BUSINESS LAW

CHAPTER 7
: SALES OF GOODS

•Statue:
•Sales of Goods Act 1957
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•Consumer Protection Act 1999
 SALE OF GOODS ACT (SOGA):

Law applicable:
-other than in the states of Penang, Malacca,
Sabah and Sarawak
-the Sale of Goods Act 1957 (SOGA) applies in
other states in Malaysia- section 1
-in the four states still refer to English Sale of
Goods Act 1893.

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SUB -TOPICS:
1) Definition of Goods
2) The Contract of Sale
3) Formation of the contract of sales:
a) formation, b) formalities, c) price, d) capacity to contract
4) Terms of the contract:
a)conditions and warranty, b) stipulation as to time,
c) implied terms
5) Implied terms :
a) condition as to title, b) warranty quiet possession,
c) warranty unencumbered, d) conditions goods by descriptions,
e) goods with reasonably fit for purposes,
f) goods of merchantable quality,
g) goods by sample

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6) Transfer of property and transfer of title
7) Exceptions to rule: “Nemo Dat Quod Non Habet”:
a) estoppel, b) merchantile agent, c) one of joint ownership,
d) voidable title, e) possession after sale,
f) buyer in possession
8) Remedies for Breach:
a) rights of the unpaid seller against the goods:
-Lien, Stoppage in transit, Resale
b) rights to sue for breach of contract
c) rights of the buyers to sue for the damages for non-delivery
d) rights of the buyer to bring an action for specific performance
e) remedies available to the buyer for breach of warranty
f) buyers’ action in tort
9) Consumer Protection Act 1999

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 1) DEFINITION OF GOODS:

Section 2, SOGA 1957 defines goods as:

-every kind of movable property other than actionable claims

and money; and includes stocks, 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.

therefore LAND is excluded

-Goods- are broadly define and include all chattels personal
other than things in action and money
-Goods only includes physical and movable things

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 1) DEFINITION OF GOODS:

Goods does not include:

-land or things attached to land (though it does
include timber and growing crops which are to be
harvested before sale or under the contract of sale)
-choses in actions or rights, eg: debts, negotiable
instruments and patents, or
-services such as work or labor or repair

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 1) DEFINITION OF GOODS
Classifications of goods legislations:
a) Existing: section 6
-are goods already owned or possessed by the seller,
either specified or agreed upon at the time a
contract of sale is made
b) Future: section 2
-means goods to be manufactured or produced or
acquired by the seller after the making of the
contract of sale
c) Specific:
-means goods identified and agreed upon at the
time a contract of sale is made
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 1) DEFINITION OF GOODS

Classifications of goods legislations:

d) Unascertained:
-are those identified by descriptions only
e) Ascertained:
-are goods which in a contract for the sale of
unascertained goods have become identified and
agreed upon by the parties

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 2) THE CONTRACT OF SALE
-a contract of sale is a contract whereby the seller
transfer or agrees to transfer the property in goods (the
ownership) to the buyer for a price ( a money
consideration)
-a sale occurs when the ownership or property in goods
passes to the buyer
-it must involves:
a) goods
b) money consideration (called the price) and
c) transfer of property.

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 3) FORMATION OF THE CONTRACT OF SALES:
a) Formation: section 1
-is made by an offer to buy or sell goods at the price and
by the acceptance of such an offer
- provides immediate delivery of the goods or the immediate
payment of the price or both
-delivery of payment may be even by installment (section 5)
-price means the money consideration for the sale of goods

b) Formalities:
- may be made in writing or by word of mouth or partly in
writing and partly by word of mouth or may be implied by
the conduct of the parties

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 3) FORMATION OF THE CONTRACT OF SALES:

c) Price:
- contract of sale is basically an offer to buy or
sell goods for a price and the acceptance of
such an offer
-is the money consideration for the sale of
goods

d) Capacity to contract:
-is governing capacity in ordinary contract law
apply for contracts of sale
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 4) TERMS OF THE CONTRACT:

a)conditions and warranty

Condition- section 12(2)
-essential to the main purpose of contract
-any breach- it may be treated as repudiated

Warranty- section 12(4)

-collateral to the main purpose of the contract
-any breach- can claim damages but not to reject the
goods/ repudiate the contract.

