Sbaa1206 Business Law Unit 3 Notes

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SCHOOL OF BUSINESS ADMINISTRATION

UNIT – III– BUSINESS LAW - SBAA1206


UNIT3 SALE OF GOODS ACT, 1930

Contract of sale, meaning and difference between sale and agreement to sell- Conditions and
warranties - Transfer of ownership in goods including sale by a non-owner - Performance of
contract of sale - Unpaid seller - meaning, rights of an unpaid seller against the goods and
the buyer.

MEANING OF 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 the buyer for a price. There may be a contract of sale between one
part-owner and another.
The term contract of sale is a generic term and includes both a sale and agreement to sell.
SALE:-
A contract of sale, means the property in the goods is transferred from the seller to the
buyers the contract is called a Sale.
AGREEMENT TO SELL:-
Agreement to sell refers to 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 an
agreement to sell.
ESSENTIALS OF A CONTRACT OF SALE:-
1. Two parties: - There must be two distinct parties i.e., a buyer, a seller, to effect a
contract of sales and they must be competent tocontract.
2. Goods: - There must be some goods the property in which is or is to be transferred
from the seller to the buyers. The goods which form the subject matter of the
contract of sale must be movable. Transfer of immovable property is not regulated
by the sale of goodsAct.
3. Price: - The consideration for the contract of sale, called price, must be money.
When goods are exchanged for goods, it is not a sale butbarter.
4. Transfer of general property: - There must be a transfer of general property as
distinguished from special property in goods from the seller tobuyer. Ex. If A owns
certain goods, he has general property in the goods. If he pledges them with B, B
has special property in the goods.
5. Essential elements of a valid contract: - All the elements of a valid contract must
be present in the contract of sale.
CONTRACT OF SALE HOW MADE:-
No particular form is necessary to constitute a contract of sale. It is, like any other
contract, made by the ordinary method of offer by one party and its acceptance by the other
party.It may be made in writing or by word of mouth or by both.
SALE AND AGREEMENT TO SELL – DISTINCTION:-
1. Transfer ofproperty:-
a. In a sale, the property in the goods passes from the seller to the buyer
immediately so that seller is no more the owner of the goodssold.
b. In an agreement to sell, the transfer of property in the goods is to take place
at a future time or subject to certain conditions being fulfilled so that the
seller continuous to beowner.
2. Risk of Loss:-
a. In a sale, if the goods are being destroyed, the loss falls on thebuyer.
b. In an agreement to sell, if the goods are destroyed, the loss falls on theseller.
3. Nature ofContract:
a. A sale is an executed contract
b. Whereas an agreement to sell is an executorycontract
4. Consequences of breach:-
a. In a sale, if there is a breach of contract by the buyer, the seller can sue for
price even though the goods are still in his possession.
b. In an agreement to sell, the seller can sue only for damages and not for the
price even though the goods are in the possession of the buyer.

5. Right toresell:-
a. In a sale, the seller can’t resell thegoods (except certain cases, ex. unpaid
seller).
b. In an agreement to sell, without prior notice of the resell, he is not bound to do
so.
6. Insolvency of Buyer:-
a. In a sale, if the buyer becomes insolvent before he pays for the goods, must
return them to the official Receiver orAssignee.
b. In an agreement to sell, if the buyer becomes insolvent and has not yet paid
the price, the seller is not bound to part with the goods until he is paidfor.
7. Nature ofRights:-
a. The buyer acquires a right against the wholework
b. In agreement to sell, the sellersecures right against a particularindividual
8. Insolvency of seller:-
a. In sale, if the seller becomes insolvent, the buyer, being the owner, is entitled
to recover the goods from Official Receiver or Assignee.
b. In agreement to sell, if the seller becomes insolvent, the buyer, who has paid
the price, he can only claim a rateable interest and not the goods because
property in them has not yet passed to him.

SUBJECT-MATTER OF SALE
‘Goods’ form the subject of a contract of sale. They mean every kind of movable
property other than actionable claims and money, and include stock and shares, growing
crops, grass and things attached to or forming part of the land which are agreed to be served
before sale or under the contract of sale.
CLASSIFICATION OFGOODS
I. Existing goods: -Existing goods are owned and possessed by the seller at the
time of sale. These goods may be specific, ascertained orunascertained:
a) Specific goods which are identified and agreed upon at the time a contract of
sale is made.
b) Ascertained goods which are ascertained subsequent to the formation of a
contract of sale.
c) Unascertained or generic goods which are not identified and agreed upon at
the time of the contract of sale. They are defined only by description and
may from part of a lot.
II. Future goods:-Future goods is which the seller does not posses at the time of
contract and which will be acquired manufactured or produced by him at some
futuredate.
III. Contingent goods: - Contingent goods refer to the acquisition of which by the
seller depends upon a contingency which may or may nothappen.

