Busi Law Proj-1

8/9/2019 Busi Law Proj-1

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Business Law

Assignment

Group # 15

1.Satyak Rajhansa Roll No.

902.Abhjit Joshi Roll No.363.Amit Phutane Roll No.884.Priya Pawar Roll No.

865.Ameya Patankar Roll No.816.Neil Gandhi Roll No.28


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Sale ofGoods Act 19301. Contract of Sale

Sale and agreement to sell.

Essentials of Contract of sale.

2. Conditions and Warranties

Distinctions between conditions and warranties.

Express and implied conditions and warranties.

3. Doctrine of Caveat Emptor: Buyer Beware

4. Transfer of Property

Rules of ascertaining when the property in goodspasses to the buyer.

Passing of Property

5. Sale by Non-Owners.

6. Performance of Contract Types of Delivery of Goods.

Rules as to delivery of Goods.

7. Rights of an unpaid seller


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The Sale of Goods Act, 1930:

Definitions some terms used in the Sale of Goods act:

Buyer: Means a person who buys or agrees to buy goods

Delivery: Means voluntary transfer from one person toanother.

Goods: Goods are said to be in deliverable state, whenthey are in such state, the buyer would under thecontract be bound to take delivery of them.

Document of Title Goods: A document of title to goodsmay be described as any document used as proof of thepossession or control of goods. The following arerecognized as documents of title to goods:

Bill of Loading

Railway Receipt

Warehouse keepers certificate

War fingers certificate.

Dock warrant.

Insolvent Person: A person is said to be insolvent whocannot pay his debts as they become due.

Price: Means the consideration for a sale of goods.

Property: Means the general property in goods and notmerely a special property.


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SALE OF GOODS ACT 1930:

An act to define and amend the law relating to the sale ofgoods

The sale of goods act, 1930 governs the contracts relating to sale ofgoods. It applies to the whole of India except the State of Jammu &Kashmir. The act first came into force on the 1st of July 1930. The actcontains Sixty-Six sections. A few amendments in the act weremade by Sale of Goods (Amendment) act 1963.

It is the most common of all commercial contracts and itsknowledge of its main principals is essential for all classes of the

community.

A contract of sale of goods results, like any other contract, by anoffer by one party & its acceptance by the other. Thus it is aconsensual transaction. The parties to the contract enjoy unfettereddiscretion to agree to any terms like relating to delivery andpayment of price, etc. The sale of goods act does not seek to fetterthis discretion. It simply lays down certain positive rules of generalapplication for those cases where the parties have failed tocontemplate expressly for contingencies which may interrupt thesmooth performance of a contract of sale, such as the destruction of

a thing sold, before its delivered or the insolvency of the buyer, etc.The act leaves the parties free to modify the provisions of the lawby express stipulations.

1. CONTRACT OF SALE:A contract of Sale of goods is a contract whereby the seller transfersor agrees to transfer the property in the goods to the buyer for aprice. The term contract of sale is a generic term and includes botha sale & an agreement to sell.

Sale and Agreement to sell:


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Where under a contract of sale, the property in the goods istransferred from the seller to the buyer (i.e. at once) the contract iscalled a sale but where the transfer of the property in the goods isto take place at a future time or subject to some conditionthereafter to be fulfilled, the contract is called as an agreement to

sell. An agreement to sell becomes a sale when the time elapses orthe condition, subject to which the property in the goods is to betransferred, is fulfilled.

In a contract of sale:

There must be an offer to sell the goods at a price andsubject, sometimes, to certain terms and conditions. This isusually a quotation.

There must be an acceptance to buy (usually a purchase

order)

But. If a supplier sends a quotation and the Purchase orderstipulates conditions at variance with the term in the quotation, it isa counter offer and the supplier must accept the revised terms togive them the legal status of the contract.The contract may provide for:

Immediate delivery of the goods or

Immediate payment

Or Both.

Delivery or payment by installments.

Delivery or payment or both at a future date.

Essentials of a contract of sale:

1.) Two Parties:There must be two distinct parties i.e. a buyer & a seller, as aperson cannot buy his own goods to affect a sale and they mustbe competent to contract.

