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02

Sales of Goods
Act

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The Sales of Goods Act

 Formation of a contract of Sale
 Types of Goods
 Difference between Sale & Agreement to sell
 Conditions & Warranties
 Performance of Contract
 Unpaid Seller

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Introduction
 The law relating to sale and purchase of goods, prior to 1930 were
dealt by the Indian Contract Act, 1872.

 In 1930, Sections 76 to 123 of the Contract Act was repealed and a

separate Act known as the Sale of Goods Act, 1930 was passed.

 The provisions of the Contract Act still apply to contracts of sale of

goods except where the Sale of Goods Act, 1930 specifically provides
for the contrary.
 Transaction in the nature of sale of goods form the
subject matter of the Sale of Goods Act -1930
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Introduction
The act covers following topics:-
 Contract of sales of Goods, Warranties & Conditions arising
out of sale
 Type of Goods & Transfer of property
 Performance of contract of Sale.
 Rights of unpaid seller.
 The Act also covers the field of documents of title to Goods & the transfer
of ownership on the basis of such documents.
 The Act came into being on 01 July 1930, it extends to whole of India except
 Jammu & Kashmir .
 Business persons/entities have worked out several varieties of
contracts of sale of goods e.g. fob( free on board), c.i.f.(cost,
insurance & freight) & ex ship etc.
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Essential Features of Sale

 Bilateral Contract
 Money Consideration
 Goods
 Transfer of Property
 Essential Elements of a Contract

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Definition
A 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. (Sec. 4)

 The term contract of sale is a generic term, which includes sale and

agreement to sale both.

Essentials of a contract of Sale

 There must be at least two parties: A person can not sell to himself
or a person can not buy his own goods.
 However a part owner may sell to another part owner
 Transfer or agreement to transfer the ownership of Goods: In
a contract of sale it is the ownership that is transferred , or agreed
to be transferred , as against the transfer of mere possession or
limited transfer(as in the case of bailment or pledge)
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Essentials of a contract of Sale

3.Price is the consideration of the contract of sale:
 If goods are offered as the consideration for goods, it will not amount to sale.
It will be called as Barter.
 If price paid partly as cash & partly as value of goods, that is considered as
Sale. These are known as part –exchange contracts.
 EX: 50 Chairs valued at Rs300/= per chair. Consideration paid 100 Kg of

wheat at Rs 25/= per kg & balance amount paid as cash/cheque or by credit

card

4. Payment by Installments
 In case of sale, parties may agree that the price will be paid by installments.
Also the terms may stipulate some amount as down payment & the balance
in installments.
 In case possession is handed over to buyer & buyer defaults in payment of

installment, the seller can not take back the goods, he can only file suit for
recovery of installments

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Essentials of a contract of Sale

5. A contract of sale may be absolute or conditional:-
Sale includes Sale & Agreement to sell.
6. All other conditions as per Indian contract act
must be present in the contract of sale.
a) Parties to contract must be competent to contract.
b) Object of the contract must not be unlawful.
c) Consent of the parties must be free

7. Subject matter of the contract of sale must be ‘Goods’

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Goods
Goods means every kind of movable property other
than
 actionable claims and money and includes stocks and shares,
growing crops, grass and things attached to or forming part
of the land
 which are agreed to be severed before sale or under the
contract of sale. [Sec 2(7)]

 Example : Trade marks, patents, copyright, good will,

water,gas, electricity are all goods & dealt under sales Act
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Goods
Goods means every kind of movable property other than
 actionable claims and money and includes stocks and shares,
growing crops, grass and things attached to or forming part of
the land
 Actionable claims are things which a person can not make use
of , but which can be claimed by him by means of a legal action ,
e.g. , a debt
 ‘Money’ itself can not be the subject of sale . Because price of
goods has to be expressed in terms of money. Therefore money
itself can not be the subject of sale. Foreign currency may ,
however be bought & sold.

