SALE OF GOODS

Ref: Sale of Goods Act, 1930.

SALE
A contract to transfer the ownership (title) of the goods from one person (seller) to another (buyer) for a price as consideration is called Sale. ESSENTIALS OF A SALE 1. 2. 3. 4. Two Parties Transfer of title. Goods. Price.

AGREEMENT TO SELL Where under a contract of sale the transfer of ownership in the goods is to take place at some future time subject to some condition thereafter to be fulfilled the transaction is said to be an agreement to sell. DISTINCTIN BETWEEN SALE AND AGREEMENT TO SELL SALE AGREEMENT TO SELL

1. Ownership or title of property passes Title in the goods passes at some certain to the buyer immediately as the contract is future time or on fulfillment of some executed. condition attached to the contract. 2. Risk of loss passes with the title even if the goods are in the possession of the seller unless otherwise agreed. 3. A sale is an executed contract because the ownership passes to the buyer from seller simultaneously. 4. Seller has no right to resell the goods even though they might be in his possession.(jus in rem) 5. In case buyer is adjudged as insolvent the goods are to be delivered to the official receiver either by the seller or buyer. Risk of loss rests with the seller even though the goods are in the possession of the buyer. An agreement to sell is an executory contract as the property in goods has to pass in future. Seller can resell the goods and give a good title to new buyer; original buyer can however sue for breach of contract. The seller may refuse to deliver the goods to official receiver unless paid for.

6. In case seller is adjudged as insolvent, The buyer can not recover the goods from the buyer is entitled to recover the goods official receiver. from the official receiver as title lies with him. KINDS OF GOODS 1. Existing goods. a) Specific: - Goods identified and agreed upon at the time a contract of sale is made. b) Ascertained: - Goods identified and agreed upon after the contract of sale is made. c) Unascertained: - Goods defined by description and not specifically identified at the time of a contract of sale. 2. Future goods: - Goods which are to be manufactured, produced or acquired by the seller after the making of the contract of sale. 3. Contingent goods: - Goods the acquisition of which depends on a contingency that may or may not happen. THE PRICE The monetary consideration, paid or promised, for the sale of goods and is the essence of the contract. MODES OF FIXING THE PRICE The price must be either certain and definite or must be determinable by some method of calculation or criterion prescribed by the Contract. 1. 2. 3. 4. It may be left on the mutual agreement of the parties. It may be left for valuation by a third party. It may be determined by the course of dealing between the parties. Reasonable price. CONDITIONS AND WARRANTIES In a contract of sale, the buyer may make statements or representations regarding the nature or quality of goods, or for their fitness for buyerspurpose with a view to influence the buyer to buy the goods. These statements or representations or terms are called STIPULATIONS. The breach of stipulations give rise to legal consequences, but all of them are not important. Mere expression of opinion is however not a stipulation.

A stipulation essential to the main purpose of the contract, the breach of which frustrates the very purpose of the contract; and gives the buyer a right to treat the contract as repudiated is called CONDITION. Stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not a right to reject the contract as repudiated is called WARRANTY.

DIFFERENCE BETWEEN CONDITION AND WARRANTY CONDITION WARRANTY

1. Essential to the main purpose of the contract. 1. Collateral to the main purpose of the contract. 2. The non-fulfillment of the condition gives the 2. Non fulfillment of warranty does not give the buyer right to reject the goods and repudiate buyer right to repudiate the contract or reject the contract. the goods. 3. A breach of condition may be treated as a 3. A breach of warranty can not be treated as breach of warranty. breach of condition. P.s.-In both condition and warranty the aggrieved party can sue for damages.

IMPLIED CONDITIONS AND WARRANTIES 1. 2. 3. In a contract of sale there is an implied condition that in the case of a sale, the seller has a right to sell the goods. Where there is a contract for sale of goods by description , there is an implied condition that the goods shall correspond with the description. Where the goods are to supplied as per the sample there are implied conditions that: a) The bulk shall correspond with the sample. b) The buyer shall have reasonable opportunity to compare the bulk with the sample. c) The goods shall be free from any defect, which is not apparent on ordinary examination, rendering them unmerchantable. Where goods are sold both by sample as well as description, there is an implied condition that goods shall correspond with both.

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Where the goods are bought by description from a seller who deals in goods of the description (whether he is manufacturer / producer or not), there is an implied condition that the goods are of merchantable quality. 6. Where there is a sale of eatables there is an implied condition that the goods are wholesome and fit for consumption. 7. In case of dangerous natured goods sold to an ignorant buyer there is an implied warranty that the buyer be informed accordingly. Note: Although the above conditions or warranties are implied, all or any of them may be negatived or varied by express agreement or by the course of dealings between the parties.

THE DOCTRINE OF CAVEAT EMPTOR (BUYER BEWARE): The doctrine states that the buyer in buying certain goods is to satisfy himself that the goods are suitable for the use for which they are being bought. He cannot later on hold the seller responsible if the goods turn out to be unsuitable or defective if he depends on his own skill and judgment. The seller is not bound to disclose the faults in his goods. EXCEPTIONS The doctrine would not apply where: 1. 2. 3. 4. 5. The buyer relies on the skill and judgment of the seller. In a contract of sale by description, the seller must supply the goods of merchantable quality. Where the usage or custom of the trade requires the seller to supply goods of particular quality, or fit for a particular purpose. In a contract of sale by sample, the seller would be responsible if the goods have a latent defect, which renders them unmerchantable. If the consent of the buyer is obtained by active concealment of defects.

EXECUTION OF THE CONTRACT DELIVERY Delivery means voluntary transfer of possession from one person to another, if transfer is not voluntary the delivery will not take palace. Types of delivery Actual Delivery: When the goods are handed over by the seller to buyer or his authorized agent. Constructive Delivery: When the person in possession of the goods of the seller acknowledges that he holds them on behalf of the buyer. Symbolic Delivery: When the means of obtaining the goods, i.e. their symbol is transferred, it is called symbolic delivery. Place of delivery i) ii) iii) As per the terms of the contract. By the usage of trade. In the absence of contract and usage, the place of delivery will be: In the case of sale, the place where they are at the time of the sale. In case of future goods, the place where they are to be manufactured or produced. In case of an agreement to sell, the place where they are at the time of the agreement. UNPAID SELLER The seller of goods is deemed to be an Unpaid seller: a) When the whole of the price has not been paid. b) When a Bill of Exchange or other instrument has been received as conditional payment and is dishonored. RIGHTS OF UNPAID SELLER a) Right of lien: Lien means the right to retain goods belonging to another person, until certain charges due from its owner are recovered. Essential conditions of lien are: i) ii) The property in the goods has been transferred to the buyer. The possession of goods is still with the seller.

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The seller can retain the goods unless the goods are sold on credit, are sold on credit and the term of credit has expired; in case of buyer becoming insolvent.

b) Right of Stoppage in transit: When the buyer of goods becomes insolvent, the unpaid seller who has parted with possession of goods, has the right of stopping them in transit, and can resume possession and retain them until paid for. The essentials are: i) ii) iii) iv) The seller is an unpaid seller. Buyer has become insolvent. The property in goods has passed to the buyer. The seller has parted with the goods to a carrier( has lost the lien)

c) Right of resale: An unpaid seller has the right to resell the goods in his possession, the property in whom has been transferred; in the following circumstances: i) ii) Where the goods are of a perishable nature. Where the unpaid seller has given a notice to the buyer of his intention to resell the goods; and the buyer does not within the stipulated or reasonable time pays or tenders price.