QUESTION 2

Manaf plans to set up a business. He is not sure about the provisions of the law on the Sales
of Goods. He seeks your advice.
Advise Manaf in detail regarding the definition and rights of buyer and seller. Support your
answer with case law and provisions of law under the Sale of Goods Act 1957.
(10 marks)

Answer

Introduction

The Sale of Goods Act 1957 governs the contract relating to sale of goods. It is
practices in Peninsular Malaysia (East Malaysia), excluding the states of Penang and
Malacca. However, the Act was later revised in 1990 and thereafter, it also includes both
Penang and Melaka. The states of Sabah and Sarawak (West Malaysia) are not governed by
this act. Sabah and Sarawak are governed by Section 5(2) of the Civil Law Act of 1956,
which provides, among others, that the law to be administered in England in the like case at
the correspondent period. The English statue use is the Sale of Goods Act 1979, which is
revision of the Sales of Goods Act 1893. As a result, Sabah and Sarawak are bound by statue
to continue to apply principles of English law relating to the sale of goods.

The Sale of Goods Act 1957 applicable only when the buyer pays the goods by cash
(or by cheque or credit card). If there is no cash involved, the Sale of Goods Act will not
applicable.

The Law of Contract & SOGA does not provide a complete law. Section 3 of SGA
expressly states for continual application to contract for the sale of goods of the provisions of
the Contract Act 1950 in so far they are not inconsistent with the express provision of the

SOGA.
Definition

Section 4(1) of the Sale of Goods Act 1957 stated that “ A contract of sale of goods is
a contract whereby the seller transfers or agree to transfer property in goods to the buyer for
a money consideration called the price.”

The term contract of sale include both a sale and agreement to sell. A sale occur when
the ownership or ‘property in goods’ passes to the buyer. It is an agreement to sell where the
‘transfer of the property in goods is to take place at a future time or subject to some
conditions thereafter be fulfilled.

Parties to the contract are the buyer and seller. Seller means a person who sells or

agrees to sell goods and buyer means a person who buys or agree to buy goods.

While an agreement to sell and sale are both treated as contract of sale, there are
differences of the two, first if an agreement to sell is breached by the buyer, the seller may
sue for unliquidated damages. (Goods the subject of the contract still belongs to the seller.
If agreement to sell is breached by seller, the buyer has only can sue for damages. He cannot
claim the goods belonging to the seller.

But where there is a sale and the buyer fails to pay them, the seller’s proper remedy is
to sue for the contract price since the ownership has passed to the buyer. (Section 55 of SGA)
It is clear from the Section 4(1) that the object of the contract of sale is transfer of ownership
of the goods to the buyer for money consideration. “Property in goods” means ownership of
goods. Property or ownership in goods must be distinguished from possessions. A person
may be the owner although not in possession of goods. For eg when he lends them to another.
Or a person may be in possession of goods but not the owner for example if he borrows book
from the library. In dealing with sale of goods we are dealing with transfer of ownership of
the goods from the seller to buyer.
Section 2 of SOGA defines goods to mean “ every kind of movable property other
than actionable claim and money, and includes stocks 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”. There are three types of goods which are specified goods,
unascertained goods and future goods. Specified goods means goods identified and agreed
upon at the time of contract of sale is made. For example Syawal agrees to buy Minah’s car
bearing registration number WUE383388. This is a contract for the sale of specific goods.
Unascertained goods is in which was identified by description only. For example a contract to
buy Perodua Beza of a specific description although you have not identified the specific one
which is subject of the contract. It become ascertained goods when goods when we choose
which Perodua Bezawe are to buy. Future goods is goods which must be manufacturered or
acquired by the seller after the making of the contract of sale. For example a contract to buy
kuih raya which the seller must then made.

IMPLIED TERMS OF THE CONTRACT OF SALE OF GOODS

This is the terms of goods to protect buyer. Section 11,12,13,14,15,16,17 Sale of Goods Act
implied that the goods will be of a certain quality. Each section also labeled the implied terms
as a condition or warranty.