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 Classification of Goods 10-11

 a) Existing goods - Goods which either owned or possessed by the seller at the
time of contract of sale.
 i) Specific goods - Means goods identified and agreed upon at the time a
contract of sale is made.
 ii) Ascertained goods - When, out of a mass or a lot of unascertained
goods, the quantity extracted is identified and earmarked for a given contract.
 iii) Unascertained goods : Generic or unascertained goods are goods
indicated by description & not specifically identified.
 EX: , Anthony , who owns a TV show room , has 100 TV sets on display &
agrees to sell one of them to Mathew . The contract is for unascertained
goods, since which particular TV set is to be sold has not been specified at the
time of sale
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Classification of Goods
 b) Future goods - Means goods to be manufactured or produced or
acquired by the seller after making of the contract of sale.
 Ex: Kulkarni agrees to sell future crop of a particular agricultural field in the next
season. This is called a contract to sell future goods.

 c) Contingent goods - The goods the acquisition of which by the seller

depends upon a contingent event which may or may no happen .

 Contingent goods is apart of future goods.

 EX: Alka agrees to sell Bhola a certain painting only if Chetan, its
present owner, sells it to her. This painting is classified as Contingent
Goods


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The Price
 Pricemeans the money consideration for a sale of
goods. [Sec 2(10)]
 Price can be fixed in the following ways :
 by the contract or terms of agreement, or

 may be determined by course of dealing between the parties.

 It may be the price prevailing on a particular day, or

 price to be fixed by a third party.

 When price is not capable of being fixed by any of the above

modes,
 the buyer shall pay the seller a reasonable price.

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Sale & Agreement to Sale
 Where under a contract of sale, the property(ownership ) in
goods is transferred from seller to buyer, it is called sale( Sec
4(3))
sale is an Executed Contract
Ex : Sham sells his car to Bhim for Rs 1 lakh. Thus sale takes place when the
ownership of the car stands transferred from Sham To Bhim.
 This is so even if payment of price of car the delivery of car or both have

been postponed.
 Agreement to sell means a contract of sale under which the
transfer of property in goods is to take place at a future date or subject to
some conditions thereafter to be fulfilled.
Ex: Amar agrees to sell certain goods to Akbar. The goods are on their way
from
London to Mumbai in a ship.
The ownership in goods will pass to buyer when the goods arrive at Mumbai &
agreement
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 Distinction between Sale & Agreement to Sell 10-15

S.No Sale Agreement to sell

1 Sale is an Executed contract
2 Since the ownership passes to the
buyer, the seller can sue the buyer
for the price of goods , if the latter
makes a default in payment
It is an Executory contract
In case of breach the seller can only sue
for damages, unless the price was
payable at a stated date.

3 It creates a right in rem, i.e. It creates a right in personam i.e.

against the whole world against the specified person only
4 In case of loss of goods , the loss The loss in this case shall be borne by
will fall on the buyer, even though the seller, even though the goods are in
the goods are in the possession of the possession of the buyer.
the seller. It is because the risk is
associated with the ownership.
5 In case, the buyer pays the price, In this case the buyer can not claim the
& the seller thereafter becomes goods but only a ratable dividend for
Insolvent , the buyer can claim the the money paid.
goods from the official receiver or
assignee as the case may be .
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S.No Sale Agreement to sell

5 Seller becomes Insolvent: In this case the buyer can not claim the
In case, the buyer pays the price, goods but only a ratable dividend for
& the seller thereafter becomes the money paid.
Insolvent , the buyer can claim the
goods from the official receiver or
assignee as the case may be .
6 If the buyer becomes insolvent Under this, the seller can refuse to
without paying the price, the deliver the goods to the official receiver
ownership having passed to the or assignee , as the case may be
buyer, the seller shall have to
deliver the goods to the official
receiver or assignee, as the case
may be , except where he has a
lien over the goods.

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Conditions and Warranties
 A contract of sale of goods contains various terms or stipulations
regarding the quality of goods, the price , mode of payment, delivery of
goods & its time and place of delivery. All these are termed as
Stipulations.
 All of these terms or stipulations are not of equal importance
 Some of these stipulations may be major terms which go to

the very root of the contract( Conditions)

 There may be some stipulations which may be minor terms ;

 which are not so vital that that there breach may seem to be

a breach of the contract as such( Warranty)

 Thus a stipulation in a contract of goods may be a condition

or a warranty.

