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BUSINESS LEGISLATION

BUSINESS LEGISLATIONUNIT II

K L UNIVERSITY

[Pick the date]

Authored by: SAMBASIVUDU (10102481) NAVEEN (10102480)

Under the esteemed guidance of

V.SRINIVAS

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Unit II

The Sale of Goods Act, 1930---------------------------------------------------(Act no. 3 of 1930)

CONTENTSSections ParticularsPreambleChapter 1 Preliminary1 Short Title, Extent and Commencement2 Definitions3 Application of provisions of Act 9 of 1872Chapter 2 Formation of the Contract4 Sale and agreement to sell5 Contract of sale how made6 Existing or future goods7 Goods perishing before making of contract8 Goods perishing before sale but after agreement to sell9 Ascertainment of price

10 Agreement to sell at valuation11 Stipulations as to time12 Condition and warranty13 When condition to be treated as warranty14 Implied undertaking as to title, etc15 Sale by description16 Implied conditions as to quality or fitness17 Sale by sampleChapter 3 Effects of the Contract18 Goods must be ascertained19 Property passes when intended to pass

20 Specific goods in a deliverable state21 Specific goods to be put into a deliverable state22 Specific goods in a deliverable state, when the seller has to doanything theretoin order to ascertain price23 Sale of unascertained goods and appropriation. Delivery to carrier24 Good sent on approval or "on sale or return"25 Reservation of right of disposal26 Risk prima facie passes with property27 Sale by person not to owner

28 Sale by one of joint owners29 Sale by person in possession under voidable contract

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30 Seller or buyer in possession after saleChapter 4 Performance of the Contract31 Duties of seller and buyer32 Payment and delivery are concurrent conditions33 Delivery

34 Effect of part delivery35 Buyer to apply for delivery36 Rules as to delivery37 Delivery of wrong quantity38 Installment deliveries39 Delivery to carrier or wharfinger40 Risk where goods are delivered at distant place41 Buyer's right of examining the goods42 Acceptance43 Buyer not bound to return rejected goods44 Liability of buyer for neglecting or refusing delivery of goodsChapter 5 Rights of unpaid seller against the goods45 "Unpaid seller" defined46 Part delivery47 Seller's lien48 Part delivery49 Termination of lien50 Right of stoppage in transit51 Duration of transit52 How stoppage in transit is effected53 Effect of sub-sale or pledge by buyer

54 Sale not generally rescinded by lien or stoppage in transitChapter 6 Suits for Breach of the Contract55 Suit for price56 Damages for non-acceptance57 Damages for non-delivery58 Specific performance59 Remedy for breach of warranty60 Repudiation of contract before due date61 Interest by way of damages and special damagesChapter 7 Miscellaneous62 Exclusion of implied terms and conditions

63 Reasonable time a question of fact64 Auction sale64A In contracts of sale, amount of increased or decreased taxes to beadded ordeducted65 Repeal66 Savings

LAW OF AGENCY1 Definition

2 Kinds of agents3 Creation of agency

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4 Rights and duties of agent and principal5 Termination of agency

The Sale of Goods Act, 1930Preamble

3 of 1930(15th March, 1930)An Act to define and amend the law relating to the sale of goods.WHEREAS it is expedient to define and amend the law relating to the saleof goods, it is herebyenacted as follows: -

Chapter 1 - Preliminary1. Short title, extent and commencement.- (1) This Act may be calledthe Sale of Goods Act,1930.2) It extends to the whole of India (except the State of Jammu and

Kashmir).(3) It shall come into force on the 1st day of July, 19302. Definitions .- In this Act, unless there is anything repugnant in thesubject of content-(1) buyer" means a person who buys or agrees to buy goods,(2) "delivery" means voluntary transfer of possession from one person toanother3. Applications of provisions of Act 9 of 1882.- The unrepealedprovisions of the IndianContract Act, 1872 save insofar as they are inconsistent with the expressprovisions of this Act,shall continue to apply to contracts for sale of goods.

Chapter 2 - Formation of the Contract4. Sale and agreement to sell.- (1) A contract of sale of goods is acontract whereby the sellertransfers or agrees to transfer the property in goods to the buyer for aprice. There may be acontract of sale between one part-owner and another.(2) A contract of sale may be absolute or conditional(3) Where under a contract of sale the property in the goods in transferredfrom the seller to the

buyer, the contract is called a sale, but where the transfer of the propertyin the goods is to takeplace at a future time or subject to some condition thereafter to befulfilled, the contract is calledan agreement to sell.(4) An agreement to sell becomes a sale when the time elapses or theconditions are fulfilledsubject to which the property in the goods is to be transferred.5. Contract of Sale how made -. (1) A contract of sale is made by anoffer to buy or sell goodsfor a price and the acceptance of such offer. The contract may provide forthe immediate delivery

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of the goods or immediate payment of the price or both, or for thedelivery or payment byinstalments, or that the delivery or payment or both shall be postponed.(2) Subject to the provisions of any law for the time being in force, acontract of sale may be

made in writing or by word of mouth, or partly in writing and partly byword of mouth or may beimplied from the conduct of the parties.6. Existing or future goods.- (1) The goods which form the subject of acontract of sale may beeither existing goods, owned or possessed by the seller, or future goods.(2) There may be a contract for the sale of goods the acquisition of whichby the seller dependsupon a contingency which may or may not happen.(3) Where by a contract of sale the seller purports to effect a present saleof future goods, thecontract operates as an agreement to sell the goods.7. Goods perishing before making of contract.- Where there is acontract for the sale ofspecific goods, the contract is void if the goods without the knowledge ofthe seller have, at thetime when the contract was made, perished or become so damaged as nolonger to answer totheir description in the contract.8. Goods perishing before sale but after agreement to sell.- Wherethere is an agreement to

sell specific goods, and subsequently the goods without any fault on thepart of the seller orbuyer perish or become so damaged as no longer to answer to theirdescription in the agreementbefore the risk passes to the buyer, the agreement is thereby avoided.9. Ascertainment of price.- (1) The price in a contract of sale may befixed by the contract ormay be left to be fixed in manner thereby agreed or may be determinedby the course of dealingbetween the parties.(2) Where the price is not determined in accordance with the foregoing

provisions, the buyershall pay the seller a reasonable price. What is a reasonable price is aquestion of fact dependenton the circumstances of each particular case.10. Agreement to sell at valuation.- (1) Where there is an agreementto sell goods on the termsthat the price is to be fixed by the valuation of a third party and such thirdparty cannot or doesnot make such valuation, the agreement is thereby avoided.Provided that, if the goods or any part thereof have been delivered to, and

appropriated by, thebuyer, he shall pay a reasonable price therefor.

