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General Lien:2nd Sem – LAW OF CONTRACTS

Contents
Contracts 1 – Recap:..............................................................................................................................5

...............................................................................................................................................................5
Sales of Goods Act, 1930 (SGA):............................................................................................................5
Features:................................................................................................................................................5
Buyer:................................................................................................................................................6
Delivery:............................................................................................................................................6
3 types of delivery:........................................................................................................................6
Sec 2(4): Document of title to goods.................................................................................................6
Sec 2(7) Goods:..................................................................................................................................7
What will not be considered as Goods:.........................................................................................7
Immovable property – General Clauses Act...................................................................................7
Contract of sale:....................................................................................................................................8
2 Aspects of Contract to Sale:............................................................................................................8
Element of Risk in COS:......................................................................................................................8
Essentials of COS:..............................................................................................................................8
Sale and Hire Purchase:.........................................................................................................................8
Sale and Bailment:.................................................................................................................................9
Contract of Work/Service and Contract of Sale:....................................................................................9
CONDITIONAL CONTRACTS:...............................................................................................................9
Promissory conditio:......................................................................................................................9
Contingent condition:....................................................................................................................9
Section 5 of SGA:.............................................................................................................................10
Section 6: Future Gouda and Existing Goods:......................................................................................10
Existing Goods:................................................................................................................................10
Future Goods:..................................................................................................................................10
Section 2(14): Specific Goods:.............................................................................................................10
Generic Goods or Unascertained Goods..............................................................................................10
Ascertained Goods:.............................................................................................................................10
Section 7: Goods Perishing before Making of Contract...................................................................10
Essentials:....................................................................................................................................11
Section 8: Goods Perishing before Sale but afterAgreement to Sell...............................................11
Essentials:....................................................................................................................................11
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Section 9: Price:...............................................................................................................................11
Section 9(1):.................................................................................................................................12
Section 9(2):.................................................................................................................................12
*Drafting the Clause for Section 9(1):..........................................................................................12
Section 10: Price and Third Party Valuer of Goods..........................................................................12
Section 10(1):...............................................................................................................................12
*Drafting Clause of Section 10(1):...............................................................................................12
Conditions and Warranties:.............................................................................................................12
Section 11:.......................................................................................................................................13
Section 12:.......................................................................................................................................13
Section 13: When a Condition is to be treated as Warranty:...........................................................13
Section 14:.......................................................................................................................................14
Clause a:......................................................................................................................................14
Clause b:......................................................................................................................................14
Clause c:.......................................................................................................................................14
Section 15: Sale by Discretion and Sample:.....................................................................................14
Sale by Description:.....................................................................................................................14
With Description and sample:.....................................................................................................15
Section 16: Quality and Fitness:.......................................................................................................15
Section 16(1):...............................................................................................................................15
Section 16(2):...............................................................................................................................15
Section 16(3):...............................................................................................................................15
Section 16(4):...............................................................................................................................16
Section 17:.......................................................................................................................................16
Section 18: Passing of Property:......................................................................................................16
Section 19:.......................................................................................................................................17
Section 19(1):...............................................................................................................................17
Section 19(2):...............................................................................................................................17
Section 19(3):...............................................................................................................................17
Section 20:.......................................................................................................................................17
Section 21: Specific Goods not in Deliverable State:.......................................................................17
Section 22:.......................................................................................................................................17
Section 23: Sale of Unascertained Goods and Appropriation:.........................................................18
Section 23(1):...............................................................................................................................18
Section 23(2):...............................................................................................................................18
Section 24:.......................................................................................................................................18
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Section 27: Proviso:.........................................................................................................................19

Section 28: Sale by one of the joint owners:...................................................................................20
Section 29:.......................................................................................................................................20
Section 30:.......................................................................................................................................20
Section 30(1): Seller in Possession of Goods after Sale:...............................................................20
Section 30(2):...............................................................................................................................20
Section 31: Duties of seller and buyer:............................................................................................21
Section 32: Payment and Delivery are Concurrent Conditions:.......................................................21
Section 33:.......................................................................................................................................21
Section 34:.......................................................................................................................................22
Section 35: Buyer to Apply for Delivery:..........................................................................................22
Section 36:.......................................................................................................................................23
Section 36(1): Rules as to Delivery:..............................................................................................23
Section 36(2): Reasonable Time for Delivery:..............................................................................23
Section 36(3): Delivery by Attornment:.......................................................................................23
Proviso to Section 36(3): [related to] Document of Title.............................................................23
Section 36(4):...............................................................................................................................23
Section 36(5):...............................................................................................................................23
Section 37: Delivery of Wrong Quantity:.........................................................................................24
Section 37(1):...............................................................................................................................24
Section 37(2):...............................................................................................................................24
Section 37(3):...............................................................................................................................24
Section 37(4):...............................................................................................................................24
Section 38:.......................................................................................................................................24
Section 38(1): Installment Deliveries:..........................................................................................24
Section 38(2):...............................................................................................................................25
Section 39:.......................................................................................................................................25
Section 39(1):...............................................................................................................................25
Section 39(2):...............................................................................................................................25
Section 39(3):...............................................................................................................................26
Section 40:.......................................................................................................................................26
Section 41:.......................................................................................................................................26
Section 41(1):...............................................................................................................................26
Section 41(2):...............................................................................................................................27
Section 42:.......................................................................................................................................27
Section 43:.......................................................................................................................................27
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Section 44:.......................................................................................................................................27
Section 45:.......................................................................................................................................27
Section 45(1):...............................................................................................................................27
Section 45(2):...............................................................................................................................28
Section 46:.......................................................................................................................................28
Section 46(1):...............................................................................................................................28
Section 46(2):...............................................................................................................................28
Section 46:.......................................................................................................................................28
Section 46(1):...............................................................................................................................28
Section 46(2):...............................................................................................................................28
Section 47:.......................................................................................................................................29
Section 48:.......................................................................................................................................29
Section 49: Termination of Lien:......................................................................................................29
Section 49(1):...............................................................................................................................29
Section 49(2):...............................................................................................................................30
Section 50:.......................................................................................................................................30
Section 51:.......................................................................................................................................30
Section 51(1):...............................................................................................................................30
Section 51(2):...............................................................................................................................31
Section 51(3):...............................................................................................................................31
Section 51(4):...............................................................................................................................31
Section 51(5):...............................................................................................................................31
Section 51(6);...............................................................................................................................31
Section 51(7):...............................................................................................................................31
Section 52:.......................................................................................................................................31
Section 53:.......................................................................................................................................31
Section 54:.......................................................................................................................................32
Section 54(2):...............................................................................................................................32
Section 54(4):...............................................................................................................................32
Section 54:.......................................................................................................................................32
Statutory transaction:......................................................................................................................33
Section 56:.......................................................................................................................................33
Section 57: Damages for non-delivery:............................................................................................33
Section 58: Specific Performance of Contracts:...............................................................................33
Section 59: Breach of Warranty:......................................................................................................35
Section 59(2):...............................................................................................................................35
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Section 60:.......................................................................................................................................35
Section 61:.......................................................................................................................................36
Section 62:.......................................................................................................................................36
Section 63:.......................................................................................................................................37
Section 64: Sale by Auction:.............................................................................................................37
Section 64(1):...............................................................................................................................37
Section 64(2):...............................................................................................................................37
Section 64(3):...............................................................................................................................37
Section 64(4):...............................................................................................................................37
Section 64(5): Knock-out agreement:..........................................................................................37
Section 64(6):...............................................................................................................................37
Section 65:.......................................................................................................................................37

Contracts 1 – Recap:
Statutory transaction: transactions with the state.
Bailment: delivery of a property from A to B for a specific purpose and specific amount of time. Eg.
car given for repair.
Pledge: Property delivered from A to B for the sake of security. Eg. A says keep property until I pay
one back.
Illegal agreements: punishable eg. lottery; against public policty
unlawful agreement: not enforceable, eg. wager agreememnt.
Remoteness of damage: damage should be a direct consequence and foreseeable.

If there is an ambiguity in a contract, there are 2 ways to find out what is written:

1. Interpretation
2. Construction

Construction: Court adds more points

Interpretation: Read what is written.

Repudiation of Contract: When the contract is cancelled on its own.

Recession of Contract: When parties mutually agree to cancel the contract.

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Sales of Goods Act, 1930 (SGA):

Features:
● applies to all the transaction Relating to sale of goods which happens in india

● it does not prescribe any language

● can be oral or written

● The registration of the document relating to contract of sale is governed by registration act 1908

● The unrepealed provision of ICA 19872 continue to apply to contract of sales

● No illustration of the act , to keep it open to interpretation , and not limit the act and let it change
with the times

● Until 1st july 1930 the law of sales of goods was governed by chapter 7 of ICA which was based on
english common law ● English sales of goods act was enacted in 1893

● Chapter 7 was found inadequate to meet theneed of the community

● The a of english sales of good act were not found in chap 7

● In 1926 draft bill was prepared

● In 1929 the draft was revised by select committe and in 1930 the separate act the indian sales of
good act was enacted

● 8th law commission report is relating to it

● Sec 65 repealed chap 7 of ICA 1872 All the essential element of sec 10 is applicable to sales of good
act Definition sec 2 subsection 1 talks about buyer

Buyer:
Who buys or agrees to buy in the future

● He is contractually bound to purchase

● He is said to buy- when transaction of sale is complete or takes place in future. Transfer of
property needs to be completed.

Delivery:
Means voluntary transfer of possession from one person to another

3 types of delivery:
1. Actual delivery: Actual transfer of goods.
2. Symbolic delivery: The buyer has control over goods but no delivery s made.
3. Constructive delivery: It is an oral acknowledgement that the goods are held on behalf og
the buyer.

● Actual delivery or constructive delivery (If you pick up a parcel on your friend's behalf and agree to
hold on to it for him, that's a constructive delivery.)

● Involuntary transfer by threat, force or duress

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● Symbolic delivery is sufficient (example – here is the key to my chamber, go and collect xyz item
whenever you want)

Sec 2(4): Document of title to goods

It includes a bill of lading, dock warrant, warehouse keeper’s certificate, wharfingers’ certificate,
railway receipt, 5 [multimodal transport document,] warrant or order for the delivery of goods and
any other document used in the ordinary course of business as proof of the possession or control of
goods, or authorising or purporting to authorise, either by endorsement or by delivery, the
possessor of the document to transfer or receive goods thereby represented Which represents the
goods as well the transfer of such documents operates the transfer of constructive possession of
goods

Sec 2(7) Goods:

Meaning every kind of moveable property (things which are not permanently fastened) under the
horizon, other than actionable claims and money; and

● includes stock and shares,

● growing crops, grass, and

● things attached to or forming part of the land but which are agreed to be severed before sale or
under the contract of sale Immovable property wont be under sales of good act : machines under
factory are build into it ,it can be sold but if you agree to severe it.

What will not be considered as Goods:

1. Actionable claim sec 3 of Transfer of Property Act (amount due under any policy or person
upon which an action can be taken, some money is due and if I have to transfer it to
someone these are not goods.)
2. Money is also not included in goods as it is a currency and prices are paid in terms of it. But
coins that are not used as legal currency in present, they are goods. Reg. old coins.

Immovable property – General Clauses Act

It is defined as…it shall include land, benefits arising out of land, things attached to Earth or
permanently fastened to anything, which is attached to Earth, except timbre, growing crops and
grass.

Land: a determinate portion of the Earth surface that might be water; the column of surface above
the surface of ground; beneath the surface.

Benefits arising out of land:

 Anand Behera v State (1956) SC

Held that right to catch fish from lake is included in benefits arising out of land, hence
making it an immovable property.

 Madras Sate v Gannon Dunkerly (1958) SC

Issue: Whether the material supplied during construction of building be goods

Held: SC: the contractor has to construct a building according to the specification, and there
is no contract of sale per se of the material spplied.

Water, oil or gases generally are capable of being bought and sold, hence movable.

Minerals should be severed to become goods.

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 Gopala Krishna Pillayi v KM Mani (1984) SC

Domestic animals are also considered as goods.But it does not include wild animals.

Human organs:

Wigs and skeleton are movable goods. They can be sold and purchased as they are not live.

