Sale of goods act - 1930

INTRODUCTION
It was earlier a part of Indian contracts act, 1872
under sec 76 123
Due to its importance , sec 76 123 was revoked
and a separate act called sale of goods act was
enacted in 1930
Act contains all the rules and regulations relating
to various types of contracts for the sale of goods
i.e, sale of movable goods
Transfer of property act, 1882 immovable
properties

Contract of sale
Sec 4 (1) defines a contract of sale of goods as
a contract, whereby, the seller transfers or
agrees to transfer the property in goods to the
buyer for a price.
There can be a contract of sale between one
part-owner and another.
A contract of sale may be absolute or
conditional depending upon the desire of
contracting parties
How is a contract of sale made?
By an offer to buy or sell goods for a price, and
Acceptance of such an offer
The contract may provide for:
Immediate delivery of the goods, or
Immediate payment of the price, or
Both, or
Delivery in installments, or
Payment in installments, or
That delivery or payment both shall be
postponed


How is a contract of sale made?
A contract of sale may be:
Made in writing, or
By word of mouth, or
Partly in writing and partly by word of mouth,
or
May be implied from the conduct of the
parties.


Essentials of a contract of sale
Two parties
Goods
Transfer of ownership
Price
All essentials of a valid contract
Includes both sale and agreement to sell
Formalities to be fulfilled

Essentials of a contract of sale
Two parties
- a contract of sale is bilateral in nature
i.e property in the goods has to pass from one party
to another
- one cannot buy ones own goods
Example - grocery shop owner supply goods to his
family
- but there can be a contract of sale between a part
owner and another
Example television set
Exception to the rule that one cannot buy his own
goods
A pawnee sells the goods pledged, then the pawnor
may buy them.




Essentials of a contract of sale
Goods
- the subject matter of a contract of sale must be
goods
- Goods means every kind of movable property
other than actionable claims and money, &
includes stocks & shares, growing crops, grass
and things attached to and forming part of the
land which are agreed to be severed before sale
or under the contract of sale.
- contracts relating to services are not considered
as contract of sale.
- Also does not cover the sale & purchase of
immovable property

Essentials of a contract of sale
Price
- the buyer must pay some price for goods
- price is defined as the money consideration
for a sale of good.
- where goods are offered in consideration for
goods, it will not amount to sale
- when goods are offered without
consideration, it amounts to a gift / charity;
and not sale.

Essentials of a contract of sale
All essentials of a contract
- should have all essential elements of a valid
contract.
Includes both a Sale and An agreement to sell
- In sale: property in the goods is transferred from
the seller to the buyer
- In agreement to sell: the transfer of the property
in goods is to take place at a future time or
subject to some condition thereafter to be
fulfilled.
- Sale: an executed & absolute contract
- Agreement to sell: executory contract and implies
a conditional sale.
Essentials of a contract of sale

Formalities to be fulfilled

- The act does not prescribe any particular form
of a valid contract of sale.
- It can be made either orally or in writing
- Or partly orally and partly in writing
- Or may even be implied from the conduct of
the parties

Sale and agreement to sell
distinguished
The fact whether the transaction is a sale or agreement
to sell determines the rights and obligations of the
parties to a contract of sale.
Differences
- transfer of ownership
- nature of rights of buyer
- risk of loss
- insolvency of the buyer
- nature of contract
- consequence of breach by buyer
- insolvency of the seller
- Consequences in case of resale

Transfer of ownership
Sale ownership in the goods passes to buyer
immediately at the time of making the contract
Agreement to sell the title passes at a future
date subject to the conditions to be fulfilled
thereafter.
So in sale the buyer becomes the proprietor of
the goods immediately
So in agreement to sell the seller continues to
be the proprietor of the goods until it becomes a
sale.

Nature of contract
Sale is an executed contract; all the
formalities of the contract have been
completed; ownership has passed
Agreement to sell is an executory contract;
all the formalities are yet to be completed;
ownership will pass on some future date.
Nature of rights of buyer
A sale creates a jus in rem
An agreement to sell only creates jus in
personam i.e the right to either party
(buyer or seller) against each other for any
default in fulfilling its part of agreement.
Consequence of breach by buyer
Sale if the buyer refuses to accept the goods &
pay the price, the seller may sue him for the
price, even though the goods are still in the
sellers possession & have never been delivered
to the buyer.
Agreement to sell: if the buyer refuses to accept
the goods or pay for them, the only remedy
available to the seller is to sue for damages. He
cannot sue for the price even though the goods
are in the possession of buyer.
Eg: Shaban sells 5 quintals of potatoes to Kiran
for 1000/- - Sale & agreement to sell
Risk of loss
Sale: if there is any loss or damage to the
goods, it falls on the buyer even if the goods
are with the seller unless otherwise agreed
Agreement to sell: if the goods are lost or
destroyed by accident, the loss falls on the
seller even if the goods are in the possession
of the buyer. This is bcoz till the agreement to
sell becomes a sale, the ownership of the
goods remains with the seller.
Insolvency of the seller
Sale: if the seller becomes insolvent while the
goods are with him, the buyer can recover the
goods from the assignee or the official
receiver as the property of the goods has
already passed to the buyer.
Agreement to sell: if the seller goes bankrupt,
the buyer cannot claim the goods even if he
has paid the price.
Consequences in case of resale
Sale: if the seller is still in possession of goods
after sale, he cannot resell the goods because
the ownership has already passed to the
buyer.
- in that case, the buyer will have double
remedy.
- but if the subsequent buyer has got it in good
faith, right to recover ceases to exist.
Consequences in case of resale
Agreement to sell: the seller can dispose of the
goods as he/she likes, and the buyers remedy
against the sellers breach of contract is only a
suit for damages.
Eg: Jerin sells his bike to Suraj for 20,000/- but
subsequently Jerin sells it to Arjun for 30,000/-
Suraj can recover the bike from Arjun and also
claim damages from Jerin.
In agreement to sell, if Jerin agrees to sell his bike to
Suraj for 20,000/- but subsequently sells it to
Arjun for 30,000/-, Surajs remedy is to claim
damages from Jerin for breach of contract and
cannot recover the bike from Arjun

Goods meaning & classification
The subject matter of a contract of sale is
essentially movable property i.e goods
Goods means every kind of movable property
other than actionable claims and money.
Goods means every kind of movable property
other than actionable claims and money, &
includes stocks & shares, growing crops, grass
and things attached to and forming part of the
land which are agreed to be severed before sale
or under the contract of sale.



Goods include every kind of transportable
property
Money & actionable claims although movable
have been excluded
Money : includes coins, bank notes
but it excludes old & ancient coins which are
regarded as antiques & can be considered as
goods
* actionable claims are excluded from goods
as they cannot be sold or purchased like
goods, they can only be assigned
Example:
A debt due from one person to another is an
actionable claim which can be enforced by
means of a legal action, and cannot be the
subject matter of sale.
Things attached to land i.e trees, crops etc can
be the subject matter of sale
Goodwill, patents, copyrights, TM, gas, water
etc are all goods an can be the subject matter
of sale
Classification of goods
1. Existing goods
2. Future goods
3. Contingent goods

Existing goods
- are the goods which are physically in
existence at the time of entering the contract
of sale.
Where seller is the owner, he has the general
property in them.
Where the seller is merely in possession of the
goods, eg: as an agent, he has a right to sell
them (on behalf of his Principal) even though
the goods are not owned by him
1. Existing goods can be divided into:
Specific goods
Ascertained goods
Unascertained goods

