Definition of Sale (Section 4)

The law relating to the sale of goods in India is governed by the Sale of Goods Act, 1930. This Act was originally part of the Indian Contract Act, 1872, but was later repealed and enacted as a separate statute. The most fundamental concept under this Act is the contract of sale.

---

Definition under Section 4

Section 4(1) of the Sale of Goods Act, 1930, defines "Sale" and "Agreement to sell":

"A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price."

Explanation:

• Contract of Sale of Goods: It is a type of contract involving specific elements.
• Two Parties: There must be a 'seller' and a 'buyer'.
• Goods: The subject matter of the contract must be 'goods'. Section 2(7) defines "goods" as "every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale." Immovable property is not covered by this Act; it is governed by the Transfer of Property Act, 1882.
• Price: The consideration for the sale must be a price, which is defined as money consideration for the sale of goods (Section 2(10)). Barter (exchange of goods for goods) is not covered by the Sale of Goods Act, although it might be considered a form of contract under the Indian Contract Act.
• Transfer of Property: The essence of a contract of sale is the transfer of 'property' in goods. Section 2(11) defines "property" as "the general property in goods, and not merely a special property". 'General property' means ownership. So, it is the transfer of ownership that is key.

---

Transfer of property from seller to buyer for a price

Section 4(1) makes a crucial distinction within the definition of a contract of sale:

• Where the seller transfers the property in goods to the buyer, the contract is called a Sale. In this case, the ownership passes immediately or at the time of the contract, depending on the circumstances and terms. A sale is an executed contract.
• Where the seller agrees to transfer the property in goods to the buyer at a future time or subject to some condition thereafter to be fulfilled, the contract is called an Agreement to sell. In this case, the ownership does not pass at the time of the contract but will pass later when the agreed time arrives or the condition is fulfilled. An agreement to sell is an executory contract.

Section 4(3): "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."

Section 4(4): "An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred."

This distinction between 'sale' and 'agreement to sell' is very important as their legal consequences, particularly concerning the risk of loss or damage to the goods and the remedies available, are different.

---

Answer:

---

Answer:

Essentials of Contract of Sale

Based on the definition in Section 4 and other relevant provisions of the Sale of Goods Act, 1930, the following are the essential elements of a valid contract of sale:

---

Two parties (Buyer and Seller)

There must be at least two distinct parties - a buyer and a seller. One person cannot buy their own goods. However, a part owner can sell his share in goods to another part owner (Section 4(1) Proviso).

---

Moversble property (Goods)

The subject matter of the contract must be 'goods' as defined in Section 2(7) - movable property. Immovable property, actionable claims (debts for which legal action can be taken), and money (except old rare coins) are excluded. Stock and shares, growing crops, etc., are included.

---

Transfer of property

There must be a transfer of general property (ownership) in the goods from the seller to the buyer, or an agreement to transfer it. Transfer of mere possession (like in bailment) is not a sale.

---

Price

The consideration for the transfer of ownership must be a price, i.e., money consideration. If goods are exchanged for goods, it is barter, not a sale under this Act. If goods are exchanged partly for goods and partly for money, it can be a sale.

---

Agreement to sell (or actual sale)

There must be a contract or agreement between the parties. All essential elements of a valid contract under the Indian Contract Act, 1872 (offer, acceptance, free consent, capacity, lawful object, lawful consideration) must be present, unless otherwise provided in the Sale of Goods Act itself.

---

Absolute sale (or conditional)

A contract of sale can be absolute (transfer of property is not subject to any condition) or conditional (transfer of property is subject to fulfilment of some condition). A conditional sale becomes absolute when the condition is fulfilled.

---

Answer:

Distinction between Sale and Agreement to Sell

The distinction between a 'sale' and an 'agreement to sell', though both are types of 'contracts of sale', is crucial due to the difference in when the ownership (property) in the goods passes from the seller to the buyer. This affects the rights and liabilities of the parties, especially in case of loss or breach.