2.) Goods:Goods means every kind of movable property other thanactionable claims and money and includes stock & shares,growing crops, grass, and things attached to or forming a part ofthe land which are agreed to be severed before sale or under thecontract of sale.Goodwill, trademarks, copy-rights, patents rights, water, gas,electricity, decree of a court of law are all regarded as goods.Goods are classified into 3 types:

Existing goodsGoods which are physically in existence and which are insellers ownership and/or possession at the time of entering


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the contract of sale are called existing goods. Where selleris the owner & has a general property in them and if he isan agent, he has the right to sell them. Existing goods arefurther classified into 2 types:

a) Specific goods:Goods identified and agreed upon at the time of themaking of the contract of sale are called SpecificGoods.e.g Where A agrees to sell B a particular radiobearing a distinctive number there is a contract ofsale of specific or ascertained goods.

b) Unascertained goods:Goods that are not separately identified orascertained at the time of making of the contract areknown as unascertained goods.e.g. If A agrees to sell to B one bag of sugar out ofthe lot of one hundred bags lying in his go down, it isa sale of unascertained goods because it is notknown which bag is to be delivered..

Future goodsGoods that are to be manufactured, produced or acquiredby the seller after the making of the contract of sale arecalled future goods.

e.g. If A Agrees to sell B all the milk that his cow may yieldduring the coming year, this is a contract for the sale offuture goods.

Contingent goodsGoods, the acquisition of which by the seller depends uponan uncertain contingency are called contingency goods.e.g. If A agrees to sell to B a specific rare paintingprovided he is able to purchase it from its present ownerthis is a contract of sale of CONTINGENT GOODS.

3.) Price: The consideration for contract of sale must be moneyconsideration called the Price. If goods are sold or exchangedfor other goods, the transaction is barter, governed by thetransfer of property act. But if goods are sold partly for goodsand partly for money, the contract is one of sale.

The price may be fixed, or

The price may be left to be fixed in a manner agreedupon, or

The price may be determined in the course of dealingbetween the two parties or


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May be fixed as per the valuation of a third party.

If the price is not fixed as per these provisions, the buyer shall paythe seller a reasonable price.e.g A agrees to exchange with B 100 kgs of barley at Rs 60/kg for

52 bullocks valued at Rs 300 per bullock & pay the difference incash. Held the contract was a contract of sale.

4.) Transfer of General Property:There must be a transfer of general property as distinguishedfrom special property in goods from the seller to the buyer. If Aowns certain goods, he has general property in the goods. If hepledges them with B, B has special property in the goods.e.g if A owns certain goods , B has general property in the goods.If he pledges them with B,B has special property in the goods.

5.) Essential Elements of a Valid Contract:All essential elements of a valid contract must be present in thecontract of sale.

2. CONDITIONS & WARRANTIES:Before a contract of sale is entered into, a seller frequently makesrepresentations or statements, which influence the buyer to clinchthe bargain. Such representations or statements differ in characterand importance. Whether any statement or representation made bythe seller with reference to the goods is a stipulation forming part ofthe contract or is a mere representation forming no part of thecontract, depends on the construction of the contract. If there areno such representations then the concept of buyer bewareapplies. This means the buyer gets the goods as they come and it isno part of the sellers duty to point out the defects in the goods tothe buyer.

A stipulation in a contract of sale with reference to goods may be acondition or a warranty.

Condition: A condition is a stipulation, which is essential to themain purpose of the contract. It goes to the root of the contract. Itsnon fulfillment upsets the very basis of the contract, it is defined asan obligation which goes so directly to the substance of thecontract, or in other words so essential to its very nature, that itsnon-performance may fairly be considered by the other party as asubstantial failure to perform the contract at all.

Warranty: A warranty is a stipulation, which is collateral to themain purpose of the contract. It is not of such vital importance as a


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condition. It is defined as an obligation, which, though it must beperformed, is not so vital that a failure to perform it goes to thesubstance of the contract. If there is a breach of a warranty, theaggrieved party can only claim the damages, as it has no right totreat the contract as repudiated.

Whether a stipulation is a contract of sale is a condition or awarranty depends on each case on the construction of the contractas a whole.

Distinctions between a condition & a warranty:

1.)Difference as to Value:A condition is a stipulation, which is essential to the main purpose ofthe contract. A warranty is a stipulation, which is collateral to themain purpose of the contract.

2.)Difference as to Breach:If there is a breach of a condition the aggrieved party canrepudiate the contract of sale, but in case of a breach of a

warranty, the aggrieved party can claim damages only.

