BUSINESS LAW (GLUE 2113)

GROUP 1

1.0 THE LAW OF SALE OF

GOODS
PREPARED BY
1. Syafinaz Binti Idrus (244653)
2. Latifah Kaiyisah Binti Mohd Latib (248159)
3. Nur Ameeraliza Binti Anhar Anuar(244592)
4. Nur Aqila Hatim Binti Yahaya (248126)
5. Norma Umairah Bt. Nasaruddin (244273)
6. Nurul Husna Binti Md Sai’aan (244518)
7. Nurul Aqilah Binti Hashim (244547)
8. Fatin Alisa Binti Alizuddin (244536)
 1. DEFINITION – MEANING OF
SALE OF GOODS
• According to Section 4. (1) of Sale of Goods Act 1957, it
can be defined as
“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. There may be a contract of sale between
one part owner and another.”
• On the other hand, a sale occurs when the ownership or
property in goods passes to the buyer. This means that there
must be goods, money or can be called as “price” and
transfer of property.
• In a relation to this, “Price” means the money
consideration for sale of the goods. “Price” is an
integral part of a contract of sale. If it is not fixed or is
not capable of being fixed, the whole contract is
void ab-initio.
 2. FORMATION OF
CONTRACT
• It is a contract where the ownership in the goods is transferred by seller
to the buyer immediately at the conclusion contract. Thus, strictly
speaking, sale takes place when there is a transfer of property in
goods from the seller to the buyer. It must be noted here that the
payment of price is immaterial to the transfer of property in goods.

EXAMPLE :
Saiful sells his Yamaha superbike to Azuan for RM 34,000. It is a sale since
the ownership of the motorcycle has been transferred from Saiful to
Azuan.
The definition stated in Section 4 (1) of Sale of Goods Act 1957 reveals the
formation of the contract of sale as well as its essential features.

1. There must be at least two parties

There should be two distinct parties to a contract of sale, for instance, a buyer
and a seller to constitute a sale of goods
2. A transfer of property (Ownership)
In a contract, there is transfer of ownership from seller to buyer, as against
transfer of mere possession or limited interest as in case of bailment or pledge.
3. The subject matter must be “Goods”
“goods” means 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.
 4. “price” must be the consideration of the contract of sale
Consideration in a contract of sale, has to be the legal tender. Where goods
are exchanged for goods, it would amounts to Barter, not sale. Similarly, where
there in no consideration, it would be a gift and not a sale. Where goods are
sold for a price, which is to be paid partly in cash and partly in goods, that is a
sale.
5. Essential elements of a valid contract
All of the essential elements of a valid contract must be present in the
contract of sale.
 3. FORMALITIES OF THE
CONTRACT
• Section 5(1) Sale of Goods Act 1957,a contract of sale is
made by an offer to buy or sell goods for a price and the
acceptance of such offer. The contract may provide for the
immediate delivery of the goods or immediate payment of
the price or both, for the delivery or payment by instalments,
or that the delivery or payment or both shall be postponed.
• Section 5(2) Sale of Goods Act 1957, subject to any law for
the time being in force, a contract of sale may be made
writing or by word of mouth, or partly in writing and partly by
word of mouth or may be implied from the conduct of the
parties.
 CASE: WONG KHAI MING @ WONG KHEE MENG
TRADING AS TANJUNG WONG ENTERPRISE V. VSAFE
ENTERPRISE & ORS [2015] 1 LNS 1352 (UNREPORTED)

Facts of the case

• The plaintiff is the inventor for "palm oil additive" and the
defendants had purchased the raw materials of the invention
and he took interest in the product by buying the formula itself.
• Plaintiff then conduct a test analysis of his product and
defendant product has similarities and has contended that
defendant is doing so to exempted himself from paying plaintiff
for what he had worked for.
• Defendant counter claim as the deal is for the formula not the
raw material
Issue of the case
Whether the agreement between the
parties was for a buy and sell transaction
of the raw materials or for the transfer of
technology for the formula
Court Held
• the agreement between the Plaintiff and the Defendants was for the
transfer of the technology and there was no evidence that the
agreement was and or includes a straight forward buy and sell
transaction for the raw material.
• Section 5 (2) of the Sales and Goods Act 1957 state, "... a contract of
sale may be made in writing or by word of mouth, or partly in writing
and partly by word of mouth or may be implied from the conduct of
the parties.“
• and there proof of written agreement of plaintiff and defendant for
the sale and purchase of the technology of the additive mixture for
RM3,000,000.00 only.
 4. SUBJECT-MATTER OF THE
CONTRACT
Subject –matter
of the contract

Meaning of the Different types

Goods of Goods

Contingency
Future Goods Existing Goods
Goods
 DEFINITION OF
GOODS
Defined by Section 61 of Sale of Goods Act 1979 UK :
• “goods” includes all personal chattels other than things
in action and money,
• and in Scotland all corporeal moveable except money;
• and in particular “goods” includes emblements,
industrial growing crops, and things attached to or
forming part of the land which are agreed to be
severed before sale or under the contract of sale;
• and includes an undivided share in goods;
Section 2 of Sale of Goods Act 1957 stated that
“goods” means 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;
 EXISTING OR FUTURE
GOODS
• Section 6(1) of Sale of Goods Act 1957 stated that “The goods
which form the subject of a contract of sale may be either
existing goods, owned or possessed by the seller, or future
goods.”
• Section 6(2) of the Act stated that “There may be a contract for
the sale of goods the acquisition of which by the seller depends
upon a contingency which may or may not happen.”
• Section 6(3) of the Act stated that “Where by a contract of sale
the seller purports to effect a present sale of future goods, the
contract operates as an agreement to sell the goods.”
 TYPES OF GOODS :
SPECIFIC/ASCERTAINED
• Defined by Section 61(1) Sale of Goods 1979 (UK) as a
goods identified and agreed on at the time of a
contract of sale is made, and includes an undivided
share, specified as a fraction or percentage, of goods
identified and agreed on
• Defined by Section 2 Sale of Goods Act 1957 “specific
goods” means goods identified and agreed upon at
the time a contract of sale is made; and any expression
used but not defined in this Act which is defined in the
Contracts Act 1950 [Act 136], shall have the meaning
assigned to it in that Act.
 TYPES OF GOODS:
UNASCERTAINED
• Good to be manufactured or grown by the seller (future goods).
• Purely generic goods.
Example: 1000 tonnes of wheat
• An unidentified part of a specified whole
Example: 1000 tonnes out of a particular load of 2000 tonnes of
wheat. (The Sale of Goods P. S. Atiyah)
• Bulk goods, manufactured goods and goods yet to be produced

