Business Law Sale of Goods Act.1930

B.Law Introduction Originally was in sec 76 to 123 of Indian Contract Act, Due to complexities in mercantile transactions, the same sections were formed as an Act, named Sale of Goods Act,1930. Reproduction of English Sale of Goods Act, 1893, and is in line with the same act.

B.Law Scope Applicable to movables other than actionable claims and money and not immovable which are under purview of Transfer of Property Act,1882. Actionable claim is “chose in action” GOODS "goods" means goods as defined in the State of Goods Act, 1930 (3 of 1930).According to the Sale of Goods Act, "goods" means every kind of movable property other than actionable claims and money, and includes stock and shares, growing crops, grass, and this attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.

B.Law Goods Contd.. Goods can be – Existing or Future goods Existing goods classified into Specific Goods (at the time of contract, for eg, a specific model of the Car) Unascertained and generic Goods(Description are not specifically identified for eg. 1 kg of oil from 100 kg oil.) Future Goods Goods don’t exist at the time of making a contract. Mr Mahesh agrees to sell Ramesh a dinning table, which he would manufacture.

B.Law Exclusions Goodwill, copy-right, trademark. Gas, electricity Exchange of Goods (Governed by Transfer of property Act) Essential ingredient for inclusion under this act. Valid consideration and that too in money. The item traded should not necessarily be current money itself.

B.Law Mind Bender Sale of old coins or notes for money is sale of goods or not ???

B.Law Document of title to goods Any document used in ordinary course of business, which entitles the possessor of the document to receive the goods unconditionally is a document of title of goods. In short it is the proof of possession or control. Examples: –Bill of lading. (Acknowledgement by the owner of the ship to deliver at the end of the voyage, subject to conditions) – Railway Receipt

B.Law Property Property means general property in goods and not merely special property as per the Act. General property means ownership rights of the goods. Special property means special rights to the subject.

B.Law Sale and Agreement to sell[Sec4] Sale Transfer of property from seller to buyer. Payment may be immediate or future. Essentials Property Movable goods Price (The consideration or price for goods must be money) Parties (two different persons-Competent enough as Per Indian Contract Act-1873) Form (Proposal and acceptance must be made.)

B.Law Sale and Agreement to sell[Sec4] Agreement to sell Transfer of property is at future date. Agreement to sell becomes sale when the conditions are fulfilled or time lapses and it is accompanied by transfer of property.

B.Law Distinguished Sale Executed contract (one of the parties have performed his part) It creates ‘jus in rem’, right against the whole world. Passing of property is immediate. On breach- seller can sue for the price of goods and has a right to lien Agreement to sell Executory contract (No party has performed their promises) It creates ‘jus in personam’ that is right against only person. Its not. On Breach- the seller has a right only to sue for damages for non-performance of the contract.

B.Law Distinguished Sale In case of loss, it will be borne by the buyer. Agreement to sell It will be borne by the seller.

B.Law Contract of sale and Contract of work and labour Case G engaged artist R, to paint a portrait for 250 guineas and R supplied the canvas and other materials, it was held that, this contract is of work and labour and hence it is not for sale of goods.

B.Law Formalities of the contract Offer and acceptance Delivery (immediate-partly-future) Consideration (immediate-partly-future) Goods (Existing or future) Contract (all essential elements of an ordinary contract)

B.Law Hire-purchase Agreement Its combination of agreement to sell and bailment. Bailment- when a party delivers a good to other party, for some purpose and when the purpose is accomplished, the other party has to return or dispose off as per the delivering person’s instruction. The hirer becomes possessor or bailee of the goods and the same time has a right to terminate the agreement at his pleasure. (But if this right is not available to the hirer then it becomes agreement to sell)

B.Law Hire-purchase Agreement Case A sells a PC to B with a stipulation that B shall pay A a fixed sum of Rs. 899 p.m. by way of installment till the full price of PC is paid. Now till B pays the full amount to A by way of installment, he does not become owner. He can discontinue of further installment. In such case A will take back his PC and B can’t ask for the money he has paid, as the money paid is termed as the hire charges.