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(2) Where such third party is prevented from making the valuation by thefault of the seller orbuyer, the party not in fault may maintain a suit for damages against theparty in fault.11. Stipulations as to time.- Unless a different intention appears from

the terms of the contract,stipulations as to time of payment are not deemed to be of the essence ofa contract of sale.Whether any other stipulations as to time is of the essence of the contractor not depends on theterms of the contract.12. Condition and warranty.- (1) A stipulation in a contract of sale withreference to goodswhich are the subject thereof may be a condition or a warranty.(2) A condition is a stipulation essential to the main purpose of thecontract, the breach of whichgives rise to right to treat the contract as repudiated.(3) A warranty is a stipulation collateral to the main purpose of thecontract, the breach of whichgives rise to a claim for damages but not to a right to reject the goods andtreat the contract asrepudiated.(4) Whether a stipulation in a contract of sale is condition or a warrantydepends in each case onthe construction of the contract. A stipulation may be a condition, thoughcalled a warranty in the

13. When condition to be treated as warranty.- (1) Where a contractof sale is subject to anycondition to the fulfilled by the seller, the buyer may waive the conditionor elect to treat thebreach of the condition as a breach of warranty and not as a ground forrelating the contract asrepudiated.(2) Where a contract of sale is not severable and the buyer has acceptedthe goods or part thereof,the breach of any condition to be fulfilled by the seller can only be treatedas a breach of

warranty and not as a ground for rejecting the goods and treating thecontract as repudiated,unless there is a term of the contract, express or implied, to that effect.(3) Nothing in this section shall affect the case of any condition orwarranty fulfilment of whichis excused by law by reason of impossibility of otherwise.14. Implied undertaking as to tile, etc.- In a contract of sale, unlessthe circumstances of thecontract are such as to show a different intention there is-(a) an implied condition on the part of the seller that, in the case of a sale,

he has a right to sell

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the goods and that, in the case of an agreement to sell, he will have aright to sell the goods at thetime when the property is to pass.(b) an implied warranty that the buyer shall have and enjoy quietpossession of the goods.

(c) an implied warranty that the goods shall be free from any charge orencumbrance in favour ofany third party not declared or known to the buyer before or at the timewhen the contract ismade.15. Sale by description.- Where there is a contract for the sale of goodsby description, there isan implied condition that the goods shall correspond with the description,and, if the sale is bysample as well as by description, it is not sufficient that the bulk of thegoods corresponds withthe sample if the goods do not also correspond with the description.16. Implied condition as to quality or fitness.- Subject to theprovisions of this Act and of anyother law for the time being in force, there is no implied warranty orcondition as to the qualityor fitness for any particular purpose of goods supplied under a contract ofsale, excepts asfollows:-(1) Where the buyer, expressly or by implication, makes known to theseller the particular

purpose for which the goods are required, so as to show that the buyerrelies on the sellers skillor judgement, and the goods are of a description which it is in the courseof the sellers businessto supply (whether he is the manufacturer or producer or not), there is animplied condition thatthe goods shall be reasonably fit for such purpose.Provided that, in the case of a contract for the sale of a specified articleunder its patent or othertrade name, there is no implied conditions to its fitness for any particularpurpose.

(2) Where goods are bought by description from a seller who deals ingoods of that description(whether he is the manufacturer or producer or not), there is an impliedcondition that the goodsshall be of merchantable quality.Provided that, if the buyer has examined the goods, there shall be noimplied conditions asregards defects which such examination ought to have revealed.(3) An implied warranty or condition as to quality or fitness for a particularpurpose may be

annexed by the usage of trade.

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(4) An express warranty or conditions does not negative a warranty orcondition implied by thisAct unless inconsistent therewith.17. Sale by sample.- (1) A contract of sale is a contract for sale bysample where there is a term

in the contract, express or implied, to that effect.(2) In the case of a contract for sale by sample there is an impliedcondition -(a) that the bulk shall corresponded with the sample in quality.(b) that the shall have a reasonable opportunity of comparing the bulkwith the sample.(c) that the goods shall be free from any defect, rendering them un-merchantable, whichwould not be apparent on reasonable examination of the

Chapter 3 - Effects of the Contract

18. Goods must be ascertained.- Where there is a contract for the saleof unascertained goods,no property in the goods is transferred to the buyer unless and until thegoods are sanctioned.19. Property passes when intended to pass.- (1) Where there is acontract for the sale ofspecific or ascertained goods the property in them is transferred to thebuyer at such time as theparties to the contract intend it to be transferred.(2) For the purpose of ascertaining the intention of the parties regard shallbe had to the terms of

the contract, the conduct of the parties and the circumstances of thecase.(3) Unless a different intention appears, the rules contained in Section 20to 24 are rules forascertaining the intention of the parties as to the time at which theproperty in the goods is topass to the buyer.20. Specific goods in a deliverable state.- Where there is anunconditional contract for the saleof specific goods in a deliverable state, the property in the goods passesto the buyer when thecontract is made, and it is immaterial whether the time of payment of theprice or the time ofdelivery of the goods, or both, is postponed.21. Specific goods to be put into a deliverable state.- Where thereis a contract for the sale ofspecific goods and the seller is bound to do something to the goods forthe purpose of puttingthem into a deliverable state, the property does not pass until such thingis done and the buyerhas notice thereof.

