TYB.

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B.V. Patel Institute of Business Management, Computer & Information
Technology, Uka Tarsadia University

Question Bank 030100601: Business Law

Unit 1: Legality of object and consideration and void agreement

Answer the following. (1 mark)

1. What is a void agreement?

Any agreement having unlawful objects or considerations is a void agreement.

2. Which section of Indian Contract Act speaks of three things, namely, consideration
and for the agreement?

Section 23

3. What is maintenance?

Maintenance is an agreement whereby a person promises to maintain a suit in which he

has no interest.

4. What the characters an unlawful agreement?

An unlawful agreement is not enforceable by law.

5. What is meant by Ex tupri cause non oritur action?

It means no action arises from a base cause.

6. What is an illegal agreement?

An illegal agreement is one which is forbidden by law.

7. State any one example of illegal agreement.

An agreement to commit a murder.

8. Which section of the Contract Act specifies agreements in restraint of marriage?

Section 26

9. Give any one exception to agreement in restraint of legal proceedings.

1. An agreement to refer all future disputes in connection with a contract to arbitration

2. An agreement to refer all present disputed with regard to a contract to arbitration

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10. Mention any one Case under which consideration or object becomes unlawful.

Forbidden by law

Briefly answer the following. (2 marks)

1. List two circumstances under which the consideration or object of an agreement is

considered unlawful?

Ans. Consideration or object is unlawful under the following cases

• It is forbidden by law

• it would defeat the provisions of any law

2. Mention any two features of legality of object.

Ans. 1. The object of the agreement should be legal

2. Consideration for both the parties should be legal

3. What is meant by trafficking public office?

Ans. Refer to trafficking public office agreements for the sale or transfer of public offices or
titles for the procurement of a public recognition. For example sale or transfer of Padma
Vibhushan or Param Veer Chakra for monetary consideration are unlawful.
4. List agreements that interfere marital duties.

Ans. Such agreements include:

• A promise by married person to marry during the lifetime or after the death of
spouse

• An agreement in contemplation of divorce.

5. What is meant by in pari delicto, potior est condition defendants?

Ans. It is a maxim which means that cases of equal guilt, the defendant is in a better position
than that of a plaintiff.
6. Mention any two cases under which a contract becomes void.

Ans. A contract becomes void in the following under the following cases:
• A contract becomes void by impossibility or illegality

• A voidable contract becomes void when the party whose consent is not freely
repudiates the contract

7. Mention exceptions agreements in restraint of trade.

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Ans. 1. Statutory exceptions

2. Judicial interpretation
8. Mention any two special cases in wagering agreements?

Ans. 1. Commercial transaction

2. Lotteries

9. List any two types of void agreements declared by the Indian Contract Act.

Ans. 1. Agreements by minor and unsound mined.

2.Agreements made under a mutual mistake of fact

10. Mention two essential features of a wagering agreement.

Ans. 1. Uncertain event

2. Each party must stand to win or lose.

11. Differentiate between an illegal agreement and a void agreement.

Ans. An illegal agreement is both unenforceable and forbidden but a void agreement is only
unenforceable.
Answer the following (limit 250 words). (5 marks)

1. List six circumstances which would make and object or consideration unlawful. Also
explain any two of them.

Ans.

1. Forbidden by law

2. Defeat of the provision of law

3. Fraudulent

4. Injurious to person or property

5. Immoral

6. Public policy

Forbidden by law: Object or consideration becomes unlawful when it is forbidden by

law. An agreement the consideration or object of which is unlawful is void. `Law' in this
connection means the law for the time being in force in India and, therefore, includes
Hindu and Mohamdan Laws and also principles of unwritten law.

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 An act is forbidden by law when it is punishable by the criminal, law of the country. An
act is forbidden by law when it is prohibited by special legislation or regulations made by
a competent authority under powers derived from the legislature.

Immoral: An agreement the object or consideration of which is immoral, e.g. an

agreement between a husband and wife for future separation, is unlawful.

