Unit – 2

Special Contracts

2.1 Special Contracts

Bailment

Introduction

 According to Sec 148 of the Contract Act, 1872, ‘A bailment is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them.

The person delivering the goods is called the bailor, the person to whom they are delivered is called the bail and the transaction is called the bailment.

Essentials of Bailment

It is a delivery of movable goods by one person to another (not being his servant). According to Section 149 the delivery of goods may be actual or constructive.

The goods are delivered for some purpose. When they are delivered without any purpose there is no bailment as defined under Sec 148

The goods are delivered subject to the condition that when the purpose is accomplished the goods are to be returned in specie or disposed of according to the directions of the bailor, either in original form or in altered form.

Kinds of Bailment

There are five sorts of Bailment are as under

1) Gratuitous Bailment:

 A Bailment made with none Consideration for the benefit of the bailor or for the benefit of the bailee is named Gratuitous Bailment. In simple words A bailment with no consideration is Gratuitous bailment.

2) Non-Gratuitous Bailment:

 Non Gratuitous may be a bailment for reward. It's for the advantage of both the bailor and bailee.

3) Bailment for the benefit of the Bailor:

 During this case the bailor delivers his goods to a bailee for a secure custody with none benefit/ reward. It's called "the bailment for the advantage of the bailor".

4) Bailment for the exclusive advantage of the Bailee:

In this case Bailor delivers his goods to a bailee with none benefit for his use, it's called "the bailment for the exclusive benefit of the bailee"

5) Bailment for the benefit of the Bailor and Bailee:

In this case goods are delivered for consideration, both the bailor and bailee get benefit and hence it's called the bailment for the advantage of the bailor and bailee.

Duties and Rights of Bailor and Bailee

Duties of the Bailee-

a)  Duty to take reasonable care of goods delivered to him [Sec 151]

b) Duty not to make unauthorized use of goods entrusted to him [ sec 154]

c)  Duty not to mix goods bailed with his own goods [ Sec 155]

d)  Duty to return the goods [ Sec 165]

e)  Duty to deliver any accretion to the goods [Sec 163]

Duties of the Bailor

a)  Duty to disclose fault in the goods bailed [Sec 150]

b) Duty to repay necessary expenses in case of gratuitous Bailment [Sec 158] eg bailment of horse and expenses incurred towards feeding and medical care of the horse to keep it alive.

c)  Duty to repay any extraordinary expenses in case of non-gratuitous expenses

d)  Duty to indemnify bailee [Sec 164]

Rights of Bailee

a)  Enforcement of Bailor’s Duties.

b) Right to deliver goods to one of several joint owners.

c)  Right to deliver goods, in good faith, to bailor without title, without incurring any liability to the true owner.

d)  Right of Lien.

Rights of the Bailor

a)  Enforcement of Bailee’s Duties.

b) Right to terminate bailment if the bailee uses the goods wrongfully [ Sec 153]

c)  Right to demand return of the goods at any time in case of gratuitous bailment [Sec 159]

SOME IMPORTANT SECTION UNDER CONTRACT OF BAILMENT

BAILEE WHEN NOT LIABLE FOR LOSS, ETC., OF THING BAILED AS PER SECTION 152

 The bailee, within the absence of any special contract, isn't liable for the loss, destruction or deterioration of the thing bailed, if he has taken the quantity of care of it described in section 151.

TERMINATION OF BAILMENT BY BAILEE’S ACT INCONSISTENT WITH CONDITIONS AS PER SECTION 153

A contract of bailment is voidable at the choice of the bailor, if the bailee does any act with reference to the goods bailed, inconsistent with the conditions of the bailment.

Example:

 A lets to B, for hire, a horse for his own riding. B drives the horse in his carriage. This is, at the choice of A, a termination of the bailment. A lets to B, for hire, a horse for his own riding. B drives the horse in his carriage. This is, at the choice of A, a termination of the bailment."

LIABILITY OF BAILEE MAKING UNAUTHORISED USE OF GOODS BAILED AS PER SECTION 154

If the bail makes any use of the goods bailed which isn't consistent with the conditions of the bailment, he's susceptible to make compensation to the bailor for any damage arising to the goods from or during such use of them. —

Example

 (a) A lends a horse to B for his own riding only. B allows C, a member of his family, to ride the horse. C rides with care, but the horse accidentally falls and is injured. B is liable to make compensation to A for the injury done to the horse.

