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STUDY MATERIAL

Course Title: Mercantile Law Course Code: IL -405 Programme: BA.LLB

Semester: Fourth Prepared

By

Burhan Majid Assistant Professor

DEPARTMENT OF LAW

SCHOOL OF LEGAL STUDIES CENTRAL UNIVERSITY OF KASHMIR

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Preface

It’s a matter of great privilege to become a part of the CUK’s initiative of preparing

the study material for courses it offers in various academic programmes. Since, in the

first round, we had a choice to choose any course for writing the material, I selected a

course titled “Mercantile Law” (which is also my teaching area).Hitherto, I have

prepared the material for only two units of the said course; the rest will be done

subsequently. Pertinently, the two units form the substantial part of the provisions of

The Sale of Goods Act, 1930. The caselaws - which have arisen from the superior

courts of India as well as England around the area giving direction and shape to the

various provisions of the Act – have also been discussed.

Interestingly, the Act, which is modelled on the English Act of 1893, is entering its

87th year of operation on March 15, 2016. The wonder is that even after all these

years, the Act is capable of governing the most intricate of transactions in sale and

purchase of goods. Remember, the Act was carved out of the Indian Contract Act,

1872 after the provisions in the latter were found to be inadequate to deal with the

commercial transactions of that time. Yet, it should be noted that despite the separate

codification of law relating to sale of goods, the unrepealed provisions of the Indian

Contract Act, 1872 continue to apply to the contracts relating to sale of goods. This is

clear from the express language of Section 3 of the Act.

However, over more than a decade now, there have been huge developments in the

field of commercial activity like that of the impact of the information technology on

the contracts. To keep pace with the changing times, the Act demands a review in

order to cater to the modern day transactions. For that, the Parliament must intervene

as soon as possible.

Srinagar Burhan Majid

20 February, 2016

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UNIT – I

1.1. CONTRACT OF SALE

A contract of sale is defined in Section 4 of the Sale of Goods Act, 1930 (hereinafter,

the Act).The definition runs as follows: “A ‘contract of sale’ of goods is a contract

whereby the seller transfers or agrees to transfer the property in goods to the buyer for

a price.”1However, before we turn to dissect the definition, it is important to notethat

the expression “contract of sale” is a generic term. That is, besides the sale simpliciter,

it includes an agreement to sell2 as well. This becomes quite evident from the very

phraseology the Parliament has employed in the aforesaid provision of law.

1.2. ESSENTIALS OF A CONTRACT OF SALE

On a plain reading of the definition of a contract of sale, following essentials become

prominent in every such contract and deserve a detailed treatment.

1. Bilateral Contract.

2. Subject matter of such contract which in every case has to be goods.3

3. Transfer of property in goods.

4. Price.

1. Bilateral Contract

A contract of sale has to be bilateral because the property in goods is to be transferred

from one person to another i.e., from seller to the buyer. Section 2(13) defines “seller”

as a person who sells or agrees to sell goods.Section 2(1) defines “buyer” as a person

who buys or agrees to buy goods.The seller and the buyer must be two different

persons. For, a person cannot buy his own goods. A sale contemplates a seller and a

purchaser. No one can sell his goods to himself.

1The Sale of Goods Act, 1930, Section 4 (1). 2The difference between sale and an agreement to sell is explained in the following pages. 3Contract of sale is a specific contract the subject matter of which is always goods (movable property, in other words).

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This principle of law has been echoed by the courts both in England and India. One

such English authority is Graff v Evan,.4 Wherein the manager of a club supplied

intoxicatingliquor to its membersat fixed prices. The club, however, was not licensed

for the sale of intoxicating liquors.It was held that this cannot be regarded as a sale

within the meaning of licensing Acts, since they were the joint owners of a club. It

was just a distribution of the liquor among the members of the same club. Pertinently,

the position would have been different if the club were an incorporated body. For

instance, in Chitoor Motor Transport Co(P)Ltd v ITO5, a company transferred a

number of buses to a partnership firm, certain members of which were also the

members of the company. It was held to be a sale due to the fact that a company is a

separate legal person and has an independent existence of its own.

The general principle has got the court’s stamp in India in yet another case, that is

State of Gujarat v Ramanlal Sankalchand & Co.6In this case, a partnership firm was

dissolved and the surplus assets including some goods were divided among the

partners. Sales tax officer sought to tax this. Rejecting the contention of the State,

Bhagwati, J stated: “They (partners) were themselves the joint owners of the goods

and they could not be both sellers and buyers”.

Hence, the existence of two separate persons is essential for a contract of sale.

However, the law recognises two exceptions to the general rule. One such exception is

where a person’sgoods are sold in execution of a decree, he may himself buy

them.7The second exception is found in the express wording of Section 64(4) of the

Act which establishes that in case of a sale by auction, a seller may reserve his right of

making a bid at the auction.

Furthermore, there may be a contract of sale between one part-owner and another.

One part-owner may transfer his portion to the other and make him the sole owner.

4 [1882] 8 QBD 373. 5 AIR 1966 SC 570. See also Century Club v State of Mysore, AIR 1961 Mys 25, supply by an unincorporated club, not a sale. 6AIR 1965 Guj 60. 7R v England, (1864) 4 B&S 782:33 LJ QB 145. See also Kitson v Hardwick,(1872) 7 CP 473 at p 478.

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This is contained in the last part of Sub-section (1) of Section 4 of the Act. Similarly,

a partner may sell to the firm and vice versa.

So, in order to crystallise the real import of what a bilateral contract entails is that a

contract of salehas always to be consensual. There must be mutual assent, in the

objective sense in which this expression is always understood in the law of contract, to

all the elements which make up a sale. The seller must agree to transfer the property

and the buyer to take it. Where the consent of the parties does not extend so far, or

does not exist at all, there is no sale. Such transactions or events are often termed as

quasi-contracts of sale or implied contracts of sale, but there is no true analogy with a

contract of sale properly so-called and the Sale of Goods Act,1930 does not apply to

them.8In Agricultural Market Committee v Shalimar Chemicals Works Ltd,9the

Supreme Court has observed that a contract of sale, like any other contract is a

consensual act since the parties are at liberty to settle the terms of the contract.

Therefore a contract of sale is “bilateral and consensual”.10

Statutory Transactions: Whether Contracts of Sale

It is quite possible that not at all times contracts are entered into by the normal process

of negotiation; instead they take place under a statutory compulsion. The question that

arises here is when the goods are supplied under a statutory complulsion, does that

ensue in a contract of sale. Remember, this question has been a subject of controversy

for a long period of time before the courts.

Courts in England have refused to regard the supply of goods by virtue of a statutory

obligation as a sale of such goods, the consensual element being absent in such

transactions. This has been held in Pfizer Corporation v Ministry of Health11which

was later followed in Appleby v Sleep12. However, the position seems to be different in

India. Though the compulsory acquisition of property would exclude the elements of

8Benjamin,SALE OF GOODS 56 (4th Edn 1992). 9(1997) 5 SCC 516; AIR 1997 SC 2502. 10Pothier, CONTRACT DE VENTE. 11[1965] AC 512. 12 [1968] 2 All ER 265.

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mutual consent which is vital to a sale, so long as mutual assent, express or implied, is

not totally excluded the transaction will amount to sale.

The question whether such a transaction amounts to a sale and whether such a

transaction is eligible to sales tax came up for consideration before a seven Bench

judge of the Supreme Court and on review of the case law the Supreme Court held in

The State of Madras v Gannon Dunkerley & Co(Madras)Ltd13:

“A sale is necessarily a consensual transaction and if the parties have no volition or

option to bargain, there can be no sale, the limitations on the normal right of dealers

and consumers to supply and obtain the goods, the obligations imposed on the parties

and the penalties prescribed by the Control Order did not militate against the position

that eventually the parties must be deemed to have completed the transaction under an

agreement by which one party bound itself to supply the stated quantity of goods to

the other at a price not higher than the notified price and the other party consent to

accept the goods on the terms and conditions mentioned in the permit or the order of

in its favour by the concerned authority. In order to see whether there was any

agreement or consensuality between parties, regard must be had to their conduct at or

about one when the goods changed hands. Since it is not obligatory on a trader to deal

in such essential commodity nor on any one to acquire it, the primary fact is that the

decision of the tile trader to deal in the essential commodity strictly in the terms of the

Control Orders is volitional and the consumer too on his own volition decides to

obtain the commodity on the terms of the permit or the order of allotment issued in his

favour. The parties enter into such transactions with their free consent _’When the

allottee presents his permit to the dealer, he signifies his willingness to obtain the

commodity from the dealer on the terms stated in the permit. His conduct reflects his

consent. Thus, though both parties are bound to comply with the legal requirements

governing the transaction, they agree as between themselves to enter into the

transaction on statutory terms, one agreeing to supply the commodity to the other on

those terms and the other agreeing to accept it from him on the very terms. It

13 AIR 1958 SC 560.

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is,therefore, not correct to say that the transactions between the dealers and the

allottees are not consensual.”

