11

22

INTRODUCTIONINTRODUCTION Most common of all the Most common of all the

commercial contractscommercial contracts Came into force on 1Came into force on 1stst

JULY,1930.JULY,1930. Are subject to the general legal Are subject to the general legal

principles applicable to all the principles applicable to all the contracts such as, offer & its contracts such as, offer & its acceptance, consideration.acceptance, consideration.

Some special featuresSome special features

33

ESSENTIALS OF VALID SALE ESSENTIALS OF VALID SALE CONTRACTCONTRACT

Two parties:Two parties:There must be 2 distinct parties i.e., a buyer and a seller There must be 2 distinct parties i.e., a buyer and a seller

Goods:Goods:Goods which form the subject matter of the contract of Goods which form the subject matter of the contract of

sale must be movable.sale must be movable. Price:Price:

The consideration for the contract of sale, called price, The consideration for the contract of sale, called price, must be moneymust be money

Essential elements of a valid contract:Essential elements of a valid contract:A A contract is made by an offer to buy or sell contract is made by an offer to buy or sell goods for a price and the acceptance of such goods for a price and the acceptance of such offer.offer.

44

SALE AND AGREEMENT TO SALE AND AGREEMENT TO SELLSELL

Property in the goods is transferred Property in the goods is transferred from the seller to the buyer- salefrom the seller to the buyer- sale

Transfer of the property in the goods Transfer of the property in the goods is to be taken place at some future is to be taken place at some future date or after fulfillment of some date or after fulfillment of some condition,condition,-AGREEMENT TO SALE-AGREEMENT TO SALE

55

SALE AND AGREEMENT TO SALE AND AGREEMENT TO SELLSELL

SaleSale1.1. Ownership is with Ownership is with

the buyerthe buyer

2.2. Executed contractExecuted contract

3.3. Sue for price, in case Sue for price, in case of breachof breach

4.4. Goods lost by Goods lost by accident then loss accident then loss falls on the buyer.falls on the buyer.

Agreement to sellAgreement to sell1.1. Ownership is with Ownership is with

the sellerthe seller

2.2. Executory contractExecutory contract

3.3. Sue for damages Sue for damages only, in case of only, in case of breachbreach

4.4. Goods lost by Goods lost by accident then loss accident then loss falls on the Sellerfalls on the Seller..

66

CONDITION AND WARRANTYCONDITION AND WARRANTY

ConditionCondition1.1. Its is a term in Its is a term in

contract which is contract which is essential.essential.

2.2. When condition When condition breaches?breaches?

3.3. Breach of condition Breach of condition can be breach of can be breach of warrantywarranty

WarrantyWarranty1.1. Its a term in contract Its a term in contract

which is collateral.which is collateral.

2.2. When warranty When warranty breaches?breaches?

3.3. Breach of warranty Breach of warranty cannot be breach of cannot be breach of condition.condition.

77

EXPRESS AND IMPLIED EXPRESS AND IMPLIED CONDITIONS AND WARRANTIESCONDITIONS AND WARRANTIES

Condition or warranty may be Condition or warranty may be expressedexpressed

Express condition and warranty are Express condition and warranty are expressly provided in the contract.expressly provided in the contract.

Implied Condition or warranty are Implied Condition or warranty are provided by the law.provided by the law.

88

Condition as to title:Condition as to title:

In a contract of sale, unless the situation of In a contract of sale, unless the situation of the contract are such as to show a different the contract are such as to show a different intention, there is an implied condition on intention, there is an implied condition on part of the seller that—part of the seller that—

In sale, he has right to sell goods.In sale, he has right to sell goods.

In agreement to sell, he will have a In agreement to sell, he will have a right to sell at the time when property right to sell at the time when property is to pass.is to pass.

99

SALE BY DESCRIPTIONSALE BY DESCRIPTION In sale by description there is an implied In sale by description there is an implied

condition that the goods shall condition that the goods shall correspond with description.correspond with description.

