Law Final Ppt

SALE OF GOODS ACT, 1930

CONTRACT OF SALE

(Sec.4)

A contract of sale of goods is a contract where by the seller transfers or agree to transfer the property in goods to the buyer for a price.

AGREEMENT TO SALE

Where the transfer the of the property, ownership in the goods is to take place at a future date or subject to some condition to fulfilled ,the contract is called an agreement to sell.

DISTINCTION BETWEEN SALE AND AGREEMENT TO SELL

BASIC SALE AGREEMENT TO SELL

Nature of contract Sale is an executed contract

Agreement to sell is an ‘executory contract

Passing of property Property in the goods passes to the buyer with the risk

Property and risk does not pass to the buyer

Remedies in case of breach of contract of

Seller is entitle to sue the price of the goods and also has a right of lien stoppage in –transit and resale

Seller has the right only to sue for damages for non –performance of the contract

Loss The loss will be born by the buyer even if the possession of goods is with the seller

The seller will have to pay for the loss since the ownership in the goods has not passed to the buyer

ESSENTIALS OF A VALID SALE

Property :there must be a transfer of general property in the goods.

Movable goods : transfer of goods must be that of movable goods only.

Price: price means the money consideration for sale of good.

Parties: there must be two parties, buyer and seller.

Form: no particular form is necessary to constitute a contract of sale.

EFFECT OF THE CONTRACT

Transfer or passing of property-risk follow ownership

Time when property passes in specific or ascertained goods[sec.2(14)]

Specific goods in a deliverable state(sec.20)

When specific goods are to be put a deliverable state(sec.21)

Specific goods in a deliverable state when the seller has to do anything,therto in order to ascertain prices(sec.22)

Goods sent on approval or on sale or return basis(sec.24)

PERFORMANCE OF CONTRACT

Duties of seller and buyer -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. (SEC 31)

Payment and delivery are concurrent conditions.-Unless otherwise agreed, delivery of the gods 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, and the buyer shall be ready and willing to pay the price in exchange for possession of the goods. (SEC 32)

PERFORMANCE OF CONTRACT Delivery.-Delivery of goods sold 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. (SEC 33)

Effect of part delivery.-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 gods, with an intention of severing it from the whole, does not operate as a delivery of the remainder. (SEC 34)

Buyer to apply for delivery.-Apart from any express contract, the seller of goods in not bound to deliver them until the buyer applies for delivery. (SEC 35)

PERFORMANCE OF CONTRACT

Risk where goods are delivered at distant place.-Where the seller of goods agrees to deliver 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 necessarily incident to the course of transit.

PERFORMANCE OF CONTRACT

Delivery of wrong quantity.-

(1) Where the seller delivers to the buyer a quantity of good less than he contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered 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 the buyer may accept the goods included in the contact and reject the rest, or he may reject the whole. If the buyer accepts the whole of the goods so delivered, he shall pay for them at the contract rate.

UNPAID SELLER AND HIS RIGHTS

In simple words, "Unpaid seller" means a person who has soldthe goods for a price but price has not been paid to him. Sales act defines the "unpaid seller" in the following words : Unpaid Seller Is A Person :- i. To whom the whole price has not been paid or tendered. ii. And where a bill of exchange or other negotiable instruments has been accepted by him as a condition on which it was received has not been fulfilled by reason of dishonor of the instrument or otherwise. 

RIGHTS OF UNPAID SELLER

When the property in the goods has been transferred

Right of LienRight of stoppage in goods in transit

Right to resale

When the property in the goods has not been transferred

Right of withholding delivery

Suit for price

Suit for damages for non acceptance

Suit for special damage and interest

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Right against goods Right against the buyer personally

A. When the property in the goods has been transferred

1.RIGHT OF LIEN[Sec 46(1)(a) and 47 to 49]The right of lien means lawfully right to retain the goods possession until the full priceis received. An unpaid seller can exercise his right

of lien in following cases.Sec47-49I. Where the goods have been sold on the cash

basis.II. Where the goods have been sold on credit basis

and the term of credit has expired.III. Where the buyer has become insolvent even

if the period of credit has not been expired.

