Law of Sale of Goods

Introduction
The Act came into force on 1st July, 1930. It extends to the whole of India, except Jammu and Kashmir. Definition: section 4 defines contract of sales as a contract whereby the seller transfers or agrees to transfer the property in goods to the buyers for a price.

Essentials of a contract of sale

There must be at least two parties. Transfer or agreement to transfer the ownership of goods. Subject matter of the contract must necessarily be goods. Price is the consideration of the contract of sale. A contract of sale may be absolute or conditional. All other essentials of a valid contract as per the Indian Contract Act,1872, must be present.

Difference between
Sale
A sale is an executed contract. Since the ownership has passed to the buyer, the seller can sue the buyer for the price of the goods, if the latter makes a default in payment. In case of loss of goods, the loss will fall on the buyer, even though the goods are in the possession of the seller. It is because the risk is associated with ownership.

Agreement to Sell
It is an executory contract. In case of breach, the seller can only sue for damages, unless the price was payable at a stated date. The loss in this case shall be borne by the seller, even though the goods are in the possession of the buyers.

Goods and their classification

Goods mean every kind of movable property, other than actionable claims and money. It includes stocks and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be served before sale or under the contract of sale.
The term goods excludes money.

Classification of Goods:
1. Existing goods: Goods are those which are owned or possessed by the seller at the time of contract (sec. 6) These are further divided into two:

Specific Goods / Ascertained Goods: Goods identified and agreed upon at the time a contract of sale is made.
Generic Goods / Unascertained Goods: Goods indicated by description and not specifically identified. (ex: pet shop)

2. Future Goods: These are the goods which are to be manufactured or produced or acquired by the seller after making the contract of sale. (crops) 3. Contingent Goods: Goods the acquisition of which by the seller depends upon a contingency which may or may not happen. (painting)

Meaning of price
Price means the money consideration for the sale of goods. According to sec. 9 the price may i. Either be fixed by the contract or ii. Agreed to be fixed in a manner provided by the contract e.g., by a valuer or iii.Determined by the course of dealings between the parties. Mode of payments of the price Earnest money Incidence of taxation

CONDITIONS & WARRANTIES

Conditions & Warranties

Sec.12(2) defines a condition as a stipulation essential to the main purpose of the contract. Sec.12(3) defines a warranty as a stipulation collateral to the main purpose of the contract. Sec.12(4) A stipulation may be a condition though called a warranty in a contract.

Example- Kaushal asks a dealer to supply him a shirt which would not shrink after use and wash. The dealer supplies a shirt which shrinks after use and wash. Kaushal can reject the shirt or keep the shirt and claim damages. Here the stipulation to supply a shirt which would not shrink after use and wash is a condition. Now if kaushal buys a particular shirt which is warranted by a dealer to be one which would not shrink after use and wash and the shirt does shrink after use and wash, Kaushals only remedy is to claim damages.

IMPLIED CONDITIONS
1. 2. 3. 4. CONDITION AS TO TITLE. SEC(14) SALE BY DESCRIPTION. SEC(15) CONDITION AS TO QUALITY OR FITNESS. SEC[16(1)] CONDITION AS TO MERCHANTABLE QUALITY. SEC[16(2)] CONDITION AS TO WHOLESOMENESS. IMPLIED CONDITION IN THE CASE OF SALE BY SAMPLE. SEC(17) IMPLIED CONDITION IN THE CASE OF SALE BY SAMPLE AS WELL AS DESCRIPTION. SEC(15).

5. 6.
7.

CONDITION AS TO TITLE. SEC(14)

No one can transfer what one does not have/own. If a person sells trademark or patent goods, there must be no infringement on the trademark/patent. Ex- 25 people in Delhi have been arrested for selling chinese goods with patent of Nokia.

SALE BY DESCRIPTION. SEC(15)

The product is described. Ex- A shirt described as a 100% cotton should not contain man made fibre. Ex- A car is sold as a new car. The buyer finds it to be a used one. The buyer may reject the car or retain the car and claim damages.

CONDITION AS TO MERCHANTABLE QUALITY. SEC[16(2)]

Goods must be merchantable. They must be saleable in the market under the denomination mentioned. If you buy a washing machine, it should actually work when you get it home. Ex- Ameer buys a black yarn from Daleep and finds it to be damaged by the white ants. The condition as to merchantability is broken.

CONDITION AS TO WHOLESOMENESS
The goods are fit for human consumption. ExHorlicks Ex- F bought a tin of condensed milk from A, the chemist. The milk contained typhoid germs. Fs wife became infected and died. A was liable for damages, because the milk was not fit for human consumption.