Specific goods
- goods identified an agreed upon at the time of
making the contract of sale.
- goods are not considered to specific merely
because they are identifiable.
Eg: Mukesh Ambani agrees to sell his car or his
watch, it will be sale of specific goods if
Mukesh Ambani has only one car or one
watch
Ascertained goods
- Goods which have been ientified subsequent
to the formation of the contract of sale.
- Example:
Rahul who deals in Enfield Motor Bikes, has 100
bikes in his showroom and agrees to sell 40
bikes to Kerala police under an agreement to
sell. Suppose, the Kerala Police, selects and
sets aside 40 bikes out of the 100 bikes, the
contract is for ascertained goods because the
qty contracted have been identified &
appropriated towards the contract
Unascertained goods
- goods not specifically identified or ascertained
at the time of entering into the contract of
sale.
- they are identified only by description
Mohan a timber merchant agrees to supply 50
chairs out of the 100 chairs lying in his
godown. It is a sale of unascertained goods as
the chairs have not been identified.
2. Future goods
- goods that have to be manufactured,
produced or acquired by the seller after
making the contract of sale.
- future gods may not exist at the time of
contract
- or they exist but have to be acquired by the
seller at the time of the contract.
Eg: Meera enters into a contract with Jinu to buy
all the apples that would be produced in Jinus
orchard over the next year.
A contract for the sale of future goods operates
only as an agreement to sell and not sale.
3. Contingent goods
- are those goods whose acquisition by the
seller depends upon a contingency, which may
or may not happen
- this is also an agreement to sell and not sale
Eg: Nikhil agrees to sell a Rollsroyce Vintage car
to Rohini only if Bibin, its present owner sells
it to him.
Here the availability of car by Nikhil depends
upon its sale by Bibin.
Effect of perishing of goods
The subject matter is goods, the contract
becomes void when they get perished.
The effect of perishing of goods:
1. perishing of goods before making of the
contract
2. perishing of goods after agreement to sell
but before sale.
perishing of goods before making of
the contract (Sec 7)
Contract becomes void
Contract to be void, the following conditions
must be satisfied:
1. The contract must be for specific or
ascertained goods & not unascertained
goods
Example: 50 bags of cement to delivered out of
200 bags of cement.
perishing of goods before making of
the contract
2. The goods must have perished at the time or
before the making of the contract
3. The seller must not have knowledge of the
destruction of goods.
Perishing includes: physical destruction, loss by
theft, goods have lost their commercial value
Examples: Sugar gets soaked up
Case: afsar & co ltd vs blundell dates

perishing of goods before making of
the contract
When only a part of the goods are destroyed
or damaged.
Indivisible contract contract will be void,
even if only a part of the goods are perished.
Eg: Barrow Lane vs Philips Ltd bags of
groundnuts
Perishing of goods before sale but
after Agreement to sell (Sec 8)
Goods might perish after an agreement to sell
has been made, but before the risk/property
passes on to the buyer i.e, before it becomes a
sale.
A contract of sale can be avoided & both
parties are excused from the performance of
the contract if the following conditions are
met:
1. The contract is an agreement to sell and not
actual sale
2. The agreement is for the sale of specific
goods
3. The goods perished before the buyer became
the owner of the goods
4. The goods have been damaged or perished
with no fault on the part of either the buyer
or seller.
Condition 3 is the most important to make a
contract of sale void on perishing of the
goods before sale but after agreement to sell
Difference & similarities b/w Sec 7 &
Sec 8
Sec 7 - Contract is void ab initio
Sec 8 contract becomes void later

Sec 7 & 8 applicable only to specific &
ascertained goods
- indivisible goods contract becomes void
- divisible goods contract is valid
Eg: Case: Elphic v Barnes horse given for a trial
for 8 days.


PRICE
PRICE means the money consideration for the
sale of goods.
Price is a pre-requisite to constitute a valid
contract of sale.
No sale of goods can take place without a
price.
If there is a voluntary surrender of goods by
the real owner to another, the transaction is
not sale but a gift
Price should be paid or promised to be paid in
money
Money here implies the legal tender i.e; bank
notes, coins. It can also include chq, B/E, Pro-
note, hundi etc because it is not the mode of
payment that is important but the money
consideration in it which forms the essence.


Modes of fixing the price - Sec. 9 & 10

Price expressly fixed in the contract itself
- price can be expressly fixed by the parties and
they are free to fix any price they want
- Adequacy of price cannot be questioned
Price fixed in manner provided in the contract
- Where price is not determined, the buyer
shall pay the seller a reasonable price
- what is a reasonable price is a question of fact
dependent on the circumstances of each
particular case


Price fixed by the valuation of a third party
- where the agreement to sell goods on the
terms that the price is to be fixed by the
valuation of a third party and such third party
cannot or does not make such valuation, the
agreement is thereby avoided.
If the goods or any part have been delivered
thereto, and appropriated by the buyer, he
shall pay a reasonable price. If however, such
third party is prevented from making the
valuation by the fault of the seller or buyer,
the party not in fault may maintain a suit for
damages against the party in default.

Difference between sale & bailment
Bailment transaction under which the goods
are delivered by one person to another for
some purpose, upon a contract that they will
be returned or disposed off as directed after
the purpose is accomplished.
In bailment ownership does not pass only
possession passes.
In sale goods are delivered by the seller to
the buyer for a price on terms, which indicate
that the property in goods is to pass at once.

Point of difference

Sale

Bailment of goods
Title & possession Title of goods passes from seller to
buyer,
With or without immediate
possession
Ownership is not transferred
Only possession in transferred

Return of goods The buyer is under no obligation to
return the goods, as there is
transfer of property in goods for
money consideration
The bailee is under an
obligation to return the goods
Relevance of
consideration
Sale is always made for a price Bailment can be made with or
without any money
consideration eg: gratuitous
bailment
Right of goods The buyer is an absolute owner &
he can deal with the goods in any
way he likes
The bailee can use the goods
only according to the terms of
bailment
Act applicable Sale of goods act,1930 Indian contract act,1872
Difference between sale & hire
purchase agreement
Sale: property in goods passes from seller to
buyer for a price.
Hire purchase agreement: a contract of hiring
in which the owner delivers his goods on lease
basis to a person called hirer. In addition the
owner gives hirer an option to purchase the
goods at the end of the hiring period.
In HP agreement: though possession is with
the hirer, ownership is with owner
The hirer under this agreement is required to
pay a fixed sum of money on periodical basis.
On paying the last installment, the hirer will
become the owner of the goods.
This means that until final payment the hirer is
only a bailee of the goods & the ownership is
with the owner

Point of difference

Sale

Hire purchase agreement
Transfer of ownership Sale is an executed contract &
ownership passes immediately
HP ownership transferred upon
the payment of all the
installments
Position of buyer Buyer is the owner Hire purchaser is a bailee
Right to terminate the
contract

Buyer cannot terminate the
contract & has to pay the agreed
price
Hirer may terminate the
contract & return the goods &
he cannot be forced to pay the
remaining installments
Mode of contract Orally or in writing Always in writing
Possession of the goods Immediate possession of the
goods need not be given along
with transfer or ownership
Immediate possession of the
goods is a must without
transfer of ownership

Point of difference

Sale

Hire purchase agreement
Act applicable Sale of goods act, 1930 Hire purchase act, 1972
Sale-tax/VAT Is payable on the goods sold No sales-tax/VAT is levied on a
HP until it becomes a sale
Effect of payments If the price is paid in
installments, each installment is
regarded as part payment of the
price
Each installment is regarded as
hire charges for the use of the
goods. But if Hpser exercises the
option to purchase the goods,
then each installment is
regarded as part payment of the
price
Benefit of implied
conditions & warranties
Implied conditions & warranties
are implied
A hirer cannot claim the benefits
of implied conditions &
warranties

