BUSINESS LAW SALE OF GOODS

Originally Contract Act covered all aspects of business relations like sale of goods and services, leasing of land and building, transportation of goods, lending etc. Later on the activities in each of these fields became large that specialised law was enacted for different fields of contracts. These defined the lessor and lesse, pawnor and pawnee, buyer and seller, principal and agent relationships, their respective rights and obligations. The law relating to the buyer and seller was first enacted in England in !"# which was later adopted in various countries. $n $ndia, the chapter in the Contract Act relating to sale of goods was deleted and a new $ndian %ale of &oods Act was enacted in "#'. As in a valid Contract, in %ale of goods also has all the ingredients of a valid contract( Offer and acceptance, two parties having capacity to contract, lawful consideration, free consent, consensus ad idem. $n addition three important elements distinguish the contract of sale. They are) .sub*ect matter of contract of sale+ ,. Transfer of property+ and #. -rice consideration. Amit purchases a .okia cell phone from Cells and Cells Co. for /s. 0,'''. Arun places an order for a dining table and 1 chairs of a particular design from the catalogue of 2urniture -eople -vt. Co for ,',''' payable on delivery in ' days at Arun3s residence. Amrita places an order for a necklace to be made and supplied in 0 days and pays an advance of ,04 of the cost and agrees to pay the balance in ' monthly installments by 0th of every month. The above are e5amples of contracts of sale. $t may be seen in all these cases, the sub*ect matter of contract and price considerations are clear. /am agrees to buy one bag of rice every month for , months at a price from /a* 6 Co and to pay for the rice on delivery. $n the first case, transfer of property takes place in the shop itself when the phone and money are e5changed. The Cells and Cells Co was the owner of the .okia Cell till the moment Amit chose that piece and paid cash. The ownership transferred to Amit the moment he had paid the cash. $n the other case, the contracts are e5ecutory in nature for the transfer of properties is to take place at a certain future date. These are agreements to sell. $t may be seen that the rights and obligations vary in each of the above cases and the incidence of transfer of property varies in time $t should be understood that a property can be transferred only by the owner. A person who does not own the property or title of ownership to the property, he cannot transfer it to another. %imilarly, a person cannot buy his own property nor sell to himself. The Sale of Goods Act The %ale of goods is a Contract. $t is a contract between the seller and the buyer. The seller transfers or agrees to transfer the ownership of the goods to the buyer for a price. $t may be absolute or conditional. $t includes actual sale or agreement to sell. %ale is an e5ecuted contract where the goods have passed from the seller to the buyer. An agreement to sell is e5ecutory contract. The transfer of goods is to take place at a future time.

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BUSINESS LAW SALE OF GOODS

Sale and Agreement to sell differences Basis Transfer of ownership .ature Conveyance Sale $mmediate E5ecuted /ight to en*oy the goods against the whole world 7fers in rein3 Transfer of risk $mmediate, even if in possession of seller /ights of seller against %ue the buyer for price even buyer3s breach if the goods are in seller3s possession. /ights of buyer against %ue the seller for damages seller3s breach and the third party for the goods. Effect of insolvency of %ince the buyer is the lawful seller having owner, he can claim from the possession receiver. Effect of insolvency of %eller must deliver the goods buyer before paying the to the receiver, as ownership price. has transferred. Agreement to Sell At a future time. E5ecutory -ure and simple contract. Creates rights against the person. 7fers in personam3 .o risk till transfer of title, even if in possession of buyer3 %ue the buyer for damages even if the goods are in 8uyer3s possession. %ue the seller for damages only.

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%eller can refuse to deliver unless paid in full.

Formalities: Modes of sale of goods . $mmediate delivery of the goods. ,. $mmediate payment of price but delivery at a future date. #. $mmediate delivery of goods and payment of price. 1. 8oth delivery and payment in installments. 0. 8oth delivery and payment at a future date. Goods Every kind of movable property is a good. E5ample %tocks and shares, goodwill, trademark, copy right, patent, growing crops, grass. Things attached to or forming part of land which are agreed to be severed before sale. # ;oney and actionable claims are not goods. &oods a< E5isting i< %pecific ii< &eneric iii< Ascertained iv< =nascertained b< 2uture c< Contingent Perishing of Goods

