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Sale of Goods Act 1930
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Contd -
Act Deals with goods
Sec 4(1) contract of sale 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.
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Essential elements
Two parties - Seller and buyer
Goods
Transfer of property Price
Essential elements of a valid contract
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Contract of sale
Contract of salemaybe
Express
In writingBy word of
mouth
Partly in writingand partly by
word of mouth
Implied from theconduct of the
parties
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Contract of sale and agreement to
sell
Contract of saleincludes
Sale
i.e, where theownership of
goods istransferred
Agreement tosell
I.e., where the transfer of ownership ingoods is to take place at a future time orsubject to fulfillment of some condition
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Condition and warranties
Both seller and buyer make representations
to each other at the time of entering into
contract of sale.
Some of these representations are mere
opinions which do not form a part of the
contract of the sale. Whereas some become
part of the contract of sale
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Contd -
Representations which become part of the
contract of sale are termed as stipulations
which may rank as condition or warranty
Stipulation Sec 12(1) A stipulation in a
contract of sale of goods may be a condition
or warranty.
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Meaning of condition
A condition is a stipulation
(a) which is essential to the main purpose of the
contract
(b) the breach of which gives the aggrieved
party a right to terminate the contract.
It goes to the root of the contract.
Its non-fulfillment upsets the very basisof the contract.
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Warranty
It is a stipulation collateral to the main
purpose of the contract
It is of secondary importance
If there is a breach of a warranty, the
aggrieved party can only claim damages and
it has no right to treat the contract as
repudiated.
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Condition and warranties
There is no hard and fast rules as to which
stipulation is a condition and which one is a
warranty.
Whether a stipulation is a condition or a
warranty depends in each case on the
construction of the contract as a whole.
The court is not to be guided by the
terminology used by the parties to the
contract
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Basis of distinction
Condition
It is a stipulation which
is essential to the main
purpose of the contract. The aggrieved party can
terminate the contract
A breach of condition
can be treated as abreach of warranty . For
example, a buyer may
like to retain the goods
and claim only damages.
Warranty
It is a stipulation which is
only collateral to the main
purpose of the contract The aggrieved party can
claim damages but cannot
terminate the contract.
A breach of warrantycannot be treated as a
breach of condition.
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Conditions and warranties
Two kinds express and implied
Express conditions and warranties Conditions
and warranties expressly provided in the contract
Implied conditions They are implied by the lawinto the contract
Condition as to title
Sale by description
Sale by sample
Condition as to the quality of the items
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Conditions and warranties
Implied warranties
Warranty of quite possession
Warranty as to freedom from encumbrances Warranty to disclose dangerous nature of
goods
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Doctrine of caveat emptor
Let the buyer beware
It is the duty of the buyer to be careful while
purchasing goods of his requirement and in
the absence of the enquiry from the buyer,
the seller is not bound to disclose every
defect in the goods of which he may be
cognisant.
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Exceptions to the doctrine of
caveat emptor
In case of misrepresentation by the seller
In case of concealment of latent defect
In case of sale by description In case of sale by sample
In case of sale by sample and description
Fitness for a particular purpose Merchantable quality
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Passing of property Transfer of property in goods from the
seller to the buyer is the main object of acontract of sale.
property in goods means the ownership ofgoods
An article may belong to A although it maynot be in his possession. B may be in
possession of that article although he is notits owner.
It is important to know the precise momentof time at which the property in goods
passes from the seller to the buyer for the
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Contd -
Significance Time of transfer of ownership of
goods decides various rights and liabilities of the
seller and buyer.
Risk Owner to bear the risk and not the personwho merely hs the possession
Action against third party Owner can take action
and not the person who merely has possession.
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Types of goods
Goods
Existing
goods
Future
goods
Contingent
goods
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Types of existing goods
Specific goods
Ascertained goods
Unascertained goods Goods sent on approval or on sale on
return basis
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Primary rules
Goods must be ascertained Where there is acontract for the sale of unascertained goods, noproperty in the goods is transferred to the buyerunless and until the goods are ascertained.
Intention of the parties Where there is a contractfor the sale of specific or ascertained goods theproperty in them passes to the buyer at the timewhen the parties intend it to pass
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Contd -
Where the intention of the parties cannot be
ascertained from the contract-
Specific goods
Passing of the property at the time of the contract
Where there is an unconditional contract for the sale
of specific goods in a deliverable state, the property
in the goods passes to the buyer when the contract is
made.
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Contd-
Passing of property delayed beyond thedate of the contract
(1) Goods not in a deliverable state Where
there is a contract for the sale of specific goodsnot in a deliverable state,ie, the seller has to dosomething to the goods to put them into adeliverable state, the property does not pass
until such thing is done and the buyer hasnotice of it.