Point of difference

Sale

Hire purchase agreement
Insolvency of the buyer Seller takes the risk of any loss
resulting from the insolvency of
the buyer
HP agreement protects the
owner of the goods against the
insolvency of the buyer, if buyer
become insolvent, the owner
can take back the goods
Resale Buyer can resell or pledge the
goods
The hirer cannot transfer any
title because the position of the
hirer is that of a bailee only.
Risk of loss Risk of loss of goods lies with the
buyer
Risk of loss of goods hired lies
with the owner. HP ser is
absolved of any responsibility if
he has taken reasonable care &
skill to protect the same
CONDITIONS
As a measure of consumer protection, the sale
of Goods Act assumes that every contract of
sale of goods is subject to certain terms.
Terms relate to: quality, use, utility, suitability,
price, delivery of the goods.
The parties to a contract are at liberty to enter
into a contract with any terms or assurances
they please.
These terms may form part of the contract
and the buyer buys the goods relying on such
assurances

There may be mere expression of opinions by
the seller, which is not part of the contract.
Statements or assurances which form part of
the contract of sale, have legal effect on the
contract and are termed as stipulation.
Mere expression of opinion by the seller
commending his goods does not amount to a
stipulation & does not give the buyer the right
of act against the seller.
Further, all stipulations cannot be treated
equally.
Stipulations intended to be of fundamental
nature are called conditions.
Stipulations intended to be of subsidiary
nature are termed as warranties.
The depending upon whether a stipulation is
fundamental or subsidiary in nature, it is
termed as a condition or warranty.
Conditions - terms which form the very basis
of a contract of sale
Warranties those obligations which are
collateral to the main purpose of the contract.
Warranties are of lesser significance as
compared to conditions
Case : Baldry v Marshall : Car for touring
purposes
X goes to horse dealer, Y and tells him that he
wants a horse that can run 35 km/hr. Y
suggests a particular horse & says it will suit
the purpose; but X finds the horse can run
only at 25 km/hr. This is a breach of condition.
X can reject the horse & get back the price paid.

KINDS OF CONDITIONS
Conditions may be:
- Express
- Implied
Express condition:
Condition expressly provided for or agreed upon
the parties at the time of the contract of sale
Eg: If Nilsmon desires to buy a black horse, the
colour of the horse intended to be bought
becomes the condition
Parties can include any number of express
conditions

Implied conditions
conditions are said to be implied if the law
incorporates their existence as implicit to a
contract of sale, unless otherwise agreed upon
b/w the contracting parties.
- Unless the parties stipulate to the contrary,
every contract of sale of goods is subject to
implied conditions

Implied conditions are of 7 types
Condition as to title
Condition as to description
Condition as to sample
Condition as to sample & description
Condition as to quality & fitness
Condition as to merchantability
Condition as to wholesomeness
Condition as to title - sec 14(a)
The condition applies when the sale involves
transfer of property in goods & possession
thereof.
There is an implied condition that the seller
- in an actual sale has the right to sell the
goods
- In an agreement to sell will have the right to
sell when the property (ownership) is to pass

This is based on the principle that ordinarily
an owner or his/her authorised agent has the
right to effect a valid sale of goods since the
ownership can be conferred only by either of
them.
The rule Nemo dat quod non-habet one
cannot give what one does not have
strengthens this condition
If the sellers title turns out to be defective,
the buyer is entitled to reject the goods & to
have the price back.
In such case, the buyer must restore the goods
to the true owner but he can recover the price
paid by him from the seller.
The condition that a seller has a valid title to
the goods is very essential to safeguard the
interest of the innocent buyer.
A contract of sale is aimed at transferring the
title from the seller to the buyer.
So if a seller has no right to transfer the goods
there can be no sale.
Example:
Case: Rowland V Diwall
R bought a second hand car from D, a car dealer
and paid for it. After a few months, G the true
owner spotted the car.
R had to give the car back to G because D had
no title to the car.
Ruling: R could recover the price from D and
sue him for damages.
Condition as to description sec 15
When goods are sold by description, there is
an implied condition that the goods shall
correspond with the description.
correspond with the description means that
goods supplied by the seller must be the same
as described by him.
If it does not match, buyer can return & claim
the price if already paid; he can also sue for
the damages

Case: Varley v Philip
- V purchased a reaper from P which he had
never seen. P described it to be only a year old
& used to harvest crops on a 50-acres plot of
land.
Ruling: V could reject the device.
Even if the buyer has seen the goods but
purchases it on the description given by the
seller sale by description

Beale V Taylor
The owner of a car advertised it for sale as a
'Herald convertible, white, 1961, twin carbs'.
The buyer answered the advertisement, went
to the seller's home and, having seen the car
there and having been driven in it by the
seller, bought it. In fact, though neither the
seller nor the buyer realised this at the time of
the sale, the rear half of the car was part of a
1961 Herald convertible car, but the front half
was part of an earlier model, the two halves
having been welded together. The rear of the
car bore the mark '1200', which was first
applied to the 1961 model. No one could see,
from looking at the car in the ordinary sort of
examination which would be made, that the
car was anything other than that which it
purported to be. The buyer, on discovering the
true position, kept the car and brought an
action against the seller for damages for
breach of condition implied by s.13 of the Sale
of Goods Act, 1893, on a contract for the sale
of goods by description; the seller contended
that the sale was of a thing seen by the buyer
and bought on the buyer's own assessment of
its value. The buyer's claim was dismissed. The
buyer appealed.



Held The buyer was entitled to damages
because, although the description of the car
was not false to the knowledge of either the
seller or the buyer, yet fundamentally the
seller was selling a car of the description
advertised

Sometimes the method of packing may also
form part of description.
Example:
Case: Moore & Co V Landaure & Co
- A sold to B 400 tins of australian fruits which
were to be packed in cases each containing 40
tins. But a major portion consisted of only 25
tins.
- B was entitled to reject the goods.
Condition as to sample
- seller shows sample of the goods to the
buyer & agrees to supply the goods as per the
sample
-there is an implied condition that goods are
supplied as per the sample in quality
In a contract of sale by sample, there are 3
implied conditions:
1. Correspondence of bulk with the sample in
quality
- as per the sample in qlty
- If they differ from sample, buyer can reject the
goods & recover the price
-
2. Reasonable opportunity of comparing the
bulk with the sample
- Opportunity to compare the goods with the
sample depends upon the nature & quantum
of goods involved
- Example:
- In a sale of 500 bags of rice, the buyer is given
an opportunity to examine the contents of 5
bags only, if not happy the buyer can
terminate the contract
- So if the seller refuses the buyers opportunity
to compare, then the buyer can reject the
goods
3. Merchantability of the goods
- goods shall be free from any defect rendering
them unmerchantable, which would not be
apparent on reasonable examination. Such
defects are termed as latent defects& are
discovered when the goods are put to use.
- but a seller is not liable for any visible defects

Case: Drummond & sons V Vans Ingen
- A sold to B some qty of fabric described as
mixed worsted coating similar to a displayed
sample.
Fabric was same as sample but later it was
found that cloth was defective & not fit for
stitching
- Even though the bulk corresponded the sample
was also defective,

Condition as to sample and
description
If seller shows sample of the goods and also
gives him description, the goods must
correspond to both sample & description
If goods do not correspond either with the
sample or the description the buyer can
terminate the contract

Case: Nichol V Galts
There was a sale of foreign refined rapeseed
oil, having warranty only equal to sample. The
oil, which was tendered by the seller, was the
same as sample. But it was not foreign refined
rapeseed oil, but a mixture of rapeseed and
hemp oil. It was held that the seller was liable
for it, and the buyer could refuse to accept the
oil.
Here it confirmed to sample but not to
decsription

