SALE OF GOODS ACT, 1930

INTRODUCTION

Originally, the transactions related to sale and purchase of goods was governed by Chapter VII (Sections 76 to 123) of the Indian Contract Act, 1872 – which was widely based on English common law. In the aftermath of fast industrialization, a need was felt to amend the law owing to a rise in mercantile transactions. Thus, on 1st July 1930, a separate act, the Sale of Good Act came into force. The sale of Goods Act deals with the sale of goods contract whereby the vendor transfers or agrees to transfer the property in goods to the buyer for a price.” ‘Contract of sale’ is a generic term that involves both sale and a sale agreement. This act has its root in contract act and so basic provisions of the Contract Act apply to the Sales of Goods Act also. It extends to the whole of India except the State of Jammu and Kashmir. It does not affect rights, interests, obligations and titles acquired before the commencement of the Act. The Act deals with sale but not with mortgage or pledge of the goods.

DEFINITION OF SALE
Section 4 of the Sales of Goods Act, 1930 defines a sale of goods as a “contract of sale whereby the seller transfers or agrees to transfer the property in goods to the buyer for price”. The term ‘contract of sale’ includes both a sale and an agreement to sell.


An offer to purchase or sell products for a cost and recognition of such an offer by the other party makes a sale contract. The contract may be either written or oral. A sale of contract may be absolute or conditional.
In the case of, State of Madras v. Gannon Dunkerley and Co.
It was held that if merely title to the goods passes, but not as a result of any contract between parties, express or implied, there is no sale.


Section 5 of the Sales of Goods Act, 1930 provides for the three formalities in a contract of sale:
 Offer and Acceptance;
 Delivery and Payment;
 Express or Implied contract

 

ESSENTIALS OF VALID CONTRACT OF SALE
The five vital characteristics of a sale agreement are:
 Two parties
 Goods
 Transfer of Ownership
 For a Price
 All essentials of a Valid Contract of Sale

 

TWO PARTIES : A sale has to be bilateral because the goods have to pass from one person to another. There must be a buyer – a person who buys or agrees to buy the goods and a seller – a person who sells or agrees to sell goods. The seller and the buyer must be different persons. One cannot buy one’s own good. For example, a person of a grocery shop, if supplies the goods to his family it does not amounts to sale.
However there are some exceptions to this rule:
 In the case of partners, one of them may sell to the firm or the firm, may sell to him.
 A person whose goods are sold in execution may purchase them himself.
 An insolvent may buyback from his assignee in bankruptcy.
The law, however, on grounds of public policy forbids the seller from purchasing himself.

 

GOODS: Section 2(7) defines the term goods, the subject matter of a contract of sale must be goods. Every kind of movable property except actionable claims and money is regarded as ‘goods’.
In the case of Commissioner of Sales Tax vs. Madhya Pradesh Electricity Board
The SC observed that, electricity can be transmitted, transferred, delivered, stored, possessed, etc., in the same way as any other movable property. If there can be sale and purchase of electric energy like any other movable object, we see no difficulty in holding that electric energy was intended to be covered by the definition of “goods”.

 

TRANSFER OF OWNERSHIP: There must be transfer of ownership or an agreement to transfer the ownership of goods from the seller to the buyer. Transfer of property in goods is also
an integral part of contract of sale. The property in the goods means “all ownership rights” of the goods. In a contract of sale, all the ownership rights of the goods must be transferred by the seller to the buyer. However, the physical delivery of the goods is not required. FOR A PRICE: According to Section 2(10) of the Sale of Goods Act, the term price means “the money consideration for a sale of good. The consideration in a contract of sales must be price i.e., money. If goods are provided as a consideration for goods, this will not amount to sale. It will be barter. If there is no consideration, it will be called a gift. But where the goods are sold for a certain amount and the price is paid partly in kind and partly in cash, the transaction is a sale. However, consideration can be paid partly in money and partly in goods.