Example: A married woman was given money to enable her to obtain divorce from her
husband and then marry the lender. Held, the agreement was immoral and the lender
could not recover the money.

2. Write a brief essay on void agreement.

Ans. “An agreement not enforceable by law is said to be void” section 2g.

The Indian Contract Act declares certain agreement as void ab initio and not illegal. An
illegal agreement is one which is forbidden by law. Thus an illegal agreement is both
unenforceable and forbidden but a void agreement is only unenforceable but not illegal.
Void contract is one which is valid when it is entered into, but subsequently something
happens which makes it unenforceable.

Examples

a. A contract becomes void by impossibility or illegality.

b. A voidable contract become void when the party whose consent is not freely
repudiates the contract.
c. A contingent contract to do or not to do something on the happening of an event
become void when the event becomes impossible.
3. What is an illegal agreement? What are effects of illegality?

Ans. An illegal agreement is both unenforceable and forbidden by law.

It has following features

Illegal agreement is unenforceable.

In illegal agreements, a further effect is other transaction which is incidental or

collateral.

Parties to an illegal agreement cannot get any help from a court of law.

The general rule is that no action is allowed on an illegal agreement. This is base on two
maxims.

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 No action arise from a base cause. The law discourages people from entering into
illegal agreement which arise from base cause.

In case of equal guilt, the defendant is in a batter position than of a plaintiff.

4. Write a brief note on agreements which interfere with administration of justice.

Or

Mentions any five types of agreements which interfere with administration of

justice. In this context explain the following.

a. Interference with the course of justice:

b. Agreement in restraint of parental rights

c. Agreement in restraint of marriage.

Ans. Agreements which interfere with administration of justice are:

1. Stifling prosecution

2. Maintenance and champerty

3. Agreements in restraint of legal proceedings of litigation

4. Trafficking public offices

5. Agreements in restraint of parental rights

6. Marriage brokerage or brokerage agreements

a. Interference with the course of justice: An agreement which obstructs the

ordinary process of justice is unlawful. Thus, an agreement for using improper
influence of any kind with the judges or officers of justice is unlawful. But an
agreement to refer present or future disputes to arbitration is valid

b. Agreement in restraint of parental rights: A father, and in his absence the

mother, is the legal guardian of his/her minor child. The right of guardianship
cannot be bartered away by any agreements. A father is entitled by law to the
custody of his legitimate child. He cannot enter into an agreement which is
inconsistent with his duties arising out of such custody.

c. Agreement in restraint of marriage: Every agreement in restraint of the

marriage of any person other than a minor is void (Section 26). This is because the
law regards marriage and married status as the right of every individual.

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5. What is meant by wager agreements? Throw light on the following cases in wages.

a. Commercial transaction

b. Lotteries

c. Crosswords puzzle.

Ans. A wager is an agreement by which money is payable by one person to another on the
happening or non happening of a future, uncertain event.

For Example: A and B agree with each other that if it rains tomorrow, A will pay B
Rs.100 and if does not rain tomorrow, B will pay Rs.100.

a. Commercial transaction: Agreements for sale and purchase of any merchandise

or share market transactions in which there is good intentions to have legitimate
business are not wagering agreements. If there is bad intention and parties only
wish to gamble on the rise or fall of the market by paying or receiving the
differences in prices, the transaction would be wagering agreement and hence
void. According to Pollock and Mulla, "in order to constitute a wagering contract,
neither party should intend to perform the contract itself, but only pay the
differences."

b. Lotteries: A lottery is a game of chance and therefore the lottery business is a

wagering transaction. Such a transaction is not only void but also illegal since
Section 294-A of the Indian Penal Code declares "conducting of lottery" a
punishable offence. If a lottery is authorized by the government, the only effect of
such permission is that the persons conducting the lottery will not be guilty of a
criminal offence, but remains a wager alright.

c. Crosswords puzzle: Where prizes depend upon a chance, it is treated as a

wagering transaction. A crossword puzzle, in which prizes depend upon
correspondence of the competitor's solution with the prepared solution, is a wager.
But if prizes depend upon skill and intelligence, it is a valid transaction.