PRICE- The price is a contract of sale means the money consideration for sale of goods
1. It may be fixed by the contract itselfor
2. It may be left to be fixed in an agreedmanner
3. It may be determined by the course of dealing between theparties

CONDITIONS AND WARRANTIES


CONDITIONS
Sec.12 (2) of the Sale of Goods Act, 1930 defined as, “A condition is a stipulation
essential to the main purpose of the contract, the breach of which gives rise to a right to
treat the contract as repudiated”.
Characteristics of Conditions
1. A condition is a stipulation or term regarding goods forming part of the contract of
sale and it is not a mere expression of opinion or commendatory statement (i.e.,
statement ofpraise).
2. A condition is a stipulation in a contract of sale essential to the main purpose of the
contract. It goes to the very root of the contract and forms the very foundation ofit.
3. The breach of a condition gives the aggrieved party the right to treat the contract as
repudiated, and also entitles him to claim damages.
4. If a condition in a contract of sale is broken, no doubt, the aggrieved party can treat
the contract as repudiated and reject the goods. But he has also an alternative option.
That is, he can treat the breach of condition as a breach of warranty and can claim
only damages without rejecting thegoods.
WARRANTIES
Sec.12 (13), of the Sale of Goods Act, 1930 defined as, “A warranty is a stipulation
which is collateral to main purpose of the contract, the breach of which gives rise to only
claim for damages but not to a right to reject the goods and treat the contract as
repudiated”.
Characteristics of Warranty
1. A warranty is a stipulation or term regarding goods forming part of the contract of
sale, and is not a mere expression of opinion or statement of commendation orpraise.
2. A warranty is a stipulation or term, which is not essential to the main purpose of the
contract and is only collateral (i.e., incidental, subsidiary or minor) to the main
purpose of the contract. In short, it is only of secondaryimportance.
3. The breach of a warranty gives the aggrieved party only the right to sue for damages,
and not the right to repudiate the contract. It may be noted that the measure of
damages for breach of warranty is the estimated loss directly or naturally resulting in
the ordinary course of events from thebreach.
EXPRESS AND IMPLIED CONDITIONS AND WARRANTIES
Express conditions and warranties are those which are agreed upon between the parties at
the time of the contract.
IMPLIED CONDITIONS
• Conditions as totitle – In every contract of sale, unless the circumstances of the
contract are such as to show a different intention, there is an implied condition on the
part of the seller, that :
a. In case of a sale, he has a right to sell the goods, and
b. In case of an agreement to sell, he will have a right to sell the goods at the time
when the property is to pass.
• Condition as to description– the goods shall correspond with the description. The
term ' sale by description' includes the following situation:
a. Where the buyer has not seen the goods and buys them relying on the description
given by the seller.
b. Where the buyer has seen the goods but he relies not on what he has seen but what
was stated to him and the deviation of the goods from the description is not apparent.
c. Packing of goods may sometimes be a part of the description. Where the goods do
not conform to be method of packing described (by the buyer or the seller) in the
contract, the buyer can reject the goods.
• Conditions in a Sale bysample – A contract of sale is a contract for sale by sample
where there is a term in the contract, express or implied to that effect. Usually, a sale
by sample is implied when a sample is shown and the parties intend that the goods
should be of the kind and quality as the sample is.
• Conditions in a sale by Sample as well as by Description - A vast majority of cases
where samples are shown, are sales by sample as well as by description. In a contract
for sale by sample as well as by description, the goods supplied must correspond both
with the sample as well as with the description.
• Condition as to quality orfitness– Where the buyer, expressly or by implication,
makes known the seller the particular purpose for which goods are required, so as to
show that the buyer relies on the seller's skill or judgment and the goods are of a
description which it is in the course of the seller's business to supply (whether or not as
the manufacturer of producer), there is an implied condition that the goods shall be
reasonably fit for such purpose. In other words, this condition of fitness shall apply, if:
a. The buyer makes known to the seller the particular purpose for which the goods
are required,
b. The buyer relies on the seller's skill or judgment,
c. The goods are of a description which he sellers ordinarily supplies in the course of
his business, and
d. The goods supplied are not reasonably fit for the buyer's purpose.
• Condition as tomerchantability- Where the goods are bought by description from a
seller, who deals in goods of that description (whether or not as the manufacturer or
producer) there is an implied condition that the goods shall be of merchantable quality.
Merchantable quality ordinarily means that the goods should be such as would be
commercially saleable under the description by which they are known in the market at
their full value.
• Condition implied bycustom– An implied warranty or condition as to quality or
fitness for a particular purpose may be annexed by the usage of trade. In certain sale
contracts, the purpose for which the goods are purchased may be implied from the
conduct of the parties or from the nature or description of the goods. In such cases, the
parties enter into the contract with reference to those known usage. For instance, if a
person buys a perambulator or a medicine the purpose for which it is purchased is
implied from the thing itself; the buyer need not disclose the purpose to the seller.
• Condition as to wholesomeness - In case of sale of eatable provisions and foodstuff,
there is another implied condition that the goods shall be wholesome. Thus, the
provisions or foodstuff must not only correspond to their description, but must also be
merchantable and wholesome. By 'wholesomeness' it means that goods must be for
human consumption.

