbrances:
- Sec 14(3) SOGA goods shall be free from any
charge or encumbrance in favour of any third
party not known to the buyer before or at the
time when the contract is made.
- For example in the case of Steinke V Edwards, it
was held that the vehicle is not free from
encumbrance was held that the seller has breach
implied warranty.

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When sale of goods by description, the goods
must correspond with the description.
- Sec 15 SOGA provides that when the goods
were described, it should correspond with the
description. Failure to correspond with
description because of:
(i) Goods vary from the contract.
Case: Moore & Co V Laundauer & Co
Contract for 3100 cases of Australian canned fruit
packed 30 tins per case.
Held: Buyer was entitled to reject the goods when
half of the cases contained only 24 tins per case.
Goods do not correspond with the contractual
description.

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(ii) Goods described in more general sense in the
absence of detailed commercial description.
Considerable discrepancy must occurs before
constitute a breach.
Case: Varley v. Whipp
Contract for a second hand reaping machine
described as new the previous year and used to
cut 50 acres, was not performed when the goods
delivered was a very old machine which has been
repaired.

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Sale of goods by description covers two situations:
(i) Where buyer has not seen the goods;
(ii) Where buyer has seen the goods.
(i)Where buyer has not seen the goods.
In such a situation buyer will only rely on the
description alone.
Case: Nagurdas Purshotumdas v. Mitsui
Bushan Kaisha (1911) 12 SSLR 67
Flour sold bearing a well known trade mark in
previous dealing. Flour was then ordered the
same as our previous contract. Flour sent was
same quality but not the same trade mark.
HELD:Goods did not comply with the description.

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(ii)Where the buyer has seen the goods.
Seller will be liable if defect was concealed
from the buyer.
Case: Beale V Taylor (1967)2 All ER 253
Seller advertised Herald convertible, white,
1961.. The buyer viewed the car before
agreeing to buy it. Later buyer discovered
that the front part of the car was earlier
model.
Held: Seller breached the condition of sale. He
failed to comply with description because the
goods were not the same as description.

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Implied conditions as to fitness for particular
purpose.
- General rule: Section 16 SOGA provides the
common law principle of caveat emptor. This
principle is applicable to buyer.
- Caveat emptor means Let the buyer beware. The
law imposed duty on the buyer to exercise due
care and diligent before making any decision to buy
any goods. If he himself is careless in making
decision then he has to face the consequence.
- Exceptions: However this principle has two
exceptions:
S.16(1)(a) - Goods must be reasonably fit for
purposes which the buyer wants;
S.16(1)(b) - Goods must be of merchantable
quality.
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- Four requirements must be fulfilled before the
buyer can use this section:
(i) The buyer must inform the seller,
expressly or impliedly before or at the time of
contract was made the particular purpose for
which the goods are required;
Case: Griffith v. Peter Conway Ltd
Where a woman who has sensitive skin did
not tell the seller about it when she purchased
the coat. She failed to claim under Sec
16(1)(a) SOGA because the coat will not
harm ordinary person.

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(ii) The buyer is relying on the sellers skill or
judgment;
Case: Grant v. Australian Knitting Mills This
case decided that when the buyer goes to the
sellers shop with confidence indirectly shows
that he relies on the sellers skill in selected
his stock.
(iii) The goods described is in the course of the
sellers business to supply;
Case: Ashington Piggeries Ltd v.
Christophern Hill Ltd
Where it was decided by the court that even
though it was the first time the seller prepare
the feeding compound for minks, but it was of
the kind of the sellers business to supply.
(The seller was the manufacturer and dealer
in animal feed).
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(iv) If goods are specific, and bought under
their patent or trade name.
If the buyer purchased the goods under
patent or trade name, and it is not fit
for purpose then he may sue the seller.
Case: Wilson v. Rickett, Cockerell Co
Ltd.
Where the seller, a firm of coal
merchant, was liable for the explosion
occurred while using the household fuel
under trade name coalite which was
contaminated with detonator that may
cause an explosion.

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Implied condition as to merchantable quality
- Sec 16(1)(b) provides that the goods must be of
merchantable quality.
- Quality means the state of condition of the
goods.
Case: Wilson v. Rickett, Cockerell Co Ltd.

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Implied conditions in a sale by sample:
- Sec 17(1) provides that a contract of sale where the
seller shows a sample, the goods sold must correspond
(exactly the same) as the sample.

The following conditions are implied in a sale by sample:


- Sec 17(2)(a) the quality of the bulk correspond with
the sample; and
- Sec 17(2)(b) buyer shall have opportunity to
compare with the sample; and
- Sec 17(2)(c) free from defect which would not be
apparent on reasonable examination of the sample.

