Chapter: 2

prinCipLes Of COnTrACT LAw

Meaning of Contract Law:

Simply, law means a set of rules and obligations which must be obeyed and followed by the people. And contract means
promise or agreement between two or more parties and parties can be persons or business organizations.

Therefore, combining law and contract, a contract enforceable by law is called law of contract. The law of contract deals with
the law relating to the general rules and principles of contract. In other words, it is the collection of rules and principles which governs
and regulates contract and contracting parties. Any contract defines the relationship and the rights and obligations of the parties who
are involved in and the law of contract regulates that relationship as well as performance of contract, discharge from contract,
termination of contract or remedy in case of breach of contract. Form the creation of contract to the termination, it is attracted.

M. C. Kuchhal – “The law of contract is the foundation upon which the superstructure of modern business is built.”

Salmond – “A contract is an agreement creating and defining obligation between the parties.”

Genesis of Contract Law:

Importance of Contract Law:

Essential elements of valid contract:

1) Two or more parties
2) Competent parties
3) Offer and Acceptance
4) Legal relationship
5) Free consent
6) Consideration
7) Lawful of objective
8) Certainty
9) Possibility of performance
10) Meeting of mind

1) Two or more parties: The contract is made between two or more than two parties. The parties may be persons or business
organizations. But the necessary criterion is that there must be at least two parties in any contract.

2) Competent parties: For making a contract valid, mere existence of two parties is not enough. Rather, both of them must be
legally capable of making a contract. If a contract is made with an incompetent person, it losses legal effect and will, therefore, be
void. Generally, a minor, a lunatic, mentally unsound person, alien enemy, insolvent person and a person who is declared disqualified
by law are known as incompetent for making contract.

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 3) Offer and Acceptance: A contract is based upon offer and acceptance. There are two parties involved in a contract; one
party offers something and another party accepts it in the same sense. One, who offers something, is called offeror and the person,
who accepts such offer, is called offeree. Offer alone does not form a contract. It means that unless the offer made by a party is
accepted by other party, contract cannot take place.

4) Legal relationship: Both parties of the contract while entering into any contract must have an intention to create legal
relationship. It means the agreement must be binding and they have to bear legal obligation in case of failure in observing the terms
and conditions of the contract.

5) Free consent: An agreement to become a valid contract, it must have been made with the free consent of both the parties.
Free consent refers to such a consent, which is given by both the parties out of their own will and conscience. If any party agrees to
conclude a contract due to other party’s coercion, undue influence, misrepresentation or mistake or fraud, the agreement lacks free
consent of the party. Hence the aggrieved party may go to the court and make the contract void.

6) Consideration: Generally speaking, a contract without consideration is no contract. For any agreement to become a valid
contract, it must be supported by some sort of consideration. Consideration means something in return. The agreement is enforceable
only when contracting parties are giving and getting something in return. It must be real and lawful, which may be in past, present or
future.

7) Lawful objective: For an agreement to become a valid contract, the objective of a contract must be lawful. Those activities
are not lawful if they are illegal, immoral and opposed to the public policy. A contract of such objective is not enforceable by law.

8) Certainty: The terms and conditions of the contract cannot be vague or indefinite or unclear. The contract must be definite
and certain so that the parties involved in it may have the knowledge about the meaning and sentiments of such contract.

9) Possibility of performance: The objective and terms of the contract must be possible to perform. Any act, which should not
be done or is non-performable, does not create legal obligations to the contracting parties and it becomes void.

10) Meeting of mind: The contracting parties must meet their minds as regards the subject and object of the contract in the same
sense, at the same time. If one party understand in one way and other party understand differently, it create problem in performance of
the contract. Therefore, unless there is a meeting of mind, there can be no contract.

Types of contract:
1) On the basis of creation of contract:
a) Expressed and Implied contract
b) Direct and Indirect contract
c) Formal and Simple contract
2) On the basis of performance of contract:
a) Executed and Executory contract
3) On the basis of origin of liability of contract:
a) General and Contingent contract
4) On the basis of contractual liability:
a) Unilateral and Bilateral contract
5) On the basis of nature of offer:
a) Specific contract and General contract
6) On the basis of enforceability of contract:
a) Void agreement
b) Void contract
c) Voidable contract
d) Unenforceable contract
e) Illegal contract
f) Valid or lawful contract

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 1) On the basis of creation of contract:
a) Expressed and Implied contract:
Expressed contract: Any contract which is made expressly by words, spoken or written, is known as expressed contract.
For example: A and B make a contract in writing under which A agrees to sell his guitar for Rs. 20,000 to B, it is an express contract.

Implied contract: Any contract which is made or resulted from the conduct of the parties or the circumstances between them
is called implied contract. For example: Transport company and passengers do not enter into any form of contract but the buss carry
passengers to its route at the scheduled fares, it is implied contract.

b) Direct and Indirect contract:

Direct contract: Any contract which is made by mutual consent of both the parties is called direct contract. For example: A
and B make a contract in writing under which A offers to sell his house for Rs. 500,000 to B and accepts to buy it, it is direct contract.

Indirect contract: Any contract which is induced without the mutual consent of the parties is called indirect contract. For
example: A repairs B’s machine and B has to pay the remuneration to A, it is indirect contract.

c) Formal and Simple contract:

Formal contract: Any contract which is made in a written form, duly sealed, properly signed and is fully concluded
according to fulfilling formalities as provided by the law is called formal contract.

Simple contract: Any contract which is concluded between the parties without much legal formalities is called simple
contract. In general, all contracts other than formal contract are simple contracts.

2) On the basis of performance of contract:

a) Executed and Executory contract:
Executed contract: Any contract which is already performed by both the parties is called executed contract. It is past
contract and it is completed. For example: A repaired B’s machine in June. B paid the remuneration in July. It is executed contract.

Executory contract: Any contract which is remained to be performed by both the parties is called executory contract. It is
future contract and it is incomplete. For example: X promises to sell his bike for Rs. 100,000 to Y within 2 months. Y promises to act
accordingly. It is an executory contract.

Partly executed and partly executory contract: Any contract in which one of the parties has fulfilled his obligation and the
other party has still to perform his obligation is called partly executed and partly executory contract. For example: A offers to sell his
computer to B for Rs. 50,000 and B accepts A’s offer. If the computer is delivered but payment is not made, then is its partly executed
and partly executory contract.

3) On the basis of origin of liability of contract:

a) General and Contingent contract:
General contract: Any contract where liability of both the parties arises from the time of its inception without any condition
is called general contract. As soon as contract is made, both the parties become responsible to perform it by fulfilling their respective
promises. For example: X promises to sell his bike for Rs. 100,000 to Y. Y promises to buy it. It is a general contract.