At the time of the contract the goods are not unconditionally attached
to the contract. (Beginning Business Law, Chris Monaghan)
Example: ‘A’ who wants to buy a mobile phone set
goes to a showroom where four sets of Samsung
model in different colour of Samsung Galaxy 9 are
displayed. He sees the performance of a particular
set and choose a color to his liking, which he agrees
to buy. The set so agreed to be bought is a specific
set. If after having bought one set he marks a
particular set, the set so marked becomes
ascertained. Till this all is done all sets are
unascertained.
 TYPES OF
GOODS: FUTURE
• Defined by Section 61(1) Sale of Goods 1979 means goods
to be manufactured or acquired by the seller after the
making of the contract of sale;
• Goods to be manufactured, produced or acquired after
making of the contract are called future goods.
• Example: ‘A’ contract, on 1st January, to sell B 50 shares in
Reliance Ltd., to be delivered and paid for on the 1st March
of the same year. At the time of making of the contract, A is
not in possession of any shares. The contract is a contract for
the sale of future goods.
 TYPES OF GOODS:
CONTINGENCY
• Section 6(2) of Sale and Goods Act 1957 stated that
“there may be a contract for the sale of goods the
acquisition of which by the seller depends upon a
contingency which may or may not happen.”
• Goods, the acquisition of which by the seller ,depends
upon an uncertain contingency are called ‘contingent
goods’. They are also a type of future goods.
• Example: ‘A’ agrees to sell 100 units of an article
provided the ship which is bringing them, reaches the
port safely. This is an agreement for the sale of
contingent goods.
 GOODS PERISHING BEFORE
MAKING OF CONTRACT
Section 7 of Sale of Goods Act 1957 stated that
“Where there is a contract for the sale of
specific goods, the contract is void if the goods
without the knowledge of the seller have, at the
time when the contract was made, perished or
become so damaged as no longer to answer
to their description in the contract.”
 EXAMPLE
Facts: ‘A’ agrees to sell to ‘B’ a certain horse. It turns out that
the horse was dead at the time of bargain, though neither
party was aware of the fact. Discuss the validity of the
contract.
Solution: The agreement is void. In case part of goods is
perished, the following rule applies :
(a) if contract is indivisible, it shall be void; and
(b) if contract is divisible, it will not be void and the part
available in good condition must be accepted by
the buyer
 CASE: LING CHICK NGAI V. SCOTT & ENGLISH
(M) SDN BHD [2006] 7 CLJ 602 (APPEAL CASE)
Facts of the case
• The appellant had purchased a set of generator model (generator) from the
respondent, the sales agent.
• The generator was tested in the respondent's Kuala Lumpur office in the presence of
the appellant's representative and the consultant of the Mulu Park electrification
project, Ranhill Bersekutu, prior to the delivery of the same first to Kuching on 30
November 2000 and then to Mulu National Park on 9 January 2001.
• Subsequently, the generator was moved into a room in the existing generator house
and on 23 March 2001, a fire broke out at the generator house burning both the
existing and the new generator.
• As the purchase price had not been paid, the respondent demanded for the full
payment of RM130,000 and on 15 January 2002 took out this action to recover the
aforesaid sum when the appellant refused to pay the respondent.
Issues of the case
• Whether risks in generator passed to
appellant .
• Whether unreasonable to hold
respondent responsible for well being of
generator.
Court Held
• It was clear from the judgment of the SCJ that what she did
was to make a finding of fact that the risks in the generator
had passed to the appellant based on evidences which
were clearly undisputed.
• Further, it was unreasonable and unfair to hold the
respondent responsible for the well being of the generator
especially when the same had been in the possession of a
third party for some three months and at a place where the
respondent had no jurisdiction at all.
 GOODS PERISHING BEFORE SALE
BUT AFTER AGREEMENT TO SELL
Section 8 of Sale of Goods Act 1957 stated that

“Where is an agreement to sell specific goods, and

subsequently the good, without any fault on the
part of the seller or buyer, perish, or become so
damaged as no longer to answer to their
description in the agreement, before the risk passes
to the buyer, the agreement is thereby avoided.”
 EXAMPLE

• Facts: A buyer took a horse on a trial for 10 days on

condition that if found suitable for his purpose the
bargain would become absolute. The horse died
on 5th day without any fault of either party. Discuss
the position of both parties.
• Solution: The contract , which was in the form of an
agreement to sell, becomes void and the seller
shall bear the loss.
 5. PRICE

Section 2 of Sale of Goods Act 1957 :

“Price” as the money consideration for a sale of goods.

