Contents Introduction Formation of the Contract Conditions and Warranties Effects of the Contract Performance of the Contract Unpaid Seller Suits for Breach of the Contracts and Auction Sales
Introduction Scope of the Act The sale of goods act applies only to movable goods and not to immovable goods which is governed by Transfer of Property Act,1882 Goods (1) Existing Goods: Specific goods & Generic goods (2) Future Goods Shares and stock, goodwill, patent, copyright , trademark If Goods are sold against goods ,it is 'EXCHANGE' governed by the Transfer of Property Act 1882.
Document of Title To Goods: A document of title to goods is a proof of possession or control over the goods. The holder of the document of title to goods is authorized to receive the goods. He is also authorized to transfer the possession of goods either by endorsement or by delivery. Property: It Means General property in goods and not merely a special property
Formation Of The Contract Sale When under a contract of sale the property in the goods transferred from seller to buyer, the contract is called “sale” Essential of a valid sale There must be two parties Transfer of property By writing or by word of mouth Consideration for a sale of goods must be money Includes both an actual sale and agreement to sell Agreement To Sell Ownership in the goods is to take place at a future date or subject to some condition to be fulfilled, is called agreement to sell
Sale and Agreement to sell – Difference Sale Nature of Contract Executed Creation of Right Right in Rem Passing of Property Goods and risk passes to buyer Risk of loss Buyer Agreement to Sell Nature of Contract: Executory Creation of Right Right in Personnam Passing of Property Goods and risk is with seller Risk of Loss Seller
Remedies: Breach Seller is entitled to Sue for Price Right of Lien Stoppage in transit Resale Insolvency of Buyer Seller must deliver goods to official assignee Insolvency of Seller Buyer is entitled to receive Remedies: Breach Seller can only sue for damages for non performance of Contract. Insolvency of Buyer Seller may refuse to deliver the goods unless paid Insolvency of Seller Buyer has to prove the amount.
Contract of Sale of Goods and Contract of Work and Labour Examples: A dentist makes a set of false teeth for his patient with materials wholly found by the dentist and the buyer agrees to pay Rs.2000 when they are properly fitted into his mouth A customer gives his tailor a length of suiting and requires him to make a suit for him, the lining materials and the buttons to be supplied by the tailor.
Formalities of The Contract How the contract made? Offer of acceptance Delivery Ascertainment of price Price to be fixed when agreement is to sell at valuation Goods Contract
Hire Purchase Agreement Sumit sells a refrigerator to Riddhi with a stipulation that Riddhi shall pay Sumit a fixed sum every month by way of installments till the full price of the refrigerator is paid. Now till Riddhi pays the full amount to Sumit by way of installments, she does not become the owner of the refrigerator . She can discontinue payment of further installments. In such a case Sumit takes back the refrigerator . Riddhi has no right to recover the installments already paid by her to Sumit because the amount paid by her is adjusted towards the hire charges of refrigerator.
Example : Hire Purchase Agreement Bilva hires a piano from Rajul on an agreement that Bilva should pay Rs500 a month as rent. The stipulation is that if she regularly pays the rent for 36 months the piano becomes her property at the end of 36 months. Further it is provided that Bilva can return the piano at any time and she need not pay any more. This is a hire purchase agreement proper. If however, it is agreed that 36 months rent must be paid and that he cannot return the piano, the agreement is a contract of sale and not a hire purchase agreement
Hire Purchase Agreement A hire purchase agreement has 2 aspects: Bailment of Goods subject to hire purchase. Element of Sale,which fructifies when the option to purchase has been exercised Hire purchase =Bailment + Agreement to Agreement Sell In hire purchase agreement a buyer cannot exercise any ownership rights. Hire purchase agreement is regulated by Hire Purchase Act, 1972.
Subject Matter of Contract Goods that form a subject matter of contract of sale may be either : Existing goods Future goods Goods Perishing – Effects of Destruction of goods Goods perishing before making of contract Goods perishing before sale but after agreement to sell
Conditions and Warranties Condition: A condition is a stipulation essential to the main purpose of the contract, breach of which gives right to treat the contract as repudiated or broken. Warranty: A Warranty is a stipulation collateral to the main purpose of the contract the breach of which gives rise to a claim for damages but not to a right to reject the foods and treat the contract as repudiated or broken.
