UNIVERSITI UTARA MALAYSIA

SUBJECT:
LAW, ETHICS AND CORPORATE SOCIAL
RESPONSIBILITY
(GMUL 5063)

GROUP PROJECT:
THE LAW OF SALE OF GOODS

Fiman Plastics Industries Sdn Bhd V Zaitun Industries Sdn

Bhd [2003] 4 MLJ 258 (High Court)

PREPARED FOR:
DR. NUARRUAL HILAL MD. DAHLAN

PREPARED BY:
Dharma Osman - 803672
DzulHisham Ghazali - 803724

SUBMISSION DATE:
28th AUGUST 2010

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TABLE OF CONTENTS

1. Elaborating the Facts 2

2. Identifying the Issues 3
3. Arguments of the Plaintiff 3
4. Arguments of the Defendant 3
5. Opinion and Judgment of the High Court 4
6. Opinion and Comments 6
7. Reference 7

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Case Law:

Fiman Plastics Industries Sdn Bhd V Zaitun Industries Sdn Bhd[2003] 4 MLJ 258 (High Court)

1. Elaborating the facts.

 The plaintiff (Fiman Plastics Industries) is in the business of manufacturing plastic

products, which include plastic bottles and packaging and was from 1983 – 1988, the sole
supplier and manufacturer of bottles used by the defendant (Zaitun Industries) in the
packaging of their products which included baby shampoo bottles.
 Zaitun Industries is a company carrying on the business of manufacturing cosmetics,
toiletries, pharmaceutical and household products since 1978.
 Negotiations took place between Zaitun Industries and Fiman Plastics Industries on the
said bottle’s concept, shape, volume capacity and purpose.
 Zaitun Industries then made orders for the said bottles and Fiman Plastics Industries
delivered the said bottles to Zaitun Industries premises. The said bottles, caps and inserts
were delivered separately and Zaitun Industries employees at the production stage would
firstly fill the shampoo, then put in the insert and screw on the cap.
 There were latent defects on the bottles when shampoo was filled into the bottles and
buyers had complained verbally of the leakage to SD5 (Chern Weai Keat), the salesman
of Fiman Plastics Industries.
 The bottles were also found to be defective with cracks appearing at the neck. These
latent defects were not discovered at the time of receipt of the goods.
 The unused bottles were kept in Zaitun Industries store as directed by SD5. Zaitun
Industries believed that Fiman Plastics Industries would rectify the defects.
Subsequently, the unused 79,402 bottles were destroyed when the defendant shifted its
factory to Rawang.
 Although Zaitun Industries was not satisfied with the said bottles, the cost of the bottles
was fully paid to Fiman Plastics Industries due to the financial practice.
 Zaitun Industries made demands to Fiman Plastics Industries to credit the sum of
RM150,681.02 to Zaitun Industries account as Fiman Plastics Industries had failed to
rectify the defects.

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2. Identifying the issues.

The issue to be determined was whether on a sale of goods by virtue of s 16 (1) (a) of the Sale of
Goods Act 1957, the defendant had made known to the plaintiff the purpose for which the bottles
were required so as to show that he relied on the seller’s skill or judgment was one of fact
depending on the circumstances of the particular case.

Section 16(1)(a) of the Sale of Goods Act 1957 (‘the Act’) states as follows: Subject to this Act
and any other law for the time being in force, there is no implied warranty or condition as to the
quality or fitness for any particular purpose of goods supplied under a contract of sale, except as
follows:

(a) Where the buyer, expressly or by implication makes known to the seller the particular
purpose for which the goods are required, so as to show that the buyer relies on the
seller’s skill or judgment, and the goods are of a description which it is in the course of
the sellers’ business to supply (whether he is the manufacturer or producer or not) there is
an implied condition that the goods shall be reasonably fit for the purpose:

3. Arguments by Fiman Plastics Industries (Plaintiff)

Fiman Industries denies that the bottles were defective.

4. Arguments by Zaitun Industries (Defendant)

When filing of the shampoo into the bottles started, it was found that there were latent defects on
the bottle. Subsequently, buyers complained that there was leakage from the neck of the said
bottles. As and when defects/problems were discovered, defendant’s employee (SD2) would
verbally complain to SD5, the salesman of plaintiff.

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Drop tests were conducted by the defendant’s employee and it was found that the bottles would
break. The bottom of the bottle would fall first but the neck of the bottle would break.

The said bottles were found to be defective with cracks appearing at the neck. These were latent
defects which were not immediately discovered at the time of receipt of the goods.

The unused bottles were kept at the defendant’s store as directed by SD5. The defendant
believed that the plaintiff would rectify the defects. Subsequently the unused 79,402 bottles
were destroyed when the defendant shifted its factory to Rawang.