 

Section 9 lays down how the price may be fixed in a contract of sale:
a) It can be fixed by the contract itself; or
b) It can be fixed in a manner provided by the contract, such as appointment of a valuer; or
c) It can be determined by the course of dealings between the parties; or
d) If the price is not capable of being fixed in any of the ways mentioned ways, the buyer is bound to pay reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case. It is not necessary that reasonable price should be equal to the market price.
In the case of, Indian Steel and Wire Products Ltd v. State of Madras
It was held that the price may be fixed by control order issued by government or the market authorities.
Section 10 makes it clear that if the third party appointed under the agreement to fix the price cannot or does not make such valuation, then the agreement to sell goods will become void. If the third party is prevented in his valuation due to the buyer or the seller, the party not at fault can file a suit for damages against the party in fault.

 

ALL ESSENTIALS OF A VALID CONTRACT OF SALE : All conditions of a valid agreement such as free consent, competence of parties, legal object and consideration must be completed. If any of the vital component of a valid agreement is missing, then the sales contract will not be valid. According to the act, the transfer of ownership must be voluntary and not confused with fraud and coercion.
 

DEFINITION OF GOODS
As per section 2(7) of act, “Goods” means every kind of movable property other than the actionable claims and money. Goods 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 will be considered goods.
In the case of, Associated Power Company v. Ram Ratan
The Calcutta High Court held that ‘electricity’ is a good as it can be transmitted, transferred, delivered, stored, possessed, etc., in the same way as any other movable property.

 

KINDS OF GOOD
1. Existing Goods
2. Future Goods
3. Contingent Goods

EXISTING GOODS : The goods are referred to as existing goods if they are present at the moment of the agreement. As per section 6 of the act, the existing goods are those goods which are in the legal possession or are owned by the vendor at the moment of the formulation of the sale contract. The existing goods are further of the following types:

a). Specific Goods: According to the sec 2(14) of the Act, these are those goods that are “recognized and agreed upon” when the contract of sale is created. For instance, a sale of motorcycle in a person’s possession is sale of specific goods.

b). Ascertained Goods: It is not defined by the law. This term is used when goods which are identified and agreed upon after the contract is made. For instance, a person have 20 chairs of the same kind and one offer to sell 10 particular chairs be appropriated towards the contract. On appropriation the goods become ascertained.

c). Unascertained Goods: The goods which are not separately identified or ascertained at the time of formation of contract are known as ascertained goods. For instance, a person have 20 chairs of the same kind and one offer to sell 10 chairs but don’t specify which one; it is a sale of unascertained goods. As soon as the 10 chairs are selected, it becomes ascertain or specific goods. In the case of, Lalchand v. Baijnath , the court said that specific goods is not identical with ascertain goods. It does not means goods examined by the buyer.

FUTURE GOODS : As per section 2(6) of the act, future goods means goods to be manufactured or produced or acquired by the seller after making the contract of sale. For instance, a manufacturer of plastic bottles contracted to sell 1000 plastic bottle at the rate of Rs 5 each. Another person agrees to purchase the bottles. This is an agreement to sell the future goods not in the possession of seller at the time of contract.

CONTINGENT GOODS : Contingent goods are a sort of future goods which are not in existence at the time sale contract. The acquisition of goods by the seller depends upon some uncertain events which may or may not happen. For example, a person made a sale contract for certain goods which is to be arrived by a train. This sale is dependent on the condition because delivery of goods depends upon the arrival of the train.
 

DIFFERENCE BETWEEN SALE AND AGREEMENT TO SELL
A contract of sale is a broad term and includes both an actual sale and an agreement to sell. Section 4 provides that if the property in goods is transferred from the seller to the buyer under a contract, the contract is called a sale. Where the transfer of the property in the goods will take place at a future time or is subject to certain condition which has to be fulfilled, the contract is called an agreement to sell.