 Transplantation Of Human Organs Act, 1994 – commercialization is banned completely –

unethical and against public policy.
 Central Inland Water Corporation ltd. v Borjonath Ganguly
SC tried to define public policy – anything against public interest and beneficial to them can
be included in public policy.

Electricity:

 Karnataka Power Corporation v Ashok Iron Works Pvt. Ltd. (2009) SC

Electricity is a provision of supply of services.

Contract of sale:
General property means all the bundle of rights attached to a property. Eg. Right to possess, sell, use
it. This entire bundle of rights is transferred to the one buying a property. If only one right is
transferred, specific right is transferred, not general property.

 CBB Draper and Sons v Edward Turner

In Contract of Sale, general property is transferred, not specific.

Agreement to sell Sec 4(2), Contract of Sale includes sale and agreement to sale.

2 Aspects of Contract to Sale:

 Sale: the transfer of property has already happened. Transfer of property is immediate. It is
already executed.
 Agreement To Sell: It is an executory contract of sale. it will take place in future or upon
some conditions.

Element of Risk in COS1:

If sale is completed but goods are lost or damaged, who will bear cost? in case of Sale, buyer: in
Agreement to Sell, the seller.

Essentials of COS:
1. 2 parties: buyer and seller.
2. Payment should be made in legal currency
3. Subject matter of sale is goods.
4. All necessary conditions of valid contract must be present.

Sale and Hire Purchase:

Under Hire Purchase agreement, the property is transferred in goods when certain fixed number of
installments are paid by the Hirer. Till then, the Hirer remains bailee 2.

Eg. A keeps B’s pen for six months, paying rent. He can either return the pen after six months or buy
it. Even if A does not buy the pen, B will not return the rent to A.

1
COS = Contract of Sale
2
Bailee = hirer/buyer.
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Option of purchase or terminate the contract are both available. In sale of goods,
termination/return is not available. Or if the goods are returned, the seller has to give the money
back, too. That does not happen in HP3.

General property is not transferred until the commodity is eventually purchased.

The prospective buyer or Hirer4 is a bailee until the purchase.

It is governed by Hire Purchase Act, 1972. It is not a part of SGA.

If there is a default in payment of Hire Charges5, the owner has rights to resume possession without
refunding the amount received as Hire charges (rent).

[Find Lee v Butler – HP]

Sale and Bailment:

Bailment is defined under Sec 158 of ICA, under which there is a delivery of goods/movable for
some purpose. Once the purpose is accomplished, the goods are returned.

In Sale, goods are not returned.

Contract of Work/Service and Contract of Sale:

In only selling goods, no mental or physical labour is used. But in Contract of Work, they are needed.
Eg. painting a picture for someone or writing a paper for someone.

 Hindustan Shipyard v Andhra Pradesh (20000) SC

Work: something that involves mental or physical efforts.

A contract substance of which is that skill and labor must be exercised in carrying out the contract in
addition to the supplying of materials used in the work is contract of work and not contract of sale.

SC: while deciding whether the transaction is a sale or contract of work predominant object of the
contract, circumstances of the case and custom of trade must be taken into consideration.

 State of Tamil Nadu v Anandam Vishvanathan (1989) SC

Whether printing and supply of question paper be regarded as a contract of sale of goods?

SC: no, the nature of the work was confidential, protecting the papers and then divulging the
information. Thus, mental skills. So not COS.

 M/S Northern India Caterers v. state [1980] SC

SC: when the hoteliers prepare and serve food to residents as well as casual customers it is service of
food not amounting to sale.

CONDITIONAL CONTRACTS:
Contracts are conditional when the enforceability depends upon the performance or fulfillment of
some conditions. The conditions may be contingent or promissory.

Promissory conditio:

Conditions within the control of the promisor.

Contingent condition:
3
HP = Hire Purchase.
4
Hirer = buyer.
5
Hire Charges = rent.
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Conditions not in control

Section 5 of SGA:
In sub section 1, there is an offer and acceptance to buy and sell the goods for price which clearly
indicates consensual nature.

Sale can be complete even without immediate delivery or payment of price.

Section 14 to 17 of SGA deals with the terms, Implied by Law.

Section 6: Future Gouda and Existing Goods:

Existing Goods:
They are existing and they are owned or possessed by the seller. Possession is different from
ownership.

Future Goods:
Those goods that may come into existence in future, one will gain ownership of them in future.
Present sale of Future Goods is Agreement to Sell.

According to Benjamin, Future Goods are goods to be manufactured or produced by the seller after
making the Contract of Sale.

For example:

 Goods to be manufactured: Eg. in facrory

 Goods which may become property of Seller: Eg. by purchase, gift, etc.
 Goods expected to come into existence in ordinary course of nature. Eg. puppies, milk from
the cowetc.
 Things attached to Earth forming part of land, agreed to be severed. Eg. timbre, minerals,
crops, etc.
 Crops produced in future.

Section 2(14): Specific Goods:

Those goods which are identified or agreed upon at the time of making the contract. In case, all the
things in my car are damage without the knowledge of seller at the time of contract i didnt know
that commodity is damage.so its void and wont suffer liability and cost. Knowledge of the seller is
material but not the buyer. If it is void, it has consequences, it is not enforceable, no party is bound
by it.

Generic Goods or Unascertained Goods

 Ram Narain Mahato v State of Madhya Pradesh (1970) SC
SC: Those goods which are not identified or agreed upon at the time of making the contract, are
Generic Goods or Unascertained Goods.

Ascertained Goods:
Those goods that are identified and agreed upon after the contract of sale. Identified+ Agreed +After
the Contract of Sale=ascertained goods.

Section 7: Goods Perishing before Making of Contract

Where there is a contract for the sale of specific goods, the contract is void if the goods, without the
knowledge of the seller, have, at the time when the contract was made, perished or become so
damaged as no longer to description contract.
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Essentials:
1. Sale of specific good
2. Without knowledge of seller
3. Perished (it includes stolen as well)

If the seller were aware of the damage, he would be liable for Fraud.

 Barandrow Lane and Ballard v Philip and Co.

“Stolen” will be treated as same as “perished”.

Section 8: Goods Perishing before Sale but afterAgreement to Sell

Where there is an agreement to sell specific goods, and subsequently the goods, without any fault
on the part of the seller or buyer, perish or become so damaged as no longer to answer to their
description in the agreement before the risk passes to the buyer, the agreement is thereby avoided.

Essentials:
1. Specific goods, not generic
2. Before sale goods are perished
3. Risk must not have passed to the buyer

Section 8 applies to the cases where goods are in existence during the time of making the contract,
but they perish without fault of either party, before risk has passed to the buyer.

This applies on specific goods.

Goods must perish before sale, and after the Agreement To Sell.

If the risk is passed to the buyer, the seller won’t be liable, the buyer won’t be able to recover the
losses.

 Tempest v Fitzerald [1820]

Facts: The buyer agrees to buy a horse. He will pay on specific day and take the horse on that
payment day itself. Before that day, buyer takes a ride of the horse, then said I will come in a week
to take the delivery and pay for it. Before the week ended, the horse died.

Held: The contract was avoided as there was no transfer of property and risk to the buyer. Avoided
because the horse died before Sale and after the Agreement to Sell.

“Avoid” is used because after the perishing of goods, there is no obligation left between the two
parties.

Section 9: Price:
It is not necessary in the contract that the exact amount is specified.

The parties may leave the price to be determined in any other manner.

If the contract is silent regarding price, or as to the method by which the price is to be determined,
the agreement to pay reasonable price would be implied.

One of the parties may be given the power to determine the price, and such agreement will be valid,
subjected to the condition that the determination should be Bonafede in nature.

If in any manner, the price is not ascertainable, the contract will be void for uncertainty. Sec 29 of
ICA.
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Section 9(1):
The price could be either be fixed in the contract itself, or it could be left to be fixed in a manner
agreed upon. Eg. one of the parties will fix the price later after seeing the market price, provided, it
should be done in a Bonafede manner, or the other party can go to court. Or it could be determined
in the course of dealing. Eg. if there is a long standing relationship, whatever the norm becomes, it is
followed.

Section 9(2):
If the price was not determined in accordance with Section 9(1), the buyer has to pay a reasonable
price on the basis of the facts and circumstances of the case. Eg. reasonable price can be
determined on the basis of the market price, etc.

*Drafting the Clause for Section 9(1):

In accordance with Section 9(1) of the Sales of Goods Act, and on the basis of the agreement
between the parties, the seller shall determine the price and such will be paid by the buyer on xyz
date, which will be subjected to due consideration by the parties. After the setting of the price, the
contract can be further executed.

Section 10: Price and Third Party Valuer of Goods

Section 10(1):
Price is determined by a third party valuer, by the mutual agreement of the contracting parties. The
third party might be an expert, arbitrator, etc.

If the 3rd party cannot determine the price, the contract is avoided.

Proviso: And if there had been some transfer or appropriation of goods, the buyer will pay a
reasonable amount for that.

It would be a conditional contract because if the 3rd party fails to value the contract, there won’t be
a contract at all, thus avoided.

Section 10(2):

If one of the parties prevents evaluation of the goods, the other party may take action or damages.

Note: if the third party is negligent or fraudulent, either of the parties may take action against the
3rd person.

*Drafting Clause of Section 10(1):

In accordance with Section 10 of the Sale of Goods Act, the two parties to the contract, A and B,
have mutually consented for a third party, C, to determine the price of the stated goods. Such shall
be determined on xyz date. If the price of goods cannot be determined by C, the contract will be
avoided.

Conditions and Warranties:

When contracting, the parties represent their goods.

Representations so important as to form the essence of the contract.

If reps are flexible - claim for damage.

If very important reps – the contract is considered a breach.

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Section 11:
Unless stated otherwise, time of payment does not become the essence of the contract, thus a
breach of time cannot be enough to terminate the contract.

Note: time should be reasonable.

But if it is stated that time is of importance, a delay or breach in paying in time, can terminate the
contract.

The seller can withhold delivery, or maintain a suit for price if the delivery is already made. (Section
55 of SGA)

Other stipulations as to time like. time of delivery of goods/date of shipment/time of getting a

license from the government, etc. would be of essence only if it is mentioned in the contract.

In some cases, timely delivery is implied depending upon the facts. Eg. delivery of cow milk, which is
a perishable item.

 Martindale v Smith [1841] QB 389

Buyer asked for extension of time, but seller did not comply, and sole the goods to someone else.

The buyer was allowed damages as payment of time was not an essence in contract.

Section 12:
If there are specific conditions given in the contract as to the goods, their breach matters. Eg.
contract for a mobile phone; condition is that the camera should work. Implied condition: phone
should switch on.

Warranty = condition in the eyes of he court.

Representation: They are general statements made by the party to contarct. They can be merely
opinions or conditions or warranties.

In breach of condition, the non-defaulting party may reject the goods, and also sue for damages for
breach.

In cases where the term broken is flexible, the court may not allow rejection of goods, but may allow
claim for damages.

A condition normally includes warranty. The buyer may waive it, and may still have remedy in
damages without rejecting the goods.

When the conditions are annexed by law to the contract, they are called implied conditions or
warranty (Section 14 to 17).

Section 13: When a Condition is to be treated as Warranty:

In non-severable contracts, it is only a breach of warranty, but goods cannot be returned.

Non-severability: If I buy 5kg of flour and 5kg of cocaine for 10 lakh, the cocaine part is unlaeful. But
as it cannot be determined how much the flour would cost out of that 10 lakh, the clause or the part
cannot be severed. The entire contarct will be declared void.

The party to a contract may dispense with the performance, therefore the buyer may waive the
conditions and treat it as warranty.
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The waiver may be expressed or implied. In an implied waiver, we see the conduct of buyer. Eg. if
the buyer deals with the goods, uses them, resell them. Then also, we consider it a waiver by
conduct.

Sub-section 3 saves the rights of the seller and in apt cases, the seller can rely upon impossibility of
performance.

Section 14:
Clause a:
Unless stated otherwise, the seller has a complete right to sell a good to the buyer in case of Sale; in
Agreement to Sell, the seller has a right to sell the goods when property is to transferred. That right
should not be restricted in any way.

There will be no breach where seller acquires rights before the property is to pass.

Eg. if A agrees to sell to B a jewel he will inherit in future—after inheriting A has an absolute right to
dispose the property.