22. Specific goods in a deliverable state, when the seller has todo anything thereto in order

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to ascertain price.- Where there is a contract for the sale of specificgoods in a deliverable state,but the seller is bound to weigh, measure, test or do some other act orthing with reference to thegoods for the purpose of ascertaining the price, the property does not

pass until such act or thingis done and the buyer has notice thereof.23. Sale of unascertained goods and appropriation.- (1) Wherethere is a contract for the saleof unascertained or future goods by description and goods of thatdescription and in a deliverablestate are unconditionally appropriated to the contract, either by the sellerwith the assent of thebuyer or by the buyer with the assent of the seller, the property in thegoods thereupon passes tothe buyer. Such assent may be expressed or implied, and may be giveneither before or after theappropriation is made.(2) Delivery to carrier.- Where, in pursuance of the contract, the sellerdelivers the goods24. Goods sect on approval or on sale or return- when goods aredelivered to the buyer onapproval or on sale or return or other similar terms, the property thereinpasses to the buyer-(a) when he signifies his approval or acceptance to the seller to does notother act

adopting the transaction.(b) if he does not signify his approval or acceptance to the seller butretains the godswithout giving notice of rejection, then, if a time has been fixed for thereturn of thegoods, on the expiration of such time, and, if not time has been fixed, onthe expiration ofa reasonable time.25. Reservation of right of disposal.- (1) Where there is a contract forthe sale of specific goodsor where goods are subsequently appropriated to the contract, the seller

may, by the terms of thecontract or appropriation, reserve the right of disposal of the goods untilcertain conditions arefulfilled. In such case, notwithstanding the delivery of the goods to abuyer, or to a carrier orother bailee for the purpose of transmission to the buyer, the property inthe goods does not passto the buyer until the conditions imposed by the seller are fulfilled.(2) Where goods are shipped or delivered to a railway administration forcarriage by railway and

by the bill of landing or railway receipt, as the case may be, the goods aredeliverable to the

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order of the seller or his agent, the seller is prima facie deemed to reservethe right of disposal.(3) Where the seller of goods draws on the buyer for the price andtransmits to the buyer the billof exchange together with the bill of lading or, as the may be, the railway

receipt, to secureacceptance to payment of the bill of exchange, the buyer is bound toreturn the bill of lading orthe railway receipt if he does not honour the bill of exchange, and, if hewrongfully retains thebill of lading or the railway receipt, the property in the goods does notpass to him.Explanation.- In this section, the expression "Railway" and "Railwayadministration" shallhave the meanings respectively assigned to them under the IndianRailways Act, 1890.26. Risk Prima facie passes with property.- Unless otherwise agreed,the goods remain at thesellers risk until the property therein is transferred to the buyer, but whenthe property therein istransferred to the buyer, the goods are at the buyers risk whetherdelivery has been made or not.Provided that, where deliver has been delayed through the fault of eitherbuyer or seller, thegoods are at the risk of the party in fault as regards any loss which mightnot have occurred but

for such fault.Provides also that nothing in this section shall affect the duties orliabilities of either seller orbuyer as a bailee of the goods of the other party.27. Sale by person not the owner.- Subject to the provisions of thisAct and of any other law forthe time being in force, where goods are sold by a person who is not theowner thereof and whodoes not sell them under the authority or with the consent of the owner,the buyer acquires nobetter title to the goods than the seller had, unless the owner of the goods

is by conduct precludedfrom denying the sellers authority to sell.Provided that, where a mercantile agent is, with the consent of the owner,in possession of thegoods or of a document of title to the goods, any sale made by him, whenacting in the ordinarycourse of business of a mercantile agent, shall be as valid as if he wereexpressly authorised bythe owner of the goods to make the same, provided that the buyer act isgood faith and has not at

the time of the contract of sale notice that the seller has not authority tosell.

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28. Sale by one of joint owners.- If one of several joint owners ofgoods has the sole possessionof them by permission of the co-owners, the property in the goods intransferred to any personhow buys them of such joint owner in good faith and has not at the time of

the contract of salenotice that the seller has not authority to sell.29. Sale by person in possession under voidable contract.- Whenthe seller of gods hasobtained possession thereof under a contract voidable under Section 19 orSection 19A of theIndian Contract Act, 1872, but the contract has not rescinded at the timeof the sale, the buyeracquires a god title to the goods, provided he buys them in good faith andwithout notice of thesellers defect of title.30. Seller or buyer in possession after sale.- (1) Where a person,having sold goods, continuesor is in possession of the goods or of the documents of title to the goods,the delivery or transferby that person or by a mercantile agent acting for him of the gods ordocuments of title under anysale, pledge o other disposition thereof to any person receiving the samein good faith andwithout notice of the previous sale shall have the same effect as if theperson making the delivery

to transfer were expressly authorised by the owner of the gods to makethe same.(2) Where a person, having bought or agreed to buy goods, obtains withthe consent of the seller,possession of the goods or the documents of title to the goods, thedelivery or transfer by thatperson or by a mercantile agent acting for him, of the goods or documentsof tile under any sale,pledge or other disposition thereof to any person receiving the same ingood faith and withoutnotice of any lien or other right of the original seller in respect of the gods

shall have effect as ifsuch lien or right did not exist.