IMPLIED CONDITION IN THE CASE OF SALE BY SAMPLE. SEC(17)

It should not be assumed to be a sale by sample in all cases where sample is shown. IN sale by sample, the implied conditions are1. The bulk shall correspond with the sample in quality. 2. The buyer shall have a reasonable opportunity of comparing the bulk with the sample. 3. The goods shall be free from any defects. Ex- Certain shoes are sold by sample. The shoes are found to contain paper not discoverable by ordinary inspection. The buyer is entitled to refund to the price plus damages.

IMPLIED CONDITION IN THE CASE OF SALE BY SAMPLE AS WELL AS DESCRIPTION. SEC(15)

The goods must correspond both with the description as well as with the sample.

IMPLIED WARRANTIES
1. Quite possession of the goods. Sec[14(b)] 2. Goods free from any charge or encumbrance. Sec[14(c)]

Quite possession of the goods. Sec[14(b)]

The buyer will be able to owe the product and use it peacefully without any hindrance from anywhere.

Goods free from any charge or encumbrance. Sec[14(c)]

If seller does not tell that the car has been bought on installment and has not been paid totally, then this would be a violation of this case.

Passing of property in Goods

Meaning of property in goods

The phrase property in goods means ownership of goods. The ownership of goods is different from possession of goods. The possession of goods refers to the custody of goods, though normally a person who is in possession of the goods shall also be its owner but it need not necessarily be so. There may be situations where a person is the owner of certain goods but is not possession of the same or vice versa.

Rules regarding passing of property I goods from the seller to the buyer
1)Specific goods in deliverable state : - In a scale of specific or ascertained goods, the property is them is transferred to the buyer at such times as the parties to the contract intend it to transferred. Ex :-Ram offer to sell his car to shyam at rs.90,000. shyam accepts the offer. As soon as the contract is made, the property in the car passes to shyam. It shall make no difference even if the goods are sold on credit, because the contract is an unconditional one for the sale of specific goods in a delivery state.

2) Specific goods not in a deliverable state :- in the case of specific goods to which something has to be done by the seller to put them in a deliverable state, property passes only when such thing is done and the buyer has notice. Ex :-The whole of the contents of a cistern of oil are sold and the seller has to put the oil in casks to be then delivered to the buyer. The ownership will not pass till the oil is actually put into casks ready for delivery and the buyer is notified accordingly.

3) Where there is a contract for the sales of specific goods in a deliverable state but the seller is bound to weight, measure, test or do some other thing with reference to them, for ascertaining the price, the property does not pass till such act or thing is done and the buyer has notice. Ex :- A stock of rice is sold at an agreed price per ton. The rice is to be weighed by the agents of the seller as also of the buyer for the ascertainment of the price. A part of the rice is weighed and carried away by the buyers agent, but the remaining is swept away by the floods. The loss of the remainder would be borne by the seller, since the ownership thereof had not passed as the required weighing had not been done.

Unascertained or future goods :- When there is a contract for the sale of unascertained goods, property in the goods is not transferred to the buyer unless and until the goods are ascertained.
Ex :- Ghanshyam agrees to sell ram rattan 200quintals of wheat out of larger quantity lying in ghanshyams godown. The agreed price is to be paid on the day appointed under the contract. Unless and until the required quantity of 200 quintals is separated from the large quantity and the goods have been ascertained the property therein cannot pass from the seller to the buyer.

Unconditional appropriation :- The Unconditional appropriation of goods may be made either by the seller with the buyers assent or by the buyer with the sellers assent.

Ex :- There are 500 bags of wheat lying with the seller and he selects 100 bags out of the lot with the buyers assent, the ownership of those 100 bags would pass to the buyer as soon as this is done

TRANSFER OF TITLE BY NON OWNERS

TRANSFER OF TITLE BY NON OWNERS

Section 27 lays down a general rule as to transfer of title, that is, it is only the owner of goods who can transfer a good title. This rule is expressed by the maxim `nemo dat quod non habet`

EXCEPTIONS TO GENERAL RULE (Sec 27-30)

SALE BY A MERCANTILE AGENT

SALE BY THE JOINT VENTURE SALE BY PERSON IN POSSESSION UNDER VOIDABLE CONTRACT

Contd
SALE BY AN UNPAID SELLER SALES BY A SELLER IN POSSESSION OF GOODS AFTER SALE.

Performance of a contract of Sale of Goods

Performance of a contract of Sale of Goods

The contract of sale of goods is to be performed. In this context, Ss 31-44 provide for the duties of the seller and the buyer and the rules regarding delivery of goods.

 Duties of the Seller and the Buyer : It is 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 (s.31). If the buyer is not willing to pay the price and if the seller is not ready to sell, there is no need for delivery. The seller has the duty of giving delivery of goods acc to the (1) terms of the contract, and (2) rules contained in the Act. The buyer has the duty to pay for the goods, accept delivery and pay compensation to the seller in case he wrongfully refuses to accept delivery.