Clause b:
There is an implied warranty that the buyer has a right to enjoy the good undisturbed by a 3 rd
party/quiet possession of goods.

 Niblett Ltd. v Confectioners Material Co. Ltd. [1921] 3 KB 387

S sold 1000 cans of condensed milk trademarked as Nestle. Infringed of trademark.

 Rawland v Divall [1923] KB 500 CCA

Clause c:
Buyer’s possession is to be free of encumbrance.

And if the buyer is compelled to discharge it, he can recover it from the seller.

Eg. the property is a pledge for a loan, that cannot be sold.

Section 15: Sale by Discretion and Sample:

The goods must correspond by description, as well as the sample.

Sale by Description:
Description means kind of goods/their identification. It may include type, packaging, etc.

Defect in quantity is not covered in this section, and thus not included in Description. It is dealt in
Section 37.

Suitability of goods for a specific purpose is also not included here. It is dealt in Section 16.

General purpose can be a part og Description. Eg. dog food.

Sometimes, sample is only description of the goods. Then the bulk must correspond with the
sample.

Even if goods are selected by the buyer himself, this section applies. Eg. A selects a pack of dal, what
description is written on the packet should correspond to the actual goods.

Stipulation of quality are dealt in Sectiosn 16(2) and 17.

Warranty implies that the buyer can claim damages.

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 Wallis v Pratt [1911] AC 394

Sale of seeds, Common English Sanfoin Seeds. No warranty given of the goods clause (exemption
clause).

When delivered and were Giant English Sanfoin Seeds which are inferior in nature.

Buyer got to know when sown and crops were grown.

Court: You can rely upon exemption clauses when the contract id fulfilled. But here, no performance
only, so buyer can recover damages.

With Description and sample:

If sample is sent first, the bulk must correspond with the sample and description.

Eg. Sharbati Gehu – sample sent – bulk should correspond.

Section 16: Quality and Fitness:

Section 16(1):
In case of sale of an article under its patent or trade name, there is an application of presumption
that the buyer does not rely on the skill and judgement of the seller. But he relies on his own
judgement.

If the buyer tells the

A person may order an article under its trade name within the meaning of a proviso, and may also
make it clear to the seller that he has been relying on the skill and the judgement of the seller that
the goods shall be fit for particular purpose.

 Baldry v. Marshall
There was a sale of a car by Def. who were dealers in car, to supply a car for touring purposes. They
recommended Bugati, P. bought it, and later realized it was unsuitable for touring.

The Specific purpose of touring that was made known to the seller.

Buyer was allowed to reject the car.

Section 16(2):
In case of goods sold by description by a seller who deals in such goods, is responsible fpr the latent
effects which render them unmerchantable.

Implied condition under sub section 2 applies to all goods of that description whether they are sold
under patent or trade name, or otherwise.

Merchantable quality – It is not defined anywhere in the SGA, but it generally means that the goods
are of such quality and in such a condition that a reasonable man would accept it in performance of
the contract. Commercially sailable.

 Jones v. Just
 Thornett v. Beers and Sons
Section 16(3):
This provision provides that an implied warranty or condition as to quality or fitness for a particular
purpose may be annexed by usage of trade.
 16

Usage of trade means a practice or method of dealing which is regularly observed in trade, and it is
justifiably expected to be followed by a party to a commercial transaction. Eg. milk is shipped in
freezer. If an implied condition is in usage of trade, it does not have to mentioned again.

If custom asks you to disclose effects/to give warranty or condition in a particular type of
transaction, then it will be deemed that the warranty and condition is attached to such contract.

Jones v. Bowden
It was held that any such usage must be proved that it has been relied upon. It must be certain,
uniform and reasonable.

Section 16(4):
If expressed term is inconsistent with the term implied by law, the expressed term will prevail. If
they not inconsistent, both will prevail.

Section 17:
If the sale is by sample, it is Contract of Sale by Sample.

The implied condition is that the entire bulk should correspond with the sample.

The buyer should have reasonable opportunity to compare the sample with the bulk. If not,

The goods have any defect,

Smith

Sale by sample of 2 parcels of wheat.

Buyer allowed to examine only 1 parcel.

Buyer could rescind the contract.

Section 18: Passing of Property:

Goods must be ascertained.

Eg. Badri prasad case

 State of Karnataka v West Coast Paper Mills:

Under COS, the company was permitted to remove bamboos at Rs. 10 per ton. The Govt. by a
subsequent order, enhanced the price to Rs. 20 per ton.

Held: The enhanced rate was not applicable to the bamboos which were already cut, although not
removed (they were laying in the forest itself) prior to the date of order of the govt. because when
the bamboos were cut, they became ascertained and the property passed to the company.

The risk usually passes with the property but it may pass independently, also (Section 26). We can
also mentioned in the contract that risks will be passed separately from the goods. Eg. after 2 dats; if
not mentioned, they will pass together.

Ascertainment of goods can be done by separating the goods from the bulk, or by severance, or by
measuring them, etc. Unless this done, the property cannot pass.

Section 19:
Section 19(1):
In case of specific or ascertained goods, the property is passed when the parties intend it to be
transferred. The parties are free to agree upon a time on their own.
 17

Section 19(2):
While ascertaining the intention (time), the circumstances of the case, or the conduct of the parties,
or expressed terms of the contract must be taken into consideration.

Section 19(3):
Unless specified otherwise, the rules given in Section 20-24 are to be followed.

Section 20:

Specific good in a deliverable state is that state where buyer is allowed to take delivery, when goods
are in physical condition in which you can take delivery of them.

Specific goods deliverable state me hone ke bad do conditions fulfill honi chaiye:

1. Property passes when contract is made.

Eg. a local uncle tells you about his car and upon finding IT IN god condition, you agree to accept his
offer, ab ekdm se bijli gire or car fatt jaye to nuksan tumhra hai.

It was held that intention of party matters.

2. it is immaterial whether the time of payment of the price, or the time of delivery of the
goods, or both, are postponed.

Section 21: Specific Goods not in Deliverable State:

Eg: the car is not ready to be delivered if one of its tyres is not fitted. As soon as the tyre is fitted and
the sellers calls the buyer that the tyre is fitted and car is ready to use, the possession of goods (the
car) is then and there at the moment transferred (buyer has notice thereof).

Presence of the buyer is sufficient notice.

 Lakshmi Niwas Rice Mills v. Ram Niwas

The appellants agreed to sell rice to the respondents on the terms that the appellants had to bag the
rice, book it on railway, and dispatch the bags through wagon. The rice was bagged and weighed, but
he could not dispatch as no wagons became available within a reasonable time, thus the goods were
not delivered. But the appellants/sellers demanded price. It was held that this was a necessary
condition to put the goods into deliverable state, and therefore, the appellants could not recover
price.

Section 22:
Contract of Sale of specific goods.

Goods are in deliverable state.

The seller is bound to do some act, weighing, measuring, etc.

The act is to be done to ascertain price.

The buyer has notice.

 18

 Simon v. Swift [1828]

There was a sale of goods at certain price per ton, which was to be measured by the party agents.
Part of it was measured and taken away, but the remainder was destroyed by flood. The loss of part
not weighed fell upon seller.

Section 23: Sale of Unascertained Goods and Appropriation:

Section 23(1):
To constitute appropriation of the goods to the contract, the parties must have an intention to
attach the contract irrevocably to those goods so that only those goods and no other are subject to
the CoS.

Selection of goods by one party and adoption of that act by the other converts an agreement to sell
into actual sale, and the property is passed for the purpose of contracting.

Ascertainment means accented.

Section 23(2):
Seller delivers goods to buyer, without resrving rights of disposal (property will passonly when you
pay, or show certificate, etc.) it is unconditional appropriation of goods.

Seller to carrier to take it to buyer; unconditionally appropriation of goods.

Where the goods are delivered to a carrier, or to any other person, for the purpose of transmission
to the buyer, the carrier is presumed to be the buyer’s agent.

If the seller reserves the right of disposal, there will be no final appropriation and no property will
pass.

 Rhode v. Thwaite
There was sale of 20 bags of sugar out of a larger quantity. The seller filled 4 bags which were taken
away by the buyer, subsequently the seller filled 16 more bags, and inform sthe buyer to come and
take them away. The buyer promised to do so. The property passed.

Unconditional Appropriation is one way of ascertainment of goods for the purpose of passing of
property. It is not defined in the act, though.

Section 24:
Person described here does not strictly fall under the definition of buyer under section 2(1).

In such cases, there is no complete sale until:

1. He signified his approval.

2. He deals with the goods as owner.
3. He seeks the good beyond prescribed or reasonable time. Eg. didn’t return the good within
10 days on Amazon.
4. He makes return impossible by doing any act or default as by letting the goods get spoiled.
Eg. tore the clothes; ate a biscuit, etc.

It is owner’s risk if the subject matter is perished.

The burden of proof that the loss or damage to the goods occurred without his fault will be on such
person who holds the goods. Eg. XYZ says it is not his fault, so XYZ will have to prove it.
 19

 Khirkhum v Attenborough
Goods delivered on “sale or return” were pledged by the person to whom the gooods were
delivered. The property passed to him once he pledged, and the original owner could not recover
goods from the pledgee. (This shows that the so-called buyer did something to show that he accepts
the goods. Pledging goods signified that he accepted the goods.)

Section 25-27: notes not taken; to be borrowed.

Section 27: Sale by person who is not the owner.

HW: Find a case related to Statutory Transaction

Section 27: Proviso:

Sale by MA6

Possession of goods or document of title; not authorized to sell the goods

But he sold them (without the permission of the owner)

Sale to be valid

Provided: the buyer is innocent and did not know that the MA had no authority to sell.

*Agents working in ordinary course of business: X is appointed to sell apples in market—working in

OCB.

*Not working in OCB7: If X is selling apple juice.

Formal comments:

Section 27 also provides that when a MA has possession of the goods or document of title, any sale
made by him when he is acting in his OCB of an MA, shall be valid, as he was authorized by the
owner to sell those goods but such sale should be valid only when the buyer acts in good faith.

*An MA is appointed by a principle in a business to act on her behalf, or to represent her, in dealing
with the third party.

Conditions for application of proviso:

1. The sale must be made by an MA.

2. The agent must be in possession of the goods with consent. Eg. uf the MA misrepresented or
defrauded or with coercion, and sold the goods to XYZ, the sale is not valid, even if XYZ was
innocent.
3. Consent here means free consent, within the meaning of Section 14 of the ICA.

Section 28: Sale by one of the joint owners:

A, B and C are joint-owners of a bulk of goods. Then A gets the sole ownership of the entire bulk, by
the permission of B and C. If A makes a sale without the permission of B and C (if A is not authorized
to sell), the sale is valid but only until the buyer is innocent.

6
Mercantile Agent = MA
7
OCB = ordinary course of business
 20

Section 29:
Voidable contract (consent is acquired under undue influence, etc.) Section 19 of ICA

Not rescinded

Buyer is acting in good faith

Eg. A gets hold of a car by undue influence from B, if A sells it to C before B has rescinded the
contract (contract being voidable). C will have title of the car if he did not know about the undue
influence part.

The seller may transfer the better title to innocent buyer even if he is not in possession of goods with
free consent of the owner.

The possession must be obtained under a contract, which is voidable at the option of the wronged
party.

The seller in possession of the goods may do so before the rescission of the contract by the other
party.

*Good title: Absolute dominion over the goods.

*Better title: Eg. a thief can only sell the goods in his own capacity, not in the capacity of the owner.

Section 30:
Section 30(1): Seller in Possession of Goods after Sale:
Even after selling the goods, the seller holds title to goods. If he sells it again to a second buyer., the
second buyer gets the good title of the goods (the second buyer being innocent).

Eg. B purchased a book from A, but forgot to take it with himself. A so it again to C, C, being an
innocent buyer, gets the good title.

B will claim the compensation from the seller, A.

Formal Comments:

There is a complete sale and the seller is in possession.

The delivery or transfer by the seller, when he has possession of goods or document of title, the
person receiving the goods in good faith will acquire good title.

Section 30(2):
A buyer bought or agreed to buy something—he obtains title of good/possession of goods with the
consent of seller--then sells it to an innocent buyer, the sale is valid.

