Introduction Sale of Good for Beginner

INTRODUCTION SALE OF GOODS FOR BEGINNER

FADZILAH BINTI AHAMAT HAYUDIN
2022

Commerce Department

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ii eBook PSP | 2022

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Perpustakaan Negara Malaysia Cataloguing-in-Publication Data

Fadzilah Ahamat Hayudin, 1981-

INTRODUCTION SALE OF GOODS FOR BEGINNER / FADZILAH BINTI

AHAMAT HAYUDIN.

Mode of access: Internet

eISBN 978-967-2774-17-4

1. Sales.

2. Consumer goods.

3. Contracts.

4. Government publications--Malaysia.

5. Electronic books.

I. Title.

346.072

eBook PSP | 2022 iii

Acknowledgement

I am grateful because I managed to complete my Introduction Sale of Goods for Beginner e-book.
This e-book cannot be completed without the effort and co-operation from others. I also sincerely
thank my KPRO DPM checker Pn Wan Nor Asniza binti Arshad and also format checker Pn
Norbahiah Zakaria for the guidance and encouragement in finishing this e-book. Last but not least,
we would like to thank our friends for their support and sharing of their knowledge to assist in
the completion of this e-book.

FADZILAH BINTI AHAMAT HAYUDIN

iv eBook PSP | 2022

Preface

With all the praise and thanks to Allah S.W.T, who has given His love and mercy an e-book entitled
“Introduction Sale of Goods for Beginner” finished in a good manner. This e-book is written to
provide surface knowledge about the sale of goods to the reader.
Introduction Sale of Goods for Beginner is published in a form of an e-book mainly to provide the
user especially the polytechnics lecturers, facilitators, polytechnics students, and readers
understanding the basic concepts sale of goods. The topic coverage adheres closely to the latest
requirements of the Malaysian Polytechnics syllabus. The end of all chapters of this e-book is
accompanied by exercises to enhance the users’ understanding.
On this occasion, I would like to thank profusely Commerce Department, Seberang Perai
Polytechnic, and all my colleagues for their support, effort, and motivation in helping me complete
this e-book. Not forgetting the family members for their endless support and patience throughout
the process of writing. Without that support and courage, this e-book might not be complete.
I am fully aware that the many flaws in the writing of this e-book, in terms of material, technical
and presentation material. Therefore, I expect criticism and constructive suggestions to further
refine the writing of this e-book. Finally, I hope that the writing of this e-book can be a useful
reference for the reader.

eBook PSP | 2022 v

Table of Content

01 INTRODUCTION 2
4
Definition of goods 5
Contract of sale of goods vs agreement to sell goods 8
Formation of the Contract
Exercise 1

02 TERMS RELATING TO THE SALE OF GOODS CONTRACT

Conditions and warranties 10

Implied conditions and implied warranties in sale of goods agreement 12

Exercise 2 22

03 TRANSFER OF PROPERTY AND TITLE UNDER SALE OF GOODS

The privity of contract 26

The concept of property and possession of goods 28

Exercise 3 35

04 PROTECTIONS TO BUYERS AND OWNERS 37
49
Principle of nemo dat quod non habet and its’ exceptions
Exercise 4

05 PROTECTIONS TO SELLERS AND BUYERS 51
56
Performance of contract 56
Types of breach of sale of goods contract by seller and buyer 62
Remedies for breach of contract
Exercise 5



eBook PSP | Introduction Sale of Goods for Beginner 1

01

INTRODUCTION

This chapter discussed basic terms relating to the sale of goods and the differences
between a contract of sale and the agreement to sell of the contracting parties in the sale
of goods contract.

2 eBook PSP | Introduction

Introduction

At the end of the topic students are able to:
a. Define the term basic terms relating to the sale of goods.
b. Compare the contract of sale and agreement to sell.

The Sale of Goods Act 1957 (SOGA 1957) shall apply to all states of Peninsular Malaysia
regarding the matters relating to the sale of goods since 23rd April 1957 for Federal
Territory, Johore, Kedah, Kelantan, Negeri Sembilan, Pahang, Perak, Perlis, Selangor, and
Terengganu and Malacca, and Penang since 23 February 1990 – Section 1, SOGA 1957.

The application of Contracts Act 1950 shall continue to apply to contracts for the sale of
goods in so far as they are not inconsistent with the express provisions of this Act (SOGA
1957) Section 3, SOGA 1957.

Definition of goods

Section 2, SOGA 1957 – defines “goods” as 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.

Thus, goods include all moveable things in the world. It does not include:
a. All actionable claims such as debts or patents
b. Money or negotiable instruments
c. Land or any things attached or forming part of the land such as buildings, trees, etc.
d. Services, such as work and labour, repair of goods or skill.

Goods can be divided into:
“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(1), SOGA 1957.

eBook PSP | Introduction Sale of Goods for Beginner 3

Based on Section 6(1) above, goods consist of:

Existing goods •Goods possessed or owned by the seller at the
time the contract was made either specific or
uncertained goods.

•e.g. Shuib owned a tablet. He wants to sell it to
Nora for RM200

Future goods •Goods to be manufacture, produced or acquired
by the seller after a contract was made.

•e.g. Kamarina entered in to an agrement to sell 2
pieces of handkerchiefs that she will sew in next
week.

Specific goods •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 - Section 2, SOGA 1957.

•e.g. Muthu agrees to sells his car registed as
SYG123 to Rani

Ascertained •Goods which in a contract for the sale of
unascertained goods, have become identified and
agreed upon by the contracting parties.

•e.g. Marina owned four pieces of watch with
difference colour. She wants to sell one of it to
Maria. Maria choose the red watch.

Unascertained •Goods are not specifically identified at the time a
goods contract of sale is made.

