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1 Sale Of Goods Act 1930
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Sale Of Goods Act 1930
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Sale Of Goods Act 1930
The Act repeals and replaces Sec. 76 to 123 of the Indian Contract ,1872 which was adequate for their time, but by 1930, clearly needed amendments as a result of the development of modern commerce.*
Sec. 2 - Definition
Buyer means a person who buys or agrees to buy goods
Delivery means voluntary transfer of possession from one person to another
Deliverable state goods are said to be in deliverable state when they are in such state the buyer would under the contract be bound to take delivery of them.
Documents of title to goods includes a bill of lading, dock warrant, warehouse keepers certificate, Wharfingers certificate, railway receipt, multimodal transport document, warrant of order for the delivery of goods and any other document used in ordinary course of business as a proof of possession or control of goods, or authorising either by endorsement or by delivery, the possessor of the document to transfer or receive the goods.
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Sec. 2 - Definition
Fault means wrongful act or default
Future goods means any goods to be manufactured or produced acquired by the seller after the making of the contract of sale.
Goods means every kind of moveable property other than actionable claims and money, and includes 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 contract of sale.
Standing timber is moveable property if under the contract of sale they are to be severed.
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Sec. 2 - Definition
A person is said to be insolvent who has ceased to pay his debts in the ordinary course of business, or cannot pay his debts as they become due, whether he has committed an act of insolvency or not;
Mercantile Agent means a mercantile 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 the goods
Specific goods means goods identified and agreed upon at the time a contract of sale is made
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Section 4 Sale and Agreement to Sale
The contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part owner and another.
A contract of sale may be absolute or conditional.
Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of property in the goods is to take place at a future time or subject to some conditions thereafter to be fulfilled, the contract is called an agreement to sell.
An agreement to sell becomes a sale when the time elapses or all the conditions are fulfilled subject to which the property in the goods is to be transferred.
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Section 4 Sale and Agreement to Sale
Examples:Agreement by A to buy 20 tonnes of oil from the sellers cisterns (tank). The seller has many cisterns, with more than 20 tonnes in them. This is merely an agreement to sale. (White Vs Wilks, 1813)A customer who picks up goods in a self-service shop is merely offering to buy them and the sale is not complete until they are paid for. (Pharmaceutical Society Vs Boots, 1952) One co-owner may sell to another and therefore a partner may sell to his firm and the firm may sell to a partner.*
Essential Requisites of Sale
In the case of (State of Madras Vs Gannon Dunkerley and Company Limited, 1958) the Supreme Court has held that in order to constitute a sale,
it is necessary that there should be an agreement between the parties for the purpose of transferring title to goods,
which of course presupposed capacity to contract,
that it must be supported by money consideration,
that as a result of transaction, the property must actually pass in the goods.
Unless all these elements are present there would be no sale.
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The essential object of the contract of sale is the exchange of property for a money price. There must be a transfer of property or an agreement to transfer it, from one party, the seller, to the other, the buyer, in consideration of a money payment or of a promise thereof by the buyer. To constitute a transaction of sale, there should be an agreement, expressed or implied relating to goods to be completed by passing of title in those goods. It is the essence of the concept that both the agreement and the sale should relate to the same subject matter. An allotment of goods amongst partners on a dissolution between partners is not a sale. Exchange of property for something other than money is not a sale.In the case of State of Himachal Pradesh V/s. Associated Hotel of India Ltd. AIR 1972 SC1131 it was held, that there is no sale when food and drinks are supplied to guests residing in a hotel, the supply of meals being essentially in the nature of services provided to them which, could not be identified as a transaction of sale.*
Statutory Transactions Whether Sale
In the case of M/s. Vishnu Agencies (Pvt). Ltd. V/s. Commercial Tax Officer Eluru AIR 1978 S.C. 449,
When essentials goods are in short supply, various types of orders are issued under the Essential Commodities Act, 1955, with a view to making the goods available to the consumer at a fair price. Such orders may lay down the requirements of holding a licence for dealing in the commodity and getting a permit for obtaining the commodity. The permit holder can obtain the supply of the essentials goods, to the extent of quantity for which permit is granted, from the named dealer at a controlled price.
The question which came up before a seven bench judge of the Supreme Court was whether such a transaction amounts to a sale in the language of the law.
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Statutory Transactions Whether Sale
The Supreme Court held that
A sale is necessarily a consensual transaction and if the parties have no volition or option to bargain, there can be no sale, the limitation on the normal right of dealers and consumers to supply and obtain the goods, the obligation imposed on the parties and the penalties prescribed by the Control Order did not militate against the position that eventually the parties must be deemed to have completed the transaction under an agreement by which one party bound itself to supply the stated quantity of goods to the other at a price not higher than the notified price and the other party consented to accept the goods on the terms and conditions mentioned in the permit or the order of in its favour by the concerned authority. Since it is not obligatory on a trader to deal in such essential commodity strictly in the terms of the Control Orders is volitional and the customer too on his own volition decides to obtain the commodity on the terms of the permit or the order of allotment issued in his favour. The parties enter into such transaction with their free consent. It is therefore not correct to say that the transaction between the dealers and the allottees are not consensual.
