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ESSENTIALS OF A CONTRACT OF SALE OF GOODS ?

“A contract of sale of goods is a contract whereby the seller transfers or agrees to


transfer the property in goods to the buyer for a price.” [Sec. (4) 1]. Important features of
a contract of sale

(1) Two Parties: The first essential is that there must be two distinct parties to a contract
of sale, viz, a buyer and a seller, as a person cannot buy his own goods. However, there
may be a contract of sale between one part-owner and another part-owner [Section
4(1)]. A partner may, therefore, buy the goods from the firm in which he is a partner and
vice-versa.

(2) Mutual Consent: Just the presence of two parties is not sufficient. The parties must
agree on the transfer of property

. (3) Transfer of Property: What a contract of sale stipulates is the transfer of property i.e.
the ownership of the goods and not the possession of the goods.

(4) Goods: Goods means every kind of movable property other than actionable claims
and money. But it includes stock and shares, growing crops, grass and things attached
to or forming part of the land which are agreed to be severed before sale or under the
contract of sale. [Sec. 2(7)]. Since the price of the goods is expressed in terms of the
money, money itself cannot be bought, and hence, money is not considered as goods.

(5) Price: Under a contract of sale, property in the goods is transferred to the buyer for a
price. Price is the money consideration for the goods. (
6) Varied requirement as to delivery and payment: The contract may provide for the
immediate delivery of goods or immediate payment of the price or both,

(7) Requires no formalities: (Sec.5) The sale of goods act does not provide for a valid
contract; mere offer and acceptance thereof forms a contract; it can be made either of
the two and accepted by the other. Neither the payment nor delivery is necessary at the
point of making the contract. It can either be verbal or in writing or both or understood
through the conduct of parties involved.

(8) Absolute or Conditional: An absolute contract of sale is technically called a ‘sale’.


Thus “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”[Sec 4 (3)]. Thus a contract of sale is
a generic term including ‘Sale’ as well as ‘an agreement to sell.’

3) What do you mean by conditions and warranties

Conditions And Warranties In Sale Of


Goods
Sale of Goods Act is one of very old mercantile law. Earlier this was a part of Indian Contract Act, 1872 in
chapter VII (sections 76 to 123). But after the completion of it’s half century, the then legislature found that
Sale of Goods is one of the special types of Contract and in perspective of it’s huge use, a special
enactment to this effect is necessary. Thus, the abovementioned relevant sections in Contract Act were dug
out, and separate Sale of Goods Act was passed in 1930.The Sale of Goods Act is complimentary to
Contract Act. Though it is a special law but it has the root in Contract Act and so basic provisions of
Contract Act apply to contract of Sale of Goods also.

The use of the word “condition” appears to have originated in the 17th century. In my second chapter I
have discussed about it in brief. The Sale of Goods Act, 1930 defines the term condition in section 12(2).
According to this definition a condition can be defined as a stipulation which is so vital to the contract that
its complete and exact performance by one party is condition precedent to the obligation of the other party
to perform his part.

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Conditions And Warranties


Opening para of section 16 makes it clear that there is no implied warranty or condition as to quality of
fitness of goods for any particular purpose, except those specified in Sale of Goods Act or any other law.
This is the basic principle of caveat emptor i.e. buyer be aware. However, there are certain stipulations
which are essential for main purpose of the contract of sale of goods which go the root of contract and non-
fulfilment these cause frustration of contract. These are termed as 'conditions'. Other stipulations, which
are not essential are termed as 'warranty'. Both of these are collateral to a contract of sale of goods.
Contract cannot be avoided for breach of warranty, but aggrieved party can claim damages.

A stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition
or a warranty. [section 12(1)]. 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. [section 12(2)]. 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. [section 12(3)]. 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. [section 12(4)].

Where a particular stipulation in contract is a condition or warranty depends on the interpretation of terms
of contract. Mere stating 'Conditions of Contract' in agreement does not mean all stipulations mentioned
are 'conditions' within meaning of section 12(2).