1. When in a contract, the exchange of goods for money consideration takes place immediately, it is called sale.
When in a contract, parties to a contract agrees to sale or exchange the goods for a price at a future specified date is known as an agreement to sell.
2. Contract of sale is an executed contract, whereas, agreement to sell is an executor contract.
3. In sale, if the goods are destroyed, the loss will fall on the buyer even if the goods are in possession of the seller.
In agreement to sell, if the goods are destroyed, the loss will fall on the seller even if the goods are in the possession of the buyer.
4. In sale, if the buyer fails to pay the price, the seller can sue him for price, but cannot resell the goods.
In agreement to sell, the seller cannot sue the intended buyer for recovery of price, but can sue for damages or resell the goods.
5. Sale is absolute in nature, whereas, the agreement to sell is conditional in nature.

 

CONDITION AND WARRANTY
CONDITION- As per section 12(2) of the act, a condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated.
WARRANTY- As per section 12(3) of the act, warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated.


In the case of, Svenska Handelsbanken v. Indian Charge Chrome
The contract stipulated a condition for establishing a power plant of 108 mw capacity. There was a breach of condition. Therefore the plaintiff could have repudiated the contract as provided in the act. The plaintiff had not repudiated the contract , in fact, the plaintiff was working with the power plant. Therefore the breach of condition was treated by plaintiff as breach of warranty, the breach of warranty only give right to claim for damage but not to a right to reject goods and treat the contract repudiated.

 

CONDITION TO BE TREATED AS WARRANTY (Section 13)  When the buyer himself waives the Condition, which gives right to the buyer to repudiate the contract on breach of that particular stipulation for e.g. accepting defective goods or beyond the stipulated time amount to waiving a conditions.  When the buyer treats the Condition as a Warranty and does not repudiate the contract on the basis of such breach; or  Where the contract is non-severable and the buyer has accepted either the whole goods or any part under the contract; or  Where the law itself excuses the fulfilment of a Condition.

IMPLIED CONDITION

1. CONDITIONS AS TO TITLE [ SECTION 14 (A)] There is an implied condition on the part of the seller that in the case of a sale, he has a right to sell the goods, and 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. In Rowland v Divall, the claimant, a car dealer bought a car from the defendant for £334. He painted the car and put it in his showroom and sold it to a customer for £400. Two months later the car was impounded by the police as it had been stolen. It was then returned to the original owner. Both the claimant and defendant were unaware that the car had been stolen. The claimant returned the £400 to the customer and brought a claim against the defendant under the Sale of Goods Act. It was held that the defendant did not have the right to sell the goods as he did not obtain good title from the thief. Ownership remained with the original owner. The defendant had 2 months use of the car which he did not have to pay for and the claimant was not entitled to any compensation for the work carried out on the car.

2. CONDITION IN CASE OF SALE BY DESCRIPTION [SECTION 15] Where there is a contract of sale of goods by description, there is an implied condition that the goods shall correspond with description. The main idea is that the goods supplied must be same as were described by the seller. Sale of goods by description include many situations as under: i. Where the buyer has never seen the goods and buys them only on the basis of description given by the seller. ii. Where the buyer has seen the goods but he buys them only on the basis of description given by the seller. iii. Where the method of packing has been described. In case of, Vigers v. Sunderson, A sells to B fifty parcels of sawn lath to be of “about the specification” mentioned in the contract. 35% of the laths shipped under the contract are not of
“about” the specification nor commercially within its meaning. The buyer is entitled to reject the whole consignment.

3. CONDITION IN CASE OF SALE BY SAMPLE [SECTION 17] A contract of sale is a contract for sale by sample when there is a term in the contract, express or implied, to that effect. Such sale by sample is subject to the following three conditions: The goods must correspond with the sample in quality. The buyer must have a reasonable opportunity of comparing the bulk with the sample. The goods must be free from any defect which renders them unmercha.ntable and which would not be apparent on reasonable examination of the sample. Such defects are called latent defects and are discovered when the goods are put to use.

4. CONDITION AS TO QUALITY OR FITNESS [SECTION 16(1) There is no implied condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale. In other words, the buyer must satisfy himself about the quality as well as the suitability of the goods.