•It is identified by description.
•e.g. Mei Ling sells 20 pieces of pens from her

stock of 50 pens to Ah Meng.

Figure 1.1: Types of goods.

4 eBook PSP | Introduction

Contract of sale of goods vs agreement to sell

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. - Section 4(1), SOGA 1957
Thus, in the contract of sale of goods there must be:
a. The contracting parties i.e., the seller and buyer
b. Goods i.e., moveable goods as an object of the contract
c. Money consideration which is the price
d. Transfer of property from seller to the buyer

Normally the contract of existing goods is called a sale of goods and a contract involving
future goods is called an agreement to sell goods. An agreement to sell becomes a sale
when the time elapses or the conditions are fulfilled subject to which the property in the
goods is to be transferred.

Section 4(3), SOGA 1957 - Where under a Section 4(3), SOGA 1957 - Section 4(4), SOGA
contract of sale the property in the goods is 1957 An agreement to sell becomes a sale when
the time elapses or the conditions are fulfilled
transferred from the seller to the buyer, the subject to which the property in the goods is to be
contract is called a sale, but where the transfer transferred.
of the property in the goods is to take place at a
future time or subject to some condition
thereafter to be fulfilled, the contract is called an
agreement to sell.

Figure 1.2: Differences between sale and agreement to sell.

Seller - a person who sells or agrees to sell goods

Buyer - a person who buys or agrees to buy goods

Price - the money consideration for a sale of goods
Figure 1.3: Section 2, SOGA 1957

eBook PSP | Introduction Sale of Goods for Beginner 5

Formation of the Contract

A contract of sale is made by an offer to buy or sell goods for a price and the acceptance
of a 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(1), SOGA 1957.

Hello, I’m
a buyer

Hello, I’m a
seller

A. Formation
i. An offer (either to buy or sell) goods for a price
ii. An acceptance of the offer
iii. Delivery of the goods either
a. Immediate delivery of the goods but payment made later;
b. Immediate payment of the price but delivery made later;
c. Both payment and delivery are made immediately; or
d. Delivery and payment of the price by instalment.

B. Formalities
The contract may be made in writing or orally or part in writing or part orally or by
the conduct of the contracting parties.

“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” – Section 5(2), SOGA 1957

6 eBook PSP | Introduction

C. Ascertainment of price
“The price in a contract of sale may be fixed by the contract or may be left to be
fixed in manner thereby agreed or may be determined by the course of dealing
between the parties” – Section 9(1), SOGA 1957

“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” – Section
9(2), SOGA 1957

Section 10(1), SOGA 1957 states 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 a 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 therefor.

Section 10(2), SOGA 1957 states that, where such a 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 fault party.

D. Capacity to contract
There was no specific provision in SOGA 1957 regarding the capacity of the
contracting parties of the contract. Thus, the legal principles and the law on
contract governing capacity in ordinary contract law shall apply to contracts for the
sale of goods.

Who are competent to contract?
Every person is competent to contract who is of the age of majority according to the
law to which he is subject, and who is of sound mind and is not disqualified from
contracting by any law to which he is subject – Section 11, Contract Act 1950.

eBook PSP | Introduction Sale of Goods for Beginner 7

Conclusion

A contract of sale of goods is a contract between a seller and a buyer whereby the seller
transfers or agrees to transfer the title or ownership of the moveable goods to the buyer
for a price or money.

Can you list down the differences between the sale of goods and other
commercial transactions such as:

a. Hire
b. Hire purchase
c. Barter system
d. Charge

8 eBook PSP | Introduction Subject to SOGA 1957
YES NO
Exercise 1
Identify the following goods:

Goods

eBook PSP | Introduction Sale of Goods for Beginner 9

02

TERMS RELATING TO THE
SALE OF GOODS
CONTRACT

This chapter discusses the terms relating to the sale of goods such as conditions
and warranties, implied condition as to title on part of the seller, implied warranty
for the buyer, an implied condition in a sale of goods by description, implied
condition for fitness of the goods, and merchantable quality, as well as implied
conditions for sale by sample.

10 eBook PSP | Term Relating to Sale of Goods Contract

Introduction

At the end of the topic students are able to:
a. Apply implied terms relating to the sale of goods contract
In any agreement between the contracting parties, it is important for them to know the
terms relating to the contract and understand the effect of those terms on them. Terms
of the contract can be either express terms or implied terms. Traditionally terms of the
contract have been classified into conditions and warranties and it is commonly used in
all commercial transactions.

Condition and warranty

Section 12 (1), SOGA 1957 states that a stipulation in a contract of sale with reference to
goods which are the subject thereof may be a condition or warranty.
A. Condition

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 – Section 12(2), SOGA
1957.
However, a condition may be treated as a warranty and have an effect as a warranty if:
a. the buyer may waive the condition;

eBook PSP | Introduction Sale of Goods for Beginner 11

b. the buyer elects to treat the breach of the condition as a breach of warranty and
not as a ground for treating the contract as repudiated. He claims for damages only;

c. Where a contract of sale is not severable and the buyer has accepted the goods or
part of it; the breach of any condition must be accepted as a breach of warranty
unless otherwise provided in the contract; or

a. where the contract is for specific goods the property which has passed to the buyer
unless there is a term of the contract express or implied to that effect.
Section 13, SOGA 1957.

B. Warranty
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 – Section 12(3), SOGA 1957.

Whether a stipulation in a contract of sale is a condition or a warranty depends in each
case on the construction of the contract. The stipulation may be a condition, though
called a warranty in the contract. – Section 12(4), SOGA 1957.

