UNIT – 1

INDIAN CONTRACT ACT, 1872 PART 1

1.1 LAW OF CONTRACT

INTRODUCTION

The Indian Contract Act, 1872 prescribes the law regarding contracts in India and is that the key act regulating Indian law.

The Act relies on the principles of English Common Law. It’s applicable to all or any the states of India. It determines the circumstances during which promises made by the parties to a contract shall be legally binding.

Under Section 2(h), the Indian Contract Act defines a contract as an agreement which is enforceable by law.

OBJECTIVE OF THE ACT

The purpose of the Contract Act is to make sure that the rights and obligations arising out of a contract are honored which legal remedies are made available to an aggrieved party against the party failing to honor a part of agreement. The Indian Contract Act makes it obligatory that this is often done and compels the defaulters to honor their commitments.

EXTENT AND COMMENCEMENT

• It extends to the entire of India except the State of Jammu and Kashmir
• It came into force on the primary day of September, 1872.
• The sale of goods was repealed from this Indian Contract Act in 1930. Contracts regarding partnership were repealed in 1932.

DEVELOPMENT

The Act as enacted originally had 266 Sections, it had wide scope

• General Principles of Law of Contract – Sections 01 to 75
• Contract regarding Sale of goods – Sections 76 to 123
• Special Contracts- Indemnity, Guarantee, Bailment & Pledge and Agency – Sections 124 to 238
• Contracts concerning Partnership – Sections 239 to 266

At present the Indian Contract Act could also be divided into two parts:

• Part 1: deals with the overall Principles of Law of Contract Sections 1 to 75
• Part 2: deals with Special sorts of Contracts like Contract of Indemnity and Guarantee and Contract of Bailment and Pledge

STEPS INVOLVED WITHIN THE CONTRACT

1. Proposal and its communication

2. Acceptance of proposal and its communication

3. Agreement by mutual promises

4. Contract

5. Performance of Contract

A. DEFINATION

CONTRACT

The Indian Contract Act, 1872 defines the term “Contract” under its section 2 (h) as “An agreement enforceable by law”. In other words, we will say that a contract is anything that's an agreement and enforceable by the law of the land.

This definition has two major elements in it viz – “agreement” and “enforceable by law”. So as to know a contract in the light of The Indian Contract Act, 1872 we need to define and explain these two pivots within the definition of a contract.

AGREEMENT

The Indian Contract Act, 1872 defines what we mean by “Agreement”. In its section 2 (e), the Act defines the term agreement as “every promise and each set of promises, forming the consideration for each other”.

Now that we know how the Act defines the term “agreement”, there may be some ambiguity within the definition of the term promise.

An agreement enforceable by law could also be a contract.

1.2 DIFFERENCE BETWEEN AGREEMENT AND CONTRACT

Let us see how a contract and agreement are different from one another. This can assist you summarize and make a map of all the important concepts that you simply have understood.

Contract Agreement

B. ESSENTIAL REQUIREMENTS OF A VALID CONTRACT

• Offer and its acceptance
• Free consent of both parties
• Mutual and lawful consideration for agreement
• It should be enforceable by law. Hence, intention should be to make legal relationship. Agreements of social or domestic nature aren't contracts
• Parties should be competent to contract
• Object should be lawful
• Certainty and possibility of performance
• Contract shouldn't be declared as void under Contract Act or the other law

C. TYPES/KINDS / CLASSIFICATION OF CONTRACTS

1. On the idea of validity

a)     Valid contract: An agreement which has all the essential elements of a contract is named a legitimate contract. a legitimate contract are often enforced by law.

b)    Void contract [Section 2(g)]: A void contract may be a contract which ceases to be enforceable by law. A contract when originally entered into could also be valid and binding on the parties. It's going to subsequently become void. -- There are many judgments which have stated that where any crime has been converted into a "Source of Profit" or if any act to be done under any contract is against "Public Policy" under any contract— than that contract itself can't be enforced under the law-

c)     Voidable contract [Section 2(i)]: An agreement which is enforceable by law at the option of 1 or more of the parties thereto, but not at the option of other or others, is a voidable contract. If the essential element of free consent is missing in a contract, the law confers right on the aggrieved party either to reject the contract or to accept it. However, the contract continues to be good and enforceable unless it's repudiated by the aggrieved party.

d)    Illegal contract: A contract is against the law if it's forbidden by law; or is of such nature that, if permitted, would defeat the provisions of any law or is fraudulent; or involves or implies injury to an individual or property of another, or court regards it as immoral or against public policy. These agreements are punishable by law. These are void-ab-initio.

“All illegal agreements are void agreements but all void agreements aren't illegal.

e)     Unenforceable contract: Where a contract is good in substance but due to some technical defect can't be enforced by law is termed unenforceable contract. These contracts are neither void nor voidable.

2. On the idea of formation

a)     Express contract: Where the terms of the contract are expressly prescribed in words (written or spoken) at the time of formation, the contract is claimed to be express contract

b)    Implied contract: An implied contract is one which is inferred from the acts or conduct of the parties or from the circumstances of the cases. Where a proposal or acceptance is formed otherwise than in words, promise is claimed to be implied.

c)     Quasi contract: A contract is made by law. Thus, quasi contracts are strictly not contracting as there's no intention of parties to enter into a contract. It's legal obligation which is imposed on a celebration who is required to perform it. A contract is predicated on the principle that an individual shall not be allowed to complement himself at the expense of another.

3. On the idea of Performance

a)     Unilateral contract: A agreement is one during which just one party has got to perform his obligation at the time of the formation of the contract, the opposite party having fulfilled his obligation at the time of the contract or before the contract comes into existence.

b)    Bilateral contract: A contract is one during which the requirement on both the parties to the contract is outstanding at the time of the formation of the contract. Bilateral contracts also are referred to as contracts with executory consideration.

4. On the bases of execution

a)     Executed contract: An executed contract is one during which both the parties have performed their respective obligation.

b)    Executory contract: An executory contract is one where one or both the parties to the contract have still to perform their obligations in future. Thus, a contract which is partially performed or wholly unperformed is termed as executory contract.

5. Other Contracts

Besides the above said classification, there are other kinds of contract also. Contingent Contract is one such type.

1.3 PROPOSAL AND ACCEPTANCE:

DEFINITION

PROPOSAL SECTION 2(A):

When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.

• May be express or implied
• May be positive or negative
• Must shall create legal relationship
• Terms of offer must be sure
• May be made to a selected person or class of persons or to anybody within the world at large
• Must be communicated to the offeree
• Must be made with a view to get the assent
• May be conditional

ACCEPTANCE SECTION 2(B):

• When the person to whom the proposal is made, signifies his assent there to, the proposal is said to be accepted.

A. ESSENTIALS OF A VALID PROPOSAL AND ACCEPTANCE

RULES OF VALID OFFER

Here are some of the few essentials that make the offer valid.

1] Offer must create Legal Relations

The offer must cause a contract that makes legal relations and legal consequences just in case of non-performance. So, a social contract which doesn't create legal relations won't be a valid offer. Say for instance a dinner invitation extended by A to B isn't a valid offer.

2] Offer must be clear, not vague

The terms of the offer or proposal should be very clear and definite. If the terms are vague or unclear, it'll not amount to a valid offer. See example the following offer – A offers to sell B fruits worth Rs 5000/-. This is often not a valid offer since what sorts of fruits or their specific quantities aren't mentioned.

3] Offer must be communicated to the Offeree

For a proposal to be completed it must be clearly communicated to the offeree. No offeree can accept the proposal without knowledge of the offer. It makes clear that acceptance in ignorance of the proposal doesn't amount to acceptance.

4] Offer could also be Conditional

While acceptance can't be conditional, an offer could be conditional. The offeror can make the offer subject to any terms or conditions he deems necessary. So, A offers to sell goods to B if he makes half the payment in advance. Now B can accept these conditions or make a counteroffer.

5] Offer cannot contain a Negative Condition

The non-compliance of any terms of the offer cannot result in automatic acceptance of the offer. Hence it cannot say that if acceptance isn't communicated by a particular time it'll be considered as accepted. Example: A offers to sell his cow to B for 5000/-. If the offer isn't rejected by Monday it'll be considered as accepted. This is often not a valid offer.

6] Offer is often specific or general

As we saw earlier the offer are often to at least one or more specific parties. Or the offer might be to the public generally.

7] Offer could also be Expressed or Implied

The offeror can make an offer through words or maybe by his conduct.

An offer which is formed via words, whether such words are written or spoken (oral contract) we call it an express contractand when an offer is formed through the conduct and therefore the actions of the offeror it's an implied contract.

TERMINATION OF OFFER

• By notice of revocation
• By lapse of your time
• By failure of the acceptor to fulfill a condition precedent to acceptance
• By failure to simply accept consistent with the mode prescribed
• By death or insanity of the offeror
• By rejection

RULES FOR VALID ACCEPTANCE

• Acceptance must be absolute and unconditional
• Acceptance by usual mode as desired by the offer or
• Acceptance cannot precede the offer
• Acceptance could also be express or implied
• Acceptance must tend within an inexpensive time
• Acceptance must be by an ascertained person (offeree)
• Offer can't be accepted after it had been rejected unless it's renewed
• Silence doesn't imply acceptance
• Acceptance must be made before the lapse or revocation of the offer
• Acceptance of offer means acceptance of all terms attached to the offer
• An agreement not enforceable by law is claimed to be void.

B. COUNTER OFFER

MEANING

A counteroffer may be a response given to an initial offer. A counteroffer means the initial offer was rejected and replaced with another one. The counteroffer gives the first offerer three options: accept the counteroffer, reject it, or make another offer.

There is typically no binding contract between the parties involved until one accepts the other's offer. Counteroffers are prevalent in many types of business negotiations, transactions, and private deals between two individuals. You'll find them in land deals, employment negotiations, and car sales.

UNDERSTANDING COUNTEROFFERS

When two parties get to negotiate a transaction or deal, one may put an offer on the table. A counteroffer may be a reply thereto original offer and should change the terms of the deal including the price. The price is also greater or but what was originally quoted depending on who makes it. So, if the person receiving the first offer doesn't accept or reject it, he may attempt to renegotiate with a counteroffer.

