Module IV - Sale of Goods Act 1930

4. The Sale Of Goods Act - 1930
Contract of Sale (S.2) – Concept, Essentials elements of contract of sale, Distinction between Sale and Agreement to sell (S.4) Distinguish between Sale and Hire Purchase Agreement, Types of Goods. Effects of Destruction of Goods (Ss. 6,7.8)
Conditions & Warranties (Ss. 11-25 & 62, 63) – Concept, Distinguish between Conditions and Warranties, Implied Conditions & Warranties, Concept of Doctrine of Caveat Emptor – Exceptions.
Property – Concept, Rules of transfer of property (Ss. 18-26)
Unpaid Seller (Ss. 45-54, 55 & 56) - Concept, Rights of an unpaid seller, Remedies for Breach of contract of Sale (Ss. 55-61),Auction sale – Concept, Legal Provisions. (S. 64)

Contract of Sale (S.2) – Concept, Essentials elements of contract of sale.

Section 4(1) defines sale as : "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."

Essential features of sale :

1. Bilateral contract.

2. Money consideration.

3. transfer of only movable goods.

4. Transfer of general property.

5. No particular form.

6. Absolute or conditional.

 

 

Distinction between Sale and Agreement to Sale

Section 4(3) lays down : "Where under a contract of sale , the property in goods is transferred from the seller to the buyer, the contract is called sale, but where the transfer of property in the goods is to take place at a future time, or subject to some conditions to be fullfilled, the contract is called agreement to sale.

1. Executed and Executory Contract.

2. Agreement plus conveyance or no conveyance.

3. Actual transfer of property in goods.

4. Passing of risk in the goods to the buyer.

5. Remedy against seller.

6. Remedy against buyer.

7. Right in rem and personam.

8. Risk of destruction of goods.

9. In case of insolvency of seller.

10. In case of Insolvency of buyer

Distinguish Between Sale and Hire Purchase Agreement

1. Transfer of Ownership.

    Transferred       -        After fixed instalments

2. Option to return goods to the seller.

3. Position of Buyer and Hire Purchaser

      Full owner           -          Bailee 

4. Appropriation of instalments.

    Price of the goods    -      Hire charges, till the option to purchase is exercised

5. Can seller get back the goods.

6. Governed by what Act ?

Types of Goods 

Existing Goods                         Future Goods                        Contingent Goods

Specific Goods

Ascertained Goods

Unascertained Goods

EFFECT OF DESTRUCTION OF GOODS

1. Effect of perishing of goods before making the contract (S-7)

2. Effect of goods perishing before sale but after agreement to sale (S-8)

CONDITION [Section 12(2)]

A condition is a stipulation, essential to the main purpose of the contract, the breach of which gives right to treat the contract as repudiated.

WARRANTY [Section 12(3)]

A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives right to claim for damages, but not a right to reject the goods and treat the contract as repudiated.

Distinction between condition and warranty :

1. Essential or collateral contract.

2. Nature of remedy.

Collateral : situated side by side; parallel.

Stipulation : a condition or requirement that is specified or demanded as part of an agreement.

IMPLIED CONDITIONS :

1. Implied condition as to title [S.149(a)]

2. Implied condition as to sale by description [S.15]

3. Implied condition as to sale by sample.

4. Implied condition as to sale by description as well as by sample. [S.15]

5. Implied condition as to quality and fitness for buyers purpose [S.16]

6. Implied condition as to merchantable quality [S.16(2)]

7. An implied condition as to wholesomeness.

8. Condition implied by Trade Usage [S. 16(3)] 

IMPLIED WARRANTIES

1. Implied Warranty of Quiet and peaceful possession. [S. 14 (b)]

2. Implied Warranty of freedom from encumbrances. [S. 14 (C)]

encumbrance : law. a mortgage or other claim on property or assets.

DOCTRINE OF CAVEAT EMPTOR

"The person who buys the goods must keep his eyes open, his mind active and cautious while buying the goods"

Exemptions :

1. Fitness for buyers purpose [S.16(1)]

2. Sale under Trade Name [S. 16(1)]

3. Merchantable Quality [S. 16 (2)]

4. Trade Usage [S.16 (3)]

5.Consent by fraud.

PROPERTY - CONCEPT, RULES OF TRANSFER OF PROPERTY

2.(11) “property” means the general property in goods, and not merely a special property;

2 (7)  “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;

RULES OF TRANSFER OF PROPERTY

18. Goods must be ascertained.—

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.

19. Property passes when intended to pass.—

(1) 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 it to be transferred.

(2) For the purpose of ascertaining the 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.

(3) Unless a different intention appears, the rules contained in sections 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer.

20. Specific goods in a deliverable state.—Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the 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 delivery of the goods, or both, is postponed.

21. Specific goods to be put into a deliverable state.—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.

22. Specific goods in a deliverable state, when the seller has to do anything thereto in order to ascertain price.—Where there is a 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.

23. Sale of unascertained goods and appropriation.—

(1) 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.

(2) Delivery to carrier.—Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the 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.

24. Goods sent on approval or “on sale or return”.—When goods are delivered to the buyer on approval or “on sale or return” or other similar terms, the property therein passes to the buyer—

(a) when he signifies his approval or acceptance to the seller or does any other act adopting the transaction;

(b) if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time.

25. Reservation of right of disposal.—

(1) Where there is a contract for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled. In such case, notwithstanding the delivery of the goods to a buyer, or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled. 1[(2) Where goods are shipped or delivered to a railway administration for carriage by railway and by the bill of lading or railway receipts, as the case may be, the goods are deliverable to the order of the seller or his agent, the seller is prima facie deemed to reserve the right of disposal.

