Sale of Goods_Business_Law

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    Law of Sale of Goods Act 1930

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    Contract of sale

    Is a contract whereby a seller transfers or agrees to transfer theproperty in goods to the buyer for a price.(sec.4)

    ESSENTIALS(1)At least two parties: Buyer/Seller. Part-owner may sell to

    another part-owner but no person could buy own goods. E.g.: State of Gujarat Vs. Ramanlal.S & Co.

    (2) Transfer or agreement to transfer ownership of goods. Henceit is different from bailment/pledge where mere possession istransferred.

    (3)Subject matter of contract must necessarily be goods: Sale ofimmovable property is excluded & the term goods is defined insec.2(7).

    (4) Price is the consideration for contract of sale & has tonecessarily be money.(5) Contract of sale may be absolute or conditional.(6) All other essentials of a valid contract must be present.

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    Sale Vs Agreement to sell

    Sale is executed contract while agreement to sell is anexecutory contract. In Sale, there is transfer of ownership ofgoods whereas in agreement to sell, the transfer is to take placeat a future time or subject to fulfillment of some condition.

    In sale, seller can sue the buyer for price, in default of paymentwhereas seller can sue only for damages in an agreement forsale.

    In sale, any loss of specific/ ascertained goods would fall onbuyer even if goods are in possession of seller while inagreement it shall be borne by seller even if goods are in thepossession of buyer.

    In sale, if seller becomes insolvent after the contract, buyer canclaim goods from official receiver or assignee. In agreement,

    buyer cannot claim goods, but only a rate able dividend. In sale, if buyer becomes insolvent before payment, seller has

    to deliver the goods to official receiver or assignee. Inagreement, the seller can refuse to deliver the goods to officialreceiver/assignee.

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    Contract of sale

    May be expressed: Writing/orally/partly written &partly oral.

    May be Implied: from conduct of parties.

    Different from hire-purchase.

    Different from a contract for work & labor or labor& materials.

    Different from barter.

    Different from bailment.

    Different from lease.

    Different from gift.

    Different from mortgage/pledge/hypothecation.

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    Sale Vs Hire-purchase

    In sale the ownership in goods is immediately transferred whilein H.P, it is only after last installment is paid.

    In sale buyer becomes owner of goods while in H.P, the buyerstands in capacity of a bailee.

    In sale, buyer has no option to rescind the contract and has topay the price agreed, while in H.P, the hirer can set aside thecontract by stopping payment of instalments.

    In sale, buyer can transfer title to a subsequent purchaser whilea hirer cannot do so, and the hiree can recover goods from suchbuyer.

    In sale instalments are treated as part-payment while in H.P,they are treated so only when hirer exercises option to buy, ifnot it would be treated as hire-charges.

    In sale, the sales tax could be levied at the time of contract,while in H.P, it could be levied only when hire ripens to a sale.

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    Definition of goods---sec.2(7)

    All kinds of movable property other than actionable claims & money(excluding rare coins) including stock & shares, growing crops, water,electricity, gas and even intangibles like goodwill, patents andtrademarks.

    CLASSIFICATION (1) Existing Goods: Goods owned/possessed by seller at the time of

    making contract of sale.

    (2) Specific Goods: Those goods identified & agreed upon at the timeof contract of sale. (3) Ascertained goods: Those goods identified & agreed upon,

    subsequent to contracting for sale. (4) Unascertained (generic goods): Those goods either not identified or

    not agreed upon at the time of making the contract of sale. Thosedefined by description only.

    (5) Future goods: Those goods to be manufactured/acquired by sellerafter making contract. Sec.2(6).There can be only an agreement to sell

    (6) Contingent Goods: When acquisition of goods by seller dependsupon an uncertain contingency, they are called contingent goods.

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    Voidability of contracts

    Goods perishing before making contract (sec.7)or damaged & no longer answering description in thecontract.

    * Part-destruction means buyer has to accept thosegoods in good condition so long as the good ones &

    destroyed ones are divisible.* If indivisible, the contract becomes void. However, if goods are unascertained, the contract is

    not void. If goods are destroyed after agreement to sell but

    before sale, (sec.8) the contract is void on grounds ofsupervening impossibility if loss is caused to specificgoods, it was beyond the control of either parties andif loss had occurred before risk passed on to buyer.

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    Conditions & warranties(sec.12)

    Representations forming an integral part of a contract of saleare stipulations.

    Any stipulation essential to the main purpose of the contract,the breach of which gives right to repudiate is called acondition.

    Any stipulation collateral to the main purpose of the contract,the breach of which gives right to claim damages but not a rightto reject/repudiate the contract.

    Difference between condition & warranty. Conditions may be precedent or subsequent to a contract of

    sale. A buyer has the right to waive a condition & treat it as warranty

    if he chooses not to repudiate. If contract is not severable, breach of any condition by seller

    can be treated as breach of warranty, unless specified/implied.

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    Implied conditions:

    Condition as to title---sec.14(a)Eg: Rowland Vs Divall, Niblett Vs Confectioners materials Co. Ltd

    Sale by descriptioncondition that goods shall correspond withdescription ,ie words / symbols/ grade/ brand/ number etc

    Sale by sample---That bulk shall correspond with sample inquality, free from defect & that buyer would have reasonable

    opportunity to compare. Sale by sample as well as description: That goods shallcorrespond with both.

    Condition as to quality/fitness: (sec16) Though it is not animplied condition of the contract generally on the principle ofCaveat emptor it becomes so when buyer relies onskill/judgment of seller, buyer makes seller know the purposefor which goods are required.

