UNIT 2: Partnership and Sale of Goods Act

Question Bank Answer

1. Define the term partnership and bring out the essential elements of a partnership?
Answer: “A partnership is the relationship between persons who have agreed to share
the profits of a business carried on by all or any of them acting or all.”

The essential ingredients or a partnership are as follows:

i. It is an association of two or more persons.
ii. The persons enter into an agreement to carry on a business.
iii. The persons agree to share the profits of the business.
iv. The business is carried, on by all.

2. Define the term ‘contract of sale.’

Answer: Section (1) of the Sale of Goods Act, 1930 defines "A contract of sale of goode
contract whereby the seller transfers or agrees to transfer the property in goods to the
buyer for a price".

3. State the essentials for a valid contract of sales.

Answer:
Essential Characteristics of a Contract of Sale of Goods:
i. There must be two parties to a contract of sale, viz., a buyer and a seller.
ii. The object of the contract of sale must be transfer of property in the goods by one
person to another Property here means ownership.
iii. The subject-matter of the contract of sale must be goods: The term ‘good’ includes
every kind of movable property other than actionable claims and money and
includes stock and share, 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.
iv. Consideration for a sale of goods must be money consideration called the Price: When
goods are exchanged for other goods, the transaction is not 'sale' but an exchange
or 'barter'. However, there is nothing to prevent the consideration being partly in
money and partly in goods.
 v. Subject to the provisions of any law for the time being in force, a contract of sale may
be writing or by words of month, or partly in writing and partly by words of month,
or may be implied from the conduct of the parties.
vi. A contract of sale includes both an actual sale and agreement to sell.

4. What are the duties of partners towards one another?

Answer:
i. to carry on the business of the firm to the greatest common advantage.
ii. to be just and faithful to each other,
iii. to render true accounts and full information of all things affecting the firm to any
partner or his legal representative,
iv. to indemnify the finn for loss caused to it by his fraud in the conduct of the business
of the firm.
v. to carry on business to the greatest common advantage
vi. to observe faith
vii. to indemnity for fraud
viii. to attend diligently
ix. no to claim remuneration
x. to share losses
xi. to indemnify for wilful neglect
xii. to hold and use property of the firm exclusively for the firm
xiii. to account for personal profits
xiv. to account for profits in competing business
xv. to act within authority
xvi. to be liable jointly and severally
xvii. not to assign his rights

5. When does an agreement to sell ripen into sale?

Answer: An agreement to sell becomes a sale when the time elapses or when the
condition is fulfilled.

6. Define the term condition. Explain the implied conditions in a contract of sale as
provided in Sale of Goods Act, 1930.
Answer: Section 12(2) of the Sale of Goods Act, 1930 has defined a condition as
“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".
Implied conditions are those conditions which the law incorporates into a contract of
sale of goods unless the parties stipulate to the contrary.

Section 14 to 17 lay down implied conditions which are discussed below:

1. Conditions as the title: In a contract of sale, there is an implied condition on the part
of the seller that:

(a) in the case of a sale, he has a right to sell the goods,

(b) in the case of an agreement to sell, he will have a right to sell the goods at the time
when the property is to pass.

2. Sale by description: Where there is a contract for the sale of goods by description,
there is an implied condition that the goods shall correspond with the description

3. Sale by sample: In the case of a contact for sale by sample, there is an implied
condition:

(a) that the bulk shall correspond with the sample in quality,

(b) that the buyer shall have a reasonable opportunity of comparing the bulk with the
sample;

(c) that the goods shall be free from any defect, rendering them unmerchantable, which
would not be apparent on reasonable examination of the sample.

4. Sale by Sample as well as by description: If the sale is by sample as well as

description, there is an implied condition that the bulk of the goods shall correspond
both with the sample and with the description.

5. Condition as to fitness or quality

Where the article can be used for only one particular purpose, the buyer need not tell
the seller the purpose, for which he requires the goods.

6. Condition as to merchantability. This condition is implied only where the sale is by

description. Where goods are bought by description from a seller be of a merchantable
quality, i.e., the goods are of merchantable quality if:
 (i) they are reasonably saleable under the description by which they are known in the
market;

(ii) they are purchased for personal use, they must be reasonably fit for the purpose for
which they are generally used.

7. Condition as to wholesomes: In the case of eatables and provisions, in addition to the

condition of the merchantable quality, there is an added obligation on the part of the
seller that the goods shall be wholesome.

8. Condition implied by custom or usage of trade: An implied warranty or condition as

to quality or fitness a particular purpose may be annexed by custom or usage of trade. It
is clear that a usage would override the law provided it is reasonable and just.

7. What do you mean by performance of a contract of sale?

Answer:
The term performance of the contract of sale may be defined performance of the
respective duties of the seller and the buyer as per the terms of the contract.
Thus, the performance of the contract of sale comprises the two parts, namely Seller's
duty to deliver the goods and Buyer's duty to accept the goods and pay the price.

