What is contract of sale?, What is agreement to sell?, What is the subject matter of sale?, Implied and Expressed Conditions and ,Warranties, Fitness and Merchantable quality, Sale by description, Sale by sample, Law of Caveat Emptor and Caveat, ,Vendetta Passing of property and risk, Nemo dat quod non habet, Remedies of unpaid seller, Case Studies,

1. Dr. Tabrez Ahmad
Professor of Law
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 1

2. Dr. Tabrez Ahmad, corpolexindia.blogspot.com, 2

3. Agenda
 What is contract of sale?
 What is agreement to sell?
 What is the subject matter of sale?
 Implied and Expressed Conditions and Warranties
 Fitness and Merchantable quality
 Sale by description
 Sale by sample
 Law of Caveat Emptor and Caveat Vendetta
 Passing of property and risk
 Nemo dat quod non habet
 Remedies of unpaid seller
 Case Studies

Dr. Tabrez Ahmad
http://corpolexindia.blogspot.in 3

4. Contract of sale
 Most common of all the commercial contracts
 Governed by Sale of Goods Act,
 came into force on 1st JULY,1930.
 are subject to the general legal principles
applicable to all the contracts such as, offer &
its acceptance, consideration etc.
 Some special features
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 4

5. ESSENTIALS OF VALID SALE CONTRACT
 Two parties:
There must be 2 distinct parties i.e., a buyer and a
seller
 Goods:
Goods which form the subject matter of the
contract of sale must be movable.
 Price:
The consideration for the contract of sale, called
price, must be money
 Essential elements of a valid contract:
A contract is made by an offer to buy or sell goods
for a price and the acceptance of such offer.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 5

6. SALE AND AGREEMENT TO SELL
 Property in the goods is transferred from the seller to
the buyer- Sale
 Transfer of the property in the goods is to take place
at some future date or after fulfillment of some
condition- Agreement to sell
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 6

7. SALE AND AGREEMENT TO SELL
Sale Agreement to sell
1. Ownership is with the 1. Ownership is with the
buyer seller
2. Executed contract 2. Executory contract
3. Sue for price, in case of 3. Sue for damages only, in
breach case of breach
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 7

8. CONDITION AND WARRANTY
Condition Warranty
1. Its is a term in contract 1. Its a term in contract
which is essential. which is collateral.
2. When condition 2. When warranty
breaches? breaches?
3. Breach of condition can 3. Breach of warranty
be breach of warranty cannot be breach of
condition.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 8

9. EXPRESS AND IMPLIED CONDITIONS
AND WARRANTIES
 Condition or warranty may be expressed
 Express condition and warranty are expressly provided
in the contract.
 Implied Condition or warranty are provided by the law.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 9

10. Condition as to title:
In a contract of sale, unless the situation of the
contract are such as to show a different
intention, there is an implied condition on part of
the seller that—
 In sale, he has right to sell goods.
 In agreement to sell, he will have a right to sell at
the time when property is to pass.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 10

11. SALE BY DESCRIPTION
 In sale by description there is an implied condition
that the goods shall correspond with description.
 This means “if you contract to sell peas, you cannot
oblige the party to take beans.”
 Hence if the description of the article tendered is
different then the buyer may not buy the goods.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 11

12. SALE BY DESCRIPTION AND SAMPLE
 If the sale is by sample as well as by description, it is not
sufficient that the bulk of goods corresponds with the
sample, if the goods do not also correspond with the
description.
 This means goods must match with the description and
sample.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 12

13. CONDITION AS TO QUALITY OR FITNESS
 Normally, in a contract of sale there is no implied
condition as to quality or fitness for particular purpose.
 The buyer must test the goods before he buys them in
order to satisfy him self that the goods shall be suitable
for him.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 13

14. CONDITION OF MERCHANTABILITY
 Where goods are bought by description from a seller who
deals in goods of that description there is an implied
condition that the goods are of merchantable quality.
 This means goods should be such that they are
commercially saleable, as per the description by which
they are known in the market at their full value.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 14

15. CONDITION IMPLIED BY CUSTOM
 An implied condition as to quality or fitness for a
particular purpose may be annexed by the usage of trade.
 This means that the goods which are required may be
ascertained from the acts and from the nature of
description of that article.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 15

16. SALE BY SAMPLE
 A contract of sale is a contract for sale by sample
where there is a term in the contract, express or
implied, to that effect.
1. That bulk shall correspond with the sample in quality,
2. That the buyer shall have a reasonable opportunity of
comparing the bulk with the sample.
3. That the goods shall be free from any
defects, rendering them unmerchantable.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 16

17. CONDITION AS TO WHOLESOMENESS
 In the case of eatables and provisions, in addition
to the implied condition as to
merchantability, there is another implied
condition that the goods shall be wholesome.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 17

18. WARRANTY OF QUIET POSSESSION
 In a contract of sale, unless there is a contrary
intention, there is an implied warranty that the buyer
shall have and enjoy quite possession of the goods.
 If the buyer is in any way disturbed in the enjoyment of
the goods in consequence of the seller’s defective title to
sell, he can claim damages from the seller.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 18

19. WARRANTY OF FREEDOM FROM
ENCUMBRANCES
 In addition to the previous warranty, the buyer is entitled
to a further warranty that the goods are not subject to
any charge or right in favor of a third party.
 If the possession is in any way disturbed by reason of the
existence of any charge or encumbrances on the goods in
favor of any third party, he shall have a right to claim
damages for breach of this warranty.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 19

