INTRODUCTION:

The term contract is defined in section 2(h) of the Indian Contracts Act,1872 1, as follows: an
agreement enforced by law. Sale of goods is also an agreement enforced by law.

The law of sale of goods was contained in chapter VII of the Indian Contract Act,1872 (section
76 to 123), but was found to be inadequate to deal with new situations arising die to increase
in mercantile transactions in the wake of rapid industrialization. The courts had to draw upon
analogies from the decisions of English Courts to meet the new situations. Hence the legislature
intervened by passing the present Act which is the sale of Goods act,1930, incorporating therein
the various provisions of English sale of goods act, 1893.

Contracts for the sale of goods are subject to the general legal principles applicable to all
contracts, such as offer and its acceptance or other essential elements of a contract.

CONTRACT OF SALE OF GOODS:

A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the
property in goods to buyer for a price. The term “contract of sale” is a generic term and includes
both a sale and an agreement to sell.

Where under a contract of sale the property in the goods is transferred from the seller to the
buyer, the contract is called a ‘sale’ but where the transfer of the property in the goods is to
take place at a future time or subject to some conditions thereafter to be fulfilled. The contract
is called agreement to sell.

An agreement to sell becomes a sale when the time elapses or the conditions, subject to which
the property in the goods is to be transferred are fulfilled.

The true nature of a transaction evidenced by a written agreement has to be ascertained from
its covenants and not merely from what the parties choose to call it.

The supreme court in that case stated that for considering whether a particular transaction is a
sale ot not the court has to consider whether as a result of the transaction the property in the
goods passed to another in return for price. It is the substance of the transaction evidenced by

1 Indian Contracts Act 1872.

the agreement which must be looked at.2 The substance of the matter must be ascertained by a
consideration of the whole of agreement.3

BUYER AND SELLER:

According to section 2(1) of the Sales of Goods Act, “buyer” means a person who buys or
agrees to buy goods and section2(13) says ‘seller’ means a person who sells or agrees.

In a Sale of Goods the two parties are the seller and the buyer, and each has his duties amd
obligations to perform.

DUTIES OF BUYER:

The duty of buyer are to accept the goods and to pay for them. Both these duties are to be
performed in accordance with the terms of the contract of sale.

In section 31 of Sales of Goods Act the words ‘ in accordance with th term si fthe contract of
sale’ are intended to show that the parties are at liberty to modify the terms. In absence of a
contract to the contrary these duties are concurrent conditions stated in the following section.
So this may mean the buyer and seller can agree amount themselved to create certain rights.

One of the main duty for buyer is to apply for delivery. The buyer has no cause of action
against the seller if he has not applied for delivery and he must stat ethat cause of action in his
plaint.4

In a case where the contract provided that seller should give notice of the arrival of the goods
(such as railway receipt), the buyer is still under an obligation to pay.

In the case of Ganesh Das v. Ram Nath, it was held that the buyer is under an obligation to
apply for delivery even if the seller is under an obligation to give notice.

The application for delivery must be in such a way that the buyer must be ready and willing to
pay the price in exchange for possession of goods.

In a case, B buys goods from A and assigns the benefit of the contract to C, C applies for
delivery. B then takes a reassignment from C and sues A on the contract without making any
demand for the goods. It is found that the assignment to C was fictitious. B is not entitled to
adopt the demand for delivery made by C. Such a demand is no demand for the goods.

2 Khedut Sahakari Ginning & Pressing Society v. State of Gujarat (AIR1972.S.C.1786).

3 Helby v. Mathews (AIR 1895.A.C. 471)

4
In section 35 of sales of goods act it is written ‘apart from any express contract’ seller is not
bound to deliver the goods to the buyer.

The buyer’s duty to apply for delivery does not rise where the seller has refused to perform his
part of the contract without any justification even before the final date of delivery has arrived
as it would become an idle formality to apply for delivery.

Next duty of the buyer is payment in the absence of any specific agreements, the buyer must
make payment at the time and place he receives the goods. When a sale is made on credit, the
buyer is obliged to pay according to the specified credit terms not when the goods are received.
The credit period usually begins on the date of shipment. Payment can be made by any means
agreed on between the parties—cash or any other method generally acceptable in the
commercial world. If the seller demands cash when the buyer offers a check, credit card, or the
like, the seller must permit the buyer reasonable time to obtain cash.

Buyer has Right of inspection under Sale of Goods Act 1930 section 40 unless otherwise
agreed, or for C.O.D transactions, the buyer has an absolute right to inspect the goods. This
rights allows the buyer to verify, before making payment, that the goods tendered or delivered
are what were contracted for or ordered. If the goods are not what the buyer ordered, the buyer
has no duty to pay. An opportunity for inspection is therefore a condition precedent to the right
of the seller to enforce payment.

Unless otherwise agreed, inspection can take place at any reasonable place and time and in any
reasonable manner generally, what is reasonable is determined by costume of the trade, past
practices of the parties, and the like. Costs of inspecting conforming goods are borne by the
buyer unless otherwise agreed.