It is the duty to 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.

8. What are the rules as to delivery of goods under the Sales of Goods Act?
Answer:
 Whether it is for the buyer to take possession of the goods or for the seller to send them
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, or, if not
then in existence, at the place at which they are manufactured or produced.
 Where under the contract of sale the seller is bound to send the goods to the buyer, but
no time for sending them is fixed, the seller is bound to send them within a reasonable
time.
 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:
o Provided that nothing in this section shall affect the operation of the issue or
transfer of any document of title to goods.
 Demand or tender of delivery may be treated as ineffectual unless made at a reasonable
hour. What is a reasonable hour is a question of fact
o Unless otherwise agreed, the expenses of and incidental to putting the goods
into a deliverable state shall be borne by the seller.

9. Who is an unpaid seller?

Answer: 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.

10. Explain unpaid seller’s lien against the goods.

Answer: "Lien' means a right in which a creditor has to retain possession of goods until
payment of the price. Lien depends on actual possession and not on title. "Unpaid seller's lien' is
possessory lien as well as a particular lien. The unpaid seller is entitled to a lien in the following
three cases:
i. No stipulation as to credit
ii. Sale on credit
iii. Insolvency of buyer
The unpaid seller may exercise his right of lien not withstanding that he is possession of the
goods as an agent or bailee for the buyer. Where the unpaid seller has made a part delivery, he
may exercise his right of lien on the remainder, unless he has waived the lien.
Section 49(2) states that the lien is not lost even if the seller obtains a decree for the payment of
a price.

11. Write short notes on Right to resale.

Answer: The unpaid seller has the right of resale of the goods. When the goods are of a
perishable nature, the unpaid seller may resell the goods without any notice to the buyer. When
the unpaid seller has exercised his night of lien or stoppage in transit, he has to give notice to
the buyer of his intention to resell.
Thereupon, the buyer may pay the price within a reasonable time. If the buyer does not pay, the
unpaid seller can resell the goods and recover from the original buyer, damages for any loss
 occasioned by his breach of contract. The original buyer shall not be entitled to any profit which
may occur on the sale.

12. What are the conditions under which seller’s lien can be terminated?
Answer:

(i) Delivery to carrier: The unpaid seller loses his lien when he delivers the goods to a carrier for
the purpose of transmission to the buyer without reserving the right of disposal of the goods.
The ordinary rule is that a delivery to common carrier for conveyance is delivery of possession to
the buyer, the carrier being the buyer's agent. But the seller may reserve the right of disposal of
the goods.

(ii) Lawful possession by buyer: The unpaid seller loses his lien where the buyer or his agent
lawfully obtains possession of the goods.

(iii) Waiver: The unpaid seller loses his lien, when he waives his lien expressly or impliedly.

13. Write a short note on delivery to a carrier.

Answer: Where, in pursuance of a contract of sale, the seller is authorised or required to
send the goods to the buyer, delivery of the goods to a carrier, whether named by the
buyer or not, for the purpose of transmission to the buyer, or delivery of the goods to a
wharfinger for safe custody, is prima facie deemed to be a delivery of the goods to the
buyer.
Unless otherwise authorised by the buyer, the seller shall make such contract with the
carrier or wharfinger on behalf of the buyer as may be reasonable having regard to the
nature of the goods and the other circumstances of the case. If the seller omits so to do,
and the goods are lost or damaged in course of transit or whilst in the custody of the
wharfinger, the buyer may decline to treat the delivery to the carrier or wharfinger as a
delivery to himself, or may hold the seller responsible in damages.
Unless otherwise agreed, where goods are sent by the seller to the buyer by a route
involving sea transit, in curcumstances in which it is usual to insure, the seller shall give
such notice to the buyer as may enable him to insure them during their sea transit, and
if the seller fails so to do, the goods shall be deemed to be at his risk during such sea
transit.

14. Write a short note on buyers right to examine the goods.

Answer: Where goods are delivered to the buyer which he has not previously examined,
he is not deemed to have accepted them unless and until he has had a reasonable
 opportunity of examining them for the purpose of ascertaining whether they are in
conformity with the contract. Unless otherwise agreed, when the seller tenders delivery
of goods to the buyer, he is bound, on request, to afford the buyer a reasonable
opportunity of examining the goods for the purpose of ascertaining whether they are in
conformity with the contract.

15. What do you understand by buyer’s liability to reject or refuse delivery of goods?
Answer: When the seller is ready and willing to deliver the goods and requests the buyer
to take delivery, and the buyer does not within a reasonable time 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, and also for a reasonable charge for the care and custody of
the goods: Provided that nothing in this section shall affect the rights of the seller where
the neglect or refusal of the buyer to take delivery amounts to a repudiation of the
contract.