Performance of Contracts under the Sale of Goods Act

S.31: It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale. Delivery of goods and payment of the price are concurrent conditions. The parties may agree otherwise. But, unless they do so, the seller should be ready and willing to deliver the goods to the buyer in exchange for the price and the buyer should be ready and willing to pay the price in exchange of the possession of goods. [S.32]. Thus the duty of the seller is to be ready and willing to deliver the goods to the buyer. He cannot demand payment of price in advance unless there is a stipulation to that effect. Any refusal to perform unless the price is offered in advance is a breach. But, he is not bound to deliver the goods until the buyer applies for delivery. This may, however, be changed by a contract to the contrary. [S.35]. S.33: Delivery: Delivery of goods sold may be made by doing anything which the parties agree shall be treated as delivery which has the effect of putting the goods in the possession of the buyer or of any person authorized to hold them on his behalf. In simple words, Delivery of goods may be made doing anything which the parties agree shall be taken as delivery. Delivery may be made by doing anything which has the effect of putting the goods in the possession of the buyer or of any person authorized to hold them on his behalf. Delivery may be either actual or symbolic or constructive. A symbolic delivery takes place where, for example, the seller hands over to the buyer the key of the godown where the goods are as seen in the case of Wrightson Ltd. v. McArthur Hutchinsons1. Another instance of symbolic delivery is by attornment. This happens when the goods are in the custody of a third person who, in accordance with the sellers order, acknowledged to hold them on the buyers behalf and the buyer has assented to it, or accepts rents for the goods from the buyer. S.34: Part delivery: A delivery of part of the goods, in progress of the delivery of the whole, has the same effect, for the purpose of passing the property in such goods, as a delivery of the whole. An interesting point to be noted is that where a part of the goods is delivered with the intention of severing it from the whole, that does not amount to a delivery of the whole of the goods.

Rules as to Delivery [S.36] S.36 lays down the following rules as to delivery: 1. Place of delivery [S.36 (1)]: Whether it is for the buyer to take possession of the goods or for the seller to send them is a question that depends on the intention of the parties as expressed in their contract. In the absence of any contract to the contrary,
1

[1919] 2 KB 807

goods sold are to be delivered at the place at which they are at the time of the sale. In case of an agreement to sell, the goods are to be delivered at the place where they are at the time of agreement, or the goods are not then in existence, at the place where they are manufactured or produced. 2. Time for delivery [S.36 (2)]: Where the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable time. If the seller fails to do so he will be guilty of breach even if the delivery is subsequently prevented by the intervention of war or some Government order. 3. Delivery by Attornment [S.36 (3)]: Where the goods are in possession of a third person, there is no delivery unless and until such third person acknowledges to the buyer that he holds the goods on his behalf. Once the third person does this that amounts to delivery to the buyer, and, therefore, the third person cannot afterwards refuse to deliver on the ground that the goods have to be paid for or that the buyer has become insolvent. 4. Time for tender of delivery [S.36 (4)]: Goods sold must be demanded by the buyer at a reasonable hour. Similarly, the seller should tender them at a reasonable hour. 5. Expenses of delivery [S.36 (5)]: Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable state shall be borne by the seller.

S.37: Delivery of wrong quantity: S. 37 lays down rules as to the effects of delivery of wrong quantity. 1. Short delivery [S.37 (1)]: Where the seller delivers to the buyer a quantity of goods less than he contracted to sell, the buyer may reject them. The buyer can, however, accept short delivery. In that case he shall have to pay for the goods actually delivered at the contract price. E does not thereby lose his right to sue for damages for short delivery. 2. Excess delivery [S.37 (2)]: Where the seller delivers a quantity larger than he contracted to sell the buyer may accept the goods included in the contract and reject the rest, or he may reject the whole. He is not bound to accept the contract quantity and reject only the excess. But where the excess is so small as to be negligible and the seller does not bill him for the excess, the buyer may not reject. 3. Delivery of mixed goods [S.37 (3)]: Where the seller delivers the goods mixed with the goods of a different description not included in the contract, the buyer may accept the goods which are in accordance with the goods and reject the rest, or may reject the whole.

S.38: Instalment Deliveries: Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by instalments. It means that instalment delivery can be made or demanded only if the contract so provides. The contract to make instalment deliveries may be either express or implied.

Where the contract for the sale of goods provides for instalment deliveries which have to be separately paid for, the problem arises as to what should happen if the seller fails to deliver an instalment or delivers defective goods in one instalment or the buyer refuses to take or pay for an instalment. S.38 (2) provides the answer. This section leaves the whole matter to be determined on the merits of each case.