TERMINATION OF GRATUITOUS BAILMENT BY DEATH AS PER SECTION 162

A gratuitous bailment is terminated by the death either of the bailor or of the bailee.

Pledge

Introduction

According to Sec 172, Contract Act, 1872, ‘The bailment of goods for repayment of a debt or performance of a promise is called ‘pledge’. The Bailor in this case is called the pawnor, the bailee is called the Pawnee.

DIFFERENCE

Essential Features of a Valid Pledge

a)  Delivery of possession.

b) Delivery should be upon a contract.

c)  Delivery should be for the purpose of security.

d)  Delivery should be upon condition to return.

Lien

A lien is that the right to retain the lawful possession of another person's piece of property until the owner fulfills a duty to the person holding the property, like the payment of lawful charges for work done on the property. A mortgage may be a common lien.

In its most general meaning, this term includes every case during which real or personal estate is charged with the payment of any debt or duty. During a more limited sense it's defined to be a right of detaining the property of another until some claim is satisfied. The proper of lien generally arises by operation of law, but in some cases it's created by express contract.

Two kinds of Liens

There are two sorts of liens: particular and general. When an individual claims a right to retain property, in respect of cash or labor expended on such particular property, this is often a specific lien.

Liens may arise in three ways:

a)  By express contract.

b) From implied contract, as from general or particular usage of trade.

c)  By legal relation between the parties, which can be created in three ways:

When the law casts an obligation on a party to try and do a specific act and reciprocally that, to secure him payment, it gives him such lien; common carriers and inn keepers are among this number.

When goods are delivered to a tradesman or the other individual to expend his labor upon, he's entitled to detain those goods until he's remunerated for the labor which he so expends.

When goods are saved from the perils of the sea, the salvor may detain them until his claim for salvage is satisfied; but in no other case has the finder of goods a lien.

General liens arise in three ways:

a)  By the agreement of the parties.

b) By the overall usage of trade.

c)  By particular usage of trade.

 Concept between the Pledge and Lien

Pledge:

1) Creation of right: during a pledge, goods are bailed as a security for payment of debt or for performance of a promise.

2) Right to sell: It gives a right to sell.

3) Possession: It creates a right of security i.e. pledge of goods isn't lost by return of goods to the owner or by loss of possession.

4) Origin: Pledge is made by contract between the parties.

Lien:

1) There's no bailment of goods as security. It's only a creation of a right to possession within the hands of the bailee. It's a mere right of retainer.

2) It gives no right to sell

3) Lien is host by loss of possession

4) Lien is made by law or by express or implied contract.

A lien is simply a personal right. A pledge may be a far more valuable right than a mere lien. The difference lies there in , during a lien there's no power of sale or disposition of the goods, whereas during a pledge there's power to sell on default. A lien is simply a personal right of retention. A lien disappears when possession is lost and there's no right of sale. Sale on default is an event of pledge. A pledge is assignable.

A pledge is something between an easy lien and a mortgage. Within the case of alien there's no transfer of any interest. Within the case of a mortgage, mortgagee has an absolute interest within the property subject to a right of redemption. But within the case of a pledge, the pledgee has only a special property while the overall property therein remains within the pledgor.

Rights and Duties of Pawnor and Pawnee

DUTIES OF A PAWNOR

a)  Duty to repay the loan.

b) Duty to pay expenses in case of default.

 DUTIES OF A PAWNEE

a)  Duty not use of pledged goods.

b) Duty to return the goods.

 RIGHT OF PAWNOR

a)  Right to redeem the goods pledged.

b) Right to receive the increase.

RIGHT OF PAWNEE

a)  Right to retain the pledged goods.

b) Right to extra ordinary expenses.

c)  Right in case of default of the pawnor.

d)  Right to sell the goods.

SOME IMPORTANT SECTION UNDER THE CONTRACT OF PLEDGE

PLEDGE BY MERCANTILE AGENT AS PER SECTION 178

Where a mercantile agent is, with the consent of the owner, in possession of goods or the document of title to goods, any pledge made by him, when acting within the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the goods to form the same; as long as the pawnee acts in good faith and has not at the time of the pledge notice that the pawnor has not authority to pledge.