3.)Difference as to Treatment:A breach of a condition may be treated as a breach of awarranty. This would happen where the agreed party iscontended with damages only. A breach of a warranty however,cannot be treated as a breach of a condition.

The distinction between the two i.e. Condition & warranty can beexplained as follows:

A Man buys a particular Horse, which is warranted quiet to ride &drive. If the horse turns out to be vicious the buyers only remedy isto claim damages. But if instead of buying a particular horse, a manasks a dealer to supply him with a quiet horse & the horse turns outto be vicious, the stipulation is a condition, & the buyer can rejectthe horse, or keep the horse & claim the damages.

Express and Implied Conditions & Warranties:Conditions & Warranties may be either express or implied.

They are said to be express when at the will of the parties they areinserted in the contract and they are said to be implied when the


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law presumes their existence in the contract automatically thoughthey have not beed out into it in express words. Implied Conditions& Warranties may however be negatived or varied by expressagreement, or by course of dealing between the parties or by usageof trade.

Implied Conditions:

Unless otherwise agreed the law incorporates the following impliedconditions:1.)Condition as to Title:

The first implied condition on part of the seller is that, in the caseof a sale, he has the right to sell the goods at the time when theproperty is to pass. As a result of this condition if the sellers titleturns out to be defective the buyer is entitled to reject the goods

and the recover the price.e.g. A purchased a car from B who had no Title to it. A used the carfor several months. After that, the two owners spotted the car &demanded it from A. Held, that A was bound to hand over that carto its true owner & that A could successfully sue B the seller withoutTitle, for the recovery of the purchase price even though severalmonths had passed.

2.)Condition in a sale by description: Where there is a contract of sale of goods by description, thereis an mplied condition where the goods shall correspond to the

with the description. If the article tendered is different in anyrespect, it is not the article bargained for, the other party is notbound to take it. Further the fact that the buyer has examinedthe goods, will not affect his rights to reject the goods, if thedeviation of the goods from the description is such which couldnot have been discovered by casual examination i.e. if the goodsshow any latent defects.

e.g. a ship was sold by description viz , copper fastened vessel butactually it was partly copper fastened. Held, that the goods did notcorrespond to description & hence could be returned or else if thebuyer took the goods, he could claim damages for breach. This waseven though the ship was sold subject to all faults & defects

3.)Condition in a sale by sample:When under a contract of sale, foods are supplied according thea sample agreed upon, the implied conditions are:

a. The bulk sample shall correspond to the sample in qualityb. The buyer shall have a reasonable opportunity of

comparing the bulk with the sample.c. The goods shall be free from any defect, rendering them

unmerchantable, which would not be apparent onreasonable examination of the sample.


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e.g. A certain shoes were sold by sample by the French Army. TheShoes were found to contain paper not discoverable by ordinaryinspection. Held, the buyer was entitled to the refund of price plusdamages.

4.)Condition in a sale by sample as well as by description:There is an implied condition that the bulk of the goods shallcorrespond both with the sample and with the description. If thegoods supplied correspond only with the sample and not with thedescription Or vice- versa, the buyer is entitled to reject thegoods. The bulk of the goods must correspond with both.

e.g A agreed to sell to B some oil describes as Foreign refined rapeoil warranted only equal to sample. the goods tendered were equalto sample but contained an admixture of Hemp oil. Held,B couldreject the goods.

5.)Condition as to fitness or quality:Normally there is no implied condition or warranty as to qualityor fitness for any particular purpose of goods supplied, the rule oflaw being let the buyer beware. But an implied condition isdeemed to exist, if the following conditions are satisfied:

a. The buyer, expressly or impliedly, should make known tothe seller the particular purpose for which the goods arerequired.

b. The buyer should rely on the sellers skill or judgment. Andc. Goods sold must be of a description which the seller deals

in the ordinary coarse of his business, be it a manufactureror not.

e.g A approached B, a motor car dealer & asked for a comfortablecar for touring purpose recommended his Bugatti car, a Trade name& also showed a specimen of the same. A there upon ordered for abugatti car, which was supplied. The car proved to be unsuitable fortouring purposes. A claimed to reject the car & recover back thepurchase money paid by him. It was held that he was entitled to do

so because, while ordering that car by its trade name he was stillrelying on the sellers skill & judgment as regards the suitability ofthe car for the specific purpose.

