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Business Law

Assignment

Group # 15

1.Satyak Rajhansa Roll No.


90
2.Abhjit Joshi Roll No.
36
3.Amit Phutane Roll No.
88
4.Priya Pawar Roll No.
86
5.Ameya Patankar Roll No.
81
6.Neil Gandhi Roll No.
28
Sale of Goods Act 1930
1. Contract of Sale
 Sale and agreement to sell.
 Essentials of Contract of sale.

2. Conditions and Warranties


 Distinctions between conditions and warranties.
 Express and implied conditions and warranties.

3. Doctrine of Caveat Emptor: “ Buyer Beware”

4. Transfer of Property
 Rules of ascertaining when the property in goods
passes to the buyer.
 Passing of Property

5. Sale by Non-Owners.

6. Performance of Contract
 Types of Delivery of Goods.
 Rules as to delivery of Goods.

7. Rights of an unpaid seller


The Sale of Goods Act, 1930:

Definitions some terms used in the Sale of Goods act:

 Buyer: Means a person who buys or agrees to buy goods

 Delivery: Means voluntary transfer from one person to


another.

 Goods: Goods are said to be in deliverable state, when


they are in such state, the buyer would under the
contract be bound to take delivery of them.

 “Document of Title Goods”: A document of title to goods


may be described as any document used as proof of the
possession or control of goods. The following are
recognized as documents of title to goods:

• Bill of Loading
• Railway Receipt
• Warehouse keepers certificate
• War finger’s certificate.
• Dock warrant.

 Insolvent Person: A person is said to be insolvent who


cannot pay his debts as they become due.

 Price: Means the consideration for a sale of goods.

 Property: Means the general property in goods and not


merely a special property.
SALE OF GOODS ACT 1930:

“An act to define and amend the law relating to the sale of
goods”

The sale of goods act, 1930 governs the contracts relating to sale of
goods. It applies to the whole of India except the State of Jammu &
Kashmir. The act first came into force on the 1st of July 1930. The act
contains Sixty-Six sections. A few amendments in the act were
made by Sale of Goods (Amendment) act 1963.

It is the most common of all commercial contracts and its


knowledge of its main principals is essential for all classes of the
community.

A contract of sale of goods results, like any other contract, by an


offer by one party & its acceptance by the other. Thus it is a
consensual transaction. The parties to the contract enjoy unfettered
discretion to agree to any terms like relating to delivery and
payment of price, etc. The sale of goods act does not seek to fetter
this discretion. It simply lays down certain positive rules of general
application for those cases where the parties have failed to
contemplate expressly for contingencies which may interrupt the
smooth performance of a contract of sale, such as the destruction of
a thing sold, before its delivered or the insolvency of the buyer, etc.
The act leaves the parties free to modify the provisions of the law
by express stipulations.

1. CONTRACT OF SALE:
A contract of Sale of goods is a contract whereby the seller transfers
or agrees to transfer the property in the goods to the buyer for a
price. The term contract of sale is a generic term and includes both
a sale & an agreement to sell.

 Sale and Agreement to sell:


Where under a contract of sale, the property in the goods is
transferred from the seller to the buyer (i.e. at once) the contract is
called “a sale” but where the transfer of the property in the goods is
to take place at a future time or subject to some condition
thereafter to be fulfilled, the contract is called as “an agreement to
sell”. An agreement to sell becomes a sale when the time elapses or
the condition, subject to which the property in the goods is to be
transferred, is fulfilled.

In a contract of sale:
• There must be an offer to sell the goods at a price and
subject, sometimes, to certain terms and conditions. This is
usually a quotation.
• There must be an acceptance to buy (usually a purchase
order)

But. If a supplier sends a quotation and the Purchase order


stipulates conditions at variance with the term in the quotation, it is
a counter offer and the supplier must accept the revised terms to
give them the legal status of the contract.
The contract may provide for:
• Immediate delivery of the goods or
• Immediate payment
• Or Both.
• Delivery or payment by installments.
• Delivery or payment or both at a future date.

 Essentials of a contract of sale:

1.) Two Parties:


There must be two distinct parties i.e. a buyer & a seller, as a
person cannot buy his own goods to affect a sale and they must
be competent to contract.