Contingent contract: Any contract whose performance depends upon some contingency or happening or non-happening of
the certain event is called contingent contract. In such contracts, the rights, duties and obligations emerge only after the happening or
non-happening of contingent event as per of the contract. For example: ABC company agrees to buy 100 tons of cotton from XYZ
company if the company does not suffer from the loss. It means that if the company does not suffer loss, it has to buy the cotton
otherwise the performance is not necessary. It is called contingent contract.

4) On the basis of contractual liability:

a) Unilateral and Bilateral contract:
Unilateral contract: Any contract which creates legal obligation in only one party is called unilateral contract. He cannot
compel the other party to perform the contract. For example: X notified through newspaper that whoever finds out his lost dog and
brings it back to him, he would be given a reward of Rs. 500. Here Y (other party) is not compelled to search the dog. But if Y found
the dog and brought it back to X, in this case X must pay Rs. 500 to Y.

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 Bilateral contract: Any contract in which both parties exchange promises with each other is called bilateral contract. In such
contracts, both parties have liabilities toward each other. For example: X promises to sell his bike for Rs. 100,000 to Y within 2
months. Y promises to act buy it. Here, it is a bilateral contract because X and Y exchange promises with each other.

5) On the basis of nature of offer:

a) Specific contract and General contract:
Specific contract: If the offeror has put his offer to a specific person or a specific group and that is accepted by the same
person to whom it was made, it is called specific contract. For example: XYZ company offers ABC company to buy raw materials for
shoe production with the details terms and conditions. This is a specific offer and the resulting contract will be a specific contract.

General contract: If the offer is made to general people or people at large the resulting contract will be general contract. For
example: X notified through newspaper that whoever finds out his lost dog and brings it back to him, he would be given a reward of
Rs. 500. It is a general offer and the resulting contract will be a general contract.

6) On the basis of enforceability of contract:

a) Void agreement: An agreement not enforceable by law is called void agreement. It is the agreement, which does not create
legal obligation between the parties. It is void from the very beginning. Hence, if a party does not fulfil his promise, the other party
cannot sue against him in the law court. For example: agreements of going picnic, seeing picture, agreement without consideration,
agreement to do an impossible act, agreement with an incompetent party etc.

b) Void contract: It refers to a contract, which was valid and enforceable by law when it was made but becomes void later due
to certain unavoidable reasons such as: due to change in law and order, due to destruction of subject matter of the contract etc. For
example: A promises to sell his land to B for Rs. 500,000. Before the ownership of land is transferred on to B, the government
acquired that land for launching a certain project. The contract between A and B becomes void as soon as it is acquired by the
government.

c) Voidable contract: A voidable contract is a contract which can be made void if the aggrieved party wants by suing a case in
the court and the court gives verdict in the favour of it. The contract is not void from the initiation but later becomes void if the
contract is made by misrepresentation, mistake or fraud, coercion, undue influence, it is called voidable contract.

d) Unenforceable contract: A contract which is actually valid but cannot be enforced because of some technical defect is called
unenforceable contract. For example: The contract that needs to be in writing and to be stamped is not in writing and not stamped.
Such contracts can be enforced if the technical defect involved is removed.

e) Illegal contract: If the contract is made between two or more parties to do something prohibited by the prevailing law is
called illegal contract. A contract made for unlawful object or consideration is called illegal contract. For example: A contract
between two parties for gambling purpose, for prostitution purpose, for murdering a third party etc.

f) Valid or lawful contract: Generally, contract refers to this sort of contract. Valid or lawful contract is a contract hiving all
the essential elements of valid contract and it can be performed as well as enforced by the law.

Standard form of contract:

Where the terms and conditions of agreements have been fixed in a standard form and the other party of the agreement has to
accept those terms and conditions, such type of contracts are called ‘standard form of contract’. Some institutions/establishments such
as the railways, insurance companies, banks and certain manufacturing companies have to enter into a very large number of contracts
with many persons they cannot possibly negotiate individually with the persons with whom the contracts are to be made. Contracts
with pre-fixed matters are generally prepared by one party, which the other party has to agree it or leave it.

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 Offer, ACCepTAnCe And COnsiderATiOn

Meaning of Offer:
An offer means a kind of a proposal put forward by one party to another party with the hope of getting acceptance for doing
or not doing of certain work. If the offer is made without the hope of getting acceptance from other, it will not be a valid offer. It is a
general principle that an agreement arises only when the offer is made by one person and is accepted by the other person to whom it is
made. One, who offers something, is called offeror and the person, who accepts such offer, is called offeree. In general, the offeror can
withdraw or cancel or revoke the offer at any time before it is been accepted. It is considered as a power of the offeror.

Anson – “Offer means willingness signified with an intention to obtaining legal validity.”

Sec 2 (b) of Nepalese Contract Act, 2056 – “Offer means a proposal put by a person with a hope to get assent from the other
to do or not to do something.”

Types of Offer:
1) Expressed or Implied offer
2) Positive or Negative offer
3) Specific or General offer
4) Counter offer
5) Cross offer
6) Offer in option
7) Open proposals and Standing offer

1) Expressed or Implied offer:

Expressed offer: An offer which is made by speaking or by writing is called expressed offer. For example: X offers to sell
his house for Rs. 500,000. This is an expressed offer.

Implied offer: The offer which is made by the conduct or activities of the offeror is called implied offer. For example: Offer
made by public transportation is called implied offer.

2) Positive or Negative offer:

Positive offer: The offer, in which the offeror expresses his willingness to do something, is known as a positive offer. For
example: A says to B that he is willing to buy dairy products from B. It is a positive offer.

Negative offer: The offer containing the offeror’s willingness not to do something is known as negative offer. For example:
X offers Y not to construct of the wall on the park. It is a negative offer.

3) Specific or General offer:

Specific offer: If the offer is made to a specific person or to a specific group of persons is called specific offer. For example:
XYZ company offers ABC company to buy raw materials for shoe production with the details terms and conditions. This is a specific
offer.

General offer: If the offer is made to the general people or people at large is called general offer. For example: X notified
through newspaper that whoever finds out his lost dog and brings it back to him, he would be given a reward of Rs. 500. It is a general
offer.

4) Counter offer: When the offeree makes new offer to the original offeror instead of accepting the original offer is called the
counter offer. The counter offer terminates the original offer and creates a new offer. For example: X offers to sell his house to Y for
Rs. 300,000. But if Y accepts to buy it for Rs. 250,000. Rather, he is offering X to sell this house for Rs. 250,000. It is a counter offer.

