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Introduction

The provision of Sale of Goods were earlier part of Indian Contract Act. Came into force on 1st JULY,1930. Are subject to the general legal principles applicable to all the contracts such as, offer & its acceptance, consideration etc. Contract of sale of goods [Section 4(1)]:- a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price.
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Essentials of a Contract of Sale


1. Two parties 2. Goods 3. Price 4. Essential elements of a valid contract 5. Transfer of Property 6. Includes both a sale and an agreement to sell. 7. No formalities to be observed.

Sale and Agreement to Sell


Property in the goods is transferred from the seller to

the buyer- Sale


Transfer of the property in the goods is to be taken place

at some future date or after fulfillment of some condition-Agreement to Sale Eg: On 1 January, A agrees with B that he will sell B his scooter on 15 January for a sum of Rs. 3,000. It is an agreement to sell, since A agrees to transfer the ownership of the scooter to B at a future time.
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Difference between a Sale and an Agreement to sell.


Sl. No. 1 Basis Sale Agreement to sell Transfer of Ownership is transferred No transfer of property or Property(Ownership) immediately upon contract ownership at the time of contract. Risk of loss Consequences breach Risk is with the buyer of Seller can sue for the price Risk is with the seller Seller can only sue for damages.

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Insolvency of buyer Seller must deliver the Seller may refuse to before he pays for the goods to Official Receiver. deliver the goods to goods Official Receiver as ownership has not passed.

Insolvency of seller if Buyer is entitled to recover Buyer could not claim the buyer has already the goods from Official right on the property. paid the price. Receiver.

Kinds of Goods
Goods

Existing goods

Future goods

Contingent goods

Specific goods

Unascertained goods

Examples
Specific goods: Where A agrees to sell to B a particular radio bearing a distinctive number. Unascertained goods: If A agrees to sell to B one bag of

sugar out of the lot of one hundred bags lying in his godown, it is a sale of unascertained goods because it is not known which bag is to be delivered. Future goods: X agrees to sell to Y all the mangoes, which will be produced in his garden next year. It is contract of sale of future goods, amounting to an agreement to sell. Contingent Goods: A agrees to sell specific goods in a particular ship to B to be delivered on the arrival of the ship.

Price
The money consideration for a sale of goods is known as Price.

Modes of fixing the Price 1. It may be expressly fixed by the contract itself. 2. It may be fixed in accordance with an agreed manner provided by the contract. 3. It may be determined by the course of dealings between the parties. 4. If the price is not capable of being determined in accordance with any of the above modes, the buyer is bound to pay to the seller a reasonable price.

Document of Title to Goods


A document of title to goods contains an

undertaking on the part of the issuing authority to deliver the goods to the holder thereof unconditionally. A document of title is a proof of the ownership of the goods.
Eg: Bill of Lading, Dock-warrant, Warehouse

keepers certificate, Railway receipt etc.

Distinction between a Sale and a Hire-purchase agreement


Sl.No. Sale H.P

Ownership is transferred from the Ownership is transferred from the seller seller to the buyer as soon as the to the hire-purchaser only when a certain contract is entered into. agreed number of installments is paid. The position of the buyer is that The position of the hire-purchaser is that of the owner. of the bailee. The buyer cannot terminate the The hire-purchaser has an option to contract and as such is bound to terminate the contract at any stage, and pay the price of the goods. cannot be forced to pay the further installments. If the buyer makes the payment in installments, the amount payable by the buyer to the seller is reduced, for the payment made by the buyer is towards the price of the goods. The installments paid by the hirepurchaser are regarded as hire charges and not as payment towards the price of the goods till option to purchase the goods is exercised

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Condition and Warranty


In a contract of sale of goods various terms or

stipulations regarding quality of the goods, price mode of payment, delivery of goods etc. are very important. These stipulations are known as conditions and warranties.

Condition and Warranty


Condition -Sec. 12 (2) defines as 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) defines 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.

Example- Condition
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. There is a breach of condition, P can repudiate the contract, return the horse to R and get back the price.

Example-Warranty
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, 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.

Distinction between Condition and Warranty


1. As to value. A condition is a stipulation which is essential

to the main purpose of the contract, whereas a warranty is a stipulation which is collateral to the main purpose of the contract. [Sec. 12(2)(3). 2. As to breach. The breach of a condition gives the aggrieved party the right to repudiate the contract and also to claim damages, whereas the breach of warranty gives the aggrieved party a right to claim damages only. 3. As to treatment. A breach of condition may be treated as a breach of warranty. But a breach of warranty can not be treated as a breach of condition.

Express and Implied Conditions and Warranties


Conditions & warranties may be either express or implied. When they are inserted in the contract they are expressed and they are implied when the law presumes their existence in the contract , although they are not been put in express words. Implied condition and warranties may, however,

be negatived by express agreement, or by course of dealing between the parties or by the usage of trade.

Implied Conditions
1. Condition as to title
2. Condition in a sale by Description 3. Condition in a sale by sample

4. Condition in a sale by sample as well as by

description 5. Condition as to fitness or quality 6. Condition as to merchantability 7. Condition as to wholesomeness

1.Condition as to title
Example: 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 which he had already paid. He was held 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). It may be noted that the implied condition as to title makes it obligatory upon the seller that he must not only be the owner but also must be able to uphold the validity of the contract. Thus if the goods sold bear labels infringing the trade mark of another, the seller is guilty of breach of this condition although he had full ownership of the goods.

2. Condition in a sale by Description


Example:

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, It was held that the mode of packing constituted a part of the description and, therefore, L was entitled to reject the whole consignment ( Re Moore & co. and Landaure & C.)

3. Condition in a sale by sample

The bulk of goods should correspond with

sample quality. Buyer shall have reasonable opportunity to compare the sample. There should not be any latent defect in the goods.

4. Condition in a sale by sample as well as by description


The implied condition is that the 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.

5. Condition as to fitness or quality


Example 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. Held, that the buyer had no right to reject the cloth as it was suitable for packing purposes alright. The buyer ought to have disclosed his particular purpose to the seller in order to make him liable for the breach of implied condition as to fitness.

6. Condition as to merchantability
The term merchantable quality means that the

goods are such quality and in such condition that a reasonable man, acting reasonably, would accept them under the circumstances of the case in performance of his offer to buy those goods, whether he buys them for his own use or to sell.

7. Condition as to wholesomeness
This condition is implied only in a contract of sale of eatables and provisions. Wholesome= free from any defect which render them unfit for human consumption. Example: The plaintiff bought a bun at a bakers and confectioners shop. The bun contained a stone which broke one of the plaintiffs teeth. Held, the seller was liable in damages because he violated the condition of wholesomeness (Chaproniere vs Mason).

Implied Warranties

1. Warranty of quite possession

2. Warranty of freedom from encumbrances


3. Warranty of disclosing the dangerous nature

of goods to the ignorant buyer

1. Warranty of quite possession

Example: A buys a typewriter and spent

some money for repairs. It turns to be a stolen article. A is entitled to get back what he paid plus repair charges.

2. Warranty of freedom from encumbrances


Example:
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. C has to make payment for the pledge amount to B. Here is breach of warranty and C can get compensation from A.

3. Warranty of disclosing the dangerous nature of goods to the ignorant buyer


Example:

C, Purchases a tin of disinfectant powder from

A. A knows that the lid of 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, A is liable in damages to C as he should have warned C of the probable danger.

Delivery of goods (section. 2(2)


Delivery means voluntary transfer of possession of goods from

one person to another. Delivery of goods may be actual, symbolic, or constructive. Actual delivery. Where the goods are handed over by the seller to the buyer or his duly authorized agent, the delivery is said to be actual. Symbolic delivery. Where the goods are ponderous or bulky and incapable of actual delivery, the delivery may be symbolic. Constructive delivery or delivery by attornment .Where a third person (e.g., a bailee) who is in possession of the goods of the seller at the time of the sale acknowledges to the buyer that he holds the goods on his behalf, there takes place a delivery by attornment or constructive delivery.

Doctrine of Caveat Emptor


The maxim of caveat emptor means 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.

Remedies in case of breach by buyer and seller


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.

Characteristics of an Unpaid seller.


1. He must sell goods on cash terms and not on credit, and

he must be unpaid. 2. He must be unpaid either wholly or partly. Even if only a portion of the price, however small, remains unpaid, he is deemed to be an unpaid seller. Where the price is paid through a bill of exchange or other negotiable instrument, the same must be dishonoured. 3. He must not refuse to accept payment when tendered. If the buyer has tendered the price but the seller wrongfully refuses to take the same, he ceases to be an unpaid seller.

Rights of unpaid seller

Against the goods

Against the buyer personally

Where the property in the goods has not passed

Where the property in the goods has passed

Suit for price

Repudiation of contract

Suit for damages

Suit for interest

Lien With holding delivery

Stoppage in transit Stoppage in transit

Re sale

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Rights of Buyer

1. Suit for Damages for Non-delivery

2. Suit for Specific Performance


3. Suit for Breach of Warranty 4. Suit for Interest