In New India Sugar Mills Ltd v Commissioner of Sales Tax Bihar,14theissue pertained

to the Sugar Products Control Order 1946 under which the producers of sugar were

prohibited from disposing of or agreeing to dispose of or making delivery to anyone

except to or through recognised dealer. The Order required every purchaser or dealer

to comply with the directions regarding production, sales, stock or distribution as may

be given from time to time by the controller. The said Order also imposed a penalty

for the contravention of the provisions of the Order. Under the said Order, the

controller made allotments to the various States and addressed orders to factory

owners to supply sugar to the states in accordance with the instructions received from

the state government. New India Sugar Mills supplied sugar to the State of Madras

under the said Order. The State of Bihar made an attempt to tax the transaction as a

sale. But, the majority negated the contention and held that such a transaction did not

amount to a sale, the reason being that there was no exercise of volition in complying

with the orders passed by the controller. HIDAYATULLAH J, however gave a

dissenting opinion. He stated as under:

So long as the parties trade controls at a fixed price and accept these as any other law

of the realm because they must, the contract is at the fixed price both sides having or

deemed to have agreed to such a price. Consent under the law of contract need not be

express, it can be implied...The present is just another example of an implied contract

with an implied offer an implied acceptance by the parties.

The minority opinion of HIDAYATULLAH J was approved in Vishnu Agencies Pvt

Ltd v Commercial Tax Officer Eluru15holding that the majority decision in New India

Sugar Mills Ltd v Commissioner of Sales Tax Bihar16is not a good law and the true

legal position is as stated in the minority judgement delivered by Hidayatullah J in that

case.

14 AIR 1963 SC 1207. 15 AIR 1978 SC 449, pp 463, 471. 16 AIR 1963 SC 1207.

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This was again reiterated in Coffee Board v Commissioner of Commercial

Taxes17wherein it was held that offer and acceptance need not always be in elementary

form, nor does the law of contract of sale of goods require that consent to a contract

must always be expressed. Offer and acceptance can be spelt out from the conduct of

the parties which cover not only their acts but omissions as well. The limitations

imposed by the Control Order on the normal rights of the dealers and consumers to

supply and obtain goods, the obligations imposed on the parties and the penalties

prescribed by the order do not militate against the position that eventually, the parties

must be deemed to have completed the transaction under an agreement by which one

party binds itself to supply the stated quantity of goods to the other at a price not

higher than the notified price and the other party consents to accept the goods on the

terms and conditions mentioned in the permit or the order of allotment.

2. Goods

The subject matter of every contract of sale must be goods. The expression “goods” is

defined in Section 2(7) of the Act. It defines goods as follows:

‘Goods’ means every kind of movable property other than actionable claims and

money; and includes stock and shares, growing crops, grass and things attached to or

forming part of the land which are agreed to be severed before sale or under the

contract of sale.

Thus goods, in the first instance, mean every kind of movable property other than

actionable claims and money. Section 3 of General Clauses Act 1897 defines

“movable property” as property of every description except immovable property, and

immovable property includes ‘land, benefits to arise out of land, and things attached to

earth or permanently fastened to anything attached to the earth. Every movable

property whether tangible or intangible is included within the definition of goods.

Hence, things like goodwill, copyright, trademark, patents, ships, water are all goods.

17 AIR 1988 SC 1487, following State of Kerela v Bhawani Tea Produce Co. Ltd.AIR 1966 SC 677.

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It was held in Firm of Sahebram Surajmal & ors v Purshottamlal Gopikishan &

ors18that the interest of a partner in partnership being movable property and not being

an actionable claim is ‘goods’.

Water, Oil and gas: Whether Goods

It is submitted that gas, water, and oil are capable of being bought and sold as goods19.

In Longhurst v Guildford Godalmng & Director, Water Board20, water has been

regarded as an “article”. Same has been held in Ferens v O’Brien21.

Energy: Whether Goods

In Commissioner of Sales Tax v Madhya Pradesh Electricity Board,22Supreme Court

held that although electric energy is not tangible, it is still “goods” as it can be

transmitted, transferred, delivered, stored or even possessed in the same way as any

other movable property. Following this Supreme Court ruling, the Madhya Pradesh

High Court in Jabalpur Cable Network Pvt Ltd v ESPN Software India Pvt Ltd23 held

that electronic T.V signals are in the form of energy just like electricity and are goods

which can be a subject matter of sale.

In Bharti Airtel Ltd v State of Karnataka24, it has been held thatthe transfer of property

in artificially created light energy carrying data through optic fibre cables is distinct

from electric-magnetic waves and falls within the definition of goods.

Software: Whether Goods

The courts are edging towards the principle that a sale of software is a sale of goods. It

has been held in St Albans City & District Council v International Computers

Ltd25that a contract to supply a programme on a disk is a sale of goods if the supplier

18 AIR 1950 Nag 89. 19 See Generally Halsbury Laws of England fourth Edn,Vol 49,paras 371,372; Benjamin,Sale of Goods, fifth Edn, 1997,pp 1-77, etc. 20 1963 AC (265). 21 [1883] 11 QBD 21,water in pipelines held to be larcenable. 22 (1969) 1 SCC 200 ;AIR 1970 SC 732. 23 AIR 1999 MP 271. 24 (2009) 22 VST 465 (Kant). 25 1995 FSR 686:[1996] 4 All ER 481 (CA).

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is selling the disk to the buyer. There is no reason why the benefits of the Sale of

Goods Act should not be extended to the purchase of software.

In his judgement Scott Baker J adopted a description of a computer system which

contains the following passage:

By itself hardware can do nothing. The really important part of the system is the

software. Programmes are the instructions or commands that tell the hardware what

to do. The programme itself is an algorithm or formula. It is of necessity contained in

a physical medium. A programme is machine readable form must be contained on a

machine readable medium, such as paper cards, magnetic cards, magnetic tapes,

discs, drum or magnetic bubbles.

Animals: Whether Goods

As regards animals, the opinion appears to be in favour of treating domestic animals

as “goods”26, but not living wild animals not in captivity or under physical control

because they are not otherwise capable of being owned absolutely27.

Human Organs: Whether Goods

The law recognises no right in property in a dead body or any part thereof28 and for

this reason human remains cannot be considered ‘goods’ capable of being bought and

sold. It is however doubtful whether there is any universal rule to this effect. Different

considerations may arise in context of human organs and blood and tissues being

increasingly in demand for transplant, transfusion and grafting. Supply and demand

situation has already arisen in respect of human remains. Many of these items are

capable of being stolen.

In Belle Bonfils Memorial Blood Bank v Hansen29, it has been held that bloodsupplied

by a blood bank is a sale of goods.

26Gopalkrishna Pillai v KM Mani AIR 1984 SC 216 pp 219,220. 27Halsbury Laws of England, fourth edn, vol 2, p 81 et seq; Hamps v Darby [1948] 2 KB 311 p 321. 28Williams v Williams, (1882) 20 Ch D 659, 664-65. 29 (1978) 579 P 2d 1158; Benjamin ,Sale of Goods, third edn, p 68, para87.

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The donor of a kidney for transplant is often monetarily compensated. Skeletons are

regularly sold to the medical students for a price. Wigs made from human hair are

openly bought and sold as goods. However the dealings with parts and products of

human body will have to be regulated by appropriate legislation so that the possible

abuses and exploitation of the poor is prevented. Perhaps establishment of a regulatory

body with expert know-how and supervision of such dealings would become essential.

Actionable claims and money: Whether Goods

Money and actionable claims are excluded from the definition of “goods”. Import

licences called REP licences or Exim scripts have been held to be goods and not

actionable claims30. Money, which is a legal tender, is an essential aspect of every sale

because the price of goods has to be expressed in terms of money and, therefore,

“money” itself cannot be the subject of sale. However, any coins or notes which have

ceased to be legal tender and have become objects of curiosity may be sold as goods.31

In R v Dockinson32, gold sovereigns were deemed to be “goods” for the purpose of

forfeiture order. Thus money is capable of various meanings.33

Stocks and shares: Whether Goods

“Goods” also include shares and stocks. The definition of “goods” as provided in the

Sale of Goods Act, 1930 is much wider than that contained in the English Act, for it

includes such things as stocks and shares, which in English law are not goods.

Growing crops, grass and things attached to or forming part of the land which

are agreed to be severed before sale or under the contract of sale: Whether

Goods

The definition also makes it clear that things fixed to the land may, notwithstanding

the definition of movable and immovable property in General Clauses Act 1897, be

subject-matter of a contract of sale of goods, provided that by the terms of the

30Vikas Sales Corpn. v CCT, (1996) 4 SCC 433. 31Moss v Hancock [1899] 2 QB 111. 32 [1920] 3 KB 552. 33R v Thompson, 1980 QB 229: [1980] 2 WLR 521: [1980] 2 All ER 102, current silver coin not “goods”.

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contract, it is clear that they are to be severed from the land. Section 3 of Transfer of

Property Act 1882 defines expression “attached to earth”. It states that “attached to

earth” means-

(a) rooted in the earth, as in case of trees and shrubs;

(b) imbedded in the earth, as in case of walls or buildings; or

(c) attached to what is so imbedded for the permanent beneficial enjoyment of

that to which it is attached

Things attached to or forming part of the land may be sold as goods only if they are

agreed to be severed under the contract, eg. trees may be regarded as goods if they are

agreed to be severed under the contract34.

In Shantabhai v State of Bombay35, the court held that there is a difference between a

tree and a standing timber and that it is only a standing timber which can be regarded

as “goods” and not the tree (immovable).The Court held that,

“Before a tree can be regarded as a standing timber it must be in such a state, if cut it

would be used as timber and when in that state it must be cut reasonably early.”

In State of Madhya Pradesh v Orient Paper Mills36, the Supreme Court held that

standing trees may be treated as goods if they are to be removed within a reasonable

time.

