The law relating to the sale of goods is contained in the Sale of Goods Act (Cap. 31). This Act is mainly based on English Sales of Goods Act 1893. At the same time, the general rules of contract law apply to contracts for the sale of goods.
Definition
Section 3(1) of the Act defines a contract for the sale of goods as:
“A contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price”.
The essential characteristics of a contract of sale of goods are as follows:
1. There must be two distinct parties to a contract of sale viz, a buyer and a seller.
2. There must be a transfer of property. Property here means ‘ownership’. A seller must either transfer or agree to transfer the property in goods to the buyer.
3. There subject-matter of the contract of sale must be goods. ‘Goods’ includes all chattels personal other than things in action and money, and all emblezments, industrial, growing crops and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale. It means every kind of movable property other than actionable claims and money, are called as goods.
4. The consideration for a contract of sale must be money consideration called the price. If goods are sold or exchanged for other goods the transaction is barter and not sale of goods.
5. There term contract of sale includes both a sale and an ‘agreement to sell’.
7.1 Distinction between Sale and Agreement to Sell.
Section 3(4) of Act provides that:
“Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale: but, where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell”.
The following are the main points of distinction between a ‘sale’ and ‘an agreement to sell’.
1. Transfer of property (ownership): In a ‘sale’ the property in goods passes to the buyer immediately at the time of making
the contract. In other words, a sale implies immediately conveyance of property so that the seller ceases to be the owner of the goods and the buyer becomes the owner thereof. In ‘an agreement to sell’ there is no transfer of property to the buyer at the time of the
contract. The conveyance of property takes place later so that the seller continues to be the owner until the agreement to sell becomes a sale either by the expiry of certain time or the fulfillment of some condition.
2. Risk of loss:
The general rule is that unless agreed, the risk of loss prima facie passes with property. Thus in case of sale, if the goods are destroyed the loss fails on the buyer even though the goods may never have come into his possession because the property in the goods has already passed to the buyer. On the other hand, in case of an agreement to sell where the ownership in the goods is yet to pass from the seller to the buyer, such loss has to be borne by the seller even though the goods are in the possession of the buyer.
3. Consequences of breach:
In case of sale, if the buyer wrongfully neglects or refuses to pay the price of the goods, the seller can sue for the price, even though the goods are still in his possession. In case of an agreement to sell, if the buyer fails to accept and pay for the goods, the seller can only sue for damages and not for the price, even though the goods are in the possession of buyer.
4. Right of resale:
In a sale, the property is with the buyer and as such the seller (in possession of goods after sale) cannot resell the goods. If he does so, the subsequent buyer having knowledge of the previous sale does not acquire a title to the goods. In an agreement to sell, the property in the goods remains with the seller and as such he can dispose of the goods as he likes and the original buyer can sue him for the breach of contract only. In this case, the subsequent buyer gets a good title to the goods irrespective of his knowledge of previous sale.
5. Insolvency of buyer before he pays for the goods:
In a sale, if the buyer is adjudged insolvent before he pays for the goods, the seller, in the absence of a ‘right of lien’ over the goods, must deliver the goods to the Official Receiver or Assignee. The seller is entitled only to a rateable dividend for the price of the goods. But in an agreement to sell, in these circumstance, the seller may refuse to deliver the goods to the Official Receiver or Assignee unless paid for, as ownership has not passed to the buyer.
6. Insolvency of seller if the buyer has already paid the price;
In a sale, if the seller is adjudged insolvent, the buyer is entitled to recover the goods from the Official Receiver or Assignee, as the property in the goods rests with the buyer. On the other hand, in an agreement to sell, if the buyer has already paid the price and the seller is adjudged insolvent, the buyer can only claim a rateable dividend. (as creditor) and not the goods because property in them still rests with the seller.
Distinction between Sale and Contract for Work and Material:
A distinction has to be made between a contract of sale and contract for work and material. The Sale of Goods Act does not apply to contracts for work and material. When property in the goods is intended to be transferred and goods are ultimately to be the buyer, it is a contract of sale even though some labour on the part of the seller of the goods may be necessary. Where, however, the essence of the contract is rendering of service and exercise of skill and no goods are delivered as such, it is a contract of work and material and not of sale.
Illustrations:
- A dentist agreed to make a set of false teeth for a lady and fit it into her mouth. Held: it is a contract for the sale of goods (Lee vs. Griffin).
- An order for making and fixing curtains in a house is a contract of sale of goods, though it involves some work and labour in fixing the same (Love vs. Norman Wright (Builders) Ltd).
- G engaged an artist to paint a portrait and supplied the necessary canvas and paint. Held: it is a contract for work and labour as the substance of the contract is the application of the skill and labour in the production of the portrait (Robinson vs. Graves). If the canvas and paint are also to be supplied by the painter, it will become a contract of sale of goods. The distinction between a sale and a contract for work and material is important due to the following two reasons:
1. A contract for work and material does not require to be in writing; while a contract for the sale of goods in Kenya must be in writing if the value of goods is shs. 200 or more.
2. The implied conditions and warranties under the sale of Goods Act do not apply to contracts of work and material.
7.2 Capacity to Buy and Sell:
Section 4 of the Act deals with the capacity to buy and sell. Under this section, the capacity to buy and sell is governed by the general law concerning capacity to contract and to transfer and acquire property. Infants and persons of unsound mind must pay a reasonable price for necessaries and not necessarily the agreed price. Necessaries are defined by section 4(20 as goods suitable to the condition in life of such or minor or other person, and to his actual requirements at the time of sale and delivery.
7.3 Form of Contract:
Section 5 of the Act states that a contract of sale may be made in writing (either with or without seal) or by word of mouth, or partly in writing and partly by word of mouth, or may by implied by the conduct of parties. Under section of the Act, a contract for the sale of any goods of the value of two hundred shillings or upwards shall not be enforceable by action unless the buyer accepts part of the goods so sold, and actually receives them, or gives something in earnest to bind the contract or in part payment, or unless some note or memorandum in writing of the contract is made and signed by the party to be charged or his agent in that behalf.
7.4 Subject Matter of Contract:
Sections 7, 8 and 9 the Act relate to the subject matter of contract. Goods form the subject matter of a contract of sale. Goods may be existing goods or future goods. These are explained as under:
7.4.1 Existing Goods:
Goods which are physically in existence and which are in seller‘s ownership and /or possession, at the time of entering the contract of sale are called ‘existing goods’. Where seller is in possession, say as an agent or a pledge, he has a right to sell them. Existing goods may again be either ‘specific’ or ‘unascertained ‘.