Right of Lean: a possessory right; if not paid, the seller may not delivery the goods, or take back the
goods.

Formal Comment:

The Section talks about the buyer being in possession after sale where both the conditions are
included, he has bought the goods or agreed to buy the goods. The buyer must obtain possession
with the consent of the seller.
 21

 Staff Motor Guarantee Ltd. v. British Wagon Company [1934]:

X here was a dealer in motor vehicles. He sold the vehicle to the defendant. The defendant lent it
back to X on hire purchase. Later on, X sold the sold vehicle to the plaintiff who was not aware of the
previous transaction. Therefore, it was held that X was not a person who, having sold the goods,
continued his possession but he was a bailee under the hire purchase agreement. Therefore the
delivery or transfer by him of the said vehicle under the sale to the plaintiff was not valid. 
Subsection 1 will be applied only when the capacity of the seller has not changed.
 Lee v Butler (for reference)

Section 31: Duties of seller and buyer:

It is 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 seller should deliver the good and give possession.

The buyer must accept and pay the price.

If the buyer wrongfully or unjustifiably refuses to take delivery or rejects the goods, there will be a
breach of duty on his part. Similarly, if the seller wrongfully refuses to deliver the goods, there will
be breach of duty.

Acceptance may be expressed or implied.

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
possession of the goods.

Ready and willing also means inability to deliver goods or inability to buy goods. It will be deemed
that you don't want to sell or buy it.

The seller is not bound to deliver if the buyer is not ready and willing to pay on delivery and the
buyer is not bound to pay if the seller is not ready and willing to give the goods.

Readiness and willingness includes capacity. If the buyer is insolvent.

The rule applies only when there is no contract to the contrary. Example- Sale on credit.

Section 33:
Any authorized act is delivery. Eg. direct delivery, symbolic delivery, etc. Any act that implies
delivery.

Any act which has effect of putting the goods in possession of the buyer or any person authorized by
him shall constitute delivery. Eg. if the buyer names an agent to hold the goods on his behalf,
delivery to the agent shall constitute as delivery to the buyer. It can be symbolic. Eg. delivery of keys
of a go-down where the goods are kept, by the seller.

The parties are free to decide upon the mode and the act which will constitute as delivery.

The duty mention in Section 31 is complied to when the delivery has taken place.
 22

 Marvin v. Wallis [1856]:

There was a sale of horse. The seller had asked the buyer to lend him the sold horse for some time.
The buyer agreed and left the horse in the custody of the seller. (There was a change in
custody/change in transaction, from seller to buyer, only then did the seller ask back for the horse
from the buyer. There was a valid delivery under the sale.)

Eg. There is a sale of goods to be delivered by the seller at the buyer’s premises. The goods are
delivered by the seller’s agent to a person who was present at the premises, and he was reasonably
appearing to be authorized to receive the goods, though in reality, he was not authorized. Whether
delivery to that person constitute a valid delivery?

Ans. It will constitute to valid delivery as the delivery person had reason enough (reasonable) to
believe the receiver to be the authorized person.

 Edan v. Dudfield [1841]:

If the buyer is already holding the goods as a bailee, and the seller agrees with him that he shall hold
the goods as owner, the character of possession is changed. The buyer here ceases to hold as a
bailee and begins to hold as an owner. (The time of delivery is when the seller accepts the bailee to
be a buyer.)

Section 34:
Delivery of part may operate as delivery of whole, if it is so intended.

Eg. there was a sale of goods laying in a go-down. The seller instructed the caretaker of the go-down
to deliver the goods to the buyer who had paid the price already. The buyer weighed the goods and
took away part of it. This will amount as delivery of whole.

But delivery of part with intention of severing it from the bulk does not operate as delivery of the
remaining part.

 Mitchell Reid v. Baldeo [1887]:

There was a sale of 5 bales of goods to be sold to a buyer, but the buyer only bought 1 bale of goods,
and refuses to take the other because they were not according to description. (The buyer has shown
that he will not be taking the remainder, and a clear intention of severance) Thus, the property will
not pass.

Section 35: Buyer to Apply for Delivery:

The buyer is not bound to make delivery until the seller has explicitly untended to buy the goods.
There should be an explicit contract, where the buyer has the duty to state the time and place.

The buyer has no cause of action against the seller if the buyer has not applied for delivery.

(Cause of Action: if we have a grievance and claim a plaint, it should have a cause of action. The
plaint would be rejected under Order 7, Rule 11 of CPC.)

When the buyer applies for delivery but the seller fails to deliver, he shall be guilty of breach of
contract (Duty to Deliver under Section 31).

Section 36:
Section 36(1): Rules as to Delivery:
In Sale and Agreement of Sell, place of delivery of goods is where the goods are kept; unless
expressed otherwise in the contract.
 23

In case of non-existent goods (non-existent at the time of Agreement to Sell, eg. make me a
customized car), place of delivery is where the goods are manufactured or produced.

This provision fixes place of delivery and the rule applies subject to express or implied agreement.
(Section 9 of ICA)

Section 36(2): Reasonable Time for Delivery:

If not explicitly stated in the contract about the time of delivery, the time taken for delivery by the
seller should be reasonable.

Generally, in CoS of goods, conditions relating to delivery, are essence of contract. Breach of such
conditions may give rights to the buyer to repudiate the contract and reject the goods.

 Philips v. Blair and Martin:

There was a sale of 12 containers of liquor, 4 were delivered. The buyer asked for the delivery of
remaining containers, but the seller delayed the delivery. Meanwhile, the Govt. passed an act
prohibiting distillation, and annulled all contracts fpr the sale pf such.

The seller was liable because he failed to deliver within reasonable time.

Section 36(3): Delivery by Attornment:

A third person has goods and he must acknowledge that he is keeping them on behalf of the seller at
the time of Sale, or there is no delivery. He is only keeping the goods, not acquiring ownership.

The ascent of all three parties is imperative.

DbA has effect of transferring possession to buyer. To constitute it, all the parties should agree.

Proviso to Section 36(3): [related to] Document of Title

(Left for later.)

Section 36(4):
Delivery should not be done at an unreasonable hour. Reasonableness of hour depends upon the
facts.

Tender here refers to the acceptance of both parties to deliver and accept the goods.

Eg. the seller is supposed to make an offer to deliver the goods. If the seller calls at 2 at night, it is
not at a reasonable hour, thus ineffectual. Or tryimg to deliver the goods at 2 at night, it is
ineffectual.

Demand of delivery by the buyer, and tender of delivery by the seller, have to be made within
reasonable hour, which depends upon facts.

Eg. working hours, etc.

Section 36(5):
The expenses to make the goods deliverable are borne by the seller. But if the buyer has paid for
that, then he may recover it from the seller.

Section 37: Delivery of Wrong Quantity:

De Minimis Non Curat Lex: Law does not bother with trivial issues. Eg. a difference of 200gms of
goods won’t be entertained by the court.
 24

Rules mentioned in Section 37 are subject to general rule of De Minimis Non Curat Lex, which
means slight change/deficiency will not entitle the buyer to reject the goods or claim damages
because some flexibility is needed in CoS, and trivial short falls in the quantity must be overlooked.

Section 37(1):
If quantity is less, the buyer can:

1. Reject the goods, and the seller cannot compel the buyer
2. Accepts, he will pay price at contractual price

Subject to this rule, if the seller does not fulfil his obligation under the contract; sends less quantity,
cannot compel the buyer to accept it. Equally, the buyer cannot call for delivery for anything which is
short of the agreed quantity.

Section 37(2):
If the buyer has received a larger quantity, he can:

1. Reject the extra

2. Reject the whole
3. Accepts the whole and pay for the extra

The seller cannot compel the buyer to do anything.

If the goods are in excess quantity, the buyer is not bound to accept the excess, nor is he bound to
put himself into trouble to separate the excess from the bulk delivered.

Section 37(3):
If the goods are mixed with goods of other description, the buyer may reject them, not bound to
accept even if it is very easy to separate the goods.

Where the buyer exercises his right to reject the goods, the property revests in the seller.

If the goods are delivered which are not of merchantable quality, the buyer may reject the whole.

Section 37(4):
This section applies to usage of trade, special agreement, and for the course of dealing between
parties.

 Dudhia Forest Co-op. Louvers and Artisans Society Ltd. v. M/S Mohamed Saiyed and
Abdul Rehman’s Co. and others:

The quantity of charcoal which was delivered was 30-35% less than the assured amount
during the auction, so that wasn’t De Minimis as it was a significant account.

Section 38:
Section 38(1): Installment Deliveries:
The buyer is not bound to accept deliveries in instalments, unless such is mentioned in the contract.

If the delivery is severable, the buyer may accept a part of it and pay. But the later delivered product
can still be rejected.

Neither the buyer nor the seller can demand or tender delivery less than the full quantity, and
neither of them can compel the other that the delivery should be by installments.

Eg. conduct of the parties accepting installments.

 25

Benjamin: A contract is severable or divisible if liability under it accrues from time to time as
performance of a part, or parts of contract.

Section 38(2):
There is a Cos of delivery by installment.

The seller in delivery or by the buyer in payment are defaulters.

In such a case, the facts and circumstances of the case are kept in mind to determine whether the
breach is severable or not.

If not severable, this would result in the repudiation of whole contract.

If there is a breach by seller, the buyer can take compensation and repudiate the entire contract.

Eg. by facts, it is proven that the deliveries were of parts of a machine being delivered in
installments, such a contract cannot be severed.

The contract may provide for delivery and payment by installment, and be of such nature that each
delivery is like a delivery under a separate contract, to be paid separately.

Section 39:
Section 39(1):
If the seller transfers the goods to the carrier—whether named by the buyer or not--or wharfinger
for safekeeping, it is prima facei a delivery to the buyer.

You can prove otherwise by the circumstances of the case.

Wharfinger: Where the goods are kept for safe custody until they are delivered to the carrier, or
shipped.

This Section provides that where, under a contract, the seller is authorized or required, to send te
goods to a carrier whether named by the buyer or not, for the purpose of transmission to the buyer,
in such a case, delivery to carrier or wharfinger prima facei deem to be delivery of goods to the
buyer.

Section 39(2):
If the nature of the goods requires specifc packaging, etc., the seller is bound to enter into a contract
with the carrier for the same, unless the buyer says that he would make a contract with the carrier,
instead.

If the seller omits his duty, or the goods are damaged, the seller pays the compensation. The buyer
can decline delivery, too, in that case.

The seller is duty bound to make such contracts with carrier or wharfinger as may be reasonable
considering nature of goods and other circumstances. If the seller omits to do so, and the goods are
lost or damaged during transit, the buyer may decline to treat delivery to himself, and may hold the
seller responsible for damages.

The purpose of imposition of duty under this Section is to secure for the buyer such a contract of
carriage as will enable the buyer to recover loss or damage from the carrier,
 26

 Clark v. Hutchins:
In this case, goods were delivered to the carrier and there was a requirement of a notice that the
goods were over certain value, otherwise the carrier was not liable for any loss. The seller gave no
such notice. It was held that he failed in his duty of making a reasonable contract, and therefore,
was liable for the loss.

 Thomas Young and Sons Ltd. v. Hobson:

In this case, machines were sold. It was agreed that they should be seny to the buyer through
railways. The seller dispatched the machines at the owner’s risk and not on the company’s riskkk.
There was no difference in trade charges, the only difference was that before accepting at
company’s risk, the company would have inspected ther packaging, and the required machines to be
properly secured at owner’s risk. They did not bother about these things. The machines werr
damaged during transit.

It was held that the seller has not secured a contract which nature of goods, reasonable, required,
and the buyer could reject the goods without being liable for payment.

Section 39(3):
It is the duty of the seller to notify the buyer to insure the goods if they are transitted through sea. If
he does not, he pays the compensation. (That the goods are in transit, so go insure.)

It was not the seller’s duty to get them insured himself, until and unless the buyer specifically is
asking him to.

If seller fails, goods won’t be transferred, and mistake of the seller.

Where the goods have to be sent via sea transit and where the insurance is usual, the seller shall
give a notice to the buyer to enable him to ensure the goods. If he fails, the goods shall be at his risk,
and this principle can be excluded by a contract to the contrary.