S.39: Delivery to carrier or wharfinger: If a tradesman orders goods to be sent by a carrier, though he does not name any particular carrier, the moment the goods are delivered to the carrier it operates as a delivery to the purchaser. S.39 (1): Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer, or delivery of the goods to a wharfinger for safe custody, is prima facie deemed to be a delivery of goods to the buyer. In the case of Cooke v. Ludlow2, A seller took the goods to a wharf, where he was told that they would be conveyed to the foreign buyer by the ship Commerce. The seller informed the buyer of this. But unknown to the seller the ship was fully laden and the goods were sent by another ship. Even so it was held that the goods had been delivered to the buyer, and he must pay the price, although the goods were lost on the way. Where, however, it is agreed that the goods are to be delivered at a particular place, for example, at the buyers mill, delivery to a carrier does not amount to delivery to the buyer. S.39 (2): Sellers duty: The seller has to make with the carrier such contract as may be reasonable having regard to the nature of the goods and the other circumstances of the case. The purpose of this duty is to secure for the buyer such contract of carriage as will enable the buyer to sue the carrier in case the goods are lost. If the seller fails to make such a contract the buyer may refuse to treat the delivery to the carrier as delivery to himself or may hold the seller liable in damages. There are two cases that are important in this regard. The first one is Clarke v. Hutchinson3. The carrier to whom the goods were delivered in this case notoriously required a notice that the goods were over the value of5, otherwise he was not liable for any loss. The seller gave no such notice. It was held that he had failed in his duty of making a reasonable contract, and therefore, was liable for the loss. The other case is Thomas Young& Sons Ltd. v. Hobson & partners4. In this case, 14 electric machines were sold, which it was agreed, should be sent to the buyers by rail. The seller s dispatched them at owners risk and not at companys risk. There was no difference in freight rates. The only difference was that before accepting at companys risk the company would have inspected their packing and required the machines to be properly secured in the wagons. At owners risk, they did not bother about these things. The machines were lying loose in their wagons and shunting
2 3 4

(1806) 2 B & PNR 119 (1811) 14 East 475: 13 RR 283 (1949) 65 TLR 365

damaged them. It was held that the sellers had not secured a contract which the nature of the goods reasonably required them to do so. The buyers could reject the goods and were not liable to pay the price.

S.39 (3): Sea Transit: Where the goods have to be sent by sea transit where insurance is usual, the seller should give to the buyer such notice as will enable him to insure the goods. If the seller fails to do so, the goods shall be at his risk during the sea transit. But where the buyer has sufficient info about the goods to enable him to insure, he cannot insist on particular info.

Contracts involving Sea Routes Contracts which usually involve sea routes and which are known as international sales are of three kinds: 1. Free on Board (F. O. B.) 2. Cost, Insurance and Freight (C. I. F.) 3. Ex. Ship

F. O. B. Contracts F. O. B. means free on board. In such contracts, the seller has to place the goods on board a ship at his own expense. He has only to bear the expenses of loading the goods. Thereafter the goods are at the buyers risk and he is responsible for freight, insurance and subsequent expenses. Thus, property passes to the buyer as soon as the goods are put on board the ship. This will be so even if the goods are not specific or ascertained. The buyer gets the insurable interest and he can protect himself by insurance. He has to pay the price when the shipping documents are presented to him even if the goods have been lost by that time. The property will not pass to the buyer if by the shipping documents the seller has reserved the right of disposal. If the buyer fails to name a ship the seller cannot sue the buyer for the price. His only remedy is to sue for damages for the breach of contract. The buyer cannot demand delivery of the goods otherwise than on board the ship.

C. I. F. Contracts C. I. F. contracts refer to the contracts of sale of goods in which the price is to include cost, insurance and freight. It is the most widely used type of contract for purposes of sea-borne commerce. The duties of the seller under a C. I. F. contract are:

1. To make out an invoice of the goods sold. 2. To ship at the port of shipment goods of the description contained in the contract. 3. To procure a contract of affreightment under which the goods will be delivered at the destination contemplated by the contract. 4. To arrange for an insurance upon the terms current in the trade which will be available for the benefit of the buyer. 5. With all reasonable dispatch to send forward and tender to the buyer these shipping documents, namely, the invoice, the bill of lading and the policy of insurance, delivery of which to the buyer is symbolical of delivery of the goods purchased, placing the same at the buyers risk and entitling the seller to payment of their price. If no place be named in the C. I. F. contract for the tender of the shipping documents they must prima facie be tendered at the residence or place of business of the buyer. If the seller fails to deliver the shipping documents within a reasonable time, that is a breach of contract. On the other hand, if the buyer refuses to receive the documents when duly tendered, that is a breach on his part. The property in the goods passes to the buyer on the delivery of the documents. That is the main difference between an F. O. B and C. I. F. contract, in the former, property passes when the goods are put on board a ship, but in the latter, the property passes when the documents are tendered and the buyer receives them by paying the price. The buyer has to pay and receive the documents without waiting for the arrival of the goods. It is no defence for him to say that he has not examined the goods or that they have been lost. He has to pay the price in the same manner as if he were buying the documents only. That is why, it is sometimes said that a C. I. F. contract is a sale of documents. But that does not mean that a C. I. F contract is a sale of documents and not goods. It contemplates the transfer of actual goods in the normal course, but I the goods are lost, the insurance policy and the bill of lading contract that is the right under them are taken to be, in business sense, the equivalent of goods. A C. I. F. contract is a contract for the sale of insured goods, lost or not lost. This is further borne out by the fact that the buyer may reject documents if he finds that they involve dealing with an enemy, although the goods were shipped before the war or on the ground that the documents are invalid because they are incorrectly dated or that the goods are of inferior quality, or that they were less in quantity. Even after accepting the documents, the buyer may reject the goods if they are not in correspondence with the contract. The parties can also by their agreement vary the incidents of a C. I. F. contract, and then property will pass when it is expressly or impliedly intended to pass.

