SOGA Notes

Introduction to The Sale of Goods Act 1957 (SOGA)

  • The Sale of Goods Act 1957 (SOGA) governs the sale of goods in Malaysia.
    • Section 1 specifies that the Act applies only within Peninsular Malaysia.
    • SOGA does not extend to Sabah and Sarawak.
    • Applies to all types of goods, including both new and second-hand items.
    • Makes no distinction between commercial and private sales or between wholesale and retail transactions.

Basis for Contract of Sale

  • A contract for the sale of goods is essentially a contract, and Section 3 SOGA states that the provisions of the Contracts Act 1950 will apply in so far as they are not inconsistent with the provisions of the SOGA.
    • Laws in SOGA supersede the Law of Contract.
    • The Contracts Act can fill gaps in SOGA where necessary.

Contract of Sale of Goods - Section 4(1)

  • 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."
    • Property refers to ownership or title, used interchangeably.
    • The contract's object is to transfer ownership of goods to the buyer for monetary consideration.
    • SOGA does not apply if goods are exchanged without money (barter trade).
Sale vs. Agreement to Sell - Section 4(3)
  • A sale involves the immediate transfer of property (ownership) from the seller to the buyer.
  • An agreement to sell involves the transfer of property at a future time or subject to certain conditions being fulfilled.
  • Section 4(3) identifies two forms of Contract of Sale:
    1. Sale: immediate transfer of ownership
    2. Agreement to sell: transfer at a future time or when conditions are met.

Requirements of a Contract of Sale of Goods

  • Four requirements:
    1. Seller and buyer
    2. Goods
    3. Price
    4. Transfer of property
Seller & Buyer
  • Seller: person who sells or agrees to sell.
  • Buyer: person who buys or agrees to buy.
  • A contract of sale occurs only when the buyer is obligated to buy, and the seller is obligated to sell.
Goods
  • Goods are defined in Section 2 SOGA as 'every kind of moveable property other than actionable claims & money; and includes stock & shares, growing crops, grass and things attached to or forming part the land which are agreed to be severed before sale or under the contract of sale'
  • Not considered goods:
    • Money
    • Services
    • Immovable properties (land, buildings)
    • Actionable claims (right to sue for a debt)
    • Trees (unless severed, then they are goods)
Price
  • Price is the consideration, defined in Section 2 as 'the money consideration' for a sale of goods.
    • If no money is involved and goods are exchanged, it's a barter trade, not a sale of goods under SOGA. If the contract involves both goods and money, it is still a contract of sale of goods.
Fixing of Price
  • A contract involves an offer to buy/sell goods for a price and the acceptance of that offer.
  • Price can be fixed in various ways (Section 9):
    • Fixed by the contract (e.g., X sells a dress to Y for RM100).
    • Determined by the course of dealing between parties.
    • If not fixed, the buyer pays a reasonable price (a question of fact based on circumstances).
Transfer of Property
  • The legal object is the transfer of ownership or title in goods from the owner to the buyer.
    • Ownership is distinct from possession. Only the owner can transfer title.
    • A seller is not necessarily the owner; Example: a mercantile agent can make a valid sale (Section 27).
Additional Considerations
  • Once the four requirements are met, a contract of sale exists even if:
    • Payment is immediate or in installments.
    • Delivery is in installments.
    • Goods do not exist at the time of the contract but are to be acquired in the future (future goods) or have yet to be identified or ascertained (unascertained goods).

Categories of Goods

  • Section 6(1): goods can be existing or future.

Existing Goods

  • Goods already existing and owned/possessed by the seller at the time of the contract.
    • Can be specific (identified) or unascertained.

Future Goods

  • Defined in Section 2 as goods yet to be manufactured, produced, or acquired by the seller after the contract.
    • Do not exist at the time of the contract but will in the future.
    • Can be specific or unascertained (typically unascertained).
    • Example: Agreement to sell a car that hasn't been made or belongs to a third party.

Specific Goods

  • Identified and agreed upon at the time of the contract.
    • Example: A sells to B his car registered as BCY 121.

Ascertained Goods

  • Goods already separated from a bulk and identified.

Unascertained Goods

  • Identified by description only; still in bulk form.
    • Not appropriated (set aside) to the contract after it's made.
    • Example: A has 10 bags of rice and agrees to sell 6 but 'which 6 bags?' are not yet specified.
    • Once set aside, they become specific and ascertained.
    • (Note: Unascertained goods mentioned but not defined in Section 18)

Formation of the Contract

  • Section 5(1): A contract is made by an offer to buy/sell goods at a price and the acceptance of that offer.
  • Section 5(2): Can be in writing, oral, partly written/oral, or implied from conduct.