Explanation.—In this section, the expressions ‘mercantile agent’ and ‘documents of title’ shall have the meanings assigned to them within the Indian Sale of goods Act, 1930 (3 of 1930).]

PLEDGE BY PERSON IN POSSESSION UNDER VOIDABLE CONTRACT AS PER SECTION 178A

When the pawnor has obtained possession of the goods pledged by him under a contract voidable under section 19 or section 19A, but the contract has not been rescinded at the time of the pledge, the pawnee acquires an honest title to the goods, provided he acts in good faith and all of sudden of the pawnor’s defect of title.]

PLEDGE WHERE PAWNOR HAS ONLY A LIMITED INTEREST AS PER SECTION 179

Where an individual pledges goods during which he has only a limited interest, the pledge is valid to the extent of that interest.

Agency

Concept

Meaning & Definition of Agency

 “An agent is a person employed to do any act for another or to represent another in dealing with third persons. The person for whom such act is done or who is so represented is called the principal”.

a)  The person who delegates the authority is known as principal.

b) To whom the power is delegated is known as agent.

c)  The relationship that is created is known as agency.

d)  A person who act in place of another – Agent.

e)  The person on whose behalf he acts – Principal.

WHO MAY EMPLOY AGENT?

AS PER SECTION 183

Any person who is of the age of majority according to the law to which he is subject, and who is of sound mind, may employ an agent.

WHO MAY BE AN AGENT?

AS PER SECTION 184

 As between the principal and third person any person may become an agent, but no person who is not of the age of majority and of sound mind can become an agent, so as to be responsible to his principle according to the provisions in that behalf herein contained. —As between the principal and third person any person may become an agent, but no person who is not of the age of majority and of sound mind can become an agent, so as to be responsible to his principle according to the provisions in that behalf herein contained."

NOTE AS PER SECTION 185

Consideration not necessary.—No consideration is necessary to create an agency.

FEATURES OF THE CONTRACT OF AGENCY

a)  Principal is answerable to third parties for the acts of agent .

b) Consideration not necessary – Section 185 of the act clearly lays down , “ No consideration is necessary to create an agency”.

c)  Principal must be competent to employ an agent – Only a person who is competent to contract can employ an agent. (Major, Sound Mind ).

d)  Agent may not have contractual capacity – A minor or a person of unsound mind may act as an agent & bind the principal to the third persons.

TEST OF AGENCY

A person does not become an agent on behalf of another merely because he gives him advice in matters of business.

Every person who acts for another cannot be agent. Cobbler mending shoes of a man, servant rendering services for us – are not agents.

 To test whether a person is or not an agent

a)  The essential condition is that whether he is clothed with a necessary authority by another (principal) to bind him & make him (principal) answerable to the third persons & thus establishing a privity contract between that third person & the principal.

b) If this condition is satisfied then a person is considered as an agent.

CLASSIFICATION OF AGENTS

Special Agents – who is employed to do some particular act or represent his principal in some particular transaction? As soon as the act is performed the authority of agent comes to an end. E.g. An agent engaged to sell a house.

General Agent – who is employed to do all such acts which are connected with the business of trade of his employer. If principal limits authority secretly, he himself will be bound

Universal Agent – is one who is employed to all such act which a principal can lawfully do & can delegate. Agent has unlimited authority.

FROM THE POINT OF VIEW OF NATURE OF WORK TO BE PERFORMED:

1. Factors – is a mercantile agent to whom the possession of goods are given for the purpose of selling them. He usually sells the goods in own name. He can exercise a general right of lien on the goods delivered to him for balance of payment if any.

2. Auctioneer – is an agent who is appointed by the principal to sell the goods on his behalf at a public auction for a reward in form of commission. Eg reserve price

3. Broker – is an agent appointed by the principal for the purpose of selling or buying goods on his behalf. He do not have possession of goods nor he can contract in his own name. He bring seller & buyer together to bargain. He gets commission ( brokerage ).

4. Commission Agent – is a mercantile agent who is employed to buy & sell goods for his principal on best possible terms. He transact in his own name. He is entitled to commission. He may or may not have possession.

5. Del credere Agent – is one who guarantees to his principal, the performance of the financial obligation by party with whom he enters into a contract on principal behalf, in consideration of an extra commission. He becomes surety & become liable on the default of third party.

6. Banker – act as a mercantile agent on behalf of his customer when he collects cheques, drafts, bills & pay insurance premium & buy or sell securities.

