You are on page 1of 24

The Indian Partnership Act 1932

13/10/15

Definitions-

Act of a firm- Sec. 2(a)

Any act/omission by all the partners, or by any partner or agent of the firm which
gives rise to a right enforceable by/ against the firm even if one partner does
something, the liability passes to everyone in the firm. With an act that has an
intention to create a legal relation.

Business- Sec. 2(b)

Business includes every trade, occupation and profession

Section 4- Definition of Partnership

Relationship between persons who have agreed to share profits of a business carried
on by all, or by any of them acting for all

Essential of a partnership

1. Agreement
2. Business
3. Share profits
4. Mutual agency

Persons who have entered into a partnership with one another individually- Partner

Collectively- Firm (not a legal entity, just a lawful association of people.)

The name under which their business is carried on- Firm Name

1. Agreement

Agreement as per ICA, 1872- expressed/implied.


Source of Partnership
Creates and defines the firm and relation between the partners
Person needs to enter into an agreement
Neither HUF/ firm can join in the agreement.
Sin qua non
2. Business

Partnership exists only for the purpose of business alone. NGOS dont
come under this.
Minck v Roshan Lal Shorey, 1931, Lah HC- two persons joining and
investing to produce a movie and deciding to share the profits are
considered to be partners. Although it maybe a single adventure but the
same requires a series of transactions and continous relationship. Particular
partnership.
Keith Spicer Ltd v Mansell, 1970, CA- Two people decided to join and
form a private limited company and one did not want to invest as the
company had not come into existence yet. The other filed a case, but it was
held that the partners should have a business in existence.

3. Share Profits

Sharing of profits and loss


Primary evidence that a partnership exists
Example: Writer and royalty out of profits: No

4. Mutual Agency

Section 4 By all or any of them acting for all


Partners have implied authority of binding the decisions of each other by
usual course of business.

14/10/15

Question: S & S were partners who were badly in debt. So they contracted with their
creditors, whereby they made their creditors, as trustees of their business and take
profits to clear the debts. These trustees bought coke from Mr. H and didnt give
money. So he filed a case against all the trustees including Mr. C, who never worked.
Is there any partnership between the trustees?

Answer: No there is no partnership as I was not carrying on the business and merely
just deriving the profits (a passive member). The court said partnership isnt just the
sharing of profits and rather in order to determine partnership, whether there is an
agreement to act as agents for each other. Cox v Hickman, 1860

Hindu Undivided Family

Each male member is called Co- parcener (after 2005 females were also included).
The eldest male member is called Kartha. As soon as a child is born it has a right over
the ancestral property, only applicable for Mithakshara School of law. To stop the
Kartha, the others can ask for partition.

Agarwal & Co v CIT, 1970, SC A HUF can never become a partnership. This is
because its not a commercial enterprise and it is a family business. Its governed
under Hindu Succession Act and not governed by commercial laws. The co- parceners
never act as agents of each other. Thus if one party enters into a contract, this doesnt
equate to ipso facto other members also enter into the contract.

Section 5- Relationship of Partnership arises from contract and not status, members
of HUF/ Burmese Buddhist H&W carrying on business are not partners
CIT v Nandlal Gandalal, 1960- HUF is neither a partnership nor can they join any
partnership.

Difference between HUF AND FIRM.

Firm HUF

Interest is acquired by contract. Interest is acquired by family


No partnership can arise without a business status. The relation of
contract. members is based on the status of
persons.

Mutual agents. An act done by Co- parcener are not agents and
any of the partners binds the firm. Kartha has the sole authority

Personal as well as Joint and Only Joint liability


several liability.

Death- dissolves Death does not dissolve

Can ask for profits and accounts Cannot ask for profits and
as a matter of right accounts as a matter of right.

Partnership
Collection of partner- no separate existence
Partners are the co-owners
Partners have unlimited liability
No right to transfer share without the consent of others

Registered Company
Legal person with separate existence
Shareholders are not co-owners
Shareholders have limited liability on shares/ guarantees.
Shareholders can transfer without consent.

Section 6-Mode of determining the existence of Partnership

Badeley v Consolidated Bank, 1888- Followed the Cox v Hickman, 1860-


Where you have to check the real relation of the parties.

15/10/15

No partnership:

1. Joint owners of property sharing gross profits or return- Govind Nair v Maga,
1948; teashop, when two people are jointly owning a property, carrying out,
splitting of profits but however they were not agents of each other. So there is
no partnership. Sharing of profits between certain persons does not make such
persons partners.
2. Lender of money receiving profits
3. Servant/ agent receiving profits
4. Widow/ child of deceased partner
5. Seller of Goodwill

Section 7- Partnership at will

No duration is fixed/ time for termination fixed.


No provision is made in the partnership agreement as to its duration and no
provision as to its determination/coming of end pf the partnership.
Will of the partner.
There should not be any express/-implied clause to indicate the opposite.
Deoki Prasad v Anar Dai Poddar, 1999, Pat, HC- Clause I the agreement- Not
to determine even after death/ retirement of the parties and mutual consent is
necessary for a dissolution.

