Commercial LawSale of Goods

Introduction

Focus is on the commercial and contractual arrangements for the sale of goods (SOG) entered into by businesses and private party

Based on the provisions of SOGA 1957

SOGA applies in Malay States only.

Melaka, Pulau Pinang, Sabah and Sarawak is governed by the English SOGA 1893

Definition of Goods

S.2 SOGA – goods include every kind of movable property other than actionable claims and money and include 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 contract of sale.

Thus, based on the above, land is excluded

See also S.6 SOGA

Classification of GoodsS.6 SOGA – goods which form subject matter of a contract of sale may either be existing goods or future goods.

Existing goods – are goods already owned or possessed by seller, and may either specified or agreed upon at the time a contract is made.

Specified goods – means goods identified and agreed upon at the time a COS is made (S.2 SOGA)

Unascertained goods – goods identified by description only (Not defined in SOGA)

Future goods – goods to be manufactured or produced or acquired by the seller after the making of COS under S.2 SOGA.

Classification of Goods

Examples: If A agrees to buy B’s motorcycle bearing registration number XYZ123. It is a COS of specific goods.

A sale of a new Proton Persona 2014 model. It is a COS of unascertained goods

A sale of a BMW sports car model Z3 yet to be manufactured by seller. It is a COS of future goods and unascertained.

A sale of a BMW sports car model Z3 owned by A who is is selling it to B. B as A’s car dealer sell to C. It is a COS of future goods and specified.

Contract of SaleS.4(1) SOGA – a COS is a contract where the seller transfers or agrees to transfer the property in goods to the buyer for a price.

Note: Distinguish between a sale and an agreement to sell. A sale is a contract under which the property in the goods is transferred from seller to buyer.

Agreement to sell (ATS) is a contract under which the transfer of property in the goods is to take place at a future time or subject to some condition to be fulfilled later. See S.4(3) SOGA.

Under S.4(4) ATS becomes a sale when time elapses or conditions fulfilled.

Formation of COS

S.5(1) a COS is made by an offer to buy or sell at a price and by acceptance of that offer.

The COS may provide for:Immediate delivery of the goods; or

Immediate payment of the price; or BOTH.

Delivery or payment may also be done by installments.

S.5(2) a COS may be made in writing and partly by word of mouth or may be implied from party’s conduct.

Terms of Contract

There are various standard TOC in a COS. It can be express or implied.

S.12(1) SOGA – in the COS there can be condition or warranty. (express)

S.12(4) – whether a stipulation is a condition or warranty depends in each case on the construction of the COS.

The stipulation may be a condition though called a warranty in the contract.

TOC: ConditionsConditions: S.12(2) – it is a stipulation essential to the main purpose of the contract.

Breach of Conditions – entitle the innocent party to repudiate the contract and claim damages.

There are circumstances where innocent party can claim damages only but cannot repudiate contract:1. Where buyer waives condition

2. Where buyer elects to treat the breach of condition as a breach of warranty and claim damages only

3. Where COS is not severable and buyer has accepted the goods or part of it, the breach of any conditions must be accepted as breach of warranty unless COS says otherwise

4. Where the COS is for specific goods, and it has passed to buyer, (See 3).

TOC: Warranty

S.12(3) – a warranty is a stipulation collateral to the main purpose of the contract. BOW give rise to claim for damages but not a right to reject the goods and cannot treat the COS as repudiated.

TOC: Time

S.11 SOGA – unless different intention appears from the TOC, stipulations as to time of payment are not deemed to be essence with respect to COS

If COS don’t say that time is of the essence, then if buyer don’t pay on the agreed date, it does not entitle seller to repudiate the COS.

Implied Terms

SOGA implies a number of stipulations in every contract of sale of goods a.k.a implied terms

When apply?Applies when parties of the COS have not excluded or implied to exclude them.

What are the implied terms?Those provided under Ss. 14-17 SOGA

Implied condition as to title

S.14(a) SOGA

In a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is an implied condition on the part of the seller, that, in the case of a sale, he has a right to sell the goods, and that, in the case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass.

The important thing is the right to sell NOT ownership.

If seller do not have right to sell, buyer may repudiate the COS

Implied warranty that the buyer shall have quiet

possession of the goodsS.14(b)

In a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is an implied warranty that the buyer shall have and enjoy quiet possession of the goods.

NOTE that it is a warranty not condition.

Thus breach of this stipulation will not entitle the buyer to repudiate the COS.

What is quiet possession?The right to enjoy the goods without disturbance to its possession and title.

Implied warranty that goods are unencumberedS.14(c)

There is implied warranty that the goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time when the contract is made, unless the circumstances of the contract are such as to show different intention.

NOTE: it is a warranty

Example: A sold to B a sea vessel. B do not know know that the vessel is charged to Bank C. A has breached the warranty. No breach if A has already told B about the charge and B still want to continue with the sale.

Implied condition that in sale of goods by description, the goods

must correspond with the description.

S.15 SOGA

Where there is contract for 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 by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not correspond with the description.

Case: Nagurdas Purshotumdas Co v Mitsui Bussan Kaisha Ltd (1911) 112 SSLR 67

Sale of flour case. Flour supplied identical in quality but packed with a different trademark. Goods did not comply description.

If goods not described but seen. It is a sale by description. For example self service shops.

Case: Grant v Australian Knitting Mills Ltd (1936) AC 85

Caveat Emptor

Buyer beware

S.16

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.

Implied condition that goods must be reasonably fit for purposes for

which the buyer wants them.S.16(1)(a)

Where the buyer, expressly or impliedly, makes known to the seller the particular purpose for which the goods are required so as to show that he relies on the buyer’s skill or judgment, and the goods are of a description which is in the course of the seller’s business to supply, there is an implied condition that the goods shall be reasonably fir for the purpose.

Requirements1. Buyer make known purpose of purchase

2. Buyer relied on seller’s judgment

Implied condition that the goods must be of

merchantable qualityS.16(1)(b)

Where goods are brought 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 provided that if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to reveal.

Nemo Dat Quad Non Habet

"no one gives what he doesn't have“

i.e. The Nemo Dat Rule

Contained in s27 – where goods sold by a person who is not the owner, the buyer acquires no better title to the goods than the seller had.

Rationale: to protect the right of ownership

This rule usually stays valid even if the purchaser does not know that the seller has no right to claim ownership of the object of the transaction (a bona fide purchaser)

Nemo Dat Rule:Exceptions

Estoppel – when the owner of goods by his conduct is precluded from denying the seller’s authority to sell

Sale by one of joint owners – S.28 – the JO must have sole possession and the buyer must have acted in good faith and has no notice that the seller does not have full authority to sell

See also S.29 (sale under voidable contract) and S.30 (sale by a seller in possession after sale and sale by buyer in possession)

Rights of unpaid sellerRight of lien: s.46(1) – unpaid seller who still possess the goods is entitled to retain possession until payment. This right is lost when seller delivers the goods to a carrier or when buyer obtains possession of the goods.

Right of stoppage in transit: S.50 – when buyer is insolvent and the unpaid seller has parted with the possession of the goods, the seller has the right to stop the goods in transit.

Right to resell: s.54(3) – seller may resell if the goods are of perishable nature and he gives notice to the buyer of his intention to resell and the buyer does not pay within reasonable time

Protection to consumers

Consumer protection Act 1999

Focus on consumer’s rights rather than seller

It protect consumers against misleading and deceptive conducts, false representation and unfair practices, ensures safety standards and provides guarantees such as guarantee as to title, as to acceptable quality, as to fitness, as to description etc.