Modes of Creation of Agency

By express agreement – authority is given to agent in written or by words of mouth. He can bind the principal to the third parties by his acts to the extent he is delegated with the authority.

By implied agreement

1. Agency by Estoppel – Where a person permit another to act on his behalf. Principal is estopped from denying his agent’s authority. E.g. A tell B in the presence of P that A is the agent of P. P does not contradict the statement. B enter into the contract with P on the belief that A is P’s agent. In such case P would be bound by the contract.  He is not the agent. He ceases to be an agent

2. Agency by holding out – Some positive conduct of the principal indicates that a particular person is his agent.

 P sends A to buy goods on credit from C. A buys goods on credit for himself & refuses to pay. C sue P. P cannot plead that A had no authority.

3. Agency by necessity – When an agency is created by the circumstances. The impossibility of getting the instructions from the principal is the basis of creation of agency by necessity.

 E.G. X sent some horses to Y through a railway company. But Y did not take the delivery of the horses at the destination with the result the railway company had to feed the horses. Held, the railway co. was an agent of necessity & could recover the amount spent on feeding the horses.

4. Agency by ratification – Ratification means subsequent adoption or acceptance by a person of an unauthorized act done by another on his behalf without any authority. X buys 5 bags of wheat on behalf of Y without his knowledge or authority. Y would be bound by the contract, if he ratify or accept the same. It can be expressed or implied.

Essentials of a valid ratification

1. Act must have been done as agent on behalf of principal identifiable – Only the person on whose behalf the act is done can ratify it. If the agent act in his own name, his act cannot be ratified by any other person. e.g. X was authorised by Y to buy wheat at certain price. X exceeded his authority & purchased wheat from Z at a higher price in his own name. He did not profess to buy wheat on behalf of Y. Subsequently Y ratified the act of X but later refused to take delivery of the wheat. Z sue Y. Held, the contract could not be ratified because X did not purport to act as an agent of Y.

2. The principal must be in existence. Eg company and promoters

3. The principal must be competent to ratify the act – must have contractual capacity. A minor cannot ratify the contract a contract on attaining the age of majority.

4. The principal must have the full knowledge of all the material facts – X bought certain goods for Y at the price greater than the market value in the name of Y. Y ratified the transaction without knowing the same ( high price ) . The ratification is invalid.

5. The principal must ratify the whole transaction.

6. Ratification must be made within reasonable time.

7. Act to be ratified must not be void or illegal.

 8. Ratification must be communicated.

Modes of Termination of Agency

TERMINATION OF AGENCY AS PER SECTION 201

An agency is terminated by the principal revoking his authority, or by the agent renouncing the business of the agency; or by the business of the agency being completed; or by either the principal or agent dying or becoming of unsound mind; or by the principal being adjudicated an insolvent under the provisions of any Act for the time being effective for the relief of insolvent debtors.

TERMINATION OF AGENCY, WHERE AGENT HAS AN INTEREST IN SUBJECT-MATTER AS PER SECTION 202

Where the agent has himself an interest within the property which forms the subject-matter of the agency, the agency cannot, within the absence of an express contract, be terminated to the prejudice of such interest.

EXAMPLE

 (a) A gives authority to B to sell A’s land, and to pay himself, out of the proceeds, the debts because of him from A. A cannot revoke this authority, nor can it's terminated by his insanity or death. (a) A gives authority to B to sell A’s land, and to pay himself, out of the proceeds, the debts because of him from A. A cannot revoke this authority, nor can it's terminated by his insanity or death."

a)  By act of parties

b) By agreement – mutual consent

c)  By revocation of authority by the principal – The principal can revoke the authority of an agent at any time before the authority has been exercised as to bind the principal.

d)  By renunciation by the agent – by giving reasonable notice.

e)  By performance of contract of agency.

f)    By death of principal or agent.

g)  By expiry of time – where agency is for fixed time period.

h)  By insolvency of the principal.

i)    By destruction of subject matter – agency was created to sell a house & house destroys.

j)    By becoming alien enemy – where principal & agent are from different countries.

