Sale of Goods Act (1)

THE SALE OF GOODS ACT, 1930 For CS FOUNDATION

BY

(CS) VINIT SIKKA CONTACT NO: 09871664440, 09136614465 SALE OF GOODS ACT 1. Define a contract contract of sale of goods. goods. What are are the essential essential features features of a contract contract of sale sale of goods? goods?

H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 1

Section 4(1) of the Indian Sale of Goods Act, 1930 defines the contract of sale of `goods as following: “A contract of sale of goods is a contract where by the seller transfers or agrees to transfer the property in goods to the buyer for a price.” From this definition it is clear that a contract of sale may be absolute or conditional. In an absolute sale, the property in the goods passes immediately to the buyer and nothing more remains to be done by the seller. Goods sold on the counter of a shop is an example of absolute sale. On the other hand, in a conditional contract of sale, the property in the goods does not pass to the buyer immediately but it will pass on the fulfillment of certain conditions. The term ‘Contract of sale of goods’ is a generic term and it includes (a) sale and (b) an agreement to sell. When the seller transfers the ownership rights to the buyer immediately on making the contract, it is a ‘contract of sale’. But where the ownership rights are to pass on some future date upon the fulfillment of certain conditions, then it is called ‘an agreement to sell’. An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. Example: A agrees to sell his book to B, B agrees ag rees to purchase it, it is sale. Suppose B agrees to purchase the book after two months, it is an agreement to sell. A contract of sale may be made in writing or by words of mouth, or partly in writing and partly by words of mouth or may be implied from the conduct of the parties. Essential Features:-

On analysis the definition of a contract of sale of goods, the following essential features emerge:

1. A co contract. A contract of sale is a special type of contract. Therefore, all the essential elements of a valid contract must be present in a contract of sale. There must be free consent, there must be some consideration and the object must be lawful. Thus, where ownership rights are given to another person without any consideration, then it is not a contract of sale but a transaction of gift. 2. Two pa parties ies. To constitute a contract of sale, there must be two parties- seller and buyer. The seller and buyer must be two different persons, because a person cannot buy his own goods. In state of Gujarat Vs. Ramanlal S. & Co. when on dissolution of a partnership, the assets of the firm were divided among the partners, the sales-tax officer wanted to tax this transaction. It was held that it was not a sale. The partners being the joint owner of those assets cannot ca nnot be both seller and buyer. However, a part-owner can sell his share to another part-owner. 3. Tran Transf sfer er of Prop Proper erty ty.. Transfer of property means transfer of ownership rights. The object of the contract of sale is to transfer the ownership of goods from seller to buyer. A mere transfer of possession of the goods cannot be termed as sale. Though transfer of property is an essential feature of a sale, but it does not mean that there should be physical delivery of goods.

The term property as is used here means the transfer of ‘general property’ in goods as distinguished from ‘special property’. For example, A the owner of some goods pledges them with B, it does not mean that there should be physical delivery of goods. H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 2

sale is goods. Goods mean all types of moveable property 4. Goods: The subject matter of the contract of sale other than actionable claims claims and money. Things like goodwill, goodwill, trade mark, patents, water water electricity are all goods. Things attached to or forming part of land may be sold as goods provided they can be severed severed or separated from the land. It should be noted that sale and purchase of immovable property is governed by the Transfer of Property Act. 5.

Price: The property property in goods is to be transferre transferred d for a considerat consideration, ion, called price. price. If the property property in goods is transferred for any consideration other than money, then it is not a sale but may be a barter or exchange. But if the price is paid partly in cash and partly in the form of goods, then it is a sale. sale.

It should, however, be remembered that payment of price is not a pre-requisite for transferring the ownership of goods. The property in goods may pass immediately, though price price is to be paid in future or in installments. 2. Distinguish Distinguish between between a contract contract of sale and and an agreement agreement to sell.

According to Section 4 (3) of the Sale of Goods Act, when the property in the goods is transferred to the buyer immediately on the making of the contract, then it is called a ‘sale’. On the other hand, when the property in the goods is to be transferred on some future date or on the fulfillment of certain conditions then it is called an ‘agreement to sell.’ Section Section 4(4) further provides provides that an agreement to sell becomes a sale when the time elapses or the conditions are fulfillment subject to which the property in the goods is to be transferred. Examples: (i) A sells all the wheat lying lying in his godown to B. It is a contract of sale, though though goods have not yet been delivered. (ii) A sells a television set to V on hire-purchase basis on the condition that the property in goods shall pass on the payment of last installment installment.. Here, though though the goods have been delivered, delivered, yet it is not a contract contract of sale but is only an agreement to sell. Following are the main points of distinction: 1.

Nature of Contract: A sale is an executed contract, meaning thereby that all the formalities have been complied with and so the property in goods passes p asses to the buyer. buy er. While an agreement to sell is an executory contract, i.e. something remains to be done and the property in goods has not yet passed to the buyer.

2.

sale,, the the prop proper erty ty in the the good goodss pass passes es from from sell seller er to the the buye buyer r Transfer Transfer of property property:: In a sale immediately when the contract is made. In other words, the moment the contract of sale is is made, the seller ceases to be the the owner of goods. Payment of price and delivery of goods are no conditions for transferr transferring ing the property property in the goods. For example A buys a wrist watch from B on 5th December and the price is to be paid after after a week. It is a contract contract of sale, A becomes the owner owner of the watch though the price is yet to be paid.

In an agreement to sell, the property in the goods does not pass immediately but it is to pass on some future future date or on the fulfillment fulfillment of some condition. condition. Thus the seller seller continues continues to be the owner of goods until hat date or till the the fulfillment of those conditions. conditions. IF in the above example, A agrees to H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 3

buy the wrist watch from B on the condition that if it is approved by A’s father, then it is an agreement agreement to sell. The property property in goods well pass from B to A only when A’s father father approves the watch. In fact, this is the basic point of distinction distinction between a sale and an agreement to sell. All other points of distinction gives below follow from this basic difference. 3.

Nature of rights: In a contract of sale, the buyer becomes the owner of goods and he acquired the proprietory rights in respect of them. He acquires a Jus a Jus in rem, rem , i.e. a right to enjoy the goods against the whole world. On the other hand in an agreement to sell the buyer gets a right as against the seller only such rights are jus in personam. personam. In case the seller seller refuses refuses to sell sell goods to the buyer, buyer, then the buyer’s only remedy is to file a suit for damages, he can not recover the goods.

4.

Risk of loss: In a sale, the risk of loss is that of the buyer. buyer. In a contract of sale because because ownership ownership passes immediately to the buyer, the risk also passes. The rule is risk follows ownership. So whosoever is the owner of the goods shall shall bear the risk. Thus, in a contract of sale, if if the goods are destroyed destroyed the loss falls on the buyer, even though the goods are in the possessio possession n of the seller. For example, A buys a radio set from B and agrees to to take the delivery on the following following day. As a result of fire in the shop that radio set is also destroyed. Here A shall be liable to pay the price because he will have to bear this loss since the ownership owne rship had already passed on to him.

In an agreement to sell, on the other hand, where the ownership in goods has not yet passed but is yet to pass from seller to the buyer, if the goods are destroyed such loss will have to be borne by the seller, even though the goods may be in the possession of the buyer. Thus, if in the above example, the radio set is given by B to A on trial for a week and if the set is destroyed on the third day, this loss will have to be borne by B because the ownership has not yet passed from seller to the buyer.

5.

buyer – In case of sale if the buyer refuses to accept the Consequences of the breach: Breach by the buyer – goods or to pay for them, the seller can sue for the price, even though the goods are still in his possession. But in an agreement to sell, if there is a breach by the buyer, then the seller can only sue for damages and not for the price, even though the goods are in possession of the buyer. Breach by the seller – seller – in a contract of sale if the seller refuses to deliver the goods, the buyer can sue for the recovery of the goods as well as for damages, But in an agreement to sell, if the seller refuses to sell the goods, the buyer’s only remedy is to claim damages, he can not ask for the delivery of goods.

6.

Right to re-sell: In a contract of sale because the property in goods is with the buyer, a seller who is in possession if goods, can not resell such such goods. IF the seller re-sells, re-sells, then the original buyer has not only a personal remedy against the seller for damages but he can also recovery the goods from the third person. The right to recover the goods from the third person is lost if the subsequent buyer had bought the goods in good faith without notice of the previous sale.

In an agreement to sell, the property in the goods remains with the seller, therefore, he can dispose them them off in any manner manner he likes. likes. The buyer’ buyer’ss only remedy remedy against against the seller seller is to sue him for damages, he can not recover the goods from the subsequent buyer.


7.

Insolvency of buyer: In a sale, if the buyer is adjudged insolvent, before he pays for the goods in the absence of any lien on the goods, the seller must deliver the goods to the Official Receiver or the Official Assignee. Assignee. This is because in sale the ownership has passed to the buyer. However, the seller seller will be entitled to a rateable dividend for the price of the goods.

In an agreement to sell, when the buyer becomes insolvent before he pays for the goods, the seller may refuse to deliver the goods until he is paid for because the property in goods has not yet passed to the buyer. 8.

Insolvency of seller: In a sale, if the seller becomes insolvent, the buyer is entitled to recover the goods from official receiver or Assignee, because the property in goods rests with the buyer.

In an agreement to sell, on the other hand, if the buyer has already paid the price and the seller becomes insolvent, the buyer b uyer can claim only a rateable dividend d ividend and not the goods. Even if the goods are in the possessio possession n of the buyer, he cannot retain them, but he will have to return return the goods to the official receiver or Assignee.

3. Distingu Distinguish ish betwee between n a sale and a hire hire purchas purchasee agreeme agreement. nt.

A hire-purchase agreement is not a contract of sale. In a hire-purchase agreement the owner of the goods lets them out on hire for a periodic rent on the terms that the hirer has the option to buy the goods after the payment of agreed number of installments or to return them and the seller can recover the goods from the possession of the hirer in case he makes a default in paying the hire charges. In a hire purchase agreement the buyer is not compelled to buy the goods. In a hire purchase agreement, therefore, till the hirer decides to buy, the property in goods remains with the seller, the hire-purchaser is entitled to use the goods on payment of hire charges. Example: A hires a sewing machine agreeing to pay Rs. 15 per month with the stipulation that if he pays regularly the monthly installments for thirty months, the machine shall become his property at the end of the said period of thirty months. This is only a hire-purchase agreement and A will not become the owner till all the installments are paid. A hire-purcha hire-purchase se agreement should be distingui distinguished shed from a contract contract of sale by installmen installment. t. In a sale by installment, there is a contract of sale and the buyer becomes the owner of the goods, the only thing is that the price is to be paid in installments. In a sale by installment, the buyer has no option to return the goods similarly similarly if the buyer fails to pay the installment installment money, the seller cannot recover the goods but he can file a suit for the recovery of the price. Following are the important points of distinction between a contract of sale and a hire h ire purchase agreement: 1) In a cont contra ract ct of sale sale the prop proper erty ty in the the goods goods passes passes to the the buyer buyer immedi immediat atel ely y on making making the the contract and the buyer can deal with the goods as he likes. But in hire-purchase agreement the ownership does not passes immediately but it passes only when a certain number of stipulated installments are paid by he hire-purchaser. 2) In a sale, the buyer buyer becomes becomes the owner of of the goods, goods, where as in a hire-pur hire-purchase chase agreement agreement he hirer hirer is not the owner but only a bailee of goods. H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 5

3) In a sale, the buyer buyer has no option to to terminate terminate the contract contract and as such he is bound bound to pay the price of the goods. But in a hire-purchase, the hirer has the option to buy or reject the goods, therefore, he can terminate the contract at any time and he is not bound boun d to pay any further installments. 4) In a sale, if the the price is agreed agreed to be paid paid in installment installmentss and the buyer makes makes a default default in making the the payment, the seller can recover the amount from the buyer but he cannot claim back the goods. But in hire-purchase, if a default is made by the hirer in paying any installment, the seller has a right to recover his goods from the hirer. 5) In a sale, because because the buyer buyer has become become the owner owner of the goods, goods, he gets a right right to sell sell them. them. But in hire-purchase, because the hire-vendor is still the owner of the goods, the hire purchaser has no right to sell them. 4. How a contract of sale is different from a contract for work and labour?

A contract of sale has to be distinguished from a contract involving the exercise of skill or labour on some material. The distinction is important not only from the point of view of sales-tax but is also important because in sale certain implied conditions and warranties are applicable. The distinction, however, is very minute. In a contract for work and labour, a party exercises some labour or skill on the material which is supplied by the other party. In Robinson Vs. Graves, the court laid down the guidelines, it said that the proper test is to see whether work is of the essence of the contract. In a case of work of art, where the application of skill and labour is of the highest order, the material is of no importance as compared to labour, the price may be recovered for work and labour. In Lee Vs. Griffin, a lady asked a dentist to make two sets of false teeth to be fitted in her mouth. Before the work could be completed the lady died. It was held to be a contract of sale. If a hotel company which provides residence and food to its customers and charges a consolidated amount for both the services, and it gives no rebate if a customer does not take his food at the hotel, it is a contract for work and labour and not a sale. But a contract to take and supply photographs, to build ships as per specifications, to construct bus bodies on chassis supplied by government have been held to be contracts of sale of goods. In conclusion, we can say that we must see the particular contract and find out whether the essence of the contract is the rendering of service and exercise of skill, then it is a contract for work and labour and not a sale.

