CHAPTER 4-; Sale of Goods CHAPTER CONTENTS Q Formation of Contract of Sale 4) Contract of Sale of Goods QO Sale and Agreement

to Sell
Distinction Q) Sale and Hire-purchase Agreement Q) Sale and Barter or Exchange Q Sale and Bailment LY Sale and Contract for Work and
Materials Subject-matter of Contract of sale Effect of Destruction of Goods 1) Document of Title to Goods The Price (Sec. 9 and 10)
Stipulations as to Time (Sec. 11) Summary Objective Type Questions Test Questions Practical Problems 0 OOooood The sale of goods is the
most common of all commercial contracts. A knowledge of its main principles is of the utmost importance to all classes of the community. The
law relating to it is contained in the Sale of Goods Act, 1930. Prior to this Act, the law of sale of goods was contained in Chapter VII of the
Indian Contract Act, 1872, Contracts for the sale of goods are subject to the general legal principles applicable to all contracts, such as offer
and its acceptance, the capacity of the parties, free and real consent, consideration, and legality of the object. The general provisions of the
Indian Contract Act continue to apply to contracts for the sale of goods in so far as they are not inconsistent with the express provisions of the
Sale of Goods Act (Sec. 3). Thus, for example, if there is a breach of contract of sale. the measure of damages is that prescribed in Secs. 73
and 74 of the Contract Act, A contract of sale, however, has some special features which are no common to all contracts. Thus, what conditions
or warranties are implied in the contract, when does the ownership of -the goods sold pass to the buyer, in what circumstances does a buyer
acquire a good title, what are the special duties of the seller and the buyer in respect of the goods and of the price, what are the rights of a seller
who has not received the price, what are the remedies of the buyer if the goods are not delivered to him; all these are matters with which the
general law of contract is not concerned. rl
SALE OF GOODS 223 The expressions used but not defined in the Sale of Goods Act, 1930 and defined in the Contract Act, 1872 have the
meanings assigned to them in the Contract Act (Sec. 2 (15)]. Sections referred to in Chapters 4-1 to 4-5, unless otherwise indicated, are the
Sections of the Sale of Goods Act, 1930. FORMATION OF CONTRACT OF SALE Contract of sale of goods A contract of sale of goods is a
contract whereby the seller transfers or agrees to transfer the property to goods to the buyer for a price. There may be a contract of sale
between one part-owner and another [Sec. 4 (1)]. A contract of sale may be absolute or conditional [Sec. 4 (2)]. The term ‘contract of sale’ is a
generic term and includes both a sale and an agreement to sell. Sale and agreement to sell. Where under a contract of sale, the property in the
goods is transferred trom the seller to the buyer, the contract is called a ‘sale’, but where the transfer of the property in the goods is to take
place at a future time or subject to some conditions thereafter to be fulfilled, the contract is called an ‘agreement to sell’ (Sec. 4 (3)]. An
agreement to sell becomes a sale when the time elapses or the conditions, subject to which the property in the goods is to be transferred are
fulfilled [Sec. 4 (4)]. Transfer of property in goods for a price is the linchpin of the definition of contract of sale (Union of India v. Central India
Machinery Mfg. Co., A.1.R. (1977) S.C., 1537]. ‘Property’ means the general property in goods, and not merely a special property [Sec. 2 (11)). In
other words, it means ‘the right of ownership’. When we say that the property in goods has passed from the seller to the buyer. it means that the
seller ceases to be, and the buyer becomes, the owner of the goods. Essentials of a contract of sale. The following essential elements are
necessary for a contract of sale : 1. Two parties. There must be two distinct parties. i.e., a buyer and a seller, to effect a contract of sale and
they must be competent to contract. ‘Buyer’ means a person who buys or agrees to buy goods [Sec. 2 (1)]. ‘Seller’ means a person who sells or
agrees to sell goods [Sec. 2 (13)]. These two terms are complimentary. Example. A partnership firm was dissolved and the surplus assets,
including the stock-in- trade, were divided among the partners, in specie (in the same form). Held, it was not a sale as the partners themselves
were the joint owners of the goods and they could not be both sellers and buyers [State of Gujarat v. Raman Lal & Co., A.LR. (1965) Guj, 60). 2.
Goods. There must be some goods the property in which is or is to be transferred from the seller to the buyer. The goods which form the
subject-matter of the contract of sale must be movable. Transfer of immovable property is not requlated by the Sale of Goods Act. Example. A
hotel company provided residence and food making a consolidated charged for both the services. No rebate was allowed if food was not taken
by the customers. Held, supply of food was not sale of goods but simply a service as the transaction was an indivisible contract of multiple
services and did not involve any sale of food [Associated Hotels of India v. Excise & Taxation Officer, A.[.R. (1996) Punj. 449]. It was observed in
this case that the “Position is akin to that of a steamship or airline company which serves food to passengers’. 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 but a barter. There is, however, nothing
to prevent the consideration from being partly in money and partly in goods [Sheldon v. Cox, (1824) 3 B. & C. 420]. in) ved |
224 SPECIAL CONTRACTS Example. A agreed to exchange with B 100 quarters of barley at £ 2 per quarter for 52 bullocks valued at £ 6 per
bullock and pay the difference in cash. Held, the contract was a contract of sale [Aldridge v. Johnson, (1857) 7 E. & B. 385]. 4. Transfer of
general property. There must be a transfer of general property as distinguished from special property in goods from the seller to the buyer. 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 essential 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 (to buy or sell
goods) by one party and its acceptance (to sell or buy goods respectively) by the other party. It may be made in writing or by word of mouth, or
partly in writing and partly by word of mouth. It may also to implied from the conduct of the parties [Sec. 5 (2)] or from the course of dealing
between the parties. The contract of sale may provide for the immediate delivery of the goods, or immediate payment of the price or both, or for
the delivery or payment by instalments or that the delivery or payment or both shall be postponed (Sec. 5 (1)]. Sale and agreement to sell—
distinction 1. Transfer of property. In a sale, the property in the goods passes from the seller to the buyer immediately so that the seller is no
more the owner of the goods sold. 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 to be fulfilled. In this sense, a sale is an executed contract and an agreement to sell is an executory contract. 2. Type of
goods. A sale can only be in case of existing and specific goods only. An agreement to sell is mostly in case of future and contingent goods
although in some cases it may refer to unascertained existing goods. 3. Risk of loss. In a sale, if the goods are destroyed, the loss falls on the
buyer even though the goods are in the possession of the seller. In an agreement to sell, if the goods are destroyed, the loss falls on the seller,
even though the goods are in the possession of the buyer. 4. Consequences of breach. In a sale, if the buyer fails to pay the price of the goods
or if there is a breach of contract by the buyer, the seller can sue for the price even though the goods are still in his possession. In an agreement
to sell if there is a breach of contract by the buyer, the seller can only sue for damages and not for the price even though the goods are in the
possession of the buyer. 5. Right to re-sell. In a sale, the seller cannot re-sell the goods (except in certain cases, as for example, a sale by a
seller in possession after sale under Sec, 30, or a sale by an unpaid seller under Sec, 54). If he does so the subsequent buyer does not acquire
title to the goods. In an agreement to sell, in case of re-sale, the buyer, who takes the goods for consideration and without notice of the prior
agreement, gets a good title. In such a case, the original buyer can only sue the seller for damages. 6. General and particular property. A sale is
a contract plus conveyarice, and creates jus in rem, i.e., gives right to the buyer to enjoy the goods as against the world at large including the
seller. An agreement to sell is merely a contract, pure and simple, and creates jus in personam, i.e., gives a right to the buyer against the seller
to sue for damages.
Sule and oastiwes’ te seit owe. bovw Conki(ack - SALE OF GOODS _ 225 7. Insolvency of buyer. In a sale, if the buyer becomes insolvent before
he pays for the goods, the seller, in the absence of a ligt over fe goods, must return them to the Official Receiver or Assignee. He can only claim
a rateable dividend for the price of the goods. 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 paid for. 8. Insolvency of seller. In a sale, if the seller becomes insolvent, the buyer, being the owner,
is entitled to recover the goods from the Official Receiver or Assignee. In an agreement to sell, if the buyer, who has paid the price, finds that the
seller has become insolvent, he can only claim a rateable dividend and not the goods because property in them has not yet passed to him. Sale
and hire-purchase agreement A hire-purchase agreement is a contract whereby the owner of the goods lets them on hire to another person
called hirer or hire purchaser on payment of rent to be paid in instalments and upon an agreement that when a certain number of such
instalments is paid, the property in the goods will pass to the hirer. The hirer may return the goods at any time without any obligation to pay the
balance rent. A hire-purchase agreement is not a contract of sale but only a bailment and the property in the goods remains in the owner during
the continuance of the bailment. In other words, itis a bailment plus an agreement to sell. : Whether an agreement is a hire-purchase agreement
or a contract of sale, the test would be whether or not any option has been given to the hirer to terminate the contract. If the answer is in the
affirmative, it would be a hire-purchase agreement and if the answer is in the negative it would be a contract of sale. The hirer must not,
however, be compelled to exercise the option. But where a buyer has no right to terminate the agreement and is bound to pay the price, the
agreement is a contract of sale. Example. B hires a piano from H on an agreement that B should pay € 20 a month as rent. The stipulation is
that if he regularly pays the rent for 36 months the piano becomes his property at the end of 36 months. Further it is provided that B can return
the piano at any time and he need not pay any more. This is a hire-purchase agreement proper. If, however, it is agreed that 36 months’ rent
must be paid and that he cannot return the piano, the agreement is a contract of sale and not a hire-purchase agreement [Helby v. Mathews,
(1895) A.C. 471]. Distinction between a sale and a hire-purchase agreement ,pvite. Lis Kn chon in cone Sale Hire-purchase agreement A carye §
$ Ownership is transferred from the seller to the 1. Ownership is transferred from the seller to the : buyer. as soon as the contract is entered
into. hire-purchaser only when a certain agreed number of instalments is paid. The position of the buyer is that of the owner. 2. The position of
the hire-purchaser is that of the bailee. The buyer cannot terminate the contract and 3. The hire-purchaser has an option to terminate as such is
bound to pay the price of the goods. the contract at any stage, and cannot be forced to pay the further instalments. If the payment is made by
the buyer in 4. The instalments paid by the hire-purchaser are instalments, the amount payable by the buyer regarded as hire charges and not as
payment to the seller is reduced, for the payment made towards the price of the goods till option to by the buyer is towards the price of the
goods. purchase the goods is exercised. The hire-purchase agreements are governed by the Hire-Purchase Act, 1972. Uy or\resh
226 SPECIAL CONTRACTS Sale and barter or exchange. Where the property in goods is transferred from the seller to the buyer for a price, it is
called a sale. Where goods are exchanged for goods, the transaction is called a barter and not sale. Where money is exchanged for money, it is
a transaction of exchange and not-of sale. But if the consideration for transfer of property in goods consists partly of goods and partly of
money, the contract is a sale. 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 possession from 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. In a sale, the buyer can deal with the goods in any way he likes. The bailee can deal with the goods according to the
directions of the bailor. Sale and contract for work and materials The Sale of Goods Act applies to a contract of sale and not to a contract for
work and materials. A contract of sale contemplates the delivery of goods whereas a contract for work and material involves exercise of skill
and labour by one party in respect of materials supplied by another, the delivery, of goods being only subsidiary or incidental [State of Gujarat v.
