CONDITION AND WARRANTYNEMO DAT QUOD NON HABET AND ITS EXCEPTIONSRIGHTS OF UNPAID SELLER

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WHAT IS A CONDITION

A C O N D I T I O N I S A S T I P U L AT I O N E S S E N T I A L T O T H E M A I N P U R P O S E O F T H E C O N T RAC T , B R E AC H O F W H I C H G I V E S R I S E T O T R E AT T H E C O N T RAC T A S R E P U D I AT E D O R B R O K E N .

WHAT IS WARRANTY

A warranty is a stipulation collateral to the main purpose of the contract the breach of which gives rise to claim for damages but not to a right to reject the goods and could not treat the contract as repudiated or broken.

DIFFERENCE BETWEEN CONDITION AND WARRANTY

C O N D I T I O N

Condition is an essential term or stipulation of the contract which must be fulfilled for the performance of the contract.

Breach of condition gives right to the party to reject the contract and also a right to claim damages.

Breach of condition may be treated as breach of warranty

W A R R A N T Y

Warranty is a collateral or incidental stipulation to the main purpose of the contract.

Breach of warranty does not gives right to the party to reject the contract. It only give right to claim damages only.

The breach of warranty cannot be treated as breach of condition

IMPLIED WARRANTY AND CONDITIONA. 1)Condition as to title

There are three implied condition on the part of the seller regarding title to the goods.

B. In case of a sale, he has a right to sell the goods. In case of an agreement to sell, the seller will have a right to sell the goods at the time when the property is to pass.

C. The buyer shall have and enjoy quiet possession of the goods

D. Goods shall be free from any charge or encumbrance

2)Sale by description

Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description.

3)Sale by sample

The sale by sample where there is a term in the contract express or implied to the that effect. There are three implied condition when the goods are supplied according to sample.

A. That the bulk shall correspond with the sample in quality

B. That the buyer shall have reasonable opportunity of comparing the bulk with the sample

C. That the goods shall be free from any defect. The defect shall not be apparent on reasonable examination.

4)SALE BY SAMPLE AND DESCRIPTION

The Sale Is By Sample As Well As By Description , It Is Not Sufficient That The Bulk Of The Goods Corresponds With The Sample If The Goods Do Not Correspond With The Description. Where The Sale Is By Sample As Well As By Description, The Goods Shall Correspond Both With The Sample As Well As Description.

5) WARRANTY AS TO QUALITY OR FITNESS

There Is No Implied Warranty Or Condition As To The Quality Or Fitness For Any Particular Purpose Of Good Supplied Under A Contract Of Sale. There Is An Implied Warranty As To Quality Or Fitness Under The Following Circumstances Only.

1)where The Good Are Order For Specific Purpose.

2)where The Buyers Relies On The Seller Skills Or Judgment.

3)where The Goods Are Bought By Description From A Seller Who Deals In Goods Of That Description

NEMO DAT QUOD NON HABET - THE PRINCIPLELiterally mean “ no one gives what he doesn’t

have”

"Subject to this act, where goods are sold by a person who is not their owner, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell.“

The general rule is that only the owner of goods can sell the goods. Conversely the sale of an article by a person who is not , or who has not the authority of the owner, gives no title to the buyer.

THE “NEMO DAT QUOD NON HABET” RULE SAFEGUARDS THE RIGHT OF OWNERSHIP.HOWEVER, THERE ARE SOME EXPECTATIONS TO THE RULES

A. EstoppelB. Sale by Mercantile AgentC.  Sale by Joint OwnerD. Sale by Seller in Possession after saleE. Sale by a Person in Possession under a

voidable ContractF. Sale by Buyer Obtaining Possession

Before Property in Goods has VestedG. Sale by an Unpaid SellerH. Sale by Person Under Other law

ESTOPPEL

If the true owner stands by and allows an innocent buyer to pay over money to a third-party, who professes to have the right to sell an article, the true owner will be estopped from denying the third-party's right to sell.

SALE BY A MERCANTILE AGENT

A buyer will get a good title if he buys in good faith from a mercantile agent who is in possession either of the goods or documents of title of goods with the consent of the owner, and who sells the goods in the ordinary course of his business.

SALE BY A CO-OWNER

A buyer who buys in good faith from one of the several joint owners who is in sale possession of the goods with the permission of his co-owners will get good title to the goods.

SALE BY SELLER IN POSSESSION AFTER SALE

Where a seller, after having sold the goods, continues in possession of goods, or documents of title to the goods. and again sells them by himself or through his mercantile agent to a person who buys in good faith and without notice of the previous sale, such a buyer gets a good title to the goods.

SALE BY A PERSON IN POSSESSION UNDER A VOIDABLE CONTRACT

A buyer buys in good faith from a person in possession of goods under a contract which is voidable, but has not been rescinded at the time of the sale.

SALE BY BUYER OBTAINING POSSESSION BEFORE TRANSFER OF OWNERSHIP

If a person has brought or agreed to buy goods obtains, with the seller's consent, possession of the goods or of the documents of title to them, any sale by him or by his mercantile agent to a buyer who takes in good faith without notice of any lien or other claim of the original seller against the goods, will give a good title to the buyer. In any of the above cases, if the transfer is by way of pledge or pawn only, it will be valid as a pledge or pawn.

