BUSINESS LAWS UNIT 2

Sale of Goods Act 1930

 INTRODUCTION
• It is one of the special types of contract.
Initially, it was the part of the Indian Contract
Act, 1872. Later it was deleted and a separate
sale of Goods Act was passed in 1930. It came
into force on 1st July, 1930. It extends to
whole of India except the State of Jammu &
Kashmir.
 CONTRACT OF SALE OF GOODS
• As per Section 4(i) of the Sale of Goods Act,
1930,
• Contract of sale of Goods is a contract
whereby the seller transfers or agrees to
transfer the property in goods to the buyer
for a price.
 Essential Elements:
• - There must be atleast two parties. (Bilateral
Contracts)
• - The subject matter of the contract must be
goods.
• - A price in money should be paid or promised.
• - A transfer of property in goods from seller to
the buyer must take place.
• - It must be absolute or conditional.
• - All other essentials of a valid contract must be
present.
 GOODS - MEANING
• As per Sec 2(7), it means every kind of
movable property other than actionable
claims and money; and includes stock and
shares, growing crops, grass and things
attached to or forming part of the land which
are agreed to be severed before sale or under
the contact of sale.
• - Money means current money and it includes
rare and old coins.
• - Actionable claim means what a person cannot
make a present use of or enjoy, but can recover it
by means of a suit or an action. Thus, a debt due
to a man from another is an actionable claim and
cannot be sold as goods, although it can be
assigned.
• Under the provisions of the Transfer of Property
Act, 1882, goodwill, trade marks, copyrights,
patents are all goods, so is a ship.
 TYPES OF GOODS
• Existing Goods: It means such goods which are in
existence at the time of the contract of sale i.e.
owned or possessed by the seller. Example: A
agrees to sell 5 kg Mangoes to B for Rs. 200.

• Specific or Ascertained Goods: It means goods

identified and agreed upon at the time the
contract of sale has been made.
• Example: Purchasing a white Honda City ZX MT
car from the showroom.
• Generic / Unascertained Goods: It means the
goods which are not specifically identified but
are indicated by description.
• Example: Visiting the car showroom and
selecting a Honda city car.

• Future Goods: It means goods to be

manufactured or produced or acquired by the
seller after making the contract of sale.
• Contingent Goods: It means the goods the
acquisition of which by the seller depends
upon a contingency which may or may not
happen.
• Example: X will purchase a painting only if the
artist is X’s friend.
 PRICE & ITS FIXING
• Price is money consideration for the sale of goods and
it constitutes the essence for a contract of sale.
• The price may be fixed:
• (i) at the time of contract by the parties themselves, or
• (ii) may be left to be determined by the course of
dealings between the parties, or
• (iii) may be left to be fixed in some way stipulated in
the contract, or
• (iv) may be left to be fixed by some third-party.
 CONDITIONS & WARRANTIES
• Condition
• - If the stipulation forms the very basis of the contract
or is essential to the main purpose of the contract, it is
a condition.
• - The breach of the condition gives the suffering party
a right to treat the contract as repudiated (cancelled).
• Thus, if the seller fails to fulfill a condition, the buyer
may treat the contract as repudiated, refuse the goods
and, if he has already paid for them, recover the price.
• He can also claim damages for the breach of contract.
• Example: A says to B, I want a “ Switzerland
made watch’. B shows him the watch. A buys
the watch and subsequently finds that watch
is made in China. This is a breach of condition
as the buyer’s stipulation is essential to the
main purpose of the contract.
 Warranties
• - If the stipulation is collateral to the main
purpose of the contract, i.e., is a subsidiary
promise, it is a warranty.
• - The effect of a breach of a warranty is that
the suffering party cannot repudiate (cancel)
the contract but can only claim damages.
• - Thus, if the seller does not fulfill a warranty,
the buyer must accept the goods and claim
damages.
• Example: A intends to buy a watch and says to
B, “ I want a good watch”. B shows him a
watch saying that it is Switzerland made
watch. B buys the watch and subsequently
finds out that the watch is made in China. This
is a breach of warranty because the
stipulation was subsidiary to the main
purpose of the contract.
• - Stipulation (condition) as to time of payment
are not to be deemed conditions (and hence
not to be of the essence of a contract of sale)
unless such an intention appears from the
contract.
• - Whether any other stipulation as to time
(e.g., time of delivery) is of the essence of the
contract or not depends on the terms of the
contract.
WHEN A CONDITION MAY BE TREATED
AS WARRANTY
• In the following cases, a breach of a condition is
treated as a breach of a warranty:

• Waiver by the buyer

• The buyer may waive a condition. Once the buyer
waives a condition, he cannot insist on its fulfillment.
• Example: A agrees to supply B 10 bags of first quality
sugar @ Rs. 300 but supplies only second quality sugar
@Rs. 250. There is a breach of condition but B may
treat it as breach of warranty, accept the second
quality sugar and claim damages @Rs.50.
• Compulsory treatment by buyer
• Where the contract is indivisible and the
buyer has accepted the goods or part thereof,
and subsequently gets to know of the breach
of condition, the breach of condition can only
be treated as breach of warranty. Thus, the
buyer cannot terminate the contract but can
only claim damages from the seller.
 IMPLIED WARRANTIES
• Implied warranties are those which the law
presumes to have been incorporated in the
contract of sale inspite of the fact that the
parties have not expressly included them in a
contract of sale.
• The following are the implied warranties in
the contract of sale:
• Warranty as to possession
• There is an implied warranty that the buyer shall have
and enjoy quiet possession of the goods. If the buyer’s
possession is disturbed by anyone having superior title
than that of the seller, the buyer may sue the seller for
the breach of warranty.

• Illustration: A lady purchased a second hand type

writer from B. Unknown to the parties the type writer
was a stolen one and the lady was compelled to return
the same to its true owner. She was held entitled to
recover from the seller for the breach of warranty.
• Warranty as to freedom from encumbrances
• There is an implied warranty that the goods shall
be so free from any charge or encumbrances in
favor of any third party. If the goods are found
subject to some charge in favor of third party, the
buyer may sue the seller for damages. However,
this warranty is not applicable where the buyer
has been informed of such charge or has notice
of the same.
• Illustration: A delivers his motorbike to B and
obtains a loan of Rs. 10,000 under the
contract of pledge. Nextday he takes the bike
from B and promises to hand over the bike to
him after 2 days. He sells the bike to C, an
innocent buyer. C may ask to discharge the
liability or may himself pay the money and
then file a suit against A for its recovery.
• Warranty as to quality or fitness:
• There is an implied warranty as to quality of
fitness for a particular purpose may be
annexed by the usage of trade.
• Warranty to disclose dangerous nature of
goods
• If the goods are inherently dangerous or likely
to be dangerous to the buyer, it is the duty of
the seller to warn the buyer of the probable
danger which may arise out of its use.
 CASE LAW
• CLARKE vs Army & Navy Cooperative society.
• C purchases a tin of disinfectant powder from
A. A knows that the lid of the tin is defective
and if it is opened without special care it may
be dangerous, but tells nothing to C. C opens
the tin in the normal way whereupon the
disinfectant powder flies into her eyes and
causes injury. A is liable in damages to C as he
should have C of the probable danger.
 IMPLIED CONDITIONS
• The implied conditions are those which are
presumed by law to present in the contract.
• Condition as to title
• In every contract of sale, there is an implied
condition on part of the seller that:
• a. In case of sale, he has ownership and right to
sell the goods, and
• b. In an agreement to sell, he will have a right to
sell the goods at the time when the property is to
pass.
• Condition as to title
• In every contract of sale, there is an implied
condition on part of the seller that:
• a. In case of sale, he has ownership and right
to sell the goods, and
• b. In an agreement to sell, he will have a right
to sell the goods at the time when the
property is to pass.
• Illustration: R purchased a car from D and
used the same for several months. D had no
title to the car and, therefore R was compelled
to return the car to the true owner. R sued D
to recover the whole of the price paid by him
despite the fact that he had used the car for
some months.
• Sale by description
• Where there is a contract of sale of goods by
description, there is an implied condition that
goods delivered by seller shall correspond
with such description.
• If the goods does not correspond with the
description, the buyer is not bound to accept
and pay for the goods.
 CASE LAW
• Varley vs. Whipp
• V agreed to sell to W a self binder reaping
machine. W had never seen the machine. V
described the machine as new the previous
year and used only for harvesting 50-60 acres.
W found the machinery to be extremely old
and returned the same.
• Held, W was entitled to return the machine as
it did not correspond with the description.
• Sale by sample
• In a contract of sale by sample, there is an
implied condition that:
• The bulk should correspond with the sample in
quality;
• The buyer shall have reasonable opportunity of
comparing the bulk with the sample; and
• The goods shall be free from any defect
rendering them unmerchantable, which would
not be apparent on reasonable examination of
the sample.
 CASE LAW
• Drummond vs. Van Ingen(1887)
• Facts: A placed an order with B to supply worsted