7.4.2 Future Goods:
Goods to be manufactured, produced or acquired by the seller after the making of the contract of sale are called ‘future goods’. These goods may be either not yet in existence or be in existence but not yet acquired by the seller. It is worth noting that there can be present sale of future goods because property cannot pass in what is not owned by the seller at the time of the contract. So even if the parties purport to effect a present sale of future goods, in law it operates as an ‘agreement to sell’.
7.4.3 Contingent Goods:
Goods, the acquisition of which by the seller depends upon an uncertain contingency are called ‘contingent goods’. Obviously they are a type of future goods and therefore a ‘contract for the sale of contingent goods also operates as ‘an agreement to sell’ and not a ‘sale’ so far as he question of passing of property to the buyer is concerned. In other words, like the future goods in the case of contingent goods also the property does not pass to the buyer at the time of making the contract. It is important to note that a contract of sale of contingent goods is enforceable only if the event on the happening of which the performance of the contract is dependent happens, otherwise the contract becomes void.
Perishable Goods:
Under section 8,where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made, contract is void. Section 9 of the Act states where there is an agreement to sell specific goods, and subsequently the goods, without any fault on the part of the seller or buyer, perish before the risk passes to the
buyer , the agreement is thereby avoided.
The Price:
The money consideration for a sale of goods is known as “price” .The price is an essential element in every contract of sale of goods, that is ,no valid sale can take place without a price. The price should be paid pr promised to be paid in legal tender money, unless otherwise agreed. It may be paid in the form of a cheque, draft, bank deposit etc. For, it is not the mode of payment of a price but the agreement to pay a price in money that is requisite to constitute a valid contract of sale.
Under section 10 of the Act, the price may be expressly fixed by the parties in the contract of sale, or may provide for the method in which the price is to be fixed. Where the price is not stated in the contract, nor is any provision made for its determination, the buyer must pay a reasonable price, and what is a reasonable price is a question of fact dependent on the circumstances of each particular case.
Section 11 of the Act provides that the price may also be left t be fixed by the valuation of a third party, provided he accepts the duty and performs it. But if the third party fails to make such valuation, the agreement is avoided. If in pursuance of the contract the goods or any part thereof have been delivered by the seller and accepted by the buyer, he must pay a reasonable price for them .I n case the third party is prevented from making the valuation by the seller or the buyer, the innocent party may maintain an action for damages against the party in fault.
7.5 Implied Conditions And Warranties.
A contract of sale of goods contains various or stipulations regarding the quality the goods, the price and the mode of its payment, the delivery of goods and its time and place. But all of them are not of equal importance. Some of these stipulations may be major terms which go to the very root of the contract, and their breach may frustrate the very purpose of the contract, while others may be minor terms which are not so vital that their breach may seem to be a breach of the contract as such. In law of sale, major terms are called ‘ conditions’ and minor terms are called ‘ warranties’.
Conditions Defined:
A ‘condition ‘ is a stipulation essential to the main purpose of the contract , the breach of which gives the aggrieved party right to repudiate the contract itself(sec .13(2).In addition , he may maintain an action for damages for loss suffered , if any , on the footing that the whole contract is broken and the seller is guilty of non –delivery.
Warranty Defined:
A ‘ warranty ‘ is a stipulation collateral to the main purpose of the contract, the breach of which gives the aggrieved party a right to sue for damages only ,and not to avoid the contract itself .(Sec.13(3). Under the Act, a buyer may elect to waive the condition or may elect to treat the breach of such condition as breach of warranty and not as a ground for treating the contract as repudiated, (Sec.
13(1).
Express and Implied Conditions and Warranties:
Conditions and warranties may be either express or implied. They are said to be express when at the will of the parties they are inserted in the contract, and they are said to be implied when the law presumes their existence in the contract automatically though they have not been put into it in express words. Implied conditions and warranties may, however, be negative or varied by express agreement, or by course of dealing between the parties, or by usage of trade. This provision is merely an application of the general maxim of law,” what is expressly done puts an end to what is tacit or implied’, and ‘custom and agreement over rule implied conditions and warranties.
7.5.1 Implied Conditions.
Unless otherwise agreed, the law incorporates into a contract of sale of goods the following implied conditions:
Right to sell (sec .14(a):
In every contract of sale, the first implied condition on the part of the seller is that, in the case of a sale he has the right to sell the goods and that in the case of an agreement to sell, he will have a right to sell the foods at the time when the property is to pass. Ordinarily the seller has the right to sell the goods if either he is the owner of the goods or he is owner’s agent. As a result of this condition, it the seller’s title turns out to be detective the buyer is entitled to reject the goods and to recover his price. Notice that in the case of breach of condition as to title, the buyer has no option to treat the breach of warranty and accept the goods to the true owner. He can of course recover the price from the seller because of a total failure of consideration.
Illustration.
R purchased a motorcar from D and used the same for several months had no title to the car and therefore, R was compelled to return the car to the true owner sued D to recover back the price which he had already paid. He was held entitled to recover the whole of the price paid by him despite the fact he had used the car for some months (Rowland vs Divall 1923).
Condition in a sale by description (S.15)
“Where there is a contract of sale of goods by description, there is an implied condition that the goods shall correspond with the description……………………..” Lord Blackburn observed “If you contract to sell peas, you cannot oblige a party to take beans. If the description of the article tendered is different in any respect, it is not the article bargained for, and the other party is into bound to take it”. It is important that the goods must correspond with the description whether it is a sale of specific goods or of unascertained goods. Further, the fact that the buyer has examined the goods will not effect his right to reject the goods, if the deviation of the goods from the description is such which could not have been discovered by casual examination, i.e. if the goods show any latent defects.
The description may be in terms of the qualities or characteristics of the goods, e.g. long staple cotton, white maize basmati rice or may simply mention the trade mark, brand name or type of packing, e.t.c.
Illustration
- Where there was a contract or the supply of ‘new single cars’ and one of the cars supplied having already run a considerable mileage was not new, there was a breach of condition on the part of the seller and buyer was held entitled to reject the car (Andrews Bros. Vs Singer & Co;. 1934).
- M agreed to supply to L 3,000 tins of canned fruit, to be packed in cases each containing 24 tins. M tendered a substantial portion in cases containing 24 tins. I t was held that the mode of packing constituted a part of the description and, therefore, L was entitled to reject the whole consignment (Re Moore & Co. and Laundaure & Co.1921).