Other rules to satisfy the conditions for this right areI. The unpaid seller must be in actual possession of

the goods sold.II. It can be exercised even If the documents of title

have been delivered to the buyer.III. It can be exercised for the price and not for other

expenses.IV. If the seller delivers some goods, it can be

exercised on the remainingTermination of right of lienSeller’s right of lien is terminated in following cases.1. When he delivers the goods to the carrier or other

bailey for transmission to the buyer

SUITES OF BREACH OF CONTRACT

Termination of right of lienSeller’s right of lien is terminated in following cases.1. When he delivers the goods to the carrier or other

bailey for transmission to the buyer 2. When the buyer or his agent lawfully obtains

the possession of the goods. 3. When seller waives his right of lien on the

goods. 4. The right of lien once lost will not be restored. 5. When the buyer further sells the goods and

the seller agrees.

2.RIGHT OF STOPPAGE IN TRANSIT[Sec. 50 to 52]

It means stoppage of goods while they are in transit to take possession until the price is paid (sec.50-52) Unpaid seller can stop the goods in transit

in the following cases.1. While the buyer becomes insolvent.2. While the goods are out of actual possession of

seller, but have not reached buyer’s possession i.e. goods are in transit with career.

3. The unpaid seller can stop the goods in transit only for payment of the price of the goods and not for any other charges.

3.RIGHT TO RE-SALE

If a buyer fails to pay or offer the price within areasonable time, the unpaid seller has the right

to resell the goods in the following circumstances.

1. Where the goods are of perishable nature.2. Where the unpaid seller has exercised his right of lien or

stoppage in transit and gives a notice to buyer of his intension of resell the goods.

3. Where the unpaid seller has expressly reserved his right of resale.

4. Where seller gives notice to the buyer of his intension to resell and the buyer does not pay within a reasonable time, he can

RIGHT OF WITHHOLDING DELIVERYIf the property in the goods has not passed to the buyer, the unpaid seller cannot exercise right of lien ,but gets a right of withholding the delivery of goods,similar to and co-extensive with lien.Rights against the buyer personallyThere are some rights which an unpaid seller mayenforce against the buyer personally. These rights arecalled RIGHTS IN PERSONAM

SUIT FOR PRICE[Sec. 55]

Where ownership of the goods has passed to the buyer and the

buyer refuses to pay the price according to the terms of the

CONDITION AND WARRANTY

A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to repudiate the contract

WARRANTY

A warranty is a stipulation collateral to the main purpose of the contract, the breach of which do not gives rise to repudiate the contract but to claim the damages.

IMPLIED CONDITION

As to title As to description As to sample As to quality or fitness

IMPLIED WARRANTY

Quiet enjoyment Freedom from encumbrance Usage of trade Dangerous nature

NEMO DAT QUOD NON HABET

Literal meaning "no one gives what he doesn't have“

states that the purchase of a possession from someone who has no ownership right to it also denies the purchaser any ownership title

DOCTRINE OF “CAVEAT EMPTOR”

Caveat Emptor is a Latin phrase meaning “let the buyer beware”. Let the buyer beware: the principle that the seller of

a product cannot be held responsible for its quality unless it is guaranteed in a warranty.

Under this doctrine the buyer takes the risk on an item he purchases and cannot complain of a defect.

Unless there is either fraud or warranty (guarantee) by the seller, the rule applies to the sale of personal property.

The buyer and seller have equal access to information about the item and the buyer is able to make personal inspection

AVEAT EMPTORo Implied condition as to quality or fitness. Where the buyer has made know to the seller the

purpose for which he requires the goods and depends on the seller’s skill and judgment, there is an implied condition that the seller will supply the goods which are fit for that purpose. Section 16(1)

o Sale of goods by description. Where the goods are purchased by description from a

seller, who deals in such class of goods, there will be an implied condition that the goods shall be of merchantable quality.

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o Usage of trade An implied condition or warranty as to quality or fitness for a particular purpose may be annexed by the usage of trade and if the seller deviates from that, the rule of caveat emptor does not hold good.

Consent by fraud.When the buyer relies on false representation of the seller and suffers damages, i.e., in a contract where the buyer’s consent was obtained by the seller by fraud, the doctrine of caveat emptor will not hold good.

EFFECTS OF THE CONTRACT

TRANSFER OR PASSING OF PROPERTY

Transfer of property in the goods is distinct from delivery of goods.

Transfer of property means transfer or passing of ownership in the goods.

Property or ownership in the goods may pass to the buyer without delivery of the goods.

On the other hand delivery of goods may not constitute transfer of ownership in the goods.

Transfer of property means that the ownership of the seller in the goods ceases and the buyer’s ownership in the goods commences.

The time of transfer of property in the goods decides various rights and liabilities of the seller and buyer.

TIME WHEN PROPERTY PASSES Section 18 to 26 lay down the rules determining the

time when the ownership in the property passes from the seller to buyer.

For this purpose goods are divided into two classes : 1) Specific or ascertained 2) Generic, unascertained or future .

TIME WHEN PROPERY PASSES IN SPECIFIC OR ASCERTAINED GOODS Individually and specifically identifies and agreed to

items bought and sold under a contract of sale. Goods are identified goods and agreed upon at the

time a contract of sale is made [Sec. 2(14)]. Property in case of specific or ascertained goods

passes when intended to pass (Sec19). Example: Usha Beltron Ltd. v. Ors.(2005)

RULES

I. Specific goods in deliverable stage:(Sec. 20)

II. When specific goods are to be put into a deliverable stag:(Sec. 21)

Examples : 1) Rugg v. Minett. 2) Underwood v. B.C. Cement Syndicate

III. Specific goods in deliverable stage, when the seller has to do anything thereto in order to ascertain price: (Sec. 22).

Example: Simmons v, Swift.

IV. Goods sent on approval or “on sale or return "basis: (Sec. 24).

Example: Municipal Commissioner of the Hooghly ,Chinsurah Municipality v. Spence Ltd &Ors.

TIME WHEN PROPERY PASSES IN GENERIC OR UNASCERTAINED OR FUTURE GOODS: Items in a seller’s inventory from which a buyer’s

order will be picked (as and when it is received) but which are not yet identified and selected for sale.

Future goods are goods which yet to be manufactured.

Unless goods are ascertained or appropriated, there is merely an agreement to sell.

RULESI. Goods must be ascertained : (Sec. 18) Examples: Bales of cotton : Commr, of Sales Tax, Nagpur v.H Adami

& Co.

II. Goods must be un-conditionally appropriated : (Sec. 23)

WHEN PROPERTY IN THE GOODS DOES NOT PASS ?

In case of contract for sale of specific goods in a deliverable state, where the seller is bound to weight,measure,test or do some other act or thing with reference to the goods for the purpose of ascertaining the price.

Property does not pass until such act done and the buyer has notice thereof.

Where the seller reserves the right of disposal of goods.

Where the seller sends the bill of exchange for acceptance with the bill of lading.

Property in the goods does not passes to the buyer unless he accepts the bill of exchange.

EFFECT OF TRANCEFER OF OWNERSHIP OR PASSING OF PROPERTY (SEC. 26)

Until property in the goods passes to the buyer the goods remain at seller’s risk.

When the property is transferred to the buyer, the goods are at the buyer’s risk.

Whether delivery has been made or not. Therefore ,as a rule ‘’risk prima facie passes

with the property”.

EXCEPTION TO THE GENERAL RULE “RISK FOLLOWS OWNERSHIP”

Where delivery has been delayed through the fault of either buyer or seller, the goods are at the risk of the party in fault.

Where parties agree that the risk will pass at a time different from the time when ownership passes.

TRANSFER OF TITLE (SECS. 27-30)

As a general rule, no one can sell the goods and give a goods title thereof unless he is the owner thereof.

“Nemo dat quod non habet”

IN THE FOLLOWING INSTANCE THE BUYER DOES NOT OBTAIN A BETTER TITLE :

Person who has bought the goods under hire-purchase agreement sells them.

In an auction sale if stolen goods are sold, and neither the auctioneer nor the buyer has knowledge that the goods are stolen.

EXCEPTION TO THE GENERAL RULE : BY NON-OWNERS

1.Title by estoppel :(Sec. 27)

2.Sale by mercantile agent (Proviso. To Sec. 27)

3.Sale by one of the several joint owners (Sec. 28)

4.Sale of goods by a person in possession of goods under voidable contract : (Sec. 29)

5.Sale by seller in possession after sale :[Sec. 30(1)]

6. Sale by buyer in possession after sale [Sec.20(2)]

7. Sale by an unpaid seller: [Sec. 54(3)]

8. Sale in market overt :

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