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Section 4 – Sale and Agreement togoods is a contract whereby the 1. The contract of sale of Sale
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; all the conditions are fulfilled subject to which the property in the goods is to be transferred.
Section 4 – Sale and Examples: Agreement to Sale
The Section may be illustrated by the following examples: A agrees to buy a haystack from B on B’s land with liberty to come on B’s land to take it away. This is a sale and B cannot revoke the licence given to A to woo on his land. (Wood Vs Manley 1839) Agreement by A to buy 20 tonnes of oil from the seller’s cisterns. The seller has many cisterns, with more than 20 tonnes in them. This is merely an agreement to sale. (White Vs Wilks, 1813) Agreement for sale of a quantity of nitrate of soda to arrive at a certain ship. This is an agreement to sell at a future date subject to the double condition of the arrival of the ship with the specified cargo on board. (Johnson Vs Macdonald 1842) 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)
Essential Requisites of Sale
In the case of (state of Madras Vs Gannon Dunkerley and Company Limited, 1958) the Supreme Court has held that according to the law, both of England and India, 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.
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 thereof. Both under the common law and the statute law relating to sale of goods England and in India, 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. Transfer of property in goods for a price is the linch pine of the definition. It is, however, not an inevitable rule that the price must be fixed. An allotment of goods among partners on dissolution of partnerships is not a sale. Exchange of property for something other than money is not a sale. The difference between a sale and an exchange is that in the former the price is paid in money while in the latter it is paid in good by way of barter. But if the exchange is made partly for goods and partly for a price, the contract is probably one of a sale.
An agreement to sell, which is also called an executive contract of sale, is a contract simply, and creates only a jus in personance; the property in the goods which forms subject matter of the contract remains in the seller, so that they may be taken in execution of his debts, and belongs on his bankruptcy to his trusty in bankruptcy; if they are destroyed the loss will, in the absence of excess agreement, have to be borne by him: and a breach by either party of the agreement will normally only give the other party a right to sue for damages. The term ‘contract of sale’ includes both actual sales and agreement for sale.
Sale and Agreement to Sale
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 personance is caused by a sale a jus in rem also is transferred. Where goods have been sold and the buyer makes the fault, 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 seller’s normal remedy is an action for unliquidity 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 usual 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 position. (The Instalment Supply Limited Vs STO Ahmedabad and others, 1974.)
Formalities of a contract of sale:
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 enforced, 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.
Formalities of a contract of statement or conduct inviting the making of an offer A sale:
such as by display of goods in a shop does not buy itself bind the shopkeeper to accept the customer’s 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 customer’s 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 seller’s assent does not arise.
Formalities of a contract of sale:
Sub-section 1 emphasis the consensual nature of a contract of sale; the parties may agree to such terms as they think fit. A sale can be complete even without effecting immediate delivery and immediate payment. In a contract of sale, the title in goods passes immediately on the payment of price while in an agreement to sale the title in goods passes at a future time subject to conditions to be fulfilled thereafter however, when the goods are accepted by the buyer and the price is received by the seller the sale is deemed to be complete.
Earnest : The conclusion of a contract of sale is sometimes marked by the giving of earnest this was expressly referred to in Sec. 78 of the Contract Act with regard to the giving of earnest Fry L.J. said in Howe V.s Smith (1884). The practice of giving something to signify the conclusion of the contract, sometimes a sum of money, sometimes a ring or other object, to be repaid or redelivered on the completion of the contract, appears to be one of great antiquity and very general prevalence….. It was familiar to the law of Roam ( where the rule was that a defaulting buyer forfeited the earnest money and a defaulting seller was bound to restore it two fold”. Earnest whether given in money or not must be something of value really given by the buyer and kept by the seller … A mere symbolic ceremony such as one party drawing a coin across the other’s hand will not do. When a deposit in the nature of earnest is paid for the same of immovable property in India, a vendor by whose default the sale goes off must return the sum so paid, but if the default is the purchasers the purchaser must loose it.
