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Published: Fri, 02 Feb 2018
Sale Of Goods Law In Malaysia
The following report serves as a lecture on the sale of goods law. Our introduction walks you into the report to sort of give you the basis and history behind the sale of goods law in Malaysia. Here in we give a basis of the act core definitions, applications, parties concerning and other key foundations behind it.
We then delve deeper into the act to give a more in depth analysis behind. The parts we decided to talk about due to time/space constraints where the conditions and warranties, performance of contract and its effect. Here in we provided brief cases and material to give an applied view of the act and as to give a more clearer understanding.
We end our report note with a comparison between the sale of goods of Malaysia and the sale of goods act of Australia. We try to bring light to its similarities and differences which turn out to be rather slight to give an idea of this law may vary from country to country.
The Sale of Good Act 1957 (SOGA herein forth) was enacted in 1957 and the statue was applicable to sale of goods in peninsular Malaysia (East Malaysia), excluding the states of Penang and Malacca. The Act was later revised in 1990 and it includes both states1. The states of Sabah and Sarawak (West Malaysia) are not governed by this act instead they are governed by section 5(2) of the Civil Law Act of 1956, which provides, among others, that the law to be administered in England in the like case at the correspondent period. The English statue applied is the Sale of Goods Act 1979, which is a revision of the Sales of Goods Act 1893.As a result Sabah and Sarawak are bound by statute to continue to apply principles of English law relating to the sale of goods. The contrast between the laws West and East Malaysia has the potential to raise unwarranted legal problems, even though English statue is the principle source of law for both parts of Malaysia (Pheng, 1997; Beatrix and Wu, 1991).
The Act contains definitions or interpretations which clarify what the wording used in it refers to and the context. Below are some of the definitions of key terms in the SOGA.
Buyer -a person who buys or agrees to buy goods.
Seller -a person who sells or agrees to sell goods.
Goods -means 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.
specific goods – means 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 [Act 136], shall have the meaning assigned to it in that Act.
Future goods – means goods to be manufacture or produced or acquired by the seller after the making of the contract of sale.
————————————————————————————————————-1SALE OF GOODS ACT 1957 is an Act relating to the sale of goods. When enacted it was applicable in Federal Territory, Johore, Kedah, Kelantan, Negeri Sembilan, Pahang, Perak, Perlis, Selangor and Terengganu —23 April 1957. The statutory was later extended to Malacca and Penang—23 February 1990.
Price – means the money consideration for a sale of goods.
Document of title to goods – includes a bill of lading, dock warrant, warehouse keeper’s certificate, wharfinger’s certificate, railway receipt, warrant or order for delivery of goods and any other document used in the ordinary course of business as proof of the possession or control of goods, or authorizing or purporting to authorize, either by endorsement or by delivery, the possessor of the document to transfer or receive goods thereby represented.
Nemo dat quod non habet – no one gives what he does not own.
Application of Contracts Act 1950
It is important to note that the principles of the Contract Act 1950 continue to apply as long as they do not contradict or are inconsistent with SOGA.
A Contract of Sale of Goods
According to section 4 of SOGA 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. Section 4 also states that the contract of sale may be absolute or conditional. The difference between the two is that an absolute contract of sale entails a seller transferring property in goods to the buyer, and the contract is known as a sale, where as in a conditional contract of sale the seller consents to transfer the property in goods to the buyer for a price pending the fulfillment of certain conditions and according to section 4 of SOGA the contract is known as, agreement to sell. The agreement to sell will become a sale when the conditions are fulfilled (SOGA section 4).
Section 5 of the SOGA deals with the formation of, the contract of sale of goods. For the contract of sale of goods to exist, there has to be an offer to buy or an offer to sell for a price. Furthermore an acceptance of the offer has to follow and ultimately the contract may provide for immediate delivery or immediate payment or both or installments delivery or installments payment or both. The agreement to form a contract between the buyer and the seller may be in writing or partly in writing and partly by word of mouth or by word of mouth or may be implied from the conduct of the parties.
Terms of a contract of Sale of Goods
The terms of a contract of sale of goods are based on section 12 of the SOGA and can be split into two parts; condition and warranty. Condition is the fundamental term of the contract, and the breach of the condition gives the injured party the right to reject the contract. Warranty refers to stipulation collateral to the main purpose of the contract, the breach of which gives the injured party the right to claim for damages but not to reject the goods and treat the contract as repudiated. According to section 13 of SOGA, the injured party can treat a breach of condition as a breach of warranty, which means that the injured party is entitled to claim for damages but not reject the contract. The case in point is the case of:
Associated Metal Smelters Ltd v. Tham Cheow Toh(1972) 1 MLJ 171
The Federal Court allowed the respondent or the buyer to treat breach of condition as breach of warranty, resulting in the buyer being entitled to claim for damages within the scope of Section 13 of the Sale of Goods Act, 1957.