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TRANSFER OF PROPERTY IN GOODS
Property in goods, that is, title or ownership, must
be distinguished with possession.
Although title of goods sold may have passed to
buyer, the seller may continue to possess the
goods. Or the buyer may have in possession the
goods but the title is still with the seller.
In a contract of sale, it is important to determine
the time when the title or ownership of the goods
passes to buyer.
This is very important because from the legal
perspective goods remain at sellers risk until it
is transferred to buyer. When the title or
ownership is transferred to buyer, the goods are
at buyers risk irrespective of whether delivery has
been made. (Sec 26 SOGA).
As a general rule, title passes from seller to buyer
when the parties intend it to pass.
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SOGA specifies the condition before seller and
buyer can apply the general rule:
- Sale of unascertained goods.
Sec 18 SOGA - where there is a contract for
the sale of unascertained goods. No title is
transferred until the goods are ascertained.
- Sale of specific or ascertained goods
Sec 19 - where there is a contract for the sale
of specific or ascertained goods, the title is
transferred at such time as the parties to the
contract intend it to be transferred.

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- Sale of Specific Goods in a Deliverable State
Sec 20 - where there is a contract of specific
goods in a deliverable state, the title passes when
the contract was made.
Sec 21 - where the contract for the sale of
specific goods but not in deliverable state, title will
not pass until the goods is put in a deliverable
state and the buyer has notice of it.
- Sale of Goods in a deliverable state but subject to
weigh
Sec 22 - where the contract of sale of specific
goods and in deliverable state but seller weigh,
measure, test or any other to ascertain the price,
the title does not pass until such act or thing is
done and the buyer has notice thereof.

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- Sale of unascertained future goods
Sec 23 contract of unascertained or future
goods by description and the goods of that
description and in a deliverable state are
unconditionally appropriated to the contract,
either by the seller or the buyer, property in
good passes to the buyer.

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- Goods delivered but on sale or return
Sec 24 unless different intention appears, when
goods are delivered to the buyer on approval or on
sale or return or other similar terms, the property
in goods passes to the buyer;
When the buyer agreed to accept the goods i.e
by paying it;
When the buyer did not say anything but retain
the goods and did not give any rejection notice.
This section covers goods sent on trial, giving the
buyer option to purchase on terms specified.

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RISK
General rule risk passes when the property in
the goods passes irrespective of whether
delivery has been made.
Refer to Sec 26.

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TRANSFER OF TITLE
General rule nemo dat quod non habet. It means
the seller cannot give a better title to the buyer
than what he has at the time of selling the goods.
Same as provided in Sec 27.
Sec 27 provides that where goods are sold by a
person who is not the owner, and who does not sell
them under the authority or with the consent of
the owner, the buyer will not get a better title to
the goods than the seller had
The buyer will not get a better title even if he
had purchased the goods for value and good
faith.

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Case: Lim Chui Lai V Zeno Ltd (1964)3 MLJ 314
Zeno Ltd contracted with Ahmad for the construction of
culverts with Petaling Jaya Local Authority. Zeno supplied
all the materials at the site but later the contract was
cancelled. Zeno Ltd informed PJ Authority that the
materials at the site belonged to them. When Zeno tried
to sell the materials, they discovered that the materials
had been sold by Ahmad to Lim Chui Lai.
Held: Ahmad was not the owner of the materials at
the time he sold them to Lim Chui Lai. Therefore Ahmad
has no title to the goods and he cannot pass the title to
Lim Chui Lai. Thus Lim Chui Lai does not have the title
upon the materials bought from Ahmad.

Rationale this rule is to protect the right of ownership


because without this rule the right of owner when his
goods were stolen will be jeopardized.

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Exceptions to Nemo Dat quod non habet:
Estoppel;
Sale by merchantile agent;
Sale by one of joint owners;
Sale under a voidable title;
Sale by a seller in possession after sale; and
Sale by a buyer in possession.
Estoppel:
- Where the owner by his conduct makes it
appear to the buyer that the seller is
authorized to sell the goods, the buyer will get
a good title because the owner is precluded
from denying the sellers authority to sell (Sec
27).
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Sale by mercantile agent:
Mercantile agent with the consent of the owner
shall be valid (Sec 27).
However the buyer must buy the goods in good
faith and had not received any notice that the
seller has no authority to sell.
Sale by one of joint owners:
Sec 28 provides that if one of the joint owners
of goods has the sole possession of the goods
by permission of the co-owners, then the
property in goods will be transferred to the
buyer provided he acted in good faith.
Sale under a voidable title:
Sec 29 provides that when seller obtained goods
through a voidable contract, buyer acquires
good title to the goods provided he buys in good
faith and without notice of the sellers defect in
title.
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Sale by a seller in possession after sale:
Sec 30(1) provides that if a seller continues to
be in possession of the goods, can transfer a
good title provided the buyer acted in good
faith and without knowledge.