In Oriental Bank of Commerce v State of U.P37, it was held that a safe-deposit locker

in a bank being embedded in the ground and not intended to be used by severing it

from the ground is, therefore, not goods.

In Karthik Engineering Works v State of Karnataka38, it was held that Plant and

machinery fixed to the floor in a building are immovable property and not goods.

34Badri Prasad v State of Madhya Pradesh & anor AIR 1970 SC 706; State of Orissa v Titaghur Paper Mills Co. Ltd AIR 1985 SC 1293. 35 AIR 1958 SC 532. 36 AIR 1977 SC 687. 37 2010 (37) VST 117 (All) (DB).

38 (2009 119 SCC 88 (Karn).

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In CIT v Bhurangya Coal Co.39, the Supreme Court held that fixtures could be

considered to be movables only if intended to be severed and sold separately.

Kinds of Goods

Goods may be either existing or future goods. Section 6 of the Act states that the

goods which form the subject matter of a contract of sale may be either existing goods

or future goods. Existing goods are the goods owned or possessed by the seller at the

time of making of contract, e.g., goods lying in the godown of the seller which he

intends to sell.

Section 2(6) defines “future good”. It defines it as goods to be manufactured or

acquired by the seller after making of the contract of sale, e.g. goods yet to be

manufactured or produced.

In case of future goods there is always an “agreement to sell”. Section 6(3) states,

Where by a contract of sale the seller purports to effect a present sale of future goods,

the contract operates as an agreement to sell the goods.

Existing goods are further of two kinds-

(a) Specific goods

(b) Unascertained goods

Section 2(14) defines “specific goods” as goods identified and agreed upon at the time

a contract of sale is made, for example, A agrees to sell to B his white horse. Here the

white horse is a specific good.

Goods not identified and agreed upon at the time a contract of sale is made are

“unascertained goods”, for instance, A agrees to sell 100 bags of wheat out of 1000

bags lying in his godown without specifying the bags which he intends to sell. Here

100 bags which A intends to sell are unascertained goods.

39AIR 1959 SC 254.

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3. Transfer of Property in Goods

Under a contract of sale the seller may transfer the property in goods to the buyer,

oragree to transfer the property in goods to the buyer. Section 2(11) states that

“property” means the general property in goods and not merely a special property.

General property in goods refers to the ownership rights in the goods, i.e. the title to

the goods and not any specific right in the goods, for example, mere right to possess

or a mere right to use the goods.

Where under a contract of sale the property in goods is transferred from the seller to

the buyer, the contract is called a sale, but where the transfer of the property in the

goods is to take place at a future time or subject to some condition thereafter to be

fulfilled, the contract is called agreement to sell.40 An agreement to sell becomes a

sale when the time elapses or the conditions are fulfilled subject to which the property

in the goods is to be transferred.41

The expression “sale of goods” is a nomen jure, it’s essential ingredients being an

agreement to sell movables for a price and property passing therein pursuant to that

agreement.

4. Price

The consideration for sale of goods must be price. Section 2(10) defines “price” as the

money consideration for a sale of goods. Thus the consideration for the contract of

sale of goods must be money. Where the property in goods is transferred for a

consideration other than money that will not be regarded as a sale but an exchange or

barter. In other words where goods are exchanged for goods, it is not a sale. But where

goods are sold for a definite sum and the price partly in cash, that is sale.

40The Sale of Goods Act, 1930, Sec.4(3). 41The Sale of Goods Act, 1930, Sec.4(4).

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In Aldridge v Johnson42, fifty two bullocks, valued at 6 pounds a piece, were

exchanged for 100 quartes of barley at 2 pounds per quarter, the difference to be made

up in cash, the contract was treated as one of sale.

In CIT V Motors and General Stores Pvt. Ltd43, where an old car was returned to the

dealer for a new one and the difference was paid in cash was regarded as a sale.

Ascertainment of price

Section 9(1) provides that the price in a contract of sale may be fixed in the following

ways:

a) By the contract itself

b) In the manner agreed by the parties

c) By the course of dealing between the parties

Where the price is not determined in accordance with the foregoing provisions, the

buyer shall pay the seller a reasonable price. What is a reasonable price is a question

of fact dependent on the circumstances of each particular case.44

In M.S Madhusoodhanan v Kerela Kaunmudi Pvt Ltd45, where certain shares were

transferred for a consideration which was left to be determined at a later date, the

Supreme held that such transfers were not void by reason of any uncertainty. Section 9

allows the parties not to fix the price at the time of sale and to leave it to a later date.

According to Section 10, the parties may agree to sell goods on the terms that the

price is to be fixed by the valuation of a third party. If such party cannot or does not

make such valuation the contract becomes void. However,if the buyer has receieved

and appropriated the goods or any part thereof, he shall pay a reasonable price to the

seller.

If the third party is prevented from making valuation by the fault of the seller or

buyer, the party not in fault may maintain a suit for damages against the party in fault. 42 (1857) 7 E&B 885 :119 ER 1476: 26 LJ QB 296. 43AIR 1968 SC 200. 44The Sale of Goods Act, 1930, Sec 9(2). 45 (2004) 9 SCC 204 : AIR 2004 SC 909.

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Formalities of a contract of sale

Besides satisfying the requirements of Section 10 of Indian Contract Act 1872,

Section 5(2) of the Sale of Goods Act, 1930 provides that a contract of sale may be

made orally or in writing or partly in writing and partly by word of mouth or may be

implied from the conduct of the parties.

Performance of the contract

According to Section 5(1) of the Act, the parties are free to provide as to when the

performance of the contract is to be made. They may provide for the immediate

delivery of the goods or immediate payment of the price or both, or for the delivery or

payment by instalments, or that the delivery or payment or both shall be postponed.

1.3. DIFFERRENCE BETWEEN SALE AND AGREEMENT TO SELL

There is a distinction between a sale and agreement to sell. Section 4(3) states the

distinction as follows:

Where under a contract of sale the property in the goods is transferred from the seller

to the buyer, the contract is called a sale, but where the transfer of the property in the

goods is to take place at a future time or subject to some condition thereafter to be

fulfilled, the contract is called an agreement to sell.

Following are the points of distinction between the two:

(1) In case of sale, the property is transferred immediately to the buyer where

as in an agreement to sell the property is to pass at some future time or

subject to some condition.

(2) An agreement to sell is a contract pure and simple whereas a sale is a

contract plus a conveyance.

(3) By an agreement to sell the buyer acquires a jus in personam whereas by a

sale the buyer acquires a jus in rem, that is , a right against the goods. In

other words, in case of a sale, if the seller refuses to deliver the goods the

buyer may sue for recovery of the goods by specific performance. If the

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seller has resold the goods to another person, the buyer may follow the

goods in his hands unless that other person has bought the goods in good

faith and without notice whereas in an agreement to sell the buyer has only

a personal remedy against the seller. He can sue only for damages for the

breach of contract and not for the recovery of goods.

(4) In case of a sale, the risk of loss, if any, of the goods lies on the buyer since

he has become the owner of the goods though the goods have never come in

his possession whereas in an agreement to sell the risk of loss lies on the

seller since he is still the owner of the goods though the goods are in

possession of the buyer.

(5) In a sale, if the buyer makes a default in the payment of price the seller may

sue him for the price, that is, for specific enforcement of the contract. In an

agreement to sell, the seller’s only remedy is to sue for damages for the

breach of contract.

In Union of India v Tara Chand46, a contract to sell coal-ash which might accumulate

at a particular pump house has been held to be an agreement to sell and not a sale.

In Wood v Manley47, the sale of the whole of the haystack on the seller’s farm, the

buyer having the liberty to take away when he likes, was regarded as an immediate

sale and not an agreement to sell.

When agreement to sell becomes a sale

According to Section 4(4), an agreement to sell becomes a sale when the time elapses

or the conditions are fulfilled subject to which the property in goods is to be

transferred.

1.4. DIFFERRENCE BETWEEN SALE AND HIRE –PURCHASE

A sale has to be distinguished from a contract of hire-purchase, their legal incidents

being different. Following are the points of distinction between the two:

46 AIR 1976 MP 101. 47 (1837) 11 A&E 34 :52 RR 271.

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(1) A hire purchase agreement entitles the hirer only to possession of the goods.

He cannot pass a good title to any buyer from him. But a person who

receives possession under an agreement to buy is able to pass a good title to

a bonafide purchaser from him.

(2) In sale transfer of property in goods takes place immediately at the time of

the contract whereas in a hire-purchase agreement the transfer of property

in goods takes place upon the payment of last instalment

(3) Position of buyer is that of the owner whereas the position of a hirer is that

of a bailee.

(4) A hirer cannot claim the benefit of implied conditions and warranties

created by the Act unless it becomes a sale.But the conditions implied under

the Hire Purchase Act, 1972 do apply.

(5) In sale, the buyer cannot terminate the contract and is bound to pay the

price of the goods. In hire-purchase agreement, the hirer may, if he so likes

terminate the agreement at any time before the property so passes.

(6) In sale the buyer can pass a good title to a bonafide purchaser. In hire-

purchase agreement the hirer cannot pass a good title even to a bonafide

purchaser.

(7) A contract of hire-purchase is properly speaking a contract of hire by which

the hirer is granted an option to buy where as under a contract of sale the

party is under a legal obligation to do so.

The basis of distinction between the two was explained by the House of Lords in

Helby v Mathews.48Earlier to this the House of Lords considered the nature of a hire-

purchase transaction in McEntire v Crossby Bros.49

Helby let a piano on hire to Brewster on the following terms:

a.Brewster should pay 10s 6d every month.

