Professional Documents
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Contract of sale
Is a contract whereby a seller transfers or agrees to transfer the property in goods to the buyer for a price.(sec.4) ESSENTIALS (1)At least two parties: Buyer/Seller. Part-owner may sell to another part-owner but no person could buy own goods. E.g.: State of Gujarat Vs. Ramanlal.S & Co. (2) Transfer or agreement to transfer ownership of goods. Hence it is different from bailment/pledge where mere possession is transferred. (3)Subject matter of contract must necessarily be goods: Sale of immovable property is excluded & the term goods is defined in sec.2(7). (4) Price is the consideration for contract of sale & has to necessarily be money. (5) Contract of sale may be absolute or conditional. (6) All other essentials of a valid contract must be present.
Contract of sale
May be expressed: Writing/orally/partly written & partly oral. May be Implied: from conduct of parties. Different from hire-purchase. Different from a contract for work & labor or labor & materials. Different from barter. Different from bailment. Different from lease. Different from gift. Different from mortgage/pledge/hypothecation.
Sale Vs Hire-purchase
In sale the ownership in goods is immediately transferred while in H.P, it is only after last installment is paid. In sale buyer becomes owner of goods while in H.P, the buyer stands in capacity of a bailee. In sale, buyer has no option to rescind the contract and has to pay the price agreed, while in H.P, the hirer can set aside the contract by stopping payment of instalments. In sale, buyer can transfer title to a subsequent purchaser while a hirer cannot do so, and the hiree can recover goods from such buyer. In sale instalments are treated as part-payment while in H.P, they are treated so only when hirer exercises option to buy, if not it would be treated as hire-charges. In sale, the sales tax could be levied at the time of contract, while in H.P, it could be levied only when hire ripens to a sale.
Definition of goods---sec.2(7)
All kinds of movable property other than actionable claims & money (excluding rare coins) including stock & shares, growing crops, water, electricity, gas and even intangibles like goodwill, patents and trademarks. CLASSIFICATION (1) Existing Goods: Goods owned/possessed by seller at the time of making contract of sale. (2) Specific Goods: Those goods identified & agreed upon at the time of contract of sale. (3) Ascertained goods: Those goods identified & agreed upon, subsequent to contracting for sale. (4) Unascertained (generic goods): Those goods either not identified or not agreed upon at the time of making the contract of sale. Those defined by description only. (5) Future goods: Those goods to be manufactured/acquired by seller after making contract. Sec.2(6).There can be only an agreement to sell (6) Contingent Goods: When acquisition of goods by seller depends upon an uncertain contingency, they are called contingent goods.
Voidability of contracts
Goods perishing before making contract (sec.7) or damaged & no longer answering description in the contract. * Part-destruction means buyer has to accept those goods in good condition so long as the good ones & destroyed ones are divisible. * If indivisible, the contract becomes void. However, if goods are unascertained, the contract is not void. If goods are destroyed after agreement to sell but before sale, (sec.8) the contract is void on grounds of supervening impossibility if loss is caused to specific goods, it was beyond the control of either parties and if loss had occurred before risk passed on to buyer.
Implied conditions:
Condition as to title---sec.14(a) Eg: Rowland Vs Divall, Niblett Vs Confectioners materials Co. Ltd Sale by descriptioncondition that goods shall correspond with description ,ie words / symbols/ grade/ brand/ number etc Sale by sample---That bulk shall correspond with sample in quality, free from defect & that buyer would have reasonable opportunity to compare. Sale by sample as well as description: That goods shall correspond with both. Condition as to quality/fitness: (sec16) Though it is not an implied condition of the contract generally on the principle of Caveat emptor it becomes so when buyer relies on skill/judgment of seller, buyer makes seller know the purpose for which goods are required. Condition of merchantability. Condition as to wholesomeness :(for food stuffs)
Implied warranties:sec.14
Warranty of quiet possession. Warranty of freedom from encumbrance. Warranty implied by usage of trade. Warranty of disclosing dangerous nature of goods
Cases
Butterworth Vs Kingsway Motors Harlington Vs. Christopher Fine Art Rowland Vs Divall Niblett Vs Confectionary Co. Beale VS Taylor Varley Vs.Whipp
Performance of contract
Duty of seller to deliver & buyer to accept goods and pay. Delivery of goods---Actual, symbolic (giving a railway receipt/key of warehouse) constructive (where bailee or carrier of seller agrees to hold the goods for buyer. Terms of delivery: Could be part-delivery with fixed time/place. Buyer has options for delivery of wrong quantity/installment delivery (not agreed) Goods delivered to buyer without personal examination. Buyer not bound to return rejected goods. Liability of buyer in the event of rejection.
Types of Sale-contracts
Ex-works/Ex-factory FOB/FOR/FOA Contracts. CIF Contracts. Warehouse-to-warehouse.
Cases
McEntire Vs Crossley Vasantha Vs Elayalwar Dennant Vs Skinner Consolidated Coffee Vs Coffee Board
Unpaid seller
Meaning of unpaid seller: (a) When whole of the price has not been paid/tendered (b) When a bill of exchange/negotiable instrument is received as conditional payment & condition was not fulfilled due to dishonor of instrument
Termination of lien
(a) Delivery of goods to buyer. (b) Delivery of goods to carriers. Waiver of lien (express waiver in contract) Implied waiver (assenting to sub-sale) Tender of price by buyer.
Right of resale
An unpaid seller having exercised the right of lien or right of right of stoppage in transit can effect resale of goods. Obligation to serve notice on buyer does not apply for perishable goods
Additional rights
Suit for price (where property in goods has passed, seller can sue for price) Suit for damages (seller could also claim other costs incidental to non-payment or rejection of goods by buyer)
Buyers rights
Suit for non-delivery : Where delivery of goods has not been carried out by seller, the buyer could file suit for costs arising out of the act along with penalties. Suit for specific performance :In case of breach to deliver certain specific/ ascertained goods courts may direct specific performance over & above payment of damages. Remedy for breach of warranty: If price is paid, buyer has to file suit for damages. If price is unpaid, buyer has to deduct the loss suffered & then pay the balance amount. Repudiation of contract before delivery: In such circumstances, buyer could treat the contract as rescinded & file suit for damages or wait till actual date of delivery. Recovery of price + interest : Courts award interest on the price from the date of payment till date of refund.