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SALE OF GOODS ACT 1930

Section 4 – Sale and Agreement to Sale

1. The 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. There
may be a contract of sale between one part owner and another.
2. A contract of sale may be absolute or conditional.
3. Where under a contract of sale the property in the goods is transferred
from the seller to the buyer, the contract is called a sale, but where the
transfer of property in the goods is to take place at a future time or subject
to some conditions thereafter to be fulfilled, the contract is called an
agreement to sell.
4. An agreement to sell becomes a sale when the time elapses; all the
conditions are fulfilled subject to which the property in the goods is to be
transferred.

Examples:
The Section may be illustrated by the following examples:
1. A agrees to buy a haystack from B on B’s land with liberty to come on B’s
land to take it away. This is a sale and B cannot revoke the licence given to
A to woo on his land. (Wood Vs Manley 1839)
2. Agreement by A to buy 20 tonnes of oil from the seller’s cisterns. The seller
has many cisterns, with more than 20 tonnes in them. This is merely an
agreement to sale. (White Vs Wilks, 1813)
3. Agreement for sale of a quantity of nitrate of soda to arrive at a certain ship.
This is an agreement to sell at a future date subject to the double condition
of the arrival of the ship with the specified cargo on board. (Johnson Vs
Macdonald 1842)
4. A customer who picks up goods in a self-service shop is merely offering to
buy them and the sale is not complete until they are paid for.
(Pharmaceutical Society Vs Boots, 1952)

Essential Requisites of Sale

In the case of (state of Madras Vs Gannon Dunkerley and Company Limited,


1958) the Supreme Court has held that according to the law, both of England
and India, in order to constitute a sale, it is necessary that there should be an
agreement between the parties for the purpose of transferring title to goods,
which of course presupposed capacity to contract, that it must be supported by
money consideration, that as a result of transaction, the property must actually
pass in the goods. Unless all these elements are present there would be no
sale.
The essential object of the contract of sale is the exchange of property for a
money price. There must be a transfer of property or an agreement to transfer
it, from one party, the seller, to the other, the buyer, , in consideration of a
money payment or of a promise thereof by the buyer thereof. Both under the
common law and the statute law relating to sale of goods England and in
India, to constitute a transaction of sale, there should be an agreement,
expressed or implied relating to goods to be completed by passing of
title in those goods. It is the essence of the concept that both the agreement
and the sale should relate to the same subject matter. Transfer of property in
goods for a price is the linch pine of the definition. It is, however, not an
inevitable rule that the price must be fixed. An allotment of goods among
partners on dissolution of partnerships is not a sale. Exchange of property for
something other than money is not a sale. The difference between a sale and
an exchange is that in the former the price is paid in money while in the latter it
is paid in good by way of barter. But if the exchange is made partly for goods
and partly for a price, the contract is probably one of a sale.

Sale and Agreement to Sale

An agreement to sell, which is also called an executive contract of sale, is a


contract simply, and creates only a jus in personance; the property in the
goods which forms subject matter of the contract remains in the seller, so that
they may be taken in execution of his debts, and belongs on his bankruptcy to
his trusty in bankruptcy; if they are destroyed the loss will, in the absence of
excess agreement, have to be borne by him: and a breach by either party of
the agreement will normally only give the other party a right to sue for
damages.
The term ‘contract of sale’ includes both actual sales and agreement for sale.

The Supreme Court distinguished these two classes of contract –thus


An agreement to sell is a contact pure and simple whereas a sale is a contract
plus conveyance. By an agreement to sale a jus in personance is caused by
a sale a jus in rem also is transferred. Where goods have been sold and the
buyer makes the fault, the seller may sue for the contract price on the count of
‘goods bargained and sold’ but when an agreement to buy is broken, the
seller’s normal remedy is an action for unliquidity damages. If an agreement
to sell be broken, by the seller, the buyer has only a personal remedy against
the seller. The goods are still the property of the seller, and he can dispose of
them as he likes, but if there has been a sale and a seller breaks his
engagement to deliver the goods, the buyer has not only a personal remedy
against the seller but also the usual proprietary remedies in respect of the
goods themselves. In many cases, too, he can follow the goods into the
hands of third parties. Again, if there be an agreement of sale, and the goods
are destroyed the loss as a rule falls on the seller, while if there has been a
sale, the loss as a rule falls up on the buyer though the goods may have
never come to his position. (The Instalment Supply Limited Vs STO
Ahmedabad and others, 1974.)

Formalities of a contract of sale:

Section 5: Contract of Sale - how made


1. A contract of sale is made by an offer to buy or sell goods for a price and
the acceptance of such price. A contract may provide for the immediate
delivery of goods or immediate payment of the price or both, or for the
delivery or payment by instalments. Or that the delivery of payments or both
shall be postponed.
2. Subject to the provisions of any law for the time being enforced, a contract
of sale may be in writing or by the word of mouth or may be impliedly or
may be implied from the conduct of the parties.
A statement or conduct inviting the making of an offer such as by display of
goods in a shop does not buy itself bind the shopkeeper to accept the
customer’s offer even at the price displayed or advertised. Such invitation to
treat therefore differs from an offer, which is intended to be binding on the
person making it and is capable of being accepted without any further
negotiation. Where, however, the accessibility to goods in intended to an
offer capable of acceptance by customer’s act such as filling the petrol tank
of a car from a self service pump or choosing items in a self service shop or
taking goods intended for sale for an automatic vending machine the
question of obtaining seller’s assent does not arise.