Chapter 4 - Performance of the Contract31. Duties of seller and buyer.- It is the duty of the seller to deliver thegoods and of the buyerto accept and pay for them, in accordance with the terms of the contractof sale.32. Payment and delivery are concurrent conditions.- Unlessotherwise agreed, delivery ofthe gods and payment of the price are concurrent conditions, that is to

say, the seller shall be

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ready and willing to give possession of the goods to the buyer inexchange for the price, and thebuyer shall be ready and willing to pay the price in exchange forpossession of the goods.33. Delivery.- Delivery of goods sold may be made by doing anything

which the parties agreeshall be treated as delivery or which has the effect of putting the goods inthe possession of thebuyer or of any person authorised to hold them on his behalf.34. Effect of part delivery.- A delivery of part of goods, in progress ofthe delivery of the wholehas the same effect, for the purpose of passing the property in suchgoods, as a delivery of thewhole, but a delivery of part of the gods, with an intention of severing itfrom the whole, doesnot operate as a delivery of the remainder.35. Buyer to apply for delivery.- Apart from any express contract, theseller of goods in notbound to deliver them until the buyer applies for delivery.36. Rules as to delivery.- (1) Whether it is for the buyer to takepossession of the goods or forthe seller to send them to the buyer is a question depending in each caseon the contract, expressor implied, between the parties. Apart from any such contract, goods soldare to be delivered atthe place at which they are the time of the sale, and goods agreed to be

sold are to be delivered atthe place at which they are at the time of the agreement to sell, if notthen in existence, at theplace at which they are manufactured or produced.(2) Where under the contract of sale the seller is bound to send the goodsto the buyer, but notime for sending them is fixed, the seller is bound to send them within areasonable time.(3) Where the goods at the time of sale are in the possession of a thirdperson, there is nodelivery by seller to buyer unless and until such third person

acknowledges to the buyer that heholds the goods on his behalf.Provided that nothing in this section shall affect the operation of the issueor transfer of anydocument of title to goods.(4) Demand or tender of delivery may be treated as ineffectual unlessmade at a reasonable hour.What is a reasonable hour is a question of fact.(5) Unless otherwise agreed, the expense of and incidental to putting thegoods into a deliverable

state shall be borne by the seller.

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37. Delivery of wrong quantity.- (1) Where the seller delivers to thebuyer a quantity of goodless than he contracted to sell, the buyer may reject them, but if thebuyer accepts the goods sodelivered he shall pay for them at the contract rate.

(2) Where the seller delivers to the buyer a quantity of goods larger thanhe contracted to sell thebuyer may accept the goods included in the contact and reject the rest, orhe may reject thewhole. If the buyer accepts the whole of the goods so delivered, he shallpay for them at thecontract rate.(3) Where the seller delivers to the buyer the gods he contract to sellmixed with goods of adifferent description not included in the contract., the buyer may acceptthe goods which are inaccordance with the contract and reject the rest, or may reject the whole.(4) The provisions of this section are subject to any usage of trade, specialagreement or courseof dealing between the parties.38. Installment deliveries.- (1) Unless otherwise agreed, the buyer ofgoods is not bound toaccept delivery thereof by instalments.(2) Where there is a contract for the sale of goods to be delivered bystated instalments which areto be separately paid for, and the seller makes no delivery or defective

delivery in respect of oneor more instalments, or the buyer neglects or refuses to take delivery ofor pay for one or moreinstalments, it is a question in each cased depending on the terms of thecontract and thecircumstances of the case, whether the breach of contract is a repudiationof the whole contract,or whether it is a severable breach giving rise to a claim forcompensation, but not a right to treatthe whole contract as repudiated.39. Delivery to carrier or wharfinger.- (1) Where, in pursuance of a

contract of sale, the selleris authorised or required to send the goods to he buyer, delivery of thegoods to a carrier, whethernamed by the buyer or not, for the purpose of transmission to the buyer,or delivery of the goodsto a wharfinger for safe custody, is prima facie deemed to be a delivery ofthe goods to the buyer.(2) Unless otherwise authorised by the buyer, the seller shall makes suchcontract with the carrieror wharfinger on behalf of the buyer as may be reasonable having regard

to the nature of the

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goods and the other circumstances of the case. If the seller omits so todo, and the goods are lostor damaged in course of transit or whilst in the custody of the wharfinger,the buyer madedecline to treat the delivery to the carrier or wharfinger as a delivery to

himself, or may hold theseller responsible in damages.(3) Unless otherwise agreed, where goods are sent by the seller to thebuyer by a route involvingsea transit, in circumstances in which it is usual to insure, the seller shallgive such notice to thebuyer as may enable him to insure them during their sea transit and if theseller fails so to do, thegoods shall be deemed to be at his risk during such sea transit.40. Risk where goods are delivered at distant place.- Where theseller of goods agrees todeliver them at his own risk at place other than that where they are whensold, the buyer shall,nevertheless, unless otherwise agreed, take any risk of deterioration inthe goods necessarilyincident to the course of transit.41. Buyers right of examining the goods.- (1) Where goods aredelivered to the buyer whichhe has not previously examined, he is not deemed to have accepted themunless and until he hasa reasonable opportunity of examining them for the purpose of

ascertaining whether they are inconformity with the contract.(2) Unless otherwise agreed, when the seller tenders delivery of goods tothe buyer, he is bound,on request, on request, to afford the buyer a reasonable opportunity ofexamining the goods forthe purpose of ascertaining whether they are in conformity with thecontract,42. Buyer not bound to return rejected goods.- Unless otherwiseagreed, where goods aredelivered to the buyer and he refuses to accept them, having the right so

to do, he is not bound toreturn them to the seller, but it is sufficient it he intimates to the sellerthat he refuses to acceptthem.43. Buyer not bound to return rejected goods.- Unless otherwiseagreed, where goods aredelivered to the buyer and he refuses to accept them, having the right soto do, he is not bound toreturn them to the seller, but it is he intimates to the seller that heintimates to the seller that he

refuses to accept them.