5. Define the the term ‘goods’.

The subject-matter of the contract of sale must be goods. The term ‘goods’ is defined by section 2(7) of the Sales of Goods Act as following: “Goods mean every kind of movable property other than actionable claims and money; and include stock 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 above definition is quite exhaustive. Things attached to or forming part of land may be sold as goods provided they can be severed from the land. Thus standing crop, trees, fruits on the trees are goods. But contracts for the sale of things forming part of the land itself are not contracts for sale of goods. For example, a contract for the sale of coal mine or building-stone quarry is not a contract of sale of goods. Money and actionable actionable claims have been expressly expressly excluded excluded from the definition definition of goods. Money here means current money or the money in circulation, thus old and rare coins can be bought and sold. An actionable claim means a claim or sight which can he enforced by filing a suit in a court of law. For example, a debt due from one person to another is an actionable claim and cannot be bought and sold as goods, however, it can be assigned. Goods may be divided into the following types: 1. Existing goods: The goods which physically exist and which are owned and / or possessed by the seller at the time of making the contract of sale are known as existing goods. Sometimes the seller may be in possession of the goods but may not be the owner, as it happens when goods are sold by mercantile agent. It is only the existing goods which are the subject matter of the sale. In case of goods which are not in existence there cannot be a contract for sale. Existing goods may again be either specific or ascertained or unascertained. a) Specific Specific Goods – Specific Specific Goods Goods means goods goods ascertaine ascertained d and identified identified and agreed agreed upon at the time of contract of sale is made. To be specific goods must be ascertained and identified. For example if A owns a number of horses, promises to sell one of them, here the goods are not specific/ But if the particular house to be sold is identified identified and separated from the rest, then the goods become specific. b) Ascertained goods – The term ‘ascertained goods’ has not been defined in the Act. Quite often the term ‘ascertained goods’ is used in the same sense as ‘specific goods’, but there is minute differ difference ence between between the two. two. Ascert Ascertain ained ed goods goods mean mean such such goods goods which are identi identifie fied d in accordance with the agreement subsequently to the the formation of contract of sale. In the above example, when the house to be sold is identified, it becomes ascertained goods. c) Unascertaine Unascertained d Goods: The goods which which are not identif identified ied or ascertained ascertained at the time time of making the contrac contractt are known known as unasce unascerta rtaine ined d or generic generic goods. goods. Such Such goods goods are defined defined by description or by sample. In the above example where A agrees to sell one of the the horses to B, the goods are unascertained. As soon as the house to be sold is identified identified it becomes specific goods. 2. Future goods: Section 2(6) defines future goods as “goods to be manufactured or produced or acquired by the seller after after the making of the contract of sale.” Unlike existing goods, future goods are not in existence at the time of contract of sale. A person may agree to sell goods in anticipation of their production production or acquisition. acquisition. But when a person purports purports to make a present present sale of future goods, the contract contract is not a sale but is an agreement agreement to sell. This is so because the ownership ownership of goods can not pass to buyer if the goods do not exist. Example: A agrees to seek B all the wheat which will be grown in his field in the current ‘season’. It is a sale of future goods, amounting to an agreement to sell. 3. Contingent goods : This is a type of future goods, acquisition of which by the seller depends upon uncertain contingencies. In this case also there can be only an agreement to sell. In a contract of H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 7

sale of contingent goods, the contract can be enforced only when the event on the happening of which the performance depends, happens, otherwise the contract becomes void. Example: A agrees ag rees to sell to B certain goods which are on their way from England to India on the condition that if the ship carrying the goods arrive safely. If the ship is sunk, sunk, the contract becomes void and the seller is not liable.

6. What is is the effec effectt of perishin perishing g of goods goods on a contra contract ct of sale? sale?

The effect of perishing of goods on a contract of sale may be studied under the two heads: a) Goods Goods perish perishing ing befor beforee making making of contrac contract, t, and b) Goods perishing before sale but after agreement to sell. 1. Goods perishing perishing before making making of contract: contract: Where there is a contract for the sale of specific goods, the contract is void, if the goods, without the knowledge of the seller have, at the time when the contract was made, perished or become so damaged as no longer to answer to their description in the contract (Section 7). This rule is applicable applicable only in case of specific goods and that the goods must have perished before the contract is made and without the knowledge of the seller.

Example: A agrees to sell a horse to B. It was discovered that the horse was dead at the time of making of contract. Here the agreement is is void. This rule is is based on the the ground of mutual mistake. In case the contract is for the supply of specific goods, and only part of the goods are lost or destroyed, then we have to see whether the contract is divisible or indivisible. indivisible. If the contract is indivisible, indivisible, then on the destruction of part of goods, the buyer can not be compelled to accept the remaining the goods. In Barrow Lane & Ballard Vs. Phillips, Phillips, a contract for the sale of 700 bags of groundnuts was made. Unknown to the seller 109 the remaining remaining 591 bags but the buyer refused to accept them. It was held that the contract, being indivisible, had become void by reason of the loss of the goods and the buyer can not be compelled to accept 591 bags or pay for the goods. “Perishing of goods” does not only mean physical destruction but it also includes loss by theft and commercial commercial destructi destruction. on. If the goods are so damaged that they become become completely completely useless for the the purpose for which they are generally used or if the goods cease to exist in the commercial sense, then also the contract becomes void. In Asfar In Asfar & Co. Ltd. Vs. Blundell Vs. Blundell , a cargo of dates was sold. The dates were contami contaminated nated with sewage so as to be unsaleable as dates, though they could be used for making spirits. spirits. The contract was declared as void because the go ods do not answer to the description d escription in the contract. 2. Goods perishing perishing before before sale sale but after agreeme agreement nt to sell: Where there is an agreement to sell specific goods, and subsequently the goods without any fault on the part of the seller or buyer perish or become so damaged as no longer to answer their description in the agreement before the risk passes to the buyer, the agreement thereby thereby becomes void (Sec. 8). Where the goods are in existence at the time time of making the contract but perish without the fault of either party before the risk passes to the buyer, the contract becomes void and the parties are excused from from performance of contract. This rule is based on the principle of supervening impossibility of performance.


If, however, fault of other party causes the destruction of the goods, then the party in default is liable for non-delivery or to pay for the goods, as the case may be. It should be noted that the rules laid down in Sections 7 and 8 are applicable only in case of specific goods. goods. Theref Therefore ore,, if the subjec subjectt matter matter of a contra contract ct of sale sale i.e. i.e. goods goods are unascert unascertain ained, ed, then the destruction destruction of goods does not affect affect the contract contract and the seller is bound to fulfill fulfill his promise. promise. For example example A agrees to sell B 10 bags of sugar sugar out of his tock of 100 bags lying lying in his godown. godown. If as a result of fire the entire stock stock of sugar is lost, the contract will not become void. A must supply 10 bags of sugar to B from wherever he likes.

7. Distinguish between a ‘condition’ and a ‘warranty’ in a contract of sale. Or Distinguish Distinguish between a ‘condition’ ‘condition’ and a ‘warranty’. When does a condition descend descend to the level of a warranty?

When a seller is selling his goods, he may make a statement or representation with view to inducing the other party to buy the goods. Such a representation may be a mere mere expression of an opinion and may may not be a part of a contract. If it is not a part of the contract, contract, no legal consequences follow. But if the representation representation forms part part of the contract and the other other party relies relies on it, then it becomes a stipulation. stipulation. In case no such representations or stipulations are made then the general principle of Caveat Emptor, i.e. let the buyer beware, applies. A stipulation in the contract of sale may be either a condition or a warranty. stipulation essential to the main purpose of the contract. If there is a breach of Condition : A condition is a stipulation any condition the aggrieved party has a right to to terminate the contract. Thus conditions are such, which go directly to the root of the contract. Warranty : A warranty is stipulation collateral to the main purpose of the contract, the breach of which gives the aggrieved aggrieved party a right to claim for damages. In case of breach of warranty the aggrieved aggrieved party can not refuse to accept the goods, i.e. he can not repudiate the contract.

From this it becomes clear that conditions form the basis of the contract and they are of primary importance. On the other hand warranty is only of secondary importance. There is no hard and fast rule as to which stipulation stipulation is a condition and which one is a warranty. Whether a stipulation in a contract of sale is a condition or warranty depends in each case of a construction of the contract. contract. A stipulati stipulation on may be a conditio condition n though called called a warranty warranty in in a contract. contract. Thus the court court is is not bound by the terminology employed by the parties, but it must see the real intention of the parties. In Baldry Vs. Marshall, Marshall, A consulted a car dealer for the purchase of a car suitable for touring touring purposes. The dealer sold a particular car saving that it will will serve the purpose. The case turned out to be unfit for touring touring purposes. It was held h eld that the buyer can return the care and get back the price as well as damages, d amages, because there was a breach of condition. If in this case had the the buyer asked for a good car, then he could not avoid the contract.


Example: A asks B, a scooter dealer to supply him a scooter which can cover 40 Kms per litre of petrol. Later on it is found that the scooter can cover only 30 Kms per litre of petrol. Here there is a breach of condition, condition, so A can return the scooter scooter and can claim damages. But if in this example example A, asks for a good scooter or B tells A that it can cover 40 Kms per litre and its only 30 Kms, then the buyer A can not repudiate the contract because it was not a breach of any condition but only a breach of warranty. Thus, if a stipulation is the basis of the contract then it is a condition, otherwise it is a warranty. Distinction between condition and warranty

1. A condition condition is a stipulatio stipulation n in a contract of sale sale which is essentia essentiall to the main purpose purpose of the contract. contract. The performance of the contract depends on the fulfillment fulfillment of condition. On the other hand, a warranty is a stipulation stipulation which is collateral to the the main purpose of the contract. contract. The performance does not depend on the fulfillment of warranty. 2. In case of breach breach of a condit condition ion,, the aggrieved aggrieved party party gets the right right to termin terminate ate the contrac contractt and also claim damages but in case of breach of warranty, the aggrieved party can not avoid the contract but can claim damages only. 3. In certain certain cases, cases, a breach breach of condition condition may be treated treated as a breach breach of warranty. warranty. But a breach breach of warranty warranty can not be treated as breach of condition. When condition to be treated as warranty In some cases cases a condit condition ion may become become a warranty warranty.. The effect effect is that the buyer can not repudiate repudiate the contract but has to be satisfied with damages only. Section 13 of the Sale of Goods Act lays down the following two conditions when a condition becomes a warranty: 1. Waiver of buyer : Where a contract of sale is subject to any condition to be fulfilled by the seller, then buyer may (a) waive the condition, or (b) elect to treat the breach of the condition as a breach of warranty. The buyer has the option to to accept the goods and claim damages from the seller. If he once decides to waive the condition, be can not afterwards insist on its fulfillment. Example: A agrees to buy from B, ten bags of wheat as per sample. B Delivers the wheat, but it was not according according to the sample. sample. A has a right to reject the the goods, but he may decide to accept accept the goods and treat this breach of condition as a breach of warranty. 2.

Acceptance of goods by buyer : Where a contract of sale is not severable, i.e. it is indivisible and the buyer has accepted the goods or part thereof, the breach of any condition is to be treated as a breach of warranty. In such a case it is not left at the option of the buyer. But if the contract is divisible divisible then even though the buyer has accepted a part of the goods, he can still reject the remaining goods.

Now the question arises as to when the buyer can be said to have accepted the goods. In this connection Section 42 provides that the buyer is deemed to have accepted the goods: (a) (b)

when when he inti intimat mates es to to the sell seller er that that he has has accep accepted ted them them of of ; when he does does any act act in relati relation on to the goods which which is inconsiste inconsistent nt with with the ownershi ownership p of seller seller or; or;


(c)

When, after after the lapse lapse of a reasonable reasonable time, time, he retains retains the the goods without without intima intimating ting to the the seller seller that he has rejected them.

Thus, where buyer after receiving the goods, resells them or pledges them, it will be regarded that the buyer buyer has accepted accepted the goods. goods. For example example A purcha purchased sed 10 bags of rice rice from from B accord according ing to the sample. When the goods were delivered, A resold the rice to P. P rejected the goods on the ground that is not according to sample. Now A also also wants to avoid the contract. Here A will not succeed because by reselling the the goods to P. A has accepted the goods. Now, he is not treat this this breach of condition condition as a breach of warranty and be content with damages only. 8. What are the implied conditions in a contract of sale? Or Explain and illustrate the implied conditions in contract of sale of goods. In a contra contract ct of sale sale conditi conditions ons and warran warrantie tiess may be express express or implie implied. d. Expres Expresss condit condition ionss and warranties are those which are agreed upon between the parties at the time of the contract and are expressly provided in the contract. The implied conditions on the other hand, are those which wh ich are presumed by law to be present in the contract. It should be noted that an implied condition or warranty may be negative or varied by an express agreement or by usage of trade. IMPLIED CONDITIONS Condition as to title [Sec. 14(a)] In every contract of sale, unless there is an agreement to the contrary, 1. Condition the first implied condition the part of the seller is that (a) in case of a sale, he has a right to sell the goods, and (b) in the case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass. In simple words, the condition condition implied is that the seller seller has the right to sell sell the goods. If the seller’s seller’s title turns turns out to be defective, defective, the buyer must return return the goods to the true owner and recover the price from the seller.

