You are on page 1of 55

SALE OF GOODS

BACHELOR OF ACCOUNTANCY LAW 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 Russel Sale of minerals still attached to land not SOG

SALE OF GOODS
LAND

EXCLUDES

ACTIONABLE CLAIMS

MONEY

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 goods Seller: Person who agrees to sell goods

SALE OF GOODS
FOR CONSIDERATION SALE: WHEN OWERNSHIP TRANSFERS

TRANSFER OF OWNERSHIP OF GOODS TO BUYER

PARTIES: BUYER & SELLER

OBJECTIVE

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
INCLUDES :
FIXTURES ONLY IF UNATTACHED TO LAND SUBSEQUENTLY UNDER THE SALE 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)

SEVERED FROM THE LAND (Amco Enterprise Pty Ltd V Wade: recovery of gravel, sand and

EXCLUDES:

CATEGORY OF GOODS
EXISTING SPECIFIC UNASCERTAINED ASCERTAINED FUTURE
Already owned/ possessed Can be specific, ascertained or unascertained Identified and agreed upon at the time of creation of contract
Not identified or agreed at time of sale Unascertained goods which have been identieif Appropriated to contract after contract is made To be manufactured or produced after contract is made

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
BY CONTRACT

REASONABLE PRICE

s.9(1) & (2) FIXED:

BY CERTAIN MANNER IN CONTRACT

BY COURSE OF DEALING

FORMATION

FORMALITIES

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))
Buyer informs acceptance Goods delivered & buyer acts against ownership of seller Keeps going without rejection after expiry of time

S.42: BUYER HAS ACCEPTED THE GOODS

IMPLIED TERMS
GOODS TO CORRESPOND WITH DESCRIPTION

TITLE - S.14(a)

QUIET POSSESSION S.14(b)

IMPLIED C & W CAN BE EXCLUDED BY EXPRESS AGREEMENT OR PREVIOUS DEALINGS S.62

FITNESS FOR PURPOSE S.16(1)

SALE BY SAMPLE S.17

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. doesnt 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 purchasers 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 IF NO DETAILED DESCRIPTION ONLY A MAJOR DIFFERENCE/ DISCREPANCY WILL GIVE RISE TO BREACH.

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)

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: Buyers beware prudent purchaser = caveat emptor Must be satisfied as to quality of goods if not must bear the consequences Seller not liable if buyer doesnt exercise caution and prudence

FITNESS FOR PARTICULAR PURPOSE


S.16(1) (a) fitness of purpose S.16(1)(b) merchantable quality

EXCEPTIONS:

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 SELLERS 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 ships 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 sellers 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 apparentS.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
Donoghue V Stevenson snail in ginger beer

Implied C & W binding on contracting parties only

Third party can sue only under tort

Tort claim must prove damages

TRANSFER OF TITLE
GENERAL RULE: NEMO DAT QUOD NON HABET
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

NEMO DAT QUOD NON HABET: EXCEPTIONS


SALE BY MERCANTILE AGENT SALE BY A SELLER IN POSSESSION AFTER SALE SALE BY ONE OF THE JOINT OWNERS SALE BY A BUYER IN POSSESSION AFTER SALE

ESTOPPEL

SALE UNDER A VOIDABLE CONTRACT

ESTOPPEL
Owner estopped from denying the sellers 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 sellers 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 sellers 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)

REMEDIES

BREACH BY BUYER BREACH BY SELLER

BREACH BY BUYER

S.44 S.56 S.56


S.45

FAILURE TO TAKE DELIVERY OF GOODS

FAILURE TO ACCEPT GOODS

FAILURE TO PAY FOR GOODS

SELLER NOT PAID OR PARTLY PAID OR PAYMENT TERMS DISHONOURED/FAILED

RIGHTS OF UNPAID SELLER


RIGHTS OF SELLER AGAINST THE GOODS

SUE FOR PRICE S.56

DAMAGES FOR NONACCEPTANCE S.56

STOPPAGE OF GOODS IN LIEN S.46(1) 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 credit b) where the goods have been sold on credit but the term of credit has expired c) 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 goods b) the buyer or his agent lawfully obtains possession of the goods c) 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 insolvent ii. 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 nondelivery''. 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