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Sale and Contract of Work and Material
A contract of sale has to be distinguished from a contract involving the exercise of skill and labour on some material.In the case of Robinson V.s. Graves, 1935
The defendant orally commissioned the plaintiff, an artist, to paint the portrait of a lady, and subsequently repudiated the contract before the portrait was complete. In an action by the Plaintiff for the agreed price, it was held to be a contract of work and labour. The painter recovered.
The Court said in such cases the proper test is to see whether work is of the essence of the contract. In case of work of art, whether in gold, silver, marble, or plaster, where the application of skill and labour is of the highest description, the material is of no importance as compared to labour, the price may be recovered as for work and labour.
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Sale and Contract of Work and Material
There have been conflicting judgments on the point whether a particular transaction is to be treated as a contract of sale of goods or a contract of work.A contract to take and supply photograph, to provide food in a restaurant, to make a mink jacket, to build ships, to prepare medical prescriptions and a contract to construct bus bodies have all been held to be contracts of sale of goods. On the other hand a contract for providing and fixing four different types of windows of certain size according to specifications, drawings and instructions set out in the contract and a contract for fabrication, supply, erection and installation of tow types of rolling shutters to be manufactured according to the specifications, drawings, designs and instructions and also to be erected and installed at the premises, have been held by the S.C. to be contracts of work and not of sale.*
Sale and Agreement to Sell
The Supreme Court distinguished these two classes of contract thus
An agreement to sell is a contact pure and simple whereas a sale is a contract plus conveyance. By an agreement to sale a jus in personam is caused, by a sale a jus in rem also is transferred. Where goods have been sold and the buyer makes default, the seller may sue for the contract price on the count of goods bargained and sold but when an agreement to buy is broken, the sellers normal remedy is an action for unliquidated damages. If an agreement to sell be broken, by the seller, the buyer has only a personal remedy against the seller. The goods are still the property of the seller, and he can dispose of them as he likes, but if there has been a sale and a seller breaks his engagement to deliver the goods, the buyer has not only a personal remedy against the seller but also the proprietary remedies in respect of the goods themselves. In many cases, too, he can follow the goods into the hands of third parties. Again, if there be an agreement of sale, and the goods are destroyed, the loss as a rule falls on the seller, while if there has been a sale, the loss as a rule falls up on the buyer though the goods may have never come to his possession. (The Instalment Supply Limited Vs STO Ahmedabad and others, 1974.)
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Sale and Hire Purchase
A hire purchase agreement entitles the hirer only to possession of the goods. He cannot pass a good title to any buyer from him. But a person who receives possession under an agreement to buy is able to pass a good title to a bonafide purchaser from him. A hirer cannot claim the benefit of implied conditions and warranties created by the Act unless it becomes a sale. A contract of hire purchase is a contract by which the hirer is granted an option to buy but is not, as under a contract of sale under a legal obligation to do so.*
Sale and Hire Purchase
The basis of distinction between the Sale and Hire purchase was explained by the House of Lords in the case of Helby V/s. Matthews Helby let a piano on hire to Brewster on the following terms:Brewster should pay 10s 6d every month
Should he punctually pay 36 monthly instalments, the piano should become his property, until then it should continue to be the property of Helby.
Brewster has the right to terminate the hire at any time by returning the instrument to Helby.
After paying a few instalments Brewster pledged the instruments with the defendant Matthews, who acted in good faith. Helby sued Mathews to recover the instrument.It was held that Brewster could not do so. Brewster was not in possession having agreed to buy the piano, but under a hire purchase agreement and therefore had no right to pledge.*
Section 5: Contract of Sale - how made
A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such price.
A contract may provide for the immediate delivery of goods or immediate payment of the price or both, or for the delivery or payment by instalments. or that the delivery of payments or both shall be postponed.
Subject to the provisions of any law for the time being in forced, a contract of sale may be in writing or by the word of mouth or may be impliedly or may be implied from the conduct of the parties.
Contract of Sale - how made
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Contract of Sale - how made
A statement or conduct inviting the making of an offer such as by display of goods in a shop does not buy itself bind the shopkeeper to accept the customers offer even at the price displayed or advertised. Such invitation to treat therefore differs from an offer, which is intended to be binding on the person making it and is capable of being accepted without any further negotiation. Where, however, the accessibility to goods in intended to an offer capable of acceptance by customers act such as filling the petrol tank of a car from a self service pump or choosing items in a self service shop or taking goods intended for sale for an automatic vending machine the question of obtaining sellers assent does not arise.*
Contract of Sale - how made
Earnest A buyer may give the seller money or a present as a token or evidence of bargain quite apart from the price i.e. earnest, or he may give him part of the agreed price to be set off against the money to be finally paid i.e. part payment. If the buyer fails to carry out the contract and it is rescinded, he cannot recover the earnest but may recover the part payment.*
Existing or future goods.-
According to Sec. 6
(1) The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or future goods.
(2) There may be a contract for the sale of goods the acquisition of which by the seller depends upon a contingency which may or may not happen.
(3) Where by a contract of sale the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods.
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Existing or future goods.-
These would include
Goods to be manufactured by the seller, whether from material now in existence or not.
