sale of goods act (2)

7/29/2019 Sale of Goods Act (2)

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Sales of Goods Act, 1930


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1. A agrees to sell to B 10 bags of wheat Kalyan (superior)

out of 100 bags lying in his godown for Rs. 6,500. The wheat is

completely destroyed by fire. Can B compel A to supply the wheat as per

agreement?

2. A hirer, who obtains possession of a refrigerator from its owner under a

hire-purchase agreement, sells the refrigerator to a buyer who buys in

good faith and without notices of he right of the owner. Does this buyer

get a good title to the refrigerator? State reasons for your answer.

3. P. agrees to sell to Q his two motor cars on the terms that the price

was to be fixed by R. Q takes the delivery of one car immediately. R

refuses to oblige P and Q and fixes no price. P asks for the return of the

car already delivered whereas Q insists on the delivery of the second car

to him for a reasonable price of both the cars. Decide the case.


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4. A agrees to sell a horse to B who tells A that he B needs the horse

for riding to Mumbai immediately. The horse is ill at the time of

agreement. What are the rights of A and B?

5. B agrees to buy As furniture at a price to be fixed by C, a

furniture dealer, C refuses to oblige A and B and fixes no price. On

As refusal to sell, can B legally compel him to sell the furniture for

any price?


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Sale of Goods Act, 1930

Sec.4(1): 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. There may be

a contract of sale between one part owner and another.

A contract of sale may be absolute or conditional.


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Essentials of contract of sale

A contract (all essentials of valid contract applicable)

Between two parties

To transfer or agree to transfer the property

In goods

For a price, i.e. the consideration is money.


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Transfer of property

Transfer of property means transfer of ownership. Mere

transfer of possession can not be termed as a sale.Sec.2(11) Property means general property in goods

and not merely a special property.

General property means all ownership rights and special

property means limited rights.

Goods

Sec.2(7). Goods means every kind of movableproperty other

than actionable claims and money, and includes stock andshares, growing crops, grass, and things attached to or

forming part of the land which are agreed to be severed

before sale or under contract of sale.


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Kind of goods

Existing goods- These are the goods which are in existence

and are physically present in the sellers possession. They are

further classified as

Specific goods- these are the goods identified and agreed

upon at the time the contract is made.

Unascertained goods- these are the goods which are not

specifically identified or agreed upon at the time of the contract

of sale.


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Future goods These are the goods which a seller does

not possess at the time of contract but which will be

manufactured or acquired by him after the making of thecontract of sale.

Contingent goods: Sec 6(2): A type of future goods but the

acquisition of which by the seller depends upon a

contingency which may or may not happen.

Sale and agreement to sale

When property is transferred from seller to buyer at the time

of formation of contract, an absolute sale occurs.When property in the goods is to be transferred at some

future date and not at the time of contract, the

contract of sale is termed as an agreement to sell.


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Basis Sale Agreement tosale

Nature ofcontract

executed executory

Transfer ofproperty

immediate future date

Nature of rightsof buyer

jus in rem jus in personem

Rights of buyerin case ofbreach

recovery of goods,specific performance

Damages

Risk of loss buyers sellers


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Rights of seller incase of breach

Suit for the price ofgoods

Damages

Right to resell not available may resale butliable for damages

Insolvency of

seller

buyer can recover

goods

if price already paid

proportionateamount can berecovered

Insolvency of

buyer

if price is not paid

proportionateamount can berecovered. deliveryof goods can bedemanded

seller can refuse

delivery unless fullprice is paid


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sale Hire-purchase agreement

Ownership is transferred from

the seller to the buyer as soonas the contract is entered into.

Ownership is transferred from the

seller to the hire-purchaser onlywhen a certain agreed number ofinstalments is paid

The position of the buyer is thatof the owner.

The position of the hire-purchaseris that of the bailee.

The buyer cannot terminate thecontract and as such is bound topay the price of the goods.

