SALE OF GOODS

BACHELOR OF ACCOUNTANCYLAW 385

COMMERCIAL LAW

THE LAW OF SALE OF GOODS

• Governed by the sale of Goods Act 1957.• Applies to all types of goods, including second-hand

goods and to commercial sales / private sales / wholesale & retail.

• S.1 : shall have effect within the Malay states ONLY.• Penang, Malacca, Sabah & Sarawak: governed by the

English SOGA vide S.3 & % of CLA• Malaysian SOGA = English SOGA

SALE OF GOODS

S.2 SOGA 1957:"--.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“

Morgan V RusselSale of minerals still attached to land – not SOG

SALE OF GOODS

EXCLUDES

LAND

MONEYACTIONABLE CLAIMS

SALE OF GOODS

S.4(1) SOGA 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”

INGREDIENTS OF SOG

There must be goods to be transferred

Seller agrees to transfer

property in goods to buyer

There is a price for the transfer

SALE OF GOODS

S.2 SOGA 1961:Buyer: Person who agrees to buy goodsSeller: Person who agrees to sell goods

SALE OF GOODS

OBJECTIVE

TRANSFER OF OWNERSHIP OF

GOODS TO BUYER

FOR CONSIDERATION

SALE: WHEN OWERNSHIP TRANSFERS

PARTIES: BUYER & SELLER

SALE OF GOODS

S.4(3) SOGA 1961:“An agreement to sell is 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.”

SALE OF GOODS

S.4(4) SOGA 1961:“An agreement to sell becomes a sale when {he

time elapses or the conditions are fulfilled subject to which the property in the goods is to

be transferred.”

SALE OF GOODS

FIXTURES ONLY IF UNATTACHED TO LAND SUBSEQUENTLY UNDER THE SALESEVERED FROM THE LAND (Amco Enterprise Pty Ltd V Wade: recovery of gravel, sand and

THINGS LEFT ON LAND AND FORMS PART OF LAND(Mills V Stockman: Heap of slate left on land for many years)MONEY EXCLUDING COMMEMORATIVE COINS (Moss V Hancock)

INCL

UD

ES :

EXCLUD

ES:

CATEGORY OF GOODS• Already owned/ possessed• Can be specific, ascertained or unascertainedEXISTING

• Identified and agreed upon at the time of creation of contractSPECIFIC

• Not identified or agreed at time of saleUNASCERTAINED

• Unascertained goods which have been identieif• Appropriated to contract after contract is madeASCERTAINED

• To be manufactured or produced after contract is madeFUTURE

TRANSFER OF OWNERSHIP

Ownership or property in goods : legal title/rights over the goods

Can be owner even if not in possession

Can be in physial possession/control but not owner

Only owner entitled to sell / transfer title

PRICE

S.2 SOGA 1961:“Money consideration for a sale of goods.”

• MUST BE EXCHANGE FOR GOODS WITH MONEY• EXCLUDES BARTER

PRICE

s.9(1) & (2)

FIXED:

BY CONTRACT

BY CERTAIN MANNER IN CONTRACT

BY COURSE OF DEALING

REASONABLE PRICE

FORMATION

FORM

ALIT

IES FORMALITIES & CAPACITY

TIME OF PAYMENT

TERMS: CONDITION OR WARRANTY?

TRANSFER OF TITLE

FORMALITIES & CAPACITY

• S.5(2): may be in writing or verbal or partly in both or implied

• No specific provisions so CA applies • S.3 SOGA : CA applied where SOGA silent and where

not inconsistent with SOGA)• Capacity: governed by S.11 CA• SOG contract made by offer to buy or sell goods for a

price and accepted• Delivery and payment can immediate or future or

(S.32) concurrent

FORMATION

TIME OF PAYMENT

• S.11: NOT OF ESSENCE

• UNLESS PROVIDED IN CONTRACT

TERMS

• CONDITIONS & WARRANTIES

• DEPENDS ON CONSTRUCTION

• CAN BE EXPRESS OR IMPLIED (S.14 – 17)

TRANSFER OF TITLE

• S.27: NO TITLE = NO TRANSFER = NO SALE

• NEMO DAT QUOD NON HABET

CONDITIONS

S.12(2) SOGA 1961:"a stipulation essential to the main purpose of the

contract, the breach of which gives rise to right to treat the contract as repudiated”