5) Cross or identical offer: When both the parties make offer to each other for the same subject matter not knowingly that the
other party has also made the same offer to the former, it is called cross or identical offer. For example: A sends a letter to B offering
to sell his bike to him for Rs. 100,000. In ignorance of A’s offer, B also writes a letter to A offering him to buy the bike for the same
price. This is called cross or identical offer, rather than offer and acceptance between A and B.

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Rules relating to Offer:
1) Offer can be expressed or implied
2) Offer can be general or specific
3) Offer should be made with an intention to create legal relations
4) Terms of offer must be clear and certain
5) Offer must be communicated
6) Offer is seeking acceptance of other party
7) Invitation to offer is not an offer

Revocation/Lapse/Termination of Offer:
1. By notice of revocation
2. By lapse of stipulated time
3. By expiry of reasonable time
4. By death or insanity of offeror
5. By refusal of acceptance
6. By counter offer by the offeree
7. By destruction of subject matter

1. By notice of revocation: The offer can be revoked by sending notice of revocation by the offeror before it is accepted by the
offeree. If this is done, the offeree cannot make a contract by accepting the revoked offer. A revocation of offer is effective only when
it is communicated to the offeree directly or indirectly.

2. By lapse of stipulated time: The offer may be provided with certain dateline by when the offeree has to accept or reject it.
After the lapse of that stipulated time, the offer will not be valid.

3. By expiry of reasonable time: An offer lapses also by the expiry of reasonable time. Even if the time, within which the offer
is to be accepted, is not given, the offeree has to accept it within a reasonable time.

4. By death or insanity of offeror: If the offeror dies or becomes insane before the offer is accepted, it is automatically
terminated. If the offer is accepted before the death or insanity of offeror, the law provides different and relative provisions.

5. By refusal of acceptance: If the offeree rejects or refuses to accept the offer and communicates this rejection or refusal of
acceptance to the offeror, the offer is terminated. This can be done within the stipulated time or reasonable time.

6. By counter offer by the offeree: When the offeree makes new offer to the original offeror instead of accepting the original
offer is called the counter offer. The counter offer terminates the original offer.

7. By destruction of subject matter: An offer lapses because of destruction of subject matter of the offer, no matter, before his
acceptance, whether the offeree knows of the destruction of such subject matter or not.

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Meaning of Acceptance:
Generally, acceptance means ‘to agree’ to what is offered to him. Accepting means giving assent or consent on the offer made
to him. When an offer is caught by acceptance contract will come into existence. The moment an offer is duly accepted by an offeree,
there will not be escape to the offeror. The offeror will then be a promisor. The offeror cannot recall, cancel or revoke the offer once it
is accepted to whom it is offered.

Anson – “Acceptance of an offer is the expression, by words or conducts, of assent to the terms of the offer in the manner
prescribed or indicated by the offer.”

Sec 2 (c) of Nepalese Contract Act, 2056 –“Acceptance means an assent given by a person upon the offer in a sense as taken
by the offeror.”

Rules relating to Acceptance:

1) Acceptance only by offeree
2) Offeree must have knowledge of offer
3) Acceptance must be absolute or unconditional
4) Acceptance can be expressed or implied
5) Communication of acceptance
6) Acceptance must be made before revocation or lapse of offer

Revocation/Lapse/Termination of Acceptance:
1. By notice of revocation of acceptance
2. By death or insanity of the offeree

1) By notice of revocation of acceptance: In general, the offeree cannot revoke acceptance after the offeror receives a notice of
the acceptance. If the offeree intends to send the notice of revocation after accepting the offer, the notice of revocation should reach
first to the offeror other than the notice of acceptance.

2) By death or insanity of the offeree: The offeree accepts the offer and before the offeror get the notice of the acceptance, the
offeree dies or becomes insane, the acceptance is automatically terminated. But the acceptance is not revoked, if the offeree dies or
becomes insane only after receiving the notice of acceptance by the offeror. The heir of the deceased or insane offeree must be liable
to the resulting contract and the consequences of it.

Meaning of Consideration:
Consideration is one of the essential elements of a valid contract. A contract without consideration is no contract. For any
agreement to become a valid contract, it must be supported by some sort of consideration. Simply, consideration means something in
return or to get something in exchange. A person enters into a contract to get and to give something. In other words, both the parties
involved in the contract must get something and must give something. This something, for which the contract is made, is called
consideration. The agreement is enforceable only when contracting parties are giving and getting something in return. It must be real
and lawful, which may be in past, present or future.

For example: Ram Promises to pay Hari Rs. 10,000 if he supplies 50 boxes of noodles. He accepts it. In this case, Ram’s
consideration for his promise is 50 boxes of noodles and Hari’s consideration for his promise is Rs. 10,000.

Anson – “Consideration must be valuable in the eye of law.”

Pollock – “Consideration is the price for which the promise of the other is bought.”

Sec 2 (d) of Nepalese Contract Act, 2056 –“Consideration means a promise made by a person to do or not to do something
for the acts done or undone by the other according to that mentioned in the offer.”

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Rules regarding Consideration:
1) Consideration must be made at the desire of the promisor
2) Consideration may move from the promisee
3) Consideration must be real
4) Consideration must be lawful
5) Consideration need not be adequate
6) Consideration may be either tangible or intangible
7) Consideration may be past, present or future

1) Consideration must be made at the desire of the promisor: The consideration is determined by the desire of the promisor.
The promisee or any other person will pay the price demanded by the promisor. The price or consideration is generally provided in the
offer at the time when it is made. For example: X promises to repair fridge for Rs. 1,000 to Y. X’s consideration for his promise is Rs.
1,000 which he demanded to Y while making a promise.

2) Consideration may move from the promisee or any other person: Consideration is what a promisor demands and receives
as the price for the promise. The promisor demands the price from promisee at the first hand and sometimes the other persons may
provide to promisor. Therefore, the consideration moves from the promisee or any other person. This depends upon the nature of
contract.

3) Consideration must be real: The consideration must be real which can satisfy and induce the parties to fulfil the promise.
Those are not real consideration, which are not possible and cannot be fulfilled. For example: Promises to pay an unlimited amount of
money, promises to fly over the sky without the help of any instrument are the examples of unreal consideration.

