Question 4 What are the difference between a condition and warranty under the Sale of Goods Contract?

What are the consequences if a party to the sale of goods contract breach a condition under the contract? Terms of the Contract
Section 12 (1) of the Sale of Goods Act states that a stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty.

Condition
Section 12 (2) of the Sale of Good Act provides that a condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to right to treat the contract as repudiated. Generally, a breach of condition entitles the innocent party to repudiate the contract. But, there are certain situations in which an innocent party cannot repudiate the contract but can only claim damages:

Where the buyer chooses to treat the breach of condition as a breach of warranty and claims damages only. Where the buyer waives the condition. Where the contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of any condition must be accepted as a breach of warranty unless otherwise provided in the contract. Where the contract is for specific goods the property in which has passed to the buyer, the breach of any condition must be accepted as a breach of warranty unless otherwise provided in the contract.

Warranty
Section 12 (3) of the Sale of Goods Act Provides that a warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated.

Remedies for Breach of Contract

There are several remedies provided under the Sale of Goods Act for breach of contract of sale of goods:

Right of the unpaid seller against the goods

oBasically, an unpaid seller is a seller to whom the whole of the price has not been paid or tendered, or 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 due to the fact that the instrument has been dishonoured etc.

oThe rights of an unpaid seller against the goods are:

a) A lien on the good for the price, where he is in possession of the goods (section 46 (1)(a) of the Sale of Goods Act) b) A right of stopping the goods in transit in the case of the buyers insolvency, where he has parted with the possession of the goods (section 46 (1)(b) of the Sale of Goods Act) c) A right of resale, subject however to section 54 (section 46 (1) (c) of the Sale of Goods Act. d) A right of withholding delivery, where the property in goods has not passed to the buyer (section 46(2) of the Sale of Goods Act)

Rights of the seller to sue for breach of contract

oThe seller can sue the buyer for breach of contract if:

a) It is contracted that the price be paid on a certain date regardless of delivery and the buyer wrongfully neglects or refuses to pay such price even thought the property in the goods has not passed and the goods have not been appropriated to the contract (section 55(2) of the Sale of Goods Act) b) The property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods. (Section 55 (2) of the Sale of Goods Act)

Right of the buyer to bring an action for non-delivery

o Section 57 of the Sale of Goods Act provides that 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.

Rights of the buyer to bring an action for specific performance

oThe buyer may bring an action for specific performance of contract by way of delivery of specific or ascertained goods. This is provided under Section 58 of the Sale of Goods Act. oHowever, this remedy depends very much on the discretion of the courts. Normally, specific performance is ordered by counts only when the goods are special or peculiar kind such as valuable paintings, priceless antique etc: Case: Behnke v Bede Shipping Co.Ltd. (1927) 1 K.B. 649 o The courts held that a ship was a specific chattel in respect of which an order for specific performance could be made. Here, the court took info account of the fact that the ship in question was of peculiar and practically unique value to the buyer, that the buyer wanted the ship for immediate use.

Remedies available to buyer for breach of warranty

oIf the seller commits a breach of warranty of where the buyer opts or is compelled to treat a breach of condition by the seller as a breach of warranty, the buyer cannot reject the goods. oHowever, the buyer may set up against the seller the breach of warranty in diminution or extinction of the price or sue the seller for damages for breach of warranty.

Question 5 What is the main legislation governing agency in Malaysia and the statutory definition of agent and principal provided under the Malaysia law? Discuss and analyse the various nature for formation of an agency? Scope of Sale of Goods Act
The main legislation governing the sale of goods in Malaysia is the Sale of Goods Act 1957. Section 1 of the said Act states that the Act shall have effect within the Malay States only. Meanwhile, Section 2 of the Sale of goods Act 1957 defines Malay States as the States of Johor, Kedah, Kelantan, Negeri Sembilan, Pahang, Perak, Perlis, Selangor and Terengganu. As for Penang, Malacca, Sabah and Sarawak, the main legislation applicable regarding sale of goods is the English Sale of Goods Act 1893.