2.) Goods:
Goods means every kind of movable property other than
actionable claims and money and includes stock & shares,
growing crops, grass, and things attached to or forming a part of
the land which are agreed to be severed before sale or under the
contract of sale.
Goodwill, trademarks, copy-rights, patents rights, water, gas,
electricity, decree of a court of law are all regarded as goods.
Goods are classified into 3 types:
• Existing goods
Goods which are physically in existence and which are in
seller’s ownership and/or possession at the time of entering
the contract of sale are called existing goods. Where seller
is the owner & has a general property in them and if he is
an agent, he has the right to sell them. Existing goods are
further classified into 2 types:

a) Specific goods:
Goods identified and agreed upon at the time of the
making of the contract of sale are called Specific
Goods.
e.g Where A agrees to sell B a particular radio
bearing a distinctive number there is a contract of
sale of specific or ascertained goods.

b) Unascertained goods:
Goods that are not separately identified or
ascertained at the time of making of the contract are
known as unascertained goods.
e.g. If A agrees to sell to B one bag of sugar out of
the lot of one hundred bags lying in his go down, it is
a sale of unascertained goods because it is not
known which bag is to be delivered..

• Future goods
Goods that are to be manufactured, produced or acquired
by the seller after the making of the contract of sale are
called future goods.
e.g. If A Agrees to sell B all the milk that his cow may yield
during the coming year, this is a contract for the sale of
future goods.

• Contingent goods
Goods, the acquisition of which by the seller depends upon
an uncertain contingency are called contingency goods.
e.g. If A agrees to sell to B a specific rare painting
provided he is able to purchase it from its present owner
this is a contract of sale of CONTINGENT GOODS.

3.) Price:
The consideration for contract of sale must be money
consideration called the “Price”. If goods are sold or exchanged
for other goods, the transaction is barter, governed by the
transfer of property act. But if goods are sold partly for goods
and partly for money, the contract is one of sale.
• The price may be fixed, or
• The price may be left to be fixed in a manner agreed
upon, or
• The price may be determined in the course of dealing
between the two parties or
• May be fixed as per the valuation of a third party.

If the price is not fixed as per these provisions, the buyer “ shall pay
the seller a reasonable price”.
e.g A agrees to exchange with B 100 kgs of barley at Rs 60/kg for
52 bullocks valued at Rs 300 per bullock & pay the difference in
cash. Held the contract was a contract of sale.

4.) Transfer of General Property:


There must be a transfer of general property as distinguished
from special property in goods from the seller to the buyer. If A
owns certain goods, he has general property in the goods. If he
pledges them with B, B has special property in the goods.
e.g if A owns certain goods , B has general property in the goods.
If he pledges them with B,B has special property in the goods.

5.) Essential Elements of a Valid Contract:


All essential elements of a valid contract must be present in the
contract of sale.

2. CONDITIONS & WARRANTIES:


Before a contract of sale is entered into, a seller frequently makes
representations or statements, which influence the buyer to clinch
the bargain. Such representations or statements differ in character
and importance. Whether any statement or representation made by
the seller with reference to the goods is a stipulation forming part of
the contract or is a mere representation forming no part of the
contract, depends on the construction of the contract. If there are
no such representations then the concept of “ buyer beware”
applies. This means the buyer gets the goods as they come and it is
no part of the seller’s duty to point out the defects in the goods to
the buyer.

A stipulation in a contract of sale with reference to goods may be a


condition or a warranty.

Condition: A condition is a stipulation, which is essential to the


main purpose of the contract. It goes to the root of the contract. Its
non fulfillment upsets the very basis of the contract, it is defined as
“an obligation which goes so directly to the substance of the
contract, or in other words so essential to its very nature, that its
non-performance may fairly be considered by the other party as a
substantial failure to perform the contract at all.

Warranty: A warranty is a stipulation, which is collateral to the


main purpose of the contract. It is not of such vital importance as a
condition. It is defined as “ an obligation, which, though it must be
performed, is not so vital that a failure to perform it goes to the
substance of the contract”. If there is a breach of a warranty, the
aggrieved party can only claim the damages, as it has no right to
treat the contract as repudiated.

Whether a stipulation is a contract of sale is a condition or a


warranty depends on each case on the construction of the contract
as a whole.

 Distinctions between a condition & a warranty:

1.) Difference as to Value:


A condition is a stipulation, which is essential to the main purpose of
the contract. A warranty is a stipulation, which is collateral to the
main purpose of the contract.