*Under Section 3 of Common Carrier’s Act, it is provided that the carrier is not liable for any loss of
certain goods valuing more than Rs. 100, unless the value is expressly declared.

Section 40:
The seller agrees to take risk and delivers the goods at some other place; risk of damage is upon the
seller. The buyer does nit take any risk during transit, unless specified. Eg. Amazon, etc.

*Sometimes, the seller and buyer can agree that parts of risk would be upon both, equally.

The seller shall take risk till delivery if the goods are supposed to be delivered at a place other than
where they are sold.

Section 41:
 Shah Mohanlal Manilal v. Firm Running in the Nmae and Style (1961)
Section 41(1):
Buyer has a right to examine the goods before purchase. The buyer may not accept the goods if he
didn’t have reasonable opportunity to examine the goods.

Section 41(2):
The seller has an obligation to let the buyer sufficiently examine the oods. Even if the seller does not
allow such, it will still be the seller’s fault.
 27

If there is a request placed by the buyer to examine the goods, and it was refused, this Section
comes into play.

In case of Myntra, etc., you can reject or replace or return the goods if one is not happy with them.

In Amazon, they tell you which products are returnable or not in their contract.

This Section applies only when there is arefusal by the delivery boy in letting the buyer examine the
goods.

Formal Comments:

If the goods are not previously examined, the buyer is not bound to accept them until he is given
reasonable opportunity to examine them, and the seller is bound to give such opportunity.

If the buyer requests and the seller rejects to do so, there will be a breach.

Section 42:
The buyer is deemed to have accepted the goods if he intimates the seller.

When the goods are delivered and the buyer does not inspect, and delivers the goods to sub-
purchaser, the buyer is deemed to have accepted the bad goods.

If the buyer keeps the goods for an unreasonable amount of time, but has intimated the seller that
he rejects it, it is still not acceptance.

The buyer is deemed to have accepted the goods in the following situations:

1. Intimates the seller that he has accepted them.

2. Does any act inconsistent with his ownership.

3. Keeps the goods beyond reasonable time.

Section 43:
The buyer is not bound to return the rejected goods to the seller, unless otherwise specified, he
could just let the seller know that he does not accept the goods.

Of course, there must be a reasonable cause for rejecting the goods.

Section 44:
If the buyer is not taking delivery in reasonable time, despite the seller’s willingness and request to
do so, the buyer shall be responsible for any loss occasioned on his neglect and refusal, and for a
reasonable charge to keep the goods in said custody

The seller may either repudiate the contract, or just ask the buyer to pay the compensation and
continue with the contract.

Section 45:
Section 45(1):
Clause a: Unpaid seller: it is a person who has not been paid price, partially or wholly.

Clause b: Bill of exchange: it is a written order to pay a person a particular sum to a particular
person, on a particular date. Eg. check. If a bill of exchange is given but it is dishonored, the seller is
unpaid.
 28

Section 45(2):
If the surety has paid amount for principle debtor to the seller, the surety will have all the rights that
a seller has. Seller includes anyone who is in the capacity or position of a seller. Same goes for an
agent of the seller to whom the bill of lading has been endorsed.

Bill of lading: it acts as a document of title, authorizing the buyer or a person whose name is
endorsed on it to receive the goods. It is issued by a carrier, which is in nature of acknowledgement
or the receipt of cargo for shipment. It implies legally that the carrier has received the cargo, and is
under obligation to deliver the goods to the person who was authorized to receive them.

If agent has paid price initially to the seller, and goes to the buyer to receive that price from the
buyer, agent will be the seller.

This term includes a person who is in position of the seller. Eg. in case of surety for the buyer who
has paid price to the seller, he will stand in the position of the seller. (Section 140 of ICA)

Section 46:
Section 46(1):
Clause a: Right of Lien: if the seller has goods in your possession and is unpaid, the seller may say
that he will not deliver until not paid. It is a possessory right.

Clause b: Stoppage in Transit: If the buyer has parted with the goods, and they are in transit (given
to carrier), and the seller knows that the buyer will not pay, he can stop the goods. Here, the uyer
must be insolvent.

Clause c: Right to resale: the seller cannot resell the goods.

Section 46(2):
Right of Withholding Delivery: when the property has not passed, the seller can withhold the
delivery.

Section 46:
Section 46(1):
The definition of lien under Black’s Law Dictionary is--a legal right or interest that a creditor has in
another's property, last thing until debt or duty that is secured, is satisfied.

This term also implies that a property in the goods has vested in the buyer because generally no man
can have lien on his own property or goods.

This right of lien is exercisable when the payment has become due and the seller remains unpaid , it
doesnt matter whether the buyer has become insolvent or not.

The right of stoppage in transit arises only when the buyer has become insolvent and the seller has
parted withe the possession

Section 46(2):

This is a situation where the property has not passed to the buyer , here the seller being still the
owner cannot exercise right of lien per se but he can withhold delivery until the price is paid , this
right is analogues to the right of lien and sometimes called as quasi lien.
 29

Section 47:
1: provides that lien can be exercised in:

Goods have been sold without any stipulations as to credit

Sold on credit but term has extinct.

Buyer becomes insolvent

Right of lien can be exercised even if the seller has possession of goods as bailee or agent etc.

The sellers lien is a particular lien. Its not general one for all his debt for a buyer.

A sale is on a credit where seller agrees to accept payment at future date

The granting of payment implies that the seller needs to accept the payment at a later date , but it
doesn't mean that he is prepared to deliver the goods without payment ,

There is no right of lien of currency during credit but it evives once the credit period expires

If the buyer becomes insolvent before price is paid and the seller is in possession he can exercise his
right of lien

Tender of price extinguishes lien even if seller declines to receive money.

Section 48:
1. The seller may exercise right of lien on remainder unless there is a waiver

2. Even where the contract is for delivery and payment by distinct installments and the buyer
becomes insolvent in the course of contract , the seller is entitled to refuse the delivery till he has
paid for those already delivered as well the price of those still to be delivered.

Section 49: Termination of Lien:

Whenever the property is passed and the goods have reached the actual possession of the buyer,
the seller’s sole remedy is personal claim. He stands in a position like that of any other creditor. All
the special remedies in his favor are gone.

If the buyer takes possession by wrongful act, the seller may take them back. He may even sue the
buyer for the recovery of possession.

When the sale is on credit, the seller is deemed to have waived the lien.

The seller may reserve the right of disposal by making the goods deliverable only on his direction.

There can be express waiver or implied waiver.

Section 49(1):
The unpaid seller will lose his lien when:

Clause a: The seller delivers goods to bailey without reserving right of disposal.

Clause b: The buyer has lawful possession of the goods.

Clause c: It is expressed in the contract that the seller will not use lien—by waiver.

Section 49(2):
If the seller has received a decree of price, even then the seller can exercise lien.
 30

Decree means an adjudication or confirmation by the court of payment, but the money is not in
hand yet.

Benjamin: once the property is passed and delivery of goods is complete, no special remedies for the
seller are left. He can only sue the buyer.

 Valpy v. Gibson:
The goods were sold and sent by the seller to the shippers. Subsequently, they were re-landed,
taken back for repacking. While repacking, the seller got to know that the buyer has become an
insolvent, so he did not deliver the goods.

Is the act of the seller justified?

No, because the goods were already delivered and the possession was then retaken. Once it is
shipped, the lien is lost.

 Eduljee v. John Bros

A refrigerator was sold to the buyer. Then two parts were returned to the seller for repair. But as the
seller was yet unpaid, he refused to give back the parts.

It was not right as the lien was lost.

Section 50:
The seller can stop the goods in transit if the buyer is insolvent.

When the price is paid, the seller has to give the possession to the buyer.

Basic difference between Lien and SiT 8:

1. In lien, the right is retained. In SiT, the right is regained by the seller.
2. In SiT, the buyer must be insolvent.
3. In lien, the seller must have possession, in SiT, the seller must have parted with the
possession to have stopped it later.

The exercise of right of SiT does not mean that the seller cancels the sale or the property revests
in him. He gets the rights to repossess the goods. After repossessing the goods, he is bound to
give the goods to the buyer if the price is paid.

After delivery, the seller loses his lien, but not SiT. We may say that when lien ends, SiT begins.

Section 51:
Section 51(1):
The transit begins when the goods are delivered to the carrier or bailee and does not complete until
they are delivered to the buyer or the agent.

The seller can stop the parcel in the transit if he is not paid.

Section 51(2):
Once the agent has taken the delivery for the buyer in the middle, then, too, the parcel is deemed to
be delivered and not in transit.

8
SiT = Stoppage in Transit.
 31

Section 51(3):
If the bailee acknowledges to the buyer that he has the parcel on behalf of the buyer, the transit is
deemed to be ended.

Then it is immaterial if a further destination was given by the buyer for delivery.

Section 51(4):
Till the time the goods are in possession of the carrier, the goods are in transit. Like when the buyer
is rejecting the goods and the seller is refusing to get them back.

Section 51(5):
The facts of the case have to be considered to determine if the carrier is possessing the goods on
behalf of the seller or the buyer.

Section 51(6);
When the carrier is wrongfully refusing to deliver goods to the buyer, the transit is completed.

Section 51(7):
When part delivery is made to the buyer, the remaining part can be stopped in transit if that part is
showing the delivery of all the goods. Eg. delivery of a machine in parts, only when all parts are
delivered can it be said that the seller has wholly delivered the machine.

Section 52:
There are two modes of exercising of right under Section 52: first by taking actual possession,
second by giving notice to carrier/bailee/agent to not to deliver the goods

This Section does not provide any form of notice. It may be oral or written

The notice must be given in advance to enable the principle to stop the goods. Once the notice is
received, the carrier has to comply with it if he fails he may be sued by the seller.

Section 53:
This Section deals with the situation where the buyer, without paying the price, sells the goods or
pledges them. Right of stoppage in transit and right of lien is not affected by subsale or pledge
unless the seller has assented.

It contemplates a situation where the seller has lawfully transferred the document of title to the
buyer and the buyer transfers that document by way of sale or pledge to a person who takes the
document in good faith and for consideration. In such a case where the rights of seller are defeated
but in case of pledge the seller can only exercise his right subject to right of pledge.

The pledgee may in advance an amount as consideration or may secure an antecedent or previous
debt

Consideration here means the debt.

Where the goods are pledged to you, it means there is a transfer of document of title to you

Section 54:
Section 54(2):
When you give notice, the seller can recover loss but the buyer cannot recover from you.
 32

When you don't give the notice and there occurs a loss, even the seller cannot recover the loss but
the buyer can recover profit.

Section 54(4):
if a seller asks a buyer with a reasonable time that if he will not pay seller may resell to someone
else

Question: x is a grain merchant who carries on his business in delhi , y order 10 bag of wheat 🌾 from
x, x sends 10bags to y, who lives in bhopal by handing over the bags to z, who was a cartier
appointed by y , goods arrived at bhopal and placed by z , at y's request in z's warehouse, while the
goods were in possession of z , y becomes insolvent, x called z and directed him not to deliver the
goods to y as the price was not paid, even after this instruction z handed over the goods to y.

Whether x can retake the possession , ( no because the transit has already ended and he has already
delivered the good and kept in godown and hence acknowledged)

Whether x can sue z for the loss sustained by him due to the delivery of goods. (No because the
notice has been given after the transit)

The word “rescinded” in subsection 1 means treated as discharge by the seller or terminated by the
seller

The buyer may put an end to sellers lien and entitle himself for delivery

Right of resale is very important because the seller cannot keep goods with him indefinitely after
exercise of right of lien or stoppage

Resale is provided in section 54 it says that if buyer fails to pay the price, the unpaid seller can resale
the goods in a following circumstances

Where the goods are of perishable nature

Where the unpaid seller has exercised right of lien or stoppage in transit and gives notice to the
buyer of his intention to resell the goods.

Where the unpaid seller has expressly reserved his right of resale

Where the goods are perishable the seller may resale the goods to another within a reasonable
 33

Statutory transaction9:
What are they: Those transactions that stems out of statutory contracts. It is not exactly ale of
goods.

Cases:

1. Madras v. Ganon Dunkerley

2. New India Sugar Mills ltd. v. Commissioner of sales tax
3. Andhra Sugar Mills v. State of UP
4. Vishnu Agency v. Commercial tax officer
*Section 4 is relevant in ST, because it defines contract of sale, sale, consensual nature of sale, etc.