coatings which were according to the sample
previously shown. The cloth supplied
corresponded with the sample, but owing to a
latent defect. Coats made out of it would not
stand ordinary wear and were therefore
unmerchantable. The same defect existed in the
sample but could not be discovered on ordinary
examination.
• Held, the buyer was entitled to reject the goods.
• Sale by sample as well as by description
• Where the goods are sold by sample as well as
by description the implied condition is that
the bulk of the goods supplied must
correspond both with the sample and the
description.
• In case the goods correspond with the sample
but do not tally with the description or vice
versa, the buyer can repudiate the contract.
 CASE LAW
• Nichol vs. Godts (1854)
• Facts; N agreed to sell to G some oil described
as “ Foreign-refined oil”, equal to sample. N
supplied the oil though, corresponded with
the sample, but which was not ‘ foreign
refined oil,.
• Held: G, was entitled to reject it.
• Condition as to quality or fitness
• There is no implied condition as to the quality or
fitness for any particular purpose of goods supplied
under a contract of sale.
• There is an implied condition as to the reasonable
quality or fitness of goods if:
• a) The particular purpose for which goods are required
must have been disclosed by the buyer to the seller.
• b) The buyer must have relied upon the seller’s skill or
judgment of the seller to select the best goods and
• c) The seller has ordinarily been dealing in those
goods.
 CASE LAW
• PRIEST VS. LAST( 1903)
• FACTS: P went to L, a retail chemist, and asked for a
“hot water bottle’. He had no knowledge of hot water
bottles and enquired before buying, whether the bottle
shown would stand boiling water. L replied that it was
meant for hot but not boiling water. He bought the hot
water bottle. After few days while using, it burst and
injured P’s wife.
• HELD: there was a breach of condition as to quality and
fitness and the seller was liable to the buyer for the
damages.
• However, there is no implied condition where:
• a) The buyer has not disclosed to the seller
any abnormal circumstances like allergies or
• b) The buyer buys a specified article under its
patent or other trade name and
• c) Buyer has not relied upon the skill and
judgment of seller.
• Example: A intends to buy a car suitable for
touring purpose. He goes to the Santro car
dealer and buys Santro Xing car from hom.
Subsequently he finds that car is unsuitable
for touring purposes. He will not be entitled to
gold the seller liable for breach of this implied
condition as he did not rely on the seller’s
skills and judgement.
• Condition as to merchantable quality
• Merchantable quality means that the goods should be
resalable in the market under the particular description
by which they are known.
• They are not merchantable if they have defects which
make them unfit for ordinary use, or are such that a
reasonable person knowing of their condition would
not buy them.
• Where the goods are bought be description from a
seller who deals in that type of goods, there is an
implied condition that the goods shall be merchantable
quality.
• Condition as to wholesomeness
• In a contract of sale of provisions and eatables, there is
an implied condition that the goods shall be
wholesome or sound, i.e. goods should be fit for
human consumption.
• CASE LAW
• FROST vs AYLESBURY DAIRY 1949
• FACTS: F purchased some milk from A, a dairy owner.
The milk contained germs of typhoid fever. F’s wife
took the milk and got infection of typhoid and died.
• HELD: F was entitled to recover damages.
 CAVEAT EMPTOR
• - The term caveat emptor is a Latin word
which means “let the buyer beware”. - It
implies that while purchasing the goods, the
buyer must be cautious.
• This principle states that, at the time of buying
goods, the buyer must make reasonable
examination of the goods to satisfy himself
that the goods are suitable for his purpose.
• Section 6 provides that there is no implied warranty or
condition as to the quality or fitness for any particular
purpose for which the goods are supplied under a
contract of sale.
• - In simple words, it is not the seller’s duty to give to
the buyer the goods which are fit for a suitable
purpose of the buyer.
• It is up to the buyer to make proper selection of goods
according to his needs.
• If he makes a wrong selection, he cannot blame the
seller if the goods turn out to be defective or do not
serve his purpose.
• Exceptions to the Doctrine of Caveat Emptor
• (1) Where the seller makes a false representation and
the buyer relies on it.
• (2) When the seller actively conceals a defect in the
goods which is not visible on a reasonable examination
of the same.
• (3) When the buyer, relying upon the skill and
judgement of the seller, has expressly or impliedly
communicated to him the purpose for which the goods
are required.
• (4) Where goods are bought by description from a
seller who deals in goods of that description.
 PASSING OF PROPERTY OR TRANSFER
OF OWNERSHIP (SECTIONS 18-20)
• Transfer of property in goods means transfer of ownership of goods from
the seller to the buyer.