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 4) TERMS OF THE CONTRACT:
b) stipulation as to time -section 11
-Time of payment are not deemed to be the essence of the contract
of sale unless stated otherwise

c) implied terms-section 14-section 17

5) Implied terms :
a) condition as to title,
b) warranty quiet possession,
c) warranty unencumbered,
d) conditions goods by descriptions,
e) goods with reasonably fit for purposes,
f) goods of merchantable quality,
g) goods by sample
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 5 a)Implied condition as a title:
-section 14 (a) :
-seller has the right to sell the goods
-agreement to sell, the right to sell the goods when the time comes
for the buyer to become the owner

5 b) Implied warranty enjoy Quiet Possession:

-section 14 (b):
-the buyer shall have and enjoy quiet (undisturbed) possession of
the good.
-the third party will not come and claim to be the true owner or
that they have the right in the goods after the sale has taken
place

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 5 c)Implied warranty: Goods are free from encumbrances:
-section 14 (3):
-goods are free from any charge/encumbrance in favor of a third party
who is not known or declared to buyer at the contract was made.
-examples: storage charges which have to be paid before the goods can be
collected

5 d)Implied condition: Goods correspond with description:

-section 15:
-the goods shall correspond with the description
case: Nagurdas Porshutamdas v Mitsui Bussan Kaisha LTD

5 e) Implied: Reasonably fit for particular purpose:

-section 16 (1)
-let the buyer beware
-buyer must exercise care when he makes purchases
-if he does not, he must bear the consequences
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case: Griffiths V Peter Conway LTD
 6) TRANSFER OF PROPERTY IN GOODS:

-Property in goods (title/ownership) must be

distinguished from possession
-Goods may have been sold to buyer but possession
still remains with the seller:

1) Section 18- Sale of unascertained goods:

-Property in goods can only be transferred to buyer
after goods are ascertained.

2) Section 19- Sale of ascertained goods:

-Property is transferred to the buyer when the
parties to the contract intend it to be transferred
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 5 f) Implied: Merchantable Quality:
-section 16 (1) (b)
-goods brought from a seller who deals in goods of that
description, the goods must be in merchantable quality.
-however, if buyer has examined the goods, there shall
be no implied condition as regards defects which such
examination ought to reveal
-goods must be fit for use.
-case: Wilson v Rickett, Cockerall & Co. Ltd.

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 5 g) Implied Sale by sample:
-section 17 (1) & (2):
-the bulk shall correspond with sample;
-buyer has ample opportunity to examine the bulk
of goods; and goods are free from any defect.

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 6) TRANSFER OF PROPERTY IN GOODS:

3) Section 20- the property in goods passes to the buyer

when the contract is made:
-Goods must be in a deliverable state; Underwood v
Burgh Castle Bricks & Cement Syndicate.

4) Section 21- The seller must do something to put the

goods in a deliverable state, property does not pass until
such thing is done.

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 6) TRANSFER OF PROPERTY IN GOODS:

5) Section 22- Where seller is supposed to weigh, measure, test or

do something to ascertain the price of goods, property does not
pass until such thing is done and buyer has notice of it.

6) Section 23- Sale of unascertained or future goods, by

description;
-goods in that description unconditionally appropriated to the
contract by both buyer & seller, the property in goods passes to
the buyer.

7) Section 24- When goods are delivered to the buyer on approval,

the property in goods passes to the buyer.

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 6) TRANSFER OF TITLES:

-as a general rule, when a person takes goods (buyer) he or she gets only the
same rights to the goods as the person from whom he or she took them (seller)
-in Latin maxim called: Nemo dat quod non habet
-in English rule : Nemo dat quod non habet
-No one can pass better title than he has himself
-section 27 SOGA:
-where goods are sold by a person who is not the owner and sells
without the authority or consent of the owner, the buyer acquires
no better title..

