SALE OF GOODS

Relevant statute: Sale of Goods Act 1957

Definition of a contract of sale

S.4(1), SGA 1957:

“A contract of sale of goods is a contract where the seller transfers or agrees to
transfer the property in the goods to the buyer for a price”.

Price refers to money. (S.2, SGA)

Price can be ascertained as follows: (S.9(1), SGA)

1. fixed by the contract
2. left to be fixed by parties
3. determine in the course of dealing between parties

Differences between sale and agreement to sell

Sale: ownership or property in the goods passes to buyer.

Agreement to sell: transfer of property in the goods takes place at future time

Definition of goods

S.2, SGA, goods mean:

1. every kinds of movable property
2. other than actionable claims and money
3. includes stocks and shares
4. growing crops and grass, and things attached to or forming part of the land
which are agreed to be severed before sale.

Types of goods

S.6(1), SGA :

 Existing goods
 Future goods
Formation of contract

= offer to buy/sell goods for a price + acceptance of such offer

S.5(2), SGA : A contract of sale may be made in writing, orally, partly in writing
and partly orally, or implied from conduct of parties.

Capacity

Governed by Contracts Act 1950.

Terms of the contract

Can be classified into:

1. Condition
2. Warranty

Definition of condition

S.12(2), SGA : A condition is a stipulation essential to the main purpose of

contract. Its breach entitle the parties to repudiate the contract

Definition of warranty

S.12(3), SGA : A warranty is a stipulation collateral to the main purpose of

contract. Its breach entitle the parties to damages

Associated Metal Smelters Ltd v Tham Cheow Toh

Held: The failure on the part of the defendant to supply a furnace that would meet
the specified temperature constituted a breach of condition. Thus, the plaintiffs
were entitled to treat such breach as a breach of warranty.
Implied Terms

1. Implied terms as to time

S.11 – time is not the essence of the sale of contract unless specified

Harrington v Browne
Held: Time of delivery is the essence of contract in commercial transaction
involving livestock.

2. Implied terms as to title

S.14(a) – the seller must have a right to sell the goods

Rowland v Divall
Facts: The plaintiff bought a car and after using it for four months, discovered that
it was stolen. He had to return it to the true owner and asked for return of the
purchase price.
Held: The defendant had no title to the car. Therefore, the plaintiff can recover the
full price.

3. Implied warranty as to quiet possession

S.14(b) – buyer shall have and enjoy quiet possession of the goods unless specified
otherwise

Microbeads A.G. v Vinhurst Road Markings Ltd

Held: There was a breach of implied terms because the buyer did not enjoy the
future quiet enjoyment of the goods.

4. Implied warranty that the goods are free from encumbrance

S.14(c) – goods must be free from any charge / encumbrance in favor of any third
party not declared or known to the buyer before or at the time when the contract is
made.

Steinke v Edwards
Facts: The plaintiff who had bought the car paid off the tax owing and sought to
recover it from the seller (defendant).
Held: The claim was allowed because there was a breach of implied warranty that
the goods are not free from encumbrance.

5. Implied condition that the goods correspond with description

Effects of s.15, SGA:

a. Contract of sale by description: goods = description
b. Contract of sale by sample + description: bulk of the goods = sample +
description

Varley v Whipp
Facts: A machine, which was described as a ‘second-hand self-binder reaping
machine’, was located at another place at the time of the sale.
Held: There was a sale of a good by description.

Moore & Co v Landauer & Co

Facts: There was a contract for 3100 cases of Australian canned fruit packed ’30
tins to case’. However, half of the cases contained only 24 tins to case.
Held: The buyers were entitled to reject the contract because the goods did not
correspond with the description.

6. Implied condition as to fitness for particular purpose

Common Law Rule – Caveat Emptor “buyer has to exercise care in making
purchase”

S.16(1)(a) – implied conditions that goods are reasonably fit for purpose:
4 conditions:
i. The buyer must make known to the seller at or before the time when the
contract is made, the particular purpose for which the goods are required
ii. The buyer is relying on the seller’ skill and judgement
iii. The goods are of description which it is in the course of the seller’s
business to supply
iv. If the goods are specific, they must not be bought under their patent or
trade name
Griffiths v Peter Conway Ltd
Facts: A woman with sensitive skin bought a Harris Tweed coat without informing
that fact to the seller. It turned out that the goods afflicted her health.
Held: The woman could not succeed because the coat would not harm a normal
person.
(This case shows that where goods are to be used for special purpose, it should be
clearly stated. If not there is no breach of implied condition if the goods are
suitable for any reasonable purpose).