4) Consideration must be lawful: The consideration must be lawful. The law does not permit persons to make promises
violating the existing laws. In other words, a promise to do something which the law prohibits or a promise to refrain from doing
something which the law requires is not valid consideration. For example: A promises to give a car to B if B destroys C’s factory. The
law does not permit to destroy other’s property. So, the promise is not legal and the consideration is unlawful.
5) Consideration need not be adequate: The consideration need not be adequate but must be something in the eye of law. The
consideration may be some more or less. For example: ABC company can sell its machine worth Rs. 100,000 for Rs. 500,000 to XYZ
company. In spite of insufficient consideration, the contract is valid in the eye of law.

6) Consideration may be either tangible or intangible: If a promisor receives something like goods or material things having
values, it is called tangible consideration and if he receives something like services or immaterial things, it is called intangible
consideration. Consideration whether tangible or intangible, both qualifies as valid consideration.

7) Consideration may be past, present or future: There are three types of consideration on the basis of time i.e. past, present
or future. Any type of the consideration is valid if it is recognized by the agreed parties.
a) Past consideration: If the consideration of one party has already moved before the date of promise, it is called past
consideration. For example: A sees B’s house burning and helps him in extinguishing fire. While helping B, A gets injured. Here, A
cannot claim for his service because his service is just voluntary. But realizing the importance of A’s help, B promises to pay him a
reward of Rs. 10,000 and if A accepts it, a contract takes place between them. Since consideration for B’s promise to pay reward to A
has already been moved before making contract, it is called past consideration.

b) Present consideration: If the consideration moves simultaneously with the promises made, it is called present consideration.
In this case, both the promise and the consideration move together. For example: A buys coat from B for Rs. 5,000. Here, as soon as
the contract is made, B gets Rs. 5,000 from A and A gets coat from B. For both the parties, consideration is present.

c) Future consideration: When consideration is to move at some future date, it is called future consideration. Sometimes,
contract may be made to do or not to do something in future. In such cases, both the parties will get consideration in future when
contract will be performed. For example: X promises to sell his bike for Rs. 100,000 to Y within 2 months. Y promises to act
accordingly. It is a future contract and considerations for both the parties are in future.

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 TerminATiOn (disChArge) Of COnTrACT

Meaning of Termination (Discharge) of Contract:

Simply, contract means promise or agreement between two or more parties which creates some legal obligations on both the
parties involved in it. As such, both the parties should perform it by fulfilling their respective promises.
The word termination means ending of something. Termination of contract means termination of contractual obligation of the
parties to contract and also ending of rights to enforce obligations of the opposite party thereof. When the contract is performed it
becomes terminated, and when it is terminated, parties to it are freed from their obligations or duties and will get relief from their
respective liabilities. This shows that unless the contract is terminated, the parties will not get relief from their contractual liabilities.
Hence, to get relief from the rights and liabilities created by a contract is called Termination of Contract. As termination of
contract discharges the parties from their respective liabilities, it is also called Discharge of Contract. In other words, discharge of
contract means termination of the contractual relations between the parties to a contract. A contract is said to be discharged when the
rights and obligations of the parties under a contract come to an end.

Methods of Termination of Contract:

1) Termination by performance
2) Termination by breach of contract
3) Termination by lapse of time
4) Termination by mutual agreement or consent
5) Termination by operation of law
6) Termination by subsequent impossibility of performance
7) Termination by material alteration

1) Termination by performance: When both the parties fulfill their respective promises as mentioned in the contract, it is said
to be performed and is discharged. For example: A promises to buy B’s cycle for Rs. 5,000. When A pays Rs. 5,000 and B delivers
his cycle to A, the contract between them will come to an end.

2) Termination by breach of contract: When one party or both parties fail to perform the contractual obligation or promises, it
is called breach of contract and the contract terminates. When there is a breach, the party may suffer loss or damage due to the non
performance of other party. In such case, the injured party can seek remedies. For example: A promises to sell a painting to B for Rs.
50,000. After taking Rs. 50,000 from B, A denies to provide the painting to B. In this case, A breaches the contract and B, bearing
loss, can seek remedy.

3) Termination by lapse of time: Every contract is required to be performed within a certain time. Failure to perform the
contract within the specified time makes the contract terminated. In such condition, the injured party can ask for the performance or
seek remedy for non performance. For example: ABC company promises to sell leather in June to XYZ company but ABC company
fails to provide in June. Due to this reason, this contract gets terminated and the injured party, XYZ Company, can claim for this.

4) Termination by mutual agreement or consent: A contract can be terminated by mutual agreement between the contracting
parties or obtaining consent from other party for the termination. If the parties thereof agree to cancel the contract, they will be
discharged from the contractual liabilities in full. Similarly, they can substitute old contract by new contract.
Termination of a contract by mutual agreement or consent includes:
a) Rescission: When the existing contract is cancelled by the parties thereof with the mutual agreement, it is called rescission.
The rescission discharges the parties from the contractual duties, liabilities or obligation in full as they are done in mutual agreement.

b) Novation: Novation means the process of substituting a new contract in place of the old contract. In other words, the original
contract is discharged by the new contract in Novation.

c) Alteration: Alteration means the process of substituting a new contract in place of the old contract between same parties and
new contract will be different in some terms and conditions only.

d) Remission: When the creditor accepts the less sum amount from the debtor, the debtor will be discharged from the debt.
Thus, the contract is discharged from remission.

e) Waiver: In general, waiver means ‘give up or release the claim’. The creditor may waive debt and sacrifice the debtor’s
entire sum receivable. In case of waiver, the contract gets terminated and the party who needs to perform as per claim is discharged
from the claim.

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 5) Termination by operation of law: When the law terminates the contract and discharges its parties from the contractual
duties, obligations or liabilities, it is called termination by operation of law. In certain situation, the contract is terminated
automatically by the law such as the death or loss of sense of promisor, insolvency or material alteration.
a) Death or loss of sense by promisor: In certain situation, the personal skill or qualifications of promisor is necessary for the
performance of the contract and the contract has to be performed by the promisor himself only. Such contract with personal nature will
terminate automatically if the promisor dies or becomes unsound mind permanently. For example: A agrees to play football from
XYZ team but before the match, he breaks his leg in an accident. Now, A will be discharge from the agreement as he cannot play the
football with his broken leg.
b) Insolvency: When a party to a contract becomes insolvent, he will be free from all the liabilities related to the contracts. The
court transfers his rights and duties to the official receiver or assignee who tries to distribute the property of an insolvent debtor to the
creditors. It means the contract gets terminated and he will be discharged from all debts and other liabilities.
c) Merger: When the superior right overlaps the inferior right to the same subject matter, it is called merger. In such case,
inferior right gets terminated. For example: A takes B’s land on lease for a year at a monthly payment of Rs. 5,000. After 6 months,
A buys the same land from B. In such case, the contract of lease is terminated due to merger.