This means “if you contract to sell peas, This means “if you contract to sell peas, you cannot oblige the party to take you cannot oblige the party to take beans.”beans.”

Hence if the description of the article Hence if the description of the article tendered is different then the buyer may tendered is different then the buyer may not buy the goods.not buy the goods.

1010

SALE BY DESCRIPTION SALE BY DESCRIPTION AND SAMPLEAND SAMPLE

If the sale is by sample as well as by If the sale is by sample as well as by description, it is not sufficient that the description, it is not sufficient that the bulk of goods corresponds with the bulk of goods corresponds with the sample, if the goods do not also sample, if the goods do not also correspond with the description. correspond with the description.

This means goods must match with the This means goods must match with the description and sample.description and sample.

1111

CONDITION AS TO CONDITION AS TO QUALITY OR FITNESSQUALITY OR FITNESS

Normally, in a contract of sale there is no Normally, in a contract of sale there is no implied condition as to quality or fitness implied condition as to quality or fitness for particular purpose.for particular purpose.

The buyer must test the goods before he The buyer must test the goods before he buys them in order to satisfy him self that buys them in order to satisfy him self that the goods shall be suitable for him. the goods shall be suitable for him.

1212

CONDITION OF CONDITION OF MERCHANTABILITYMERCHANTABILITY

Where goods are bought by description from a Where goods are bought by description from a seller who deals in goods of that description seller who deals in goods of that description there is an implied condition that the goods are there is an implied condition that the goods are of merchantable quality.of merchantable quality.

This means goods should be such that they are This means goods should be such that they are commercially saleable, as per the description commercially saleable, as per the description by which they are known in the market at their by which they are known in the market at their full value.full value.

1313

CONDITION IMPLIED BY CONDITION IMPLIED BY CUSTOMCUSTOM

An implied condition as to quality or An implied condition as to quality or fitness for a particular purpose may be fitness for a particular purpose may be annexed by the usage of trade.annexed by the usage of trade.

This means that the goods which are This means that the goods which are required may be ascertained from the acts required may be ascertained from the acts and from the nature of description of that and from the nature of description of that article.article.

1414

SALE BY SAMPLESALE BY SAMPLE A contract of sale is a contract for sale by A contract of sale is a contract for sale by

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

1.1. That bulk shall correspond with the sample in That bulk shall correspond with the sample in quality,quality,

2.2. That the buyer shall have a reasonable That the buyer shall have a reasonable opportunity of comparing the bulk with the opportunity of comparing the bulk with the sample.sample.

3.3. That the goods shall be free from any defects, That the goods shall be free from any defects, rendering them unmerchantable.rendering them unmerchantable.

1515

CONDITION AS TO CONDITION AS TO WHOLESOMENESSWHOLESOMENESS

In the case of eatables and In the case of eatables and provisions, in addition to the provisions, in addition to the implied condition as to implied condition as to merchantability, there is another merchantability, there is another implied condition that the goods implied condition that the goods shall be wholesome.shall be wholesome.

1616

WARRANTY OF QUIET WARRANTY OF QUIET POSSESSIONPOSSESSION

In a contract of sale, unless there is a contrary intention, there is an implied warranty that the buyer shall have and enjoy quite possession of the goods.

If the buyer is in any way disturbed in the enjoyment of the goods in consequence of the seller’s defective title to sell, he can claim damages from the seller.

1717

WARRANTY OF FREEDOM FROM WARRANTY OF FREEDOM FROM ENCUMBRANCESENCUMBRANCES

In addition to the previous warranty, the In addition to the previous warranty, the buyer is entitled to a further warranty that buyer is entitled to a further warranty that the goods are not subject to any charge or the goods are not subject to any charge or right in favor of a third party.right in favor of a third party.