-Case: Lim Chu Lai v Zeno Ltd.

-Case: Lord Denning in Bishopsgate Motor Finance Corp v
Transport Brakes Ltd:
“ Accepts the general rule of nemo dat principle but also
21 recognizes the need for exceptions for commercial necessity..”
 7) EXCEPTIONS TO NEMO DAT RULE:
a) Estoppel:
-section 27 SOGA:
-Owner of goods by his own conduct precluded from denying the seller’ s
authority to sale
( N.Z. Securities & Finance Ltd. V Wrightcars Ltd.
-example:

b) Sale by mercantile agent:

-proviso of Section 27
-a mercantile agent having in the customary course of business as such
authority either to sell goods or to consign goods for the purpose of sale or to
raise money on the security of goods
-example:

c) Sale by one of joint owners:

-section 28:
-One of the owner has sole possession of goods by permission of the co-owners;
the buyer buys in good faith and has not noticed that the seller has no
authority to sell
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-example:
 7) EXCEPTIONS TO NEMO DAT RULE:
d) Sale under a voidable contract:
-section 29:
-Seller of goods obtained possession under a contract voidable
under S 19 & S 20 but contract not yet rescinded at time of
sale, the buyer acquires title of goods in good faith and without
notice of seller’s defect of title.
-example:

e) Sale by a seller in possession after sale:

-section 30(1):
- If seller continues to be in possession of goods or document
of title to the goods, sells it to another person and the second
buyer buys in good faith
-case: Pacific Motor Auctions Pty Ltd v Motor Credit Ltd
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 7) EXCEPTIONS TO NEMO DAT RULE:
f) Sale by a buyer in possession:
-section 30 (2):
- the buyer with the consent of the seller obtains
possession of goods or document of title to goods, may
dispose or pledge the goods to another person who
purchases in good faith
-case: Newtons of Wembley Ltd v Williams

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 BREACH BY THE BUYER :
1) Failure of buyer to take delivery:
Section 44:
-When seller is ready and willing to deliver the goods and
requests the buyer to take delivery
- after reasonable time buyer does not take delivery, he is liable
for any loss due to his neglect or refusal to take delivery.

2) Failure of Buyer to accept goods:

Section 56:
-Seller entitled to sue for damages for non-acceptance of goods
by buyer.

3) Failure of buyer to pay for goods:

Section 55:
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-the seller may sue for the price of the goods.
 PERFORMANCE OF CONTRACT:
Chapter IV of the Sale of Goods Act

1) Delivery of Goods:
Section 31:
-The duty of seller to deliver goods while the buyer’s duty as to accept
and pay for them..

2) Place of delivery:
Section 36 (1):
-Goods sold are to be delivered at the place at which they are at the
time of the sale..

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 PERFORMANCE OF CONTRACT:

3) Time of delivery:
Section 36 (2) within reasonable time

4) Delivery of wrong quantity or wrong mix of goods:

Section 37 (1):
- Quantity of goods less than agreed, buyer may reject them
-case: Harland & Wollf v J Burstall & Co;
-quantity of goods larger than contracted, buyer may accept his
portion and reject the rest and; goods are mixed, buyer may
accept the goods of his description and reject the rest.

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 PERFORMANCE OF CONTRACT:

5) Delivery by Installments:
Section 38 (1):
-Unless agreed by the parties, the buyer is not bound to accept
delivery by instalments
-case: Behrend & Co. Ltd v Produce Brokers Co Ltd

6) Delivery to carriers or Wharfingers:

Section 39(1):
- Seller delivers goods to carriers for transmission or to
wharfingers for safe custody it is deemed to be a delivery of
goods to buyer.

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 8) Remedies for Breach:
a) rights of the unpaid seller against the goods:
-Lien, Stoppage in transit, Resale
b) rights to sue for breach of contract
c) rights of the buyers to sue for the damages
for non-delivery
d) rights of the buyer to bring an action for
specific performance
e) remedies available to the buyer for breach of
warranty
f) buyers’ action in tort

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 8) a) RIGHTS OF UNPAID SELLER AGAINST THE GOODS:

-SOGA accords additional remedies for the unpaid seller.