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Unit: 2 Performances of Contract, Distract and Breach Of Contract
1 mark Questions
1. What is meant by performance of contract?

Performance of a contract means fulfilment of promises and legal obligations by the

parties under the contract.

2. Who has right to perform a contract?

 Promisor himself
 Agent
 Legal representatives
 Third Person
 Joint promisors
3. Who can demand the performance?

Only promisee

4. What is meant by tender?

Tender is the offer to perform the obligation under the contract.
5. What is meant by the term to „assign‟?

To assign means to transfer

6. Under which Act a contract may be discharge by lapse of time?

Limitation Act, 1963

7. What is meant by discharge of contract?

Cancellation of contract

8. Mention various types of breach of contract.

 Anticipatory breach of contact
 Actual breach of contact
9. Give the alternative name of anticipatory breach of contract.

Constructive breach of contract

10. Who has the right to discharge contract in anticipatory breach of contract?

Aggrieved party

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2 Marks Questions

1. What is a reciprocal promise?

“Promises which form the consideration or part of the consideration for each other is
called “reciprocal promise”.

2. Mention rules for assignment of contractual obligation.

 Contractual obligations involving personal skill or ability cannot be assigned

 A promisor cannot assign his liabilities or obligations under a contact

3. Why time is of essence of the contract?

If the promisor fails to perform on an agreed or specified time, the contracts will
become voidable at the option of the promisee.

4. List any two types of reciprocal promise.

 Mutual and independent

 Conditional and dependent

5. Define discharge of contract.

When the parties fulfill their respective obligations, their liability under the contract
comes to end the contract is said to be discharged.

6. List any two implied consent for discharge by agreement.

 Novation

 Alteration

7. What is meant by rescission?

Rescission is cancellation of the contract which takes when all or some of the terms of
contract are cancelled.

8. Mention any two cases when contracts can be discharge by operation of law.

(1) Discharge by death and (2) Discharge by insolvency

9. What is meant by breach of contract?

Under the parties breach of contract the contract by refusing to perform their
obligations, it is call breach of contract.

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 10. Define anticipatory breach of contract.

When a party repudiates his obligation under the contract before the time for
performance us due.

11. What is actual breach of contract?

Actual breach means breach committed either (i) at the time when the performance of
the contract is due, or (ii) during the performance of the contract

12. What are the consequences of anticipatory breach?

The aggrieved party can take following steps

 Treat the contract as discharged,

 Resort to the legal action

5 Marks Questions

1. What is meant by performance of the contract? Who can perform the

performance under contract?

Performance of a contract means carrying out of promises and obligations undertaken

by the parties under the contract.

The promise under a contract may be performed by:

Promisor himself: his means contracts which involve the exercise of personal skill or
diligence performed by promisor himself. For example A contract to paint a picture.

Agent: The promisor or his representative may employ a competent person to perform
it.

Legal Representatives: A contract which involves the use of personal skill or is

founded on personal considerations comes to an end on death of the promisor. As
regards any other contract, the legal representatives of the deceased promisor are bound
to perform it unless a contrary intention appears from the contract.

Third person: When a promisee accepts the performance of the promise from third
person, he cannot afterwards enforce it against the promisor.

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 Joint promisors: When two or more persons have made a joint promise, then unless a
contrary intention appears from the contract, all such persons must jointly fulfill the
promise.

2. List the rules regarding the reciprocal promises and explain any two of them.

 Simultaneous performance of reciprocal promises

 Order of performance of reciprocal promises

 Effect of one party preventing another from performing promise

 Effect of default as to promise to be performed first

Simultaneous performance of reciprocal promises: Where the promises are to be

performed simultaneously, they are said to be “mutual and concurrent”. According to
section 51 such promises need not perform by the promisor unless the promise is ready
and willing to perform his reciprocal promise.