6) Termination by subsequent impossibility of performance: A contract may be terminated because of subsequent

impossibility of performance. A contract, when it was made, was possible to be performed but because of external conditions, it is
impossible to be performed later. As soon as the contract becomes not performable due to any reason the contract terminates and the
parties will be relieved form their liability.
a) By destruction of subject matter: If the subject matter of the contract gets destructed or damaged without the parties’ fault,
the contract should not be performed. For example: A promises to sell a painting to B for Rs. 50,000. But the painting gets stolen.
The contract becomes subsequently impossible to perform.
b) By change in law and order: The change in law affects the performance of the contract. The contract may be possible at the
time of conclusion but later, the discharge in law may make it impossible to perform. For example: A promises to sell his land to B
for Rs. 500,000. Before the ownership of land is transferred on to B, the government acquired that land for launching a certain project.
The change in law makes the contract between A and B impossible to perform.
c) By outbreak of war: Situations like outbreak of war which are beyond the control of contracting parties make the contract
terminated. For example: A, an Indian promises to buy a car from B, a Pakistani. After the conclusion of the contract, the war breaks
out between India and Pakistan. The contract between them is terminated by impossibility of performance.

7) Termination by material alteration: The term ‘material alteration’ means a change made in the material fact affecting
significantly the rights and liabilities of the parties involved in it. Material alteration without authority of both the parties terminates
the contract. So, if a party, without taking the consent from other party, makes some changes in terms and conditions of the contract, it
is called material alteration. For example: When ABC news paper makes an advertisement contract with X. But while doing so, the
news paper, without the consent of X, makes the rate of payment higher. This material alteration terminates the contract.

Doctrine of Supervening Impossibility (DOSI):

The Doctrine of Supervening Impossibility is concerned with the termination of contract by a subsequent impossibility of
performance. A contract may be terminated because of subsequent impossibility of performance which refers external conditions, not
the parties’ personal inability to perform and it should be emerged in due course of the time, not in initial. In other words, a contract,
when it was made, was possible to be performed but because of external conditions, it is impossible to be performed later. Thus, the
contract should become impossible to perform after concluding the contract and the causes should be external. The Doctrine of
Supervening Impossibility applies in the situations such as death or permanent incapability, destruction of subject matter of contract,
change in law and order or outbreak of war.
a) Death or permanent incapability: If any person who is a party to the contract dies or permanently becomes incapable for
performing the contract, the contract will be terminated as DOSI applies in such cases. For example: A agrees to play football from
XYZ team but before the match, he breaks his leg in an accident. Now, A will be discharge from the agreement as he cannot play the
football with his broken leg.
b) By destruction of subject matter: If the subject matter of the contract gets destructed or damaged without the parties’ fault,
the contract should not be performed. DOSI will apply. For example: A promises to sell a painting to B for Rs. 50,000. But the
painting gets stolen. The contract becomes subsequently impossible to perform.
c) By change in law and order: The change in law affects the performance of the contract. The contract may be possible at the
time of conclusion but later, the discharge in law may make it impossible to perform. In such case, DOSI applies. For example: A
promises to sell his land to B for Rs. 500,000. Before the ownership of land is transferred on to B, the government acquired that land
for launching a certain project. The change in law makes the contract between A and B impossible to perform.
d) By outbreak of war: DOSI applies on the circumstances like outbreak of war which are beyond the control of contracting
parties. For example: A, an Indian promises to buy a car from B, a Pakistani. After the conclusion of the contract, the war breaks out
between India and Pakistan. The contract between them is terminated by impossibility of performance.

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 BreACh Of COnTrACT And remedy

Meaning of Breach of Contract:

Simply, contract means promise or agreement between two or more parties which creates some legal obligations on both the
parties involved in it. As such, both the parties should perform it by fulfilling their respective promises. Breach means not doing
something what a person is supposed to do or doing something what a person is not supposed to do.
In general, one party or both parties may fail to perform the contractual obligations or promises, and the result will be the
breach of the contract. So, breach of contract means promisor in a contract not performing as specified or provided in the contract. It is
the situation where one party breaks the contract fully or partially through non-fulfilment with terms and conditions of the contract.
When there is a breach, the party may suffer loss or damage due to the non performance of other party. And in case of loss and
damage, the remedy for breach is provided by the law.

Types of Breach of Contract:

1) Anticipatory breach of contract
2) Actual breach of contract

1) Anticipatory breach of contract: It refers to the breach of contract by a party before the date of performance. Anticipatory
breach may take place either in two ways:
a) By notice: Here, a party gives pre-information to another party that he will not perform the contract. Thus, when a promisor
refuses to perform his promise and informs the promisee before the time of performance that he will not perform the contract on the
due date, it is called anticipatory breach of contract. For example: A promises to sell his house to B by 20th March. But on the 15th
March, he informs B that he will not sell his house to him. This is a case of anticipatory breach of contract.

b) By conduct: Here, a party by his own conduct disables himself from performing the contract in the future date. For
example: Saprina agrees to marry Mahesh, but before the agreed date of marriage, she marries with Manjeel. In this case, there occurs
an anticipatory breach of contract brought about by conduct of one of the parties.

2) Actual breach of contract: If a party does not perform or denies to perform the contract expressly or impliedly at the time
when he is supposed to perform, it is called actual breach of contract. So, it is the case of refusal to perform the promise on the
scheduled date. For example: A agreed to supply 1 quintal of sugar to B by 15th June. On the scheduled date, A could not supply the
sugar. This is the case of actual breach of contract.

Remedies for Breach of Contract:

When there is a breach of contract by a party, the other party may enjoy any of the following rights against the former:
1) Right to cancel the contract
2) Right to get performance
3) Right to claim compensation
4) Right to sue for injunction
5) Right to claim for quantum meruit

1) Right to cancel the contract: When a contract is breached by a party, the other party will also be relieved from his
contractual liability and he may cancel the contract on the ground of such breach. For example: A promises to sell cycle to B for Rs.
10,000 within 7 days. After the end of 7 days, A does not fulfil his promise. It is a breach of contract and B can cancel the contract and
does not have to pay Rs. 10,000 to A.

2) Right to get performance: When one party breaches the contract, the other party may not accept it as the termination and
ask for the performance of it. It means the other party demands the party who breaches the contract to fulfil its contractual duties,
obligations or liabilities under the contract. For example: A and ABC construction company make a contract in which the company
will build a house for A. If the company breaches the contract without completing the house, A can demand that the house should be
completely built by the same company.