Goods which are to become or may become, property of seller whether by purchase, gift, succession or otherwise
Goods expected to come into existence as the property of the seller in ordinary course of nature e.g. milk to be produced of his cows or the young to be born to livestock,
Things attached to or forming part of any land which are to be severed
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Goods perishing before making of contract
According to Sec. 7 - 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.
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Goods perishing before making of contract
The rule applies subject to the following conditionsThe contract must be for the sale of specific goods. Specific goods means goods identified and agreed upon at the time a contract of sale is made.
They must have perished before the contract is made and without the knowledge of the seller.
For example
a sale of cargo of goods is void if unknown to the seller the goods have, before the contract, become heated and sold at an intermediate port or destroyed before loading by flood.
sale of 700 bags of nuts, identified by marks, lying in a named warehouse. Unknown to the seller before the sale, 109 of the bags had been stolen. The sale is void and the buyer cannot be compelled to take the remainder.
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Goods perishing before sale but after agreement to sell.
According to Sec. 8 - 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 to their description in the agreement before the risk passes to the buyer, the agreement is thereby avoided.*
Goods perishing before sale but after agreement to sell.
An agreement to sell specific goods becomes void if subsequently the goods without the fault of the seller or buyer, have perished or become so damaged as to no longer answer their description in the agreement, provided this happens before the risk has passed to the buyer.
For example -Contract for the sale of a horse on the condition that the buyer should have it for 8 days for trail and be at liberty to return it at the expiration of that period if he did not find it suitable. The horse dies without any fault on the part of either party 3 days after it has been delivered to the buyer for trial. The contract is avoided.
In the case of Howell V/s. Coupland, the defendant agreed to sell to the plaintiff 200 tons of potatoes to be grown on the land belonging to the defendant. The defendant sowed sufficient land to grow more than 200 tons, but without any fault in him, a disease attached the crop and he was able to deliver only about 8 tons. The agreement was held to become void.
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Goods perishing before sale but after agreement to sell.
Justice Mellish observedThis is not like the case of contract to deliver so many goods of a particular kind, where no specific goods are to be sold.
Here there was an agreement to sell and buy 200 tons out of crop to be grown on specific land, so that it is an agreement to sell what will be and may be called specific things, therefore neither party is liable if the performance becomes impossible.
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Ascertainment of price
According to Sec. 9 - the price in a contract of sale may be fixed by the contract or may be left to be fixed in manner thereby agreed or may be determined by the course of dealing between the parties
Where the price is not determined in accordance with the foregoing provisions, the buyer shall pay the seller a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case.
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Ascertainment of price
In the case of M.S. Madhusoodhanan V/s. Kerala Kaunmadi (P) Ltd. AIR 2004 SC 909where certain shares were transferred for a consideration which was left to be determined at a later date, the Supreme Court held that such transfers were not void by reason of uncertainty. The court observed the expression intention in this case was to effect an immediate transfer of the shares and to agree upon the consideration later. The first stage of the agreement for the immediate transfer of shares was executed. The question as to what would be reasonable price for the shares, the mode of its determination and whether any consideration has already been paid by the transferee to the transferor were to be considered subsequently. Sec.9 permits this. Sec. 9 allows the parties not to fix the price at the time of sale and to leave it to a later date. An agreement which provides for future fixation of price either by the parties themselves or by a third party is capable of being made certain and is not invalid under Sec. 29 of the Indian Contract Act.
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Agreement to sell at valuation
According to Sec. 10 - Where there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of a third party and such third party cannot or does not make such valuation, the agreement is thereby avoided.
Provided that, if the goods or any part thereof have been delivered to, and appropriated by, the buyer, he shall pay a reasonable price therefor.
Where such third party is prevented from making the valuation by the fault of the seller or buyer, the party not in fault may maintain a suit for damages against the party in fault.
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Conditions and Warranties
Sec. 11 - Stipulation as to time
Unless a different intention appears from the terms of the contract, stipulation as to time of payment are not deemed to be of the essence of a contract of sale.whether any other stipulation as to time is of the essence of the contract or not depends on the terms of the contract.Thus time of payment is not a condition of the contract unless the parties make it so by their contract.
