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CONTENTSCONTENTS IntroductionIntroduction General PrinciplesGeneral Principles

Meaning of Contract of SaleMeaning of Contract of Sale Distinction between Sale and Agreement to SellDistinction between Sale and Agreement to Sell Essentials of Contract of SaleEssentials of Contract of Sale GoodsGoods Perishing of goodsPerishing of goods PricePrice

Transfer of OwnershipTransfer of Ownership Importance of Transfer of OwnershipImportance of Transfer of Ownership Rules regarding Transfer of OwnershipRules regarding Transfer of Ownership

Unpaid seller and his rightsUnpaid seller and his rights Conditions and warrantiesConditions and warranties

Meaning of Conditions and WarrantiesMeaning of Conditions and Warranties Difference between Condition and WarrantyDifference between Condition and Warranty Express and Implied Conditions and WarrantiesExpress and Implied Conditions and Warranties Doctrine of “Caveat Emptor”Doctrine of “Caveat Emptor”

Auction of Sale Auction of Sale 2

INTRODUCTIONINTRODUCTION

The law relating to sale and purchase of goods, The law relating to sale and purchase of goods,

prior to 1930 were dealt by the Indian Contract prior to 1930 were dealt by the Indian Contract

Act, 1872. Act, 1872. In 1930, Sections 76 to 123 of the Contract Act In 1930, Sections 76 to 123 of the Contract Act

was repealed and a separate Act known as the was repealed and a separate Act known as the

Sale of Goods Act, 1930 was passedSale of Goods Act, 1930 was passed This act lays down special provisions governing This act lays down special provisions governing

the contract of sales of goods .The general law of the contract of sales of goods .The general law of

contract is also applicable to the contracts for the contract is also applicable to the contracts for the

sale of goods unless they are inconsistent with sale of goods unless they are inconsistent with

the express provisions of the Sale of Goods Act the express provisions of the Sale of Goods Act 3

GENERALGENERAL PRINCIPLESPRINCIPLES

MEANING OF CONTRACT OF SALEMEANING OF CONTRACT OF SALE According to Section 4 of the Act, a contract of Sale According to Section 4 of the Act, a contract of Sale

means “a contract where the seller transfers or means “a contract where the seller transfers or agrees to transfer the property in goods to the agrees to transfer the property in goods to the buyer for price” buyer for price”

Contract of Sale may be of two typesContract of Sale may be of two types

SALE AGREEMENT TO SELL

CONTRACTOF

SALE

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SALESALE :: It is a contract where the ownership in the goods is transferred by It is a contract where the ownership in the goods is transferred by

seller to the buyer immediately at the conclusion contractseller to the buyer immediately at the conclusion contract

EXAMPLEEXAMPLE: A sells his house to B for Rs. 10,00,000. It is a sale since : A sells his house to B for Rs. 10,00,000. It is a sale since the ownership of the house has been transferred from A to B.the ownership of the house has been transferred from A to B.

AGREEMENT TO SELLAGREEMENT TO SELL : : It is a contract of sale where the transfer of property in goods is to It is a contract of sale where the transfer of property in goods is to

take place at a future date or subject to some condition thereafter take place at a future date or subject to some condition thereafter to be fulfilled.to be fulfilled.

EXAMPLEEXAMPLE: A agreed to buy from B a certain quantity of nitrate of : A agreed to buy from B a certain quantity of nitrate of soda. The ship carrying the nitrate of soda was yet to arrive. This soda. The ship carrying the nitrate of soda was yet to arrive. This is `an agreement to sale`. In this case, the ownership of nitrate of is `an agreement to sale`. In this case, the ownership of nitrate of soda is to be to transferred to A on the arrival of the ship soda is to be to transferred to A on the arrival of the ship containing the specified goods (i.e. nitrate of soda) [containing the specified goods (i.e. nitrate of soda) [Johnson V Johnson V McDonald McDonald (1842) 9 M & W 600, 60 RR 838](1842) 9 M & W 600, 60 RR 838]

DISTINCTION BETWEEN SALE AND DISTINCTION BETWEEN SALE AND AGREEMENT TO SELLAGREEMENT TO SELL

BASIS SALE AGREEMENT TO SELL

1. Transfer of

property

The property of goods passes from the seller to the buyer immediately. So the seller is no more owner of the goods sold. It is an executed contract.

The transfer of property of the goods is to take place at a future time or subject to certain conditions to be fulfilled. It 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 ( associated or dependent ). Although it may refer to uncertain 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 posssession 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 posssession of the buyer.

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BASIS SALE AGREEMENT TO SELL

4.Consequences of the breach

In a sale the buyer fails to pay the price of 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

If there is a breach of contract by the buyer the seller can only sue for the damages and not for the price. 

5. Right to re- sell

In a sale the seller cannot re-sell the goods.

The buyer who takes the goods for consideration and without notice of the prior agreement gets him a good title. The original buyer can only sue the seller for damages.

6. General and particular property

The sale of contract plus conveyance and creates ‘Jus in rem’ i.e., gives right to the buyer to enjoy the goods as against the word and 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 the damages.

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BASIS SALEAGREEMENT TO

SELL

7. Insolvency of buyer

In a sale if the buyer becomes insolvent before he pays for goods, the seller in the absence of the lien over the goods, must return them to the official receiver or assignee. He can only claim the reteable 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 the seller

In a sale the seller becomes insolvent, the buyer being the owner is entitled to recover the goods from the official receiver of the assignee.

If the buyer who has paid the price, finds that the seller has become insolvent he can only claim a reteable dividend and not the goods because property in them has not yet passed to him.

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ESSENTIALS OF CONTRACT OF SALEESSENTIALS OF CONTRACT OF SALE Two partiesTwo parties: : There must be two parties- a buyer and a seller to There must be two parties- a buyer and a seller to

constitute a contract of sale.constitute a contract of sale.

GoodsGoods:: Contract of sale relates to goods i.e., movable property . Contract of sale relates to goods i.e., movable property . Transaction involving purchase and sale of immovable property are Transaction involving purchase and sale of immovable property are out of the purview of the Sale of Goods Act.out of the purview of the Sale of Goods Act.

Transfer of general propertyTransfer of general property: : The object of the contract must The object of the contract must be the transfer of general property as distinguished from the be the transfer of general property as distinguished from the special property in the goods by one person to another. The term special property in the goods by one person to another. The term ‘general property’ refers to ownership of goods.‘general property’ refers to ownership of goods.

PricePrice: : The consideration for the contract of sale called price must The consideration for the contract of sale called price must be money.be money.