Benefits to concerned parties
SOGA aims to protect concerned parties in the transaction and the eventual transfer of ownership of a good from a seller to a buyer.
Implied terms of the Sale of Goods Act, 1957
The statutory of implied terms main function is to protect the rights to every buyer or consumer. These statutory implied terms are in Section 14- 17 of the Sales of Goods Act, 1957 and are the implied terms in every contract of sale of goods.
Section 14 of the SOGA is divided into three parts. The first part states that 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. This in short means that it is an implied condition to the seller to ensure that the buyer will enjoy the ownership as well as possession and use of the goods, failure to do so gives the buyer the right to reject the contract as the issue constitutes an implied condition (Razman and Shukor, 2001). The next part states that there is an implied warranty that the buyer shall enjoy quit possession of the goods, and if the seller fails to comply, the buyer is entitled to claim for damages since the matter is being constituted as an implied warranty. Paragraph c, the last part of Section 14 of SOGA, states that there is an implied warranty that the goods shall be free from any charge or encumbrance in favor of any third party not declared or known to the buyer before or at the time when the contract is made. If the seller fails to comply, the buyer is entitled to claim for damages since the matter is being constituted as an implied warranty.
Section 15 of the SOGA is on the sale of goods by description. It states that 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. The case in point is the case of:
Purshotumdas and Co. v Mitsui Bussan Kaisha Ltd. (1911) 12 SSLR 67
In this case, the party’s previous contracts entailed the sale goods being flour, which was sold in bags bearing a recognized trademark. Later the previous contract description of flour was used to order and flour of identical quality was delivered but, short of the same well-known trade mark. The court held that the goods did not comply with the description (Beatrix and Wu, 1991).
Section 16 of SOGA, in a nutshell says that there is no implied condition or warranty as to the quality or fitness for any particular purpose of goods, unless the buyer requests the goods be reasonable for a purpose and the goods be of merchantable quality. The last section of implied terms is Section 17 of SOGA, and in summary points out that, when dealing with goods by sample, it is required by the seller to ensure that the bulk of the goods must correspond with the sample. If the seller fails to comply, the buyer is entitled to reject the contract since the matter is being constituted as an implied condition.
Nemo dat quod non habet rule
Nemo dat quod non habet rule as explained previously, simply means that the buyer of the goods does not acquire the title of the goods if they are bought from a person who is not the owner of the goods or does not have authority from the owner to sell the goods. This rule seeks to protect the right of ownership, and therefore the sellers’ interest. The rule is illustrated in Ng Ngat Siang v. Arab-Malaysian Finance Bhd. @ Anor.
Ng Ngat Siang v. Arab-Malaysian Finance Bhd. @ Anor. (1988) 3 M.L.J.319
Facts: The plaintiff bought a car from the second defendant. To affect the transfer of ownership of the car into the plaintiff’s name, the second defendant had to pay off MUI Finance from whom he had earlier obtained a hire-purchase facility. For this purpose, the second defendant retained the registration card. After obtaining the cancellation of endorsement of MUI’s ownership, the second defendant sold the car to B whose purchase was financed by the first defendant. The first defendant endorsed its ownership claim on the registration card. The plaintiff applied to the court to determine whether or not the first defendant had a better title to the car.
Held: allowing the application :
After a full payment was made by the second defendant to MUI Finance and MUI Finance had relinquished all rights to ownership over the car, the plaintiff had acquired ownership to the car and the second defendant’s further dealings on the car with the first defendant are therefore illegal. To that end, the first defendant acquired no title or interest over the car when they purchased it and their only remedy, if any, is against the second defendant personally for the return of the purchase price but as against the plaintiff they cannot claim any right ownership over the car.
Analysis of the sale of goods law
Formation of the contract
The Subject matter of the contract involves the following areas. It may involve goods or service that are presently available or goods that may be available in the future. There may be a contract that depends upon a condition set be the seller which may or may not occur. Whenever the seller attempts to create a contract on the present sale of future goods this contract operates as an agreement to sell the goods this contract then lawfully becomes an agreement between the two parties to sell the goods becomes null.
It should also be noted that under the sale of goods law Section 7 if the goods before a set contract deteriorated or come under so much harm the good no longer becomes fit for its intended purpose without the knowledge of the seller. Noted in Section 8 an agreement will be voided if the goods are marred after an agreement but before the sale the agreement. This will still be the case even if the is done so without the knowledge of the seller and the buyer.