Agency and Principal

Agency is the relationship which subsists between a principal and an agent, where the agent has been authorized to act for the principal or represent him in dealing with others. A principal is person who authorizes the agent to act on behalf of him and an agent is a person who is employed by the principal to do certain act for him or to represent him in dealings with third party (Section 135 of the Contract Act 1950). Normally, an agency is created by the agreement of both the principal and the agent and there is no specific formality in order to form a contract of agency; and consideration is not necessary in order to form a contract of agency (Section 138 of the Contract Act).

Kind of Agency
An agency may be formed in the following ways: By Express Appointment -Under this mode, the principal appoints the agent expressly, i.e. either orally or writing (Section 140 of the Contract Act). By Implied Appointment - Here, implied appointment of agents may occur in three situations: Implied by the Partnership Act 1961 o Section 7 of the Partnership Act states that:

o Every partner is an agent of the firm and his other partners for the purpose of the business of the partnership o Each partner is an implied agent to the firm and has the implied authority to act on behalf of the other partners. o The firm or other partners are liable to whether contracts which had been entered into by any of the partners. Implied from the circumstances of the case o The creation of agency may be implied by referring to the words, conduct or the regular conduct of the business between the parties. o It appears to third parties that certain person is having authority to act on behalf of another person (Section 140 of the Contract Act 1950). Implied from the relationship of husband and wife o It is implied that the wife has authority to pledge the husbands credit in a contract, on condition that the contracts are for necessaries and suited to their condition and style of living. In other words, the wife is an agent of the husband. o However, the husband can rebut this implied authority by proving that: a) b) c) d) He expressly forbade his wife from pledging his credit He expressly warned the tradesman not to supply his wife with goods or credit His wife was sufficiently provided with goods of the kind in question or His wife was given sufficient allowance for buying goods without having to pledge her husbands credit or e) The contract was unreasonable, taking into consideration her husbands income at that time.

By Ratification
Agency by ratification may arise in two situations: a) When an agent who was appointed by the principal, has exceeded his given authority or b) When a person, who has no authority to act for the principal, has acted as if he has the authority to act on behalf of the principal. c) Ratification here refers to certification or acceptance by the principal for an act done without authority or exceeding the authority given.

d) If such situations arise, the principal has a choice either to reject or to accept the contract which has been made on behalf of him. If he accept the affirms the contract, this means that he ratifies the contract and there exits an agency relationship between the principal and the agent (Section 149 of Contract Act 1950). As such, the principal is bound to the said contract. But, if the principal does not accept such contract, then no agency relationship exists and the principal would not be liable upon such contracts. e) The ratification can either be express or implied as provided as provided under (Section 150 of the Contract Act 1950).\

By Necessity or Emergency
Agency by necessity may occur in two situations: a) When a wife is deserted and has no means of support. b) A wife can pledge her husbands credit for necessaries suited to the income and life condition of her husband. c) However, she cannot become an agent by necessity if her husband has provided her with sufficient allowance. When a person is entrusted with another persons property and it becomes necessary for him due to the emergency situation, to do something in order to preserve and to protect that property although he has no authority to do so. Case: Great Northern Railway v Swaffield The plaintiff, a railway company, had been entrusted to deliver a horse of the defendant to deliver a horse of the defendant to a destination. However, when it reached the destination, nobody came to take the horse. The plaintiff had to look after the horse and took several actions in order to preserving the safety of the horse. The plaintiff then claimed from the defendant the extra expenses incurred in preserving the interest of the defendant. However, the defendant refused to pay on the ground that the plaintiff was not authorized to do so. Held: The plaintiff was an agent by necessity and therefore entitled to the claim.