3. Condition in a sale by sample; (S.17)
When under a contract of sale, goods are to be supplied according to a sample agreed upon, the implied conditions are:
- That the bulk shall have a reasonable with the sample in quality:
- That the buyer shall have a reasonable opportunity of comparing the bulk with the sample;
- That goods shall be free from any defect, rendering them unmerchantable which would not be apparent on reasonable examination of the ample. In other words, there should not be any latent defect in the goods. If the defect is patent one, that is, easily discoverable by
Illustrations
1. Two parcels of wheat were sold by sample. The buyer went to examine the bulk a week after. One parcel was shown to him but the seller refused to show the other parcel which was not there in the warehouse. Held: the buyer was entitled to rescind the contract
(Lorymer vs. Smith 1822).
2. Some mixed worested coatings were sold by sample. The goods when supplied corresponded to the sample but it was found that owning to a latent defect in the cloth, coats made out of it would not stand ordinary wear and were therefore unsaleable, the
same defect existed in the sample also but could not be detected on a reasonable examination. Held: the buyer was entitled to reject the cloth (Drummond & Sons vs. Van Lugen (1887).
3. Condition in a sale by sample as ell as by description: (S.15)
When goods are sold by sample as well as by description, there is an implied condition that the bulk of the goods shall correspond both with the description. If the goods supplied correspond only with the sample and not with the description or vice versa, the buyer in
entitled to reject the goods. The bulk of the goods must correspond the both.
Illustrations:
- There was a contract of sale by sample of seeds described as ‘common English sainfion’. The contract contained a term excluding all warranties express or implied. The seed was sown and when the crop was ready it was discovered that the seed supplied and the sample shown were a different and inferior variety known as ‘gaint sanfion’. It was held that there was a breach of condition and exemption clause did not protect the sellers. The buyer was, therefore, entitled to recover damages (Willis vs. Pratt 1911).
- N agreed to sell G some oil described as ‘foreign refined or warranty as to quality of fitness for any particular purpose of goods supplied; the rule of law being ‘Caveat Emptor’, that is, let the buyer beware. But an implied condition is deemed to exist on the part of the seller that the goods supplied shall be reasonably fit for the purpose for which the buyer wants them, if
the following conditions are satisfied:
- The buyer, expressly or impliedly, should make known to the seller the particular purpose for which the goods are required: and;
- The buyer should rely on the seller’s skill or judgment; and;
- The goods sold must be of a description which the seller deals in the ordinary course of his business whether he be the manufacturer or not.
The purpose must be made known expressly if the goods to be supplied can be used for several purposes, otherwise the condition as to ‘fitness will not be implied and the buyer will have no right to reject the goods merely because they are unfit for the specific purpose he had in mind.
Illustration:
A buyer ordered for the Hessian cloth, which is generally used for packing purposes, without specifying the purpose for which he wanted the same. The cloth was supplied accordingly. On receiving the cloth the buyer found that it was not suitable for packing food products as it had unusual smell. Held: that the buyer had no right to reject the cloth as it was suitable for packing purposes alright. The buyer ought to have disclosed his particular purpose to the seller in order to make him liable for the breach of implied condition as to fitness (Re Andrew Yule & Co, 1932). The purpose need not be told expressly if the goods are fit for one particular purpose only or if the nature of the goods itself tells the purpose by implication. In such cases the purpose is deemed to be made known to the seller impliedly.
Illustration:
- A, a draper, who had no special knowledge of hot water bottles, went to the shop of a chemist and asked for a hot water bottle. He was shown an American rubber bottle which the chemist said would not stand boiling water, but was meant for hot water, A bought the bottle. A few days, while being used, it burst and injured his wife. It was found that the bottle was not fit for use as a hot water bottle. It was held that since the bottle could be used only for one particular purpose, there was a breach of implied condition as to fitness and the seller was liable to pay damages (Priest vs. Last, 1903).
- Where a buyer demands tinned fruit juice, it is implied from the nature of the product itself that he wants it for consumption and if later on it is found poisonous matter, there is a breach of implied condition as to fitness and the seller is liable in damages.
6. Condition as to merchantability [S.16 (b)]
This condition is implied only where the sale is by description. We have already seen that there is an implied condition in such cases, that the goods should correspond with the description. This sub-section lays down another implied condition in such cases, that is, that the goods should be of ‘merchantable quality’. But for making this condition applicable, not only that the sale must
be by description, but the following conditions must also be satisfied:
- The seller should be a dealer in goods of that description, whether he be the manufacturer or not; and:
- The buyer must not have any opportunity of examining the goods or there must be some latent defect in the goods which would bot the apparent on reasonable examination of the same.
If the buyer had an opportunity of making the examination but he avoids to examine or if he has examined the goods, there is no implied condition as to merchantability as regards defects which such examination ought to have revealed. The phrase ‘merchantable quality’ means that the goods are of such quality and in such condition that a reasonable man, acting reasonably, would accept them under the circumstances of the case in performance of his offer to buy those goods, whether he buys them for his own use or to sell again. Stated briefly, in order to be ‘merchantable’ the goods must be such as are reasonable under the description by which they are known in the market.
Illustrations:
- Where the underwears supplied contained certain chemicals which could cause skin disease to a person wearing them next to skin it was held that because of such a defect the underwears were not of merchantable quality and the buyer was entitled to reject the goods (Grant Knitting Mills Ld. 1936).
- Where A purchases a certain quantity of black yarn from B, a dealer in yarn, and finds it damaged by white ants, the condition as to merchantability has been broken and A is entitled to reject it as unmerchantable.
7.5.2 Implied Warranties:
Unless other wise agreed, the law also incorporates into a contract of sale of goods the following implied warranties:
1. Warranty of quiet possession:[S.14(b)]
In every contract of sale, the first implied warranty on the part of the seller is that ‘the buyer shall have and enjoy quiet possession of the goods.” If the quiet possession of the buyer is in anyway disturbed by a person having a superior right from the seller. Since disturbance of quiet possession is likely to arise only where the seller’s title to goods is defective.
Illustration:
The plaintiff, a lady, purchased a second hand typewriter from the defendant. She thereafter spent some money on its repair and used it for some months. Unknown to the parties, the typewriter was a stolen one and the plaintiff was compelled to return the same to its true owner. She was held entitled to recover from the sellers for the breach of this warranty damages reflecting not merely the price paid but also the cost of repair (Moson Vs. burningham” 1949).