C. Stipulations as to time
Unless a different intention appears from the terms of the contract, stipulations as to
time of payment are not deemed to be of the essence of the contract of sale. Whether
any other stipulation as to time is of the essence of the contract or not depends on
the terms of the contract – Section 11, SOGA 1957.

The above section tells that time is not deemed to be of the essence of the contract
of sale unless specified otherwise. Thus, if a buyer fails to pay by an agreed date, it
does not automatically entitle the seller to repudiate the contract unless some term
of the contract allows him to do so. However, if the time of delivery is of the essence,
the party can repudiate the contract and claim damages.

12 eBook PSP | Term Relating to Sale of Goods Contract

Harrington v. Browne (1917) 23 CLR 297
It was held that in a commercial transaction involving
livestock, time of delivery is the essence of the contract.
If the goods are to be shipped within a particular time, then
the time of shipment is important and should be strictly

adhered to.

Implied conditions and implied warranties in sale of goods
agreement

Implied conditions and implied warranties laid down in Section 14 to 17, SOGA 1957 as
follows:

A. Implied condition as to title

Section 14(a), SOGA 1957 - 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;

In a sale of goods practice, normally the seller is the owner of the goods. However, in a
certain situation, the seller may not the owner of the goods. Based on Section 14(a),
of SOGA 1957, only states that the seller must have a “right” to sell the goods. This
means that he may not necessarily be the owner of the goods. Nevertheless, he must
have a valid right over the goods at the time he transferred them to the buyer to enable
the buyer to receive the title and enjoyment of the goods. The rationale is that the buyer
agrees to pay the price of the goods to enjoy ownership as well as to use the goods. A
breach of this condition entitles the buyer to repudiate the contract and recovered the
full purchase price even though he has used the goods.

eBook PSP | Introduction Sale of Goods for Beginner 13

Rowland v Divall [1923] 2 KB 500
The Plaintiff bought a car from the defendant and used it for

four months before discovering it had been stolen. The
plaintiff had to return the car to the true owner and claimed

back the purchase price from the defendant.
Issue: Whether the plaintiff could recover the full amount he
had paid from the defendant even though he had used the

car for several months?
It was held that, although the plaintiff had used the car for
some time, he was entitled to recover the full purchase price
he had paid due to the defendant had no right to sell him the
car. Since the car was stolen from its owner, the plaintiff had
failed to get the property or title in the car, thus the condition

was breached.

B. Implied warranty that the buyer shall have quiet possession of the goods

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 – Section14(b), SOGA 1957.

When a seller transferred possession or ownership of the goods to a buyer, there is an
implied warranty that the buyer shall have and enjoy quiet possession of the goods.
This means that the buyer shall have exclusive privacy and enjoyment of the goods
without interference in any manner by the seller or his agent unless with express
consent from the buyer. Since this section applies an implied warranty on the part of
the buyer thus, any breach of this stipulation will not entitle the innocent party to
repudiate the contract except to recover damages from defaulted seller regardless of
whether the purchase has been fully paid or not.

14 eBook PSP | Term Relating to Sale of Goods Contract

Healing (Sales) Pty. Ltd. V. Inglis Electrix Pty. Ltd. (1968)
121 CLR 584

The court laid the principle that a seller who has not been
paid the full purchase price or partly paid may not interfere

with the goods sold to the buyer.

C. Implied warranty that the goods are unencumbered

Section14(c), SOGA 1957- there is an 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 a different intention.

Any goods to be transferred to a buyer shall be with an implied warranty that it is free
from any charge or other encumbrance and it was not known by the buyer, for example,
storage charges, levy tax, charge, etc. which have to be paid before the goods can be
collected.

Steinken vs Edward (1935) 8 AJL 368
The plaintiff (i.e., buyer) who had bought the car, paid off
the tax owing and sought to recover it from the defendant

(i.e., seller).
The court held that the right of the government to levy a tax
on a vehicle coupled with a right to seize the car to enforce
collection was a charge or encumbrance with the meaning

of the provision.

Thus, the court allowed the claim for breach of the implied
warranty.

eBook PSP | Introduction Sale of Goods for Beginner 15

D. Implied condition in a sale of goods by description

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.
Section 15, SOGA 1957.

Applies where the buyer had seen or not seen the goods or does not have a sight of
the goods but agreed to buy after relying only on the description of the goods. E.g.,
there was a sale of goods from a catalog, mail order, online platform, etc where the
buyer buys the goods by relying upon the description given. The sale of goods by
description also covers certain transaction whereby the buyer has seen the goods but
the seller concealed any defect from the buyer’s knowledge.

In the sale of goods by description there is an absolute duty to the seller to make sure
that the goods shall correspond with the description. A breach of this condition entitles
the buyers to repudiate the contract.

Nagurdas Purshotumdas & Co vs Mitsui Bussan Kaisha Ltd
(1911) 12 SSLR 67

A contract of sale was made between 2 parties in a sale of a
well-known type of flour. After the buyer ran out of such
flour, he made an order describing it as “the same as our
previous contract”. The seller delivered flour identical in
quality to the previous one but of a different brand.

It was held that the seller did not comply with the buyer’s
stipulated description.

16 eBook PSP | Term Relating to Sale of Goods Contract

Varley vs Whipp (1900) 1 QB 513
The buyer purchased a second-hand reaping machine
without ever having seen it. The seller had described it as
new the previous year and used it to cut only 50 or 60

acres. In reality, the machine was very old.

It was held that this is a sale by description and since the
machine did not correspond to its description, the seller was

in breach sale of goods by description.

Arcos Ltd v Ronaasen (1933) AC 470
Buyers ordered staves of ½ inch thick. Only 15% conformed

with the requirement and the balance was nearly all less
than 9/6 inch thick.