Section 8- Particular Partnership

A type of partnership that is for a temporary period, to do a particular adventure.

Karmali Abdulla v Vora Karimji, 1915- Rashid and Karim are two Indian traders from
Bombay. They along with a Hong Kong trader enter into partnership agreement. The
agreement between them was to ship brown sugar from Mauritius. The shipping from
Mauritius reaches the Bombay port and from the Bombay port the order gets split
respectively between them. And then the ship was sent to Hong Kong and the
shipment was lost. The Indians said that as it was a partnership, the loses should be
split, the guys at Hong Kong did not agree to this. The Court held that the partnership
was a particular partnership and a same adventure and it had to be shared.

Types of PARTNERS

1. Active Partner- He carries out the business.


2. Dormant/ Sleeping partner- Not involved in the usual course of business.
His name is not revealed to the firm.
3. Nominal Partner- Similar to the sleeping partner. His names is used, money
(sometimes) and reputation. His name is revealed to the public.
4. Minor Partner- When you afresh a partnership a minor cannot be introduced.
5. Holding out/ Estoppel- His name is not a partner in the terms of the
partnership agreement, however he does all of the works of a partner and if the
other partners dont have any objections then he is known as a Holding out
Partner.
6. Salaried Partners- He is an active member who carries out the business. But
instead of getting a split from the profits, he receives a salary.

16/10/15

Duties of Partners.

1. Goodfaith
Duty of absolute good faith-Section 9- Uberimae Fidei- utmost good
faith.
Greatest common advantage.
Just and faithful to each other.
Render accounts and full information. Bentley v Craven, 1857- firm for
refining of sugar was established between 4 partners. One of the
partners considered to be an expert was authorized to purchase for the
firm for refining. Instead of purchasing sugar from the market he
supplied his own sugar, which he had purchased earlier when the
prices were considerably lower. He did not disclose the fact and it was
held that the firm was entitled to recover the profits made by the
partner.

2. Not to compete
Not to compete in the same business
If so, return profits to firm- Pulin Hihari v. Mahendra Ghoshal, 1921-
We will import salt from a foreign country and a partner bought salt for
himself and was also selling the salt privately. The Court did not allow
this.
Case 1: Dean v. Mac Dowell 1878- Salt manufacturing and distribution
are different.
Case 2: Ass v Banham, 1891- Partner from ship brokers- ship building
Co.s director- Both are different.

3. Due diligence
Duty of due diligence 12(b) + 13(f)
Any willful diligence
Indemnify
Question. A partnership was into dissolution. One partner asked the
managing partner to sell bales of cotton immediately. But he didnt and
said will sell it in the end of dissolution. By the time it was supposed to
be sold, the rates went down. Will the partner be liable for willful
neglect? No, as the partner never anticipated any such loss- Market
speculation. Cragg v Ford

4. Indemnify for fraud


Section 10
Breach of Duty
Provide compensation for any loss created
This is to make the partners work honestly
For such acts of the firm, all the partners of the firm have to pay even
if any one partner was unaware of the situation.
Campbell v Campbell, 1834- One of the partners was not a working
partner of the firm, they were in the business of selling illicit whiskey.
The police caught them and they were fined. The working partner also
had to pay. The court held that the other partners had to reimburse the
working partner as he did not know.

5. Render true accounts and full information


Duty to render true accounts- Section 9
Its the duty of the partners never to conceal any profits/ account
details related to the business and their partnership.
Law v Law, 1905, CA- If a partner, who is entitled to repudiate the
contract on the ground of concealment of facts by the other co- partner
does not insist on full disclosure, but rather agrees to modification of
the original bargain, the partner is not allowed to repudiate.

6. Proper use of property


Section 15
Firms property to be used only for any business purpose- unless
contract to contrary
Duty to account for the same
Criminal case- can be filed under sec. 403 of IPC- for dishonest
misappropriation of properties.

7. Account for personal use


Section 16
Duty to use property properly for the business of the firm alone.
Even information need to be used only for the firm.
Otherwise, the firm can seek for compensation for the use of property/
information in an illegal manner.

Rights of partners.

1. Right to take part in Business


Section 12 (a)
Every partner has the right to take part in business
It should not be for any activities that will undermine the business.
2. Majority rights
All the decisions related to differences on the business need to be
made- Majority decisions
Section 12
If any changes is made, approval from all.
Every partner has the right to express ones own before a decision
is been taken.
Blisset v Daniel, 1853- The partner P1 wanted his son to be part of
the partnership. But another partner P2 rejected this proposal.
However P1 had a lot of hold on the others and he influenced the
other partners and made a resolution to kick out P2. P2 challenges
this majority decisions. The Court said you cannot apply the
majority rule for a personal bearing.
3. Right to Access Books
Section 12(d)
Every partner/ Agent
It needs to be exercised only in the place of business unless agreed
by all the partners to change the place.
4. Right to Indemnity
Section 13 (e)
While in the ordinary course of business/ emergency expenses to
protect the firms property and he proves that he acts as a reasonable
prudent man he has the right to indemnify.
5. Rights to Profits
Section 13 (b)
Equal sharing of loss and profits
Unless agreed otherwise
Its not changed even if the partners had imparted extraordinary
services/ contributions.
6. Right to Interest
Section 13 and 13 (d)
In case any partner contributed extra money beyond what was
agreed.
Right to interest- 6% per annum.
It should be given out of profits.
7. Right to Remuneration
If agreed then remuneration can be given for the working partners.
Firm = partners
Even if some extraordinary services were rendered salary can be
given only if agreed by all in an agreement.