2. Warranty of freedom form encumbranced: [Sec.14 (c)]
The second implied warranty on the part of the seller is that “the goods shall be free from any charge or encumbrance in favour of any third party not declared or known to the buyer before or at the time when the contract is made”. If the goods are afterwards found to be subject to a charge and the buyer has to discharge the same, there is breach of warranty and buyer is entitled to damages. It is to be emphasized that the breach of this warranty occurs only when the buyer in fact discharges the amount of the encumbrance, and he had no notice of that at the time of the contract of sale. If the buyer knows about the encumbrance on the goods at the time of entering into the contract, he becomes bound by the same and he is not entitles to claim compensation from the seller for discharging the same.
Illustration:
A, the owner of the watch, pledges it with B. After a week, A obtains possession of the watch from B for some limited purpose and sells I to C. B approaches C tells him about the pledge affair. C has to make payment of the pledge amount to B. There is breach of this warranty and C is entitled to claim compensation from A. (Notice that in the instant case the buyer (i.e. C) cannot allege breach of implied condition as to title against the seller (i.e. A) because the seller in fact had a title to the goods, through subject to the rights of the pledge).
3. Warranty of disclosing the dangerous nature of goods to the ignorant buyer:
The third implied warranty on the part of the seller is that in case the goods are of dangerous nature he will warn the ignorant buyer of the probable danger. If there is breach of this warranty the buyer is entitled to claim compensation for the injury caused to him.
7.6 Doctrine of Caveat Emptor:
The maxim of ‘caveat emptor’ means “let the buyer beware”. According to the doctrine of caveat emptor, it is the duty of the buyer to be careful while purchasing goods of his requirement and, in the absence of any enquiry from the buyer, the seller is not bound to disclose every defect in goods of which he may be aware. The buyer must examine the gods thoroughly and must see that the goods he buys are suitable for the purpose for which he wants them. If the goods turn out to be defective or do not suit his purpose, the buyer cannot hold the seller liable for he same , as there is no implied undertaking by the seller that he shall supply such goods as suit the buyer’s p[purpose. If therefore, while making purchases of goods the buyer depends upon his own skill and makes a bad choice, he must curse himself for his folly, in the absence of any misrepresentation of fraud or guarantee by the seller.
Illustration:
A, purchases a horse from B. A needed the horse for riding but he did not mention this fact to B. The horse is not suitable for riding but is dutiable only for being driven in the carriage. Caveat emptor being the rule, A can neither reject the horse nor can he claim any compensation from B.
Exceptions
The doctrine of ‘caveat emptor’ is subject to the following exceptions:
1. Where the seller makes a mis-representation and the buyer relies on it, the doctrine of caveat emptor does not apply. Such a contract being voidable at the option of the innocent party, the buyer has a right to rescind the contract.
2. Where the seller makes a false representation amounting to fraud and the buyer relies on it, or where the seller actively conceals a defect in the goods so that the same could not be discovered on a reasonable examination, the doctrine of caveat emptor does not apply. Such a contract is also viodable at the option of the buyer and the buyer is entitled to avoid the contract and also claim damages for fraud.
3. Where the goods are purchased by description and they do not correspond with the description.
4. Where the goods are purchased by description from a seller who deals in such class of goods and they are not of ‘merchantable quality’, the doctrine of caveat emptor does not apply.
5. Where the goods are bought by sample, the doctrine of caveat emptor does not apply if the bulk dos not correspond with the sample, or if the buyer is not provided an opportunity to compare he bulk with the sample, or if there is nay hidden or latent defect in the goods.
6. Where the goods are bought by sample as well as by description and the bulk of the goods does not correspond both with the sample and with the description, the buyer is entitled to reject the goods.
7. Where the buyer makes known to the seller the purpose for which he requires the goods and relies upon the seller’s skill nod judgment but the goods supplied are unfit for the specified purpose, the principle of caveat emptor does not protect the seller and he is liable in damages.
8. Where the trade usage attaches an implied condition or warranty as to quality or fitness and the seller deviates from that, the doctrine of caveat emptor does not apply and the seller is liable in damages.
7.7 Transfer of Property in Goods
The phrase “transfer of property in goods” means transfer of ownership of the goods. ‘Property in goods’ is different from possession of goods. Possession refers to the custody over the goods. So the property in goods may pass from the seller to the buyer but the goods may be in possession of the seller either as unpaid seller or as a bailee for the buyer. In other cases the property in goods may still be with the seller although the goods may be in possession of the buyer or his agent or a carrier for transmission to the buyer. The precise moment of time at which property in goods passes from the seller to the buyer is of great importance from various points of view:
Rules Regarding Transfer of Property:
We shall be studying the rules regarding transfer of property under the following two heads:
Transfer of property in specific or ascertained goods.
Transfer of property in unascertained and future goods.
7.7.1 Transfer of property in specific or Ascertained Goods:
Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer as such time as he parties to the contract intend it to be transferred. For the purpose of the ascertained the intention of the parties and the circumstances of the case (Sec . 19(1) (2)]. Thus, in the case of specific good, the transfer of property takes place when the parties intend to pass it. The parties may intend to pass the property at once at the time of making of the contract or when the goods are delivered or when the goods are paid for.
It is only when the intention of the parties cannot be judged from their contract or conduct or other circumstances that the rules laid down in Section 20 apply. These rules are as follows:
1. When goods are in deliverable state: [S.20 (a)]
When there is an unconditional (i.e. not subject to any condition precedent to be fulfilled by the parties) contract for the sale of specific goosa in a delivereable state, the property in the goods passes to the buyer as soon as the contract is made, and it is immaterial whether the time of payment of the price or the time of delivery of goods, or both are postponed.
Illustrations:
- A, buys a bicycle for sh. 3,000 on a month’s credit and asks the shopkeeper to send it to his house. The shopkeeper agrees to do so. The bicycle immediately becomes the property of A.
- P buys a table for sh. 1000 on a week’s credit and arranges to take delivery of the table the next day. A fire broke out in the furniture mart the same evening and the table is destroyed. The property in the table has passed to P and he is bound to pay the price. The goods are said to be in ‘deliverable state’ when they are in such a state that the buyer would, under the contract, be bound to take delivery of them. For example, in illustration (b) above, if the seller has to polish the table to make it acceptable to the buyer, it is not in a deliverable state until it is so polished, and the buyer does not acquire property at the time of the contract.