• ESSENTIAL TERM OF CONTRACT• BREACH: NON-DEFAULTING PARTY CAN REPUDIATE

WARRANTIES

S.12(3) SOGA 1961:"a stipulation collateral to the main purpose of the

contract, the breach of which gives rise to right to a claim for damages but not a right to reject the goods

and treat the contract as repudiated”

WARRANTIES

A LESS VITAL TERM, BREACH OF WHICH PARTY CAN CLAIM FOR DAMAGES WHERE:

BUYER WAIVES OR TREATS CONDITION AS WARRANTY OR

BREACH THEREOF (S.13(1)

CONTRACT UNSEVERABLE & GOODS ACCEPTED IN TOTO OR IN PART (S.13(2) & s.42

(RE ACCEPTANCE)

CONTRACT FOR SPECIFIC GOODS AND PROPERTY

TRANSFERRED TO BUYER (S.13(2))

S.42: “BUYER HAS ACCEPTED THE GOODS”

• Buyer informs acceptance• Goods delivered & buyer acts against

ownership of seller• Keeps going without rejection after expiry of

time

IMPLIED TERMS

TITLE - S.14(a) QUIET POSSESSION – S.14(b)

GOODS TO CORRESPOND WITH

DESCRIPTION

SALE BY SAMPLE – S.17FITNESS FOR PURPOSE – S.16(1)

IMPLIED C & W CAN BE EXCLUDED BY EXPRESS

AGREEMENT OR PREVIOUS DEALINGS –

S.62

CONDITION AS TO TITLE

• S.14(a) – implied condition of the seller of his right to sell or he will have the right to sell i.e. right of title or ownership

• Rationale: to pass or obtain good title• breach of condition = seller can repudiate (terminate

& recover money even if goods already used)• ROWLAND V DIVALL – purchase of stolen car :

breach of implied condition• BUTTERWORTH V KINGSWAY MOTORS LTD –

sale/purchase of hire purchase car

QUIET POSSESSION

• S.14(b) "unless a different intention is shown, there is an implied warranty that the buyer shall have and enjoy quiet possession on the goods“

• Includes situations of defective title & subsequent disturbance of possession

• Gives assurance against wrongful interference then and in the future

• Breach: entitled to damages but not repudiation• Microbeads A.G. V Vinhurst Road Markings Ltd

(patentee claim for breach of patent of road markings)

ENCUMBERANCES FREE

• S.14(c): "an implied warranty that the goods shall be free from any charge or encumberances in favour of any third party not declarecl or known to the buyer before or at the time when the contract is made“

• Seller must declare encumberance• Breach: damages not repudiation• Steinke V Edwards (car with undisclosed

outstanding tax liabilities sold)

SALE BY SAMPLE

S.15 SOGA 1961:" Where there is a contract for the sale of goods by description there is an implied condition that the

goods shall correspond with the description, and, if the sale is by sample as well as by description, it is not

sufficient that the bulk of the goods correspond with the sample if the goods do not also correspond with

the description”

SALE BY SAMPLE

• Goods must correspond with description or sample• Absolute obligation i.e. doesn’t matter if defect is

insignificant• GENERAL RULE: Applies where goods not yet seen

and description relied on by the buyer e.g. sale by catalogue

• Nagurdas Purshotumdan & Co V Mitsui Russan Kaisha Ltd (flour sold not “the same as previous contract”)

SALE BY SAMPLE

• In certain cases, general rule covers situation where buyer HAS seen the goods but defects hidden, concealed or undisclosed

• Associated Metal Smelters Ltd V Tham Cheow Toh (furnace ordered did not meet the purchaser’s requirements of 2600 F)

• In a sale by sample AND description, bulk of goods must correspond with the same

• If not – buyer can reject goods and rescind contract

SALE BY SAMPLE - EXCEPTION

FAILURE TO CORRESPOND WITH DESCRIPTION:BULK CORRESPONDS WITH DESCRIPTION WITH MINOR

DISCREPANCIES

• Arcos Ltd V EA Ronaasen & Sons – only 15% of items corresponded with description. Even though fit for purpose, buyer can reject and rescind

• Moore & Co V Landauer & Co ( packaging of goods did not correspond with contractual description – buyer can reject and rescind)

IF NO DETAILED DESCRIPTION – ONLY A MAJOR DIFFERENCE/

DISCREPANCY WILL GIVE RISE TO BREACH.

