Sale of Goods Act, 1930

Sale of Goods Act, 1930

APPLICABILITY OF THE ACT

  • This Act extends to whole of India, except the State of Jammu and Kashmir.
  • This Act came into force w.e.f. 1st July 1930.
  • The ‘contract of sale’ includes both a sale as sell as an agreement to sell.
  • The word Indian was omitted from the title of the Act in 1963 (22 Sept.)
  • This Act does not deal with the sale of immovable property.
  • This Act lays down special provisions governing the contract of sale of goods.
  • The general law of contract is also applicable to contracts for the sale of goods unless they are inconsistent with the express provisions of the Sale of Goods Act.

Contract of Sale of Goods [Section 4]

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.

Transfer or agreement to transfer the ownership in goods

Seller —————————————————————————————Buyer

for a price

Note:

  • There may be a contract of sale between one part-owner and another.
  • A contract of sale includes both
    • actual sale and
    • an agreement to sell

Essentials of a contract of sale of goods

  • Bilateral contract: Atleast 2 persons are required. A person cannot buy the goods himself.
  • Transfer of property in goods from one person to another: Property means ownership.
  • Goods: The subject matter of contract must be some goods.
  • Price or money consideration: The goods must be sold for some price, where the goods are exchanged for goods it is barter, not sale.
  • Valid contract: All essential elements of a valid contract (as per Contract Act) must be present in a contract of sale.

Distinctions

Distinction between Sale and Agreement to Sell

Sale

Agreement to Sell

Ownership in the goods sold passes to the buyer at the time of contract so that he becomes the owner of the goods

Ownership does not pass to the buyer at the time of the contract, but it passes only when it becomes sale on the expiry of certain time or the fulfilment of some conditions subject to which the property in the goods is to be transferred

Executed contract (Present Contract)

Executory contract (Future Contract)

Contract + conveyance of ownership

Only a contract

Transfer of risk even if goods are with seller

No transfer of risk

In case of breach by seller – Buyer has personal remedy (claim for damage) as well as other remedies which owner of the goods has

In case of breach by seller –  Buyer has only a personal remedy (claim for damage)

Distinction between Sale and Bailment

Sale

Bailment

Ownership in the goods sold passes to the buyer at the time of contract so that he becomes the owner of the goods

Ownership in the goods bailed does not passes to the buyer

A bailment is a transaction under which goods are delivered by one person (the bailor) to another (the bailee) for some purpose, upon a contract that those goods shall be returned or disposed of by the bailee as directed by the bailor after the purpose is accomplished.

Distinction between Sale and Contract for Work and Labour

Sale

Contract for Work and Labour (Service)

Ownership in an article is transferred to one who had no property therein previously for a money consideration

No transfer of ownership

Contract of work and labour can be term as

  •  Contract of Service or
  • Contract of Job Work

Here material (goods) provider is the actual owner. Service provider or Job worker gets paid only for his services.  

Distinction between Sale and Hire Purchase Agreement
A hire purchase agreement is basically a contract of hire, but in addition, it gives the hirer an option to purchase the goods at the end of the hiring period. Consequently, until the final payment, the hirer is merely a bailee of goods and ownership remains vested in the bailor. Under such a contract, the owner of goods delivers the goods to person who agrees to pay certain stipulated periodical payments as hire charges. Though the possession is with the hirer, the ownership of the goods remains with the original owner.

Since the hirer does not become owner of the goods until he has exercised his option to buy, he cannot pass any title even to an innocent and bona fide purchaser.

The transaction of hire-purchase protects the owner of the goods against the insolvency of the buyer, for if the buyer becomes insolvent or fails to pay the instalments, he can take back the goods as owner.