Ascertainment of price
Section 9 of Sale of Goods Act 1957 :
9(1) - Price in a contract of sale may be fixed by the contract itself, or
left to be fixed in an agreed manner, or determined by the course of
dealing between the parties.
9(2) - Where the price is not determined in accordance with the
foregoing provisions, the buyer shall pay the seller a reasonable price.
What is a reasonable price is a question of fact dependent on the
circumstances of each particular case.
Agreement to sell at valuation
Section 10 of the Sale of Goods Act 1957:
Section 10(1) - Where there is an agreement to sell goods on
the terms that the price is to be fixed by the valuation of a third
party and such third party cannot or does not make such
valuation, the agreement is thereby avoided.
Provided that, if the goods or any part thereof have been
delivered to, and appropriated by, the buyer, he shall pay a
reasonable price there for.
Section 10(2) - Where such third party is prevented from
making the valuation by the fault of the seller or buyer, the
party not in fault may maintain a suit for damages against the
party in fault.
 CASE : HUGHES V PENDRAGON SABRE
LIMITED T/A PORSCHE CENTRE BOLTON
[2016] EWCA CIV 18
Facts of the case
• In this case, the appellant customer appealed against a decision that
he had not entered into a contract with the respondent car dealer.
• The appellant had entered into a binding contract with a car
dealership to buy a limited edition Porsche, even though the contract
did not stipulate the price, specification or delivery date of the
vehicle.
• The appellant had pay an "expression of interest deposit" of £10,000 to
increase his chances of obtaining a vehicle and also signed a
document headed "Vehicle Order Form" which stated that he agreed
to purchase the vehicle subject to the terms and conditions in the
form.
• The document also indicated that the seller was not obliged to fulfil orders in
the sequence in which they were placed.
• However, a few days after the appellant signed the order form, the sales
executive emailed him, confirming that he had placed an order and
confirming that he would get the first vehicle which the dealer was
allocated by Porsche.
• The dealer subsequently received a vehicle, but supplied it to another
customer.
• The judge found that there was no contract, only an agreement to agree
because price, specification and delivery date had not been agreed.
• He also found that the customer could not prove any loss because there
was no indication of the price he would have been willing to pay.
Issue of the case
Whether the customer had
entered into a binding
agreement with the dealer?
Court held:
• Allowed the appeal as under the Sale of Goods Act 1979, it was
possible to enter into a contract for the sale of goods which had
not yet been acquired by the seller, even though the seller's
acquisition of those goods depended on a contingency which
might or might not happen.
• S. 8(1) of the act stated explicitly that the price of goods might
be left to be fixed in a manner agreed by the contract.
• The terms and conditions of the order form covered the issue of
price, providing that once a vehicle was available for delivery, a
purchaser had to pay the balance of the purchase price, being
the difference between the importer's recommended retail price
and any deposits paid.
 CASE: RF MARTIN LIMITED V DUFFY,
COOPER THIRD PARTY
[1985] NI 417
Facts of the case
• The plaintiff sold and delivered catering equipment to the third party who
carried on a restaurant business. It was a term of the sale that the property in
the equipment would not pass to the third party until they were paid for in
full.
• At the time of the action no payment had been made for the equipment.
The third party purported to sell the restaurant business together with the
catering equipment to the defendant. The plaintiff commenced
proceedings against the defendant claiming delivery of the goods or their
value and damages.
• The defendant's sole defence was that he received the goods in good faith
and without notice of any title or other right of the plaintiff in respect of them
and he relied on section 9 and section 25(1) of the Sale of Goods Act 1979.
Issue:
Whether the third party is a mercantile agent for plaintiff?