Ex Ship Contracts Under an ex ship contract, the seller has to deliver the goods to the buyer at the port of destination. An important case coming under ex ship contracts is the case of Yangtsze Ins. Association v. Lukhmanjee5. In this case, there was a contract for an
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[1918] AC 585

ex ship sale of Indian first class teak squares. The first instalment of logs was shipped on board at Colombo. It was discharged at the port of destination, and was lost in a gale. The seller had insured the timber and the buyer sought to enforce the policy. It was held that he could not do so. At the time of the insurance, the timber was the property of the seller and not of the buyer, because in an ex ship contract, the property passes on delivery at the port of destination. The buyer had no insurable interest when the goods were shipped. Lord Sumner explained the concept of an ex ship contract in the following words: In the case of a sale ex ship, the seller has to cause delivery to be made to the buyer from a ship which has arrived at the port of delivery and has reached a place therein which is usual for the delivery of goods of the kind in question. The seller has, therefore, to pay the freight, or otherwise release the ship owners lien and to furnish the buyer with an effectual direction to the ship to deliver. Till this is done, the buyer is not bound to pay for the goods. Till this is done, he may have insurable interest in profits, but none that can correctly described as an interest upon goods nor any interest, which the seller, as seller, is bound to insure for him. If the seller insures he does so for his own purposes and of his own motion.

Deterioration during transit S. 40: deterioration during transit: Where the seller of goods agrees to deliver them at his own risk at a place other than that where they are when sold, the buyer shall, nevertheless, unless otherwise agreed, take any risk of deterioration in the goods necessarily incident to the course of the transit.

Acceptance S. 42: Acceptance: A buyer cannot reject the goods after he has accepted them. The buyer is deemed to have accepted the goods in the circumstances given in S. 42. They are as follows: 1. When he intimates to the seller that he has accepted them. 2. When the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller. 3. When, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them.

Any dealing by the buyer with goods in a manner inconsistent with the sellers ownership amounts to acceptance and deprives the buyer f his right to reject. But dealings with documents of title do not amount to acceptance. In Chao v. British Traders & Shippers Ltd.6, the buyer had received the bill of lading along with other documents in a c.i.f. contract. He immediately pledged the bill of lading with a bank and afterwards found that the bill was wrongly dated. He sought to reject the goods.
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[1954] 1 All ER 779: [1954] 2 QB 459

The seller contended that by pledging the bill, the buyer had accepted the goods. But the buyer was allowed to reject. The reason why the buyer was allowed to reject in the above case was because in a C. I. F. contract, the buyer has two rights, namely, the right to reject the documents, if they are not in order and secondly, the right to reject the goods if they are not in conformity with the contract. The latter right is lost only when the goods have been delivered to the buyer and he has dealt with them. S. 41: Right of examination: By accepting the documents of title the buyer is not deemed to have accepted the goods. He still has the right of examining the goods on their arrival. S. 41 (1): Where goods are delivered to the buyer which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract. S. 41 (2): Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract. In the absence of an agreement to the contrary the proper place of inspection is the place of delivery. Carrying the goods from the place of delivery to some other place amounts to acceptance.

According to s. 42, if the buyer retains the goods beyond reasonable time without rejecting them he is deemed to have accepted them. Thus if the buyer wants to reject he must intimate to the seller his intention to reject. But he is bound to do no more. He is not bound to return the goods to the seller. This principle applies when the rejection is rightful and there is agreement to the contrary.

S. 44 deals with the liability of the buyer for refusing to receive goods. It says that when the seller is ready and willing to deliver the goods and requests the buyer to take delivery, and the buyer does not within a reasonable time after such request takes delivery of the goods, he is liable to the seller for any loss occasioned by his neglect or refusal to take delivery, and also for reasonable charge for the care and custody of the goods. The proviso to the section, however, declares that this does not apply where the property in the goods has not passed to the buyer, or where the seller has a alien on the goods or where the buyers refusal to take delivery amounts repudiation of the contract entitling the seller to sue him for damages for breach.