Essential elements of a valid contractEssential elements of a valid contract: : All the essential All the essential elements of a valid contract must be present in the contract of elements of a valid contract must be present in the contract of sale.sale.

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GOODSGOODSDefinitionDefinition::

The subject matter of a contract of a sale must be goods .The subject matter of a contract of a sale must be goods .

According to Section 2(7) the term ‘goods’ means “every kind ofAccording to Section 2(7) the term ‘goods’ means “every kind of

movable property other than actionable claims and money andmovable property other than actionable claims and money and

includes stock and shares , growing crops , and things attached toincludes stock and shares , growing crops , and things attached to

or forming part of the land which are agreed to be severed before or forming part of the land which are agreed to be severed before

sale or under the contract of sale”sale or under the contract of sale”

Types of goodsTypes of goods::

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GOODS

Exiting goods

Future goods

Contingent goods

Specific

Ascertained

Unascertained

1.1. Existing goodsExisting goods:: These are the goods which are owned These are the goods which are owned or possessedor possessed by the seller at the time of sale. Only by the seller at the time of sale. Only existing goods can be the subject of a sale. The existing existing goods can be the subject of a sale. The existing goods may be-goods may be-

a) a) Specific goodsSpecific goods: : Goods identified and agreed upon at Goods identified and agreed upon at the the

time of making of the contract of sale of goods.time of making of the contract of sale of goods.

b) b) Ascertained goodsAscertained goods: : Goods identified subsequent to Goods identified subsequent to the formation of the contract of sale. The terms the formation of the contract of sale. The terms ascertained and specific, are commonly used for ascertained and specific, are commonly used for same kind of goods.same kind of goods.

c) c) Unascertained or generic goodsUnascertained or generic goods:: Goods not identified Goods not identified or agreed upon at the time of making of the contract or agreed upon at the time of making of the contract of sale. They are the goods defined for description of sale. They are the goods defined for description only.only.

ExampleExample:: ‘A’ who wants to buy a television set goes to a showroom ‘A’ who wants to buy a television set goes to a showroom where four sets of Janta model of Oscar television are displayed. He 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 sees the performance of a particular set, which he agrees to buy. The set so agreed to be bought is a set so agreed to be bought is a specific setspecific set.. If after having bought one If after having bought one set he marks aset he marks a

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particular set, the set so marked becomes particular set, the set so marked becomes ascertainedascertained. Till this. Till this

all is done all sets are all is done all sets are unascertainedunascertained..

2. 2. Future goodsFuture goods: : Goods to be manufactured, produced Goods to be manufactured, produced or acquired after making of the contract are called future or acquired after making of the contract are called future goods. goods.

ExampleExample: : ‘‘A’ contract, on 1A’ contract, on 1stst January, to sell B 50 shares in Reliance January, to sell B 50 shares in Reliance Ltd., to be delivered and paid for on the 1Ltd., to be delivered and paid for on the 1stst March of the same year. March of the same year. At the time of making of the contract, A is not in possession of any At the time of making of the contract, A is not in possession of any shares. The contract is a contract for the sale of future goods. shares. The contract is a contract for the sale of future goods.

3. 3. Contingent goodsContingent goods : : Goods, the acquisition of which by Goods, the acquisition of which by the seller ,depends upon an uncertain contingency are the seller ,depends upon an uncertain contingency are called ‘contingent goods’. They are also a type of future called ‘contingent goods’. They are also a type of future goods.goods.

ExampleExample: : ‘A’ agrees to sell 100 units of an article provided the ship ‘A’ agrees to sell 100 units of an article provided the ship which is bringing them, reaches the port safely. This is an agreement which is bringing them, reaches the port safely. This is an agreement for the sale of for the sale of

contingent goods. contingent goods. 12

PERISHING OF GOODSPERISHING OF GOODS

Perishing of goods before making of the contractPerishing of goods before making of the contract(Sec. (Sec. 7)7) Where there is a contract for the sale of specific goods, the contract Where there is a contract for the sale of specific goods, the contract

is void if the goods without the knowledge of the seller have, at the is void if the goods without the knowledge of the seller have, at the time when the contract was made, perished or become so damaged time when the contract was made, perished or become so damaged as no longer to answer to their description in the contract.as no longer to answer to their description in the contract.

IllustrationIllustration FactsFacts: :  ‘A’ agrees to sell to ‘B’ a certain horse.  It turns out that  ‘A’ agrees to sell to ‘B’ a certain horse.  It turns out that

the horse was dead at the time of bargain, though neither party the horse was dead at the time of bargain, though neither party was aware of the fact.  Discuss the validity of the contract.was aware of the fact.  Discuss the validity of the contract.

SolutionSolution: The agreement is void. In case part of goods is : The agreement is void. In case part of goods is perished, the following rule applies :perished, the following rule applies :

(a)if contract is indivisible, it shall be void; and(a)if contract is indivisible, it shall be void; and

(b)if contract is divisible, it will not be void and the part available (b)if contract is divisible, it will not be void and the part available in in

good condition must be accepted by the buyergood condition must be accepted by the buyer 13

Goods perishing before sale but after agreement toGoods perishing before sale but after agreement to

sell sell (Sec.8) (Sec.8) Where there is a contract for the sale of specific goods, the contract Where there is a contract for the sale of specific goods, the contract

is void if the goods without the knowledge of the seller have, at the is void if the goods without the knowledge of the seller have, at the time when the contract was made, perished or become so damaged time when the contract was made, perished or become so damaged as no longer to answer to their description in the contract.as no longer to answer to their description in the contract.

IllustrationIllustration FactsFacts: A buyer took a horse on a trial for 10 days on condition : A buyer took a horse on a trial for 10 days on condition

that that

if found suitable for his purpose the bargain would becomeif found suitable for his purpose the bargain would become

absolute.  The horse died on 5absolute.  The horse died on 5thth day without any fault of either day without any fault of either

party.  Discuss the position of both parties.party.  Discuss the position of both parties.

SolutionSolution :The contract , which was in the form of an :The contract , which was in the form of an agreement agreement

to sell, becomes void and the seller shall bear the loss.to sell, becomes void and the seller shall bear the loss.

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PRICEPRICESec.2(10) defines price “as money consideration Sec.2(10) defines price “as money consideration

forfor

a sale of goods”. a sale of goods”. It forms an essential part of the contract.It forms an essential part of the contract. It must be expressed in terms of money.It must be expressed in terms of money. It is not essential that the price should be fixed It is not essential that the price should be fixed

at the time of sale. It must, however, be at the time of sale. It must, however, be payable, though it may not have been fixed.payable, though it may not have been fixed.