Despite examination of the goods by the buyer in consonance with his right, the buyer has a
rights to reject the goods of a hidden, not apparent, defect is subsequently found out.

A buyer is not bound to return rejected goods, where a buyer rejects goods as not being of the
contract description, it is not his duty to send them back to the seller, it is enough for him to
give a clear notice that they are not accepted and then they are at sellers risk.

The buyer is also under the obligation to accept. A buyer can manifest assent to the delivered
goods in the following ways, each of which constitutes acceptance:

1. There is an acceptance if the buyer, after having had a reasonable opportunity to inspect
the goods, signifies agreement to the seller that the goods are either conforming or are
acceptable despite their non-conformity.
2. Acceptance is presumed if the buyer has had a reasonable opportunity to inspect the
goods and has failed to reject them within a reasonable period of time.
3. In sale contracts, the buyer will be deemed to have accepted the goods if he performs
any act inconsistent with the sellers’ ownership e.g. use or resale of goods.
Buyer’s liability for delay in taking delivery:
Section 44 of the Sale of Goods Act, contemplates the case where the property in the
goods has passed to the buyer and he has become the owner thereof. The fact that the
seller has been given the right to recover charges for care and custody and to recover
the loss shows that the buyer’s neglect does not entitle the seller to put an end to the
contract, that the property in the goods has passed to the buyer and that the goods are
kept against the seller’s will. In such a case if the buyer fails to take delivery with a
reasonable time, he is liable to the seller for any loss occasioned by his default and also
for a reasonable charge for the care and custody of the goods.

Conclusion:
DUTIES OF BUYER
1 To accept the delivery of goods, when the seller is willing to
make the delivery as per the contract
(Sec. 31 of Sales of goods Act)
2. To pay the price in exchange for possession of the goods
3. To apply for delivery of the goods. (Sec. 35, Sales of Goods
Act)
4 To demand delivery of the goods at a reasonable hour ( sec
36 (4), Sales of Goods Act)
5 To accept delivery of the goods in instalments and pay for
them, in accordance with the contract. (Sec. 38 (2),Sales of
Goods Act)
6 To bear the risk of deterioration in the course of transit, when
the goods are to be delivered at a place other than where they
are sold ( sec 40, Sales of Goods Act)
7 To inform the seller in case the buyer refuses to accept or
rejects the goods ( sec 43, Sales of Goods Act)
8 To take the delivery of the goods within a reasonable time after
the seller tenders the delivery (Sec. 44, Sales of Goods Act)
9 To pay the price, where the property in the goods are passed
to the buyer, in accordance with the terms of the contract ( Sec
55, Sales of Goods Act)
10 To pay damages for non-acceptance of goods ( Sec 56,Sales
of goods Act)

DUTIES OF SELLER:

The major obligation of the seller under a sales contract is to tender conforming goods
to the buyer. Tender of delivery requires that the seller have and hold conforming goods
at the disposal of the buyer and give the buyer whatever notification is reasonably
necessary to enable the buyer to take delivery. Conforming goods are goods that
conform exactly to the description of the goods in the contract.

Tender must occur at a reasonable hour and in a reasonable manner. Unless the parties
have agreed otherwise, the goods must be tendered for delivery at a reasonable hour
and kept available for a reasonable period of time to enable the buyer to take possession
of them. All goods called for by a contract must be tendered in a single delivery unless
the parties agree otherwise, or the circumstances are such that either party can rightfully
request delivery in lots.

Delivery:

It is the duty of the seller to deliver the goods and of the buyer to accept and pay for
them, in accordance with the terms of the contract of sale.

Unless otherwise, agreed, delivery of goods and payment of the price are concurrent
conditions, that is to say, the seller shall be ready and wiling to give possession of the
goods to the buyer in exchange of the price and the buyer shall be ready and wiling to
pay the price in exchange of possession of the goods.

Risk of deterioration in the goods:

Where the seller of goods agrees to deliver them at his own risk at a place other than
that were they are when sold, the buyer shall, nevertheless, unless otherwise agreed,
take any risk of deterioration in the goods, necessarily incident to the course of transit.

Damages for non-delivery:

Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the
buyer may sue the seller for damages for non-delivery.

Specific performance:

Under certain circumstances in any suit for breach of contract the deliver specific or
ascertained goods, the court may if it think fir, on the application of the plaintiff, by its
decree direct that the contract shall be performed specifically. The power of the court
to order specific performance in such cases is to be used subject to rules contained in
the specific relief act regarding specific performance of the contract.

Place of delivery:

The UCC provides for the place of delivery pursuant to a contract if the contract does
not of course, the parties may agree on a particular destination, or their contract’s terms
or the circumstances may indicate.
 Non carrier cases:

If the contract does not designate the place of delivery for the goods and the buyer is
expected to pick them up, the place of delivery is the seller’s place of business or, if the
seller has none, the seller’s residence. If the contract involves the sale of identified
goods, and the parties know ehn they enter into the contract that these goods are located
somewhere other than at the seller’s place of business, then the location of the good sis
the place for their delivery.