2.) Difference as to Breach:


If there is a breach of a condition the aggrieved party can
repudiate the contract of sale, but in case of a breach of a
warranty, the aggrieved party can claim damages only.

3.) Difference as to Treatment:


A breach of a condition may be treated as a breach of a
warranty. This would happen where the agreed party is
contended with damages only. A breach of a warranty however,
cannot be treated as a breach of a condition.

The distinction between the two i.e. Condition & warranty can be
explained as follows:
A Man buys a particular Horse, which is warranted quiet to ride &
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 & the horse turns out
to be vicious, the stipulation is a condition, & the buyer can reject
the horse, or keep the horse & claim the damages.

 Express and Implied Conditions & Warranties:


Conditions & Warranties may be either express or implied.
They are said to be express when at the will of the parties they are
inserted in the contract and they are said to be implied when the
law presumes their existence in the contract automatically though
they have not beed out into it in express words. Implied Conditions
& Warranties may however be negatived or varied by express
agreement, or by course of dealing between the parties or by usage
of trade.

Implied Conditions:

Unless otherwise agreed the law incorporates the following implied


conditions:
1.) Condition as to Title:
The first implied condition on part of the seller is that, in the case
of a sale, he has the right to sell the goods at the time when the
property is to pass. As a result of this condition if the sellers title
turns out to be defective the buyer is entitled to reject the goods
and the recover the price.
e.g. A purchased a car from B who had no Title to it. A used the car
for several months. After that, the two owners spotted the car &
demanded it from A. Held, that A was bound to hand over that car
to its true owner & that A could successfully sue B the seller without
Title, for the recovery of the purchase price even though several
months had passed.

2.) Condition in a sale by description:


“ Where there is a contract of sale of goods by description, there
is an mplied condition where the goods shall correspond to the
with the description. If the article tendered is different in any
respect, it is not the article bargained for, the other party is not
bound to take it”. Further the fact that the buyer has examined
the goods, will not affect his rights to reject the goods, if the
deviation of the goods from the description is such which could
not have been discovered by casual examination i.e. if the goods
show any latent defects.

e.g. a ship was sold by description viz , “copper fastened vessel” but
actually it was partly copper fastened. Held, that the goods did not
correspond to description & hence could be returned or else if the
buyer took the goods, he could claim damages for breach. This was
even though the ship was sold subject to all faults & defects

3.) Condition in a sale by sample:


When under a contract of sale, foods are supplied according the
a sample agreed upon, the implied conditions are:
a. The bulk sample shall correspond to the sample in quality
b. The buyer shall have a reasonable opportunity of
comparing the bulk with the sample.
c. The goods shall be free from any defect, rendering them
unmerchantable, which would not be apparent on
reasonable examination of the sample.
e.g. A certain shoes were sold by sample by 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.

4.) Condition in a sale by sample as well as by description:


There is an implied condition that the bulk of the goods shall
correspond both with the sample and with the description. If the
goods supplied correspond only with the sample and not with the
description Or vice- versa, the buyer is entitled to reject the
goods. The bulk of the goods must correspond with both.

e.g A agreed to sell to B some oil describes as “Foreign refined rape


oil warranted only equal to sample”. the goods tendered were equal
to sample but contained an admixture of Hemp oil. Held,B could
reject the goods.

5.) Condition as to fitness or quality:


Normally there is no implied condition or warranty as to quality
or fitness for any particular purpose of goods supplied, the rule of
law being let the “buyer beware”. But an implied condition is
deemed to exist, if the following conditions are satisfied:
a. The buyer, expressly or impliedly, should make known to
the seller the particular purpose for which the goods are
required.
b. The buyer should rely on the seller’s skill or judgment. And
c. Goods sold must be of a description which the seller deals
in the ordinary coarse of his business, be it a manufacturer
or not.

e.g A approached B, a motor car dealer & asked for a comfortable


car for touring purpose recommended his Bugatti car, a Trade name
& also showed a specimen of the same. A there upon ordered for a
bugatti car, which was supplied. The car proved to be unsuitable for
touring purposes. A claimed to reject the car & recover back the
purchase money paid by him. It was held that he was entitled to do
so because, while ordering that car by its trade name he was still
relying on the sellers skill & judgment as regards the suitability of
the car for the specific purpose.