Ascertainment of priceAscertainment of price Price in a contract of sale may bePrice in a contract of sale may be

fixed by the contract itself, orfixed by the contract itself, or left to be fixed in an agreed manner, orleft to be fixed in an agreed manner, or determined by the course of dealing between the determined by the course of dealing between the

parties[Sec. 9(1)] parties[Sec. 9(1)] 15

In the absence of this, the buyer must pay to seller a In the absence of this, the buyer must pay to seller a reasonable price. What is the reasonable price is a reasonable price. What is the reasonable price is a question of fact dependent on the circumstances of question of fact dependent on the circumstances of each particular case[Sec. 9(2)]each particular case[Sec. 9(2)]

Agreement to sell at valuationAgreement to sell at valuation Where there is an agreement to sell goods on the terms that Where there is an agreement to sell goods on the terms that

the price is to be fixed by the valuation of a third party and the price is to be fixed by the valuation of a third party and such third party cannot or does not make such valuation, the such third party cannot or does not make such valuation, the agreement is thereby avoided.agreement is thereby avoided.

Provided that, if the goods or any part thereof have Provided that, if the goods or any part thereof have been delivered to, and appropriated by, the buyer, he shall been delivered to, and appropriated by, the buyer, he shall pay a reasonable price there for.pay a reasonable price there for.

Where such third party is prevented from making the valuation Where such third party is prevented from making the valuation by the fault of the seller or buyer, the party not in fault may by the fault of the seller or buyer, the party not in fault may maintain a suit for damages against the party in fault.maintain a suit for damages against the party in fault.

  

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TRANSFERTRANSFER OFOF OWNERSHIPOWNERSHIP A contract of sale of goods involves transfer of A contract of sale of goods involves transfer of

ownership from the seller to the buyer. Transfer ownership from the seller to the buyer. Transfer of ownership or property in goods is in fact the of ownership or property in goods is in fact the main object of making a contract of sale.main object of making a contract of sale.

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It is important to know the precise moment It is important to know the precise moment ofof

time at which the property in goods passes time at which the property in goods passes fromfrom

the seller to the buyer for the following the seller to the buyer for the following reasons:-reasons:-

1. 1. Risk Risk prima facie prima facie passes with ownershippasses with ownership: : In case of destruction of or damage to the In case of destruction of or damage to the goods, it is the owner who has to bear the loss goods, it is the owner who has to bear the loss because the general rule is ‘because the general rule is ‘res perit domino’ res perit domino’ risk follows ownership risk follows ownership or whosoever is the owner or whosoever is the owner must bear the loss. The payment of the price or must bear the loss. The payment of the price or possession of goods is immaterial.possession of goods is immaterial.

IMPORTANCE OF TRANSFER OF OWNERSHIPIMPORTANCE OF TRANSFER OF OWNERSHIP

EXAMPLEEXAMPLE:‘A’ contracts to purchase 30 tons of apple:‘A’ contracts to purchase 30 tons of apple

juice from ‘B’.B crushes the apple, puts juice in juice from ‘B’.B crushes the apple, puts juice in

casks and keeps them ready for delivery. A , casks and keeps them ready for delivery. A ,

however , delays to take the delivery and the juice however , delays to take the delivery and the juice

goes putrid and has to be thrown away. A is liable to pay the goes putrid and has to be thrown away. A is liable to pay the

price[price[Demby Hamilton & Co.Demby Hamilton & Co. Ltd. v. Barden,(1949) All E R. Ltd. v. Barden,(1949) All E R. 435]435]

2. 2. Action against third partiesAction against third parties: In case the goods : In case the goods have damaged by a third party, it is the only the have damaged by a third party, it is the only the owner who can take action against him.owner who can take action against him.

3. 3. Insolvency of the seller or the buyerInsolvency of the seller or the buyer: In the : In the

event of insolvency of either the seller or the event of insolvency of either the seller or the buyer, the question whether the Official Receiver buyer, the question whether the Official Receiver or Assignee can take over the goods or not or Assignee can take over the goods or not depends on whether the property in the goods depends on whether the property in the goods has passed from the seller to the buyer. has passed from the seller to the buyer. 12

RULES REGARDING TRANSFER OF RULES REGARDING TRANSFER OF OWNERSHIP OWNERSHIP

Goods must be ascertainedGoods must be ascertained Property passes when intended to pass. Property passes when intended to pass. For Specific goodsFor Specific goods(Sec. 20 to 22)(Sec. 20 to 22)

Passing of property at the time of Passing of property at the time of contractcontract(Sec.20)(Sec.20)

Where there is an unconditional contract for the sale Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is the goods passes to the buyer when the contract is mademade.. EXAMPLEEXAMPLE: B offers A for his horse a sum of : B offers A for his horse a sum of

Rs.1000.The horse is to be delivered to B on a fixed Rs.1000.The horse is to be delivered to B on a fixed day and the price is to be paid on another fixed day. day and the price is to be paid on another fixed day. A accepts the offer. The horse becomes B’s A accepts the offer. The horse becomes B’s property as soon as the offer is accepted.property as soon as the offer is accepted.

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Passing of property delayed beyond the date of the Passing of property delayed beyond the date of the contract contract

Goods not in a deliverable stateGoods not in a deliverable state(Sec.21)(Sec.21)

Where there is a contract for sale of specific goods not Where there is a contract for sale of specific goods not

in a deliverable state, i.e., the seller has to do something in a deliverable state, i.e., the seller has to do something

to the goods to put them into the deliverable state, the to the goods to put them into the deliverable state, the

property does not pass until such thing is done and the property does not pass until such thing is done and the

buyer has notice of it.buyer has notice of it. When the price of goods is to be ascertained by weighingWhen the price of goods is to be ascertained by weighing

(Sec. 22)(Sec. 22)

Where there is a contract for sale of specific goods in a Where there is a contract for sale of specific goods in a

deliverable state, but the seller is bound to weigh, deliverable state, but the seller is bound to weigh,

measure, test or do some other act or thing with measure, test or do some other act or thing with

reference to the goods for the purpose of ascertaining reference to the goods for the purpose of ascertaining

the price, the property does not pass until such act or the price, the property does not pass until such act or

thing is done and the buyer has notice thereof. thing is done and the buyer has notice thereof. 21

For unascertained/ ‘future’ goodsFor unascertained/ ‘future’ goods Sec.23 Sec.23

In the case of a contract for a sale of unascertained or future In the case of a contract for a sale of unascertained or future goods by description , property will pass from the seller to the goods by description , property will pass from the seller to the buyer when the goods of the same description, in a deliverable buyer when the goods of the same description, in a deliverable state, are unconditionally appropriated to the contract by one state, are unconditionally appropriated to the contract by one party with the consent of the other.party with the consent of the other.

