Updated: Thursday January 14, 2010/AlKhamis Muharram 29, 1431/Bruhaspathivara Pausa 24, 1931, at 07:00:47 PM
Course Contents: Entire Act.
The Sale
of Goods’ Act, 1930, extends to whole of
Essential
requirement of sales is offer from buyer or seller, consideration, acceptance,
delivery of goods at once or in installments. Goods may be either existent
goods or possessed or future goods.
Condition: Contract has
certain conditions, which are to be fulfilled by all the parties. Also there
are some warranties. These are called stipulations. Condition is necessary part
of the contract and its breach renders contract invalid. It is fundamental of
contract. Its breach produces legal consequences.
Warranty: It is also a
stipulation but is not fundamental. Its breach neither creates any legal consequences
nor defeats contract and purpose of contract is served.
Condition and Warranty distinguished: Breach
of condition arises legal consequences and renders contract invalid. Other
party may terminate contract. He can claim damages.
Warranty
is secondary point. If it breaches, right of compensation arises, but does not
redder contract invalid. If the goods purchased are not in accordance with the
specification of the contract, it is condition and contract is liable to
terminate, but if goods are likely to be ordered and there is just a defect, it
is warranty and other party may claim damages. Contract cannot be terminated.
There is only one condition in which upon breach of warranty, contract can be
terminated. Contract is liable to terminate by seller upon breach of warranty
provided seller could neither repair nor replace the goods, which are
defective.
For example,
100 chairs for
Condition
can be treated as warranty if buyer waives his right.
It
is obligation of seller to provide opportunity to buyer to inspect the goods,
he is intended to buy. If the opportunity to inspect the goods for quality and
quantity is not provided by the seller to buyer and goods are found defective,
seller is liable to compensate buyer. If seller provides opportunity to buyer
and goods found defective, only damages can be claimed. If opportunity is not
provided and goods found defective, contract may be terminated. If party
accepts delivery of goods, and then it is warranty, otherwise condition.
If
the stipulation is condition but law of land deals it as warranty, then it will
be warranty.
1.
2.
3.
4.
There is another way of sale. It is sale by approval. In this instance goods are
delivered to party to inspect and decided for purchase. If party disapproves,
sale is not happened. Expenses of delivery and retaking will be borne by
seller. If buyer disapproves sale not within specified or reasonable time,
buyer will be responsible. If buyer disapproves, and goods are damages without
negligence and fault of buyer, seller will remain responsible.
Goods
cannot be sold ownership of which is not passed
on to buyer by seller. By this process buyer becomes owner and he acquires
title and seller loses the ownership over property. Property is not transferred
until the title over property is not transferred. Stolen goods cannot be
transferred being the absence of title. Possession is insufficient to have
title. Transfer of goods and title, are two different things. Goods are passed
on when seller loses control over goods and buyer acquires control over them.
Transfer of subject matter is passing on of property in goods and control of
seller is lost.
Who
is subject of risk or loss when goods sold are in transit? Goods may be damaged
before passing on, after passing on, and while transit. Who will be responsible
if loss is occurred? It depends on the situation whether property in goods
which is subject matter, has been passed on. As soon as seller loses control
over goods, it completes the process of passing on.
There
are certain steps in passing on property in goods. For example, order to buy 500 kilo gram wheat does not
constitute passing on until specific wheat is separated from bulk. There may be
bags of 50 kg., each. If bags are to be bought, then they must be separated. If
the goods are likely to be assembled, they must be assembled, and if packing is
necessary to give it deliverable form, it must take place.
1.
Ascertainment of goods must be assured
before passing on goods. Goods must be separated.
2.
Specific goods are not required to be
ascertained.
3.
Goods must be in deliverable form before
passing on. Packing, assembling, polishing furniture are different kinds of
deliverable form.
4.
Parties must be intended in passing on at
particular date and time. If date and time is specified, then passing on
completes even if goods are not transferred.
If
the goods are perished before passing on, seller is responsible, if perished
after delivery, buyer is responsible for loss. When specific date and time
comes, passing on is considered takes place.
5.
If goods are brought through carrier or
porter, who will bear loss, if occurred? As a general rule, when goods passes
on, risk also passes on. But it depends on situation. If buyer hires the
carrier then risk is responsibility of buyer. Normally buyer gets goods insured
to cover risk. If dispatch of goods is responsibility of seller at the doorstep
of buyer, then risk lies on seller. Damage by porter is also dealt by this
principle.
As
soon as buyer acquires the control over property in goods and seller loses his
control over the same, passing on takes place. How the title is transferred from seller to buyer? In mortgages, pledges,
bailment, title of ownership does not transfer, but only possession transfers.
As general rule goods cannot be transferred until the seller thus passing
acquires the possession on does not take place in absence of possession. Some
time buyer purchases the goods, which are not in possession of seller, thus he
has no title, but even than under special circumstances, title transfers to
buyer. Such exceptions are as below:
1.
If a principal has not a particular person
being an agent but his conduct shows a particular person acting as an agent. A
third party deals with an agent. Contract is made between buyer and principal
and principal will remain responsible for the transfer of title. Law of estopal
will come into operation to stop him in deviation.
2.
A mercantile agent is an agent who has goods
in his possession related to his principal. He can pledge goods with the
consent of his principal. If conduct of a principal shows a particular person
as his mercantile agent, and third party deals with an agent, title will be
transferred and principal will face consequences.
3.
There may be several joint owners in any
business. They act as an agent of each other and can transfer title upto extent
of their share. If joint owners give authority to one joint owner and he sells
property, title, which is acquired, will be transferred.
4.
A sell fan to B, under void-able contract,
which is not known, to B at the time of sale, title will be transferred even if
contract becomes void. A is liable to pay damages to actual owner. B will not
be responsible in this case.
5.
A seller sells a thing to another person and
receives price and buyer did not take possession and goods rest there in shop
or seller’s premises, it means possession is not transferred. Buyer should be
very careful and he should, at least, take the documents containing title. It
is a general rule that law regards possession. As matter of rule, seller cannot
resell sold things. But if he resells and possession and title is transferred
to third person, then law regards possession and protects interest of
possessor. However first buyer can claim damages, but he cannot acquire
possession.
Performance of contract
is delivery of goods. If seller fulfills all the terms and conditions of sale
agreement and delivers goods to buyer as contractual responsibility. It is duty
of buyer that he should accept the goods delivered to him.
There
may be concurrent sale, means delivery of goods and receipt of payment takes
place in a time. In this instance there is no breach of contract. But in many
cases, breach of contract may take place like in instances of credit sale,
advance sale, sale in installments. If contract is silent regarding criteria of
breach, then S. 32 will apply. Seller is duty bound to deliver goods as
provided in mutual agreement. Where agreement is silent whether where the goods
are to be supplied, buyer has to inform to seller whether where delivery of
goods be made. If place of delivery of goods is part of contract, then seller
is bound to deliver goods at the requisite place. In contrast, seller is not
bound to deliver goods as buyer wishes, he is responsible upto the extent of
his premises. Buyer cannot appoint another point to deliver goods other than
agreed.
Delivery of goods
should be made as agreed in contract, otherwise reasonable time must be
adhered. Seller is responsible for loss, if occurs, if he send goods through
his an agent for loss, if occurred.
Possession
of goods placed in cold storage or god-own can be changed if change of
possession is acknowledged to cold storage’s owner.
Delivery
of goods must take place within reasonable hours, if no provided in contract.
Unpaid seller:
Unpaid seller is a person who has sold goods but buyer has failed to pay him
price of goods. If bill of exchange or other negotiable instruments dishonors,
it also amounts unpaid selling. Goods sold on credit are not covered under this
section.
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 otherwise.
In case of contract of sale, this situation does not arise, because contract is performed at spot. Passing of goods takes place, property is transferred, title is transferred, possession is transferred, and consideration or price of goods sold is received on spot. Since the performance of contract takes place, so matter of unpaid seller does not take place, and he is converted into paid seller.
A
sells goods to B, at Rs. 15,000/- A passes on the goods to B along-with
transfer of goods, title, and possession. In result of such transfer B
pays Rs. 15,000/- to A. This is a contract of sale so unpaid seller is
not created. But if B pays Rs. 5,000/- and withholds Rs. 10,000/- due to
reasons unknown, it creates unpaid seller.
Rights of unpaid seller:
Law gives following rights to unpaid seller:
1.
In case, goods are sold, property in goods
has passed on, goods are not delivered, and goods are lying at the premises of
seller, price is not paid, seller can establish lien over sold goods and can
retain or stop goods until the payment is received. Lien is retention of goods
until the condition is fulfilled.
2.
If the goods are in transit and buyer
becomes insolvent then goods in transit can be retaken or stopped. Since
insolvent buyer can not pay the price of goods so law gives right to seller to
retake his goods from the possession of the buyer. U/s 11 of Contract Act,
person of insolvent cannot enter into agreement until he attains solvency.
3.
Seller, can resale the goods which have been
retained or stopped.
4.
Where property in goods has not been passed
on, seller may resale the goods.
Rights of unpaid seller to retain or stop,
property in goods in transit, ends if:
1.
Seller sells goods to buyer and buyer
resells goods to another person.
2.
Goods have been reached to the appointed
destination of the buyer.
3.
Perishable items lying in cold storage are
the bailment, and owner of cold storage acts as bailee, and holder of title is
referred as bailor. Owner of cold storage can retain goods on the behalf of
buyer or seller, whatsoever situation is.
4.
Goods have been reached at the destination
where they are liable to transfer but are not transferred, ends lien.
5.
Goods are not delivered wrongfully to buyer.
6.
Goods are transferred to another career
wrongfully, ends lien.
How an unpaid seller can retain goods and
what are consequences of retention:
1.
Unpaid seller can take physical possession.
2.
If career is acting on behalf of another,
seller has to give notice to actual possessor or to his principal for not
reselling.
3.
Reasonable time must be given to principal
so that he may communicate the message to his agent.
4.
If the goods of unpaid seller have been
resold to third party or second party has pledged the goods, unpaid seller can
establish his lien over goods.
5.
If A buy goods from
6.
Reselling and/or pledge do not defeat the
right of retention or stoppage.
7.
If goods are resold with the consents of
unpaid seller, the right of retention or stoppage becomes end.
8.
Goods, which have been retained, are not
liable to resell until a notice is served to buyer. In sale agreement property
in goods and title passes on. Simply retention does not mean right of selling.
Retention only creates lien over goods. If buyer is no more interested in
payment of price, unpaid seller can resell goods after serving a notice to buyer.
If loss occurs from sale proceedings, unpaid seller can recover damages from
buyer. Notice should be served within reasonable time, as subject matter
allows.
9.
If unpaid seller sells goods without
consents of buyer, buyer can recover damages.
10. Seller
can sue buyer whenever he commits default in payment of price of sale.
11. If
buyer refuses to accept contractual goods, seller may sue buyer for damages.
12. Buyer
may sue seller for the recovery of damages where seller willfully or
negligently refuses to deliver goods.
13. If
taxes are imposed at the time of delivery, price will be increased and if taxes
are decreased, price will be reduced.
Go to Index | LL. B. – II | LL. B. – III | Laws | Home