IMPLIED WARRANTIES
A condition becomes a warranty when --
a) the buyer waives the conditions or opts to treat the breach of the condition as a breach of
warranty; or
b) The buyer accepts the goods or a part thereof, or is not in a position to reject the goods.
i. Implied Warranty of Quiet Possession -- In every contract of sale, unless there is a
contrary intention, there is implied warranties that the buyer's shall have and enjoy quiet
possession of the goods. If the buyer's right to possession and enjoyment of the goods is
in any way disturbed as consequences of the seller's defective title, the buyer may sue the
seller for damages for breach of this warranty.
ii. Implied Warranty of Freedom from Encumbrances -- The buyer is entitled to a
further warranty that the goods shall be free from any charge or encumbrance in favor of
any third party not declared or known to buyer before or at the time when the contract is
made. If the buyer is required to discharge the amount of the encumbrance it shall be a
breach of this warranty and the buyer shall be entitled to damages for the same.
iii. Warranty as to quality or fitness by usage oftrade – An implied warranty as to quality
or fitness for a particular purpose may be annexed by the usage of trade.
iv. Warranty to disclosure dangerous nature ofgoods– Where a person sells goods,
knowing that the goods are inherently dangerous or they are likely to be dangerous to the
buyer and that the buyer is ignorant of the danger, he must warn the buyer of the probable
danger, otherwise he will be liable in damages.
DIFFERENCE BETWEEN CONDITION AND WARRANTY
CONDITION WARRANTY

A condition is of primary importance. A condition is of secondary importance.

Breach of condition leads to termination of the In case of a breach of warranty, the


contract. injured party is liable to be compensated.

The injured party can refuse to accept the goods as The Injured party can only claim damages
well as claim damages in case of breach of condition. in case of breach of warranty.

The injured party can refuse to accept goods not The Injured party cannot refuse to accept
fulfilling the condition of the contract. the goods not fulfilling the warranty.

A condition can be treated as a warranty on the wish A warranty cannot be treated as a


of the buyer. condition.

Defined in Section 12(2) of the Sale of Goods Act, Defined in Section 12(3) of the Sale of
1930. Goods Act, 1930.

CAVEAT EMPTOR
It is originated from the Latin Word. It means “let the buyer beware”, i.e., a contract
of sale of goods, the seller is under no duty to reveal unflattering truths about the goods
sold. Therefore, when a person buys some goods, he must examine themthoroughly.
Exceptions
• Fitness for buyer’spurpose- When the buyer informs the seller of his purpose of
buying the goods, it is implied that he is relying on the seller’s judgment. It is the duty
of the seller then to ensure the goods match their desired usage. Ex. A goes to B to buy
a bicycle. He informs B he wants to use the cycle for mountain trekking. If B sells him
an ordinary bicycle that is incapable of fulfilling A’s purpose the seller will be
responsible.
• Sale under a brand or tradename- When the buyer buys a product under a trade
name or a branded product the seller cannot be held responsible for the usefulness or
quality of the product. So there is no implied condition that the goods will be fit for the
purpose the buyer intended.
• Merchantable quality - the seller who is selling goods by description has a duty of
providing goods of merchantable quality, i.e. capable of passing the market standards.
So if the goods are not of marketable quality then the buyer will not be the one who is
responsible. It will be the seller’s responsibility. However if the buyer has had a
reasonable chance to examine the product, then this exception will not apply.
• Usage oftrade- There is an implied condition or warranty about the quality or the fitness of
goods/products. But if a seller deviated from this then the rules of caveat emptor cease to
apply. Ex.A bought goods from B in an auction of the contents of a ship. But B did not inform
A, the contents were sea damaged, and so the rules of the doctrine will not apply here.
• Consent byfraud- If the seller obtains the consent of the buyer by fraud then caveat emptor
will not apply. Also if the seller conceals any material defects of the goods which are later
discovered on closer examination then again the buyer will not be responsible. In both cases,
the seller will be the guilty party.