If the possession is in any way disturbed If the possession is in any way disturbed by reason of the existence of any charge or by reason of the existence of any charge or encumbrances on the goods in favor of any encumbrances on the goods in favor of any third party, he shall have a right to claim third party, he shall have a right to claim damages for breach of this warranty.damages for breach of this warranty.

1818

WARRANTY AS TO QUALITY OR WARRANTY AS TO QUALITY OR FITNESS BY USAGE OF TRADEFITNESS BY USAGE OF TRADE

An implied warranty as to An implied warranty as to quality or fitness for a quality or fitness for a particular purpose may be particular purpose may be annexed by the usage of trade.annexed by the usage of trade.

1919

WARRANTY TO DISCLOSE WARRANTY TO DISCLOSE DANGEROUS NATURE OF GOODSDANGEROUS NATURE OF GOODS..

When a person sells goods knowing When a person sells goods knowing that the goods are inherently that the goods are inherently dangerous or they are likely to be dangerous or they are likely to be dangerous to the buyer and that the dangerous to the buyer and that the buyer is ignorant of the danger, he buyer is ignorant of the danger, he must warn the buyer of the probable must warn the buyer of the probable danger, other wise he will be liable in danger, other wise he will be liable in damages.damages.

2020

CAVEAT EMPTORCAVEAT EMPTOR This means “LET THE BUYER BEWARE” i.e., the This means “LET THE BUYER BEWARE” i.e., the

seller is under no duty to reveal unflattering seller is under no duty to reveal unflattering truths about the goods sold. truths about the goods sold.

Therefore, when a person buys some goods, be Therefore, when a person buys some goods, be must examine them thoroughly.must examine them thoroughly.

If the goods turn out to be defective or do not If the goods turn out to be defective or do not suit his purpose or he depends upon his own suit his purpose or he depends upon his own skills and makes a bad decision, he cannot blame skills and makes a bad decision, he cannot blame the seller.the seller.

EXCEPTIONS TO CAVEAT EMPTOR

Fitness for buyer’s purpose

Sale under a patent or trade name

Merchantable quality

Usage of trade

Consent by fraud

2121

WHO IS AN UNPAID SELLERWHO IS AN UNPAID SELLER

A A seller of goods is deemed to be an seller of goods is deemed to be an unpaid seller:- unpaid seller:-

When the whole of the price has not When the whole of the price has not been paid or tenderedbeen paid or tendered

When any negotiable instrument is When any negotiable instrument is dishonoureddishonoured

2222

Rights of unpaid sellerAgainst

the goods Against the seller personall

yWhere the property in the goods

has not passed

Where the

property in the goods

has passed

Lien

Stoppage in transit

Re sale

With holding delivery

Stoppage in transit

Suit for price Repudiation of contract

Suit for damages

Suit for interest

2323

RULES OF DELIVERYRULES OF DELIVERY Mode of delivery Mode of delivery Delivery and Delivery and

payment con payment con current conditioncurrent condition

Effects of part Effects of part deliverydelivery

Buyer to apply for Buyer to apply for deliverydelivery

Place of deliveryPlace of delivery

Time of deliveryTime of delivery Goods in Goods in

possession of a possession of a third partythird party

Cost of deliveryCost of delivery Delivery of wrong Delivery of wrong

quantityquantity Installment Installment

deliveriesdeliveries

2424

FREE ON BOARDFREE ON BOARD Seller’s duties: Seller’s duties: To deliver the goods on To deliver the goods on

board the ship named board the ship named by the buyerby the buyer

Once goods are put on Once goods are put on board the ship, they board the ship, they are at the risk of the are at the risk of the buyer.buyer.

The duty of the seller The duty of the seller ends when he delivers ends when he delivers the goods to the ship at the goods to the ship at the port of shipmentthe port of shipment..

BUYER’S DUTY:BUYER’S DUTY: Arrange for the Arrange for the

contract of contract of affreightmentaffreightment

Name the ship on Name the ship on which goods are to be which goods are to be delivered.delivered.