---

Comparison Table: Sale vs. Agreement to Sell

Basis	Sale	Agreement to Sell
Transfer of Property	Transfer of property (ownership) takes place immediately at the time of the contract or earlier.	Transfer of property (ownership) is to take place at a future time or subject to some condition to be fulfilled.
Nature of Contract	It is an executed contract. Ownership has already passed.	It is an executory contract. Ownership has not yet passed.
Risk of Loss (Section 26)	Generally, the risk of loss follows ownership. If the goods are destroyed, the loss falls on the buyer, even if the goods are still in the seller's possession. (Unless otherwise agreed).	Generally, the risk of loss remains with the seller, even if the goods are in the buyer's possession. (Unless otherwise agreed).
Remedies for Breach by Buyer (Suit for Price)	If the buyer wrongfully neglects or refuses to pay for the goods, the seller can sue the buyer for the price (Section 55(1)), because the ownership has passed to the buyer.	If the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller can only sue for damages for non-acceptance (Section 56). The seller cannot sue for the full price because ownership has not passed. (Unless the price is payable on a certain day irrespective of delivery and ownership transfer - Section 55(2)).
Remedies for Breach by Seller (Suit for Damages/Specific Performance)	If the seller breaches the contract (e.g., refuses to deliver), the buyer can sue for damages for non-delivery (Section 57) or, in certain cases, specific performance (Section 58 - for specific/ascertained goods where damages are inadequate). Since ownership may have passed, the buyer can also treat the seller as a bailee of his own goods.	If the seller breaches the contract, the buyer can sue for damages for non-delivery (Section 57). The buyer cannot generally sue for specific performance unless the goods are specific or ascertained and damages are inadequate (Section 58). The buyer does not have ownership, so cannot treat the seller as bailee of his goods.
Insolvency of Seller	If the seller becomes insolvent before delivering the goods, the buyer, having ownership, can claim the goods from the Official Receiver/Assignee.	If the seller becomes insolvent, the buyer cannot claim the goods from the Official Receiver/Assignee, as ownership has not passed. The buyer can only claim for damages (dividend from seller's estate).
Insolvency of Buyer	If the buyer becomes insolvent before paying the price, the seller, having parted with ownership, cannot claim the goods back (unless he has a right of lien or stoppage in transit in specific situations of an unpaid seller - Sections 47, 50). He can only prove for the price as a creditor in the buyer's insolvency.	If the buyer becomes insolvent, the seller is not bound to deliver the goods, as ownership has not passed. If the buyer has paid a deposit, the seller may retain it. The seller can claim damages for non-acceptance.
Subsequent Sale by Seller	If the seller sells the goods again to a third party, the first buyer has already acquired ownership and can recover the goods from the second buyer, unless the second buyer obtained good title under specific exceptions (e.g., sale by a seller in possession after sale - Section 30(1)).	If the seller sells the goods to a third party, the third party may obtain good title, and the first buyer's remedy is only against the seller for damages, as the first buyer did not have ownership.

---

Answer:

---

Answer:

Meaning of Condition and Warranty (Section 12)

In a contract of sale, statements or stipulations are made by the seller regarding the goods. These stipulations can be either Conditions or Warranties. The distinction between the two is crucial because their breach results in different remedies for the buyer. Section 12 of the Sale of Goods Act, 1930, defines these terms.

---

Definition under Section 12

Section 12(1):

"A stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty."

Section 12(2):

"A 'condition' is a stipulation essential to the main purpose of the contract, the breach of which gives the aggrieved party a right to repudiate the contract."

Section 12(3):

"A 'warranty' is a stipulation collateral to the main purpose of the contract, the breach of which gives the aggrieved party a right to claim damages but not a right to repudiate the contract and reject the goods."

Section 12(4):

"Whether a stipulation in a contract of sale is a condition or a warranty depends in each case on the construction of the contract. A stipulation may be a condition, though called a warranty in the contract."

Explanation:

• Condition: An essential term that goes to the root of the contract. Its performance is fundamental to the buyer getting what they essentially bargained for. Breach of a condition is a major breach.
• Warranty: A term that is secondary or collateral to the main purpose of the contract. Its breach is a minor breach, not affecting the core of the agreement.

---

Distinction:

Basis	Condition (Section 12(2))	Warranty (Section 12(3))
Relation to Contract	Essential to the main purpose of the contract.	Collateral to the main purpose of the contract.
Remedy for Breach	Aggrieved party (buyer) can repudiate the contract and reject the goods OR treat the breach of condition as a breach of warranty and claim damages.	Aggrieved party (buyer) can only claim damages. Cannot repudiate the contract or reject the goods.
Effect of Breach	Breach of condition is a fundamental breach.	Breach of warranty is a minor breach.
Option to Treat as Warranty	Breach of condition may be treated as a breach of warranty by the buyer (Section 13).	Breach of warranty cannot be treated as a breach of condition.
Conversion of Condition into Warranty (Section 13)	A condition may be treated as a warranty in certain circumstances (e.g., voluntarily waived by buyer, or if buyer accepts goods).	A warranty remains a warranty.

---

When Condition to be Treated as Warranty (Section 13):

Section 13 provides situations where a breach of condition is treated as a breach of warranty, limiting the buyer's remedy to damages:

• Waiver by Buyer: The buyer may voluntarily waive the condition.
• Compulsory Treatment due to Acceptance: Where a contract of sale is not severable and the buyer has accepted the goods or a part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty, unless there is an express or implied term of the contract to the contrary. (Acceptance usually occurs when the buyer intimates the seller that he has accepted, or when the goods have been delivered to him and he does an act inconsistent with the seller's ownership, or after a reasonable time has elapsed and he retains the goods without intimating rejection - Section 42).

The determination of whether a stipulation is a condition or a warranty depends on the intention of the parties and the importance of the stipulation to the overall contract, regardless of the words used (Section 12(4)).

---

Answer:

---

Answer:

Implied Conditions and Warranties

Apart from express conditions and warranties agreed upon by the parties, the Sale of Goods Act, 1930, implies certain conditions and warranties into every contract of sale, unless otherwise agreed. These implied terms are read into the contract by law for the protection of the buyer.