TRANSFER OF PROPERTY IN GOODS


There are 3 stages in the performance of a contract of sale of goods by a seller viz.,
1. Transfer of property in the goods
2. Transfer of possession of the goods i.e. delivery
3. the passing of the risk
The property in the goods is said, to be transferred from the seller to the buyer when the latter
acquires the proprietary rights over the goods and the obligations linked thereto. 'Property in
Goods' which means the ownership of goods, is different from ' possession of goods' which
means the physical custody or control of the goods.
The transfer of property in the goods from the seller to the buyer is the essence of a contract of
sale. Therefore, the moment when the property in goods passes from the seller to the buyer is
significant for following reasons:
a. Ownership -- The moment the property in goods passes, the seller ceases to be their
owner and the buyer acquires the ownership. The buyer can exercise the proprietary
rights over the goods. For example, the buyer may sue the seller for non-delivery of the
goods or when the seller has resold the goods, etc.
b. Risk follows ownership -- The general rule is that the risk follows the ownership,
irrespective of whether the delivery has been made or not. If the goods are damaged or
destroyed, the loss shall be borne by the person who was the owner of the goods at the
time of damage or destruction. Thus the risk of loss prima facie is in the person in whom
the property is.
c. Action Against Third parties -- When the goods are in any way damaged or destroyed
by the action of third parties, it is only the owner of the goods who can take action
against them.
d. Suit for Price - The seller can sue the buyer for the price, unless otherwise agreed, only
after the goods have become the property of the buyer.
e. Insolvency of the seller or the buyer - In the event of insolvency of either the seller or
the buyer, the question whether the goods can be taken over by the Official Receiver or
Assignee, will depend on whether the property in goods is with the party who has become
insolvent.
Essentials for Transfer of Property -- The two essentials requirements for transfer of property
in the goods are:
1. Goods must be ascertained:Where there is a contract for the sale of unascertained
goods, no property in the goods is transferred to the buyer unless and until the goods are
ascertained
2. Intention to PASS Property in Goods must be there: In a sale of specific or
ascertained goods, the property in them is transferred to the buyer at the time when the
parties intend it to pass. For the purpose of ascertaining the intention of the parties regard
shall be had to the terms of the contract, the conduct of the parties and the circumstances
of the case.
Unless a different intention appears, the rules contained in sections 20 to 24 are rules for
ascertaining the intention of the parties as to the time at which the property in the goods
is to pass to the buyer are:
I. Specific Goods (Sec 20 to 22)

a) Specific goods in a deliverable state - Where there is an unconditional contract for the
sale of specific goods in a deliverable state, the property in the goods passes to the buyer
when the contract is made, and it is immaterial whether the time of payment of the price
or the time of delivery of the goods, or both, is postponed.

b) Specific goods to be put into a deliverable state - Where there is a contract for the sale
of specific goods and the seller is bound to do something to the goods for the purpose of
puttingthem into a deliverable state, the property does not pass until such thing is done
and the buyer has notice thereof.