Goods sent on approval or ‘sale or return’Goods sent on approval or ‘sale or return’ Sec.24 Sec.24

When the goods are delivered to the buyer on ‘approval’ or on When the goods are delivered to the buyer on ‘approval’ or on ‘sale or return’ basis, the property in the goods will pass from ‘sale or return’ basis, the property in the goods will pass from seller to the buyer, when any of the following conditions are seller to the buyer, when any of the following conditions are satisfied.satisfied.

The buyer accepts the goods, or The buyer accepts the goods, or The buyer does something which is similar to his act of accepting theThe buyer does something which is similar to his act of accepting the

goods, e.g., pledges the goods or sells away the goods, or goods, e.g., pledges the goods or sells away the goods, or The buyer retains the goods without giving notice of rejection beyond The buyer retains the goods without giving notice of rejection beyond

the period fixed or reasonable period if no time is fixed.the period fixed or reasonable period if no time is fixed.

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TRANSFERTRANSFER OF TITLE BY NON-OWNERSOF TITLE BY NON-OWNERS GENERAL RULE - NEMO DAT NON HABETGENERAL RULE - NEMO DAT NON HABET

No one can give that which he has notNo one can give that which he has not To protect property rights.To protect property rights.

EXCEPTIONSEXCEPTIONS:: Transfer of title by Estoppel.(Sec.27)Transfer of title by Estoppel.(Sec.27) Sale by Mercantile Agent.(Sec. 27)Sale by Mercantile Agent.(Sec. 27) Sale by joint owner/co-owner(Sec.28)Sale by joint owner/co-owner(Sec.28) Sale by person in possession under voidable Sale by person in possession under voidable

contract.contract. (Sec.29)(Sec.29) Sale by a seller in possession after sale.(Sec.30(1))Sale by a seller in possession after sale.(Sec.30(1)) Sale by a buyer in possession of goods.(Sec.30(2))Sale by a buyer in possession of goods.(Sec.30(2)) Sale by an Unpaid Seller.(Sec. 54)Sale by an Unpaid Seller.(Sec. 54)

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UNPAID SELLER AND HIS RIGHTSUNPAID SELLER AND HIS RIGHTSUNPAID SELLER:-SellerSeller :- :- A person who sells the goods or agrees to A person who sells the goods or agrees to

sell the goods is called seller. sell the goods is called seller. 

UnpaidUnpaid :- :- It means payment is not made or without  It means payment is not made or without

payment. In simple words, "Unpaid seller" means a person who has payment. In simple words, "Unpaid seller" means a person who has soldsold

the goods for a price but price has not been paid to him. the goods for a price but price has not been paid to him. 

Sales act defines the "unpaid seller" in the following words Sales act defines the "unpaid seller" in the following words : : 

Unpaid Seller Is A PersonUnpaid Seller Is A Person :-  :- 

i.i. To whom the whole price has not been paid or tendered.  To whom the whole price has not been paid or tendered. 

ii.ii. And where a bill of exchange or other negotiable instruments has  And where a bill of exchange or other negotiable instruments has been accepted by him as a condition on which it was received been accepted by him as a condition on which it was received has not been fulfilled by reason of dishonor of the instrument or has not been fulfilled by reason of dishonor of the instrument or otherwise. otherwise. 

EXAMPLEEXAMPLE: Party A sells a car on cash basis to party B: Party A sells a car on cash basis to party B

and the price has not been received yet. and the price has not been received yet.

RIGHTS OF UNPAID SELLERRIGHTS OF UNPAID SELLER

Rights of unpaid seller

Right against goods

Right against the buyer personally

When the property in the goods has been transferred

Right of LienRight of stoppage in goods in transit

Right to resale

When the property in the goods has not been transferred

Right of withholding delivery

Suit for price

Suit for damages for non acceptance

Suit for special damage and interest

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Right against the goods Right against the goods A. A. When the property in the goods has been When the property in the goods has been

transferredtransferred

1.1.RIGHTRIGHT OF LIENOF LIEN[Sec 46(1)(a) and 47 to 49][Sec 46(1)(a) and 47 to 49]

The right of lien means lawfully right to The right of lien means lawfully right to

retain the goods possession until the full priceretain the goods possession until the full price

is received. An unpaid seller can exercise his right is received. An unpaid seller can exercise his right of lien of lien

in following cases.Sec47-49in following cases.Sec47-49

I.I. Where the goods have been sold on the cash Where the goods have been sold on the cash basisbasis..

II.II. Where the goods have been sold on credit basis Where the goods have been sold on credit basis and the term of credit has expired.and the term of credit has expired.

III.III. Where the buyer has become insolvent even Where the buyer has become insolvent even if the period of credit has not been expired.if the period of credit has not been expired.

Other rules to satisfy the conditions for this right Other rules to satisfy the conditions for this right areare

I.I. The unpaid seller must be in actual possession The unpaid seller must be in actual possession of the goods sold.of the goods sold.

II.II. It can be exercised even If the documents of It can be exercised even If the documents of title have been delivered to the buyer.title have been delivered to the buyer.

III.III. It can be exercised for the price and not for It can be exercised for the price and not for other expenses.other expenses.

IV.IV. If the seller delivers some goods, it can be If the seller delivers some goods, it can be exercised on the remainingexercised on the remaining

Termination of right of lienTermination of right of lien

Seller’s right of lien is terminated in following Seller’s right of lien is terminated in following cases.cases.

1. When he delivers the goods to the carrier or 1. When he delivers the goods to the carrier or other bailey for transmission to the buyerother bailey for transmission to the buyer

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2. When the buyer or his agent lawfully obtains the possession of the goods.

3. When seller waives his right of lien on the goods.4. The right of lien once lost will not be restored.5. When the buyer further sells the goods and the

seller agrees.Example:

A seller “S” sells a TV set to “B” and delivers it to “B” and since the TV set was not functioning properly , “B” delivered it back to “S” for the repairs. It was held that “S” can not exercise his right of lien over TV set.

2.2.RIGHT OF STOPPAGE IN TRANSITRIGHT OF STOPPAGE IN TRANSIT[Sec. 50 to [Sec. 50 to 52]52]

It means stoppage of goods while It means stoppage of goods while

they are in transit to take possession they are in transit to take possession

until the price is paid (sec.50-52)until the price is paid (sec.50-52) Unpaid seller can stop the goods in transit in Unpaid seller can stop the goods in transit in

the following cases.the following cases.