3) Right to claim compensation: If breach of contract by a party causes losses or damages to the other party, the injured party
can claim for compensation against the former for the losses he has suffered. Compensation can be recovered in the following ways:
a) Compensation for actual loss: In this case of breach of contract, the injured party is entitled to claim actual loss suffered by
him under the contract.

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 b) Amount of compensation if mentioned: In this case of breach of contract, the injured party is entitled to claim amount of
compensation mentioned in the contract only. It is because the parties at the time of writing contract fixed the compensation amount
and agreed upon it.

c) Amount of compensation if not mentioned: In this case of breach of contract, the injured party is entitled to claim amount
of compensation reasonable way.

4) Right to sue for injunction: Injunction is a preventive remedy if a party to the contract is in doubt that the other party is
about to breach it. In general, injunction means the order issued by the court not to do something. Therefore, it prohibits or limits the
power of the party to breach the contract or do the activities that affect the performance of contract negatively. The party can file a
case for injunction in the court. For example: A and ABC construction company make a contract in which the company will build a
house for A. If A is in doubt that the company may leave the contract without completing the house, A can bring injunction order from
the court so that the house should be completely built by the same company. This is called injunction.

5) Right to claim for quantum meruit: Quantum meruit refers to a reasonable remuneration or a reasonable consideration that
a person supposed to get from the other upon the breach of contract. According to the doctrine of quantum meruit, if a party has done
some work or has supplied some goods of another party and the latter party has obtained some benefits from such work done or goods
supplied, the former can claim reasonable amount of compensation from the other for the loss he suffers because of the breach of
contract by the latter. For example: A and ABC construction company make a contract in which the company will build a house for A.
If both parties agree to terminate the contract during the performance, ABC Company has the right to obtain remuneration for the
construction work done as quantum meruit.

Doctrine of Quantum Meruit:

Quantum meruit refers to a reasonable remuneration or a reasonable consideration that a person supposed to get from the
other upon the breach of contract. According to the doctrine of quantum meruit, if a party has done some work or has supplied some
goods of another party and the latter party has obtained some benefits from such work done or goods supplied, the former can claim
reasonable amount of compensation from the other for the loss he suffers because of the breach of contract by the latter.
For example: A and ABC construction company make a contract in which the company will build a house for A. If both
parties agree to terminate the contract during the performance, ABC Company has the right to obtain remuneration for the construction
work done as quantum meruit.

Rules regarding Quantum Meruit:

1) Breach of contract: If the contract is breached, the injured party or person can claim for reasonable remuneration or
reasonable compensation to the other party. For example: A appoints B as his agent to sell his product in certain locality. After
looking his job for a month, A dismissed him. B is entitled to claim his due share of remuneration for the month.

2) Work done or goods supplied without any contract: If a party has done some work or has supplied some goods of another
party and the latter party has obtained some benefits from such work done or goods supplied, the former can claim reasonable amount
of compensation from the other for the loss he suffers because of the breach of contract by the latter. For example: A, by mistake,
leaves his cycle in B’s shop. B lets the cycle to C on hire and receives Rs. 10 as rent. If A comes to know this fact, he will be entitled
not only to receive the cycle back from B but also the rent collected by him by hiring such cycle.

3) Non gratuitous: If a person, without a request does something for another person with an intention to receive benefit thereof,
the doctrine of quantum meruit will be applied. For example: A carries B’s luggage from train station to home. B has to pay
reasonable remuneration for A.

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 COnTrACT Of sALe Of gOOds

Meaning of Sale of Goods:

The transaction of purchase and sales of goods is normal activity in the business. Buyer is a person who buys goods and
seller is a person who sales goods. ‘Sale of Goods’ refers to the transfer of ownership of goods against a price from one person to
another. It is an act performed between a buyer and a seller and a contract of sale of goods is created between them.

Types of Goods:
1) Existing goods
2) Future goods
3) Contingent goods

1) Existing goods: Those goods which are already in existence and physically present in the possession of a person and owned
by him are known as existing goods.
They can be:
a) Specific or Ascertained goods: The goods which can be identified at the time of sale are specified or ascertained goods. For
example: Particular furniture, a particular picture etc.

b) Generic or Unascertained goods: The goods which are indicated only by description and not identified separately are
generic or unascertained goods. For example: If a person agrees to supply a bag of rice from his go down to a buyer, it is the sale of
as unascertained goods, because it is not certain, which bag will be delivered for sale.

2) Future goods: The goods which will be produced within a certain time by the seller after entering into a contract are known
as future goods. For example: A producer promise to B to supply 200 tons of sugar within 3 months and B agrees. It is a contract of
future goods for a future consideration.

3) Contingent goods: The goods which do not exist at the time of making a contract but their possibility of acquisition in the
future are contingent are called contingent goods. For example: A agrees to sell a certain ring to B after he gets it from his mother C.
This is an agreement for the sale of contingent goods because whether he can get the ring from his mother or not is a question of
contingency. Now, according to the agreement, if he gets the ring he will sell it to B. But if he cannot get it from his mother he will not
be responsible to sell it to B.

Contract of Sale of Goods:

Sale of Goods is a special type of contract. Like any other contract, sale of goods contract also requires all the requisites of a
valid contract. In addition, it needs some more requisites like seller and buyer, goods, transfer of property and price. The contract of
sale of goods is a contract where a party transfers or agrees to transfer the goods for a price to another party. It is exchange of goods
for money. In simple, it is transfer of ownership or possession of the goods for amount or price.

Sec 40 (1) of Nepalese Contract Act, 2056 –“A contract of sale of goods is deemed to have been concluded if any seller
agrees to handover the goods to the buyer either immediately or in the future for a price.”

Essentials elements of a Contract of Sale:

1) Seller and Buyer
2) Movable goods for money
3) Price
4) Change of ownership
5) Verbal or written contract
6) Terms of contract

1) Seller and buyer: There must be two parties for contract of sale of goods i.e. seller and buyer. Seller is a person who sells or
agrees to sell his goods at an agreed price and conditions. Buyer is a person who buys or agrees to buy the goods from the seller at a
price agreed by him with the seller.

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 2) Movable goods for money: This refers to two things –firstly, sale refers to the sale of particular movable goods. The sale of
immovable property like land and building does not come under the scope of sale of goods act. Secondly, sale refers to the sale of
movable goods for money. It does not include in it the barter exchange. Money is the only consideration for a contract of sale.

