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 Pakistan. Since it is federal law, therefore it is followed in all parts of Pakistan. It relates to moveable goods, such as, fan, book, table, chair, car etc. All goods, which are moveable, can be carried out from one place to another. Where the transfer of goods takes place in a way of sale, there the Sale of Goods Act, 1930, applies. There are many ways whereby contract of sale can be made. They may either be verbal, written, or implied. Purchase of pen for Rs. 50/- is a verbal contract. Everything is not written. If a person gives me Rs. 50/- and takes my pen and I accept price of pen, is called implied contract. I purchase a book, take it to home, open and find some papers missing or binding is out of order I may return it to get my money back or replace it. Merchantable quality must contain its commercial value. Perished items have no commercial value like perish milk. Seller and buyers are bound to follow rights and obligations, which are provided in contract. Rights and duties either provided or not in any contract, the Sale of Goods Act, 1930, applies in all circumstances. Contract of pledge may take place verbally and if breach of contract is committed, it can be sued. Pawnee has right to sell the goods of pawner in order to recover his credit and expenses for the proceeding of sale. This right even is not provided in contract but Contract Act, which is a statue, gives him such right. Formation of sale of goods contract has two kinds, i.e., contract of sale and agreement to sell. Where a sale proceeds happens immediately and goods are delivered at once that is called contract of sale. Where transfer of goods takes place in future time, which is subject matter, is called agreement to sell. After compliance, agreement to sell is converted into contract of sale.

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 Computer College are ordered. Chairs provided by contractor are not as per requirements and purpose is not served, it is condition and contract is liable to terminate. But if the chairs serve the purpose but color of the chairs is not according to contract, it is warranty and damages can be claimed.

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.

Sale can be offered by three ways in addition of one more way:

1.      Sale by sample: In this instance, sample of product is shown to buyer and order is collected/obtained. For example, a seller of fan in Gujrat may show sample of fan to buyer in Lahore. Seller is under obligation to provide goods according to sample.

2.      Sale by description: In this case, specification of goods is provided to buyer and no physical good is shown to him.

3.      Sale by both: Sample along-with description, both are provided. Sale may vary from the sample shown because of description.

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 Singapore and goods are sent through ship and ship is in transit, seller receives title documents, can resale goods.

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.

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