1.1. While the buyer becomes insolvent.While the buyer becomes insolvent.

2.2. While the goods are out of actual possession of While the goods are out of actual possession of seller, but have not reached buyer’s possession seller, but have not reached buyer’s possession i.e. goods are in transit with career.i.e. goods are in transit with career.

3.3. The unpaid seller can stop the goods in transit The unpaid seller can stop the goods in transit only for payment of the price of the goods and only for payment of the price of the goods and not for any other charges.not for any other charges.

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The unpaid seller can not stop goods in transit in The unpaid seller can not stop goods in transit in following cases.following cases.

1.1. When the goods reaches the destination.When the goods reaches the destination.

2.2. While the buyer or his agent takes possession While the buyer or his agent takes possession of delivery even if it is not reached destination.of delivery even if it is not reached destination.

3.3. In case the carrier is agent of the buyer, the In case the carrier is agent of the buyer, the transit comes to an end the instance carrier transit comes to an end the instance carrier receives the goods and seller can not stop the receives the goods and seller can not stop the transition.transition.

4.4. Carrier’s wrongful refusal to deliver goods to Carrier’s wrongful refusal to deliver goods to the buyerthe buyer

ExampleExample:”A” sells TV set to “B”. “A” delivers the TV :”A” sells TV set to “B”. “A” delivers the TV to the carrier to carry it to “B”. Later on gets news to the carrier to carry it to “B”. Later on gets news that “B” has become insolvent;“A” can stop that “B” has become insolvent;“A” can stop delivery.delivery. 30

3.3.RIGHT TO RE-SALERIGHT TO RE-SALE

If a buyer fails to pay or offer the price within aIf a buyer fails to pay or offer the price within a

reasonable time, the unpaid seller has the right to reasonable time, the unpaid seller has the right to

resell the goods in the following circumstances.resell the goods in the following circumstances.

1.1. Where the goods are of perishable nature.Where the goods are of perishable nature.

2.2. Where the unpaid seller has exercised his Where the unpaid seller has exercised his right of lien or stoppage in transit and gives a right of lien or stoppage in transit and gives a notice to buyer of his intension of resell the notice to buyer of his intension of resell the goods.goods.

3.3. Where the unpaid seller has expressly Where the unpaid seller has expressly reserved his right of resale.reserved his right of resale.

4.4. Where seller gives notice to the buyer of his Where seller gives notice to the buyer of his intension to resell and the buyer does not pay intension to resell and the buyer does not pay within a reasonable time, he canwithin a reasonable time, he can 31

a)a) Recover loss on resale of the goods, if anyRecover loss on resale of the goods, if any

b)b) Retain any surplus on resale of goods, if Retain any surplus on resale of goods, if anyany

However if the seller sells with out the notice toHowever if the seller sells with out the notice to

the buyer, he can notthe buyer, he can not

a)a) Recover any loss of the goods, if anyRecover any loss of the goods, if any

b)b) Retain any surplus on the resale of the Retain any surplus on the resale of the goods, if anygoods, if any

ExampleExample:“:“M” sells 100 blankets to “N” and M” sells 100 blankets to “N” and gives him one week for payment. “N” does gives him one week for payment. “N” does not pay. “M” can resell those to any other not pay. “M” can resell those to any other person.person.

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B. B. When the property in goods has not been transferredWhen the property in goods has not been transferred

RIGHT OF WITHHOLDING DELIVERYRIGHT OF WITHHOLDING DELIVERY

If the property in the goods has not passed to the If the property in the goods has not passed to the

buyer, the unpaid seller cannot exercise right of lien ,buyer, the unpaid seller cannot exercise right of lien ,

but gets a right of withholding the delivery of goods,but gets a right of withholding the delivery of goods,

similar to and co-extensive with lien.similar to and co-extensive with lien.

Rights against the buyer personallyRights against the buyer personally

There are some rights which an unpaid seller mayThere are some rights which an unpaid seller may

enforce against the buyer personally. These rights areenforce against the buyer personally. These rights are

called RIGHTS IN PERSONAM called RIGHTS IN PERSONAM

SUIT FOR PRICESUIT FOR PRICE[Sec. 55][Sec. 55]Where ownership of the goods has passed to the buyer and theWhere ownership of the goods has passed to the buyer and the

buyer refuses to pay the price according to the terms of thebuyer refuses to pay the price according to the terms of the

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contract, the seller can sue the buyer for price, irrespective ofcontract, the seller can sue the buyer for price, irrespective of

delivery of the goods.(Sec. 55)delivery of the goods.(Sec. 55)

SUIT FOR DAMAGES FOR NON-DELIVERYSUIT FOR DAMAGES FOR NON-DELIVERY[Sec.56][Sec.56]Where the buyer refuses to accept and pay for the goods, theWhere the buyer refuses to accept and pay for the goods, the

seller may sue him for damages for non acceptance. The sellerseller may sue him for damages for non acceptance. The seller

can recover damages only and not the full price (Sec. 56)can recover damages only and not the full price (Sec. 56)

SUIT FOR SPECIAL DAMAGES AND INTERESTSUIT FOR SPECIAL DAMAGES AND INTEREST

[Sec.61][Sec.61]The seller can sue the buyer for special damages where theThe seller can sue the buyer for special damages where the

parties are aware of such damages at the time of contract. Theparties are aware of such damages at the time of contract. The

unpaid seller can recover interest at a reasonable rate on the totalunpaid seller can recover interest at a reasonable rate on the total

unpaid price of goods, from the time it was due until it is paid. unpaid price of goods, from the time it was due until it is paid.

(Sec. 61)(Sec. 61)

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REMEDIES FOR BREACH OF CONTRACT OF SALEREMEDIES FOR BREACH OF CONTRACT OF SALE

The Sale of Goods Act gives the following remedies The Sale of Goods Act gives the following remedies to ato a

seller and buyer for a breach of a contract of sale:seller and buyer for a breach of a contract of sale: Seller’s suits Seller’s suits

Suit for price(Sec. 55)Suit for price(Sec. 55) Suit for damages for non-acceptance of the Suit for damages for non-acceptance of the

goods(Sec.56)goods(Sec.56) Suit for interest[Sec. 61(2)(a)]Suit for interest[Sec. 61(2)(a)]

Buyer’s suitsBuyer’s suits Suit for damages for non-delivery of the goods(Sec.57)Suit for damages for non-delivery of the goods(Sec.57) Suit for specific performance(Sec.58)Suit for specific performance(Sec.58) Suit for breach of warranty(Sec.59)Suit for breach of warranty(Sec.59) Suit for interest[Sec.61(2)(a)]Suit for interest[Sec.61(2)(a)]

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CONDITIONS AND WARRANTIESCONDITIONS AND WARRANTIESMEANING OF CONDITION AND WARRANTYMEANING OF CONDITION AND WARRANTY

A stipulation in a contract of sale with reference A stipulation in a contract of sale with reference to goods which are the subject thereof may be to goods which are the subject thereof may be a condition or a warranty[Sec. 12(1)]. a condition or a warranty[Sec. 12(1)].