SALE BY AN UNPAID SELLER

Where an unpaid seller has exercised his right of lien or stoppage in transit and is in possession of the goods, he may resell them and the second buyer will get absolute right to the goods.

CONCEPT OF UNPAID SELLER

WHO IS UNPAID SELLER

1.Who has not received the whole of the price

2.Who has received payment in the form of negotiable instrument or bill of exchange which is dishonoured.

“ an unpaid seller is one who has not been paid or tendered the whole of the price or one who receives a bill of exchange or other negotiable instrument as conditional payment and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise.

RIGHTS OF AN UNPAID SELLER

Two heads –

1. When the property in the goods has passed to the buyer.

Right of lienRight of stoppage in transitRight of re-sale

2. When the property in the goods has not passed to buyer.

Right of withholding deliveryOther rights

MEANING OF LIEN

A lien is a right of any one person to retain that, which is in his possession, belonging to another, until certain demands of a person in possession are satisfied.

Right of lien means –

‘Right to remain’ the possession of the goods or property until the claim is paid or satisfied.

Lien may arise by –

Statute express or implied contract in ordinary course of dealing

LIEN IS OF TWO KINDS –

1. General Lien – Right to retain the goods until all the claims of the holder are satisfied.

2. Particular or specific lien – Right to retain the particular goods until all the claims arising on those goods are satisfied.

RIGHT OF LIEN AS APPLICABLE TO UNPAID SELLER

Unpaid seller of goods, who is in possession of them is entitled to retain possession of them until payment or tender of the price in following cases ::

Where the goods have been sold without any stipulation as to credit. Where the goods have been sold on credit and the term of credit has expired. Where the buyer insolvent and the seller is in possession of the goods.

The right of lien can be exercised only when the seller is in actual possession of the goods. If he loses it, he loses the right of lien.

If the seller has parted with the documents of title of the goods, he does not loses his right of lien; if he continues to have actual possession of the goods.

TERMINATION OF LIEN

Unpaid seller’s lien is lost under following circumstances ::

When he delivers the goods to a carrier/other bailee for the purpose of transmission to the buyer without reserving the right of disposal of goods.

When the buyer or his agent lawfully obtains possession of goods.

When the seller waives his right of lien.

MEANING OF TRANSIT

If the goods are delivered to the carrier or bailee by the seller the transit is commenced and it comes to an end when the buyer acquires possession thereof.

When goods are in the hands of a middle man, goods are said to be in transit.

When the right of lien ends, right of stoppage in transit begins.

RIGHT OF STOPPAGE IN TRANSIT

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

Right of stoppage in transit as applicable to the unpaid seller ::

The seller must be unpaid wholly or partly The buyer must have become insolvent The goods must be in transit

WHEN DOES TRANSIT OF GOODS COME TO AN END..??

1. When the buyer takes delivery of the goods from the carrier or other bailee

2. When the buyer or his agent in that behalf obtains delivery of the goods before their arrival at the appointed destination.

3. When the carrier or bailee on arrival of the goods at the appointed destination, acknowledges to the buyer or his agent that he holds the goods on his behalf.

4. When the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent.

Transit of goods is not deemed to be at an end even if the goods are rejected by the buyer and the carrie/bailee continues in possession of them.

HOW IS RIGHT OF STOPPAGE IN TRANSIT EFFECTED..??

1. By taking actual possession of the goods

2. By giving notice of his claim to the carrier/bailee, in whose possession the goods are or his principal, to re-deliver the goods to seller or according to his directions.

Right of lien is to retain possession. Right of stoppage in transit is to regain possession.

RIGHT OF RE-SALE

When the unpaid seller has exercised his right of lien on his retaining the possession of the goods or regaining it by exercising the right of stoppage in transit upon insolvency of the buyer he can re-sale the goods under following conditions ::

Where the goods are of perishable nature

Where the seller gives notice to the buyer of his intention to re-sell the goods and the buyer does not pay/tender the price within a reasonable time after the notice

No notice Is necessary in case of perishable goods

Where the seller has expressly reserved his right of re-sale in case the buyer makes default

SOME FEATURES OF RIGHT OF RE-SALE

Notice of re-sale is given to the buyer unpaid seller is entitled to retain the profits

No notice to the buyer no right to recover damages from the buyer pay the profit arising from re-sale to the buyer

Loss to the seller in re-sale claim it from the buyer as damages for the breach of the contract

No notice required when the seller has expressly reserved the right of re-sale in case the price is not paid

RIGHT OF WITHHOLDING DELIVERY

Where the property in the goods has not passed to the buyer, the

seller has a right to withhold delivery of the goods.

OTHER RIGHTS

Besides these rights, the seller has the following rights against the buyer personally ::

1. Sue the buyer for the price of goods

2. The seller may sue the buyer for damages for wrongfully neglecting or refusing to accept the goods

3. Recover interest from the buyer where there is specific agreement to that effect or else the seller may charge interest on the price when it becomes due.

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