6.)Condition as to merchantability:This condition is implied only when the sale is by description; thefollowing conditions are to be met:

a. The seller should be a dealer in the goods of thatdescription, whether he is the manufacturer or not.

b. The buyer must not have any opportunity of examining the

goods, or there must be some latent defect in the goods,


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which would not be apparent on reasonable examination ofthe same.

e.g. Where A purchases a certain quantity of black yarn from B, adealer in yarn, and finds if damaged by white ants, the condition as

to merchantability has been broken and A is entitled to reject asunmerchantable.

7.)Condition as to Wholesomeness:This condition is implied only in a contract of sale of eatables andprovisions. In such cases the goods supplied must not onlyanswer to description and be merchantable but must also bewholesome i.e. free from any defect, which render them, unfit forhuman consumption.

e.g. A bought milk from B a dairy owner. The milk was contaminatedwith germs of typhoid fever, As wife on taking the milk becameinfected and died of it. B was held liable in damages.

Implied Warranties:Unless otherwise agreed the law also incorporates into a contract ofsale of goods the following implied warranties:

1.) Warranty of Quiet Possession:In every contract of sale, the first implied warranty on the part of

the seller is that the buyer shall have & enjoy quiet possessionof the goods. If the quiet possession of the buyer is in anywaydisturbed by a person having superior right than that of theseller, the buyer can claim damages from the seller.

e.g. The plaintiff a lady purchased a second hand typewriter fromthe defendant. She thereafter spent some money on its repairsand used it for some months. Unknown to the parties, thetypewriters was a stolen one and the plaintiff was compelled toreturn the same to its true owner. She was held entitled torecover from the sellers for the breach of the warranty, damagesreflecting not merely the price paid, but also the cost of repair.

2.) Warranty of freedom from encumbrances:Where the goods shall be free from any charge or encumbrancein favour of any third party not declared or known to the buyerbefore or at the time when the contract is made If the goods areafterwards found to be subject to a charge and the buyer has todischarge the same, then there is a breach of warranty & buyeris entitled to damages.

e.g. A, the owner of the watch, pledges it with B. After a week

obtains possession of the watch from B for some limited purposeand sells it to C. B approaches C and tells him about the pledge


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affair. C has to make payment of the pledge amount to B. There isbreach of this warranty and C is entitled to claim compensationfrom A.

3.) Warranty of disclosing the dangerous nature of goods to the

ignorant buyer:The third implied warranty on the part of the seller is that, if thegoods sold are of dangerous nature, he will warn the buyer of theprobable danger. If there is a breach of warranty the buyer isentitield to claim compensation for the injury caused to him.

e.g. A purchases a Tin of disinfectant powder from B. B knows thatthe lid of the tin is defective and if it is opended without special careit may be dangerous, but tells nothing to A. A opens the tin in thenormal way, whereupon the disinfectant power flies into her eyesand causes injury. B is liable in damages to A as he should havewarned A of the probably danger.

3. BUYER BEWARE: DOCTRINE OF CAVEATEMPTOR.

The maxim of caveat emptor means, let the buyer beware.

According to the doctrine of caveat emptor it is the duty of thebuyer to be careful while purchasing goods of his requirement and,in the absence of any enquiry from the buyer, the seller is notbound to disclose every defect in the goods of which he may becognizant.The buyer must examine the goods thoroughly and must see thatthe goods that he buys must be suitable for the purpose of which hewants them.If the goods turn out to be defective or do not serve his purpose, thebuyer cannot hold the seller liable for the same, as there is noimplied undertaking by the seller that he shall supply the goods,

which suits the buyers purpose. If, therefore, while makingpurchases of the goods the buyer depends upon his own skills andmakes a bad choice, he must curse himself for his own mistake, inthe absence of any misrepresentation or guarantee by the seller.This doctrine too has certain exceptions.

e.g. A, a farmer, bought from B, a butcher, the carcass of a dead pigfor consumption and left it hanging up, intending to return aftercompleting other business and take it away. In his absence C, afarmer, on seeing and wishing to buy it, was referred to A and

bought it of A. It turned out unsound and unfit for human


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consumption. It was held that no warranty of soundness was impliedby law between farmers A and C.

4. TRANSFER OF PROPERTY:

There are primarily 3 stages in the performance of a contract of saleof goods by a seller, viz:1.) The transfer of property in the goods.2.) The transfer of possession in the goods.3.) The passing of the risk.

Transfer of property in the goods from the seller to the buyer is themain object of a contract of sale. Property in Goods means theownership of goods, whereas possession of goods refers to thecustody or control of goods.