DUTIES OF AN AGENT

a)  To follow principal’s directions – An agent must act within the scope of the authority conferred on him. An agent was instructed to insure goods. He failed to do so. The goods were destroyed. He was held liable to the extent of loss.

b) To follow the customs in the absence of instructions – B, a broker, in whose business, it is not the custom to sell on credit , sell goods of A on credit to C, whose credit at the time was very high. C, before payment, becomes insolvent. B must make good the loss to A.

c)  To conduct business with reasonable care skill & diligence – A, an agent for the sale of goods, having authority to sell on credit, sells to B on credit, without making the proper & usual enquires as to the solvency of B. B at the time of such sale, is insolvent. A must make compensation of his principal in respect of any loss thereby sustained.

d)  To keep & render accounts to principal when demanded.

e)  To communicate with principal.

f)    Not to deal on his own account – If an agent wants to deal on his own account, he must seek the consent of the principal first & must acquaint him with all the material facts. ( Purchase )

g)  Not to make secret profits ( Bribe )– Agency is a judiciary relation.

h)  To pay sum received – he can deduct his remuneration & all expenses incurred in conducting business.

RIGHTS OF AN AGENT

Right of retainer – The agent has a right to retain, out of any sums received all money due to him in respect of remuneration, advance made, expenses incurred in conducting business.

Right to receive remuneration if he has completed his task. He is not entitled to any remuneration for part transaction.

Right of lien – he has right to exercise particular lien over the goods, paper, property until the amount due to him for commission, expenses has been paid.

Rights and Duties of Principle and Agent

DUTIES & RIGHTS OF THE PRINCIPAL

a)  To pay remuneration to agent.

b) To recover compensation for breach of duty by the agent.

c)  To forfeit agent’s remuneration where he is guilty of misconduct.

d)  To receive any extra profit made by agent.

e)  To enforce the various duties of the agent.

f)    To receive all sums.

SOME IMPORTANT SECTION UNDER CONTRACT OF AGENCY

WHEN PRINCIPAL MAY REVOKE AGENT’S AUTHORITY AS PER SECTION 203

The principal may, save as is otherwise provided by the last preceding section, revoke the authority given to his agent at any time before the authority has been exercised so on bind the principal.

REVOCATION WHERE AUTHORITY HAS BEEN PARTLY EXERCISED.AS PER SECTION 204

The principal cannot revoke the authority given to his agent after the authority has been partly exercised; thus far as regards such acts and obligations as arise from acts already wiped out the agency.

EXAMPLE

(a) A authorizes B to buy 1,000 bales of catch on account of A and to buy it out of A’s moneys remaining in B’s hands. B buys 1,000 bales of cotton in his own name, so on make himself personally responsible for the value. A cannot revoke B’s authority thus far as regards payment for the cotton

COMPENSATION FOR REVOCATION BY PRINCIPAL, OR RENUNCIATION BY AGENT AS PER SECTION 205

Where there's an express or implied contract that the agency should be continued for any period of your time, the principal must make compensation to the agent, or the agent to the principal, because the case could also be , for any previous revocation or renunciation of the agency without sufficient cause.

Notice of revocation or renunciation AS PER SECTION 206

Reasonable notice must tend of such revocation or renunciation, otherwise the damage thereby resulting to the principal or the agent, because the case could also be, must be made good to the one by the other.

REVOCATION AND RENUNCIATION COULD ALSO BE EXPRESSED OR IMPLIED AS PER SECTION 207

Revocation or renunciation could also be expressed or could also be implied within the conduct of that principal or agent respectively. —Revocation or renunciation could also be expressed or could also be implied within the conduct of that principal or agent respectively."

 EXAMPLE:

 A empowers B to let A’s house. Afterwards A lets it himself. This is an implied revocation of B’s authority. A empowers B to let A’s house. Afterwards A lets it himself. This is an implied revocation of B’s authority."

WHEN TERMINATION OF AGENT’S AUTHORITY TAKES EFFECT ON AGENT, AND ON THIRD PERSONS.AS PER SECTION 208

The termination of the authority of an agent doesn't , thus far as regards the agent, become before it becomes known to him, or, thus far as regards third persons, before it becomes known to them.

EXAMPLE

 (a) A directs B to sell goods for him, and agrees to offer B five per cent. Commission on the worth fetched by the goods an afterwards by letter, revokes B’s authority. B after the letter is shipped, but before he receives it, sells the goods for 100 rupees. The sale is binding on A, and B is entitled to 5 rupees as his commission.