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. Examples: The section may be illustrated by the following examples 1) Sale of some stacks of oak on the sellers ground, upon the terms that they might remain there for four months and the buyer should pay within 12 weeks of the contract. The seller on the expiration of 12 weeks demanded the price which the buyer failed to pay. Later the buyer asked for further time which the seller refused to give, and said that as the buyer had not paid he should not have the stacks. The buyer later tendered the price, but the seller refused to accept it and subsequently resold the stacks. The Buyer was held entitled to recover in an action of trover. ( Martin Dale V/s. Smith 1841) 2) Sale of goods to be shipped and bill of lading to be dated December – January. Goods were shipped on 30th January but the bill of lading was dated 2nd February the buyer was held entitled to reject.
2. 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 name 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; and a subsequent resale by him will be tortious. 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.
3. Stipulations as to time of performance of other terms
As the Act deals with all kinds of contracts of sale, and not only with commercial contracts, the enactment as to stipulations as to time, other than as to payment of the price, is necessarily put in somewhat general language. 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. In contracts of sales of goods, the computation of the time of performance from a particular date, act or event is prima facie exclusive of the day, act or event and inclusive of the day of performance, although this presumption may be displaced by a contrary intention appearing from the contract and its surrounding circumstances.
4. 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. Where, however, an initial stipulation making time of the essence of the contract is waived, reasonable notice to make time again of the essence would give rise to the right to rescind. 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.
1. 2. 3.
Section 12. Condition and A stipulation in a contract of sale with reference to goods which Warranty
1. 3. 5.
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. Synopsis Conditions and warranties 2. Express Conditions Express Warranties 4. Representations Implied conditions and warranties 6. Puffs
This section or interpretation section and supplies a want long felt in India. At the time when the Contract Act was passed the phrase ‘warranty’ had been and used with several different meanings and shades of meaning, and the difficulty had been increased by some of those meanings overlapping some of the meanings of the word ‘condition’. The Contract Act used the word ‘warranty’ in this ambiguous sense and did not define it. The result was that the courts had to decide on the construction of each section whether the word ‘warranty’ was used in the strict sense of the English Law, as it was . The present Act avoids this confusion and uses the words ‘condition’, and ‘warranty’ and draws a distinction between the two.
Conditions and Warranties definition is in effect an additional
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-s (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.
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). A condition of sale, protecting a seller in respect of misdescription, may be overridden by a warranty given before the sale takes place and damages may be recovered for breach of the warranty. 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.
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, it is not necessary so in law. 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.
Implied Conditions and Although the parties may have used no expressed words that would create such Warranty annexes too many a stipulation, the law
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, confirmative with description and quality, terms designated a conditions by the contract itself, terms similar to those or already treated as conditions in another case, time clauses in mercantile contracts and residual category 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. The existence of an employed condition or warranty may be rebutted by proof of facts, which show a contrary intention
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 whom it is made.
Section 13 : When condition to be treated as warranty,
1. 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 a 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 s 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 Nothing in this section shall affect the case of any condition or warranty fulfilment of which is excused by law, by reason of impossibility or otherwise.
Transfer of Property as Between Seller and Buyer Section 18 – Goods must be Goods must be ascertained: where there is ascertained contract for the sale of unascertained goods, no
1. 2. 3. 4. 5.
property in the goods is transferred to the buyer unless and until the goods are ascertained Synopsis Transfer of property Property cannot pass until the goods are identified Part of a specific whole Property and risk Identification of goods
1. Transfer of property
This and the five following sections of the Act deal with the question foreshadowed by section 4 of the Act and lay down rules which assist in deciding the question when the object of the contract of sale, namely, the transfer of the property in the goods to the buyer has been affected.