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44. Liability of buyer for neglecting or refusing delivery of goods.-When the seller is readyand willing to deliver the goods and requests the buyer to take delivery,and the buyer does notwithin a reasonable time after such request take delivery of the goods , he

is liable to the sellerfor any loss occasioned by his neglect or refusal to take delivery and alsofor a reasonable chargefor the care and custody of the goods.Provided that nothing in this section shall affect the rights of the sellerwhere the neglect orrefusal of the buyer to take delivery amounts to a repudiation of thecontract.

Chapter 5 - Rights of unpaid seller against the goods45. "Unpaid seller" defined.- (1) The seller of goods is deemed to be

an "unpaid seller" withinthe meaning of this Act-(a) When the whole of the price has not been paid or tendered.(b) When a bill of exchange or other negotiable instrument has beenreceived as conditionalpayment, and the conditions on which it was received has not beenfulfilled by reason of thedishonour of the instrument or otherwise.(2) In this Chapter, the term "seller" includes any person who is in theposition of a seller, as, forinstance, an agent of the seller to whom the bill of lading has been

endorsed, or a consignor oragent who has himself paid, or is directly responsible for, the price.46. Unpaid sellers rights.- (1) Subject to the provisions of this Act andof any law for the forthe time being in force, notwithstanding that the property in the goodsmay have passed to thebuyer, the unpaid seller of goods, as such, has by implication of law.(a) a lien on the goods for the period while he is in possession of them,(b) in case of the insolvency of the buyer a right of stopping the goods intransit after he hasparted with the possession of them.(c) a right of re-sale as limited by this Act.(2) Where the property in goods has not passed to the buyer, the unpaidseller has, in addition tohis other remedies, a right of withholding delivery similar to and co-extensive with his rights oflien and stoppage in transit where the property has passed to the buyer.47. Sellers lien.-(1) Subject to the provisions of this Act, the unpaid seller of goods who isin possession of themis entitled to retain possession of them until payment or tender of the

price in the following cases,namely :-

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(a) where the goods have been sold without any stipulations as to credit.(b) where the goods have been sold on credit, but the term of credit hasexpired.(c) where the buyer becomes insolvent.(2) The seller may exercise his right of lien notwithstanding that he in

possession of the goods asagent or bailee for the buyer.48. Part delivery.- Where an unpaid seller has made part delivery of thegoods, he may exercisehis right of lien on the remainder, unless such part delivery has beenmade under suchcircumstances as to show an agreement to waive the lien.49. Termination of lien.-(1) The unpaid seller of goods losses his lien thereon -(a) when he delivers the goods to a carrier or other bailee for the purposeof transmissionto the buyer without reserving the right of disposal of the goods.(b) when the buyer or his agent lawfully obtains possession of the goods,(c) by waiver thereof.(2) The unpaid seller of goods, having a lien thereon, not lose his lien byreason only that he hasobtained a decree for the price of the goods.50. Right of stoppage in transit.- Subject to the provisions of this Act,when the buyer of goodsbecomes insolvent, the unpaid seller who has parted with the possessionof the goods has the

right of stopping them in transit, that is to say, he may resume possessionof the goods as long asthey are in the course of transit, and may retain them until payment ortender of the price.51. Duration of transit.- (1) Goods are deemed to be in course oftransit from the time whenthey are delivered to a carrier or other bailee for the purpose oftransmission to the buyer, untilthe buyer or his agent in that behalf takes delivery of them from suchcarrier or other bailee.(2) If the buyer or his agent in that behalf obtains delivery of the goods

before their arrival at theappointed destination, the transit is at an end.(3) If, after the arrival of the goods at the appointed destination, thecarrier or other baileeacknowledges to the buyer or his agent that he holds the goods on hisbehalf and continues inpossession of them as bailee for the buyer or his agent, the transit is at anend and it is immaterialthat a further destination for the goods may have been indicated by thebuyer.

(4) If the goods are rejected by the buyer and the carrier or other baileecontinues in possession

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of them, the transit is not deemed to be at an end, even if the seller hasrefused to receive themback.(5) When goods are delivered to a ship chartered by the buyer, it is aquestion depending on the

circumstances of the particular case, whether they are in the possessionof the master as a carrieror as agent of the buyer.(6) Where the carrier or other bailee wrongfully refuses to deliver thegoods to the buyer or hisagent in that behalf, the transit is deemed to be at an end.(7) Where part delivery of the goods has been made to the buyer or hisagent in that behalf, theremainder of the goods may be stopped in transit, unless such partdelivery has been given insuch circumstances as to show an agreement to give up possession of thewhole of the goods.52. How stoppage in transit is effected.- (1) The unpaid seller mayexercise his right tostoppage in transit either by taking actual possession of the goods, or bygiving notice of hisclaim to the carrier or other bailee in whose possession the goods are.Such notice may be giveneither to the person in actual possession of the goods or to his principal. Inthe later case thenotice, to be effectual, shall be given at such time and in such

circumstances, that the principal,by the exercise of reasonable diligence, may communicate is to hisservant or agent in time toprevent a delivery to the buyer.(2) Whether notice of stoppage in transit is given by the seller to thecarrier or other bailee inpossession of the goods, he shall re-deliver the goods to, or according tothe directions of, theseller. The expenses of such re-delivery shall be borne by the seller.53. Effect to sub-sale or pledge by buyer.- (1) Subject to theprovisions of this Act, the unpaid

sellers right of lien or stoppage in transit is not affected by any sale orother disposition of thegods which the buyer may have made, unless the seller has assentedthereto.Provided that where a document of title to goods has been issued orlawfully transferred to anyperson as buyer or owner of the goods, and that person transfers thedocument to a person whotakes the document in good faith and for consideration, then, if such lastmentioned transfer was

by way of sale, the unpaid sellers right of lien of stoppage in transit isdefeated, and, if such last

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and the buyer wrongfully neglects or refuses to pay such price, the sellermay sue him for theprice although the property in the goods has not passed and the goodshave not been appropriatedto the contract.