The hire-purchaser has an optionto terminate the contract at anystage, and cannot be forcedto pay the further instalments

If the buyer makes the payment ininstalments, the amount payable bythe buyer to the seller is reduced,for the payment made by the buyeris towards the price of the goods.

The instalments paid by the hirepurchaser are regarded as hirecharges and not as paymenttowards the price of the goods tilloption to purchase the goods is

exercised


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Sale Bailment

Property in the goods istransferred from the sellerto the buyer

Only transfer of possessionfrom the bailor to the baileefor any purpose such as safecustody, use etc.

Buyer can deal with thegoods in any way he likes

Bailee can deal with thegoods acc to the directions ofthe bailor


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CONDITIONS AND WARRANTIES


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Condition Sec. 12 (2):A condition is a stipulation

essential to the main purpose of the contract, the breach of

which gives the aggrieved party a right to repudiate the

contract itself. In addition he can claim damages from the

guilty party

Warranty Sec. 12(3):A warranty is a stipulation collateral

to the main purpose of the contract, the breach of which

gives the aggrieved party a right to sue for damages only,

and not to avoid the contract itself.


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Case:P goes to R, a horse dealer, and says, I want a horse which can run

at a speed of 30 kilometers per hour. The horse dealer points out a

particular horse and says, This will suit you. P buys the horse. Later on P

finds that the horse can run only at a speed of 20 kilometers per hour. Is

there a breach of condition?.

If P says to R, I want a good horse. R shows him a horse and says, This

is a good horse and it can run at a speed of 30 kilometers per hour, and P

buys the horse and finds later on that it can run at a speed of 20 kilometers

per hour only. Is there a breach of condition?

{There is a breach of warranty because the stipulation made by the seller

did not form the very basis of the contract and was only subsidiary one.

The seller gave the assurance about the running speed of the horse of his

own without being asked by the buyer hence it is only of secondary

important.}


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Distinction between condition and warranty

Basis Conditions Warranties

As to value A condition is a stipulationwhich is essential to themain purpose of thecontract

a warranty is astipulationwhich is collateralto the main purpose of thecontract.

As to breach The breach of a conditiongives the aggrievedparty the right to repudiatethe contract and also toClaim damages

breach of warranty givesthe aggrieved party a rightto claim damages only

As to treatment A breach of condition maybe treated as a breach ofwarranty

breach of warranty cannot be treated as a breachof condition


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When breach of Condition is to be treated as Breach of warranty

Voluntary waiver by buyer: In a breach of condition by

Seller, the buyer may instead elect to waive the condition i.e to treat

the breach of condition as a breach of warranty and accept goods

and sue the seller for damages

Case: A agrees to supply B 10 bags of first quality sugar @

Rs. 625 per bag but supplies only second quality sugar, the price

of which is Rs. 600 per bag.

Acceptance of goods by buyer:

When the buyer has accepted the goods and subsequently he comes

to know of the breach of the conditions, he can not reject them, but

can only maintain an action for damages


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Express and Implied Conditions

Condition as to title

(a) In case of sales, he has a right to sell the goods and

(b) In the case of agreement to sale, he will have a right to

sell to goods at the time when the property is to pass

Case: R. purchased a motorcar from D used the same for several

months. D had no title to the car and, therefore, R was compelled to

return the car to the true owner. R sued D to recover back the price. Was

R entitled to recover the whole of the price paid by him despite the fact

that he had used the car for some months ( Rowland vs Divall).

Condition in a sale by Description

Goods shall correspond with description. The goods must correspond with

description whether it is a sale of specific goods or of unascertained goods.

The description may be in term of the qualities or characteristics of the goods


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Case: M agreed to supply to L 3,000 tins of canned fruit, to be packed in

cases each containing 30 tins. M tendered a substantial portion

in cases containing 24 tins, Was L entitled to reject the whole consignment (

Re Moore & co. and Landaure & C.)