6.) Condition as to merchantability:


This condition is implied only when the sale is by description; the
following conditions are to be met:
a. The seller should be a dealer in the goods of that
description, whether he is the manufacturer or not.
b. The buyer must not have any opportunity of examining the
goods, or there must be some latent defect in the goods,
which would not be apparent on reasonable examination of
the same.

e.g. Where A purchases a certain quantity of black yarn from B, a


dealer in yarn, and finds if damaged by white ants, the condition as
to merchantability has been broken and A is entitled to reject as
unmerchantable.

7.) Condition as to Wholesomeness:


This condition is implied only in a contract of sale of eatables and
provisions. In such cases the goods supplied must not only
answer to description and be merchantable but must also be
wholesome i.e. free from any defect, which render them, unfit for
human consumption.

e.g. A bought milk from B a dairy owner. The milk was contaminated
with germs of typhoid fever, A’s wife on taking the milk became
infected and died of it. B was held liable in damages.

Implied Warranties:
Unless otherwise agreed the law also incorporates into a contract of
sale of goods the following implied warranties:

1.) Warranty of Quiet Possession:


In every contract of sale, the first implied warranty on the part of
the seller is that “the buyer shall have & enjoy quiet possession
of the goods.” If the quiet possession of the buyer is in anyway
disturbed by a person having superior right than that of the
seller, the buyer can claim damages from the seller.
e.g. The plaintiff a lady purchased a second hand typewriter from
the defendant. She thereafter spent some money on its repairs
and used it for some months. Unknown to the parties, the
typewriters was a stolen one and the plaintiff was compelled to
return the same to its true owner. She was held entitled to
recover from the seller’s for the breach of the warranty, damages
reflecting not merely the price paid, but also the cost of repair.

2.) Warranty of freedom from encumbrances:


Where the goods shall be free from any charge or encumbrance
in favour of any third party not declared or known to the buyer
before or at the time when the contract is made” If the goods are
afterwards found to be subject to a charge and the buyer has to
discharge the same, then there is a breach of warranty & buyer
is entitled to damages.

e.g. A, the owner of the watch, pledges it with B. After a week


obtains possession of the watch from B for some limited purpose
and sells it to C. B approaches C and tells him about the pledge
affair. C has to make payment of the pledge amount to B. There is
breach of this warranty and C is entitled to claim compensation
from A.

3.) Warranty of disclosing the dangerous nature of goods to the


ignorant buyer:
The third implied warranty on the part of the seller is that, if the
goods sold are of dangerous nature, he will warn the buyer of the
probable danger. If there is a breach of warranty the buyer is
entitield to claim compensation for the injury caused to him.

e.g. A purchases a Tin of disinfectant powder from B. B knows that


the lid of the tin is defective and if it is opended without special care
it may be dangerous, but tells nothing to A. A opens the tin in the
normal way, whereupon the disinfectant power flies into her eyes
and causes injury. B is liable in damages to A as he should have
warned A of the probably danger.

3. BUYER BEWARE: DOCTRINE OF CAVEAT


EMPTOR.
The maxim of caveat emptor means, “let the buyer beware”.
According to the doctrine of caveat emptor it is the duty of the
buyer to be careful while purchasing goods of his requirement and,
in the absence of any enquiry from the buyer, the seller is not
bound to disclose every defect in the goods of which he may be
cognizant.
The buyer must examine the goods thoroughly and must see that
the goods that he buys must be suitable for the purpose of which he
wants them.
If the goods turn out to be defective or do not serve his purpose, the
buyer cannot hold the seller liable for the same, as there is no
implied undertaking by the seller that he shall supply the goods,
which suits the buyers purpose. If, therefore, while making
purchases of the goods the buyer depends upon his own skills and
makes a bad choice, he must curse himself for his own mistake, in
the absence of any misrepresentation or guarantee by the seller.
This doctrine too has certain exceptions.

e.g. A, a farmer, bought from B, a butcher, the carcass of a dead pig


for consumption and left it hanging up, intending to return after
completing other business and take it away. In his absence C, a
farmer, on seeing and wishing to buy it, was referred to A and
bought it of A. It turned out unsound and unfit for human
consumption. It was held that no warranty of soundness was implied
by law between farmers A and C.

4. TRANSFER OF PROPERTY:
There are primarily 3 stages in the performance of a contract of sale
of goods by a seller, viz:
1.) The transfer of property in the goods.
2.) The transfer of possession in the goods.
3.) The passing of the risk.