Sale

Hire Purchase

Transfer of ownership to the buyer

No transfer of ownership to the hirer until the payment of last instalment

Buyer becomes the owner

Hirer is considered as bailee till he opt for ownership after the payment of last instalment

Absolute transfer of risk

Here the risk of loss or deterioration of the goods hired lies with the owner, if hirer takes reasonable care to protect the goods as a bailee

Transferor can further transfer the ownership

Hirer cannot pass any title even to an innocent and bona fide purchaser as hirer is not the owner

Subject matter of Contract of Sale of Goods

Goods [Section 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.

Note:

  • Money means current money, i.e., the recognised currency in circulation in the country, but not old and rare coins which may be treated as goods.
  • An actionable claim is what a person cannot make a present use of or enjoy, but what can be recovered by him by means of a suit or an action. Thus, a debt due to a man from another is an actionable claim and cannot be sold as goods, although it can be assigned.

According to Section 6, Goods may be

  • existing,
  • future, or
  • contingent

The existing goods may be

  • specific or generic, or
  • ascertained or unascertained

Existing Goods
Existing goods are goods which are either owned or possessed by the seller at the time of the contract.

  • Specific goods or ascertained goods are goods which are identified and agreed upon at the time of the contract of sale.
  • Generic or unascertained goods are goods which are not specifically identified but are indicated by description.

Future Goods [Section 2(6)]
Future goods are goods to be manufactured or produced or acquired by the seller after the making of the contract of sale.

A agrees to sell all the mangoes which will be produced in his garden next season. This is an agreement for the sale of future goods.

Contingent Goods
Where there is a contract for the sale of goods, the acquisition of which by the seller depends upon a contingency which may or may not happen, such goods are known as contingent goods. Contingent goods fall in the class of future goods.

Note:

  • 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.

Effect of Perishing of Goods

Goods perishing before making a contract (Section 7)
Where in a contract of sale of specific goods, the goods

  • without the knowledge of the seller

have, at the time of making the contract perished or become so damaged as no longer to answer to their description in the contract, the contract is void (as it will be considered as mutual mistake of facts).

What if seller was aware of perishing of goods before making a contract?
If the seller was aware of the destruction and still entered into the contract, he cannot avoid contract. It means seller shall perform his part or pay damages.

Note:

  • Perishing of goods not only includes loss by theft but also where the goods have lost their commercial value.

Goods perishing after agreement to sell [Section 8]
Where there is an agreement to sell specific goods, and subsequently the goods without any fault of any party perish or are so damaged as no longer to answer to their description in the agreement before the risk passes to the buyer, the agreement is thereby avoided.

The provision applies only to sale of specific goods. If the sale is of unascertained goods, the perishing of the even whole quantity of such goods in the possession of the seller will not relieve him of his obligation to deliver.

Consideration [Section 9 & 10]

In case of sale covered under this Act, consideration shall be monetary consideration (at least in part). If, in a sale,

  • there is no consideration or
  • the consideration is not monetary consideration,

such sale shall not be covered under this Act.

Consideration may be

  • Past Consideration or
  • Present Consideration (Actually Paid) or
  • Future Consideration (Promised to be Paid)

Mode of Fixing Price
The price may be fixed:

  1. at the time of contract by the parties themselves, or
  2. may be left to be determined by the course of dealings between the parties, or
  3. may be left to be fixed in some way stipulated in the contract, or
  4. may be left to be fixed by some third-party.

Note:

  • Where no consideration is fixed, buyer shall pay reasonable price (depends upon case to case)

Where left to be fixed by some third-party

  • If third-party fails to fix the price,
    • the contract is void.
      In such case, if the buyer has already taken the benefit of the goods, he must pay a reasonable price for them.
  • If third-party fails to fix the price due to the fault of the seller or buyer,
    • then that party is liable for an action for damages.

Time of Payment [Section 11]
Unless a different intention appears from the terms of the contract, stipulations as to the time of payment are not deemed to be of the essence of a contract of a sale.

Conditions and Warranties [Sections 12-17]

Stipulation means terms and condition on which contract of sale is based. Stipulations are different from the opinions/recommendations. Stipulations bind the parties but opinions/recommendations don’t.