EXCEPTION TO THIS RULE: There is an implied condition that the goods shall be reasonably fit for a particular purpose described if the following three conditions are satisfied:

1. The particular for which goods are required must have been disclosed (expressly or impliedly) by the buyer to the seller.

2. The buyer must have relied upon the seller’s skill or judgement.

3. The seller’s business must be to sell such goods. In the case of, Priest v. last, A goes to a chemist’s shop and ask for a hot water bottle. He is shown a bottle which the chemist says will not stand boiling water, but is meant for hot water. A buys the bottle. After a few days, while using it, it burst and injuries A. It is found that the bottle was not fit for use as a hot-water bottle. This is a sale of an article required for the purpose of holding water. There is therefore an implied condition that the bottle is fit for that purpose, and the seller is liable in damages for breach of warranty.

6. CONDITION AS TO MERCHANTABLE QUALITY[SECTION 16(2) Where the goods are bought by description from a seller who deals in goods of that description, there is an implied condition that the goods shall be of merchantable quality.The expression ‘ merchantable quality’ means that the quality and condition of the goods must be such that a man of ordinary prudence would accept them as the goods of that description. Goods must be free from any latent or hidden defects. In Shivallingappa v. Balakrishna & Son , the buyer ordered for the best quality of 'toor dal'. The dal was loaded in rain and by the time it reached the destination, it became damages by moisture. It was held that since the damaged toor dal could not be sold as that of best quality as it was no longer of merchantable quality. The buyer was entitled to claim damages.

7. CONDITION AS TO WHOLESOMENESS
In case of eatables or provisions or foodstuffs, there is an implied condition as to wholesomeness. Condition as to wholesomeness means that the goods shall be fit for human consumption.

8. CONDITIONS IMPLIED BY CUSTOM [SECTION 16(3)] Condition as to quality or fitness for a particular purpose may be annexed by the usage of trade.

Implied Warranties

1.Implied warranty of quiet possession – S. 14 (b)-In a contract of sale unless the circumstances of the case show different intention, there is an implied warranty that the buyer shall have and enjoy possession of goods.

2. Implied warranty against encumbrances- S. 14(c)- There is an implied warranty that the goods sold shall be free from any charge or encumbrances in favour of any third party. If there is a charge or encumbrance on the goods sold and the buyer has to discharge the same, he is entitled to get compensation for the same from the seller. If the charge or encumbrance of the goods is known to the buyer at the time of the contract of sale, he becomes bound by the same sand does not have any right to claim compensation for discharging the same.

EXPRESS CONDITION AND WARRANTY

When any stipulation and warranty is inserted in the contract at the will of parties, it is said to be express condition and warranty. An express condition is any stipulation, essential to the main function of the contract, which is put in the contract at the will of the two parties.
 

TRANSFER OF PROPERTY
The property in the goods is said to be transferred from the seller to the buyer when the latter acquires the proprietary privileges over the goods and the responsibilities linked thereto. 'Property in Goods' which means the ownership of goods, is distinct from ' possession of goods' which means the physical custody or control of the goods.
The transfer of ownership in the goods from the seller to the buyer is the core of a contract of sale. Therefore the moment when the property in goods passes from the seller to the buyer is important for following reasons:
a. Ownership -- The moment the property in goods passes, the seller ceases to be their owner and the buyer acquires the ownership. The buyer can exercise the proprietary rights over the goods. For example, the buyer may sue the seller for non-delivery of the goods or when the seller has resold the goods, etc.
b. Risk follows ownership -- The general rule is that the risk follows the ownership, irrespective of whether the delivery has been made or not. If the goods are damaged or destroyed, the loss shall be borne by the person who was the owner of the goods at the time of damage or destruction. Thus the risk of loss prima facie is in the person in whom the property is.
c. Action Against Third parties -- When the goods are in any way damaged or destroyed by the action of third parties, it is only the owner of the goods who can take action against them.
d. Suit for Price - The seller can sue the buyer for the price, unless otherwise agreed, only after the gods have become the property of the buyer.
e. Insolvency - In the event of insolvency of either the seller or the buyer, the question whether the goods can be taken over by the Official Receiver or Assignee, will depend on whether the property in goods is with the party who has become insolvent.