3) Price: Seller transfers or agrees to transfer goods for a price to the buyer. It is necessary for the both parties to fix the price of
the goods concerned. Sale is not complete without price.

4) Change of ownership: Sale refers to the transfer of goods i.e. transfer of ownership along with possession of the goods from
seller to the buyer. Transfer of ownership result transfer of rights on the goods which is in true sense or legal term sales of goods.

5) Verbal or written contract: A contract is said to be valid, if there is exists consent of both the parties. A contract of sale of
goods to be valid, there should be either verbal or written consent of both buyer and seller.

6) Terms of contract: A contract of sale of goods may be either conditional or unconditional. If it is to include some terms and
conditions, both the parties must agree upon all the terms mentioned like payment of price, time, place and mode of delivery etc.
These terms may be of two types -conditions and warranties. Condition is compulsory terms and warranty is necessary but not
compulsory.

Meaning of Condition:
Condition is a term, which is essential to the main purpose of the contract. Without prior fulfillment of the condition given,
the contract cannot be performed. Condition, therefore, is of a fundamental character. Breach of condition gives the aggrieved party a
right to reject the contract. It also gives him a right to claim for damages. Condition is expressed or implied.

For example: A orders B 2 quintals of ‘Basmati rice’ within 1 week and B accepts. Hence, ‘Basmati rice’ is the main
purpose of the contract. If B sends ‘Mansuli rice’ the contract of sale shall be terminated and the injured party can claim compensation
for the loss caused to him.

Meaning of Warranty:
Warranty is a stipulation in a contract of sale, but it is collateral (subsidiary) to the main purpose of the contract. Its breach
entitles the injured party only to claim for damages. He can neither reject the goods nor can he reject the contract. Warranty is of
subsidiary character. It is not as urgent as condition. Hence, performance of contract does not urgently need the fulfillment of the
warranty. Warranty is necessary but not urgent. Warranty can be expressed or implied.

For example: A asks B to deliver him a quintal of Basmati rice on the 1st of January. B delivers the rice on the fixed date, but
the rice is not as pure as desired by A. He cannot reject the rice, but if he suffers a loss because of impure rice, he can claim
compensation for damages.

Difference between Condition and Warranty:

Condition
1) Condition is a term, which is essential to the main
purpose of the contract. Without prior fulfillment of the
condition given, the contract cannot be performed. Condition,
therefore, is of a fundamental character.
2) Breach of condition gives the aggrieved party a right
to reject the contract. It also gives him a right to claim for
damages.
3) A breach of condition may be treated as breach of
warranty as well.
Warranty
1) Warranty is only collateral to the main purpose of the
contract. It is of a subsidiary character. For performance of
the contract, prior fulfillment of warranty is not compulsorily
necessary.
2) Breach of warranty gives the injured party a right to
claim only for damages.
3) A breach of warranty cannot be treated as a breach of
condition.

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Implied condition:
1) Sale by description
2) Condition as to title (ownership)
3) Condition as to fitness or quality of goods
4) Sale by sample
5) Sale by sample as well as by description
6) Condition as to merchantability

1) Sale by description: When the goods are sold by description, all the goods sold must correspond to the description made. If
the goods sold are different from the description made, the buyer can reject the goods and can reject the contract. Such description
may be in terms of physical characteristics such as: quality, quantity, size, trade mark, brand, label etc.

2) Condition as to title (ownership): Anyone has a right to sell his goods whenever he likes. But he cannot sell any goods,
which do not belong to him. After buying goods from a seller, if the buyer finds that the title of the seller to the goods is defective, he
can reject the contract and can claim for damages too.

3) Condition as to fitness or quality of goods: If the buyer has made known to the seller expressly or impliedly the particular
purpose for which he needs the goods, the seller must supply the goods usable for such purpose. If the goods supplied are not fit to
serve the purpose of the buyer, he can reject taking delivery of such goods.

4) Sale by sample: When the goods are purchased by a buyer on the basis of the samples shown by the seller beforehand, all the
goods purchased must correspond with the samples shown, otherwise the buyer will enjoy every right to reject the goods. But the
buyer should inspect the goods very carefully. If the buyer does not inspect the gods so carefully or he takes delivery of goods after
inspection, he has no remedy.

5) Sale by sample as well as by description: When goods are sold by sample as well as by description, all the goods sold must
correspond with both the samples as well as description made. That means, after buying the goods relying upon the seller, if the buyer
finds on inspection that the goods are similar to samples but are different from the description made or they are similar to description
made but are different from the samples, he has a right to reject the goods.

6) Condition as to merchantability: Merchantability means the quality of the goods purchased should be either in condition to
be use for own consumption or should be resalable in the market. If the goods purchased are not in merchantable quality or damaged
or perished, the buyer can refuse taking delivery of such goods.

Doctrine of Caveat Emptor:

‘Caveat Emptor’ literally means ‘let the buyer beware’. This is the basic principle of the contract of sale of goods. This
indicates the buyer should be aware whether the goods purchased are up to the standard or not or goods are up to the quality to suit the
main purpose of the goods. Thus, he should inspect the goods prior to the purchase. It is not duty of seller to show the defect of the
goods to the buyer, but buyer should be provided an opportunity to check the quality of the goods. He relied on his knowledge, skill
and judgment to check the fitness of the goods. If buyer purchase goods voluntary without inspection, and seller intentionally hidden
the defect of the goods, the buyer cannot reject the goods after the delivery of the goods. According to Doctrine of Caveat Emptor
buyer should carefully inspect the goods whether they are of merchantable quality or not and then only purchase the goods.

For example: A buys a horse from B for his personal riding without disclosing the purpose. The horse supplied by B is fit
only for pulling on the charts and not useful for riding purpose. A can neither reject the horse nor can he claim compensation.

Transfer of Ownership:
Ownership of goods is different from possession of goods. Ownership gives absolute right to use, transfer or deal with goods
to the owner. In many cases person possessing may be an owner also. If he is only possessing goods, no sales can be made. Transfer of
ownership is a must for contract of sale of goods. Ownership is a legal right over goods and transfer of it may be called passing of
property. When and at what point of time ownership is transferred is a matter of importance in a contract of sale because whole thing
depends upon ownership of goods.
Sale refers to the transfer of ownership of goods from seller to the buyer. Whenever a seller sells his goods to the buyer, his
ownership towards the goods will also be transferred to the buyer simultaneously. In fact, the contract of sale is said to be complete
only when the ownership of goods passes from seller to the buyer. Hence, change of ownership is the main feature of the contract of
sale. Title and risk on the goods gets transferred along with ownership. Who can sue the third party for any loss or damage also
depends upon who is the owner, buyer or seller. A seller cannot sue for price unless ownership is transferred to a buyer. In case of
insolvency of a buyer or seller, the official assignee or receiver cannot take possession of the goods unless the party they represent
owns the goods.