c) Specific goods in a deliverable state, when the seller has to do anything thereto in
order to ascertain price - Where there is a contract for the sale of specific goods in a
deliverable state, but the seller is bound to weigh, measure, test or do some other act or
thing with reference to the goods for the purpose of ascertaining the price, the property
does not pass until such act or thing is done and the buyer has notice thereof.
II. Unascertained Goods (Sec 23)
Where there is a contract for the sale of unascertained or future goods by description and
goods of that description and in a deliverable state are unconditionally appropriated to the
contract, either by the seller with the assent of the buyer or by the buyer with the assent
of the seller, the property in the goods thereupon passes to the buyer. Such assent may be
express or implied, and may be given either before or after the appropriation is made.
Delivery to carrier - Where, in pursuance of the contract, the seller delivers the goods to
the buyer or to a carrier or other bailee (whether named by the buyer or not) for the
purpose of transmission to the buyer, and does not reserve the right of disposal, he is
deemed to have unconditionally appropriated the goods to the contract.
III. Goods sent on approval or “on sale or return”
When goods are delivered to the buyer on approval or “on sale or return” orother similar
terms, the property therein passes to the buyer—(a) when he signifies his approval or
acceptance to the seller or does any other act adopting the transaction;(b) if he does not
signify his approval or acceptance to the seller but retains the goods without giving notice
of rejection, then, if a time has been fixed for the return of the goods, on the expiration of
such time, and, if no time has been fixed, on the expiration of a reasonable time.

RESERVATION OF RIGHT OF DISPOSAL.—


Where there is a contract for the sale of specific goods or where goods are subsequently
appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve
the right of disposal of the goods until certain conditions are fulfilled. In such case,
notwithstanding the delivery of the goods to a buyer or to a carrier or other bailee for the purpose
of transmission to the buyer, the property in the goods does not pass to the buyer until the
conditions imposed by the seller are fulfilled as follows:
1. Where goods are shipped or delivered to a railway administration for carriage by railway and
by the bill of lading or railway receipt, as the case may be, the goods are deliverable to the order
of the seller or his agent, the seller is prima faciedeemed to reserve the right of disposal.
2. Where the seller of goods draws on the buyer for the price and transmits to the buyer the bill
of exchange together with the bill of lading or, as the case may be, the railway receipt, to secure
acceptance or payment of the bill of exchange, the buyer isbound to return the bill of lading or
the railway receipt if he does not honour the bill of exchange; and, if he wrongfully retains the
bill of lading or the railway receipt, the property in the goods does not pass to him.