 

Essentials for Transfer of Property -- The two essentials requirements for transfer of property in the goods are:
1. Goods must be ascertained: Unless the goods are ascertained, they (or the property therein) cannot pass from the seller to the buyer. Thus, where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained
2. Intention to PASS Property in Goods must be there: In a sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.

 

PERFORMANCE OF CONTRACT OF SALE
A sale of goods contract is automatically created whenever a good or product is sold. The resulting contract imposes the duties that are required of both parties involved:
 The seller.
 The buyer.

The term ‘Performance of Contract’ means that both, the promisor, and the promisee have fulfilled their respective obligations, which the contract placed upon them.
If either of the involved parties fails in carrying out his or her respective duties under the contract's terms, the resulting consequences can have adverse effects. When it comes to performing a sale of goods contract, there are three general dimensions. These dimensions are outlined in the Sale of Goods Act, specifically in section 31, which states it is the seller's duty to deliver the purchased goods and it is the buyer's duty to pay for and accept them. These duties are in accordance with the contract of sale that comes into play when the transaction In the case of, Chhunna Mal v. Mool Chand
It was held that when a buyer puts an end to the contract and has repudiated his obligations, a seller would be absolved from his duty of delivering the goods.
Simply put, the three dimensions of performing a sale of goods contract are as follows:
 The seller delivers the goods.
 The buyer accepts the goods.
 The buyer pays for the goods.

 

Section 32 of the act provides that, delivery of the goods and the payment of the price are concurrent conditions i.e. they have to be performed simultaneously. The seller must be ready and willing to give the delivery in exchange for the price, and the buyer must be ready and willing to pay the price in exchange for possession of goods.
 

DELIVERY OF GOODS (Section 33) Delivery of goods sold may be made by doing anything which the parties agree shall be treated as delivery or which has the effect of putting the goods in the possession of the buyer or of any person authorized by him.

Modes of Delivery

1. Actual Delivery- Actual delivery means physical transfer of goods by the seller to the buyer. The delivery may be made by the agent of the seller to the agent of the buyer.

2. Symbolic Delivery - Where the goods are bulky, it is usual for the seller to give symbolic delivery. For example, A sells B certain specific goods which are locked up in a godown. A gives B the key of the godown in order that he may get the goods. This is a symbolic delivery.

3. Constructive Delivery - when the goods at the time of sale are in possession of a third person and such third person acknowledges to the buyer that he holds the goods on his (buyer’s) behalf, the delivery is called constructive delivery. In the case of, Elmore v. Stone, a horse was sold. The seller at the buyer’s request agreed to keep it at his livery and moved the horse from sale stable into another stable. It was held that there was a delivery. Place of delivery, In the absence of an agreement, express or implied, the goods sold are to be delivered at the place at which they are at the time of sale. The goods agreed to be sold are to be delivered at the place at which they are at the time of the agreement to sell, or if not then in existence, at the place at which they are manufactured or produced.
 

PASSING OF PROPERTY The passing of property is an significant element to assist determine both the seller and buyer’s liabilities and rights. Once a property is passed to the buyer, then the risk in the sold goods is that of the buyer and not the seller. This is true even if the goods are in the possession of the seller.

There are certain rules that govern the passing of property:

 Specific or Ascertained Goods

 Passing of Unascertained Goods

 Goods sent on approval

 Transfer of property in case of reservation of the right to disposal Passing of Ascertained Goods
Rules relating to transfer of ascertain goods are provided under section 20 to 22:

GOODS IN DELIVERABLE STATE(section 20)- a state in which buyer is bound to take delivery of goods is known as deliverable state. When a contract for transfer of property in the goods is unconditional, the transfer of property in the goods is said to be done when such contract is doe. Two conditions must be fulfilled under section 20:  The contract of sale is for specific goods which are in deliverable state  The contract must be an undeliverable state. In the case of, Consolidated Coffee ltd. v. Coffee Board It was held that in an auction sale of chattels, property passes to the purchaser on the acceptance of his bid. This occurs not because of section 64(2) but because of the rule contained in section 20.

SPECIFIC GOODS TO BE PUT INTO THE DELIVERABLE STATE(section 21)- when the seller is suppose to do something to put the goods into deliverable state, the property in the goods is said not to be transferred unless such thing is done to the goods and the buyer is given notice of same.

PRICE OF GOODS ASCERTAINED THROUGH WEIGHING(section 22)- where anything remain to be done to the goods by the seller for the purpose of ascertaining the price, the property does not passes until this has been done and the buyer has notice thereof. Passing of Unascertained Property If there is a contract for the sale of unascertained goods, then the passing of the property of the goods to the buyer cannot happen unless the goods are ascertained. This is specified under Section 18 of The Sale of Goods Act, 1930.

Further Section 23 lists two important rules for the passing of property of unascertained goods:

 Sale of unascertained goods by description: Imagine a contract for the sale of unascertained or future goods by description. If any goods of that description are appropriated to the contract either by the buyer or the seller with the consent of the other party, then the property of the goods passes to the buyer. The consent can be express or implied and given before or after the appropriation is made.

 Delivery to the carrier: If the seller delivers the goods to the buyer or a carrier or a bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, but does not reserve the right of disposal, then he is deemed to have unconditionally appropriated the goods to the contract.


Goods Sent on Approval (section 24)
When the goods are sold to buyer on certain specific terms, the property is said to be transferred when:
 Buyer signifies his approval or assent or does any other act, adopting the transaction
 Buyer retain the goods without giving notice of rejection, then, if time has been fixed, on expiration of such time or within the reasonable time.

 

Transfer of property in case of reservation of the right to disposal (section 25)- when seller reserves a right to dispose of the goods until fulfillment of certain conditions, then the property in the goods cannot be transferred to the buyer until such conditions are fulfilled even if goods are specific.
 

DEFINITION OF UNPAID SELLER
“Unpaid Seller” implies the individual who sold the goods at a price and the payment was not made to him or the instrument provided to him was dishonoured at maturity.
As per section 45 of the act, a seller becomes an ‘unpaid seller’ in two situations:
• When the whole of the price has not been paid or tendered:
• When a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of dishonor of the instrument or otherwise.
In case of, Feise v. Wray
The seller draws bills for the price of goods on the buyer, who accepts them, and the seller negotiates them. Before the bills arise at maturity the buyer fails. The seller is in position of an unpaid seller.

 

RIGHTS OF AN UNPAID SELLER
When the seller becomes an unpaid seller, he can exercise certain rights against the buyer which can be divided into two folds:
1. Rights of unpaid seller against the goods.
2. Rights of unpaid seller against the buyer personally.


A). Against the Goods
Section 46 of the act, provides for rights of seller against goods sold:
• A lien on the goods while he is in possession of them
• A right to stop the goods in transit
• A right of resale

 

LIEN
‘Lien’ is the right to retain possession of goods and refuse to deliver them to the buyer until the price due in respect of them is paid or tendered. The seller can retain his possession as per Section 47 under the following circumstances:
1- In case the buyer is insolvent.
2- When the term of goods sold on credit is expired.
3- Goods sold without any stipulation as to credit.
However as per section 48 of the act, in those situations where goods have been partially delivered by the seller then he may exercise his right of lien on the remaining part unless there is an agreement in which he waives this right.
In Grice V Richardson , the sellers had delivered a part of the three parcels of tea comprised in the sales, and they had not been paid for the part which remained with them. They were allowed to keep it till the payment of the price. Where, however, a part of goods delivered which show an agreement to waive the lien, the seller cannot the remainder.

