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Law of
Sale of Goods

By,
Ms. Sharvina Binti Shajahan 2
Faculty of Business
 The law of Sale of Goods
 Introduction
The contract of sale of goods is governed by
the Sale of Goods Act 1957 (hereinafter
refers as SOGA)
SOGA operates against the background of
contract law that are not inconsistent with its
express provisions.
 Sale of goods: The transfer of ownership from
seller to buyer at the time of contract.

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 Example

Seller--------Buyer---------Price
E.g:-
• A agrees to transfer the ownership of his
car to B.
• B then pay RM10,000 for a price of the car
to A.

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 Definition of Contract of Sales
Section 4(1) of SOGA 1957 defines ‘contract of sale’;
It is a contract where seller transfers or agrees to
transfer the property in goods to the buyer for a
price.

In a contract of sale there must be:

• Goods;
• Money consideration (price);
• Transfer of property;
• A contract of sale has both express and implied terms.
The express terms of a contract of sale contains 5
conditions and warranties as to the goods being sold.
 Money Consideration
In a contract of sale, the price must be:
• Fixed by the contract;
• Left to be fixed in a manner agreed in the
contract;
• Determined by the course of dealing between
parties;
• Where the price is not determined in any one of
the above ways, the buyer must pay a
reasonable price – Section 9 SOGA 1957.

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Three (3) main elements in a contract of
sale of goods:

There must be goods which are to

be transferred to the buyer
The seller transfers or agrees to
transfer the property in goods to the
buyer
There is a price for the said transfer
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 Definition of Goods
Section 2 of the Sale of Goods Act
(SOGA) 1957
defines ‘goods’ as

every kind of moveable property other

than actionable claims & money, &
includes stocks & shares, growing crops,
grass & things attached to or forming part
of the land which are agreed to be severed
before sale or under the contract of sale
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Growing crops, grass and things attached to or
forming part of the land which are
agreed to be severed before the sale or
under the contract of sale

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 Morgan v Russel
• The vendor, who was the lessee, sold to
the purchaser all slag and cinder in his
premises so much as the purchaser
should desire to remove.
• Held - the sale of slag and cinder was not
a sale of goods but a sale of an interest in
the land. The vendor did not sellany
definite quantity of mineral which could be
said to be a 'separate thing'

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 Types / Categories of Goods

Section 6(1) SOGA

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

There are 5 categories of goods:

Existing goods (goods already owned by the
seller)

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 Continue...
 Specific goods
Section 2 SOGA
Goods identified and agreed upon at that time a
contract of sale is made
(example: Azmie sells his motorcycle bearing
registration number BCD 4994)

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 Continue….
Unascertained:
The goods exists but it is not ascertained yet
at that time of the contract is made.
 Goods to be manufactured or grown by the
seller
Generic goods e.g. 1000 tones of wheat
An unidentified part of a specific whole
Example: 100 kg of wheat out of 200 kg of wheat

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 Continue…
Ascertained goods
Ascertained goods which have been identified
and appropriated to the contract after the
contract has been made
Example:
Upon selection of the 5 dress from the 10 boxes
of dresses.

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 Continue…

Future goods
Section 2 SOGA
Goods to be manufactured or produced or
acquired by the seller after the making of the
contract of sale
Example:
Agreement to buy Mitsubishi Evolution yet to be
manufactured by the seller.

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 Section 9 (1) SOGA -
It may:-
 Be fixed by the contract.
 Be left to be fixed in a manner agreed in
the contract.
 Be determined by the course of dealing
between parties.

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 The term 'Contract of Sale' includes:
• Sale (Section 4 (1) of SOGA)
a contract under which the property or
ownership of the goods is transferred from
the seller to the buyer at the time of
contract
• Agreement to sell (Section 4 (3) of SOGA)
is a contract under which the transfer of
the property or ownership of the goods is
to take place at a future time or subject to
some condition to be fulfilled later on
Section 4(4) SOGA. 17
 Ownership or Property in goods and
possession - differenciate
• Ownership or property in goods - means
having legal title or right over the goods.
• Possession - means having physical
control over the goods.
• So owner of a goods may not necessarily
be in possession of the goods.
• A possessor of a goods may not be the
owner.
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 Formation of Contract of Sale
Section 5 (1)
• A contract of sale is made by an offer to buy or sell goods
for a price; & the accceptance of such an offer.
• The contract of sale may provide for the immediate
delivery of the goods / immediate payment of the price or
both. However, both delivery of the goods and payment
may be postponed.

