DOCTRINE OF CAVEAT EMPTOR

y Caveat Emptor is a fundamental principle of the law

of sale of goods. It means Caution Buyer, i.e. Let the buyer beware. In the other words, it is no part of the sellers duty to point out defects of his own goods. The buyer must inspect the goods to find out if they will suit his purpose.

The doctrine of Caveat Emptor is however, subject to the following expections :

Where the seller makes a false representation and

buyer relies on the representation. The rule of Caveat Emptor will not apply and the buyer will be entitled to the goods according to that representation ; Where the seller actively conceals a defect in the goods, so that on a reasonable examination the same could not be discovered ;

Where the buyer makes know to the seller the purpose

for which he is buying the goods, and the seller happens to be a person whose business is to sell goods of that description, then there is an implied condition that the goods shall be reasonably fit for such purpose. The rule of Caveat Emptor will not apply. In case of sale by description, there is implied condition as to their of merchantable quality. However ,if the buyer has examined the goods, this condition of merchantability extends only to hidden or latent defects. The defects which such examination ought to have revealed are not covered i.e. the rule of Caveat Emptor will be applicable.

PASSING (TRANSFER) OF PROPERTY (OWNERSHIP) IN GOODS

y The rules regarding passing of the property in goods

are contained in Section 18 to 25. what does property in goods mean? It means ownership of goods. It is worth nothing that property in goods is not the same thing as possession of goods. The possession of goods refers to the custody of goods. Though normally a person who is in possession shall also be its owner but is not in possession of the same or vice-versa.

TRANSFER OF TITLE BY NON-OWNERS

GENERAL RULE AS TO TRANSFER OF TITLE
The general rule is that the only the owner of goods can transfer a good title. No one can give a better title than he himself has. This rule is expressed by the maxim Nemo dat quod non habet which means that no one can give what he himself has not. If the seller, therefore, has no title, or a defective title, the buyers title will be equally wanting or defective as the case may be, though he may be a purchaser bonafide and for value. Section 27 in this regard says that Subject to the provisions of the Act and of any other law at the time in force, where goods are sold by a person, who is not owner thereof and who does not sell under the authority or with the consent of the owner, the buyer acquires no better title to the goods than what the seller had, unless the owner is precluded by his conduct from denying the sellers authority to sell.

Exceptions to the rule:

Sale by Mercantile Agent: In case of sale by a

mercantile agent who in possession of either the goods or documents of title to the goods with the consent of the owner and sells the goods in the ordinary course of business as a mercantile agent, the buyer gets a good title to the goods provide he buys them in good faith and for value. Who is a mercantile agent? Section 2(9) defines a mercantile agent as an agent having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods.

Sale by a joint-owner:
Where one of several joint owners of goods has the sole possession thereof, with the consent of the others, any purchaser from such person, for value without notice at the time, of the sellers want of authority to sell, acquires a good title thereto against the other jointowners.(Section 28) In case of sale by co-owner, good title can pass to the purchaser only if the co-owner was in possession with the consent of the other co-owners.

Sale by a person in Possession under a Voidable Contract: A person who has obtained possession of goods under a contract which is voidable on the ground of fraud, misrepresentation, coercion, or undue influence, can convey a good title, provided the sale takes place before the voidable contract is avoided (Section 29 )

Sale by the Seller in Possession of Goods after Sale: Where a seller having sold goods, continues in possession thereof or of documents or title to the goods, the delivery or transfer by such person or by a mercantile agent acting for such person, of the same, by way of sale, pledge or other disposition, will pass a good title to the transferee, if such latter person has acted in good faith and without notice of the previous sale(Section 30).For the Section to apply two conditions must be satisfied, namely

A. The seller must be in possession of the goods as

seller and not in any other capacity. thus., where the buyer asks the seller to keep the goods as his bailee. B. The purchaser must be a bonafide purchaser and for value.

Sale by buyer in Possession of Goods: Where a person having bought or agreed to buy obtains, with the consent of the seller, possession of the goods or of the documents of title to the goods, the delivery or transfer by such person or by a mercantile agent acting for such person, of the goods or documents, by way of sale, pledge or other disposition thereof will be valid and effective, if the person receiving the same, acted bonafide and without notice of the sellers lien, if any.

Sale by an Unpaid Seller:

According to section 54(3), an unpaid seller of goods who has exercised his right of lien or stoppage in transit can, even though the ownership in them has passed to the buyer, resell the goods and convey a valid tile to another buyer, no notice of re- sale has been given to the original buyer.

EXCERPTIONS UNDER OTHER ACTS

a) Sale by a finder of lost goods under certain circumstances shall be valid even against the true owner. A finder of goods may sell the goods foundI.

II.

III.

IV.

If the owner cannot with reasonable diligence be found: or If found, he refuses to pay lawful charges of the finder: or If the goods are in the danger of perishing or of losing the greater part of their value: or If the lawful charges of the finder, in respect of the goods found, amount to 2/3rd of their value.

b) Sale by a Pawnee or pledgee under Section 176 of the Indian Contract Act. c) Sale by an official Receiver or Official Assignee or Liquidator of Companies.

UNPAID SELLER
An unpaid seller of goods is a person who has not been paid the whole of the price or to whom the whole of the price has not been tendered. Section 45910 provides thatThe seller of goods is deemed to be an unpaid seller if: a)The whole of the price has not been paid or tendered: b)When a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonor of the instrument or otherwise. The term seller includes any person who is in the position of a seller , e.g., an agent of the seller.

RIGHTS OF AN UNPAID SELLER

Rights of unpaid seller Rights against goods Rights against the buyer personally A right of stoppage in transit A right of re- sale Right to sue for the price Right to sue the buyer for damages for nonacceptance

Lien on the goods

Rights against goods :

1.

Lien on the goods The word lien means to retain possession of. Under Section 47 an unpaid seller who is in possession of goods, is entitled to retain them in his possession until payment or tender of the price in the following cases, namely: a) where the goods have been sold without any stipulation as to credit. b)where the goods have been sold on credit, but the term of credit has expired. c)where the buyer becomes insolvent.

ii) A right of stoppage in transit This right consist in preventing the goods from being delivered to the buyer, and resuming or regaining their possession while in transit, retaining them till the price is paid. The right of stoppage in transit is earned only when the right of lien is lost and is available only where the buyer has become insolvent. Section 50 provides- subject to the provisions of the Sale of Goods Act, when the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transit, that is to say, he may resume possession of the goods as long as they are in the course of transit, and may retain them until payment or tender of the price.

iii) Rights of Re-sale:

The unpaid seller, who has retained possession of the goods in exercise of his right of lien or who has resumed upon insolvency of the buyer, can resell the goods: a)If the goods are of a perishable nature, without any notice to the buyer, and b) In other cases, after notice to buyer calling upon him to pay or tender the price within reasonable time, and upon failure of the buyer to do so.

Rights Against the Buyer Personally

I.

Right to sue for the price

Where under a contract of sale the property in the goods has passed to the buyer, and the buyer wrongfully neglects or refuses to pay the price, the seller can sue the buyer for the price of the goods. Where under a contract of sale the price is payable on a day fixed irrespective of delivery, and the buyer wrongfully o pay the price, the seller may sue the buyer for the price although the property in the goods has not passed and the goods have not passed and the goods have not been appropriated to the contract.

ii) Right to sue the buyer for damages for nonacceptance

Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for non- acceptance. Where the property in the goods has passed to the buyer, and the price was not payable without passing of property, the seller can only sue for damaged and not for the price.