Hence it is important to know the precise moment of time at whichthe property in the goods passes from the seller to the buyer for thefollowing reasons:

1.) Risk follows ownership:Unless otherwise agreed, risk follows ownership, whetherdelivery has been made or not and whether the price has beenpaid or not. Hence the risk of loss lies with the owner. When theproperty of the goods gets transferred to the buyer, the goodsare at the buyers risk, whether the delivery has been made or

not. But if the delivery has been delayed by fault of either thebuyer or seller, the goods are at the risk of the party at fault.Thus risk and Property go together.

e.g. B contracts to purchase 30 Tons of apple juice from S. Scrushes the apples, puts juice in casts and keeps it ready fordelivery. B, however, delay to take the delivery and the juicegoes putrid and has to be thrown away. B is liable to pay theprice.

2.) Action against Third Parties:When the goods are in anyways damaged or destroyed by theaction of third parties, it is only the owner of the goods who cantake action at that time.

4.) Insolvency of the Seller or the Buyer:In the event of insolvency of the seller of the buyer, whether theofficial receiver or Assignee can take over the goods or notdepends on whether the property in the goods has passed from

the seller to the buyer.


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5.)Suit for Price:The seller can sue for the price, unless otherwise agreed, only ifthe goods have become the property of the buyer.

PASSING OF PROPERTY:

What does Property in Goods mean?Ans: It means ownership of the goods.

But it should be understood that Property in Goods is not thesame as Possession of Goods. Possession of goods refers to thecustody of goods.The rules regarding the passing or property in goods are containedin Section 18-25 of the act.Primary Rules of ascertaining the when the property of the rightsgets transferred to the buyer as follows:

1.)Goods must be ascertained:Where there is a contract for the sale of unascertained goods, noproperty in the goods is transferred to the buyer unless and untilthe goods are ascertained.

Ex: Under a contract of sale, B was entitled to cut teak trees ofmore that 12 in Girth. The stumps of the trees after cutting had tobe 3 inches high. Held in these circumstances the property in thetimber that was cut would pass to B when the trees are cut. Till the

trees were felled, they were not ascertained.

2.) Intention of the parties:Where there is a contract for the sale for specific or ascertainedgoods, property in them passes to the buyer at the time whenthe parties intend to pass. For purpose of ascertaining theintention of the parties, regard shall be had to the terms of thecontract, conduct of the parties & the circumstances of the case.

E.g.: S offers to sell B a certain machine for Rs. 5000/-. B refuses tobuy it unless certain work was done on it to put it under properrunning conditions. S replied that B could get it done himself andwhen the cost of repairs was known B might pay S Rs 5000 less thecost of repairs. To this B agreed and took the machine to his repairshop. While being repaired the machine was destroyed without anyfault of the repairman. The property in the machine did not passfrom S to B.

But where the intention of the parties as to the time when the

property in the goods is to pass to the buyer cannot be ascertainedfrom the contract, the rules contained in Sec 20 to 24 apply.


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These rules are as follows:

1.)Specific Goods:

The rules relating to the transfer of property of specific goods areas follows:

a. Passing of property at the time of contract:

When there is an unconditional contract for sale of specificgoods in a deliverable state, the property in the goodspasses to the buyer when the contract is made. Deliverablestate means such a state that the buyer under the contractbe bound to take delivery of them. The fact that the time ofpayment of the price or the time of delivery of the goods,or both, is postponed does not prevent the property in thegoods, passing at once.

Ex: X sells to B a horse, which is to be delivered to B thenext week. B is to pay the price on delivery, B asks hisservant to keep the horse separate from the other horses.The horse dies before it is delivered and paid for. Theproperty of the goods has passed to B and he has to bearthe loss.

b. Passing of property delayed beyond the date of thecontract:

i. Goods not in a deliverable state: Where there is acontract for the sale of specific goods not in adeliverable state, i.e.; the seller has to dosomething to the goods to put them into adeliverable state, the property does not pass untilsuch a thing is done and buyer has notice of it.

Ex: There is a contract of sale for a machine

weighing 30 Tons and embedded into theconcrete floor. A part of the machine wasdestroyed while being removed. Held, the buyerwas entitled to refuse to take the machine, as itwas not in a deliverable state.

ii. When the price of goods is to be ascertained byweighing: Where there is a contract for the sale ofspecific goods in deliverable state, but the seller isbound to weigh, test, measure or do some other

act or thing with reference to the goods for thepurpose of ascertaining the price, the property


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does not pass until such act or thing is done, andbuyer has notice thereof.

