sales of good act1930

8/4/2019 Sales of Good Act1930

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THE SALES OF GOODS ACT 1930

FORMATION OF CONTRACT :

CONTRACT OF SALE:

LEGISLATIVE HISTORY:

In 1926-27 an exhaustive examination of

the Indian Contract Act was made and in

1928 a draft bill was prepared under the

aeges of the late D.F.Mull and the present

Sales of Goods Act (Act III of 1930) was

enacted.

The Sales of Goods Act 1930 is basedupon and is largely a reproduction of

English Sale of Goods Act 1893.

Section 4: SALE AND AGREEMENT TO SELL:

(1) A contract of sale of goods is a contract

whereby the seller transfers or agrees to


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transfer the property in goods to buyers for

a price.

(2) A contract of sale may be absolute andconditional

(3) Where under a contract of sale the property

in goods transferred from the seller to

buyer, the contract is called sale,

but where the transfer of property in

goods is to take place at a future time or

subject to some condition, the contract is

called an agreement to sell.

(4) An agreement to sell becomes a sale when

the time elapses or conditions are fulfilled

subject to which the property in goods is tobe transferred.

SALE AND AGREEMENT TO SELL:

1. Transfer of property: Immediately - in

future

2. Type of goods: Existing - in future

3. Risk of loss - Buyer - Seller


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4. Consequenses of breach: Seller to sue -

damages claim

5. Right to re-sell: Seller cannot - Buyer gets

title

6. General and particular property: sale

creates jus in rem i.e. right to buyer to

enjoy the goods. Merely contract jus in

personam gives to buyer against seller to sue.

7. Insolvency of buyer Seller not bound to part

goods in case of sale.

CONDITIONS AND WARRANTY

Sec. 12 (1) a stipulation in contract of sale with

reference to goods which are the subject thereof

may be a condition or a warrantee.


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(2) A condition is a stipulation essential to

main purpose of the contract, the breach

of which gives rise to a right to treat the

contract as a repudiated.

(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 right to reject the

goods and treat the contract as

repudiated.

(4) Whether a stipulation in a contract of sale

is condition or a warrantee depends in

each on the construction of contract.

Stipulation may be a condition thoughcalled warrantee in the contract.

DISTINCTION BETWEEN A CONDITION

AND WARRANTY


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1. Difference as to value. A condition is a

stipulation which is essential to the main

purpose of the contract. A warrantee is s

stipulation which is collateral to the minpurpose of the contract.

2. Difference as to breach. If there is a

breach of condition, the aggrieved party

can repudiate the contract of sale; in case

of a breach of a warranty the aggrieved

party can claim damages only

3. Difference as to treatment; A breach of

a condition may be treated as a breach

of a warranty. This would happen where

the aggrieved party is contented with

damages only. A breach of a warranty,however, cannot be treated as a breach of a

condition.

EXPRESS AND IMPLIED CONDITIONS

AND WARRANTIES:


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Express conditions and warranties are those

which are expressly provided in the contract.

Implied conditions:

1. condition as to title -- right to sell, right

to sell in future Sec. 14(a)

Example: A purchases a car from B and

uses it for some time. It turns out that

the car sold by B to A was a stolen one

and had to be returned to the rightful

owner. A brings action against B for

return of the price. Will he succeed?

Ref. 14(a) Rowland v. Divali

2. Sale by description Sec.15

Example: A agreed to sell a second hand reaping

machine which B the buyer, had not seen. The

seller stated the machine was new the previous

year and had been used to cut 50 acres only. Bhowever found that the machine, when it was

delivered, was old and had even been repaired.

Can B repudiate the contract?


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Re.S 15: Varley vs Whipp

3. Condition as to quality and fitnessSec.16(2)

Example: B purchased a hot water bottle from a

retail from a retail chemist. The bottle could

stand hot water but not boiling water. When it

was filled by A with boiling water, it burst and

injured his wife. A sues for damages. Decide.

Ref. Priest vs. Last.

4. Condition as merchantability Sec. 16(2)

Example: a purchases some chocolates from ashop. One of the chocolates contains a poisonous

matter and as a result As wife who has eaten it

falls seriously il. What remedy is available to A

against the shopkeeper?

5. Condition implied by custom Sec. 16 (3)

Where an implied warranty or condition as to

quality or fitness for a particular purpose is

gathered by the usage of trade annexed to the


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contractof sale such usage of trade must b taken

into consideration while deciding the validity of

such implied condition under S. 16(2)

Its origin and use are to promote high standards,

in business and to discourage sharp dealings. It

rests upon the principle that honesty is the best

policy and it contemplate3s business transactions

in which both parties may profit.