The stipulation may either be a condition or a warranty.

Conditions

  • If the stipulation is essential to the main purpose of the contract, it is a condition.
  • The breach of the condition gives the aggrieved party a right to avoid the contract.
  • Thus, if the seller fails to fulfil a condition, the buyer may treat the contract as repudiated, refuse the goods and, if he has already paid for them, recover the price. He can also claim damages for the breach of contract.

Warranties

  • If the stipulation is collateral to the main purpose of the contract, i.e., is a subsidiary promise, it is a warranty.
  • Here, aggrieved party cannot repudiate the contract but can only claim damages.
  • Thus, if the seller does not fulfil a warranty, the buyer must accept the goods and claim damages for breach of warranty.

Implied Warranties/Conditions
Implied Warranties/Conditions are those terms and conditions which are not expressed in the contract by the parties but such terms and conditions are implied by law. 

Implied Warranties

  1. Implied warranty of quiet possession: The buyer shall have the right to enjoy quiet possession of the goods without the interference of others.
  2. Implied warranty against encumbrances: There shall be no encumbrances in favour of a third-party without the notice of the buyer. If the good are subject to any encumbrances and the buyer discharges the amount of the encumbrance, he is entitled to claim damages from the seller.
  3. Warranty to Disclose Dangerous Nature of Goods: If the goods are inherently dangerous or likely to be dangerous and the buyer is ignorant of the danger, the seller must warn the buyer of the probable danger.
  4. Warranties implied by the custom or usage of trade: An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade.

Implied Conditions
Implied Conditions as to Title
Seller has right to sell the goods. If the title of the seller turns out to be defective, the buyer is entitled to reject the goods and can recover the full price paid by him.

Aallu had bought a second hand motor car from Babu and paid for it. After he had used it for 10 months, Aallu was deprived of car because the Babu had no title to it. It was held that ‘Babu’ had broken the condition as to title and ‘Aallu’ was therefore, entitled to recover the purchase money from ‘B’ [Rowland v. Divall]

Implied Conditions under a Sale by Description
In a sale by description there are the following implied conditions:

  1. Goods must correspond with description:
    When there is a sale of goods by description, there is an implied condition that the goods shall correspond with description.
    Even if the buyer has seen the goods, the goods must be in accordance with the description [Beale v. Taylor].
  2. Goods must also be of merchantable quality if they are bought by description from dealer of goods of that description:
    Merchantable quality means that the goods must be such as would be acceptable to a reasonable person, having regard to prevailing conditions. Goods are not merchantable if they have defects which make them unfit for ordinary use, or are such that a reasonable person knowing of their condition would not buy them
    If buyer has examined the goods
    • If the buyer has examined the goods, there is no implied condition as regards defects which such examination ought to have revealed.
    • If, however, examination by the buyer does not reveal the defect and he approves and accepts the goods, but when put to work, the goods are found to be defective, there is a breach of condition of merchantable quality.
    • A mere opportunity to examine goods without an actual examination would not deprive him of this right.
  3. Condition as to wholesomeness:
    Goods, (i.e., eatables) supplied must not only answer the description, but they must also be merchantable and wholesome or sound.
  4. Condition as to quality or fitness for a particular purpose:
    Ordinarily, in a contract of sale, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied. But there is an implied condition that the goods are reasonably fit for the purpose for which they are required if:
    • 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 he relies on the seller’s skill and judgement, and
    • the goods are of a description which it is in the course of the seller’s business to supply (whether he is the manufacturer or producer or not).

Note:

  • There is no such condition if the goods are bought under a patent or trade name.