DEFINATION

An offer made in response to a previous offer by the other party during negotiations for a final contract. Making a counter offer automatically rejects the prior offer, and requires an acceptance under the terms of the counter offer or there's no contract.

Example:

Susan Seller offers to sell her house for $150,000, to be paid in 60 days; Bruce Buyer receives the offer and provides Seller a counter offer of $140,000, payable in 45 days. The first offer is dead, despite the shorter time for payment since the value is lower. Seller then can prefer to accept at $140,000, counter again at some compromise price, reject the counter offer, or let it expire.

There is no limit to the amount of times each party can counter during negotiations. When countering back and forth, each offer should present a price but the previous offer. This conveys to the seller that the customer is nearing his final offer.

Neither party is obligated to settle until they agree on a contract, which occurs once the counteroffer is accepted. This is often when a binding contract is made . The contract is enforceable against either party. The counteroffer voids a previous offer, and therefore the entity that presented that provide is not any longer legally liable for it.

[Important: When negotiating, never let emotions affect negotiations—instead, ask questions, do your research, and invite additional time to think about the new offer.]

TERMS OF THE COUNTEROFFER

A counteroffer may include explanations of the terms of the offer or requests for supplementary information. Finalizing counteroffer negotiations requires the customer and offeror to simply accept the terms with none additional conditions or modifications.

A counteroffer is usually conditional. When the seller receives a low offer, he can counter with a price he feels is cheap. The customer can either accept that provide or counter again. The vendor can counter the offer. The person receiving the counteroffer doesn't need to accept it.

KEY TAKEAWAYS

• A counteroffer is that the response given to an offer, meaning the original offer was rejected and replaced with another one.

• Counteroffers give the first offerer three options: accept it, reject it, or make another offer and continue negotiations.

• Parties aren't obligated by a contract until one accepts the other's offer.

• Counteroffers are common in business negotiations and transactions, like assets deals, car sales, and employment contracts.

1.4 CAPACITIES OF PARTIES/ CONTRACT (UNDER SECTION 10 -12)

DEFINATION

The parties who enter into a contract must have the capacity to do the contract.

“Capacity “here means competence of the parties to enter into a legitimate contract. According Sec 10, an agreement becomes a contract if it's entered into between the parties who are competent to contract.

According Sec .11, every person is competent to contract who

• Is of the age of majority according to the law to which he's subject
• Is of sound mind
• Is not qualified from contracting by any law to which he's subject.

Thus Sec. 11 declares following persons to be incompetent to contract:

1. Minors

2. Persons of unsound mind

3. Persons disqualified by any law to which they're subject.

1. MINORS

According to Sec 3 of the Indian Majority Act, 1875, a minor is a person who has not completed eighteen years of age.

In following cases he attains majority after 21 years aged

• Where a guardian of minor person or property has been appointed under guardians and wards act,1890
• Where the superintendence of minor’s property is assumed by a court of wards.

The position of minor as regards his agreements could also be summed up as under:

• An agreement with or by a minor is void
• He are often a promisee or beneficiary.
• His agreement can't be ratified by him on attain the age of majority.
• If he has received any benefit under a void agreement, he can't be asked to compensate or buy it.

2. PERSONS OF UNSOUND MIND

One of the essential conditions of competency of parties to a contract is that they ought to be of sound mind.

Sec 12 lays down the soundness of mind “A person is said to be of sound mind for the purpose of making the contract if, at the time when he makes it, he's capable of understanding it and of forming a rational judgment as to its effect upon his interests.

A person, who is usually of unsound mind but occasionally of sound mind, may make a contract when he's of sound mind.

A person, who is typically of sound mind but occasionally of unsound mind, might not make a contract when he's of unsound mind

E.g.: an individual may be a lunatic, who is at intervals of sound mind, may contract during those intervals.

Soundness of minds depends on two facts:

• His capacity to know the contents of the business concerned,
• His ability to make a rational judgment on its effect on his interests.
• If an individual is incapable of both, he suffers from unsoundness of mind.

CONTRACTS OF PERSONS OF UNSOUND MIND

1. Lunatics: A lunatic may be a one that is mentally deranged due to some strain or personal experience. He suffers from intermittent intervals of sanity and insanity. He can enter contracts during the amount when he's of sound mind.
2. Idiots: An Idiot may be a one that has completely lost his mental powers. He doesn't exhibit understanding of even ordinary matters. Idiocy is permanent lunacy denotes periodical insanity with lucid intervals. An agreement of an idiot like that of minor is void.
3. Drunken or intoxicated persons: A drunken or intoxicated person suffers from temporary incapacity to contract i.e. at the time when he's so drunk or intoxicated that he's incapable of forming a rational judgment. The position of a drunken or intoxicated person is analogous thereto of a lunatic.

3. PERSONS DISQUALIFIED BY ANY LAW TO WHICH THEY'RE SUBJECT

• Alien Enemies: An Alien (the subject of foreign state) is an individual who isn't subject of the Republic of India. He could also be Alien friend of Alien enemy.
• Foreign sovereigns, their diplomatic staff and accredited representativesof foreign states: they need some special privileges and usually can't be sued unless of their own undergo the jurisdiction of our law courts. But an Indian citizen has got to obtain a previous sanction of central govt. So as to sue them in our law courts.
• Corporations: an organization is a man-made person created by law, having a legal existence aside from its members. It may be available to existence by a legislative act of legislature or by registration under the companies’ Act, 1956.
• Insolvents: When a debtor is adjudged insolvent, his property vests within the official receiver or official assignee. As such insolvent is bereft of his power to deal therein property.
• Convicts: A convict when undergoing imprisonment is incapable of getting into contract.

1.5 CONSENT AND FREE CONSENT (AS PER SECTION 13, 14 -18, 39, 53, 55, 66)

CONSENT AS PER UNDER SECTION 13

INTRODUCTION

Sec 10 of contract act states “all agreements are contract, if they're made by the free consent of parties.” in order to form a valid contract it's necessary that there should be a (a) consent & (b) Free consent. For the formation of a contract the parties should either have assented, or be deemed to possess assented, to an equivalent thing within the same sense it's called consensus ad idem.

MEANING OF CONSENT:

The term consent has been defined by many scholars are as under:

• Webster’s College Dictionary: Consent means “to agree or to be willing to try to something.”
• Section 13 of Contract Act: “Two or more persons are said to be consented when they agree upon the same thing in a same manner.”

ESSENTIALS OF CONSENT:

• Parties must be agreeing on an equivalent thing: “same thing” the entire material of the agreement whether it consist wholly or partially of an act or promise to try to or abstain from doing something. If the parties have various things in mind or the parties though agree upon a thing but do so in several sense, it's not said to be a true consent and agreement.
• Parties must agree within the same sense: if one among the parties to a clear contract, by his own fault enters into it during a sense different from that during which it had been understood by the opposite party he could also be precluded from fixing that there was no agreement within the same sense.
• Parties expressions must be in agreement: the aim of the good majority of contract is to effect and exchange of promises, or of certain performance. To attend this purpose, there must be mutual expressions of assent to the exchange.

FREE CONSENT

AS PER SECTION 14

There need to be two parties to a contract, who willingly and knowingly enter into an agreement. But how does the law determine if the parties are both these things? this is often where the concept of free consent comes in. Allow us to learn more about free consent and therefore the elements vitiating free consent.

DEFINITION:

In the Indian Contract Act, the definition of Consent is given in Section 13, which states that “it is when two or more persons agree upon the same thing and in the same sense”. Therefore, the two people must comply with something within the same sense also .

Example: A agrees to sell his car to B. A owns three cars and needs to sell the Maruti. B thinks he's buying his Honda. Here A and B haven't prescribed an equivalent thing within the same sense. Hence there's no consent and subsequently no contract.

Now Free Consent has been defined in Section 14 of the Act. The section says that consent is taken into account free consent when it's not caused or suffering from the subsequent,

• Coercion
• Undue Influence
• Fraud
• Misrepresentation
• Mistake
• Elements Vitiating Free Consent

Let us take a glance at these elements individually that impair the free consent of either party.

1. Coercion (Section 15)

Coercion means using force to compel an individual to enter into a contract. So, force or threats are wont to obtain the consent of the party under coercion, i.e. it's not free consent. Section 15 of the Act describes coercion as committing or threatening to commit any act forbidden by the law within the IPC unlawfully detaining or threatening to detain any property with the intention of causing a person to enter into a contract

Example: A threatens to harm B if he doesn't sell his house to A for five lakh rupees. Here albeit B sells the house to A, it'll not be a legitimate contract since B’s consent was obtained by coercion.

Now the effect of coercion is that it makes the contract voidable. This suggests the contract is voidable at the choice of the party whose consent wasn't free. Therefore, the aggravated party will decide whether to perform the contract or to void the contract. So, within the above example, if B still wishes, the contract can plow ahead.

Also, if any monies are paid or goods delivered under coercion must be repaid or returned once the contract is void. Andtherefore, the burdens of proof proving coercion are going to be on the party who wants to avoid the contract. Therefore, the aggravated party will need to prove the coercion, i.e. prove that his consent wasn't freely given.

2 Undue Influences (Section 16)

Section 16 of the Act contains the definition of undue influence. It states that when the relations between the 2 parties are such one party is during a position to dominate the opposite party, and uses such influence to get an unfair advantage of the opposite party it'll be undue influence.

The section also further describes how the person can abuse his authority within the following two ways: When an individual holds real or maybe apparent authority over the opposite person or if he's during a fiduciary relationship with the opposite person. He makes a contract with an individual whose brain is suffering from age, illness or distress. The unsoundness of mind is often temporary or permanent

Example: A sold his gold awaits only Rs 500/- to his teacher B after his teacher promised him good grades. Here the consent of A (adult) isn't freely given, he was under the influence of his teacher.