B.Law Subject matter of Contract (Sec-6) Goods There may be a contract for the sale of goods the acquisition of which by the seller depends upon a contingency which may or may not happen. And If a condition is to be complied with before the seller comes into possession of the goods, then the contract of sale of goods is performed only when the condition happens.

B.Law Conditions and Warranties A contract contains some stipulations or terms. Some stipulations may be essential to the contract and some may be collateral or incidental to the contract. Essentials are termed as CONDITIONS Collateral or incidental are termed as WARRANTIES

B.Law Conditions and Warranties Condition :A condition is a stipulation essential to the main purpose of the contract, breach of which gives rise to a right to treat the contract as repudiated or broken. Warranty : It is a stipulation collateral to the main purpose of the contract, the breach of which give rise to a claim for damage but not to a right to reject the goods and treat the contract as broken.

B.Law Stipulations as to time Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not deemed to be of the essence of a contract of sale. Whether any other stipulations as to time is of the essence of the contract or not depends on the terms of the contract.

B.Law Case

B.Law Condition and warranty a comparision (1) A stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty. (2) A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to right to treat the contract as 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 a right to reject the goods and treat the contract as repudiated. (4) Whether a stipulation in a contract of sale is condition or a warranty depends in each case on the construction of the contract. A stipulation may be a condition.

B.Law When condition to be treated as warranty.- 1.Where a contract of sale is subject to any condition to the fulfilled by the seller, the buyer may waive the condition or elect to treat the breach of the condition as a breach of warranty and not as a ground for relating the contract as repudiated. 2.When the buyer elects to treat breach if condition as a breach of warranty. For eg. He claims damages and doest not elect for repudiation.

B.Law Difference A guarantee, as for a product or service: a new refrigerator still under guaranty. b. A guarantee to perform something in a specified way. 4. A guarantee serving to assure a particular outcome or condition. Warranty A guarantee given to the purchaser by a company stating that a product is reliable and free from known defects and that the seller will, without charge, repair or replace defective parts within a given time limit and under certain conditions

B.Law Two possibilities as far as the destruction of goods are concern Before making of contract (Sec 7) Before sale but after agreement to sell (Sec-8) Goods perishing- EFECTS OF DESTRUCTION OF GOODS

B.Law Before making of contract Contract becomes void if any of the following condition/s is complied. –Goods must be specified goods. –Goods must have perished, as no longer to answer to their description in the contract. –Goods must have perished without the knowledge of seller. –Exceptions If the goods are destroyed but they answer to the description, the contract is valid and the buyer must pay the price. Goods perishing- EFECTS OF DESTRUCTION OF GOODS Cont..

B.Law Goods perishing before sale but after agreement to sell. Risk passes after the possession. Hence if the goods are dispatched by the seller, but if the goods are destroyed before the buyer receives the title, then the agreement is avoided. Essentials to declare the agreement as avoided. Specific goods Goods are so destroyed that they are no longer as per the description. The goods which are perished are not due to any fault on buyer’s or seller’s part. Goods perishing- EFECTS OF DESTRUCTION OF GOODS Cont..

B.Law Implied conditions and Warranties Warranties or conditions may be either express or implied. Section 14 to 17 of the Act deal with implied conditions and warranties. –WARRANTY AS TO TITLE (Sec-14) Three implied conditions on the part of seller regarding title to the goods. 1) in case, of sale, the seller has a right to sell the goods and in case of agreement, the seller will have right to sell the goods at the time when the property is to pass. 2) The buyer shall enjoy quiet possession. 3) Goods shall be free from any charge.

B.Law Case A purchased a car from B and used it four months. B had no title to the car. A was forced to return the car to the true owner, and recover the purchase money paid from B.

B.Law Sale by Descriptions Sec 15 When the contract is for the described goods, the goods shall necessarily correspond to the prescribed description. Breach of this warranty entitles to reject the goods. –Case. Mr. Rahul ordered the Sheets and table cloth to Mr. Mahesh, and described that the Sheets and table cloth should be of 18 th Century. But on receiving the goods Rahul found it to be of 19 th Century, it was held that Rahul was entitled to reject the goods.