48 1895 AC 471:[1895-99] All ER Rep A 21. 49 1895 AC 457 : (1895-99) All ER Rep A 29.

19 | P a g e

b. Should he punctually pay 36 monthly instalments, the piano should become his

property, until then it should continue to be the property of Helby;

c. Brewster had the right to terminate the hire at any time by returning the instrument

to Helby.

After paying a few instalments Brewster pledged the instrument with the defendant

Mathews, who acted in good faith. Helby sued Mathews to recover the instrument.

It was held that he could do so. Brewster was not in possession having agreed to buy

the piano, but under a hire-purchase agreed and, therefore, had no right to pledge.

Distinguishing hire-purchase from an agreement to buy Lord HERSCHELL, LC said:

An agreement to buy imports a legal obligation to buy. If there was no such

obligation, there cannot properly be said to have been an agreement. Where is any

such legal obligation to be found? Brewster might buy, or not, just as he pleased. He

did not agree to pay 36 or any number of monthly payments. All that he undertook

was to make the monthly payment of 10 s 6 d so long as he kept the piano. He had an

option no doubt to buy it by continuing the stipulated payments. If he had exercised

that option he would have become the purchaser. I cannot see under these

circumstances how he can be said either to have bought or agreed to buy the piano.

The Supreme Court of India has cited this statement with approval in K.L. Johar& Co.

v Deputy Commercial Tax Officer50, WANCHOO, J (afterwards C.J) said:

The essence of sale is that the property is transferred from the seller to the buyer for a

price, whether paid at once or paid later in instalments. On the other hand, a hire-

purchase agreement has two aspects. There is first an aspect of bailment of goods

subject to the hire-purchase agreement, and there is next, an element of sale which

fructifies when the option to purchase is exercised by the intending purchaser.

50 AIR 1965 SC 1082.

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UNIT - II

2.1.CONDITIONS AND WARRANTIES

Introduction:

As a general rule when a person buys something it is his duty to see whether that

something suits his purpose or not. He cannot hold anybody responsible for making a

bad choice. This is known as the doctrine of caveat emptor. When a seller gives

express condition or warranty regarding a product, he is bound to honour that. In case

the goods bought do not comply with such condition or warranty, the seller is liable to

compensate the buyer. Even in the absence of express stipulations by the seller, law

presumes that products should meet certain conditions and warranties, breach of

which has the same effect as the breach of express stipulations. The Act recognizes

condition and warranty separately although both the terms denote the promise made

by the seller. The difference lies in the nature of promise. If the promise is such that it

affects the very basis of the contract, it is a “condition”. If the promise is such that it is

collateral to the main purpose of the contract it is a “warranty”.

Section 12(1) of the Act, provides that stipulations in a contract of sale with reference

to goods may be conditions or warranties

Section 12(2) defines the term “condition”. It states that a condition is a stipulation

essential to the main purpose of the contract, the breach of which gives rise to treat the

contract as repudiated.

Section 12(3) defines the term “a warranty”. It states that a warranty is a stipulation

collateral to the main purpose of the contract, the breach of which gives rise to a claim

for damages but not to a right to reject the goods and treat the contract as repudiated.

Section 12(4) provides that whether a stipulation in a contract of sale is a condition or

a warranty depends in each case on the construction of the contract. A stipulation may

be a condition, though called a warranty in the contract.

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Comments

A condition forms the very basis of the contract the breach of which causes an

irreparable damage to the buyer, and he has a right to terminate the contract of sale

entitling him to return the goods and get the refund of the price paid. It goes to the

root of the contract.

In Baldry v Marshall51, A consulted B, a car dealer and told him that he wanted to

purchase a car for touring purposes. B suggested that a Buggati car will be fit for the

purpose. Relying upon the statement, he bought the Buggati car. Later on the car

turned to be unfit for the purpose of touring. The Court observed that the suitability of

the car for touring purpose was a condition because, it was so important that the non

fulfilment defeated the very purpose of purchasing the car. It was held that A was

entitled to return the car and get back the price paid.

In Wallis v. Pratt52,Lord FLETCHER MOULTON defined condition as,an obligation

which goes so directly to the substance of the contract or in other words, is so

essential to its very nature,that its non-performance will fairly be considered by the

other party as a substantial failure to perform the contract at all.

2.2.IMPLIED CONDITIONS

Whether any express condition is made or not law presumes certain standards which

are to be ensured by the seller before selling any product.These presumptions as to

nature, quality and rightful ownership of the product are termed as implied conditions.

Section 14-17 of the Sale of Goods Act, 1930 deals with implied conditions.

2.2.1. Condition as to title:

It is presumed in law that in the case of a sale, the seller has the right to sell the goods,

and in the case of an agreement to sell, the seller will have the right to sell the goods at

the time of sale. In case a seller sells without the right to sell them, the buyer has the

51 (1925) 1 KB 26. 52 1910 2 K.B.1012.

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right to repudiate the contract. The term right to sell infers that the seller should have a

valid title to the goods.

According to Section 14 of the Act, “In a contract of sale, unless the circumstances of

the contract are such as to show a different intention, there is an implied condition on

the part of the seller that, in the case of a sale, he has a right to sell the goods and that,

in the case of an agreement to sell, he will have a right to sell the goods when the

property is to pass.

In Rowland v Divall53, B bought a second hand car from S a car dealer. After few

months the car was taken away by the police as it was a stolen one. The court

observed that it was a breach of condition as to title as S had no right to sell the car. It

was held that B could recover full price from S.

In Niblett v Confectioners Material Co54,B bought 3000 tins of condensed milk from

S. Out of these 1000 tins were labeled as NisslyBrand.N, another manufacturer of the

milk under the brand name of Nestle, claimed that this was an infringement of his

trademark. Consequently B had to remove all the labels from the tins and had to sell

them at loss. The court held that the seller had breached the implied condition that he

had a right to sell.

Comments:

When a person sells the goods by infringing the copyright or trademark of the others,

he is considered as not having the right to sell the goods.

Where a seller having no title to sell the goods acquires a valid title to the goods after

the sale, but before the buyer seeks to terminate the contract, the implied condition as

to title is considered to be complied with.

B buys a stolen car from S without knowing this fact.By the time B came to know

about it S had compensated the true owner and acquired a legal ownership of the car.

Now B cannot terminate the contract on the ground of breach of implied condition.

53 [1923] 2K.B 500 (CA). 54 [1921] 3 KB 387.

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In Mathew Varkey v T.C Abraham55, the plaintiff purchased a car from defendant in

good faith, though defendant had not transferred the registration in the name of the

plaintiff. The car was seized by police being stolen property. The plaintiff filed a suit

for damages against the defendant. The court held that the plaintiff could not

successfully lay a claim in the absence of any pleading or proof thereof that he had

lost title to vehicle. In order to claim damages, the plaintiff had necessarily to plead

that title over the car had been lost and this had not been pleaded or proved by the

plaintiff.

In Butterworth vKingsway Motors56.Where a seller having no title to the goods at the

time of the sale, subsequently acquires a title, that title feeds the defective titles of

both the original buyer and the subsequent buyer.

2.2.2. Sale by description

“If you contract to sell Lays, you cannot oblige the party to take Kurkure”.

This is the rule laid down in the Section 15 of the Act. Section 15 states, where there

is a contract for the sale of goods by description, there is an implied condition that the

goods shall correspond with the description; and, if the sale is by sample as well as

description, it is not sufficient that the bulk of the goods corresponds with the sample

if the goods do not also correspond with the description.

Comments

Two things are necessary to enable a buyer to invoke the protection of this section.

There should be a sale by description and the goods should not correspond with the

description.

The expression “sale by description” includes many situations. Lord WRIGHT

pointed out in Grant v Australian Knitting Mills57:

55 A.I.R.2001 Ker.98(D.B). 56 1954 1 W.L.R.1286. 57 1936 AC 85.

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It may also be pointed out that there is a sale by description even though the buyer is

buying something displayed before him on the counter: a thing is sold by description,

though it is specific, so long as it is sold not merely as a specific thing, but as a thing

corresponding to a description, e.g., woollen undergarments, a hot-water bottle, a

second-hand reaping machine, to select a few obvious illustrations.

In Bowes vShand58,it was held that if the description of the article tendered is different

in any respect, it is not the article bargained for and the other party is not bound to

take it. Goods are sold by description when they are described in the contract, as farm

wheat, Australian apple, Indian silk etc and the buyer contracts in reliance on that

description.

In Shepherd v Kane59, A ship was contracted to be sold as copper fastened vesselto be

taken with all faults, without any allowance for any defects whatsoever. The ship

turned to be partially Copper fastened .The court held that that the buyer was entitled

to reject the goods.

When a descriptive word or phrase is used in a contract of sale to describe the product

it creates an implied condition that the goods will correspond to the description. For

example, a sale of Seedless grapes, signifies that the fruit will have no seeds. If it turns

that the fruit is with seeds the buyer can reject the goods.Sale of Goods by description

may include the following situations;

(a) Where the buyer has not seen the goods and relies on their description given

by the seller.

In Varley v Whipp60, W bought a reaping machine which he had never seen V the

seller described to have been new the previous year and used to cut only 50 to 60

acres crops .W found the machine to be extremely old .It was held that W could return

the machine as it did not answer to the description.

58 1877 App.Cas.455. 59 (1821)5 b & Ald.240. 60 [1900] 1 QB 513 at p 516.