• Varley V Whipp (“new the previous year” was not new but old second hand – buyer can reject and rescind)

• Beale V Taylor – description of car substantially different. Car was made of parts of 2 cars put together!.

FITNESS FOR PARTICULAR PURPOSE

GENERAL RULE:• S.16(1) SOGA: Buyer’s beware – prudent

purchaser = caveat emptor• Must be satisfied as to quality of goods if not

must bear the consequences• Seller not liable if buyer doesn’t exercise

caution and prudence

FITNESS FOR PARTICULAR PURPOSE

EXCEPTIONS:

S.16(1) (a) – fitness of purpose

S.16(1)(b) – merchantable

quality

FITNESS FOR PURPOSE S.16(1)(a): CONDITIONS

DISCLOSURE OF PURPOSE

• Buyer must disclose purpose

• Griffiths V Peter Conway Ltd (allergy to tweed not disclosed)

• Ingham V Emes – proper disclosure required before can rely on S.16(1)

• Sunrise Berhad & Anor V L & M Agencies Sdn Bhd – tower cranes not fit for purpose of contruction of condominium towers

• Single purpose goods requires no disclosure of purpose – Priest V Last (hot water bottlecase)

RELIANCE ON SELLER’S SKILL & JUDGEMENT

• Reasonable inference of each case

• Grant V Australian Knitting Mills

• Manchester Liners Ltd V REA Ltd

• Mash & Murrel Ltd V Joseph Emmanuel Ltd

• Cammel Laird & C V Manganese Bronze & Brass – ship’s propeller built according to specs but did not fit purpose (for ship & engine)

GOODS ARE THOSE WHICH SELLER IS IN BUSINESS TO

SUPPLY

• Spencer Trading Co Ltd – gum ordered for flypaper not the same as previously.

• Ashington Piggeries Ltd V Christopher Hill Ltd – type of compound feed never supplied before but was the seller’s business to supply

NOT BOUGHT UNDER PATENT OR TRADE NAME

• Patent or licence implies reliance on brand and not on the seller

• Even if patented or licensed but still relied on seller, then implied condition applies.

• Baldry V Marshall – bugatti car sold but not fit for purpose of touring

MERCHANTABLE QUALITY S.16(1)(b)

DEPENDS ON DESCRIPTION OF

GOODS

• Henry Kendall & Sons V William Lilico & Sons

• Single purpose goods – fit for purpose

• General description – fit for purpose if fit any of the general purposes

• David Jones V Wills – kasut tercabut case

BREACH

• Breach of implied condition

• Applies even if sold under patent or trade name

• Wilson V Ricket, Cockernell & Co

EXCEPTIONS

• Inspection or examination by buyer ought to reveal defects

• If undiscoverable - exception not applicable

• Wren V Holt – beer laced with arsenic undiscoverable

• Thornett & Fehr V Beers & Sons: superficial examination of the external barrels of glue is insufficient

SALE BY SAMPLE s.17(2)• IMPLIED CONDITION - If bulk goods – bulk must correspond with

sample• If partly correspond – buyer can reject goods and end contract• If correspond but has latent defects – right to reject.• S.17(2) applies :(i) correspond with quality – s.17(2)(a)(ii) reasonable opportunity to compare bulk vs sample – S.17(2)(b)(iii) free from unmerchantable/latent defects not otherwise apparent- S.17(2)(c) • Drummond V Van Ingen - cloth matched sample but had latent defects• Godley V Perry – catapult had latent defects which led to loss of