Condition in a sale by sample:

The bulk of goods should correspond with sample quality Buyer shall have reasonable opportunity to compare the sample

That the goods shall be free from any defect, rendering

them unmerchantable, which would not be apparent on reasonable

examination of the sample.


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Condition in a sale by sample as well as by description: Bulk of goods

shall correspond, both with the sample and with description. If it

corresponds with only sample and not with description, or vice versa, the

buyer is entitled to reject the goods. It must correspond with both.

Condition as to fitness or quality:

Goods supplied shall be reasonably fit for the purpose for which the

buyer wants them, if the following conditions are satisfied:

(i) The buyer, expressly or impliedly, should make known to the

seller the particular purpose for which the goods are required

(ii) The buyer should rely on the sellers skill or judgment

(iii) The goods sold must be of a description which the seller deals in the

ordinary course of his business, whether he be the manufacturer or not.


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Case: A buyer ordered for the Hessian cloth, which is generally used for

packing purposes, without specifying the purpose for which he wanted the

same. The cloth was supplied accordingly. On receiving the cloth the buyer

found that it was not suitable for packing food products as it had an unusual

smell. Is the buyer has right to reject the cloth. (Rs. Andrew Yule & Co.)

Condition as to merchantability: This condition is applicable only when the

sale is by description and it should satisfy following conditions:

(a) The seller should be a dealer in goods of that description, whether

he be a manufacturer or not

(b) The buyer must not have any opportunity of examining the goods or there

must be some latent defect in the goods, which should be apparent on

reasonable examination.


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Condition as to wholesomeness: This condition is implied only in a

contract of sale of eatables and provisions. In such cases the goods

supplied must not only answer to description and be merchantable but

must also be wholesome, i.e., free from any defect which render

them unfit for human consumption

Case:The plaintiff bought a bun at a bakers and confectioners shop. The

bun contained a stone which broke one of the plaintiffs teeth. Was the

seller held liable for damages? (Chaproniere vs Mason).


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Implied Warranties

Warranty of quite possession:the buyer shall have and enjoy quite

possession of goods. If the buyer is in anyway disturbed by a person having

a superior right than that of the seller, the buyer can claim damages

from the seller.

Case: A buys a typewriter and spent some money forrepairs. It turns to be a

stolen article. Is A entitled to get back what he paid plus repair charges?

Warranty of freedom from encumbrances: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 if

goods are afterwards found to be subject to a charge and the buyer has to

discharge the same , there is a breach of warranty and the buyer is entitled to

damages

Case: A pledges a watch with B Later gets the watch for limited purpose


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Case: A pledges a watch with B. Later gets the watch for limited purpose

and A sales it to C. B tells C about the pledge.

Is C liable to make payment for the pledge amount to B?

Warranty of disclosing the dangerous nature of goods tothe ignorant buyer:

The third implied warranty on the part of seller is that in case the

goods sold are of dangerous nature he will warn the ignorant buyer of the

probable danger. If there is a breach of warranty the buyer is entitled to

claim damages for injury. The seller is bound to give some warning of the

danger in the goods to the buyer

Case: C. Purchases a tin of disinfectant powder from A. A knows that the lidof the tin is defective and if it is opened without special care it may be

dangerous, but tells nothing to C. C opens the tin in the normal

ways whereupon the disinfectant powder flies into her eyes and

causes injury. Is A is liable for damages to C?


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Doctrine of Caveat Emptor:Let the buyer beware

According to this it is the duty of the buyer to be careful while purchasing

goods of his requirement, and in the absence of any inquiry

from the buyer, the seller is not bound to disclose every defect in goods of

which he may be aware.

The buyer must examine the goods thoroughly and must see that the

goods he buys are suitable for the purpose for which he wants them. If the

goods turn out to be defective the buyer cannot sue the seller because

there is no implied undertaking by the seller that he shall supply goods to

suit the buyers purpose. If the buyer depends on his own skill and makes

bad choice he must suffer in the absence of any misrepresentation or

fraud or guarantee by the seller.


