Unit 1 Sale of Goods Act 1930
Transcript of Unit 1 Sale of Goods Act 1930
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CONTRACT OF SALE OF GOODS
SALE OF GOODS ACT, 1930
UNIT I
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Sale of Goods Act, 1930
Indian Contract Act, 1872; Chapter VII
Sections 76-123.
Came into force on 1st July 1930.
Act applies to whole of India except the State
of Jammu and Kashmir.
This Act lays down special provisionsgoverning the contract on sale of goods.
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Contract of Sale of Goods
Section 4 (1) of the Sale of Goods Act, 1930
defines A Contract of sale of goods is contract
whereby the seller transfers or agrees to
transfer the property in goods to the buyer for
a price
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Essential Characteristics
There must be 2 parties (buyer and seller)
Object of the contract must be transfer ofproperty in the goods by one person to another
Subject matter of the contract must be Goods Consideration for a sale of goods must be money
consideration called the Price
May be in writing or by word of mouth or partly
in writing and partly by word of mouth orimplied from the conduct of the parties
A contract of sale includes both an actual sale
and agreement to sell
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Distinction between Sale and
Agreement to Sell
Transfer of Property : (S)Property in goods passes from seller to buyer
immediately
(ATS)Transfer of Property to goods take place at a futuredate or subject to certain conditions being fulfilled
Risk of Loss (S) Loss falls on buyer even if seller possesses the goods
(ATS) Loss falls on seller even if buyer possesses the goods
Nature of Contract
(S) Executed Contract (ATS) Executory Contract
Consequences of Breach of contract by buyer (S) Seller can sue for price
(ATS) Seller can sue only for damages
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Distinction between Sale and
Agreement to Sell
Right to Resell (S) Cannot resell
Insolvency of Buyer (S) before he pays, seller must return them to Official Receiver
or Assignee, he will be entitled to a rate-able dividend only for
the price of goods (ATS) Seller is not bound to part with goods until he is paid for
Insolvency of Seller (S) Buyer can recover identical goods from the Official Receiver
or Assignee
(ATS) Buyer can claim a rate-able dividend from the sellersestate
Nature of rights (S) Buyer acquires ajus in rem ie. Right against the whole world
(ATS) Buyer acquiresjus in personam ie. Right against a
particular individual
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Goods
Existing Goods Future Goods Contingent Goods
Specific Goods Ascertained GoodsUnascertained
Goods
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Goods
Goods mean every kind of movable propertyand includes
Stocks and shares
Growing crops, grass Things attached to or forming part of the land
which can be severed from the land
Does not include money (currency not old orrare coins) and actionable claims (claim whichcan be enforced through the court of law).
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Existing Goods
Existing Goods are those which are owned or
possessed by the seller at the time of contract
Specific and Ascertained goods identified
and agreed upon at the time a contract of sale
is made
Generic and Unascertained goods indicated
by description and not specifically identified
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Future Goods
Goods to be manufactured or produced or
acquired by the seller after making the
contract of sale.
Contingent Goods
Goods the acquisition of which by the sellerdepends upon a contingency which may or
may not happen.
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Price
Money consideration for a sale of goods
May be money actually paid or promised to bepaid depending on the agreement (may be
cash or credit)
Modes of fixing price Price expressly stated in contract
Price to be fixed in manner provided by contract
Price to be determined by the course of dealingsbetween the parties
Reasonable price
Price fixed by third party (eg. valuer)
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Document of Title of Goods
Any Document which is used in the ordinary
course of business as proof of the possession
or control of goods, or authorizing or
purporting to authorize, either by
endorsement or by delivery the possessor of
the document to transfer or receive goods
thereby represented is document of title ofgoods.
It is proof of the ownership of the goods
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Examples of Document of title to
goods
Bill of lading (receipt given by ship owner
acknowledging the receipt of goods for
carriage)
Dock Warrant (issued by dock owner [port
ware housekeeper]; contains details of goods
held on behalf of a person)
Warehouse keepers certificate (issued by
ware housekeeper stating that the goods
specified in the document are in the
warehouse)
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Examples of Document of title to
goods
Railway receipt (document issued by the
railway as the acknowledgment of the receipt
of goods; surrender of receipt entitles the
delivery of goods)
Delivery Order (order given by the owner of
goods directing a person who holds the goods
on his behalf to deliver them to a personnamed therein)
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Conditions and Warranties
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 (2)
Warranty is a stipulation collateral(incidental,
subsidiary / minor) to the main purpose of the
contract, the breach of which gives rise to onlyclaim for damages but not to a right to reject
the goods and treat the contract as repudiated
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Test to determine whether a
stipulation is a condition or a
warranty Breach fatal (irreparable damage) to the rights
of the aggrieved party or not
Entitlement to repudiation of the contract or
not
Breach of Condition can be treated as a
Breach of Warranty
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Condition and Warranties
Conditions and Warranties may be either
express or implied.