eyesight

PRIVITY OF CONTRACT

Implied C & W binding on contracting parties only

Third party can sue only under tort

Tort claim must prove damages

Donoghue V Stevenson – snail in ginger beer

TRANSFER OF TITLEG

ENER

AL R

ULE

: NEM

O D

AT

QU

OD

NO

N H

ABET

ONE CANNOT GIVE WHAT HE DOES NOT HAVE

S.27 - BUYER ACQUIRES NO BETTER TITLE THAN THE SELLER

APPLLIES EVEN IF VALUE PAID IN GOOD FAITH

LIM CHU LAIN V ZENO LTD : CONTRACTOR SOLD GOODS BELONGING TO SUPPLIER TO A 3RD PARTY

COMMERCIAL & SAVINGS BANK OF SOMALIA V JOO SENG COMPANY : RICE SOLD AT 50% WITHOUT CONSENT OF OWNER

ESTOPPELSALE BY

MERCANTILE AGENT

SALE BY ONE OF THE JOINT OWNERS

SALE UNDER A VOIDABLE CONTRACT

SALE BY A SELLER IN POSSESSION

AFTER SALE

SALE BY A BUYER IN POSSESSION

AFTER SALE

NEMO DAT QUOD NON HABET: EXCEPTIONS

ESTOPPEL

Owner estopped from denying the seller’s authority if:(a) Representation of ownership by conduct(b) Representation of authority to sell(c) Buyer acts in reliance of the representation• S.27: “…unless the owner of the goods is by conduct

precluded from denying his seller’s authority to sell…” = estoppel

• N Z Securities V Wrightcars Ltd – only deposit paid for car. Before cheque for balance purchase priced was cleared, original owner confirmed the sale. The cheque bounced and no ownership passed to second seller.

SALE BY A MERCANTILE AGENT

• S.2 : “… mercantile agent having in the customary course of business as such agent authority either to sell goods or to consign goods for the purposes of sale, or to buy goods, or to raise money on the security of goods”

• lnitially, not the owner of the goods but can sell goods with good title

SALE BY A MERCANTILE AGENT

S.27 SOGA 1961:“… where mercantile agent is, with the consent of the owner, in possession of the goods or of a document of title to the goods, any sale made by him when acting in the ordinary course of business of a mercantile agent shall be valid as if e were expressly authorized by the owner of the goods to make the same; provided that

the buyer acts in good faith and has not at the time of the contract of sale notice that the seller has no

authority to sell”

SALE BY A MERCANTILE AGENT: REQUIREMENTS

• In possession of goods or DOT (s.2) as proof of possession at time of sale

• Possession must be with the consent of owner• Sale in the ordinary course of business of MA• Buyer acted in good faith/no knowledge of ack

of authority

SALE BY ONE OF THE JOINT OWNERS

S.28 SOGA 1961:"lf one of several joint owners of goods has the sole possession

of them by permission of the co-owners, the property in the goods is transferred to any person who buys them of such joint owner in good faith and has not at the time of the contract of

sale notice that the seller has no authority to sell"

SALE BY ONE OF JOINT OWNERS

• Effectively transfers the title of goods to buyer

• Subject to 2 conditions:(i) permission of other co-owners(ii) buyer acts in good faith and has no knowledge of lack of authority

SALE UNDER A VOIDABLE CONTRACT

S.29 SOGA 1961:Where the seller of goods has obtained possession thereof

under a contract voidable under section 19 or section 20 of the Contracts Act 1950, but the contract has not been rescinded at

the time of the sale, the buyer acquires a good title to the goods provided he buys them in good faith and without notice of the

seller’s defect or title"

SALE UNDER A VOIDABLE CONTRACT

• Contract without free consent under S. 19 or 20 CA is voidable

• Conditions:• (i) voidable contract• (ii) not yet rescinded• (iii) goods bought in good faith and

without knowledge of no good title

SALE BY SELLER IN POSSESSION AFTER SALE

S.30 SOGA 1961:'Where a person, having sold goods, continues or is in the possession of the goods or of the documents of title to the

goods, the delivery or transfer by that person or by a mercantile agent acting for him, of the goods or documents of title under any pledge or other disposition thereof to any person receiving the same in good faith and without notice of the previous sale

shall have the same effect as it the person making the delivery or transfer were expressly authorized by the owner of the goods to

make the same"

SALE BY SELLER IN POSSESSION AFTER SALE

• Possession with consent of buyer• Property transferred by goods still in possession• Then sells to another party who buys in good faith.• 2nd buyer gets good title• Original buyer loses title and must sue the seller.• Pacific Motor Auctions Pte Ltd V Motor Credits (Hire

Finance) Ltd – seller continued to sell tho his authority was revoked.

• Worcester Works V Coolen Engineering Co Ltd – so long as there is continuous possession whether lawful or not, sale is valid with good title.