In Rowland Vs. Divall , R bough boughtt a car car from from D and and used used it for for severa severall mont months hs.. It was, was, late laterr on, on, discovered that D had no title to the car as it was a stolen one and R had to return the car to the true owner. It was held that the buyer R can recover the full price price from the seller seller even though he has used the car for several months. The term “right “right to sell ” is of wider implication. implication. Thus, if a person sells sells goods by infringing infringing the trade mark, patent or copyright, the buyer is entitled to terminate the contract on the ground that though seller is the owner of the goods but b ut he has no right to sell them as they are. In Niblett In Niblett Vs. confectioner’s Materials Co., Co., 3000 tins of condensed milk were sold to a buyer in London. 1000 tins were labeled ‘Nissly brand’, proved that this this was an infringement of its trade trade mark. The buyer had to remove all the labels and sold them at a reduced reduced value. It was held that the seller seller had no right to sell the goods and they were liable to pay damages to the buyer. 2. Sale by Description [Sec. 15] Where there is a contract of sale of goods by description, there is an implie implied d conditi condition on that that the goods goods shall shall correspo correspond nd with with the descrip descriptio tion. n. This This rule rule is based on the principle that “if you contract to sell peas, you can not compel the buyer to take beans” The buyer is not bound to accept and pay for the goods which are not in accordance with the description of goods. In Shephead Vs. Kain, Kain, a ship was advertised for sale as copper fastened without allowance for any defects defects whatsoever. whatsoever. The ship was not not fully fully copper fastened fastened as is understoo understood d in the trade. trade. It was held held that it was a sale by description and the buyer could reject the goods. H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 11

The term ‘sale ‘sale by description’ description’ has nowhere nowhere been defined in the Act. It may include include the following following situations: (a) Where the buyer had never seen the goods and buys them on the basis of the description given by the seller. seller. For example example the seller seller says that that the machine machine he is selling selling is brand brand new. On delivery delivery it was found to be a used one. The buyer can reject the goods. (b) Where the buyer has seen the goods but he relies not on what he has seen but what was stated to him and the deviation of the goods from the description is not apparent. (c) Packing of goods goods may sometimes sometimes be a part of descri description ption.. It should, however, be noted that where the goods supplied do not correspond with the description, the buyer has a right to reject the goods were though the goods may serve the purpose for which they were bought. 3. Sale by Sample [Sec. 17] A contract of sale is a contract for sale by sample where there is a term in a contract contract express or implied, implied, to that effect. effect. Thus where a seller shows shows that sample to the buyer, it does not amoun amountt to a sale by sample sample.. It will will be a sale by sampl samplee only when when the seller seller has has agreed agreed or guaranteed to supply the goods according to the sample. In a contract of sale by sample, there is an implied condition – (a) that the bulk shall correspond with the sample in quality, (b) that the buyer shall have a reasonable opportunity of comparing the bulk with the sample, and (c) that the goods shall be free from any defect, rendering them unmerchantable, which would not be apparent on reasonable examination of the sample. sample. This condition is applicable applicable only with regard to defects defects which could not be discovered discovered by an ordinary ordinary examination examination of the goods. Therefore, Therefore, if the defects are such which could be discovered by an ordinary inspection and the buyer accepts the goods after inspecting them, later on he can not avoid the contract. But if the defects are latent, then the buyer can avoid the contract.

In Drummond In Drummond & Sons Vs Van Ingen, Ingen, there was a sale by sample of worsted coating. The cloth that was supplied supplied was according according to the sample sample but because of some latent defect it was unmerchant unmerchantable. able. The same defect was in the sample, sample, but it could not be discovered on a reasonable reasonable examination. It was held that the buyer can avoid the contract. 4. Sale by sample as well as by description [Sec 15] where the goods are sold by sample as well as by description, the implied condition is that the bulk of the goods supplied must correspond both will the sample sample and the descri descripti ption. on. In case the goods corresp correspond ond with the sample sample but do not tally tally with description or vice versa, the buyer can repudiate the contract. It is not sufficient that the bulk of the goods correspond with the sample if the goods do not also correspond with description. In Nichol In Nichol Vs. Godts, Godts, foreign refined rape oil was sold warranted equal to sample. The bulk corresponded with the sample but it was not rape oil but a mixture of rape and hemp oil. It was held that the buyer could repudiate the the contract. 5. Condition as a quality or fitness [Sec 16(1)] ordinarily, in a contract of sale there is no implied warranty warranty or condition condition as to the quality quality or fitness for any particular particular purpose purpose of goods supplied. supplied. The general principle is Caveat Emptor, i.e. let the buyer beware, the buyer should buy the goods after satisfying himself that they will serve his purpose. H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 12

The first exception to the rule of Caveat Emptor is that where the buyer, expressly or by implication, makes known to the seller the particular particular purpose for which the goods are required, required, so as to shown that the buyer relies on seller’s skill or judgment and the goods are of a description which it is in the course of the seller’s business to supply (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be reasonably fit for such purpose. The implied condition as to quality or fitness shall apply if the following condition is satisfied: (i) (i) The The buyer, buyer, expr expres essl sly y or impli impliedl edly y infor informs ms the the selle sellerr about about the the parti particu cula larr purpos purposee for whic which h the goods are required. (ii) (ii) The The buy buyer er shou should ld rely rely on sell seller er’s ’s skil skilll or or jud judgm gmen ent. t. (iii) (iii) The good goodss must must be be of a type type which which is norm normall ally y dealt dealt with with by the the sell seller. er. When the goods are capable of more that one use, the buyer must inform the seller the particular purpose, then only this condition shall apply. In Andrwe In Andrwe Yule & Co’s case, Hessian cloth, cloth, which is generally generally used for packing packing purposes, purposes, was supplied supplied to the buyer. The buyer found it unsuitable unsuitable for packing foodstuff’s because of an unusual smell and wanted to reject the goods. It was held that the buyer can not reject the goods as it was fit for packing purpose, though unfit for packing foodstuffs. It was the duty of the buyer to disclose the particular purpose to the seller. Where the goods are fit for one particular particular use alone or if the nature of goods itself tells the purpose by implication, then the buyer need not inform the seller the particular purpose for which they are being bought. In Priest Vs. Last, the buyer buy er bought a hot h ot water bottle from a chemist. When it was being used by his wife, it burst and injured her. It was held that the implied condition as to fitness was broken and the seller was liable for damages. Here the bottle could be used for one particular purpose only, so there was no need to inform the seller the particular purpose. In Evans vs. Benjamin, a refrigerator was sold to the buyer. It performed all other acts which a refrigerator normally does but failed to make ice. It was held that there was a breach of the implies condition as to fitness. If a person buying goods for a particular purpose is suffering from some abnormality and it is not made known to the seller at the time of sale, the implied condition as to fitness shall not apply. In Griffiths vs. Peter Conway Ltd. a buyer who bought a tweed coat contacted dermatitis (a skin disease). It was held that the illness was due to her sensitive skin and not because of the coat, so the seller was not liable. Sale under patent or trade name . Sometimes a buyer may rely more on the trade name of an article than the judgment of the seller. Proviso of o f sec.16 (1) provides that in the case of contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose. For example, a person buys ‘Aspro’ to get relief from severe headache, if he does not get any relief, he cannot avoid the contract and the seller of ‘Aspro’ cannot be held liable. 6. Condition as to merchantability [sec.16 (2)]. Another exception to the principle of Caveat Emptor is that where the goods are sold by description by a seller who deals in goods of that description, there is an implied condition that they shall be of a merchantable or saleable quality. Goods must be of such a quality as to be capable of being resold in the market by that description. But for applying this condition, the following requirements must be satisfied--(a) The goods should have been bought by description, and (b) The goods should have been bought from a seller who deals in goods of that description (whether he is the manufacturer or producer or not). The term ‘merchantable’ has nowhere been defined in the Act. It means that goods must correspond with the description and must be in such condition that a reasonable man would accept them. In Jones vs. Just, a firm of Liverpool merchants contracted to H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 13

buy from London merchant a number of bales of Manila hemp to arrive from Singapore. The hemp h emp was so much damaged by the sea water that it could not be sold as Manila hemp. The good had to be sold at a reduced rate. It was held that the goods were not merchantable and the seller was liable to make good the loss caused by selling at the reduced price. If the goods are purchased for self use, they must be reasonably fit for the purpose for which they are generally used. In Grant vs. Australian knitting Mills Ltd., the buyers bought some garments which contained some chemical which could cause skin disease. It was held that goods were not of a merchantable quality and the buyers could reject the goods and claims damages. In Godley vs. Perry, a boy of six bought a plastic toy catapult from a toy dealer. While he was using it, it broke off and damaged his left eye. It was held the toy dealer was liable because the catapult was not of a merchantable quality. In Wilson vs. rickett cokerell & co. housewife purchased a certain quality of a coal for domestic use from a coal dealer. The coal contained some explosive matter which exploded and caused some damage to her. It was held that owing to the presence of the explosive material the coal was unmerchantable and therefore, the coal dealer was liable. Sometimes Sometimes the packing of goods is an important important consideration consideration in judging judging their merchantabili merchantability. ty. In Moreli vs. Fitch and gibbons, a buyer bought a Stone’s Ginger Wine. While he was attempting to draw its cork with a corkscrew and with due care, the bottle broke off and injured the hand of the buyer, it was held that the bottle was not of merchantable quality so the seller was liable. liable. But if the buyer has examined the goods there shall be no implied condition with regards to defects which such inspection ought to have revealed. However, the implied condition as to merchantability will continue to apply so far as latent defects in the goods are concerned, since defects cannot be discovered by ordinary examination of the goods. In Phornett & Fehr. Vs. Beers & Sons, the buyer contracted to buy glue. The glue was packed in dasks and were lying in the seller’s go down. The seller took the buyer to his go down and offered every facility to the buyer to examine the goods. The buyer did not ask that any of the casks should be opened. He was satisfied by looking at the casks. The glue turned out to be defective and not of merchantable quality. It was held that since an opportunity to examine the goods was given and this ought to have revealed the defect, because the buyer did not bother to look into the casks, now he cannot avoid the contract. Condition as to wholesomeness wholesomeness. This is also an exception 7. Condition exception to the rule of Caveat Emptor. Emptor. In the case of eatables and other provision, in addition of merchantability, there is another implied condition that the goods shall be wholesome i.e. the goods should be fit for consumption. In Frost vs. Aylesbury Dairy Co.Ltd. The milk supplied by the diarist was contaminated with germs of typhoid fever as a result of which the buyer’s wife died. It was that buyer could cou ld recover damages. In Wren vs. Halt the beer was contaminated with arsenic the seller was held liable. Similarly in Chaproniere vs. Mason a bun was bought from a baker’s and confectioner’s shop and it contained a stone which broke the buyer tooth. The seller was held liable for damages. 9. Explain the doctrine doctrine of Caveat Emptor? What are exceptions exceptions to this this rule?

In the case of sale of goods the doctrine applicable is caveat emptor, which means “let the buyer beware”. This rule originated in the open markets where sellers display their goods and articles in the open market and buyers has to opt or chooses goods from the same. If goods turn out to be defective then buyers cannot hold sellers responsible for the bad selection. The seller is further not responsible for disclosing the contents or defects of the goods, which he is selling. It is the duty of the buyer to satisfy him before buying any commodity. H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 14

The rule of Caveat Emptor is laid down in the opening lines of section 16, which states that, “subject to the provisions of this act or any other law for the time being in force, there is no implied warranty or condition as to quality or fitness for any particular purpose of goods supplied under a contract of sale.” Example: A purchased from B basmati Rice. B erroneously thought that the rice were old. The rice was, however new. Here A cannot avoid the contract because he has depended on his own skill and judgment. Here the rule of Caveat emptor was applicable. Exceptions: 1. Where the the buyer makes known known to the seller seller the particular particular purpose purpose for which which the goods are require required, d, so as to show that he relies on the seller’s skill or judgment and the goods are of a description which it is in the course of seller’s business to supply, it is the duty of the seller to supply such goods as are reasonably fit for that purpose. 2. In case where where the goods goods are are purch purchas ased ed under under its its paten patentt name name or brand brand name name,, ther theree is no impl implie ied d condition that the goods shall be fit for any particular purpose. 3. Where the the goods are sold sold by description description there there is an implied implied condition condition that the goods goods shall correspo correspond nd with the description. 4. Wher Wheree the the goods goods are brou brough ghtt by desc descri ript ptio ion n from from a sell seller er who deal dealss in goods goods of that descri descript ptio ion n (whether he is the manufacturer or producer or not) there is an implied condition that the goods shall be of merchan merchantab table le quality quality.. The rule rule of Caveat Empto Emptorr is not applicab applicable. le. But where where the buyer buyer has examined the goods this rule shall apply of the defects were such which ought to have been revealed by ordinary examination. 5. Where the the goods are are bought by sample, sample, this this rule of Caveat Caveat Emptor Emptor does not not apply of the the bulk does not not correspond with the sample. 6. Wher Wheree the the good goodss are are bough boughtt by sampl samplee as well well as descr descrip ipti tion on the rule ruless of Caveat Caveat Emptor Emptor is not applicable in case the goods do not correspond with both the sample and description. 7. An implied implied warranty warranty or condition condition as to quality quality or fitness fitness for a particul particular ar purpose purpose may be annexed by the usage of trade and if the seller deviates from that, this rule of Caveat of Caveat Emptor is Emptor is not applicable. 8. Where the the seller sells sells the the goods by making making some misreprese misrepresentati ntation on or fraud and the the buyer relies relies on it or when the seller actively conceals some defect in the goods so that the same could not be discovered by the buyer on a reasonable examination, then the rule of Caveat of Caveat Emptor will Emptor will not apply. In such a case the buyer has a right to avoid the contract and claim damages. 10. Explain the implied implied warranties warranties in a contract of sale of goods?

