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A contract of sale of goods is a contract whereby the seller transfers (or agrees to transfer) the property in goods to the buyer for a price. Where there is a transfer it is a contract call a Sale. A contract of sale may be absolute or conditional. The former is without any conditions. Conditions may have to be fulfilled by the seller or by the buyer.
Agreement to Sell
Where the transfer of property, for example, ownership in the goods is to take place at a future date or subject to some condition to be fulfilled, the contract is called an agreement to sell. When agreement to sell becomes a sale? It is when the time lapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.
Remedies: Sale seller is entitled to sue for the price of goods. ATS seller has only right to sue for damages for nonperformance of contract. Risk of loss: Sale loss will be borne by the buyer even if the possession is with seller. ATS seller will have to pay for loss. Insolvency: Insolvency of buyer: Sale seller must deliver goods to official assignee and claim dividend for the price of goods. ATS seller may refuse to deliver goods unless paid for. Insolvency of seller: Sale buyer is entitled to receive the goods from official assignee. ATS buyer has to prove the
What is a Condition? [Section 12 (2)] A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat it as repudiated or broken. What is Warranty? [Section 12 (3)] A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages, but not to a right to reject the goods and treat the contract as repudiated or broken.
X, a seller of electronic goods, was supposed to sell a TV of a particular brand & model to Y. The outer surface of the TV came in two colours, silver and black. Y had asked for silver colour. X is unable to deliver a set in silver colour. He, thus, delivers a TV set of black colour. Has Y got what he had contracted for? There is no difference in the quality of the TV, even if the outer cover is black or silver. Thus, he has got what he basically asked for. Yet
A contract for sale would contain a number of terms specifying the nature, quality, & feature of the good being sold. Some of the terms may form the core of the contract, while others may be surrounding and peripheral. The term that the TV must be of a particular brand and model is the core part of contract, while its colour is not of central importance. Core part is called the condition and
Any breach of a condition would be a breach of a contract. Thus, for violation of a condition, the contract can be repudiated. Even if there is breach of warranty, the contract has been mostly fulfilled. That is, the contract cannot be repudiated, but the suffering party can claim damages. In a given situation, stipulation (condition or warranty) would depend on the construction of the contract.
Sale by description (Section 15): It means that there is a implied condition that the goods shall correspond with the description. Breach of this warranty entitles the buyer to reject the goods. A description can be physical appearance, brand name, trade mark, packing particulars, or particulars of the ship where the goods are to be
Sale by sample (Section 17): There are 3 implied conditions when the goods are supplied according to the sample: (i) Bulk shall correspond with the sample in quality. (ii) Buyer shall have a reasonable opportunity of comparing the bulk with the sample. (iii) Goods shall be free from any defect. The defect shall not be apparent on reasonable examination. Should be latent one.
Warranty as to quality or fitness (Section 16): There is an implied warranty as to the quality or fitness under the following circumstances. (i) Where goods are ordered for specific purpose and the same is made known to seller. (ii) Where the buyer relies on the sellers skill of judgment. However, if the buyer selects himself then there is no implied condition as to fitness. (iii) Where goods are bought by description from seller there is an implied condition that the goods shall be reasonably fit for such purpose.
Warranty as to quiet possession free from encumbrances. The buyer shall have and enjoy quiet possession of the goods [Section 14 (b)]. The buyer shall have a right to sell the goods [Section 14 (a)]. The goods shall be free from any charge in favor of any 3rd party not declared or known to the buyer before or at the time when the contract is made [Section 14 (c)].
CAVEAT EMPTOR
It means let the buyer beware. That is, the buyer must take care. In a contract for sale of goods there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods. Therefore, the buyer purchases the goods at his risk relying on his own skill and judgment (Section 16). There are certain cases where the Doctrine of Caveat Emptor does not apply.
For specific purpose: Where the goods are ordered for a specific purpose and seller is made aware of it and the buyer relies on the skill or judgment of the seller, there is an implied condition that the goods shall be reasonably fit. Merchantable Quality: Where (i) sale is by description and (ii) purchased from the seller who deals in goods of that description, there is an implied condition that the goods are of merchantable quality.
Duties: To pay for the goods and take delivery thereof; To apply for the delivery of goods as the seller is not bound to deliver until the buyer applies for delivery; To compensate the seller for any loss occasioned by his neglect or refusal to take delivery of the goods and also for reasonable charge for care and custody of the goods.
To recover interest from the buyer for price due. To sue for damages on buyer repudiating the contract. Duties: To deliver the goods when buyer demands. To compensate the buyer in case he repudiates the contract. To give reasonable opportunity to the buyer to examine the goods. To refund the amount paid by the buyer in case he fails to deliver the goods.
Unpaid Seller
Who is an unpaid seller? (Section 45) One who has not been paid or tendered the whole of the price or one who receives a bill of exchange or other negotiable instrument as conditional payment and the condition on which it was received has not been fulfilled by reason of the dishonor of the instrument.
Right of stoppage in transit (Section 50): When the buyer of goods becomes insolvent, the u.s. who has parted with the possession of the goods has the right of stopping them in transit. That is, he may resume possession of the goods as long as they are in the course of transit and may retain them until payment. What is Transit? If it is with a middle man who is required to deliver the goods to the
Essentials: (i) Seller must be unpaid wholly or partly. (ii) Buyer must have become insolvent. (iii) The goods must be in transit. When does transit of goods come to an end? When buyer acquires possession or is deemed to acquire possession of the goods. How is stoppage in transit effected? (i) By taking actual possession of the goods; or (ii) By giving notice of his claim to the carrier in whose possession the goods are, to re-deliver to the seller or according to his directions.
When is right of stoppage in transit lost? Upon delivery of the goods; Carrier acknowledges to buyer that he holds goods on his behalf; Carrier wrongfully refuses to deliver; or Where part delivery has been made.
Right of Re-Sale (Section 54): He can resell the goods under the following circumstances: Where goods are of perishable nature; Where the seller gives notice to the buyer of his intention to resell and the buyer does not pay within a reasonable time after notice; Where the seller has expressly reserved his right of re-sale in case the buyer makes default.
Unpaid Seller
Where property in goods has not passed
Right of withholding delivery. Seller reserves the right of disposal over the goods (Section 25). Right to sue buyer personally for the price of the goods (Section 55). Right to sue for damages for wrongfully neglecting or refusing to accept the goods (Section 56). To recover interest from buyer where there is specific agreement to that effect.
Breach of Contract
Remedies Available to the Seller Suit for Price (Section 55) If the buyer neglects or refuses to pay as per terms of contract, seller may sue him for the price of the goods. Suit for Damages (i) For non-acceptance: (Sec. 56) Where buyer wrongfully neglects or refuses to accept and pay, the seller may sue for damages for nonacceptance.
(ii) For repudiation of contract Anticipatory breach: (Sec.60) If buyer repudiates contract before date of delivery, seller may either treat it as: Subsisting and wait till delivery date, or he may treat the contract as rescinded and sue for damages for the breach. This remedy is in anticipation of the breach of contract popularly known as anticipatory breach of contract.