Now undue influence to be evident the dominant party must have the target to require advantage of the opposite party. If influence is wielded to profit the opposite party it'll not be undue influence. But if consent isn't free thanks to undue influence, the contract becomes voidable at the choice of the aggravated party and therefore the burden of proof is going to be on the dominant party to prove the absence of influence.

3. Fraud (Section 17)

Factors Impairing Free Consent: Fraud

Fraud means deceit by one among the parties, i.e. when one among the parties deliberately makes false statements. Therefore, the misrepresentation is completed with full knowledge that it's not true, or recklessly on faith for the trueness, this is often said to be fraudulent. It absolutely impairs free consent.

So consistent with Section 17, a fraud is when a celebration convinces another to enter into an agreement by making statements that are suggesting an incontrovertible fact that isn't true, and he doesn't believe it to be true the active concealment of facts a promise made with none intention of performing it the other such act fitted to deceive.

Example: A bought a horse from B. B claims the horse are often used on the farm. Seems the horse is lame and A cannot use him on his farm. Here B knowingly deceived A and this may amount to fraud.

One factor to think about is that the aggravated party should suffer from some actual loss thanks to the fraud. There’s no fraud without damages. Also, the falsehood must be a fact, not an opinion. Within the above example if B had said his horse is best than C’s this is able to be an opinion, not a fact. And it might not amount to fraud.

4. Misrepresentation (Section 18)

Misrepresentation is additionally when a celebration makes a representation that's false, inaccurate, incorrect, etc. The difference here is that the misrepresentation is innocent.

i.e. not intentional. The party making the statement believes it to be true. Misrepresentation are often of three types an individual makes a positive assertion believing it to be true any breach of duty gives the person committing it a plus by misleading another. But the breach of duty is with none intent to deceive.

When one party causes the opposite party to form an error on the topic matter of the contract but this is often done innocently and not intentionally.

5 Mistake: an error is described as a component , which when occurs during a contract makes it void.

There are two sorts of mistakes, which occurs during a contract

• Unilateral Mistake: A mistake is claimed to be unilateral when one party is mistaken within the agreement.
• Bilateral Mistake: A mistake is claimed to be mutual when both parties misunderstood one another. Thus, it shows that there's a breach within the principle of consensus-ad-idem within the contracts and therefore the contract is to be considered as void.

Example: “A” made an offer to “B” to sell his scooter. “A” intended to sell his 3G scooter but “B” believed that “A” would sell his 4G scooter. Thus, there was no proper communication and therefore the fact was mistaken. It might amount to an effective agreement.

• Common mistake: Section 20 of the Indian Contract Act, 1872 lays down the supply for common mistakes. A contract arising out of common mistake is taken into account to be void. This sort of mistake is possessed by both the parties but this error isn't the results of mutual mistake, it arises individually.

SOME IMPORTANT SECTION UNDER CONTRACT OF CONSENT

EFFECT OF REFUSAL OF PARTY TO PERFORM PROMISE WHOLLY AS PER SECTION 39

When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.

When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance."

Example: A, a singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two nights in weekly during next two months, and B engages to pay her 100 rupees for every night’s performance. On the sixth night A willfully absents herself from the theatre. B is at liberty to place an end to the contract. (a) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two nights in weekly during next two months, and B engages to pay her 100 rupees for every night’s performance. On the sixth night A willfully absents herself from the theatre. B is at liberty to place an end to the contract."

EFFECT OF DEFAULT AS TO THAT PROMISE WHICH SHOULD BE PERFORMED, IN CONTRACT CONSISTING OF RECIPROCAL PROMISES AS PER SECTION 54

When a contract consists of reciprocal promises, such one of them can't be performed, or that its performance can't be claimed till the other has been performed, and therefore the promisor of the promise last mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which such other party may sustain by the non-performance of the contract. —When a contract consists of reciprocal promises, such one of them can't be performed, or that its performance can't be claimed till the other has been performed, and therefore the promisor of the promise last mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which such other party may sustain by the non-performance of the contract."

Example: A hires B’s ship to require in and convey, from Calcutta to the Mauritius, a cargo to be provided by A, B receiving a particular freight for its conveyance. A doesn't provide any cargo for the ship. A cannot claim the performance of B’s promise, and must take compensation to B for the loss which B sustains by the non-performance of the contract. (a) A hires B’s ship to require in and convey, from Calcutta to the Mauritius, a cargo to be provided by A, B receiving a particular freight for its conveyance. A doesn't provide any cargo for the ship. A cannot claim the performance of B’s promise, and must take compensation to B for the loss which B sustains by the non-performance of the contract."

EFFECT OF FAILURE TO PERFORM AT A FIXED TIME, IN CONTRACT IN WHICH TIME IS ESSENTIAL AS PER SECTION 55

When a party to a contract promises to try and do a particular thing at or before a specified time, or certain things at or before specified times, and fails to try to any such thing at or before the required time, the contract, approximately much of it as has not been performed, becomes voidable at the choice of the promisee, if the intention of the parties was that point should be of the essence of the contract.

If it had been not the intention of the parties that point should be of the essence of the contract, the contract doesn't become voidable by the failure to do such thing at or before the required time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure.

“Effect of acceptance of performance at time aside from that agreed upon.

If, just in case of a contract voidable on account of the promisor’s failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time aside from that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance he gives notice to the promisor of his intention to do so.

MODE OF COMMUNICATING OR REVOKING RESCISSION OF VOIDABLE CONTRACT

The rescission of a voidable contract could also be communicated or revoked within the same manner, and subject to an equivalent rule, as apply to the communication or revocation of the proposal.

1.6 CONSIDERATION (AS PER SECTION 2 AND 25)

A. CONCEPT

When at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing something, such act or abstinence or promise is called a consideration for the promise.

DEFINITION OF CONSIDERATION:

Consistent with Pollock, “Consideration is the price for which the promise of other is brought & the promise thus given for value is enforceable.”

According to section 2(d) when at the desire of the promisor, the promisee or any other person:

• Has done or abstained from doing ,or [Past consideration]
• Does or abstains from doing, or [Present consideration]
• Promises to do or abstain from doing something [Future consideration] such act or abstinence or promise are called a consideration for the promise.

EXAMPLE: ‘P’ aggress to sell his car to ‘Q’ for Rs.50, 000 Here ‘Q’s Promise to pay Rs.50, 000 is that the consideration for P’s promise and ‘P’s promise to sell the car is that the consideration for ‘Q’s promise.

B. IMPORTANCE OF CONSIDERATION

Consideration explains why a party is entering a contract and what they get from being a part of the contract. A contract must include consideration for each party involved so as to be valid. Essentially, consideration is that the benefit a party gets for entering a contract. During a basic contract, if you pay money for an item at the store and receive the item, that's your consideration. So as to qualify as consideration, each party must change their position.

Consideration usually results from:

• A promise to do something you are not legally obligated to try and do

• A promise to not do something you're allowed to do

What Happens Without Consideration?

If a court believes the contract doesn't have adequate consideration, it can step in and rule the contract unenforceable. This will happen for variety of reasons, including:

A party was already obligated to perform. If one among the parties is already legally obligated to do something, it is not actually consideration.

The promise may be a gift, not a contract. If one party gives something to the other party without expecting anything reciprocally, it's considered a present, not a contract. Because the other party didn't provide anything in exchange for the gift, they need no legal standing if the promise falls apart.

The exchange is past consideration. Consideration doesn't apply if the action has already taken place. For instance , a promise to pay money for a product that somebody has already given you isn't legally binding.

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C. LEGAL RULES REGARDING CONSIDERATION U/S 2

It must move at the will of the promisor: It must be offered by the promisee at the will or request of the promisor. An act done at the will or request of the third party doesn't form a legitimate consideration.

It’s going to move from the promisee or the other person: Consideration may move from the promisee or the other person i.e. even a stranger. It may be an act, abstinence or forbearance or a return promise.

The following are good consideration for the contract:

• Forbearance To Sue
• Compromise Of A Disputed Claim
• Composition With Creditors

It’s going to be present, past or future. i. Past Consideration ii. Present Or Executed Consideration iii. Future or Executory Consideration

Consideration needn't to be adequate but it must have some value. It must be real & not illusory.

There’s no consideration within the following cases:

1. Physical impossibility 2. Legal impossibility 3.Uncertain consideration

It must be something which the promisor isn't already sure to do A promise to try to what one is sure to do , either by general law or under an existing contract, isn't an honest consideration. It must not be illegal, immoral or against public policy

Unlawful consideration includes any activities:

• Is forbidden by law.
• Is fraudulent.
• Is of such nature that, it'll defeat a provision of any law.
• Involves any injury to the person or property of another.
• The Court regards it as immoral or against public policy.

D. EXCEPTIONS OF THE RULE “NO CONSIDERATION NO CONTRACT” (AS PER U/S 25)

1.On account of natural love & affection u/s 25(1): Such agreements are enforceable even inconsiderately.

2. For voluntary services u/s 25(2): A promise to compensate wholly or partially, an individual who has voluntarily done something for the promisor, is enforceable, even inconsiderately.

3. For promise to pay time-barred debts 25(3): A promise by a debtor to pay a time barred debt is enforceable provided it's in writing and signed by the debtor or his agent.

4.Within the case of completed gifts: The rule no consideration no contract doesn't apply.

5. Within the case of agency: to make workplace relationship consideration isn't necessary.

E. UNLAWFL CONSIDERATION (AS PER SECTION 23)

According to Section 23, within the following cases consideration or object of an agreement is unlawful:

1. If it's forbidden by law:

Where the object of a contract is forbidden by law, the agreement shall be void. An act is claimed to be forbidden if it's punishable by criminal law or any special statute, or if it's prohibited by any law or order made in exercise of powers or authority conferred by the legislature.

Example:

(1) A and B agreed to deal in smuggled goods. It is forbidden by law and thus void.

(2) A committed B's murder within the presence of C. A promise to pay Rs. 500 to C, if C doesn't inform the police about the murder

The agreement in example No. 2 given above is against the law as its object is unlawful. Besides, A and C are going to be responsible for the act of murder and its concealment under the Indian penal code.