ConditionCondition:: A condition is a stipulation essential to the main A condition is a stipulation essential to the main

purpose of the contract, the breach of which gives purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated. rise to a right to treat the contract as repudiated. [Sec 12(2)][Sec 12(2)]

WarrantyWarranty:: A warranty is a stipulation collateral to the main A warranty is a stipulation collateral to the main

purpose of the contract, breach of which gives rise to purpose of the contract, breach of which gives rise to a claim for damages, but not a right to reject the a claim for damages, but not a right to reject the goods and treat the contract as repudiated. [Sec goods and treat the contract as repudiated. [Sec 12(3)]12(3)]

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When condition to be treated as warrantyWhen condition to be treated as warranty[Sec.13][Sec.13]o Where a contract of sale is subject to any Where a contract of sale is subject to any

condition to be fulfilled by the seller, the buyer condition to be fulfilled by the seller, the buyer may waive the condition or elect to treat the may waive the condition or elect to treat the breach of the condition as a breach of warranty. breach of the condition as a breach of warranty. [section 13(1)]. [section 13(1)].

o Where a contract of sale is not severable and the Where a contract of sale is not severable and the buyer has accepted the goods or part thereof, buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the the breach of any condition to be fulfilled by the seller can only be treated as a breach of seller can only be treated as a breach of warranty ,unless there is a term of the contract, warranty ,unless there is a term of the contract, express or implied, to that effect. [section 13(2)]. express or implied, to that effect. [section 13(2)].

o Nothing in this section shall affect the case of Nothing in this section shall affect the case of any condition or warranty fulfillment of which is any condition or warranty fulfillment of which is excused by law by reason of impossibility or excused by law by reason of impossibility or otherwise. [section 13(3)].otherwise. [section 13(3)]. 37

DIFFERENCE BETWEEN DIFFERENCE BETWEEN CONDITION AND WARRANTYCONDITION AND WARRANTY

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BASIS CONDITION WARRANTY

1. Nature Condition is of a fundamental nature.

Warranty is of a subsidiary of inferior character.

2. Value

Condition is essential to the main purpose of the contract. The main purpose of the contract cannot be fulfilled without the prior fulfillment of this stipulation.

Warranty is only collateral to the main purpose of the contract. Fulfillment of the main purpose of the contract does not depend up on the fulfillment of the warranty.

3. Breach

If there is breach of condition, the aggrieved party can repudiate the contract.

In case of breach of warranty, the aggrieved party can claim damages only.

4. Treatment A breach of condition may be treated as a breach of warranty. This would happen where the aggrieved party is contented with damages only.

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

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BASIS CONDITION WARRANTY

4. Example X sells food-stuff to Y. The contract between X and Y states that the food to be sold should be fit for consumption and this is the essential term in the contract. So, if it contains any poisonous substance, Y is entitled to reject the food-stuff and to repudiate the contract This essential term is called a condition. 

On the other hand, if the contract stipulates that the food-stuff should be packed in 1 kilo box but the seller packs it in half-kilo box, only an auxiliary or minor term of the contract is broken, Y may be able to claim compensation in respect of its breach, but not avoid the contract. Such an auxiliary term is called warranty. 

EXPRESS AND IMPLIED EXPRESS AND IMPLIED CONDITION AND WARRANTIESCONDITION AND WARRANTIES

CConditions and warranties may be express or onditions and warranties may be express or implied.implied.

Express condition and warrantiesExpress condition and warranties: : Express condition and warranties are those which Express condition and warranties are those which

havehave

been expressly agreed upon by the parties at the been expressly agreed upon by the parties at the time of time of

contract of salecontract of sale

Implied condition and warrantiesImplied condition and warranties::Implied condition and warranties are those which theImplied condition and warranties are those which the

law incorporates into the contract unless the partieslaw incorporates into the contract unless the parties

stipulate to the contrary. stipulate to the contrary. 40

41

IMPLIED CONDITION (Secs. 14 to 17)IMPLIED CONDITION (Secs. 14 to 17)

IMPLIED CONDITION

As to TitleAs to Title

As to DescriptionAs to Description

As to SampleAs to Sample

As to Quality or FitnessAs to Quality or Fitness

As to MerchantabilityAs to Merchantability As to

WholesomenessAs to Wholesomeness

Condition as to titleCondition as to title[Sec. 14(a)][Sec. 14(a)]

In a contract of sale, unless the circumstances of the contract In a contract of sale, unless the circumstances of the contract

are such as to show a different intention, there is an implied are such as to show a different intention, there is an implied

condition on the part of the seller that – condition on the part of the seller that –

a)In the case of a sale, he has a right to sale the goods, anda)In the case of a sale, he has a right to sale the goods, and

b)In the case of an agreement to sell, he will have a right to 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.sell the goods at the time when the property is to pass.ExampleExample: R: R bought a car from bought a car from D D and used it for 4 months. and used it for 4 months. D D had no title to the car and consequently R had to had no title to the car and consequently R had to

hand it over to the true owner. hand it over to the true owner. Held, Held, RR could recover the price paid [could recover the price paid [Rowland v. Divall(1923)2 K.B. 500] Rowland v. Divall(1923)2 K.B. 500]

Condition a to descriptionCondition a to description(Sec. 15)(Sec. 15) In sale by description there is an implied condition that the goods shall correspond with In sale by description there is an implied condition that the goods shall correspond with

description.description. This means “if you contract to sell peas, you cannot oblige the party to take beans.”This means “if you contract to sell peas, you cannot oblige the party to take beans.” Hence if the description of the article tendered is different then the buyer may not buy the Hence if the description of the article tendered is different then the buyer may not buy the

goodsgoods..

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ExampleExample: : A want to sell his typewriter. He says to B , intending A want to sell his typewriter. He says to B , intending buyer who has not have seen the machine, that it is a brand new buyer who has not have seen the machine, that it is a brand new machine. B agrees to purchase it . On delivery B finds that the machine machine. B agrees to purchase it . On delivery B finds that the machine is old and repaired. B can repudiate the contract. is old and repaired. B can repudiate the contract.