The buyers were entitled to reject them even though the
goods were reasonably fit for the purpose. The reason is
that the supply of goods failed to comply with the contract

description.

Fell free online searching for the cases of
i. Lau Yaw Seng v Cooperativa Ceramica D’Imola (1991) 1
MLJ 393
ii. Beale v Taylor (1967) 2 All ER 253
iii. Associated Metal Smelters Ltd v Tham Cheow Toh (1971)
1 MLJ 271

eBook PSP | Introduction Sale of Goods for Beginner 17

E. An implied condition that goods must be reasonably fit for purposes for which the buyer
wants them

Section 16(1), SOGA 1957 - 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, 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 names there is no implied condition as to its fitness for any
particular purpose.

A principal of caveat emptor in common law expects the buyer to exercise care
when he makes purchases. If he does not, he must bear the consequences since
there were no rules relating to implied warranty or condition as to the quality or
fitness for any particular purpose of goods supplied by the seller according to this
provision.

This general rule however provides four exceptions to this rule which are:
1. The buyer expressly or impliedly makes known to the seller the particular

purpose for the goods required.

18 eBook PSP | Term Relating to Sale of Goods Contract

Deutz Far East Pte Ltd vs Pacific Navigation Co. Pte Ltd
(1990) 1 MLJ 65

Plaintiff is a manufacturer and supplier of ship engines and
spare parts. They sued for payment for parts supplied to the
Defendant’s ship. Defendant claimed that the part supplied
were defective and caused great damage to the engine of
his ship. Defendant also claimed that the parts supplied did

not fit with the engine of their ship and were of
unmerchantable quality.

The court held that Defendant had relied on Plaintiff to
supply parts that could be used for the engine of their ship
and the goods supplied should be of merchantable quality.

2. The buyer relies on the seller’s skill of judgment at the time of purchase.

Cammell Laird & Co ltd vs Manganese Bronze & Brass Co
Ltd (1934) AC 402

The defendant entered into a contract with the plaintiff to
build a propeller for the plaintiff’s ship according to the

specifications given by the plaintiff. The defendant delivered
the propeller but it did not fit the ship’s engine.

The court held that the defendant broke the implied term
because the plaintiff specifically told the defendant the
purpose or use of the propeller and had relied on the

defendant’s skill to build it.

eBook PSP | Introduction Sale of Goods for Beginner 19

3. The buyer purchases goods that are usually sold by the seller in the course of
his business.

4. Goods sold not under specified patents or trademarks
There is no implied condition as to its fitness for any particular purpose
regarding the sale of goods under a specific patent, trade name, or brand.
Therefore, the buyer would not tell the seller the purpose of the goods since the
goods sold have only one purpose, the description of the goods is enough to
indicate their purpose. E.g., buying toothpaste for brushing teeth, the buyer
need not inform the specific purpose of the purchase, unless the said goods
were purchased for another special purpose.

Griffiths vs Peter Conway Ltd (1939) 1All ER 685
A woman with abnormally sensitive skin bought a coat
without telling the salesman that she had sensitive skin.
She subsequently contracted dermatitis from wearing the

coat.

It was held that she was unable to recover for breach of
fitness for purpose because there was nothing in the coat
that would have affected the skin of a normal person. She
had failed to disclose that she suffered from skin problems.

F. An implied condition that goods must be of merchantable quality

Section 16(b), SOGA 1957 - 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.

20 eBook PSP | Term Relating to Sale of Goods Contract

What is merchantable quality? It means the goods sold are fit for the particular use to
which they were sold. In other words, the quality of goods also refers to their state or
condition factors to be considered to determine ‘merchantability’ such as:
a. Price
b. the description applied to the goods
c. whether the purpose for the goods had been made known to the seller
d. any other circumstances relevant to the sale

David Jones Ltd v Willis (1934) 52 CLR 110
Willis went to the shoe department of David Jones (DJ) and
told the saleswoman that she wanted a comfortable pair of
walking shoes because she had a bunion on her foot. After

trying on many pairs, she bought a pair that was
recommended by the saleswoman. The third time she wore

the shoes, the heel broke off that causing her to fall and
break her leg. Evidence showed that the shoes were not

well made and that the heels had not been properly
attached to the shoes.

Held: as the shoes had been bought by description, there
had been a breach of the implied condition of merchantable

quality.

G. Implied conditions for sale by sample

Section 17(1), SOGA 1957 - 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.
In the case of a contract for sale by sample there is an implied condition —
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;

eBook PSP | Introduction Sale of Goods for Beginner 21

c. that the goods shall be free from any defect rendering them unmerchantable which
would not be apparent on a reasonable examination of the sample.
Section 17(2), SOGA 1957

Sale of goods by the sample is normally used in the sale of bulk goods such as wheat,
rice, flour, carpet, titles, etc. Thus, the bulk must correspond with the sample. The buyer
shall have a reasonable time to compare the bulk with the sample before making an
acceptance. Breach of this implied condition entitled the innocent party to repudiate
and discharged the contract as well as the claim for damages.

Godly vs Perry (1960) 1 WLR 9
A boy bought a catapult. While using it, the catapult broke
and he lost sight of an eye. The shopkeeper had bought it
from a wholesaler by sample and tested it by pulling back
the elastic. The shopkeeper was sued and the court held
that the catapult was not fit for the purpose for which the
buyer wanted it and that it was of unmerchantable quality.

The shopkeeper then failed an action against the
wholesaler.

The court then held that, although the shopkeeper had
made the reasonable examination, the defect was not
apparent on such examination. Thus, he had action against

the wholesaler.

Conclusion

In the agreement sale of goods, it is important for the contracting parties to understand
the terms of the contract. Any clause or condition included in a contract is referred to as a
contract term. Each of these conditions establishes a legal responsibility that, if broken,
can result in legal action.