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BUSINESS LAW SALE OF GOODS

A Contract for sale of specific goods will be void, if such goods without the knowledge of the seller have become so damaged as no longer to answer to their description in the contract. . Cement spoiled by water. ,. %ugar became sherbet. #. The goods which have ceased to e5ist in the commercial sense. # >here the ship carrying the goods for delivery under agreement to sell, sinks the contract is void. # E5ample # A sold to 8 specific goods which he believed was on their way from England. The ship sinks the day before the bargain. ?ence the contract is void. # >here a seller is irretrievably deprived of the goods as when they have been stolen, or lawfully re@uisitioned by the government or have been lost in some other way and cannot be traced. # >here there is an agreement to sell, the goods -erish or are damaged without any fault of the seller or the buyer. # %ubse@uent to the agreement but before the risk passes to the buyer, the agreement becomes void. Conditions . There must be an agreement to sell. ,. The loss must be specific. #. The loss must not have been caused by any fault or wrongful act by the seller or buyer. 1. The goods must perish before the risk passes to the buyer. $n such cases of perishing of goods, the contract becomes void only at the time of -erishing and not before. # $f by agreement, the price was payable by the buyer or at a date prior to the destruction of the goods ,the seller can sue for the price if unpaid and if paid, the buyer cannot recover # 8lakely As ;uller Price # .o sale can take place without a price as the money consideration. # The price may be e5pressly stated in the contract. # The contract may provide for the manner in which the price is to be fi5ed by the contracting parties and not by a third party. # $f a price is not e5pressed or provided, it may be determined in the course of dealing between the parties. # >here nothing is said about price, the market price or reasonable price will apply. # The price may be left to a third party to fi5 any valuation provided he agrees to perform this duty. # $f he fails, the agreement becomes void. # A buyer must pay a reasonable price for goods bought. # -ayment shall be in the currency unless there is an e5press or implied to the contrary in the contract. # >here security deposit or earnest money is paid in advance by the buyer for due performance of his part of the contract, $f the sale goes off through the seller3s fault, ?e must refund the deposit money to the buyer. Right of parties to sue . B agrees to sell '' bags of sugar to C in # installments of #', #' 6 1'.

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BUSINESS LAW SALE OF GOODS

B and C agree that D will fi5 the price. B delivers #' bags as scheduled accepts delivery. # Ea< B prevents D in fi5ing the price. Agreement to sell becomes void .C can sue for damages. C should pay reasonable price. Eb< D is prevented by the fault of C in fi5ing the price. Agreement to sell becomes void. B can sue. C should pay reasonable price. Ec< D refuses to fi5 the price. Agreement to sell becomes void .C must pay reasonable price. CON !T!ONS AN "ARRANT!#S # A stipulation in a contract may be condition or warranty. # A condition is a stipulation which is essential to the main purpose of the contract. # The breach of which gives the aggrieved party a right to terminate the contract. # $n 8aldry As ;arshall, B wanted a car suitable for touring purposes. C suggested a car for the purpose and sold to B. B found it unsuitable. %uitability of car for touring was a CO.F$T$O. of contract. ?ence B could re*ect and get refund. # A warranty is a stipulation which is collateral to the main purpose of the contract and breach of which gives the aggrieved party, the power to claim damages but not to re*ect the goods and to terminate the contract. CO.F$T$O. >A//A.TC . %tipulation essential to the main$t is collateral purpose .ot so ,. %ale cannot be fulfilled without fulfilling the condition Aggrieved party can claim #. The aggrieved party can repudiate thedamages contract on breach of condition and also claim damages. .ot so 1. Can be treated as warranty also Ca$eat #mptor $t means let the buyer beware. $t is not the seller3s duty to point out the defects in the goods, he is selling. # The goods come with the risk . 8uyer should take care. $f the buyer depends on his own skill and knowledge and the goods turn out to be defective, it is his own fault. This is caveat emptor. >here the buyer makes it known to the seller that he depends on the seller3s skill, knowledge and *udgment and buys them in that basis, caveat emptor will not apply. The contract will be sub*ect to the condition or warranty. # Contract of sale is consensual. $t can be absolute or conditional, as parties decide. $f a seller asserts a fact of which the buyer is ignorant, such representation or statement becomes a stipulation. A mere commendation by the seller of the goods will not amount to stipulation and hence does not create a right to action. # $f stipulation forms the basis of the contract essential to the main purpose of the contract, it is a condition. # $f the stipulation is not essential to the main purpose of the contract, it is collateral to the main purpose of the contract, it is warranty. Breach # $f the condition is breached, the aggrieved party can terminate the contract.
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BUSINESS LAW SALE OF GOODS