In the absence of any contract to the contrary, the following are the implied warranties in a contract of sale of goods: 1. Quiet Possession : In every contract of sale, unless other wise agreed, there is “an implied warranty that the buyer shall have and enjoy quiet possession of goods”. This means that there is an assurance assurance to the buyer that he shall have quiet possession of the goods and his right will not be disturbed by the seller or any other person. person. If there is breach of this warranty, warranty, the buyer is entitled entitled to claim damages damages from the H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 15

seller. This warranty is more ore less covered in in the implied condition as to title. Example: Example: A purchased secondhand typewriter and spend some money on its repairs. The typewriter was a stolen property and A had to return it to the real owner. Here A can recover the price paid as well as the damages from the seller because the buyer’s right to possess the goods was disturbed. 2. Free from Encumbrance : In addition to the above warranty, there is an implied warranty on the part of the seller that the the goods are free from any charge or encumbrance. If the goods are afterwards afterwards found to be subject to some charge and the buyer had to discharge the amount of encumbrance, there is a breach of implied warranty and the buyer can ca n claim damages. 3. Warranty to disclose the dangerous nature of goods: When the goods sold are of a dangerous nature or require a particular care in using or handling the goods and the buyer is ignorant about such risk, and then it becomes the duty of the seller that he should warn the buyer about the danger. If the seller fails fails to warn the buyer, then the seller seller shall be liable for damages damages to the buyer. In Clarke Vs. Army Vs. Army & Navy Co-Operative Society Ltd . A sold a tin tin of disinfectant disinfectant power to C. The seller knew that that the lid of the tin is to be opened carefully carefully and in a particular particular manner manner but he tells nothing nothing to C. C opens the tin in the usual manner whereupon whereupon some disinfecta disinfectant nt powder flew into her eyes causing injury. It was held that the seller A is liable for damages to C because she should have warned the buyer about the possible danger. danger. It is because of this reason reason we find that tins, packers packers bottles bottles etc. which contain dangerous dangerous goods, a warning is printed is printed in red letters so that the buyer can take proper care. care. 11.

Why it it is importan importantt to know know the the exact exact time time when when the propert property y in good goodss passes passes from a seller seller to the the buyer? Explain with examples examples the rules regarding regarding the transfer of ownership of goods from seller to buyer. Or Discuss the provisions of the Sale of Goods Act, 1930 in regard to the passing of property in (i) specific goods and (ii) unascertained goods. Or Explain the rules regarding passing of property from the seller to the buyer.

The object of the contract of sale is is to transfer the property property in goods from a seller to the buyer. The term ‘property ‘property in goods’ is different different from ‘possessi ‘possession’. on’. Possessio Possession n means the physical physical custody to goods whereas whereas property property in goods means ownership ownership or proprietary proprietary rights rights over the goods. Thus an agent or servant entrusted with the goods, or a carrier ho is in possession of goods are not the owner of goods though the goods are in their possession. possession. Similarly, where a seller has sold the goods but goods are are still in his possession as an unpaid seller, he cannot be called the owner of goods though he is in possession of goods. It is important to know the precise moment of time as to when the property in goods passes from a seller to the buyer because of the following reasons: 1. Risk prima facie passes with property . In simple words, it means that risk follows follows ownership i.e. the risk risk of loss loss is to be borne borne by the person person who is the owner of goods goods at the time of loss. loss. Section Section 26 provides that “unless otherwise agreed, a greed, 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 buyer, the goods are at buyer’s risk whether delivery has been made made or not.” Thus, question of finding the the owner of goods is important important H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 16

when there is some loss to the goods. The loss is to be borne by the person who is the owner of them them at the time of loss. Example: A buyers ten books from B but allows the books to remain in B’s possession. Because of fire, the books were lost. A must bear the loss and pay the price of books to B. This is so because the ownership has passed in to A. 2. Action against third parties : When property in goods passes to the buyer, he can exercise exercise proprietary rights over them. The buyer can sue the seller for for delivery and if goods are damaged by a third party, it is the owner who can take action against the third party. 3. Suit for the price: The seller cannot sue the buyer for price unless the goods have become the property of the buyer. 4. Insolv Insolvenc ency y of the seller seller or the buyer: buyer: In the event event of insolv insolvency ency of either either the seller seller or the buyer, buyer, the question arises as to whether the official receiver or assignee can take over the goods or not, we can answer this only with reference reference to the point as to who is the owner of goods. For example : in a sale if the seller becomes insolvent and the goods are still in his possession, then the buyer is entitled to recover his goods, but if the property has not yet passed to the buyer then even though the goods may be in the possession of the buyer, the buyer can not keep them. Rules regarding Transfer of property

The parties are free to fix any time regarding the passing passing of ownership from seller to the buyer. In case this time is decided by them then no problem arises. The difficulty arises in cases when the time time is not fixed by the parties, in hat case the following rules shall be applied: Goods must must be ascerta ascertained ined:: Section 18 provides that where there is a contract for the sale of 1. Goods unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertaine ascertained. d. Thus, for for transferr transferring ing the ownership ownership it is essent essential ial that goods goods must be ascert ascertained. ained. No property in goods can pass if the goods are unascertained.

Transfer of property in Specific goods (i)

Where here there here is a con conttract ract for for the the sal sale of of spe speci ciffic or asce ascert rtai aine ned d goo goods ds,, the the prop proper ertty in in the them m is is transferred to the buyer at such time as the parties to the contract intend it to the transferred section 19(1). For the purpose of ascertaining ascertaining the intention of the parties regard shall be had to the terms terms of the contract, the conduct parties regard shall be has to the terms of the contract, the conduct of the parties and the circumstances of the case (sec. 19(2)). Thus for finding the time of passing of ownership of specific goods were have to see the intention of the parties parties in this respect. Some times the parties may intend to pass the ownership at once when the contract is made and sometimes they may intend it to pass on some subsequent date. If the intention of the parties can not be ascertained then the rules given in the Act from Sections 20 to 24 shall apply.

(a)

Specific goods in deliverable state: Section 20 provides that 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 b uyer when wh en the contract is made, and it is immaterial whether the time of payment of the price or the time time of delivery of the goods, goods, or both is postponed. postponed. The goods are said said to be in a deliverable state when they are in such a state that the buyer would under the contract be bound to take delivery of them. When the goods are ready for for delivery and there remains nothing to be done to them, they are aid to be in a deliverable state. Example: A buyers ten books from B, a bookseller, H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 17

delivery to be taken the next day and the price to be paid after after a week. A fire breaks out in the shop; as a result the books were destroyed. A shall be liable liable to pay the price of the the books, because books were in a deliverable state and the buyer became the owner on making the contract. (b)

Specific Specific goods not in a deliverable deliverable state : Section 21 provides that where there is a contract for the sale of specific goods and the seller is bound to do something o the goods for the purpose of putting them into a deliverable state, the property does not no t pass until such thing is done and the buyer has notice thereof. thereof. Thus, the property property will not pass unless somethin something g is done to put the goods in a delive deliverab rable le condit condition ion.. This This ‘some ‘somethi thing’ ng’ may mean mean packin packing g the goods, goods, resti resting, ng, polishing, filling in casks or bags etc. It should be noted carefully that the property shall not pass when the goods are made in deliverable state but it shall pass only when this fact is made known to the buyer.

In Rugg In Rugg Vs Minerr , terpentine oil lying in a cistern was sold. sold. The oil had to be filled by the seller in casks. Some of the casks were filled in the presence presence of the buyer, but before the buyer could remove them, the entire stock was destroyed destroyed by fire. The buyer had to bear the loss for the casks which had been filled up in his presence because becau se the goods were put in the deliverable state in the presence of the buyer. (c)

When price of goods is to be ascertained . Section 22 provides that that 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 goes not pass until such act or thing is done and the buyer has notice thereof. As per this rule the goods are already in a deliverable condition but the seller has to be something for ascertaining the price. In Zagury Zagury Vs. Furnell , bales of goat skin were sold, the seller had to count the goat skin in each bale as the price is to be calculated per dozen. Before the goods are counted, as a result of fire the goods were lost; the seller had to bear the loss. Where the seller has done his part the property passes even if the buyer has to do something for his own satisfaction.

(d)

When goods are sent on approval or “on sale or return” Section 24 lays down the rule when goods are sent on approval or on sale or return basis. In such cases the property passes to the buyer – (i)

when he sign signifi ifies es his appro approval val or accept acceptanc ancee to the seller seller or does does any other other act act adopting adopting the the transaction; (ii) (ii) If he does no signi signify fy his approv approval al or accepta acceptance nce to the seller seller but retai retains ns the goods goods without without giving notice of rejection, then, if a time has been fixed for the return of the goods, in the expiration of such time, and if no time ahs been fixed, in the expiration of a reasonable time. The approval or acceptance acceptance by the buyer may be either express express or implied. implied. When the buyer deals deals with the goods in such a manner which shows that he has accepted the goods, the property in goods passes to the buyer. In Kirkham Vs. Vs. Attenborough, Attenborough, a jeweler delivere delivered d some jewelry to W on sale or return basis. basis. W pledged the jewelry with A. when W failed to pay the price, the jeweler wanted to recover the goods from A. It was held that that the jeweler cannot recover the good from A because by pledging the goods W has accepted the goods, as such he become the owner.


In Elphick Vs Barnes, ahorse was delivered by A to B on the terms of “sale or return within right days.” The horse died on the third day without without any fault on the part of B. B. It was held that that the loss was to be borne by A because the property in the goods had not yet passed to B. When the goods are delivered on “sale or return” basis the seller may get a clause included in the agreement agreement that the property property in the goods shall not pass to the buyer unless the the price is paid for. In such a case the buyer bu yer will not become the owner till the price is paid. In Weiner Vs. Smith Smith jewelry was delivered on sale or return basis. basis. The contract expressly provided on sale for cash cash only or returns returns.. The buyer pledged pledged the the jewelry jewelry without without making making payment. It was held that the jeweler could recover his jewelry since the property had not passed to the buyer because payment of the price was a condition precedent for passing the property to the buyer. When the goods are sold on approval basis, the property in the goods passes to the buyer when he fails to return the goods within a reasonable time or if a time is fixed, then, on the expiry of that time. Thus, till the expiry of such time, the the goods remain the property of the seller. In Elphick Vs. Barnes, where a horse was delivered on approval for eight days, if the buyer continues to retain the horse even after the expiry of eighth day, the property in the horse will pass to the buyer on expiry of eighth day. Transfer of property in unascertained goods Secti Section on 18 clea clearl rly y prov provid ides es that that no prop proper erty ty can can pass pass to the the buye buyerr in unas unasce cert rtai ained ned goods goods.. Therefore, where the goods are unascertained or future goods, the property in them can pass only when goods are ascertained. Section Section 23, deals with the question of passing of the property property of unascertained unascertained goods. It provides provides that where there is a contract for the sale of unascertained or future goods in a deliverable state, the property in goods passes to the buyer, when the goods are unconditionally appropriated to the contract wither by the seller with the assent of the buyer, or by the buyer with the assent of the seller. First of all, the goods must must be ascertained and then there should be unconditional appropriation. appropriation. The word ‘appropriation’ has not been defined in the Act. Act. It means doing something with the intention intention of iden identi tify fyin ing g or determ determin inin ing g the the good goodss in resp respec ectt of whic which h the the owner ownersh ship ip is to pass pass.. The The appropriation may be done either by the seller or by the buyer with the assent of the other party. The assent to the appropriation may be given either before or after appropriation is made. Generally the goods are appropriated by the seller by putting the goods in bags, boxes containers and in case of fluids in in bottles, casks or other suitable containers. For example, A agreed to sell 10 bags of wheat out of his stock of 500 bags. When the ten bags are identified and set aside separately, separately, the goods are appropriated. The appropriation of goods must be unconditional. unconditional. One of mode of appropriation recognized by the Act itself is the delivery to the carrier carrier or other bailee. Section 23 (2) says that that then in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee for the purpose of transmission deemed to have unconditionally appropriated the goods to to the contract. Thus, when the seller delivers the goods to the carrier to or o r the purpose of carrying them to the buyer and he does not reserve his right over the goods, the property in the goods passes when or bill of lading is made out in the name of the buyer and is sent to him, the presumption is that the seller has not reserved his right over the goods. If the seller seller reserves to himself himself the right of disposal disposal of the goods until and H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 19

unless some conditions conditions are fulfilled, fulfilled, the property property in the goods does not pass until those conditions conditions are fulfille fulfilled. d. The seller seller may reserve reserve such right right expressly expressly or impliedl impliedly. y. For example example : when the railway receipt is taken in the seller’s name itself or it is sent to the agent or the banker with the instructions that it is to be handed over to the buyer only on the fulfillment of certain condition (such as payment of price or acceptance acceptance of a bill) the seller seller is said to have reserved his right of disposal disposal over the goods and in such cases the property does not pass to the buyer on delivery to the carrier.

12. 12.

“No “No selle sellerr of goods goods can can give give the buye buyerr of goods goods a bette betterr title title to thos thosee goods goods than than what what he himself possesses” Examine this statement and mention whether there are any exceptions to this rule. OR “A seller cannot convey a better title to the buyer than he himself has”. Discuss this rule of law and point out the exceptions. OR “No one can pass a better title title than what he has”. Commen Commentt on the above above statement statement and explain the exceptions to the above rule.

In general the seller seller sells sells only such goods of which he is the absolute absolute owner. But sometimes sometimes a person may sell goods of which he is not the owner then the question arises as to what is the real position of the buyer who has bought the goods by paying price. The general rule regarding the transfer of title is that “the seller cannot transfer to the buyer of goods a better title than he himself has,” If the seller is not the owner of the goods then then the buyer also will not become the owner i.e. i.e. the title of the buyer shall be the same as that of the seller. seller. This rule is expressed in in the Latin maxim “ Nemo dat quod non habet ” which means that no one can give what he has not got. Section 27 of the Sale of Goods Act also provides that “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 acquir acquires es no better better title title to the goods goods than the seller seller had ….” This This rule is framed framed to safeguard the interests of the true true owner. In the absence of this rule anybody will be able to to sell the goods belonging to others and this will create utter chaos in the society. IF the seller has no title or if his title is defective then the buyer will also have no title to them or his title shall be the same as that of the seller. For example, if A sells some stolen goods good s to B who buys them in good g ood faith B will get no title to them and the true owner has a right to get back his goods from B. If this rule is forced rigidly rigidly then the innocent buyers may be put to loss in many cases. Therefore, to protect the interests of innocent buyers a number of exceptions have been provided to this rule. Exceptions

The general rule rule that ‘no one can give what he has not got is subject subject to certain exceptions exceptions.. In the following cases the buyer gets a better title to the goods than what is possessed by the seller: 1. Titl Titlee by Esto Estopp ppel el:: In some cases the true owner is prevented by his conduct from denying the seller’s authority to to sell. The principle of Estoppel Estoppel applies when the owner by his his words or conduct has let the buyer to believe that the seller was the owner of the goods, or had the owner’s authority to H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 20

sell them and induced induced the buyer to buy, he cannot afterwards afterwards deny the seller’s seller’s authority authority to sell. In such a case the buyer gets a better title. For example A is selling B’s goods in his presence to M. B does not object to the sale. M gets a better title because the true true owner B is estopped from denying A’s authority. In Eastern Distribution Ltd. Vs. Goldring, the owner of a car delivered singed papers to a person which enabled enabled him to pretend to the buyer that the has the necessary necessary authorit authority y to sell the car. The buyer gets a better title. The owner was estopped from disputing the authority of the seller.