Court held:
The court against the defendant and the third party, as the
entire business had been transferred by the third party to the
defendant with no separate value attributed to the catering
equipment which it was a transaction which did not bear the
slightest resemblance to the sale of goods by a mercantile
agent.
 6. CONDITION AND WARRANTIES
TERMS OF THE CONTRACT
Section 12 (1) of SOGA 1957
“A stipulation in a contract of sale with reference to goods which are the
subject thereof may be a condition or warranty.”
 EXPRESS
TERMS
CONDITIONS
• Section 12 (2) of SOGA 1957 stated that “A condition is a
stipulation essential to the main purpose of the contract,
the breach of which gives rise to a right to treat the
contract as repudiated.”
• A statement of fact or a promise that agreed by both
parties as essential or fundamental to the main purpose
of the contract.
• The breach of conditions gives rise to a right to treat the
contract as repudiated.
 CASE: GOH HOCK CHOY V. ZAIBI
MOTOR SDN BHD [2015] 2 CLJ 364
Facts of the case
• The plaintiff purchased a Mercedes Benz car from the defendant which was
thought to be an imported used car. The plaintiff paid the full purchase price
of the car for the sum of RM820,000.
• Before the car was purchased, the plaintiff was of the understanding that
the car complied with all relevant laws, free from any encumbrance and
customs clearance.
• The plaintiff sold the car to one Siow Chung Peng for RM900,000. However,
Siow defaulted in the payment and the car was returned to the bank where
it was subsequently sold at a public auction.
• On 20 February 2009, the Customs Department seized the car as it was found
that the car was in fact a new car and no customs clearance was obtained.
Since the car was seized, the bank could not pass good title to the
purchaser when the car was auctioned off by the bank.
• The bank sued the plaintiff for RM1,044,800.92 for the refund of the purchase
price and for breach of contract. The plaintiff was then adjudged a
bankrupt. The plaintiff filed a suit against the defendant for the sum of
RM1,044,800.92 for failure to provide a valid, effective and proper title to the
car.
Issue:
Whether there was a breach of contract
by the defendant?
Court Held:
• The Court held that the defendant had breached the condition and
warranty of the contract of sale. The plaintiff relied on the implied condition
that the defendant had a good title and had the right to sell the car to the
plaintiff.
• There was also an implied warranty by the defendant that the vehicle was
free from any charge or encumbrance in favour of any third party which
was not declared or known to the plaintiff before or at the time when the
contract of sale was made. The plaintiff relied on the defendant to be
convinced that the documents pertaining to the car were in order. Further,
there was an implied undertaking by the defendant that it was capable of
delivering good, lawful and valid title to the plaintiff in respect of the car.
 CASE: PUNCAK NIAGA (M) SDN BHD V NZ
WHEELS SDN BHD [2012] 1 AMR 1
Facts of the case
• The appellant, a company, had purchased a brand new luxury Mercedes-
Benz motor vehicle model S350L from the respondent.
• The appellant began to encounter fundamental problems and defects in
the Mercedes-Benz motor car right from the time it took delivery of the car,
wherein the car could not start and thereby rendering the motor car to be of
unsatisfactory quality and/or unfit for its purpose.
• In total, the Mercedes-Benz motor car had broken down on seven occasions
and on all occasions, the motor car could not start.
• The appellant finally rejected the Mercedes-Benz motor car, having lost all
confidence in the motor car. The appellant contended that there were
breaches of statutory implied conditions and/or guarantees in relation to the
motor car pursuant to the Sale of Goods Act 1957 and the Consumer
Protection Act 1967.
Issue:
Whether the appellant was entitled to
reject the Mercedes-Benz motor car?
Court Held
• The Court allow the appeals. There are statutory implied conditions and/or
guarantees that require that the Mercedes-Benz motor car be of
acceptable quality and fit for all the purposes for which goods of the type
are commonly supplied.
• However, it was crystal clear that when the Mercedes-Benz motor car could
not start there was a breach of the implied conditions and/or guarantees
which rendered the said motor car not to be of satisfactory or acceptable
quality and unfit for its purpose. The respondent was in breach of the
conditions and/or guarantees.
• Pursuant to Section 12(2) of the SOGA , the breach of a condition that is a
stipulation essential to the main purpose of the contract would give rise to
the right to treat the contract as repudiated. As such, the appellant was
right in rejecting the Mercedes-Benz motor car.
WARRANTY
• Section 12(3) of SOGA 1957 stated that “A warranty is a
stipulation collateral to the main purpose of the contract,
the breach of which gives rise to a claim for damages but
not to a right to reject the goods and treat the contract as
repudiated.”
• The warranty is a stipulation, but supportive or subsidiary for
the main purpose of the contract of sale.
• The breach of warranty can gives rise to a right to claim for
damages only, there is no right to either reject the goods or
repudiate the contract.
 CASE: KINTA SUNWAY RESORT SDN BHD
V SIM LEISURE CONSULTANTS SDN BHD
[2017] AMEJ 0556
Facts of the case
•
The dispute between the plaintiff and the defendant concerns the
development of the Banjaran.
• Plaintiff was proposed by the Managing Director of the defendant to use the
Defendant’s proprietary roofing system, the Elae Thatch Roof. The defendant
issued a formal quotation to the Plaintiff which contained a warranty that
the Elae Thatch Roof has a life span of 10 years (‘the Warranty’) subject
always that the defendant shall maintain the Elae Thatch Roof.
• The plaintiff agreed. Despite the constant maintenance carried out by the
defendant, the Elae Thatch Roof did not last for 10 years as warranted by
the defendant due to algae problem and insect infestation.
Issue:
Whether the defendant had
breach the warranty in the
contract?
Court Held:
• The Court held the plaintiff able to prove the
damages it has suffered as a result from the
defective and/or problematic Elae Thatch Roof
despite the maintenance and it having been
warranted the life span of 10 years by the
defendant.
• Having considered that there has been a breach of
warranty by the defendant, the plaintiff is thereby
entitled to claim for damages.
 CASE: LAU TEK SEN @ LAU BENG
CHONG & 3 ORS. V. S.K. SONG [1995] 2
CLJ 425
• Facts of the case
The defendant, a practising advocate and solicitor, acted for the vendor of
land Geran No. 27017 Lot 960 District of Johor Bahru, namely Tang Ngon
Kong in the sale of the same to the plaintiffs.
• The plaintiffs made part payment of RM24,225 and the balance 70% was to
be paid within three (3) months. It was a condition of the agreement of sale
that upon receiving the said balance, the vendor shall execute a valid and
registrable memorandum of transfer in favour of the purchasers and shall
forward the document of title to the purchasers free from all encumbrances.
• It was subsequently discovered that the "vendor" had obtained a
replacement title by fraud and had used a false identity card.
• The defendant confirmed that the actual owner of the land was
not the person who had met him and instructed him over the
sale.
• The true registered owner of the land obtained an order from the
Johor Bahru High Court that the title to Geran No. 27017 Lot No.
960 issued be declared null and void and be restored to the
register.
• The plaintiffs claimed for damages due to breach of warranty of
authority in professing to act for the true registered owner of the
said land. The defendant argued that there was no warranty
and even if so, it was the fraud of his client of which he was
innocent.
Issue:
Whether the defendant is
liable for breach of warranty
in the contract?
Court Held
• The Court held even though the defendant believed he had the
authority to act as agent and had no reason to suspect his
client's fraud but, good faith alone will not protect the
defendant.
• It is clear that the defendant never had authority to act for the
registered owner of the said land and failed to ensure that he
was acting for that person. It is implied where any person
purports to do any act or make any contract as agent on behalf
of a principal i.e. the agent is deemed to warrant that he has in
fact authority from such principal to do the act or make the
contract.
• If such an agent has no such authority, he is liable to be
sued for breach of warranty of authority by any third person
who was induced by his conduct to believe that he had the
authority to do the act or make the contract and who by
acting upon such belief, has suffered loss in consequence of
absence of authority.
 CASE: BETTINI V GYE (1876) 1
QBD 183
Facts of the case
• The claimant, Alessandro Bettini (a tenor) entered into an agreement with
the defendant, Frederick Gye.
• The terms of that agreement were that Bettini would not perform within 50
miles of London in any venue, apart from the Royal Italian Opera Covent
Garden within the time period of 1 January 1875 to 1 December 1875.
Further, between 30 March 1875 and 13 July 1875, Bettini would perform for
Gye in return for £150 per month.
• The agreement also stipulated that Bettini must be in London 6 days before
rehearsals “without fail”. Bettini however arrived two days before his
performance period was to begin. Gye however declined to have him
perform at his opera.
Issue:
Whether the requirement to be in London
“without fail” 6 days before the start of
rehearsals was a condition of the contract and
therefore, whether Gye could rescind the
contract on the basis of the breach of that
term.
Court Held:
• The court held that taking into consideration the
length and nature of the performance, the rehearsal
clause was not a vital part of the agreement.
• It was not a condition but merely a warranty.
• Thus, Gye could not repudiate the contract but
could sue for damages only.
 DIFFERENCES BETWEEN
CONDITIONS AND WARRANTIES
 WHEN DOES CONDITION IS
TREATED AS WARRANTY?
• A breach of condition is to be treated as a breach of warranty under these
following circumstances:
(i) Section 13(1) of SOGA 1957 - Waiver of Condition
“Where a contract of sale is subject to any condition to be fulfilled by the seller the
buyer may waive the condition or elect to treat the breach of the condition as a
breach of warranty and not as a ground for treating the contract as repudiated.”
(ii) Section 13(2) of SOGA 1957 - Compulsory treatment of breach of condition as
breach of warranty
“Where a contract of sale is not severable and the buyer has accepted the goods or
part thereof, or where the contract is for specific goods the property in which has
passed to the buyer, the breach of any condition to be fulfilled by the seller can only
be treated as a breach of warranty, and not as a ground for rejecting the goods and
treating the contract as repudiated, unless there is a term of the contract express or
implied to that effect.”
 CASE: IPMUDA BHD V BAKITAN
SDN BHD & ORS [2011] 7 CLJ 297
Facts of the case
• The plaintiff was in the business of trading in building materials whereas the
first defendant was in the business of construction. The plaintiff claimed
against the first defendant for a sum of RM307,965.47.
• The plaintiff claimed that it had sold and delivered steel bars in accordance
to the first defendant's purchase orders and had sent the invoices for the
price of the goods sold and delivered to the first defendant for payment.
• The plaintiff also contended that specifications of the goods in the said
delivery order stated that the first defendant must examine the goods at the
time of the delivery and that no complaints or return could be entertained
after the acknowledgment of the delivery. The first defendant did not
dispute that the plaintiff had supplied and delivered the materials ordered
under the purchase orders.
• However in respect of two (2) purchase orders, the first defendant
contended that the plaintiff had delivered steel bars that were not in
accordance with the description because they were significantly
undersized.
• As a result of those undersized steel bars, the first defendant sustained
loss and damages as the wall panels that were constructed for a
bungalow which had used those undersized steel bars had
subsequently given rise to cracks and had to be rectified.
• That led the owner of the bungalow to deduct a sum of RM188,505.15
from the contract price with the first defendant. The first defendant
claimed that they were entitled to counterclaim for the sum of
RM188,505.15 against the plaintiff for damages.
Issue:
Whether the defendant was in a position
to treat the breach of condition of the said
purchase steel bars as a breach of
warranty?
Court Held:
• The Court held that the plaintiff had breached the
contract with the first defendant when the plaintiff
supplied to the first defendant the undersized steel bars
which had caused defects to the wall panels.
• By virtue of Section 13 of the Sale of Goods Act 1957,
the first defendant was in a position to treat the breach
of condition of the said Purchase Orders as a breach of
warranty and was entitled to pursue the matter further
and claim for damages.
 CASE: INTERDEALS AUTOMATION (M) SDN BHD V
HONG HONG DOCUMENTS SDN BHD [2003] 2
AMR 55
Facts of the case
• The plaintiff's claim against the defendant was for monies due and
owing to it for a “Kern Page Mailer 180000” (the machine) sold and
delivered to the defendant.
• The defendant accepted and acknowledged in writing to the
plaintiff, the delivery of the said machine and confirmed that the
same was satisfactorily installed, tested, and commissioned.
• The plaintiff claimed that the defendant had despite repeated
demands, failed and/or refused to pay the sum due or any part
thereof or to return the said machine.
• In the alternative, the plaintiff pursuant to s 13(2) of the Sale
of Goods Act 1957 (SOGA) sought to obtain an award
under s 55(2) of the SOGA and claimed as damages, the
price of the goods.
• The defendant opposed the plaintiff's claim on the ground
of breach of representation in that the machine was
incapable of the producing the number of documents
stipulated in its brochure and was not reasonably fit for the
purpose for which it was acquired.
Issue:
Whether the plaintiff was entitled to its
alternative claim under Section 13(2) of
the SOGA 1957?
Court Held:
• The Court held that the plaintiff did not fall under either
category referred to in Section 13(2) of the SOGA and thus,
cannot avail itself to the aforesaid provisions.
• In the circumstances, and upon the defendant's continued
refusal to pay for the machine, the plaintiff, having reserved
a right of ownership over the machine, ought to have
retaken possession and sold the said machine in the open
market and then recover the difference if any, between its
recovered value and the original sale price.
 IMPLIED TERMS