25 | P a g e

(b) Where the buyer has seen the goods but relies not on what he had seen but on

what was stated to him by the seller.

In Nicholson&Venn v Smith Marriot61, in an auction sale of a set of Napkins and table

cloths these were described as dating from the seventh century; the buyer bought the

set after seeing it. Subsequently it was found that the set was not of the seventh

century but of the eighteenth century, it was held that he could reject the goods.

(c) Packing of goods may sometimes be part of the description.

In Moore & Co v Landauver&Co62,M sold to N 300 TINS OF Australian Apple

packed in cases containing 30 tins. M tendered a substantial portion in case containing

24 tins. It was held that N could reject all the tins as the goods were not packed

according to the description given in the contract as the method in which the fruit was

packed was an essential part of the description.

(d) Sale by description as well as by sample.

Section 15 further provides that if the sale is by sample as well as by description then

it is not sufficient that it corresponds to the description but it should also correspond to

the sample.

In Wallis v Pratt63,in a contract for the sale of a quantity of the sale of seed described

as common English Sainfoin the seed supplied was of a different kind, though the

defect was not discoverable except by sowing the defect also existed in the sample.

Held the buyer was entitled to recover damages for the breach of contract.

2.2.3. Condition as to sale by sample

Section 17(1) states that a contract of sale by sample is a contract for sale by sample

where there is a term, express or implied in the contract, to that effect.

Section 17(2) states that in case of contract of sale by sample, there is an implied

condition-

61 (1947)177 L.T.189. 62 (1921 ),2K.B. 519. 63 (1911) A.C .394.

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1. that the bulk shall correspond to the sample in quality.

2. that the buyer shall have a reasonable opportunity of comparing the bulk with

the sample.

3. that the goods shall be free from any defect, rendering them un-merchantable.

The defect should not, however, be apparent on a reasonable examination of

the sample.

In the case of patent defect there is no breach of implied condition as to

merchantability.

In Mody v Gregson64, in a contract for the sale of brandy, by sample brandy coloured

with a dye was supplied. The court held that the buyer was not bound by the contract

even though the goods supplied were equal to the sample as the defects were not

apparent on the reasonable examination of the sample.

In E & S Ruben Ltd vFair Bros65,A agreed to buy some rubber material from B. The

sample of the rubber was shown to A. On receiving the rubber material, A found that

the measurement of the rubber material was different from that of the sample. The

court held that measurement of the rubber material was part of its quality. It was held

that the goods did not correspond to the sample.

In Lorymer vSmith66, Two parcels of wheat were sold by sample. The buyer went to

examine the wheat a week later. One parcel was shown to him but the seller refused to

show the other parcel as it was not there. In this case the buyer was not given

reasonable opportunity to test the bulk with the sample. The court held that the buyer

was entitled to reject the contract of sale.

In Goddey v Perry67,a retailer bought certain toys. He tested the sample by pulling that

at the elastic end and found no defect. One of the toys exploded in the hands of a

child, who had bought it from the retailer. It was heldthat the retailer does have a right

64. L.R.4E.X.49. 65. 1949 1K.B.254. 66. (1822) 1 B&C 1. 67 (1961) England.

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to claim the price because the goods were un-merchantable by reason of a latent

defect.

2.2.4. Implied condition as to quality or fitness (Conditions Implied as by way of

Exceptions to the Rule of Caveat Emptor)

Rule of Caveat emptor:

The opening words of Section 16 run as follows:

Subject to the provisions of this Act and of any other law for the time being in force,

there is no implied warranty or condition as to the quality or fitness for any particular

purpose of goods supplied under a contract of sale... This implies that ordinarily there

is no implied condition that the goods supplied by the seller should be fit for the

particular purpose of the buyer. It is the buyer’s duty to select the goods of hid

requirement, for example, A purchased a horse from the B. A needs the horse for

riding but did not mention it to B. subsequently it turns out that the horse is not

suitable for riding and is only suitable for being driven in a carriage. A can neither

claim damages nor he can reject the goods.

One illustration of the application of this principle is Ward v Hobbs68, certain pigs

were sold by auction and no warranty was given by the seller in respect of any fault or

error or description. The buyer paid fair price for healthy pigs, but they were ill and all

but one died of typhoid fever. They also infected a few of buyer’s own pigs. The

House of Lords held that sending infected pigs to the market was an offence, but there

was no implied condition or warranty that they were sound. Hence, generally the

seller is under no obligation to sell to the buyer goods fit for his purpose.

Exceptions

There are certain exceptions to this general rule which are contained in Section 16

itself. The section provides the following exceptions;

1. Fitness for Buyer’s purpose

68 [1878] 4 AC 13 (HL).

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2. Merchantable quality

1. Fitness for Buyer’s purpose[S. 16(1)]

Sub-section (1) requires the seller in certain circumstances to supply goods which

shall be fit for the buyer’s purpose. It runs thus:

Where the buyer, expressly or by implication, makes known to the seller the particular

purpose for which the goods are required, so as to show that the buyer relies on the

seller’s skill or judgement and the goods are of a description which it is in course of

the seller’s business to supply (whether he is the manufacturer or producer or not,

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

For this condition to arise, the following points have to be proved:

(1) The buyer should make known to the seller the particular purpose for which he

requires the goods.

(2) The buyer should rely on the skill and judgment of the seller.

(3) The goods must be of a description which is in the course of the seller’s

business to supply.

Comments

The condition is applicable by way of exception to the general rule of caveat emptor.

The general rule is “there is no implied condition of warranty as to fitness for any

particular purpose of goods supplied under a contract of sale.”

InRe Andrew Yule &Co69, a buyer ordered for Hessian cloth which is generally used

for packing purposes the cloth was supplied accordingly on receiving the cloth, the

buyer found that the cloth was not suitable for packing food products as it had unusual

smell He wanted to reject the cloth. The court observed that the buyer had no right to

reject the cloth because although it was not fit for the specific purpose, it was fit for

the purpose of packing otherwise for which it was commonly used. There was no

breach of condition of fitness in this case. In this case had the buyer informed to the

69 AIR 1932 Cal. 879.

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seller that he needs the cloth for the packing of food products, situation would have

been different.

It is not necessary that the purpose should be expressed in words only. If the goods

could only be used for one purpose only, it is implied that the seller had knowledge

about the purpose for which the buyer need the goods.

In Priest v Last70, B went to S a chemist and demanded a hot water bottle from him, S

gave a bottle to him telling that it was meant for hot water, but not boiling water. after

few days while using the bottle B’s wife got injured as the bottle burst out, it was

found that the bottle was not fit to be used as hot water bottle. The court held that the

buyer’s purpose was clear when he demanded a bottle for hot water bottle, thus the

implied condition as to fitness is not met in this case.

In Grant v Australian Knitting Mills71,B bought underwear from S, B examined it

while purchasing. Later on it turned out to be harmful for his skin because of the

presence of hidden sulphites in the underwear which could not have been revealed by

ordinary examination. The court held that the implied condition of merchantability is

applicable in this case. The court observed also that since these garments are intended

to be worn next to skin, there was no need to expressly specify the purpose.

In Griffith v Peter Conway Ltd.72, the plaintiff purchased a tweed coat, but when he

used the coat he got dermatitis, the matter went to the court. While the case was

pending before the court, it was found that plaintiff was abnormally over sensitive and

could not claim any damages because there is no implied condition that the goods

shall suit abnormal buyer like that of plaintiff.

An exception to this exception is laid down in proviso to section 16(1) which states

that if a buyer buys a good by way of specific patent or trade name, then there is no

implied condition or warranty that the goods shall suit the buyer.

70 (1903)2K.B.148. 71 AIR 1936 SC34. 72 [1939] 1 All ER 685(CA).

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In Chanter v Hopkins, the buyer made an order to the seller, which said,“Send me

your patent hopper and apparatus to fit up my brewing copper with smoke consuming

furnace as well as the apparatus”. These were found not to be fit for the purpose of

buyer’s brewing machine. The court held that, since the seller supplied what the buyer

had ordered, the seller is entitled to recover the price from the buyer.

2. Condition as to Merchantable quality [S. 16(2)]

Section 16 (2) states- Where goods are bought by description from a seller who deals

in goods of that description whether he is not the producer or manufacturer or not,

there is an implied condition that the goods shall be of merchantable quality.

The above provision reveals that the condition of merchantability is applicable when,

a) The goods are sold by description;

b) The seller deals with such goods;

“Merchantable” means that the goods must be fit for the ordinary purpose for which

such goods are used. For example, when shoes are sold, merchantability requires that

the shoes have their heels attached well enough, that they will not break off under the

normal use.The term “merchantable” is nowhere defined in the Act however in Bristol

Tramways Carriage Co. Ltd v Fiat Motors73the court observed that, ‘when an article

is of such a quality and in such a condition that a reasonable man acting reasonably

would after a full examination accept it under the circumstances of the case in

performance of his offer whether he buys for his own purpose or to sell them again, it

can be said to be of a merchantable quality’.

In Jones vJust74,B&Co a firm of merchants contracted to buy from S some bales of

Manila hemp. This was to arrive from Singapore. The hemp arrived wetted with sea

water. It was so damaged that it was not possible to sell it as Manila hemp in the

market. The court held that the hemp was not of merchantable quality and it was

entitled to be rejected.

73 [1910] 2 KB 831. 74 1868LR 3 QB 197 (grant case).