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Meaning of Condition
 A condition is stipulation to the main purpose of the contract the breach
of which gives rise to a right to treat the contract as repudiated.
Ex: 1
 Kapil ask a dealer to supply him a horse which can run 50 Km /hour.

 The dealer gives him a particular horse.

 Kapil purchased the horse but found him unsuitable/horse can not run

50km/hour.
 In this case suitability of Horse to run at 50km/hour was a condition of

contract.
 Kapil is therefore entitled to reject the horse & get refund of the price

paid.
 Ex:2

 Dealer to supply shirts which will not shrink after wash ( essential

condition for supply of goods)

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Meaning of Warranty
 A warranty is a collateral to the main purpose of the contract the
breach of which gives rise to a claim for the damages but not a right to
reject the goods & treat the contract as repudiated.
Ex: 1
 Kaushal ask a dealer to suggest him a good car & while suggesting the

dealer said that it could give mileage of 20 km /ltr

 But the car could run only 15km /ltr of patrol.

 In this case statement made by the dealer was a warranty. Kaushal was

therefore not entitled to reject the car but he is entitled to claim the
damages.
 Conditions & warranties may be either expressed or implied

 These are said to be express when at the will of the parties these are

inserted in a contract.
 Ex: A buyer desires to buy a Sony TV Model Bravia : No 2062. Here

Model No is an express condition.

 In an advertisement for Orient fans, guarantee of 5 years is an express

warranty
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How to determine whether a Stipulation is a

warranty or Condition
 Whether a stipulation in a contract of sale is a condition or warranty
depends on each case in the construction of the contract.
 A stipulation may be a condition though , called a warranty in the

contract.
Distinction between Condition & Warranty
 S.No Points of Distinction
Stipulation :
A condition is an essential stipulation to the main purpose of the contract
Warranty is a stipulation collateral to the main purpose.
Breach
Breach of condition gives right to repudiate the contract and also to
claim the damages
Breach of warranty gives rise to claim damages only
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How to determine whether a Stipulation is a

warranty or Condition
Distinction between Condition & Warranty
Points of Distinction
Treatment
Breach of condition may be treated as breach of warranty
A breach of warranty can not be treated as a breach of condition

Express conditions & Warranties

 Conditions & warranties may be either expressed or implied .They are
said to be expresses when at the will of the parties these are inserted into
the contract.
Examples:
1. Buying a TV : Model No make & Size is a express condition
2. Advertisement of Khaitan fan , guarantee of 5 years is a warranty.
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Express Conditions & Warranty

Express conditions & Warranties

 Conditions & warranties may be either expressed or implied .They

are said to be expresses when at the will of the parties these are
inserted into the contract.

Examples:
1. Buying a TV : Model No make & Size is a express condition
2. Advertisement of Khaitan fan , guarantee of 5 years is a warranty.

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Types of Implied Conditions
 Conditions & warranties are said to be implied when the law presumes
their existence in the contract automatically though these have not been
put into it in express words. These are as under:-
 a) Condition as to title
 b) Sale by description
 c) Sale by Sample
 d) Sale by description as well as sample
 e) Condition as to fitness or quality
 f) Condition as to Merchantability
 g) Conditions implied by trade usage
 h) Condition as to wholesomeness
 i) Marketability

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Implied Conditions
 Unless otherwise agreed, the law incorporates into the contract of sale the
following Implied Conditions:-
Condition as to Title
 In the case of sale, the seller has the right to sell the goods & that in case
of Agreement to sell, he will have a right to sell the goods at a time when
the ownership is to pass from seller to buyer.
 As a consequence of above, if the title turns out to be defective the buyer
is entitled to reject the goods & claim the refund of the price(if paid) plus
damages.
 This will be allowed even if the buyer has used the goods.
Ex:
 Kamal purchases a car from Bimal who has no title to it. Kamal uses the
car far few days
 After the true owner spots the car & demands it from Kamal.

 Kamal is bound to hand over the car to its true owner & he can sue
Bimal , the seller without title , for the recovery of the purchase price
even though he has used the car for few days.
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Implied Conditions
 Unless otherwise agreed, the law incorporates into the contract of sale the
following Implied Conditions:-
Sales by Description
 When there is a contract for the sale of goods by description there is an
implied condition that the goods shall correspond with the description

Examples:
 A shirt described as 100% cotton , should not contain man made fabric.