---

Condition as to title (Section 14)

Section 14(a):

"In a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is an implied condition on the part of the seller that, in case of a sale, he has a right to sell the goods and that, in case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass."

Explanation:

• There is an implied condition that the seller is the true owner of the goods or is authorized by the owner to sell the goods at the time of sale (or will be at the time property is to pass in an agreement to sell).
• If the seller does not have the right to sell, there is a breach of this implied condition, and the buyer can repudiate the contract and recover the full price paid, even if they have used the goods.

Example: A buys a stolen car from B (who is not the owner). A later has to return the car to the true owner. A can sue B for breach of implied condition as to title and recover the full price paid, even if he used the car for some time.

---

Implied Warranty of Quiet Possession (Section 14)

Section 14(b):

"In a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is an implied warranty that the buyer shall have and enjoy quiet possession of the goods."

Explanation: After buying the goods, the buyer should not be disturbed in their possession or enjoyment of the goods by the seller or any person claiming through the seller. Breach of this is a breach of warranty, giving the buyer a right to claim damages for the disturbance.

Example: A sells goods to B. A's agent subsequently interferes with B's use of the goods. A is liable for breach of implied warranty of quiet possession.

---

Implied Warranty Against Encumbrances (Section 14)

Section 14(c):

"In a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is an implied warranty 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."

Explanation: The buyer is entitled to receive goods that are free from any third-party rights (like a pledge or charge) unless the buyer knew about the encumbrance at the time of the contract. If there is an undisclosed encumbrance, and the buyer suffers loss (e.g., has to pay a third party to release the goods), the buyer can claim damages for breach of this implied warranty.

---

Condition as to description (Section 15)

Section 15:

"Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description."

"And, if the sale is by sample as well as by description, the goods shall correspond with the description as well as with the sample."

Explanation:

• When goods are sold based on a description (e.g., "Basmati Rice", "100% Cotton Fabric", "Size 10 Shoes"), there is an implied condition that the goods delivered will match that description.
• If the goods do not correspond with the description, the buyer can reject them, as it is a breach of a condition essential to the contract.

Example: A contracts to sell B "Indian Sona Masuri Rice". If A delivers rice that is not Sona Masuri, there is a breach of implied condition as to description. B can reject the rice.

---

Condition as to quality or fitness (Section 16)

Section 16 deals with implied conditions as to quality or fitness, subject to the principle of caveat emptor (let the buyer beware), which is the general rule (buyer is responsible for choosing goods suitable for their purpose). However, Section 16 provides exceptions to this rule:

Section 16(1): Fitness for a particular purpose:

"Where the buyer, 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 seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply, there is an implied condition that the goods shall be reasonably fit for such purpose:" (Subject to certain exceptions, like sale of a specified article under its patent or other trade name).

Explanation:

• The buyer must inform the seller of the specific purpose for which they need the goods.
• The buyer must show that they are relying on the seller's skill or judgment to select suitable goods.
• The seller must be dealing in goods of that description.

If these conditions are met, there is an implied condition that the goods will be reasonably fit for the buyer's specified purpose.

Example: A goes to a dealer in heating systems and tells him he needs a heater for his bedroom of a specific size, relying on the dealer's expertise. If the dealer supplies a heater that is too small to heat the bedroom adequately, there is a breach of implied condition of fitness for purpose.

---

Condition as to merchantability (Section 16)

Section 16(2): Merchantable quality:

"Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or not), there is an implied condition that the goods shall be of merchantable quality:" (Subject to proviso about examination).

Explanation:

• Goods are of merchantable quality if they are fit for the purpose for which goods of that description are ordinarily used. They should be in a usable condition and free from latent defects that make them unfit for ordinary use.
• This condition applies when goods are bought by description from a seller who deals in such goods.
• Proviso: "Provided that, if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed." If the buyer inspects the goods, this condition does not apply to defects that a reasonable inspection would have revealed. It still applies to latent defects (those not discoverable by ordinary inspection).

Example: Buying packaged food items from a grocery store. There is an implied condition that the food items are edible and free from contamination that makes them unfit for consumption (their ordinary use). If the food is contaminated, there is a breach of merchantable quality.

---

Condition as to bulk (Section 16 - seems like a typo, should be Section 17 regarding Sample)

Section 16 deals with Quality and Fitness. The condition relating to 'bulk' is typically associated with a sale by sample, covered under Section 17.

Condition as to Bulk in Sale by Sample (Section 17)

Section 17: Sale by sample:

"(1) A contract of sale is a contract for sale by sample where there is a term in the contract, express or implied, to that effect.

(2) In the case of a contract for sale by sample, there is an implied condition—

(a) that the bulk shall correspond with the sample in quality;

(b) that the buyer shall have a reasonable opportunity of comparing the bulk with the sample;

(c) that the goods shall be free from any defect, rendering them unmerchantable, which would not be apparent on reasonable examination of the sample."

Explanation:

• In a sale by sample, the buyer is shown a small portion (sample) of the goods, and the contract is based on the understanding that the rest of the goods (the bulk) will be of the same quality as the sample.
• There is an implied condition that the bulk goods supplied must match the sample in quality.
• The buyer must be given a reasonable chance to compare the bulk with the sample.
• The goods must be free from hidden defects that would make them unmerchantable and that were not discoverable by examining the sample.