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Rules regarding transfer of Ownership:
1) Sale of unascertained and future goods
2) Intention of the parties
a) Sale of specific goods
b) Where goods are to be delivered
3) Delivery to the carrier
4) Goods sent on approval or on ‘Sale or Return’ basis

1) Sale of unascertained and future goods: The goods, which are just indicated by description but are not separately identified
at the time of making contract for sale, are called unascertained or generic goods. Although the contract is made for the sale of
unascertained goods, ownership will not be transferred to the buyer until and unless they are made ascertained. The unascertained
goods are supposed to be ascertained when they are kept separate for delivery and notice is given to the buyer.

2) Intention of the parties: The period of transfer of ownership of sale of goods are fixed by the seller and buyer in the
contract. If they have fixed the time for transfer of ownership in the contract, it will be passed at the time as the parties intend it to
pass. But if it is not mentioned, ownership is transferred according to the intention of the parties, which follows the certain rules:

a) Sale of specific goods: Specific goods refer to the ascertained goods that can be identified at the time of making contract.
While making contract for the sale of specific goods, the time for the transfer of ownership of goods is mentioned in the contract, it
passes on at the very time as mentioned in it, or otherwise, it passes at the time when the parties intend it to transfer.

b) Where goods are to be delivered: If the time of transfer of ownership of goods is not mentioned in the contract, the
ownership of goods is supposed to be transferred from seller to the buyer at the very moment when goods are delivered to him.

In absence of agreement between the parties as regards to the transfer of ownership, the following rules are to be
followed:
i. When goods are in a deliverable state: The term ‘deliverable state’ refers to such a state where for delivery of the goods,
the seller does not have to do anything more. The goods can be immediately dispatched and the buyer too is bound to take delivery of
such goods.

ii. If the seller has to do something for putting the goods in deliverable state: When a seller has something to do for
bringing the goods in a deliverable state, ownership will be passed to the buyer only after making them deliverable.

iii. If the goods are to be measured, weighted or tested: Even though goods are in a deliverable state, if the seller, for
determining the price, is bound to measure, weight or test the goods, the ownership does not pass on to the buyer until such acts are
done and the buyer has notice thereof.

iv. Right of the buyer to inspect the goods: Only the delivery of goods does not transfer the ownership, buyer has right to
inspect the goods. Until the buyer inspects and accepts the goods there is no transfer of ownership.

v. To send bill and other related documents to the buyer: When the goods are transferred basic documents like bills etc.
should also be transferred. Only then there is transfer of ownership.

3) Delivery to the carrier: When the seller delivers goods to the carrier so as to deliver to the buyer, the ownership of such
goods may or may not be transferred to the buyer at the same time. It depends upon the ‘right of disposal’ of the seller. If the seller
does not retain this right with him, ownership of goods is supposed to be transferred to the buyer as soon as the goods are delivered to
the carrier. It does not matter whether the buyer has received the goods from the carrier or not.

4) Goods sent on approval or on ‘Sale or Return’ basis: If the goods are sent on approval basis, ownership of goods is
transferred to the buyer only when he gives approval as he gets delivery of the goods. On the other hand, if the goods are sent on ‘sale
or return’ basis, ownership of goods is transferred to the buyers only when the goods sent will be sold by the buyers, not then goods is
returned.

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Meaning of Unpaid Seller:
Goods are sold either for cash or on credit. Under cash sale, payment is made immediately after the purchase of goods. Under
the credit sale, payment is made after certain period of time as agreed by seller and buyer. The seller becomes an unpaid seller under
credit sale, if he does not get the whole payment from the buyer on the due date or if the negotiable instrument (cheque) received for
payment is dishonoured by the buyer. In short, when seller does not get cash value for his goods in time, he becomes the unpaid seller.
For example: A sells goods to B for Rs. 1,000. A becomes unpaid seller in any of the following cases:
 If B does not pay whole of the price on the due date.
 If the payment is made by B by means of cheque is dishonoured on the due date.

Characteristics of Unpaid Seller:

1) Though the buyer has promised to pay the price, the seller has not received it yet
2) The seller is not paid the price either wholly or in part
3) The seller cannot received the payment due to dishonor of negotiable instrument
4) The seller must not have refused to accept the payment at the time when the buyer has tried to make it

Rights of Unpaid seller:

a) Rights against the goods:
1) Right of lien on goods
2) Right of stoppage of goods in transit
3) Rights of resale
b) Rights against the buyer personally:
1) Right to sue for price
2) Right to sue for damage
3) Right to sue for interest

a) Rights against the goods:

1) Right of lien on goods: Right of lien on goods is a kind of right which the unpaid seller exercises to retain the possession of
goods until the full price is paid by the buyer.
The seller may exercise this right on following condition:
 When sales are made on cash but no payment is yet received
 When sales are made on credit & the time has expired
 When the buyer has become insolvent

2) Right of stoppage of goods in transit: When seller has already put the goods in delivery and goods are in transit, the seller
who is not paid the price may exercise right to stop the goods in case the buyer fails to pay the price and also becomes insolvent.
Damage arising from the same shall be claimed by filing a suit against the buyer.
The seller can exercise this right by following methods:
 By retaking actual possession of the goods
 By giving notice to the carrier redeliver the goods to the seller

3) Rights of resale: When a buyer fails to pay the price on time and also the goods are in possession of the seller, he may resale
such goods to another buyer in the following conditions:
 The goods are perishable in nature
 The right is expressly reserved in the contract in favour of the seller
 The seller asks the buyer to pay the price within a certain time but the buyer does not pay the price

b) Rights against the buyer personally:

1) Right to sue for price: A seller is entitled for the price of the goods sold. Price must be paid on or within the prescribed time
by the buyer. If the ownership of goods has already been transferred to the buyer but buyer does not make payment as prescribed, the
seller may exercise his right to sue against such buyer in a court of law for the price.

2) Right to sue for damage: Where the buyer wrongfully neglects or refuses to accept delivery of goods and to pay price of the
goods, the seller may sue him in the law court for compensation of loss or damage for non acceptance.

3) Right to sue for interest: If the buyer fails to make payment on the date promised, the seller enjoys a right to claim interest
at a reasonable rate for the time delayed.

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