2.)Unascertained Goods:Where there is a contract for the sale of unascertained goods,

the property is the goods do not pass to the buyer until thegoods are ascertained. Until goods are ascertained there ismerely an agreement to sell.Further under section 23 states that where there is a contract forsale of unascertained or future goods by description & goods thatthat description and in a deliverable state are unconditionallyappropriated in the contract, the property of the goodsthereupon passes to the buyer.

The ascertainment of the goods and their unconditionalappropriation to the contract are two pre-conditions for thetransfer of property from the sellar to the buyer in case ofunascertained goods.Ascertainment is a process by which the goods answering thedescription are identified and set apart.Ex: in a sale of 20 hog-heads of sugar out of a large quantity, 4were filled and taken away by the buyer. The remaining 16 weresubsequently filled and the buyer was informed of the same. Thebuyer promised to take them away, but before he could do so thegoods were lost. Held the property had passed to the buyer atthe time of the loss.

3.)Goods sent on approval or on sale or return: under sec 24,Where goods are delivered to the buyer on approval or on sale oron return or other similar terms, the property there in passes tothe buyer:

a. When he signifies his approval or acceptance to theseller.

b. When he does some act adopting the transaction.

Ex: Goods are delivered by A to B on sale or return. They arefurther delivered by B to C and then by C to D on similar terms. The

goods are stolen while in custody of D. As between A and B and Band C, has not passed to D. As such, C cannot recover the loss fromD, but is bound to pay the price to B and B is bound to pay the priceto A.

Reservation of rights of disposal: The property in goods, whether specific or unascertained,

does not pass to the buyer if the seller reserves the right of disposalof goods.If for Ex: it is the term of the contract that the buyer is to pay for the

goods before delivery, the seller reserves the right for disposal. In


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such a case the property of the goods does not pass to the buyeruntil the conditions imposed by the seller is fulfilled.

5.SALE

BY

NON-

OWNERS: Sections 27 30.

The general rule of law is that no one can give that which he hasnot got. Only an owner of the goods can transfer a good title. Thisrule is expressed by the Latin maxim Nemo dat quod non habet.

Examples:1.)A, the hirer of goods under a hire purchase agreement sells

them to B, B, through a bonafide purchaser, does not acquirethe property in the goods. At the most he acquires such an

interest as the hirer had.2.)A finds a ring of B and sells it to a third person who purchases

it for a value & in good faith. The true owner i.e. B can recoverfrom that person, for A having no title could pass none thebetter.

The above rules, there are certain exceptions:1.)Sale by a person not the owner or title by estoppels:

Where the true owner by his conduct or by an act of omission,leads the buyer to believe that the seller has the authority to selland induces the buyer to buy the goods, he shall be estopped

from denying the fact of want of authority of the seller. Thebuyer in such a case gets a better title than that of the seller.Ex: A tells B within the hearing of C that he is the owner ofcertain goods which infact belong to C. After sometime B buysthose goods from A. The title of B will be better than that of Aand C will be precluded from disputing B title to the goods.

2.)Sale by a mercantile agent:A mercantile agent is the one who in the customary course of hisbusiness, has, as such agent authority either to sell goods or to

consign goods for the purpose of sale or to buy goods, or to raisemoney on the security of the goods. The buyer of the goods froma mercantile agent, who has no authority from the principal tosell, gets a good title to the goods if the following conditions aresatisfied:

a. The agent should be in possession of the goods ordocuments of the title to the goods with the consent ofthe owner.

b. The agent should sell the goods while acting in theordinary course of business of a mercantile agent.

c. The buyer should act in good faith


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d. The buyer should not have at the time of the contract ofsale notice that the agent has no authority to sell.

Ex: F, the owner of a car delivered it to H a mercantile agent for saleat not less that Rs 575. H sold the car for Rs 145 to K who bought it

in good faith and without notice of any fraud. H misappropriated themoney. F sued to recover the car from K. Held, as H was inpossession of the car with Fs consent for the purpose of sale, Kobtained a good title to the car.

3.)Sale by one of several joint owners:If one of the several joint owners, who is in sole possession of thegoods by permission of the other co-owners, sells the goods, abuyer in good faith of those goods gets a good title to the goods.