22 eBook PSP | Term Relating to Sale of Goods Contract

Exercise 2

Answer all questions.
1. Implied conditions and implied warranties in the contract of sale of goods are
bound between?
A. offeror and offeree
B. Buyer and seller
C. Hirer and owner
D. Principal and agent

2. It is a stipulation collateral to the main purpose of the contract, the breach of
which gives rise a claim for damages but not a right to reject the goods and
treat the contract as repudiated - Section 12(3) of the Sale of Goods Act 1957.
Based on the above statement, identify the best term refers to.
A. An innominate term.
B. An implied term.
C. Condition.
D. Warranty.

3. Which of the following are NOT the implied conditions stipulated under the
Sale of Goods Act 1957?
A. Implied condition as to title.
B. Buyer shall have quiet possession of the goods.
C. Goods must correspond with the description.
D. Goods must be of merchantable quality.

4. Ascertain which of the following is the implied warranty stipulated under the
Sale of Goods Act 1957.
A. Implied condition as to title.
B. Goods must be reasonably fit for purpose.
C. Goods are unencumbered.
D. Goods must be of merchantable quality.

eBook PSP | Introduction Sale of Goods for Beginner 23

5. Contract of sale of goods is a contract _______________.
A. wherein the seller lends the property in goods to the buyer for free
B. wherein the seller hires and agree to hire the property in goods to the buyer
for a price
C. wherein the seller transfers and agrees to transfer the property in goods to
the buyer for free
D. wherein the seller transfers and agree to transfer the property in goods to
the buyer for a price

6. The main purpose of the contract of Sale of goods is to transfer _________ to
the buyer. Choose the best term to fill in the blank
A. Ownership.
B. Successor ship.
C. Guarantee.
D. Warranty.

7. Lina bought a watch from World of Watch Ltd. She told the sales assistant
that she knew nothing about watches and she wanted a watch that is suitable
for diving. She bought the watch recommended by the sales assistant. The
watch was fine initially, but when it was used while she was diving it stopped
functioning. Lina wanted to bring her case against World of watches Ltd for
breaching of contract in accordance with the Sales of Goods Act 1957.
Ascertain which of the provisions below best relates to her action.
A. Section 12 Sales of Good Act 1957
B. Section 11 Sales of Good Act 1957
C. Section 10 Sales of Good Act 1957
D. Section 9 Sales of Good Act 1957

8. Fazira entered Sogo to buy a new coat. She has abnormally sensitive skin and
without telling the sales girl, she bought the coat, which has wool at the collar.
After wearing it, she subsequently contracted dermatitis. She went to the
Sogo to return the coat. However, she was informed that the coat could not

24 eBook PSP | Term Relating to Sale of Goods Contract

be returned because there it is stated on the receipt, that “once sold cannot
be returned”. Fazira can ______________. Complete the answer.
A. repudiate the contract.
B. claim damages
C. claim damages and not repudiate the contract
D. claim specific performance.

9. According to the Sale of Good Act 1957 there a difference between is a ‘sale’
and ‘an agreement to sell’. Examine the difference between these terms.
A. The price of the goods.
B. The quantities of the goods to be supplied.
C. The time when the goods are to be supplied.
D. The qualities of the goods to be supplied.

10. Where goods are bought by the 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 to defects which such
examination ought to reveal.
Identify the case that stipulates the above principle.
A. David Jones Ltd v Willis [1934] 52 CLR 110
B. Rowland v Divall [1923] 2 KB 500
C. Public Bank Bhd v Ng Kang Siang & Anor [2011] MLJU 988
D. Newtons of Wembley Ltd v Williams [1965] 1 QB 560

eBook PSP | Introduction Sale of Goods for Beginner 25

03

TRANSFER OF
PROPERTY AND TITLE
UNDER SALE OF GOODS

This chapter discusses the privity of the contract, the concept of property, and the
possession of goods on the part of the seller.

26 eBook PSP | Term Relating to Sale of Goods Contract

Introduction

At the end of the topic students are able to:
a. Understand the concept of privity of contract.
b. Describe the concept of property and possession of goods.
The contracting parties to the sale of goods are bound in performing their duties in arising
in the agreement. However, before this obligation can perform it is important for the
contracting parties able to identify the concept of possession and property of the goods.

Privity of contract

Privity is the legal term for a close, mutual, or successive relationship to the same right of
property or the power to enforce a promise or warranty. The doctrine of privity in the
common law of contract provides that a contract cannot confer rights or impose obligations
arising under it on any person or agent except the parties to it i.e., buyer and seller. The
premise is that only parties to contracts should be able to sue to enforce their rights or
claim damages as such. However, the doctrine has proven problematic due to its
implications upon contracts made for the benefit of third parties who are unable to enforce
the obligations of the contracting parties.
If the goods bought have been used by 3rd party and the 3rd party suffered an injury caused
by the goods, the remedy available for him is under the law of tort. However, he must prove
that negligence had taken place and caused him to suffer loss or injury.

eBook PSP | Introduction Sale of Goods for Beginner 27

Donoghue v Stevenson (1923) AC 562
The plaintiff consumed ginger beer purchased by her friend.
The bottle was a dark, opaque colour. The plaintiff claimed

after she had consumed most of the ginger beer she saw
the remains of a badly decomposed snail float out of the
bottle that was being poured into her glass. She became ill,
and was diagnosed with severe gastroenteritis and shock.
She took legal action against the defendant who is a ginger

beer manufacturer.

At the first trial, the plaintiff’s claim was rejected due to her
lack of contractual relationship with the defendant since
Donoghue's friend had purchased the ginger beer.