Variety Body Builders, A.I.R. (1976) S.C. 2109]. Examples. (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 v. Griffin, (1861) 3L.J.Q.B. 252]. (b) A contract involved the repair
of a car and the supply of parts for that purpose. Held, it was a contract for work and materials (Myers & Co. v. Brent Cross Services Co., (1934)
1 K. B. 46]. (c) 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 artist's skill and it was only
ancillary to that there would pass to the customer some materials, namely, the paint and canvas [Robinson v. Graves, (1935) 1 K.B. 579]. In
contrast, however, note the following case: (d) F contracted for the sale of a fur coat of a special design and colour to a customer's
requirements. Held, it was a sale of goods, notwithstanding the degree of skilled work and labour involved in its production [Marcel v. Furriers
Tapper, (1953) All E.R. 15). SUBJECT-MATTER OF CONTRACT OF SALE Goods form the subject-matter of a contract of sale. According to Sec. 2
(7), ‘goods’ means every kind of movable property other than actionable claims and money; and includes stocks and shares, growing crops,
grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale. Trade marks,
copyrights, patent rights, goodwil, electricity, water, gas are all goods. Actionable claims and money, are not goods. An actionable claim means
a claim to any debt or any beneficial interest in movable property not in possession (Sec. 3 of the Transfer of Property Act, 1882). It is
something which can only be enforced by action in a Court of law. A debt due from one person to another is an actionable claim and’ cannot be
bought or sold as goods. It can only be assigned. Money here means current money and not old rare coins. 4y +
SALE OF GOODS 227 The definition of the term ‘goods’ also suggests that it includes stocks and shares, growing crops, grass and things
attached to or forming part of the land which are agreed to be severed from the land before sale. Growing crops and grass are included in the
definition of the term goods because they are to be severed from land. Trees which are agreed to be severed before sale or under the contract
of sale are goods [Badri Prasad v. State of M.P., A.I.R (1970) S.C. 706]. Classification of goods. The goods which form the subject of a contract
of sale may be either existing goods, or future goods [Sec. 6 (1)], or contingent goods [Sec. 6 (2)]. 1. Existing goods. These are the goods which
are owned or possessed by the seller at the time of sale. Only existing goods can be the subject of a sale. The existing goods may be— (1)
Specific goods. These are goods which are identified and agreed upon at the time a contract of sale is made [Sec. 2 (14)] as, for example, a
specified watch, dog or horse. Goods are, however, not specific merely because the source of supply is identified, e.g., “500 quintals from 1,000
quintals on board”. (2) Ascertained goods. Though commonly used as similar in meaning to specific goods, these are the goods which become
ascertained subsequent to the formation of a contract of sale. (3) Unascertained or generic goods. These are the 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. Example. A who
wants to buy a television set goes to a showroom where four sets of Janta model of Oscar television are displayed. He sees the performance of
a particular set, which he agrees to buy. The set so agreed to be bought is a specific set. If after having bought one set he marks a particular
set, the set so marked becomes ascertained. Till this is done, all sets are unascertained 2. Future goods. These are the goods which a seller
does not possess at the time of the contract but which will be manufactured or produced or acquired by him after the making of the contract of
sale [Sec, 2 (6)]. A contract of present sale of future goods, though expressed as an actual sale, purports to operate as an agreement to sell the
goods and not a sale (Sec. 6 (3)]. This is because the ownership of a thing cannot be transferred before that thing comes into existence.
Example. A railway administration entered into a contract for sale of coal-ash that might accumulate during the period of contract. Held, the
contract amounted to an agreement to sell [Union of India v. Tara Chand, A.LR. (1976) M.P. 101], 6. Contingent goods. Though a type of future
goods, these are the goods the acquisition of which by the seller depends upon a contingency which may or may not happen |Sec. 6 (2)].
Example. A agrees to sell specific goods in a particular ship to B to be delivered on the arrival of the ship. If the ship arrives but with no such
goods on board, the seller is not liable, for the contract is to deliver the goods should they arrive. 3. Contingent and future goods. The
procurement of contingent goods depends upon a contingency whereas it is not so in case of future goods. On non-acquisition of contingent
goods. the parties are discharged whereas on non-acquisition or non-production of future goods the parties are not discharged. Effect of
destruction of goods 1. Goods perishing before making of contract (Sec. 7). A contact for the sale of specific goods js void if at the time when
the contract was made, the goods have, without the knowledge of the seller, perished. The same would be the case where the goods become
so damaged as no longer
228 : SPECIAL CONTRACTS to answer to their description in the contract. This rule is based on the ground of mutual mistake or impossibility of
performance [Couturier v. Hastie, (1856) 5 H.L.C. 673]. Examples. (a) A agrees to sell a horse to B who tells A that he (B) needs the horse for
riding to Mumbai immediately. The horse is ill at the time of the agreement. Both A and B are ignorant of this fact. The agreement is void. (b) A
cargo of dates was sold. The dates were contaminated with sea water so as to be unsaleable as dates, though they could be used for making
spirits. Held, the contract was void as the dates no longer answered their description in the contract [Asfar & Co. v. Blundell, (1896) 1 Q.B. 123].
The contract is also void in the case of an indivisible lot of specific goods if only a part of the goods has perished at the time when the contract
is made. Example. A sold to B 700 bags of Chinese groundnuts identified by marks and lying ina named warehouse. Unknown to A. 109 bags
had been stolen at the time of the sale. A tendered delivery of 591 bags. Held, the sale was void and B could not be compelled to take the
remainder [Barrow, Lane & Ballard Ltd. v. Philips & Co., (1929) 1 K.B. 574). The same result obtains where the seller has been irretrievably (that
cannot be recovered) deprived of the goods as, for example, when the goods have been stolen or lawfully requisitioned by the Government or
seized by enemy during war. 2. Goods perishing after the agreement to sell but before the sale is effected (Sec. 8). An agreement to sell specific
goods becomes void if subsequently the goods, without any fault on the part of the seller or buyer, perish or become so damaged as no longer
to answer to their description in the agreement before the risk passes to the buyer. ‘Fault’ means wrongful act or default [Sec. 2 5)]. This rule is
based on the ground of impossibility of performance [Howell v. Coupland, (1876) Q.B.D. 258]. Secs. 7 and 8 apply only to specific goods and not
to unascertained goods. If the agreement is to sell a certain quantity of unascertained goods, the perishing of even the whole quantity of such
goods in the possession of the seller will not relieve him of his obligation to deliver the goods. Example. 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 a certain quantity of unascertained goods. A must
supply 10 bales of cotton or pay damages for the breach. Document of title to goods A document of title to goods is one which enables its
possessor to deal with the goods described in it as if he were the owner. It is used in the ordinary course of business as proof of the possession
or control of goods. It authorises, either by endorsement or by delivery, its possessor to transfer or receive goods represented by it [Sec. 2 (4)].
It symbolises the goods and confers a right on the purchaser to receive the goods or to further transfer such right to another person. This may
be done by mere delivery or by proper endorsement and delivery. Conditions to be fulfilled by a document of title: to goods. (1) It must be used
in the ordinary course of business. (2) The undertaking to deliver the goods to the possessor of. the document must be unconditional. (3). The
possessor of the document, by virtue of holding such document, must be entitled to receive the goods unconditionally.
be SALE OF GOODS Transfer of docrments oe Kyle op ” 229 Sale. Some instances of documents of title to goods are given below: 1. Bill of
lading. It is a document which acknowledges receipt of goods on board a ship and is signed by the captain of the ship or his duly authorised
representative. 2. Dock warrant. It is a document issued by a dock owner, giving details of the goods and certifying that the goods are held to
the order of the person named in it or endorsee. It authorises the person holding it to receive possession of the goods. 3. Warehouse-keeper’s
or wharfinger’s certificate. 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 of the goods. 5. Delivery order. It is a document containing an order by
the owner of the goods to the holder of the goods on his behalf, asking him to deliver the goods to the person named in the document. THE
PRICE (Secs. 9 and 10) The ‘price’ in a contract of sale means the money consideration for sale of goods [Sec. 2 (10)]. It forms an essential part
of the contract. It must be expressed in money. It is the consideration for the transfer or agreement to transfer the property in goods from the
seller to the buyer. It is not essential that the price should be fixed at the time of sale. It must, however, be payable, though it may not have been
fixed. Ascertainment of price. Price in a contract of sale may be (a) fixed by the contract itself, or (b) left to be fixed in an agreed manner, or (c)
determined by the course of dealing between the parties (Sec. 9 (1)]. In the absence of this, the buyer must pay to the seller a reasonable price.
What is a reasonable price is a question of fact dependent on the circumstances of each particular case [Sec. 9 (2)]. It is not necessarily the
market price. 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 of any part thereof
have been delivered to, and appropriated by the buyer, he shall pay a reasonable price therefor [Sec. 10 (1)]. If the third party is prevented from
making the valuation by the fault of the seller or buyer, the party not in fault may maintain a suit for damages against the party in fault [Sec. 10
(2)]. Example. A agrees to sell certain goods to B at a price to be fixed by C. If C refuses to value the goods and fix the price, the agreement is
avoided. If, however, C is willing to value the goods, but is prevented from making the valuation by the wrongful act or fault of A or B, the party in
fault is liable in damages to the party not in fault. Earnest. Quite often in a contract of sale the buyer may give some tangible thing as a token of
good faith as a quarantee or security for the due performance of the contract [Howe v. Smith, (1884) 27 Ch. D. 89]. This is known as earnest. If
the contract is duly performed, the earnest is returned or if it is in the form of money it is adjusted against the purchase price. If the contract is
not, or cannot be, performed through the default of the buyer, the buyer forfeits the earnest, unless otherwise agreed. An ‘earnest’ must be
distinguished from part payment. It is forfeited if through the buyer's default, the contract goes off. But if there has been a part payment, and
the contract goes off through the buyer's default, the buyer may recover the part payment ; but he remains liable to the seller for such damages
as the seller has sustained by reason of the breach.
230 SPECIAL CONTRACTS STIPULATIONS AS TO TIME (Sec. 11) Stipulations as to time in a contract of sale may be— 1. Stipulations relating to
time of payment. These are not of the essence of a contract of sale, unless a different intention appears from the contract. 2. Stipulations not
relating to time of payment, e.g., delivery of goods, etc. As regards these stipulations, time may be of the essence of the contract but this
essentially depends on the terms of the contract. In a contract of sale, stipulations other than those relating to the time of payment are
regarded as of the essence of the contract. Thus, if a time is fixed for the delivery of goods, the delivery must be made at the fixed time,
otherwise the other party is entitled to put an end to the contract. Summary Contract of sale. 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 (Sec.4). Sale and agreement to sell. Where under a
contract of sale the roperty in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the
property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled the contract is called an agreement
to sell. An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is
to be transferred. Contract of sale how made. A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such
offer. It may provide for the immediate delivery of the goods or immediate payment of the price or both, or for the delivery or payment by
instalments or that the delivery or payment or both shall be postponed. It may be made in writing or by word of mouth or partly in writing and
partly by word of mouth, or may be implied from the conduct of the parties (Sec.5), 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 severed before sale or under the contract of sale [Sec.
2(7)]. Goods may be: (1) Existing goods, i.e., goods which are owned and possessed by the seller at the time of sale. These goods may be
specific ascertained or unascertained. (2) Future goods, i.e., Coda which the ser does not possess at the time of the contract and which will
acquired, manufactured or produced by him at some future date. (3) Contingent goods, i.e., goods the acquisition of which by the seller
depends upon a contingency which may or may not happen Price. The price in a contract of sale must be expressed in money. It (1) may be
fixed by the contract itself, or (2) may be left to be fixed in an agreed manner, or (3) may be determined from the course of dealing between the
parties. Where the price is not determined in accordance with these provisions, the buyer must pay the seller a reasonable price (Sec. 9).
Objective Type Questions Multiple Choice Questions 1. In a sale, the property in goods— (a) is transferred to the buyer. (b) is yet to be
transferred to the buyer, (c) may be transferred at a future time. (d) is transferred when gocds are delivered to the buyer, (e) is transferred when
the buyer pays the price. 2. In a sale, if the goods are destroyed, the loss falls on — (a) the buyer. (b) the seller. (c) partly on the buyer and partly
on the seller. (d) the seller if price has not been paid. (e) by the buyer. 4. The term ‘property’ as used in the Sale of Goods Act, 1930 means— (a)
possession. (b) ownership. (c) ownership and possession both. (d) the subject-matter of contract of sale. 5. Ifa price is not determined by the
parties in a contract of sale, the buyer is bound to pay— (a) the price demanded by the seller. (b) a reasonable price. (c) the price which the
buyer thinks is reasonable. (d) the price to be determined by a third independent person.