2. When goods have to be put into a deliverable state: (Sec. 20 (b)]
When there is a contract for the sale of specific goods and the seller is bound to do ‘something here means an act like packing the goods, or loading them on rail or ship, or filling them in containers or polishing them in order to give a finished shape, etc. it is to be noted that merely putting the things in a deliverable state would not result in the transfer of property in the good from It is further necessary that the buyer must have notice thereof, i.e. the fact that the goods have been put in a deliverable state must come to the knowledge of the buyer in some way or the other.
Illustration:
A, agrees to sell to B the whole of turpentine oil lying in a cistern. It is further agreed that the oil is to be put into casks by A and the B is to take them away. Some of the casks are filled in he presence of B, but before any are removed or the remainder filled, the whole is destroyed accidentally by fire. B must bear the loss of oil which had been put into the casks because in all these casks the property has passed to him as nothing further remained to be done to them by the seller. But the property in the casks not filled up remained in the seller, at whose risk they continued (Rugg vs 1809).
When the goods have to be measured etc. to ascertain price: [Sec. 20 (c) ]
When there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing done and the buyer has notice thereof.
Illustration:
A, sold to B 289 bales of goat skins, each bale containing five dozens, and the price was for certain sum per dozen skins. It was the duty of A to could the goats skins in each bale. Before A could do the same, the bales were destroyed by fire. Held: that the property in the goods had not passed to the buyer (i.e. B) as something still remained to be done by the seller (i.e. A) for ascertaining the price, and as such the loss caused by fire had to be borne by the seller (i.e. A)
(Zagury vs. Furnell 1809).
It may e noted that if the seller has done all what he was required to do under the contract and nothing remains to be by him, the property passes to the buyer even if the buyer has to do something for his own satisfaction.
Illustration:
A contracted with B to sell him 975 bags of rice, the whole content of a certain ‘golah’. B paid the entire price but agreed to remove the rice after weighing (for his own satisfaction) before a certain date. After delivery was taken of a part of the rice the other part was destroyed by fire.
Held: the ownership had passed to the buyer because nothing remained to be done by the seller to ascertain the price, and therefore B, the buyer, suffer the loss (Shoshi Mohum Pal Vs Nobo Kristo Poddar).
When goods are delivered on approval: [S. 20(d)]
When goods are delivered to the buyer on approval or ‘on sale or return’, or on other similar terms, the property therein passes to the buyer:
- When he signifies his approval or acceptance to the seller or does any other act adopting the transaction e.g., pledges the goods or resells them.
- If he does not signify his approval or acceptance to the seller but retains the goods, without giving notice of rejection, beyond the time fixed for the return of goods, or if no time has been fixed, beyond a reasonable time.
Illustrations:
- A, delivered a horse to B on the terms of ‘sale or return, within 8 days’. The horse died on the third day without any fault on the part of B. Held: A was to bear the loss as the horse was still his property when it perished (Elphick vs Barnes 1880).
- A, delivered a horse to B on trial for 8 days. B continued to retain the horse even after the expiry of 8 days without giving notice of rejection to A. B had automatically become the owner of the horse on the expiry of 8 days.
7.7.2 Transfer of Property in Unascertained and Future Goods:
The rule relating to transfer of property in ascertained and future goods is contained in Section 20 (e) (i) & (ii). This section provides that where goods contracted to be sold are not ascertained or where they are future goods, the property in goods does not pass to the buyer unless and until the goods are ascertained or unconditionally appropriated to the contract so as to bring them in a deliverable state, either by the seller with the assent of the buyer or by the buyer with assent of the seller. Such assent may be expressed or implied, and may bee given either before or after the appropriation is made.
It must be noted that the above rule (as contained in section 20 (e) (i) & (ii) is a fundamental rule and it applies irrespective of what the parties intended. Until goods are ascertained or appropriated there is merely ‘an agreement to sell’. Thus a sale of ten quintals of wheat from a granary containing a large quantity has not the effect of transferring property in the ten quintals to the purchaser. It amounts only to ‘an agreement to sell’. It is only when ten quintals are appropriated to the contract by the seller and the buyer has notice thereof, that property shall pass from the seller to the buyer.
The process of ascertainment or appropriation consists in earmarking or setting apart goods as subject-matter of the contract. It involves separating, weighing measuring, counting or similar acts done in relation to goods with an intention to identify and determine the specific goods to be delivered under the contract. The distinction between ‘ascertainment’ and ‘appropriation’ is that
whereas ‘ascertainment’ can be a unilateral act of the seller, that is, he alone may set apart the goods, ‘appropriation’ involves the element of mutual consent of the seller and the buyer.
Reservation of right of disposal: (Sec.21)
Reservation of right of disposal means reserving a right to dispose to the goods until certain conditions (like payment of the price) are fulfilled. When the seller reserves such a right expressly while making a contract or while making appropriation of unascertained goods. He may also reserve this right by implication, for example, when the seller while transporting goods takes the railway receipt or the bill of lading in his own name or where the seller has taken the R/R or B/L in the name of the buyer but has delivered the same to his bank with the instructions that the document is to be delivered to the buyer only when he makes payment of the price or accepts the bill of exchange, the right of disposal is said to be reserved impliedly.
7.8 Transfer of Title on Sale:
The general rule relating to the transfer of title on sale is that “the seller cannot transfer to the buyer of goods a better title than he himself has”. If the tile of the seller is defective the buyer’s title will also be subject to the same defect. Section 23 also lays down to the same effect and provides that “where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had………………” This rule is expressed by the maxim, “nemo det quod no habet,” which means that no one can give what he has not got.
The general rule aims at protecting the interests of the true owner and is deemed necessary in the larger interest of society. So if a thief disposes of stolen property, the buyer acquires no title though he may have purchased the goods bonafide, for value, and the real owner of the goods in entitled to recover possession of goods without paying anything to the buyer. Similarly, where a hirer of goods under a hire-purchase agreement sells them before he had paid all the installments, the buyer though acting in good faith, does not acquire the property in the goods against the true owner and, on default of payment by the hirer The true owner can recover the goods from the buyer (Whiteley & Co. Vs. Hilt 1918).
Thus a buyer cannot get a good title to the goods unless he purchases goods from a person who is the owner thereof or who sells them under the authority or with the consent of the owner.