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Stipulation as to time of payment
In the case of Martindale V/s. Smith, the defendant sold the plaintiff some stacks of oats, then on the his ground, under a written agreement by which the plaintiff was to have liberty to leave the stacks on the ground for 4 months and was to pay for them in 12 weeks. On the expiry of 12 weeks the buyer failed to pay and asked for further time which the seller refused to grant. Later the buyer tendered the price, but the seller refused at accept. The seller was held liable to the buyer in an action for recovery of damages for wrongful taking of property .*
Stipulations as to time of payment
As punctual payment does not go to the whole consideration of the sale, the failure by the buyer to pay on the appointed day does not as a rule, entitle the seller to treat the contract as repudiated, though he may be entitled to withhold delivery until the price is paid and to resell the goods if the buyer does not pay or tender the price within a reasonable time. Consequently, if before such resale the buyer tenders the price, even though it be on a date after the date named in the contract the seller cannot, in the absence of a stipulation to the contrary, treat the contract as at an end and refuse to allow the buyer to have the goods. The time cannot be taken to be the essence of the contract in case where the contract itself does not stipulate the time for payment of the price. Where by their contract the parties contemplate time of payment to be of the essence of the contract, a failure to pay in time entitles the seller to treat the contract as repudiated and sue the buyer in damages.In the case of Ryan V.s. Ridley & Co. 1902 where C.I.F contract provided for payment in cash in London on delivery of bill of lading and insurance policy, the buyers failure to pay amounted to repudiation entitling the seller to damages.*
Stipulations as to time of performance of other terms
If a man orders a suit of clothes, a promise by the tailor that he shall have it by a certain date would not, generally speaking, be of the essence of the contract, though it might be if he was ordering court dress for the purpose of attending a court on a particular day. But in the case of commercial contracts, although occasionally stipulations as to time may not be of the essence, the usual rule is that they are.The principal adopted by the courts is that in ordinary commercial contract for the sale of goods the rule clearly is that time is prime facie of the essence with respect to delivery. The reason is obvious. A mercantile contract is not always an isolated transaction, but a link in a chain of transactions so that punctual performance may go to the whole consideration of sale.*
Stipulations as to time of performance of other terms
Time is considered to be of the essence in the following casesWhere the parties have expressly agreed to treat it as of the essence,
Where the delay operates as an injury
Where the nature and necessity of the contract require it to be so construed.
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Stipulations as to time of performance of other terms
In Charles Richards Ltd. V/s. Oppenhaim, 1950, the seller agreed to supply a Rolls Royce chassis to be ready at the latest by March 28th 1948. It was not ready on this day. It was on June 29th that the buyer lost his patience and prescribed July 25th as the final date of delivery after which he would not accept. The chassis was offered for delivery on 18th October. The buyer refused to accept. The Court of Appeal held that he was entitled to reject. He had given the seller a reasonable notice prescribing new time for delivery. Thereafter he was entitled to refuse.*
Stipulations as to time of performance of other terms
If the seller happens to do his work earlier than the stipulated time, even that may be a ground of rejection irrespective of the fact whether or not the buyer has suffered any damage. In the case of Browes V/s Shand, 1877, in a contract to deliver Madras rice during the month of March and / or April, the bulk of the rice was in fact shipped at the end of February and only 1/8th was shipped during March. The House of Lords held that the buyer were entitled to reject the goods. There was no difference in the quality of the goods and the buyer has suffered no loss.*
Waiver of the stipulations
Stipulations as to time may be waived by the party in whose favour they are inserted either expressly or by implication, and if he does so he cannot afterwards treat the failure to comply with them by other party as giving a right to rescind the contract. There can, strictly speaking, be no waiver after breach, but to accept goods, though delivered late, is often spoken of as a waiver of the right of action which the breach has given.*
Section 12. Condition and Warranty
A stipulation in a contract of sale with reference to goods which are subject thereof may be a condition or a warranty.
A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated.
A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated.
Whether a stipulation in a contract of sale is a condition or a warranty depends in each case on the construction of the contract. A stipulation may be a condition, though called a warranty in the contract.
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1. Express Conditions
The parties if they wish, may put the contents of any particular statement or promise which passes between them on the same footing as the description of the thing contracted for, so that if it is not made good by the party undertaking it, the failure is deemed to be a total failure of the performance, and the other is at least wholly discharged, and may in addition recover damages for such failure of performance. This is a condition in the proper sense, as defined in sub Sec. (2). In the usual sense, the condition means an essential undertaking in the contract which one party promises will be made good. If it is not made good, not only will the other party be entitled to repudiate the contract, but also to sue for damages for breach.*
1. Express Conditions
In the case of Baldry V/s. Marshall, the plaintiff consulted a motor dealear the defendant, for a car suitable for the purpose of touring purpose. The defendant suggested that a Bugatti car would be appropriate and the plaintiff accordingly brought one. The car turned out to be unfit for touring purposes and the plaintiff sought to reject it. The defendant relied upon the term in the contract which guaranteed the car for two months against mechanical defects and excluded every other guarantee or warranty.It was held that the suitability of the car for touring purposes was not a guarantee or warranty, but a condition of the contract. The term was so vital that its non fulfillment defeated the very purpose for which the Plaintiff brought the car. He was therefore, entitled to reject and have refund of the price.*
2. Express Warranties
There may also be, and there occur in common practice, auxiliary promises or undertakings of which the breach is not intended to avoid the contract, but only to give a remedy in damages. These are warranties in the proper sense, as defined in sub-s (3). Whether a statement is to be regarded as warranty must be objectively ascertained by asking whether adopting the standard of a reasonable man, the other party assumed that the representor was to be regarded as undertaking legal liability for his assertions. The importance of the statement, the relative knowledge and means of knowledge of the parties, and the possibility of verification are the relevant factors which would indicate whether the statement is a warranty. Thus, statements may be warranties when made by dealers, though they would not be warranties if made by private sellers; for the dealers may be in possession of special knowledge, expertise and means of information not available to ordinary persons.
In the case of Harrison V/s. Knowles and Foster, the plaintiff bought two small ships from the defendant relying upon particulars furnished by the Defendant that the dead weight capacity of each ship was 460 tons. The capacity was if fact only 360 tons. The Plaintiff sought to reject the ships. It was held that the representation of capacity was not a condition but a warranty, for which the plaintiff could have sued in damages.
