SALE OF GOODS

Observe this question

What do you understand by the following
terms in the context of sale of goods?
Condition
Warranty
Sale
Agreement to sell
Ownership
possession

OBJECTIVE
At the end of this lecture, you are able to:
Understand what is the sale of goods
Know the relevant statute governing sale of
goods
Distinguish several legal terms in the context
of sale of goods
Identify the effect of breach of agreement to
sell
Comprehend the formation of contract
Recognize the terms of the contract

SALE OF GOODS
Relevant statute : Sale of Goods Act 1957
SGA 1957 applies to contracts for the sale
of all types of goods including 2nd hand goods.
However, SGA 1957 not applies to contracts
for the sales of goods if it involves
bankruptcy, mortgage, charges or other
security.

Definition
Def of Ctc of Sale: Sec 4 (1) SGA a ctc of sale
of goods is a ctc whereby the seller transfers or
agrees to transfer the property in goods to the
buyer for a price. There may be a ctc of sale
between one part-owner and another
Def of Goods: sec 2 SGA every kind of
movable property other than actionable claims
(right to sue) & money. Also include things
attached to land which are agreed to be severed
before sale or under a ctc of sale.

Types of Goods Sec 6 (1)

FUTURE GOODS

EXISTING GOODS

(Gds to be
manufactured or produces
after the making of the
ctc of sale)

(Owned &possessed
by the seller)

UNASCERTAIN
SPECIFIC
identified
& agreed
upon at the time
of the ctc
of sale

SPECIFIC
agreement to sell
a car wc seller & buyer
know belong to 3rd
party + that the seller
intends to acquire.

UNASCERTAIN
an agreement
to sell
a car yet to be
manufactured

SALE AND AGREEMENT TO SELL

S 4 (3):
SALE = where the property is transferred
from the seller to the buyer & when the
ownership of the goods passes to buyer.
AGREEEMENT TO SELL = where the
transfer of the property is to take place at the
future time or subject to some conditions
thereafter to be fulfilled.

Ownership = possession
A person can be the owner but not in
possession of the goods ( lend something
to someone)
A possessor may not be the owner of the
goods ( goods borrowed from the library)

Effect of breach
Breach on an agreement to sell:
Breach by buyer = seller may sue for
unliquidated damages, goods still belong to
the seller
Breach by seller = buyer may sue for
damages but cannot claim ownership over the
goods.

Breach on a sale by buyer = seller may

sue for the ctc price since ownership has
passed to the buyer.

Formation of the contract

FORMALITIES
under sga, no special
formalities
(may b in writing/oral/
partly oral partly writing
/implied from the
conduct of the parties)
s 5(2) of sga

CAPACITY
FORMATION
ctc of sale is made by
an offer to buy
/sell goods
for a price + the
acceptance of
such offer.

sga has
no specific
provision dealing
with capacity.
have to refer
ctc act 1950
and otr
appropriate law

Terms of the contract.

IF EXPRESS

CONDITION
S 12(2)

a term essential
to a ctc,the breach
of it allow
the otr party
to treat the
ctc as repudiated.

IF NOT EXPRESS

WARRANTY
S 12(3)

a less vital term

of a ctc.
the breach of it gives
rise to a claim
for damages but not
a right to repudiate
the ctc

IMPLIED
TERM

IMPLIED TERMS
IMPLIED TERM AS TO TIME
S 11: time is not deemed to be of the essence
of the ctc of sale unless specified.

~ EFFECTS:Thus, if a buyer fails to pay by an agreed date,

it does not automatically entitle the seller to
repudiate the ctc unless some term of the ctc
allow him to do so.
However, if time of delivery is the essence, the
party can repudiate the ctc and claim
damages.

Case: Harrington v.
Browne (1917) 23 CLR
297
Held: in 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 time of
shipment is important & should be
strictly adhered to.
14

 IMPLIED TERM AS TO TITLE

Unless the different intention is shown in the ctc.
S 14(a) states that the seller must have a right to sell
the goods (this means that he may not necessary be
the owner of the goods).
Effect:
1. the seller with no title to sells goods at the time of
the agreement to sell but later acquires title, can hold
the buyer to the bargain provided the title is acquired
before the buyer repudiate the ctc on discovery.

