SALE OF GOODS

TOPIC OUTLINE• The Law Applicable

• Contracts of Sales and Agreement to Sell.

• Implied Terms.• Transfer of Property.• Transfer of Title.

• Performance of Contract.• Remedies.

The Law Applicable• The governing statute as to Peninsular Malaysia is the Sales of Goods Act 1957 which was modeled after the English SoGA 1893 almost in its entirety.

• Sabah and Sarawak - still apply the English SoGa 1979 (which replaced the 1893 Act) by virtue of Sec 5 of Civil Law Act 1956.

• Sec 3 of SoGA - provides for the application of Contract Acts where relevant as long as it does not contradict SoGA itself - in which case the latter would prevail.

• Scope of SoGA -applies to all types of sale of goods but is not comprehensive in covering all aspects of sale or offer adequate protection to the parties involved.

The Contract of Sale• Sec 4 (1) - A contract of sale is a contract whereby the seller

transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part- owner and another.

• Price - the money consideration for a sale of goods and may be fixed by the contract, or by a third party or determine in the course of dealing - Sec 9 (1).

• If none of the methods is used - pay a reasonable price depending on the circumstances.

• Sale must be distinguished from agreement to sell.• Sec 4 (3) - where under a contract of sale the property in the goods

is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some agreement to be fulfilled, the contract is called an agreement to sell.

• Sec 4 (4) - agreement to sell becomes a sale when time elapses or condition fulfilled

• Difference btw sale and ATS - in term of remedies in case of breach.

• Sale - when there’s transfer of ‘property’ or ownership.

• Ownership different from possession.• Elements of the contract:1. Parties to the contract.- must fulfilled all the capacity as required under CA.2. Transfer of property in the goods sold.- not only transfer of possession but also ownership.3. Price as consideration of the contract.4. Subject matter is within the definition of ‘ goods’.

• What is goods?- every kind of movable property other than actionable claims and money, and includes stocks and shares, growing crops …and things attached..which are agreed to be severed before sale

• Sec 6 (1) - goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller or future goods.

• Goods may also be ascertain (specific) or unascertained.

• Specific goods - if they are identified and agreed upon at the time of contract.

• Future goods - goods to be manufactured or produced or acquired by the seller after the making of the contract.

• Perishing goods - Sec 7 -contract void if the subject matter perished before the contract entered into without knowledge of the seller - Rendell v. Turnbull

• If the goods perished after ATS but before sale as to no longer able to answer to description - contract voidable.- Sec 8

The Terms of the Contract.• Stipulations in the contract may be conditions

or warranties depending on the construction of the contract despite being called otherwise.

• Implied Terms.- applies only when the parties have not excluded or modified them - Sec 62-provided by sec 14 to sec 17 of SoGA.1. Title.2. Quiet possession of the goods.3. Unencumbered goods.4. Correspond with description.5. Fit for buyer’s purpose.6. Merchantable quality7. Sale by sample.

1. Title.-sec 14(a) - requires the seller to have the rights to sell the goods- based on the rule - Nemo dat quod non habet - one cannot gives what one does not have.- breach will entitled the buyer to repudiate the contract and recover the price in full even though he has used the goods.Rowland v. Divall

2. Right to enjoy quiet possession of the goods.- sec 14 (b) - buyer shall have an enjoy quiet possession of the goods.- a warranty rather than a contract- protect the buyer from unnecessary claims from any third party or the seller himself.

3. Free from encumbrance.- sec 14 ( c) - goods free from any encumbrance in favour of any third party.- in form of charge or mortgage.- Steinke v. Edwards.

4. Correspond with description.- Sec 15 - implied condition.- absolute condition - latent defect not a defense- covers sale of unascertained goods and sale of specific goods from catalogue or mail order- Arcos Ltd v. E.A Ronaasen- Beale v. Taylor- Associated Metal Smelters v. Tham Cheow Toh

5. Fit for buyer’s purpose.- the common law rule is -caveat emptor or let the buyer beware.- if the buyer does not exercise prudence - he have to bear the consequence.- Sec 16 - no implied warranty or condition as to the fitness or fitness of goods supplied under the contract of sale.- Exception :- sec 16 (a):

• When there’s disclosure, express or implied of the purpose for which the goods is bought.

