Sale of Goods Act 1930

Contd

Act Deals with goods Sec 4(1) contract of sale 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.

Essential elements

Two parties - Seller and buyer Goods Transfer of property Price Essential elements of a valid contract

Contract of sale
Contract of sale maybe

Express

Implied from the conduct of the parties

In writing

By word of mouth

Partly in writing and partly by word of mouth

Contract of sale and agreement to sell

Contract of sale includes

Sale

Agreement to sell

i.e, where the ownership of goods is transferred

I.e., where the transfer of ownership in goods is to take place at a future time or subject to fulfillment of some condition

Condition and warranties

Both seller and buyer make representations to each other at the time of entering into contract of sale. Some of these representations are mere opinions which do not form a part of the contract of the sale. Whereas some become part of the contract of sale

Contd

Representations which become part of the contract of sale are termed as stipulations which may rank as condition or warranty Stipulation Sec 12(1) A stipulation in a contract of sale of goods may be a condition or warranty.

Meaning of condition

A condition is a stipulation

(a) which is essential to the main purpose of the contract (b) the breach of which gives the aggrieved party a right to terminate the contract.

It goes to the root of the contract. Its non-fulfillment upsets the very basis of the contract.

Warranty

It is a stipulation collateral to the main purpose of the contract It is of secondary importance If there is a breach of a warranty, the aggrieved party can only claim damages and it has no right to treat the contract as repudiated.

Condition and warranties

There is no hard and fast rules as to which stipulation is a condition and which one is a warranty. Whether a stipulation is a condition or a warranty depends in each case on the construction of the contract as a whole. The court is not to be guided by the terminology used by the parties to the contract

Basis of distinction
Condition It is a stipulation which is essential to the main purpose of the contract. The aggrieved party can terminate the contract A breach of condition can be treated as a breach of warranty . For example, a buyer may like to retain the goods and claim only damages. Warranty It is a stipulation which is only collateral to the main purpose of the contract The aggrieved party can claim damages but cannot terminate the contract. A breach of warranty cannot be treated as a breach of condition.

Conditions and warranties

Two kinds express and implied Express conditions and warranties Conditions and warranties expressly provided in the contract Implied conditions They are implied by the law into the contract

Condition as to title Sale by description Sale by sample Condition as to the quality of the items

Conditions and warranties

Implied warranties Warranty of quite possession Warranty as to freedom from encumbrances Warranty to disclose dangerous nature of goods

Doctrine of caveat emptor

Let the buyer beware It is the duty of the buyer to be careful while purchasing goods of his requirement and in the absence of the enquiry from the buyer, the seller is not bound to disclose every defect in the goods of which he may be cognisant.

Exceptions to the doctrine of caveat emptor

In case of misrepresentation by the seller In case of concealment of latent defect In case of sale by description In case of sale by sample In case of sale by sample and description Fitness for a particular purpose Merchantable quality

Passing of property

Transfer of property in goods from the seller to the buyer is the main object of a contract of sale. property in goods means the ownership of goods An article may belong to A although it may not be in his possession. B may be in possession of that article although he is not its owner. It is important to know the precise moment of time at which the property in goods passes from the seller to the buyer for the

Contd

Significance Time of transfer of ownership of goods decides various rights and liabilities of the seller and buyer. Risk Owner to bear the risk and not the person who merely hs the possession Action against third party Owner can take action and not the person who merely has possession.

Types of goods

Goods Existing goods Future goods Contingent goods

Types of existing goods

Specific goods Ascertained goods Unascertained goods Goods sent on approval or on sale on return basis

Primary rules

Goods must be ascertained Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained. Intention of the parties Where there is a contract for the sale of specific or ascertained goods the property in them passes to the buyer at the time when the parties intend it to pass

Contd

Where the intention of the parties cannot be ascertained from the contract

Specific goods

Passing of the property at the time of the contract Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made.