Nature of Liabilities of Partners to third Parties- S.25

Every partner is liable, jointly with all the other partners and also severally, for all the
other partners and also severally, for all acts of the firm done while he is a partner.

Kinds of acts a Partner is liable for:

A. Expressed or Implied Authority- inferred from the circumstances of the


case, things spoken or written, on the ordinary course of dealing and
circumstances of the case. The authority of a parner to bind the firm is called
implied authority- 19(1). Subject to 22 where the act of any partner in the
usual course of business is binding on the firm. For the determination of
Implied authority one has to look at the nature of the business. Only when it is
a trading business (buying and selling of goods, make and endorse of
negotiable instruments). Higgins v Beauchamp, cinematographic theatre
company is non -trading and the firm will not be held for the borrowing of any
money. Tomlinson v Broadsmith, P who was a partner bought goods on credit
and then couldnt pay it back. The firm was sued as it was a trading company.

Sec 19(2)- Restrictions on Implied Authority


The partner does not have implied authority unless there is a usage or custom
of trade to the contrary.
Submit a dispute relating to the firm for arbitration
Open a banking account on behalf of the firm in his own name
Compromise or relinquish a claim by the firm
Withdraw a suit filed on behalf of the firm
Admit any liability in a suit against the firm
Acquire immovable property on behalf of the firm
Transfer immovable property belonging to the firm
Enter into a partnership on the behalf of the firm.

Section 20- Extension or restriction implied authority by agreement.

B. Emergency- Sec 21- A partner has the authority in the case of an emergency
to do all such acts for the purpose of protecting the firm from the loss as would
be done by a person of ordinary prudence.

Section 22- Using the firms name imposes a liability

C. Ratification- Even if the partner has acted without authority, if the partners
subsequently ratify the act then the act will become binding on them.
D. Admission made by a Partner- Sec 23- The admission and representation
made by a partner constitute evidence against the firm.
E. Notice to an Acting Partner-Sec 24- Notice to an Acting partner equates to a
notice on the firm.
F. Torts and Wrongful Acts- Sec 26 - The firm is liable to the same extent as
the partner. It has to be done in the usual course of business and the wrongful
act done within the realm of Implied authority. Then the firm will be liable.
Hamlyn v Houston, Two firms were rivals of eachother. A partner in one firm
bribes the clerk of the other to get details of the clients and to find out the
purchase price. Firm A makes a profit and Firm B loses 750 pounds. Since Mr
X did a wrongful act through the course of business and hence the firm was
also held liable for the acts.
G. Misapplication of money or property- Section 27- Liability when a) money
or property has been received by a partner and he misapplies the same without
accounting for it to the firm b) when the money or property has been received
by the firm from a third party and the same is misapplied by any of the
partners.
Apparent and ostensible authority- the firm will be liable to the 3rd party.
Firm receives the money- The firm will be made liable to the 3rd parties.

H. The doctrine of Holding Out


Anyone by the words spoken or written or by conduct represents himself, or
knowingly permits himself to be represented, to be a partner in the firm, is
liable as a partner in that firm.
The third party who wants to bring an action, must have acted on the faith of
the representation and given credit to the firm.
Colonel AR Porter v W Incell, A wanted to start a cattle farm, he went to B
and asked for help. B lent him the money for A to start a farm. B was
interested in the business and looked for the land and also personally dealt
with the customers. X filed a suit against both A and B. The court held that B
was indeed a partner by holding out as he knowingly allowed his name to be
used in the fir.
Tower Cabinet v Ingram- Notice of retirement- Sec 32- Retired partners need
to give a public notice otherwise they are bound by holding out. Death is itself
a notice and hence his legal reps will not be held liable.

Transfer of the Partners Interest- Sec 29

Can be done only after dissolution. There are two rights:


Right to share the profits of the partners as the firm but has no right to seek
the books of accounts.
On dissolution he can sue for the assets of that partner and for this, he can
seek accounts.