Condition as to quality or fitness
In a contract of sale, there is no implied
condition as to the quality of fitness for any
particular purpose of the goods supplied.
The buyer has to satisfy himself about the
quality & suitability of the goods.
Exceptions:
Where the buyer by expressly or by
implication makes known to the seller the
particular purpose for which the goods are
required so as to show that the buyer relies on
the sellers skill or judgement. And the goods

are of description which it is in the course of
the sellers business to supply, then there is an
implied condition that the goods shall be
reasonably fit for the purpose.
In order to avail the implied condition,
requirements to be fulfilled:
1. The buyer requires the goods for a particular
purpose
2. The buyer expressly or impliedly makes
known to the seller the intended purpose
3. The buyer relies upon the sellers skill &
judgement with respect to the fitness of the
goods

4. Sellers business is to supply such goods
whether or not he/she is the manufacturer or
producer thereof.
Case 1: Priest v Last: P , a draper bought a hot
water bottle from L, the chemist.
Case 2: Dr. Baretto Vs T R Pruce, A bought
artifical teeth from B, a dentist
Case 3: Evens Vs Stelle Benjamin: Evens
purchased a refrigerator from Stelle Benjamin
dealing in electrical appliances without asking
the dealer whether it is fit to make ice

From the cases, we infer:
Where goods can be used only for specific
purposes such as oven etc buyer need not
disclose to the seller the purpose
Where goods are used for multiple purposes,
the buyer has to inform the seller about his
specific purpose
Example:
Case: Andrew Yule & co Vs unknown
- the plaintiff bought a piece of hessian from a
cloth merchant. It was not suitable for packing
food stuffs
The implied condition as to the fitness is
applicable only in case of a sale under normal
circumstances.
Sometimes there may be abnormal or special
circumstances affecting the use of the goods
for a particular purpose.
In such cases, the aforesaid condition shall not
work.
Case: Griffith Vs Peter Conway Ltd
- a woman bought a tweed coat from a retailer
whose business was to sell goods of that
description.
Where the buyer buys the goods under a
patent or TM, there is no implied condition as
to the fitness of the goods for the buyers
purpose.
Eg: if a person goes to a medical shop and
buys Dabur chawanprash as a health tonic.
Condition to merchantable quality
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.
In order to avail the relief under this
condition, the following two requirements
must be fulfilled:
1. The goods should be bought by description
2. The seller should be dealing in goods of that
description.
Merchantable quality means 2 things:
1. Where the goods are purchased for self-use,
they should be capable of being used as the
goods of that description
2. Where the goods are purchased for resale,
they should be resalable in the market under
their description.
The cardinal principle of merchantability
That the goods should be free from any
apparent or hidden defects.
Eg: if cement becomes concrete, it is no longer
merchantable
But if the buyer has examined the goods there
shall be no implied condition as regards
defects, which such examination ought to
have revealed.
Example 1:
A bought black yarn from D, and when
delivered, found it damage by ants. The
condition as to merchantability was breached
Example 2:
In Morelli Vs Fitch & gibbons a purchased a
bottle of wine from B .
Condition as to wholesomeness
This is part of a condition as to
merchantability
Applicable only in a contract of sale of
provisions and food stuffs ie; physically
consumed.
Such items should not only answer their
description but they must also be wholesome
ie, they should be fit for human consumption.
Any provision or food item should not be
stale, contaminated or otherwise unfit for
human consumption
Case: Frost V Aylesbury Dairy co .Ltd
F bought milk from As dairy. Milk contained
typhoid germs.
Case: Chaproneere Vs Mason
C bought a bun from Ms bakery and
confectionary shop. The bun contained stone

WARRANTIES
A warranty is a stipulation collateral to the
main purpose of the contract.
It is not essential to the main purpose of the
contract, it is only collateral & subsidiary
Its non fulfillment does not defeat the very
purpose of the buyer
The breach of warranty
claim for damages
No right to reject the goods & treat the
contract repudiated

Where a stipulation is a condition or warranty
depends on the construction of the contract.
The terms used in the contract do not matter
much
Sometimes a stipulation referred as a
warranty in a contract of sale could be a
condition
Examples of warranty:
1. A goes to a car dealer & asks for a good car.
While seller, the dealer says that the mileage
of the car is 16km/l. Later buyer finds it gives
only 12 km/l. Buyer could not reject the car.
Example 2:
Case: Harrison V Knowles & Foster
H bought 2 small ships from K relying upon the
latters statement that DWT of each ship was
460 tons, actual DWT was 360 tons.
The buyer could not reject because it was not a
condition but only a warranty
KINDS OF WARRANTIES
Express warranties
- expressly agreed upon between the parties
Implied warranties
- one which law incorporates into the contract
of sale.
- Even if there are no express representations,
the law implies certain representations


3 implied warranties:
1. Warranty as to quiet possession
2. Warranty against encumbrances
3. Warranty to disclose the dangerous nature of
goods.
Warranty as to quiet possession
- the buyer is entitled to quiet possession of the
goods.
- if the right of possession & enjoyment of the
buyer is disturbed by the seller or any other
person, buyer can sue the seller for damages.
- breach of this warranty happens usually when
the sellers title is defective.
Case: Mason V Burningham
A purchased a typewriter from B; spent some
money on repair & used it. Later found it was
stolen. Seller asked to pay damages o the
extend of Price + cost of repair
Warranty against encumbrances
- goods are not subject to any charge in favour
of a third party
- If it is so, buyer can claim damages from seller.
- This warranty is not applicable where the
buyer has been informed of the
encumbrances or has notice of the same.
- Claim for damages is available only when the
buyer discharges the amount of encumbrance.
- Case: Collinge V Heywood
- A sold scooter to B for Rs. 5000. the scooter
was hypothecated for Rs.3000/-. B not aware
about this.
Warranty to disclose the dangerous nature of
goods
- applicable in case of dangerous goods
- if the goods sold are inherently dangerous, the
seller must warn the innocent buyer of the
probable danger.
- Breach: the buyer can claim compensation
from the seller for any injury suffered by him.
Case: Clarke V Army & Navy co-op society Ltd
C purchased a tin of disinfectant powder from A.
the seller knew the tin was defective.

When condition sinks to the level
of warranty
- when this happens, breach of condition is
treated as breach of warranty.
- so buyer loses the right to reject goods
His remedy is to claim damages

Circumstances when condition
sinks to the level of warranty
1. Voluntary waiver by the buyer
- condition becomes a warranty when the buyer
waives the condition on its non-fulfillment or
treats its breach as breach of warranty
- In such cases, buyer remains liable for the
price and cannot reject the goods.
- But he can sue the seller for damages as in
breach of warranty
- Example: Nilsmon buys an Aston Martin car
20 miles/l.
Example:
Ram makes a contract to deliver 500 bales of
cotton to hari on 15 jan and the delivery on
that date is considered as a condition. But it
gets delivered only on 18 jan.
2. Compulsory treatment of breach of condition
as breach of warranty
-where a contract of sale is indivisible, & the
buyer has accepted goods or part thereof,
breach of condition is treated as breach of
warranty.
- Buyer cannot reject goods & cannot treat the
contract as repudiated
- He can only claim damages from the seller.
- But where the contract is separable, & buyer
has accepted part of the goods, he can still
reject the remaining goods.
[Hardy & Co. v. Hillerns and
Fowler],

Certain goods were sold by sample by A to B,
who in turn sold them by sample to C. The
goods were not found according to the
sample. C rejected the goods and gave a
notice to B. B sued A. Held, C could reject the
goods but not B, as B had accepted the goods
by selling them to C. Hence C can get the price
back but B cannot get the refund. B can claim
damages for a breach of condition as a breach
of warranty
What is acceptance of goods?
Mere possession or taking delivery of the
goods does not amount to acceptance.
Following circumstances will lead to acceptance
of goods:
1. When the buyer intimates the seller abt
acceptance
2. When the goods have been delivered to the
buyer & he does some action consistent with
ownership eg: pledges the same
3. When after the lapse of reasonable time,
he/she retains the goods without intimating
the seller that he has rejected them

SL.
NO
Point of difference Condition Warranty

1.

