INTRODUCTION ESSENTIALS OF CONTRACT OF SALE DISTINGUISH BETWEEN SALE AND AGREEMENT TO SELL DOCUMENTS OF TITLE TO GOODS` CONDITIONS AND WARRANTIES DOCTRINE OF CAVEAT EMPTOR RIGHTS OF UNPAID SELLER DELIVERY – RULES REGARDING DELIVERY SALE BY AUCTION
Originally, the law relating to sale of goods was contained in Chapter VII of the Indian Contract Act, 1872. The same was repealed and re-enacted by the Sale of Goods Act, III of 1930.
(Section 4) 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 price".
From the above definition, the following essentials of a contract of sale may by noted: 1. There must be at least two parties 2. Transfer or Agreement to transfer the ownership of goods. 3. The subject matter of the contract must necessarily be goods. 4. The consideration is Price. 5.A Contract of sale may be in writing or by words 6. All other essentials of a valid contract must be present
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.
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) [Johnson V Mcdonald (1842) 9 M & W 600, 60 RR 838] 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 B`s 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:
Sale -Agreement to sell1. A sale is an executed contract. 1. An Agreement to sell is an executory2. In a sale, since the property has passed to contract. the buyer, the seller can sue the buyer for the 2. In an agreement to sell, in case of breach, price of the goods. the seller can only sue for damages, unless3. A sale creates a right in rem. the price was payable at a stated date.4. In case of loss of goods, the loss will fall on 3. An agreement to sell creates a right in the buyer, even though the goods are in the personam. pos-session of the seller. It is because Risk 4. The loss in this case shall be borne by the is as-sociated with ownership. seller, even though the goods are in the4. In case buyer pays the price and the seller pos-session of the buyer. thereafter becomes an insolvent, the buyer 5. In these circumstances, the buyer cannot can claim the goods from the Official claim the goods but only a rateable Receiver or Assignee. dividend for the money paid.6. If the buyer becomes an insolvent without 6. In these circumstances, the seller can paying the price, the ownership having refuse to deliver the goods to the Official passed to the buyer, the seller shall have to Assignee or Re-ceiver. deliver the goods to the Official Assignee or Receiver ex-cept where he has a lien over the goods.
Hire Purchase Agreement It is an agreement for hire, with an option to purchase. The hirer, under this agreement, is required to pay every month a particular sum of money, and if he pays in that way for a fixed number of months, the hirer will become the owner of the goods on the payment of the last instalment. But, if the hirer fails to pay any particular instalment, the owner can terminate the contract and take away the goods, because the ownership continues to remain in the owner. A "Hire-purchase agreement" is distinct from "Sale" in which price is payable by instalments A Hire-purchase agreement, does not result in passing of the property unless the option to purchase is exercised, usually by payment of all the instalments. Till such time, it constitutes bailment.
Sale: ln case of sale, the property passes as soon as sale is made though price has not been fully paid. In determining as to whether a particular contract belongs to one type or the other, regard shall have to be paid to the fact whether the hirer has merely an option to purchase, or whether he has bought or agreed to buy the 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 sub-ject 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`.
A document of title to goods may be described as any document used as proof of the possession or con-trol of goods, authorising or purporting to authorise, either by endorsement or by delivery, the possessor of the document to transfer or receive goods thereby represented. The following are documents of title to goods: ◦ Bill of Lading; ◦ Dock Warrant; ◦ Warehouse keepers Certificate; ◦ Warfingers Certificate; ◦ Railway Receipt; ◦ Warrant or order for the delivery of goods; and Any other document used in the ordinary course of business as a document of title
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”.
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”.
DISTINCTION BETWEEN CONDITION AND WARRANTY Condition Warranty1. A condition is a stipulation (in 1. A warranty is a stipulation, a contract), which is essential which is only collateral or to the main purpose of the subsidiary to the main contract. purpose of the contract.2. A breach of condition gives 2. A breach of warranty gives the aggrieved party a right to only the right to sue for sue for damages as well as damages. The contract the right to repudiate the cannot be repudiated. contract.3. A breach of condition may be 3. A breach of warranty cannot treated as a breach of be treated as a breach of warranty in certain condition. circumstances.