6. Sale by sample Sec.17

Example: worsted cotton clothe of quality equal to

sample was sold to tailors who could not stitch itinto coats owing to some defect in its texture. The

buyers had examined the cloth before effecting the

purchase. Are they entitled to damages?

S. 17: Drummond vs Van Ingen.

7. Condition as to wholesomeness. (pure)


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IMPLIED WARRANTIES:

1 Warranty of quiet possession Sec.14 (b)

2 Warranty of freedom from encumbrances

Sec 14

3 Warranty as to quality Sec. 16 (4)

4 Warranty to disclose dangerous nature of

goods

CAVEAT EMPTOR:

This means let the buyer beware i.e. in a

contract of sale of goods the seller is under no

duty to reveal unflattering truths about the goods

sold. Example. H bought oats from S a sample of

which had been shown to H erroneously thoughtthat the oats were old. The oats were, however,

new. Held, H could not avoid the contract.

SMITH VS HUGHES (1871) LR.


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EXCEPTIONS:

1 Fitness for buyers purpose Sec. 16(1)

2 Sale under a patent or trade name16(1)

3 Merchantable quality Sec.16(2)

4 Usage of trade Sec. 16(3)

5 Consent by fraud

TRANSFER OF PROPERTY:

There are three stages in performance of contract

of sale of goods by a seller.

1. The transfer of property in goods

2. The transfer of possession in goods i.e.


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Delivery

3. The passing of risk.

PASSING OF PROPERTY FROM SELLER TO

BUYER:

1. Risk follows ownership Sec.26

2. Action against third party - in case of

damage

3. Insolvency of seller or the buyer

Suit for price.

SPECIFIC GOODS: Sec. 20 - 22

1. Passing of property at time of contract (S.

20)

Eg. B selects certain books in a book shop. The

price is settled. He arranges to take delivery of the

books the next day through his servant and agreesto pay for the books the next day through his

servant and agrees to pay for the books on the

first of the next month. The books are destroyed

by fire the same evening. The property in the


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books has passed to the buyer and he is bound to

pay the price.

(2) Passing of the property delayed beyond the

date of the contract:

(i) Goods not in a deliverable state.

S. 21.

Eg. There was a contract for a sale of machine,

weighing 30 tons and embedded in a concrete

floor. A part of the machine was destroyed while

being removed .

Ref. Underwood vs. B.C. Cement Syndicate(1922) 1 K.B. 343.

2. Unascertained goods Sec.23 does not pass

to buyer.

Eg. In a sale of 20 hogheads of sugar out of alarger quantity, 4 were filled and taken away by

the buyer. The remaining 16 hogheads were

subsequently filled and the buyer was informed of


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the same. The buyer promised to take them away,

but before he could do so the goods were lost.

Held , the property had passed to the buyer at thetime of the loss.

Rhode vs. Thwaits (1827) 6 B & C 388.

3. Goods sent on approval - when he signifies.

S.24.

Eg. K delivered some jewellery to W on sale

or return. W pledged it with A.

Held, the pledge was an act by W adoptingthe transaction. As such the property in the

jewellery had passed to w so that k could not

recover it from A.

Kirkham vs Attenborough (1897) 1 Q.B. 210.

4. Reservation of right of disposal. S. 25.

Eg. B placed an order with S requesting him to

send the goods by sea. S took a bill of lading in the

name of B and sent it to his own agent. The goods


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were destroyed in the course of voyage. S had to

suffer the loss as the ownership had not passed to

B.

RIGHTS OF AN UNPAID SELLER:

A seller is deemed to be unpaid seller when :

(1) The whole of price has not been paid or

tendered

(2) A bill of exchange or other negotiable

instrument has been received as a

conditional payment and the condition has

not been fulfilled Sec.45 (a)

RIGHT OF UNPAID SELLER Sec. 46 (1) -

AGAINST GOODS:

1 Right of lien - right to retain possession

Rules regarding lien;

1. Should have actual possession

2. Lien depends on actual possession and

not on title


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3. Seller must not exclude the right of lien

4. Lien can be excercised only for price5. Unpaid seller does not lose his lien by

reason only that he has obtained a

decree for price of goods.