56. Damages for non-acceptance.- Where the buyer wrongfullyneglects or refuses to acceptand pay for the goods, the seller may sue him for damages for non-acceptance.57. Damages for non-delivery.- Where the seller wrongfully neglects orrefuses to deliver thegoods to the buyer, the buyer may sue the seller for damages for non-delivery.58. Specific performance.- Subject to the provisions of Chapter II of theSpecific Relief Act,1877, in any suit for breach of contract to deliver specific or ascertainedgoods, the Court may, ifit thinks fit, one the application of the plaintiff, by its decree direct thatthe contract shall beperformed specifically, without giving the defendant the option ofretaining the goods onpayment of damages. The decree may be unconditional, or upon suchterms and conditions as todamages, payment of the price or otherwise, as the Court may deem just,and the application ofthe plaintiff may be made at any time before the decree.

59. Remedy for breach of warranty - (1) Where there is a breach ofwarranty by the seller, orwhere the buyer elects or is compelled to treat any breach of a conditionon the part of the selleras a breach of warranty, the buyer is not by reason only of such breach ofwarranty entitled toreject the goods; but he may-(a) Set up against the seller the breach of warranty in diminution orextinction of theprice; or(b) Sue the seller for damages for breach of warranty.

(2) The fact that a buyer has set up a breach of warranty in diminution orextinction of the pricedoes not prevent him from suing for the same breach of warranty if he hassuffered furtherdamage.60. Repudiation of contract before due date.- Where either party toa contract of salerepudiates the contract before the date of delivery, the other may eithertreat the contracts assubsisting and wait till the date of delivery, or he may treat the contract

as rescinded and use fordamages for the breach.

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61. Interest by way of damages and special damages.- (1) Nothingin this Act shall affect theright of the seller or the buyer to recover interest or special damages inany case whereby lawinterest or special damages may be recoverable, or to recover the money

paid where theconsideration for the payment of it has failed.(2) In the absence of a contract to the contrary, the Court may awardinterest at such rate a itthink fit one the amount of the price-(a) to the seller in a suit by him for the amount of the price.- from the dateof the tender of thegoods or from the date on which the price was payable.(b) to the buyer in a suit by him for the refund of the price in a case of abreach of the contract onthe part of the seller- from the date on which the payment was made.

Chapter 7 - Miscellaneous62. Exclusion of implied terms and conditions.- Where any right,duty or liability would ariseunder a contract of sale by implication of law, it may be negatived orvaries by expressagreement or by the course of dealing between the negatives or varied byexpress agreement orby the course of dealing between the parties, or by usage, if the usage issuch as to bind parties tothe contract.

63. Reasonable time a question of fact.- Where in this Act anyreference is made to areasonable time, the question what is a reasonable time is a question offact.64. Auction sale.- In the case of sale by auction-(1) where goods are put up for sale in lots, each lot is prima facie deemedto be the subject of aseparate contract of sale.(2) the sale is complete when the auctioneer announces its completion bythe fall of the hammeror in other customary manner, and, until such announcement is made,any bidder may retract hisbid.(3) a right to bid may be reserved expressly by or on behalf of the sellerand, where such rights isexpressly so reserved, but not otherwise, the seller or any one person onhis behalf may, subjectto the provisions hereinafter contained, bid at the auction,(4) where the sale is not notified to be subject to a right to bid on behalf ofthe seller, it shall notbe lawful for the seller to bid himself or to employ any person to bid at

such sale, or for the

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auctioneer knowingly to take any bid from the seller or any such person,and any such person,and any sale contravening this rule may be treated as fraudulent by thebuyer.(5) the sale may be notified to be subject to a reserved or upset price.

(6) if the seller makes use of pretended bidding to raise the price, the saleis voidable at theoption of the buyer.64A. In contracts of sale, amount of increased or deceased to taxto be added or deducted.-(1) Unless a different intention appears from the terms of the contract, inthe event of any tax ofthe nature described in sub-section (2) being imposed, increased,decreased or remitted in respectof any goods after the making of any contract for the sale or purchase ofsuch goods withoutstipulations as to the payment of tax where tax was not chargeable at thetime of the making ofthe contract, or for the sale or purchase of such good tax- paid where taxwas chargeable at thattime.-(a) if such imposition or increase so takes effect that the tax or increasedtax, as the case may be,or any part of such tax is paid or is payable, the seller may add so muchto the contract price aswill be equivalent to the amount paid or payable in respect of such tax or

increase of tax, and heshall be entitled to be paid and to sue for and recover such addition, and(b) if such decrease or remission so takes effect that the decreased taxonly, or no tax, as the casemay be, is paid or is payable, the buyer made deduct so much from thecontract price as will beequivalent to the decrease of tax or remitted tax, and he shall not beliable to pay, or be sued for,or in respect of, such deduction.(2) The provisions of sub-section (1) apply to the following taxes, namely:-(a) any duty of customs or excise on goods.

(b) any tax on the sale or purchase of goods.65. (Repeal.) Rep. By the Repealing Act, 1938 (1of 1938), S. 2 and Sch.66. Savings.- (1) Nothing in this Act or in any repeal effected therebyshall affect or be deemedto affect.(a) any right, title, interest, obligations or liability already acquired,accrued or incurredbefore the commencement of this Act, or(b) any legal proceedings or remedy in respect of any such right, title,interest, obligation

or liability, or(c) anything done or suffered before the commencement of this Act, or

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(d) any enactment relating to the sale of goods which is not expresslyrepealed by thisAct, or(e) any rule of law not inconsistent with this Act.(2) The rules of insolvency relating to contracts for the sale of goods shall

continue to applythereto, notwithstanding anything contained in this Act.(3) The provisions of this Act relating to contracts of sale do not apply toany transaction in theform of a contract of sale which is intended to operate by way ofmortgage, pledge, charge orother security.***************

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LAW OF AGENCY

Modern business is becoming complex day by day. As such it is not possible for anindividual to carry on the business singly. He must necessarily depend on others for the

efficient running of the business. He must delegate some of his powers to another. The person

who acts on behalf of another of who has been delegated the authority is called an agent. The

person who authorises another to act is called a principal. The contract which creates the

relationship of principal and agent is called an agency. The law of agency is based on the

principle, which a person does by another, he does by himself.