SECTION 30- MINOR PARTNERS RIGHTS AND LIABILITIES

(1) A minor may not be a partner in a firm but with the consent of the other
partners, he maybe admitted to the benefits of partnership.
(2) The minor has the right to share in property and profits of the firm as agreed
upon and he may have access to the accounts of the firm.
(3) Minors share is liable for the acts of the firm but the minor is not personally
liable.
(4) The minor may not sue the partners for an account or payment of his share of
the property or profits until he severs such a connection.
(5) At any time within 6 months of attaining majority or of his obtaining
knowledge that he has been admitted to the benefits of a partnership such a
person may give a notice that he has elected not to become a partner in the
firm. If he fails to give such a notice then he will become a partner by default.
(6) When such a person has been admitted his rights and liabilities as a minor
continue up to the date he becomes a partner, but he also becomes liable to
third parties for all the acts the firm has done since he has been admitted to the
benefits of partnership.
(7) His share in the property and the profits shall be the same as when he was a
minor.
(8) When a person elects not to become a partner, then his rights and liabilities
shall continue to be that of a minor until the date of the public notice. His
share shall not be liable for any acts of the firm after that date. He shall be
entitled to sue the partners for his share of property and profits in accordance
with sub-section (4).
CIT V Dwarkadas Khetan co, 1961, SC, Within 6 months of his option, if any suit is
filed against the firm, the minor will not be personally liable. If the monor accepts to
be a partner, then his liability is retrospective from the date of admission to when he
first attained benefits from the firm.
12/11/15

The sales of goods act.

Formalities of contract of sale.

Section 5- Contract of sale: How it is made.

Offer to sell or buy goods. There must be an acceptance for selling or buying
goods.
Delivery- immediate, simultaneous by installments/ future.
Payment of price- Immediate, simultaneous, by installments/future.

Earnest money- advance money, given by the buyer to the seller.

Section 6- Subject matter of sale

The goods that form the subject of the sale, owned by the seller or possessed
by the seller or for future goods.
Case 1: A agrees to sell Hemp to B to be delivered on arrival per Fanny and
Almira. Ship arrives, but no goods on board. Is the seller liable? No.
Case 2: A agrees to sell 50 cases of tallow to be delivered on safe arrival of
the ship Elgin. Ship arrives safely, but no goods on board. Is the seller
liable? Yes.

Section 7- Goods perishing before making of contract.

Contract of sale of a specific of a good is void if without the knowledge of the


seller the goods become perished or it becomes so damaged that it no longer
exists as the contract describes.
Barrow lane & Ballard Ltd v Phillips Phillips & co Ltd, 1929, There was a
sale for 700 bags of Chinese groundnuts. Unknown to the seller 109 bags were
stolen. So 591 bags were delivered. Buyers refused and the sellers sued for the
price. The contract gets repudiated as the sale of goods is for a specific number
of goods and hence the description of goods is not the same.
ASFAR & CO V. Blundell, 1896, ca, Cargo of dates sold. The dates got
contaminated with sewage water though it can be used for making spirits. The
court held that the contract was void as the goods were no longer of the same
description and the commerciality of the goods we lessened.
Section 8- Before the sale, the goods get perished.

Before the title is passed the contract can be voided at any time. Before the
risk passes.
Agreement to sell specified goods.
Without the fault of buyer or seller
Goods are damaged or no longer same to the description.
Howell v Coupland, 1876, QB, Was a potato grower, however a disease
struck the potatoes and the promised value was 52 tonnes however he could
only grow 8 tonnes and hence the contract was repudiated.

Section 9- If no price- Void

Section 11- Stipulation as to time

Stipulation as to the time of payment


No essence of COS
Unless intended opposite
It depends of the terms of contract
In ordinary COS, time is prima facie essence with respect to delivery rules for
assuring punctual transactions.
This right is lost by waiving or acquiesces.
Charles Rickards Ltd v Oppenheim 1950, KB, ordered for a car and its
parts to be delivered in a stipulated time. He rejected the goods as in this
contract time was an essence and hence the contract and the goods were
repudiated.

Intention of time as essence to be obtained from:

Language used in the contract


Nature of goods sold
Conduct of Parties
Surrounding circumstances at the time of making the contract.

Essay question.

Conditions and Warranties- Section 12

Condition is a stipulation, which is essential to a contract. I f there is a breach in the


condition the whole contract collapses. The remedy is to reject the contract, the goods
or claim from the whole price money.

Warranty is a stipulation that is collateral to a contract. If there is a breach you will


have the right to claim damages but not the right to reject.

Expressed conditions

Expressed
Breach: repudiate and sue for damages

Expressed warranties

Expressed- auxiliary promises


Breach: No repudiation, only damages
Implies conditions/ warranties: those implied by law into the contract.
To determine the same- intention of parties.
For a condition as such that if not fulfilled, the contract can be repudiated or
me collateral contract.

Section 13

1. Waiver by buyer
2. Elect to treat a breach of Condition as Warranty
3. Contract is not severable and the goods were accepted in parts.
4. Excused by law impossibility of performance otherwise

Acceptance- Section 42

Nagardas v Velmahomed, 1930, Bom HC, Konda rice, was delivered in port of
Mumbai and here one can inspect the goods. He did not inspect but just sealed and
stacked it in the goodown. He had to ship the rice to Liverpool and thats when he
checked the goods and found it was Paddy husk. And then he rejected the goods, as it
was a breach of an implied condition. The courts said that there was a breach of an
implied condition however he waved of his rights when he did not inspect it in the
port.