Example: A contracts to sell B 100 bags of sugar, showing B a sample of the sugar. There is an implied condition that the 100 bags of sugar will be of the same quality as the sample. If the sugar in the bags is inferior to the sample, A is in breach of this implied condition.

---

Implied Warranties:

Section 14 lists implied warranties (quiet possession, free from encumbrances) as discussed above. Other implied warranties may arise from custom or usage of trade (Section 16(3)).

Example: In a particular trade, there might be a custom that packaged goods carry an implied warranty that the packaging is sufficient to protect the goods during transit.

---

Exclusion of Implied Terms (Section 62):

The implied conditions and warranties can be excluded or varied by express agreement between the parties, or by the course of dealing between them, or by usage of trade, provided the usage is such as to bind both parties. However, exclusion clauses are interpreted strictly against the seller, especially when dealing with consumers.

---

Answer:

---

Answer:

Rules as to Transfer of Property (Sections 18-25)

In a contract of sale, the most critical element is the transfer of property (ownership) in the goods from the seller to the buyer. The time at which this transfer takes place is crucial because it generally determines when the risk of loss passes (Section 26) and what remedies are available to the parties. Sections 18 to 25 of the Sale of Goods Act, 1930, lay down the rules for determining when the property in goods is transferred.

---

When property passes

The rules for the passing of property depend primarily on whether the goods are 'ascertained' or 'unascertained', and the intention of the parties.

Where there is a contract for the sale of Unascertained Goods (Section 18):

Section 18:

"Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained."

Explanation: 'Unascertained goods' are goods that are not specifically identified or agreed upon at the time the contract is made (e.g., 100 quintals of wheat from a larger stock, goods to be manufactured). In such a case, ownership cannot pass until the specific goods meant for the buyer are identified or set aside. This process of identifying or setting aside the goods is called ascertainment. The property passes only after ascertainment.

Where there is a contract for the sale of Ascertained Goods (Sections 19-24):

'Ascertained goods' are goods that are specifically identified and agreed upon at the time the contract is made. For ascertained goods, the rules for passing of property are:

Section 19: Property passes when intended to pass:

"(1) Where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred."

"(2) For the purpose of ascertaining the intention of the parties, regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case."

"(3) Unless a different intention appears, the rules contained in sections 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer."

Explanation: The paramount rule is the intention of the parties. If the contract explicitly states when ownership passes, that intention prevails. If the intention is not clear, Sections 20 to 24 provide rules to determine the presumed intention.

Rules for Ascertaining Intention (Sections 20-24 - Presumptive Rules):

These rules apply in the absence of a contrary intention:

• Section 20: 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, even though the time of payment of the price or the time of delivery of the goods, or both, is postponed."
  • 'Specific goods' are identified at the time of contract.
  • 'Deliverable state' means in a state where the buyer would be bound to take delivery.
  • 'Unconditional contract' means the transfer of property is not subject to any condition.

  If these conditions are met, property passes at the time of contract, regardless of delivery or payment dates.

• Section 21: Specific goods to be put into a deliverable state: "Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof."
• Section 22: Specific goods in a deliverable state, but price to be ascertained by weighing, etc.: "Where 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 is done and the buyer has notice thereof."
• Section 23: Sale of unascertained goods by description: When goods are sold by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract (either by the seller with the buyer's assent or by the buyer with the seller's assent), the property passes to the buyer. 'Appropriation' is the process of setting aside specific goods.
• Section 24: Goods sent on approval or 'on sale or return': When goods are delivered to the buyer on approval or 'on sale or return', the property passes to the buyer when he signifies his approval or acceptance, or does any act adopting the transaction, or retains the goods without giving notice of rejection beyond the agreed time or a reasonable time.

---

Answer:

---

Answer:

Doctrine of Nemo Dat Quod Non Habet

The general rule regarding the transfer of title (ownership) in goods is based on the maxim "Nemo Dat Quod Non Habet", which means "no one can give what he does not have."

---

Meaning of Nemo Dat Quod Non Habet

This doctrine states that if a seller does not have a good title to the goods, they cannot transfer a better title than they themselves possess to the buyer. If the seller is not the owner, the buyer, however innocent and acting in good faith, will not acquire ownership of the goods, even if they paid value. The true owner can recover the goods from the buyer.

Example: A steals goods belonging to B and sells them to C, who buys in good faith for value. C does not acquire good title to the goods because A (the thief) had no title. B, the true owner, can recover the goods from C.

This rule protects the rights of the true owner. However, a strict application of this rule would hinder commercial transactions, as buyers would constantly face the risk of the goods being claimed by a third party. Therefore, the Sale of Goods Act and other laws provide several exceptions to this rule, where a buyer who buys in good faith for value can acquire a good title even from a seller who does not have a good title.