Sub-section 1 emphasis the consensual nature of a contract of sale; the


parties may agree to such terms as they think fit. A sale can be complete
even without effecting immediate delivery and immediate payment. In a
contract of sale, the title in goods passes immediately on the payment of
price while in an agreement to sale the title in goods passes at a future time
subject to conditions to be fulfilled thereafter however, when the goods are
accepted by the buyer and the price is received by the seller the sale is
deemed to be complete.

Earnest :
The conclusion of a contract of sale is sometimes marked by the giving of
earnest this was expressly referred to in Sec. 78 of the Contract Act with
regard to the giving of earnest Fry L.J. said in Howe V.s Smith (1884).
The practice of giving something to signify the conclusion of the contract,
sometimes a sum of money, sometimes a ring or other object, to be repaid
or redelivered on the completion of the contract, appears to be one of great
antiquity and very general prevalence….. It was familiar to the law of Roam
( where the rule was that a defaulting buyer forfeited the earnest money
and a defaulting seller was bound to restore it two fold”.
Earnest whether given in money or not must be something of value really
given by the buyer and kept by the seller … A mere symbolic ceremony
such as one party drawing a coin across the other’s hand will not do.
When a deposit in the nature of earnest is paid for the same of immovable
property in India, a vendor by whose default the sale goes off must return
the sum so paid, but if the default is the purchasers the purchaser must
loose it.

Conditions and Warranties :


Sec. 11 - Stipulation as to time – Unless a different intention appears from
the terms of the contract, stipulation as to time of payment are not deemed
to be of the essence of a contract of sale. Whether any other stipulation as
to time is of the essence of the contract or not depends on the terms of the
contract.
Examples: The section may be illustrated by the following examples
1) Sale of some stacks of oak on the sellers ground, upon the terms that
they might remain there for four months and the buyer should pay within 12
weeks of the contract. The seller on the expiration of 12 weeks demanded
the price which the buyer failed to pay. Later the buyer asked for further
time which the seller refused to give, and said that as the buyer had not
paid he should not have the stacks. The buyer later tendered the price, but
the seller refused to accept it and subsequently resold the stacks. The
Buyer was held entitled to recover in an action of trover. ( Martin Dale V/s.
Smith 1841)
2) Sale of goods to be shipped and bill of lading to be dated December –
January. Goods were shipped on 30th January but the bill of lading was
dated 2nd February the buyer was held entitled to reject.

2. Stipulations as to time of payment

As punctual payment does not go to the whole consideration of the sale, the
failure by the buyer to pay on the appointed day does not as a rule, entitle
the seller to treat the contract as repudiated, though he may be entitled to
withhold delivery until the price is paid and to resell the goods if the buyer
does not pay or tender the price within a reasonable time. Consequently, if
before such resale the buyer tenders the price, even though it be on a date
after the date name in the contract the seller cannot, in the absence of a
stipulation to the contrary, treat the contract as at an end and refuse to
allow the buyer to have the goods; and a subsequent resale by him will be
tortious. The time cannot be taken to be the essence of the contract in case
where the contract itself does not stipulate the time for payment of the price.
3. Stipulations as to time of performance of other terms

As the Act deals with all kinds of contracts of sale, and not only with
commercial contracts, the enactment as to stipulations as to time, other
than as to payment of the price, is necessarily put in somewhat general
language. If a man orders a suit of clothes, a promise by the tailor that he
shall have it by a certain date would not, generally speaking, be of the
essence of the contract, though it might be if he was ordering court dress
for the purpose of attending a court on a particular day. But in the case of
commercial contracts, although occasionally stipulations as to time may not
be of the essence, the usual rule is that they are.

In contracts of sales of goods, the computation of the time of performance


from a particular date, act or event is prima facie exclusive of the day, act or
event and inclusive of the day of performance, although this presumption
may be displaced by a contrary intention appearing from the contract and
its surrounding circumstances.

4. Waiver of the stipulations

Stipulations as to time may be waived by the party in whose favour they are
inserted either expressly or by implication, and if he does so he cannot
afterwards treat the failure to comply with them by other party as giving a
right to rescind the contract. Where, however, an initial stipulation making
time of the essence of the contract is waived, reasonable notice to make
time again of the essence would give rise to the right to rescind. There can,
strictly speaking, be no waiver after breach, but to accept goods, though
delivered late, is often spoken of as a waiver of the right of action which the
breach has given.

Section 12. Condition and warranty 1. A stipulation in a contract of


sale with reference to goods which are subject thereof may be a condition
or a warranty.
2. A condition is a stipulation essential to the main purpose of the contract,
the breach of which gives rise to a right to treat the contract as repudiated.
3. 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.
4. Whether a stipulation in a contract of sale is a condition or a warranty
depends in each case on the construction of the contract. A stipulation may
be a condition, though called a warranty in the contract.
Synopsis

1. Conditions and warranties


2. Express conditions
3. Express warranties
4. Representations
5. Implied conditions and warranties
6. Puffs

1. Conditions and Warranties

This section is in effect an additional definition or interpretation section and


supplies a want long felt in India. At the time when the Contract Act was
passed the phrase ‘warranty’ had been and used with several different
meanings and shades of meaning, and the difficulty had been increased by
some of those meanings overlapping some of the meanings of the word
‘condition’. The Contract Act used the word ‘warranty’ in this ambiguous
sense and did not define it. The result was that the courts had to decide on
the construction of each section whether the word ‘warranty’ was used in the
strict sense of the English Law, as it was . The present Act avoids this
confusion and uses the words ‘condition’, and ‘warranty’ and draws a
distinction between the two.