 A ship was sold by description viz,’ Copper –fastened vassel’, but actually
it was only partly copper –fastened. The condition as to sale by
description is broken.

 A car is sold as a new car. The buyer finds it as used one. The buyer may
reject the car , or retain the car & claim damages.

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Implied Conditions
 Unless otherwise agreed, the law incorporates into the contract of sale the
following Implied Conditions:-
Condition as to quality or fitness (Sec 16(1))
 As a general rule, a buyer is supposed to satisfy himself about the quality
of goods he purchases
 & is also charged with the responsibility of seeing for himself that the
goods suit the purpose for which he buys them
 Thus later on , if the goods purchased turn out to be unsuitable for the
purpose for which he bought them , the seller can not be asked to
compensate
There are certain exceptions to this rule.
Ex: If you ask sales man to recommend a heavy duty carpet which would
be suitable for lounge, it should not be threadbare after a couple of
months.
 It is only in these exceptional circumstances that there is an implied
condition as to the quality or fitness.

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Implied Conditions
 Some of the exceptional circumstances that there is an implied condition
as to the quality or fitness.
 where the buyer, expressly or by implications, makes known to the seller
the particulars purpose for which the goods are required,
so as to show that the buyer relies on the seller’s skill or judgment &
the goods are of the description which it is in the course of seller’s business
to supply( whether he is a manufacturer or producer or not) .

 There is an implied condition that the goods shall be reasonably fit for
such purpose.

For this exception to operate all three conditions must be fulfilled:

 The purpose must have been disclosed(expressly or implied).

 The buyer must have relied on the skill or judgment of the seller.

 The seller business must be to sell such type of goods

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Implied Conditions
 Some of the exceptional circumstances that there is an implied condition
as to the quality or fitness.
 EX:

 Mohan has no special knowledge of hot water bottles, purchases a hot

water bottle from a chemist.
 The bottle bursts & injures his wife.

 The chemist would be liable for refund of price & damages as there is
breach of an implied condition as to fitness.

 Condition as to merchantable quality (Sec 16(2))

 Another implied condition is that goods must be merchantable.

 These must be saleable in the market under the denomination mentioned.

 Thus the quality of goods is such that reasonable persons would accept
them as performance of a promise.
 This means if you buy a washing machine , it should work actually

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Implied Conditions
EX:
 Amar buys a black yarn from Dalip & finds it to be damaged by white
ants. The condition as to merchantability is broken from a chemist.
 Where, however the buyer examines the goods prior to sale, there is no
implied condition as to merchantability as regards defects which such
examination ought to have revealed.

 Example:
 A certain skins of ‘fair average quality ‘ are sold.

 The inspection of skin even by a specialist does not show any defects.

 But when the skins are processed, certain defects are found which are not
visible in their dry conditions.
 The implied condition of merchantability is broken , as the defect were
latent.

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Conditions and Warranties
 As a general rule, a person buying something, is duty bound to see
whether that thing suits his propose.
 This is called the doctrine of caveat emptor.

 The expression ‘Caveat Emptor’ means let the buyer beware

. It is not part of the ‘seller’s duty to pin point defects of the goods which
he offers for sale, rather it is the duty of buyer to satisfy himself about the
quality as well as suitability of goods.

 When a seller gives an express assurance regarding the product, he is

bound to honor that.
 Law presumes that product should meet certain minimum standards,

 breach of which has the same effect as the breach of express assurances

or stipulations.
 Such legal presumptions are called implied conditions and warranties.

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Caveat Emptor & Exceptions [Sec16]
 Where the seller makes a misrepresentation of fact;
 where the seller actively conceals a defect in the goods;
 where goods are supplied by description and they do not corresponds with
the description;
 where the goods are supplied by description and they are not of
merchantability quality;
 when goods are sold by sample, and the goods do not correspond with the
sample;

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 when the goods are sold by sample as well as description, and the bulk
of the goods do not match either the sample or description, or both;
 where the buyer relies upon the skill and judgement of the seller;
 where trade usages or customs implies some condition or warranty and
the seller deviates from that.