Transfer of property in the goods from the seller to the buyer is the
main object of a contract of sale. Property in Goods means the
ownership of goods, whereas “possession of goods” refers to the
custody or control of goods.

Hence it is important to know the precise moment of time at which


the property in the goods passes from the seller to the buyer for the
following reasons:

1.) Risk follows ownership:


Unless otherwise agreed, risk follows ownership, whether
delivery has been made or not and whether the price has been
paid or not. Hence the risk of loss lies with the owner. When the
property of the goods gets transferred to the buyer, the goods
are at the buyers risk, whether the delivery has been made or
not. But if the delivery has been delayed by fault of either the
buyer or seller, the goods are at the risk of the party at fault.
Thus risk and Property go together.

e.g. B contracts to purchase 30 Tons of apple juice from S. S


crushes the apples, puts juice in casts and keeps it ready for
delivery. B, however, delay to take the delivery and the juice
goes putrid and has to be thrown away. B is liable to pay the
price.

2.) Action against Third Parties:


When the goods are in anyways damaged or destroyed by the
action of third parties, it is only the owner of the goods who can
take action at that time.

4.) Insolvency of the Seller or the Buyer:


In the event of insolvency of the seller of the buyer, whether the
official receiver or Assignee can take over the goods or not
depends on whether the property in the goods has passed from
the seller to the buyer.
5.) Suit for Price:
The seller can sue for the price, unless otherwise agreed, only if
the goods have become the property of the buyer.

 PASSING OF PROPERTY:

What does “Property in Goods” mean?


Ans: It means ownership of the goods.

But it should be understood that “Property in Goods” is not the


same as “Possession of Goods”. Possession of goods refers to the
custody of goods.
The rules regarding the passing or property in goods are contained
in Section 18-25 of the act.
Primary Rules of ascertaining the when the property of the rights
gets transferred to the buyer as follows:

1.) Goods must be ascertained:


Where there is a contract for the sale of unascertained goods, no
property in the goods is transferred to the buyer unless and until
the goods are ascertained.

Ex: Under a contract of sale, B was entitled to cut teak tree’s of


more that 12 in Girth. The stumps of the tree’s after cutting had to
be 3 inches high. Held in these circumstances the property in the
timber that was cut would pass to B when the trees are cut. Till the
trees were felled, they were not ascertained.

2.) Intention of the parties:


Where there is a contract for the sale for specific or ascertained
goods, property in them passes to the buyer at the time when
the parties intend to pass. For purpose of ascertaining the
intention of the parties, regard shall be had to the terms of the
contract, conduct of the parties & the circumstances of the case.
E.g.: S offers to sell B a certain machine for Rs. 5000/-. B refuses to
buy it unless certain work was done on it to put it under proper
running conditions. S replied that B could get it done himself and
when the cost of repairs was known B might pay S Rs 5000 less the
cost of repairs. To this B agreed and took the machine to his repair
shop. While being repaired the machine was destroyed without any
fault of the repairman. The property in the machine did not pass
from S to B.

But where the intention of the parties as to the time when the
property in the goods is to pass to the buyer cannot be ascertained
from the contract, the rules contained in Sec 20 to 24 apply.
These rules are as follows:

1.) Specific Goods:


The rules relating to the transfer of property of specific goods are
as follows:

a. Passing of property at the time of contract:

When there is an unconditional contract for sale of specific


goods in a deliverable state, the property in the goods
passes to the buyer when the contract is made. Deliverable
state means such a state that the buyer under the contract
be bound to take delivery of them. The fact that the time of
payment of the price or the time of delivery of the goods,
or both, is postponed does not prevent the property in the
goods, passing at once.

Ex: X sells to B a horse, which is to be delivered to B the


next week. B is to pay the price on delivery, B asks his
servant to keep the horse separate from the other horses.
The horse dies before it is delivered and paid for. The
property of the goods has passed to B and he has to bear
the loss.

b. Passing of property delayed beyond the date of the


contract:

i. Goods not in a deliverable state: Where there is a


contract for the sale of specific goods not in a
deliverable state, i.e.; the seller has to do
something to the goods to put them into a
deliverable state, the property does not pass until
such a thing is done and buyer has notice of it.