Nature
Stipulation that is essential to
the main purpose of the
contract
Stipulation is only collateral
to the main purpose

2.

Effect of breach
If there is breach of condition,
the aggrieved party can
repudiate the contract & sue the
seller for damages
Only damages are available
cannot reject the contract

3.

Importance
Vital importance for completion
of a contract
Not of vital importance, the
main contract can be
completed even if the
warranty is not fulfilled

4

Treatment
A breach of condition is treated
as breach of warranty, if the
aggrieved party chooses to be
satisfied with claiming damages
or when the contract is
indivisible.
A breach of warranty under
no circumstances can be
treated as breach of
condition
Doctrine of caveat emptor
Let the buyer beware
A cardinal principle of the law relating to sale
of goods.
Buyer should satisfy himself/herself about the
quality of the goods
If the goods are bought for a purpose, he
should satisfy himself that they are fit for the
purpose
Seller is under no duty to point out defects of
the goods that he is offering for sale.
There is no implied condition as to the quality
or fitness for any particular purpose of goods
supplied under a contract of sale.
Examples:
Case: Ward V Goddard Hobbs
- pigs bought under auction, pigs were sold
subject to faults. No warranty given by seller
in respect of any fault or error of description.
Buyer paid price for healthy pigs.
Example 2: A purchases a shorts for his son B
Exceptions to the doctrine of caveat
emptor
1. Where seller makes a misrepresentation &
the buyer relies on it. Contract will be
voidable at the option of the buyer
2. Where seller actively conceals a defect in the
goods which are not visible on reasonable
examination or where he conducts fraud &
buyer relies on it. Buyer can terminate the
contract & also claim damages.
3. Where buyer is relying on the sellers skill &
judgement.
4. Where goods are bought by description from
a seller who deals in such goods, goods should
be of merchantable quality
5. Where the goods are sold by sample & the
bulk do not correspond to the sample
6. In Sale by sample as well as description, & the
goods do not correspond

Doctrine of caveat venditor
Let the seller beware
Sellers can deceive the innocent buyers
This doctrine helps seller to take responsibility
for the product & discourages them from
selling products of unreasonable quality
The seller is under an obligation to inform the
buyer of any defect in the goods sold at the
time of the contract except where the defect
can be clearly known by the buyer
Transfer of ownership & delivery
Significance of transfer of ownership:
- dictates the legal course in several extra-
ordinary circumstances
Significance of transfer of ownership:
1. Risk prima-facie passes with property
2. Action against third party
3. Suit for price
4. Insolvency of the buyer & seller

1. Risk prima-facie passes with property

Risk follows ownership
Risk remains with seller until property passes
Once transferred to buyer, goods are at
buyers risk whether delivery is made or not
So risk of loss will be with the owner.
Example: A bought suiting cloth from B and
kept in Bs shop.
Sometimes, parties may agree that risk will pass
at a different time than ownership. Guiding rule is
resperit demino loss falls on the buyer
Case: In consolidated coffee ltd vs coffee board
- Auction was conducted for sale of coffee. One of
the terms said property in coffee knocked down
to a bidder would remain with the seller but at
buyers risk.
- Property & risk passes at two stages
Case: Multanmal Chempala vs shah & co
Goods were delivered by the seller from Bombay to
Bellary through a public carrier. Condition was
made:Property with seller & risk with buyer
2. Action against third party
If there is a risk of the goods being damaged
by the action of third parties, generally owner
can take action & not the person who is in
mere possession of the goods.

Price being an integral part of contract of sale,
seller can sue the buyer for the price when the
property in goods has passed to the latter.
Here seller is not bound to accept money in
any form other than the legal tender, unless
otherwise agreed.
3. Suit for price

4. Insolvency of the buyer or seller
In the above, it has to be ascertained whether the
goods can be taken over by the official receiver or
the official assignee
Depends upon whether the property in the goods
was with the party adjudged insolvent.
If buyer becomes insolvent, the buyers official
receiver can take possession of the goods even
though the goods are with the seller.
If seller becomes insolvent before effecting delivery
but the property in goods have passed to the buyer
who has paid the price, sellers offical receiver shall
have no claim against the goods.

Rules regarding transfer of property
Transfer of property in specific or ascertained
goods
Transfer of property in unascertained goods
Transfer of property in goods sent on
approval or sale or return basis.
Transfer of property in specific or
ascertained goods

Specific goods goods identified at the time
of the contract of sale of goods.
Transfer of property in specific/ascertained
goods , the property will be transferred at
such time as the parties to the contract intend
or want to be transferred.
Intention of the parties can be ascertained
through following rules:
1. Specific goods in a deliverable state
Where there is an unconditional contract for the
sale of specific goods in a deliverable state,
the property in the goods passes to the buyer
when the contract is made.
- It does not matter whether payment of price
or the delivery of goods or both is postponed
Following conditions should be satisfied:
1. Goods are specific
2. Contract is an unconditional one
3. Goods are in deliverable state

Example: Jithu buys a televison from Green
appliances for Rs. 25,000/- on one month
credit and asks them to deliver it to his house.
The dealer agrees, so TV immediately
becomes Jithus property.
suppose, before the delivery of the TV
happens, a fire breaks out in the showroom &
the TV is destroyed. In that case also, Jithu will
be liable even though price has not been paid
& the TV has not been delivered.
Deliverable state buyer is bound to take
delivery of them
Specific goods not in deliverable state
- In the above case, the seller should work on
them to make them deliverable
- The property does not pass to the buyer
unless something is done in order to put them
in a deliverable state.
Case: Rugg v Minett
- A certain qty of oil was bought & it was
supposed to be filled in casks by the seller &
then taken away by the buyer. Seller filled oil
in some casks.
Specific goods in a deliverable state but
seller has to do something to ascertain the
price.
Goods are in deliverable state but if the seller
is supposed to weigh, measure, test etc for
ascertaining the price, the property does not
pass until such act is done.
Example: A purchases a heap of fodder @
100/- per quintal from B. However, B has to
weigh the fodder in order to ascertain the
price. Property will pass only after such act is
done
TRANSFER OF PROPERTY IN
UNASCERTAINED/FUTURE GOODS
- until the goods are ascertained the property
does not pass to the buyer.
Generic /unascertained goods are goods
having no brand name & therefore defined by
description. Eg: 100 quintals of wheat
These are goods which are not being
identified & agreed upon when the contract is
made.
Case study:
A agreed to sell to B 5 bags of sugar out of 100
bags of sugar in his warehouse.
The property does not pass until the goods are
separated from the bulk & unconditionally
appropriated to the contract. This constitutes
only to agreement to sell.
Two conditions to be fulfilled in the case of
generic goods
1. Ascertainment of goods
2. Their appropriation to the contract.
1. Ascertainment of goods
- process of identifying and earmarking (i.e
setting apart) the goods to be delivered.
- Involves separating, measuring, weighing,
counting etc
- In order to identify and determine the
specific goods to be delivered
2. Appropriation to the contract
- selection of the goods with the exclusive
intention of using them in performance of
the contract and involves the element of
mutual consent of the seller and the buyer.