2. Sale Sale by by Merc Mercan antil tilee Age Agent. nt. A ‘mercantile agent’ means an agent having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purpose of sale or to buy goods or to raise money on the security of goods. Section 27(2) provides that when a mercantile agent, who is in possession of goods, with the consent of the owner sells goods in the ordinary course of business to a buyer who buys them in good faith, the buyer, gets a better title even though the seller had no authority to sell. This exception will apply of the following conditions are satisfied. satisfied. : (i)

The person selling the goods must be mercantile agent.

(ii)

The mercantile agent should be in possession of goods or of documents of title to the goods in his capacity capacity as mercantile mercantile agent. agent. If the goods are held in some other capacity, capacity, he cannot convey a better title.

(iii)

The mercantile agent should be in possession possession of goods with the consent of the owner. If the goods are in the possession possession of the agent without the consent of the owner, the buyer gets no title.

(iv)

The mercantile agent should sell goods while wh ile acting in the ordinary course of business. b usiness.

(v)

The buyer must act in good faith and should not have notice that the seller has n authority to sell.

The case of Folks Folks Vs. King Vs. King illu illustra strates tes this exception. exception. A, the owner of a car, entrusted entrusted his car to a mercantile agent for sale at a stated price and not below that. The agents sold the car to P below the reserve reserve price and misappro misappropriat priated ed the money. P subsequently subsequently sold sold the car to R. A cannot recover recover the car from R. The mercantile agent was able to to convey a better title in his case. provides that where one of several several joint owners owners of goods, has the 3. Sale Sale by by a join jointt owne ownerr . Sec 28 provides sole possession of them by permission of the co-owners, the property in the goods is transferred to any person who buys them from such joint owner to good faith and without notice that the seller had no authority to sell. Example: A, B and C are joint owners of a poultry farm having one thousand chickens. The farm was being managed by B with the consent of A and C. B sells all the chickens to to Y who buys in good faith. Y gets a better title.

This exception exception is applicable applicable only when the buyer buys goods goods in the good faith. If it can be proved that the buyer had the knowledge about the defective title of the seller, then the buyer will not get a better title. H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 21

4. Sale by by person person in possess possession ion under under voidab voidable le contrac contractt . Sec 29 deals deals with the the case of a sale sale by a person who has obtained possession of goods under a voidable contract. It provides that when the seller of goods has obtained possession of goods under a voidable contract and he sells those goods before the contract is rescinded the buyer of such goods acquires a better title provided the buyer acts in good faith and without notice of the seller’s defect of title.

In Phillips In Phillips Vs. Brooks Vs. Brooks,, A obtained possession of a costly costly ring from B, a jeweler jeweler by fraud. Before the fraud could could be detected Apledged Apledged the ring with with P who received it in good faith. faith. It was held that P got a better title. It should be, however, noted that where the possession of the goods is obtained under a void or illegal contract, the buyer goes not get any title. title. In Cundy Vs Lindsay Vs Lindsay,, a person obtained possession of goods by imitating the name of a reputed form and sold the goods to a buyer. It was held that the buyer got no title. This exception is applicable only when the goods are in the possession of the seller under a voidable contract and they are sold to a bonafide buyer before the contract is rescinded. 5. Sale Sale by seller seller in poss posses essi sion on after after sale sale . Section Section 30(1) deals with with this exception, exception, it provides provides that that where a person, having sold the goods, continues to be in possession of the goods or of the documents of title and the sells them over again to a buyer, the buyer gets a better title provided he has acted acted in good faith faith and withou withoutt a notice notice of the previous previous sale. sale. For the applica applicatio tion n of this exception it is necessary that the goods must be in the possession of the seller after sale in the capacity of a seller and not as hire or bailee.

Example: A sells a transistor to B, but B allows the goods to remain in the possession of the seller. A subsequently sells that very transistor to D who buys it in good faith and without notice of the previous sale. D gets a better tile. This exception will not be applicable where the goods are held by the seller as a hirer or bailee. 6. Sale Sale by buyer buyer in posse possessi ssion on after after sale sale:: Section 30(2) provides that where the buyer has bought or agreed to buy the good, with the consent of the owner obtains possession of the goods or documents of title to the goods, but the seller still has some lien or right over the goods, if the buyer sells the goods to a second buyer, who buys tem in good g ood faith, the section buyer gets a better title.

illustrates this point. A agreed to buy a car of his his solicitor approved. The case of Marten Vs. Whale illustrates The possession of the car was given given to A. A sold the car to B, who buys it in good faith. It was held that B got a better title. Here it should be remembered that where a person is in possession of goods under a hire purchase agreement; the hirer cannot pass on a better title because in hire-purchase agreement there is only an option with with the hire to buy the goods i.e. he has not agreed to buy. This exception exception will, therefore therefore,, apply only where the buyer has bought the goods or has agreed to buy. Example: A buys a radio and agrees to pay the price in twenty installments the ownership to pass on the payment of twentieth installment. After paying ten installments, A sells sells the radio to B who buys it in good faith. B gets a good title title irrespective of the right of the radio dealer. provides that where where an unpaid seller who is in possession possession of 7. Sale Sale by by an Unp Unpai aid d sell seller er. Sec 54(3) provides goods after having exercised the right of lien or stoppage of goods in transit, resells the goods the H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 22

buyer gets a good title thereto as against the original buyer. b uyer. The title of the subsequent buyer will not be affected by the fact that no notice of such re-sale was given g iven to the original buyer. 8. Excep Exceptio tions ns und under er oth other er Act Actss : Under certain Acts, a person who is not the owner of the goods may sell them and give a good title title to the buyer. They are following : Under sec 169 of the Indian Contract Act, a finder of the goods has the right to sell the (i) goods under certain circumstances then the buyer will get a good title.

13.

(ii)

Under Sec 176 of the Contract Act, the pawnee or pledge of goods has tight right to sell the goods pledged in case a default is made by the pawnor in fulfilling his promise, then the buyer gets a good title.

(iii)

In case of the insolvency of a person, all his property vests in the Official Receiver or Assignee Assignee and he has a right to sell the the property of the insolvent insolvent person. person. This official official is not the owner of the goods but still he is able to pass a better title to the buyer.

Explain the provisions relating to delivery of goods in wrong quantities.

A. the seller is under an obligation to deliver that quality of goods as is asked for Section 37 of the Sale of Goods Act lays down the rules when goods are delivered in wrong quantity. There can be the following three possibilities. 1) Short delivery . Section Section 37 provides that that where the seller seller delivers delivers to the buyer a quantity quantity of goods less than he contracted to sell. The buyers may reject them. For examples. A agree to sell and deliver to B 100 quintals of sugar. But he could supply only 85 quintals. B has a right to reject the goods. When the buyer is refusing to accept the goods it is sufficient if he informs the seller that he is not accepting the goods i.e. the buyer is not bound to return them to the seller. If, however, the goods have been rejected for short delivery, the seller can make, within the limited period, another delivery according to the terms of the contract, and then the buyer is bound to accept them. In case of short delivery, the buyer may accept the goods. In that case the buyer shall be liable to pay for the goods actually received at the contract price. But the buyer does not lose his right to claim damages from the seller for short delivery. 2) Excess delivery . section 37 (2) provides that that where the seller seller delivers a quantity larger than that ordered or he contracted to sell the buyer has the option (a) (b) (c)

to accept the whole of the goods , in that case he shall be liable to pay for them at the contract rate ; or to accept the goods included in the contract and reject the excess ; to reject the whole of the goods

But if the excess is so small as to be negligible and the seller is not asking any an y payment for the excess, then the buyer cannot reject the goods. 3)

Mixed Delivery – section 37(3) provides that where the seller delivers to the buyer the goods mixed with the goods of a different description not included in the contract , the buyer has the option -


(a) (b)

to acce accept pt the the good goodss whic which h are are in accorda accordance nce with with the the contr contract act and reject reject the rest rest ; or to re reject th the who wholle of of th the go goods.

In levy vs. green the contract was to sell certain articles of china the seller supplied with them certain articles of china, not ordered for, but clearly distinguishable from the article ordered for, it was held the buyer could reject the whole quantity. 14. “Delivery does not amount to acceptance.” Explain. When can buyer be said to have accepted the goods? Or “The fact that the buyer has received the goods does not mean that he has accepted them.” Comment.

A. The general rule is that once the buyer accepts the goods, he cannot reject them afterwards. Now the question question arises as to when the buyer is deemed to have accepted the goods. The fact that the buyer has received the goods does not necessarily mean that he has accepted them. Accepting the goods is something more than taking the delivery of the goods. According to Section 42 of the Sale of Goods Act, the buyer is deemed to have accepted the goods in the following circumstances: (1) When he intimates intimates to the seller seller that he has accepted the goods. goods. (2) When When the goods goods have been delivere delivered d to him and he does any act in relati relation on to them them which is inconsistent with the ownership of the seller, for example, when he re-sells or pledges the goods. In Hardy & Co. vs. Hillerns and Fowler, the buyer took delivery of wheat, without making proper inspection, sold a part of it to H. Three days later the buyer found that the wheat was not of contract quality and therefore wanted to reject it. It was held that the buyer buy er has lost the right of rejection because when he resold part of the wheat to another buyer, it shows that he has accepted the goods. It should be noted that where goods are not delivered but only documents of title to the goods are delivered and the buyer deals with the documents of title, it will not amount to accepting the goods. (3) When, after the lapse of a reasonable time, he retains the goods without intimating intimating to the seller that he has rejected them. What is a reasonable time is a question of fact depending on the circumstances of each case. When the buyer rejects the goods, goo ds, it is not necessary that the buyer must return the goods, but it is sufficient if the buyer inform the seller that he is not ac cepting the goods. This rule is applicable only when the rejection is proper and there is no agreement to the contrary. 15. Explain the position of the buyer if he neglects or refuses to take the delivery of the goods .

Section 44 provides that when the seller is ready and willing to the deliver the goods and requests the buyer to the take delivery, and the buyer does not, within a reasonable time after a fter such request take delivery of the goods, he is liable to the seller for--(a) Any loss occasioned by his h is neglect or refusal to take delivery, and H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 24

(b) A reasonable charge for the care and custody of the goods. If the buyer neglects to take the delivery of the goods, it does not give any right to the seller to terminate the contract. The above rule shall apply in those cases where the property in goods has passes to the buyer. When the buyer neglects or refuses to take the delivery of the goods and it appears that his intention is to terminate the contract, the seller has the right to sue the buyer for price of o f the goods.

16. What are the rights of the buyer against the seller for breach of contract by the seller?

In a contract of sale of goods, the seller is under an obligation to deliver the exact quantity of goods agreed for on the stipulate stipulated d date and at the stipulate stipulated d place. In case there is a breach of contract contract by the seller, the buyer has the following rights: (1) Suit for damages . Section Section 57 provides that where the seller seller wrongfully wrongfully neglects neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for non- delivery. The amount of damages shall be calculated with reference to the rules given in sec. 73 of the Indian Contract Act. If the goods are readily available in the market, the amount of damages shall be the difference between the contract price and the market price on o n the day of o f breach. If the buyer has informed the seller about the existence of special circumstances, then he may claims ‘special damages’ (2) Suit for specific performance. Section 58 provides that where the contract is for the sale of specific or ascertained goods and the seller refuses to deliver them, the court may order the seller to deliver the goods in accordance with the terms of the contract. The court shall pass an order for specific performance in such cases where damages would not be an adequate remedy and it is feasib feasible le for the court court to superv supervise ise the specif specific ic perfor performan mance. ce. The specif specific ic perfor performan mance, ce, is generally claimed where the subject matter of the contract is rare goods. (3) Suit for damages for breach of warranty. Section Section 59 provides provides that where there is a breach of warranty warranty or where the buyer elects or is compelled compelled to treat the breach of condition as breach of warranty, the buyer cannot reject the goods, but he may ask for the reduction of the price payable by him or he can ask for damages. condition. In case there is a breach (4) Suit for rescission of contract and damages for breach of condition. of condi conditi tion on by the the sell seller er,, the the buyer buyer has has a righ rightt to repu repudi diat atee the the contr contrac act. t. In addi additi tion on to repudiation, he has the right to claim damages.