Ex: There is a contract of sale for a machine


weighing 30 Tons and embedded into the
concrete floor. A part of the machine was
destroyed while being removed. Held, the buyer
was entitled to refuse to take the machine, as it
was not in a deliverable state.

ii. When the price of goods is to be ascertained by


weighing: Where there is a contract for the sale of
specific goods in deliverable state, but the seller is
bound to weigh, test, measure 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
buyer has notice thereof.

2.) Unascertained Goods:


Where there is a contract for the sale of unascertained goods,
the property is the goods do not pass to the buyer until the
goods are ascertained. Until goods are ascertained there is
merely an agreement to sell.
Further under section 23 states that where there is a contract for
sale of unascertained or future goods by description & goods that
that description and in a deliverable state are unconditionally
appropriated in the contract, the property of the goods
thereupon passes to the buyer.

The “ascertainment of the goods” and their unconditional


“appropriation to the contract” are two pre-conditions for the
transfer of property from the sellar to the buyer in case of
unascertained goods.
Ascertainment is a process by which the goods answering the
description are identified and set apart.
Ex: in a sale of 20 hog-heads of sugar out of a large quantity, 4
were filled and taken away by the buyer. The remaining 16 were
subsequently filled and the buyer was informed of the same. The
buyer promised to take them away, but before he could do so the
goods were lost. Held the property had passed to the buyer at
the time of the loss.

3.) Goods sent on approval or “ on sale or return”: under sec 24,


Where goods are delivered to the buyer on approval or “on sale” or
“on return” or other similar terms, the property there in passes to
the buyer:
a. When he signifies his approval or acceptance to the
seller.
b. When he does some act adopting the transaction.

Ex: Goods are delivered by A to B on “sale or return”. They are


further delivered by B to C and then by C to D on similar terms. The
goods are stolen while in custody of D. As between A and B and B
and C, has not passed to D. As such, C cannot recover the loss from
D, but is bound to pay the price to B and B is bound to pay the price
to A.

Reservation of rights of disposal:


The property in goods, whether specific or unascertained,
does not pass to the buyer if the seller reserves the right of disposal
of goods.
If for Ex: it is the term of the contract that the buyer is to pay for the
goods before delivery, the seller reserves the right for disposal. In
such a case the property of the goods does not pass to the buyer
until the conditions imposed by the seller is fulfilled.

5. SALE BY NON-OWNERS: Sections 27 – 30.


The general rule of law is that “no one can give that which he has
not got”. Only an owner of the goods can transfer a good title. This
rule is expressed by the Latin maxim
“ Nemo dat quod non habet”.

Examples:
1.) A, the hirer of goods under a hire purchase agreement sells
them to B, B, through a bonafide purchaser, does not acquire
the property in the goods. At the most he acquires such an
interest as the hirer had.
2.) A finds a ring of B and sells it to a third person who purchases
it for a value & in good faith. The true owner i.e. B can recover
from that person, for A having no title could pass none the
better.

The above rules, there are certain exceptions:


1.) Sale by a person not the owner or title by estoppels:
Where the true owner by his conduct or by an act of omission,
leads the buyer to believe that the seller has the authority to sell
and induces the buyer to buy the goods, he shall be estopped
from denying the fact of want of authority of the seller. The
buyer in such a case gets a better title than that of the seller.
Ex: A tells B within the hearing of C that he is the owner of
certain goods which infact belong to C. After sometime B buys
those goods from A. The title of B will be better than that of A
and C will be precluded from disputing B title to the goods.

2.) Sale by a mercantile agent:


A mercantile agent is the one who in the customary course of his
business, has, as such agent authority either to sell goods or to
consign goods for the purpose of sale or to buy goods, or to raise
money on the security of the goods. The buyer of the goods from
a mercantile agent, who has no authority from the principal to
sell, gets a good title to the goods if the following conditions are
satisfied:

a. The agent should be in possession of the goods or


documents of the title to the goods with the consent of
the owner.
b. The agent should sell the goods while acting in the
ordinary course of business of a mercantile agent.
c. The buyer should act in good faith
d. The buyer should not have at the time of the contract of
sale notice that the agent has no authority to sell.

Ex: F, the owner of a car delivered it to H a mercantile agent for sale


at not less that Rs 575. H sold the car for Rs 145 to K who bought it
in good faith and without notice of any fraud. H misappropriated the
money. F sued to recover the car from K. Held, as H was in
possession of the car with F’s consent for the purpose of sale, K
obtained a good title to the car.