- Distinction between ascertainment and
appropriation is that:
- Ascertainment is a unilateral act and is usually
done by the seller alone.
- Appropriation is bilateral in nature which
involves mutual consent.
Essentials of a valid appropriation
5 conditions for a valid appropriation:
1. The goods should confirm to the description
stated in the contract, both as to quality and
quantity
2. The appropriation must be intentional; it
should not be by mistake
3. The appropriation must be made either:
* by the seller with the assent of the buyer, or
* by the buyer with the assent of seller

4. The assent, whether express, or implied is
necessary for valid appropriation.
5. The appropriation must be unconditional. i.e
the goods must be unconditionally
appropriated to the contract either by delivery
of goods directly to the buyer or his agent for
the purpose of transmission to the buyer.
The seller should not reserve himself the right
of disposal of goods.
Once goods are appropriated to the contract
legally, it becomes the property of the buyer.
It is immaterial in this regard whether they
have been delivered or not.
If not delivered, then remain in custody of the
seller as a bailee.
Transfer of ownership when goods
are delivered on approval or sale
or return basis
In the above case, property transfers to the
buyer:
(a) When the buyer signifies his
approval/acceptance to the seller & does any
act adopting the transaction.
(b) If the buyer does not signify his acceptance
but retains the goods without giving notice of
rejection.
Case: Elphick V Barnes
E delivered a horse to B on sale or return
terms within 80 days. The horse died on the
third day for no fault of B. it was held that E,
the seller was to bear the loss as the
ownership of the horse was still with him
when it expired.

Rule regarding transfer of title on sale
General rule: only owner can transfer the
ownership in the goods to the buyer
Maxim nemo dat quod non-habet applies
here, no one can pass a better title than what
he himself has.
When applied to the sale of goods, this rule
provides that if a person deals with the goods
of another person, & without the owners
authority, such transaction is a nullity.
i.e no value in the eyes of law

Thus even a bonafide buyer who buys stolen
goods from a thief does not get a valid title.

Exceptions to the rule
Sometimes the buyer gets a better title to the
goods than the transferor himself has.
Exception include:
- Sale by mercantile agent
- Transfer of title by estoppel
- Sale by one of the joint owners
- Sale by a person in possession under a
voidable contract
- Sale by seller in possession after sale
- Sale by a buyer in possession after agreement
to buy
- Sale by unpaid seller
- Sale by a finder of lost goods
- Sale by pledgee
- Sale by official assignee or official receiver
Sale by mercantile agent
Mercantile agent means an agent having, in
the customary course of business, authority to
either sell goods, or to buy goods, or to raise
money on the security of goods.
Auctioneers & factors are examples of
mercantile agents
A buyer gets a good title from a mercantile
agent provided the following conditions are
met
The mercantile agent should be in possession
of the goods to sell the goods with the
consent of the owner
The agent should sell the goods while acting in
the ordinary course of business as a
mercantile agent
The buyer must act in good faith i.e, at the
time of the contract he must have no
knowledge that the agent had no authority to
sell.
In Folks Vs King
- F, the owner of the car, instructed a mercantile
agent to sell the car at a stipulated price and
not below that.
But the agent sold the car to A, a bona fide
buyer below the stipulated price and
misappropriated the proceeds.
The buyer, A resold the car to K, the defendant. It
was held that A had obtained a good title to the
car from the mercantile agent and conveyed a
good title to K, the ultimate buyer, and
therefore F, the real owner cannot recover the
car from K

Transfer of title by Estoppel
Estoppel arises when a person by his words or
conduct makes another person believe that
certain state of affairs existed. He/she is not
allowed to deny that such a state of affairs did
not exist.
Applying this rule to the contract of sale of
goods. where the true owner of the goods
by his act or omission leads an innocent buyer
to believe that the seller has the authority to
sell, later on he is estopped from denying the
sellers authority to sell.
Example:
A sells the goods of B to C in his presence. B
does not raise any objections to it. Here, C will
get a good title. In this case if B, the real
owner subsequently decides to deny A
authority to sell the goods, B may be estopped
from doing so and the sale will be binding on
B.
Case: Oconnor Vs Clark
A, the owner of a wagon allowed one of his
employees B to have his (Bs) name painted on
it. A did so with aim of giving public an
impression that the wagon belonged to B.C,
an innocent buyer purchased the wagon from
B, for value.
It was held that C had acquired a good title and
A was estopped from denying Bs authority to
sell.
Thus, under the law of estoppel, the buyer gets
the ownership in spite of the fact that the
seller is not the true owner

Sale by one of the joint owners
If one if the several owners of goods, has the
sole possession thereof, with the permission
of others, if the property in the goods is
transferred to any person who buys them
from such joint owner for value & without
being aware of the fact that the seller has no
authority to sell, the buyer will acquire a good
title thereto.
Usually the co-owner can only transfer his
share.
But this sec allows the co-owner to sell not
only his share but also the share of other co-
owners.
An exception to the rule that no one can sell
what he has not got.
Eg: A, B & c are joint owners of a car. With Bs
& Cs consent, the car is in As custody. A sells
the car to P who purchases it for value. P gets
a good title.
Sale by a person in possession
under a voidable contract
If a person has obtained possession of goods
under a contract which is voidable due to
fraud etc. & he sells the goods o a bodafide
buyer before the contract is rescinded, the
buyer will get good title.
Eg: A by misrepresentation induces B, a
jeweller to sell & deliver to him a diamond
ring. This contract is voidable at the option of
B under sec 19 of The Indian contract act.Bute
before B rescinds it, A resells it to C
Sale by a seller in possession of the
goods after sale.
A seller who is possession of the goods or in
possession of the document of title to the
goods resells it, the person who buys it for
value and without notice of previous sale,
such a buyer gets a good title to the goods.
Eg: A buys a TV from B, and leaves it with B for
the time being. Mean while, B sells the same
TV to C who buys the same without
knowledge about the pvs sale, C gets good
title to the goods.
For this provision to apply, the seller must be
in the possession of goods in the capacity of
the seller& not as a bailee or hirer.
Eg: In the above case, if the TV set was
delivered to A but later he gave it to B for
some repair & B resold that TV to C who
bought in good faith, C would not get any title
to the good because B was in possession of
the good not as a seller but in the capacity of
a bailee
Sale by a buyer in possession after
Agreement to Buy
Where goods are bought or agreed to be bought
& are in possession of the buyer, but the
property has not yet passed to the buyer, any
sale by him to a second buyer who takes in good
faith, will get a good title.
Eg:A sells his car for a certain price to B on
installment basis with a condition that A will be
the owner till the last installment is paid. After
few installments, B sells the car to C for an
agreed price who bought in good faith. C gets a
good title.