Condition as to sampleCondition as to sample(Sec. 17)(Sec. 17)A contract of sale is a contract for sale by sample where A contract of sale is a contract for sale by sample where

there is a term in the contract, express or implied, tothere is a term in the contract, express or implied, to

that effect. that effect.

In a sale by sample, the following are the implied In a sale by sample, the following are the implied conditions:conditions:

1.The bulk shall correspond with the sample in quality;1.The bulk shall correspond with the sample in quality;

2.That the buyer shall have a reasonable opportunity 2.That the buyer shall have a reasonable opportunity

of comparing the bulk with the sample; and of comparing the bulk with the sample; and

3.That the goods shall be free from any defects 3.That the goods shall be free from any defects rendering rendering

them unmerchantable, which would not be apparent them unmerchantable, which would not be apparent on on

reasonable examination of the samplereasonable examination of the sample..43

ExampleExample: : Certain shoes were sold by sample for the French Army. Certain shoes were sold by sample for the French Army. The shoes were found to contain paper not discoverable by ordinary The shoes were found to contain paper not discoverable by ordinary inspection. inspection. Held, Held, the buyer was entitled to the refund of price plus the buyer was entitled to the refund of price plus damages.damages.

Condition as to quality or fitnessCondition as to quality or fitness[Sec. 16 (1)][Sec. 16 (1)]

Normally, in a contract of sale there is no implied condition Normally, in a contract of sale there is no implied condition as to quality or fitness of the goods for a particular as to quality or fitness of the goods for a particular purpose. The buyer must examine the goods thoroughly purpose. The buyer must examine the goods thoroughly before he buys them in order to satisfy himself.before he buys them in order to satisfy himself.

ExampleExample: : An order was placed for some lorries to be An order was placed for some lorries to be

used “for heavy traffic in a hilly area”. The lorries supplied used “for heavy traffic in a hilly area”. The lorries supplied

were unfit and breakdown. There is a breach of condition as to fitness.were unfit and breakdown. There is a breach of condition as to fitness.

Condition as to merchantabilityCondition as to merchantability[Sec. 16(2)][Sec. 16(2)] Where goods are bought by description from a seller who Where goods are bought by description from a seller who

deals in goods of that description there is an implied deals in goods of that description there is an implied

condition that the goods are of merchantable quality.condition that the goods are of merchantable quality.44

This means goods should be such that they are This means goods should be such that they are commercially saleable, as per the description by commercially saleable, as per the description by which they are known in the market at their full which they are known in the market at their full valuevalue..

Condition as to wholesomenessCondition as to wholesomeness In the case of eatables and provisions, in addition to In the case of eatables and provisions, in addition to

the implied condition as to merchantability, there is the implied condition as to merchantability, there is another implied condition that the good shall be another implied condition that the good shall be wholesome.wholesome.

ExampleExample: : X purchased milk from Y , a milk dealer. The milk X purchased milk from Y , a milk dealer. The milk contained typhoid germs. X’s wife, on taking the milk, got contained typhoid germs. X’s wife, on taking the milk, got infection and died. Held, X can entitled for damages. infection and died. Held, X can entitled for damages.

45

46

IMPLIED WARRANTIES

IMPLIED WARRANTIES

Quiet Enjoyment

Freedom from

Encumbrance

Usage of Trade

Dangerous Nature

Warranty of quiet possessionWarranty of quiet possession[Sec. 14(b)]. [Sec. 14(b)].

In a contract of sale, unless there is a contrary intention, there is an In a contract of sale, unless there is a contrary intention, there is an implied warranty that the buyer shall have and enjoy quiet implied warranty that the buyer shall have and enjoy quiet possession of the goods. If the buyer is in any way disturbed in the possession of the goods. If the buyer is in any way disturbed in the enjoyment of the goods in consequence of seller’s defective title to enjoyment of the goods in consequence of seller’s defective title to sell, he can claim damages from the seller.sell, he can claim damages from the seller.

Warranty of freedom from encumbrancesWarranty of freedom from encumbrances[Sec. 14 [Sec. 14 (c)].(c)].

The goods are not subject to any change or right in favour of a third The goods are not subject to any change or right in favour of a third

partyparty.. Warranty as to quality or fitness by usage of tradeWarranty as to quality or fitness by usage of trade

[Sec. 16 (4)][Sec. 16 (4)]. . An implied warranty as to quality or fitness for a particular purpose An implied warranty as to quality or fitness for a particular purpose

may be annexed by the usage of trade.may be annexed by the usage of trade. Warranty to disclose dangerous nature of goodsWarranty to disclose dangerous nature of goods

Where a person sell goods, knowing that the goods are inherently Where a person sell goods, knowing that the goods are inherently dangerous or they are likely to be dangerous to the buyer and that 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 the buyer is ignorant of the danger, he must warn the buyer of the probable danger, otherwise he will be liable in damages.probable danger, otherwise he will be liable in damages. 47

DOCTRINE OF “CAVEAT EMPTOR” DOCTRINE OF “CAVEAT EMPTOR” Caveat Emptor is a Latin phrase meaningCaveat Emptor is a Latin phrase meaning

“ “let the buyer bewarelet the buyer beware”.”. Let the buyer bewareLet the buyer beware: the principle that the seller : the principle that the seller

of a product cannot be held responsible for its quality of a product cannot be held responsible for its quality unless it is guaranteed in a warranty.unless it is guaranteed in a warranty.

For example, you buy a used car which you are told For example, you buy a used car which you are told is in perfect condition, but it immediately breaksis in perfect condition, but it immediately breaks

down OR you buy a house, but it has termites.down OR you buy a house, but it has termites. Under this doctrineUnder this doctrine the buyer takes the risk on an the buyer takes the risk on an

item he purchases and cannot complain of a defect.item he purchases and cannot complain of a defect. Unless there is either fraud or warranty (guarantee) Unless there is either fraud or warranty (guarantee)

by the seller, the rule applies to the sale of personal by the seller, the rule applies to the sale of personal property.property.

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The buyer and seller have equal access to The buyer and seller have equal access to information about the item and the buyer is able to information about the item and the buyer is able to make personal inspectionmake personal inspection

ExampleExample: Suppose Ram bought 10 cows from a cattle broker. Out of : Suppose Ram bought 10 cows from a cattle broker. Out of those 10, 2 cows had defects. However, Ram did not know this those 10, 2 cows had defects. However, Ram did not know this because he didn't check all 10 cows though he paid for them. because he didn't check all 10 cows though he paid for them. Guess what happened? The 2 infected cows died within three days Guess what happened? The 2 infected cows died within three days of the purchase. Now, as there was no tacit condition that the of the purchase. Now, as there was no tacit condition that the cows would be in great health at the time of the sale, Ram cannot cows would be in great health at the time of the sale, Ram cannot hold the cattle broker as responsible or having sold him those hold the cattle broker as responsible or having sold him those infected cows. It was Ram's basic duty to check the health of infected cows. It was Ram's basic duty to check the health of those cows and not expect the cattle broker to state all the those cows and not expect the cattle broker to state all the defects.defects.