 Case: Butterworth v Kingsway Motor

The hirer sold a car taken on hire purchase and it was resold a
number of times bf she discovered that she had no right to sell
since the car was still on hire purchase.
Pf (last buyer), rescinded the ctc after he knew that the seller
(hirer) has no title. Pf demanded the return of the purchase
price.
8 days later the seller got the title after paid out the outstanding
balance to the bank.
The Pf was entitled to recover the money paid on account of a
total failure of consideration. This is because at the time he
rescinded the ctc, the hirer has no title.
However, the other intermediate buyers who had not repudiated
the sale could not claim for the return of purchase money. The
acquisition of title by the hirer went to feed their title.

 2. The party who had enjoyed the use of the goods need
not pay a price for such use. This is based on the total
failure of consideration in the performance of the
agreement.
Rowland v Divall
The Pf bought a car and after using it for some four
months, discovered that it was stolen. He had return it to
the the owner and asked for return of purchase money.
Ct: the Df had breached the condition as to title and
allowed recovery by the Pf by the Pf of the full price on
the basis of total failure of consideration
Amendment to the current law!!! : enable a seller who
has acted honestly in the transaction to receive
reasonable compensation for the use of his property by
the buyer repudiating the ctc.

 IMPLIED WARRANTY AS TO QUITE

POSSESSION.
S 14(b) : buyer shall have & enjoy quite
possession of the goods unless specified
otherwise.
Coverage: where the title is defective and
subsequent future disturbance of possession
of the goods
Purpose: to cover the buyer against lawful
interference by a stranger(3rd party) claiming a
lawful right by virtue of a better title than the
seller as well as wrongful act of the seller
himself.

Effect: the seller who has not been paid/

partly paid cannot repossess the goods
sold.
Microbeads AG v Vinhurst Road Markings
The patentee(3rd party) had brought an action
against the buyer alleging the use of certain
road marking machines was in breach of their
patent 2 years after the sale of the machines
by the pf to the df.
There was a breach of implied terms because
the buyer did not enjoy the future quite
enjoyment of the goods.

IMPLIED WARRANTY THAT THE

GOODS ARE FREE FROM
ENCUMBRANCES.
S14(3):Goods must be free from any
charge/encumbrance in favor of any 3rd party
not declared or known to the buyer before/at
the time when the ctc is made.
Steinke v Edwards
The pf who had bought the car paid off the tax
owing and sought to recover it from the df(seller)
Held: 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 and
encumbrance. T4, the claim was allowed for
breach of the implied warranty.

IMPLIED CONDITION THAT THE

GOODS CORRESPOND WITH
DESCRIPTION
S15
1. ctc of sale by description: goods =
description.
2. ctc of sale by sample + description:
goods = sample + description
Applies where the buyer had seen/not seen
the goods.

Nagurdas Purshotumdas v Mitsui Bussan

Kaisha
Previous ctcs btw the parties for the sale of
flour had been sold in bags bearing a wellknown trademark.
Further flour was ordered described as the
same as our previous ctcs.
Flour identical in quality was delivered but it
did not bear the same well known trademark,
it was held that it did not comply with the
description.

Two categories of failure of goods to

correspond with description:
1. where the goods are substantially what is
required but there is some small discrepancy
from the ctc particulars.
Arcos Ltd v Ronaasen
Buyers ordered staves of inch thick. Only 15%
conformed with the requirement and the balance
were nearly all less than 9/16 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 contract description.

2. Those involving goods described in a more

general sense in the absence of detailed
commercial description
- Varley v Whipp
A contract for a machine described as new
was not performed. This is because the
goods delivered did not correspond with the
description ( delivery of a very old machine
which had been repaired)

IMPLIED CONDITION AS TO
MERCHANTABLE QUALITY
Def of MQ: the goods sold are fit for the particular use
to which they were sold
SEC 16(1) (b) : the goods sold are in good condition
and can be used.
David jones v willis
It was held that a pair of shoes that heels came off
on the third occasion was unmerchantable. The
goods were defective for the purpose for which
they were sold.

 Quality of goods refers to their state or

condition/the goods sold are fit for the
particular use to which they were sold.
It also applies where the goods are sold
under their patent or trade mark.
E g: if Siti buys a pair of Levis jeans, it is
an implied condition that she will not get
rashes when wearing it.