Conditions

Condition is a stipulation essential to the main purpose of contract. The breach of

which give rise to a right to repudiate the contract and claim for damages.

Warranty

Warranty is a stipulation collateral to the main purpose of contract. The

breach of which give rise to claim for damages but no right to repudiate the contract. First,
Implied terms as to time Section 11 of SOGA stated that“Time of payment are not deemed to
be of the essence of a contract of sale ( i.e not treated as condition) unless a different
intention appears from its term.” Therefore, if a buyer fails to pay by an
agreed date, it does not automatically entitle the seller to repudiate the contract unless the
terms of the contract allows him to do so. For example, date of shipment, date of delivery are
normally time are of essence . Secondly, Implied terms as to title as Section 14(a) provides
that it is an implied condition that the seller has a right to sell the goods or in the case of an
agreement to sell that when the property is to pass, he will have right to sell them. Next is the
implied condition that in a sale of goods by description, the goods must correspond with
description. Under the warranty also implied condition as to merchantable quality. Section 16
(1) (b) of SOGA implied condition that the goods supplied must be or merchantable quality
except in respect of defects specifically drawn to the buyer’s attention before the contract is
made, and the defects which any examination actually carried out by the buyer before the
contract ought to reveal. To be merchantable quality, the goods must be fit for their ordinary
purpose.The implied conditions that goods must be reasonably fit for the purposes for which
buyer wants them lies on Section 16 (1) (a) of SOGA which provides that if the goods are
sold in the course of business & the buyer expressly or impliedly must make known the
purpose for which he requires the goods,here is an implied condition that the goods supplied
will be reasonably fit for that purpose. The condition does not apply if where the buyer does
not rely or it is unreasonable for him to rely on the seller’s skill and judgment.

Case
Referring to the case Rowland v Divall [1923] 2 KB 500, that the Plaintiff bought a
car and after using it for some four months, discovered it was stolen. The Court held that the
Defendant had breached the condition as to title and allowed the Plaintiff for recovery of the
full price on the basis of total failure of consideration.
The other case to referred to is Nagurdas Purshotmundas & co v Mitsui Bussan
Kaisha ltd [1911] that the Defendant contracted to sell to the Plaintiff flour knowns as
‘golden dragon’. Later, Plaintiff further ordered ‘the same as our previous contracts’ Flour
identical in quality was delivered but it did not bear the same well known trade mark. It was
held that the goods did not comply with the description.

While in the case Bartlett Sydney Marcus ltd (1965), A buyer was offered a car but
before the sale, he was informed that the vehicle has a faulty clutch . The seller offered to sell
the car with faulty clutch for 550 pound or said that he could have the clutch repaired before
purchase, in which case the car would cost 575 pound. The buyer choose to buy the car as it
stood for 550 pound but when he later had the clutch repaired discovered that the repair cost
45 pound. He brought an action claiming that the seller was in breach of Section 16(1) as
defect was more serious than he had been lead to believe. The court held that the car was of
merchantable quality. The defect had been pointed out to the seller before the sale and was
not substantially worse than the buyer had been told. The buyer therefore lost his action.

Under The implied conditions that goods must be reasonably fit for the purposes for
which buyer wants them lies on Section 16 (1) (a) of SOGA, we can refer to the case of Frost
v Aylesbury (1905) The buyer bought some milk from the Defendant milk suppliers. The
sellers took all precautions known at the time to keep the milk free from germs but this
particular milk contained typhoid germs. The buyer’s wife drank the milk and died of
typhoid. It was held thatThe defendant was liable for breach of Section 16(1)(a) as the milk
was not fit for human consumption.

Buyer’s rights under Sales of Goods Act 1957

The right to reject goods

(i) Buyer is entitled to reject goods delivered if the seller breached any express or
implied condition or if the seller does not comply with the rules of delivery (for
example s. 37).
(ii) The Buyer will lose this right if he had waived this right or if the buyer has
“accepted” the goods. Refer to s. 13 and s. 42.