2. 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. In any given case, there may be question whether this condition is fulfilled or not, and it may be that the property will not pass even if it is fulfilled, but until it is, there is no possibility of the property passing. 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 pas 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)
3. Part of a specific whole
It is obvious that if the contract is merely for the sale of goods by description, such as a contract for sale of a certain quantity of malting barley, or future goods, the necessary condition is not fulfilled. Nor is it fulfilled even if the goods are so far ascertained that the parties have agreed that they shall be taken from some specified larger stock. ‘The parties did not intend to transfer the property in one portion of the stock more than in another, and the law which only gives effect to their intention does not transfer the property in any individual portion’(White Vs. Wilks 1813). And the 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)
Property and Risk
In this class of case, it is necessary to distinguish the passing of the property from the transfer of the 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. Equally, it would seem that there can be none in an individual part of a chattel, such as a tree which has been felled, of which a marked portion was sold, and of which the other portion is to be retained by the seller. In such a case, it is conceived, the whole tree remains the property of the seller until the marked portion is severed, even if the severance is to be done by the buyer.
Identification of the The contract itself may provide that the property shall pass on the goods to identify the goods, and happening of some specified event, sufficient
occasionally they may become identified by other means. Thus, in a case where the seller sold 250 quarters of wheat out of a larger bulk belonging to him in a warehouse, and the buyer took delivery of 400 quarters and pledged the remaining 850 quarters to a bank, and in the meantime the seller sold the remainder of the bulk in the warehouse, of which delivery was taken, so that 850 quarters only were left in the warehouse, it was held that by this process of exhaustion the 850 quarters became ascertained goods and property therein passed to the buyer, so that the pledgee acquired a title thereto against the seller. (Wait & Midland Bank 1926) 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 no 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
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. 3. Unless a different intention appears, the roles contained in section 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer.
Synopsis 1. Principles for determining whether the property is transferred 2. Intention of the parties 3. Ascertained goods
1. Principles for determining whether the property is transferred
When it appears that the goods -- the subject of the contract—are specific or ascertained, so that it is possible for the property to pass to the buyer, it becomes necessary to determine whether it has actually passed; This section reproduces this statement in statutory form, and the rules of construction adopted by courts are those set out in Ss 20 to 24.
The governing principle which should determine as to the passing of the property in the goods must be to find out what is the intention of the parties. It is open to the parties to agree that the property shall pass ipso facto immediately the goods become ascertained or even that it shall pass at some time after the delivery is effected. The desirability of making express provisions to this effect is demonstrated by the consequences of its omission from the Contract Act. It might have been thought that, even in the absence of such a provision, the courts would be free to give effect to the intention of the parties to a lawful contract of sale on such an important element of the contract as the transfer of the property, and that view has on some occasions been acted upon.
Intention of the parties
2. Intention of the parties had transferred its plant and machinery to Where a company
the finance corporation and the only right the company had was to redeem and it was clear that the company could not sell the same without the concurrence of the finance corporation it was held that the intention of the parties notwithstanding the language of the document between the company and M/s Ranga Engineering Company was to transfer the property only after obtaining the consent of the finance corporation and there was no sale until then.(PPLooke Vs. NJ Mathew & others 1967) Sale of shares becomes complete as soon as property in the shares is intended to be transferred to the buyer. Such intention does not depend on any particular form or mode of transfer and has to be gathered from the facts of each particular case. Unity Company Pvt. Ltd. Vs. Diamond Sugar Mills & others AIR 1971
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’. Sections 23 and 25, therefore, must also be read subject to the provisions of this section, and regard must be had to the intention of the parties when considering whether the property has or has not passed in the circumstances dealt with by those sections. 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. Examples This section may be illustrated by the following examples: 1. Sale on the 4th January of a haystack on the seller’s land at the price of £145 to the paid on the 4th February, the hay to be allowed to remain on the seller’s 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)
Section 20 Specific goods in a deliverable state
Examples 2. Sale of a specified number of bushels of oats, the contents of a bin in a warehouse. The seller gives a delivery order to the buyer, addressed to the warehouseman, authorising delivery of the oats tio the buyer, and asking the warehouseman to weigh them,. The warehouseman accepts the order and enters it in his books. The property has passed to the buyer, as the weighing was not necessary to identify the oats or to ascertain the price, but was merely for the satisfaction of the buyer. Swanwik Vs. Sothern (1839)
Section 21 Specific goods to be put into a deliverable Where there is a contract for the sale of specific goods and state to the goods for the the seller is bound to do something
purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof. Example This 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, buy before any are removed, or the remainder are filled, 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)
Section 22 : Specific goods in a deliverable state , when the seller has to do anything thereto in order to ascertain Where there is a price for the sale of specific contract :
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.