Goods Not Answering the Description

Remedy 1

Reject the goods


Refund price
Sue for non-delivery and seek the damage.

Remedy 2

Waive the condition


Accept the goods
Sues for the breach of warranty

CONDITION IS CONVERTED INTO WARRANTY ONLY FOR REMEDY

Wallis, Sons and Wells v. Pratt & Haymes, 1911, HL, Commons English Sanfoin
seeds and Giant Sanfoin seeds. The buyer wanted to buy a CES but he was given
GSS, however he did not know the difference in the seeds. When the plants grew, he
found out that he had been given the wrong type of Sanfoin seeds. There was a breach
of condition and he sued. The sellers said there is an exception clause for implied
warranty, that is that the sellers give no warranty express or implied as to growth,
description or any other matter. The court said that this would not stand and that it
was in fact an implied warranty. The condition is converted into a warranty for
damages.

I. IMPLIED CONDITION AS TO TITLE- S.14


Rowland v Divall, 1923, KB, A seller sold a stolen car to a buyer. And the
original owner of the car came and took back the car, the buyer sued for a
breach of warranty.
Niblett ltd v Confectioners Material Co Ltd, 1921, KB, A person sold 3000
tins of condensed milk to the buyer. Out of the 3000 tins, 100o tins had the
brand Nissly Brand and when the buyer tried to sell the tins. The original
Nestle brand sued the buyer for using and infringing their original trademark.
The buyer took of the labels and had to sell in for a reduced cost. The 1000
tins do not have ownership, he can get damages of implied warranty.

II. IMPLIED CONDITION AS TO DESCRIPTION- S.15


III. IMPLIED CONDITION AS TO QUALITY/ FITNESS S.16

Subject it provisions of this Act/ any other law


No implied condition/ warranty as to fitness/ quality
Particular purpose of goods supplied u/COS
Principle of Caveat Emptor, in a contract of sale there is an obligation on
both the buyer and the seller. Buyers beware.
Principle of Caveat Venditor, sellers beware again.
Goddard v Hobbes, 1878, HL, An auction for the selling of pigs and the buyer
buys a pig. He finds out the pigs he bought have a disease and his existing pigs
also get the disease. The court said it was the buyers duty to inspect the pigs
and that it was his fault, there was no breach of condition.
Section 16 (1)-
1. Buyer made known to the seller the particular purpose. Priest v
Last, 1903, KB, A lady goes to a shop for a hot water bag and
the seller gave a hot water bag that burst and it gave her burns.
She sued for a breach of condition as to the quality of the good.
2. Buyer relied upon the sellers skill/ judgment. Grant v.
Australian Knitting Mills, 1936, Ca, underwear. Breach of
description so breach of implied condition.
3. Goods must be of the description, which is in the course of the
sellers business supply.
Exception of Trade Name- Proviso- Section 16(1)-
1. Bankes LJ: Did the buyer specify the trade name in such a way
as to indicate that he is satisfied rightly/ wrongly, that it will
answer his purpose, and that he is not relying on the skill or
judgment of seller, however great the skill or judgment may
be?
2. Baldry v Marshall, 1925, KB, A Bugatti car for touring
purpose. He did not specify that it was for touring and he
bought it just because his friend suggested it.

IV. IMPLIED CONDITION AS TO MERCHANTABILITY- S.16 (2)

1. Sale by description Exception- Buyer


2. By Seller/ manufacturer himself examined and no
3. Merchantability quality defects were
revealed.
Undefined Term
Suitable for one/ more purpose for which they might be bought without
abatement of price though not usable for all the purpose for which it is bought
It needs to be marketable at full value.
Manila Hemp case (Jones v. Just, 1868), A specific variety of thread that
Very needed to be exported from manila to Singapore. But on the transit it got
Important damaged and they could not sell it as Manila hemp thread. It was said to be
case for a breach of merchantability.
Merchantabili Reasonable fitness for ordinary purpose for which goods are intended,
designed and sold.
Frost v Avlasbary Dairy & Co, 1905, KB, A person bought milk for
consumption but it was contaminated with typhoid virus. His wife died
because of this and he sued.
Morelli v. Fitch and Gibbons, 1928, KB, A person buys a ginger Stones Wine
and uses a cork screw to open it however the bottle broke and it cut his has.
The bottle was of a merchantable quality and it was a breach of merchantable
quality.

V. IMPLIED CONDITIONS AS TO TRADE USAGE- S.16 (3)

Annexations of trade/ custom usage for condtions as to fitness/ quality


No reasonable custom- Peter Darlington Partners Ltd v. Gesho co. Ltd 1964,
For selling canary seeds with impurities- buyer gets rebate in price and does
not reject the goods- custom of trade.
S.16 (4)- Express conditions/ warranties can override/ superadd to implied
conditions unless not unreasonable.

V1. SALE BY SAMPLE

Bulk shall correspond to the sample


Buyer given reasonable opportunity to inspect
Goods free from defects rendering them un-merchantable which is not
apparent on reasonable examination.
E & S Ruben V. Faire Bros & co Ltd, 1949, KB, The sample that was given to
them was of rubbers and it was of a certain thickness and size. What they got
was different. So they sued.
Godley v. Perry, 1960, A boy uses a slingshot and the rubber band snaps and
hurts his eye. They sued for un-merchantability. It was a latent defect and the
court awarded in their favour.

IMPLIED WARRANTIES

1. Quiet possession- S.14(b)- Mason v. Burningham, 1949, KB, A woman


bought a second hand typewriter and did some repairs. A third person comes
and claims back the typewriter. She sues for a breach of title and of warranty.
The court awarded damages for both.
2. Free from encumbrance (any kind of charge and security that is not revealed)-
S. 14(c)
3. Exclusion of implied terms - S.62
4. Crowther v. Shannon Motor co, 1975, CA- The time at which you can sue for
a breach of warranty? A second hand car was sued to a person. But then after
2000 miles the car came to a fault and he sued the previous owner. The court
rejected the claim.

Transfer of Property

Its important to know when exactly property passes because:

Risk follows ownership.


Action against 3rd party- only owner can claim for the 3rd party.
Suit for price.

3 Stages of performance of Contract of Sale

1. Transfer of property goods.


2. Transfer of Possession of goods (delivery).
3. Passing of risk

Passing of Property/ Transfer of Property

Section 18- unascertained goods- unless ascertained


If goods needs to be measured, weighed or severed. Then it doesnt pass
unless the same is done.

Badri Prasad v State of Mp, 1971, SC, cut teak trees of more than 12 inches grith.
Stunps of trees after the cutting should be 2 inches high

Till the tree is felled in the prescribed limits, it does not pass to the buyer, but
remains with the state.
They are unascertained.

Section 23- SALE OF UNASCERTAINED GOODS & APPROPRIATION.

Sale of unascertained/future goods by description


At deliverable state are appropriated (ex/Im)
1. By the seller with the consent of the buyer
2. By the buyer with the consent of the seller
Then, the property passes
Unconditional Appropriation is done if
1. Seller delivers the goods to buyer/carrier/bailee for
transmitting.
2. No reservations as to the right disposal by the seller.

Healy v Howlett and Sons, 1916, KB


Fish- 20 boxes of hard bright mackerel
190 boxes sent to railway- 3 consignments.
Usual practice- Railways need to mark the goods for the parties.
Consignment delayed en route.
By the time goods were marked, they become un-merchantable.
Defendants refused to accept.
Sellers sued for price.
Have the goods been passed? The goods have not been ascertained or
appropriated- so the goods have not been passed to the buyers.

Section 19- PROPERTY PASS WHEN INTENDED

Specific/Ascertained
As parties intended.
Depends on
o Terms of contract
o Conduct of parties
o Circumstances of the case
Section 20-24- rules to determine the intention unless intended otherwise.

Agricultural Market Committee v Shamlimer chemical works, 1997, SC

The case involves the delivery of Copra from Kerala to Hyderabad. The seller loads
all the goods in a truck and the contractual terms tell us that that when the goods have
been loaded, it is no longer his responsibility. The buyer has also acquired a insurance
on the goods. A sales tax is imposed buy the AP government. The buyer argues the
contractual term shows us that the ownership has been transferred. The conduct of the
parties, there is insurance, so the buyer has accepted the ownership of the goods.

RULES U/SS. 20-24

Sect 20- specific goods in deliverable state


Unconditional sale
Specific goods in a deliverable state
Property passes when the contract is made
Immaterial if payment of price/ delivery of goods/ both is postponed.
Shankar Das v Bhana Ram, 1926, LAH, HC, for the delivery of 5 buses. The
bus route will be given within one week of the last installment on the bus has
been made.

Section 21- SPECIFIC GOODS TO BE PUT INTO A DELIVERABLE STATE

Sale of specific goods.


Seller is bound to do something to put the goods into a deliverable state.
Property does not pass.
Until the thing is done and buyer is notified about it.
Mere collateral acts off seller will not change the ownership transferred.
Section 22- Specific goods in a deliverable state, when seller has to do
anything to ascertain the price.

Section 24- GOODS SENT ON APPROVAL ON SALE OR RETURN

Property passes
When signifies his approval/accepts or does any act to indicate the same.
No notice of rejection and retains the goods
-If time for approval-no communication of dismissal.
-If no time is fixed-within reasonable period.
State of Maharashtra v Britannia Biscuits Co Ltd 1955, SC, Biscuits sold in
tins and these are refundable within reasonable time in addition with a
refundable deposit of 20%- boxed not returned it is a sale.

Section 25- Right of disposal.

Section 26- Passing of Risk

Seller
Passing off property- buyer even if no delivery
Proviso- if any delay in delivery issue to seller/buyer- faulty party
Proviso- bailees right and duties with regard to seller/buyer remains the same.
Unless there is contract to contrary.
Demby Hamilton and Co ltd v Barden, 1949, 30 tonnes of apple juice was to
be delivered. The delivery is asked to be retained for a few days. The delivery
re-started and then he stopped accepting the goods.. The apple juice then
becomes totally unmarketable. The court held because the delay was due to the
buyer and hence the risk passed to the buyer.

Transfer of Title- Sec 27

Nemo Dat Quad Non Habet- No one can transfer what they dont have.
Buyer gets only what the seller has.
Lee v Bayer, 1856, Auction for a stolen horse. The owner claims it back and
the court held that there was no transfer of title and the horse had to be
returned back.
Problem on Exceptions:
estoppel. Study 1. Estoppel
Morvi Mercantile When the seller makes representations with regard to authority
case. to sell.
Buyer innocently believes the same.

Sale by Mercantile Agent- Section 27 Proviso

Mercantile agent
Consent of owner
Goods/ documents to title
Ordinary course of business
Buyer acted in good faith and knows that seller doesnt have authority to sell.
Folkes v R, 1923, KB,

Sale by Joint owners- Section28

One/more joint owners


With the permission of co-owners- goods are sold
Buyer acted in good faith and knows that seller doesnt have authority to sell.
Seale by person in possession under voidable contract- section 29

If the goods under section 19 and 19 A of ICA


Contract not yet rescinded
Buyer acquires goods title
Buyer acted in good faith and knows that the seller does have authority to sell.
Philips v Brooks, 1919, KB, Mr X misrepresents himself as a very reputable
person and he goes to a jewelers and buys a ring. He then pledges the ring to
another person and the pledgee on the default of payment sells it to the buyer.
The seller acquires the title under a voidable contract and this contract is still
not rescinded by any of the parties. The title then passes to the buyer as the
good was bought in good faith.

Seller in Possession- S. 30(1) VALID- as if


authorized/ as if
Sold the goods. Documents to title- but still in possession. lien/ original right
Delivery transfer by himself/his mercantile agent. didnt exist.
Under sale, pledge or other disposition
Buyer accepts in good faith and without notice of prior sale.

Person bought/agrees to buy the goods.


With the consent of the seller, takes the possession.
Delivery/ transfer by himself/ his mercantile agent.
Under sale, pledge or other disposition
Buyer accepts in good faith and without the notice of prior lien/right of
original owner.

Performance of Sale Contract


Rights of
Section 31 unpaid seller-
essay.
In accordance with the contract
Duty of seller- deliver goods
Duty of buyer- accept and pay

Section 32

Unless agreed otherwise


Delivery of goods and payment of price are concurrent
Readiness and willing of seller to deliver the possession in exchange of buyers
payment of price.
Readiness and willing of buyer to pay price in exchange of possession of
goods.

Section 33- Delivery

As parties agreed
Effect of putting the possession of goods in buyer and any such person
authorized to do so.
It can be symbolic, constructive or actual.

SECTION 34- Effect of part delivery

Delivery of part equals the delivery of the whole for passing of


property
Delivery of part with intention to sever it from the whole does not
operate as delivery.

Bunney v Poyntz, 1983

For the delivery of hay stacks and it was put in a truck and delivered. The
buyer only took half and paid for it. When the parties are delivering in part

SECTION 35

Seller not to deliver the goods unless buyer applies


Provided no contrart contract exist

Section 36- RULES OF DELIVERY

A) Place of Delivery
Whether seller should send/buyer takes the ossession- intention of
parties
In the absence of any contract
Sale-delivered where the goods are at the time of sale.
Agreement to sell- where the goods are at the time of agreement/
manufacturing or produced (if future)

B) Time for Delivery


If fixed- follow
If not fixed- reasonable.

C) If the goods are in 3rd partys custody, unless the 3rd party acknowledge the
same, the buyer is not delivered the goods.
D) Buyer/ seller should tender the performance at a reasonable hour which
depends upon facts of the case.
E) Expenses for putting goods into deliverable state are born by the seller by
default.
Section 37- Delivery of Wrong Quantity

If less quantity you can either reject of accept and pay for the same.
If the quantity is more you can accept whatever agreed and send the rest
back/reject fully/accept fully= pay fully.
Mixed goods are sold- accept whatever he wants/ reject fully.
Subject to the agreement, trade usage, course of dealings.
Levy v Green, 1859, got goods from China and the goods were mixed. They
can either accept the quantity you want or reject it fully and sue for a breach of
contract.

Section 38- Installment Deliveries

Unless agreed- no installment delivery possible.


