UNIT – 4

THE SALE OF GOODS ACT-1930

Q1.What are the essential elements of contract of sales of goods?

A 1)

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 the 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.

Q 2) Explain the distinction between a sale and an agreement to sell.

A 2)

Q 3) Explain the distinguish between sale and hire purchase agreement

A 3)

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 instalment.

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 instalment.

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 instalments.

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 instalment, 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

Q 4)Explain the distinction between condition and warranty.

A 4)

Q 5) List the exceptions to the doctrine of caveat emptor

A 5)

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.

Q 6)Which are the four primary rules for passing of property?

A 6)

•         Specific or Ascertained Goods

•         Passing of Unascertained Goods

•         Goods sent on approval or “on sale or return”

•         Transfer of property just in case of reservation of the proper to disposal

•         Passing of Ascertained Goods

Section 19

This is the primary rule of the passing of property. It deals with the passing of specified goods and states that –Specific or ascertained goods pass when intended to pass. Section 19 of The Sale of goods Act, 1930, has three sub-sections as follows:

Sub-section (1): Imagine a contract for the sale of specific or ascertained goods with a transparent mention of the time when the parties to the contract shall transfer the property. In such cases, the property is transferred at the time mentioned within the contract.

Sub-section (2): to know the intention of the parties, the terms of the contract, the conduct of the parties, and therefore the circumstances of the case are considered.

Sub-section (3): Sections 20 to 24 of The Sale of products Act, 1930, contain rules to determine the intention of the parties. This intention is about the time at which the property within the goods will pass to the buyer. Let’s check out these sections

Section 20

Section 20 relates to Specific goods during a deliverable state. It states that if the contract is unconditional for the sale of specific goods during a deliverable state, then the property within the goods passes to the customer the instant the contract is formed. This rule holds true albeit the time of payment of price or delivery of the goods or both is postponed.

Example: Peter goes to an electronics store and buys a tv set. He asks the shopkeeper to deliver it to his house. The shopkeeper agrees. The tv immediately becomes the property of Peter.

Section 21

Speci­fic goods to be put into a deliverable state (Section 21) – Imagine a contract for the sale of goods where the seller has got to do something before the goods are ready for delivery. In such cases, the passing of property happens only after the vendor does the items and informs the customer.

Example: Peter buys a laptop from an electronics store and asks for a home delivery. The shopkeeper agrees thereto. However, the laptop doesn't have a Windows OS installed. The shopkeeper promises to put in it and call Peter before making the delivery. During this case, the property transfers to Peter only after the shopkeeper has installed the OS making the laptop ready for delivery.

Section 22

Specific goods are during a deliverable state but the vendor has got to do something to determine the worth – Imagine a contract of sale of goods which are during a deliverable state but the seller has got to do something like weight, measure, test, or perform the other act on the goods to determine the price. In such cases, the property doesn't pass until the seller does the act and informs the seller.

Example: Peter sells a carpet to John and agrees to get it in John’s house as a neighborhood of the contract. He delivers the carpet and informs John that he will lie it subsequent day. That night the carpet gets stolen from John’s premises. During this case, John isn't responsible for the loss since the property had not passed to him. Consistent with the terms of the contract, the carpet would be during a deliverable state only after it's laid.

Passing of Property: Passing of Ascertained and Unascertained Goods

Passing of Unascertained Goods

If there's a contract for the sale of unascertained goods, then the passing of the property of the goods to the customer cannot happen unless the goods are ascertained. This is often specified under Section 18 of The Sale of goods Act, 1930.

Section 23

Further Section 23 lists two important rules for the passing of property of unascertained goods:

Sale of unascertained goods by description: Imagine a contract for the sale of unascertained or future goods by description. If any goods of that description are appropriated to the contract either by the buyer or the seller with the consent of the other party, then the property of the goods passes to the buyer. The consent are often express or implied and given before or after the appropriation is formed.

Delivery to the carrier: If the vendor delivers the goods to the buyer or a carrier or a bailee (whether named by the customer or not) for the aim of transmission to the buyer, but doesn't reserve the proper of disposal, then he's deemed to have unconditionally appropriated the products to the contract.

Q7)What does traditional principles associated with property rights include?

A 7)

•         Control over the use of the property.

•         Right to require any enjoy the property.

•         Right to transfer or sell the property.

•         Right to exclude others from the property.

Q 8) Make a note on the conditions for an unpaid seller.

A 8)

Q 9)Enlist the legal provisions of auction.

A 9)

•         Goods Sold in Lots

•         Completion of Sale

•         Seller may Reserve Right to Bid

•         Sale Not Notified

•         Reserve Price

•         Pretend Bidding

•         No Credit

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.