(5) In the event of anticipatory breach. If the seller repudiates the contract before the date of delivery, the buyer has two options: (a) He may treat treat this breach breach as actual actual breach breach and take take the necessa necessary ry action action agains againstt the seller seller immediately; or (b) He may decide to wait wait till the the due date of performanc performance. e. If the buyer adopts the first course the contract comes to an end and the amount of damages will be calculated with reference to the price prevailing p revailing in the market on the date. H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 25

If the buyer decides to opt for the second course, the contract remains open at the risk and for the benefit of both the parties. The seller may change his mind and may be willing to perform the contract, and then the buyer will have to accept the goods. Here if the contract remains unperformed on the contracted day, the damages will be the difference between the contract price and the market price on the day of delivery. (6) Suit for price . If the buyer has paid the price to the seller and the goods are not delivered, he can sue the seller for the recovery of the price paid. 17. Who is an unpaid seller? What are his rights against (a) goods, (b) buyer personally? Or Who is an unpaid seller? What are his rights against the buyer personally and against the goods? A seller who seller who has not received the whole of the price of the goods sold is known as an unpaid seller. Section 45 of Sale of Goods Act defines an unpaid seller as following: “The seller of goods is deemed to be an unpaid seller---(a) when the whole whole of the price has not been been paid or tendered tendered ; (b) When a bill of exchange exchange or other negotiable negotiable instrument instrument has been received as conditional conditional payment and the condition on which it was received has not been fulfilled by reason of the dishonor of the instrument or otherwise.” A seller will be considered as an unpaid u npaid seller when he satisfies the following conditions: (1) He must have sold goods on cash terms and he has not yet received the price. In case the goods are sold on credit, he cannot be called as an unpaid seller during the period of credit because the payment has not become due. It is only on the expiry of the period of credit if he remains unpaid, he will become an unpaid seller. (2) He must not have received the whole of the price. The seller is treated as unpaid seller so long as any portion of the price, however small, remains unpaid. Where the whole of the price was tendered, and the seller refused to accept such a tender, the seller cannot be called an unpaid seller. (3) A bill of exchange or other negotiable instrument has been received in payment for the price but the same has been dishonored. Rights of an Unpaid Seller

An unpaid seller has been expressly given the following rights: (1) Rights against the goods __ (a) Right of lien. (b) Right of stoppage in transit (c) Right of re-sale. (2) Rights against the buyer personally __ (a) Right to sue for price. (b) Right to sue for damages. (c) Right to sue for interest. Rights of an Unpaid Seller against the goods.


An unpaid seller has the following right of against the goods, even though the property in goods has passed to the buyer: (1) Right of Lien ‘Lien’ is the right of an unpaid seller to retain possession of goods which are under his actual possession until the price due in respect of them is paid or tendered. Sec. 47 describes the circumstances in which an unpaid seller may exercise his right of lien. The right of lien can be exercised in the following cases, namely: (1) where the goods have been sold without any stipulation as to credit; (2) where the goods have been sold on credit, credit, but the term term of credit has expired; (3) where the the buyer becomes becomes insolvent insolvent.. If the goods are sold on credit, the right of lien cannot be exercised during the period of credit. But on the expiry expiry of the period of credit, if the price is still not paid and the goods are in the possession possession of the seller, right of lien can be exercised. But in case of insolvency of the buyer, the right of lien can be exercised even though the goods have sold on credit and the period of credit has not yet expired. The right of lien is essentially a possessor right; it is a right to retain the property of another person. Lien has nothing to do with the title to the goods. Right of lien is not affected by the seller giving a document capable of transferring title, e.g. bill of lading or any other type of delivery order, provided the goods are in the actual possession of the seller. The right of lien will also not be affected by the fact that the seller is holding the goods as agent or bailee for the buyer. See 47 (2) clearly provides that ‘the seller may exercise his lien not with standing that he is in possession po ssession of goods as agent or bailee for the buyers.’ Unpaid seller’s right of lien extends to the whole of the goods in his possession. He may refuse to deliver a part of the goods on payments of a proportionate part of the price by the buyer. Where an unpaid seller has delivered a part of the goods, he may still exercise the right of lien over the remaining goods. But if part of the goods are delivered under circumstances which show an agreement to waive the lien. Then the lien cannot be exercised over the remaining goods. The right of lien can be exercised only for the price of the goods, and not for any other type of maintenance or custody charges etc. the right of lien does not extend to other charges which the seller may have to incur for storing the goods during the exercise of the lien. The unpaid seller’s right of lien will not be affected even if the seller has obtained a decree for the price of the goods. The unpaid seller’s right of lien arises only when the property in goods has passed to the buyer. Because if the property in goods has not passed to the buyer, the title is still with the seller, then where is the question of retaining the goods of another person? Sec46(2) specifically provides that where the property in the 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 coextensive with his right of lien and stoppage in transit. Termination of lien

An unpaid seller of goods loses his right of lien on the goods in the following cases:


(1) When the seller seller delivers delivers the goods to a carrier carrier or other bailee for the purpose purpose of transmission transmission to the buyer, without reserving the right of disposal of the goods. Delivery of the goods to a carrier for the purpose of carrying them to the buyer operates as a delivery to the buyer himself, and so, the right of lien is lost. If the seller takes back the goods from the carrier for any other purpose, the right of lien does not revive. (2) When the buyer or his agent lawfully obtain possession possession of the goods. Therefore, once the goods are are delivered to the buyer or his agent the lien is lost. If the goods are delivered back to the seller for specific purpose, such as repair etc., the right of lien does not revive. (3) When the seller expressly expressly or impliedly waives his his right of lien. An implied waiver takes place when the seller grants a fresh term of credit or takes a bill of e xchange for the price payable payab le at a future date or when the seller assents to a sub-sale by the buyer. (4) When the buyer tenders tenders price for the goods, goods, the seller ceases ceases to be an unpaid seller. seller. Even if the seller seller refuses to receive money, he cannot exercise the right of lien on the goods. (2.) Right of Stoppage of Goods in Transit . When the goods are delivered to the carrier for the purpose of transmission to the buyer, the right of lien comes to an end but so long the goods are in transit, the seller still has a right to stop them in transit. The right of stoppage means the right to stop further transit of goods to resume possession over the goods and to retain them till the price is paid. From this provision it is clear that this right of stoppage in transit can be exercised when the following conditions are satisfied: 1) The seller seller should should be unpa unpaid. id. 2) The buyer buyer shou should ld have have become become inso insolve lvent. nt. 3) The property property in the goods should should have have passed passed to to the buyer. buyer. 4) The goods goods shoul should d be in the cours coursee of transi transit. t. The right of stoppage in transit arises only when the buyer has parted with the possession of the goods and the buyer has become insolvent. This right is available only so long the goods are in transit i.e. they are in the possession of a third party, they are neither in the possession of the seller nor that of the buyer. It is in this sense it is said that the right of stoppage in transit is an extension of the right of lien. The point where the lien ends, stoppage in transit begins. Duration of transit: Sec. 51(1) provides that goods are deemed to be in course of transit from the time when they are delivered to a carrier or other bailee for the purpose of transmission to the buyer, until the buyer or his agent takes delivered of o f them. Thus transit comes to an end when the goods are delivered to the buyer or his agent. Transit, however, does not mean that the goods must be actually moving. In simple words, when the goods are in the custody of a middlemen or a carrier they are said to be in transit.

The transit comes to an end in the following cases: (1) When When the buyer or his agent agent takes takes delivery delivery of the goods goods from from the carrier carrier before before their arrival arrival at the appointed destination. (2) When the buyer or his agent tales tales delivery delivery of the goods after the goods have reached reached destination. destination. In G.I.P. Rly Co. Vs. Hanmandas, the goods were handed over to the railway Co. On arrival at destination the goods were delivered to the buyer who got them loaded on his cart but had not yet left the railway H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 28

(3) (4) (5) (6)

compound when the railway Co. received the telegram to stop the goods. It was held that the goods cannot be stopped, since they had already been delivered to the buyer. When after the arrival arrival of goods at the appointed appointed destination, destination, the carrier or other bailee bailee acknowledges acknowledges to the buyer or his agent that he is now holding the goods goo ds on his behalf, the transit comes to an end. When the goods are delivered delivered to a carrier, carrier, who is acting as the agent of the buyer, the transit transit ends as soon as the goods are delivered to the carrier. Where the carrier carrier wrongfully wrongfully refuses to deliver deliver the goods to the buyer or his agent, the transit transit is at an end. When When part part delivery delivery of the goods goods has been made to the buyer or his agent, agent, the remainin remaining g can still still be stopped. But if part delivery has been made in such circumstances which show that the seller has given up the possession of the whole of the goods, the transit ends. If the goods are rejected by the buyer and the carrier or other bailee continues in possession of them, the transit does not come to an end. Similarly, where the buyer directs the goods to be taken to some other destination, after the transit has started, the transit continues.

How stoppage in transit is affected? The unpaid seller may exercise the right of stoppage in transit:

(1) By actually actually taking taking possession possession of the goods; goods; or (2) By giving notice of his claim to the carrier or other bailee in whose possession possession the goods are. A notice is required to be given to the carrier to stop the goods and redeliver them to the seller or according to his directions. Such notice may be given either (a) to the person in actual possession of the goods, or (b) to his principal. Where a notice is given to the principal, there should be sufficient margin of time to enable the principal to communicate with his agent, so as to prevent delivery to the buyer. When notice of stoppage in transit is duly given by the seller to the carrier in possession of goods or to his principal then the carrier must not deliver the goods to the buyer or his agent but should redeliver them to, or according too the directions of, the seller. If the carrier delivers the goods to the buyer even after receiving such a notice, then he shall be liable to the seller for conversion. The expenses of redelivery of the goods are to be borne by the seller. Distinction between right of lien and stoppage in transit

(1) The right of lien can be exercised exercised only when the goods are in the actual possession possession of the seller, seller, while right of stoppage in transit can be enforced so long as the goods have not reached in the possession of the buyer though the seller has parted with the possession of the goods. (2) The right of stopping the the goods in transit arises arises only when the buyer has become insolvent and is unable to pay. But the right of lien can be exercised even when the buyer is solvent i.e. he is able to pay but does not pay. (3) The right of lien comes to an end as soon as the goods go out of the possession possession of the seller, seller, but the right of stoppage in transit commences when the goods have left the possession of the seller continues till the goods reach in the hands of the buyer or his agent. (4) In lien, the seller retains retains the possession possession over the goods, while while by exercising exercising the right of stoppage in transit; the seller regains or resumes possession over the goods. 3) The Right of Re-sale. In a contract contract of sale where the property in goods has passed to the buyer and the seller by exercising the lien or stopping the goods in transit, again gets the possession of the goods but the seller does not get back the ownership rights. The seller gets into a peculiar position since he is not the owner, he cannot sell the goods and at the same time buyer is not coming forward to take the H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 29

delivery of the goods, so the seller continues to be in possession of the goods. But such a position cannot be allowed to continue for long. The seller is, therefore, given a limited right to resell resell the goods. The unpaid seller can exercise the right of resale in the following case: (a) When the goods are of a perishable nature. nature. In this case the seller need not give any notice to the buyer of his intention to resell the goods. (b) When the unpaid seller seller has exercised the right of lien or stoppage in transit, transit, the seller seller should give a notice to the buyer of his intention to resell the goods. If the buyer does not pay the price within reasonable time after receiving the notice, the seller may resell the goods. (c) When the seller seller has expressly reserved reserved the right of resale resale in case of buyer’s default. default. In such a case no notice need be given to the buyer. If on a resale there is a loss to the seller (i.e. difference between the contract price and the sale price), he is entitled to recover it from the defaulting buyer. But if there is a surplus on such resale, the seller can keep the surplus with him because the buyer buye r cannot be allowed to take benefit of his default. If the notice of resale is not given to the buyer, then the seller is not entitled (i) to recover any deficiency on such resale; and (ii) is not entitled to retain any surplus arising on resale, rather the buyer may take action against the seller for conversion. The notice is required to be given to the buyer for the following reasons: (a) That the buyer is given the last opportuni opportunity ty to fulfill fulfill his promise, promise, by paying the price the buyer can take possession of the goods; (b) That if the buyer is himself himself unable to pay, at least he can see to it that the goods are resold at a proper price, so that his liability may be minimum. It should be noted that on resale of goods, the subsequent buyer gets a good title, irrespective of the fact whether the notice of resale was or was not given to the original buyer. buy er. Rights of an unpaid seller against the buyer personally

In addition to the rights discussed above, the seller has the following rights against the buyer personally. 1) Suit for price . When the property in goods has passed to the buyer and the buyer refuses to pay the price, the seller may sue him h im for the price of goods. If the contract of sale stipulates payment of price on a certain day irrespective of delivery or of passing of property, and the buyer refuses or neglects to pay the price on that day, the seller may still sue the buyer for the price, even though the ownership has not yet passed on to the buyer. Non-Acceptance. Section 56 provides that where the buyer wrongfully neglects 2) Suit for damages for Non-Acceptance. or refuses to pay for the goods, the seller may sue him for damages for non- acceptance. The amount of damages is to be calculated in accordance with the rules laid down in section 73 and 74 of the Indian contract Act. Where there is a ready market for the goods, the quantum of damages will be the difference between the contract price and the market price on the data of breach. if there is no difference between the two, the seller will get only nominal damages. In case the market price rises after the data of breach, even then the seller will be entitled only to the difference on the data of breach. When there is no ready market for the goods, the amount of damages will depends upon the facts of each case.


3) Suit for interest . Where the unpaid seller is entitled to sue for the price of the goods, he is given a right to claim interest on the price from the date when the price becomes payable. The rate of interest, if not already agreed upon, is to be decided by the court. 18. How the unpaid seller’s right of lien and stoppage in transit affected by a sub-sale or pledge by the buyer.