• The Sale of Goods Act 1957 implies a number of stipulations in

every contract of sale of goods. However, these implied terms
apply only when the parties to the contract of sale have not
excluded or modified them.
• These implied terms, laid down in Sections 14 to 17 of the SOGA
1957.
• The exclusion of implied terms and conditions is stated in Section
62 of SOGA 1957. “Where any right, duty or liability would arise
under a contract of sale by implication of law, it may be
negatived or varied by express agreement or by the course of
dealing between the parties, or by usage, if the usage is such as
to bind both parties to the contract”
 IMPLIED CONDITIONS

a)Implied condition as to ownership.

b)Implied condition that sale by description.
c) Implied condition as to quality and fitness.
d)Implied condition in a sale by sample.
 IMPLIED WARRANTIES

a)Implied warranty as to “time”.

b)Implied warranty as to “quite possession”.
c) Implied warranty that the goods are free from
“encumbrances”.
 7. OWNERSHIP

• Ownership - a legal title coupled with exclusive legal right to

possession.
• Also can be defined as when the moment of property in
products or goods passes, the merchant stops to be their
owner and the purchaser gets the possession.
According to Section 4(1) of Sales of Good Act 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.”
 THE TRANSFER OF
PROPERTY
Section 26 of Sales of Good Act 1957 stated that :