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Implied Warranties
 Law of sales of goods has following implied warranties.:-
Warranties as to Quite Possession: Sec14(b)
 In a contract of sale, unless contrary intention appears, there is an
implied warranty that the buyer shall have & shall enjoy quiet
possession of goods.
 Thus if the right of enjoyment or possession of the buyer is disturbed by
the seller or any other person, the buyer is entitled to sue for damages.
Example : Mohan buys a car from Michel, a motor mechanic. Mohan give
car for repairs . Michel refuses to return the car…….
Warranties of freedom from encumbrances : S.14(c)
 The buyer is entitled to another warranty that goods are free from any
charge or encumbrances in favor of a third person , not declared to
known to the buyer.
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Implied Warranties
Warranties of freedom from encumbrances : S.14(c)
 The buyer is entitled to another warranty that goods are free from any
charge or encumbrances in favor of a third person , not declared to
known to the buyer.
 Thus, this implied warranty will not be applicable , where the buyer has
been informed o the encumbrance or has a notice of the same .
 Further, the claim under this warranty shall be available only when the
buyer discharges the amount of encumbrance.
 Ex: Xavier borrowed Rs 1 lakh from Mohan & hypothecated his car
with Mohan as security.
 Later Xavier sold his car to Zaffar , who bought it in good faith. Here
Zaffar can claim damages from Xavier because his possession is
disturbed by Mohan having a charge or encumbrance.
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Implied Warranties
Warranties of disclosing the dangerous nature of goods to the ignorant
buyer : S.14(c)
 There is an implied warranty on the part of the seller that in case the
goods are of dangerous nature he will warn the ignorant buyer of the
probable danger.
 Ex: Chand purchased a tin of disinfected powder from Amar .
 Amar knows that the lid of tin is defective & if it is opened without
special care, it may be dangerous., but tells nothing to Chand.
 Chand opens the tin in a normal way , where upon the disinfectant
powder flies into his eyes& causes injury.
 Amar is liable to pay damages to chand as he should have warned Chand
of the probable danger.

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Implied Warranties
 Law of sales of goods has following implied warranties.:-
Warranties as to Quite Possession.: In a contract of sale, unless contrary intention
appears, there is an implied warranty that the buyer shall have & shall enjoy
quiet possession of goods. Thus if the right of enjoyment or possession of the
buyer is disturbed by the seller or any other person, the buyer is entitled to sue
for damages.
Example
 Warranties as to free from encumbrance.
 Warranty as to disclosure of dangerous nature of the goods.
 Warranty implied by customs.
 Conditions reduced to Warranty.
 Waiver by Buyer.
 Acceptance of the goods by the buyer.

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 Implied Conditions
 A condition is a stipulation essential to the main purpose of the contract,
the breach of which gives rise to a right to treat the contract as
repudiated. [Sec 12(12)]
 Implied Warranties

 A warranty is a stipulation collateral to the main purpose of the contract,

breach of which gives rise to a claim for damages, but not a right to reject
the goods and treat the contract as repudiated. [Sec 12(3)]

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Passing of Property
 Transfer of property in the goods to the buyer is the main object .
 The significance of transfer of property is that risk travels with property.
 After the formation of the contract but before the delivery of goods the
questions regarding the rights and obligation are very crucial in the wake
of risk of loss being associated with property.

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Effect of Passing of Property

 1. Risk Travels with Property

 2. Action against third parties
 3. Insolvency of seller or buyer
 4. Seller's right for price

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Rules regarding Passing of property

 Goods must be specific or ascertained.

 Property passes when intended to pass.
 Sale of Specific Goods
 a) Passing of property at the time of contract.
 b) Goods to be put in deliverable state.
 c) Goods to be weighed or measured for ascertaining their price.
 d) Sale on approval.

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Delivery to carrier

 Where the goods are delivered to the buyer or to a carrier or other bailee
for the purpose of transmission to the buyer,
 the seller is deemed to have appropriated the goods to the contract.
 Provided without reserving the right of disposal.