In Priest v. Last, a hot water bottle was bought by the plaintiff, who could not be expected to have special skill knowledge with regard to hot water bottles, from a chemist, who sold such articles stating that the bottle will not stand boiling water but was intended to hold hot water. While being used by the plaintiff’s wife, the bottle bursted and injured her. Held, the seller was responsible for damages as the bottle was not fit for use as a hot water bottle.
In Grant v. Australian Knitting Mills, ‘Guddu’ a doctor purchased woollen underpants from ‘Monu’ a retailer whose business was to sell goods of that description. After wearing the underpants, ‘Guddu’ developed some skin diseases. Held, the goods were not fit for their only use and ‘G’ was entitled to avoid the contract and claim damages.

Implied Conditions under a Sale by Sample
In a contract of sale by sample:

  • there is an implied condition that the bulk shall correspond with the sample in quality;
  • there is another implied condition that the buyer shall have a reasonable opportunity of comparing the bulk with the sample;
  • it is further an implied condition of merchantability, as regards latent or hidden defects in the goods which would not be apparent on reasonable examination of the sample.

Implied Conditions in Sale by Sample as Well as by Description
In a sale by sample as well as by description, the goods supplied must correspond both with the samples as well as with the description.

In Nichol v. Godis, there was a sale of “foreign refined rapeoil having warranty only equal to sample”. The oil tendered was the same as the sample, but it was not “foreign refined rape-oil” having a mixture of it and other oil. It was held that the seller was liable, and the buyer could refuse to accept.

When Condition Sinks to the Level of Warranty
In some cases a condition sinks or descends to the level of a warranty. The first two cases depend upon the will of the buyer, but the third is compulsory and acts as estoppel against him.

  •  A condition will become a warranty where the buyer waives the condition; or
  • A condition will sink to the level of a warranty where the buyer treats the breach of condition as a breach of warranty; or
  • Where the contract is indivisible and the buyer has accepted the goods or part thereof, the reach of condition can only be treated as breach of warranty. The buyer can only claim damages and cannot reject the goods or treat the contract as repudiated.

If seller is excused by law
Sometimes the seller may be excused by law from fulfilling any condition or warranty and the buyer will not then have a remedy in damages.

Doctrine of Caveat Emptor (Latin word which means “let the buyer beware”)

It states that

  • It is for the buyer to satisfy himself that the goods which he is purchasing are of the quality which he requires.
  • If buyer buys goods for a particular purpose, he must satisfy himself that they are fit for that purpose.

According to Section 16,

  • 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.

So, it is not the seller’s duty to give to the buyer the goods which are fit for a suitable purpose of the buyer. If buyer makes a wrong selection, he cannot blame the seller if the goods turn out to be defective or do not serve his purpose.

Where certain pigs were sold by auction and no warranty was given by seller in respect of any fault or error of description. The buyer paid the price for healthy pigs. But they were ill and all but one died of typhoid fever. They also infected some of the buyer’s own pigs. It was held that there was no implied condition or warranty that the pigs were of good health. It was the buyer’s duty to satisfy himself regarding the health of the pigs. [Ward v. Hobbs]

Exceptions: Section 16 lays down the following exceptions to the doctrine of Caveat Emptor:

  1. Where the seller makes a false representation and the buyer relies on it.
  2. When the seller actively conceals a defect in the goods which is not visible on a reasonable examination of the same.
  3. When the buyer, relying upon the skill and judgement of the seller, has expressly or impliedly communicated to him the purpose for which the goods are required.
  4. Where goods are bought by description from a seller who deals in goods of that description.

Passing of Property or Transfer of Ownership (Sections 18-20)

Points to Note:

  • Risk follows the ownership. In general owner is responsible for the loss or damage of goods.
  • Generally owner has the right to take the action against third party.
  • In case of insolvency of either the seller or the buyer, it is necessary to know whether the goods can be taken over by the official assignee or the official receiver.
  • Ownership and possession are two distinct concepts.

Thus, it is very important to know the exact point of passing of ownership in goods.