“Unless otherwise agreed, the goods remain at the

seller’s risk until the property therein is transferred to
the buyer, but when the property therein is
transferred to the buyer, the goods are at the
buyer’s risk whether delivery has been made or
not.”
• Before the property passes to the buyer, the goods remains
at the seller’s risk.
• When the property passes to the buyer, the goods are at
the buyer’s risk irrespective of whether the goods have
been actually delivered to the buyer or not.
• A person should note that there must be transfer of
ownership in the goods if the transaction is to be caught by
the sales of goods legislation.
• The importance of transfer of ownership is that risk of loss of
the goods goes with the person who has the ownership in
the goods.
It is important to know when property passes from the seller to the buyer
because:
• Risk of loss or damage to goods is with the owner, assuming that the goods
have not been lost or damaged because of other party’s fault.
• If property in the goods has passed to the buyer, generally the buyer is no
longer able to reject the goods for breach of a condition, the seller’s breach
can only be treated as a breach of warranty.
• Once property in the goods has passed to the buyer, good title can be
given to the third parties, even though the buyer may have not paid for the
goods
• If the seller or buyer have gone bankrupt, it is necessary to determine
whether property has passed for the purpose of determining whether the
goods vest in the trustee.
 THE TRANSFER OF TITLE

• As 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).
• This rule is expressed in the Latin maxim nemo
dat quod non habet.
 SALE BY THE PERSON NOT THE
OWNER
According to Section 27 of Sales of Good Act 1957:
Where goods are sold by a person who is not the
owner thereof, and who does not sell them under the
authority or with the consent of the owner, the buyer
acquires no better title to the goods than the seller
had, unless the owner of the goods is by his conduct
precluded from denying the seller’s authority to sell.
• This provision means that if goods are
brought from a person who is not the
owner and does not sell them under the
owner’s authority, the buyer does not
acquired any title.
• The purpose of this section is to protect
the right of ownership.
 CASE: MEWAH-OILS SDN BHD V LUSHING
TRADERS PTE LTD [2017] 2 AMR 886
Facts of the case
• Lushing’s claim against the Applicant is for the conversion of Lushing’s cargo
which was shipped on board the vessel ‘Suppavan 1’ and discharged into
the Mewah’s tanks in November 2003.
• There was a common party to both Lushing and Mewah – Summerwind
Trading Pte Ltd.
• Summerwind was Lushing’s buyer who did not pay Lushing and did not
obtain the document of title by way of the original bills of lading. Lushing
was able to produce the original bills of lading at trial proving that Lushing
never relinquished the title and possessory rights to the cargo. Lushing never
received any payment or consideration for the cargo from its buyer
Summerwind.
• Mewah did not obtain any bill of lading to the cargo nor did it insist to
sight the original bills of lading from Summerwind.
• Its defence was that it was tolling / refining the cargo for Summerwind
and therefore there was no need for it to obtain the original bills of
lading.
• Mewah also raised the fact that Lushing obtained judgment in the
Singapore Courts in its recovery from the Summerwind and its directors
for non-payment for several transactions including the present
shipment
Issue:
Whether the respondent was the owner of
the crude palm oil and has the right to
immediate possession of the same?
Court Held:
• The High Court allowed the plaintiff's claim together with
interest for the tort of conversion.
• Hence the instant appeal in support of which the defendant
contended inter alia that the plaintiff, cannot claim
ownership or right to possession of the crude palm oil
bearing in mind further that at the time of discharge of the
crude palm oil into the defendant's tanks, the plaintiff did
not have the original bills of lading in its possession. The
respondent is the owner of the crude palm oil.
 LIM CHUI LAI V ZENO LTD [1964] 30 MLJ 314
Facts of the case
• The Chairman of the respondent company’s board of directors
entered into an agreement in January 1961 with a contractor named
Ahmad, who had secured contracts from the Petaling Jaya Authority
for construction of culverts, under which the respondent was to
provide Ahmad with all materials for his culverts and also to finance
the carrying out of the contracts.
• The respondent then bought materials for the project and delivered
them to the construction site. In June 1961, the respondent came to
know that Petaling Jaya Authority after having some problems with
Ahmad, had cancelled his contract.
• The respondent then informed to the Petaling Jaya authority that the
materials on the site belonged to them and also made attempts to sell
them. In September 1961, the respondent discovered that the
materials had been sold by Ahmad to the appellant for RM14,000 of
which Ahmad had received RM7,000 as part payment.
• The respondent then commenced this action for
conversion. The trial judge gave judgement for respondent
for the sum of RM25,080.52 and costs.
• On appeal by the appellant, it was contended that the
respondent caused the chattels to be delivered to Ahmad,
he became the owner of the chattels and as such could
pass a title in the chattels to the appellant and the chattels
were the property of a partnership between the respondent
and Ahmad as such he had the power to dispose of the
goods under Section 28 of Sales of Good Act 1957.
Issue:
• Whether Ahmad has the ownership of the chattle?
Court Held :
• Ahmad was merely the bailee and not the owner
of the chattels at the time he sold them to the
appellant. As he has no title to the chattels or
authority to sell them, he could not give the
appellant any title.
 8. SALE BY DESCRIPTION

According to section 15 of Sale of Goods Act 1957:

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
corresponds with the sample if the goods do not also
correspond with the description.
• Where there is a contract of sale of goods by description,
there is an implied condition that the goods shall
correspond with the description.
• When a descriptive word or phrase is used in a contract of
sale to describe the product, it creates an implied condition
that the goods will be like the description.
• Thus, if it is ascertained that the sale is by description, then
the goods must correspond with the description. If they do
not correspond, the buyer may reject them and the seller
cannot take the defence by saying that they will serve the
buyer’s purpose.
 CASE: KIAN HAP ENTERPRISE SDN
BHD V LEE MAN ON [2017] MLJU 638
Facts of the case
• Both plaintiff and defendant enter into a Sale and Purchase Agreement
(SPA) where defendant has agreed to sell and plaintiff to purchase a
machine for the purpose of plaintiff business.
• However, the plaintiff received the machine in dismantled part which he
expected to be in a whole unit. Plaintiff argued that there is nothing in the
SPA to suggest that the machine will come in separate parts. The words “in
dismantled condition and separate parts” were not present in the SPA.
• Since the machine delivered did not correspond with the description in the
specification provided by the defendant, the plaintiff claimed that he
defendant had breached the implied conditions under section 15 of the
Sale of Goods Act 1967.
• Nevertheless, the defendant then submits documentary
evidence and oral testimonies of the witnesses shows that
the machines was at all material times intended to be
delivered in parts as agreed by the parties.
• Plus, when the machine were delivered to the plaintiff’s
factory the defendant who is the managing director of the
plaintiff were present, the defendant did not protest or
reject to the dismantled condition of the machine.
• Defendant claims that the plaintiff had accepted the
machine and hence has lost the right of rejecting the
machine.
Issue of the case
Whether there is breach of contract in the Sale and
Purchase Agreement (SPA) between plaintiff and
defendant as the goods does not correspond with
the description?
Court held
• The Sessions Court finds that the machine is intended to be delivered
in dismantled parts.
• The Plaintiff’s pleaded case that the machine is to be delivered in one
complete unit is not supported by credible evidence.
• Although the quotation and the SPA does not expressly stated that
the machine will come in dismantled parts but the events that
transpired before and after delivery especially the conduct of the
plaintiff inevitably led to a reasonable inference that the machine is
intended to be delivered in dismantled parts.
• The learned judge dismissed the plaintiff appeal.
 CASE: WASCO LINDUNG SDN BHD V LUSTRE
METALS & MINERALS SDN BHD [2015] 9 MLJ 610
Facts of the case
• The plaintiff had ordered from the defendant a supply of aluminium ingots at
an agreed price to be delivered in two batches. The first batch was to be
delivered at the end of April 2014 while the second batch was to be
delivered by the end of May 2014.
• However, on 19 May 2014, when the containers which were supposed to
contain the first batch of aluminium ingots arrived at Port Klang, it was
discovered that it contained white powder instead. The plaintiff claimed
against the defendant a sum of US$394,539.15 (or RM1,271,205.14) and
made the application for summary judgment against the defendant.
• The plaintiff submitted that there was a contract of sale of goods between
the parties and the defendant had breached its obligations under the
contract.
Issues of the case
Whether there was a breach of contract as
referred to section 15 of Sale of Goods Act; and
whether the plaintiff was entitled to damages?
Court held
• The defendant had breached the implied conditions under
section 15 of the Sale of Goods Act 1957 where the goods
should have corresponded with the description in the
defendant's proforma invoice.
• Another breach under section 57 of Sales of Goods Act 1957 is
when the aluminium ingots were not delivered at all by the
defendant to the plaintiff.
• The plaintiff had fulfilled its duty to take reasonable steps to
mitigate its losses in respect of the non-delivery of the aluminium
ingots which entitled the plaintiff to claim for interests.
 9. QUALITY AND FITNESS

Implied condition as to quality or fitness

Section 16. (1) Subject to this Act and of any other law for the time being in
force, there is no implied warranty or condition as to the quality or fitness for
any particular purpose of goods supplied under a contract of sale, except as
follows:
(a) Where the buyer, expressly or by implication makes known to the seller the
particular purpose for which the goods are required, so as to show that the
buyer relies on the seller’s skill or judgment, and the goods are of a description
which it is in the course of the seller’s business to supply (whether he is the
manufacturer or producer or not) there is an implied condition that the goods
shall be reasonably fit for such purpose: Provided that, in the case of a
contract for the sale of a specified article under its patent or other trade
name there is no implied condition as to its fitness for any particular purpose.
(b) Where goods are bought by description from a seller who deals in
goods of that description (whether he is the manufacturer or producer
or not) there is an implied condition that the goods shall be of
merchantable quality: Provided that if the buyer has examined the
goods, there shall be no implied condition as regards defects which
such examined ought to have revealed.

(2) An implied warranty or condition as to quality or fitness for a

particular purpose may be annexed by the usage of trade.

(3) An express warranty or condition does not negative a warranty or

condition implied by this Act unless inconsistent therewith.
SECTION 16 (1) OF SALE OF
GOODS ACT 1957
• Usually, there is no implied condition that the goods
supplied by the seller should be fit for the particular purpose
of the buyer. The rule ‘Caveat emptor’ applies instead. This
means that while purchasing the goods, it is the
responsibility of the buyer to examine whether the goods he
is buying are fit for his purpose in order to satisfy himself.
EXCEPTIONS TO CAVEAT EMPTOR
RULE
 CONDITIONS TO BE
FULFILLED
1. Disclosure of purpose - Section 16 (1) (a)
 CASE: PRIEST V LAST [1903] 2 KB 148
Facts of the case
The Plaintiff purchased a hot water bottle from the
Defendant, a retail chemist. Some days later, the bottle while
in use by the P’s wife, burst. As a result, she was scalded.
Issue of the case
Whether the plaintiff was entitled to sue the defendant?
Court Held
It was held that if the description of the goods by which they
were sold pointed to one particular purpose only, then the
requirement of disclosure of purpose is deemed fulfilled.
 CASE:JUMBOHAN OMH SDN BHD V. KIAN
JOO CAN FACTORY BERHAD
[2010] 1 LNS 915
FACTS OF THE CASE
The plaintiff was at all material times was a licensed supplier of health supplements
products. One of the health supplements sold by the plaintiff was a type of milk
powder known as SM-6 chewable colostrum.
The plaintiff's pleaded that as the defendant had knowledge that the plaintiff's
products have a shelf life of two 2 years and purpose for which the said cans were
required. The plaintiff relied on the defendant's skill and judgment as to the suitability
of the said cans for the intended purpose.
The cans offered to be sold and supplied to the plaintiff must be specifically fit for the
purpose which to be free of defects and to have a shelf life similar or longer than the
plaintiff's products.
However, the plaintiff contends that defendant failed or neglected to advice the
plaintiff that the said cans to be supplied to the plaintiff not only had a shelf life of
three 3 months but was susceptible to rusting on the outside.
Court Held
The court finds that the plaintiff had succeeded in proving its case against the
defendant. Accordingly the court hereby orders the defendant to pay the
plaintiff the sum RM154,037.00 and interest there on at the rate of 8% per
annum from the date of filing of the writ until full settlement with costs.