PERFORMANCE OF CONTRACT
Performance of a contract of sale means as regards the seller delivery of the goods to the
buyer, and as regards the buyer, acceptance of the delivery of the goods and payment for them,
in accordance with the terms of the contract of sale.
DELIVERY OF GOODS
Delivery means voluntary transfer of possession of goods from one person to another.
Delivery of goods sold may be made by doing anything which the parties agree shall be
treated as delivery or which has effect of putting the goods in the possession of the buyer or
his agent.
Delivery of goods may be actual, symbolic or constructive.
1. Actual delivery, where the goods are handed over by the seller to the buyer or his duly
authorized agent.
2. Symbolic delivery, where goods are ponderous or bulky and incapable of actual
delivery ex. handing over the key of the house to the buyer
3. Constructive delivery or delivery by attornment, where a third person who is in
possession of the goods of the seller at the time of sale acknowledges to the buyer that
he holds the goods on his behalf.
Rules as to delivery of goods:-
1. Mode ofdelivery: Delivery should have the effect of putting the goods in the
possession of the buyer or his duly authorized agent.
2. Delivery and payment concurrentconditions: Delivery of the goods and payment of
the price must be according to the terms of the contract.
3. Effect of partdelivery: A delivery of part of the goods in progress of the delivery of
the whole, has the same effect, for the purpose of passing the property in such goods,
as a delivery of the whole.
4. Buyer to apply fordelivery: Apart from any express contract, the seller of the goods is
not bound to deliver them until the buyer applies for delivery.
5. Place ofdelivery: Where the place at which delivery of the goods is to take place is
specified in the contract, the goods must be delivered at that place during business
hours on a working day.
6. Time of delivery: Where the seller is bound to send the goods to the buyer, but no
time for sending them is fixed, the seller is bound to send them within a reasonable
time.
7. Goods in possession of a thirdparty: When at the time of sale, the goods are with a
third party, there is no delivery by the seller to the buyer until such third party
acknowledges to the buyer that he holds them on his behalf.
8. Cost ofdelivery: Unless otherwise agreed, all expenses of and incidental to making of
delivery are borne by the seller, but all expenses of and incidental to obtaining of
delivery are borne by the buyer. waive
9. Delivery of wrongquantity:-
a. Delivery of goods less than contractedfor – the buyer may reject the goods. If
he accepts them, he shall pay for them at the contract rate.
b. Delivery of goods in excess of thequantity – the buyer may accept the whole or
reject the whole or accept the quantity he ordered and reject the rest. If he
accepts the whole, he must pay for them at the contract rate.
c. Delivery of goods contracted for mixed (different description) with othergoods-
the buyer may accept the goods which are in accordance with the contract and
reject the rest, or may reject the whole.
10. Installmentdeliveries – Unless otherwise agreed, the seller is not entitled to deliver the
goods by instalments and if he does so, the buyer is not bound to accept the goods.
11. Delivery to carrier orwharfinger- Where, in pursuance of a contract of sale, the
goods are delivered to a carrier for the purpose of transmission to the buyer, or to a
wharfinger for safe custody, is prima facie deemed to be a delivery of the goods to the
buyer.
RIGHTS OF THE BUYER:-
1. Right to have delivery as percontract – the first right of the buyer is to have delivery
of the goods as per contract.
2. Right to reject thegoods– If the seller sends to the buyer a larger or smaller quantity
of goods than he ordered, the buyer may (i) reject the whole, (ii) accept the whole or
(iii) accept the quantity ordered and reject the rest.
3. Right torepudiate– Unless otherwise agreed, the buyer of the goods has a right not to
accept delivery thereof by instalments.
4. Right to notice ofinsurance - Unless otherwise agreed, where goods are sent by the
seller to the buyer by a sea route, the buyer has a right to be informed by the seller so
that he may get the goods insured.
5. Right toexamine – The buyer has a right to examine the goods which he has not
previously examined before he accepts them.
6. Rights against the seller for breach ofcontract:-
a. Suit fordamages - 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
b. Suit forprice – If the buyer has paid the price and the goods are not delivered, he
can recover the amount paid.
c. Suit for specificperformance – The buyer may sue the seller for specific
performance of the contract to sell. The court may, if it thinks fit, order for the
specific performance of the contract.
d. Suit for breach ofwarranty– Where there is a breach of warranty by the seller, or
where the buyer elects or is compelled to treat any breach of condition on the part
of the seller as a breach of warranty, the buyer is not by reason only of such breach
of warranty entitled to reject the goods. But he may (i) set up against the seller the
breach of warranty in diminution or extinction of the price or (ii) sue the seller for
damages for breach of warranty.
e. Suit for contract before duedate– When the seller repudiates the contract before
the date of delivery, the buyer may either treat the contract as subsisting and wait
till the date of delivery, or he may treat the contract as rescinded and sue for
damages for the breach. This rule is known as “rule of anticipatory breach of
contract”
f. Suit forinterest–Where there is a breach of contract on the part of the seller and as
a result the price has to be refunded to the buyer, the buyer has a right to claim
interest on the amount of the price refunded to him from the date on which the
payment was made. The court may award the interest at such rate as it thinks fit.
DUTIES OF BUYER:-
1. Duty to accept the goods and pay for them in exchange forpossession – It is the
duty of the buyer to accept the goods and pay for them, in accordance with the terms of
the contract of sale.
2. Duty to apply fordelivery – Apart from any express contract, it is the duty of the
buyer to apply for delivery.
3. Duty to demand delivery at a reasonablehour– It is the duty of the buyer to demand
delivery at a reasonable hour.
4. Duty not to accept instalment delivery and pay forit– Unless otherwise agreed, the
seller is not entitled to deliver the goods by instalments and if he does so, the buyer is
not bound to accept the goods. If he accepts, then pay for it.
5. Duty to take risk of deterioration in the course oftransit – Where the seller of the
goods agrees to deliver them at his own risk at a place other than where they are sold,
the buyer shall take any risk of deterioration in the goods necessarily incident to the
course of transit.
6. Duty to intimate the seller where he rejects thegoods – Unless otherwise agreed, it is
the duty of the buyer to inform the seller in case he refuses to accept the goods.
7. Duty to takedelivery – It is the duty of the buyer to take delivery of the goods within a
reasonable time after the tender of the delivery. He becomes liable to the seller for any
loss caused by his neglect or refusal to take delivery.
8. Duty to payprice – Where property in the goods has passed to buyer, it is his duty to
pay the price according to the terms of the contract.
9. Duty to pay damage for non-acceptance–Where the buyer wrongfully neglects or
refuses to accept and pay for the goods, he will have to compensate the seller, in a suit
by him, for damages for non-acceptance.

