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Originally, the law relating to sale of goods was contained in Chapter VII of the Indian Contract Act, 1872. The same was repealed and re-enacted by the Sale of Goods Act, III of 1930.
From the above definition, the following essentials of a contract of sale may by noted: 1. There must be at least two parties 2. Transfer or Agreement to transfer the ownership of goods. 3. The subject matter of the contract must necessarily be 'goods'. 4. The consideration is Price. 5. A Contract of sale may be absolute or conditional 6. All other essentials of a valid contract must be present.
Sale: It is a contract where the ownership in the goods is transferred by seller to the buyer immediately at the conclusion contract. Thus, strictly speaking, sale takes place when there is a transfer of property in goods from the seller to the buyer. A sale is an executed contract. It must be noted here that the payment of price is immaterial to the transfer of property in goods. Ex A sells his Yamaha Motor Bicycle to B for Rs. 10,000. It is a sale since the ownership of the motorcycle has been transferred from A to B. Agreement to sell: It is a contract of sale where the transfer of property in goods is to take place at a future date or subject to some condition thereafter to be fulfilled. Ex(i) A agreed to buy from B a certain quantity of nitrate of soda. The ship carrying the nitrate of soda was yet to arrive. This is `an agreement to sale`. In this case, the ownership of nitrate of soda is to be to transferred to A on the arrival of the ship containing the specified goods (i.e. nitrate of soda) [Johnson V Mcdonald (1842) 9 M & W 600, 60 RR 838] (ii) On 1st March 1998, A agreed to sell his car to B for Rs. 80,000. It was agreed between themselves that the ownership of the car will transfer to B on 31st March 1998 when the car is got registered in B`s name. It is an agreement to sell and it will become sale on 31 st March when the car is registered in the name of B. Other points of distinction between a sale and an agreement to sell are: Sale Agreement to sell 1. A sale is an executed contract. 1. An Agreement to sell is an executory contract. 2. In a sale, since the property has passed to the buyer, 2. In an agreement to sell, in case of breach, the the seller can sue the buyer for the price of the seller can only sue for damages, unless the price goods. was payable at a stated date. 3. A sale creates a right in rem. 3. An agreement to sell creates a right in 4. In case of loss of goods, the loss will fall on the personam. buyer, even though the goods are in the possession 4. The loss in this case shall be borne by the of the seller. It is because 'Risk' is associated with seller, even though the goods are in the possession ownership. of the buyer. 4. In case buyer pays the price and the seller thereafter becomes an insolvent, the buyer can claim the goods 5. In these circumstances, the buyer cannot claim from the Official Receiver or Assignee. the goods but only a rateable dividend for the money 6. If the buyer becomes an insolvent without paying the paid. price, the ownership having passed to the buyer, the 6. In these circumstances, the seller can refuse to
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seller shall have to deliver the goods to the Official Assignee or Receiver except where he has a lien over the goods.
Sale
ln case of sale, the property passes as soon as sale is made though price has not been fully paid. In determining as to whether a particular contract belongs to one type or the other, regard shall have to be paid to the fact whether the hirer has merely an option to purchase, or whether he has bought or agreed to buy the goods.
CLASSIFICATION OF GOODS
Goods may be classified into: 1. Existing Goods - Existing goods are those, which are owned or possessed by the seller at the time of the contract. Instances of sale of goods possessed but not owned by the sellers fire sales by agents and pledgees. Existing goods may be either: (a) Specific and Ascertained - goods identified and agreed upon at the time a contract of sale is made; or (b) Generic and Unascertained - goods arc goods indicated by description and not specifically identified. 2. Future Goods - Future goods" means goods to be manufactured or produced or acquired by the seller after making the contract of sale. 3. Contingent Goods - Contingent goods are the goods the acquisition of which by the seller depends upon a contingency which mayor may not happen. Contingent goods are a part of future goods.
4.3 PRICE
'Price' means the money consideration for sale of the goods. 'Price' is an integral part of a contract of sale. If it
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is not fixed or is not capable of being fixed, the whole contract is void ab-initio. The Act provides that the price may be fixed (I) either by the contract or (II) may be agreed to be fixed in a manner provided by the contract, e.g., by a valuer, or (III) it may be determined by the course of dealings between the parties. (IV) in case, price is not capable of being fixed in any of the above ways, the buyer is bound to pay reasonable price. What is reasonable price will vary from case to case.