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3. Representations
An affirmation as regards the goods, if it is to have contractual effect, must be part of the contract; if it is not, it is only a representation, the untruth of which will not, in the absence of fraud, give rise to an action an for damages, though it may enable the other party to rescind the contract and sometimes a representation may amount to a condition precedent to the formation of the contract, so that if be untrue, the other party is discharged from all liability. It depends upon the intention of the parties whether an affirmation made at the time of, or during the negotiations for sale, is to be treated as a condition, a warranty or a mere representation: and although an assertion made by the seller of a fact unknown to the purchaser may be strong evidence that it was intended as a warranty. If the representation does not form part of the contract, that is, if it is neither a condition nor a warranty, it amounts to an expression of opinion not intended to enter the bargain and its no fulfilment does not give rise to any right to a legal action.*
4. Implied Conditions and Warranty
Although the parties may have used no expressed words that would create such a stipulation, the law annexes to many contracts conditions, the breach of which may be treated by the buyer as avoiding the contract or given a right to damages. These are called as implied conditions and are enforced on the grounds that the law infers from all the circumstances of the case, that the parties intended to add such a stipulation to their contract, but did not put it into expressed words. Most of the statutory implied terms as to sellers duties as to title, conformity with description and quality, terms designated as conditions by the contract itself, terms similar to those or already treated as conditions in another case, time clauses in mercantile contracts where breached of term is to be treated as giving right to treat the contract as discharged are considered as terms likely to be treated as conditions.*
5. Puffs
A mere puff is a vague and extravagant statement so preposterous in its nature that nobody could believe that anyone was misled by it. The extent to which a statement may be so categorised depends on the degree or obviousness of its untruth, the circumstances of its making and in particular on the expertise and knowledge attributable to the person to whom it is made.
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Section 13 : When condition to be treated as warranty,
Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the condition or elect to treat the breach of the condition as a breach of warranty an not as a ground for treating the contract as repudiate.
Where a contract of sale is not severable and the buyer has accepted the goods or part thereof, or where the contract is for specific goods, the property in which has passed to the buyer, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as ground for rejecting the goods and treating the contract as repudiated unless, there is a term of a contract, expressed or implied to that effect
Implied undertaking as to tile
In a contract of sale, unless the circumstances of the contract are such as to show a different intention there is-
an implied condition on the part of the seller that, in the case of a sale, he has a right to sell the goods and that, 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.
an implied warranty that the buyer shall have and enjoy quiet possession of the goods.
an implied warranty that the goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time when the contract is made.
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, and, if 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 also correspond with the description.Implied condition as to quality or fitness
There is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, excepts as follows:-
Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the sellers skill or judgement, and the goods are of a description which it is in the course of the sellers 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.
Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality.
If the buyer has examined the goods, there shall be no implied conditions as regards defects which such examination ought to have revealed.
Sale by sample
A contract of sale is a contract for sale by sample where there is a term in the contract, express or implied, to that effect.
In the case of a contract for sale by sample there is an implied condition -
that the bulk shall corresponded with the sample in quality.
that the buyer shall have a reasonable opportunity of comparing the bulk with the sample.
that the goods shall be free from any defect, rendering them un-merchantable, which would not be apparent on reasonable examination of the sample.
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Transfer of Property as Between Seller and Buyer
Section 18 Goods must be ascertained
Property cannot pass until the goods are identified
Part of a specific whole
Property and risk
Identification of goods
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1.Property cannot pass until the goods are identified
It is a condition precedent to the passing of the property in every case that, the individuality of the thing to be delivered should be established. It is essential that the article should be specific and ascertained in a manner binding on both the parties, for unless that be so, the contract cannot be construed as contract to pass the property in that category. Where according to the terms of the contract, the seller was to supply waste coal ash as and when it was discharged from the bunkers of the powerhouse, it was held that the contract was for the sale of unascertained goods and, therefore no property passed to the buyer till the goods were ascertained. (Tej Singh Vs State of Uttar Pradesh and others 1981)*
2.Part of a specific whole
Mere fact that an order for the delivery is given by the seller to the buyer, and is lodged by the buyer with a warehouseman, who holds the specified larger stock out of which the goods sold are to be taken, is not sufficient to transfer the property to the buyer. (Laurie & Morewood Vs. Dudin & sons 1926) Thus, where the ascertainment of the goods depends upon their being separated from the bulk by the seller or a third party or the buyer, by their being severed, weighed or measured or some other process, no property can pass until this is done (National Coal Board Vs. Gamble 1959)*
3. Property and Risk
The risk usually passes with the property, but may pass independently of it. Thus, acceptance of the delivery warrant for a certain quantity of spirit out of a larger bulk which was liable to deteriorate in storage was held to put the risk of deterioration on the buyer, although he had acquired, not property but only undivided interest in the whole bulk.*
4. Identification of the goods
The contract itself may provide that the property shall pass on the happening of some specified event, sufficient to identify the goods.In State of Karnataka Vs. The West Coast Paper Mills Ltd. AIR 1986 it was held that where under a contract a company was permitted to remove bamboos from the forest area at Rs.10 /- per ton, and the government by a subsequent order enhanced the price to Rs.20/- per ton, it was held that the enhanced rate was not applicable to the bamboos cut although not removed prior to the date of the government order, because on the bamboos being cut and extricated, the goods being ascertained and in a deliverable state, the property had passed to the company.*
Section 19. Property passes when intended to pass
1. Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.