Express : expressly (words written or spoken)
provided by the parties
Implied (given by law)
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Implied Conditions Sec 14-17
Conditions as to title
In case of Sale, he has right to sell the goods; In
case of Agreement to Sell, he will have a right to
sell the goods at the time when the property is topass
right to sell contemplate not only that the seller
has the title to what he purports to sell, but also
that the seller has the right to pass the property. If
the seller's title turns out to be defective, the
buyer may reject the goods.
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Implied Conditions Sec 14-17
Sale by Description Correspond to Description
Sale by Sample
Correspond the sample in quality, free fromdefect. Applies to latent defect (which are not
detectable on reasonable examination)
If contract is severable, the buyer may reject some
and accept others. If it is not severable, buyer hasto accept whole or reject whole.
Sale by Sample as well as by Description
Correspond to both sample and description
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Implied Conditions Sec 14-17
Conditions as to fitness or qualityThis condition of fitness shall apply, if:
The buyer makes known to the seller the
particular purpose for which the goods are
required,
The buyer relies on the seller's skill or judgment,
The goods are of a description which he sellers
ordinarily supplies in the course of his business,and
The goods supplied are not reasonably fit for the
buyer's purpose.
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Implied Conditions Sec 14-17
Condition as to Merchantability
Merchantable quality ordinarily means that the
goods should be such as would be commercially
saleable under the description by which they areknown in the market at their full value.
Condition as to Wholesomeness
The provisions or foodstuff must not onlycorrespond to their description, but must also be
merchantable and wholesome. It means that
goods must be for human consumption.
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Implied Warranties
Unless a contrary intention is expressed in a
contract, warranties are implied to be
followed in every contract of sale of goods
Warranty of Quiet Possession
The buyer shall have and enjoy quiet possession
of the goods. If the buyer's right to possession and
enjoyment of the goods is in any way disturbed asconsequences of the seller's defective title, the
buyer may sue the seller for damages for breach
of this warranty
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Implied Warranties
Freedom from Encumbrance (A mortgage or
other charge on property or assets)
The goods shall be free from any charge or
encumbrance in favor of any third party notdeclared or known to buyer before or at the time
when the contract is made. If the buyer is
required to discharge the amount of the
encumbrance it shall be a breach of this warranty
and the buyer shall be entitled to damages for the
same.
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Implied Warranties
Disclosure of dangerous nature of goods
The seller must warn the buyer about the
probable danger. If there is a breach of warranty,
the seller will be liable in damages
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Implied Conditions and Warranties
Implied conditions and warranties may be
excluded or varied by
Express agreement between the parties
The course of dealings between the parties
The custom or usage of trade (if it binds both the
parties to the contract)
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Exceptions to Doctrine of Caveat
Emptor
Condition as to quality or fitness for buyers
purpose
Condition as to merchantability
Condition as to wholesomeness
Conditions implied by customs
Sale under a patent or trade name Consent obtained by fraud
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Performance of Contract of Sale
Performance of respective duties of the seller
and the buyer
Performance comprises of two parts
Sellers duty to deliver the goods
Buyers duty to accept the goods and pay the
price
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Delivery of Goods
Voluntary transfer of possession from one person
to another
Actual (goods are handed over by the seller to
the buyer or his duly authorized agent),
Symbolic (where goods are bulky and incapableof actual delivery; it is as effective as actual
delivery eg. Handing over the key of warehouse),
Constructive (When a third person who is inpossession of goods of seller at time of sale
acknowledges to buyer that he holds the goods
on his behalf).
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Rules as to Delivery of Goods
Mode of Delivery (may be actual, constructiveor symbolic)
Delivery and Payment (acc. to terms of
contract)
Effect of Part Delivery
Buyer to apply for delivery (seller not bound
till buyer applies for delivery)
Place of Delivery (specified place, business
hours on a working day)
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Rules as to Delivery of Goods
Time of Delivery (fixed/reasonable time)
Demand of delivery to be treated ineffectual
unless made at a reasonable hour
Goods in possession of third party (third party
acknowledgement to buyer that he holds
them on behalf; not needed if goods are sold
by issue or transfer of document of title)
Cost of Delivery (costs incidental to making
delivery borne by seller; expenses incidental
to obtaining delivery borne by buyer)
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Transfer of Title by Non-Owners
Nemo dat quod non habet : No one can give
what he himself has not.