2. Right of stoppage in transit - Sec. 50 52

3. Right of resale Sec. 46 (1) & 54

WHERE THE PROPERTY IN THE GOODS

HAS NOT PASSED:

Right of withholding delivery - Sec. 46 (2)

1. With holding delivery

2. Stoppage in transit

AGAINST THE BUYER PERSONALLY

1 Suit for price Sec. 55


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2 Suit for damages Sec. 56

3 Repudiation of contract Sec 60

4 Suit for interest Sec.61(2)

REMEDIES FOR BREACH OF CONTRACT OF

SALE:

1. Sellers suit

Suit for price S. 55

Suit for damages S.56

Suit for damages or repudiation ofcontract S. 60

Suit for interest S.61.

RIGHT OF THE BUYER:

1.Right to have delivery as per contract S. 31,

322. Right to reject the goods S. 37

3. Right to repudiate s. 38(1)

4. Right to notice of insurance S. 39 (3)

5. Right to examine S.41


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6. Rights against the seller for breach of

contract

Suit for damages for non delivery S. 57

Suit for price

Suit for specific performance S.58

Suit for breach of warranty S. 59

Repudiation of contract before due date S, 60

Suit for interest. S.61 (2) (b)

DUTIES OF THE BUYER

1. DUTY TO ACCEPT THE GOODS AND

PAY FOR THEM IN EXCHANGE FOR

POSSESSION s 31 and 32

2. Duty to apply for delivery Se. 35

3. Duty to demand delivery at a reasonable hourSe. 36

4. Duty to accept instalment delivery and pay

for it S. 38.


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5. Duty to take risk of deterioration in the

course of transit S. 40

6. Duty to intimate the seller where he rejects

the goods S. 437. Duty to take delivery S.44

8. Duty to pay price S. 55

9. Duty to pay damages for non-acceptance S.

56.

AUCTION SALE: S. 64

1. Goods put up for sale in lots

2. Completion of sale

3. Right of seller to bid

4. Sale not notified subject to right to bid.

5. Reserve price

6. Use of pretended bidding

DISTINCTION BETWEEN SALE AND HIRE

PURCHASE:

Sale Hire

Ownership is

transferred from seller

to buyer as soon ascontract entered

Ownership is

transferred from seller

to hire purchased onlywhen certain agreed

number of installments

is paid

The position of buyer is The position of hire


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that of owner purchaser is that of

bailee

The buyer cannot

terminate contract andas such bound to pay

price

Hire purchaser has an

option to terminate thecontract as any time and

cannot be forced to pay

further installments

The amount payable by

buyer is reduced

towards price of goods

Till option to purchase

the goods is not

exercised, the payment

of hire purchaser will

not be regarded as

payment towards price.

DISTINCTION BETWEEN CONTRACT OF

SALE AND CONTRCT OF WORK:

Halsuburys Laws of England (4th Edition 41,

para 603):

A contract of sale of goods must bedistinguished from a contract for work and

labor.

The distinction is often a fine one.


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A contract of sale is a contract the main object

of which is the transfer of the property in, and

the delivery of the possession of, a chattel as

such to the buyer.Where the main object of work undertaken by

the payee of the price is not the transfer of a

chattel as such, the contract is one for the work

and labor.

The test is whether or not the work and labour

bestowed end in anything that can properly

become the subject of sale.

Neither the ownership of the materials, nor the

value of the skill and labor as compared with

the value of the materials, is conclusive,

although such matters may be taken into

consideration in determining in the

circumstances of a particular case whether thecontract is in substance one for work and labor

or one for the sale of a chattel.

Example: (a) A dentist agreed to supply a set of

artificial teeth to a patient. The material was

wholly found by the dentist.Held. The contract was for the sale of goods .

Lee vs. Griffin 1861


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(b) a contract involved the repair of a car and

the supply of part for that purpose.

Held, it was contract for work and materials

.Myers and co. vs. Brent ross ervices Co. 1934.

G commissioned R an artist, to paint a

portrait of A for 250 guineas. R supplied the

canvas and other materials.

Held, the contract was one for work and

materials and not for sale of goods because the

substance of the contract was the artists skill

and it was only ancillary to that there would

pass to the customer some materials, viz. the

paint and canvas. Robinson vs. Graves 1935

SALE AND BAILMENT:

In a sale, the property in goods is transferred from the

seller to the buyer.

In a bailment, there is only transfer of possessionfrom the bailor to the bailee.

This may be for any one of the objects, namely safe

custody , use, carriage from one place to another,etc.


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In a sale the buyer can deal with the goods inany way he likes.

The bailee can deal with the goods according to the

directions of the bailor.

EFFECT OF DESTRUCTION OF GOODS:

1. Goods perishing before making contract (S.7):Eg. A agrees to sell a horse to B who tells A that

he needs the horse for riding to Mumbai

immediatel. The horse is ill at the time of the

agreement. Both A and B are ignorant of this

fact. The agreement is void.