7.8.1 Transfer of title by Non-Owners:
The above general rule as to title is subject to the following exceptions where the buyer gets a better title to the goods than what the seller himself possesses:
1. An unauthorized sale by a mercantile agent:
A mercantile agent means an agent having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purposes of sale, or to raise money on the security of goods. Thus as a rule a mercantile agent having authority
to sell goods coveys a good title to the buyer. But by virtue of this provision, a mercantile agent can convey a good title to the buyer.
2. Transfer of title by estoppels:
In the words of Lord Halsbury: “Estoppel arises when you are precluded from denying the truth of anything, which you have represented as a fact, although it is not a fact”. Thus, estoppels means that a person who by his conduct or words leads another to believe that certain state of affairs existed, would be stopped from denying later on that such a state of affairs did not exist. The basis of estoppels is that it would be unfair or unjust to allow a party to depart from a particular state of affairs which he has permitted another person to believe to be true. In such circumstances, the buyer gets a better title.
3. Sale by person in possession under voidable contract:
When a person has obtained possession of the goods under voidable contract and he sells those goods before the contract has been rescinded, the buyer of such goods acquires a goods title to them provided the buyer acts in good faith and without notice of seller’s defect of title.
4. Sale by seller in possession after sale:
Where a seller, after having sold the goods continues to be in possession of the goods or of the documents of title to them and again sells or pledge them either himself or though a mercantile agent, he will convey a good title to the buyer or the pledge provided the buyer or the pledge acts in good faith and without notice of the previous sale. For the application of this exception it is essential that the possession of the seller must be as seller and not as hirer or bailee.
5. Sale by buyer in possession after ‘agreement to buy’.
Where a buyer has agreed to buy the goods and has obtained possession of the same or the documents of title to them with the consent of the seller, resells or pledges the goods either himself or through a mercantile agent, he will convey a good title to the buyer or the pledge provided the person receiving the goods acts in good faith and without notice of any lien or other right of the original seller in respect of those goods.
6. Resale by unpaid seller:
When an unpaid seller, who has exercised his right of lien or stoppage in transit, resells the goods (of which ownership has passed to the buyer), the subsequent
7.9 Performance of the Contract
“It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in accordance with the term of the contract of sale”. [Sec. 28). Thus, the performance with the terms of the contract of delivery of goods by the seller and acceptance of the delivery of goods and payment for them by the buyer, in accordance with the contract. The parties are free to provide any terms they like in their contract about the time and place and manner of delivery of goods, acceptance thereof and payment of the price. But if the parties are silent and do not provide any thing regarding these matters in the contract then the rules contained in the Sale of
Goods Act are applicable.
7.9.1 Delivery:
Delivery of goods means voluntary transfer of possession of goods from one person to another (Sec. 2). If transfer of possession of goods is not voluntary i.e. possession is obtained under pistol point or by theft, there is no delivery:
Rules to Delivery of Goods:
Rules of delivery of goods are given in section 30 of the Act. These are as follows:
1. Place of delivery:
The place of delivery may be stated in the contract of sale, and where it is so stated, the goods must be delivered at the named place during business hours on a working day* But where no place is mentioned in the contract, the following rules must be followed:
- In the case of sale, the goods are to be delivered at the place at which they are at the time of the sale.
- In ‘an agreement to sell”. The goods are to be delivered at the place where they are at the time of the agreement to sell.
- In the case of future goods are to be delivered at the place at which they are manufactured or produced.
2. Time of delivery:
Where tender the contract of sale the seller is bound to send the goods to the buyer, but no time for sending them is fixed, the seller is bound to send them within a reasonable, time. Further, demand of delivery by the buyer or the tender of delivery by the seller should be made at a reasonable hour. What is a reasonable hour is a question of fact.
3. Delivery of goods where they are in possession of third party:
Where the goods at the time of sale are in the possession of a third person, there is no delivery by the seller to the buyer unless and until such third person acknowledges to the buyer that he holds the goods on his behalf Such a delivery is known as ‘constructive delivery” or “delivery by attornment” requires the consent of all the three parties, the seller, the buyer and the person having possession of the goods. Where the Seller hands over the ‘del)very order” to the buyer, there is no delivery unless the seller’s agent holding the goods has assented thereto.
4. Expenses of delivery:
Unless otherwise agreed, the expenses of and incidental to putting the goods into a deliverable spate must be borne by the seller.
Delivery of Wrong Quantity
Under section 31 of the act, a seller is duty bound to deliver the goods to the buyer statically in accordance with the terms of the contract. A defective delivery i.e. delivery of a quantity less or more than that contracted for or delivery of goods mixed with the goods of a different description not included in the contract, entitles the buyer:
- To reject the whole, or
- To accept the whole, or
- To accept the quantity and quality he ordered and reject the rest of the goods so delivered.
Remember that in case of rejection of goods because of defective delivery the buyer is not bound to return them to the seller, but it is sufficient is he intimidates to the seller that he refuses to accept them/. Further, right to reject the goods is no equivalent to right to cancel the contract. If the buyer rejects the goods, the seller has a right to tender again goods of contract quality and quantity subject to the terms tender again goods of contract and the buyer is bound to accept the same.
Where the buyer accepts the goods, he must pay what he (as actually accepted, at the contract rate. In case the buyer has accepted short delivery he is entitled to claim damages for the same from the seller.
Delivery by Installments:
Section 32 of the Act deals with the delivery by installments. Unless otherwise agreed, the buyer of goods is not bound to accept delivery thereof by installments. If the parties so agree then only the delivery of the goods may be by installments. When the parties agree that the delivery is to be made by installment is to be separately paid for, and either buyer or seller commits a breach of contract in respect of one or more installments, there arises a question as to whether such a breach amounts to a breach of the whole of the contract or a breach of only a part of it? The answer to this question depends upon the terms of the contract and the circumstance of the case.
Generally, failure to deliver or pay for one installment does not amount to a breach of the whole contract, unless from the special circumstances of the case (e.g. the factory is closed because of a labour strike of the buyer becomes insolvent) it can inferred that similar breaches will be repeated.
7.9.2 Acceptance:
Under section 36 of the Act, the buyer is deemed to have accepted the goods in the following circumstances:
- When he intimidates to the seller that he has accepted this goods.
- When the goods have been delivered to him, and he does not act to the goods which is inconsistent with the ownership of seller.
- When he retains the goods, after the lapse of a reasonable time, without intimating to the seller that he has rejected them.