---

Exceptions to the Nemo Dat rule:

These are situations where a non-owner can pass a good title to a bona fide purchaser for value without notice. Section 27 to 30 of the Sale of Goods Act, 1930, list some of these exceptions:

Sale by Estoppel (Section 27 Proviso):

If the true owner of the goods, by their conduct or words, leads the buyer to believe that the seller has the authority to sell, and the buyer acts on this belief, the true owner may be estopped from denying the seller's authority and claiming the goods from the buyer. The buyer gets a good title.

Example: A tells B in C's presence that A is C's agent to sell goods. C remains silent. B buys the goods from A, believing A is C's agent. C is estopped from denying A's authority to sell and cannot recover the goods from B.

---

Exception: Sale by mercantile agent (Section 27)

Section 27: "...Provided that where a mercantile agent is, with the consent of the owner, in possession of the goods or of a document of title to the goods, any sale made by him when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the goods to make the same; provided that the buyer acts in good faith and has not at the time of the contract of sale notice that the seller has not authority to sell."

Explanation: A mercantile agent is an agent who in the customary course of business has authority either to sell goods, or to consign goods for the purposes of sale, or to buy goods, or to raise money on the security of goods (Section 2(9)). If such an agent, with the owner's consent, possesses goods or documents of title, and sells them in the ordinary course of his business, a bona fide buyer for value without notice gets a good title, even if the agent's actual authority was limited or withdrawn.

---

Exception: Sale by one of joint owners with consent of others (Section 28)

Section 28: "If one of several joint owners of goods has the sole possession of them by permission of the co-owners, the property in the goods is transferred to any person who buys them from such joint owner in good faith and has not at the time of the contract of sale notice that the seller has no authority to sell."

Explanation: If goods are owned jointly by several persons, and one of them has exclusive possession with the permission of the others, a bona fide buyer from the possessor gets a good title, provided they did not know the seller lacked full authority.

---

Exception: Sale by buyer in possession under voidable contract (Section 29)

Section 29: "When the seller of goods has obtained possession thereof under a contract voidable under section 19 or section 19A of the Indian Contract Act, 1872, but the contract has not been rescinded at the time of the sale, the buyer acquires a good title to the goods, provided he buys them in good faith and without notice of the seller's defect of title."

Explanation: If a person obtains goods under a contract that is voidable (due to fraud, misrepresentation, coercion, undue influence), they have a voidable title. If they sell these goods to a bona fide buyer for value without notice *before* the original owner rescinds the contract, the bona fide buyer gets a good title, and the original owner loses the right to recover the goods from the buyer (their remedy is against the fraudulent seller). The voidable contract must not have been rescinded at the time of the sale to the new buyer.

---

Exception: Sale by seller in possession after sale (Section 30(1))

Section 30(1): "Where a person, having sold goods, continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title under any sale, pledge or other disposition thereof, to any person receiving the same in good faith and without notice of the previous sale, shall have the same effect as if the person making the delivery or transfer were expressly authorized by the owner of the goods to make the same."

Explanation: If a seller sells goods to Buyer 1 but remains in possession of the goods or documents of title, and then sells or pledges the same goods to Buyer 2 (or pledgee), who buys in good faith without notice of the first sale, Buyer 2 (or pledgee) gets a good title (or valid pledge). Buyer 1's remedy is against the seller for damages. This exception protects innocent buyers who see the seller still in possession.

---

Other Exceptions (Briefly):

• Sale by an unpaid seller (Section 54(3)): If an unpaid seller has a right of lien or stoppage in transit, and the buyer does not pay within a reasonable time, the unpaid seller can resell the goods. The new buyer acquires a good title against the original buyer.
• Sale by Court Order: Goods sold under the order of a court acquire a good title.
• Sale by Pledgee (Section 176): A pawnee (pledgee) has the right to sell the pledged goods upon default after giving reasonable notice. A buyer at such a lawful sale acquires a good title.
• Sale by Finder of Goods (Section 169): Under certain limited circumstances, a finder of goods can sell the goods (e.g., if perishable, or true owner cannot be found), and the buyer gets a good title.

These exceptions balance the protection of the true owner with the needs of commercial transactions to protect innocent buyers who act in good faith.

---

Answer:

---

Answer:

Delivery of Goods (Sections 31-46)

Performance of a contract of sale essentially involves the seller delivering the goods as per the contract and the buyer accepting the goods and paying the price. The Sale of Goods Act, 1930, lays down detailed rules regarding the delivery of goods in Sections 31 to 46.

---

Meaning of Delivery (Section 2(2))

Section 2(2) defines "Delivery":

"'Delivery' means voluntary transfer of possession from one person to another."

Explanation: Delivery implies a voluntary change of possession, not necessarily physical handing over. It can be actual, constructive, or symbolic.

• Actual Delivery: Goods are physically handed over to the buyer or his authorized agent.
• Constructive Delivery: Transfer of possession without actual change in custody. E.g., Seller holding goods as bailee for buyer, or third party holding goods for seller now holding them for buyer (attornment).
• Symbolic Delivery: Transfer of a symbol representing the goods, giving the buyer control over the goods. E.g., Handing over keys to a warehouse where goods are stored, or transferring documents of title (like a bill of lading).