Under the subject matter of price is section 9.1 the price may be set accordingly by the contract, may be set under agreed conditions or may be set pertaining to the dealings between both the buyer and the seller. As state in section 9.2 if there is if no price is decided upon a reasonable price might be charged but this will set not to any standard but according to every single particular individual case.
When dealing with an agreement to sell under valuation according to section 10 (1) if the value which had been agreed to be determined by a third party, if that third party fails to commit such an act the contract is becomes voided. If however the goods manage to be delivered the buyer is subjected to pay a reasonable price. According to section to section 10 (2) if one if the parties is at fault for the inability for the third party to decide on the price the party not in fault may maintain a suit to claim damages.
Conditions and Warranties
With respect section eleven under the contract unless the objectives are not similar in the terms of the contract, stipulations as to time of payment are not considered to be the essence of the contract of sale.
If we look at the case of Themes sack and Bag co Ltd v Knowles & CO Ltd (1918) we can get an example of this. Here the sellers sold a quantity of goods and this was a spot contract form with a payment date of on or before the 19th of September. Because they failed to do this contract was repudiated. If the only issue at hand here was failure to pay on time the buyers had not right to repudiate the contract for that is not the essence of the contract, but they were entitled to repudiate it because the buyers had not removed the goods by that date.
Section 12 of the Sale of goods act talks separates between a condition and a warranty. A condition is important for the basis of the contract and it not being met gives right for cancellation. However a warranty is a stipulation and a warranty not being met allows one to claim for damages but not cancel or repudiate the contract.
However according to section 13 the buyer is entitled to treat a condition as a breach of warranty. We can see this in the case of Associated Metal Smelters Ltd V Tham Cheow Toh. Here the plaintiff purchased a furnace from the defendant. It was stated in the contract that this could reach a temperature of about 2600 F but theirs could not. So they sued for damages. It was held that they were allowed to treat the breach of conditions as a breach of warranty as sue for damages.
Nissly Brand. The defendant was held liable because this was wrongly representing the Nestle brand.
Effect of contract
This deals with the transfer of property between buyer and seller what must be noted first is that no property may be transferred until the goods are in possession of the buyer according to section 18.
Section 19 (1) states that the property of goods is transferred to the buyer at the time the contract drawn up intends for it to do so. In the case of Re Anchor Line (Henderson Brothers) Ltd an electric crane was bought from Ocean ss Co Ltd. Annual payments where to be made and Anchor was to have full responsibility in the mean time. Payments were made regularly but it went into liquidation. It was held that the property was still under Ocean because all the payments had not been made.
Regarding section 20 s where there is an unconditional al contract for sale of good property passes to the buyer when the contract is made. In reference to Mohamed Mydin v Ramiaj (1965), a lorry was sold to the buyer however a vehicle repairer had taken delivery on behalf of the buyer. Although the registration of the lorry was not passed it is not the document of title so it was held that the vehicle was duly delivered to the plaintiff.
Section 24 of the Sale of Goods act unless a different intention appears unless a different intention appears when a good is delivered to a buyer on approval the property of the good passes on to the buyer if this is approved in any way. s 24 (a) shows the property is passed if signifies his acceptance of the good or does any act to show his approval. A pledge is accepted as an act of transaction. We can see here with Kirkham v Attenborough case (1895) When Kirkham sold jewelry to Winter on sale or return Shortly after Winter pledged the goods with Attenborough. It was held that although Kirkham tried to reclaim the jewelry it was denied their only entitlement was a claim to prince from Winter.
By section 24 (b), the buyer retains property if he retains the goods but does not give his notice of rejection and returns the goods within a reasonable time. The length of time would then be a question of fact. We can see here with the Pole v Smith’s car Sales (Balham) Ltd A car was sold to smith on sale or returned and it was decided that it should have been returned by the 10 of November. Since they did not return the car until the end of November it was held that the property was passed because a reasonable time had passed.
According to section 26, where the goods are delivered by fault of either the buyer or the seller the goods are at the risk of the party in fault as regards any loss which might not have occurred for such fault. When we look into the Demby Hamilton & Co Ltd v Barden case (1949) where the sellers were supposed to deliver the 30 tons of apple juice by February 1946 but they were asked to hold it in December 1945. So they delivered in January and April but after that the buyer would accept no mo more. By November the remainder of the juice had gone bad. It was held that the fault remained on the buyer for the delivery was delayed because of him.