2. Express Conditions

The parties if they wish, may put the contents of any particular statement or
promise which passes between them on the same footing as the description
of the thing contracted for, so that if it is not made good by the party
undertaking it, the failure is deemed to be a total failure of the performance,
and the other is at least wholly discharged, and may in addition recover
damages for such failure of performance. This is a condition in the proper
sense, as defined in sub-s (2). In the usual sense, the condition means an
essential undertaking in the contract which one party promises will be made
good. If it is not made good, not only will the other party be entitled to
repudiate the contract, but also to sue for damages for breach.

£. Express warranties

There may also be, and there occur in common practice, auxiliary promises or
undertakings of which the breach is not intended to avoid the contract, but
only to give a remedy in damages. These are warranties in the proper sense,
as defined in sub-s (3). A condition of sale, protecting a seller in respect of
misdescription, may be overriden by a warranty given before the sale takes
place and damages may be recovered for breach of the warranty. Whether a
statement is to be regarded as warranty must be objectively ascertained by
asking whether adopting the standard of a reasonable man, the other party
assumed that the representor was to be regarded as undertaking legal liability
for his assertions. The importance of the statement, the relative knowledge
and means of knowledge of the parties, and the possibility of verification are
the relevant factors which would indicate whether the statement is a warranty.
Thus, statements may be warranties when made by dealers, though they
would not be warranties if made by private sellers; for the dealers may be in
possession of special knowledge, expertise and means of information not
available to ordinary persons.

4. Representations

An affirmation as regards the goods, if it is to have contractual effect, must be


part of the contract; if it is not, it is only a representation, the untruth of which
will not, in the absence of fraud, give rise to an action an for damages, though
it may enable the other party to rescind the contract and sometimes a
representation may amount to a condition precedent to the formation of the
contract, so that if be untrue, the other party is discharged from all liability. It
depends upon the intention of the parties whether an affirmation made at the
time of, or during the negotiations for sale, is to be treated as a condition, a
warranty or a mere representation: and although an assertion made by the
seller of a fact unknown to the purchaser may be strong evidence that it was
intended as a warranty, it is not necessary so in law. If the representation
does not form part of the contract, that is, if it is neither a condition nor a
warranty, it amounts to an expression of opinion not intended to enter the
bargain and its no fulfilment does not give rise to any right to a legal action.

5. Implied Conditions and Warranty

Although the parties may have used no expressed words that would create
such a stipulation, the law annexes too many contracts, conditions, the breach
of which may be treated by the buyer as avoiding the contract or given a right
to damages. These are called as implied conditions and are enforced on the
grounds that the law infers from all the circumstances of the case, that the
parties intended to add such a stipulation to their contract, but did not put it
into expressed words.
Most of the statutory implied terms as to sellers duties as to title, confirmative
with description and quality, terms designated a conditions by the contract
itself, terms similar to those or already treated as conditions in another case,
time clauses in mercantile contracts and residual category where breached of
term is to be treated as giving right to treat the contract as discharged are
considered as terms likely to be treated as conditions.
The existence of an employed condition or warranty may be rebutted by proof
of facts, which show a contrary intention
6. Puffs

A mere puff is a vague and extravagant statement so preposterous in its


nature that nobody could believe that anyone was misled by it. The extent to
which a statement may be so categorised depends on the degree or
obviousness of its untruth. The circumstances of its making and in particular
on the expertise and knowledge attributable to the person whom it is made.

Section 13

When condition to be treated as warranty,


1. Where a contract of sale is subject to any condition to be fulfilled by the
seller, the buyer may waive the condition or elect to treat the breach of
the condition as a breach of warranty an not as a ground for treating
the contract as repudiate.
2. Where a contract of sale is not severable and the buyer has accepted a
goods or part thereof, or where the contract is for specific goods, the
property in which has passed to the buyer, the breach of any condition
to be fulfilled by the seller can only be treated as s breach of warranty
and not as ground for rejecting the goods and treating the contract as
repudiated unless, there is a term of a contract, expressed or implied to
that effect
3. Nothing in this section shall affect the case of any condition or warranty
fulfilment of which is excused by law, by reason of impossibility or
otherwise.

Transfer of Property as Between Seller and Buyer

Section 18
Goods must be ascertained: where there is contract for the sale of
unascertained goods, no property in the goods is transferred to the buyer
unless and until the goods are ascertained

Synopsis

1. Transfer of property
2. Property cannot pass until the goods are identified
3. Part of a specific whole
4. Property and risk
5. Identification of goods
1. Transfer of property – This and the five following sections of the Act
deal with the question foreshadowed by section 4 of the Act and lay
down rules which assist in deciding the question when the object of the
contract of sale, namely, the transfer of the property in the goods to the
buyer has been affected.