2. If it's of such a nature that if permitted, it might defeat the provisions of the other law:

The object of an agreement might not be directly forbidden but indirectly, it's going to defeat the thing of any other law, and the agreement would be void in such a case.

Example:

(1) A failed to pay his land revenue. Therefore, his estate was sold for arrears of revenue by the govt. By the law, the defaulter is prohibited from purchasing the land again. A asks B to get the estate and afterward, transfer an equivalent to him at an equivalent price. The agreement is void because it will defeat the thing of the law which prohibits a defaulter to get back the land, for indirectly A will again become the owner of the estate.

The second agreement is additionally void because it would defeat the provision or object of the law of limitation.

3. If it's fraudulent:

If the object of an agreement is fraudulent, i.e., to cheat people, it's void. Example:

A, B & C enter into an agreement to sell bogus plots of land in Delhi the agreement is void because it is fraudulent and thereby unlawful.

4. If it involves or implies injury to the person or property of another: Law protects property and person of its citizens. It cannot permit any contract which ends up in an injury to the person or property of any one.

Examples:

(1) A promise to pay Rs. 500 to B if B beats C. It involves injury to C, hence it's unlawful and void.

5. If the Court regards it as immoral or against public policy: If the thing of an agreement is immoral or against public policy, it'll be void. Morality here means something which the law regards as immoral.

Examples:

(1) A agrees to offer his house on rent to a prostitute for her immoral purpose. A cannot recover the rent of his house if he prostitute refuse to pay. However, he could also be allowed to urge his house vacated from the prostitute because it will put an end to the immoral purpose.

(2) A agrees to offer his daughter on hire to B for concubinage. The agreement is void because it's immoral, though the letting might not be punishable under the Indian penal code.

Effect of Illegality:

1. An illegal agreement is void:

It is not enforceable at law.

2. Collateral transactions to illegal transactions also are void:

Not only the illegal agreement is void but also the collateral transactions are void.

Example:

A borrows Rs. 2,000 from B to shop for a revolver to shoot C. Since the thing of the transaction is against the law , B cannot recover his Rs. 2,000 if he has given the loan, knowing that A is taking the loan to get a revolver to shoot C.

Thus, people are going to be discouraged to finance or assist illegal transaction once they know that they're going to not be able to recover their loans.

3. Law doesn't help any party:

Where the agreement is against the law , the law won't help any of the parties. The rationale is that both the parties are equally guilty and therefore the law doesn't help a guilty person. The law wants to discourage both the parties.

Example:

A promise to pay a bribe of Rs. 200 to B, if B does his work The agreement is against the law   cannot recover the amount of Rs. 200 after doing A's work. Similarly, if A has paid the bribe in advance, he cannot get it back if B doesn't do his work.

4. Indirectly defendant is helped:

Defendant may be a person against whom the suit is filed. When the law doesn't help any of the parties, it means the party who has paid the amount won't be ready to get it back as we've seen within the above example. The party who has received the quantity is thus helped to stay the money with it and isn't asked by the Court to return it. The Court is neutral and therefore the defendant gets the advantage of the Court's neutrality. Within the example given above, B can keep Rs. 200, even if B doesn't do the work of A. The Court won't ask B to return the quantity . Thus, B is indirectly benefited or helped by the refusal of the Court to intervene.

5. In cases of fraud, coercion, etc., money or property transferred is often recovered:

Where the illegality is that the results of coercion and fraud of the other party, the Court can compel the guilty to return the cash paid or property transferred.

6. Agreement partly legal and partly illegal (Sec. 24):

An agreement may contain promises which are legal and illegal. If the legal promise are often separated from the illegal one, the legal promise are often enforced. In Such a case the illegal part are going to be void.

Where the legal promise can't be separated from the illegal one, the entire of it might be void.

Where there's one consideration for one or more unlawful objects, the agreement is void.

Example:

(1) A promise to manage B's factory, where genuine and bogus motor parts are manufactured. B agrees to pay A (Manager) a salary of Rs. 1,000 per month.

The agreement is void as partly it's legal and illegal and therefore the legal part can't be separated because the salary is for both the parts.

7. Reciprocal promises, legal and illegal (Sec. 57):

Where persons reciprocally promise, firstly to do certain things which are legal, and secondly under specified circumstances to do certain other things which are illegal, the first set of promise may be a contract, but the second may be a void agreement.

Example:

A and B agree that A shall sell a house to B for Rs. 10,000 but that if B uses it as a gambling house, he shall pay A Rs. 50,000 for it.

The first set of promise, i.e., to sell the house and to pay Rs. 10,000 may be a contract.

The second set of promise, i.e., B may use the house as a gambling house and pay Rs. 50,000 may be a void agreement.

8. Alternative promise, legal and illegal (Sec. 58):

In the case of an alternate promise, one branch of which is legal and therefore the other illegal, the legal branch alone are often enforced.

1.7 MODES OF DISCHARGE OF CONTRACT

• Discharge by performance.
• Discharge of Contract by Substituted Agreement.
• Discharge by lapse of your time .
• Discharge by operation of law.
• Discharge by Impossibility of Performance.
• Discharge by Accord and Satisfaction.
• Discharge by breach.

We shall examine each of them as follows.

Discharge by performance

Where both the parties have either carried out or tendered (attempted) to carry out their obligations under the contract, is mentioned as discharge of the contract by performance. Because performance by one party constitutes the occurrence of a constructive condition, the other party’s duty to perform is additionally triggered, and thus the one that has performed has the proper to receive the other party’s performance. The overwhelming majority of contracts are discharged during this manner.

Discharge of Contract by Substituted Agreement

A contract emanates from an agreement between the parties. It thus follows that, the contract must even be discharged by agreement. Therefore, what's required, inevitably, is mutuality. Discharge by substituted agreement arises when a contract is abandoned, or the terms within it are altered, and both the parties are in conformity over it.

For example, A and B enter into some agreement, and A wants to change his mind and to not perform his terms of the contract. If he does this unilaterally then he are getting to be in breach of contract to B. However, if he approaches B and states that he would adore to be released from his liabilities under the contract then the latter might agree. Therein case the contract is claimed to be discharged by (bilateral) agreement. In effect B has promised to not sue A if he doesn't perform a neighborhood of the contract and thus the consideration for his promise could also be a ‘s promise to not sue B. Discharge by agreement may arise within the subsequent ways.

• Novation: The term novation implies the substitution of a fresh contract for the first one. This arrangement could even be either with the same parties or with different parties. For a novation to be valid and effective, the consent of all the parties, including the new one(s), if any, is vital. Moreover, subsequent or second agreement must be one capable of enforcement in law, the consideration that is that the exchange of promises to not enforce the first contract.
• Rescission: This refers to cancellation of all or few the fabric terms of the contract. If the contracting parties mutually decide to do so, the respective contractual obligations of the parties stand terminated.
• Alteration: This refers to a change in one or more of the terms of a contract with the consent of all the contracting parties. Alteration results in a replacement contract but parties thereto remain the same. Here the assumption is that both the parties are to understand a fresh but different enjoy the new agreement. Remission this means the acceptance (by the promisee) of a lesser sum than what was contracted for, or a lesser fulfillment of the promise made. As per Section 63, ‘every promisee may (a) remit or dispense with it, wholly or partially, or (b) extend the time of performance, or (c) accept the opposite satisfaction instead of performance’.
• Waiver: The term waiver implies abandonment or relinquishment of a right. Where a party deliberately abandons its rights under the contract, the other party is released of its obligations, otherwise binding upon it.

Discharge by lapse of your time

A contract stands discharged if not enforced within a specified period called the ‘period of limitation‘. The Limitation Act, 1963 prescribes the duration of limitation for various contracts. As an example , period of limitation for exercising right to recover an immovable property is twelve years, and right to recover a debt is three years. Contractual rights become time barred after the expiry of this limitation period. Accordingly, if a debt isn't recovered within three years of its payment becoming due, the debt ceases to be payable and is discharged by lapse of your time .

Discharge by Impossibility of Performance

Sometimes after a contract has been established, something might occur, though not at the fault of either party, which can render the contract impossible to perform, or illegal, or radically different from that originally undertaken.

However, if whatever happens to prevent the contract from being performee has not been caused by either party couldn't are foreseen, and its effect is to destroy the thought of the contract then the courts will, generality, state that the contract has become impossible to perform. If that happens then the contract is discharged and neither party will have any liability there under. Section 56 of the Indian Contract Act clearly provides that an agreement to undertake to an act impossible in itself is void

The performance of a contractual obligation may become subsequently impossible on sort of grounds.

They include the next

• Objective impossibility of performance

• Commercial impracticability

• Frustration of purpose

• Temporary impossibility

Discharge of operation of law

A contract stands discharged by operation of law within the subsequent circumstances.

Unauthorized material alteration of a document

A party can treat a contract discharged (i.e., from his side) if the other party alters a term (such as quantity or price) of the contract without seeking the consent of the previous.

• Statutes of Limitations

A contract stands discharged if not enforced within a specified period called the ‘period of limitation’. The Limitation Act, 1963 prescribes the duration of limitation for various contracts. As an example , limitation period for exercising right to recover an immovable property is twelve years and right to recover a debt is three years. Contractual rights become time barred after the expiry of this limitation period. Accordingly, if a debt isn't recovered within three years of its payment becoming due, the debt ceases to be payable and is discharged by lapse of your time.

• Insolvency

A discharge in bankruptcy will ordinarily bar enforcement of most of a debtor’s contracts.

• Merger

A contract also stands discharged through a merger that happens when an inferior right accruing to party during a contract amalgamates into the superior right ensuing to an equivalent party. As an example , A hires a factory premises from B for a couple of manufacturing activity for a year, but 3 months before the expiry of lease purchases that very premises. Now since A has become the owner of the building, his rights associated with the lease (inferior rights) subsequently merge into the rights of ownership (superior rights). The previous rental contract ceases to exist.

Discharge by Accord and Satisfaction

To discharge a contract by accord and satisfaction; the parties must suits accept performance that's different from the performance originally promised. It's getting to be studied under the next sub-heads.