(3) Where the seller of goods draws on the buyer for the price and transmits to the buyer the bill of exchange together with the bill of lading or, as the case may be, the railway receipt, to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading or the railway receipt if he does not honour the bill of exchange; and, if he wrongfully retains the bill of lading or the railway receipt, the property in the goods does not pass to him. Explanation.—In this section, the expressions “railway” and “railway administra-tion” shall have the meanings respectively assigned to them under the 2Indian Railways Act, 1890 (9 of 1890).]

26. Risk prima facie passes with property.—Unless otherwise agreed, the goods remain at the seller’s risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer’s risk whether delivery has been made or not: Provided that, where delivery has been delayed through the fault of either buyer or seller, the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault: Provided also that nothing in this section shall affect the duties or liabilities of either seller or buyer as bailee of the goods of the other party.

(SOURCE : www.indiankanoon.com)

What does appropriation mean in law?

In law and government, appropriation (from Latin appropriare, "to make one's own", later "to set aside ") is the act of setting apart something for its application to a particular usage, to the exclusion of all other uses. It typically refers to the legislative designation of money for particular uses, in the context of a budget or spending bill.

Appropriation (law) - Wikipedia

en.wikipedia.org/wiki/Appropriation_(law)

UNPAID SELLER

Section 45 (1) 

"The seller is deemed to be an unpaid seller when the whole of the price has not been paid or tendered or when a bill of exchange or other negotiable instrument has been received as conditional payment and condition on which it was received has not been fulfilled by reason of the dishonor of the instrument or otherwise."

RIGHTS OF AN UNPAID SELLER

I. Rights of an unpaid seller against the goods

a) Rights when the property (ownership) in the goods has passed to the buyer.

1. Right of Lien (S. 47 to 49)

2. The right of stoppage in transit. (S. 50)

3. The right of resale. (S. 54)

 

b) Rights when the property (ownership) in the goods has not passed to the buyer.

RIGHTS OF WITHHOLDING DELIVERY:
WHEN PROPERTY IN GOODS HAS NOT PASSED to the buyer,unpaid seller in addition to other remedies
has a right of withholding delivery similar coextensive with the right of lien

 

II. Right of an unpaid seller against the buyer personally.

a. Suit for price.(S. 55)

b. Suit for damages for non acceptance (S. 56)

c. Suit for repudiation of contract before due date (S. 60)

d. Suit for interest [S. 61(2) (a)]

 

 

REMEDIES FOR BREACH OF CONTRACT OF SALE (Ss. 55-61)

 

55. Suit for price.—

(1) Where under a contract of sale the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may sue him for the price of the goods.

(2) Where under a contract of sale the price is payable on a day certain irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller may sue him for the price although the property in the goods has not passed and the goods have not been appropriated to the contract.

 

56. Damages for non-acceptance.—Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for non-acceptance.

 

57. Damages for non-delivery.—Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for non-delivery.

 

58. Specific performance.—Subject to the provisions of Chapter II of the Specific Relief Act, 1877 (1 of 1877), in any suit for breach of contract to deliver specific or ascertained goods, the Court may, if it thinks fit, on the application of the plaintiff, by its decree direct that the contract shall be performed specifically, without giving the defendant the option of retaining the goods on payment of damages. The decree may be unconditional, or upon such terms and conditions as to damages, payment of the price, or otherwise, as the Court may deem just, and the application of the plaintiff may be made at any time before the decree.

 

59. Remedy for breach of warranty.—

(1) Where there is a breach of warranty by the seller, or where the buyer elects or is compelled to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods; but he may—

(a) set up against the seller the breach of warranty in diminution or extinction of the price; or

(b) sue the seller for damages for breach of warranty.

 

(2) The fact that a buyer has set up a breach of warranty in diminution or extinction of the price does not prevent him from suing for the same breach of warranty if he has suffered further damage.

 

60. Repudiation of contract before due date.—Where either party to a contract of sale repudiates the contract before the date of delivery, the other may either treat the contract as subsisting and wait till the date of delivery, or he may treat the contract as rescinded and sue for damages for the breach.

 

61. Interest by way of damages and special damages.—

(1) Nothing in this Act shall affect the right of the seller or the buyer to recover interest or special damages in any case where by law interest or special damages may be recoverable, or to recover the money paid where the consideration for the payment of it has failed.

(2) In the absence of a contract to the contrary, the court may award interest at such rate as it thinks fit on the amount of the price—

(a) to the seller in a suit by him for the amount of the price—from the date of the tender of the goods or from the date on which the price was payable;

(b) to the buyer in a suit by him for the refund of the price in a case of a breach of the contract on the part of the seller—from the date on which the payment was made.

 

AUCTION

64. Auction sale.—In the case of sale by auction—

1.  where goods are put up for sale in lots, each lot is prima facie deemed to be the subject of a separate contract of sale;

2.  the sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner; and, until such announcement is made, any bidder may retract his bid;

3. a right to bid may be reserved expressly by or on behalf of the seller and, where such right is expressly so reserved, but not otherwise, the seller or any one person on his behalf may, subject to the provisions hereinafter contained, bid at the auction;

4. where the sale is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person; and any sale contravening this rule may be treated as fraudulent by the buyer;

5. the sale may be notified to be subject to a reserved or upset price;

6. if the seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the buyer.