2. For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and circumstances of the case.
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Ascertained goods
Then term ascertained goods, which also occurs in Section 58, is not defined by the Act. It is, however, clear that the words specific goods bear the meaning assigned to them in the definition clause, goods identified and agreed upon at the time a contract of sale is made. Ascertained probably means identified in accordance with the agreement after the time a contract of sale is made. Where teak trees to be cut were of more than 12 inches girth, it was held that, till it was ascertained as to which trees fell within the description they were not ascertained goods. Badri Prasad Vs. The State of Madhya Pradesh AIR 1970 SC.*
Section 20 Specific goods in a deliverable state
Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of or the time of delivery of goods, or both, is postponed.ExamplesThis section may be illustrated by the following examples:
1. Sale on the 4th January of a haystack on the sellers land at the price of 145 to the paid on the 4th February, the hay to be allowed to remain on the sellers land until the 1st May: no hay to be cut until the price was paid. The property in the haystack passed on the making of the contract and on the stack being destroyed by fire, the buyer must bear the loss Tarling Vs. Baxter (1827)
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Section 21 Specific goods to be put into a deliverable state
Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof.ExampleThis section may be illustrated by the following example: Sale of the whole contents of a cistern of oil, the oil to be put into casks by the seller and then taken away by the buyer. Some of the casks are filled in the presence of the buyer, but before any are removed, or the remainder are filled, fire destroys the whole of the oil. The buyer must bear the loss of the oil which had been put into the casks, the seller that of the remainder .Rugg Vs. Minett (1089)
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Section 22 : Specific goods in a deliverable state , when the seller has to do anything thereto in order to ascertain price :
Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing is done and the buyer has notice thereof.*
Section 22
Examples This section may be illustrated by the following examples:1. Sale of a stack of bark at a certain price per ton, the bark to be weighed by the sellers and buyers agents. Part was weighed and taken away, but before anything more was done a flood carried away the remainder. The loss of this fell on the seller. Simmons Vs Swift (1826)
2. Sale of 289 specified bales of goatskin, containing 5 dozen in each bale, at a certain price per dozen. By the usage of the trade, it was the sellers duty to see whether the bales contain the number specified in the contract. Before the seller had done this the bales were destroyed by fire. The loss fell on the seller. Zagury vs Furnell(1809)
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Section 23 : Sale of unascertained goods and appropriation.
Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods there upon passed to the buyer. Such assent may be expressed or implied, and may be given either before or after the appropriation made.
Delivery to the carrier - Where in pursuance of the contract the seller delivers the goods to the buyer or to the carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract.
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Section 23 : Sale of unascertained goods and appropriation
ExampleThis section may be illustrated by the following example:Sale of 20 barrels of sugar out of a larger quantity. The seller fills four barrels which the buyer takes away. Subsequently the seller fills sixteen more barrels, and informs the buyer of this asking him to come and take them away. The buyer promises to do so. The property has passed to the buyer.
Mr A contracts to sell to Mr B a certain quantity of liquor out of a big cask containing a much larger quantity. The required quantity is not separated or bottled. The property in the liquor does not pass to the purchaser.
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Section 24 Goods sent on approval or on sale or return
When goods are delivered to the buyer on approval or on sale or return or other similar terms, the property therein passes to the buyer(a) when he signifies his approval or acceptance to the seller or does any other act adopting the transaction:(b) if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time.*
Section 26 Risk prima facie passes with property
Unless otherwise agreed, the goods remain at the sellers risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyers risk whether delivery has been made or not.ExamplesThe defendant contracted to purchase 30 tons of apple juice. The plaintiff crushed the apples, put the juice in casks and kept it pending delivery. The defendant delayed taking delivery and the juice went putrid and had to be thrown away. The defendant was liable to pay the price; the seller had been in a position to sell the goods elsewhere and acquire other goods for the postponed time of delivery and he had not done so and there was some loss in the meanwhile, the responsibility for the loss would have fallen on him, but in the present case the seller had to keep the goods ready for delivery as and when the buyer proposed to take them. Demby Hammilton & Co. Ltd. Vs. Barden (Endeavour Wines Ltd) 1949Sec. 27 - Sale by person not the owner
Where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by conduct precluded from denying the sellers authority to sell.
Provided that, where a mercantile agent is, with the consent of the owner, in possession of the goods or of a document of title to the goods, any sale made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the goods to make the same, provided that the buyer act is good faith and has not at the time of the contract of sale notice that the seller has not authority to sell.