Illustration: Conditions and Warranty Samir places an order to Rushi for supply of machine parts strictly according to the sample, delivery to be made within 3 mths. Now supply of parts strictly according to the sample is an essential condition while delivery withing 3 mths is a warranty . If , therefore, Rushi does not supply the machine parts strictly according to the sample, Samir can repudiate the contract and reject the goods and also claim damages. If, however, Rushi supplies the parts later than 3 mths, A can claim damages only for late delivery but he cannot repudiate the contract.
Implied Warranties and Conditions Warranty as to title Sale by description Sale by sample Sale by sample as well as by description Warranty as to quality or fitness Warranty as to quiet possession free from encumbrances
Difference between Condition & Warranty Condition Essential Affects the legality of contract May be treated as breach of warranty Contract can be cancelled Warranty Subsidiary It does not affect Warranty cannot become a condition At best damages are to be paid
Caveat Emptor Caveat emptor means&quot; let the buyer beware” ex. the buyer must take care Exception Custom or usage of trade Fraud : seller is guilty of fraud, he is liable. For specific purpose Merchantable quality : where (1) sale is by description & (2) purchased form the seller deals in goods of that description., implied condition is that the goods are of merchantable quality.
Where goods are sold by a person who is not the owner thereof and does not sell them under the authority or with the consent of the owner, the buyer acquires no better title than the seller had. Transfer of Title
Title by estoppel Sale by mercantile agent Sale by one of the several joint owners Sale of goods by a person in possession of goods under a voidable contract Sale by seller in possession after sale Sale by buyer in possession after sale Sale by an unpaid seller Sale in market overt Exception to the general rule
Performance of the contract Delivery of goods Actual delivery Symbolic or constructive delivery Rules for Delivery of goods Delivery and payment Delivery to be made to buyer Part delivery Buyer to apply for delivery Mode of delivery Place of delivery Time of delivery Demand at reasonable hour Expenses Installment delivery Goods in possession of third party
Delivery of wrong Quantity Short delivery Excess delivery Mixed delivery Acceptance of delivery Rules Examining goods When accepted? Buyer intimates When after the lapse of reasonable time, he retains the rejected items Buyer not bound to return the rejected goods: Mere Intimation of rejection by buyer is sufficient
Carriage by sea : 1) C.I.F(Cost – insurance –freight) Contracts 2) F.O.B(Free on Board) - Contracts 3) Ex - ship contracts: Seller has to deliver the goods after the arrival of the ship. Seller has to pay freight. The goods are at the seller's risk during the voyage. Delivery to carrier
Unpaid Seller Who is an unpaid seller? A seller of the 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 conditional payment. Rights of an unpaid seller When the property in the good s has passed to the buyer When the property in the goods has not passed to the buyer
When the property in the good s has passed to the buyer Right of lien Right of stoppage in transit Right of re-sale When the property in the goods has not passed to the buyer Right of withholding delivery Reservation of right of disposal Other rights
Remedies for breach of the contract of sale Remedies available to the seller Suit for price Suit for damages Remedies available to the buyer Suit for damages for non-delivery of the goods Suit for specific performance Suit for breach of warranty Suit for repudiation of the contract-anticipatory breach
Auction Sales Implied warranties in an auction sale (1) Auctioneer warrants his authority to sell (2)He warrants that he knows of no defect in principals title. (3)He warrants to give quiet and peaceful possession of goods against payment of the price Knock-out agreement A knock-out agreement means an agreement between a group of persons not to bid against each other
CASE STUDY - 1 Case Summary Harish bought a second-hand refrigerator from Manoj for Rs 450. An agreement made between them that refrigerator should be put in order at Rs 320. Harish took delivery. Harish found it is not working properly and gave two parts for repair to Manoj. The full Bill for repair has not been paid. Manoj claimed Lien on two parts and refuse to return until balance is paid.
QUESTIONS Is Manoj right what he did? Is the Lien justified?
JUDGEMENT Manoj has no right of Lien. His refusal to return until payment is made is not justified. The contract had been fully performed. Once the refrigerator is handed over , the Lien had ended. The contract cant revive