CASES OF TREATING THE BREACH OF CONDITION AS BREACH OF WARRANTY [SECTION 13] 1. Voluntary Waiver . 2. Compulsory treatment of breach of condition as breach of Warranty.
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.
(1) Condition as to Title(2) Sale by Description(3) Condition as to Quality or Fitness(4) Merchantable Quality1)They are reasonably saleable under the description by which they are known in market.2)They are purchased for the personal use they must be reasonably fit for the purpose for which they are generally held.
(5)Sale by sample- In a sale by sample, the following are the implied conditions:1. The bulk shall correspond with the sample in quality;2. That the buyer shall have a reasonable opportunity of comparing the bulk with the sample; and3. That the goods shall be free from any defects rendering them unmerchantable, which would not be apparent on reasonable examination of the sample.
Implied warranties 1. Warranty of Quiet PossessionIn a contract of sale, unless the circumstances of the contract are such as to show different intention, there is a implied warranty that the buyer shall have and enjoy quiet possession of the goods. 2. Warranty of Freedom from Encumbrances
Caveat Emptor is a fundamental principle of the law of sale of goods It means "Caution Buyer", i.e. "Let the buyer beware".
In case of any misrepresentation by the seller In case of concealment of latent defects by the sellers In case of sale by descriptions and sample(Sec 15) Conditions as to merchantability Conditions as to quality of fitness for buyers purpose Conditions of wholesomeness
The general rule is that only the owners of the property can transfer a goods title. “Nemo dat quod non habet” which means “no one can give which he himself has not”
UNDER THE SALE OF GOODS ACT IN OTHER LAWS Estoppels (Sec . 27) Sale by a finder of lost goods Sale by a mercantile agent Sale by a Pawnee Sale by one of several joint Sale by Official Receiver owners (Sec 28) Purchase in market overt Sale by an unpaid seller Under Negotiable Instrument Act 1881
A seller deemed to be an unpaid seller (a). When the whole of the price has not been paid or rendered (b). When the bill of exchange or other negotiable instrument has been received as conditional payment and condition has not been fulfilled by the reason of the dishonor of the instrument or otherwise (Sec. 45)
AGAINST THE BUYERAGAINST THE GOODS PERSONALLY Unpaid sellers lien Right to sue for price Stoppage in transit Right to sue for damage Repudiation of contract Right of resale before due date
It has been defined as a voluntary transfer of possession from one person to another.. Delivery of the goods may, be: I. Physical or Actual Delivery 2. Symbolic Delivery - e.g., delivery of a railway receipt properly endorsed, or deliv-ery of the key of a warehouse; 3. Constructive Delivery or Attornment - only an acknowledgement by the person in possession that he holds them on behalf of another.
1. The seller is not bound to deliver goods till the buyer applies for delivery in terms of the contract.2. Place of Delivery - goods sold are to be delivered at the place agreed for delivery in the contract.3. Time of Delivery – as per contract otherwise within reasonable time.4. The expenses of and incidental to putting the goods into a deliverable state shall be borne by the seller, as per the terms of the contact.
5 Demand and tender must be at a reasonable hour - What is a reasonable hour is a question of fact.6 Delivery of Wrong Quantity -.7 Instalment Deliveries - The buyer is not bound to accept delivery by instalment, unless otherwise agreed.8 Delivery to the Carrier or Wharfinger –9 Buyer not bound to return rejected goods -. 10 Liability of the Buyer -
In the case of sale by auction the following rules apply:1. At an auction, the sale is complete when the auctioneer announces its completion by the fall of the hammer2. A bidder is at liberty to withdraw his bid at any time before it is accepted by auctioneer3. Advertisement to auction is not an offer but mere invitation .4. Auctioneer has right to make any condition he likes .5. Biddings can be withdrawn before acceptance
6 In case of goods put up for sale in lots –7 no seller or any person who has advertised can bid at an auction sale – unless right is notified8 Knockout agreements are unlawful9 Pretended bidding by seller to raise price is voidable at option of buyer
The Sale of goods is the most common of all commercial transaction . Knowledge of sale of goods is important to all . Law relating to sale of goods is contained in sale of goods act 1930.