Definitions:

Agency: is a relation between two parties created by an agreement express or implied.

The relationship of agency arises whenever one person called the agent has authority to act

on behalf of another called the principal. The concept of agency emphasises that one person

brings two persons into a legal relationship. It is this power of creation of a relationship

between the principal and third parties that the essential importance of agency lies. It may be

noted that an agent is not a mere connecting link between the principal and third parties. He

has the power to make the principal and third parties. He has the power to make the principal

answerable to the third parties for his conduct.

A contract of agency has all the essentials of a contract, with some special

features of its own. The essentials of agency are as follows:

1. There should be appointment by the principal of an agent.

2. The principal should confer authority on the agent to act for him.3. The authority conferred should be such as will make the principal answerable to third

parties.

4. The object of the appointment must be to establish relationship between principal and

third parties.

5. The relationship of agency being based on confidence between the principal and

agent, no consideration is necessary.

Agent: Every person who acts for another is not an agent. A person does not become an

agent on behalf of another merely because he gives him advice, a person can be an agent only

when he is authorised to act for the principal. To be an agent, the person employed must be

authorised to do any act for another, of to represent another in dealings with third persons.

(Section 182). The person for whom such act is done, or who is so represented if=s called the

principal.

Who may be an agent?

Section 184 of the contract act provides that any person may become an agent. In other

words, even a minor can be employed as agent and the principal shall be bound by the acts of

such an agent. But no person who is not of the age of majority and of sound mind can become

an agent so as to be responsible to his principal. This, if an agent is to held liable to the

principal, he must be major and of sound mind.

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Principal: a person who is major and who is of sound mind can employ another person as an

agent. Section 183 states that a person who is of the age of majority and is of sound mind can

become a principal. Thus, a minor cannot act as a principal.

Consideration in agency contracts: it may be noted that consideration is essential for the

validity of a contract, but section 185 lays down that no consideration is necessary to createan agency. the acceptance of the office of an agent is regarded as a sufficient consideration

for the appointment.

Example: A authorises his friend B, who has knowledge of automobiles, to buy a motor car

for him, B accepts the responsibility. Here a valid contract of agency is created though no

consideration is involved in the contract.

Kinds of agents:

The term agent applies to anyone who by authority performs an act for another, and includes

a great many classes of persons to whom distinctive names are given. There may be various

types of agents whose powers and duties are settled by usage and custom of trade recognised

by the courts of law. The important on are classified as under:

1. Express or implied agents: An express agent is one who is appointed verbally or by

writing an implied agent is one whose appointment is to be inferred from the conduct of the

parties.

2. General, special or universal agents: A general agent is one who is employed to transact

generally all the business of the principal in regard to which he is employed. A special agent

has only authority to do some particular act or represent his principal in some particular

transaction. A universal agent is one who is authorised to transact all the business of his

principal of every kind and to do all the acts which the principal can lawfully do and can

delegate.3. Agent or sub-agent: An agent derives his authority directly from the principal. A subagent

derives his authority from the agent who has been appointed to do the act.

One broad classification of agents is mercantile or commercial agents and non-

mercantile or non-commercial agents.

Mercantile agents:

1. Factor: The word 'factor' in Bangladesh, as in England, means an agent entrusted

with the possession of goods for the purpose of selling them." "He is a mercantile

agent whose ordinary course of business is to. dispose of goods, of which he is

entrusted with the possession or control by his principal.''.

2. Broker: A "broker" is also a kind of mercantile agent.He is appointed to negotiate

and make contracts for the sale or purchase of property on behalf of his Principal, but

is not given possession of the goods.

3. Del credere agent A "del credere agent" is another type of mercantile agent. In

ordinary cases the only function of an agent is to effect a contract between his

principal and a third party. The agent then drops out. He can neither sue on the

contract, nor he is held liable for the failure of the third party to perform. But Where

an agent undertakes, on the payment of some extra commission, to be liable to the

principal for the failure of the third party to perform the contract; he is called del

credere agent and his extra commission for the guarantee is known as del credere

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commission. The position of such agent was explained in Couturier v Hastie.

The defendants acting as del credere agents sold the plaintiff's goods which were supposed

to be on a voyage but which unknown to the parties had already been sold by the captain

owing to damage by heat. The buyer repudiated the contract and, therefore, the agents were

sued for the buyer's failure to perform. The question was "whether the defendants areresponsible by reason of their charging a del credere commission, though they have not

guaranteed by writing". The court said that they were. "A higher reward is paid in

consideration of their taking greater care in sales to their customers and also for assuming a

greater share of responsibility than ordinary agents, namely, responsibility for the solvency

and performance of their contracts by their vendees. This is the main object of the reward

being given to them.

4. Auctioneer: an auctioneer is an agent who is appointed to sell goods at a public

auction for remuneration. He may be agent both for the seller and buyer. The auctioneer can

sue for the purchase price in his own name.

5. Commission agent: A commission agent is a mercantile agent who in consideration

of a certain commission engages to purchase or sell goods for his principal. Only interest in

the transaction is his commission. All profits and losses accrue to the principal. A

commission agent may or may not be in actual possession of the goods. His position is very

similar to that of a broker.