Case studyCase study : : Jones vs. PadgettJones vs. Padgett

The buyer bought cloth for making uniforms. However, the seller The buyer bought cloth for making uniforms. However, the seller was not aware of the purpose of buying the cloth. Later, the buyer was not aware of the purpose of buying the cloth. Later, the buyer found that the cloth is not fit making uniforms. It was, however, fit found that the cloth is not fit making uniforms. It was, however, fit for other normal purposes. The seller was not found guilty as the for other normal purposes. The seller was not found guilty as the principle of ‘caveat emptor’ applied in this case.principle of ‘caveat emptor’ applied in this case.

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EXCEPTION OF CAVEAT EMPTOREXCEPTION OF CAVEAT EMPTOR Implied condition as to quality or fitness.Implied condition as to quality or fitness.

Where the buyer has made know to the seller the Where the buyer has made know to the seller the purpose for which he requires the goods and purpose for which he requires the goods and depends on the seller’s skill and judgment, there is depends on the seller’s skill and judgment, there is an implied condition that the seller will supply the an implied condition that the seller will supply the goods which are fit for that purpose. Section 16(1)goods which are fit for that purpose. Section 16(1)

ExampleExample: A buys a black yarn from B and finds : A buys a black yarn from B and finds that it has been damaged by white ants. The that it has been damaged by white ants. The condition as to merchantable quality is broken condition as to merchantable quality is broken and therefore, the doctrine of  broken and and therefore, the doctrine of  broken and therefore, the doctrine of caveat emptor does not therefore, the doctrine of caveat emptor does not hold good.hold good.

Sale of goods by description.Sale of goods by description. Where the goods are purchased by description from Where the goods are purchased by description from

a seller, who deals in such class of goods, there will a seller, who deals in such class of goods, there will be an implied condition that the goods shall be of be an implied condition that the goods shall be of merchantable quality.merchantable quality.

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Example Example :English sainfoin seeds, duly exhibited by a :English sainfoin seeds, duly exhibited by a

sample, are sold. The bulk corresponds to the sample sample, are sold. The bulk corresponds to the sample

but the seeds supplied are giant sainfoins and not but the seeds supplied are giant sainfoins and not

English sainfoin. There is a breach of condition as to English sainfoin. There is a breach of condition as to

description of goods. So the doctrine of caveat emptor description of goods. So the doctrine of caveat emptor

is not applicable.is not applicable. Usage of tradeUsage of trade

An implied condition or warranty as to quality or fitness An implied condition or warranty as to quality or fitness for a particular purpose may be annexed by the usage for a particular purpose may be annexed by the usage of trade and if the seller deviates from that, the rule of of trade and if the seller deviates from that, the rule of caveat emptor does not hold good.caveat emptor does not hold good.

ExampleExample: A dealer sells a refrigerator to Mohit.: A dealer sells a refrigerator to Mohit.

The refrigerator performs all other functions The refrigerator performs all other functions

except making ice. This would amount to breach except making ice. This would amount to breach

of an implied condition and thus the doctrine of of an implied condition and thus the doctrine of caveatcaveat

emptor will not work.emptor will not work.  51

Consent by fraud.Consent by fraud. When the buyer relies on false representation of the When the buyer relies on false representation of the

seller and suffers damages, i.e., in a contract where seller and suffers damages, i.e., in a contract where the buyer’s consent was obtained by the seller by the buyer’s consent was obtained by the seller by fraud, the doctrine of caveat emptor will not hold good.fraud, the doctrine of caveat emptor will not hold good.

ExampleExample: A bought 3000 tins of preserved milk: A bought 3000 tins of preserved milk

from U.S.A. The tins were labeled in such a way as to from U.S.A. The tins were labeled in such a way as to

infringe the Nestlé's trademark. As a result, they were infringe the Nestlé's trademark. As a result, they were

detained by the custom authorities. To get the detained by the custom authorities. To get the

clearance certificate from the customs, A had to clearance certificate from the customs, A had to remove remove

the labels and sell them at a loss. Now A can hold the the labels and sell them at a loss. Now A can hold the

seller responsible for fraud and claim damages.seller responsible for fraud and claim damages.

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AUCTION OF SALEAUCTION OF SALE

MEANINGMEANING::

Sale of auction is the public sale where the goodsSale of auction is the public sale where the goods

are generally sold to the highest bidderare generally sold to the highest bidder

RULES OF AUCTION SALERULES OF AUCTION SALE::

The law on auction sales is contained in Sec.64 of The law on auction sales is contained in Sec.64 of thethe

Sale of Goods Act. According to it, in the case of aSale of Goods Act. According to it, in the case of a

sale of auction the following rules apply :sale of auction the following rules apply : Where goods are put up for sale in lots, each lot Where goods are put up for sale in lots, each lot

is is prima facieprima facie deemed to be the subject of a  deemed to be the subject of a separate contract of sale; separate contract of sale;

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The sale is complete when the auctioneer The sale is complete when the auctioneer announces its completion by the fall of the hammer announces its completion by the fall of the hammer or in other customary manner; and, until such or in other customary manner; and, until such announcement is made, any bidder may retract his announcement is made, any bidder may retract his bid;bid;

A right to bid may be reserved expressly by or on A right to bid may be reserved expressly by or on behalf of the seller and, where such right is behalf of the seller and, where such right is expressly so re served, but not otherwise, the seller expressly so re served, but not otherwise, the seller or any one person on his behalf may, subject to the or any one person on his behalf may, subject to the provisions hereinafter contained, bid at the provisions hereinafter contained, bid at the auction;  auction; 

Where the sale is not notified to be subject to a Where the sale is not notified to be subject to a right to bid on behalf of the seller, it shall not be right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ any lawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any knowingly to take any bid from the seller or any such person; such person;

54

and any sale contravening this rule may be and any sale contravening this rule may be treated treated

as fraudulent by the buyer; as fraudulent by the buyer; The sale may be notified to be subject to a The sale may be notified to be subject to a

reserved or upset price; reserved or upset price; If the seller makes use of pretended bidding If the seller makes use of pretended bidding

to raise the price, the sale is voidable at the to raise the price, the sale is voidable at the option of the buyer.option of the buyer.

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THANK U