3.) Sale by one of several joint owners:


If one of the several joint owners, who is in sole possession of the
goods by permission of the other co-owners, sells the goods, a
buyer in good faith of those goods gets a good title to the goods.

4.) Sale by a person in possession under a void able contract:


When the seller of goods has obtained their possession under a
voidable contract, but the contract has not be rescinded at the
time of the sale, the buyer acquired a good titile to the goods,
provided he buys them in good faith and without notice of the
seller defect of title.
Ex: A purchases a piano from B by fraud. A has a voidable title to
the goods. Before B reincides the contract, A sells the piano to C,
who buys in good faithand in ignorance of the fraud. C gets a good
title.

5.) Sale by seller in possession after sale.:


Where the seller having sold goods, continues to be in
possession of the goods or documents of the title to the goods
and sells them either himself or through a merchantile agent to a
person who buys in good faith and without notice of previous
sale, the buyer gets a good title.

Ex: A sells certain goods to B and promises to deliver the goods the
next day. Before delivery A sells & delivers the goods to C who buys
the goods in good faith and without prior knowledge of sale to B. C
gets a good title to the goods not withstanding that the property
had, before he purchased, passed to B. B’s only remedy in this case
is against A.

6.) Sale by a buyer in possession after a sale:


Where a person having bought or agreed to buy goods obtains,
with the concent of the seller , possession of the goods or
documents of the titile to the goods and sells them either himself
or through an agent, the buyer who acts in good faith and
without notice of any lien or other right of the original seller in
respect of the goods gets a good title
Ex: A bought some furniture on hire – purchase, the ownership to
pass to him on the payment of the last installment. A sold the
furniture to B before paying the last instalment. A sold the furniture
to B before paying the last instalment. B purchased the furniture
bona-fide. Held, B having bought in good faith, had obtained a good
title to the furniture.

7.) Sale by an unpaid seller:


Where an unpaid seller who has exercised his right of lien or
stoppage in transit re-sells the goods, the buyer acquires a good
title to the goods as against the original buyer.

8.) Exceptions in other acts like Indian Contract Act 1872, under a
sale by finder of lost goods.m A sale by a pawnee or pledgee or sale
by sale by official receiver or official assignee.

6. PERFORMANCE OF THE CONTRACT OF SALE:


Duties of the seller and the buyer:

It is the duty of the seller to deliver the goods & of the buyer to
accept and pay for them, in accordance with the terms of the
contract of sale.

Unless otherwise agreed, delivery & payment of price are


concurrent conditions. In other words, no delivery need be given, if
the buyer is not willing to pay the price, nor need the buyer pay the
price, unless the seller us ready and willing to give the delivery.

Delivery:
It is defined in the act as “a voluntary transfer of a possession from
one person to another.” Delivery of goods may, therefore be;
1.) Physical or actual delivery: The physical possession of the
goods is handed over by the seller to the buyer.
2.) Symbolic Delivery: The deliver is made by delivering some
symbol. Ex: Delivery of a railway receipt properly endorsed.
3.) Constructive Delivery: There is only an acknowledgement by
the person in possession of goods that he holds them on
behalf of another.

Rules Regarding Delivery:


1.) Delivery of Part of Goods: Part of goods sold may amount to
delivery of the whole if it is so intended and agreed. But,
however, where the part is intended to be severed from the
whole, part delivery does not amount to delivery of the whole.
2.) Unless agreed otherwise, the seller is not bound to deliver the
goods, the buyer applies for delivery.
3.) Place of Delivery: Where at the place at which delivery of the
goods is to take place is specified in the contract, the goods
must be delivered at that place during business hours on a
working day. Where there is no specific agreement as to
place, the goods sold are to be delivered at the place at which
they are at the time of sale.
4.) Time of Delivery: When under the contract of sale, the seller is
bound to sell the goods to the buyer, but no time for sending
them is fixed, the seller is bound to send them within a
reasonable time. What is a reasonable time is a question of
fact.
5.) Cost of Delivery: Unless otherwise agreed, all expenses of and
incidental to the making of delivery are borne by the seller,
but all expenses of and incidental to obtaining of delivery are
borne by the buyer.
6.) Delivery of Wrong Quantity: Where the seller delivers to the
buyer a quantity of goods, less that he contracted to sell, the
buyer may reject them. But, if the buyer accepts the goods
delivered he should be required to pay for them at the
contracted rate. Where a larger quantity is delivered, the
buyer may accept the goods included in the contract and
reject the rest or he may reject the whole. If the buyer accepts
the whole of the goods so delivered, he shall pay for them at
the contract rate.
7.) Installment Deliveries: The buyer is not bound to accept
delivery by installment, unless otherwise agreed.
8.) Delivery to the carrier or wharfinger: Delivery of the 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, unless the right of disposal
has been recovered by the seller. The seller is bound to make
with the carrier such a contract of carriage as properly
protects the interest of the buyer. If he fails to do so, he is
liable in damages to the buyer.
9.) Liability of the buyer: When the seller is ready and willing to
deliver the goods and requests the buyer to take delivery and
buyer does not within a reasonable time after such request
take delivery of the goods, he is liable to the seller for any loss
occasioned by his neglect or refusal to take delivery.
10.) Where goods are delivered to a buyer, which he has not
previously examined, he is not deemed to have accepted
them, unless he has reasonable opportunity of examining
them and ascertaining whether they conform to the contract.