SALE BY BUYER IN POSSESSION AFTER SALE

S.30(2) SOGA 1961:“Where a person, having bought or agree to buy the goods,

obtains, with the consent of the seller, possession of the goods or the document of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him of the goods or documents of title under any sale, pledge, or other disposition

thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods shall have effect as if such lien or right did

not exist".

SALE BY BUYER IN POSSESSION AFTER SALE

• Possession with consent of seller.• However, still exists rights or interest of the

seller• Good title can pass to bona fide buyer with

no knowledge/without notice• Newtons of Wembley Ltd V Williams – Car

sold but not fully paid for then subsequently sold to bona fide buyer without notice.

REMEDIES FOR BREACH OF CONTRACT (SALE OF GOODS)

REM

EDIE

SBREACH BY BUYER

BREACH BY SELLER

BREACH BY BUYER

• FAILURE TO TAKE DELIVERY OF GOODSS.44• FAILURE TO ACCEPT GOODSS.56• FAILURE TO PAY FOR GOODSS.56• SELLER NOT PAID OR PARTLY PAID OR

PAYMENT TERMS DISHONOURED/FAILEDS.45

RIGHTS OF UNPAID SELLER

RIGHTS OF SELLER AGAINST THE GOODS

SUE FOR PRICE S.56

DAMAGES FOR NON-

ACCEPTANCE S.56

LIEN S.46(1)

STOPPAGE OF GOODS IN TRANSIT S.46(1)

RIGHT TO RESALE S.46(1)

RIGHT OF LIEN• Unpaid seller as seller, agent or bailee in possession of goods is entitled to retain• Retention until payment or tender of the price – s. 46 (1)(a)• Exists even where property in the goods has passed to the buyer but delivery has

not been made • These rights arise in situations listed in section 47 (1):a) where the goods have been sold without any stipulation as to creditb) where the goods have been sold on credit but the term of credit has expiredc) where the buyer becomes insolvent• lien can be in part or in whole unless lien waived S.48• S.49(1), the unpaid seller loses his lien a) when he delivers the goods to a carrier or other bailee in order that the goods be transmitted to the buyer without reserving the right of disposal of the goodsb) the buyer or his agent lawfully obtains possession of the goodsc) when the seller waives his lien

STOPPAGE IN TRANSIT• Seller may resume possession of the goods as long as they are in the

course of transit• may retain them until payment• This right exists only when :i. the buyer becomes insolventii. the goods are in control of a carrier (in transit)• S.2: insolvent – when he "has ceased to pay his debts in the ordinary

course of business or cannot pay his debts as they become due, whether he has committed an act of bankruptcy or not'

• S. 51: duration of transit - from the time when they are delivered to a carrier or other to deliver to the buyer, until delivery taken by them.

• goods can still be stationary but treated as being in transit so long as they are still in the possession of the carrier

BREACH BY SELLER - REMEDIES

Damaqes for non-deliverv of qoods

•S.57 : "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''.

•Prepaid price can be recovered + any other damages + interest from the date payment was made (S. 61 (2Xb))

Specific Performance – S. 58

•Only if it is a contract to deliver specific or ascertained goods

•Courts to decide whether or not to award SP

•MENSA MERCANTILE (FAR EAST) PTE LTD v EIKOBINA - sale of heavy machinaries, must show that the machines were not easily available in the market. Since the goods can be located in the market, specific performance was not granted.

•BEHNKE v BEDE SHIPPING Co LTD - SP granted as the ship in question was of peculiar and practically unique and of value to the buyer, that the buyer wanted the ship for immediate use and damages would not be an adequate relief.

Action in Tort

• lf property in goods had passed to the buyer and he is entitled to delivery which is being with held, he may bring an action in tort for wrongful interference with the goods inconsistent with the ownership of the buyer vide an action in detinue and conversion

•Detinue : wrongful detention of chattels belonging to the plaintiff after their return has been demanded (S.9. where property in goods has passed)

•Conversion : dealing with the goods in a manner inconsistent with the ownership of the buyer (S.9. the seller wrongfully sells the goods to a third party

Damaqes for breach of warranty – S.59(1)(b)

•This section covers all breaches of sections 14, 15,16 & 17 of the Sale of Goods Act 1957