Business Law

Group# 8
Sec-A
Sale of Goods Act
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Introduction
The Act is referred to as the Sale of Goods Act, 1930 and came into force on July 1,
1930
It extends to the whole of India except the states of Jammu and Kashimir
Prior to the introduction of the Sale of Goods Act, the Sale and Purchase of Goods
were regulated by the Indian Contract Act, 1872 through its sections 76 to 123.
The Laws laid down by the Indian Contract Act apply to Contracts of Sale and
Purchase except in cases where the Sale of Goods Act indicates otherwise.
Contracts for the sale of goods are subject to the general legal principles applicable
to all contracts, such as offer and its acceptance or other essential elements of a
contract.
However it also deals with Transfer of Ownership of Goods, Delivery of Goods,
Rights and Duties of Buyer and Seller, Remedies for Breach of Contract, Conditions
and Warranties implied under the Sale of Goods.
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Introduction
Buyer: A person who buys or agrees to buy goods.
Delivery: Voluntary transfer of possession from one person to another
Delivered State: A good is said to be in a delivered state if they are in such a State the buyer under
contract be bound to take delivery of them.
Document of Title to Goods: Any document used in the course of business that serves as a proof for
possession or control of goods authorising the possessor to transfer or receive goods thereby
represented. Example: Railway Receipt, Bill of Lading Dock, Warehouse keepers certificate etc.
Fault: Wrongful Action
Future Goods: The goods are manufactured after making the contract of Sale.
Goods: Every kind of moveable property other than actionable claims and money.
Mercantile Agent: A person who has the authority to sell goods, buy goods, consign to sell goods or to
raise money on the security of Goods.
Price: The money consideration for the sale of Goods.
Quality of Goods: State or Condition of the Goods
Seller: A person who agrees to sell the Goods
Specific Goods: Goods identified and agreed upon at the time of contract.
Important Definitions
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Introduction
Sec 4(1) of the Indian Sale of Goods Act, 1930 defines the contract of the sale of
goods in the following manner: A contract of sale of goods is a contract
whereby the seller transfers or agrees to transfer the property in goods to the
Buyer for a price.

The term Contract of sale of goods is a generic term and it includes:
a. Sale
b. An agreement to sell

Where the seller transfers the ownership rights to the buyer immediately on
making the contract, it is the contract of sale, but where the ownership rights Are
to pass on some future date upon the fulfilment of certain conditions then it is
called an agreement to sell.
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Introduction
Sale and Agreement to Sell
Sale
A sale is an executed contract

Since the ownership has passed to the
buyer, the seller can sue the buyer for the
price of the goods, if the latter makes a
default in payment

In case of loss of goods, the loss will fall on
the buyer, even though the goods are in the
possession of the seller. It is because the risk
is associated with ownership

In case the buyer pays the price and the
seller thereafter becomes insolvent, the
buyer can claim the goods from the official
receiver or assignee as the case may be
Agreement to Sell
It is an executory contract

In case of breach, the seller can
only sue for damages, unless the
price was payable at a stated date

The loss in this case shall be
borne by the seller, even though
the goods are in the possession of
the buyer

In this case, the buyer cannot
claim the goods, but only a
rateable dividend for the money
paid

Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Introduction
Sale and Hire Purchase Agreement
1. In a sale, property in the goods is transferred to the buyer immediately at the time of
contract, whereas in hire-purchase, the property in the goods passes to the hirer upon
payment of the last instalment.
2. In a sale, the position of the buyer is that of the owner of the goods but in hire
purchase, the position of the hirer is that of a bailee till he pays the last installment.
3. In the case of a sale, the buyer cannot terminate the contract and is bound to pay the
price of the goods. In the case of hire-purchase, the hirer may, if he so likes, terminate
the contract by returning the goods
4. In the case of a sale, the seller takes the risk of any loss resulting from the insolvency of
the buyer. In the case of hire purchase, the owner takes no such risk, for if the hirer fails
to pay an instalment, the owner has the right to take back the goods.
5. In the case of a sale, the buyer can pass a good title to a bonafide purchaser from him
but in a hire-purchase, the hirer cannot pass any title even to a bonafide purchaser.
6. In a sale, sales tax is levied at the time of the contract whereas in a hire-purchase, sales
tax is not leviable until it eventually ripens into a sale
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Introduction
By definition, the following are essential to the contract:
1) There must be at least two parties: a sale has to be bilateral because the property
in goods has to pass from one person to another. The seller and the buyer must be
different persons
2) Transfer or agreement to transfer the ownership of goods: In a contract of sale, it is
the ownership that is transferred (in the case of sale), or agreed to be transferred (in
the case of agreement to sell), as against transfer of mere possession
3) The subject matter of the contract must necessarily be goods: the sale of
immovable property is not covered under Sale of Goods Act.
4) Price is the consideration of the contract of sale: the consideration in a contract of
sale has necessarily to be money.
5) All other essentials of a valid contract as per the Indian Contract Act, 1872 must be
present: the parties to the contract must be competent of contract, the consent of
the parties must be free, the object of the contract must be lawful.
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Introduction
Effect of perishing of goods
Section 7 and 8 deal with the effect of perishing of goods on the rights and obligations of the parties to a
contract of sale.
The word perishing means not only physical destruction of the goods but it also covers:
1. Damage to goods so that the goods have ceased to exist in the commercial sense, i.e. their
merchantable character as such has been lost. Example: where cement is spoiled by water and
becomes almost stone.
2. Loss of goods by theft
3. Where the goods have been lawfully requisitioned by the government
It may also be mentioned that it is only the perishing of specific and ascertained goods that affects a
contract of sale
Where unascertained goods form the subject matter of a contract of sale, their perishing does not affect
the contract and the seller is bound to supply the goods from wherever he likes, otherwise be liable for
breach of contract

Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Introduction
Effect of perishing of goods
1.Perishing of specific goods at or before making of the contract (Sec 7)
In case of the perishing of the whole of goods: Where specific goods form the
subject-matter of a contract of sale (both actual sale and agreement to sell), and they
, without the knowledge of the seller , perish at or before the time of the contract ,
the agreement is void .This provision is based either on the ground of mutual
mistake as to a matter of fact essential to the agreement , or on the ground of
impossibility of performance, both of which render an agreement void.
ILLUSTRATION: A sold to B a specific cargo of goods supposed to be on its way from
England to Bombay. It turned out, however , that before the day of the bargain, the
ship conveying the cargo had been cast away and the goods were lost. Neither
party was aware of the fact. The agreement was held to be void.

Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Introduction
Effect of perishing of goods
In case of perishing of only a part of the goods: Where in a contract for the sale of specific
goods, only part of the goods are destroyed or damaged, the effect of perishing will depend
upon whether the contract is entire or divisible.
If it is entire (i.e. indivisible) and part only of the goods has perished, the contract is void. If
the contract is divisible, it will not be void and the part available in good condition must be
accepted by the buyer.
Example: There was a contract for the sale of a parcel containing700 bags of Chinese
groundnuts of different qualities. Unknown to the seller 109 bags had been stolen at the
time of the contract. The seller delivered the remaining 591 bags and, on the buyers refusal
to take them, brought an action for the price. It was held that the contract being indivisible
had become void by reason of the loss of the goods and the buyer was not bound to take
delivery of 591 bags or pay for the goods.
Note: Had there been all bags of the same weight and quality for certain price per bag, the
contract would have been divisible and the buyer could only have avoided the contract as to
those goods which had actually perished

Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Introduction
Effect of perishing of goods

Perishing of specific goods before sale but after agreement to sell (sec.8).