Accord

An accord is an executor contract to perform an act which can satisfy an existing duty. An accord suspends, but doesn't discharge, the primary contract.

Satisfaction

Satisfaction is that the performance of the accord, which discharges the primary contractual obligation.

If the obligor refuses to perform the oblige can sue on the primary obligation or seek a decree for performance on the accord.

1.8 BREACH OF CONTRACT

A contract is breached or broken when any of the parties fails or refuses to perform its promise under the contract. Breach of contract is a legal cause of action in which a binding agreement is not honoured by one or more parties by non-performance of its promise by him renders impossible.

Section 37 of the Indian Contract Act,1872 provides that the parties to the contract are under obligation to perform or offer to perform, their respective promises under the contract, unless such performance is dispensed with or excused under the provisions of the Indian Contract Act or of any other law.

According to Section 39, where the party has refused to perform or disabled himself from performing, his promise in its entirely, the other party may put an end to the contract, , unless that other party has expressly or impliedly signified its consent for the continuance of contract. If the other party chooses to put an end to the contract, the contract is said to be broken and amounts to breach of contract by the party not performing or refusing to perform its promise under the contract. This is called repudiation. Thus, repudiation can occur when either party refuses to perform his part or makes it impossible for him to perform his part of contract in each of the cases in such a manner as to show an intention not to fulfil his part of the contract.

REMEDIES FOR BREACH OF CONTRACT (AS PER SECTION 73-75)

A legal remedy may be a writ that seeks to uphold a person’s rights or to redress a breach of the law.

When one party breaches a contract, the opposite party may ask a court to supply a remedy for the breach. The court may order the breaching party to pay money to the non-breaching party.

TYPES OF REMEDIES

• Suit for rescission
• Suit for damages
• Suit for quantum meruit
• Suit for performance
• Suit for an i injunction
• Suit for Rescission

SUIT FOR RESCISSION

The term Rescission refers to the cancellation of contract.

In such cases, if one party has broken his contractual relations, the opposite party may treat the breach as discharge and refuse to perform his part of performance.

Thus, just in case of rescission of contract, the aggrieved or casualty is discharged from all his obligations of the contract.

UNDER FOLLOWING CASES THE COURT MAY REFUSE TO GRANT RESCISSION:

• The parties can't be restored to their original positions thanks to changed circumstances.

• The party(s) has acquired rights in straightness and value during subsistence of contract.

• Only a neighborhood of the contract is rescinded and this part can’t be separated from remainder of the contract.

• But if an individual rightfully rescinded, he's entitled to compensation for any damage which he has sustained through non fulfillment of the contract by the opposite party.

EXAMPLE:

'A' contract to provide 10kg of tea leaves for Rs.8, 000 to 'B' on 15 June. If 'A' doesn't supply the tea leaves on the appointed day, 'B' needn't pay the worth. 'B' may treat the contract as rescinded and should sit quietly reception. 'B' can also file a ‘suit for rescission’ and claim damages. 12 A B Breach of contract when ‘A’ don’t supply to ‘B

SUIT FOR DAMAGES

Damages are a monetary compensation allowed to the casualty for the loss or injury suffered by him as results of the breach of contract. The elemental principle underlying damages isn't punishment but to compensate the aggrieved party for the loss suffered by him within the original position as he would fare.

Rules regarding damages

• The damages must naturally arise within the usual course of things from such breach i.e. the damages must be the proximate or direct consequence of the breach of contract.

• The aggrieved party must have suffered damages by breach of contract.

• Damages are awarded to compensate the loss caused by a celebration but to not punish the party at default for the breach of contract.

• Amount of damages is often decided at the time of agreement by the mutual consent of both the parties.

Types of damages

• Ordinary

• Special

• Exemplary

• Nominal damages

• Damages for inconvenience and discomfort

• Liquidated damages and penalty

• Stipulation for interest

• Forfeiture of margin there are 8 sorts of damages

EXAMPLE: Mr. A to pay 3 lacs to Mr. on 1st April. Mr. Doesn't pay the cash thereon day. Mr. B is unable to pay her debts and suffer a loss. Mr. A is susceptible to pay B principal amount and also interest thereon. 16 A B Breach of contract when ‘A’ don’t give money to ‘B’. Payable money

SUIT FOR QUANTUM MERUIT

It means “AS much as EARNED” or “in proportion to the work done.”

Right to ‘Quantum Meruit’ literally means a right to say the compensation for the work already done.

EXAMPLES Mr. Engages Mr. a contractor, to create a 3 storied house. After a neighborhood is made ‘A’ prevents ‘B’ from working any longer. ‘B’ the contractor, is entitled to urge reasonable compensation for work done under the doctrine of quantum merit additionally to the damages for breach of contract. 18 Breach of contract when ‘A’ told ‘B’ to prevent building construction. A B

SUIT FOR PERFORMANCE

Suit for performance means demanding the court’s direction to the defaulting party to hold out the promise consistent with the terms of contract Cases where suit for performance isn't maintainable

i. Where compensatory damages arising from breach aren't measurable

Ii. Where monetary compensation isn't an adequate remedy.

Example agreed to sell an old painting to Y for Rs50, 000. Subsequently, X refused to sell the painting. Here, Y may file a suit against X for the precise performance of the contract.

SUIT FOR INJECTION

It means demanding court’s stay order.

An order of the court which prohibits an individual to try to a specific act

A party to a contract does something which he presumed to not do, the court may issue an order prohibiting him from doing so.

EXAMPLES: A, a singer contracts with B the Manager of a theatre to Sing at his theatre for one year and to abstain from Singing at other theatres during the theatre. She absents herself, B cannot compel A to sing at his theatre, but he may sue her for an injunction restraining her from Singing at other theatres.

G agreed to require the entire of his supply of electricity from a particular company. The agreement was held to import a negative promise that he would take none from elsewhere. He was, therefore, restrained by an injunction from buying electricity from the other company.

1.9 INTRODUCTION TO THE SALE OF GOODS ACT-1930

The Sale of Goods Act, 1930 governs the contracts relating to sale of goods. It applies to the whole of India except the State of Jammu & Kashmir. The contacts for sale of goods are subject to the general principles of the law relating to contracts i.e. the Indian Contact Act. A contract for sale of goods has, however, certain peculiar features such as, transfer of ownership of the goods, delivery of goods rights and duties of the buyer and seller, remedies for breach of contract, conditions and warranties implied under a contract for sale of goods, etc. These peculiarities are the subject matter of the provisions of the Sale of Goods Act, 1930.

1.10 CONTRACT OF SALE

A. CONCEPT

FORMATION OF CONTRACT OF SALE

DEFINITION:

As per Sec 2(1) of the Indian Sale of Goods Act, 1930 defines the contract of sale of goods in the following manner:

“A 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”.

B. ESSENTIALS ELEMENTS OF CONTRACT OF SALE

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

The following six features are essential elements of any contract of sale of goods.

• Goods

• Price

• Two parties

• Transfer of ownership

• All Essentials of a valid Contract of Sale

• Includes both a ‘sale ‘and ‘an agreement to sell‘

1. Two Parties:

A contract of sale of goods is bilateral in nature wherein property within the goods has got to pass from one party to a different. One cannot buy one’s own goods.

For example, A is that the owner of a grocery shop. If he supplies the goods (from the stock meant for sale) to his family, it doesn't amount to a sale and there's no contract of sale. This is often so because the vendor and buyer must be two different parties, together person can't be both a seller also as a buyer. However, there shall be a contract of sale between part owners.

Suppose A and B jointly own a tv set, A may transfer his ownership within the tv set to B, thereby making B the only owner of the goods. Within the same way, a partner may buy goods from the firm during which he's a partner, and vice-versa.

However, there's an exception against the overall rule that nobody should purchase his own goods. Where a Pawnee sells the goods pledged with him/her on non-payment of his/her money, the pawnor may buy them in execution of a decree.

2. Goods:

The topic matter of a contract of sale must be goods. All kinds of movable property except actionable claims and money are considered ‘goods. Contracts concerning services aren't considered as contract of sale. Immovable property is governed by a separate statute, ‘Transfer of Property Act’.

3. Transfer of ownership:

Transfer of property in goods is additionally integral to a contract of sale. The term ‘property in goods’ means the ownership of the goods in every contract of sale, there should be an agreement between the buyer and therefore the seller for transfer of ownership. Here property means the overall property in goods, and not merely a special property.

Thus, it's the overall property, which is transferred under a contract of sale as distinguished from special property, which is transferred just in case of pledge of goods, i.e., possession of goods is transferred to the pledgee or Pawnee while the ownership rights remain with the pledger. Thus, during a contract of sale there must be an absolute transfer of the ownership. It must be noted that the physical delivery of products isn't essential for transferring the ownership.

4. Price:

The customer must pay some price for goods. The term ‘price’ is ‘the money consideration for a purchase of goods’. Accordingly, consideration during a contract of sale has necessarily to be in money. Where goods are offered as consideration for goods, it'll not amount to sale, but it'll be called barter or exchange, which was prevalent in past.

Similarly, if an individual offers the goods to somebody else inconsiderately, it amounts to a present or charity and not sale. In explicit terms, goods must be sold for a particular amount of cash, called the worth. However, the consideration is often partly in money and partly in valued up goods. Furthermore, payment isn't necessary at the time of creating the contract of sale.

5. All essentials of a valid contract:

A contract of sale may be a special form of contract, therefore, to be valid, it must have all the essential elements of a valid contract, viz., free consent, consideration, competency of contracting parties, lawful object, legal formalities to be completed, etc. A contract of sale is going to be invalid if important elements are missing. As an example , if A agreed to sell his car to B because B forced him to try and do so by means of undue influence, this contract of sale isn't valid since there's no free consent on a part of the transferor.

6. Includes both a ‘Sale’ and ‘An Agreement to Sell’:

The ‘contract of sale’ may be a generic term and includes both sale and an agreement to sell. The sale is an executed or absolute contract whereas ‘an agreement to sell’ is an executory contract and implies a conditional sale.