2. Property cannot pass until the goods are identified – It is a


condition precedent to the passing of the property in every case that,
the ‘individuality of the thing to be delivered’ should be established. In
any given case, there may be question whether this condition is fulfilled
or not, and it may be that the property will not pass even if it is fulfilled,
but until it is, there is no possibility of the property passing. It is
essential that the article should be specific and ascertained in a
manner binding on both the parties, for unless that be so, the contract
cannot be construed as contract to pas the property in that category.
Where according to the terms of the contract, the seller was to
supply waste coal ash as and when it was discharged from the bunkers
of the powerhouse, it was held that the contract was for the sale of
unascertained goods and, therefore no property passed to the buyer till
the goods were ascertained. (Tej Singh Vs State of Uttar Pradesh
and others 1981)

3. Part of a specific whole

It is obvious that if the contract is merely for the sale of goods by


description, such as a contract for sale of a certain quantity of malting
barley, or future goods, the necessary condition is not fulfilled. Nor is it
fulfilled even if the goods are so far ascertained that the parties have
agreed that they shall be taken from some specified larger stock. ‘The
parties did not intend to transfer the property in one portion of the stock
more than in another, and the law which only gives effect to their
intention does not transfer the property in any individual portion’(White
Vs. Wilks 1813). And the mere fact that an order for the delivery is
given by the seller to the buyer, and is lodged by the buyer with a
warehouseman, who holds the specified larger stock out of which the
goods sold are to be taken, is not sufficient to transfer the property to
the buyer.(Laurie & Morewood Vs. Dudin & sons 1926) Thus,
where the ascertainment of the goods depends upon their being
separated from the bulk by the seller or a third party or the buyer, by
their being severed, weighed or measured or some other process, no
property can pass until this is done (National Coal Board Vs. Gamble
1959)
4. Property and Risk

In this class of case, it is necessary to distinguish the passing of the


property from the transfer of the risk; the risk usually passes with the
property, but may pass independently of it; Thus, acceptance of the
delivery warrant for a certain quantity of spirit out of a larger bulk which
was liable to deteriorate in storage was held to put the risk of deterioration
on the buyer, although he had acquired, not property but only undivided
interest in the whole bulk. Equally, it would seem that there can be none in
an individual part of a chattel, such as a tree which has been felled, of
which a marked portion was sold, and of which the other portion is to be
retained by the seller. In such a case, it is conceived, the whole tree
remains the property of the seller until the marked portion is severed, even
if the severance is to be done by the buyer.

5. Identification of the goods

The contract itself may provide that the property shall pass on the
happening of some specified event, sufficient to identify the goods, and
occasionally they may become identified by other means. Thus, in a case
where the seller sold 250 quarters of wheat out of a larger bulk belonging
to him in a warehouse, and the buyer took delivery of 400 quarters and
pledged the remaining 850 quarters to a bank, and in the meantime the
seller sold the remainder of the bulk in the warehouse, of which delivery
was taken, so that 850 quarters only were left in the warehouse, it was
held that by this process of exhaustion the 850 quarters became
ascertained goods and property therein passed to the buyer, so that the
pledgee acquired a title thereto against the seller.(Wait & Midland Bank
1926) In State of karnataka Vs. The West Coast Paper Mills Ltd. AIR
1986 it was held that where under a contract a company was permitted to
remove bamboos from the forest area at Rs.10 /- per ton, and the
government by a subsequent order enhanced the price to Rs.20/- per ton,
it was held that the enhanced rate was no applicable to the bamboos cut
although not removed prior to the date of the government order, because
on the bamboos being cut and extricated, the goods being ascertained
and in a deliverable state, the property had passed to the company.

Section 19. Property passes when intended to pass


1. Where there is a contract for the sale of specific or ascertained goods
the property in them is transferred to the buyer at such time as the parties
to the contract intend it to be transferred.
2. For the purpose of ascertaining the intention of the parties regard shall
be had to the terms of the contract, the conduct of the parties and
circumstances of the case.
3. Unless a different intention appears, the roles contained in section 20
to 24 are rules for ascertaining the intention of the parties as to the time at
which the property in the goods is to pass to the buyer.

Synopsis

1. Principles for determining whether the property is transferred


2. Intention of the parties
3. Ascertained goods

1. Principles for determining whether the property is transferred

When it appears that the goods -- the subject of the contract—are specific
or ascertained, so that it is possible for the property to pass to the buyer, it
becomes necessary to determine whether it has actually passed;

This section reproduces this statement in statutory form, and the rules of
construction adopted by courts are those set out in Ss 20 to 24.

2. Intention of the parties

The governing principle which should determine as to the passing of


the property in the goods must be to find out what is the intention of the
parties. It is open to the parties to agree that the property shall pass
ipso facto immediately the goods become ascertained or even that it
shall pass at some time after the delivery is effected. The desirability
of making express provisions to this effect is demonstrated by the
consequences of its omission from the Contract Act. It might have been
thought that, even in the absence of such a provision, the courts would
be free to give effect to the intention of the parties to a lawful contract
of sale on such an important element of the contract as the transfer of
the property, and that view has on some occasions been acted upon.
Where a company had transferred its plant and machinery to the
finance corporation and the only right the company had was to redeem
and it was clear that the company could not sell the same without the
concurrence of the finance corporation it was held that the intention of
the parties notwithstanding the language of the document between the
company and M/s Ranga Engineering Company was to transfer the
property only after obtaining the consent of the finance corporation and
there was no sale until then.(PPLooke Vs. NJ Mathew & others
1967) Sale of shares becomes complete as soon as property in the
shares is intended to be transferred to the buyer. Such intention does
not depend on any particular form or mode of transfer and has to be
gathered from the facts of each particular case. Unity Company Pvt.
Ltd. Vs. Diamond Sugar Mills & others AIR 1971

3. Ascertained goods

Then term ‘ascertained goods’, which also occurs in Section 58, is not
defined by the Act. It is, however, clear that the words ‘specific goods’
bear the meaning assigned to them in the definition clause, ‘goods
identified and agreed upon at the time a contract of sale is made.’
Ascertained’ probably means ‘identified in accordance with the
agreement after the time a contract of sale is made’. Sections 23 and
25, therefore, must also be read subject to the provisions of this
section, and regard must be had to the intention of the parties when
considering whether the property has or has not passed in the
circumstances dealt with by those sections. Where teak trees to be
cut were of more than 12 inches girth, it was held that till it was
ascertained as to which trees fell within the description they were not
ascertained goods. Badri Prasad Vs. The State of Madhya Pradesh
AIR 1970 SC.