RIGHTS OF AN UNPAID SELLER


A seller of goods is deemed to be an unpaid seller when:-
1. When the whole of the price has not been paid ortendered
2. When a bill of exchange or other negotiable instrument has been received as a
conditional payment and the condition on which it was received has not been
fulfilled by reason of the dishonored of the instrument orotherwise.

AS AGAINST THE GOODS


1. Right of Lien
A lien is a right to retain possession of goods until payment of the price. It is available
to the unpaid sellerof the goods who is in possession of them where:
a. The goods have been sold without any stipulation as tocredit
b. The goods have been sold on credit, but the term of the credit hasexpired
c. The buyer becomesinsolvent
Rules regarding Lien:
• The seller may exercise his right of lien notwithstanding that he is in possession
of the goods asagent or bailee for the buyer.
• Where an unpaid seller has made part delivery of the goods, he may exercise his
right of lien on the remainder, unless such part delivery has been made under such
circumstances as to show agreement to waive the lien.
• The seller may exercise his right of lien even though he has obtained a decree
for the price of the goods.
2. Right of stoppage intransit
The seller may resume possession of the goods, as long as they are in the course of transit
and may retain then until payment or tender of theprice.
The right o of stoppage in transit either by taking actual possession of the goods, or by
giving notice of his claim to the carrier or other bailee in whose possession the goodsare.
3. Right ofre-sale
the unpaid seller can re-sell the goods
i. Where the goods are of a perishablenature
ii. Where he has exercised his right of lien or stoppage in transit and
given notice to the lawyer of his intention to re-sell the goods
iii. Where the seller expressly reserves a right of resale in case the buyer
makesdefault.
4. Right of withholdingdelivery
When 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.

AS AGAINST THE BUYER PERSONALLY:-


1. Suit forprice:-
Where undera contract of sale the property in the good has passed to the buyer and
the buyer wrongfully neglects or refuses to pay for the goods according to the terms
of the contract, the seller may suit him for price of the goods.
2. Damage for non-acceptance: - where the buyer wrongfully neglects or refuses to
pay for the goods, the seller may sue him for damages for non-acceptance.
3. Suit for interest: - The seller can recover interest on price from the date on which
the payment become due, if there is a special agreement to theeffect.
4. Repudiation of contact before due date:- when the buyer in a contract of sale
repudiates the contract before the date of delivery, the seller may either treat the
contract as subsisting and wait till the date of delivery, or he may treat the contract
as rescinded and sue for damages for the breach.

References
1. Goel, P.K., Business Law for Managers, Wiley, 2006.
2. Jyoti Rattan, Sale of Goods Act, Bharat Law House, 4th Edition, 2017.
3. Kapoor, N.D., Elements of Mercantile Law, Sultan Chand & Co. Ltd, 37th Edition, 2015.
4. Kuchhal, M.C., Vivek Kuchhal, Business law, Vikas Publication, 7th Edition, 2018.
5. Tulsian, Business Law, McGraw-Hill Education, 3nd Edition, 2018.

Question Bank

PART – A

Blooms
Sno. Questions CO
Level

1. Define Contract of Sale. CO3 L1

2. “Sale and Barter system are same” – Do you agree. CO3 L5

3. Explain Sale and Agreement to Sell. CO3 L2

4. Determine the subject-matter of a Contract of Sale. CO3 L3

5. Classify the Goods based on its types. CO3 L4

6. Short note on Condition and Warranty. CO3 L3

7. Discuss the exceptions to Caveat Emptor rule. CO3 L4

Illustrate the conditions upon which the seller can stop the goods CO3 L3
8.
in transit.

9. State any four rights of a Buyer. CO3 L2

10. Short note on Unpaid Seller. CO3 L3


PART – B

Blooms
Sno. Questions CO
Level

1. Differentiate Sale and Agreement to Sell. CO3 L4

2. Explain the different types of goods. CO3 L2

Describe the rules as to the passing of property from the seller to CO3 L2
3.
the buyer in a contract of the sale of goods.

4. With a neat diagram, explain the rights of an unpaid seller. CO3 L4

5. Explain in detail the implied Conditions and Warranties. CO3 L2

Define delivery of goods. Describe the rules as to delivery of CO3 L2


6.
goods.

7. Analyse the rights and duties of the Buyer. CO3 L4

8. Differentiate ‘Condition’ and ‘Warranty’. CO3 L4

9. Critically examine the non-applicability of Caveat Emptor. CO3 L4

Evaluate the points in which the rule of caveat emptor does not CO3 L5
10.
apply.

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