• The time at which the property passes is of great significance because:

• (a) Risk follows the ownership, whether the delivery has been made or
not. If the goods are lost or damaged by accident, then the loss falls on
the owner of the goods at the time they are lost or damaged.

• (b) When there is a danger of the goods being damaged by the action of
third parties, it is generally the owner who can take action.

• (c) In case of insolvency of either the seller or the buyer, it is necessary to

know whether the goods can be taken over by the official assignee or the
official receiver. It will depend upon whether the property in the goods
was with the party adjudged insolvent.
 RULES REGARDING TRANSFER OF
PROPERTY
• Passing of Property in Specific / Ascertained Goods
• 1. Where there is an unconditional contract for the sale
of specific goods in a deliverable state, the property in
the goods passes to the buyer when the contract is
made.

• 2. Where there is an unconditional contract for the sale

of specific goods in a deliverable state, the property in
goods passes to the buyer when the contract is made
and is immaterial whether the time of payment or
price or delivery of goods is postponed. (sec 20)
• Example: A buys a LG computer for Rs. 30, 000
and pays the price and promises the seller to
take the delivery the next day through his
servant. All the LG computers lying in the
godown are destroyed by fire. The property in
goods has passed to the buyer and thus he
has to bear the loss of destruction of
computer.
• 3. Where there is a contract for the sale of
specific goods not in a deliverable state, i.e.
the seller has to do something to the goods to
put them in a deliverable state, the property
does not pass until that thing is done by seller
and buyer has notice of it. (Sec. 21)
 CASE LAW
• Rugg vs. Minett
• FACTS: There was a contract between A and B for the
sale of whole quantity of oil lying in a cistern. The
agreement provided that the oil was to be filled into
drums by B and then the drums were to be taken away
by A. some of the drums were filled in the presence of
A. Even before the remaining drums could be filled a
fire broke out and entire quiantity of oil was destroyed.
• HELD: The buyer must bear the loss of oil which was
filled in the drums and the seller must bear the loss of
the remainder.
• 4. When there is a sale of specific goods in a deliverable
state, but seller is bound to weigh, measure, test or do
something with reference to the goods for the purpose of
ascertaining the price, the property to the goods for the
purpose of ascertaining the price does not pass until such
act or thing is done and the buyer has notice of it. (Sec.
22)

• 4. If goods are delivered to the buyer “on approval” or “on

sale of return” basis then the property passes to the buyer
when he signifies his approval or acceptance to the seller
or he does not signify his approval or acceptance to the
seller but retains goods beyond a reasonable time.
 CASE LAW
• ELPHIC VS. BARNERS
• FACTS: A delivers horse to B on sale or return
basis. The agreement provided that B should
try the horse for 8 days and then return, if he
did not like it. On the 3rd day the horse dies
without the fault of . A filed a suit against B for
the recovery of price.
• HELD: He could not recover the price since the
property in the horse had not yet passed to B.
 Passing of property in Unascertained
Goods
• The word ascertainment means to identify the goods
by separating them from bigger lot.