6. Banker: The relation between a banker and a customer is either that of debtor and

creditor or of an agent and principal. When the bankers advances money to this customer as a

loan banker is the creditor and customer the debtor. But the banker acts as agent of his

customer when he buys or sells securities, collects cheques, dividends, bills, etc. on behalf of

his customer.

7. General agent and particular agent: A general agent is one who represents the

principal in all matters concerning a particular business. A particular agent is one who isappointed for a specific purpose e.g. to sell a particular article. Factors and commission

agents are usually general agents.

Non-mercantile agents:

Non-mercantile agents include counsel, solicitor, guardian, promoter, wife, receiver,

insurance agent etc.

Creation of agency

Followings are the principal methods to create agency:

* Agency by Express Agreement;

* Agency by Implied Agreement;

* Agency by Ratification

Agency by Express Agreement: Normally agency is created by an express

agreement. This agreement may be made orally. This agreement may even be reduced to

writing.

Agency by Implied Agreement: Agency may, as well, arise when there is no express

agreement appointing a person as an agent. In absence of express agreement agency may,

under certain circumstances, be inferred from the circumstances of the case or from theconduct of the parties on a particular occasion, or from the relationship between parties. Such

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agency may be created, amongst other,--(a) by estoppel and (b) by necessity.

(a)Agency by estoppel: Estoppel is a principle of law of evidence which denotes,

"Where a person by his words or conduct has wilfully led another to believe that certain set of

circumstances or facts exists, and that other person has acted on that belief, he is estopped orprecluded from denying the truth of such statements, although such a state of things did not in

fact exist. Liability of the principal may be determined when he induces third party to believe

that the agent is given certain authority although, in fact, such authority is lacking. Section

237 of the Act provides to the same effect: When an agent has, without authority, done acts

or incurred obligations to third persons on behalf of his principal, the principal is bound by

such acts or obligations if he believe that such acts and obligations were within the scope of

the agent's authority.

Aftaf, an owner of car, allowed it to remain in the custody of Bikaash, the agent, through

whom he had bought it. Bikaashs ordinary business was to buy and sell cars on behalf of

Aftaf. Bikaash sold the car to a thirdparty at a price which is lower than the one fixed by

Aftaf. The Court held that the sale and receipt of money were binding on Aftaf.

(b)Agency by necessity: In certain circumstances the law confers an authority on one

person to act as agent for another or allows the agent to exceed his authority even without any

regard to the consent of the principal. Such an agency is called an agency of necessity.

Section 189 of the Act recognizes such mode of creating agency. To constitute an agency by

necessity certain conditions shall have to be satisfied:

(i) There should be a real necessity for acting on behalf of the principal.

(ii) It should be impossible to communicate with the principal within the time available.

(iii) The alleged agent should act bonafide in the interests of the principal.

A quantity of butter was consigned with the defendant railway company. It was delayed in

transit owing to a strike. The goods being perishable the company sold them. The sale was

held binding on the owner, The Companys action was justified by the necessities of the case

and it was also not practicable to get instructions from the owner.

Agency by Ratification Ratification is an act by which approval is given to any act done

previously without any sanction. An agency may also be created by ratification. Where actsare done by one person on behalf of another, but without his knowledge or authority, he may

elect to ratify or to disown such acts. If he ratifies them, the same effects will follow as if

they had been performed by his authority. The act so ratified shall have retrospective effect in

the eye of law unless otherwise mentioned. Aftaf buys 5 bags of wheat on behalf of Bikaash.

Bikaash did not appoint Aftaf as his agent. Bikaash may, upon hearing of the transaction,

accept or reject it. If Bikaash accepts it, the act is ratified and Aftaf becomes his agent with

retrospective effect. It is an instance where the ratification is given expressly. Ratification

may be given by impliedly either. Illustration to Section 197 has got the merit to explain it.

Aftaf, without authority of Bikaash, lends Bikaash's money to Rafiq. Afterwards Bikaash

accepts interest on the money from Rafiq. conduct of Bikaash implies a ratification of the

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loan.

It is to be noted that a person ratifying any unauthorised act done on his behalf ratifies the

whole of the transaction of which such act formed a part. Likewise, in order to make a valid

ratification the person ratifying the transaction shall have to have full knowledge. Defectiveknowledge invalidates ratification.

Rights and duties

Agents duty to principal (section 211)

1. Duty to act according to principals directions

2. Duty to act with reasonable skill and diligence

3. Duty to render accounts

4. Duty to communicate

5. Duty not to deal on his own account

6. Duty to pay over all moneys7. Duty not to use information obtained in the course of the agency against a principal

8. Duty not to set up adverse title

9. Duty not to delegate

10. Duty to protect and preserve the interests of the principal in case of his death or

insolvency

Rights of an agent (sections 219 and 220)

1. Right to remuneration

2. Tight of retainer

3. Right of lien

4. Right to be indemnified against consequences of lawful acts

5. Right to be indemnified against consequences of acts done in good faith

6. Right to compensation

Personal liability of agent (section 230)

1. Where the agent acts for a foreign principal

2. Where the agent acts for an undisclosed principal

3. When the agent acts for a disclosed principal who cannot be sued

4. Where agents authority is coupled with interest

5. Where an agent receives or pays money by mistake or fraud

6. Where the agent signs the negotiable instrument in his own name7. Where the agent exceeds his authority

8. Where the contract expressly provides

9. Where an agent acts for a non-existing principal

10. Where according to trade usage agent is personally liable

Termination of agency (section 201 to 210)

There are two modes to termination

1. By the act of parties

2. By operation of law

1. By the act of parties

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a. By agreement between the parties

b. By revocation of authority by the principal

c. By renunciation by the agent

2. By operation of law

d. By the completion of the business of agency

e. By death or insanity of the principal or agentf. By the efflux of time

g. By the insolvency of the principal

h. By the destruction of the subject-matter

i. By subsequent event rendering the agency unlawful

j. By dissolution of a company