However, on appeal, the court stated that, the manufacturer
(i.e. defendant) owed a duty of care to all end-consumers of

their product to the condition of its product.
Thus, the court granted the Damages for negligence were
recovered from the manufacturer who had bottled the drink.

Are there any exceptions to the general rule allowing rights to third
parties and some impositions of obligations?
Do some online searching and get additional info about this matter.

28 eBook PSP | Term Relating to Sale of Goods Contract

Concept of property and possession of goods

In the sale of goods, it is important to distinguish the concept of property and possession
of the goods. Basically, the owner owned the ‘title’ or ‘property’ of the goods which means
he owned the ownership of goods and stand the right everyone to claim the goods. At the
same time, the owner also owned possession of the goods. Whereas the person who owns
the possession of the goods yet does not have the property (ownership) of the goods. This
means the passing of property in goods does not necessarily mean the possession also
passed with it and vice versa. Thus, a buyer cannot transfer the title to another person
unless he has the title because a person cannot sell what he does not have.

Therefore, it is important to ascertain the time when the property in goods passes to the
buyer because the goods remain at the seller’s risk until the goods are transferred to the
buyer. For example, Kavita who owned a laptop, sell her laptop to a buyer, she will bear all
risk until the property of the goods (laptop) is passed to a buyer. When the property is
transferred to the buyer, the laptop is at the buyer’s risk irrespective of whether delivery
has been made or not.

Section 26, SOGA 1957 provides:

“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:
Provided that where delivery has been delayed through the fault of either buyer or seller,
the goods are at the risk of the party in fault as regards any loss which might not have
occurred but for such fault:
Provided also that nothing in this section shall affect the duties or liabilities of either seller
or buyer as a bailee of the goods of the other party”.

As a general rule, title passes when the parties to a contract of a sale intend that it should
pass. Sections 18 – 24, SOGA 1957, provide certain specific rules regarding the transfer
of property between seller and buyer.

eBook PSP | Introduction Sale of Goods for Beginner 29

A. Goods must be ascertained
Where there is a contract for the sale of unascertained goods, no property in the goods
is transferred to the buyer unless and until the goods are ascertained.
Section 18, SOGA 1957

Based on the above provision, if a buyer enters into a contract of sale for unascertained
goods (which means goods that are only described by the seller to the buyer) the
property (title or ownership) can only be transferred to the buyer after the goods is
ascertained.

Fikri enters into a contract for the sale of a car from a seller. The car was stored with
another car owned by the seller. The property in the car does not pass to Fikri until the
seller has set aside the car for Fikri.

Re Goldcorp Exchange Ltd (in receivership) [1995] 1 AC 74
Customers of a company purchased bullion for future
delivery on terms that they were buying ‘non-allocated

metal’, which meant it was not set aside but was stored as
part of the company’s general stock. Under the agreement,
an investor had the right to take physical delivery of bullion

from that stock. The company became insolvent.

The Privy Council held that the goods were unascertained
and property had not passed because the company was

free to decide what bullion to allocate to a particular
investor.

B. Property passes when intended to pass
a. Where there is a contract for the sale of specific or ascertained goods the property
in them is transferred to the buyer at such time as the parties to the contract intend
it to be transferred.

30 eBook PSP | Term Relating to Sale of Goods Contract

b. For the purpose of ascertaining the intention of the parties regard shall be had to
the terms of the contract, the conduct of the parties and the circumstances of the
case.

c. Unless a different intention appears the rules contained in sections 20 to 24 are
rules for ascertaining the intention of the parties as to the time at which the
property in the goods is to pass to the buyer.
Section 19, SOGA 1957

In a situation, where the contract for the sale of specific or ascertained goods, the
property or title of the goods is passed from seller to buyer according to the intention
of the contracting parties. The intention of the contracting parties can be ascertained
as follows:
a. terms of the contract
b. the conduct of the parties
c. the circumstances of the case (take place at a reasonable time)

For example, Aina agrees to supply Wani 10,000 kg of flour at a price of RM1 per kg.
Both parties agreed in their agreement that, the transfer of ownership will only happen
when the total price of flour is paid. Thus, as long as the price of wheat is not fully paid
the property will not be transferred to Budi even if delivery has occurred.

C. Specific goods in a deliverable state
Where there is an unconditional contract for the sale of specific goods in a deliverable
state the property in the goods passes to the buyer when the contract is made, and it
is immaterial whether the time of payment of the price, or the time of delivery of the
goods, or both is postponed.
Section 20, SOGA 1957

The unconditional contract in the above provision means the contract is not subjected
to any condition upon the fulfilment of which the transfer of property depends. The
deliverable state means the goods must be in a physical state that the buyer can take
delivery.

eBook PSP | Introduction Sale of Goods for Beginner 31

For example, Sue buys a book on credit. The ownership of the book passes immediately
on the sale even though payment is postponed.

Underwood Ltd v Burgh Castle Brick and Cement Syndicate
[1922] 1 KB 343

There was a contract for the sale of a condensing engine to
be delivered free on a rail in London. At the time of the

contract, the engine was affixed to the seller’s premises and
it had to be separated from the concrete floor and

dismantled before it could be delivered on a rail. While the
main engine was being loaded on a railway truck, it was
partially broken by accident.

It was held the title had not passed to the buyer at the time
of the accident so that the engine was still at the seller’s
risk.

D. Specific goods to be put into a deliverable state
Where there is a contract for the sale of specific goods and the seller is bound to do
something to the goods for the purpose of putting them into a deliverable state, the
property does not pass until such thing is done and the buyer has notice thereof.
Section 21, SOGA 1957

In a situation, where the contract for the sale of specific goods but not in a deliverable
state, the property of the goods is passed from the seller to the buyer if the goods are
in the deliverable state and the buyer notices it. The word ‘notice’ in the above provision
refers to the buyer’s knowledge. There is no need for the seller to deliver such notice
to the buyer personally.