Need fot ST: To enforce statutory obligations, and for sale of essential commodities, eg. mask. To
make them readily available to public.

Contract of Building – material transfers, too.

Section 56:
 Suresh Kumar Rajendra Kumar v. Koya and Sons:
The P sold goods to the D, who wrongfully rejected them. P took all necessary measures to sell the
goods urgently. It was held that P was entitled to claim the difference between price at which the
goods were supposed to be sold and the price at which they were actually sold.

(It also involves Mitigation of Damages – the non-defaulting party must try to minimize the loss or
the defaulting party will not be held liable and compensate.)

Section 57: Damages for non-delivery:

Buyer’s remedies:

A buyer may sue for damages for non-delivery of the goods provided the seller wrongfully neglects
or refuses to deliver the goods.

Wrongful refusal or neglect may arise In the following circumstances:

1. Where the buyer has paid the price, wholly or partly, and the goods are not delivered.
2. That the seller unreasonably delays the delivery of the goods.

Other remedies of the buyer:

1. Suit for specific performance.

2. Defects in the goods delivered – Breach of Warranty, etc.

Section 58: Specific Performance of Contracts:

This Section is the only Section in the Act that deals with equitable rights.

And it provides remedies for the buyer.

It is only on the application of the buyer when suing as P that the CoS can be enforced specifically.

This Section applies when the goods are specific or ascertained.

9
Statutory Transaction – ST.
 34

Chapter II of Specific Relief Act10 applies because if there is a monetary compensation availale,
specific performance is not required.

The remedies here are limited, they can only be given if possible.

The court may not give D the opportunity to retain the goods even if the seller has claims against the
buyer as it is a specific performance. The said claims can be settled later.

When decree is passed, it may be conditional or unconditional.

Conditions: Eg. the decree may say that the goods will be delivered but the buyer will get goods but
with full payment, interest, etc.

Ingredients:

1. Subject to Chapter II of SRA.

2. On application of the P.
3. Without giving the D an option of retaining goods upon payment of damages.
4. Goods must be specific or ascertain.
5. Decree may be unconditional or conditional.

Case reg

P presents

Court agree

Summon

Written statement by D

Court phrase the issues

Argument

Judgement

*Decree: a formal expression of an adjudication. It is formal because we have a specific format for it
in CPC. It conclusively determines the rights of the parties.

The Court of Equity only exercises their jurisdiction when the chattle in question is an article of
peculiar value, and such reliefs were not given for the goods which were general articles of
commerce readily available in the market which had sufficient remedy in an action for damages.

Because Chapter II applies, therefore the cases in which the remedy can be provided are limited.

The court may impose conditions in a decree, those conditions may be relating to the payment of
price, payment of damages, payment for interest, etc. And the buyer has to comply with those
conditions to get the goods delivered.

Section 59: Breach of Warranty:

When there is a breach of warranty by the seller, treats a breach as a breach of warranty, is
compelled to treat it as such: he is not entitled to reject the goods but has remedies if he has not
paid the price yet. If he has paid price, he can claim damages from the seller.

10
If monetary compensation is not adequate.
 35

Breach of conditions or warranty are dealt from Sections 14-17. Eg. if there is a breach as to fitness
of goods under Section 15, the buyer is entitled to treat the contract as repudiated and to reject the
goods. But he may elect to treat the breach of condition as a breach of warranty, in which case he
may be entitled for a remedy under the present Section.

Section 59(2):
The buyer may claim a deduction from the price if the loss occasioned is less than price; he may
refuse to pay the price altogether nif the loss equals the price; or he may not only refuse to pay the
price but also claim the access if the loss exceeds the price; and he may pay the price in all these
cases and sue the seller for breach of warranty.

In case of breach of condition, buyer can reject the goods. In case of breach of warranty, he cannot
reject the goods but has other remedies.

Section 73 of ICA applies.

In case of breach of warranty relating to quality, such loss is primarily the difference between value
of goods at the time of delivery to the buyer and the value they would have had if they answered to
the warranty.

Section 60:
Section 73 of ICA applies. Mitigation of damages applies, too.

This Section provides that if the contract is repudiated before due date, it shall be considered as
anticipatory breach. This covers the situation where the performance is to take place in future. But
before the time arrives, the promisor says or shows, by conduct, that he will not perform his part of
obligation under the contract.

This Section gives action to the promisee to wait till the date of actual performance and treat the
contract as subsisting or to treat the contract as rescinding in anticipation.

 Frost v. Knight:
P had asked the D to marry his daughter after his demise. But during the course of P’s life itself, D
breaks the engagement. D goes to court. The court says that there is no need to wait till the actual
breach, a mere anticipation of breach is enough to file a case.

“The promisee, if he pleases, may treat the notice of intention as inoperative and await the time
when the contract is to be executed, and then hold the other party responsible for all the
consequences of non-performance. But in that case, he keeps the contract alive for the benefit of
the other party as well as his own, that is, he remains subjected to all his own obligations ad enables
the other party not only to complete the contract notwithstanding the previous repudiation but also
to take advantages of any supervening circumstances.”

(Immediate action; can wait till the actual date and treat it as subsisting; if so, it is for the advantage
of both parties.)

The case shows that an action can take place immediately in case of anticipation of breach.

Repudiation: Where one party does not perform.

Rescind: In response, the non-defaulting party ends the contract.

The recession of contract is a result of repudiation, together with the acceptance of repudiation.
 36

The measure of damages is fixed by the difference between the contract price and the market price
on the date when they ought to have been delivered or accepted.

If the party accepts repudiation, he must act reasonably to minimise the loss.

Section 61:
This Section deals with the situation where the seller or buyer wants to recover the interest, special
damages, or money paid--where consideration for the payment of it is failed. Here, the special
damages must be recoverable by law. There may be a contract mentioned in the rate of interest, or
else the court may apply the rate which it deems fit.

If the delivery is tenderd and there is a wrongful rejection by the buyer, the calculation of interest
may start from thereon itself. We don’t have to wait till the institution of the suit, but we may—our
choice.

If under a CoS, the seller tenders the goods to the buyer, and the buyer wrongfully refuses to accept
and pay for them, the court may award interest on the price from the day of such tender. Or if the
price is payable on a certain day irrespective of delivery, the interest will run from that day. And if
the goods are sold on credit, the interst will run from expiry of the credit period.

Interests prior to the suit may be awarded.

Section 73 of ICA: The word “compensation for any loss or damage which naturally arose from the
usual force of things from such breach” refers to general damages. And the words, “or which the
party knew when they made the contract to be likely to result from such breach” refers to special
damages.

Failure of consideration: The buyer is entitled to recover the price if the seller had no title (Section
14), or if the goods were not matching the description (Section 15), or there had been beach of
condition as to quality (Section 16).

Section 62:
This Section provides that any right or liability by implication of law (implied) may be negated or
varied by express agreement. Therefore, conditions and warranties implied from Section 14 vto 17
may be negated or varied by an express agreement. Similarly, the rules relating to passing of
property under Section 20 to 24 may be varied or negated in the similar manner.

Section 16(4) provides that an express warranty or condition would not negate or vary unless
inconsistent their way. Therefore, court under this Section must see where the conditions are
inconsistent or in concurrence with the applied terms. These two Sections are complementary to
each other.

This may be done by cours eof dealing or usage of trade.

*Usage of Trade: a pattern of dealing that is used in the market widely.

*Course of Dealing: how a seller and buyer follow a pattern of sale between themselves. Eg. the
seller gives specific discount to Mr. X.

Section 63:
Reasonable time deepens upon question of facts and particular circumstances, nature of goods, etc.

In some cases, usage of trade has also been taken into consideration.
 37

Section 64: Sale by Auction:

This Section deals with auction sale where the budder gives proposal by declaring price and the
invition to such proposal is given by the seller/auctioneer.

Section 64(1):
If the auctioneer puts the goods subject to auction sale in separate lots, each lot shall be subject to
separate CoS prima facie.

Section 64(2):
One can retract until fall of hammer or such announcement that deems the deal closed. (So long as
there is no acceptance of the proposal; given by the bidders, the bidders may retract their bid.)

The last proposal that is accepted by call of hammer or such, the sale is deemed to be complete.
Such acceptance may be subject to condition depending upon the contract.

Condition: Eg. if the price is not paid, the sale will revert back to the seller.

Section 64(3):
It also lays down that the seller cannot make bid without reserving a right to do so. Once such right
is reserved, it must be notified ti the other party. The seller cannot ask his agent or nominee, also, to
make bid on his behalf, unless such right is reserved.

Section 64(4):
If it was not notified, the sale is not lawful.

If this provision is violated, it may render the same as fraudulent or voidable.

The auction sale may be subject to base or upset price and in such a situation, unless the bid
rechase, the reserved price. The auctioneer can postpone or cancel the auction sale.

Section 64(5): Knock-out agreement:

When the bidders collude within themselves to hamper competition in the bidding process by
agreeing to not to bid against each other are also unlawful;. Competition Act, 2002 deals with bid-
rigging.

Section 64(6):
If the seller uses pretended bidding, the sale is voidable at the option of the buyer.

This act is not retrospective in nature.

Section 65:
Types of auction sale contracts:

1. Sale with reserved price

2. Sale without reserved price
3. Sale with reservation of right to bid by the seller
4. Conditional sale

Parts of a Deed:
1. Description of a deed
2. Date
 38

3. Parties (entire description should be given)

4. Recitals – the background of the deed is given in this part; it may or may not be a part of the
deed
5. Testatum
6. After the recitals, the operative part of the deed starts. It commences with a witnessing
clause.
7. Eg. “Now this deed witnesses as follows....” (operative part starts from here.)
8. Parcels – it means full description of the property transferred so if it is by name, you should
give that, or by some other description, like where it is situated, etc.
9. Testimonial
10. It is generally as follows, “In witness whereof the parties hereto have signed this deed on….”
11. Attestation, registration, etc. depend upon the law dealing with it.
 39

Contract of Indemnity:
Section 124: Definition of Contract of Indemnity11
All principles of Ica apply, eg. fraud, misrep, etc.

It includes insurance contracts, but not all. Eg. life insurance is not. Insurance contracts are
Indemnity related in nature.

Section 125: Rights of Indemnity Holder:

Cost of suit can be indemnified

Dmages

If a compromise decree is passed, that can also be claimed—provided, the losses should be
mitigated

Commencement of liability:

In English law,

2. In the case of an unconditional bank guarantee, the nature of the obligation of bank is absolute,
and it is not dependent upon any dispute or proceeding between the party at whose instance the
bank guarantee is given and the beneficiary.

3. Commitment by the bank must be honored free from interference by the court, and it is only in
exceptional cases, i.e., in case of fraud or in case irretrievable injustice would be done if the bank
guarantee is allowed to be incashed.

 UP Cooperative Federation ltd. v. Singh Consultants [19888] SC

Held: the operation of bank guarantee should be stayed in cases of serious dispute or fraud, etc.

 State Bank of India v. Sahakari Shakkar Kaarkana [2007] SC

It was held that the Court cannot take recourse to the surrounding circumstances except in
exceptional cases.

 Centax (India ltd.) v. Vinmar Impex Inc. [1986] SC

It was held that commitments under bank guarantee must be honored, otherwise trust in
international commerce would be irreparably damaged.

 UCM Investments v. Royal Bank of Canada [1982]

Lord Diplok: The commercial purpose for which the system of confirmed irrevocable documentary
cedit has been developed in the international trade is to give to the seller an assured right to be paid
before he parts with the control of the goods, and that does not permit any dispute with the buyer
as to yje performance of CoS be used as a ground for non-payment or reduction or deferment of the
payment.

---------------------------------------------------------------------------------

A guarantee has to be imposed within the period of limitation from the date on which it was
executed (The Limitation Act, 1963). For general contracts, the time is 3 years.

11
CoI
 40

Section 133: Discharge of Surety:

If there is any variance in the terms of the contract without the knowledge of the surety, he shall be
discharged.

Illustrations a and c are important.

A surety is discharged when without his cobsent the creditor makes any change in the nature or
terms of the contract.