Terms of the Contract

  • Terms can be expressed or implied and are divided into 'Conditions' and 'Warranties'.
  • Section 12(2): A condition is essential to the main purpose, and its breach allows the innocent party to repudiate the contract.
  • Section 12(3): A warranty is collateral to the main purpose, and its breach allows a claim for damages but not rejection of goods or repudiation.
  • Besides expressed terms, there are implied terms provided and regulated by SOGA, protecting the buyer/consumer (not the seller).
    • These can be excluded by the seller (Section 62).
    • If not excluded, they automatically apply.
  • Implied terms regulate time, title, possession, encumbrance, description, fitness for purpose, sale by sample, etc.

Implied Terms

Stipulation as to Time – Section 11

  • Section 11 states that time of payment is not essential unless otherwise specified in the contract.
  • Other stipulations as to time (e.g., delivery) depend on the contract terms.
  • Harrington v Browne: In contracts involving livestock, time of delivery is often essential.

Implied Condition as to Title – Section 14(a)

  • Section 14(a): The seller has the right to sell the goods in a sale or will have the right in an agreement to sell when the property passes.
    • This is a condition; breach allows contract termination.
  • The seller needs the 'right to sell,' not necessarily ownership.
  • Breach allows the buyer to repudiate the contract and recover the full price, even after using the goods.
  • Rationale: The buyer pays to enjoy ownership and use – Rowland v Divall.
    • Rowland v Divall: The plaintiff bought a used car and discovered it was stolen after 4 months. He returned it and sued the seller. The court held that the seller breached the implied condition and allowed the plaintiff to recover the full price.

Implied Warranty as to Quiet Possession - Section 14(b)

  • Section 14(b): The buyer shall have and enjoy quiet possession of the goods unless a different intention is shown.
    • This is a warranty; breach does not allow contract termination.
  • Meaning: The buyer should use the goods without interference from the seller.
Illustration
  • X sells his car to Y but repeatedly borrows it and uses his own keys. X breaches the implied warranty of quiet possession.
  • Healing (Sales) Pty Ltd v Inglis Electrix Pty Ltd: A seller not fully paid cannot wrongfully repossess the goods.

Implied Warranty that goods are free from encumbrances - Section 14(c)

  • Implied warranty that goods are free from any charge or encumbrances not declared or known to the buyer at the time of the contract.
    • This is a warranty; breach does not allow contract termination.
  • Steinke v Edwards: The owner sold a car to P without disclosing unpaid government tax. The government seized the car. The owner breached the warranty, and P, after paying the tax, recovered the money from the owner.

Implied Condition that goods correspond with description - Section 15

  • 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 goods corresponds with the sample if the goods do not also correspond with the description.
    • This is a condition; breach allows contract termination.
  • All sales of unascertained goods are sales by description.
  • Includes mail order, sales by catalog, or self-service shops where goods are described on labels/packaging.
Sale of goods by Description
  • Goods must correspond with the description, including physical attributes.
    • Beale v Taylor: The seller advertised a car as a 'Herald Convertible, white 1961 twin carb.' The buyer discovered the front was from an earlier model. The court held there was a breach of condition for the sale by description.
Sale of goods by Sample & Description
  • The bulk of goods must correspond with both the sample and the description.