4.)Sale by a person in possession under a void able contract:When the seller of goods has obtained their possession under avoidable contract, but the contract has not be rescinded at thetime of the sale, the buyer acquired a good titile to the goods,provided he buys them in good faith and without notice of theseller defect of title.

Ex: A purchases a piano from B by fraud. A has a voidable title tothe goods. Before B reincides the contract, A sells the piano to C,who buys in good faithand in ignorance of the fraud. C gets a goodtitle.

5.)Sale by seller in possession after sale.:Where the seller having sold goods, continues to be inpossession of the goods or documents of the title to the goodsand sells them either himself or through a merchantile agent to aperson who buys in good faith and without notice of previoussale, the buyer gets a good title.

Ex: A sells certain goods to B and promises to deliver the goods thenext day. Before delivery A sells & delivers the goods to C who buysthe goods in good faith and without prior knowledge of sale to B. Cgets a good title to the goods not withstanding that the property

had, before he purchased, passed to B. Bs only remedy in this caseis against A.

6.)Sale by a buyer in possession after a sale:Where a person having bought or agreed to buy goods obtains,with the concent of the seller , possession of the goods ordocuments of the titile to the goods and sells them either himselfor through an agent, the buyer who acts in good faith andwithout notice of any lien or other right of the original seller inrespect of the goods gets a good title


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Ex: A bought some furniture on hire purchase, the ownership topass to him on the payment of the last installment. A sold thefurniture to B before paying the last instalment. A sold the furnitureto B before paying the last instalment. B purchased the furniturebona-fide. Held, B having bought in good faith, had obtained a good

title to the furniture.

7.)Sale by an unpaid seller:Where an unpaid seller who has exercised his right of lien orstoppage in transit re-sells the goods, the buyer acquires a goodtitle to the goods as against the original buyer.

8.)Exceptions in other acts like Indian Contract Act 1872, under asale by finder of lost goods.m A sale by a pawnee or pledgee or saleby sale by official receiver or official assignee.

6. PERFORMANCE OF THE CONTRACT OF SALE:

Duties of the seller and the buyer:

It is the duty of the seller to deliver the goods & of the buyer toaccept and pay for them, in accordance with the terms of thecontract of sale.

Unless otherwise agreed, delivery & payment of price are

concurrent conditions. In other words, no delivery need be given, ifthe buyer is not willing to pay the price, nor need the buyer pay theprice, unless the seller us ready and willing to give the delivery.

Delivery:It is defined in the act as a voluntary transfer of a possession fromone person to another. Delivery of goods may, therefore be;

1.)Physical or actual delivery: The physical possession of thegoods is handed over by the seller to the buyer.

2.)Symbolic Delivery: The deliver is made by delivering some

symbol. Ex: Delivery of a railway receipt properly endorsed.3.)Constructive Delivery: There is only an acknowledgement bythe person in possession of goods that he holds them onbehalf of another.

Rules Regarding Delivery:1.)Delivery of Part of Goods: Part of goods sold may amount to

delivery of the whole if it is so intended and agreed. But,however, where the part is intended to be severed from the

whole, part delivery does not amount to delivery of the whole.


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2.)Unless agreed otherwise, the seller is not bound to deliver thegoods, the buyer applies for delivery.

3.)Place of Delivery: Where at the place at which delivery of thegoods is to take place is specified in the contract, the goodsmust be delivered at that place during business hours on a

working day. Where there is no specific agreement as toplace, the goods sold are to be delivered at the place at whichthey are at the time of sale.

4.)Time of Delivery: When under the contract of sale, the seller isbound to sell the goods to the buyer, but no time for sendingthem is fixed, the seller is bound to send them within areasonable time. What is a reasonable time is a question offact.

5.)Cost of Delivery: Unless otherwise agreed, all expenses of andincidental to the making of delivery are borne by the seller,but all expenses of and incidental to obtaining of delivery areborne by the buyer.

6.)Delivery of Wrong Quantity: Where the seller delivers to thebuyer a quantity of goods, less that he contracted to sell, thebuyer may reject them. But, if the buyer accepts the goodsdelivered he should be required to pay for them at thecontracted rate. Where a larger quantity is delivered, thebuyer may accept the goods included in the contract andreject the rest or he may reject the whole. If the buyer acceptsthe whole of the goods so delivered, he shall pay for them atthe contract rate.