-Remedies are against the goods themselves and not ‘personal’

-Section 45 defines unpaid seller as:

a) when the whole price has not been paid or tendered for
b) when bill of exchange or negotiable instrument has been
dishonoured

Section 46:
(a) right of lien
(b) stoppage in transit
(c) resale

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 a) RIGHTS OF LIEN:

The unpaid seller of goods who still possesses them is

entitled to retain possession of them until payment or
tender of the price in any of the following events

Rights arises based on Section 47:

1) Goods sold without any stipulation of credit

2) Goods sold on credit but term of credit has expired
3) The buyer becomes insolvent

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 a) RIGHTS OF LIEN:

Seller loses rights based on Section 49 (1):

1) Goods delivered to carrier/ bailee for transmission

without reserving the rights for the disposal of the goods

2) When buyer or his agents lawfully obtains possession

of the goods

3) When the seller waives his lien

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 b) STOPPAGE IN TRANSIT:

Section 50:
-An unpaid seller who has parted with the possession of goods has
the right to stop them in transit when the buyer becomes insolvent
so as long the goods are in the course of transit.
-stoppage in transit is effected by the unpaid seller in the:
a) by taking actual possession of goods
b) by giving notice of the seller’s claim to the carrier or
bailee in whose possession the goods are

-case: Bethell v Clarke

-case: Ex. P Rosevear China Clay Co.

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 c) Resale
Section 54 (1):
-provides that a contract of sale is not rescinded by the mere
exercise by an unpaid seller of his rights of lien or stoppage in
transit
Section 54 (2):
-provides the seller has the authority to resell :
i) the goods are of perishable nature
ii) gives notices to the buyer of his intention to resell and the
buyer does not within a reasonable time pay or tender the price
iii) the seller expressly reserved the right of resale in case buyer
make default and the buyer makes such default

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 8 b) Rights to sue for breach of contract

The seller can sue for the price of goods where:

i) the property in the goods has passed to the

buyer and the buyer wrongfully neglects or refuses
to pay for the goods

ii) it is contracted that the price be paid on a certain

date irrespective of delivery and the buyer
wrongfully neglects and the goods have not been
appropriated to the contract

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 8 c) Rights of the buyers to sue for the damages
for non-delivery
-where the seller wrongfully neglects or refuses to
deliver the goods to the buyer, the buyer may sue the
seller for damages for non-delivery

8 d) Rights of the buyer to bring an action for

specific performance
-section 58
-usually specific performance is ordered by the court
only when goods are of a special or peculiar kind
Ex: valuable painting or a priceless antique
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 8 e) Remedies available to the buyer for breach of
warranty
-where the seller commits a breach of warranty or
where the buyer elects or is compelled to treat a
breach of condition by the seller as a breach of
warranty
-the buyer cannot reject the goods, but he may :
i) set up against the seller the breach of warranty in
diminution or extinction of the price
ii) sue the seller for damages for breach of warranty

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 8 f) buyers’ action in tort
-the buyer can sue the seller in tort by bringing an action in
detinue and conversion

Detinue:
-is the wrongful detention of chattels belonging to the plaintiff
after their return has been demanded
-ex: the property in goods has passed to the buyer and the seller
withholds the goods although the buyer demands for them

Conversion:
-is the dealing with the goods in a manner inconsistent with the
ownership of the buyer
-ex: the seller wrongfully sells the goods to a third party although
the property in the goods has passed t the buyer
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 9) Consumer Protection Act 1999
a) Price Control Act 1946
b) Trade Marks Ordinance 1950
c) Sale of Food and Drugs Ordinance 1952
d) Medicines (Advertisement & Sale) Ordinance 1956
e) Sales of Goods Act 1957
f) Control of Supplies Act 1961 (revised 1973)
g) Copyright Act 1969
h) Weights and Measured Act 1972
i) Trade Descriptions Act 1972
j) Hire Purchase Act 1967 (revised 1978)

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 SUMMARY:

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