By section 27 of the sale of goods act we can see that when a good is sold by a person who is not the owner without the authority of the owner the buyer attains no better title than the owner unless owner is precluded from denying the seller authority to do so. If we look at Heap V Motorists Advisory Agency Ltd We can see here Heap was induced to give North a car to show to a false client who ended up using to for a few weeks then sold it to the defendant. Their action succeeded because they were precluded from denying North Authority to sell. In order for the title to have the Negligence must have amounted to a disregard in his obligations
By section 30 (1) When a person having sold goods continues or is in possession of those goods sells those goods to buyer who bought the goods in good faith will attain property is if that person has full authorization from the owner of those goods. Looking at The Pacific Motor Auctions Pty Ltd v Motor Credits Hire Finance Ltd Motor Credits bought a number of cars from Motordom which carried on business as car dealers, for the purpose of letting out hire purchase agreements to Motordom’s Customers. Motordom’s Obtained Possession of the cars as bailess with Authority to sell, the buyer revoked their authority to see but they had already sold them to Pacific Motor who had bought them in good faith. The buyers commenced proceeding claiming their return and damages for detention. This however failed because Pacific Motors had obtained good title under s (30) (1) because Motordom continued in Possession of the cars. Any private transactions between the original seller and buyer were immaterial.
Looking at Section 30 (2), when a person agrees to buy goods and obtains them with the consent of the seller, possession of the goods the delivery by that person of the goods under any sale and without notice or right of the original seller shall have effect. Going by the Forsythe International (UK) Ltd v Silver Shipping Co Ltd and Petro globe International Ltd : The Saetta. Forsythe supplied oil to Silver who charted the vessel from Petroglobe who were her owner under a charterparty. Petroglobe brought the oil on board without notice from Forsythe. When Forsythe brought an action against Petro globe it was given in their favor the delivery of goods to Petroglobe was not voluntary since it was brought about by the termination of the charter party not the voluntary delivery of Silver.
COMPARISON OF MALAYSIA SALE OF GOODS ACT V AUSTRALIA SALE OF GOODS ACT
Name Of Act
Sale of Goods Act 1957
Sale of Goods Act 1954
Australian Capital Territory
In the beginning
At the end
The contract act 1950 in Malaysia shall also apply to contract for the sale of goods.
There are no noticeable differences between the 2 countries concerning specifications under the contract of sale, formalities of contract, subject matter of contract, the price, conditions and warranties, and sale of goods. Since all specifications under the formation are quite similar, one need not go through both of the countries formation part of the sale of goods act but can get the idea from reading either of the two.
Effects of contract
Transfer of property as between seller and buyer
The specifications of the following for the two countries are the same: Goods must be ascertained; property passes if intended to pass; rules for ascertaining intention; reservation of right of disposal; risk prima facie passes with property.
Transfer of Title
Sale by person not the owner: the Australian version makes a reference to mercantile law act 1962 and registration of interests in goods act 1990 noting that the latter and the former are not affected by the act. Other than the previous statement nothing is different in this section for the two countries.
Australia has 2 sections which explain the revesting of property in stolen goods on conviction of offender and the effects of writs of execution.
Other specifications under resale under voidable title and seller or buyer in possession after sale for the two countries are very similar.
RIGHTS OF UNPAID SELLER AGAINST THE GOODS
The seller in this case is anybody in the position of the seller; an agent of the person selling the goods, a consignor or agent who has himself paid or is directly responsible for the price of the goods.
Australian and Malaysia law are fundamentally similar in definition and rights of the unpaid seller.
However, Australian law lacks the following provision as given by Malaysian law:
Where the transfer is by way of pledge, the unpaid seller may require the pledgee to have the price of the pledge satisfied, as far as possible, with any other goods or securities belonging to the buyer held by the pledge.
This is the only recognizable difference between them in this Section
Performance of the contract
Duties of the seller and buyer: both Malaysia and Australia share the same concept when it comes to the duties of the seller and buyer which state that “it is the duty of the seller to deliver the goods and of the buyer to accept and pay for them in accordance with the terms of the contract.”
Payment and delivery are concurrent conditions
Under the above mentioned case, both countries (Malaysia and Australia) states that the seller must be willing to give the goods to the buyer in exchange for their price and the buyer shall also be willing to pay the required price by the seller in order to accept the goods. This will happen in most cases unless otherwise agreed of something by the parties.
Rules as to delivery of goods under the Malaysian Sale of goods act is general and brief, it states that it’s up to what the parties agreed on to deliver the goods or anyway that can lead to the buyer hold possession of the goods. It covers some conditions which are similar to those of Australia which will come next. While the Australian Sale of Goods act of delivery gets into detail and give conditions, like it depends on the agreement between the parties, whether the seller will send the goods to the buyer. It goes on to discuss the place of delivery which is mostly of the seller if the seller has one, or their residence or it depends on their contract. It mentions the time period and goods on a third party the responsibility of the seller to make the goods are delivered in good condition.