For example, Nordin agrees to buy Tan’s car on condition that Tan will change the tires.
The property in the car passes only after the tires are changed and Nordin has been
notified of the same.

32 eBook PSP | Term Relating to Sale of Goods Contract

E. Specific goods in a deliverable state when the seller has to do anything thereto in order
to ascertain price
Where there is a contract for the sale of specific goods in a deliverable state, but the
seller is bound to weigh, measure, test, or do some other act or thing with reference to
the goods for the purpose of ascertaining the price, the property does not pass until
such act or thing is done and the buyer has notice thereof.
Section 22, SOGA 1957

In a situation, where the contract for the sale of specific goods is in the deliverable
state but the seller needs to do another act for determining the price, the property of
the goods is passed from the seller to the buyer if the seller does such an act and the
buyer knows it.

For example, Ida agrees to sell vegetable to Nora at RM2 per kilogram, the property in
the vegetable does not pass until the vegetables has been weighed and Nora knows it.

F. Sale of unascertained goods and appropriation
Section 23(1), SOGA 1957 - Where there is a contract for the sale of unascertained or
future goods by description and goods of that description and in a deliverable state are
unconditionally appropriated to the contract, either by the seller with the assent of the
buyer or by the buyer with the assent of the seller, the property in the goods thereupon
passes to the buyer.

Such assent may be expressed or implied, and may be given either before or after the
appropriation is made.

Delivery to carrier
Section 23(2), SOGA 1957 - Where, in pursuance of the contract, the seller delivers the
goods to the buyer or to a carrier or other bailee (whether named by the buyer or not)
for the purpose of transmission to the buyer, and does not reserve the right of disposal,
he is deemed to have unconditionally appropriated the goods to the contract.

Section 23, SOGA 1957
Section 23, SOGA 1957 deals with an agreement to sale not a sale since its involved
with unascertained or future goods. The phrase ‘unconditionally appropriated to the

eBook PSP | Introduction Sale of Goods for Beginner 33

contract’ means an overt act show the intention to identify certain goods to the contract
without any condition.

For example, Ah Long orders a book from a catalogue through the post. The said book
was lost in the post. Ah Long must bear the loss as the property in the goods passed
to him when the parcel was posted.

G. g. Goods sent on approval or “on sale or return”
When goods are delivered to the buyer on approval or “on sale or return”, or other
similar terms, the property therein passes to the buyer—
a. when he signifies his approval or acceptance to the seller or does any other act
adopting the transaction;
b. if he does not signify his approval or acceptance to the seller but retains the goods
without giving notice of rejection, then, if a time has been fixed for the return of
goods, on the expiration of such time, and if no time has been fixed, on the
expiration of a reasonable time.
Section 24, SOGA 1957
If the buyer has been given by the seller the option either sell or return the title pass
from the seller to the buyer when:
a. makes an express acceptance,
b. retains the goods without notice of revocation until the end of a fixed time or
expiration of a reasonable time.

What is a reasonable time? It is depending on certain circumstances.

Poole v Smith’s Car Sales (Balham) Ltd (1962) 2 All ER 482

Poole was to leave a car with Smith’s on sale or return Smith
would sell it and then give Poole £325 The car was not sold
after 3 months Poole demanded Smith return the car or pay
up Smith did not return the car for several weeks (damaged)

Poole sued for the price.

Held: Smith retained the car beyond a reasonable time – the
property passed to Smith who had to pay the price

34 eBook PSP | Term Relating to Sale of Goods Contract

Conclusion

It is important to know who are the contracting parties in the contract of sale as well as
able to determine when the property of the goods was passed from the seller to the buyer.
In practice, the seller will bear all risk in the goods until it is passed to the buyer.

eBook PSP | Introduction Sale of Goods for Beginner 35

Exercise 3

Answer all questions.

1. Ascertain incorrect statements from the following
a) Unascertained goods are products that have not yet been manufactured or
acquired by the seller or are unidentified.
b) Specific goods are those that are identified at the time the contract of sale is
made.
c) Ownership of goods always passes when physical possession passes to the
buyer.
d) Section 17, SOGA provides that the property in specific or ascertained goods
passes when the parties intend it to be transferred.

2. Ali sold Bunyamin a computer. Bunyamin tells Ali that he may return the said
computer within 3 days from the sale's date if he doesn’t want to proceed with the
agreement. Bunyamin was delayed until the expiration date was completed. He then
wants to return the computer.
a) Bunyamin may return the goods since no acceptance be made.
b) Bunyamin may sell the said computer to another buyer.
c) Bunyamin cannot do so because the act done by Bunyamin amount to accept of
the title of the goods purchased.
d) Bunyamin does nothing wrong.

3. What are "unascertained goods"?
a) Unascertained goods are goods that need to be specifically ordered.
b) Unascertained goods are goods that have not been paid for when the contract is
made.
c) Unascertained goods are goods that are not usually stocked by the seller and
are therefore unusual.
d) Unascertained goods are in effect all goods that are not specific.

36 eBook PSP | Term Relating to Sale of Goods Contract

04

PROTECTIONS TO
BUYERS AND OWNERS

This chapter discusses the principle of nemo dat quod non habet and its’ exceptions.

eBook PSP | Introduction Sale of Goods for Beginner 37

Introduction

At the end of the topic students are able to:
a. Explain the principle of nemo dat quod non habet and the exceptions

Have you ever brought something but later it was claimed by another? What should you
do? As a general rule, only the seller who has the property in goods may sell his goods to
the buyer. However, there is an exception to this general rule.