• The buyer is relying on the seller’s skills or judgement.• The goods are of a description which is in the course of

the seller’s business to supply• If the goods are specific - not bought under their patent

or trade name

• Cases:• Cammell Laird v. Manganese Bronz• Griffiths v. Peter Conway• Baldry v. Marshall.

6. Of Merchantable Quality.• Sec 16 (b) - where goods are bought by description from a seller who deals in such goods.

• What is merchantable quality?- generally means the goods sold are fit for the particular use to which they were sold.- specifically - per Lord Reid in Henry Kendall v. William.- to be applicable - buyer bought goods based on description, the seller is a person who deals in such good and the buyer has not been given the opportunity to examine the goods.

• If buyer had given a chance to examine - the implied term no longer applicable though the examination is superficial - Thornett & Fehr v. Beers & Sons

• This implied term covers even goods sold under patent or trade name. - Wilson v. Ricket, Cockerall & Co.

• Sec 16 (2) - allows implied warranty or condition as to quality or fitness to be construed against a custom or trade usage.

7. Sale by Sample• Sec 17 - a contract of sale is a contract by sample where there is a term

in the contract express or implied to that effect.• The implied conditions:- the bulk shall correspond with the sample in quality- the buyer have reasonable opportunity of comparing the bulk with the sample.- the goods are free form any defect which are not apparent on reasonable examination that would make them unmerchantable

• The three conditions are independent of each other - breach of any one entitled the buyer to reject the goods.

• However to apply the terms - parties must show intention to contract a sale by sample.

• Cases:- Drummond v. Van Ingenue- Godley v. Perry

Transfer of Property• Passing of ownership not necessarily means passing of possession vice versa.

• The time of transfer of property (ownership) have important connotation in sale of goods as it relates with who have to bear the risks on the goods.

• Sec 26 - risk prima facie passes with property - owner bear the risk regardless of whether he have possession or not.

• Provided - if delivery delayed due to fault of either party, party at fault bear any risk that might occur because of the delay.

• Legal consequences as regards to transfer of property, title and risk:

1.When there’s contract of sale, there must be transfer of property - if not - failure of consideration.

2. Consequence as regards to who bear the risk.

3. Determine whether buyer who have not paid full price can keep the goods

4 . Problems in time of insolvency of seller or buyer

• As a general rule -title passes when the parties to the contract intends it to be.

• Sec 18 - sale of uncertain goods.• Sec 19 - sale of specific goods - subject to sec 4 (3)• Sec 20 - sale of specific goods in a deliverable state.• Sec 21 - sale of goods to be put in a deliverable state.

• Sec 22 - sale of goods in deliverable state that needs to be weighed, measured etc to ascertain the price.

• Sec 23 - contract of sale of unascertained or future goods

• by description in a deliverable state.• Sec 24 - sale of goods delivered to buyer on approval or ‘sale or return’

Transfer of Title• Title basically means ownership.• Sec 27 requires that for a seller to be able to transfer good title to the buyer, he must first have title over the said goods - nemo dat quod non habet

• If a buyer bought some goods from a seller who is not the owner nor have any authority to sell them - the buyer does not acquire any tittle even if he has paid value in good faith.

• Rationale - to protect the right of ownership- Lim Chui Lai v. Zeno Ltd.-Ng Ngat Siang v. Arab Malaysian Finance.

• However, there are several exception to the rule as provided by Sec 27 to Sec 30 of SoGA.

1. Estoppel• Arises when the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.

• Estoppel can be by record, by deed or by conduct.

2. Sale by Merchantile Agent.• Basic rule of agency is that an agent may pass a good title in selling goods belonging to the principal provided he is acting under the scope of his actual or apparent authority.

• Requirements to satisfy the provision:- the agent is in possession of the goods at the time of sale.- the possession is with consent of the owner.- the sale was made when acting in the ordinary course of business of a merchantile agent.- buyer must act in good faith and have no notice of the agent's lack of authority at the time of the sale.

3. Sale by one of Joint Owner.• Goods may be owned by one or more persons.• Sale by one of the joint owner is valid notwithstanding the absence of the other’s consent.

• Two conditions have to be satisfied:- the seller have sole possession of the goods with consent from the others.- the buyer acts on good faith and have no notice of the lack of authority at the time of the sale.

4. Sale under a Voidable Title.• When the seller acquires possession under a voidable contract and the contract has not been rescinded at the time of the sale, the buyer gets a good title provide he is a BFPFVWN.