    Condition of merchantability. Condition as to wholesomeness :(for food stuffs)

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    Implied warranties:sec.14

    Warranty of quiet possession. Warranty of freedom from

    encumbrance.

    Warranty implied by usage of trade. Warranty of disclosing dangerous

    nature of goods

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    Cases

    Butterworth Vs Kingsway Motors Harlington Vs. Christopher Fine Art

    Rowland Vs Divall

    Niblett Vs Confectionary Co.

    Beale VS Taylor

    Varley Vs.Whipp

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    Doctrine of Caveat emptor

    There is no implied warranty or condition asto quality/fitness for any particular purpose ofgoods supplied under a contract of sale.

    Ward Vs Hobbs(Swine-flu case)

    Exceptions

    Misrepresentation by seller.(Baldry )

    Concealment of latent defect.

    Non-conformity in case of sale bysample/description/both. Fitness for apurpose. Merchantable quality.

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    Passing of property in goods(sec.18 to 25)

    Pertinent to know to find who is to bearthe cost in the event of loss to goods.

    Who could have actionable rights over

    third parties responsible for loss. Whether official receiver/assignee could

    claim goods in the event of insolvency

    of buyer/seller.

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    Ownership transfer vis--vis Goods-type

    Specific/ascertained goods: Property transferred to buyer at such times

    as parties to contract intend to be transferred.(sec.20 to 24) Specific goods in deliverable state: Here the property passes at the

    time of contract (unconditional) is made, irrespective of time ofpayment/ delivery.

    Specific goods not in deliverable state: Here something is left to bedone by the seller to put goods in a deliverable state & hence propertypasses only when such a thing is done and buyer is given notice.

    Unascertained or future goods: Here property is transferred to buyeronly after goods are ascertained.

    Unconditional appropriation: Property in goods passes afterunconditional appropriation either by the seller or buyer with mutualassent. But it may be given before or after appropriation.

    Mode of appropriation is also to have mutual consent.

    Sale on approval or sale or return contracts: In such cases propertypasses when buyer (1) signifies acceptance/approval or(2) does anyact adopting the transaction like pledging (3) retains goods withoutgiving notice of rejection. If it is cash only, then property passes onseller receiving payment & hence it cannot be pledged till then.

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    Transfer of title by non-owners(sec27-30)

    Sale by mercantile agent. Sale by joint owner.

    Sale by person in possession under

    voidable contract. Sale by a seller in possession of goods

    after sale.

    Sale by a buyer in possession of goods. Sale by unpaid seller.

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    Performance of contract

    Duty of seller to deliver & buyer to accept goods andpay. Delivery of goods---Actual, symbolic (giving a railway

    receipt/key of warehouse) constructive (where baileeor carrier of seller agrees to hold the goods forbuyer.

    Terms of delivery: Could be part-delivery with fixedtime/place.

    Buyer has options for delivery of wrongquantity/installment delivery (not agreed)

    Goods delivered to buyer without personalexamination. Buyer not bound to return rejected goods. Liability of buyer in the event of rejection.

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    Types of Sale-contracts

    Ex-works/Ex-factory FOB/FOR/FOA Contracts.

    CIF Contracts.

    Warehouse-to-warehouse.

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    Cases

    McEntire Vs CrossleyVasantha Vs Elayalwar

    Dennant Vs Skinner

    Consolidated Coffee Vs Coffee Board

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    Unpaid seller

    Meaning of unpaid seller:(a) When whole of the price has not been

    paid/tendered

    (b) When a bill of exchange/negotiableinstrument is received as conditionalpayment & condition was not fulfilled

    due to dishonor of instrument

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    Rights of an unpaid seller

    Right against goods:(1) Right of lien or right to retain possession till receiptof payment & can be exercised:

    (a) Goods sold without stipulation of credit.

    (b) Goods sold on credit but credit period has expired

    (c) Buyer becomes insolvent before expiry of creditperiod.

    (2) In part delivery, seller may exercise lien onremainder. However, in sale through instalment

    payment, default in an instalment would not entitleseller to stop delivery until buyer has becomeinsolvent

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    Termination of lien

    (a) Delivery of goods to buyer. (b) Delivery of goods to carriers.

    Waiver of lien (express waiver in

    contract) Implied waiver (assenting to sub-sale)

    Tender of price by buyer.

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    Right of stoppage in transit

    This right can be exercised by anunpaid seller who has parted with thegoods and the goods are in transit. Butto exercise the right, the buyer must be

    insolvent. The right gets terminated when seller

    delivers goods to buyer or his

    agent/interception by buyer/carrier orbailee acknowledges arrival of goods orpart delivery is effected.

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    Right of resale

    An unpaid seller having exercised theright of lien or right of right of stoppagein transit can effect resale of goods.

    Obligation to serve notice on buyerdoes not apply for perishable goods

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    Additional rights

    Suit for price (where property in goodshas passed, seller can sue for price)

    Suit for damages (seller could also claim

    other costs incidental to non-paymentor rejection of goods by buyer)

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    Buyers rights

    Suit for non-delivery : Where delivery of goods has not beencarried out by seller, the buyer could file suit for costs arisingout of the act along with penalties.

    Suit for specific performance :In case of breach to delivercertain specific/ ascertained goods courts may direct specificperformance over & above payment of damages.

    Remedy for breach of warranty: If price is paid, buyer has to file

    suit for damages. If price is unpaid, buyer has to deduct theloss suffered & then pay the balance amount.

    Repudiation of contract before delivery: In such circumstances,buyer could treat the contract as rescinded & file suit fordamages or wait till actual date of delivery.

    Recovery of price + interest : Courts award interest on the price

    from the date of payment till date of refund.