Section 20 Specific goods in a deliverable state

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, and it is immaterial whether the time of
payment of or the time of delivery of goods, or both, is postponed.

Examples

This section may be illustrated by the following examples:

1. Sale on the 4th January of a haystack on the seller’s land at the


price of £145 to the paid on the 4th February, the hay to be allowed to
remain on the seller’s land until the 1st May: no hay to be cut until the
price was paid. The property in the haystack passed on the making of
the contract and on the stack being destroyed by fire, the buyer must
bear the loss Tarling Vs. Baxter (1827)

2. Sale of a specified number of bushels of oats, the contents of a bin


in a warehouse. The seller gives a delivery order to the buyer,
addressed to the warehouseman, authorising delivery of the oats tio
the buyer, and asking the warehouseman to weigh them,. The
warehouseman accepts the order and enters it in his books. The
property has passed to the buyer, as the weighing was not necessary
to identify the oats or to ascertain the price, but was merely for the
satisfaction of the buyer. Swanwik Vs. Sothern (1839)

Section 21 Specific goods to be put into a deliverable state


Where there is a contract for the sale of specific goods and the seller is
bound to do something to the goods for the purpose of putting them
into a deliverable state, the property does not pass until such thing is
done and the buyer has notice thereof.

Example
This section may be illustrated by the following example: Sale of
the whole contents of a cistern of oil, the oil to be put into casks by the
seller and then taken away by the buyer. Some of the casks are filled in
the presence of the buyer, buy before any are removed, or the
remainder are filled, filled, fire destroys the whole of the oil. The buyer
must bear the loss of the oil which had been put into the casks, the
seller that of the remainder .Rugg Vs. Minett (1089)

Section 22 Specific goods in a deliverable state , when the seller


has to do anything thereto in order to ascertain price : 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 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.

Examples
This section may be illustrated by the following examples:

1. Sale of a stack of bark at a certain price per ton, the bark to be


weighed by the seller’s and buyer’s agents. Part was weighed and
taken away, but before anything more was done a flood carried away
the remainder. The loss of this fell on the seller. Simmons Vs Swift
(1826)
2. Sale of 289 specified bales of goatskin, containing 5 dozen in each
bale, at a certain price per dozen. By the usage of the trade, it was the
sellers duty to see whether the bales contain the number specified in
the contract. Before the seller had done this the bales were destroyed
by fire. The loss fell on the seller. Zagury vs Furnell(1809)

Section 23 Sale of unascertained goods and appropriation.

1. Where there is a contract for the sale of unascertained or future


goods by description and goods of that description and in a deliverable
state are unconditionally appropriated to the contract assent of the
buyer or by the buyer with the assent of the seller, the property in the
goods there upon passed to the buyer. Such assent may be expressed
or implied, and may be given either before or after the appropriation
made.

2. Delivery to the carrier.


Where in pursuance of the contract the seller delivers the goods to the
buyer or to the carrier or other bailee (whether named by the buyer or
not) for the purpose of transmission to the buyer, and does not reserve
the right of disposal, he is deemed to have unconditionally appropriated
the goods to the contract.

Example
This section may be illustrated by the following example:
1. Sale of 20 hogsheads of sugar out sugar out of a larger quantity.
The seller fills four hogsheads which the buyer takes away.
Subsequently the seller fills sixteen more hogsheads, and informs the
buyer of this asking him to come and take them away. The buyer
promises to do so. The property has passed to the buyer.
2. Mr A contracts to sell to Mr B a certain quantity of liquor out of a big
cask containing a much larger quantity. The required quantity is not
separated or bottled. The property in the liquor does not pass to the
purchaser.
Section 24 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
(a) when he signifies his approval or acceptance to the seller or does
any other act adopting the transaction:
(b) if he does not signify his approval or acceptance to the seller but
retains the goods without giving notice of rejection, then, if a time has
been fixed for the return of the goods, on the expiration of such time,
and, if no time has been fixed, on the expiration of a reasonable time.

Examples
The section may be illustrated by the following examples:

1. Goods delivered on sale or return are pledged by the deliveree. He


thereby becomes the buyer of the goods, and the original owner cannot
recover the goods from the pledgee.

2. Goods delivered on sale or return to the defendant are delivered by


him on similar terms to another. The latter in turn hands them to a
fourth person, who loses them. The defendant, being unable to return
the goods, must pay for them as if he had actually agreed to become
the buyer.

Section 26 Risk prima facie passes with property unless


otherwise agreed, the goods remain at the seller’s risk until the
property therein is transferred to the buyer, but when the property
therein is transferred to the buyer, but when the property therein is
transferred to the buyer, the goods are at the buyer’s risk whether
delivery has been made or not.
Provided also that nothing in this section shall affect the duties or
liabilities of either seller or buyer as a bailee of the goods of the other
party.