Ne a ae SALE OF GOODS 231 State whether the following statements are True or False 1. The goods which form the subject-matter of a
contract of sale may be movable or immovable. 2. The term ‘property’ as used in the Sale af Goods Act, 1930 means general property in goods
as distinguished from special property. 3. A particular form is necessary to constitute a contract of sale. 4. Under a contract of sale, property in
the goods is transferred from the seller to the buyer. The contract is an agreement to sell. 5. Actionable claims and money are not goods. 6. A
contract for the sale of specific goods is violable if at the time when the contract was made, the goods have, without the knowledge of the
seller, perished. 7. Stipulations relating to time of payment are not of the essence of a contract of sale. 8. In a sale if goods are destroyed while
still in the possession of the seller, the loss falls on the seller. 9. A hire-purchase agreement is a bailment plus an agreement to sell. 10. The
consideration for a contract of sale cannot be partly in money and partly in goods. 11. A rare coin cannot be considered as goods. ' 12. In an
agreement to sell, the ownership in goods in transferred from the seller to the buyer. [Answers: MCQ. 1. a; 2. a; 3. a; 4. b: 5.b. T/F 1. F; 2. T; 3. F;
4. F; 5. T; 6. F; 7. T, 8. F; 9. T; 10, F; 11. F; 12. F Test Questions 1. Explain the nature of a contract of sale of goods and bring out clearly the
distinction between a sale and an agreement to sell. 2. How is a contract of sale made ? State briefly the necessary formalities of such a
contract with illustrations. 3. Define the term ‘goods’. What are the different types of goods ? 4. Distinguish between a sale and a hire-purchase
agreement. | 5. What is the effect of destruction of specific goods in a contract of sale ? 6. State the rules as to the ascertainment of price in a
contract of sale. Are stipulations as to time of payment the essence of a contract of sale ? 7. How is price fixed in a contract of sale ? If a price
is not determined by the parties, what price, if any, is the buyer liable to pay ? 8. Write short notes on: {a) Goods, (b) Document of title to goods,
{c) Earnest, (d) Stipulations as to time. | Practical Problems Attempt the following problems, giving reasons : 1, State the nature of the
transaction in each of the following cases : (i) A dentist makes a set of false teeth for his patient with materials wholly found by the dentist and
the buyer agrees to pay Rs. 2,000 when they are properly fitted into his mouth. (ii) A customer gives his tailor a length of suiting and requires
him to make a suit for him, the lining materials and the buttons to be supplied by the tailor. (iii) A member of a recreation club takes home a
supply of certain provisions from the club store, the payment to be made along with the subscription for the month. (iv) A dealer in bicycles
gives a ‘Hercules’ bicycle to a customer on the terms that Rs. 100 should be paid by him then and there and balance Rs. 375 in five equal
monthly Instalments. [Hint ; (i) The contract is one for the sale of goods (Lee v. Griffin). (ii) The contract is one for work and material and not for
sale of goods. (iii) The contract is one for the sale of goods. (iv) The contract is a sale if the customer cannot terminate the agreement at his
will, and is bound to pay the price. It is a hire-purchase agreement if he can terminate the agreement at his will and is not bound to pay the
balance instalments. |
232 SPECIAL CONTRACTS 2. A agrees to sell to B his two second-hand cars on the terms that the price was to be fixed by C. B takes delivery of
one car immediately. C, however, refuses to fix the price. A asks for the return of the car alread delivered whereas B insists on the delivery of the
second car to him for a reasonable price of both the cars. Decide. (Hint; B shall have to pay for the car already delivered a reasonable price. A
cannot ask for its return. As regards the second car, B cannot insist on its delivery to him since the contract has become void (Sec. 10)]. 3. A
sold 100 quintals of groundnut oil to B. Before it could be delivered to B, the Government of India requisitioned the whole quantity lying with A in
public interest. B wants to sue A for breach of contract. Advise B. . [Hint: The contract becomes void (Sec. 8). It also becomes vaid because of
supervening impossibility (Sec. 56 of the Indian Contract Act).] 4. A hirer, who obtains possession of a refrigerator from its owner under a hire-
purchase agreement, sells the refrigerator to a buyer who buys in good faith and without notice of the right of the owner. Does this buyer get a
good title to the refrigerator ? State reasons for your answer. (Hint: No, as the hire-purchaser has no title to the refrigerator.] 5. A to sell a horse
to B who tells A that he (B) needs the horse for riding to Mumbai immedately. The horse is ill at the time of agreement. What are the rights of A
and B? [Hint: The agreement is void (Sec. 8).] 6. B agrees to buy A's furniture at a price to be fixed by C, a furniture dealer. C refuses to oblige A
and B and fixes no price. On A's refusal to sell, can B legally compel him to sell the furniture for any price ? [Hint: No (Sec. 10).] >
CHAPTER 4-2 Conditions and Warranties CHAPTER CONTENTS 2 Conditions and Warranties Q) Express and Implied Conditions and Warranties
Q Implied Conditions {4 Implied Warranties 4 Caveat Emptor Q Summary {4 Objective Type Questions (4 Test Questions 1 Practical Problems
Before a contract of sale is entered into, a seller frequently makes representations or statements with reference to the goods which influence
the buyer to clinch the bargain. Such representations or statements differ in character and importance. Whether any statement or
representation made by the seller with reference to the goods is a stipulation forming part of the contract or is a mere representation (such as
expression of an opinion) forming no part of the contract, depends on the construction of the contract. If there are no such representations, the
ordinary rule of law — caveat emptor’, i.e., “let the buyer beware” — applies. This means the buyer gets the goods as they come and it is no part
of the seller's duty to point out the defects in the goods to the buyer, CONDITIONS AND WARRANTIES A stipulation in a contract of sale with
reference to goods which are the subject thereof may be a condition or a warranty (Sec. 12 (1)]. Condition (Sec. 12 (2)]. A condition is a
stipulation which is essential to the main purpose of the contract. It goes to the root of the contract. Its non-fulfilment upsets the very basis of
the contract. It is defined by Fletcher Moulton L.J. in Wallis v. Pratt, (1910) 2 K.B. 1012 as an “obligation which goes so directly to the substance
of the contract or, in other words, is so essential to its very nature, that its non-performance may fairly be considered by the other party as a
substantial failure to perform the contract at all.” If there is a breach of a condition, the aggrieved party can treat the contract as repudiated.
Example. By a charter party (a contract by which a ship is hired for the carriage of goods), it was agreed that ship M of 420 tons “now in the port
of Amsterdam” should proceed direct to Newport to load a cargo. In fact at the time of the contract the ship was not in the port of Amsterdam
and when the ship reached Newport, the charterer refused to load. Held, the words “now in the port of Amsterdam” amounted to a condition, the
breach of which entitled the charterer to repudiate the contract [Behn v. Burness, (1863) 3 B. & S. 751].
L CONTRACTS in purpose of ‘ mal ™ Warranty [Sec. 12 (3)]. A warranty is a stipulation which is collateral el ee ile y, Pratt as an contract. It is not
of such vital importance as a condition is. It is defined in “form it goes to the not so vital that @ failure to Pr ey can only claim “obligation which,
though it must be performed, is : rt substance of the contract.” If there is a breach of a warranty, the aggrieved party damages and it has no
right to treat the contract as repudiated . Whether a stipulation in a contract of sale is a condition or @ warranty depé the construction of the
contract as a whole.. The Court is not to be guided by th r by the parties to the contract. A stipulation may be a condition though acne t contract
(Sec. 12 (4)]. nds in each case on e terminology used anty in the Distinction between a condition and a warranty to the main purpose 1.
Difference as to value. A condition is a stipulation which is essential = of the contract. A warranty is a stipulation which is collateral to the main
purpose of the contract. grieved parly can 2. Difference as to breach. If there is a breach of a condition, the ag , 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 tre
warranty. This would happen where the aggrieved party is contented with damages on of a warranty, however, cannot be treated as a breach of
a condition. When condition to be treated as warranty (Sec. 13) sale is subject to any condition to be (b) elect to treat the breach of the cides to
waive the condition, he ated as a breach of a ly. A breach 1. Voluntary waiver of condition. Where a contract of fulfilled by the seller, the buyer
may (a) waive the condition, or condition as a breach of warranty (Sec. 13 (1). If the buyer once de cannot afterwards insist on its fulfilment. 2.
Acceptance of goods by buyer. Where a contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of
any condition to be fulfilled by the seller can only be treated as a breach of warranty, unless there is a term of the contract, express or implied, to
the contrary [Sec. 13 (2). The provisions of Sec. _ warranty is excused by law b EXPRESS AND IMPLIED CONDITIONS AND WARRANTIES In a
contract of sale of goods conditions and warranties may be express or implied. E conditions and warranties are those which are expressly
provided in the contract. Im lied —e and warranties (contained in Secs. 14 to 17) are those which the law implies into Sheae seem the parties
stipulate to the contrary. Sec. 16 (4) further provides that an express ntract unless condition does not negative an implied warranty or condition
unless the express Se or Y or condition is inconsistent with the implied warranty or condition. itle (Sec _ 4 (a)). In a contract of sale unless the ir
n [ l , cl cumsta ces o how a different intention, there is an implied iti ; plied condition on the Part of the 13 do not affect the cases where the
fulfilment of any condition, or y reason of impossibility or otherwise [Sec. 13 (3)]. ; Impli 1. Condition as t contract are such as to S seller that—
CONDITIONS AND WARRANTIES 235 (a) in the case of a sale, he has a right to sell the goods, and (b) in the case of an agreement to sell, he will
have a right to sell the goods at the time when the property is to pass. Example. R bought a car from D and used it for four months. D had no
title to the car and consequently R had to hand it over to the true owner. Held, R could recover the price paid [Rowland v. Divall, (1923) 2 K.B.
500]. If the goods delivered can only be sold by infringing a trade mark, the seller has broken the condition that he has a right to sell the goods.
The expression “right to sell” is wider than the “right to property’. Example. A bought 3,000 tins of condensed milk from the U.S.A. The tins were
labelled in such a way as to infringe the Nestle’s trade mark. As a result, they were detained by the custom authorities. To get the clearance
certificate from the custom authorities, A had to remove the labels and sell the tins at a loss. Held, the seller had broken the condition that he
had the right to sell [Niblett Ltd. v. Confectioners’ Materials Co., (1921) 3 K.B. 387]. Where a seller having no title to the goods at the time of the
sale, subsequently acquires a title, that title feeds the defective titles of both the original buyer and the subsequent buyer [Butterworth v.
Kingsway Motors, (1954) 1 W.L.R. 1286]. 2. Sale by description (Sec. 15). Where there is a contract for the sale of goods by ‘description, there is
an implied condition that the goods shall correspond with the description. The rule of law contained in Sec. 15 is summarised in the following
maxim : “If you contract to sell peas, you cannot oblige a party to take beans. If the description of the article tendered is different in any respect,
it is not the article bargained for and the other party is not bound to take it” [Bowes v. Shand, (1877) App. Cas. 455], Goods are sold by
description when they are described in the contract, as Farm wheat or Dehra Dun Basmati, and the buyer contracts in reliance on that
description. Example. A ship was contracted to be sold as a ‘copper-fastened vessel’ to be taken with all faults, without any allowance for any
defects whatsoever. The ship turned out to be ‘partially copper-fastened’. Held, the buyer was entitled to reject [Shepherd v. Kain, (1821) 5 B. &
Ald. 240]. ‘Sale of goods by description’ may include the following situations : (1) Where the buyer has not seen the goods and relies on their
description given by the seller. Example. W bought a reaping machine which he had never seen and which, V, the seller, described “to have been
new the previous year and used to cut only 50 or 60 acres”. W found the machine to be extremely old. Held, W could return the machine as it did
not correspond with the description [Varley v. Whipp, (1900) Q.B, 513]. (2) 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. Examples. (a) In an auction sale of a set
of napkins and table cloths, these were described as ‘dating from the seventh century’. The buyer bought the set after seeing it. Subsequently
he found the set to be an eighteenth century set. Held, he could reject the set [Nicholson & Venn vy. Smith Marriott. (1947) 177 L.T. 189]. (b) A
car was advertised for sale as a “Herald Convertible, 1961 model”. The buyer saw the car before buying it. After buying the car, he discovered
that while the rear part of the car was part of a 1961 model, the front half was part of an earlier model. Held, he could return the car [Beale v.
Taylor, (1967) 3 All E.R 253].
236 SPECIAL CONTRACTS (3) Packing of goods may sometimes be a part of the description. Example. M sold to L 300 tins of Australian fruits
packed in cases each containing 30 tins. M tendered a substantial portion in cases containing 24 tins. Held, L could reject all the tins as the
goods were not packed according to the description given in the contract as the method in which the fruit was packed was an essential part of
the description [Moore & Co. v. Landauer & Co., (1921) 2 K.B. 519). Sale by description as well as by sample. Sec. 15 further provides that if the
sale is by sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also
correspond with the description. This means the goods must correspond both with the sample and with the description. Examples. (a) In a
contract for the sale of a quantity of seed described as “Common English Sainfoin”, the seed supplied was of a different kind, though the
difference was not discoverable except by sowing. The defect also existed in the sample. Held, the buyer was entitled to recover damages for
the breach of condition [Wallis v. Pratt, (1911) A.C. 394). (b) N agreed to sell to G some oil described as “foreign refined rape oil, warranted only
equal to sample”. The goods tendered were equal to sample, but contained an admixture of hemp oil. Held, G could reject the goods [Nichol v.