$n case of warranty, can only claim damages, not terminate the contract. $f the buyer likes to retain the goods in case of breach of condition, he can only claim damages as though it is a breach of warranty. "ai$er of condition # The buyer can waive the condition. # ?e may treat the breach of condition as breach of warranty. # Three cases of waiver. # 8y Aoluntary waiver # 8y Acceptance # 8y impossibility . The buyer can waive the condition. ,. ?e may treat the breach of condition as breach of warranty. %& B' (oluntar' )ai$er A agrees to supply 8 2irst @uality rice at /s :,' per bag. %upplies %econd @uality at /s 9:' per bag. . 8 can re*ect as breach of condition 8 can accept as breach of warranty and claim damages at /s 0'G bag # # 8y Acceptance After accepting the goods, buyer cannot re*ect. Acceptance comes into force when) # 8uyer informs seller of acceptance # 8uyer resells the goods # 8uyer retains goods for reasonable time #. 8y impossibility #stoppel # >here the contract is indivisible and the buyer has accepted the goods or part thereof. The breach of condition is treated as breach of warranty. 8uyer can claim damages. Stipulation to Time factor # $f the time is specified for delivery of goods or for doing any other act, delivery must be made or act done at the specified time. $f not done, the other party can repudiate the contract. # >here as time fi5ed for payment is not deemed to be essence of the contract, unless the parties intended that it should be so. # 2ailure to pay on the date fi5ed does not entitle the seller to repudiate the contract. . 8ut he may withhold delivery till price is paid. ,. /esell if the buyer does not pay within a reasonable time. #. >hen the buyer pays after the due date but before the resale, the seller shall sell the goods to the buyer. !mplied conditions . As to title ,. %ale by description #. %ale by sample 1. %ale by sample and description

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BUSINESS LAW SALE OF GOODS

0. Huality or fitness 9. ;erchantability :. >holesomeness !. 8y custom As to Title # Every sale implies transfer of title to goods from seller to buyer. $f the title is defective, the buyer can re*ect the goods. . $n /owland and Fivall ) /owland bought a car from Fivall and sold to /ailsdon. -olice took away the car from /ailsdon as it was a stolen car sold to Fivall. /owland refunded /ailsdon and sued Fivall for damages. $t was held 7 the seller did not have the right to possession and conse@uently cannot give it to the buyer. I. There can be no sale at all of goods which seller has no right to sell . The principle is) .o one can transfer a better title than he himself has.3 %o , /owland was entitled to recover the full price from Fivall. ,. .E; &eneral $nsurance Co. As. Jones The .E; &eneral $nsurance Co had settled an insurance claim against theft of car owned by ;s. ?opkin whose 2ord 2iesta was stolen in 2eb. "!#. $n %ept "!#, the thieves were convicted. The car was finally traced at ;r.Jones3 place who was the 9th buyer of the stolen car. The .E; &eneral $nsurance Co sued Jones. Jones maintained that he had no idea of the theft and he bought in good faith from the previous owner. ?eld, none can ac@uire a title to a property without a lawful ownership nor can transfer the title. Sale *' description # >hen goods are sold by description, the implied condition is that they shall correspond to the description. # The goods sold should be described by the seller. # The buyer might not have seen at all but may buy on the basis of description by the seller. Aerley As. >hipp >hipp agreed to buy a reaping machine from Aerley who had described that the machine was hardly a year old and hardly used. On receipt of the machine >hipp found that the machine was very old, e5tensively used and repaired. ?e returned the machine and sued Aerley. $t was held that Kthe term 7sale of goods by description3must apply to all cases where the purchase has not seen the goods, but relying on the description alone. ?ence, >hipp was entitled to recover the cost.. # >here the buyer has seen the goods but buys only on the basis of description given by the seller. # A buyer bought certain goods which the seller described as 7dating from :th centuryL Actually, they belonged to !th century. # The buyer is entitled to re*ect the goods as goods did not correspond to the seller3s description. >here method of packing has been described # B purchased 0''' tins of canned fruit from C. The condition of the purchase was that the tins to be packed in bo5es of 0' tins of each. The seller packed ,0 tinsGbo5. # B re*ected because the goods were not packed as per description.