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4) What are the Rights and Duties of an buyer
Rights and Duties of The Buyer
RIGHT DUTIES
1. To have delivery of the goods as per 1 To accept the delivery of goods, when the
contract. (secs. 31 & 32) seller is willing to make the delivery as per
the contract
(Sec. 31)
2. To reject the goods when they are not of 2. To pay the price in exchange for
the description, quality or quantity as possession of the goods
specified in the contract (Sec 37).
3. To repudiate the contract when goods are 3. To apply for delivery of the goods. (Sec.
delivered in installments without any 35)
agreement to that effects [ Sec. 38 (1)]
4. To be informed by the seller, when the 4 To demand delivery of the goods at a
goods are to be sent by sea route, so that reasonable hour ( sec 36 (4)
he may arrange for their insurance [Sec
39 (30]
5 To have a reasonable opportunity to 5 To accept delivery of the goods in
examine the goods for ascertaining installments and pay for them, in
whether they are in conformity with the accordance with the contract. (Sec. 38 (2)
contract. (sec. 41)
6 To sue the seller for recovery of the price, 6 To bear the risk of deterioration in the
if already paid, when the seller fails to course of transit, when the goods are to
deliver the goods. be delivered at a place other than where
they are sold ( sec 40)
7 To sue the seller for damages if the seller 7 To inform the seller in case the buyer
wrongfully neglects or refuses to deliver refuses to accept or rejects the goods
the gods to the buyer ( sec 57) ( sec 43)
8 To sue the seller for specific performance 8 To take the delivery of the goods within a
reasonable time after the seller tenders
the delivery (Sec. 44)
9 To sue the seller for damages for breach 9 To pay the price, where the property in the
of a warranty or for breach of a condition goods are passed to the buyer, in
treated as breach of a warranty ( Sec 59) accordance with the terms of the contract
( Sec 55)
10 To sue the seller the damages for 10 To pay damages for non-acceptance of
anticipatory breach of contract ( Sec 60) goods ( Sec 56)
11 To sue the seller for interest where there
is a breach of contract on the part of the
seller and price has to be refunded to the
buyer ( sec 61)

5) What are the rights of an unpaid seller?


UNPAID SELLER :-

Seller :- A person who sells the goods or agrees to sell the goods is called seller.

Unpaid :- It means payment is not made or without payment.

In simple words, "Unpaid seller" means a person who has sold the goods for a price but price has not been

paid to him.

Sales act defines the "unpaid seller" in the following words :

Unpaid Seller Is A Person :-

i. To whom the whole price has not been paid or tendered.

ii. And where a bill of exchange or other negotiable instruments has been accepted by him as a condition

on which it was received has not been fulfilled by reason of dishonor of the instrument or otherwise.

It is also declares that any person who is in the position of a seller like agent is also considered seller.

Rights Of Unpaid Seller or Lien Of Unpaid Seller :-

He has following important rights against goods.

1. Right of Lien :-

For the recovery of price an unpaid seller has a right to keep the goods in his own possession.

Example :- Mr. Hunny sells the goods to Mr. Abhijit for Rs. 10 lac. Mr. Abhijit pays 5 lac and promises to

pay the remaining 5 lac after two month. Mr. Hunny has a right of lien on the goods.
2. Right of Stopping :-

If buyer becomes insolvent, an unpaid seller has a right of stopping the goods in transit.

Example :- "X" sells 100 bales of cotton to "Y" but delivery will be two stages. "X" delivers 50 bales first.

Later on he comes know that "Y" has become insolvent. "X" can stop delivery of bales in transit.

3. Right of Resale :-

An unpaid seller is considered the owner of the goods until he is not paid by the buyer. So he has a right to

sell his goods subject to few conditions.

Example :- "X" sells one horse to "Y" on credit. "Y" does not pay. "X" can resell to other person.

4. Right of Delivery :-

The unpaid seller has a right of with holding the delivery of goods where the property in the goods has not

passed to the buyer.

5. Right of Claim :-

The unpaid seller has also a right to claim the buyer for the prices of goods.

i. Suit For Price :- If the goods have passed to the buyer and buyer refuse to pay the price, the seller can

sue for price.

Example :- "M" sells the goods to "Y" for Rs. 5 lac. "Y" refuses to pay. "M" can sue for price.

ii. Suit For Damages For Non Acceptance :- If buyer refuses to accept and pay for the goods, the seller

has the right to sue him for damages non-acceptance. He can recover only damages and not full price.

iii. Suit For Interest & Special Damages :- The unpaid seller can recover the reasonable interest on the

unpaid price goods sold. The seller can also sue the buyer for special damages where both the parties are

aware of such loss at the time of contract.