The unpaid seller’s right of lien or stoppage in transit is not affected by any sale or other disposition of the goods by the buyer [sec. [sec. 53(1)]. Example: A sells certain certain goods to B and they are handed over to a carrier carrier for carrying them to B. before the goods reach their destination, A comes to know that B has become insolvent. In the meanwhile B sells those very goods to C who buys them in good faith. The transaction of sale between B and C will not affect the right of A of stopping the goods in transit. This right of the unpaid seller is defeated in the following two cases: (1) When the seller seller has himself himself given his assent to such such sub sale or pledge by the buyer, then the sale sale is binding on the seller. The meaning of consent of the seller in this case is that the seller must have done something which shows that he has renounced his rights against the goods. If the unpaid seller has only been simply informed, this information does not amount to acceptance. (2) When a document of title to the goods (bill of lading or railway railway receipt) is transferred transferred to a buyer, and the buyer transfers it by way of sale or pledge to a person who takes it in good faith and for valuable consideration, then the seller’s right of lien or stoppage in transit is lost. If the goods are pledged by the buyer, the unpaid seller can exercise his right over the goods only subject to the right of pledge to satisfy his claim against the buyer first out of any other goods or securities of the buyer in the hands of the pledge [see 53(2)] this means that if the goods have been pledged by the buyer, then the unpaid seller may still exercise his right by paying off the pledge. Examples: A sold some goods to B.A sent the railway receipt to B. B became insolvent. A’s right to stop the goods in transit is defeated. In this examples to P, then A can exercise his right subject the right of the pledge i.e. A by paying off the amount to the pledge, he can exercise his rights. The point to be noted is that the buyer or the pledge should accept the goods in good faith. If the sub- buyer or the pledge knows that the original buyer has become insolvent, then the unpaid seller can exercise his right of lien or stoppage in transit. 19. State the rules regarding sale by auction. Auction sales are very much different in their ways and methods of selling goods from the usual cash sales. In an auction sale, the auctioneer invites bids from the prospective buyers and the goods are sold to the highest bidder. The auctioneer accepts the highest bid in a customary manner, i.e. by the fall of the hammer or by using the words “one, two and three”. The property in goods passes to the buyer on the fall of the hammer.

The rules regarding auction sale are as following: 1.) Wher Wheree an aucti auction on sale sale is made made in separa separate te lots, lots, each each lot lot is prim primaa facie facie deem deemed ed to be subj subjec ectt of a separate contract of sale. 2.) The sale sale is complet completee when the auctio auctioneer neer annou announces nces its its complet completion ion by the fall fall of the hammer hammer or in some other customary manner. Until such announcement is made, any bidder may withdraw his bid. This is so because each bid is only an offer from the bidder and the offer can be revoked at any time before it is accepted. When the auctioneer announces the completion of the sale by falling the hammer, the sale is complete and the property in goods passes immediately to the buyer. A condition in an H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 31

3.)

4.)

5.)

6.) 7.)

8.)

9.)

10.)

auction sale which will make the bids not withdraw able before the fall of the hammer shall not be enforceable. Seller Seller or any other person person on his behalf cannot cannot bid bid at an an auction auction sale sale unless unless such a right right has expres expressly sly been reserved and this fact is expressly notified. Any sale in contravention to this rule may be treated as fraudulent by the buyer. When When the right right to bid has expre express ssly ly been reser reserved ved by the auctio auctionee neer, r, then only only one person person can bid on his behalf. Such persons who are employed by the auctioneer to bid and to increase the price are known as ‘puffer’. Only one puffer can be engaged. If more than one puffer is engaged, the sale may be treated as fraudulent by the buyer. In an auction auction sale, the auction auctioneer eer may notif notify y in the the way beginni beginning ng to the the intending intending bidders bidders that the the sale sale shall be subject to a reserve price or upset price i.e. the price below which the goods will not be sold. If the highest bid is not up to the expectation of he seller, he may refuse to sell the goods. Even where the seller has not reserved any price, he may refuse to sell the goods to the highest bidder. This is based on the rule that the acceptor is not bound to accept the offer. The auction auctioneer eer has has the the right right to make the the auction auction subject subject to to any conditions conditions he he likes. likes. When When a group of perso persons ns agree agree not to to bid agains againstt each other other,, such an agree agreemen mentt is known known as “knock “knock out”. Such agreements are made to avoid competition and are not illegal. But, if the intention of the parties to “knock out” is to defraud a third party, the ‘knock out’ will be illegal. When the the buyers buyers are dissuad dissuaded ed to bid bid or from from raising raising the the price price by pointing pointing out the defects defects in in the goods goods or by scaring the bidders away or by doing any other act to dissuade the intending bidders, this is known as ‘damping’. Damping is illegal and in such a case the auctioneer can refuse to sell the goods. All auction auction sales sales are are subject subject to certai certain n implied implied warranties warranties for which which the auctioneer auctioneer is held responsi responsible. ble. Auctioneer warrants his authority to sell and he does not known of any defect in the title of his principal and he undertakes to give quiet and undisturbed possession against the payment of price. The auctioneer auctioneer cannot cannot be compelle compelled d to accept the payment payment of of the price price in the form form of a bill of of exchange exchange or a cheque.

PRACTICAL PROBLEMS H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 32

General Principle 1.

State giving reasons, the nature of the transaction in each of the following cases: (a) A promise to make a set of false false teeth for B with with materials wholly found by A and B promises promises to pay for them when made. (b) A member of an ordinary club pays for provisions provisions in the club’s store store and carries them them away for his use at home. (c) A sells his motor car to B for Rs. 5,000 on the conditions conditions that B will recover recover the car to A it within within six months he repays the amount to B with interest @6% (Ans. All are contract of sale since ownership in the goods has been transferred. In the last case the sale is conditional but it does not alter the nature n ature of the contract.)

2.

X agrees to sell two of his cars to Y at a price to be fixed by Z. He immediately gives delivery of the first car. Z refuses to fix the price. X asks for return of the car already delivered while Y claims the delivery of the second car too. Decide. (Ans. X can not get the first back, he will get a reasonable price for it. However, he need not deliver the second car since the contract regarding it sale is now void.)

3.

X agrees to sell Y fine sugar, out of 2,000 bags stock in his godown, for Rs. 12,000 @ Rs. 3,000 per bag. Before the delivery of sugar there is fire in the godown which completely destroys the stock. Can Y compel X to supply the sugar as per agreement? (Ans. X cannot to compel to supply the sugar since it was a contract contract for sale of specified specified goods which perished before transfer of title to the buyer without fault fault of either party.)

4.

G commissioned R, an artist, to paint a portrait for A for Rs. 250. r supplied the canvas and other materials. State with reasons whether this is a contract for sale of goods. ( Ans. It is contract for service and not for sale of o f goods.)

5.

A agreed to exchange with B 100 tins of baby food at Rs. 10 per tin, for 10 cows at Rs. 500 per cow and pay the difference in cash. State with reasons whether this is a contract for sale sale of goods. (Ans. It is a contract for sale of goods since money value have been taken into consideration.)

6.

A agrees to sell a flower-pot to B at a price to be fixed by B. Is it a valid contract? Give reasons. (Ans. It is a valid contract.)

Conditions and Warranties 1.

Worsted cloth of quality equal to sample was sold to tailors who could not stitch in into coats owing to some defect in its texture. The buyers had examined the cloth before effecting the purchase. Are they entitled to damages. (Ans. Yet, if the defect is a latent one.)

2.

F bought milk form A. the milk contained typhoid germs. F’s wife took the milk and got infection as a result of which she died. What damages can F recover form A? (Ans. Reasonable damages. See rule regarding damages.)

3.

A bought a car from B who had no title to it. A used the car for several months. After that the true owner came forward and demanded the car. State the rights of A and the true owner of the car. (Ans. A is bound to hand over the car to the true owner. He can sue B for breach of ‘condition as to title’.)


4.

A boiler was sold for manufacturing carbon paper and the seller knew that it was so required. But the boiler was not fit as required under the Indian Boilers’ Act. State the rights and the liabilities of the buyer and the seller. (Ans. The seller must know the requirements under the Indian Boilers, Act. The principal e of Caveat Emptor is not applicable. Buyer can cancel the contract and recover compensation from the seller.)

5.

A sold a new singer car to B. On delivery. B found that it was not a new car. What is the remedy of B. (Ans. There is a breach of condition as to description. B may repudiate the contract.)

6.

H sold to G certain quantity of foreign refined palm oil’ warranted only equal to sample. The sample consisted of palm oil mixed with vegetable oil. The oil tendered corresponded with the sample but it was not such as is known in the market as ‘foreign palm oil. G wants to reject the goods on the ground that the oil supplied was not in accordance with the sample. Advise him giving reasons. (Ans. G can reject the goods as they do not correspond to the description.)

7.

D purchases a video- cassette- recorder (VCR) from a dealer of repute. D being a non-technical person does not Know about the technical details of the VCR. On being put to use, the VCR was found to be defective from the very beginning and it did not work inspire of the repairs undertaken by the dealer. D wants to return the set and claim refund. Dealer refuses to take the set back and also refuses to accept the claim for refund. State the provisions of the sale of goods act regarding the liability of the seller in this case. Is the action of the dealer justified? (Ans. The seller cannot refuse to take back bac k the set. He will have to accept the claim for refund.)

8.

Mrs. K, a housewife, purchased a tin of standard quality kerosene form G, a kerosene dealer of repute. When part of the kerosene was put to use in a stove for cooking by Mrs. K, an explosion occurred causing damages. Mrs. K claims damages form the dealer. The dealer refuses to pay for the damages. Decide giving the provisions of the Indian S ale of Goods Act in this regard. (Ans. Mrs. K is entitled to claim damages from the dealer since the goods were not of merchantable quality.)

9.

A sold a refrigerator to B. The refrigerator performs all other function but fails to make ice. Is it a valid sale. (Ans. It is a breach of an implied condition as to fitness. Hence the buyer c an repudiate the contract.)

10.

A goes to B’s shop and purchases a silk saree thinking that it is made of banarasi-silk. The shopkeeper knows that A’s thinking is wrong. He, however, does not correct A’s impression. Later on, when A succeed? Give reasons. (Ans. A will not succeed. Let the buyer be aware.)

11.

Aman borrows Rs. 200 from Bhuvan against the security of his wrist-watch. After week’s time, Aman obtains the each from Bhuvan on some pretext and then sells the same watch to Chandan, an innocent buyer, who has no knowledge about Bhuvan’s charge on the watch. Subsequently, Bhuvan disturbs Chandan’s possession and gets payment of Rs. 200 from him. Now Chandan files a suit against Aman for recovery of Rs. 200 from him. Will Chandan succeed? Give reasons. (Ans. Chandan Chandan can recover recover Rs. 200 from Aman since Aman had not disclosed disclosed any charge in favour of Bhuvan to him.)

12.

For the purpose of making uniform for the employees, Bansi Bhaiya bought dark blue coloured cloth from Vivek, but did nit disclose to the seller the purpose of said purchases. When uniforms were prepared and used by the employees, the cloth was found unfit. However, there was evidence that the cloth was fit for caps, boots and carriage lining. Advise Bansi Bhaiya whether he is entitled to have any remedy under the Sale of Goods Act, 1930. H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 34

(Ans. Bansi will not succeed since there is no implied condition of the article being fit for a particular purpose.) 13.

Ram sells by auction a horse to Rahim without disclosing that the horse was unsound. Can Rahim cancel the contract? Answer with reasons. (Ans. No. the principle of Caveat Emptor is applicable.)

14.

A agreed to sell to B 20 kg of rice described as ‘Dehradun Basmati’ as per the sample shown. Although the rice supplied was in accordance with the sample but the sample itself was of ‘Punjab Sela’. The buyer refuses to make payment. What remedies are available to the seller? (Ans. There is breach of an implied condition of ‘Sale by sample as well as description and the buyer has got right to set aside the contract.)

15.

B purchased some glue. The glue was stored in barrels. Every facility was given to the buyer to examine them. He having looked the barrels from outside purchased to glue. B wants to avoid the contract on the ground of breach of implies condition. Advise giving full reasons for your answer. (Ans. There was no breach of any implied condition as to the merchantability and, B was not entitled to avoid the contract and also not entitled as any relief against the seller.

16.

M agreed to supply to N a certain quantity of timber of half-inch thickness. The timber actually supplied varied varied in thickne thickness ss from from one- third inch to five-e five-eigh ighth th inch. inch. The timbe timberr was mercha merchanta ntable ble and commercially fit for the purpose for which it was ordered. N rejected the timber. Is this action justified? (Ans. Yes, N can reject the goods.)

17.

Mr. A purchased some gule. The gule was stored in barrels. Every facility was given to him to examine the gule. However, he did not get the barrels opened to examine them. He giving looked the barrel from outside, purchased the gule. He wants to avoid the contract on the ground of breach of implied condition. Advise him giving full reasons for your answer. (Ans. No, the principal of Caveat Emptor is applicable.)

18.

A purchases a television from B on B’s plea that though it is old, it in excellent condition. A finds later on that the television does not work at all. Can he reject the set and recover his money. (Ans. Condition as to description has been broken. Hence, A can reject the set and recover his money.)

19.

A asked a car dealer to suggest him a suitable car for touring purposes. The dealer suggested him to buy ‘Buggati Car’. Accordingly, A purchased the car but found it unsuitable for touring purposes. Can A return the car the get back the price. (Ans. Condition as to fitness broken. Hence, A can return the car and get back the price.)

20.

A contract to sell B, by showing sample, certain quantity of rape- seed oil described as ‘foreign refined rape-seed-oil’. The oil when delivered matches with the sample, but is not foreign refined rape-seed oil. Referring to the provisions of sale of Goods Act, 1930 advise the remedy, if any available to B. (Ans. B has a remedy to repudiate the contract.)

21.

Roshan purchases a desktop computer from Harish on Harish’s plea that though the said computer is used, it is an excellent condition. Later on, Roshan finds that the computer does not work at all. Can he reject the purchase of the said computer and recover his money? Hive reasons. (Ans. Roshan can reject the computer and recover his money from Harish.)

Transfer of Ownership


1.

The plaintiff handed over a motor car to a mercantile agent for sale on condition that the car should not be sole below a specified price. The agent agreed to do so, but sold it below such price to A and misappropriated the proceeds. A bought the car in good faith and resold it to the defendant can the plaintiff recover the car from the defendant? State reasons for your answer. (Ans. No. see sale by mercantile agent under “Transfer of title by non-owners’.)

2.

A sold and delivered a motor car to B. Subsequently A gets possession of the same car on hire from B. A, the former seller, who is now in possession of the car as the hirer sells and delivers it to C who, in good faith and without notice of the previous sale, purchases it for consideration. Has B any right to get the car from C? Decide stating reasons. (Ans. Yes. See, Sale by a seller in possession after sale’.)