Section 31: Duty of seller and buyer

"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 terms of the contract of sale."

This section lays down the fundamental obligations regarding delivery and payment.

---

Rules relating to delivery

Sections 32 to 44 lay down specific rules regarding the mode, time, place, and quantity of delivery, unless the contract specifies otherwise:

• Section 32: Delivery and Payment are Concurrent Conditions: (Discussed in next subheading).
• Section 33: Mode of Delivery: Delivery may be actual or constructive as agreed.
• Section 34: Effect of Part Delivery: A delivery of part of the goods, with an intention of severing it from the whole, operates as a delivery of the whole. But if done with no intention of severing, it is not a delivery of the whole.
• Section 35: Buyer to apply for delivery: Unless agreed otherwise, the buyer must apply for delivery. (Contrast with Indian Contract Act where promisor performs without application if not specified).
• Section 36: Rules as to delivery:
  • Place of Delivery: If no place is fixed, goods are to be delivered at the place where they are at the time of sale (for specific goods) or at the place where they are produced/manufactured (for goods to be produced/manufactured).
  • Time of Delivery: If no time is fixed, delivery must be made within a reasonable time.
  • Goods in possession of a third person: Delivery is complete when the third person acknowledges to the buyer that he holds the goods on his behalf (attornment).
  • Time for tender of delivery: Must be at a reasonable hour.
  • Expenses of delivery: Seller bears expenses of putting goods into a deliverable state.
• Section 37: Delivery of wrong quantity: If the seller delivers less or more goods than contracted for, the buyer may reject the whole, or accept the quantity delivered and pay for it (proportionately for less, contract rate for more), and claim damages for breach. If the seller delivers the agreed goods mixed with others, the buyer may accept the agreed quantity or reject the whole.
• Section 38: Instalment deliveries: Unless agreed, the buyer is not bound to accept delivery by instalments. If delivery is by instalments and the seller makes a defective delivery of one or more instalments, or the buyer fails to take delivery or pay, the effect on the whole contract depends on the terms and circumstances.
• Section 39: Delivery to carrier or wharfinger: Delivery of goods to a carrier for transmission to the buyer is prima facie deemed to be a delivery of the goods to the buyer. Seller must make a reasonable contract with the carrier. If goods are sent by sea, seller must give notice to buyer to enable him to insure.
• Section 40: Risk where goods are delivered at distant place: Unless agreed, buyer bears the risk of deterioration during transit incidental to the course of transit.
• Section 44: Buyer's liability for neglecting or refusing delivery of goods: If the seller is ready and willing to deliver, and requests the buyer to take delivery within a reasonable time, and the buyer fails to do so, the buyer is liable for any loss caused by his neglect/refusal and for reasonable charges for care and custody. This doesn't affect the seller's other rights.

---

Delivery and payment are concurrent conditions

Section 32:

"Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that is to say, the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer must be ready and willing to pay the price in exchange for possession of the goods."

Explanation:

• This section establishes the default rule for performance in a contract of sale. Unless the contract specifies payment in advance, or credit terms, or delivery first, the obligations of the seller (delivery) and the buyer (payment) are expected to occur simultaneously.
• Neither party is bound to perform their promise unless the other party is ready and willing to perform their reciprocal promise at the same time. This aligns with Section 51 of the Indian Contract Act regarding simultaneous performance of reciprocal promises.

Example: A contracts to sell goods to B for cash. A is not bound to deliver the goods unless B is ready and willing to pay the price on delivery. B is not bound to pay the price unless A is ready and willing to deliver the goods on payment.

---

Answer:

Buyer's Right to Examine Goods

When goods are delivered to the buyer, they have a right to examine the goods to ensure they conform to the contract before accepting them. This right is recognized in Section 41 of the Sale of Goods Act, 1930.

---

Rule under Section 41

Section 41: Buyer's right to examine the goods

"(1) Where goods are delivered to the buyer which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract.

(2) Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract."

Explanation:

• No Prior Examination: This right is particularly important when the buyer has not had a chance to inspect the goods thoroughly before delivery (e.g., sale by description, sale by sample).
• Purpose of Examination: The purpose is to check if the goods are "in conformity with the contract", meaning they match the description, quality, fitness, etc., as agreed.
• Reasonable Opportunity: The buyer is entitled to a reasonable opportunity to examine the goods. What constitutes a reasonable opportunity depends on the type of goods and circumstances. Examination that would reveal latent defects is not required; only a reasonable inspection.
• Seller's Duty to Afford Opportunity: The seller, upon tendering delivery, must provide the buyer with a reasonable opportunity to examine the goods if requested.
• Acceptance after Examination: The buyer is not deemed to have accepted the goods until they have had this reasonable opportunity for examination and either signify acceptance or act in a way that indicates acceptance (Section 42).

If the buyer finds that the goods are not in conformity with the contract after examination, they can reject the goods and repudiate the contract (provided the non-conformity amounts to a breach of condition). If they accept the goods despite the non-conformity (or after losing the right to reject by accepting), they may only claim damages for the breach of warranty (Section 13).