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Reservation of right of disposal
 The seller may reserve the right of disposal until certain conditions are
fulfilled. For example –
 Where buyer is to pay for the goods before delivery,

 Where by the BoL or R/R, the goods are deliverable to the order of the

seller or his agent,

 Where the seller draws a BoE and send the same along with the BoL or

R/R to secure buyer's acceptance or payment.

 The property in the goods does not pass to the buyer until the conditions

are fulfilled.

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Transfer of Title
The principle of Nemo dat quod non habet
Exceptions -

Transfer of title by Estoppel.

Sale by Mercantile Agent.

Sale by joint owner.

Sale by person in possession under voidable

contract.
Seller in possession after sale.

Buyer in possession before sale.

Resale by an Unpaid Seller.

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Other Exceptions
Finder of lost goods can convey a better title
under certain circumstances.
Pawnee or pledgee of goods can transfer a better
title under certain circumstances.
Sale by Official Receiver or Assignee in case of
insolvency can transfer a better title in spite of
not being owner of the goods.
A holder in due course gets better title of a
negotiable instrument than the transferor.
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Performance of Contract

LESSON-4

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Performance of Contract
 It is the duty of the seller to deliver the goods and of
the buyer to accept and pay for them. [Sec 31]
 Unless otherwise agreed, delivery of the goods and

payment of the price are concurrent conditions. [Sec

32]
 Delivery may be made by doing anything that shall

be treated as delivery, or
 which has the effect of putting the goods in the

possession of the buyer, or

 of any person authorized to hold them on his behalf.

[Sec 33]
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Modes of Delivery
• a) Actual Delivery
• b) Constructive Delivery
• Constructive delivery may take place in either of the
three ways -
• i) seller in possession of goods after sale agrees to
hold them on behalf of the buyer; or
• ii) buyer is in possession of the goods and the seller
agrees to his holding the goods as owner; or
• iii) a third person in possession of goods acknowledges
to the buyer that he is holding them on his behalf.
• c) Symbolic Delivery
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Part Delivery

A delivery of part of goods, in progress of the

delivery of the whole, has the same effect, as a
delivery of the whole;
but a delivery of part of the goods, with an
intention of severing it from the whole does not
operate as a delivery of the remainder. [Sec 34]

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Duty of buyer to apply for delivery
In the absence of any express contract, the seller
of goods is not bound to deliver them unless the
buyer applies for delivery. [Section 35]
Even when the goods are to be acquired by the
seller, and when they are acquired, and the seller
notifies the buyer that the goods are in his
possession, the buyer must apply for the delivery.
The buyer has no cause of action against the
seller if he does not apply for delivery, unless
otherwise agreed.
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Place of Delivery
 The place of delivery of goods may be specified in the
contract itself.
 Where no place is specified in the contract, the
following rule shall apply –
a) in case of sale, goods sold are to be delivered at
the place at which they are at the time of sale,
b) in case of an agreement to sale, goods are to be
delivered at the place at which they are at the time of
the agreement to sell,
c) if at the time of agreement to sell the goods are
not in existence, they are to be delivered at the place
where they are manufactured or produced.
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• Where the goods are in the possession of a third

person, there is no delivery by seller to buyer until
such person acknowledges to the buyer that he
holds the goods on his behalf.
• Unless otherwise agreed, the expenses of and
incidental to putting the goods into a deliverable
state shall be borne by the seller.
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Delivery in wrong quantity [Sec

37]
Short delivery
Excess delivery
Delivery of mixed goods
Installment deliveries

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Delivery to Carrier/Wharfinger
• Delivery of the goods to a carrier or to a wharfinger is
deemed to be a delivery to buyer.
• The seller shall make such contract with the carrier or
wharfinger on buyer's behalf as may be reasonable
having regard to the nature of goods and other
circumstances.
• If the seller omit to do so, and the goods are lost or
damaged, the buyer may decline the delivery to himself.
• Where goods are sent by sea, the seller shall give notice
to the buyer to enable him to insure them, if he fails to do
so, the goods shall be deemed to be at his risk.
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Duties of the buyer
• Duty to accept the goods and pay for them in
exchange of possession.
• Duty to apply for delivery of goods.