A contract of sale is often made merely by an offer, to buy or sell goods for a price, followed by acceptance of such an offer. Interestingly, neither the payment of price nor the delivery of goods is important at the time of creating the contract of sale unless otherwise agreed.

Subject to the provisions of the law for time being effective, a contract of sale could also be made either orally or in writing, or partly orally and partly in writing, or may even be implied from the conduct of the parties.

1.11 DISTINGUISHED BETWEEN “SALE” AND “AGREEMENT TO SELL” UNDER SECTION 4

SALE:

• It is a contract where the ownership in the goods is transferred by seller to the buyer immediately at the conclusion contract. Thus, strictly speaking, sale takes place when there is a transfer of property in goods from the seller to the buyer. A sale is an executed contract.
• It must be noted here that the payment of price is immaterial to the transfer of property in goods.
• Ex - A sells his Yamaha Motor Bicycle to B for Rs. 10,000. It is a sale since the ownership of the motorcycle has been transferred from A to B.

AGREEMENT TO SELL

• It is a contract of sale where the transfer of property in goods is to take place at a future date or subject to some condition thereafter to be fulfilled.
• Ex- A agreed to buy from B a certain quantity of nitrate of soda. The ship carrying the nitrate of soda was yet to arrive. This is an agreement to sale. In this case, the ownership of nitrate of soda is to be to transferred to A on the arrival of the ship containing the specified goods (i.e. nitrate of soda)
• On 1st March 1998, A agreed to sell his car to B for Rs. 80,000. It was 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 is an agreement to sell and it will 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

D. DISTINGUSH BETWEEN SALE AND HIRE PURCHASE AGREEMENT

The main points of distinction between the ‘sale’ and ‘hire-purchase’ are as follows:

1. In a sale, property within the goods is transferred to the customer immediately at the time of contract, whereas in hire-purchase, the property within the goods passes to the hirer upon payment of the last installment.

2. In a sale, the position of the customer is that of the owner of the goods but in hire purchase, the position of the hirer is that of a bailee till he pays the last installment

3. Within the case of a sale, the customer cannot terminate the contract and is sure to pay the price of the goods. On the other hand, within the case of hire-purchase, the hirer may, if he so likes, terminate the contract by returning the products to its owner with none liability to pay the remaining installments.

4. Within the case of a sale, the vendor takes the danger of any loss resulting from the insolvency of the customer. Within the case of hire purchase, the owner takes no such risk, for if the hirer fails to pay an installment, the owner has the proper to require back the goods.

5. Within the case of a sale, the customer can pass an honest title to a bonafide purchaser from him but during a hire-purchase, the hirer cannot pass any title even to a bonafide purchaser.

6. In a sale, sales tax is levied at the time of the contract whereas during a hire-purchase, sales tax isn't leviable until it eventually ripens into a sale

E. GOODS

Definition of GOODS under the Act

• 'Goods' means every kind of moveable property and includes stock and shares, growing crops, grass, and things attached to or forming part of the land, which are agreed to be severed before sale or under the contract of sale.
• Actionable claims and money are not included in the definition of goods.
• Thus, goods include every kind of moveable property other than actionable claim or money. Example - goodwill, copyright, trademark, patents, water, gas, and electricity are all goods and may be the subject matter of a contract of sale.
• The test is if the property on shifting its situation, does not lose its character, the said property shall be movable and fall within the definition of Goods.

TYPES OF GOODS

• Existing goods
• Future goods
• Contingent goods

1. Existing goods:

Goods which are physically in existence 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 the owner, he has the general property in them.

2. Future goods:

Goods to be manufactured, produced or acquired by the seller after the making of the contract of sale are called 'future goods' [Sec. 2(6)]. These goods may be either not yet in existence or be in existence but not yet acquired by the seller. Ex:- A agrees to sell to B all the milk that his cow may yield during the coming year. This is a contract for the sale of future goods.

3. Contingent goods:

Though a type of future goods, these are the goods the acquisition of which by the seller depends upon a contingency, which may or may not happen [Sec. 6 (2)].

Ex:- (a) A agrees to sell to B a specific rare painting provided he is able to purchase it from its present owner. This is 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 is a contract for the sale of contingent goods. If the ship in sunk, the contract becomes void and the seller is not liable.

F. EFFECTS OF DESTRUCTION OF GOODS - ALREADY CONTRACTED (AS PER SECTION 6,7,8)

There are various sorts of goods and therefore the parties have various options to agree about the delivery of the goods. What shall be the fate of a contract if the products are perished or destroyed?

Destruction before making of contract -- Where during a contract purchasable of specific goods, at the time of creating the contract, the goods, without knowledge of the vendor, have perished or become as damaged as not to answer to their description within the contract, the contract shall become null and void. This is often based on the rule of impossibility of performance. Since the subject matter of the contract, which is one among its essential ingredients, it is destroyed, the contract can't be administered.

'Perishing of goods' includes not only complete destruction of the goods when the vendor has been irretrievably deprived by the goods or when the goods are stolen or have in another way been lost and are untraceable, but also when the goods become un merchantable i.e. when the goods has lost their commercial value.

Destruction After the Agreement to Sell but before Sale -- Where in an agreement to sell specific goods, if subsequently the goods, with none fault on the a part of the vendor of buyer, perish or become so damaged as not answer to their description within the agreement, the agreement shall become void, provided the goods are perished before the ownership and risk passes to the buyer. This rule is predicated on the bottom of impossibility of performance.

If the title to be goods has already passed to the customer, he must buy the goods though an equivalent can't be delivered.

1.12 CONDITIONS AND WARRANTIES [SECTIONS 11-25 AND 62, 63]

A. CONCEPT

MEANING OF CONDITION

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

• A condition is a stipulation

(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.

• It goes to the root 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 was agreed that ship m of 420 tons “now in port of Amsterdam” should proceed direct to new port to load a cargo. In fact, at the time of the contract the ship was not in the port of Amsterdam and when the ship reached Newport, the charterer refused to load. Held, the words “now in 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 main purpose of the contract, the breach of which gives rise to only claim for damages but not to a right to reject the goods and treat the contract as repudiated”.

• It is a stipulation collateral to the main purpose of the contract
• 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.

B. DISTINCTION BETWEEN CONDITION AND WARRANTY

C. IMPLIED CONDITIONS AND WARRANTIES (TYPES)

• Conditions and Warranties may be either express or implied.
• They are said to be "express" when they are expressly provided by the parties.
• 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

• Conditions as to title [Sec.14(a)] [Rowland v. Divall,(1923)]
• Sale by description [Sec.15] [Bowes v.shand,(1877)]
• Condition as to quality or fitness.[Sec.16(1)]
• Conditions as to Merchantability [Sec.16(2)] [R.S.Thakur v. H.G.E. Corp., A.I.R.(1971)]
• Conditions implied by custom [Sec.16 (3)]
• Sale by Sample (Sec.17)
• Condition as to wholesomeness.
• Warranty of Quiet possession-Sec.14(6)
• Warranty against encumbrances-Sec.14(c)
• Warranty to disclose dangerous natures of goods.
• Warranty as to quality or fitness by usage of trade – Sec.16 (4).

D. THE DOCTRINE OF CAVEAT EMPTOR

The doctrine of caveat emptor is an integral a part of the Sale of goods Act. It translates to “let the customer beware”. This suggests it lays the responsibility of their choice on the customer themselves.

It is specifically defined in Section 16 of the act “there is not any implied warranty or condition on the standard or the fitness for any particular purpose of goods supplied under such a contract of sale“

A seller makes his goods available within the open market. The buyer previews all his options then accordingly makes his choice. Now let’s assume that the product seems to be defective or of inferior quality.

This doctrine says that the vendor won't be liable for this. The customer himself is liable for the choice he made.

So, the doctrine attempts to form the customer more aware of his choices. It’s the duty of the customer to see the standard and therefore the usefulness of the product he's purchasing. If the product seems to be defective or doesn't live up to its potential the vendor won't be liable for this.

Let us see an example.

A bought a horse from B. A wanted to enter the horse during a race seems the horse wasn't capable of running a race on account of being lame. But A didn't inform B of his intentions. So, B won't be liable for the defects of the horse. The Doctrine of principle will apply.

However, the customer can shift the responsibility to the vendor if the three following conditions are fulfilled.

• If the customer shares with the vendor his purpose for the acquisition

• The buyer relies on the knowledge and/or technical expertise of the seller

• And the vendor sells such goods

EXCEPTIONS TO THE DOCTRINE OF CAVEAT EMPTOR

The doctrine of caveat emptor has certain specific exceptions.

1] Fitness of Product for the Buyer’s Purpose

When the customer informs the vendor of his purpose of buying the goods, it's implied that he's counting on the seller’s judgment. It’s the duty of the seller then to ensure the goods match their desired usage.

Say for instance: A goes to B to shop for a bicycle. He informs B he wants to use the cycle for mountain trekking. If B sells him a standard bicycle that's incapable of fulfilling A’s purpose the vendor are going to be responsible. Another example is that the case study of Priest v. Last.

2] Goods Purchased under brand name

When the customer buys a product under a brand name or a branded product the seller can't be held liable for the usefulness or quality of the product. So, there's no implied condition that the goods are going to be fit the aim the customer intended.

3] Goods sold by Description

When the customer buys the products based only on the outline there'll be an exception. If the goods don't match the outline then in such a case the vendor are going to be liable for the goods.

4] Goods of Merchantable Quality

Section 16 (2) deals with the exception of merchantable quality. The sections state that the vendor who is selling goods by description features a duty of providing goods of merchantable quality, i.e. capable of passing the market standards.

So, if the products aren't of marketable quality then the customer won't be the one who is responsible. It’ll be the seller’s responsibility. However, if the customer has had an inexpensive chance to look at the product, then this exception won't apply.

5] Sale by Sample

If the customer buys his goods after examining a sample then the rule of Doctrine of principle won't apply. If the remainder of the goods don't resemble the sample, the customer can't be held responsible. During this case, the vendor is going to be the one responsible.