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Proviso to section 16(2) states that where the buyer examines the goods and the

defects are such which could be revealed by ordinary examination, the implied

condition of merchantability does not apply to the extent of such defects.

Where the product has some latent defects which cannot be revealed by ordinary

examination, the condition of merchantability would apply when even if the buyer has

examined the goods.

In Thornet v Beers75,B wanted to purchase some glue. The glue was stored in the

seller’s warehouse in barrels. B was given every facility to open the barrels and

inspect them but B did not open the barrels. Later on the glue was found to have

defects which B could have noted if he had opened the Barrels. The court held that

there is no breach of implied condition as to merchantability in this case and B was

not entitled to any relief.

In Grant v Australian Knitting Mills76, B bought underwear from S, B examined it

while purchasing.Later on it turned out to be harmful for his skin because of the

presence of hidden sulphites in the underwear which could not have been revealed by

ordinary examination. The court held that the implied condition of merchantability is

applicable in this case.

Now what amounts to an examination is a question of fact in each case. In case of

Thornet, thebuyer had the product before him to examine but he chose not to examine

it. Here as against the seller the examination is deemed to be made by the buyer.

Packing of goods is an equally important consideration in judging their

merchantability.

In Morreli v Fitch & Gibbons77, M asked for a bottle of Stones Ginger Wine at S’s

shop which was licensed for the sale of wines. While M was drawing the cork, the

bottle broke and M was injured. It was held the sale was by description and M was

entitled to recover damages as the bottle was not of merchantable quality.

75 (1919) 1 KB 486. 76 Ibid;70. 77 (1928) 2K.B .636.

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2.3.EXCLUSION OF IMPLIED CONDITIONS:

Section 62 reads as- Where any right, duty or liability would arise under a contract of

sale by implication of law, it may be negatived or varied by express agreement or by

the course dealing by the parties or by usage, if the usage is such as to bind both the

parties to the contract. The rule of law is that in a contract of sale the parties are free to

make any bargain they feel like. The seller can exclude his liability by expressly

providing in a contract of sale that he will not be liable for the breach of any

condition. Similarly the buyer can waive any condition in a contract. However, the

seller cannot exclude his liability to perform the fundamental aspects of the contract.

As quoted by Lord Harbinger, “if a seller contract to sell a horse, and expressly

excluded all conditions and warranties, express or implied, could he escape liability ,if

he delivered a pig? He would be met by the simple and sufficient answer that he had

failed the one fundamental obligation. S sold a horse to B with the stipulation, that

there is no condition or warranty as to the fitness of the horse. The horse dies on the

third day after the sale. In this case the seller is not liable to compensate the buyer”.

2.4. REMEDY FOR BREACH OF CONDITION

On breach of a condition by the seller, the buyer’s remedy is that he can reject the

transaction and return the goods to the seller. On breach of a warranty by the seller,

the buyer is provided with a remedy to claim damages suffered because of the goods

bought under the transaction, but he cannot return the goods. When certain condition

is not fulfilled, the buyer may not put an end to the contract by rejecting the goods and

recover damages from the seller for breach of warranty. But once the buyer exercises

his option to treat a breach of condition as a breach of warranty, he cannot afterwards

insist on the fulfilment of the condition. This rule is laid down in Section 13 (1) of the

Act. Where the contract of sale is not severable and the buyer has accepted the goods

or any part of the goods the breach of any condition by the seller can only be treated

as a breach of a warranty, unless there is a term of the contract, express or implied to

the contrary. This rule is laid down in Section 13(2) of the Sale Goods Act.

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2.3. WARRANTY

Warranty as defined in section 12(3) of the Act is a stipulation collateral to the main

purpose of the contract, the breach of which gives rise to a claim for damages but not

to a right to reject the goods and treat the contract as repudiated.

Implied warranties

1. Implied warranty of quiet possession [ Section 14(b)]In every contract of sale

there is an implied warranty that the buyer shall have and enjoy quiet possession

of the goods.

Seller has no right to disturb the possession of the buyer after the delivery of goods, if

seller does so, there is breach of an implied warranty and the buyer can claim

damages.

2. Implied warranty against encumbrance [Section 14(c)] There is an implied

warranty that the goods shall be free from any charge or encumbrance in favour

of any third party not declared or known to the buyer before or at the time when

the contract is made.

When breach of condition to be treated as breach of warranty-

Section 13 of the Act provides that in certain circumstances, a condition is reduced to

the status of warranty as a result the buyer loses his right to reject the contract. It

provides for the following conditions:

1. Waiver by the buyer[ section 13(1)]:Where a contract of sale is subject to any

condition to be fulfilled by the seller, the buyer may waive the condition or elect

to treat the breach of condition as a breach of warranty.

2. Acceptance of goods by buyer [section 13(2)]: In a contract of sale, if the buyer

has accepted the goods or part thereof, the breach of condition is reduced to the

breach of warranty.

Section 42 of the Act provides that a buyer is deemed to have accepted the goods

if:

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a. He intimates the seller that he has accepted the goods.

b. When the goods have been delivered to the buyer and buyer does an act which

is inconsistent with the ownership of seller.

c. When after the lapse of reasonable period of time, he retains the goods with

himself without intimating the seller.

2.4. DIFFERENCE BETWEEN CONDITION AND WARRANTY

Condition Warranty

1. Stipulation essential to the main

purpose of the contract.

2. In case of a breach of condition,

the aggrieved party can repudiate

the contract.

3. A breach of condition may be

treated as breach of warranty.

1. Stipulation collateral to the main

purpose of the contract.

2. In case of a breach of warranty, the

aggrieved party can claim damages

only.

3. A breach of warranty cannot be

treated as a breach of condition.

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2.6. PASSING OF PROPERTY

The property in the goods is said, to be transferred from the seller to the buyer when

the latter acquires the proprietary rights over the goods and the obligations linked

thereto. “Property in Goods” which means the ownership of goods, is different from

“possession of goods” which means the physical custody or control of the goods. The

transfer of property in the goods from the seller to the buyer is the essence of a

contract of sale. Therefore the moment when the property in goods passes from the

seller to the buyer is significant for following reasons:

a. Ownership: The moment the property in goods passes, the seller ceases to be their

owner and the buyer acquires the ownership. The buyer can exercise the

proprietary rights over the goods. For example, the buyer may sue the seller for

non-delivery of the goods or when the seller has resold the goods, etc.

b. Risk follows ownership: The general rule is that the risk follows the ownership,

irrespective of whether the delivery has been made or not. If the goods are

damaged or destroyed, the loss shall be borne by the person who was the owner of

the goods at the time of damage or destruction. Thus the risk of loss prima facie is

in the person in whom the property is.

c. Action against third parties: When the goods are in any way damaged or destroyed

by the action of third parties, it is only the owner of the goods who can take action

against them.

d. Suit for Price -- The seller can sue the buyer for the price, unless otherwise agreed,

only after the gods have become the property of the buyer.

e. Insolvency-- In the event of insolvency of either the seller or the buyer, the

question whether the goods can be taken over by the Official Receiver or

Assignee, will depend on whether the property in goods is with the party who has

become insolvent.

Essentials for Transfer of Property

The two essentials requirements for transfer of property in the goods are:

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1. Goods must be ascertained: Unless the goods are ascertained, they (or the

property therein) cannot pass from the seller to the buyer. Thus, where there is

a contract for the sale of unascertained goods, no property in the goods is

transferred to the buyer unless and until the goods are ascertained

2. Intention to pass the property in goods must be there: In a sale of specific or

ascertained goods the property in them is transferred to the buyer at such a time

as the parties to the contract intend it to be regard shall be had to the terms of

the contract, the conduct of the parties and the circumstances of the case.

Since the transfer of property in goods from seller to buyer is the main essence of the

contract of sale. Section(4) of the Act lays down the essentials of the sale and has been

noted in the very section that in such a contract the seller either transfers or agrees to

transfer the property in the goods for a price. For the purpose of the transfer of

property, goods may be classified into two classes, i.e., specific or un-ascertained.

Section 2(14) defines specific goods as those goods which have been identified and

agreed upon at the time of the contract of sale.

For example, the seller has 100 bags of coffee in his godown and the buyer agrees to

purchase 10 bags out of them; if the 10 bags which the buyer agrees to purchase is to

yet have been marked or otherwise identified at the time of the making of contract, it

is sale of specific goods. On the other hand, if it has not been described as to which 10

bags of those 100 bags are to be delivered to the specific buyer, the goods are

unascertained.

Ss.19, 20, 21,22 and 24 provide the rules regarding the transfer of property in specific

goods, Ss.18,23 and 25 provide the rules regarding the transfer of property in

unascertained goods or future goods.

Transfer of property in specific goods

The general rule is that though the passing of property is natural result of sale it is not

the inevitable result.

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Section 19(1) lays down the general rule and it mainly focuses on intention. It states

that where there is a contract for the sale of specific or ascertained goods, the property

in them is transferred to the buyer at such time as the parties to the contract intend to

be transferred.

Section 19(2) talks about the implied intention of the parties with regard to the transfer

of property. It states that for the purpose of ascertaining intention of the parties regard

shall be had to the terms of the contract, the conduct of the parties and the

circumstances of the case.

Section 19(3) states that unless a different intention appears, the rules contained in

Sections 20-24 are rules for ascertaining the intention of the parties as to the time at

which the property in goods is to pass to the buyer.

Sections 20, 21, 22 and 24 raise certain presumptions about the question when the

property in goods is to pass from seller to buyer in certain circumstances.

