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Sale of Goods Act 1930. Contd - Act Deals with goods Act Deals with goods Sec 4(1) – contract of sale – Contract of sale of goods is a contract whereby.

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Presentation on theme: "Sale of Goods Act 1930. Contd - Act Deals with goods Act Deals with goods Sec 4(1) – contract of sale – Contract of sale of goods is a contract whereby."— Presentation transcript:

1 Sale of Goods Act 1930

2 Contd - Act Deals with goods Act Deals with goods Sec 4(1) – contract of sale – 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. Sec 4(1) – contract of sale – 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.

3 Essential elements Two parties - Seller and buyer Goods Transfer of property Price Essential elements of a valid contract

4 Contract of sale Contract of sale maybe ExpressIn writing By word of mouth Partly in writing and partly by word of mouth Implied from the conduct of the parties

5 Contract of sale and agreement to sell Contract of sale includes Sale i.e, where the ownership of goods is transferred Agreement to sell I.e., where the transfer of ownership in goods is to take place at a future time or subject to fulfillment of some condition

6 Difference Between Sale A sale is an executed contract A sale is an executed contract Since the ownership has passed to the buyer, the seller can sue the buyer for the price of the goods, if the latter makes a default in payment Since the ownership has passed to the buyer, the seller can sue the buyer for the price of the goods, if the latter makes a default in payment In case of loss of goods, the loss will fall on the buyer, even though the goods are in the possession of the seller. It is because the risk is associated with ownership In case of loss of goods, the loss will fall on the buyer, even though the goods are in the possession of the seller. It is because the risk is associated with ownership In case the buyer pays the price and the seller thereafter becomes insolvent, the buyer can claim the goods from the official receiver or assignee as the case may be In case the buyer pays the price and the seller thereafter becomes insolvent, the buyer can claim the goods from the official receiver or assignee as the case may be Agreement to Sell It is an executory contract It is an executory contract In case of breach, the seller can only sue for damages, unless the price was payable at a stated date In case of breach, the seller can only sue for damages, unless the price was payable at a stated date The loss in this case shall be borne by the seller, even though the goods are in the possession of the buyer The loss in this case shall be borne by the seller, even though the goods are in the possession of the buyer In this case, the buyer cannot claim the goods, but only a rateable dividend for the money paid In this case, the buyer cannot claim the goods, but only a rateable dividend for the money paid

7 Condition and warranties Both seller and buyer make representations to each other at the time of entering into contract of sale. Both seller and buyer make representations to each other at the time of entering into contract of sale. Some of these representations are mere opinions which do not form a part of the contract of the sale. Whereas some become part of the contract of sale Some of these representations are mere opinions which do not form a part of the contract of the sale. Whereas some become part of the contract of sale

8 Contd - Representations which become part of the contract of sale are termed as stipulations which may rank as condition or warranty Representations which become part of the contract of sale are termed as stipulations which may rank as condition or warranty Stipulation – Sec 12(1) – A stipulation in a contract of sale of goods may be a condition or warranty. Stipulation – Sec 12(1) – A stipulation in a contract of sale of goods may be a condition or warranty.

9 Meaning of condition A condition is a stipulation – A condition is a stipulation – (a) which is essential to the main purpose of the contract (a) which is essential to the main purpose of the contract (b) the breach of which gives the aggrieved party a right to terminate the contract. (b) the breach of which gives the aggrieved party a right to terminate the contract. It goes to the root of the contract. It goes to the root of the contract. Its non-fulfillment upsets the very basis of the contract. Its non-fulfillment upsets the very basis of the contract.

10 Warranty It is a stipulation collateral to the main purpose of the contract It is a stipulation collateral to the main purpose of the contract It is of secondary importance It is of secondary importance If there is a breach of a warranty, the aggrieved party can only claim damages and it has no right to treat the contract as repudiated. If there is a breach of a warranty, the aggrieved party can only claim damages and it has no right to treat the contract as repudiated.