 

Termination of Lien
As per Section 49, under following circumstances right of lien is terminated-
• If an unpaid seller himself waives his right of lien then it will be terminated.
• When a buyer or his agent or his any representative obtains the lawful possession of goods, unpaid seller’s right of lien automatically ends.
• When an unpaid seller delivers the goods to the carrier/bailee without reserving the right to disposal with himself then his right of lien ends.

 

In the case of, Valpy v Gibson the goods were delivered to the buyer’s shipping agent, who had put them on board a ship. But the goods were returned to the seller for repacking, while they were still with the sellers the buyer became insolvent and seller being unpaid seller claimed to retain the goods in the exercise of their lien. It was held that they have lost their lien by delivery to the shipping agent. On the contrary, when the seller has reserved the rights of disposal his right of lien continues till the end of the transit. And the seller cannot lose his right to lien just because he has obtained a decree for the price of goods.

RIGHT OF STOPPAGE OF GOODS IN TRANSIT

The right of stoppage of goods means the right of stopping the goods while they are in transit, to regain possession and to retain them till the full price is paid. Conditions under which right of stoppage in transit can be exercised[Section 50]:

 The goods must not be in possession of seller.

 The goods must be in transit.
 The buyer must have become insolvent.

RIGHT OF RESALE

The unpaid seller can resale the goods in following conditions:

 When the goods are perishable in nature.

 When the seller expressly reserves the right of resale if buyer commits default in payment.

 Where the unpaid seller who has exercised his right of lien or stoppage in transit gives a notice to the buyer about his intention to resell if buyer does not pay or tender within a reasonable time.
 

B) Against the Buyer
SUIT FOR PRICE(section 55)-
Where property in goods has passed to the buyer; or where the sale price is payable ‘on a day certain’, although the property in goods has not passed; and the buyer wrongfully neglects or refuses to pay the price according to the terms of the contract, the seller is entitled to sue the buyer for price, irrespective of the delivery of goods. Where the goods have not been delivered, the seller would file a suit for price normally when the goods have been manufactured to some special order and thus are unsalable otherwise.

 

DAMAGES FOR NON ACCEPTANCE (section 56)-
Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for non-acceptance. The seller’s remedy in this case is a suit for damages rather than an action for the full price of good.

 

BREACH OF CONTRACT

Where the property in the goods has passed to the buyer, the seller may sue him for the price. Where the price is payable on a certain day regardless of delivery, the seller may sue for the price, if it is not paid on that day, although the property in the goods has not passed. Where the buyer wrongfully neglects or refuses to accept the goods and pay for them, the seller may sue the buyer for damages for non-acceptance. Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue him for damages for non-delivery. Where there is a breach of warranty or where the buyer elects or is compelled to treat the breach of condition as a breach of warranty, the buyer cannot reject the goods. He can set breach of warranty in extinction or dimunition of the price payable by him and if loss suffered by him is more than the price he may sue for the damages. If the buyer has paid the price and the goods are not delivered, the buyer can sue the seller for the recovery of the amount paid. In appropriate cases the buyer can also get an order from the court that the specific goods ought to be delivered.

 

ANTICIPATORY BREACH

Where either party to a contract of sale repudiates the contract before the date of delivery, the other party may either treat the contract as still subsisting or wait till the date of delivery, or he may treat the contract as rescinded and sue for damages for the breach. In case the contract is treated as still subsisting it would be for the benefit of both the parties and the party who had originally repudiated will not be deprived of:
(a) His right of performance on the due date in spite of his prior repudiation; or

(b) His right to set up any defense for non-performance which might have actually arisen after the date of the prior repudiation.

 

MEASURE OF DAMAGES

The Act does not specifically provide for rules as regards the measure of damages except by stating that nothing in the Act shall affect the right of the seller or the buyer to recover interest or special damages in any case were by law they are entitled to the same.

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By: Aayushi Devpura

      "Special Student Columnist"

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