---

Buyer Not Bound to Return Rejected Goods (Section 43)

Section 43:

"Unless otherwise agreed, where goods are delivered to the buyer and he refuses to accept them, having the right so to do, he is not bound to return them to the seller, but it is sufficient if he intimates to the seller that he refuses to accept them."

If, after examination, the buyer rightfully rejects the goods, their obligation is merely to inform the seller of the rejection. They are not required to physically return the goods to the seller's premises, unless the contract specifically imposes such a duty. The seller must then arrange to collect the rejected goods.

---

Answer:

Who is an Unpaid Seller?

The Sale of Goods Act, 1930, provides special rights to a seller who has not received the full price for the goods sold. This person is known as an Unpaid Seller. Section 45 defines who qualifies as an unpaid seller.

---

Definition under Section 45

Section 45(1):

"The seller of goods is deemed to be an 'unpaid seller' within the meaning of this Act—

(a) when the whole of the price has not been paid or tendered;

(b) when a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise."

Section 45(2):

"In this Chapter, the term 'seller' includes any person who is in the position of a seller, as, for instance, an agent of the seller to whom the bill of lading has been endorsed, or a consignor or agent who has himself paid, or is directly responsible for, the price."

Explanation:

• Whole Price Not Paid: The seller becomes an unpaid seller if any portion of the agreed price remains outstanding. It is not necessary that the entire price is unpaid; non-payment of even a part makes the seller unpaid.
• Payment by Negotiable Instrument: If payment is made by a bill of exchange, cheque, or promissory note, the payment is usually considered conditional upon the instrument being honoured (paid upon presentation). If the instrument is dishonoured (not paid), the seller becomes an unpaid seller.
• Person in Position of Seller: The rights of an unpaid seller extend not only to the original seller but also to anyone who stands in the position of a seller (e.g., an agent of the seller who paid the price to the principal).

Example: A sells goods to B for Rs. 10,000/-. B pays Rs. 8,000/- and promises to pay the remaining Rs. 2,000/- later. A is an unpaid seller.

Example: A sells goods to B for Rs. 20,000/- and receives a cheque for the amount. Before the cheque is presented for payment, or upon presentation, the cheque is dishonoured by the bank. A becomes an unpaid seller.

The rights of an unpaid seller are given by law and arise automatically upon the buyer's default in paying the price. These rights are available whether the property (ownership) in the goods has passed to the buyer or not.

---

Answer:

Rights of Unpaid Seller

An unpaid seller has significant rights provided by the Sale of Goods Act to protect their interest in recovering the price. These rights are primarily against the goods and against the buyer personally.

---

Rights of Unpaid Seller

The rights of an unpaid seller are enumerated in Section 46:

Section 46(1):

"Subject to the provisions of this Act and of any law for the time being in force, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implication of law—

(a) a lien on the goods for the price while he is in possession of them;

(b) in case of the insolvency of the buyer, a right of stopping the goods in transit after he has parted with the possession of them;

(c) a right of re-sale as limited by this Act."

Section 46(2):

"Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in transit where the property has passed to the buyer."

---

Against the goods

These are rights that the unpaid seller can exercise over the goods themselves, even if ownership has passed to the buyer. These rights are primarily aimed at enabling the seller to recover the price from the goods.

• Right of Lien (Section 47): The right to retain possession of the goods until the price is paid. (Discussed in next subheading).
• Right of Stoppage in Transit (Section 50): The right to stop the goods while they are in transit and resume possession, in case the buyer becomes insolvent. (Discussed in next subheading).
• Right of Resale (Section 54): The right to sell the goods to a third party under certain circumstances. (Discussed in next subheading).
• Right of Withholding Delivery (Section 46(2)): If ownership has not passed to the buyer, the seller can withhold delivery until the price is paid. This right is similar to lien but applicable when ownership hasn't passed.

---

Against the buyer personally

These are the ordinary remedies available to a seller for breach of contract, enforceable against the buyer personally (their other assets), not just against the goods themselves.

• Suit for Price (Section 55): Where, under a contract of sale, the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods, the seller may sue him for the price of the goods. Even if the property has not passed, if the price is payable on a certain day irrespective of delivery and the buyer wrongfully neglects or refuses to pay, the seller may sue for the price.
• Suit for Damages for Non-acceptance (Section 56): Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for non-acceptance. The measure of damages is the estimated loss directly and naturally resulting from the buyer's breach, which is usually the difference between the contract price and the market price on the date of breach (if market price is lower).

An unpaid seller may exercise rights against the goods (lien, stoppage, resale) AND sue the buyer personally for any deficiency in price after resale or for damages.

---

Answer:

Right of Lien

The Right of Lien is the unpaid seller's right to retain possession of the goods until the price is paid. This right is available even if the ownership has passed to the buyer. It is a possessory lien.

---

Rule under Section 47

Section 47(1):

"Subject to the provisions of this Act, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely:—

(a) where the goods have been sold without any stipulation as to credit;

(b) where the goods have been sold on credit, but the term of credit has expired;

(c) where the buyer becomes insolvent."