11 Condition and warranties There is no hard and fast rules as to which stipulation is a condition and which one is a warranty. There is no hard and fast rules as to which stipulation is a condition and which one is a warranty. Whether a stipulation is a condition or a warranty depends in each case on the construction of the contract as a whole. Whether a stipulation is a condition or a warranty depends in each case on the construction of the contract as a whole. The court is not to be guided by the terminology used by the parties to the contract The court is not to be guided by the terminology used by the parties to the contract

12 Basis of distinction Condition It is a stipulation which is essential to the main purpose of the contract. It is a stipulation which is essential to the main purpose of the contract. The aggrieved party can terminate the contract The aggrieved party can terminate the contract A breach of condition can be treated as a breach of warranty. For example, a buyer may like to retain the goods and claim only damages. A breach of condition can be treated as a breach of warranty. For example, a buyer may like to retain the goods and claim only damages. Warranty It is a stipulation which is only collateral to the main purpose of the contract It is a stipulation which is only collateral to the main purpose of the contract The aggrieved party can claim damages but cannot terminate the contract. The aggrieved party can claim damages but cannot terminate the contract. A breach of warranty cannot be treated as a breach of condition. A breach of warranty cannot be treated as a breach of condition.

13 Conditions and warranties Two kinds – express and implied Two kinds – express and implied Express conditions and warranties – Conditions and warranties expressly provided in the contract Express conditions and warranties – Conditions and warranties expressly provided in the contract Implied conditions – They are implied by the law into the contract – Implied conditions – They are implied by the law into the contract – Condition as to title Condition as to title Sale by description Sale by description Sale by sample Sale by sample Condition as to the quality of the items Condition as to the quality of the items

14 Conditions and warranties Implied warranties – Implied warranties – Warranty of quite possession Warranty of quite possession Warranty as to freedom from encumbrances Warranty as to freedom from encumbrances Warranty to disclose dangerous nature of goods Warranty to disclose dangerous nature of goods

15 Conditions & Warranties (Sec ) Example: 1 Kaushal asks a dealer to supply him a shirt which would not shrink after use and wash. The dealer supplies a shirt which shrinks after use and wash. Kaushal can reject the shirt or keep the shirt and claim damages. Here the stipulation to supply a shirt which would not shrink after use and wash is a condition. Now if Kaushal buys a particular shirt which is warranted by the dealer to be one which would not shrink after use and wash and the shirt does shrink after use and wash, Kaushal’s only remedy is to claim damages

16 Conditions & Warranties (Sec ) Example: 2 Example: 2 A man buys a particular horse which is warranted quiet to ride and drive. If the horse turns out to be vicious, the buyer’s only remedy is to claim damages. But if instead of buying a particular horse, a man asks a dealer to supply him with a quiet horse and the dealer supplies him with a vicious one, the stipulation is a condition, and the buyer can return the horse and can also claim damages for breach of contract (Hartley vs Hyman) The illustrations are a clear proof of the fact that an exactly similar term may be a condition in one contract and a warranty in another depending upon the construction of the contract as a whole The illustrations are a clear proof of the fact that an exactly similar term may be a condition in one contract and a warranty in another depending upon the construction of the contract as a whole

17 When breach of Condition is to be treated as breach of Warranty Section 13 deals with cases where a breach of condition is to be treated as a breach of warranty, as a consequence of which the buyer loses his right to rescind the contract and has to be content with a claim for damages only. Section 13 deals with cases where a breach of condition is to be treated as a breach of warranty, as a consequence of which the buyer loses his right to rescind the contract and has to be content with a claim for damages only. These cases are as follows: These cases are as follows: 1. Voluntary waiver by buyer: Although on a breach of condition by the seller, the buyer has a right to treat the contract as repudiated and reject the goods, but he is not bound to do so Although on a breach of condition by the seller, the buyer has a right to treat the contract as repudiated and reject the goods, but he is not bound to do so He may instead elect to waive the condition, i.e., to treat the breach of condition as a breach of warranty and accept the goods and sue the seller for damages for breach of warranty He may instead elect to waive the condition, i.e., to treat the breach of condition as a breach of warranty and accept the goods and sue the seller for damages for breach of warranty

18 When breach of Condition is to be treated as breach of Warranty Illustration: Illustration: A agrees to supply B 10 bags of first quality Rs per bag but supplies only second quality sugar, the price of which is Rs per bag. There is a breach of condition and the buyer can reject the goods. But if the buyer so elects, he may treat it as a breach of warranty, accept the second quality sugar and claim Rs. 125 per bag.

19 Doctrine of caveat emptor “Let the buyer beware” “Let the buyer beware” It is the duty of the buyer to be careful while purchasing goods of his requirement and in the absence of the enquiry from the buyer, the seller is not bound to disclose every defect in the goods of which he may be cognisant. It is the duty of the buyer to be careful while purchasing goods of his requirement and in the absence of the enquiry from the buyer, the seller is not bound to disclose every defect in the goods of which he may be cognisant.

20 Exceptions to the doctrine of caveat emptor In case of misrepresentation by the seller In case of misrepresentation by the seller In case of concealment of latent defect In case of concealment of latent defect In case of sale by description In case of sale by description In case of sale by sample In case of sale by sample In case of sale by sample and description In case of sale by sample and description Fitness for a particular purpose Fitness for a particular purpose Merchantable quality Merchantable quality

21 Passing of property Transfer of property in goods from the seller to the buyer is the main object of a contract of sale. Transfer of property in goods from the seller to the buyer is the main object of a contract of sale. “property in goods” means the ownership of goods “property in goods” means the ownership of goods An article may belong to A although it may not be in his possession. B may be in possession of that article although he is not its owner. An article may belong to A although it may not be in his possession. B may be in possession of that article although he is not its owner. It is important to know the precise moment of time at which the property in goods passes from the seller to the buyer for the following reasons It is important to know the precise moment of time at which the property in goods passes from the seller to the buyer for the following reasons

22 Contd - Significance – Time of transfer of ownership of goods decides various rights and liabilities of the seller and buyer. Significance – Time of transfer of ownership of goods decides various rights and liabilities of the seller and buyer. Risk – Owner to bear the risk and not the person who merely hs the possession Risk – Owner to bear the risk and not the person who merely hs the possession Action against third party – Owner can take action and not the person who merely has possession. Action against third party – Owner can take action and not the person who merely has possession.

23 Types of goods Goods Existing goods Future goods Contingent goods

24 Types of existing goods Specific goods Specific goods Ascertained goods Ascertained goods Unascertained goods Unascertained goods Goods sent “on approval” or “on sale on return basis” Goods sent “on approval” or “on sale on return basis”

25 Primary rules Goods must be ascertained – Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained. Goods must be ascertained – Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained. Intention of the parties –Where there is a contract for the sale of specific or ascertained goods the property in them passes to the buyer at the time when the parties intend it to pass Intention of the parties –Where there is a contract for the sale of specific or ascertained goods the property in them passes to the buyer at the time when the parties intend it to pass

26 Contd - Where the intention of the parties cannot be ascertained from the contract- Where the intention of the parties cannot be ascertained from the contract- Specific goods – Specific goods – Passing of the property at the time of the contract – Where there is 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. Passing of the property at the time of the contract – Where there is 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.

27 Contd- Passing of property delayed beyond the date of the contract Passing of property delayed beyond the date of the contract (1) Goods not in a deliverable state –Where there is a contract for the sale of specific goods not in a deliverable state,ie, the seller has to do something to the goods to put them into a deliverable state, the property does not pass until such thing is done and the buyer has notice of it. (1) Goods not in a deliverable state –Where there is a contract for the sale of specific goods not in a deliverable state,ie, the seller has to do something to the goods to put them into a deliverable state, the property does not pass until such thing is done and the buyer has notice of it.

28 Contd - (2) When the price of goods is to be ascertained by weighing, etc. – Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh measure test or to do some other act or thing with reference to the goods for the purpose of ascertaining the price the property does not pass until such act or thing is done and the buyer has notice thereof (2) When the price of goods is to be ascertained by weighing, etc. – Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh measure test or to do some other act or thing with reference to the goods for the purpose of ascertaining the price the property does not pass until such act or thing is done and the buyer has notice thereof

29 Contd - Unascertained goods – Unascertained goods – Where there is a contract for the sale of unascertained goods, the property in the goods does not pass to the buyer until the goods are ascertained. Until the goods are ascertained there is merely an agreement to sell. Where there is a contract for the sale of unascertained goods, the property in the goods does not pass to the buyer until the goods are ascertained. Until the goods are ascertained there is merely an agreement to sell.

30 Contd - Where there is a contract for sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, the property in the goods thereupon passes to the buyer. Where there is a contract for sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, the property in the goods thereupon passes to the buyer. “ascertainment of goods’, “unconditional appropriation to the contract” “ascertainment of goods’, “unconditional appropriation to the contract”

31 Delivery to carrier A seller is deemed to have unconditionally appropriated the goods to the contract where he delivers them to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer and does not reserve the right of disposal. A seller is deemed to have unconditionally appropriated the goods to the contract where he delivers them to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer and does not reserve the right of disposal.

32 Goods sent on approval or “on sale or return’ When goods are delivered to the buyer on approval or ‘on sale or return’ or other similar terms the property therein passes to the buyer – When goods are delivered to the buyer on approval or ‘on sale or return’ or other similar terms the property therein passes to the buyer – (1) When he signifies his approval or acceptance to the seller: (1) When he signifies his approval or acceptance to the seller: (2)When he does any other act adopting the transaction (2)When he does any other act adopting the transaction

33 Reservation of right of disposal The property in goods whether specific or subsequently appropriated to the contract does not pass to he buyer if the seller reserves the right of disposal of goods until certain conditions are fulfilled. The property in goods whether specific or subsequently appropriated to the contract does not pass to he buyer if the seller reserves the right of disposal of goods until certain conditions are fulfilled.

34 Perishing of goods The possible causes of perishing of goods:- The possible causes of perishing of goods:- 1. Physical destruction of goods. 2. Damage of goods in such a manner that they loose their commercial value. 3. Loss of goods by theft. 4. Lawful acquisition of goods by government.

35 Effect of perishing of goods Goods perishing before formation of the contract.- in case of specific goods such contract is void ab initio Goods perishing before formation of the contract.- in case of specific goods such contract is void ab initio as the performance of the contract is impossible due to destruction of subject matter. Goods perishing before the sale but after the agreement to sell.:- in case of specific goods the contract of sale becomes void and both parties are excused from the performance. (Sec.8) Goods perishing before the sale but after the agreement to sell.:- in case of specific goods the contract of sale becomes void and both parties are excused from the performance. (Sec.8)

36 Effect of perishing of goods… Effect of perishing of future goods.:- Sec.8 applies in this case also which says ‘where there is an agreement to sell specific goods, and subsequently the goods without any fault on the part of the seller or buyer perish or become 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.’ Effect of perishing of future goods.:- Sec.8 applies in this case also which says ‘where there is an agreement to sell specific goods, and subsequently the goods without any fault on the part of the seller or buyer perish or become 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.’

37 Transfer of Title by Person not the owner General rule – Only the Owner of goods can sell the goods General rule – Only the Owner of goods can sell the goods No one can give a better title than what he himself has. No one can give a better title than what he himself has. This rule is expressed by the maxim, ‘Nemo Dat Quod Non Habet‘ - no one can pass a better title than he himself possess. This rule is expressed by the maxim, ‘Nemo Dat Quod Non Habet‘ - no one can pass a better title than he himself possess. Thus, even a bonafide buyer who buys stolen goods from a thief or from a transferee from such thief can get no valid title to them since the thief has no title, nor he could give one to any transferee Thus, even a bonafide buyer who buys stolen goods from a thief or from a transferee from such thief can get no valid title to them since the thief has no title, nor he could give one to any transferee

38 Exceptions to the general rule 1. Sale by a mercantile agent 2. Sale by a joint owner 3. Sale by a person in possession under a voidable contract 4. Sale by a seller in possession of goods after sale Sale by a buyer in possession of goods Sale by a buyer in possession of goods 1. Sale by an unpaid seller 2. Exceptional cases under other Acts

39 Performance of the Contract of Sale The contract of sale of goods is to be performed. The contract of sale of goods is to be performed. Duties of the Seller and the Buyer. Duties of the Seller and the 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 (s.31). 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 (s.31). The seller has the duty of giving delivery of goods according to the (i) terms of the contract, and (ii) rules contained in the Act. The seller has the duty of giving delivery of goods according to the (i) terms of the contract, and (ii) rules contained in the Act.

40 Delivery. A voluntary transfer of possession from one person to another. A voluntary transfer of possession from one person to another. The 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. The 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. Therefore, any other act, in addition to transfer of physical possession, which the parties agree to treat as equivalent thereto, has the effect of delivery. Therefore, any other act, in addition to transfer of physical possession, which the parties agree to treat as equivalent thereto, has the effect of delivery. Actual delivery and Constructive delivery Actual delivery and Constructive delivery

41 Rights of an unpaid seller Meaning of an unpaid seller – Sec 45(1)(2) Meaning of an unpaid seller – Sec 45(1)(2) The seller of the goods is deemed to be an ‘unpaid seller’ - The seller of the goods is deemed to be an ‘unpaid seller’ - (a) When whole of the price has not been paid or tendered (a) When whole of the price has not been paid or tendered (b) When a bill of exchange or other negotiable instrument (such as cheque) has been received as conditional payment and it has been dishonoured [sec 45(1)] (b) When a bill of exchange or other negotiable instrument (such as cheque) has been received as conditional payment and it has been dishonoured [sec 45(1)]

42 Contd - The seller shall be called an unpaid seller even when only a small portion of the price remains to be paid. The seller shall be called an unpaid seller even when only a small portion of the price remains to be paid. It is for the non-payment of the price and not for other expenses that a seller is termed as an unpaid seller. It is for the non-payment of the price and not for other expenses that a seller is termed as an unpaid seller. Where the goods have been sold on credit, the seller cannot be called as an unpaid seller during the credit period unless the buyer becomes insolvent. On the expiry of credit period if the price remains unpaid, then only the seller will become an unpaid seller Where the goods have been sold on credit, the seller cannot be called as an unpaid seller during the credit period unless the buyer becomes insolvent. On the expiry of credit period if the price remains unpaid, then only the seller will become an unpaid seller

43 Contd - Where the full price has been tendered by the buyer and the seller refused to accept it, the seller cannot be called as an unpaid seller. Where the full price has been tendered by the buyer and the seller refused to accept it, the seller cannot be called as an unpaid seller.

44 Rights of an unpaid seller Against goods Against goods Against buyer personally Against buyer personally AGAINST GOODS AGAINST GOODS Where the property in goods has passed to the buyer Where the property in goods has not passed to the buyer

45 Contd - Where the property in goods has passed to the buyer Where the property in goods has passed to the buyer Right of lien Right of stoppage in transit Right of resale

46 Right of lien The right of lien means the right to retain the possession of the goods until the full price is received. The right of lien means the right to retain the possession of the goods until the full price is received. Circumstances under the right of lien can be exercised Circumstances under the right of lien can be exercised Where the goods have been sold without any stipulation to credit Where the goods have been sold without any stipulation to credit Where the goods have been sold on credit, but the term of credit has expired Where the goods have been sold on credit, but the term of credit has expired Where the buyer becomes insolvent Where the buyer becomes insolvent

47 Right of stoppage of goods in transit Right of stoppage in transit means the right of stopping the goods while they are in transit, to regain possession and to retain them till the full price is paid. Right of stoppage in transit means the right of stopping the goods while they are in transit, to regain possession and to retain them till the full price is paid. Conditions under which Right of stoppage in transit can be exercised Conditions under which Right of stoppage in transit can be exercised (i)Seller must have parted with the possession of goods,ie, the goods must not be in the possession of the seller (i)Seller must have parted with the possession of goods,ie, the goods must not be in the possession of the seller

48 Contd - (ii) the goods must be in course of transit (ii) the goods must be in course of transit (iii) buyer must have become insolvent (iii) buyer must have become insolvent

49 Right of resale An unpaid seller can resell the goods under the following circumstances: An unpaid seller can resell the goods under the following circumstances: (i) Where the goods are of a perishable nature (i) Where the goods are of a perishable nature (ii) Where the seller expressly reserves the right of resale if the buyer commits a default in making payment (ii) Where the seller expressly reserves the right of resale if the buyer commits a default in making payment (iii)Where the unpaid seller who has exercised his right of lien or stoppage in transit gives a notice to the buyer about his intention to resell and buyer does not pay or tender within a reasonable time. (iii)Where the unpaid seller who has exercised his right of lien or stoppage in transit gives a notice to the buyer about his intention to resell and buyer does not pay or tender within a reasonable time.

50 Contd - Where the property in goods has not passed to the buyer Where the property in goods has not passed to the buyer Withholding delivery LienStoppage in transit Resale

51 Contd - Against the buyer personally Against the buyer personally Suit for price Suit for damages Suit for interest

52 Contd - Buyer’s suits Buyer’s suits (a) Suit for damages for non-delivery of the goods (a) Suit for damages for non-delivery of the goods (b) suit for specific performance (b) suit for specific performance (c) Suit for breach of warranty (c) Suit for breach of warranty (d)Suit for interest (d)Suit for interest (e)Suit for damages for repudiation of contract by the seller before the due date. (e)Suit for damages for repudiation of contract by the seller before the due date.

53 Remedies for breach of contract of sale (1) seller’s suits (1) seller’s suits (a) Suit for price (a) Suit for price (b) Suit for damages for non acceptance of the goods (b) Suit for damages for non acceptance of the goods (c) Suit for damages for repudiation of contract by the buyer before the due date (c) Suit for damages for repudiation of contract by the buyer before the due date (d) Suit for interest. (d) Suit for interest.

54 Passing of Property in Goods in the Case of Foreign Trade. F.O.B. contracts. - This means that the property in goods passes to the buyer only after the goods have been loaded on board the ship, and accordingly, the risk attaches to the buyer only on shipment of goods. F.O.B. contracts. - This means that the property in goods passes to the buyer only after the goods have been loaded on board the ship, and accordingly, the risk attaches to the buyer only on shipment of goods. C. I. F contracts. - It is a contract for the sale of insured goods, lost or not lost, to be implemented by the transfer of certain documents. These documents are (i) Bill of lading; (ii) Insurance policy; (iii) Invoice; (iv) A certificate of origin. C. I. F contracts. - It is a contract for the sale of insured goods, lost or not lost, to be implemented by the transfer of certain documents. These documents are (i) Bill of lading; (ii) Insurance policy; (iii) Invoice; (iv) A certificate of origin. Ex-ship contracts. - Under this agreement the seller has to deliver the goods to the buyer at the port of destination. The price quotation will include all expenses up to the point of delivery of the goods at the port of destination. Ex-ship contracts. - Under this agreement the seller has to deliver the goods to the buyer at the port of destination. The price quotation will include all expenses up to the point of delivery of the goods at the port of destination.


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