(B) The right to reject because the contract is a voidable contract Refer to s. 19 and s. 20
Contracts Act 1950 on voidable contracts.

C) Damages for non delivery by the seller (s. 57) If the seller refuses to deliver the goods
the buyer can claim damages. (i) The principles in s. 74 Contracts Act 1950 is used to
determine damages. (ii) How to set the damages: the market price less the contract price.
This can be refer to Eikobina (M) Sdn Bhd v Mercantile Mensa (Far East) Pte Ltd [1994]
1 MLJ 553 case.

In this case, the plaintiff (the buyer) claimed for specific performance of the agreement,
general damages for breach of contract, and damages for loss of agency to sell other units
of similar goods for the vendor. The defendant (the vendor) also counterclaimed for work
done and materials that had being supplied to the buyer. The High court judge dismissed
the counterclaim made by the vendor and award the buyer damages for the breach of
contract by the vendor. However, the judge declined the buyer’s claim for specific
performance. Both the parties appeal to the Supreme Court and the Supreme Court judged
upheld the decision of the High Court but lower the amount of damages in respect for the
second claim. The judge ruled that the vendor need to pay RM 1,766,429 damages to the
buyer for the loss of profit, RM 120,000 damages for the loss of comission in respect with
the second claim by the buyer, and RM 456,000 damages for the loss of confidence of the
buyer in the part of its business associates and customers. Then the vendor further appeal
agaisnt the award of all damages, and the Court ruled that the damages for the loss of
profit could not stand because of the issue of remoteness. They also found that the award
for the loss of opportunity did not pass the remosteness test based on Hadley v Baxendale
2, thus set aside the award for the loss of opportunity. Only the RM 120,000 damages for
the loss of commission stood.

(iii) In general, only the market price of the goods will be taken into account. If the
buyer has sold the goods resale price of the goods shall not be taken into account:
William v Agius [1914] A.C. 510 and Eikobina (M) Sdn Bhd v Mercantile Mensa
(Far East) Pte Ltd [1994] 1 MLJ 553 However, in certain situations the resale
price will be taken into account. Refer to Re Hall and Pim’s Arbitration [1928] All
ER 763 and Popular Industries Ltd v Eastern Garment Manufacturing Sdn Bhd
[1989] 3 MLJ 360.
In the Popular Industries Ltd v Eastern Garment Manufacturing Sdn Bhd, the
plaintiff resides in Canada and operate business there, ordered certain goods from
the defendant in Penang, Malaysia. The goods supposedly to be delivered between
months of January and June 1980. The plaintiff claimed that the defendants knew
that the plaintiff bought the goods for resale at a profit and that in breach of the
contract, the defendant failed to deliver the goods. The plaintiff and defendant had
a previous dealings before where the plaintiff is a company who is a traders
importing garment from suppliers which also include Malaysia, Singapore and
Hong Kong. The defendant contended that there is no concluded contract and
even if there is a concluded contract, the defendants were discharges by reason of
the failure of the plaintiffs to open the letter of credit. It was hELD that each and
everyone of the 26 contracts sued on was a valid and binding contract. Secondly,
having regard to the previous course of dealings between the parties, the plaintiffs
were under no obligation to open the letters of credit, until and unless the
defendant had furnished the shipping dates. Thirdly, that the defendants were
liable for damages for breach of contract. Lastly, that, although the plaintiff had
shown the fact of damage, no evidence or sufficient evidence was adduced as to
its amount, making it virtually impossible to assess damages. In the
circumstances, the plaintiffs were only entitled to nominal damages

(D) Damages for breach of warranty by seller The buyer can claim damages if there is
breach of warranty. For the manner in which damages is calculated refer to Lee Heng &
Co v Melchers [1963] M.L.J. 47 Chop Chin Leong v Ban Hoe Hin [1957] M.L.J. 13
 (E) Specific Performance (i) Specific Performance will not be granted unless the contract
of sale involves specific goods: Re Wait [1926] All ER 433. (ii) Specific Performance
will not be granted where damages is an adequate remedy. Refer to s. 20 Specific Relief
Act 1950. Refer also to Behnke v Bede Shipping Co Ltd [1927] 1 KB 649 (Yes, in the
case of ships). Mensa Mercantile (Far East) Pte Ltd v Eikobina (M) Sdn Bhd [1989] 2
MLJ 170 (No, in the case of heavy construction machinery).