By Estoppel
When the principal himself induces a third party to believe that a person has an authority to act for him, as if that person is his agent, he is stopped by law from denying that agents authority (Section 190 of the Contract Act 1950). In other words, the principal cannot avoid the liability upon the contract being made by that particular agent. When the principal does not inform the third party that his agent has no authority or the agents authority has been terminated, but the agent continues acting on behalf of the principal, then the principal is stopped by law from again denying the agents authority. In this case, the principal would be liable for the contract made by such agent regardless as to whether the agent had acted with or without the principals knowledge. Case: Freeman & Lockyear v. Buckhurst Park Properties Ltd There were four directions in a company. One of them, A, contracted on behalf of the company with T (a third party) without any authority. The other directions knew about the contract but did not inform T that A actually had no authority to act on behalf of the company. Held: The company is estopped from denying that A is the companys agent and from denying that A had the authority to act behalf of the company

Agency by estopped only happen if the principal himself, through his own words or conduct, induced the third party to believe that a certain person is having the authority to act on behalf of the principal. It does not happen if the third party was induced by the agent only. Case: Armagas v Mundogas, The Ocean Frost Held: Agency by estopped does not exits if the agent himself represents to the third party that he is the agent of the principal, and not from the words or the conduct of the principal.

Question 3

i) What is a sale of goods contract and types of goods can be sold under the sale of goods contract? Scope of Sale of Goods Act
The main legislation governing the sale of goods in Malaysia is the Sale of Goods Act 1957. Section 1 of the said Act states that the Act shall have effect within the Malay States only. Meanwhile, Section 2 of the Sale of goods Act 1957 defines Malay States as the States of Johor, Kedah, Kelantan, Negeri Sembilan, Pahang, Perak, Perlis, Selangor and Terengganu. As for Penang, Malacca, Sabah and Sarawak, the main legislation applicable regarding sale of goods is the English Sale of Goods Act 1893.

Interpretation o In this Act, unless the context otherwise requires buyer means a person who buys or agrees to buy goods; delivery means voluntary transfer of possession from one person to another.

o Goods are said to be in a deliverable state when they are in such state that the buyer would under the contract be bound to take delivery of them.

o Document of title to goods includes a bill of lading, dock warrant, warehouse keepers certificate, wharfingers 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.

o Fault means wrongful act or default

o Future goods means goods to be manufacture or produced or acquired by the seller after the making of the contract of sale.

o 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.

o a person is said to be insolvent who has ceased to pay his debts in the ordinary course of business, or cannot pay his debts as they become due, whether he has committed an act of bankruptcy or not. o Mercantile agent means a mercantile agent having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purposes of sale, or to buy goods, or to raise money on the security of goods.

o Price means the money consideration for a sale of goods; property means the general property in goods, and not merely a special property.

o Quality of goods includes their state or condition; seller means a person who sells or agrees to sell goods; 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

ii) Discuss and analyse the rights of the unpaid seller under the sale of goods contract. Right of the unpaid seller against the goods
oBasically, an unpaid seller is a seller to whom the whole of the price has not been paid or tendered, or 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 due to the fact that the instrument has been dishonoured etc.

oThe rights of an unpaid seller against the goods are:

a) A lien on the good for the price, where he is in possession of the goods (section 46 (1)(a) of the Sale of Goods Act) b) A right of stopping the goods in transit in the case of the buyers insolvency, where he has parted with the possession of the goods (section 46 (1)(b) of the Sale of Goods Act)

c) A right of resale, subject however to section 54 (section 46 (1)(c) of the Sale of Goods Act. d) A right of withholding delivery, where the property in goods has not passed to the buyer (section 46(2) of the Sale of Goods Act)

Question 1 i. What are the important elements for formation of a good contract?

Formation of the Contract

Section 5 (1) of the Sale of Goods Act provides that a contract of sale is made by an offer to buy or sell goods at a price and by the acceptance of such an offer. Section 5 (1) further indicates that the contract may provide for immediate delivery of goods or the immediate payment of the price or both. As a matter of fact, delivery or payment may be even be made by way of instalments. Price here refers to the money consideration for the sale goods. Section 5 (2) of the Sale of Goods Act states that a contract of sale may be made in writing or by word of mouth or party in writing and party by word of mouth or may be implied from the conduct of the parties. As to the capacity to contract, the legislation, legal principals and law of contract governing capacity in ordinary contract law apply to contract of sale, with the Contract Act being the main legislation.