Order of performance of reciprocal promises: According to section 52, where the

order in which the reciprocal promises are to be performed is expressly fixed in the
contract, they must be performed in that order. Where the order is not expressly fixed,
they must be performed in that order which the nature of transaction requires.

3. Write brief essay on discharge of a contract by performance

Performance means the doing of that which is required by a contract. Discharge by

performance takes place when the parties to the contract fulfill their obligations arising
under the contract within the time and in the manner prescribed. In such a case, the
parties are discharged and the contract comes to an end.

Performance of a contract is the most usual mode of its discharge. It may be:

 Actual performance

 Attempted performance or tender of performance.

Actual performance: When both the parties perform their promises, the contract is
discharged.

Performance should be complete, precise and according to the terms of the agreement.
Most of the contracts are discharged by performance in this manner.

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 Attempted performance or Tender of Performance: In certain situations the
promisor offers performance of his obligation under the contract at the proper time and
place but the promise refuses to accept the performance. This is called as “Tender” or
“Attempted Performance”. Where a valid Tender is made and is not accepted by the
promise, the promisor shall not be responsible for non-performance and he doest not
lose his rights under the contract.

4. Mention various mode of discharge of contract. Also explain any one of them.

The different mode of discharging a contact are:

 Discharge by Performance

 Discharge by agreement

 Discharge by impossibility of performance

 Discharge by lapse of time

 Discharge by operation of law

Discharge by operation of law

1. By death: If contracts involving personal skill or ability of the promisor, the contract
is discharged / terminated on the death of the promisor.
2. By insolvency: When a person is adjudged insolvent, he is discharged from all
liabilities incurred prior to his adjudication.
3. By merger : Merger takes place when an inferior right accruing to a party under a
contract merges into a superior right accruing to the same party under the same or
some other contract. In such a case, the contract may be discharged.
4. By unauthorized alteration of the terms of a written agreement: Where a party to
a contract makes any material alteration in the contract without the consent of the other
party, the other party can avoid the contract.
5. By rights and liabilities becoming vested in the same person : When the rights
and liabilities under a contract vests in the same person, the other parties are
discharged.
5. Discuss the types of breach of contract.

There are two types of breach of contract.

 Anticipatory breach of contract or constructive breach of contract.

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  Actual breach of contract

Anticipatory breach of contract: Anticipatory breach of contract occurs when a party

repudiates his obligation under the contract before the time for performance is due or
when a party by his own act cripples himself from performing the contract. In simple
words, it is a breach committed before the actual due date of performance of the contract.

Examples: S agrees to sing at L's theatre on and from a certain date. Before that date, she
enters into a long-term contract to sing at a different theatre.

 Consequences Can treat the contract as discharged,

 Can instantly resort to the legal remedies available to him for breach of contract, viz.
file a suit for damages or specific performance or injunction.

Anticipatory breach: When anticipatory breach occurs, the aggrieved can take the
following steps:

Actual breach of contract: Actual breach means breach committed either (i) at the
time when the performance of the contract is due, or (ii) during the performance of the
contract.

Examples: D agrees to deliver to B, 15 tons of sugar on 1st August. He fails to do so

on 1st August. There is a breach of contract by D.

6. Explain the following in the context of consent for contract discharge by agreement.

 Novation

 Alteration

 Waiver

The general rule of law is a thing may be destroyed in the same manner in which it is
constituted. This means a contractual obligation may be discharged by a agreement
which may be expressed or implied.

The various cases of discharge of a contract by mutual agreement are dealt with in
Section 62 and 63 and are discussed below:

Novation (Section.62): Novation takes places:

i. When substitution of a new contract for the original one either between the same
parties or between same parties.

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 ii. The consideration for the new contract is mutually being the discharge of old
contract.

iii. Novation should take place before the expiry of the time of the performance of
the original contract.

Alteration (Section.62): Alteration means a change in one or more terms of a contract

with mutual consent of parties. In such a case the old is discharged.

Waiver: When a contracting party fails to perform his obligation under the contract, the
other party (aggrieved party) may resend the contract and may waive the promisor or
release. This is called as Waiver.

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Unit: 3 The Sales of Goods Act 1930-I
1mark Questions

1. When did the Indian Sales of Goods Act came into force?

1st day of July, 1930

2. State two contracts that is not applicable in case of “The Sale of Goods Act”?

 Bailment of goods

 Contract of work and skill

3. Mention two important elements of contract of sales.

(1) Transfer of ownership and (2) Price

(2) Which section of Sales of Goods Act provides rules for transfer of property in
specific goods?

Section 19 under Sales of Goods Act 1930

(3) What is meant by „specific goods‟?

Specific goods denote goods indentified and agreed upon at the time a contract of sale is
made.

(4) What is the prime of aim of contract of sale?

Transfer of property in goods from the seller to the buyer.

(5) What is meant by „possession of goods‟?

Possession of goods implies the custody of goods.

(6) What is meant by „nemo dat quo non habet’?

“No one can pass a better title than what he has”

(7) State cases where a non owner can convey better title to the bonafide buyer of goods
for value.

 Sale by one of the joint owner

(8) Under which Section of Sale of Goods Act the buyer can treat the breach of a
condition as a breach of warranty?

Under Section 13(1) of the Sale of Goods Act 1930

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 2 Marks Questions

1. What is meant by symbolic delivery? Give an example

Delivery of good in case of transit may be made by handling over documents of title of
goods to buyer, like bill of landing or railway receipt.

2. Mention one difference between sale and agreement of sell on the bases of transfer of
ownership.

Sale: transfer of properly in goods passes immediately from the seller to the buyer.

Agreement to sell: it occur at future time or to fulfilment of certain condition.

3. What are the essential features of a contract of sale?

 Parties

 Subject matter

 Price

 Transfer of property

 Condition

 Sale and agreement to sell

 Moveable property

4. Define term of “Agreement to sell”.

Where the transfer of property in the goods passes only after the seller has fulfilled certain
conditions subsequently is called an agreement to sell.

5. What is meant by implied conditions and warranties?

Implied conditions and warranties are those which the law incorporates into the contract
unless the parties stipulated to the contrary.

6. Differential between condition and warranty.

Condition: It is essential to the main purpose of the contract and the breach of the
condition effect to the legality of the contract

Warranty: It is subsidiary to the main purpose of the contract and the breach of the
warranty not effect to the legality of the contract.

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7. List three level process of performance of a contract of sale of goods by seller.

i. The transfer of property in goods

ii. The transfer of possession of the goods

iii. The passing of risk

8. State any two rules regarding transfer of property in specific goods.

 Specific goods in deliverable state

 Specific goods in a deliverable sate, when the seller has to do anything there to in
order to ascertain price.

9. Write any two conditions that needs to be satisfied in case of sales by person in
possession of goods under voidable contract.

 The buyer must possess goods.

 The contract must not have be rescinded at time of sale.

10. Write any one conditions to be when sale by person not the owner.

The buyer should act in good faith. He should presume that the mercantile agent has
authority to sell goods

5 Marks Questions

1. Give differential between sale and agreement to sell.

Basis Sale
Nature of contract Executed contract.
Risk of loss The buyer bears loss even if the
goods are in the seller's
possession.
Breach of contract In case of breach of contract by
the buyer, the seller can sue
even though the goods are still
in possession. If the seller
breaches, the buyer has the legal
right to get the possession of
goods
Basis Sale
Type Sale means absolute sale.
Agreement to sell
Executory contract.
The buyer bears loss even if
the goods are in the seller's
possession.
If the buyer breaches, the
seller can only sue for
damages but not the price
although the goods are in the
buyer's possession. If the
seller breaches, the buyer's
remedy is to claim damages
for non performance.
Agreement to sell
Agreement to sell means
conditional sale