Godts, (1854) 10 Ex. 191]. 3. Condition as to quality or fitness (Sec. 16 (1)]. Normally, in a contract of sale there is no implied _condition_as to
quality or fitness of the goods for a particular purpose. The buyer must examine the goods thoroughly before he buys them in order to satisfy
himself that the gcods will be suitable for the purpose for which he is buying them. The following points should, however, be noted in this
regard : (1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which he needs the goods and
depends upon the skill and judgment of the seller whose business it is to supply goods of that description, there is an implied condition that the
goods shall be reasonably fit for that purpose (Sec. 16 (1)]. Example. An order was placed for some lorries to be used “for heavy traffic in a hilly
area’. The lorries supplied were unfit and break down. There is breach of condition as to fitness. (2) If the buyer purchasing an article for a
particular use is suffering from an abnormality and it is not made known to the seller at the time of sale, implied condition of fitness does not
apply. Example. G purchased a tweed coat which caused her dermatitis (inflammation of the skin) due to her unusually sensitive skin. Held, the
seller was not liable, the cloth being fit for any one with a normal skin [Griffiths v. Peter Conway Ltd., (1939) 1 All E.R. 685). (3) If the buyer
purchases an article under its patent or other trade name, the implied condition that articles are fit for a particular purpose shall not apply,
unless the buyer relies on the seller’s skill and judgment and makes known to the seller that he so relies on him. Example. B told M, a motor car
dealer, that he wanted a comfortable car suitable for touring purposes. M recommended a ‘Bugatti car’ and B thereupon bought one. The car
was uncomfortable and unsuitable for touring purposes. Held, B could reject the car and recover the price, and the mere fact that B bought the
car under its trade name did not necessarily exclude the condition of fitness [Baldry v. Marshall, (1925) 1 K.B. 260]. (4) In case the goods can be
used for a number of purposes, the buyer must tell the seller the particular purpose for which he requires the goods. If he does not, he cannot
hold the seller liable if the goods do not suit the particular purpose for which he buys the goods.
ae CONDITIONS AND WARRANTIES 237 Example. A, a woollen merchant who was also a tailor, bought, by a sample, indigo cloth for the
purpose of making liveries. This fact was not brought to the notice of the seller. Held, the seller was not liable when, on account of a latent
defect in the cloth, the cloth was unfit for making liveries, but was fit for other usual purposes (Jones v. Padgett, (1890) 24 Q.B.D. 650). 4.
Condition as to merchantability |Sec. 16 (2)]. Where goods are bought by description from a seller who deals in goods of that description
(whether he is the manufacturer or producer or not), there is an implied condition that the goods are of merchantable quality. This means goods
should be such as are commercially saleable under the description by which they are known in the market at their full value. The term
‘merchantable’ quality is not defined in the Sale of Goods Act. But according to Sec. 62 (1-A) of the English Sale of Goods Act, 1893, “Goods of
any kind are of merchantable quality if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is
reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances.” Example.
A firm of Liverpool merchants contracted to buy from a London merchant a number of bales of Manilla hemp to arrive from Singapore. The
hemp was damaged by sea water in such a way that it would not pass in the market as Manilla hemp. Held, the goods were not of
merchantable quality [Jones v. Just, (1868) L.R. 3 Q.B. 197). If goods are of such a quality and in such a condition that a reasonable person
acting reasonably would accept them after having examined them thoroughly, they are of merchantable quality. Thus a watch that will not keep
time, a pen that will not write, and tobacco that will not smoke, cannot be regarded as merchantable under such names. Examples. (a) A
manufacturer supplied 600 horns under a contract. The horns were found to be dented, scratched and otherwise of faulty manufacture. Held,
they were not of merchantable quality and therefore the seller's suit for price was dismissed [Jackson v. Rutax Motor & Cycle Co., (1910) 2 K.B.
397]. (b) There was a sale by a grocer of tinned salmon which was poisonous. It resulted in the death of the wife of the buyer. Held, the buyer
could recover damages including a sum to compensate him for being compelled to hire services which were rendered by his wife [Jackson v.
Watson & Sons, (1909) 9 K.B. 193 C.A]]. (c) P sold a plastic catapult fo G, a boy of six. While G was using it in the proper manner, the catapult
broke due to the fact that the material used in its manufacture was unsuitable. As a result, the boy was blinded in one eye. Held, P was liable as
the catapult was not of merchantable quality [Codley v. Perry, (1960) / All E.R. 36]. (d) A radio set was sold to a layman. The set was defective. It
did not work in spite of repairs. Held, the buyer could return the set and claim refund [R.S. Thakur v. H.G.E. Corpn., AIR. (1971) Bom. 97], Even if
the defect can be easily cured, e.g., by washing an irritant out of a woollen or nylon garment by making some triffling repair, the buyer can avoid
the contract. If he has examined the goods, there is no implied condition as regards defects which such examination ought to have revealed. If,
while professing to examine the goods, he makes a perfunctory examination with the result that he overlooks a defect which a proper
examination would have revealed, he has nevertheless examined the goods, and there will be no implied condition of merchantable quality,
Example. B went to V's warehouse to buy some glue. The glue was stored in barrels and every facility was given to B for its inspection. B did not
have any of the barrels opened, but
238 SPECIAL CONTRACTS only looked at the outside. He then purchased the glue. Held, as an examination of the inside of the barrels would
have revealed the nature of the glue, and as B had an opportunity of making the examination, there was no condition as to merchantable quality
[Thornett ¢ & Fehr v. Beers & Sons, (1919) 1 K.B. 486]. Packing of the goods is an equally important consideration in judging their
‘merchantability’. Example. M asked for a bottle of Stone’s ginger wine at F's shop, which was licensed for the sale of wines. While M was
drawing the cork, the bottle broke and M was injured. Held, the sale was by description and M was entitled to recover damages as the bottle
was not of merchantable quality [Morelli v. Fitch & Gibbons, (1928) 2 K.B. 636). Where the buyer has examined the goods, there is no implied
condition as regards defects which such examination ought to have revealed [Proviso to Sec. 16 (2)]. 5. Condition implied by custom. An
implied condition as to quality or fitness for a particular purpose may be annexed by the usage of trade [Sec. 16 (3)]. In some cases, the
purpose for which the goods are required may be ascertained from the acts and conduct of the parties to the sale, or from the nature of
description of the article purchased. For instance, if a perambulator or a bottle of milk is purchased, the purpose for which it is purchased is
implied in the thing itself. In such a case the buyer need not tell the seller the purpose for which he buys the goods. Examples. (a) P asked for a
hot water bottle of L, a retail chemist. He was supplied one which burst after a few days use and injured P’s wife. Held, L was liable for breach of
implied condition because P had sufficiently made known the use- for which he required the bottle [Priest v. Last, (1903) 2 K.B. 148]. (b) G
purchased a woollen underwear from M, a retailer, whose business it was to sell goods of that description. After wearing the underwear, G
developed an acute skin disease. Held the goods were not fit for their only proper use and G was entitled to avoid the contract and claim
damages [Grant v. Australian Knitting Mills Ltd., (1936) A.C. 5]. (c) A bought a set of false teeth from a dentist. The set did not fit into A’s mouth.
Held he could reject the set as the purpose for which anybody would buy it was implicitly known to the seller, i.e., the dentist [Dr. Baretto v. T.R.
Price, A.|.R. (1939) Nag. 19). 6. Sale by sample (Sec. 17). 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 [Sec. 17 (1)]. In the case of a contract for sale by sample, there is an implied condition— (a) that the
bulk shall correspond with the sample in quality; (b) that the buyer shall have a reasonable opportunity of comparing the bulk with the sample.
(c) that the goods shall be free from any defect, rendering them unmerchantable. The defect should not however be apparent on a reasonable
examination of the sample [Sec. 17 (2)]. This implied condition applies only to latent defects, i.e., defects which are not discoverable on a
reasonable examination of the sample. The seller is not responsible for the defects which are patent, i.e., visible or discoverable by examination
of the goods. In case of patent defects, there is no breach of implied condition as to merchantability. Examples. (a) There was a sale by sample
of mixed worsted coatings to be in quality and weight equal to the samples. It was found that the goods owing to a latent defect would not
stand ordinary wear when made up into coats. The same defect was there in the sample but could not be detected on a reasonable
examination of the sample. Held, the buyer could reject
CONDITIONS AND WARRANTIES 239 the goods [Drummond v. Van Ingen, (1887) 12 App. Cas. 284]. The office of the sample is to present to the
eye the real meaning and intention of the parties with regard to the subject- matter of the contract which, owing to the imperfection of language,
it may be difficult or impossible to express in words, The sample speaks for itself.” (Lord Macnaghten). (b) In a contract for the sale of brandy
by sample, brandy coloured with a dye was supplied. Held, the buyer was not bound to the contract even though the goods supplied were equal
to sample, as the defects were not apparent on reasonable examination of sample [Mody v. Gregson, (1868) L.R. 4 Ex. 49]. (c) D sold sulphuric
acid to P as commercially free from arsenic. P used it for making © glucose which he sold to brewers who used it in brewing beer. The persons
who drank the beer were poisoned. D was not aware of the purpose for which P had bought the acid. Held, P was entitled to repudiate the
contract and since this was not possible in the instant case (as P had already used the goods), he could treat breach of condition as breach of
warranty and claim damages [Bostock & Co. Ltd. v. Nicholson & Sons Ltd., (1904) 1 K.B. 725). 7. Condition as to wholesomeness. In the case of
eatables and provisions, in addition to the implied condition as to merchantability, there is a hee implied condition that the goods shall be
wholesome. Mére wen Sait an \ved shaft . Examples. (a) F bought milk from A. The milk contained germs of typhoid fever. F's wife took the milk
and got infection as a result of which she died. Held, F could recover damages [Frost v. Aylesbury Dairy Co. Ltd., (1905) 1 K.B. 608}. (b) C
bought a bun containing a stone which broke one of C’s teeth. Held, he could recover damages [Chaproniere v. Mason, (1905) 21 T.L.R. 633).
Implied warranties The implied warranties ie genvvact ol, of sale areas, follows : 1. Warranty of ite ogsenninny noc.” 4 “b)]. In a contract of sale,
unless there is a contrary intention, there is an implied warranty that the buyer shall have and enjoy quiet possession of the goods. If the buyer
is in any way disturbed in the enjoyment of the goods in consequence of the seller's defective title to sell, he can claim aes: from the seller. 2.
Warranty of freedom from Encdi br ces (Sec. 14 (c)]. In addition to the previous warranty, the buyer is entitled to a further warranty that the
goods are not subject to any charge or right in favour of a third party. If his possession is in any way disturbed by reason of the existence of any
charge or encumbrance on the goods in favour of any third party, he shall have a right to claim damages for breach of this warranty. 3. Warranty
as to quality or fitness by usage of trade [Sec. 16 (4)]. An implied warranty as to quality or fitness for a particular purpose may be annexed by
the usage of trade. 4. Warranty to disclose dangerous nature of qoods. 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. Example. A sold a ‘tin of disinfectant powder to C. He knew that it was likely to be dangerous to
C if it was opened without special care being taken. C opened the tin whereupon the disinfectant powder flew into her eyes, causing injury. Held,
A was liable in damages to C, as he should have warned C of the probable danger [Clarke v. Army & Navy Co-operative Society Ltd., (1963) 1 K.
B, 155].
240 spECIAL CONTRACTS ed condition Exclusio ae n of implied conditions and warranties. [mpli nt between the contract of Sibi ck i ie be
negative or varied by (a) express agreeme ing between them ; or (c) the custom or usage of trade. CAVEAT EMPTOR This means ‘let the buyer
beware’, i.e, i e of goods th to reveal unflattering truths about a a, a person buys some pea ne ‘one examine them thoroughly. If the goods turn
out to be defective oF do not suit his purpose OF met oi his own skill or judgment and makes a bad selection, he cannot blame any y Examples.