7.) Installment Deliveries: The buyer is not bound to acceptdelivery by installment, unless otherwise agreed.

8.)Delivery to the carrier or wharfinger: Delivery of the goods bythe seller to a carrier for transmission to buyer or towharfinger for safe custody is prima facie deemed to be adelivery of the goods to the buyer, unless the right of disposalhas been recovered by the seller. The seller is bound to makewith the carrier such a contract of carriage as properlyprotects the interest of the buyer. If he fails to do so, he isliable in damages to the buyer.

9.)Liability of the buyer: When the seller is ready and willing to

deliver the goods and requests the buyer to take delivery andbuyer does not within a reasonable time after such requesttake delivery of the goods, he is liable to the seller for any lossoccasioned by his neglect or refusal to take delivery.

10.) Where goods are delivered to a buyer, which he has notpreviously examined, he is not deemed to have acceptedthem, unless he has reasonable opportunity of examiningthem and ascertaining whether they conform to the contract.

7. UNPAID SELLER AND HIS RIGHTS:


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Who is an unpaid seller?A seller is deemed to be an unpaid seller when 1.) The whole of the price has not been paid or tendered;2.) A bill of exchange or other negotiable instrument has been

received as a conditional payment & the condition on which it wasreceived has not been fulfilled by reason of dishonor of theinstrument.

The following conditions must be fulfilled before a seller can bedeemed to be an unpaid seller:

1.)He must be unpaid and the price must be due.2.)He must have an immediate right of action for the price.3.)A bill of exchange or other negotiable instruments was

received but the same has been dishonored. When payment ismade by a negotiable instrument it is usually a conditionalpayment, the condition being that the instrument shall beduly honored. If the instrument is not honored the seller isdeemed to be an unpaid seller.

Rights of an unpaid seller:

These may be broadly classified under 2 heads1.)Rights against goods2.)Rights against the buyer personally.

1.)Rights against goods: An unpaid seller has the following rightsagainst the goods

a. Right of Lienb. Right of Stoppage in transit.c. Right of Resale.

Lien of Goods: The word lien means to retain possession of. Anunpaid seller who is in possession of goods, is entitled to retainthem in his possession until payment or tender of the price in thefollowing cases, namely:

a.)Where the goods have been sold, without any stipulation

as to credit.b.)Where the goods have been sold on credit, but the term of

credit has expired.c.) Where the buyer becomes insolvent.

Lien can be exercised only for the non-payment of the price, and notfor any other charges due against the buyer.Ex: The seller cannot claim lien for go down charges for storing thegoods in exercise for his lien of the rights.

Termination of Lien:An unpaid seller, looses his lien in the following cases:


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1.)When the seller delivers the goods to a carrier for the purposeof transmission to the buyer, without reserving a right ofdisposal of the goods to himself

Ex: Seller take Railway Receipt in the name of the buyer or hiscarrier.

2.)Where a buyer or his agent lawfully obtains the possession ofthe goods

3.)By waving the right of lien.4.)Where he ascends to a sub sale by the buyer.5.)Where he takes a security from the buyer for the payment of

the price, in place of his lien

2.)Rights of stoppage in transit

The right of stoppage in transit is a right of stopping the goods whilethey are in transit, resuming possession of the goods as long asthey are in the course of transit, & retaining possession untilpayment or tender of the price.

3.)Right of Re-sale:

The unpaid seller can re-sell the goods :1) where the goods are of perishable nature.2) Where the seller expressly reserves theright of resale in case

the buyer shoul make default.

3) Where he gives notice to buyer of his intention to resale thegoods & the buyer does not within a reasonable time pay ortender the price.

Rights of an unpaid seller against the buyer personally:

These are the rights, which an unpaid seller may enforce againstthe buyer personally. These rights of the seller against the buyerpersonally are called Rights in personam as against the rights inrem( i.e rights against the goods & are in addition ti his rightsagainst the goods. The rights in personam are explained as follows:

1) Suit for Price2) Suit for damages for non-acceptance.3) Repudiation of contract before due date.4) Suit for interest.


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References:

1.)Elements of Business Law: N.D.Kapoor, Ed. 19862.)Business Law: M.C. Kuchhal, Ed. 20053.)Business Law: S.S. Gulshan, G.K.Kapoor, Ed 19954.)Law of Sale of Goods and Hire Purchase, Dr.Avatar Singh,

Ed.2000

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