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2. List the essential features of a contract of sale? Explain any six of them.
 Parties
 Subject matter
 Price
 Transfer of property
 Absolute or conditional
 Essential elements of contract
 Sale and agreement to sell
 Movable property
The following elements must co-exist so as to establish a contract of sale of goods under
the Sale of Goods Act, 1930:
1. Parties: There should be at least two parties, i.e. buyer and seller. A buyer means a
person who buys or agrees to buy. A seller means a person who sells or agrees to sell.
2. Subject matter: The subject matter of the contract must necessarily be goods.
3. Price: Price means the money consideration for a sale of goods.
4. Sale and agreement to sell: It includes both `sale' and `agreement to sell'.
5. Movable property: Transfer of movable goods is regulated by the Sale of Goods
Act.
6. Formalities: Formalities observed are not much stringent in entering into contract of
sale. It does not prescribe any specific form to form a valid contract of sale. It may be
made by simple offer and acceptance. Offer may be made either by the seller or the
buyer.
3. Differential between condition and warranty.

Condition Warranties
Relation to main purpose: It is Relation to main purpose: It is subsidiary to
essential to the main purpose of the the main purpose of the contract.
contract
Rights of aggrieved party: Breach of Rights of aggrieved party: Breach of
condition gives the aggrieved party warranty entitles the aggrieved party to
a right to repudiate the contract and get claim damages only
damages.
Treating condition as warranty: Under Treating condition as warranty:
certain circumstances, a breach of A warranty cannot become a
condition may be treated as a breach condition.
of warranty.
Legal effect of breach: Breach of Legal effect of breach: Breach of warranty
condition will affect the legality of the will not affect the legality of the contract.
contract

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 4. Under what circumstances breach of condition would be treated as a breach of
warranty?
A buyer can treat the breach of a condition as a breach of warranty. "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 and not as a
ground for treating the contract as repudiated."
In the following cases, a contract is not avoided even on account of a breach of
condition:
i. Where the buyer altogether waives the performance of the condition, a party may, for
his own benefit, waive a stipulation.
ii. Where the buyer elects to treat the breach of condition as one of a warranty. That is to
say, he may only claim damages instead of repudiating the contract.
iii. Where the contract is non-severable and the buyer has accepted either the whole
goods or any part thereof. Acceptance means acceptance as envisaged in Section 72.

iv. Where the fulfillment of any condition or warranty is excused by law by reason of
impossibility or otherwise.

5. What is meant by transfer title? Mention cases where transfer of tile indicates „sale
by non owners‟ as per Sale of Goods Act. Also explain sales by person not the owner.

A true seller can sell and transfer ownership title to the buyer. An absolute owner of the
goods can transfer absolutely to the buyer. Subject to provisions of this act and of any
other law for the time being in force, where goods are sold by a person who is not the
owner thereof and who does not sell them under the authority (or) with the consent of the
owner, the buyer acquires no better title to the goods than the seller had.

1. Sale by person not owner

2. Sale by one of the joint owners

3. Sale by a person in possession under a voidable contract

4. Sale by one who has already sold the goods but continues in possession thereof

5. Sale by buyer obtaining possession before the property in the goods has vested in him

6. Effect of estoppels

7. Sale by unpaid seller

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Sale by person not the owner (Section 27): As a rule, a mercantile agent having an
authority to sell goods grants a good title to the buyer. A mercantile agent can
communicate a good title to the buyer although he sells goods without having any
authority from the principal to do so, provided the following conditions are fulfilled:

(a) The mercantile agent should be in possession of the goods or documents of title to
the goods in his capacity as a mercantile agent and with the consent of the owner.

(b) The buyer should act in good faith. He should presume that the mercantile agent
has authority to sell goods.

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Unit: 4 The Sales of Goods Act 1930-II
1mark Question

1. When is the seller bound to deliver the goods?

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

2. Who bares expenses to put goods into a deliverable state?

The seller bare expenses to put goods into a deliverable state

3. Mention any two rules for to delivery of goods.

(1) Place of delivery and (2) Time of delivery

4. How delivery of goods to the carrier is treated?

Delivery to the buyer

5. Mention any two modes of delivery of goods.

(1) Actual delivery and (2) Symbolic delivery

6. List any two right of an unpaid seller against the buyer personally.

(1)Suit for price and (2) Suit for damages

7. Who can be called an unpaid seller?

If the seller is not paid by the buyer, the seller is called the unpaid seller.