Examples
This section may be illustrated by the following examples;

1. Goods in a house held on lease and belonging to the tenant were


sold by auction under conditions expressly providing that all lots should
be taken to be delivered at the fall of the hammer, after which time they
should remain at the exclusive risk of the purchaser. The rent of the
house was in arrear, and after the sale the landlord threatened to
distress on these goods; to prevent distress, the auctioneer paid the
rent and handed the net proceeds of the sale to the original owner of
the goods, the tenant. It was held that the auctioneer had no right to
make this deduction, as the property in the goods had passe0d to the
respective buyers and the seller, therefore, had no further interest in
them; the auctioneer, in consequence, had no implied authority from
him to pay the rent in order to save the goods from distress. Sweeting
Vs. Turner (1871)

2. The defendant purchased 975 bales of rice, being the whole


contents of a gola, paid earnest money, and took part delivery of the
rice. The rest was afterwards destroyed by fire. The property in the
whole had passed to him and he was held liable to pay the balance of
the price. The Union of India Vs. The West Punjab Factories Ltd.
AIR 1966 SC

3. The defendant contracted to purchase 30 tons of apple juice. The


plaintiff crushed the apples, put the juice in casks and kept it pending
d3elivery. The defendant delayed taking delivery and the juice went
putrid and had to be thrown away. The defendant was liable to pay the
price; the seller had been in a position to sell the goods elsewhere and
acquire other goods for the postponed time of delivery and he had not
done so and there was some loss in the meanwhile, the responsibility
for the loss would have fallen on him, but in the present case the seller
had to keep the goods ready for delivery as and when the buyer
proposed to take them. Demby Hammilton & Co. Ltd. Vs. Barden
(Endeavour Wines Ltd) 1949

PERFORMANCE OF THE CONTRACT

Section 31. Duties of the seller and buyer It shall be 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 of sale.

The general rule enunciated in this section follows from the nature of
the contract of sale, by which the property in the goods is transferred,
or agreed to be transferred, from the seller to the buyer in return for the
price.

There would be breach of the ‘duty to accept’ when the buyer


unjustifiably rejects the goods. Taking of delivery of the goods is an
important aspect of the ‘duty to accept’ and refusal to do so will
constitute rejection of the goods and therefore , would amount to a
non-acceptance of the goods. There is however a distinction between
acceptance of goods and taking delivery of them. The buyer signifying
his approval of the goods accepts them though he may not have taken
delivery of the goods. It will be noticed that the Act does not expressly
impose any duty to take delivery although it prescribes sanctions when
there is delay in taking delivery.

Section 32 Payment and delivery are concurrent conditions :


Unless otherwise agreed, delivery of the goods and payment of the
price are concurrent conditions, that is to say, the seller shall be ready
and willing to give possession of the goods to the buyer in exchange
for the price, and the buyer shall be ready and willing to pay the price in
exchange for the possession of the goods.

A contract of sale is an example of a contract consisting of reciprocal


promises to be simultaneously performed. In accordance, thereof, with
the general principle laid down in s.51 of the contract Act, the seller is
not bound to deliver, and commits no breach of contract in failing to
deliver, if the buyer is not ready and willing to pay the price, and is not
liable to an action for failure to accept the goods, if the seller was not
ready and willing to let the buyer have goods on demand. The owes to
the buyer as onerous a duty to deliver the goods, as the buyer owes to
the seller the duty to accept and pay for them.

Section 34. Effect of part delivery a delivery of part goods, in


progress of the delivery of the whole, has the same effect, for the
purpose of passing the property in such goods, as a delivery of the
whole; but a delivery of the part of the goods with an intention of
severing it from the whole, does not operate as a delivery of the
remainder.

Examples
The section may be illustrated by the following examples:

1`. Sale of a quantity of goods lying at a wharf. The seller left an


order with the wharfinger to deliver the goods to the buyer, who had
paid for them by a bill. The buyer subsequently weighed the goods and
took away part of them. This was held to amount to a delivery of the
whole of the goods.

2. A ship arrived in port with a cargo of wheat. The master reported


her at the Customs House and made an oath that the cargo was for
A., the indorsee of the bill of lading. Next day, A made entry
of the wheat in his name at the Customs House. Part of the cargo was
then delivered to A. This constituted a deliver of the whole.

3. Sale of a stack of hay. The buyer asked the permission of the seller
to cut and remove part of the stack, which was granted. The clear
intention of the parties being to separate the part delivered of the
whole.

Section 35 Buyer to apply for delivery Apart from any express contract,
the seller of the goods is not bound to deliver them until the buyer applies for
the delivery

This section reproduces s93 of the contract Act except that for the words ‘in
the absence of any specific promise’, the words ‘apart from any express
contract’ have been substituted. The words ’in the absence of any special
promise’ have been construed to mean an express stipulation as to delivery6
which relieves the buyer from the obligation to apply for delivery or the
necessary implication of such a stipulation from the nature of the contract as
expressed. It might also arise out of usage or custom.
Even if there is an obligation on the part of the seller to inform the buyer when
the goods are in a deliverable state, it is not a ‘special promise’, though it may
postpone the obligation of the buyer to apply for delivery, and after the lapse
of a reasonable time, to enable the goods to be procured by the seller, the
buyer would be entitled and bound to apply for delivery.

