ASSIGNMENT 3

Submitted By: Sumit Mittal

Univ. Roll No.: 194600036

ANSWERS

Q1. Discuss the Rights of an unpaid seller?

Ans: He is the seller to whom: -

1. Whole of the price is not paid

2. Conditional payment

Bill of exchange/ promissory note/ cheque has been received by seller

but its dishonor’s. Till the time bill of exchange/ promissory note/
cheque is with the seller so, till that time he is only called as seller but
when any of the mentioned instruments dishonor’s then after this
seller is called unpaid seller.

Features of an unpaid seller: -

1. Seller must sell the goods on cash basis and must be unpaid (in cash
transactions payment becomes due instantly)

2. Seller must be unpaid either wholly or party

3. The decided period has expired and the price has not been paid to
seller
4. Seller must not refuse to accept the payment

5. Where the price paid through negotiable instrument (bill of

exchange/ promissory note/ cheque) and the same has been
dishonored.
Q2. Differentiate between sale & Agreement to sell?
Ans: As already described above, the sale takes place immediately,
while an agreement to sell takes place in the future depending upon the
fulfilment of certain terms and conditions. Thus, at the time of the sale,
an actual transfer takes place whereas at the time of the agreement to sell
future transfer takes place. Risks are transferred immediately in sale
whereas in the agreement of sale risks are attached to the seller till the
goods are being transferred in the future. The sale is an executed
contract whereas agreement to sell is an executory contract.
As per section 6(1) the sale deed mostly comprises of the existing goods
owned or possessed by the seller or future goods. Whereas in the
agreement to sell, the seller indicates to impact a present offer of future
merchandise, thus it entirely depends upon the contingency of the event
which may or may not happen.
However, section 8 of the said act, deals with the goods perishing before
the sale but after the agreement to sell, thus this section again highlights
the goods which damage or perishes without any fault of the seller or the
buyer. Thus, this also happens to be an instance of an agreement to sell.
Further, section 9 deals with the ascertainment of the price of the goods.
Hence, when a sale is made, immediately a transfer takes place, and
therefore the price is certain and fixed, whereas in specific conditions
the price is determined, depending upon the circumstances of a certain
particular case, thus an agreement to sell is completed but the sale is not.
Therefore, the price of the goods itself falls and thereby the risk being
attached to the seller, he suffers the loss. However, if the goods or a part
thereof is delivered and appropriated by the buyer, the buyer is bound to
pay a reasonable price to the seller. Thus, it could be concluded that one
is an instant action while other is a future action.
Q3. Discuss any 4 examples of Caveat venditor (exceptions of caveat
emptor?
Ans: The doctrine of caveat emptor has certain specific exceptions. Let
us take a brief look at these exceptions.
1] Fitness of Product for the Buyer’s Purpose:
When the buyer informs the seller of his purpose of buying the goods, it
is implied that he is relying on the seller’s judgment. It is the duty of the
seller then to ensure the goods match their desired usage.
2] Goods Purchased under Brand Name:
When the buyer buys a product under a trade name or a branded product
the seller cannot be held responsible for the usefulness or quality of the
product. So there is no implied condition that the goods will be fit for the
purpose the buyer intended.
3] Goods sold by Description
When the buyer buys the goods based only on the description there will
be an exception. If the goods do not match the description then in such a
case the seller will be responsible for the goods.
4] Goods of Merchantable Quality
Section 16 (2) deals with the exception of merchantable quality. The
sections state that the seller who is selling goods by description has a
duty of providing goods of merchantable quality, i.e. capable of passing
the market standards.
Q4. Discuss the essential characteristics of contract of sale?
Ans: 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, e.g., if A and B jointly own a computer, A may sell his
ownership in the computer to B, thereby making B sole owner of the
goods [Sec. 4(1)]. Similarly, a partner may buy the goods from the firm
in which he is a partner and vice-versa.
2. Transfer of property:
‘Property’ here means ‘ownership’. Transfer of property in the goods is
another essential of a contract of sale of goods. A mere transfer of
possession of the goods cannot be termed as sale. To constitute a
contract of sale the seller must either transfer or agree to transfer the
property in the goods to the buyer.
3. Goods:
The subject-matter of the contract of sale must be ‘goods’. According to
Section 2(7), “goods means every kind of movable property other than
actionable claims and money; and 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.”
Thus every kind of movable property except actionable claim and
money is regarded as ‘goods’. Goodwill, trademarks, copyrights, patents
right, water, gas, electricity, decree of a court of law, are all regarded as
goods. Shares and stock are also included in goods.
It may be mentioned that sale of immovable property is governed by the
Transfer of Property Act, 1882.
4. Price:
The consideration for a 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 and not a
sale of goods under this Act. But if goods are sold partly for goods and
partly for money, the contract is one of sale (Aldridge vs Johnson).
5. Includes both a ‘sale’ and ‘an agreement to sell:
The term ‘contract of sale’ is a generic term and includes both a ‘sale’
and an ‘agreement to sell’ [as is clear from the definition of the term as
per Section 4(1) given earlier)].
Sale. Where under a contract of sale the property in the goods is
immediately transferred at the time of making the contract from the
seller to the buyer, the contract is called a ‘sale’ [Sec. 4(3)]. It refers to
an ‘absolute sale’, e.g., an outright sale on a counter in a shop.
Q5. What is the importance of sale of goods Act, 1930?
Ans: IMPORTANCE OF A CONTRACT OF SALE:-
Two parties: there must be 2 distinct parties i.e. a buyer and a seller, to
affect a contract of sale and they must be competent to contract. ‘Buyer’
means a person who buys or agrees to buy goods [Sec. 2(1)]. ‘Seller’
means a person who sells or agrees to sell goods [Sec. (13)].
Goods: there must be some goods the property in which is or is to be
transferred from the seller to the buyer. The goods which form the
subject-matter of the contract of sale must be movable. Transfer of
immovable property is not regulated by the Sale of Goods Act.
Price: Price is an essential ingredient for all transactions of sale and in
the absence of the price or the consideration, the transfer is not regarded
as a sale. The transfer by way of sale must be in exchange for a price. It
has been held that price normally means money. The price can be paid
fully in cash or it can be partly paid and partly promised to be paid in
future. The price can be fixed by the agreement between the parties
before the conveyance of the property
Transfer of general property: There must be a transfer of general
property as distinguishes from special property in goods from the seller
to the buyer. For e.g. 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.
Essential elements of a valid contract: All essential elements of a valid
contract must be present in the contract of sale.