However since the plaintiff failed to take reasonable action to mitigate its loss,
the court is not allowing the plaintiff claim on loss of profit. The defendant's
counter-claim is also dismiss with costs.
2. Reliance on the seller’s skill and judgement- Section 16 (1) (a)
The buyer must also established that he had relied on the seller’s skill and
judgment before purchasing the goods
Case : Dr. Barreto v. T.T. Pruce [1939] AIR Nag. 19
Facts of the case:
Mr. Pruce bought a set of false teeth from Dr. Baretto, a dentist. But the set
was not fit for Mr. Pruce’s mouth, so he rejected the set of teeth and claimed
a refund of price.
Issue of the case:
Whether or not Mr. Pruce had the right to reject the set of teeth and claimed
a refund?
Court Held:
It was held that Mr. Pruce was entitled to do so as the only purpose for which
he wanted the set of teeth was not fulfilled.
3. The goods are of a description which it is in the course of the seller’s
bysiness to supply.
The goods bought by the buyer must be the kind which is in the course of the
seller’s business to supply.
Section 16(1)(b) of Sale of Goods Act 1957
Where goods are bought by description from a seller who deals in goods of
that description, there is an implied condition that the goods shall be of
merchantable quality.

Merchantable Quality of goods :-

the goods must meet the standard which a reasonable person would regard
as satisfactory
Goods sold must be fit for particular use for which they were sold
i.e. with reference to the expectations of the average buyer
E g: in a sale of a lorry, it is an implied condition that the lorry will not
overheat easily
 EXCEPTIONS

Section 16 (1) (b) of Sale of Goods Act 1957

“ …Provided that if the buyer has examined the goods, there
shall be NO IMPLIED condition as regards defect which such
examination ought to have revealed”.

However, if the DEFECT COULD NOT BE DISCOVERED by any

reasonable examination (some defects are noticed later as
they were not evident but latent). Implied condition as
merchantable quality would apply.
 CASE: ONG SIEW HWA V UMW TOYOTA
MOTOR SDN BHD. [2015] 8 CLJ 1003
Facts of the case
• The plaintiff purchased a new car from the D1, paid D1 an initial sum and
took a hire-purchase loan for the balance sum from the second defendant
D2. From the day he took possession of the car, the plaintiff found that there
was an imbalance in the way the car moved, specifically the car wobbled
and the steering pulled to one side.
• Over the course of nine months thereafter the plaintiff sent the car on nine
occasions to D1's various service centres for the problems to be rectified but
despite all the measures taken by D1's personnel, the problems persisted. The
plaintiff finally left the car at D1's service centre, filed the instant action for an
order to terminate the contract of sale and seek the return of the purchase
price of the car and RM30,300 he had spent on car rentals.
Court Held
• The court of the view that where a vehicle which was the subject
matter of hire purchase agreement has been declared to be
unacceptable quality, the plaintiff is entitled to reject and return
the goods which the plaintiff in my judgment has properly done
in accordance with the provisions of the Consumer Protection
Act 1999.
• The plaintiff is therefore entitled to the return of all sums
paid to the second defendant and damages of RM30,300.
• In the premises the plaintiff's claim against the first defendant is
dismissed with costs whilst the plaintiff's claim against the second
defendant is allowed in terms as stated above with costs to be
taxed.
 CASE: MORELLI V. FITCH &
GIBBONS, [1928] 2 K. B. 636

Facts of the case

Morelli bought from a dealer, Fitch & Gibbons, a bottle of
wine. While opening its cork in the normal manner, the bottle
broke off and injured Mr. Morelli’s hands.
Issue of the case
Whether Morelli was entitled to claim damages?
Court Held
Morelli was entitled to claim damages because the bottle
was not of merchantable quality.
 10. SALE BY SAMPLE
Section 17(1) : A contract of sale is a contract for sale by sample where there
is a term in the contract express or implied to that effect.

Section 17(2): In the case of contract for sale by sample there is an implied
condition that:
a) that the bulk shall correspond with the sample in quality;
b) that the buyer shall have a reasonable opportunity of comparing the bulk
with the sample;
c) that the goods shall be free from any defect rendering them
unmerchantable which would not be apparent on reasonable
examination of the sample.
 CASE: PERFECT KAM HUNG SDN BHD V CHEAH TAI
HOE & ANOR [2011] 9 MLJ 593
Facts of the case
• Plaintiff purchases the lorry by looking at the sample provided by the
defendants.
• However, the lorry that was delivered did not conform to the sample. On the
other hand, the lorry was not in a roadworthy and good working order, and
also the condition it was delivered four months later than contracted and
the lorry was not suitable for the purpose known to the defendants.
• The plaintiff wanted to sue the defendant for the breach of the implied
condition that the lorry supplied ought to be correspond to the sample in
quality which would be free from any defect.
Issue of the case
Whether the plaintiff was entitled to reject the defect
vehicle?
Court held
The defendant was in breach of the implied condition
because the lorry supplied ought to be correspond to
the sample in quality which would be free from any
defect. Therefore, the plaintiff’s claim allowed.
 CASE: GODLEY V PERRY [1960]
1 ALL ER 36
Facts of the case
A boy had bought a catapult. Suddenly, while he played, the catapult broke
and has been caused him blind for one eye. The shopkeeper was sued by the
boy.
Issue of the case
Whether or not the shopkeeper can sue the wholesaler after he had made a
reasonable examination towards the catapult?
Court held
The defect was not one which was apparent on such examination. Thus, the
shopkeeper had an action against the wholesaler.
CONCLUSION
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