• Duty to demand delivery at a reasonable hour.

• Duty to accept installment delivery and pay for it.

• Duty to take risk of deterioration in the course of

transit.
• Duty to intimate the seller where he rejects the goods.

• Duty to take delivery.

• Duty to pay the price.

• Duty to pay damages for non-acceptance.

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Unpaid Seller & His Rights
Who is an unpaid seller?
 The seller of goods is deemed to be an "unpaid" seller –
1. when the whole of the price has not been paid or tendered; or
2. when a bill of exchange or other negotiable instruments has
been received as conditional payment,
3. theconditions has not been fulfilled by reason of the dishonor
of the instrument or otherwise. [Sec 45(1)]

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Rights of Unpaid Seller

 Rights of unpaid seller classified under two sub heads:-

1. Rightsunder sec 73-74 of the Indian Contract Act -1872. To

recover damages for breach of contract

1. Rights under sales of Goods Act -1930

* Rights against the goods
* Rights against the buyer personally

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Rights against the Goods

1. When the property in the goods has passed to the buyer,
the unpaid seller, by implication of law has following
rights:--
 Right of lien on the goods

 Right of Stoppage of goods in transit

 Right of Resale


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lien on the goods ( Sec 47-49)
The word lien means to retain possession of---goods
 An unpaid seller who is in possession of goods is entitled to retain them in
his possession until payment or the tender of the price, in three
situations, namely:-
1. Where the goods have been sold without any stipulation as to the credit
2. Where the goods have been sold on credit, but the terms of credit has
expired.
3. Where the buyer becomes insolvent.
 Lien can be exercised for non payment of price & not for
any other charges due against the buyer.
 E.g. Seller can not claim lien for godown charges for storing the goods in
exercise of his lien for for price.


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lien on the goods ( Sec 47-49)

 Lien can be excersied only for nonpayment of the price &
not for any other charges due against the buyer
Example:
 Amar buys certain goods from Suraj, & agrees to pay for
them later,
 Amar leaves the Goods with Suraj to be sent to him later.
 Amar becomes insolvent during this period & Suraj comes to
know of it.
Q. Can Suraj have a right of lien on the goods
purchased by Amar?
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Unpaid Seller’s lien – How it is lost?

 An unpaid seller loses his lien in following five cases:-
1. When the seller delivers the goods to a carrier or other bailee for the
purpose of transmission to the buyer, without reserving the right of
disposal of goods to himself, e.g. takes Railway Receipt in the name of
buyer or his Agent.
2. Where buyer or his Agent lawfully obtains possession of the goods
3. The Seller waives his right of lien.
4. Where the seller gives his consent to a sub –sale by the buyer.
5. Where the seller takes a security from the buyer for payment of the
price in place of his lien

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Right of Stoppage in Transit

 This right of unpaid seller consists of preventing the goods from being
delivered to the buyer & resuming & regaining their possession while in
transit, retaining them till price is paid.
 The right of stoppage is earned only when the right of lien is lost
 & is available only where the buyer has become
insolvent(Section-50)
 to a carrier or other bailee for transmission to the buyer without
reserving the right of disposal;
 when the buyer or his agent lawfully obtain possession of the goods; and
 by waiver thereof.

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Termination of lien [Section 49]

 When he delivers the goods to a carrier or other bailee for transmission

to the buyer without reserving the right of disposal;
 when the buyer or his agent lawfully obtain possession of the goods; and
 by waiver thereof.

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Right of Stoppage in Transit
Delivery to buyer
 Goods are deemed to be in course of transit from the time when they are
delivered to a carrier or a bailee, until the buyer or his agent takes delivery
of them from such carrier or other bailee.
When does the transit ends?
Transit comes to end in the following situations:-
 When goods reach at the hands of buyer or his Agent.

 If the buyer or his agent takes delivery of the goods from the
carrier before their arrival at the appointed destination.

 If after goods have arrived at their destination and the carrier

acknowledges to the buyer or his agent that he is now holding the
goods on his behalf, the transit is at the end. i.e On Acknowledgement
to buyer.