It applies only in cases where buyer is in
possession of the goods.
Sale by an unpaid seller
Where an unpaid seller has exercised his right
of lien or stoppage in transit & is in the
possession of the goods, he may resell them &
the second buyer will get good title.
Eg: A sold certain goods to B for Rs.10,000 &
allowed him to pay the price within a month.
B, the buyer goes insolvent during the period
of credit. A being the unpaid seller can retain
possession of the goods for non-payment of
the price by B.
Right of lien is linked with possession & not with
ownership
Sale by the finder of lost goods
Sec 169 provides that a finder of lost goods
has the power to sell them under certain
circumstances & the buyer will get good title
under following conditions,
1. the real owner cannot be found with
reasonable search & diligence
2 .if found, he/she refuses to reimburse the
lawful charges incurred by the finder
3. if the goods found are highly perishable or
likely to lose its mercantile value
4. if he lawful charges of the finder amount to
two thirds or more of its value
Sale by a pledgee
On default of the pledger to repay a loan, the
pledgee has a right to sell the goods pledged
with him/her after giving a reasonable notice
to the pledger.
In such a case, the pledgee, even though not
being the owner of the goods, can sell the
goods & convey a good title to the buyer.
Sale by official assignee or official
receiver, liquidator
The official assignee/official receiver under
the Presidency Towns Insolvency act or
Provincial Towns Insolvency act
And the liquidator under the companies act,
although not owners of a property can convey
a better title than they have under normal
circumstances
Delivery of goods
- transfer of possession from one person to
another
It should be transferred willingly & not by
fraud, theft or force etc.
Mere possession of goods does not amount to
delivery
Modes of delivery
3 types:
1. Actual delivery
2. Symbolic delivery
3. Constructive delivery
Actual delivery
- actual delivery / physical delivery takes place
when the goods are physically handed over by
the seller to the buyer to take possession of
the goods.
Eg: A sells a car to B, & he hands over the car
to B this is actual delivery
Symbolic delivery
Where goods are bulky& heavy & physical
delivery not possible
Then symbolic delivery happens.
Eg: delivering the keys of the warehouse
where the goods are stored.
Keys of car handed over
Constructive delivery
In this case, neither physical nor symbolic
delivery is made.
Also called attornment
It can be effected in 3 ways:
1. Where the seller after having sold the goods,
agrees to hold them as a bailee for the buyer
2. Where the buyer who is already in
possession of the goods as a bailee of the
seller, hold them as his own after the sale
3. Where a third party eg, carrier/transporter
who holds the goods as a bailee for the seller,
agrees & acknowledges holding them for the
buyer
RULES REGARDING DELIVERY OF GOODS
1. EFFECT OF DELIVERY
- whether the delivery is actual, symbolic or
constructive, it should have the effect of
putting the goods in the possession of the
buyer/agent.
2. DELIVERY & PAYMENT ARE CONCURRENT
CONDITIONS
- seller should give possession of the goods to
the buyer
- who in turn should pay for the price.

3. EFFECT OF PART-DELIVERY
-delivery of part of the goods in progress of the
delivery of the whole has the same effect for
the purpose passing the property in such
goods, as a delivery of the whole.
- where part delivery is made with the effect of
severing it from the whole lot, then it does
not operate as a delivery of the whole of the
goods
Case: Hammond Vs Anderson
- A sold certain goods to B lying at a wharf.
Case: Bunnery Vs Poyntz
- A sold a stack of hay grown on his filed to B.
4. BUYER TO APPLY FOR DELIVERY
- in the absence of any express term to do so,
the seller is not bound to deliver the goods
unless the buyer applies for delivery.
- even where the goods are to be procured by
the seller, duty of the seller ends with
intimating the buyer that the goods are
procured.
5. PLACE OF DELIVERY
- stated in the contract.
- goods should be delivered at the stipulated
place during business hours on a working day
as given in the contract.
- where no place is mentioned
*in actual sale, goods are to be delivered at the
place at which they are at the time of the sale
* in agreement to sell, at the place decided at
the time of agreement to sell
In ATG, if goods are not in existence, they should
be delivered where they are produced
6. TIME OF DELIVERY
- contract may specify the time of delivery
- when stated so delivery should be at the
specific time
- when not stated, within reasonable time.
7. DELIVERY WHEN GOODS ARE IN POSSESSION
OF A THIRD PARTY
- in such case, there is no delivery by the seller
unless & until such person acknowledges to
the buyer that he holds the goods on his
behalf.
Such delivery is called as constructive delivery
It requires the consent of all the three parties.
8. EXPENSES OF DELIVERY
- shall be borne by the seller unless otherwise
agreed.
9. DELIVERY OF WRONG QUANTITY
- any delivery less or more than the contracted
qty, is treated as defective delivery
- 3 cases of wrong delivery
* short delivery
* Excess delivery
* Mixed delivery



Short delivery
- buyer can reject the goods
- if accepting the same, he should pay for the
qty accepted
- however, can sue the seller for damages
Eg: 10 kgs of basmati rice @ 1000 per bag.
Excess delivery
- buyer can accept the contracted qty & reject
the rest
- to reject the whole qty
- to accept the whole qty

- if the buyer accepts the whole, he should pay
for it too.
Eg: A agrees to sell & deliver 50 kgs of wheat @
Rs.30 per kg; instead 55 kgs are delivered.
Mixed delivery
- where seller delivers goods mixed with other
goods which are not included in the contract
- buyer may accept goods as per the contract
& reject the rest.
- or he may reject the whole lot.
Eg: A agrees to sell & deliver 100 bags of
Aashirwad flour @ 35 per bag.
10. INSTALLMENT DELIVERIES
- if agreed, delivery of goods by installments
can be made i.e only if it is expressly or
impliedly stated
Case: Richardson V Dunn, A coal merchant
agrees to sell to B 200 tons of coal. But A
shipped only 152 tons & intimated abt the
same. But buyer didnt reply. It was held that
buyer impliedly assented to it.

Sometimes, the contract is for delivering goods
by installment & each installment is to be
separately paid for, problem arises:
* if the seller makes a defective delivery for
one or more installments
* the buyer refuses to take delivery of or pay
for one or more installments
Case:Maple Flock co ltd vs Universal Furniture
Products (wembley) Ltd

11. DELIVERY TO A CARRIER OR WHARFINGERS
- where the seller is authorised /required to
send the goods by a carrier, for the purpose of
transmission to the buyer, or
delivery of goods to wharfingers for safe
custody; is prima facie deemed to be a
delivery of the goods to the buyer
12. DETERIORATION OF GOODS IN TRANSIT
- If the goods are to be delivered at a place
other than that where they are when sold at
the risk of the seller, the risk of deterioration
of the goods in transit will be borne by the
buyer.
13. ACCEPTANCE OF DELIVERY BY BUYER
- mere acceptance or taking possession of the
goods wont lead to acceptance.
Acceptance happens when:
When he/she intimates to the seller
When he/she does any act in relation to the
goods which is consistent with ownership.
When after lapse of reasonable time, goods are
retained
14. BUYERS RIGHT OF EXAMINING THE GOODS
- where goods are delivered to the buyer, which
he has not previously examined
- where seller tenders delivery of goods to the
buyer, he is bound on request to afford buyer a
reasonable opportunity

15. BUYER NOT BOUND TO RETURN REJECTED
GOODS
- he just needs to intimate the seller about it.
16. LIABILITY OF THE BUYER FOR NEGLECTING
/REFUSING TO TAKE DELIVERY OF THE GOODS
-in such cases, the buyer is liable to the seller for:
* any loss cause by his neglect or refusal to take
delivery
* a reasonable charge for the care & custody of the
goods.
i.E Seller in such case may sue for the price for
damages

UNPAID SELLER
One who has not received the full price of the
goods sold by him/her.
Sec .45 of Sale of goods act defines:
The seller of goods is deemed to be an unpaid
seller
When whole of the price has not been paid, or
When the B/E or other negotiable instrument
has been received as conditional payment &
the condition on which it has been received
has not been fulfilled by reason of the
dishonour of the instrument or otherwise
EXAMPLES:
1. A sold his scooter to B for Rs. 10,000
2. Same as above, but payment by chq
3. Same as 1, one month credit
Rights of an unpaid seller
Broadly classified as:
- rights against the goods
- Rights against the buyer

RIGHTS AGAINST THE GOODS
RIGHT OF LIEN
RIGHT OF STOPPAGE OF GOODS IN TRANSIT
RIGHT OF RESALE
RIGHT TO WITHHOLD DELIVERY
Right of lien
- lien implies possession of the goods until the
price is paid.
Lien can be exercised in:
Where goods have been sold without any
stipulation as to credit
Where the goods have been sold on credit,
but credit term has expired
Where the buyer becomes insolvent, even
though the credit period has not expired.