 IMPLIED CONDITIONS AS TO THE FITNESS

FOR PARTICULAR PURPOSE
Gen rule: S16(1) - no implied warranty or condition
as to the quality or fitness for any particular purpose
of goods supplied under ctc of sale.
Exception: S16(1)(a) & S 16(1)(b)

S 16(1)(a)-Implied conditions that the goods

are reasonably fit for purpose:
4 requirements:
1. the buyer must make known, either expressly or
impliedly, to the seller at or before the time when
the ctc is made, the particular purpose for which
the goods are required
2. the buyer relying on the sellers skill and
judgment.
3. the goods are of the description which it is in the
course of the sellers business to supply.
4. if the goods are specific, must not be bought
under their patent or trade name.

Disclosure of purpose
No further indication is required where the good serve only
one purpose.
Where goods are to be used for special purpose, it should
be clearly stated - if not stated, no breach of implied
condition if the goods are suitable for any purpose
reasonably foreseeable.
Griffiths v Peter Conway Ltd
A woman with an unusually sensitive skin bought a
coat without disclosing that fact to the seller. It
turned out that the goods (coat) afflicted her health.
It was held that the woman could not succeed as the
coat would not harm a normal person.

Patent and trade name

If the buyer asks for specific goods under a
patent or trade name with the impression that he
is not relying on the sellers skill or judgment , he
cannot later complain if the goods are not for the
purpose which he requires them.
But if the buyer purchase the goods under a
trade name and relying on the sellers skill or
judgment, this means that the buyer is relying on
the sellers skill/judgment.

 Eg: a ctc for a sale of Naza car was entered into

between the buyer and the dealer as a result of
the dealers recommendation that the car was
suitable for touring. However, it was found that
the car was unsuitable for touring. The dealer
was held liable for breach of contract bcoz the
buyer had relied on the dealers judgment in the
selection of a car suitable to the buyers stated
purpose even if it was sold under a trade
name.

Baldry v Marshall sale of Bugatti car

Sale by sample.
S 17(1) SGA contract for sale by sample
Usually sale of bulks goods, eg: rice, flour,
carpet etc.
No ctc of sale by sample if the ctc is in
writing & the written document was
intended to be a complete record
containing no reference to a sale by
sample even if sample is produced
before the buyer.

 3 Implied condition in the sale of sample:

The bulk shall correspond with the sample in term of
quality S.17(2)(a)
The buyer shall have a responsible opportunity of
comparing the bulk with the sample S. 17(2)(b)
That the goods are free from any defect causing them
unmerchantable which would not be apparent on
reasonable examination of the sample S. 17(2)(c)
The 3 conditions above are independent of one another
(breach of any one may entitles the buyer to reject the
goods & treat the ctc as at end. !!!!

 Drummond v Van Ingen

The cloth supplied by the seller was equal to
samples previously examined. However, there
was a latent defect not discoverable by a
reasonable examination.
The seller was held liable for breach because
even though the bulk correspond with the
sample, there was a latent defect rendering
the good unmerchantable.
The buyer was entitled to reject the goods.

EXCLUSION OF THE IMPLIED

TERMS
S 62 implied terms and conditions can
be excluded by express agreement or by
previous dealings or by usage.

PRIVITY OF CONTRACT
Principle of privity of ctc: implied term
binds the contracting parties in the ctc of
sale of goods (e.g buyer & seller).
If the goods bought have been used by 3 rd
party & 3rd party suffered injury caused by
the goods, the remedy available for him is
under law of tort (he must prove that
negligence had taken place)

Donoghue v Stevenson
In this case, the person became ill as a result
of drinking a bottle of ginger beer which had
been fouled by a decomposed snail in the
bottle. The bottle of ginger beer was
purchased by a friend. Damages for
negligence were recovered from the
manufacturer who had bottled the drink.
In short, the rule is a manufacturer owes a
duty of care to the ultimate consumer in
relation to the condition of its product.

Goldley v Perry
Fact: a man had purchased underwear,
which was contaminated by a noxious
chemical, causing him severe
dermatitis
Held: succeeded v. seller for breach of
contract and manufacturer for
negligence