Condition 1. A condition is a stipulation (in a contract), which is essential to the main purpose of the contract. 2. A breach of condition gives the aggrieved party a right to sue for damages as well as the right to repudiate the contract. 3. A breach of condition may be treated as a breach of warranty in certain circumstances.
Warranty A warranty is a stipulation, which is only collateral or subsidiary to the main purpose of the contract. 2. A breach of warranty gives only the right to sue for damages. The contract cannot be repudiated. 3. A breach of warranty cannot be treated as a breach of condition.
ExA man buys a particular horse, which is warranted quiet to ride and drive. If the horse turns out to be vicious, the buyer's only remedy is to claim damages. But if instead of buying a particular horse, a man asks a dealer to supply him with a quiet horse and the horse turns out to be vicious, the stipulation is a condition and the buyer can reject the horse, or keep the horse and claim damages.
Under the following circumstances a breach of condition is to be treated as a breach of warranty, i.e., the right to repudiate the contract is deemed to have been lost: 1. Waiver of Condition 2. Compulsory treatment of breach of condition as breach of Warranty.
Conditions and Warranties may be either express or implied. They are said to be "express" when the terms of the contract expressly provide for them. They are said to be 'implied' when the law deems their existence in the contract even without their actually having been put in the contract.
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(i)
Certain shoes were sold by sample for the French Army. The shoes were found to contain paper not discoverable by ordinary inspection. Held, the buyer was entitled to the refund of price plus damages. (ii) In a contract for the sale of brandy by sample, the brandy that was supplied had been coloured with a dye. Held, the buyer was not bound by the contract, though the bulk corresponded with sample, since the defect could not have been located on reasonable examination of the sample [Mody v. Gregson (1868) L.R.4Ex. 49.].
Caveat Emptor is a fundamental principle of the law of sale of goods. It means "Caution Buyer", i.e. "Let the buyer beware". In other words, it is not the duty of the seller's duty to point out defects of his own goods. The buyer must inspect the goods to find out if they will suit his purpose.
ExPigs were sold "subject to all faults", and these pigs, being infected, caused typhoid to other healthy pigs of the buyer, it was held that the seller was not bound to disclose that the pigs were unhealthy. The rule of the law being 'Caveat Emptor'. [Goddard v. Hobbs 1878, 4 App. Cas. 13].
Exceptions
1. Where the seller makes a false representation and buyer relies on that representation. The rule of "Caveat Emptor" will not apply and the buyer will be entitled to the goods according to that representation; 2. Where the seller actively conceals a defect in the goods, so that on a reasonable examination the same could not be discovered; 3. Where the buyer makes known to the seller the purpose for which he is buying the goods, and the seller happens to be a person whose business is to sell goods of that description, then there is an implied condition that the goods shall be reasonably fit for such purpose. The rule of Caveat Emptor will not apply; 4. In case of sale by description, there is implied condition as to their being of merchantable quality. However, if the buyer has examined the goods, this condition of "merchantability" extends only to hidden or latent defects. The defects, which such examination ought to have revealed, are not covered, i.e., the rule of Caveat Emptor will be applicable. Ex In Donoghue v. Stevenson (the `snail in the ginger-beer `case) it was held that manufacturers owed a duty to the ultimate consumer to take care in making their goods where there is no likelihood of their being examined before they reach the ultimate consumer.
(a) Specific or Ascertained goods - the property in the good is transferred to the buyer at such times the parties to the contract intend to be transferred or when something has to be done by the seller to put them in a deliverable state, property passes only when such thing is done, and the buyer has notice thereof. ExThe whole of the contents of a cistern of oil were sold, and the seller had to put the oil in casks to be then delivered to the buyer. Held, the property did not pass until the oil was actually put into casks ready for delivery and the buyer was notified accordingly. [Rugg v. Minett, 1809,11 East 2.101]. (b) Unascertained or Future Goods - property in the goods is not transferred to the buyer unless and until the goods are ascertained. ExX agrees to sell Y 200 quintals of wheat out or a larger quantity lying in X's store. The agreed price is to be paid on the day appointed under the contract. Unless and until the required quantity of 200 quintals is separated from the larger quantity and the goods have thus been ascertained, -property cannot pass from the seller to the buyer.