B.Law Sale by Sample (Sec.17) The sale is by sample where there is a term in the contract in the contract express or implied to that effect. There are three implied conditions when the goods are supplied according to the sample- 1.That the bulk shall correspond with the sample in quality. 2.That the buyer shall have a reasonable opportunity of comparing the bulk with the sample; 3. That the goods shall be free from any defect. Case: Order of a cloth as per the sample was Turqoish blue, but the goods delivered were Navy Blue. The goods are bound to be rejected.

B.Law Sale by sample as well as description(Sec-15) Close ended that is the goods should be as per sample and as well as per description in case of sale is by description. Case: In Nichol Vs Godts Where Nichol agreed to sell to Godts some oil described as ‘foreign refined rape oil’ warranted only equal to the sample but contained an admixture of rape and mustard oil, it was held that Godts could reject the goods.

B.Law Warranty as to quality or fitness: (Sec.16) As a rule, there is no implied warranty or condition as to quality or fitness for any particular purpose of goods supplied under a contract of sale. There is an implied warranty as to the quality or fitness under the following circumstances only. 1.Where the goods are ordered for specific purpose and the buyer makes it known to the seller expressely or by implication. 2. Where the buyer relies on the seller’s skill or judgement. But if the buyer himself selects the articles, then he cant take the shield of seller’s skill. 3.Where the goods are bought by the description from a seller who deals in goods of that description, it is assumed that the goods should be of merchantable quality. However if the buyer has examined the goods, the seller is not responsible for any defects.

B.Law Contd.. 4) By custom or usage of trade, implied condition of fitness is annexed to a contract of sale. Case: A contract from Fiat Motors limited specifically for traffic on hilly road. Case: A contract from a motor car dealer, the customer has informed that he want it for touring purpose.

B.Law IMP note for Sec-16 A seller may by contract guard himself from any responsibility as to quality, yet if the sale is by description he is bound to supply goods which correspond with the description. Thus, an implied condition as to description is distinct from that relating quality.

B.Law Remedies –Reject the goods. –Accept them and claim the damage if any. Warranty as to quiet possession free from encumbarances.

B.Law Caveat emptor (Buyer Beware) Exceptions: –Custom or usage of trade. –Fraud. (auction of healthy pigs but after auction found to be ill) –For specific purpose. –Merchantable quality. The goods are merchantable if they are fit for any one of the several purposes for which the goods may ordinarily be used. It means commercially saleable. But if the buyer has examined the goods than the merchantable quality cannot shield the buyer.

B.Law Transfer of title As a general rule, no one can sell the goods and give a good title thereof unless he is the owner thereof. Its ‘ NEMO DAT QUOD NON HABET’, which means NO ONE CAN GIVE THAT WHICH HE POSSESSES NOT’. The seller can’t give to the buyer of the goods a better title to the goods than he himself has: Case: Theft case Circumstances under which, the buyer doesn’t get a good title: Person who has bought goods under HPA In an auction sale if the goods transacted are stolen.

B.Law Exceptions to the general rule.(Sale by non-owners) To the general rule that no one can pass or transfer a better title than himself possesses are the following exceptions. Title by estoppel(Sec-27): When the owner of the goods by his words or conduct, causes the buyer to believe that the seller has the authority to sell the goods, and if the buyer buys it, he cannot afterwards set up seller’s want of title or authority to sell. He shall be estopped from denying the authority of the seller to sell. –Case: A is the owner of some goods and behaves in a manner as if C,is the owner of those goods, B purchased the goods from C. Here A is estopped by his conduct from disputing B’s title to the goods. Estoppel: A bar preventing one from making an allegation or a denial that contradicts what one has previously stated as the truth.

B.Law Sale by mercantile Agent. Sec 27 Definition: Mercantile agent is an agent who, in the customary course of the business, has as such agent, authority either to sell goods, or to consign goods foe the purpose of sale, or to buy goods, or to raise money on the security of goods. The owner is binding to the acts of Mercantile Agent in an ordinary course of business and be as valid as if were expressely authorised by the owner of the goods to make the same provided that: The buyer acts in good faith: He has no notice at the time of the contract of sale that the seller has no authority to sale.