Section 37 states that where the buyer rejects the goods having the right to do so, he is not bound to return them to the seller. However, he must intimate to the seller that he refuses to accept. Under section 38, if the seller is ready and willing to deliver the goods but the buyer does not take delivery within a reasonable time the buyer is liable to the seller for any loss occasioned by his neglect or refusal to take delivery, and also for a reasonable charge for the care and custody of the goods:
7.10 Rights of Unpaid Seller.
Unpaid seller Defined:
The seller of goods is deemed to be an ‘unpaid seller’ (a) when the whole of the price has not been paid or tendered ; or (b) where a bill of exchange or other negotiable instrument has been received as a conditional payment, i.e.. subject to the realization thereof, and the same has been dishonoured.
Rights of an unpaid Seller:
An unpaid seller has two-fold rights, viz:
- Rights of unpaid seller against the goods, and;
- Rights of unpaid seller against the buyer personally.
7.11 Rights of Unpaid Seller against the Goods:
The seller has the following rights against the goods not withstanding the fact that the property in the goods has passed to the buyer:
1. Right of lien;
2. Right of stoppage of goods in transit;
3. Right of resale
1. Right of lien (Sec 41):
‘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. An unpaid seller in possession of goods sold is entitled to exercise his lien on the goods in the following cases:
- Where the goods have been sold without any stipulation as to credit;
- Where the goods have been sold on credit, but the term of credit has expired;
- Where the buyer becomes insolvent, even though the period of credit may not have yet expired.
the case of buyer’s insolvency, the lien exists even though goods had been sold on credit and the period of credit has not yet expired. When the goods are sold on credit the presumption is that the buyer shall keep his credit goods. If, therefore, before payment the buyer becomes insolvent, the seller is entitled to exercise this right and hold the goods as security for the price. The unpaid seller’s lien is possessory lien. i.e the lien can be exercised as long as the seller remains in possession of the goods. He may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer.
Termination of Lien:
Section 43 states that the unpaid seller of goods loses his lien in the following cases:
- When he delivers the goods to a carrier or other bailee for the purpose of transmission the buyer without reserving the right of disposal of the goods; or
- When the buyer or his agent lawfully obtains possession of the goods; or
- When the seller expressly or impliedly waives his right of lien. An implied waiver takes place when the seller grants fresh term of credit or allows the buyer to accept a bill of exchange payable at a future date or assents to a sub-sale which the buyer may have
made.
2. Right of Stoppage of Goods in Transit or Stoppage in Transit:
The right of stoppage in transit means the right of stopping further transit of the goods wile they are with a carrier for the purpose of transmission to the buyer, resuming possession of them and retaining possession until payment or tender of the price. Thus, in a sense this right is an extension of the right of lien because it entitles the seller to regain possession even when the seller has parted with the possession of the goods:
When can this right be exercised? (Sec. 44)
An unpaid seller can exercise this right only when:
- The buyer becomes insolvent. The buyer is said to be insolvent when he has ceased to pay his debts in the ordinary course of business, or cannot pay his debts as they become due, whether he Is declared an insolvent or not; and.
- The property has passed to the buyer. If Property has not passed to buyer then this right is termed as the “right of withholding delivery” and.
- The goods are in the course of transit. This means that goods must be neither with the seller nor the buyer no with their agent. They should be in the custody of a carrier as an independent middleman (i.e. in his own right as a carrier) e.g. railways and common carriers whore business is to transport goods of others. the carrier must not be either 3eller’s agent or buyer’s agent. Because if he is seller’s agent, the goods are still in the hands of seller in the exe Of law and hence there is no transit, and if he is buyer’s agent, the buyer gets delivery in the eye of law and hence question of stoppage does not arise.
Duration of transit (Section 45)
Since the right of stoppage in transit can be exercised only so long as the goods are in the course of transit, it becomes necessary to know as to when he transit begins and when it comes to an end. When the transit comes to an end, the right to stoppage cannot be exercised. According to Section 45, goods are deemed to be in course of transit from the time when they are delivered to a carrier or other bailee for the purpose of transmission to the buyer, until the buyer or his agent takes delivery of them. Thus the transit continues so long as the goods are not delivered to t(e bu9ep or his agent no matter whether they are lying at the destination with the carrier awaiting transmission or are an actual transit. The goods are still deemed to be in transit if they are rejected by the buyer and the carrier or other bailee continues in possession of them, even if the seller has refused to receive them back.
The transit is deemed to be at an end and the seller cannot exercise his right of stoppage in the following cases:
- When the buyer or his agent takes delivery of the Goods after the goods have reached destination.
- When the buyer or his agent obtains delivery of the goods before their arrival at the appointed destination.
- When the goods have arrived a Destination and the carrier acknowledges to the buyer or his agent that he holds the goods on his behalf.
- When the goods arrived at their destination but the buyer instead of taking delivery requests the carrier to carry the goods to more further destination and the carrier agreed to take them to the new destination.
- When the carrier wrongfully refuses to deliver the goods to the buyer or h)s agent.
- When part delivery of the goods has been made to the buyer with an intention of delivering the whole of the goods, transit will be at end for the remainder of the goods also which Are yet in the course of the transit.
How right of stoppage is exercised? (Sec 46)
The unpaid seller may exercise his right of stoppage in transit either:
- by taking actual possession of the goods ,or
- by giving notice of his claim to the carrier or other bailee in whose possession the goods are.
Such notice may be given either (a) to the person in actual possession of the goods, or (b) to his principal. In the latter case, notice must be given well in advance to enable the principal to communicate with his agent or servant in time, so as to prevent delivery to the buyer. It is the duty of the carrier, after receiving due notice, not to deliver the goods to the buyer but to redeliver them to, or according to the directions of the seller. If by mistake he delivers the goods to the buyer, he can be made liable for conversion. The expenses of redelivery are to be borne by the seller.
Lien and Stoppage in Transit Distinguished:
The main points of distinction between these two rights of an unpaid seller are as follows*
1. The seller’s lien attaches when the buyer is in default, whether he be solvent or insolvent. The right of stoppage in transit arises only when the buyer is insolvent.
2. Lien is available only when the goods are in actual possession of the seller while right of stoppage is available when the seller has parted with possession and the goods are in the custody of an independent carrier.
3. The right of lien comes to an end once the seller hands over possession of the goods to the carrier for the purpose of transmission to the buyer. One the other hand, the right of stoppage in transit commences after the seller has delivered the goods to a carrier for the
purposes of transmission to the buyer and continues until the buyer has acquired their possession.