The general rule is that only the owner of goods can transfer a good title. No one can give a better title than he
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Ex-
himself has. This rule is expressed by the maxim "Nemo dat quod non habet" which means "that no one can give what he himself has not" If the seller, therefore, has no title, or a defective title, the buyer's title will be equally wanting or defective as the case may be, though he may be a purchaser - bonafide and for value.
A finds a ring of B and sells it to a third person who purchases it for value and in good faith. The true owner, i.e., B can recover from that person, for A having no title could pass none the better. [Faruquaharson v. King (1902) A.C. 324.). Exceptions to the Rule
1. Sale by Mercantile Agent 2. Sale by a Joint-owner 3. Sale by a Person in Possession under a Voidable Contract 4. Sale by the Seller in Possession of Goods after Sale - Where a seller having sold goods, continues in possession
thereof or of documents or title to the goods, such seller will pass a good title to the (second) buyer, if that buyer has acted in good faith and without notice of the previous sale. 5. Sale by an unpaid seller - a seller who has exercised his right of lien or stoppage in transit can, resell the goods and convey a valid title to another buyer, though no notice of re-sale has been given to the original buyer.
Duty of the seller a) To deliver the goods, in accordance with the terms of the contract of sale. b) Delivery and payment of price are concurrent conditions. c) The seller of goods has the duty of giving delivery according to the terms of the contract. Duty of the buyer a) Pay for the goods; b) Accept delivery; and c) Pay compensation to the seller in case he wrongfully refuses to accept delivery.
DELIVERY
I. 2. 3.
Rules regarding delivery 1. The seller is not bound to deliver goods till the buyer applies for delivery in terms of the contract. 2. Place of Delivery - goods sold are to be delivered at the place agreed for delivery in the contract. 3. Time of Delivery as per contract otherwise within reasonable time. 4. The expenses of and incidental to putting the goods into a deliverable state shall be borne by the seller, as per
the terms of the contact. 5. Demand and tender must be at a reasonable hour - What is a reasonable hour is a question of fact. 6. Delivery of Wrong Quantity - Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them. But, if the buyer accepts the goods so delivered he shall be required to pay for them at the contracted rate. 7. Instalment Deliveries - The buyer is not bound to accept delivery by instalment, unless otherwise agreed. 8. Delivery to the Carrier or Wharfinger - Delivery of goods by the seller to a carrier for transmission to buyer or to wharfinger for safe custody is prima facie deemed to be a delivery of the goods to the buyer. As regards insurance, the sellers duty is only to give sufficient notice to the buyer to enable him to insure the goods. Alternatively it may be agreed to send the goods c.i.f. or ex-ship. 9. Buyer not bound to return rejected goods - when the goods are delivered to a buyer on sale or return basis and the buyer refuses to accept them, he is not bound to return them to the seller, but it is his duty to inform the seller that he has refused them; otherwise after lapse of a reasonable time, he will be deemed to have accepted them. 10. Liability of the Buyer - When the seller is ready and willing to deliver the goods and requests the buyer to take delivery and the buyer does not within a reasonable time takes delivery of the goods, he is liable to the seller for any loss occasioned by his neglect or refusal to take delivery, and also for a reasonable charge for the care and custody of the goods.
It has been defined as a voluntary transfer of possession from one person to another.. Delivery of the goods may, be: Physical or Actual Delivery Symbolic Delivery - e.g., delivery of a railway receipt properly endorsed, or delivery of the key of a warehouse; Constructive Delivery or Attornment - only an acknowledgement by the person in possession that he holds them on behalf of another.
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(a) Lien on the goods (b) A right of stoppage in transit (c) A right of re-sale
2. Rights Against the Buyer Personally An unpaid seller, besides his rights against goods, has the following rights against the buyer personally: (i) Right to sue for the price; and (ii) the right to sue the buyer for damages for non-acceptance.