When the applies for delivery and the seller then fails to deliver, the seller is
guilty of a breach of contract. So where the contract provided for delivery in
all November on seven day’s notice from the buyer, and the buyer gave the
notice early in November, it was held that by the terms of the contract the
buyer had the right to fix the date in November on which the delivery should
be made, and the seller having failed to deliver as required by the notice, was
guilty of a breach of contract. Juggernath Khan Vs. Machlachar (1881)

Section 36. Rules as to delivery 1. Whether it is for the buyer to take


possession of the goods or for the seller to send the goods to the buyer is a
question depending in each case on the contract, express or implied, between
the parties. Apart from any such contract, goods sold are to be delivered at
the place at which they are at the time of the sale, and goods agreed to be
sold are to be delivered at the place at which they are at the time of the
agreement to sell., if not then in existence, at the place at which they are
manufactured or produced.
2. Where under the contract of sale the seller is bound to send the goods to
he buyer, but no time for sending is fixed, the seller is bound to send them
within a reasonable time.
3. Where the goods at the time of sale are in the possession of a third
person, there is no delivery by seller to buyer unless and until such third
person acknowledges to the buyer that he holds the goods on his behalf :
Provided that nothing in this section shall affect the operation of the issue or
transfer of any document of title to goods.
4. Demand or tender of delivery may be treated as ineffectual unless made
at a reasonable hour. What is reasonable hour is a question of fact.
5. Unless otherwise agreed, the expenses of and incidental to putting the
goods into a deliverable state shall be borne by the seller.

Examples
The section may be illustrated by the following examples :

1. Sale of 12 puncheons of rum, made from molasses, of which 4 were


delivered. The buyer pressed for delivery of the remainder, but the seller
delayed and in the meanwhile an Act of Parliament was passed prohibiting
the distillation of spirits from molasses, and annulling all contracts for the sale
of such spirits. The sellers were held liable in damages as having failed to
deliver within a reasonable time. Phillips Vs. Blair and Martin (1801)

2. Sale of goods to be sold to be delivered in the last fortnight of March.


Delivery is tendered at 9 p.m. on 31 March. It is a question of fact whether
this is a reasonable hour. If it is not, there is no delivery, and the buyer may
repudiate. Startup Vs. macdonald (1843)

3. Sale of goods for ready money. The seller packs them up in the buyer’s
boxes in the buyer’s presence, but they remain in the seller’s premises. This
is not a delivery. Boulter Vs. Arnott (1833)

Section 38. Instalment Deliveries 1. Unless otherwise agreed, the buyer


of goods is not bound to accept delivery thereof by instalments.
2. Where there a contract for the sale of goods to be delivered by stated
instalments which are to be separately paid for, and the seller makes no
delivery or defective delivery in respect of one or more instalments, or the
buyer neglects or refuses to take delivery of or pay for one or more
instalments, it is a question in each case depending on the terms of the
contract and the circumstances of the case, whether the breach of the
contract is a repudiation of the whole contract, or whether it is severable
breach giving rise to a claim for compensation, but not to a right to treat the
whole contract as repudiated.

Examples
The section may be illustrated by the following examples :

1. Sale of 25 tons of pepper October /November shipment. The sellers


shipped 20 tons in November and 5 tons in December. The buyers were
entitled to reject the whole 25 tons. Reuter Vs. Sala (1879)

2. Sale of 200-300 tons of coal to be shipped as early as possible by a


named ship or other vessel. The named ship was not available and the seller
shipped 152 tons on another ship, informing the buyer that he had done so
and that he had drawn on him for the price and proposing to ship the
remainder later. The buyer made no reply to this communication. The ship
was lost. In an action by the seller for the price it was held that the buyer had
impliedly assented to the shipment of the smaller quantity as an instalment
and was liable to pay for it. Riichardson Vs. Dunn (1841)

Rights of Unpaid Seller against goods

Section 45. ‘Unpaid seller defined 1. The seller of goods is deemed to


be an ‘unpaid seller’ within the meaning of this Act
(a) when the whole of the price has not been paid or tendered ;
(b) 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 by reason of the dishonour of the instrument or otherwise.
2. In this chapter, the term ‘seller’ includes any person who is in the position
of a seller, as, for instance, an agent of the seller to whom the bill of lading
has been indorsed, or a consignor or agent who has himself paid, or is directly
responsible for, the price.

Examples
The section may be illustrated by the following example;

The seller draws bills for the price of the goods on the buyer, who accepts
them, and the seller negotiates them. Before the bills arrive at maturity the
buyer fails. The seller is in position of an unpaid seller.

Section 46. Unpaid Seller’s rights 1. Subject to the provisions of this Act
and of and of any law for the time being in force, notwithstanding that the
property in the goods may have passed to the buyer, the unpaid seller of
goods, as such, has by implication of law—
(a) a lien on the goods for the price while he is in possession of them;
(b) in case of the insolvency of the buyer a right of stopping the goods in
transit after he has parted with the possession of them ;
(c) a right of resale as limited by this Act.

2. Where the property in goods has not passed to the buyer, the unpaid
seller has, in addition to his other remedies, a right of withholding delivery
similar to and co-extensive with his rights of lien and stoppage in transit where
the property has passed to the buyer.

Example
The section may be illustrated by the following example :
Sale of goods to be delivered by instalments, each instalment to be paid for
in cash fourteen days after delivery. During the currency of the contract, the
buyer becomes insolvent and the price of one instalment is unpaid. The seller
need not make further deliveries unless the price of that instalment is paid and
cash is paid against delivery of subsequent instalments.