Section 5 (2)
• A contract of sale may be in writing / by word of mouth, or
partly in writing & partly by word of mouth / may be implied
from the conduct of the parties.
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TERMS OF THE
CONTRACT

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 Terms of Contract :
Conditions & Warranties
• Section 12 (2) • Section 12(3) :
Condition is a Warranty is a
stipulation essential to stipulation collateral
the main purpose of to the main purpose
the contract.
of the contract.
• Breach of condition :
Contract can be • Breach of warranty :
repudiated, goods can only claim
can be rejected damages but cannot
reject goods or
repudiate the contract

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 Conditions

A term which is essential to contract; breach of

it would allow the other party to treat the contract
as repudiated. (section 12(2) SOGA)

If the condition is breached, the party not in

default entitled to repudiate the contract
because the contract can be deemed to be
VOID

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 Warranties
‘Warranty’ – a less vital term of a contract (collateral to
the main purpose), breach of it would give rise to a claim
for damages, not a right to discharge/reject the goods.
(Section 12(3) SOGA)

If the warranty is breached, the party not in default is

not entitled to repudiate the contract because
it is not voidable
HOWEVER
Party in default is entitled for damages

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Condition & Warranty (C&W) can be either:

• Express C & W - provided expressly and clearly

either by the seller or buyer when making the
contract.

• Implied C & W - that is implied or presumed by

SOGA to exist in all contract of sale of goods,
except expressly excluded.

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 Implied Terms in a Contract of Sale
• Section 17 of SOGA 1957 governs the provisions for
implied terms in a contract of sale.
• The implied terms are:
1. Implied condition as to title;
2. Implied warranty that buyer shall have quiet
possession of the goods;
3. Implied warranty that the goods are unencumbered;
4. Implied condition that in a sale of goods by description,
goods must correspond with the description;
5. Goods must be reasonably fit for the purpose for which
the buyer wants them;
6. Goods must be of merchantable quality;
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 Implied Terms in a Contract of Sale

7. In a contract for the sale of goods by sample,

implied conditions are:-
• The bulk shall correspond with the sample in
quality;
• The buyer shall have reasonable opportunity of
comparing the bulk with the sample before
acceptance;
• The goods are free from defect rendering them
unmerchantable which would not be apparent on
reasonable examination of the sample.
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 Implied Terms
• The SOGA implies a number of stipulations (implied
terms) in every contract for the sale of goods
• The stipulations applicable only if the parties did not
exclude or modified the terms/stipulation

(Section 62 SOGA)
“ 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 parties, or by usage, if
the usage is such as to bind both parties to the
contract” 27
1. Implied warranty as to “time”:-

section 11 of SOGA
Time of payment are NOT deemed to be
of the essence.
Meaning that, if a buyer fails to pay by an
agreed time, the seller does not
automatically repudiate the contract.

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2. Implied condition as to “title”:-

Section 14 (a) SOGA:

“In the case of sale, the seller must
have a right to sell the goods & in the
case of agreement to sell, he must
have a right to sell at the time when
the property is to pass”

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  Seller must be the owner of the goods
Seller has the ownership/title over
the goods

Presumed to have a right to sell

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3. Implied warranty as to “quite
possession”:-

Section 14 (b) SOGA

“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 & enjoy quite possession
of the goods”.
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This provision covers not only where the
title is defective but also a subsequent
future disturbance of possession of
the goods.

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 Example:
• A sold his car to his friend Ali and because
Kassim like the car very much he often
persuaded Ali to lend him the car.
• Kassim had a set of the car key and he used
the car whenever he liked regardless of
whether Ali needed the car or not.
• Kassim had breached the implied warranty
that Ali should have enjoy quiet possession
of the car.

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4. Implied warranty that the goods are free
from “encumbrance” :-

• Section 14 (c) SOGA: The goods must be free

from any charge (gadaian) 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.

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 Example:

• Syarikat ABC sold a machine to XYZ

company. XYZ did not know that
syarikat ABC had charged the
machine to Bank X. Syarikat ABC had
breach the warranty.

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5. Implied condition that the goods must correspond
with the “description”:-
Section 15
If the contract is for the sale of goods by description,
there is an implied condition that the goods must
correspond with the description

it is not sufficient that the bulk of goods

correspond with the sample if the goods do not
also correspond with the description
(bulk of goods shall correspondence with the sample
and description).
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Sale of goods by description covers
all cases where the buyer has not
seen the goods but is relying on
the description alone
(the contract is made through
telephone, mail order or sale for
catalogue)
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 6. Implied condition as to “fitness for
particular purpose”:-

GENERAL RULE :
The rule of common law applies; that is,
“CAVEAT EMPTOR” (let the buyer beware)
– where the buyer must exercise due care in
making purchases.
 If he does not, he must bear the consequences

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 CONDITIONS TO BE FULLFILLED
DISCLOSURE OF PURPOSE - Section 16 (1) (a).

EVEN THOUGH THE

GOODS IS NOT FIT
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TRANSFER OF
PROPERTY

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Transfer of Property in Goods

Differences between Property in

Goods and Possession

Property in goods refers to title or

ownership;

Possession refers to physical control.

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 Transfer of Title
• General Rule : no one can give what he
does not have to another.
• A seller who does not own the goods
cannot transfer the title to the buyer.
• Section 27 SOGA - where the goods are
sold by a person who is not the owner, the
buyer acquires no better title to the goods
than the seller had.