The only condition that the Malaysian act does not cover but the Australian act covers is that of the rules of delivery does not affect the operation of the issue or transfer of a document of title to goods and demand.
Delivery of wrong quantity
Both countries have the same rules regarding the wrong quantity deliveries. It is stated that if the seller deliver less than that agreed on, the buyer can reject it or he decides to accept if, he must pay the amount agreed on the contract, and if the goods are of a larger quantity, the buyer may reject them and if he decides to accept them, he has to take the exact quantity agreed on pay the exact amount. In case of the mix goods, the buyer may reject them or if he decides to accept them, he may only take the goods agreed on and pay the necessary amount.
It is clearly mention in both country acts that the buyer of the goods has to reject the delivery unless there is a contract between the parties covering that particular matter and if so, the goods must be paid separately.
Delivery to carrier and risk if goods are delivered at distant place
Both countries share similar acts which explain that the seller is responsible for sending goods to the buyer and making all necessary communication with the carrier and the buyer can only make with the carrier if referred by the seller to do so. If the seller fails to make any arrangements with the carrier or the buyer and the goods are delivered in bad condition, the buyer can decline to accept the goods or he can hold the seller responsible for damages.
In case of goods being sent by sea, the buyer has to be informed by the seller and it’s important to insure, the seller shall notify the buyer of such circumstances and if the seller fails to do so, he is responsible for their safety during sea transportation.
Buyer’s right to examining the goods and acceptance
The buyer has the right to examine the goods to see if they arrived in good condition and if they satisfy the agreements on the contract then that’s when he can inform the seller to have accepted the goods.
The buyer has to inform the seller that he has seen the goods or if he does not do that it’s concluded that the goods have arrived safely. If the buyer accepts the goods and rejects them and does not inform the seller for a certain period of time, the goods are regarded as accepted by the buyer.
Malaysian law and Australian law comparison
Breach of contract
The Malaysian sale of goods act and Australian sale of goods act are very similar, they only differ in small aspects of explaining the sections in the various parts of the act. The following will explain and compare the pair.
Action for price
Section 52 of the Australian sale of goods act 1954 is identical to the section 55 of the Malaysian sale of goods act 1957. The acts state that a seller can sue the buyer if he/she neglects or refuses to pay for the goods according to the terms of the contract. The buyer can still be sued for not paying even when they have not acquired the goods as long as there was a certain day of payment as agreed in the contract.
Damages for non-acceptance
Section 53 of the Australian sale of goods act 1954 is similar to section56 of the Malaysian sale of goods act. It reads that the buyer can be sued if the buyer wrongfully neglects or refuses to accept and pay for the goods. The Australian act continues to explain further that damage is the estimated loss directly and naturally resulting in the ordinary course of events from the buyer’s breach of contract but if there is an available market for the goods, the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price at the time or times when the goods ought to have been accepted, or, if no time was fixed for acceptance, at the time of the refusal to accept.
Damages for non-delivery
Section 54 of the Australian sale of goods act 1954 is similar to section 57 of the Malaysian sale of goods act. It states that the buyer can sue the seller if the seller wrongfully neglects or refuses to deliver the goods to the buyer. The Australian sale of goods act continues to explain damages in the same way as above in section 53 of Australia.
Section 58 of the Malaysian sale of goods act is similar to section 55 of the Australian sale of goods act, it discusses about that in any suit for breach of contract to deliver specific or ascertained goods.
Remedy for breach of warrant
Section 59 of the Malaysian sale of goods act is similar to section 56 of the Australian sale of goods act, but the Australian act further explains the measure of damage as above.
Repudiation of contract before due date
section 60 of the Malaysian sale of goods act states that Where either party to a contract of sale repudiates the contract before the date of delivery, the other party may either treat the contract as subsisting and wait till the date of delivery, or he may treat the contract as rescinded and sue for damages for the breach.
Interest by way of damages and special damages
Nothing in this Act shall affect the right of the seller or the buyer to recover interest or special damages in any case where by law interest or special damages may be recoverable, or to recover the money paid where the consideration for the payment of it has failed. As upheld by both countries. Section 61 in Malaysia and section 57 in Australia
In this part, both countries have their own acts, which are different from each other. The following table will compare the acts according to the sections.
Exclusion of implied terms and conditions, section 62
Rights etc enforced by action section 59
Reasonable time a question of fact section 63
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