AGENT’S DUTY ON TERMINATION OF AGENCY BY PRINCIPAL’S DEATH OR INSANITY.AS PER SECTION 209

When workplace is terminated by the principal dying or becoming of unsound mind, the agent is sure to take, on behalf of the representatives of his late principal, all reasonable steps for the protection and preservation of the interests entrusted to him.

2.2 The Sales of Goods Act,1930

Contract of Sale

HISTORY

a)     Sale of Goods act was enacted in 1930.

b)    Borrowed from English Sales of Goods Act, 1893.

c)     Came into force in July 01, 1930.

d)    Prior to the act, the law of sale of Goods was contained in chapter VII of the Indian contract act, 1872.

e)     It extends to whole India except J& K.

Meaning

As per Sec 4(1) of the Indian Sale of Goods Act, 1930 defines the contract of sale of Goods within the following manner: “A contract of sale of Goods may be a contract whereby the vendor transfers or agrees to transfer the property in goods to the customer for a price”.

ESSENTIALS OF CONTRACT OF SALE

From the above definition, the subsequent essentials of a contract of sale may by noted:

a)     There must be a minimum of two parties

b)    Transfer or Agreement to transfer the ownership of Goods.

c)     The material of the contract must necessarily be 'goods'. Sale of immovable property isn't covered under this act.

d)    The consideration is Price.

e)     A Contract of sale could also be in writing or by words.

f)       All other essentials of a legitimate contract must be present.

Difference between Sale and Agreement to Sell-

A. SALE

B. AN AGREEMENT TO SALE

 Where the vendor transfers the ownership rights to the customer immediately on making the contract, it's the contract of sale, but where the ownership rights are to expire some future date upon the fulfillment of certain conditions then it's called an agreement to sell.

DISTINGUISHED BETWEEN “SALE” AND “AGREEMENT TO SELL”

 SALE:

a)     It may be a contract where the ownership within the goods is transferred by seller to the customer immediately at the conclusion contract. Thus, properly speaking, sale takes place when there's a transfer of property in goods from the vendor to the customer. a purchase is an executed contract.

b)    It must be noted here that the payment of price is immaterial to the transfer of property in goods.

c)     Ex - A sells his Yamaha Motor Bicycle to B for Rs. 10,000. it's a purchase since the ownership of the motorcycle has been transferred from A to B.

AGREEMENT TO SALE

a)     It may be a contract of sale where the transfer of property in goods is to require place at a future date or subject to some condition thereafter to be fulfilled.

b)    Ex- A agreed to shop for from B a particular quantity of nitrate of soda. The ship carrying the nitrate of soda was yet to arrive. this is often an agreement to sale. during this case, the ownership of nitrate of soda is to be to transferred to A on the arrival of the ship containing the required goods (i.e. nitrate of soda)

c)     On 1st March 1998, A agreed to sell his car to B for Rs. 80,000. it had been agreed between themselves that the ownership of the car will transfer to B on 31st March 1998 when the car is got registered in Bs name. it's an agreement to sell and it'll become sale on 31st March when the car is registered in the name of B. Other points of distinction between a sale and an agreement to sell are:

DIFFERENCE BETWEEN SALE AND AGREEMENT TO SALE

Key Takeaways:

2.3 Conditions and Warranties

MEANING OF CONDITION

Sec 12(2) of Sales of Goods Act, 1930 has defined Condition as: “A condition may be a stipulation essential to the most purpose of the contract, the breach of which provides rise to a right to treat the contract as repudiated”.

• A condition may be a stipulation –

 (a) which is important to the most purpose of the contract

 (b) the breach of which provides the aggrieved party a right to terminate the contract.

• It goes to the basis of the contract.

• Its non-fulfillment upsets the very basis of the contract.

Example -

By charter party (a contract by which a ship is hired for the carriage of goods), it had been agreed that ship m of 420 tons “now in port of Amsterdam” should proceed direct to new port to load a cargo. Actually, at the time of the contract the ship wasn't in the port of Amsterdam and when the ship reached Newport, the charterer refused to load. Held, the words “now within the port of Amsterdam” amounted to a condition, the breach of which entitled the charterer to repudiate the contract.

WARRANTY

Sec 12(3) of Sale of Goods Act, 1930 has defined Warranty as: “A warranty is a stipulation collateral to the most purpose of the contract, the breach of which provides rise to only claim for damages but to not a right to reject the Goods and treat the contract as repudiated”.