B.Law Essential to Sec.27 The agent is in possession of goods or document of title. He has possession of goods as mercantile agent with the consent of owner. The agent sells the goods in ordinary course of business. The buyer acts in good faith. The buyer has no notice at the time of contract of sale that the agent has no authority to sell. Case: Folks vs king(1923): Folks owner, A his agent, condition not to sell less than 575 pounds, but sold to King for 340 pounds, in good faith. Folks sued king to recover the car. It was held that that King acquired a good title to the car. Possession it self does not make him mercantile agent, but possession as a mercantile agent and that too with the consent of the owner makes him mercantile agent. Eg: servant, care taker, or a friend are not mercantile agent.

B.Law Sale by one of the several joint owners. Sec.28 If one of the several joint owners of the goods has the sole possession of them by permission of the co-owners, the property in the goods is transferred to any person who buys them from such joint owner:

B.Law Sale of goods by a person in possession of goods under a voidable contract: Sec.29 As per the Indian Contracts Act, the contract is voidable at the option of party whose consent is caused under the following circumstances: Coercion Undue-influence Fraud Misrepresentation Case: A buys a horse from B under coercion, and sells it to C who is unaware about the consent of A, it is held that C gets a better title, and B can’t recover horse from C even if the agreement with A is subsequently rescinded (void).

B.Law Sale by seller in possession after sale: Sec 30(1). Even after sale, the seller possesses the goods, and sells it to other person, the third party will get the good title. Case : Painting bought by B from A sold to C. Remedy: the original buyer can claim for the damages from the shop keeper.

B.Law Sale by buyer in possession after sale. Sec20 (2) Buyer possesses the goods but does not have the title, and sells it to the third person, it is held that the third person gets the good title. Case: S purchases furniture under agreement that the price is to be paid in two installments………

B.Law Sale by an unpaid seller: sec. 54(3) Where an unpaid seller who has exercised his right of lien or stoppage in transit, re-sells the goods, the buyer acquires a good title to the goods as against the original buyer.

B.Law Sale in market Overt: English law provides an additional exception to the general rule.” Market Overt” is an open, public and legally constituted market.: Where a person buys goods in market overt, according to usage of the market, the buyer acquires a good title to the goods provided: He buys the goods in good faith. Without notice of any defect or want of title on the part of seller. INDIAN LAW THEREFORE RIGHTLY MAKES NO PROVISION FOR SALES AND PURCHASES IN MARKET OVERT For Info

B.Law "Unpaid seller" defined.- (1) The seller of goods is deemed to be an "unpaid seller" within the meaning of this Act- (a) When the whole of the price has not been paid or tendered. (b) When a bill of exchange or other negotiable instrument has been received as conditional payment, and the conditions on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise. (2) In this Chapter, the term "seller" includes any person who is in the position of a seller, as, for instance, an agent of the seller to whom the bill of lading has been endorsed, or a consignor or agent who has himself paid, or is directly responsible for, the price.

B.Law Unpaid seller’s rights.- (1) Subject to the provisions of this Act and of any law for the for the time being in force, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law. (a) a lien on the goods for the period while he is in possession of them, (b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with the possession of them. (c) a right of re-sale as limited by this Act. (2) Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in transit where the property has passed to the buyer.

B.Law Rights of an unpaid seller Property in the Goods Has passed Lien Stoppage In transit Resale Property of goods Not passed Withholding delivery Other Rights

B.Law Seller’s lien.- (1) Subject to the provisions of this Act, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely :- (a) where the goods have been sold without any stipulations as to credit. (b) where the goods have been sold on credit, but the term of credit has expired. (c) where the buyer becomes insolvent..

B.Law Inputs On right of lien Insolvent within the period of credit payment. Title transferred but goods still in possession. Part delivery of the goods, lien applies to the remainder of the goods. –As delivery of part goods does not constitute the delivery of whole goods.

B.Law Termination of lien.- (1) The unpaid seller of goods losses his lien thereon - (a) when he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods. (b) when the buyer or his agent lawfully obtains possession of the goods, (c) by waiver thereof. (2) The unpaid seller of goods, having a lien thereon, not lose his lien by reason only that he has obtained a decree for the price of the goods.