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Contd -
(2) When the price of goods is to be ascertainedby weighing, etc. Where there is a contract forthe sale of specific goods in a deliverable state,but the seller is bound to weigh measure test orto do some other act or thing with reference tothe goods for the purpose of ascertaining theprice the property does not pass until such actor thing is done and the buyer has notice
thereof
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Contd -
Unascertained goods
Where there is a contract for the sale of
unascertained goods, the property in the goods
does not pass to the buyer until the goods areascertained. Until the goods are ascertained
there is merely an agreement to sell.
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Contd -
Where there is a contract for sale of
unascertained or future goods by description
and goods of that description and in a
deliverable state are unconditionallyappropriated to the contract, the property in
the goods thereupon passes to the buyer.
ascertainment of goods, unconditional
appropriation to the contract
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Delivery to carrier
A seller is deemed to have unconditionally
appropriated the goods to the contract
where he delivers them to the buyer or to a
carrier or other bailee for the purpose oftransmission to the buyer and does not
reserve the right of disposal.
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Goods sent on approval or on
sale or return
When goods are delivered to the buyer on
approval or on sale or return or other
similar terms the property therein passes to
the buyer
(1) When he signifies his approval or
acceptance to the seller:
(2)When he does any other act adopting thetransaction
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Reservation of right of disposal
The property in goods whether specific or
subsequently appropriated to the contract
does not pass to he buyer if the seller
reserves the right of disposal of goods untilcertain conditions are fulfilled.
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Rights of an unpaid seller
Meaning of an unpaid seller Sec 45(1)(2)
The seller of the goods is deemed to be anunpaid seller -
(a) When whole of the price has not been paid ortendered
(b) When a bill of exchange or other negotiableinstrument (such as cheque) has been received asconditional payment and it has been dishonoured
[sec 45(1)]
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Contd -
The seller shall be called an unpaid seller evenwhen only a small portion of the price remainsto be paid.
It is for the non-payment of the price and notfor other expenses that a seller is termed as anunpaid seller.
Where the goods have been sold on credit, theseller cannot be called as an unpaid sellerduring the credit period unless the buyer
becomes insolvent. On the expiry of creditperiod if the price remains unpaid, then onlythe seller will become an unpaid seller
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Contd -
Where the full price has been tendered by
the buyer and the seller refused to accept it,
the seller cannot be called as an unpaid
seller.
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Rights of an unpaid seller
Against goods
Against buyer personally
AGAINST GOODS
Where the property in
goods has passed to
the buyer
Where the property
in goods has not
passed to the buyer
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Contd -
Where the property in goods has passed to
the buyer
Right of
lien
Right of
stoppage intransit
Right ofresale
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Right of lien
The right of lien means the right to retainthe possession of the goods until the fullprice is received.
Circumstances under the right of lien can beexercised
Where the goods have been sold without anystipulation to credit
Where the goods have been sold on credit, but theterm of credit has expired
Where the buyer becomes insolvent
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Right of stoppage of goods in
transit
Right of stoppage in transit means the rightof stopping the goods while they are intransit, to regain possession and to retain
them till the full price is paid. Conditions under which Right of stoppage in
transit can be exercised
(i)Seller must have parted with the possessionof goods,ie, the goods must not be in thepossession of the seller
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Contd -
(ii) the goods must be in course of transit
(iii) buyer must have become insolvent
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Right of resale
An unpaid seller can resell the goods under the
following circumstances:
(i) Where the goods are of a perishable nature
(ii) Where the seller expressly reserves the right ofresale if the buyer commits a default in making
payment
(iii)Where the unpaid seller who has exercised his right
of lien or stoppage in transit gives a notice to the buyerabout his intention to resell and buyer does not pay or
tender within a reasonable time.
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Contd -
Where the property in goods has not passed
to the buyer
Withholding
delivery Lien Stoppage in
transit
Resale
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Contd -
Against the buyer personally
Suit for
price
Suit for
damages
Suit for
interest
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Contd -
Buyers suits
(a) Suit for damages for non-delivery of the
goods
(b) suit for specific performance
Suit for breach of warranty
(d)Suit for interest
(e)Suit for damages for repudiation of contractby the seller before the due date.
d f b h f
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Remedies for breach of contract
of sale
(1) sellers suits
(a) Suit for price
(b) Suit for damages for non acceptance of the
goods
(c) Suit for damages for repudiation of contract
by the buyer before the due date
(d) Suit for interest.
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