4. The right of lien consists in retaining the possession of the goods while the right of stoppage consists in regaining possession of the goods.
Effects of Rights of lien and Stoppage in Transit.
The unpaid seller’s right of lien or stoppage in transit is not affected by any sale or other disposition of the goods which the buyer might have made .For example ,P sells certain goods to R and delivers them to a carrier for transmission to R. Before the goods reach their destination P comes to know that R has become insolvent. In the meanwhile R sells those goods to Q. The sale of goods between R and Q will not affect the right of P to stop them in transit.
But there are two exceptional cases when these two rights of the unpaid seller are affected by as ale or other disposition of the goods by the buyer. These exceptions are:
- When the seller has assented to the sale or other disposition which the buyer may have made.
- When a document of title of goods (e.g a bill of lading or railway receipt) has been issued or transferred to a buyer and the buyer transfers the document to a person who takes the document in good faith and for consideration ,then:
- if such last mentioned transfer was by way of sale ,the unpaid seller’s right of lien or stoppage in transit is defeated, and
- if such last mentioned transfer was by way of pledge , the unpaid seller’s right of lien or stoppage in transit can only be exercised subject to the rights of pledge. But in this case the unpaid seller may require the pledge to satisfy his claim against the buyer first out of many other goods or securities of the buyer in the hands of the pledgee.
3. Rights of Resale:
The right of resale is a very valuable right given to an unpaid seller. In the absence of this right, the unpaid seller’s other rights against the goods, namely ,’lien’ and stoppage in transit, would not have been of much use because these rights only entitle the unpaid
seller to retain the goods until paid by the buyer. If the buyer continues to remain in default, then should the seller be expected to retain the goods indefinitely, specially when the goods are perishable? Obviously, this cannot be the intention of the law. Section 48
therefore, gives to the unpaid seller a limited right to resell the goods in the following cases:
- where the goods are a perishable nature ; or
- where such a right is expressly reserved in the contract in case the buyer should make a default ; or
- where the seller has given a notice to the buyer of his intention to resell and the buyer does not pay or tender the price within a reasonable time.
If on a resale there is a loss to the seller, he can recover it from the defaulting buyer. But if there is a surplus on the resale, the seller can keep it with him because the buyer cannot be allowed to take advantage of his own wrong. If, however, no notice of resale (as required in case (c) above) is given to the buyer, the right of seller to claim loss and retain surplus, if any is reversed. In other words, if the unpaid seller fails to give notice of resale to the buyer, where neither the goods are of perishable nature nor such a right was expressly reserved, he cannot recover the loss from the buyer and is under an obligation to hand over the surplus, if any ,to the buyer ,arising form the resale. Thus it will be seen that giving of notice to the buyer, when so required, is very necessary to make him liable for the breach of contact. It is so because such a notice gives an opportunity to the buyer either to pay the price and have the goods, or, if he cannot pay to supervise the sale to see that the same is properly made. It is important that absence of notice, when so required ,affects the rights of the unpaid seller himself only as discussed above ad it does not affect the title of the subsequent buyer who will acquire a good title to the goods. Section 48(3) 3pecially declares “ where an unpaid seller who has exercised his right of lien or stoppage in transit resells the goods , the buyer acquires a good title thereto as against the original buyer, notwithstanding that no notice of the resale has been given to the original buyer”.
7.12 Rights of Unpaid Seller against the Buyer Personally.
The unpaid seller, in addition to his rights against the goods as discussed above, has the following three rights of action against the buyer personally:
1. Suit for price: (Sec.49)
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 of price, irrespective of the delivery of goods.
2. Suit for damages for non-acceptance: (Sec.50)
Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him 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 the goods.
7.13 Rights of The Buyer.
The buyer has the following rights against the seller for breach of contract:
1. Suit for damages for non –delivery: (Sec.51)
Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for non delivery. The measure of damages shall be the estimated loss directly and naturally resulting, in the ordinary course of events, from the seller’s breach of contract. If the goods in question have a ready market the measure of damages is primary facie to be ascertained by the difference between the contract price and market price eon the date of breach.
2. Suit for specific performance: (Sec.52)
Where there is breach of a contract for the sale for specific or ascertained goods, the buyer may file a suit for the specific performance of the contract. This remedy is discretionary and will only be granted when damage would not be an adequate remedy ,for instance ,the subject-matter of the contract is rare goods, say, a picture by a dead painter.
3. Suit for damages for breach of warranty: (Sec .53)
Where there is a breach of warranty by the seller, or where the buyer elects or is compelled to treat breach of condition as breach of warranty, the buyer is entitled to file a suit for damages of the price has already been paid. But if the buyer has not yet paid the price ha may ask the seller for a reasonable reduction in price.
4. Suit for rescission of contract and for damages for breach of ‘condition’:
The breach of ‘condition’ entitles the buyer to treat the contract as repudiated. Accordingly, where there is a breach of rescission of the contract. Also, he may claim damages for loss suffered on the footing that the whole contract is broken and the seller is guilty of non
delivery.
5. Suit for recovery of the price together with interest: (Sec:54)
If the buyer has already paid the price of the goods to the seller and the goods are not delivered or they are stolen one, he can sue the seller for the refund of the price and also for the interest at reasonable rate from the date of payment to the date of refund.
7.14 Auction Sale
In an auction sale, the auctioneer invites bids from prospective purchasers and sells the goods to the highest bidder. Section 58 lays down the following rules relating to an auction sale:
1. Where goods are put up for sale in lots, each lot is prima facie deemed to be the subject of a separate contract of sale.
2. The sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner, say, by saying words like “one, two three” and until such announcement is made, any bidder may retract his bid. On the other hand, the auctioneer is also not bound to accept the highest bid id he feels that is much below his expectation. Of course, his not accepting the highest bid would injure his business reputation because if it is the custom of trade that goods must be sold to the highest
bidder.
3. The seller or any one person on his behalf can bid at the auction, provided such a right to bid has been expressly reserved at the time of notifying the auction sale.
4. The sale may be notified to be subject to a reserved or upset price. It is a price below which the auctioneer will not sell, and if he by mistake knocks down the lot for less than the reserved price, no valid contract comes into existence and he can refuse to deliver the goods to the highest bidder
Summary of the topic
- Differences between sale and agreement to sell
- Subject matter of the contract
- Implied conditions and warranties
- Doctrine of caveat emptor
- Transfer of property in goods
- Transfer of title on sale
- Rights of both the buyer and the seller
- Auction sale