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Exceptions:

1. Where the seller makes a mis-representation and the buyer relies on it,

the doctrine of caveat emptor does not apply. Such a contract being

voidable at the option of the innocent party, the buyer has a

right to rescind the contract.

2. Where the seller makes a false representation amounting to fraud and

the buyer relies on it, or where the seller actively conceals a defect in the

goods so that the same could not be discovered on a reasonable

examination, the doctrine of caveat emptor does not apply. Such a contract

is also voidable at the option of the buyer and the buyer is entitled to avoid

the contract and also claim damages for fraud.

3. Where the goods are purchased by description and they do not

correspond with the description


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4. Where the goods are purchased by description from a seller who deals in

such class of goods and they are not of merchantable quality, the doctrine

of caveat emptor does not apply. But the doctrine applies, if the buyer has

examined the goods, as regards defects which such

examination ought to have revealed

5. Where the goods are bought by sample, the doctrine of caveat emptor

does not apply if the bulk does not correspond with the sample, or if the

buyer is not provided an opportunity to compare the build with the sample,

or if there is any hidden or latent defect in the goods

6. Where the goods are bought by sample as well as by description and the

bulk of the goods does not correspond both with the sample and with the

description, the buyer is entitled to reject the goods


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7. Where the buyer makes known to the seller the purpose for which he

requires the goods and relies upon the sellers skill and judgment but the

goods supplied are unfit for the specified purpose, the principle of caveat

emptor does not protect the seller and he is liable in damages

8. Where the trade usage attaches an implied condition or warranty as to

quality or fitness and the seller deviates from that, the doctrine of caveat

emptor does not apply and the seller is liable for damages

Rights of an Unpaid Seller

The seller of goods is deemed to be an unpaid seller

(a) When the whole of the price has not been paid or tendered; or

(b) Where a bill of exchange or other negotiable instrument has been

received as a conditional payment, i.e., subject to the realization thereof,

and the same has been dishonoured.


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Rights of an unpaid seller

Ri ht f li (S 47)


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Right of lien (Sec. 47)

Lien is the right to retain possession of goods and

refuse to deliver them to the buyer until the price due in respect of

them is paid or tendered. An unpaid seller in possession of goods

sold is entitled to exercise his lien on the goods in the following

cases:

(a) Where the goods have been sold without any stipulation as to

credit;

(b) Where the goods have been sold on credit, but the term of

credit has expired:

(c) Where the buyer becomes insolvent, even though the

period of credit may not have yet expired.


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Basis Right of lien Right of stoppage in transit

Possessionof goods

must be in actualpossession of the seller.

must be in the possession of acarrier or other bailee who is

acting as an independent person

Solvency when the buyer issolvent but refuses to paythe price

when the buyer has becomeinsolvent.

End. Vs.Commencment ondelivery tocarrier

comes to an end when theseller delivers the goodto a carrier.

commences only when the sellerdelivers the goods to a carrier.

Purpose to retain possession of thegoods

right is to regain the possessionof the goods.

Mode of

exercisingthe right

By the seller himself. by the seller through the carrier

or the other bailee.

Right of Resale


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Right of Resale

(a) Where the goods are of a perishable nature; or

(b) Where such a right is expressly reserved in the contract

in case the buyer would make a default; or

(c) Where the seller has given a notice to the buyer of his intention to resell

and the buyer does not pay or tender the price within a reasonable time.

If on a resale there is a loss to the seller, he can recover it from the defaulting

buyer. But if there is a surplus on the resale, the seller can keep it with him

because the buyer cannot be allowed to take advantage of his own wrong.

Rights of Buyer

Suit for Damages for Non-delivery

Suit for Specific Performance

Suit for Breach of Warranty

Right to Treat the Contract as Rescinded

sale of goods act (2)

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