(a) H bought oats from S a sample of which had bee erroneously thought that the oats were old. The oats were, however, new. avoid the
contract [Smith v. Hughes, (1871) L.R. 6 Q.B. 597]. (b) H sent to market 32 pigs to be sold by auction. The pigs were sold to W ‘with all faults
and errors of description”. H knew that the pigs were suffering from swine-fever, but he never disclosed this to W. Held, there was no implied
warranty by H and the sale was good and was not liable in damages (Ward v. Hobbs, (1878).4 App. Cas 13), The.rule of caveat emptor is
enunciated in the opening words of Sec. +6 which runs thus : “Subject to the provisions of this Act and of any other law for the time being in
force, there is no implied warranty OF condition as to the quality or fitness for any particular purpose of goods supplied under a contract of
sale ...” Exceptions. The doctr these exceptions has already been discussed. The exceptions are however briefly referred to— 1. Fitness for
buyer’s purpose. Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which he requires the goods
and relies on the seller's skill or judgment and the goods are of a description which it is in the Coutse of the seller's business to supply, the
seller must supply the goods which, shall be fit for the buyer's purpose [Sec. 16 (1)). 2. Sale under a patent or trade name. In the case of a
contract for the sale of a specified article under its patent or other trade name, there is no implied condition that the goods shall be reasonably
fit for any particular purpose [Proviso to Sec. 16 (1)]. 3. Merchantable quality. Where goods are bought by description from a seller who deals in
goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of
merchantable quality. But if the buyer has examined the goods, there is no implied condition as regards defects which such examination ought
to have revealed [Sec. 16 (2)). 4, Usag purpose may be annexed by the u 5. Consent by fraud. Wh the seller by fraud or where the sell a
reasonable examination (i.e., where t emptor does not apply. e seller is under no duty n shown to H. H Held, H could not ine of caveat emptor
has certain important exceptions. The case law on e of trade. An implied warranty or condition as to quality or fitness for a particular sage of
trade [Sec. 16(3)]. ere the consent of the buyer, in a contract of sale, is obtained by er knowingly conceals a defect which could not be
discovered on here is a latent defect in the goods), the doctrine of caveat sdavealal sale with reference to goods which are the subject thereof
may be a condition or.a lation essential to the main purpose of the contract. Its breach gives a right to hie on in a on is a stipu A stipulati ne 2
(1). 4 conditi warranty [Sec. 1
CONDITIONS AND WARRANTIES 241 buyer to treat the contract as repudiated (Sec. 12 (2). A warranty is a stipulation collater al to the main
purpose of the contract. Its breach gives rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated
[Sec. 12 (3). Express and implied conditions and warranties In a contract of sale, conditions and warranties may be express or implied. Express
conditions and warranties are those which are agreed upon between the parties at the time of the contract. Implied conditions and warranties
are those which are implied by law unless the parties stipulate to the contrary. Implied conditions. 1. Condition as to title. In a contract of sale
there is an implied condition on the part of the seller that (a) in the case of a sale, he has a right to sell the goods, and (b) in the case of an
agreement to sell, he will have a right to sell the goods at the time when the property is to pass (Sec. 14 (1)]. 2. Sale by description. Where there
is a contract for the sale of goods by description, there is an implied condition that the goads shall correspond with the description. If the sale
is by sample as well as by description, the goods shall correspond both with the sample and the description (Sec. 15 ) 3. Condition as to quality
or fitness. The condition as to quality or fitness is implied where (a} the goods sold are such as the seller deals in the ordinary course of his
business ; (b) the buyer relies on the seller's skill or judgment as to the fitness of the goods for any particular purpose ; and (c) the buyer
expressly or impliedly makes known to the seller that he wants the goods for that particular purpose [Sec. 16 (1) }. 4. Condition as to
merchantability. Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or
producer or not), there is an implied condition that the qoods shall be of merchantable quality (Sec. 16 (2)). 5. Condition implied by custom. An
implied condition as to quality or fitness for a particular purpose may be annexed by the usage of trade [Sec. 16 (3). 6. Sale by sample. In the
case of a contract for sale by sample there Is an implied condition (a) that the bulk shall correspond with the sample in quality ; (b) that the
buyer shall have a reasonable opportunity of comparing the bulk with the sample ; and {c) that the goods shall be [ree from any defect,
rendering them unmerchantable, which would not be apparent on a reasonable examination of the sample (Sec. 17). 7. Condition as to
whalesomeness. In case of eatables and provisions, there is an implied condition that the qoods shall be wholesome and fit for human
consumption Implied warranties. In a contract of sale, unless there is a contrary intention, there is an implied warranty that (1) the buyer shall
have and enjoy quiet possession of the goods [Sec. 14 (b}]. and (2) the goods are free from any charge or encumbrance in favour of any third
party [Sec. 14 (c)). Caveat emptor. This means “let the buyer beware”. The doctrine of caveat emptor does not apply—{1) In case of implied
conditions and warranties : (2) When the buyer intimates the purpose to the seller and depends upon his skill or judgment; (3) When there is a
usage of trade; (4) When there is a fraud by the seller. Objective Type Questions Multiple Choice Questions 1. The doctrine of caveat emptor
applies— (a) in case of implied conditions and warranties (b) when the buyer does not intimate the purpose to the seller and depends upon his
own skill and jusgment. (c) when goods are sold by sample. (d) when goods are sold by description. 2. If a sale is by sample as well as by
description, the implied condition is that the goods shall correspond with — (a) sample, (b) description. (c) both sample and description. (d)
either sample or description. 3.-In a sale, there is an implied condition on the part of the seller that he— (a) has a right to sell the goods; (b) is in
possession of the goods. (c) will have the right to sell. (a) will acquire the goods. 4. A condition is a stipulation which is — (a) essential to the
main purpose of contract of sale. (b) not essential to the main purpose of contract of sale. (c) collateral to the main purpose of contract of sale.
(d) None of the above. 5. In case of breach of a warranty. the buyer can— (a) repudiate the contract. (b) claim damages only. {c) return the
goods. (d) refuse to pay the price. (e) refuse to take delivery of the goods.
242 SPECIAL CONTRACTS 6. In case of breach of a warranty, the buyer can— (a) claim damages only. (b) repudiate the contract. (c) cannot
return the goods. (d) refuse to take delivery of the goods. State whether the following statements are True or False 1. If there is breach of
condition, the aggrieved party can only claim damages and it has not the right to repudiate the contract. 2. If a buyer once waives a condition,
he cannot afterwards insist on its fulfillment. 3. In a sale by sample as well as by description, the goods must correspond both with the sample
and the description. 4. In a contract of sale, there is no implied conditions as to quality or fitness of the goods for a particular purpose. 5.
Packing of goods is not an important consideration in judging their ‘merchantability’. 6. Where a person sells goods, knowing that the goods are
dangerous to the buyer and that the buyer is ignorant of the danger, he need not warn the buyer of the probable danger. 7. An article is sold
under its patent name. There is no implied condition that the goods shall be reasonably fit for any particular purpose. 8. In a contract of sale by
sample, the bulk of goods supplied may not correspond with sample. 9. An implied conditions to quality may be annexed by the usage of trade.
10. If the buyer has examined the goods there is no implied condition as regards defects which such examination ought to have disclosed.
[Answers: MCOQ 1. a: 2. c; 3. a; 4.4; 5. b: 6. b; T/F 1. F; 2. T; 3. T; 4. T; 5. F; 6. F; 7. T; 8. F; 9. T; 10. TL] Test Questions 1. Briefly explain the
conditions and warranties implied by law in a contract for the sale of goods. 2. Distinguish between a ‘condition’ and a ‘warranty’. When does a
condition descend to the level of a warranty ? Explain the rule of caveat emptor and state how far it is modified by implied conditions. 3. “In a
contract for the sale of goods there is no implied condition or warranty as to the quality of the goods or their fitness for any particular purpose.”
Comment. 4. “If a person sells an article, he thereby warrants that it is fit for some purpose, but he does not warrant that it is fit for any
particular purpose.” State the various qualifications subject to which this proposition should be received. 5. State the conditions implied in a
contract for the sale of goods (a) by description, (b) by sample, and (c) required for a particular purpose. 6. What is implied ‘warranty’ in case of
a sale by sample ? Can a contract be avoided if such warranty is breached? 7. State the doctrine of caveat emptor and exceptions to it. Practical
Problems Attempt the following problems, giving reasons : 1. 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 the return of the price. Will he succeed ?
[Hint: Yes (Sec. 14 (a), Rowland v. Divali).) 2. A, a farmer, simply exhibits oats in his farm. B buys the oats in the belief that they are old oats. In
fact they are new oats. B wants to return the oats and refuses to pay the price. Decide. [Hint : B cannot return the oats as the doctrine of caveat
emptor will apply.] 3. A purchased a hot-water bottle 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. {Hint ; There is a breach of implied condition as to fitness
and hence A can recover damages (Priest v. Last).]
CONDITIONS AND WARRANTIES 243 4. A purchases some chocolates from a shop. One of the chocolates contains a poisonous matter and as
a result A's wife who has eaten it falls seriously ill. What remedy is available to A against the shopkeeper ? [Hint : The chocolates are not of
merchantable quality and hence A can repudiate the contract and recover damages (Sec. 16 (2).] 5. Worsted cotton cloth of quality equal to
sample was sold to tailors who could not stick it into coats owing to some defect in its texture. The buyers had examined the cloth before
effecting the purchase. Are they entitled to darnages ? [Hint : Yes, as there is a latent defect in cloth (Sec. 17; Drummond v, Van Ingen).] 6. M
asked for a bottle of Stone’s Ginger Wine at F's shop which was licensed for the sale of wines. While M was drawing the cork, the bottle brake
because of defect in the glass and M was injured. Can M claim damages for the injury ? [Hint : Yes, as the bottle is not of merchantable quality
and there is a sale of goods by description [Secs. 15 and 16 (2); Morelli v. Fitch and Gibbons)]. 7. A seller agrees to supply to the buyer timber of
1/2” thickness for being made into cement barrels. The timber actually supplied varies in thickness from 1/2” to 5/8". The timber is
merchantable and commercially fit for the purpose for which it was ordered. The buyer rejects the timber. Is his action justified ? {Hint: Yes
(Sec. 15).] 8. The sale of pure ghee was warranted only equal to sarnple. The ghee tendered corresponded to the sample, but was adulterated
with 25% groundnut oil. Are the buyers bound to accept ? [Hint : No (Sec. 17).] 9. A lady buys synthetic pearls for a high price thinking that they
are natural pearls. The seller does not correct her mistake. Has she any remedies against the seller ? Would your decision be different if the lady
had told the seller; “I think they are natural pearls and, therefore, agree to buy them at your price,” and the seller was silent ? [Hint : The lady has
no remedy against the seller as the doctrine of caveat emptor applies in this case. In the latter case, she-can avoid the contract as there is a
breach of condition as to quality (Sec. 16 (1).] 10. A wholesale dealer in soaps agrees to sell and deliver two cases of ‘Luxury’ toilet soap to a
sub-dealer but delivers that quantity of ‘Luxury’ washing soap. What are the rights of the sub-dealer ? [Hint : The sub-dealer can repudiate the
contract on the ground of breach of condition as to description (Sec. 15).] 11. A lady who knew that she was allergic to a particular hair dye
developed dermatitis as a result of having her hair dyed with that substance. She did not disclose her allergy to the hair dresser. Is the hair
dresser liable for breach of implied condition ? [Hint: No, The hair dresser is not liable for the breach of implied condition as to the fitness of the
hair dye since that condition extends to the dyeing of the hair of a normal person (Sec. 16 (1) ; Ingham v. Emes (1955) 2 Q.B. 366; Griffiths v.