Section 20 provides that where there is anunconditional contract for the sale of

specific goods in a deliverable state, the property in goods passes to the buyer when

the contract is made, and it is immaterial whether the time of payment of the price or

the time of the delivery of goods, or both, is postponed.

Section 2(3) of the Act defines the expression “deliverable state”. It states that goods

are said to be in deliverable state when they are in such a state that the buyer would

under the contract be bound to take delivery of them. For example, furniture is ready

and seller is polishing it to give a final shape for delivery, it is called specific goods to

be put in a deliverable state. Specific goods are already defined above under Section

2(14). The expression “unconditional contract” was dealt by Calcutta High Court in

Abdul AzizvJogendra Krisna Roy78; the goods in this case were “specific” and even in

deliverable state but even then the property did not pass. There was a custom of trade,

that sale shall not be complete until the goods were selected, tested and weighed by

the buyer. Hence it is laid down that the sale should be unconditional. The seller is

78 1917 Cal.

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having no right to put the conditions which otherwise would deprive the buyer from

above mentioned customs or any other practise beneficial for the buyer.

Section 21 of the Act provides that where there is a contract for the sale of specific

goods and the seller is bound to do something to the goods for the purpose of putting

them into a deliverable state, the property does not pass until such thing is done and

the buyer has notice thereof.

Comments

In Lachhmi Niwas Rice MillsvFirm Das Raminivas79, it was held that where there is

an unconditional contract for sale of specific goods by way of blity-cut, it is the seller

who undertakes to get the goods booked. He will not be deemed to have performed his

part of the contract unless he arranges for the wagon, the goods are booked and the

railway receipt is obtained from the sale for which service payment is already

included in the bilty-cut rate. In that view, therefore, the sellers are bound to do

something to the goods for the purpose of putting them into a deliverable state, i.e.,

get them booked and obtain railway receipt for the same. It is therefore, S.21 which

applies to such case. There could be no passing of property in the goods to the buyers

till the goods were booked:

Goods to be Weighed or measured

Section 22 provides that where there is contract for the sale of specific goods in a

deliverable state, but the seller is bound to weigh, measure, test or do some other act

or thing with reference to the goods for the purpose of ascertaining the price, the

property does not pass until such act or thing is done and the buyer has notice thereof.

In Zagury vFurnell80, A, sold to B 289 bales of goat skin, each bale containing five

dozens, and the price was for certain sum per dozen skins. It was the duty of A to

count the goat skin in each bale. Before A could do the same,the bales were destroyed

by fire. Held, that the property in the goods had not passed to buyer (i.e., B) as

79 A.I.R.1963 ALL.110. 80 1809 Eng.

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something still remained to be done by the seller for the ascertaining of price and as

such the loss caused by the fire had to be borne by the seller.

It may be noted that if the seller has done all what he was required to do under the

contact and nothing remains to be by him, the property passes to the buyer even if the

buyer has to do something for his satisfaction.

Transfer of property in unascertained goods or future goods:

Sections 18 and 23 lay down the rules relating to transfer of property in unascertained

and future goods. These sections provide that where goods are contracted to be sold

are not ascertained or where they are future goods, the property in goods does not pass

to the buyer unless and until the goods are ascertained or unconditionally appropriated

to the contract so as to bring them in deliverable state, either by the seller. Such assent

may be expressed or implied, and may be given either before or after the appropriation

is made.

The above rule is fundamental rule and it applies irrespective of what the parties

intended until goods are ascertained or appropriated there is merely as curtained

“agreement to sell”. Example: sale of ten tons of rice from a granary, has not the effect

of transferring property to buyer (it is an agreement to sell only) until ten tons are

appropriated to the contract by the seller and the buyer knows it. The general rule has

been laid down in the Section 18 of the Act and it states that where there is a contract

for the sale of unascertained goods, no property in goods is transferred to the buyer

unless and until the goods are ascertained.

Section 23lays down the provisions for the sale of unascertained goods and

appropriation. It states, that where there is a contract for the sale of unascertained or

future goods by description and goods of that description and in a deliverable state are

unconditionally appropriated to the contract, either by the seller with the assent of the

buyer or by the buyer with the assent of the seller, the property in the goods thereupon

passes to the buyer. Such assent may be express or implied, and may be given either

before or after the appropriation is made.

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The following conditions are to be fulfilled:

a. Appropriation.( common mutual intention of seller and buyer)

b. Assent to appropriation.

c. Appropriation of the goods of contract according to the description.

d. Unconditional appropriation.

Appropriation of the goods to the contract by the seller or by the buyer, there should

be the mutual intention rather a common intention by both the seller and the buyer,

whereas ascertainment might be unilateral. Appropriation if done by the seller, the

assent should be from the buyer and vice versa. Assent to appropriation must be

express or implied, before appropriation or after the appropriation.

Essentials of valid appropriation of goods: The following points should be noted:

1. The appropriation must be of goods answering the contract description, both as

to quality and quantity.

2. The appropriation must be intentional, i.e., it must be made with intention to

appropriate goods to specific contract, it must not be due to mere accident or

mistake.

3. The appropriation must be made either by the seller with the assent of the buyer

or by the buyer with the assent of the seller. Assent of the other future party is

thus necessary; whether before or after the appropriation is made for a valid

appropriation.

4. The appropriation must be unconditional, i.e., the seller should not reserve to

himself the right of disposal of goods until and unless certain conditions are

fulfilled.

Section 23(2) deals with delivery to the carrierwhere in pursuance of the contract, the

seller delivers the goods to the buyer or to the carrier or other bailee (whether named

by buyer or not) for the purpose of transmission to the buyer, and does not reserve the

right of disposal, he is deemed to have unconditionally appropriated the goods to the

contract.

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When a seller delivers the goods to a carrier or other bailee for the purpose of

transmission to the buyer and does not reserve the right of disposal, the property

passes on to the buyer at once. As soon as goods are loaded and the railways receipt

obtained and the same is sent to the buyer direct the ownership is passed on delivery

of goods to Railway Company. If the receipt is sent to banker with instructions to

deliver the same on payment, the right of disposal is said to be reversed and the

property will not pass to buyer at the time of delivery of goods to railway Co.

The delivery of the carrier may be;

1. Absolutely for the buyer. Where the bill of landing or railway receipt is made

out in the name of the buyer and is sent to him, the presumption is that no right

of disposal has been reserved by the seller in respect of those goods. The

ownership in such a case passes from seller to buyer.

2. Absolutely for the seller. Where the bill of landing or railway receipt is taken in

the seller’s or his agent’s name and is sent to the agent of the seller to be

delivered to the buyer on the fulfilment of certain conditions, the seller is

deemed to have reserved the right of disposal of the goods. In such a case the

ownership does not pass to the buyer until the necessary conditions are fulfilled

and the documents of title are delivered to the buyer.

Section 25 lays down the provisions for the reservation of right of disposal;

reservation of the right of disposal means reserving a right to dispose of the

goodsuntil certain conditions(like payment of price) are fulfilled. When the seller

reserves such a right the property in goods does not pass until those conditions are

fulfilled. The seller reserves such a right expressly while making the contract or

while making appropriation of unascertained goods. He may also reserve the right

by implication, for example, when the seller while transporting goods takes the

railway receipt or the bill of landing in his own name or where the seller has taken

the bill in the name of the buyer but has delivered the same to his bank with the

instructions that the document is to be delivered to the buyer only when he makes

payment of the price or accepts the bill of exchange, the right of disposal is said to

be reserved impliedly.

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2.7. PERFORMANCE OF CONTRACT

Parties to the contract have, on the one hand, the right to have the contract performed,

and, on the other, are obliged to perform. Performance should be completeand

according to the real effect of the contract between the parties when goods are sold, a

sale of goods contract is created. Within that, contract different duties are imposed on

the parties to it i.e., the seller and the buyer. If any party fails to carry out his or her

duties under the terms of the contract, such omission attracts adverse consequences.

The performance of a sale of goods contract has three dimensions. These are evident

in the provisions of the act, the three elements in the performance of a sale of goods

contract are: the delivery of the goods by seller; the acceptance of the goods by the

buyer and the payment of the price for the goods by the buyer.Section31 lays down

the duties of the seller and the buyer that it is the duty of the seller to deliver the goods

and of the buyer to accept and pay for them, in accordance with the terms of the

contract of sale.

Section 32 provides that the payment and the delivery are concurrent condition It

states that unless otherwise agreed, delivery of the goods and payment of the price are

concurrent conditions, that is to say, the seller shall be ready and willing to give

possession of the goods to the buyer in exchange for the price, the buyer shall be

ready and willing to pay the price in exchange of the goods.

In Loon Karan v John & Co, a direction to pay price of goods within a specified

period does not take the right of the purchaser to demand delivery of goods at the time

of payment. If the purchaser gives up a valuable right under the Act and makes the

payment in advance, he cannot hold the person at whose bidding he entered into a

transaction of sale responsible if the goods are not delivered. The case illustrates the

scope of the section 32.

Section 33 lays down the provisions of delivery. It states that delivery of goods may

be made by doing anything which the parties agree shall be treated as delivery or

which has the effect of putting the goods in the possession of the buyer or of any

person authorised to hold them on his behalf.

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Section 34 lays down the effect of part delivery. It states that a delivery of part of

goods, in progress of the delivery of the whole, has the same effect, for the purpose of

passing the property in such goods, as a delivery of the whole, but a delivery of part of

the goods, with an intention of severing it from the whole, does not operate as a

delivery of the reminder.

Section 35 provides that buyer has to apply for delivery that, apart from any express

contract, the seller of goods is not bound to deliver him until the buyer applies for the

delivery.

In A. RammurthyvP. Satyanaryana81, the court laid down the scope and the object of

the Section 35 as the language of section 35 clearly indicates that the provisions is

intended for the benefit of the seller. The seller may, if he chooses deliver the goods

without any application in that behalf by the buyer. But he is also entitled to wait until

the buyer applies for delivery, unless the seller has contracted himself out of this right.

Section 36 lays down the rules as to delivery:

1. Whether it is for the buyer to take possession of the goods or for the seller to

send them to the buyer is a question depending in each case on the contract,

express or implied, between the parties. Apart from any such contract, goods

sold are to be delivered at the place at which they are at the time of the

agreement to sell, or are at the time of the sale, or, if not then in existence, at

the place at which they are manufactured or produced.

2. Where under the contract of sale the seller is bound to send the goods to the

buyer, but no time for sending them is fixed, the seller is bound to send them

within a reasonable time.

3. Where the goods at the time of sale are in the possession of a third person,

there is no delivery by the seller to buyer unless and until such third party

acknowledges to the buyer that he holds on his behalf: provided that nothing in

this section shall effect the operation of the issue or transfer of any document of

title to goods.

81 A.I.R.1958 Andh.pra.550.

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4. Demand or tender of delivery may be treated as ineffectual unless made at a

reasonable hour. What is reasonable hour is a question of fact.

5. Unless otherwise agreed, the expenses of and incidental to putting the goods

into a deliverable state shall be borne by the seller.

Section 37 lays down the provisions relating to the delivery of wrong quality that;

(1) Where the seller delivers to the buyer a quantity of goods less than he contracted to

sell, the buyer may reject them, but if the buyer 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 than he contracted

to sell thebuyer may accept the goods included in the contact and reject the rest, or he

may reject thewhole. If the buyer accepts the whole of the goods so delivered, he shall

pay for them at thecontract rate.

(3) Where the seller delivers to the buyer the gods he contract to sell mixed with

goods of adifferent description not included in the contract, the buyer may accept the

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, special agreement

or courseof dealing between the parties.

Section 38lays down the provisions relating to the Instalment deliveries that;

(1) Unless otherwise agreed, the buyer of goods is not bound toaccept delivery thereof

by instalments.

(2) Where there is a contract for the sale of goods to be delivered by stated 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 of or pay for one or moreinstalments, it is a question in each cased depending

on the terms of the contract and thecircumstances of the case, whether the breach of

contract is a repudiation of the whole contract,or whether it is a severable breach

giving rise to a claim for compensation, but not a right to treatthe whole contract as

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repudiated. In SriramvSagarmal82, the court held that, where the contract is one and

indivisible though its performance is stipulated to be made in stages, the question

whether repudiation of a part of the contract would amount to repudiation of the whole

contract has to be decided with reference to the contract.

Section 39 provides for delivery to carrier or wharfinger. It states- Where, in

pursuance of a contract of sale, the selleris authorised or required to send the goods to

the buyer, delivery of the goods 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 of the goods to the buyer.

(2) Unless otherwise authorised by the buyer, the seller shall makes such contract with

the carrieror wharfinger on behalf of the buyer as may be reasonable having regard to

the nature of thegoods and the other circumstances of the case. If the seller omits so to

do, and the goods are lose or damaged in course of transit or whilst in the custody of

the wharfinger, the buyer may decline 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 the buyer by a route

involvingsea transit, in circumstances in which it is usual to insure, the seller shall

give such notice to thebuyer as may enable him to insure them during their sea transit

and if the seller fails so to do, thegoods shall be deemed to be at his risk during such

sea transit.

Section 40states- Where the seller of goods agrees todeliver them at his own risk at

place other than that where they are when sold, the buyer shall, nevertheless, unless

otherwise agreed, take any risk of deterioration in the goods necessarilyincident to the

course of transit. In G.N. Bherev N.B. Rice mills83the court held that Section 40

provides that though the seller undertakes to take goods at his own risk to a place

other than that where they were when sold, if any deterioration takes place in the

course of transit, the buyer would himself be liable for it. Whether there was any

deterioration for which the buyer would have been liable or not within the meaning of

Section 40 could only be determined after the delivery had been taken; it cannot be 82 A.I.R 1957 Ori. 8 83 A.I.R.1996 Assam 95.

46 | P a g e

said that under no circumstances the buyer was bound to refuse delivery of goods as

soon as he found them in damaged condition.

Buyer’s right of examining the goods

Section 41 lays down the buyer’s right of examining the goods. Section 41(1) states

that where goods are delivered to the buyer whichhe has not previously examined, he

is not deemed to have accepted them unless and until he hasa reasonable opportunity

of examining them for the purpose of ascertaining whether they are inconformity with

the contract.

Sec. 41(2) provides that unless otherwise agreed, when the seller tenders delivery of

goods to the buyer, he is bound, on request, to afford the buyer a reasonable

opportunity of examining the goods forthe purpose of ascertaining whether they are in

conformity with the contract.

In KIG Systel Ltd.vFujitsu ICIM Ltd84,where in a contract for supply of software the

defendant buyer had made substantial payment for initial supply and subsequently the

defendant raised the grievance that subsequent supply was defective. It was held that

Sections 41 and 42 of the act conjointly indicate that if the goods are not recorded

within a reasonable time, they will have been deemed to have been accepted.

Furthermore, by making substantial payments for the price of the goods, the defendant

acted in a manner which would render it inconsistent for the plaintiff to still claim

ownership thereon.

Acceptance

Section 42 provides for acceptance. It states that the buyer is deemed to have accepted

the goods when he intimates to the seller that he has accepted them, or when the goods

have been delivered to him and he does any act in relation to them which is

inconsistent with the ownership of the seller, or when, after the lapse of a reasonable

time, he retains the goods without intimating to the seller that he has rejected them.

84 A.I.R.2001 Del. 357.

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In Om Enterprisesv State of Bihar85, it was held that where a party has a right to

repudiate the contract and or right to reject the goods but he does not do so on the

delivery of the goods, once goods are accepted, there is a simultaneous obligation to

make payment thereof.

Buyer not bound to return rejected goods

Section 43states that unless otherwise agreed, 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 he intimates to the seller that he intimates to the seller that

herefuses to accept them.

Liability of buyer for refusing to receive goods

Section 44 provides for the liability of buyer for neglecting or refusing delivery of

goods. It states that when the seller is readyand willing to deliver the goods and

requests the buyer to take delivery, and the buyer does not within a reasonable time

after such request take delivery of the goods,he is liable to the seller for any loss

occasioned by his neglect or refusal to take delivery and also for a reasonable

chargefor the care and custody of the goods:

Provided that nothing in this section shall affect the rights of the seller where the

neglect or refusal of the buyer to take delivery amounts to a repudiation of the

contract.

The three elements of the performance can be summed up as below in the following

manner:

1. Delivery of goods by the seller:Delivery is the voluntary transfer of the seller’s

possession of good to a buyer or someone else involved in the transaction between

the seller and the buyer (for example, a carrier). In essence, such transfer may be in

four forms. These are:

a. Physical delivery: This involves the physical handing-over of the goods to the

buyer. 85 A.I.R.2008 Pat.74

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b. Constructive delivery: This involves the handing-over to the buyer a means of

access to the goods. In other words, it is not the physical goods that are handed-

over to the buyer. This is the case where what is handed-over to the buyer are the

keys to the warehouse where the goods are.

c. Symbolic delivery: This involves the handing-over of something that symbolises

the goods. This is typically the case where the document of title in respect of the

goods is handed-over to the buyer. Another situation is the handing-over of a bill

of lading in respect of shipped goods to the buyer which will enable the buyer to

receive the goods on the arrival of the ship carrying the goods.

d. Delivery by attornment: In this case, the goods are with a third party. In such a

situation, delivery can be said to have occurred when the third party acknowledges

to the buyer that he is in possession of the goods and acknowledges the buyer’s

ownership of the goods.

It is noteworthy that the Sale of Goods Act, 1930 provides for some rules which

regulate the delivery of goods in a contract for sale of goods. These rules cover such

matters as the time of delivery, place of delivery, delivery of wrong quantity, delivery

by instalment, and delivery to a carrier.

2. Acceptance of goods by the buyer:The buyer is obligated to accept the goods when

they are delivered. In this context, acceptance involves the buyer taking possession

of the goods. This may be by express statement. If the buyer refuses to take

delivery of the goods at the stipulated time, it does not automatically permit the

seller to selling off the goods to another person unless the delay of the buyer in

taking delivery of the goods is unreasonable. Thus, it may be concluded that time

of the acceptance may not be the essence to the contract.It is noteworthy that a

buyer may reject the goods delivered to him. A valid excuse for this is where the

goods delivered are not those ordered or if the goods are damaged. For a rejection

to be effective, it must be communicated to the seller. In such circumstances, the

buyer is not obliged to physically send the rejected goods back to the seller. It is

sufficient if he clearly communicates to the seller the fact of his rejecting the goods

delivered.

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3. Paymentof price by the buyer:In addition to accepting the goods, the buyer is

under a duty to pay the price for the goods he has bought. Where payment for the

goods has been made by the buyer, in the absence of a contrary intention, he is

entitled to take possession of the goods, if he has not already done so.