Sale of specific or ascertained goods
In a sale of specific or ascertained goods, the property in them passes to the buyer as and when the parties intended to pass. Unless a contrary intention appears, the following rules are applicable for ascertaining the intention of the parties:

  1. In case of 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.
    Deliverable state means such a state that the buyer would be bound to take delivery of the goods. The fact that the time of delivery or the time of payment is postponed does not prevent the property from passing at once. (Section 20)
  2. In case of contract for the sale of specific goods not in a deliverable state,
    • Here the seller has to do something to the goods to put them in a deliverable state.
    • The property does not pass until goods are in deliverable state and the buyer has notice of it (Section 21).
      A certain quantity of oil was brought. The oil was to be filled into casks by the seller and then taken away by the buyer. Some casks were filled in the presence of buyer but, before the remainder could be filled, a fire broke out and the entire quantity of oil was destroyed, Held, the buyer must bear the loss of the oil which was put into the casks (i.e., put in deliverable state) and the seller must bear the loss of the remainder [Rugg v. Minett].
  • Where there is a sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test or do something with reference to the goods for the purpose of ascertaining the price,
    • the property to the goods for the purpose of ascertaining the price, does not pass until such act or thing is done and the buyer has notice of it. (Section 22)
  • When goods are delivered to the buyer “on approval” or “on sale of return” or other similar terms
  • the property therein passes to the buyer:
    • when he signifies his approval or acceptance to the seller, or does any other act adopting the transaction;
    • if he does not signify his approval or acceptance but retains the goods without giving notice of rejection, in such a case—
      • 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.

Ownership in Unascertained Goods
The property in unascertained or future goods does not pass until the goods are ascertained.

Unless a different intention appears, the following rules are applicable for ascertaining the intention of the parties in regard to passing of property in respect of such goods:

  • Where unascertained or future goods sold by description
    The property in the goods passes to the buyer when 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.
    Such assent may be expressed or implied and may be given either before or after the appropriation is made. (Section 23)
  • Where there is a sale of a quantity of goods out of a large quantity, (for example, 50 quintals of rice out of a heap in the godown),
    • the property will pass on the appropriation of the specified quantity by one party with the assent of the other.
  • Delivery by the seller of the goods to a carrier or other person for the purpose of transmission to the buyer.
    • the property in the goods will pass when goods are delivered to such carrier or other person.

In case seller reserves the right of disposal of the goods (whether specific or unascertained)

  • The property in goods does not pass if the seller reserves the right of disposal of the goods.
  • Apart from an express reservation of the right of disposal, the seller is deemed to reserve the right of disposal in the following two cases:
    • where goods are shipped or delivered to a railway administration for carriage by railway and by the bill of lading or railway receipt, the goods are deliverable to the order of the seller or his agent.
    • when the seller sends the bill of exchange for the price of the goods to the buyer for this acceptance, together with the bill of lading, the property in the goods does not pass to the buyer unless he accepts the bill of exchange.

Passing of Risk (Section 26)

The general rule is that goods remain at the seller’s risk until the ownership is transferred to the buyer. After the ownership has passed to the buyer, the goods are at the buyer’s risk whether the delivery has been made or not. The rule is res perit demino – the loss falls on the owner.

But the parties may agree that risk will pass at the time different from the time when ownership passed. For example, the seller may agree to be responsible for the goods even after the ownership is passed to the buyer or vice versa.

In Consolidated Coffee Ltd. v. Coffee Board, one of the terms adopted by coffee board for auction of coffee was the property in the coffee knocked down to a bidder would not pass until the payment of price and in the meantime the goods would remain with the seller but at the risk of the buyer. In such cases, risk and property passes on at different stages.

In Multanmal Champalal v. Shah & Co., goods were despatched by the seller from Bombay to Bellary through a public carrier. According to the terms of the contract, the goods were to remain the property of the seller till the price was paid though the risk was to pass to the buyer when they were delivered to public carrier for despatch. When the goods were subsequently lost before the payment of the price (and the consequent to the passing of the property to the buyer), the Court held that the loss was to be borne by the buyer.

Transfer of Title by Person not the Owner (Section 27-30)

General Rule

  • Only the owner of goods can sell the goods.

Thus, sale of an article by a person who is not or who has not the authority of the owner, gives no title to the buyer. The rule is expressed by the maxim; “Nemo Dat Quod Non Habet” i.e. no one can pass a better title than he himself has.

Thus, even a bona fide buyer who buys stolen goods from a thief or from a transfree from such a thief can get no valid title to them, since the thief has no title, nor could he give one to any transferee.

Example:

  1. A, the hirer of goods under a hire purchase agreement, sells them to B, then B, though a bona fide purchaser, does not acquire the property in the goods. At most he can acquire such an interest as the hirer had.
  2. A finds a ring of B and sells it to a third person who purchases it for value and in good faith. The true owner, i.e. B can recover from that person, for A having no title to the ring could pass none the better.

Exception to the General Rule
The Act while recognizing the general rule that no one can give a better title than he himself has, laid down important exceptions to it. Under the exceptions the buyer gets a better title to the goods than the seller himself.
These exceptions are given below:

  • Sale by a mercantile agent: A buyer will get a good title if he buys in good faith from a mercantile agent who is in possession either of the goods or documents of title to the goods with the consent of the owner, and who sells the goods in the ordinary course of his business.
  • Sale by a co-owner: A buyer who buys in good faith from one of the several joint owners who is in sole possession of the goods with the permission of his co-owners will get good title to the goods.
  • Sale by a person in possession under a voidable contract: A buyer buys in good faith from a person in possession of goods under a contract which is voidable, but has not been rescinded at the time of the sale.
  • Sale by seller in possession after sale: Where a seller, after having sold the goods, continues or is in possession of the goods or of the documents of title to the goods and again sells them by himself or through his mercantile agent to a person who buys in good faith and without notice of the previous sale such a buyer gets a good title to the goods.
  • Sale by buyer in possession: If a person has brought or agreed to buy goods obtains, with the seller’s consent, possession of the goods or of the documents of title to them, any sale by him or by his mercantile agent to a buyer who takes in good faith without notice of any lien or other claim of the original seller against the goods, will give a good title to the buyer. In any of the above cases, if the transfer is by way of pledge or pawn only, it will be valid as a pledge or pawn.
  • Estoppel: If the true owner stands by and allows an innocent buyer to pay over money to a third-party, who professes to have the right to sell an article, the true owner will be estopped from denying the third party’s right to sell.
  • Sale by an unpaid seller: Where an unpaid seller has exercised his right of lien or stoppage in transit and is in possession of the goods, he may resell them and the second buyer will get absolute right to the goods.
  • Sale by person under other laws: A pawnee, on default of the pawnee to repay, has a right to sell the goods, pawned and the buyer gets a good title to the goods. The finder of lost goods can also sell under certain circumstances. The Official Assignee or Official Receiver, Liquidator, Officers of Court selling under a decree, Executors, and Administrators, all these persons are not owners, but they can convey better title than they have.

Delivery (Sections 33-39)

Delivery is the voluntary transfer of possession from one person to another. Delivery may be actual, constructive or symbolic.

  • Actual or physical delivery takes place where the goods are handed over by the seller to the buyer or his agent authorised to take possession of the goods.
  • Constructive delivery takes place when the person in possession of the goods acknowledges that he holds the goods on behalf of and at the disposal of the buyer. For example, where the seller, after having sold the goods, may hold them as bailee for the buyer, there is constructive delivery.
  • Symbolic delivery is made by indicating or giving a symbol. Here the goods themselves are not delivered, but the “means of obtaining possession” of goods is delivered, e.g, by delivering the key of the warehouse where the goods are stored, bill of lading which will entitle the holder to receive the goods on the arrival of the ship.

Rules as to Delivery
The following rules apply regarding delivery of goods:

  1. Delivery should have the effect of putting the buyer in possession.
  2. The seller must deliver the goods according to the contract.
  3. Duty of buyer to claim delivery: The seller is to deliver the goods when the buyer applies for delivery; it is the duty of the buyer to claim delivery.
  4. Goods in Possession of 3rd Party: Where the goods at the time of the sale are in the possession of a third person, there will be delivery only when that person (3rd party) acknowledges to the buyer that he holds the goods on his behalf.
  5. Duty of Seller to tender delivery:
    • The seller should tender delivery so that the buyer can take the goods.
    • It is no duty of the seller to send or carry the goods to the buyer unless the contract so provides.
    • But the goods must be in a deliverable state at the time of delivery or tender of delivery. If by the contract the seller is bound to send the goods to the buyer, but no time is fixed, the seller is bound to send them within a reasonable time.
  6. Place of Delivery:
    • The place of delivery is usually stated in the contract. Where it is so stated, the goods must be delivered at the specified place during working hours on a working day.
    • Where no place is mentioned, the goods are to be delivered at a place at which they happen to be at the time of the contract of sale and if not then in existence they are to be delivered at the place at which they are manufactured or produced.
  7. Cost of Delivery:
    • The seller has to bear the cost of delivery unless the contract otherwise provides.
    • The cost of obtaining delivery is said to be of the buyer.
    • The cost of the putting the goods into deliverable state must be borne by the seller.
  8. If the goods are to be delivered at a place other than where they are, the risk of deterioration in transit will, unless otherwise agreed, be borne by the buyer.
  9. Delivery in Installments: Unless otherwise agreed, the buyer is not bound to accept delivery in installments.

Acceptance of Goods by the Buyer
Acceptance of the goods by the buyer takes place when the buyer:

  • intimates to the seller that he has accepted the goods; or
  • retains the goods, after the lapse of a reasonable time without intimating to the seller that he has rejected them; or
  • does any act on the goods which is inconsistent with the ownership of the seller, e.g., pledges or resells.

If the seller sends the buyer a larger or smaller quantity of goods than ordered, the buyer may:

  • reject the whole; or
  • accept the whole; or
  • accept the quantity be ordered and reject the rest.

If the seller delivers with the goods ordered, goods of a wrong description, the buyer may accept the goods ordered and reject the rest, or reject the whole.

Where the buyer rightly rejects the goods, he is not bound to return the rejected goods to the seller. It is sufficient if he intimates the seller that he refuses to accept them. In that case, the seller has to remove them.

Suits for Breach of Contract

Where the property in the goods has passed to the buyer

The seller may sue him for the price

Where the price is payable on a certain day regardless of delivery

The seller may sue for the price, if it is not paid on that day, although the property in the goods has not passed

Where the buyer wrongfully neglects or refuses to accept the goods and pay for them

The seller may sue the buyer for damages for non-acceptance.

Where the seller wrongfully neglects or refuses to deliver the goods to the buyer

The buyer may sue him for damages for non-delivery.

If the buyer has paid the price and the goods are not delivered

The buyer can sue the seller for the recovery of the amount paid

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

In case the contract is treated as still subsisting it would be for the benefit of both the parties and the party who had originally repudiated will not be deprived of:

  • his right of performance on the due date in spite of his prior repudiation; or
  • his rights to set up any defence for non-performance which might have actually arisen after the date of the prior repudiation.

Unpaid Seller (Sections 45-54)

Who is an unpaid seller? (Section 45)
The seller of goods is deemed to be unpaid seller:

  • When the whole of the price has not been paid or tendered; or
  • When a conditional payment was made by a bill of exchange or other negotiable instrument, and the instrument has been dishonoured.

 

Rights of an Unpaid Seller against the Goods

An unpaid seller’s right against the goods are:

(a) A lien or right of retention

(b) The right of stoppage in transit.

(c) The right of resale.

(d) The right to withhold delivery.

Leave a Comment