Explanation:

• Seller in Possession: The seller must have actual possession of the goods. If possession has been transferred to the buyer, the lien is lost.
• Lien is for Price Only: The lien is only for the unpaid price, not for other charges like storage costs.
• Circumstances for Lien: Lien is available in cash sales (no credit agreed), when the credit period in a credit sale expires, or if the buyer becomes insolvent.

Example: A sells goods to B without any credit term. B does not pay the price immediately. A, who is still in possession of the goods, can retain them until B pays the price.

Example: A sells goods to B on one month's credit. After one month, B has not paid. A, if still in possession, can exercise a lien.

Example: A sells goods to B on credit and is in possession. B becomes insolvent before the credit period expires or before paying. A can exercise a lien.

---

Termination of Lien (Section 49)

Section 49(1): The unpaid seller of goods loses his lien thereon—

(a) when he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal of the goods;

(b) when the buyer lawfully obtains possession of the goods;

(c) by waiver thereof.

Section 49(2): The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that he has obtained a decree for the price of the goods.

---

Right of Stoppage in Transit

The Right of Stoppage in Transit is the unpaid seller's right to stop the goods while they are on their way to the buyer and resume possession. This right is available only when the buyer becomes insolvent and the seller has parted with possession but the buyer has not yet received delivery.

---

Rule under Section 50

Section 50:

"Subject to the provisions of this Act, when the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them in transit, that is to say, he may resume possession of the goods as long as they are in the course of transit, and may retain them until payment or tender of the price."

Explanation:

• Buyer's Insolvency: This right arises only if the buyer becomes insolvent (ceases to pay debts in the ordinary course of business or cannot pay debts as they become due - Section 2(8)).
• Seller Parted with Possession: The seller must have delivered the goods to a carrier or other intermediary for transmission to the buyer, thus losing possession and the right of lien.
• Goods in Transit: The goods must be in the course of transit. Section 51 defines when goods are in transit (from delivery to carrier/bailee until buyer takes delivery).
• Purpose: To prevent the goods from reaching the insolvent buyer and falling into the hands of the Official Receiver/Assignee without the seller receiving the price.
• Resumption of Possession: The seller stops the goods and takes them back into possession. The right of stoppage effectively revives the unpaid seller's lien.

---

Duration of Transit (Section 51)

Goods are generally considered in transit from the time they are delivered to a carrier or bailee for transmission to the buyer, until the buyer or his agent takes delivery of them. Transit ends in various ways (e.g., buyer taking delivery before arrival, carrier acknowledging holding goods for buyer, carrier wrongfully refusing delivery).

---

How to Stop in Transit (Section 52)

The unpaid seller may stop the goods by taking actual possession or by giving notice of his claim to the carrier or other bailee in whose possession the goods are. Upon receiving notice, the carrier must redeliver the goods to the seller or according to his directions, at the seller's expense.

---

Right of Resale

The Right of Resale is the unpaid seller's right to sell the goods to a third party. This is a crucial right that enables the seller to recover their money, especially when the buyer fails to pay despite the seller exercising lien or stoppage in transit.

---

Rule under Section 54

Section 54(1): Subject to the provisions of this section, a contract of sale is not rescinded by the mere exercise of a right of lien or stoppage in transit. (Exercising these rights doesn't automatically end the contract). But, the unpaid seller may resell the goods in certain cases:

Section 54(2):

"Where the goods are of a perishable nature, or where the unpaid seller who has exercised a right of lien or stoppage in transit gives notice to the buyer of his intention to re-sell, and the buyer does not within a reasonable time pay or tender the price, the unpaid seller may re-sell the goods within a reasonable time and recover from the original buyer damages for any loss occasioned by his breach of contract, but the buyer shall not be entitled to any profit which may accrue on the re-sale."

Section 54(3):

"Where the seller expressly reserves a right of re-sale in case the buyer should make default, and on the buyer making such default, re-sells the goods, the original contract of sale is thereby rescinded, but the seller is entitled to recover from the buyer damages for any loss occasioned by his breach of contract."

Explanation:

• When Right Arises: The right of resale arises in two main situations:
  • Goods are perishable (resale can be done immediately without notice, though notice is advisable).
  • Seller exercises lien or stoppage in transit AND gives notice to the buyer of intention to resell, and buyer fails to pay within a reasonable time.
  • Seller expressly reserves the right of resale in the contract upon buyer's default.
• Consequences of Lawful Resale:
  • The new buyer gets a good title to the goods, overriding the original buyer's claim.
  • The unpaid seller can recover from the original buyer any loss on resale (if sold for less than the contract price) as damages for breach.
  • The unpaid seller keeps any profit on resale (if sold for more than the contract price), unless the right was expressly reserved under Section 54(3) where the original contract is rescinded.
• Consequences of Unlawful Resale: If the seller resells unlawfully (e.g., without notice when required), they may be liable to the original buyer for breach of contract, and the original buyer may be entitled to damages or even recover the goods from the second buyer (though this is complex if the second buyer is bona fide).

The right of resale is a powerful remedy allowing the unpaid seller to liquidate the goods to recover their price, without necessarily going to court first.

---

Answer:

---

Answer: