UNIT 3
SALES OF GOODS ACT,1930
HISTORY
FORMATION OF CONTRACT OF SALE:
DEFINITION:
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'.
d) Sale of immovable property isn't covered under this act.
e) The consideration is Price.
f) A Contract of sale could also be in writing or by words .
g) All other essentials of a legitimate contract must be present .
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 | AGREEMENT TO SELL |
Ownership remains with the buyer | Ownership remains with the seller |
It is a executed contract | It is a executor contract |
Risk of loss falls on the buyer | Risk of loss falls on the seller |
Seller cannot re sell the goods | Seller can sell goods to third party |
It can be in case of existing and specific goods | It can be in case of future and unascertained goods |
In case of breach of a contract, seller can sue for the price of the goods | In case of breach of a contract, seller can sue only for damages not for the price |
The seller is only entitled to the ratable dividend of the price due if the buyer becomes insolvent | The seller may refuse to sell the goods to the buyer w/o payments if the buyer becomes insolvent |
Definition of GOODS under the Act
a) 'Goods' means all kinds of moveable property and includes stock and shares, growing crops, grass, and things attached to or forming a part of the land, which are agreed to be severed before sale or under the contract of sale.
b) Actionable claims and money aren't included within the definition of Goods .
c) Thus, goods include all kinds of moveable property aside from actionable claim or money. Example - goodwill, copyright, trademark, patents, water, gas, and electricity are all goods and should be the topic matter of a contract of sale.
d) The test is that if the property on shifting its situation, doesn't lose its character, the said property shall be movable and fall within the definition of Goods.
TYPES OF GOODS-
a) Existing goods
b) Future goods
c) Contingent goods
1. Existing goods:
Goods which are physically alive and which are in seller's ownership and/or possession, at the time of entering the contract of sale are called 'existing goods.' Where seller is that the owner, he has the overall property in them.
2. Future goods:
Goods to be manufactured, produced or acquired by the vendor after the making of the contract of sale are called 'future goods' [Sec. 2(6)]. These goods could also be either not yet alive or be alive but not yet acquired by the vendor . Ex:- A agrees to sell to B all the milk that his cow may yield during the approaching year. this is often a contract for the sale of future goods.
3. Contingent goods:
Though a kind of future goods, these are the Goods the acquisition of which by the vendor depends upon a contingency, which can or might not happen [Sec. 6 (2)].
Ex: - (a) A agrees to sell to B a selected rare painting provided he's ready to purchase it from its present owner. this is often a contract for the sale of contingent goods. (b) X agrees to sell to 25 bales of Egyptian cotton , provided the ship which is bringing them reaches the port safely. it's a contract for the sale of contingent goods. If the ship in sunk, the contract becomes void and therefore the seller isn't liable.
WHICH DOCUMENTS ARE CONSIDERED AS DOCUMENTS OF TITLE TO GOODS
A document of title to goods could also be described as any document used as proof of the possession or control of Goods , authorising or purporting to authorise, either by endorsement or by delivery, the possessor of the document to transfer or receive goods thereby represented.
The subsequent are documents of title to goods:
a) Bill of Lading;
b) Dock Warrant;
c) Warehouse keeper's Certificate;
d) Warfinger's Certificate;
e) Railway Receipt;
f) Warrant or order for the delivery of goods; etc.
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) 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.
b) It goes to the basis of the contract.
c) 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”.
a) It may be a stipulation collateral to the most purpose of the contract
b) It is of secondary importance
c) 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
CONDITION | WARRANTY |
A condition is a stipulation (in a contract), which is essential to the main purpose of the contract. | A warranty is a stipulation, which is only collateral or subsidiary to the main purpose of the contract. |
A breach of condition gives the aggrieved party a right to sue for damages as well as the right to repudiate the contract. | A breach of warranty gives only the right to sue for damages. The contract cannot be repudiated. |
A breach of condition may be treated as a breach of warranty in certain circumstances. | A breach of warranty cannot be treated as a breach of condition |
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.
RIGHTS OF UNPAID SELLER
UNPAID SELLER (SEC.45)
A seller of Goods is deemed to be an unpaid seller when:-
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.
CONDITIONS:
a) The term "seller" includes a person who is within the position of a seller, as, as an example , an agent of the vendor to whom the bill of lading has been endorsed or agent who has himself paid, or is directly liable for , the price.
b) The seller shall be called an unpaid seller even when only alittle portion of the worth remains to be unpaid.
c) It is for the non payment of the worth and not for other expenses that a seller is termed as an unpaid seller.
d) Where the complete price has been tendered by the customer and therefore the seller refused to simply accept it, the vendor can't be called as unpaid seller.
e) Where the Goods are sold on credit, the vendor can't be called as an unpaid seller. Unless -
f) If during the credit period seller becomes insolvent, or
g) On the expiry of the credit period, if the worth remains unpaid, Then, only the vendor will become an unpaid seller.
RIGHTS OF AN UNPAID SELLER
a) Against goods: Where the property in goods has passed to the buyer: Right of lien , right of stoppage in transit, right of resale
b) Against buyer personally : Where the property in goods has not passed to the buyer: Withholding delivery, Stoppage in transit, Resale
Right of lien (sec.47-49)
a) The right of lien means the proper to retain the possession of the Goods until the complete price is received.
b) Circumstances under the proper of lien are often exercised
c) Where the Goods are sold with none stipulation to credit
d) Where the Goods are sold on credit, but the term of credit has expired
e) Where the customer becomes insolvent
Right of stoppage of Goods in transit (sec.50-52)
a) 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.
b) 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 became 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 co-ordinating 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.