It becomes the duty of It becomes the duty of the buyer once the the buyer once the goods are on the ship.goods are on the ship.

2525

COST, INSURANCE, FREIGHTCOST, INSURANCE, FREIGHT

Seller’s duty:Seller’s duty: Make out an invoice Make out an invoice

of the goods sold.of the goods sold.

Procure a contract Procure a contract of affreightment.of affreightment.

To arrange for an To arrange for an insurance.insurance.

Buyer’s dutyBuyer’s duty

To pay unloading To pay unloading charges, wharf age charges, wharf age charges, etc.charges, etc.

To pay custom and To pay custom and import duties.import duties.

2626

AUCTION SALEAUCTION SALE

A sale by auction is a public sale where A sale by auction is a public sale where different intending buyers try to outbid different intending buyers try to outbid each other.each other.

The goods are ultimately sold to the The goods are ultimately sold to the highest bidder.highest bidder.

The auctioneer who sells the goods by the The auctioneer who sells the goods by the auction is an agent of the seller, i.e. the auction is an agent of the seller, i.e. the owner. owner.

2727

RULES OF AUCTION RULES OF AUCTION SALESALE

Completion of sale:- Completion of sale:-

The sale is complete when the The sale is complete when the auctioneer announces its completion auctioneer announces its completion by the fall of the hammer or in some by the fall of the hammer or in some other customary manner like “one other customary manner like “one two three” or “going going, gone”two three” or “going going, gone”

2828

RIGHT OF SELLER TO RIGHT OF SELLER TO BIDBID

A right to bid may be reserved A right to bid may be reserved expressly by or on behalf of expressly by or on behalf of the seller. Where such right is the seller. Where such right is expressly reserved, the seller expressly reserved, the seller or any one person on his or any one person on his behalf may bid at the auction.behalf may bid at the auction.

2929

SALE NOT NOTIFIED SALE NOT NOTIFIED SUBJECT TO A RIGHT TO BIDSUBJECT TO A RIGHT TO BID

It is not lawful It is not lawful

1.1. For the seller to bid himself or to For the seller to bid himself or to employ any person to bid at such sale.employ any person to bid at such sale.

2.2. For the auctioneer knowingly to take For the auctioneer knowingly to take any bid from the seller or any such any bid from the seller or any such person.person.

3.3. Any sale against this rule may be Any sale against this rule may be treated as fraudulent. treated as fraudulent.

3030

RESERVE PRICERESERVE PRICE It is the price below which the auctioneer It is the price below which the auctioneer

will not sell.will not sell. Where the sale is subject to a reserve Where the sale is subject to a reserve

price, every bid is accepted conditionally price, every bid is accepted conditionally on the reserve price being reached.on the reserve price being reached.

But where the sale is without reserve, the But where the sale is without reserve, the goods will be sold to the highest bidder.goods will be sold to the highest bidder.

3131

USE OF PRETENDED USE OF PRETENDED BIDDINGBIDDING

If the seller makes use of If the seller makes use of pretended bidding to pretended bidding to raise the price, the sale raise the price, the sale is void able at the option is void able at the option of the buyer. of the buyer.

3232

KNOCK OUT OR AGREEMENT KNOCK OUT OR AGREEMENT NOT TO BID AGAINST EACH NOT TO BID AGAINST EACH

OTHEROTHER Where a group of persons form a Where a group of persons form a

combination to prevent competition combination to prevent competition between themselves at an auction between themselves at an auction and arrange that only one of them and arrange that only one of them will bid and share anything so will bid and share anything so obtained among themselves.obtained among themselves.

This is called knock out which is This is called knock out which is legal.legal.

3333

PRESENTED BY:-PRESENTED BY:-157157

159159

160160

161161

162162

163163

ANITA

DHARAK

NISHIT

POOJA

HIREN

AUSTOSH

MAULI

AVANI

DEEP

NISHIT

ANKIT

151151

152152

154154

155155

156156