• - The property in unascertained or future goods does

not pass until the goods are ascertained.
• Example: A agrees to sell to B 100 quintals of wheat
out of 1000 quintals of wheat lying in his godown. A
receives the price and hands over the delivery order
but the goods are to be ascertained by him. In this case
as the goods have not been ascertained, the property
in the goods does not pass to B.
• - The property in unascertained or future goods
sold by description passes to the buyer when
goods of that description and in a deliverable
state are unconditionally appropriated.
• The term appropriation has not been defined in
the act. It means selecting and putting the goods
in suitable receptacles or separating the goods
from others, weighting, measuring or counting
them.
• Ascertainment is a unilateral act of the seller
whereas appropriation is a bilateral act which
is performed by mutual assent of the buyer
and seller.
• - If there is a sale of a quantity of goods out of a
large quantity, for example, 50 quintals of rice out
of a heap in B’s godown, the property will pass
on the appropriation of the specified quantity by
one party with the assent of the other.

• - Delivery by the seller of the goods to a carrier

or other buyer is sufficient to pass the property in
the goods.
 PASSING OF RISK (SEC. 26)
• - The general rule is that unless otherwise agreed the
goods remain at the seller’s risk until the property is
transferred to the buyer, but when the property is
transferred to the buyer, the goods are at the buyer’s risk
whether delivery has been made or not.

• - Rule is known as Resperit Demino i.e. the loss falls on the

owner.

• - But the parties may agree that risk will pass at the time
different from the time when ownership is passed, e.g. the
seller may agree to be responsible for the goods even
after the ownership is passed to the buyer or vice versa.
• Exceptions to the above general rule:
• (i) If there is agreement between the parties.
• (ii) If the delivery of goods are delayed either
due to buyer’s or seller’s default, goods are at
risk of party in default.
• (iii) Trade customs.
 NEMO DAT QUOD NON-HABET
(Transfer of Title by Person not the
Owner (Section 27-30)
• The maxim NEMO DAT QUOD NON HABET
means, no one can pass a better title than
what he had. The object is to protect the
interest of the owner.
• Thus a person having no title or defective title
to the goods sells them, the buyer does not
get a good title to them.
 Case law
• LEO VS BAYES (1856)
• A horse was sold at a public auction. The
horse was stolen one, but the auctioneer was
unaware of that fact. B, the buyer bought it in
good faith.
• Held, the buyer had obtained no title against
the true owner.
 Exceptions to the General Rule
• (a) Sale by a mercantile agent: A buyer will get a
good title if he buys in good faith from a
mercantile agent who is in possession either of
the goods or documents of title to the goods with
the consent of the owner.

• (b) Sale by a co-owner: A buyer who buys in good

faith from one of the several joint owners who is
in sole possession of the goods with the
permission of his co-owners will get good title to
the goods.
• Example: A and B jointly purchased a car for
Rs 5 lac. B kept the car in possession of A.
afterwards A sold the car to C who bought it in
good faith and without notice that A had no
authority to sell. C gets a good title in the car.
• (c) Sale by a person in possession under a voidable
contract: A buyer buys in good faith from a person in
possession of goods under a contract which is voidable,
but has not been rescinded at the time of the sale.

• Example: A buys B’s Honda City car by obtaining his

consent at gunpoint. A has a voidable title to the car.
Before avoiding the contract by B, A sells the car to C. C
buys the car in good faith and has no knowledge of
defect in A’s title. C gets a good title and B cannot
recover the car from him.
• (d) Sale by seller in possession after sale:
Where a seller, after having sold the goods, is
in possession of the goods and again sells
them to a person who buys in good faith and
without notice of the previous sale, such a
buyer gets a good title to the goods.
• (e) Sale by buyer in possession: If a person
has brought or agreed to buy goods, any sale
by him to a buyer who takes in good faith, will
give a good title to the buyer. In any of the
above cases, if the transfer is by way of pledge
or pawn only, it will be valid as a pledge or
pawn
• (f) Estoppel: If the true owner stands by and
allows an innocent buyer to pay over money to a
third-party, who professes to have the right to sell
an article, the true owner will be estopped from
denying the third-party’s right to sell.