 Delivery : According to [s.2(2)], Delivery is defined as a voluntary transfer of possession from one person to another. Delivery of goods may be actual, symbolic or constructive. In the case of actual delivery, the possession of goods is handed over by the seller to the buyer. In the case of symbolic delivery, it is made by delivering some symbol that carries with it the real possession or control over the goods, e.g., the delivery of a railway receipt properly endorsed, or delivery of the key of a warehouse.

 1. 2. 3. 4. 5.

Rules regarding Delivery : The following are the rules regarding delivery of goods : Delivery of part of goods sold may amount to delivery of the whole if it is so intended and agreed (s.34). Unless agreed otherwise, the seller is not bound to deliver goods, till the buyer applies for delivery (s.35). Place of delivery [s.36(1)] Time of delivery [s.36(2)] Unless agreed otherwise, the expense of and incidental to putting the goods into a deliverable state shall be borne by the seller.

6. Demand for and tender of delivery must be at a reasonable hour. 7. Delivery of wrong quantity. 8. Installment delivery [s.38] 9. Delivery to the carrier or wharfinger [s.39] 10. Where goods are delivered to a buyer, which he has not personally examined, [s.41] 11. Buyer not bound to return the rejected goods [s.43]. 12. Liability of the buyer [s.44]

 Performance of Property in Goods in the Case of Foreign Trade : there are certain terms which are used in the contract of sale of goods in foreign trade. The most usual of such contracts are (1) Free on board (F.O.B.) or Free on Airport (F.O.A) and (2) Cost, Insurance and Freight (C.I.F.) and Ex-Ship.

Unpaid Seller and His Rights

Unpaid Seller and His Rights

A contract is comprised of reciprocal promises. In a contract of sale, if seller is under an obligation to deliver goods, buyer has to pay for it. In case buyer fails or refuses to pay, the seller, as unpaid seller, shall have certain rights.

 Who is an Unpaid Seller : A seller of goods is an unpaid seller when (a) the whole of the price has not been paid or tendered (b) 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 dishonor of the instrument or otherwise. The term seller includes any person who is in the position of a seller.

 Rights of an Unpaid Seller : It is broadly be classified under two heads, namely (1) Rights under the Ss. 73-74 of the Indian Contract Act, 1872, i.e., to recover damages for breach of contract. (2) Rights under the Sale of Goods Act, 1930: (a) rights against the goods (b) rights against the buyer personally.

 Lien on Goods (Ss. 47-49) : Lien means to retain possession of. An unpaid seller who is in possession of goods is entitled to retain them in his possession until payment or tender of the price in three situations that are: (1) where the goods have been sold without any stipulation as to credit; (2) where the goods have been sold on credit, but the term of credit has expired (3) where the buyer becomes insolvent.

 Right of Stoppage in Transit : This right of the unpaid seller consists in preventing the goods from being delivered to the buyer and resuming and regaining their possession while in transit, retaining them till the price is paid. The right of stoppage in transit is earned only where the right of lien is lost and is available only where the buyer has become insolvent [s.50].

 Right of Resale : The unpaid seller, who has retained the possession of the goods in exercise of his right of lien or who has resumed possession from the carrier upon insolvency of the buyer, can resell the goods, (a) if the goods are of a perishable nature, without any notice to the buyer and (b) in other cases after notice to buyer calling upon him to pay the price within a reasonable time and upon failure of the buyer to do so. The seller is entitled to recover from the original buyer damages caused to him by the resale. But if any profit accrues from the resale, such profit shall go to unpaid seller and not to the buyer.

Remedies for Breach of a Contract

In addition to the rights against goods provided in Ss. 47-54, the seller has the following remedies against the buyer personally. (1) suit for price (s.55); (2) damages for non-acceptance of goods (s.56); (3) suit for interest (s.56).

 Suit for Price : Where under a contract of sale the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay the price, the seller can sue the buyer for the price of goods. Where the property in goods has not passed to the buyer, as a rule, the seller cannot file a suit for the price; his only remedy is to claim damages.

 Suit for Damages for Non-Acceptance : 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 the property in the goods has not passed to the buyer and the price was not payable without passing of property, the seller can only sue for damages and not for the price. The amount of damages is to be determined in accordance with the provisions laid down in s. 73 of the Indian Contract Act, 1872.

 Suit for Interest : when under a contract of sale, the seller tenders the goods to the buyer and the buyer wrongfully refuses or neglects to accept and pay the price, the seller has a further right to claim interest on the amount of the price. In the absence of a contract to the contrary, the court may award interest at such rate as it thinks fir on the amount of the price.

1. 2. 3. 4. 5. 6. 7.

Buyers remedies against Seller : The buyer has the following rights against seller for breach of contract : Damages for non-delivery Right of recovery of the price Specific performance Suit for breach of condition Suit for breach of warranty Anticipatory breach Recovery of interest

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