• It may be a stipulation collateral to the most purpose of the contract

• It is of secondary importance

• If there's a breach of a guaranty, the aggrieved party can only claim damages and it's no right to treat the contract as repudiated.

DISTINCTION BETWEEN CONDITION AND WARRANTY

EXPRESS AND IMPLIED CONDITIONS AND WARRANTIES (TYPES)

a)     Conditions and Warranties could also be either express or implied.

b)    They are said to be "express" once they are expressly provided by the parties.

c)     They are said to be 'implied' when the law deems their existence in the contract even without their actually having been put in the contract. Sec (14 to17)

IMPLIED CONDITIONS:

a)     Conditions on title [Sec.14 (a)] [Rowland v. Divall,(1923)]

b)    Sale by description [Sec.15] [Bowes v.shand,(1877)]

c)     Condition on quality or fitness. [Sec.16 (1)]

d)    Conditions on Merchantability [Sec.16 (2)] [R.S.Thakur v. H.G.E. corp., A.I.R.(1971)]

e)     Conditions implied by custom [Sec. 16(3)].

f)       Sale by Sample (Sec.17)

g)    Condition on wholesomeness.

h)     Warranty of Quiet possession-Sec.14 (6)

i)       Warranty against encumbrances-Sec.14(c)

j)       Warranty to disclose dangerous natures of Goods.

k)     Warranty on quality or fitness by usage of trade – Sec.16 (4).

DOCTRINE OF PRINCIPLE

a)     Caveat Emptor may be fundamentals of the law of sale of Goods

b)    It means "Caution Buyer", i.e. "Let the customer beware".

c)     It is that the duty of the customer to take care while purchasing goods of his requirement and within the absence of the enquiry from the customer, the vendor isn't sure to disclose every defect within the goods of which he could also be cognizant.

 EXCEPTIONS TO THE DOCTRINE OF principle (SEC16)

a)     In case of misrepresentation by the vendor.

b)    In case of concealment of latent defect.

c)     In case of sale by description.

d)    In case of sale by sample.

e)     In case of sale by sample and outline.

f)       Fitness for a specific purpose.

g)    Merchantable quality.

PASSING / TRANSFER OF PROPERTY

a)     Transfer of property in goods from the vendor to the customer is that the main object of a contract of sale.

b)    “property in goods” means the ownership of Goods.

c)     An article may belong to A although it's going to not be in his possession. B could also be in possession of that article although he's not its owner.

d)    It is vital to understand the precise moment of your time at which the property in goods passes from the vendor to the customer for the subsequent reasons.

e)     Significance – Time of transfer of ownership of Goods decides various rights and liabilities of the vendor and buyer.

f)       Risk – Owner in touch the danger and not the one that merely has the possession.

g)    Action against third party – Owner can take action and not the one that merely has possession.

Key Takeaways:

2.4 Transfer of Ownership in Goods including Sale by Non-Owners

There are three stages in the recital of a convention of auction of commodities by a vendor. Viz.

Transfer of assets in goods from the seller to buyer is the main object of a contract of sale. The possession of commodities whereas ownership of the goods refers to the custody or control of goods is known as Transfer of Assets. The assets in the commodities goes by the retailer to the purchaser for the subsequent reasons

Passing of Property

The key systems for ascertaining when the property in commodities passes to the purchaser are as follows:

These rules are follows: -

a. Passing of goods at the time of agreement - Where there is an unconditional agreement for the auction of specific commodities in a deliverable state, the property in the goods passes to the buyer when the contract is made even though the payment of the price or time of delivery of goods is made or not made.

 A state that the buyer would under the contract be bound to take delivery of the goods is known as Deliverance Sec 2(3).

2.  Passing of property delayed beyond the date of the contract: - Sec21

(a)    Goods not in a deliverable state: - where there is a contract of sale for specific goods not in a deliverable state in that case the property in the goods passes to the buyer when the seller puts the goods into deliverable state.

(b)    When the price of goods is to be ascertained by weighting Sec 22: - Where there is a contract of sale of goods in a deliverable state but the seller is bound to weight measure or test for determining price, the property does not pass until, such act is done and the buyer has notice, thereof.

3.  Unascertained goods: - Sec 23: - 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. Sec 18. Sec 23(1) provides that where an agreement for sale of ascertained commodities by depiction and commodities of that portrayal and in a deliverable state are unconditionally appropriated to the contract, the assets in the commodities there upon passes to the purchaser.