 Raju Shetty v. Bank of Baroda [1992] Karnataka HC

A variance with a consent either given in advance or at the time of variance would maintain the
liability of the surety intact.

Section 134:
If creditor releases the principle debtor of his liabilities, the surety is automatically released.

Or if the creditor does something, the legal consequence of which is the discharge of principle
debtor12, the surety is automatically released.

Eg. A fails to supply construction material, B cannot build the houses—creditor did something the
legal cpnsequence of which is the release from liability for the PD.

This Section provides two modes of Discharge:

1. Credior makes a contract with PD by which the PD is discharged. Eg. the creditor releases the
PD.
2. 2. When creditor does any act or omission, the legal consequence of which is discharge of
PD. Eg. the contract of construction – creditor was bound to supply material – omitted to
supply – PD is discharged – surety discharged.

12
PD
 41

Right against co-sureties:

This covers the situation where the debt has been uaranteed by more than one person.

The released co-surety remains liable to the others for contribution (Section 138).

The co-sureties are laible to make equal contribution to the extent of default (Section 146).

The principle of equal contribution is subject to the maximum limit, if any, fixed by the surety to his
liability.

A continuing guarantee I a type of guarantee which applies to a series of transaction (Section 129). It
may be revoked at any time by the surety by giving notice to the creditor.

Contract of Bailment:
Section 148:
The goods refer to MOVABLE.

Delivery of goods for a purpose after which the goods are returned/disposed off on the direction of
the bailor13.

It should be upon a contract.

Even if there is no physical delivery, the law assumes it to be a delivery.

Conditional delivery: if there is no condition of returning the goods is attached to it, it is not contract
of bailment.

This Section defines bailment, bailor and bailee.

The bailment is delivery of goods by one person to another upon some purpose and condition that
once the purpose is accomplished, the goods shall be returned to the bailor or to ant person to
whom he directs or dispose off the goods in pursuance of his direction.

The explanation clarifies that if one is already in possession of the goods and contracts to hold them
as a bailee, he becomes the bailee, although the goods may not have nbeen delivered in reality.

Bailor: He delivers the goods.

Bailee: To whom the goods are delivered.

Essentials:
1. Delivery and transfer of possession:

13
Person who delivers the goods.
 42

For application of this Section, possession must be transferred and not mere custody {Eg.
women delivered ornaments to the jeweler for melting and making new jewels. During the
daytime, he used to work but in the evening, she used to lock them and keep the keys The
goods were lost during evening. The jeweler was not held liable.)
2. Delivery should be made upon a contract:
Goods are delivered for some purpose and upon a contract that after the purpose is
accomplished, the goods be returned or disposed off.
3. Contract may be expressed or implied.
4. Cheshire: This ingredient is usual but not essential.

 State of Gujarat v. Memon Mohd. (1967) SC::

Vehicles belonging to P were seized by customs. While in custody, the goofds were damaged—
they remained totally uncared for. It was contended that the state was not bailee—no
obligation to take care.
It was held that the state was the bailee—held liable.

5. Conditional delivery:
Under the Contract of Bailment, the delivery is always conditional that the gooods shall be
returned after the purpose is aaccomplished.
If the person is not bound to return the goods, it will not constitute as bailment.
Deposit of money in the bank is NOT bailment—the bank is not bound to retuen the same
coins and currency.

 Union of India v. K.V. Venugopalan (1990) Kerela:

The bank was not allowed to exercise the right of lien n the money deposited under fixed
deposited scheme.

Agency and Bailment:

The bailee does not represent bailor, however in agency, the agent represents the principle.

Section 150:
2 types of Bailor:
Gratuitous bailor14.

Bailor for Reward/Non-gratuitous bailor who has received a reward and his responsibility is higher.

Conditions:
1. He should have knowledge of the defect.
2. The defect must pose risk to the bailee or materially interfere with the use of goods.

Duty of Bailor for Reward is much greater. It is no answer for him to say that he was not aware ofv
the defects. He will be liable, anyway.

 Reed v. Dean:
P hired motor launch (boat) for holiday The launch caught fire. P was not able t extinguish it, and
suffered injuries.

It was held that there was an invite undertaking on the part of D that the launch shall be fit for
purpose. They were held liable.

14
GB
 43

Duties of Bailee:
1. Reasonable care (Section 151)
2. The burden of proof is upon the Bailee to show that he has taken reasonable care.

New India (insurance) case

The car was given the bailee and caught fire; it was upon bailee could not prove his reason nable
care and was held liable.
 44

Section 170:
Eduljee v. John Brothers;

Facts; P purchased a refrigerator—seller agreed to repair—the repairs were done—delivered to P—

part of repair unpaid—refrigerator stopped working again—the seller took some quality parts within
for further repairs—claimed lien on these parts for the outstanding charges of previous repairs.

Held: Delivery of possession after repairs puts an end to lien. Cannot be revived due to the reason
that the seller undertook further repairs.

Lien is a possessory right and continues until the possessor holds the goods.

The right of GL means the right to hold the goods as security for general balance of accounts (Section
171). It entitles the bailee to retain any goods bailed to him for any amount due to him whether in
respect of those goods or any other goods.

Eg, Two securities, one given to a banker, the loan had been taken against one of them, The banker
was allowed to retain both securities until the dues were paid.

Jowitt and Sons v. Union Cold Storage [1913]:

Fcats: Meat was stored in cold storage, who by general terms of the trade was allowed to keep the
goods for general balance of accounts.

Held: He could retain the meat for his charges due in respect of other goods.

Section 171: Who can exercise the General Lien15:

Only those who are mentioned IN Section 171 can exercise GL.

Eg. the wharfinger can say that the previous debts are not paid, thus I will not deliver the goods to
the carrier.

Following bailees can exercise GL:

1. Banker
2. Wharfinger – custodian of goods
3. Attorneys of HC
4. Policy-brokers – insurance, etc.
5. Fcators – agents who are authorized to keep possession of the goods

No other persons that these have right to retain unless there is a contract to that affect.

Its right to sue (Sections 180 and 181) these sections enables a bailee to sue any person who has
wrongfully deprived him to use or keep possessin of the goods bailed, and if some damage to the
goods happens due to third person.

Pledge:
Section 172:
Bailment for:

 Security for payment of debt

15
GL
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 Performance of promise

Implied or expressed contract of the same has to be there.

Bailor = Pawnor: who delivers the goods.

Bailee = Pawnee.

Whether railway receipts can be pledged?

SC said yes, as the possessor of receipts also has possession of goods. Document of Title can also be
pledged.

Notee: if a question is what is pledge, do describe what is bailment.

Formal Comments:

It is a special kind of bailment, where the loan is secure, or performance of promise is assured.

Essential Elements:

1. Delivery of possession

 Mercantile Bank Ltd. v. Union of india:

Railway receipts – document of title constituted valid pledge.
2. Pledge must happen in pursuance to a contract but it is not necessary that the delivery and
loan should be contemporaneous.

Section 173: Panee’s Right to Retain:

When there is a bailee (pawnee), the right of retention is involved. Pawnee has a right to retain
goods until dues are paid, or for interest.

Right of retainer (Sections 173 and 174) – it is particularly – can be exercised for the amount
advanced or for the interest and necessary expenses.

Section 174:
But retention of goods can only be done to particular goods for which the dues are not paid. Not in
general.

Section 175:
Pawnee has right for extraordinary expenses.

Eg. the pledgee has the cow to look after, and if he builds a new shed for her, that is extraordinary
expenses.

Rule:

The pledgee cannot retain the goods, only sue for extraordinary expenses.

Right to extra ordinary expenses – can only sue to recover loss

 Lallan Prasad v. Rehmat Ali (1967) SC:

The loan advanced was Rs. 20k – securities given were worth 35k – P sued for repayment of the
loan, but was unable to produce securities – action not allowed.
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Section 176:
If the pawnor defaults in payment of the debt, or performance, the pawnee may bring a suit against
the pawner if they had already parted with the goods mistakenly, and retain the goods pledge as a
collateral security; or he may sell the thing pledged, on giving the pawnor reasonable notice of the
sale that he will have to take action, it is a statutory obligation.

If the money received by such sale are less than the amount due in respect of the debt or promise,
the pawnor is still liable to pay the balance – deficit.

If the proceeds of the sale are greater than the amount so due, the pawnee shall pay over the
surplus to the pawner.

Right to Sale is an alternative right.

Notice means a proper, written notice.

Right to sell – upon a default being made by the pawner in bailment or in performance of promise,
the pledgee gets right to sell under this section.

Reasonable notice is statutory requirement here.

There is no bar on retaining the goods even if the pawnee has sued the pawner, until the payment is
made. The court MAY allow it.

Section 177: Pawner’s Right to Redeem:

The pawnor can redeem his goods after payment, or within the stipulated time in the notice if such
is the case.

Upon repayment of loan or performance of promise, the pawnor has a right to get the possession
back. If stipulated time has passed for the repayment, and a subsequent time is given before sale via
notice, the pawner may redeem the goods during that extended period approved.

Section 178:
Pledge by mercantile agent is also valid. If he retains the goods with the consent of the pawnee, it is
valid.

Essentials:
1. Person should be MA as defined in SGA.
2. MA should possess the goods with the consent of the pawnee
3. Working in ordinary course of business (eg. furniture and house…)
4. The pawnee should act in good faith, should not be aware of any defects in the MA’s
authority, or that MA is exceeding his given power
5. If the MA is In possession of document of title – pledges them – valid pledge

Section 178-A:
If the pawner has obtained goods through a voidable contract, and pledges it to the pawnee, if the
contract was not rescinded until the pledge was made, the pledge will be valid.

When goods are pledged by a person who has obtained possession under voidable contract, the
pledge is valid. Provided, the contract has not been rescinded at the time of pledge, and the pledgee
has acted in good faith and without notice of the pledger’s defect of title.

 Philip v. Brook:
A ring was obtained under a voidable agreement – pledged – valid pledge.
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Section 179:
When a pledgee further pledges goods, the pledge will be valid only to the extent of his interest,
and his interest is to the extent of amount for whicg the goods had been given to him as security.

A pledge by a seller remaining in possession of the goods after sale is valid.

When one of the joint owners who is in possession of the goods with consent of the others, a pledge
by who would be valid. (Read with Section 30 of SGA.)
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Agency:
Section 182:
An “agent” is a person employed to do any act for another, or to represent another in dealings with
third persons. The person for whom such act is done, or who is so represented, is called the
“principal”.

Agent is a person employed to do:

1. Act for another

2. Represent another in dealing with third persons

Representative character and derivative authority are distinguishing features of an agent.

A domestic servant is not an agent.

He generally renders personal service.

Section 183: Who may employ agent:

Any person who is of the age of majority according to the law to which he is subject, and who is of
sound mind, may employ an agent.

If the principle is of unsound mind, the contract of agency that he entered will be void.

*If question comes on Principal must be competent, include Sections 10, 11, 12 of ICA, majority act

An agency is a type of employment which bring the principal into equal relations with the third
party, thus the primary requisite is that he should be competent. But an agent need not be
competent.

Section 184: Who may be an agent:

Any person who is of the age of majority and of sound mind can become an agent.

If he is a minor, he shall not be responsible to the principal.

As between the principal and third person, any person may be an agent. He need not be competent.

Section 185:
No consideration is necessary for creating an agency (esception to the doctrine of consideration).

 Lakshmi Narayan Ram Gopal and Sons Ltd. v. Govt. of Hyderabad:

SC said:

1. Servant/driver cannot act on behalf of his master, but an agent can. Servant does not have
the power to enter into a contractual relationship, an agent has.
 Agent has authority to act on behalf of his principal and to create contractual relations
between the principal and 3rd party. This power is generally not enjoyed by the servant.
2. Principal generally only gives task to an agent, not directions. But a servant is given
directions, too.
 The principal has right to direct what agent has to do, but the master generally not only
directs what has to be done but also HOW it has to be done. Therefore, a servant acts in
direct supervision and control of the master. However, an agent is bound to exercise his
authority in accordance with the lawful instructions, but is not in direct control and
supervision.
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3. Remuneration: Agent gets commission. Servant gets salary, not commission.