Carrier cases:

It is the seller’s duty to do whatever necessary to secure the carrier’s responsibility for
the safe delivery of the goods to the buyer so that in the event of a loss, the buyer may
have his indemnity against the carrier.

In many instances, attendant circumstances or delivery terms in the contract make it

apparent that the parties intend that a carrier be used to move the goods. These are two
ways a seller can complete performance of the obligation to deliver the goods in carrier
cases—through a shipment contract and through a destination contract.

Shipment contracts: unless otherwise agreed, the seller must do the following:
1. Put the goods into the hands of the carrier.
2. Make a contract for their transportation that is reasonable according to the nature of
the goods and their value.
3. Obtain and promptly deliver or tender too the buyer any documents necessary to
enable the buyer to obtain possession of the goods from the carrier.
4. Promptly notify the buyer that shipment has been made.
If the seller fails to notify the buyer that shipment has been made or fails to make a
proper contract for transportation, and a material loss of the goods or a significant delay
results, the buyer can reject the shipment. Of course, the parties can agree that a lesser
amount of loss or any delay will be ground for rejection.

Destination contract: in a destination contract, the seller agrees to see that conforming
goods will be duly tendered to the buyer at a particular destination. The goods must be
tendered at a reasonable hour and held at the buyer’s disposal for a reasonable length
of time. The seller must also give the buyer appropriate notice. In addition, the seller
must provide the buyer with any documents of title necessary to enable the buyer to
obtain delivery from the carrier. Sellers often do this by tendering the documents
through ordinary banking channels.

The Perfect Tender Rule:

The seller has an obligation to ship or tender conforming goods, ad this entitles the
buyer to accept and pay for the goods according to the terms of the contract. Under the
common law, the seller was obligated to deliver goods in conformity with ther terms of
the contract in every detail. This was called the perfect tender rule. The UCC preserves
the perfect tender rule by saying that if goods or tender of delivery fail in any respect
to conform to the contract, the buyer has the right to accept the goods, reject the entire
shipment, or accept part and reject part.

Exceptions to the Perfect Tender Rule

Because of the rigidity of the perfect tender rule, several exceptions to the rule have
been created. They are
1. Agreement of the parties
2. Right to cure
3. Substitution of carriers
4. Installment contracts
5. Commercial impracticability
6. Destruction of identified goods.

Section 45 lays down that a seller is unpaid:

1. When the whole of the price has not been paid or tendered.
2. When a negotiable instrument or a bill of exhcnage has been received as conditional
payment and the condition in which it was received has not been fulfilled by reason
of the dishonor of the instrument or otherwise.
The seller remains as unpaid seller as long as any portion of the price, however small,
remain unpaid. Where the whole of price has been tendered, and the seller refused to
accept such a tender, seller ceases to be an unpaid seller. In such a case the seller loses
all high right against the goods.

If there is a period of credit then the seller is not unpaid until the price become due.
Against if there is a condition attached to payment it must be fulfilled.

The unpaid seller’s right can be exercised by an agent of the seller to whom the bill of
leading has been endorsed, or a consignor or an agent who has himself paid, or is
directly responsible for the price.

Rights of an Unpaid Seller:

if seller is not paid he has some rights under this Act.

The sales of Goods Act has expressly given two kinds of rights to an unpaid seller of
goods, namely:
1. Against the goods:
1.1.When the property in the goods has passed
1.1.1. Right of lien
 1.1.2. Right of stoppage of goods in transit
1.1.3. Rights of re-sale
1.2.When property in the goods has not passed
1.2.1. Right of withholding delivery
2. Against the buyer personally
2.1.Right to use for price
2.2.Right to sue for damages
2.3.Right to sue for interest

Right to lien:

The lien of an unpaid seller is a right to retain possession of the goods until tender
or payment of the price. A person cannot on his own goods. On the basis of this
principle, when the statue gives a right of lien to the selle, it presumes that the
property in the goods has passed to the buyer. The lien depends on actual possession
and not on title, and is not affected by his having parted with a document capable
of transferring title. He may have given a bill of lading which passes the lagl
property in the goods, or he may have given a delivery order.

Which though it does not pass the legal title or property in the goods, enable the
person receiving it to acquire possession of the goods and acquire a title in that way,
but whatever he has done in that respect does not destroy his right of lien as long as
he keeps possession of the goods as a vendor.

Under sub-section (2) an unpaid seller could exercise his right of lien even though
his character of an unpaid seller has ceased and has become the Bailee or agent for
the buyer. Accordingly, it has been held that giving a delivery order by a seller to a
buyer does not itself give the buyer such a possession of the goods as to defeat the
seller’s lien for the price. But the seller’s lien may be defeated where the
circumstances of the case are such as to stop him from denying that payment had
been received for the goods to which the delivery order is related.