B.Law Right of stoppage in transit.- Subject to the provisions of this Act, when the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transit, that is to say, he may resume possession of the goods as long as they are in the course of transit, and may retain them until payment or tender of the price.

B.Law Duration of transit.- (1) Goods are deemed to be in course of transit from the time when they are delivered to a carrier or other bailee for the purpose of transmission to the buyer, until the buyer or his agent in that behalf takes delivery of them from such carrier or other bailee. (2) If the buyer or his agent in that behalf obtains delivery of the goods before their arrival at the appointed destination, the transit is at an end. (3) If, after the arrival of the goods at the appointed destination, the carrier or (4) If the goods are rejected by the buyer and the carrier or other bailee continues in possession of them, the transit is not deemed to be at an end, even if the seller has refused to receive them back.

B.Law Contd… (5) When goods are delivered to a ship chartered by the buyer, it is a question depending on the circumstances of the particular case, whether they are in the possession of the master as a carrier or as agent of the buyer. (6) Where the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in that behalf, the transit is deemed to be at an end. (7) Where part delivery of the goods has been made to the buyer or his agent in that behalf, the remainder of the goods may be stopped in transit, unless such part delivery has been given in such circumstances as to show an agreement to give up possession of the whole of the goods.

B.Law Contd… (4) where the sale is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person, and any such person, and any sale contravening this rule may be treated as fraudulent by the buyer. (5) the sale may be notified to be subject to a reserved or upset price. (6) if the seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the buyer.

B.Law Distinguish SELLER’S LIEN To Be excersized when buyer does not pay. It is applicable only if the possession of the goods still lies with the unpaid seller. It ends when the Possession of goods is transferred from seller RIGHT OF STOPPAGE IN TRANSIT To be excersized when buyer becomes insolvent. It comes into existence when the possession of goods no longer are with the seller. This right comes into existence when the lien is lost. It ends when the buyer receives the goods

B.Law Resale Once the seller gets the possession back, he can resale the goods under following circumstances. Perishable goods Seller gives notice to the buyer of his intention to re-sell goods and the buyer does not pay the tender price within the reasonable time. (N-A for perishable goods) Where the seller has expressly reserved his right of re-sale in case the buyer makes default

B.Law Case When the seller resales the goods with prior notice to buyer, profits on resale, are they entitled to the buyer ??????????????s

B.Law RIGHT OF WITHHOLDING DELIVERY Where the property in the goods has not passed to the buyer, the seller has a right to withhold delivery of the goods.

B.Law Reservation of right to disposal Under the following instances the seller reserves the right of disposal. Where the seller imposes certain conditions and until the conditions are not fulfilled. Where the goods are shipped, and the goods are deliverable to the order of the seller or his agent. Where the goods are sent by VPP, until actual delivery and payment is made, the goods remain the property of the sender.

B.Law Other Rights Sue the buyer for the price of the goods. The seller may sue the buyer for damages wrongfully neglecting or refusing to accept the goods: Recover interest from the buyer where there is specific agreement to that effect. If there is no specific agreement, the seller may charge interest on the price when it becomes due.

B.Law Mind Bender ??????? A sells an consigned goods to B and sends him a bill of lading. A being still unpaid, B comes insolvent and, while the goods are in transit, assigns the bill of lading for cash to C, who is unaware of B’s insolvency. Can A stop these goods in transit ???????

B.Law Auction sale.- In the case of sale by auction- (1) where goods are put up for sale in lots, each lot is prima facie deemed to be the subject of a separate contract of sale. (2) the sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner, and, until such announcement is made, any bidder may retract his bid. (3) a right to bid may be reserved expressly by or on behalf of the seller and, where such rights is expressly so reserved, but not otherwise, the seller or any one person on his behalf may, subject to the provisions hereinafter contained, bid at the auction,

B.Law Contd… (4) the sale may be notified to be subject to a reserved or upset price. (5) if the seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the buyer. KNOCK OUT AGREEMENT An agreement between a group of persons not to bid against each other. It is valid if it is not harming any third party, but if it harm’s then it is void. The seller may protect himself by a reserve bid.

B.Law