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 seller’s and buyer’s 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)
Section 23 : Sale of unascertained goods and 1. Where there is a contract for the sale of unascertained or appropriation. future goods by description and goods of that description and
in a deliverable state are unconditionally appropriated to the contract 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. 2. 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.
This section may be illustrated by the following example: 1. Sale of 20 hogsheads of sugar out sugar out of a larger quantity. The seller fills four hogsheads which the buyer takes away. Subsequently the seller fills sixteen more hogsheads, 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. 2. 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.
Section 23 : Sale of unascertained goods and Example appropriation
Section 24 Goods sent on approval or ‘on sale or When goods are return’ 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 24 Goods sent on approval or ‘on sale or Examples return’ The section may be illustrated by the following
examples: 1.Goods delivered on sale or return are pledged by the deliveree. He thereby becomes the buyer of the goods, and the original owner cannot recover the goods from the pledgee. 2. Goods delivered on sale or return to the defendant are delivered by him on similar terms to another. The latter in turn hands them to a fourth person, who loses them. The defendant, being unable to return the goods, must pay for them as if he had actually agreed to become the buyer.
Section 26 Risk prima facie passes with property
unless otherwise agreed, the goods remain at the seller’s risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer’s risk whether delivery has been made or not. Provided also that nothing in this section shall affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party.
Section 26 Risk prima facie passes with
Examples This section may be illustrated by the following examples; 1. Goods in a house held on lease and belonging to the tenant were sold by auction under conditions expressly providing that all lots should be taken to be delivered at the fall of the hammer, after which time they should remain at the exclusive risk of the purchaser. The rent of the house was in arrear, and after the sale the landlord threatened to distress on these goods; to prevent distress, the auctioneer paid the rent and handed the net proceeds of the sale to the original owner of the goods, the tenant. It was held that the auctioneer had no right to make this deduction, as the property in the goods had passe0d to the respective buyers and the seller, therefore, had no further interest in them; the auctioneer, in consequence, had no implied authority from him to pay the rent in order to save the goods from distress. Sweeting Vs. Turner (1871)
Section 26 Risk prima facie passes with
2. The defendant purchased 975 bales of rice, being the whole contents of a gola, paid earnest money, and took part delivery of the rice. The rest was afterwards destroyed by fire. The property in the whole had passed to him and he was held liable to pay the balance of the price. The Union of India Vs. The West Punjab Factories Ltd. AIR 1966 SC 3. The defendant contracted to purchase 30 tons of apple juice. The plaintiff crushed the apples, put the juice in casks and kept it pending d3elivery. 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) 1949
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. The general rule enunciated in this section follows from the nature of the contract of sale, by which the property in the goods is transferred, or agreed to be transferred, from the seller to the buyer in return for the price. 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. It will be noticed that the Act does not expressly impose any duty to take delivery although it prescribes sanctions when there is delay in taking delivery.
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 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. The owes to the buyer as onerous a duty to deliver the goods, as the buyer owes to the seller the duty to accept and pay for them.
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: 1`. 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.
Section 34. Effect of part delivery
2. A ship arrived in port with a cargo of wheat. The master reported her at the Customs House and made an oath that the cargo was for A., the indorsee of the bill of lading. Next day, A made entry of the wheat in his name at the Customs House. Part of the cargo was then delivered to A. This constituted a deliver of the whole. 3. Sale of a stack of hay. The buyer asked the permission of the seller to cut and remove part of the stack, which was granted. The clear intention of the parties being to separate the part delivered of the whole.