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PERFORMANCE OF THE CONTRACT
Section 31. Duties of the seller and buyer It shall be the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale.There would be breach of the duty to accept when the buyer unjustifiably rejects the goods. Taking of delivery of the goods is an important aspect of the duty to accept and refusal to do so will constitute rejection of the goods and therefore , would amount to a non-acceptance of the goods. There is however a distinction between acceptance of goods and taking delivery of them. The buyer signifying his approval of the goods accepts them though he may not have taken delivery of the goods.*
Section 32 Payment and delivery are concurrent conditions :
Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that is to say, the seller shall be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer shall be ready and willing to pay the price in exchange for the possession of the goods.A contract of sale is an example of a contract consisting of reciprocal promises to be simultaneously performed. In accordance, thereof, with the general principle laid down in S.51 of the contract Act, the seller is not bound to deliver, and commits no breach of contract in failing to deliver, if the buyer is not ready and willing to pay the price, and conversely the buyer is not liable to an action for failure to accept the goods, if the seller was not ready and willing to let the buyer have goods on demand.*
Section 34. Effect of part delivery
A delivery of part goods, in progress of the delivery of the whole, has the same effect, for the purpose of passing the property in such goods, as a delivery of the whole; but a delivery of the part of the goods with an intention of severing it from the whole, does not operate as a delivery of the remainder.Examples The section may be illustrated by the following examples:Sale of a quantity of goods lying at a wharf. The seller left an order with the wharfinger to deliver the goods to the buyer, who had paid for them by a bill. The buyer subsequently weighed the goods and took away part of them. This was held to amount to a delivery of the whole of the goods.
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Section 35 Buyer to apply for delivery
Apart from any express contract, the seller of the goods is not bound to deliver them until the buyer applies for the deliveryEven if there is an obligation on the part of the seller to inform the buyer when the goods are in a deliverable state, it is not a special promise, though it may postpone the obligation of the buyer to apply for delivery, the buyer would be entitled and bound to apply for delivery.When the buyer applies for delivery and the seller then fails to deliver, the seller is guilty of a breach of contract. So where the contract provided for delivery in all November on seven days notice from the buyer, and the buyer gave the notice early in November, it was held that by the terms of the contract the buyer had the right to fix the date in November on which the delivery should be made, and the seller having failed to deliver as required by the notice, was guilty of a breach of contract. Juggernath Khan Vs. Machlachar (1881)*
Section 36. Rules as to delivery
Whether it is for the buyer to take possession of the goods or for the seller to send the goods to the buyer is a question depending in each case on the contract, express or implied, between the parties. Apart from any such contract, goods sold are to be delivered at the place at which they are at the time of the sale, and goods agreed to be sold are to be delivered at the place at which they are at the time of the agreement to sell., if not then in existence, at the place at which they are manufactured or produced.
Where under the contract of sale the seller is bound to send the goods to he buyer, but no time for sending is fixed, the seller is bound to send them within a reasonable time.
Where the goods at the time of sale are in the possession of a third person, there is no delivery by seller to buyer unless and until such third person acknowledges to the buyer that he holds the goods on his behalf
Demand or tender of delivery may be treated as ineffectual unless made at a reasonable hour. What is reasonable hour is a question of fact.
Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state shall be borne by the seller
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Section 36. Rules as to delivery
Examples
The section may be illustrated by the following examples :
Sale of 12 puncheons of rum, made from molasses, of which 4 were delivered. The buyer pressed for delivery of the remainder, but the seller delayed and in the meanwhile an Act of Parliament was passed prohibiting the distillation of spirits from molasses, and annulling all contracts for the sale of such spirits. The sellers were held liable in damages as having failed to deliver within a reasonable time. Phillips Vs. Blair and Martin (1801)
Sale of goods to be sold to be delivered in the last fortnight of March. Delivery is tendered at 9 p.m. on 31 March. It is a question of fact whether this is a reasonable hour. If it is not, there is no delivery, and the buyer may repudiate. Startup Vs. Macdonald (1843)
Sale of goods for ready money. The seller packs them up in the buyers boxes in the buyers presence, but they remain in the sellers premises. This is not a delivery. Boulter Vs. Arnott (1833)
Sec. 37 Delivery of wrong quantity
Where the seller delivers to the buyer a quantity of good less than he contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered he shall pay for them at the contract rate.Where the seller delivers to the buyer a quantity of goods larger than he contracted to sell the buyer may accept the goods included in the contact and reject the rest, or he may reject the whole. If the buyer accepts the whole of the goods so delivered, he shall pay for them at the contract rate.Where the seller delivers to the buyer the gods he contract to sell mixed with goods of a different description not included in the contract., the buyer may accept the goods which are in accordance with the contract and reject the rest, or may reject the whole.*
Section 38. Instalment Deliveries
1.Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by instalments.
2. Where there is a contract for the sale of goods to be delivered by stated instalments which are to be separately paid for, and the seller makes no delivery or defective delivery in respect of one or more instalments, or the buyer neglects or refuses to take delivery of or pay for one or more instalments, it is a question in each case depending on the terms of the contract and the circumstances of the case, whether the breach of the contract is a repudiation of the whole contract, or whether it is severable breach giving rise to a claim for compensation, but not to a right to treat the whole contract as repudiated.