• Example: A sells her mother’s diamond ring to B

in the presence of her mother. Her mother does
not object to the sale. B gets a good title since A’s
mother by her conduct has led to believe that A
had authority to sell.
• (g) Sale by an unpaid seller: Where an unpaid seller has
exercised his right of lien or stoppage in transit and is in
possession of the goods, he may resell them and the
second buyer will get absolute right to the goods.

• (h) Sale by person under other laws: A pawnee, on default

in repayment, has a right to sell the goods, pawned and the
buyer gets a good title to the goods. The finder of lost
goods can also sell under certain circumstances. The Official
Assignee or Official Receiver, Liquidator, Officers of Court
selling under a decree, Executors, and Administrators, all
these persons are not owners, but they can convey better
title than they have.
 PERFORMANCE OF CONTRACT
• Performance of contract means the delivery
of goods by the seller and acceptance of the
delivery of goods and payment for the same
by the buyer.

• According to section 31, 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.
 Meaning and modes of delivery
• According to Sec 2(2) of the Act, delivery means
“Voluntary transfer of possession from one person to
another”.

• Delivery of goods is of the following 3 types:

• 1. Actual or physical delivery takes place where the
goods are physically handed over by the seller to the
buyer or his agent authorised to take possession of the
goods.

• Example: A seller of the Santro car hands it over to the

buyer. It is the actual delivery.
• 2. Symbolic delivery is made by indicating or
giving a symbol. Here the goods themselves are
not delivered, but the “means of obtaining
possession” of goods is delivered, e.g, by
delivering the key of the warehouse where the
goods are stored.

• Example: A purchases 10 Acer computers from B.

B hands over to A the keys of the godown where
the computers are lying. This is symbolic delivery
of computers.
• Constructive delivery takes place when the person in
possession of the goods acknowledges that he holds
the goods on behalf of and at the disposal of the buyer.

• This may happen in any of the following 3 ways:

• (a) Where the seller in possession of goods after sale
agrees to hold them on behalf of the buyer as his
bailee.
• (b) where the buyer is in possession of goods and
seller agrees that buyer is holding the goods as owner.
• (c) where the third party (warehouseman) in
possession of goods acknowledges to the buyer that
he holds the goods on his behalf.
 RULES RELATING TO DELIVERY OF
GOODS
• 1. Delivery and payment are concurrent
conditions (sec. 32)

• Both delivery and payment are concurrent

conditions i.e. the seller shall be ready and
willing to give the possession of the goods to
the buyer in exchange for the price and the
buyer shall be ready to pay the price in
exchange for possession.
• 2. Delivery may be actual, symbolic or constructive
(Sec 33)

• 3. Effect of part delivery (Sec 34)

• This section provides the following 2 rules:
• (a) A delivery of the part of the goods, in progress of
the delivery of the whole has the same effect, for the
purpose of passing the property in such goods, as a
delivery of the whole.
• (b) A delivery of the part of the goods, with an
intention of separating it from the whole, does not
operate as a delivery of the remainder.
 CASE LAW
• Hammond Vs. Anderson (1803)
• Facts: A sold certain goods to B and instructed
the wharfinger to deliver the goods to B who has
paid the price for them. B thereafter weighted all
the goods, accepted them and took away a part
of them.
• Held, in this case delivery of part of goods
amounted to delivery of the whole and the
property in whole of the goods passed to the
buyer.
• 4. Buyer to Apply for Delivery (sec 35):
• The seller of goods is not bound to deliver
them until the buyer applies for delivery. It is
the duty of the buyer to demand delivery. If
he does not apply of delivery, the buyer has
no cause of action against the seller.
• 5. Place of Delivery (sec 36(1))
• The place at which the delivery of the goods is to take
place, may be specified in the contract and the seller
must deliver the goods at that place during business
hours on a working day.

• 6. Time of Delivery (sec 36(2))

• where under the contract of sale the seller is bound to
send the goods to the buyer, but no time for sending
them is fixed, the seller is bound to send them within a
reasonable time. What is a reasonable hour is a
question of fact.
• 7. Goods in Possession of a Third Party
(Section 36(3))
• Where the goods are in the possession of a
third person, there is no delivery unless and
until such third person acknowledges to the
buyer that he holds the goods on his behalf.
Once the third person does this that amounts
to delivery.
• 8. Expenses of Delivery (sec 36(5)):
• Unless otherwise agreed, the expenses of and
incidental to putting the goods into a
deliverable state shall be borne by the seller,
but all expenses of and incidental to obtaining
of delivery are borne by the buyer.

• Example: Delivery charges paid to Amazon by

the buyer.
 9. INSTALMENT DELIVERIES (SEC 38)
• Unless otherwise agreed, the buyer of the
goods is not bound to accept delivery thereof
by instalments. However, if the parties so
agree then only the goods may be delivered
by instalments.
• Breach of contract as to instalment deliveries.
• Where there is a contract for the sale of goods to be
delivered by stated instalments which are to be
separately paid for and the seller or the buyer commits
breach of contract as to one or more instalments, this
raises a question as to whether such a breach would
constitute breach of whole contract or only a part of
it.

• According to sec 38(2), the answer to this question

depends upon the terms of the contract.
• In the absence of a contract to the contrary,
the following 2 factors must be considered in
deciding the stated matter:
• (a) The quantitative ratio which the breach
bears to the contract as a whole,
• (b) The degree of the probability of the
repetition of the breach.
 CASE LAW
• Maple Flock Co. Ltd. Vs. Universal Furniture
Products Ltd. (1934)
• Facts: A contracted to supply to B 10 tons of flock
by 20 instalments. The first 15 instalments were
satisfactory but the 16th instalment was defective.
However, the remaining 4 instalments were again
satisfactory.
• Held, the buyer could not reject the whole
contract, as there was no probability of default
being repeated.
 SUITS FOR BREACH OF CONTRACT
• - Where the property in the goods has passed to the buyer, the
seller may sue him for the price.
• - Where the price is payable on a certain day, the seller may sue for
the price, if it is not paid on that day.
• - Where the buyer wrongfully neglects or refuses to accept the
goods and pay for them, the seller may sue the buyer for damages
for non-acceptance.
• - Where the seller wrongfully neglects or refuses to deliver the
goods to the buyer, the buyer may sue him for damages for non-
delivery.
• - If the buyer has paid the price and the goods are not delivered,
the buyer can sue the seller for the recovery of the amount paid. In
appropriate cases the buyer can also get an order from the court
that the specific goods ought to be delivered.
 RIGHTS OF BUYERS AND SELLERS
• Rights of the Buyer:

• 1). Right to have delivery of goods:

• It is the basic right of the buyer to take the delivery of
goods from the seller after payment of consideration.

• 2). Right to Reject:

• It is the right of the buyer to reject the goods if it is found
that the seller has delivered him the goods of other
quantity or quality or if the buyer notices any defects in the
goods he may also refuse to take those defective goods.
• 3). Right to Cancel:
• It is another right of the buyer to cancel the contract if
the seller does not perform his part in the stipulated
time.

• 4). Right to claim damages:

• If there is any defect in the Goods which may cause
loss to the buyer or if due to the negligence of a
seller. It is the right of the buyer to be compensated or
the buyer may claim damages.
•
• 5). Right to Examine:
• It is the right of the buyer to examine the goods
before its purchase and to duly satisfy himself as
to be quality of goods.

• 6). Right to sue for performance:

• If the seller refuses to obey the terms and
conditions of the contract, the buyer has the right
to knock or approach the competent court of law
to compel the seller for specific performance.
• 7). Right to sue for recovery of price:
• It is the right of the buyer to file a suit for
recovery of the price which he has already
paid to the seller but even then, the seller
refuses to perform his part.
 Rights of Seller:

• 1). Right to have acceptance of goods:

• It is the right of the seller that goods delivered by
a seller under a contract of sale must be accepted
by the buyer.