8. State the rights of an unpaid seller against the goods.

 Lien

 Stoppage in transit

 Resale

9. List any two conditions that need to be fulfilled in right of stoppage.

 The seller must be paid

 He must have parted with the possession of goods

10. Give the alternative name for the rights against the buyer personally.

Right in personam

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2 Marks Question

1. Define term „Delivery‟?

Delivery means voluntary transfer of possession from one person to another.

2. What is meant by concurrent condition?

The seller shall be ready and willing to give possession of the goods to the buyer in
exchange for price, and the buyer shall be ready and willing to pay the price in exchange
for possession of the goods

3. What are the options available to buyer if larger quantity is delivered?

 Accept the contracted goods and reject the balance

 Accept the whole bulk

 Reject the whole lot

4. Mention two options available to buyer if mixed quantity is delivered?

 Accept the contracted goods and reject the balance

 Reject the whole lot

5. Under what circumstances acceptance is deemed to take place.

 Intimated t the seller that he had accepted the goods,

 Retains the goods after the lapse of a reasonable time, without intimating the seller
that he has rejected them

6. Mention any two warranties in an auction sale.

 Auctioneer warranties that he has authority to sell.

 He guarantees the quiet possession of the goods by the purchaser.

7. What is meant by „lien‟?

Lien means a right which a creditor has to retain possession of goods until payment of
the price.

8. What is meant by „auction sale‟?

An auction sale is a method of selling merchandise by inviting bids to the world at

large, and property in merchandise is sold to the highest bidder.

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 9. Define „knockout agreements‟.

Buyers join their hands to eliminate competition among themselves at an auction sale.
They agree that they will not raise the bid against each other. Among the buyers, only
one will bid at the auction.

10. State the rules of auction under section 64 of Sales of Goods Act.

 Goods put up for sale in lot

 Completion of sales

 Right of seller to bid

 Reserve price

 Use of pretended bidding

5 Marks Question

1. Define the term „delivery‟. List the rules regarding valid delivery of goods. Also
explain any of two.

According to Section 2(2), `delivery' means voluntary transfer of possession from one
person to another. Rules for valid delivery of goods

1. Place of delivery
2. Time of delivery
3. Goods in possession of a third person:
4. Expenses of delivery
5. Modes of delivery
6. Constructive delivery
7. Symbolic delivery

Place of delivery: In case the contract does not provide, goods sold are to be delivered at
the place at which they are at the time of sale. This is applicable to specific goods. In case
of unascertained goods, goods are to be delivered at the place at which they are produced.

Time of delivery: As per the contract, if not stipulated, within reasonable time. The
demand for delivery must be made within reasonable hours. What is reasonable is a
matter of fact.

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2. Discuss buyer‟s rights regarding „acceptance of delivery of goods‟.

Acceptance (Section 42): Acceptance is deemed to take place when the buyer (a)
intimates to the seller that he had accepted the goods; or (b) does any act to the goods,
which is inconsistent with the ownership of the seller; or (c) retains the goods after the
lapse of a reasonable time, without intimating the seller that he has rejected them.

Buyer is not bound to return rejected goods (Section 43): The seller cannot compel
the buyer to return the rejected goods. But the seller is entitled to a notice of the
rejection.

Liability of buyer for neglecting or refusing delivery of goods (Section 44): When
the seller is ready and willing to deliver the goods and requests the buyer to take
delivery, and the buyer does not take delivery within a reasonable time, he is liable to the
seller for any loss occasioned by the neglect or refusal to take delivery, and also
reasonable charge for the care and custody of the goods.

3. Discuss rights of unpaid seller against goods.

Rights of lien (Section 47): The right of lien can be exercised by him in the following
cases only:

 Where the goods have been sold without any stipulation of credit.