2. Goods perishing after the agreement to sell butbefore the sale is effected (S.8).

Eg. A agrees to sell to B 10 bales of Egyptian

cotton out of 100 bales lying in his godown.

The godown had been destroyed by fire at the

time of the contract.

Both A and B are unaware of this fact.

The contract is not void as the sale here is not of

specific goods, but of certain quantity of

unascertained goods.


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A must supply 10 bales of cotton or pay damages

for the breach.

DOCUMENTS OF TITLE TO GOODS:

A document of title to goods is one which

enables its possessor to deal with the goods

described it it as if he were the owner.

It is used in the ordinary course of business as

proof of the possessionor control of goods.

It authorizes either by endorsement or by

delivery, it spossessor to transfer or receive

goods represented by it ( 2 (4))

SOME INSTANCES OF DOCUMENTS OFTITLE TO GOODS ARE GIVEN BELOW:

1. Bill of lading; it is document which

acknowledges receipt of goods on board a ship


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and is signed by the captain of the ship or his

duly authorized representative.

2. Dock warrant. It is adocument issued by a

dock owner, giving details of the goods andcertifying that the goods are held to the order

of the person named in it or endorsee. It

authorizes the person holding it to receive

possession of the goods.

3. Warehouse keepers or wharfingerscertificate.

It is a document issued by a warehouse keeper

or a wharfinger stating that the goods specified

in the document are in his warehouse or in his

wharf.

4. Railway receipt. It is a document issued by a

railway company acknowledging receipt of

goods. It is to be presented by the holder or

consignee at the destination to take delivery ofthe goods.

5. Delivery order. It is a document containing an

order b the owner of the goods to the holder of

the goods on his behalf asking him to delivery

the goods to the person named in the

document.

THE PRICE [Sec. 9 and 10]

Ascertained price:


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Price in contract of sale may be (a) fixed by

the contract itself

(b) left to be fixed in an agreed manner

determined by the course of dealingbetween the parties (s, 9(1).

Agreement to sell at valuation. The parties

may agree to sell and buy goods on the terms

that price is to be fixed by the valuation of a

third party.

if such third party cannot or does not make such

valuation the agreement becomes void. But if the

goods or any part thereof have been delivered to and

appropriated by the buyer he shall pay a reasonable

price therefor (S. 10(1).

CONTRACTS INVOLVING SEA ROUTES:

F.A.S.Contract:

FAS stands for free alongside ship. The property in

goods sold under an FAS contract passes from the

seller to the buyer when the goods are delivered

alongside the ship named by the buyer under a

contract of carriage.

FOB CONTRACTS:

FOB stands for free on board


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If A of Delhi agrees to sell 100 tons of sugar FOB

Mumbai to B of Manchester, this would mean that A

must put the goods on board a ship at Mumbai at his

own expense under a contract of carriage bu sea to bemade by or on behalf of the buyer for the purpose of

transmission to the buyer.

C.I.F. CONTRACTS.

CIF stands for cost, insurance and freight

If A of Delhi agrees to sell 100 bags of rice at Rs..

2450 per bags CIF Manchester, the sum of Rs.

2,45,000 includes (1) the price of goods (2) the cost

insurance and (3) the freight up to Manchester.

A CIF contract is performed by the delivery of

edocuments representing the goods to the buyer

through a bank.The documentsare usually delivered by the bank

against payment of the price or against acceptance of

a draft(bill of exchange).

The seller contibues to be the owner of goods until

the buyer pays for the goods and gets the documents.

If in the meantime goods are lost at sea the buyer or

the seller whoever is the owner at the time of the losscan recover the amount from the insrer.

If on receiving the goods thefuyer finds that they are

not according to the contract, he may reject them and

recover the price paid by him.


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CIF contracr - Is it a contract for the sale of

documents?

In Arnhold Karberg and company Vs. Elythe (1916),

Scrutton J, observed, A CIF sale is not a sale of

goods but a sale of documents relating to goods.

This view is however not correct.

A CIF contract may better be described as a contract

for the sale of goods to be performed by the delivery

of documents,or a contract for the sale of goods

through documents.

EX-SHIP CONTRACTS. (named ship and named

port of delivery)

These are contract under which the seller causes the

delivery of the goods to be made to the buyer from a

ship which has arrived at the port of destination at his

(sellers expense.

In such contracts the property in the goods does not

pass to the buyer until the goods are actuallydelivered to him.

sales of good act1930

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