Peter Conway, Ltd, (1939) 1 All. E.R. 683.} 12, A sold to B a tin of disinfectant powder. He knew that it would be dangerous to open the tin
without special care but he did not warn B. B without knowledge of the danger, opened the tin whereupon the powder flew into his eyes and
injured him. B filed a suit for damages for the injury. Will he succeed ? [Hint: Yes (Sea 16 (2).] 13. A contracts to sell Ba piece of silk. B thinks
that it is Indian silk. A knows that B thinks so, but knows that It is not Indian silk. A does not correct B's impression. B afterwards discovers that
it is not Indian silk. Can he repudiate the contract ? [Hint: Yes, as the rule of caveat emptor will apply in this case.] 14. 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, B, however, found that the machine, when it was delivered, was old and had even been repaired. Can B repudiate the contract ? [Hint:
Yes, as there is a breach of the implied condition that the goods shall correspond with the description (Sec. 15 : Varley v. Whipp).] 15. A sells a
horse to B. When B goes with the horse he is arrested by the police on the charge of keeping stolen property as the horse belongs to C. Can sue
A, and if so, on what basis, and what’ damages can he recover ? [Hint: Yes, B can sue A and also recover the loss suffered by him which is the
direct and natural consequence of the breach of condition (Sec. 14 (a) : Rowland v. Divall). ‘
244 SPECIAL CONTRACTS 16. H, a housewife. ordered from C, a coal merchant, ‘a ton of coalite’ and it was duly delivered to her. When part of
the consignment was put on fire in an open grate in H's house, an explosion occurred which caused damage. H claims damages. Is she entitled
to sue ? [Hint: Yes, as the goods are not of merchantable quality (Sec. 16 (2).] 17. In a contract for the purchase of 3,000 tins of canned fruits to
be packed in cases each containing 30 tins, a substantial part was tendered in cases, containing 24 tins instead of 30. Can the buyer reject the
cases ? [Hint: Yes, as the goods do not correspond with the description of the goods ordered (Sec. 15 : Moore & Cav. Landaur & Co.).] 18. X
contracted to sell by sample two parcels of wheat one containing 200 bushels and the other 400, and he allowed inspection of the smaller
parcel but refused inspection of the larger parcel. Is the buyer entitled to refuse any of the above- mentioned two parcels ? State reasons for
your answer. [Hint: Yes (Sec. 17).] 2L gM eal
CHAPTER 4.5 Rights of an Unpaid Seller CHAPTER CONTENTS Q) Who is an Unpaid Seller ? 1 Rights of an Unpaid Seller Against the Goods QO
Right of Lien Q Right of Stoppage in Transit ) Right of Re-sale Q Right of Withholding Delivery Rights of an Unpaid Seller against the Buyer Per
Sonally Remedies for Breach of Contract of Sale Auction Sales Summary Objective Type Questions Test Questions Geo oodgaqc Practical
Problems WHO IS AN UNPAID SELLER ? | : ak 7s € Yee han re A seller of goods is deemed to be an unpaid seller when— pay peymenk (1) the
whole of the price has not been paid or tendered; a é (2) 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 dishonour of the instrument or otherwise (Sec, 45
(1)]. The following conditions must be fulfilled before a seller of goods can be deemed to be an unpaid seller : (1) He must be unpaid and the
price must be due, (2) He must have an immediate right of action for the price. (3) A bill of exchange or other pegotiable instrument was
received but the same has been dishonoured. When payment is made by a negotiable instrument it is usually a conditional payment, the
condition being that the instryment shall be duly honoured. If the instrument is not honoured, the seller is deemed to be an ‘unpaid seller’. A
seller who has obtained a money decree for the price of the goods is still an unpaid seller if the decree has not been satisfied.
RIGHTS OF AN UNPAID SELLER 271 ‘Seller’ here means not only the actual seller, but also any person who is in the position of a seller, e.g., an
agent of the seller to whom a bill of lading has been endorsed, or a consignee or agent who has himself paid for the goods or is directly
responsible for the price [Sec. 45 (2). RIGHTS OF AN UNPAID SELLER | | Against the goods Against the buyer | personally Where the property
Where the property in the goods has in the goods has passed not passed See 46 (1) [Sec. 46 (2)] ! | ] | | Lien Stoppage Re-sale Withholding
Stoppage (Secs. intransit (Sec. 54) delivery in transit 47 to (Secs. 50 49) to 52) | Suit for Suit for Repudiation Suit for price damages of contract
interest (Sec. 55) (Sec. 56) (Sec. 60) (Sec. 61) |. Rights of an unpaid seller against the goods Where the property in the goods has passed to the
buyer, an unpaid seller has the following rights against the goods [Sec. 46 (1)] : I. Right of lien (Secs. 46 (1) (a) and 47 to 49) A lien is a right to
retain possession of goods until payment of the price [Sec. 46 (1) (a)]. ‘It is available to the unpaid seller of the goods who is in possession of
them where— (a) the goods have been sold without any stipulation as to credit ; (b) the goods have been sold on credit, but the term of credit
has expired ; (c) the buyer becomes insolvent [Sec. 47 (1)], Rules regarding lien. (1) The seller may exercise his right of lien notwithstanding that
he is in possession of the goods as agent or bailee for the buyer [Sec. 47 (2)]. If he loses the possession of the goods, he loses the right of lien
also. (2) The lien depends on actual possession and not on title. It is not affected even if the seller has parted with the document capable of
transferring title. (3) The possession of the goods by the seller must not expressly exclude the right of lien. (4) The lien can be exercised by the
unpaid seller only for the price and not for any other charges surh as warehouse or dock charges. (5) Where an unpaid seller has made part
delivery of the goods, he may exercise his right of lien on the remainder. He may refuse to deliver such remainder of the goods till he is paid for
the goods already delivered and the goods yet to be delivered [Ex parte Chamers, (1873) 8 Ch. 291]. Where, however. a part of the goods is
delivered under such circumstances as to show an agreement to waive the lien, the seller cannot retain the remainder (Sec. 48).
272 frrol orden oh Ue cok (6) The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that he has obtained a
decree for the price of the goods [Sec. 49 (2)]. Termination of lien (Sec. 49). The unpaid seller of goods loses his lien on the goods when— (a)
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) the buyer or his agent lawfully obtains possession of the goods as bager ; Example. P sells a lawn-mower to D and: refuses to deliver
it'to D till he has been paid for. But he lends it to D in order that D may cut the grass. P does not lose his lien [Knights v. Wiffen, (1870) L.R. 5 Q.B.
660]. (c) he waives his right of lien on the goods [Sec. 49 (1)]. He may do this either expressly or impliedly. SPECIAL CONTRACTS (i) Express
waiver, When the contract of sale provides in express terms that the seller shall not retain possession of the goods even if the price has not
been paid, there is an express waiver of lien. (ii) Implied waiver. When the seller sells the goods on credit, or grants a fresh term of credit on the
expiry of the original term of credit, lien is waived until the expiry of the term of credit. The lien revives on the expiry of the term of credit. Again
when the seller takes a bill for the price payable at a future date, the lien is waived during the currency of the bill. The lien revives on the
dishonour of the bill. Likewise, when the seller assents to a sub-sale, the lien is waived. 2. Right of stoppage in transit [Secs. 46 (1) (b) and 50 to
52] The right of stoppage in transit is a right of stopping the goods in transit after the unpaid seller has parted with the possession of the
goods. He has the further right of resuming possession of the goods as long as they are in the course of transit, and retaining possession until
payment or tender of the price. It is available to the unpaid seller— AY) when the buyer becomes insolvent; and Noa) when the goods are in
transit (Sec. 50). The buyer is said to be ‘insolvent’ when he has ceased to pay his debts in the ordinary course of business or cannot pay his
debts as they become due, whether he has committed an act of insolvency or not [Sec. 2 (8)]. The right of stoppage in transit is an extension of
the right of lien, but it arises only on the insolvency of the buyer and when the goods are in transit [Sec. 46 (1) (b)). Duration of transit (Sec. 51).
Transit is an intermediate stage. Goods are deemed to be in course of transit from the time they are delivered to a carrier, or other bailee for the
purpose of transmission to the buyer, until the buyer or his agent takes delivery of them from such carrier or other bailee [Sec. 51 (1)). The
carrier may hold goods— (1) as seller’s agent. In this case, the walter has lien on the goods and the question of right of stoppage in transit does
not arise ; (2) as buyer's agent. In this case. the seller cannot exercise his right of stoppage in transit ; (3) in an independent capacity. It is in this
case that the seller has, and can exercise. the right of stoppage in transit. When transit comes to an end. Traisit comes to an end: (1) If the
buyer or his agent on that behalf obtains delivery of the goods before they arrive at the appointed destination [Sec. 51 (2)]. at — ———— = ie A ca

RIGHTS OF AN UNPAID SELLER 273 (2) If, after the arrival of the goods at the appointed destination, the carrier or other bailee acknowledges to
the buyer or his agent that he holds the goods on his behalf [Sec. 51 (3)]. (3) Where the carrier or other bailee wrongfully refuses to deliver the
goods to the buyer or his agent in that behalf (Sec. 51 (6)]. (4) 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. However if part delivery has been given in such circumstances as to show an
agreement to give up the possession of the whole of the goods. the goods cannot be stopped in transit [Sec. 51 (7)). If the goods are rejected
by the buyer and the carrier or other bailee continues to be in possession of them, the transit is not deemed to be at an end [Sec. 51 (4). How
stoppage in transit is effected (Sec. “52). The unpaid seller may exercise his right of stoppage in-transit either— (1) by taking actual possession
of the goods, or (2) by giving notice of his claim to the carrier or other bailee in whose possession the goods are. Notice of stopping the goods
in transit may be given either— (1) to the person in actual possession of the goods, or (2) to his principal. Notice to the principal, to be effectual,
must be given in such manner that the principal, by the exercise of reasonable diligence, may communicate it to his servant or agent in time to
prevent delivery to the buyer (Sec. 52 (1)}. When notice of stoppage in transit is given by the seller to the carrier or other bailee in possession of
the goods, the latter must re-deliver the goods to, or according to the directions of, the seller. The expenses of such re-delivery are to be borne
by the seller (Sec. 52 (2)], Liability of carrier. If the carrier, after a proper notice by the seller to him to stop the goods in transit, delivers them to
the buyer or refuses to deliver them to the seller, he is liable to the seller for conversion (wrongful appropriation of the goods of another). If after
the transit has ended and he wrongfully returns the goods to the seller, he is liable to the buyer for conversion. Distinction between right of lien
and right of stoppage in transit (1) The unpaid seller's right to stop the goods in transit arises only when the buyer is insolvent but the right of
lien can be exercised even when the buyer is able to pay but does not pay, (2) The right of lien can be exercised on goods which are in actual or
constructive possession of the seller, while right of stoppage in transit can be exercised when the goods are in the possession of a middleman
between the seller who has parted with the possession of the goods and the buyer who has not yet acquired the possession. (3) The right of
lien comes to an end when the possession of the goods is surrendered by the seller, but the right of stoppage in transit commences when the
goods have left the possession of the seller and continues until the buyer or his agent has acquired their possession. (4) The right of lien is to
retain possession, while the right of stoppage in transit is to regain or resume possession. Effect of sub-sale or pledge by buyer (Sec. 53) The
unpaid seller’s-right of lien or stoppage in transit is not affected by any sale or pledge of the goods which the buyer may have made, unless the
seller has assented to it. But this right is defeated
274 SPECIAL CONTRACTS. if he has transferred a document of title to goods (e.g., a bill of lading or a railway receipt) to the buyer, and the
buyer transfers it by way of sale to a person who takes it in good faith and for consideration. Examples. (a) A bought from B a shipment of
certain goods. B sent the bill of lading to A, A handed over the bill of lading to C in return for a loan, C took the bill of lading, in good faith.
Subsequently, A became insolvent. B attempted to stop the goods in transit but C claimed them. Held, C had a good title to the goods, which
defeated B's right of stoppage in transit [Leask v. Scott Bros (1882) 2 Q.B.D. 376]. (b) B sells and consigns certain goods to A. B being still
unpaid, A becomes insolvent and while the goods are in transit, assigns the bill of lading for cash to C who knows that A is insolvent. The
assignment not being in good faith. B may stop the goods in transit. Where the buyer transfers the document of title to the goods by way of
pledge to any person who takes the document in good faith and for consideration, the unpaid seller’s right of lien or stoppage in transit can only
be exercised subject to the rights of the pledgee [Sec. 53 (1)]. Example. A sells goods to B of the value of Rs. 10,000 and forwards a bill of
lading to B who deposits it with C to secure an advance of Rs. 4,000. B becomes insolvent. A may exercise his right of stoppage in transit. but
subject to paying C the sum of Rs. 4.000. Where the transfer of goods is by way of a pledge, the unpaid seller may require the pledgee to satisfy
his claim against the buyer first out of any other goods or securities of the buyer in the hands of the pledgee [Sec. 53(2)]. 3. Right of re-sale
(Secs. 46 (1) (c) and 54}. The unpaid seller can re-sell the qdods— (1) Where the goods are of a perishable nature ; or (2) Where he gives notice
to the buyer of his intention to re-sell the goods and the buyer does not within a reasonable time pay or tender the price. If, on a re-sale, there is
a loss to the seller (i.e., the difference between the contract price and the amount realised on re-sale of the goods), he can claim it from the
buyer as damages for breach of contract. If there is a surplus on the re-sale. he is not bound to hand it over to the buyer because the buyer
cannot be allowed to take advantage of his own wrong. In case notice is not given, the unpaid seller is not entitled— (a) to recover any loss an
the re-sale of the goods, and (b) to retain any surplus arising on the re-sale of the goods. The buyer is entitled to claim such surplus as his right
[Sec. 54 (2)] ; (3) Where the seller expressly reserves a right of re-sale in case the buyer should make default (Sec. 54 (4)). Sale not generally
rescinded by lien or stoppage in transit. (Sec. 54 (1)]. A contract of sale is not rescinded by the mere exercise by an unpaid seller of his right of
lien or stoppage in transit. This is, however, subjegt to provisions relating to the unpaid seller's right of re-sale as contained in Sec. 54. Right of
withholding delivery [Sec. 46 (2)] Where the property in goods has not passed to the buyer, an 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: ia
RIGHTS OF AN UNPAID SELLER 275 Il. Rights of an unpaid seller against the buyer personally These are the rights which an unpaid seller may
enforce against the buyer personally. These rights of the seller against the buyer are called rights in personam as against the rights in rem (i.e,
rights against the goods), and are in addition to his rights against the goods. The rights in personam are as follows: 1. Suit for price (Sec. 55).