7. Implied condition as to merchantable quality

S.16(1)(b) – Where goods are bought by description, there is implied condition

that goods shall be of merchantable quality. Provided that if the buyer has
examined the goods, there is no implied condition if examination ought to have
revealed the defect.

David Jones v Willis

It was held that a pair of shoes that heels came off on the third occasion was
unmerchantable.

BS Brown & Sons Ltd v Craiks Ltd

Held: The difference in price was small and therefore not such as to render the
goods not of merchantable quality.

Wilson v Ricket, Cocherall & Co, it was held that a consignment of fuel which
included a piece of coal in which a detonator was embedded was unmerchantable
since it had defects making it unfit for burning.

8. Sale by sample

S.17(1):
“A contract of sale is a contract for sale by sample where there is a term in the
contract express or implied to that effect”

Conditions:
i. S.17(2)(a), the bulk shall correspond with the sample in quality
ii. S.17(2)(b), the buyer shall have reasonable opportunity of comparing the
bulk with the sample
iii. S.17(2)(c), the goods are free from any defect rendering them
unmerchantable which would not apparent on reasonable examination.
Drummond v Van Ingen
Facts: the cloth supplied by seller was equal to samples previously examined.
However, there was a latent defect not seen by reasonable examination.
Held: The seller was liable because there was a latent defect which made the goods
unmerchantable.

Exclusion of the implied terms

S.62 – implied terms can be excluded by express agreement or previous dealings.

By express agreement means that words must be used, conduct alone is not
enough.
Transfer of title

Rule: No one can give what he doesn’t have.

S.27, SGA:
“…where goods are sold by a person who is not the owner and who does not sell
them under authority or with consent of the owner, the buyer acquires no better
title to the goods than the seller had…”

Maxim: Nemo Dat Quod Non Habet ( no one can transfer a better title than he has
himself)

Purpose: To protect the right of ownership so that the right of original owner is
retained.

Exceptions to the general rule

1. Estoppel

This may arise when the owner of the goods by his conduct precluded from
denying seller’s authority to sell (s.27).

N.Z. Securities & Finance Ltd v Wrightcars Ltd

Held: The owner of a car A was precluded from denying B’s authority to sell the
car to C.

2. Sale by a mercantile agent

An agent may sell goods belong to his principal provided he is acting within his
authority. However, there are conditions to fulfill:
i. The agent must be in possession of the goods
ii. The possession must be with consent of the owner
iii. The disposition must be made when acting in the ordinary course of
business
iv. The buyer must have acted in good faith

Oppenheimer v Attenborough & Son

Held: In the ordinary course of business means within business hours, at a proper
place and in the ordinary way in which an agent would act.
3. Sale by one of Joint-Owners

Conditions to fulfill: (s.28)

a. One of the joint-owners has the sole possession of the goods with permission
of the co-owners.
b. The buyer acts in good faith

4. Sale under a voidable contract

S.29: “Where seller of goods obtained possession under the contract voidable
under s.19 or s.20 of Contracts Act, but the contract has not been rescinded at the
time of the sale, buyer gets good title to the goods provided he buys them in good
faith and without notice of seller’s defect of title”.

5. Sale by a seller in possession after sale

- A seller who has parted with title to the goods but remains in possession of the
goods or of the documents of title can pass a good title to a bona fide buyer
- Implications:
i. The second buyer gets a good title whereas the original buyer loses his
ii. The original buyer can sue the seller for remedy

Pacific Motor Auctions v Motor Credits

Held: the plaintiff obtained good title since he bought the car in good faith.

6. Sale by a buyer in possession

- A buyer having bought the goods or agreed to buy goods obtains possession of
the goods or the documents of title with the consent of the seller, can pass a good
title to the innocent buyer.

Newtons of Wembley Ltd v Williams

Held: The defendant had a good title to the car that he had bought although there
was a prior defect in title.
REMEDIES FOR BREACH OF CONTRACT IN SOGA

A) Remedies for seller if buyer fails to pay the goods

Who is unpaid seller:

- S.45(1)(a), when the whole price has not been paid
- S.45(1)(b), when a bill of exchange or negotiable instrument has been
dishonoured

Rights of unpaid seller:

S.46(1): (a) lien, (b) stoppage in transit, (c) resell

What is lien?
Right to retain possession of the goods until payment of price is made.

B) Remedies for buyer. Right of buyer to bring an action for non-delivery.

i. S.57, damages.
ii. S.58, specific performances
iii. S.59, breach of warranty – damages
iv. Action in law of tort