For example, A places an order for 50 toy cars with B. He checks one sample where the car is red the remainder of the cars end up orange. Here the doctrine won't apply and B is going to be responsible.

6] Sale by Description and Sample

If the sale is completed via a sample also as an outline of the product, the customer won't be responsible if the goods don't resemble the sample and/or the outline. Then the responsibility will fall squarely on the vendor.

7] Usage of Trade

There is an implied condition or warranty about the standard or the fitness of goods/products. But if a seller deviated from this then the rules of caveat emptor cease to use. For instance, A bought goods from B in an auction of the contents of a ship. But B didn't inform A the contents were sea damaged, and then the rules of the doctrine won't apply here.

8] Fraud or Misrepresentation by the seller

This is another important exception. If the seller obtains the consent of the customer by fraud then caveat emptor won't apply. Also, if the vendor conceals any material defects of the goods which are later discovered on closer examination but the customer won't be responsible. In both cases, the vendor is going to be the guilty party.

1.13 UNPAID SELLER (SEC.45-54, 55 AND 56)

A. CONCEPT

A seller of goods is deemed to be an unpaid seller when:-

• The whole of the price has not been paid or tendered;
• A bill of exchange or other negotiable instrument has been received as a conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonor of the instrument or otherwise.

CONDITIONS:

• The term "seller" includes any person who is in the position of a seller, as, for instance, an agent of the seller to whom the bill of lading has been endorsed or agent who has himself paid, or is directly responsible for, the price.
• The seller shall be called an unpaid seller even when only a small portion of the price remains to be unpaid.
• 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 full price has been tendered by the buyer and the seller refused to accept it, the seller cannot be called as unpaid seller.
• Where the goods have been sold on credit, the seller cannot be called as an unpaid seller. Unless
• If during the credit period seller becomes insolvent, or
• On the expiry of the credit period, if the price remains unpaid, then, only the seller will become an unpaid seller.

B. RIGHTS OF AN UNPAID SELLER

• Against goods : Where the property in goods has passed to the buyer:

Right of lien, right of stoppage in transit, right of resale

• 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)

• 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
• 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 buyer becomes insolvent

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

• 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

(i) Seller must have parted with the possession of goods i.e., the goods must not be in the possession of the seller

(ii) The goods must be in course of transit

(iii) Buyer must have become insolvent

Right of resale (sec.54)

An unpaid seller can resell the goods under the following circumstances:

Where the goods are of a perishable nature

1. Where the seller expressly reserves the right of resale if the buyer commits a default in making payment
2. 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.

C. REMEDIES FOR BREACH OF CONTRACT OF SALE ( AS PER SECTION 55-61)

The Sale of goods Act, 1930 was enacted because the law concerning the sale of goods under the Indian Contract Act was considered to be inadequate. Here attention has been drawn to the remedies available to either party for breach of the contract of sale by the other. Chapter VI of the Sale of goods Act, 1930 relates to breach of contract and lays down the rights and liabilities of the vendor unto the customer and the other way around. Sections 55 to 61 affect this.

Sections 55 and 56 specialize in seller’s remedies against the customer and entitle the vendor to either sue for price of the goods or invite damages for non-performance of the contract. Sections 57, 58 and 59 lay down the remedies available to the customer against the seller within the event the latter breaches the contract. The buyer can seek damages for non-delivery of goods, damages for breach of warranty or performance of the contract. Sections 60 and 61 produce to those special situations wherein a remedy for breach is out there to both the buyer and seller.”

The Sale of products Act, which relates to suits for the Breach of a Contract it, shall be divided roughly, into 3 parts

• Seller’s Remedies against Buyer – Sections 55 and 56
• Buyer’s remedies against Seller – Sections 57, 58 and 59
• Remedies available to both buyer and seller – Sections 60 and 61

The paper is structured during a section by section format, wherein the sections, as divided under the varied heads are described and explained individually.

A. Seller’s remedies against buyer

The suits which will be instituted by the seller against the buyer under the Act are often roughly divided into two types

1. Suit for Price

2. Damages for non-acceptance

i. Suit for Price

Section 55

(1) Where under a contract of sale the property within the goods has passed to the buyer and therefore the buyer wrongfully neglects or refuses to buy the goods consistent with the terms of the contract, the vendor may sue him for the worth of the goods.

(2) Where under a contract of sale the worth is payable on each day certain regardless of delivery and therefore the buyer wrongfully neglects or refuses to pay such price, the seller may sue him for the worth although the property within the goods has not passed and therefore the goods haven't been appropriated to the contract.

From the above section, it are often seen that except as provided by sub-section (2), the vendor can only sue for the payment when the property has passed to the buyer. The passing of the property depends upon certain conditions, and if these conditions aren't fulfilled, he cannot sue for the payment under this section.

Where goods are sold for a specific amount and therefore the payment has got to be made partly in cash and partly in a similar way, the default if made in a similar way entitles the vendor to sue for the rest of the amount.

Ii. Damages for non-acceptance

Section 56

Where the buyer wrongfully neglects or refuses to simply accept and buy the goods, the vendor may sue him for damages for non-acceptance.

The damages are assessed on the idea of the principles contained in sections 73 and 74 of the Indian Contract Act, 1872. Consistent with section 73 of the Indian Contract Act, when a contract has been broken, the party who suffers by the breach is entitled to receive, from the party who has broken the contract, compensation for any loss caused to him thereby, which naturally arose, within the usual course of things from such a breach, or which the parties knew once they entered into the contract, to be likely to result from the breach of it.

Furthermore, in estimating the loss or damage caused by a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken under consideration.

The date at which the market value is to be ascertained is that the day on which the contract need to are performed by delivery and acceptance as fixed by the contract or, where no time is fixed, at the time of the refusal to perform.

By virtue of the provisions of sections 55 and 63 of the Indian Contract Act, where the time for the performance is fixed by the contract but it's extended and another date substituted for it by agreement between the parties, the substituted date must be taken because the date for ascertaining the measure of damages.

Where the products are deliverable by installments and therefore the buyer has got to accept one or the opposite or all the installments, the difference in prices is to be reckoned with on the day that a specific installment was to be delivered.

Where the military authorities refused to simply accept further supplies of cots in breach of their contract, the J&K high court allowed Rs. 4 per cot because the damages to the supplies because the profit which the supplier would have earned under his contract of supply.

It has been seen that the vendor has various remedies against both the goods and therefore the buyer personally, and in many cases where those remedies exist he still has the choice of availing himself of the remedy declared by this section ; but where the property has not passed and there's nothing within the contract which enables him to resell the products and charge the customer with the difference between the contract price, and therefore the price realized on the resale, or to sue for the price regardless of delivery, or the passing of the property, the remedy provided by this section is that the only remedy by which he can recover pecuniary compensation for the buyer’s breach of contract.

B. Buyer’s remedies against the seller

The suits which will be instituted by the customer against the seller are often roughly divided into three types

1. Damages for non-delivery

2. Remedy for breach of warranty

3. Specific Performance

i. Damages for Non- Delivery

Section 57

Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for non-delivery.

When the property within the goods has passed, the buyer, as long as he's entitled to the immediate possession, has all the remedies of an owner against people who affect the goods during a manner inconsistent together with his rights. If, therefore, the seller wrongfully re-sells them, he may sue the vendor in trover, and also against the second buyer, though as against him the rights could also be hamper by the provisions in sections 30 and 54.

In the case of non-delivery, truth measure of damages is going to be the difference between the contract price and therefore the market value at the time of the breach. The market price of the goods means “the value within the market, independently of any circumstances peculiar to the plaintiff (the buyer)”

Where he, the seller, is guilty of breach of an agreement to sell, the subsequent remedies could also be available to the buyer:

(i) The customer may sue for damages for non-delivery under section 57 of the Sale of goods Act

(ii) Just in case the worth has been paid by the buyer, he may recover it during a suit for money had and received for a consideration which has totally failed.

Where however the buyer has done not prove the alleged damages caused thanks to short supply of goods by seller and has also not served to seller a notice under Section 55 of the Indian Contracts Act, the buyer cannot claim damages.

In the case of pre-payment, the date for ascertaining the measure of damages must be the date of the breach, though it'd be said in such a case, the customer has not got the cash in his hands and can't therefore enter the market and buy; and in conformity with this concept it's been ruled at nisi prius that the date of the trial could also be taken. However, a more rational view is that even during this case the date of breach should be taken to calculate the difference between the contract price and therefore the sale price, and therefore the buyer can recover this amount, alongside an interest.

Ii. Remedy for Breach of Warranty

Section 59

(1) Where there's a breach of warranty by the seller, or where the buyer elects or is compelled to treat any breach of a condition on a part of the seller as a breach of warranty, the customer isn't by reason only of such breach of warranty entitled to reject the goods; but he may-

(a) Found out against the seller the Brach of warranty in diminution or extinction of the price; or

(b) Sue the seller for damages for breach of warranty.

(2) The very fact that a buyer has found out a breach of warranty in diminution or extinction of the worth doesn't prevent him from suing for an equivalent breach of warranty if he has suffered further damage.

A breach of warranty doesn't entitle the customer to reject the goods and his only remedy would be those provided in s. 59 namely, to set up against the vendor the breach of warranty in diminution or extinction of the value or to sue the vendor for damages for breach of warranty. From the definition of warranty given in s. 12(3) it's clear that a breach of it gives rise to a claim for damages only on the part of the buyer. It's also laid down by s. 13 that, even within the case of a breach of condition, if the buyer has accepted the goods, or, within the case of entire contracts, a part of them, either voluntarily, or by acting in such how on preclude himself from exercising his right to reject them, he must fall back upon his claim for damages as if the breach of the condition was a breach of warranty.

This section declares the methods by which a buyer who features a claim for damages, in either case, may avail himself of it. It doesn't affect the cases of fraudulent misrepresentation, which can enable the client to line aside the contract nor with cases where by the express terms of the contract the client may return the goods just in case of a breach of warranty. Also, in cases where the client has lawfully rejected the goods, he must proceed not under this section, but under s. 57, and if necessary, under s. 61, to recover the acquisition price and interest.