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Section 38. Instalment Deliveries
The section may be illustrated by the following examples :
1. Sale of 25 tons of pepper October /November shipment. The sellers shipped 20 tons in November and 5 tons in December. The buyers were entitled to reject the whole 25 tons. Reuter Vs. Sala (1879)
2. Sale of 200-300 tons of coal to be shipped as early as possible by a named ship or other vessel. The named ship was not available and the seller shipped 152 tons on another ship, informing the buyer that he had done so and that he had drawn on him for the price and proposing to ship the remainder later. The buyer made no reply to this communication. The ship was lost. In an action by the seller for the price it was held that the buyer had impliedly assented to the shipment of the smaller quantity as an instalment and was liable to pay for it. Riichardson Vs. Dunn (1841)
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Rights of Unpaid Seller against goods
1. The seller of goods is deemed to be an unpaid seller within the
meaning of this Act
(a) when the whole of the price has not been paid or tendered ;
(b) when a bill of exchange or other negotiable instrument has been
received as conditional payment, and the condition on which it
was received has not been fulfilled by reason of the dishonour of
the instrument or otherwise.
2. In this chapter, the term seller includes any person who is in the position of a seller, as, for instance, an agent of the seller to whom the bill of lading has been indorsed, or a consignor or agent who has himself paid, or is directly responsible for, the price
ExamplesThe section may be illustrated by the following example;
The seller draws bills for the price of the goods on the buyer, who accepts them, and the seller negotiates them. Before the bills arrive at maturity the buyer fails. The seller is in position of an unpaid seller.
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Section 46. Unpaid Sellers rights
1. Subject to the provisions of this Act and of and of any law for the time being in force, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law
(a) a lien on the goods for the price while he is in possession of
them;
(b) in case of the insolvency of the buyer a right of stopping the
goods in transit after he has parted with the possession of
them
(c) a right of resale as limited by this Act.
2. Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in transit where the property has passed to the buyer.
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Section 46. Unpaid Sellers rights
The section may be illustrated by the following example :
Sale of goods to be delivered by instalments, each instalment to be paid for in cash fourteen days after delivery. During the currency of the contract, the buyer becomes insolvent and the price of one instalment is unpaid. The seller need not make further deliveries unless the price of that instalment is paid and cash is paid against delivery of subsequent instalments.*
The unpaid seller of goods who is in possession of goods is entitled to retain possession of them until payment or tender of the price in the following cases, namely :
(a) Where the goods have been sold without any stipulation as to credit
(b) Where the goods have been sold on credit, but the term of credit
has expired ;
(c) where the buyer becomes insolvent.
2. The seller may exercise his right of lien notwithstanding that he is in
possession of the goods as agent or bailee for the buyer.
A sellers lien is described as an additional security given to a person who has a right to be paid, but he has a right to be paid besides and independently of his lien. One of the objects of S.47 which confers the sellers lien is to protect a vendor from incurring an expense in manufacturing or acquiring goods for which payment remains justly in doubt .UNPAID SELLERS RIGHT TO LIEN
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Section 48. Part delivery
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Section 49. Termination of lien
1. The unpaid seller of goods loses his lien thereon
when he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of goods;
when the buyer or his agent lawfully obtains possession of the goods;
by waiver thereof.
2. The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that he has obtained a decree for the price of the goods.
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Section 49. Termination of lien
This section may be illustrated by the following examples:
Goods were sold and sent by the sellers at the request of the buyer to shipping agents of the buyer, and were put on board a ship by those agents. Subsequently, they were re-landed and sent back to the sellers for the purpose of re-packing. While they were still in the possession of the sellers for that purpose, the buyer became insolvent. Thereupon the sellers refused to deliver them to the buyers trustee in bankruptcy except upon payment of the price. Held, that the sellers had lost their lien by delivering the goods to the shipping agents, and their refusal to deliver the goods to the trustee was wrongful. Valpy Vs. Gibson 1847
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Section 50 Right of stoppage in transit
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Section 52. How stoppage to transit is effected
The unpaid seller may exercise his right of stoppage in transit either by taking actual possession of the goods, or by giving notice of his claim to the carrier or other bailee in whose possession the goods are. Such notice may be given either to the person in actual possession of the goods or to his principal. In the latter case the notice, to be effectual, shall be given at such time and in such circumstances that the principal, by the exercise of reasonable diligence, may communicate it to his servant or agent in time to prevent a delivery to the buyer.
When notice of stoppage in transit is given by the seller to the carrier or other bailee in possession of the goods, he shall redeliver the goods to, or according to the directions of, the seller. The expenses of such re-delivery shall be borne by the seller.
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Section 52. How stoppage to transit is effected
The section may be illustrated by the following examples :
An unpaid seller stops goods sent by sea at a port short of their destination. He is liable for the fright, not only to the part where the goods were actually landed, but also to the port of their ultimate destination. Booth & Co. vs. Cargo Fleet Iron Co. Ltd. 1916
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Section 64. Auction sale
IN A CASE OF A SALE BY AUCTION
Where goods are put up for sale in lots, each lot is prima facie deemed to be the subject of a separate contract of sale ;
the sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner; and, until such announcement is made, any bidder may retract his bid;
a right to bid may be reserved expressly by or on behalf of the seller and, where such right is expressly so reserved, but not otherwise, the seller or any one person on his behalf may, subject to the provisions hereinafter contained, bid at the auction;
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Section 64. Auction sale
IN A CASE OF A SALE BY AUCTION
where the sale is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person ; and any sale contravening this rule may be treated as fraudulent by the buyer ;
the sale may by notified to be subject to a reserved or upset price ;
if the seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the buyer.
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