7. UNPAID SELLER AND HIS RIGHTS:


Who is an unpaid seller?
A seller is deemed to be an unpaid seller when –
1.) The whole of the price has not been paid or tendered;
2.) A bill of exchange or other negotiable instrument has been
received as a conditional payment & the condition on which it was
received has not been fulfilled by reason of dishonor of the
instrument.

The following conditions must be fulfilled before a seller can be


deemed to be an unpaid seller:
1.) He must be unpaid and the price must be due.
2.) He must have an immediate right of action for the price.
3.) A bill of exchange or other negotiable instruments was
received but the same has been dishonored. When payment is
made by a negotiable instrument it is usually a conditional
payment, the condition being that the instrument shall be
duly honored. If the instrument is not honored the seller is
deemed to be an unpaid seller.

Rights of an unpaid seller:

These may be broadly classified under 2 heads


1.) Rights against goods
2.) Rights against the buyer personally.

1.) Rights against goods: An unpaid seller has the following rights
against the goods
a. Right of Lien
b. Right of Stoppage in transit.
c. Right of Resale.

Lien of Goods: The word “lien” means to retain possession of. An


unpaid seller who is in possession of goods, is entitled to retain
them in his possession 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.

Lien can be exercised only for the non-payment of the price, and not
for any other charges due against the buyer.
Ex: The seller cannot claim lien for go down charges for storing the
goods in exercise for his lien of the rights.

Termination of Lien:
An unpaid seller, looses his lien in the following cases:
1.) When the seller delivers the goods to a carrier for the purpose
of transmission to the buyer, without reserving a right of
disposal of the goods to himself
Ex: Seller take Railway Receipt in the name of the buyer or his
carrier.

2.) Where a buyer or his agent lawfully obtains the possession of


the goods
3.) By waving the right of lien.
4.) Where he ascends to a sub sale by the buyer.
5.) Where he takes a security from the buyer for the payment of
the price, in place of his lien

2.) Rights of stoppage in transit

The right of stoppage in transit is a right of stopping the goods while


they are in transit, resuming possession of the goods as long as
they are in the course of transit, & retaining possession until
payment or tender of the price.

3.) Right of Re-sale:

The unpaid seller can re-sell the goods :


1) where the goods are of perishable nature.
2) Where the seller expressly reserves theright of resale in case
the buyer shoul make default.
3) Where he gives notice to buyer of his intention to resale the
goods & the buyer does not within a reasonable time pay or
tender the price.

Rights of an unpaid seller against the buyer personally:

These are the rights, which an unpaid seller may enforce against
the buyer personally. These rights of the seller against the buyer
personally are called Rights in personam as against the rights in
rem( i.e rights against the goods & are in addition ti his rights
against the goods. The rights in personam are explained as follows:
1) Suit for Price
2) Suit for damages for non-acceptance.
3) Repudiation of contract before due date.
4) Suit for interest.
References:

1.) Elements of Business Law: N.D.Kapoor, Ed. 1986


2.) Business Law: M.C. Kuchhal, Ed. 2005
3.) Business Law: S.S. Gulshan, G.K.Kapoor, Ed 1995
4.) Law of Sale of Goods and Hire Purchase, Dr.Avatar Singh,
Ed.2000