If its installment delivery-
1. Seller makes no delivery/ defective delivery
2. Buyer neglects/ refuses to take delivery/ refuses to pay for one or more
delivery.
Depends upon the terms of contract and circumstances
Determine repudiation is possible/its severable breach for compensation only.
Maple Flock v Universal Furniture Products (Wembley) Ltd, 1934, KB, The
delivery of Rag flock was to happen in installments, however in the 16th
delivery he repudiated the contract as the chlorine level was too high.
Subsequently he also accepted some other delivery. The buyer at the time of
payment he rejected the whole contract due to one delivery having high levels
of chlorine.

Section 39- Delivery to carrier/ wharfinger

If the contract says so


Seller is authorized/ requires sending of the goods.
If goods send to carrier/ wharfinger
Whether named by buyer/ not
Prima facie proof of delivery of goods.
Seller is to ensure the safe delivery of goods by a contract with the carrier/
wharfinger.
In sea transit, unless agreed otherwise, the seller should give notice to the
buyer to insure the same/ seller will be liable for the loss.

FOB-Free on Board

CIF- Cost, Insurance, Freight.

SECTION 40-

Risk passes to buyer,


For incidental deteriorations,
If seller delivers in a place other than what was agreed and
Tool personal risk for the same

Section 40- Buyers right to inspect

If not examined- accept goods have been delivered/


Otherwise, opportunity to inspect given.
Unless otherwise agreed
If its tender of delivery- if inspection asked for- allowed.

Section 42- Acceptance

Hardy & co v. Hillman & Fowler, 1923 KB, For the delivery of wheat. The
buyer did not check the wheat and he sold it to sub- buyers. Then he came to
the information that the wheat was of poor quality and he rejected the goods.
The court held that you cannot reject the goods as the sale to your sub- buyers
indicated your acceptance of the goods.

Section 43

Unless agreed
If buyer rejects the goods
No duty to return it back
Only intimation of rejection is sufficient.

Section 44-

If seller is ready and willing to do the delivery


If buyer neglects- buyer bears the loss
Without affecting his rights of rejection.

Right of an unpaid seller- 45

Whole of the price not paid/ tendered.


B.E./ other N.I. received as conditional payment,
But not yet fulfilled due to dishonor of the instruments.
Seller can be agent of seller endorsed/ consigner or agent who paid personally
or directly responsible for the price.

Question?

J co. Sold some quantity of citric acid crystals to P who resold it to M & B.
Later due to bad quality of crystals, P rejected the goods.
J and co said that they would refund the price and send a cheque to M&B.
The check bounced.
Can M&B retain the goods as unpaid seller until the refund is made? The
property doesnt revert back seller just because of the acceptance of the
refund.
Section 46- UNPAID SELLERS RIGHT.

1. Right of lien when goods are possessed.


2. Right to stoppage in transit, when buyer is insolvent and parted the possession.
3. Right to resale.
4. Right to withhold delivery.

- These are applicable, if property has passed.


- If property not passed except one, all the other rights are available.

Section 47- Unpaid sellers lien

Right to retain the goods until the payment of price/tender of price-

1. Possession of goods
2. Goods sold without stipulations as to price.
3. Goods sold in credit, but the term of the credit has expired
4. Buyer is insolvent
5. Irrespective of whether he is an agent/bailee of the buyer.

Section 48- part delivery

- Unless an agreement to the contrary exists.


- If part delivery is done.
- Right of lein exists in reminder of goods.
- Installment deliveries- no right of lien unless the buyer becomes insolvent.

Section 49- Termination of Lien.

- Delivers goods to agent/ carrier/ bailee for transmission of goods to buyer


without reserving the right of disposal.
- Buyer/ his agent lawfully obtains the possession of goods
- Waiver
- No loss even if obtained a decree for price.
- Valpy v Gibson, 1847, Goods were sold and sent tat the request of the buyers
to their agents by seller and put on board.
- Took them back for some repacking
- Buyers become insolvent.
- Sellers tried to impose their lien right
- No reservation as to right of disposal was made
- Held: lien right was lost.

II) Right to stoppage in transit- sec.50

- Subject to provisions of the act.


- Buyer becomes insolvent
- Seller parted with possession
- Goods in transit
- Unpaid seller has
-right to stoppage and resume possession
-right to retain till the payment/ tender of price.

Section 51- Duration of Transit

- Goods rejected by buyer and carrier/agent continues possession, goods in


transit even if seller refused to take the delivery.
- If carrier/bailee refuse wrongfully to deliver the goods to buyer, the transit
ends.
- Part delivery- right can be exercised in rest of the goods.
- Course of transit equates to the goods delivered to carrier/bailee until the
buyer/his agent has taken the delivery.
- Great Indian Peninsula railway and co v Hanmanndas, 1889, BOM HC,
-Goods in G.I.P. ry.co to the buyer.
-Co. delivered and buyer loaded it into his cart.
-Cart had not left the premises of the railway.
-Telegram sent to stop the goods.
-Co. didnt do the same.
-Seller sued the railway company for damages.
-Held as soon as the goods were handed to buyer the transit has ended,
so railway company has no power to stop.

Ex parte Golding Davis and Co 1883, Ch.D, There was a delivery of drums to
Liverpool and then sub selling to a customer in New York.