Seller’s rights under Sales of Goods Act 1957

a) Rights of unpaid seller against the

goods

There are three types of remedies:-

• Lien
• Stoppage in transit
• Resale of goods
(i) Lien (Section 47 of SOGA):

• A lien is a right of an unpaid seller in possession of goods to retain them until the price has
been paid or his debt secured or satisfied.
• The seller has right to retain the goods if he is unpaid seller and the right of retention
operates until the seller is paid
• The lien is only enforceable against the goods in respect of which the price is owing, not in
respect of any other debt due by the buyer to the seller.

(ii) Right of stoppage in transit (Section 50 of SOGA)

a) This is a right given to an unpaid seller who has handed the goods to an independent
carrier for the purpose of having them transported to the buyer to recover the goods from the
carrier and to hold them until the buyer pays the price.
b) The right to stop exists for as ling as the goods are in the hand of the independent carrier.
The seller may exercise the right at any time before the goods are handed over to
the buyer or before the carrier acknowledges to the buyer that the goods are being held for
them.
c) Stoppage will be carried out by unpaid seller giving notice to the carrier, altering original
instructions. The carrier must obey his notice and the seller must pay the expenses of re-
delivery.
(iii) Right of Resale (Section 54 of SOGA)

As a seller, he may resell the goods and if he does so, the second buyer obtains good title and
the original buyer’s right to the goods is defeated.

The circumstances in which the unpaid seller may re-sell the goods
• Where the goods perishable
• Where unpaid seller gives notice of his intention to resell if the buyer does not
within reasonable time, pay the price and the buyer does not do so; or
• Where in the contract, the seller reserves the right to dispose of the goods if the buyer does
not pay, and the buyer does not do so.

Rights of seller to sue for breach of contract

Personal remedies- is a remedy against the buyer

(i)The seller will have right to sue the buyer for the price of goods where the buyer failed to
pay for the goods after the property has passed to the buyer or the price is payable on
a certain day regardless of the passing of the property. (Section 55)

(ii)If the property has not passed to the buyer or the price is not payable on a certain day, the
seller’s remedy for buyer’s wrongful non payment will be an action in damages.

(iii)Action of damages for non acceptance (Section 56) If the buyer wrongfully refuses to
accept and pay for the goods, the seller may sue him for damages for non-acceptance.

Case on Seller’s Right

In the case of Harrington v Brown, where the parties to a contract for the sale and purchase of
live-stock depasturing on a station have therein specified a date on or before which the
delivery of the same is to be taken, time is of the essence of the contract unless the contract
has something in its terms which renders time unessential or unless the circumstances of the
country deprive it of its normal character.
The defendant in an action for breach of contract had, by a contract in writing dated 31st July
1916, agreed to sell and the plaintiff had agreed to purchase sheep on the defendant’s station,
and it was stipulated in the contract that pro forma delivery was to be given and taken, and
that the sheep should be counted, at the defendant’s station on or before 21st August. The
plaintiff did not attend or claim delivery till 22nd August, when the defendant refused to give
it as being applied for too late. The jury having found that the date of delivery had not been
altered to the 22nd,

Held, that the defendant was entitled to judgment.

Observations as to the duty of a purchaser of live-stock to notify the seller distinctly of the
day on which the purchaser requires delivery, where by the contract delivery is to be taken “
on or before ” a certain date.Time of delivery was an essence in this contract because it
involved livestock .

Next is the case of Griffiths V Peter Conway. In this case, A woman with an
unusually sensitive skin bought a Harris Tweed coat without disclosing that fact to the seller.
It turned out that the goods afflicted her health. It was held that the woman could not succeed
under this section, as the coat would not harm a normal person.