‘Ascertainment’ is the process by which the goods answering the description are identified and a part. It is a unilateral act of the seller, i.e., be along may set a part of goods.

‘Appropriation’ involves selection of goods with the intention of using them with the mutual consent of the seller and the buyer, the appropriation must be unconditional when the seller does not reserve to himself the right of disposal of goods. If the contract is unvoiced as to the assets which is suitable for the commodities the party who under the contract is first to act is the one who appropriates.

If the buyer tells the seller to send the goods by some mode of carriage, he is deemed to have given his assent in advance to the subsequent appropriation by the seller of the goods.

Key takeaways:

2.5   Performance of Contract of Sale

Performance of contract of sale means as regards the seller, delivery of the goods to the buyer, and as regards the buyer, acceptance of the delivery of the goods and imbursement for them, in, accord by means of the conditions of the Contract of Sale. Sec. (31).

 A contract of sale always involves reciprocal promises.

a)    Seller promises to deliver the goods.

b)   Buyer promises to accept the goods any pay for it.

In the absence of the contract, they are performed simultaneously and each party should be ready and willing to perform his promise.

Key takeaways:

2.6   Unpaid Seller

Rights of Unpaid Seller against the goods and the buyer

Meaning

A seller of Goods is deemed to be an unpaid seller when-

CONDITIONS:

RIGHTS OF AN UNPAID SELLER

Right of lien (sec.47-49)

Right of stoppage of Goods in transit (sec.50-52)

• Right of stoppage in transit means the proper of stopping the Goods while they're in transit, to regain possession and to retain them till the complete price is paid.

• Conditions under which Right of stoppage in transit are often exercised

 (i) Seller must have parted with the possession of Goods,ie, the Goods must not be within the possession of the vendor

 (ii) The goods must be in course of transit

 (iii) buyer must become insolvent

Right of resale (sec.54)

An unpaid seller can resell the Goods under the subsequent circumstances:

 Where the Goods are of a perishable nature

i. Where the vendor expressly reserves the proper of resale if the customer commits a default in making payment

ii. Where the unpaid seller who has exercised his right of lien or stoppage in transit gives a notice to the customer about his intention to resell and buyer doesn't pay or tender within an inexpensive time.

REMEDIAL MEASURES:

Remedies for Breach of Condition and Breach of Warranty

As has already appeared (52), in the case of a breach of warranty, the injured party is entitled to damages, whereas in the case of a breach of condition, he has the alternative of treating the contract as being completely broken by non-performance.

The fact that the buyer has resold the goods does not necessarily preclude him from exercising his right to reject them for breach of condition if the inspection and rejection take place within a reasonable time.

The injured party may, however, elect to treat a breach of condition as merely a breach of warranty.

The Sale of Goods Act (Ont. s. 13; U.K. s. 11) provides: 13-(1) Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the condition, or may elect to treat the breach of such condition as a breach of warranty, and not as a ground for treating the contract as repudiated.

In this section the word "or" must be read as a conjunction coordinating two phrases which are equivalent one to the other. The meaning seems reasonably plain, namely, that the injured party, instead of insisting on his right to be discharged on account of the other party's breach of condition, and to reject the goods, may waive this right, that is, may content himself with his right of action for damages as on a breach of warranty. Ewart (Waiver Distributed, pp. 148-150) criticizes the wording of the section on the ground that it seems to allow an alternative between waiving the condition (that is treating the condition as non-existent) and treating the breach of condition as a breach of warranty, and doubtless the section would be improved if the word "and" were substituted for "or," or if the words "may waive the condition or" were omitted.

Under a contract for the sale of goods to be delivered within a certain period of time. the buyer's right to require delivery within that period may be waived even after that period has expired; but it would seem that where the contract is within the Statute of Frauds (Sale of Goods Act, Ont. s. 6; U. K. s. 4), the waiver must be evidenced by writing.

Key takeaways:

a)  The whole of the worth has not been paid or tendered;

b) A bill of exchange or other legal document has been received as a conditional payment, and therefore the condition on which it had been received has not been fulfilled by reason of the dishonor of the instrument or otherwise.

References:

1.Commercial Law by John. A. Chamberlain.

2. Business Law by B.B. Dam.

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