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SALE - a contract whereby the seller transfers the ownership of the goods to the buyer for a price. It is an executed contract. Sale is different from a gift, because there is no consideration in gift. It is only gratis. A contract for work and labour or using of skills is not a contract for sale. Where skill and material are involved in one transaction, it is a contract for materials and not sale. An agreement to sell is not a contract of sale, it is only an agreement to sell at a future date, an executory contract. Essentials ± minimum two parties - a part-owner may sell to another partowner. - a transfer or an agreement to transfer ownership of the goods. Risk associated with sale moves to the buyer. - subject-matter of the transaction- only movable property. Landed property cannot be part of a contract of sale under this Act. - price is the consideration for the sale, so barter does not amount to sale.
Sale ² transfer of goods
Hypothecation not a sale. It is an equitable charge without possession of goods. Hire purchase is not a sale. The buyer only has an option to purchase it, the ownership is not with him till the final payment is made. Bailment not a sale. Bailee only has the possession of goods, not ownership. Sale by instalments is a sale. Ownership is transferrred, only the payments are staggered.
Classification of Goods
Every kind of movable property, other than actionable claims, like debts, and money, and includes stocks and shares, crops and things attached to land that is forming part of the sale. Trademarks, copyrights, patents can be part of the sale. Existing ± specific or ascertained ± goods identified and agreed upon at the time of sale - unascertained ± only described and not specifically identified. Future goods ± goods manufactured, produced or acquired after the contract of sale. Contingent goods ± the acquisition by the seller depends upon the happening of any specific event.
Price ± the money consideration for the sale, absence of it, contract is void ab initio. It can be fixed by the contract, agreed to be fixed by a contract between the parties, by a valuer, or can be determined by the course of dealings of the parties. S.64-A permits revision of price as a result of revision in taxation, subject to agreement between parties. Seller is not bound to accept anything except in the legal tender, unless there is an express agreement to the contrary. Thus he is not bound to accept payment by cheque. Since money is a part of legal tender and is a method of consideration, it cannot be subject matter of sale. Default in payments, seller can sue the buyer. Not possible in an agreement to sell, as it is an executory contract. Earnest money deposit, is not a part payment of price, but is an advance tendered by the buyer as security for future performance of his part of the contract.
Condtions and warranties
1.Condition ± a stipulation
essential to the main purpose of the contract.
1. Warranty ± a stipulation
collateral to the main purpose of the contract.
2. breach of condition ± repudiation 2. breach of warranty ± damages. of contract. 3. deemed implied into every contract by operation of law. 3. condition can become warranty. 4. express conditions ± as agreed upon by the parties. Ex: condition as to title - sale according to description condition as to quality or fitness ± caveat emptor - condition as to merchantable quality - implied condition as to sale by sample. Ex: as to the quiet and undisturbed possession and free from any charge or encumbrance.
Buyer beware ± seller does not take any responsibility, once the goods are sold. Buyer must inspect the goods at the time of sale. If he doesn't do so, he buys at his own risk. Exceptions ± where the buyer makes a false representation - where the consent of the buyer is obtained by fraud. - where the buyer makes the purpose of purchase known to the seller, then the seller must sell goods that reasonably fit the description of the purpose given by the buyer. - manufacturer's liability in case of negligence (Donoghue v. Stevenson ± no privity of contract under the Sale of Goods Act.
Conditions as to time
Unless agreed upon by the parties, stipulation as to the time of payment is not an essential condition of contract of sale. Any other stipulation as to the time of the contract, shall be decided by individual terms of contract. Failure to pay on the stipulated date does not permit the seller to repudiate the contract, unless so agreed upon. However, he may resell the goods if not paid in a reasonable amount of time.
Passing of title in goods
Specific ascertained goods ± ownership passes at the time of contract, even if payment or delivery is postponed, in case the goods are deliverable. In case goods are not deliverable state -property passes when such thing is done and the buyer has notice thereof. In a contract of sale of goods in a deliverable state, where the seller is supposed to ascertain the specific state of goods, the title does not pass until such action by the seller. Unascertained or future goods ± property in the goods does not pass to the buyer unless and until the goods are ascertained. Sale by description of unascertained or future goods ± goods when deliverable are unconditionally appropriated to the contract. Unconditional appropriation ± assigning the goods to the contract of sale by either party with the consent of the other party. Done by specific categorization or delivery to the carrier or bailee for further transmission to the buyer.
Seller's reserve right of disposal
Seller's right of disposal is retained only when the railway receipt or the bill of lading is taken in his or his agent's name. Where the buyer does not approve the bill of exchange, even if he retains the bill of lading taken in his name, still the title does not pass to the buyer. Where the goods are delivered with the clause sale on approval or sale on return, the title passes only after the approval is signified. If he doesn't signify rejection even after the stipulated time, the buyer is deemed to have approved the contract of sale. In case where it is a sale on cash only or return, buyer has no title until he has paid for it.
Passing of risk in the property
Subject to agreement, goods remain at seller's risk until the property therein is transferred to the buyer, when at such time they become buyer's risk, whether he has taken delivery or not. Risk follows ownership, but the parties may agree otherwise. Parties may agree that risk might pass at different time and not simultaneously with the ownership. Where delivery might be delayed because of the fault of the parties, risk might be borne by the party at fault for any loss that might have occurred. Risk and property may be separated by a contractual term. Where the goods are at a distant place, risk and property rights might still be separated and the buyer might take risk for loss and damage in transit.
Transfer of title by non-owners
Nemo dat quod non habet ± no one can give what he doesn't have. Only an owner or his authority can make a contract of sale. Ex: a hirer of goods under the hire purchase agreement, cannot give a valid title under sale. Exceptions ± sale by a mercantile agent, sale by a joint owner, sale by a person in possession under a voidable contract, sale by a seller in possession of goods after sale, in case the later transferee is a bona fide purchaser, and the ownership in the earlier transaction has not yet passed.
A seller who has not been paid in whole. An unpaid seller has lien on the goods, can retain possession until payment is tendered. A bill of exchange has been received on a conditional term, and such condition has not been fulfilled, like dishonour of a cheque. Rights of the unpaid seller - under the Contracts Act, to recover damages under the Sale of Goods Act, against the goods and also personally against the buyer.
When the goods have been sold without any stipulation as to credit -when the term of credit has expired -when the buyer becomes insolvent.
Unpaid seller's lien on goods
Its a possessory lien, remains through the possession. It remains even after a decree for the price of goods is obtained, till the time possession is there with the seller. The lien is lost ± the goods are delivered to the carrier or the bailee - buyer or his agent obtains lawful possession of the goods - seller waives his right of lien - seller assents to a sub-sale by the buyer - seller takes a security for the payment of the price from the buyer Right of stoppage in transit ± unpaid seller can also order stoppage of delivery of goods when they are in transit. Possible when lien is absent and the buyer has become insolvent. Transit is deemed to be there till the time the buyer or his agent takes delivery of the goods. It exists even in the hands of the bailee or a carrier holding goods for transmission.
Right of stoppage in transit & Resale
Unpaid seller can take actual possession of goods. He can notify his claim to the carrier or the bailee who has possession of goods. Once notified the carrier or the bailee shall redeliver the goods to the seller, expenses being borne by the seller. RESALE - Unpaid seller can exercise this option if he has retained possession - when the goods are of a perishable nature - when the buyer fails to pay upon notice and expiration of reasonable period of time. Notice is necessary except when goods are of a perishable nature. Right of resale is available if its a contractual term. Seller retains right to claim damages, despite the original contract being rescinded.
Rights of the seller and the buyer
SELLER -Suit for the price and interest. Suit for damages for non-acceptance of goods ± seller might recover any loss that accrues to him for such non-acceptance. BUYER - Damages for non-delivery; Right to recover the price paid in case of non-delivery. Can also claim interest on price paid. Suit for specific performance; Suit for breach of condition; Suit for breach of warranty Anticipatory breach ± where the seller has repudiated the contract before the time of performance has come. Buyer can keep it open till the date, or repudiate it and claim damages.
Sale by auction
Each lot of the auction sale, is deemed to be a separate contract of sale The sale is complete when the auctioneer brings down the hammer or in any other prescribed customary manner. A right to bid may be expressly reserved , the seller or his agent may bid at the auction. If such a seller's bid may not be notified, then the seller cannot bid in the auction process. The sale may have a notified reserve price. If the seller uses bidding to raise the price, the buyer has an option to treat the sale as voidable.
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