It must be noted here that in such cases, damages are assessed in accordance with the provisions contained in section 73 of Indian Contract Act, 1872. This was also observed by a division bench of the Bombay high court in City And Industrial Development Corporation of Maharashtra ltd., Bombay v Nagpur steel and alloys, Nagpur;

“Remedies under Section 59 aren't absolute and can't be resorted to at any point or strategically point suitable to the customer. He’s duty sure to give notice of his intention. Its proper time, form and manner will, of course, depend on the facts and circumstances of every case. To carry otherwise, would amount to placing the vendor in a clumsy and indefinite position — not warranted either by law or by equity.”

In the case of a guaranty of quality, the presumption is that the measure of damages is that the difference between what the goods are worth at the time of delivery, and what they might are worth consistent with the contract which this must be ascertained by regard to the market value at the time.

In a majority of cases it's found that the warranty in question isn't a warranty as defined in s 12(2), but a condition which falls under s 13(2) to be treated as a warranty. Fairly often it's the condition that the goods should correspond with the outline by which they were sold, or should be fit a specific purpose.

It is necessary that the customer should believe the warranty, and act reasonably, that's to mention, he should take reasonable steps to minimize the damages. Where there's a breach of the warranty that the goods should be fit a specific purpose, the rule again is that the damages should be such, as may naturally be due the breach. This was seen during a case where the plaintiff’s wife died from the consequences of eating tinned salmon which the plaintiff bought from the defendant, the plaintiff was held entitled to recover, as damages for the breach of the warranty, that the salmon would be fit human consumption. Compensation was awarded for medical expenses, funeral costs, and therefore the loss of her life.

There can also be breaches of other conditions which may be treated as breaches of warranty, like the warranty of title. In such a case also, the customer could also be involved in difficulties with sub-buyers, as an example , he may buy a motor car from one who has no right to sell it and should resell it to a 3rd person, from whom truth owner may recover it, or its value.

Iii. Performance

Section 58

Subject to the provisions of the precise Relief Act, 1877, in any suit for breach of contract to deliver specific or ascertained goods, the court, may, if it deems fit, on the appliance of the plaintiff, by its decree direct that the contract shall be performed specifically, without giving the defendant the choice of retaining the goods on the payment of damages. The decree could also be unconditional, or upon such terms and conditions on damages, payment of the worth, or otherwise, because the Court may deem just, and therefore the application of the plaintiff could also be made at any time before the decree.

The section provides a remedy to the customer and provides no correlative right to the vendor. It's therefore only on application of the customer when suing as plaintiff, that the contract of sale are often enforced specifically and therefore the section only applies when the contract is to deliver specific or ascertained goods. It’s been held that a seller isn't entitled to enforce performance of the contract under s. 58 because it deals with the case of a buyer of specific goods in respect of a contract to deliver specific or ascertained goods. ‘Specific’ here has the meaning which is given in section 2(14) while ‘ascertained’ means ‘identified in accordance with the agreement after a contract of sale is made’.

Section 58, as noted above, reproduces with some suitable changes s. 52 of English Act. Before passing of the Sale of goods Act, 1930, there existed Specific Relief Act 1877, Chapter II of which addressed performance of an existing contract. This is often also why Section 58 of the Sale of products Act, 1930 begins with the words “subject to the provisions of Chapter II of the precise Relief Act, 1877”.

The court has wide discretion to impose conditions. In one case, performance of agreement to transfer shares was granted subject to a lien to guard the transferor against non-payment of the worth of the shares. In another case, the House of Lords while ordering the precise performance of a contract to sell shares put a condition that the customer should pay interest on the acquisition price which he had been entitled to retain pending the order.

C. Remedies available to both seller and buyer

The suits which will be instituted by either the customer or the vendor are of two types

Suit for repudiation of contract before date or constructive breach

Interest by way of damages and special damages

i. Suit for repudiation of contract before date or constructive breach

Section 60

Where either party to a contract of sale repudiates the contract before the date of delivery, the opposite may either treat the contract as subsisting or wait till the date of delivery, or he may treat the contract as rescinded and use for damages for the breach.

This section, doesn't appear within the English act, and deals with constructive breach of a contract, that's to mention, a manifested intention, by either party, to not be bound by the promise to perform that a part of the contract when the time of performance arrives. Whether or not there has, in fact, been repudiation depends on the facts of every particular case.

The measure of damages isn't fixed by date of the defaulting party’s repudiation. It’s decided, just in case of goods that there's a market, in accordance with the difference between the contract price of the goods and market value thereon day. This is often wiped out order to bring the plaintiff as almost the position as he would are in, had the contract not been repudiated. In cases of contracts where no date is fixed, and a party refuses to perform the contract the principle of reasonable time is applied. During this case the date of repudiation is treated because the date on which the contract is broken and damages are calculated on the idea of this date.

If the party not in default declines to simply accept the opposite party’s repudiation, he keeps the contract alive for all purposes, as are often seen from Frost v Knight. Hence it follows that if, when the time for performance arrives, he himself is unable to perform or doesn't perform his contract, the position are going to be an equivalent because it would be if there had been no anticipatory repudiation by the other party and therefore the latter could also be discharged, and may also sue for damages.

If therefore, the vendor after refusing to simply accept the buyer’s anticipatory repudiation, when the time for performance arrives, tenders goods which aren't of the contract description, or tenders documents under a CIF contract which the customer isn't sure to accept, the customer may lawfully reject the goods or the documents and therefore the seller are going to be without remedy; or the customer may accept the goods tendered and treat the breach of condition as a breach of warranty and recover damages accordingly.

Ii. Interest by way of damages and special damages

Section 61

(1) Nothing during this Act shall affect the proper of the vendor or the customer to recover interest or special damages in any case whereby law interest or special damages could also be recoverable or to recover the cash paid where the consideration for the payment of it's failed.

(2) Within the absence of a contract to the contrary, the Court may award interest at such rate as it think fit one the quantity of the price-

(a) To the vendor during a suit by him for the quantity of the worth. - From the date of the tender of the goods or from the date on which the worth was payable.

(b) To the customer during a suit by him for the refund of the worth during a case of a breach of the contract on a part of the seller- from the date on which the payment was made.

This section preserves the proper of a party to a contract of sale to recover special damages, that's to mention , compensation for any loss or damage caused to him by either party’s breach ‘which the parties knew once they made the contract to be likely to result from the breach of it’.

These damages are contrasted with those which ‘naturally arose within the usual course of things’ from the breach. Generally speaking, the latter alone are recoverable by the plaintiff. However, his rule is subject to limitations where the breach has occasioned a special loss, which was actually in contemplation of the parties at the time of getting into the contract, that special loss happening subsequently to the breach must be taken under consideration.

Act 32 of 1839 provided for the payment of interest by way of damages in certain cases. Under the Act, the court could allow interest on debts or certain sums payable by an instrument in writing, from the time when the quantity became payable where a time was fixed for payment, or when no time was fixed, from the date on which the demand was made for payment in writing giving notice to the debtor that interest would be claimed.

It will be observed that the vendor can only recover interest when he's during a position to recover the worth. When he can only sue for damages for breach of contract, he's not entitled to interest under the provisions of this sub-section.

Similarly, the customer can also only recover interest when he's entitled to recover the acquisition price, that's to mention, when he can sue for the worth prepaid as money and received, by reason of total failure, for consideration. He cannot recover interest when his only remedy is to sue for damages, as an example for a breach of warranty, albeit those damages could also be sufficient to extinguish the worth. Moreover, he's only entitled to interest within the case of a breach of contract, presumably by the vendor. This limitation therefore, excludes cases arising under sections 7 and 8 and presumably other cases where the contract depends upon some condition inserted for the advantage of the vendor, and isn't performed due to the non- fulfillment of that condition, or the contract is frustrated by circumstances over which the vendor has no control, in order that in law he wouldn't be susceptible to an action.

D. AUCTION SALE (AS PER SECTION 64)

An auction may be a public sale. The goods are sold to all or any members of the general public at large who are assembled in one place for the auction. Such interested buyers are the bidders.

The price they're offering for the goods is that the bid and therefore the goods are going to be sold to the bidder with the very best bid.

The person completing the auction is that the auctioneer. He’s the agent of the vendor.

So, all the principles of the Law of Agency apply to him

But if an auctioneer wishes to sell his own property because the principal he can do so. And he needn't disclose this fact; it's not a requirement under the law.

E. LEGAL PROVISIONS OF AUCTION

As we saw previously, the rules regarding an auction are found within the Sale of goods Act. Section 64 of the Act specifically deals with the rules governing an auction.

1] Goods Sold in Lots

In an auction, there are often many goods up purchasable of the many kinds. If some particular goods are put up purchasable during a lot, then each such lot are going to be considered a separate subject of a separate contract of sale. So, each lot ill clear be the topic of its own contract of sale.

2] Completion of Sale

The sale is complete when the auctioneer says it's complete. This will be done by actions also – just like the falling of the hammer, or any such customary action. Till the auctioneer doesn't announce the completion of the sale the potential buyers can keep bidding.

3] Seller may Reserve Right to Bid

The seller may reserve his right to bid. To try to so he must expressly reserve such right to bid. During this case, the vendor on a person on his behalf can bid at the auction.

4] Sale Not Notified

If the vendor has not notified of his right to bid, he might not do so under any circumstances. Then neither the vendor nor a person on his behalf can bid at the auction if done then it'll be unlawful.

The auctioneer also cannot accept such bids from the vendor or the other person on his behalf. And any sale that contravenes this rule is to be treated as fraudulent by the customer.

5] Reserve Price

An auction sale could also be subject to a reserve price or an asking price. This suggests the auctioneer won't sell the products for any price below the said reserve price.

6] Pretend Bidding

But if the vendor or the other person appointed by him employs pretend bidding to boost the worth of the goods, the sale is voidable at the choice of the customer meaning the buyer can prefer to honor the contract or he can prefer to void it.

7] No Credit

The auctioneer cannot sell the goods on credit as per his wishes. He cannot accept a bill of exchange either unless the vendor is expressly fine with it.