 Where goods have been sold on credit but the terms of credit have expired

 Where the buyer becomes insolvent.

Rights of stoppage in transit (Section 50): The right of stoppage in transit is

exercised only when the following conditions are fulfilled:

 The seller must be unpaid.

 He must have parted with the possession of goods.

 The goods are in transit.

 The buyer has become insolvent.

 The right is subject to the provisions-of the Act.

Right of re-sale (Section 54): The unpaid seller can exercise the right to re-sell the
goods under the following conditions:

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  When the goods are of a perishable nature. In such a case, the buyer need not be
informed of the intention of re-sale.

 When he gives notice to the buyer of his intention to re-sell the goods and the buyer
does not, within a reasonable time, pay or tender the price.

4. Differentiate between right of lien and right to stoppage in transit.

Right of lien Right of stoppage in transit

1.Essence: To retain possession 1. Essence: To regain possession.
2. Possession: The seller should be in 2. Possession: (i) The seller should have
possession of the goods under lien. parted with the pos-session, (ii) Possession
should be with a carrier and (iii) The buyer
has not acquired the possession
3. Ceasing of right of lien: The right of 3. Ceasing of right of stoppage: Right of
lien comes to an end when the stoppage of the goods in transit starts when
possession of the goods is surrendered goods have left the possession of the seller
by the seller. and continues until the buyer or his agent
acquired their possession.
4. Prerequisite: Possession must be with 4. Prerequisite: The seller must have parted
the seller. with possession.
5. Commencement: Starts with default 5. Commencement: Starts. Where lien ends.
of the buyer to pay.

5. List rights of unpaid seller against the buyer. Explain suit for price and suit for

damage for non- acceptance.

The right in personam are as follows:

1. Suit for price (Section 55)

2. Suit for damages for non-acceptance (Section 56)
3. Repudiation of contract before due date (Section60)
4. Suit for interest [Section 61(2)(a)]

Suit for price (Section 55): (a) when a property in goods has passed to the buyer and the
buyer wrongfully refuses to pay for the goods, the seller may sue him for the price of the
goods [Section 55(l)]. (b) When property in the goods has not passed to the buyer and the
goods have not been appropriated to the contract, if the price is payable on a certain day
irrespective of delivery, the seller may sue the buyer on his wrongful refusal to pay for
the price [Section 55(2)].

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 Suit for damages for non-acceptance (Section 56): Where the buyer wrongfully
neglects or refuses to accept and pay for the goods, the seller may sue him for damages
for non-acceptance.

Where there is no default of the seller and the buyer wrongfully refuses to take delivery of
the goods within reasonable time, the seller is entitled to recover from the buyer (i) any loss
caused by the buyer's refusal to take delivery; and (ii) any reasonable charge for the care
and custody of the goods.

6. Write a brief essay on „auction sales‟.

An auction sale is a method of selling merchandise by inviting bids to the world at large,
and property in merchandise is sold to the highest bidder. An auctioneer is an agent
governed by the Law of Agency. When he sells, he is only the agent of the seller. The
auctioneer may, however, sell his own property as the principal and need not disclose the
fact he is so selling.

Different provisions of law on auction sale are dealt under Section 64 of the Sale of
Goods Act.

1. Where goods are put up for sale in lots, each lot is prima facie deemed to be subject
matter of a separate contract of sale [Section 64(1)].

2. The sale is complete when the auctioneer announces its completion by the fall of the
hammer or in any other customary manner and until such announcement is made, any
bidder may retract from his bid [Section 64(2)].

3. Right to bid may be reserved expressly by or on behalf of the seller and where such a
right is expressly reserved, but not otherwise, the seller or any one person on his
behalf may bid at the auction [Section 64(3)].

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 person
representing him. Any sale contravening this rule may be treated as fraudulent by the
buyer [Section 64(4)].

5. The sale may be notified to be subject to a reserved or upset price [Section 64(5)].

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