Although the defendant was not satisfied with the said bottles, the cost of the bottles was full
paid to the plaintiff due to the financial practice of the defendant in force then.

The defendant through the letters of its solicitors dated 26/2/1988 and 25/3/1988 made demands
upon the plaintiff to credit the said sum of RM150,681.02 to the defendant’s account as the
plaintiff had failed to rectify the defects.

The defendant has counterclaimed amongst other things, for loss of profits for baby shampoo in
the of RM119,897.02. This is based on 79,402 bottles @ RM1.51 normal profit margin of 55%
for shampoo products.

5. Opinion of the High Court

In this case, the only issue to be determined by court was whether Zaitun Industries could rely on
the acceptations of S16(1)(a) of the Sale of Goods 1957.

Section 16(1)(a) of the Sale of Goods 1957 states that in order to rely on the exception of implied
warranty or condition as to the quality or fitness for any particular purpose of goods supplied
under a contract of sale, the buyer must expressly or by implication make known to the seller the
particular purpose for which the goods are required, so as to show that the buyers relies on the
seller’s skill or judgment, and the goods are of a description which it is in the course of the
seller’s business to supply (whether he is the manufacturer or producer or not).

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In the case of Union Alloy (M) Sdn Bhd v Syarikat Pembinaan Yeoh Tiong Lay Sdn Bhd, (1993)
3 MLJ 167, the High Court in the said case summarize the preconditions of s 16(1)(a) as follows:

(a) The buyer must make known to the seller the particular purpose for which the goods are
required;

(b) It must be shown that there was reliance by the buyer on the seller’s skill and judgment,
and the buyer must in fact rely on the seller to supply suitable goods;

(c) The goods must be of a description which it is in the course of the seller’s business to
supply; and

(d) The goods are specific; they must not be sold under their patent or trade name.

On the fact of this case, it was established that SD5 was an authorize agent of the plaintiff and
expressly authorized to liaise with and make representation to the defendant. In his evidence,
SD5 stated that he would supply replacement bottles for the defective bottles. Indulgence of
time was given to the plaintiff to do so. The defendant did make attempts to return the goods by
asking SD5 to take the bottles.

From the facts of this case, the defendant had when purchasing the said bottles, made known to
SD5 that they were meant to contain baby shampoo and that the said bottles should be fit for that
purpose.

It was the plaintiff’s business to supply and manufacture suitable plastic bottles fit to contain the
baby shampoo to be produced by the defendant. Looking at the representation by SD5, who is
the plaintiff’s salesman, the plaintiff is stopped from denying that the bottles were defective. On
the facts, SD5 had admitted that the bottles supplied to the defendant suffered from many defects
including breakage and leaking. As such, the high court held that Zaitun Industries has fulfilled
the precondition contained under S16(1)(a). This means that when Zaitun Industries bought the
plastic bottles from Fiman Plastics Industries there is an implied warranty by Fiman Plastics
Industries as to the quality and fitness of the bottles.

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However, the court only allows Zaitun Industries counterclaim to the extent of the total amount
of RM30,704.64, as Zaitun Industries has failed to provide any tangible evidence to support their
claim for loss of profit and for damages sustain to their goodwill and reputation .

The counterclaim by the defendant is allowed to this extent:

i. Special damages

Cost of 79,402 bottles which cannot be : RM25,408.64

used by the defendant at 0.32 sen per bottle

Labels for baby shampoo : RM3,000

Carton boxes for baby shampoo : RM2,376

Total RM30,784.64

ii. Interest at 8%pa from 25 September 1987 until full settlement; and

iii. Cost.

6. Our opinion and Comments

In this case, Zaitun Industries claimed that Fiman Plastics Industries has breached the implied
warranty as to the quality and fitness of the plastic bottles. The evidence given by SD5 who was
Fiman Plastics Industries sales person clearly shows that Zaitun Industries when placing the
orders for the plastic bottles had made known to Fiman Plastic Industries the purpose for which
the bottles were required for. It was based on that fact and evidence that the high court held the
precondition contain in S16(1)(a) had be fulfilled by Zaitun Industries.

However, the court did not allow Zaitun Industries counterclaim as prayed by them because
Zaitun Industries has failed to provide any tangible evidence to support the claim. Since their
claim was not proved, it was too remote for the court to access the damages for such claim.

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7. Reference

 The Malayan Law Journal Fiman Plastics Industries Sdn Bhd v. Zaitun Industries Sdn
Bhd (2003) 4 MLJ 258.

 Sale of Goods Act 1957.

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