Contract of Indemnity

 A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is called a 'contract of indemnity'.(Wiki Answer,2010).  All contracts of insurance (other than marine, life and accident insurance are contract of indemnity. This means that in case of a loss against which the policy has been made, the insured is entitle to be indemnified, for example, to be compensated for his loss but he cannot recover more than the actual loss

The example for indemnity contract are;

 Ali owned a factory in Bintulu and he bought an insurance to assured his factory from fire accident. One day, factory store room is burned and he asked for compensation for his loss. Under indemnity contract, insurance company will pay compensation for his loss as stated in the contract.

Terms of Contract

When parties entered into an agreement, the terms of contract are very important as it contained information and details regarding the contract. Thus, it is important for us to know what are terms of contract and the rules and regulations that must included in term of contract. Below are few FAQs regarding term of contract.

What is ‘term of contract’?

 Term of contract is a stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty [Section 12(1)]

What is ‘warranty’? What rights may arise if warranty is breached?

Warranty is a stipulation collateral to main purpose of the contract. The rights to claim for damages but not a right to reject the goods and treat of contract may arise if the warranty is breached. [Section 12 (3)] 

What is ‘condition’? What rights may arise if condition is breached?

A condition is a stipulation essential to the main purpose of the contract. The rights to treat the contract may arise of the condition is breached [Section 12(2)]

Who determine whether a term of contract is warranty or condition?

The Court is the one who determine whether a term of contract is a warranty or condition.

What is meant by ‘time is of essence in the contract’?

 Time is essence in the contract mean that the timing or time for payment is the key or an essential element of the contract. For example, if the time pf payment shall be the essence of the contract, if the buyer fails to pay by an agreed date, it does entitle the seller to repudiate the contract.

nemo dat quod non habet

Nemo dat quod non habet means that no one [can] give what he does not have" as stated in Section 27 of the Sale of Goods Act 1957.  In other meaning,  the purchase of a possession from someone who has no ownership right to it denies the purchaser any ownership title. The rationale behind this rules is to protect the rights of ownership. Related cases showing the nemo dat quod non habet rule are illustrated in Lim Chui Lai v. Zeno Ltd (1964) and Ng Nyat Siang v. Arab Malaysian Finance Bhd & Anor (1988)

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However, there are some exceptions to the nemo dat quod habet rule included; 

1) estoppel

2) sale by merchantile agent

3) sale by one of joint owners

4) sale under voidable title

5) sale by a seller in possession after sale

6) sale by a buyer in possession

Caveat Emptor and Caveat Venditor

Caveat Emptor is a Latin word it means "let the buyer beware". It is a warning that tells buyer that the goods he or she is buying are "as it", or subject to all defects. The seller is not going to carry full responsibilities for any defect in the goods. It is stated under the doctrine of caveat emptor. With Caveat Emptor, seller is not liable to disclose all the information of the product. Thus, the buyer must examine, judge, and test the product by himself or herself before making the decision to purchase the product. The most common practice of caveat emptor is used in many online businesses such as E-bay and some of the e-commerce business. Mostly, the seller will state “CAVEAT EMPTOR" in the description of the goods or in any information that may related to the sale of goods. Thus, buyer should really be careful when buying goods especially during online shopping. 

Sound horrible??? That is the fact and reality when we are engaging in sale of good. However, there are quite a number of implied conditions and warranties to protect the buyer. The implied terms are;

• Implied Condition as to Title
• Implied Warranty to Quiet Possession of the Goods
• Implied Warranty against Encumbrance of Charge
• Implied Condition on Sale by Description
• Implied condition of Fitness for Purpose
• Implied Condition of Merchantable Quality
• Implied Condition on the Sale by Sample

Well, when dealing in sale of goods, buyer is not only the only victim in faulty transaction. Sometimes, the seller is victimized from faulty transaction. Some indecent buyer may trick seller into engaging faulty trading to gain benefit from the seller. Thus, the seller should also have awareness and carry responsibilities when engaging in sale of goods.  Caveat Venditor means "let the seller beware". It’s stated that despite the responsibilities imposed on buyers, sellers also have to bear the responbilities on goods to prevent themselves from being deceived. The case of MacPherson v. Buick Motor Co. (1916) is regarded as the origin of caveat venditor.  In this case, Buick Motor is liable for MacPherson's injury due to the collapse of a defective wheel. 