(a) Where property has passed. Where under a contract of sale the property in the goods has passed to the buyer and the buyer wrongfully
neglects or refuses to pay for the goods, the seller may sue him for the price of the goods [Sec. 55 (1). (b) Where property has not passed.
Where under a contract of sale the price is payable on a certain day irrespective of delivery and the buyer wrongfully neglects or refuses to pay
such price, the seller may sue him for the price. It makes no difference even if the property in the goods has not passed and the goods have not
been appropriated to the contract [Sec. 55(2)]. 2. Suit for damages for non-acceptance (Sec. 56). Where the buyer wrongfully neglects or
refuses to accept and pay for the goods, the seller may sue him for non-acceptance. As regards measure of damages, Sec. 73 of the Indian
Contract Act, 1872 applies. Also refer to Sec. 44 (dealing with buyer's liability for neglecting or refusing delivery of goods) discussed in the
previous Chapter. ' 3. Repudiation of contract before due date (Sec. 60). Where the buyer repudiates the contract before the date of delivery, the
seller may either— (a) treat the contract as subsisting and wait till the date of delivery, or (b) he may treat the contract as rescinded and sue for
damages for the breach. This rule is known as the “rule of anticipatory breach of contract”. 4. Suit for interest [Sec. 61 (2) (a)]. Where there is a
specific agreement between the seller and the buyer as to interest on the price of the goods from the date on which payment, becomes due, the
seller may recover interest from the buyer. If, however there is no specific agreement to this effect, the seller may charge interest on the price
when it becomes due from such day as he may notify to the buyer. In the absence of a contract to the contrary, the Court may award interest to
the seller in a suit by him at such rate as it thinks fit on the amount of the price from the date of the tender of the goods or from the date on
which the price was payable |Girja Prasad v. Sardar Labh Singh, A.1.R. (1977) Pat. 241). REMEDIES FOR BREACH OF CONTRACT OF SALE The
Saie of Goods Act gives the following remedies to a seller and a buyer for breach of a contract of sale : 1. Seller’s suits (1) Suit for price (Sec.
55). (2) Suit for damages for non-acceptance of the goods (Sec. 56). (3) Suit for damages for repudiation of contract by the buyer before due
date (Sec. 60). (4) Suit for interest [Sec. 61 (2) (a)}. 2. Buyer's suits (1) Suit for damages for non-delivery of the goods (Sec. 57). (2) Suit for
specific performance (Sec. 58).
276 SPECIAL CONTRACTS (3) Suit for breach of warranty (Sec. 59). (4) Suit for damages for repudiation of contract by the seller before due
date (Sec, 60). ( 5) Suit for interest [Sec. 61 (2) (b)]. All these remedies have already been discussed. AUCTION SALES A sale by auction is a
public sale where different intending buyers try to outbid each other. The goods are ultimately sold to the highest bidder. The auctioneer who
sells the goods by auction is an agent of the seller, i.e., the owner. His relationship with the owner of the goods is governed by the general
principles of the law relating to agency. Procedure to auction sales. The usual procedure in case of auction sales is as follows : The proposed
auction is duly advertised and a printed catalogue of the goods together with the terms of sale is circulated. On the appointed day and time, the
intending buyers assemble and the auctioneer puts the different lots to auction and invites bids from the intending buyers. Every bid is an offer.
The auction goes in favour of the highest bidder. The highest bid is accepted by the auctioneer in a cutomary method, i.e., by the fall of a
hammer, or by using the words “one, two, three” or “going, going, gone”. The auctioneer thus “knocks down” the lot to the highest bidder. The
highest bid constitutes the offer. The fall of the hammer or other customary announcement constitutes acceptance of the offer by the
auctioneer. At this stage, the contract of sale is completed. Until acceptance, any bidder may retract his bid. Quite often the auctioneer reserves
a right to refuse the highest bid, at his discretion. Similarly before final acceptance of the bid or falling of the hammer, it is always open to the
bidder to withdraw his bid. Example. D sold a car by auction. It was knocked down to K who was allowed to take it away on (i) giving a cheque
for the price, and (ii) signing an agreement that ownership should not pass to him until the cheque was cleared. The cheque was not cleared;
but meanwhile K had sold the car to S. Held, the property passed on the fall of the hammer and S had a good title [Dennant v. Skinner, (1948) 2
K.B. 164]. Rules of auction sales. The law on auction sales is contained in Sec. 64 of the Sale of Goods Act. According to it,. in the case of a
sale by auction the following rules apply: 1. Goods put up for sale lots. Where goods are put up for sale in lots. each lot is prima facie deemed
to be subject of a separate contract of sale [Sec. 64 (1)]. 2. Completion of sale. The sale is complete when the auctioneer announces its
completion by the fail of the hammer or in some other customary manner like “one, two, three” or “going, going, gone”. Until such
announcement any bidder may retract (withdraw, revoke) his bid [Sec. 64 (2)]. If before the fall of the hammer any bidder retracts his bid, the
security amount may not be forfeited [Zila Parishad, Muzaffarnagar v. Udai Veer Singh, A.I.R. (1989) All. 64). Example. At an auction sale. C
made the highest bid for an article of P. but he withdrew his bid before the fall of the hammer. P contended that there was a completed sale and
C was bound by it, Held. C’s bid was an offer and it could be revoked before the fall of the hammer [Payne v. Cave, (1780) 3 T.R. 148]. The
withdrawal of the bid is valid even if one of the conditions of sale was : “Bid opce made shall not be withdrawn”. Sec. 64 (2) has nothing to do
with the effect of the passing of the property at an auction sale and it is by virtue of goods being specific in a deliverable state that under Sec.
20 the property in such goods passes to the buyer at the completion of the contract at the fall of the hammer at such sale [Consolidated Coffee
Ltd. v. Coffee Board, Bangalore, A.|.R. (1980) S.C. 1468].
RIGHTS OF AN UNPAID SELLER 277 Where goods are destroyed or damaged before the completion of sale, the loss will fall on the seller.
Example. A bids Rs. 1,000 for a costly flower vase at an auction sale. The auctioneer purports to accept the bid by striking his hammer, but
accidentally strikes the vase which is broken to pieces. The sale in this case is not complete and the seller will have to bear the loss, 3. Right of
seller to bid. A right to bid may be reserved expressly by or on behalf of the seller. Where such right is expressly reserved (but not otherwise),
the seller or any one person on his behalf may bid at the auction [Sec. 64 (3)]. Secret employment of even one puffer (a person employed to bid
at an auction to incite others and raise prices) is fraudulent unless a right to bid is expressly reserved, and even in that case, the employment of
the second puffer is fraudulent. 4. Sale not notified subject to a right to bid. Where a sale is not notified to be subject to a right to bid on behalf
of the seller, it is not lawful (i) for the seller to bid himself or to employ any person to bid at such sale, or (ii) for the auctioneer knowingly to take
any bid from the seller or any such person. Any sale contravening this rule may be treated as fraudulent by the buyer [Sec. 64 (4). 5. Reserve
price. The sale may be notified to be subject to a reserve or. upset price [Sec. 64 (5)]. It is a price below which the auctioneer will not sell. Where
the sale is subject to a reserve price, every bid is accepted conditionally on the reserve price being reached [McManus v. Fortescue, (1907) 2
K.B. |]. But where the sale is without reserve, the goods will be sold to the highest bidder whether the surn bid is equal to the real value or not. 6.
Use of. pretended bidding. If the seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the buyer [Sec. 64
(6)}. 7. Knock out or agreement not to bid against each other. Where a group of persons form a combination to prevent competition between
themselves at an auction and arrange that only one of them will bid and that they will dispose of anything so obtained privately among
themselves, such a combination is called a ‘knock out’ and is not illegal [Jyoti v. Jhowmull, 36 Cal. 134]. But if the intention of the parties to
knock out is to defraud a third party, the ‘knock out’ is illegal, Damping. It is an illicit act dissuading the intending purchaser from bidding — (1)
by pointing out defects in the goods, or (2) by doing some other act so that the intending purchaser is not in a position to have proper estimate
of the price of the goods, or (3) by scaring the intending purchaser away by some other device. ‘Damping’ is illegal and entitles the auctioneer to
withdraw the property from the auction. Implied warranties in an auction sale. When an auctioneer sells goods, he impliedly undertakes the
following obligations : 1. He warrants that he has authority to sell. 2. He also warrants that he does not know of any defect in the title of his
principal. 3. He undertakes to give possession of the goods against the price paid to him. 4. He guarantees the quiet possession of the goods
by the purchaser. RIGHTS OF AN UNPAID SELLER A seller of goods is deemed to be an unpaid seller (1) when the whole of the price has not
been paid or tendered; (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 net been fulfilled by reason of the dishonour of the instrument, or otherwise (Sec. 45). An unpaid seller has the
rights—
the goods ha en (a) : 5 expin 278 f the credit ha unpaid seller wh jable to the t, but the term te) It is aval : credi (1) Right of lien. been sold on 1.
As against the goods. : (b) the goods have without any stipulation as to credit buyer becomes insolvent (Sec. 47). (2) Right of stoppage in
transit. When the buyer of goods become? t. The seller may re possession of the goods has the right of stopping them in transi vor of the price
( i r tender of the Pr transit and may retain them until payment © vf the goods, Of by giving notic @ in transit either by taking actual possession
the goods are. an re-sell the goods (i) ransit and given notice t he price ; and (ii) wher r ith t nsolvent, the unpaid seller who has pat ted ‘ ne ume
possession of the goods, a5 ong a Sec. 50). The unpaid seller may i jm to the they are in the course of exercise this right of stoppag carrier or
other bailee in whose possession (3) Right of re-sale. The unpaid seller c has exercised his right of lien or stoppage int buyer has not within a
reasonable time paid t the buyer should make default (Sec. 54). Right of withholding delivery. Where the property in goods ha addition to his
other remedies, a right of withholding delivery similar to an in transit where the property has passed to the buyer (Sec. 46 (2)]. t of sale the
property in the gaods has 2. As against the buyer personally. (1) Suit for price. Where under a contrac passed to the buyer and the buyer
wrong[ully neglects or refuses to pay for the goods according to the terms of the contract, the seller may sue him for the price if the goods (Sec,
55). (2) Damages for non-acceptance. Where the buyer wrong sue him for damages for non-acceptance (Sec. 56). (3) Repudiatian of contract
before due date. date of delivery, the seller may either treat the contract as subsisting 4 contract as rescinded and sue for damages for the
breach (Sec. 60). (4) Suit for interest. The seller can recover interest on price from the d a special agreement to that effect. AUCTION SALE
intending buyers try to outbid each other. The goods are ultim dis Sec. 64 of the Sale of Goods Act. nature; (ii) where he II the goods and the
sale in case fa perishable re-sé a right of re- oods are 0 r af his intention to reserves where the 9 o the buye e the seller expressly paid seller has,
in e buyer, the un) n and stoppage 5 not passed to th th his rights of lie d co-extensive wil fully neglects or refuses to pay for the goods, the
seller may ontract before the ie repudiates the c he may treat the Where the buyer in a contract of sal of delivery, or nd wait till the date ate on
which the payment became due, if there is ately sold A sale by auction is a public sale where different on auction sales in containe to the
highest bidder. The law Objective Type Questions Multiple Choice Questions 1. The lien of an unpaid seller depends on —{a) possession, (b)
title. (¢) ownership. (d) whether the buyer has paid the price or nat. @ his right of lien—{a) where the goods have been sold on credit and the
term of credit 2. An unpaid seller can exercis has not expired. (b) where the buyers has not become insolvent. 3. The right of lien exercised by
an unpaid seller is to —{a) other charges. (d) recover damages. 4. An unpaid seller can exercise the right of stoppage in transit when the carrier
holds the goods—(a) as seller’ 5 seller's agent. (b) as buyer's agent. {c) as agent of both of them. (d) in his own name. 5. If the goods are
rejected by the buyer and the carrier or other bailee continues to be in possessi f th sion of them, the transit—{a) is deemed to be at an end. (b)
is deemed to be at an end. (c) commences. d) None of the th 6. An unpaid seller has not given notice of resale to the buyer. ON resale there is a
loss —fa Ze recover it from the buyer. (b) The unpaid seller cannot recover it from the buyer. (c) The buyer c ) The amped seller can seller, (d)
The buyer must compensate the unpaid seller, an recover it from the unpaid 7. An unpaid seller has not given notice of resale to the buyer there
is a i profit. The unpaid selle F nd to hand it over to the buyer. (c) may dispose it of in any mene be ten ih ae . (a) may set it it over to the buyer.
