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Sale of Goods


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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,

Sale of Goods

  1. 1. Dr. Tabrez Ahmad Professor of LawDr. TabrezAhmad, Blog:, 1
  2. 2. Dr. Tabrez Ahmad,, 2
  3. 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 3
  4. 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:, 4
  5. 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:, 5
  6. 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:, 6
  7. 7. SALE AND AGREEMENT TO SELLSale Agreement to sell1. Ownership is with the 1. Ownership is with the buyer seller2. Executed contract 2. Executory contract3. Sue for price, in case of 3. Sue for damages only, in breach case of breach Dr. Tabrez Ahmad, Blog:, 7
  8. 8. CONDITION AND WARRANTYCondition Warranty1. 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:, 8
  9. 9. EXPRESS AND IMPLIED CONDITIONSAND 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:, 9
  10. 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:, 10
  11. 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:, 11
  12. 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:, 12
  13. 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:, 13
  14. 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:, 14
  15. 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:, 15
  16. 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:, 16
  17. 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:, 17
  18. 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:, 18
  19. 19. WARRANTY OF FREEDOM FROMENCUMBRANCES 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:, 19
  20. 20. WARRANTY AS TO QUALITY ORFITNESS 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:, 20
  21. 21. WARRANTY TO DISCLOSEDANGEROUS 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:, 21
  22. 22. CAVEAT EMPTOR and Itsexceptions 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:, 22
  23. 23. Sale under Patent or Trade name Merchantable quality Usage of trade Consent by fraud Dr. Tabrez Ahmad, Blog:, 23
  24. 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:, 24
  25. 25. Rights of unpaid seller Against the seller Against the goods personally Where the Where the Repudiation Suit for Suit forproperty in the property in the Suit for pricegoods has not of contract damages interest goods has passed passed With holding delivery Lien Stoppage in transit Stoppage in transit Re sale 25
  26. 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:, 26
  27. 27. FREE ON BOARDSeller’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:, 27
  28. 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:, 28
  29. 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:, 29
  30. 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:, 30
  31. 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:, 31
  32. 32. SALE NOT NOTIFIED SUBJECT TO ARIGHT TO BID It is not lawful1. 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:, 32
  33. 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:, 33
  34. 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:, 34
  35. 35. KNOCK OUT OR AGREEMENT NOT TOBID 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:, 35
  36. 36. Sale Under Compulsion Board of Trade Tea Board Steel Controller OPEC etc Dr. Tabrez Ahmad, Blog:, 36
  37. 37. Case StudiesIndian Steel and Wire Products Ltd. (Appellant) v. State of Madras ( Respondent) AIR 1968 SC 478 Dr. Tabrez Ahmad, Blog:, 37
  38. 38. Orissa Textile Mills Ltd. and Another ( Petitioners) V.Ganesh Das Ramkishun ( Opposite Party) AIR 1961 PAT 107 Dr. Tabrez Ahmad, Blog:, 38
  39. 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:, 39
  40. 40. Union of India, (Appellant) V.A.L Ralliaram (Respondent) AIR 1963 SC 1685 Dr. Tabrez Ahmad, Blog:, 40
  41. 41. Dr. Tabrez Ahmad 41
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  43. 43. Dr. Tabrez Ahmad 43