Where there is an agreement to sell specific goods, and subsequently the goods , without
any fault on the part of the seller or buyer, perish before the risk passes to the buyer, the
contract of sale becomes void, and both parties are excused from performance of the
contract.
This provision is based on the ground of supervening impossibility of performance which
makes a contract void
If only part the goods agreed to be sold perish, contract becomes void if it is indivisible.
But if it is divisible then the parties are absolved from their obligations only to the extent of
the perishing of the goods (i.e., the contract remains valid as regards the part available in
goods condition ).
It must further be noted that if fault of either party causes the destruction of the goods,
then the party in default is liable for non-delivery or the pay for the goods
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Introduction
Effect of perishing of goods: Example
(a) A buyer took a horse on a trial for 8 days on condition that if found suitable for his
purpose the bargain would become absolute. The horse died on the 3
rd
day without any
fault of either party. Held, contract, which was in the from of an agreement to sell, becomes
void and the seller should bear the loss ( Elphick vs Barnes).
Effect of perishing of future goods.
As observed earlier, a present sale of future goods always operates as an agreement to sell
[sec. 6(3)]. As such there arises a question as to whether section 8 applies to a contract of
sale of future goods. (amounting to an agreement to sell) as well? The answer is found in
the leading case of Howell vs Coupland 20, where it has been held that future goods, the
destruction of which makes the contract void . The facts of the case are as follows:
Example: C agreed to sell to H 200 tons of potatoes to be grown on Cs land. C sowed
sufficient land to grow the required quantity of potatoes, but without any fault on his part, a
disease attacked the crop and he could deliver only about ten tons. The contract was held to
have become void.
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Introduction
The Price of the Goods
For a contract to be valid, the buyer must pay the seller a reasonable price which must in
the form of money for the contract to be a valid Sale of Good Contract.
The Sale of Goods Act allows the parties entering into the contract to:
1) Ascertain the Price of the contract at the time of Sale
2) To determine the price at a later date in a manner they may find suitable
If the price is not decided then the buyer must pay the seller a reasonable price, which may
vary from case to case
The parties may also opt to leave the valuation of the contract price to a third party. If the
third party fails to do so then the contract is avoided, but it the goods have been delivered
then a reasonable price has to be paid.
If the third party fails to perform its duties due to the mistake of one of the parties in the
contract then party not in fault can file for damages
Introduction
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
A Stipulation is a representation which forms part of the contract of sale and affects the contract.
This may be either a condition or warranty
A Condition is a stipulated essential to the main purpose of contract and forms the hardcore
of the contract, breach of which gives rise to a right to treat the contract as repudiated.
Case: Bentsen Vs. Taylor, (1893) 2 QB 274
Court asked to test difference between condition and warranty.
As per Judge Bowen L J, There is no way to zero on whether stipulation is condition or warranty
unless the contract is looked in its entirety under surrounding circumstances.
Once done then only mind can be made, whether intention of involved parties will be best out by a
condition or warranty
Case: Baldry Vs. Marshall (1925) 1KB 260
Plaintiff Baldry consulted Marhsall, the defendants, for a car suitable for touring purpose
Defendant suggested a Bugatti, which plaintiff bought.
But the car turned out unsuitable for touring purpose therefore plaintiff sued defendants
for the recovery of the payments made.
But as contract excluded defendant liability for guarantee/warranty, statutory or
otherwise, hence court ruled in favor of plaintiff as the condition behind purchase was
violated. As contract does not exclude liability for breach of condition.
Introduction
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
A Warranty is a stipulation collateral to the purpose of contract, breach of which gives
aggrieved party to sue only for damages only but not avoid the contract or reject goods
Case: Hartley Vs. Hymans
A man buys a horse which is warranted quite to ride and drive but if the horse turns out to
be vicious the buyers only remedy is to claim damages.
Essential Collateral
Treatment
Right in case of Breach
Differences Condition Warranty
Essential to the main
purpose of contract
Collateral to the main
purpose of contract
Contract can be
terminated
Only damages can be
claimed
Breach of condition can be
treated as breach of
warranty
Breach of warranty cannot
be treated as breach of
condition
Introduction
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Condition will be treated as warranty
Voluntary waiver by buyer
Acceptance of goods by buyer
Seller has the right to sell the goods in case of a sale or in case of an agreement seller will
have right to sell when the goods is to pass
Case: Rowland Vs Divall
Claimant bought a car from defendant which he painted, put in his showroom and sold to
another customer
Later car was impounded by police on account of being stolen and was returned to original
owner
The claimant returned money to his customer and sued the defendant
Judgment: Defendant has no right to sell goods as he did not obtain title from thief and
ownership remained with original owner. Defendant used the car and claimant was not
entitled for any compensation for the work carried out on car but he is entitled to get the
purchase money back
Implied warranties:
Introduction
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Warranty of quiet possession: Unless there is a contrary intention, buyer shall have and
enjoy quiet possession of goods and if any way disturbed due to sellers defective title of
goods, buyer may sue seller for breach of warranty
Case: Niblett Limited Vs. Confectioners Materials Co. Ltd.
Planintiff, Niblett purchased 1000 tins of condensed milk, labelled as Nissy,
from defendant, Confectioners Materiasl Co. Ltd.
Nestle told the claimant that if they attempted to sell these on, they would
apply for an injunction to prevent the sale as the label was very similar to
Nestle's labels for their condensed milk
The claimants agreed not to sell them and brought an action against the
sellers.
Judgement: The sellers did not have right to sell the goods and therefore the
buyers were entitled to repudiate the contract

Warranty that goods will be free from any charges or encumbrances in favor of any third party not
declared or known to the buyer before or at the time when contract is made
Introduction
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Sale by Description:
Buyer has never seen and buys on the basis of decription
Case: Varley Vs Whipp
Defendant agreed to buy reaping machine from plaintiff
Plaintiff described it as New the previous year and used very little
Defendant returned machine on account of non-compliance
Judgment: Court ruled in favor of defendant and held that there was a breach

Buyer has seen the goods but buys only on basis of description
Case: Nicholson and Venn Vs. Smith Marriott
Table linen was sold at an auction as being property of King Charles I but was
Georgian; main ground though was for breach of contract

Packing method has been described in contract
Sale by Description and Sample:
Sale takes place on the basis of both
Sample
Description
Introduction
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Condition as to quality or Fitness:
No implied warranty or condition
To the quality for particular purpose
To the fitness for particular purpose
Except:
Purpose of goods is known to seller, i.e. buyer relies on judgment of seller
Goods are brought by description from seller who deals in goods of that description

CAVEAT EMPTOR
Caveat Emptor means let buyer beware.
Buyer must be careful while purchasing goods
Must examine thoroughly while purchasing goods
Satisfy himself that the goods are not defective
As per required quality and suit the purpose
Seller is not liable in case buyer relies on his own judgment and skills and if goods
turns out to be defective or of poor quality or unsuited for the purpose
Introduction
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Case: Eternit Everest Ltd. Vs. Abraham, AIR 2003 KERALA 273
Plaintiff C.G. Abraham filed suit claiming damages against defendant, Eternit Everest Ltd.
Plaintiff purchase asbestos sheets for roofing which was known to the defendant
Asbestos sheets also has unique usage for roofing, protecting against sun and rain
Sheets are fit for purpose only if leak proof
Plaintiff wanted Everest asbestos sheet thus trusting judgment/skill of the defendant
But goods supplied has manufacturing defect of leakage

As purpose was known beforehand to the seller
Therefore there is breach of implied warranty of quality of sheet being fit for intended
use
Sale by Sample:
Sale by sample, when there is term in contract, expressed or implied
Case of contract of sale by sample:
Bulk corresponds with sample in quality
Buyer have opportunity to compare bulk with sample
Goods be free from defect
Introduction
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Conditions &
Warranties
Goods must be ascertained
Where there is a contract for sale of unascertained goods, no property in goods is transferred to the buyer unless goods are
ascertained

Case Study
Tej Singh Vs State, AIR 1981 ALLAHBAD 103
Tej Singh filed a suit against the U. P. State Electricity Board and Superintending
Engineer and the Executive Engineer
Tej Singh had entered into a contract to buy 500 trucks of ash at Rs 16.25 per ft
3
as
and when the ash was produced

But the U.P. electricity board did not allow him to take the ash after as they said it was
their policy to sell the ash at going market rates
Court decreed that the contract was enforceable however, permanent injunction was
not maintainable as he could be adequately compensated in terms of money for non-
performance of the contract
Key Reason
The contracted quantity of the coal ash was not in ready stock for supply to the
appellant and as such the property which was to be sold to the plaintiff was not
specified
In the absence of specified goods no title could pass to the appellant in the waste coal
ash.



Introduction
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Conditions &
Warranties
In case of contract of sale of specific and ascertained goods, the property in them is
transferred to the buyer at such time as parties to contract intend it to be transferred
Intent shall be ascertained from terms of contract, conduct of parties and circumstances of the
case
Rules contained in Section 20 to 24 will be applied for ascertaining this unless a different
intention appears



Property passes when intended to pass
Specific goods in deliverable state
In case of unconditional contract for sale of specific goods in deliverable state title passes
to the buyer when contract is made, Irrespective of time of payment or delivery unless a
different intention appears
Case Study
Agricultural Market Committee vs Shalimar Chemical Works
Goods were ascertained and in deliverable state
The seller loaded goods on lorry & dispatched to Hyderabad
Contract did mention that seller will not be liable for any future losses of goods and buyer
had also obtained an insurance of the goods
Hence the intention of the buyer was that of goods to be treated as that of his own
Thus the argument that title was accepted after that payment or weighting of the goods at
Hyderabad were incorrect, title had already been transferred in Kerala

Introduction
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Conditions &
Warranties
Goods sent on approval or on sale or return
In contract for sale of specific goods in a deliverable state, but the seller is bound to weigh,
measure, test or do something with reference goods for purpose of ascertaining the price, the
property does not pass until
Such act or something is done
Buyer has notice thereof

Goods to be put in deliverable state
Where there is a contract for sale of specific goods and the seller is bound to do something to put
it in a deliverable state the title doesnt pass until
a) such thing is done
b) Buyer has notice thereof

Where seller has to Ascertain price
When goods are delivered to the buyer on approval or on sale or return the property passes to
the buyer if:
Buyer signifies approval / acceptance
Or If time fixed decided for return passes or reasonable time passes and buyer retains the goods
without giving notice of rejection
Introduction
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Conditions &
Warranties
Sale of Unascertained goods and appropriation
The property of the goods passes on to the buyer if there is a contract of
Unascertained goods or Future goods by description
Deliverable state
Unconditionally appropriated to the contract by either:
Seller with assent of the buyer
Or buyer with the assent of the seller
Assent may be implied or express, given before or after appropriation
Delivery to Carrier
The seller is deemed to have unconditionally appropriated goods to the contract if:
If seller delivers goods to buyer or carrier or other bailee (whether named by buyer of not)
for the purpose of transmission to buyer
Seller doesnt reserve the right of disposal
Exception 1: when the contract contemplates delivery to the buyer, the sellers act of delivery
merely is considered a step in the execution of the contract

Exception 2:Even when the above is true question whether seller intends to transfer the title
still persists

Introduction
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Conditions &
Warranties

In contract for sale of specific goods or appropriated goods or appropriated subsequently
The seller may by the terms of the contract reserve the right of disposal of goods until certain
conditions are fulfilled
Goods are shipped / delivered to the railway and are deliverable to the order of the seller or
his agent
Where seller of goods draws on buyer for the price and transmits to the buyer bill of exchange
together with the bill of lading / railway receipt to secure acceptance of payment if the buyer
does not intend to honor the payment then even if the buyer holds on to the railway receipt
wrongfully the title doesnt pass to the buyer


Reservation of right of disposal
Goods remain sellers risk until title has been transferred whether delivery has been made or
not
Exception 1: delivery has been delayed through fault of one of the parties the goods are at risk
of the party as regards to any loss which might have occurred but for such fault
Exception 2: Seller or buyer holds the goods in capacity of bailee
Risk Prima facie passes with property
Introduction
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Sale by person not the owner
Goods are sold by person to buyer who is not the owner
Buyer has no title to the goods
Unless owner precluded from denying sellers authority to sell

Case: Cundy Vs. Lindsay
Rogue Blenkarn impersonated the reputed firm Blenkiron and Son traded
Blenkarn ordered linen from Lindsay and Co. and sold to Cundy
Cundy has bought the items in good faith
First contact was void, on account of mistake of identity
Blenkarn could not confer any title on Cundy who were liable to Lindsay and Co in
conversion

When seller obtained possession of goods under a voidable contract but at the time of
sale contract has not rescinded, then buyer acquires title of the goods if bought in good
faith and without notice of seller defect of title

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 the goods and payment of the price are concurrent conditions.

Delivery of goods sold may be made by doing anything which
the parties agree shall be treated as delivery or
has the effect of putting the goods in the possession of the buyer or of any person
authorized to hold them on his behalf.

A delivery of part of 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,
but a delivery of part of the goods, with an intention of severing it from the whole,
does not operate as a delivery of the remainder.
If during the working or performance of a contract of sale, if an imposition of customs or
excise duty or tax on the sale or purchase of goods happens, the seller may add an
equivalent amount to the contract price.
Performance of the Contract Basic Information
Sec 64(A) Special Provision:
Introduction
Conditions &
Warranties
Effects of
the contract
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Transfer of
Title
A Ramamoorthy v. P. Satyanarayana

The plaintiff entered into contracts with the defendants to buy gunnies

Although the time and place of the delivery were fixed, the payment was stipulated
against the delivery order

At the end of the contracts, the plaintiff passed to the defendants a stop-loss letter,
under which the plaintiff agreed to accept damages in lieu of delivery

The plaintiff without applying for delivery, sued the defendants for damages for non
delivery

As the plaintiff did not apply for delivery, he had no cause of action for claiming
damages

Apart from any express contract, the seller of goods is not bound to deliver them until the
buyer applies for delivery.
Buyer to Apply for Delivery
Introduction
Conditions &
Warranties
Effects of
the contract
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Transfer of
Title
Whether it is for the buyer to take possession of the goods or for the seller to send them to the
buyer is a question depending in each case on the contract, express or implied, between the
parties. Apart from any such contract, goods sold are to be delivered at the place at which
they are at the time of the sale, and goods agreed to be sold are to be delivered at the
place at which they are at the time of the agreement to sell, if not then in existence, at
the place at which they are manufactured or produced.

Where under the contract of sale 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.

Where the goods at the time of sale are in the possession of a third person, there is no delivery
by seller to buyer unless and until such third person acknowledges to the buyer that he
holds the goods on his behalf. Provided that nothing in this section shall affect the operation
of the issue or transfer of any document of title to goods.

Demand or tender of delivery may be treated as ineffectual unless made at a reasonable
hour. What is a reasonable hour is a question of fact.

Unless otherwise agreed, the expense of and incidental to putting the goods into a deliverable
state shall be borne by the seller.
Rules as to Delivery
Introduction
Conditions &
Warranties
Effects of
the contract
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Transfer of
Title
If seller delivers greater than the contracted quantity of goods
Buyer may accept the contracted quantity only or reject the whole
If buyer accepts the whole, he has to pay at the contract rate.

If seller delivers lesser than the contracted quantity of goods
Buyer may reject the quantity
If buyer accepts, he has to pay at the contract rate

If seller delivers goods which include non specified ones
Buyer may accept the contracted type of goods or reject the whole
Delivery of Wrong Quantity

Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by
instalments.
If the contract species delivery in instalments and the seller makes no or defective
delivery or the buyer neglects or refuses to take delivery of one or more instalments,
the intensity of the breach has to be decided based on the circumstance
Instalment Deliveries
Introduction
Conditions &
Warranties
Effects of
the contract
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Transfer of
Title
Girija Prashad Pal v. National Coal
Co. ltd.

The words f.o.r. were used,
meaning it is the sellers
responsibility to keep the goods
free on the rail as the place of
delivery. Once that is done, the risk
is with the buyer.

The seller delivered the goods in
the wagons at Jodhpur for
transmission to the buyer

The court ruled that the property of
the goods together with the risk
passed from the seller to the buyer
as soon as the goods were loaded
in the railway wagons at Jodhpur
i.e. F.O.R. Jodhpur
If the seller is required to send the goods to the buyer
Delivery of the goods to a carrier, whether named
by the buyer or not, for transmission to the buyer, is
prima facie deemed as delivery to the buyer
Delivery of goods to a wharfinger for safe custody is
prima facie deemed as delivery to the buyer

But in this case the seller has to make a reasonable
contract with the carrier or the wharfinger on behalf of
the buyer with regard to the goods and circumstances.

If the seller omits to do so and the goods are
lost/damaged,
The buyer may not treat the delivery to the carrier
or the wharfinger as delivery to himself or
The buyer may hold the seller responsible in
damage

If such a transit is through the sea, the seller has to give
notice to the buyer to insure the goods during the transit.
If the seller fails to do so, the goods will be at the sellers
risk during the transit.
Delivery to carrier or wharfinger
Introduction
Conditions &
Warranties
Effects of
the contract
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Transfer of
Title
Cost, Insurance and Freight (CIF)
A type of contract wherein the price includes cost, insurance and freight charges
The seller is required to send the bill of lading and insurance policy together with
the invoice to the buyer
Buyer pays on the receipt of the documents.

Free on Board (FOB)
The seller has to deliver the goods on board a vessel designated by the buyer
The seller fulfills his obligation when the goods pass over the ships rail
All freight, insurance costs etc. are borne by the buyer
A flexible instrument obligations can be changed by either of the parties
CIF and FOB
B designates a carrier for transit. S puts the goods on board and forwards the bill of
lading to B classic FOB
S undertakes additional duties arranges for carriage and insurance. The lading bill is
forwarded to B. Similar to CIF but contract price excludes carriage costs.
B takes the contract of carriage in advance. S puts goods on board in exchange for a
mates receipt which is forwarded to B.
FOB Varieties: Examples
Introduction
Conditions &
Warranties
Effects of
the contract
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Transfer of
Title
Generally, risk passes to the buyer when the goods are put across the ships rail.
Even when the property does not pass to the buyer on loading, risk normally will pass.
If the contract varies the sellers duties, the point at which the risk passes may vary. Eg. Free on
Board Stowed.
Risk could also pass to the buyer prior to shipment. Eg. If the goods deteriorate because of delay by
the buyer in giving shipping instructions to the seller.
Buyer bears the risk of fluctuations in freight rates and insurance premiums
A Note on FOB
Most widely and frequently used contract for sea borne commerce
An essential feature is that performance of the contract is satisfied by the delivery of the
documents and not by the actual physical delivery of the goods
The buyer cannot refuse the documents and ask for the goods, neither can the vendor withhold the
documents and tender the goods.
Advantages
The buyer knows from the date of the contract the exact price he must pay as it includes
freight and insurance
The use of documents to represent goods allow the buyer to resell the goods before they
arrive
The use of documents facilitate the involvement of financial institutions they can be
transferred to the buyers bank as security for the advance of the price by the buyer.
The seller is assured of payment even of the goods are damaged or they never arrive. The
buyer is protected by the lading bill and insurance policy against such losses.
A Note on CIF
Introduction
Conditions &
Warranties
Effects of
the contract
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Transfer of
Title
Will always be an export contract
Exception to the general rule of passage of risks and passage of goods
The property passes at the time the buyer pays and takes up the documents
But the goods are at the buyers risk from the time of shipment
If seller ships the goods for the buyer
Risk passes at the time of shipment
If the contract is made after the shipment,
Risk passes at the time of the contract retrospectively, so that goods are deemed to have been
at the buyers risk since the time of shipment
A few stages at which loss/damage may occur during a CIF transaction
Loss/deterioration after the buyer has paid the price buyers loss
Loss/deterioration after the tender of documents buyers loss (unless other conditions are
prescribed)
A Note on CIF
Seller has to deliver the goods to the buyer at the port of destination

Property does not pass until actual delivery

The goods are at the sellers risk during voyage. Thus, the seller has to insure

The seller has to pay the freight as well
Ex-Ship Contract
Introduction
Conditions &
Warranties
Effects of
the contract
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Transfer of
Title
Services FOB CIF ES
Warehouse Storage Seller Seller Seller
Warehouse Labour Seller Seller Seller
Export Packing Seller Seller Seller
Loading Charges Seller Seller Seller
Inland Freight Seller Seller Seller
Terminal Charges Seller Seller Seller
Forwarders Fees Buyer Seller Seller
Loading on Vessel Seller Seller Seller
Ocean/Air Freight Buyer Seller Seller
Charges on Arrival at Destination Buyer Buyer Buyer
Duty, Taxes and Customs Clearance Buyer Buyer Buyer
Delivery to Destination Buyer Buyer Buyer
Summary of Responsibilities
Introduction
Conditions &
Warranties
Effects of
the contract
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Transfer of
Title
Where the seller of goods agrees to deliver them at his own risk at 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 transit.
Delivery at a Distant Place
Buyer is not deemed to have accepted goods unless he has had a reasonable
opportunity to examine them for conformity
The seller is bound to afford the buyer this reasonable opportunity
This is only a right to examine the goods not repudiate the contract
If the seller affords the opportunity to the buyer and the latter does not accept
the opportunity, the buyer cannot subsequently say that the goods were of
inferior quality and sue the seller
If the buyer sells and delivers a part of the goods to sub purchasers, the buyer is
deemed to have accepted the goods and he forfeits the right to examine the
goods and reject them for non-conformity
Buyers Right of Examining the Goods
Introduction
Conditions &
Warranties
Effects of
the contract
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Transfer of
Title

The buyer is deemed to have accepted the goods when he intimates to the
seller that he has accepted them, or 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, or when, after the lapse of a reasonable time, he
retains the goods without intimating to the seller that he has rejected them.
Acceptance

In a contract for supply of software, the defendant buyer had made substantial
payments for the initial supply and later raised grievances that the subsequent
supply was defective.

But the defect was not detected within a reasonable time. (One Year)

Such goods are deemed to have been accepted.
Case in Point
Introduction
Conditions &
Warranties
Effects of
the contract
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Transfer of
Title

Unless otherwise agreed, where goods are delivered to the buyer and he
refuses to accept them, having the right so to do, he is not bound to return
them to the seller, but it is sufficient if he intimates to the seller that he refuses
to accept them.
Buyer not bound to return rejected goods

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 take 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 a reasonable
charge for the care and custody of the goods:
Liability of buyer for neglecting or refusing delivery of goods
Introduction
Conditions &
Warranties
Effects of
the contract
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Transfer of
Title
Introduction
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
A seller is deemed as an Unpaid Seller when:
When the whole of the price has not been paid or tendered
When a bill of exchange or other negotiable instrument has been received as conditional payment,
and the conditions on which it was received has not been fulfilled by reason of the dishonor of the
instrument or otherwise
Rights of an Unpaid Seller:











Introduction
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Sellers Lien: Entitlement of retaining possession
Applicable when:
Goods sold without any stipulation as to credit
Goods sold on credit & credit-term expires
Buyer becomes insolvent
Incase of part delivery of goods:
Right of lien is applicable to remainder unless an agreement to waive lien has been made
Delivery of the part does not constitute the delivery of the whole
Lien Terminates when:
Seller delivers goods to carrier/bailee for transmission to buyer without reserving
right of disposal of goods
Buyer lawfully obtains possession of goods
Seller waives his right of lien
Prerequisites for Right of stoppage in transit:
Seller must be partially/wholly unpaid
Buyer must have become insolvent
Goods must be in transit
Eg: Seller has parted with possession of goods and buyer has not received the goods
Introduction
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Duration of Transit:
Transit ends when
Buyer takes delivery of goods
Buyer/his agent takes deliver of goods before appointed destination i.e. in anticipation
Carrier/bailee at appointed destination acknowledges possession of goods
Carrier/bailee wrongfully refuses to deliver goods to buyer/his agent
Transit continues in effect when:
Buyer refuses to accept delivery and seller refuses to take it back, bailee is still in
possession
How Right of Stoppage in transit is effected by the seller:
Taking actual possession of goods
Giving notice of his claim to carrier/bailee who possesses goods or to redirect goods
to seller or according to his directions
Sale generally not rescinded by lien or stoppage in transit
Effect of Sub-sale or pledge by buyer:
In case of transfer of goods by buyer, the unpaid sellers right of lien or stoppage in transit
can be exercised subject to rights of transferee.
When pledgee sells goods, the unpaid seller is entitled to receive the surplus sale proceeds.
Introduction
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Unpaid sellers right of re-sale can be exercised when:
Goods are perishable
After executing his Right of Lien on retaining his goods or,
After exercising his Right to Stoppage in Transit upon insolvency of the buyer
Seller gives notice to buyer of his intention to resell and buyer does not pay the price
within a reasonable time after the notice
Seller has expressly reserved his right of resale in case of default
If the seller has given notice to the buyer:
He can hold the buyer responsible for loss suffered due to breach of contract
Profits earned on resale are retained by the unpaid seller.
If notice has not been given to the buyer:
Seller cannot recover damages from buyer
Seller has to pay the profits if any to the buyer
Seller can claim difference between the contract price and the market price at the date of
the breach

Part -1 : To protect Seller
Suit for Price
Goods been passed but buyer
wrongfully neglects or refuses to pay
Or
Although goods not been passed
but price is payable on certain day
irrespective of delivery which buyer
has wrongfully neglected or has
refused to pay

Seller may sue buyer
for the price of the
goods


Damages for Non-
Acceptance

Buyer wrongfully neglects or refuses
to accept and pay for the goods




Seller may sue buyer
for damages of non
acceptance
Introduction
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Part -2 : To protect Buyer
Damages for Non-
Delivery
Seller wrongfully neglects or
refuses to deliver the goods to
the buyer


Buyer may sue seller for damages for
non-delivery

Remedy for breach of
Warranty

If breach of warranty by seller
- He may not only reject the
goods but

Set up against seller breach of warranty
in diminution/extinction of price
Sue the seller for damages for breach
of warranty
Or do both in case he suffers from
further damage
Introduction
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Part -3 : To protect both
Repudiation of contract
before due date

Either party to contract of sake
repudiates the contract before the date
of delivery

Other may treat contract as
subsisting and wait till delivery
Interest by way of damages &
special damages

In the absence of specific contract to
not allow any party to get paid for
interest or special damages court may
award interest as it thinks fit on the
amount of price :

Treat contract as rescinded and
sue for damages for the breach
Or
To seller from the date of the
tender of the goods or from the
date on which price was payable
Or
To buyer for the refund of the
price from the date on which
payment was made
Introduction
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Miscellaneous
Exclusion of implied terms and conditions

It is open to parties to the contract to agree to themselves to any special rights and
obligations as they may please.

Such as providing for measure of damages and specially exclude any of the terms and
conditions which law automatically attaches to the contract of SOG
Reasonable time a question of fact

Where any reference is made to a reasonable time, the question what is reasonable time
is a question of fact.

Introduction
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Miscellaneous

Auction Sale
Where goods are put up for sale in lots, each lot is prima facie subject of separate
contract of sale

Sale is complete when auctioneer announces its completion of the hammer or in
customary manner.

If the seller Makes use of pretended bidding to raise the price, the sale is voidable at the
option of the buyer



Introduction
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach
Miscellaneous
In contracts of sale, amount of increased or decreased taxes to be
added or deducted
Unless a different intention appears from the terms of the contract, in the event of any
tax being imposed/increased/decreased
A) If the Tax is being increased seller may add so much to the contract price equivalent
to amount of tax being added. He shall be entitled to be paid and to sue for and
recover such addition
B) If the Tax is being decreased buyer may deduct so much from the contract price
equivalent to amount of tax being decreased. He shall not be liable to be pay or be
sued for in respect of such deduction.

Introduction
Conditions &
Warranties
Effects of
the contract
Transfer of
Title
Contract
Performance
Rights of
Unpaid
Seller
Remedy for
Breach