20. WARRANTY AS TO QUALITY OR
FITNESS BY USAGE OF TRADE
 An implied warranty as to quality or fitness for a
particular purpose may be annexed by the usage
of trade.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 20

21. WARRANTY TO DISCLOSE
DANGEROUS NATURE OF GOODS.
 When a person sells goods knowing that the goods
are inherently dangerous or they are likely to be
dangerous to the buyer and that the buyer is
ignorant of the danger, he must warn the buyer of
the probable danger, other wise he will be liable in
damages.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 21

22. CAVEAT EMPTOR and Its
exceptions
 This means “LET THE BUYER BEWARE” i.e., the
seller is under no duty to reveal unflattering
truths about the goods sold.
Fitness for Buyers purpose
 Therefore, when a person buys some goods, he
must examine them thoroughly.
 If the goods turn out to be defective or do not
suit his purpose or he depends upon his own
skills and makes a bad decision, he cannot blame
the seller.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 22

23. Sale under Patent or Trade name
Merchantable quality
Usage of trade
Consent by fraud
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 23

24. WHO IS AN UNPAID SELLER
 A seller of goods is deemed to be an unpaid seller:-
 When the whole of the price has not been paid or
tendered
 When any negotiable instrument is dishonoured
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 24

25. Rights of
unpaid seller
Against the seller
Against the goods
personally
Where the Where the Repudiation Suit for Suit for
property in the property in the
Suit for price
goods has not
of contract damages interest
goods has
passed passed
With holding
delivery Lien
Stoppage in
transit Stoppage in
transit
Re sale
25

26. RULES OF DELIVERY
 Mode of delivery  Time of delivery
 Delivery and payment  Goods in possession of
con current condition a third party
 Effects of part delivery  Cost of delivery
 Buyer to apply for  Delivery of wrong
delivery quantity
 Place of delivery  Installment deliveries
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 26

27. FREE ON BOARD
Seller’s duties: Buyer’s Duties:
 To deliver the goods on  Arrange for the contract
board the ship named by of affreightment
the buyer
 Name the ship on which
 Once goods are put on
board the ship, they are at goods are to be delivered.
the risk of the buyer.
 It becomes the duty of the
 The duty of the seller ends buyer once the goods are
when he delivers the on the ship.
goods to the ship at the
port of shipment.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 27

28. COST, INSURANCE, FREIGHT
 Seller’s duty:  Buyer’s duty
 Make out an invoice of
the goods sold.
 To pay unloading
 Procure a contract of charges, wharf age
affreightment. charges, etc.
 To arrange for an  To pay custom and
insurance. import duties.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 28

29. AUCTION SALE
 A sale by auction is a public sale where different
intending buyers try to outbid each other.
 The goods are ultimately sold to the highest bidder.
 The auctioneer who sells the goods by the auction is an
agent of the seller, i.e. the owner.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 29

30. RULES OF AUCTION SALE
 Completion of sale:-
The sale is complete when the auctioneer
announces its completion by the fall of the
hammer or in some other customary manner like
“one two three” or “going going, gone”
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 30

31. RIGHT OF SELLER TO BID
 A right to bid may be reserved expressly by or on
behalf of the seller. Where such right is expressly
reserved, the seller or any one person on his behalf
may bid at the auction.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 31

32. SALE NOT NOTIFIED SUBJECT TO A
RIGHT TO BID
 It is not lawful
1. For the seller to bid himself or to employ any person
to bid at such sale.
2. For the auctioneer knowingly to take any bid from
the seller or any such person.
3. Any sale against this rule may be treated as
fraudulent.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 32

33. RESERVE PRICE
 It is the price below which the auctioneer will not sell.
 Where the sale is subject to a reserve price, every bid is
accepted conditionally on the reserve price being
reached.
 But where the sale is without reserve, the goods will be
sold to the highest bidder.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 33

34. USE OF PRETENDED BIDDING
 If the seller makes use of pretended bidding to
raise the price, the sale is void able at the option of
the buyer.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 34

35. KNOCK OUT OR AGREEMENT NOT TO
BID AGAINST EACH OTHER
 Where a group of persons form a combination to
prevent competition between themselves at an auction
and arrange that only one of them will bid and share
anything so obtained among themselves.
 This is called knock out which is legal.
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 35

36. Sale Under Compulsion
 Board of Trade
 Tea Board
 Steel Controller
 OPEC
 etc
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 36

37. Case Studies
Indian Steel and Wire Products Ltd.
(Appellant)
v.
State of Madras ( Respondent)
AIR 1968 SC 478
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 37

38. Orissa Textile Mills Ltd. and Another (
Petitioners)
V.
Ganesh Das Ramkishun ( Opposite Party)
AIR 1961 PAT 107
Dr. Tabrez Ahmad,
Blog: http://technolexindia.blogspot.com, 38

39. P.S.N.S Ambalavana Chettiar & Co.
Ltd. and another ( In both the
Appeals), Appellants
V.
Express Nespapers Ltd. Bombay (
In both the Appeals), Respondent.
AIR 1968 SC 741
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 39

40. Union of India, (Appellant)
V.
A.L Ralliaram (Respondent)
AIR 1963 SC 1685
Dr. Tabrez
Ahmad, Blog:
http://technolexindia.blogspot.com, 40

41. Dr. Tabrez Ahmad
http://corpolexindia.blogspot.in 41

42. Dr. Tabrez Ahmad
http://corpolexindia.blogspot.in 42

43. Dr. Tabrez Ahmad
http://corpolexindia.blogspot.in
43