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BUSINESS LAW SALE OF GOODS

$f the goods do .OT correspond with the description but are 2$T for buyer3s purpose, even then the buyer may re*ect. # The seller cannot argue that the goods serve the purpose of the buyer. # Arcos A% /amaason 6 sons CON !T!ON AS TO SAMP+# # &oods are supplied as per sample % 8ulk shall correspond to sample in @uality % 8uyer shall have reasonable opportunity to compare with sample % &oods shall be free from defect 8uyer can retain what corresponds to sample and re*ect the rest, where items are separable. B sold certain worsted woolen material for coat making to C as per sample. 8ut it was found that the material had some latent defects that it cannot be used as coating material at all. Even though the supply met with the approved sample, the latent defect could not be discovered by making reasonable e5aminations. ?ence buyer could re*ect. CON !T!ON AS TO SAMP+# AN #SCR!PT!ON # %ale of &oods is both as per sample and description - &oods shall correspond to sample in @uality - and to the description 8uyer contracts for imported refined oil. The goods corresponds to sample but mi5ed with local oil. 8uyer can re*ect. CON !T!ON AS TO F!TN#SS OR ,-A+!T. # 8uyer re@uires goods for particular purpose and informs the seller # 8uyer relies on the skill of the seller. &rant As. Australian Mnitting ;ills Ltd. Fr &rant contracted skin disease after using woolen underpants which was caused by chemical irritant. ?eld, ;erchantable means that the article sold if meant for one particular use in the ordinary course, is fit for that use. ;erchantable does not mean that the thing is saleable in the market simply because it looks alright+ it is not merchantable in that event if it has defects unfitting it for its only proper use. %o the retailer who sold the woolen under garments was liable to Fr. &rant and not the manufacturer as there was no privity of contract between him and the manufacturer. -riest asked for hot water bottle. Chemist showed a bottle and said not for boiling water but for hot water. On use it burst. CON !T!ON AS TO M#RC/ANTAB!+!T. # %eller must be a dealer in goods of that description # 8uyer must not have any opportunity of e5amining the goods. # ;orelli As 2itch # Case of &inger bottle CON !T!ON !MP+!# B. C-STOM # CO.F$T$O. A% to >?OLE%O;E.E%% # Case of 2rost As Avlesbury Fairy # 2rost3s wife died after consuming milk from Avlebury Fairy which contained typhoid germs. # Jackson As. >eston 6 sons A grocer sold tinned poisonous salmon,which resulted in death of many. ?eld the grocer was responsible for damages, because of breach of condition of wholesomeness. # SA+# B. NON O"N#RS

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BUSINESS LAW SALE OF GOODS

. ;ercantile agent ,. Estoppel #. Joint Owner 1. Aoidable contract 0. %eller in possession after sale 9. 8uyer in possession after sale :. =npaid seller !. 2inder of goods ". -ledgee '. Official /eceiver Sale *' Non O)ners ;ercantile Agent Oppenheimer As. Attenborough Agent fraudulently pledges diamonds . -rincipal bound by actions of agent. 2olkes As. Ming Agent sells a car below the authorised price and misappropriates the sale proceeds. 8uyer gets a clean title. Sale *' Non O)ners ,. Joint Owner %ale by one of several *oint owners ;ust have sole possession ;ust have consent from all other *oint owners for sale 8rowning As. %helley 8rowning 6 Tennyson co(own a TA in possession of 8rowning. Tennyson secretly sells it to %helley. %helley cannot get clean title as TA was not in sole possession of Tennyson and was sold without consent of 8rowning Sale *' Non O)ners #. -erson in possession of goods under voidable contract A person may possess some goods by fraud or coercion or undue influence and sell it. The buyer gets a clean title if he buys it before the action of the seller is held voidable. Sale *' Non O)ners 1. %eller in possession of goods after sale %eller must be in possession of goods AL/EAFC sold 8=T not on behalf of the buyer %eller may sell to another. Aalid Sale *' Non O)ners 0. 8uyer in possession of goods After buying or agreeing to buy some goods, the buyer takes possession of the goods and before payment of the price he sells to another who is not aware of the status of the title to goods, becomes a bonafide buyer with valid title transferred. Sale *' Non O)ners 9. =npaid seller A seller who has sold his goods to a buyer and has not been paid for and the goods are under his control or in transit can /E%ELL the same goods to another with clean title even without notice to the original buyer. Sale *' Non O)ners

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BUSINESS LAW SALE OF GOODS

2inder of lost goods can sell the goods if True owner cannot be traced The true owner refuses to pay for the e5penses incurred by the finder The goods are likely to perish or lose value The e5penses incurred are two thirds value of the goods. Sale *' Non O)ners !. -awnee Epledgee< Can sell after giving notice to the pawner Epledger< Sale *' Non O)ners ". Official Assignee Or /eceiver Or Li@uidator Can sell as per court order

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