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Sale by a buyer in possession:
Sec 30(2) provides that when a buyer had in
possession goods with the consent of the seller,
can pass a good title to the subsequent buyer,
even if under the first transaction he has not
obtained a good title.
Case: Newtons of Wembley Ltd v. Williams
(1965) 1 QB 560
Plaintiff sold car to A who paid in cheque.
Although he was given possession, it was agreed
that the property would pass until the cheque
was honoured but A sold the car to B who
bought the car without the knowledge of the
position. B resold to defendant. Plaintiff tried to
recover the car from defendant.
Held: A, was given permission to keep the car.
Therefore he could pass a good title to B, who
in turn transferred to defendant.Therefore
defendant was entitled to keep the car.
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DUTY OF SELLER AND BUYER (Sec 31)

Duty of seller willing to deliver the goods.


Duty of buyer willing to accept and pay for them in
accordance with the terms of the contract of sale.
Sec 32 provides that delivery and payment should
be concurrent unless agreed otherwise.
Place of delivery Sec 36(1) whether the seller is
required to send the goods or the buyer takes
possession depend on what is agreed upon between
them.
General rule goods sold are to be delivered at the
place at which they are at the time of the sale.
Sec 36(5) provides that unless the parties agree
otherwise, the expenses and any expenditure in
relation to the delivery of the goods shall be borne
by the seller.
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REMEDIES FOR BREACH
Chapter V and VI of SOGA deal with:
rights of unpaid seller against the goods;
right to sue for breach of contract;
right of buyer to sue for damages for non
delivery;
right of buyer to bring an action for specific
performance;
remedies available to the buyer for breach of
warranty; and
buyers action in torts.

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BREACH BY BUYER
Breach by buyer because:
Refuse to take the delivery of the goods;
- Sec 44 when the seller ready to deliver but
buyer refuse to take delivery of the goods.
- Liable to any loss arising from his refusal.
- Liable for the custody and care of the goods.
Did not accept delivery of the goods; or
- Sec 56 where the buyer wrongfully neglects or
refuses to accept and pay for the goods seller
may sue for damages for non acceptance.
- Illustration Sec 74 provide example for non
acceptance.
Did not make payment for the goods delivered.
- Sec 55 seller may sue for the price.
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RIGHTS OF UNPAID SELLER
AGAINST THE GOODS
Sec 45 SOGA seller is considered as unpaid
seller in the following situations:
(i)When the whole price has not been paid or
tendered;
(ii)Cheque was dishonoured by the sellers bank.
Unpaid has two types of remedies:
Rights in personam;
Rights in rem.

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Rights in personam:
means the seller who has not been paid by the
buyer is entitled to sue the buyer personally in
court.
The method is provided in Sec 55 and 56 SOGA.
The seller has the right to sue the buyer for:
- Sec 55 : for the unpaid price.
- Sec 56 : for damages for non acceptance such
as the transportation fees etc.

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Rights in Rem:
Unpaid seller have three rights under the law in Sec
46(1) SOGA:
Lien on goods.- Sec 46(1)(a)
Right in lien is right to retain the goods until
payment is made . This is only possible if the
goods is still in his possession.
Right to lien can only be exercised by seller
under situations provided by Sec 47:
Where the goods have been sold without any
agreement that it is to be paid by credit -
Sec 47(1)(a)
Where goods sold on credit but term for
credit has expired - S.47(1)(b)
Where the buyer becomes insolvent -
S.47(1)(c)

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Stopping the goods in transit Sec 50
Stopping the goods in transit means the seller
stops the goods that is still with the carrier and
resume possession.
Sec 50 provides right of stopping only applicable:
if the buyer is insolvent;
The goods are in the custody of carrier.
Sec 51 provides that transit starts from the
time the goods are delivered to for the purpose
of transmission to the buyer.
The purpose of stopping is to resume possession
of the goods.

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A right to resell.
Sec 54(3) provides that unpaid who resells
can give a good title to second buyer as
against the first buyer.
The seller can resell when:
The property in goods has not passed to
the first buyer.
Seller in possession of the goods;
When the seller resells after exercised
his right in lien or stoppage in transit.

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Sec 54 provides that seller has a right
to resell:
Sec 54(2) goods are perishable in
nature;
The seller has exercised his right
of lien and stoppage in transit gives
notice to the buyer of his intention
to resell, the buyer fails to make
payment within reasonable time.
There is an express provision in the
contract of sale for the right to
resell in the event buyer defaults in
the payment.

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