Exceptions under Sale of Goods Act, 1930
Estoppel (by his conduct the owner of the goods
may be precluded from denying the sellers
authority to sell)
Sale by a Mercantile agent (if he is in possession ofgoods or document of title with the consent of the
owner and acting in the ordinary course of
business)
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Transfer of Title by Non-Owners
Exceptions under Sale of Goods Act, 1930
Sale by one of several joint owners (possible with
the permission of other co-owners)
Sale by a person in possession of goods under a
voidable contract (buyer acquires a good titleprovided he buys them without notice of sellers
defect of title)
Sale by seller in possession after sale (if buyer
buys without notice of the previous sale, thebuyer gets a good title)
Sale by an unpaid seller (after stoppage of goods
in transit, buyer gets good title)
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Duties of Buyer
Take delivery of and pay for goods
To apply for delivery
To demand delivery at a reasonable hour
To take risk of deterioration
Bear liability in case of neglecting or refusing
delivery of goods (loss and charges for careand custody of goods)
Duty to accept installment delivery and pay
for it
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Duties of Buyer
Duty to intimate the seller where he rejects
the goods
Duty to pay damages for non-acceptance
Deliver the goods to carrier or wharfinger
Examine the goods delivered
h f
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Breach of Contract
Rights of buyer (Ifbreach is by seller)
Damages for non-
delivery
Specific performance
Remedy for breach
of warranty
Damages for breachof contract
Interest
Special damages
Rights of seller (Ifbreach is by buyer)
Suit for price
Damages for non-
acceptance
Damages for breach
of contract
Interest
Special damages
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Against the Goods
When the property in the goods has passed
Right of Lien
Right of stoppage in transit
Right of Resale
When the property in the goods has not
passed
Right of withholding delivery
Right of Lien
Right of stoppage in transit
Right of Resale
Right of Lien
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Right of Lien Lien means a right in which a creditor has to
retain possession of goods until payment of the
price. It depends on actual possession and not
on title.
Lien arises in following cases
No stipulation (condition / provision) as to credit
Sale on credit and credit period expired
Insolvency of buyer
Termination of Lien
Delivery to carrier
Lawful possession by buyer
Waiver of lien by seller either expressly or impliedly
Ri h f i i
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Right of stoppage in transit
Goods are deemed to be in course of transit from
the time when they are delivered to a carrier orother bailee for the purpose of transmission to
the buyer until the buyer takes delivery of them
from such carrier. Transit is not ended even if the seller refuses to
receive goods that are rejected by buyer
Unpaid seller may exercise his right of stoppageeither by taking actual possession of goods or by
giving notice of his claim to the carrier in whose
possession the goods are lying.
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Right of Resale
Goods are of Perishable nature
Seller gives notice to buyer of his intention to
resell but price not paid by buyer within
reasonable time; seller can resell goods and
recover damages for any loss from originalbuyer.
Seller does not give notice to buyer of his
intention to resell and resells goods; he cannotrecover damages for any loss from original
buyer and have to give profit if any on resale, if
any to the original buyer.
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Suit for price
When property in goods has passed to the
buyer and the buyer wrongfully refuses to pay
for the goods, seller may sue him for the price
of the goods.
When property is not passed and the goods
have not been appropriated to the contract, if
the price is payable on a certain dayirrespective of delivery, the seller may sue the
buyer
S it f d f
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Suit for damages for non-
acceptance
When buyer wrongfully neglects or refuses to
accept and pay for goods seller may sue for
damages.
Where there is no default of the seller and the
buyer wrongfully refuses to take goods within
reasonable time the seller is entitled to
recover Any loss caused by buyers refusal to take delivery
Any reasonable charge for the care and custody of
the goods
R di ti f C t t b f d
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Repudiation of Contract before due
date
Where buyer repudiates before due date
Seller may wait till due date and sue for damages
Seller may treat the contract as rescinded and sue
for damages
This rule is called Rule of anticipatory breach
of contract
S it f I t t
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Suit for Interest
Based on specific agreement about payment
of interest of price of goods from the date onwhich payment becomes due
In the absence of agreement, seller may
recover interest from such date as the sellermay notify to the buyer
Court may also award interest at such rate as
it thinks fit, on the amount of price to theseller in a suit by him for the price from the
date on which the goods are supplied or from
the date on which the price is payable.
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Auction Sale
Public sale where different intending buyerstry to outbid each other. Goods are ultimately
sold to the highest bidder. Auctioneer : agent
of the seller.
Rules in cases of a sale by auction (Sec. 64)
Where goods are put up for sale in lots, each lot is
deemed to be the subject of a separate contract
of sale
Sale is complete when auctioneer announces its
completion by fall of hammer or in other
customary manner
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Auction Sale
Rules in cases of a sale by auction (Sec. 64)
Right to bid may be reserved expressly by or on
behalf of the seller otherwise it shall not be lawful
for the seller to bid himself or to employ anyperson to bid
The sale may be notified to be subject to a reserve
or upset price (specified); otherwise the highest
bidder gets the goods
Auctioneer cannot sell goods on credit or accept a
bill of exchange
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Auction Sale
Rules in cases of a sale by auction (Sec. 64)
Sale is voidable at the option of the buyer, if seller
makes use of pretended bidding to raise the price.