Contd

Passing of property delayed beyond the date of the contract

(1) Goods not in a deliverable state Where there is a contract for the sale of specific goods not in a deliverable state,ie, the seller has to do something to the goods to put them into a deliverable state, the property does not pass until such thing is done and the buyer has notice of it.

Contd

(2) When the price of goods is to be ascertained by weighing, etc. Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh measure test or to do some other act or thing with reference to the goods for the purpose of ascertaining the price the property does not pass until such act or thing is done and the buyer has notice thereof

Contd

Unascertained goods

Where there is a contract for the sale of unascertained goods, the property in the goods does not pass to the buyer until the goods are ascertained. Until the goods are ascertained there is merely an agreement to sell.

Contd

Where there is a contract for sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, the property in the goods thereupon passes to the buyer. ascertainment of goods, unconditional appropriation to the contract

Delivery to carrier

A seller is deemed to have unconditionally appropriated the goods to the contract where he delivers them to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer and does not reserve the right of disposal.

Goods sent on approval or on sale or return

When goods are delivered to the buyer on approval or on sale or return or other similar terms the property therein passes to the buyer

(1) When he signifies his approval or acceptance to the seller: (2)When he does any other act adopting the transaction

Reservation of right of disposal

The property in goods whether specific or subsequently appropriated to the contract does not pass to he buyer if the seller reserves the right of disposal of goods until certain conditions are fulfilled.

Rights of an unpaid seller

Meaning of an unpaid seller Sec 45(1)(2)

The seller of the goods is deemed to be an unpaid seller

(a) When whole of the price has not been paid or tendered (b) When a bill of exchange or other negotiable instrument (such as cheque) has been received as conditional payment and it has been dishonoured [sec 45(1)]

Contd

The seller shall be called an unpaid seller even when only a small portion of the price remains to be paid. It is for the non-payment of the price and not for other expenses that a seller is termed as an unpaid seller. Where the goods have been sold on credit, the seller cannot be called as an unpaid seller during the credit period unless the buyer becomes insolvent. On the expiry of credit period if the price remains unpaid, then only the seller will become an unpaid seller

Contd

Where the full price has been tendered by the buyer and the seller refused to accept it, the seller cannot be called as an unpaid seller.

Rights of an unpaid seller

Against goods Against buyer personally

AGAINST GOODS

Where the property in goods has passed to the buyer

Where the property in goods has not passed to the buyer

Contd

Where the property in goods has passed to the buyer

Right of lien

Right of stoppage in transit

Right of resale

Right of lien

The right of lien means the right to retain the possession of the goods until the full price is received.
Circumstances under the right of lien can be exercised

Where the goods have been sold without any stipulation to credit Where the goods have been sold on credit, but the term of credit has expired Where the buyer becomes insolvent

Right of stoppage of goods in transit

Right of stoppage in transit means the right of stopping the goods while they are in transit, to regain possession and to retain them till the full price is paid. Conditions under which Right of stoppage in transit can be exercised

(i)Seller must have parted with the possession of goods,ie, the goods must not be in the possession of the seller

Contd

(ii) the goods must be in course of transit (iii) buyer must have become insolvent

Right of resale

An unpaid seller can resell the goods under the following circumstances:

(i) Where the goods are of a perishable nature (ii) Where the seller expressly reserves the right of resale if the buyer commits a default in making payment (iii)Where the unpaid seller who has exercised his right of lien or stoppage in transit gives a notice to the buyer about his intention to resell and buyer does not pay or tender within a reasonable time.

Contd

Where the property in goods has not passed to the buyer

Withholding delivery

Lien

Stoppage in transit

Resale

Contd

Against the buyer personally

Suit for price

Suit for damages

Suit for interest

Contd

Buyers suits

(a) Suit for damages for non-delivery of the goods (b) suit for specific performance Suit for breach of warranty (d)Suit for interest (e)Suit for damages for repudiation of contract by the seller before the due date.

Remedies for breach of contract of sale

(1) sellers suits

(a) Suit for price (b) Suit for damages for non acceptance of the goods (c) Suit for damages for repudiation of contract by the buyer before the due date (d) Suit for interest.