 The mode of remuneration is different—the servant gets wages, agent gets commission.
4. If servant does something wrong in his course of employment (eg. 9 to 5), master has
vicarious liability16. Principal is also responsible but the wrong is done by agent in the scope
of authority, and the wrong should be done unintentionally.
 A master is liable for the wrongs by the servant during the course of employment, the
principal is liable for the wrongs committed by his agent in the scope of his authority and
unintentionally.
5. Servant usually serves only one master, but an agent can work for several principals.

Agent versus Bailee:

1. The relationship of bailor amd bailee exists as long as he holds goods, and aslso the delivery
is an essential element. This is not necessary for subsistence of agency. Sometimes, bailee
acts as agent when he receives such directions form the bailor.
2. Agent is the representative who has power to contract, the bailee, though, does not.
3. Agent can sell the goods but bailee does not have the power.
4. Agent represents the principal but bailee does not represent the bailor.
5. Agent does not necessarily have the possession of the goods, the bailee has.
6. Agent has more power than the bailee.
7. Principal has VL, bailor does not.

Kind of agents:

Factor:
Entrusted with the possession of the goods fpr selling them. He is a MA, nad possession of goods is
must.

Broker:
1. They purchase property for you but they do not have possession of goods and property.
2. They negotiate on your behalf.
3. But he does not execute a contract on your behalf. He facilitates the execution of contract
between principal and 3rd party.

Del credere agent:

1. They receive extra commission or del credere commission as they have to see that the
promise shall be performed.
2. If they fail, they give compensation.
3. They have higher responsibility.
4. They bring the deal to you and make sure that the promise is performed.
5. They can even sue and be sued.
6. They undertake to be liable to the principal for thw failure of 3 rd party to perform the
contract.

16
VL.
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Creation of Agency:
1. By express agreement.
2. By implied agency (conduct and situation).
3. Necessity.
4. By ratification.

Implied agency:
1. By conduct when you authorize someone.
2. Eg. my acquiesce is there that X sells my goods when I could not go to the market, and did
not object when he sold the goods.
3. Estopple: you did not stop the other person to act on your behalf. If you later say that you
were not consenting, you will be estopped—that why did you not object then?!

Expressed agency:
1. It can be oral or written

Estopple/holding out: where principle by his voluntary act places agent in such a situation thst a
person of ordinary prudent conversant with business usages and nature of particular business, is
justified in presuming that the agent has authority to perform a particular act and the principle
allowed it and to this the third person deals with the agent than the principle is esstoped from
denying the agent's work

Husband wife - wife living with husband has the implied authority of the articles subject to the
following conditioned

1. They have domestic establishment of their own

2. Necessaries

3. No reasonable allowance

 Girdharilal v Crawford
Husband shall not be liable even if the fact of allowance was not known to the seller.

Husband can negate his liability by proving

That he expressly want the seller/tradesman to not to supply goods on credit/deal with her.

The wife has sufficient supply already.

That the wife has sufficient means.

Husband is not implied agent of wife.

When agent is justified in assuming : extraordinary power due to necessity thus any act for principle
- it is binding upon the principle
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Example : carriage of goods by a sea - goods exposed to sea perils - threat of damage -master of ship
is justified in selling due to necessity - sales shall be binding upon the owner.

 Sims and company v. midland railway:

Water was consigned to the railway company - delayed delivery during transit - goods perishable -
company sold-action was justified.

Urgent need of medical attendance - any person may act on behalf of the person who needs it ,shall
be binding upon the person to whom attendance is provided

Conditions for application of principle of necessity :

Enability communicate to the principle :gwilliam v. twist - defendants servants were driving vehicle
belonging to him , policemen caught him , was not allowed to drive as he was drunk , defendants
yard was quarter mile away from _ driver authorized a biased tender to drive it back to the yard-
while returning - accident happened - defendants not liable . there was no necessity ,the driver
could have communicated to the principle easily.

It should be reasonably necessary : the agent has to prove it . furskin was sold by the agent there
wawa no threat of deterioration of the goods , hence no necessity.

Agents must satisfy the court that he was acting bonafidely

Section 196: Ratification

Comes into play when a person has done an acct on behalf of another without his knowledge or
consent

Gives option to the person on whose behalf the act is done to adopt the act or to refuse or disown it.

Conditions for ratification:

Act must be done of behalf of someones else

Ratification relates back to the date when the contract was originally made by the agent therefore it
is necessary that the person ratifying it must be in existence and competent at the time when the
contract by agent was made

Only lawful acts can be ratified : example - state of up v. murarilal 1971 sc

Ratification made in contravention with art 291 _ of the constitution of india not allowed.

A person cannot ratify part of transaction which is beneficial for and repudiate the rest , he must
ratify the whole transaction not only one part

Effect of ratification:
It creates relationship of principal and agent : between the person who has ratified the act and the
pearson who have done the act

It establishes relationship between principal and third party.

Section 211: Duties of Agent:

1. Agent is bound to conduct business of his principal according to the directions given by him.
In absence of such directions, he musy follow customs. If he acts otherwise, amd principle
suffers loss, the agent shall compensate. And if there is a profit, the agent will give it to the
principal.
Eg. Nilley v. Double Day:
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Principal instructed the agent to keep the goods in a named warehouse. But the agent
placed them at a different warehouse, which was equally safe. Goods wete destroyed due to
fire-agent still held liable.
Section 212: Reasonable Care and Skill:
Eg. Agent keeping goods which are exposed to perils, must insure them.
Eg. If the goods are sold on credit, the agent must ensure the solvency of the buyer.
Question: define reasonable.

Section 215: Duty to Avoid Conflict of Interest

It is a fiduciary relationship, thus the agent is duty bound not to do anything which would
bring his personal interest and his duty to the principal in conflict with each other.
Eg. a company appointed Y to sell ships. Y attempted to sell but failed to find a customer—
without disclosing to the principal, he bought it for himself, and later sold it at a very high
price. The company was allowed to recover the profit.

Section 216: Duty not Make Secret Profit:

Secret profit – any advantage over Agent’s remuneration, which he would not be able to make
but for his position as Agent.

Eg. using confidential info in his favour; trade secrets, etc.

Agent17 cannot keep Secret Profits

An agent has to tell the principal about any business and profits.

Sectiom 190:
Agent cannot delegate authority to someone else, except when:

1. If Prin allows expressly

2. Prin impliedly allowed it through conduct
3. Custom
Eg. stalk brokers can appoint for ministerial work.
4. Nature of Agency demands such appointments
Eg. auction, appointment of auctioneer.

Section 192: Proper Delegation:

Effect:
1. Sub-agent18 acts under direct control of agent.
2. SA does not directly liable to prin except for fraud and wilful wrong.
3. Relationship between principal and sub-agent is created only in case of a proper delegation.
SA represents the principal, but is directly answerable to A.

Section 219: Right of Agent to Remuneration:

Entitled to agreed remuneration and if no agreed remuneration, then reasonable remuneration.

Even if prin and third party enter an agreement and exclude the agent, the agent will get
remuneration.

17
A
18
SA
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 Green v. Bartlett:
A was appointed to sell house-auction took place-no buyer could be found. One person stttending
the auction directly contacted the prin and purchased the houseA was held entitled for
remuneration.

Effectt of misconduct: if the agent has done any misconduct on his part, relating to agency, the prin
may:

1. Refuse to pay remuneration

2. He may recover compensation for the loss occurred due to his misconduct

Section 217: Right of Retainer:

It concerns money belonging to prin-agent can keep it until he is paid.

Section 221: Right of Lien:

It concerns goods—movable/immovable/property papers, etc.

Conditions:
1. Agent must be lawfully entitled.
2. The property that the agent is keeping should belong to principal; agent has gotten
possession through rightful means; and during his agency.
3. Agent’s lien is a particular lien (subject to the exceptions).

Agent cannot sell the goods held in lien.

Loss of Lien:

1. If A has lost the possession of goods—given to prin or carrier, A cannot take back from
carrier unlike the unpaid seller’s rights. Then A can only take legal action. (stopping the
goods in transit.) It is because agent already has many remedies.
2. Agent can also waive his right of lien-implied or expressed-and decide to directly sue them.
It means when he shows or communicates to the prin that he is not willing to exercise Lien.
3. Lien is subject to contract which may be contrary. If the contract says that the agent cannot
exercise right of lien, it will prevail over this rule. (By a contract to contrary.)
4.

Section 222: Right to Indemnity:

If agent is doing anything on the direction of the prin lawfully and suffers loss, the prin will
indemnify the agent.
Adamson v. Jarvis (previously discussed)

Section 223: Right of Compensation:

In compensation, if there is a wilful wrong on the part of prin that has caused loss to agent,
the prin will compensate. (Injury caused to agent due to prin’s neglevt or want of skill.)
Eg. prin says sell the goods in X market which is prohibited, agent is fined, prin compensates.
 54

Section 230: Personal Liability of the Agent:

General rule: A is not personally liable/enforced or be bound by the contracts which he has made on
behalf of the prin, to the third party, only rpresents prin.

This rule is subject to a contract which may be contrary.

Such contract is presumed in following situations (Exceptions to this general rule):

1. If the prin stays aboard-it is logically presumed by the third party that the agent is
personally liable. (del credere agent)
2. The prin is unnamed/undisclosed-the agent is not disclosing the agent, obviously agent
himself will be sued just in case.
3. When prin is incompetent or absent-even disclosed cannot be sued.
4. Pretending Agent-X is not appointed agent by prin-enters a contract with the third party
under false intentions-he is liable for the prin is not even present/has not authorised X.
But if prin ratifies the act later, prin will be directly answerable to the third party.
5. Breach of Warranty of Authority: agent exceeded his power/authority and it is not
ratified by prin/is not legal/does not fall under any exception where A can exceed his
power but the prin is still bound (MA), the agent is personally liable.
6. If X is agent for a minor, he is personally liable.
7. If agent is saying that he is entering the contract in personal capacity but the third party
is aware about the presence of prin, prin will be liable.

Determination of Agency:

When relationship of prin and A comes to an end. After that ifA is doing anything, the prin is not
liable.

Revocation is done for future transactions, not for the previous ones (prospective application).

There is a notice required if there is a fixed time.

Termination or determination can be done by:

1. Revocation: If prin does not want agent to work for him anymore, he can revoke by implied
or expressed means.
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Partnership Act:
Section 4: Definitions:
Partnership: A relationship between persons where they have agreed to share the profit of a
business, carried on by all or any of them, acting for all.

In practice, they share losses, too, although that is not mentioned in the Section itself.

Essentials:
1. An agreement—express/formal-implied, by conduct—partnership is created by contract, not
by succession or inheritance, etc.

 K. T. Abdul Badshah v. Sanctuary Goods:

Two bros-inherited property-did not divide it--sold it and invested in timbre business-earlier, they
had joint ownership of property-the intention obviously was to be partners in business although
there was no formal agreement.

2. Business: a regular activity which is being done to earn profits. (Read with Section 2.)
Section 2 clarifies that business includes every trade, business and occupation.
Business means any activity which, if successful, would result in profits.
Society for religious and charitable purposes is not partnership.

 Smith v. Anderson
3. Sharing of profit: without sharing of profits, there is no partnership.

 Cox v. Hickman:
No man is a partner unless he has right to share profit of a business.
4. Mutual Agency: X buys goods for the firm, all owners are equally bound.
Partners stand in a position of principle or agents tpwarsdeach other.

 Cox v. Hickman:
Iron Merchant-financial constraints-asked his creditors for money-become the trustee of his
business and when his debts are cleared, give my business back to me-they were empowered to
carry business and divide net income-one of the creditors, Cox, was not active-the other partners
purchased a quantity of coke from P-the bill remained unpaid-Hickman (P) brought an action against
trustees including Cox.

Held: Cox was not partner, not liable. The main intention was to satisfy the claim of the creditors.

Section 6:
To determine if it is a firm or X is a partner, analyse the real relationship and relevant facts.

Even if two people are joint owners of a property and share the profits after selling it, it doesn’t
mean they are partners because it is a regular activity, not business.

Servant or agent, widow or child of deceased partner may be given profits, but will not by default
become partners. All essentials and especially the certain intention of the party should be there.

A and B purchased a tea shop-incurred expenses to make it fancy-decided to lease it out. They are
not partners, only joint owners.
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