5. Sale by a Seller in Possession after Sale.• A seller who have parted with the title of the goods but remain in possession of the goods or the title document can pass a good title to a BFPFVWN.

• The second buyer then gets a good title over the first one but the latter can seek redress against the seller.

6. Sale by a Buyer in Possession.• If a buyer, having bought or agree to buy goods, obtained possession of the goods or the title document with the consent of the seller, he can pass good title to a subsequent buyer of good faith for value without notice.

Performance of the Contract.

• The Sale of Goods Act also deals with performance of the contract of sale under Chapter IV of the Act.

• Sec 31 to sec 44 generally laid down the duties of both parties under the contract.

1. Delivery of the goods.2. Place of delivery.3. Time of delivery.4. Delivery of wrong quantity.5. Delivery by installment.6. Delivery by carrier or wharfingers.7. Acceptance.

1. Delivery.• Delivery means voluntary transfer of possession from one person to another - need not involve physical delivery.

• Sec 31 - Duty of seller to deliver the goods.• Sec 32 - Unless otherwise agreed - payment and delivery - concurrent.

• Sec 36 (1) - whether seller has to send or buyer take possession - depends on agreement.

• Sec 36 (5) - expense of putting the goods into deliverable state is to be borne by seller.

• Sec 36 (2) - seller bound to deliver goods within reasonable time.

• Sec 37 (1) - if seller deliver wrong quantity (less) - buyer may reject - if not, bound to pay at contract rate.

• If deliver larger quantity -buyer may accept only the contracted amount, or reject all, or accept all and pay at contract rate.

• Sec 38 (1) -unless agreed, buyer not bound to accept delivery by installment.

• Sec 39 (1) - where seller is authorized or required to send goods sold to buyer through carrier / wharfinger - such delivery is prima facie deemed delivery to buyer.

• However - seller shall make such contract so as to secure safe and speedy delivery on behalf of the buyer -if fail to do so, may be responsible in event of damage.

2. Acceptance.• Where goods not previously examined - buyer deemed not accept until and unless given reasonable opportunity to examine the goods - see whether conform to contract or not.

• Buyer deemed to accept if he told the seller to that effect, or did anything to jeopardize the seller’s ownership of the goods or after lapse of reasonable time without any communication of acceptance.

Remedies.A. REMEDIES OF THE BUYER.1. Right to damages for non- delivery of goods - sec 57 of SoGA as well as Sec 74 or Sec 75 of Contract Act to determine quantum of damages to be paid.- Popular Industries Limited.

2. Remedy for breach of warranty.- Sec 59 - where buyer can elect to treat breach of condition as breach of warranty.- if treat as breach of warranty - cannot reject goods but should claim damages.

3. Claim for specific performance.-sec 58 - granted on discretion of the courts if damages not sufficient.- only for specific or ascertained goods.

B. REMEDIES OF THE SELLER. 1. For failure of buyer to take delivery.- Sec 44 - buyer will be liable to seller for any loss and charge.

2. Failure of buyer to accept goods.-sec 56 - seller entitled to damages.

3. Failure of buyer to pay for the goods.- sec 55 - seller may sue for the price.

C. RIGHTS OF UNPAID SELLER AGAINST GOODS.• Unpaid seller - to whom the whole price has not been paid or the negotiable instrument serving as conditional payment has been dishonored.

• The rights of the unpaid seller are provided in Sec 46 of the Act.

1. Right to create lien on the goods for the price - Sec 46 (1) (a)- Has the right if the seller is in possession of the goods and to retain them until payment is made- Sec 49 - circumstances where the seller will lose his lien.

2. Stoppage in transit. - Sec 46 (1) (b)- When buyer becomes insolvent and not paid the price - seller can stop the goods in transit by taking actual possession or giving notice to the carrier or bailee.- Stoppage in transit has the effect of restoring the seller’s rights over the goods.- However, BFPFVWN is protected from this rights.

3. Right of resale - Sec 46 (1) ( c )- Contract not rescinded merely by the creation of a lien or stoppage in transit - thereby generally no right to resell

- However - sec 54 (2) give the authority to resell when:

i. The goods are of perishable nature.ii. Seller gives notice of intention to resell to buyer but buyer does not within reasonable time pay the price.

iii. The seller expressly reserves a right to resell in case of the buyer’s default

- if the above provisions are complied with - the subsequent buyer hence acquire good title of the goods.

END OF LESSON