Section 47. Seller’s lien 1. Subject to the provisions of this Act, the unpaid
seller of goods who is in possession of them is entitled to retain possession of
them until payment or tender of the price in the following cases, namely :
(a) Where the goods have been sold without any stipulation as to credit ;
(b) where the goods have been sold on credit, but the term of credit has
expired ;
(c) where the buyer becomes insolvent.
2. The seller may exercise his right of lien notwithstanding that he is in
possession of the goods as agent or bailee for the buyer.

A seller’s lien is described as an additional security given to a person who has


a right to be paid, but he has a right to be paid besides and independently of
his lien. One of the objects of S.47 which confers the seller’s lien is ‘ to
protect a vendor from incurring an expense in manufacturing or acquiring
goods for which payment remains justly in doubt ’. The seller’s lien is a
particular lien arising in the precise circumstances specified by the Act and
not a general lien for all his debts due from the buyer and he cannot rely on
the equitable principle of the vendor’s lien.

Section 48. Part delivery Where an unpaid seller has made part delivery of
the goods, he may exercise his right of lien on the remainder, unless such
part delivery has been made under such circumstances as to show an
agreement to waive the lien.

Section 49. Termination of lien 1. The unpaid seller of goods loses his lien
thereon—
(a) when he delivers the goods to a carrier or other bailee for the purpose of
transmission to the buyer without reserving the right of disposal of goods;
(b) when the buyer or his agent lawfully obtains possession of the goods;
(c) by waiver thereof.

2. The unpaid seller of goods, having a lien thereon, does not lose his lien by
reason only that he has obtained a decree for the price of the goods.

Examples
This section may be illustrated by the following examples:

1. Goods were sold and sent by the sellers at the request of the buyer to
shipping agents of the buyer, and were put on board a ship by those agents.
Subsequently, they were re-landed and sent back to the sellers for the
purpose of re-packing. While they were still in the possession of the sellers
for that purpose, the buyer became insolvent. Thereupon the sellers refused
to deliver them to the buyer’s trustee in bankruptcy except upon payment of
the price. Held, that the sellers had lost their lien by delivering the goods to
the shipping agents, and their refusal to deliver the goods to the trustee was
wrongful. Valpy Vs. Gibson 1847

2. Sale of a stack of hay for £ 86, to be paid for as it is taken away, the
whole to be removed by a certain date. Part, but only part, was paid for and
removed by a certain date, and two months after that date the seller cut up
and used the remainder. By doing so, the seller waived his lien, and the
buyer successfully maintained an action against him. Gurr Vs. Cuthbert
1843

Section 50 Right of stoppage in transit


Subject to the provisions of this Act, when the buyer of goods become
insolvent, the unpaid seller, who has parted with the possession of the goods
has the right of stopping them in transit, that is to say, he may resume
possession of the goods as long as they are in the course of transit, and may
retain them until payment or tender of the price.

In order that the right may be exercised, the following conditions must all be
satisfied—the seller must be unpaid, the seller must have parted with the
possession of the goods and the buyer must not have acquired it. This last
condition, as appears from the next section is that which is shortly expressed
by saying that the goods are in transit. Further, the right can only be
exercised by a seller or a person in a position analogous to that of a seller,
the right to stop in transit is unknown outside the law of sale of goods. Lastly,
it is a right against the goods themselves only.

Section 52. How stoppage to transit is effected 1. The unpaid seller


may exercise his right of stoppage in transit either by taking actual possession
of the goods, or by giving notice of his claim to the carrier or other bailee in
whose possession the goods are. Such notice may be given either to the
person in actual possession of the goods or to his principal. In the latter case
the notice, to be effectual, shall be given at such time and in such
circumstances that the principal, by the exercise of reasonable diligence, may
communicate it to his servant or agent in time to prevent a deliver to the
buyer.

2. When notice of stoppage in transit is given by the seller to the carrier or


other bailee in possession of the goods, he shall redeliver the goods to, or
according to the directions of, the seller. The expenses of such re-delivery
shall be borne by the seller.

Examples
The section may be illustrated by the following examples :

1. A railway company is in possession of goods as carriers when the sellers


give notice of stoppage in transit. A sum of money is owing by the buyers to
the railway company. The railway company is not entitled to set up in priority
to the sellers’ right of stoppage in transit a general lien exercisable by the
company against the buyers as owners of the goods.

2. An unpaid seller stops goods sent by sea at a port short of their


destination. He is liable for the fright, not only to the part where the goods
were actually landed, but also to the port of their ultimate destination. Booth
& Co. vs. Cargo Fleet Iron Co. Ltd. 1916

Section 64. Auction sale In a case of a sale by auction


1. Where goods are put up for sale in lots, each lot is prima facie deemed to
be the subject of a separate contract of sale ;

2. the sale is complete when the auctioneer announces its completion by the
fall of the hammer or in other customary manner; and, until such
announcement is made, any bidder may retract his bid;
3. a right to bid may be reserved expressly by or on behalf of the seller and,
where such right is expressly so reserved, but not otherwise, the seller or any
one person on his behalf may, subject to the provisions hereinafter contained,
bid at the auction;
4. where the sale is not notified to be subject to a right to bid on behalf of the
seller, it shall not be lawful for the seller to bid himself or to employ any
person to bid at such sale, or for the auctioneer knowingly to take any bid
from the seller or any such person ; and any sale contravening this rule may
be treated as fraudulent by the buyer ;
5. the sale may by notified to be subject to a reserved or upset price ;
6. if the seller makes use of pretended bidding to raise the price, the sale is
voidable at the option of the buyer.