Nemo dat quod non habet and the exceptions

Section 27(1), SOGA 1957 provides a provision regarding to sale by person not the owner.
Subject to this Act and of any other law for the time being in force, 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:

Provided that where a 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 as valid as if he 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.

Thus, if the goods are bought from a person who is not the owner, and who does not sell
them under the owner’s authority, the buyer does not acquire any title. If the rightful owner
claims the goods back, the goods must return to him.

Section 27(1), SOGA 1957 laid down the nemo dat quod non habet principle, which means
no one gives no possesses, not or sales by the person not the owner. For example, Arun
sold Zenith a stolen beg. Zenith has no title over the beg. If the real owner claimed the bag,

38 eBook PSP | Term Relating to Sale of Goods Contract

Zenith must return it. The purpose of nemo dat quod non habet principle is to protect the
interest of the owner of the goods sold without his consent or stolen from him.

LIM CHUI LAI v ZENO Limited, [1964] 1 MLJ 314

Ahmad, a contractor, obtained a contract to build sewerage
from the Petaling Jaya Local Authority and agreed with Zeno
ltd to supply materials needed for sewerage works. Zeno ltd

supplied the said materials to the building site. Several
problems arose which caused the contract between Petaling
Jaya Local Authority and Ahmad to be nullified. Ahmad was
later found to have sold the materials supplied by Zeno ltd to
Lim Chuo Lai. Zeno ltd alleged that the materials were theirs,
and Ahmad had no authority to sell them to other persons.

The court held that Ahmad was just a bailee (custodian) and
not the possessor who has the right to sell the said goods to

a third party.

The exception to nemo dat quod non habet principle is as follows:
Estoppel

Sales by a mercantile agent

Sale by joint-owner

Sale under voidable contract

Sale of goods in seller’s possession

Sale of goods in buyer’s possession

A. Estoppel eBook PSP | Introduction Sale of Goods for Beginner 39

Mr Owner

Miss Seller

Mr Buyer

Estoppel arises in the situation where the owner of the goods, by his conduct, appeared
as though he consented to the sale made by the seller to a third party, the owner is
precluded from denying that the seller has no authority.

This means if the owner gives authority to a seller to sell goods to the buyer, he will be
stopped from denying the seller’s authority. The buyer who takes in good faith and for value
will acquire a good title by estoppel. Authority given by the owner to the seller’s right to sell
may be expressly or impliedly.

For example, Noni wished to sell Abu’s car to Din. Abu was aware of Noni’s conduct but
did not do anything to stop it. It, therefore, appears as though Abu had given Noni the
authority to sell it. Abu is precluded from making any claims on Din.

40 eBook PSP | Term Relating to Sale of Goods Contract

Syarikat BATU Sinar SDN BHD & ORS v. UMBC Finance BHD
& ORS Case [1990] 1 LNS1 80

The 2nd Plaintiff (Supreme Leasing) purchased a tractor
from a seller and leased it to the first Plaintiff (Syarikat Batu

Sinar). The 1st D (UMBC) had previously bought the same
tractor from the seller and leased it to the 2nd Defendant.
However, at the time UMBC purchased it, the registration
card for the tractor was in the seller’s possession and no
certificate was made on the card to show that the tractor
then belongs to UMBC. The issue was who was entitled to

the tractor.

The court held that the failure by UMBC to take steps to
make the certification in the registration card precluded it

from denying Supreme Leasing now has the title to the
tractor.

B. Sales by a mercantile agent

eBook PSP | Introduction Sale of Goods for Beginner 41

“Mercantile agent” means a 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.

Section 2, SOGA 1957

Examples of mercantile agents would be an auctioneer, a broker, or a second-hand
automobile dealers.

5 conditions need to be fulfilled by the mercantile agent
1. The seller is a mercantile agent authorized by the owner.
2. Has possession of the goods or document of title at the time of the sale.
3. The keeping of the goods or document of title with the owner’s consent.
4. The sale was in the ordinary course of business of a mercantile agent.
5. The buyer bought them in good faith and has no notice that the mercantile agent
has no authority to sell.

Folkes vs King
Folkes owned a car and delivered it to a mercantile
agent for sale. The mercantile agent sold it to King
and disappeared with the money he receives from

King.

The court held that King bought the car in good
faith and the mercantile agent sold it with Folkes’s

consent. King therefore, had a good title for the
car.

42 eBook PSP | Term Relating to Sale of Goods Contract

C. Sale by joint-owner

Section 28, SOGA 1957 states, if 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 the 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

For example, Upin and Ipin jointly owned a laptop. Upin was allowed to keep the laptop
since Ipin has his tablet. Upin, without Ipin’s permission, sold the laptop to Zul who did not
know about Upin’s lack of authority. Zul would acquire a good title for the laptop.

Thus, a buyer who buys goods which were jointly-owned by several people has the right
over the goods bought if the buyer complied with
A. One of several joint owners has the sole possession of the goods by permission of the

co-owner and
B. the buyer bought them in good faith and has no notice at the time of the contract that

the seller had no authority to sell.

eBook PSP | Introduction Sale of Goods for Beginner 43

D. Sale under voidable contract

Section 29, SOGA 1957 discusses the sale by the person in possession under a voidable
contract. Where the seller of goods has obtained possession thereof under a contract
voidable under section 19 or 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 seller’s defect of title.

A voidable contract occurred when the contracting parties to the contract entered due to
coercion, fraud, misrepresentation, or undue influence. For example, Didi bought a
television from Sue by fraud. Didi sold it to May. The contract between Didi and Sue was
voidable at Sue’s option. If Sue didn’t rescind the contract before Didi sold it to May. May
then has a valid right over the television.