Implied Condition as to quality or fitness - Section 16

  • Section 16(1): There is no implied warranty or condition as to quality or fitness for any particular purpose.
    • The buyer must be aware and careful when making purchases.
    • Adopts the 'Caveat Emptor' principle: 'let the buyer beware.'
    • The buyer must check the quality and fitness of goods; S16 (1) does not protect the buyer.
    • There are 2 exceptions: S16 (1) (a) & (b).
1st exception: Implied condition that the goods must be reasonably fit for a particular purpose. Section 16(1)(a)
  • where the buyer makes known expressly or impliedly 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 as manufacturer or producer or not) there is the implied condition that the goods shall be reasonably fit for such purpose.
  • The buyer makes known the particular purpose and relies on the seller's skill/judgment.
  • The goods are of a description that the seller's business supplies and are reasonably fit.
  • If specific goods are under a patent/trade name, there is no implied condition.
Requirements in Section 16(1)(a)
  1. The buyer must inform the seller of the purpose of the goods.
    • Goods bought for their normal purpose: No need to indicate the purpose - Priest v Last.
      • Priest v Last: A thermos flask exploded when hot water was poured in. This breached the implied condition as it was not fit for its normal purpose. This is an exception to the general rule of s.16 which does not protect the buyer.
    • Goods bought for a special purpose: The buyer must state the purpose - Griffiths v Peter Conway Ltd.
      • Griffiths v Peter Conway Ltd: A woman with sensitive skin bought a tweed coat without disclosing her condition. There was no breach as the coat was fine for normal people.
  2. The buyer relies on the seller’s skill and judgment.
    • Show that the buyer relied on the seller's skill and judgment, either expressly or impliedly.
    • Grant v Australian Knitting Mills: Reliance can be inferred from the buyer going to a shop with confidence in the seller's selection.
  3. The goods are of a description which it is in the course of the seller’s business to supply…and reasonably fit for a particular purpose.
    • The seller is in that trade or business.
    • Ashington Piggeries Ltd V Christopher Hill Ltd: A seller (animal feed manufacturer) was asked to supply mink food (never supplied it before). After a year, they substituted it with Norwegian herring meal. The minks died in large numbers after consuming it. The seller was liable because making and selling animal feed are in the course of the seller’s business.
    • The condition of the goods does not have to be absolutely fit but reasonably so.
    • In Griffiths v Peter Conway Ltd, the Tweed coat was reasonably fit for wearing by normal persons but not for one who has sensitive skin.
  4. If the goods are specific, they must not be sold (or bought) under their patent or trade name.
    • If a buyer asks for specific goods under a patent or trade name with the impression that he is not relying on the seller’s skill or judgment, then he cannot later complain if the goods bought are not fit for the purpose for which he requires them.
    • But, if the buyer buys under a trade name and relies on the seller to select a suitable item, an implied condition arises that the buyer is relying on the seller’s skill or judgment.
    • Baldry v Marshall: The buyer asked for a car suitable for touring, and the dealer recommended a 'Bugatti'. It wasn't suitable. The dealer was liable because the buyer relied on the dealer’s judgment.
2nd exception – Implied condition that the goods bought by description must be of merchantable quality
  • Section 16(1)(b) i.e. where the goods are bought by description from a seller who deals in goods of that description (whether or not he is the manufacturer or producer) there is an implied condition that the goods shall be of merchantable quality.
  • If the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed. A buyer cannot later complain of the defects, which on reasonable and proper examination would have revealed.
What is merchantable quality
  • The goods sold must be fit for the described use.
  • Certain standards of quality/fitness should be expected.
  • Defective goods are not of merchantable quality.
  • Davis Jones v Wills: Shoes where the heels came off on the third wear were unmerchantable.
Price
  • Price can determine merchantability, especially if there's a substantial difference.
  • However, reduced prices don't conclusively mean goods are unmerchantable - Cehave v Bremer.
Buyer has examined the goods – Proviso to Section 16(1)(b)
  • Proviso to S.16(1)(b) states that if the buyer has the opportunity to examine the goods and such examination would have revealed the defect, then this implied condition will no longer apply to protect the buyer.
  • Thornett & Fehr v Beers & Sons: The buyer superficially examined barrels of glue. Proper examination would have revealed defects. The implied condition didn't apply because there was an examination, and the buyer couldn't sue.
  • Both Section 16(1) (a) & (b) are implied condition, if breach, can lead to termination of the contract.
  • It would also appear that both sections exclude a private sale.

Implied Condition of Sale by Sample - Section 17

  • Section 17(1) states that 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. This is an implied condition.

  • Under Section 17(2) there are 3 implied conditions of sale by sample:

    1. S17(2)(a) - that the bulk shall correspond with the sample in quality.
    2. S17(2)(b) - that the buyer shall have reasonable opportunity of comparing the bulk with the sample before acceptance, and
    3. S17(2)(c) - that the goods shall be free from any defects rendering them unmerchantable which would not be apparent on reasonable examination of the sample.

  • (not be apparent here means ‘not easily seen or detected’)

  • The three conditions are independent of one another, meaning a breach of any one will entitle the buyer to reject the goods and terminate the contract.

    • Drummond v Van Ingen: The manufacturer submitted a sample of material (cloth) to the cloth merchants who later bought the material. The cloth when made into garments will split at the seams. It was therefore unsuitable for its purpose., The cloth supplied was equal to the sample previously examined but because of a latent defect which not discoverable upon reasonable examination, the court found the seller in breach of section 17(2)(c). (latent here means ‘not visible’).

Exclusion of Implied Terms

  • Section 62 allows the exclusion of implied terms and conditions by express agreement, or by previous dealings or by usage.