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When does the transit ends?
Wrongful refusal to deliver
 Where the carrier wrongfully refuses to deliver the goods to the buyer or
his agent, the transit is at an end.

Part delivery
 Where the goods have been delivered in part, the seller may stop the
remainder of the goods, unless the part delivery shows an agreement to
give up the possession of the whole.

Rejection by buyer
 If the goods are rejected by the buyer, and the carrier or other bailee
continues in possession of them, the transit is not at an end.

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When transit comes to an end
Ship chartered by buyer
 Where the goods are delivered to a ship chartered by the buyer, the carrier
is the agent of the buyer. The transit comes to an end as soon as the goods
are loaded on the ship
Goods Delivery destination changed
 When goods to be delivered at a particular place, buyer ask seller to
deliver these at a different place, transit continues till goods reach at the
new station.
Good rejected by Buyer
Ex: Badal at Delhi orders goods from Amar at Jammu. Amar sends the
goods to Badal’s warehouse.
 Badal refuses to take goods & stops payment.
 The goods are deemed to be in transit & unpaid seller can take them back
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When transit comes to an end

 Goods are delivered on board the ship belonging to a buyer.

 Under the bill of lading the goods are delivered to the buyer or
his Agent.

 Sucha bill of lading is a delivery to the buyer& therefore there

could be no right of stoppage in transit.

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Right of resale [Sec 54]

 Right of resale is a valuable right given to the unpaid seller.
 Right of lien & Stoppage in transit entitle unpaid seller to retain goods

until paid by buyer.

 If buyer continues to remain in default , then unpaid seller has got limited

right( under sec 54) to resell the goods in the following cases:-
1. Where goods are of perishable nature;

2. or where such a right is expressly reserved in the contract in case the

buyer should make a default; or
3. Where the seller has given notice to the buyer of his intention to resell &
the buyer does not pay or tender the price within a reasonable time.
 If on resale there is loss:------

 If on resale there is profit to seller:----------

 If no notice of resale is given:---------------

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Right of resale [Sec 54]

 A contract of sale is not rescinded by mere exercise of right of lien or
stoppage in transit.
 Where the unpaid seller gives notice to the buyer of his intention to resell,

he may resell the goods and recovers from the buyer damages for any loss.

 If no notice is given, the unpaid seller is not entitled to recover damages

and the buyer shall be entitled to the profit.

 Where the seller reserves a right of resale and sells the goods, the original
contract is thereby rescinded, but without prejudice to any claim by the
seller.

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Seller's remedies against Buyer
• Suit for price.
• Damages for non-acceptance.
• Damages are assessed as follows:
• Where the goods have a ready market, the buyer has to pay the loss that
the seller has sustained on reselling the goods.
• If the seller does not resell the goods, the difference between
the contract and market price on the day of breach is the
measure of damages.

• Where the goods are deliverable by installments, the

difference in prices is to be reckoned on the day that a
particular installment was to be delivered.

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Buyer's Remedies against Seller
1. Damages for non-delivery.

2. Remedy for breach of warranty.

3. Specific Performance.

4. Anticipatory breach.

5. Recovery of interest.

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Auction Sales [Sec 64]

 An auction sale is complete when the auctioneer announces its completion
by the fall of the hammer.
 The bidder can withdraw before the acceptance of his bid and his security

amount cannot be forfeited.

 The law does not prevent the seller from bidding provided he expressly
reserve the right to bid.

 If the seller appoint a puffer (persons who make bids in order to prompt
bidding at higher prices), the sale is voidable at the option of the buyer.

 Auction subject to a reserve or upset price means a price below which the
auctioneer will not sell.

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Knock out Agreement

• An agreement among bidders not to bid against each other.
• It is a combination to prevent competition inter se.
• An arrangement that only one of them will bid and dispose of anything so
obtained privately among themselves.
• Not illegal per se but if the intention is to defraud a third party then
knock out is illegal.

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Damping
 An unlawful act discouraging the intending purchaser from bidding –
 by pointing out defects in the goods in the auction sale; or
 by taking away the intending purchaser from the place of auction by
some other method.
 Damping is illegal and the auctioneer is entitled to withdraw the goods
from the auction.

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THANKS

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