• 2). Right to claim loss:

• If the buyer unlawfully refuses to accept the
delivery of goods, the seller has a right to claim
from the buyer the loss caused to him due to
non-acceptance of the goods.
• 3). Right to receive the price of goods:
• It is the right of the seller to receive the price
of goods from the buyer as per the term of
the contract.

• 4). Right to take legal action:

• It is the right of a seller to take legal action
against the buyer if the price is not paid to
him.
• 5). Right to interest:
• Seller is entitled to interest at a reasonable
rate on the total unpaid price of goods sold,
from the time it was due and until it is actually
paid to him.
•
 UNPAID SELLER (SEC 45 – 54)
• Seller is deemed to be an unpaid seller, when:
• - Whole of the price has not been paid or
tendered and seller had an immediate right of
action for the price.

• - bill of exchange or other negotiable instrument

was given as payment, but the same has been
dishonoured, unless this payment was an
absolute and not a conditional payment.
 Rights of Unpaid Seller against Goods
• • Right of lien or retention.
• • Right of stoppage in transit.
• • Right of resale.
• • Right to withhold delivery.
Right of Lien or Retention (Sec. 47 - 49
& 54)
• It can be exercised on the goods for the price
while he is in possession until the payment of
price of such goods.

• It can be exercised in following cases:

• (i) Where goods have been sold without any
stipulation as to credit.
• (ii) Where goods have been sold on credit but
the term of credit has expired.
• (iii) Where buyer becomes insolvent.
• This right depends upon physical possession. It can
only be exercised for the nonpayment of price.
This right is terminated under following circumstances:
a. Where he delivers goods to carrier or bailee for the
purpose of transmission to buyer without reserving
the disposal right.
b. Where buyer or his agent lawfully obtains possession
of goods.
c. Where seller has waived the right of lien.
d. By estoppel.
 Right of Stoppage in Transit (Sec. 50 -
52)
• It means right to stop the further transit of goods,
to resume possession and to hold the same till
the price is paid. It can be exercised in following
cases:
• (i) Seller must be unpaid.
• (ii) He must have parted with the possession of
goods.
• (iii) Goods are in transit.
• (iv) Buyer has become insolvent.
• (v) Right is subject to provisions of the Act
• Goods are deemed to be in transit from the
time they are delivered to carrier or other
bailee- for transmission, until buyer or his
agent takes delivery of them.
 Right of Resale (Sec. 54)
• It can be exercised in following cases:
• a. Where the goods are of perishable nature, buyer need not be informed
of the intention of resale.
• b. Where he gives notice to the buyer of his intention to resell the goods,
the buyer does not within a reasonable time pay or tender the price.
• c. Where the right is expressly reserved in the contract.

• If no notice has been given to the buyer of intention to re-sell, unpaid

seller cannot claim any damages and buyer will be entitled for all profits.
• Unpaid seller can recover from buyer the balance amount (if any) on
resale.
• If notice has been given to buyer, then profits origin out of sale of goods
won’t be shared with buyer. Only seller will hold the samples.
 Rights to Withhold Delivery
• - It is exercised if the property in goods has
not passed to the buyer.
• - It is in additions to above 3 rights.
• - However if the property has not been passed
the unpaid seller has a right of with holding
delivery similar to and co-extensive with his
rights of lien and stoppage in transit.
 Rights of Unpaid Seller against Buyer
• Suit for Price (Sec. 55)
• Seller may sue —
• (a) Where the property has passed to the buyer and he
wrongfully neglects or refuses to pay for goods.
• (b) Where the property has not passed and price is payable
on a certain day irrespective of delivery and buyer
wrongfully neglects or refuses to pay such price.

• Suit for Damages for Non-Acceptance (Sec. 56)

• The seller may sue the buyer for non-acceptance, where he
wrongfully neglects or refuses to accept and pay for the
goods.