(b) is not bow off against a previous loss in similar circumstances. 8. Ifa seller makes use of pretended bidding at an auction to raise the price,
the sale is —{a) void , —\a) voidable at the opti ption of the buyer. {b)soid, (c) valid, (d) illegal. retain possession. (b) regain possession. (c)
recover price and
RIGHTS OF AN UNPAID SELLER 279 State whether the following statements are True or False 1. A seller who has obtained a money decree for
the price of the goods is not an unpaid seller even if the decree has not been satisfied. 2. The right of lien is available to an unpaid seller of the
goods who is in possession of them and the term of credit has expired. 3. An unpaid seller of goods does not lose his lien on the goods when
the buyer or his agent lawfully obtains possession of the goods as buyer. 4. The right of stoppage in transit is an extension of the right of lien. 5.
Transit comes to an end where the carrier wrongfully refuses to deliver the goods to the buyer or his agent. 6. If the unpaid seller does not give
notice to the buyer of his intention to re-sell the good, the buyer is entitled to claim any surplus arising on the re-sale of the goods. 7. Where a
buyer transfers the document of title to the goods by way of pledge, the unpaid seller's right of lien or stoppage in transit can only be exercised
subject the rights of the pledge. 8. Where the right to bid at an auction is expressly reserve, the seller or anyone person on his behalf may bid at
the auction. [Answers : MCOQ 1. a; 2.¢; 3.4; 4.d; 5. b; 6. b; 7. a; 8.4. T/F 1. F; 2. T; 3. F; 4. T;.5. T; 6. T;-7.. T; 8. T] Test Questions 1. When is a seller
of goods deemed to be an unpaid seller ? What are his rights against (i) the goods, and (ii) the buyer personally ? 2. What is meant by the right
of “stoppage in transit” in respect of sale of goods ? Subject to what conditions and how is this right exercised ? , 3. Explain the nature of the
right of lien and the right of stoppage in transit of an unpaid seller. How are these rights affected by a sub-sale or pledge by the buyer ? 4. Is an
unpaid seller of goods who is in possession of them entitled to retain possession ? If so, under what circumstances ? When does he lose his
lien over the goods ? 5. Distinguish between an unpaid seller's right of lien and right of stoppage in transit. When can he re-sell the goods ? 6.
“The right of stoppage in transit is an extension of an unpaid seller's right of lien.” Comment. 7. Write a short note on : Stoppage in transit. 8.
State the rules regarding sale by auction. Practical Problems Attempt the following problems, giving reasons : 1. A sells to B a quantity of sugar
in A's warehouse. It is agreed that B shall get two months’ credit. B allows the sugar to remain in A's warehouse. B becomes insolvent before the
expiry of the two months, and the Official Receiver demands delivery of the sugar without offering to pay. What are the rights of A ? [Hint: A can
exercise right of lien and he is not bound to deliver the goods to the Official Receiver till he is paid for (Sec. 47).| 2. A sold 50 bales of cotton on
credit and kept them in his warehouse on rent charged to the buyer. Before the period of credit expired the buyer sold away 15 bales and
became insolvent. A seeks to exercise his lien on the remaining bales in the warehouse for the price of 50 bales and the rent in arrears. Advise
A. [Hint: A can exercise right of lien on 35 bales for the price of 50 bales. He has however no right of lien for the arrears of rent for which he has
only a personal remedy against the buyer (Sec. 47)]. 3. A sells to B 80 quintals of grain out of a larger quantity lying in his granary. B sells 60
quintals out of those, the goods not yet being ascertained to C. Then C having a delivery order from B forwards it to A, who informs C that he
will
280 SPECIAL CONTRACTS send the grain in due course, B then becomes insolvent. Can A refuse to deliver the 60 quintals of grain to C ? Give
reasons for your answer. [Hint: A cannot refuse to deliver the 60 quintals of grain to C, but as to the reminder 20 quintals, he can exercise right
ol lien (Sec. 53: Knights v. Wiffen)]. 4. A seller in London drew on a buyer in Mumbai a bill for the price of the goods. While the goods were in
transit, the buyer became insolvent, whereupon C, the holder for value of the bill, purporting to act on behalf of the seller instructed the carrier to
withald delivery. On the arrival of the goods in Mumbai, the Official Assignee made a demand for their delivery which the carrier did not comply
with. Subsequently, the seller ratified C's act of stopping the goods in transit. Who is entitled to obtain delivery— the seller or the Official
Assignee? [Hint ; The Official Assignee is entitled to receive the goods (Sec. 200 of the Indian Contract Act, 1872).] 5, B, a Liverpool merchant,
ordered 100 bales of cotton from A, a Mumbai merchant. B sent his own ship to Mumbai to receive delivery of the cotton. A delivered the bales
of cotton on board B's ship and took a bill of lading from the master making the cotton deliverable to A's order or assigns. The cotton arrived in
Liverpool but before it came into B's possession, B became insolvent. The cotton had not been paid for, Can A exercise the right of stoppage in
transit ? [Hint: In this case since A took a bill of lading from the master making the cotton deliverable to his order the master of the ship (even
though it was sent by B] is acting as A's agent. The transit, therefore, has not come to an end, and the unpaid seller can exercise his right of
stoppage in transit (Sec. 51).] 6. A sells and consigns certain qoods to B, and sends him the bill of lading. A being still unpaid, B becomes
insolvent and while the goods are still in transit, assigns the bill of lading for cash to C, who is aware of B's insolvency. Can A stop the goods in
transit? [Hint: Yes, A can stop the goods in transit as the assignment ol the bill of lading to C is not in good faith (Sec. 53).] 7. S sells and
consigns to B goods of the value of Rs. 12,000. B assigns the railway receipt to C to secure a specific advance of Rs. 5,000 on the railway
receipt. Before the goods reach destination B becomes insolvent. B is indebted to C for Rs. 5,000. Can A stop the goods in transit? [Hint: Yes, A
can stop the goods in transit subject to C's right over them to the extent of Rs. 5,000 (Sec. 53).) 8. At a sale by auction without reserve, the
auctioneer is instructed not to sell for less than a certain price. The auctioneer accepts the highest bona fide bid which, however, is lower than
the reserve price. (a) Is the sale valid ? (b) What are the rights of the principal against the auctioneer ? {Hint: (a) Yes. 6) The auctioneer is liable
to compensate the principal for the difference between the reserve price and the price for which the goods are sold.] 9. At an auction sale, A
makes the highest hid for a flower vase. Purporting to accept the bid, the auctioneer strikes the vase and breaks it. Who is to bear the lass ?
Would your decision differ if the auctioneer had struck the table on which the vase was kept with the hammer and the vase fell down and broke
to pieces ? [Hint ; The loss in both the cases is to be borne by the owner of the vase (Sec. 64).] 10. A railway company is in possession of goods
as a carrier when an unpaid seller gives notice-of stoppage in transit. The buyer of the goods owes money to the railway company also. Can the
railway company exercise the right of lien over the goods in violation of the right of stoppage in transit of the seller ? [Hint: No, the raikway
company cannot exercise the right of lien over the goods in violation of the right of stoppage in transit of the seller (Sec, 52).] 11. X sold goods
to Y and on Y's instruction delivered them to 2, forwarding agent, whom Y had already instructed to ship them to a foreign country. 2 does so
and while the goods are in transit, X wants to exercise his right of stoppage in transit as Y had been declared insolvent. Can he do so ? [Hint: No
(Sec. 51).} 12. A is the owner of specific goods lying in N's warehouse. He sells those goods to B and takes from B a bill of exchange for the
price and hands over to B delivery order addressed to N. B resells the goods to C and gives C a delivery order but before C can obtain
possession of the goods B becomes insolvent and A warns N not to deliver the goods to anyone without his (A's] order. Is A entitled to retain the
goods against C? |Hint: No (Sec. 53).]
RIGHTS OF AN UNPAID SELLER ; 281 13. A sells certain goods to B, the delivery of the goods to take place on Ist July, 2007 and the payment to
be made by B on Ist April, 2007. B refuses to pay the price on the due date on the plea that the property in the goods has not passed to him. Can
A sue for the price before the delivery of the goods takes place ? [Hint: Yes (Sec. 55). 14. A bought from B a shipment of nuts and B sent to A
the bill of lading. A handed over the bill of lading to C in return for a loan. C took the bill of lading in good faith. Subsequently A became
insolvent. B attempted to stop the goods in transit, but C claimed them. Is C's claim justified ? |Hint: Yes. B cannot stop the goods in transit
(Sec. 53).] 15. A sells 100 bales of jute to B and sends 50 bales by motor and 50 bales by railway. 8 receives delivery of the bales sent by motor,
but before he receives the delivery of the bales sent by railway he becomes insolvent. A, being still unpaid, stops the goods in transit. The
Official Receiver in B's insolvency claims the goods. Decide the case. [Hint: A, being still unpaid, can stop the 50 bales sent by railway as they
are still in transit (Sec. 50).| 16. A of Delhi orders B of Mumbai to deliver certain goods to him at Delhi B supplies the goods. but A delays to take
the delivery. The Station Master of Delhi Railway Station informs A that the goods are lying at the Station at “A's risk”. Before taking delivery, A
becomes insolvent, Can B recover the goods by stopping the goods in transit ? [Hint: No, B cannot recover the goods by stopping them in transit
as transit comes to an end when the Station Master informs A that the goods are lying at his risk (Sec. 51).] 17. X sold goods to Y and
forwarded to Y the bill lading indorsed in blank together with a draft for the price for acceptance. Y, who was insolvent, did not accept the draft
but transferred the bill of lading to 2, who took it in good faith and for value. The seller stopped the goods in transit. Discuss the rights of 2 as
against the goods. Hint: 7 gets a good title to the goods (Leask v. Soott Bros, (Sec . 53).] 18. A sold to B a quantity of leather F.O.B. Liverpool,
the goods being unascertained at the date of the sale. B instructed A to send the goods to Liverpool for shipment on the $.5. Kingship, and A
did so. The 5.5. Kingship would not take the leather which remained on the dock for two months. A brought an action against B for the price.
Decide the case and state the law. [Hint: B is liable to pay the price as the property in goods has passed to him (Sec. 55)}.] 19. X sold a quantity
of wheat to Y, who paid by cheque which was dishonoured upon presentation, X gave a delivery order to Y for the wheat and ’ resold it to 4,
purchaser in good faith, for consideration indorsing the delivery order to him. ¥ refuses to deliver the goods to Z on the plea of non-receipt of
price. Advise 2. [Hint: Z is entitled to the goods (Sec. 53)). 20. X sells and consigns goods to Y of the value of Rs. 10,000. Y assigns the bill of
lacing for these goods to Z to secure the sum of Rs. 4,000 due from him to 4, Y becomes insolvent, Can X stop the goods in transit? (Hint: Yes,
X can stop the goods in transit only subject to the right of Z, i.e. on payment or tender to 2 of Rs. 4,000 (Sec. 53).] 21, Goods were sold and sent
by the sellers al the request of the buyer to shipping agents of the buyer and were put on board a ship by those agents. Subsequently they were
re-landed and sent back to the sellers for the purpose of re-packing. While they were still in the possession of the sellers for that purpose, the
buyer became insolvent. The sellers refused to deliver them to the Olficial Receiver except upon payment of the price. Are the sellers entitled to
refuse to deliver the qoods to the Official Receiver ? State reasons for your answer. [Hint: The sellers had, by delivery of the goods to the
shipping agents, without reserving right of disposal of the goods, lost their lien over the goods. The sellers are, therefore, not entitled to refuse
to deliver the goods to the Official Receiver [Valpy v. Gibson, (1847) 4 C.B. 837].