Moral of the story: Be careful when engaging in sale of goods. Inspect and see carefully the agreement especially those 'too good to be true' agreements 

Implied Term Under SOGA

 A contract of sales of goods is an essential contract in our daily life and most of us do enter into a contract of sales of goods.  For instance, you want to buy a laptop with a list of specifications that you want at a reasonable price. Thus, you go to a well known computer shop and negotiate with the seller. The negotiation ended when the seller agreed to sell you the laptop you wished at a price. Thus, he printed out the receipt and gave it to you and you signed the receipt (or an agreement) and pay the price of laptop to the seller. In this case, you are actually entering into a contract of sales of goods.


No one wish that something bad to happen to the goods we bought and thus, we need to understand the rules and regulations set by law of Malaysia regarding the sales of goods in order to protect our rights. 


One of the law governing the sales of goods is The Sale of Goods Act 1957. It implies a number of stipulations in every contract for the sale of goods. These implied terms  stated in Section 14 to Section 17 are;

Terms	Section	Explanation
Implied condition as to title	Section 14(a)	Seller must has a rights to sell the goods at the time the property is to pass to the buyer
Implied warranty that buyer shall have quiet possession of the goods	Section 14(b)	Seller should have and enjoy the full possession to the goods he bought from the seller.
Implied warranty that the goods are unencumbered	Section 14(c)	The goods should be free from any charge in favor of any third party not declared to the buyer before or at the time the contract is made
Implied condition that in a sale of goods by description, the goods must correspond with the description	Section 15	The goods must be correspond with the description stated in the contract
Goods Must be Reasonably Fit for the Purposes for which the Buyer wants them	Section 16	Buyer must exercise case when he makes purchases. Else, the buyer must be the consequences
Sale by sample	Section 17	Contract for sale by sample must have such implied condition: 1)      bulk shall correspond with the sample in quality 2)      buyer shall have reasonable opportunity of comparing the bluk with the sample 3)      goods shall free from any defect. If bulk is partly defect, buyer may elect to accept and claim for damages

Notes: These implied terms may apply ONLY when the parties to the contract of sale have not EXCLUDED or MODIFIED them.




Reference: General Principles of Malaysian Law by Lee Mei Pheng

Nature, Definition, and Scope of SOGA

Another chapter has began and the topic I am going to write today is regarding the tutorial question discussed during class. SOGA or also stand for Scope of Sale of Goods Act 1957 is a law to govern the rights of the buyer and seller. It is an essential law regarding the sale of goods. Here is some FAQs regarding the nature, definition and scope of SOGA.

What is ‘sale of goods’ contract?

Sale of goods contract is a contract whereby the seller transfers or agree to transfer the property in goods to the buyer for a price [Section 4 (1), Sale of Goods Act 1957]. It is said that sale occurs when the seller passes the ownership to the buyer.

Discuss the elements necessary to exist in a sale of goods contract.

The elements necessary to exist in sale of goods contract are parties to the contract, price and also offer and acceptance. In a contract of sale of goods, the parties involved are the seller and buyer. Their capacity is governed under the Contracts Act 1950 where;

The contract is made by an offer to buy or sell goods at a price + acceptance of such an offer (s.5(1)). 

The offer & acceptance may be made in writing or/and by word of mouth, or implied from conduct (s.5(2))

The most essential elements that must included in a contract of sale of goods is the price. Price involved the money consideration in a sale of goods. 

What is ‘goods’ under the SOGA?

By definition from Section 2,SOGA, goods is defined as '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 agrees to be severed before sale or under the contract of sale'. Land is excluded from the SOGA.

Goods can be in the form of future goods or existing goods [Section 6,SOGA].  Besides that, there are specific goods and unascertained goods. Future goods are goods that to be produced by seller ONLY after making the contract of sale [Section 2, SOGA]. For example, a construction company may only start building the house in housing area after they make the contract of sale to the buyer. The property (house) is then classified as future goods.

Mean while, existing goods are the goods that already possessed by seller or owned by the seller. Specific goods are goods that are identified and agreed upon the contract of sale of goods is made. For example, when we go to a second hand car dealer and we bought the second hand car after we inspect it. The property ( second hand car) is said to be a specific goods. Unascertained goods are the goods that identified by description of the goods only. For example, I browsed through an online boutique and saw a pretty cloth that sell for RM 23. I bought the cloth through the online boutique just by seeing the description of the cloth. The cloth is an unascertained goods.

Price in an important feature in a sale of goods contract. How is price being fixed? 

There are few manners in which the price may be fixed;

• Fixed by contract
• Left in a manner to be agreed, eg by 3rd party
• Determined by course of dealing of the parties
• By subject to a reasonable price, s.9.

Mind Mapping (Company Law)

A brief notes regarding Company Law.