The seller may exercise his right of lien no
matter he is possession of the goods, merely,
as an agent or bailee for the buyer.
Lien depends upon physical possession.
Unpaid sellers lien is possessory lien means
lien can be exercised as long as the seller is in
actual possession of the goods
Transfer of ownership is immaterial.
- i.e it is not affected even where the seller has
delivered to the buyer documents of title to
the goods provided
The real test of exercising the lien subsists
whether the property in goods has passed to
the buyer.
If the seller retains the title, it is incorrect to
state that the seller has a lien against his own
goods.
Seller can exercise lien only for non-payment
of price.

Example 1
A sold some goods to B for Rs.10,000 & allowed
him to pay price within one month. The buyer
becomes insolvent during the period of credit.
A can retain the possession of the goods.
Example 2
Suraj sells his car to Jithu. Price to be paid within
one month of sale. While Suraj is having
possession over the car , he issues a sale letter
to Jithu & hands over the documents. But jithu
does not pay within the time agreed.
Rules regarding right of lien
The seller must possess the goods
- first prerequisite to exercise a right of lien
Regarding cash sale
Regarding credit sale
When the buyer becomes insolvent
In case of part delivery right of lien on the
remainder but right of lien is lost where part
delivery is intended as delivery of the whole
Rules regarding right of lien
Subject matter is price not incidental charges
Where documents of title have already been
delivered
The right of lien is absolute i.e the unpaid seller is
entitled to refuse to deliver a part of the goods
against the payment of proportionate price by a
buyer
When the seller possesses the goods otherwise
Where the seller has obtained a decree for the
price of the goods
Termination of lien
In five cases, lien is lost:
1. When he delivers the goods to a carrier
which amounts to delivery to the buyer
Eg: Anand agreed to sell 1000 bags of cement to
Gibin for a price to be paid on delivery and
delivered the bags to the railways for
transmission to the Gibin. the RR was also
taken in Gibins name. So here right of lien is
lost
2. When the buyer lawfully obtains possession
of the goods.
3. Lien is lost wqiver thereof. The seller is free to
waive his right of lien expressly or impliedly
Eg: where a seller grants fresh terms of credit or
allows the buyer to accept B/E payable at a
future date.
4. By tender of the price by the buyer.
5. By subsequent sale by the buyer where
property in the goods has been lawfully
passed to the buyer


Right of stoppage of goods in transit
- implies preventing the goods from being
delivered to the buyer while in transit and
retaining them until payment of price.
When can this right be exercised?
when the buyer of the goods becomes
insolvent, the unpaid seller who has parted
possession of the goods has the right of
stopping them in transit.

Conditions to be fulfilled for stoppage in transit
1. The seller is unpaid
2. The property has passed to the buyer
3. The buyer has become insolvent
4. The goods are in transit.
How is stoppage in transit effected?
By taking actual possession of the goods, or
By giving notice of his claim to the carrier or
to the bailee in whose possession the goods
are.


Sl no

Lien

Stoppage in transit

1
To exercise the right of lien, goods must
be in actual possession of the seller
Seller has parted possession but goods
are in transit

2
When the buyer is in fault, no matter
whether he is insolvent
When the buyer is in fault but when he
has become insolvent

3
Lien comes to an as soon as the unpaid
seller parts with the goods
The right of stoppage in transit
commences when the seller has parted
with his goods, i.e delivered to the
carrier & ends as soon as the goods are
delivered to the buyer
4 This right remains in force till the right of
stoppage in transit commences
This right is an extension of the right of
lien & remains in force till the goods are
delivered to the buyer
5 This is right to retain possession of the
goods & is available even when the buyer
is insolvent
This is right to regain possession of the
goods & is available only when the buyer
becomes insolvent
Right of resale
The law grants another protection to the
unpaid seller by giving him the right to resell
the goods in the following circumstances:
1. Where the goods are of perishable nature
- resale is possible after the expiry of a
reasonable time
- no need to serve any notice to the original
buyer
2. Where the seller expressly reserves such right
3. Where the unpaid seller gives notice to buyer of
his intention to resell
- having exercised the right of lien or stoppage in
transit, the unpaid seller should give notice to
the buyer of his intention to resell
- If the buyer does not pay within a reasonable
time, seller can resell.
- Seller can also claim damages from the buyer for
any loss.
- If no notice is given to the buyer, the seller
cannot recover the damages & the buyer can be
entitled to the profit
Right to withhold delivery
Where the property in goods has not passed
to the buyer, the unpaid seller can withhold
delivery .
RIGHTS OF UNPAID SELLER
AGAINST THE BUYER PERSONALLY
Suit for price
Suit for damages for non-acceptance
Suit for damages for repudiating contract
before due date
Suit for interest and special damages.
Suit for price
Where property of goods has passed to the
buyer, the seller may sue the buyer for the
price of the goods
If the property of goods have not passed,
generally, the seller can only sue for damages;
he cannot file a suit for price.
But where price is payable on a certain day
irrespective of delivery & ownership of goods
not passed, seller can sue the buyer for a price
if the buyer neglects or refuses to pay such
price.

Suit for damages for non-acceptance
1. Where buyer does not accept the goods, the
amount of damages to be paid to the seller is
calculated in accordance with the rules in sec
73 & 74:
- where the goods have a ready market, the
seller may recover from the buyer damages
equal to the difference between the contract
price & the market price on the date of the
breach of the contract, if the market price
exceeds the contract price
Eg: Sonu agreed to sell 50 kgs of almonds to
Neethu @ Rs.250 per kg.
The almonds were to be delivered after 15
days & the price to be paid on delivery
Sonu delivered the almonds but Neethu
refused to accept & pay for them.
On the date of breach, market price of
almonds is Rs. 300 per kg.
Sonus claim = 15000 12500 = 2500/-
2. Where goods do not have ready market,
damages will depend upon the facts of each case.
- general rule: damages in such a case = the
estimated loss arising directly and naturally in the
ordinary course of events , from the buyers
breach of contract.
I.e: where the goods have been manufactured on
some special order, & the buyer neglects or
refuses to accept such goods & pay for them,
then the seller is entitled to full price of the
goods reason being such goods may not be
saleable
Case: Thompson (WL) Ltd vs Robinson
(gunmakers) ltd.
- R entered into a contract with T ltd, a car dealer to
purchase a Vanguard car.
- but upon being offered, R refused to accept the
delivery.
- There was no market price for this car on the date
of breach as supply of the car exceeded the
demand
- Held that T were entitled to damages for the the
profit they would have made, as they sold one car
less that they would have sold otherwise
Suit for damages repudiating
contract before due date
If a buyer repudiates the contract before the due
date of delivery of goods, the seller may either
treat the contract
as subsisting or
wait till the due date of delivery or
Can treat the contract as rescinded and sue for
damages for the breach
Amt of damages will depend upon the price
prevailing at the time of the breach & contract
price
Example:
Christy agreed to sell to Alina 100 gms of gold @
30000/- per 10 gms.
The gold was to be delivered after 15 days & the
price to be paid on delivery
Before the due date of delivery, Alina informed
that she was no longer interested & was
unwilling to accept.
So Christy sold it to Suriya @ 29000/- per 10
gms.
Christy can sue Alina for Rs. 1000/- per 10 gms.

Suit for interest & special damages
- if any case where by law, interest or special
damages may be recoverable, the unpaid
seller can do so.
The seller can claim the interest only when he
is entitled to recover the price from the buyer
If the unpaid seller has only the remedy to
claim damages, then he is not entitled to
interest.