3.

X, the owner of a motor car, leaves its certificate of registration in the car. The certificate of registration is equivalent to a document of registration in the car. The driver of the car by forgery procures its registration to his own name and sells it to Z, a bona fide purchaser for value. Is X estopped from denying Y’s authority to sell? Give reasons for you answer. (Ans. No. mere negligence is not enough. He could not have anticipated the forgery. No disregard to buyer’s interests.)

4.

A delivered his horse to B on trial for a week with a condition that if found suitable he will buy the horse ho rse for Rs. 1,000. The horse died on the third day. Is B liable to pay the price? (Ans. No. ownership was not transferred.)

5.

A hirer, who obtains possession of a refrigerator from its owner under hire purchase agreement, sells the refrigerator to a buyer who buys in good faith and without notice of the right of the owner. Does this buyer get a goods title to the refrigerator? State reasons for your answer. (Ans. No. the hirer has no title and therefore cannot transfer any title to the buyer.)

6.

A delivered to B certain goods in sale or return. It was agreed that the property would not pass except on payment of cash by B by a particular date. Before the date B pledged the goods with C. C an A recover the goofs from C by filling a suit? (Ans. B’s pledging of goods with B was not valid and hence A could recover the goods from C.)

7.

B selects certain furniture in a shop. The price is settled. He arranges to takes delivery of the furniture the next day through his servant and agrees to pay for the furniture on the first of the next month. The furniture was destroyed by fire the same evening. Is B liable to pay the price? (Ans. B is liable to pay the price. Thus is unconditional contract for sale of specific goods in a deliverable state.)

8.

A sells 80 kilograms of grain out of a large quantity lying in his granary. B sells 60 kilograms out of these, the goods not get being ascertained, to C. then C having a delivery order from B, forwards it to A who informs C that he will sent the grain in due course. B then becomes insolvent. Can A refuses to deliver the 60 kilograms of grain to C. give reasons. (Ans. A cannot refuse to deliver grains to C.)

9.

J, the owner of a fiat car wants to sell his car. For his purpose he hands over the car to P, a mercantile agent for sale at a price not less than Rs. 50,000. The agent sells the car for Rs. 40,000 to A, who buys the car in good faith and without notice of any fraud P misappropriated the money also. J sues A to recover the car. Decide giving reasons whether J would succeed. (Ans. J would not succeed.) H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 36

10.

Mr. Shah agreed to purchase 50 bales of cotton from Mr. Bose from his large stock and sent him men to take delivery of the goods. They could pack only 30 bales. Then there was accidental fire and the entire stock was destroyed including the 30 bales that were packed. Who will bear the loss and to what extent? Explain. (Ans. In case the bales have been selected with the buyer’s consent the loss will be borne to the extent of 30 bales by Mr. shah.)

11.

While traveling in a bus Ashish finds a VCR. After making reasonable efforts efforts to discover the owner, he sells the VCR to Deepika, who buys the VCR with the knowledge that Ashish was merely a finder. On coming to know about the deal, M, the owner of the VCR files a suit against Deepika for the recovery of VCR from her. Decide giving reasons, whether M will succeed in getting the VCR back from Deepika? (Ans. M would succeed in getting the VCR back.)

12.

A delivers his watch to B on sale or return’ basis B delivers the same watch to C on ‘Sale or return basis. C delivers it to D on ‘sale or return’ basis and D delivers the same watch to E the watch is damaged. Who will bear the loss? Give reasons. (Ans. D will bear the loss.)

13.

A delivered a horse to B for trial for three days. It was agreed that if found suitable to the buyer for his purposes, the sale would then be absolute. The ho rse died on the 2nd day without the fault of either party, who will bear the loss. (Ans. The seller will bear the loss since the ownership had not been transferred.)

14.

A delivered a diamond ring to B on “Sale or Return” basis. B delivers that ring to C and then C delivers it to D on similar terms. D lost the ring. Is B liable to A for the loss? Give reasons.

15.

A agrees to purchase bales of cotton from B at Chennai. The goods are sent by rail, delivery to be given against payment by A through bank. A pays the amount and obtains a delivery not. But the goods had been destroyed by fire before he pays the amount. Has the property in goods passed to A? Give reasons. (Ans. No., A will not bear the loss as property p roperty in goods has not passed to A.)

16.

B buys furniture and makes full payment. He promises to take delivery of furniture in the next week to which the seller agreed. Next day, the shopkeeper sold that furniture to C on cash basis Examine C’s title to the furniture. (Ans. In the present case, B has bought furniture but the possession of the furniture is still with the shopkeeper. C is the subsequent purchaser who is not aware of previous sale to B. C gets a valid title.)

17.

J, the owner of a Fiat car wants to sell his car. Fir this purpose, he handed over the car to P, a mercantile agent for sale at a price not less than Rs. 50,000. the agent sells the car for Rs. 40,000 to A, who buys the car in good faith and without notice of any fraud. P misappropriated the money also. F sues A to recover the car. Decide giving reasons whether F would succeed. (Ans. P, the agent was in the possession of the car with Fs consent for the purpose of sale. A, the buyer, therefore obtained a good title to the car. Hence, F in this case, cannot recover the car from A, A similar decision, in analogous circumstances was taken in Folkes us. King.)

18.

A sells his horse to B. The delivery of the horse is to be made in the next week. B agrees to pay the price of the horse on delivery. A requires his servant to keep the horse separate from the other horse. The horse is kept separately with the knowledge and consent of B. The horse however, dies before it is H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 37

delivered and paid for. Now A files a suit against ‘B’ for recovery of the price. Will A succeed? Give reasons. (Ans. A will succeed. It is a contract of sale of specific goods in a deliverable state and therefore, the property in the horse passes to B at once at the time of contract.) 19.

Goods are delivered by A to B on ‘sale or retur4n’ basis. They are further delivered by B to C and then by C to D on similar terms. The goods are stolen while in the custody of D. Who is to bear the loss of goods and why? (Ans. C can recover the loss from D. C is bound to pay the Price to B and B is bound to pay the price to A.)

20.

A horse was delivered to B on the condition of sale return within 8 days. The horse died within 8 days. Who shall bear the loss of goods and why? (Ans. The loss would fall on the seller as the property in the goods had not yet been transferred from the seller to the buyer since the sale was on sale or return basis.)

21.

With a view to boost the sales Hanuman Automobiles sells a motorcar to Mr. A on trial basis for a period of three days with a condition cond ition that if Mr. A is not satisfied with the performance of the car he can return back the car. However, the car was destroyed in a fire accident at the place of Mr. A before the expiry of three days. Decide whether Mr. A is liable for the loss suffered. (Ans. There was no transfer of owndership to A. Hence A is not liable for the loss due to the fire accident. M’s Hanuman Automobiles will have to bear the loss.)

22.

Gautam delivers some jewellery a Priya on approval without specifying any time or its return is case of non-acceptance. Priya keeps the jewellery with her without signifying her approval or refusal. After one month, a burglary takes place in Priya’s house and the Jewellery is stolen. Can Gautam sue Priya for the price of jewellery? Give reasons. (Ans. Ownership transferred to Priya on expiry of reasonable period if there is no specified period. Hence, Gautam can sue Priya.)

Performance of A Contract of Sale 1.

A contr contrac actt is made made for the the suppl supply y of 100 100 tonne tonness of flock flock by inst instal alme ment nts. s. The The first first 15 deli delive veri ries es are are satisfactory but the sixteenth instalment contains much more chlorine than what is permitted. However, the next deliveries adre to the complete satisfaction of the buyer. The buyer wants to repudiate the whole contract. Advise. (Ans. The buyer cannot do so. The chances of supplying goods not according to terms seem to be negligible.)

2.

A buys buys cert certai ain n bags bags of whe wheat at fro from m B. With Without out mak makin ing g prope properr insp inspec ecti tion on of the the qual qualit ity y of whet whet he he sells sells these bages to different buyers. After a few days, A comes to know that the what is not of the quality as agreed., Can he repudiate the contract? (Ans. No. sale of wheat amounts to his acceptance of goods.)

3.

B agre agrees es to to sell sell and and deli delive verr to A 300 300 quint quintal alss of ric rice. e. Only Only 200 200 quint quintal alss are del deliv iver ered ed.. A gets gets the ric ricee weighed and accepts the quintals sent. A afterward, objects that the whole of the 300 quintals was not delivered and refuses to pay 200 quintals. Can A be compelled to pay the price for 200 quintals? What are the provisions of the Indian sale of goods Act in this regard? (Ans. A can be compelled to compensate B for the price of 200 quintals.) H. No:-1760, Sec-28, Faridabad, Contact Nos.:- 9871664440, 9136614465, E-mail: [email protected] 38

Remedial Measures 1.

X sold a quantity of wheat to Y, who paid by cheque which was dishomoured upon presentation. X gave a delivery order to Y for the wheat and Y resold it to Z, a purchaser in good faith for consideration endorsing the delivery order to him. X refuses to deliver the goods to Z on the plea of non-receipt of price. Advise Z. (Ans. Z is entitled to the goods. See ‘Effect of sub-sale or pledge by the buyer’.)

2.

X sells and consigns goods to Y of the value of Rs. 10,000 y assigns the bill of lading for these goods in transit. (Ans. X can stop goods only on payment of Rs. 4000 to Z. See ‘Effect of sub-sale or pledge by the buyer’.)

3.

X sells and consigns goods to Y, X being still unpaid, y becomes insolvent and while the goods are still in transit Y assigns the bill of lading for cash to Z who knows that Y is insolvent. Can X stop the goods in transit? (Ans. X can still stop the goods in transit since the assignee has not acted in goods good s faith.)

4.

Goods were sold and sent by the sellers sellers at the request of the buyer to shipping shipping agents of the buyer and were put on board a ship by those agents. Subsequently they were re-loaded and sent back to sellers for the purpose of re-packing. While they were still in possession of the sellers for that purpose the buyer became insolvent. The sellers refused to deliver them to the buyer’s trustee in bankruptcy except upon payment of price. Are the sellers entitled to refuse to deliver the goods to the trustee? State reasons for your answer. (Ans. The sellers had lost their lien by delivering goods to the shipping agents. Their refusal to deliver goods to the trustee in bankruptcy was wrong.)

5.

Goods were delivered by the vendor to the railway company for conveyance and the endorsee of the railway receipt paid the freight and obtained delivery. Before the goods were taken out of the station compound the unpaid vendor gave a telegram which was received. State with reasons whether the right of stopping in transit is available. (Ans. The transit having come to an end, the right of stopping in transit cannot therefore, be exercised.)

6.

X of Delhi orders Y of Madras, to deliver certain goods to him at Delhi. While the goods are lying at the Delhi Railway station, the station master informs X that the goods are held at X’s risk. But X has become insolvent. Has Y any right over the goods as an unpaid seller? (Ans. The transit is at an end and hence Y cannot exercise the right of stoppage of goods in transit.)

7.

R sells and consigns certain goods to P for cash and sends the Railway Receipt to him. R, being still the unpaid seller, P becomes insolvent and while the goods are in transit, P assigns the Railway Receipt to N, who does not know that P is insolvent. R, being an unpaid seller wants to exercise his right of stoppage of goods in transit. Advise: (i) Whether R can do so? (ii) (ii) Would Would your answe answerr be differen differentt if N was aware aware of P’s insolv insolvency ency,, before before the assignm assignment ent of the Railway Receipt in favour of N. (iii) (iii) What are are the provisi provisions ons of the the Indian Indian Sale of of Good Act Act in this this regard? regard? (Ans. (i) R can not stop the goofs in transit. (ii) R can stop the goods in transit.)


8.

A sells goods to B. B pays to A through a cheque. Before B could obtain the delivery of goods, his cheque was dishonored by the bank. A therefore, refuses to deliver the goods until paid. Is A’s action justified? (Ans. A can retain possession of the goods exercising his right of lien under Section 47.)

9.

Certain goods were sold by sample by A to B, who in turn sold them by sample to C. The goods were not according to the sample. Therefore, C rejected the goods and gave notice to B. B sued A. Advise B. (Ans. There is breach of an implied condition as to ‘sale by sample’. Thus, B can repudiate the contract, refuse the goods and if the has already paid for them, he can even recover the price.)

10.

Suraj sold his car to Sohan for Rs. 75000. After inspection inspection and satisfactio satisfaction, n, Sohan paid Rs. 25000 and took possession of the car and promised to pay the remaining amount within a month Later on Sohan refuses to give the remaining amount on the ground that the car was not in a good condition. Advice Suraj as to what remedy is available to him against Sohan. (Ans. Suraj will succeed against Sohan for recovery of the remaining amount Apart from this Suraj is also entitled to interest on the remaining amount interest during the pendency of the suit and costs of the proceedings)

AUCTION SALE 1.

A sold a car by an auction to B. The buyer was in fact swindler. He gave a fake cheque and obtained delivery. A in order to protect himself, inserted a clause in the agreement that the property in the car would not pass to B until the cheque was cleared. B sold the car to C before the fraud could be detected. A claims the car from C. Will he succeed? (Ans. No. Ownership passed when the hammer fell. C gets goods title.)

2.

In an auction sale on of the conditions was,” The seller does not bind himself to accept the highest bid or any bid, he is not bound to assign any reason for his decision and his decision shall be final conclusive,” Is such a condition valid? (Ans. Yes, Auctioneer may impose such conditions as he likes.)

3.

An auctioneer advertised in the newspaper that a sale of office furniture will be held at Bangalore, Ajay a broker of Mumbai, reached Bangalore on the appointed date and time. But the auctioneer withdrew all the office furniture from the auction sale. The broker sued for his loss of time and expenses. Will he succeed? (Ans. The broker will not succeed.)


Sale of Goods Act (1)

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