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 Nemo Dat Quod Non Habet
• This principle is known in law by its Latin term ‘nemo
dat quod non habet’. Which means 'no one can
transfer a better title than he has himself'.
• There are exceptions to the rule of nemo dat quod
non habet.
• The exceptions are as follows:
i. Estoppel
ii. Sale by mercantile agent
iii.Sale by one of joint owners
iv.Sale under a voidable title
v. Sale by a seller in possession after sale
vi.Sale by a buyer in possession
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 Exception 1 - Estoppel
Owner makes Owner is
Representation estopped from
denying seller's
authority

Buyer gets good title

Buyer CONTRACT Seller

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 Exception 2 -
Sale by Mercantile Agent
Owner gives possession
of goods & Mercantile
documents of goods Agent
for safe custody

Selles in his
ordinary course
Buyer
of business
acts in
good faith
Buyer gets
good title

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 Exception 3 -
Sale by one of Joint - Owners

A Jointly own goods B

Goods in B's possession

with A's consent

Gets good title C SELLS even

without authority

Purchaser in good faith

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 Exception 4 -
Sale Under a Voidable Contract

A B
Sells
Voidable contract
not rescinded

Bona Fide
Purchaser
(gets good title)

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 Exception 5 -
Sale by a Seller in Possession After Sale

First Buyer Seller

Contract
Sells
of Sale

Gets Good Title

Bona Fide Buyer

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 Exception 6 -
Sale by a Buyer in Possession after Sale

Seller First Buyer

Contract Gets possession with
of Sale consent but not title

Sells Buyer acts in

gets good good faith
title

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PERFORMANC
E OF THE
CONTRACT

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 Delivery and acceptance of
Goods

Section 31 SOGA –
• It’s the duty of seller to deliver the
goods whilst the buyer’s duty is to
accept & pay for them accordance
with the terms of the contract.
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 Delivery
Section 2
Delivery means voluntary transfer of possession
from one person to another.

Section 33
Delivery of goods sold may be made by doing
anything which the parties agree shall be treated
as delivery or which has the effect of putting the
goods in the possession of the buyer or of any
person authorized to hold them on his behalf.
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Effects of Non- Delivery

If the seller wrongfully neglects or refuses to deliver the

goods to the buyer, the buyer may sue the seller for
damages for non-delivery.

Place of Delivery

Section 36 (1)
‘..goods sold are to be delivered at the place at which they
are at the time of the sale and goods agreed to be sold
are to be delivered at the place at which they are at the
time of the agreement to sell, or if not then in existence, at
the place at which they are manufactured or produced’.

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REMEDIES FOR
BREACH OF
CONTRACT OF
SALE OF GOODS
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 Remedies for Breach of Contract of Sale
The remedies afforded by SOGA 1957 for breach of
a sales contract are as follows:-
1. Rights of the unpaid seller against the goods;
2. Rights of the buyer to sue for breach of contract;
3. Rights of the buyer to sue for damages for non-
delivery;
4. Rights of the buyer to bring an action for specific
performance;
5. Remedies for buyer for breach of warranty;
6. Buyer’s action in tort by bringing an action in detinue
or conversion:-
Detinue is the wrongful detention of chattels (goods)
belonging to the plaintiff after their return has been
demanded;
Conversion is the dealing with the goods in a manner 55
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BREACH BY THE BUYER

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 Remedies for Buyer
• Seller breaches the contract if : he does
not deliver the good. He breahes any of
the implied conditions / warranty.
a) Damages for non-delivery of goods
- If price has been paid by buyer, buyer
can sue for the price & other losses he
may sue suffered.

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b) Specific Perfomance
- given at the discretion of the court;
- must look into Specific Relief Act;

c) Action in Tort
- Ownership has passed to buyer but
possession wrongfully retained by seller or
the seller wrongly sells to third party

d) Damages for breach of warranty

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BREACH BY THE SELLER

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 Remedies for Seller
Buyer breaches contract if :
a)He does not take delivery of the goods;
b)He does not accept the goods;
c)He does not pay for the goods.
Seller becomes an 'unpaid seller'
(Section 45)

a) when the whole of the price has not been paid or tendered;
b) when a bill of exchange or other negotiable instrument has been
received as conditional payment, and the condition on which it was received
has not been fulfilled by reason of the dishonour of the instrument or
otherwise. 61
 GLOSSARY
• Ascertained goods: Goods identified and upon
by the parties
• Unascertained goods: Goods that are defined
by descriptions only
• Nemo dat rule: A buyer getting the same rights
to the goods as the person they took it from (the
seller)
• Possession of goods: Control or custody of
goods
• Property in goods: Ownership
• Sale of goods: The transfer of ownership from
seller to buyer at the time of contract 62
 Tutorial
1. State the Act governs law of sales of goods.
2. Define Goods.
3. Define contract of sales.
4. Describe the elements of sales of goods.
5. Discuss the FIVE (5) categories of goods.
6. Section 17 of SOGA 1957 governs the provisions for
implied terms in a contract of sale. Discuss the
implied terms.
7. Discuss the principle of latin team nemo dat quod
non habet and state the exception.
8. Breach of a sales of goods can happen either by the
buyer or by the seller. Discuss generally how breach
of contract by buyer and breach of contract by seller
can be happen. 63