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 delivery This section reproduces s93 of the contract Act except that for the words ‘in the absence of any specific promise’, the words ‘apart from any express contract’ have been substituted. The words ’in the absence of any special promise’ have been construed to mean an express stipulation as to delivery6 which relieves the buyer from the obligation to apply for delivery or the necessary implication of such a stipulation from the nature of the contract as expressed. It might also arise out of usage or custom. Even 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, and after the lapse of a reasonable time, to enable the goods to be procured by the seller, the buyer would be entitled and bound to apply for delivery. When the 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 day’s 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
1. 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. 2. 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. 3. 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 Provided that nothing in this section shall affect the operation of the issue or transfer of any document of title to goods. 4. 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. 5. Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state shall be borne by the seller
Section 36. Rules as to delivery
Examples The section may be illustrated by the following examples : 1. 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) 2. 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) 3. Sale of goods for ready money. The seller packs them up in the buyer’s boxes in the buyer’s presence, but they remain in the seller’s premises. This is not a delivery. Boulter Vs. Arnott (1833)
Section 38. Instalment Deliveries
1. 2. Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by instalments. Where there 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.
Section 38. Instalment Deliveries
Examples 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)
Rights of Unpaid Seller against goods
Section 45. ‘Unpaid seller defined 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 Examples The 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.
Section 46. Unpaid Seller’s 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.
Section 46. Unpaid Seller’s rights
Example 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.
Section 47. Seller’s lien
1. Subject to the provisions of this Act, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in 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 seller’s 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 seller’s lien is ‘ to protect a vendor from incurring an expense in manufacturing or acquiring goods for which payment remains justly in doubt ’. The seller’s lien is a particular lien arising in the precise circumstances specified by the Act and not a general lien for all his debts due from the buyer and he cannot rely on the equitable principle of the vendor’s lien.
Section 48. Part delivery
Where an unpaid seller has made part delivery of the goods, he may exercise his right of lien on the remainder, unless such part delivery has been made under such circumstances as to show an agreement to waive the lien.
Section 49. Termination of lien
1. The unpaid seller of goods loses his lien thereon— (a) 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; (b) when the buyer or his agent lawfully obtains possession of the goods; (c) 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.
Section 49. Termination of lien
Examples This section may be illustrated by the following examples: 1. 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 buyer’s 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 2. Sale of a stack of hay for £ 86, to be paid for as it is taken away, the whole to be removed by a certain date. Part, but only part, was paid for and removed by a certain date, and two months after that date the seller cut up and used the remainder. By doing so, the seller waived his lien, and the buyer successfully maintained an action against him. Gurr Vs. Cuthbert 1843
Section 50 Right of stoppage in transit
Subject to the provisions of this Act, when the buyer of goods become insolvent, the unpaid seller, who has parted with the possession of the goods has the right of stopping them in transit, that is to say, he may resume possession of the goods as long as they are in the course of transit, and may retain them until payment or tender of the price. In order that the right may be exercised, the following conditions must all be satisfied—the seller must be unpaid, the seller must have parted with the possession of the goods and the buyer must not have acquired it. This last condition, as appears from the next section is that which is shortly expressed by saying that the goods are in transit. Further, the right can only be exercised by a seller or a person in a position analogous to that of a seller, the right to stop in transit is unknown outside the law of sale of goods. Lastly, it is a right against the goods themselves only.
Section 52. How stoppage to transit is effected
1. 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 deliver to the buyer. 2. 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.
Section 52. How stoppage to transit is effected
Examples The section may be illustrated by the following examples : 1. A railway company is in possession of goods as carriers when the sellers give notice of stoppage in transit. A sum of money is owing by the buyers to the railway company. The railway company is not entitled to set up in priority to the sellers’ right of stoppage in transit a general lien exercisable by the company against the buyers as owners of the goods. 2. 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
Section 64. Auction sale
In a case of a sale by auction 1. 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 ; 2. 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; 3. 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; 4. 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 ; 5. the sale may by notified to be subject to a reserved or upset price ; 6. 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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